QUARTERLY FUND REVIEW AS OF DECEMBER 31, 2017 Fidelity Real Estate Investment Investment Approach Fidelity Real Estate Investment seeks above-average income and long-term capital growth, consistent with reasonable investment risk, by investing in securities of companies that own and, in most cases, operate commercial real estate properties. Investment in real estate securities has the potential to provide portfolio diversification, consistent income generation, total return and the ability to outpace inflation. We believe real estate investment trusts (REITs) represent a balance between real estate and stocks, and that recognizing attributes of both is key to identifying opportunities to outperform. Through rigorous bottom-up research from both Fidelity's dedicated real estate team and the firm's broader research resources, we strive to add value through security selection within a disciplined risk framework. Our process seeks to determine the relative attractiveness of individual REITs and will try to take advantage of pricing discrepancies in the market. PERFORMANCE SUMMARY Cumulative 3 Month YTD 1 Year Annualized 3 Year 5 Year 10 Year/ LOF 1 Fidelity Real Estate Investment Gross Expense Ratio: 0.76% 2 1.28% 4.27% 4.27% 5.99% 9.48% 7.92% S&P 500 6.64% 21.83% 21.83% 11.41% 15.79% 8.50% Dow Jones U.S. Select Real Estate Securities 1.98% 3.76% 3.76% 4.95% 9.08% 6.98% Morningstar Fund Real Estate 2.09% 6.22% 6.22% 5.14% 8.68% 6.76% % Rank in Morningstar Category (1% = Best) -- -- 66% 23% 21% 21% # of Funds in Morningstar Category -- -- 257 228 199 145 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 11/17/1986. 2 This expense ratio is from the most recent prospectus and generally is based on amounts incurred during the most recent 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. For definitions and other important information, please see the Definitions and Important Information section of this Fund Review. FUND INFORMATION Manager(s): Steve Buller Trading Symbol: FRESX Start Date: November 17, 1986 Size (in millions): $4,211.30 Morningstar Category: Fund Real Estate 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. Real Estate is a cyclical industry that is sensitive to interest rates, economic conditions (both nationally and locally), property tax rates, and other factors. The fund may have additional volatility because it can invest a significant portion of assets in securities of a small number of individual issuers. Not FDIC Insured May Lose Value No Bank Guarantee
Market Review Real estate investment trusts (REITs) were modestly positive performers in the final quarter of 2017, with the Dow Jones U.S. Select Real Estate Securities SM gaining 1.98%. That return significantly trailed the broader U.S. equity market, as measured by the S&P 500 index, which rose 6.64%. The fundamental backdrop for REITs remained generally favorable for the quarter. Continued economic strength and employment gains were behind the healthy demand for commercial properties. The rate of fundamental improvement in the REIT market has been declining in recent years, however, reflecting increasing supply among certain types of properties, such as coastal apartments, assisted-living facilities and selected office markets. Once again, REIT investors saw significant differences in how certain property types performed. During the quarter, for example, retail REITs fared best, bouncing back from weak results earlier in 2017, as investors became more optimistic about the potential for corporate actions unlocking value in the sector. In contrast, the health care REIT sector continued to struggle, reflecting concern about the senior-housing industry, with a combination of market headwinds and areas of increasing supply weighing on performance. LARGEST CONTRIBUTORS VS. BENCHMARK Average Contribution (basis points)* HCP, Inc. Healthcare -1.86% 14 Mid-America Apartment Communities, Inc. General Growth Properties, Inc. Residential -1.77% 13 Retail 0.91% 12 Extra Space Storage, Inc. Self Storage 1.13% 9 Equity Residential (SBI) Residential -1.58% 8 * 1 basis point = 0.01%. Performance Review For the three months ending December 31, 2017, the fund returned 1.28%, trailing the 1.98% return of the benchmark Dow Jones U.S. Select Real Estate Securities SM. Compared with the index, the fund was hampered the most by its positioning in the retail category, where a combination of weak security selection and an unhelpful underweight in the group detracted from results. After significant underperformance for most of 2017, retail REITs bounced back from beaten-down levels. On the positive side, security selection among residential REITs added value. On an individual basis, the fund's detractors included mall operators Macerich and Taubman Centers, both strongperforming benchmark components that we either owned for a portion of the period (Macerich) or not at all (Taubman) this quarter. As activist investors became involved at both companies, the market bid up their shares. One retail REIT that we did overweight, GGP, however, was a strong contributor for the fund. This mall owner saw its shares gain 15%, with much of the increase coming in November, after the company agreed to be fully acquired by Brookfield Property, which already owned a roughly one-third stake in GGP. In the struggling health care REIT sector, Ventas detracted from our relative performance. Ventas, a leading operator of seniorhousing facilities, among other health care properties, and one of our largest holdings at quarter end, returned about -7%. On the positive side, the fund lacked exposure to benchmark component HCP (-5%) another health care REIT with exposure to the seniorhousing industry. Other relative detractors included Alexandria Real Estate (+11%), an owner of laboratory space for life sciences companies and an index component we declined to own, and Duke Realty (-2%), an operator of warehouse properties that gave back some performance after very strong gains earlier in the year. Meanwhile, the fund benefited from a lack of a position in poorperforming benchmark component Mid-America Apartment Communities (-5%) as well as an overweighting in self-storage REIT Extra Space Storage, a stock that returned 10%. LARGEST DETRACTORS VS. BENCHMARK Average Contribution (basis points)* The Macerich Co. Retail -0.80% -16 Ventas, Inc. Healthcare 1.59% -15 Alexandria Real Estate Equities, Inc. -1.77% -14 Taubman Centers, Inc. Retail -0.50% -14 Duke Realty Corp. 3.10% -13 * 1 basis point = 0.01%. 2 For definitions and other important information, please see Definitions and Important Information section of this Fund Review.
Outlook and Positioning Our goal is for individual stock picking to be the primary driver of the fund's long-term relative performance. Increasingly, however, we have been finding opportunities to establish greater relative sector over- and underweightings, driven by a combination of bottom-up (stock-by-stock) insights and top-down perspectives. As a result of our increasingly sector-focused investment positioning, the fund was underweighted in retail and hotel REITs and overweighted in industrial and residential REITs this quarter. Our retail underweight is based on: 1) an excessive amount of retail space in the U.S.; 2) the growth of e-commerce; and 3) a potential repricing of retail real estate in light of negative supply and demand dynamics. In particular, we have chosen to underweight many mall owners. We finished the quarter less underweighted among retail strip center REITs, which we believe will be a bit more protected in light of the essential goods they tend to sell. In contrast to this retail underweight, the fund was overweight in industrial REITs, as they benefit from the move away from brickand-mortar retail to e-commerce. Following this theme, the fund's largest position at quarter end was Prologis, while Duke Realty and DCT were other significant overweights and large holdings in the portfolio. The fund's underweight in hotels reflected our concerns about competitive supply in the industry; demand growth remains mixed, even with the improving economy; and competition from Internet-based, private-rental sites, such as Airbnb, has risen. The fund's overweight in residential REITs came primarily from exposure to manufactured housing and apartment property owners. We have long been overweight in manufactured housing due to its lack of competitive supply and low tenant turnover. Looking ahead, we have a modestly favorable outlook for the REIT market, reflecting sustained economic growth and constrained new supply in most sectors, as well as REITs' ready access to capital and generally attractive valuations across most property types. In 2017, REITs significantly underperformed growth stocks as REITs' income and defensive characteristics remained out of favor. We see some potential similarities to the market environment of 1998 99, when REITs massively underperformed in a strong environment for technology stocks. In our opinion, investors may now be overlooking relatively "boring," incomeoriented investments such as REITs. But if broader equities start to slow down and investors regain their interest in these types of investments, we would expect REITs to enjoy more visibility from investors. LARGEST OVERWEIGHTS BY MARKET SEGMENT Change From Prior Quarter 33.54% 26.52% 7.02% 1.23% Residential 24.25% 20.48% 3.77% 0.67% LARGEST UNDERWEIGHTS BY MARKET SEGMENT Change From Prior Quarter Hotels 4.21% 8.27% -4.06% -0.13% Retail 18.44% 21.58% -3.14% -1.25% Diversified 0.98% 3.81% -2.84% 0.05% Healthcare 8.49% 10.38% -1.89% -0.40% Self Storage 6.81% 7.89% -1.08% -0.38% 10 LARGEST HOLDINGS Prologis, Inc. Simon Property Group, Inc. UDR, Inc. Boston Properties, Inc. Ventas, Inc. Duke Realty Corp. AvalonBay Communities, Inc. Public Storage Welltower, Inc. Digital Realty Trust, Inc. 10 Largest s as a % of Net Assets Retail Total Number of s 46 Residential Healthcare Residential Self Storage Healthcare 47.35% 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. s do not include money market investments. 3 For definitions and other important information, please see Definitions and Important Information section of this Fund Review.
LARGEST OVERWEIGHTS BY HOLDING UDR, Inc. Residential 3.21% Duke Realty Corp. 2.97% Prologis, Inc. 2.08% Equity Lifestyle Properties, Inc. Residential 1.79% DCT Industrial Trust, Inc. 1.72% LARGEST UNDERWEIGHTS BY HOLDING Vornado Realty Trust Diversified -2.01% Alexandria Real Estate Equities, Inc. -1.86% HCP, Inc. Healthcare -1.82% Mid-America Apartment Communities, Inc. Residential -1.70% Simon Property Group, Inc. Retail -1.68% ASSET ALLOCATION Asset Class Change From Prior Quarter Domestic Equities 97.09% 100.00% -2.91% -0.33% International Equities 0.00% 0.00% 0.00% 0.00% Developed Markets 0.00% 0.00% 0.00% 0.00% Emerging Markets 0.00% 0.00% 0.00% 0.00% Tax-Advantaged Domiciles 0.00% 0.00% 0.00% 0.00% Bonds 0.00% 0.00% 0.00% 0.00% Cash & Net Other Assets 2.91% 0.00% 2.91% 0.33% 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. 3-YEAR RISK/RETURN STATISTICS Beta 0.99 1.00 Standard Deviation 13.46% 13.57% Sharpe Ratio 0.42 0.34 Tracking Error 1.52% -- Information Ratio 0.68 -- R-Squared 0.99 -- "Tax-Advantaged Domiciles" represent countries whose tax policies may be favorable for company incorporation. 4 For definitions and other important information, please see Definitions and Important Information section of this Fund Review.
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. 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 positioning data presented in this commentary is based on the fund's primary benchmark (index) unless a secondary benchmark is provided to assess performance. The Board of Trustees unanimously approved a proposal to shareholders for trustee election that would combine oversight of Fidelity's sector funds with Fidelity's broader equity and high income funds under a single Board of Trustees. If approved, the unified Board would be effective on or about 3/1/18. 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. Dow Jones U.S. Select Real Estate Securities is a floatadjusted market-capitalization-weighted index of publicly traded real estate securities such as real estate investment trusts (REITs) and real estate operating companies (REOCs). 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 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. % 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 5
3-YEAR RISK/RETURN STATISTICS Beta is a measure of the volatility of a fund relative to its benchmark index. A beta greater (less) than 1 is more (less) volatile than the index. Information Ratio measures a fund's active return (fund's average monthly return minus the benchmark's average monthly return) in relation to the volatility of its active returns. R-Squared measures how a fund's performance correlates with a benchmark index's performance and shows what portion of it can be explained by the performance of the overall market/index. R- Squared ranges from 0, meaning no correlation, to 1, meaning perfect correlation. An R-Squared value of less than 0.5 indicates that annualized alpha and beta are not reliable performance statistics. Sharpe Ratio is a measure of historical risk-adjusted performance. It is calculated by dividing the fund's excess returns (the fund's average annual return for the period minus the 3-month "risk free" return rate) and dividing it by the standard deviation of the fund's returns. The higher the ratio, the better the fund's return per unit of risk. The three month "risk free" rate used is the 90-day Treasury Bill rate. Standard Deviation is a statistical measurement of the dispersion of a fund's return over a specified time period. Fidelity calculates standard deviations by comparing a fund's monthly returns to its average monthly return over a 36-month period, and then annualizes the number. Investors may examine historical standard deviation in conjunction with historical returns to decide whether a fund's volatility would have been acceptable given the returns it would have produced. A higher standard deviation indicates a wider dispersion of past returns and thus greater historical volatility. Standard deviation does not indicate how the fund actually performed, but merely indicates the volatility of its returns over time. Tracking Error is the divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark, creating an unexpected profit or loss. 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. 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. 2018 FMR LLC. All rights reserved. Not NCUA or NCUSIF insured. May lose value. No credit union guarantee. 656358.19.0