QUARTERLY FUND REVIEW AS OF DECEMBER 31, 2017 Fidelity Select Energy Portfolio Investment Approach Fidelity Select Energy Portfolio is a sector-based, equity-focused strategy that seeks to outperform its benchmark through active management. We believe that energy stocks can become mispriced relative to their long-term intrinsic value due to either overemphasis on short-term commodity price swings, underappreciation of changes in technology or cost structures, or geopolitical events. Supported by in-depth fundamental research, we seek to uncover investment opportunities by analyzing the drivers of supply and demand for energy commodities, in combination with valuations and growth potential for energy stocks. Our process is grounded in the belief that earnings growth drives stock performance, and those companies with differentiated technologies, business models, cost positions or restructuring opportunities are best-positioned to deliver superior earnings. Sector strategies could be used by investors as alternatives to individual stocks for either tactical- or strategic-allocation purposes. PERFORMANCE SUMMARY Cumulative 3 Month YTD 1 Year Annualized 3 Year 5 Year 10 Year/ LOF 1 Select Energy Portfolio Gross Expense Ratio: 0.79% 2 9.98% -2.64% -2.64% 1.17% 2.36% -1.04% S&P 500 Index 6.64% 21.83% 21.83% 11.41% 15.79% 8.50% MSCI US IMI Energy 25/50 6.45% -2.33% -2.33% -0.95% 2.00% 0.74% Morningstar Fund Equity Energy 6.49% -4.84% -4.84% -5.23% -3.66% -2.85% % Rank in Morningstar Category (1% = Best) -- -- 45% 11% 3% 37% # of Funds in Morningstar Category -- -- 107 90 75 61 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 07/14/1981. 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): John Dowd Trading Symbol: FSENX Start Date: July 14, 1981 Size (in millions): $2,012.89 Morningstar Category: Fund Equity Energy The value of the fund's domestic and foreign investments will vary from day to day in response to many factors. Stock values fluctuate in response to issuer, political, regulatory, market, or economic developments. You may have a gain or loss when you sell your shares. Investments in foreign securities, especially those in emerging markets, involve risks in addition to those of U.S. investments, including increased political and economic risk, as well as exposure to currency fluctuations. Because FMR concentrates the fund's investments in a particular industry, the fund's performance could depend heavily on the performance of that industry and could be more volatile than the performance of less concentrated funds and the market as a whole. The fund is considered non-diversified and can invest a greater portion of assets in securities of individual issuers than a diversified fund; thus changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a more diversified fund. The energy industries can be significantly affected by fluctuations in energy prices and supply and demand of energy fuels, energy conservation, the success of exploration projects, and tax and other government regulations. Not FDIC Insured May Lose Value No Bank Guarantee
Market Review The energy sector, as represented by the MSCI U.S. IMI Energy 25/50 Index, returned 6.45% for the three months ending December 31, 2017, slightly trailing the 6.64% gain of the broadly based S&P 500 index. Of the 11 major sectors, energy finished around the middle of the pack this quarter. Rising crude oil prices provided a favorable backdrop for the sector's profit outlook. The West Texas Intermediate spot price, a benchmark for per barrel price of domestic oil, rose from about $53 per barrel to more than $61 per barrel during the quarter, while the price of Brent North Sea Crude rose from around $55 to $67 per barrel. Higher oil prices were driven largely by a combination of the industry's improving supply-and-demand conditions, falling U.S. inventory levels, and economic data indicating increased manufacturing activity around the world. Among individual industry groups, oil & gas exploration & production stocks (+9%), which represented about a quarter of the energy sector benchmark, rallied amid higher oil prices and the improved outlook for energy commodity producers. Strong demand for refined petroleum products helped boost the returns for oil & gas refining & marketing companies (+16%), a group that represented about 10% of the index. Integrated oil & gas (6%), the sector's largest industry group at roughly 40% of the index, performed reasonably well amid the improved pricing environment. Coal & consumable fuels (+43%), a rather small portion of the index at less than 1%, continued to benefit from increased demand from overseas markets. Industries that lagged this quarter included oil & gas equipment & services (-0.1%) and oil & gas storage & transportation (0.5%). Looking at the biggest individual drivers of sector performance, shares of integrated oil and gas companies Chevron and Occidental Petroleum rallied the past three months after reporting favorable operating results. Refiners Valero Energy and Marathon Petroleum also were among the major contributors, as were E&Ps EOG Resources and ConocoPhillips. Conversely, services names Schlumberger and Baker Hughes notably detracted. LARGEST CONTRIBUTORS VS. BENCHMARK Diamondback Energy, Inc. & Average Contribution (basis points)* 4.87% 102 Exxon Mobil Corp. Integrated Oil & Gas -17.34% 63 Continental Resources, Inc. Delek U.S. s, Inc. Schlumberger Ltd. * 1 basis point = 0.01%. & & Services 1.83% 51 2.04% 47-4.33% 41 Performance Review Good stock selection among the fund's overweighted stake in E&Ps was the primary driver of the fund's outperformance versus the sector benchmark during the fourth quarter. In particular, overweighted positions in Diamondback Energy (+29%), Continental Resources (+37%), and Pioneer Natural Resources (+17%), proved helpful. Stock picking within the oil & gas storage and transportation industry also boosted relative results. Here, the fund's holdings collectively advanced 10%, compared with a 0.5% return for those in the index. Among specific stocks, a non-index stake in liquefied natural gas company Golar LNG was helpful, as our holdings in the stock rallied 32% this quarter. The fund also benefited from not owning a stake in index constituent Oneok, a pipeline company, which returned -2%. Good stock selection and positioning within the integrated oil & gas industry also served the fund well. Specifically, underweighting Exxon Mobil (+3%) provided a relative boost. The fund gave back some performance due to its modest underweighting in oil & gas refining & marketing stocks, a group that outperformed the index by nearly 10 percentage points. Specifically, it hurt to have avoided strong-performing refining companies Valero (+21%) and Marathon Petroleum (+18%). Other notable disappointments included a small non-index stake in onshore well services provider NCS Multistage s, which returned -39% in the fund, and a significant overweighting in oil & gas exploration services provider Newpark Resources, which returned -14%. LARGEST DETRACTORS VS. BENCHMARK Valero Energy Corp. NCS Multistage s, Inc. Marathon Petroleum Corp. Newpark Resources, Inc. Seven Generations Energy Ltd. * 1 basis point = 0.01%. & Services & Services & Average Contribution (basis points)* -2.50% -34 0.49% -29-2.15% -24 0.76% -18 0.49% -17 2 For definitions and other important information, please see Definitions and Important Information section of this Fund Review.
Outlook and Positioning The quarterly increase in crude oil prices generally provided a modest boost to overall profitability within the sector, and helped the fund's positioning relative to its sector benchmark index. Throughout the quarter, we maintained the fund's overweighting in U.S. E&P companies, focusing primarily on higher-quality names with little debt, and this positioning proved rewarding on an absolute and relative basis. These companies continued to trade near historical low valuations relative to large, established integrated oil companies during the quarter, and we believed they would continue to grow U.S. oil production amid $50-$60 per barrel crude oil prices, a level that puts greater pressure on the profitability of other energy producers, particular those focusing on offshore production. Many U.S. E&P companies are among the sector's most capital efficient, meaning they have demonstrated the ability to grow oil production at half the commodity price of just a few years ago, which remains a competitive advantage. These U.S. companies also continue to benefit from strategic land ownership near fertile basins and improving well efficiency/productivity, and from maintaining little debt. These are significant advantages in a climate of historically lower commodity prices relative to what we saw four to five years ago. The U.S. E&P companies owned in the fund have increased production, even amid flat commodity prices, and many continue to become more efficient as they produce oil in existing and new domestic locations. Falling U.S. crude oil inventory levels provided support for higher oil prices this quarter. The International Energy Agency (IEA) is forecasting that the crude oil industry's supply-and-demand profile will remain favorable through 2018, assuming the combination of OPEC's supply cuts and decreased investment by non-opec producers continues. Generally speaking, oil markets are undersupplied, and demand has surprised to the upside. Historically, inventory reductions have led to a higher oil prices. Given these dynamics, we continue to believe that the best opportunities in the sector are U.S.-based E&P companies that have embraced disruptive technology to improve productivity. We have been allocating capital to companies with better cost positions, production growth and return prospects than their foreign peers. The portfolio's E&P holdings have roughly the same valuation as the benchmark as of period end, but our holdings are more capital efficient and are growing production faster, on average, than the companies in the benchmark. Generally speaking, outside of some E&Ps, we have not been hearing that many energy companies are aggressively ramping up production capacity; most are focused on improving their profitability in a flat oil-price environment and trying to keep costs in check. Demand for refined petroleum product continues to be strong, and as such, we have been evaluating the fund's refining exposure to assess whether additional commitment may help improve its overall risk/reward profile. 10 LARGEST HOLDINGS EOG Resources, Inc. Chevron Corp. Diamondback Energy, Inc. Halliburton Co. Exxon Mobil Corp. Pioneer Natural Resources Co. Phillips 66 Co. Encana Corp. RSP Permian, Inc. Devon Energy Corp. 10 Largest s as a % of Net Assets Total Number of s 72 Integrated Oil & Gas & Services Integrated Oil & Gas 46.89% ASSET ALLOCATION Asset Class Portfolio Index Change From Prior Quarter Domestic Equities 90.18% 98.04% -7.86% -1.09% International Equities 8.98% 1.96% 7.02% 0.58% Developed Markets 5.19% 1.79% 3.40% 0.63% Emerging Markets 3.79% 0.17% 3.62% -0.05% Tax-Advantaged Domiciles 0.00% 0.00% 0.00% 0.00% Bonds 0.00% 0.00% 0.00% 0.00% Cash & Net Other Assets 0.84% 0.00% 0.84% 0.51% 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. 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 MARKET SEGMENT Portfolio Index Change From Prior Quarter & 51.76% 27.68% 24.08% -0.58% Commodity Chemicals 1.90% -- 1.90% 0.00% Gas Utilities 0.49% -- 0.49% 0.01% Oil & Gas Storage & Transportation 7.61% 7.13% 0.48% 0.57% Oil & Gas Drilling 2.11% 1.69% 0.42% 0.42% LARGEST UNDERWEIGHTS BY MARKET SEGMENT Portfolio Index Change From Prior Quarter Integrated Oil & Gas 14.50% 40.06% -25.56% -0.28% 7.50% 9.98% -2.49% -0.23% & Services 13.05% 13.26% -0.21% 0.18% Coal & Consumable Fuels -- 0.20% -0.20% -0.09% LARGEST OVERWEIGHTS BY HOLDING Diamondback Energy, Inc. EOG Resources, Inc. Encana Corp. Halliburton Co. RSP Permian, Inc. & Services 5.27% 3.42% 3.11% 2.86% 2.75% LARGEST UNDERWEIGHTS BY HOLDING Exxon Mobil Corp. Integrated Oil & Gas -17.11% Chevron Corp. Integrated Oil & Gas -8.01% Schlumberger Ltd. ConocoPhillips Co. Valero Energy Corp. & Services -4.49% -3.26% -2.61% 3-YEAR RISK/RETURN STATISTICS Portfolio Index Beta 1.08 1.00 Standard Deviation 21.93% 19.89% Sharpe Ratio 0.04-0.07 Tracking Error 5.05% -- Information Ratio 0.42 -- R-Squared 0.95 -- 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. 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. RELATIVE WEIGHTS 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. MSCI US IMI Energy 25/50 Index is a modified marketcapitalization-weighted index of stocks designed to measure the performance of Energy companies in the MSCI U.S. Investable Market 2500 Index. The MSCI U.S. Investable Market 2500 Index is the aggregation of the MSCI U.S. Large Cap 300, Mid Cap 450, and Small Cap 1750 Indices. 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. 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. 656256.20