QUARTERLY FUND REVIEW AS OF JUNE 30, 2018 Fidelity Select Industrials Investment Approach Fidelity Select Industrials is a sector-based equity-focused strategy that seeks to outperform its benchmark through active management. We believe that uncertainty provides investment opportunity. Stock prices can become disengaged from a company's intrinsic (fair) value at cyclical extremes because of investor overreaction. Cyclical stocks exhibit repeatable patterns. We believe this can present opportunities for a disciplined investor whose time horizon spans the next cycle. We strive to capitalize on these opportunities through intensive, academic-style research on cyclical drivers and company-specific fundamentals, along with disciplined portfolio construction. The fund's success is predicated on finding the right mix of undervalued cyclicals and moreconsistent earnings growers throughout the cycle. Sector strategies could be used by investors as alternatives to individual stocks for either tacticalor strategic-allocation purposes. PERFORMANCE SUMMARY Cumulative 3 Month YTD 1 Year Annualized 3 Year 5 Year 10 Year/ LOF 1 Select Industrials Gross Expense Ratio: 0.77% 2-2.04% -3.53% 9.58% 9.46% 11.19% 10.30% S&P 500 3.43% 2.65% 14.37% 11.93% 13.42% 10.17% MSCI US IMI Industrials 25/50 Linked -1.99% -3.77% 7.66% 11.52% 12.87% 9.87% Morningstar Fund Industrials -1.30% -2.86% 10.04% 10.70% 12.38% 10.01% % Rank in Morningstar Category (1% = Best) -- -- 46% 72% 69% 28% # of Funds in Morningstar Category -- -- 46 42 39 27 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 03/03/1997. 2 This expense ratio is from the most recent prospectus and generally is based on amounts incurred during the most recent fiscal year. It does not include any fee waivers or reimbursements, which would be reflected in the fund's net expense ratio. 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): Tobias Welo Trading Symbol: FCYIX Start Date: March 03, 1997 Size (in millions): $702.78 Morningstar Category: Fund Industrials Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Industrial industries can be significantly affected by general economic trends, changes in consumer sentiment and spending, commodity prices, legislation, government regulation and spending, import controls, worldwide competition, and liability for environmental damage, depletion of resources, and mandated expenditures for safety and pollution control. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks. The fund may have additional volatility because of its narrow concentration in a specific industry. Non-diversified funds that focus on a relatively small number of stocks tend to be more volatile than diversified funds and the market as a whole. Not FDIC Insured May Lose Value No Bank Guarantee
QUARTERLY FUND REVIEW: Fidelity Select Industrials AS OF JUNE 30, 2018 Market Review For the three months ending June 30, 2018, the industrials sector, as measured by the MSCI U.S. IMI Industrials 25/50, returned -1.99%, versus 3.43% for the broadly based S&P 500. Among the 11 S&P 500 sectors, industrials recorded the lowest total return this quarter, just behind financials (-3.2%). Many stocks in the industrials sector were adversely affected by increasing concerns about worsening trade relations between the U.S. and other nations, especially China. Among the industry groups with meaningful weightings in the MSCI sector index, many had negative returns, including airlines (-10%), construction machinery & heavy trucks (-6%), industrial machinery (-4%) and aerospace & defense (-4%). Airlines, hampered by rising fuel costs as the price of crude oil advanced, were weighed down by American Airlines Group (-27%) and Southwest Airlines (-11%), among others. Research & consulting services (+9%) and railroads (+9%) were two of the better-performing index groups. Within the railroads group, CSX was a standout (+15%), along with Norfolk Southern (+12%) and Union Pacific (+6%), as rail traffic and freight rates continued to rise. According to a report released by financial data-keeper FactSet Research Systems in late June, industrials ranked fifth among S&P 500 sectors in first-quarter earnings growth, at +23.0%, and also fifth in Q1 revenue growth, at +10.5%. For the second quarter, earnings growth in the sector was expected to come in at a healthy +12.6% rate, good enough for seventh place. For Q2 revenue expectations, the sector ranked sixth, at +7.9%. Performance Review For the second quarter, the fund returned -2.04%, slightly trailing the MSCI U.S. IMI Industrials 25/50 and considerably short of the S&P 500. Versus the MSCI sector index, stock selection in air freight & logistics weighed most on the fund's relative performance. Among individual holdings, several overweighted positions in aerospace & defense were noteworthy detractors, including General Dynamics (-15%) the fund's largest relative detractor Huntington Ingalls Industries (- 16%) and Northrop Grumman (-12%). The first two are shipbuilders, an area we've been bullish about for some time because of what we view as a supportive defense budget. However, higher steel prices and other costs hampered the stocks this quarter. As for militaryindustrial conglomerate Northrop Grumman, despite the company topping analysts' estimates for revenue and earnings for the first quarter, investors seemed to focus on the late-april release of cashflow and sales guidance that was flat. The same day, Northrop Grumman announced it didn't submit a bid to build the next round of the U.S. Air Force's GPS III satellites a contract that could be worth up to $10 billion. On the positive side, stock selection in industrial machinery contributed most. Picks in construction machinery & heavy trucks, aerospace & defense, and industrial conglomerates also lifted our relative result. At the stock level, the top relative contributor was an out-of-index position in Canada-based commercial jet manufacturer Bombardier, which rose 36% this quarter. Prospects for the company and its C Series jets have brightened notably since industry heavyweight Airbus announced its purchase of a 51% stake in the company in October 2017. The ability to leverage Airbus marketing and financial resources helped Bombardier boost orders for the C Series. Avoiding index name American Airlines Group also lifted our result versus the MSCI index. These shares returned -27% for the quarter, driven lower by increasing costs for jet fuel, as well as a difficult year-earlier earnings comparison. The company lowered its 2018 earnings target in April, despite strong demand for both business and leisure travel that drove a roughly 6% year-overyear revenue increase. LARGEST CONTRIBUTORS VS. BENCHMARK Bombardier, Inc. Class B (sub. vtg.) 3M Co. Lockheed Martin Corp. Aerospace & Industrial Conglomerates Aerospace & Average Contribution (basis points)* 1.15% 38-4.04% 35-2.79% 29 Snap-On, Inc. Industrial Machinery 1.77% 20 American Airlines Group, Inc. * 1 basis point = 0.01%. Airlines -0.64% 19 LARGEST DETRACTORS VS. BENCHMARK General Dynamics Corp. Aerospace & Northrop Grumman Corp. Aerospace & Average Contribution (basis points)* 2.29% -33 2.75% -28 CSX Corp. Railroads -1.75% -27 General Electric Co. Industrial Conglomerates -0.24% -22 Azul SA Airlines 0.23% -16 * 1 basis point = 0.01%. 2 For definitions and other important information, please see Definitions and Important Information section of this Fund Review.
QUARTERLY FUND REVIEW: Fidelity Select Industrials AS OF JUNE 30, 2018 Outlook and Positioning As of June 30, we see healthy conditions in a variety of end markets in the industrials sector. Global capital spending appears to be accelerating, although we believe this will be more evident in 2019 than in 2018 because of the delayed impact on revenue and earnings. The fund is positioned to benefit from this pick-up in spending through overweightings in industrial machinery our largest industry overweighting at quarter end and in construction & engineering. We believe both groups could be helped by a firming construction cycle, particularly in non-residential construction. The commercial aerospace industry appears solid at period end, reflecting healthy global GDP growth. The defense industry is another bright spot, benefiting from a supportive U.S. defense budget, especially in the areas of equipment procurement and R&D, the two most important drivers of revenue for defense contractors. As a result, aerospace & defense was another significant overweighting for the fund as of June 30. With that said, the tensions around international trade could get worse before they get better. Barring major fallout from a trade war, though, we're relatively optimistic about the sector's prospects for the next year or two. Industrial conglomerates remained our largest industry underweighting at quarter end. Much of this was due to a lighterthan-benchmark exposure to 3M. We had a small position in 3M at the end of June, making this stock our largest individual underweighting. General Electric another conglomerate had also been a large underweighting the prior quarter. However, we significantly increased this position during the quarter, as we thought most of the bad news was already priced into the stock. As a result, GE was the fund's second-largest position at quarter end. 3M contributed, while GE was a detractor for the three months. Other large underweightings at the end of June included defense contractor Lockheed Martin, jet manufacturer/defense contractor Boeing and package-delivery firm United Parcel Service. We considered Lockheed the least attractive of the major defense contractors. From a relative performance standpoint, Lockheed aided relative performance (it returned -12% and we didn't own it), while Boeing and UPS both outperformed the sector's result, so these underweightings detracted from relative performance. Three of our largest overweightings as of June 30 were aerospace & defense stocks: United Technologies, Northrop Grumman and General Dynamics. The latter two were mentioned earlier as relative detractors. United Technologies did not have a meaningful impact on the fund's relative performance. 10 LARGEST HOLDINGS United Technologies Corp. General Electric Co. Honeywell International, Inc. Union Pacific Corp. Northrop Grumman Corp. General Dynamics Corp. The Boeing Co. Ingersoll-Rand PLC FedEx Corp. Fortive Corp. 10 Largest s as a % of Net Assets Total Number of s 60 Industrial Conglomerates Industrial Conglomerates Railroads Industrial Machinery Air Freight & Logistics Industrial Machinery 41.60% 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. CHARACTERISTICS Valuation Price/Earnings Trailing 19.6x 19.1x Price/Earnings (IBES 1-Year Forecast) 15.9x 16.0x Price/Book 3.9x 4.0x Price/Cash Flow 15.5x 14.7x Return on Equity (5-Year Trailing) 18.0% 19.2% Growth Sales/Share Growth 1-Year (Trailing) 9.8% 8.2% Earnings/Share Growth 1-Year (Trailing) 39.4% 42.6% Earnings/Share Growth 1-Year (IBES Forecast) 24.7% 23.7% Earnings/Share Growth 5-Year (Trailing) 8.3% 9.7% Size ed Average Market Cap ($ Billions) 50.4 55.2 ed Median Market Cap ($ Billions) 29.5 34.8 Median Market Cap ($ Billions) 11.5 2.5 3 For definitions and other important information, please see Definitions and Important Information section of this Fund Review.
QUARTERLY FUND REVIEW: Fidelity Select Industrials AS OF JUNE 30, 2018 LARGEST OVERWEIGHTS BY MARKET SEGMENT Change From Prior Quarter Industrial Machinery 15.48% 10.35% 5.13% -0.47% 28.27% 23.59% 4.68% 0.07% Construction & Engineering 3.93% 1.77% 2.16% -0.54% Home Improvement Retail 1.01% -- 1.01% 0.10% Airlines 4.67% 4.07% 0.59% 0.89% LARGEST UNDERWEIGHTS BY MARKET SEGMENT Change From Prior Quarter Industrial Conglomerates 10.19% 13.11% -2.92% 4.06% Building Products 2.24% 4.04% -1.80% -1.84% Air Freight & Logistics 4.25% 6.03% -1.78% -0.79% Electrical Components & Equipment 3.55% 5.30% -1.75% -0.29% Environmental & Facilities Services 1.72% 3.36% -1.64% 0.38% LARGEST OVERWEIGHTS BY HOLDING United Technologies Corp. 3.16% Northrop Grumman Corp. 2.50% Ingersoll-Rand PLC Industrial Machinery 2.21% General Dynamics Corp. 2.20% Fortive Corp. Industrial Machinery 2.07% LARGEST UNDERWEIGHTS BY HOLDING 3M Co. Industrial Conglomerates -3.94% The Boeing Co. -2.65% Lockheed Martin Corp. -2.62% United Parcel Service, Inc. Class B Air Freight & Logistics -2.52% CSX Corp. Railroads -1.85% ASSET ALLOCATION Asset Class Change From Prior Quarter Domestic Equities 94.30% 98.73% -4.43% -2.13% International Equities 5.15% 1.27% 3.88% 1.88% Developed Markets 4.91% 1.27% 3.64% 1.64% Emerging Markets 0.24% 0.00% 0.24% 0.24% Tax-Advantaged Domiciles 0.00% 0.00% 0.00% 0.00% Bonds 0.00% 0.00% 0.00% 0.00% Cash & Net Other Assets 0.55% 0.00% 0.55% 0.25% 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 1.05 1.00 Standard Deviation 13.14% 12.37% Sharpe Ratio 0.67 0.88 Tracking Error 2.40% -- Information Ratio -0.86 -- R-Squared 0.97 -- "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.
QUARTERLY FUND REVIEW: Fidelity Select Industrials AS OF JUNE 30, 2018 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. CHARACTERISTICS Earnings-Per-Share Growth measures the growth in reported earnings per share over the specified past time period. Median Market Cap identifies the median market capitalization of the portfolio or benchmark as determined by the underlying security market caps. Price-to-Book (P/B) Ratio is the ratio of a company's current share price to reported accumulated profits and capital. Price/Cash Flow is the ratio of a company's current share price to its trailing 12-months cash flow per share. Price-to-Earnings (P/E) Ratio (IBES 1-Year Forecast) is the ratio of a company's current share price to Wall Street analysts' estimates of earnings. Price-to-Earnings (P/E) Ratio Trailing is the ratio of a company's current share price to its trailing 12-months earnings per share. Return on Equity (ROE) 5-Year Trailing is the ratio of a company's last five years historical profitability to its shareholders' equity. Preferred stock is included as part of each company's net worth. Sales-Per-Share Growth measures the growth in reported sales over the specified past time period. ed Average Market Cap identifies the market capitalization of the average equity holding as determined by the dollars invested in the portfolio or benchmark. ed Median Market Cap identifies the market capitalization of the median equity holding as determined by the dollars invested in the portfolio or benchmark. 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. 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 topperforming 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 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. At a shareholder meeting on 12/8/17, a proposal was approved to combine the oversight of Fidelity's sector funds with Fidelity's broader equity and high income funds under a single Board of Trustees. The unified Board will be effective on 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. MSCI US IMI Industrials 25/50 is a modified marketcapitalization-weighted index of stocks designed to measure the performance of Industrials companies in the MSCI U.S. Investable Market 2500. The MSCI U.S. Investable Market 2500 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 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. 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. 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. 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. 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. 657263.24.0 Diversification does not ensure a profit or guarantee against a loss.