QUARTERLY FUND REVIEW AS OF JUNE 30, 2016 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 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: 0.78% 2 5.95% 12.53% 25.94% 14.19% 12.85% 7.18% S&P 500 2.46% 3.84% 3.99% 11.66% 12.10% 7.42% Dow Jones U.S. Select Real Estate Securities 5.42% 10.79% 22.72% 13.52% 12.18% 6.76% Morningstar Real Estate 5.51% 10.46% 19.50% 12.11% 11.17% 6.42% % Rank in Morningstar Category (1% = Best) -- -- 1% 9% 6% 29% # of Funds in Morningstar Category -- -- 291 246 210 157 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. This fund has a short term trading fee 0.75% for shares held less than 90 days. 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. 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): $5,212.85 Morningstar Category: 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
QUARTERLY FUND REVIEW: Fidelity Real Estate Investment AS OF JUNE 30, 2016 Market Review Real estate investment trusts (REITs) enjoyed a generally favorable market backdrop for the second quarter of 2016, gaining 5.42%, as measured by the Dow Jones U.S. Select Real Estate Securities SM. An unexpected decline in interest rates particularly late in the period, in the wake of the U.K's vote to leave the European Union boosted performance of the asset class. In a period of dollar strength and macroeconomic uncertainty, the domestic focus of REITs also helped their relative appeal. REITs far outpaced the broad U.S. stock and bond markets. U.S. stocks, for example, as measured by the S&P 500 index, returned 2.46%. The broad U.S. bond market, as measured by the Barclays U.S. Aggregate Bond, added 2.21% for the year's second quarter. Most of the sectors in the Dow Jones real estate index finished the quarter in positive territory. A particularly interest-ratesensitive category, health care, fared best, gaining 13%. Other categories to outperform the benchmark during the period included industrial/office (+13%), diversified REITs (+7%) and retail (+6%). Meanwhile, only two categories in the index produced negative returns. The weakest-performing REIT segment was self-storage (-6%) which gave back some of the large gains it had achieved in prior periods, and hotels (-3%), which faced concerns about a potential decline in travel spending and a deceleration in the revenue per available room. The residential category, which consists primarily of apartment REITs, gained just 1% but still lagged the real estate benchmark's return. Real estate will become the 11 th index sector at the end of August 2016, and market participants are closely watching the potential impact from this increase in visibility for the asset class. LARGEST CONTRIBUTORS VS. BENCHMARK Average Contribution (basis points)* Duke Realty LP Industrial/Office 2.91% 38 AvalonBay Communities, Inc. Residential -2.29% 24 DCT Industrial Trust, Inc. Industrial/Office 1.40% 22 Equity Residential (SBI) Residential -1.14% 16 Sovran Self Storage, Inc. Self Storage -0.73% 13 * 1 basis point = 0.01%. Performance Review For the three months ending June 30, 2016, the fund gained 5.95%, outpacing the 5.42% increase in the Dow Jones U.S. Select Real Estate Securities SM. Versus the benchmark, the fund benefited from strong security selection in the industrial/office and residential sectors. To a lesser extent, stock picking was negative in the retail and diversified categories. Meanwhile, the fund's relative overweighting in the outperforming industrial/office category added value, with the impact tempered by maintaining less exposure to the strong-performing health care REIT group. Overall, sector allocation also added slightly to results, even as our preference is to add value mainly through security selection. sector weightings typically are a byproduct of bottom-up stock decisions. On an individual basis, the fund benefited from our overweightings in several strong-performing industrial REITs, led by Duke Realty and DCT Industrial Trust, which gained 19% and about 22%, respectively for the quarter. Like other industrial REITs, these companies have lately benefited from optimism about the business prospects for warehouse owners, as Internet shopping has fueled demand for the services offered by Duke, DCT and its competitors. In a difficult environment for residential REITs, several of the fund's top individual contributors were apartment owners in which we were meaningfully underweighted. For example, the fund benefited from its reduced exposure to AvalonBay Communities and Equity Residential, both of which produced negative returns this quarter. That said, the fund was overweighted in UDR, which similarly lost ground and was our largest individual detractor. Of final note, self-storage REITs struggled this period. Our lack of exposure to two benchmark components, Sovran Self Storage and CubeSmart, proved beneficial in light of those companies' respective returns of about -10% and about -7%. However, our overweighting in Public Storage the fund's second-largest holding at period end and the nation's largest self-storage operator proved detrimental, as the stock retuned approximately -7%. LARGEST DETRACTORS VS. BENCHMARK Average Contribution (basis points)* UDR, Inc. Residential 1.99% -18 Host Hotels & Resorts, Inc. Liberty Property Trust (SBI) American Homes 4 Rent Class A Senior Housing Properties Trust (SBI) * 1 basis point = 0.01%. Hotels 1.99% -15 Industrial/Office -0.85% -12 Residential -0.49% -10 Healthcare -0.71% -9 2 For definitions and other important information, please see Definitions and Important Information section of this Fund Review.
QUARTERLY FUND REVIEW: Fidelity Real Estate Investment AS OF JUNE 30, 2016 Outlook and Positioning As of quarter end, our portfolio positioning is slightly more defensive, incrementally emphasizing health care REITs and socalled "triple-nets" an arrangement whereby the lessee agrees to pay taxes, insurance and maintenance (the three "nets") associated with the property, in addition to customary fees. Health care and triple-nets represent areas of the REIT market that, in general, are characterized by longer-duration lease terms. Other major themes exhibited in the portfolio include stocks we believe demonstrate characteristics of GARP (growth at a reasonable price). We strove to find opportunities in REITs with growth expectations similar to those of the broader REIT market but that currently trade at a discount to their particular group or to their own historical valuation measures. We also looked to identify stocks of companies we believe could benefit from a corporate event, such as a spinoff or asset sale, in order to unlock value. Such events could be driven internally by company management teams or directors, or externally through the actions of activist investors. We continue to monitor fundamental, valuation and capital considerations for REITs. In our view, the fundamentals for REITs remain favorable: Growth is still positive however, by our calculation the pace of growth is no longer accelerating. As of quarter end, REITs overall were trading near the value of their underlying properties. While REITs were more expensive versus historical prices, at least on the basis of funds from operations (FFO) multiples, they were less expensive when comparing historical dividend-yield spreads. We think access to and cost of capital remains good, with higher credit costs offset by lower long-term interest rates. LARGEST OVERWEIGHTS BY MARKET SEGMENT Change From Prior Quarter Industrial/Office 25.44% 22.15% 3.29% -0.72% Residential 20.58% 19.56% 1.02% -0.27% Commercial 1.68% 0.74% 0.94% -0.00% Real-Estate Related 0.85% -- 0.85% 0.12% Hotels 5.69% 5.32% 0.36% 0.25% LARGEST UNDERWEIGHTS BY MARKET SEGMENT Change From Prior Quarter Diversified 1.57% 4.22% -2.65% -1.22% Healthcare 10.44% 12.36% -1.92% 0.63% Retail 24.94% 26.56% -1.62% 1.53% Self Storage 8.28% 9.08% -0.80% 0.32% 10 LARGEST HOLDINGS Simon Property Group, Inc. Public Storage Prologis, Inc. Ventas, Inc. Welltower, Inc. Duke Realty LP Host Hotels & Resorts, Inc. Boston Properties, Inc. General Growth Properties, Inc. UDR, Inc. 10 Largest s as a % of Net Assets Retail Self Storage Industrial/Office Healthcare Healthcare Industrial/Office Hotels Industrial/Office Retail Total Number of s 52 Residential 46.92% 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.
QUARTERLY FUND REVIEW: Fidelity Real Estate Investment AS OF JUNE 30, 2016 LARGEST OVERWEIGHTS BY HOLDING Duke Realty LP Industrial/Office 3.12% UDR, Inc. Residential 2.01% Host Hotels & Resorts, Inc. Hotels 1.96% Equity Lifestyle Properties, Inc. Residential 1.84% DDR Corp. Retail 1.80% LARGEST UNDERWEIGHTS BY HOLDING Simon Property Group, Inc. Retail -2.87% Vornado Realty Trust Diversified -2.68% AvalonBay Communities, Inc. Residential -2.08% Federal Realty Investment Trust (SBI) Retail -1.77% Regency Centers Corp. Retail -1.24% ASSET ALLOCATION Asset Class Change From Prior Quarter Domestic Equities 99.46% 100.00% -0.54% 0.63% 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 0.54% 0.00% 0.54% -0.63% 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 15.34% 15.48% Sharpe Ratio 0.92 0.87 Tracking Error 1.18% -- Information Ratio 0.57 -- 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.
QUARTERLY FUND REVIEW: Fidelity Real Estate Investment AS OF JUNE 30, 2016 Definitions and Important Information 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. 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 2016 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 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. 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. 2016 FMR LLC. All rights reserved. Not NCUA or NCUSIF insured. May lose value. No credit union guarantee. 656358.13.0