-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I2hSN6wNtZhc48OqRDnIzL/DIbwAeP43vUT/x0JTzgdYD8SD78zK7BtukIBHNCeb ++I7vGwSkDRkhTLQA2RT8Q== 0000320351-96-000046.txt : 19961021 0000320351-96-000046.hdr.sgml : 19961021 ACCESSION NUMBER: 0000320351-96-000046 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961018 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY SELECT PORTFOLIOS CENTRAL INDEX KEY: 0000320351 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 042732797 STATE OF INCORPORATION: MA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03114 FILM NUMBER: 96645436 BUSINESS ADDRESS: STREET 1: 82 DEVONSHIRE ST CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6174391263 MAIL ADDRESS: STREET 1: 82 DEVONSHIRE STREET STREET 2: MAILZONE ZH1 CITY: BOSTON STATE: MA ZIP: 02109 N-30D 1 (2_FIDELITY_LOGOS)FIDELITY SELECT PORTFOLIOS(REGISTERED TRADEMARK) AIR TRANSPORTATION AMERICAN GOLD AUTOMOTIVE BIOTECHNOLOGY BROKERAGE AND INVESTMENT MANAGEMENT CHEMICALS COMPUTERS CONSTRUCTION AND HOUSING CONSUMER INDUSTRIES DEFENSE AND AEROSPACE DEVELOPING COMMUNICATIONS ELECTRONICS ENERGY ENERGY SERVICE ENVIRONMENTAL SERVICES FINANCIAL SERVICES FOOD AND AGRICULTURE HEALTH CARE HOME FINANCE INDUSTRIAL EQUIPMENT INDUSTRIAL MATERIALS INSURANCE LEISURE MEDICAL DELIVERY MONEY MARKET MULTIMEDIA NATURAL GAS PAPER AND FOREST PRODUCTS PRECIOUS METALS AND MINERALS REGIONAL BANKS RETAILING SOFTWARE AND COMPUTER SERVICES TECHNOLOGY TELECOMMUNICATIONS TRANSPORTATION UTILITIES GROWTH SEMIANNUAL REPORT AUGUST 31, 1996 CONTENTS PERFORMANCE OVERVIEW AND 2 MARKET RECAP FUND UPDATES* CONSUMER SECTOR 4 CONSUMER INDUSTRIES (FORMERLY CONSUMER 10 PRODUCTS) 16 FOOD AND AGRICULTURE 22 LEISURE 28 MULTIMEDIA RETAILING CYCLICALS SECTOR 34 AIR TRANSPORTATION 39 AUTOMOTIVE 45 CHEMICALS 51 CONSTRUCTION AND HOUSING 57 ENVIRONMENTAL SERVICES 63 INDUSTRIAL EQUIPMENT 69 INDUSTRIAL MATERIALS 75 PAPER AND FOREST PRODUCTS 81 TRANSPORTATION ENERGY, UTILITIES AND 87 AMERICAN GOLD NATURAL RESOURCES SECTOR 94 ENERGY 100 ENERGY SERVICE 106 NATURAL GAS 112 PRECIOUS METALS AND MINERALS 118 UTILITIES GROWTH FINANCIAL SERVICES SECTOR 124 BROKERAGE AND INVESTMENT MANAGEMENT 129 FINANCIAL SERVICES 134 HOME FINANCE 140 INSURANCE 146 REGIONAL BANKS HEALTH CARE SECTOR 152 BIOTECHNOLOGY 158 HEALTH CARE 164 MEDICAL DELIVERY * FUND UPDATES FOR EACH SELECT PORTFOLIO INCLUDE: PERFORMANCE AND INVESTMENT SUMMARY, MANAGER'S OVERVIEW, INVESTMENTS, AND FINANCIAL STATEMENTS. TECHNOLOGY SECTOR 170 COMPUTERS 176 DEFENSE AND AEROSPACE 182 DEVELOPING COMMUNICATIONS 188 ELECTRONICS 194 SOFTWARE AND COMPUTER SERVICES 200 TECHNOLOGY 207 TELECOMMUNICATIONS 213 MONEY MARKET NOTES TO FINANCIAL STATEMENTS 220 FOOTNOTES TO THE FINANCIAL STATEMENTS To reduce expenses and demonstrate respect for our environment, we have initiated a project through which we will begin eliminating duplicate copies of most financial reports and prospectuses to most households, even if they have more than one account in the fund. If additional copies of financial reports, prospectuses or historical account information are needed, please call 1-800-544-6666. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. PERFORMANCE OVERVIEW DEAR SHAREHOLDER: The six-month period ended August 31, 1996, provided varied returns from different sectors for equity investors. The Standard & Poor's 500 Index returned 2.96% during the period, including reinvested dividends. During the six months, 18 of our 35 Select equity portfolios outperformed the S&P 500. Of the remaining 17, 11 produced negative returns. The best of the Select portfolios was RETAILING, which generated a return of 15.86%, while AIR TRANSPORTATION performed worst, losing 16.93%. Confusion over the direction of interest rates made for a volatile market in the summer months. Investors became concerned that emerging data indicating a strengthening economy might lead the Federal Reserve Board to increase short-term interest rates to head off inflation. Interest rate increases tend to slow economic growth and add to corporate borrowing costs, decreasing company earnings. Not all the news was negative, though, as continued strong corporate earnings reports, large cash inflows into mutual funds, wide-spread optimism and high-profile merger announcements provided a generally favorable environment for stocks on either side of a mid-summer stock market correction. Overall, large-capitalization stocks tended to perform better than the smaller company stocks that make up a preponderance of our Select portfolios. Despite the unusual length of the current economic expansion, signs of strength in the economy over the past six months helped many CYCLICALS - those companies whose profitability levels tend to rise and fall with the economy. Consumer cyclicals - dependent on upticks in people's spending habits that result from a strong economy - had fairly solid returns, as evidenced by the 8.83% return of AUTOMOTIVE. One notable exception in the cyclical area was AIR TRANSPORTATION, which suffered from the fallout from several highly publicized air disasters. Early cyclicals - those that tend to do well at the beginning of an economic upturn - and basic industries had mixed returns as CONSTRUCTION AND HOUSING, CHEMICALS, INDUSTRIAL EQUIPMENT, INDUSTRIAL MATERIALS and PAPER AND FOREST PRODUCTS had returns in a range of 1.95% to 7.92%. The public's greater propensity to spend money during the period was one factor that helped the CONSUMER sector. In fact, RETAILING rocketed to the forefront and returned 15.86% as retailers' earnings jumped due to increased consumer spending. Confusion over the direction of the economy aided consumer nondurables, which historically grow no matter what the economic climate. However, FOOD AND AGRICULTURE fell 4.33% during the period, largely as a result of an unfavorable court ruling that battered the prices of tobacco stocks. Stocks in the HEALTH CARE sector endured a somewhat bumpy ride. BIOTECHNOLOGY'S negative return reflected a correction of biotech stocks from overvalued levels, particularly during the past three months. Disappointing HMO price estimates and earnings reports - coupled with slowing patient admission growth with respect to hospital stocks - played key roles in the performance of both HEALTH CARE and MEDICAL DELIVERY. News concerning semiconductor stocks and small-capitalization stocks dominated the TECHNOLOGY sector over the past six months. After posting solid gains through the first part of 1996, many small-company technology stocks - including those with businesses tied to the Internet - had a sudden fall from grace in the market's brief July correction. Semiconductors were lackluster performers for much of the year based on a worldwide supply glut in computer chips and faltering demand. However, there was a mixed range of returns among the subsectors that make up the technology area. DEFENSE AND AEROSPACE, DEVELOPING COMMUNICATIONS and TELECOMMUNICATIONS had returns ranging from 1.51% to 6.62% versus the - -11.29% to -1.60% range posted by TECHNOLOGY, COMPUTERS and ELECTRONICS. The strong relative performance of software and networking companies helped SOFTWARE AND COMPUTER SERVICES to record only a slight downturn during the period. While there was confusion over the direction of interest rates in the summer, the overall interest rate environment remained generally positive for stocks in the FINANCIAL SERVICES sector. This and other factors helped produce positive results. The period was marked by sound fundamentals - or business prospects - as earnings estimates came through as expected and overall credit quality didn't deteriorate as some had feared. Banks improved their earnings growth by implementing balance sheet restructuring, cost-cutting and capital management measures. On the brokerage front, the speculative nature of the market translated into dramatically high trading volumes, generally a positive indicator. As a result of these trends, HOME FINANCE, REGIONAL BANKS, BROKERAGE AND INVESTMENT MANAGEMENT, FINANCIAL SERVICES and INSURANCE all outpaced the S&P 500. The ENERGY sector received high marks, as the period was characterized by robust demand and production, strengthening oil and gas prices and renewed confidence in exploration. Customers also sought to utilize new technologies put forth by oil service companies. ENERGY SERVICE, ENERGY and NATURAL GAS benefited from these positive developments. Several circumstances led to a glut of gold on the market. The added supply led to declines in the price of that metal, affecting the performance of PRECIOUS METALS AND MINERALS. At the same time, other companies in the NATURAL RESOURCES sector that showed strong growth of production and reserves - including many holdings in AMERICAN GOLD - fared better than counterparts more sensitive to changes in the price of gold. As is typical, stock performance in the UTILITIES sector closely tracked the bond market, which struggled due to fears that the Fed would raise interest rates. On the positive side, cool weather and tight supply helped gas utility stocks. Uncertainty over deregulation and resulting competitive pressures continued to affect stocks in the industry. Domestic equities remain at excessive valuation levels, although the market's rebound from the brief correction in July has encompassed a greater breadth of stocks than before. The most important issue remains whether or not corporate earnings growth will continue to support the market at these levels. Certainly, this country's tight labor market will eventually put pressure on profit margins if businesses are not able to pass on higher prices to the consumer. What follows are detailed summaries of all the portfolio. We hope you find them useful in evaluating your investments. As always, we thank you for your continued interest in Fidelity Select Portfolios. Sincerely, Robert J. Haber Director, U.S. Equity Research Select Group Leader CUMULATIVE TOTAL RETURNS FOR THE SIX MONTHS ENDED AUGUST 31, 1996 Row: 1, Col: 1, Value: 15.86 Row: 2, Col: 1, Value: 15.13 Row: 3, Col: 1, Value: 14.31 Row: 4, Col: 1, Value: 14.23 Row: 5, Col: 1, Value: 9.890000000000001 Row: 6, Col: 1, Value: 8.83 Row: 7, Col: 1, Value: 8.390000000000001 Row: 8, Col: 1, Value: 8.0 Row: 9, Col: 1, Value: 7.92 Row: 10, Col: 1, Value: 7.33 Row: 11, Col: 1, Value: 6.619999999999999 Row: 12, Col: 1, Value: 5.51 Row: 13, Col: 1, Value: 4.649999999999999 Row: 14, Col: 1, Value: 4.55 Row: 15, Col: 1, Value: 4.41 Row: 16, Col: 1, Value: 4.319999999999999 Row: 17, Col: 1, Value: 3.35 Row: 18, Col: 1, Value: 3.21 Row: 19, Col: 1, Value: 2.96 Row: 20, Col: 1, Value: 2.27 Row: 21, Col: 1, Value: 1.95 Row: 22, Col: 1, Value: 1.51 Row: 23, Col: 1, Value: 1.35 Row: 24, Col: 1, Value: 1.15 Row: 25, Col: 1, Value: 0.23 Row: 26, Col: 1, Value: -0.6100000000000001 Row: 27, Col: 1, Value: -1.2 Row: 28, Col: 1, Value: -1.6 Row: 29, Col: 1, Value: -3.1 Row: 30, Col: 1, Value: -3.58 Row: 31, Col: 1, Value: -4.33 Row: 32, Col: 1, Value: -4.49 Row: 33, Col: 1, Value: -5.119999999999999 Row: 34, Col: 1, Value: -7.37 Row: 35, Col: 1, Value: -11.29 Row: 36, Col: 1, Value: -16.93 Retailing 15.86%Energy Service 15.13%Natural Gas 14.31%Energy 14.23%Home Finance 9.89%Automotive 8.83%Regional Banks 8.39%American Gold 8.00%Construction & Housing 7.92%Environmental Services 7.33%Defense and Aerospace 6.62%Brokerage and Investment Management 5.51%Financial Services 4.65%Chemicals 4.55%Industrial Materials 4.41%Paper and Forest Products 4.32%Insurance 3.35%Leisure 3.21%S&P 500 2.96%Developing Communications 2.27%Industrial Equipment 1.95%Telecommunications 1.51%Consumer Industries 1.35%Health Care 1.15%Utilities Growth 0.23%Software and Computer Services - -0.61%Transportation -1.20%Electronics -1.60%Medical Delivery - -3.10%Precious Metals and Minerals -3.58%Food and Agriculture - -4.33%Multimedia -4.49%Computers -5.12%Biotechnology -7.37%Technology - -11.29%Air Transportation -16.93% PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. TOTAL RETURNS INCLUDE CHANGES IN A FUND'S SHARE PRICE, PLUS REINVESTMENT OF ANY DIVIDENDS AND CAPITAL GAINS BUT DOES NOT INCLUDE SELECT'S 3% SALES CHARGE, AND CERTAIN FEES PAID BY SHAREHOLDERS UPON EXCHANGE OR REDEMPTION. FIGURES FOR THE STANDARD & POOR'S 500 INDEX (S&P 500 (registered trademark)), AN UNMANAGED INDEX OF COMMON STOCK PRICES, INCLUDE REINVESTMENT OF DIVIDENDS. S&P 500 IS A REGISTERED TRADEMARK OF STANDARD & POOR'S. ALL PERFORMANCE NUMBERS ARE HISTORICAL; EACH EQUITY FUND'S SHARE PRICE AND RETURN WILL VARY AND SHAREHOLDERS MAY HAVE A GAIN OR LOSS WHEN THEY SELL THEIR SHARES. IF FMR HAD NOT REIMBURSED CERTAIN EXPENSES FOR SOME OF THE FUNDS, THOSE RETURNS WOULD HAVE BEEN LOWER. CONSUMER INDUSTRIES PORTFOLIO (FORMERLY CONSUMER PRODUCTS PORTFOLIO) PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past one year, five year, and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF FEBRUARY 29, 1996 MONTH YEAR YEARS FUND S CONSUMER INDUSTRIES 1.35% 18.59% 84.78% 130.54% CONSUMER INDUSTRIES -1.70% 15.03% 79.24% 123.62% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 117.91% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on June 29, 1990. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 29, 1996 YEAR YEARS FUND CONSUMER INDUSTRIES 18.59% 13.07% 14.47% CONSUMER INDUSTRIES 15.03% 12.38% 13.91% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.43% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19960831 19960909 152106 S00000000000001 Consumer Industries SP Standard & Poor 500 00517 SP001 1990/06/29 9700.00 10000.00 1990/07/31 9670.90 9980.27 1990/08/31 8943.40 9078.05 1990/09/30 8439.00 8635.95 1990/10/31 8749.40 8598.82 1990/11/30 9234.40 9154.30 1990/12/31 9593.72 9409.71 1991/01/31 9808.43 9819.97 1991/02/28 10569.68 10522.10 1991/03/31 11077.18 10776.73 1991/04/30 10950.31 10802.60 1991/05/31 11477.33 11269.27 1991/06/30 10911.27 10753.14 1991/07/31 11623.72 11254.23 1991/08/31 12101.94 11520.96 1991/09/30 11994.59 11328.56 1991/10/31 12375.21 11480.36 1991/11/30 11857.95 11017.70 1991/12/31 13290.07 12278.13 1992/01/31 13379.46 12049.75 1992/02/29 13836.37 12206.40 1992/03/31 13677.45 11968.38 1992/04/30 13717.18 12320.25 1992/05/31 13627.78 12380.62 1992/06/30 13015.69 12196.14 1992/07/31 13388.15 12694.97 1992/08/31 13253.65 12434.72 1992/09/30 13377.81 12581.45 1992/10/31 13595.08 12625.48 1992/11/30 14246.90 13056.01 1992/12/31 14427.78 13216.60 1993/01/31 14331.67 13327.62 1993/02/28 13851.10 13508.88 1993/03/31 14662.73 13793.92 1993/04/30 14566.61 13460.10 1993/05/31 15719.98 13820.83 1993/06/30 15730.66 13860.91 1993/07/31 15880.17 13805.47 1993/08/31 16916.07 14328.70 1993/09/30 17289.85 14218.37 1993/10/31 17823.81 14512.69 1993/11/30 17428.68 14374.82 1993/12/31 17987.73 14548.75 1994/01/31 17835.98 15043.41 1994/02/28 17789.29 14635.73 1994/03/31 16645.36 13997.61 1994/04/30 16823.06 14176.78 1994/05/31 16600.01 14409.28 1994/06/30 15684.31 14056.26 1994/07/31 16106.94 14517.30 1994/08/31 17046.12 15112.51 1994/09/30 16729.15 14742.25 1994/10/31 17057.86 15073.95 1994/11/30 16224.34 14524.96 1994/12/31 16716.09 14740.37 1995/01/31 16569.67 15122.58 1995/02/28 16972.32 15711.91 1995/03/31 17435.98 16175.57 1995/04/30 17815.10 16651.94 1995/05/31 18145.91 17317.52 1995/06/30 18133.66 17719.80 1995/07/31 18893.31 18307.39 1995/08/31 18856.56 18353.34 1995/09/30 19861.26 19127.86 1995/10/31 20755.69 19059.57 1995/11/30 21980.94 19896.28 1995/12/31 21446.67 20279.49 1996/01/31 21446.67 20969.80 1996/02/29 22065.08 21164.19 1996/03/31 22844.29 21368.00 1996/04/30 23611.12 21682.97 1996/05/31 24835.58 22242.17 1996/06/30 24711.90 22326.91 1996/07/31 22015.61 21340.51 1996/08/30 22361.92 21790.58 IMATRL PRASUN SHR__CHT 19960831 19960909 152110 R00000000000077 Let's say hypothetically that $10,000 was invested in Fidelity Select Consumer Industries Portfolio on June 29, 1990, when the fund started, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $22,362 - a 123.62% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $21,791 over the same period - a 117.91% increase. TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS HFS, Inc. 6.2 Lowe's Companies, Inc. 4.7 Estee Lauder Companies, Inc. 4.5 NIKE, Inc. Class B 4.4 Avon Products, Inc. 4.4 Gillette Co. 4.3 Nine West Group, Inc. 4.2 Melville Corp. 3.5 Patriot American Hospitality, Inc. 2.9 Toys "R" Us, Inc. 2.8 TOP INDUSTRIES AS OF AUGUST 31, 1996 Cosmetics 16.4% Hotels, Motels, & Tourist Courts 11.1% Footwear 10.2% Lumber & Building Materials - Retail 4.7% Food 3.7% All Others 53.9% Row: 1, Col: 1, Value: 53.9 Row: 1, Col: 2, Value: 3.7 Row: 1, Col: 3, Value: 4.7 Row: 1, Col: 4, Value: 10.2 Row: 1, Col: 5, Value: 11.1 Row: 1, Col: 6, Value: 16.4 CONSUMER INDUSTRIES PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: Effective September 3, 1996, after the period ended, Katherine Collins (right) became Portfolio Manager of Fidelity Select Consumer Industries Portfolio. The following is an interview with Mary English, who managed the fund during the period covered by the report, and Katherine Collins, who discusses her outlook. Q. HOW DID THE FUND PERFORM, MARY? A. For the six- and 12-month periods ended August 31, 1996, the fund returned 1.35% and 18.59%, respectively. By comparison, the Standard & Poor's 500 Index returned 2.96% for the past six months and 18.73% for the year. Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE DURING THE PERIOD? A. Perceptions surrounding the health of the economy and fears about the direction of interest rates caused a tumultuous environment. During the past six months, it seemed like people's fears one day about recession were confused by concerns about interest rate hikes the next day. When you're trying to run a consumer fund in this kind of market environment, you have to be very careful about the stocks the fund owns. For instance, if you own defensive stocks such as food and beverage companies and the economy strengthens, defensive stocks go out of favor and the fund can get hurt. It was this kind of thinking that led me to decrease the fund's holdings in the more defensive stocks, such as PepsiCo, and buy more of the top names in traditional consumer products, such as Avon Products and Estee Lauder. Q. WHY DID YOU LIKE THESE STOCKS? A. There were a couple of reasons. These companies all have strong global brand franchises that make them extremely attractive. In addition, despite weakening economies in Europe, these companies benefited from strong product lines and franchises that are balanced by their global nature, and were therefore less affected by the gyrations of the U.S. economy. I more than doubled the fund's holdings of Estee Lauder because I felt that the company's earnings had bottomed in the second quarter. I also was impressed by the efforts it was making on the re-launch of significant global products as well as its cost-cutting initiatives. Q. HOW DID THE FUND'S CONSUMER-RELATED TECHNOLOGY THEME PLAY OUT DURING THE PERIOD? A. The fund was adversely affected by its large holding in America Online (AOL), a stock that the fund had owned and benefited from for some time. AOL was the fund's top holding in July when the company reported that its membership had dropped significantly and that its earnings would not meet Wall Street's expectations. The situation worsened with AOL's much-publicized day-long outage that occurred later in the summer. The fund no longer held a position in AOL at the end of the period. Q. HOW DO YOU FEEL ABOUT ON-LINE SERVICES NOW? A. It's interesting to see how the demand for these types of services changes as the industry becomes more mainstream. A couple of years ago, on-line service providers such as AOL were dealing almost exclusively with "early adapters" - people who were very interested in accessing the Internet, and weren't too concerned about cost. Now, the average user is influenced much more by the services, prices and plans of various providers, much as they are in the retail and long-distance sector. Q. TURNING TO YOU, KATHERINE, WHAT'S YOUR OUTLOOK FOR THE FUND? A. There are several interesting developments in consumer industries that I will try to capitalize on in the months ahead. First, many consumer companies are trying to reduce the number of products that they offer, which could help improve the companies' profitability. Second, there is some concern over consumer debt levels, which may eventually hurt big-ticket purchases. Third, there has been significant change in telecommunications legislation, which may spur further changes in the leisure and entertainment industries. I will use Fidelity's traditional bottom-up fundamental research to find companies that will benefit from these and other broad trends. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: June 29, 1990 FUND NUMBER: 517 TRADING SYMBOL: FSCPX SIZE: as of August 31, 1996 more than $21 million MANAGER: Katherine Collins, since September 1996; manager Fidelity Select Leisure Portfolio, since February 1996; assistant director of research 1994-May 1995; manager, Fidelity Select Construction and Housing Portfolio, 1992-1994; analyst, since 1990; joined Fidelity in 1990 (checkmark) CONSUMER INDUSTRIES PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 100.0% SHARES VALUE (NOTE 1) APPAREL STORES - 6.1% GENERAL APPAREL STORES - 2.6% TJX Companies, Inc. 17,500 $ 560,000 87254010 WOMEN'S CLOTHING STORES - 3.5% Melville Corp. 17,500 739,375 58574510 TOTAL APPAREL STORES 1,299,375 AUTOS, TIRES, & ACCESSORIES - 1.4% MOTOR VEHICLES & CAR BODIES - 1.4% Honda Motor Co. Ltd. 13,000 299,700 43812810 BEVERAGES - 3.3% SOFT DRINKS - 3.3% Coca-Cola Co. (The) 9,200 460,000 19121610 PepsiCo, Inc. 8,600 247,250 71344810 707,250 COMPUTER SERVICES & SOFTWARE - 2.6% ELECTRONIC INFORMATION RETRIEVAL - 1.6% CUC International, Inc. (a) 10,000 343,750 12654510 PREPACKAGED COMPUTER SOFTWARE - 1.0% Netscape Communications Corp. (a) 6,200 219,325 64114910 TOTAL COMPUTER SERVICES & SOFTWARE 563,075 CONSUMER ELECTRONICS - 3.3% APPLIANCES - 3.3% Black & Decker Corp. 10,000 395,000 09179710 Newell Co. 10,000 311,250 65119210 706,250 ENTERTAINMENT - 3.8% MOTION PICTURE PRODUCTION - 2.0% Disney (Walt) Co. 7,500 427,500 25468710 RECREATIONAL SERVICES - 1.8% MGM Grand, Inc. (a) 10,000 377,500 55295310 TOTAL ENTERTAINMENT 805,000 FOODS - 5.2% FOOD - 3.7% General Mills, Inc. 7,000 385,000 37033410 Kellogg Co. 6,000 405,000 48783610 790,000 GRAIN MILL PRODUCTS - 1.5% Ralston Purina Group 5,000 312,500 75127730 TOTAL FOODS 1,102,500 GENERAL MERCHANDISE STORES - 1.0% DEPARTMENT STORES - 1.0% Stein Mart, Inc. (a) 10,000 208,750 85837510 HOUSEHOLD PRODUCTS - 21.7% COSMETICS - 16.4% Alberto-Culver Co. Class A 7,500 262,500 01306820 Avon Products, Inc. 19,600 938,350 05430310 Estee Lauder Companies, Inc. 22,500 967,500 51843910 Gillette Co. 14,400 918,000 37576610 Revlon, Inc. Class A (a) 14,000 418,250 76152550 3,504,600 SHARES VALUE (NOTE 1) MANUFACTURED PRODUCTS - 3.2% First Brands Corp. 12,100 $ 275,275 31935610 Luxottica Group Spa sponsored ADR 5,400 412,425 55068R20 687,700 SOAPS & DETERGENTS - 2.1% Procter & Gamble Co. 5,000 444,375 74271810 TOTAL HOUSEHOLD PRODUCTS 4,636,675 LEISURE DURABLES & TOYS - 0.9% TOYS & GAMES - 0.9% Hasbro, Inc. 5,000 183,750 41805610 LODGING & GAMING - 12.4% HOTELS, MOTELS, & TOURIST COURTS - 11.1% HFS, Inc. (a) 22,000 1,317,250 40418110 Host Marriott Corp. (a) 28,000 385,000 44107810 La Quinta Motor Inns, Inc. 10,000 191,250 50419510 Sun International Hotels Ltd. Ord. (a) 10,000 473,750 86699N22 2,367,250 RACING & GAMING - 1.3% Gtech Holdings Corp. (a) 10,000 277,500 40051810 TOTAL LODGING & GAMING 2,644,750 MEDICAL EQUIPMENT & SUPPLIES - 1.0% OPHTHALMIC GOODS - 1.0% Oakley, Inc. (a) 5,000 205,000 67366210 PACKAGING & CONTAINERS - 2.0% SANITARY FOOD CONTAINERS - 2.0% Tupperware Corp. 10,000 437,500 89989610 PAPER & FOREST PRODUCTS - 0.9% PAPER - 0.9% Kimberly-Clark Corp. 2,500 195,938 49436810 REAL ESTATE INVESTMENT TRUSTS - 2.9% Patriot American Hospitality, Inc. 20,000 610,000 70335310 RETAIL & WHOLESALE, MISCELLANEOUS - 8.4% HOBBY, TOY, & GAME SHOPS - 2.8% Toys "R" Us, Inc. 20,000 590,000 89233510 LUMBER & BUILDING MATERIALS - RETAIL - 4.7% Lowe's Companies, Inc. 27,500 993,438 54866110 RETAIL, GENERAL - 0.9% Staples, Inc. (a) 10,000 197,500 85503010 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 1,780,938 SERVICES - 4.7% COMMUNICATION, ECONOMY, SOCIAL & EDUCATION RESEARCH - 2.3% Gartner Group, Inc. Class A (a) 16,000 500,000 36665110 GENERAL SERVICES - 1.7% Service Corp. International 13,000 366,438 81756510 PERSONAL SERVICES - 0.7% Block (H&R), Inc. 6,200 155,000 09367110 TOTAL SERVICES 1,021,438 TEXTILES & APPAREL - 16.5% APPAREL - 2.6% Gucci Group NV 8,500 565,250 40156610 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TEXTILES & APPAREL - CONTINUED CARPETS & RUGS - 1.4% Shaw Industries, Inc. 20,000 $ 300,000 82028610 COTTON MILLS - 0.4% Cone Mills Corp. (a) 10,000 90,000 20681410 FOOTWEAR - 10.2% NIKE, Inc. Class B 8,700 939,600 65410610 Nine West Group, Inc. (a) 17,500 901,250 65440D10 Wolverine World Wide, Inc. 13,500 325,687 97809710 2,166,537 TEXTILE MILL PRODUCTS - 1.9% Westpoint Stevens, Inc. Class A (a) 15,600 407,550 96123810 TOTAL TEXTILES & APPAREL 3,529,337 TOBACCO - 1.9% CIGARETTES - 1.9% RJR Nabisco Holdings Corp. 15,400 406,175 74960K87 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $20,412,175) $ 21,343,401 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $58,904,624 and $56,680,215, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $21,391 for the period (see Note 5 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $20,423,805. Net unrealized appreciation aggregated $919,596, of which $1,565,703 related to appreciated investment securities and $646,107 related to depreciated investment securities. The fund intends to elect to defer to its fiscal year ending February 28, 1997 approximately $2,016,000 of losses recognized during the period November 1, 1995 to February 29, 1996. CONSUMER INDUSTRIES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED)
ASSETS Investment in securities, at $ 21,343,401 value (cost $20,412,175) - See accompanying schedule Receivable for investments sold 1,360,078 Receivable for fund shares sold 97,414 Dividends receivable 14,257 Redemption fees receivable 95 Other receivables 4,426 Prepaid expenses 9,576 TOTAL ASSETS 22,829,247 LIABILITIES Payable to custodian bank $ 151,831 Payable for fund shares redeemed 996,313 Accrued management fee 12,551 Other payables and 56,314 accrued expenses TOTAL LIABILITIES 1,217,009 NET ASSETS $ 21,612,238 Net Assets consist of: Paid in capital $ 23,186,973 Accumulated net investment (loss) (122,937 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (2,383,024 ) Net unrealized appreciation (depreciation) on investments 931,226 NET ASSETS, for 1,195,257 $ 21,612,238 shares outstanding NET ASSET VALUE and redemption price per share ($21,612,238 (divided by) 1,195,257 shares) $18.08 Maximum offering price per share (100/97.00 of $18.08) $18.64
STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED)
INVESTMENT INCOME $ 147,276 Dividends Interest 75,715 TOTAL INCOME 222,991 EXPENSES Management fee $ 94,652 Transfer agent fees 185,735 Accounting fees and expenses 30,139 Non-interested trustees' compensation 86 Custodian fees and expenses 10,377 Registration fees 9,817 Audit 23,155 Legal 332 Miscellaneous 178 Total expenses before reductions 354,471 Expense reductions (8,543 345,928 ) NET INVESTMENT INCOME (LOSS) (122,937 ) REALIZED AND UNREALIZED GAIN (LOSS) (309,563 Net realized gain (loss) on ) investment securities Change in net unrealized appreciation (depreciation) on investment securities (1,651,201 ) NET GAIN (LOSS) (1,960,764 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (2,083,701 ) OTHER INFORMATION $ 125,166 Sales charges paid to FDC Deferred sales charges withheld $ 474 by FDC Exchange fees withheld by FSC $ 19,928 Expense reductions $ 8,543 Directed brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED Operations ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED)
Net investment income (loss) $ (122,937 $ 160,644 ) Net realized gain (loss) (309,563 (15,575 ) ) Change in net unrealized appreciation (depreciation) (1,651,201 2,287,139 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (2,083,701 2,432,208 ) Distributions to shareholders - (179,260 From net investment income ) From net realized gain - (51,276 ) In excess of net realized gain - (1,382,081 ) TOTAL DISTRIBUTIONS - (1,612,617 ) Share transactions 51,017,963 203,425,708 Net proceeds from sales of shares Reinvestment of distributions - 1,603,782 Cost of shares redeemed (49,815,171 (204,220,866 ) ) Paid in capital portion of redemption fees 130,856 232,770 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 1,333,648 1,041,394 TOTAL INCREASE (DECREASE) IN NET ASSETS (750,053 1,860,985 ) NET ASSETS 22,362,291 20,501,306 Beginning of period End of period (including accumulated net investment loss of $122,937 and $0, respectively) $ 21,612,238 $ 22,362,291 OTHER INFORMATION Shares Sold 2,614,718 11,665,407 Issued in reinvestment of distributions - 90,434 Redeemed (2,672,801 (11,976,587 ) ) Net increase (decrease) (58,083) (220,746)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, beginning of period $ 17.84 $ 13.91 $ 15.24 $ 12.97 $ 13.81 $ 11.22 Income from Investment Operations Net investment income (loss) (.07) .08 (.15) (.20) (.09) (.07) Net realized and unrealized gain (loss) .23 H 3.97 (.60) 3.84 .20 2.86 Total from investment operations .16 4.05 (.75) 3.64 .11 2.79 Less Distributions From net investment income - (.02) - - - - From net realized gain - (.01) (.60) (1.40) (.97) (.22) In excess of net realized gain - (.20) - - - - Total distributions - (.23) (.60) (1.40) (.97) (.22) Redemption fees added to paid in capital .08 .11 .02 .03 .02 .02 Net asset value, end of period $ 18.08 $ 17.84 $ 13.91 $ 15.24 $ 12.97 $ 13.81 TOTAL RETURN B, C 1.35% 30.01% (4.59)% 28.43% .98% 25.27% RATIOS AND SUPPLEMENTAL DATA $ 21,612 $ 22,362 $ 20,501 $ 8,374 $ 7,005 $ 7,553 Net assets, end of period (000 omitted) Ratio of expenses to average net assets 2.25% A 1.53% 2.49% 2.48% 2.47% A, 2.48% E E E E E Ratio of expenses to average net assets after 2.20% A, 1.48% 2.49% 2.48% 2.47% A 2.48% expense reductions F F Ratio of net investment income (loss) to average net (.78)% A .46% (1.08)% (1.34)% (.80)% A (.56)% assets Portfolio turnover rate 412% A 601% 190% 169% 215% A 140% Average commission rate G $ .0381
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E DURING THE PERIOD, FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. H THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
FOOD AND AGRICULTURE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 FEBRUARY 29, 1996 MONTH YEAR YEARS YEARS S FOOD AND AGRICULTURE -4.33% 17.97% 87.13% 340.78% FOOD AND AGRICULTURE -7.20% 14.43% 81.52% 327.56% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 29, 1996 YEAR YEARS YEARS FOOD AND AGRICULTURE 17.97% 13.35% 15.99% FOOD AND AGRICULTURE 14.43% 12.66% 15.64% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960909 164556 S00000000000001 Food & Agriculture SP Standard & Poor 500 00009 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8917.13 9173.00 1986/10/31 9114.44 9702.28 1986/11/30 9222.64 9938.05 1986/12/31 8974.41 9684.63 1987/01/31 10069.16 10989.15 1987/02/28 10852.03 11423.22 1987/03/31 11183.01 11753.35 1987/04/30 11144.82 11648.74 1987/05/31 11074.80 11750.09 1987/06/30 11717.65 12343.47 1987/07/31 12144.09 12969.28 1987/08/31 12570.54 13453.04 1987/09/30 12443.24 13158.41 1987/10/31 9636.35 10324.09 1987/11/30 9209.91 9473.39 1987/12/31 9648.64 10194.31 1988/01/31 10026.11 10623.49 1988/02/29 10522.78 11118.55 1988/03/31 10595.62 10774.98 1988/04/30 10628.73 10894.59 1988/05/31 10708.20 10989.37 1988/06/30 11145.27 11493.78 1988/07/31 11224.74 11450.10 1988/08/31 11218.11 11060.80 1988/09/30 11668.43 11531.99 1988/10/31 12211.45 11852.58 1988/11/30 11926.70 11683.09 1988/12/31 12232.00 11887.54 1989/01/31 12862.86 12757.71 1989/02/28 12630.44 12440.04 1989/03/31 13108.56 12729.90 1989/04/30 13785.90 13390.58 1989/05/31 14635.90 13932.90 1989/06/30 14923.48 13853.48 1989/07/31 16347.03 15104.45 1989/08/31 16095.02 15400.50 1989/09/30 16163.13 15337.35 1989/10/31 15999.66 14981.53 1989/11/30 16605.86 15287.15 1989/12/31 16986.26 15654.04 1990/01/31 15804.74 14603.66 1990/02/28 16030.83 14792.04 1990/03/31 16723.70 15184.03 1990/04/30 16658.06 14804.43 1990/05/31 18109.44 16247.86 1990/06/30 18696.88 16137.38 1990/07/31 18689.51 16085.74 1990/08/31 17326.12 14631.59 1990/09/30 16773.40 13919.03 1990/10/31 17171.36 13859.18 1990/11/30 17878.85 14754.48 1990/12/31 18570.58 15166.13 1991/01/31 19103.56 15827.37 1991/02/28 20542.61 16959.03 1991/03/31 21547.66 17369.44 1991/04/30 21220.26 17411.13 1991/05/31 21996.89 18163.29 1991/06/30 21090.59 17331.41 1991/07/31 21973.24 18139.05 1991/08/31 22848.14 18568.95 1991/09/30 22445.53 18258.85 1991/10/31 22453.28 18503.51 1991/11/30 22298.43 17757.82 1991/12/31 24901.23 19789.32 1992/01/31 24530.05 19421.24 1992/02/29 24392.88 19673.71 1992/03/31 23852.25 19290.07 1992/04/30 23577.90 19857.20 1992/05/31 23787.70 19954.50 1992/06/30 23527.61 19657.18 1992/07/31 24436.36 20461.16 1992/08/31 24327.98 20041.71 1992/09/30 24736.50 20278.20 1992/10/31 25003.29 20349.17 1992/11/30 25962.07 21043.08 1992/12/31 26401.77 21301.91 1993/01/31 26410.31 21480.84 1993/02/28 26342.02 21772.98 1993/03/31 27059.04 22232.39 1993/04/30 26008.39 21694.37 1993/05/31 26827.27 22275.78 1993/06/30 26560.24 22340.38 1993/07/31 26230.91 22251.02 1993/08/31 27485.93 23094.33 1993/09/30 27396.92 22916.50 1993/10/31 28429.43 23390.88 1993/11/30 28100.09 23168.66 1993/12/31 28729.73 23449.00 1994/01/31 29598.63 24246.27 1994/02/28 29421.11 23589.20 1994/03/31 28047.69 22560.71 1994/04/30 27734.30 22849.48 1994/05/31 27532.77 23224.22 1994/06/30 27743.89 22655.22 1994/07/31 28674.77 23398.31 1994/08/31 30498.13 24357.64 1994/09/30 30555.71 23760.88 1994/10/31 31131.51 24295.50 1994/11/30 30373.37 23410.66 1994/12/31 30480.51 23757.84 1995/01/31 31765.47 24373.88 1995/02/28 32402.97 25323.73 1995/03/31 33140.08 26071.03 1995/04/30 33864.41 26838.83 1995/05/31 35079.64 27911.57 1995/06/30 35910.05 28559.96 1995/07/31 36305.00 29507.01 1995/08/31 36244.23 29581.07 1995/09/30 39089.90 30829.39 1995/10/31 39150.66 30719.33 1995/11/30 40689.95 32067.91 1995/12/31 41648.20 32685.54 1996/01/31 43365.87 33798.15 1996/02/29 44691.23 34111.46 1996/03/31 43938.43 34439.95 1996/04/30 43137.49 34947.60 1996/05/31 44728.71 35848.90 1996/06/30 44772.31 35985.48 1996/07/31 44161.98 34395.64 1996/08/30 42756.03 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960909 164600 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Food and Agriculture Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $42,756 - a 327.56% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS General Mills, Inc. 8.5 Kellogg Co. 8.5 Philip Morris Companies, Inc. 8.2 Ralston Purina Group 7.2 PepsiCo, Inc. 6.3 RalCorp Holdings, Inc. 5.3 Whitman Corp. 4.3 RJR Nabisco Holdings Corp. 4.2 Nabisco Holdings Corp. Class A 4.1 Pioneer Hi-Bred International, Inc. 4.0 TOP INDUSTRIES AS OF AUGUST 31, 1996 Food 21.0% Soft Drinks 10.0% Tobacco Manufacturers 8.7% Grain Mill Products 7.2% Cereal Breakfast Foods 5.3% All Others 47.8% * Row: 1, Col: 1, Value: 47.8 Row: 1, Col: 2, Value: 5.3 Row: 1, Col: 3, Value: 7.2 Row: 1, Col: 4, Value: 8.699999999999999 Row: 1, Col: 5, Value: 10.0 Row: 1, Col: 6, Value: 21.0 * INCLUDES SHORT-TERM INVESTMENTS FOOD AND AGRICULTURE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW William Mankivsky, Portfolio Manager of Fidelity Select Food and Agriculture Portfolio Q. HOW HAS THE FUND PERFORMED, BILL? A. For the six months ended August 31, 1996, the fund had a total return of - -4.33%, while the Standard & Poor's 500 Index returned 2.96%. For the 12 months ended August 31, 1996, the fund returned 17.97% and the S&P 500 had a total return of 18.73%. Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS? A. The fund's performance was dragged down by its tobacco and food investments. Both categories underperformed the broad market during the past six months. Q. LET'S TAKE A LOOK AT THE FUND'S TOBACCO INVESTMENTS. WHY HAVE THOSE STOCKS STRUGGLED RECENTLY? A. Even though the tobacco companies in the fund had good fundamentals - or business prospects - stocks in this sector suffered from a jury trial decision in Florida in August that went against a tobacco company. Investors became concerned the outcome of the trial was a signal that tobacco companies might face increasing problems due to litigation. In addition, the Clinton administration took strong regulatory steps that might affect tobacco company business prospects in the future. With this backdrop, stocks such as Philip Morris and RJR Nabisco saw periodic share price declines. Q. HAVE THESE EVENTS CHANGED YOUR OUTLOOK TOWARD THESE STOCKS? A. There's no question that I've kept an eye on the risk presented by litigation and regulation in this sector, and have reduced the tobacco stake somewhat. At the same time, tobacco stocks remain a significant part of the fund, and I remain guardedly optimistic about the sector. The industry has withstood nearly all legal challenges in the past, including a case in Indiana that took place at roughly the same time as the one in Florida. Even though I believe there will always be some sort of discount placed on the value of tobacco company shares because of litigation risk, I find tobacco companies to be strong cash flow generators and very shareholder friendly. Philip Morris, for example, continued to post very strong earnings growth compared to other consumer nondurable stocks - largely on the basis of strong international sales - and offered very attractive dividends. To me, that represents an outstanding investment opportunity. Q. YOU MENTIONED THAT FOOD STOCKS STRUGGLED AS WELL. WHAT WAS THE STORY THERE? A. While the business and earnings growth rates posted by most of the stocks in this group have been good, the rates haven't been as attractive as those posted in other parts of the market. In addition, valuations - stock prices compared to other measures such as earnings - for stocks in the group were fairly high in both absolute and relative terms. Companies in the group will have to show investors that they're on top of their game - - posting earnings growth at or near peak levels - in order for investors to be willing to pay higher valuations for the stocks from here. Further, three of the companies in the sector that have a stake in the cereal business were involved in a price war that ate into their earnings. Q. WHAT STOCKS WERE POSITIVE CONTRIBUTORS TO THE FUND'S PERFORMANCE OVER THE PAST YEAR? A. Pioneer Hi-Bred and DEKALB Genetics, two seed companies, were positive performers. DEKALB performed particularly well because of some groundbreaking patents on new strains of corn it developed. Campbell Soup also was strong because of its restructuring efforts. Q. AT THE END OF THE PERIOD, THE FUND HAD ABOUT 14% IN CASH AND SHORT-TERM INVESTMENTS. WHY? A. It was a momentary anomaly, a function of flows into and out of the fund. The fund has seen strong fluctuations in its assets from time to time, and it just so happened that on the day the period closed, the fund held more than its 5% to 10% target amount in cash and short-term investments. It was not an indication of any kind of defensive positioning. Q. WHAT'S YOUR OUTLOOK? A. Over the next six to 12 months, I believe there will be greater differentiation between the winners and the losers, especially in the food sector. I'll look to invest in single-product companies because a company trying to do one thing well usually can do better than another that is trying to compete in that and other areas at the same time. NOTE TO SHAREHOLDERS: Daniel Pickering became manager of Fidelity Select Food and Agriculture Portfolio on October 14, 1996. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 009 TRADING SYMBOL: FDFAX SIZE: as of August 31, 1996, more than $312 million MANAGER: William Mankivsky, since 1993; manager, Fidelity Select Energy Service Portfolio, 1991-1994; joined Fidelity in 1991 (checkmark) FOOD AND AGRICULTURE PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 85.9% SHARES VALUE (NOTE 1) AGRICULTURE - 5.2% CROPS - 5.2% DEKALB Genetics Corp. Class B 119,200 $ 3,874,000 24487820 Pioneer Hi-Bred International, Inc. 223,400 12,314,171 72368610 Sylvan Foods Holdings, Inc. (a) 6,000 65,250 87137110 16,253,421 BEVERAGES - 10.8% MALT BEVERAGE - 0.8% Anheuser-Busch Companies, Inc. 28,000 2,121,000 03522910 Fomento Economico Mexicano SA de CV Class B 36,000 108,796 34441892 Quilmes Industrial SA 28,000 266,000 74899692 Quilmes Industrial SA sponsored ADR 14,000 140,000 74838Y10 2,635,796 SOFT DRINKS - 10.0% Celestial Seasonings, Inc. (a) 178,400 3,612,600 15101610 Coca-Cola Co. (The) 88,000 4,400,000 19121610 Coca-Cola Enterprises, Inc. 2,000 81,500 19121910 Panamerican Beverages, Inc. Class A 54,700 2,311,075 69829W10 PepsiCo, Inc. 677,800 19,486,750 71344810 Serm Suk Co. Ltd. 38,800 1,208,427 81799999 31,100,352 TOTAL BEVERAGES 33,736,148 CONGLOMERATES - 4.3% Whitman Corp. 593,600 13,281,801 96647K10 FOODS - 48.3% BAKERY PRODUCTS - 0.3% Flowers Industries, Inc. 18,000 324,000 34349610 Interstate Bakeries Corp. 22,000 665,500 46072H10 989,500 CANNED SPECIALTIES - 3.0% Campbell Soup Co. 143,000 9,312,875 13442910 CEREAL BREAKFAST FOODS - 5.3% RalCorp Holdings, Inc. (a) 802,066 16,642,870 75102510 COOKIES & CRACKERS - 4.1% Nabisco Holdings Corp. Class A 383,400 12,891,825 62952610 DAIRY - 0.5% Dean Foods Co. 60,600 1,568,025 24236110 FOOD - 21.0% Chiquita Brands International, Inc. 574,700 7,255,588 17003210 Dole Food, Inc. 57,100 2,362,513 25660510 General Mills, Inc. 482,500 26,537,500 37033410 Kellogg Co. 390,600 26,365,500 48783610 Nestle SA (Reg.) 1,280 1,496,173 64106992 Sara Lee Corp. 11,000 346,500 80311110 Universal Foods Corp. 41,100 1,176,488 91353810 65,540,262 GENERAL FOOD PREPARATIONS - 0.2% Herdez SA de CV Class B 438,846 150,577 42799F23 McCormick & Co., Inc. (non-vtg.) 22,000 451,000 57978020 601,577 GRAIN MILL PRODUCTS - 7.2% Ralston Purina Group 357,900 22,368,750 75127730 MEAT & FISH - 5.1% Golden Poultry Co., Inc. 2,000 21,000 38115110 GoodMark Foods, Inc. (b) 385,200 6,259,500 38238710 SHARES VALUE (NOTE 1) Hormel (George A.) & Co. 5,000 $ 106,250 44045210 Hudson Foods, Inc. Class A 60,000 817,500 44378210 Sanderson Farms, Inc. 28,000 304,500 80001310 Tyson Foods, Inc. 338,950 8,219,538 90249410 WLR Foods, Inc. 6,000 70,125 92928610 15,798,413 POULTRY SLAUGHTER & PROCESSING - 0.1% Pilgrims Pride Corp. 33,000 276,375 72146710 RICE MILLING - 0.1% Riviana Foods, Inc. 12,000 190,500 76953610 SUGAR & CANDIES - 1.4% Grist Mill Co. (a) 240,400 1,427,375 39862920 Wrigley (Wm.) Jr. Co. 52,000 2,814,500 98252610 4,241,875 TOTAL FOODS 150,422,847 GROCERY STORES - 0.1% GROCERY - RETAIL - 0.1% Giant Food, Inc. Class A 12,000 403,500 37447810 HOLDING COMPANIES - 0.3% Triarc Companies, Inc. Class A (a) 67,000 728,625 89592710 RESTAURANTS - 3.9% Brinker International, Inc. (a) 10,000 150,000 10964110 Darden Restaurants, Inc. 111,400 891,200 23719410 McDonald's Corp. 241,000 11,176,375 58013510 12,217,575 TOBACCO - 13.0% CIGARETTES - 4.3% RJR Nabisco Holdings Corp. 501,220 13,219,678 74960K87 TOBACCO MANUFACTURERS - 8.7% Philip Morris Companies, Inc. 285,400 25,614,650 71815410 UST, Inc. 51,000 1,530,000 90291110 27,144,650 TOTAL TOBACCO 40,364,328 TOTAL COMMON STOCKS (Cost $271,059,102) 267,408,245 REPURCHASE AGREEMENTS - 14.1% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 44,039,675 44,014,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $315,073,102) $ 311,422,245 LEGEND 1. Non-income producing 2. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME GoodMark Foods, Inc. $ - $ 445,888 $ 37,072 $ 6,259,500 Grist Mill Co. 53,000 516,638 - - Totals $ 53,000 $ 962,526 $ 37,072 $ 6,259,500 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $143,794,800 and $123,996,148, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $73,109 for the period (see Note 5 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $315,119,837. Net unrealized depreciation aggregated $3,697,592, of which $12,813,198 related to appreciated investment securities and $16,510,790 related to depreciated investment securities. FOOD AND AGRICULTURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED)
ASSETS Investment in securities, at $ 311,422,245 value (including repurchase agreements of $44,014,000) (cost $315,073,102) - See accompanying schedule Cash 999 Receivable for investments sold 3,936,148 Receivable for fund shares sold 707,264 Dividends receivable 413,695 Redemption fees receivable 527 Other receivables 10,900 Prepaid expenses 25,720 TOTAL ASSETS 316,517,498 LIABILITIES Payable for investments purchased $ 2,174,444 Payable for fund shares redeemed 1,886,574 Accrued management fee 164,830 Other payables and accrued expenses 284,072 TOTAL LIABILITIES 4,509,920 NET ASSETS $ 312,007,578 Net Assets consist of: Paid in capital $ 289,761,306 Undistributed net investment income 1,373,138 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 24,523,746 Net unrealized appreciation (depreciation) on investments (3,650,612 and assets and liabilities in ) foreign currencies NET ASSETS, for 7,953,862 $ 312,007,578 shares outstanding NET ASSET VALUE and redemption price per share ($312,007,578 (divided by) 7,953,862 shares) $39.23 Maximum offering price per share (100/97.00 of $39.23) $40.44
STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED)
INVESTMENT INCOME $ 2,515,900 Dividends (including $37,072 received from affiliated issuers) Interest 985,714 TOTAL INCOME 3,501,614 EXPENSES Management fee $ 853,089 Transfer agent fees 1,073,702 Accounting fees and expenses 141,190 Non-interested trustees' compensation 507 Custodian fees and expenses 13,917 Registration fees 32,682 Audit 19,271 Legal 1,112 Miscellaneous 1,892 Total expenses before reductions 2,137,362 Expense reductions (13,725 2,123,637 ) NET INVESTMENT INCOME 1,377,977 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including realized gain of $459,500 on sales of investment in affiliated issuers) 24,776,331 Foreign currency transactions 985 24,777,316 Change in net unrealized appreciation (depreciation) on: Investment securities (44,536,720 ) Assets and liabilities in (813 (44,537,533 foreign currencies ) ) NET GAIN (LOSS) (19,760,217 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (18,382,240 ) OTHER INFORMATION $ 757,383 Sales charges paid to FDC Deferred sales charges withheld $ 3,016 by FDC Exchange fees withheld by FSC $ 74,333 Expense reductions $ 10,509 Directed brokerage arrangements Custodian interest credits 153 Transfer agent interest credits 3,063 $ 13,725
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED)
Operations $ 1,377,977 $ 2,077,785 Net investment income Net realized gain (loss) 24,777,316 29,464,842 Change in net unrealized appreciation (depreciation) (44,537,533 31,022,063 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (18,382,240 62,564,690 ) Distributions to shareholders (360,792 (1,144,034 From net investment income ) ) From net realized gain (6,434,160 (12,658,077 ) ) TOTAL DISTRIBUTIONS (6,794,952 (13,802,111 ) ) Share transactions 255,626,036 355,816,771 Net proceeds from sales of shares Reinvestment of distributions 6,704,973 13,613,779 Cost of shares redeemed (226,485,997 (314,447,812 ) ) Paid in capital portion of redemption fees 237,425 227,026 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 36,082,437 55,209,764 TOTAL INCREASE (DECREASE) IN NET ASSETS 10,905,245 103,972,343 NET ASSETS Beginning of period 301,102,333 197,129,990 End of period (including undistributed net investment income of $1,373,138 and $1,092,171, respectively) $ 312,007,578 $ 301,102,333 OTHER INFORMATION Shares Sold 6,236,634 9,278,227 Issued in reinvestment of distributions 165,595 361,809 Redeemed (5,592,642 (8,554,944 ) ) Net increase (decrease) 809,587 1,085,092
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, beginning of period $ 42.15 $ 32.53 $ 31.49 $ 30.86 $ 29.22 $ 27.87 Income from Investment Operations Net investment income .20 .37 .15 .09 .05 .13 Net realized and unrealized gain (loss) (2.02) 11.61 2.80 3.29 3.26 2.89 Total from investment operations (1.82) 11.98 2.95 3.38 3.31 3.02 Less Distributions From net investment income (.06) (.20) (.08) (.06) (.10) (.11) From net realized gain (1.07) (2.20) (1.85) (2.70) (1.57) (1.59) Total distributions (1.13) (2.40) (1.93) (2.76) (1.67) (1.70) Redemption fees added to paid in capital .03 .04 .02 .01 - .03 Net asset value, end of period $ 39.23 $ 42.15 $ 32.53 $ 31.49 $ 30.86 $ 29.22 TOTAL RETURN B, C (4.33)% 37.92% 10.14% 11.69% 11.72% 11.11% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 312,008 $ 301,102 $ 197,130 $ 95,010 $ 108,377 $ 108,922 Ratio of expenses to average net assets 1.50% A 1.43% 1.70% 1.65% 1.67% A 1.83% Ratio of expenses to average net assets after 1.49% A, 1.42% 1.68% 1.64% 1.67% A 1.83% expense reductions E E E E Ratio of net investment income to average net assets .97% A .99% .49% .29% .21% A .46% Portfolio turnover rate 99% A 124% 126% 96% 515% A 63% Average commission rate F $ .0311
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
LEISURE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 FEBRUARY 29, 1996 MONTHS YEAR YEARS YEARS LEISURE 3.21% 8.85% 134.90% 242.33% LEISURE 0.11% 5.58% 127.86% 232.06% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 29, 1996 YEAR YEARS YEARS LEISURE 8.85% 18.63% 13.10% LEISURE 5.58% 17.91% 12.75% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960910 135306 S00000000000001 Leisure SP Standard & Poor 500 00062 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8755.41 9173.00 1986/10/31 9204.41 9702.28 1986/11/30 9090.04 9938.05 1986/12/31 8687.64 9684.63 1987/01/31 9602.58 10989.15 1987/02/28 10636.11 11423.22 1987/03/31 10763.19 11753.35 1987/04/30 10517.51 11648.74 1987/05/31 10949.56 11750.09 1987/06/30 11419.74 12343.47 1987/07/31 12262.66 12969.28 1987/08/31 12516.81 13453.04 1987/09/30 12245.72 13158.41 1987/10/31 8751.18 10324.09 1987/11/30 8141.22 9473.39 1987/12/31 9182.52 10194.31 1988/01/31 9323.86 10623.49 1988/02/29 10138.93 11118.55 1988/03/31 10478.15 10774.98 1988/04/30 10544.11 10894.59 1988/05/31 10270.85 10989.37 1988/06/30 10956.85 11493.78 1988/07/31 11047.96 11450.10 1988/08/31 10616.40 11060.80 1988/09/30 11354.84 11531.99 1988/10/31 11354.84 11852.58 1988/11/30 10918.49 11683.09 1988/12/31 11570.62 11887.54 1989/01/31 12558.42 12757.71 1989/02/28 12357.02 12440.04 1989/03/31 12937.23 12729.90 1989/04/30 13670.89 13390.58 1989/05/31 14351.79 13932.90 1989/06/30 14487.88 13853.48 1989/07/31 15703.68 15104.45 1989/08/31 15829.62 15400.50 1989/09/30 15931.34 15337.35 1989/10/31 14783.36 14981.53 1989/11/30 14957.73 15287.15 1989/12/31 15181.56 15654.04 1990/01/31 13340.44 14603.66 1990/02/28 13222.16 14792.04 1990/03/31 13325.01 15184.03 1990/04/30 12805.59 14804.43 1990/05/31 13865.01 16247.86 1990/06/30 13705.58 16137.38 1990/07/31 13232.44 16085.74 1990/08/31 11705.03 14631.59 1990/09/30 10594.18 13919.03 1990/10/31 10470.75 13859.18 1990/11/30 11303.89 14754.48 1990/12/31 11798.28 15166.13 1991/01/31 12458.07 15827.37 1991/02/28 13413.98 16959.03 1991/03/31 13637.38 17369.44 1991/04/30 13673.74 17411.13 1991/05/31 14146.51 18163.29 1991/06/30 13351.64 17331.41 1991/07/31 13990.65 18139.05 1991/08/31 14136.11 18568.95 1991/09/30 14499.78 18258.85 1991/10/31 14936.17 18503.51 1991/11/30 14219.24 17757.82 1991/12/31 15684.28 19789.32 1992/01/31 16037.55 19421.24 1992/02/29 16598.64 19673.71 1992/03/31 16260.95 19290.07 1992/04/30 16442.78 19857.20 1992/05/31 16541.49 19954.50 1992/06/30 16286.92 19657.18 1992/07/31 16364.85 20461.16 1992/08/31 16131.07 20041.71 1992/09/30 16447.97 20278.20 1992/10/31 16572.66 20349.17 1992/11/30 17700.02 21043.08 1992/12/31 18229.93 21301.91 1993/01/31 18681.91 21480.84 1993/02/28 18583.20 21772.98 1993/03/31 19549.50 22232.39 1993/04/30 19108.93 21694.37 1993/05/31 20481.57 22275.78 1993/06/30 21032.79 22340.38 1993/07/31 21594.82 22251.02 1993/08/31 23080.95 23094.33 1993/09/30 24232.02 22916.50 1993/10/31 25572.24 23390.88 1993/11/30 24621.12 23168.66 1993/12/31 25440.53 23449.00 1994/01/31 25704.95 24246.27 1994/02/28 25485.54 23589.20 1994/03/31 23944.03 22560.71 1994/04/30 23992.30 22849.48 1994/05/31 23738.38 23224.22 1994/06/30 22735.09 22655.22 1994/07/31 23614.52 23398.31 1994/08/31 24555.88 24357.64 1994/09/30 24549.69 23760.88 1994/10/31 24462.98 24295.50 1994/11/30 23416.34 23410.66 1994/12/31 23701.22 23757.84 1995/01/31 24134.74 24373.88 1995/02/28 25212.35 25323.73 1995/03/31 25875.02 26071.03 1995/04/30 26104.25 26838.83 1995/05/31 26609.38 27911.57 1995/06/30 27638.33 28559.96 1995/07/31 29559.05 29507.01 1995/08/31 30506.93 29581.07 1995/09/30 30556.82 30829.39 1995/10/31 29085.10 30719.33 1995/11/30 30032.99 32067.91 1995/12/31 30090.54 32685.54 1996/01/31 30536.53 33798.15 1996/02/29 32174.16 34111.46 1996/03/31 32334.44 34439.95 1996/04/30 33662.05 34947.60 1996/05/31 35043.28 35848.90 1996/06/30 34908.00 35985.48 1996/07/31 32401.86 34395.64 1996/08/30 33206.39 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960910 135311 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Leisure Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $33,206 - a 232.06% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Disney (Walt) Co. 4.5 Infinity Broadcasting Corp. Class A 3.2 General Electric Co. 3.1 Hilton Hotels Corp. 2.9 Renaissance Communications Corp. 2.7 Omnicom Group, Inc. 2.5 Sodak Gaming, Inc. 2.3 Westinghouse Electric Corp. 2.2 Sinclair Broadcast Group, Inc. Class A 2.0 Mirage Resorts, Inc. 2.0 TOP INDUSTRIES AS OF AUGUST 31, 1996 Row: 1, Col: 1, Value: 57.1 Row: 1, Col: 2, Value: 5.3 Row: 1, Col: 3, Value: 6.2 Row: 1, Col: 4, Value: 10.0 Row: 1, Col: 5, Value: 10.5 Row: 1, Col: 6, Value: 10.9 Hotels, Motels, & Tourist Courts 10.9% Television Broadcasting 10.5% Radio Broadcasting 10.0% Advertising Agencies 6.2% Electrical Machinery 5.3% All Others 57.1% * * INCLUDES SHORT-TERM INVESTMENTS LEISURE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Katherine Collins, Portfolio Manager of Fidelity Select Leisure Portfolio Q. HOW DID THE FUND PERFORM, KATHERINE? A. For the six months ended August 31, 1996, the fund had a total return of 3.21%. For the past year, it returned 8.85%. For the same periods, the Standard & Poor's 500 Index returned 2.96% and 18.73%, respectively. Q. IN YOUR OPINION, WHAT WOULD ACCOUNT FOR THE FUND'S PERFORMANCE IN THE PAST SIX MONTHS? A. I think the solid performance of radio stocks and, to a lesser extent, TV stocks had a big role in the fund's return. Broadcast companies are now enjoying the benefits of the new telecommunications law, which eased ownership restrictions. During the period, we saw heightened merger and acquisition activity in the broadcast area with a prime example being Westinghouse's agreement to acquire Infinity Broadcasting, one of the largest radio companies in America. Q. WHAT WERE SOME KEY DECISIONS YOU MADE DURING THE PERIOD? A. I raised the fund's position in gaming and hotels. The gaming companies are adding attractive new capacity and the supply/demand balance for upscale hotels remained favorable. These factors may lead to positive earnings comparisons in the future. I maintained small positions in large entertainment companies and cut back on cable companies. In the entertainment area, competition was fierce, late summer box office revenues fell below expectations and many of the stocks became expensive relative to historical valuation measures. As for cable companies, I was lucky to reduce the fund's holdings quickly and avoid many of the losses these stocks endured due to investors' concerns about competition and capital expenditures in the industry. Q. DID THE FUND'S HOLDINGS IN ADVERTISING FIRMS HAVE A POSITIVE IMPACT? A. Yes. The advertising industry continued to do well because of a good advertising environment, consolidation in the industry and globalization over the past several years. Although there were some fears in the market that the Olympics would only be a one-time "pop" to these companies, business since then appears strong. Q. WAS NBC'S ROLE AS BROADCASTER OF THE OLYMPICS A BIG PLUS FOR GENERAL ELECTRIC? A. Absolutely. With viewers glued to their TV sets during the Olympics, any TV station that wasn't an NBC affiliate suffered lousy Nielsen ratings. Meanwhile, on a more long-term basis, NBC's partnership with Microsoft to create the news service MSNBC is a solid development for GE. Certainly, given that Microsoft could have chosen just about any broadcaster, the fact that it chose NBC speaks well about the level of innovation within the network. Q. WAS THERE A PARTICULAR COMPANY THAT DID NOT MEET EXPECTATIONS? A. Disney would be one. I think many investors expected too much, too soon from the company's merger with Capital Cities/ABC. During the period, the transaction hit some snags - as any of that size and magnitude could - and the stock suffered somewhat. Additionally, while Disney's summer animated movie release - "The Hunchback of Notre Dame" - did well at the box office by industry standards, it failed to reach the "blockbuster" standards attained by the "The Lion King." That said, I added to the fund's Disney position because I felt the market was ignoring Disney's long-term potential. In fact, Disney has outlined an exciting upcoming film lineup including "101 Dalmatians" and "Hercules." Q. WHAT DO YOU SEE GOING FORWARD FOR THE FUND? A. Near the end of the period, I began increasing some of the large entertainment companies as their valuations became more reasonable. I anticipate holding the fund's broadcast, hotel and gaming weightings steady for the reasons I outlined above. I don't anticipate any near-term move back into cable stocks, although valuations are becoming more compelling. I will continue to try to invest in companies that either have strong franchises or benefit from changes in consumer tastes and government regulations. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: May 8, 1984 FUND NUMBER: 062 TRADING SYMBOL: FDLSX SIZE: as of August 31, 1996, more than $93 million MANAGER: Katherine Collins, since February 1996; manager, Fidelity Select Consumer Industries, since September 1996; Fidelity Select Construction and Housing Portfolio, 1992-1994; joined Fidelity in 1990 (checkmark) LEISURE PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.3% SHARES VALUE (NOTE 1) ADVERTISING - 6.2% ADVERTISING AGENCIES - 6.2% ADVO, Inc. 50,000 $ 493,750 00758510 Interpublic Group of Companies, Inc. 37,400 1,692,350 46069010 Omnicom Group, Inc. 51,700 2,345,888 68191910 WPP Group PLC ADR 35,000 1,273,125 92930930 5,805,113 APPAREL STORES - 1.5% WOMEN'S CLOTHING STORES - 1.5% Melville Corp. 32,500 1,373,125 58574510 BEVERAGES - 2.6% DISTILLED & BLENDED LIQUOR - 0.9% Seagram Co. Ltd. 25,000 825,872 81185010 SOFT DRINKS - 1.7% PepsiCo, Inc. 56,882 1,635,358 71344810 TOTAL BEVERAGES 2,461,230 BROADCASTING - 24.6% CABLE TV OPERATORS - 3.4% BET Holdings, Inc. Class A (a) 20,800 533,000 08658510 Gaylord Entertainment Co. Class A 23,625 578,813 36790110 Heartland Wireless Communications, Inc. (a) 16,540 349,408 42235W10 TCI Group Class A 46,400 690,200 87924V10 Time Warner, Inc. 13,837 461,810 88731510 Turner Broadcasting System, Inc. Class B 23,100 571,725 3,184,956 COMMUNICATIONS SERVICES - 0.7% PanAmSat Corp. (a) 23,800 660,450 69830X10 RADIO BROADCASTING - 10.0% American Radio Systems Corp. Class A (a) 39,900 1,416,450 02916110 Chancellor Corp. Class A (a) 15,100 566,250 15891010 Clear Channel Communications, Inc. (a) 20,100 1,655,738 18450210 Emmis Broadcasting Corp. Class A (a) 9,900 517,275 29152510 Evergreen Media Corp. Class A (a) 28,287 891,041 30024810 EZ Communications, Inc. Class A (a) 25,100 1,047,925 26928810 Infinity Broadcasting Corp. Class A (a) 109,525 2,998,247 45662610 Paxson Communications Corp. (a) 30,000 315,000 70423110 9,407,926 TELEVISION BROADCASTING - 10.5% Canwest Global Communications Corp. (non-vtg.) (a) 29,200 266,758 13890630 Heritage Media Corp. Class A 25,100 502,000 42724120 Home Shopping Network, Inc. (a) 65,200 700,900 43735110 Jacor Communications, Inc. Class A (a) 33,200 1,112,200 46985840 Lin Television Corp (a) 25,000 893,750 53277610 Renaissance Communications Corp. (a) 71,450 2,518,613 75966110 Sinclair Broadcast Group, Inc. Class A (a) 50,300 1,886,250 82922610 Viacom, Inc. (a): Class A 50,000 1,562,500 92552410 Class B: (non-vtg.) 8,555 269,483 92552430 (warrants C) 122,000 30,500 92552412 (warrants E) 50,000 56,250 92552413 9,799,204 TOTAL BROADCASTING 23,052,536 CELLULAR - 2.8% CELLULAR & COMMUNICATION SERVICES - 2.8% AirTouch Communications, Inc. (a) 49,000 1,347,500 00949T10 International Cabletel, Inc. (a) 4,600 111,550 45921610 SHARES VALUE (NOTE 1) 360 Degrees Communications Co. (a) 40,000 $ 955,000 88557110 United States Cellular Corp. (a) 6,300 190,575 91168410 2,604,625 COMMUNICATIONS EQUIPMENT - 0.6% DATACOMMUNICATIONS EQUIPMENT - 0.6% Echostar Communications Corp. Class A (a) 22,600 573,122 27876210 COMPUTER SERVICES & SOFTWARE - 2.7% ELECTRONIC INFORMATION RETRIEVAL - 0.7% CUC International, Inc. (a) 19,200 660,000 12654510 PREPACKAGED COMPUTER SOFTWARE - 2.0% Microsoft Corp (a) 15,000 1,837,500 59491810 TOTAL COMPUTER SERVICES & SOFTWARE 2,497,500 CONSUMER DURABLES - 0.6% MANUFACTURING INDUSTRIES - 0.6% Ballantyne of Omaha, Inc. (a) 44,000 550,000 05851610 CREDIT & OTHER FINANCE - 0.6% FINANCIAL SERVICES - 0.6% American Express Co. 12,200 533,750 02581610 ELECTRICAL EQUIPMENT - 7.0% ELECTRICAL MACHINERY - 5.3% General Electric Co. 35,000 2,909,375 36960410 Westinghouse Electric Corp. 125,000 2,046,875 96040210 4,956,250 TV & RADIO COMMUNICATION EQUIPMENT - 1.2% Avid Technology, Inc. 20,000 370,000 05367P10 Scientific-Atlanta, Inc. 57,200 772,200 80865510 1,142,200 WIRING & LIGHTING - 0.5% Oak Industries, Inc. (a) 15,200 456,000 67140050 TOTAL ELECTRICAL EQUIPMENT 6,554,450 ENTERTAINMENT - 10.0% AMUSEMENT PARKS - 0.8% Premier Parks, Inc. (a) 30,000 750,000 74054020 MOTION PICTURE DISTRIBUTION - 0.2% All American Communications, Inc. Class B (non-vtg.) (a) 30,000 202,500 01648040 MOTION PICTURE PRODUCTION - 4.5% Disney (Walt) Co. 73,452 4,186,764 25468710 MOVIE THEATERS - 2.5% AMC Entertainment, Inc. (a) 16,900 310,538 00166910 Carmike Cinemas, Inc. Class A (a) 41,600 1,003,600 14343610 Regal Cinemas, Inc. (a) 27,000 1,005,750 75875410 2,319,888 RECORDS & CDS - 0.1% PolyGram NV ADR 1,700 100,725 73173310 RECREATIONAL SERVICES - 1.9% Cedar Fair LP (depositary unit) 1,000 37,625 15018510 MGM Grand, Inc. (a) 46,400 1,751,600 55295310 1,789,225 TOTAL ENTERTAINMENT 9,349,102 GENERAL MERCHANDISE STORES - 0.4% DEPARTMENT STORES - 0.4% Federated Department Stores, Inc. (a) 12,400 429,350 31410H10 HOME FURNISHINGS - 0.3% FURNITURE STORES - 0.3% Ethan Allen Interiors, Inc. 11,700 312,975 29760210 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) HOUSEHOLD PRODUCTS - 1.3% COSMETICS - 1.3% Estee Lauder Companies, Inc. 12,000 $ 516,000 51843910 Revlon, Inc. Class A (a) 22,000 657,250 76152550 1,173,250 MANUFACTURED PRODUCTS - 0.0% Windmere-Durable Holdings, Inc. 845 12,041 97341110 TOTAL HOUSEHOLD PRODUCTS 1,185,291 LEISURE DURABLES & TOYS - 5.0% MISCELLANEOUS TRANSPORTATION EQUIPMENT - 0.6% Polaris Industries, Inc. 20,000 575,000 73106810 MOTORCYCLES - 0.9% Harley Davidson, Inc. 20,700 848,700 41282210 SPORTING & ATHLETIC GOODS - 1.1% Callaway Golf Co. 30,000 990,000 13119310 TOYS & GAMES - 2.4% Galoob (Lewis) Toys, Inc. (a) 11,500 301,875 36409110 Hasbro, Inc. 30,000 1,102,500 41805610 Toy Biz, Inc. Class A (a) 51,200 870,400 89226110 2,274,775 TOTAL LEISURE DURABLES & TOYS 4,688,475 LODGING & GAMING - 13.0% HOTELS, MOTELS, & TOURIST COURTS - 10.9% Circus Circus Enterprises, Inc. (a) 46,100 1,567,400 17290910 HFS, Inc. (a) 12,000 718,500 40418110 Hilton Hotels Corp. 25,100 2,682,563 43284810 Host Marriott Corp. (a) 120,000 1,650,000 44107810 ITT Corp. (a) 24,200 1,288,650 45091210 Mirage Resorts, Inc. (a) 81,000 1,883,250 60462E10 Sun International Hotels Ltd. Ord. (a) 8,600 407,425 86699N22 10,197,788 LODGING PLACES, OTHER THAN HOTELS - 0.2% Anchor Gaming (a) 3,300 180,263 03303710 RACING & GAMING - 1.9% Aztar Corp. (a) 11,600 127,600 05480210 International Speedway Corp. 1,500 390,000 46033510 Speedway Motorsports (a) 11,200 315,000 84778810 WMS Industries, Inc. (a) 40,000 925,000 92929710 1,757,600 TOTAL LODGING & GAMING 12,135,651 PRINTING - 0.4% COMMERCIAL PRINTING - 0.4% Valassis Communications, Inc. (a) 26,000 396,500 91886610 PUBLISHING - 3.3% NEWSPAPERS - 2.7% Knight-Ridder, Inc. 30,000 1,012,500 49904010 Times Mirror Co. Class A 35,500 1,539,813 88736410 2,552,313 PERIODICALS - 0.6% Meredith Corp. 12,200 $ 524,600 58943310 TOTAL PUBLISHING 3,076,913 RESTAURANTS - 0.1% Host Marriott Services Corp. (a) 20,000 140,000 44091410 RETAIL & WHOLESALE, MISCELLANEOUS - 6.1% DURABLE GOODS - WHOLESALE - 2.3% Sodak Gaming, Inc. (a) 42,100 2,189,200 83377710 SHARES VALUE (NOTE 1) HOBBY, TOY, & GAME SHOPS - 1.4% Toys "R" Us, Inc. 43,400 $ 1,280,300 89233510 LUMBER & BUILDING MATERIALS - RETAIL - 1.0% Lowe's Companies, Inc. 25,000 903,125 54866110 MUSIC, TV, & ELECTRONIC STORES - 0.8% Tandy Corp. 17,100 754,538 87538210 RETAIL, GENERAL - 0.1% Pier 1 Imports, Inc. 3,900 65,325 72027910 SPORTING GOODS & BIKES STORES - 0.5% Cannondale Corp. (a) 27,500 501,875 13779810 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 5,694,363 TELEPHONE SERVICES - 1.1% US West, Inc. (Media Group) (a) 55,000 996,875 91288920 TEXTILES & APPAREL - 2.1% APPAREL - 0.9% Warnaco Group, Inc. Class A 35,000 866,250 93439010 FOOTWEAR - 1.2% NIKE, Inc. Class B 10,000 1,080,000 65410610 TOTAL TEXTILES & APPAREL 1,946,250 TOTAL COMMON STOCKS (Cost $81,760,027) 86,357,196 CONVERTIBLE PREFERRED STOCKS - 0.2% CELLULAR - 0.2% CELLULAR & COMMUNICATION SERVICES - 0.2% AirTouch Communications, Inc. Class B $1.74 3,167 91,051 00949T20 Class C $2.125 2,034 96,869 00949T30 TOTAL PREFERRED STOCKS (Cost $191,059) 187,920 REPURCHASE AGREEMENTS - 7.5% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 7,050,110 7,046,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $88,997,086) $ 93,591,116 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $62,752,777 and $52,758,212, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $30,948 for the period (see Note 5 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $89,060,604. Net unrealized appreciation aggregated $4,530,512, of which $10,327,065 related to appreciated investment securities and $5,796,553 related to depreciated investment securities. LEISURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED)
ASSETS Investment in securities, at $ 93,591,116 value (including repurchase agreements of $7,046,000) (cost $88,997,086) - See accompanying schedule Cash 533 Receivable for investments sold 1,810,494 Receivable for fund shares sold 222,707 Dividends receivable 24,525 Redemption fees receivable 93 Other receivables 49,016 Prepaid expenses 6,760 TOTAL ASSETS 95,705,244 LIABILITIES Payable for investments purchased $ 1,765,776 Payable for fund shares redeemed 326,611 Accrued management fee 48,007 Other payables and 105,016 accrued expenses TOTAL LIABILITIES 2,245,410 NET ASSETS $ 93,459,834 Net Assets consist of: Paid in capital $ 82,221,756 Undistributed net investment income 237,448 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 6,406,532 Net unrealized appreciation (depreciation) on investments 4,594,098 and assets and liabilities in foreign currencies NET ASSETS, for 2,003,915 $ 93,459,834 shares outstanding NET ASSET VALUE and redemption price per share ($93,459,834 (divided by) 2,003,915 shares) $46.64 Maximum offering price per share (100/97.00 of $46.64) $48.08
STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED)
INVESTMENT INCOME $ 299,459 Dividends Special dividend from ADVO, Inc. 500,000 Interest 235,136 TOTAL INCOME 1,034,595 EXPENSES Management fee $ 312,963 Transfer agent fees 416,835 Accounting fees and expenses 51,829 Non-interested trustees' compensation 195 Custodian fees and expenses 10,779 Registration fees 6,760 Audit 13,032 Legal 696 Miscellaneous 837 Total expenses before reductions 813,926 Expense reductions (13,168 800,758 ) NET INVESTMENT INCOME 233,837 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 6,532,398 Foreign currency transactions (278 6,532,120 ) Change in net unrealized appreciation (depreciation) on: Investment securities (5,110,142 ) Assets and liabilities in (12 (5,110,154 foreign currencies ) ) NET GAIN (LOSS) 1,421,966 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 1,655,803 OTHER INFORMATION $ 202,356 Sales charges paid to FDC Deferred sales charges withheld $ 5,950 by FDC Exchange fees withheld by FSC $ 19,058 Expense reductions $ 13,036 Directed brokerage arrangements Custodian interest credits 132 $ 13,168
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED)
Operations $ 233,837 $ (369,128 Net investment income (loss) ) Net realized gain (loss) 6,532,120 14,883,189 Change in net unrealized appreciation (depreciation) (5,110,154 3,623,038 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,655,803 18,137,099 Distributions to shareholders from net realized gains (2,208,246 (8,732,838 ) ) Share transactions 75,638,574 62,794,252 Net proceeds from sales of shares Reinvestment of distributions 2,174,470 8,564,535 Cost of shares redeemed (68,945,904 (65,359,698 ) ) Paid in capital portion of redemption fees 132,270 40,287 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 8,999,410 6,039,376 TOTAL INCREASE (DECREASE) IN NET ASSETS 8,446,967 15,443,637 NET ASSETS Beginning of period 85,012,867 69,569,230 End of period (including undistributed net investment income of $237,448 and $3,611, respectively) $ 93,459,834 $ 85,012,867 OTHER INFORMATION Shares Sold 1,590,325 1,338,175 Issued in reinvestment of distributions 47,636 200,267 Redeemed (1,475,456 (1,405,986 ) ) Net increase (decrease) 162,505 132,456
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, beginning of period $ 46.17 $ 40.71 $ 45.30 $ 35.77 $ 31.65 $ 26.32 Income from Investment Operations Net investment income (loss) .11 G (.21) (.21) (.29) (.11) (.08) Net realized and unrealized gain (loss) 1.29 10.97 (.48) 12.98 4.21 5.40 Total from investment operations 1.40 10.76 (.69) 12.69 4.10 5.32 Less Distributions From net realized gain (.99) (5.32) (3.93) (3.26) - - Redemption fees added to paid in capital .06 .02 .03 .10 .02 .01 Net asset value, end of period $ 46.64 $ 46.17 $ 40.71 $ 45.30 $ 35.77 $ 31.65 TOTAL RETURN B, C 3.21% 27.61% (1.07)% 37.14% 13.02% 20.25% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 93,460 $ 85,013 $ 69,569 $ 105,833 $ 44,824 $ 40,051 Ratio of expenses to average net assets 1.56% A 1.64% 1.64% 1.55% 1.90% A 2.21% Ratio of expenses to average net assets after 1.53% A, 1.63% 1.62% 1.53% 1.90% A 2.21% expense reductions E E E E Ratio of net investment income (loss) to average net .45% A (.46)% (.52)% (.69)% (.39)% A (.28)% assets Portfolio turnover rate 112% A 141% 103% 170% 109% A 45% Average commission rate F $ .0341
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. G INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM ADVO, INC. WHICH AMOUNTED TO $.23 PER SHARE.
MULTIMEDIA PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past five and 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 FEBRUARY 29, 1996 MONTH YEAR YEARS YEARS S MULTIMEDIA -4.49% 1.55% 167.83% 360.51% MULTIMEDIA -7.36% -1.49% 159.80% 346.69% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 29, 1996 YEAR YEARS YEARS MULTIMEDIA 1.55% 21.78% 16.50% MULTIMEDIA -1.49% 21.04% 16.15% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960910 142526 S00000000000001 Multimedia SP Standard & Poor 500 00503 SP001 1986/08/31 9700.00 10000.00 1986/09/30 9189.98 9173.00 1986/10/31 9623.02 9702.28 1986/11/30 9700.00 9938.05 1986/12/31 9411.31 9684.63 1987/01/31 10537.20 10989.15 1987/02/28 11817.06 11423.22 1987/03/31 11778.57 11753.35 1987/04/30 11595.73 11648.74 1987/05/31 12134.62 11750.09 1987/06/30 12644.64 12343.47 1987/07/31 13616.57 12969.28 1987/08/31 13606.94 13453.04 1987/09/30 13279.76 13158.41 1987/10/31 10575.69 10324.09 1987/11/30 9844.35 9473.39 1987/12/31 11287.40 10194.31 1988/01/31 11474.31 10623.49 1988/02/29 12242.73 11118.55 1988/03/31 12772.31 10774.98 1988/04/30 12928.07 10894.59 1988/05/31 12710.01 10989.37 1988/06/30 13149.01 11493.78 1988/07/31 13127.52 11450.10 1988/08/31 12633.36 11060.80 1988/09/30 13428.32 11531.99 1988/10/31 13578.71 11852.58 1988/11/30 13471.29 11683.09 1988/12/31 14317.77 11887.54 1989/01/31 16027.51 12757.71 1989/02/28 15994.42 12440.04 1989/03/31 16744.51 12729.90 1989/04/30 17869.63 13390.58 1989/05/31 18730.02 13932.90 1989/06/30 19113.54 13853.48 1989/07/31 20567.59 15104.45 1989/08/31 20545.39 15400.50 1989/09/30 20223.50 15337.35 1989/10/31 18858.25 14981.53 1989/11/30 18969.25 15287.15 1989/12/31 18977.28 15654.04 1990/01/31 16457.37 14603.66 1990/02/28 16041.71 14792.04 1990/03/31 15885.84 15184.03 1990/04/30 15132.46 14804.43 1990/05/31 16574.27 16247.86 1990/06/30 16431.39 16137.38 1990/07/31 15522.14 16085.74 1990/08/31 13508.81 14631.59 1990/09/30 12352.77 13919.03 1990/10/31 11820.21 13859.18 1990/11/30 13041.20 14754.48 1990/12/31 14002.40 15166.13 1991/01/31 14755.78 15827.37 1991/02/28 15846.87 16959.03 1991/03/31 16275.52 17369.44 1991/04/30 16834.06 17411.13 1991/05/31 16924.98 18163.29 1991/06/30 15587.09 17331.41 1991/07/31 16171.60 18139.05 1991/08/31 16678.18 18568.95 1991/09/30 17691.35 18258.85 1991/10/31 18587.60 18503.51 1991/11/30 17314.66 17757.82 1991/12/31 19302.01 19789.32 1992/01/31 19808.59 19421.24 1992/02/29 20912.68 19673.71 1992/03/31 20380.12 19290.07 1992/04/30 20691.86 19857.20 1992/05/31 21003.60 19954.50 1992/06/30 21081.54 19657.18 1992/07/31 21133.49 20461.16 1992/08/31 20847.73 20041.71 1992/09/30 20717.84 20278.20 1992/10/31 21055.56 20349.17 1992/11/30 22588.29 21043.08 1992/12/31 23451.56 21301.91 1993/01/31 23925.33 21480.84 1993/02/28 24030.61 21772.98 1993/03/31 24978.15 22232.39 1993/04/30 24332.22 21694.37 1993/05/31 25990.93 22275.78 1993/06/30 26806.91 22340.38 1993/07/31 27810.16 22251.02 1993/08/31 30177.84 23094.33 1993/09/30 30900.18 22916.50 1993/10/31 33214.35 23390.88 1993/11/30 31046.76 23168.66 1993/12/31 32367.96 23449.00 1994/01/31 32829.59 24246.27 1994/02/28 32408.70 23589.20 1994/03/31 30426.43 22560.71 1994/04/30 30441.19 22849.48 1994/05/31 31560.69 23224.22 1994/06/30 30855.25 22655.22 1994/07/31 31606.70 23398.31 1994/08/31 33508.31 24357.64 1994/09/30 33278.28 23760.88 1994/10/31 34029.72 24295.50 1994/11/30 32956.23 23410.66 1994/12/31 33663.83 23757.84 1995/01/31 34044.39 24373.88 1995/02/28 35439.78 25323.73 1995/03/31 37691.44 26071.03 1995/04/30 38563.56 26838.83 1995/05/31 38769.69 27911.57 1995/06/30 40260.23 28559.96 1995/07/31 42638.73 29507.01 1995/08/31 43986.56 29581.07 1995/09/30 45239.24 30829.39 1995/10/31 43907.27 30719.33 1995/11/30 45603.94 32067.91 1995/12/31 44999.40 32685.54 1996/01/31 45274.74 33798.15 1996/02/29 46771.85 34111.46 1996/03/31 46152.35 34439.95 1996/04/30 48300.88 34947.60 1996/05/31 49905.03 35848.90 1996/06/30 47595.75 35985.48 1996/07/31 43065.34 34395.64 1996/08/30 44669.50 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960910 142531 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Multimedia Portfolio on August 31, 1986 and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $44,669 - a 346.69% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Meredith Corp. 6.6 Times Mirror Co. Class A 5.9 Scientific-Atlanta, Inc. 5.3 Mobile Telecommunications Technologies, Inc. 4.9 Disney (Walt) Co. 3.5 Hollinger International, Inc. Class A 3.4 Knight-Ridder, Inc. 3.4 Infinity Broadcasting Corp. Class A 3.0 360 Degrees Communications Co. 2.9 MFS Communications, Inc. 2.3 TOP INDUSTRIES AS OF AUGUST 31, 1996 7.7 Newspapers 18.0% TV & Radio Communication Equipment 10.2% Cellular & Communication Services 9.9% Periodicals 9.3% Cable TV Operators 7.2% All Others 45.4% * Row: 1, Col: 1, Value: 45.4 Row: 1, Col: 2, Value: 7.2 Row: 1, Col: 3, Value: 9.300000000000001 Row: 1, Col: 4, Value: 9.9 Row: 1, Col: 5, Value: 10.2 Row: 1, Col: 6, Value: 18.0 * INCLUDES SHORT-TERM INVESTMENTS MULTIMEDIA PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW John Porter, Portfolio Manager of Fidelity Select Multimedia Portfolio Q. HOW DID THE FUND PERFORM, JOHN? A. For the six months ended August 31, 1996 the fund had a total return of - -4.49%. For the past year, it returned 1.55%. For the same periods, the Standard & Poor's 500 Index returned 2.96% and 18.73%, respectively. Q. WHY DID THE FUND UNDERPERFORM THE MARKET? A. I think the fund's performance is indicative of the underperformance of the multimedia sector as a whole. If you look at some of the subsectors that make up the multimedia market - such as regional Bell operating companies (RBOCs) and cable companies - they significantly underperformed the general market. Q. MORE SPECIFICALLY, DID THE UNDERWEIGHTING OR OVERWEIGHTING OF A PARTICULAR ASSET CLASS HURT THE FUND'S PERFORMANCE? A. In the fund's annual report, I discussed my reservations about radio stocks. At the time, I thought they were overvalued and faced stiff competition for advertising revenues from other forms of media. Unfortunately, I was wrong. Since then, radio stocks have performed well on increased merger and acquisition activity resulting from the new telecommunications law, which eased broadcast market restrictions. What mergers like the recent Westinghouse/Infinity agreement say to me is that maybe there are more economies of scale than I originally thought in putting two broadcasting operations together. Q. CAN YOU TELL US ABOUT THE RETURNS OF SOME OF THE OTHER MAJOR COMPONENTS OF THE MULTIMEDIA SECTOR? A. Publishing stocks had fair performance, but entertainment and newspaper stocks underperformed the market. Entertainment stocks suffered from tough competition and a lackluster summer box office. For newspapers, newsprint prices fell - good news for their cost structures - but advertising revenue was not as strong as expected. Q. HOW DO YOU VIEW THE MULTIMEDIA MARKET AND WHAT ARE THE IMPLICATIONS OF THE TELECOMMUNICATIONS LAW ON THE STOCKS THE FUND OWNS? A. I break the multimedia market down into four segments: entertainment, publishing, equipment and distribution. The last two of these are directly impacted by the telecom law. The passage of the telecom law increases competition in the distribution area because companies such as RBOCs, long-distance phone companies, cable companies and broadcasting companies are suddenly entering each other's markets. In general, competition can lead to pricing pressures and increased capital spending to gain market share. Capital spending, on the other hand, could potentially help equipment firms including cable equipment providers such as Scientific-Atlanta. Q. WHAT DO YOU SEE GOING FORWARD FOR THE MULTIMEDIA INDUSTRY? A. The size and scope of the multimedia market are changing dramatically. We've already seen some interesting cross-industry combinations as a result of the telecom law. For example, with companies that combine local and long-distance telephone service with Internet service, or local telephone service with cable service, the challenge will be to offer a better product at lower prices in order to encourage the consumer from going out and buying each service individually. We'll have to wait and see which companies can offer these multi-source packages. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 503 TRADING SYMBOL: FBMPX SIZE: as of August 31, 1996, more than $86 million MANAGER: John Porter, since February 1996; joined Fidelity in 1995 (checkmark) MULTIMEDIA PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.5% SHARES VALUE (NOTE 1) ADVERTISING - 5.0% ADVERTISING AGENCIES - 4.3% ADVO, Inc. 210,000 $ 2,073,748 00758510 Interpublic Group of Companies, Inc. 15,000 678,750 46069010 Omnicom Group, Inc. 25,000 1,134,375 68191910 3,886,873 RADIO & TV ADVERTISING REPRESENTATIVES - 0.7% Katz Media Group, Inc. (a) 50,000 606,250 48611210 TOTAL ADVERTISING 4,493,123 BROADCASTING - 17.0% CABLE TV OPERATORS - 7.2% BET Holdings, Inc. Class A (a) 12,700 325,438 08658510 CAI Wireless Systems, Inc. (a) 104,400 776,475 12476P10 Gaylord Entertainment Co. Class A 8,400 205,800 36790110 People's Choice TV Corp. (a) 150,412 1,936,555 71084710 TCI Group Class A 105,000 1,561,875 87924V10 Tele-Communications Liberty Media Group, Series A (a) 13,750 362,656 87924V50 Videotron Holdings PLC sponsored ADR (a) 81,000 1,356,750 92659H10 6,525,549 COMMUNICATIONS SERVICES - 0.9% PanAmSat Corp. (a) 30,000 832,500 69830X10 RADIO BROADCASTING - 4.3% Grupo Radio Centro SA de CV sponsored ADR 137,200 1,080,450 40049C10 Infinity Broadcasting Corp. Class A 100,000 2,737,500 45662610 3,817,950 TELEVISION BROADCASTING - 4.6% Canwest Global Communications Corp. (non-vtg.) (a) 75,000 685,182 13890630 Central European Media Class C (a) 25,000 703,125 15399422 Grupo Televisa SA de CV sponsored ADR (a) 53,100 1,612,915 40049J20 Lambert Communications, Inc. (a) 150,000 - 51328G10 New World Communications Group, Inc. Class A (a) 50,000 1,153,125 64927A10 4,154,347 TOTAL BROADCASTING 15,330,346 CELLULAR - 9.9% CELLULAR & COMMUNICATION SERVICES - 9.9% AirTouch Communications, Inc. (a) 43,400 1,193,500 00949T10 Arch Communications Group, Inc. (a) 50,000 681,250 03938110 Mobile Telecommunications Technologies, Inc. (a) 320,000 4,440,000 60740610 360 Degrees Communications Co. (a) 110,000 2,626,250 88557110 8,941,000 COMMUNICATIONS EQUIPMENT - 1.4% TELEPHONE EQUIPMENT - 1.4% DSC Communications Corp. (a) 42,600 1,267,350 23331110 COMPUTER SERVICES & SOFTWARE - 4.3% COMPUTER SERVICES - 1.2% Barra, Inc. (a) 30,000 637,500 06831310 Checkfree Corp. (a) 25,000 415,625 16281210 1,053,125 SHARES VALUE (NOTE 1) PREPACKAGED COMPUTER SOFTWARE - 3.1% FactSet Research Systems, Inc. (a) 42,000 $ 850,500 30307510 Softkey International, Inc. 115,000 1,998,125 83402N10 2,848,625 TOTAL COMPUTER SERVICES & SOFTWARE 3,901,750 COMPUTERS & OFFICE EQUIPMENT - 2.0% OFFICE AUTOMATION - 2.0% Bell & Howell Co. (a) 60,000 1,800,000 07785210 CONSUMER ELECTRONICS - 0.7% RADIOS, TELEVISIONS, STEREOS - 0.7% Sony Corp. ADR 9,300 588,225 83569930 ELECTRICAL EQUIPMENT - 10.2% TV & RADIO COMMUNICATION EQUIPMENT - 10.2% California Amplifier, Inc. (a) 90,400 1,130,000 12990010 General Instrument Corp. (a) 70,600 1,932,675 37012110 Leitch Technology Corp. (a) 46,400 1,398,867 52543H10 Scientific-Atlanta, Inc. 356,900 4,818,150 80865510 9,279,692 ENTERTAINMENT - 3.6% MOTION PICTURE PRODUCTION - 3.6% Alliance Communications Corp. Class A (vtg.) (a) 12,500 110,543 01855R20 Disney (Walt) Co. 55,000 3,135,000 25468710 3,245,543 PUBLISHING - 30.9% BOOK PUBLISHING & PRINTING - 3.9% Harcourt General, Inc. 32,000 1,532,000 41163G10 Scholastic Corp. (a) 30,000 2,032,500 80706610 3,564,500 NEWSPAPERS - 17.7% Central Newspapers, Inc. Class A 40,000 1,460,000 15464710 Hollinger International, Inc. Class A 284,000 3,088,500 43556910 Knight-Ridder, Inc. 90,400 3,051,000 49904010 New York Times Co. (The) Class A 61,900 1,934,375 65011110 News Corp. Ltd. sponsored ADR (ltd. vtg.) . 61,700 1,095,175 65248780 Times Mirror Co. Class A 123,200 5,343,800 88736410 15,972,850 PERIODICALS - 9.3% K-III Communications Corp. (a) 130,000 1,430,000 48272710 Meredith Corp. 138,200 5,942,600 58943310 Playboy Enterprises, Inc. Class B (a) 80,000 1,000,000 72811730 8,372,600 TOTAL PUBLISHING 27,909,950 SERVICES - 2.6% COMMERCIAL TESTING LABS - 0.7% Forensic Technologies International Corp. (a) 75,000 693,750 34551810 GENERAL SERVICES - 1.9% Flextech PLC (a) 211,100 1,687,881 33999392 TOTAL SERVICES 2,381,631 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TELEPHONE SERVICES - 5.9% MFS Communications, Inc. 50,000 $ 2,118,750 55272T10 Telebras sponsored ADR 25,000 1,859,375 87928710 U.S. West, Inc. (Media Group) (a) 75,000 1,359,375 91288920 5,337,500 TOTAL COMMON STOCKS (Cost $85,122,408) 84,476,110 NONCONVERTIBLE PREFERRED STOCKS - 0.3% PUBLISHING - 0.3% NEWSPAPERS - 0.3% News Corp. Ltd. (ltd. vtg.) (Cost $178,728) 50,993 229,549 65199093 REPURCHASE AGREEMENTS - 6.2% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 5,622,278 5,619,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $90,920,136) $ 90,324,659 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $41,968,998 and $44,174,846, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $8,093 for the period (see Note 5 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 86.2% United Kingdom 3.4 Mexico 3.0 Canada 2.4 Brazil 2.1 Australia 1.5 Others (individually less than 1%) 1.4 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $91,567,024. Net unrealized depreciation aggregated $1,242,365, of which $7,873,902 related to appreciated investment securities and $9,116,267 related to depreciated investment securities. MULTIMEDIA PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED)
ASSETS Investment in securities, $ 90,324,659 at value (including repurchase agreements of $5,619,000) (cost $90,920,136) - See accompanying schedule Cash 824 Receivable for investments sold 729,048 Receivable for fund shares sold 206,147 Dividends receivable 39,024 Redemption fees receivable 765 Other receivables 231 Prepaid expenses 7,959 TOTAL ASSETS 91,308,657 LIABILITIES Payable for investments purchased $ 4,541,115 Payable for fund shares redeemed 489,677 Accrued management fee 43,230 Other payables and 94,071 accrued expenses TOTAL LIABILITIES 5,168,093 NET ASSETS $ 86,140,564 Net Assets consist of: Paid in capital $ 82,938,103 Undistributed net investment income 1,411,855 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 2,386,553 Net unrealized appreciation (depreciation) on investments (595,947 and assets and liabilities in ) foreign currencies NET ASSETS, for 3,399,323 $ 86,140,564 shares outstanding NET ASSET VALUE and redemption price per share ($86,140,564 (divided by) 3,399,323 shares) $25.34 Maximum offering price per share (100/97.00 of $25.34) $26.12
STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED)
INVESTMENT INCOME $ 335,700 Dividends Special dividend from ADVO, Inc. 1,600,000 Interest 174,508 TOTAL INCOME 2,110,208 EXPENSES Management fee $ 278,551 Transfer agent fees 359,285 Accounting fees and expenses 46,147 Non-interested trustees' compensation 178 Custodian fees and expenses 8,483 Registration fees 7,959 Audit 16,603 Legal 361 Miscellaneous 1,287 Total expenses before reductions 718,854 Expense reductions (20,501 698,353 ) NET INVESTMENT INCOME 1,411,855 REALIZED AND UNREALIZED GAIN (LOSS) 3,097,891 Net realized gain (loss) on investment securities Change in net unrealized appreciation (depreciation) on: Investment securities (9,821,811 ) Assets and liabilities in (470 (9,822,281 foreign currencies ) ) NET GAIN (LOSS) (6,724,390 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (5,312,535 ) OTHER INFORMATION $ 236,689 Sales charges paid to FDC Deferred sales charges withheld $ 1,832 by FDC Exchange fees withheld by FSC $ 14,355 Expense reductions $ 18,644 Directed brokerage arrangements Custodian interest credits 1,593 Transfer agent interest credits 264 $ 20,501
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED)
Operations $ 1,411,855 $ 79,501 Net investment income Net realized gain (loss) 3,097,891 15,081,916 Change in net unrealized appreciation (depreciation) (9,822,281 7,021,515 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (5,312,535 22,182,932 ) Distributions to shareholders - (62,595 From net investment income ) From net realized gain (2,110,174 (6,860,366 ) ) TOTAL DISTRIBUTIONS (2,110,174 (6,922,961 ) ) Share transactions 29,616,559 226,094,070 Net proceeds from sales of shares Reinvestment of distributions 2,079,894 6,804,045 Cost of shares redeemed (33,175,893 (191,430,375 ) ) Paid in capital portion of redemption fees 72,992 84,905 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (1,406,448 41,552,645 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (8,829,157 56,812,616 ) NET ASSETS Beginning of period 94,969,721 38,157,105 End of period (including undistributed net investment income of $1,411,855 and $16,907, respectively) $ 86,140,564 $ 94,969,721 OTHER INFORMATION Shares Sold 1,089,078 8,957,896 Issued in reinvestment of distributions 79,295 262,403 Redeemed (1,262,842 (7,433,399 ) ) Net increase (decrease) (94,469) 1,786,900
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, beginning of period $ 27.18 $ 22.35 $ 23.87 $ 18.26 $ 15.93 $ 12.96 Income from Investment Operations Net investment income (loss) .41 H .02 (.01) (.10) (.07) (.17) Net realized and unrealized gain (loss) (1.63) 7.00 1.67 6.28 2.61 3.08 Total from investment operations (1.22) 7.02 1.66 6.18 2.54 2.91 Less Distributions From net investment income - (.02) - - - - From net realized gain (.64) (2.19) (3.21) (.65) (.23) - Total distributions (.64) (2.21) (3.21) (.65) (.23) - Redemption fees added to paid in capital .02 .02 .03 .08 .02 .06 Net asset value, end of period $ 25.34 $ 27.18 $ 22.35 $ 23.87 $ 18.26 $ 15.93 TOTAL RETURN B, C (4.49)% 31.98% 9.35% 34.86% 16.14% 22.92% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 86,141 $ 94,970 $ 38,157 $ 49,177 $ 16,647 $ 8,393 Ratio of expenses to average net assets 1.55% A 1.56% 2.05% 1.66% 2.49% A, 2.49% F F Ratio of expenses to average net assets after 1.50% A, 1.54% 2.03% 1.63% 2.49% A 2.49% expense reductions E E E E Ratio of net investment income (loss) to average net 3.04% A .08% (.07)% (.42)% (.52)% A (1.22)% assets Portfolio turnover rate 95% A 223% 107% 340% 70% A 111% Average commission rate G $ .0402
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F DURING THE PERIOD, FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. H INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM ADVO, INC. WHICH AMOUNTED TO $.46 PER SHARE.
RETAILING PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 FEBRUARY 29, 1996 MONTH YEAR YEARS YEARS S RETAILING 15.86% 22.64% 88.95% 353.58% RETAILING 12.38% 18.96% 83.28% 339.97% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 29, 1996 YEAR YEARS YEARS RETAILING 22.64% 13.57% 16.32% RETAILING 18.96% 12.88% 15.97% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960910 152717 S00000000000001 Retailing SP Standard & Poor 500 00046 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8990.45 9173.00 1986/10/31 9783.48 9702.28 1986/11/30 10050.60 9938.05 1986/12/31 9341.05 9684.63 1987/01/31 10117.38 10989.15 1987/02/28 11294.41 11423.22 1987/03/31 11636.66 11753.35 1987/04/30 11277.71 11648.74 1987/05/31 11478.06 11750.09 1987/06/30 12104.13 12343.47 1987/07/31 12713.51 12969.28 1987/08/31 12997.33 13453.04 1987/09/30 12070.74 13158.41 1987/10/31 8464.54 10324.09 1987/11/30 7880.21 9473.39 1987/12/31 8653.42 10194.31 1988/01/31 9200.05 10623.49 1988/02/29 10265.51 11118.55 1988/03/31 10395.22 10774.98 1988/04/30 10719.49 10894.59 1988/05/31 10413.75 10989.37 1988/06/30 11330.97 11493.78 1988/07/31 11229.06 11450.10 1988/08/31 11201.27 11060.80 1988/09/30 11859.07 11531.99 1988/10/31 12109.23 11852.58 1988/11/30 11942.46 11683.09 1988/12/31 12002.74 11887.54 1989/01/31 12596.28 12757.71 1989/02/28 12426.70 12440.04 1989/03/31 13020.24 12729.90 1989/04/30 13755.10 13390.58 1989/05/31 14706.65 13932.90 1989/06/30 14444.84 13853.48 1989/07/31 15609.74 15104.45 1989/08/31 16366.93 15400.50 1989/09/30 16328.10 15337.35 1989/10/31 15541.79 14981.53 1989/11/30 15638.86 15287.15 1989/12/31 15547.26 15654.04 1990/01/31 14332.99 14603.66 1990/02/28 14832.31 14792.04 1990/03/31 16046.59 15184.03 1990/04/30 15819.62 14804.43 1990/05/31 17930.42 16247.86 1990/06/30 17703.45 16137.38 1990/07/31 16977.16 16085.74 1990/08/31 14537.26 14631.59 1990/09/30 12914.44 13919.03 1990/10/31 12312.98 13859.18 1990/11/30 13992.53 14754.48 1990/12/31 14765.11 15166.13 1991/01/31 16198.40 15827.37 1991/02/28 17699.93 16959.03 1991/03/31 19542.73 17369.44 1991/04/30 19815.74 17411.13 1991/05/31 21465.15 18163.29 1991/06/30 20782.63 17331.41 1991/07/31 22113.54 18139.05 1991/08/31 23285.20 18568.95 1991/09/30 23034.94 18258.85 1991/10/31 22602.68 18503.51 1991/11/30 22170.42 17757.82 1991/12/31 24825.06 19789.32 1992/01/31 26201.63 19421.24 1992/02/29 27461.55 19673.71 1992/03/31 26913.25 19290.07 1992/04/30 25816.66 19857.20 1992/05/31 26353.29 19954.50 1992/06/30 25123.14 19657.18 1992/07/31 26240.81 20461.16 1992/08/31 25645.53 20041.71 1992/09/30 26410.89 20278.20 1992/10/31 28221.02 20349.17 1992/11/30 30359.16 21043.08 1992/12/31 30305.50 21301.91 1993/01/31 30514.59 21480.84 1993/02/28 29358.45 21772.98 1993/03/31 31621.53 22232.39 1993/04/30 29806.52 21694.37 1993/05/31 31457.54 22275.78 1993/06/30 30701.35 22340.38 1993/07/31 30852.59 22251.02 1993/08/31 32264.14 23094.33 1993/09/30 33247.19 22916.50 1993/10/31 33763.92 23390.88 1993/11/30 34091.61 23168.66 1993/12/31 34254.78 23449.00 1994/01/31 32728.71 24246.27 1994/02/28 33941.39 23589.20 1994/03/31 33232.86 22560.71 1994/04/30 34241.15 22849.48 1994/05/31 32551.58 23224.22 1994/06/30 32279.07 22655.22 1994/07/31 32824.09 23398.31 1994/08/31 34908.81 24357.64 1994/09/30 34227.53 23760.88 1994/10/31 34377.41 24295.50 1994/11/30 33178.36 23410.66 1994/12/31 32537.95 23757.84 1995/01/31 32279.07 24373.88 1995/02/28 32578.83 25323.73 1995/03/31 32946.72 26071.03 1995/04/30 31665.91 26838.83 1995/05/31 32224.56 27911.57 1995/06/30 34282.03 28559.96 1995/07/31 36380.37 29507.01 1995/08/31 35876.23 29581.07 1995/09/30 36952.65 30829.39 1995/10/31 35303.95 30719.33 1995/11/30 37075.28 32067.91 1995/12/31 36434.88 32685.54 1996/01/31 35372.08 33798.15 1996/02/29 37974.57 34111.46 1996/03/31 40795.07 34439.95 1996/04/30 43179.55 34947.60 1996/05/31 45250.65 35848.90 1996/06/30 44446.73 35985.48 1996/07/31 40195.54 34395.64 1996/08/30 43997.09 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960910 152722 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Retailing Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $43,997 - a 339.97% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Melville Corp. 9.9 Wal-Mart Stores, Inc. 5.6 Tandy Corp. 5.3 TJX Companies, Inc. 4.5 Lowe's Companies, Inc. 4.3 Toys "R" Us, Inc. 3.7 Gadzooks, Inc. 3.0 Federated Department Stores, Inc. 2.9 Dayton Hudson Corp. 2.7 Sears, Roebuck & Co. 2.5 TOP INDUSTRIES AS OF AUGUST 31, 1996 Women's Clothing Stores 13.9% Department Stores 9.9% General Merchandise Stores 9.3% General Apparel Stores 8.5% Music, TV, & Electronic Stores 5.7% All Others 52.7% * Row: 1, Col: 1, Value: 52.9 Row: 1, Col: 2, Value: 5.7 Row: 1, Col: 3, Value: 8.300000000000001 Row: 1, Col: 4, Value: 9.300000000000001 Row: 1, Col: 5, Value: 9.9 Row: 1, Col: 6, Value: 13.9 * INCLUDES SHORT-TERM INVESTMENTS RETAILING PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Erin Sullivan, Portfolio Manager of Fidelity Select Retailing Portfolio Q. HOW HAS THE FUND PERFORMED, ERIN? A. The fund has done pretty well. For the six-month period ended August 31, 1996, the fund showed a 15.86% gain. For the 12-month period, the fund returned 22.64%. For the same six- and 12-month periods, the Standard & Poor's 500 Index returned 2.96% and 18.73%, respectively. Q. THE PERFORMANCE OF RETAIL STOCKS HAS BEEN QUITE STRONG OVER THE PAST SIX MONTHS. WHAT'S BEEN FUELING THAT RECENT STRENGTH? A. Generally speaking, the earnings gains of retail companies have outpaced the earnings gains of the stock market overall. At the end of 1995, retailers had pared their inventories back. So coming into 1996, inventories were relatively low. Meanwhile, demand for apparel and other consumer goods strengthened to better-than-expected levels through the end of the spring. Lower inventories, combined with higher sales, led to better profit margins for many retailers. Additionally, many retailers were able to benefit from cost-cutting and lower expenses. However, the retail sector sold off with the rest of the market in July's down draft at the hands of weak June retail sales results. But by August, the situation had improved, and the retail sector was once again strong, thanks in part to better back-to-school spending. Q. WHICH OF THE FUND'S HOLDINGS DID PARTICULARLY WELL OVER THE PAST SIX MONTHS? A. Melville Corp., the fund's largest investment at the end of the period, was a strong performer for the fund. Over the past 12 months, the company has shed businesses to focus on its drugstore business, which operates under the CVS flag. Wal-Mart, which is the country's largest retail company and operates Wal-Mart stores, Sam's Clubs and Wal-Mart Supercenters (combination supermarket and discount department stores), was also one of the fund's top performers and one of its largest investments at the end of the period. The company has been very focused on improving its profits, primarily by controlling costs, and investors rewarded the company by bidding up its stock price. Wal-mart's stock got an added boost late in the period from better back-to-school apparel sales. Q. SOME OF THE FUND'S LARGEST HOLDINGS ARE DEPARTMENT STORES. WHAT KIND OF PERFORMANCE DID THEY HAVE DURING THE PAST SIX MONTHS? A. The fund's largest department store holdings turned in mixed performances. Federated Department Stores - which operates through divisions including Abraham & Straus/Jordan Marsh, Bloomingdale's, Burdines, Lazarus, Macy's, Rich/Goldsmith's and Stern's - did quite well, improving its earnings primarily through cost-cutting measures. Dayton Hudson also performed well, thanks to the strong returns of its Target division. On the other hand, the stock of Sears suffered as investors worried about rising credit card delinquencies and bankruptcies related to the store's proprietary Sears credit card. Q. DESPITE THE FUND'S STRONG SHOWING, THERE MUST HAVE BEEN SOME DISAPPOINTMENTS . . . A. Sears, as I just mentioned, was one disappointment. Also, Tandy - the retailer of consumer electronics through Radio Shack, Computer City and Incredible Universe stores - didn't fare as well as I had hoped. While the stock enjoyed a run-up in the spring, it tumbled in the summer when the company's second quarter earnings fell below expectations. Q. WHAT'S YOUR OUTLOOK FOR THE RETAIL ENVIRONMENT? A. I'm cautiously optimistic. I think it's encouraging that inventory levels continue to remain low. There are some concerns that if interest rates rise it could curtail demand. On the other hand, consumer confidence remains high, and the recent hike in the minimum wage could stir additional demand. The retail sector could see some additional consolidation - although to a lesser extent than we've seen over the past year. In my view, the retail sector will continue to be troubled by an over supply of stores for some time. That's why I believe it's important to focus on stocks whose fundamentals and market position are strong. As a part of that strategy, I'll most likely focus on niche companies that concentrate on one specialized line or product and that dominate or lead their industry. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 046 TRADING SYMBOL: FSRPX SIZE: as of August 31, 1996, more than $261 million MANAGER: Erin Sullivan, since 1995; equity analyst, medical technology and hospital supply industries, 1993-1995; analyst, initial public offerings, 1991-1992; joined Fidelity in 1991 (checkmark) RETAILING PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 87.3% SHARES VALUE (NOTE 1) APPAREL STORES - 24.3% FAMILY CLOTHING STORES - 0.1% Harolds Stores, Inc. (a) 19,000 $ 268,375 41335310 GENERAL APPAREL STORES - 8.3% Gymboree Corp. (a) 80,000 2,310,000 40377710 Limited, Inc. (The) 84,700 1,566,950 53271610 Men's Wearhouse, Inc. (The) 77,300 1,681,275 58711810 Ross Stores, Inc. 109,300 4,208,050 77829610 Saks Holdings, Inc. (a) 11,000 375,375 79377R10 TJX Companies, Inc. 369,900 11,836,800 87254010 21,978,450 MENS & BOYS CLOTHING STORES - RETAIL - 0.1% K&G Men's Center, Inc. (a) 10,000 226,250 48224510 SHOE STORES - 1.4% Just for Feet, Inc. 900 40,275 48213P10 Payless ShoeSource, Inc. 108,600 3,814,575 70437910 3,854,850 WOMEN'S ACCESSORY & SPECIALTY STORES - 0.5% Loehmanns, Inc. (a) 52,000 1,293,500 54041710 WOMEN'S CLOTHING STORES - 13.9% AnnTaylor Stores Corp. 60,000 870,000 03611510 Charming Shoppes, Inc. (a) 381,900 2,553,956 16113310 Chicos Fas, Inc. (a) 46,900 410,375 16861510 Melville Corp. 619,600 26,178,100 58574510 Mothers Work (a) 64,500 1,290,000 61990310 Talbots, Inc. 163,200 5,589,600 87416110 36,892,031 TOTAL APPAREL STORES 64,513,456 AUTOS, TIRES, & ACCESSORIES - 2.0% AUTO & TRUCK PARTS - 0.8% Tower Automotive, Inc. (a) 85,000 2,040,000 89170710 AUTO PARTS - RETAIL - 1.2% AutoZone, Inc. (a) 15,000 408,750 05333210 Discount Auto Parts, Inc. (a) 20,000 470,000 25464210 Monro Muffler Brake, Inc. 10,500 207,375 61023610 O'Reilly Automotive, Inc. (a) 30,900 1,120,125 68609110 Pep Boys-Manny, Moe & Jack 30,000 1,005,000 71327810 3,211,250 TOTAL AUTOS, TIRES, & ACCESSORIES 5,251,250 BROADCASTING - 0.0% TELEVISION BROADCASTING - 0.0% Home Shopping Network, Inc. (a) 10,000 107,500 43735110 COMPUTER SERVICES & SOFTWARE - 0.2% COMPUTER & SOFTWARE STORES - 0.2% CompUSA, Inc. (a) 10,200 409,275 20493210 PREPACKAGED COMPUTER SOFTWARE - 0.0% Metromail Corp. (a) 5,900 103,250 59168010 TOTAL COMPUTER SERVICES & SOFTWARE 512,525 DRUG STORES - 3.6% Big B, Inc. 260,000 2,697,500 08889110 Eckerd Corp. (a) 70,100 1,717,450 27876310 General Nutrition Companies, Inc. (a) 200,000 2,950,000 37047F10 Revco (D.S.), Inc. (a) 81,200 2,090,900 76133910 9,455,850 SHARES VALUE (NOTE 1) GENERAL MERCHANDISE STORES - 21.9% DEPARTMENT STORES - 9.9% Dillard Department Stores, Inc. Class A 93,200 $ 3,168,800 25406310 Federated Department Stores, Inc. (a) 219,600 7,603,650 31410H10 Neiman-Marcus Group, Inc. (a) 62,700 1,857,488 64020410 Nordstrom, Inc. 50,000 1,950,000 65566410 Proffitts, Inc. (a) 64,052 2,626,132 74292510 Sears, Roebuck & Co. 153,510 6,754,440 81238710 Stein Mart, Inc. 110,400 2,304,600 85837510 26,265,110 GENERAL MERCHANDISE STORES - 9.3% Dayton Hudson Corp. 205,000 7,072,500 23975310 Dollar General Corp. 38,750 1,249,688 25666910 Family Dollar Stores, Inc. 49,700 844,900 30700010 Price/Costco, Inc. (a) 35,300 701,588 74143W10 Wal-Mart Stores, Inc. 559,800 14,834,700 93114210 24,703,376 VARIETY STORES - 2.7% Consolidated Stores Corp. (a) 89,100 3,385,800 21014910 Freds, Inc. Class A 29,500 280,250 35610810 Michaels Stores, Inc. (a) 10,600 148,400 59408710 Woolworth Corp. (a) 156,800 3,332,000 98088310 7,146,450 TOTAL GENERAL MERCHANDISE STORES 58,114,936 GROCERY STORES - 3.3% GROCERIES & RELATED PRODUCTS - WHOLESALE - 0.1% Provigo, Inc. (a) 30,000 146,903 74395110 GROCERY - RETAIL - 3.2% Albertson's, Inc. 38,200 1,618,725 01310410 American Stores Co. 40,000 1,645,000 03009610 Great Atlantic & Pacific Tea Co., Inc. 40,000 1,070,000 39006410 Kroger Co. (The) (a) 50,000 2,118,750 50104410 Safeway, Inc. (a) 56,400 2,044,500 78651420 8,496,975 TOTAL GROCERY STORES 8,643,878 LEASING & RENTAL - 0.1% PASSENGER CAR RENTAL - 0.1% Team Rental Group, Inc. Class A (a) 12,000 222,000 87815610 LEISURE DURABLES & TOYS - 1.8% TOYS & GAMES - 1.8% Galoob (Lewis) Toys, Inc. (a) 108,200 2,840,250 36409110 Hasbro, Inc. 34,800 1,278,900 41805610 Nintendo Co. Ltd. Ord. 10,300 630,062 65443999 4,749,212 POLLUTION CONTROL - 0.5% REFUSE SYSTEMS - 0.5% Republic Industries, Inc. (a) 50,000 1,306,250 76051610 RESTAURANTS - 2.5% Applebee's International, Inc. 10,000 290,000 03789910 Brinker International, Inc. (a) 33,600 504,000 10964110 Cooker Restaurant Corp. 40,000 515,000 21628420 Darden Restaurants, Inc. 90,000 720,000 23719410 McDonald's Corp. 70,000 3,246,250 58013510 Planet Hollywood International, Inc. Class A (a) 60,000 1,462,500 72702510 6,737,750 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) RETAIL & WHOLESALE, MISCELLANEOUS - 22.2% BOOK STORES - RETAIL - 0.2% Borders Group, Inc. (a) 15,000 $ 485,625 09970910 BUILDING MATERIALS - RETAIL - 2.5% BMC West Corp. (a) 60,000 825,000 05592610 Home Depot, Inc. (The) 77,200 4,101,250 43707610 Orchard Supply Hardware Corp. (a) 50,200 1,744,450 68569110 6,670,700 GIFT, NOVELTY & SOUVENIR SHOPS - 0.1% Cole National Corp. Class A (a) 10,000 190,000 19329010 HOBBY, TOY, & GAME SHOPS - 3.7% Brookstone, Inc. (a) 10,000 108,750 11453710 Toys "R" Us, Inc. 330,700 9,755,650 89233510 9,864,400 JEWELRY STORES - 1.2% Marks Brothers Jewelers, Inc. (a) 62,300 1,495,200 57069810 Zale Corp. (a) 100,000 1,812,500 98885810 3,307,700 LUMBER & BUILDING MATERIALS - RETAIL - 4.3% Lowe's Companies, Inc. 318,900 11,520,263 54866110 MAIL ORDER - 0.1% Micro Warehouse, Inc. (a) 10,700 287,563 59501B10 MUSIC, TV, & ELECTRONIC STORES - 5.7% Best Buy Co., Inc. (a) 13,000 285,997 08651610 Circuit City Stores, Inc. 22,700 715,050 17273710 Sound Advice, Inc. (warrants) (a) 50 - 83606611 Tandy Corp. 320,600 14,146,475 87538210 15,147,522 PAINT, VARNISH & SUPPLIES - WHOLESALE - 0.1% Finish Line, Inc. Class A (a) 10,000 315,000 31792310 RETAIL STORES - 3.0% Gadzooks, Inc. (a) 207,918 7,900,884 36255310 RETAIL, GENERAL - 0.8% Officemax, Inc. (a) 55,000 770,000 67622M10 Office Depot, Inc. (a) 75,000 1,190,625 67622010 Staples, Inc. (a) 10,000 197,500 85503010 2,158,125 SEWING STORES - 0.4% Fabri-Centers of America, Inc. (a): Class A 35,000 472,500 30284620 Class B (non-vtg) 35,000 463,750 30284630 936,250 SPORTING GOODS & BIKES STORES - 0.1% Cannondale Corp. 10,000 182,500 13779810 Sports Authority, Inc. 5,000 119,375 84917610 301,875 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 59,085,907 SERVICES - 0.8% GENERAL SERVICES - 0.8% Regis Corp. 85,500 2,137,500 75893210 TEXTILES & APPAREL - 4.1% APPAREL - 2.0% Designer Holdings Ltd. (a) 20,000 442,500 25057110 Fila Holding Spa sponsored ADR 25,000 2,425,000 31685010 Fruit of the Loom, Inc. Class A (a) 41,400 1,148,850 35941610 Liz Claiborne, Inc. 15,000 521,250 53932010 Russell Corp. 26,600 851,200 78235210 5,388,800 SHARES VALUE (NOTE 1) FOOTWEAR - 1.1% NIKE, Inc. Class B 20,900 $ 2,257,200 65410610 Wolverine World Wide, Inc. 30,000 723,750 97809710 2,980,950 FOOTWEAR, EXCEPT RUBBER - 0.2% Adidas AG 5,000 429,681 00699D22 MEN'S & BOYS' CLOTHING - 0.2% North Face, Inc. (a) 22,000 539,000 65931710 TEXTILE MILL PRODUCTS - 0.6% Westpoint Stevens, Inc. Class A (a) 58,300 1,523,088 96123810 TOTAL TEXTILES & APPAREL 10,861,519 TOTAL COMMON STOCKS (Cost $225,521,374) 231,699,533 CONVERTIBLE PREFERRED STOCKS - 0.2% APPAREL STORES - 0.2% GENERAL APPAREL STORES - 0.2% TJX Companies, Inc., Series E, $7.00 (Cost $514,020) 3,000 546,000 87254030 REPURCHASE AGREEMENTS - 12.5% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 33,081,286 33,062,000 69899TYY TOTAL INVESTMENTS IN SECURITIES - 100% (Cost $259,097,394) $ 265,307,533 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $438,345,103 and $253,401,951, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $186,550 for the period (see Note 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $783,750 and $810,000, respectively (see Note 7 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $6,897,000 and $4,916,750, respectively. The weighted average interest rate paid was 5.7% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $259,400,465. Net unrealized appreciation aggregated $5,907,068 of which $ 15,261,649 related to appreciated investment securities and $9,354,581 related to depreciated investment securities. At February 29, 1996, the fund had a capital loss carryforward of approximately $591,000 which will expire on February 28, 2003. RETAILING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED)
ASSETS Investment in securities, at $ 265,307,533 value (including repurchase agreements of $33,062,000) (cost $259,097,394) - See accompanying schedule Cash 175,033 Receivable for investments sold 1,270,465 Receivable for fund shares sold 3,128,624 Dividends receivable 144,195 Redemption fees receivable 3,820 Other receivables 15,571 Prepaid expenses 42,748 TOTAL ASSETS 270,087,989 LIABILITIES Payable for investments purchased $ 5,406,685 Payable for fund shares redeemed 1,765,801 Accrued management fee 120,384 Other payables and 223,513 accrued expenses Collateral on securities loaned, 810,000 at value TOTAL LIABILITIES 8,326,383 NET ASSETS $ 261,761,606 Net Assets consist of: Paid in capital $ 255,512,622 Accumulated net investment (loss) (174,976 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 213,820 Net unrealized appreciation (depreciation) on investments 6,210,140 and assets and liabilities in foreign currencies NET ASSETS, for 8,107,586 $ 261,761,606 shares outstanding NET ASSET VALUE and redemption price per share ($261,761,606 (divided by) 8,107,586 shares) $32.29 Maximum offering price per share (100/97.00 of $32.29) $33.29
STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED)
INVESTMENT INCOME $ 866,607 Dividends Interest (including income on securities loaned of $17,108) 609,557 TOTAL INCOME 1,476,164 EXPENSES Management fee $ 744,389 Transfer agent fees 755,442 Accounting and security lending fees 124,692 Non-interested trustees' compensation 451 Custodian fees and expenses 14,370 Registration fees 73,300 Audit 13,549 Legal 471 Interest 3,121 Miscellaneous 721 Total expenses before reductions 1,730,506 Expense reductions (79,366 1,651,140 ) NET INVESTMENT INCOME (LOSS) (174,976 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 1,224,626 Foreign currency transactions (963 1,223,663 ) Change in net unrealized appreciation (depreciation) on: Investment securities 4,076,596 Assets and liabilities in 4 4,076,600 foreign currencies NET GAIN (LOSS) 5,300,263 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 5,125,287 OTHER INFORMATION $ 656,660 Sales charges paid to FDC Deferred sales charges withheld $ 2,020 by FDC Exchange fees withheld by FSC $ 80,910 Expense reductions $ 75,498 Directed brokerage arrangements Custodian interest credits 2,642 Transfer agent interest credits 1,226 $ 79,366
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED)
Operations $ (174,976 $ (197,764 Net investment income (loss) ) ) Net realized gain (loss) 1,223,663 2,253,913 Change in net unrealized appreciation (depreciation) 4,076,600 3,066,064 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 5,125,287 5,122,213 Share transactions 515,336,616 68,570,912 Net proceeds from sales of shares Cost of shares redeemed (303,167,480 (60,782,922 ) ) Paid in capital portion of redemption fees 416,000 50,523 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 212,585,136 7,838,513 TOTAL INCREASE (DECREASE) IN NET ASSETS 217,710,423 12,960,726 NET ASSETS Beginning of period 44,051,183 31,090,457 End of period (including accumulated net investment loss of $174,976 and $0, respectively) $ 261,761,606 $ 44,051,183 OTHER INFORMATION Shares Sold 16,251,876 2,635,958 Redeemed (9,724,997 (2,355,724 ) ) Net increase (decrease) 6,526,879 280,234
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, beginning of period $ 27.87 $ 23.91 $ 24.91 $ 23.87 $ 22.13 $ 17.42 Income from Investment Operations Net investment income (loss) (.02) (.14) (.18) (.22) (.08) (.03) Net realized and unrealized gain (loss) 4.39 4.07 (.96) 3.85 2.93 5.09 Total from investment operations 4.37 3.93 (1.14) 3.63 2.85 5.06 Less Distributions From net realized gain - - - (2.63) (1.17) (.50) Redemption fees added to paid in capital .05 .03 .14 .04 .06 .15 Net asset value, end of period $ 32.29 $ 27.87 $ 23.91 $ 24.91 $ 23.87 $ 22.13 TOTAL RETURN B, C 15.86% 16.56% (4.01)% 15.61% 13.72% 30.28% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 261,762 $ 44,051 $ 31,090 $ 52,790 $ 74,878 $ 48,441 Ratio of expenses to average net assets 1.40% A 1.94% 2.07% 1.86% 1.77% A 1.87% Ratio of expenses to average net assets after 1.33% A, 1.92% 1.96% 1.83% 1.77% A 1.87% expense reductions E E E E Ratio of net investment income (loss) to average net (.14)% A (.53)% (.74)% (.87)% (.44)% A (.13)% assets Portfolio turnover rate 237% A 235% 481% 154% 171% A 205% Average commission rate F $ .0404
ANNUALIZED THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN SEE (NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
AIR TRANSPORTATION PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past five and 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S AIR TRANSPORTATION -16.93% -1.67% 69.17% 152.44% AIR TRANSPORTATION -19.42% -4.62% 64.10% 144.86% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS AIR TRANSPORTATION -1.67% 11.09% 9.70% AIR TRANSPORTATION -4.62% 10.41% 9.37% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960923 100259 S00000000000001 Air Transportation SP Standard & Poor 500 00034 SP001 1986/08/31 9700.00 10000.00 1986/09/30 9898.36 9173.00 1986/10/31 10424.03 9702.28 1986/11/30 10552.97 9938.05 1986/12/31 10721.57 9684.63 1987/01/31 11683.64 10989.15 1987/02/28 12179.55 11423.22 1987/03/31 11762.99 11753.35 1987/04/30 11772.90 11648.74 1987/05/31 12477.10 11750.09 1987/06/30 12635.79 12343.47 1987/07/31 12913.50 12969.28 1987/08/31 13022.60 13453.04 1987/09/30 12546.52 13158.41 1987/10/31 8757.77 10324.09 1987/11/30 8162.68 9473.39 1987/12/31 8507.07 10194.31 1988/01/31 8745.27 10623.49 1988/02/29 9471.21 11118.55 1988/03/31 9879.55 10774.98 1988/04/30 9766.12 10894.59 1988/05/31 9618.67 10989.37 1988/06/30 10855.03 11493.78 1988/07/31 10537.43 11450.10 1988/08/31 9947.61 11060.80 1988/09/30 10605.49 11531.99 1988/10/31 10809.66 11852.58 1988/11/30 10560.11 11683.09 1988/12/31 10979.80 11887.54 1989/01/31 12000.65 12757.71 1989/02/28 12227.50 12440.04 1989/03/31 12840.01 12729.90 1989/04/30 13350.44 13390.58 1989/05/31 13690.72 13932.90 1989/06/30 13622.28 13853.48 1989/07/31 14581.44 15104.45 1989/08/31 15689.03 15400.50 1989/09/30 15072.43 15337.35 1989/10/31 13884.91 14981.53 1989/11/30 13747.89 15287.15 1989/12/31 13871.10 15654.04 1990/01/31 12443.54 14603.66 1990/02/28 12966.98 14792.04 1990/03/31 13645.07 15184.03 1990/04/30 13145.43 14804.43 1990/05/31 14061.44 16247.86 1990/06/30 14097.13 16137.38 1990/07/31 13668.86 16085.74 1990/08/31 11503.73 14631.59 1990/09/30 10349.79 13919.03 1990/10/31 10897.02 13859.18 1990/11/30 10730.47 14754.48 1990/12/31 11349.08 15166.13 1991/01/31 12693.37 15827.37 1991/02/28 14120.92 16959.03 1991/03/31 14061.44 17369.44 1991/04/30 13716.45 17411.13 1991/05/31 14525.40 18163.29 1991/06/30 14219.12 17331.41 1991/07/31 14656.26 18139.05 1991/08/31 14474.12 18568.95 1991/09/30 13988.41 18258.85 1991/10/31 14668.40 18503.51 1991/11/30 14012.69 17757.82 1991/12/31 15554.82 19789.32 1992/01/31 16453.38 19421.24 1992/02/29 17194.09 19673.71 1992/03/31 16186.24 19290.07 1992/04/30 15348.39 19857.20 1992/05/31 15554.82 19954.50 1992/06/30 15049.71 19657.18 1992/07/31 14963.22 20461.16 1992/08/31 14333.06 20041.71 1992/09/30 14802.59 20278.20 1992/10/31 15333.90 20349.17 1992/11/30 15704.59 21043.08 1992/12/31 16576.43 21301.91 1993/01/31 16726.33 21480.84 1993/02/28 16988.65 21772.98 1993/03/31 18862.40 22232.39 1993/04/30 19075.62 21694.37 1993/05/31 20165.30 22275.78 1993/06/30 18662.30 22340.38 1993/07/31 19301.07 22251.02 1993/08/31 20453.38 23094.33 1993/09/30 20040.05 22916.50 1993/10/31 21192.35 23390.88 1993/11/30 21242.45 23168.66 1993/12/31 21696.42 23449.00 1994/01/31 22534.32 24246.27 1994/02/28 21734.51 23589.20 1994/03/31 20477.66 22560.71 1994/04/30 20343.00 22849.48 1994/05/31 19492.56 23224.22 1994/06/30 18898.61 22655.22 1994/07/31 19884.03 23398.31 1994/08/31 20639.98 24357.64 1994/09/30 18331.65 23760.88 1994/10/31 18480.14 24295.50 1994/11/30 17251.73 23410.66 1994/12/31 16978.86 23757.84 1995/01/31 17525.24 24373.88 1995/02/28 19027.79 25323.73 1995/03/31 20257.16 26071.03 1995/04/30 21882.65 26838.83 1995/05/31 22237.80 27911.57 1995/06/30 25051.67 28559.96 1995/07/31 25898.56 29507.01 1995/08/31 24901.41 29581.07 1995/09/30 25816.61 30829.39 1995/10/31 25516.09 30719.33 1995/11/30 28808.05 32067.91 1995/12/31 27087.90 32685.54 1996/01/31 26473.53 33798.15 1996/02/29 29475.54 34111.46 1996/03/31 30983.53 34439.95 1996/04/30 29685.92 34947.60 1996/05/31 29968.51 35848.90 1996/06/30 29827.21 35985.48 1996/07/31 24938.43 34395.64 1996/08/30 24486.29 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960923 100302 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Air Transportation Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $24,486 - a 144.86% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Continental Airlines, Inc. 8.3 AMR Corp. 8.3 Atlantic Southeast Airlines, Inc. 6.7 Premier Technologies, Inc. 5.7 Northwest Airlines Corp. Class A 5.6 Comair Holdings, Inc. 4.8 America West Airlines, Inc. Class B (warrants) 4.7 Midwest Express Holdings, Inc. 4.7 UAL Corp. 4.6 America West Airlines, Inc. Class B 4.6 TOP INDUSTRIES AS OF AUGUST 31, 1996 Air Transportation, Major National 48.1% Air Transportation, Regional 16.1% Business Services 5.7% Training Equipment & Simulators 3.7% Freight Forwarding 3.7% All Others 22.7% * Row: 1, Col: 1, Value: 22.7 Row: 1, Col: 2, Value: 3.7 Row: 1, Col: 3, Value: 3.7 Row: 1, Col: 4, Value: 5.7 Row: 1, Col: 5, Value: 16.1 Row: 1, Col: 6, Value: 48.1 * INCLUDES SHORT-TERM INVESTMENTS AIR TRANSPORTATION PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Kevin Richardson became Portfolio Manager of Fidelity Select Air Transportation Portfolio on May 24, 1996. Q. KEVIN, HOW HAS THE FUND PERFORMED? A. Not as well as I would have liked. For the six months ended August 31, 1996, the fund had a return of -16.93%. This trailed the 2.96% return of the Standard & Poor's 500 Index over the same period. For the one-year period ended August 31, 1996, the fund compiled a return of -1.67%, while the S&P 500 returned 18.73%. Q. CAN YOU POINT TO ANY FACTORS THAT TRIGGERED THIS UNDERPERFORMANCE? A. The fund and the airlines sector in general suffered due to a slew of unpredictable, negative events. These included the aviation tragedies involving ValuJet and Trans World Airlines (TWA), legislation surrounding the airline excise tax, an ill-timed price promotion by Southwest Airlines and soaring jet fuel costs. Basically, everything that could have gone wrong in the airline industry did go wrong - all in one hectic, six-week period. With the stock market being fairly volatile during the period, the aggressive-by-nature airline industry was even more susceptible. Q. LET'S EXAMINE TWO OF THE EVENTS YOU MENTIONED. WHAT HAPPENED WITH THE EXCISE TAX? A. The excise tax - essentially a surcharge on airline tickets - is funneled to the government to help pay the costs of running the Federal Aviation Administration, as well as all airport traffic-related equipment. When the tax came up for renewal in Congress, it was pushed to the back burner by other issues and was not approved by its January 1 deadline. So what you had was a timeframe where the excise tax was no longer in effect, and airlines were stimulating demand by discounting their prices. Congress eventually tacked the excise tax measure onto the minimum wage bill in May. Investor concerns mounted because it was widely believed that Congress would wait until January 1997 to re-institute the tax. Q. . . . AND THE SOUTHWEST AIRLINES PROMOTION? A. Southwest has always been a marketing-oriented airline big on splashy promotions. To celebrate its entry into the Florida market and its 25th year of business, Southwest ran a promotion where passengers could fly one-way to any spot in the country for $25. One of the competitive aspects of this industry is that airlines are a commodity; to stay profitable, an airline has to match fares. When some of the airlines announced matching fares, stock prices tumbled. The timing of the promotion was bad because the industry was showing good growth signs. In retrospect, it would have been much better if Southwest had been celebrating its 50th anniversary and cut prices to $50. Q. WITH THE RECENT TRAGEDIES, THERE HAS BEEN MUCH TALK OF TAKING STEPS TO HEIGHTEN SECURITY. HOW WILL THIS AFFECT THE FUND? A. The TWA crash really unsettled the markets. From looking at the traffic numbers, international travel declined steadily in the weeks following the tragedy. As a result of the crash, President Clinton announced plans to improve traveler safety. These measures will be quite costly, but should alleviate passenger concerns. On the other hand, an emphasis on prevention will make those companies specializing in safety equipment potentially attractive investments. Q. WHAT CHARACTERISTICS MAKE A STOCK APPEALING TO YOU? A. When I'm looking over a particular company, I like to pay close attention to its management discipline. I look at how a company controls its costs, its new airplane orders and its methods of capital allocation. Sometimes it's not smart to buy more planes and take on more debt, and sometimes it is. I also consider the growth potential as well as the company's cost structure. Companies that make what I feel are smart capital allocation decisions are very desirable for the portfolio. Q. WHAT DO YOU THINK IS IN STORE FOR THE COMING MONTHS? A. It's hard to imagine as many things going awry as we've just witnessed. The airline industry sorely needs to see low plane orders for the next six months and the price of jet fuel go down. Investors need to realize that this industry is like a commodity. If you have excess supply, prices will decline. Generally, whenever airlines order more airplanes, the increased costs drive the stocks down. If the orders are low, fuel prices come down, and the economy remains near its end-of-the-period level, I think the situation could look good. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 034 TRADING SYMBOL: FSAIX SIZE: as of August 31, 1996, more than $54 million MANAGER: Kevin Richardson, since May 1996; equity analyst, computer services, health care information systems and specialty finance industries, since 1994; joined Fidelity in 1994 (checkmark) AIR TRANSPORTATION PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.9% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 7.4% AIRCRAFT - 0.6% Boeing Co. 2,000 $ 181,001 09702310 McDonnell Douglas Corp. 3,000 150,375 58016910 331,376 AIRCRAFT & PARTS - 0.5% Sundstrand Corp. 7,500 280,312 86732310 AIRCRAFT ENGINES & PARTS - 2.6% Greenwich Air Services, Inc. Class B (non-vtg.) (a) 50,000 962,500 39678120 Kellstrom Industries, Inc. (a) 61,000 488,000 48803510 1,450,500 TRAINING EQUIPMENT & SIMULATORS - 3.7% Flightsafety International, Inc. 46,700 2,066,475 33942310 TOTAL AEROSPACE & DEFENSE 4,128,663 AIR TRANSPORTATION - 64.2% AIR TRANSPORTATION, MAJOR NATIONAL - 48.1% AMR Corp. 56,200 4,608,400 00176510 Alaska Air Group, Inc. (a) 117,000 2,471,625 01165910 America West Airlines, Inc.: Class B (warrants) (a) 400,400 2,602,600 02365011 Class B 190,800 2,551,950 02365020 Continental Airlines, Inc. (a) 204,000 4,615,500 21079530 Delta Air Lines, Inc. 29,400 2,083,725 24736110 KLM Royal Dutch Air Lines NV 10,000 278,750 48251610 Mesa Airlines, Inc. (a) 25,000 246,875 59048110 Northwest Airlines Corp. Class A (a) 82,700 3,121,925 66728010 Pan Am Corp. (a) 5,900 - 69775710 Southwest Airlines Co. 9,400 215,025 Trans World Airlines, Inc. (a) 100,900 1,349,537 UAL Corp. (a) 53,500 2,568,000 90254950 26,713,912 AIR TRANSPORTATION, REGIONAL - 16.1% Atlantic Southeast Airlines, Inc. 160,600 3,693,800 04886910 Comair Holdings, Inc. 110,300 2,647,200 19978910 Midwest Express Holdings, Inc. (a) 86,000 2,601,500 59791110 8,942,500 TOTAL AIR TRANSPORTATION 35,656,412 COMMUNICATIONS EQUIPMENT - 0.4% TELEPHONE EQUIPMENT - 0.4% IPC Information Systems, Inc. 10,800 180,900 44980K10 COMPUTER SERVICES & SOFTWARE - 3.4% COMPUTER SERVICES - 1.6% American Management Systems, Inc. 35,000 888,125 02735210 CUSTOM COMPUTER PROGRAMMING SERVICES - 1.8% Walsh International, Inc. (a) 115,000 1,006,250 93313110 TOTAL COMPUTER SERVICES & SOFTWARE 1,894,375 CONGLOMERATES - 0.8% United Technologies Corp. 4,000 451,000 91301710 DEFENSE ELECTRONICS - 0.9% Raytheon Co. 10,000 515,000 75511110 ELECTRONICS - 1.0% ELECTRONIC PARTS - WHOLESALE - 1.0% Airport Systems International, Inc. (a) 100,000 550,000 00949N10 SHARES VALUE (NOTE 1) POLLUTION CONTROL - 1.2% POLLUTION EQUIPMENT & DESIGN - 1.2% Ogden Corp. 32,000 $ 628,000 67634610 SERVICES - 7.8% BUSINESS SERVICES - 5.7% Premier Technologies, Inc. (a) 150,100 3,189,625 74058F10 COMMERCIAL TESTING LABORATORIES - 2.1% Forensic Technologies International Corp. (a) 122,700 1,134,975 34551810 TOTAL SERVICES 4,324,600 TELEPHONE SERVICES - 0.7% American Communications Services, Inc. 33,500 402,000 02520B10 TRUCKING & FREIGHT - 6.1% FREIGHT FORWARDING - 3.7% Expeditors International of Washington, Inc. 40,700 1,332,925 30213010 Pittston Co. (Burlington Group) 37,600 719,100 72570188 2,052,025 TRUCKING, LOCAL & LONG DISTANCE - 2.4% Consolidated Freightways, Inc. 58,400 1,343,200 20923710 TOTAL TRUCKING & FREIGHT 3,395,225 TOTAL COMMON STOCKS (Cost $58,817,359) 52,126,175 REPURCHASE AGREEMENTS - 6.1% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 3,377,969 3,376,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $62,193,359) $ 55,502,175 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $253,071,783 and $249,515,014, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $85,456 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $4,540,000 and $2,545,111, respectively. The weighted average interest rate paid was 5.7% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $62,347,669. Net unrealized depreciation aggregated $6,845,494 of which $1,064,579 related to appreciated investment securities and $7,910,073 related to depreciated investment securities. AIR TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 55,502,175 securities, at value (including repurchase agreements of $3,376,000) (cost $62,193,359) - See accompanying schedule Cash 808 Receivable for 406,976 investments sold Receivable for 5,216,916 fund shares sold Dividends 23,359 receivable Redemption fees 2,227 receivable Other receivables 2,598 Prepaid expenses 38,533 TOTAL ASSETS 61,193,592 LIABILITIES Payable for $ 5,616,677 investments purchased Payable for fund 811,539 shares redeemed Accrued 25,641 management fee Other payables 95,341 and accrued expenses TOTAL LIABILITIES 6,549,198 NET ASSETS $ 54,644,394 Net Assets consist of: Paid in capital $ 68,564,897 Accumulated net (475,046 investment loss ) Accumulated (6,754,293 undistributed net ) realized gain (loss) on investments and foreign currency transactions Net unrealized (6,691,164 appreciation ) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 54,644,394 3,153,728 shares outstanding NET ASSET VALUE $17.33 and redemption price per share ($54,644,394 (divided by) 3,153,728 shares) Maximum offering $17.87 price per share (100/97.00 of $17.33) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 163,718 INCOME Dividends Interest 169,077 TOTAL INCOME 332,795 EXPENSES Management fee $ 285,763 Transfer agent 443,826 fees Accounting fees 48,138 and expenses Non-interested 195 trustees' compensation Custodian fees 16,657 and expenses Registration fees 38,533 Audit 20,577 Legal 558 Interest 3,621 Miscellaneous 615 Total expenses 858,483 before reductions Expense (50,642 807,841 reductions ) NET INVESTMENT (475,046 INCOME (LOSS) ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment (5,157,973 securities ) Foreign 29 (5,157,944 currency ) transactions Change in net unrealized appreciation (depreciation) on: Investment (10,269,361 securities ) Assets and 20 (10,269,341 liabilities in ) foreign currencies NET GAIN (LOSS) (15,427,285 ) NET INCREASE $ (15,902,331 (DECREASE) IN ) NET ASSETS RESULTING FROM OPERATIONS OTHER $ 409,096 INFORMATION Sales charges paid to FDC Deferred sales $ 678 charges withheld by FDC Exchange fees $ 75,420 withheld by FSC Expense $ 45,764 reductions Directed brokerage arrangements Custodian 4,021 interest credits Transfer agent 857 interest credits $ 50,642 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ (475,046 $ (45,385 Net investment ) ) income (loss) Net realized (5,157,944 15,522,776 gain (loss) ) Change in net (10,269,341 2,826,938 unrealized ) appreciation (depreciation) NET INCREASE (15,902,331 18,304,329 (DECREASE) IN ) NET ASSETS RESULTING FROM OPERATIONS Distributions to (2,206,145 (3,187,856 shareholders ) ) from net realized gains Share 254,485,753 431,292,376 transactions Net proceeds from sales of shares Reinvestment of 2,188,172 3,161,234 distributions Cost of shares (259,856,261 (393,536,104 redeemed ) ) Paid in capital 576,527 691,969 portion of redemption fees NET INCREASE (2,605,809 41,609,475 (DECREASE) IN ) NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (20,714,285 56,725,948 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 75,358,679 18,632,731 period End of period $ 54,644,394 $ 75,358,679 (including accumulated net investment loss of $475,046 and $0, respectively) OTHER INFORMATION Shares Sold 11,945,645 23,122,779 Issued in 96,693 152,569 reinvestment of distributions Redeemed (12,459,115 (21,042,298 ) ) Net increase (416,777) 2,233,050 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 21.11 $ 13.93 $ 17.12 $ 13.60 $ 12.64 $ 11.53 beginning of period Income from Investment Operations Net investment (.11) (.01) (.18) (.18) (.09) E (.13) income (loss) Net realized and (3.53) 7.47 (2.01) 3.78 1.33 1.40 unrealized gain (loss) Total from (3.64) 7.46 (2.19) 3.60 1.24 1.27 investment operations Less Distributions From net (.27) (.46) (.92) (.22) (.36) (.25) realized gain In excess of net - - (.17) (.05) - - realized gain Total (.27) (.46) (1.09) (.27) (.36) (.25) distributions Redemption fees .13 .18 .09 .19 .08 .09 added to paid in capital Net asset value, $ 17.33 $ 21.11 $ 13.93 $ 17.12 $ 13.60 $ 12.64 end of period TOTAL RETURN B, C (16.93)% 54.91% (12.45)% 27.94% 10.69% 11.90% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 54,644 $ 75,359 $ 18,633 $ 11,035 $ 11,868 $ 6,971 period (000 omitted) Ratio of expenses 1.81% A 1.47% 2.50% 2.33% 2.48% A, 2.51% to average net G G G assets Ratio of expenses 1.71% A, 1.41% 2.50% 2.31% 2.48% A 2.51% to average net F F F assets after expense reductions Ratio of net (1.00)% A (.07)% (1.31)% (1.11)% (.90)% A (1.04)% investment income (loss) to average net assets Portfolio turnover 620% A 504% 200% 171% 96% A 261% rate Average $ .0408 commission rate H
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.01 PER SHARE. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). G DURING THE PERIOD, FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. H FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
AUTOMOTIVE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S AUTOMOTIVE 8.83% 8.78% 109.01% 240.91% AUTOMOTIVE 5.57% 5.52% 102.74% 230.69% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS AUTOMOTIVE 8.78% 15.89% 13.05% AUTOMOTIVE 5.52% 15.18% 12.70% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960909 144333 S00000000000001 Automotive SP Standard & Poor 500 00502 SP001 1986/08/31 9700.00 10000.00 1986/09/30 9033.74 9173.00 1986/10/31 9494.24 9702.28 1986/11/30 9602.02 9938.05 1986/12/31 9435.45 9684.63 1987/01/31 10856.16 10989.15 1987/02/28 11826.16 11423.22 1987/03/31 12149.49 11753.35 1987/04/30 12325.86 11648.74 1987/05/31 12306.26 11750.09 1987/06/30 12492.42 12343.47 1987/07/31 13364.44 12969.28 1987/08/31 13883.74 13453.04 1987/09/30 13677.98 13158.41 1987/10/31 9572.63 10324.09 1987/11/30 9190.51 9473.39 1987/12/31 10052.73 10194.31 1988/01/31 10507.79 10623.49 1988/02/29 11180.04 11118.55 1988/03/31 11986.74 10774.98 1988/04/30 12193.59 10894.59 1988/05/31 12152.22 10989.37 1988/06/30 12855.49 11493.78 1988/07/31 12710.70 11450.10 1988/08/31 12121.19 11060.80 1988/09/30 12172.90 11531.99 1988/10/31 12079.82 11852.58 1988/11/30 11821.26 11683.09 1988/12/31 12069.48 11887.54 1989/01/31 12627.96 12757.71 1989/02/28 12493.51 12440.04 1989/03/31 12731.39 12729.90 1989/04/30 13300.21 13390.58 1989/05/31 13496.72 13932.90 1989/06/30 13258.84 13853.48 1989/07/31 13724.25 15104.45 1989/08/31 13858.70 15400.50 1989/09/30 13538.09 15337.35 1989/10/31 12410.77 14981.53 1989/11/30 12524.54 15287.15 1989/12/31 12564.47 15654.04 1990/01/31 12232.70 14603.66 1990/02/28 12596.58 14792.04 1990/03/31 13067.48 15184.03 1990/04/30 13024.67 14804.43 1990/05/31 13763.12 16247.86 1990/06/30 14009.58 16137.38 1990/07/31 14052.98 16085.74 1990/08/31 12034.56 14631.59 1990/09/30 10884.28 13919.03 1990/10/31 10667.24 13859.18 1990/11/30 11296.64 14754.48 1990/12/31 11719.86 15166.13 1991/01/31 12381.82 15827.37 1991/02/28 13391.03 16959.03 1991/03/31 13499.54 17369.44 1991/04/30 13651.47 17411.13 1991/05/31 14747.49 18163.29 1991/06/30 14714.94 17331.41 1991/07/31 15322.63 18139.05 1991/08/31 15821.81 18568.95 1991/09/30 15355.19 18258.85 1991/10/31 15756.70 18503.51 1991/11/30 14975.38 17757.82 1991/12/31 16094.33 19789.32 1992/01/31 17833.02 19421.24 1992/02/29 19628.91 19673.71 1992/03/31 20052.14 19290.07 1992/04/30 21333.28 19857.20 1992/05/31 21321.84 19954.50 1992/06/30 21194.99 19657.18 1992/07/31 21389.75 20461.16 1992/08/31 20060.77 20041.71 1992/09/30 19728.53 20278.20 1992/10/31 20553.41 20349.17 1992/11/30 21550.15 21043.08 1992/12/31 22791.93 21301.91 1993/01/31 23844.40 21480.84 1993/02/28 24195.23 21772.98 1993/03/31 25493.28 22232.39 1993/04/30 25345.99 21694.37 1993/05/31 26889.42 22275.78 1993/06/30 27359.68 22340.38 1993/07/31 27673.19 22251.02 1993/08/31 28637.83 23094.33 1993/09/30 28939.28 22916.50 1993/10/31 29554.24 23390.88 1993/11/30 29554.24 23168.66 1993/12/31 30856.76 23449.00 1994/01/31 32615.75 24246.27 1994/02/28 31562.83 23589.20 1994/03/31 29345.51 22560.71 1994/04/30 28748.81 22849.48 1994/05/31 28322.90 23224.22 1994/06/30 27959.62 22655.22 1994/07/31 28798.91 23398.31 1994/08/31 28322.90 24357.64 1994/09/30 27120.33 23760.88 1994/10/31 27633.93 24295.50 1994/11/30 25967.88 23410.66 1994/12/31 26921.63 23757.84 1995/01/31 26281.96 24373.88 1995/02/28 27589.11 25323.73 1995/03/31 27450.05 26071.03 1995/04/30 27366.61 26838.83 1995/05/31 27922.85 27911.57 1995/06/30 28618.14 28559.96 1995/07/31 30676.20 29507.01 1995/08/31 30398.08 29581.07 1995/09/30 30551.04 30829.39 1995/10/31 29132.65 30719.33 1995/11/30 29855.75 32067.91 1995/12/31 30537.14 32685.54 1996/01/31 30175.59 33798.15 1996/02/29 30384.17 34111.46 1996/03/31 32233.64 34439.95 1996/04/30 33862.19 34947.60 1996/05/31 34641.91 35848.90 1996/06/30 34238.13 35985.48 1996/07/31 32247.05 34395.64 1996/08/30 33068.54 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960909 144338 R00000000000123 Let's say hypothetically that $10,000 was invested in Select Automotive Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $33,069 - a 230.69% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS TRW, Inc. 6.9 General Motors Corp. 5.9 Honda Motor Co. Ltd. 5.6 Lear Corp. 5.5 AutoZone, Inc. 5.2 Chrysler Corp. 5.1 Danaher Corp. 4.5 Gentex Corp. 4.3 Echlin, Inc. 3.3 Volvo AB Class B 3.2 TOP INDUSTRIES AS OF AUGUST 31, 1996 Auto & Truck Parts 37.2% Motor Vehicles & Car Bodies 34.2% Auto Parts - Retail 6.2% Tires & Inner Tubes 5.1% Conglomerates 2.3% All Others 15.0% * Row: 1, Col: 1, Value: 15.0 Row: 1, Col: 2, Value: 2.3 Row: 1, Col: 3, Value: 5.1 Row: 1, Col: 4, Value: 6.2 Row: 1, Col: 5, Value: 34.2 Row: 1, Col: 6, Value: 37.2 * INCLUDES SHORT-TERM INVESTMENTS AUTOMOTIVE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Doug Chase became Portfolio Manager of Fidelity Select Automotive Portfolio on May 24, 1996. Q. HOW DID THE FUND PERFORM, DOUG? A. For the six-month and 12-month periods ending August 31, 1996, the fund returned 8.83% and 8.78%, respectively. For the same time periods, the Standard & Poor's 500 Index returned 2.96% and 18.73%. Q. YOU BEGAN TO MANAGE THE FUND IN MAY. HOW DOES YOUR INVESTMENT STRATEGY DIFFER FROM THE PREVIOUS FUND MANAGER'S? A. I have increased the fund's stake in auto manufacturers, specifically General Motors, Honda, Chrysler and Volvo. In the automobile sector, the manufacturers and suppliers move in tandem. You generally won't see a situation in which the Big Three go down and the major auto suppliers go up; the suppliers are too dependent on the manufacturers for that to happen. Q. WHY WERE THE MANUFACTURERS ATTRACTIVE TO YOU? A. Let's start with the U.S. manufacturers, specifically General Motors and Chrysler. General Motors has an extremely strong balance sheet - the best it's had in 30 years. In fact, nearly 35% of GM's market capitalization, or approximately $13 billion, is cash. In addition, although its international operations were very strong, the market didn't seem to recognize the company's value during the period. I increased the fund's holding in General Motors because I believed the market would eventually recognize that it's a much better, much stronger company than it was five years ago. I increased the fund's holding in Chrysler because I think that, eventually, the market is going to realize the value that Chrysler has built during the past couple of years. Chrysler is the low-cost producer, it's gaining share in almost all of the product segments in which it competes, it pays a 5% dividend and it's planning to buy back 10% of its stock. Q. HOW DID THESE STOCKS PERFORM DURING THE PERIOD? A. Given the strong financial position of the Big Three during the period, their performance was disappointing. I believed the market was not paying attention to how these companies have improved in recent years and how well-positioned they are for the future. Q. YET THE FUND DID OUTPERFORM THE S&P 500 OVER THE PAST SIX MONTHS. WHY? A. Autos have managed to outperform the overall market. The fund did well because of its holdings in auto suppliers, which generally outperformed during the period. The story on the suppliers' side has been consolidation. Because the auto makers are always looking for ways to cut costs, they are encouraging the supplier base to consolidate to create a more manageable "one-stop-shopping" environment for the manufacturers. Increasing profit margins and revenues for suppliers are an immediate by-product of this consolidation. Q. TRW IS NEW TO THE FUND'S TOP 10 HOLDINGS. WHY WAS IT ATTRACTIVE? A. I liked TRW for a couple of reasons. First, the breakup value of the company is worth more than what the stock price indicates. Second, based on my valuation of the company's growth rate and cost-cutting efforts and expected auto production, I believe that Wall Street estimates for TRW's earnings in 1998 were too low. And, finally, I think that some of the new technology the company is developing has a lot of potential. TRW is best known for being a leader in air-bag technology, but it has some satellite communications technology in the works that could be quite exciting. Q. WHERE ELSE DID YOU FIND OPPORTUNITIES DURING THE PERIOD? A. Honda's numbers have been very strong, and I've increased the fund's holding in the company based on strong sales of its Accord and Civic models in the U.S., and because its auto sales in Japan are up nearly 30%. I've also increased the fund's holding in Volvo. Volvo is another company whose breakup value is quite a bit higher than its stock price at the end of the period. Sometimes foreign investments can be more risky than domestic ones, but I thought these were compelling stock stories. Q. WHAT'S YOUR OUTLOOK FOR THE FUND? A. I think the fund has the potential to outperform the market during the next six months. I believe that the longer the Big Three stocks go without the market recognizing their true value, the more compelling the run-up in the stock will be when it finally happens. It's very strange when a company announces it's going to buy back 10% of its stock, has a 5% yield and gains market share every month, and yet its stock price is flat. But that's what's happening with Chrysler. My goal is to seek the best values for the fund, and I believe it will increasingly be in the auto manufacturers going forward. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 502 TRADING SYMBOL: FSAVX SIZE: as of August 31, 1996, more than $148 million MANAGER: Douglas B. Chase, since May 1996; manager, Select Industrial Materials, since 1994; equity analyst, steel, non-ferrous metals, since 1993; joined Fidelity in 1993 (checkmark) AUTOMOTIVE PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 87.1% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 0.6% AIRCRAFT - 0.3% Lockheed Martin Corp. 5,000 $ 420,625 53983010 AIRCRAFT EQUIPMENT - 0.3% Aviall, Inc. 40,000 340,000 05366B10 Simula, Inc. (a) 10,000 165,000 82920610 505,000 TOTAL AEROSPACE & DEFENSE 925,625 AUTOS, TIRES, & ACCESSORIES - 82.3% AUTO & TRUCK PARTS - 37.2% Arvin Industries, Inc. 20,000 460,000 04333910 Borg-Warner Automotive, Inc. 124,200 4,657,500 09972410 Dana Corp. 81,000 2,430,000 23581110 Danaher Corp. 161,800 6,714,700 23585110 Eaton Corp. 72,700 4,025,761 27805810 Echlin, Inc. 161,600 4,928,800 27874910 Gentex Corp. (a) 267,400 6,417,600 37190110 Intermet Corp. (a) 20,000 241,250 45881K10 Johnson Controls, Inc. 39,700 2,798,850 47836610 Magna International, Inc. Class A 38,000 1,832,998 55922240 Mascotech, Inc. 51,700 749,650 57467010 SPX Corp. 20,200 563,075 78463510 Safety Components International, Inc. (a) 1,000 13,000 78647410 Smith (A.O.) Corp. Class B 16,600 402,550 83186520 Snap-on Tools Corp. 73,400 3,348,875 83303410 Standard Products Co. 44,400 1,021,200 85383610 Strattec Security Corp. (a) 25,000 343,750 86311110 TRW, Inc. 111,700 10,332,250 87264910 Titan Wheel International, Inc. 33,000 503,250 88832810 Tower Automotive, Inc. (a) 152,000 3,648,000 89170710 Wynn's International, Inc. 1,400 37,275 98319510 55,470,334 AUTO PARTS - RETAIL - 6.2% AutoZone, Inc. (a) 282,300 7,692,675 05333210 Monro Muffler Brake, Inc. 56,206 1,110,069 61023610 O'Reilly Automotive, Inc. (a) 10,800 391,500 68609110 9,194,244 AUTOMOTIVE STAMPINGS - 0.4% Sinter Metals, Inc. Class A (a) 25,000 546,875 82934Q10 MOTOR VEHICLE SUPPLIES & NEW PARTS - 1.5% APS Holding Corp. Class A (a) 64,000 1,792,000 00193710 Hahn Automotive Warehouse, Inc. 51,000 408,000 40519110 2,200,000 MOTOR VEHICLES & CAR BODIES - 31.2% Chrysler Corp. 258,600 7,531,725 17119610 General Motors Corp. 176,300 8,770,925 37044210 Honda Motor Co. Ltd. 362,000 8,345,534 43812810 Lear Corp. (a) 213,100 8,177,713 52186510 Scania AB: Class A 2,500 66,467 80699R22 Class B 110,000 2,932,868 80699R23 Toyota Motor Corp. 193,000 4,644,409 89399999 Volkswagen AG 3,500 1,300,017 92866210 Volvo AB Class B 222,500 4,739,192 92885630 46,508,850 TIRES & INNER TUBES - 5.1% Bandag, Inc. 33,000 1,555,125 05981510 Cooper Tire & Rubber Co. 9,300 181,350 21683110 SHARES VALUE (NOTE 1) Goodyear Tire & Rubber Co. 100,500 $ 4,585,313 38255010 Michelin SA (Compagnie Generale des Etablissements) Class B 26,270 1,226,175 59410020 7,547,963 TRUCK & BUS BODIES - 0.7% Miller Industries, Inc. (a) 30,000 1,005,000 60055110 TOTAL AUTOS, TIRES, & ACCESSORIES 122,473,266 CONGLOMERATES - 2.3% Mark IV Industries, Inc. 61,500 1,322,250 57038710 United Technologies Corp. 19,000 2,142,250 91301710 3,464,500 INDUSTRIAL MACHINERY & EQUIPMENT - 1.4% METAL WORKING MACHINERY - 0.4% Exco Technologies Ltd. (a) 79,500 578,129 30150P10 STORAGE BATTERIES - 1.0% Exide Corp. 52,800 1,405,800 30205110 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,983,929 POLLUTION CONTROL - 0.5% REFUSE SYSTEMS - 0.5% Republic Industries, Inc. (a) 30,000 783,750 76051610 TOTAL COMMON STOCKS (Cost $125,800,960) 129,631,070 NONCONVERTIBLE PREFERRED STOCKS - 3.0% AUTOS, TIRES, & ACCESSORIES - 3.0% MOTOR VEHICLES & CAR BODIES - 3.0% Volkswagen AG (Cost $4,267,590) 16,000 4,451,798 92866291 REPURCHASE AGREEMENTS - 9.9% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 14,785,620 14,777,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $144,845,550) $ 148,859,868 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $167,309,048 and $86,609,161, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $52,367 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balance during the period for which loans were outstanding amounted to $3,262,000. The weighted average interest rate paid was 5.8% (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 79.8% Japan 8.7 Sweden 5.2 Germany 3.9 Canada 1.6 Others (individually less than 1%) 0.8 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $145,129,974. Net unrealized appreciation aggregated $3,729,894, of which $12,089,810 related to appreciated investment securities and $8,359,916 related to depreciated investment securities. At February 29, 1996, the fund had a capital loss carryforward of approximately $2,947,000 which will expire on February 29, 2004. The fund intends to elect to defer to its fiscal year ending February 28, 1997 approximately $30,000 of losses recognized during the period November 1, 1995 to February 29, 1996. AUTOMOTIVE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 148,859,868 securities, at value (including repurchase agreements of $14,777,000) (cost $144,845,550) - - See accompanying schedule Cash 200 Receivable for 345,249 investments sold Receivable for 79,745 fund shares sold Dividends 256,553 receivable Redemption fees 147 receivable Other receivables 2,405 Prepaid expenses 22,185 TOTAL ASSETS 149,566,352 LIABILITIES Payable for fund $ 646,048 shares redeemed Accrued 76,792 management fee Other payables 139,879 and accrued expenses TOTAL LIABILITIES 862,719 NET ASSETS $ 148,703,633 Net Assets consist of: Paid in capital $ 146,805,162 Undistributed net 522,371 investment income Accumulated (2,638,382 undistributed net ) realized gain (loss) on investments and foreign currency transactions Net unrealized 4,014,482 appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 148,703,633 6,262,481 shares outstanding NET ASSET VALUE $23.75 and redemption price per share ($148,703,633 (divided by) 6,262,481 shares) Maximum offering $24.48 price per share (100/97.00 of $23.75) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 1,322,144 INCOME Dividends Interest 275,269 TOTAL INCOME 1,597,413 EXPENSES Management fee $ 450,604 Transfer agent 487,496 fees Accounting fees 74,583 and expenses Non-interested 278 trustees' compensation Custodian fees 15,856 and expenses Registration fees 22,185 Audit 10,008 Legal 289 Interest 527 Miscellaneous 2,160 Total expenses 1,063,986 before reductions Expense (22,593 1,041,393 reductions ) NET INVESTMENT 556,020 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 620,933 securities Foreign (1,157 619,776 currency ) transactions Change in net unrealized appreciation (depreciation) on: Investment 1,276,823 securities Assets and 281 1,277,104 liabilities in foreign currencies NET GAIN (LOSS) 1,896,880 NET INCREASE $ 2,452,900 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 405,358 INFORMATION Sales charges paid to FDC Deferred sales $ 1,435 charges withheld by FDC Exchange fees $ 35,790 withheld by FSC Expense $ 19,357 reductions Directed brokerage arrangements Custodian 520 interest credits Transfer agent 2,716 interest credits $ 22,593 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ 556,020 $ 76,016 Net investment income Net realized 619,776 1,307,573 gain (loss) Change in net 1,277,104 3,088,654 unrealized appreciation (depreciation) NET INCREASE 2,452,900 4,472,243 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (109,841 - shareholders ) from net investment income Share 207,091,543 79,629,136 transactions Net proceeds from sales of shares Reinvestment of 108,759 - distributions Cost of shares (116,708,841 (88,521,546 redeemed ) ) Paid in capital 115,630 98,432 portion of redemption fees NET INCREASE 90,607,091 (8,793,978 (DECREASE) IN ) NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 92,950,150 (4,321,735 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 55,753,483 60,075,218 period End of period $ 148,703,633 $ 55,753,483 (including undistributed net investment income of $522,371 and $76,192, respectively) OTHER INFORMATION Shares Sold 8,576,034 3,758,408 Issued in 4,640 - reinvestment of distributions Redeemed (4,869,612 (4,235,574 ) ) Net increase 3,711,062 (477,166) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 21.85 $ 19.84 $ 25.48 $ 20.69 $ 18.65 $ 12.58 beginning of period Income from Investment Operations Net investment .09 .03 .08 .05 .13 .06 income Net realized and 1.82 1.95 (3.46) 6.00 2.26 6.55 unrealized gain (loss) Total from 1.91 1.98 (3.38) 6.05 2.39 6.61 investment operations Less Distributions From net (.03) - (.05) (.05) (.06) - investment income From net - - (2.26) (1.26) (.36) (.70) realized gain Total (.03) - (2.31) (1.31) (.42) (.70) distributions Redemption fees .02 .03 .05 .05 .07 .16 added to paid in capital Net asset value, $ 23.75 $ 21.85 $ 19.84 $ 25.48 $ 20.69 $ 18.65 end of period TOTAL RETURN B, C 8.83% 10.13% (12.59)% 30.45% 13.42% 56.27% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 148,704 $ 55,753 $ 60,075 $ 228,698 $ 110,360 $ 178,445 period (000 omitted) Ratio of expenses 1.42% A 1.81% 1.82% 1.69% 1.57% A 2.48% to average net assets Ratio of expenses 1.39% A, 1.80% 1.80% 1.68% 1.57% A 2.48% to average net E E E E assets after expense reductions Ratio of net .74% A .13% .34% .22% .72% A .36% investment income to average net assets Portfolio turnover 129% A 61% 63% 64% 140% A 29% rate Average $ .0418 commission rate F
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
CHEMICALS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S CHEMICALS 4.55% 17.19% 106.81% 309.02% CHEMICALS 1.41% 13.68% 100.60% 296.75% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS CHEMICALS 17.19% 15.64% 15.13% CHEMICALS 13.68% 14.94% 14.78% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960909 144946 S00000000000001 Chemicals SP Standard & Poor 500 00069 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8932.46 9173.00 1986/10/31 9476.39 9702.28 1986/11/30 9639.56 9938.05 1986/12/31 9464.30 9684.63 1987/01/31 10727.41 10989.15 1987/02/28 11724.61 11423.22 1987/03/31 12081.18 11753.35 1987/04/30 12347.10 11648.74 1987/05/31 12183.93 11750.09 1987/06/30 12866.85 12343.47 1987/07/31 13706.92 12969.28 1987/08/31 14208.54 13453.04 1987/09/30 14462.37 13158.41 1987/10/31 10062.62 10324.09 1987/11/30 9724.17 9473.39 1987/12/31 10867.25 10194.31 1988/01/31 10600.72 10623.49 1988/02/29 11775.89 11118.55 1988/03/31 12375.59 10774.98 1988/04/30 12520.97 10894.59 1988/05/31 12048.48 10989.37 1988/06/30 13641.61 11493.78 1988/07/31 13229.70 11450.10 1988/08/31 12654.23 11060.80 1988/09/30 12811.73 11531.99 1988/10/31 13011.63 11852.58 1988/11/30 12575.48 11683.09 1988/12/31 13144.89 11887.54 1989/01/31 14023.24 12757.71 1989/02/28 13847.57 12440.04 1989/03/31 13999.01 12729.90 1989/04/30 14398.81 13390.58 1989/05/31 14731.97 13932.90 1989/06/30 14556.08 13853.48 1989/07/31 15483.64 15104.45 1989/08/31 16192.95 15400.50 1989/09/30 15617.02 15337.35 1989/10/31 14513.64 14981.53 1989/11/30 14822.83 15287.15 1989/12/31 15420.45 15654.04 1990/01/31 14321.73 14603.66 1990/02/28 14417.54 14792.04 1990/03/31 14845.54 15184.03 1990/04/30 14500.59 14804.43 1990/05/31 15765.40 16247.86 1990/06/30 15894.08 16137.38 1990/07/31 15946.67 16085.74 1990/08/31 13816.94 14631.59 1990/09/30 13133.32 13919.03 1990/10/31 13284.51 13859.18 1990/11/30 14171.89 14754.48 1990/12/31 14783.20 15166.13 1991/01/31 15775.76 15827.37 1991/02/28 16985.24 16959.03 1991/03/31 17392.78 17369.44 1991/04/30 17254.74 17411.13 1991/05/31 18451.07 18163.29 1991/06/30 17949.63 17331.41 1991/07/31 18814.75 18139.05 1991/08/31 19184.57 18568.95 1991/09/30 19039.29 18258.85 1991/10/31 19343.07 18503.51 1991/11/30 18378.89 17757.82 1991/12/31 20498.64 19789.32 1992/01/31 20892.32 19421.24 1992/02/29 21645.75 19673.71 1992/03/31 21489.63 19290.07 1992/04/30 22270.21 19857.20 1992/05/31 22141.25 19954.50 1992/06/30 21484.95 19657.18 1992/07/31 22162.89 20461.16 1992/08/31 21405.62 20041.71 1992/09/30 21427.25 20278.20 1992/10/31 21210.89 20349.17 1992/11/30 21852.77 21043.08 1992/12/31 22323.99 21301.91 1993/01/31 22301.02 21480.84 1993/02/28 21910.58 21772.98 1993/03/31 22431.17 22232.39 1993/04/30 22847.22 21694.37 1993/05/31 23193.15 22275.78 1993/06/30 22611.36 22340.38 1993/07/31 22957.29 22251.02 1993/08/31 24081.57 23094.33 1993/09/30 23318.95 22916.50 1993/10/31 24199.50 23390.88 1993/11/30 24380.33 23168.66 1993/12/31 25171.88 23449.00 1994/01/31 27131.21 24246.27 1994/02/28 27088.43 23589.20 1994/03/31 26275.61 22560.71 1994/04/30 27546.27 22849.48 1994/05/31 28209.52 23224.22 1994/06/30 27856.36 22655.22 1994/07/31 29113.95 23398.31 1994/08/31 30802.21 24357.64 1994/09/30 30578.26 23760.88 1994/10/31 30526.58 24295.50 1994/11/30 28132.00 23410.66 1994/12/31 28891.11 23757.84 1995/01/31 28136.13 24373.88 1995/02/28 29768.99 25323.73 1995/03/31 30681.99 26071.03 1995/04/30 31339.71 26838.83 1995/05/31 31651.77 27911.57 1995/06/30 32186.73 28559.96 1995/07/31 33711.37 29507.01 1995/08/31 33854.02 29581.07 1995/09/30 34388.98 30829.39 1995/10/31 32677.11 30719.33 1995/11/30 34103.67 32067.91 1995/12/31 35087.75 32685.54 1996/01/31 36700.54 33798.15 1996/02/29 37948.53 34111.46 1996/03/31 39782.12 34439.95 1996/04/30 40196.67 34947.60 1996/05/31 40109.72 35848.90 1996/06/30 39597.73 35985.48 1996/07/31 37994.11 34395.64 1996/08/30 39675.01 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960909 144951 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Chemicals Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $39,675 - a 296.75% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Raychem Corp. 6.6 Praxair, Inc. 6.4 Monsanto Co. 6.0 du Pont (E.I.) de Nemours & Co. 5.4 Cytec Industries, Inc. 5.2 Union Carbide Corp. 4.5 IMC Global, Inc. 2.8 Potash Corp. of Saskatchewan 2.7 Witco Corp. 2.7 Great Lakes Chemical Corp. 2.5 TOP INDUSTRIES AS OF AUGUST 31, 1996 36 Chemicals 43.3% Industrial Gases 12.6% Agricultural Chemicals 7.3% Chemicals, General 4.1% Adhesives & Sealants 3.2% All Others 29.5% * Row: 1, Col: 1, Value: 29.5 Row: 1, Col: 2, Value: 3.2 Row: 1, Col: 3, Value: 4.1 Row: 1, Col: 4, Value: 7.3 Row: 1, Col: 5, Value: 12.6 Row: 1, Col: 6, Value: 43.3 * INCLUDES SHORT-TERM INVESTMENTS CHEMICALS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW John Avery, Portfolio Manager of Fidelity Select Chemicals Portfolio Q. HOW DID THE FUND PERFORM, JOHN? A. For the six months ended August 31, 1996, the fund had a total return of 4.55%. For the past year, it returned 17.19%. For the same periods, the Standard &Poor's 500 Index returned 2.96% and 18.73%, respectively. Q. HOW DO YOU EVALUATE THE CHEMICAL MARKET, AND HOW DID YOU POSITION THE FUND DURING THE PERIOD? A. I look at the chemical industry in three segments: commodity, specialty and diversified. Commodity chemical companies generally perform well in the earlier stages of an economic expansion. Therefore, their stock prices typically react to investors' outlook on the economy as well as the underlying price of the raw materials - such as ethylene and methanol - they supply. Specialty chemical companies, on the other hand, are more broadly based companies that are less susceptible to changes in the economy. Finally, diversifieds are exactly that - companies offering a wide range of chemical-related products. During the period, I overweighted commodity companies until they became too expensive relative to historical standards. Additionally, I believe that the supply of chemical commodities will grow faster than demand, thereby driving down profitability. I felt it was appropriate to lower the fund's position. Q. WHAT ABOUT SPECIALTY AND DIVERSIFIED COMPANIES? A. I took every opportunity to raise the fund's stake in these companies. My goal is to try to position the fund so that it has as little exposure as possible to economic cycles. I can't predict what the economy is going to do, but I can look at such features as a company's product line, management philosophy, profitability and potential earnings and make sound decisions about its attractiveness as an investment. Q. CAN YOU GIVE SOME EXAMPLES? A. Sure. Many of the fund's core holdings are companies that are in the midst of going through positive changes - such as a new management team taking over and accelerating the rate of cost cutting. du Pont - the global chemical conglomerate - is cutting costs and managing its portfolio of businesses to focus on high return businesses. A company such as Monsanto, which used to be considered a pure commodity company, has since refocused its assets on agricultural chemicals and agriculture biotech products. Finally, Praxair positioned itself well in a high growth industry - industrial gas. Q. WHY DID YOU RAISE THE FUND'S STAKE IN FERTILIZER COMPANIES? A. It made sense to own fertilizer companies such as IMC Global and Potash given the currently low levels of grain reserves and the high level of crop planting expected next year. This may drive up fertilizer demand and pricing. Q. YOU'VE SAID SPECIALTY AND DIVERSIFIED CHEMICAL COMPANIES ARE ATTRACTIVE BECAUSE THEY ARE USUALLY NOT ECONOMICALLY SENSITIVE. IS THERE A POTENTIAL DOWNSIDE TO THESE GROUPS? A. While my goal is to find companies that can grow their earnings no matter what's going on in the economy, sometimes I find that individual companies have become more tied to the economy than they had been in the past. Therefore, although I may like a company's long-term prospects, its stock may encounter some price volatility when the economic outlook is uncertain. Q. JOHN, WHAT DO YOU SEE AHEAD FOR THE CHEMICAL SECTOR? A. It seems clear to me that supply will outstrip demand in the commodity chemical area and, therefore, I don't anticipate increasing the fund's position in this segment. As for the diversified and specialty areas, I will continue to focus on companies that I believe offer less exposure to unpredictable economic cycles. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 069 TRADING SYMBOL: FSCHX SIZE: as of August 31, 1996, more than $92 million MANAGER: John Avery, since 1995; manager, Fidelity Select Regional Banks, since September 1996; joined Fidelity in 1994 (checkmark) CHEMICALS PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 85.4% SHARES VALUE (NOTE 1) AGRICULTURE - 1.3% CROPS - 1.3% Delta & Pine Land Co. 42,900 $ 1,217,283 24735710 CHEMICALS & PLASTICS - 78.3% ADHESIVES & SEALANTS - 3.2% Ferro Corp. 30,000 783,750 31540510 Fuller (H.B.) Co. 31,104 1,100,304 35969410 International Specialty Products, Inc. (a) 26,700 293,700 46033410 Loctite Corp. 7,900 346,613 54013710 Lydall, Inc. (a) 16,500 408,375 55081910 2,932,742 AGRICULTURAL CHEMICALS - 7.3% FMC Corp. (a) 14,200 908,800 30249130 IMC Global, Inc. 60,640 2,607,520 44966910 OM Group, Inc. 19,100 725,800 67087210 Potash Corp. of Saskatchewan 32,700 2,473,561 73755L10 6,715,681 CHEMICALS - 43.3% Asahi Chemical Industry Co. Ltd. 142,000 952,101 04338910 BASF AG 49,000 1,458,666 05526230 Bayer AG 7,500 267,939 07273010 Crompton & Knowles Corp. 131,021 1,965,315 22711110 Cytec Industries, Inc. (a) 137,013 4,761,202 23282010 du Pont (E.I.) de Nemours & Co. 60,800 4,993,200 26353410 Ethyl Corp. 34,800 313,200 29765910 Hercules, Inc. 35,700 1,776,075 42705610 Hoechst AG Ord. 22,500 788,621 43439010 Imperial Chemical Industries PLC ADR 35,200 1,782,000 45270450 Lyondell Petrochemical Co. 12,600 286,650 55207810 Monsanto Co. 170,100 5,464,463 61166210 NL Industries, Inc. 18,300 201,300 62915640 Olin Corp. 21,700 1,719,725 68066520 Raychem Corp. 88,300 6,059,588 75460310 Rohm & Haas Co. 4,000 250,000 77537110 Union Carbide Corp. 96,300 4,164,975 90558110 Witco Corp. 81,000 2,450,250 97738510 39,655,270 CHEMICALS, GENERAL - 4.1% Grace (W.R.) & Co. 22,300 1,463,438 38388310 Great Lakes Chemical Corp. 40,360 2,320,700 39056810 3,784,138 INDUSTRIAL GASES - 12.6% AGA AB Series B shares 119,400 1,938,956 00107010 Air Products & Chemicals, Inc. 23,000 1,259,250 00915810 BOC Group PLC 74,900 1,014,109 09676210 L'Air Liquide 5,700 969,304 00867810 NuCo2, Inc. (a) 18,900 491,400 62942810 Praxair, Inc. 141,953 5,837,817 74005P10 11,510,836 INORGANIC CHEMICALS - 2.2% Minerals Technologies, Inc. 12,000 457,500 60315810 Valspar Corp. 33,100 1,563,975 92035510 2,021,475 NITROGENOUS FERTILIZERS - 0.8% Soc Quimica y Minera de Chile ADR 14,300 754,325 83363510 ORGANIC CHEMICALS - 0.3% Cambrex Corp. 9,450 310,669 13201110 PLASTIC FOAM PRODUCTS - 1.0% Foamex International, Inc. (a) 58,200 905,738 34412310 SHARES VALUE (NOTE 1) PLASTICS & SYNTHETIC RESINS - 0.6% Geon Co. 3,300 $ 73,425 37246W10 Schulman (A.), Inc. 9,000 195,750 80819410 Spartech Corp. 25,600 252,800 84722020 521,975 PLASTICS - 2.5% Hanna (M.A.) Co. 15,125 328,969 41052210 Sealed Air Corp. (a) 51,100 1,935,413 81211510 2,264,382 PLASTICS, RESINS & ELASTOMERS - 0.4% AT Plastics, Inc. 37,500 369,998 00194710 TOTAL CHEMICALS & PLASTICS 71,747,229 CONSUMER DURABLES - 1.9% MANUFACTURING INDUSTRIES - 1.9% Minnesota Mining & Manufacturing Co. 25,600 1,760,000 60405910 DRUGS & PHARMACEUTICALS - 1.1% BIOTECHNOLOGY - 1.1% Sigma Aldrich Corp. 18,400 970,600 82655210 INDUSTRIAL MACHINERY & EQUIPMENT - 0.3% PUMPING EQUIPMENT - 0.3% Duriron Co., Inc. 8,700 234,900 26684910 IRON & STEEL - 2.0% METAL FORGINGS & STAMPINGS - 2.0% Hexcel Corp. (a) 106,800 1,882,350 42829110 PHOTOGRAPHIC EQUIPMENT - 0.1% Imation Corp. (a) 2,560 60,480 45245A10 PRECIOUS METALS - 0.4% GOLD ORES - 0.4% Stillwater Mining Co. (a)(b) 19,400 397,700 86074Q90 TOTAL COMMON STOCKS (Cost $75,609,253) 78,270,542 REPURCHASE AGREEMENTS - 14.6% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 13,376,799 13,369,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $88,978,253) $ 91,639,542 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $397,700 or 0.4% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $201,255,657 and $204,801,335, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $80,053 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $7,645,000 and $4,651,750, respectively. The weighted average interest rate paid was 5.7%. Interest expense includes $2,934 paid under the bank borrowing program (see Note 6 of Notes to Financial Statements). The fund participated in the interfund lending program as a borrower. The maximum loan and the average daily balance during the period for which the loan was outstanding amounted to $25,562,000. The weighted average interest rate was 5.5%. Interest expense includes $3,880 paid under the interfund lending program (see Note 8 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 86.1% Canada 3.1 United Kingdom 3.1 Germany 2.7 Sweden 2.1 France 1.1 Japan 1.0 Chile 0.8 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $88,978,253. Net unrealized appreciation aggregated $2,661,289, of which $5,511,393 related to appreciated investment securities and $2,850,104 related to depreciated investment securities. CHEMICALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 91,639,542 securities, at value (including repurchase agreements of $13,369,000) (cost $88,978,253) - See accompanying schedule Cash 995 Receivable for 932,724 fund shares sold Dividends 175,138 receivable Redemption fees 188 receivable Other receivables 62,769 Prepaid expenses 25,053 TOTAL ASSETS 92,836,409 LIABILITIES Payable for fund $ 454,029 shares redeemed Accrued 42,539 management fee Other payables 151,463 and accrued expenses TOTAL LIABILITIES 648,031 NET ASSETS $ 92,188,378 Net Assets consist of: Paid in capital $ 75,866,187 Undistributed net 1,090,589 investment income Accumulated 12,570,151 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 2,661,451 appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 92,188,378 2,244,874 shares outstanding NET ASSET VALUE $41.07 and redemption price per share ($92,188,378 (divided by) 2,244,874 shares) Maximum offering $42.34 price per share (100/97.00 of $41.07) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 1,820,427 INCOME Dividends Interest (including 540,964 income on securities loaned of $4,392) TOTAL INCOME 2,361,391 EXPENSES Management fee $ 447,884 Transfer agent 685,546 fees Accounting and 74,199 security lending fees Non-interested 271 trustees' compensation Custodian fees 18,391 and expenses Registration fees 25,053 Audit 20,161 Legal 808 Interest 6,814 Miscellaneous 1,370 Total expenses 1,280,497 before reductions Expense (16,875 1,263,622 reductions ) NET INVESTMENT 1,097,769 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 12,597,516 securities Foreign (10,270 12,587,246 currency ) transactions Change in net unrealized appreciation (depreciation) on: Investment (10,725,028 securities ) Assets and 265 (10,724,763 liabilities in ) foreign currencies NET GAIN (LOSS) 1,862,483 NET INCREASE $ 2,960,252 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 437,903 INFORMATION Sales charges paid to FDC Deferred sales $ 3,715 charges withheld by FDC Exchange fees $ 94,328 withheld by FSC Expense $ 15,865 reductions Directed brokerage arrangements Custodian 130 interest credits Transfer agent 880 interest credits $ 16,875 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ 1,097,769 $ 31,898 Net investment income Net realized 12,587,246 9,931,910 gain (loss) Change in net (10,724,763 8,885,611 unrealized ) appreciation (depreciation) NET INCREASE 2,960,252 18,849,419 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to - (214,329 shareholders ) From net investment income From net (1,957,920 (6,011,068 realized gain ) ) TOTAL (1,957,920 (6,225,397 DISTRIBUTIONS ) ) Share 287,449,062 70,422,861 transactions Net proceeds from sales of shares Reinvestment of 1,944,433 6,107,748 distributions Cost of shares (287,660,120 (97,475,212 redeemed ) ) Paid in capital 222,207 40,196 portion of redemption fees NET INCREASE 1,955,582 (20,904,407 (DECREASE) IN ) NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 2,957,914 (8,280,385 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 89,230,464 97,510,849 period End of period $ 92,188,378 $ 89,230,464 (including undistributed net investment income of $1,090,589 and $15,890, respectively) OTHER INFORMATION Shares Sold 6,938,320 1,900,418 Issued in 47,058 171,374 reinvestment of distributions Redeemed (6,997,518 (2,690,711 ) ) Net increase (12,140) (618,919) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 39.53 $ 33.91 $ 31.66 $ 28.62 $ 32.81 $ 26.25 beginning of period Income from Investment Operations Net investment .31 .01 .36 .29 .30 .12 income Net realized and 1.43 8.89 2.65 5.97 (.84) 7.27 unrealized gain (loss) Total from 1.74 8.90 3.01 6.26 (.54) 7.39 investment operations Less Distributions From net - (.08) (.22) (.23) (.31) (.18) investment income From net (.26) (3.22) (.60) (3.05) (3.36) (.71) realized gain Total (.26) (3.30) (.82) (3.28) (3.67) (.89) distributions Redemption fees .06 .02 .06 .06 .02 .06 added to paid in capital Net asset value, $ 41.07 $ 39.53 $ 33.91 $ 31.66 $ 28.62 $ 32.81 end of period TOTAL RETURN B, C 4.55% 27.48% 9.90% 23.63% (1.61)% 29.07% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 92,188 $ 89,230 $ 97,511 $ 62,217 $ 28,796 $ 39,566 period (000 omitted) Ratio of expenses 1.72% A 1.99% 1.52% 1.93% 1.89% A 2.16% to average net assets Ratio of expenses 1.69% A, 1.97% 1.51% 1.93% 1.89% A 2.16% to average net E E E assets after expense reductions Ratio of net 1.47% A .04% 1.07% .97% 1.21% A .40% investment income to average net assets Portfolio turnover 314% A 87% 106% 81% 214% A 87% rate Average $ .0447 commission rate F
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
CONSTRUCTION AND HOUSING PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past five year and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1996 MONTH YEAR YEARS FUND S CONSTRUCTION AND HOUSING 7.92% 16.32% 89.87% 234.32% CONSTRUCTION AND HOUSING 4.68% 12.83% 84.17% 224.29% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 281.45% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on September 29, 1986. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF AUGUST 31, 1996 YEAR YEARS FUND CONSTRUCTION AND HOUSING 16.32% 13.68% 12.92% CONSTRUCTION AND HOUSING 12.83% 12.99% 12.58% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 14.43% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19960831 19960909 151908 S00000000000001 Construction & Housing SP Standard & Poor 500 00511 SP001 1986/09/29 9700.00 10000.00 1986/09/30 9709.70 9962.80 1986/10/31 10262.60 10537.66 1986/11/30 10369.30 10793.72 1986/12/31 10437.20 10518.48 1987/01/31 12192.90 11935.32 1987/02/28 13483.00 12406.77 1987/03/31 14307.50 12765.32 1987/04/30 13327.80 12651.71 1987/05/31 12949.50 12761.78 1987/06/30 12804.00 13406.25 1987/07/31 13599.40 14085.95 1987/08/31 13890.40 14611.35 1987/09/30 12823.40 14291.37 1987/10/31 8749.40 11213.00 1987/11/30 8109.20 10289.05 1987/12/31 9141.24 11072.05 1988/01/31 9466.31 11538.18 1988/02/29 10352.85 12075.86 1988/03/31 10766.57 11702.72 1988/04/30 11081.79 11832.62 1988/05/31 11012.83 11935.56 1988/06/30 11662.97 12483.41 1988/07/31 11544.76 12435.97 1988/08/31 10953.73 12013.15 1988/09/30 11288.65 12524.91 1988/10/31 11367.45 12873.10 1988/11/30 11229.54 12689.01 1988/12/31 11809.46 12911.07 1989/01/31 12529.18 13856.16 1989/02/28 12377.13 13511.14 1989/03/31 12691.37 13825.95 1989/04/30 13188.08 14543.52 1989/05/31 13654.38 15132.53 1989/06/30 13645.75 15046.28 1989/07/31 14199.39 16404.95 1989/08/31 14438.22 16726.49 1989/09/30 14698.76 16657.91 1989/10/31 13873.72 16271.45 1989/11/30 14079.98 16603.39 1989/12/31 13769.49 17001.87 1990/01/31 12900.94 15861.04 1990/02/28 13167.30 16065.65 1990/03/31 13908.46 16491.39 1990/04/30 13503.14 16079.11 1990/05/31 14753.86 17646.82 1990/06/30 14487.50 17526.82 1990/07/31 13731.86 17470.73 1990/08/31 11986.06 15891.38 1990/09/30 10748.37 15117.47 1990/10/31 10370.55 15052.46 1990/11/30 11373.73 16024.85 1990/12/31 12442.05 16471.95 1991/01/31 13536.43 17190.12 1991/02/28 14722.01 18419.22 1991/03/31 15086.80 18864.96 1991/04/30 15321.31 18910.24 1991/05/31 16845.63 19727.16 1991/06/30 15985.76 18823.66 1991/07/31 16402.66 19700.84 1991/08/31 17080.14 20167.75 1991/09/30 16702.32 19830.95 1991/10/31 16415.69 20096.68 1991/11/30 15594.91 19286.79 1991/12/31 17582.47 21493.19 1992/01/31 18889.56 21093.42 1992/02/29 19198.76 21367.64 1992/03/31 19184.71 20950.97 1992/04/30 19451.75 21566.92 1992/05/31 20070.16 21672.60 1992/06/30 18636.06 21349.68 1992/07/31 18973.62 22222.88 1992/08/31 18326.63 21767.31 1992/09/30 18565.74 22024.17 1992/10/31 19212.72 22101.25 1992/11/30 20323.86 22854.91 1992/12/31 20872.39 23136.02 1993/01/31 21744.42 23330.36 1993/02/28 22138.23 23647.66 1993/03/31 22658.64 24146.62 1993/04/30 22123.98 23562.27 1993/05/31 22363.23 24193.74 1993/06/30 22630.63 24263.90 1993/07/31 23404.69 24166.85 1993/08/31 24375.78 25082.77 1993/09/30 25163.91 24889.63 1993/10/31 26078.71 25404.85 1993/11/30 25670.57 25163.50 1993/12/31 27887.78 25467.98 1994/01/31 28798.86 26333.89 1994/02/28 28215.20 25620.25 1994/03/31 26563.85 24503.20 1994/04/30 26503.76 24816.84 1994/05/31 25101.29 25223.84 1994/06/30 24485.92 24605.86 1994/07/31 25187.15 25412.93 1994/08/31 26145.98 26454.86 1994/09/30 24686.27 25806.71 1994/10/31 23956.42 26387.37 1994/11/30 22983.28 25426.34 1994/12/31 23441.19 25803.41 1995/01/31 23544.07 26472.49 1995/02/28 24675.71 27504.13 1995/03/31 25116.61 28315.77 1995/04/30 25146.00 29149.67 1995/05/31 26380.52 30314.78 1995/06/30 26630.37 31019.00 1995/07/31 27864.89 32047.59 1995/08/31 27879.58 32128.03 1995/09/30 27717.92 33483.83 1995/10/31 27703.22 33364.29 1995/11/30 29408.04 34828.98 1995/12/31 30186.91 35499.79 1996/01/31 30125.46 36708.20 1996/02/29 30048.65 37048.49 1996/03/31 31077.92 37405.26 1996/04/30 31117.38 37956.62 1996/05/31 32141.29 38935.52 1996/06/30 32333.27 39083.86 1996/07/31 30973.39 37357.14 1996/08/30 32429.26 38145.00 IMATRL PRASUN SHR__CHT 19960831 19960909 151913 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Construction and Housing Portfolio on September 29, 1986, when the fund started, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $32,429 - a 224.29% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $38,145 over the same period - a 281.45% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Lowe's Companies, Inc. 5.6 Home Depot, Inc. (The) 4.8 Black & Decker Corp. 3.9 Sherwin-Williams Co. 3.8 Leggett & Platt, Inc. 3.1 Belmont Homes, Inc. 3.1 Green Tree Financial Corp. 3.0 Caterpillar, Inc. 3.0 Fluor Corp. 2.6 Masco Corp. 2.5 TOP INDUSTRIES AS OF AUGUST 31, 1996 Appliances 7.6% Lumber & Building Materials - Retail 5.6% Building Materials - Retail 4.8% Furniture 4.4% Farm Machinery & Equipment 4.3% All Others 73.3% * Row: 1, Col: 1, Value: 73.3 Row: 1, Col: 2, Value: 4.3 Row: 1, Col: 3, Value: 4.4 Row: 1, Col: 4, Value: 4.8 Row: 1, Col: 5, Value: 5.6 Row: 1, Col: 6, Value: 7.6 * INCLUDES SHORT-TERM INVESTMENTS CONSTRUCTION AND HOUSING PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: Effective August 1, 1996, Peter Saperstone (right) became Portfolio Manager of Fidelity Construction and Housing Portfolio. The following is an interview with William Bower, who managed the fund during most of the period covered by the report, and Peter Saperstone, who discusses his investing style and outlook. Q. BILL, HOW DID THE FUND PERFORM? A. Pretty well. For the six months ended August 31, 1996, the fund had a return of 7.92%. This compared favorably to the Standard & Poor's 500 Index, which posted a return of 2.96% over the same period. For the 12-month period ended August 31, 1996, the fund provided a return of 16.32%, while the S&P 500 posted a return of 18.73%. Q. CAN YOU POINT TO ANY PARTICULAR FACTORS AS HAVING HAD A SIGNIFICANT EFFECT ON THE PORTFOLIO? A. Relative to the index, my overweighting in manufactured housing helped performance, as this sector continued to grab market share from "site-built," or homebuilding, stocks. This shift in market share was due partly to continued strong job growth in the Southeast region of the U.S. A lot of factories opened up below the Mason-Dixon line, and the blue-collar workers in that region tend to utilize manufactured housing. Also, with home values falling, many people don't look at homes in terms of investment value anymore. Instead, they're seeking out more affordable alternatives such as manufactured housing. Q. THIS FUND IS VERY CYCLICAL - THAT IS, IT TENDS TO PARALLEL THE UPS AND DOWNS OF THE ECONOMY. CAN YOU DESCRIBE THE ECONOMIC CONDITIONS OVER THE PAST SIX MONTHS AND THEIR RAMIFICATIONS? A. Sure. The economy showed its strength during the period, resulting in increased home sales and housing starts, both key indicators of the well-being of the sector. In this type of atmosphere, stocks such as Home Depot and Lowe's tend to flourish because people are either in the remodeling phase or the building phase. This sends a positive ripple throughout the sector. The sector historically has been characterized as having good "fundamentals" when there have been strong housing starts, low interest rates, low unemployment and solid jobs creation. These trends, for the most part, existed during the period. Q. HOW DID RETAIL STOCKS PERFORM? A. The retail sector performed well as investors showed renewed confidence in the economy. Retail stocks in general are powerful forces within the housing sector; they tend to benefit from industry consolidations and, in a sense, these companies can control pricing. In terms of the portfolio, we saw good returns from two of the fund's larger positions - Home Depot and Lowe's - due largely to the robust economy. Both companies are trying to improve earnings growth by expanding square footage and increasing the profitability of existing stores. There are also a lot of investment opportunities in the retail sector with companies that tend to be less sensitive to the economy. Stocks such as Black & Decker and Stanley Works - companies with established product lines - would fall into that category. Q. WHICH INDIVIDUAL HOLDINGS PLAYED KEY ROLES? A. Actually, I was helped by some of the stocks I avoided. I generally steered clear of many of the paper and lumber stocks because pricing and inventories were high. Sunbeam-Oster, an appliance manufacturer, was a good performer. Q. TURNING TO YOU PETER, HOW WOULD YOU EXPLAIN YOUR INVESTING STRATEGY? A. In this sector, I'm looking for companies that can benefit from strong secular trends, tend to be less sensitive to fluctuations in the U.S. housing market, are internationally diversified, or are cost reduction stories. In terms of secular trends, retail consolidation could benefit companies such as Lowe's and Home Depot. Black & Decker and Sherwin-Williams are companies that can perform well in a weakening housing market, and Stanley Works continues to aggressively attack its cost structure. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. The cyclicality of the housing market plays an integral role in the performance of the group. If current economic conditions hold - moderate economic growth combined with minimal inflationary pressure - the group should continue to meet earnings expectations over the next couple of quarters. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 511 TRADING SYMBOL: FSHOX SIZE: as of August 31, 1996, more than $62 million MANAGER: Peter Saperstone, since August 1996; equity analyst, textile, apparel and footwear industries, since 1995; building materials and appliances, since 1996, joined Fidelity in 1995 (checkmark) CONSTRUCTION AND HOUSING PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 83.6% SHARES VALUE (NOTE 1) APPAREL STORES - 1.9% SHOE STORES - 1.9% Payless ShoeSource, Inc. (a) 35,000 $ 1,229,370 70437910 AUTOS, TIRES, & ACCESSORIES - 0.6% AUTO & TRUCK PARTS - 0.6% Titan Wheel International, Inc. 26,900 410,225 88832810 BUILDING MATERIALS - 12.4% CEMENT - 2.8% Centex Construction Products, Inc. 14,300 210,925 15231R10 Medusa Corp. 20,400 606,900 58507230 Texas Industries, Inc. 5,600 364,700 88249110 Vulcan Materials Co. 9,900 572,963 92916010 1,755,488 CONCRETE, GYPSUM, PLASTER - 0.4% CalMat Co. 13,500 243,000 13127110 FABRICATED STRUCTURAL METAL - 0.1% United Dominion Industries Ltd. 2,600 52,988 90991410 HEATING & AIR-CONDITIONING EQUIPMENT - 2.1% Falcon Building Products, Inc. (a) 113,400 1,332,450 30591610 PAINT & VARNISH - 3.8% Sherwin-Williams Co. 55,000 2,406,250 82434810 PLUMBING SUPPLIES - WHOLESALE - 3.2% Masco Corp. 53,400 1,555,275 57459910 Shelter Components Corp. 37,625 479,719 82283510 2,034,994 TOTAL BUILDING MATERIALS 7,825,170 CHEMICALS & PLASTICS - 1.8% CHEMICALS - 1.8% PPG Industries, Inc. 22,500 1,110,938 69350610 CONSTRUCTION - 13.3% CONSTRUCTION - 0.8% Walter Industries, Inc. (a) 37,200 497,550 93317Q10 GENERAL BUILDING - 1.2% Crossman Communities, Inc. (a) 11,900 211,225 22764E10 DR Horton, Inc. 60,940 540,843 23331A10 752,068 MOBILE HOMES - 2.9% Clayton Homes, Inc. 37,800 760,725 18419010 Oakwood Homes Corp. 46,400 1,090,400 67409810 1,851,125 OPERATIVE BUILDERS - 2.1% Continental Homes Holding Corp. 34,700 667,975 21148C10 Lennar Corp. 21,400 478,825 52605710 Washington Homes, Inc. (a) 47,600 184,450 93886410 1,331,250 PREFABRICATED WOOD BUILDINGS - 3.0% American Homestar Corp. (a) 56,800 1,334,800 02665110 Palm Harbor Homes, Inc. (a) 19,750 585,094 69663910 1,919,894 SINGLE-FAMILY HOUSING CONSTRUCTION - 3.3% Beazer Homes USA, Inc. (a) 10,000 145,000 07556Q10 Belmont Homes, Inc. (a) 91,500 1,967,250 08038110 2,112,250 TOTAL CONSTRUCTION 8,464,137 SHARES VALUE (NOTE 1) CONSUMER ELECTRONICS - 7.6% APPLIANCES - 7.6% Black & Decker Corp. 63,000 $ 2,488,500 09179710 Maytag Co. 17,200 346,150 57859210 Sunbeam-Oster, Inc. 56,400 1,226,700 86707110 Whirlpool Corp. 15,000 735,000 96332010 4,796,350 CREDIT & OTHER FINANCE - 3.0% MORTGAGE BANKERS - 3.0% Green Tree Financial Corp. 54,400 1,890,400 39350510 ENGINEERING - 3.2% ARCHITECTS & ENGINEERS - 2.6% Fluor Corp. 25,700 1,644,800 34386110 SPECIAL CONTRACTORS - 0.6% Foster Wheeler Corp. 9,000 388,125 35024410 TOTAL ENGINEERING 2,032,925 FEDERAL SPONSORED CREDIT - 1.4% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 1.4% Federal National Mortgage Association 29,400 911,400 31358610 HOME FURNISHINGS - 5.4% FURNITURE - 4.4% Furniture Brands International, Inc. (a) 65,600 787,200 36092110 Leggett & Platt, Inc. 69,900 1,992,150 52466010 2,779,350 FURNITURE STORES - 1.0% Haverty Furniture Companies, Inc. 38,050 413,794 41959610 Heilig-Meyers Co. 13,153 233,466 42289310 647,260 TOTAL HOME FURNISHINGS 3,426,610 HOUSEHOLD PRODUCTS - 1.7% FABRICATED RUBBER PRODUCTS - 1.7% Premark International, Inc. 59,000 1,076,750 74045910 INDUSTRIAL MACHINERY & EQUIPMENT - 12.8% ACCESS & MEASURING CUTTING TOOLS - 1.4% Stanley Works 33,000 907,500 85461610 CONSTRUCTION EQUIPMENT - 3.3% Caterpillar, Inc. 27,200 1,873,400 14912310 Komatsu Ltd. Ord. 23,000 196,253 50045899 2,069,653 FARM MACHINERY & EQUIPMENT - 4.3% Allied Products Corp. 29,700 768,488 01941110 Case Corp. 17,200 782,600 14743R10 Deere & Co. 16,900 671,775 24419910 Varity Corp. (a) 9,900 497,475 92224R60 2,720,338 GENERAL INDUSTRIAL MACHINERY - 1.5% Ingersoll-Rand Co. 22,500 961,875 45686610 LAWN, GARDEN TRACTORS, EQUIPMENT - 2.3% Toro Co. 47,300 1,478,125 89109210 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 8,137,491 IRON & STEEL - 2.3% METAL FORGINGS & STAMPINGS - 2.3% TriMas Corp. 61,800 1,436,850 89621510 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) LEISURE DURABLES & TOYS - 1.8% MOTOR HOMES - 0.4% Thor Industries, Inc. 13,500 $ 281,813 88516010 TRAVEL TRAILERS AND CAMPERS - 1.4% Champion Enterprises, Inc. (a) 46,600 885,400 15849610 TOTAL LEISURE DURABLES & TOYS 1,167,213 METALS & MINING - 0.9% METAL ORES - 0.6% Wolverine Tube, Inc. (a) 9,100 373,100 97809310 NON-METALLIC MINERAL MINING - 0.3% Martin Marietta Materials, Inc. 9,000 198,000 57328410 TOTAL METALS & MINING 571,100 PAPER & FOREST PRODUCTS - 1.3% PAPER - 1.3% Champion International Corp. 10,000 430,000 15852510 Georgia-Pacific Corp. 5,000 371,875 37329810 801,875 REAL ESTATE - 0.3% SUBDIVIDED REAL ESTATE DEVELOPMENT - 0.3% Catellus Development Corp. (a) 18,000 171,000 14911110 RETAIL & WHOLESALE, MISCELLANEOUS - 10.4% BUILDING MATERIALS - RETAIL - 4.8% Home Depot, Inc. (The) 57,500 3,054,688 43707610 LUMBER & BUILDING MATERIALS - RETAIL - 5.6% Lowe's Companies, Inc. 97,400 3,518,575 54866110 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 6,573,263 TEXTILES & APPAREL - 1.5% APPAREL - 0.9% Kellwood Co. 35,000 564,375 48804410 CARPETS & RUGS - 0.6% Shaw Industries, Inc. 25,000 375,000 82028610 COTTON MILLS - 0.0% Galey & Lord, Inc. (a) 1,000 11,625 36352K10 TOTAL TEXTILES & APPAREL 951,000 TOTAL COMMON STOCKS (Cost $49,096,807) 52,984,067 REPURCHASE AGREEMENTS - 16.4% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 10,416,073 10,410,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $59,506,807) $ 63,394,067 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $37,072,931 and $24,292,691,respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $16,222 for the period (see Note 5 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $59,558,365. Net unrealized appreciation aggregated $3,835,702 of which $4,834,165 related to appreciated investment securities and $998,463 related to depreciated investment securities. CONSTRUCTION AND HOUSING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 63,394,067 securities, at value (including repurchase agreements of $10,410,000) (cost $59,506,807) - See accompanying schedule Cash 897 Receivable for 4,237 investments sold Receivable for 57,166 fund shares sold Dividends 57,276 receivable Redemption fees 174 receivable Other receivables 156 Prepaid expenses 5,607 TOTAL ASSETS 63,519,580 LIABILITIES Payable for $ 708,911 investments purchased Payable for fund 196,032 shares redeemed Accrued 29,639 management fee Other payables 52,960 and accrued expenses TOTAL LIABILITIES 987,542 NET ASSETS $ 62,532,038 Net Assets consist of: Paid in capital $ 56,355,428 Undistributed net 33,283 investment income Accumulated 2,256,067 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 3,887,260 appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 62,532,038 3,085,221 shares outstanding NET ASSET VALUE $20.27 and redemption price per share ($62,532,038 (divided by) 3,085,221 shares) Maximum offering $20.90 price per share (100/97.00 of $20.27) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 246,454 INCOME Dividends Interest (including 129,165 income on securities loaned of $277) TOTAL INCOME 375,619 EXPENSES Management fee $ 145,334 Transfer agent 134,877 fees Accounting and 30,114 security lending fees Non-interested 85 trustees' compensation Custodian fees 8,254 and expenses Registration fees 5,607 Audit 14,795 Legal 182 Miscellaneous 569 Total expenses 339,817 before reductions Expense (5,368 334,449 reductions ) NET INVESTMENT 41,170 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 2,315,529 securities Foreign (25 2,315,504 currency ) transactions Change in net unrealized appreciation (depreciation) on: Investment 559,040 securities Assets and (1 559,039 liabilities in ) foreign currencies NET GAIN (LOSS) 2,874,543 NET INCREASE $ 2,915,713 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 111,412 INFORMATION Sales charges paid to FDC Deferred sales $ 363 charges withheld by FDC Exchange fees $ 9,435 withheld by FSC Expense $ 5,264 reductions Directed brokerage arrangements Custodian 104 interest credits $ 5,368 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ 41,170 $ 166,036 Net investment income Net realized 2,315,504 4,719,847 gain (loss) Change in net 559,039 2,880,267 unrealized appreciation (depreciation) NET INCREASE 2,915,713 7,766,150 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to - (162,155 shareholders ) From net investment income From net (1,694,411 (1,876,368 realized gain ) ) TOTAL (1,694,411 (2,038,523 DISTRIBUTIONS ) ) Share 47,409,467 90,250,248 transactions Net proceeds from sales of shares Reinvestment of 1,676,339 2,017,008 distributions Cost of shares (30,504,402 (72,254,026 redeemed ) ) Paid in capital 61,319 64,179 portion of redemption fees NET INCREASE 18,642,723 20,077,409 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 19,864,025 25,805,036 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 42,668,013 16,862,977 period End of period $ 62,532,038 $ 42,668,013 (including undistributed net investment income of $33,283 and $1,803, respectively) OTHER INFORMATION Shares Sold 2,355,875 4,943,241 Issued in 89,025 103,809 reinvestment of distributions Redeemed (1,541,480 (3,869,788 ) ) Net increase 903,420 1,177,262 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 19.56 $ 16.79 $ 19.82 $ 15.74 $ 13.84 $ 11.76 beginning of period Income from Investment Operations Net investment .02 .07 (.02) .01 .02 (.06) income (loss) Net realized and 1.44 3.55 (2.50) 4.26 1.87 2.93 unrealized gain (loss) Total from 1.46 3.62 (2.52) 4.27 1.89 2.87 investment operations Less Distributions From net - (.07) - - - - investment income From net (.78) (.81) (.52) (.22) (.01) (.88) realized gain Total (.78) (.88) (.52) (.22) (.01) (.88) distributions Redemption fees .03 .03 .01 .03 .02 .09 added to paid in capital Net asset value, $ 20.27 $ 19.56 $ 16.79 $ 19.82 $ 15.74 $ 13.84 end of period TOTAL RETURN B, C 7.92% 21.77% (12.54)% 27.45% 13.81% 26.96% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 62,532 $ 42,668 $ 16,863 $ 80,999 $ 31,111 $ 26,687 period (000 omitted) Ratio of expenses 1.40% A 1.43% 1.76% 1.67% 2.02% A 2.50% to average net G assets Ratio of expenses 1.37% A, 1.40% 1.74% 1.66% 2.02% A 2.50% to average net E E E E assets after expense reductions Ratio of net .17% A .39% (.11)% .03% .20% A (.49)% investment income (loss) to average net assets Portfolio turnover 113% A 139% 45% 35% 60% A 183% rate Average $ .0360 commission rate F
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. G DURING THE PERIOD, FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER.
ENVIRONMENTAL SERVICES PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1996 MONTH YEAR YEARS FUND S ENVIRONMENTAL SERVICES 7.33% 9.53% 20.01% 51.34% ENVIRONMENTAL SERVICES 4.11% 6.25% 16.41% 46.80% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 147.46% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on June 29, 1989. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF AUGUST 31, 1996 YEAR YEARS FUND ENVIRONMENTAL SERVICES 9.53% 3.71% 5.94% ENVIRONMENTAL SERVICES 6.25% 3.08% 5.49% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.45% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19960831 19960909 155914 S00000000000001 Environmental Services SP Standard & Poor 500 00516 SP001 1989/06/29 9700.00 10000.00 1989/06/30 9573.90 9761.13 1989/07/31 10485.70 10642.57 1989/08/31 10621.50 10851.16 1989/09/30 11193.80 10806.67 1989/10/31 10941.60 10555.96 1989/11/30 11009.50 10771.30 1989/12/31 11368.64 11029.81 1990/01/31 10358.96 10289.71 1990/02/28 10562.83 10422.44 1990/03/31 11019.13 10698.64 1990/04/30 11077.38 10431.17 1990/05/31 12106.48 11448.21 1990/06/30 12485.11 11370.37 1990/07/31 12407.45 11333.98 1990/08/31 10863.80 10309.39 1990/09/30 10281.29 9807.32 1990/10/31 10135.66 9765.15 1990/11/30 10485.17 10395.98 1990/12/31 11087.09 10686.03 1991/01/31 12057.94 11151.94 1991/02/28 12611.32 11949.30 1991/03/31 12611.32 12238.47 1991/04/30 12572.49 12267.85 1991/05/31 12601.62 12797.82 1991/06/30 11650.18 12211.68 1991/07/31 12019.11 12780.74 1991/08/31 12232.69 13083.64 1991/09/30 11941.44 12865.15 1991/10/31 11494.85 13037.54 1991/11/30 10863.80 12512.13 1991/12/31 11936.55 13943.51 1992/01/31 13005.20 13684.17 1992/02/29 13146.34 13862.06 1992/03/31 11835.74 13591.75 1992/04/30 11482.88 13991.35 1992/05/31 11190.52 14059.90 1992/06/30 10592.18 13850.41 1992/07/31 10665.31 14416.89 1992/08/31 10445.94 14121.35 1992/09/30 10571.29 14287.98 1992/10/31 11072.70 14337.99 1992/11/30 11762.13 14826.91 1992/12/31 11772.58 15009.28 1993/01/31 12002.39 15135.36 1993/02/28 11866.59 15341.20 1993/03/31 11574.10 15664.90 1993/04/30 11333.85 15285.81 1993/05/31 11584.55 15695.47 1993/06/30 11438.31 15740.99 1993/07/31 10957.79 15678.02 1993/08/31 11542.77 16272.22 1993/09/30 11553.21 16146.93 1993/10/31 11877.04 16481.17 1993/11/30 11354.74 16324.60 1993/12/31 11699.45 16522.12 1994/01/31 12691.82 17083.88 1994/02/28 12462.01 16620.90 1994/03/31 11333.85 15896.23 1994/04/30 11521.87 16099.70 1994/05/31 11490.54 16363.74 1994/06/30 10801.10 15962.83 1994/07/31 11030.91 16486.41 1994/08/31 11417.41 17162.35 1994/09/30 11344.29 16741.87 1994/10/31 10957.79 17118.56 1994/11/30 10341.48 16495.11 1994/12/31 10581.74 16739.73 1995/01/31 10592.18 17173.79 1995/02/28 10727.98 17843.05 1995/03/31 11239.83 18369.60 1995/04/30 12044.17 18910.59 1995/05/31 12232.20 19666.44 1995/06/30 12733.60 20123.29 1995/07/31 13214.12 20790.58 1995/08/31 13402.14 20842.77 1995/09/30 13872.21 21722.33 1995/10/31 12890.29 21644.78 1995/11/30 13339.47 22594.99 1995/12/31 13346.83 23030.17 1996/01/31 13809.34 23814.11 1996/02/29 13677.20 24034.87 1996/03/31 14282.87 24266.33 1996/04/30 14757.09 24624.01 1996/05/31 15893.10 25259.07 1996/06/30 15606.34 25355.30 1996/07/31 13808.58 24235.11 1996/08/30 14679.89 24746.22 IMATRL PRASUN SHR__CHT 19960831 19960909 155918 R00000000000090 Let's say hypothetically that $10,000 was invested in Fidelity Select Environmental Services Portfolio on June 29, 1989, when the fund started, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $14,680 - a 46.80% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $24,746 over the same period - a 147.46% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS WMX Technologies, Inc. 6.1 Browning-Ferris Industries, Inc. 4.2 Ogden Corp. 3.9 IMCO Recycling, Inc. 3.2 USA Waste Services, Inc. 3.2 Wheelabrator Technologies, Inc. 3.1 United Water Resources, Inc. 3.0 Fluor Corp. 3.0 United Waste Systems, Inc. 2.9 Memtec Ltd. sponsored ADR 2.7 TOP INDUSTRIES AS OF AUGUST 31, 1996 Refuse Systems 30.6% Pollution Equipment & Design 11.6% Sanitary Services 6.3% Water Supply 5.3% Architects & Engineers 3.4% All Others 42.8% * Row: 1, Col: 1, Value: 42.8 Row: 1, Col: 2, Value: 3.4 Row: 1, Col: 3, Value: 5.3 Row: 1, Col: 4, Value: 6.3 Row: 1, Col: 5, Value: 11.6 Row: 1, Col: 6, Value: 30.6 * INCLUDES SHORT-TERM INVESTMENTS ENVIRONMENTAL SERVICES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Robert Ewing, Portfolio Manager of Fidelity Select Environmental Services Portfolio Q. BOB, HOW DID THE FUND PERFORM? A. It did well over the past six months. For the six months ended August 31, 1996, the fund had a total return of 7.33%, while the Standard & Poor's 500 Index returned 2.96%. For the 12 months ended August 31, 1996, the fund returned 9.53%, and the S&P 500 had a total return of 18.73%. Q. WHAT FACTORS HELPED THE FUND'S PERFORMANCE? A. There were two main reasons the fund did well over the past six months. First, business prospects across the industry generally were more stable than they had been in some time and stock valuations - or stock prices compared to other measures such as earnings - were attractive after several years of underperformance relative to the broad market. Second, the fund benefited from its investments in mid-capitalization, or mid-sized, solid waste companies. There was a great deal of acquisition activity among the companies in this group, and the fund benefited from owning the acquiring companies as well as those that were being bought. The former included USA Waste and United Waste, both of which were aided by the cost savings and opportunities for improved profit margins that their acquisitions produced. Examples of acquired companies would be Addington Resources and Sanifill. The fund also benefited from the performance of individual stocks, such as Memtec, a water company that manufacturers membranes and filters, and TSI, which tests gas masks and profited from a multi-year contract with the U.S. Army. Q. WERE THERE ANY OTHER MAJOR THEMES IN THE SECTOR DURING THE PERIOD? A. Companies with any significant stake in recycling had a tough time of it over the past six months. That's because the cost of recyclable commodities dropped precipitously. Recycled paper fiber was the prime example of this trend, falling in price from about $180 per ton a year ago to about $40 per ton at the end of the period. This decrease largely was due to the moderate slowdown in the economy we saw earlier in the year. Demand for paper dropped off, and therefore demand for fiber by paper mills did so as well. While every solid waste company is involved in recyclable goods, Browning-Ferris Industries suffered notably because it has about 12% of its business generated through the value of commodities recovered from the waste stream. However, the core prospects of the solid waste business are favorable at this time, with about 2% or 3% volume growth and 3% to 4% pricing growth going forward. I estimate the long-term equilibrium price of paper at about $100 per ton and, if we approach that figure, the outlook for solid waste companies should improve. Q. WERE YOU PURSUING ANY OTHER STRATEGIES OF NOTE? A. In June and July, some of the fund's solid waste stocks reached fairly high valuations, so I tried to reduce some of the risk posed by that situation by reducing those positions and purchasing some convertible securities. The advantage here was one typical of convertible securities: Their yield provided some downside protection if stocks were to fall, while at the same time the convertibles offered the possibility of participating in any upward swing in stock prices. I've since sold the fund's convertible securities. I also added to the fund's position in water utilities because they were selling at attractive valuations and contributed additional yield to the fund. Q. WHAT WERE SOME OF THE STOCKS THAT DIDN'T PERFORM AS WELL AS YOU WOULD HAVE LIKED? A. I already mentioned Browning-Ferris and its problems with commodity prices. IMCO Recycling - a company that recycles aluminum cans - was another disappointment. It suffered from the fall in the price of aluminum we've seen over the past six months. Q. WHAT'S YOUR OUTLOOK? A. I believe there will be more opportunities offered by acquiring companies in the solid waste sector that are consolidating their operations and driving results through the benefits of adding to their businesses. Companies whose prospects are sensitive to commodity prices hopefully will see some improvement in paper and other prices. If we continue to see the signs of economic improvement that have emerged recently, or if the economy accelerates even more, I might increase the fund's stake in these companies because in that environment commodity prices should improve. If the economy weakens, I'll look more to the water group because those stocks generally are more immune to economic trends. In general, though, I'm not structuring the fund in anticipation of the direction of the economy. Instead, I'll continue to focus on the business prospects of individual companies, making minor adjustments as the economic backdrop emerges. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: June 29, 1989 FUND NUMBER: 516 TRADING SYMBOL: FSLEX SIZE: as of August 31, 1996, more than $37 million MANAGER: Robert Ewing, since January 1996; equity analyst, restaurant, foods, specialty retail, toy retail industries, initial public offerings, 1990-1993; insurance, mortgage, specialty finance industries, since 1993; joined Fidelity in 1990 (checkmark) ENVIRONMENTAL SERVICES PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 89.5% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 2.5% ORDNANCE - 2.5% Harsco Corp. 15,600 $ 949,650 41586410 BUILDING MATERIALS - 0.9% NUTS, BOLTS, SCREWS - 0.9% Dominion Bridge Corp. (a) 150,000 328,125 25719210 COAL - 2.5% Addington Resources, Inc. (a) 41,000 943,000 00651610 CONSTRUCTION - 0.8% HEAVY CONSTRUCTION - 0.8% Emcor Group, Inc. (a) 20,000 295,000 29084Q10 DRUGS & PHARMACEUTICALS - 0.6% COMMERCIAL LABORATORY RESEARCH - 0.6% Energy Biosystems Corp. (a) 34,900 226,850 29265L10 ELECTRONIC INSTRUMENTS - 3.2% INDUSTRIAL MEASUREMENT INSTRUMENTS - 2.4% TSI, Inc. 96,000 900,000 87287610 LAB & RESEARCH EQUIPMENT - 0.8% Microfluidics International Corp. (a) 181,400 294,775 59507310 TOTAL ELECTRONIC INSTRUMENTS 1,194,775 ENERGY SERVICES - 2.3% OIL & GAS SERVICES - 2.3% Newpark Resources, Inc. 21,400 773,075 65171850 Serv-Tech, Inc. (a) 26,600 93,100 81753910 866,175 ENGINEERING - 3.4% ARCHITECTS & ENGINEERS - 3.4% Fluor Corp. 17,600 1,126,400 34386110 Harding Lawson Associations Group, Inc. (a) 27,900 170,888 41229310 1,297,288 HOUSEHOLD PRODUCTS - 2.7% MANUFACTURED PRODUCTS - 2.7% Memtec Ltd. sponsored ADR 33,100 1,019,894 58626530 INDEPENDENT POWER - 2.4% STEAM SUPPLY - 2.4% Thermo Electron Corp. 22,950 909,394 88355610 INDUSTRIAL MACHINERY & EQUIPMENT - 4.6% SERVICE INDUSTRY MACHINERY - 2.1% Ionics, Inc. (a) 8,000 345,000 46221810 Trojan Technologies Corp. (a) 38,300 425,478 89692410 770,478 SPECIAL INDUSTRIAL MACHINERY - 2.5% Thermo Fibertek, Inc. (a) 73,275 943,416 88355W10 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,713,894 MEDICAL EQUIPMENT & SUPPLIES - 1.7% MEDICAL TECHNOLOGY - 1.7% Pall Corp. 12,000 282,000 69642930 Thermedics, Inc. (a) 13,000 354,250 88390110 636,250 METALS & MINING - 3.2% SECONDARY NONFERROUS SMELTING - 3.2% IMCO Recycling, Inc. 75,800 1,203,325 44968110 SHARES VALUE (NOTE 1) POLLUTION CONTROL - 51.9% HAZARDOUS WASTE MANAGEMENT - 3.4% GNI Group, Inc. (a) 50,000 $ 287,500 36202210 International Technology Corp. (a) 80,000 220,000 46046510 Molten Metal Technology, Inc. (a) 16,500 503,250 60871210 TRC Companies, Inc. (a) 74,900 280,875 87262510 1,291,625 POLLUTION EQUIPMENT & DESIGN - 11.6% Calgon Carbon Corp. 27,000 310,500 12960310 Dames & Moore, Inc. 29,000 355,250 23571310 Handex Environmental Recovery, Inc. (a) 30,000 283,125 41024310 Ogden Corp. 75,400 1,479,725 67634610 Sevenson Environmental Services, Inc. 26,400 481,800 81806310 TETRA Technologies, Inc. (a) 15,900 282,225 88162F10 Thermatrix, Inc. (a) 28,000 252,000 88355010 Thermo Instrument Systems, Inc. (a) 21,200 821,500 88355910 Waste Management International PLC sponsored ADR 10,000 93,750 94090610 4,359,875 REFUSE SYSTEMS - 30.6% Allied Waste Industries, Inc. par value $0.01 (a) 125,300 1,002,400 01958930 American Disposal Services, Inc. (a) 10,000 142,500 02538910 Browning-Ferris Industries, Inc. 62,000 1,581,000 11588510 Continental Waste Industries, Inc. (a) 39,400 788,000 21215T30 Eastern Environmental Services, Inc. (a) 33,000 214,500 27636910 GTS Duratek, Inc. (a) 40,500 650,531 36237J10 Laidlaw, Inc. Class B 90,000 868,262 50730K20 Rollins Environmental Services, Inc. (a) 65,000 203,125 77570910 Sanifill, Inc. (a) 18,100 839,388 80101810 Superior Services, Inc. (a) 36,000 585,000 86831610 TransAmerican Waste Industries, Inc. (a) 50,000 100,000 89351V10 United Waste Systems, Inc. (a) 37,000 1,091,500 91317410 WMX Technologies, Inc. 72,000 2,277,000 92929Q10 Wheelabrator Technologies, Inc. 79,300 1,179,586 96290130 11,522,792 SANITARY SERVICES - 6.3% Philips Environmental, Inc. 80,000 637,310 71790610 Safety Kleen Corp. 31,100 536,475 78648410 USA Waste Services, Inc. (a) 43,270 1,189,925 90291710 2,363,710 TOTAL POLLUTION CONTROL 19,538,002 REAL ESTATE - 0.7% REAL ESTATE, GENERAL - 0.7% Cadiz Land, Inc. (a) 57,600 259,200 12754910 SERVICES - 0.8% BUS CHARTER SERVICE - 0.8% Coach USA, Inc. (a) 12,000 285,000 18975L10 WATER - 5.3% WATER SUPPLY - 5.3% American Water Works, Inc. 40,000 855,000 03041110 United Water Resources, Inc. 70,000 1,146,250 91319010 2,001,250 TOTAL COMMON STOCKS (Cost $36,966,076) 33,667,072 REPURCHASE AGREEMENTS - 10.5% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 3,951,304 $ 3,949,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $40,915,076) $ 37,616,072 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $89,603,500 and $77,854,019, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $37,750 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $3,698,000 and $2,517,750, respectively. The weighted average interest rate paid was 5.7% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $40,930,349. Net unrealized depreciation aggregated $3,314,277, of which $1,118,946 related to appreciated investment securities and $4,433,223 related to depreciated investment securities. The fund intends to elect to defer to its fiscal year ending February 28, 1997 approximately $245,000 of losses recognized during the period November 1, 1995 to February 29, 1996. ENVIRONMENTAL SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 37,616,072 securities, at value (including repurchase agreements of $3,949,000) (cost $40,915,076) - See accompanying schedule Cash 458 Receivable for 531,588 investments sold Receivable for 294,853 fund shares sold Dividends 30,094 receivable Redemption fees 7,186 receivable Other receivables 35,811 Prepaid expenses 13,557 TOTAL ASSETS 38,529,619 LIABILITIES Payable for $ 227,355 investments purchased Payable for fund 1,124,323 shares redeemed Accrued 18,842 management fee Other payables 74,282 and accrued expenses TOTAL LIABILITIES 1,444,802 NET ASSETS $ 37,084,817 Net Assets consist of: Paid in capital $ 41,924,151 Accumulated net (62,061 investment ) (loss) Accumulated (1,479,059 undistributed net ) realized gain (loss) on investments and foreign currency transactions Net unrealized (3,298,214 appreciation ) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 37,084,817 2,786,127 shares outstanding NET ASSET VALUE $13.31 and redemption price per share ($37,084,817 (divided by) 2,786,127 shares) Maximum offering $13.72 price per share (100/97.00 of $13.31) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 237,283 INCOME Dividends Interest 162,688 TOTAL INCOME 399,971 EXPENSES Management fee $ 153,094 Transfer agent 261,029 fees Accounting fees 34,067 and expenses Non-interested 104 trustees' compensation Custodian fees 10,533 and expenses Registration fees 13,557 Audit 13,094 Legal 364 Interest 1,586 Miscellaneous 388 Total expenses 487,816 before reductions Expense (25,784 462,032 reductions ) NET INVESTMENT (62,061 INCOME (LOSS) ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment (1,211,258 securities ) Foreign (348 (1,211,606 currency ) ) transactions Change in net unrealized appreciation (depreciation) on: Investment (3,736,432 securities ) Assets and (22 (3,736,454 liabilities in ) ) foreign currencies NET GAIN (LOSS) (4,948,060 ) NET INCREASE $ (5,010,121 (DECREASE) IN ) NET ASSETS RESULTING FROM OPERATIONS OTHER $ 101,673 INFORMATION Sales charges paid to FDC Deferred sales $ 4,199 charges withheld by FDC Exchange fees $ 27,525 withheld by FSC Expense $ 24,516 reductions Directed brokerage arrangements Custodian 1,268 interest credits $ 25,784 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ (62,061 $ (455,922 Net investment ) ) income (loss) Net realized (1,211,606 5,167,156 gain (loss) ) Change in net (3,736,454 2,838,058 unrealized ) appreciation (depreciation) NET INCREASE (5,010,121 7,549,292 (DECREASE) IN ) NET ASSETS RESULTING FROM OPERATIONS Distributions to (48,355 (1,461,704 shareholders ) ) from net realized gains Share 125,063,759 22,448,123 transactions Net proceeds from sales of shares Reinvestment of 47,753 1,440,232 distributions Cost of shares (110,934,521 (33,702,230 redeemed ) ) Paid in capital 379,082 43,195 portion of redemption fees NET INCREASE 14,556,073 (9,770,680 (DECREASE) IN ) NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 9,497,597 (3,683,092 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 27,587,220 31,270,312 period End of period $ 37,084,817 $ 27,587,220 (including accumulated net investment loss of $62,061 and $0, respectively) OTHER INFORMATION Shares Sold 8,794,491 1,846,010 Issued in 3,682 120,119 reinvestment of distributions Redeemed (8,233,593 (2,790,218 ) ) Net increase 564,580 (824,089) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 12.42 $ 10.27 $ 11.93 $ 11.36 $ 11.39 $ 12.95 beginning of period Income from Investment Operations Net investment (.02) (.17) (.14) (.11) (.06) (.09) income (loss) Net realized and .83 G 2.95 (1.53) .67 .42 (1.06) unrealized gain (loss) Total from .81 2.78 (1.67) .56 .36 (1.15) investment operations Less Distributions From net (.02) (.65) - - (.39) (.42) realized gain Redemption fees .10 .02 .01 .01 - .01 added to paid in capital Net asset value, $ 13.31 $ 12.42 $ 10.27 $ 11.93 $ 11.36 $ 11.39 end of period TOTAL RETURN B, C 7.33% 27.49% (13.91)% 5.02% 3.34% (8.67)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 37,085 $ 27,587 $ 31,270 $ 65,956 $ 65,913 $ 65,132 period (000 omitted) Ratio of expenses 1.92% A 2.36% 2.04% 2.07% 1.99% A 2.03% to average net assets Ratio of expenses 1.82% A, 2.32% 2.01% 2.03% 1.99% A 2.03% to average net E E E E assets after expense reductions Ratio of net (.24)% A (1.43)% (1.32)% (1.02)% (.70)% A (.74)% investment income (loss) to average net assets Portfolio turnover 363% A 138% 82% 191% 176% A 130% rate Average $ .0352 commission rate F
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. G THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
INDUSTRIAL EQUIPMENT PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past five year and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1996 MONTH YEAR YEARS FUND S INDUSTRIAL EQUIPMENT 1.95% 8.33% 142.97% 200.73% INDUSTRIAL EQUIPMENT -1.11% 5.08% 135.69% 191.71% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 281.45% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on September 29, 1986. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF AUGUST 31, 1996 YEAR YEARS FUND INDUSTRIAL EQUIPMENT 8.33% 19.43% 11.72% INDUSTRIAL EQUIPMENT 5.08% 18.70% 11.38% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 14.43% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19960831 19960910 130856 S00000000000001 Industrial Equipment SP Standard & Poor 500 00510 SP001 1986/09/29 9700.00 10000.00 1986/09/30 9729.10 9962.80 1986/10/31 10039.50 10537.66 1986/11/30 10291.70 10793.72 1986/12/31 10311.10 10518.48 1987/01/31 11804.90 11935.32 1987/02/28 12804.00 12406.77 1987/03/31 12580.90 12765.32 1987/04/30 12367.50 12651.71 1987/05/31 12357.80 12761.78 1987/06/30 12707.00 13406.25 1987/07/31 13483.00 14085.95 1987/08/31 14084.40 14611.35 1987/09/30 14414.20 14291.37 1987/10/31 8759.10 11213.00 1987/11/30 8361.40 10289.05 1987/12/31 9357.40 11072.05 1988/01/31 9188.17 11538.18 1988/02/29 10024.36 12075.86 1988/03/31 10173.68 11702.72 1988/04/30 10472.32 11832.62 1988/05/31 10412.60 11935.56 1988/06/30 11149.24 12483.41 1988/07/31 10561.92 12435.97 1988/08/31 9606.27 12013.15 1988/09/30 9785.45 12524.91 1988/10/31 9626.18 12873.10 1988/11/30 9317.58 12689.01 1988/12/31 9815.31 12911.07 1989/01/31 10532.05 13856.16 1989/02/28 10113.96 13511.14 1989/03/31 10263.28 13825.95 1989/04/30 10999.92 14543.52 1989/05/31 11597.20 15132.53 1989/06/30 11099.47 15046.28 1989/07/31 11806.25 16404.95 1989/08/31 12025.25 16726.49 1989/09/30 11856.02 16657.91 1989/10/31 11069.60 16271.45 1989/11/30 11378.20 16603.39 1989/12/31 11577.29 17001.87 1990/01/31 11189.06 15861.04 1990/02/28 11756.48 16065.65 1990/03/31 12453.31 16491.39 1990/04/30 12353.76 16079.11 1990/05/31 13498.55 17646.82 1990/06/30 13258.63 17526.82 1990/07/31 13008.09 17470.73 1990/08/31 10863.46 15891.38 1990/09/30 9390.28 15117.47 1990/10/31 9139.74 15052.46 1990/11/30 9440.38 16024.85 1990/12/31 9781.12 16471.95 1991/01/31 10823.37 17190.12 1991/02/28 11845.58 18419.22 1991/03/31 11745.36 18864.96 1991/04/30 11625.10 18910.24 1991/05/31 12116.16 19727.16 1991/06/30 11725.01 18823.66 1991/07/31 11825.31 19700.84 1991/08/31 12005.85 20167.75 1991/09/30 12286.69 19830.95 1991/10/31 12216.48 20096.68 1991/11/30 11634.74 19286.79 1991/12/31 12406.41 21493.19 1992/01/31 13519.55 21093.42 1992/02/29 14480.89 21367.64 1992/03/31 14055.88 20950.97 1992/04/30 14055.88 21566.92 1992/05/31 14167.19 21672.60 1992/06/30 13296.92 21349.68 1992/07/31 13418.36 22222.88 1992/08/31 12720.11 21767.31 1992/09/30 12983.22 22024.17 1992/10/31 12932.62 22101.25 1992/11/30 13549.91 22854.91 1992/12/31 13813.01 23136.02 1993/01/31 14460.66 23330.36 1993/02/28 15219.61 23647.66 1993/03/31 15492.84 24146.62 1993/04/30 16201.67 23562.27 1993/05/31 17011.75 24193.74 1993/06/30 17234.52 24263.90 1993/07/31 17477.55 24166.85 1993/08/31 18672.42 25082.77 1993/09/30 18459.77 24889.63 1993/10/31 19077.46 25404.85 1993/11/30 19057.21 25163.50 1993/12/31 19798.04 25467.98 1994/01/31 20728.99 26333.89 1994/02/28 21318.58 25620.25 1994/03/31 20087.67 24503.20 1994/04/30 19905.86 24816.84 1994/05/31 19498.98 25223.84 1994/06/30 18497.43 24605.86 1994/07/31 19373.79 25412.93 1994/08/31 20750.92 26454.86 1994/09/30 20813.52 25806.71 1994/10/31 21074.34 26387.37 1994/11/30 20051.92 25426.34 1994/12/31 20417.07 25803.41 1995/01/31 20302.31 26472.49 1995/02/28 20907.41 27504.13 1995/03/31 22639.27 28315.77 1995/04/30 23703.68 29149.67 1995/05/31 24183.81 30314.78 1995/06/30 25102.32 31019.00 1995/07/31 27461.20 32047.59 1995/08/31 26928.89 32128.03 1995/09/30 25697.26 33483.83 1995/10/31 25645.07 33364.29 1995/11/30 26521.82 34828.98 1995/12/31 26095.90 35499.79 1996/01/31 27144.29 36708.20 1996/02/29 28614.33 37048.49 1996/03/31 28819.45 37405.26 1996/04/30 29348.94 37956.62 1996/05/31 29562.21 38935.52 1996/06/30 29431.88 39083.86 1996/07/31 27962.65 37357.14 1996/08/30 29171.21 38145.00 IMATRL PRASUN SHR__CHT 19960831 19960910 130901 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Industrial Equipment Portfolio on September 29, 1986, when the fund started, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $29,171 - a 191.71% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $38,145 over the same period - a 281.45% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Pitney Bowes, Inc. 7.5 Ingersoll-Rand Co. 7.2 Case Corp. 6.6 Caterpillar, Inc. 6.2 Harnischfeger Industries, Inc. 3.8 Xerox Corp. 3.5 IMC Global, Inc. 3.3 TRINOVA Corp. 3.2 Stewart & Stevenson Services, Inc. 2.6 AMETEK, Inc. 2.3 TOP INDUSTRIES AS OF AUGUST 31, 1996 Row: 1, Col: 1, Value: 49.7 Row: 1, Col: 2, Value: 4.5 Row: 1, Col: 3, Value: 6.2 Row: 1, Col: 4, Value: 10.9 Row: 1, Col: 5, Value: 11.7 Row: 1, Col: 6, Value: 17.0 General Industrial Machinery 17.0% Farm Machinery & Equipment 11.7% Office Automation 10.9% Construction Equipment 6.2% Conglomerates 4.5% All Others 49.7% * * INCLUDES SHORT-TERM INVESTMENTS INDUSTRIAL EQUIPMENT PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Paul Antico became Portfolio Manager of Fidelity Select Industrial Equipment Portfolio on March 26, 1996. Q. HOW DID THE FUND PERFORM, PAUL? A. For the six- and 12-month periods ended August 31, 1996, the fund returned 1.95% and 8.33%, respectively. By comparison, the Standard & Poor's 500 Index returned 2.96% and 18.73% for the same time period. Q. HOW WOULD YOU DESCRIBE THE MARKET FOR INDUSTRIAL EQUIPMENT STOCKS DURING THE PAST SIX MONTHS? A. It's been difficult to predict. Industrial equipment stocks are cyclical - - they tend to perform best when the economy is just beginning to improve. Interestingly, during this period the economy was at a point where many market observers thought it was about as strong is it could be - generally the worst time for cyclical stocks - yet business conditions continued to improve for many of the stocks the fund invests in. It has been a struggle, but the fund managed to perform fairly well during the past six months given the uncertain market for cyclical stocks. Q. YOU BEGAN TO MANAGE THE FUND IN MARCH. HOW DOES YOUR INVESTMENT STYLE DIFFER FROM THE PREVIOUS MANAGER'S? A. The stocks in the fund may have changed, but the investment style hasn't. Like the previous manager, I use a bottom-up stock selection method to decide where best to invest the fund's assets. Q. WHAT WAS YOUR INVESTMENT STRATEGY DURING THE PERIOD? A. One key investment strategy that worked well during the period was deciding to invest in companies that should perform well regardless of how the economy behaves. Pitney Bowes and Xerox, two of the fund's largest holdings, are good examples. Each company performed well in an uncertain market environment, since each receives nearly 70% of its revenues from recurring streams. Q. WHERE ELSE DID YOU FIND OPPORTUNITIES? A. I tried to invest in companies that I feel still have room for profit margin expansion. Specifically, I invested in companies whose stock prices could rise significantly if revenues increased only marginally. Ingersoll-Rand is a good example. The company performed well because of improving orders and increasing profit margins. Another effective strategy was the fund's investments in aerospace suppliers. The aerospace industry is at the beginning of what looks like a long up-trend in terms of new commercial airline orders. The strength of the aerospace cycle drove up the stock price of some of the fund's holdings such as TRINOVA and Parker Hannifin. The fund took profits in Parker Hannifin before the end of the period. Q. IMC GLOBAL IS NEW TO THE FUND'S TOP 10 HOLDINGS. WHAT CAN YOU TELL US ABOUT IT? A. IMC Global isn't a strict investment in industrial equipment - it's a fertilizer company. During the past six months, there's been a lot of talk in the industry about farm dynamics and how the business outlook for grain farmers is the best it's been in 20 years. I think the same positive business prospects that have already been reflected in the stock prices of farm equipment companies have the potential to occur in fertilizer companies such as IMC Global. Q. ANY PARTICULAR DISAPPOINTMENTS DURING THE PAST SIX MONTHS? A. Yes. The fund's position in Stewart & Stevenson Services was disappointing. The company makes gas turbine equipment, and it's been hurt because international orders for gas turbines have slowed dramatically. The stock was down more than 25% before rebounding. Though the situation has begun to improve, I wish I had waited a little longer before investing. In retrospect, I invested in this stock about three months before I should have. Q. WHAT'S AHEAD FOR THE FUND? A. I expect more of the same. I don't think the questions about the economy will be decided anytime soon. If we continue to see moderate or slow growth, I'll want to insulate the fund by continuing to own companies that can perform well in a questionable economy. I also expect to keep the fund invested in companies where there is the potential for profit margin improvement, so that if the economy remains stagnant, these companies can still grow earnings quickly. Finally, I expect to continue investing in companies that have cash on hand for stock buy-back programs or acquisitions if prices are favorable. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 510 TRADING SYMBOL: FSCGX SIZE: as of August 31, 1996, more than $77 million MANAGER: Paul Antico, since March, 1996; manager, Fidelity Select Developing Communications, 1993-1996; equity analyst, telecommunications equipment, 1992-1996, restaurant industry, 1992-1993; joined Fidelity in 1991 (checkmark) INDUSTRIAL EQUIPMENT PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.6% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 4.6% AIRCRAFT - 0.6% Boeing Co. 5,000 $ 452,500 09702310 AIRCRAFT & PARTS - 1.9% Sundstrand Corp. 25,000 934,375 86732310 Wyman-Gordon Co. (a) 24,500 511,438 98308510 1,445,813 AIRCRAFT ENGINES & PARTS - 0.6% Rolls Royce PLC Ord. 140,000 483,175 77577910 GUIDED MISSILES & SPACE VEHICLES - 1.5% Rockwell International Corp. 22,000 1,144,000 77434710 TOTAL AEROSPACE & DEFENSE 3,525,488 AUTOS, TIRES, & ACCESSORIES - 3.2% AUTO & TRUCK PARTS - 3.2% Cummins Engine Co., Inc. 30,000 1,128,750 23102110 Eaton Corp. 25,000 1,384,375 27805810 2,513,125 BUILDING MATERIALS - 0.9% AIRCONDITIONING EQUIPMENT - 0.9% York International Corp. 15,000 676,870 98667010 CHEMICALS & PLASTICS - 3.6% ADHESIVES & SEALANTS - 0.3% Furon Co. 10,200 224,400 36110610 AGRICULTURAL CHEMICALS - 3.3% IMC Global, Inc. 60,100 2,584,300 44966910 TOTAL CHEMICALS & PLASTICS 2,808,700 COMMUNICATIONS EQUIPMENT - 3.1% DATACOMMUNICATIONS EQUIPMENT - 2.0% Cisco Systems, Inc. (a) 30,000 1,582,500 17275R10 TELEPHONE EQUIPMENT - 1.1% DSC Communications Corp. (a) 28,400 844,900 23331110 TOTAL COMMUNICATIONS EQUIPMENT 2,427,400 COMPUTERS & OFFICE EQUIPMENT - 10.9% OFFICE AUTOMATION - 10.9% Pitney Bowes, Inc. 120,700 5,823,775 72447910 Xerox Corp. 49,300 2,705,338 98412110 8,529,113 CONGLOMERATES - 4.5% AlliedSignal, Inc. 26,000 1,605,500 01951210 American Standard Companies, Inc. (a) 51,800 1,767,675 02971210 Textron, Inc. 1,400 119,525 88320310 3,492,700 CONSUMER ELECTRONICS - 0.8% APPLIANCES - 0.8% Black & Decker Corp. 15,000 592,500 09179710 DEFENSE ELECTRONICS - 0.8% Ducommun, Inc. (a) 38,900 646,713 26414710 ELECTRICAL EQUIPMENT - 8.0% ELECTRIC LAMP BULBS & TUBES - 1.3% Advanced Lighting Technologies, Inc. (a) 60,000 1,050,000 00753C10 ELECTRICAL EQUIPMENT - WHOLESALE - 0.8% Grainger (W.W.), Inc. 9,000 607,500 38480210 SHARES VALUE (NOTE 1) ELECTRICAL MACHINERY - 3.2% Emerson Electric Co. 5,000 $ 418,750 29101110 General Electric Co. 15,000 1,246,875 36960410 General Signal Corp. 20,400 818,550 37083810 2,484,175 ELECTRICAL, INDUSTRIAL APPARATUS - 2.3% AMETEK, Inc. 92,900 1,799,938 03110510 TV & RADIO COMMUNICATION EQUIPMENT - 0.4% Scientific-Atlanta, Inc. 21,000 283,500 80865510 TOTAL ELECTRICAL EQUIPMENT 6,225,113 ELECTRONICS - 2.3% SEMICONDUCTORS - 2.3% Intel Corp. 22,000 1,755,875 45814010 ENERGY SERVICES - 1.7% OIL & GAS SERVICES - 1.7% Dresser Industries, Inc. 46,700 1,354,300 26159710 INDUSTRIAL MACHINERY & EQUIPMENT - 41.3% BALL & ROLLER BEARINGS - 0.7% Kaydon Corp. 11,500 516,063 48658710 CONSTRUCTION EQUIPMENT - 6.2% Caterpillar, Inc. 70,000 4,821,250 14912310 ENGINES & TURBINES - 2.6% Stewart & Stevenson Services, Inc. 103,500 2,057,063 86034210 FARM MACHINERY & EQUIPMENT - 11.7% AGCO Corp. 20,000 472,500 00108410 Allied Products Corp. 39,700 1,027,238 01941110 Case Corp. 112,300 5,109,650 14743R10 Valmont Industries, Inc. 23,500 728,500 92025310 Varity Corp. (a) 35,100 1,763,775 92224R60 9,101,663 GENERAL INDUSTRIAL MACHINERY - 17.0% Cooper Industries, Inc. 20,300 822,150 21666910 Graco, Inc. 36,600 686,250 38410910 Harnischfeger Industries, Inc. 79,017 2,982,892 41334510 Illinois Tool Works, Inc. 10,000 691,250 45230810 Ingersoll-Rand Co. 131,100 5,604,525 45686610 TRINOVA Corp. 80,000 2,510,000 89667810 13,297,067 PUMPING EQUIPMENT - 3.1% BW/IP Holdings, Inc. Class A 53,600 971,500 05604410 Duriron Co., Inc. 42,950 1,159,650 26684910 Goulds Pumps, Inc. 13,300 295,925 38355010 2,427,075 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 32,220,181 IRON & STEEL - 0.5% METAL FORGINGS & STAMPINGS - 0.5% TriMas Corp. 17,100 397,575 89621510 METALS & MINING - 1.0% NONFERROUS ROLLING & DRAWING - 1.0% Titanium Metals Corp. (a) 32,000 764,000 88833910 PAPER & FOREST PRODUCTS - 1.8% PAPER - 1.8% Albany International Corp. Class A 70,000 1,426,250 01234810 PHOTOGRAPHIC EQUIPMENT - 0.6% Imation Corp. (a) 20,000 472,500 45245A10 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SHIP BUILDING & REPAIR - 1.0% SHIP BUILDERS - 1.0% General Dynamics Corp. 12,500 $ 801,563 36955010 TOTAL COMMON STOCKS (Cost $68,103,064) 70,629,966 REPURCHASE AGREEMENTS - 9.4% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 7,356,289 7,352,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $75,455,064) $ 77,981,966 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $88,743,771 and $138,436,925, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $45,477 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $2,514,000 and $2,331,750, respectively. The weighted average interest rate paid was 5.7% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $75,455,064. Net unrealized appreciation aggregated $2,526,902 of which $3,825,967 related to appreciated investment securities and $1,299,065 related to depreciated investment securities. On October 26,1990, the fund acquired substantially all of the assets of Automation and Machinery Portfolio in a tax-free exchange for shares of Industrial Equipment Portfolio. Automation and Machinery Portfolio has a capital loss carryover of approximately $74,000 available to offset future realized capital gains in Industrial Equipment Portfolio, to the extent provided by regulations. INDUSTRIAL EQUIPMENT PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 77,981,966 securities, at value (including repurchase agreements of $7,352,000) (cost $75,455,064) - See accompanying schedule Cash 782 Receivable for 8,872 investments sold Receivable for 8,233 fund shares sold Dividends 131,405 receivable Redemption fees 228 receivable Other receivables 10,281 Prepaid expenses 18,537 TOTAL ASSETS 78,160,304 LIABILITIES Payable for fund $ 198,414 shares redeemed Accrued 39,064 management fee Other payables 84,784 and accrued expenses TOTAL LIABILITIES 322,262 NET ASSETS $ 77,838,042 Net Assets consist of: Paid in capital $ 63,635,150 Undistributed net 149,682 investment income Accumulated 11,526,308 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 2,526,902 appreciation (depreciation) on investments NET ASSETS, for $ 77,838,042 3,161,908 shares outstanding NET ASSET VALUE $24.62 and redemption price per share ($77,838,042 (divided by) 3,161,908 shares) Maximum offering $25.38 price per share (100/97.00 of $24.62) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 726,131 INCOME Dividends Interest 147,620 TOTAL INCOME 873,751 EXPENSES Management fee $ 294,316 Transfer agent 347,740 fees Accounting fees 48,744 and expenses Non-interested 185 trustees' compensation Custodian fees 16,373 and expenses Registration fees 18,537 Audit 12,050 Legal 498 Interest 1,468 Miscellaneous 1,997 Total expenses 741,908 before reductions Expense (29,760 712,148 reductions ) NET INVESTMENT 161,603 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 11,655,357 securities Foreign 3 11,655,360 currency transactions Change in net (10,260,753 unrealized ) appreciation (depreciation) on investment securities NET GAIN (LOSS) 1,394,607 NET INCREASE $ 1,556,210 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 168,491 INFORMATION Sales charges paid to FDC Deferred sales $ 860 charges withheld by FDC Exchange fees $ 22,223 withheld by FSC Expense $ 28,922 reductions Directed brokerage arrangements Transfer agent 838 interest credits $ 29,760 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ 161,603 $ 191,568 Net investment income Net realized 11,655,360 16,163,635 gain (loss) Change in net (10,260,753 13,213,429 unrealized ) appreciation (depreciation) NET INCREASE 1,556,210 29,568,632 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (46,012 (185,403 shareholders ) ) From net investment income From net (4,144,559 (7,003,238 realized gain ) ) TOTAL (4,190,571 (7,188,641 DISTRIBUTIONS ) ) Share 32,366,961 176,105,552 transactions Net proceeds from sales of shares Reinvestment of 4,151,169 7,099,056 distributions Cost of shares (93,775,613 (178,150,788 redeemed ) ) Paid in capital 209,898 118,239 portion of redemption fees NET INCREASE (57,047,585 5,172,059 (DECREASE) IN ) NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (59,681,946 27,552,050 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 137,519,988 109,967,938 period End of period $ 77,838,042 $ 137,519,988 (including undistributed net investment income of $149,682 and $51,339, respectively) OTHER INFORMATION Shares Sold 1,281,980 7,343,923 Issued in 171,891 311,832 reinvestment of distributions Redeemed (3,768,563 (7,667,655 ) ) Net increase (2,314,692) (11,900) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 25.11 $ 20.04 $ 20.61 $ 15.04 $ 13.89 $ 11.60 beginning of period Income from Investment Operations Net investment .04 .04 .01 - .02 (.07) income (loss) Net realized and .38 7.10 (.44) 5.92 1.09 2.39 unrealized gain (loss) Total from .42 7.14 (.43) 5.92 1.11 2.32 investment operations Less Distributions From net (.01) (.05) (.01) (.01) - - investment income In excess of net - - - - - (.11) investment income From net (.95) (2.05) (.16) (.40) - - realized gain Total (.96) (2.10) (.17) (.41) - (.11) distributions Redemption fees .05 .03 .03 .06 .04 .08 added to paid in capital Net asset value, $ 24.62 $ 25.11 $ 20.04 $ 20.61 $ 15.04 $ 13.89 end of period TOTAL RETURN B, C 1.95% 36.86% (1.93)% 40.07% 8.28% 20.91% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 77,838 $ 137,520 $ 109,968 $ 206,012 $ 14,601 $ 7,529 period (000 omitted) Ratio of expenses 1.51% A 1.54% 1.80% 1.69% 2.49% A, 2.49% to average net E E assets Ratio of expenses 1.45% A, 1.53% 1.78% 1.68% 2.49% A 2.49% to average net F F F F assets after expense reductions Ratio of net .33% A .19% .06% .01% .15% A (.57)% investment income (loss) to average net assets Portfolio turnover 191% A 115% 131% 95% 407% A 167% rate Average $ .0396 commission rate G
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E DURING THE PERIOD, FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
INDUSTRIAL MATERIALS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past five year and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1996 MONTH YEAR YEARS FUND S INDUSTRIAL MATERIALS 4.41% 2.80% 93.73% 192.36% INDUSTRIAL MATERIALS 1.28% -0.28% 87.92% 183.59% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 281.45% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on September 29, 1986. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF AUGUST 31, 1996 YEAR YEARS FUND INDUSTRIAL MATERIALS 2.80% 14.14% 11.41% INDUSTRIAL MATERIALS -0.28% 13.45% 11.07% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 14.43% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19960831 19960910 134528 S00000000000001 Industrial Materials SP Standard & Poor 500 00509 SP001 1986/09/29 9700.00 10000.00 1986/09/30 9729.10 9962.80 1986/10/31 10262.60 10537.66 1986/11/30 10621.50 10793.72 1986/12/31 10233.50 10518.48 1987/01/31 12008.60 11935.32 1987/02/28 13017.40 12406.77 1987/03/31 13958.30 12765.32 1987/04/30 14123.20 12651.71 1987/05/31 13764.30 12761.78 1987/06/30 14482.10 13406.25 1987/07/31 15820.70 14085.95 1987/08/31 16363.90 14611.35 1987/09/30 16606.40 14291.37 1987/10/31 10301.40 11213.00 1987/11/30 10252.90 10289.05 1987/12/31 11834.99 11072.05 1988/01/31 11222.33 11538.18 1988/02/29 12544.89 12075.86 1988/03/31 12768.56 11702.72 1988/04/30 12788.01 11832.62 1988/05/31 12476.82 11935.56 1988/06/30 13838.28 12483.41 1988/07/31 13322.87 12435.97 1988/08/31 12603.24 12013.15 1988/09/30 12710.21 12524.91 1988/10/31 12476.82 12873.10 1988/11/30 12360.12 12689.01 1988/12/31 13117.42 12911.07 1989/01/31 13908.23 13856.16 1989/02/28 13305.24 13511.14 1989/03/31 13166.85 13825.95 1989/04/30 13572.13 14543.52 1989/05/31 13750.06 15132.53 1989/06/30 12949.38 15046.28 1989/07/31 14115.81 16404.95 1989/08/31 15242.70 16726.49 1989/09/30 14313.51 16657.91 1989/10/31 13137.19 16271.45 1989/11/30 13325.01 16603.39 1989/12/31 13700.64 17001.87 1990/01/31 12652.83 15861.04 1990/02/28 12870.30 16065.65 1990/03/31 13245.93 16491.39 1990/04/30 12287.08 16079.11 1990/05/31 13028.46 17646.82 1990/06/30 12890.20 17526.82 1990/07/31 12738.07 17470.73 1990/08/31 11267.51 15891.38 1990/09/30 10466.31 15117.47 1990/10/31 10344.61 15052.46 1990/11/30 10892.27 16024.85 1990/12/31 11348.65 16471.95 1991/01/31 11754.32 17190.12 1991/02/28 12616.37 18419.22 1991/03/31 12788.78 18864.96 1991/04/30 12809.06 18910.24 1991/05/31 13904.37 19727.16 1991/06/30 13752.20 18823.66 1991/07/31 14302.29 19700.84 1991/08/31 14638.46 20167.75 1991/09/30 14444.91 19830.95 1991/10/31 15066.30 20096.68 1991/11/30 13864.26 19286.79 1991/12/31 15412.65 21493.19 1992/01/31 16084.98 21093.42 1992/02/29 16869.37 21367.64 1992/03/31 16573.95 20950.97 1992/04/30 17439.83 21566.92 1992/05/31 17643.57 21672.60 1992/06/30 17215.31 21349.68 1992/07/31 17602.63 22222.88 1992/08/31 16491.63 21767.31 1992/09/30 16267.40 22024.17 1992/10/31 16450.86 22101.25 1992/11/30 17062.42 22854.91 1992/12/31 17319.00 23136.02 1993/01/31 17687.49 23330.36 1993/02/28 17851.26 23647.66 1993/03/31 18148.10 24146.62 1993/04/30 17881.97 23562.27 1993/05/31 18618.95 24193.74 1993/06/30 18669.79 24263.90 1993/07/31 18926.53 24166.85 1993/08/31 19419.46 25082.77 1993/09/30 18813.56 24889.63 1993/10/31 19922.66 25404.85 1993/11/30 20189.67 25163.50 1993/12/31 21021.49 25467.98 1994/01/31 22726.21 26333.89 1994/02/28 22253.82 25620.25 1994/03/31 21627.38 24503.20 1994/04/30 22439.14 24816.84 1994/05/31 22665.59 25223.84 1994/06/30 22428.85 24605.86 1994/07/31 23262.60 25412.93 1994/08/31 24518.37 26454.86 1994/09/30 24209.57 25806.71 1994/10/31 23890.48 26387.37 1994/11/30 22202.40 25426.34 1994/12/31 22743.96 25803.41 1995/01/31 22101.83 26472.49 1995/02/28 23955.73 27504.13 1995/03/31 24504.65 28315.77 1995/04/30 24618.13 29149.67 1995/05/31 24369.15 30314.78 1995/06/30 25458.44 31019.00 1995/07/31 27657.79 32047.59 1995/08/31 27585.17 32128.03 1995/09/30 26807.10 33483.83 1995/10/31 25250.96 33364.29 1995/11/30 27574.79 34828.98 1995/12/31 26244.23 35499.79 1996/01/31 26650.56 36708.20 1996/02/29 27161.06 37048.49 1996/03/31 28536.31 37405.26 1996/04/30 29205.00 37956.62 1996/05/31 29025.18 38935.52 1996/06/30 28062.61 39083.86 1996/07/31 26899.07 37357.14 1996/08/30 28358.79 38145.00 IMATRL PRASUN SHR__CHT 19960831 19960910 134533 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Industrial Materials Portfolio on September 29, 1986, when the fund started, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $28,359 - a 183.59% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $38,145 over the same period - a 281.45% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Monsanto Co. 10.0 Inco Ltd. 8.8 QNI Ltd. 5.7 Pechiney SA Class A 5.6 du Pont (E.I.) de Nemours & Co. 4.9 Eramet SA 4.9 Alumax, Inc. 4.6 Western Atlas, Inc. 3.8 Cytec Industries, Inc. 3.3 Huntco, Inc. Class A 3.3 TOP INDUSTRIES AS OF AUGUST 31, 1996 Chemicals 22.2% Prime Nonferrous Smelting 12.0% Metal Ores 11.3% Railroads 5.1% Metal Mining Services 4.9% All Others 44.5% * Row: 1, Col: 1, Value: 44.5 Row: 1, Col: 2, Value: 4.9 Row: 1, Col: 3, Value: 5.1 Row: 1, Col: 4, Value: 11.3 Row: 1, Col: 5, Value: 12.0 Row: 1, Col: 6, Value: 22.2 * INCLUDES SHORT-TERM INVESTMENTS INDUSTRIAL MATERIALS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Doug Chase, Portfolio Manager of Fidelity Select Industrial Materials Portfolio Q. HOW DID THE FUND PERFORM, DOUG? A. For the six and 12 months ended August 31, 1996, the fund returned 4.41% and 2.80%, respectively. The Standard & Poor's 500 Index returned 2.96% for the six-month period and 18.73% for the year. Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE DURING THE PERIOD? A. Though the fund outperformed the S&P, it had a rough time between May and July when fears surrounding the performance of the U.S. economy and the possibility of rising interest rates were at their strongest. When investors become worried about the strength and performance of the economy, cyclical stocks such as metals and chemicals, which rise and fall with the economy, went down as investors believed rising interest rates would lead to a slowdown in the economy. Q. WHAT CHANGES DID YOU MAKE TO THE FUND'S HOLDING DURING THE PERIOD? A. In April, I began to think that expectations for the performance of the U.S. economy were too high. Moreover, I began to worry that the strength that was expected in the world economy for the second half of the year wasn't going to happen either. So, I cut back on the fund's significant aluminum position. It started to look like earnings for aluminum stocks were going to be especially disappointing, and I believed that the fund's investments in those stocks - relative to some of the other sectors in the fund - had become too large, although Aluminum Company of America (Alcoa), previously a top holding of the fund, has been very strong. The fund would have been much more adversely impacted had I not reduced its overweighted position in aluminum. Q. ASIDE FROM ECONOMIC CONCERNS, WERE THERE OTHER PRESSURES ON METALS STOCKS DURING THE PERIOD? A. Yes. Some of the weakness in aluminum and nickel was triggered by the collapse in copper. In May, a large Japanese bank announced that one of its traders had covered up what is currently estimated to be $2.6 billion in losses in the copper market. For several months, he may have kept the price for copper artificially high. When he was exposed, the price for copper dropped dramatically almost overnight. The collapse in copper prices forced agents in the market who owned all metals to sell their positions in other metals to raise cash for margin calls. This has put pressure on aluminum and nickel prices, and therefore the stocks, which hurt the fund. Fortunately, the fund owned no pure copper stocks when this happened. Q. BASED ON THIS MARKET BACKDROP FOR METALS, WHERE DID YOU FIND INVESTMENT OPPORTUNITIES? A. While I cut way back on the fund's holdings in aluminum and nickel, I increased its holdings in chemicals. At the end of the period, Monsanto was the largest holding in the fund. It's a huge chemical conglomerate with an extremely attractive agricultural chemical business that is performing well and has great growth potential. Another chemical holding, du Pont, was attractive given the likelihood it will spin out Conoco, its oil company subsidiary, possibly greatly increasing the value of the stock. Q. HOW HAVE THE FUND'S INTERNATIONAL HOLDINGS FARED? A. I cut back on Australian nickel companies QNI and Western Mining when the price of the metal dropped, although I should have sold them earlier when the prices first started to fall. Sometimes foreign investments can be more risky than domestic ones. However, I think the fund has benefited from its collective group of non-U.S. holdings in the long term, and I will keep the fund's investments in them because I have confidence in them. Q. WHAT'S YOUR OUTLOOK GOING FORWARD? A. I think that U.S. investors in global cyclical industries continue to be too focused on the U.S. economy. At the beginning of the year, the U.S. economy looked very strong, and many took it to mean that the global outlook was strong. That wasn't the case. The fact is that what this fund tends to invest in is global commodities - U.S. demand is just a piece of the puzzle. I think the European and Japanese economies are beginning to get stronger, and there are good reasons to be encouraged. I also think that when global economies show sure signs of recovery, the stocks and sectors that the fund is invested in have the potential to outperform. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 509 TRADING SYMBOL: FSDPX SIZE: as of August 31, 1996, more than $97 million MANAGER: Douglas B. Chase, since 1994; manager, Fidelity Select Automotive Portfolio, since May 1996; equity analyst, steel, non-ferrous metals, since 1993; joined Fidelity in 1993 (checkmark) INDUSTRIAL MATERIALS PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 87.0% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 0.8% AUTO & TRUCK PARTS - 0.8% Cummins Engine Co., Inc. 20,000 $ 752,500 23102110 BUILDING MATERIALS - 2.4% PAINT & VARNISH - 0.9% Sherwin-Williams Co. 20,000 875,000 82434810 PLUMBING SUPPLIES - WHOLESALE - 1.5% Masco Corp. 50,800 1,479,550 57459910 TOTAL BUILDING MATERIALS 2,354,550 CHEMICALS & PLASTICS - 25.4% AGRICULTURAL CHEMICALS - 0.2% OM Group, Inc. 5,000 190,000 67087210 CHEMICALS - 22.2% Cytec Industries, Inc. (a) 93,000 3,231,750 23282010 du Pont (E.I.) de Nemours & Co. 58,000 4,763,250 26353410 Monsanto Co. 300,000 9,637,500 61166210 Raychem Corp. 40,110 2,752,549 75460310 Witco Corp. 38,000 1,149,500 97738510 21,534,549 CHEMICALS, GENERAL - 0.6% Great Lakes Chemical Corp. 10,000 575,000 39056810 INDUSTRIAL GASES - 2.4% Praxair, Inc. 57,000 2,344,125 74005P10 TOTAL CHEMICALS & PLASTICS 24,643,674 ENERGY SERVICES - 3.8% OIL & GAS SERVICES - 3.8% Western Atlas, Inc. (a) 60,000 3,645,000 95767410 INDUSTRIAL MACHINERY & EQUIPMENT - 3.9% CONSTRUCTION EQUIPMENT - 1.0% Caterpillar, Inc. 14,000 964,250 14912310 GENERAL INDUSTRIAL MACHINERY - 2.9% Harnischfeger Industries, Inc. 73,300 2,767,075 41334510 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 3,731,325 IRON & STEEL - 7.0% BLAST FURNACES - 3.3% Huntco, Inc. Class A 189,000 3,165,750 44566110 IRON & STEEL BLAST FURNACES, MILLS - 3.7% Birmingham Steel Corp. 183,000 2,859,375 09125010 Inland Steel Industries, Inc. 30,000 517,500 45747210 Worthington Industries, Inc. 10,000 202,500 98181110 3,579,375 TOTAL IRON & STEEL 6,745,125 METALS & MINING - 33.0% ALUMINUM, EXTRUDED PRODUCTS - 4.5% Alumax, Inc. (a) 133,800 4,415,400 02219710 METAL MINING SERVICES - 4.9% Eramet SA 72,654 4,758,558 29499H22 METAL ORES - 11.3% Pechiney SA Class A 130,475 5,456,836 70599396 QNI Ltd. 2,500,000 5,488,763 74799B92 10,945,599 PRIME NONFERROUS SMELTING - 12.0% Aluminum Co. of America 49,400 3,068,975 02224910 Inco Ltd. 264,000 8,508,971 45325840 11,577,946 SHARES VALUE (NOTE 1) SECONDARY NONFERROUS SMELTING - 0.3% IMCO Recycling, Inc. 20,000 $ 317,500 44968110 TOTAL METALS & MINING 32,015,003 PACKAGING & CONTAINERS - 1.1% METAL CANS & SHIPPING CONTAINERS - 1.1% Crown Cork & Seal Co., Inc. 23,500 1,098,624 22825510 PRECIOUS METALS - 4.1% GOLD ORES - 4.1% Bre-X Minerals Ltd. (a) 80,000 1,438,334 10625K10 Stillwater Mining Co. (a)(b) 50,000 1,025,000 86074Q90 Western Mining Holdings Ltd. 219,400 1,524,786 95869410 3,988,120 RAILROADS - 5.1% Burlington Northern Santa Fe Corp. 27,592 2,207,360 12189T10 CSX Corp. 54,000 2,733,750 12640810 4,941,110 SHIPPING - 0.4% Kirby Corp. (a) 21,000 341,250 49726610 TOTAL COMMON STOCKS (Cost $81,616,063) 84,256,281 REPURCHASE AGREEMENTS - 13.0% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 12,605,349 12,598,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $94,214,063) $ 96,854,281 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $1,025,000 or 1.1% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $66,243,774 and $68,526,468, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $27,244 for the period (see Note 5 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 72.0% France 10.5 Canada 10.3 Australia 7.2 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $94,689,694. Net unrealized appreciation aggregated $2,164,587, of which $4,901,190 related to appreciated investment securities and $2,736,603 related to depreciated investment securities. INDUSTRIAL MATERIALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 96,854,281 securities, at value (including repurchase agreements of $12,598,000) (cost $94,214,063) - See accompanying schedule Receivable for 306,907 fund shares sold Dividends 208,525 receivable Redemption fees 303 receivable Other receivables 325 Prepaid expenses 8,675 TOTAL ASSETS 97,379,016 LIABILITIES Payable for fund $ 206,632 shares redeemed Accrued 46,925 management fee Other payables 118,160 and accrued expenses TOTAL LIABILITIES 371,717 NET ASSETS $ 97,007,299 Net Assets consist of: Paid in capital $ 91,595,507 Undistributed net 124,890 investment income Accumulated 2,646,131 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 2,640,771 appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 97,007,299 3,618,316 shares outstanding NET ASSET VALUE $26.81 and redemption price per share ($97,007,299 (divided by) 3,618,316 shares) Maximum offering $27.64 price per share (100/97.00 of $26.81) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 767,718 INCOME Dividends Interest 157,325 TOTAL INCOME 925,043 EXPENSES Management fee $ 322,863 Transfer agent 399,604 fees Accounting fees 53,483 and expenses Non-interested 210 trustees' compensation Custodian fees 16,491 and expenses Registration fees 10,159 Audit 22,117 Legal 450 Miscellaneous 1,483 Total expenses 826,860 before reductions Expense (26,707 800,153 reductions ) NET INVESTMENT 124,890 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 3,202,361 securities Foreign 1,708 3,204,069 currency transactions Change in net unrealized appreciation (depreciation) on: Investment 438,997 securities Assets and 259 439,256 liabilities in foreign currencies NET GAIN (LOSS) 3,643,325 NET INCREASE $ 3,768,215 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 283,422 INFORMATION Sales charges paid to FDC Deferred sales $ 1,587 charges withheld by FDC Exchange fees $ 22,073 withheld by FSC Expense $ 23,176 reductions Directed brokerage arrangements Custodian 201 interest credits Transfer agent 3,330 interest credits $ 26,707 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ 124,890 $ 627,773 Net investment income Net realized 3,204,069 13,688,969 gain (loss) Change in net 439,256 (3,691,387 unrealized ) appreciation (depreciation) NET INCREASE 3,768,215 10,625,355 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (47,896 (782,540 shareholders ) ) From net investment income From net (1,963,741 - realized gain ) TOTAL (2,011,637 (782,540 DISTRIBUTIONS ) ) Share 91,192,373 164,160,384 transactions Net proceeds from sales of shares Reinvestment of 1,998,313 774,191 distributions Cost of shares (84,376,190 (272,164,952 redeemed ) ) Paid in capital 97,903 271,871 portion of redemption fees NET INCREASE 8,912,399 (106,958,506 (DECREASE) IN ) NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 10,668,977 (97,115,691 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 86,338,322 183,454,013 period End of period $ 97,007,299 $ 86,338,322 (including undistributed net investment income of $124,890 and $81,888, respectively) OTHER INFORMATION Shares Sold 3,323,813 6,349,116 Issued in 72,693 30,728 reinvestment of distributions Redeemed (3,089,667 (10,999,650 ) ) Net increase 306,839 (4,619,806) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 26.07 $ 23.13 $ 21.67 $ 17.44 $ 17.12 $ 12.63 beginning of period Income from Investment Operations Net investment .03 .12 .17 .15 .12 .04 income Net realized and 1.11 2.92 1.43 4.07 .19 4.32 unrealized gain (loss) Total from 1.14 3.04 1.60 4.22 .31 4.36 investment operations Less Distributions From net (.01) (.15) (.18) (.06) (.08) - investment income In excess of net - - - - - (.06) investment income From net (.41) - - - - - realized gain Total (.42) (.15) (.18) (.06) (.08) (.06) distributions Redemption fees .02 .05 .04 .07 .09 .19 added to paid in capital Net asset value, $ 26.81 $ 26.07 $ 23.13 $ 21.67 $ 17.44 $ 17.12 end of period TOTAL RETURN B, C 4.41% 13.38% 7.65% 24.66% 2.36% 36.15% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 97,007 $ 86,338 $ 183,454 $ 155,721 $ 25,041 $ 22,184 period (000 omitted) Ratio of expenses 1.54% A 1.64% 1.56% 2.10% 2.02% A 2.47% to average net F assets Ratio of expenses 1.49% A, 1.61% 1.53% 2.08% 2.02% A 2.47% to average net E E E E assets after expense reductions Ratio of net .23% A .49% .77% .75% .86% A .25% investment income to average net assets Portfolio turnover 134% A 138% 139% 185% 273% A 222% rate Average $ .0222 commission rate G
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F DURING THE PERIOD, FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
PAPER AND FOREST PRODUCTS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S PAPER AND FOREST PRODUCTS 4.32% -1.68% 91.57% 171.80% PAPER AND FOREST PRODUCTS 1.19% -4.63% 85.82% 163.64% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS PAPER AND FOREST PRODUCTS -1.68% 13.88% 10.52% PAPER AND FOREST PRODUCTS -4.63% 13.19% 10.18% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960910 150216 S00000000000001 Paper & Forest SP Standard & Poor 500 00506 SP001 1986/08/31 9700.00 10000.00 1986/09/30 9594.37 9173.00 1986/10/31 10307.35 9702.28 1986/11/30 10738.66 9938.05 1986/12/31 10580.22 9684.63 1987/01/31 13352.90 10989.15 1987/02/28 13784.21 11423.22 1987/03/31 14840.47 11753.35 1987/04/30 13960.25 11648.74 1987/05/31 13159.26 11750.09 1987/06/30 13740.20 12343.47 1987/07/31 13907.44 12969.28 1987/08/31 14919.69 13453.04 1987/09/30 14470.78 13158.41 1987/10/31 10175.32 10324.09 1987/11/30 9823.23 9473.39 1987/12/31 10996.78 10194.31 1988/01/31 10552.66 10623.49 1988/02/29 11547.10 11118.55 1988/03/31 11180.22 10774.98 1988/04/30 11305.73 10894.59 1988/05/31 11180.22 10989.37 1988/06/30 12338.79 11493.78 1988/07/31 11788.47 11450.10 1988/08/31 11209.18 11060.80 1988/09/30 11431.24 11531.99 1988/10/31 11180.22 11852.58 1988/11/30 10938.85 11683.09 1988/12/31 11741.34 11887.54 1989/01/31 11857.49 12757.71 1989/02/28 11509.03 12440.04 1989/03/31 11518.71 12729.90 1989/04/30 11934.93 13390.58 1989/05/31 12147.88 13932.90 1989/06/30 11373.51 13853.48 1989/07/31 12467.31 15104.45 1989/08/31 13357.83 15400.50 1989/09/30 12622.18 15337.35 1989/10/31 12051.08 14981.53 1989/11/30 11963.97 15287.15 1989/12/31 12220.20 15654.04 1990/01/31 11103.04 14603.66 1990/02/28 11210.83 14792.04 1990/03/31 11524.42 15184.03 1990/04/30 10779.65 14804.43 1990/05/31 11495.02 16247.86 1990/06/30 11220.63 16137.38 1990/07/31 11387.23 16085.74 1990/08/31 10025.07 14631.59 1990/09/30 9054.90 13919.03 1990/10/31 8770.71 13859.18 1990/11/30 9652.68 14754.48 1990/12/31 10374.03 15166.13 1991/01/31 11231.06 15827.37 1991/02/28 11769.19 16959.03 1991/03/31 12008.36 17369.44 1991/04/30 12596.32 17411.13 1991/05/31 14041.31 18163.29 1991/06/30 13682.56 17331.41 1991/07/31 13692.52 18139.05 1991/08/31 13762.28 18568.95 1991/09/30 13234.11 18258.85 1991/10/31 13732.38 18503.51 1991/11/30 12686.01 17757.82 1991/12/31 13980.59 19789.32 1992/01/31 15266.39 19421.24 1992/02/29 15337.82 19673.71 1992/03/31 15439.87 19290.07 1992/04/30 15684.79 19857.20 1992/05/31 15245.98 19954.50 1992/06/30 15144.70 19657.18 1992/07/31 15032.21 20461.16 1992/08/31 14428.88 20041.71 1992/09/30 14275.49 20278.20 1992/10/31 14970.85 20349.17 1992/11/30 15523.06 21043.08 1992/12/31 15665.94 21301.91 1993/01/31 16148.44 21480.84 1993/02/28 16507.76 21772.98 1993/03/31 16487.22 22232.39 1993/04/30 17237.22 21694.37 1993/05/31 17288.59 22275.78 1993/06/30 16918.78 22340.38 1993/07/31 16744.14 22251.02 1993/08/31 17196.13 23094.33 1993/09/30 16374.34 22916.50 1993/10/31 17011.23 23390.88 1993/11/30 18069.30 23168.66 1993/12/31 18572.65 23449.00 1994/01/31 20729.87 24246.27 1994/02/28 20144.34 23589.20 1994/03/31 18007.66 22560.71 1994/04/30 17987.53 22849.48 1994/05/31 18721.29 23224.22 1994/06/30 18532.61 22655.22 1994/07/31 20104.95 23398.31 1994/08/31 22348.15 24357.64 1994/09/30 22746.47 23760.88 1994/10/31 21331.37 24295.50 1994/11/30 20398.45 23410.66 1994/12/31 21198.51 23757.84 1995/01/31 21056.17 24373.88 1995/02/28 23147.55 25323.73 1995/03/31 23311.79 26071.03 1995/04/30 23408.19 26838.83 1995/05/31 23795.19 27911.57 1995/06/30 25951.35 28559.96 1995/07/31 26835.93 29507.01 1995/08/31 26813.82 29581.07 1995/09/30 26371.53 30829.39 1995/10/31 25984.52 30719.33 1995/11/30 26371.53 32067.91 1995/12/31 25844.12 32685.54 1996/01/31 26488.70 33798.15 1996/02/29 25272.50 34111.46 1996/03/31 26561.67 34439.95 1996/04/30 27723.04 34947.60 1996/05/31 27164.26 35848.90 1996/06/30 25640.32 35985.48 1996/07/31 24967.24 34395.64 1996/08/30 26364.19 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960910 150221 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Paper and Forest Products Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $26,364 - a 163.64% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Boise Cascade Corp. 9.9 Champion International Corp. 9.6 Weyerhaeuser Co. 5.5 Chesapeake Corp. 4.9 Hollinger International, Inc. Class A 4.6 Mead Corp. 3.8 Willamette Industries, Inc. 3.5 Fort Howard Corp. 3.4 Rayonier, Inc. 3.4 Mercer International, Inc. SBI 3.1 TOP INDUSTRIES AS OF AUGUST 31, 1996 Paper & Forest Products 75.5% Publishing 9.0% Tobacco 2.1% Insurance 2.0% Packaging & Containers 1.3% All Others 10.1% * Row: 1, Col: 1, Value: 10.1 Row: 1, Col: 2, Value: 1.3 Row: 1, Col: 3, Value: 2.0 Row: 1, Col: 4, Value: 2.1 Row: 1, Col: 5, Value: 9.0 Row: 1, Col: 6, Value: 75.5 * INCLUDES SHORT-TERM INVESTMENTS PAPER AND FOREST PRODUCTS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Larry Rakers, Portfolio Manager of Fidelity Select Paper and Forest Products Portfolio Q. HOW HAS THE FUND PERFORMED, LARRY? A. For the six months ended August 31, 1996, the fund had a total return of 4.32%, while the Standard & Poor's 500 Index returned 2.96%. For the 12 months ended August 31, 1996, the fund returned -1.68%, while the S&P 500 had a return of 18.73%. Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS? A. The fund performed slightly better than the S&P 500 because of improvements we've seen in the U.S. economy recently. Economic strength is a major factor for the performance of paper companies and paper company stocks. They fall into the broad category known as cyclical stocks - those that tend to move up and down with the economy. As we've seen signs of economic improvement, stocks in the sector have attracted investor interest because of their economic sensitivity and because their valuations - their stock prices relative to other measures such as earnings - have been very attractive after a rough 1995. Business prospects for companies were improving slowly, and commodity paper prices appeared to be near a low point from which they could rebound. Q. WHAT SORTS OF STRATEGIES HAVE YOU BEEN PURSUING IN THIS ENVIRONMENT? A. While we've seen some indications of an improving economy, I've pursued a number of different strategies that provide a mix of investments offering exposure to several potentially positive trends. First, I've invested in companies such as Fort Howard that are involved in the production of tissue. Tissue, which tends to have stable demand and pricing, is perceived to be an attractive grade of paper late in an economic cycle - when commodity paper prices tend to be falling due to production overcapacity. Second, I've invested in companies with a component of their business dedicated to wood. Demand for wood historically is high in the early stages of an economic cycle, so I've increased these investments in anticipation of continued economic growth. Unfortunately, while wood prices have increased considerably, most share prices of companies with wood businesses have not increased; the performance from other components of these companies' businesses has been weak and Wall Street does not think the higher wood prices are sustainable. Third, I've invested in companies such as Champion International and Boise Cascade that tend to be sensitive to the price of paper and can show solid returns if the price of paper goes up. As I said, there are some indications that paper and paper stock prices may be bottoming. Finally, I've invested in specialty paper companies such as Schweitzer-Mauduit International - which makes cigarette paper - and Specialty Paperboard. I am not completely convinced we will see marked improvement in the economy or paper prices, and these companies and stocks tend to perform better when paper prices remain relatively flat. Q. WHICH STOCKS HAVE PERFORMED WELL FOR THE FUND? A. Specialty Paperboard was one, on the strength of some positive acquisitions the company made. Schweitzer-Mauduit International was another, because prices for the pulp it uses to make cigarette paper went down, helping the company improve earnings. Finally, I purchased Fort Howard during the period when its valuation was depressed. The stock subsequently did well because waste paper prices were weak, decreasing costs for the company's tissue production. Q. AND WHICH TURNED OUT TO BE DISAPPOINTMENTS? A. Hollinger International is a company that buys newsprint to make newspapers. Even though it was helped by falling newsprint prices, it made an acquisition that Wall Street felt diluted its value, and so the company's stock fell. Boise Cascade was slowed because its publicly traded office products subsidiary did not live up to high expectations for sales and earnings growth. Q. WHAT'S YOUR OUTLOOK? A. I'm fairly positive that we'll eventually see an uptick in paper prices. However, the stock prices of paper companies may stay fairly stagnant until we get a clearer picture of the direction of the economy and interest rates. Conditions would be ripe for good performance if there were enough of an economic pick-up to help push paper prices upward. If that happens, I'll seek to reduce the fund's position in specialty paper company stocks and increase investments in those companies that tend to be more sensitive to the price of paper, including producers of commodity paper products such as uncoated free sheet and liner board. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 506 TRADING SYMBOL: FSPFX SIZE: as of August 31, 1996, more than $31 million MANAGER: Larry Rakers, since February 1996; manager, Fidelity Select American Gold Portfolio, since 1995; Fidelity Select Precious Metals and Minerals Portfolio, since July 1996; joined Fidelity in 1993 (checkmark) PAPER AND FOREST PRODUCTS PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.7% SHARES VALUE (NOTE 1) BASIC INDUSTRIES - 76.9% METALS & MINING - 0.5% English China Clay PLC 36,500 $ 143,638 29321792 PACKAGING & CONTAINERS - 1.3% Gaylord Container Corp. Class A 25,000 181,250 36814510 Mayr Melnhof Karton AG (a) 5,000 234,656 57847192 415,906 PAPER & FOREST PRODUCTS - 75.1% Boise Cascade Corp. 94,900 3,202,875 09738310 Bowater, Inc. 2,700 97,200 10218310 Buckeye Cellulose Corp. (a) 20,000 532,500 11815H10 Champion International Corp. 71,900 3,091,700 15852510 Chesapeake Corp. 64,900 1,590,050 16515910 Crown Pacific Partners LP unit 8,400 175,350 22843910 Domtar, Inc. 14,700 117,643 25756110 Donohue, Inc. (vtg.) 9,210 129,240 25804140 Enso OY Class R 15,000 128,033 29399Q22 Fletcher Challenge Canada Ltd. Class A 7,400 106,274 33932D10 Fort Howard Corp. (a) 46,500 1,098,563 34746110 Georgia-Pacific Corp. 4,900 364,438 37329810 International Paper Co. 1,500 60,000 46014610 Jefferson Smurfit Corp. (a) 20,000 242,500 47508710 Kimberly-Clark Corp. 11,330 887,989 49436810 Louisiana-Pacific Corp. 11,900 258,825 54634710 MacMillan Bloedel Ltd. 20,000 287,959 55478320 Mead Corp. 21,600 1,236,600 58283410 Mercer International, Inc. SBI 67,000 1,005,000 58805610 Metsa-Serla Ltd. Class B 12,500 93,567 59299992 Mo Och Domsjoe AB Class B 7,000 202,499 61399792 Plum Creek Timber Co. LP depositary unit 6,000 159,750 72923710 Pope & Talbot, Inc. 31,000 496,000 73282710 Rayonier, Inc. 27,600 1,093,650 75490710 St. Joe Corp. 1,000 61,500 79014810 Slocan Forest Products Ltd. 31,800 341,648 83158C10 Specialty Paperboard, Inc. (a) 58,900 986,575 84750410 Stone Consolidated Corp. 2,400 29,381 86158K10 Stone Container Corp. 65,000 901,875 86158910 Stora Kopparbergs B Free shares 3,000 41,920 86210998 Svenska Cellulosa AB (SCA) Class B Ord. 20,000 424,484 86958730 Temple-Inland, Inc. 5,900 291,313 87986810 Timberwest Forest Ltd. 22,300 260,771 88690810 Union Camp Corp. 3,800 184,300 90553010 UPM-Kymmene Corp. (a) 14,200 324,270 91599K22 Wausau Paper Mills Co. 46,037 822,911 94331710 Westvaco Corp. 3,700 105,913 96154810 Weyerhaeuser Co. 39,600 1,767,150 96216610 Willamette Industries, Inc. 18,100 1,117,675 96913310 24,319,891 TOTAL BASIC INDUSTRIES 24,879,435 FINANCE - 2.0% INSURANCE - 2.0% Arbatax International, Inc. (a) 115,600 647,360 03891910 INDUSTRIAL MACHINERY & EQUIPMENT - 0.5% Valmet OY (b) 10,000 171,381 92029992 SHARES VALUE (NOTE 1) MEDIA & LEISURE - 9.0% PUBLISHING - 9.0% Hollinger International, Inc. Class A 136,900 $ 1,488,788 43556910 Knight-Ridder, Inc. 19,200 648,000 49904010 New York Times Co. (The) Class A 11,300 353,125 65011110 Times Mirror Co. Class A 9,800 425,075 88736410 2,914,988 NONDURABLES - 2.1% TOBACCO - 2.1% Schweitzer-Mauduit International, Inc. 21,100 675,200 80854110 RETAIL & WHOLESALE - 0.1% GROCERY STORES - 0.1% Taiga Forest Products Ltd. (a) 5,000 30,696 87391010 SERVICES - 0.1% PRINTING - 0.1% Alco Standard Corp. 900 39,263 01378810 TOTAL COMMON STOCKS (Cost $30,406,317) 29,358,323 CONVERTIBLE PREFERRED STOCKS - 0.4% BASIC INDUSTRIES - 0.4% PAPER & FOREST PRODUCTS - 0.4% James River Corp., Series P, $1.55 depositary shares representing 1/100 share (dividend enhanced conversion stock) (Cost $122,507) 4,600 114,425 47034988 REPURCHASE AGREEMENTS - 8.9% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 2,897,689 2,896,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $33,424,824) $ 32,368,748 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $171,381 or 0.5% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $40,796,133 and $36,570,010, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $15,942 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balance during the period for which loans were outstanding amounted to $2,916,000. The weighted average interest rate paid was 5.9% (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 85.4% Canada 9.1 Finland 2.2 Sweden 2.1 Others (individually less than 1%) 1.2 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $33,447,797. Net unrealized depreciation aggregated $1,079,049, of which $1,064,396 related to appreciated investment securities and $2,143,445 related to depreciated investment securities. PAPER AND FOREST PRODUCTS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 32,368,748 securities, at value (including repurchase agreements of $2,896,000) (cost $33,424,824) - See accompanying schedule Cash 11 Receivable for 171,353 fund shares sold Dividends 48,017 receivable Redemption fees 846 receivable Prepaid expenses 7,154 TOTAL ASSETS 32,596,129 LIABILITIES Payable for $ 280,450 investments purchased Payable for fund 332,016 shares redeemed Accrued 14,196 management fee Other payables 57,859 and accrued expenses TOTAL LIABILITIES 684,521 NET ASSETS $ 31,911,608 Net Assets consist of: Paid in capital $ 31,991,259 Undistributed net 99,901 investment income Accumulated 876,521 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized (1,056,073 appreciation ) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 31,911,608 1,537,389 shares outstanding NET ASSET VALUE $20.76 and redemption price per share ($31,911,608 (divided by) 1,537,389 shares) Maximum offering $21.40 price per share (100/97.00 of $20.76) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 394,642 INCOME Dividends Interest 90,173 TOTAL INCOME 484,815 EXPENSES Management fee $ 119,694 Transfer agent 206,799 fees Accounting fees 30,107 and expenses Non-interested 79 trustees' compensation Custodian fees 11,379 and expenses Registration fees 8,378 Audit 11,089 Legal 158 Interest 1,434 Miscellaneous 628 Total expenses 389,745 before reductions Expense (5,091 384,654 reductions ) NET INVESTMENT 100,161 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 1,304,260 securities Foreign (438 1,303,822 currency ) transactions Change in net unrealized appreciation (depreciation) on: Investment (697,354 securities ) Assets and (41 (697,395 liabilities in ) ) foreign currencies NET GAIN (LOSS) 606,427 NET INCREASE $ 706,588 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 99,449 INFORMATION Sales charges paid to FDC Deferred sales $ 1,391 charges withheld by FDC Exchange fees $ 18,668 withheld by FSC Expense $ 3,092 reductions Directed brokerage arrangements Custodian 108 interest credits Transfer agent 1,891 interest credits $ 5,091 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ 100,161 $ 196,357 Net investment income Net realized 1,303,822 10,192,650 gain (loss) Change in net (697,395 (5,417,439 unrealized ) ) appreciation (depreciation) NET INCREASE 706,588 4,971,568 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (22,582 (148,185 shareholders ) ) From net investment income From net (2,077,516 (4,557,795 realized gain ) ) TOTAL (2,100,098 (4,705,980 DISTRIBUTIONS ) ) Share 63,613,128 89,748,449 transactions Net proceeds from sales of shares Reinvestment of 2,072,146 4,602,520 distributions Cost of shares (59,757,187 (161,775,476 redeemed ) ) Paid in capital 106,992 210,077 portion of redemption fees NET INCREASE 6,035,079 (67,214,430 (DECREASE) IN ) NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 4,641,569 (66,948,842 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 27,270,039 94,218,881 period End of period $ 31,911,608 $ 27,270,039 (including undistributed net investment income of $99,901 and $46,687, respectively) OTHER INFORMATION Shares Sold 2,941,531 3,969,187 Issued in 98,486 214,948 reinvestment of distributions Redeemed (2,814,784 (7,328,171 ) ) Net increase 225,233 (3,144,036) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 20.78 $ 21.14 $ 19.61 $ 16.08 $ 15.37 $ 12.64 beginning of period Income from Investment Operations Net investment .05 .08 .01 (.01) .06 .13 income (loss) Net realized and .80 1.83 2.53 3.38 .65 2.64 unrealized gain (loss) Total from .85 1.91 2.54 3.37 .71 2.77 investment operations Less Distributions From net (.01) (.08) - (.01) (.09) (.30) investment income From net (.92) (2.27) (1.17) - - - realized gain Total (.93) (2.35) (1.17) (.01) (.09) (.30) distributions Redemption fees .06 .08 .16 .17 .09 .26 added to paid in capital Net asset value, $ 20.76 $ 20.78 $ 21.14 $ 19.61 $ 16.08 $ 15.37 end of period TOTAL RETURN B, C 4.32% 9.18% 14.91% 22.03% 5.25% 24.52% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 31,912 $ 27,270 $ 94,219 $ 66,908 $ 25,098 $ 28,957 period (000 omitted) Ratio of expenses 1.95% A 1.91% 1.88% 2.08% 2.21% A 2.05% to average net assets Ratio of expenses 1.93% A, 1.90% 1.87% 2.07% 2.21% A 2.05% to average net E E E E assets after expense reductions Ratio of net .50% A .34% .05% (.08)% .49% A .92% investment income (loss) to average net assets Portfolio turnover 210% A 78% 209% 176% 222% A 421% rate Average $ .0319 commission rate F
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
TRANSPORTATION PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past six months, one year, five year, and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1996 MONTH YEAR YEARS FUND S TRANSPORTATION -1.20% 4.24% 121.54% 262.64% TRANSPORTATION -4.16% 1.11% 114.90% 251.76% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 281.45% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on September 29, 1986. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF AUGUST 31, 1996 YEAR YEARS FUND TRANSPORTATION 4.24% 17.24% 13.85% TRANSPORTATION 1.11% 16.53% 13.50% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 14.43% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19960831 19960910 154348 S00000000000001 Transportation SP Standard & Poor 500 00512 SP001 1986/09/29 9700.00 10000.00 1986/09/30 9748.50 9962.80 1986/10/31 10039.50 10537.66 1986/11/30 10204.40 10793.72 1986/12/31 10039.50 10518.48 1987/01/31 10737.90 11935.32 1987/02/28 11397.50 12406.77 1987/03/31 11397.50 12765.32 1987/04/30 11475.10 12651.71 1987/05/31 11649.70 12761.78 1987/06/30 11998.90 13406.25 1987/07/31 12474.20 14085.95 1987/08/31 12474.20 14611.35 1987/09/30 11795.20 14291.37 1987/10/31 7992.80 11213.00 1987/11/30 7527.20 10289.05 1987/12/31 8284.50 11072.05 1988/01/31 8698.73 11538.18 1988/02/29 9418.69 12075.86 1988/03/31 9704.70 11702.72 1988/04/30 9734.29 11832.62 1988/05/31 9675.11 11935.56 1988/06/30 10661.36 12483.41 1988/07/31 10523.29 12435.97 1988/08/31 10030.16 12013.15 1988/09/30 10690.95 12524.91 1988/10/31 11036.14 12873.10 1988/11/30 11134.76 12689.01 1988/12/31 11470.09 12911.07 1989/01/31 12456.34 13856.16 1989/02/28 12584.55 13511.14 1989/03/31 12969.19 13825.95 1989/04/30 13403.14 14543.52 1989/05/31 13975.16 15132.53 1989/06/30 13889.01 15046.28 1989/07/31 14730.77 16404.95 1989/08/31 15688.27 16726.49 1989/09/30 15383.13 16657.91 1989/10/31 14404.59 16271.45 1989/11/30 14530.85 16603.39 1989/12/31 14737.71 17001.87 1990/01/31 13812.21 15861.04 1990/02/28 14456.54 16065.65 1990/03/31 14890.01 16491.39 1990/04/30 14327.68 16079.11 1990/05/31 14854.86 17646.82 1990/06/30 14691.33 17526.82 1990/07/31 14642.53 17470.73 1990/08/31 12494.96 15891.38 1990/09/30 10884.28 15117.47 1990/10/31 10713.45 15052.46 1990/11/30 11152.72 16024.85 1990/12/31 11555.39 16471.95 1991/01/31 12543.76 17190.12 1991/02/28 13763.97 18419.22 1991/03/31 13776.18 18864.96 1991/04/30 13739.57 18910.24 1991/05/31 14825.56 19727.16 1991/06/30 14702.46 18823.66 1991/07/31 15596.12 19700.84 1991/08/31 15877.68 20167.75 1991/09/30 15583.88 19830.95 1991/10/31 16734.61 20096.68 1991/11/30 15694.05 19286.79 1991/12/31 17811.89 21493.19 1992/01/31 17971.04 21093.42 1992/02/29 18938.14 21367.64 1992/03/31 18485.20 20950.97 1992/04/30 18962.63 21566.92 1992/05/31 19354.37 21672.60 1992/06/30 18521.92 21349.68 1992/07/31 18791.24 22222.88 1992/08/31 18228.12 21767.31 1992/09/30 18950.39 22024.17 1992/10/31 19758.35 22101.25 1992/11/30 21190.65 22854.91 1992/12/31 22049.78 23136.02 1993/01/31 23037.27 23330.36 1993/02/28 23349.77 23647.66 1993/03/31 24912.25 24146.62 1993/04/30 24850.15 23562.27 1993/05/31 25778.43 24193.74 1993/06/30 25853.69 24263.90 1993/07/31 25853.69 24166.85 1993/08/31 26330.38 25082.77 1993/09/30 26393.10 24889.63 1993/10/31 26945.04 25404.85 1993/11/30 27095.57 25163.50 1993/12/31 28513.94 25467.98 1994/01/31 29763.83 26333.89 1994/02/28 29763.83 25620.25 1994/03/31 28967.19 24503.20 1994/04/30 29508.50 24816.84 1994/05/31 29034.13 25223.84 1994/06/30 29006.23 24605.86 1994/07/31 29982.87 25412.93 1994/08/31 30875.80 26454.86 1994/09/30 30052.63 25806.71 1994/10/31 30499.09 26387.37 1994/11/30 28671.38 25426.34 1994/12/31 29616.40 25803.41 1995/01/31 29416.80 26472.49 1995/02/28 31520.20 27504.13 1995/03/31 31934.73 28315.77 1995/04/30 32410.69 29149.67 1995/05/31 31443.43 30314.78 1995/06/30 31105.66 31019.00 1995/07/31 33777.12 32047.59 1995/08/31 33746.42 32128.03 1995/09/30 33439.35 33483.83 1995/10/31 33024.81 33364.29 1995/11/30 34160.95 34828.98 1995/12/31 34108.67 35499.79 1996/01/31 34628.42 36708.20 1996/02/29 35602.96 37048.49 1996/03/31 36463.79 37405.26 1996/04/30 37658.31 37956.62 1996/05/31 37707.30 38935.52 1996/06/30 37886.94 39083.86 1996/07/31 35143.40 37357.14 1996/08/30 35159.73 38145.00 IMATRL PRASUN SHR__CHT 19960831 19960910 154353 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Transportation Portfolio on September 29, 1986, when the fund started and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $35,176 - a 251.76% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $38,145 over the same period - a 281.45% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS CSX Corp. 9.3 Burlington Northern Santa Fe Corp. 9.1 Hunt (J.B.) Transport Services, Inc. 8.7 Eaton Corp. 8.1 Cummins Engine Co., Inc. 5.4 Boeing Co. 5.2 AMR Corp. 4.7 M.S. Carriers, Inc. 3.8 PACCAR, Inc. 3.6 UAL Corp. 3.2 TOP INDUSTRIES AS OF AUGUST 31, 1996 Railroads 21.6% Auto & Truck Parts 15.4% Air Transport, Major National 15.1% Trucking, Long Distance 12.9% Motor Vehicles & Car Bodies 11.0% All Others 24.0%* Row: 1, Col: 1, Value: 24.0 Row: 1, Col: 2, Value: 11.0 Row: 1, Col: 3, Value: 12.9 Row: 1, Col: 4, Value: 15.1 Row: 1, Col: 5, Value: 15.4 Row: 1, Col: 6, Value: 21.6 * INCLUDES SHORT-TERM INVESTMENTS TRANSPORTATION PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Stephen DuFour, Portfolio Manager of Fidelity Select Transportation Portfolio Q. HOW DID THE FUND PERFORM, STEVE? A. For the six- and 12-month periods ended August 31, 1996, the fund returned -1.20% and 4.24%, respectively. By comparison, the Standard & Poor's 500 Index returned 2.96% and 18.73% for the same time periods. Q. HOW DO YOU EXPLAIN THE FUND'S PERFORMANCE? A. Simply put, the fund is divided into four key segments: railroads, airlines, trucking and truck manufacturing. During the past six months, the railroads, trucking and truck manufacturing stocks were average performers and the airlines stocks were very poor performers. The fund's performance was hurt by its exposure to airline stocks during the past six months. Q. WHY DID THE AIRLINES PERFORM SO POORLY? A. Airline stocks performed poorly because of the timing of a number of unrelated events, specifically, the tragedies involving ValuJet and Trans World Airlines. In addition, airline stocks were hurt by rising fuel costs. Q. GIVEN THIS BACKDROP, YOU INCREASED THE FUND'S WEIGHTING IN TRUCKING AND TRUCK MANUFACTURING STOCKS. WHY WERE THEY ATTRACTIVE? A. The trucking industry purchased too many trucks during much of 1994 and 1995. By late 1995 and early 1996, truck orders virtually stopped causing truck manufacturing stocks to perform poorly. During the period, I realized that there had been a long period in which commercial trucks hadn't been ordered, and I believed that the tide would turn and the supply/demand balance within the trucking industry would improve. My belief was that once that happened and trucking stocks began to post better performance results, then more trucks would be purchased. In short, I began to envision the beginning of the next cycle for truck and truck manufacturing stocks. During the period, the fund held large positions in Eaton, Cummins and PACCAR, all truck manufacturers. The fund's top trucking stocks included JB Hunt and M.S. Carriers. Q. HOW DID YOU VIEW RAILROAD STOCKS DURING THE PERIOD? A. In 1995, rail stocks were good performers due to their strong revenue growth and improved cost cutting. By early 1996, however, I believed that the rail stocks were close to fully valued. Q. BUT THE FUND STILL HAS A LARGE HOLDING IN RAILROAD STOCKS . . . A. That's true. The fund's weighting in railroads is similar to what it was six months ago. In fact, the fund's two top holdings continue to be railroad stocks. But that has more to do with specific company dynamics than it does with any positive trend within the rail industry. For instance, CSX, the fund's largest holding, owns a large container shipping subsidiary, SeaLand. SeaLand has entered into an alliance with Maersk, the largest container shipping company in the world. I believe that by combining their cost structures - in addition to some of the other positive business prospects in the container shipping industry - SeaLand has the potential to increase its profit margins. Q. WHAT WERE THE MAJOR DISAPPOINTMENTS DURING THE PAST SIX MONTHS? A. Certainly the fund's investment in airlines was the greatest disappointment. While I'm pleased that I cut the fund's weighting I wish I'd reduced it more - and much sooner. Q. WHAT'S AHEAD FOR THE FUND? A. As you can see by the fund's weightings, I'm very optimistic about trucking and truck manufacturing. I'm beginning to feel better about selected railroads, but remain uncertain about airline stocks. My goal is to keep the fund as focused as possible on the stocks that have the best chance to outperform the overall market. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 512 TRADING SYMBOL: FSRFX SIZE: as of August 31, 1996, more than $10 million MANAGER: Stephen DuFour, since 1994; manager, Fidelity Select Energy Portfolio, since October 1996; Fidelity Select Multimedia Portfolio, 1993-February 1996; equity analyst, media, 1992-1993; joined Fidelity in 1992 (checkmark) TRANSPORTATION PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 96.0% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 5.2% AIRCRAFT - 5.2% Boeing Co. 6,000 $ 543,000 09702310 AIR TRANSPORTATION - 16.6% AIR TRANSPORTATION, MAJOR NATIONAL - 15.1% AMR Corp. (a) 6,000 492,000 00176510 Alaska Air Group, Inc. (a) 5,000 105,620 01165910 Continental Airlines, Inc., Class B (a) 12,400 280,550 21079530 Delta Air Lines, Inc. 2,000 141,750 24736110 Northwest Airlines Corp. Class A (a) 5,900 222,725 66728010 UAL Corp. (a) 7,000 336,000 90254950 1,578,645 AIR TRANSPORTATION, REGIONAL - 1.5% Atlantic Southeast Airlines, Inc. 5,100 117,300 04886910 Comair Holdings, Inc. 2,000 48,000 19978910 165,300 TOTAL AIR TRANSPORTATION 1,743,945 AUTOS, TIRES, & ACCESSORIES - 26.4% AUTO & TRUCK PARTS - 15.4% Cummins Engine Co., Inc. 14,900 560,613 23102110 Eaton Corp. 15,300 847,238 27805810 Modine Manufacturing Co. 7,900 203,425 60782810 1,611,276 MOTOR VEHICLES & CAR BODIES - 11.0% Federal Signal Co. 1,100 24,888 31385510 Navistar International Corp. (a) 10,000 97,500 63934E10 PACCAR, Inc. 8,300 375,575 69371810 Scania AB: Class A 10,000 265,869 80699R22 Class B 10,000 266,624 80699R23 Sime Darby Hongkong Ltd. 20,000 21,080 82899392 Volvo AB ADR Class B 5,000 105,313 92885640 1,156,849 TRUCK & BUS BODIES - 0.0% Grupo Dina sponsored ADR, Series L (a) 11 25 21030620 TOTAL AUTOS, TIRES, & ACCESSORIES 2,768,150 RAILROADS - 21.6% Burlington Northern Santa Fe Corp. 11,930 954,400 12189T10 CSX Corp. 19,300 977,063 12640810 Conrail, Inc. 1,000 68,125 20836810 Tranz Rail Holdings Ltd. sponsored ADR (a) 5,000 75,000 89411610 Wisconsin Central Transportation Corp. (a) 5,300 186,825 97659210 2,261,413 SHIPPING - 4.6% DEEP SEA TRANSPORTATION - 1.7% Pacific Basin Bulk Shipping Ltd. 11,010 170,655 69402710 Pacific Basin Bulk Shipping Ltd. (warrants) (a) 1,000 938 69402711 171,593 SHIPPING - 2.9% Bergesen Group Class B 2,000 41,496 08399011 IM Skaugen A/S (a) 50,000 26,910 45299592 Kirby Corp. (a) 12,200 198,250 49726610 SHARES VALUE (NOTE 1) Storli, Skibs AS 2,000 $ 34,788 86229910 Storli, Skibs AS Class B (non-vtg.) 300 5,148 86229992 306,592 TOTAL SHIPPING 478,185 TRUCKING & FREIGHT - 21.6% FREIGHT FORWARDING - 0.3% NFC PLC sponsored ADR 2,300 32,775 62892330 TRUCKING, LOCAL & LONG DISTANCE - 8.4% Caliber System, Inc. 3,000 52,125 12989410 Consolidated Freightways, Inc. 5,000 115,000 20923710 M.S. Carriers, Inc. (a) 18,400 400,200 55353310 Werner Enterprises, Inc. 18,000 315,000 95075510 882,325 TRUCKING, LONG DISTANCE - 12.9% Hunt (J.B.) Transport Services, Inc. 50,500 915,313 44565810 PST Vans, Inc. (a) 9,500 29,688 69393410 US Freightways Corp. 12,900 267,675 91690610 Yellow Corp. (a) 10,000 133,750 98550910 1,346,426 TOTAL TRUCKING & FREIGHT 2,261,526 TOTAL COMMON STOCKS (Cost $9,978,805) 10,056,219 REPURCHASE AGREEMENTS - 4.0% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 421,246 421,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $10,399,805) $ 10,477,219 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $8,835,637 and $9,026,646, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $2,823 for the period (see Note 5 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 90.0% Sweden 6.1 Bermuda 1.7 Norway 1.0 New Zealand 0.7 United Kingdom 0.3 Hong Kong 0.2 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $10,407,746. Net unrealized appreciation aggregated $69,473, of which $674,916 related to appreciated investment securities and $605,443 related to depreciated investment securities. TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 10,477,219 securities, at value (including repurchase agreements of $421,000) (cost $10,399,805) - See accompanying schedule Cash 506 Receivable for 94,431 fund shares sold Dividends 15,380 receivable Redemption fees 8 receivable Other receivables 6,938 Prepaid expenses 4,330 TOTAL ASSETS 10,598,812 LIABILITIES Payable for fund $ 30,801 shares redeemed Accrued 1,044 management fee Other payables 33,622 and accrued expenses TOTAL LIABILITIES 65,467 NET ASSETS $ 10,533,345 Net Assets consist of: Paid in capital $ 9,919,429 Accumulated net (21,281 investment ) (loss) Accumulated 557,783 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 77,414 appreciation (depreciation) on investments NET ASSETS, for $ 10,533,345 488,986 shares outstanding NET ASSET VALUE $21.54 and redemption price per share ($10,533,345 (divided by) 488,986 shares) Maximum offering $22.21 price per share (100/97.00 of $21.54) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 132,835 INCOME Dividends Interest 20,196 TOTAL INCOME 153,031 EXPENSES Management fee $ 42,012 Transfer agent 81,050 fees Accounting fees 30,067 and expenses Non-interested 26 trustees' compensation Custodian fees 8,173 and expenses Registration fees 4,330 Audit 13,345 Legal 84 Miscellaneous 175 Total expenses 179,262 before reductions Expense (4,950 174,312 reductions ) NET INVESTMENT (21,281 INCOME (LOSS) ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 601,988 securities Foreign (109 601,879 currency ) transactions Change in net (809,907 unrealized ) appreciation (depreciation) on investment securities NET GAIN (LOSS) (208,028 ) NET INCREASE $ (229,309 (DECREASE) IN ) NET ASSETS RESULTING FROM OPERATIONS OTHER $ 84,756 INFORMATION Sales charges paid to FDC Deferred sales $ 241 charges withheld by FDC Exchange fees $ 7,560 withheld by FSC Expense $ 463 reductions Directed brokerage arrangements Custodian 70 interest credits FMR 4,417 reimbursement $ 4,950 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ (21,281 $ (46,898 Net investment ) ) income (loss) Net realized 601,879 1,654,188 gain (loss) Change in net (809,907 (414,468 unrealized ) ) appreciation (depreciation) NET INCREASE (229,309 1,192,822 (DECREASE) IN ) NET ASSETS RESULTING FROM OPERATIONS Distributions to (82,067 (578,339 shareholders ) ) from net realized gains Share 16,302,923 23,608,416 transactions Net proceeds from sales of shares Reinvestment of 81,051 567,930 distributions Cost of shares (17,020,320 (26,101,274 redeemed ) ) Redemption 35,834 51,261 fees NET INCREASE (600,512 (1,873,667 (DECREASE) IN ) ) NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (911,888 (1,259,184 INCREASE ) ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 11,445,233 12,704,417 period End of period $ 10,533,345 $ 11,445,233 (including accumulated net investment loss of $21,281 and $0, respectively) OTHER INFORMATION Shares Sold 715,787 1,097,987 Issued in 3,675 26,954 reinvestment of distributions Redeemed (752,614 (1,221,676 ) ) Net increase (33,152) (96,735) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 21.92 $ 20.53 $ 21.67 $ 18.68 $ 15.49 $ 11.26 beginning of period Income from Investment Operations Net investment (.03) (.09) F (.17) (.20) (.07) (.05) income (loss) Net realized and (.29) 2.60 1.17 5.07 3.55 4.18 unrealized gain (loss) Total from (.32) 2.51 1.00 4.87 3.48 4.13 investment operations Less Distributions From net - - - - - (.04) investment income From net (.12) (1.22) (2.19) (1.96) (.36) - realized gain Total (.12) (1.22) (2.19) (1.96) (.36) (.04) distributions Redemption fees .06 .10 .05 .08 .07 .14 added to paid in capital Net asset value, $ 21.54 $ 21.92 $ 20.53 $ 21.67 $ 18.68 $ 15.49 end of period TOTAL RETURN B, C (1.20)% 12.95% 5.90% 27.47% 23.14% 38.01% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 10,533 $ 11,445 $ 12,704 $ 13,077 $ 10,780 $ 2,998 period (000 omitted) Ratio of expenses 2.50% A, 2.47% 2.37% 2.40% 2.48% A, 2.43% to average net G G G G assets Ratio of expenses 2.49% A, 2.44% 2.36% 2.39% 2.48% A 2.43% to average net E E E E assets after expense reductions Ratio of net (.30)% A (.43)% (.83)% (.96)% (.53)% A (.34)% investment income (loss) to average net assets Portfolio turnover 137% A 175% 178% 115% 116% A 423% rate Average $ .0350 commission rate H
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.05 PER SHARE. G DURING THE PERIOD, FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. H FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
AMERICAN GOLD PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S AMERICAN GOLD 8.00% 29.73% 123.17% 163.40% AMERICAN GOLD 4.76% 25.84% 116.48% 155.50% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS AMERICAN GOLD 29.73% 17.42% 10.17% AMERICAN GOLD 25.84% 16.70% 9.83% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960909 143939 S00000000000001 American Gold SP Standard & Poor 500 00041 SP001 1986/08/31 9700.00 10000.00 1986/09/30 10172.96 9173.00 1986/10/31 10026.77 9702.28 1986/11/30 10190.16 9938.05 1986/12/31 10172.96 9684.63 1987/01/31 11720.83 10989.15 1987/02/28 12933.33 11423.22 1987/03/31 15048.76 11753.35 1987/04/30 15986.08 11648.74 1987/05/31 15134.75 11750.09 1987/06/30 14661.79 12343.47 1987/07/31 17499.56 12969.28 1987/08/31 17207.18 13453.04 1987/09/30 17938.12 13158.41 1987/10/31 12701.15 10324.09 1987/11/30 14730.59 9473.39 1987/12/31 14293.42 10194.31 1988/01/31 12146.79 10623.49 1988/02/29 12469.65 11118.55 1988/03/31 13717.49 10774.98 1988/04/30 13804.75 10894.59 1988/05/31 13717.49 10989.37 1988/06/30 13988.00 11493.78 1988/07/31 13953.10 11450.10 1988/08/31 13132.84 11060.80 1988/09/30 12565.64 11531.99 1988/10/31 12696.53 11852.58 1988/11/30 12871.06 11683.09 1988/12/31 12513.28 11887.54 1989/01/31 12967.04 12757.71 1989/02/28 13647.68 12440.04 1989/03/31 13167.74 12729.90 1989/04/30 12530.74 13390.58 1989/05/31 12076.98 13932.90 1989/06/30 12757.62 13853.48 1989/07/31 12888.51 15104.45 1989/08/31 13542.97 15400.50 1989/09/30 13621.50 15337.35 1989/10/31 13761.12 14981.53 1989/11/30 15515.08 15287.15 1989/12/31 15270.74 15654.04 1990/01/31 15942.66 14603.66 1990/02/28 15497.62 14792.04 1990/03/31 14895.52 15184.03 1990/04/30 13281.18 14804.43 1990/05/31 14450.49 16247.86 1990/06/30 13525.52 16137.38 1990/07/31 14467.94 16085.74 1990/08/31 14206.16 14631.59 1990/09/30 14197.43 13919.03 1990/10/31 11867.55 13859.18 1990/11/30 11719.21 14754.48 1990/12/31 12644.18 15166.13 1991/01/31 10890.22 15827.37 1991/02/28 11876.28 16959.03 1991/03/31 11832.65 17369.44 1991/04/30 11413.79 17411.13 1991/05/31 11806.47 18163.29 1991/06/30 12600.55 17331.41 1991/07/31 12460.93 18139.05 1991/08/31 11448.70 18568.95 1991/09/30 11256.72 18258.85 1991/10/31 12120.61 18503.51 1991/11/30 12094.43 17757.82 1991/12/31 11867.55 19789.32 1992/01/31 12155.51 19421.24 1992/02/29 11780.29 19673.71 1992/03/31 10977.48 19290.07 1992/04/30 10419.01 19857.20 1992/05/31 11160.73 19954.50 1992/06/30 11885.00 19657.18 1992/07/31 12635.45 20461.16 1992/08/31 12399.84 20041.71 1992/09/30 12330.04 20278.20 1992/10/31 11963.54 20349.17 1992/11/30 10951.31 21043.08 1992/12/31 11501.05 21301.91 1993/01/31 11282.90 21480.84 1993/02/28 12347.49 21772.98 1993/03/31 13734.94 22232.39 1993/04/30 15471.45 21694.37 1993/05/31 17190.49 22275.78 1993/06/30 18194.00 22340.38 1993/07/31 19642.54 22251.02 1993/08/31 18612.86 23094.33 1993/09/30 16640.75 22916.50 1993/10/31 19127.70 23390.88 1993/11/30 19145.15 23168.66 1993/12/31 20550.06 23449.00 1994/01/31 20558.78 24246.27 1994/02/28 19773.43 23589.20 1994/03/31 20253.37 22560.71 1994/04/30 18543.05 22849.48 1994/05/31 19345.85 23224.22 1994/06/30 18394.70 22655.22 1994/07/31 18124.19 23398.31 1994/08/31 18979.35 24357.64 1994/09/30 20637.32 23760.88 1994/10/31 19145.15 24295.50 1994/11/30 16876.35 23410.66 1994/12/31 17373.74 23757.84 1995/01/31 15558.71 24373.88 1995/02/28 16091.00 25323.73 1995/03/31 18560.50 26071.03 1995/04/30 18490.69 26838.83 1995/05/31 18874.64 27911.57 1995/06/30 19136.42 28559.96 1995/07/31 19651.27 29507.01 1995/08/31 19694.90 29581.07 1995/09/30 19686.17 30829.39 1995/10/31 17312.66 30719.33 1995/11/30 18918.27 32067.91 1995/12/31 19319.67 32685.54 1996/01/31 22749.05 33798.15 1996/02/29 23656.56 34111.46 1996/03/31 24223.76 34439.95 1996/04/30 24799.69 34947.60 1996/05/31 27504.79 35848.90 1996/06/30 23621.66 35985.48 1996/07/31 23185.35 34395.64 1996/08/30 25550.14 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960909 143944 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select American Gold Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $25,550 - a 155.50% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Newmont Mining Corp. 8.7 Getchell Gold Corp. 7.9 Bre-X Minerals Ltd. 7.5 Euro-Nevada Mining Corp. Ltd. 6.2 Greenstone Resources Ltd. 4.2 Franco Nevada Mining Corp. 4.0 Agnico Eagle Mines Ltd. 3.9 Barrick Gold Corp. 3.5 Golden Star Resources Ltd. 3.1 Newmont Gold Co. 3.0 TOP INDUSTRIES AS OF AUGUST 31, 1996 Gold Ores 79.0% Gold & Silver Ores 5.2% Investment Managers 1.8% Copper Ores 1.8% Silver Ores 0.8% All Others 11.4% * Row: 1, Col: 1, Value: 11.4 Row: 1, Col: 2, Value: 0.8 Row: 1, Col: 3, Value: 1.8 Row: 1, Col: 4, Value: 1.8 Row: 1, Col: 5, Value: 5.2 Row: 1, Col: 6, Value: 79.0 * INCLUDES SHORT-TERM INVESTMENTS AMERICAN GOLD PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Larry Rakers, Portfolio Manager of Fidelity Select American Gold Portfolio Q. LARRY, HOW DID THE FUND PERFORM? A. It did well. For the six months ended August 31, 1996, the fund had a total return of 8.00%, while the Standard & Poor's 500 Index returned 2.96%. For the 12 months ended August 31, 1996, the fund returned 29.73% and the S&P 500 returned 18.73%. Q. WHAT FACTORS HELPED THE FUND POST THOSE KINDS OF PERFORMANCE NUMBERS? A. During the period, the price of gold fell substantially. This kind of drop can have a negative effect on the performance of gold stocks, because gold stocks tend to ride along with the price of gold. Fortunately, this fund bucked that trend, having been insulated from that downward move through its focus on stocks of companies that showed strong growth of production and reserves. These stocks generally have seen some capital appreciation because they have been successful in finding gold through exploration. Q. WAS YOUR FOCUS ON COMPANIES SHOWING STRONG GROWTH OF PRODUCTION AND RESERVES TYPICAL OF YOUR STOCK PICKING STRATEGY? A. Yes it was. My investment approach is based on the premise that over the long term the price of gold goes up, but you can't tell when. You also can't predict the price of gold over short periods of time. As a result, I focus on looking for companies that can post solid growth of production and reserves. Q. WHAT WERE SOME OF THE STOCKS THAT HELPED THE FUND'S PERFORMANCE? A. The stocks that showed strong growth of production and reserves included Getchell Gold, which has benefited from a number of new finds and the positive influence of a new, mining-based management team. In addition, Euro-Nevada and Franco Nevada have entered the exploration business, posting strong resource growth, after having focused exclusively on making money by buying interests in gold mines in the past. The fund also benefited over the past few years from applying a growth strategy in my selection of established producers. That is, I structured the fund to include large positions in gold companies with significant production and reserves in order to decrease risk and increase liquidity. The fund's investments in Newmont Mining, Barrick and Placer Dome helped the fund over the past few years because they have grown production reserves faster than other established companies. Q. WERE THERE SOME HOLDINGS THAT DETRACTED FROM PERFORMANCE? A. I bought Pioneer Group because it had an attractive valuation with good long-term growth potential. Unfortunately, the stock hasn't performed that well as operating results from its gold operations have been poor and management has cut back on exploration. Ashanti Goldfields also stumbled because it engaged in a few acquisitions that diluted the company's short-term earnings and cash flow. TVI Pacific, an exploration company, didn't produce any meaningful results during the period. Although this and other of the fund's foreign investments involved greater risks than U.S. investments, I felt the potential gains made them worth the additional risk. Q. INVESTORS OFTEN LOOK TO GOLD AS A HEDGE AGAINST INFLATION. WE'VE SEEN SIGNS OF IMPROVING ECONOMIC GROWTH LATELY, AND MUCH OF THE MARKET IS ANTICIPATING INTEREST-RATE INCREASES BY THE FEDERAL RESERVE BOARD TO HEAD OFF POSSIBLE FUTURE INFLATION. WHAT'S YOUR READ ON THE SITUATION, ESPECIALLY CONCERNING INFLATION AND MOVES IN THE PRICE OF GOLD? A. Most of the time, the price of gold doesn't respond to moderate, slow moves in inflation. Since inflation has been modest and generally under control, I don't anticipate that it will have a marked effect on the demand for and price of gold. Historically, the price of gold only moves sharply when the rate of inflation is high. Q. WHAT'S YOUR OUTLOOK? A. First, I'd like to make it clear to shareholders that they shouldn't expect the kind of returns the fund posted over the past six months should a similar environment of falling gold prices occur again. It was very unusual for the fund to perform as well as it did; I was very fortunate in my stock selection. That being said, I believe seasonal gold trends will be in our favor. As a result, the wind may be at our backs in terms of gold price increases. In any event, I intend to pursue the same strategy, looking for growth companies. My aim is to help investors benefit when the price of gold goes up, and hopefully to help them see some capital appreciation through growth in exploration if the price of gold does not increase. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 041 TRADING SYMBOL: FSAGX SIZE: as of August 31, 1996 more than $459 million MANAGER: Larry Rakers, since 1995; manager, Fidelity Select Paper and Forest Products Portfolio, since February 1996; Fidelity Select Precious Metals and Minerals Portfolio, since July, 1996; joined Fidelity in 1993 (checkmark) AMERICAN GOLD PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.8% SHARES VALUE (NOTE 1) CANADA - 56.7% HOLDING COMPANIES - 0.1% HOLDING COMPANY OFFICES - 0.1% Bolivar Goldfields Ltd. (a) 596,700 $ 610,546 09760Q10 MEDICAL EQUIPMENT & SUPPLIES - 0.0% DRUG DISTRIBUTORS - WHOLESALE - 0.0% Gran Colombia Resources, Inc. (a) 75,000 150,740 38490410 METALS & MINING - 1.8% METAL MINING - 0.7% Argosy Mining Corp. unit (a)(b) 375,000 739,996 04022W96 Dayton Mining Corp. (a) 10,000 72,355 23990210 First Dynasty Mines Ltd. (a) 120,000 403,435 31997410 Morgain Minerals, Inc. (a) 390,000 262,233 61688E10 Romarco Minerals, Inc. (a) 50,000 215,604 77590310 Southernera Resources Ltd. (a) 253,900 1,688,646 84390110 3,382,269 METAL MINING SERVICES - 0.6% Da Capo Resources Ltd. (a)(d) 667,800 2,049,889 23335T10 Pentland Firth Ventures Ltd. (a) 447,300 588,445 70963W10 2,638,334 MISCELLANEOUS NONMETAL MINERALS - 0.5% DIA Metropolitan Minerals Ltd. (a): Class A 42,450 620,501 25243K20 Class B 91,500 1,404,349 25243K30 Winspear Resources Ltd. (a) 165,000 84,414 97551E10 2,109,264 TOTAL METALS & MINING 8,129,867 OIL & GAS - 0.6% OIL & GAS EXPLORATION - 0.6% Southwestern Gold Corp. (a) 159,000 2,876,119 84548W10 PRECIOUS METALS - 54.2% GOLD & SILVER ORES - 5.0% Banro Resources Corp. (a) 16,000 78,933 06690910 GoldCorp, Inc. Class A (a) 110,000 1,077,289 38095610 Greenstone Resources Ltd. (a) 1,267,300 19,496,923 39573W10 Mentor Exploration & Development Co. Ltd. (a)(d) 188,000 2,129,728 58719310 Minorca Resources Ltd. (a) 353,300 761,728 60393110 23,544,601 GOLD ORES - 48.5% Agnico Eagle Mines Ltd. 1,058,700 18,492,914 00847410 Aber Resources Ltd. (a) 49,900 811,456 00291610 Barrick Gold Corp. 605,100 16,340,906 06790110 Brazilian Resources, Inc. 750,000 356,295 10591310 Bre-X Minerals Ltd. (a) 1,956,800 35,181,641 10625K10 Bresea Resources Ltd. (a) 571,900 6,060,698 10734F10 Cambior, Inc. 897,800 13,648,266 13201L10 Campbell Resources, Inc. (a) 490,800 559,582 13442210 Canaarc Resources Corp. 280,000 409,282 13722D10 Canarc Resources Corp. (warrants) (a)(b) 250,000 328,887 13722D96 Cartaway Resources Corp. (a) 110,400 150,078 14590210 Cathedral Gold Corp. (a) 201,000 440,709 14890710 Crown Resources Corp. (a) 254,600 1,527,600 22856910 SHARES VALUE (NOTE 1) Crystallex International Corp. (a) 561,500 $ 1,227,031 22942F10 Eldorado Gold Corp. (a) 100,000 628,540 28490110 Euro-Nevada Mining Corp. Ltd. 1,159,600 28,815,202 29870P10 Franco Nevada Mining Corp. 561,200 18,867,312 35186010 Geomaque Explorations Ltd. (a) 38,300 103,570 37247E10 Golden Knight Resources, Inc. (a) 196,300 1,248,171 38109010 Golden Queen Mining Co. Ltd. (a) 125,900 207,035 38115J10 Golden Star Resources Ltd. (a) 802,100 14,303,848 38119T10 Iamgold International African Mining Gold Corp. (a) 100,000 551,800 45091310 Indochina Goldfields Ltd. (a)(b) 40,000 333,272 45591392 International Pursuit Corp. (a) 300,000 1,074,366 46022D10 International Pursuit Corp. (warrants) (a) 150,000 - 46022D92 Kinross Gold Corp. (a) 1,432,400 11,358,699 49690210 Meridian Gold, Inc. (c) 2,538,000 6,492,235 58997520 Metallica Resources, Inc. (a) 264,500 985,894 59125J10 Minvita Enterprises Ltd. (a) 44,000 42,127 60454T10 Mountain Province Mining, Inc. (a) 565,800 2,108,957 62426E10 Naxos Resources Ltd. (a) 10,000 61,027 63934H10 Nevsun Resources Ltd. (a) 552,100 4,842,098 64156L10 Oliver Gold Corp. (a) 373,800 994,432 68085H10 Oliver Gold Corp. (warrants) (a) 50,000 43,486 68085H92 Orvana Minerals Corp. (a) 1,033,400 6,306,516 68759M10 Placer Dome, Inc. 465,300 11,222,291 72590610 Prime Resources Group, Inc. 301,200 2,333,433 74157L10 Queenston Mining, Inc. 4,000 7,016 74832E10 Rayrock Yellowknife Resources Inc. (a) 264,400 1,555,578 75509N10 Repadre Capital Corp. (a) 26,900 132,706 76026J10 Repadre Capital Corp. (warrants) (a)(b) 155,000 688,197 76026J93 Rio Narcea Gold Mines Ltd. (a) 50,000 157,135 76690910 Silver Standard Resources, Inc. (a) 161,700 886,351 82823L10 Sudbury Contact Mines Ltd. (a)(d) 606,500 5,651,654 86462610 TVI Pacific, Inc. (a) 3,103,000 3,787,327 87291710 TVI Pacific, Inc. (a)(b) 96,000 117,172 87291792 Teuton Resources Corp. (a) 95,000 99,287 88162H10 Valerie Gold Resources Ltd. (special warrants) (a)(b) 50,000 493,331 91890895 Viceroy Resources Corp. (a) 65,824 368,027 92564C10 War Eagle Mining, Inc. (a) 490,000 734,149 93390110 Wharf Resources Ltd. 463,000 2,740,946 96226010 William Resources, Inc. (a)(b) 1,000,000 1,388,635 76093310 227,267,167 SILVER ORES - 0.7% Pan American Silver Corp. (a) 357,700 2,875,718 69790010 Pan American Silver Corp. (warrants) (a) 87,500 - 69790092 Rea Gold Corp. (a) 95,000 183,994 75490010 3,059,712 TOTAL PRECIOUS METALS 253,871,480 TOTAL CANADA 265,638,752 FRANCE - 1.1% PRECIOUS METALS - 1.1% GOLD ORES - 1.1% Guyanor Resources SA Class B (a) 498,440 5,191,135 40299D23 GHANA - 1.8% PRECIOUS METALS - 1.8% GOLD ORES - 1.8% Ashanti Goldfields Co. Ltd. GDR 457,452 8,520,044 04374320 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PERU - 3.0% PRECIOUS METALS - 3.0% GOLD ORES - 2.9% Compania de Minas Buenaventura SA 278,182 $ 2,353,848 17999B23 Compania de Minas Buenaventura SA Class B 92,846 866,437 17999B27 Compania de Minas Buenaventura SA Class T 1,208,703 10,276,422 17999B22 13,496,707 SILVER ORES - 0.1% Compania de Minas Buenaventura SA Class B sponsored ADR 27,000 509,625 20444810 TOTAL PERU 14,006,332 SWEDEN - 0.2% PRECIOUS METALS - 0.2% GOLD & SILVER ORES - 0.2% Terra Mining AB (b) 50,000 929,031 90699E23 UNITED STATES OF AMERICA - 28.0% METALS & MINING - 1.8% COPPER ORES - 1.8% Freeport McMoRan Copper & Gold, Inc.: Class A 85,000 2,390,625 35671D10 Class B 200,000 5,875,000 35671D85 8,265,625 PRECIOUS METALS - 24.4% GOLD ORES - 24.4% Canyon Resources Corp. (a) 519,834 1,494,523 13886910 Getchell Gold Corp. (a) 841,148 36,800,225 37426510 Newmont Gold Co. 260,200 14,018,275 65163710 Newmont Mining Corp. 771,690 40,803,109 65163910 Santa Fe Pacific Gold Corp. 360,000 4,680,000 80217610 Stillwater Mining Co. (a) 340,600 6,982,300 86074Q10 Stillwater Mining Co. (a)(b) 460,600 9,442,300 86074Q90 114,220,732 SECURITIES INDUSTRY - 1.8% INVESTMENT MANAGERS - 1.8% Pioneer Group, Inc. 325,600 8,506,300 72368410 TOTAL UNITED STATES OF AMERICA 130,992,657 TOTAL COMMON STOCKS (Cost $308,256,206) 425,277,951 BULLION - 1.1% TROY OUNCES Silver Bullion (Cost $5,263,749) 1,000,332 5,191,725 83799692 CONVERTIBLE BONDS - 0.3% MOODY'S PRINCIPAL VALUE RATINGS AMOUNT (NOTE 1) CANADA - 0.3% PRECIOUS METALS - 0.3% GOLD ORES - 0.3% Pegasus Gold, Inc. euro 6 1/4%, 4/30/02 (b) (Cost $1,560,600) Baa3 $ 1,360,000 $ 1,377,000 70556KAA REPURCHASE AGREEMENTS - 7.8% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 36,668,377 36,647,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $351,727,555) $ 468,493,676 CURRENCY ABBREVIATIONS CAD - Canadian dollar LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $15,837,821 or 3.4% of net assets. 3. Purchased on an installment basis. Market value reflects only those payments made through August 31, 1996. The remaining installment aggregating 6,345,000 CAD is due July 31, 1997. 4. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Da Capo Resources Ltd. $ 6,520 $ - $ - $ 2,049,889 Mentor Exploration & Development Co. Ltd. - - - 2,129,728 Silver Standard Resources, Inc. - - - - Southernera Resources Ltd. - - - - Sudbury Contact Mines Ltd. 11,343 - - 5,651,654 Winspear Resources Ltd. 71,799 - - - Totals $ 89,662 $ - $ - $ 9,831,271 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $140,983,299 and $153,846,374, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $55,949 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balance during the period for which the loan was outstanding amounted to $9,652,000. The weighted average interest rate paid was 5.69% (see Note 6 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $1,025,000 and $1,100,000, respectively (see Note 7 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: Canada 57.0% United States (including silver bullion) 36.9 Peru 3.0 Ghana 1.8 France 1.1 Sweden 0.2 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $351,818,951. Net unrealized appreciation aggregated $116,674,725, of which $132,951,620 related to appreciated investment securities and $16,276,895 related to depreciated investment securities. At February 29, 1996, the fund had a capital loss carryforward of approximately $10,621,000 of which $2,282,000 and $8,339,000 will expire on February 29, 2000 and February 28, 2001, respectively. AMERICAN GOLD PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 468,493,676 securities, at value (including repurchase agreements of $36,647,000) (cost $351,727,555) - - See accompanying schedule Receivable for 251,023 investments sold Receivable for 5,102,912 fund shares sold Dividends 228,635 receivable Interest receivable 28,333 Redemption fees 20,049 receivable Other receivables 3,500 Prepaid expenses 29,293 TOTAL ASSETS 474,157,421 LIABILITIES Payable to $ 185,890 custodian bank Payable for 3,047,428 investments purchased Payable for fund 9,750,520 shares redeemed Accrued 209,902 management fee Other payables 343,727 and accrued expenses Collateral on 1,100,000 securities loaned, at value TOTAL LIABILITIES 14,637,467 NET ASSETS $ 459,519,954 Net Assets consist of: Paid in capital $ 337,126,058 Accumulated net (1,584,347 investment ) (loss) Accumulated 7,212,042 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 116,766,201 appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 459,519,954 15,692,666 shares outstanding NET ASSET VALUE $29.28 and redemption price per share ($459,519,954 (divided by) 15,692,666 shares) Maximum offering $30.19 price per share (100/97.00 of $29.28) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 1,110,040 INCOME Dividends Interest (including 853,659 income on securities loaned of $6,664) TOTAL INCOME 1,963,699 EXPENSES Management fee $ 1,358,101 Transfer agent 1,429,222 fees Accounting and 226,264 security lending fees Non-interested 841 trustees' compensation Custodian fees 53,165 and expenses Registration fees 29,293 Audit 15,246 Legal 1,587 Interest 1,525 Reports to 25,842 shareholders Miscellaneous 2,127 Total expenses 3,143,213 before reductions Expense (53,835 3,089,378 reductions ) NET INVESTMENT (1,125,679 INCOME (LOSS) ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 18,496,345 securities (including realized (loss) of $(364,591) on sale of investments in precious metals) Foreign (2,813 18,493,532 currency ) transactions Change in net unrealized appreciation (depreciation) on: Investment 10,822,866 securities Assets and 80 10,822,946 liabilities in foreign currencies NET GAIN (LOSS) 29,316,478 NET INCREASE $ 28,190,799 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 675,999 INFORMATION Sales charges paid to FDC Deferred sales $ 23,149 charges withheld by FDC Exchange fees $ 112,808 withheld by FSC Expense $ 51,916 reductions Directed brokerage arrangements Custodian 1,725 interest credits Transfer agent 194 interest credits $ 53,835 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ (1,125,679 $ (952,464 Net investment ) ) income (loss) Net realized 18,493,532 25,985,654 gain (loss) Change in net 10,822,946 105,571,674 unrealized appreciation (depreciation) NET INCREASE 28,190,799 130,604,864 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Share 436,516,956 656,288,557 transactions Net proceeds from sales of shares Cost of shares (458,007,490 (615,297,920 redeemed ) ) Paid in capital 1,326,594 1,700,313 portion of redemption fees NET INCREASE (20,163,940 42,690,950 (DECREASE) IN ) NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 8,026,859 173,295,814 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 451,493,095 278,197,281 period End of period $ 459,519,954 $ 451,493,095 (including accumulated net investment loss of $1,584,347 and $458,668, respectively) OTHER INFORMATION Shares Sold 15,335,521 28,496,378 Redeemed (16,298,933 (26,927,012 ) ) Net increase (963,412) 1,569,366 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 27.11 $ 18.44 $ 22.66 $ 14.15 $ 11.94 $ 13.08 beginning of period Income from Investment Operations Net investment (.07) (.06) (.05) (.11) (.05) (.06) income (loss) Net realized and 2.16 8.62 (4.25) 8.44 2.16 (1.17) unrealized gain (loss) Total from 2.09 8.56 (4.30) 8.33 2.11 (1.23) investment operations Redemption fees .08 .11 .08 .18 .10 .09 added to paid in capital Net asset value, $ 29.28 $ 27.11 $ 18.44 $ 22.66 $ 14.15 $ 11.94 end of period TOTAL RETURN B, C 8.00% 47.02% (18.62)% 60.14% 18.51% (8.72)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 459,520 $ 451,493 $ 278,197 $ 347,406 $ 168,033 $ 130,407 period (000 omitted) Ratio of expenses 1.39% A 1.39% 1.41% 1.50% 1.59% A 1.75% to average net assets Ratio of expenses 1.36% A, 1.39% 1.41% 1.49% 1.59% A 1.75% to average net E E assets after expense reductions Ratio of net (.50)% A (.27)% (.22)% (.51)% (.44)% A (.47)% investment income (loss) to average net assets Portfolio turnover 66% A 56% 34% 39% 30% A 40% rate Average $ .0258 commission rate F
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
ENERGY PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S ENERGY 14.23% 25.55% 55.88% 165.31% ENERGY 10.80% 21.79% 51.20% 157.35% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS ENERGY 25.55% 9.28% 10.25% ENERGY 21.79% 8.62% 9.91% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960909 154937 S00000000000001 Energy SP Standard & Poor 500 00060 SP001 1986/08/31 9700.00 10000.00 1986/09/30 9594.66 9173.00 1986/10/31 9849.23 9702.28 1986/11/30 10051.13 9938.05 1986/12/31 10121.36 9684.63 1987/01/31 11192.31 10989.15 1987/02/28 11411.76 11423.22 1987/03/31 12359.82 11753.35 1987/04/30 12008.69 11648.74 1987/05/31 12430.05 11750.09 1987/06/30 12860.18 12343.47 1987/07/31 13527.33 12969.28 1987/08/31 13448.33 13453.04 1987/09/30 13158.64 13158.41 1987/10/31 9682.44 10324.09 1987/11/30 9278.64 9473.39 1987/12/31 9939.20 10194.31 1988/01/31 10309.32 10623.49 1988/02/29 10679.45 11118.55 1988/03/31 11437.75 10774.98 1988/04/30 11871.07 10894.59 1988/05/31 11437.75 10989.37 1988/06/30 11564.13 11493.78 1988/07/31 11636.35 11450.10 1988/08/31 11194.01 11060.80 1988/09/30 11067.63 11531.99 1988/10/31 11166.93 11852.58 1988/11/30 11194.01 11683.09 1988/12/31 11523.72 11887.54 1989/01/31 12394.48 12757.71 1989/02/28 12199.95 12440.04 1989/03/31 12903.97 12729.90 1989/04/30 13339.35 13390.58 1989/05/31 13496.83 13932.90 1989/06/30 13774.73 13853.48 1989/07/31 14349.07 15104.45 1989/08/31 14664.02 15400.50 1989/09/30 14895.61 15337.35 1989/10/31 14793.71 14981.53 1989/11/30 15349.52 15287.15 1989/12/31 16458.81 15654.04 1990/01/31 15723.96 14603.66 1990/02/28 16213.86 14792.04 1990/03/31 16223.28 15184.03 1990/04/30 15676.85 14804.43 1990/05/31 16628.39 16247.86 1990/06/30 16236.49 16137.38 1990/07/31 17342.39 16085.74 1990/08/31 17654.05 14631.59 1990/09/30 17603.78 13919.03 1990/10/31 16698.96 13859.18 1990/11/30 16517.99 14754.48 1990/12/31 15719.42 15166.13 1991/01/31 14701.24 15827.37 1991/02/28 16072.67 16959.03 1991/03/31 15854.49 17369.44 1991/04/30 16031.11 17411.13 1991/05/31 16124.61 18163.29 1991/06/30 15406.25 17331.41 1991/07/31 16197.38 18139.05 1991/08/31 16509.67 18568.95 1991/09/30 16343.12 18258.85 1991/10/31 16832.37 18503.51 1991/11/30 15583.21 17757.82 1991/12/31 15724.95 19789.32 1992/01/31 14883.48 19421.24 1992/02/29 14904.52 19673.71 1992/03/31 14473.27 19290.07 1992/04/30 15461.99 19857.20 1992/05/31 16198.28 19954.50 1992/06/30 15396.73 19657.18 1992/07/31 15808.01 20461.16 1992/08/31 16092.74 20041.71 1992/09/30 16187.65 20278.20 1992/10/31 15491.64 20349.17 1992/11/30 15133.08 21043.08 1992/12/31 15349.36 21301.91 1993/01/31 15928.18 21480.84 1993/02/28 16978.63 21772.98 1993/03/31 17846.85 22232.39 1993/04/30 18190.15 21694.37 1993/05/31 18737.14 22275.78 1993/06/30 18983.83 22340.38 1993/07/31 18844.40 22251.02 1993/08/31 20335.22 23094.33 1993/09/30 20217.24 22916.50 1993/10/31 19927.65 23390.88 1993/11/30 17514.46 23168.66 1993/12/31 18289.46 23449.00 1994/01/31 19269.05 24246.27 1994/02/28 18623.41 23589.20 1994/03/31 17721.74 22560.71 1994/04/30 19075.44 22849.48 1994/05/31 19277.30 23224.22 1994/06/30 19176.37 22655.22 1994/07/31 19467.94 23398.31 1994/08/31 19142.73 24357.64 1994/09/30 18996.94 23760.88 1994/10/31 20073.51 24295.50 1994/11/30 18839.94 23410.66 1994/12/31 18364.89 23757.84 1995/01/31 17925.15 24373.88 1995/02/28 18631.05 25323.73 1995/03/31 19649.39 26071.03 1995/04/30 20253.27 26838.83 1995/05/31 20775.86 27911.57 1995/06/30 20171.98 28559.96 1995/07/31 20648.12 29507.01 1995/08/31 20497.15 29581.07 1995/09/30 20508.76 30829.39 1995/10/31 19626.16 30719.33 1995/11/30 20752.63 32067.91 1995/12/31 22291.85 32685.54 1996/01/31 22636.26 33798.15 1996/02/29 22529.38 34111.46 1996/03/31 24037.67 34439.95 1996/04/30 25201.69 34947.60 1996/05/31 25462.14 35848.90 1996/06/30 25933.44 35985.48 1996/07/31 24767.61 34395.64 1996/08/30 25735.00 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960909 154942 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Energy Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $25,735 - a 157.35% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Royal Dutch Petroleum Co. ADR 5.8 British Petroleum PLC ADR 5.2 Schlumberger Ltd. 4.7 Total SA sponsored ADR 4.3 Amerada Hess Corp. 4.2 Kerr-McGee Corp. 4.2 Phillips Petroleum Co. 4.1 Occidental Petroleum Corp. 4.0 Unocal Corp. 4.0 Atlantic Richfield Co. 3.8 TOP INDUSTRIES AS OF AUGUST 31, 1996 Crude Petroleum & Gas 38.0% Oil & Gas Exploration 22.9% Drilling 12.3% Oil & Gas Services 9.4% Holding Companies 3.5% All Others 13.9% * Row: 1, Col: 1, Value: 13.9 Row: 1, Col: 2, Value: 3.5 Row: 1, Col: 3, Value: 9.4 Row: 1, Col: 4, Value: 12.3 Row: 1, Col: 5, Value: 22.9 Row: 1, Col: 6, Value: 38.0 * INCLUDES SHORT-TERM INVESTMENTS ENERGY PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: Effective October 1, 1996, after the period ended, Stephen DuFour (right) became Portfolio Manager of Fidelity Select Energy Portfolio. The following is an interview with Albert Ruback, who managed the fund during the period covered by this report, and Stephen DuFour, who discusses his outlook. Q. ALBERT, HOW DID THE FUND PERFORM? A. It did very well. For the six months ended August 31, 1996, the fund had a total return of 14.23%, while the Standard & Poor's 500 Index returned 2.96%. For the 12 months ended August 31, 1996, the fund returned 25.55%, and the S&P 500 had a total return of 18.73%. Q. WHAT HELPED THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS? A. The fund was helped by a generally stronger environment for prices of both natural gas and oil. Natural gas prices stayed firm during the summer - - typically the season when they would weaken - because of very low storage levels that required producers to keep producing at very high levels. Oil prices also remained firm because of two reasons. First, there were some delays in production coming on stream from non-OPEC (Organization of Petroleum Exporting Countries) sources. Second, there was uncertainty about Iraq's re-entry into the world oil market. It was also significant that world oil demand increased at a good clip, requiring that production remain high. Q. HOW HAS THE RECENT CONFLICT BETWEEN THE U.S. AND IRAQ AFFECTED THE FUND'S HOLDINGS? A. It hasn't, really, even though I don't think Iraq will produce oil during the rest of 1996 and perhaps 1997, which will probably keep oil prices at present levels. That's because I've chosen stocks for the fund not for their sensitivity to commodity prices, but because of fundamental considerations such as lower cost structures or good production profiles. A higher oil price will be a "tide that lifts all boats." The stocks I've picked are those that I thought would have gone up anyway, even though some of them should be among the biggest beneficiaries of higher-than-expected oil prices. Q. WHAT WERE SOME OF THE STOCKS WHOSE PERFORMANCE HELPED THE FUND? A. Royal Dutch Petroleum and Shell Transport have done very well due to big cost-cutting programs and positive production profiles for the next few years. The future benefits of these cost-reduction programs became evident in the first quarter of 1996, and the stocks responded. British Petroleum has continued to lower its costs through restructuring and has increased its production profile as well. Although these and other foreign investments involve greater risks than U.S. investments, I felt the potential gains made them worth taking on the additional risk. Domestically, Unocal has cut costs and sold off marginally profitable oil fields. Its stock reacted favorably since the completion of these transactions. Q. AND WHICH STOCKS DIDN'T PERFORM AS WELL AS YOU WOULD HAVE LIKED? A. Stocks in the fund generally performed well, so the stocks that remained flat were the weaker performers. Among those was Amerada Hess, which suffered from negative inventory and accounting issues tied to its restructuring, and negative sentiment toward the company's refining and marketing business. Occidental Petroleum also wavered, largely because prices for chemicals - where Occidental has a significant stake - were weak. Q. STEVE, LET'S DISCUSS YOUR OUTLOOK. WHAT DO YOU SEE ON THE HORIZON? A. The outlook for the energy industry is rapidly changing. Two months ago, the consensus view on oil stocks was that they were overvalued given that oil prices were headed lower. Following recent events in Iraq, oil prices have firmed and the short-term outlook for the stocks has improved. My strategy will be to focus on the energy service and exploration and production sectors. The large oil companies have used the recent strength in commodity prices to improve their balance sheets and are now looking to increase production. At the same time, I'll underweight the fund in commodity chemical and integrated oil companies. The commodity chemical industry has expanded too rapidly, to the point where supply currently exceeds demand. There are a number of very good stories in the integrated oil industry, but, taken as a whole, they do not currently offer the same positive prospects as the smaller exploration and production companies. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 060 TRADING SYMBOL: FSENX SIZE: as of August 31, 1996, more than $138 million MANAGER: Stephen Dufour, since October 1996; manager, Fidelity Select Transportation Portfolio, since 1994; Fidelity Select Multimedia Portfolio, 1993-February 1996; equity analyst, media, 1992-1993; joined Fidelity in 1992 (checkmark) ENERGY PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.1% SHARES VALUE (NOTE 1) CHEMICALS & PLASTICS - 0.4% PLASTICS & SYNTHETIC RESINS - 0.4% ARCO Chemical Co. 12,800 $ 614,400 00192010 COAL - 0.4% MAPCO, Inc. 10,000 538,750 56509710 CONGLOMERATES - 0.1% Suncor, Inc. 5,000 176,500 86722910 CONSTRUCTION - 1.3% HEAVY CONSTRUCTION - 1.3% McDermott (J. Ray) SA 79,200 1,841,400 58099A22 ENERGY SERVICES - 21.7% DRILLING - 12.3% British Petroleum PLC ADR 63,429 7,468,765 11088940 Falcon Drilling, Inc. (a) 20,000 452,500 30591410 Royal Dutch Petroleum Co. ADR 55,700 8,320,188 78025770 Transocean Drilling AS (a) 50,000 1,329,890 93499492 17,571,343 OIL & GAS SERVICES - 9.4% BJ Services Co. (a) 15,000 564,375 05548210 Dresser Industries, Inc. 15,000 435,000 26159710 Halliburton Co. 64,200 3,378,525 40621610 Schlumberger Ltd. 79,500 6,707,813 80685710 Tidewater, Inc. 16,000 614,000 88642310 Weatherford Enterra, Inc. (a) 10,000 287,500 94707110 Western Atlas, Inc. (a) 22,800 1,385,100 95767410 13,372,313 TOTAL ENERGY SERVICES 30,943,656 GAS - 4.1% GAS DISTRIBUTION - 0.5% Aquila Gas Pipeline Corp. 57,900 709,275 03839B10 GAS TRANSMISSION - 1.8% Enron Corp. 50,900 2,042,363 29356110 Williams Companies, Inc. 10,000 498,750 96945710 2,541,113 GAS TRANSMISSION & DISTRIBUTION - 1.8% Gas Natural SDG SA, Series E 4,700 900,347 36699692 Questar Corp. 47,500 1,721,875 74835610 2,622,222 TOTAL GAS 5,872,610 HOLDING COMPANIES - 3.5% Shell Transport & Trading Co. PLC ADR 55,000 4,812,500 82270360 INSURANCE - 0.1% PROPERTY-CASUALTY & REINSURANCE - 0.1% Highlands Insurance Group, Inc. (a) 6,120 116,280 43103210 OIL & GAS - 63.3% CRUDE PETROLEUM & GAS - 38.0% Anadarko Petroleum Corp. 31,700 1,672,175 03251110 Apache Corp. 9,015 264,816 03741110 Atlantic Richfield Co. 45,800 5,347,150 04882510 Bellwether Exploration Co. (a) 47,000 252,625 07989520 Brown (Tom), Inc. (a) 150,000 2,400,000 11566020 Burlington Resources, Inc. 93,700 3,993,963 12201410 Cairn Energy USA, Inc. (a) 40,000 410,000 12776210 Canada Occidental Petroleum Ltd. 40,000 665,083 13642010 SHARES VALUE (NOTE 1) Chesapeake Energy Corp. (a) 68,100 $ 3,660,375 16516710 Coho Resources, Inc. (a) 47,000 287,875 19248110 Elan Energy, Inc. (a) 20,000 178,330 28390410 Flores & Rucks, Inc. (a) 80,700 2,653,013 34039C10 Forcenergy Gas Exploration, Inc. (a) 10,000 216,250 34520610 Global Natural Resources, Inc. (a) 102,400 1,561,600 37935510 NGC Corp. 1,198 18,120 62912110 Norsk Hydro AS ADR 77,700 3,545,063 65653160 Occidental Petroleum Corp. 246,600 5,733,450 67459910 Paramount Resources Ltd. 29,200 386,274 69932010 Renaissance Energy Ltd. (a) 102,208 2,875,942 75966610 Renaissance Energy Ltd. (a)(b) 10,300 291,705 75966692 Rio Alto Exploration Ltd. (a) 262,500 1,371,734 76689210 Santa Fe Energy Resources, Inc. (a) 319,000 3,748,250 80201210 Stone Energy Corp. (a) 10,000 196,250 86164210 Swift Energy Co. (a) 75,000 1,865,625 87073810 Total SA sponsored ADR 164,800 6,118,200 89151E10 Tullow Oil PLC (a) 846,360 1,500,150 89999C22 Ulster Petroleums Ltd. (a) 79,400 496,159 90384030 Vintage Petroleum, Inc. 95,700 2,416,425 92746010 54,126,602 OIL & GAS EXPLORATION - 22.9% Amerada Hess Corp. 117,600 5,982,900 02355110 Chieftain International, Inc. (a) 116,200 2,335,465 16867C10 Kerr-McGee Corp. 103,700 5,949,788 49238610 Louisiana Land & Exploration Co. 35,400 2,013,375 54626810 Petro-Canada 10,000 129,362 71644E10 Phillips Petroleum Co. 144,300 5,844,150 71850710 Saga Petroleum AS Class B 20,000 276,118 84099794 USX-Marathon Group 190,100 3,968,338 90290582 Union Pacific Resources Group, Inc. 19,200 523,200 90783410 Unocal Corp. 164,915 5,648,339 91528910 32,671,035 OIL FIELD EQUIPMENT - 0.2% Cooper Cameron Corp. (a) 5,600 295,400 21664010 PETROLEUM REFINERS - 2.2% Coastal Corp. (The) 10,000 396,250 19044110 Pennzoil Co. 50,000 2,668,750 70990310 3,065,000 TOTAL OIL & GAS 90,158,037 POLLUTION CONTROL - 0.2% SANITARY SERVICES - 0.2% USA Waste Services, Inc. (a) 10,000 275,000 90291710 TOTAL COMMON STOCKS (Cost $116,463,383) 135,349,133 REPURCHASE AGREEMENTS - 4.9% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 7,016,090 7,012,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $123,475,383) $ 142,361,133 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $291,705 or 0.2% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $51,368,801 and $50,479,400, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $17,593 for the period (see Note 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $3,655,000 and $3,808,000, respectively (see Note 7 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $2,721,000 and $2,678,500, respectively. The weighted average interest rate paid was 5.6% (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 68.4% United Kingdom 8.6 Canada 6.3 Netherlands 5.8 France 4.3 Norway 3.6 Panama 1.3 Ireland 1.1 Others (individually less than 1%) 0.6 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $123,964,905. Net unrealized appreciation aggregated $18,396,228, of which $20,465,682 related to appreciated investment securities and $2,069,454 related to depreciated investment securities. ENERGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 142,361,133 securities, at value (including repurchase agreements of $7,012,000) (cost $123,475,383) - - See accompanying schedule Cash 425 Receivable for 524,356 fund shares sold Dividends 323,846 receivable Redemption fees 607 receivable Prepaid expenses 12,257 TOTAL ASSETS 143,222,624 LIABILITIES Payable for fund $ 783,382 shares redeemed Accrued 69,576 management fee Other payables 157,734 and accrued expenses Collateral on 3,808,000 securities loaned, at value TOTAL LIABILITIES 4,818,692 NET ASSETS $ 138,403,932 Net Assets consist of: Paid in capital $ 113,520,048 Undistributed net 757,563 investment income Accumulated 5,240,769 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 18,885,552 appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 138,403,932 6,670,262 shares outstanding NET ASSET VALUE $20.75 and redemption price per share ($138,403,932 (divided by) 6,670,262 shares) Maximum offering $21.39 price per share (100/97.00 of $20.75) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 1,675,685 INCOME Dividends Interest (including 208,785 income on securities loaned of $8,639) TOTAL INCOME 1,884,470 EXPENSES Management fee $ 433,877 Transfer agent 592,762 fees Accounting and 72,361 security lending fees Non-interested 264 trustees' compensation Custodian fees 8,797 and expenses Registration fees 12,257 Audit 14,448 Legal 482 Interest 833 Miscellaneous 1,065 Total expenses 1,137,146 before reductions Expense (10,689 1,126,457 reductions ) NET INVESTMENT 758,013 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 5,760,491 securities Foreign (35 5,760,456 currency ) transactions Change in net unrealized appreciation (depreciation) on: Investment 9,548,512 securities Assets and (14 9,548,498 liabilities in ) foreign currencies NET GAIN (LOSS) 15,308,954 NET INCREASE $ 16,066,967 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 308,577 INFORMATION Sales charges paid to FDC Deferred sales $ 6,472 charges withheld by FDC Exchange fees $ 38,528 withheld by FSC Expense $ 10,523 reductions Directed brokerage arrangements Custodian 82 interest credits Transfer agent 84 interest credits $ 10,689 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ 758,013 $ 1,171,293 Net investment income Net realized 5,760,456 9,827,602 gain (loss) Change in net 9,548,498 9,441,160 unrealized appreciation (depreciation) NET INCREASE 16,066,967 20,440,055 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (348,530 (687,111 shareholders ) ) From net investment income From net (5,671,012 (2,283,890 realized gain ) ) TOTAL (6,019,542 (2,971,001 DISTRIBUTIONS ) ) Share 123,938,431 161,715,061 transactions Net proceeds from sales of shares Reinvestment of 5,913,439 2,918,567 distributions Cost of shares (121,426,029 (158,608,994 redeemed ) ) Paid in capital 255,149 159,215 portion of redemption fees NET INCREASE 8,680,990 6,183,849 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 18,728,415 23,652,903 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 119,675,517 96,022,614 period End of period $ 138,403,932 $ 119,675,517 (including undistributed net investment income of $757,563 and $486,372, respectively) OTHER INFORMATION Shares Sold 6,067,115 8,981,770 Issued in 301,091 162,874 reinvestment of distributions Redeemed (6,007,492 (8,799,673 ) ) Net increase 360,714 344,971 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 18.97 $ 16.10 $ 16.73 $ 15.84 $ 14.70 $ 15.43 beginning of period Income from Investment Operations Net investment .11 .18 .07 .06 .23 .17 income Net realized and 2.50 3.13 (.11) 1.35 1.16 (.75) unrealized gain (loss) Total from 2.61 3.31 (.04) 1.41 1.39 (.58) investment operations Less Distributions From net (.05) (.11) (.08) (.03) (.27) (.16) investment income From net (.82) (.36) (.54) (.57) - (.02) realized gain Total (.87) (.47) (.62) (.60) (.27) (.18) distributions Redemption fees .04 .03 .03 .08 .02 .03 added to paid in capital Net asset value, $ 20.75 $ 18.97 $ 16.10 $ 16.73 $ 15.84 $ 14.70 end of period TOTAL RETURN B, C 14.23% 20.92% .04% 9.69% 9.81% (3.55)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 138,404 $ 119,676 $ 96,023 $ 145,490 $ 179,133 $ 77,334 period (000 omitted) Ratio of expenses 1.57% A 1.63% 1.85% 1.67% 1.71% A 1.78% to average net assets Ratio of expenses 1.55% A, 1.63% 1.85% 1.66% 1.71% A 1.78% to average net E E assets after expense reductions Ratio of net 1.05% A 1.04% .42% .37% 1.88% A 1.16% investment income to average net assets Portfolio turnover 74% A 97% 106% 157% 72% A 81% rate Average $ .0418 commission rate F
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
ENERGY SERVICE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S ENERGY SERVICE 15.13% 32.25% 70.06% 134.30% ENERGY SERVICE 11.68% 28.28% 64.96% 127.27% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS ENERGY SERVICE 32.25% 11.20% 8.89% ENERGY SERVICE 28.28% 10.53% 8.56% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960909 155539 S00000000000001 Energy Service SP Standard & Poor 500 00043 SP001 1986/08/31 9700.00 10000.00 1986/09/30 9542.64 9173.00 1986/10/31 9205.45 9702.28 1986/11/30 9520.16 9938.05 1986/12/31 9621.32 9684.63 1987/01/31 10700.35 10989.15 1987/02/28 11149.94 11423.22 1987/03/31 12206.49 11753.35 1987/04/30 12206.49 11648.74 1987/05/31 13150.64 11750.09 1987/06/30 14443.22 12343.47 1987/07/31 15387.37 12969.28 1987/08/31 14218.42 13453.04 1987/09/30 13757.59 13158.41 1987/10/31 8845.77 10324.09 1987/11/30 7879.14 9473.39 1987/12/31 8486.10 10194.31 1988/01/31 8823.29 10623.49 1988/02/29 9598.84 11118.55 1988/03/31 10160.83 10774.98 1988/04/30 10363.15 10894.59 1988/05/31 9655.04 10989.37 1988/06/30 9104.29 11493.78 1988/07/31 8958.17 11450.10 1988/08/31 9126.77 11060.80 1988/09/30 8733.37 11531.99 1988/10/31 8441.14 11852.58 1988/11/30 8081.46 11683.09 1988/12/31 8452.38 11887.54 1989/01/31 8969.41 12757.71 1989/02/28 9070.57 12440.04 1989/03/31 9643.80 12729.90 1989/04/30 10104.63 13390.58 1989/05/31 10284.47 13932.90 1989/06/30 10621.67 13853.48 1989/07/31 11217.38 15104.45 1989/08/31 11745.65 15400.50 1989/09/30 11577.06 15337.35 1989/10/31 11003.82 14981.53 1989/11/30 11947.97 15287.15 1989/12/31 13476.59 15654.04 1990/01/31 12611.12 14603.66 1990/02/28 13802.55 14792.04 1990/03/31 14465.70 15184.03 1990/04/30 13701.39 14804.43 1990/05/31 16005.56 16247.86 1990/06/30 15185.05 16137.38 1990/07/31 16612.51 16085.74 1990/08/31 16320.28 14631.59 1990/09/30 16005.56 13919.03 1990/10/31 13993.63 13859.18 1990/11/30 14207.18 14754.48 1990/12/31 13713.10 15166.13 1991/01/31 13093.87 15827.37 1991/02/28 15199.25 16959.03 1991/03/31 14017.09 17369.44 1991/04/30 14084.64 17411.13 1991/05/31 14456.18 18163.29 1991/06/30 12564.71 17331.41 1991/07/31 13510.44 18139.05 1991/08/31 13364.08 18568.95 1991/09/30 12136.88 18258.85 1991/10/31 12317.02 18503.51 1991/11/30 10842.13 17757.82 1991/12/31 10493.11 19789.32 1992/01/31 10346.75 19421.24 1992/02/29 10560.66 19673.71 1992/03/31 9806.33 19290.07 1992/04/30 10616.96 19857.20 1992/05/31 11461.36 19954.50 1992/06/30 10797.10 19657.18 1992/07/31 11247.45 20461.16 1992/08/31 11821.64 20041.71 1992/09/30 12181.92 20278.20 1992/10/31 11551.43 20349.17 1992/11/30 11315.00 21043.08 1992/12/31 10853.39 21301.91 1993/01/31 11281.22 21480.84 1993/02/28 12395.83 21772.98 1993/03/31 13375.34 22232.39 1993/04/30 14096.35 21694.37 1993/05/31 14749.89 22275.78 1993/06/30 14671.02 22340.38 1993/07/31 14873.84 22251.02 1993/08/31 15392.17 23094.33 1993/09/30 14941.45 22916.50 1993/10/31 14727.36 23390.88 1993/11/30 13172.37 23168.66 1993/12/31 13127.88 23449.00 1994/01/31 13252.26 24246.27 1994/02/28 13184.42 23589.20 1994/03/31 12200.68 22560.71 1994/04/30 12838.58 22849.48 1994/05/31 13410.48 23224.22 1994/06/30 13818.98 22655.22 1994/07/31 14075.75 23398.31 1994/08/31 13515.52 24357.64 1994/09/30 14029.07 23760.88 1994/10/31 14589.29 24295.50 1994/11/30 13830.65 23410.66 1994/12/31 13202.37 23757.84 1995/01/31 13285.33 24373.88 1995/02/28 14186.03 25323.73 1995/03/31 14968.22 26071.03 1995/04/30 15880.77 26838.83 1995/05/31 16295.57 27911.57 1995/06/30 15738.56 28559.96 1995/07/31 16520.74 29507.01 1995/08/31 17184.42 29581.07 1995/09/30 17231.82 30829.39 1995/10/31 15738.56 30719.33 1995/11/30 16627.40 32067.91 1995/12/31 18598.72 32685.54 1996/01/31 19003.57 33798.15 1996/02/29 19739.67 34111.46 1996/03/31 21297.74 34439.95 1996/04/30 22899.38 34947.60 1996/05/31 22566.25 35848.90 1996/06/30 22615.61 35985.48 1996/07/31 21369.47 34395.64 1996/08/30 22726.65 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960909 155544 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Energy Service Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $22,727 - a 127.27% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Schlumberger Ltd. 7.5 Halliburton Co. 6.7 Western Atlas, Inc. 6.4 BJ Services Co. 5.6 Weatherford Enterra, Inc. 5.3 Dresser Industries, Inc. 4.5 Baker Hughes, Inc. 4.0 Transocean Drilling AS 3.8 McDermott (J. Ray) SA 2.8 Sonat Offshore Drilling, Inc. 2.6 TOP INDUSTRIES AS OF AUGUST 31, 1996 Oil & Gas Services 50.3% Drilling 18.4% Oil Field Equipment 3.0% Heavy Construction 2.8% Crude Petroleum & Gas 0.9% All Others 24.6% * Row: 1, Col: 1, Value: 24.6 Row: 1, Col: 2, Value: 0.9 Row: 1, Col: 3, Value: 2.8 Row: 1, Col: 4, Value: 3.0 Row: 1, Col: 5, Value: 18.4 Row: 1, Col: 6, Value: 50.3 * INCLUDES SHORT-TERM INVESTMENTS ENERGY SERVICE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Dan Pickering, Portfolio Manager of Fidelity Select Energy Service Portfolio Q. HOW DID THE FUND PERFORM, DAN? A. The fund did well. For the six- and 12-months ended August 31, 1996, the fund returned 15.13% and 32.25%, respectively. By comparison, the Standard & Poor's 500 Index returned 2.96% for the six-month period and 18.73% for the year. Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE DURING THE PERIOD? A. During the past six months, we've seen the positive scenario for energy service continue. Fairly strong commodity prices for oil and gas generated a lot of confidence in the industry and have encouraged increased oil and gas exploration. In addition, customers are using technology developed by the oil service companies, such as horizontal and directional drilling, to reach new pools of oil and gas. This increased level of activity has boosted the revenues and profits of the service companies. Q. HAVE YOU MADE ANY SIGNIFICANT CHANGES TO THE FUND'S AREAS OF EMPHASIS DURING THE PAST SIX MONTHS? A. No, not really. You'll notice that the top holdings in the fund as of August 31, 1996, were very similar to the fund's top holdings six months earlier. I maintained a high weighting in international service companies such as Schlumberger and Halliburton, and they were solid performers. I continued to believe that these companies were well-positioned to benefit from the increased level of activity mentioned above. I also believed that Wall Street expectations were too low and that the market didn't fully appreciate the leverage these companies had to grow their revenues. I also continued to keep the fund focused on the deep water industry. There is a mini-boom occurring in offshore areas where water depths are 1,000 feet or more. New technology is allowing companies to drill where they previously could not. Q. WHERE ELSE DID YOU FIND OPPORTUNITIES? A. I've increased the fund's investments in the offshore construction industry because of the increase in offshore construction and deep water drilling activity. Specifically, I increased the fund's holdings in J. Ray McDermott and Coflexip, two companies that are involved in the construction and installation of offshore pipelines and platforms. Q. WHAT WERE YOU SELLING? A. Six months ago the fund had a decent position in oil companies such as Royal Dutch, British Petroleum, Exxon and Mobil. During the period, I took the opportunity to sell these companies in order to increase the fund's exposure to the energy service sector. Q. WHAT INVESTMENTS PROVED DISAPPOINTING? A. The fund's holding in Weatherford Enterra was a bit disappointing; the stock was down as much as 20% during the period. Although I have tremendous confidence in the company, its stock didn't perform as well as I had hoped. Last year's merger with Enterra hasn't progressed as smoothly as either the company or I had expected. In addition, there have been some internal problems that have depressed earnings. Another regret was that since service companies outperformed oil companies, I wish I'd moved more quickly to shift the fund's investments out of the oils and into the service companies. Q. WHAT'S YOUR OUTLOOK GOING FORWARD? A. I remain optimistic about the industry. In the past couple of years, the energy service sector has undergone a shift; it's become more consolidated, which I think is good for pricing power. In addition, I still think that the stocks in the sector are conservatively valued, and that there's a potential for strong revenue and earnings growth. I think that oil companies are going to spend more money in 1997 than they did in 1996, and that business trends for service companies will continue to strengthen. My goal is to position this fund so it can participate in as much of the upside potential as possible. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 043 TRADING SYMBOL: FSESX SIZE: as of August 31, 1996, more than $343 million MANAGER: Daniel Pickering, since 1994; manager, Fidelity Select Natural Gas Portfolio, since February 1995; equity analyst, energy services and hotel industry since 1994; joined Fidelity in 1994 (checkmark) ENERGY SERVICE PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 79.3% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 0.9% FABRICATED PIPE & FITTINGS - 0.9% Coflexip Sponsored ADR 157,000 $ 3,120,371 19238410 COMPUTER SERVICES & SOFTWARE - 0.1% CAD/CAM/CAE - 0.1% Landmark Graphics Corp. (a) 7,700 229,075 51491310 CONSTRUCTION - 2.8% HEAVY CONSTRUCTION - 2.8% McDermott (J. Ray) SA 434,100 10,092,825 58099A22 ENERGY SERVICES - 68.4% DRILLING - 18.4% Cliffs Drilling Co. (a) 200,000 5,700,000 18682C10 Diamond Offshore Drilling, Inc. (a) 10,000 510,000 25271C10 ENSCO International, Inc. (a) 176,600 5,165,550 26874Q10 Falcon Drilling, Inc. (a) 128,800 2,914,100 30591410 Global Marine, Inc. (a) 37,200 534,750 37935240 Helmerich & Payne, Inc. 114,200 4,510,900 42345210 Marine Drilling Companies, Inc. (a) 97,900 856,625 56824020 Nabors Industries, Inc. (a) 602,700 8,965,163 62956810 Noble Drilling Corp. (a) 332,650 4,740,263 65504210 Patterson Energy, Inc. (a) 20,168 398,318 70341410 Rowan Companies, Inc. (a) 60,000 922,500 77938210 Smedvig AS 302,900 5,859,258 79799892 Smedvig Series B 75,725 1,429,375 79799897 Sonat Offshore Drilling, Inc. 168,000 9,177,000 83542010 Transocean Drilling AS (a) 502,400 13,362,744 93499492 UTI Energy Corp. (a) 17,800 264,775 90338710 65,311,321 OIL & GAS SERVICES - 50.0% BJ Services Co. (a) 527,788 19,858,024 05548210 Baker Hughes, Inc. 474,500 14,353,625 05722410 Carbo Ceramics, Inc. 15,700 294,375 14078110 Dawson Geophysical Co. (a) 69,500 642,875 23935910 Dreco Energy Services Ltd. Class A (a) 40,000 1,030,000 26152820 Dresser Industries, Inc. 544,500 15,790,500 26159710 Energy Ventures, Inc. (a) 197,600 6,496,100 29274010 Global Industries Ltd. (a) 190,400 2,522,800 37933610 Gulfmark International, Inc. (a) 27,500 990,000 40262810 Halliburton Co. 451,100 23,739,138 40621610 Input/Output, Inc. (a) 34,600 1,223,975 45765210 Lone Star Technologies, Inc. (a) 55,100 902,263 54231210 McDermott International, Inc. 165,800 3,440,350 58003710 Numar Corp. (a) 40,000 615,000 67052E10 Oceaneering International, Inc. (a) 2,000 34,250 67523210 Pool Energy Services Co. (a) 217,500 2,528,438 73278810 Pride Petroleum Services, Inc. (a) 35,600 511,750 74154110 RPC Energy Services, Inc. (a) 6,000 66,750 74966010 Schlumberger Ltd. 316,400 26,696,250 80685710 Seacor Holdings, Inc. (a) 65,300 2,971,150 81190410 Smith International, Inc. (a) 30,800 1,070,300 83211010 Tidewater, Inc. 211,265 8,107,294 88642310 Varco International, Inc. (a) 117,000 1,886,625 92212610 Weatherford Enterra, Inc. (a) 659,600 18,963,500 94707110 Western Atlas, Inc. (a) 372,400 22,623,300 95767410 177,358,632 TOTAL ENERGY SERVICES 242,669,953 SHARES VALUE (NOTE 1) ENGINEERING - 0.7% ARCHITECTS & ENGINEERS - 0.7% Stolt Comex Seaway SA (a) 198,500 $ 2,357,188 86199A22 GAS - 1.2% GAS DISTRIBUTION - 0.2% Aquila Gas Pipeline Corp. 46,600 570,850 03839B10 K N Energy, Inc. 10,000 343,750 48262010 914,600 GAS TRANSMISSION - 0.3% Enron Corp. 26,300 1,055,288 29356110 GAS TRANSMISSION & DISTRIBUTION - 0.7% Tejas Gas Corp. (a) 70,100 2,435,975 87907510 TOTAL GAS 4,405,863 OIL & GAS - 4.3% CRUDE PETROLEUM & GAS - 0.9% Anadarko Petroleum Corp. 32,900 1,735,475 03251110 Unit Corp. (a) 220,400 1,405,050 90921810 3,140,525 OIL & GAS EXPLORATION - 0.4% Petroleum Geo-Services AS sponsored ADR (a) 60,400 1,645,900 71659710 OIL FIELD EQUIPMENT - 3.0% Camco International, Inc. 25,700 870,588 13263210 Cooper Cameron Corp. (a) 145,788 7,690,317 21664010 Dailey Petroleum Services Corp. 60,000 547,500 23380G10 Drilex International, Inc. (a) 100,000 1,400,000 26204410 10,508,405 TOTAL OIL & GAS 15,294,830 RAILROADS - 0.3% RAILROAD EQUIPMENT - 0.3% Trinity Industries, Inc. 35,000 1,133,125 89652210 SHIPPING - 0.6% DEEP SEA DOMESTIC TRANSPORT - 0.4% Trico Marine Services, Inc. (a) 55,000 1,292,500 89610610 SHIPPING - 0.2% Hvide Marine, Inc. 50,000 593,750 44851510 TOTAL SHIPPING 1,886,250 TOTAL COMMON STOCKS (Cost $268,057,451) 281,189,480 NONCONVERTIBLE BONDS - 0.3% MOODY'S PRINCIPAL VALUE RATINGS AMOUNT (NOTE 1) ENERGY SERVICES - 0.3% OIL & GAS SERVICES - 0.3% Tuboscope Vetco International, Inc. 10 3/4%, 4/15/03 (Cost $900,000) B $ 900,000 938,250 898602AA REPURCHASE AGREEMENTS - 20.4% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 (Note 3) $ 72,560,302 $ 72,518,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $341,475,451) $ 354,645,730 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $432,592,501 and $420,393,243 respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $199,604 for the period (see Note 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $9,177,000 and $9,408,000, respectively (see Note 7 of Notes to Financial Statements). The fund participated in the interfund lending program as a borrower and a lender. As a borrower, the maximum loan and the average daily loan balance during the period for which the loan was outstanding amounted to $18,905,000 and $6,781,250, respectively. The weighted average interest rate was 5.4%. As a lender, the maximum loan and the average daily loan balance during the period for which the loan was outstanding amounted to $16,745,000. The weighted average interest rate was 5.6%. Interest earned from the interfund lending program amounted to $2,594 and is included in interest income on the statement of operations (see Note 8 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 88.7% Norway 6.5 Panama 2.9 France 1.6 Canada 0.3 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $341,653,456. Net unrealized appreciation aggregated $12,992,274 of which $20,960,932 related to appreciated investment securities and $7,968,658 related to depreciated investment securities. ENERGY SERVICE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 354,645,730 securities, at value (including repurchase agreements of $72,518,000) (cost $341,475,451) - - See accompanying schedule Cash 194 Receivable for 1,588,366 fund shares sold Dividends 227,657 receivable Interest receivable 36,281 Redemption fees 7,732 receivable Other receivables 336,000 Prepaid expenses 41,038 TOTAL ASSETS 356,882,998 LIABILITIES Payable for fund $ 3,599,752 shares redeemed Accrued 162,441 management fee Other payables 361,029 and accrued expenses Collateral on 9,408,000 securities loaned, at value TOTAL LIABILITIES 13,531,222 NET ASSETS $ 343,351,776 Net Assets consist of: Paid in capital $ 283,877,512 Undistributed net 40,932 investment income Accumulated 46,263,053 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 13,170,279 appreciation (depreciation) on investments NET ASSETS, for $ 343,351,776 18,641,829 shares outstanding NET ASSET VALUE $18.42 and redemption price per share ($343,351,776 (divided by) 18,641,829 shares) Maximum offering $18.99 price per share (100/97.00 of $18.42) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 1,715,820 INCOME Dividends Interest (including 1,085,951 income on securities loaned of $18,783) TOTAL INCOME 2,801,771 EXPENSES Management fee $ 1,173,586 Transfer agent 1,324,330 fees Accounting and 193,714 security lending fees Non-interested 691 trustees' compensation Custodian fees 25,599 and expenses Registration fees 48,567 Audit 20,477 Legal 952 Interest 4,099 Miscellaneous 1,707 Total expenses 2,793,722 before reductions Expense (32,883 2,760,839 reductions ) NET INVESTMENT 40,932 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 47,677,931 securities Foreign (1,911 47,676,020 currency ) transactions Change in net (13,504,173 unrealized ) appreciation (depreciation) on investment securities NET GAIN (LOSS) 34,171,847 NET INCREASE $ 34,212,779 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 1,325,992 INFORMATION Sales charges paid to FDC Deferred sales $ 4,334 charges withheld by FDC Exchange fees $ 187,860 withheld by FSC Expense $ 26,338 reductions Directed brokerage arrangements Custodian 757 interest credits Transfer agent 5,788 interest credits $ 32,883 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED Operations ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Net investment $ 40,932 $ 963,116 income Net realized 47,676,020 18,797,151 gain (loss) Change in net (13,504,173 27,955,663 unrealized ) appreciation (depreciation) NET INCREASE 34,212,779 47,715,930 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to - (345,905 shareholders ) From net investment income From net (2,253,610 (4,150,860 realized gain ) ) TOTAL (2,253,610 (4,496,765 DISTRIBUTIONS ) ) Share 731,301,262 762,157,835 transactions Net proceeds from sales of shares Reinvestment of 2,237,839 4,455,875 distributions Cost of shares (697,277,271 (600,660,872 redeemed ) ) Paid in capital 1,325,514 838,814 portion of redemption fees NET INCREASE 37,587,344 166,791,652 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 69,546,513 210,010,817 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 273,805,263 63,794,446 period End of period $ 343,351,776 $ 273,805,263 (including undistributed net investment income of $40,932 and $619,525, respectively) OTHER INFORMATION Shares Sold 40,556,724 54,578,475 Issued in 127,223 301,480 reinvestment of distributions Redeemed (39,062,219 (43,190,194 ) ) Net increase 1,621,728 11,689,761 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 16.09 $ 11.97 $ 11.66 $ 11.01 $ 9.43 $ 12.51 beginning of period Income from Investment Operations Net investment - .08 G .02 .03 .01 (.12) income (loss) Net realized and 2.37 4.49 .67 .51 1.47 (3.11) unrealized gain (loss) Total from 2.37 4.57 .69 .54 1.48 (3.23) investment operations Less Distributions From net - (.04) (.01) (.05) - - investment income In excess of net - - (.01) - - - investment income From net (.10) (.48) (.35) - - - realized gain In excess of net - - (.13) - - - realized gain Total (.10) (.52) (.50) (.05) - - distributions Redemption fees .06 .07 .12 .16 .10 .15 added to paid in capital Net asset value, $ 18.42 $ 16.09 $ 11.97 $ 11.66 $ 11.01 $ 9.43 end of period TOTAL RETURN B, C 15.13% 39.15% 7.60% 6.36% 16.76% (24.62)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 343,352 $ 273,805 $ 63,794 $ 40,857 $ 85,234 $ 41,322 period (000 omitted) Ratio of expenses 1.42% A 1.59% 1.81% 1.66% 1.76% A 2.07% to average net assets Ratio of expenses 1.41% A, 1.58% 1.79% 1.65% 1.76% A 2.07% to average net E E E E assets after expense reductions Ratio of net .02% A .60% .19% .23% .13% A (1.13)% investment income (loss) to average net assets Portfolio turnover 244% A 223% 209% 137% 236% A 89% rate Average $ .0367 commission rate F
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. G INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM ARETHUSA OFFSHORE LTD. WHICH AMOUNTED TO $.02 PER SHARE.
NATURAL GAS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 LIFE OF AUGUST 31, 1996 MONTHS YEAR FUND NATURAL GAS 14.31% 29.30% 32.65% NATURAL GAS 10.88% 25.42% 28.67% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 60.17% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, or since the fund started on April 21, 1993. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF AUGUST 31, 1996 YEAR FUND NATURAL GAS 29.30% 8.75% NATURAL GAS 25.42% 7.78% (INCL. 3% SALES CHARGE) S&P 500 18.73% 15.02% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19960831 19960910 150011 S00000000000001 Natural Gas SP Standard & Poor 500 00513 SP001 1993/04/21 9700.00 10000.00 1993/04/30 9515.70 9893.80 1993/05/31 9670.90 10158.96 1993/06/30 9952.20 10188.42 1993/07/31 9913.40 10147.66 1993/08/31 10767.00 10532.26 1993/09/30 10582.70 10451.16 1993/10/31 10010.40 10667.50 1993/11/30 9156.80 10566.16 1993/12/31 9209.91 10694.01 1994/01/31 9672.37 11057.61 1994/02/28 9327.98 10757.95 1994/03/31 8993.44 10288.90 1994/04/30 9692.05 10420.60 1994/05/31 9613.33 10591.50 1994/06/30 9662.53 10332.00 1994/07/31 9603.49 10670.89 1994/08/31 9288.63 11108.40 1994/09/30 9229.59 10836.24 1994/10/31 9554.30 11080.06 1994/11/30 8717.93 10676.52 1994/12/31 8580.06 10834.86 1995/01/31 8313.78 11115.81 1995/02/28 8856.20 11548.99 1995/03/31 9378.89 11889.80 1995/04/30 9536.79 12239.95 1995/05/31 9902.07 12729.18 1995/06/30 9665.13 13024.88 1995/07/31 9665.13 13456.79 1995/08/31 9951.43 13490.56 1995/09/30 10237.73 14059.87 1995/10/31 9793.47 14009.67 1995/11/30 10632.63 14624.70 1995/12/31 11187.09 14906.37 1996/01/31 11236.63 15413.78 1996/02/29 11256.45 15556.67 1996/03/31 11761.80 15706.48 1996/04/30 12587.74 15937.99 1996/05/31 12687.64 16349.03 1996/06/30 13356.99 16411.32 1996/07/31 12397.92 15686.27 1996/08/30 12867.47 16017.09 IMATRL PRASUN SHR__CHT 19960831 19960910 150014 R00000000000044 Let's say hypothetically that $10,000 was invested in Fidelity Select Natural Gas Portfolio on April 21, 1993, when the fund started, and a 3% sales charge was paid. By August 31, 1996, the investment would be valued at $12,867 - a 28.67% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $16,017 over the same period - a 60.17% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Enron Corp. 5.3 Chesapeake Energy Corp. 5.0 Anadarko Petroleum Corp. 4.9 Belco Oil & Gas Corp. 4.5 Louisiana Land & Exploration Co. 4.3 Enron Oil & Gas Co. 3.6 United Meridian Corp. 2.9 Burlington Resources, Inc. 2.8 Sonat, Inc. 2.7 Noble Affiliates, Inc. 2.3 TOP INDUSTRIES AS OF AUGUST 31, 1996 Crude Petroleum & Gas 52.6% Oil & Gas Exploration 10.6% Gas Transmission 10.6% Gas Transmission & Distribution 2.9% Oil & Gas Services 2.3% All Others 21.0% * Row: 1, Col: 1, Value: 21.0 Row: 1, Col: 2, Value: 2.3 Row: 1, Col: 3, Value: 2.9 Row: 1, Col: 4, Value: 10.6 Row: 1, Col: 5, Value: 10.6 Row: 1, Col: 6, Value: 52.6 * INCLUDES SHORT-TERM INVESTMENTS NATURAL GAS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Dan Pickering, Portfolio Manager of Fidelity Select Natural Gas Portfolio Q. HOW DID THE FUND PERFORM, DAN? A. The fund did well. For the six and 12 months ended August 31, 1996, the fund returned 14.31% and 29.30%, respectively. By comparison, the Standard & Poor's 500 Index returned 2.96% for the six- month period and 18.73% for the year. Q. CAN YOU DESCRIBE THE MARKET BACKDROP FOR NATURAL GAS THAT EXISTED DURING THE PERIOD? A. Sure. Natural gas prices were extremely volatile during the period. Prices went as high as $2.50 per thousand cubic feet but tapered off to about $1.80. The relatively mild summer months set the stage for a lower-than-normal demand for cooling and therefore a lower-than-normal electric utility demand for gas. Fortunately, there were relatively few new gas wells drilled during the past year, limiting the amount of new supply. Q. GIVEN THIS CHALLENGING ENVIRONMENT, HOW DID THE FUND MANAGE TO OUTPERFORM THE MARKET? A. It's worth noting that, in general, oil and gas stocks trade somewhat independently of the overall stock market, and the fund's heavy weighting in them insulated it from the volatility in the market during the past six months. That said, I continued to focus the fund's investment on two particular themes: exploration and production companies with a bias toward fast-growing, mid-cap stocks; and natural gas and power marketing. I made very few changes to the top holdings in this sector but have emphasized exploration and production companies over the larger integrated oil and gas companies. I like the business prospects for these companies and believe further upward earnings revisions are likely since prices for oil and gas increased during the period. Q. WHAT DO YOU MEAN BY "POWER MARKETING"? A. One of the best ways for utilities to compete is to bring low cost sources of power, such as gas-generated power, to market. One of the trends I foresee is that as the electric utilities deregulate, the customer is going to have the freedom to buy his electricity from a number of competing sources. Many gas companies are positioning themselves not only to have physical gas assets such as pipelines and gas production, but also financial exposure to the gas market through trading and marketing operations. In addition, gas companies are beginning to establish a physical and financial presence in the electric industry as well. Ultimately, they'll have the ability to produce gas in one region, run it into a power plant in another area and create electricity and sell it in yet another region. That is my thinking behind some stocks the fund owns such as PanEnergy and NGC Corp. However, Enron, which I think is positioned to be a long-term winner in this area and is the largest holding in the fund, somewhat underperformed its peers during the period. Q. WHERE ELSE DID YOU FIND OPPORTUNITIES? A. A couple of the fund's holdings in smaller, fast-growing exploration and production companies performed well during the period. Belco Oil and Gas was an initial public offering that was up substantially during the period. Rutherford-Moran, a natural gas exploration company, was another IPO that contributed to the fund's results. Q. THE FUND DOESN'T SEEM TO HAVE A LARGE FOREIGN EXPOSURE . . . A. That's right. I've found a way to give the fund some international flavor through domestic holdings such as Pogo and Rutherford without taking on the currency and other risks that come from investing overseas. In general, I prefer tilting the fund toward U.S. companies. Q. WHAT INVESTMENTS PROVED DISAPPOINTING? A. The fund's holding in TransTexas continued to be a disappointment. Its fields have been less prolific than I expected and I thought the stock - which had been down for some time - would bounce back. It hasn't. For the most part, however, I've been pretty comfortable with the stocks the fund owns. Q. WHAT'S YOUR OUTLOOK, DAN? A. I continue to expect more turbulence. The market for natural gas has been very volatile and I've focused on growth companies to reduce the commodity price risk. I've also tried to make the fund less interest rate sensitive than it was six months ago by cutting the fund's exposure to local distribution companies. I'd much rather analyze the specific business prospects of oil and production companies than figure out how interest rates will behave; I think it's the best way to manage the fund. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: April 21, 1993 FUND NUMBER: 513 TRADING SYMBOL: FSNGX SIZE: as of August 31, 1996, more than $104 million MANAGER: Daniel Pickering, since 1995; manager, Fidelity Select Energy Service Portfolio, since 1994; equity analyst, energy service and hotel industries, since 1994; joined Fidelity in 1994 (checkmark) NATURAL GAS PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 82.3% SHARES VALUE (NOTE 1) ELECTRIC UTILITY - 0.0% ELECTRIC POWER - 0.0% AES Corp. (warrants) (a) 188 $ 2,350 00130H11 ENERGY SERVICES - 2.9% DRILLING - 0.6% Cliffs Drilling Co. (a) 20,000 570,000 18682C10 UTI Energy Corp. (a) 1,500 22,312 90338710 592,312 OIL & GAS SERVICES - 2.3% BJ Services Co. (a) 44,300 1,666,788 05548210 Weatherford Enterra, Inc. (a) 26,800 770,500 94707110 2,437,288 TOTAL ENERGY SERVICES 3,029,600 GAS - 15.2% GAS DISTRIBUTION - 1.7% Aquila Gas Pipeline Corp. 79,100 968,975 03839B10 K N Energy, Inc. 26,500 910,938 48262010 Public Service Co. of North Carolina, Inc. 150 2,569 74451610 1,882,482 GAS TRANSMISSION - 10.6% Enron Corp. 140,510 5,637,964 29356110 Leviathan Gas Pipeline Partners LP unit 24,800 998,200 52736710 Sonat, Inc. 65,900 2,907,838 83541510 Williams Companies, Inc. 35,900 1,790,513 96945710 11,334,515 GAS TRANSMISSION & DISTRIBUTION - 2.9% PanEnergy Corp. 57,650 1,909,655 69792610 Tejas Gas Corp. (a) 34,505 1,199,048 87907510 3,108,703 TOTAL GAS 16,325,700 OIL & GAS - 64.2% CRUDE PETROLEUM & GAS - 52.6% Anadarko Petroleum Corp. 99,475 5,247,306 03251110 Apache Corp. 22,525 661,672 03741110 Barrett Resources Corp. (a) 56,600 1,874,875 06848020 Basin Exploration, Inc. (a) 43,500 293,625 07010710 Beau Canada Exploration Ltd. (a) 393,000 574,456 07428010 Belco Oil & Gas Corp. (a) 177,400 4,878,500 07741010 Belden & Blake Corp. (a) 20,000 410,000 07744710 Brown (Tom), Inc. (a) 16,300 260,800 11566020 Burlington Resources, Inc. 69,557 2,964,867 12201410 Chesapeake Energy Corp. (a) 99,300 5,337,375 16516710 Coho Resources, Inc. (a) 25,000 153,125 19248110 Comstock Resources, Inc. (a) 112,500 1,181,250 20576820 Devon Energy Corp. 47,300 1,076,075 25179910 Elan Energy, Inc. (a) 42,700 380,735 28390410 Enron Oil & Gas Co. 147,900 3,826,913 29356210 Flores & Rucks, Inc. (a) 44,100 1,449,788 34039C10 Fortune Petroleum Corp. (a) 100,000 250,000 34968730 HS Resources, Inc. (a) 500 6,375 40429710 Harcor Energy, Inc. (a) 11,000 48,125 41162820 Key Production Co., Inc. (a) 40,000 350,000 49313810 NGC Corp. 81,923 1,239,085 62912110 Noble Affiliates, Inc. 60,450 2,425,556 65489410 Northstar Energy Corp. (a)(b) 20,000 193,678 66703R92 Parker & Parsley Petroleum Co. 30,000 742,500 70101810 Petroleum Securities Australia Ltd. (a) 152,000 666,233 71699M22 SHARES VALUE (NOTE 1) Petroleum Securities Australia Ltd. sponsored ADR (a) 15,500 $ 344,875 71667810 Plains Resources, Inc. (a) 82,000 1,117,250 72654050 Pogo Producing Co. 16,700 569,888 73044810 Renaissance Energy Ltd. (a) 73,300 2,062,525 75966610 Rutherford-Moran Oil Corp. (a) 80,100 1,952,438 78328610 Santa Fe Energy Resources, Inc. (a) 53,300 626,275 80201210 Stone Energy Corp. (a) 39,500 775,188 86164210 Swift Energy Co. (a) 63,900 1,589,512 87073810 Texas Meridian Resources Corp. (a) 89,400 1,151,025 88254510 TransTexas Gas Corp. (a) 63,800 701,800 89389510 Triton Energy Ltd. Class A (a) 1,900 87,163 89699W22 Union Texas Petroleum Holdings, Inc. 70,000 1,452,500 90864010 Unit Corp. (a) 137,200 874,650 90921810 United Meridian Corp. (a) 77,500 3,080,625 91086510 Vastar Resources, Inc. 62,700 2,186,662 92238010 Vintage Petroleum, Inc. 44,100 1,113,525 92746010 Wascana Energy, Inc. (a) 21,500 190,919 93690110 56,369,734 OIL & GAS EXPLORATION - 10.6% Abacan Resource Corp. (a) 275,000 1,478,125 00291910 Chieftain International, Inc. (a) 67,200 1,350,630 16867C10 Cross Timbers Oil Co. 20,000 455,000 22757310 Denbury Resources, Inc. (a) 185,000 1,176,320 24791610 Louisiana Land & Exploration Co. 80,300 4,567,063 54626810 Petro-Canada 1st installment receipt (c) 45,900 313,660 71644E30 Union Pacific Resources Group, Inc. 61,600 1,678,600 90783410 Unocal Corp. 410 14,042 91528910 Zydeco Energy, Inc. (a) 69,500 330,125 98985410 11,363,565 OIL FIELD EQUIPMENT - 0.4% Drilex International, Inc. (a) 34,000 476,000 26204410 PETROLEUM REFINERS - 0.6% Coastal Corp. (The) 16,900 669,662 19044110 TOTAL OIL & GAS 68,878,961 TOTAL COMMON STOCKS (Cost $87,069,581) 88,236,611 REPURCHASE AGREEMENTS - 17.7% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 19,022,090 19,011,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $106,080,581) $ 107,247,611 CURRENCY ABBREVIATIONS CAD - Canadian dollar LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $193,678 or 0.2% of net assets. 3. Purchased on an installment basis. Market value reflects only those payments made through August 31, 1996. The remaining installments aggregating CAD 390,150 are due September 23, 1996 and March 24, 1997. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $229,360,603 and $201,042,228, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $51,816 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $12,125,000 and $4,468,400, respectively. The weighted average interest rate paid was 5.7% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $106,111,972. Net unrealized appreciation aggregated $1,135,639 of which $5,479,204 related to appreciated investment securities and $4,343,565 related to depreciated investment securities. NATURAL GAS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 107,247,611 securities, at value (including repurchase agreements of $19,011,000) (cost $106,080,581) - - See accompanying schedule Cash 393 Receivable for 75,219 investments sold Receivable for 1,336,469 fund shares sold Dividends 90,942 receivable Redemption fees 20,032 receivable Prepaid expenses 58,746 TOTAL ASSETS 108,829,412 LIABILITIES Payable for fund $ 4,098,206 shares redeemed Accrued 54,801 management fee Other payables 209,368 and accrued expenses TOTAL LIABILITIES 4,362,375 NET ASSETS $ 104,467,037 Net Assets consist of: Paid in capital $ 100,221,213 Accumulated net (133,398 investment ) (loss) Accumulated 3,212,194 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 1,167,028 appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 104,467,037 8,109,238 shares outstanding NET ASSET VALUE $12.88 and redemption price per share ($104,467,037 (divided by) 8,109,238 shares) Maximum offering $13.28 price per share (100/97.00 of $12.88) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 460,267 INCOME Dividends Interest 247,713 TOTAL INCOME 707,980 EXPENSES Management fee $ 294,782 Transfer agent 412,401 fees Accounting fees 49,198 and expenses Non-interested 162 trustees' compensation Custodian fees 10,169 and expenses Registration fees 66,433 Audit 25,258 Legal 256 Interest 3,548 Miscellaneous 689 Total expenses 862,896 before reductions Expense (19,262 843,634 reductions ) NET INVESTMENT (135,654 INCOME (LOSS) ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 3,465,619 securities Foreign 85 3,465,704 currency transactions Change in net unrealized appreciation (depreciation) on: Investment (4,398,919 securities ) Assets and (12 (4,398,931 liabilities in ) ) foreign currencies NET GAIN (LOSS) (933,227 ) NET INCREASE $ (1,068,881 (DECREASE) IN ) NET ASSETS RESULTING FROM OPERATIONS OTHER $ 311,935 INFORMATION Sales charges paid to FDC Deferred sales $ 1,038 charges withheld by FDC Exchange fees $ 62,948 withheld by FSC Expense $ 18,559 reductions Directed brokerage arrangements Custodian 210 interest credits Transfer agent 493 interest credits $ 19,262 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED Operations ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Net investment $ (135,654 $ 320,851 income (loss) ) Net realized 3,465,704 9,256,256 gain (loss) Change in net (4,398,931 7,236,487 unrealized ) appreciation (depreciation) NET INCREASE (1,068,881 16,813,594 (DECREASE) IN ) NET ASSETS RESULTING FROM OPERATIONS Distributions to (52,511 (323,738 shareholders ) ) From net investment income From net (465,719 - realized gain ) TOTAL (518,230 (323,738 DISTRIBUTIONS ) ) Share 319,652,649 96,403,538 transactions Net proceeds from sales of shares Reinvestment of 508,434 314,856 distributions Cost of shares (275,755,809 (132,986,230 redeemed ) ) Paid in capital 1,420,792 112,239 portion of redemption fees NET INCREASE 45,826,066 (36,155,597 (DECREASE) IN ) NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 44,238,955 (19,665,741 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 60,228,082 79,893,823 period End of period $ 104,467,037 $ 60,228,082 (including accumulated undistributed net investment (loss) income of $(133,398) and $56,526, respectively) OTHER INFORMATION Shares Sold 24,271,473 9,263,323 Issued in 41,777 30,032 reinvestment of distributions Redeemed (21,507,408 (12,883,616 ) ) Net increase 2,805,842 (3,590,261) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEAR ENDED APRIL 21, 1993 ENDED FEBRUARY 29, FEBRUARY 28, (COMMENCEMEN AUGUST 31, 1996 T OF OPERATIONS) TO FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994
Net asset value, $ 11.36 $ 8.98 $ 9.48 $ 10.00 beginning of period Income from Investment Operations Net investment (.02) .05 .03 .02 income (loss) Net realized and 1.46 G 2.36 (.53) (.46) unrealized gain (loss) Total from 1.44 2.41 (.50) (.44) investment operations Less Distributions From net (.01) (.05) (.02) - investment income From net (.09) - - (.07) realized gain In excess of net - - - (.06) realized gain Total (.10) (.05) (.02) (.13) distributions Redemption fees .18 .02 .02 .05 added to paid in capital Net asset value, $ 12.88 $ 11.36 $ 8.98 $ 9.48 end of period TOTAL RETURN B, C 14.31% 27.10% (5.06) (3.84)% % RATIOS AND $ 104,467 $ 60,228 $ 79,894 $ 63,073 SUPPLEMENTAL DATA Net assets, end of period (000 omitted) Ratio of expenses 1.74% A 1.68% 1.70% 1.94% A to average net assets Ratio of expenses 1.70% A 1.67% 1.66% 1.93% A, to average net , E E E E assets after expense reductions Ratio of net (.27)% .46% .30% .17% A investment A income (loss) to average net assets Portfolio turnover 493% A 79% 177% 44% A rate Average $ .0377 commission rate F
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. G THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD ENDED DUE TO THE TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
PRECIOUS METALS AND MINERALS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST AUGUST 31, 1996 MONTH YEAR YEARS 10 S YEARS PRECIOUS METALS AND -3.58% 13.36% 98.88% 134.89% MINERALS PRECIOUS METALS AND -6.47% 9.96% 92.91% 127.84% MINERALS (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS PRECIOUS METALS AND MINERALS 13.36% 14.74% 8.91% PRECIOUS METALS AND MINERALS 9.96% 14.04% 8.58% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960910 150529 S00000000000001 Precious Metals SP Standard & Poor 500 00061 SP001 1986/08/31 9700.00 10000.00 1986/09/30 10967.78 9173.00 1986/10/31 10004.66 9702.28 1986/11/30 11036.58 9938.05 1986/12/31 10957.95 9684.63 1987/01/31 12274.87 10989.15 1987/02/28 13139.72 11423.22 1987/03/31 16893.92 11753.35 1987/04/30 18063.42 11648.74 1987/05/31 16451.67 11750.09 1987/06/30 16215.81 12343.47 1987/07/31 19517.93 12969.28 1987/08/31 19006.89 13453.04 1987/09/30 19596.56 13158.41 1987/10/31 14191.29 10324.09 1987/11/30 15979.94 9473.39 1987/12/31 15068.08 10194.31 1988/01/31 12420.71 10623.49 1988/02/29 12440.62 11118.55 1988/03/31 13475.68 10774.98 1988/04/30 13027.82 10894.59 1988/05/31 13097.48 10989.37 1988/06/30 12619.76 11493.78 1988/07/31 12699.38 11450.10 1988/08/31 11942.99 11060.80 1988/09/30 11136.84 11531.99 1988/10/31 11544.89 11852.58 1988/11/30 11972.85 11683.09 1988/12/31 11472.85 11887.54 1989/01/31 11950.02 12757.71 1989/02/28 12333.83 12440.04 1989/03/31 12333.83 12729.90 1989/04/30 11773.67 13390.58 1989/05/31 11213.52 13932.90 1989/06/30 12095.25 13853.48 1989/07/31 12427.19 15104.45 1989/08/31 12676.15 15400.50 1989/09/30 13122.20 15337.35 1989/10/31 13111.83 14981.53 1989/11/30 14781.93 15287.15 1989/12/31 15162.81 15654.04 1990/01/31 16370.37 14603.66 1990/02/28 14963.30 14792.04 1990/03/31 14312.26 15184.03 1990/04/30 12842.19 14804.43 1990/05/31 13577.22 16247.86 1990/06/30 12590.17 16137.38 1990/07/31 13356.71 16085.74 1990/08/31 13493.22 14631.59 1990/09/30 13188.70 13919.03 1990/10/31 11708.12 13859.18 1990/11/30 11498.11 14754.48 1990/12/31 11967.47 15166.13 1991/01/31 10668.51 15827.37 1991/02/28 11626.76 16959.03 1991/03/31 11403.17 17369.44 1991/04/30 11371.23 17411.13 1991/05/31 12010.06 18163.29 1991/06/30 12797.95 17331.41 1991/07/31 12797.95 18139.05 1991/08/31 11456.40 18568.95 1991/09/30 11690.64 18258.85 1991/10/31 12478.54 18503.51 1991/11/30 12872.48 17757.82 1991/12/31 12151.47 19789.32 1992/01/31 12409.33 19421.24 1992/02/29 11764.69 19673.71 1992/03/31 11302.70 19290.07 1992/04/30 10636.57 19857.20 1992/05/31 11334.93 19954.50 1992/06/30 11398.88 19657.18 1992/07/31 11549.57 20461.16 1992/08/31 11032.91 20041.71 1992/09/30 10580.83 20278.20 1992/10/31 9902.71 20349.17 1992/11/30 9321.46 21043.08 1992/12/31 9494.43 21301.91 1993/01/31 9724.40 21480.84 1993/02/28 10797.59 21772.98 1993/03/31 12265.01 22232.39 1993/04/30 14247.12 21694.37 1993/05/31 16130.68 22275.78 1993/06/30 16393.50 22340.38 1993/07/31 18528.93 22251.02 1993/08/31 16667.27 23094.33 1993/09/30 15353.16 22916.50 1993/10/31 17532.39 23390.88 1993/11/30 17499.54 23168.66 1993/12/31 20092.51 23449.00 1994/01/31 19261.32 24246.27 1994/02/28 18419.05 23589.20 1994/03/31 18230.65 22560.71 1994/04/30 18231.39 22849.48 1994/05/31 18264.65 23224.22 1994/06/30 18630.61 22655.22 1994/07/31 19340.35 23398.31 1994/08/31 20715.47 24357.64 1994/09/30 22301.29 23760.88 1994/10/31 21436.29 24295.50 1994/11/30 19140.74 23410.66 1994/12/31 19863.25 23757.84 1995/01/31 16402.91 24373.88 1995/02/28 17155.65 25323.73 1995/03/31 18897.05 26071.03 1995/04/30 19054.34 26838.83 1995/05/31 18818.41 27911.57 1995/06/30 19043.11 28559.96 1995/07/31 19829.55 29507.01 1995/08/31 20099.19 29581.07 1995/09/30 20155.36 30829.39 1995/10/31 17638.75 30719.33 1995/11/30 18874.59 32067.91 1995/12/31 19199.96 32685.54 1996/01/31 23224.85 33798.15 1996/02/29 23630.72 34111.46 1996/03/31 23495.43 34439.95 1996/04/30 24027.38 34947.60 1996/05/31 25417.49 35848.90 1996/06/30 21880.06 35985.48 1996/07/31 21608.82 34395.64 1996/08/30 22784.20 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960910 150534 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Precious Metals and Minerals Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $22,784 - a 127.84% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Newmont Mining Corp. 9.6 Bre-X Minerals Ltd. 8.3 Vaal Reefs Exploration & Mining Co. Ltd. ADR 5.3 Barrick Gold Corp. 5.1 Getchell Gold Corp. 5.0 Euro-Nevada Mining Corp. Ltd. 4.6 Agnico Eagle Mines Ltd. 4.4 Western Deep Levels Ltd. ADR 4.2 De Beers Consolidated Mines Ltd. ADR 4.1 Gold Fields of South Africa Ltd. sponsored ADR 3.6 TOP INDUSTRIES AS OF AUGUST 31, 1996 Gold Ores (South Africa) 33.7% Gold Ores (Canada) 32.4% Gold Ores (U.S.) 18.1% Gold & Silver Ores (Australia) 4.5% Gold Ores (Australia) 2.1% All Others 9.2% * Row: 1, Col: 1, Value: 9.199999999999999 Row: 1, Col: 2, Value: 2.1 Row: 1, Col: 3, Value: 4.5 Row: 1, Col: 4, Value: 18.1 Row: 1, Col: 5, Value: 32.4 Row: 1, Col: 6, Value: 33.7 * INCLUDES SHORT-TERM INVESTMENTS PRECIOUS METALS AND MINERALS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Larry Rakers became Portfolio Manager of Fidelity Select Precious Metals and Minerals Portfolio on July 1, 1996. Q. LARRY, HOW HAS THE FUND PERFORMED? A. For the six months ended August 31, 1996, the fund had a total return of - -3.58%, while the Standard & Poor's 500 Index returned 2.96%. For the 12 months ended August 31, 1996, the fund returned 13.36% and the S&P 500 returned 18.73%. Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS? A. The fund had a negative return during the period mainly because of the poor performance of its South African gold stocks. These stocks are sensitive in terms of profit and cash flow to the price of gold because they are high-cost producers. Unfortunately, the price of gold fell during much of 1996. In addition, there were some operations problems for some companies, such as Driefontein, which had a fire in the shaft of one of its mines. Q. WHAT WERE THE REASONS BEHIND THE DROP IN THE PRICE OF GOLD? A. First of all, summer historically is a season when the price of gold tends to be weak. Second, there was a big central bank sale of gold in February and March. Specifically, Belgium sold the equivalent of one-tenth of the world's usual annual mine supply. The added supply dampened gold prices. The Belgian government said it was trying to bring its gold holdings as a percentage of total reserves in line with neighboring countries, as part of the process of creating a European monetary union. Q. AT THE SAME TIME, THERE MUST HAVE BEEN SOME STOCKS THAT TURNED IN GOOD PERFORMANCE FOR THE FUND . . . A. The stocks that did well were exploration companies that showed strong growth in production and reserves. Among those were Getchell Gold. Over the past few quarters, this company announced new finds, and as a result the stock has gone up. This Nevada-based company used to be run by a fertilizer company, but installed a new management team with a mining background that has come in and started to turn the company around. Euro-Nevada and Franco Nevada also have done well. These companies used to focus exclusively on buying interests in gold mines, but they've expanded into the exploration business and have posted strong resource growth. Q. WHAT CHANGES HAVE YOU MADE SINCE TAKING OVER THE FUND? A. I've maintained a similar strategy to the one employed by the previous manager, including a substantial stake in South Africa. Going forward, I may reduce South African investments, looking to hold on to those companies that are pursuing some kind of restructuring or cost-cutting strategy. I'll probably try to avoid the very high-cost producers in South Africa because they are especially susceptible to any labor price pressure. If I do reduce the fund's investments in South Africa, I'll probably replace them with more Australian growth stocks, because that's a region that might hold some promise. Although the fund's foreign investments involve greater risks than U.S. investments, I feel the potential gains make them worth the additional risk. Q. HOW WOULD YOU DESCRIBE YOUR STOCK PICKING APPROACH? A. For this fund, my approach is two-pronged. First, as I have mentioned in regards to the fund's South African investments, I look for companies that are pursuing some kind of restructuring or cost-cutting program. For example, some companies presently are talking about merging adjacent mines, combining the infrastructures to lower costs. In the U.S., Australia and elsewhere, I tend to look for those companies that are growing production and reserves. By doing so, I hope to insulate the fund somewhat from fluctuations in the price of gold. How do I go about finding companies that are doing this? By visiting the properties and asking company geologists about the properties' exploration potential, comparing them and choosing those I believe will post the strongest growth. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. I believe seasonal gold trends will be in our favor. As a result, the wind may be more at our backs in terms of gold price increases. I'll be looking closely at what's going on in South Africa, especially efforts there to restructure mining methods and techniques. I'm leaning toward reducing the fund's stake there because there is an element of political risk and a lack of growth one doesn't see elsewhere. Without growth, these stocks might not do well if the price of gold doesn't resume an upward trend. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 061 TRADING SYMBOL: FDPMX SIZE: as of August 31, 1996, more than $339 million MANAGER: Larry Rakers, since July 1996; manager, Fidelity Select American Gold Portfolio, since 1995; Fidelity Select Paper and Forest Products Portfolio, since February 1996; joined Fidelity in 1993 (checkmark) PRECIOUS METALS AND MINERALS PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 97.1% SHARES VALUE (NOTE 1) AUSTRALIA - 7.3% METALS & MINING - 0.7% METAL MINING SERVICES - 0.7% Acacia Resources Ltd. (a) 1,050,000 $ 2,321,865 00399822 PRECIOUS METALS - 6.6% GOLD & SILVER ORES - 4.5% Normandy Mining Ltd. 4,995,786 7,890,844 65699J23 North Flinders Mines, Ltd. 499,060 3,310,714 65940091 Plutonic Resources Ltd. 625,000 3,134,320 72999192 Sons of Gwalia NL 100,000 646,805 83568810 14,982,683 GOLD ORES - 2.1% Great Central Mines NL sponsored ADR 90,000 821,250 39029010 Great Central Mines NL 1,805,000 5,559,445 39029092 Leo Shield Exploration NL 12,000 5,307 52699L22 Metex Resources NL (a) 300,000 52,124 59199K22 Menzies Gold NL (a) 1,000,000 450,158 61899H22 Ross Mining NL 100,000 108,986 77899722 6,997,270 TOTAL PRECIOUS METALS 21,979,953 TOTAL AUSTRALIA 24,301,818 CANADA - 33.8% HOLDING COMPANIES - 0.0% Bolivar Goldfields Ltd. (a) 124,000 126,870 09760Q10 METALS & MINING - 1.0% COPPER ORES - 0.7% Arequipa Resources Ltd. (a) 105,000 2,294,537 03990710 METAL MINING - 0.3% Dayton Mining Corp. (a) 72,500 524,575 23990210 First Dynasty Mines Ltd. (a) 100,000 336,196 31997410 860,771 TOTAL METALS & MINING 3,155,308 PRECIOUS METALS - 32.8% GOLD & SILVER ORES - 0.4% Greenstone Resources Ltd. (a) 51,700 795,385 39573W10 Minorca Resources Ltd. (a) 282,000 608,003 60393110 1,403,388 GOLD ORES - 32.4% Agnico Eagle Mines Ltd. 841,100 14,691,972 00847410 Barrick Gold Corp. 635,000 17,148,365 06790110 Bre-X Minerals Ltd. (a) 1,550,000 27,867,714 10625K10 Cartaway Resources Corp. (a) 150,000 203,910 14590210 Eldorado Gold Corp. (a) 200,000 1,257,080 28490110 Euro-Nevada Mining Corp. Ltd. 618,400 15,366,782 29870P10 Franco Nevada Mining Corp. 256,000 8,606,614 35186010 Geomaque Explorations Ltd. (a) 32,900 88,968 37247E10 Indochina Goldfields Ltd. (a)(b) 34,000 283,282 45591392 Kinross Gold Corp. (a) 725,000 5,749,132 49690210 Meridian Gold, Inc. Installment Receipt (c) 2,212,000 5,658,323 58997520 Metallica Resources, Inc. (a) 177,500 661,612 59125J10 Mountain Province Mining, Inc. (a) 200,000 745,478 62426E10 Nevsun Resources Ltd. (a) 101,300 888,434 64156L10 SHARES VALUE (NOTE 1) Orvana Minerals Corp. (a) 647,800 $ 3,953,320 68759M10 Prime Resources Group, Inc. 288,000 2,231,171 74157L10 South Pacific Resources, Inc. (a) 85,000 444,181 83890320 Sudbury Contact Mines Ltd. (a) 172,600 1,608,368 86462610 TVI Pacific, Inc. (a) 1,025,000 1,251,051 87291710 108,705,757 TOTAL PRECIOUS METALS 110,109,145 TOTAL CANADA 113,391,323 GHANA - 1.3% PRECIOUS METALS - 1.3% GOLD ORES - 1.3% Ashanti Goldfields Co. Ltd. GDR 236,300 4,401,088 04374320 SOUTH AFRICA - 35.0% METALS & MINING - 1.3% METAL MINING - 0.4% Target Exploration Co. Ltd. Class R (a) 390,000 1,258,905 91499N22 MISCELLANEOUS METAL ORES - 0.9% Anglo American Platinum Ltd. 316,800 2,045,236 03499K22 Impala Platinum Holdings Ltd. ADR 88,300 1,147,900 45255320 3,193,136 TOTAL METALS & MINING 4,452,041 PRECIOUS METALS - 33.7% GOLD ORES - 33.7% Buffelsfontein Gold Mines Ltd. sponsored ADR (a) 176,300 881,500 11987140 Buffelsfontein Gold Mines Ltd. (a)(d) 893,200 4,652,912 11987192 De Beers Consolidated Mines Ltd. ADR 442,500 13,662,188 24025330 Driefontein Consolidated Ltd.: ADR 773,500 9,958,813 26202650 Ord. 136,500 1,747,273 26202630 Free State Consolidated Gold Mines Ltd. ADR 854,100 9,501,863 35614220 Gold Fields of South Africa Ltd. 10,000 291,630 38059730 Gold Fields of South Africa Ltd. sponsored ADR 415,000 12,138,750 38059750 Harmony Gold Mining Co. Ltd. Class R 100,000 1,001,781 41321610 Hartebeesfontein Gold Mining Co. Ltd. Class R 717,500 2,148,347 41619830 Kloof Gold Mining Co. Ltd. sponsored ADR 760,000 7,220,000 49874660 Oryx Gold Holdings Ltd. (a) 900,000 1,803,206 68799L22 Rustenberg Platinum Holdings Ltd. ADR (a) 317,708 5,281,896 78307820 Unisel Gold Mines Ltd. 123,800 485,058 90917010 Vaal Reefs Exploration & Mining Co. Ltd. ADR 2,118,500 17,742,438 91850640 Western Areas Gold Mining Ltd. Ord. 580,000 7,747,106 95765410 Western Deep Levels Ltd.: ADR 376,000 14,006,000 95807720 Ord. 50,000 1,875,557 95807710 Winkelhaak Mines Ltd. ADR 94,000 716,750 97420420 112,863,068 TOTAL SOUTH AFRICA 117,315,109 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) UNITED STATES OF AMERICA - 19.7% PRECIOUS METALS - 18.1% GOLD ORES - 18.1% Getchell Gold Corp. (a) 383,000 $ 16,756,250 37426510 Newmont Mining Corp. 610,000 32,253,750 65163910 Stillwater Mining Co. (a) 206,900 4,241,450 86074Q10 Stillwater Mining Co. (a)(b) 366,600 7,515,300 86074Q90 60,766,750 SECURITIES INDUSTRY - 1.6% INVESTMENT MANAGERS - 1.6% Pioneer Group, Inc. 200,000 5,225,000 72368410 TOTAL UNITED STATES OF AMERICA 65,991,750 TOTAL COMMON STOCKS (Cost $271,445,444) 325,401,088 REPURCHASE AGREEMENTS - 2.9% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 9,795,711 9,790,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $281,235,444) $ 335,191,088 CURRENCY ABBREVIATIONS CAD - Canadian dollar LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $7,798,582 or 2.3% of net assets. 3. Purchased on an installment basis. Market value reflects only those payments made through August 31, 1996. The remaining installment aggregating CAD 5,530,000 is due July 31, 1997. 4. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Buffelsfontein Gold Mines Ltd. $ 1,073,541 $ - $ - $ 4,652,912 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $51,158,663 and $139,513,970, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $25,270 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $6,590,000 and $4,105,250, respectively. The weighted average interest rate paid was 5.7% (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: South Africa 35.0% Canada 33.8 United States 22.6 Australia 7.3 Ghana 1.3 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $282,849,757. Net unrealized appreciation aggregated $52,341,331, of which $75,627,788 related to appreciated investment securities and $23,286,457 related to depreciated investment securities. At February 29, 1996, the fund had a capital loss carryforward of approximately $16,253,000 of which $5,571,000, and $10,682,000 will expire on February 29, 2000 and February 28, 2001, respectively. PRECIOUS METALS AND MINERALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 335,191,088 securities, at value (including repurchase agreements of $9,790,000) (cost $281,235,444) - - See accompanying schedule Cash 278 Receivable for 846,062 investments sold Receivable for 5,473,341 fund shares sold Dividends 1,453,713 receivable Redemption fees 5,768 receivable Prepaid expenses 37,553 TOTAL ASSETS 343,007,803 LIABILITIES Payable for fund $ 2,755,974 shares redeemed Accrued 167,612 management fee Other payables 341,627 and accrued expenses TOTAL LIABILITIES 3,265,213 NET ASSETS $ 339,742,590 Net Assets consist of: Paid in capital $ 293,581,826 Distributions in (78,296 excess of net ) investment income Accumulated (7,716,971 undistributed net ) realized gain (loss) on investments and foreign currency transactions Net unrealized 53,956,031 appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 339,742,590 16,848,780 shares outstanding NET ASSET VALUE $20.16 and redemption price per share ($339,742,590 (divided by) 16,848,780 shares) Maximum offering $20.78 price per share (100/97.00 of $20.16) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 2,748,228 INCOME Dividends Interest (including 313,213 income on securities loaned of $282) TOTAL INCOME 3,061,441 EXPENSES Management fee $ 1,153,208 Transfer agent 1,483,094 fees Accounting and 191,202 security lending fees Non-interested 733 trustees' compensation Custodian fees 53,874 and expenses Registration fees 37,553 Audit 15,162 Legal 1,505 Interest 2,579 Reports to 29,042 shareholders Miscellaneous 2,559 Total expenses 2,970,511 before reductions Expense (7,211 2,963,300 reductions ) NET INVESTMENT 98,141 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 10,417,924 securities (including realized loss of $467,365 on sale of investments in precious metals) Foreign 878 10,418,802 currency transactions Change in net unrealized appreciation (depreciation) on: Investment (26,800,875 securities ) Assets and 821 (26,800,054 liabilities in ) foreign currencies NET GAIN (LOSS) (16,381,252 ) NET INCREASE $ (16,283,111 (DECREASE) IN ) NET ASSETS RESULTING FROM OPERATIONS OTHER $ 407,211 INFORMATION Sales charges paid to FDC Deferred sales $ 21,749 charges withheld by FDC Exchange fees $ 88,245 withheld by FSC Expense $ 4,559 reductions Directed brokerage arrangements Custodian 2,180 interest credits Transfer agent 472 interest credits $ 7,211 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ 98,141 $ 1,477,464 Net investment income Net realized 10,418,802 29,509,771 gain (loss) Change in net (26,800,054 86,598,754 unrealized ) appreciation (depreciation) NET INCREASE (16,283,111 117,585,989 (DECREASE) IN ) NET ASSETS RESULTING FROM OPERATIONS Distributions to (511,993 (1,115,809 shareholders ) ) From net investment income In excess of net (511,039 - investment ) income TOTAL (1,023,032 (1,115,809 DISTRIBUTIONS ) ) Share 235,281,248 820,033,799 transactions Net proceeds from sales of shares Reinvestment of 1,004,449 1,089,810 distributions Cost of shares (347,629,361 (837,693,561 redeemed ) ) Paid in capital 1,196,512 3,091,710 portion of redemption fees NET INCREASE (110,147,152 (13,478,242 (DECREASE) IN ) ) NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (127,453,295 102,991,938 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 467,195,885 364,203,947 period End of period $ 339,742,590 $ 467,195,885 (including (over) under distribution of net investment income of $(78,296) and $846,595, respectively) OTHER INFORMATION Shares Sold 11,477,545 44,966,074 Issued in 48,974 63,583 reinvestment of distributions Redeemed (16,963,978 (46,598,892 ) ) Net increase (5,437,459) (1,569,235) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 20.96 $ 15.27 $ 16.62 $ 9.86 $ 9.90 $ 10.68 beginning of period Income from Investment Operations Net investment .01 .07 .17 .21 .09 .10 income Net realized and (.82) 5.54 (1.42) 6.48 (.05) (.91) unrealized gain (loss) Total from (.81) 5.61 (1.25) 6.69 .04 (.81) investment operations Less Distributions From net (.03) (.06) (.18) (.19) (.17) (.10) investment income In excess of net (.02) - (.05) (.02) - - investment income Total (.05) (.06) (.23) (.21) (.17) (.10) distributions Redemption fees .06 .14 .13 .28 .09 .13 added to paid in capital Net asset value, $ 20.16 $ 20.96 $ 15.27 $ 16.62 $ 9.86 $ 9.90 end of period TOTAL RETURN B, C (3.58)% 37.74% (6.86)% 70.58% 1.51% (6.46)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 339,743 $ 467,196 $ 364,204 $ 409,212 $ 137,922 $ 130,002 period (000 omitted) Ratio of expenses 1.54% A 1.52% 1.46% 1.55% 1.73% A 1.81% to average net assets Ratio of net .05% A .39% .99% 1.38% 1.12% A .92% investment income to average net assets Portfolio turnover 27% A 53% 43% 73% 36% A 44% rate Average $ .0152 commission rate E
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
UTILITIES GROWTH PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S UTILITIES GROWTH 0.23% 12.40% 69.96% 148.42% UTILITIES GROWTH -2.77% 9.03% 64.86% 140.97% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS UTILITIES GROWTH 12.40% 11.19% 9.53% UTILITIES GROWTH 9.03% 10.52% 9.19% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960910 154806 S00000000000001 Utilities Growth SP Standard & Poor 500 00065 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8627.59 9173.00 1986/10/31 9030.15 9702.28 1986/11/30 9110.66 9938.05 1986/12/31 8795.05 9684.63 1987/01/31 9506.77 10989.15 1987/02/28 9171.85 11423.22 1987/03/31 8988.28 11753.35 1987/04/30 8473.01 11648.74 1987/05/31 8337.75 11750.09 1987/06/30 8634.03 12343.47 1987/07/31 8514.87 12969.28 1987/08/31 8782.17 13453.04 1987/09/30 8711.32 13158.41 1987/10/31 8186.39 10324.09 1987/11/30 7912.65 9473.39 1987/12/31 7980.99 10194.31 1988/01/31 8670.70 10623.49 1988/02/29 8602.75 11118.55 1988/03/31 8358.12 10774.98 1988/04/30 8381.91 10894.59 1988/05/31 8643.52 10989.37 1988/06/30 8871.16 11493.78 1988/07/31 8843.00 11450.10 1988/08/31 8829.02 11060.80 1988/09/30 9136.61 11531.99 1988/10/31 9328.85 11852.58 1988/11/30 9311.37 11683.09 1988/12/31 9294.36 11887.54 1989/01/31 9732.16 12757.71 1989/02/28 9671.16 12440.04 1989/03/31 9836.23 12729.90 1989/04/30 10342.22 13390.58 1989/05/31 10833.85 13932.90 1989/06/30 11107.50 13853.48 1989/07/31 11715.77 15104.45 1989/08/31 11767.39 15400.50 1989/09/30 11936.97 15337.35 1989/10/31 11881.67 14981.53 1989/11/30 12272.44 15287.15 1989/12/31 12921.27 15654.04 1990/01/31 12283.50 14603.66 1990/02/28 12261.38 14792.04 1990/03/31 12195.02 15184.03 1990/04/30 11686.28 14804.43 1990/05/31 12294.56 16247.86 1990/06/30 12440.25 16137.38 1990/07/31 12542.37 16085.74 1990/08/31 11853.98 14631.59 1990/09/30 11884.24 13919.03 1990/10/31 12493.20 13859.18 1990/11/30 12822.27 14754.48 1990/12/31 12992.92 15166.13 1991/01/31 12935.63 15827.37 1991/02/28 13493.23 16959.03 1991/03/31 13646.00 17369.44 1991/04/30 13584.90 17411.13 1991/05/31 13588.71 18163.29 1991/06/30 13423.88 17331.41 1991/07/31 13860.75 18139.05 1991/08/31 14178.48 18568.95 1991/09/30 14615.35 18258.85 1991/10/31 14817.90 18503.51 1991/11/30 14988.67 17757.82 1991/12/31 15725.07 19789.32 1992/01/31 15241.04 19421.24 1992/02/29 15129.33 19673.71 1992/03/31 14972.12 19290.07 1992/04/30 15381.70 19857.20 1992/05/31 15679.57 19954.50 1992/06/30 15860.95 19657.18 1992/07/31 16704.30 20461.16 1992/08/31 16695.74 20041.71 1992/09/30 16785.64 20278.20 1992/10/31 16781.36 20349.17 1992/11/30 16896.94 21043.08 1992/12/31 17390.73 21301.91 1993/01/31 17686.55 21480.84 1993/02/28 18596.42 21772.98 1993/03/31 19098.42 22232.39 1993/04/30 18994.04 21694.37 1993/05/31 19034.78 22275.78 1993/06/30 19763.58 22340.38 1993/07/31 19989.92 22251.02 1993/08/31 20859.04 23094.33 1993/09/30 20859.04 22916.50 1993/10/31 20646.29 23390.88 1993/11/30 19636.83 23168.66 1993/12/31 19572.34 23449.00 1994/01/31 19973.37 24246.27 1994/02/28 19067.15 23589.20 1994/03/31 18379.67 22560.71 1994/04/30 18908.37 22849.48 1994/05/31 18530.84 23224.22 1994/06/30 18472.35 22655.22 1994/07/31 19004.09 23398.31 1994/08/31 18929.64 24357.64 1994/09/30 18445.77 23760.88 1994/10/31 18679.73 24295.50 1994/11/30 18004.43 23410.66 1994/12/31 18121.89 23757.84 1995/01/31 18861.45 24373.88 1995/02/28 19107.97 25323.73 1995/03/31 19184.66 26071.03 1995/04/30 19853.40 26838.83 1995/05/31 20160.61 27911.57 1995/06/30 20358.10 28559.96 1995/07/31 20906.69 29507.01 1995/08/31 21438.82 29581.07 1995/09/30 22459.19 30829.39 1995/10/31 22678.62 30719.33 1995/11/30 23177.84 32067.91 1995/12/31 24353.92 32685.54 1996/01/31 24610.92 33798.15 1996/02/29 24041.05 34111.46 1996/03/31 23828.74 34439.95 1996/04/30 24790.85 34947.60 1996/05/31 24808.79 35848.90 1996/06/30 25191.57 35985.48 1996/07/31 24091.08 34395.64 1996/08/30 24097.06 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960910 154811 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Utilities Growth Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $24,097 - a 140.97% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Pacific Telesis Group 5.6 SBC Communications, Inc. 5.5 BellSouth Corp. 5.5 Ameritech Corp. 5.4 AirTouch Communications, Inc. 5.3 GTE Corp. 5.0 AT&T Corp. 5.0 NYNEX Corp. 4.9 Bell Atlantic Corp. 4.5 U.S. West, Inc. 3.7 TOP INDUSTRIES AS OF AUGUST 31, 1996 Telephone Services 52.3% Gas Transmission 8.9% Gas Transmission & Distribution 8.7% Gas Distribution 7.0% Cellular & Communication Services 5.8% All Others 17.3% * Row: 1, Col: 1, Value: 17.3 Row: 1, Col: 2, Value: 5.8 Row: 1, Col: 3, Value: 7.0 Row: 1, Col: 4, Value: 8.699999999999999 Row: 1, Col: 5, Value: 8.9 Row: 1, Col: 6, Value: 52.3 * INCLUDES SHORT-TERM INVESTMENTS UTILITIES GROWTH PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW John Muresianu, Portfolio Manager of Fidelity Select Utilities Growth Portfolio Q. JOHN, HOW HAS THE FUND PERFORMED? A. For the six and 12 months ended August 31, 1996, the fund had total returns of 0.23% and 12.40%, respectively, while the Standard & Poor's 500 Index returned 2.96% and 18.73%, respectively. Q. LET'S TALK ABOUT THE INVESTING ENVIRONMENT FOR UTILITY STOCKS OVER THE PAST SIX MONTHS. A. In general, interest rates and the bond market tend to influence utility stocks fairly strongly. When bonds do well, so do stocks in the utility sectors. When bonds falter, utility stocks often do, too. The past six months have seen a difficult bond market environment. At the beginning of the year, sentiment in the market reflected the belief that the economy was slowing, that inflation posed little threat and that - most importantly - the Federal Reserve Board would continue the reductions in interest rates it had pursued through much of 1995 and the beginning of 1996. However, starting in February, statistics indicating stronger-than-expected economic growth started to change that sentiment. The market reflected the fear that economic strength would encourage the Fed to increase interest rates instead. As a result, yields in the bond market rose, bond prices fell and utility stocks dropped along with bonds. Especially affected were electric utility stocks, which are historically the highest-yielding utility stocks and typically move more in tandem with bonds than do gas or telephone stocks. Q. AT THE SAME TIME, THERE MUST HAVE BEEN OTHER FACTORS THAT AFFECTED THE INDIVIDUAL UTILITY SECTORS . . . A. Deregulation remains a major influence on utility companies and their stocks. The gas, electric and phone sectors all are undergoing some form of deregulation. One of the main concerns is timing. When will the rules change within these sectors? Another question is about what the specific rules will be. In the phone sector, for instance, there has been uncertainty as to the timing and specific rules that will govern the entry of long-distance companies into local service - and of regional Bell operating companies (RBOCs or Baby Bells) into long-distance service. This uncertainty affected telephone stocks over the period, and probably will going forward. Gas stocks weren't as affected by deregulation concerns and bucked the negative trend because of a sharp increase in the price of natural gas. The increase resulted from a cold winter and concerns about adequate supplies going forward. Q. CAN YOU GIVE US EXAMPLES OF GAS STOCKS THAT BENEFITED FROM THIS POSITIVE TREND? A. Sonat was a particular beneficiary of the higher gas prices because its exploration and production subsidiary made it the most sensitive to the price of natural gas. Also, it had remarkable exploratory success during the period. ENSERCH was another gas stock that did well during the period. Despite disappointing results from its exploration and production division offshore in the Gulf of Mexico, ENSERCH stock did well during the period because the company sold its distribution and transmission business to Texas Utilities. Q. TELEPHONE SERVICE STOCKS CONTINUED TO COMPRISE THE LARGEST WEIGHTING AT THE END OF THE PERIOD. WHY THE CONTINUED INTEREST IN PHONE STOCKS? A. I continued to concentrate on telephone stocks over gas and electrics because their growth prospects remained the best in the utility sector. While the pace and structure of deregulation cast a cloud of uncertainty over the telephone industry, the new telecommunications law enacted early this year should create opportunities for growth that surpass alternatives in the utility sector. Long-distance carriers, cable operators and the RBOCs will be able to enter each others' business and compete with one another. RBOCs, specifically, have the potential for strong earnings growth, because they should be able to enter the long-distance business inexpensively. Q. WHAT'S YOUR OUTLOOK? A. It's very difficult to predict the direction of the economy and interest rates. Witness the past six months, when the market sentiment shifted rapidly from an expectation of economic weakness and falling interest rates to a fear of rapid economic growth and rising interest rates. While I'll keep an eye on the economy and interest rates, my strategy will continue to be based on individual stock picking. I intend to continue to look for those companies poised to post the best earnings growth. For the moment, it appears that more of these prospects are in the telephone industry, so I'll probably continue to favor telephone stocks over gas and electric utility stocks. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: December 10, 1981 FUND NUMBER: 065 TRADING SYMBOL: FSUTX SIZE: as of August 31, 1996, more than $213 million MANAGER: John Muresianu, since 1992; manager, Fidelity Utilities Fund, since 1992; Fidelity Select Natural Gas Portfolio, 1993-1994; joined Fidelity in 1986 (checkmark) UTILITIES GROWTH PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 97.1% SHARES VALUE (NOTE 1) BROADCASTING - 0.0% CABLE TV OPERATORS - 0.0% TCI Group Class A 4,500 $ 66,937 87924V10 CELLULAR - 5.8% CELLULAR & COMMUNICATION SERVICES - 5.8% AirTouch Communications, Inc. (a) 409,800 11,269,500 00949T10 Telephone & Data Systems, Inc. 8,020 341,852 87943310 Vodafone Group PLC sponsored ADR 15,200 575,700 92857T10 12,187,052 COAL - 0.3% MAPCO, Inc. 11,300 608,787 56509710 ELECTRIC UTILITY - 9.3% ELECTRIC & OTHER SERVICES - 4.1% DPL, Inc. 33,300 786,713 23329310 Enova Corp. 28,300 647,363 29355210 Hidroelectrica de Cantabrico SA 10,650 341,724 42899999 IES Industries, Inc. 10,100 335,825 44949M10 LG&E Energy Corp. 8,700 197,925 50191710 Montana Power Co. 30,600 661,725 61208510 NIPSCO Industries, Inc. 26,300 973,100 62914010 PacifiCorp 44,800 901,600 69511410 Public Service Co. of New Mexico 32,200 627,900 74449910 Rochester Gas & Electric Corp. 8,800 163,900 77136710 Sierra Pacific Resources 5,400 137,700 82642510 Utilicorp United, Inc. 3,776 109,032 91800510 Veba AG Ord. 50,700 2,658,690 92239110 WPL Holdings, Inc. 900 27,450 92930510 8,570,647 ELECTRIC POWER - 5.2% AES Corp. (a) 133,949 4,755,190 00130H10 American Electric Power Co., Inc. 14,900 618,350 02553710 Boston Edison Co. 10,000 231,250 10059910 Central Louisiana Electric Co., Inc. 37,706 994,496 15389760 CESC Ltd. GDR (b) 34,300 68,600 15712810 DQE, Inc. 28,050 778,388 23329J10 Centrais Electircas Brasileiras SA 1,182,600 323,458 69699993 Entergy Corp. 15,200 385,700 29364G10 Great Bay Power Corp. (a) 1,729 14,264 39013910 Kansas City Power & Light Co. 8,500 233,750 48513410 Korea Electric Power Corp. sponsored ADR 20,000 425,000 50063110 Pinnacle West Capital Corp. 22,700 652,625 72348410 Portland General Corp. 30,300 1,098,374 73650610 TECO Energy, Inc. 7,000 167,125 87237510 United Illuminating Co. 8,000 277,000 91063710 11,023,570 TOTAL ELECTRIC UTILITY 19,594,217 GAS - 25.7% GAS & OTHER SERVICES - 1.1% MDU Resources Group, Inc. 51,900 1,135,312 55269010 UGI Corp. 43,251 1,010,992 90268110 Western Resources, Inc. 6,500 190,938 95942510 2,337,242 GAS DISTRIBUTION - 7.0% Energen Corp. 34,900 820,150 29265N10 K N Energy, Inc. 57,000 1,959,375 48262010 MCN Corp. 212,600 5,687,050 55267J10 NUI Corp. 17,500 328,125 62943010 SHARES VALUE (NOTE 1) National Fuel Gas Co. 7,800 $ 288,600 63618010 New Jersey Resources Corp. 8,600 246,175 64602510 NICOR, Inc. 17,000 533,375 65408610 Northwest Natural Gas Co. 2,900 102,950 66765510 Pacific Enterprises 133,400 3,985,325 69423210 Peoples Energy Corp. 9,700 329,800 71103010 WICOR, Inc. 11,800 423,325 92925310 14,704,250 GAS TRANSMISSION - 8.9% Enron Corp. 195,400 7,840,425 29356110 ONEOK, Inc. 28,200 771,975 68267810 Sonat, Inc. 95,000 4,191,874 83541510 TPC Corp. (a) 39,000 302,250 87261610 USX-Delhi Group 5,700 76,950 90336X10 Williams Companies, Inc. 112,023 5,587,147 96945710 18,770,621 GAS TRANSMISSION & DISTRIBUTION - 8.7% Bay State Gas Co. 14,100 384,225 07261260 Columbia Gas System, Inc. (The) 73,500 4,134,374 19764810 Consolidated Natural Gas Co. 17,500 951,563 20961510 ENSERCH Corp. 206,100 4,147,763 29356710 Equitable Resources, Inc. 18,450 528,131 29454910 Noram Energy Corp. 78,100 1,142,213 65541910 Panenergy Corp. 44,100 1,460,813 69792610 Questar Corp. 113,000 4,096,250 74835610 Tejas Gas Corp. (a) 35,895 1,247,351 87907510 Yankee Energy System, Inc. 16,500 367,125 98477910 18,459,808 TOTAL GAS 54,271,921 HOLDING COMPANIES - 0.6% CINergy Corp. 44,406 1,332,180 17247410 INDEPENDENT POWER - 0.0% STEAM SUPPLY - 0.0% Bonneville Pacific Corp. (a) 11,300 11,300 09890410 OIL & GAS - 3.1% CRUDE PETROLEUM & GAS - 0.1% Nuevo Energy Corp. (a) 800 29,900 67050910 Occidental Petroleum Corp. 12,100 281,325 67459910 311,225 PETROLEUM REFINERS - 3.0% Coastal Corp. (The) 159,900 6,336,037 19044110 TOTAL OIL & GAS 6,647,262 TELEPHONE SERVICES - 52.3% AT&T Corp. 201,000 10,552,500 00195710 ALLTEL Corp. 7,400 209,050 02003910 Ameritech Corp. 221,600 11,440,100 03095410 BCE, Inc. 32,464 1,281,240 05534B10 Bell Atlantic Corp. 168,100 9,455,625 07785310 BellSouth Corp. 322,300 11,683,375 07986010 Cincinnati Bell, Inc. 10,000 477,500 17187010 Frontier Corp. 800 23,600 35906P10 GTE Corp. 269,400 10,607,625 36232010 NYNEX Corp. 239,900 10,345,688 67076810 Pacific Telesis Group 365,600 11,836,300 69489010 SBC Communications, Inc. 250,600 11,684,225 78387G10 Telecom Argentina Class B sponsored ADR 36,000 1,399,500 87927320 Telebras sponsored ADR 88,100 6,552,438 87928710 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TELEPHONE SERVICES - CONTINUED Telefonica de Argentina SA sponsored ADR 61,600 $ 1,470,700 87937820 U.S. West, Inc. 268,159 7,910,691 91288910 U.S. West, Inc. (Media Group) (a) 192,359 3,486,507 91288920 110,416,664 TOTAL COMMON STOCKS (Cost $187,086,043) 205,136,320 CONVERTIBLE PREFERRED STOCKS - 0.8% ELECTRIC UTILITY - 0.8% COMBINATION UTILITIES - 0.8% Citizens Utilities Trust 5.10% (Cost $1,705,000) 34,100 1,653,850 REPURCHASE AGREEMENTS - 2.1% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 4,330,525 4,328,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $193,119,043) $ 211,118,170 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $68,600 or 0.0% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $18,935,340 and $65,011,538, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $18,605 for the period (see Note 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $1,473,363 and $1,478,100, respectively (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $193,299,093. Net unrealized appreciation aggregated $17,819,077, of which $25,244,396 related to appreciated investment securities and $7,425,319 related to depreciated investment securities. UTILITIES GROWTH PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 211,118,170 securities, at value (including repurchase agreements of $4,328,000) (cost $193,119,043) - - See accompanying schedule Cash 767 Receivable for 4,978,178 investments sold Receivable for 109,025 fund shares sold Dividends 433,812 receivable Redemption fees 273 receivable Other receivables 20,400 Prepaid expenses 6,084 TOTAL ASSETS 216,666,709 LIABILITIES Payable for fund $ 1,268,322 shares redeemed Accrued 112,329 management fee Other payables 215,040 and accrued expenses Collateral on 1,478,100 securities loaned, at value TOTAL LIABILITIES 3,073,791 NET ASSETS $ 213,592,918 Net Assets consist of: Paid in capital $ 186,470,029 Undistributed net 2,680,802 investment income Accumulated 6,443,452 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 17,998,635 appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 213,592,918 5,301,323 shares outstanding NET ASSET VALUE $40.29 and redemption price per share ($213,592,918 (divided by) 5,301,323 shares) Maximum offering $41.54 price per share (100/97.00 of $40.29) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 4,093,426 INCOME Dividends Interest (including 197,011 income on securities loaned of $10,287) TOTAL INCOME 4,290,437 EXPENSES Management fee $ 722,931 Transfer agent 886,180 fees Accounting and 120,068 security lending fees Non-interested 471 trustees' compensation Custodian fees 13,580 and expenses Registration fees 6,084 Audit 16,306 Legal 1,201 Miscellaneous 2,947 Total expenses 1,769,768 before reductions Expense (19,035 1,750,733 reductions ) NET INVESTMENT 2,539,704 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 6,615,249 securities Foreign (428 6,614,821 currency ) transactions Change in net unrealized appreciation (depreciation) on: Investment (8,866,075 securities ) Assets and (557 (8,866,632 liabilities in ) ) foreign currencies NET GAIN (LOSS) (2,251,811 ) NET INCREASE $ 287,893 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 130,726 INFORMATION Sales charges paid to FDC Deferred sales $ 16,403 charges withheld by FDC Exchange fees $ 39,563 withheld by FSC Expense $ 18,511 reductions Directed brokerage arrangements Custodian 21 interest credits Transfer agent 503 interest credits $ 19,035 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ 2,539,704 $ 7,298,546 Net investment income Net realized 6,614,821 23,321,198 gain (loss) Change in net (8,866,632 27,286,486 unrealized ) appreciation (depreciation) NET INCREASE 287,893 57,906,230 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (1,403,382 (5,508,527 shareholders ) ) From net investment income From net (15,353,364 - realized gain ) TOTAL (16,756,746 (5,508,527 DISTRIBUTIONS ) ) Share 46,907,892 283,936,618 transactions Net proceeds from sales of shares Reinvestment of 16,197,747 5,265,104 distributions Cost of shares (99,940,564 (312,698,789 redeemed ) ) Paid in capital 129,116 231,738 portion of redemption fees NET INCREASE (36,705,809 (23,265,329 (DECREASE) IN ) ) NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (53,174,662 29,132,374 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 266,767,580 237,635,206 period End of period $ 213,592,918 $ 266,767,580 (including undistributed net investment income of $2,680,802 and $2,165,391, respectively) OTHER INFORMATION Shares Sold 1,124,586 6,910,440 Issued in 399,254 124,287 reinvestment of distributions Redeemed (2,421,488 (7,649,316 ) ) Net increase (897,648) (614,589) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 43.03 $ 34.88 $ 36.61 $ 41.49 $ 37.18 $ 35.57 beginning of period Income from Investment Operations Net investment .44 1.10 1.13 1.33 1.19 1.66 income Net realized and (.34) 7.86 (1.17) (.16) 6.14 2.82 unrealized gain (loss) Total from .10 8.96 (.04) 1.17 7.33 4.48 investment operations Less Distributions From net (.24) (.84) (1.05) (1.13) (1.33) (1.69) investment income From net (2.62) - (.67) (4.94) (1.70) (1.19) realized gain Total (2.86) (.84) (1.72) (6.07) (3.03) (2.88) distributions Redemption fees .02 .03 .03 .02 .01 .01 added to paid in capital Net asset value, $ 40.29 $ 43.03 $ 34.88 $ 36.61 $ 41.49 $ 37.18 end of period TOTAL RETURN B, C .23% 25.82% .21% 2.53% 20.90% 13.23% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 213,593 $ 266,768 $ 237,635 $ 250,522 $ 290,718 $ 206,872 period (000 omitted) Ratio of expenses 1.47% A 1.39% 1.43% 1.36% 1.42% A 1.51% to average net assets Ratio of expenses 1.45% A, 1.38% 1.42% 1.35% E 1.42% A 1.51% to average net E E E assets after expense reductions Ratio of net 2.10% A 2.76% 3.24% 3.11% 3.71% A 4.58% investment income to average net assets Portfolio turnover 16% A 65% 24% 61% 34% A 45% rate Average $ .0348 commission rate F
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past one, five and 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S BROKERAGE AND INVESTMENT 5.51% 13.61% 130.61% 114.42% MANAGEMENT BROKERAGE AND INVESTMENT 2.35% 10.20% 123.69% 107.99% MANAGEMENT (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS BROKERAGE AND INVESTMENT 13.61% 18.19% 7.93% MANAGEMENT BROKERAGE AND INVESTMENT 10.20% 17.47% 7.60% MANAGEMENT (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960909 144728 S00000000000001 Brokerage/Invt. Mgt SP Standard & Poor 500 00068 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8566.89 9173.00 1986/10/31 9505.13 9702.28 1986/11/30 9036.01 9938.05 1986/12/31 8747.32 9684.63 1987/01/31 10385.64 10989.15 1987/02/28 10623.81 11423.22 1987/03/31 10580.51 11753.35 1987/04/30 9425.74 11648.74 1987/05/31 9007.14 11750.09 1987/06/30 8992.71 12343.47 1987/07/31 9014.36 12969.28 1987/08/31 9303.05 13453.04 1987/09/30 8985.49 13158.41 1987/10/31 5679.99 10324.09 1987/11/30 5254.17 9473.39 1987/12/31 5523.96 10194.31 1988/01/31 5919.75 10623.49 1988/02/29 6203.70 11118.55 1988/03/31 6040.21 10774.98 1988/04/30 6143.46 10894.59 1988/05/31 5911.15 10989.37 1988/06/30 6539.31 11493.78 1988/07/31 6487.61 11450.10 1988/08/31 6444.54 11060.80 1988/09/30 6608.23 11531.99 1988/10/31 6634.08 11852.58 1988/11/30 6487.61 11683.09 1988/12/31 6548.57 11887.54 1989/01/31 7401.98 12757.71 1989/02/28 7227.81 12440.04 1989/03/31 7236.52 12729.90 1989/04/30 7306.19 13390.58 1989/05/31 7785.14 13932.90 1989/06/30 7566.25 13853.48 1989/07/31 8477.01 15104.45 1989/08/31 8687.18 15400.50 1989/09/30 8415.71 15337.35 1989/10/31 7732.64 14981.53 1989/11/30 7653.83 15287.15 1989/12/31 7469.24 15654.04 1990/01/31 7141.02 14603.66 1990/02/28 7380.54 14792.04 1990/03/31 7584.56 15184.03 1990/04/30 7070.06 14804.43 1990/05/31 7744.24 16247.86 1990/06/30 7735.15 16137.38 1990/07/31 7459.85 16085.74 1990/08/31 6447.44 14631.59 1990/09/30 5896.83 13919.03 1990/10/31 5532.72 13859.18 1990/11/30 5896.83 14754.48 1990/12/31 6260.94 15166.13 1991/01/31 6781.94 15827.37 1991/02/28 7455.64 16959.03 1991/03/31 8219.17 17369.44 1991/04/30 8335.95 17411.13 1991/05/31 8776.10 18163.29 1991/06/30 8191.74 17331.41 1991/07/31 8821.18 18139.05 1991/08/31 9019.00 18568.95 1991/09/30 9486.59 18258.85 1991/10/31 10116.03 18503.51 1991/11/30 9558.53 17757.82 1991/12/31 11410.88 19789.32 1992/01/31 11572.74 19421.24 1992/02/29 11500.80 19673.71 1992/03/31 11195.08 19290.07 1992/04/30 10322.85 19857.20 1992/05/31 10295.87 19954.50 1992/06/30 10053.09 19657.18 1992/07/31 10619.59 20461.16 1992/08/31 10313.86 20041.71 1992/09/30 10241.92 20278.20 1992/10/31 10700.51 20349.17 1992/11/30 11662.66 21043.08 1992/12/31 11995.37 21301.91 1993/01/31 12705.74 21480.84 1993/02/28 12786.66 21772.98 1993/03/31 13811.76 22232.39 1993/04/30 13766.78 21694.37 1993/05/31 14216.67 22275.78 1993/06/30 14891.51 22340.38 1993/07/31 15386.40 22251.02 1993/08/31 16601.11 23094.33 1993/09/30 16907.04 22916.50 1993/10/31 16358.17 23390.88 1993/11/30 15908.28 23168.66 1993/12/31 17912.10 23449.00 1994/01/31 18293.83 24246.27 1994/02/28 17373.76 23589.20 1994/03/31 15425.94 22560.71 1994/04/30 15298.69 22849.48 1994/05/31 15670.64 23224.22 1994/06/30 16267.71 22655.22 1994/07/31 15885.98 23398.31 1994/08/31 16003.43 24357.64 1994/09/30 15396.57 23760.88 1994/10/31 15386.79 24295.50 1994/11/30 14319.89 23410.66 1994/12/31 14819.08 23757.84 1995/01/31 14633.11 24373.88 1995/02/28 15181.24 25323.73 1995/03/31 15337.85 26071.03 1995/04/30 15802.52 26838.83 1995/05/31 16691.10 27911.57 1995/06/30 17630.16 28559.96 1995/07/31 18478.35 29507.01 1995/08/31 18306.69 29581.07 1995/09/30 19417.42 30829.39 1995/10/31 18336.99 30719.33 1995/11/30 18781.28 32067.91 1995/12/31 18315.53 32685.54 1996/01/31 19509.56 33798.15 1996/02/29 19712.11 34111.46 1996/03/31 20596.97 34439.95 1996/04/30 20722.33 34947.60 1996/05/31 21408.72 35848.90 1996/06/30 21343.35 35985.48 1996/07/31 20035.94 34395.64 1996/08/30 20798.60 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960909 144733 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Brokerage and Investment Management Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $20,799 - a 107.99% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Bear Stearns Companies, Inc. 5.0 Alex Brown, Inc. 4.7 Morgan Stanley Group, Inc. 4.7 Lehman Brothers Holdings, Inc. 4.3 Legg Mason, Inc 4.2 Advest Group, Inc. (The) 4.1 Quick & Reilly Group, Inc. (The) 3.9 Raymond James Financial, Inc. 3.9 Jefferies Group, Inc. 3.9 Schwab (Charles) Corp. 3.7 TOP INDUSTRIES AS OF AUGUST 31, 1996 Security & Commodity Brokers 61.6% Security Brokers & Dealers 10.2% Investment Managers 5.4% Investment Advice 2.4% Financial Services 2.2 % All Others 18.2% * Row: 1, Col: 1, Value: 18.2 Row: 1, Col: 2, Value: 2.2 Row: 1, Col: 3, Value: 2.4 Row: 1, Col: 4, Value: 5.4 Row: 1, Col: 5, Value: 10.2 Row: 1, Col: 6, Value: 61.6 * INCLUDES SHORT-TERM INVESTMENTS BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Louis Salemy, Portfolio Manager of Fidelity Select Brokerage and Investment Management Portfolio Q. HOW DID THE FUND PERFORM, LOUIS? A. Reasonably well. For the six months ended August 31, 1996, the fund compiled a return of 5.51%. This compares favorably to the Standard & Poor's 500 Index, which had a return of 2.96% over the same period. For a longer-term perspective, the fund had a one-year return of 13.61% as of August 31, 1996, while the S&P 500 returned 18.73%. Q. IN TERMS OF PERFORMANCE, WERE THERE ANY PARTICULAR FACTORS THAT DICTATED THE DIRECTION OF THE SECTOR DURING THE PERIOD? A. The large number of initial public offerings (IPOs) during the first three months of the period produced positive results. From March through the beginning of July, a large amount of mutual fund cash flooded the market. This influx created a favorable environment for companies interested in raising money through IPOs. IPOs are popular because they can be quite profitable to the issuing firm. The IPO activity during the last three months, however, had become somewhat quiet. Q. CAN YOU POINT TO ANY OTHER FACTORS AS HAVING PLAYED A KEY ROLE IN PERFORMANCE? A. Trading volume is a good indicator of the pulse of the market. Trading volume - the number of trades executed - is very important to all securities firms, especially discount brokerage houses whose revenues are largely volume-driven. Due to the speculative nature of the market over the past six months, trading volume was off-the-charts. The high-volume trading going on throughout the industry results in increased profits. Q. WERE THERE ANY INDIVIDUAL STOCKS THAT HAD EITHER POSITIVE OR NEGATIVE RAMIFICATIONS ON THE PORTFOLIO? A. With this type of fund, the stocks in the portfolio tend to trade as a group. Because of this, there usually isn't one stock which stands out above the rest. That being said, however one disappointment was the fund's position in Lehman Brothers Holdings. Q. THE FUND'S LARGEST HOLDING SIX MONTHS AGO IS NO LONGER ON THE RADAR SCREEN. WHAT'S THE STORY THERE? A. That's right. Dean Witter Discover, a credit card-related position, was reduced because credit card charges exploded and delinquencies were on the rise. I sold the stock before most of the bad news hit, somewhat minimizing the effect. Q. DID YOU NOTICE ANY SIGNIFICANT TRENDS WITHIN THE INDUSTRY DURING THE PERIOD? A. One potentially negative development is the rapidly increasing popularity of electronic, or on-line, trading. Many investors are discovering that it can be cheaper to conduct transactions over vehicles such as the Internet than with the traditional, full-service brokers or the discount brokerage firms. If you can trade a stock electronically for $15, you're certainly not going to pay companies $100 to execute the trade in the more traditional manner. Of course, there are issues that need to be settled, particularly concerning the methods of execution and the level of confidentiality. Q. THE BROKERAGE SECTOR KEEPS A VERY CLOSE EYE ON INTEREST RATES. WHAT WAS THE STORY THERE? A. Interest rates increased the first half of the year, and stocks went up. This was different than what I had expected to see, but the amount of money coming into the market dwarfed the impact of the rise in rates. Q. WHAT IS YOUR BASIC INVESTING STRATEGY? A. I tend to focus on stocks that I feel are cheap on a price-to-book basis. My feeling is that stocks that fall into this category have limited downside. Because of the scarcity of names, the number of investing opportunities are very limited within the brokerage universe. Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? A. I'd have to say it's a bit negative. The strong mutual fund inflow and positive performance it spawned has created an expectation level for brokerage stocks that could be difficult to meet. If interest rates are lowered and stocks get a bit cheaper, it would be a positive for the fund. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 068 TRADING SYMBOL: FSLBX SIZE: as of August 31, 1996, more than $40 million MANAGER: Louis Salemy, since 1995; manager, Fidelity Select Financial Services Portfolio, since 1994; joined Fidelity in 1992 (checkmark) BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 84.6% SHARES VALUE (NOTE 1) CREDIT & OTHER FINANCE - 2.2% FINANCIAL SERVICES - 2.2% Investors Financial Services Corp. 6,297 $ 142,465 46191510 Investors Financial Services Corp. Class A 1,210 18,453 46191520 Perpetual PLC 20,000 726,167 71499822 887,085 INSURANCE - 2.8% LIFE INSURANCE - 0.9% Liberty Financial Companies, Inc. 12,000 366,000 53051210 PROPERTY-CASUALTY & REINSURANCE - 1.9% Travelers, Inc. (The) 18,000 780,750 89419010 TOTAL INSURANCE 1,146,750 SECURITIES INDUSTRY - 79.6% INVESTMENT ADVICE - 2.4% Mutual Fund Co., Ltd. (For. Reg.) 27,600 226,900 65499B23 Trimark Financial Corp. 33,200 736,430 89621H10 963,330 INVESTMENT MANAGERS - 5.4% Eaton Vance Corp. 22,500 863,438 27826510 Franklin Resources, Inc. 8,900 529,550 35461310 Price (T. Rowe) Associates, Inc. 28,000 812,000 74147710 2,204,988 SECURITY & COMMODITY BROKERS - 61.6% Advest Group, Inc. (The) (a) 169,100 1,669,863 00756610 Alex Brown, Inc. 38,500 1,925,000 01390210 BHC Financial, Inc. 22,000 313,500 05544W10 Bear Stearns Companies, Inc. 86,583 2,023,878 07390210 Edwards (A.G.), Inc. 52,000 1,456,000 28176010 Fahnestock Viner Holdings, Inc. Class A 77,600 1,091,760 30292110 First Marathon Inc. Class A (non-vtg.) 33,100 349,567 32076L20 Jefferies Group, Inc. 51,800 1,566,950 47231810 Legg Mason, Inc. 56,700 1,722,263 52490110 McDonald & Co. Investments, Inc. 34,200 679,725 58004710 Merrill Lynch & Co., Inc. 21,900 1,341,375 59018810 Morgan Keegan, Inc. 91,950 1,149,375 61741010 Morgan Stanley Group, Inc. 40,000 1,910,000 61744610 Peregrine Investments Holdings Ltd. 843,000 1,188,322 71399492 Peregrine Investments Holdings Ltd. (warrants) (a) 84,300 13,737 71399497 Piper Jaffray, Inc. 32,600 387,125 72408110 Quick & Reilly Group, Inc. (The) 54,375 1,590,469 74837610 Raymond James Financial, Inc. 67,900 1,578,675 75473010 Schwab (Charles) Corp. 60,400 1,510,000 80851310 Southwest Securities Group, Inc. 60,000 705,000 84522410 Waterhouse Investor Services, Inc. 23,500 878,313 94154710 25,050,897 SECURITY BROKERS & DEALERS - 10.2% Inter-Regional Financial Group, Inc. 36,250 965,156 45835110 Lehman Brothers Holdings, Inc. 83,100 1,755,488 52490810 PaineWebber Group, Inc. 69,700 1,437,563 69562910 4,158,207 TOTAL SECURITIES INDUSTRY 32,377,422 TOTAL COMMON STOCKS (Cost $30,194,097) 34,411,257 REPURCHASE AGREEMENTS - 15.4% MATURITY VALUE AMOUNT (NOTE 1) Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 6,269,655 $ 6,266,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $36,460,097) $ 40,677,257 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $8,126,332 and $8,814,149, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $1,159 for the period (see Note 5 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 89.2% Canada 5.4 Hong Kong 3.0 United Kingdom 1.8 Thailand 0.6 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $36,558,784. Net unrealized appreciation aggregated $4,118,473, of which $5,374,140 related to appreciated investment securities and $1,255,667 related to depreciated investment securities. BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 40,677,257 securities, at value (including repurchase agreements of $6,266,000) (cost $36,460,097) - See accompanying schedule Cash 510 Receivable for 103,016 fund shares sold Dividends 30,527 receivable Redemption fees 1,077 receivable Other receivables 238 Prepaid expenses 3,550 TOTAL ASSETS 40,816,175 LIABILITIES Payable for fund $ 687,263 shares redeemed Accrued 20,576 management fee Other payables 56,091 and accrued expenses TOTAL LIABILITIES 763,930 NET ASSETS $ 40,052,245 Net Assets consist of: Paid in capital $ 35,305,258 Undistributed net 57,691 investment income Accumulated 472,136 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 4,217,160 appreciation (depreciation) on investments NET ASSETS, for $ 40,052,245 2,098,283 shares outstanding NET ASSET VALUE $19.09 and redemption price per share ($40,052,245 (divided by) 2,098,283 shares) Maximum offering $19.68 price per share (100/97.00 of $19.09) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 292,176 INCOME Dividends Interest 127,284 TOTAL INCOME 419,460 EXPENSES Management fee $ 120,117 Transfer agent 192,092 fees Accounting fees 30,099 and expenses Non-interested 73 trustees' compensation Custodian fees 6,843 and expenses Registration fees 3,550 Audit 11,794 Legal 131 Miscellaneous 309 Total expenses 365,008 before reductions Expense (3,240 361,768 reductions ) NET INVESTMENT 57,692 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 669,417 securities Foreign (116 669,301 currency ) transactions Change in net 701,973 unrealized appreciation (depreciation) on investment securities NET GAIN (LOSS) 1,371,274 NET INCREASE $ 1,428,966 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 83,504 INFORMATION Sales charges paid to FDC Deferred sales $ 412 charges withheld by FDC Exchange fees $ 15,315 withheld by FSC Expense $ 3,240 reductions Directed brokerage arrangements STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED Operations ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Net investment $ 57,692 $ 166,720 income Net realized 669,301 5,390,883 gain (loss) Change in net 701,973 2,887,650 unrealized appreciation (depreciation) NET INCREASE 1,428,966 8,445,253 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (45,162 (62,341 shareholders ) ) From net investment income From net (903,245 (1,755,263 realized gain ) ) In excess of net - (564,639 realized gain ) TOTAL (948,407 (2,382,243 DISTRIBUTIONS ) ) Share 39,946,309 73,164,616 transactions Net proceeds from sales of shares Reinvestment of 930,656 2,335,190 distributions Cost of shares (39,782,012 (70,682,177 redeemed ) ) Paid in capital 95,061 155,181 portion of redemption fees NET INCREASE 1,190,014 4,972,810 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 1,670,573 11,035,820 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 38,381,672 27,345,852 period End of period $ 40,052,245 $ 38,381,672 (including undistributed net investment income of $57,691 and $115,192, respectively) OTHER INFORMATION Shares Sold 2,089,987 4,209,639 Issued in 48,649 138,315 reinvestment of distributions Redeemed (2,116,618 (4,034,436 ) ) Net increase 22,018 313,518 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 18.49 $ 15.51 $ 17.75 $ 14.22 $ 11.48 $ 9.28 beginning of period Income from Investment Operations Net investment .03 .09 (.03) (.02) - .02 income (loss) Net realized and .94 4.29 (2.25) 4.95 2.65 1.96 unrealized gain (loss) Total from .97 4.38 (2.28) 4.93 2.65 1.98 investment operations Less Distributions From net (.02) (.04) - (.01) - (.01) investment income From net (.40) (1.09) - (1.47) - - realized gain In excess of net - (.35) - - - - realized gain Total (.42) (1.48) - (1.48) - (.01) distributions Redemption fees .05 .08 .04 .08 .09 .23 added to paid in capital Net asset value, $ 19.09 $ 18.49 $ 15.51 $ 17.75 $ 14.22 $ 11.48 end of period TOTAL RETURN B, C 5.51% 29.85% (12.62)% 35.87% 23.87% 23.84% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 40,052 $ 38,382 $ 27,346 $ 59,810 $ 24,687 $ 17,915 period (000 omitted) Ratio of expenses 1.82% A 1.64% 2.54% 1.79% 2.21% A 2.17% to average net E E assets Ratio of expenses 1.80% A, 1.61% 2.54% 1.77% 2.21% A 2.17% to average net F F F assets after expense reductions Ratio of net .29% A .50% (.20)% (.14)% .02% A .16% investment income (loss) to average net assets Portfolio turnover 46% A 166% 139% 295% 111% A 254% rate Average $ .0462 commissions rate G
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E DURING THE PERIOD, FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
FINANCIAL SERVICES PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S FINANCIAL SERVICES 4.65% 21.76% 184.21% 216.74% FINANCIAL SERVICES 1.51% 18.11% 175.68% 207.24% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS FINANCIAL SERVICES 21.76% 23.23% 12.22% FINANCIAL SERVICES 18.11% 22.48% 11.88% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960909 160149 S00000000000001 Financial Services SP Standard & Poor 500 00066 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8662.26 9173.00 1986/10/31 8854.64 9702.28 1986/11/30 8767.93 9938.05 1986/12/31 8551.17 9684.63 1987/01/31 9152.68 10989.15 1987/02/28 9759.61 11423.22 1987/03/31 9388.41 11753.35 1987/04/30 8797.74 11648.74 1987/05/31 8735.42 11750.09 1987/06/30 9057.85 12343.47 1987/07/31 9163.52 12969.28 1987/08/31 9694.58 13453.04 1987/09/30 9350.47 13158.41 1987/10/31 7234.36 10324.09 1987/11/30 6792.71 9473.39 1987/12/31 7136.88 10194.31 1988/01/31 7674.25 10623.49 1988/02/29 7929.87 11118.55 1988/03/31 7793.34 10774.98 1988/04/30 7656.82 10894.59 1988/05/31 7732.35 10989.37 1988/06/30 8208.72 11493.78 1988/07/31 8153.53 11450.10 1988/08/31 8130.29 11060.80 1988/09/30 8467.24 11531.99 1988/10/31 8490.48 11852.58 1988/11/30 8139.01 11683.09 1988/12/31 7994.33 11887.54 1989/01/31 8404.06 12757.71 1989/02/28 8386.12 12440.04 1989/03/31 8999.23 12729.90 1989/04/30 9163.72 13390.58 1989/05/31 9737.95 13932.90 1989/06/30 9670.09 13853.48 1989/07/31 10444.06 15104.45 1989/08/31 10739.20 15400.50 1989/09/30 10962.05 15337.35 1989/10/31 9917.04 14981.53 1989/11/30 9781.52 15287.15 1989/12/31 9540.63 15654.04 1990/01/31 8735.19 14603.66 1990/02/28 9051.28 14792.04 1990/03/31 8911.47 15184.03 1990/04/30 8595.38 14804.43 1990/05/31 9352.18 16247.86 1990/06/30 9090.80 16137.38 1990/07/31 8507.23 16085.74 1990/08/31 7489.04 14631.59 1990/09/30 6373.59 13919.03 1990/10/31 5817.38 13859.18 1990/11/30 6638.01 14754.48 1990/12/31 7219.40 15166.13 1991/01/31 7875.43 15827.37 1991/02/28 8780.19 16959.03 1991/03/31 9199.92 17369.44 1991/04/30 9498.40 17411.13 1991/05/31 10225.93 18163.29 1991/06/30 9395.79 17331.41 1991/07/31 10138.88 18139.05 1991/08/31 10810.45 18568.95 1991/09/30 10745.16 18258.85 1991/10/31 10981.45 18503.51 1991/11/30 10166.86 17757.82 1991/12/31 11668.61 19789.32 1992/01/31 12249.84 19421.24 1992/02/29 13129.54 19673.71 1992/03/31 12834.21 19290.07 1992/04/30 13327.47 19857.20 1992/05/31 13899.28 19954.50 1992/06/30 14219.10 19657.18 1992/07/31 14625.72 20461.16 1992/08/31 13786.86 20041.71 1992/09/30 14215.90 20278.20 1992/10/31 14779.41 20349.17 1992/11/30 15890.43 21043.08 1992/12/31 16665.12 21301.91 1993/01/31 17716.28 21480.84 1993/02/28 18187.26 21772.98 1993/03/31 19139.46 22232.39 1993/04/30 18223.20 21694.37 1993/05/31 18230.11 22275.78 1993/06/30 18910.67 22340.38 1993/07/31 19418.50 22251.02 1993/08/31 20023.06 23094.33 1993/09/30 20485.98 22916.50 1993/10/31 19936.69 23390.88 1993/11/30 19048.85 23168.66 1993/12/31 19590.57 23449.00 1994/01/31 20920.48 24246.27 1994/02/28 20161.09 23589.20 1994/03/31 19240.39 22560.71 1994/04/30 19971.02 22849.48 1994/05/31 20823.47 23224.22 1994/06/30 20331.82 22655.22 1994/07/31 21041.53 23398.31 1994/08/31 21779.00 24357.64 1994/09/30 20137.54 23760.88 1994/10/31 20030.49 24295.50 1994/11/30 18761.74 23410.66 1994/12/31 18876.01 23757.84 1995/01/31 19852.20 24373.88 1995/02/28 21112.94 25323.73 1995/03/31 21485.03 26071.03 1995/04/30 22159.17 26838.83 1995/05/31 23389.27 27911.57 1995/06/30 23498.70 28559.96 1995/07/31 24286.66 29507.01 1995/08/31 25232.22 29581.07 1995/09/30 26672.43 30829.39 1995/10/31 25989.53 30719.33 1995/11/30 27740.55 32067.91 1995/12/31 27811.95 32685.54 1996/01/31 29112.28 33798.15 1996/02/29 29358.05 34111.46 1996/03/31 29706.59 34439.95 1996/04/30 29376.90 34947.60 1996/05/31 30059.55 35848.90 1996/06/30 30499.38 35985.48 1996/07/31 29835.05 34395.64 1996/08/30 30723.87 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960909 160154 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Financial Services Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $30,724 - a 207.24% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Allstate Corp. 5.7 Bank of New York Co., Inc. 5.6 Federal National Mortgage Association 5.4 Household International, Inc. 4.9 Associates First Capital Corp. 4.6 American Express Co. 4.6 Beneficial Corp. 4.6 Fleet Financial Group, Inc. 4.3 Citicorp 4.3 Alex Brown, Inc. 4.2 TOP INDUSTRIES AS OF AUGUST 31, 1996 National Commercial Banks 27.3% Personal Credit Institutions 14.1% Property-Casualty & Reinsurance 11.3% Federal & Federally Sponsored Credit Agencies 10.3% Financial Services 6.1% All Others 30.9% * Row: 1, Col: 1, Value: 31.0 Row: 1, Col: 2, Value: 6.0 Row: 1, Col: 3, Value: 10.3 Row: 1, Col: 4, Value: 11.3 Row: 1, Col: 5, Value: 14.1 Row: 1, Col: 6, Value: 27.3 * INCLUDES SHORT-TERM INVESTMENTS FINANCIAL SERVICES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Louis Salemy, Portfolio Manager of Fidelity Select Financial Services Portfolio Q. LOUIS, HOW HAS THE FUND PERFORMED? A. All things considered, pretty well. For the six months ended August 31, 1996, the fund compiled a return of 4.65%, while the Standard & Poor's 500 Index had a return of 2.96%. For the one-year period ended August 31, 1996, the fund posted a return of 21.76%, while the S&P 500 had a return of 18.73%. Q. HOW WOULD YOU CHARACTERIZE THE OVERALL INVESTING ENVIRONMENT DURING THE PERIOD? A. From March through the beginning of July, the markets went through a pretty rough time. Investors were concerned that the Federal Reserve Board was going to raise interest rates, and this made for a stagnant atmosphere. Things began to turn around, though, when the government released the unemployment figures issued in July. The market had anticipated the figures to be much worse than they actually were and, accordingly, had already begun discounting bond prices. This sent the bond market off on a nice rally and resulted in positive gains within the financial services sector. Q. MERGERS AND ACQUISITIONS ARE TYPICALLY STRONG DRIVERS OF PERFORMANCE IN THIS SECTOR. WERE THERE ANY SIGNIFICANT DEVELOPMENTS IN THIS AREA? A. It was an extremely quiet period in terms of mergers and acquisitions, especially with the bank-related stocks. There were some minor transactions in the insurance area, but these involved mostly small-cap stocks that didn't have much of an impact on the fund. I think this lack of activity can be traced to a couple of factors. First, a number of the "target" stocks - those believed to be ripe for a takeover - were trading at expensive levels, and no one wanted to pay those prices. Second, some of the institutions that wanted to expand had their hands full with other management issues. Q. DID "MONEY-CENTER" BANKS CONTINUE TO BE POSITIVE CONTRIBUTORS? A. Money-center bank stocks turned in a stronger performance than the regional banks during the period. Money-center banks - larger banks situated in the major financial centers of the world - tend to have a broad domestic and/or international focus. Regional banks, on the other hand, focus on a particular region of the country. Stocks such as Citicorp and Bank of New York were positive contributors to the fund. Q. WHAT WAS YOUR STRATEGY WITH RESPECT TO COMPANIES IN THE INSURANCE AND CREDIT CARD SECTORS? A. In the insurance field, Allstate continued to be my biggest holding. I've felt that Allstate's business is going to become more stable over time and returns may increase. With credit card-related stocks, we've seen consumer debt rise dramatically over the last six months. As a result, I've reduced my holdings in these types of companies. Q. WHAT MAKES A PARTICULAR STOCK APPEALING TO YOU? A. The first thing I look at is whether returns have been on the upswing over the past year. If returns have been increasing, I'll give the stock every consideration. I also consider valuations to be pivotal and focus on price-to-book values. If the numbers seem out of whack, I'll stay away. If they look good, it's a potential buy. Q. DOES THE "CHEMISTRY" OF THE FUND COME INTO PLAY WHEN MAKING AN INVESTMENT DECISION? A. Not too much. The mix of the fund is really a residual of my stockpicking. I won't choose a stock solely because it's in a certain sector, nor will I avoid a stock for the same reason. Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? A. The financial services sector has been on a roll over the past year or so. This leads me to believe that we may see some kind of correction within the sector. If the Fed decides to raise rates, the investing environment could be tougher. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: December 10, 1981 FUND NUMBER: 066 TRADING SYMBOL: FIDSX SIZE: as of August 31, 1996, more than $254 million MANAGER: Louis Salemy, since 1994; manager, Fidelity Select Brokerage and Investment Management Portfolio, since 1995; joined Fidelity in 1992 (checkmark) FINANCIAL SERVICES PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 83.1% SHARES VALUE (NOTE 1) BANKS - 27.3% NATIONAL COMMERCIAL BANKS - 27.3% Bank of New York Co., Inc. 521,468 $ 14,535,919 06405710 Citicorp 135,000 11,238,750 17303410 Comerica, Inc. 109,445 5,335,444 20034010 First Bank System, Inc. 87,400 5,615,450 31927910 First Union Corp. 1 64 33735810 Fleet Financial Group, Inc. 269,367 11,246,072 33891510 Mercantile Bancorp., Inc. 22,050 1,077,694 58734210 National City Corp. 200,000 7,525,000 63540510 Norwest Corp. 232,900 8,762,863 66938010 Republic New York Corp. 3,000 198,375 76071910 Wells Fargo & Co. 10,000 2,487,500 94974010 Zions Bancorp. 33,000 2,846,250 98970110 70,869,381 COMPUTER SERVICES & SOFTWARE - 1.2% DATA PROCESSING - 1.2% First Data Corp. 39,647 3,092,466 31996310 CREDIT & OTHER FINANCE - 20.2% FINANCIAL SERVICES - 6.1% American Express Co. 273,000 11,943,750 02581610 Equitable Companies, Inc. 44,200 1,088,425 29444G10 First USA, Inc. 50,000 2,650,000 33743H10 15,682,175 PERSONAL CREDIT INSTITUTIONS - 14.1% Associates First Capital Corp. 304,000 12,008,000 04600810 Beneficial Corp. 211,800 11,940,225 08172110 Household International, Inc. 159,300 12,624,525 44181510 Mercury Finance Co. 5,800 67,425 58939510 36,640,175 TOTAL CREDIT & OTHER FINANCE 52,322,350 FEDERAL SPONSORED CREDIT - 10.3% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 10.3% Federal Home Loan Mortgage Corporation 122,400 10,817,100 31340030 Federal National Mortgage Association 452,400 14,024,400 31358610 Student Loan Marketing Association 26,000 1,914,250 86387150 26,755,750 INSURANCE - 17.1% INSURANCE BROKERS & SERVICES - 4.6% Alexander & Alexander Services, Inc. 250,000 3,937,500 01447610 ITT Hartford Group, Inc. 150,000 7,912,500 45068H10 11,850,000 LIFE INSURANCE - 1.2% Providian Corp. 21,800 901,975 74406110 Torchmark Corp. 55,000 2,337,500 89102710 Transport Holdings, Inc. Class A (a) 248 12,152 89385510 3,251,627 PROPERTY-CASUALTY & REINSURANCE - 11.3% Allstate Corp. 332,900 14,855,663 02000210 Chubb Corp. (The) 31,200 1,384,500 17123210 General Re Corp. 70,000 10,141,250 37056310 NAC Re Corp. 75,000 2,831,250 62890710 29,212,663 TOTAL INSURANCE 44,314,290 SHARES VALUE (NOTE 1) SAVINGS & LOANS - 0.6% SAVINGS BANKS & SAVINGS & LOANS - 0.6% Standard Federal Bancorp., Inc. 39,300 $ 1,645,688 85338610 SECURITIES INDUSTRY - 6.4% SECURITY & COMMODITY BROKERS - 4.2% Alex Brown, Inc. 217,000 10,850,000 01390210 SECURITY BROKERS & DEALERS - 2.2% Lehman Brothers Holdings, Inc. 274,000 5,788,250 52490810 TOTAL SECURITIES INDUSTRY 16,638,250 TOTAL COMMON STOCKS (Cost $181,544,976) 215,638,175 REPURCHASE AGREEMENTS - 16.9% MATURITY VALUE AMOUNT (NOTE 1) Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 43,830,553 43,805,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $225,349,976) $ 259,443,175 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $70,798,321 and $96,536,292, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $24,607 for the period (see Note 5 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $225,675,310. Net unrealized appreciation aggregated $33,767,865, of which $37,978,596 related to appreciated investment securities and $4,210,731 related to depreciated investment securities. FINANCIAL SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 259,443,175 securities, at value (including repurchase agreements of $43,805,000) (cost $225,349,976) - - See accompanying schedule Cash 565 Receivable for 585,824 fund shares sold Dividends 500,026 receivable Redemption fees 1,052 receivable Other receivables 4,825 Prepaid expenses 11,890 TOTAL ASSETS 260,547,357 LIABILITIES Payable for $ 3,781,967 investments purchased Payable for fund 2,163,271 shares redeemed Accrued 124,661 management fee Other payables 207,824 and accrued expenses TOTAL LIABILITIES 6,277,723 NET ASSETS $ 254,269,634 Net Assets consist of: Paid in capital $ 206,727,757 Undistributed net 1,417,166 investment income Accumulated 12,031,512 undistributed net realized gain (loss) on investments Net unrealized 34,093,199 appreciation (depreciation) on investments NET ASSETS, for $ 254,269,634 3,791,451 shares outstanding NET ASSET VALUE $67.06 and redemption price per share ($254,269,634 (divided by) 3,791,451 shares) Maximum offering $69.13 price per share (100/97.00 of $67.06) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 2,548,452 INCOME Dividends Interest 609,072 TOTAL INCOME 3,157,524 EXPENSES Management fee $ 710,805 Transfer agent 872,869 fees Accounting fees 117,982 and expenses Non-interested 446 trustees' compensation Custodian fees 6,529 and expenses Registration fees 11,890 Audit 22,049 Legal 1,057 Miscellaneous 1,453 Total expenses 1,745,080 before reductions Expense (11,991 1,733,089 reductions ) NET INVESTMENT 1,424,435 INCOME REALIZED AND 12,798,030 UNREALIZED GAIN (LOSS) Net realized gain (loss) on investment securities Change in net (7,293,636 unrealized ) appreciation (depreciation) on investment securities NET GAIN (LOSS) 5,504,394 NET INCREASE $ 6,928,829 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 331,569 INFORMATION Sales charges paid to FDC Deferred sales $ 4,291 charges withheld by FDC Exchange fees $ 53,535 withheld by FSC Expense $ 11,912 reductions Directed brokerage arrangements Custodian 58 interest credits Transfer agent 21 interest credits $ 11,991 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ 1,424,435 $ 3,488,580 Net investment income Net realized 12,798,030 13,966,548 gain (loss) Change in net (7,293,636 35,177,894 unrealized ) appreciation (depreciation) NET INCREASE 6,928,829 52,633,022 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (1,000,873 (1,512,445 shareholders ) ) From net investment income From net (5,428,808 (3,719,914 realized gain ) ) TOTAL (6,429,681 (5,232,359 DISTRIBUTIONS ) ) Share 131,603,618 434,251,303 transactions Net proceeds from sales of shares Reinvestment of 6,322,372 5,143,919 distributions Cost of shares (154,907,276 (369,962,899 redeemed ) ) Paid in capital 285,389 544,495 portion of redemption fees NET INCREASE (16,695,897 69,976,818 (DECREASE) IN ) NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (16,196,749 117,377,481 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 270,466,383 153,088,902 period End of period $ 254,269,634 $ 270,466,383 (including undistributed net investment income of $1,417,166 and $1,976,083, respectively) OTHER INFORMATION Shares Sold 1,976,334 7,271,619 Issued in 95,779 83,493 reinvestment of distributions Redeemed (2,397,476 (6,412,630 ) ) Net increase (325,363) 942,482 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 65.70 $ 48.23 $ 51.24 $ 53.29 $ 42.42 $ 30.55 beginning of period Income from Investment Operations Net investment .40 1.03 .76 .29 .33 .54 income Net realized and 2.55 17.56 .87 5.02 14.30 11.35 unrealized gain (loss) Total from 2.95 18.59 1.63 5.31 14.63 11.89 investment operations Less Distributions From net (.26) (.37) (.79) (.20) (.51) (.35) investment income From net (1.41) (.91) (3.93) (7.32) (3.38) - realized gain Total (1.67) (1.28) (4.72) (7.52) (3.89) (.35) distributions Redemption fees .08 .16 .08 .16 .13 .33 added to paid in capital Net asset value, $ 67.06 $ 65.70 $ 48.23 $ 51.24 $ 53.29 $ 42.42 end of period TOTAL RETURN B, C 4.65% 39.05% 4.72% 10.85% 36.46% 40.31% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 254,270 $ 270,466 $ 153,089 $ 116,195 $ 214,612 $ 91,700 period (000 omitted) Ratio of expenses 1.47% A 1.42% 1.56% 1.64% 1.54% A 1.85% to average net assets Ratio of expenses 1.46% A, 1.41% 1.54% 1.63% 1.54% A 1.85% to average net E E E E assets after expense reductions Ratio of net 1.20% A 1.78% 1.52% .53% .86% A 1.49% investment income to average net assets Portfolio turnover 65% A 125% 107% 93% 100% A 164% rate Average $ .0443 commission rate F
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
HOME FINANCE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S HOME FINANCE 9.89% 23.20% 293.94% 465.78% HOME FINANCE 6.59% 19.50% 282.12% 448.80% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS HOME FINANCE 23.20% 31.55% 18.92% HOME FINANCE 19.50% 30.75% 18.56% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960916 090330 S00000000000001 Home Finance SP Standard & Poor 500 00098 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8541.90 9173.00 1986/10/31 8857.74 9702.28 1986/11/30 9019.18 9938.05 1986/12/31 9040.23 9684.63 1987/01/31 10436.98 10989.15 1987/02/28 11419.61 11423.22 1987/03/31 10738.78 11753.35 1987/04/30 10135.17 11648.74 1987/05/31 9784.23 11750.09 1987/06/30 9966.71 12343.47 1987/07/31 9931.62 12969.28 1987/08/31 10830.03 13453.04 1987/09/30 10135.17 13158.41 1987/10/31 8162.88 10324.09 1987/11/30 7496.09 9473.39 1987/12/31 8321.86 10194.31 1988/01/31 9325.50 10623.49 1988/02/29 9064.13 11118.55 1988/03/31 8813.22 10774.98 1988/04/30 8959.59 10894.59 1988/05/31 8949.13 10989.37 1988/06/30 9513.68 11493.78 1988/07/31 9680.96 11450.10 1988/08/31 9440.50 11060.80 1988/09/30 9921.41 11531.99 1988/10/31 10203.69 11852.58 1988/11/30 9691.41 11683.09 1988/12/31 9861.06 11887.54 1989/01/31 10688.12 12757.71 1989/02/28 10921.39 12440.04 1989/03/31 10974.41 12729.90 1989/04/30 11536.38 13390.58 1989/05/31 12034.74 13932.90 1989/06/30 12276.98 13853.48 1989/07/31 12704.75 15104.45 1989/08/31 13485.43 15400.50 1989/09/30 13988.05 15337.35 1989/10/31 12244.89 14981.53 1989/11/30 11849.21 15287.15 1989/12/31 10780.74 15654.04 1990/01/31 9887.00 14603.66 1990/02/28 10255.67 14792.04 1990/03/31 10278.01 15184.03 1990/04/30 10032.23 14804.43 1990/05/31 10981.83 16247.86 1990/06/30 10870.11 16137.38 1990/07/31 9931.69 16085.74 1990/08/31 8926.23 14631.59 1990/09/30 8155.38 13919.03 1990/10/31 7540.93 13859.18 1990/11/30 8356.47 14754.48 1990/12/31 9154.68 15166.13 1991/01/31 10030.34 15827.37 1991/02/28 11395.01 16959.03 1991/03/31 11918.14 17369.44 1991/04/30 12327.54 17411.13 1991/05/31 12839.29 18163.29 1991/06/30 12122.84 17331.41 1991/07/31 13419.28 18139.05 1991/08/31 13931.03 18568.95 1991/09/30 13817.31 18258.85 1991/10/31 13578.49 18503.51 1991/11/30 12953.02 17757.82 1991/12/31 15069.12 19789.32 1992/01/31 16554.15 19421.24 1992/02/29 17636.28 19673.71 1992/03/31 17336.97 19290.07 1992/04/30 17705.35 19857.20 1992/05/31 19455.16 19954.50 1992/06/30 19479.53 19657.18 1992/07/31 20437.35 20461.16 1992/08/31 19329.51 20041.71 1992/09/30 19641.09 20278.20 1992/10/31 20010.37 20349.17 1992/11/30 22064.49 21043.08 1992/12/31 23787.01 21301.91 1993/01/31 25493.60 21480.84 1993/02/28 25926.09 21772.98 1993/03/31 26849.52 22232.39 1993/04/30 25395.22 21694.37 1993/05/31 24960.61 22275.78 1993/06/30 25583.16 22340.38 1993/07/31 27227.63 22251.02 1993/08/31 28660.66 23094.33 1993/09/30 30493.06 22916.50 1993/10/31 30727.98 23390.88 1993/11/30 29353.68 23168.66 1993/12/31 30279.67 23449.00 1994/01/31 31605.34 24246.27 1994/02/28 31010.64 23589.20 1994/03/31 30428.34 22560.71 1994/04/30 31604.80 22849.48 1994/05/31 33554.11 23224.22 1994/06/30 34112.91 22655.22 1994/07/31 34866.64 23398.31 1994/08/31 35997.24 24357.64 1994/09/30 34762.68 23760.88 1994/10/31 32683.41 24295.50 1994/11/30 30994.01 23410.66 1994/12/31 31091.50 23757.84 1995/01/31 32461.68 24373.88 1995/02/28 34866.79 25323.73 1995/03/31 34808.48 26071.03 1995/04/30 36630.54 26838.83 1995/05/31 38802.42 27911.57 1995/06/30 39210.56 28559.96 1995/07/31 40784.81 29507.01 1995/08/31 44545.53 29581.07 1995/09/30 45478.42 30829.39 1995/10/31 44647.56 30719.33 1995/11/30 47110.98 32067.91 1995/12/31 47722.77 32685.54 1996/01/31 49027.57 33798.15 1996/02/29 49942.43 34111.46 1996/03/31 51082.26 34439.95 1996/04/30 50430.08 34947.60 1996/05/31 51554.17 35848.90 1996/06/30 51785.15 35985.48 1996/07/31 52709.06 34395.64 1996/08/30 54880.25 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960916 090336 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Home Finance Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $54,880 - a 448.80% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Chase Manhattan Corp. 3.4 Standard Federal Bancorp., Inc. 3.2 Charter One Financial Corp. 3.1 Bank of New York Co., Inc. 2.9 NationsBank Corp. 2.7 BankAmerica Corp. 2.4 Bank of Boston Corp. 2.3 Federal National Mortgage Association 2.3 Astoria Financial Corp. 2.2 North Side Savings Bank 2.2 TOP INDUSTRIES AS OF AUGUST 31, 1996 National Commercial Banks 27.2% Savings Banks & Savings & Loans 22.2% Savings Banks, Federal Charter 9.7% Federal and Federally Sponsored Credit Agencies 3.8% Savings Banks, no Federal Charter 3.3% All Others 33.8% * Row: 1, Col: 1, Value: 33.8 Row: 1, Col: 2, Value: 3.3 Row: 1, Col: 3, Value: 3.8 Row: 1, Col: 4, Value: 9.6 Row: 1, Col: 5, Value: 22.2 Row: 1, Col: 6, Value: 27.3 * INCLUDES SHORT-TERM INVESTMENTS HOME FINANCE PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: Effective October 1, 1996, after the period ended, Bill Rubin (right) became Portfolio Manager of Fidelity Select Home Finance Portfolio. The following is an interview with David Ellison, who managed the fund during the period covered by the report, and Bill Rubin, who discusses his investment style and outlook. Q. DAVID, HOW DID THE FUND PERFORM? A. It has done well. For the six months ended August 31, 1996, the fund posted a total return of 9.89%. That topped the Standard & Poor's 500 Index, which returned 2.96% over the same period. For the 12-month period ended August 31, 1996, the fund returned 23.20% compared to 18.73% for the S&P 500. Q. WHAT FACTORS DROVE THE FUND'S PERFORMANCE? A. A combination of sound market fundamentals and a better-than-expected investing environment as a whole helped. Short-term interest rates didn't climb as some had feared, earnings came through strongly, credit quality didn't suffer, and we saw a continuation in the home finance sector of mergers/acquisitions and stock buybacks. These factors combined to create a favorable atmosphere. Q. DID YOU FOLLOW ANY SPECIFIC STRATEGIES IN TERMS OF PORTFOLIO STRUCTURE? A. I typically try to keep the number of different stocks within the portfolio to approximately 100. Over the past year, I've steadily added to the number of regional banks I own as they have performed well. I also continued to scrutinize stocks that I felt had cheap valuations relative to the financial arena. Q. WERE THERE ANY REGULATORY DEVELOPMENTS - EITHER PLACED IN EFFECT OR PENDING - THAT HAD RAMIFICATIONS ON THE HOME FINANCE SECTOR? A. Yes. Legislation passed that eliminated the possibility of taxes on pre-1988 bad debt reserves, but this had a minimal impact within the industry. Two pending developments, however, affected the sector during the period and will do so going forward. The first involves the Bank Insurance Fund/Savings Association Insurance Fund resolution. Under the proposed merger of these two entities, thrifts will take a one-time charge in order to get their insurance premiums down to what Bank Insurance Fund members are paying. This consolidation will be favorable to earnings. Another significant development is the likelihood of banks being able to offer insurance to their customers. Once this happens, you'll be able to go to the bank or thrift for your car loan and get insurance coverage for the car at the same time. This will change the channels of insurance distribution and should have a positive effect on the sector. Q. YOU MENTIONED MERGERS AND ACQUISITIONS EARLIER. WHY DO HOME FINANCE INVESTORS LOOK UPON THESE TRANSACTIONS SO FAVORABLY? A. It's basically a win-win situation. The selling institution receives a premium compared to its current market price, and the acquiring institution can reap future operational, market and financial benefits. There's good news to be had on both ends. Q. TURNING TO YOU, BILL, WHAT'S YOUR STRATEGY WITH RESPECT TO INTEREST RATES? A. Following rates is important on an absolute basis, but I don't make any moves based solely on interest rates. Unless rates rise quickly and substantially, thrifts should be able to react in time to avoid any significant earnings problems. I'll focus on companies' internal operating strategies, execution, and outlook. Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? A. Earnings have been good, and I'm anticipating that this will continue in the third and fourth quarters. The stocks that will perform best will be those that produce earnings greater than expected, make logical acquisitions that will boost earnings, and/or get acquired themselves. Excess capital should continue to be re-deployed into stock buybacks, higher dividends, and additional acquisitions. Credit quality and non-performing assets should also continue to improve. If the Federal Reserve Board lowers interest rates, I think the initial reaction will be positive. If rates go up, the market's initial reaction could be negative. A gradual increase, though, could allow thrifts to increase interest spreads. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 098 TRADING SYMBOL: FSVLX SIZE: as of August 31, 1996, more than $752 million MANAGER: Bill Rubin, since October 1996; manager, Fidelity Select Defense and Aerospace Portfolio, since 1994; equity analyst, savings & loans, aerospace, defense electronics, cable equipment and electronic connectors industries, since 1994; joined Fidelity in 1994 (checkmark) HOME FINANCE PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 78.0% SHARES VALUE (NOTE 1) BANKS - 29.5% NATIONAL COMMERCIAL BANKS - 27.2% Ambanc Holding, Inc. (a) 187,700 $ 1,853,530 02316110 Bank of Boston Corp. 331,659 17,495,013 06071610 Bank of New York Co., Inc. 804,000 22,411,500 06405710 Bank of New York Co., Inc. (warrants) (a) 32,500 1,616,875 06405711 BankAmerica Corp. 240,000 18,600,000 06605010 Chase Manhattan Corp. 350,000 26,031,250 16161A10 Citicorp 60,000 4,995,000 17303410 Comerica, Inc. 65,000 3,168,750 20034010 CoreStates Financial Corp. 100,000 4,137,500 21869510 First Bank System, Inc. 35,000 2,248,750 31927910 First Savings Bank of Washington Bancorp, Inc. 70,000 1,198,750 33620W10 First Tennessee National Corp. 45,000 1,535,625 33716210 First Union Corp. 155,974 9,962,839 33735810 Fleet Financial Group, Inc. 150,000 6,262,500 33891510 KeyCorp. 75,000 3,009,375 49326710 Mellon Bank Corp. 80,000 4,430,000 58550910 National City Corp. 39,200 1,474,900 63540510 NationsBank Corp. 240,000 20,430,000 63858510 PNC Financial Corp. 125,000 3,906,250 69347510 Peoples Heritage Financial Group, Inc. 454,800 10,005,600 71114710 Republic New York Corp. 240,000 15,870,000 76071910 TF Financial Corp. 100,000 1,450,000 87239110 Union Planters Corp. 205,000 6,739,375 90806810 UnionBanCal Corp. 249,000 12,014,250 90890610 Wachovia Corp. 95,000 4,346,250 92977110 Wells Fargo & Co. 12,000 2,985,000 94974010 208,178,882 STATE BANKS FEDERAL RESERVE - 2.3% Crestar Financial Corp. 45,000 2,615,625 22609110 Dime Community Bancorp, Inc. (a) 550,000 7,356,250 25392210 R&G Financial Corp Class B 50,000 887,500 74913610 SouthTrust Corp. 40,000 1,180,000 84473010 T R Financial Corp. 185,000 5,249,375 87263010 17,288,750 TOTAL BANKS 225,467,632 COMPUTER SERVICES & SOFTWARE - 0.1% CAD/CAM/CAE - 0.1% Ultradata Corp. (a) 91,000 602,875 90388N10 CREDIT & OTHER FINANCE - 6.6% BANK HOLDING COMPANY OFFICES - 2.1% Greenpoint Financial Corp. 410,000 14,606,250 39538410 Little Falls Bancorp, Inc. 135,000 1,451,250 53710110 16,057,500 FINANCIAL SERVICES - 2.0% First Chicago NBD Corp. 331,500 14,130,188 31945A10 RCSB Financial, Inc. 30,000 806,250 74937110 14,936,438 LOAN BROKERS - 0.3% Imperial Thrift & Loan Association (a) 158,000 2,152,750 45310510 MORTGAGE BANKERS - 1.5% First Alliance Mortgage Co. (a) 5,000 123,750 31793610 Imperial Credit Mortgage Holdings, Inc. 36,000 639,000 45292210 North American Mortgage Co. 70,000 1,198,750 65703710 PFF Bancorp, Inc. (a) 830,000 9,545,000 69331W10 11,506,500 SHARES VALUE (NOTE 1) PERSONAL CREDIT INSTITUTIONS - 0.7% Beneficial Corp. 100,000 $ 5,637,500 08172110 TOTAL CREDIT & OTHER FINANCE 50,290,688 FEDERAL SPONSORED CREDIT - 3.8% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 3.8% Federal Home Loan Mortgage Corporation 90,000 7,953,750 31340030 Federal National Mortgage Association 560,000 17,360,000 31358610 Student Loan Marketing Association 53,700 3,953,663 86387150 29,267,413 INSURANCE - 0.9% INSURANCE BROKERS & SERVICES - 0.2% Fidelity National Financial, Inc. 72,500 1,096,563 31632610 Stewart Information Services Corp. 12,900 267,675 86037210 1,364,238 PROPERTY-CASUALTY & REINSURANCE - 0.4% PMI Group, Inc. 59,300 2,898,288 69344M10 SURETY INSURANCE - 0.3% CMAC Investments 41,600 2,600,000 12566210 TOTAL INSURANCE 6,862,526 REAL ESTATE INVESTMENT TRUSTS - 1.9% Capstead Mortgage Corp. 578,865 12,083,807 14067E10 Thornburg Mortgage Asset Corp. 162,000 2,652,750 88521810 14,736,557 SAVINGS & LOANS - 35.2% SAVINGS BANKS & SAVINGS & LOANS - 22.2% Astoria Financial Corp. 633,000 16,972,313 04626510 Bankers Corp. 79,500 1,530,375 06612010 Bay View Capital, Inc. 66,298 2,453,026 07262L10 BostonFed Bancorp, Inc. 79,700 1,006,213 10117810 Cameron Financial Corp. 110,000 1,567,500 13342510 Charter One Financial Corp. 620,000 23,598,750 16090310 Collective Bancorp., Inc. 531,290 13,946,363 19390110 Commercial Federal Corp. 210,600 8,213,400 20164710 Eagle Financial Corp. 10,000 242,500 26951310 First Bell Bancorp, Inc. 267,400 3,676,750 31930110 First Federal Savings & Loan Association 118,400 2,368,000 31994410 First Financial Corp. of Wisconsin 295,000 7,006,250 32022710 FirstFed Financial Corp. (a) 291,400 5,354,475 33790710 GA Financial, Inc. (a) 274,700 3,262,063 36143710 Glendale Federal Bank FSB (a) 379,600 6,737,900 37850750 Golden West Financial Corp. 120,000 6,660,000 38131710 Great Western Financial Corp. 561,273 13,891,507 39144210 North Side Savings Bank (b) 361,200 16,795,800 66248810 Pamrapo Bancorp, Inc. 35,000 686,875 69773810 Sovereign Bancorp., Inc. 100,000 1,068,750 84590510 Standard Federal Bancorp., Inc. 591,300 24,760,688 85338610 Statewide Financial Corp. 195,000 2,461,875 85791410 Webster Financial Corp. 158,600 5,114,850 94789010 169,376,223 SAVINGS BANKS, NO FEDERAL CHARTER - 3.3% Acadiana Bancshares, Inc. (a) 163,300 2,163,725 00428010 Avondale Financial Corp. (a)(b) 272,300 3,846,238 05434110 Dime Financial Corp. (a) 270,300 4,189,650 25432H10 First Mutual Bancorp., Inc. 67,500 869,063 32094110 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SAVINGS & LOANS - CONTINUED SAVINGS BANKS, NO FEDERAL CHARTER - CONTINUED Ocean Financial Corp. (a) 395,000 $ 8,986,250 67490410 People's Bancshares, Inc. 87,500 896,875 70979510 SIS Bancorp., Inc. (a) 60,000 1,290,000 78427E10 Walden Bancorp., Inc. 109,600 3,096,200 93119210 25,338,001 SAVINGS BANKS, FEDERAL CHARTER - 9.7% Affiliated Community Bancorp., Inc. 90,000 1,912,500 00818810 Ahmanson (H.F.) & Co. 120,000 3,030,000 00867710 Albank Financial Corp. 167,500 4,878,438 01204610 American National Bancorp., Inc. 70,200 807,300 02772210 Bank United Corp. Class A (a) 331,800 8,004,675 06541210 Carver Federal Savings Bank (a)(b) 142,000 1,118,250 14700510 Catskill Financial Corp. (a) 55,000 605,000 14934810 CenFed Financial Corp. 47,295 1,140,992 15131U10 Citizens First Financial Corp. (a) 174,700 1,899,863 17462310 Dime Bancorp., Inc. (a) 150,000 1,968,750 25429Q10 First Bergen Bancorp. (a) 235,000 2,408,750 31891510 First Defiance Financial Corp. 110,000 1,168,750 32006W10 First Federal Bancshares of Arkansas, Inc. 75,000 1,125,000 32020F10 First Palm Beach Bancorp., Inc. 15,000 339,375 33589B10 Leader Financial Corp. 110,000 5,472,500 52190610 Long Island Bancorp., Inc. 235,000 6,580,000 54266210 Quaker City Bancorp. (a) 115,000 1,681,875 74731K10 RedFed Bancorp, Inc. (a) 116,000 1,189,000 75734110 Roosevelt Financial Group, Inc. 175,000 3,084,375 77649310 SGV Bancorp., Inc. (a)(b) 140,000 1,260,000 78422T10 Teche Holding Co. 17,900 232,700 87833010 Washington Federal, Inc. 322,100 7,126,463 93882410 Washington Mutual, Inc. 433,000 15,696,250 93932210 Yonkers Financial Corp. 85,000 935,000 98607310 73,665,806 TOTAL SAVINGS & LOANS 268,380,030 TOTAL COMMON STOCKS (Cost $503,495,956) 595,607,721 CONVERTIBLE PREFERRED STOCKS - 0.5% REAL ESTATE INVESTMENT TRUSTS - 0.5% Criimi Mae, Inc. $2.71875 70,000 1,872,500 22660320 Walden Residential Properties, Inc., Series B, $2.29 80,000 2,040,000 93121030 TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $3,750,000) 3,912,500 REPURCHASE AGREEMENTS - 21.5% MATURITY VALUE AMOUNT (NOTE 1) Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 (Note 3) $ 164,273,771 164,178,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $671,423,956) $ 763,698,221 LEGEND 1. Non-income producing 2. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Avondale Financial Corp. $ - $ 602,263 $ - $ 3,846,238 Cameron Financial Corp - 1,061,406 22,204 - Carver Federal Savings Bank - 603,477 - 1,118,250 Farmers & Mechanics Bank - 72,600 - - Mississippi View Holding Co. - 309,375 - - North Side Savings Bank 515,650 920,416 206,125 16,795,800 SGV Bancorp., Inc. - 1,163,938 - 1,260,000 Wells Financial Corp. - 1,074,813 - - Totals $ 515,650 $ 5,808,288 $ 228,329 $ 23,020,288 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $256,311,491 and $251,749,349, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $92,535 for the period (see Note 5 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $671,620,314. Net unrealized appreciation aggregated $92,077,907, of which $95,661,782 related to appreciated investment securities and $3,583,875 related to depreciated investment securities. HOME FINANCE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 763,698,221 securities, at value (including repurchase agreements of $164,178,000) (cost $671,423,956) - - See accompanying schedule Receivable for 2,645,168 fund shares sold Dividends 740,737 receivable Redemption fees 6,395 receivable Other receivables 30,726 Prepaid expenses 15,507 TOTAL ASSETS 767,136,754 LIABILITIES Payable to $ 108,514 custodian bank Payable for 4,950,056 investments purchased Payable for fund 8,357,111 shares redeemed Accrued 352,078 management fee Other payables 465,556 and accrued expenses TOTAL LIABILITIES 14,233,315 NET ASSETS $ 752,903,439 Net Assets consist of: Paid in capital $ 618,917,475 Undistributed net 4,230,042 investment income Accumulated 37,481,657 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 92,274,265 appreciation (depreciation) on investments NET ASSETS, for $ 752,903,439 21,127,092 shares outstanding NET ASSET VALUE $35.64 and redemption price per share ($752,903,439 (divided by) 21,127,092 shares) Maximum offering $36.74 price per share (100/97.00 of $35.64) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 6,387,323 INCOME Dividends (including $228,329 received from affiliated issuers) Interest 1,757,044 TOTAL INCOME 8,144,367 EXPENSES Management fee $ 1,679,402 Transfer agent 1,920,714 fees Accounting fees 230,876 and expenses Non-interested 1,002 trustees' compensation Custodian fees 13,940 and expenses Registration fees 36,796 Audit 38,642 Legal 2,462 Miscellaneous 3,528 Total expenses 3,927,362 before reductions Expense (22,252 3,905,110 reductions ) NET INVESTMENT 4,239,257 INCOME REALIZED AND 37,876,439 UNREALIZED GAIN (LOSS) Net realized gain (loss) on investment securities (including realized gain of $3,693,051 on sale of investments in affiliated issuers) Change in net 4,319,948 unrealized appreciation (depreciation) on investment securities NET GAIN (LOSS) 42,196,387 NET INCREASE $ 46,435,644 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 1,773,155 INFORMATION Sales charges paid to FDC Deferred sales $ 2,819 charges withheld by FDC Exchange fees $ 120,863 withheld by FSC Expense $ 17,126 reductions Directed brokerage arrangements Custodian 1,546 interest credits Transfer agent 3,580 interest credits $ 22,252 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ 4,239,257 $ 7,032,404 Net investment income Net realized 37,876,439 39,131,196 gain (loss) Change in net 4,319,948 72,785,221 unrealized appreciation (depreciation) NET INCREASE 46,435,644 118,948,821 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (1,990,900 (3,332,255 shareholders ) ) From net investment income From net (14,298,615 (12,803,251 realized gain ) ) TOTAL (16,289,515 (16,135,506 DISTRIBUTIONS ) ) Share 472,666,405 936,625,637 transactions Net proceeds from sales of shares Reinvestment of 16,010,879 15,962,916 distributions Cost of shares (383,377,769 (669,013,084 redeemed ) ) Paid in capital 422,355 722,441 portion of redemption fees NET INCREASE 105,721,870 284,297,910 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 135,867,999 387,111,225 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 617,035,440 229,924,215 period End of period $ 752,903,439 $ 617,035,440 (including undistributed net investment income of $4,230,042 and $3,690,897, respectively) OTHER INFORMATION Shares Sold 13,736,739 31,755,939 Issued in 475,383 501,513 reinvestment of distributions Redeemed (11,617,111 (23,337,483 ) ) Net increase 2,595,011 8,919,969 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 33.30 $ 23.92 $ 25.03 $ 22.18 $ 15.38 $ 10.84 beginning of period Income from Investment Operations Net investment .26 .53 .20 .03 .09 .05 income Net realized and 2.95 9.72 2.34 4.15 6.80 4.40 unrealized gain (loss) Total from 3.21 10.25 2.54 4.18 6.89 4.45 investment operations Less Distributions From net (.11) (.19) (.12) (.01) (.01) (.14) investment income From net (.79) (.73) (3.60) (1.40) (.28) - realized gain Total (.90) (.92) (3.72) (1.41) (.29) (.14) distributions Redemption fees .03 .05 .07 .08 .20 .23 added to paid in capital Net asset value, $ 35.64 $ 33.30 $ 23.92 $ 25.03 $ 22.18 $ 15.38 end of period TOTAL RETURN B, C 9.89% 43.24% 12.43% 19.61% 46.43% 43.62% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 752,903 $ 617,035 $ 229,924 $ 155,563 $ 337,903 $ 49,405 period (000 omitted) Ratio of expenses 1.40% A 1.35% 1.47% 1.58% 1.55% A 2.08% to average net assets Ratio of expenses 1.39% A, 1.32% 1.45% 1.58% 1.55% A 2.08% to average net E E E assets after expense reductions Ratio of net 1.51% A 1.80% .80% .11% .61% A .40% investment income to average net assets Portfolio turnover 99% A 81% 124% 95% 61% A 134% rate Average $ .0403 commission rate F
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
INSURANCE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past five and 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S INSURANCE 3.35% 16.82% 111.56% 172.70% INSURANCE 0.25% 13.32% 105.22% 164.52% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS INSURANCE 16.82% 16.17% 10.55% INSURANCE 13.32% 15.46% 10.22% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960910 135040 S00000000000001 Insurance SP Standard & Poor 500 00045 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8438.27 9173.00 1986/10/31 8350.75 9702.28 1986/11/30 8073.61 9938.05 1986/12/31 8000.68 9684.63 1987/01/31 8562.26 10989.15 1987/02/28 9466.62 11423.22 1987/03/31 8985.26 11753.35 1987/04/30 8241.35 11648.74 1987/05/31 8131.95 11750.09 1987/06/30 8394.51 12343.47 1987/07/31 8474.74 12969.28 1987/08/31 9087.37 13453.04 1987/09/30 9087.37 13158.41 1987/10/31 7380.75 10324.09 1987/11/30 6862.93 9473.39 1987/12/31 7027.88 10194.31 1988/01/31 7568.48 10623.49 1988/02/29 7561.08 11118.55 1988/03/31 7383.34 10774.98 1988/04/30 7331.50 10894.59 1988/05/31 7531.45 10989.37 1988/06/30 7872.11 11493.78 1988/07/31 7909.14 11450.10 1988/08/31 7990.60 11060.80 1988/09/30 8264.61 11531.99 1988/10/31 8227.58 11852.58 1988/11/30 8049.84 11683.09 1988/12/31 8250.84 11887.54 1989/01/31 8878.05 12757.71 1989/02/28 8937.78 12440.04 1989/03/31 9146.85 12729.90 1989/04/30 9445.53 13390.58 1989/05/31 9497.79 13932.90 1989/06/30 9706.77 13853.48 1989/07/31 10521.90 15104.45 1989/08/31 10843.47 15400.50 1989/09/30 10993.03 15337.35 1989/10/31 11351.99 14981.53 1989/11/30 11658.60 15287.15 1989/12/31 11372.22 15654.04 1990/01/31 10406.94 14603.66 1990/02/28 10701.05 14792.04 1990/03/31 10648.26 15184.03 1990/04/30 10278.74 14804.43 1990/05/31 11221.39 16247.86 1990/06/30 11251.56 16137.38 1990/07/31 11085.65 16085.74 1990/08/31 9931.84 14631.59 1990/09/30 9072.14 13919.03 1990/10/31 8710.15 13859.18 1990/11/30 9863.97 14754.48 1990/12/31 10256.11 15166.13 1991/01/31 10806.62 15827.37 1991/02/28 11900.11 16959.03 1991/03/31 12684.40 17369.44 1991/04/30 12616.53 17411.13 1991/05/31 12933.26 18163.29 1991/06/30 12129.29 17331.41 1991/07/31 12579.65 18139.05 1991/08/31 12503.32 18568.95 1991/09/30 12625.45 18258.85 1991/10/31 13007.11 18503.51 1991/11/30 12892.61 17757.82 1991/12/31 14018.09 19789.32 1992/01/31 14002.77 19421.24 1992/02/29 14378.12 19673.71 1992/03/31 14171.30 19290.07 1992/04/30 13811.27 19857.20 1992/05/31 13995.11 19954.50 1992/06/30 14287.90 19657.18 1992/07/31 15097.43 20461.16 1992/08/31 14655.11 20041.71 1992/09/30 15431.26 20278.20 1992/10/31 16090.58 20349.17 1992/11/30 16641.40 21043.08 1992/12/31 17172.33 21301.91 1993/01/31 17890.31 21480.84 1993/02/28 18228.18 21772.98 1993/03/31 19191.11 22232.39 1993/04/30 18734.46 21694.37 1993/05/31 18251.92 22275.78 1993/06/30 18446.63 22340.38 1993/07/31 19090.02 22251.02 1993/08/31 20063.57 23094.33 1993/09/30 20131.29 22916.50 1993/10/31 19547.16 23390.88 1993/11/30 18353.51 23168.66 1993/12/31 18576.42 23449.00 1994/01/31 18826.82 24246.27 1994/02/28 18001.41 23589.20 1994/03/31 17157.45 22560.71 1994/04/30 17342.94 22849.48 1994/05/31 18140.53 23224.22 1994/06/30 18038.51 22655.22 1994/07/31 18372.38 23398.31 1994/08/31 18873.20 24357.64 1994/09/30 18743.36 23760.88 1994/10/31 18511.50 24295.50 1994/11/30 17574.79 23410.66 1994/12/31 18511.50 23757.84 1995/01/31 19179.25 24373.88 1995/02/28 19763.53 25323.73 1995/03/31 20078.85 26071.03 1995/04/30 20264.36 26838.83 1995/05/31 20710.34 27911.57 1995/06/30 21360.73 28559.96 1995/07/31 22001.83 29507.01 1995/08/31 22642.93 29581.07 1995/09/30 23767.18 30829.39 1995/10/31 23051.75 30719.33 1995/11/30 24426.87 32067.91 1995/12/31 24955.28 32685.54 1996/01/31 25681.95 33798.15 1996/02/29 25595.90 34111.46 1996/03/31 25309.05 34439.95 1996/04/30 24995.13 34947.60 1996/05/31 25500.28 35848.90 1996/06/30 25956.86 35985.48 1996/07/31 25383.71 34395.64 1996/08/30 26452.29 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960910 135045 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Insurance Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $26,452 - a 164.52% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Allstate Corp. 4.6 CIGNA Corp. 4.3 Progressive Corp. 3.7 General Re Corp. 3.5 Aetna, Inc. 3.5 Transamerica Corp. 3.4 MBIA, Inc. 3.1 American International Group, Inc. 2.9 UNUM Corp. 2.8 Travelers, Inc. (The) 2.5 TOP INDUSTRIES AS OF AUGUST 31, 1996 Row: 1, Col: 1, Value: 27.6 Row: 1, Col: 2, Value: 4.3 Row: 1, Col: 3, Value: 5.9 Row: 1, Col: 4, Value: 11.7 Row: 1, Col: 5, Value: 14.5 Row: 1, Col: 6, Value: 36.0 Property-Casualty & Reinsurance 36.0% Life Insurance 14.5% Multi-Line Insurance 11.7% Insurance Carriers 5.9% Financial Services 4.3% All Others 27.6% * * INCLUDES SHORT-TERM INVESTMENTS INSURANCE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Michael Tempero, Portfolio Manager of Fidelity Select Insurance Portfolio Q. MIKE, HOW HAS THE FUND PERFORMED? A. For the six- and 12-month periods ended August 31, 1996, the fund returned 3.35% and 16.82%, respectively. The Standard & Poor's 500 Index returned 2.96% and 18.73% for the same six- and 12-month periods. Q. INSURANCE STOCKS HAD A GOOD RUN - THANKS IN PART TO FALLING INTEREST RATES DURING THE LAST SEVERAL MONTHS OF 1995. WERE RISING INTEREST RATES THE REASON WHY INSURANCE STOCKS HAD A TOUGHER TIME DURING THE MOST RECENT SIX-MONTH PERIOD? A. That's part of the reason. Insurance companies typically invest the premiums they collect in bonds. As interest rates rose, the value of the insurance companies' bond portfolios dropped, and insurance companies had a lower implied liquidation value. But in late summer, interest rates stabilized somewhat. Insurance stock prices responded positively to that development. Additionally, insurance stocks had a strong run in the previous six months, with many stocks gaining 20%, 25% or more in just half a year. So in my view, it wasn't all that surprising that they took a break during the past six months. Q. WHICH STOCKS HAVE DONE WELL OVER THE PAST SIX MONTHS? A. Allstate, the fund's largest holding at the end of the period, was a good performer. The company is one of the largest property-liability insurers in the United States, based on premiums earned. On the expenditure side, Allstate has done a good job of cutting costs, and, on the revenue side, it grew its business through market share gains. Other strong performers included municipal bond insurers - most notably MBIA. The business of providing insurance for municipal bonds was very stable. These companies also expanded their businesses by insuring asset-backed securities. In addition to MBIA, other municipal bond insurers including AMBAC, Capital Re and Enhance Financial, benefited from those trends and helped the fund's performance. Q. WHICH STOCKS DIDN'T FARE AS WELL OVER THE PAST SIX MONTHS? A. Multi-line insurer CIGNA proved to be a disappointment. You may recall that six months ago CIGNA was one of the fund's top performers. The stock had a great run-up the spring, and I think it just took time out to rest in the summer. The company continued to post strong earnings as it restructured some of its businesses and took charges to put some of its asbestos and environmental liability behind it. In my view, the stock continued to represent a good value, selling at about eight or nine times earnings, compared to the insurance stock group, which sells at about 10 to 11 times earnings. Another lackluster performer was Aetna, which recently purchased U.S. Healthcare - one of the country's largest health maintenance organizations (HMOs). Within the HMO sector, costs were rising faster than HMOs could raise prices. These unfavorable cost trends meant that profit margins were squeezed. Finally, there was American International Group (AIG), which specializes in commercial- and industrial-insurance coverage. AIG derives a significant portion of its revenue from overseas, and when the dollar rose, its premium growth was somewhat eroded. Q. A NEW ADDITION TO THE FUND'S TOP 10 HOLDINGS WAS UNUM. WHAT MADE THAT STOCK SO ATTRACTIVE? A. One factor was the anticipation of a better competitive environment. The number two and number three players within the disability insurance arena are merging. That could help to create more pricing power for disability insurance providers. If so, UNUM, the top pro- vider of individual and group disability coverage, should be a prime beneficiary of that trend. Q. WHAT'S YOUR OUTLOOK? A. It's mixed. Insurance companies that supply coverage to commercial entities could be negatively affected by a more competitive environment. That could put a strain on their profitability. However, I think that there will be segments of the industry where things will be better. So my focus will be on trying to add value, one stock at a time, looking for the best companies in what I believe to be the strongest segments in the insurance sector. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 045 TRADING SYMBOL: FSPCX SIZE: as of August 31, 1996, more than $41 million MANAGER: Michael Tempero, since 1995; manager, Fidelity Select Natural Gas Portfolio, 1994-1995; analyst, oil and gas exploration and production, conglomerates and household products; joined Fidelity in 1993 (checkmark) INSURANCE PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 79.0% SHARES VALUE (NOTE 1) CREDIT & OTHER FINANCE - 5.7% FINANCIAL SERVICES - 4.3% Equitable Companies, Inc. 14,200 $ 349,675 29444G10 Transamerica Corp. 21,200 1,444,250 89348510 1,793,925 MORTGAGE BANKERS - 1.4% Southern Pacific Funding Corp. 2,000 51,500 84357610 Triad Guaranty, Inc. (a) 20,150 554,125 89592510 605,625 TOTAL CREDIT & OTHER FINANCE 2,399,550 GAS - 0.1% GAS TRANSMISSION & DISTRIBUTION - 0.1% Consolidated Natural Gas Co. 1,000 54,374 20961510 INSURANCE - 73.2% ACCIDENT & HEALTH INSURANCE - 0.7% Provident Companies, Inc. 7,400 273,800 74386210 INSURANCE BROKERS & SERVICES - 4.2% Alexander & Alexander Services, Inc. 6,800 107,100 01447610 Frontier Insurance Group, Inc. 4,640 180,960 35908110 ITT Hartford Group, Inc. 7,700 406,175 45068H10 Marsh & McLennan Companies, Inc. 10,400 967,200 57174810 Mutual Risk Management Ltd. 4,000 126,000 62835110 1,787,435 INSURANCE CARRIERS - 5.9% AFLAC, Inc. 15,000 515,625 00105510 AMBAC, Inc. 6,000 326,250 02313910 MBIA, Inc. 15,800 1,287,700 55262C10 MGIC Investment Corp. 5,700 361,237 55284810 2,490,812 LIFE INSURANCE - 14.5% American General Corp. 28,000 1,022,000 02635110 Aon Corp. 1,300 65,650 03738910 Conseco, Inc. 6,200 260,400 20846410 Equitable of Iowa Companies 4,100 150,675 29451030 Jefferson Pilot Corp. 15,700 806,587 47507010 Penncorp Financial Group, Inc. 5,000 152,500 70809410 Protective Life Corp. 5,000 176,250 74367410 Providian Corp. 21,000 868,875 74406110 Reliastar Financial Corp. 10,134 447,163 75952U10 SunAmerica, Inc. 27,800 946,938 86693010 UNUM Corp. 18,900 1,200,150 90319210 6,097,188 MULTI-LINE INSURANCE - 11.7% Aetna, Inc. 22,100 1,461,362 00811710 American Financial Group, Inc. 10,000 311,250 02608W10 CIGNA Corp. 15,600 1,811,550 12550910 CNA Financial Corp. (a) 8,000 804,000 12611710 Masthead Insurance Underwriting PLC 25,000 42,555 57699F22 Syndicate Capital Trust PLC 9,500 16,171 87199B22 US Facilities Corp. 29,300 498,100 91182210 4,944,988 PROPERTY-CASUALTY & REINSURANCE - 36.0% ACE Ltd. 11,800 550,175 00499G92 Acceptance Insurance Co., Inc. 20,000 345,000 00430810 Allmerica Financial Corp. 3,100 95,713 01975410 Allstate Corp. 43,300 1,932,263 02000210 American International Group, Inc. 12,800 1,216,000 02687410 American Reinsurance Corp. 10,000 631,250 02916310 Berkley (W.R.) Corp. 3,100 141,050 08442310 SHARES VALUE (NOTE 1) Capital Re Corp. 8,200 $ 311,600 14043210 CapMAC Holdings, Inc. 5,000 146,250 14064910 Chartwell Re Corp. 10,000 252,500 16139W10 Chubb Corp. (The) 19,000 843,125 17123210 Cincinnati Financial Corp. 11,410 618,992 17206210 Commerce Group, Inc. 3,000 62,625 20064110 Enhance Financial Services Group Corp. 9,000 258,750 29331010 Everest Reinsurance Holdings, Inc. 5,400 131,625 29980810 Executive Risk, Inc. 2,000 68,750 30158610 Fremont General Corp. 3,100 84,088 35728810 General Re Corp. 10,100 1,463,238 37056310 Gryphon Holdings, Inc. (a) 48,300 603,750 40051510 Harleysville Group, Inc. 3,100 77,500 41282410 Hartford Steam Boiler Inspection & Insurance Co. 3,000 133,875 41670410 Integon Corp. 3,000 61,125 45810F10 NY Magic, Inc. 6,200 116,250 62948410 PMI Group, Inc. 15,800 772,225 69344M10 PXRE Corp. 2,500 58,125 69367410 Progressive Corp. 28,400 1,544,250 74331510 Reinsurance Group of America, Inc. 8,200 329,025 75935110 SAFECO Corp. 10,000 331,250 78642910 St. Paul Companies, Inc. (The) 4,000 207,000 79286010 TIG Holdings, Inc. 8,000 230,000 87246910 Terra Nova (Bermuda) Holdings Ltd. 2,400 43,800 90699Q22 Travelers, Inc. (The) 24,700 1,071,362 89419010 USF&G Corp. 18,000 290,250 90329010 Unionamerica Holdings PLC sponsored ADR 9,300 173,213 90904810 15,195,994 SURETY INSURANCE - 0.2% Financial Security Assurance Holdings Ltd. 2,400 68,700 31769P10 TOTAL INSURANCE 30,858,917 TOTAL COMMON STOCKS (Cost $31,909,907) 33,312,841 REPURCHASE AGREEMENTS - 21.0% MATURITY VALUE AMOUNT (NOTE 1) Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 (Note 3) $ 8,861,166 8,856,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $40,765,907) $ 42,168,841 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $20,999,384 and $25,036,390, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $10,567 for the period (see Note 5 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $40,767,623. Net unrealized appreciation aggregated $1,401,218 of which $2,181,449 related to appreciated investment securities and $780,231 related to depreciated investment securities. On October 26, 1990, the fund acquired all the assets of Life Insurance Portfolio in a tax-free exchange for shares of Insurance Portfolio. Life Insurance Portfolio has a capital loss carryover of approximately $12,000 available to offset future realized capital gains in Insurance Portfolio, to the extent provided by regulations. INSURANCE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 42,168,841 securities, at value (including repurchase agreements of $8,856,000) (cost $40,765,907) - See accompanying schedule Cash 495 Receivable for 234,338 investments sold Receivable for 99,016 fund shares sold Dividends 31,725 receivable Redemption fees 851 receivable Prepaid expenses 5,608 TOTAL ASSETS 42,540,874 LIABILITIES Payable for fund $ 1,093,722 shares redeemed Accrued 17,997 management fee Other payables 48,424 and accrued expenses TOTAL LIABILITIES 1,160,143 NET ASSETS $ 41,380,731 Net Assets consist of: Paid in capital $ 38,003,804 Undistributed net 33,696 investment income Accumulated 1,940,287 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 1,402,944 appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 41,380,731 1,519,500 shares outstanding NET ASSET VALUE $27.23 and redemption price per share ($41,380,731 (divided by) 1,519,500 shares) Maximum offering $28.07 price per share (100/97.00 of $27.23) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 246,728 INCOME Dividends Interest 66,670 TOTAL INCOME 313,398 EXPENSES Management fee $ 97,182 Transfer agent 135,852 fees Accounting fees 30,091 and expenses Non-interested 58 trustees' compensation Custodian fees 8,968 and expenses Registration fees 6,203 Audit 13,629 Legal 131 Miscellaneous 580 Total expenses 292,694 before reductions Expense (13,372 279,322 reductions ) NET INVESTMENT 34,076 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 1,971,351 securities Foreign (1 1,971,350 currency ) transactions Change in net unrealized appreciation (depreciation) on: Investment (1,883,728 securities ) Assets and 10 (1,883,718 liabilities in ) foreign currencies NET GAIN (LOSS) 87,632 NET INCREASE $ 121,708 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 115,718 INFORMATION Sales charges paid to FDC Deferred sales $ 857 charges withheld by FDC Exchange fees $ 16,305 withheld by FSC Expense $ 13,368 reductions Directed brokerage arrangements Custodian 4 interest credits $ 13,372 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED Operations ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Net investment $ 34,076 $ 54,801 income Net realized 1,971,350 2,892,996 gain (loss) Change in net (1,883,718 1,911,651 unrealized ) appreciation (depreciation) NET INCREASE 121,708 4,859,448 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (16,906 (62,008 shareholders ) ) From net investment income In excess of net (8,002 - investment ) income From net (469,749 (753,776 realized gain ) ) TOTAL (494,657 (815,784 DISTRIBUTIONS ) ) Share 47,891,150 47,521,158 transactions Net proceeds from sales of shares Reinvestment of 482,962 802,788 distributions Cost of shares (45,716,701 (35,249,916 redeemed ) ) Paid in capital 102,570 37,695 portion of redemption fees NET INCREASE 2,759,981 13,111,725 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 2,387,032 17,155,389 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 38,993,699 21,838,310 period End of period $ 41,380,731 $ 38,993,699 (including undistributed net investment income of $33,696 and $55,083, respectively) OTHER INFORMATION Shares Sold 1,789,641 1,872,126 Issued in 19,318 31,329 reinvestment of distributions Redeemed (1,746,002 (1,471,921 ) ) Net increase 62,957 431,534 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 26.77 $ 21.31 $ 19.41 $ 21.58 $ 18.03 $ 16.73 beginning of period Income from Investment Operations Net investment .03 .06 .05 - (.04) .04 income (loss) Net realized and .75 6.15 1.78 (.24) 5.12 1.48 unrealized gain (loss) Total from .78 6.21 1.83 (.24) 5.08 1.52 investment operations Less Distributions From net (.01) (.07) - (.01) - (.26) investment income In excess of net (.01) - - - (.03) - investment income From net (.38) (.72) - (1.96) (1.71) - realized gain Total (.40) (.79) - (1.97) (1.74) (.26) distributions Redemption fees .08 .04 .07 .04 .21 .04 added to paid in capital Net asset value, $ 27.23 $ 26.77 $ 21.31 $ 19.41 $ 21.58 $ 18.03 end of period TOTAL RETURN B, C 3.35% 29.51% 9.79% (1.24)% 31.98% 9.47% RATIOS AND $ 41,381 $ 38,994 $ 21,838 $ 18,419 $ 26,367 $ 2,573 SUPPLEMENTAL DATA Net assets, end of period (000 omitted) Ratio of expenses 1.80% A 1.77% 2.36% 1.93% 2.49% A, 2.47% to average net F F assets Ratio of expenses 1.72% A, 1.74% 2.34% 1.93% 2.49% A 2.47% to average net E E E assets after expense reductions Ratio of net .21% A .26% .25% (.02)% (.26)% A .22% investment income (loss) to average net assets Portfolio turnover 141% A 164% 265% 101% 81% A 112% rate Average $ .0257 commission rate G
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F DURING THE PERIOD, FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
REGIONAL BANKS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S REGIONAL BANKS 8.39% 27.14% 205.60% 401.37% REGIONAL BANKS 5.14% 23.32% 196.43% 386.33% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS REGIONAL BANKS 27.14% 25.03% 17.49% REGIONAL BANKS 23.32% 24.28% 17.14% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960910 152255 S00000000000001 Regional Banks SP Standard & Poor 500 00507 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8646.74 9173.00 1986/10/31 8867.43 9702.28 1986/11/30 8837.33 9938.05 1986/12/31 8566.49 9684.63 1987/01/31 9198.45 10989.15 1987/02/28 9810.34 11423.22 1987/03/31 9830.40 11753.35 1987/04/30 9238.57 11648.74 1987/05/31 9288.73 11750.09 1987/06/30 9619.75 12343.47 1987/07/31 9619.75 12969.28 1987/08/31 10061.12 13453.04 1987/09/30 9800.31 13158.41 1987/10/31 8195.35 10324.09 1987/11/30 7934.54 9473.39 1987/12/31 8305.37 10194.31 1988/01/31 8893.46 10623.49 1988/02/29 9120.44 11118.55 1988/03/31 9326.78 10774.98 1988/04/30 9223.61 10894.59 1988/05/31 9388.68 10989.37 1988/06/30 10048.99 11493.78 1988/07/31 10100.57 11450.10 1988/08/31 9966.45 11060.80 1988/09/30 10348.19 11531.99 1988/10/31 10471.99 11852.58 1988/11/30 10214.06 11683.09 1988/12/31 10440.31 11887.54 1989/01/31 11103.19 12757.71 1989/02/28 11268.91 12440.04 1989/03/31 12196.93 12729.90 1989/04/30 12517.33 13390.58 1989/05/31 13478.50 13932.90 1989/06/30 13254.31 13853.48 1989/07/31 14433.95 15104.45 1989/08/31 14790.07 15400.50 1989/09/30 14912.49 15337.35 1989/10/31 13532.53 14981.53 1989/11/30 13510.27 15287.15 1989/12/31 13222.25 15654.04 1990/01/31 12030.95 14603.66 1990/02/28 12526.35 14792.04 1990/03/31 12219.67 15184.03 1990/04/30 11523.77 14804.43 1990/05/31 12325.83 16247.86 1990/06/30 11842.23 16137.38 1990/07/31 11122.73 16085.74 1990/08/31 10084.77 14631.59 1990/09/30 8858.08 13919.03 1990/10/31 8598.59 13859.18 1990/11/30 9742.71 14754.48 1990/12/31 10489.31 15166.13 1991/01/31 11185.40 15827.37 1991/02/28 12133.52 16959.03 1991/03/31 12817.60 17369.44 1991/04/30 13681.71 17411.13 1991/05/31 14569.82 18163.29 1991/06/30 13705.71 17331.41 1991/07/31 14845.86 18139.05 1991/08/31 15913.99 18568.95 1991/09/30 15601.95 18258.85 1991/10/31 16250.03 18503.51 1991/11/30 15505.94 17757.82 1991/12/31 17390.53 19789.32 1992/01/31 18478.23 19421.24 1992/02/29 19970.66 19673.71 1992/03/31 19692.41 19290.07 1992/04/30 20843.35 19857.20 1992/05/31 21728.68 19954.50 1992/06/30 21945.49 19657.18 1992/07/31 21970.95 20461.16 1992/08/31 20799.84 20041.71 1992/09/30 21767.28 20278.20 1992/10/31 22696.53 20349.17 1992/11/30 24555.02 21043.08 1992/12/31 25828.85 21301.91 1993/01/31 26905.05 21480.84 1993/02/28 27742.09 21772.98 1993/03/31 28924.59 22232.39 1993/04/30 27435.54 21694.37 1993/05/31 27167.35 22275.78 1993/06/30 28682.60 22340.38 1993/07/31 28763.06 22251.02 1993/08/31 29165.34 23094.33 1993/09/30 30171.04 22916.50 1993/10/31 28548.51 23390.88 1993/11/30 27650.08 23168.66 1993/12/31 28714.58 23449.00 1994/01/31 30389.18 24246.27 1994/02/28 29535.46 23589.20 1994/03/31 29042.93 22560.71 1994/04/30 30581.93 22849.48 1994/05/31 32110.20 23224.22 1994/06/30 31312.84 22655.22 1994/07/31 32143.42 23398.31 1994/08/31 32974.00 24357.64 1994/09/30 31013.83 23760.88 1994/10/31 30880.94 24295.50 1994/11/30 28887.55 23410.66 1994/12/31 28777.23 23757.84 1995/01/31 30226.70 24373.88 1995/02/28 31835.25 25323.73 1995/03/31 32100.40 26071.03 1995/04/30 32895.84 26838.83 1995/05/31 35052.36 27911.57 1995/06/30 35494.28 28559.96 1995/07/31 36873.04 29507.01 1995/08/31 38251.80 29581.07 1995/09/30 39984.09 30829.39 1995/10/31 39789.65 30719.33 1995/11/30 42069.91 32067.91 1995/12/31 42235.69 32685.54 1996/01/31 43616.54 33798.15 1996/02/29 44868.51 34111.46 1996/03/31 46194.13 34439.95 1996/04/30 45799.65 34947.60 1996/05/31 46573.99 35848.90 1996/06/30 46215.15 35985.48 1996/07/31 46290.70 34395.64 1996/08/30 48632.62 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960910 152300 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Regional Banks Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $48,633 - a 386.33% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS BankAmerica Corp. 4.9 Chase Manhattan Corp. 4.9 NationsBank Corp. 4.7 Bank of New York Co., Inc. 4.0 Citicorp 3.9 Wells Fargo & Co. 3.9 Comerica, Inc. 3.7 First Chicago NBD Corp. 3.5 Household International, Inc. 3.2 Canadian Imperial Bank of Commerce 3.1 TOP REGIONS AS OF AUGUST 31, 1996 Northeast 18.4% Midwest 14.7% West 13.3% Southeast 5.8% Multi-Regional 4.7% All Others 43.1% * Row: 1, Col: 1, Value: 43.1 Row: 1, Col: 2, Value: 4.7 Row: 1, Col: 3, Value: 5.8 Row: 1, Col: 4, Value: 13.3 Row: 1, Col: 5, Value: 14.7 Row: 1, Col: 6, Value: 18.4 * INCLUDES SHORT-TERM INVESTMENTS REGIONAL BANKS PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: Effective September 23, after the period ended, John Avery (right) became manager of Fidelity Select Regional Bank Portfolio. The following is an interview with Remy Trafelet, who managed the fund during the period covered by the report, and John Avery, who discusses his outlook. Q. HOW DID THE FUND PERFORM, REMY? A. For the six months ended August 31, 1996 the fund had a total return of 8.39%. For the past year, it returned 27.14%. For the same periods, the Standard & Poor's 500 Index returned 2.96% and 18.73%, respectively. Q. WHAT'S HAPPENED IN THE REGIONAL BANK MARKET OVER THE PAST SIX MONTHS? A. It's been a good year for banks as they continued to drive earnings growth through balance sheet restructuring, cost cutting and capital management. These internal factors have offset a weakening external environment as loan growth continues to slow and credit costs are increasing. Although consolidation of the industry will continue, the first half of 1996 had very few acquisitions. The anticipation of acquisition activity led to outperformance by the traditional acquisition-oriented banks such as NationsBank and BankAmerica. Q. WHAT SIZE BANKS PERFORMED THE BEST IN THE FIRST HALF OF 1996? WHICH REGIONS DID WELL? A. The larger banks outperformed the smaller banks in the first half of the year for several reasons. First, despite many potential takeover targets trading at substantial takeover premiums, the valuations of the larger banks were very cheap relative to the rest of the banking industry. The larger banks also began to focus on cost reduction and increasing returns by restructuring their balance sheets; one example of this was BankAmerica. Some of the larger banks - such as NationsBank - also announced significant share repurchase programs. As for regions, the West and the Southeast did well as loan demand was still positive and credit was solid. Q. IT SEEMS BANKING STOCKS HAVE BEEN IMPROVING FOR SOME TIME . . . A. Bank stocks have done very well since 1991, but the reasons for their continued performance have changed. The banks were recovering from undercapitalization and slowly decreasing levels of non-performing assets. Coming out of the 1990-91 recession with sturdier balance sheets, the banks then entered a period characterized by increasing loan demand and decreasing credit costs. While both the external factors of loan growth and credit costs are now working against the banks, the companies have been able to continue earnings growth through cost cutting, balance sheet restructuring and capital management. While the fund is focused on these themes, it is also positioned to take advantage of the increased percentage of revenues that banks are now generating from fee businesses rather than the traditional spread businesses, such as lending. Focusing on banks with larger exposure to fee businesses can give the fund some protection against the rising credit costs affecting the industry - especially from consumer credit. Q. WAS THERE A PARTICULAR STOCK OR SECTOR OF THE BANKING MARKET THAT DIDN'T PERFORM AS WELL AS EXPECTED? A. The stocks that underperformed my expectations were those that had announced acquisitions with significant cost savings but were unable to return the efficiencies to shareholders through stock repurchases. This was because of SEC pooling regulations, which delayed several company's buyback programs. First Chicago NBD is a good example of this. Q. TURNING TO YOU, JOHN, HOW ARE YOU POSITIONING THE FUND GOING FORWARD? A. Primarily I'm looking for banks that have solid fundamentals and have demonstrated the ability to grow earnings over time. Additionally, I'm looking for regional banks that have strong franchises in respect to their geography and market position. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 507 TRADING SYMBOL: FSRBX SIZE: as of August 31, 1996, more than $416 million MANAGER: John Avery, since September 1996; manager, Select Chemicals Portfolio, since 1995; joined Fidelity in 1994 (checkmark) REGIONAL BANKS PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 84.2% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 0.2% MOTOR VEHICLE DEALERS (NEW & USED) - 0.2% Ugly Duckling Corp. (a) 70,500 $ 643,313 90351210 CLOSED END INVESTMENT COMPANY - 0.3% Sirrom Capital Corp. 50,000 1,350,000 82990510 BANKS - 67.0% INTERNATIONAL - 4.3% Barclays PLC Ord. 100,000 1,421,102 06738E10 Canadian Imperial Bank of Commerce 390,300 13,021,880 13606910 HSBC Holdings PLC 208,000 3,579,552 42199192 National Bank of Canada 20,000 168,829 63306710 18,191,363 MID-ATLANTIC - 1.5% Crestar Financial Corp. 22,283 1,295,199 22609110 HUBCO, Inc. 25,030 519,373 40438210 PNC Financial Corp. 140,000 4,375,000 69347510 Signet Banking Corp. 10,000 241,250 82668110 6,430,822 MIDWEST - 14.7% Banc One Corp. 10,000 383,750 05943810 Boatmen's Bancshares, Inc. 56,400 3,003,300 09665010 Comerica, Inc. 325,800 15,882,750 20034010 Commercial Federal Corp. 20,000 780,000 20164710 Corus Bankshares, Inc. 10,000 305,000 22087310 Fifth Third Bancorp 25,700 1,362,100 31677310 First Bank System, Inc. 191,100 12,278,175 31927910 KeyCorp. 50,000 2,006,250 49326710 National City Corp. 305,809 11,506,064 63540510 Northern Trust Corp. 105,000 6,890,625 66585910 Norwest Corp. 30,000 1,128,750 66938010 Pinnacle Financial Services, Inc. 50,000 1,100,000 72346210 Star Banc Corp. 70,600 5,559,750 85508310 62,186,514 NORTHEAST - 18.4% Bank of Boston Corp. 127,400 6,720,350 06071610 Bank of New York Co., Inc. 604,648 16,854,563 06405710 Bankers Trust New York Corp. 20,200 1,570,550 06636510 Chase Manhattan Corp. 281,000 20,899,375 16161A10 DS Bancor, Inc. 40,000 1,490,000 23290710 Dime Bancorp., Inc. (a) 17,500 229,688 25429Q10 Eastern Bancorp 37,500 665,625 27626910 Fleet Financial Group, Inc. 115,567 4,824,922 33891510 Long Island Bancorp., Inc. 100,600 2,816,800 54266210 Mellon Bank Corp. 65,000 3,599,375 58550910 Morgan (J.P.) & Co., Inc. 87,500 7,667,188 61688010 North Fork Bancorp., Inc. 20,200 626,200 65942410 Norwalk Savings Society 30,000 648,750 66920410 ONBANCorp, Inc. 33,800 1,090,050 68230310 State Street Boston Corp. 50,000 2,706,250 85747310 U.S. Bancorp 153,000 5,852,250 91159610 78,261,936 SOUTHEAST - 5.8% BanPonce Corp. 337,002 8,762,052 06670410 First Tennessee National Corp. 204,200 6,968,325 33716210 First Union Corp. 50,000 3,193,750 33735810 Meritor Savings Bank (a) 678,600 1,314,788 59000710 SouthTrust Corp. 1,200 35,400 84473010 SunTrust Banks, Inc. 10,000 383,750 86791410 SHARES VALUE (NOTE 1) Synovus Financial Corp. 20,000 $ 477,500 87161C10 Union Planters Corp. 58,500 1,923,188 90806810 Wachovia Corp. 32,600 1,491,450 92977110 24,550,203 SOUTHWEST - 0.4% Texas Regional Bancshares, Inc. Class A (vtg.) 60,600 1,742,250 88267310 WEST - 13.3% BankAmerica Corp. 269,800 20,909,500 06605010 California Federal Bancorp., Inc. (a) 87,300 1,986,075 12802610 Coast Savings Financial, Inc. (a) 60,000 1,852,500 19039M10 First Regional Bancorp (a) 25,000 134,375 33615C10 First Security Corp. 20,400 555,900 33629410 Glendale Federal Bank FSB (a) 128,000 2,272,000 37850750 Quaker City Bancorp (a) 25,000 365,625 74731K10 Sterling Financial Corp. 68,000 918,000 85931910 UnionBanCal Corp. 26,000 1,254,500 90890610 Wells Fargo & Co. 65,666 16,334,418 94974010 Westcorp, Inc. 9,000 189,000 95790710 Zions Bancorp 109,900 9,478,875 98970110 56,250,768 MONEY CENTER - 3.9% Citicorp 200,000 16,650,000 17303410 MULTI-REGIONAL - 4.7% NationsBank Corp. 233,500 19,876,688 63858510 TOTAL BANKS 284,140,544 CREDIT & OTHER FINANCE - 16.4% FINANCE LESSORS - 0.1% Onyx Acceptance Corp. 16,500 251,625 68291410 FINANCIAL SERVICES - 8.4% American Express Co. 267,000 11,681,250 02581610 First Chicago NBD Corp. 350,300 14,931,538 31945A10 First Merchants Acceptance Corp. 20,000 382,500 32081610 First USA, Inc. 145,100 7,690,300 33743H10 RCSB Financial, Inc. 40,000 1,075,000 74937110 35,760,588 LOAN BROKERS - 0.5% Aames Financial Corp. 38,100 1,862,138 00253A10 Imperial Thrift & Loan Association (a) 10,000 136,250 45310510 1,998,388 MORTGAGE BANKERS - 1.0% Cityscape Financial Corp. (a) 45,800 1,259,500 17877810 Newcourt Credit Group, Inc. 59,600 1,555,066 65090510 North American Mortgage Co. 90,000 1,541,250 65703710 4,355,816 PERSONAL CREDIT INSTITUTIONS - 6.4% Associates First Capital Corp. 106,000 4,187,000 04600810 Beneficial Corp. 140,500 7,920,688 08172110 Household International, Inc. 173,700 13,765,725 44181510 Olympic Financial Ltd. 40,000 980,000 68159310 Union Acceptance Corp. Class A 20,000 345,000 90483210 27,198,413 TOTAL CREDIT & OTHER FINANCE 69,564,830 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) INSURANCE - 0.3% MULTI-LINE INSURANCE - 0.3% US Facilities Corp. 68,600 $ 1,166,200 91182210 TOTAL COMMON STOCKS (Cost $304,219,466) 356,864,887 REPURCHASE AGREEMENTS - 15.8% MATURITY VALUE AMOUNT (NOTE 1) Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 67,023,074 66,984,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $371,203,466) $ 423,848,887 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $163,263,949 and $121,500,199, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $40,907 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $2,363,000 and $1,558,400, respectively. The weighted average interest rate paid was 5.7% (see Note 6 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $3,153,250 and $3,298,200, respectively (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $371,555,744. Net unrealized appreciation aggregated $52,293,143, of which $54,697,042 related to appreciated investment securities and $2,403,899 related to depreciated investment securities. REGIONAL BANKS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 423,848,887 securities, at value (including repurchase agreements of $66,984,000) (cost $371,203,466) - - See accompanying schedule Cash 733,923 Receivable for 2,535,340 investments sold Receivable for 2,462,061 fund shares sold Dividends 521,321 receivable Redemption fees 3,971 receivable Other receivables 3,107 Prepaid expenses 18,700 TOTAL ASSETS 430,127,310 LIABILITIES Payable for $ 3,908,321 investments purchased Payable for fund 5,920,937 shares redeemed Accrued 193,035 management fee Other payables 302,136 and accrued expenses Collateral on 3,298,200 securities loaned, at value TOTAL LIABILITIES 13,622,629 NET ASSETS $ 416,504,681 Net Assets consist of: Paid in capital $ 344,444,612 Undistributed net 2,286,239 investment income Accumulated 17,128,258 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 52,645,572 appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 416,504,681 16,174,498 shares outstanding NET ASSET VALUE $25.75 and redemption price per share ($416,504,681 (divided by) 16,174,498 shares) Maximum offering $26.55 price per share (100/97.00 of $25.75) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 4,218,178 INCOME Dividends Interest (including 436,026 income on securities loaned of $13,322) TOTAL INCOME 4,654,204 EXPENSES Management fee $ 981,392 Transfer agent 1,177,528 fees Accounting and 162,532 security lending fees Non-interested 592 trustees' compensation Custodian fees 10,598 and expenses Registration fees 23,906 Audit 25,104 Legal 1,279 Interest 1,239 Miscellaneous 2,419 Total expenses 2,386,589 before reductions Expense (22,555 2,364,034 reductions ) NET INVESTMENT 2,290,170 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 17,620,269 securities Foreign (836 17,619,433 currency ) transactions Change in net unrealized appreciation (depreciation) on: Investment 2,996,175 securities Assets and 151 2,996,326 liabilities in foreign currencies NET GAIN (LOSS) 20,615,759 NET INCREASE $ 22,905,929 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 757,787 INFORMATION Sales charges paid to FDC Deferred sales $ 1,601 charges withheld by FDC Exchange fees $ 56,640 withheld by FSC Expense $ 20,655 reductions Directed brokerage arrangements Custodian 1,046 interest credits Transfer agent 854 interest credits $ 22,555 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ 2,290,170 $ 5,565,530 Net investment income Net realized 17,619,433 22,328,052 gain (loss) Change in net 2,996,326 44,057,165 unrealized appreciation (depreciation) NET INCREASE 22,905,929 71,950,747 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (1,218,898 (3,155,657 shareholders ) ) From net investment income From net (7,020,305 (9,088,286 realized gain ) ) TOTAL (8,239,203 (12,243,943 DISTRIBUTIONS ) ) Share 236,569,764 388,478,435 transactions Net proceeds from sales of shares Reinvestment of 8,038,419 11,963,979 distributions Cost of shares (158,282,272 (309,887,067 redeemed ) ) Paid in capital 334,446 312,663 portion of redemption fees NET INCREASE 86,660,357 90,868,010 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 101,327,083 150,574,814 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 315,177,598 164,602,784 period End of period $ 416,504,681 $ 315,177,598 (including undistributed net investment income of $2,286,239 and $2,409,873, respectively) OTHER INFORMATION Shares Sold 9,404,116 17,599,773 Issued in 340,034 512,815 reinvestment of distributions Redeemed (6,500,306 (14,323,517 ) ) Net increase 3,243,844 3,789,071 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 24.37 $ 18.01 $ 17.99 $ 20.88 $ 16.48 $ 11.40 beginning of period Income from Investment Operations Net investment .17 .52 .37 .19 .16 .25 income Net realized and 1.79 6.78 .87 .93 5.09 5.37 unrealized gain (loss) Total from 1.96 7.30 1.24 1.12 5.25 5.62 investment operations Less Distributions From net (.09) (.25) (.29) (.15) (.11) (.15) investment income From net (.52) (.72) (.98) (3.92) (.81) (.53) realized gain Total (.61) (.97) (1.27) (4.07) (.92) (.68) distributions Redemption fees .03 .03 .05 .06 .07 .14 added to paid in capital Net asset value, $ 25.75 $ 24.37 $ 18.01 $ 17.99 $ 20.88 $ 16.48 end of period TOTAL RETURN B, C 8.39% 40.94% 7.79% 6.46% 33.10% 52.34% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 416,505 $ 315,178 $ 164,603 $ 97,429 $ 315,520 $ 156,570 period (000 omitted) Ratio of expenses 1.46% A 1.41% 1.58% 1.62% 1.49% A 1.77% to average net assets Ratio of expenses 1.44% A, 1.40% 1.56% 1.60% E 1.49% A 1.77% to average net E E E assets after expense reductions Ratio of net 1.40% A 2.42% 1.99% .88% 1.06% A 1.80% investment income to average net assets Portfolio turnover 77% A 103% 106% 74% 63% A 89% rate Average $ .0365 commission rate F
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
BIOTECHNOLOGY PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past one, five and 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S BIOTECHNOLOGY -7.37% 12.80% 35.29% 263.30% BIOTECHNOLOGY -10.14% 9.42% 31.23% 252.40% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six month, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS BIOTECHNOLOGY 12.80% 6.23% 13.77% BIOTECHNOLOGY 9.42% 5.59% 13.42% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960909 144533 S00000000000001 Biotechnology SP Standard & Poor 500 00042 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8036.27 9173.00 1986/10/31 8631.55 9702.28 1986/11/30 8440.76 9938.05 1986/12/31 7898.90 9684.63 1987/01/31 8952.08 10989.15 1987/02/28 10791.35 11423.22 1987/03/31 10745.55 11753.35 1987/04/30 10608.18 11648.74 1987/05/31 10562.39 11750.09 1987/06/30 10486.07 12343.47 1987/07/31 10501.34 12969.28 1987/08/31 10928.72 13453.04 1987/09/30 10768.45 13158.41 1987/10/31 7456.25 10324.09 1987/11/30 6731.24 9473.39 1987/12/31 7632.63 10194.31 1988/01/31 8018.20 10623.49 1988/02/29 8317.21 11118.55 1988/03/31 8262.13 10774.98 1988/04/30 8112.62 10894.59 1988/05/31 7955.25 10989.37 1988/06/30 8222.78 11493.78 1988/07/31 8214.92 11450.10 1988/08/31 7986.72 11060.80 1988/09/30 8151.97 11531.99 1988/10/31 8065.41 11852.58 1988/11/30 7687.71 11683.09 1988/12/31 7947.38 11887.54 1989/01/31 8498.19 12757.71 1989/02/28 8435.24 12440.04 1989/03/31 9056.87 12729.90 1989/04/30 9363.74 13390.58 1989/05/31 9788.65 13932.90 1989/06/30 9536.86 13853.48 1989/07/31 10418.15 15104.45 1989/08/31 10811.58 15400.50 1989/09/30 11267.97 15337.35 1989/10/31 11307.31 14981.53 1989/11/30 11661.40 15287.15 1989/12/31 11438.86 15654.04 1990/01/31 10582.95 14603.66 1990/02/28 11582.85 14792.04 1990/03/31 12070.80 15184.03 1990/04/30 12222.78 14804.43 1990/05/31 13942.61 16247.86 1990/06/30 14916.27 16137.38 1990/07/31 14956.71 16085.74 1990/08/31 14495.63 14631.59 1990/09/30 14172.07 13919.03 1990/10/31 14293.41 13859.18 1990/11/30 16024.47 14754.48 1990/12/31 16511.73 15166.13 1991/01/31 18408.01 15827.37 1991/02/28 21016.44 16959.03 1991/03/31 23185.98 17369.44 1991/04/30 22175.74 17411.13 1991/05/31 23583.46 18163.29 1991/06/30 22331.32 17331.41 1991/07/31 24341.66 18139.05 1991/08/31 26047.41 18568.95 1991/09/30 27396.34 18258.85 1991/10/31 30094.20 18503.51 1991/11/30 28083.86 17757.82 1991/12/31 32865.81 19789.32 1992/01/31 32207.05 19421.24 1992/02/29 29734.44 19673.71 1992/03/31 27478.41 19290.07 1992/04/30 24915.57 19857.20 1992/05/31 26702.34 19954.50 1992/06/30 26233.66 19657.18 1992/07/31 27605.03 20461.16 1992/08/31 25878.49 20041.71 1992/09/30 25789.69 20278.20 1992/10/31 27052.54 20349.17 1992/11/30 29716.36 21043.08 1992/12/31 29466.42 21301.91 1993/01/31 27952.13 21480.84 1993/02/28 23440.38 21772.98 1993/03/31 23793.02 22232.39 1993/04/30 24404.96 21694.37 1993/05/31 25981.48 22275.78 1993/06/30 26137.06 22340.38 1993/07/31 25276.19 22251.02 1993/08/31 26230.40 23094.33 1993/09/30 27309.08 22916.50 1993/10/31 29341.96 23390.88 1993/11/30 29113.78 23168.66 1993/12/31 29673.86 23449.00 1994/01/31 30690.30 24246.27 1994/02/28 28636.67 23589.20 1994/03/31 25742.93 22560.71 1994/04/30 25276.19 22849.48 1994/05/31 24850.95 23224.22 1994/06/30 23865.62 22655.22 1994/07/31 23927.85 23398.31 1994/08/31 26168.17 24357.64 1994/09/30 26085.20 23760.88 1994/10/31 25193.22 24295.50 1994/11/30 24726.49 23410.66 1994/12/31 24280.50 23757.84 1995/01/31 25369.54 24373.88 1995/02/28 26240.78 25323.73 1995/03/31 26666.02 26071.03 1995/04/30 27495.77 26838.83 1995/05/31 27744.69 27911.57 1995/06/30 28750.76 28559.96 1995/07/31 30036.87 29507.01 1995/08/31 31240.01 29581.07 1995/09/30 32640.21 30829.39 1995/10/31 32380.91 30719.33 1995/11/30 33459.58 32067.91 1995/12/31 36202.27 32685.54 1996/01/31 38343.43 33798.15 1996/02/29 38042.00 34111.46 1996/03/31 37439.15 34439.95 1996/04/30 38247.50 34947.60 1996/05/31 38693.84 35848.90 1996/06/30 36355.84 35985.48 1996/07/31 33688.40 34395.64 1996/08/30 35239.98 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960909 144538 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Biotechnology Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $35,240 - a 252.40% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Amgen, Inc. 9.9 Genentech, Inc. special 8.8 Schering-Plough Corp. 3.8 Pharmacia & Upjohn, Inc. 3.6 Interneuron Pharmaceuticals, Inc. 2.2 Biogen, Inc. 2.2 Ares Serono Class B (Bearer) 2.0 Protein Design Labs, Inc. 1.7 Ligand Pharmaceuticals, Inc. Class B 1.6 COR Therapeutics, Inc. 1.5 TOP INDUSTRIES AS OF AUGUST 31, 1996 Row: 1, Col: 1, Value: 14.4 Row: 1, Col: 2, Value: 2.8 Row: 1, Col: 3, Value: 3.0 Row: 1, Col: 4, Value: 12.7 Row: 1, Col: 5, Value: 21.5 Row: 1, Col: 6, Value: 45.6 Biotechnology 45.6% Drugs 21.5% Pharmaceutical Preparations 12.7% Commercial Laboratory Research 3.0% Medical Technology 2.8% All Others 14.4% * * INCLUDES SHORT-TERM INVESTMENTS BIOTECHNOLOGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Karen Firestone, Portfolio Manager of Fidelity Select Biotechnology Portfolio Q. HOW DID THE FUND PERFORM, KAREN? A. For the six- and 12-month periods ended August 31, 1996, the fund returned -7.37% and 12.80%, respectively. By comparison, the Standard & Poor's 500 Index returned 2.96% and 18.73% for the same time period. Q. HOW DO EXPLAIN THE FUND'S BELOW-MARKET PERFORMANCE? A. The relative performance of the biotechnology sector was very weak, especially during the past three months. When compared to the S&P 500, the fund's performance was poor, as the biotech industry performed much worse than the overall market did. Stocks in this sector had an extended period from June 1995 to May 1996 during which they were very strong performers. Eventually, they became overvalued and, ultimately, they corrected. I think it was inevitable. Q. DID THE CHALLENGES BROUGHT ON BY THE BIOTECH CORRECTION CAUSE YOU TO CHANGE YOUR INVESTMENT STRATEGY? A. No. I had positioned the portfolio rather conservatively in anticipation of such a correction. In fact, the top holdings in the fund reflect a more offensive approach to pure biotechnology stocks going forward. Since many of the stocks corrected by more than 30% during the period, I became a bit more aggressive and recently began to buy the ones I thought were too expensive three and six months ago. Specifically, I increased the fund's position in Interneuron Pharmaceuticals, a biotech firm that recently received the Food and Drug Administration's approval for a new obesity drug. Q. WHAT OTHER STRATEGIES DID YOU FOLLOW IN THIS PARTICULARLY CHALLENGING MARKET ENVIRONMENT? A. I've continued to add to the fund's exposure to genomics. Genomics is the discovery and categorization of genes as they relate to diseases. I've increased the fund's holdings in Human Genome Sciences and initiated a position in Millennium Pharmaceuticals, which is also involved with genetics. Q. IT LOOKS LIKE YOU REDUCED THE FUND'S HOLDINGS IN DRUG STOCKS DURING THE PERIOD. WHAT WAS YOUR THINKING? A. That's true, and the fund's holdings had been fairly large in this area. Drug stocks performed well on a price basis during the period - and the fund's holdings in them helped to reduce the effects of the correction in biotech on the fund. But I began to sell them when their prices got a little too high and focused more of the fund's assets back toward biotech. Q. WHERE ELSE DID YOU FIND OPPORTUNITIES? A. I continued to steer the fund toward stocks where I thought there were definite near-term business prospects. I'm especially interested in companies where I expect a positive announcement about clinical results or where there's other tangible evidence of success. Q. DO YOU REGRET ANY INVESTMENTS YOU MADE DURING THE PAST SIX MONTHS? A. As I said, I think the fund was well-positioned to weather the inevitable correction in biotech stocks so, no, I don't have any regrets with respect to the fund's specific investments. I am disappointed in the industry, though, in that there hasn't been faster success for companies on the clinical front. It is an extremely slow and costly process to develop new drugs, and sometimes it can be frustrating. Q. WHAT'S AHEAD FOR THE FUND? A. I don't expect my strategy to change much, and my outlook for the industry remains positive. New products are constantly being researched and new therapies go into clinical trials on a weekly basis for everything from cancer to arthritis. I also think the biotech industry was given a boost by the success of the AIDS inhibitors treatment that was developed using biotechnology techniques. My goal continues to be to pick the best stocks in the biotech sector that I think will outperform the market and other biotech companies. FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 042 TRADING SYMBOL: FBIOX SIZE: as of August 31, 1996, more than $645 million MANAGER: Karen Firestone, since 1992; manager, Fidelity Select Health Care Portfolio, since 1995; Fidelity Select Air Transportation Portfolio, 1987-1992; Fidelity Select Leisure Portfolio, 1989-1992; joined Fidelity in 1983 (checkmark) THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. BIOTECHNOLOGY PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.0% SHARES VALUE (NOTE 1) AGRICULTURE - 0.4% CROPS - 0.4% DEKALB Genetics Corp. Class B 71,100 $ 2,310,750 24487820 CHEMICALS & PLASTICS - 1.3% Hoechst AG Ord. 250,000 8,762,450 43439010 DRUGS & PHARMACEUTICALS - 83.0% BIOTECHNOLOGY - 45.6% Advanced Tissue Sciences Corp. Class A 50,000 687,500 00755F10 Alkermes, Inc. (a) 434,200 5,753,150 01642T10 Amgen, Inc. (a) 1,110,200 64,669,150 03116210 Biochem Pharmaceuticals, Inc. (a) 254,000 8,854,961 09058T10 Biogen, Inc. (a) 202,900 14,152,275 09059710 COR Therapeutics, Inc. (a)(c) 1,025,500 10,062,719 21775310 Cambridge Neuroscience, Inc. (a) 108,100 959,388 13242610 Cell Genesys, Inc. (a) 336,600 2,272,050 15092110 Cephalon, Inc. 120,000 2,010,000 15670810 Chiron Corp. (a) 296,400 5,816,850 17004010 Depotech Corp. (a) 32,500 613,438 24967310 Dynagen, Inc. (warrants) (a) 40,000 41,250 26791712 Genentech, Inc. special (a) 1,093,800 57,424,500 36871030 Genetics Institute, Inc. (a) 109,280 6,775,360 37185530 Genome Therapeutics Corp. (a) 670,000 6,113,750 37243010 Genzyme Corp. (a) 270,000 6,446,250 37291710 Gilead Sciences, Inc. (a) 273,100 6,622,675 37555810 Human Genome Sciences, Inc. (a) 223,800 7,637,175 44490310 Idexx Laboratories (a) 80,000 3,100,000 45168D10 Imclone Systems, Inc. 200,000 1,750,000 45245W10 Interneuron Pharmaceuticals, Inc. (a) 470,600 14,706,250 46057310 Magainin Pharmaceuticals, Inc. (a) 394,800 4,466,175 55903610 Medimmune, Inc. 230,000 3,220,000 58469910 Molecular Biosystems, Inc. 200,000 1,550,000 60851310 Neurex Corp. (a) 250,000 4,578,125 64123810 Neurogen Corp. (a) 62,400 1,435,200 64124E10 North American Vaccine, Inc. (a) 73,300 1,594,275 65720110 Pharmacia & Upjohn, Inc. 559,800 23,511,600 71694110 Protein Design Labs, Inc. (a) 743,400 11,243,925 74369L10 Regeneron Pharmaceuticals, Inc. 200,000 3,350,000 75886F10 Sepracor, Inc. (a) 228,000 3,021,000 81731510 Sequana Therapeutics, Inc. (a) 370,900 6,119,850 81732210 Somatix Therapy Corp. (a) 427,900 2,059,269 83444710 Sugen, Inc. (a) 293,900 3,563,538 86504110 Vical, Inc. (a) 118,900 1,575,425 92560210 Virus Research Institute, Inc. 50,000 325,000 92792010 298,082,073 COMMERCIAL LABORATORY RESEARCH - 3.0% Cryomedical Sciences, Inc. (a) 393,000 736,875 22904910 INCYTE Pharmaceuticals, Inc. (a) 127,600 5,183,750 45337C10 Intercardia, Inc. 225,000 4,781,250 45844M10 Medarex, Inc. (a) 379,400 2,513,525 58391610 Millennium Pharmaceuticals, Inc. 330,100 6,024,325 59990210 19,239,725 DRUGS - 21.5% Allergan, Inc. 155,600 6,048,950 01849010 Anesta Corp. 176,900 2,056,463 03460310 Ares Serono Class B (Bearer) 12,300 12,893,511 03999392 Astra AB Class B Free shares 165,000 6,829,510 04632299 Barr Laboratories, Inc. (a) 75,000 1,931,250 06830610 Bristol-Myers Squibb Co. 70,000 6,142,500 11012210 Dura Pharmaceuticals, Inc. (a) 160,000 5,560,000 26632S10 Elan Corp. PLC (a): ADR 267,276 8,385,785 28413120 (warrants) 14,339 394,323 28413114 SHARES VALUE (NOTE 1) Glaxo Wellcome PLC sponsored ADR (a) 100,000 $ 2,850,000 37733W10 IVAX Corp. 85,900 1,385,138 46582310 Lilly (Eli) & Co. 51,300 2,936,925 53245710 Lynx Therapeutics, Inc. (a) 19,399 96,995 55181230 Matrix Pharmaceutical, Inc. (a) 125,400 1,583,175 57684410 Merck & Co., Inc. 50,000 3,281,250 58933110 Novo Industri A/S ADR 16,000 616,000 67010020 Novo-Nordisk AS Class B 44,000 6,761,420 67010010 Pfizer, Inc. 105,600 7,497,600 71708110 Roche Holdings Ltd. participation certificates 700 5,325,706 77157092 Schering-Plough Corp. 440,900 24,635,288 80660510 Schering-Plough Corp. unit (b) 6,300 1,000,125 80660540 Sequus Pharmaceuticals, Inc. (a) 599,400 8,691,300 81747110 Takeda Chemical Industries Ltd. 361,000 6,233,571 87405810 Warner-Lambert Co. 100,000 5,950,000 93448810 Watson Pharmaceuticals, Inc. (a) 238,894 6,927,926 94268310 Yamanouchi Pharmaceutical Co. Ltd. 233,000 4,793,754 98414010 140,808,465 IN VITRO, IN VIVO DIAGNOSTIC SUBSTANCES - 0.2% Igen, Inc. (a) 173,900 1,195,563 44953610 PHARMACEUTICAL PREPARATIONS - 12.7% Alpharma, Inc. Class A 216,700 3,413,025 02081310 Ariad Pharmaceuticals, Inc. (c) 979,100 3,549,238 04033A10 Arris Pharmaceutical Corp. (a) 623,500 6,702,624 04269W10 CIBA-GEIGY AG (Reg.) 7,400 9,326,955 17199492 Cocensys, Inc. (a) 156,000 1,092,000 19126310 Copley Pharmaceutical, Inc. (a) 257,400 2,831,400 21745K10 Guilford Pharmaceuticals, Inc. (a) 283,700 7,872,675 40182910 Houghten Pharmaceuticals, Inc. 100,000 500,000 44150210 Ibah, Inc. 30,000 172,500 45073110 Immunex Corp. (a) 734,700 9,642,938 45252810 Inhale Therapeutic Systems (a) 477,500 7,162,500 45719110 La Jolla Pharmaceutical Co. (a) 87,300 469,238 50345910 Ligand Pharmaceuticals, Inc. Class B (a) 857,065 10,445,480 53220K20 NPS Pharmaceuticals, Inc. 415,000 5,031,875 62936P10 Nexstar Pharmaceuticals, Inc. 220,800 4,857,600 65333B10 Noven Pharmaceuticals, Inc. (a) 50,000 656,250 67000910 Sandoz AG (Reg.) 2,500 2,970,050 80005292 T Cell Sciences, Inc. (a) 494,100 1,142,606 87234210 Theratech, Inc. (a) 195,000 2,096,250 88338310 Vivus, Inc. 95,500 3,342,500 92855110 83,277,704 TOTAL DRUGS & PHARMACEUTICALS 542,603,530 ELECTRICAL EQUIPMENT - 0.0% TV & RADIO COMMUNICATION EQUIPMENT - 0.0% ASN (warrants) (a) 5,000 - 04599F22 HOME FURNISHINGS - 0.5% FURNITURE - 0.5% Kinetic Concepts, Inc. 210,500 3,131,187 49460W10 MEDICAL EQUIPMENT & SUPPLIES - 3.2% MEDICAL SUPPLIES & APPLIANCES - 0.4% Cygnus, Inc. (a) 100,000 1,725,000 23256010 Exogen, Inc. (a) 213,500 1,014,124 30209210 2,739,124 MEDICAL TECHNOLOGY - 2.8% Conceptus, Inc. (a) 132,000 1,369,500 20601610 Haemonetics Corp. (a) 130,700 2,679,350 40502410 Metra Biosystems, Inc. 300,000 1,537,500 59159110 Pall Corp. 300,000 7,050,000 69642930 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) MEDICAL EQUIPMENT & SUPPLIES - CONTINUED MEDICAL TECHNOLOGY - CONTINUED St. Jude Medical, Inc. (a) 97,400 $ 3,494,225 79084910 Sonus Pharmaceuticals, Inc. (a) 70,000 1,417,500 83569210 Stryker Corp. 30,000 733,125 86366710 18,281,200 TOTAL MEDICAL EQUIPMENT & SUPPLIES 21,020,324 MEDICAL FACILITIES MANAGEMENT - 1.6% HOSPITALS - 0.9% Columbia/HCA Healthcare Corp. 103,700 5,846,088 19767710 HOSPITALS, GENERAL MEDICAL - 0.2% Medpartners/Mullikin, Inc. 60,000 1,245,000 58496810 HMOS & OUTPATIENT CARE - 0.1% United HealthCare Corp. 14,860 573,967 91058110 NURSING CARE & NURSING HOMES - 0.1% ARV Assisted Living, Inc. (a) 43,000 623,500 00204C10 SKILLED NURSING CARE FACILITIES - 0.3% TheraTx, Inc. (a) 149,500 2,317,250 88338410 TOTAL MEDICAL FACILITIES MANAGEMENT 10,605,805 TOTAL COMMON STOCKS (Cost $560,936,891) 588,434,046 REPURCHASE AGREEMENTS - 10.0% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 65,328,086 65,290,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $626,226,891) $ 653,724,046 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1993. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $1,000,125 or 0.2% of net assets. (c) A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Ariad Pharmaceuticals, Inc. $ 85,000 $ - $ - $ 3,549,238 Arris Pharmaceutical Corp. 1,962,500 475,000 - - COR Therapeutics, Inc. - - - 10,062,719 Guilford Pharmaceuticals, Inc. 1,000,000 - - - Inhale Therapeutic Systems - 822,515 - - Insite Vision, Inc. - 82,613 - - Protein Design Labs, Inc. - 1,014,182 - - Totals $ 3,047,500 $ 2,394,310 $ - $ 13,611,957 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $150,848,181 and $450,314,607, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $50,803 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the period for which loans were outstanding amounted to $10,839,000. The weighted average interest rate paid was 5.7% (see Note 6 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $8,941,850 and $9,508,100, respectively (see Note 7 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 86.8% Switzerland 4.7 Japan 1.7 Canada 1.6 Ireland 1.3 Germany 1.3 Denmark 1.1 Sweden 1.0 Others (individually less than 1%) 0.5 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $626,929,147. Net unrealized appreciation aggregated $26,794,899 of which $79,598,399 related to appreciated investment securities and $52,803,500 related to depreciated investment securities. BIOTECHNOLOGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED)
ASSETS Investment in securities, at $ 653,724,046 value (including repurchase agreements of $65,290,000) (cost $626,226,891) - See accompanying schedule Cash 227 Receivable for investments sold 2,420,025 Receivable for fund shares sold 1,098,751 Dividends receivable 213,129 Redemption fees receivable 2,050 Other receivables 1,292,060 Prepaid expenses 9,845 TOTAL ASSETS 658,760,133 LIABILITIES Payable for investments purchased $ 82,892 Payable for fund shares redeemed 2,326,787 Accrued management fee 321,308 Other payables and 704,942 accrued expenses Collateral on securities loaned, 9,508,100 at value TOTAL LIABILITIES 12,944,029 NET ASSETS $ 645,816,104 Net Assets consist of: Paid in capital $ 534,630,667 Accumulated net investment (loss) (1,543,871 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 85,230,528 Net unrealized appreciation (depreciation) on investments 27,498,780 and assets and liabilities in foreign currencies NET ASSETS, for 19,474,838 $ 645,816,104 shares outstanding NET ASSET VALUE and redemption price per share ($645,816,104 (divided by) 19,474,838 shares) $33.16 Maximum offering price per share (100/97.00 of $33.16) $34.19
STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED)
INVESTMENT INCOME $ 2,594,669 Dividends Interest (including income on securities loaned of $103,347) 1,909,865 TOTAL INCOME 4,504,534 EXPENSES Management fee $ 2,392,734 Transfer agent fees 3,211,380 Accounting and security lending fees 329,759 Non-interested trustees' compensation 1,547 Custodian fees and expenses 35,413 Registration fees 9,845 Audit 26,334 Legal 11,775 Interest 1,701 Miscellaneous 6,308 Total expenses before reductions 6,026,796 Expense reductions (38,931 5,987,865 ) NET INVESTMENT INCOME (LOSS) (1,483,331 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including realized gain of $1,771,496 85,456,015 on sale of investments in affiliated issuers) Foreign currency transactions (2,401 85,453,614 ) Change in net unrealized appreciation (depreciation) on: Investment securities (147,201,218 ) Assets and liabilities in 1,625 (147,199,593 foreign currencies ) NET GAIN (LOSS) (61,745,979 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (63,229,310 ) OTHER INFORMATION $ 1,161,324 Sales charges paid to FDC Deferred sales charges withheld $ 15,996 by FDC Exchange fees withheld by FSC $ 206,723 Expense reductions $ 34,550 Directed brokerage arrangements Custodian interest credits 632 Transfer agent interest credits 3,749 $ 38,931
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED Operations ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED)
Net investment income (loss) $ (1,483,331) $ 2,118,503 Net realized gain (loss) 85,453,614 60,844,285 Change in net unrealized appreciation (depreciation) (147,199,593) 158,651,823 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (63,229,310) 221,614,611 Distributions to shareholders (756,797) (1,392,589) From net investment income From net realized gain (18,469,880) - TOTAL DISTRIBUTIONS (19,226,677) (1,392,589) Share transactions 198,596,743 886,867,937 Net proceeds from sales of shares Reinvestment of distributions 18,832,280 1,358,134 Cost of shares redeemed (586,578,191) (460,786,384) Paid in capital portion of redemption fees 557,462 1,005,318 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (368,591,706) 428,445,005 TOTAL INCREASE (DECREASE) IN NET ASSETS (451,047,693) 648,667,027 NET ASSETS Beginning of period 1,096,863,797 448,196,770 End of period (including accumulated undistributed net investment (loss) income of $(1,543,871) and $ 645,816,104 $ 1,096,863,797 $729,404, respectively) OTHER INFORMATION Shares Sold 5,591,988 26,953,463 Issued in reinvestment of distributions 548,886 41,419 Redeemed (16,636,965) (14,737,686) Net increase (decrease) (10,496,091) 12,257,196
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, beginning of period $ 36.60 $ 25.30 $ 27.61 $ 22.60 $ 27.61 $ 26.78 Income from Investment Operations Net investment income (loss) (.07) .11 (.06) (.18) (.08) (.11) Net realized and unrealized gain (loss) (2.62) 11.21 (2.26) 5.15 (1.09) 3.36 Total from investment operations (2.69) 11.32 (2.32) 4.97 (1.17) 3.25 Less Distributions From net investment income (.03) (.07) - - - - In excess of net investment income - - - - - (.02) From net realized gain (.74) - - - (3.89) (2.52) Total distributions (.77) (.07) - - (3.89) (2.54) Redemption fees added to paid in capital .02 .05 .01 .04 .05 .12 Net asset value, end of period $ 33.16 $ 36.60 $ 25.30 $ 27.61 $ 22.60 $ 27.61 TOTAL RETURN B, C (7.37)% 44.97% (8.37)% 22.17% (5.92)% 12.36% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 645,816 $ 1,096,864 $ 448,197 $ 481,146 $ 507,993 $ 679,877 Ratio of expenses to average net assets 1.51% A 1.44% 1.59% 1.62% 1.50% A 1.50% F Ratio of expenses to average net assets after 1.50% A, 1.43% 1.59% 1.61% 1.50% A 1.50% expense reductions E E E Ratio of net investment income (loss) to average net (.37)% A .35% (.27)% (.69)% (.37)% (.34)% assets A Portfolio turnover rate 41% A 67% 77% 51% 79% A 160% Average commission rate G $ .0363
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F DURING THE PERIOD, FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
HEALTH CARE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S HEALTH CARE 1.15% 19.96% 88.58% 396.49% HEALTH CARE -1.88% 16.36% 82.92% 381.60% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS HEALTH CARE 19.96% 13.53% 17.38% HEALTH CARE 16.36% 12.84% 17.02% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960910 104724 S00000000000001 Health Care SP Standard & Poor 500 00063 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8375.45 9173.00 1986/10/31 9105.96 9702.28 1986/11/30 8972.17 9938.05 1986/12/31 8771.48 9684.63 1987/01/31 10079.97 10989.15 1987/02/28 11575.78 11423.22 1987/03/31 11506.21 11753.35 1987/04/30 11233.27 11648.74 1987/05/31 11342.98 11750.09 1987/06/30 11613.24 12343.47 1987/07/31 12057.43 12969.28 1987/08/31 12413.32 13453.04 1987/09/30 12180.52 13158.41 1987/10/31 8966.81 10324.09 1987/11/30 8097.16 9473.39 1987/12/31 8715.46 10194.31 1988/01/31 9363.19 10623.49 1988/02/29 9644.34 11118.55 1988/03/31 9404.54 10774.98 1988/04/30 9258.45 10894.59 1988/05/31 9233.65 10989.37 1988/06/30 9476.20 11493.78 1988/07/31 9462.42 11450.10 1988/08/31 9206.08 11060.80 1988/09/30 9514.79 11531.99 1988/10/31 9633.31 11852.58 1988/11/30 9352.17 11683.09 1988/12/31 9484.93 11887.54 1989/01/31 10154.68 12757.71 1989/02/28 9960.15 12440.04 1989/03/31 10485.39 12729.90 1989/04/30 11057.87 13390.58 1989/05/31 11402.48 13932.90 1989/06/30 11145.46 13853.48 1989/07/31 12526.01 15104.45 1989/08/31 12829.06 15400.50 1989/09/30 12921.66 15337.35 1989/10/31 12826.25 14981.53 1989/11/30 13379.04 15287.15 1989/12/31 13514.93 15654.04 1990/01/31 12739.49 14603.66 1990/02/28 12605.98 14792.04 1990/03/31 13108.75 15184.03 1990/04/30 13108.75 14804.43 1990/05/31 14912.44 16247.86 1990/06/30 15420.55 16137.38 1990/07/31 15633.45 16085.74 1990/08/31 14932.65 14631.59 1990/09/30 14483.19 13919.03 1990/10/31 14814.37 13859.18 1990/11/30 16390.43 14754.48 1990/12/31 16801.28 15166.13 1991/01/31 18459.84 15827.37 1991/02/28 20739.97 16959.03 1991/03/31 22588.80 17369.44 1991/04/30 22195.57 17411.13 1991/05/31 23400.64 18163.29 1991/06/30 22345.45 17331.41 1991/07/31 24322.69 18139.05 1991/08/31 25538.14 18568.95 1991/09/30 26052.77 18258.85 1991/10/31 27769.30 18503.51 1991/11/30 26252.52 17757.82 1991/12/31 30862.69 19789.32 1992/01/31 29850.09 19421.24 1992/02/29 28546.64 19673.71 1992/03/31 26805.12 19290.07 1992/04/30 25286.22 19857.20 1992/05/31 25806.88 19954.50 1992/06/30 24812.18 19657.18 1992/07/31 26304.79 20461.16 1992/08/31 25595.31 20041.71 1992/09/30 23823.57 20278.20 1992/10/31 24556.30 20349.17 1992/11/30 25901.59 21043.08 1992/12/31 25482.01 21301.91 1993/01/31 24113.47 21480.84 1993/02/28 21540.27 21772.98 1993/03/31 22134.40 22232.39 1993/04/30 22126.21 21694.37 1993/05/31 23011.25 22275.78 1993/06/30 22929.31 22340.38 1993/07/31 22183.57 22251.02 1993/08/31 22974.38 23094.33 1993/09/30 23691.43 22916.50 1993/10/31 25453.33 23390.88 1993/11/30 25367.29 23168.66 1993/12/31 26097.82 23449.00 1994/01/31 26614.69 24246.27 1994/02/28 25970.66 23589.20 1994/03/31 24276.47 22560.71 1994/04/30 25250.39 22849.48 1994/05/31 26676.48 23224.22 1994/06/30 26253.17 22655.22 1994/07/31 26779.22 23398.31 1994/08/31 30293.07 24357.64 1994/09/30 30510.88 23760.88 1994/10/31 30934.19 24295.50 1994/11/30 31604.08 23410.66 1994/12/31 31698.06 23757.84 1995/01/31 33376.98 24373.88 1995/02/28 34084.36 25323.73 1995/03/31 35011.13 26071.03 1995/04/30 35499.14 26838.83 1995/05/31 35841.17 27911.57 1995/06/30 37654.83 28559.96 1995/07/31 39810.52 29507.01 1995/08/31 40148.05 29581.07 1995/09/30 42398.25 30829.39 1995/10/31 42501.76 30719.33 1995/11/30 44292.91 32067.91 1995/12/31 46236.33 32685.54 1996/01/31 47890.17 33798.15 1996/02/29 47610.58 34111.46 1996/03/31 47776.44 34439.95 1996/04/30 47576.43 34947.60 1996/05/31 48439.49 35848.90 1996/06/30 48473.82 35985.48 1996/07/31 46580.96 34395.64 1996/08/30 48159.98 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960910 104729 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Health Care Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $48,160 - a 381.60% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Bristol-Myers Squibb Co. 5.8 Schering-Plough Corp. 5.4 SmithKline Beecham PLC ADR 5.3 Pharmacia & Upjohn, Inc. 5.2 Pfizer, Inc. 3.9 St. Jude Medical, Inc. 3.0 American Home Products Corp. 2.9 Allergan, Inc. 2.7 Amgen, Inc. 2.7 Merck & Co., Inc. 2.6 TOP INDUSTRIES AS OF AUGUST 31, 1996 Drugs 41.0% Biotechnology 13.7% Medical Technology 9.5% Medical Supplies & Appliances 6.4% Pharmaceutical Preparations 5.0% All Others 24.4% * Row: 1, Col: 1, Value: 24.4 Row: 1, Col: 2, Value: 5.0 Row: 1, Col: 3, Value: 6.4 Row: 1, Col: 4, Value: 9.5 Row: 1, Col: 5, Value: 13.7 Row: 1, Col: 6, Value: 41.0 * INCLUDES SHORT-TERM INVESTMENTS HEALTH CARE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Karen Firestone, Portfolio Manager of Fidelity Select Health Care Portfolio Q. HOW DID THE FUND PERFORM, KAREN? A. The fund returned 1.15% for the six months and 19.96% for the year ended August 31, 1996. By comparison, the Standard & Poor's 500 Index returned 2.96% and 18.73% for the same time periods, respectively. Q. WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THE PERIOD? A. Health care stocks tend to move up when the market gets defensive and tend to underperform in a rising long-term interest rate environment such as the one we experienced during the past six months. Although they are growth companies and not cyclical ones, health care stocks still move up and down quite a bit. Q. SO, WHAT WAS YOUR INVESTMENT STRATEGY DURING THE PERIOD? A. It's the same as it's always been. I am most interested in owning the companies that I feel fairly confident will have a positive earnings picture. This philosophy is reflected in some of the fund's largest holdings, such as Bristol-Myers Squibb, Schering-Plough and SmithKline Beecham. Q. BESIDES THE MAJOR DRUG COMPANIES, WHERE ELSE DID YOU FIND OPPORTUNITIES? A. During the period, I added to the fund's position in medical device companies such as Medtronic. Medtronic is the leader in developing, manufacturing and distributing implantable medical devices for use with cardiac patients. Medical device companies underperformed recently, and I think they may be ready to move higher. Again, while making these investments, I'm looking for sustainable earnings growth and successful product introductions. Q. HEALTH MAINTENANCE ORGANIZATION (HMO) STOCKS ENDURED A TOUGH COUPLE OF MONTHS. HOW DID THAT AFFECT THE FUND? A. The HMO industry is well-known as a rapidly changing and volatile field. The fund had limited exposure to HMOs in 1995, and I began buying them selectively again in early 1996. As a group, HMOs performed rather poorly during the past six months. HMOs have grown in popularity so quickly during the past couple of years that it recently resulted in a couple of negative trends in the business. For instance, many HMOs have grown so fast that they've been unable to control costs, which hurt stock prices, especially during the past couple of months. However, I still think that companies that can run their businesses efficiently should be able to meet their targeted earnings and continue to grow. I've begun to add to the fund's holdings in HMOs and hospitals as I find attractive buying opportunities. Q. WERE THERE ANY INVESTMENT DECISIONS THAT YOU REGRET MAKING DURING THE PAST SIX MONTHS? A. Yes. I wish the fund had owned more long-term-care nursing homes and assisted living organizations. It's only been in recent years that these types of stocks have been available in the marketplace - and they are only beginning to get over some early growing pains and come into their own as investments. They performed well during the period and, in hindsight, the fund didn't have as large a position in them as I would have liked. Q. WHAT'S YOUR OUTLOOK GOING FORWARD? A. While the first portion of 1996 was tough, I think the health care industry has the potential to outperform for the rest of the year. I think the industry's earnings momentum is strongly in place versus other sectors of the economy. I'll continue to pick the stocks in the health care sector that I think have the best chances of outperforming based on growth fundamentals, strong balance sheets, product flow and innovation. I'll also be watching for companies that are buying back stock - a trend that recently began to surface in the sector. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 063 TRADING SYMBOL: FSPHX SIZE: as of August 31, 1996, more than $1.1 billion MANAGER: Karen Firestone, since 1995; manager, Fidelity Select Biotechnology Portfolio since 1992; Fidelity Select Air Transportation portfolio, 1987-1992; Fidelity Select Leisure Portfolio, 1989-1992; joined Fidelity in 1983 (checkmark) HEALTH CARE PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 86.8% SHARES VALUE (NOTE 1) CHEMICALS & PLASTICS - 1.0% CHEMICALS - 1.0% Hoechst AG Ord. 340,000 $ 11,916,934 43439010 COMPUTER SERVICES & SOFTWARE - 0.1% CAD/CAM/CAE - 0.1% Healthdyne Information Enterprises, Inc. 258,200 1,323,275 42220410 DEFENSE ELECTRONICS - 0.1% Maxwell Laboratories, Inc. (a) 91,500 1,555,500 57776310 DRUG STORES - 0.3% Eckerd Corp. (a) 148,000 3,626,000 27876310 DRUGS & PHARMACEUTICALS - 60.0% BIOTECHNOLOGY - 13.7% Amgen, Inc. (a) 550,000 32,037,500 03116210 Biochem Pharmaceuticals, Inc. (a) 71,200 2,482,178 09058T10 Biogen, Inc. (a) 76,500 5,335,875 09059710 COR Therapeutics, Inc. (a) 387,100 3,798,419 21775310 Elf Sanofi SA 165,000 13,026,830 91399A92 Genentech, Inc. special (a) 397,400 20,863,500 36871030 Genetics Institute, Inc. (a) 90,000 5,580,000 37185530 Human Genome Sciences, Inc.(a) 100,000 3,412,495 44490310 Idexx Laboratories (a) 150,000 5,812,500 45168D10 IGI, Inc. (a) 100,000 556,250 44957510 Interneuron Pharmaceuticals, Inc. 100,000 3,125,000 46057310 Magainin Pharmaceuticals, Inc. (a) 70,000 791,875 55903610 Pharmacia & Upjohn, Inc. 1,493,600 62,731,200 71694110 Regeneron Pharmaceuticals, Inc. (a) 155,900 2,611,325 75886F10 Ribozyme Pharmaceuticals, Inc. (a) 80,500 955,938 76256710 Sequana Therapeutics, Inc. (a) 100,000 1,650,000 81732210 Virus Research Institute, Inc. (a) 35,000 227,500 92792010 164,998,385 COMMERCIAL LABORATORY RESEARCH - 0.3% INCYTE Pharmaceuticals, Inc. (a) 80,000 3,250,000 45337C10 DRUGS - 41.0% ALZA Corp. Class A (a) 140,000 3,832,500 02261510 Allergan, Inc. 851,500 33,102,063 01849010 American Home Products Corp. 584,800 34,649,400 02660910 Astra AB Class A Free shares 270,000 11,420,285 04632292 Barr Laboratories, Inc. (a) 105,600 2,719,200 06830610 Bristol-Myers Squibb Co. 791,100 69,419,025 11012210 Dura Pharmaceuticals, Inc. (a) 200,000 6,950,000 26632S10 Elan Corp. PLC ADR (a) 391,820 12,293,353 28413120 Glaxo Wellcome PLC sponsored ADR 295,000 8,407,500 37733W10 Glaxo Wellcome PLC 240,000 3,440,627 37733W92 Lilly (Eli) & Co. 491,806 28,155,894 53245710 Merck & Co., Inc. 471,800 30,961,875 58933110 Novo-Nordisk AS Class B 92,000 14,137,515 67010010 Pfizer, Inc. 663,600 47,115,600 71708110 Roche Holdings Ltd. participation certificates 1,900 14,455,491 77157092 Schering-Plough Corp. 1,168,400 65,284,350 80660510 SmithKline Beecham PLC ADR 1,100,000 64,075,000 83237830 Takeda Chemical Industries Ltd. 361,000 6,233,571 87405810 Warner-Lambert Co. 335,600 19,968,200 93448810 Watson Pharmaceuticals, Inc. (a) 440,000 12,760,000 94268310 Yamanouchi Pharmaceutical Co. Ltd. 233,000 4,793,754 98414010 494,175,203 SHARES VALUE (NOTE 1) PHARMACEUTICAL PREPARATIONS - 5.0% Alpharma, Inc. Class A 225,000 $ 3,543,750 02081310 Andrx Corp. (a) 198,500 2,878,250 03455110 Arris Pharmaceutical Corp. (a) 250,000 2,687,500 04269W10 CIBA-GEIGY AG (Reg.) 15,300 19,284,110 17199492 Copley Pharmaceutical, Inc. (a) 210,600 2,316,600 21745K10 Inhale Therapeutic Systems (a) 39,000 585,000 45719110 Ligand Pharmaceuticals, Inc. Class B (a) 232,800 2,837,250 53220K20 Rhone Poulenc Rorer, Inc. 8,200 577,075 76242T10 Sandoz AG (Reg.) 17,200 20,433,943 80005292 Zeneca Group PLC Ord. 240,000 5,726,883 98934D92 60,870,361 TOTAL DRUGS & PHARMACEUTICALS 723,293,949 ELECTRICAL EQUIPMENT - 0.2% ELECTRICAL MACHINERY - 0.2% VWR Corp. 121,800 2,101,050 91843510 MEDICAL EQUIPMENT & SUPPLIES - 17.6% DENTAL EQUIPMENT - 0.5% Sybron Corp. (a) 232,300 6,388,250 87114F10 DRUG DISTRIBUTORS - WHOLESALE - 2.3% Bergen Brunswig Corp. Class A 714,290 19,910,834 08373910 Cardinal Health, Inc. 107,666 7,899,993 14149Y10 27,810,827 MEDICAL SUPPLIES & APPLIANCES - 6.4% Abbott Laboratories 100,000 4,512,500 00282410 Baxter International, Inc. 273,000 12,182,625 07181310 Becton, Dickinson & Co. 260,600 10,652,025 07588710 Boston Scientific Corp. (a) 368,668 16,912,645 10113710 Exactech, Inc. (a) 38,100 257,175 30064E10 Johnson & Johnson 499,200 24,585,600 47816010 Omnicare, Inc. 200,000 4,900,000 68190410 Sofamor/Danek Group, Inc. (a) 110,500 3,176,875 83400510 77,179,445 MEDICAL TECHNOLOGY - 8.3% Beckman Instruments, Inc. 405,000 14,934,375 07581610 Biomet, Inc. 10,000 156,250 09061310 Conmed Corp. (a) 5,000 85,000 20741010 Datascope Corp. (a) 122,600 2,176,150 23811310 Guidant Corp. 151,930 7,710,448 40169810 InControl, Inc. (a) 100,000 993,750 45336L10 Medtronic, Inc. 420,000 21,840,000 58505510 Nellcor, Inc. (a) 182,800 4,707,100 64027510 St. Jude Medical, Inc. (a) 1,009,000 36,197,875 79084910 Sonus Pharmaceuticals, Inc. (a) 115,000 2,328,750 83569210 Stryker Corp. 120,000 2,932,500 86366710 U.S. Surgical Corp. 50,000 1,825,000 91270710 Vital Signs, Inc. 179,300 3,653,238 92846910 99,540,436 X-RAY ELECTRO-MEDICAL APPARATUS - 0.1% Healthdyne Technologies, Inc. (a) 96,813 871,317 42220610 TOTAL MEDICAL EQUIPMENT & SUPPLIES 211,790,275 MEDICAL FACILITIES MANAGEMENT - 7.3% HOME HEALTH CARE AGENCIES - 0.3% Matria Healthcare, Inc. (a) 258,200 1,904,225 57681710 Sterling House Corp. (a) 105,000 1,680,000 85933110 3,584,225 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) MEDICAL FACILITIES MANAGEMENT - CONTINUED HOSPITALS - 2.2% Columbia/HCA Healthcare Corp. 319,005 $ 17,983,907 19767710 Tenet Healthcare Corp. (a) 400,000 8,400,000 88033G10 26,383,907 HMOS & OUTPATIENT CARE - 3.0% Health Systems International, Inc. (a) 476,900 11,684,050 42194910 Oxford Health Plans, Inc. (a) 202,900 9,282,675 69147110 PacifiCare Health Systems, Inc. Class B (a) 110,700 8,911,350 69511020 United HealthCare Corp. 162,800 6,288,150 91058110 36,166,225 MEDICAL SERVICES - 0.6% Lincare Holdings, Inc. (a) 126,800 4,731,225 53279110 Physician Reliance Network, Inc. (a) 200,000 2,850,000 71940G10 7,581,225 NURSING CARE & NURSING HOMES - 0.3% ARV Assisted Living, Inc. (a) 109,000 1,580,500 00204C10 Arbor Health Care Co. (a) 112,000 2,408,000 03876L10 3,988,500 SKILLED NURSING CARE FACILITIES - 0.9% Multicare Companies, Inc. (a) 77,550 1,463,756 62543V10 Vencor, Inc. (a) 288,000 9,036,000 92260210 10,499,756 TOTAL MEDICAL FACILITIES MANAGEMENT 88,203,838 SERVICES - 0.2% MANAGEMENT SERVICES - 0.2% Sterling Healthcare Group, Inc. (a) 100,000 2,075,000 85932610 TOTAL COMMON STOCKS (Cost $848,991,737) 1,045,885,821 CONVERTIBLE PREFERRED STOCKS - 1.0% MEDICAL EQUIPMENT & SUPPLIES - 1.0% MEDICAL TECHNOLOGY - 1.0% U.S. Surgical Corp. $2.20 (c) (Cost $7,710,166) 332,800 11,980,800 91270720 NONCONVERTIBLE BONDS - 0.2% MOODY'S PRINCIPAL RATINGS AMOUNT MEDICAL EQUIPMENT & SUPPLIES - 0.2% MEDICAL TECHNOLOGY - 0.2% Advanced Medical, Inc. 15%, 7/15/99 (Cost $1,542,097) - $ 2,090,000 2,090,000 00754CAC REPURCHASE AGREEMENTS - 12.0% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 145,157,626 145,073,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $1,003,317,000) $ 1,205,029,621 LEGEND 1. Non-income producing (c) A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Protocol Systems, Inc. $ - $ 977,901 $ - $ - Spacelabs Medical, Inc. - 2,270,615 - - Totals $ - $ 3,248,516 $ - $ - (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $11,980,800 or 1.0% of net assets OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $250,901,674 and $516,577,546 respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $111,825 for the period (see Note 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $24,791,850 and $25,918,400, respectively (see Note 7 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 82.3% United Kingdom 6.8 Switzerland 4.5 Denmark 1.2 France 1.1 Ireland 1.0 Germany 1.0 Others (individually less than 1%) 2.1 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $1,004,244,869. Net unrealized appreciation aggregated $200,784,752 of which $225,979,432 related to appreciated investment securities and $25,194,680 related to depreciated investment securities. HEALTH CARE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED)
ASSETS Investment in securities, at $ 1,205,029,621 value (including repurchase agreements of $145,073,000) (cost $1,003,317,000) - See accompanying schedule Cash 303 Receivable for investments sold 15,093,697 Receivable for fund shares sold 1,267,762 Dividends receivable 2,113,586 Interest receivable 39,188 Redemption fees receivable 1,264 Other receivables 1,431,435 Prepaid expenses 24,260 TOTAL ASSETS 1,225,001,116 LIABILITIES Payable for investments purchased $ 10,799,015 Payable for fund shares redeemed 2,291,935 Accrued management fee 600,602 Other payables and 984,174 accrued expenses Collateral on securities loaned, 25,918,400 at value TOTAL LIABILITIES 40,594,126 NET ASSETS $ 1,184,406,990 Net Assets consist of: Paid in capital $ 843,828,359 Undistributed net investment income 5,503,042 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 133,357,473 Net unrealized appreciation (depreciation) on investments 201,718,116 and assets and liabilities in foreign currencies NET ASSETS, for 12,059,868 $ 1,184,406,990 shares outstanding NET ASSET VALUE and redemption price per share ($1,184,406,990 (divided by) 12,059,868 shares) $98.21 Maximum offering price per share (100/97.00 of $98.21) $101.25
STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED)
INVESTMENT INCOME $ 9,733,179 Dividends Interest (including income on securities loaned of $104,604) 4,237,577 TOTAL INCOME 13,970,756 EXPENSES Management fee $ 3,857,415 Transfer agent fees 4,093,716 Accounting and security lending fees 404,479 Non-interested trustees' compensation 2,471 Custodian fees and expenses 47,216 Registration fees 24,260 Audit 44,290 Legal 13,010 Miscellaneous 8,845 Total expenses before reductions 8,495,702 Expense reductions (79,673 8,416,029 ) NET INVESTMENT INCOME 5,554,727 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including realized gain of 1,743,407 133,954,353 on sale of investments in affiliated issuers) Foreign currency transactions (3,601 133,950,752 ) Change in net unrealized appreciation (depreciation) on: Investment securities (126,797,546 ) Assets and liabilities in 5,495 (126,792,051 foreign currencies ) NET GAIN (LOSS) 7,158,701 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 12,713,428 OTHER INFORMATION $ 1,539,180 Sales charges paid to FDC Deferred sales charges withheld $ 29,641 by FDC Exchange fees withheld by FSC $ 195,105 Expense reductions $ 75,485 Directed brokerage arrangements Custodian interest credits 103 Transfer agent interest credits 4,085 $ 79,673
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED AUGUST 31, 1996 FEBRUARY 29, (UNAUDITED) 1996
Operations $ 5,554,727 $ 11,861,909 Net investment income Net realized gain (loss) 133,950,752 127,563,700 Change in net unrealized appreciation (depreciation) (126,792,051) 221,015,172 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 12,713,428 360,440,781 Distributions to shareholders (3,046,964) (7,988,345) From net investment income From net realized gain (42,679,614) (66,667,821) TOTAL DISTRIBUTIONS (45,726,578) (74,656,166) Share transactions 176,483,560 1,031,303,280 Net proceeds from sales of shares Reinvestment of distributions 44,717,766 73,110,795 Cost of shares redeemed (530,111,629) (808,071,923) Paid in capital portion of redemption fees 420,517 642,187 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (308,489,786) 296,984,339 TOTAL INCREASE (DECREASE) IN NET ASSETS (341,502,936) 582,768,954 NET ASSETS Beginning of period 1,525,909,926 943,140,972 End of period (including undistributed net investment income of $5,503,042 and $4,463,587, respectively) $ 1,184,406,990 $ 1,525,909,926 OTHER INFORMATION Shares Sold 1,783,679 11,376,458 Issued in reinvestment of distributions 451,284 771,121 Redeemed (5,363,132) (9,348,659) Net increase (decrease) (3,128,169) 2,798,920
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, beginning of period $ 100.47 $ 76.13 $ 63.31 $ 52.57 $ 70.42 $ 69.99 Income from Investment Operations Net investment income (loss) .43 .95 .75 .15 .13 (.02) Net realized and unrealized gain (loss) .73 28.85 18.38 10.61 (9.34) 9.47 Total from investment operations 1.16 29.80 19.13 10.76 (9.21) 9.45 Less Distributions From net investment income (.23) (.59) (.62) (.07) (.16) (.34) From net realized gain (3.22) (4.92) (5.74) - (8.51) (8.81) Total distributions (3.45) (5.51) (6.36) (.07) (8.67) (9.15) Redemption fees added to paid in capital .03 .05 .05 .05 .03 .13 Net asset value, end of period $ 98.21 $ 100.47 $ 76.13 $ 63.31 $ 52.57 $ 70.42 TOTAL RETURN B, C 1.15% 39.68% 31.24% 20.57% (14.81)% 13.92% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 1,184,407 $ 1,525,910 $ 943,141 $ 522,890 $ 536,367 $ 838,814 Ratio of expenses to average net assets 1.32% A 1.31% 1.39% 1.59% 1.46% A 1.44% Ratio of expenses to average net assets after 1.31% A, 1.30% 1.36% 1.55% 1.46% A 1.44% expense reductions E E E E Ratio of net investment income (loss) to average net .86% A 1.06% 1.08% .26% .24% A (.02)% assets Portfolio turnover rate 44% A 54% 151% 213% 112% A 154% Average commission rate F $ .0437
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
MEDICAL DELIVERY PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S MEDICAL DELIVERY -3.10% 16.23% 77.42% 338.74% MEDICAL DELIVERY -6.00% 12.74% 72.10% 325.58% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS MEDICAL DELIVERY 16.23% 12.15% 15.94% MEDICAL DELIVERY 12.74% 11.47% 15.58% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960910 140720 S00000000000001 Medical Delivery SP Standard & Poor 500 00505 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8925.24 9173.00 1986/10/31 9627.69 9702.28 1986/11/30 9059.53 9938.05 1986/12/31 8460.38 9684.63 1987/01/31 8883.92 10989.15 1987/02/28 9534.72 11423.22 1987/03/31 9989.24 11753.35 1987/04/30 8956.23 11648.74 1987/05/31 9235.14 11750.09 1987/06/30 9865.28 12343.47 1987/07/31 10288.82 12969.28 1987/08/31 10051.22 13453.04 1987/09/30 9896.27 13158.41 1987/10/31 7076.14 10324.09 1987/11/30 6652.61 9473.39 1987/12/31 7438.00 10194.31 1988/01/31 7481.89 10623.49 1988/02/29 7865.85 11118.55 1988/03/31 8074.29 10774.98 1988/04/30 8140.12 10894.59 1988/05/31 8008.47 10989.37 1988/06/30 8260.79 11493.78 1988/07/31 8173.03 11450.10 1988/08/31 7942.65 11060.80 1988/09/30 8392.44 11531.99 1988/10/31 8611.85 11852.58 1988/11/30 8337.58 11683.09 1988/12/31 8611.85 11887.54 1989/01/31 9248.14 12757.71 1989/02/28 9588.22 12440.04 1989/03/31 10114.81 12729.90 1989/04/30 10805.95 13390.58 1989/05/31 11365.44 13932.90 1989/06/30 11233.32 13853.48 1989/07/31 12508.33 15104.45 1989/08/31 13090.88 15400.50 1989/09/30 13453.60 15337.35 1989/10/31 13002.95 14981.53 1989/11/30 13607.48 15287.15 1989/12/31 13608.27 15654.04 1990/01/31 11604.74 14603.66 1990/02/28 11897.39 14792.04 1990/03/31 12448.92 15184.03 1990/04/30 12572.74 14804.43 1990/05/31 14351.16 16247.86 1990/06/30 15037.76 16137.38 1990/07/31 15094.04 16085.74 1990/08/31 13889.67 14631.59 1990/09/30 12966.69 13919.03 1990/10/31 12809.11 13859.18 1990/11/30 14587.53 14754.48 1990/12/31 15821.24 15166.13 1991/01/31 18371.18 15827.37 1991/02/28 19507.06 16959.03 1991/03/31 22404.73 17369.44 1991/04/30 21732.47 17411.13 1991/05/31 23529.02 18163.29 1991/06/30 21546.82 17331.41 1991/07/31 23708.74 18139.05 1991/08/31 23986.53 18568.95 1991/09/30 24203.93 18258.85 1991/10/31 24735.36 18503.51 1991/11/30 24046.92 17757.82 1991/12/31 28134.12 19789.32 1992/01/31 28158.85 19421.24 1992/02/29 27071.06 19673.71 1992/03/31 25278.68 19290.07 1992/04/30 24277.43 19857.20 1992/05/31 24030.20 19954.50 1992/06/30 22764.83 19657.18 1992/07/31 24060.27 20461.16 1992/08/31 24033.29 20041.71 1992/09/30 21212.98 20278.20 1992/10/31 22265.54 20349.17 1992/11/30 24451.61 21043.08 1992/12/31 24424.62 21301.91 1993/01/31 23183.15 21480.84 1993/02/28 19512.71 21772.98 1993/03/31 19944.52 22232.39 1993/04/30 19701.63 21694.37 1993/05/31 20308.87 22275.78 1993/06/30 20511.28 22340.38 1993/07/31 21024.06 22251.02 1993/08/31 20956.59 23094.33 1993/09/30 22683.86 22916.50 1993/10/31 23749.91 23390.88 1993/11/30 24141.24 23168.66 1993/12/31 25774.05 23449.00 1994/01/31 27217.93 24246.27 1994/02/28 27366.37 23589.20 1994/03/31 26003.45 22560.71 1994/04/30 26840.09 22849.48 1994/05/31 27744.21 23224.22 1994/06/30 26030.44 22655.22 1994/07/31 27190.94 23398.31 1994/08/31 29943.77 24357.64 1994/09/30 31009.82 23760.88 1994/10/31 32021.89 24295.50 1994/11/30 30645.48 23410.66 1994/12/31 30887.64 23757.84 1995/01/31 32243.47 24373.88 1995/02/28 32737.79 25323.73 1995/03/31 34813.91 26071.03 1995/04/30 33682.45 26838.83 1995/05/31 32577.65 27911.57 1995/06/30 33101.72 28559.96 1995/07/31 36444.47 29507.01 1995/08/31 36614.44 29581.07 1995/09/30 37379.31 30829.39 1995/10/31 36741.92 30719.33 1995/11/30 39815.55 32067.91 1995/12/31 40828.15 32685.54 1996/01/31 43024.03 33798.15 1996/02/29 43917.52 34111.46 1996/03/31 44341.55 34439.95 1996/04/30 44846.44 34947.60 1996/05/31 44751.72 35848.90 1996/06/30 43694.10 35985.48 1996/07/31 38958.47 34395.64 1996/08/30 42557.55 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960910 140725 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Medical Delivery Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $42,558 - a 325.58% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS HEALTHSOUTH Rehabilitation Corp. 7.8 Columbia/HCA Healthcare Corp. 7.5 Tenet Healthcare Corp. 6.0 Oxford Health Plans, Inc. 5.8 PacifiCare Health Systems, Inc. Class B 4.2 Health Management Associates, Inc. Class A 4.1 Universal Health Services, Inc. Class B 4.1 OrNda Healthcorp 3.9 Bergen Brunswig Corp. Class A 3.2 Sierra Health Services, Inc. 3.1 TOP INDUSTRIES AS OF AUGUST 31, 1996 Hospitals 30.7% HMOs & Outpatient Care 19.3% Drug Distributors - Wholesale 6.1% Skilled Nursing Care Facilities 4.7% Hospitals, General Medical 3.9% All Others 35.3% * Row: 1, Col: 1, Value: 35.3 Row: 1, Col: 2, Value: 3.9 Row: 1, Col: 3, Value: 4.7 Row: 1, Col: 4, Value: 6.1 Row: 1, Col: 5, Value: 19.3 Row: 1, Col: 6, Value: 30.7 * INCLUDES SHORT-TERM INVESTMENTS MEDICAL DELIVERY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Stephen Binder, Portfolio Manager of Fidelity Select Medical Delivery Portfolio Q. HOW DID THE FUND PERFORM, STEVE? A. For the six months ended August 31, 1996, the fund had a total return of - -3.10%. For the past year, the fund returned 16.23%. For the same periods, the Standard & Poor's 500 Index returned, respectively, 2.96% and 18.73%. Q. IN YOUR LAST REPORT, YOU SAID HEALTH CARE PROVIDERS AND HEALTH MAINTENANCE ORGANIZATIONS (HMOS) DRIVE THE MEDICAL DELIVERY MARKET. WAS THAT THE CASE IN THE PAST SIX MONTHS? A. That's right. Providers - mainly publicly traded hospitals - and HMO stocks are the main forces behind this sector's returns. Over the past six months, hospital stocks outperformed HMOs by a substantial margin. Q. WHAT WAS THE STORY WITH HMOS? A. HMOs renew their contracts with customers to determine their revenue each January. Therefore, investors attempt to predict what prices will be set at. In the second half of 1995, the market was somewhat optimistic that HMOs would be able to set prices above their anticipated cost trends. As quarterly reports began coming in this year, however, it became clear that the companies' pricing was not up to expectations. After poor earnings reports during July, HMO stocks tanked, and the fund's performance was dragged down with them. In August, however, many HMO stocks rebounded somewhat on the anticipation of better pricing expectations for 1997 and merger and acquisition activity. Q. . . . AND HOSPITALS? A. Hospital stocks did well relative to HMOs, but on their own they've had somewhat of an up and down six months. Hospitals rallied in the first quarter but fell in unison on news of slowing patient admission growth. One company that bucked the trend was Columbia/HCA, which saw strong admission growth despite the industry trend. In general, I look for hospital companies that are consolidating capacity, contracting with managed-care providers(HMOs) and controlling costs. Q. WHERE DOES HEALTHSOUTH - YOUR TOP HOLDING - FIT INTO THE PICTURE? A. HEALTHSOUTH is the nation's largest provider of medical rehabilitative and outpatient surgery services. By combining these services, they can service patients who would otherwise go to two different places for these services. Additionally, they provide some of the more profitable procedures in orthopedic care. Thus, they were able to improve revenue per case and improve profit margin. Q. LET'S LOOK AT SOME OF THE SPECIALTY AREAS IN THE PORTFOLIO. WHAT HAPPENED IN THE NURSING HOME MARKET? A. During the period, nursing home stocks struggled. Occupancy softened as a result of more competition from acute care hospitals. Assisted living facilities have also siphoned away private paying patients from the nursing homes. Q. HOW ABOUT HOME OXYGEN THERAPY? A. This subsector of the medical delivery market had a good first half of 1996 when it became clear Congress and the president would not be able to agree on major budget cuts. Therefore, investors knew there wouldn't be draconian cuts in the government reimbursements that these companies depend on. Q. WHY DID UNITED HEALTHCARE FALL OUT OF YOUR TOP 10 HOLDINGS? A. United HealthCare was a big disappointment during the period. The company's acquisition of indemnity insurance company Metra Health didn't provide the immediate benefits I expected. Meanwhile, United's costs grew at a 3% to 4% rate and - like many other HMOs - pricing remained flat. Q. WHAT DO YOU SEE AHEAD FOR THE MEDICAL DELIVERY MARKET? A. As one can see, pricing plays a big part in the performance of HMO stocks. Therefore, any sustained rebound in HMO stocks will depend on pricing improvements when contracts are renegotiated in January. Meanwhile, the demands of managed care on the provider industry will pressure providers' revenue and force consolidation. Finally, we'll have to wait until the November elections to get a sense of the outlook for Medicare and Medicaid reimbursements. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 505 TRADING SYMBOL: FSHCX SIZE: as of August 31, 1996, more than $215 million MANAGER: Stephen Binder, since 1994; joined Fidelity in 1989 (checkmark) MEDICAL DELIVERY PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 88.8% SHARES VALUE (NOTE 1) DRUG STORES - 0.4% Vitalink Pharmacy Services, Inc. (a) 35,000 $ 813,750 92846E10 DRUGS & PHARMACEUTICALS - 2.0% DRUGS - 1.6% Lilly (Eli) & Co. 63,900 3,658,275 53245710 IN VITRO, IN VIVO DIAGNOSTIC SUBSTANCE - 0.4% Serologicals Corp. (a) 28,600 836,550 81752310 TOTAL DRUGS & PHARMACEUTICALS 4,494,825 HOUSEHOLD PRODUCTS - 0.3% FABRICATED RUBBER PRODUCTS - 0.3% Safeskin Corp. 19,800 643,500 78645410 INSURANCE - 3.1% INSURANCE BROKERS & SERVICES - 1.2% HealthCare COMPARE Corp. (a) 63,100 2,697,525 42192810 MULTI-LINE INSURANCE - 1.9% Aetna, Inc. 65,000 4,298,125 00811710 TOTAL INSURANCE 6,995,650 MEDICAL EQUIPMENT & SUPPLIES - 12.7% DRUG DISTRIBUTORS - WHOLESALE - 6.1% AmeriSource Health Corp. Class A (a) 105,500 4,022,188 03071P10 Bergen Brunswig Corp. Class A 259,765 7,240,946 08373910 Cardinal Health, Inc. 31,800 2,333,325 14149Y10 13,596,459 MEDICAL SUPPLIES & APPLIANCES - 1.4% Boston Scientific Corp. (a) 68,000 3,119,500 10113710 MEDICAL TECHNOLOGY - 3.8% Medtronic, Inc. 52,000 2,704,000 58505510 St. Jude Medical, Inc. (a) 162,250 5,820,719 79084910 8,524,719 OPHTHALMIC GOODS - 1.4% Cooper Companies, Inc. (a) 240,200 3,122,600 21664840 TOTAL MEDICAL EQUIPMENT & SUPPLIES 28,363,278 MEDICAL FACILITIES MANAGEMENT - 69.1% HOME HEALTH CARE AGENCIES - 1.3% Vivra, Inc. (a) 100,000 3,012,500 92855M10 HOSPITALS - 30.7% Columbia/HCA Healthcare Corp. 297,982 16,798,735 19767710 HEALTHSOUTH Rehabilitation Corp. (a) 540,300 17,492,213 42192410 Health Management Associates, Inc. Class A (a) 406,652 9,251,333 42193310 Quorum Health Group, Inc. 100,000 2,525,000 74908410 Tenet Healthcare Corp. (a) 633,000 13,293,000 88033G10 Universal Health Services, Inc. Class B (a) 355,600 9,067,800 91390310 68,428,081 HOSPITALS, GENERAL MEDICAL - 3.9% OrNda Healthcorp (a) 339,100 8,731,825 68685710 HMOS & OUTPATIENT CARE - 19.3% Health Systems International, Inc. (a) 234,600 5,747,700 42194910 Oxford Health Plans, Inc. (a) 283,200 12,956,400 69147110 PacifiCare Health Systems, Inc. Class B (a) 117,000 9,418,500 69511020 Physician Corp. of America (a) 135,000 1,788,750 71940P10 Rightchoice Managed Care, Inc. Class A (a) 31,400 349,325 76657K10 SHARES VALUE (NOTE 1) Safeguard Health Enterprises, Inc. (a) 101,000 $ 1,868,500 78644410 Sierra Health Services, Inc. (a) 218,100 6,897,413 82632210 United HealthCare Corp. 103,000 3,978,375 91058110 43,004,963 MEDICAL SERVICES - 3.9% American Oncology Resources, Inc. (a) 170,000 1,721,250 02891010 Foundation Health Corp. (a) 153,200 4,596,000 35040110 Lincare Holdings, Inc. (a) 63,100 2,354,419 53279110 National Surgery Centers, Inc. (a) 1,500 39,750 63804410 8,711,419 MISCELLANEOUS HEALTH & ALLIED SERVICES - 1.9% Renal Treatment Centers, Inc. (a) 133,100 4,342,388 75967110 NURSING CARE & NURSING HOMES - 1.2% Arbor Health Care Co. (a) 24,800 533,200 03876L10 Health Care & Retirement Corp. 45,000 1,113,750 42193710 Integrated Health Services, Inc. 41,800 961,400 45812C10 2,608,350 NURSING, PERSONAL CARE FACILITIES - 0.8% NovaCare, Inc. (a) 200,000 1,800,000 66993010 SKILLED NURSING CARE FACILITIES - 4.7% Multicare Companies, Inc. (a) 143,550 2,709,506 62543V10 TheraTx, Inc. (a) 350,575 5,433,913 88338410 Vencor, Inc. (a) 72,919 2,287,834 92260210 10,431,253 SPECIALTY OUTPATIENT CLINICS - 1.4% Sun Healthcare Group (a) 239,800 3,237,300 86693310 TOTAL MEDICAL FACILITIES MANAGEMENT 154,308,079 REAL ESTATE INVESTMENT TRUSTS - 0.7% Capstone Capital Corp. 71,900 1,482,938 14066R10 RETAIL & WHOLESALE, MISCELLANEOUS - 0.5% RETAIL, GENERAL - 0.5% Gulf South Medical Supply, Inc. (a) 47,000 1,022,250 40252G10 TOTAL COMMON STOCKS (Cost $174,352,788) 198,124,270 REPURCHASE AGREEMENTS - 11.2% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 25,026,590 25,012,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $199,364,788) $ 223,136,270 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $61,833,275 and $128,568,872, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $23,465 for the period (see Note 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $6,689,550 and $6,897,300, respectively (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $199,364,788. Net unrealized appreciation aggregated $23,771,482, of which $31,415,735 related to appreciated investment securities and $7,644,253 related to depreciated investment securities. MEDICAL DELIVERY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED)
ASSETS Investment in securities, at $ 223,136,270 value (including repurchase agreements of $25,012,000) (cost $199,364,788) - See accompanying schedule Cash 207 Receivable for investments sold 157,247 Receivable for fund shares sold 1,341,761 Dividends receivable 61,997 Redemption fees receivable 1,237 Other receivables 601,076 Prepaid expenses 11,349 TOTAL ASSETS 225,311,144 LIABILITIES Payable for investments purchased $ 1,505,625 Payable for fund shares redeemed 886,133 Accrued management fee 102,942 Other payables and 221,282 accrued expenses Collateral on securities loaned, 6,897,300 at value TOTAL LIABILITIES 9,613,282 NET ASSETS $ 215,697,862 Net Assets consist of: Paid in capital $ 176,583,110 Accumulated net investment (loss) (1,002,883 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 16,346,153 Net unrealized appreciation (depreciation) on investments 23,771,482 NET ASSETS, for 7,999,746 $ 215,697,862 shares outstanding NET ASSET VALUE and redemption price per share ($215,697,862 (divided by) 7,999,746 shares) $26.96 Maximum offering price per share (100/97.00 of $26.96) $27.79
STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED)
INVESTMENT INCOME $ 526,180 Dividends Interest (including income on securities loaned of $8,696) 265,112 TOTAL INCOME 791,292 EXPENSES Management fee $ 731,863 Transfer agent fees 927,108 Accounting and security lending fees 121,418 Non-interested trustees' compensation 462 Custodian fees and expenses 23,792 Registration fees 11,349 Audit 12,952 Legal 4,470 Miscellaneous 2,064 Total expenses before reductions 1,835,478 Expense reductions (41,303 1,794,175 ) NET INVESTMENT INCOME (LOSS) (1,002,883 ) REALIZED AND UNREALIZED GAIN (LOSS) 16,322,247 Net realized gain (loss) on investment securities Change in net unrealized appreciation (depreciation) on investment securities (22,475,462 ) NET GAIN (LOSS) (6,153,215 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (7,156,098 ) OTHER INFORMATION $ 419,722 Sales charges paid to FDC Deferred sales charges withheld $ 2,677 by FDC Exchange fees withheld by FSC $ 52,365 Expense reductions $ 40,198 Directed brokerage arrangements Custodian interest credits 78 Transfer agent interest credits 1,027 $ 41,303
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED)
Operations $ (1,002,883 $ (256,812 Net investment income (loss) ) ) Net realized gain (loss) 16,322,247 39,973,448 Change in net unrealized appreciation (depreciation) (22,475,462 14,596,764 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (7,156,098 54,313,400 ) Distributions to shareholders from net realized gains (11,769,192 (13,085,061 ) ) Share transactions 88,107,953 327,500,676 Net proceeds from sales of shares Reinvestment of distributions 11,505,591 12,820,140 Cost of shares redeemed (160,603,740 (385,938,068 ) ) Paid in capital portion of redemption fees 124,549 307,864 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (60,865,647 (45,309,388 ) ) TOTAL INCREASE (DECREASE) IN NET ASSETS (79,790,937 (4,081,049 ) ) NET ASSETS Beginning of period 295,488,799 299,569,848 End of period (including accumulated net investment loss of $1,002,883 and $0, respectively) $ 215,697,862 $ 295,488,799 OTHER INFORMATION Shares Sold 3,164,132 12,483,087 Issued in reinvestment of distributions 406,127 484,557 Redeemed (5,761,267 (15,700,950 ) ) Net increase (decrease) (2,191,008) (2,733,306)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, beginning of period $ 29.00 $ 23.18 $ 20.28 $ 14.46 $ 19.64 $ 18.75 Income from Investment Operations Net investment income (loss) (.12) (.03) .06 (.10) (.13) (.15) Net realized and unrealized gain (loss) (.73) 7.72 3.74 5.84 (3.56) 2.16 Total from investment operations (.85) 7.69 3.80 5.74 (3.69) 2.01 Less Distributions From net investment income - - (.06) - - - From net realized gain (1.20) (1.91) (.89) - (1.55) (1.24) Total distributions (1.20) (1.91) (.95) - (1.55) (1.24) Redemption fees added to paid in capital .01 .04 .05 .08 .06 .12 Net asset value, end of period $ 26.96 $ 29.00 $ 23.18 $ 20.28 $ 14.46 $ 19.64 TOTAL RETURN B, C (3.10)% 34.15% 19.63% 40.25% (19.63)% 11.71% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 215,698 $ 295,489 $ 299,570 $ 188,553 $ 71,809 $ 129,361 Ratio of expenses to average net assets 1.50% A 1.65% 1.48% 1.82% 1.77% A 1.69% Ratio of expenses to average net assets after 1.47% A, 1.62% 1.45% 1.79% 1.77% A 1.69% expense reductions E E E E Ratio of net investment income (loss) to average net (.82)% A (.13)% .29% (.57)% (.89)% (.71)% assets A Portfolio turnover rate 53% A 132% 123% 164% 155% A 181% Average commission rate F $ .0427
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
COMPUTERS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S COMPUTERS -5.12% -6.92% 181.27% 332.33% COMPUTERS -7.97% -9.71% 172.83% 319.36% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS COMPUTERS -6.92% 22.98% 15.77% COMPUTERS -9.71% 22.23% 15.41% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960909 145151 S00000000000001 Computers SP Standard & Poor 500 00007 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8951.34 9173.00 1986/10/31 9830.20 9702.28 1986/11/30 9895.30 9938.05 1986/12/31 9935.99 9684.63 1987/01/31 11913.42 10989.15 1987/02/28 13101.51 11423.22 1987/03/31 13191.02 11753.35 1987/04/30 13508.39 11648.74 1987/05/31 13451.43 11750.09 1987/06/30 13174.75 12343.47 1987/07/31 13394.46 12969.28 1987/08/31 14314.01 13453.04 1987/09/30 14436.07 13158.41 1987/10/31 9341.95 10324.09 1987/11/30 8080.62 9473.39 1987/12/31 9305.05 10194.31 1988/01/31 8818.40 10623.49 1988/02/29 9615.50 11118.55 1988/03/31 9464.47 10774.98 1988/04/30 9951.12 10894.59 1988/05/31 9657.45 10989.37 1988/06/30 10572.02 11493.78 1988/07/31 9774.92 11450.10 1988/08/31 8843.58 11060.80 1988/09/30 9078.51 11531.99 1988/10/31 8348.54 11852.58 1988/11/30 8298.19 11683.09 1988/12/31 8835.18 11887.54 1989/01/31 9355.39 12757.71 1989/02/28 9187.59 12440.04 1989/03/31 8751.28 12729.90 1989/04/30 9732.97 13390.58 1989/05/31 10597.19 13932.90 1989/06/30 9338.61 13853.48 1989/07/31 9506.42 15104.45 1989/08/31 9649.06 15400.50 1989/09/30 9875.61 15337.35 1989/10/31 9548.38 14981.53 1989/11/30 9338.61 15287.15 1989/12/31 9439.30 15654.04 1990/01/31 9355.39 14603.66 1990/02/28 10202.83 14792.04 1990/03/31 10932.81 15184.03 1990/04/30 10639.14 14804.43 1990/05/31 12023.57 16247.86 1990/06/30 12241.72 16137.38 1990/07/31 11369.11 16085.74 1990/08/31 9565.16 14631.59 1990/09/30 8935.87 13919.03 1990/10/31 9271.49 13859.18 1990/11/30 10798.56 14754.48 1990/12/31 11176.77 15166.13 1991/01/31 13081.90 15827.37 1991/02/28 13928.62 16959.03 1991/03/31 15029.36 17369.44 1991/04/30 14055.63 17411.13 1991/05/31 14766.88 18163.29 1991/06/30 12756.13 17331.41 1991/07/31 14037.84 18139.05 1991/08/31 14909.76 18568.95 1991/09/30 14125.03 18258.85 1991/10/31 13846.02 18503.51 1991/11/30 12895.63 17757.82 1991/12/31 14613.31 19789.32 1992/01/31 16139.16 19421.24 1992/02/29 17246.49 19673.71 1992/03/31 15886.30 19290.07 1992/04/30 15371.87 19857.20 1992/05/31 15563.70 19954.50 1992/06/30 14064.00 19657.18 1992/07/31 14752.81 20461.16 1992/08/31 13907.06 20041.71 1992/09/30 14595.87 20278.20 1992/10/31 15746.80 20349.17 1992/11/30 16723.34 21043.08 1992/12/31 17821.96 21301.91 1993/01/31 18859.54 21480.84 1993/02/28 17569.10 21772.98 1993/03/31 17917.87 22232.39 1993/04/30 17408.98 21694.37 1993/05/31 19448.68 22275.78 1993/06/30 18670.37 22340.38 1993/07/31 19448.68 22251.02 1993/08/31 20602.71 23094.33 1993/09/30 21184.21 22916.50 1993/10/31 21184.21 23390.88 1993/11/30 22087.76 23168.66 1993/12/31 22966.78 23449.00 1994/01/31 24447.60 24246.27 1994/02/28 25485.11 23589.20 1994/03/31 25221.02 22560.71 1994/04/30 25060.68 22849.48 1994/05/31 25041.81 23224.22 1994/06/30 22985.65 22655.22 1994/07/31 23711.91 23398.31 1994/08/31 26550.92 24357.64 1994/09/30 26362.28 23760.88 1994/10/31 27352.64 24295.50 1994/11/30 27512.98 23410.66 1994/12/31 27663.89 23757.84 1995/01/31 26815.02 24373.88 1995/02/28 28927.77 25323.73 1995/03/31 31153.71 26071.03 1995/04/30 33628.97 26838.83 1995/05/31 35291.31 27911.57 1995/06/30 39151.00 28559.96 1995/07/31 44071.14 29507.01 1995/08/31 45055.17 29581.07 1995/09/30 47634.67 30829.39 1995/10/31 45905.45 30719.33 1995/11/30 44797.22 32067.91 1995/12/31 42002.19 32685.54 1996/01/31 41732.87 33798.15 1996/02/29 44199.79 34111.46 1996/03/31 40461.71 34439.95 1996/04/30 44909.16 34947.60 1996/05/31 46461.15 35848.90 1996/06/30 43083.94 35985.48 1996/07/31 40198.57 34395.64 1996/08/30 41936.35 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960909 145156 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Computers Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $41,936 - a 319.36% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Intel Corp. 8.5 Compaq Computer Corp. 7.6 Microsoft Corp. 6.1 Cisco Systems, Inc. 5.2 Seagate Technology 4.8 Oracle Systems Corp. 4.4 Dell Computer Corp. 4.2 Ascend Communications, Inc. 4.0 Vanstar Corp. 3.1 Electronics for Imaging, Inc. 2.5 TOP INDUSTRIES AS OF AUGUST 31, 1996 Semiconductors 16.2% Prepackaged Computer Software 13.8% Mini & Micro Computers 11.8% Computer Services 8.1% Computer Storage Devices 7.7% All Others 42.4% * Row: 1, Col: 1, Value: 42.4 Row: 1, Col: 2, Value: 7.7 Row: 1, Col: 3, Value: 8.1 Row: 1, Col: 4, Value: 11.8 Row: 1, Col: 5, Value: 13.8 Row: 1, Col: 6, Value: 16.2 * INCLUDES SHORT-TERM INVESTMENTS COMPUTERS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Jason Weiner became Portfolio Manager of Fidelity Select Computers Portfolio on March 26, 1996 Q. JASON, HOW HAS THE FUND PERFORMED? A. For the six months ended August 31, 1996, the fund had a total return of - -5.12%, while the Standard & Poor's 500 Index returned 2.96%. For the 12 months ended August 31, 1996, the fund returned -6.92% and the S&P 500 had a total return of 18.73%. Q. WHAT FACTORS AFFECTED THE FUND'S SIX-MONTH PERFORMANCE? A. It was a difficult period for most of the technology sector. There was a slowdown in the overall demand for personal computers attributed to the consumer market in the U.S. and Europe. While this downturn was occurring, semiconductor manufacturers overspent on capacity which led to excess inventory and falling prices. There was a massive inventory sell-off by retailers, manufacturers and component suppliers, too, as semiconductor prices began to fall. In addition, after a strong two-year run, most technology stock valuations - stock prices relative to other measures such as earnings - were high. When investors saw a drop in growth in the technology sector, they started to look elsewhere for more positive growth trends and cheaper valuations. Lastly, the summer months typically are weak ones for the technology sector. Q. WHAT KIND OF STRATEGIES DID YOU PURSUE IN THIS KIND OF ENVIRONMENT? A. In general, I stuck with the fund's investments in PC manufacturers, moved the fund away from commodity semiconductor stocks and gravitated toward what I would call safe stocks. By safe stocks, I mean those companies that have a high level of recurring revenues and are dominant factors in their markets, and have good growth trends and strong profit margins. On the opposite end of the spectrum would be those companies with high fixed costs in a commodity-related industry such as semiconductors. Q. WHAT OTHER KINDS OF STOCKS WERE APPEALING TO YOU? A. Networking stocks, because there has been strong demand within all sectors of networking. The Internet and remote access to corporate data - with more people working on the road telecommuting - have been among the hottest trends. There have been a number of strong product introductions that have posted significant growth. Among the fund's holdings in networking stocks at the end of the period were Ascend Communications and Cisco Systems. Q. WHILE IT HAS BEEN A TOUGH PERIOD, THERE MUST HAVE BEEN SOME STOCKS THAT TURNED IN PERFORMANCES THAT HELPED THE FUND . . . A. Sure there were. Some of the companies in the fund benefited from the fact that semiconductors and other components became cheaper. Dell and Intel were two examples. I believed Intel was able to command a greater proportion of the dollars spent per PC as other components of PCs fell in price. Sun Microsystems performed well on the strength of some new high-end products. Microsoft continued to make inroads with Windows NT, its next generation operating system. Q. JASON, THE SWING WE'VE SEEN IN THE TECHNOLOGY SECTOR OVER THE PAST YEAR POINTS TO THE FACT THAT IT IS A VOLATILE SECTOR. HOW DO YOU TRY TO CONTROL VOLATILITY WHILE MANAGING THE FUND? A. First of all, I try to diversify the fund by exposing it to a broad range of stocks in the hardware industry. Second, I try to focus on the reality of each stock's potential by analyzing the company's business prospects. When I talk about the reality of a stock's potential, I'm speaking to the difference between a company's actual prospects and the market's perception of them. The volatility inherent in the technology sector is a reflection of this difference. I think it's important for me to remain steady when a stock starts to go down if I feel that its prospects are positive. I also try to take advantage of volatility by buying more of a stock I believe in when investors overreact to bad news and send its share price lower. Q. WHAT'S YOUR OUTLOOK? A. I think that between now and the end of the year we'll see alternating euphoria over how strong the PC market is and fear of a PC slowdown at the retail level. Ultimately, though, I think the growth outlook for the sector is fairly positive, especially among those companies that are introducing new products. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 007 TRADING SYMBOL: FDCPX SIZE: As of August 31, 1996, more than $443 million MANAGER: Jason Weiner, since March 1996; manager, Fidelity Select Air Transportation Portfolio, 1994-1996; joined Fidelity in 1991 (checkmark) COMPUTERS PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.6% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 1.6% TRAINING EQUIPMENT & SIMULATORS - 1.6% Flightsafety International, Inc. 164,500 $ 7,279,123 33942310 AIR TRANSPORTATION - 4.2% AIR TRANSPORTATION, MAJOR NATIONAL - 4.2% AMR Corp. 100,000 8,200,000 00176510 Delta Air Lines, Inc. 150,000 10,631,250 24736110 18,831,250 COMMUNICATIONS EQUIPMENT - 11.9% DATACOMMUNICATIONS EQUIPMENT - 6.8% Cisco Systems, Inc. (a) 444,300 23,436,825 17275R10 3Com Corp. (a) 150,000 7,012,500 88553510 30,449,325 TELEPHONE EQUIPMENT - 5.1% Ascend Communications, Inc. (a) 341,400 17,880,825 04349110 Lucent Technologies, Inc. 130,000 4,793,750 54946310 22,674,575 TOTAL COMMUNICATIONS EQUIPMENT 53,123,900 COMPUTER SERVICES & SOFTWARE - 23.9% COMPUTER SERVICES - 8.1% American Management Systems, Inc. (a) 200,000 5,075,000 02735210 BDM International, Inc. (a) 27,800 1,473,400 05537W20 Computer Learning Centers, Inc. (a) 99,600 2,888,400 20519910 Computer Sciences Corp. (a) 132,800 9,296,000 20536310 Electronic Data Systems Corp. 74,600 4,065,700 28566110 Vanstar Corp. (a) 651,400 13,760,825 92208M10 36,559,325 CUSTOM COMPUTER PROGRAMMING SERVICES - 1.1% Analysts International Corp. 16,700 613,725 03268110 CACI International, Inc. Class A (a) 50,000 837,500 12719030 Keane, Inc. (a) 74,600 3,357,000 48666510 4,808,225 DATA PROCESSING - 0.9% First Data Corp. 50,000 3,900,000 31996310 PREPACKAGED COMPUTER SOFTWARE - 13.8% Electronics for Imaging, Inc. (a) 177,000 11,195,250 28608210 Fuji Soft, Inc. 900 29,346 36399G22 Microsoft Corp. (a) 225,000 27,562,500 59491810 Netscape Communications Corp. (a) 100,000 3,537,500 64114910 Oracle Systems Corp. (a) 560,000 19,740,000 68389X10 62,064,596 TOTAL COMPUTER SERVICES & SOFTWARE 107,332,146 COMPUTERS & OFFICE EQUIPMENT - 33.3% COMPUTER EQUIPMENT - 2.3% GVC Corp. GDR (a)(b) 113,071 819,765 36237Y10 Stratus Computer, Inc. (a) 500,000 9,375,000 86315510 10,194,765 COMPUTER EQUIPMENT - WHOLESALE - 1.9% Pomeroy Computer Resources, Inc. 58,300 1,311,750 73182210 Tech Data Corp. (a) 276,700 7,332,550 87823710 8,644,300 COMPUTER PERIPHERALS - 1.8% EMC Corp. (a) 200,000 3,850,000 26864810 SCI Systems, Inc. (a) 91,700 4,092,113 78389010 7,942,113 SHARES VALUE (NOTE 1) COMPUTER RENTAL & LEASING - 1.2% Comdisco, Inc. 212,400 $ 5,522,400 20033610 COMPUTER STORAGE DEVICES - 7.7% Exabyte Corp. (a) 548,200 8,085,950 30061510 Quantum Corp. 300,000 4,612,500 74790610 Seagate Technology (a) 449,500 21,576,000 81180410 34,274,450 COMPUTERS & OFFICE EQUIPMENT - 3.0% Diebold, Inc. 172,900 8,882,738 25365110 Hewlett-Packard Co. 105,200 4,602,500 42823610 13,485,238 ELECTRONIC COMPUTERS - 1.6% Bay Networks, Inc. (a) 260,000 7,150,000 07251010 GRAPHICS WORKSTATIONS - 2.0% Silicon Graphics, Inc. (a) 272,300 6,330,975 82705610 Sun Microsystems, Inc. (a) 48,700 2,648,063 86681010 8,979,038 MINI & MICRO COMPUTERS - 11.8% Compaq Computer Corp. (a) 601,200 34,042,950 20449310 Dell Computer Corp. (a) 282,200 18,942,675 24702510 52,985,625 TOTAL COMPUTERS & OFFICE EQUIPMENT 149,177,929 CONSUMER ELECTRONICS - 0.7% RADIOS, TELEVISIONS, STEREOS - 0.7% Harman International Industries, Inc. 69,200 3,036,150 41308610 ELECTRONICS - 17.1% ELECTRONIC PARTS - WHOLESALE - 0.1% PC Service Source, Inc. (a) 49,000 686,000 69325810 ELECTRONICS & ELECTRONIC COMPONENTS - 0.8% Cascade Communications Corp. (a) 50,000 3,406,250 14718410 SEMICONDUCTORS - 16.2% Actel Corp. (a) 100,000 1,600,000 00493410 Altera Corp. (a) 100,000 4,400,000 02144110 Intel Corp. 480,300 38,333,944 45814010 Intel Corp. (warrants) (a) 100,000 4,187,500 45814014 Linear Technology Corp. 150,000 5,100,000 53567810 S-3, Inc. (a) 201,300 2,969,175 78484910 Storage Technology Corp. (a) 240,000 9,090,000 86211120 Xilinx, Inc. (a) 200,000 7,000,000 98391910 72,680,619 TOTAL ELECTRONICS 76,772,869 TELEPHONE SERVICES - 0.9% MFS Communications, Inc. (a) 100,000 4,237,500 55272T10 TOTAL COMMON STOCKS (Cost $404,263,198) 419,790,867 CONVERTIBLE BONDS - 1.8% MOODY'S PRINCIPAL VALUE RATINGS AMOUNT (NOTE 1) COMPUTERS & OFFICE EQUIPMENT - 1.8% COMPUTERS - 1.8% Acer, Inc. euro 4%, 6/10/01 (Cost $9,039,392) - $ 3,510,000 $ 7,897,500 004993AC REPURCHASE AGREEMENTS - 4.6% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 20,813,134 20,801,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $434,103,590) $ 448,489,367 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $819,765 or 0.2% of net assets. 3. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME C.P. Clare Corp. $ - $ - $ - $ - Insignia Solutions PLC sponsored ADR - - - - Totals $ - $ - $ - $ - OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $665,585,929 and $662,602,870, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $117,805 for the period (see Note 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $3,537,500 and $3,700,000, respectively (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996 the aggregate cost of investment securities for income tax purposes was $434,115,531. Net unrealized appreciation aggregated $14,373,836, of which $33,829,886 related to appreciated investment securities and $19,456,050 related to depreciated investment securities. COMPUTERS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 448,489,367 securities, at value (including repurchase agreements of $20,801,000) (cost $434,103,590) - - See accompanying schedule Cash 310 Receivable for 847,717 investments sold Receivable for 564,877 fund shares sold Dividends 134,993 receivable Interest receivable 11,700 Redemption fees 1,518 receivable Other receivables 67,344 Prepaid expenses 18,960 TOTAL ASSETS 450,136,786 LIABILITIES Payable for $ 21,826 investments purchased Payable for fund 2,356,487 shares redeemed Accrued 226,485 management fee Other payables 452,182 and accrued expenses Collateral on 3,700,000 securities loaned, at value TOTAL LIABILITIES 6,756,980 NET ASSETS $ 443,379,806 Net Assets consist of: Paid in capital $ 407,311,844 Accumulated net (1,695,347 investment ) (loss) Accumulated 23,377,532 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 14,385,777 appreciation (depreciation) on investments and assets and liabilities in foreign currency NET ASSETS, for $ 443,379,806 11,556,365 shares outstanding NET ASSET VALUE $38.37 and redemption price per share ($443,379,806 (divided by) 11,556,365 shares) Maximum offering $39.56 price per share (100/97.00 of $38.37) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 503,118 INCOME Dividends Interest (including 1,390,640 income on securities loaned of $41,580) TOTAL INCOME 1,893,758 EXPENSES Management fee $ 1,423,992 Transfer agent 1,913,669 fees Accounting and 240,431 security lending fees Non-interested 918 trustees' compensation Custodian fees 19,727 and expenses Registration fees 18,960 Audit 32,114 Legal 2,342 Miscellaneous 4,792 Total expenses 3,656,945 before reductions Expense (67,840 3,589,105 reductions ) NET INVESTMENT (1,695,347 INCOME (LOSS) ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 24,481,941 securities Foreign (880 24,481,061 currency ) transactions Change in net unrealized appreciation (depreciation) on: Investment (51,825,165 securities ) Assets and 24 (51,825,141 liabilities in ) foreign currencies NET GAIN (LOSS) (27,344,080 ) NET INCREASE $ (29,039,427 (DECREASE) IN ) NET ASSETS RESULTING FROM OPERATIONS OTHER $ 878,830 INFORMATION Sales charges paid to FDC Deferred sales $ 3,034 charges withheld by FDC Exchange fees $ 89,588 withheld by FSC Expense $ 65,228 reductions Directed brokerage arrangements Custodian 1,015 interest credits Transfer agent 1,597 interest credits $ 67,840 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ (1,695,347 $ (2,669,832 Net investment ) ) income (loss) Net realized 24,481,061 102,860,639 gain (loss) Change in net (51,825,141 47,678,623 unrealized ) appreciation (depreciation) NET INCREASE (29,039,427 147,869,430 (DECREASE) IN ) NET ASSETS RESULTING FROM OPERATIONS Distributions to (6,490,368 (63,147,066 shareholders ) ) from net realized gains Share 188,811,235 837,037,606 transactions Net proceeds from sales of shares Reinvestment of 6,403,480 62,103,715 distributions Cost of shares (244,129,184 (672,703,503 redeemed ) ) Paid in capital 487,227 1,162,861 portion of redemption fees NET INCREASE (48,427,242 227,600,679 (DECREASE) IN ) NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (83,957,037 312,323,043 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 527,336,843 215,013,800 period End of period $ 443,379,806 $ 527,336,843 (including accumulated net investment loss of $1,695,347 and $0, respectively) OTHER INFORMATION Shares Sold 4,818,068 20,220,825 Issued in 169,585 1,547,662 reinvestment of distributions Redeemed (6,282,779 (15,928,239 ) ) Net increase (1,295,126) 5,840,248 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 41.03 $ 30.67 $ 27.02 $ 20.15 $ 17.63 $ 16.60 beginning of period Income from Investment Operations Net investment (.14) (.23) (.31) (.21) G (.15) (.03) F income (loss) Net realized and (2.01) 16.10 3.68 8.66 2.44 1.18 unrealized gain (loss) Total from (2.15) 15.87 3.37 8.45 2.29 1.15 investment operations Less Distributions In excess of net - - - - - (.27) investment income From net (.55) (5.61) - (1.80) - (.22) realized gain Total (.55) (5.61) - (1.80) - (.49) distributions Redemption fees .04 .10 .28 .22 .23 .37 added to paid in capital Net asset value, $ 38.37 $ 41.03 $ 30.67 $ 27.02 $ 20.15 $ 17.63 end of period TOTAL RETURN B, C (5.12)% 52.79% 13.51% 45.06% 14.29% 9.36% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 443,380 $ 527,337 $ 215,014 $ 120,435 $ 47,596 $ 32,810 period (000 omitted) Ratio of expenses 1.54% A 1.40% 1.71% 1.90% 1.81% A 2.17% to average net assets Ratio of expenses 1.51% A, 1.38% 1.69% 1.89% 1.81% A 2.17% to average net E E E E assets after expense reductions Ratio of net (.71)% A (.56)% (1.12)% (.91)% (.98)% (.18)% investment A income (loss) to average net assets Portfolio turnover 299% A 129% 189% 145% 254% A 568% rate Average $ .0419 commission rate H
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.22 PER SHARE RELATING TO A NONRECURRING INITIATIVE TO INVEST IN DIVIDEND INCOME PRODUCING SECURITIES WHICH WAS IN EFFECT FOR A PORTION OF 1992. G INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.07 PER SHARE. H FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
DEFENSE AND AEROSPACE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past one, five, and 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S DEFENSE AND AEROSPACE 6.62% 23.02% 132.42% 113.73% DEFENSE AND AEROSPACE 3.42% 19.33% 125.44% 107.32% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS DEFENSE AND AEROSPACE 23.02% 18.37% 7.89% DEFENSE AND AEROSPACE 19.33% 17.65% 7.56% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960909 153107 S00000000000001 Defense & Aerospace SP Standard & Poor 500 00067 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8918.71 9173.00 1986/10/31 9038.91 9702.28 1986/11/30 9327.39 9938.05 1986/12/31 8888.66 9684.63 1987/01/31 9663.94 10989.15 1987/02/28 10276.95 11423.22 1987/03/31 10084.63 11753.35 1987/04/30 9645.91 11648.74 1987/05/31 9513.69 11750.09 1987/06/30 9423.54 12343.47 1987/07/31 9675.96 12969.28 1987/08/31 9573.79 13453.04 1987/09/30 9381.47 13158.41 1987/10/31 6989.53 10324.09 1987/11/30 6628.93 9473.39 1987/12/31 6826.62 10194.31 1988/01/31 7265.83 10623.49 1988/02/29 7698.77 11118.55 1988/03/31 7679.94 10774.98 1988/04/30 7629.75 10894.59 1988/05/31 7341.12 10989.37 1988/06/30 7642.30 11493.78 1988/07/31 7491.71 11450.10 1988/08/31 7309.75 11060.80 1988/09/30 7529.36 11531.99 1988/10/31 7516.81 11852.58 1988/11/30 7184.26 11683.09 1988/12/31 7121.52 11887.54 1989/01/31 7403.87 12757.71 1989/02/28 7372.50 12440.04 1989/03/31 7523.08 12729.90 1989/04/30 7792.88 13390.58 1989/05/31 7930.92 13932.90 1989/06/30 7836.81 13853.48 1989/07/31 8345.04 15104.45 1989/08/31 8558.37 15400.50 1989/09/30 8401.51 15337.35 1989/10/31 7924.65 14981.53 1989/11/30 7623.47 15287.15 1989/12/31 7748.96 15654.04 1990/01/31 7309.75 14603.66 1990/02/28 7334.85 14792.04 1990/03/31 7786.61 15184.03 1990/04/30 7466.61 14804.43 1990/05/31 8018.77 16247.86 1990/06/30 8024.53 16137.38 1990/07/31 7702.54 16085.74 1990/08/31 7026.99 14631.59 1990/09/30 6799.70 13919.03 1990/10/31 6711.31 13859.18 1990/11/30 7071.18 14754.48 1990/12/31 7393.75 15166.13 1991/01/31 8046.33 15827.37 1991/02/28 8204.72 16959.03 1991/03/31 8838.29 17369.44 1991/04/30 8692.57 17411.13 1991/05/31 9098.05 18163.29 1991/06/30 8640.30 17331.41 1991/07/31 9015.69 18139.05 1991/08/31 8920.25 18568.95 1991/09/30 8710.29 18258.85 1991/10/31 9130.21 18503.51 1991/11/30 8716.65 17757.82 1991/12/31 9384.71 19789.32 1992/01/31 9352.90 19421.24 1992/02/29 9499.24 19673.71 1992/03/31 9308.36 19290.07 1992/04/30 9142.94 19857.20 1992/05/31 8684.84 19954.50 1992/06/30 8277.64 19657.18 1992/07/31 8595.76 20461.16 1992/08/31 8430.34 20041.71 1992/09/30 8551.22 20278.20 1992/10/31 8621.21 20349.17 1992/11/30 8920.25 21043.08 1992/12/31 9384.71 21301.91 1993/01/31 9664.67 21480.84 1993/02/28 9594.68 21772.98 1993/03/31 10103.68 22232.39 1993/04/30 10135.49 21694.37 1993/05/31 10447.26 22275.78 1993/06/30 10886.27 22340.38 1993/07/31 11331.65 22251.02 1993/08/31 11312.56 23094.33 1993/09/30 11605.23 22916.50 1993/10/31 12069.70 23390.88 1993/11/30 11713.40 23168.66 1993/12/31 12092.94 23449.00 1994/01/31 12668.79 24246.27 1994/02/28 12668.79 23589.20 1994/03/31 12159.13 22560.71 1994/04/30 12225.12 22849.48 1994/05/31 12265.43 23224.22 1994/06/30 11956.44 22655.22 1994/07/31 12131.08 23398.31 1994/08/31 12675.17 24357.64 1994/09/30 12037.04 23760.88 1994/10/31 12332.60 24295.50 1994/11/30 11848.97 23410.66 1994/12/31 12305.73 23757.84 1995/01/31 12299.01 24373.88 1995/02/28 13192.39 25323.73 1995/03/31 13756.62 26071.03 1995/04/30 14515.65 26838.83 1995/05/31 15409.03 27911.57 1995/06/30 15979.98 28559.96 1995/07/31 16859.92 29507.01 1995/08/31 16853.20 29581.07 1995/09/30 17323.40 30829.39 1995/10/31 16691.99 30719.33 1995/11/30 17894.36 32067.91 1995/12/31 18133.27 32685.54 1996/01/31 18457.73 33798.15 1996/02/29 19445.50 34111.46 1996/03/31 19892.52 34439.95 1996/04/30 20850.95 34947.60 1996/05/31 21630.63 35848.90 1996/06/30 21118.27 35985.48 1996/07/31 19692.56 34395.64 1996/08/30 20732.14 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960909 153112 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Defense and Aerospace Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $20,732 - a 107.32% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS United Technologies Corp. 4.3 Boeing Co. 4.0 Raytheon Co. 3.5 Alliant Techsystems, Inc. 3.5 Lockheed Martin Corp. 3.4 Harris Corp. 3.1 Bombardier, Inc. Class B 2.9 McDonnell Douglas Corp. 2.8 Sundstrand Corp. 2.5 Thiokol Corp. 2.5 TOP INDUSTRIES AS OF AUGUST 31, 1996 Row: 1, Col: 1, Value: 22.3 Row: 1, Col: 2, Value: 8.9 Row: 1, Col: 3, Value: 9.4 Row: 1, Col: 4, Value: 9.5 Row: 1, Col: 5, Value: 15.2 Row: 1, Col: 6, Value: 34.7 Aerospace & Defense 34.7% Defense Electronics 15.2% Electronics 9.5% Conglomerates 9.4% Electrical Equipment 8.9% All Others 22.3% * * INCLUDES SHORT-TERM INVESTMENTS DEFENSE AND AEROSPACE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Bill Rubin, Portfolio Manager of Fidelity Select Defense and Aerospace Portfolio Q. WHAT WAS THE FUND'S RETURN, BILL? A. For the six months ended August 31, 1996 the fund had a total return of 6.62%. For the past year, it returned 23.02%. For the same periods, the Standard & Poor's 500 Index returned 2.96% and 18.73%, respectively. Q. OVER THE PAST SIX MONTHS, WHICH GROUP IN THE FUND PERFORMED BETTER - COMMERCIAL AEROSPACE STOCKS OR DEFENSE CONTRACTORS? A. Commercial aerospace stocks outperformed all other market segments in the fund due to a variety of factors. Commercial aerospace companies generally enjoyed good fundamentals in an environment of strong demand for aircraft as new plane orders surged and order backlogs increased. In fact, order backlogs have been on an upward trend for some time - a positive sign about the industry's health. At the same time, many of these companies continued aggressively to cut costs and generate stronger cash flows. The best example is Boeing, whose commercial order backlog has been up the past five quarters and cash flows have been very strong. Q. WHAT ABOUT DEFENSE CONTRACTORS? A. Defense stocks performed well, although not as well as commercial aerospace stocks. Earnings-per-share growth continued to be strong - generally in the 10%-to-15% range - and in some cases higher. The U.S. defense budget fell slightly in nominal terms. However, the reduction was modest compared to the dramatic reductions in defense spending we've seen over the past 10 years. Profit margins continued to improve and cash flows remained strong. Cash redeployment into stock buybacks, debt reduction, increased dividends and acquisitions continued to boost stock performances. Valuations of defense contractor stocks during the period looked more expensive relative to historical ranges, although they were still undervalued relative to the general market. Q. WERE THERE ANY MAJOR CONTRACTS AWARDED DURING THE PERIOD? A. During the past six months, there were several large contracts. British Aerospace won contracts from the U.K. for a maritime patrol aircraft replacement program and for a conventional standoff missile program. Alliant Techsystems won a large contract from the U.S. for a lightweight hybrid torpedo program. Lockheed Martin and McDonnell Douglas won the contract for a new joint services standoff missile program. Additionally, General Dynamics won the contract for an advanced amphibious assault vehicle program for the Marines. There are also several very large contracts on the horizon. The Navy will select a winner for the $8 billion LPD-17 ship program. Also, the Pentagon will choose two contractors from three to compete for the mammoth $50 billion contract to build the Joint Strike Fighter, the latest joint services all-purpose fighter aircraft. The final winner, however, will not be known for a few years. Q. ALTHOUGH THE STRIKE AT MCDONNELL DOUGLAS WAS RECENTLY RESOLVED, DO YOU THINK LABOR IS A BIG CONCERN FOR THE INDUSTRY? A. From a cost standpoint, not really. Raw materials represent a much greater proportion of defense and aerospace companies' costs than does labor. Additionally, approximately half of defense contracts are structured as "cost plus" - meaning that the government will pay for, among other things, any costs above original estimates. Furthermore, many companies have already negotiated contracts with the major unions, so labor problems should not arise for some time. Q. WAS THERE ONE STOCK THAT DID NOT LIVE UP TO EXPECTATIONS? A. Litton Industries was a significant underperformer. The company continues successfully to implement its strategy of acquiring small- to medium-sized companies and integrating them in a way that adds value for shareholders. Although the company grew earnings slightly more than expected and the stock was priced cheaply relative to its cash flow, the market has so far chosen not to recognize its value. Q. WHAT DO YOU SEE GOING FORWARD? A. In commercial aerospace, barring any significant downturn in demand, stocks should continue to perform well, as many of these companies can continue to grow their order backlogs and increase their production rates and profitability. As for defense contractors' stocks, my outlook is mixed. While they have shown they can generate strong cash flows and improve profit margins, I'm less sanguine about their historically high valuations. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: May 8, 1984 FUND NUMBER: 067 TRADING SYMBOL: FSDAX SIZE: as of August 31, 1996, more than $32 million MANAGER: Bill Rubin, since 1994; manager, Select Home Finance Portfolio since October 1996; equity analyst, savings & loans, aerospace, defense electronics, cable equipment and electronic industries, since 1994; joined Fidelity in 1994 (checkmark) DEFENSE AND AEROSPACE PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 99.6% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 34.7% AIRCRAFT - 11.1% Boeing Co. 14,400 $ 1,303,188 09702310 British Aerospace PLC 18,500 288,039 11042010 Lockheed Martin Corp. 13,350 1,123,069 53983010 McDonnell Douglas Corp. 18,700 937,338 58016910 3,651,634 AIRCRAFT & PARTS - 7.6% AAR Corp. 14,300 309,238 00036110 Banner Aerospace, Inc. (a) 28,100 221,288 06652510 Precision Castparts Corp. 5,500 268,813 74018910 Rohr Industries, Inc. (a) 20,200 421,675 77542210 Sundstrand Corp. 22,000 822,250 86732310 Wyman-Gordon Co. (a) 21,500 448,813 98308510 2,492,077 AIRCRAFT ENGINES & PARTS - 1.8% General Motors Corp. Class H 4,500 251,438 37044250 Rolls Royce PLC Ord. 30,000 103,537 77577910 UNC, Inc. (a) 28,900 234,813 90307010 589,788 AIRCRAFT EQUIPMENT - 2.6% Aviall, Inc. 37,500 318,750 05366B10 BE Aerospace, Inc. (a) 11,900 196,350 07330210 Moog, Inc. Class A 11,300 220,350 61539420 Transtechnology Corp. 6,200 110,050 89388910 845,500 GUIDED MISSILES & SPACE VEHICLES - 2.2% Rockwell International Corp. 14,300 743,600 77434710 MISSILES & SPACE VEHICLES - 4.7% Orbital Sciences Corp. (a) 30,100 541,800 68556410 Special Devices, Inc. (a) 12,700 193,675 84740910 Thiokol Corp. 18,100 812,238 88410310 1,547,713 ORDNANCE - 3.4% Alliant Techsystems, Inc. (a) 22,100 1,140,913 01880410 TRAINING EQUIPMENT & SIMULATORS - 1.3% C A E Industries Ltd. 25,500 198,483 12476510 Flightsafety International, Inc. 5,000 221,250 33942310 419,733 TOTAL AEROSPACE & DEFENSE 11,430,958 AIR TRANSPORTATION - 0.6% AIR TRANSPORT, MAJOR NATIONAL - 0.6% AMR Corp. 2,600 213,200 00176510 AUTOS, TIRES, & ACCESSORIES - 3.9% AUTO & TRUCK PARTS - 2.7% Safety Components International, Inc. (a) 36,200 470,600 78647410 Sparton Corp. (a) 29,900 183,138 84723510 TRW, Inc. 2,700 249,750 87264910 903,488 AUTO DEALERS - RETAIL - 0.6% Aviation Sales Co. (a) 9,700 191,575 05367210 MOTOR VEHICLE SUPPLIES & NEW PARTS - 0.6% Hahn Automotive Warehouse, Inc. 23,800 190,400 40519110 TOTAL AUTOS, TIRES, & ACCESSORIES 1,285,463 SHARES VALUE (NOTE 1) BROADCASTING - 0.6% COMMUNICATIONS SERVICES - 0.6% Asia Satellite Telecommunications Holdings Ltd. Sponsored ADR (a) 6,000 $ 157,500 04516X10 Asia Satellite Telecommunications Holdings Ltd. (a) 12,500 32,735 04699K22 190,235 BUILDING MATERIALS - 0.2% AIRCONDITIONING EQUIPMENT - 0.2% Engineered Support Systems, Inc. (a) 8,600 74,175 29286610 CELLULAR - 0.6% CELLULAR & COMMUNICATION SERVICES - 0.6% Commet Cellular, Inc. (a) 6,200 198,400 20260410 CHEMICALS & PLASTICS - 0.6% CHEMICALS - 0.6% Goodrich (B.F.) Co. 5,500 206,250 38238810 COMMUNICATIONS EQUIPMENT - 1.9% DATACOMMUNICATIONS EQUIPMENT - 0.2% Echostar Communications Corp. Class A (a) 3,100 78,614 27876210 TELEPHONE EQUIPMENT - 1.0% DSC Communications Corp. (a) 4,700 139,825 23331110 Globalstar Telecommunications Ltd. (a) 4,200 181,650 37999822 321,475 TELEPHONE INTERCONNECT SYSTEMS - 0.7% General Instrument Corp. (a) 7,700 210,788 37012110 TOTAL COMMUNICATIONS EQUIPMENT 610,877 COMPUTER SERVICES & SOFTWARE - 0.6% CUSTOM COMPUTER PROGRAMMING SERVICES - 0.6% CACI International, Inc. Class A (a) 10,900 182,575 12719030 COMPUTERS & OFFICE EQUIPMENT - 0.4% COMPUTER PERIPHERALS - 0.4% Miltope Group, Inc. (a) 42,400 121,900 60219110 CONGLOMERATES - 9.4% AlliedSignal, Inc. 3,400 209,950 01951210 Harris Corp. 16,600 1,020,900 41387510 Sequa Corp. Class A (a) 4,600 201,250 81732010 Textron, Inc. 3,000 256,125 88320310 United Technologies Corp. 12,500 1,409,375 91301710 3,097,600 DEFENSE ELECTRONICS - 15.2% Ducommun, Inc. (a) 13,600 226,100 26414710 ESCO Electronics Corp. (trust receipt) (a) 40,100 471,175 26903020 Flir Systems, Inc. (a) 47,800 657,250 30244510 KVH Industries, Inc. (a) 12,100 101,338 48273810 Litton Industries, Inc. (a) 9,200 428,950 53802110 Logicon, Inc. 9,700 287,363 54140910 Nichols Research Corp. 13,000 419,250 65381810 Raytheon Co. 22,500 1,158,750 75511110 Remec, Inc. (a) 15,400 223,300 75954310 Tracor, Inc. (a) 34,300 664,563 89234920 Trimble Navigation Ltd. (a) 11,300 203,400 89623910 Whittaker Corp. (a) 12,200 170,800 96668040 5,012,239 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRICAL EQUIPMENT - 8.9% CURRENT-CARRYING WIRING DEVICE - 0.9% Adflex Solutions (a) 27,200 $ 285,600 00686610 ELECTRIC COILS & TRANSFORMERS - 0.6% Spectrum Control, Inc. (a) 54,000 212,625 84761510 ELECTRICAL EQUIPMENT - WHOLESALE - 0.6% Antec Corp. (a) 13,300 184,538 03664P10 ELECTRICAL MACHINERY - 1.6% Amphenol Corp. Class A (a) 10,500 206,063 03209420 Honeywell, Inc. 5,800 337,125 43850610 543,188 TV & RADIO COMMUNICATION EQUIPMENT - 4.5% C-COR Electronics, Inc. (a) 15,200 235,600 12501010 California Amplifier, Inc. (a) 15,200 190,000 12990010 Gilat Satellite Networks Ltd. (a) 12,900 253,163 40199892 NII Norsat International, Inc. (a) 76,400 139,594 62913L10 Ortel Corp. (a) 11,900 296,013 68749W10 Scientific-Atlanta, Inc. 8,500 114,750 80865510 TSX Corp. (a) 20,450 250,513 87302710 1,479,633 WIRING & LIGHTING - 0.7% Oak Industries, Inc. (a) 7,400 222,000 67140050 TOTAL ELECTRICAL EQUIPMENT 2,927,584 ELECTRONIC INSTRUMENTS - 0.7% ELECTRONIC EQUIPMENT - 0.7% Berg Electronics Corp. (a) 9,300 225,526 08372L10 ELECTRONICS - 9.5% CONNECTORS - 2.0% AMP, Inc. 6,000 229,500 03189710 Augat, Inc. 11,700 223,763 05104210 PCD, Inc. (a) 16,900 198,575 69318P10 651,838 ELECTRONIC CAPACITORS - 1.1% AVX Corp. 9,200 172,500 00244410 Kemet Corp. (a) 11,800 200,600 48836010 373,100 ELECTRONIC PARTS - WHOLESALE - 3.2% Anicom, Inc. (a) 11,700 190,125 03525010 Harmonic Lightwaves, Inc. (a) 12,400 248,000 41316010 Kent Electronics Corp. (a) 18,000 398,250 49055310 Zero Corp. 10,400 210,600 98948410 1,046,975 ELECTRONICS & ELECTRONIC COMPONENTS - 3.2% Alpine Group, Inc. (a) 12,500 70,313 02082510 Esterline Technologies Corp. 37,000 763,125 29742510 Vishay Intertechnology, Inc. 11,100 223,388 92829810 1,056,826 TOTAL ELECTRONICS 3,128,739 INDUSTRIAL MACHINERY & EQUIPMENT - 1.7% FLUID POWER CYLINDERS & ACTUATORS - 0.6% Power Control Technologies, Inc. (a) 24,500 189,875 73922810 GENERAL INDUSTRIAL MACHINERY - 0.5% Park Ohio Industries, Inc. (a) 11,700 169,650 70067710 MACHINE TOOLS, METAL CUTTING - 0.1% Devlieg-Bullard, Inc. (a) 19,400 43,650 25178210 SHARES VALUE (NOTE 1) STORAGE BATTERIES - 0.5% Exide Corp. 6,200 $ 165,075 30205110 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 568,250 IRON & STEEL - 0.2% METAL FORGINGS & STAMPINGS - 0.2% Hexcel Corp. (a) 4,000 70,500 42829110 METALS & MINING - 3.9% NONFERROUS ROLLING & DRAWING - 1.5% Oregon Metallurgical Corp. (a) 9,600 285,600 RMI Titanium Co. (a) 10,400 211,900 74961H20 497,500 NONFERROUS WIRE - 1.8% Cable Design Technology Corp. (a) 16,300 578,650 12692410 PRIME NONFERROUS SMELTING - 0.6% Tremont Corp. (a) 6,500 207,188 89474520 TOTAL METALS & MINING 1,283,338 RAILROADS - 2.9% RAILROAD EQUIPMENT - 2.9% Bombardier, Inc. Class B 67,400 950,718 09775120 SHIP BUILDING & REPAIR - 3.1% Avondale Industries, Inc. (a) 33,700 530,775 05435010 General Dynamics Corp. 7,700 493,763 36955010 1,024,538 TOTAL COMMON STOCKS (Cost $31,754,509) 32,803,065 REPURCHASE AGREEMENTS - 0.4% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 139,081 139,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $31,893,509) $ 32,942,065 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $54,411,779 and $47,082,079, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $15,956 for the period (see Note 5 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $31,948,578. Net unrealized appreciation aggregated $993,487 of which $2,793,902 related to appreciated investment securities and $1,800,415 related to depreciated investment securities. DEFENSE AND AEROSPACE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 32,942,065 securities, at value (including repurchase agreements of $139,000) (cost $31,893,509) - See accompanying schedule Cash 517 Receivable for 269,920 fund shares sold Dividends 36,867 receivable Redemption fees 111 receivable Prepaid expenses 12,776 TOTAL ASSETS 33,262,256 LIABILITIES Payable for fund $ 234,715 shares redeemed Accrued 16,447 management fee Other payables 48,911 and accrued expenses TOTAL LIABILITIES 300,073 NET ASSETS $ 32,962,183 Net Assets consist of: Paid in capital $ 29,919,943 Accumulated net (106,135 investment ) (loss) Accumulated 2,099,819 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 1,048,556 appreciation (depreciation) on investments NET ASSETS, for $ 32,962,183 1,180,419 shares outstanding NET ASSET VALUE $27.92 and redemption price per share ($32,962,183 (divided by) 1,180,419 shares) Maximum offering $28.78 price per share (100/97.00 of $27.92) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 198,924 INCOME Dividends Interest 48,189 TOTAL INCOME 247,113 EXPENSES Management fee $ 128,577 Transfer agent 162,153 fees Accounting fees 30,156 and expenses Non-interested 83 trustees' compensation Custodian fees 9,819 and expenses Registration fees 14,009 Audit 14,887 Legal 114 Miscellaneous 200 Total expenses 359,998 before reductions Expense (6,750 353,248 reductions ) NET INVESTMENT (106,135 INCOME (LOSS) ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 2,244,371 securities Foreign (28 2,244,343 currency ) transactions Change in net (1,076,448 unrealized ) appreciation (depreciation) on investment securities NET GAIN (LOSS) 1,167,895 NET INCREASE $ 1,061,760 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 143,379 INFORMATION Sales charges paid to FDC Deferred sales $ 886 charges withheld by FDC Exchange fees $ 17,865 withheld by FSC Expense $ 6,750 reductions Directed brokerage arrangements STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ (106,135 $ (42,041 Net investment ) ) income (loss) Net realized 2,244,343 6,184,658 gain (loss) Change in net (1,076,448 1,844,428 unrealized ) appreciation (depreciation) NET INCREASE 1,061,760 7,987,045 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (1,088,127 (1,652,319 shareholders ) ) from net realized gains Share 57,637,845 82,853,410 transactions Net proceeds from sales of shares Reinvestment of 1,073,164 1,633,401 distributions Cost of shares (52,441,499 (69,255,038 redeemed ) ) Paid in capital 70,825 97,064 portion of redemption fees NET INCREASE 6,340,335 15,328,837 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 6,313,968 21,663,563 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 26,648,215 4,984,652 period End of period 32,962,183 26,648,215 (including accumulated net investment loss of $106,135 and $0, respectively) OTHER INFORMATION Shares Sold 2,060,864 3,489,764 Issued in 39,600 65,863 reinvestment of distributions Redeemed (1,908,261 (2,821,248 ) ) Net increase 192,203 734,379 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 26.97 $ 19.64 $ 19.14 $ 15.08 $ 14.37 $ 13.72 beginning of period Income from Investment Operations Net investment (.07) (.05) (.06) .07 (.02) (.01) income (loss) Net realized and 1.78 9.09 .70 4.57 .69 .67 unrealized gain (loss) Total from 1.71 9.04 .64 4.64 .67 .66 investment operations Less Distributions From net - - - (.10) - (.04) investment income In excess of net - - - - - (.02) investment income From net (.81) (1.82) (.27) (.62) - - realized gain Total (.81) (1.82) (.27) (.72) - (.06) distributions Redemption fees .05 .11 .13 .14 .04 .05 added to paid in capital Net asset value, $ 27.92 $ 26.97 $ 19.64 $ 19.14 $ 15.08 $ 14.37 end of period TOTAL RETURN B, C 6.62% 47.40% 4.13% 32.04% 4.94% 5.18% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 32,962 $ 26,648 $ 4,985 $ 11,136 $ 1,463 $ 1,280 period (000 omitted) Ratio of expenses 1.68% A 1.77% 2.49% 2.53% 2.48% A, 2.46% to average net G G G G G assets Ratio of expenses 1.65% A, 1.75% 2.49% 2.53% 2.48% A 2.46% to average net E E assets after expense reductions Ratio of net (.50)% A (.20)% (.32)% .40% (.14)% A (.10)% investment income (loss) to average net assets Portfolio turnover 242% A 267% 146% 324% 87% A 32% rate Average $ .0319 commission rate F
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. G DURING THE PERIOD, FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER.
DEVELOPING COMMUNICATIONS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1996 MONTH YEAR YEARS FUND S DEVELOPING COMMUNICATIONS 2.27% -5.47% 149.17% 225.47% DEVELOPING COMMUNICATIONS -0.80% -8.31% 141.69% 215.71% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 117.91% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on June 29, 1990. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF AUGUST 31, 1996 YEAR YEARS FUND DEVELOPING COMMUNICATIONS -5.47% 20.03% 21.04% DEVELOPING COMMUNICATIONS -8.31% 19.30% 20.44% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.43% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19960831 19960909 154202 S00000000000001 Developing Communications SP Standard & Poor 500 00518 SP001 1990/06/29 9700.00 10000.00 1990/07/31 8953.10 9980.27 1990/08/31 7866.70 9078.05 1990/09/30 6751.20 8635.95 1990/10/31 7081.00 8598.82 1990/11/30 8235.30 9154.30 1990/12/31 8759.10 9409.71 1991/01/31 10146.20 9819.97 1991/02/28 10776.70 10522.10 1991/03/31 11494.50 10776.73 1991/04/30 11591.50 10802.60 1991/05/31 11766.10 11269.27 1991/06/30 10841.06 10753.14 1991/07/31 11963.62 11254.23 1991/08/31 12670.42 11520.96 1991/09/30 12815.94 11328.56 1991/10/31 13564.32 11480.36 1991/11/30 12888.70 11017.70 1991/12/31 14135.99 12278.13 1992/01/31 14510.18 12049.75 1992/02/29 14998.70 12206.40 1992/03/31 14260.72 11968.38 1992/04/30 14073.63 12320.25 1992/05/31 14011.26 12380.62 1992/06/30 13512.35 12196.14 1992/07/31 14104.81 12694.97 1992/08/31 13574.71 12434.72 1992/09/30 14032.05 12581.45 1992/10/31 14655.70 12625.48 1992/11/30 15986.14 13056.01 1992/12/31 16569.33 13216.60 1993/01/31 17017.15 13327.62 1993/02/28 17121.30 13508.88 1993/03/31 17735.75 13793.92 1993/04/30 17206.93 13460.10 1993/05/31 18365.83 13820.83 1993/06/30 19160.51 13860.91 1993/07/31 19535.77 13805.47 1993/08/31 21323.79 14328.70 1993/09/30 21621.79 14218.37 1993/10/31 22372.32 14512.69 1993/11/30 20672.60 14374.82 1993/12/31 21833.52 14548.75 1994/01/31 22673.27 15043.41 1994/02/28 22298.78 14635.73 1994/03/31 20744.11 13997.61 1994/04/30 21598.03 14176.78 1994/05/31 20440.78 14409.28 1994/06/30 18918.07 14056.26 1994/07/31 20879.32 14517.30 1994/08/31 22657.83 15112.51 1994/09/30 22962.38 14742.25 1994/10/31 25021.07 15073.95 1994/11/30 24314.54 14524.96 1994/12/31 25138.57 14740.37 1995/01/31 24467.87 15122.58 1995/02/28 25337.29 15711.91 1995/03/31 25473.91 16175.57 1995/04/30 26593.13 16651.94 1995/05/31 27505.97 17317.52 1995/06/30 30405.58 17719.80 1995/07/31 33318.60 18307.39 1995/08/31 33399.15 18353.34 1995/09/30 34285.14 19127.86 1995/10/31 30875.42 19059.57 1995/11/30 31023.08 19896.28 1995/12/31 29504.05 20279.49 1996/01/31 28582.05 20969.80 1996/02/29 30871.16 21164.19 1996/03/31 30569.12 21368.00 1996/04/30 32572.09 21682.97 1996/05/31 34416.10 22242.17 1996/06/30 32921.82 22326.91 1996/07/31 30060.43 21340.51 1996/08/30 31570.61 21790.58 IMATRL PRASUN SHR__CHT 19960831 19960909 154205 R00000000000077 Let's say hypothetically that $10,000 was invested in Fidelity Select Developing Communications Portfolio on June 29, 1990, when the fund started, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $31,571 - a 215.71% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $21,791 over the same period - a 117.91% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Newbridge Networks Corp. 3.5 Cisco Systems, Inc. 3.3 360 Degrees Communications Co. 3.2 Microsoft Corp. 2.9 Dynatech Corp. 2.7 3Com Corp. 2.4 Scientific-Atlanta, Inc. 2.4 DSC Communications Corp. 2.4 AirTouch Communications, Inc. 2.4 Palmer Wireless, Inc. 2.4 TOP INDUSTRIES AS OF AUGUST 31, 1996 Row: 1, Col: 1, Value: 42.6 Row: 1, Col: 2, Value: 7.5 Row: 1, Col: 3, Value: 8.5 Row: 1, Col: 4, Value: 9.199999999999999 Row: 1, Col: 5, Value: 15.5 Row: 1, Col: 6, Value: 16.7 Telephone Equipment 16.7% Cellular & Communication Services 15.5% Prepackaged Computer Software 9.2% Datacommunications Equipment 8.5% TV & Radio Communication Equipment 7.5% All Others 42.6%* * INCLUDES SHORT-TERM INVESTMENTS DEVELOPING COMMUNICATIONS PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: Effective August 13, 1996, Minerva Butler became Portfolio Manager of Fidelity Select Developing Communications Portfolio. The following is a discussion with Paul Antico, who discusses the period covered by the report, and Minerva Butler, who discusses her investment style and outlook. Q. PAUL, HOW DID THE FUND PERFORM? A. For the six-month period ended August 31, 1996, the fund compiled a return of 2.27%. This lagged the Standard & Poor's 500 Index, which provided a return of 2.96% during the same period. For the 12 months ended August 31, 1996, the fund had a return of -5.47%, while the S&P 500 posted a return of 18.73%. Q. HOW WOULD YOU SUM UP THE INVESTING ENVIRONMENT DURING THE PERIOD? A. I would describe it as swimming against the tide. The industry as a whole suffered as wireless service stocks turned in a subpar performance - partly due to confusion in the market over the pending unveiling of personal communications services (PCS). Though cellular stocks continued to have excellent business prospects, investor sentiment remained cautious due to the uncertainty surrounding PCS. Q. WHAT EXACTLY IS PCS AND WHY IS IT SO VITAL TO THE HEALTH OF THE DEVELOPING COMMUNICATIONS SECTOR? A. Since 1984, there have been only two cellular service providers located in each major market of the U.S. When - and it will happen fairly soon - PCS is implemented, it will allow for the introduction of three additional competing companies in each region of the country. Market uncertainty concerning PCS is based on the premise that these new, inexperienced competitors will significantly reduce industry pricing, and the cash flows of the incumbent companies will be slowed. I think market worries will be pacified as soon as PCS is up and running. People will see the benefit of the added competition in increased wireless industry awareness and subscriber growth for all players. Q. WHICH INDIVIDUAL HOLDINGS OR SECTORS MADE SIGNIFICANT CONTRIBUTIONS TO THE PORTFOLIO? A. While wireless service provider stocks dragged, we saw fairly strong performance from selected telecommunications equipment-related holdings. I like to think of the equipment companies as being the bullet suppliers in the war. If a service provider wants to improve its competitive position in this new era of deregulation, that provider will have to spend large amounts of capital on new equipment. The fund also enjoyed strong performances from its positions in Black Box Corp., a catalog distributor of networking products, and Vantive, a company with a computer help desk theme. Q. WHAT OTHER INDIVIDUAL STORIES ARE WORTH NOTING? A. DSP Communications is an interesting stock. DSP manufactures a large portion of the chips that go inside Japanese-made cellular phones. While its market has been growing rapidly, Japanese companies are also beginning to realize that the phone business in the U.S. is becoming increasingly commodity-like. As a result, Japan is attempting to tap into the U.S. market via retail distribution. If this next wave of cellular distribution occurs, and I think it's likely, DSP could become a beneficiary. Q. TURNING TO YOU, MINERVA, WHAT'S YOUR OUTLOOK FOR THE FUND AND THE SECTOR IN THE COMING MONTHS? A. I'm cautiously optimistic on the telecommunications sector. Some details of the recent legislation need to be worked out, and a fair amount of uncertainty remains regarding the outcome. On the cellular side, the well-positioned cellular operators should benefit when PCS is rolled out and its effect comes into focus. Until then, however, investors will remain cautious on the cellular names. Lastly, I agree with Paul that the equipment suppliers will be vital in the upcoming telecommunications battle for the customer. In terms of positioning the fund, I'll try to strike a balance between large companies with proven track records and the faster-growing, smaller- to mid-sized companies with strong balance sheets, proven technologies and good product niches. I'll continue to look for young companies with new yet proven technologies. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: June 29, 1990 FUND NUMBER: 518 TRADING SYMBOL: FSDCX SIZE: as of August 31, 1996, more than $306 million MANAGER: Minerva Butler, since August 1996; equity analyst, cellular, paging, cable and wireless cable industries, since 1995; joined Fidelity in 1995 (checkmark) DEVELOPING COMMUNICATIONS PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 89.1% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 2.4% GUIDED MISSILES & SPACE VEHICLES - 1.2% Rockwell International Corp. 69,300 $ 3,602,344 77434710 MISSILES & SPACE VEHICLES - 1.2% Orbital Sciences Corp. (a) 217,600 3,916,800 68556410 TOTAL AEROSPACE & DEFENSE 7,519,144 APPAREL STORES - 0.5% WOMEN'S CLOTHING STORES - 0.5% Melville Corp. 40,000 1,690,000 58574510 BROADCASTING - 9.0% CABLE TV OPERATORS - 6.7% American Telecasting, Inc. (a) 237,900 2,379,000 03015110 Comcast UK Cable Partners PLC Class A (a) 200,100 2,151,075 20099622 General Cable PLC sponsored ADR (a) 265,000 3,610,625 36930Q10 Heartland Wireless Communications, Inc. (a) 224,700 4,746,788 42235W10 International Cabletel, Inc. (a) 65,800 1,595,650 45921610 Nynex CableComms Group PLC ADR Unit (a) 161,500 2,624,375 67076410 TCI Group Class A 100,000 1,487,500 87924V10 Telewest Communications PLC (a) 1,250,000 2,713,367 87956P92 21,308,380 COMMUNICATIONS SERVICES - 0.4% Metro One Telecommunications, Inc. 100,000 1,125,000 59163F10 TELEVISION BROADCASTING - 1.9% Home Shopping Network, Inc. (a) 50,000 537,500 43735110 Viacom, Inc. Class A (a) 178,100 5,565,625 92552410 6,103,125 TOTAL BROADCASTING 28,536,505 CELLULAR - 15.5% CELLULAR & COMMUNICATION SERVICES - 15.5% AirTouch Communications, Inc. (a) 273,925 7,532,938 00949T10 Arch Communications Group, Inc. (a) 345,387 4,705,898 03938110 Cellular Communications Puerto Rico, Inc. (a) 60,000 1,605,000 15091910 Geotek Industries, Inc. (a) 60,000 547,500 37365410 Nextel Communications, Inc. Class A (a) 290,000 4,748,750 65332V10 Paging Network, Inc. (a) 148,000 2,608,500 69554210 Palmer Wireless, Inc. (a) 384,600 7,499,700 69703310 Telephone & Data Systems, Inc. 62,131 2,648,334 87943310 360 Degrees Communications Co. (a) 420,000 10,027,500 88557110 United States Cellular Corp. (a) 235,600 7,126,900 91168410 Vanguard Cellular Systems, Inc. Class A 10,000 191,250 92202210 49,242,270 COMMUNICATIONS EQUIPMENT - 25.2% DATACOMMUNICATIONS EQUIPMENT - 8.5% Cisco Systems, Inc. (a) 200,500 10,576,375 17275R10 Dynatech Corp. (a) 217,650 8,542,763 26813810 3Com Corp. (a) 165,000 7,713,750 88553510 26,832,888 TELEPHONE EQUIPMENT - 16.7% Andrew Corp. (a) 55,000 2,447,500 03442510 Ascend Communications, Inc. (a) 120,000 6,285,000 04349110 Brite Voice Systems, Inc. (a) 104,000 1,313,000 11041110 Brooktrout Technology, Inc. (a) 150,000 3,750,000 11458010 SHARES VALUE (NOTE 1) DSC Communications Corp. (a) 255,200 $ 7,592,200 23331110 DSP Communications, Inc. (a) 23,300 1,185,388 23332K10 Dialogic Corp. (a) 136,800 4,873,500 25249910 Inter-Tel, Inc. (a) 170,200 3,552,925 45837210 InterVoice, Inc. (a) 340,100 4,633,863 46114210 Newbridge Networks Corp. (a) 195,000 11,236,875 65090110 Tadiran Ltd. sponsored ADR 32,000 816,000 87359310 Tellabs, Inc. (a) 81,600 5,171,400 87966410 52,857,651 TOTAL COMMUNICATIONS EQUIPMENT 79,690,539 COMPUTER SERVICES & SOFTWARE - 14.8% CAD/CAM/CAE - 0.2% TCSI Corp. (a) 25,500 612,000 87233R10 COMPUTER SERVICES - 3.7% America Online, Inc. (a) 113,500 3,433,375 02364J10 Clarify, Inc. (a) 50,900 2,128,256 18049210 Electronic Data Systems Corp. 115,000 6,267,500 28566110 11,829,131 CUSTOM COMPUTER PROGRAMMING SERVICES - 1.6% Data Dimensions, Inc. (a) 33,200 1,112,200 23765420 Keane, Inc. (a) 90,400 4,068,000 48666510 5,180,200 DATA PROCESSING - 0.1% Automatic Data Processing, Inc. 10,000 422,500 05301510 PREPACKAGED COMPUTER SOFTWARE - 9.2% Black Box Corp. (a) 257,700 6,796,838 09182610 Metromail Corp. (a) 23,600 413,000 59168010 Microsoft Corp. (a) 74,000 9,065,000 59491810 Oracle Systems Corp. (a) 152,500 5,375,625 68389X10 Sykes Enterprises, Inc. (a) 38,100 1,712,119 87123710 Vantive Corp. (a) 120,800 5,315,200 92209110 Wind River Systems, Inc. 10,000 342,500 97314910 29,020,282 TOTAL COMPUTER SERVICES & SOFTWARE 47,064,113 COMPUTERS & OFFICE EQUIPMENT - 1.9% COMPUTER COMMUNICATIONS EQUIPMENT - 0.8% Comverse Technology, Inc. (a) 75,000 2,643,750 20586240 COMPUTER STORAGE DEVICES - 0.4% Adaptec, Inc. (a) 23,600 1,177,050 00651F10 COMPUTERS & OFFICE EQUIPMENT - 0.7% Hewlett-Packard Co. 50,000 2,187,500 42823610 TOTAL COMPUTERS & OFFICE EQUIPMENT 6,008,300 DEFENSE ELECTRONICS - 0.1% Remec, Inc. (a) 13,600 197,200 75954310 ELECTRICAL EQUIPMENT - 9.3% ELECTRICAL EQUIPMENT - WHOLESALE - 0.9% Antec Corp. (a) 211,200 2,930,400 03664P10 ELECTRICAL MACHINERY - 0.2% Amphenol Corp. Class A 30,800 604,450 03209420 TV & RADIO COMMUNICATION EQUIPMENT - 7.5% Allen Group, Inc. (The) 250,300 3,910,938 01763410 California Amplifier, Inc. 13,000 162,500 12990010 California Microwave Corp. (a) 211,500 3,093,188 13044210 General Instrument Corp. (a) 190,500 5,214,938 37012110 Ortel Corp. (a) 80,000 1,990,000 68749W10 Scientific-Atlanta, Inc. 562,400 7,592,400 80865510 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRICAL EQUIPMENT - CONTINUED TV & RADIO COMMUNICATION EQUIPMENT - CONTINUED TSX Corp. (a) 115,750 $ 1,417,938 87302710 Vertex Communications Corp. (a) 19,200 345,300 92532010 23,727,202 WIRING & LIGHTING - 0.7% Oak Industries, Inc. (a) 74,600 2,238,000 67140050 TOTAL ELECTRICAL EQUIPMENT 29,500,052 ELECTRONICS - 4.2% ELECTRONIC PARTS - WHOLESALE - 1.0% Brightpoint, Inc. 139,500 3,051,563 10947310 ELECTRONICS & ELECTRONIC COMPONENTS - 1.3% Sanmina Corp. (a) 119,800 4,193,000 80090710 SEMICONDUCTORS - 1.9% Intel Corp. 76,500 6,105,656 45814010 TOTAL ELECTRONICS 13,350,219 ENGINEERING - 0.4% WATER & SEWER PIPES - 0.4% MasTec, Inc. (a) 37,700 1,112,150 57632310 SERVICES - 0.0% BUSINESS SERVICES - 0.0% Premier Technologies, Inc. 2,000 42,500 74058F10 TELEPHONE SERVICES - 5.8% AT&T Corp. 72,700 3,816,750 00195710 ALLTEL Corp. 95,000 2,683,750 02003910 BCE, Inc. 50,000 1,973,324 05534B10 DDI Corp. Ord. 250 1,986,223 23399J22 MFS Communications, Inc. (a) 115,200 4,881,600 55272T10 Telecom Italia Mobile Spa 1,475,000 3,039,082 89799F22 18,380,729 TOTAL COMMON STOCKS (Cost $272,803,276) 282,333,721 REPURCHASE AGREEMENTS - 10.9% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 34,561,149 34,541,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $307,344,276) $ 316,874,721 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $326,745,423 and $330,131,656 respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $58,710 for the period (see Note 5 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $309,213,176. Net unrealized appreciation aggregated $7,661,545, of which $26,648,593 related to appreciated investment securities and $18,987,048 related to depreciated investment securities. The fund intends to elect to defer to its fiscal year ending February 28, 1997 approximately $20,116,000 of losses recognized during the period November 1, 1995 to February 29, 1996. DEVELOPING COMMUNICATIONS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 316,874,721 securities, at value (including repurchase agreements of $34,541,000) (cost $307,344,276) - - See accompanying schedule Cash 936 Receivable for 1,634,541 investments sold Receivable for 522,731 fund shares sold Dividends 94,548 receivable Redemption fees 223 receivable Other receivables 3,160 Prepaid expenses 3,349 TOTAL ASSETS 319,134,209 LIABILITIES Payable for $ 11,241,347 investments purchased Payable for fund 1,016,384 shares redeemed Accrued 153,859 management fee Other payables 294,290 and accrued expenses TOTAL LIABILITIES 12,705,880 NET ASSETS $ 306,428,329 Net Assets consist of: Paid in capital $ 304,621,117 Accumulated net (960,271 investment ) (loss) Accumulated (6,763,299 undistributed net ) realized gain (loss) on investments and foreign currency transactions Net unrealized 9,530,782 appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 306,428,329 15,430,635 shares outstanding NET ASSET VALUE $19.86 and redemption price per share ($306,428,329 (divided by) 15,430,635 shares) Maximum offering $20.47 price per share (100/97.00 of $19.86) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 481,197 INCOME Dividends Interest 1,137,029 TOTAL INCOME 1,618,226 EXPENSES Management fee $ 985,842 Transfer agent 1,448,758 fees Accounting fees 142,851 and expenses Non-interested 629 trustees' compensation Custodian fees 17,457 and expenses Registration fees 3,349 Audit 14,780 Legal 1,296 Miscellaneous 3,057 Total expenses 2,618,019 before reductions Expense (39,522 2,578,497 reductions ) NET INVESTMENT (960,271 INCOME (LOSS) ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 15,924,050 securities Foreign (358 15,923,692 currency ) transactions Change in net unrealized appreciation (depreciation) on: Investment (11,378,066 securities ) Assets and 329 (11,377,737 liabilities in ) foreign currencies NET GAIN (LOSS) 4,545,955 NET INCREASE $ 3,585,684 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 574,583 INFORMATION Sales charges paid to FDC Deferred sales $ 2,621 charges withheld by FDC Exchange fees $ 55,028 withheld by FSC Expense $ 36,821 reductions Directed brokerage arrangements Custodian 1,966 interest credits Transfer agent 735 interest credits $ 39,522 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ (960,271 $ (2,597,260 Net investment ) ) income (loss) Net realized 15,923,692 52,212,710 gain (loss) Change in net (11,377,737 9,525,013 unrealized ) appreciation (depreciation) NET INCREASE 3,585,684 59,140,463 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to - (64,709,372 shareholders ) from net realized gains Share 112,615,702 436,869,315 transactions Net proceeds from sales of shares Reinvestment of - 63,769,821 distributions Cost of shares (143,187,387 (416,608,338 redeemed ) ) Paid in capital 228,841 297,961 portion of redemption fees NET INCREASE (30,342,844 84,328,759 (DECREASE) IN ) NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (26,757,160 78,759,850 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 333,185,489 254,425,639 period End of period $ 306,428,329 $ 333,185,489 (including accumulated net investment loss of $960,271 and $0, respectively) OTHER INFORMATION Shares Sold 5,516,071 19,756,179 Issued in - 3,380,520 reinvestment of distributions Redeemed (7,241,743 (18,449,215 ) ) Net increase (1,725,672) 4,687,484 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 19.42 $ 20.40 $ 19.65 $ 16.44 $ 13.54 $ 11.95 beginning of period Income from Investment Operations Net investment (.06) (.17) (.16) (.16) (.07) (.08) E income (loss) Net realized and .49 4.17 2.55 4.82 2.98 2.42 unrealized gain (loss) Total from .43 4.00 2.39 4.66 2.91 2.34 investment operations Less Distributions From net - (5.00) (1.67) (1.47) (.03) (.79) realized gain Redemption fees .01 .02 .03 .02 .02 .04 added to paid in capital Net asset value, $ 19.86 $ 19.42 $ 20.40 $ 19.65 $ 16.44 $ 13.54 end of period TOTAL RETURN B, C 2.27% 21.84% 13.63% 30.24% 21.66% 21.41% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 306,428 $ 333,185 $ 254,426 $ 222,109 $ 83,383 $ 39,261 period (000 omitted) Ratio of expenses 1.59% A 1.53% 1.58% 1.56% 1.88% A 2.50% to average net assets Ratio of expenses 1.57% A, 1.51% 1.56% 1.56% 1.88% A 2.50% to average net F F F assets after expense reductions Ratio of net (.58)% A (.78)% (.83)% (.88)% (.59)% A (.61)% investment income (loss) to average net assets Portfolio turnover 226% A 249% 266% 280% 77% A 25% rate Average $ .0317 commission rate G
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.06 PER SHARE. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
ELECTRONICS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTHS YEAR YEARS YEARS ELECTRONICS -1.60% -2.89% 266.62% 312.72% ELECTRONICS -4.55% -5.81% 255.62% 300.34% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS ELECTRONICS -2.89% 29.67% 15.23% ELECTRONICS -5.81% 28.88% 14.88% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960909 154358 S00000000000001 Electronics SP Standard & Poor 500 00008 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8624.46 9173.00 1986/10/31 8654.61 9702.28 1986/11/30 8654.61 9938.05 1986/12/31 8503.83 9684.63 1987/01/31 9911.09 10989.15 1987/02/28 10705.18 11423.22 1987/03/31 10534.30 11753.35 1987/04/30 10845.91 11648.74 1987/05/31 10624.77 11750.09 1987/06/30 10393.58 12343.47 1987/07/31 10715.23 12969.28 1987/08/31 11489.22 13453.04 1987/09/30 11479.17 13158.41 1987/10/31 7579.07 10324.09 1987/11/30 6392.95 9473.39 1987/12/31 7357.93 10194.31 1988/01/31 6935.75 10623.49 1988/02/29 7669.53 11118.55 1988/03/31 7558.96 10774.98 1988/04/30 7900.73 10894.59 1988/05/31 7629.33 10989.37 1988/06/30 8373.16 11493.78 1988/07/31 7860.52 11450.10 1988/08/31 7076.48 11060.80 1988/09/30 7187.05 11531.99 1988/10/31 6664.35 11852.58 1988/11/30 6332.64 11683.09 1988/12/31 6734.72 11887.54 1989/01/31 6975.96 12757.71 1989/02/28 6875.44 12440.04 1989/03/31 6825.18 12729.90 1989/04/30 7357.93 13390.58 1989/05/31 8061.55 13932.90 1989/06/30 7267.46 13853.48 1989/07/31 7347.88 15104.45 1989/08/31 7599.17 15400.50 1989/09/30 7810.26 15337.35 1989/10/31 7458.45 14981.53 1989/11/30 7478.55 15287.15 1989/12/31 7790.16 15654.04 1990/01/31 8051.50 14603.66 1990/02/28 8694.82 14792.04 1990/03/31 9116.99 15184.03 1990/04/30 9157.20 14804.43 1990/05/31 10504.15 16247.86 1990/06/30 10664.97 16137.38 1990/07/31 10162.38 16085.74 1990/08/31 8574.20 14631.59 1990/09/30 7277.51 13919.03 1990/10/31 7016.17 13859.18 1990/11/30 7739.90 14754.48 1990/12/31 8242.59 15166.13 1991/01/31 9389.91 15827.37 1991/02/28 10215.17 16959.03 1991/03/31 10758.64 17369.44 1991/04/30 10819.02 17411.13 1991/05/31 11171.27 18163.29 1991/06/30 9812.60 17331.41 1991/07/31 10486.90 18139.05 1991/08/31 10919.67 18568.95 1991/09/30 10084.34 18258.85 1991/10/31 10577.48 18503.51 1991/11/30 9933.37 17757.82 1991/12/31 11151.14 19789.32 1992/01/31 12469.55 19421.24 1992/02/29 13153.92 19673.71 1992/03/31 12117.31 19290.07 1992/04/30 11885.83 19857.20 1992/05/31 11905.96 19954.50 1992/06/30 11040.44 19657.18 1992/07/31 11624.16 20461.16 1992/08/31 11744.93 20041.71 1992/09/30 12167.63 20278.20 1992/10/31 13083.47 20349.17 1992/11/30 13938.93 21043.08 1992/12/31 14210.66 21301.91 1993/01/31 14693.74 21480.84 1993/02/28 14371.69 21772.98 1993/03/31 14874.90 22232.39 1993/04/30 14612.70 21694.37 1993/05/31 16079.02 22275.78 1993/06/30 16372.29 22340.38 1993/07/31 16837.47 22251.02 1993/08/31 18283.57 23094.33 1993/09/30 18586.95 22916.50 1993/10/31 18233.01 23390.88 1993/11/30 18091.43 23168.66 1993/12/31 18769.41 23449.00 1994/01/31 20065.91 24246.27 1994/02/28 21017.46 23589.20 1994/03/31 20791.47 22560.71 1994/04/30 20731.99 22849.48 1994/05/31 20672.52 23224.22 1994/06/30 19566.34 22655.22 1994/07/31 19970.75 23398.31 1994/08/31 21921.44 24357.64 1994/09/30 21291.03 23760.88 1994/10/31 22159.33 24295.50 1994/11/30 21873.86 23410.66 1994/12/31 21992.80 23757.84 1995/01/31 21362.40 24373.88 1995/02/28 23550.97 25323.73 1995/03/31 25977.44 26071.03 1995/04/30 28879.68 26838.83 1995/05/31 30984.99 27911.57 1995/06/30 35397.83 28559.96 1995/07/31 40690.85 29507.01 1995/08/31 41226.10 29581.07 1995/09/30 41963.55 30829.39 1995/10/31 40809.79 30719.33 1995/11/30 39786.87 32067.91 1995/12/31 37160.87 32685.54 1996/01/31 38416.89 33798.15 1996/02/29 40683.50 34111.46 1996/03/31 38301.39 34439.95 1996/04/30 42675.80 34947.60 1996/05/31 43801.89 35848.90 1996/06/30 40120.45 35985.48 1996/07/31 38185.89 34395.64 1996/08/30 40019.39 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960909 154403 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Electronics Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $40,034 - a 300.34% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Intel Corp. 9.0 Cisco Systems, Inc. 6.9 International Business Machines Corp. 5.6 Compaq Computer Corp. 5.1 Linear Technology Corp. 4.3 Microsoft Corp. 3.8 Adaptec, Inc. 3.8 Electronic Data Systems Corp. 3.1 Cascade Communications Corp. 3.0 Tellabs, Inc. 2.6 TOP INDUSTRIES AS OF AUGUST 31, 1996 Semiconductors 24.9% Datacommunications Equipment 10.9% Prepackaged Computer Software 8.2% Telephone Equipment 7.9% Mini & Micro Computers 6.8% All Others 41.3%* Row: 1, Col: 1, Value: 41.3 Row: 1, Col: 2, Value: 6.8 Row: 1, Col: 3, Value: 7.9 Row: 1, Col: 4, Value: 8.199999999999999 Row: 1, Col: 5, Value: 10.9 Row: 1, Col: 6, Value: 24.9 * INCLUDES SHORT-TERM INVESTMENTS ELECTRONICS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Andrew Kaplan became Portfolio Manager of Fidelity Select Electronics Portfolio on August 26, 1996. Q. ANDY, HOW DID THE FUND PERFORM? A. For the six- and 12-month periods ended August 31, 1996, the fund returned -1.60% and -2.89%, respectively. By comparison, the Standard & Poor's 500 Index returned 2.96% for the past six months and 18.73% for the year. Q. JUDGING BY THE NUMBERS, IT WAS A PRETTY ROUGH PERIOD FOR ELECTRONICS STOCKS. WHAT FACTORS ACCOUNTED FOR THE SECTOR'S PERFORMANCE OVER THE PAST SIX MONTHS? A. Two events had a negative effect on the electronics sector. The first was a dramatic over-supply of commodity semiconductors, which caused a major price drop for these components. Nowhere was this more evident than in the price of D-RAM, which fell roughly 75% in the first five months of 1996. The drop in semiconductor chip prices not only hurt the stock prices of commodity semiconductor manufacturers, but the companies that make semiconductor equipment as well. The second event was a major inventory correction that affected even the high-quality, proprietary semiconductor companies, which typically can weather severe downturns. Proprietary companies are the only manufacturer producing a given product and, as such, aren't typically affected by commodity pricing pressures. But during the period, even these manufacturers suffered. In late 1995, computer and telecommunications equipment manufacturers began to stockpile chips because parts and shortages crept up. However, what transpired in 1996 was that the demand for semiconductors actually cooled a bit. Not only did we see demand slow, but computer and telecom companies started to draw down their own stockpiles. Consequently, the number of new orders slumped. Q. WHICH STOCKS WERE MOST ADVERSELY AFFECTED BY THE INVENTORY CORRECTION? A. Manufacturers of proprietary components in the programmable logic device area were poor performers and hurt the fund's performance over the past six months. Stocks such as Actel and Altera suffered losses because the inventory correction in this particular segment of the semiconductor arena took longer than expected to work itself through. Q. WASN'T INTEL - THE FUND'S LARGEST HOLDING AT THE END OF AUGUST - ALSO NEGATIVELY AFFECTED? A. Intel was practically the only semiconductor stock that was able to weather the inventory correction relatively unscathed. Intel's parts remained in tight enough supply so that the market never became flooded with them. The market continued to push the price of Intel's stock higher throughout the period in anticipation of two new products. The first is the multi-media extension (MMX) architecture, which will improve the quality of computer-based video and graphics. The other is the Pentium Pro, or the 686 chip, which has been well-received among workstation and server users. Other companies in this arena failed to offer up competing products, and in my view, that helped solidify Intel's dominance. Q. SOME COMPANIES KNOWN LARGELY FOR THEIR PERSONAL COMPUTERS - INCLUDING DELL AND COMPAQ - WERE AMONG THE FUND'S LARGEST HOLDINGS AT THE END OF AUGUST. DOES THEIR PRESENCE MEAN YOU'RE OPTIMISTIC ABOUT FUTURE PC DEMAND? A. Yes, that's part of their attraction, but there is another factor. With the collapse in commodity semiconductor chip prices - which is the major cost of goods for those companies - their input costs fell very rapidly. Because the PC makers didn't immediately pass on these savings to the consumer, there was a period in which Dell and Compaq were able to enjoy expanded profit margins. In my view, that situation could continue until 1997. Likewise Cisco Systems, which produces network equipment and software, benefited from the dramatic fall in D-RAM prices I mentioned previously. Q. ANDY, WHAT'S YOUR OUTLOOK? A. I'm optimistic. In my view, the worst of the inventory correction is behind the electronics industry. As I mentioned earlier, I believe that demand for personal computers will be strong. PC demand across Asia has continued to be extremely robust. In Europe, demand seems to be improving, admittedly from a somewhat weak level. While they don't represent a very large part of global PC sales, emerging countries have rapidly increased their demand. I believe that the holiday sales of PCs in the U.S. will be good, if consumer confidence remains high and shoppers are lured by the favorable financing options that retailers are expected to offer. I'll most likely focus on finding high-quality companies that I believe can best benefit from these trends. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 008 TRADING SYMBOL: FSELX SIZE: as of August 31, 1996, more than $1.0 billion MANAGER: Andrew Kaplan, since August, 1996; analyst, semiconductor equipment companies and producers; joined Fidelity in 1995 (checkmark) ELECTRONICS PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.5% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 2.3% AIRCRAFT - 2.3% Lockheed Martin Corp. 172,700 $ 14,528,380 53983010 McDonnell Douglas Corp. 192,200 9,634,025 58016910 24,162,405 COMMUNICATIONS EQUIPMENT - 18.8% DATACOMMUNICATIONS EQUIPMENT - 10.9% Cabletron Systems, Inc. (a) 288,300 17,586,300 12692010 Cisco Systems, Inc. (a) 1,375,000 72,531,250 17275R10 Level One Communications, Inc. 100,000 2,150,000 52729510 3Com Corp. (a) 497,700 23,267,475 88553510 115,535,025 TELEPHONE EQUIPMENT - 7.9% Andrew Corp. (a) 60,000 2,670,000 03442510 Ascend Communications, Inc. (a) 243,900 12,774,263 04349110 DSC Communications Corp. (a) 560,000 16,660,000 23331110 Newbridge Networks Corp. (a) 165,200 9,519,650 65090110 Pairgain Technologies, Inc. (a) 169,600 11,236,000 69593410 Tellabs, Inc. (a) 435,100 27,574,463 87966410 Xylan Corp. (a) 60,000 2,535,000 98415110 82,969,376 TOTAL COMMUNICATIONS EQUIPMENT 198,504,401 COMPUTER SERVICES & SOFTWARE - 13.5% CAD/CAM/CAE - 1.2% Cambridge Technology Partners Mass., Inc. (a) 60,000 1,695,000 13252410 Parametric Technology Corp. (a) 241,700 10,944,478 69917310 12,639,478 COMPUTER & SOFTWARE STORES - 0.2% MicroAge, Inc. (a) 138,200 2,073,000 59492810 COMPUTER SERVICES - 3.6% America Online, Inc. (a) 100,000 3,025,000 02364J10 Computer Sciences Corp. (a) 35,000 2,450,000 20536310 Electronic Data Systems Corp. 602,700 32,847,150 28566110 38,322,150 DATA PROCESSING - 0.3% Ceridian Corp. (a) 87,400 3,725,425 15677T10 PREPACKAGED COMPUTER SOFTWARE - 8.2% Adobe Systems, Inc. 90,000 3,138,750 00724F10 BMC Software, Inc. (a) 60,700 4,522,150 05592110 Cadence Design Systems, Inc. (a) 157,300 4,660,013 12738710 Computer Associates International, Inc. 75,000 3,937,500 20491210 Electronics for Imaging, Inc. (a) 237,800 15,040,850 28608210 McAfee Associates, Inc. (a) 25,000 1,490,625 57905710 Microsoft Corp. (a) 330,000 40,425,000 59491810 Oracle Systems Corp. (a) 355,100 12,517,275 68389X10 Phoenix Technologies Ltd. (a) 50,000 856,250 71915310 86,588,413 TOTAL COMPUTER SERVICES & SOFTWARE 143,348,466 COMPUTERS & OFFICE EQUIPMENT - 23.4% COMPUTER PERIPHERALS - 0.7% Centennial Technologies, Inc. (a) 99,300 3,401,025 15139210 SCI Systems, Inc. (a) 12,000 535,500 78389010 Western Digital Corp. (a) 100,000 3,512,500 95810210 7,449,025 SHARES VALUE (NOTE 1) COMPUTER STORAGE DEVICES - 6.5% Adaptec, Inc. (a) 796,690 $ 39,734,914 00651F10 Hutchinson Technology, Inc. (a) 68,200 2,548,975 44840710 Quantum Corp. (a) 64,500 991,688 74790610 Read Rite Corp. (a) 143,500 1,901,375 75524610 Seagate Technology (a) 489,300 23,486,400 81180410 68,663,352 COMPUTERS & OFFICE EQUIPMENT - 5.6% International Business Machines Corp. 520,700 59,555,063 45920010 ELECTRONIC COMPUTERS - 1.2% Bay Networks, Inc. (a) 450,000 12,375,000 07251010 GRAPHICS WORKSTATIONS - 2.0% Silicon Graphics, Inc. (a) 302,200 7,026,150 82705610 Sun Microsystems, Inc. (a) 258,600 14,061,375 86681010 21,087,525 MAGNETIC & OPTICAL RECREATION MEDIA - 0.1% Caere Corp. (a) 175,000 1,569,531 12764610 MINI & MICRO COMPUTERS - 6.8% Compaq Computer Corp. (a) 959,800 54,348,675 20449310 Dell Computer Corp. (a) 260,000 17,452,500 24702510 71,801,175 OFFICE AUTOMATION - 0.5% Pitney Bowes, Inc. 100,000 4,825,000 72447910 TOTAL COMPUTERS & OFFICE EQUIPMENT 247,325,671 DEFENSE ELECTRONICS - 0.7% Raytheon Co. 100,000 5,150,000 75511110 Tracor, Inc. (a) 100,000 1,937,500 89234920 7,087,500 ELECTRICAL EQUIPMENT - 1.6% ELECTRICAL EQUIPMENT - 0.3% Cyberoptics Corp. 115,500 1,501,500 23251710 Vicor Corp. (a) 55,000 1,354,375 92581510 2,855,875 TV & RADIO COMMUNICATION EQUIPMENT - 1.3% General Instrument Corp. (a) 327,400 8,962,575 37012110 Scientific-Atlanta, Inc. 378,600 5,111,100 80865510 14,073,675 TOTAL ELECTRICAL EQUIPMENT 16,929,550 ELECTRONIC INSTRUMENTS - 1.3% ELECTRONIC EQUIPMENT - 0.1% Anadigics, Inc. (a) 50,000 1,600,000 03251510 MEASURING INSTRUMENTS - 1.2% Perkin-Elmer Corp. 234,700 12,175,063 71404110 TOTAL ELECTRONIC INSTRUMENTS 13,775,063 ELECTRONICS - 28.5% ELECTRONICS & ELECTRONIC COMPONENTS - 3.6% Cascade Communications Corp. (a) 459,300 31,289,813 14718410 Cirrus Logic, Inc. 205,000 3,177,500 17275510 Sanmina Corp. (a) 65,000 2,275,000 80090710 Solectron Corp. (a) 50,800 1,898,650 83418210 38,640,963 SEMICONDUCTORS - 24.9% Actel Corp. (a)(b) 1,484,000 23,744,000 00493410 Altera Corp. (a) 291,000 12,804,000 02144110 Analog Devices, Inc. (a) 290,000 6,996,250 03265410 Burr-Brown Corp. (a) 5,000 96,250 12257410 CFM Technologies, Inc. (a) 40,000 440,000 12525K10 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRONICS - CONTINUED SEMICONDUCTORS - CONTINUED Intel Corp. 1,197,400 95,567,488 45814010 Intel Corp. (warrants) (a) 534,500 $ 22,382,188 45814014 Lattice Semiconductor Corp. (a) 360,000 10,215,000 51841510 Linear Technology Corp. 1,334,710 45,380,140 53567810 Maxim Integrated Products, Inc. (a) 129,300 3,967,894 57772K10 Mylex Corp. (a) 78,400 1,293,600 62854610 S-3, Inc. (a) 1,460,500 21,542,375 78484910 Sierra Semiconductor Corp. 279,500 3,249,188 82648510 Storage Technology Corp. (a) 35,300 1,336,988 86211120 Triquint Semiconductor, Inc. (a) 207,000 4,165,875 89674K10 Vitesse Semiconductor Corp. (a) 85,000 2,709,375 92849710 Xilinx, Inc. (a) 199,700 6,989,500 98391910 262,880,111 TOTAL ELECTRONICS 301,521,074 LEISURE DURABLES & TOYS - 0.3% TOYS & GAMES - 0.3% Nintendo Co. Ltd. Ord. 50,700 3,101,374 65443999 MEDICAL EQUIPMENT & SUPPLIES - 0.7% MEDICAL TECHNOLOGY - 0.7% Medtronic, Inc. 65,600 3,411,200 58505510 St. Jude Medical, Inc. (a) 99,900 3,583,913 79084910 6,995,113 TELEPHONE SERVICES - 2.4% LCI International, Inc. (a) 234,900 8,309,588 50181310 MFS Communications, Inc. 100,000 4,237,500 55272T10 WorldCom, Inc. (a) 625,100 13,127,100 98155K10 25,674,188 TOTAL COMMON STOCKS (Cost $946,341,075) 988,424,805 CONVERTIBLE BONDS - 0.8% MOODY'S PRINCIPAL RATINGS AMOUNT COMPUTERS & OFFICE EQUIPMENT - 0.8% COMPUTERS - 0.0% Acer, Inc. euro 4%, 6/10/01 - $ 100,000 225,000 004993AC MAINFRAME COMPUTERS - 0.8% Unisys Corp. 8 1/4%, 8/1/00 B3 9,375,000 8,648,438 909214AX TOTAL CONVERTIBLE BONDS (Cost $9,269,206) 8,873,438 REPURCHASE AGREEMENTS - 5.7% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 59,989,974 59,955,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $1,015,565,281) $ 1,057,253,243 LEGEND 1. Non-income producing 2. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Actel Corp.. $ 9,989,485 $ 4,633,792 $ - $ 23,744,000 Unitrode Corp.. - 1,808,487 - - Totals $ 9,989,485 $ 6,442,279 $ - $ 23,744,000 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $1,971,295,013 and $1,891,864,674, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $235,835 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balance during the period for which the loan was outstanding amounted to $5,338,000. The weighted average interest rate paid was 5.8% (see Note 6 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $2,535,000 and $2,640,000, respectively (see Note 7 of Notes to Financial Statements). The fund participated in the interfund lending program as a lender. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $18,905,000 and $6,781,250, respectively. The weighted average interest rate was 5.4%. Interest earned from the interfund lending program amounted to $4,099 and is included in interest income on the Statement of Operations (see Note 8 of Notes to Financial Statements.) INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $1,016,526,418. Net unrealized appreciation aggregated $40,726,825 of which $67,221,782 related to appreciated investment securities and $26,494,957 related to depreciated investment securities. The fund intends to elect to defer to its fiscal year ending February 28, 1997 approximately $62,667,000 of losses recognized during the period November 1, 1995 to February 29, 1996. ELECTRONICS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 1,057,253,243 securities, at value (including repurchase agreements of $59,955,000) (cost $1,015,565,281) - - See accompanying schedule Cash 695 Receivable for 43,504,356 investments sold Receivable for 2,951,195 fund shares sold Dividends 437,855 receivable Interest receivable 62,638 Redemption fees 7,502 receivable Other receivables 41,886 Prepaid expenses 44,328 TOTAL ASSETS 1,104,303,698 LIABILITIES Payable for $ 31,239,575 investments purchased Payable for fund 8,082,195 shares redeemed Accrued 545,407 management fee Other payables 805,380 and accrued expenses Collateral on 2,640,000 securities loaned, at value TOTAL LIABILITIES 43,312,557 NET ASSETS $ 1,060,991,141 Net Assets consist of: Paid in capital $ 1,100,186,633 Accumulated net (1,015,866) investment (loss) Accumulated (79,867,588) undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 41,687,962 appreciation (depreciation) on investments NET ASSETS, for $ 1,060,991,141 38,265,235 shares outstanding NET ASSET VALUE $27.73 and redemption price per share ($1,060,991,141 (divided by) 38,265,235 shares) Maximum offering $28.59 price per share (100/97.00 of $27.73) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 1,450,117 INCOME Dividends Interest (including 4,880,975 income on securities loaned of $96,848) TOTAL INCOME 6,331,092 EXPENSES Management fee $ 3,323,685 Transfer agent 3,678,853 fees Accounting and 399,509 security lending fees Non-interested 2,081 trustees' compensation Custodian fees 30,300 and expenses Registration fees 44,328 Audit 56,710 Legal 4,200 Interest 853 Miscellaneous 8,568 Total expenses 7,549,087 before reductions Expense (202,129 7,346,958 reductions ) NET INVESTMENT (1,015,866 INCOME (LOSS) ) REALIZED AND 1,773,071 UNREALIZED GAIN (LOSS) Net realized gain (loss) on investment securities (including realized gain (loss) of $2,845,939 on sale of investments in affiliated issuers) Change in net (39,490,378 unrealized ) appreciation (depreciation) on investment securities NET GAIN (LOSS) (37,717,307 ) NET INCREASE $ (38,733,173 (DECREASE) IN ) NET ASSETS RESULTING FROM OPERATIONS OTHER $ 2,823,293 INFORMATION Sales charges paid to FDC Deferred sales $ 3,867 charges withheld by FDC Exchange fees $ 180,323 withheld by FSC Expense $ 183,529 reductions Directed brokerage arrangements Custodian 14,367 interest credits Transfer agent 4,233 interest credits $ 202,129 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ (1,015,866) $ (2,596,453) Net investment income (loss) Net realized 1,773,071 270,475,690 gain (loss) Change in net (39,490,378) 60,817,847 unrealized appreciation (depreciation) NET INCREASE (38,733,173) 328,697,084 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to - (151,485,297) shareholders from net realized gains Share 795,086,087 2,894,540,424 transactions Net proceeds from sales of shares Reinvestment of - 148,005,751 distributions Cost of shares (830,868,415) (2,308,922,665) redeemed Paid in capital 2,144,848 6,093,960 portion of redemption fees NET INCREASE (33,637,480) 739,717,470 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (72,370,653) 916,929,257 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 1,133,361,794 216,432,537 period End of period $ 1,060,991,141 $ 1,133,361,794 (including accumulated net investment loss of $1,015,866 and $0, respectively) OTHER INFORMATION Shares Sold 28,185,788 99,523,034 Issued in - 6,026,277 reinvestment of distributions Redeemed (30,145,088) (76,257,043) Net increase (1,959,300) 29,292,268 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 28.18 $ 19.80 $ 17.67 $ 14.28 $ 11.81 $ 10.75 beginning of period Income from Investment Operations Net investment (.03) (.08) (.18) (.09) (.05) (.12) income (loss) Net realized and (.47) 13.51 2.11 6.09 2.33 1.00 unrealized gain (loss) Total from (.50) 13.43 1.93 6.00 2.28 .88 investment operations Less Distributions From net - (5.25) - (2.75) - - realized gain Redemption fees .05 .20 .20 .14 .19 .18 added to paid in capital Net asset value, $ 27.73 $ 28.18 $ 19.80 $ 17.67 $ 14.28 $ 11.81 end of period TOTAL RETURN B, C (1.60)% 72.75% 12.05% 46.24% 20.91% 9.86% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 1,060,991 $ 1,133,362 $ 216,433 $ 110,993 $ 48,027 $ 34,222 period (000 omitted) Ratio of expenses 1.36% A 1.25% 1.72% 1.67% 1.69% A 2.16% to average net assets Ratio of expenses 1.32% A, 1.22% 1.71% 1.67% 1.69% A 2.16% to average net E E E assets after expense reductions Ratio of net (.18)% A (.28)% (.98)% (.52)% (.50)% A (1.07)% investment income (loss) to average net assets Portfolio turnover 379% A 366% 205% 163% 293% A 299% rate Average $ .0411 commission rate F
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
SOFTWARE AND COMPUTER SERVICES PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTHS YEAR YEARS YEARS SOFTWARE AND -0.61% 7.06% 179.71% 431.81% COMPUTER SERVICES SOFTWARE AND -3.59% 3.85% 171.32% 415.85% COMPUTER SERVICES (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS SOFTWARE AND COMPUTER SERVICES 7.06% 22.84% 18.19% SOFTWARE AND COMPUTER SERVICES 3.85% 22.09% 17.83% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960910 152925 S00000000000001 Software/Computer Svcs SP Standard & Poor 500 00028 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8957.42 9173.00 1986/10/31 9792.82 9702.28 1986/11/30 10009.41 9938.05 1986/12/31 9785.09 9684.63 1987/01/31 11865.87 10989.15 1987/02/28 12979.74 11423.22 1987/03/31 13196.33 11753.35 1987/04/30 13420.65 11648.74 1987/05/31 13482.54 11750.09 1987/06/30 13010.69 12343.47 1987/07/31 12972.01 12969.28 1987/08/31 13884.77 13453.04 1987/09/30 14031.74 13158.41 1987/10/31 10318.82 10324.09 1987/11/30 9336.44 9473.39 1987/12/31 10708.87 10194.31 1988/01/31 10399.42 10623.49 1988/02/29 11254.50 11118.55 1988/03/31 11352.22 10774.98 1988/04/30 11694.25 10894.59 1988/05/31 11376.65 10989.37 1988/06/30 12272.45 11493.78 1988/07/31 11661.68 11450.10 1988/08/31 10855.46 11060.80 1988/09/30 11555.81 11531.99 1988/10/31 10945.04 11852.58 1988/11/30 10782.17 11683.09 1988/12/31 11677.97 11887.54 1989/01/31 12549.33 12757.71 1989/02/28 11987.42 12440.04 1989/03/31 11694.25 12729.90 1989/04/30 12826.22 13390.58 1989/05/31 13290.40 13932.90 1989/06/30 11974.16 13853.48 1989/07/31 11620.74 15104.45 1989/08/31 12150.87 15400.50 1989/09/30 12394.90 15337.35 1989/10/31 12655.75 14981.53 1989/11/30 13026.00 15287.15 1989/12/31 13085.07 15654.04 1990/01/31 12619.90 14603.66 1990/02/28 12947.24 14792.04 1990/03/31 13464.10 15184.03 1990/04/30 13421.03 14804.43 1990/05/31 15109.42 16247.86 1990/06/30 15462.61 16137.38 1990/07/31 14049.87 16085.74 1990/08/31 12085.82 14631.59 1990/09/30 10698.92 13919.03 1990/10/31 10914.28 13859.18 1990/11/30 12318.40 14754.48 1990/12/31 13197.06 15166.13 1991/01/31 15135.27 15827.37 1991/02/28 16237.89 16959.03 1991/03/31 17159.62 17369.44 1991/04/30 17030.40 17411.13 1991/05/31 17340.52 18163.29 1991/06/30 16069.58 17331.41 1991/07/31 17056.73 18139.05 1991/08/31 18442.53 18568.95 1991/09/30 17835.06 18258.85 1991/10/31 18727.28 18503.51 1991/11/30 16677.06 17757.82 1991/12/31 19247.22 19789.32 1992/01/31 22336.65 19421.24 1992/02/29 23007.83 19673.71 1992/03/31 21902.35 19290.07 1992/04/30 21349.61 19857.20 1992/05/31 21685.20 19954.50 1992/06/30 20510.63 19657.18 1992/07/31 21961.57 20461.16 1992/08/31 20323.09 20041.71 1992/09/30 21793.78 20278.20 1992/10/31 23550.70 20349.17 1992/11/30 25603.74 21043.08 1992/12/31 26087.39 21301.91 1993/01/31 27429.76 21480.84 1993/02/28 27261.96 21772.98 1993/03/31 27844.31 22232.39 1993/04/30 27375.72 21694.37 1993/05/31 30463.29 22275.78 1993/06/30 32034.94 22340.38 1993/07/31 31065.20 22251.02 1993/08/31 33160.73 23094.33 1993/09/30 33829.52 22916.50 1993/10/31 33751.50 23390.88 1993/11/30 32915.51 23168.66 1993/12/31 34626.01 23449.00 1994/01/31 35832.58 24246.27 1994/02/28 36310.18 23589.20 1994/03/31 32413.97 22560.71 1994/04/30 32581.66 22849.48 1994/05/31 29320.95 23224.22 1994/06/30 26748.04 22655.22 1994/07/31 28059.97 23398.31 1994/08/31 31104.15 24357.64 1994/09/30 32517.98 23760.88 1994/10/31 34517.71 24295.50 1994/11/30 33728.01 23410.66 1994/12/31 34759.72 23757.84 1995/01/31 34186.54 24373.88 1995/02/28 37026.93 25323.73 1995/03/31 39141.30 26071.03 1995/04/30 40364.07 26838.83 1995/05/31 41459.46 27911.57 1995/06/30 45127.77 28559.96 1995/07/31 47853.52 29507.01 1995/08/31 48184.69 29581.07 1995/09/30 50171.68 30829.39 1995/10/31 50770.33 30719.33 1995/11/30 52209.63 32067.91 1995/12/31 50841.03 32685.54 1996/01/31 48891.12 33798.15 1996/02/29 51902.01 34111.46 1996/03/31 50582.95 34439.95 1996/04/30 55675.31 34947.60 1996/05/31 57616.61 35848.90 1996/06/30 54741.71 35985.48 1996/07/31 50533.09 34395.64 1996/08/30 51585.24 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960910 152930 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Software and Computer Services Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $51,585 - a 415.85% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Microsoft Corp. 7.4 Electronics for Imaging, Inc. 7.3 Oracle Systems Corp. 7.1 Cisco Systems, Inc. 5.8 Intel Corp. 4.6 BMC Software, Inc. 3.6 Tech Data Corp. 3.4 International Business Machines Corp. 3.0 Electronic Arts, Inc. 2.8 SunGard Data Systems, Inc. 2.8 TOP INDUSTRIES AS OF AUGUST 31, 1996 Row: 1, Col: 1, Value: 31.3 Row: 1, Col: 2, Value: 3.4 Row: 1, Col: 3, Value: 6.8 Row: 1, Col: 4, Value: 7.0 Row: 1, Col: 5, Value: 7.2 Row: 1, Col: 6, Value: 44.3 Prepackaged Computer Software 44.3% Computer Services 7.2% Datacommunications Equipment 7.0% Semiconductors 6.8% Retail, General 3.4% All Others 31.3% * * INCLUDES SHORT-TERM INVESTMENTS SOFTWARE AND COMPUTER SERVICES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW John Hurley, Portfolio Manager of Fidelity Select Software and Computer Services Portfolio Q. HOW DID THE FUND PERFORM, JOHN? A. For the six months ended August 31, 1996, the fund had a total return of - -0.61%, while the Standard & Poor's 500 Index returned 2.96%. For the 12 months ended August 31, 1996, the fund returned 7.06% and the S&P 500 had a total return of 18.73%. Q. WHAT CAUSED THE FUND TO UNDERPERFORM THE MARKET? A. The entire technology sector - including software and computer services stocks - lagged the market primarily due to its weakening business prospects, including disappointing news on the earnings front. Fidelity's internal analysis found that in June and July alone, the sector underperformed the S&P 500 by more than 10% on a market capitalization weighted basis. The decline in technology stocks was broad-based, with every sector underperforming the market. In short, there was no place to hide during the decline. However, software and computer services stocks rebounded and outperformed the market as a whole in August. Q. WHICH OF THE FUND'S HOLDINGS WERE HURT MOST DURING THE SUMMER DECLINE? A. Broderbund Software, a leading publisher and distributor of entertainment, educational and personal productivity software, was one of the fund's holdings hardest hit. Its poorer-than-expected financial results led to dramatic declines in its stock price. Q. WHICH HOLDINGS WERE BETTER ABLE TO WEATHER THE DOWNTURN? A. One of the fund's best performers over the past six months was Electronics for Imaging, Inc. (EFII), which makes a computer server that allows customers to print documents from computer networks using high-end color copiers. Early this year, EFII began selling this technology to color printer vendors including Canon and Digital Equipment Corp. In my view, the company's management has done a brilliant job, evidenced by earnings which were significantly higher than many Wall Street analysts had anticipated. Other top performers included: Oracle Systems, a producer of relational database and applications software for the client-server market; PeopleSoft, which provides businesses with software packages to manage human resource and financial functions; and SunGard Data, which specializes in proprietary investment-support systems and comprehensive computer disaster-recovery services. All three managed to deliver stronger-than-expected revenue growth and increasing profit margins, despite brutally competitive operating environments. Q. WHAT WAS THE ATTRACTION TO MICROSOFT, THE FUND'S LARGEST HOLDING AT THE END OF THE PERIOD? A. With the introduction of Windows 95 about a year ago, Microsoft successfully overwhelmed all of its key competitors and became the dominant leader in many areas. A year ago, Apple's MacIntosh still had some life left, as did IBM's OS/2 operating system. Likewise, Word Perfect's applications business and Novell's networking business looked like they may cause some competition for Microsoft. Despite a slower-than-expected acceptance of Windows 95, Microsoft currently enjoys almost complete control of desktop operating systems and productivity applications, and is rapidly penetrating the server operating system and database markets with Windows NT Server and NT SQL Software. Q. WHAT OTHER STOCKS DID YOU FIND ATTRACTIVE? A. I added Intel to the fund's holdings for two reasons. First, demand for personal computers was showing signs of strengthening, which translated into increased demand for Intel's products. Second, like Microsoft, Intel did a good job fending off competitors. With recent problems at two of its largest competitors, Intel was able to raise prices, which helped its revenues. A new addition to the fund's top ten holdings during the period was Tech Data Corporation, which resells computers, networking, software and peripherals to value-added resellers and retail stores. The company's management team has delivered outstanding results over the past year, growing revenues more than 50% and sharply increasing operating margins. Q. WHAT'S YOUR OUTLOOK? A. The sharp decline in technology stocks in June and July did take some hot air out of the inflated valuations - stock prices compared to other measures, such as earnings - of many software names, and seemed to cool the past year's frenzy over technology initial public offerings (IPOs). The 50-60% declines in several of these stocks this summer did not make them cheap, but the correction was certainly a step in the right direction. In many cases, the revaluation was short-lived, with many high-quality names climbing back up in August. Still, somewhat better valuations and measurably better business prospects leave me more optimistic about the success of technology and client-server computing for the months ahead. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 028 TRADING SYMBOL: FSCSX SIZE: as of August 31, 1996, more than $367 million MANAGER: John Hurley, since 1994; analyst, PC software, database software and mainframe software industries, since 1994; joined Fidelity in 1993 (checkmark) SOFTWARE AND COMPUTER SERVICES PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.2% SHARES VALUE (NOTE 1) COMMUNICATIONS EQUIPMENT - 7.0% DATACOMMUNICATIONS EQUIPMENT - 7.0% Cisco Systems, Inc. (a) 420,000 $ 22,155,000 17275R10 3Com Corp. 100,000 4,675,000 88553510 26,830,000 COMPUTER SERVICES & SOFTWARE - 55.1% CAD/CAM/CAE - 0.0% New Dimension Software Ltd. (a) 7,500 42,188 64399A22 COMPUTER SERVICES - 7.2% American Management Systems, Inc. (a) 150,000 3,806,247 02735210 Electronic Data Systems Corp. 150,000 8,175,000 28566110 Paychex, Inc. 93,750 5,015,625 70432610 SunGard Data Systems, Inc. (a) 250,000 10,687,500 86736310 27,684,372 DATA PROCESSING - 1.8% Fiserv, Inc. (a) 200,000 6,775,000 33773810 ELECTRONIC INFORMATION RETRIEVAL - 1.8% CUC International, Inc. (a) 199,307 6,851,178 12654510 PREPACKAGED COMPUTER SOFTWARE - 44.3% Arbor Software Corp. (a) 200 8,400 03891810 Aspect Development, Inc. (a) 2,000 52,500 04523410 BMC Software, Inc. (a) 185,000 13,782,500 05592110 Boole & Babbage, Inc. (a) 152,250 3,615,938 09858610 Broderbund Software, Inc. (a) 201,600 6,073,200 11201410 Business Objects SA sponsored ADR (a) 19,900 353,225 12328X10 Check Point Software Technologies Ltd. (a) 2,000 49,000 16299A22 Cheyenne Software, Inc. (a) 300,000 5,550,000 16688810 Electronic Arts, Inc. (a) 350,000 10,806,250 28551210 Electronics for Imaging, Inc. (a) 441,000 27,893,250 28608210 General Magic, Inc. (a) 89,400 368,775 37025310 Hyperion Software, Inc. (a) 37,600 498,200 44914Q10 Mercury Interactive Group Corp. (a) 474,400 6,641,600 58940510 Metrowerks, Inc. (a) 108,300 1,147,707 59266R10 Microsoft Corp. (a) 230,000 28,175,000 59491810 OneWave, Inc. (a) 2,000 30,000 68272R10 Openvision Technologies, Inc. (a) 2,000 18,750 68371610 Oracle Systems Corp. (a) 772,800 27,241,200 68389X10 PeopleSoft, Inc. (a) 113,000 8,672,750 71271310 Policy Management Systems Corp. (a) 129,200 4,554,300 73110810 Remedy Corp. (a) 9,000 409,500 75954810 Restrac, Inc. (a) 110,000 1,416,250 76126W10 Scopus Technology, Inc. (a) 365,000 6,661,250 80917210 Software 2000, Inc. (a) 50,000 556,250 83404710 Spectrum Holobyte, Inc. (a) 342,800 1,756,850 84762J10 Sybase, Inc. (a) 269,200 4,336,644 87113010 Vantive Corp. (a) 135,400 5,957,600 92209110 VMARK Software, Inc. (a) 356,000 2,759,000 92856110 169,385,889 TOTAL COMPUTER SERVICES & SOFTWARE 210,738,627 COMPUTERS & OFFICE EQUIPMENT - 14.9% COMPUTER EQUIPMENT - WHOLESALE - 3.4% Tech Data Corp. (a) 490,000 12,985,000 87823710 COMPUTER PERIPHERALS - 2.3% Fore Systems, Inc. 250,000 8,875,000 34544910 COMPUTER STORAGE DEVICES - 1.0% Adaptec, Inc. (a) 79,100 3,945,113 00651F10 SHARES VALUE (NOTE 1) COMPUTERS & OFFICE EQUIPMENT - 3.0% International Business Machines Corp. 100,000 $ 11,437,500 45920010 ELECTRONIC COMPUTERS - 1.9% Auspex Systems, Inc. (a) 250,000 3,937,500 05211610 Bay Networks, Inc. 125,000 3,437,500 07251010 7,375,000 MINI & MICRO COMPUTERS - 3.3% Compaq Computer Corp. (a) 100,000 5,662,500 20449310 Dell Computer Corp. 100,000 6,712,500 24702510 12,375,000 TOTAL COMPUTERS & OFFICE EQUIPMENT 56,992,613 ELECTRICAL EQUIPMENT - 1.5% TV & RADIO COMMUNICATION EQUIPMENT - 1.5% Avid Technology, Inc. (a) 300,000 5,550,000 05367P10 ELECTRONICS - 9.5% ELECTRONICS & ELECTRONIC COMPONENTS - 2.7% Cascade Communications Corp. (a) 150,000 10,218,750 14718410 SEMICONDUCTORS - 6.8% Intel Corp. 220,000 17,558,750 45814010 Intel Corp. (warrants) (a) 117,000 4,899,375 45814014 S-3, Inc. 250,000 3,687,500 78484910 26,145,625 TOTAL ELECTRONICS 36,364,375 LEISURE DURABLES & TOYS - 2.1% TOYS & GAMES - 2.1% Nintendo Co. Ltd. Ord. 129,800 7,940,005 65443999 PHOTOGRAPHIC EQUIPMENT - 0.7% 3D Systems Corp. (a) 186,600 2,810,663 88554D20 RETAIL & WHOLESALE, MISCELLANEOUS - 3.4% RETAIL, GENERAL - 3.4% Office Depot, Inc. 200,000 3,175,000 67622010 Staples, Inc. (a) 500,000 9,875,000 85503010 13,050,000 TOTAL COMMON STOCKS (Cost $338,592,466) 360,276,283 REPURCHASE AGREEMENTS - 5.8% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 22,027,842 22,015,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $360,607,466) $ 382,291,283 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $652,433,006 and $558,974,429, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $48,561 for the period (see Note 5 of Notes to Financial Statements). The fund participated in the interfund lending program as a lender. The maximum loan and the average daily balance during the period for which the loan was outstanding amounted to $25,562,000. The weighted average interest rate was 5.5%. Interest earned from the interfund lending program amounted to $3,880 and is included in interest income on the statement of operations (see Note 8 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $360,607,466. Net unrealized appreciation aggregated $21,683,817, of which $38,078,278 related to appreciated investment securities and $16,394,461 related to depreciated investment securities. SOFTWARE AND COMPUTER SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 382,291,283 securities, at value (including repurchase agreements of $22,015,000) (cost $360,607,466) - - See accompanying schedule Cash 81 Receivable for 15,612,901 investments sold Receivable for 492,296 fund shares sold Dividends 57,500 receivable Redemption fees 583 receivable Other receivables 85,117 Prepaid expenses 55,341 TOTAL ASSETS 398,595,102 LIABILITIES Payable for $ 29,114,968 investments purchased Payable for fund 1,427,962 shares redeemed Accrued 189,552 management fee Other payables 374,838 and accrued expenses TOTAL LIABILITIES 31,107,320 NET ASSETS $ 367,487,782 Net Assets consist of: Paid in capital $ 336,117,919 Accumulated net (994,107 investment ) (loss) Accumulated 10,680,153 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 21,683,817 appreciation (depreciation) on investments NET ASSETS, for $ 367,487,782 10,557,374 shares outstanding NET ASSET VALUE $34.81 and redemption price per share ($367,487,782 (divided by) 10,557,374 shares) Maximum offering $35.89 price per share (100/97.00 of $34.81) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 455,850 INCOME Dividends Interest 1,713,490 TOTAL INCOME 2,169,340 EXPENSES Management fee $ 1,281,909 Transfer agent 1,619,839 fees Accounting and 210,296 security lending fees Non-interested 838 trustees' compensation Custodian fees 13,325 and expenses Registration fees 64,607 Audit 21,585 Legal 1,818 Miscellaneous 3,138 Total expenses 3,217,355 before reductions Expense (53,908 3,163,447 reductions ) NET INVESTMENT (994,107 INCOME (LOSS) ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 12,118,314 securities Foreign (1,790 12,116,524 currency ) transactions Change in net (22,775,450 unrealized ) appreciation (depreciation) on investment securities NET GAIN (LOSS) (10,658,926 ) NET INCREASE $ (11,653,033 (DECREASE) IN ) NET ASSETS RESULTING FROM OPERATIONS OTHER $ 1,134,204 INFORMATION Sales charges paid to FDC Deferred sales $ 2,681 charges withheld by FDC Exchange fees $ 92,370 withheld by FSC Expense $ 52,836 reductions Directed brokerage arrangements Custodian 390 interest credits Transfer agent 682 interest credits $ 53,908 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ (994,107 $ (1,677,670 Net investment ) ) income (loss) Net realized 12,116,524 78,787,493 gain (loss) Change in net (22,775,450 11,995,871 unrealized ) appreciation (depreciation) NET INCREASE (11,653,033 89,105,694 (DECREASE) IN ) NET ASSETS RESULTING FROM OPERATIONS Distributions to (10,599,684 (42,462,985 shareholders ) ) from net realized gains Share 403,125,681 441,404,241 transactions Net proceeds from sales of shares Reinvestment of 10,437,700 41,961,776 distributions Cost of shares (361,989,918 (429,413,822 redeemed ) ) Paid in capital 533,739 593,307 portion of redemption fees NET INCREASE 52,107,202 54,545,502 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 29,854,485 101,188,211 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 337,633,297 236,445,086 period End of period $ 367,487,782 $ 337,633,297 (including accumulated net investment loss of $994,107 and $0, respectively) OTHER INFORMATION Shares Sold 10,856,798 12,357,143 Issued in 302,192 1,146,186 reinvestment of distributions Redeemed (9,928,836 (12,309,713 ) ) Net increase 1,230,154 1,193,616 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 36.20 $ 29.07 $ 28.89 $ 27.62 $ 21.63 $ 19.77 beginning of period Income from Investment Operations Net investment (.09) (.19) (.26) (.34) (.07) E (.28) income (loss) Net realized and (.19) 11.85 .67 7.92 5.88 4.37 unrealized gain (loss) Total from (.28) 11.66 .41 7.58 5.81 4.09 investment operations Less Distributions From net (1.16) (4.60) (.33) (6.48) - (2.50) realized gain Redemption fees .05 .07 .10 .17 .18 .27 added to paid in capital Net asset value, $ 34.81 $ 36.20 $ 29.07 $ 28.89 $ 27.62 $ 21.63 end of period TOTAL RETURN B, C (.61)% 40.17% 1.97% 33.19% 27.69% 25.36% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 367,488 $ 337,633 $ 236,445 $ 178,034 $ 151,212 $ 89,571 period (000 omitted) Ratio of expenses 1.51% A 1.48% 1.52% 1.57% 1.64% A 1.98% to average net assets Ratio of expenses 1.48% A, 1.47% 1.50% 1.57% 1.64% A 1.98% to average net F F F assets after expense reductions Ratio of net (.47)% A (.54)% (1.01)% (1.19)% (.37)% (1.30)% investment A income (loss) to average net assets Portfolio turnover 307% A 183% 164% 376% 402% A 348% rate Average $ .0446 commission rate G
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS DIVIDENDS RECEIVED IN ARREARS WHICH AMOUNTED TO $.03 PER SHARE. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
TECHNOLOGY PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S TECHNOLOGY -11.29% -9.06% 139.84% 265.52% TECHNOLOGY -13.95% -11.79% 132.64% 254.55% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS TECHNOLOGY -9.06% 19.12% 13.84% TECHNOLOGY -11.79% 18.40% 13.49% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960916 104737 S00000000000001 Technology SP Standard & Poor 500 00064 SP001 1986/08/31 9700.00 10000.00 1986/09/30 8841.22 9173.00 1986/10/31 9348.04 9702.28 1986/11/30 9718.77 9938.05 1986/12/31 9512.29 9684.63 1987/01/31 11286.16 10989.15 1987/02/28 12562.60 11423.22 1987/03/31 11849.30 11753.35 1987/04/30 12191.87 11648.74 1987/05/31 12468.75 11750.09 1987/06/30 12098.02 12343.47 1987/07/31 12220.03 12969.28 1987/08/31 12938.03 13453.04 1987/09/30 13003.73 13158.41 1987/10/31 8428.25 10324.09 1987/11/30 7330.14 9473.39 1987/12/31 8391.96 10194.31 1988/01/31 7939.41 10623.49 1988/02/29 8726.46 11118.55 1988/03/31 8633.00 10774.98 1988/04/30 8962.58 10894.59 1988/05/31 8716.62 10989.37 1988/06/30 9518.43 11493.78 1988/07/31 8810.08 11450.10 1988/08/31 7998.43 11060.80 1988/09/30 8214.87 11531.99 1988/10/31 7875.46 11852.58 1988/11/30 7639.34 11683.09 1988/12/31 8165.68 11887.54 1989/01/31 8824.84 12757.71 1989/02/28 8583.81 12440.04 1989/03/31 8426.40 12729.90 1989/04/30 9036.36 13390.58 1989/05/31 9774.22 13932.90 1989/06/30 8908.47 13853.48 1989/07/31 9065.88 15104.45 1989/08/31 9262.64 15400.50 1989/09/30 9484.00 15337.35 1989/10/31 9415.13 14981.53 1989/11/30 9439.73 15287.15 1989/12/31 9552.87 15654.04 1990/01/31 9356.10 14603.66 1990/02/28 9882.44 14792.04 1990/03/31 10344.84 15184.03 1990/04/30 9877.53 14804.43 1990/05/31 11151.57 16247.86 1990/06/30 11249.95 16137.38 1990/07/31 10649.82 16085.74 1990/08/31 9198.69 14631.59 1990/09/30 8416.56 13919.03 1990/10/31 8657.59 13859.18 1990/11/30 9956.23 14754.48 1990/12/31 10556.36 15166.13 1991/01/31 12337.07 15827.37 1991/02/28 12961.79 16959.03 1991/03/31 13999.72 17369.44 1991/04/30 13311.05 17411.13 1991/05/31 14048.91 18163.29 1991/06/30 12686.00 17331.41 1991/07/31 14090.62 18139.05 1991/08/31 14783.03 18568.95 1991/09/30 14857.22 18258.85 1991/10/31 15257.83 18503.51 1991/11/30 14758.30 17757.82 1991/12/31 16781.59 19789.32 1992/01/31 17419.81 19421.24 1992/02/29 17691.91 19673.71 1992/03/31 16286.85 19290.07 1992/04/30 16049.37 19857.20 1992/05/31 16207.69 19954.50 1992/06/30 15048.99 19657.18 1992/07/31 15815.75 20461.16 1992/08/31 15005.79 20041.71 1992/09/30 15740.15 20278.20 1992/10/31 16668.90 20349.17 1992/11/30 18018.83 21043.08 1992/12/31 18245.62 21301.91 1993/01/31 18801.79 21480.84 1993/02/28 18693.79 21772.98 1993/03/31 18936.78 22232.39 1993/04/30 18882.48 21694.37 1993/05/31 20787.45 22275.78 1993/06/30 21802.64 22340.38 1993/07/31 21223.38 22251.02 1993/08/31 22358.00 23094.33 1993/09/30 22704.36 22916.50 1993/10/31 22256.49 23390.88 1993/11/30 22041.51 23168.66 1993/12/31 23473.00 23449.00 1994/01/31 24654.83 24246.27 1994/02/28 25351.81 23589.20 1994/03/31 24497.26 22560.71 1994/04/30 24003.85 22849.48 1994/05/31 24041.70 23224.22 1994/06/30 22004.58 22655.22 1994/07/31 22856.01 23398.31 1994/08/31 25265.22 24357.64 1994/09/30 25139.09 23760.88 1994/10/31 26078.81 24295.50 1994/11/30 25719.32 23410.66 1994/12/31 26085.11 23757.84 1995/01/31 25069.71 24373.88 1995/02/28 26520.29 25323.73 1995/03/31 28134.84 26071.03 1995/04/30 30255.39 26838.83 1995/05/31 31425.81 27911.57 1995/06/30 34345.36 28559.96 1995/07/31 37817.61 29507.01 1995/08/31 38988.04 29581.07 1995/09/30 40782.68 30829.39 1995/10/31 40171.46 30719.33 1995/11/30 39963.39 32067.91 1995/12/31 37512.18 32685.54 1996/01/31 37892.35 33798.15 1996/02/29 39968.64 34111.46 1996/03/31 36876.13 34439.95 1996/04/30 40051.80 34947.60 1996/05/31 41138.07 35848.90 1996/06/30 38211.78 35985.48 1996/07/31 34132.70 34395.64 1996/08/30 35455.45 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960916 104743 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Technology Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $35,455 - a 254.55% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS Ascend Communications, Inc. 10.0 Cisco Systems, Inc. 6.6 Compaq Computer Corp. 4.4 Intel Corp. 4.0 Bay Networks, Inc. 3.2 Dell Computer Corp. 2.4 Intel Corp. (warrants) 2.2 Electronic Arts, Inc. 2.1 Tellabs, Inc. 1.9 Computer Sciences Corp. 1.8 TOP INDUSTRIES AS OF AUGUST 31, 1996 Telephone Equipment 14.8% Prepackaged Computer Software 10.6% Semiconductors 9.5% Datacommunications Equipment 9.5% Mini & Micro Computers 6.8% All Others 48.8% * Row: 1, Col: 1, Value: 48.8 Row: 1, Col: 2, Value: 6.8 Row: 1, Col: 3, Value: 9.5 Row: 1, Col: 4, Value: 9.5 Row: 1, Col: 5, Value: 10.6 Row: 1, Col: 6, Value: 14.8 * INCLUDES SHORT-TERM INVESTMENTS TECHNOLOGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Adam Hetnarski became Portfolio Manager of Fidelity Select Technology Portfolio on March 26, 1996 Q. ADAM, HOW DID THE FUND PERFORM? A. The fund had a total return of -11.29% for the six months ended August 31, 1996. That compares with 2.96% for the Standard & Poor's 500 Index. For the 12 months ended August 31, 1996, the fund's total return was -9.06%, while the S&P 500 returned 18.73%. Q. WHAT CAUSED THE FUND TO UNDERPERFORM THE MARKET? A. Well, technology stocks had a dramatic correction during the period, particularly from May through June of this year. Much of the volatility in the technology sector occurred in networking companies, where the portfolio's significant investments in both data and voice networking stocks hurt performance over the period. Q. THE FUND'S MOVE INTO NETWORKING STOCKS HAD ALREADY STARTED BEFORE YOU BEGAN MANAGING THE PORTFOLIO . . . A. That's right, and I continued to add to those positions during the period. As a group, their growth rates compared to price-earnings ratios have been strong, and many of them have been trading at or below the mid-point of their historical price average. I believed that justified the valuations of companies such as 3Com and Cisco Systems, despite the fact that their volatility caused them to fall further than the overall tech market. Q. WHERE ELSE DID YOU FIND OPPORTUNITIES FOR THE FUND? A. Although I didn't make dramatic changes to the portfolio's direction, I did focus some of the fund's investments in telecommunications equipment stocks. I believed that those stocks could benefit from the advent of personal communications services (PCS). PCS will integrate data and voice transmission, and that could stimulate significant growth in digital and cellular capabilities. Now, because data traffic is proving to be more band-width intensive than was previously thought, I believe that we could see greater demand for telecommunications equipment for central office sites. In turn, that could help the equipment stocks, such as Tellabs, Lucent Technologies and Ascend Communications, that I've added to or increased in the fund. Q. LET'S COVER YOUR THOUGHTS BEHIND A COUPLE OF THE OTHER TOP 10 HOLDINGS IN THE FUND. A. Sure. While I've reduced the fund's holdings in some semiconductor stocks, Intel became an important position in the portfolio. It was my belief that, should personal computer prices remain fairly stable through the year, companies that produce proprietary products, such as computer-chipmaker Intel, may find opportunities to sustain their margins and garner a greater percentage of the total PC sale. Electronic Arts became a top holding during the period, based on my analysis that makers of both cartridge and PC-based 32- and 64-bit computer games have shrugged off the lethargy that's affected them since the end of the previous 16-bit cycle in 1993. Q. WHAT PARTICULAR STOCKS OR AREAS WERE DISAPPOINTMENTS DURING THE PERIOD? A. Ascend Communications was one. The problem there was that, even though it's had strong recent earnings growth, the rate of growth has slowed somewhat from exceptionally high levels. Also in the area of computer services, Electronic Data Systems (EDS) and Computer Sciences Corp. both garnered their fair share of some of the big service deals that have happened recently, but their stock prices did not get the boost I might have expected. As a result, they were also relative underperformers within the technology sector. Q. WHAT'S THE OUTLOOK, ADAM? A. I'd say that I'm more optimistic now than I was earlier in the year. I'm looking forward to a good Christmas season for PC units, which could create a ripple effect throughout many of the technology areas, from software and semiconductors to games and equipment. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 064 TRADING SYMBOL: FSPTX SIZE: as of August 31, 1996, more than $417 million MANAGER: Adam Hetnarski, since March 1996; joined Fidelity in 1991 (checkmark) TECHNOLOGY PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.4% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 0.9% AIRCRAFT - 0.9% Boeing Co. 30,000 $ 2,715,000 09702310 Lockheed Martin Corp. 10,100 849,663 53983010 McDonnell Douglas Corp. 1,000 50,110 53983010 3,614,773 AIR TRANSPORTATION - 0.2% AIR TRANSPORT, MAJOR NATIONAL - 0.2% AMR Corp. 10,000 820,000 00176510 CELLULAR - 2.0% CELLULAR & COMMUNICATION SERVICES - 2.0% AirTouch Communications, Inc. 114,200 3,140,500 00949T10 Arch Communications Group, Inc. 192,900 2,628,263 03938110 Paging Network, Inc. 40,000 705,000 69554210 360 Degrees Communications Co. 31,100 742,513 88557110 Vanguard Cellular Systems, Inc. Class A 54,540 1,043,078 92202210 8,259,354 COMMUNICATIONS EQUIPMENT - 25.1% DATACOMMUNICATIONS EQUIPMENT - 9.5% Amati Communications Corp. 218,500 3,796,438 02311510 Cabletron Systems, Inc. 10,500 640,500 12692010 Cisco Systems, Inc. (a) 527,200 27,809,800 17275R10 Digital Link Corp. 144,800 2,244,400 25385610 Dynatech Corp. 10,000 392,500 26813810 Network General Corp. (a) 118,800 2,019,600 64121010 Olicom A/S 74,300 984,475 68099A92 3Com Corp. 43,000 2,010,250 88553510 39,897,963 TELEPHONE EQUIPMENT - 14.8% Ascend Communications, Inc. (a) 803,200 42,067,600 04349110 DSC Communications Corp. 100 2,975 23331110 Dialogic Corp. 100 3,563 25249910 Ericsson (L.M.) Telephone Co. Class B ADR 75,000 1,729,688 29482140 Lucent Technologies, Inc. 55,000 2,028,125 Octel Communications Corp. 20,000 582,500 67572410 Pairgain Technologies, Inc. 105,400 6,982,750 69593410 Tellabs, Inc. (a) 125,300 7,940,888 87966410 Xylan Corp. 20,000 845,000 98415110 62,183,089 TELEPHONE INTERCONNECT SYSTEMS - 0.8% ACT Networks, Inc. 143,400 3,549,150 00097510 TOTAL COMMUNICATIONS EQUIPMENT 105,630,202 COMPUTER SERVICES & SOFTWARE - 21.1% CAD/CAM/CAE - 2.3% BBN Corp. 62,800 1,153,950 05528310 Broadway & Seymour, Inc. 385,800 4,677,825 11143310 Cambridge Technology Partners Mass., Inc. 3,500 98,875 13252410 Computer Data Systems, Inc. 9,500 210,188 20501710 Interlink Computer Sciences, Inc. 26,000 250,250 45874710 Parametric Technology Corp. 17,500 792,422 69917310 Viewlogic Systems, Inc. 183,600 2,363,850 92672110 9,547,360 SHARES VALUE (NOTE 1) COMPUTER & SOFTWARE STORES - 0.4% MicroAge, Inc. (a) 107,500 $ 1,612,500 59492810 COMPUTER SERVICES - 4.9% America Online, Inc. 100 3,025 02364J10 American Management Systems, Inc. 101,500 2,575,563 02735210 Computer Sciences Corp. 110,000 7,700,000 20536310 Electronic Data Systems Corp. 20,000 1,090,000 28566110 HBO & Co. 82,400 4,501,100 40410010 IDX Systems Corp. 9,000 261,000 44949110 SunGard Data Systems, Inc. 28,400 1,214,100 86736310 Technology Solutions, Inc. 112,300 3,312,850 87872T10 Visioneer, Inc. 9,200 67,850 92830V10 20,725,488 CUSTOM COMPUTER PROGRAMMING SERVICES - 1.7% Analysts International Corp. 49,700 1,826,475 03268110 CACI International, Inc. Class A 131,100 2,195,925 12719030 Softdesk, Inc. (a)(b) 439,200 3,184,200 83402010 7,206,600 DATA PROCESSING - 0.3% Ceridian Corp. 30,900 1,317,113 15677T10 ELECTRONIC INFORMATION RETRIEVAL - 0.9% CUC International, Inc. 112,500 3,867,188 12654510 PREPACKAGED COMPUTER SOFTWARE - 10.6% Acclaim Entertainment, Inc. (a) 125,000 1,015,625 00432520 Arbor Software Corp. 10,100 424,200 03891810 Baan Co. NV 55,000 1,753,125 11499523 Broderbund Software, Inc. (a) 4,500 135,563 11201410 Business Objects SA sponsored ADR 100 1,775 12328X10 Cadence Design Systems, Inc. 90,000 2,666,250 12738710 Citrix Systems, Inc. 32,800 1,377,600 17737610 Computer Associates International, Inc. 55,000 2,887,500 20491210 Electronic Arts, Inc. 290,900 8,981,538 28551210 GT Interactive Software, Inc. 39,100 664,700 36236E10 HPR, Inc. 117,500 2,026,875 40391210 Maxis, Inc. 200 2,300 57772X10 Microsoft Corp. (a) 28,200 3,454,500 59491810 Netscape Communications Corp. 6,100 215,788 64114910 Optika Imaging Systems, Inc. 30,000 213,750 68397310 Oracle Systems Corp. (a) 210,950 7,435,988 68389X10 PeopleSoft, Inc. 36,800 2,824,400 71271310 Raptor Systems, Inc. 50,000 850,000 75381710 Softkey International, Inc. (a) 199,672 3,469,301 83402N10 Spectrum Holobyte, Inc. (a) 709,900 3,638,238 84762J10 Vantive Corp. 6,200 272,800 92209110 44,311,816 TOTAL COMPUTER SERVICES & SOFTWARE 88,588,065 COMPUTERS & OFFICE EQUIPMENT - 20.6% COMPUTER PERIPHERALS - 1.2% Applied Magnetics Corp. 130,000 1,901,250 03821310 Fore Systems, Inc. 31,900 1,132,450 34544910 SCI Systems, Inc. (a) 10,100 450,713 78389010 Safeguard Scientifics, Inc. 10,000 322,500 78644910 Western Digital Corp. 35,200 1,236,400 95810210 5,043,313 COMPUTER RENTAL & LEASING - 1.0% Comdisco, Inc. 164,350 4,273,100 20033610 COMPUTER STORAGE DEVICES - 4.2% Adaptec, Inc. 124,400 6,204,450 00651F10 Exabyte Corp. 171,800 2,534,050 30061510 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) COMPUTERS & OFFICE EQUIPMENT - CONTINUED COMPUTER STORAGE DEVICES - CONTINUED Hutchinson Technology, Inc. (a) 105,300 $ 3,935,588 44840710 Read Rite Corp. (a) 204,500 2,709,625 75524610 Seagate Technology (a) 44,700 2,145,600 81180410 17,529,313 COMPUTERS & OFFICE EQUIPMENT - 2.5% Diebold, Inc. 22,500 1,155,938 25365110 Hewlett-Packard Co. 160,200 7,008,750 42823610 International Business Machines Corp. 22,300 2,550,563 45920010 10,715,251 ELECTRONIC COMPUTERS - 3.2% Bay Networks, Inc. (a) 490,000 13,475,000 07251010 GRAPHICS WORKSTATIONS - 0.1% Intergraph Corp. 32,200 293,825 45868310 Sun Microsystems, Inc. 6,000 326,250 86681010 620,075 MAINFRAME COMPUTERS - 0.7% Amdahl Corp. 95,000 944,063 02390510 Unisys Corp. 306,000 1,797,750 90921410 2,741,813 MINI & MICRO COMPUTERS - 6.8% Compaq Computer Corp. (a) 324,500 18,374,813 20449310 Dell Computer Corp. (a) 149,200 10,015,050 24702510 28,389,863 OFFICE AUTOMATION - 0.9% FileNet Corp. 154,600 3,710,400 31686910 Pitney Bowes, Inc. 100 4,825 72447910 Telxon Corp. 100 1,175 87970010 3,716,400 TOTAL COMPUTERS & OFFICE EQUIPMENT 86,504,128 CONSUMER DURABLES - 0.2% MANUFACTURING INDUSTRIES - 0.2% Wireless Telecom Group, Inc. 110,000 983,125 97652410 PRESSED & BLOWN GLASS - 0.0% Dupont Photomasks, Inc. 2,000 46,000 26613X10 TOTAL CONSUMER DURABLES 1,029,125 DRUGS & PHARMACEUTICALS - 7.1% BIOTECHNOLOGY - 2.4% Alkermes, Inc. 85,000 1,126,250 01642T10 Amgen, Inc. (a) 17,300 1,007,725 03116210 Biogen, Inc. 53,900 3,759,525 09059710 COR Therapeutics, Inc. 194,800 1,911,475 21775310 Genentech, Inc. special (a) 15,000 787,500 36871030 Protein Design Labs, Inc. 90,000 1,361,250 74369L10 9,953,725 COMMERCIAL LABORATORY RESEARCH - 0.6% Millennium Pharmaceuticals, Inc. 137,300 2,505,725 59990210 DRUGS - 3.9% Lilly (Eli) & Co. 118,100 6,761,225 53245710 Pfizer, Inc. 90,000 6,390,000 71708110 Schering-Plough Corp. 28,800 1,609,200 80660510 Warner-Lambert Co. 30,000 1,785,000 93448810 16,545,425 SHARES VALUE (NOTE 1) PHARMACEUTICAL PREPARATIONS - 0.2% Guilford Pharmaceuticals, Inc. 5,000 $ 138,750 40182910 Inhale Therapeutic Systems 34,600 519,000 45719110 657,750 TOTAL DRUGS & PHARMACEUTICALS 29,662,625 ELECTRICAL EQUIPMENT - 2.2% ELECTRICAL TRANSMISSION EQUIPMENT - 0.9% Adtran, Inc. 60,000 3,780,000 00738A10 MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT SUPPLIES - 0.1% Energy Conversion Devices, Inc. (a) 19,000 345,563 29265910 TV & RADIO COMMUNICATION EQUIPMENT - 1.2% Avid Technology, Inc. 100 1,850 05367P10 General Instrument Corp. (a) 40,000 1,095,000 37012110 Glenayre Technologies, Inc. 40,000 1,470,000 37789910 Ortel Corp. 45,000 1,119,375 68749W10 Spectrain Corp. 100,000 1,450,000 84760810 5,136,225 TOTAL ELECTRICAL EQUIPMENT 9,261,788 ELECTRONIC INSTRUMENTS - 0.5% ELECTRONIC EQUIPMENT - 0.5% Teradyne, Inc. (a) 8,600 133,300 88077010 Wandel & Goltermann Technologies, Inc. 127,500 1,992,188 93369210 2,125,488 ELECTRONICS - 11.0% ELECTRONICS & ELECTRONIC COMPONENTS - 1.5% Cascade Communications Corp. 75,000 5,109,375 14718410 Cirrus Logic, Inc. 75,800 1,174,900 17275510 Solectron Corp. 100 3,738 83418210 6,288,013 SEMICONDUCTORS - 9.5% Actel Corp. 10,100 161,600 00493410 Altera Corp. 5,100 224,400 02144110 Atmel Corp. 200 5,175 04951310 ESS Technology, Inc. 25,800 322,500 26915110 Intel Corp. 209,500 16,720,719 45814010 Intel Corp. (warrants) (a) 224,000 9,380,000 45814014 Linear Technology Corp. 205,100 6,973,400 53567810 Maxim Integrated Products, Inc. 55,700 1,709,294 57772K10 Micro Linear Corp. (a) 20,300 154,788 59485010 S-3, Inc. 110,000 1,622,500 78484910 Sierra Semiconductor Corp. 170,200 1,978,575 82648510 Vitesse Semiconductor Corp. 1,000 31,875 92849710 Xilinx, Inc. (a) 21,000 735,000 98391910 40,019,826 TOTAL ELECTRONICS 46,307,839 LEISURE DURABLES & TOYS - 0.6% TOYS & GAMES - 0.6% Nintendo Co. Ltd. Ord. 41,300 2,526,365 65443999 LODGING & GAMING - 0.5% HOTELS, MOTELS, & TOURIST CENTERS - 0.3% HFS, Inc. 20,000 1,197,500 40418110 RACING & GAMING - 0.2% WMS Industries, Inc. 40,000 925,000 92929710 TOTAL LODGING & GAMING 2,122,500 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) MEDICAL EQUIPMENT & SUPPLIES - 1.3% MEDICAL SUPPLIES & APPLIANCES - 0.1% Boston Scientific Corp. 10,000 $ 458,750 10113710 MEDICAL TECHNOLOGY - 1.2% Biomet, Inc. 1,300 20,313 09061310 Medtronic, Inc. 10,000 520,000 58505510 St. Jude Medical, Inc. 123,000 4,412,625 79084910 4,952,938 TOTAL MEDICAL EQUIPMENT & SUPPLIES 5,411,688 MEDICAL FACILITIES MANAGEMENT - 0.6% MEDICAL SERVICES - 0.0% Lincare Holdings, Inc. 1,300 48,506 53279110 NURSING, PERSONAL CARE FACILITIES - 0.6% NovaCare, Inc. 258,200 2,323,800 66993010 TOTAL MEDICAL FACILITIES MANAGEMENT 2,372,306 RETAIL & WHOLESALE, MISCELLANEOUS - 0.2% LUMBER & BUILDING MATERIALS - RETAIL - 0.1% Lowe's Companies, Inc. 10,000 361,250 54866110 RETAIL, GENERAL - 0.1% Staples, Inc. 25,500 503,625 85503010 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 864,875 SERVICES - 0.3% HCIA, Inc. 100 5,663 40390810 Medaphis Corp. 100,000 1,262,500 58402810 1,268,163 TELEPHONE SERVICES - 0.0% WorldCom, Inc. 10,000 210,000 98155K10 TOTAL COMMON STOCKS (Cost $403,861,961) 396,579,284 CONVERTIBLE BONDS - 0.7% MOODY'S PRINCIPAL RATINGS AMOUNT COMPUTERS & OFFICE EQUIPMENT - 0.7% Acer, Inc. euro 4%, 6/10/01 (Cost $3,305,711) - $ 1,270,000 2,857,500 004993AC REPURCHASE AGREEMENTS - 4.9% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 20,693,064 20,681,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $427,848,672) $ 420,117,784 LEGEND 1. Non-income producing 2. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Softdesk, Inc. $ 1,672,584 $ 122,278 $ - $ 3,184,200 Target Technologies, Inc. - 441,075 - - Telechips Corp. - - - - Totals $ 1,672,584 $ 563,353 $ - $ 3,184,200 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $1,182,629,625 and $1,143,196,049, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $180,921 for the period (see Note 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $215,788 and $225,700, respectively (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $427,849,044. Net unrealized depreciation aggregated $7,731,260, of which $17,885,804 related to appreciated investment securities and $25,617,064 related to depreciated investment securities. TECHNOLOGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 420,117,784 securities, at value (including repurchase agreements of $20,681,000) (cost $427,848,672) - - See accompanying schedule Cash 889,581 Receivable for 16,145,951 investments sold Receivable for 778,933 fund shares sold Dividends 110,972 receivable Interest receivable 4,233 Redemption fees 1,548 receivable Other receivables 179,110 Prepaid expenses 25,987 TOTAL ASSETS 438,254,099 LIABILITIES Payable for $ 17,646,846 investments purchased Payable for fund 2,408,945 shares redeemed Accrued 214,770 management fee Other payables 400,558 and accrued expenses Collateral on 225,700 securities loaned, at value TOTAL LIABILITIES 20,896,819 NET ASSETS $ 417,357,280 Net Assets consist of: Paid in capital $ 398,554,262 Accumulated net (960,492 investment ) (loss) Accumulated 27,494,398 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized (7,730,888 appreciation ) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 417,357,280 8,697,914 shares outstanding NET ASSET VALUE $47.98 and redemption price per share ($417,357,280 (divided by) 8,697,914 shares) Maximum offering $49.46 price per share (100/97.00 of $47.98) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 564,342 INCOME Dividends Interest (including 1,691,085 income on securities loaned of $131,191) TOTAL INCOME 2,255,427 EXPENSES Management fee $ 1,331,999 Transfer agent 1,666,891 fees Accounting and 229,858 security lending fees Non-interested 844 trustees' compensation Custodian fees 30,528 and expenses Registration fees 25,987 Audit 23,996 Legal 2,750 Miscellaneous 3,179 Total expenses 3,316,032 before reductions Expense (100,113 3,215,919 reductions ) NET INVESTMENT (960,492 INCOME (LOSS) ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 29,082,177 securities (including realized loss of $88,619 on sale of investments in affiliated issuers) Foreign (9,563 29,072,614 currency ) transactions Change in net unrealized appreciation (depreciation) on: Investment (83,689,811 securities ) Assets and 641 (83,689,170 liabilities in ) foreign currencies NET GAIN (LOSS) (54,616,556 ) NET INCREASE $ (55,577,048 (DECREASE) IN ) NET ASSETS RESULTING FROM OPERATIONS OTHER $ 831,111 INFORMATION Sales charges paid to FDC Deferred sales $ 16,656 charges withheld by FDC Exchange fees $ 73,343 withheld by FSC Expense $ 91,199 reductions Directed brokerage arrangements Custodian 8,187 interest credits Transfer agent 727 interest credits $ 100,113 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ (960,492 $ (1,983,084 Net investment ) ) income (loss) Net realized 29,072,614 81,893,509 gain (loss) Change in net (83,689,170 45,607,438 unrealized ) appreciation (depreciation) NET INCREASE (55,577,048 125,517,863 (DECREASE) IN ) NET ASSETS RESULTING FROM OPERATIONS Distributions to (4,271,944 (54,900,757 shareholders ) ) from net realized gains Share 221,414,399 586,067,139 transactions Net proceeds from sales of shares Reinvestment of 4,181,610 53,878,429 distributions Cost of shares (232,025,914 (458,176,007 redeemed ) ) Paid in capital 610,142 878,697 portion of redemption fees NET INCREASE (5,819,763 182,648,258 (DECREASE) IN ) NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (65,668,755 253,265,364 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 483,026,035 229,760,671 period End of period $ 417,357,280 $ 483,026,035 (including accumulated net investment loss of $960,492 and $0, respectively) OTHER INFORMATION Shares Sold 4,316,244 10,597,931 Issued in 84,975 1,032,983 reinvestment of distributions Redeemed (4,538,589 (8,259,673 ) ) Net increase (137,370) 3,371,241 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 54.67 $ 42.05 $ 41.83 $ 34.62 $ 32.44 $ 27.06 beginning of period Income from Investment Operations Net investment (.11) (.28) (.39) (.24) F .13 G (.26) income (loss) Net realized and (6.12) 20.83 1.95 11.04 4.68 5.56 unrealized gain (loss) Total from (6.23) 20.55 1.56 10.80 4.81 5.30 investment operations Less Distributions From net - - - (.13) - - investment income In excess of net - - - - - (.16) investment income From net (.53) (8.05) (1.50) (3.70) (2.75) - realized gain Total (.53) (8.05) (1.50) (3.83) (2.75) (.16) distributions Redemption fees .07 .12 .16 .24 .12 .24 added to paid in capital Net asset value, $ 47.98 $ 54.67 $ 42.05 $ 41.83 $ 34.62 $ 32.44 end of period TOTAL RETURN B, C (11.29)% 50.71% 4.61% 35.62% 16.48% 20.57% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 417,357 $ 483,026 $ 229,761 $ 202,475 $ 132,689 $ 105,954 period (000 omitted) Ratio of expenses 1.49% A 1.40% 1.57% 1.55% 1.64% A 1.72% to average net assets Ratio of expenses 1.45% A, 1.39% 1.56% 1.54% E 1.64% A 1.72% to average net E E E assets after expense reductions Ratio of net (.43)% A (.52)% (.98)% (.65)% .52% A (.84)% investment income (loss) to average net assets Portfolio turnover 570% A 112% 102% 213% 259% A 353% rate Average $ .0120 commission rate H
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F INVESTMENT INCOME PER SHARE REFLECTS DIVIDENDS RECEIVED IN ARREARS WHICH AMOUNTED TO $.03 PER SHARE. G INVESTMENT INCOME PER SHARE REFLECTS DIVIDENDS RECEIVED IN ARREARS WHICH AMOUNTED TO $.10 PER SHARE. H FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
TELECOMMUNICATIONS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. A fund's total return includes changes in share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells securities that have grown in value), but does not include certain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 MONTH YEAR YEARS YEARS S TELECOMMUNICATIONS 1.51% 3.73% 125.26% 390.03% TELECOMMUNICATIONS -1.54% 0.62% 118.51% 375.33% (INCL. 3% SALES CHARGE) S&P 500 2.96% 18.73% 89.14% 251.21% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark reflects reinvestment of dividends and capital gains, if any, but does not reflect any sales charges, brokerage commissions, or other costs of investing. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS TELECOMMUNICATIONS 3.73% 17.64% 17.23% TELECOMMUNICATIONS 0.62% 16.92% 16.87% (INCL. 3% SALES CHARGE) S&P 500 18.73% 13.59% 13.34% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19960831 19960910 162127 S00000000000001 Telecommunications SP Standard & Poor 500 00096 SP001 1986/08/31 9700.00 10000.00 1986/09/30 9102.85 9173.00 1986/10/31 9568.92 9702.28 1986/11/30 9736.41 9938.05 1986/12/31 9598.05 9684.63 1987/01/31 10806.91 10989.15 1987/02/28 11717.19 11423.22 1987/03/31 11571.55 11753.35 1987/04/30 11396.77 11648.74 1987/05/31 11833.71 11750.09 1987/06/30 12285.21 12343.47 1987/07/31 12671.17 12969.28 1987/08/31 13268.32 13453.04 1987/09/30 13537.76 13158.41 1987/10/31 11156.46 10324.09 1987/11/30 10391.82 9473.39 1987/12/31 11058.31 10194.31 1988/01/31 11574.56 10623.49 1988/02/29 11918.73 11118.55 1988/03/31 11971.11 10774.98 1988/04/30 12360.17 10894.59 1988/05/31 12517.29 10989.37 1988/06/30 13168.22 11493.78 1988/07/31 12981.17 11450.10 1988/08/31 12502.32 11060.80 1988/09/30 13272.96 11531.99 1988/10/31 13542.31 11852.58 1988/11/30 13662.02 11683.09 1988/12/31 14128.35 11887.54 1989/01/31 15274.91 12757.71 1989/02/28 15335.26 12440.04 1989/03/31 15961.34 12729.90 1989/04/30 17168.25 13390.58 1989/05/31 18435.50 13932.90 1989/06/30 17985.13 13853.48 1989/07/31 19350.51 15104.45 1989/08/31 19813.22 15400.50 1989/09/30 20541.43 15337.35 1989/10/31 19813.22 14981.53 1989/11/30 20313.86 15287.15 1989/12/31 21317.10 15654.04 1990/01/31 19005.33 14603.66 1990/02/28 18934.56 14792.04 1990/03/31 19374.90 15184.03 1990/04/30 18234.73 14804.43 1990/05/31 20153.35 16247.86 1990/06/30 19752.33 16137.38 1990/07/31 18848.06 16085.74 1990/08/31 16654.23 14631.59 1990/09/30 15576.98 13919.03 1990/10/31 16119.54 13859.18 1990/11/30 17039.53 14754.48 1990/12/31 17821.83 15166.13 1991/01/31 18455.18 15827.37 1991/02/28 19072.49 16959.03 1991/03/31 19609.63 17369.44 1991/04/30 20026.51 17411.13 1991/05/31 20234.95 18163.29 1991/06/30 19393.17 17331.41 1991/07/31 20491.50 18139.05 1991/08/31 21100.79 18568.95 1991/09/30 21373.37 18258.85 1991/10/31 22215.16 18503.51 1991/11/30 21365.35 17757.82 1991/12/31 23320.18 19789.32 1992/01/31 23352.58 19421.24 1992/02/29 23644.18 19673.71 1992/03/31 22809.87 19290.07 1992/04/30 23668.48 19857.20 1992/05/31 23393.08 19954.50 1992/06/30 22849.79 19657.18 1992/07/31 24075.92 20461.16 1992/08/31 23791.72 20041.71 1992/09/30 24254.56 20278.20 1992/10/31 24498.16 20349.17 1992/11/30 25773.01 21043.08 1992/12/31 26892.38 21301.91 1993/01/31 26809.66 21480.84 1993/02/28 28282.08 21772.98 1993/03/31 29440.17 22232.39 1993/04/30 29502.28 21694.37 1993/05/31 30689.84 22275.78 1993/06/30 32013.11 22340.38 1993/07/31 32946.19 22251.02 1993/08/31 35431.58 23094.33 1993/09/30 35940.53 22916.50 1993/10/31 36975.40 23390.88 1993/11/30 33947.13 23168.66 1993/12/31 34883.62 23449.00 1994/01/31 35589.84 24246.27 1994/02/28 34474.75 23589.20 1994/03/31 33396.84 22560.71 1994/04/30 33992.93 22849.48 1994/05/31 33793.31 23224.22 1994/06/30 33764.79 22655.22 1994/07/31 35637.44 23398.31 1994/08/31 36673.58 24357.64 1994/09/30 36245.82 23760.88 1994/10/31 37975.88 24295.50 1994/11/30 35960.64 23410.66 1994/12/31 36390.29 23757.84 1995/01/31 36895.17 24373.88 1995/02/28 37225.29 25323.73 1995/03/31 37691.33 26071.03 1995/04/30 38862.79 26838.83 1995/05/31 39923.58 27911.57 1995/06/30 41846.89 28559.96 1995/07/31 44503.84 29507.01 1995/08/31 45822.40 29581.07 1995/09/30 47329.32 30829.39 1995/10/31 45346.53 30719.33 1995/11/30 46347.84 32067.91 1995/12/31 47182.23 32685.54 1996/01/31 47516.19 33798.15 1996/02/29 46827.40 34111.46 1996/03/31 46608.24 34439.95 1996/04/30 48784.30 34947.60 1996/05/31 49866.89 35848.90 1996/06/30 50374.36 35985.48 1996/07/31 46562.73 34395.64 1996/08/30 47532.55 35121.05 IMATRL PRASUN SHR__CHT 19960831 19960910 162132 R00000000000123 Let's say hypothetically that $10,000 was invested in Fidelity Select Telecommunications Portfolio on August 31, 1986, and a 3% sales charge was paid. By August 31, 1996, the investment would have grown to $47,533 - a 375.33% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $35,121 over the same period - a 251.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1996 % OF FUND'S INVESTMENTS MFS Communications, Inc. 10.0 MCI Communications Corp. 4.1 WorldCom, Inc. 4.1 Cincinnati Bell, Inc. 3.4 360 Degrees Communications Co. 3.0 GTE Corp. 2.7 Sprint Corp. 2.7 DSP Communications, Inc. 2.6 Brooks Fiber Properties, Inc. 2.4 LCI International, Inc. 2.3 TOP INDUSTRIES AS OF AUGUST 31, 1996 Telephone Services 55.1% Hotels, Motels, & Tourist Centers 6.9% Telephone Equipment 6.8% Cellular & Communication Services 5.7% Computer Services 3.0% All Others 22.5% * Row: 1, Col: 1, Value: 22.5 Row: 1, Col: 2, Value: 3.0 Row: 1, Col: 3, Value: 6.8 Row: 1, Col: 4, Value: 5.7 Row: 1, Col: 5, Value: 6.9 Row: 1, Col: 6, Value: 55.1 * INCLUDES SHORT-TERM INVESTMENTS TELECOMMUNICATIONS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Nick Thakore became Portfolio Manager of Fidelity Select Telecommunications Portfolio on July 1, 1996. Q. NICK, HOW DID THE FUND PERFORM? A. For the six months ended August 31, 1996, the fund's total return was 1.51%, compared to 2.96% for the Standard & Poor's 500 Index. For the 12 months ended August 31, 1996, the fund returned 3.73%, while the S&P 500 returned 18.73%. Q. HOW WOULD YOU CHARACTERIZE THE PAST SIX MONTHS? A. The telecomm industry is approaching a period of dramatic change as local and long distance markets open up to competition. Concerns over increased competition and uncertainty related to regulatory decisions weighed negatively on the group, causing it to underperform the broader market. Although business was strong for the regional Bell operating companies (RBOCs), their performance was hurt by the August FCC ruling that determined interconnection rules that will set the tone for local telephone competition. As for the long distance companies, AT&T reported an earnings disappointment for the second quarter of 1996, with revenue growth slowing substantially, and the fall in its share price produced a ripple effect for other carriers. Q. THE OTHER BIG STORY DURING THE PERIOD WAS THE ANNOUNCEMENT OF THE MERGER BETWEEN LONG DISTANCE PROVIDER WORLDCOM AND COMPETITIVE ACCESS PROVIDER MFS . . . A. That's right. In fact, both of these were top 10 holdings at the time of the merger announcement, so that had quite an impact on the fund. Unfortunately, the market bid the buyer, WorldCom, down as a result. Q. WHY WAS THAT? A. In the near term, the acquisition causes significant earnings dilution. However, I continued to hold large positions at the end of the period because I felt that the combined entity is well positioned for the new landscape in telecommunications, as it owns both local and long distance networks, and that the near term dilution would more than be made up through longer term synergies and growth. Q. THERE WAS CONSIDERABLE CHANGE AMONG THE REST OF THE FUND'S TOP 10 HOLDINGS AS WELL . . . A. Yes, the RBOCs became a smaller part of the portfolio during the period, down from about 18% to about 10% of the fund. I increased significantly the holdings in MCI and Sprint, long distance companies whose business was strong and whose valuations were beaten down coincident with AT&T's earnings disappointment. I also increased or added holdings in cellular operators whose growth prospects remained strong while valuations have gotten cheaper, such as 360 Communications. Q. DID ANY AREAS PROVE ESPECIALLY DISAPPOINTING OVER THE PERIOD? A. As I mentioned, the fund's positions in RBOCs and long-distance companies were hurt by uncertainty about the FCC and the AT&T earnings disappointment, respectively. But there weren't many areas of telecommunications that did well outside of there, either. The equipment and cellular stocks represent only about 15% of the portfolio, so the fund wasn't badly affected by their weak showing during the period. I would say that the biggest disappointment was the large position in WorldCom, which was bought as a stand-alone investment, but that at least initially has been hurt by the market's valuation of the deal. Q. NICK, WHAT'S YOUR OUTLOOK FOR THE NEXT SEVERAL MONTHS? A. I think this period will continue to be dominated by FCC rulings regarding the opening of new markets and, especially, in the area of access reform. We should also see the first effects of the entry into local markets by the major long-distance providers. With current valuations for many telecommunications stocks near the low end of their historical range and prospects for near-term business fairly solid, my outlook is cautiously optimistic right now. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 096 TRADING SYMBOL: FSTCX SIZE: as of August 31, 1996, more than $479 million MANAGER: Nick Thakore, since July 1996; joined Fidelity in 1993 (checkmark) TELECOMMUNICTIONS PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.8% SHARES VALUE (NOTE 1) BROADCASTING - 0.8% CABLE TV OPERATORS - 0.8% Viacom, Inc. Class B (non-vtg.) (a) 122,285 $ 3,851,978 92552430 CELLULAR - 5.7% CELLULAR & COMMUNICATION SERVICES - 5.7% Century Telephone Enterprises, Inc. 180,887 6,127,541 15668610 McLeod, Inc. 41,800 1,206,975 58226610 Rogers Communications, Inc. Class B (a) 149,900 1,084,604 77510920 Telephone & Data Systems, Inc. 109,222 4,655,588 87943310 360 Degrees Communications Co. (a) 625,200 14,926,650 88557110 28,001,358 COMMUNICATIONS EQUIPMENT - 8.8% DATACOMMUNICATIONS EQUIPMENT - 2.0% Cisco Systems, Inc. (a) 187,200 9,874,800 17275R10 TELEPHONE EQUIPMENT - 6.8% DSC Communications Corp. (a) 366,200 10,894,450 23331110 DSP Communications, Inc. (a) 250,000 12,718,750 23332K10 Lucent Technologies 271,900 10,026,313 23332K10 33,639,513 TOTAL COMMUNICATIONS EQUIPMENT 43,514,313 COMPUTER SERVICES & SOFTWARE - 6.4% CAD/CAM/CAE - 1.3% ECI Telecom Ltd. 310,000 6,393,750 26825810 COMPUTER SERVICES - 3.0% Electronic Data Systems Corp. 200,000 10,900,000 28566110 HBO & Co. 75,000 4,096,875 40410010 14,996,875 DATA PROCESSING - 1.4% Ceridian Corp. (a) 70,000 2,983,750 15677T10 First Data Corp. 50,000 3,900,000 31996310 6,883,750 PREPACKAGED COMPUTER SOFTWARE - 0.7% Sterling Software, Inc. (a) 50,000 3,393,750 85954710 TOTAL COMPUTER SERVICES & SOFTWARE 31,668,125 COMPUTERS & OFFICE EQUIPMENT - 1.1% COMPUTER PERIPHERALS - 0.1% Norand Corp. (a) 16,900 285,188 65542110 ELECTRONIC COMPUTERS - 1.0% Bay Networks, Inc. (a) 175,000 4,812,500 07251010 TOTAL COMPUTERS & OFFICE EQUIPMENT 5,097,688 ELECTRICAL EQUIPMENT - 2.4% TV & RADIO COMMUNICATION EQUIPMENT - 2.4% California Amplifier, Inc. (a)(b) 654,300 8,178,750 12990010 Glenayre Technologies, Inc. (a) 100,500 3,693,375 37789910 11,872,125 ENTERTAINMENT - 1.5% RECREATIONAL SERVICES - 1.5% MGM Grand, Inc. (a) 200,000 7,550,000 55295310 LODGING & GAMING - 11.9% HOTELS, MOTELS, & TOURIST CENTERS - 6.9% Hilton Hotels Corp. 85,000 9,084,375 43284810 ITT Corp. (a) 140,000 7,455,000 45091210 SHARES VALUE (NOTE 1) Mirage Resorts, Inc. (a) 350,000 $ 8,137,500 60462E10 Sun International Hotels Ltd. Ord. (a) 200,000 9,475,000 86699N22 34,151,875 LODGING PLACES, OTHER THAN HOTELS- 2.0% Anchor Gaming 181,590 9,919,354 03303710 RACING & GAMING - 3.0% Aztar Corp. (a) 400,000 4,400,000 05480210 International Game Technology Corp. 500,000 10,187,500 45990210 14,587,500 TOTAL LODGING & GAMING 58,658,729 RETAIL & WHOLESALE, MISCELLANEOUS - 0.1% DURABLE GOODS, WHOLESALE - 0.1% Sodak Gaming, Inc. (a) 11,400 592,800 83377710 TELEPHONE SERVICES - 55.1% AT&T Corp. 210,900 11,072,250 00195710 Ameritech Corp. 68,500 3,536,313 03095410 BCE, Inc. 100,000 3,946,647 05534B10 Bell Atlantic Corp. 74,600 4,196,250 07785310 BellSouth Corp. 203,600 7,380,500 07986010 Brooks Fiber Properties, Inc. 400,000 12,000,000 11439910 Cincinnati Bell, Inc. 354,100 16,908,275 17187010 DDI Corp. Ord. 797 6,332,078 23399J22 Frontier Corp. 372,600 10,991,700 35906P10 GTE Corp. 337,773 13,299,812 36232010 Incomnet, Inc. (a) 21,600 102,600 45336520 LCI International, Inc. (a) 320,800 11,348,300 50181310 MCI Communications Corp. 800,000 20,100,000 55267310 MFS Communications, Inc. (a) 1,168,391 49,510,569 55272T10 NYNEX Corp. 227,700 9,819,563 67076810 Pacific Gateway Exchange, Inc. (a) 100,000 2,387,500 69432710 Pacific Telesis Group 280,000 9,065,000 69489010 Royal Ptt Nederland NV 166,000 5,814,746 72699422 SBC Communications, Inc. 55,600 2,592,350 78387G10 Sprint Corp. 325,600 13,227,500 85206110 Telebras PN (Pfd. Reg.) 126,221,131 9,375,933 95499792 Telefonica de Espana SA Ord. 150,000 2,783,653 87938210 Teleport Communications Group, Inc. Class A 200,000 4,625,000 87946310 U.S. West, Inc. 251,700 7,425,150 91288910 U.S. West, Inc. (Media Group) (a) 613,700 11,123,313 91288920 Winstar Communications, Inc. 151,200 2,929,500 97551510 WorldCom, Inc. (a) 953,524 20,024,004 98155K10 271,918,506 TOTAL COMMON STOCKS (Cost $449,393,644) 462,725,622 CONVERTIBLE PREFERRED STOCKS - 0.0% CELLULAR - 0.0% CELLULAR & COMMUNICATION SERVICES - 0.0% AirTouch Communications, Inc.: Class B $1.74 2,991 85,991 00949T20 Class C $2.125 1,921 91,488 00949T30 TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $180,443) 177,479 REPURCHASE AGREEMENTS - 6.2% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.25%, dated 8/30/96 due 9/3/96 $ 30,600,840 $ 30,583,000 69899TYY TOTAL INVESTMENT IN SECURITIES - 100% (Cost $480,157,087) $ 493,486,101 LEGEND 1. Non-income producing 2. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME California Amplifier, Inc. $ 617,317 $ - $ - $ 8,178,750 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $315,504,209 and $254,376,180, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $59,487 for the period (see Note 5 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1996, the aggregate cost of investment securities for income tax purposes was $480,421,586. Net unrealized appreciation aggregated $13,064,515 of which $41,898,014 related to appreciated investment securities and $28,833,499 related to depreciated investment securities. TELECOMMUNICATIONS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED) ASSETS Investment in $ 493,486,101 securities, at value (including repurchase agreements of $30,583,000) (cost $480,157,087) - - See accompanying schedule Cash 658 Receivable for 5,183,091 investments sold Receivable for 352,385 fund shares sold Dividends 333,554 receivable Redemption fees 369 receivable Other receivables 17,219 TOTAL ASSETS 499,373,377 LIABILITIES Payable for $ 17,184,685 investments purchased Payable for fund 1,821,870 shares redeemed Accrued 248,308 management fee Other payables 470,129 and accrued expenses TOTAL LIABILITIES 19,724,992 NET ASSETS $ 479,648,385 Net Assets consist of: Paid in capital $ 436,257,281 Undistributed net 3,027,787 investment income Accumulated 27,034,172 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 13,329,145 appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 479,648,385 11,378,467 shares outstanding NET ASSET VALUE $42.15 and redemption price per share ($479,648,385 (divided by) 11,378,467 shares) Maximum offering $43.45 price per share (100/97.00 of $42.15) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED) INVESTMENT $ 5,445,847 INCOME Dividends Interest (including 1,302,756 income on securities loaned of $161,468) TOTAL INCOME 6,748,603 EXPENSES Management fee $ 1,528,014 Transfer agent 1,923,021 fees Accounting and 258,175 security lending fees Non-interested 953 trustees' compensation Custodian fees 31,564 and expenses Registration fees 3,007 Audit 18,119 Legal 1,937 Miscellaneous 5,249 Total expenses 3,770,039 before reductions Expense (54,876 3,715,163 reductions ) NET INVESTMENT 3,033,440 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 28,098,805 securities Foreign (6,391 28,092,414 currency ) transactions Change in net unrealized appreciation (depreciation) on: Investment (23,971,595 securities ) Assets and 105 (23,971,490 liabilities in ) foreign currencies NET GAIN (LOSS) 4,120,924 NET INCREASE $ 7,154,364 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 873,332 INFORMATION Sales charges paid to FDC Deferred sales $ 10,627 charges withheld by FDC Exchange fees $ 49,320 withheld by FSC Expense $ 53,046 reductions Directed brokerage arrangements Custody 1,031 interest credits Transfer agent 799 interest credits $ 54,876 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 29, AUGUST 31, 1996 1996 (UNAUDITED) Operations $ 3,033,440 $ 4,937,209 Net investment income Net realized 28,092,414 57,156,039 gain (loss) Change in net (23,971,490 28,358,016 unrealized ) appreciation (depreciation) NET INCREASE 7,154,364 90,451,264 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (1,102,279 (3,666,827 shareholders ) ) From net investment income From net (34,762,694 (25,859,291 realized gain ) ) TOTAL (35,864,973 (29,526,118 DISTRIBUTIONS ) ) Share 134,760,905 183,961,070 transactions Net proceeds from sales of shares Reinvestment of 35,118,095 28,851,878 distributions Cost of shares (129,967,696 (175,053,917 redeemed ) ) Paid in capital 147,745 139,366 portion of redemption fees NET INCREASE 40,059,049 37,898,397 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 11,348,440 98,823,543 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 468,299,945 369,476,402 period End of period $ 479,648,385 $ 468,299,945 (including undistributed net investment income of $3,027,787 and $1,251,216, respectively) OTHER INFORMATION Shares Sold 3,087,663 4,122,731 Issued in 865,191 677,781 reinvestment of distributions Redeemed (3,010,098 (4,001,104 ) ) Net increase 942,756 799,408 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, $ 44.87 $ 38.34 $ 37.10 $ 34.19 $ 29.22 $ 24.98 beginning of period Income from Investment Operations Net investment .26 .51 .29 .25 .29 .36 income (loss) Net realized and .28 9.15 2.54 7.00 5.29 4.13 unrealized gain (loss) Total from .54 9.66 2.83 7.25 5.58 4.49 investment operations Less Distributions From net (.10) (.39) (.33) (.20) (.18) (.28) investment income From net (3.17) (2.75) (1.27) (4.18) (.48) - realized gain Total (3.27) (3.14) (1.60) (4.38) (.66) (.28) distributions Redemption fees .01 .01 .01 .04 .05 .03 added to paid in capital Net asset value, $ 42.15 $ 44.87 $ 38.34 $ 37.10 $ 34.19 $ 29.22 end of period TOTAL RETURN B, C 1.51% 25.79% 7.98% 21.90% 19.49% 18.19% RATIOS AND SUPPLEMENTAL DATA Net assets, end of $ 479,648 $ 468,300 $ 369,476 $ 371,025 $ 134,338 $ 78,533 period (000 omitted) Ratio of expenses 1.48% A 1.52% 1.56% 1.54% 1.74% A 1.90% to average net assets Ratio of expenses 1.46% A, 1.52% 1.55% 1.53% 1.74% A 1.90% to average net E E E assets after expense reductions Ratio of net 1.19% A 1.17% .77% .64% 1.16% A 1.32% investment income to average net assets Portfolio turnover 109% A 89% 107% 241% 115% A 20% rate Average $ .0343 commission rate F
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
MONEY MARKET PORTFOLIO PERFORMANCE PERFORMANCE To measure a money market fund's performance, you can look at either total return or yield. Total return reflects both the change in a fund's share price over a given period, and reinvestment of its dividends (or income). Yield measures the income paid by a fund. Since a money market fund tries to maintain a $1 share price, yield is an important measure of performance. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST AUGUST 31, 1996 MONTH YEAR YEARS 10 S YEARS MONEY MARKET 2.48% 5.18% 22.36% 72.94% MONEY MARKET -0.59% 2.03% 18.69% 67.75% (INCL. 3% SALES CHARGE) All Taxable 2.43% 5.07% 21.99% 72.26% Money Market Funds Average CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or 10 years. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050 without including the effect of the 3% sales charge. To measure how the fund's performance stacked up against its peers, you can compare it to the all taxable money market funds average, which reflects the performance of 818 all taxable money market funds with similar objectives tracked by IBC Financial Data, Inc. over the past six months. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1996 YEAR YEARS YEARS MONEY MARKET 5.18% 4.12% 5.63% MONEY MARKET 2.03% 3.49% 5.31% (INCL. 3% SALES CHARGE) All Taxable 5.07% 4.05% 5.58% Money Market Funds Average AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had achieved that return by performing at a constant rate each year. YIELD Row: 1, Col: 1, Value: 5.41 Row: 1, Col: 2, Value: 5.25 Row: 1, Col: 3, Value: 2.84 Row: 2, Col: 1, Value: 5.19 Row: 2, Col: 2, Value: 5.26 Row: 2, Col: 3, Value: 2.86 Row: 3, Col: 1, Value: 5.31 Row: 3, Col: 2, Value: 4.78 Row: 3, Col: 3, Value: 2.76 Row: 4, Col: 1, Value: 4.859999999999999 Row: 4, Col: 2, Value: 4.74 Row: 4, Col: 3, Value: 2.66 Row: 5, Col: 1, Value: 4.87 Row: 5, Col: 2, Value: 4.83 Row: 5, Col: 3, Value: 2.68 6% - 4% - 2% - 0% Money Market All Taxable Money Market Funds Average MMDA 8/29/95 11/28/95 2/27/96 5/28/96 9/3/96 MONEY MARKET 5.41% 5.19% 5.31% 4.86% 4.87% All Taxable Money Market Funds Average 5.25% 5.26% 4.78% 4.74%% 4.83% 8/30/95 11/29/95 2/28/96 5/31/96 8/28/96 MMDA 2.84% 2.86% 2.76% 2.66% 2.68% YIELD refers to the income paid by the fund over a given period. Yields for money market funds are usually for seven-day periods, expressed as annual percentage rates. A yield that assumes income earned is reinvested or compounded is called an effective yield. The chart above shows the fund's current seven-day yield at quarterly intervals over the past year. You can compare these yields to the all taxable money market funds average and the bank money market deposit account average (MMDA). Figures for the all taxable money market funds average are from the IBC Financial Data, Inc. The MMDA average is supplied by BANK RATE MONITOR.(Trademark) COMPARING PERFORMANCE There are some important differences between a bank money market deposit account (MMDA) and a money market fund. First, the U.S. Government neither insures nor guarantees a money market fund. In fact, there is no assurance that a money fund will maintain a $1 share price. Second, a money market fund returns to its shareholders income earned by the fund's investments after expenses. This is in contrast to banks, which set their MMDA rates periodically based on current interest rates, competitors' rates, and internal criteria. (checkmark) MONEY MARKET PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW John Todd, Portfolio Manager of Fidelity Select Money Market Portfolio Q. JOHN, WHAT KIND OF INVESTMENT CLIMATE HAVE YOU BEEN OPERATING IN FOR THE PAST SIX MONTHS? A. The only way to appreciate how much the climate has changed is to go back to the third quarter of 1995, well before the period began. The economy was starting to rebound from a slowdown caused mainly by a buildup of excess inventories; from July through September, the gross domestic product expanded at an annual rate of 3.8%. During the fourth quarter, however, the recovery seemed to lose momentum, overwhelmed by severe winter weather and a budget standoff that twice resulted in government shutdowns. Rather than risk continued deterioration in economic activity, the Federal Reserve took steps to ease short-term interest rates. In December 1995 and again on the last day of January 1996, the Fed lowered the rate banks charge each other for overnight loans - known as the federal funds rate - a total of one-half percentage point, to 5.25%. That brings us to the start of the current reporting period, when forecasts of continued economic weakness suggested that further rate cuts were likely. Within a week, however, the mood shifted again. Q. WHAT CAUSED THE TURNAROUND IN MARKET SENTIMENT? A. The February employment report came as a big surprise to most market participants. It showed that the economy was generating new jobs at a rate about three times greater than the previous quarter. That slammed the door on the possibility of another Fed rate cut and set the tone for the rest of the period. In the months that followed, subsequent jobs reports confirmed that the February employment report was indeed a turning point, and marked the beginning of a healthier trend. In fact, during 1996 the economy has produced an average of about 237,000 new jobs a month, compared to 185,000 in 1995. As market participants adjusted to the new reality, many assumed the Fed would eventually have to raise interest rates. Such speculation increased during the second quarter, when the economy expanded at an annual rate of 4.8%, and continued to build through the end of August. So far, however, inflationary pressures have remained mild and the Fed has stayed on the sidelines. Q. HOW DID YOU RESPOND TO CHANGING CONDITIONS? A. Ordinarily, my preference would be to aggressively extend the fund's average maturity when interest rates are stable or falling, and shorten the fund's average maturity when rates are rising. That's not always possible with Select Money Market, only because so many shareholders use the fund as a temporary parking place for their cash, and the asset base is constantly changing. That said, at the end of February the fund's average maturity was 48 days. As the economy gained strength, I gradually let the fund's average maturity roll down, reaching a low of about 30 days at the end of July. Since then, I've taken advantage of buying opportunities to extend the fund's average maturity, while remaining somewhat defensive. At the end of the period, the fund's average maturity was 40 days. Q. HOW DID THE FUND PERFORM? A. The fund's seven-day yield on August 31, 1996, was 5.08%, compared to 5.21% six months ago. The fund's total return during the six-month period was 2.48%. That beat the total return of 2.43% for the all taxable money market funds average during the same period, according to IBC Financial Data, Inc. Q. WHAT CAN WE EXPECT IN THE MONTHS AHEAD? A. The outlook is uncertain. Many market participants assume that having already waited this long, the Fed will wait until after the November election to raise interest rates. I'm not willing to make that assumption. We know that the Fed governors adopted a bias in favor of a rate increase over the summer, and I'm not sure they wouldn't act before the election if they thought it necessary to prevent an outbreak of inflation. In any case, a rate increase seems likely before year-end. One of the factors inhibiting inflation thus far has been the weak economic climate in the rest of the developed world. Now that Japan's and Europe's economies appear to have bottomed out, inflationary pressures are likely to build, especially as we move into 1997, adding to upward pressure on rates. Accordingly, I'll probably aim for an average maturity in the neutral to defensive range in the months ahead, or between 35 and 45 days. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: August 30, 1985 FUND NUMBER: 085 TRADING SYMBOL: FSMMKT SIZE: as of August 31, 1996, more than $902 million MANAGER: John Todd, since 1991; manager Spartan Money Market Fund, since 1989; Daily Money Fund: Money Market and Fidelity Institutional Cash Portfolios: Money Market, since 1992; joined Fidelity in 1982 (checkmark) MONEY MARKET PORTFOLIO INVESTMENTS AUGUST 31, 1996 (UNAUDITED) Showing Percentage of Total Value of Investments BANKERS' ACCEPTANCES - 0.4% ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) DOMESTIC BANKERS' ACCEPTANCES CHASE MANHATTAN BANK 9/10/96 5.46% $ 27,711 $ 27,674 161999QM 9/13/96 5.46 201,477 201,118 161999NW 9/17/96 5.47 56,809 56,674 161999PA 9/23/96 5.47 61,337 61,137 161999PE 9/24/96 5.47 126,617 126,185 161999PH 10/24/96 5.50 629,355 624,398 161999QC 12/18/96 5.59 2,632,052 2,588,782 161999UB TOTAL BANKERS' ACCEPTANCES 3,685,968 CERTIFICATES OF DEPOSIT - 23.8% DOMESTIC CERTIFICATES OF DEPOSIT - 2.4% U.S. NATIONAL BANK OF OREGON 9/24/96 5.29 20,000,000 19,999,809 91199CAM CHICAGO BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 0.6% ABN-AMRO BANK 12/2/96 5.51 5,000,000 5,000,000 032993NW NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 13.3% BANQUE NATIONALE DE PARIS 9/4/96 5.42 5,000,000 5,000,009 055992SG BAYERISCHE LANDESBANK GIROZENTRALE 10/30/96 5.74 (a) 5,000,000 5,000,000 072990FF 4/22/97 5.85 4,000,000 4,000,000 072990GE COMMERZBANK, GERMANY 9/16/96 5.42 5,940,000 5,939,629 202990TD LANDESBANK HESSEN - THURINGEN 9/6/96 5.40 7,000,000 6,999,650 514998BC 4/29/97 5.90 14,000,000 13,974,280 514998BG NATIONAL WESTMINSTER BANK, PLC 9/9/96 5.40 15,000,000 15,000,000 638990MG SANWA BANK, LTD. 9/3/96 5.49 5,000,000 5,000,000 8049992B 11/4/96 5.69 7,000,000 7,000,000 8049992D SOCIETE GENERALE 9/3/96 5.13 6,000,000 6,000,000 833991YU 9/3/96 5.43 25,000,000 25,000,048 8339916L 11/6/96 5.36 3,000,000 3,000,104 8339919P 12/2/96 5.52 5,000,000 5,000,000 8339914K SUMITOMO BANK, LTD. 10/15/96 5.50 2,000,000 2,000,000 86699EPL 11/14/96 5.50 2,000,000 2,000,000 86699EPP 110,913,720 LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 7.5% AUSTRALIA & NEW ZEALAND BANKING 10/1/96 5.36 13,000,000 12,999,526 0525289G BANCO BILBAO VIZCAYA, S.A. 10/28/96 5.36 3,000,000 2,999,830 05999MBQ BAYERISCHE HYPOTHEKEN-UND WESCHEL 9/23/96 5.41 10,000,000 9,999,867 07299GBG KREDIETBANK, N.V. 10/15/96 5.38 5,000,000 5,000,091 5007999J ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) SWISS BANK CORP. 9/11/96 5.40% $ 11,000,000 $ 11,000,243 8709903D 10/11/96 5.55 20,000,000 20,000,438 8709903E 61,999,995 TOTAL CERTIFICATES OF DEPOSITS 197,913,524 COMMERCIAL PAPER - 49.7% A.H. ROBINS COMPANY, INCORPORATED 9/25/96 5.35 2,000,000 1,992,907 770998EP AMERICAN EXPRESS CREDIT CORP. 10/21/96 5.35 15,000,000 14,889,583 025990PL ASSET SECURITIZATION COOPERATIVE CORPORATION 9/17/96 5.46 12,500,000 12,469,944 04599RCL 10/15/96 5.33 2,000,000 1,987,069 04599RCU 10/21/96 5.35 5,000,000 4,963,195 04599RCS ASSOCIATES CORP. OF NORTH AMERICA 10/21/96 5.35 4,000,000 3,970,555 04699JBT 10/30/96 5.37 15,000,000 14,869,217 04699JCH BEAR STEARNS COS., INC. 11/20/96 5.40 4,000,000 3,952,711 07399HPM BENEFICIAL CORP. 9/19/96 5.33 10,000,000 9,973,500 08199BDU 9/24/96 5.33 10,000,000 9,966,139 08199BDV CIESCO, L.P. 10/2/96 5.50 8,000,000 7,962,456 177996VP CAISSE D'AMORTISSEMENT DE LA DETTE SOCIALE 9/25/96 5.50 10,000,000 9,963,867 12799FAH 10/24/96 5.51 20,000,000 19,840,117 12799FAR 12/20/96 5.64 7,000,000 6,882,789 12799FAD CAISSE DES DEPOTS ET CONSIGNATIONS 10/8/96 5.33 2,707,000 2,692,282 12799EBC COMMERCIAL CREDIT CO. 9/16/96 5.39 15,000,000 14,966,563 201997AG COMPAGNIE BANCAIRE 11/25/96 5.38 4,400,000 4,344,835 20499FCL CORESTATES CAPITAL CORP. (A) 9/5/96 5.42 15,000,000 15,000,000 218995AP EIGER CAPITAL CORP. 10/15/96 5.34 2,000,000 1,987,044 278997FA ELECTRICITE DE FRANCE 9/18/96 5.47 12,100,000 12,069,145 2850399A ELECTRONIC DATA SYSTEMS CORP. 9/16/96 5.33 15,000,000 14,966,875 2856619M ENTERPRISE FUNDING CORP. 9/18/96 5.46 6,939,000 6,921,272 29399HLR 11/7/96 5.39 5,840,000 5,782,069 29399HNN GTE CORP. 9/26/96 5.40 2,000,000 1,992,555 362991KR GENERALE BANK 9/12/96 5.45 10,000,000 9,983,500 371995DX GENERAL ELECTRIC CO. 10/22/96 5.35 5,000,000 4,962,458 369999EL COMMERCIAL PAPER - CONTINUED ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) GENERAL MOTORS ACCEPTANCE CORP. 9/24/96 5.36% $ 5,000,000 $ 4,982,973 6389987E 11/26/96 5.68 2,000,000 1,973,579 6389985Y 2/20/97 5.70 2,000,000 1,947,014 6389987G 2/24/97 5.71 2,000,000 1,945,733 6389987F 2/25/97 5.71 3,000,000 2,918,137 6389987H GOLDMAN SACHS GROUP, L.P. (THE) 9/19/96 5.33 20,000,000 19,947,000 696992QP 9/24/96 5.33 9,000,000 8,969,525 696992QS HOUSEHOLD FINANCE CORP. 10/30/96 5.39 5,000,000 4,956,242 44199DNX IBM CORP. 9/13/96 5.32 6,100,000 6,089,223 45499EEV KREDIETBANK, N.A. FINANCE CORP. 10/24/96 5.51 5,000,000 4,960,029 50099DAV MORGAN STANLEY GROUP, INC. 10/15/96 5.35 25,000,000 24,838,055 61799EQU MORGAN (J.P.) & CO. 9/5/96 5.11 5,000,000 4,997,233 61799HDF NATIONWIDE BUILDING SOCIETY 9/4/96 5.39 25,000,000 24,988,917 638993JN 10/22/96 5.50 30,000,000 29,769,225 638993JY NEW CENTER ASSET TRUST 9/27/96 5.43 5,000,000 4,980,897 643995KJ 2/19/97 5.63 2,000,000 1,947,940 643995LN NEW ENGLAND POWER COMPANY 9/10/96 5.28 5,900,000 5,892,241 644997BL PREFERRED RECEIVABLES FUNDING CORP. 9/17/96 5.33 9,000,000 8,978,800 74099SCD 9/19/96 5.31 3,000,000 2,992,065 74099SCH SHERWOOD MEDICAL COMPANY 9/16/96 5.49 4,000,000 3,990,933 82599UDE SMITH BARNEY, INC. 10/3/96 5.37 10,000,000 9,952,533 83199HCT TEXTRON, INC. 9/11/96 5.50 1,000,000 998,477 88599CPV UNIFUNDING, INC. 9/9/96 5.33 6,000,000 5,992,907 90499AAQ 10/16/96 5.33 5,000,000 4,966,938 90499AAP TOTAL COMMERCIAL PAPER 413,329,263 FEDERAL AGENCIES - 11.2% FEDERAL HOME LOAN BANK - AGENCY COUPONS (A) - 1.6% 9/13/96 5.49 4,000,000 3,999,292 567995QC 9/20/96 5.44 4,000,000 3,999,243 567995QB 10/2/96 5.46 5,000,000 4,999,624 567995QF 12,998,159 FEDERAL NATIONAL MORTGAGE ASSOC. - AGENCY COUPONS (A) - 5.5% 9/2/96 5.41 25,000,000 24,987,075 31364CAB 9/20/96 5.44 11,000,000 10,997,440 9950286B 9/29/96 5.35 5,000,000 4,996,649 995030LU 10/17/96 5.56 5,000,000 4,998,538 995029EJ 45,979,702 ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) FEDERAL NATIONAL MORTGAGE ASSOC. - DISCOUNT NOTES - 2.9% 2/3/97 5.62% $ 25,000,000 $ 24,412,292 31359k9Q STUDENT LOAN MARKETING ASSOC. - AGENCY COUPONS (A) - 1.2% 10/16/96 5.68 10,000,000 10,000,000 863990QB TOTAL FEDERAL AGENCIES 93,390,153 BANK NOTES - 4.7% BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOC. (A) 9/3/96 5.43 % 3,000,000 2,999,992 06399AEY BANK OF NEW YORK - DELAWARE (A) 10/30/96 5.78 4,000,000 4,000,000 0640629E COMERICA BANK - DETROIT (A) 9/1/96 5.45 5,000,000 4,999,980 226990BU 10/27/96 5.68 5,000,000 4,999,606 226990BX FIRST NATIONAL BANK OF CHICAGO 9/3/96 5.40 15,000,000 15,000,000 995990YT PNC BANK, N.A. (A) 9/9/96 5.44 3,000,000 2,998,386 69399EBC 9/20/96 5.44 4,000,000 3,999,417 69399EAX TOTAL BANK NOTES 38,997,381 MASTER NOTES (A)- 1.9% J.P. MORGAN SECURITIES 9/6/96 5.43 16,000,000 16,000,000 61899FKH MEDIUM-TERM NOTES (A) - 4.3% ABBEY NATIONAL TREASURY SERVICES (B) 9/9/96 5.57 8,000,000 8,000,000 010998AJ BENEFICIAL CORP. 11/3/96 5.65 3,000,000 2,999,534 08199BCN CIT GROUP HOLDINGS, INC. 9/3/96 5.40 10,000,000 9,999,407 172990WV GENERAL MOTORS ACCEPTANCE CORP. 10/23/96 5.67 2,000,000 2,001,388 6389985G 11/1/96 5.68 5,000,000 5,000,000 6389984L NORWEST CORP. 9/10/96 5.61 8,000,000 8,000,000 66899CBK TOTAL MEDIUM-TERM NOTES 36,000,329 SHORT-TERM NOTES (A)(B) - 2.3% SMM TRUST (1995-D) 10/27/96 5.68 1,000,000 1,000,000 83199GBB SMM TRUST (1995-N) 11/8/96 5.55 3,000,000 3,000,000 83199GBC SMM TRUST (1996-I) 9/30/96 5.46 7,000,000 7,000,000 83199GBS SMM TRUST (1996-V) 9/26/96 5.62 8,000,000 8,000,000 TOTAL SHORT-TERM NOTES 19,000,000 TIME DEPOSITS - 1.3% ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) SANWA BANK, LTD. 10/4/96 5.44% $ 3,000,000 $ 3,000,000 8049992J SUMITOMO BANK, LTD. 9/12/96 5.50 5,000,000 5,000,000 86699EPH 9/30/96 5.41 3,000,000 3,000,000 86699EPS TOTAL TIME DEPOSITS 11,000,000 REPURCHASE AGREEMENTS - 0.4% MATURITY AMOUNT In a joint trading account (U.S. Treasury Obligations) dated 8/30/96 due 9/3/96 At 5.27% $ 2,961,735 2,960,000 69899T2A TOTAL INVESTMENTS - 100% $ 832,276,618 Total Cost for Income Tax Purposes - $828,276,618 LEGEND 1. The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due date on these types of securities reflects the next interest rate reset date or, when applicable, the final maturity date. 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $27,000,000 or 3.0% of net assets. MONEY MARKET PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996 (UNAUDITED)
ASSETS Investment in securities, at $ 832,276,618 value (including repurchase agreements of $2,960,000) - See accompanying schedule Receivable for fund shares sold 87,302,975 Interest receivable 4,346,613 TOTAL ASSETS 923,926,206 LIABILITIES Payable for investments purchased $ 3,000,000 Payable for fund shares redeemed 18,400,338 Accrued management fee 170,400 Other payables and 307,623 accrued expenses TOTAL LIABILITIES 21,878,361 NET ASSETS $ 902,047,845 Net Assets consist of: Paid in capital $ 902,034,381 Accumulated net realized gain (loss) on investments 13,464 NET ASSETS, for 902,029,123 $ 902,047,845 shares outstanding NET ASSET VALUE, offering price $1.00 and redemption price per share ($902,047,845 (divided by) 902,029,123 shares) Maximum offering price per share $1.03 (100/97 of $1.00)
STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED)
INTEREST INCOME $ 21,210,270 EXPENSES Management fee $ 787,919 Transfer agent fees 1,045,692 Accounting fees and expenses 54,280 Non-interested trustees' compensation 2,445 Custodian fees and expenses 5,995 Registration fees 269,465 Audit 9,512 Legal 2,560 Reports to shareholders 3,707 Miscellaneous 3,801 TOTAL EXPENSES BEFORE EXPENSE REDUCTIONS 2,185,376 EXPENSE REDUCTIONS (9,449 2,175,927 ) NET INTEREST INCOME 19,034,343 NET REALIZED GAIN (LOSS) 10,346 ON INVESTMENTS NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 19,044,689 OTHER INFORMATION $ 1,787,169 Sales charges paid to FDC Deferred sales charges withheld $ 47,109 by FDC Expenses reductions Custodian interest credits $ 723 Transfer agent interest credits 8,726 $ 9,449
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS ENDED YEAR ENDED AUGUST 31, 1996 FEBRUARY 29, (UNAUDITED) 1996
Operations $ 19,034,343 $ 35,253,224 Net interest income Net realized gain (loss) 10,346 33,656 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 19,044,689 35,286,880 Distributions to shareholders from net interest income (19,034,343) (35,253,224) Share transactions at net asset value of $1.00 per share 3,752,838,724 6,107,173,652 Proceeds from sales of shares Reinvestment of distributions from net interest income 17,726,183 32,687,547 Cost of shares redeemed (3,479,348,842) (6,102,217,401) NET INCREASE (DECREASE) IN NET ASSETS AND SHARES RESULTING FROM SHARE TRANSACTIONS 291,216,065 37,643,798 TOTAL INCREASE (DECREASE) IN NET ASSETS 291,226,411 37,677,454 NET ASSETS Beginning of period 610,821,434 573,143,980 End of period $ 902,047,845 $ 610,821,434
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS YEAR ENDED ENDED FEBRUARY 29, ENDED APRIL 30, AUGUST 31, 1996 FEBRUARY 28, SELECTED PER-SHARE DATA (UNAUDITED) 1996 1995 1994 1993 1992
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 Income from Investment Operations .025 .054 .042 .026 .026 .048 Net interest income Less Distributions (.025) (.054) (.042) (.026) (.026) (.048) From net interest income Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 TOTAL RETURN B 2.48% 5.56% 4.28% 2.62% 2.63% 4.93% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 902,048 $ 610,821 $ 573,144 $ 518,657 $ 431,133 $ 542,620 Ratio of expenses to average net assets .56% A .59% .65% .72% .56% A .64% Ratio of net interest income to average net assets 4.88% A 5.39% 4.19% 2.59% 3.09% A 4.84%
ERROR: The Following Table: "Assets" is Too Wide! Table Width is 150 characters.
A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED.
NOTES TO FINANCIAL STATEMENTS For the period ended August 31, 1996 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Select Portfolios (the trust) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The trust has thirty-five equity funds (collectively, with the money market fund, referred to as the funds) which invest primarily in securities of companies whose principal business activities fall within specific industries, and a money market fund which invests in high quality money market instruments. Each fund is authorized to issue an unlimited number of shares. The American Gold Portfolio and the Precious Metals and Minerals Portfolio may also invest in certain precious metals. The financial statements have been prepared in conformity with generally accepted accounting principles which permit management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the funds: SECURITY VALUATION: EQUITY FUNDS. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Securities (including restricted securities) for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange) are valued primarily using dealer-supplied valuations or at their fair value as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities maturing within sixty days of their purchase date are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. Direct investments in precious metals in the form of bullion are valued at the most recent bid price quoted by a major bank on the New York Commodities Exchange. MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and certain conditions therein, securities are valued initially at cost and thereafter assume a constant amortization to maturity of any discount or premium. FOREIGN CURRENCY TRANSLATION. The accounting records of each fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, each fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for the fiscal year. The schedules of investments include information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME: EQUITY FUNDS. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the funds are informed of the ex-dividend date. Interest income is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. MONEY MARKET FUND. Interest income, which includes amortization of premium and accretion of discount, is accrued as earned. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid monthly from net interest income for the money market fund. Distributions are recorded on the ex-dividend date for all other funds. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for litigation proceeds, foreign currency transactions, passive foreign investment companies (PFIC), partnerships, non-taxable dividends, net operating losses, capital loss carryforwards, expiring capital loss carryforwards and losses deferred due to wash sales and excise tax regulations. Certain funds also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital. Undistributed net investment income and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences which will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED REDEMPTION FEES. Shares redeemed (including exchanges) from an equity fund are subject to redemption fees. Shares held less than 30 days are subject to a short-term redemption fee equal to .75% of the net asset value of shares redeemed. Shares held 30 days or more are subject to a long-term redemption fee equal to the lesser of $7.50 or .75% of the net asset value of shares redeemed. The fees, which are retained by the fund, are accounted for as an addition to paid in capital. There is a $7.50 fee for shares exchanged into another Fidelity fund (see Note 5). This is in addition to the applicable redemption fees. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The equity funds may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage each fund's currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge a fund's investments against currency fluctuations. Also, a contract to buy or sell can offset a previous contract. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and any realized gain (loss) is recognized on the date of offset; otherwise, gain (loss) is recognized on settlement date. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the SEC), the funds, along with other affiliated entities of Fidelity Management & Research Company (FMR), may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that mature in 60 days or less from the date of purchase for U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency Securities are transferred to an account of the funds, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the funds' investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by the SEC, the funds, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from, or lend money to, other participating funds. 3. JOINT TRADING ACCOUNT. At the end of the period, the following funds had 20% or more of their total investments in repurchase agreements through a joint trading account. These repurchase agreements were with entities whose creditworthiness has been reviewed and found satisfactory by FMR. The maturity values of the joint trading account investments were $164,273,771 for Home Finance Portfolio, $72,560,302 for Energy Service Portfolio, and $8,861,166 for Insurance Portfolio, at 5.25% for each fund. The investments in repurchase agreements through the joint trading account are summarized as follows: SUMMARY OF JOINT TRADING Dated August 30, 1996, due September 3, 1996 Number of dealers or banks 26 Maximum amount with one dealer or bank 14.0% Aggregate principal amount of agreements $24,642,654,000 Aggregate maturity amount of agreements $24,657,021,088 Aggregate market value of transferred assets $25,171,106,668 Coupon rates of transferred assets 0.0% to 13.88% Maturity dates of transferred assets 8/31/96 to 8/15/26 4. PURCHASES AND SALES OF INVESTMENTS. Information regarding purchases and sales of securities (other than short-term securities) is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. 5. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As each fund's investment adviser, FMR receives a monthly fee. For each equity fund, the monthly fee is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of each fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2500% to .5200% for the period. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The annualized individual fund fee rate is .30%. For the period, the management fee was equivalent to an annualized rate of .61% of average net assets for each equity fund. 5. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED MANAGEMENT FEE - CONTINUED For the money market fund, FMR receives a monthly fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund and an income-based fee. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .1100% to .3700% for the period. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The annual individual fund fee rate is .03%. The income-based fee is added only when the fund's gross yield exceeds 5%. At that time, the fee would equal 6% of that portion of the fund's gross income that represents a gross yield of more than 5% per year. The maximum income-based component is .24% (annualized) of average net assets. For the period, the management fee was equivalent to an annualized rate of .20% of the fund's average net assets. SUB-ADVISER FEE. As the money market fund's investment sub- adviser, FMR Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of 50% of the management fee payable to FMR. The fee is paid prior to any voluntary expense reimbursements which may be in effect. SALES LOAD. Fidelity Distributors Corporation (FDC), an affiliate of FMR, is the general distributor of each fund. FDC is paid a 3% sales charge on sales of shares of each fund. Prior to October 12, 1990, FDC was paid a 2% sales charge and a 1% deferred sales charge. Shares purchased before October 12, 1990 are subject to the deferred sales charge upon redemption or exchange to any other Fidelity fund (other than Select funds). The amounts received by FDC for sales charges and deferred sales charges are shown under the caption "Other Information" on each fund's Statement of Operations. TRANSFER AGENT FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the funds' transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the funds' accounting records and administers each applicable fund's security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses. EXCHANGE FEES. FSC charges an exchange fee of $7.50 to cover administrative costs associated with exchanges out of an equity fund to any other Fidelity Select fund or to any other Fidelity fund. The exchange fees retained by FSC are shown under the caption "Other Information" on each applicable fund's Statement of Operations. BROKERAGE COMMISSIONS. Certain funds placed a portion of their portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms are shown under the caption "Other Information" at the end of each applicable fund's schedule of investments. 6. BANK BORROWINGS. Each fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. Each fund has established borrowing arrangements with certain banks. Under the most restrictive arrangement, each fund must pledge to the bank securities having a market value in excess of 220% of the total bank borrowings. The interest rate on the borrowings is the bank's base rate, as revised from time to time. Information regarding each applicable fund's participation in the program is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. 7. SECURITY LENDING. Certain equity funds loaned securities to certain brokers who paid the fund negotiated lenders' fees. These fees are included in interest income. Each applicable fund receives U.S. Treasury obligations and/or cash as collateral against the loaned securities, in an amount at least equal to 102% of the market value of the loaned securities at the inception of each loan. This collateral must be maintained at not less than 100% of the market value of the loaned securities during the period of the loan. For funds with loans outstanding at the period end, the value of the securities loaned and the value of collateral held are shown under the caption "Other Information" at the end of each applicable fund's schedule of investments. 8. INTERFUND LENDING PROGRAM. Each fund is permitted to participate in the interfund lending program. Information regarding each fund's participation in the program is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. 9. EXPENSE REDUCTIONS. FMR voluntarily agreed to reimburse the funds' operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) above an annual rate of 2.50% of average net assets. In addition, FMR agreed to reimburse each fund's expenses in accordance with a state expense limitation if, and to the extent that, the total operating expenses of each fund, excluding interest, taxes, brokerage commissions and extraordinary expenses, are in excess of specified percentages of the average net assets of the fund for its fiscal year. The lowest limitation applicable to the fund is 2.50% of the first $30 million of average net assets, 2.0% of 9. EXPENSE REDUCTIONS - CONTINUED the next $70 million and 1.50% of the excess. FMR retains the ability to be repaid by the fund for these expense reductions in the amount that expenses fall below the limit prior to the end of the fiscal year. For the period, the reimbursement reduced expenses by $4,417 for Select Transportation Portfolio. FMR has directed certain portfolio trades to brokers who paid a portion of each equity fund's expenses. In addition, certain funds have entered into arrangements with their custodian and transfer agent whereby interest earned on uninvested cash balances was used to offset a portion of each applicable fund's expenses. For the period, the reductions under these arrangements are shown under the caption "Other Information" on each applicable fund's Statement of Operations. 10. BENEFICIAL INTEREST. At the end of the period, certain unaffiliated shareholders were record owners of 10% or more of the total outstanding shares of the following funds: BENEFICIAL INTEREST FUND NUMBER OF SHAREHOLDERS % OWNERSHIP Automotive 1 18.0 Construction and Housing 1 32.9 Industrial Equipment 1 29.2 Industrial Materials 1 41.4 Multimedia 1 24.2 11. TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company in which a fund has ownership of at least 5% of the voting securities. Information regarding affiliated companies is included in the "Legend" following each applicable fund's schedule of investments. 12. LITIGATION. A single individual who purchased shares of Apple Computer, Inc. ("Apple") in September 1995 filed a purported class action complaint against Select Technology Portfolio, Select Computers Portfolio and others. The complaint alleges that, in violation of a federal securities law and state common law, the funds' portfolio manager made misleading statements regarding Apple and the funds' holdings of Apple. The defendants deny the allegations in the complaint and intend to defend the lawsuits vigorously. PROXY VOTING RESULTS A special meeting of the shareholders of American Gold Portfolio and Precious Metals and Minerals Portfolio was held on April 17, 1996. The results of votes taken among shareholders on proposals before them are listed below. PROPOSAL 1 To modify certain fundamental investment policies to permit American Gold Portfolio to invest up to 20% of its assets in precious metals other than gold. # OF % OF SHARES VOTED SHARES VOTED Affirmative 8,257,166.102 88.378 Against 855,026.679 9.152 Abstain 230,780.897 2.470 TOTAL 9,342,973.678 100.000 PROPOSAL 2 To modify a certain fundamental investment policy for Precious Metals and Minerals Portfolio. # OF % OF SHARES VOTED SHARES VOTED Affirmative 11,509,554.245 90.705 Against 526,777.649 4.151 Abstain 652,691.714 5.144 TOTAL 12,689,023.608 100.000 INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS FMR Texas Inc., Irving, TX Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, PRESIDENT J. Gary Burkhead, SENIOR VICE PRESIDENT William J. Hayes, VICE PRESIDENT Sarah H. Zenoble, VICE PRESIDENT, MONEY MARKET FUND Arthur S. Loring, SECRETARY Kenneth A. Rathgeber, TREASURER Robert H. Morrison, MANAGER, SECURITY TRANSACTIONS Thomas D. Maher, ASSISTANT VICE PRESIDENT, MONEY MARKET FUND John H. Costello, ASSISTANT TREASURER Leonard M. Rush, ASSISTANT TREASURER Thomas J. Simpson, ASSISTANT TREASURER, MONEY MARKET FUND BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox * Phyllis Burke Davis * Richard J. Flynn * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Edward H. Malone * Marvin L. Mann * Gerald C. McDonough * Thomas R. Williams * ADVISORY BOARD William O. McCoy GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIANS Brown Brothers Harriman & Co. Boston, MA and The Bank of New York New York, NY CORPORATE HEADQUARTERS 82 Devonshire Street Boston, MA 02109 1-800-544-8888 * INDEPENDENT TRUSTEES FIDELITY SELECT PORTFOLIOS CONSUMER SECTOR Consumer Industries Food and Agriculture Leisure Multimedia Retailing CYCLICALS SECTOR Air Transportation Automotive Chemicals Construction and Housing Environmental Services Industrial Equipment Industrial Materials Paper and Forest Products Transportation ENERGY, UTILITIES & NATURAL RESOURCES SECTOR American Gold Energy Energy Service Natural Gas Precious Metals and Minerals Utilities Growth FINANCIAL SERVICES SECTOR Brokerage and Investment Management Financial Services Home Finance Insurance Regional Banks HEALTH CARE SECTOR Biotechnology Health Care Medical Delivery TECHNOLOGY SECTOR Computers Defense and Aerospace Developing Communications Electronics Software and Computer Services Technology Telecommunications Money Market THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Exchanges/Redemptions 1-800-544-7777 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0111 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) TouchTone Xpress 1-800-544-5555 SM AUTOMATED LINE FOR QUICKEST SERVICE BULK RATE U.S. Postage PAID Fidelity Investments (registered trademark) P.O. Box 193 Boston, MA 02101 -----END PRIVACY-ENHANCED MESSAGE-----