-----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, HveGCHoTxHj50dEj4QZF8A0ZDWXkSCwKWppTX2cwTBoHHsERe7RyGl2nZ5n7u7r3 4B35s1zS5Pr2zhZJK6l+fA== 0000320351-97-000004.txt : 19970423 0000320351-97-000004.hdr.sgml : 19970423 ACCESSION NUMBER: 0000320351-97-000004 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970228 FILED AS OF DATE: 19970422 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: 97584968 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 CYCLICAL 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 NATURAL RESOURCES * PAPER AND FOREST PRODUCTS PRECIOUS METALS AND MINERALS REGIONAL BANKS RETAILING SOFTWARE AND COMPUTER SERVICES TECHNOLOGY TELECOMMUNICATIONS TRANSPORTATION UTILITIES GROWTH ANNUAL REPORT FOR THE YEAR ENDING FEBRUARY 28, 1997 AND PROSPECTUS DATED APRIL 29, 1997 * Prospectus only CONTENTS PERFORMANCE OVERVIEW AND A-2 MARKET RECAP FUND UPDATES* CONSUMER SECTOR A-4 CONSUMER INDUSTRIES (FORMERLY CONSUMER A-10 PRODUCTS) A-16 FOOD AND AGRICULTURE A-22 LEISURE A-28 MULTIMEDIA RETAILING CYCLICALS SECTOR A-34 AIR TRANSPORTATION A-39 AUTOMOTIVE A-44 CHEMICALS A-50 CONSTRUCTION AND HOUSING A-56 DEFENSE AND AEROSPACE A-62 ENVIRONMENTAL SERVICES A-68 INDUSTRIAL EQUIPMENT A-74 INDUSTRIAL MATERIALS A-80 PAPER AND FOREST PRODUCTS A-86 TRANSPORTATION FINANCIAL SERVICES SECTOR A-91 BROKERAGE AND INVESTMENT MANAGEMENT A-97 FINANCIAL SERVICES A-102 HOME FINANCE A-109 INSURANCE A-115 REGIONAL BANKS HEALTH CARE SECTOR A-121 BIOTECHNOLOGY A-127 HEALTH CARE A-134 MEDICAL DELIVERY NATURAL RESOURCES SECTOR A-140 AMERICAN GOLD A-146 ENERGY A-152 ENERGY SERVICE A-158 PRECIOUS METALS AND MINERALS * FUND UPDATES FOR EACH SELECT PORTFOLIO INCLUDE: PERFORMANCE AND INVESTMENT SUMMARY, MANAGER'S OVERVIEW, INVESTMENTS, AND FINANCIAL STATEMENTS.
TECHNOLOGY SECTOR A-165 COMPUTERS A-171 DEVELOPING COMMUNICATIONS A-177 ELECTRONICS A-183 SOFTWARE AND COMPUTER SERVICES A-189 TECHNOLOGY UTILITIES SECTOR A-196 NATURAL GAS A-202 TELECOMMUNICATIONS A-208 UTILITIES GROWTH A-214 MONEY MARKET NOTES TO FINANCIAL STATEMENTS A-221 FOOTNOTES TO THE FINANCIAL STATEMENTS REPORT OF INDEPENDENT ACCOUNTANTS A-225 THE AUDITORS' OPINION DISTRIBUTIONS A-226 FIDELITY SELECT PORTFOLIOS PROSPECTUS P-1
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: While the 12-month period that ended February 28, 1997, provided generally positive returns for equity investors, the market's outstanding performance stemmed from the strength of a narrow group of sectors. The Standard & Poor's 500 Index (S&P 500) returned 26.16% during the period - including reinvested dividends - well above its historical annual average of about 12%. Seven of our 35 Select equity portfolios outperformed the S&P 500. Three produced negative returns. The best-performing portfolio was Home Finance, which generated a return of 47.50%, while Air Transportation performed worst, losing 15.06%. The market's gains for the past 12 months were largely due to the robust performance of blue chip stocks. Solid corporate earnings reports, large cash inflows into mutual funds, widespread optimism and a generally favorable interest rate environment propelled share prices higher. Large-capitalization stocks thrived as investors sought their lower volatility and higher degree of liquidity over smaller-cap stocks. While short-term confusion over the direction of interest rates created a volatile backdrop in the summer months, stocks rallied again when the Federal Reserve Board left short-term interest rates unchanged. In late February, the market lost some of its steam when Fed Chairman Alan Greenspan testified before Congress and reiterated the Fed's bias toward raising short-term rates as a way to pre-empt latent inflation that might arise later in 1997 due to a tight labor market. In general, CYCLICALS - those companies whose profitability levels tend to rise and fall with the economy - performed well, helped by continued economic expansion that coincided with virtually no signs of inflationary pressures. However, Paper and Forest Products was plagued by increasing inventories and reduced pricing power. While increased demand for commercial aircraft helped Defense and Aerospace, stock performance trailed off as investors became wary that the consolidation activity in the industry might be nearing an end. Rising oil prices and two major airliner crashes bedeviled the Air Transportation fund. With the economy purring along, the public's steady spending helped stocks in the CONSUMER sector. At the same time, Christmas sales reports that met, but didn't beat, expectations caused a momentary blip for stocks in Retailing. Price competition and investment alternatives posting stronger earnings growth hurt the performance of stocks in Food and Agriculture. Stocks in the HEALTH CARE sector benefited from new product introductions and increased pharmaceutical sales. On the other hand, Biotechnology had a difficult year, as promising research efforts have not yet produced tangible results for many of the industry's smaller, less-developed companies. Cost cutting and consolidation among HMOs and hospitals, as well as the prospect of reductions in government entitlement spending for long-term care providers, were the main factors hurting Medical Delivery's performance. The TECHNOLOGY sector's year could be divided into two halves. Stocks in the sector suffered from a sharp correction in the late spring of 1996 that arose from dampened demand and excess inventory. However, over the second part of the period, inventories were taken down and demand spiked upward. For Software and Computer Services, most stocks except for software giant Microsoft didn't recover as well as the rest of the sector. Stocks in the Developing Communications industry faced some adversity due to uncertainty over who would win out in an increasingly competitive environment. Companies in the FINANCIAL SERVICES sector were strong performers, helped by low interest rates, moderate growth, subdued inflation and strong cash flows into the capital markets. Brokerage and Investment Management reaped the benefits of strong equity market performance. Solid business prospects and strong earnings helped Home Finance, Regional Banks, Financial Services and Insurance post strong returns. Stocks in the NATURAL RESOURCES sector suffered from a sharp depreciation in the price of gold during the second half of 1996. Energy stocks benefited from oil and natural gas prices that were strong through much of the year. However, energy prices tailed off in early 1997 due to winter weather that was warmer than usual. Energy Service outpaced the S&P 500 due to tight capacity and strong, sustained demand for fossil fuels. The UTILITIES sector continued to lag the overall market, as uncertainty over deregulation and resultant competitive pressures continued to cast a shadow. In addition, utility stocks tend to track the bond market, which markedly underperformed stocks over the 12-month period. At the beginning of March 1997, we stand pretty much where we have over the past two years. Domestic stocks remain at high valuations, with the market's advance encompassing, for the most part, only the largest, most liquid names. For the extended market rally to continue, companies will have to report strong earnings growth and interest rates will have to remain relatively stable. That might be difficult. Potential hikes in short-term interest rates by the Fed could bring on higher borrowing costs for corporations, slow the economy and make alternatives to equity investments more attractive. In addition, a tight labor market in the U.S. could put pressure on profit margins at a time when companies are already facing limited pricing power. Of course, the market has overcome concerns such as these as it has continued its relentless climb upward over the past two years. Only time will tell. In the pages that follow, you'll find detailed summaries of the portfolios. We hope that you will use them to evaluate your investments. Thank you very much for your continued interest in the Fidelity Select Portfolios. Sincerely, Robert J. Haber Director, U.S. Equity Research Select Group Leader CUMULATIVE TOTAL RETURNS FOR THE YEAR ENDED FEBRUARY 28, 1997 Row: 1, Col: 1, Value: 47.5 Row: 2, Col: 1, Value: 44.27 Row: 3, Col: 1, Value: 43.33 Row: 4, Col: 1, Value: 35.54 Row: 5, Col: 1, Value: 34.67 Row: 6, Col: 1, Value: 32.26000000000001 Row: 7, Col: 1, Value: 28.28 Row: 8, Col: 1, Value: 26.16 Row: 9, Col: 1, Value: 23.97 Row: 10, Col: 1, Value: 20.6 Row: 11, Col: 1, Value: 20.41 Row: 12, Col: 1, Value: 20.35 Row: 13, Col: 1, Value: 19.59 Row: 14, Col: 1, Value: 18.64 Row: 15, Col: 1, Value: 18.25 Row: 16, Col: 1, Value: 18.13 Row: 17, Col: 1, Value: 16.93 Row: 18, Col: 1, Value: 16.14 Row: 19, Col: 1, Value: 15.87 Row: 20, Col: 1, Value: 15.86 Row: 21, Col: 1, Value: 15.06 Row: 22, Col: 1, Value: 13.59 Row: 23, Col: 1, Value: 12.69 Row: 24, Col: 1, Value: 12.64 Row: 25, Col: 1, Value: 12.45 Row: 26, Col: 1, Value: 10.87 Row: 27, Col: 1, Value: 10.5 Row: 28, Col: 1, Value: 10.14 Row: 29, Col: 1, Value: 7.85 Row: 30, Col: 1, Value: 6.1 Row: 31, Col: 1, Value: 5.85 Row: 32, Col: 1, Value: 4.67 Row: 33, Col: 1, Value: 1.34 Row: 34, Col: 1, Value: -4.52 Row: 35, Col: 1, Value: -6.26 Row: 36, Col: 1, Value: -15.06 Home Finance 47.50%Brokerage and Investment Management 44.27%Regional Banks 43.33%Financial Services 35.54%Electronics 34.67%Energy Service 32.26%Insurance 28.28%S&P 500 26.16%Computers 23.97%Automotive 20.60%Health Care 20.41%Energy 20.35%Retailing 19.59%Construction and Housing 18.64%Industrial Equipment 18.25%Utilities Growth 18.13%Environmental Services 16.93%Software and Computer Services 16.14%Defense and Aerospace 15.87%Consumer Industries 15.81%Chemicals 15.06%Food and Agriculture 13.59%Industrial Materials 12.69%Technology 12.64%Natural Gas 12.45%Paper and Forest Products 10.87%Medical Delivery 10.50%Leisure 10.14%Telecommunications 7.85%American Gold 6.10%Biotechnology 5.85%Transportation 4.67%Developing Communications 1.34%Multimedia -4.52%Precious Metals and Minerals -6.26%Air Transportation -15.06% 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 DO 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 FUND 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past five year and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1997 YEAR YEARS FUND CONSUMER INDUSTRIES 15.81% 84.68% 163.43% CONSUMER INDUSTRIES 12.33% 79.14% 155.53% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 167.01% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on June 29, 1990. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1997 YEAR YEARS FUND CONSUMER INDUSTRIES 15.81% 13.05% 15.61% CONSUMER INDUSTRIES 12.33% 12.37% 15.09% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 15.85% AVERAGE ANNUAL RETURNS take the fund's 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 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 1996/08/31 22361.92 21790.58 1996/09/30 23809.01 23016.95 1996/10/31 23994.54 23651.76 1996/11/30 24674.80 25439.60 1996/12/31 24266.64 24935.64 1997/01/31 25355.05 26493.62 1997/02/28 25552.95 26701.33 Let's say hypothetically that $10,000 was invested in Fidelity Select Consumer Industries Portfolio on June 29, 1990, when the fund started, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $25,553 - - a 155.53% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $26,701 - a 167.01% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS TJX Companies, Inc. 4.5 HFS, Inc. 4.1 CVS Corp. 3.9 MGM Grand, Inc. 3.6 Procter & Gamble Co. 3.6 Westinghouse Electric Corp. 3.4 Gillette Co. 3.2 Campbell Soup Co. 2.5 PepsiCo, Inc. 2.5 Disney (Walt) Co. 2.4 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Hotels, Motels, & Tourist Courts 9.3% Drug Stores 6.7% General Apparel Stores 6.1% Electrical Machinery 5.6% Cosmetics 5.5% All Others 66.8% * Row: 1, Col: 1, Value: 66.8 Row: 1, Col: 2, Value: 5.5 Row: 1, Col: 3, Value: 5.6 Row: 1, Col: 4, Value: 6.1 Row: 1, Col: 5, Value: 6.7 Row: 1, Col: 6, Value: 9.300000000000001 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS CONSUMER INDUSTRIES PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: Effective January 7, 1997, Paul Antico became Portfolio Manager of Fidelity Select Consumer Industries Portfolio. The following is an interview with Katherine Collins, who managed the fund during much of the period covered by the report, and Paul Antico, who discusses his investing style and outlook. Q. KATHERINE, HOW DID THE FUND PERFORM? K.C. For the 12 months ending February 28, 1997, the fund returned 15.81%. By comparison, the Standard & Poor's 500 Index returned 26.16% for the same time period. Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE DURING THE PERIOD? K.C. Personal care stocks performed well, as did the larger traditional consumer companies. Retailing had mixed performance; some smaller retail chains experienced bumps in growth, but those involved in consolidation activity performed well. Increased demand for upscale, luxury hotels, with little new supply, provided the opportunity to raise prices, resulting in strong performance for certain hotel stocks. Broadcast companies took advantage of the new telecommunications law, which eased ownership restrictions and resulted in heightened merger and acquisition activity. A prime example is Westinghouse's acquisition of Infinity Broadcasting, one of the country's largest radio companies. Q. WHAT INVESTMENT STRATEGIES HELPED THE FUND'S PERFORMANCE? K.C. If I had to choose the biggest contributor to the fund's performance, it would be the weighting in large-capitalization, blue chip consumer stocks, which had exceptionally strong performance. I was able to find good opportunities in companies such as Procter & Gamble and Gillette, as well as large-cap entertainment stocks such as Walt Disney. The fund's investments in personal care and hotel stocks also helped the fund's performance. Additionally, the fund benefited by limiting its exposure to restaurant, cable and cellular communications stocks, which performed poorly during the period. Q. WERE THERE ANY DISAPPOINTMENTS? K.C. Sure. The two biggest disappointments were gaming stocks and Internet stocks. Several gaming companies have been adding new facilities and, when they open, I believe they will have the potential to increase earnings. In the meantime, however, there has been some lowering of short-term earnings expectations due to the disruptions caused by capacity additions. The fund also had significant holdings in Internet service providers earlier in the year. America Online, in particular, saw slowing subscriber growth and more intense competition around mid-year. Q. TURNING TO YOU, PAUL, WHAT IS YOUR INVESTMENT PHILOSOPHY? P.A. Like Katherine, I'm a common sense investor, managing the fund from the bottom up. First I evaluate the merits of each company, rather than looking solely at industries or economic trends. My goal is to buy growth at the right price and, although I'm sensitive to valuations, I'm not afraid to pay more for a great company such as Gillette. In the current environment, there are always some great buying opportunities in this sector because of its breadth. Q. HAVING RECENTLY TAKEN THE HELM, WHAT IS YOUR OUTLOOK? P.A. The outlook for consumer stocks is, as a whole, tied to general economic health. Right now, although the consumer debt level is high, so are consumer confidence and cash flows. Regardless, I think this fund has the ability to perform well in varying economic climates simply because of the range of investment opportunities available. This allows me great flexibility in managing the fund, no matter what the environment. For example, if I see companies with strong potential for growth bolstered by changing trends in the industry, I can take advantage of that potential. If, on the other hand, I need to position the fund more defensively, I have the ability to purchase more conservative stocks. 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 February 28, 1997, more than $18 million MANAGER: Paul Antico, since January 1997; manager, Fidelity Select Leisure Portfolio, since January 1997; Fidelity Advisor Consumer Industries, since January 1997; Fidelity Select Industrial Equipment Portfolio, March 1996-January 1997; Fidelity Select Developing Communications Portfolio, 1993-1996; joined Fidelity in 1991 (checkmark) CONSUMER INDUSTRIES PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 97.3% SHARES VALUE (NOTE 1) APPAREL STORES - 10.5% FOOTWEAR - WHOLESALE - 1.0% Kenneth Cole Productions, Inc. Class A (a) 8,800 $ 172,700 GENERAL APPAREL STORES - 6.1% Gymboree Corp. (a) 4,100 100,963 Ross Stores, Inc. 4,000 192,000 TJX Companies, Inc. 19,500 814,120 1,107,083 MISCELLANEOUS APPAREL, ACCESSORIES - 0.9% Abercrombie & Fitch Co. (a) 9,700 168,538 SHOE STORES - 0.7% Footstar, Inc. (a) 5,038 127,210 WOMEN'S ACCESSORY & SPECIALTY STORES - 0.4% Loehmanns, Inc. (a) 5,000 79,688 WOMEN'S CLOTHING STORES - 1.4% AnnTaylor Stores Corp. (a) 8,100 162,000 Talbots, Inc. 2,800 89,950 251,950 TOTAL APPAREL STORES 1,907,169 BEVERAGES - 6.0% MALT BEVERAGE - 1.8% Anheuser-Busch Companies, Inc. 7,200 320,400 Coors (Adolph) Co. Class B 200 4,275 324,675 SOFT DRINKS - 4.2% Coca-Cola Co. (The) 5,200 317,200 PepsiCo, Inc. 13,600 447,100 764,300 TOTAL BEVERAGES 1,088,975 BROADCASTING - 4.4% CABLE TV OPERATORS - 0.0% Time Warner, Inc. 19 779 RADIO BROADCASTING - 4.1% Clear Channel Communications, Inc. (a) 8,600 411,725 Evergreen Media Corp. Class A (a) 5,700 171,000 Metro Networks, Inc. (a) 1,000 22,250 Univision Communications, Inc. Class A (a) 4,500 148,500 753,475 TELEVISION BROADCASTING - 0.3% Young Broadcasting, Inc. Class A (a) 1,500 43,688 TOTAL BROADCASTING 797,942 CELLULAR - 0.7% CELLULAR & COMMUNICATION SERVICES - 0.7% AirTouch Communications, Inc. (a) 5,000 136,250 COMPUTER SERVICES & SOFTWARE - 4.9% COMPUTER & SOFTWARE STORES - 2.0% CompUSA, Inc. 18,000 360,000 COMPUTER SERVICES - 2.9% America Online, Inc. (a) 9,000 337,500 Computer Learning Centers, Inc. (a) 3,800 116,850 Midway Games, Inc. (a) 5,000 78,125 532,475 PREPACKAGED COMPUTER SOFTWARE - 0.0% Spectrum Holobyte, Inc. (a) 100 825 TOTAL COMPUTER SERVICES & SOFTWARE 893,300 SHARES VALUE (NOTE 1) DRUG STORES - 6.7% CVS Corp. 15,500 $ 716,875 Revco (D.S.), Inc. (a) 8,000 327,000 Rite Aid Corp. 4,000 168,500 1,212,375 DRUGS & PHARMACEUTICALS - 0.7% PHARMACEUTICAL PREPARATIONS - 0.7% Twinlab Corp. (a) 10,000 135,000 ELECTRICAL EQUIPMENT - 5.6% ELECTRICAL MACHINERY - 5.6% General Electric Co. 4,000 411,500 Westinghouse Electric Corp. 35,650 614,963 1,026,463 ENTERTAINMENT - 6.1% MOTION PICTURE PRODUCTION - 2.5% Disney (Walt) Co. 6,000 445,500 RECREATIONAL SERVICES - 3.6% MGM Grand, Inc. (a) 18,900 663,863 TOTAL ENTERTAINMENT 1,109,363 FOODS - 2.5% CANNED SPECIALTIES - 2.5% Campbell Soup Co. 5,000 450,625 GENERAL MERCHANDISE STORES - 2.0% GENERAL MERCHANDISE STORES - 1.5% Wal-Mart Stores, Inc. 10,000 263,750 VARIETY STORES - 0.5% Hot Topic, Inc. 5,200 93,600 TOTAL GENERAL MERCHANDISE STORES 357,350 GROCERY STORES - 0.6% GROCERY - RETAIL - 0.6% Dominick's Supermarkets, Inc. (a) 6,000 111,000 HOUSEHOLD PRODUCTS - 10.5% COSMETICS - 5.5% Alberto-Culver Co. Class A 4,200 100,275 Avon Products, Inc. 4,000 233,000 Gillette Co. 7,400 585,525 Tambrands, Inc. 2,000 86,000 1,004,800 SOAPS & DETERGENTS - 5.0% Clorox Co. 2,000 239,000 Procter & Gamble Co. 5,500 660,688 899,688 TOTAL HOUSEHOLD PRODUCTS 1,904,488 LEISURE DURABLES & TOYS - 4.3% SPORTING & ATHLETIC GOODS - 0.9% Callaway Golf Co. 5,000 159,375 TOYS & GAMES - 3.4% Hasbro, Inc. 10,300 440,325 Nintendo Co. Ltd. Ord. 2,700 191,117 631,442 TOTAL LEISURE DURABLES & TOYS 790,817 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) LODGING & GAMING - 10.2% HOTELS, MOTELS, & TOURIST COURTS - 9.3% HFS, Inc. (a) 10,900 $ 746,650 Hilton Hotels Corp. 7,000 175,875 Host Marriott Corp. (a) 14,000 252,000 ITT Corp. (a) 5,000 282,500 Mirage Resorts, Inc. (a) 10,000 248,750 1,705,775 RACING & GAMING - 0.9% WMS Industries, Inc. (a) 8,000 159,000 TOTAL LODGING & GAMING 1,864,775 PAPER & FOREST PRODUCTS - 2.3% PAPER - 2.3% Kimberly-Clark Corp. 3,900 413,400 PUBLISHING - 1.9% GREETING CARDS - 0.2% Gibson Greetings, Inc. 1,800 37,125 PERIODICALS - 1.7% Playboy Enterprises, Inc. Class B (a) 20,600 314,150 TOTAL PUBLISHING 351,275 RESTAURANTS - 3.9% Landry's Seafood Restaurants, Inc. 6,000 108,000 Logan's Roadhouse, Inc. (a) 3,000 70,500 Rainforest Cafe, Inc. 9,000 183,375 Starbucks Corp. (a) 10,500 353,063 714,938 RETAIL & WHOLESALE, MISCELLANEOUS - 2.6% HOBBY, TOY, & GAME SHOPS - 1.4% Toys "R" Us, Inc. (a) 10,100 262,600 LUMBER & BUILDING MATERIALS - RETAIL - 0.6% Lowe's Companies, Inc. 3,000 109,500 RETAIL, GENERAL - 0.6% Pier 1 Imports, Inc. 6,000 104,250 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 476,350 TEXTILES & APPAREL - 9.2% APPAREL - 2.8% Fruit of the Loom, Inc. Class A 5,000 204,375 Intimate Brands, Inc. Class A 4,000 78,000 Liz Claiborne, Inc. 5,800 234,900 517,275 CARPETS & RUGS - 0.7% Mohawk Industries, Inc. (a) 5,000 131,875 COTTON MILLS - 0.6% Galey & Lord, Inc. (a) 5,800 105,850 FOOTWEAR - 3.4% NIKE, Inc. Class B 5,400 388,125 Reebok International Ltd. 4,900 229,075 617,200 KNIT OUTERWEAR MILLS - 0.4% Tultex Corp. (a) 9,000 72,000 MEN'S & BOYS' CLOTHING - 1.3% Tommy Hilfiger (a) 4,200 229,425 TOTAL TEXTILES & APPAREL 1,673,625 SHARES VALUE (NOTE 1) TOBACCO - 1.7% CIGARETTES - 1.0% RJR Nabisco Holdings Corp. 4,900 $ 179,463 TOBACCO MANUFACTURERS - 0.7% Philip Morris Companies, Inc. 1,000 135,125 TOTAL TOBACCO 314,588 TOTAL COMMON STOCKS (Cost $16,426,642) 17,730,068 CASH EQUIVALENTS - 2.7% Taxable Central Cash Fund (b) (Cost $487,888) 487,888 487,888 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $16,914,530) $ 18,217,956 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $79,036,677 and $83,160,729, respectively (see Note 3 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 $29,979 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $16,982,694. Net unrealized appreciation aggregated $1,235,262, of which $1,626,330 related to appreciated investment securities and $391,068 related to depreciated investment securities. The fund hereby designates approximately $46,000 as a capital gain dividend for the purpose of the dividend paid deduction. CONSUMER INDUSTRIES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997 ASSETS Investment in $ 18,217,956 securities, at value (cost $16,914,530) - - See accompanyin g schedule Receivable for 703,519 investments sold Receivable for 219,653 fund shares sold Dividends 8,339 receivable Interest 6,561 receivable Redemption 168 fees receivable Other 2,898 receivables TOTAL ASSETS 19,159,094 LIABILITIES Payable to $ 126,335 custodian bank Payable for 248,540 investments purchased Payable for 347,635 fund shares redeemed Accrued 9,035 management fee Other payables 35,439 and accrued expenses TOTAL 766,984 LIABILITIES NET ASSETS $ 18,392,110 Net Assets consist of: Paid in capital $ 17,108,780 Accumulated (20,096 undistributed ) net realized gain (loss) on investments and foreign currency transactions Net unrealized 1,303,426 appreciation (depreciation ) on investments NET ASSETS, for $ 18,392,110 890,378 shares outstanding NET ASSET $20.66 VALUE and redemption price per share ($18,392,110 (divided by) 890,378 shares) Maximum $21.30 offering price per share (100/97.00 of $20.66) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997 INVESTMENT $ 233,081 INCOME Dividends Interest 103,153 TOTAL 336,234 INCOME EXPENSES Management $ 154,434 fee Transfer agent 346,240 fees Accounting 60,450 fees and expenses Non-interested 209 trustees' compensatio n Custodian fees 15,757 and expenses Registration 20,409 fees Audit 37,685 Legal 423 Miscellaneous 724 Total 636,331 expenses before reductions Expense (12,169 624,162 reductions ) NET (287,928 INVESTMENT ) INCOME (LOSS) REALIZED AND 2,053,365 UNREALIZED GAIN (LOSS) Net realized gain (loss) on investment securities Change in net (1,279,001 unrealized ) appreciation (depreciation ) on investment securities NET GAIN (LOSS) 774,364 NET INCREASE $ 486,436 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 169,639 INFORMATION Sales charges paid to FDC Deferred $ 682 sales charges withheld by FDC Exchange $ 29,948 fees withheld by FSC Expense $ 12,169 reductions Directed brokerage arrangement s STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ (287,928 $ 160,644 Net ) investment income (loss) Net realized 2,053,365 (15,575 gain (loss) ) Change in (1,279,001 2,287,139 net ) unrealized appreciation (depreciation ) NET INCREASE 486,436 2,432,208 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to - (179,260 shareholders ) From net investment income From net - (51,276 realized gain ) In excess of - (1,382,081 net realized ) gain TOTAL - (1,612,617 DISTRIBUTION ) S Share 64,681,737 203,425,708 transactions Net proceeds from sales of shares Reinvestmen - 1,603,782 t of distributions Cost of (69,290,503 (204,220,866 shares ) ) redeemed Paid in 152,149 232,770 capital portion of redemption fees NET INCREASE (4,456,617 1,041,394 (DECREASE) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (3,970,181 1,860,985 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 22,362,291 20,501,306 period End of period $ 18,392,110 $ 22,362,291 OTHER INFORMATION Shares Sold 3,299,962 11,665,407 Issued in - 90,434 reinvestment of distributions Redeemed (3,662,924 (11,976,587 ) ) Net increase (362,962) (220,746) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 17.84 $ 13.91 $ 15.24 $ 12.97 $ 13.81 value, beginning of period Income from Investment Operations Net (.22) .08 (.15) (.20) (.09) investment income (loss) Net realized 2.93 3.97 (.60) 3.84 .20 and unrealized gain (loss) Total from 2.71 4.05 (.75) 3.64 .11 investment operations Less Distributions From net - (.02) - - - investment income From net - (.01) (.60) (1.40) (.97) realized gain In excess of - (.20) - - - net realized gain Total - (.23) (.60) (1.40) (.97) distributions Redemption .11 .11 .02 .03 .02 fees added to paid in capital Net asset $ 20.66 $ 17.84 $ 13.91 $ 15.24 $ 12.97 value, end of period TOTAL 15.81% 30.01% (4.59)% 28.43% .98% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 18,392 $ 22,362 $ 20,501 $ 8,374 $ 7,005 end of period (000 omitted) Ratio of 2.49% 1.53% E 2.49% E 2.48% E 2.47% A, expenses to E average net assets Ratio of 2.44% F 1.48% F 2.49% 2.48% 2.47% A expenses to average net assets after expense reductions Ratio of net (1.13)% .46% (1.08)% (1.34)% (.80)% investment A income (loss) to average net assets Portfolio 340% 601% 190% 169% 215% A turnover rate Average $ .0355 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 8 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 8 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.
FOOD AND AGRICULTURE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS FOOD AND AGRICULTURE 13.59% 108.11% 367.79% FOOD AND AGRICULTURE 10.18% 101.87% 353.76% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS FOOD AND AGRICULTURE 13.59% 15.79% 16.68% FOOD AND AGRICULTURE 10.18% 15.08% 16.33% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9995.84 10289.00 1987/04/30 9961.70 10197.43 1987/05/31 9899.12 10286.15 1987/06/30 10473.72 10805.60 1987/07/31 10854.90 11353.44 1987/08/31 11236.07 11776.92 1987/09/30 11122.29 11519.01 1987/10/31 8613.37 9037.81 1987/11/30 8232.20 8293.10 1987/12/31 8624.35 8924.20 1988/01/31 8961.75 9299.91 1988/02/29 9405.70 9733.29 1988/03/31 9470.81 9432.53 1988/04/30 9500.40 9537.23 1988/05/31 9571.43 9620.20 1988/06/30 9962.11 10061.77 1988/07/31 10033.14 10023.54 1988/08/31 10027.22 9682.74 1988/09/30 10429.73 10095.22 1988/10/31 10915.11 10375.87 1988/11/30 10660.58 10227.49 1988/12/31 10933.47 10406.47 1989/01/31 11497.36 11168.23 1989/02/28 11289.61 10890.14 1989/03/31 11716.98 11143.88 1989/04/30 12322.41 11722.25 1989/05/31 13082.18 12197.00 1989/06/30 13339.23 12127.48 1989/07/31 14611.66 13222.59 1989/08/31 14386.39 13481.75 1989/09/30 14447.28 13426.47 1989/10/31 14301.16 13114.98 1989/11/30 14843.01 13382.52 1989/12/31 15183.03 13703.71 1990/01/31 14126.93 12784.19 1990/02/28 14329.03 12949.10 1990/03/31 14948.34 13292.25 1990/04/30 14889.67 12959.95 1990/05/31 16186.98 14223.54 1990/06/30 16712.05 14126.82 1990/07/31 16705.46 14081.62 1990/08/31 15486.81 12808.64 1990/09/30 14992.76 12184.86 1990/10/31 15348.47 12132.46 1990/11/30 15980.86 12916.22 1990/12/31 16599.16 13276.58 1991/01/31 17075.56 13855.44 1991/02/28 18361.84 14846.11 1991/03/31 19260.20 15205.38 1991/04/30 18967.55 15241.87 1991/05/31 19661.73 15900.32 1991/06/30 18851.65 15172.09 1991/07/31 19640.60 15879.11 1991/08/31 20422.62 16255.44 1991/09/30 20062.75 15983.98 1991/10/31 20069.67 16198.16 1991/11/30 19931.26 15545.38 1991/12/31 22257.76 17323.77 1992/01/31 21925.98 17001.55 1992/02/29 21803.37 17222.57 1992/03/31 21320.13 16886.73 1992/04/30 21074.91 17383.20 1992/05/31 21262.43 17468.37 1992/06/30 21029.96 17208.09 1992/07/31 21842.24 17911.90 1992/08/31 21745.36 17544.71 1992/09/30 22110.52 17751.74 1992/10/31 22348.99 17813.87 1992/11/30 23205.98 18421.32 1992/12/31 23599.00 18647.90 1993/01/31 23606.63 18804.55 1993/02/28 23545.59 19060.29 1993/03/31 24186.50 19462.46 1993/04/30 23247.38 18991.47 1993/05/31 23979.33 19500.44 1993/06/30 23740.65 19556.99 1993/07/31 23446.28 19478.76 1993/08/31 24568.07 20217.01 1993/09/30 24488.51 20061.34 1993/10/31 25411.41 20476.61 1993/11/30 25117.03 20282.08 1993/12/31 25679.83 20527.49 1994/01/31 26456.49 21225.43 1994/02/28 26297.81 20650.22 1994/03/31 25070.19 19749.87 1994/04/30 24790.07 20002.67 1994/05/31 24609.93 20330.71 1994/06/30 24798.65 19832.61 1994/07/31 25630.70 20483.12 1994/08/31 27260.50 21322.93 1994/09/30 27311.97 20800.52 1994/10/31 27826.64 21268.53 1994/11/30 27148.99 20493.93 1994/12/31 27244.75 20797.85 1995/01/31 28393.30 21337.14 1995/02/28 28963.13 22168.65 1995/03/31 29621.99 22822.85 1995/04/30 30269.42 23494.98 1995/05/31 31355.64 24434.07 1995/06/30 32097.89 25001.68 1995/07/31 32450.92 25830.73 1995/08/31 32396.61 25895.57 1995/09/30 34940.18 26988.36 1995/10/31 34994.49 26892.01 1995/11/30 36370.37 28072.57 1995/12/31 37226.90 28613.25 1996/01/31 38762.22 29587.24 1996/02/29 39946.88 29861.52 1996/03/31 39274.00 30149.08 1996/04/30 38558.08 30593.48 1996/05/31 39980.39 31382.49 1996/06/30 40019.35 31502.05 1996/07/31 39473.81 30110.29 1996/08/31 38217.12 30745.32 1996/09/30 39512.78 32475.67 1996/10/31 40243.42 33371.34 1996/11/30 42269.71 35893.88 1996/12/31 42196.49 35182.83 1997/01/31 44020.49 37381.05 1997/02/28 45375.75 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Food and Agriculture Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $45,376 - a 353.76% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Philip Morris Companies, Inc. 10.9 Ralston Purina Co. 8.8 Nabisco Holdings Corp. Class A 6.1 Campbell Soup Co. 6.1 RJR Nabisco Holdings Corp. 5.4 Coca-Cola Co. (The) 4.6 PepsiCo, Inc. 4.4 Kellogg Co. 4.4 General Mills, Inc. 4.1 Heinz (H.J.) Co. 3.2 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Food 18.8% Tobacco Manufacturers 10.9% Grain Mill Products 10.0% Soft Drinks 9.2% Cookies & Crackers 6.1% All Others 45.0% * Row: 1, Col: 1, Value: 45.0 Row: 1, Col: 2, Value: 6.1 Row: 1, Col: 3, Value: 9.199999999999999 Row: 1, Col: 4, Value: 10.0 Row: 1, Col: 5, Value: 10.9 Row: 1, Col: 6, Value: 18.8 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS FOOD AND AGRICULTURE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Scott Offen became Portfolio Manager of Fidelity Select Food and Agriculture Portfolio on November 12, 1996. Q. SCOTT, HOW DID THE FUND PERFORM OVER THE PAST YEAR? A. For the 12 months that ended February 28, 1997, the fund had a total return of 13.59%, while the Standard & Poor's 500 Index returned 26.16% over the same period. Q. LOOKING BACK OVER THE YEAR, WHAT FACTORS AFFECTED THE SECTOR? A. I believe the sector didn't perform as well as the overall market for several reasons. First, the companies in it didn't experience the same kind of explosive unit growth as the parts of the S&P 500 that led the market, such as technology companies. Second, some of the categories, such as the cereal group, saw intense price competition, forcing companies to cut prices to maintain market share. Third, some companies have been slow to restructure or take other measures to help streamline their operations. Finally, this is a sector that, relative to the broader stock market, generally performs best when the future of the economy is uncertain, because many of the companies in it are capable of sustaining steady earnings growth. Over the past year, the economy has been doing fine, and other parts of the market were more attractive because they were able to sustain better earnings growth. Q. SCOTT, YOU TOOK OVER THE FUND IN NOVEMBER. WHAT CHANGES HAVE YOU MADE SINCE THEN? A. I've reduced the number of positions in the fund and concentrated it more on large-capitalization stocks. For example, in the beverage area I reduced the fund's small- and mid-cap positions and increased investments in Coca-Cola and PepsiCo. I've pursued a large-cap bias because I felt these companies have the resources to take costs out of their systems and take advantage of economies of scale. By doing so, they can reinvest some of those cost savings back into their businesses, either through capital expenditures or marketing, to increase volume growth to help them further their domination of their categories. That process should lead to enhanced returns over time. Q. WHICH STOCKS WERE SOME OF THE BEST PERFORMERS FOR THE FUND? A. The fund's tobacco investments - Philip Morris and RJR Nabisco - did very well, even though they struggled somewhat last summer after another tobacco company lost a lawsuit. However, the companies have rebounded after winning recent cases, and the stocks have been among the market's top performers. Also, these companies had positive business prospects that have been driven by increased consumption overseas. In addition, consumption in the U.S. has been flat recently, where it had been declining during the previous three years. In addition, Campbell Soup has done very well, because it successfully pursued the kind of cost-cutting strategy I just described above. Q. WERE THERE DISAPPOINTMENTS? A. As I mentioned, the cereal group, including companies such as Kellogg's and General Mills, ran into some problems because of a difficult pricing environment. PepsiCo suffered from the problems that have held it back over the past few years, namely its struggling restaurant franchises. However, the company announced that it plans to divest itself of those holdings by the end of 1997. McDonald's faltered as well, as it fought to maintain market share. Q. WHAT'S YOUR OUTLOOK OVER THE NEXT FEW MONTHS? A. I believe the sector will do well. I feel confident that I've found some companies that will take control of their own destiny. I'll continue to look for companies that are striving to reduce costs, increase market share, pursue aggressive marketing tactics or introduce new products to create new demand. By doing so, these types of companies can create real value for shareholders. 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 February 28, 1997, more than $223 million MANAGER: Scott Offen, since November 1996; manager, Fidelity Select Paper and Forest Products Portfolio, 1993-1996; Fidelity Select Brokerage and Investment Management Portfolio, 1990-1993; Fidelity Select Life Insurance Portfolio, 1988-1990; joined Fidelity in 1985 (checkmark) FOOD AND AGRICULTURE PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.6% SHARES VALUE (NOTE 1) AGRICULTURE - 3.8% CROPS - 3.8% DEKALB Genetics Corp. Class B 27,800 $ 1,813,950 Pioneer Hi-Bred International, Inc. 96,200 6,553,622 8,367,572 BEVERAGES - 10.3% MALT BEVERAGE - 1.1% Anheuser-Busch Companies, Inc. 53,200 2,367,400 SOFT DRINKS - 9.2% Celestial Seasonings, Inc. (a) 5,600 121,100 Coca-Cola Co. (The) 166,900 10,180,900 Coca-Cola Enterprises, Inc. 6,400 395,200 PepsiCo, Inc. 300,100 9,865,788 20,562,988 TOTAL BEVERAGES 22,930,388 CONGLOMERATES - 0.6% Whitman Corp. 51,700 1,214,950 FOODS - 56.0% BAKERY PRODUCTS - 1.0% Flowers Industries, Inc. 49,800 1,151,625 Interstate Bakeries Corp. 24,800 1,159,400 2,311,025 CANDY - 2.9% Hershey Foods Corp. 139,400 6,360,125 CANNED SPECIALTIES - 6.1% Campbell Soup Co. 150,700 13,581,838 CEREAL BREAKFAST FOODS - 0.4% Ralcorp Holdings, Inc. (a) 72,466 769,951 COOKIES & CRACKERS - 6.1% Nabisco Holdings Corp. Class A 332,400 13,669,950 DAIRY - 1.7% Dean Foods Co. 51,300 1,673,663 Suiza Foods Corp. 87,800 2,205,975 3,879,638 FOOD - 18.8% Burns Philp & Co. (a) 100,000 155,750 Chiquita Brands International, Inc. 318,500 4,299,750 Dole Food, Inc. 91,900 3,515,175 General Mills, Inc. 140,611 9,174,868 Heinz (H.J.) Co. 173,000 7,201,125 Kellogg Co. 141,600 9,699,600 Nestle SA (Reg.) 680 738,765 Sara Lee Corp. 183,100 7,095,125 41,880,158 GENERAL FOOD PREPARATIONS - 2.8% CPC International, Inc. 62,700 5,274,638 McCormick & Co., Inc. (non-vtg.) 38,500 909,563 6,184,201 GRAIN MILL PRODUCTS - 10.0% Quaker Oats Co. 77,600 2,783,900 Ralston Purina Co. 237,300 19,488,263 22,272,163 MEAT & FISH - 4.8% ConAgra, Inc. 79,000 4,187,000 GoodMark Foods, Inc. 13,200 188,100 Hormel (George A) & Co. 3,200 84,000 Tyson Foods, Inc. 302,925 6,134,231 10,593,331 SHARES VALUE (NOTE 1) POULTRY SLAUGHTER & PROCESSING - 0.0% Pilgrims Pride Corp. 300 $ 3,338 RICE MILLING - 0.1% Riviana Foods, Inc. 7,700 138,600 SUGAR & CANDIES - 1.3% Tootsie Roll Industries, Inc. 21,800 921,050 Wrigley (Wm.) Jr. Co. 33,200 1,987,850 2,908,900 TOTAL FOODS 124,553,218 HOUSEHOLD PRODUCTS - 0.9% SOAPS & DETERGENTS - 0.9% Unilever PLC Ord. 80,000 2,053,170 RESTAURANTS - 2.7% McDonald's Corp. 140,900 6,093,925 TOBACCO - 16.3% CIGARETTES - 5.4% RJR Nabisco Holdings Corp. 329,220 12,057,683 TOBACCO MANUFACTURERS - 10.9% General Cigar Holdings, Inc. Class A 1,000 18,000 Philip Morris Companies, Inc. 179,000 24,187,375 24,205,375 TOTAL TOBACCO 36,263,058 TOTAL COMMON STOCKS (Cost $177,419,937) 201,476,281 CASH EQUIVALENTS - 9.4% Taxable Central Cash Fund (b) (Cost $20,959,213) 20,959,213 20,959,213 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $198,379,150) $ 222,435,494 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions during the period with companies which are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME GoodMarK Foods, Inc. $ - $ 500,511 $ 56,332 $ - Grist Mill Co. 53,000 516,638 - - TOTALS $ 53,000 $ 1,017,149 $ 56,332 $ - OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $224,665,594 and $315,313,469, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $97,562 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and average daily balance during the period for which loans were outstanding amounted to $3,769,000 and $3,530,500, respectively. The weighted average interest rate was 5.7% (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997 the aggregate cost of investment securities for income tax purposes was $199,053,524. Net unrealized appreciation aggregated $23,381,970, of which $25,819,468 related to appreciated investment securities and $2,437,498 related to depreciated investment securities. The fund hereby designates approximately $18,228,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 45% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. FOOD AND AGRICULTURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997 ASSETS Investment in $ 222,435,494 securities, at value (cost $198,379,150 ) - See accompanyin g schedule Receivable for 2,252,499 investments sold Receivable for 1,683,446 fund shares sold Dividends 287,457 receivable Interest 66,867 receivable Redemption 1,577 fees receivable Other 14,523 receivables TOTAL ASSETS 226,741,863 LIABILITIES Payable for $ 2,130,369 investments purchased Payable for 903,203 fund shares redeemed Accrued 109,196 management fee Other payables 176,533 and accrued expenses TOTAL 3,319,301 LIABILITIES NET ASSETS $ 223,422,562 Net Assets consist of: Paid in capital $ 167,636,464 Undistributed 1,614,818 net investment income Accumulated 30,114,932 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 24,056,348 appreciation (depreciation ) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 223,422,562 5,017,354 shares outstanding NET ASSET $44.53 VALUE and redemption price per share ($223,422,56 2 (divided by) 5,017,354 shares) Maximum $45.91 offering price per share (100/97.00 of $44.53) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997 INVESTMENT $ 5,413,281 INCOME Dividends (including $56,332 received from affiliated issuers) Interest 1,595,063 TOTAL 7,008,344 INCOME EXPENSES Management $ 1,682,437 fee Transfer agent 2,162,676 fees Accounting 279,388 fees and expenses Non-interested 1,469 trustees' compensatio n Custodian fees 19,482 and expenses Registration 54,981 fees Audit 38,254 Legal 1,923 Interest 2,216 Miscellaneous 8,134 Total 4,250,960 expenses before reductions Expense (56,861 4,194,099 reductions ) NET 2,814,245 INVESTMENT INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 41,583,692 securities (including realized gain (loss) of $535,623 on sales of investments in affiliated issuers) Foreign 445 41,584,137 currency transactions Change in net unrealized appreciation (depreciation ) on: Investment (16,829,519 securities ) Assets and (1,054 (16,830,573 liabilities in ) ) foreign currencies NET GAIN (LOSS) 24,753,564 NET INCREASE $ 27,567,809 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 1,095,115 INFORMATION Sales charges paid to FDC Deferred $ 7,683 sales charges withheld by FDC Exchange $ 171,225 fees withheld by FSC Expense $ 52,629 reductions Directed brokerage arrangement s Custodian 971 interest credits Transfer 3,261 agent interest credits $ 56,861 STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 2,814,245 $ 2,077,785 Net investment income Net realized 41,584,137 29,464,842 gain (loss) Change in (16,830,573 31,022,063 net ) unrealized appreciation (depreciation ) NET INCREASE 27,567,809 62,564,690 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (1,549,005 (1,144,034 shareholders ) ) From net investment income From net (17,656,169 (12,658,077 realized gain ) ) TOTAL (19,205,174 (13,802,111 DISTRIBUTION ) ) S Share 332,131,288 355,816,771 transactions Net proceeds from sales of shares Reinvestmen 18,966,497 13,613,779 t of distributions Cost of (437,551,907 (314,447,812 shares ) ) redeemed Paid in 411,716 227,026 capital portion of redemption fees NET INCREASE (86,042,406 55,209,764 (DECREASE) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (77,679,771 103,972,343 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 301,102,333 197,129,990 period End of period $ 223,422,562 $ 301,102,333 (including undistribute d net investment income of $1,614,818 and $1,092,171 , respectivel y) OTHER INFORMATION Shares Sold 8,035,192 9,278,227 Issued in 465,609 361,809 reinvestment of distributions Redeemed (10,627,722 (8,554,944 ) ) Net increase (2,126,921) 1,085,092 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 42.15 $ 32.53 $ 31.49 $ 30.86 $ 29.22 value, beginning of period Income from Investment Operations Net .42 .37 .15 .09 .05 investment income Net realized 4.91 11.61 2.80 3.29 3.26 and unrealized gain (loss) Total from 5.33 11.98 2.95 3.38 3.31 investment operations Less Distributions From net (.24) (.20) (.08) (.06) (.10) investment income From net (2.77) (2.20) (1.85) (2.70) (1.57) realized gain Total (3.01) (2.40) (1.93) (2.76) (1.67) distributions Redemption .06 .04 .02 .01 - fees added to paid in capital Net asset $ 44.53 $ 42.15 $ 32.53 $ 31.49 $ 30.86 value, end of period TOTAL 13.59% 37.92% 10.14% 11.69% 11.72% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 223,423 $ 301,102 $ 197,130 $ 95,010 $ 108,377 end of period (000 omitted) Ratio of 1.52% 1.43% 1.70% 1.65% 1.67% A expenses to average net assets Ratio of 1.50% E 1.42% E 1.68% E 1.64% E 1.67% A expenses to average net assets after expense reductions Ratio of net 1.01% .99% .49% .29% .21% A investment income to average net assets Portfolio 91% 124% 126% 96% 515% A turnover rate Average $ .0326 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 8 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS LEISURE 10.14% 113.49% 233.16% LEISURE 6.83% 107.08% 223.17% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS LEISURE 10.14% 16.38% 12.79% LEISURE 6.83% 15.67% 12.45% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9815.89 10289.00 1987/04/30 9591.84 10197.43 1987/05/31 9985.86 10286.15 1987/06/30 10414.66 10805.60 1987/07/31 11183.39 11353.44 1987/08/31 11415.17 11776.92 1987/09/30 11167.94 11519.01 1987/10/31 7980.96 9037.81 1987/11/30 7424.69 8293.10 1987/12/31 8374.34 8924.20 1988/01/31 8503.24 9299.91 1988/02/29 9246.58 9733.29 1988/03/31 9555.94 9432.53 1988/04/30 9616.10 9537.23 1988/05/31 9366.88 9620.20 1988/06/30 9992.51 10061.77 1988/07/31 10075.60 10023.54 1988/08/31 9682.02 9682.74 1988/09/30 10355.47 10095.22 1988/10/31 10355.47 10375.87 1988/11/30 9957.52 10227.49 1988/12/31 10552.26 10406.47 1989/01/31 11453.12 11168.23 1989/02/28 11269.45 10890.14 1989/03/31 11798.59 11143.88 1989/04/30 12467.68 11722.25 1989/05/31 13088.65 12197.00 1989/06/30 13212.76 12127.48 1989/07/31 14321.56 13222.59 1989/08/31 14436.41 13481.75 1989/09/30 14529.18 13426.47 1989/10/31 13482.23 13114.98 1989/11/30 13641.26 13382.52 1989/12/31 13845.39 13703.71 1990/01/31 12166.31 12784.19 1990/02/28 12058.44 12949.10 1990/03/31 12152.24 13292.25 1990/04/30 11678.53 12959.95 1990/05/31 12644.71 14223.54 1990/06/30 12499.31 14126.82 1990/07/31 12067.82 14081.62 1990/08/31 10674.84 12808.64 1990/09/30 9661.76 12184.86 1990/10/31 9549.19 12132.46 1990/11/30 10309.00 12916.22 1990/12/31 10759.88 13276.58 1991/01/31 11361.60 13855.44 1991/02/28 12233.38 14846.11 1991/03/31 12437.11 15205.38 1991/04/30 12470.28 15241.87 1991/05/31 12901.43 15900.32 1991/06/30 12176.53 15172.09 1991/07/31 12759.29 15879.11 1991/08/31 12891.96 16255.44 1991/09/30 13223.61 15983.98 1991/10/31 13621.60 16198.16 1991/11/30 12967.76 15545.38 1991/12/31 14303.87 17323.77 1992/01/31 14626.05 17001.55 1992/02/29 15137.74 17222.57 1992/03/31 14829.78 16886.73 1992/04/30 14995.61 17383.20 1992/05/31 15085.63 17468.37 1992/06/30 14853.47 17208.09 1992/07/31 14924.54 17911.90 1992/08/31 14711.33 17544.71 1992/09/30 15000.34 17751.74 1992/10/31 15114.05 17813.87 1992/11/30 16142.19 18421.32 1992/12/31 16625.46 18647.90 1993/01/31 17037.66 18804.55 1993/02/28 16947.64 19060.29 1993/03/31 17828.90 19462.46 1993/04/30 17427.10 18991.47 1993/05/31 18678.93 19500.44 1993/06/30 19181.64 19556.99 1993/07/31 19694.20 19478.76 1993/08/31 21049.53 20217.01 1993/09/30 22099.30 20061.34 1993/10/31 23321.56 20476.61 1993/11/30 22454.15 20282.08 1993/12/31 23201.44 20527.49 1994/01/31 23442.59 21225.43 1994/02/28 23242.49 20650.22 1994/03/31 21836.65 19749.87 1994/04/30 21880.67 20002.67 1994/05/31 21649.10 20330.71 1994/06/30 20734.11 19832.61 1994/07/31 21536.14 20483.12 1994/08/31 22394.65 21322.93 1994/09/30 22389.00 20800.52 1994/10/31 22309.93 21268.53 1994/11/30 21355.40 20493.93 1994/12/31 21615.21 20797.85 1995/01/31 22010.58 21337.14 1995/02/28 22993.35 22168.65 1995/03/31 23597.69 22822.85 1995/04/30 23806.75 23494.98 1995/05/31 24267.41 24434.07 1995/06/30 25205.81 25001.68 1995/07/31 26957.47 25830.73 1995/08/31 27821.93 25895.57 1995/09/30 27867.43 26988.36 1995/10/31 26525.24 26892.01 1995/11/30 27389.70 28072.57 1995/12/31 27442.19 28613.25 1996/01/31 27848.93 29587.24 1996/02/29 29342.42 29861.52 1996/03/31 29488.60 30149.08 1996/04/30 30699.36 30593.48 1996/05/31 31959.02 31382.49 1996/06/30 31835.65 31502.05 1996/07/31 29550.08 30110.29 1996/08/31 30283.80 30745.32 1996/09/30 31757.74 32475.67 1996/10/31 30887.66 33371.34 1996/11/30 31764.23 35893.88 1996/12/31 31120.90 35182.83 1997/01/31 32506.01 37381.05 1997/02/28 32316.82 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Leisure Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $32,317 - a 223.17% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Disney (Walt) Co. 3.7 HFS, Inc. 3.3 Westinghouse Electric Corp. 3.3 MGM Grand, Inc. 3.3 Clear Channel Communications, Inc. 3.0 Hasbro, Inc. 2.6 America Online, Inc. 2.5 Premier Parks, Inc. 2.1 General Electric Co. 2.1 Omnicom Group, Inc. 2.1 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Row: 1, Col: 1, Value: 62.0 Row: 1, Col: 2, Value: 4.2 Row: 1, Col: 3, Value: 4.4 Row: 1, Col: 4, Value: 5.4 Row: 1, Col: 5, Value: 11.2 Row: 1, Col: 6, Value: 11.8 Radio Broadcasting 11.8% Hotels, Motels & Tourist Courts 11.2% Electrical Machinery 5.4% Advertising Agencies 4.4% Motion Picture Production 4.2% All Others 63.0% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS LEISURE PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: Effective January 7, 1997, Paul Antico became Portfolio Manager of Fidelity Select Leisure Portfolio. The following is an interview with Katherine Collins, who managed the fund for most of the period covered by this report, and Paul Antico, who discusses his outlook. Q. HOW DID THE FUND PERFORM, KATHERINE? K.C. For the 12-month period that ended February 28, 1997, the fund returned 10.14%. By comparison, the Standard & Poor's 500 Index returned 26.16% for the same time period. Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE DURING THE PERIOD? K.C. The environment and stock performance varied by industry. During the year, the broadcasting, advertising and lodging industries performed well. The Telecommunications Act liberalized broadcasting station ownership rules, leading to significant merger and acquisition activity in the radio industry. Advertising companies saw the benefits of their own consolidation, as well as their customers' concentration of business. The lodging industry was able to increase prices, especially at high-end luxury hotels. Weaker industries in the leisure sector over the past year included restaurants, cable and cellular stocks. Many restaurants saw negative sales trends, which led to earnings disappointments. The cable and cellular industries suffered from increased competition from direct broadcast satellite and personal communications services, respectively. Several large entertainment companies showed relatively weak cash flow growth due to disappointing film releases and a slow retail music environment. Q. HOW DID GAMING AND TOBACCO DO? K.C. In gaming, it was an up and down year. During the first half of the period, business was strong, with several new properties being planned. In the second half of the period, business weakened for some companies; overall, the stocks' performance was still positive for the year. The tobacco industry did relatively well, despite corrections resulting from litigation scares. Tobacco stocks recovered during the latter part of the period, after the market appeared to over-discount litigation risk in these stocks. Q. WHAT HOLDINGS DID WELL? K.C. Companies that performed well included advertising stocks such as Omnicom, which returned over 20% for the year, due to the strong advertising market, market share gains and a good job consolidating acquisitions made in the last couple of years. Broadcasting stocks such as Clear Channel Communications and Evergreen Media Corp. contributed to the fund's performance. The fund's performance also was helped by its limited exposure to restaurant, cable and cellular communications stocks. Q. WERE THERE DISAPPOINTMENTS? K.C. Yes, there were missed opportunities, and opportunity costs had the greatest impact on performance. For example, I did not own enough Coca-Cola or Microsoft, and both companies had very strong performance. If we look at what the fund did own, the biggest disappointments were some of the large entertainment stocks. Viacom and Time Warner both performed poorly for much of 1996, as they reported relatively weak cash flow growth and little progress on corporate initiatives such as debt pay-downs. Q. TURNING TO YOU, PAUL, WHAT'S YOUR OUTLOOK? P.A. I always have to look out for what's happening in the economy, of course, but my main focus will be on finding those companies that I think will do well in any scenario. In the current economic climate, I have to be more selective. My team of analysts and I contact hundreds of companies, and we share information constantly to find the best buying opportunities. The economy has a part to play, but it's my job to know which industries or companies are going to present the best opportunities in various environments. 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: May 8, 1984 FUND NUMBER: 062 TRADING SYMBOL: FDLSX SIZE: as of February 28, 1997, more than $98 million MANAGER: Paul Antico, since January 1997; manager, Fidelity Select Consumer Industries Portfolio, since January 1997; Fidelity Advisor Consumer Industries, since January 1997; Fidelity Select Industrial Equipment Portfolio, March 1996-February 1997; Fidelity Select Developing Communications Portfolio, 1993-1996; joined Fidelity in 1991 (checkmark) LEISURE PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.9% SHARES VALUE (NOTE 1) ADVERTISING - 4.4% ADVERTISING AGENCIES - 4.4% ADVO, Inc. 40,000 $ 515,000 Omnicom Group, Inc. 41,700 2,069,356 WPP Group PLC ADR 40,000 1,720,000 4,304,356 AEROSPACE & DEFENSE - 1.8% AIRCRAFT - 1.8% Boeing Co. 17,000 1,729,750 AIR TRANSPORTATION - 1.8% AIR TRANSPORT, MAJOR NATIONAL - 1.8% America West Holding Corp. Class B (a) 130,000 1,803,750 BEVERAGES - 4.5% DISTILLED & BLENDED LIQUOR - 0.6% Seagram Co. Ltd. 15,000 584,914 MALT BEVERAGE - 1.3% Anheuser-Busch Companies, Inc. 27,600 1,228,200 SOFT DRINKS - 2.6% Coca-Cola Co. (The) 17,000 1,037,000 PepsiCo, Inc. 46,882 1,541,246 2,578,246 TOTAL BEVERAGES 4,391,360 BROADCASTING - 16.4% CABLE TV OPERATORS - 2.9% BET Holdings, Inc. Class A (a) 41,200 1,210,250 Tele-Communications Liberty Media Group, Series A (a) 75,000 1,575,000 2,785,250 RADIO BROADCASTING - 11.8% American Radio Systems Corp. Class A (a) 40,100 1,343,350 Clear Channel Communications, Inc. (a) 60,900 2,915,588 Cox Radio, Inc. Class A (a) 31,000 592,875 EZ Communications, Inc. Class A (a) 30,100 1,271,725 Emmis Broadcasting Corp. Class A (a) 29,800 1,028,100 Evergreen Media Corp. Class A (a) 57,987 1,739,610 Heftel Broadcasting Corp. Class A (a) 29,200 1,178,950 Jacor Communications, Inc. Class A (a) 43,200 1,271,700 Metro Networks, Inc. (a) 1,000 22,250 Univision Communications, Inc., Class A (a) 7,500 247,500 11,611,648 TELEVISION BROADCASTING - 1.7% Renaissance Communications Corp. (a) 36,550 1,306,663 Young Broadcasting, Inc. Class A (a) 13,000 378,625 1,685,288 TOTAL BROADCASTING 16,082,186 CELLULAR - 0.8% CELLULAR & COMMUNICATION SERVICES - 0.8% AirTouch Communications, Inc. (a) 29,300 798,425 COMPUTER SERVICES & SOFTWARE - 6.1% COMPUTER SERVICES - 3.0% America Online, Inc. (a) 66,600 2,497,500 Midway Games, Inc. (a) 30,000 468,750 2,966,250 SHARES VALUE (NOTE 1) ELECTRONIC INFORMATION RETRIEVAL - 1.1% CUC International, Inc. (a) 43,800 $ 1,045,725 PREPACKAGED COMPUTER SOFTWARE - 2.0% Excite, Inc. 125,000 1,984,375 Yahoo, Inc. 200 6,050 1,990,425 TOTAL COMPUTER SERVICES & SOFTWARE 6,002,400 DRUG STORES - 1.3% CVS Corp. 27,500 1,271,875 ELECTRICAL EQUIPMENT - 5.4% ELECTRICAL MACHINERY - 5.4% General Electric Co. 20,400 2,098,650 Westinghouse Electric Corp. 187,417 3,232,943 5,331,593 ELECTRONICS - 0.7% ELECTRONIC PARTS - WHOLESALE - 0.7% Brightpoint, Inc. (a) 23,800 642,600 ENTERTAINMENT - 13.5% AMUSEMENT - 0.8% Scientific Games Holdings Corp. (a) 30,000 742,500 AMUSEMENT & RECREATION SERVICES - 0.9% IMAX Corp. (a) 25,000 881,665 AMUSEMENT PARKS - 2.1% Premier Parks, Inc. (a) 69,800 2,111,450 MOTION PICTURE DISTRIBUTION - 0.3% All American Communications, Inc. Class B (non-vtg.) (a) 30,000 330,000 MOTION PICTURE PRODUCTION - 4.2% Disney (Walt) Co. 48,452 3,597,561 Medialink Worldwide, Inc. 50,000 481,250 4,078,811 MOVIE THEATERS - 1.9% AMC Entertainment, Inc. (a) 16,900 280,963 Carmike Cinemas, Inc. Class A (a) 41,600 1,066,000 Regal Cinemas, Inc. (a) 20,500 545,813 1,892,776 RECREATIONAL SERVICES - 3.3% Cedar Fair LP (depositary unit) 1,000 40,000 MGM Grand, Inc. (a) 91,400 3,210,425 3,250,425 TOTAL ENTERTAINMENT 13,287,627 GENERAL MERCHANDISE STORES - 0.5% VARIETY STORES - 0.5% Consolidated Stores Corp. (a) 15,000 526,875 HOME FURNISHINGS - 1.4% FURNITURE STORES - 1.4% Ethan Allen Interiors, Inc. 30,300 1,390,013 HOUSEHOLD PRODUCTS - 0.6% COSMETICS - 0.6% Estee Lauder Companies, Inc. 12,000 558,000 LEASING & RENTAL - 0.3% VIDEO TAPE RENTAL - 0.3% Hollywood Entertainment Corp. 12,000 288,000 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) LEISURE DURABLES & TOYS - 6.3% MOTORCYCLES - 0.5% Harley-Davidson, Inc. 13,700 $ 512,038 SPORTING & ATHLETIC GOODS - 1.8% Callaway Golf Co. 34,900 1,112,438 K2, Inc. 21,800 602,225 1,714,663 TOYS & GAMES - 4.0% Hasbro, Inc. 59,500 2,543,625 Nintendo Co. Ltd. Ord. 20,000 1,415,679 3,959,304 TOTAL LEISURE DURABLES & TOYS 6,186,005 LODGING & GAMING - 14.2% HOTELS, MOTELS, & TOURIST COURTS - 11.2% HFS, Inc. (a) 47,400 3,246,900 Hilton Hotels Corp. 39,400 989,925 Host Marriott Corp. (a) 90,000 1,620,000 ITT Corp. (a) 34,200 1,932,300 La Quinta Motor Inns, Inc. 27,600 545,100 Mirage Resorts, Inc. (a) 80,900 2,012,388 Sun International Hotels Ltd. Ord. (a) 18,600 706,800 11,053,413 RACING & GAMING - 3.0% International Game Technology Corp. 25,000 437,500 International Speedway Corp. Class B 25,500 532,313 Penn National Gaming, Inc. (a) 75,000 1,162,500 WMS Industries, Inc. (a) 40,000 795,000 2,927,313 TOTAL LODGING & GAMING 13,980,726 PRINTING - 0.5% COMMERCIAL PRINTING, NEC - 0.5% Valassis Communications, Inc. (a) 26,000 503,750 PUBLISHING - 3.2% NEWSPAPERS - 1.6% Knight-Ridder, Inc. 15,000 596,250 New York Times Co. (The) Class A 21,400 952,300 1,548,550 PERIODICALS - 1.6% Playboy Enterprises, Inc. Class B (a) 105,300 1,605,825 TOTAL PUBLISHING 3,154,375 RESTAURANTS - 2.8% RESTAURANTS - 2.8% Host Marriott Services Corp. (a) 50,000 456,250 Rainforest Cafe, Inc. 20,000 407,500 Starbucks Corp. (a) 56,800 1,909,900 2,773,650 RETAIL & WHOLESALE, MISCELLANEOUS - 3.4% DURABLE GOODS, - WHOLESALE - 0.9% Sodak Gaming, Inc. (a) 58,100 835,188 HOBBY, TOY, & GAME SHOPS - 1.1% Toys "R" Us, Inc. (a) 43,400 1,128,400 LUMBER & BUILDING MATERIALS-RETAIL - 0.8% Lowe's Companies, Inc. 21,900 799,350 SHARES VALUE (NOTE 1) SPORTING GOODS & BIKES STORES - 0.6% Cannondale Corp. (a) 27,500 $ 560,313 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 3,323,251 TEXTILES & APPAREL - 2.0% FOOTWEAR - 2.0% NIKE, Inc. Class B 15,000 1,078,125 Reebok International Ltd. 19,900 930,325 2,008,450 TOTAL COMMON STOCKS (Cost $84,003,302) 90,339,017 CONVERTIBLE PREFERRED STOCKS - 0.8% CELLULAR - 0.8% CELLULAR & COMMUNICATION SERVICES - 0.8% AirTouch Communications, Inc. Class B $1.74 23,167 680,531 Class C $2.125 2,034 98,141 TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $731,559) 778,672 CASH EQUIVALENTS - 7.3% Taxable Central Cash Fund (b) (Cost $7,201,868) 7,201,868 7,201,868 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $91,936,729) $ 98,319,557 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $130,115,797 and $123,176,399, respectively (see Note 3 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 $56,198 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $92,024,257. Net unrealized appreciation aggregated $6,295,300, of which $9,141,185 related to appreciated investment securities and $2,845,885 related to depreciated investment securities. The fund hereby designates approximately $3,267,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 34% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. LEISURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997 ASSETS Investment in $ 98,319,557 securities, at value (cost $91,936,729) - - See accompanyin g schedule Receivable for 2,517,223 investments sold Receivable for 53,351 fund shares sold Dividends 42,823 receivable Interest 36,372 receivable Redemption 204 fees receivable Other 51,268 receivables TOTAL ASSETS 101,020,798 LIABILITIES Payable for $ 2,390,531 investments purchased Payable for 356,302 fund shares redeemed Accrued 52,603 management fee Other payables 87,976 and accrued expenses TOTAL 2,887,412 LIABILITIES NET ASSETS $ 98,133,386 Net Assets consist of: Paid in capital $ 83,754,553 Undistributed 376,579 net investment income Accumulated 7,619,481 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 6,382,773 appreciation (depreciation ) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 98,133,386 2,051,726 shares outstanding NET ASSET $47.83 VALUE and redemption price per share ($98,133,386 (divided by) 2,051,726 shares) Maximum $49.31 offering price per share (100/97.00 of $47.83) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997 INVESTMENT $ 577,251 INCOME Dividends Special 500,000 dividend from ADVO, Inc. Interest 431,607 TOTAL 1,508,858 INCOME EXPENSES Management $ 643,761 fee Transfer agent 846,466 fees Accounting 107,125 fees and expenses Non-interested 443 trustees' compensatio n Custodian fees 13,505 and expenses Registration 15,522 fees Audit 28,572 Legal 1,134 Miscellaneous 4,043 Total 1,660,571 expenses before reductions Expense (20,840 1,639,731 reductions ) NET (130,873 INVESTMENT ) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 12,371,340 securities Foreign (575 12,370,765 currency ) transactions Change in net unrealized appreciation (depreciation ) on: Investment (3,321,344 securities ) Assets and (135 (3,321,479 liabilities in ) ) foreign currencies NET GAIN (LOSS) 9,049,286 NET INCREASE $ 8,918,413 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 282,104 INFORMATION Sales charges paid to FDC Deferred $ 14,717 sales charges withheld by FDC Exchange $ 33,945 fees withheld by FSC Expense $ 20,659 reductions Directed brokerage arrangement s Custodian 181 interest credits $ 20,840 STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ (130,873 $ (369,128 Net ) ) investment income (loss) Net realized 12,370,765 14,883,189 gain (loss) Change in (3,321,479 3,623,038 net ) unrealized appreciation (depreciation ) NET INCREASE 8,918,413 18,137,099 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (6,329,218 (8,732,838 shareholders ) ) from net realized gains Share 109,666,003 62,794,252 transactions Net proceeds from sales of shares Reinvestmen 6,225,261 8,564,535 t of distributions Cost of (105,536,133 (65,359,698 shares ) ) redeemed Paid in 176,193 40,287 capital portion of redemption fees NET INCREASE 10,531,324 6,039,376 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 13,120,519 15,443,637 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 85,012,867 69,569,230 period End of period $ 98,133,386 $ 85,012,867 (including undistribute d net investment income of $376,579 and $3,611, respectivel y) OTHER INFORMATION Shares Sold 2,311,420 1,338,175 Issued in 136,974 200,267 reinvestment of distributions Redeemed (2,238,078 (1,405,986 ) ) Net increase 210,316 132,456 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 46.17 $ 40.71 $ 45.30 $ 35.77 $ 31.65 value, beginning of period Income from Investment Operations Net (.06) G (.21) (.21) (.29) (.11) investment income (loss) Net realized 4.47 10.97 (.48) 12.98 4.21 and unrealized gain (loss) Total from 4.41 10.76 (.69) 12.69 4.10 investment operations Less Distributions From net (2.83) (5.32) (3.93) (3.26) - realized gain Redemption .08 .02 .03 .10 .02 fees added to paid in capital Net asset $ 47.83 $ 46.17 $ 40.71 $ 45.30 $ 35.77 value, end of period TOTAL 10.14% 27.61% (1.07)% 37.14% 13.02% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 98,133 $ 85,013 $ 69,569 $ 105,833 $ 44,824 end of period (000 omitted) Ratio of 1.56% 1.64% 1.64% 1.55% 1.90% A expenses to average net assets Ratio of 1.54% E 1.63% E 1.62% E 1.53% E 1.90% A expenses to average net assets after expense reductions Ratio of net (.12)% (.46)% (.52)% (.69)% (.39)% investment A income (loss) to average net assets Portfolio 127% 141% 103% 170% 109% A turnover rate Average $ .0370 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 8 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 8 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 (LOSS) 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS MULTIMEDIA -4.52% 113.54% 277.91% MULTIMEDIA -7.38% 107.14% 266.57% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS MULTIMEDIA -4.52% 16.39% 14.22% MULTIMEDIA -7.38% 15.68% 13.87% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9668.40 10289.00 1987/04/30 9518.32 10197.43 1987/05/31 9960.67 10286.15 1987/06/30 10379.32 10805.60 1987/07/31 11177.12 11353.44 1987/08/31 11169.22 11776.92 1987/09/30 10900.65 11519.01 1987/10/31 8681.03 9037.81 1987/11/30 8080.70 8293.10 1987/12/31 9265.23 8924.20 1988/01/31 9418.66 9299.91 1988/02/29 10049.41 9733.29 1988/03/31 10484.11 9432.53 1988/04/30 10611.97 9537.23 1988/05/31 10432.97 9620.20 1988/06/30 10793.32 10061.77 1988/07/31 10775.69 10023.54 1988/08/31 10370.05 9682.74 1988/09/30 11022.59 10095.22 1988/10/31 11146.04 10375.87 1988/11/30 11057.86 10227.49 1988/12/31 11752.69 10406.47 1989/01/31 13156.14 11168.23 1989/02/28 13128.97 10890.14 1989/03/31 13744.68 11143.88 1989/04/30 14668.23 11722.25 1989/05/31 15374.48 12197.00 1989/06/30 15689.29 12127.48 1989/07/31 16882.84 13222.59 1989/08/31 16864.62 13481.75 1989/09/30 16600.40 13426.47 1989/10/31 15479.74 13114.98 1989/11/30 15570.85 13382.52 1989/12/31 15577.44 13703.71 1990/01/31 13508.98 12784.19 1990/02/28 13167.79 12949.10 1990/03/31 13039.84 13292.25 1990/04/30 12421.44 12959.95 1990/05/31 13604.94 14223.54 1990/06/30 13487.65 14126.82 1990/07/31 12741.30 14081.62 1990/08/31 11088.66 12808.64 1990/09/30 10139.73 12184.86 1990/10/31 9702.58 12132.46 1990/11/30 10704.83 12916.22 1990/12/31 11493.83 13276.58 1991/01/31 12112.23 13855.44 1991/02/28 13007.86 14846.11 1991/03/31 13359.71 15205.38 1991/04/30 13818.18 15241.87 1991/05/31 13892.82 15900.32 1991/06/30 12794.61 15172.09 1991/07/31 13274.41 15879.11 1991/08/31 13690.24 16255.44 1991/09/30 14521.89 15983.98 1991/10/31 15257.58 16198.16 1991/11/30 14212.68 15545.38 1991/12/31 15844.00 17323.77 1992/01/31 16259.82 17001.55 1992/02/29 17166.11 17222.57 1992/03/31 16728.96 16886.73 1992/04/30 16984.85 17383.20 1992/05/31 17240.74 17468.37 1992/06/30 17304.71 17208.09 1992/07/31 17347.36 17911.90 1992/08/31 17112.80 17544.71 1992/09/30 17006.17 17751.74 1992/10/31 17283.39 17813.87 1992/11/30 18541.53 18421.32 1992/12/31 19250.14 18647.90 1993/01/31 19639.04 18804.55 1993/02/28 19725.46 19060.29 1993/03/31 20503.24 19462.46 1993/04/30 19973.03 18991.47 1993/05/31 21334.57 19500.44 1993/06/30 22004.37 19556.99 1993/07/31 22827.88 19478.76 1993/08/31 24771.38 20217.01 1993/09/30 25364.32 20061.34 1993/10/31 27263.89 20476.61 1993/11/30 25484.64 20282.08 1993/12/31 26569.14 20527.49 1994/01/31 26948.07 21225.43 1994/02/28 26602.58 20650.22 1994/03/31 24975.44 19749.87 1994/04/30 24987.56 20002.67 1994/05/31 25906.49 20330.71 1994/06/30 25327.44 19832.61 1994/07/31 25944.26 20483.12 1994/08/31 27505.19 21322.93 1994/09/30 27316.37 20800.52 1994/10/31 27933.19 21268.53 1994/11/30 27052.02 20493.93 1994/12/31 27632.85 20797.85 1995/01/31 27945.23 21337.14 1995/02/28 29090.63 22168.65 1995/03/31 30938.90 22822.85 1995/04/30 31654.78 23494.98 1995/05/31 31823.98 24434.07 1995/06/30 33047.48 25001.68 1995/07/31 34999.87 25830.73 1995/08/31 36106.23 25895.57 1995/09/30 37134.49 26988.36 1995/10/31 36041.15 26892.01 1995/11/30 37433.85 28072.57 1995/12/31 36937.62 28613.25 1996/01/31 37163.63 29587.24 1996/02/29 38392.53 29861.52 1996/03/31 37884.02 30149.08 1996/04/30 39647.63 30593.48 1996/05/31 40964.39 31382.49 1996/06/30 39068.83 31502.05 1996/07/31 35350.05 30110.29 1996/08/31 36666.82 30745.32 1996/09/30 38996.48 32475.67 1996/10/31 37896.76 33371.34 1996/11/30 38591.32 35893.88 1996/12/31 37334.16 35182.83 1997/01/31 37142.85 37381.05 1997/02/28 36657.23 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Multimedia Portfolio on February 28, 1987 and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $36,657 - a 266.57% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Times Mirror Co. Class A 6.9 Omnicom Group, Inc. 6.4 New York Times Co. (The) Class A 5.0 Scientific-Atlanta, Inc. 4.4 ADVO, Inc. 4.2 Harcourt General, Inc. 4.1 Mobile Telecommunications Technologies, Inc. 3.8 Gibson Greetings, Inc. 3.8 Hollinger International, Inc. Class A 3.6 Meredith Corp. 3.1 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 7.7 Newspapers 18.1% Advertising Agencies 12.4% Book Publishing & Printing 8.2% Cellular & Communication Services 6.5% Telephone Services 5.8% All Others 49.0% * Row: 1, Col: 1, Value: 49.0 Row: 1, Col: 2, Value: 5.8 Row: 1, Col: 3, Value: 6.5 Row: 1, Col: 4, Value: 8.199999999999999 Row: 1, Col: 5, Value: 12.4 Row: 1, Col: 6, Value: 18.1 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS MULTIMEDIA PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW John Porter, Portfolio Manager of Fidelity Select Multimedia Portfolio Q. JOHN, HOW DID THE FUND PERFORM? A. For the 12 months that ended February 28, 1997, the fund had a return of - -4.52%. The Standard & Poor's 500 Index had a 26.16% return over the same period. Q. WHAT HELD THE FUND BACK? A. I like to break my investing universe into four groups of stocks: entertainment, equipment, publishing and distribution. Of these four groups, three - entertainment, equipment and distribution - experienced major problems that led to weak performance. Q. CAN YOU ELABORATE? A. Sure. With the entertainment group, the problems revolved around specific stock issues. For example, one of the group's bigger players - Viacom - experienced disappointing results due to issues involving its Blockbuster Video franchises. With the equipment group, it's a matter of waiting for telecommunications reform to be implemented. As local and long-distance markets open up to competition, infrastructures will need to be built and equipment providers should be in demand. In the distribution group, cable TV stocks performed poorly, as the opening of markets sparked competitive fears and new satellite TV systems increased in popularity. Cable companies would like to meet the demand for extra bandwidth - the capacity for communication flow - but it would mean huge amounts of capital spending. Q. PUBLISHING-RELATED STOCKS PERFORMED REASONABLY WELL. WHAT WAS THE STORY WITH THIS PARTICULAR GROUP? A. The fund saw good results from its positions in some of its newspaper stocks. My strategy here revolved around the price of newsprint - the only real variable cost for newspaper companies. Market consensus was that the cost of newsprint would rise or stay level, and I thought the price would actually go down. The price did take a dip and, as a result, many of the fund's newspaper stocks were positive contributors. Q. HAVE YOU BEEN ABLE TO IDENTIFY GOOD INVESTING OPPORTUNITIES IN THE INTERNET AREA? A. I really haven't found a compelling theme with Internet-related stocks. The fund has positions in companies that are doing some interesting work from a content perspective, but much of the Internet's success will depend on its advertising power. There are lots of advertising agencies out there helping people put together themes for the Internet, but it's still uncharted territory. Until the Internet can prove that it's a strong advertising vehicle, I think it will be difficult to pinpoint any long-term investing opportunities. Q. WHICH INDIVIDUAL STOCKS CONTRIBUTED POSITIVELY TO THE FUND'S RETURN? WHERE DID THE DISAPPOINTMENTS LIE? A. As I mentioned, newspaper stocks were very strong. The fund benefited from its positions in both Times Mirror Co. and the New York Times Co. Omnicom, a global, diversified advertising agency and one of the fund's top holdings at the close of the period, was also a solid performer. On the negative side, paging company Mobile Telecommunications had problems as did Learning Co., Inc., a children's educational software firm. Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? A. The outlook for entertainment stocks is encouraging. Companies are beginning to realize what they need to do in order to enhance their value. With equipment stocks, I'm hoping that patience really is a virtue. As soon as the markets open up to competition, I think these stocks are poised for a good run. I'll most likely reduce the fund's positions in newspaper stocks, reflecting my feeling that my newsprint cost strategy may have come full circle. Lastly, the outlook for distribution stocks depends largely on how the opening of competitive markets progresses. 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 February 28, 1997, more than $54 million MANAGER: John Porter, since 1996; equity analyst, newspaper and publishing industries, since 1996; joined Fidelity in 1995 (checkmark) MULTIMEDIA PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.0% SHARES VALUE (NOTE 1) ADVERTISING - 15.3% ADVERTISING - 0.5% Cordiant PLC sponsored ADR 50,000 $ 243,750 ADVERTISING AGENCIES - 12.4% ADVO, Inc. 180,000 2,317,500 Interpublic Group of Companies, Inc. 20,000 1,002,500 Omnicom Group, Inc. 70,000 3,473,750 6,793,750 RADIO & TV ADVERTISING REPRESENTATIVES - 2.4% Katz Media Group, Inc. (a) 179,000 1,320,124 TOTAL ADVERTISING 8,357,624 BROADCASTING - 5.0% CABLE TV OPERATORS - 0.7% TCI Group Class A 32,500 385,938 RADIO BROADCASTING - 0.5% Grupo Radio Centro SA de CV sponsored ADR (a) 27,600 265,650 TELEVISION BROADCASTING - 3.8% Central European Media Class C (a) 25,000 843,750 Grupo Televisa SA de CV sponsored ADR (a) 23,100 565,950 HSN, Inc. (a) 25,000 643,750 2,053,450 TOTAL BROADCASTING 2,705,038 CELLULAR - 6.5% CELLULAR & COMMUNICATION SERVICES - 6.5% AirTouch Communications, Inc. (a) 13,400 365,150 Mobile Telecommunications Technologies, Inc. (a) 270,000 2,092,500 360 Degrees Communications Co. (a) 50,000 1,081,250 3,538,900 COMMUNICATIONS EQUIPMENT - 0.0% DATACOMMUNICATIONS EQUIPMENT - 0.0% Centigram Communications Corp. (a) 2,000 22,750 COMPUTER SERVICES & SOFTWARE - 5.3% COMPUTER SERVICES - 1.7% Barra, Inc. (a) 30,000 907,500 CUSTOM COMPUTER PROGRAMMING SERVICES - 0.8% Intersolv, Inc. (a) 50,000 456,250 PREPACKAGED COMPUTER SOFTWARE - 2.8% CompuServe Corp. (a) 30,000 303,750 FactSet Research Systems, Inc. (a) 42,000 761,250 Learning Co., Inc. (a) 50,000 481,250 1,546,250 TOTAL COMPUTER SERVICES & SOFTWARE 2,910,000 COMPUTERS & OFFICE EQUIPMENT - 4.2% COMPUTER PERIPHERALS - 1.2% Creative Technology Corp. Ltd. 51,100 629,967 OFFICE AUTOMATION - 3.0% Bell & Howell Co. (a) 70,000 1,662,500 TOTAL COMPUTERS & OFFICE EQUIPMENT 2,292,467 SHARES VALUE (NOTE 1) CONSUMER ELECTRONICS - 0.7% RADIOS, TELEVISIONS, STEREOS - 0.7% Sony Corp. ADR 5,300 $ 381,600 ELECTRICAL EQUIPMENT - 8.0% ELECTRICAL MACHINERY - 3.0% Westinghouse Electric Corp. 93,250 1,608,563 TV & RADIO COMMUNICATION EQUIPMENT - 5.0% General Instrument Corp. (a) 15,600 370,500 Scientific-Atlanta, Inc. 141,900 2,376,825 2,747,325 TOTAL ELECTRICAL EQUIPMENT 4,355,888 ELECTRONICS - 1.0% SEMICONDUCTORS - 1.0% Motorola, Inc. 10,000 558,750 ENTERTAINMENT - 3.4% MOTION PICTURE PRODUCTION - 3.4% Disney (Walt) Co. 20,000 1,485,000 Viacom, Inc. Class A (a) 10,000 348,750 1,833,750 PRINTING - 1.7% COMMERCIAL PRINTING - 1.7% Donnelley (R.R.) & Sons Co. 30,000 926,250 PUBLISHING - 35.4% BOOK PUBLISHING & PRINTING - 8.2% ACNielsen Corp. (a) 30,000 442,500 Cognizant Corp. 25,000 871,875 Harcourt General, Inc. 47,000 2,214,875 Scholastic Corp. (a) 30,000 990,000 4,519,250 GREETING CARDS - 3.8% Gibson Greetings, Inc. (a) 100,000 2,062,500 NEWSPAPERS - 18.1% Hollinger International, Inc. Class A 194,000 1,964,250 Knight-Ridder, Inc. 15,400 612,150 New York Times Co. (The) Class A 61,900 2,754,550 Times Mirror Co. Class A 73,200 3,769,800 Tribune Co. 20,000 785,000 9,885,750 PERIODICALS - 5.3% Meredith Corp. 34,000 1,666,000 Playboy Enterprises, Inc. Class B (a) 80,000 1,220,000 2,886,000 TOTAL PUBLISHING 19,353,500 RETAIL & WHOLESALE, MISCELLANEOUS - 1.5% STATIONERY & OFFICE SUPPLIES - WHOLESALE - 1.5% Corporate Express, Inc. (a) 45,000 843,750 SERVICES - 1.2% COMMERCIAL, ECONOMIC, SOCIAL & EDUCATIONAL RESEARCH - 0.7% Gartner Group, Inc. Class A (a) 15,000 397,500 COMMERCIAL TESTING LABS - 0.5% Forensic Technologies International Corp. 32,600 236,350 TOTAL SERVICES 633,850 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TELEPHONE SERVICES - 5.8% LCI International, Inc. (a) 30,000 $ 570,000 Telebras sponsored ADR 10,000 970,000 U S WEST Media Group (a) 15,000 275,625 WorldCom, Inc. (a) 50,000 1,331,250 3,146,875 TOTAL COMMON STOCKS (Cost $51,921,775) 51,860,992 CASH EQUIVALENTS - 5.0% Taxable Central Cash Fund (b) (Cost $2,755,462) 2,755,462 2,755,462 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $54,677,237) $ 54,616,454 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $78,587,912 and $114,720,245, respectively (see Note 3 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 $19,584 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $55,379,028. Net unrealized depreciation aggregated $762,574 of which $5,669,788 related to appreciated investment securities and $6,432,362 related to depreciated investment securities. The fund hereby designates approximately $1,264,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. MULTIMEDIA PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997 ASSETS Investment in $ 54,616,454 securities, at value (cost $54,677,237) - - See accompanyin g schedule Receivable for 8,400 investments sold Receivable for 35,685 fund shares sold Dividends 40,716 receivable Interest 17,158 receivable Redemption 177 fees receivable Other 231 receivables TOTAL ASSETS 54,718,821 LIABILITIES Payable for $ 450,042 fund shares redeemed Accrued 31,489 management fee Other payables 66,461 and accrued expenses TOTAL 547,992 LIABILITIES NET ASSETS $ 54,170,829 Net Assets consist of: Paid in capital $ 51,051,309 Undistributed 1,484,090 net investment income Accumulated 1,696,213 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized (60,783 appreciation ) (depreciation ) on investments NET ASSETS, for $ 54,170,829 2,174,440 shares outstanding NET ASSET $24.91 VALUE and redemption price per share ($54,170,829 (divided by) 2,174,440 shares) Maximum $25.68 offering price per share (100/97.00 of $24.91) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997 INVESTMENT $ 575,928 INCOME Dividends Special 1,600,000 dividend from ADVO, Inc. Interest 282,395 TOTAL 2,458,323 INCOME EXPENSES Management $ 513,562 fee Transfer agent 692,306 fees Accounting 85,280 fees and expenses Non-interested 523 trustees' compensatio n Custodian fees 10,776 and expenses Registration 20,220 fees Audit 32,109 Legal 603 Miscellaneous 4,294 Total 1,359,673 expenses before reductions Expense (34,656 1,325,017 reductions ) NET 1,133,306 INVESTMENT INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 3,645,015 securities Foreign 4,306 3,649,321 currency transactions Change in net (9,287,117 unrealized ) appreciation (depreciation ) on investment securities NET GAIN (LOSS) (5,637,796 ) NET INCREASE $ (4,504,490 (DECREASE) ) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 338,283 INFORMATION Sales charges paid to FDC Deferred $ 4,261 sales charges withheld by FDC Exchange $ 36,660 fees withheld by FSC Expense $ 31,551 reductions Directed brokerage arrangement s Custodian 3,105 interest credits $ 34,656 STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 1,133,306 $ 79,501 Net investment income Net realized 3,649,321 15,081,916 gain (loss) Change in (9,287,117 7,021,515 net ) unrealized appreciation (depreciation ) NET INCREASE (4,504,490 22,182,932 (DECREASE) ) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to - (62,595 shareholders ) From net investment income From net (3,347,638 (6,860,366 realized gain ) ) TOTAL (3,347,638 (6,922,961 DISTRIBUTION ) ) S Share 42,427,132 226,094,070 transactions Net proceeds from sales of shares Reinvestmen 3,294,839 6,804,045 t of distributions Cost of (78,777,876 (191,430,375 shares ) ) redeemed Paid in 109,141 84,905 capital portion of redemption fees NET INCREASE (32,946,764 41,552,645 (DECREASE) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (40,798,892 56,812,616 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 94,969,721 38,157,105 period End of period $ 54,170,829 $ 94,969,721 (including undistribute d net investment income of $1,484,090 and $16,907, respectivel y) OTHER INFORMATION Shares Sold 1,577,831 8,957,896 Issued in 127,316 262,403 reinvestment of distributions Redeemed (3,024,499 (7,433,399 ) ) Net increase (1,319,352) 1,786,900 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 27.18 $ 22.35 $ 23.87 $ 18.26 $ 15.93 value, beginning of period Income from Investment Operations Net .35 E .02 (.01) (.10) (.07) investment income (loss) Net realized (1.58) 7.00 1.67 6.28 2.61 and unrealized gain (loss) Total from (1.23) 7.02 1.66 6.18 2.54 investment operations Less Distributions From net - (.02) - - - investment income From net (1.07) (2.19) (3.21) (.65) (.23) realized gain Total (1.07) (2.21) (3.21) (.65) (.23) distributions Redemption .03 .02 .03 .08 .02 fees added to paid in capital Net asset $ 24.91 $ 27.18 $ 22.35 $ 23.87 $ 18.26 value, end of period TOTAL (4.52)% 31.98% 9.35% 34.86% 16.14% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 54,171 $ 94,970 $ 38,157 $ 49,177 $ 16,647 end of period (000 omitted) Ratio of 1.60% 1.56% 2.05% 1.66% 2.49% A, expenses to G average net assets Ratio of 1.56% F 1.54% F 2.03% F 1.63% F 2.49% A expenses to average net assets after expense reductions Ratio of net 1.33% .08% (.07)% (.42)% (.52)% investment A income (loss) to average net assets Portfolio 99% 223% 107% 340% 70% A turnover rate Average $ .0400 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 8 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 FROM ADVO, INC. WHICH AMOUNTED TO $.49 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 8 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.
RETAILING PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value), but does not include cetain fees paid by shareholders upon exchange or redemption. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS RETAILING 19.59% 65.38% 302.10% RETAILING 16.01% 60.42% 290.04% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS RETAILING 19.59% 10.58% 14.93% RETAILING 16.01% 9.91% 14.58% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9993.94 10289.00 1987/04/30 9685.66 10197.43 1987/05/31 9857.72 10286.15 1987/06/30 10395.42 10805.60 1987/07/31 10918.77 11353.44 1987/08/31 11162.53 11776.92 1987/09/30 10366.74 11519.01 1987/10/31 7269.62 9037.81 1987/11/30 6767.78 8293.10 1987/12/31 7431.83 8924.20 1988/01/31 7901.30 9299.91 1988/02/29 8816.35 9733.29 1988/03/31 8927.75 9432.53 1988/04/30 9206.24 9537.23 1988/05/31 8943.66 9620.20 1988/06/30 9731.41 10061.77 1988/07/31 9643.88 10023.54 1988/08/31 9620.01 9682.74 1988/09/30 10184.96 10095.22 1988/10/31 10399.79 10375.87 1988/11/30 10256.57 10227.49 1988/12/31 10308.34 10406.47 1989/01/31 10818.09 11168.23 1989/02/28 10672.45 10890.14 1989/03/31 11182.20 11143.88 1989/04/30 11813.32 11722.25 1989/05/31 12630.55 12197.00 1989/06/30 12405.69 12127.48 1989/07/31 13406.15 13222.59 1989/08/31 14056.45 13481.75 1989/09/30 14023.10 13426.47 1989/10/31 13347.79 13114.98 1989/11/30 13431.16 13382.52 1989/12/31 13352.49 13703.71 1990/01/31 12309.63 12784.19 1990/02/28 12738.47 12949.10 1990/03/31 13781.33 13292.25 1990/04/30 13586.40 12959.95 1990/05/31 15399.22 14223.54 1990/06/30 15204.29 14126.82 1990/07/31 14580.53 14081.62 1990/08/31 12485.06 12808.64 1990/09/30 11091.34 12184.86 1990/10/31 10574.78 12132.46 1990/11/30 12017.24 12916.22 1990/12/31 12680.75 13276.58 1991/01/31 13911.71 13855.44 1991/02/28 15201.27 14846.11 1991/03/31 16783.93 15205.38 1991/04/30 17018.39 15241.87 1991/05/31 18434.96 15900.32 1991/06/30 17848.80 15172.09 1991/07/31 18991.82 15879.11 1991/08/31 19998.08 16255.44 1991/09/30 19783.15 15983.98 1991/10/31 19411.91 16198.16 1991/11/30 19040.67 15545.38 1991/12/31 21320.56 17323.77 1992/01/31 22502.81 17001.55 1992/02/29 23584.86 17222.57 1992/03/31 23113.97 16886.73 1992/04/30 22172.18 17383.20 1992/05/31 22633.05 17468.37 1992/06/30 21576.57 17208.09 1992/07/31 22536.45 17911.90 1992/08/31 22025.21 17544.71 1992/09/30 22682.52 17751.74 1992/10/31 24237.12 17813.87 1992/11/30 26073.42 18421.32 1992/12/31 26027.34 18647.90 1993/01/31 26206.91 18804.55 1993/02/28 25213.99 19060.29 1993/03/31 27157.59 19462.46 1993/04/30 25598.80 18991.47 1993/05/31 27016.75 19500.44 1993/06/30 26367.31 19556.99 1993/07/31 26497.20 19478.76 1993/08/31 27709.49 20217.01 1993/09/30 28553.76 20061.34 1993/10/31 28997.55 20476.61 1993/11/30 29278.97 20282.08 1993/12/31 29419.11 20527.49 1994/01/31 28108.47 21225.43 1994/02/28 29149.96 20650.22 1994/03/31 28541.45 19749.87 1994/04/30 29407.41 20002.67 1994/05/31 27956.34 20330.71 1994/06/30 27722.30 19832.61 1994/07/31 28190.39 20483.12 1994/08/31 29980.81 21322.93 1994/09/30 29395.70 20800.52 1994/10/31 29524.43 21268.53 1994/11/30 28494.64 20493.93 1994/12/31 27944.64 20797.85 1995/01/31 27722.30 21337.14 1995/02/28 27979.75 22168.65 1995/03/31 28295.71 22822.85 1995/04/30 27195.71 23494.98 1995/05/31 27675.49 24434.07 1995/06/30 29442.51 25001.68 1995/07/31 31244.64 25830.73 1995/08/31 30811.66 25895.57 1995/09/30 31736.13 26988.36 1995/10/31 30320.17 26892.01 1995/11/30 31841.45 28072.57 1995/12/31 31291.45 28613.25 1996/01/31 30378.68 29587.24 1996/02/29 32613.78 29861.52 1996/03/31 35036.12 30149.08 1996/04/30 37083.99 30593.48 1996/05/31 38862.71 31382.49 1996/06/30 38172.29 31502.05 1996/07/31 34521.23 30110.29 1996/08/31 37786.12 30745.32 1996/09/30 39143.56 32475.67 1996/10/31 38371.22 33371.34 1996/11/30 39845.69 35893.88 1996/12/31 37819.01 35182.83 1997/01/31 37643.06 37381.05 1997/02/28 39003.79 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Retailing Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $39,004 - a 290.04% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS CVS Corp. 15.2 Consolidated Stores Corp. 7.1 Wal-Mart Stores, Inc. 6.0 Safeway, Inc. 5.9 Payless ShoeSource, Inc. 5.8 Revco (D.S.), Inc. 3.6 Proffitts, Inc. 3.6 Kroger Co. (The) 3.5 Rite Aid Corp. 3.1 Vons Companies, Inc. 2.9 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Drug Stores 22.0% Grocery-Retail 14.9% Variety Stores 10.1% Shoe Stores 8.6% General Merchandise Stores 6.0% All Others 38.4% * Row: 1, Col: 1, Value: 38.4 Row: 1, Col: 2, Value: 6.0 Row: 1, Col: 3, Value: 8.6 Row: 1, Col: 4, Value: 10.1 Row: 1, Col: 5, Value: 14.9 Row: 1, Col: 6, Value: 22.0 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS RETAILING PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Ramin Arani became Portfolio Manager of Fidelity Select Retailing Portfolio on January 7, 1997. Q. RAMIN, HOW DID THE FUND PERFORM? A. For the 12 months that ended February 28, 1997, the fund had a total return of 19.59%. For the same 12-month period, the Standard & Poor's 500 Index returned 26.16%. Q. WHAT WAS THE YEAR LIKE FOR STOCKS IN THE SECTOR? A. Stocks in the retailing sector enjoyed a good first half of 1996, as comparable store sales - this year's retail store performance compared to the previous year's sales for the same stores - were up solidly. Much of that improvement came from the fact that 1995 was such a poor year for the sector. Going into the Christmas 1996 season, there were even higher expectations for comparable store sales, because Christmas 1995 had been a particularly poor selling season. In addition, companies had done a better job managing inventories through the fall. As it turned out, Christmas 1996 did show improvement over 1995. Stores met expectations, but didn't beat them as many had hoped. The companies that suffered through disappointing earnings at Christmas prereported that fact, hurting most of the stocks in the group at the beginning of 1997. However, in January and February many other companies confirmed solid earnings and comparable store sales rebounded, helping stocks in the sector pick up a bit in February. Q. WHAT HAVE YOU FOCUSED ON SINCE TAKING OVER THE FUND IN JANUARY? A. I haven't made any major changes. I reduced the number of stocks in the fund, concentrating the portfolio on those names whose stories I was most familiar with. CVS was the fund's largest holding when I took over the fund and remains so. It also was one of the fund's better-performing stocks. I added shares in Revco because it is being acquired by CVS, so the fund's investments in Revco will help increase the fund's overall stake in CVS going forward. I also increased the fund's investment in Wal-Mart, which I found to be attractive because of its strong cash flow. I increased investments in supermarkets such as Safeway, Kroger and American Stores. These companies appealed to me because of their cash flows and profit margin improvements. Q. WHAT HAS HELPED DRUG STORE COMPANIES, SUCH AS CVS, PERFORM WELL? A. In the current push toward managed health care, the use of pharmaceuticals is on the rise. This has driven strong pharmacy sales growth at the drug stores, although that part of their business provides lower profit margins. In addition, the stores are designed with the pharmacies at the back. When customers walk back through the store, they're attracted to the other merchandise, which typically is sold at high margins. The companies have been doing a better job merchandising and managing their inventories for products in the front of the store. These merchandising and inventory management efforts have helped offset the margin erosion arising from the growth in the pharmacy business. Strong sales and overall flat margins have led to strong profit growth. Q. WERE THERE PARTICULAR AREAS THAT YOU AVOIDED? A. Consumer electronics continued to be a difficult area; it is very competitive with a lot of store capacity and price cutting. Companies that are struggling tend to try to liquidate their inventories by cutting prices drastically, making it tough for all companies in the group. In addition, the lack of new product offerings and the highly competitive personal computer business hurt the group. Q. WHAT'S YOUR OUTLOOK? A. I don't make any forecasts related to the economy or the stock market. I'll be looking for those companies that can expand their profit margins and improve their cash flow by emphasizing returns on invested capital. I think those stocks will present the best opportunity. 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 February 28, 1997, more than $59 million MANAGER: Ramin Arani, since January 1997; joined Fidelity in 1992 (checkmark) RETAILING PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.4% SHARES VALUE (NOTE 1) APPAREL STORES - 15.2% GENERAL APPAREL STORES - 5.4% Gap, Inc. 44,600 $ 1,471,800 Limited, Inc. (The) 5,500 104,500 TJX Companies, Inc. 36,600 1,528,050 3,104,350 SHOE STORES - 8.6% Footstar, Inc. (a) 64,630 1,631,905 Payless ShoeSource, Inc. (a) 77,600 3,336,800 4,968,705 WOMEN'S CLOTHING STORES - 1.2% AnnTaylor Stores Corp. (a) 15,000 300,000 Charming Shoppes, Inc. (a) 50,400 223,650 Talbots, Inc. 5,600 179,900 703,550 TOTAL APPAREL STORES 8,776,605 AUTOS, TIRES, & ACCESSORIES - 0.4% MOTOR VEHICLE DEALERS (NEW & USED) - 0.4% Cross-Continent Auto Retailers, Inc. (a) 13,000 206,375 COMPUTER SERVICES & SOFTWARE - 0.7% COMPUTER & SOFTWARE STORES - 0.7% CompUSA, Inc. (a) 20,400 408,000 DRUG STORES - 22.0% CVS Corp. 190,000 8,787,500 Revco (D.S.), Inc. (a) 51,200 2,092,800 Rite Aid Corp. 43,000 1,811,375 12,691,675 GENERAL MERCHANDISE STORES - 21.5% DEPARTMENT STORES - 5.4% Neiman-Marcus Group, Inc. (a) 38,700 1,040,063 Proffitts, Inc. (a) 63,852 2,067,209 3,107,272 GENERAL MERCHANDISE STORES - 6.0% Wal-Mart Stores, Inc. 130,300 3,436,663 VARIETY STORES - 10.1% Consolidated Stores Corp. (a) 116,175 4,080,647 Costco Companies, Inc. (a) 45,000 1,153,125 Woolworth Corp. (a) 27,800 580,325 5,814,097 TOTAL GENERAL MERCHANDISE STORES 12,358,032 GROCERY STORES - 14.9% GROCERY - RETAIL - 14.9% American Stores Co. 34,300 1,534,925 Kroger Co. (The) (a) 38,000 2,014,000 Safeway, Inc. (a) 70,600 3,397,625 Vons Companies, Inc. (a) 24,500 1,669,063 8,615,613 RETAIL & WHOLESALE, MISCELLANEOUS - 12.6% BUILDING MATERIALS - RETAIL - 1.6% Home Depot, Inc. (The) 17,200 937,400 HOBBY, TOY, & GAME SHOPS - 1.5% Toys "R" Us, Inc. (a) 32,591 847,366 JEWELRY STORES - 1.2% Tiffany & Co., Inc. 20,000 695,000 SHARES VALUE (NOTE 1) LUMBER & BUILDING MATERIALS - RETAIL - 2.6% Lowe's Companies, Inc. 40,900 $ 1,492,850 MAIL ORDER - 0.9% Viking Office Products, Inc. (a) 23,500 555,188 MUSIC, TV, & ELECTRONIC STORES - 1.8% Circuit City Stores, Inc. 31,700 990,625 Tandy Corp. 600 30,225 1,020,850 RETAIL STORES - 1.5% Gadzooks, Inc. (a) 34,518 845,691 RETAIL, GENERAL - 1.5% Staples, Inc. (a) 40,000 865,000 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 7,259,345 TEXTILES & APPAREL - 4.1% APPAREL - 3.3% Fruit of the Loom, Inc. Class A (a) 21,400 874,725 Liz Claiborne, Inc. 25,000 1,012,500 1,887,225 FOOTWEAR - 0.8% Reebok International Ltd. 10,000 467,500 TOTAL TEXTILES & APPAREL 2,354,725 TOTAL COMMON STOCKS (Cost $47,959,089) 52,670,370 CASH EQUIVALENTS - 8.6% Taxable Central Cash Fund (b) (Cost $4,985,645) 4,985,645 4,985,645 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $52,944,734) $ 57,656,015 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $533,180,581 and $532,921,181, respectively (see Note 3 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 $250,241 for the period (see Note 4 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $4,262,625 and $4,410,000, respectively (see Note 6 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and average daily loan balances during the period for which loans were outstanding amounted to $6,897,000 and $4,586,667, respectively. The weighted average interest rate paid was 5.7% (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $53,883,345. Net unrealized appreciation aggregated $3,772,670, of which $5,245,423 related to appreciated investment securities and $1,472,753 related to depreciated investment securities. The fund hereby designates approximately $2,146,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. RETAILING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997 ASSETS Investment in $ 57,656,015 securities, at value (cost $52,944,734) - - See accompanyin g schedule Receivable for 8,994,276 fund shares sold Dividends 2,813 receivable Interest 46,907 receivable Redemption 208 fees receivable Other 1,045 receivables TOTAL ASSETS 66,701,264 LIABILITIES Payable to $ 22,323 custodian bank Payable for 1,460,174 investments purchased Payable for 1,332,647 fund shares redeemed Accrued 41,153 management fee Other payables 86,602 and accrued expenses Collateral on 4,410,000 securities loaned, at value TOTAL 7,352,899 LIABILITIES NET ASSETS $ 59,348,365 Net Assets consist of: Paid in capital $ 49,203,362 Accumulated 5,433,722 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 4,711,281 appreciation (depreciation ) on investments NET ASSETS, for $ 59,348,365 1,785,059 shares outstanding NET ASSET $33.25 VALUE and redemption price per share ($59,348,365 (divided by) 1,785,059 shares) Maximum $34.28 offering price per share (100/97.00 of $33.25) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997 INVESTMENT $ 1,331,191 INCOME Dividends Interest 880,613 (including income on securities loaned of $64,512) TOTAL 2,211,804 INCOME EXPENSES Management $ 1,338,783 fee Transfer agent 1,497,747 fees Accounting and 227,507 security lending fees Non-interested 1,013 trustees' compensatio n Custodian fees 24,319 and expenses Registration 88,475 fees Audit 28,788 Legal 1,358 Interest 4,377 Miscellaneous 4,352 Total 3,216,719 expenses before reductions Expense (141,203 3,075,516 reductions ) NET (863,712 INVESTMENT ) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 7,832,073 securities Foreign (1,134 7,830,939 currency ) transactions Change in net unrealized appreciation (depreciation ) on: Investment 2,577,738 securities Assets and 3 2,577,741 liabilities in foreign currencies NET GAIN (LOSS) 10,408,680 NET INCREASE $ 9,544,968 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 838,536 INFORMATION Sales charges paid to FDC Deferred $ 4,812 sales charges withheld by FDC Exchange $ 203,490 fees withheld by FSC Expense $ 136,573 reductions Directed brokerage arrangement s Custodian 3,913 interest credits Transfer 717 agent interest credits $ 141,203 STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ (863,712 $ (197,764 Net ) ) investment income (loss) Net realized 7,830,939 2,253,913 gain (loss) Change in 2,577,741 3,066,064 net unrealized appreciation (depreciation ) NET INCREASE 9,544,968 5,122,213 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (523,662 - shareholders ) from net realized gains Share 606,855,160 68,570,912 transactions Net proceeds from sales of shares Reinvestmen 520,661 - t of distributions Cost of (601,757,660 (60,782,922 shares ) ) redeemed Paid in 657,715 50,523 capital portion of redemption fees NET INCREASE 6,275,876 7,838,513 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 15,297,182 12,960,726 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 44,051,183 31,090,457 period End of period $ 59,348,365 $ 44,051,183 OTHER INFORMATION Shares Sold 19,012,106 2,635,958 Issued in 15,768 - reinvestment of distributions Redeemed (18,823,522 (2,355,724 ) ) Net increase 204,352 280,234 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 27.87 $ 23.91 $ 24.91 $ 23.87 $ 22.13 value, beginning of period Income from Investment Operations Net (.13) (.14) (.18) (.22) (.08) investment income (loss) Net realized 5.49 4.07 (.96) 3.85 2.93 and unrealized gain (loss) Total from 5.36 3.93 (1.14) 3.63 2.85 investment operations Less Distributions From net (.08) - - (2.63) (1.17) realized gain Redemption .10 .03 .14 .04 .06 fees added to paid in capital Net asset $ 33.25 $ 27.87 $ 23.91 $ 24.91 $ 23.87 value, end of period TOTAL 19.59% 16.56% (4.01)% 15.61% 13.72% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 59,348 $ 44,051 $ 31,090 $ 52,790 $ 74,878 end of period (000 omitted) Ratio of 1.45% 1.94% 2.07% 1.86% 1.77% A expenses to average net assets Ratio of 1.39% E 1.92% E 1.96% E 1.83% E 1.77% A expenses to average net assets after expense reductions Ratio of net (.39)% (.53)% (.74)% (.87)% (.44)% investment A income (loss) to average net assets Portfolio 278% 235% 481% 154% 171% A turnover 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 8 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 8 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.
AIR TRANSPORTATION PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS AIR TRANSPORTATION -15.06% 45.62% 105.57% AIR TRANSPORTATION -17.61% 41.25% 99.40% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS AIR TRANSPORTATION -15.06% 7.81% 7.47% AIR TRANSPORTATION -17.61% 7.15% 7.15% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9368.24 10289.00 1987/04/30 9376.14 10197.43 1987/05/31 9936.97 10286.15 1987/06/30 10063.36 10805.60 1987/07/31 10284.53 11353.44 1987/08/31 10371.42 11776.92 1987/09/30 9992.26 11519.01 1987/10/31 6974.84 9037.81 1987/11/30 6500.90 8293.10 1987/12/31 6775.18 8924.20 1988/01/31 6964.88 9299.91 1988/02/29 7543.03 9733.29 1988/03/31 7868.24 9432.53 1988/04/30 7777.90 9537.23 1988/05/31 7660.47 9620.20 1988/06/30 8645.13 10061.77 1988/07/31 8392.19 10023.54 1988/08/31 7922.44 9682.74 1988/09/30 8446.39 10095.22 1988/10/31 8608.99 10375.87 1988/11/30 8410.25 10227.49 1988/12/31 8744.50 10406.47 1989/01/31 9557.52 11168.23 1989/02/28 9738.19 10890.14 1989/03/31 10226.00 11143.88 1989/04/30 10632.51 11722.25 1989/05/31 10903.52 12197.00 1989/06/30 10849.02 12127.48 1989/07/31 11612.90 13222.59 1989/08/31 12495.01 13481.75 1989/09/30 12003.94 13426.47 1989/10/31 11058.18 13114.98 1989/11/30 10949.05 13382.52 1989/12/31 11047.18 13703.71 1990/01/31 9910.25 12784.19 1990/02/28 10327.12 12949.10 1990/03/31 10867.17 13292.25 1990/04/30 10469.24 12959.95 1990/05/31 11198.77 14223.54 1990/06/30 11227.19 14126.82 1990/07/31 10886.11 14081.62 1990/08/31 9161.77 12808.64 1990/09/30 8242.75 12184.86 1990/10/31 8678.57 12132.46 1990/11/30 8545.93 12916.22 1990/12/31 9038.60 13276.58 1991/01/31 10109.21 13855.44 1991/02/28 11246.14 14846.11 1991/03/31 11198.77 15205.38 1991/04/30 10924.01 15241.87 1991/05/31 11568.27 15900.32 1991/06/30 11324.35 15172.09 1991/07/31 11672.49 15879.11 1991/08/31 11527.43 16255.44 1991/09/30 11140.61 15983.98 1991/10/31 11682.16 16198.16 1991/11/30 11159.95 15545.38 1991/12/31 12388.12 17323.77 1992/01/31 13103.75 17001.55 1992/02/29 13693.66 17222.57 1992/03/31 12891.00 16886.73 1992/04/30 12223.72 17383.20 1992/05/31 12388.12 17468.37 1992/06/30 11985.85 17208.09 1992/07/31 11916.96 17911.90 1992/08/31 11415.09 17544.71 1992/09/30 11789.03 17751.74 1992/10/31 12212.18 17813.87 1992/11/30 12507.40 18421.32 1992/12/31 13201.75 18647.90 1993/01/31 13321.13 18804.55 1993/02/28 13530.05 19060.29 1993/03/31 15022.33 19462.46 1993/04/30 15192.15 18991.47 1993/05/31 16059.99 19500.44 1993/06/30 14862.97 19556.99 1993/07/31 15371.70 19478.76 1993/08/31 16289.42 20217.01 1993/09/30 15960.24 20061.34 1993/10/31 16877.95 20476.61 1993/11/30 16917.85 20282.08 1993/12/31 17279.40 20527.49 1994/01/31 17946.71 21225.43 1994/02/28 17309.73 20650.22 1994/03/31 16308.76 19749.87 1994/04/30 16201.51 20002.67 1994/05/31 15524.21 20330.71 1994/06/30 15051.17 19832.61 1994/07/31 15835.98 20483.12 1994/08/31 16438.03 21322.93 1994/09/30 14599.64 20800.52 1994/10/31 14717.89 21268.53 1994/11/30 13739.57 20493.93 1994/12/31 13522.25 20797.85 1995/01/31 13957.40 21337.14 1995/02/28 15154.06 22168.65 1995/03/31 16133.14 22822.85 1995/04/30 17427.71 23494.98 1995/05/31 17710.56 24434.07 1995/06/30 19951.57 25001.68 1995/07/31 20626.05 25830.73 1995/08/31 19831.91 25895.57 1995/09/30 20560.78 26988.36 1995/10/31 20321.45 26892.01 1995/11/30 22943.22 28072.57 1995/12/31 21573.26 28613.25 1996/01/31 21083.97 29587.24 1996/02/29 23474.82 29861.52 1996/03/31 24675.80 30149.08 1996/04/30 23642.37 30593.48 1996/05/31 23867.43 31382.49 1996/06/30 23754.90 31502.05 1996/07/31 19861.39 30110.29 1996/08/31 19501.30 30745.32 1996/09/30 19264.99 32475.67 1996/10/31 19084.94 33371.34 1996/11/30 21414.29 35893.88 1996/12/31 21841.90 35182.83 1997/01/31 20986.68 37381.05 1997/02/28 19940.16 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Air Transportation Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $19,940 - a 99.40% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS America West Airlines, Inc. Class B (warrants) 9.9 Sundstrand Corp. 9.5 Comair Holdings, Inc. 9.2 Boeing Co. 8.1 America West Holding Corp. Class B 7.2 Premier Technologies, Inc. 5.2 Rohr Industries, Inc. 5.0 ASA Holdings, Inc. 5.0 Alaska Air Group, Inc. 4.9 UAL Corp. 4.8 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Air Transport, Major National 40.4% Aircraft & Parts 17.4% Air Transportation, Regional 12.5% Aircraft 11.8% Business Services 5.2% All Others 12.7% * Row: 1, Col: 1, Value: 12.7 Row: 1, Col: 2, Value: 5.2 Row: 1, Col: 3, Value: 11.8 Row: 1, Col: 4, Value: 12.5 Row: 1, Col: 5, Value: 17.4 Row: 1, Col: 6, Value: 40.4 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS AIR TRANSPORTATION PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Kevin Richardson, Portfolio Manager of Fidelity Select Air Transportation Portfolio Q. HOW DID THE FUND PERFORM, KEVIN? A. It was a disappointing period. For the 12 months that ended February 28, 1997, the fund returned -15.06%. The Standard & Poor's 500 Index had a return of 26.16% over the same period. Q. WHY DID THE INDUSTRY STRUGGLE? A. The first half of the period was characterized by a chain of unpredictable, negative events. These included airline tragedies involving ValuJet and Trans World Airlines, excise tax legislation concerns, ill-timed pricing promotions by some players in the group and soaring jet fuel prices. Anything that could go wrong, did go wrong. The second half of the period was slightly better, but we still saw some negative developments, such as the threatened American Airlines pilot strike and an announcement by United Airlines that it was planning to purchase additional airplanes. As the period drew to a close, airline stocks staged a near-term rally and began showing some signs of resuscitating. Q. CAN YOU BE MORE SPECIFIC AS TO THE IMPACT OF THE AMERICAN AIRLINES LABOR SITUATION AND UNITED AIRLINES' ANNOUNCEMENT? A. Sure. Despite President Clinton's last-minute intervention to avoid the strike, the industry witnessed a good degree of "spillage." By that, I mean travelers who were scheduled to fly on American were forced to seek alternative flights on other carriers. While this is a good development for the other carriers in the short-term, it has a negative effect on American, a big industry influencer. United's announcement that it would purchase more planes was viewed negatively because oversupply in this industry is detrimental. When one carrier decides to purchase more planes, it can set off a chain reaction within the entire industry for other airlines to follow suit. Airlines are commodities and commodities need to stay in tight supply/demand cycles. Q. WHAT'S THE LATEST ON THE EXCISE TAX SITUATION? A. The excise tax - a surcharge on airline tickets that is funnelled to the Federal Aviation Administration to cover industry costs - has been at the epicenter of much debate. The government is still trying to determine how much each carrier should pay. It's anyone's guess as to how this situation will play out, but it certainly didn't help stock performance. Q. WHICH AREAS OF THE INDUSTRY ATTRACTED YOUR ATTENTION? A. There were a couple. I overweighted the portfolio in aircraft manufacturing stocks, including Sundstrand, Boeing and McDonnell Douglas. This group was in high demand, and the merger between Boeing and McDonnell Douglas was viewed favorably by the market. Another group that caught my eye was the regional, or commuter, airlines. These smaller planes can fly good distances, are fuel-economical and have good pricing characteristics. Examples included Comair and Atlantic Southeast Airlines, also known as ASA Holdings, Inc. Q. WHICH INDIVIDUAL STOCKS PERFORMED WELL? WHICH WERE DISAPPOINTMENTS? A. Boeing and Sundstrand, which I mentioned previously, were good contributors. Sundstrand is a commercial aerospace company that supplies different products to manufacturers such as Boeing and Airbus. On a negative note, the positions in Comair and American Airlines were detractors to the fund's overall return. Q. WHAT'S YOUR OUTLOOK? A. I'm very optimistic in the near-term, but more cautious as I look out further. We've seen some positive developments in the last two months of the period, but the continuing short-term rally is a delicate one. Going back to the oversupply issue, airlines need to show discipline. When they order new planes, they need to discard older ones. In terms of portfolio strategies, I may delve more into defense and aerospace stocks and will look for any interesting international opportunities. 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 February 28, 1997, more than $35 million MANAGER: Kevin Richardson, since May 1996; manager, Fidelity Select Defense & Aerospace Portfolio, since January 1997; equity analyst, computer services, health care information systems and specialty finance industries, since 1994; joined Fidelity in 1994 (checkmark) AIR TRANSPORTATION PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.9% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 30.0% AIRCRAFT - 11.8% Boeing Co. 29,000 $ 2,950,750 McDonnell Douglas Corp. 21,700 1,377,951 4,328,701 AIRCRAFT & PARTS - 17.4% Precision Castparts Corp. 21,900 1,073,100 Rohr Industries, Inc. (a) 101,600 1,841,500 Sundstrand Corp. 79,500 3,468,188 6,382,788 AIRCRAFT EQUIPMENT - 0.4% BE Aerospace, Inc. 5,800 140,650 MISSILES & SPACE VEHICLES - 0.4% Thiokol Corp. 3,000 167,250 TOTAL AEROSPACE & DEFENSE 11,019,389 AIR TRANSPORTATION - 52.9% AIR TRANSPORT, MAJOR NATIONAL - 40.4% AMR Corp. 15,000 1,179,375 Alaska Air Group, Inc. (a) 75,800 1,800,250 America West Airlines, Inc. Class B (warrants) (a) 567,600 3,618,450 America West Holding Corp. Class B (a) 190,800 2,647,350 ASA Holdings, Inc. 80,800 1,828,100 Atlantic Coast Airlines, Inc. (a) 8,600 131,150 Continental Airlines, Inc. (a) 45,100 1,290,988 Delta Air Lines, Inc. 2,300 185,150 Northwest Airlines Corp. Class A 10,000 353,750 Pan Am Corp. (a) 5,900 - Southwest Airlines Co. 1,500 35,250 UAL Corp. (a) 30,700 1,742,225 14,812,038 AIR TRANSPORTATION, REGIONAL - 12.5% Comair Holdings, Inc. 162,800 3,357,750 Midwest Express Holdings, Inc. 35,700 1,209,338 4,567,088 TOTAL AIR TRANSPORTATION 19,379,126 CHEMICALS & PLASTICS - 0.6% CHEMICALS - 0.6% Goodrich (B.F.) Co. 5,000 203,125 CONGLOMERATES - 0.5% United Technologies Corp. 2,500 188,123 POLLUTION CONTROL - 1.0% POLLUTION EQUIPMENT & DESIGN - 1.0% Ogden Corp. 18,200 370,825 SERVICES - 5.8% BUSINESS SERVICES - 5.2% Premier Technologies, Inc. (a) 102,400 1,920,000 COMMERCIAL TESTING LABS - 0.6% Forensic Technologies International Corp. 27,700 200,825 TOTAL SERVICES 2,120,825 TRUCKING & FREIGHT - 3.1% TRUCKING, LOCAL & LONG DISTANCE - 3.1% Consolidated Freightways, Inc. 45,900 1,136,025 TOTAL COMMON STOCKS (Cost $36,994,197) 34,417,438 CASH EQUIVALENTS - 6.1% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $2,231,434) 2,231,434 $ 2,231,434 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $39,225,631) $ 36,648,872 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $373,535,151 and $393,610,484, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $111,004 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $5,986,000, and $1,930,394, respectively. The weighted average interest rate was 5.7% (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $39,552,483. Net unrealized depreciation aggregated $2,903,611, of which $1,268,151 related to appreciated investment securities and $4,171,762 related to depreciated investment securities. At February 28, 1997, the fund had a capital loss carryforward of approximately $4,508,000 all of which will expire on February 28, 2005. A total of 13% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. AIR TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 36,648,872 (cost $39,225,631) - See accompanying schedule Receivable for investments sold 2,669,570 Receivable for fund shares sold 198,163 Dividends receivable 41,575 Interest receivable 1,199 Redemption fees receivable 569 Other receivables 2,313 TOTAL ASSETS 39,562,261 LIABILITIES Payable for investments purchased $ 2,657,356 Payable for fund shares redeemed 866,001 Accrued management fee 22,397 Other payables and accrued expenses 58,929 TOTAL LIABILITIES 3,604,683 NET ASSETS $ 35,957,578 Net Assets consist of: Paid in capital $ 43,442,014 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (4,907,677 ) Net unrealized appreciation (depreciation) on investments (2,576,759 ) NET ASSETS, for 2,029,077 $ 35,957,578 shares outstanding NET ASSET VALUE and redemption price per share ($35,957,578 (divided by) 2,029,077 shares) $17.72 Maximum offering price per share (100/97.00 of $17.72) $18.27
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 351,810 Dividends Interest 278,077 TOTAL INCOME 629,887 EXPENSES Management fee $ 539,940 Transfer agent fees 901,731 Accounting fees and expenses 92,138 Non-interested trustees' compensation 535 Custodian fees and expenses 23,086 Registration fees 80,554 Audit 36,243 Legal 751 Interest 10,054 Miscellaneous 2,614 Total expenses before reductions 1,687,646 Expense reductions (78,037 1,609,609 ) NET INVESTMENT INCOME (LOSS) (979,722 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (3,349,033 ) Foreign currency transactions (71 (3,349,104 ) ) Change in net unrealized appreciation (depreciation) on investment securities (6,154,936 ) NET GAIN (LOSS) (9,504,040 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (10,483,762 ) OTHER INFORMATION $ 688,390 Sales charges paid to FDC Deferred sales charges withheld $ 1,386 by FDC Exchange fees withheld by FSC $ 136,958 Expense reductions $ 71,154 Directed brokerage arrangements Custodian interest credits 4,992 Transfer agent interest credits 1,891 $ 78,037
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ (979,722 $ (45,385 Net ) ) investment income (loss) Net realized (3,349,104 15,522,776 gain (loss) ) Change in (6,154,936 2,826,938 net ) unrealized appreciation (depreciation ) NET INCREASE (10,483,762 18,304,329 (DECREASE) ) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (609,796 (3,187,856 shareholders ) ) From net realized gain In excess of (1,596,628 - net realized ) gain TOTAL (2,206,424 (3,187,856 DISTRIBUTION ) ) S Share 442,243,515 431,292,376 transactions Net proceeds from sales of shares Reinvestmen 2,188,450 3,161,234 t of distributions Cost of (472,146,987 (393,536,104 shares ) ) redeemed Paid in 1,004,107 691,969 capital portion of redemption fees NET INCREASE (26,710,915 41,609,475 (DECREASE) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (39,401,101 56,725,948 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 75,358,679 18,632,731 period End of period $ 35,957,578 $ 75,358,679 OTHER INFORMATION Shares Sold 22,183,259 23,122,779 Issued in 96,706 152,569 reinvestment of distributions Redeemed (23,821,393 (21,042,298 ) ) Net increase (1,541,428) 2,233,050 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 21.11 $ 13.93 $ 17.12 $ 13.60 $ 12.64 value, beginning of period Income from Investment Operations Net (.22) (.01) (.18) (.18) (.09) E investment income (loss) Net realized (3.12) 7.47 (2.01) 3.78 1.33 and unrealized gain (loss) Total from (3.34) 7.46 (2.19) 3.60 1.24 investment operations Less Distributions From net (.07) (.46) (.92) (.22) (.36) realized gain In excess of (.20) - (.17) (.05) - net realized gain Total (.27) (.46) (1.09) (.27) (.36) distributions Redemption .22 .18 .09 .19 .08 fees added to paid in capital Net asset $ 17.72 $ 21.11 $ 13.93 $ 17.12 $ 13.60 value, end of period TOTAL (15.06)% 54.91% (12.45)% 27.94% 10.69% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 35,958 $ 75,359 $ 18,633 $ 11,035 $ 11,868 end of period (000 omitted) Ratio of 1.89% 1.47% 2.50% F 2.33% 2.48% A, expenses to F average net assets Ratio of 1.80% H 1.41% H 2.50% 2.31% H 2.48% A expenses to average net assets after expense reductions Ratio of net (1.10)% (.07)% (1.31)% (1.11)% (.90)% investment A income (loss) to average net assets Portfolio 469% 504% 200% 171% 96% A turnover rate Average $ .0409 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 8 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 (LOSS) PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.01 PER SHARE. 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 FMR OR THE FUND HAS ENTERED VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS).
AUTOMOTIVE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS AUTOMOTIVE 20.60% 86.68% 209.85% AUTOMOTIVE 16.98% 81.08% 200.55% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS AUTOMOTIVE 20.60% 13.30% 11.97% AUTOMOTIVE 16.98% 12.61% 11.63% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9965.20 10289.00 1987/04/30 10109.86 10197.43 1987/05/31 10093.79 10286.15 1987/06/30 10246.48 10805.60 1987/07/31 10961.72 11353.44 1987/08/31 11387.66 11776.92 1987/09/30 11218.89 11519.01 1987/10/31 7851.62 9037.81 1987/11/30 7538.19 8293.10 1987/12/31 8245.40 8924.20 1988/01/31 8618.65 9299.91 1988/02/29 9170.04 9733.29 1988/03/31 9831.71 9432.53 1988/04/30 10001.37 9537.23 1988/05/31 9967.44 9620.20 1988/06/30 10544.27 10061.77 1988/07/31 10425.51 10023.54 1988/08/31 9941.99 9682.74 1988/09/30 9984.40 10095.22 1988/10/31 9908.05 10375.87 1988/11/30 9695.98 10227.49 1988/12/31 9899.57 10406.47 1989/01/31 10357.65 11168.23 1989/02/28 10247.37 10890.14 1989/03/31 10442.48 11143.88 1989/04/30 10909.04 11722.25 1989/05/31 11070.22 12197.00 1989/06/30 10875.11 12127.48 1989/07/31 11256.84 13222.59 1989/08/31 11367.12 13481.75 1989/09/30 11104.15 13426.47 1989/10/31 10179.51 13114.98 1989/11/30 10272.82 13382.52 1989/12/31 10305.57 13703.71 1990/01/31 10033.45 12784.19 1990/02/28 10331.91 12949.10 1990/03/31 10718.15 13292.25 1990/04/30 10683.03 12959.95 1990/05/31 11288.73 14223.54 1990/06/30 11490.87 14126.82 1990/07/31 11526.47 14081.62 1990/08/31 9870.93 12808.64 1990/09/30 8927.45 12184.86 1990/10/31 8749.44 12132.46 1990/11/30 9265.68 12916.22 1990/12/31 9612.81 13276.58 1991/01/31 10155.76 13855.44 1991/02/28 10983.53 14846.11 1991/03/31 11072.53 15205.38 1991/04/30 11197.14 15241.87 1991/05/31 12096.12 15900.32 1991/06/30 12069.42 15172.09 1991/07/31 12567.86 15879.11 1991/08/31 12977.29 16255.44 1991/09/30 12594.56 15983.98 1991/10/31 12923.89 16198.16 1991/11/30 12283.04 15545.38 1991/12/31 13200.82 17323.77 1992/01/31 14626.92 17001.55 1992/02/29 16099.93 17222.57 1992/03/31 16447.07 16886.73 1992/04/30 17497.89 17383.20 1992/05/31 17488.50 17468.37 1992/06/30 17384.46 17208.09 1992/07/31 17544.21 17911.90 1992/08/31 16454.15 17544.71 1992/09/30 16181.64 17751.74 1992/10/31 16858.23 17813.87 1992/11/30 17675.76 18421.32 1992/12/31 18694.29 18647.90 1993/01/31 19557.55 18804.55 1993/02/28 19845.30 19060.29 1993/03/31 20909.98 19462.46 1993/04/30 20789.17 18991.47 1993/05/31 22055.11 19500.44 1993/06/30 22440.83 19556.99 1993/07/31 22697.97 19478.76 1993/08/31 23489.19 20217.01 1993/09/30 23736.44 20061.34 1993/10/31 24240.84 20476.61 1993/11/30 24240.84 20282.08 1993/12/31 25309.19 20527.49 1994/01/31 26751.94 21225.43 1994/02/28 25888.32 20650.22 1994/03/31 24069.64 19749.87 1994/04/30 23580.21 20002.67 1994/05/31 23230.88 20330.71 1994/06/30 22932.91 19832.61 1994/07/31 23621.31 20483.12 1994/08/31 23230.88 21322.93 1994/09/30 22244.51 20800.52 1994/10/31 22665.77 21268.53 1994/11/30 21299.25 20493.93 1994/12/31 22081.54 20797.85 1995/01/31 21556.87 21337.14 1995/02/28 22629.01 22168.65 1995/03/31 22514.95 22822.85 1995/04/30 22446.52 23494.98 1995/05/31 22902.75 24434.07 1995/06/30 23473.04 25001.68 1995/07/31 25161.09 25830.73 1995/08/31 24932.97 25895.57 1995/09/30 25058.44 26988.36 1995/10/31 23895.05 26892.01 1995/11/30 24488.15 28072.57 1995/12/31 25047.03 28613.25 1996/01/31 24750.48 29587.24 1996/02/29 24921.57 29861.52 1996/03/31 26438.53 30149.08 1996/04/30 27774.29 30593.48 1996/05/31 28413.83 31382.49 1996/06/30 28082.64 31502.05 1996/07/31 26449.53 30110.29 1996/08/31 27123.33 30745.32 1996/09/30 27351.74 32475.67 1996/10/31 27477.36 33371.34 1996/11/30 28870.64 35893.88 1996/12/31 29072.35 35182.83 1997/01/31 29581.56 37381.05 1997/02/28 30067.08 37674.12 Let's say hypothetically that $10,000 was invested in Select Automotive Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $30,055 - a 200.55% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS AutoZone, Inc. 11.3 Volvo AB ADR Class B 10.1 TRW, Inc. 9.0 Snap-on Tools Corp. 6.6 General Motors Corp. 6.0 Gentex Corp. 5.6 Honda Motor Co. Ltd. 5.1 Lear Corp. 4.4 Chrysler Corp. 4.4 Danaher Corp. 3.6 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Auto & Truck Parts 41.4% Motor Vehicles & Car Bodies 31.9% Auto Parts - Retail 11.8% Tires & Inner Tubes 4.8% Motor Vehicles Supplies & New Parts 0.8% All Others 9.3% * Row: 1, Col: 1, Value: 9.300000000000001 Row: 1, Col: 2, Value: 0.8 Row: 1, Col: 3, Value: 4.8 Row: 1, Col: 4, Value: 11.8 Row: 1, Col: 5, Value: 31.9 Row: 1, Col: 6, Value: 41.4 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS AUTOMOTIVE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Doug Chase, Portfolio Manager of Fidelity Select Automotive Portfolio Q. HOW DID THE FUND PERFORM, DOUG? A. For the 12 months that ended February 28, 1997, the fund had a return of 20.60%. The Standard & Poor's 500 Index returned 26.16% over the same time period. Q. CAN YOU CHARACTERIZE THE GENERAL INVESTING ENVIRONMENT OVER THE PAST YEAR? A. Sure. What we've seen is a stock market environment where growth stocks continue to outpace cyclical stocks - those particularly sensitive to economic conditions - by extraordinarily wide margins. Price-to-earnings multiples on cyclical stocks such as Chrysler did not expand, yet stocks such as Coca-Cola did have expansion. Cyclicals aren't going to outperform growth stocks under those conditions. Q. DID YOU MAKE ANY CHANGES TO THE COMPOSITION OF THE PORTFOLIO AS THE PERIOD PROGRESSED? A. When I began managing the fund in May 1996, the portfolio was tilted toward suppliers. In a good business market and strong economy, suppliers have proven that they can grow their earnings faster than other segments within the industry. When we reached the midpoint of the period, my feeling was that the auto supply market wasn't going to get stronger and that U.S. manufacturers could provide better investment opportunities. As we got later into the period, I moved away from the domestic manufacturers and began adding foreign manufacturers to the mix. These stocks were inexpensive relative to both the U.S. and their own historical levels. The natural tendencies of economic cycles also played a role in this strategy. The U.S. cycle was at or near its historical high, while Europe and Japan were close to the bottom and on their way up. Q. WHAT WERE YOUR VIEWS ON THE U.S. AND INTERNATIONAL AUTOMOBILE MANUFACTURING MARKETS? A. I was optimistic on Europe and Japan, but became increasingly negative on the U.S. auto market. In contrast, Europe and Japan continue to present somewhat more favorable backdrops. While Europe's economy has nowhere to go but up - albeit not quickly - and the Japanese economy should improve from here as well, foreign investments do involve more risk than U.S. investments. In the U.S. market, we've seen an increase in auto finance company bankruptcies, new highs in auto retail credit losses, increased competition and higher fuel prices. Q. DID YOU COMPLETELY AVOID U.S. AUTO STOCKS AS A RESULT OF THESE NEGATIVE DEVELOPMENTS? A. Not at all. Rather than completely staying away from U.S. auto stocks, I concentrated on finding stocks that weren't as vulnerable to the U.S. economic cycle. An example of this was tire wholesaler Goodyear, which generated half of its earnings from overseas sales. The negative developments within the U.S. market also led me to look at niche companies such as Gentex, a company that makes automatic dimmable mirrors for cars. Q. WHICH INDIVIDUAL STOCKS CONTRIBUTED POSITIVELY TO THE FUND'S PERFORMANCE? WHICH WERE DISAPPOINTING? A. The fund realized gains from its positions in Tower Automotive, a parts supplier, and General Motors, which came on strong in the latter part of the period. On a negative note, Echlin, a manufacturer of brake pads, was a disappointment for much of the period as its management situation became muddled. Toward the end of the period, however, the management picture had begun to clear up and the stock rebounded. Q. WHAT'S YOUR OUTLOOK? A. I'd say I'm cautious. I'll continue to look for growth prospects in the U.S. and more cyclical stocks abroad. I'll try to combine favorable valuations with what I perceive to be good opportunities for earnings growth. 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 February 28, 1997, more than $86 million MANAGER: Doug Chase, since May 1996; manager, Fidelity Select Industrial Materials Portfolio, since 1994; equity analyst, steel, non-ferrous metals, since 1993; joined Fidelity in 1993 (checkmark) AUTOMOTIVE PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.5% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 0.1% AIRCRAFT EQUIPMENT - 0.1% Simula, Inc. (a) 4,400 $ 78,095 AUTOS, TIRES, & ACCESSORIES - 91.6% AUTO & TRUCK PARTS - 41.4% Arvin Industries, Inc. 8,700 204,450 Borg-Warner Automotive, Inc. 54,700 2,160,650 Breed Technologies, Inc. 27,100 592,813 Danaher Corp. 71,300 3,083,725 Eaton Corp. 32,100 2,303,175 Echlin, Inc. 28,400 983,350 Gentex Corp. (a) 261,400 4,835,900 Intermet Corp. 61,600 931,700 Johnson Controls, Inc. 2,500 210,625 Mascotech, Inc. 22,800 433,200 SPX Corp. 54,000 2,477,250 Safety Components International, Inc. (a) 500 5,500 Smith (A.O.) Corp. Class B 52,400 1,761,950 Snap-on Tools Corp. 147,800 5,745,725 Standard Products Co. 19,700 462,950 TRW, Inc. 148,100 7,756,738 Titan Wheel International, Inc. 14,500 204,813 Tower Automotive, Inc. (a) 42,500 1,630,938 Wynn's International, Inc. 950 19,594 35,805,046 AUTO PARTS - RETAIL - 11.8% AutoZone, Inc. (a) 395,100 9,778,725 Monro Muffler Brake, Inc. (a) 24,806 440,307 10,219,032 AUTOMOTIVE STAMPINGS - 0.3% Sinter Metals, Inc. Class A (a) 11,000 276,375 MOTOR VEHICLE DEALERS (NEW & USED) - 0.0% United Auto Group, Inc. (a) 500 11,563 MOTOR VEHICLE SUPPLIES & NEW PARTS - 0.8% APS Holding Corp. Class A (a) 73,300 659,700 MOTOR VEHICLES & CAR BODIES - 31.9% Chrysler Corp. 111,800 3,787,225 General Motors Corp. 89,900 5,202,963 Honda Motor Co. Ltd. 142,000 4,405,573 Lear Corp. (a) 97,200 3,790,800 Scania AB Class A 1,100 26,881 Toyota Motor Corp. 64,000 1,644,916 Volvo AB ADR Class B 352,300 8,763,463 27,621,821 TIRES & INNER TUBES - 4.8% Bandag, Inc. 14,500 706,875 Goodyear Tire & Rubber Co. 52,600 2,774,650 Michelin SA (Compagnie Generale des Etablissements) Class B 11,470 716,724 4,198,249 TRUCK & BUS BODIES - 0.6% Miller Industries, Inc. (a) 39,650 505,538 TOTAL AUTOS, TIRES, & ACCESSORIES 79,297,324 CONGLOMERATES - 0.7% Mark IV Industries, Inc. 27,100 630,075 INDUSTRIAL MACHINERY & EQUIPMENT - 0.4% METAL WORKING MACHINERY - 0.4% Exco Technologies Ltd. (a) 35,100 320,689 SHARES VALUE (NOTE 1) IRON & STEEL - 0.7% FABRICATED METAL PRODUCTS - 0.7% SPS Technologies, Inc. (a) 9,000 $ 576,000 TOTAL COMMON STOCKS (Cost $76,019,315) 80,902,183 CASH EQUIVALENTS - 6.5% Taxable Central Cash Fund (b) (Cost $5,621,494) 5,621,494 5,621,494 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $81,640,809) $ 86,523,677 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $205,168,550 and $186,256,883, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $90,015 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $3,262,000. The weighted average interest rate was 5.8% (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 81.6% Sweden 10.2 Japan 7.0 Others (individually less than 1%) 1.2 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $82,228,128. Net unrealized appreciation aggregated $4,295,549 of which $6,574,266 related to appreciated investment securities and $2,278,717 related to depreciated investment securities. The fund hereby designates approximately $1,457,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. AUTOMOTIVE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 86,523,677 (cost $81,640,809) - See accompanying schedule Receivable for investments sold 50,897 Receivable for fund shares sold 140,874 Dividends receivable 173,764 Interest receivable 29,546 Redemption fees receivable 155 Other receivables 4,808 TOTAL ASSETS 86,923,721 LIABILITIES Payable for fund shares redeemed $ 448,801 Accrued management fee 47,615 Other payables and accrued expenses 80,739 TOTAL LIABILITIES 577,155 NET ASSETS $ 86,346,566 Net Assets consist of: Paid in capital $ 78,187,533 Undistributed net investment income 225,693 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 3,052,136 Net unrealized appreciation (depreciation) on investments 4,881,204 and assets and liabilities in foreign currencies NET ASSETS, for 3,401,568 $ 86,346,566 shares outstanding NET ASSET VALUE and redemption price per share ($86,346,566 (divided by) 3,401,568 shares) $25.38 Maximum offering price per share (100/97.00 of $25.38) $26.16
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 1,925,906 Dividends Interest 549,818 TOTAL INCOME 2,475,724 EXPENSES Management fee $ 726,743 Transfer agent fees 921,947 Accounting fees and expenses 120,805 Non-interested trustees' compensation 548 Custodian fees and expenses 21,699 Registration fees 49,401 Audit 22,861 Legal 752 Interest 527 Miscellaneous 6,511 Total expenses before reductions 1,871,794 Expense reductions (39,112 1,832,682 ) NET INVESTMENT INCOME 643,042 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 8,359,918 Foreign currency transactions (2,395 8,357,523 ) Change in net unrealized appreciation (depreciation) on: Investment securities 2,145,373 Assets and liabilities in (1,547 2,143,826 foreign currencies ) NET GAIN (LOSS) 10,501,349 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 11,144,391 OTHER INFORMATION $ 466,135 Sales charges paid to FDC Deferred sales charges withheld $ 2,159 by FDC Exchange fees withheld by FSC $ 86,168 Expense reductions $ 36,374 Directed brokerage arrangements Custodian interest credits 528 Transfer agent interest credits 2,210 $ 39,112
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 643,042 $ 76,016 Net investment income Net realized 8,357,523 1,307,573 gain (loss) Change in 2,143,826 3,088,654 net unrealized appreciation (depreciation ) NET INCREASE 11,144,391 4,472,243 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (492,439 - shareholders ) From net investment income From net (2,049,624 - realized gain ) TOTAL (2,542,063 - DISTRIBUTION ) S Share 256,027,701 79,629,136 transactions Net proceeds from sales of shares Reinvestmen 2,523,772 - t of distributions Cost of (236,749,789 (88,521,546 shares ) ) redeemed Paid in 189,071 98,432 capital portion of redemption fees NET INCREASE 21,990,755 (8,793,978 (DECREASE) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 30,593,083 (4,321,735 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 55,753,483 60,075,218 period End of period $ 86,346,566 $ 55,753,483 (including undistribute d net investment income of $225,693 and $76,192, respectivel y) OTHER INFORMATION Shares Sold 10,548,479 3,758,408 Issued in 104,848 - reinvestment of distributions Redeemed (9,803,178 (4,235,574 ) ) Net increase 850,149 (477,166) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 21.85 $ 19.84 $ 25.48 $ 20.69 $ 18.65 value, beginning of period Income from Investment Operations Net .13 .03 .08 .05 .13 investment income Net realized 4.28 1.95 (3.46) 6.00 2.26 and unrealized gain (loss) Total from 4.41 1.98 (3.38) 6.05 2.39 investment operations Less Distributions From net (.17) - (.05) (.05) (.06) investment income From net (.75) - (2.26) (1.26) (.36) realized gain Total (.92) - (2.31) (1.31) (.42) distributions Redemption .04 .03 .05 .05 .07 fees added to paid in capital Net asset $ 25.38 $ 21.85 $ 19.84 $ 25.48 $ 20.69 value, end of period TOTAL 20.60% 10.13% (12.59)% 30.45% 13.42% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 86,347 $ 55,753 $ 60,075 $ 228,698 $ 110,360 end of period (000 omitted) Ratio of 1.56% 1.81% 1.82% 1.69% 1.57% A expenses to average net assets Ratio of 1.52% E 1.80% E 1.80% E 1.68% E 1.57% A expenses to average net assets after expense reductions Ratio of net .54% .13% .34% .22% .72% A investment income to average net assets Portfolio 175% 61% 63% 64% 140% A turnover rate Average $ .0495 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 8 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS CHEMICALS 15.06% 101.73% 272.42% CHEMICALS 11.61% 95.67% 261.25% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS CHEMICALS 15.06% 15.07% 14.05% CHEMICALS 11.61% 14.37% 13.71% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9995.00 10289.00 1987/04/30 10215.00 10197.43 1987/05/31 10080.00 10286.15 1987/06/30 10645.00 10805.60 1987/07/31 11340.00 11353.44 1987/08/31 11755.00 11776.92 1987/09/30 11965.00 11519.01 1987/10/31 8325.00 9037.81 1987/11/30 8045.00 8293.10 1987/12/31 8990.69 8924.20 1988/01/31 8770.18 9299.91 1988/02/29 9742.42 9733.29 1988/03/31 10238.56 9432.53 1988/04/30 10358.84 9537.23 1988/05/31 9967.94 9620.20 1988/06/30 11285.97 10061.77 1988/07/31 10945.19 10023.54 1988/08/31 10469.09 9682.74 1988/09/30 10599.39 10095.22 1988/10/31 10764.78 10375.87 1988/11/30 10403.94 10227.49 1988/12/31 10875.03 10406.47 1989/01/31 11601.70 11168.23 1989/02/28 11456.37 10890.14 1989/03/31 11581.66 11143.88 1989/04/30 11912.42 11722.25 1989/05/31 12188.05 12197.00 1989/06/30 12042.53 12127.48 1989/07/31 12809.92 13222.59 1989/08/31 13396.75 13481.75 1989/09/30 12920.26 13426.47 1989/10/31 12007.42 13114.98 1989/11/30 12263.22 13382.52 1989/12/31 12757.64 13703.71 1990/01/31 11848.64 12784.19 1990/02/28 11927.92 12949.10 1990/03/31 12282.00 13292.25 1990/04/30 11996.62 12959.95 1990/05/31 13043.02 14223.54 1990/06/30 13149.48 14126.82 1990/07/31 13192.99 14081.62 1990/08/31 11431.02 12808.64 1990/09/30 10865.46 12184.86 1990/10/31 10990.53 12132.46 1990/11/30 11724.69 12916.22 1990/12/31 12230.43 13276.58 1991/01/31 13051.60 13855.44 1991/02/28 14052.22 14846.11 1991/03/31 14389.39 15205.38 1991/04/30 14275.18 15241.87 1991/05/31 15264.93 15900.32 1991/06/30 14850.08 15172.09 1991/07/31 15565.81 15879.11 1991/08/31 15871.77 16255.44 1991/09/30 15751.57 15983.98 1991/10/31 16002.90 16198.16 1991/11/30 15205.21 15545.38 1991/12/31 16958.93 17323.77 1992/01/31 17284.63 17001.55 1992/02/29 17907.95 17222.57 1992/03/31 17778.79 16886.73 1992/04/30 18424.58 17383.20 1992/05/31 18317.89 17468.37 1992/06/30 17774.92 17208.09 1992/07/31 18335.79 17911.90 1992/08/31 17709.29 17544.71 1992/09/30 17727.19 17751.74 1992/10/31 17548.18 17813.87 1992/11/30 18079.22 18421.32 1992/12/31 18469.07 18647.90 1993/01/31 18450.07 18804.55 1993/02/28 18127.05 19060.29 1993/03/31 18557.75 19462.46 1993/04/30 18901.95 18991.47 1993/05/31 19188.15 19500.44 1993/06/30 18706.82 19556.99 1993/07/31 18993.02 19478.76 1993/08/31 19923.15 20217.01 1993/09/30 19292.22 20061.34 1993/10/31 20020.72 20476.61 1993/11/30 20170.32 20282.08 1993/12/31 20825.19 20527.49 1994/01/31 22446.18 21225.43 1994/02/28 22410.79 20650.22 1994/03/31 21738.32 19749.87 1994/04/30 22789.57 20002.67 1994/05/31 23338.29 20330.71 1994/06/30 23046.11 19832.61 1994/07/31 24086.54 20483.12 1994/08/31 25483.27 21322.93 1994/09/30 25297.99 20800.52 1994/10/31 25255.24 21268.53 1994/11/30 23274.15 20493.93 1994/12/31 23902.18 20797.85 1995/01/31 23277.57 21337.14 1995/02/28 24628.47 22168.65 1995/03/31 25383.81 22822.85 1995/04/30 25927.96 23494.98 1995/05/31 26186.13 24434.07 1995/06/30 26628.71 25001.68 1995/07/31 27890.07 25830.73 1995/08/31 28008.10 25895.57 1995/09/30 28450.68 26988.36 1995/10/31 27034.42 26892.01 1995/11/30 28214.64 28072.57 1995/12/31 29028.78 28613.25 1996/01/31 30363.08 29587.24 1996/02/29 31395.56 29861.52 1996/03/31 32912.53 30149.08 1996/04/30 33255.49 30593.48 1996/05/31 33183.56 31382.49 1996/06/30 32759.97 31502.05 1996/07/31 31433.27 30110.29 1996/08/31 32823.91 30745.32 1996/09/30 34278.49 32475.67 1996/10/31 34510.26 33371.34 1996/11/30 35781.02 35893.88 1996/12/31 35275.54 35182.83 1997/01/31 35827.65 37381.05 1997/02/28 36124.94 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Chemicals Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $36,125 - a 261.25% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Praxair, Inc. 6.5 Monsanto Co. 6.2 Air Products & Chemicals, Inc. 5.3 Cytec Industries, Inc. 5.3 Raychem Corp. 4.9 Union Carbide Corp. 4.4 ICI (Imperial Chemical Industries) PLC ADR Class L 4.4 du Pont (E.I.) de Nemours & Co. 3.9 Minnesota Mining & Manufacturing Co. 2.8 Sealed Air Corp. 2.5 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 36 Chemicals 43.9% Industrial Gases 15.0% Agricultural Chemicals 4.4% Paint & Varnish 3.1% Manufacturing Industries 2.8% All Others 30.8% * Row: 1, Col: 1, Value: 30.8 Row: 1, Col: 2, Value: 2.8 Row: 1, Col: 3, Value: 3.1 Row: 1, Col: 4, Value: 4.4 Row: 1, Col: 5, Value: 15.0 Row: 1, Col: 6, Value: 43.9 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S 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 12 months that ended February 28, 1997, the fund provided a return of 15.06%. This lagged the 26.16% return of the Standard & Poor's 500 Index over the same period. Q. CAN YOU ISOLATE THE FACTORS THAT PLAYED SIGNIFICANT ROLES IN THE FUND'S PERFORMANCE? A. Sure. Chemical stocks generally performed well through the first six months of 1996, but then certain industry groups hit a roadblock. A significant part of the problem was the overall slowdown of earnings growth, which had been strong for the last couple of years. While the U.S. chemical companies were relatively solid, companies based in Europe and parts of Asia - whose stocks tend to be more volatile than those in the U.S. - really struggled. I think it was a case where the stocks had their day in the sun, but became stagnant during the second half of the year. As this became apparent, investors began seeking growth in other areas of the market. Q. WHAT TYPES OF CHEMICAL STOCKS PERFORMED WELL DURING THE PERIOD? WHICH WERE DISAPPOINTMENTS? A. I look at the chemicals universe in three parts: specialty, diversified and commodity stocks. The two categories that performed best during the period were specialty and diversified. Much of my specialty concentration was in industrial gas stocks; there are only six industrial gas companies in the world, and I owned each of them. These companies tend to perform well in the latter stages of an economic cycle and can generate strong earnings growth. Diversified stocks - those offering a wide range of chemical products - performed well for the same reasons. On the downside, commodities had an atrocious period. Q. WHY DID COMMODITIES PERFORM SO POORLY? A. When the supply and demand characteristics were good and profits were up, commodity companies decided to build more plants. This brought more supply into the picture, and the corresponding demand just couldn't keep pace. As a result, both prices and profits dropped. I had lightened the fund's exposure in this area, so I wasn't hurt as badly as I could have been. Q. FUNDS SUCH AS THIS ARE PARTICULARLY SUSCEPTIBLE TO CHANGES IN THE ECONOMIC CYCLE. HOW DOES THIS PLAY INTO YOUR INVESTING STRATEGY? A. It's impossible, of course, to completely limit the fund's exposure to cyclicality. Commodity stocks are more vulnerable to cyclicality than many other chemical stocks. With this fund, however, I have the flexibility to go into other areas if I think a group is going to perform poorly. Thus, I can try to limit the fund's exposure to cyclicality by the types of stocks I buy. Q. IT SEEMS AS THOUGH THE CURRENT ECONOMIC CYCLE JUST KEEPS PLUGGING ALONG . . . A. And I'm nervous about it. When the economy performs this well for such an extended period of time, I wonder how much better it can get. Where do we go from here? I'm not panicked, but I've been looking closely at companies that have shown they can perform well in the late stages of a cycle. Q. WHICH INDIVIDUAL STOCKS PLAYED KEY ROLES WITHIN THE PORTFOLIO? A. Industrial gas stocks - including Praxair and Air Products & Chemicals - performed exceptionally well. Non-commodity chemical stocks such as Monsanto and du Pont turned in solid performances as well. As far as disappointments, U.K.-based ICI (Imperial Chemical Industries) fits the bill. All signs indicated that ICI would experience some sort of restructuring that would unleash value, but it hasn't happened yet. Another restructuring play that has taken longer to work out than I anticipated was Witco. Q. WHAT'S YOUR OUTLOOK? A. Chemical commodity stocks could realize a short-term rally, but I think they're going to struggle as supply increases. I'll continue to look for attractive risk/reward opportunities while focusing on companies that I believe offer less exposure to uncertain 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 February 28, 1997, more than $111 million MANAGER: John Avery, since 1995; manager, Fidelity Select Regional Banks Portfolio, since September 1996; joined Fidelity in 1995 (checkmark) CHEMICALS PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 89.4% SHARES VALUE (NOTE 1) AGRICULTURE - 1.3% CROPS - 1.3% Delta & Pine Land Co. 42,000 $ 1,559,246 BUILDING MATERIALS - 3.1% PAINT & VARNISH - 3.1% Lilly Industrial Coatings, Inc. Class A 135,000 2,615,625 Sherwin-Williams Co. 20,000 1,122,500 3,738,125 CHEMICALS & PLASTICS - 74.3% ADHESIVES & SEALANTS - 1.7% Ferro Corp. 25,900 815,850 International Specialty Products, Inc. (a) 66,200 885,425 Lydall, Inc. (a) 14,200 319,500 2,020,775 AGRICULTURAL CHEMICALS - 4.4% FMC Corp. (a) 25,200 1,732,500 IMC Global, Inc. 26,640 929,070 OM Group, Inc. 37,800 1,096,200 Potash Corp. of Saskatchewan 19,600 1,542,185 5,299,955 CHEMICALS - 43.9% Asahi Chemical Industry Co. Ltd. 158,000 858,174 BASF AG 78,900 2,911,146 Bayer AG 6,500 273,512 Crompton & Knowles Corp. 130,321 2,476,099 Cytec Industries, Inc. (a) 158,313 6,273,153 du Pont (E.I.) de Nemours & Co. 43,000 4,611,750 Ethyl Corp. 30,100 274,663 Hercules, Inc. 39,500 1,836,750 Hoechst AG Ord. 59,400 2,510,033 ICI (Imperial Chemical Industries) PLC ADR Class L 104,900 5,231,888 Lyondell Petrochemical Co. 10,800 255,150 Monsanto Co. 203,800 7,413,225 NL Industries, Inc. 26,800 304,850 Olin Corp. 33,600 1,344,000 Quaker Chemical Corp. 100,000 1,512,500 Raychem Corp. 69,000 5,873,625 Rohm & Haas Co. 3,500 322,000 Union Carbide Corp. 111,300 5,258,925 Witco Corp. 95,800 2,945,850 52,487,293 CHEMICALS, GENERAL - 1.5% Grace (WR) & Co. 19,200 1,017,600 Great Lakes Chemical Corp. 15,960 740,145 1,757,745 INDUSTRIAL & ORGANIC CHEMICALS - 0.0% Primex Technologies, Inc. 3,360 62,160 INDUSTRIAL GASES - 15.0% AGA AB Series B 112,500 1,613,664 Air Products & Chemicals, Inc. 85,700 6,352,513 BOC Group PLC 65,641 1,058,924 L'Air Liquide 5,470 858,340 NuCo2, Inc. (a) 16,300 203,750 Praxair, Inc. 160,553 7,806,890 17,894,081 INORGANIC CHEMICALS - 1.7% Minerals Technologies, Inc. 10,400 393,900 Valspar Corp. 28,500 1,631,625 2,025,525 SHARES VALUE (NOTE 1) NITROGENOUS FERTILIZERS - 0.7% Soc Quimica y Minera de Chile ADR 14,300 $ 832,975 ORGANIC CHEMICALS - 0.2% Cambrex Corp. 8,150 273,025 PLASTIC FOAM PRODUCTS - 0.8% Foamex International, Inc. (a) 50,200 934,975 PLASTICS & SYNTHETIC RESINS - 1.6% Geon Co. 2,800 60,200 Spartech Corp. 160,200 1,862,325 1,922,525 PLASTICS - 2.5% Sealed Air Corp. (a) 71,800 2,952,775 PLASTICS, RESINS & ELASTOMERS - 0.3% AT Plastics, Inc. 32,300 311,632 TOTAL CHEMICALS & PLASTICS 88,775,441 CONSUMER DURABLES - 2.8% MANUFACTURING INDUSTRIES - 2.8% Minnesota Mining & Manufacturing Co. 37,000 3,404,000 DRUGS & PHARMACEUTICALS - 1.2% BIOTECHNOLOGY - 1.2% Sigma Aldrich Corp. 45,600 1,396,500 HOUSEHOLD PRODUCTS - 1.0% COSMETICS - 1.0% Gillette Co. 15,000 1,186,875 INDUSTRIAL MACHINERY & EQUIPMENT - 0.1% PUMPING EQUIPMENT - 0.1% Duriron Co., Inc. 6,500 145,438 IRON & STEEL - 2.3% METAL FORGINGS & STAMPINGS - 2.3% Hexcel Corp. (a) 142,200 2,737,350 METALS & MINING - 0.7% NON-METALLIC MINERAL MINING - 0.7% Freeport McMoRan, Inc. par $0.01 30,400 828,400 PACKAGING & CONTAINERS - 2.1% GLASS CONTAINERS - 1.0% Owens-Illinois, Inc. (a) 50,000 1,206,250 METAL CANS & SHIPPING CONTAINERS - 1.1% Silgan Holdings, Inc. 51,000 1,300,500 TOTAL PACKAGING & CONTAINERS 2,506,750 PHOTOGRAPHIC EQUIPMENT - 0.1% Imation Corp. (a) 2,260 60,173 PRECIOUS METALS - 0.4% GOLD ORES - 0.4% Stillwater Mining Co. (a)(c) 19,400 454,688 TOTAL COMMON STOCKS (Cost $96,159,907) 106,792,986 NON-CONVERTIBLE PREFERRED STOCKS - 0.0% MEDICAL FACILITIES MANAGEMENT - 0.0% HMOS & OUTPATIENT CARE - 0.0% Fresenius National Medical Care, Inc. Class D (special dividends) (a) (Cost $3,880) 19,200 1,920 CASH EQUIVALENTS - 10.6% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $12,647,580) 12,647,580 $ 12,647,580 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $108,811,367) $ 119,442,486 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. 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 $454,688 or 0.4% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $245,863,230 and $230,467,657, respectively (see Note 3 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 $102,951 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $7,645,000 and $4,651,750, respectively. The weighted average interest rate was 5.7%. Interest expense includes $2,934 paid under the bank borrowing program (see Note 7 of Notes to Financial Statements). The fund participated in the interfund lending program as a borrower. The maximum loan and 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 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $6,791,138 and $6,987,900, respectively (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 84.9% United Kingdom 5.3 Germany 4.8 Canada 1.7 Sweden 1.4 Others (individually less than 1%) 1.9 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $109,116,037. Net unrealized appreciation aggregated $10,326,449, of which $13,812,563 related to appreciated investment securities and $3,486,114 related to depreciated investment securities. The fund hereby designates approximately $10,131,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 40% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. CHEMICALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 119,442,486 (cost $108,811,367) - See accompanying schedule Receivable for investments sold 15,085 Receivable for fund shares sold 134,923 Dividends receivable 150,654 Interest receivable 47,329 Redemption fees receivable 516 Other receivables 62,769 TOTAL ASSETS 119,853,762 LIABILITIES Payable to custodian bank $ 24,357 Payable for fund shares redeemed 1,261,747 Accrued management fee 57,102 Other payables and accrued expenses 113,374 Collateral on securities loaned, 6,987,900 at value TOTAL LIABILITIES 8,444,480 NET ASSETS $ 111,409,282 Net Assets consist of: Paid in capital $ 90,726,863 Undistributed net investment income 583,830 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 9,468,140 Net unrealized appreciation (depreciation) on investments 10,630,449 and assets and liabilities in foreign currencies NET ASSETS, for 2,619,523 $ 111,409,282 shares outstanding NET ASSET VALUE and redemption price per share ($111,409,282 (divided by) 2,619,523 shares) $42.53 Maximum offering price per share (100/97.00 of $42.53) $43.85
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 2,323,438 Dividends Interest (including income on securities loaned of $8,507) 734,648 TOTAL INCOME 3,058,086 EXPENSES Management fee $ 745,680 Transfer agent fees 1,278,656 Accounting and security lending fees 124,554 Non-interested trustees' compensation 625 Custodian fees and expenses 21,983 Registration fees 52,288 Audit 22,309 Legal 1,235 Interest 6,814 Miscellaneous 5,396 Total expenses before reductions 2,259,540 Expense reductions (24,095 2,235,445 ) NET INVESTMENT INCOME 822,641 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 14,210,798 Foreign currency transactions (10,443 14,200,355 ) Change in net unrealized appreciation (depreciation) on: Investment securities (2,755,198 ) Assets and liabilities in (567 (2,755,765 foreign currencies ) ) NET GAIN (LOSS) 11,444,590 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 12,267,231 OTHER INFORMATION $ 579,393 Sales charges paid to FDC Deferred sales charges withheld $ 6,478 by FDC Exchange fees withheld by FSC $ 115,155 Expense reductions $ 23,210 Directed brokerage arrangements Custodian interest credits 236 Transfer agent interest credits 649 $ 24,095
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 822,641 $ 31,898 Net investment income Net realized 14,200,355 9,931,910 gain (loss) Change in (2,755,765 8,885,611 net ) unrealized appreciation (depreciation ) NET INCREASE 12,267,231 18,849,419 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (228,367 (214,329 shareholders ) ) From net investment income From net (6,676,304 (6,011,068 realized gain ) ) TOTAL (6,904,671 (6,225,397 DISTRIBUTION ) ) S Share 349,364,954 70,422,861 transactions Net proceeds from sales of shares Reinvestmen 6,799,944 6,107,748 t of distributions Cost of (339,611,033 (97,475,212 shares ) ) redeemed Paid in 262,393 40,196 capital portion of redemption fees NET INCREASE 16,816,258 (20,904,407 (DECREASE) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 22,178,818 (8,280,385 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 89,230,464 97,510,849 period End of period $ 111,409,282 $ 89,230,464 (including undistribute d net investment income of $583,830 and $15,890, respectivel y) OTHER INFORMATION Shares Sold 8,409,682 1,900,418 Issued in 164,313 171,374 reinvestment of distributions Redeemed (8,211,486 (2,690,711 ) ) Net increase 362,509 (618,919) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 39.53 $ 33.91 $ 31.66 $ 28.62 $ 32.81 value, beginning of period Income from Investment Operations Net .28 .01 .36 .29 .30 investment income Net realized 5.49 8.89 2.65 5.97 (.84) and unrealized gain (loss) Total from 5.77 8.90 3.01 6.26 (.54) investment operations Less Distributions From net (.12) (.08) (.22) (.23) (.31) investment income From net (2.74) (3.22) (.60) (3.05) (3.36) realized gain Total (2.86) (3.30) (.82) (3.28) (3.67) distributions Redemption .09 .02 .06 .06 .02 fees added to paid in capital Net asset $ 42.53 $ 39.53 $ 33.91 $ 31.66 $ 28.62 value, end of period TOTAL 15.06% 27.48% 9.90% 23.63% (1.61)% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 111,409 $ 89,230 $ 97,511 $ 62,217 $ 28,796 end of period (000 omitted) Ratio of 1.83% 1.99% 1.52% 1.93% 1.89% A expenses to average net assets Ratio of 1.81% E 1.97% E 1.51% E 1.93% 1.89% A expenses to average net assets after expense reductions Ratio of net .67% .04% 1.07% .97% 1.21% A investment income to average net assets Portfolio 207% 87% 106% 81% 214% A turnover rate Average $ .0458 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 8 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS CONSTRUCTION AND HOUSING 18.64% 85.69% 164.41% CONSTRUCTION AND HOUSING 15.08% 80.12% 156.47% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS CONSTRUCTION AND HOUSING 18.64% 13.18% 10.21% CONSTRUCTION AND HOUSING 15.08% 12.49% 9.88% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 10293.17 10289.00 1987/04/30 9588.35 10197.43 1987/05/31 9316.19 10286.15 1987/06/30 9211.51 10805.60 1987/07/31 9783.74 11353.44 1987/08/31 9993.09 11776.92 1987/09/30 9225.47 11519.01 1987/10/31 6294.53 9037.81 1987/11/30 5833.96 8293.10 1987/12/31 6576.43 8924.20 1988/01/31 6810.29 9299.91 1988/02/29 7448.09 9733.29 1988/03/31 7745.74 9432.53 1988/04/30 7972.51 9537.23 1988/05/31 7922.90 9620.20 1988/06/30 8390.62 10061.77 1988/07/31 8305.58 10023.54 1988/08/31 7880.38 9682.74 1988/09/30 8121.33 10095.22 1988/10/31 8178.02 10375.87 1988/11/30 8078.81 10227.49 1988/12/31 8496.02 10406.47 1989/01/31 9013.80 11168.23 1989/02/28 8904.41 10890.14 1989/03/31 9130.48 11143.88 1989/04/30 9487.83 11722.25 1989/05/31 9823.29 12197.00 1989/06/30 9817.09 12127.48 1989/07/31 10215.39 13222.59 1989/08/31 10387.21 13481.75 1989/09/30 10574.65 13426.47 1989/10/31 9981.09 13114.98 1989/11/30 10129.48 13382.52 1989/12/31 9906.11 13703.71 1990/01/31 9281.25 12784.19 1990/02/28 9472.87 12949.10 1990/03/31 10006.09 13292.25 1990/04/30 9714.49 12959.95 1990/05/31 10614.29 14223.54 1990/06/30 10422.66 14126.82 1990/07/31 9879.03 14081.62 1990/08/31 8623.07 12808.64 1990/09/30 7732.64 12184.86 1990/10/31 7460.83 12132.46 1990/11/30 8182.54 12916.22 1990/12/31 8951.12 13276.58 1991/01/31 9738.44 13855.44 1991/02/28 10591.37 14846.11 1991/03/31 10853.81 15205.38 1991/04/30 11022.53 15241.87 1991/05/31 12119.16 15900.32 1991/06/30 11500.54 15172.09 1991/07/31 11800.48 15879.11 1991/08/31 12287.87 16255.44 1991/09/30 12016.05 15983.98 1991/10/31 11809.85 16198.16 1991/11/30 11219.36 15545.38 1991/12/31 12649.26 17323.77 1992/01/31 13589.61 17001.55 1992/02/29 13812.06 17222.57 1992/03/31 13801.95 16886.73 1992/04/30 13994.06 17383.20 1992/05/31 14438.96 17468.37 1992/06/30 13407.24 17208.09 1992/07/31 13650.09 17911.90 1992/08/31 13184.63 17544.71 1992/09/30 13356.65 17751.74 1992/10/31 13822.10 17813.87 1992/11/30 14621.48 18421.32 1992/12/31 15016.11 18647.90 1993/01/31 15643.46 18804.55 1993/02/28 15926.79 19060.29 1993/03/31 16301.18 19462.46 1993/04/30 15916.53 18991.47 1993/05/31 16088.65 19500.44 1993/06/30 16281.03 19556.99 1993/07/31 16837.91 19478.76 1993/08/31 17536.53 20217.01 1993/09/30 18103.53 20061.34 1993/10/31 18761.66 20476.61 1993/11/30 18468.03 20282.08 1993/12/31 20063.15 20527.49 1994/01/31 20718.61 21225.43 1994/02/28 20298.70 20650.22 1994/03/31 19110.69 19749.87 1994/04/30 19067.45 20002.67 1994/05/31 18058.48 20330.71 1994/06/30 17615.77 19832.61 1994/07/31 18120.25 20483.12 1994/08/31 18810.06 21322.93 1994/09/30 17759.91 20800.52 1994/10/31 17234.83 21268.53 1994/11/30 16534.73 20493.93 1994/12/31 16864.17 20797.85 1995/01/31 16938.18 21337.14 1995/02/28 17752.31 22168.65 1995/03/31 18069.50 22822.85 1995/04/30 18090.65 23494.98 1995/05/31 18978.79 24434.07 1995/06/30 19158.54 25001.68 1995/07/31 20046.68 25830.73 1995/08/31 20057.25 25895.57 1995/09/30 19940.95 26988.36 1995/10/31 19930.38 26892.01 1995/11/30 21156.86 28072.57 1995/12/31 21717.20 28613.25 1996/01/31 21672.99 29587.24 1996/02/29 21617.73 29861.52 1996/03/31 22358.22 30149.08 1996/04/30 22386.60 30593.48 1996/05/31 23123.23 31382.49 1996/06/30 23261.35 31502.05 1996/07/31 22283.01 30110.29 1996/08/31 23330.41 30745.32 1996/09/30 24596.49 32475.67 1996/10/31 24228.17 33371.34 1996/11/30 25333.12 35893.88 1996/12/31 24586.61 35182.83 1997/01/31 24831.42 37381.05 1997/02/28 25647.48 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Construction and Housing Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $25,647 - a 156.47% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Lowe's Companies, Inc. 10.6 Masco Corp. 6.5 Westpoint Stevens, Inc. Class A 4.8 Sunbeam-Oster, Inc. 4.4 Oakwood Homes Corp. 4.3 Leggett & Platt, Inc. 3.9 Case Corp. 3.8 Heilig-Meyers Co. 3.8 American Homestar Corp. 3.4 TriMas Corp. 3.1 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Lumber & Building Materials - Retail 10.6% Plumbing Supplies - Wholesale 6.5% Appliances 6.4% Furniture 6.2% Textile Mill Products 4.8% All Others 65.5% * Row: 1, Col: 1, Value: 65.5 Row: 1, Col: 2, Value: 4.8 Row: 1, Col: 3, Value: 6.2 Row: 1, Col: 4, Value: 6.4 Row: 1, Col: 5, Value: 6.5 Row: 1, Col: 6, Value: 10.6 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS CONSTRUCTION AND HOUSING PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Peter Saperstone, Portfolio Manager of Fidelity Select Construction and Housing Portfolio Q. PETER, HOW DID THE FUND PERFORM? A. For the 12 months that ended February 28, 1997, the fund returned 18.64%. The Standard & Poor's 500 Index had a return of 26.16% over the same period. Q. WHAT SORTS OF MARKET DEVELOPMENTS INFLUENCED THE SECTOR'S PERFORMANCE? A. During the year, mortgage rates fluctuated between 7-8%, keeping the housing market at historically healthy levels. After a slow first quarter, most housing-related companies reported strong gains in both sales and earnings for the full year and, for the most part, surpassed prior peak earnings levels. Strong fundamentals, however, didn't necessarily translate into strong performance for housing stocks. Rather, investors shied away from many early cyclical groups, or groups of stocks that tend to underperform late in an economic cycle and outperform in the early stages of an economic recovery. This was the case with many of the housing-related stocks. Q. DID YOU LOOK FOR DIFFERENT WAYS TO POSITION THE PORTFOLIO WHEN INDUSTRY SENTIMENT APPEARED TO BE ON A DOWNSWING? A. Absolutely. Given the mixed outlook on new housing as we entered 1997 and the fact that we're in the latter stages of an economic cycle, I've tried to position the fund in sectors that are driven more by the repair and remodel markets. I also focused on secular segments, such as retailers that benefited from industry consolidation and manufactured housing companies that benefited from market share gains over site-built homes. Lastly, I looked for company-specific stories, which could have involved management changes and cost reduction efforts. These strategies led me to stocks such as Lowe's, Home Depot, Oakwood Homes, Stanley Works and Sunbeam-Oster. Q. WHAT SPECIFIC CHANGES HAVE YOU MADE TO THE FUND SINCE TAKING OVER AS MANAGER LAST AUGUST? A. One change I've made is that I've tried to concentrate the fund's investments in fewer names. When I took over the fund, the portfolio had close to 60 different stocks. I've since cut that down to around 35. My rationale is that I can focus my research efforts on fewer names and know those companies better. If I don't have the time to research a stock, I'd rather not own it. Another strategy I've employed is that I'm not making any sub-sector bets; most of my focus has been on selecting the best individual stocks in the housing group. Q. WHAT TYPES OF STOCKS ATTRACTED YOUR ATTENTION DURING THE PERIOD? A. The stocks I gravitated toward offered the most upside given the industry's backdrop. As it turned out, many of the stocks were in the retail and small appliances and tools areas. Q. WHICH INDIVIDUAL STOCKS CONTRIBUTED POSITIVELY TO THE PORTFOLIO? WHICH HURT? A. On the positive side, the fund benefited from its stake in Masco - a manufacturer of faucets, cabinets and other building products. Westpoint Stevens, a sheet and towel manufacturer, continued to gain market share from weaker competitors, while Stanley Works and Sunbeam-Oster performed well following management changes. One of the bigger disappointments was the fund's position in Black & Decker. Pricing became very competitive in a few of their product categories and the stock suffered as a result. Q. WHAT'S YOUR OUTLOOK FOR 1997? A. Many of the key influencers of the industry - including mortgage rates and mortgage applications - seem to signal a slight downturn for 1997, but I don't think it will be dramatic. If interest rates stay flat, I think the slowdown will be somewhat cushioned. 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: 511 TRADING SYMBOL: FSHOX SIZE: as of February 28, 1997, more than $30 million MANAGER: Peter Saperstone, since August 1996; equity analyst, textile, apparel and footwear industries, since 1995; equity analyst, building materials and appliances, since 1996; joined Fidelity in 1995 (checkmark) CONSTRUCTION AND HOUSING PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 88.4% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 16.1% CEMENT - 3.3% Medusa Corp. 6,700 $ 267,160 Southdown, Inc. 21,400 765,050 1,032,210 HEATING & AIR-CONDITION EQUIPMENT - 0.9% Falcon Building Products, Inc. (a) 16,900 289,413 PAINT & VARNISH - 3.0% Sherwin-Williams Co. 16,600 931,675 PAVING, ROOFING & SIDING - 2.4% Elcor Corp. 31,900 773,575 PLUMBING SUPPLIES - WHOLESALE - 6.5% Masco Corp. 58,500 2,054,813 TOTAL BUILDING MATERIALS 5,081,686 CHEMICALS & PLASTICS - 2.0% CHEMICALS, GENERAL - 1.7% Grace (W.R.) & Co. 10,000 530,000 PLASTIC FOAM PRODUCTS - 0.3% Foamex International, Inc. (a) 5,000 93,125 TOTAL CHEMICALS & PLASTICS 623,125 CONSTRUCTION - 11.8% GENERAL BUILDING - 1.4% D.R. Horton, Inc. 36,640 458,000 MOBILE HOMES - 4.3% Clayton Homes, Inc. 125 1,781 Oakwood Homes Corp. 68,400 1,350,900 1,352,681 PREFABRICATED WOOD BUILDINGS - 3.4% American Homestar Corp. (a) 64,250 1,076,188 SINGLE-FAMILY HOUSING CONSTRUCTION - 2.7% Belmont Homes, Inc. (a) 100,100 850,850 TOTAL CONSTRUCTION 3,737,719 CONSUMER DURABLES - 0.4% MANUFACTURING INDUSTRIES - 0.4% Samsonite Corp. (a) 2,700 128,250 CONSUMER ELECTRONICS - 6.4% APPLIANCES - 6.4% Maytag Co. 29,900 657,800 Sunbeam-Oster, Inc. 50,300 1,376,963 2,034,763 CREDIT & OTHER FINANCE - 2.6% MORTGAGE BANKERS - 2.6% Green Tree Financial Corp. 21,600 810,000 ENTERTAINMENT - 0.1% RECREATIONAL SERVICES - 0.1% Vail Resorts, Inc. 1,000 21,875 FEDERAL SPONSORED CREDIT - 1.9% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 1.9% Federal National Mortgage Association 15,400 616,000 SHARES VALUE (NOTE 1) HOME FURNISHINGS - 10.0% FURNITURE - 6.2% Furniture Brands International, Inc. (a) 50,300 $ 741,925 Leggett & Platt, Inc. 34,300 1,230,513 1,972,438 FURNITURE STORES - 3.8% Heilig-Meyers Co. 85,000 1,200,625 TOTAL HOME FURNISHINGS 3,173,063 INDUSTRIAL MACHINERY & EQUIPMENT - 9.7% ACCESS & MEASURING CUTTING TOOLS - 3.0% Stanley Works 25,000 956,250 FARM MACHINERY & EQUIPMENT - 3.9% Case Corp. 23,400 1,213,875 LAWN, GARDEN TRACTORS, EQUIPMENT - 1.5% Toro Co. 13,400 463,975 SPECIAL INDUSTRIAL MACHINERY - 1.3% Singer Co. 25,000 421,875 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 3,055,975 IRON & STEEL - 3.1% METAL FORGINGS & STAMPINGS - 3.1% TriMas Corp. 40,000 975,000 LEISURE DURABLES & TOYS - 3.5% MOTOR HOMES - 2.6% Coachmen Industries, Inc. 40,000 810,000 TRAVEL TRAILERS AND CAMPERS - 0.9% Champion Enterprises, Inc. (a) 15,000 290,625 TOTAL LEISURE DURABLES & TOYS 1,100,625 PAPER & FOREST PRODUCTS - 2.1% LUMBER & WOOD - 2.1% Fibreboard Corp. (a) 20,000 667,500 REAL ESTATE - 0.7% REAL ESTATE, GENERAL - 0.7% Price Enterprises, Inc. 12,000 213,000 REAL ESTATE INVESTMENT TRUSTS - 0.0% Golf Trust of America, Inc. 500 12,125 RETAIL & WHOLESALE, MISCELLANEOUS - 13.2% BUILDING MATERIALS - RETAIL - 2.6% Home Depot, Inc. (The) 15,000 817,500 LUMBER & BUILDING MATERIALS - RETAIL - 10.6% Lowe's Companies, Inc. 91,800 3,350,700 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 4,168,200 TEXTILES & APPAREL - 4.8% TEXTILE MILL PRODUCTS - 4.8% Westpoint Stevens, Inc. Class A (a) 44,400 1,531,800 TOTAL COMMON STOCKS (Cost $27,040,798) 27,950,706 CASH EQUIVALENTS - 11.6% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $3,658,424) 3,658,424 $ 3,658,424 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $30,699,222) $ 31,609,130 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $153,685,201 and $170,804,470, respectively (see Note 3 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 $63,646 for the period (see Note 4 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $975,000 and $1,000,000, respectively (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $31,190,794. Net unrealized appreciation aggregated $418,336, of which $2,118,542 related to appreciated investment securities and $1,700,206 related to depreciated investment securities. The fund hereby designates approximately $5,543,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 48% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. CONSTRUCTION AND HOUSING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 31,609,130 (cost $30,699,222) - See accompanying schedule Receivable for investments sold 1,285,853 Receivable for fund shares sold 446,109 Dividends receivable 16,596 Interest receivable 9,786 Redemption fees receivable 114 TOTAL ASSETS 33,367,588 LIABILITIES Payable for investments purchased $ 1,448,771 Payable for fund shares redeemed 270,536 Accrued management fee 18,159 Other payables and accrued expenses 49,496 Collateral on securities loaned, 1,000,000 at value TOTAL LIABILITIES 2,786,962 NET ASSETS $ 30,580,626 Net Assets consist of: Paid in capital $ 20,910,223 Undistributed net investment income 68,372 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 8,692,123 Net unrealized appreciation (depreciation) on investments 909,908 NET ASSETS, for 1,390,131 $ 30,580,626 shares outstanding NET ASSET VALUE and redemption price per share ($30,580,626 (divided by) 1,390,131 shares) $22.00 Maximum offering price per share (100/97.00 of $22.00) $22.68
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 688,635 Dividends Interest (including income on securities loaned of $3,121) 410,186 TOTAL INCOME 1,098,821 EXPENSES Management fee $ 408,988 Transfer agent fees 397,614 Accounting and security lending fees 76,770 Non-interested trustees' compensation 322 Custodian fees and expenses 13,190 Registration fees 27,787 Audit 29,699 Legal 342 Miscellaneous 3,000 Total expenses before reductions 957,712 Expense reductions (40,138 917,574 ) NET INVESTMENT INCOME 181,247 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 10,159,029 Foreign currency transactions (55 10,158,974 ) Change in net unrealized appreciation (depreciation) on: Investment securities (2,418,312 ) Assets and liabilities in (1 (2,418,313 foreign currencies ) ) NET GAIN (LOSS) 7,740,661 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 7,921,908 OTHER INFORMATION $ 174,919 Sales charges paid to FDC Deferred sales charges withheld $ 1,261 by FDC Exchange fees withheld by FSC $ 75,683 Expense reductions $ 39,950 Directed brokerage arrangements Custodian interest credits 188 $ 40,138
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 181,247 $ 166,036 Net investment income Net realized 10,158,974 4,719,847 gain (loss) Change in (2,418,313 2,880,267 net ) unrealized appreciation (depreciation ) NET INCREASE 7,921,908 7,766,150 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (112,820 (162,155 shareholders ) ) From net investment income From net (3,093,992 (1,876,368 realized gain ) ) TOTAL (3,206,812 (2,038,523 DISTRIBUTION ) ) S Share 137,278,007 90,250,248 transactions Net proceeds from sales of shares Reinvestmen 3,185,271 2,017,008 t of distributions Cost of (157,413,712 (72,254,026 shares ) ) redeemed Paid in 147,951 64,179 capital portion of redemption fees NET INCREASE (16,802,483 20,077,409 (DECREASE) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (12,087,387 25,805,036 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 42,668,013 16,862,977 period End of period $ 30,580,626 $ 42,668,013 (including undistribute d net investment income of $68,372 and $1,803, respectivel y) OTHER INFORMATION Shares Sold 6,539,196 4,943,241 Issued in 160,947 103,809 reinvestment of distributions Redeemed (7,491,813 (3,869,788 ) ) Net increase (791,670) 1,177,262 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 19.56 $ 16.79 $ 19.82 $ 15.74 $ 13.84 value, beginning of period Income from Investment Operations Net .06 .07 (.02) .01 .02 investment income (loss) Net realized 3.38 3.55 (2.50) 4.26 1.87 and unrealized gain (loss) Total from 3.44 3.62 (2.52) 4.27 1.89 investment operations Less Distributions From net (.02) (.07) - - - investment income From net (1.03) (.81) (.52) (.22) (.01) realized gain Total (1.05) (.88) (.52) (.22) (.01) distributions Redemption .05 .03 .01 .03 .02 fees added to paid in capital Net asset $ 22.00 $ 19.56 $ 16.79 $ 19.82 $ 15.74 value, end of period TOTAL 18.64% 21.77% (12.54)% 27.45% 13.81% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 30,581 $ 42,668 $ 16,863 $ 80,999 $ 31,111 end of period (000 omitted) Ratio of 1.41% 1.43% 1.76% 1.67% 2.02% A expenses to average net assets Ratio of 1.35% E 1.40% E 1.74% E 1.66% E 2.02% A expenses to average net assets after expense reductions Ratio of net .27% .39% (.11)% .03% .20% A investment income (loss) to average net assets Portfolio 270% 139% 45% 35% 60% A turnover rate Average $ .0410 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 8 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 8 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.
DEFENSE AND AEROSPACE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS DEFENSE AND AEROSPACE 15.87% 137.19% 119.24% DEFENSE AND AEROSPACE 12.39% 130.08% 112.67% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS DEFENSE AND AEROSPACE 15.87% 18.86% 8.17% DEFENSE AND AEROSPACE 12.39% 18.13% 7.84% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9518.48 10289.00 1987/04/30 9104.39 10197.43 1987/05/31 8979.59 10286.15 1987/06/30 8894.50 10805.60 1987/07/31 9132.75 11353.44 1987/08/31 9036.32 11776.92 1987/09/30 8854.80 11519.01 1987/10/31 6597.13 9037.81 1987/11/30 6256.78 8293.10 1987/12/31 6443.37 8924.20 1988/01/31 6857.92 9299.91 1988/02/29 7266.56 9733.29 1988/03/31 7248.79 9432.53 1988/04/30 7201.41 9537.23 1988/05/31 6928.99 9620.20 1988/06/30 7213.26 10061.77 1988/07/31 7071.12 10023.54 1988/08/31 6899.38 9682.74 1988/09/30 7106.66 10095.22 1988/10/31 7094.81 10375.87 1988/11/30 6780.93 10227.49 1988/12/31 6721.71 10406.47 1989/01/31 6988.21 11168.23 1989/02/28 6958.60 10890.14 1989/03/31 7100.73 11143.88 1989/04/30 7355.39 11722.25 1989/05/31 7485.68 12197.00 1989/06/30 7396.85 12127.48 1989/07/31 7876.54 13222.59 1989/08/31 8077.90 13481.75 1989/09/30 7929.84 13426.47 1989/10/31 7479.76 13114.98 1989/11/30 7195.49 13382.52 1989/12/31 7313.93 13703.71 1990/01/31 6899.38 12784.19 1990/02/28 6923.07 12949.10 1990/03/31 7349.47 13292.25 1990/04/30 7047.43 12959.95 1990/05/31 7568.59 14223.54 1990/06/30 7574.03 14126.82 1990/07/31 7270.12 14081.62 1990/08/31 6632.49 12808.64 1990/09/30 6417.96 12184.86 1990/10/31 6334.54 12132.46 1990/11/30 6674.21 12916.22 1990/12/31 6978.66 13276.58 1991/01/31 7594.60 13855.44 1991/02/28 7744.10 14846.11 1991/03/31 8342.10 15205.38 1991/04/30 8204.56 15241.87 1991/05/31 8587.28 15900.32 1991/06/30 8155.23 15172.09 1991/07/31 8509.54 15879.11 1991/08/31 8419.46 16255.44 1991/09/30 8221.29 15983.98 1991/10/31 8617.64 16198.16 1991/11/30 8227.29 15545.38 1991/12/31 8857.85 17323.77 1992/01/31 8827.83 17001.55 1992/02/29 8965.95 17222.57 1992/03/31 8785.79 16886.73 1992/04/30 8629.65 17383.20 1992/05/31 8197.27 17468.37 1992/06/30 7812.93 17208.09 1992/07/31 8113.19 17911.90 1992/08/31 7957.05 17544.71 1992/09/30 8071.16 17751.74 1992/10/31 8137.21 17813.87 1992/11/30 8419.46 18421.32 1992/12/31 8857.85 18647.90 1993/01/31 9122.09 18804.55 1993/02/28 9056.03 19060.29 1993/03/31 9536.46 19462.46 1993/04/30 9566.48 18991.47 1993/05/31 9860.74 19500.44 1993/06/30 10275.11 19556.99 1993/07/31 10695.48 19478.76 1993/08/31 10677.47 20217.01 1993/09/30 10953.71 20061.34 1993/10/31 11392.10 20476.61 1993/11/30 11055.80 20282.08 1993/12/31 11414.04 20527.49 1994/01/31 11957.56 21225.43 1994/02/28 11957.56 20650.22 1994/03/31 11476.51 19749.87 1994/04/30 11538.80 20002.67 1994/05/31 11576.84 20330.71 1994/06/30 11285.20 19832.61 1994/07/31 11450.04 20483.12 1994/08/31 11963.58 21322.93 1994/09/30 11361.28 20800.52 1994/10/31 11640.24 21268.53 1994/11/30 11183.76 20493.93 1994/12/31 11614.88 20797.85 1995/01/31 11608.54 21337.14 1995/02/28 12451.76 22168.65 1995/03/31 12984.32 22822.85 1995/04/30 13700.74 23494.98 1995/05/31 14543.96 24434.07 1995/06/30 15082.86 25001.68 1995/07/31 15913.40 25830.73 1995/08/31 15907.06 25895.57 1995/09/30 16350.86 26988.36 1995/10/31 15754.90 26892.01 1995/11/30 16889.76 28072.57 1995/12/31 17115.26 28613.25 1996/01/31 17421.50 29587.24 1996/02/29 18353.82 29861.52 1996/03/31 18775.75 30149.08 1996/04/30 19680.37 30593.48 1996/05/31 20416.28 31382.49 1996/06/30 19932.68 31502.05 1996/07/31 18587.02 30110.29 1996/08/31 19568.23 30745.32 1996/09/30 20528.42 32475.67 1996/10/31 20170.98 33371.34 1996/11/30 21271.34 35893.88 1996/12/31 21398.81 35182.83 1997/01/31 20935.86 37381.05 1997/02/28 21266.54 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Defense and Aerospace Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $21,267 - a 112.67% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS APT Satellite Holdings Ltd. sponsored ADR 12.2 Boeing Co. 9.1 McDonnell Douglas Corp. 8.1 Northrop Grumman Corp. 5.7 Sundstrand Corp. 5.1 General Dynamics Corp. 4.9 United Technologies Corp. 4.2 Continental Airlines, Inc. 3.7 Lockheed Martin Corp. 3.6 Gulfstream Aerospace Corp. 3.3 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Row: 1, Col: 1, Value: 18.2 Row: 1, Col: 2, Value: 6.6 Row: 1, Col: 3, Value: 6.8 Row: 1, Col: 4, Value: 12.2 Row: 1, Col: 5, Value: 12.2 Row: 1, Col: 6, Value: 44.0 Aerospace & Defense 44.0% Air Transportation 12.2% Broadcasting 12.2% Ship Building & Repair 6.8% Conglomerates 6.6% All Others 18.2% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS DEFENSE AND AEROSPACE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Kevin Richardson became Portfolio Manager of Fidelity Select Defense and Aerospace Portfolio on January 7, 1997. Q. HOW DID THE FUND PERFORM, KEVIN? A. Not as well as I would have liked. For the 12 months that ended February 28, 1997, the fund had a return of 15.87%. The Standard & Poor's 500 Index had a return of 26.16% over the same time frame. Q. WERE THERE ANY INDUSTRY-WIDE FACTORS THAT AFFECTED PERFORMANCE? A. Consolidation - namely merger and acquisition activity - was a positive theme throughout much of the period. Earnings growth and valuation trends within the industry were positively influenced by this consolidation. However, with the recent Boeing/McDonnell Douglas merger, there are no more major acquisition opportunities out there. Now that the consolidation game has concluded in the defense sector, the dust is settling and investors are trying to figure out what they own. Aside from the consolidation issue, defense stocks as a group performed quite poorly. Q. WILL CONSOLIDATION WITHIN THE ENTIRE INDUSTRY COME TO A SCREECHING HALT? A. Not at all. I think the next consolidation wave we'll see will occur among the boat-building stocks. As currently constituted, this industry has far too many shipyards, and layoffs are happening everywhere. The government has said it will endorse shipyard mergers, so the stage has been set. Q. HOW DID COMMERCIAL AEROSPACE STOCKS PERFORM? A. Aerospace stocks were one of the few bright spots. Some of the companies I owned - including United Technologies and Sundstrand - benefited from the increased demand for aircraft building. Q. THE FUND'S POSITION IN SATELLITE STOCKS ROSE DURING THE PERIOD. WHAT WAS THE STORY THERE? A. The increase in satellite stocks reflects my belief that satellite systems are poised for growth. One of the fund's positions - APT Satellite Holdings - has two satellites operating over China right now, and it's scheduled to announce a third one in July. Valuations are extremely favorable, and I think you may see satellites make the Internet hype look small in coming years. Q. IN TERMS OF PORTFOLIO COMPOSITION, DID YOU MAKE ANY SIGNIFICANT CHANGES AFTER YOU TOOK OVER THE FUND? A. My primary imprint on the portfolio has come in the form of reducing the amount of stocks it owns and adding to existing positions. When I began managing the fund, there were approximately 95 different stocks staring at me from my computer screen. I've since pared that number back and have made bigger investments in some of my top holdings. Tracking 100 names can be cumbersome; if I do my due diligence on the companies I own, I'm confident in my abilities to find the winners. Q. WHICH INDIVIDUAL STOCKS PERFORMED WELL? WHERE DID THE DISAPPOINTMENTS LIE? A. Boeing, APT Satellite and Sundstrand all registered strong performances, while defense stocks such as Lockheed and Northrop Grumman went through a prolonged slump, but rebounded somewhat toward the end of the period. On a side note, a niche stock that was interesting was Jamco, a company that makes every toilet installed on Boeing jets. Q. WHAT'S YOUR OUTLOOK? A. I think we're in for more of the same. Airline stocks have recently shown signs of life, so I'll keep an eye on potential opportunities in that area. I may be a bit early with my satellite hunch, but I'll most likely increase my positions there because I want to be well-positioned should that hunch pay off. I'll also try to continue reducing the number of names in the portfolio. I'd like to get down to exactly 30. 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 February 28, 1997, more than $68 million MANAGER: Kevin Richardson, since January 1997; manager, Fidelity Select Air Transportation Portfolio, since 1996; equity analyst, computer services, health care information systems and specialty finance industries, since 1994; joined Fidelity in 1994 (checkmark) DEFENSE & AEROSPACE PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.8% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 44.0% AIRCRAFT - 29.7% Boeing Co. 61,900 $ 6,298,320 Gulfstream Aerospace Corp. (a) 105,100 2,285,925 Lockheed Martin Corp. 28,100 2,486,850 McDonnell Douglas Corp. 88,400 5,613,400 Northrop Grumman Corp. 54,200 3,936,275 20,620,770 AIRCRAFT & PARTS - 7.9% Precision Castparts Corp. 20,000 980,000 Rohr Industries, Inc. (a) 34,100 618,063 Sundstrand Corp. 81,500 3,555,438 Wyman-Gordon Co. (a) 20,000 357,500 5,511,001 AIRCRAFT EQUIPMENT - 2.9% Aviall, Inc. (a) 20,000 222,500 BE Aerospace, Inc. (a) 11,900 288,575 Jamco Corp. 110,000 1,235,184 Moog, Inc. Class A 9,900 235,125 1,981,384 MISSILES & SPACE VEHICLES - 2.2% Orbital Sciences Corp. (a) 50,000 862,500 Thiokol Corp. 12,000 669,000 1,531,500 ORDNANCE - 1.3% Alliant Techsystems, Inc. (a) 20,400 889,950 TOTAL AEROSPACE & DEFENSE 30,534,605 AIR TRANSPORTATION - 12.2% AIR TRANSPORT, MAJOR NATIONAL - 9.0% Alaska Air Group, Inc. 14,000 332,500 America West Holding Corp. Class B (a) 108,000 1,498,500 Continental Airlines, Inc. (a) 89,700 2,567,663 Northwest Airlines Corp. Class A (a) 53,000 1,874,875 6,273,538 AIR TRANSPORTATION, REGIONAL - 3.2% Comair Holdings, Inc. 107,500 2,217,188 TOTAL AIR TRANSPORTATION 8,490,726 AUTOS, TIRES, & ACCESSORIES - 0.9% AUTO DEALERS - RETAIL - 0.8% Aviation Sales Co. (a) 21,700 545,213 INDUSTRIAL TRUCKS - 0.1% ESCO Electronics Corp. (trust receipt) 10,000 116,250 TOTAL AUTOS, TIRES, & ACCESSORIES 661,463 BROADCASTING - 12.2% COMMUNICATIONS SERVICES - 12.2% APT Satellite Holdings Ltd. sponsored ADR 603,700 8,451,800 CHEMICALS & PLASTICS - 1.0% INDUSTRIAL & ORGANIC CHEMICALS - 1.0% Primex Technologies, Inc. 37,500 693,750 COMPUTER SERVICES & SOFTWARE - 1.3% CAD/CAM/CAE - 1.3% Firearms Training Systems, Inc. Class A 60,000 877,500 SHARES VALUE (NOTE 1) CONGLOMERATES - 6.6% Harris Corp. 23,000 $ 1,696,250 United Technologies Corp. 38,500 2,897,125 4,593,375 DEFENSE ELECTRONICS - 6.2% Doncasters PLC sponsored ADR 8,300 164,963 Litton Industries, Inc. (a) 52,500 2,257,500 Raytheon Co. 30,500 1,437,313 Tracor, Inc. (a) 17,500 417,813 4,277,589 ELECTRICAL EQUIPMENT - 0.9% TV & RADIO COMMUNICATION EQUIPMENT - 0.9% Loral Space & Communications Ltd. 40,000 645,000 ELECTRONICS - 2.6% ELECTRONIC PARTS - WHOLESALE - 2.2% Airport Systems International, Inc. (a)(b) 223,100 1,310,713 Zero Corp. 8,000 176,000 1,486,713 ELECTRONICS & ELECTRONIC COMPONENTS - 0.4% Esterline Technologies Corp. (a) 12,000 303,000 TOTAL ELECTRONICS 1,789,713 RAILROADS - 1.1% RAILROAD EQUIPMENT - 1.1% Bombardier, Inc. Class B 40,000 767,460 SHIP BUILDING & REPAIR - 6.8% SHIP BUILDERS - 6.6% Avondale Industries, Inc. (a) 56,800 1,171,500 General Dynamics Corp. 50,200 3,375,950 4,547,450 SHIP BUILDING & REPAIRING - 0.2% Newport News Shipbuilding, Inc. 9,900 153,450 TOTAL SHIP BUILDING & REPAIR 4,700,900 TOTAL COMMON STOCKS (Cost $64,897,985) 66,483,881 CASH EQUIVALENTS - 4.2% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.37%, dated 2/28/97 due 3/3/97 $ 2,939,315 2,938,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $67,835,985) $ 69,421,881 LEGEND 1. Non-income producing 2. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions during the period with companies which are or were affiliates are as follows: PURCHASE SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Airport Systems International, Inc. $ 6,050 $ - $ - $ 1,310,713 TOTALS $ 6,050 $ - $ - $ 1,310,713 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $130,082,549 and $92,130,148, respectively (see Note 3 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 $24,182 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $67,919,764. Net unrealized appreciation aggregated $1,502,117, of which $3,693,313 related to appreciated investment securities and $2,191,196 related to depreciated investment securities. The fund hereby designates approximately $674,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 16% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. DEFENSE AND AEROSPACE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at $ 69,421,881 value (including repurchase agreements of $2,938,000) (cost $67,835,985) - See accompanying schedule Cash 576 Receivable for investments sold 2,346,657 Receivable for fund shares sold 70,511 Dividends receivable 81,968 Redemption fees receivable 163 TOTAL ASSETS 71,921,756 LIABILITIES Payable for investments purchased $ 2,432,492 Payable for fund shares redeemed 565,644 Accrued management fee 35,834 Other payables and accrued expenses 85,246 TOTAL LIABILITIES 3,119,216 NET ASSETS $ 68,802,540 Net Assets consist of: Paid in capital $ 64,480,380 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 2,736,264 Net unrealized appreciation (depreciation) on investments 1,585,896 NET ASSETS, for 2,377,401 $ 68,802,540 shares outstanding NET ASSET VALUE and redemption price per share ($68,802,540 (divided by) 2,377,401 shares) $28.94 Maximum offering price per share (100/97.00 of $28.94) $29.84
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 511,376 Dividends Interest 114,569 TOTAL INCOME 625,945 EXPENSES Management fee $ 268,010 Transfer agent fees 386,697 Accounting fees and expenses 61,443 Non-interested trustees' compensation 226 Custodian fees and expenses 20,070 Registration fees 45,791 Audit 29,206 Legal 235 Miscellaneous 937 Total expenses before reductions 812,615 Expense reductions (13,368 799,247 ) NET INVESTMENT INCOME (LOSS) (173,302 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 4,765,146 Foreign currency transactions 15 4,765,161 Change in net unrealized appreciation (depreciation) on investment securities (539,108 ) NET GAIN (LOSS) 4,226,053 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 4,052,751 OTHER INFORMATION $ 292,571 Sales charges paid to FDC Deferred sales charges withheld $ 1,408 by FDC Exchange fees withheld by FSC $ 35,265 Expense reductions $ 12,553 Directed brokerage arrangements Transfer agent interest credits 815 $ 13,368
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ (173,302 $ (42,041 Net ) ) investment income (loss) Net realized 4,765,161 6,184,658 gain (loss) Change in (539,108 1,844,428 net ) unrealized appreciation (depreciation ) NET INCREASE 4,052,751 7,987,045 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (2,799,166 (1,652,319 shareholders ) ) from net realized gains Share 127,346,343 82,853,410 transactions Net proceeds from sales of shares Reinvestmen 2,752,265 1,633,401 t of distributions Cost of (89,310,784 (69,255,038 shares ) ) redeemed Paid in 112,916 97,064 capital portion of redemption fees NET INCREASE 40,900,740 15,328,837 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 42,154,325 21,663,563 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 26,648,215 4,984,652 period End of period $ 68,802,540 $ 26,648,215 OTHER INFORMATION Shares Sold 4,464,416 3,489,764 Issued in 99,462 65,863 reinvestment of distributions Redeemed (3,174,693 (2,821,248 ) ) Net increase 1,389,185 734,379 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 26.97 $ 19.64 $ 19.14 $ 15.08 $ 14.37 value, beginning of period Income from Investment Operations Net (.11) (.05) (.06) .07 (.02) investment income (loss) Net realized 4.18 9.09 .70 4.57 .69 and unrealized gain (loss) Total from 4.07 9.04 .64 4.64 .67 investment operations Less Distributions From net - - - (.10) - investment income From net (2.17) (1.82) (.27) (.62) - realized gain Total (2.17) (1.82) (.27) (.72) - distributions Redemption .07 .11 .13 .14 .04 fees added to paid in capital Net asset $ 28.94 $ 26.97 $ 19.64 $ 19.14 $ 15.08 value, end of period TOTAL 15.87% 47.40% 4.13% 32.04% 4.94% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 68,803 $ 26,648 $ 4,985 $ 11,136 $ 1,463 end of period (000 omitted) Ratio of 1.84% 1.77% G 2.49% G 2.53% G 2.48% A, expenses to G average net assets Ratio of 1.81% E 1.75% E 2.49% 2.53% 2.48% A expenses to average net assets after expense reductions Ratio of net (.39)% (.20)% (.32)% .40% (.14)% investment A income (loss) to average net assets Portfolio 219% 267% 146% 324% 87% A turnover rate Average $ .0335 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 8 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 1 PAST 5 LIFE OF FEBRUARY 28, 1997 YEAR YEARS FUND ENVIRONMENTAL SERVICES 16.93% 21.65% 64.87% ENVIRONMENTAL SERVICES 13.42% 18.00% 59.92% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 203.23% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or since the fund started on June 29, 1989. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1997 YEAR YEARS FUND ENVIRONMENTAL SERVICES 16.93% 4.00% 6.73% ENVIRONMENTAL SERVICES 13.42% 3.37% 6.31% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 15.55% AVERAGE ANNUAL RETURNS take the fund's 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 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 1996/08/31 14679.89 24746.22 1996/09/30 15209.29 26138.94 1996/10/31 15054.88 26859.85 1996/11/30 15462.96 28890.19 1996/12/31 15429.87 28317.87 1997/01/31 16389.42 30087.18 1997/02/28 15992.36 30323.06 Let's say hypothetically that $10,000 was invested in Fidelity Select Environmental Services Portfolio on June 29, 1989, when the fund started, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $15,992 - - a 59.92% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $30,323 - a 203.23% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Browning-Ferris Industries, Inc. 6.4 WMX Technologies, Inc. 6.1 USA Waste Services, Inc. 5.4 United Waste Systems, Inc. 4.0 Ogden Corp. 3.5 Safety Kleen Corp. 3.3 Thermo Electron Corp. 3.2 Allied Waste Industries, Inc. 3.0 Harsco Corp. 2.7 Wheelabrator Technologies, Inc. 2.6 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Refuse Systems 31.0% Pollution Equipment & Design 10.7% Sanitary Services 10.4% Medical Technology 3.3% Service Industry Machinery 3.3% All Others 41.3% * Row: 1, Col: 1, Value: 41.3 Row: 1, Col: 2, Value: 3.3 Row: 1, Col: 3, Value: 3.3 Row: 1, Col: 4, Value: 10.4 Row: 1, Col: 5, Value: 10.7 Row: 1, Col: 6, Value: 31.0 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S 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. For the 12 months that ended February 28, 1997, the fund had a total return of 16.93%. During the same 12-month period, the Standard & Poor's 500 Index returned 26.16%. Q. WHAT WERE THE MAIN FACTORS THAT DROVE STOCK PERFORMANCE IN THE SECTOR? A. The two large-capitalization solid waste companies - Browning-Ferris Industries and WMX Technologies, the fund's two largest holdings - struggled through the course of the year. Both companies reached a stage where they couldn't grow as rapidly as they had previously and were slow to adapt to new circumstances. More recently, both companies have started to divest themselves of underperforming assets and to raise prices, in an attempt to respond to the new slower growth phase of their business. Another negative factor that particularly affected Browning-Ferris was a drop in the price of recycled paper fiber. Q. DOES THAT MEAN THAT ALL SOLID WASTE COMPANIES STRUGGLED? A. Not at all. The mid-sized solid waste companies performed quite well, as they sought to acquire other companies' operations. As a matter of fact, two of the fund's best performers during the past six months, USA Waste Services and United Waste Systems, are mid-capitalization solid waste companies. The two of them followed different strategies to success. USA Waste has pursued an urban strategy, aiming to be the top or second player in urban marketplaces with fully integrated waste collection operations. The company has become the third largest solid waste firm in the U.S., establishing a national presence. United Waste, on the other hand, has focused more on small marketplaces in rural areas, trying to win a dominant market share and asking higher prices for its services. Q. SOLID WASTE COMPANIES COMPRISE THE FUND'S LARGEST INDUSTRY WEIGHTING. WHAT OTHER THEMES DID YOU PURSUE? A. I positioned the fund to take advantage of opportunities in the water industry. Water is becoming a more scarce commodity for both consumption and industrial applications. In fact, in the U.S. we use about 10 times more water each day for industrial use than for human consumption. I've invested the fund in water supply companies and firms that make mechanical separation technology and membranes for water clean-up, such as Ionics and Memtec. On the whole, water stocks have become expensive, so I've been selective in this area by remaining sensitive to the stocks' valuations. Q. YOU MENTIONED SOME STOCKS THAT PERFORMED WELL FOR THE FUND. WHICH STOCKS PROVED TO BE DISAPPOINTMENTS? A. Beyond the large-cap solid waste companies I talked about earlier, I'd mention two others. IMCO Recycling, an aluminum recycler, suffered when the price of aluminum fell. The commodity's price has since stabilized and moved up a bit, so the stock has recovered somewhat. Thermo Fibertek, a company that makes blades that shave the sides of paper when it is manufactured and placed on spindles, faltered when paper production rates went down. The company also is a paper recycler, and struggled when recycled paper demand and prices fell. Q. WHAT ABOUT HAZARDOUS WASTE COLLECTION? IT APPEARS YOU'VE CONTINUED TO DE-EMPHASIZE THAT GROUP. A. Yes, I've avoided those stocks because there is too much industry capacity to treat today's hazardous waste stream, which is diminishing over time largely because commercial enterprises have re-engineered their processes to produce less hazardous waste. Q. WHAT'S YOUR OUTLOOK FOR 1997? A. I believe it has the potential to be a watershed year for the group, especially the solid waste industry that has become the most important group in the sector. The major players such as WMX and Browning-Ferris should see higher rates of return as they divest underperforming assets, raise prices and improve their operations. On the other side of this equation, the mid-cap solid waste companies should benefit from integrating the acquisitions they've been making. I see the solid waste industry becoming healthier as we see the solid waste operators nationwide integrating their operations, improving returns and benefiting from better pricing. 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 February 28, 1997, more than $32 million MANAGER: Robert Ewing, since 1996; manager, Fidelity Select Energy Service Portfolio, since November 1996; joined Fidelity in 1990 (checkmark) ENVIRONMENTAL SERVICES PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.7% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 2.7% ORDNANCE - 2.7% Harsco Corp. 25,200 $ 907,200 CHEMICALS & PLASTICS - 4.1% ADHESIVES & SEALANTS - 2.1% Nalco Chemical Co. 19,000 698,254 CHEMICALS - 2.0% Betz Dearborn, Inc. 10,000 648,750 TOTAL CHEMICALS & PLASTICS 1,347,004 CONSTRUCTION - 0.8% HEAVY CONSTRUCTION - 0.8% Emcor Group, Inc. (a) 15,000 251,250 DRUGS & PHARMACEUTICALS - 2.7% COMMERCIAL LABORATORY RESEARCH - 2.7% Energy Biosystems Corp. (a) 24,900 168,075 Thermotrex Corp. (a) 26,600 711,550 879,625 EDUCATIONAL SERVICES - 0.5% DATA PROCESSING SCHOOLS - 0.5% New Horizons Worldwide, Inc. (a) 15,000 165,000 ELECTRONIC INSTRUMENTS - 5.6% INDUSTRIAL MEASUREMENT INSTRUMENTS - 1.7% TSI, Inc. 59,300 570,763 Thermedics Detection, Inc. (rights) (a) 3,500 1,094 571,857 LABORATORY & RESEARCH EQUIPMENT - 0.7% Microfluidics International Corp. (a) 86,400 226,800 LABORATORY ANALYTICAL INSTRUMENTS - 3.2% Thermo Electron Corp. 30,950 1,056,169 TOTAL ELECTRONIC INSTRUMENTS 1,854,826 ENERGY SERVICES - 2.2% OIL & GAS SERVICES - 2.2% Newpark Resources, Inc. (a) 12,400 564,200 Serv-Tech, Inc. (a) 26,600 149,625 713,825 ENGINEERING - 2.5% ARCHITECTS & ENGINEERS - 2.5% Fluor Corp. 10,600 642,625 Harding Lawson Associates Group, Inc. (a) 27,900 191,813 834,438 HOUSEHOLD PRODUCTS - 2.1% MANUFACTURED PRODUCTS - 2.1% Memtec Ltd. sponsored ADR 35,600 709,775 INDUSTRIAL MACHINERY & EQUIPMENT - 5.9% SERVICE INDUSTRY MACHINERY - 3.3% Ionics, Inc. (a) 14,500 715,938 Trojan Technologies Corp. (a) 25,300 389,259 1,105,197 SPECIAL INDUSTRIAL MACHINERY - 2.6% Thermo Fibergen, Inc. (a) 2,000 21,000 Thermo Fibergen, Inc. (rights) (a) 2,000 5,750 Thermo Fibertek, Inc. (a) 68,275 819,300 846,050 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,951,247 SHARES VALUE (NOTE 1) MEDICAL EQUIPMENT & SUPPLIES - 3.3% MEDICAL TECHNOLOGY - 3.3% Pall Corp. 17,700 $ 384,975 Thermedics, Inc. (a) 35,000 726,250 1,111,225 METALS & MINING - 1.9% SECONDARY NONFERROUS SMELTING - 1.9% IMCO Recycling, Inc. 40,800 642,600 POLLUTION CONTROL - 54.7% HAZARDOUS WASTE MANAGEMENT - 2.6% GNI Group, Inc. (a) 35,000 214,375 International Technology Corp. (a) 25,000 215,625 Molten Metal Technology, Inc. (a) 11,500 130,813 TRC Companies, Inc. (a) 74,900 308,963 869,776 POLLUTION EQUIPMENT & DESIGN - 10.7% Calgon Carbon Corp. 12,000 135,000 Dames & Moore, Inc. 20,000 275,000 Ogden Corp. 57,400 1,169,525 Sevenson Environmental Services, Inc. 25,300 461,725 TETRA Technologies, Inc. (a) 6,900 163,013 Thermo Instrument Systems, Inc. (a) 23,200 788,800 Waste Management International PLC sponsored ADR (a) 72,000 540,000 3,533,063 REFUSE SYSTEMS - 31.0% Allied Waste Industries, Inc. (a) 115,300 1,008,875 American Disposal Services, Inc. 5,000 83,750 Browning-Ferris Industries, Inc. 67,500 2,117,813 Eastern Environmental Services, Inc. (a) 30,000 408,750 GTS Duratek, Inc. (a) 25,500 309,188 Laidlaw, Inc. Class B 62,000 858,751 Republic Industries, Inc. (a) 18,280 648,940 Rollins Environmental Services, Inc. (a) 75,000 206,250 Stericycle, Inc. 15,000 140,625 Superior Services, Inc. (a) 11,300 245,775 TransAmerican Waste Industries, Inc. (a) 50,000 59,375 United Waste Systems, Inc. (a) 37,000 1,332,000 WMX Technologies, Inc. 64,000 2,024,000 Wheelabrator Technologies, Inc. 60,300 859,275 10,303,367 SANITARY SERVICES - 10.4% Philips Environmental, Inc. 35,000 575,595 Safety Kleen Corp. 60,100 1,081,800 USA Waste Services, Inc. (a) 50,040 1,801,440 3,458,835 TOTAL POLLUTION CONTROL 18,165,041 REAL ESTATE - 0.6% REAL ESTATE, GENERAL - 0.6% Cadiz Land Inc. (a) 37,600 188,000 WATER - 3.1% WATER SUPPLY - 3.1% American Water Works, Inc. 25,000 584,375 United Water Resources, Inc. 25,000 446,875 1,031,250 TOTAL COMMON STOCKS (Cost $31,903,671) 30,752,306 CASH EQUIVALENTS - 7.3% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $2,439,265) 2,439,265 $ 2,439,265 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $34,342,936) $ 33,191,571 LEGEND 3. Non-income producing 4. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $98,093,724 and $92,018,243, respectively (see Note 3 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 $42,243 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $3,698,000 and $2,517,750, respectively. The weighted average interest rate was 5.7% (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $34,403,056. Net unrealized depreciation aggregated $1,211,485, of which $2,439,648 related to appreciated investment securities and $3,651,133 related to depreciated investment securities. At February 28, 1997, the fund had a capital loss carryforward of approximately $797,000, which will expire on February 28, 2005. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. ENVIRONMENTAL SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 33,191,571 (cost $34,342,936) - See accompanying schedule Receivable for fund shares sold 19,815 Dividends receivable 17,620 Interest receivable 18,345 Redemption fees receivable 245 Other receivables 10,141 TOTAL ASSETS 33,257,737 LIABILITIES Payable for fund shares redeemed $ 662,287 Accrued management fee 17,344 Other payables and accrued expenses 52,669 TOTAL LIABILITIES 732,300 NET ASSETS $ 32,525,437 Net Assets consist of: Paid in capital $ 34,522,967 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (846,231 ) Net unrealized appreciation (depreciation) on investments (1,151,299 and assets and liabilities in ) foreign currencies NET ASSETS, for 2,242,478 $ 32,525,437 shares outstanding NET ASSET VALUE and redemption price per share ($32,525,437 (divided by) 2,242,478 shares) $14.50 Maximum offering price per share (100/97.00 of $14.50) $14.95
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 394,229 Dividends Interest 238,669 TOTAL INCOME 632,898 EXPENSES Management fee $ 252,081 Transfer agent fees 512,668 Accounting fees and expenses 64,394 Non-interested trustees' compensation 164 Custodian fees and expenses 15,760 Registration fees 28,338 Audit 27,353 Legal 624 Interest 1,586 Miscellaneous 1,783 Total expenses before reductions 904,751 Expense reductions (27,446 877,305 ) NET INVESTMENT INCOME (LOSS) (244,407 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (599,664 ) Foreign currency transactions (361 (600,025 ) ) Change in net unrealized appreciation (depreciation) on: Investment securities (1,588,793 ) Assets and liabilities in (746 (1,589,539 foreign currencies ) ) NET GAIN (LOSS) (2,189,564 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (2,433,971 ) OTHER INFORMATION $ 177,009 Sales charges paid to FDC Deferred sales charges withheld $ 9,944 by FDC Exchange fees withheld by FSC $ 37,545 Expense reductions $ 26,169 Directed brokerage arrangements Custodian interest credits 1,277 $ 27,446
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ (244,407 $ (455,922 Net ) ) investment income (loss) Net realized (600,025 5,167,156 gain (loss) ) Change in (1,589,539 2,838,058 net ) unrealized appreciation (depreciation ) NET INCREASE (2,433,971 7,549,292 (DECREASE) ) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to - (1,461,704 shareholders ) From net realized gains In excess of (48,255 - net realized ) gain TOTAL (48,255 (1,461,704 DISTRIBUTION ) ) S Share 138,035,351 22,448,123 transactions Net proceeds from sales of shares Reinvestmen 47,653 1,440,232 t of distributions Cost of (131,078,192 (33,702,230 shares ) ) redeemed Paid in 415,631 43,195 capital portion of redemption fees NET INCREASE 7,420,443 (9,770,680 (DECREASE) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 4,938,217 (3,683,092 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 27,587,220 31,270,312 period End of period $ 32,525,437 $ 27,587,220 OTHER INFORMATION Shares Sold 9,698,891 1,846,010 Issued in 3,673 120,119 reinvestment of distributions Redeemed (9,681,633 (2,790,218 ) ) Net increase 20,931 (824,089) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 12.42 $ 10.27 $ 11.93 $ 11.36 $ 11.39 value, beginning of period Income from Investment Operations Net (.08) (.17) (.14) (.11) (.06) investment income (loss) Net realized 2.04 G 2.95 (1.53) .67 .42 and unrealized gain (loss) Total from 1.96 2.78 (1.67) .56 .36 investment operations Less Distributions From net - (.65) - - (.39) realized gain In excess of (.02) - - - - net realized gain Redemption .14 .02 .01 .01 - fees added to paid in capital Net asset $ 14.50 $ 12.42 $ 10.27 $ 11.93 $ 11.36 value, end of period TOTAL 16.93% 27.49% (13.91)% 5.02% 3.34% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 32,525 $ 27,587 $ 31,270 $ 65,956 $ 65,913 end of period (000 omitted) Ratio of 2.18% 2.36% 2.04% 2.07% 1.99% A expenses to average net assets Ratio of 2.11% E 2.32% E 2.01% E 2.03% E 1.99% A expenses to average net assets after expense reductions Ratio of net (.59)% (1.43)% (1.32)% (1.02)% (.70)% investment A income (loss) to average net assets Portfolio 252% 138% 82% 191% 176% A turnover 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 8 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS INDUSTRIAL EQUIPMENT 18.25% 133.66% 164.26% INDUSTRIAL EQUIPMENT 14.70% 126.65% 156.33% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS INDUSTRIAL EQUIPMENT 18.25% 18.50% 10.21% INDUSTRIAL EQUIPMENT 14.70% 17.78% 9.87% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9530.98 10289.00 1987/04/30 9369.32 10197.43 1987/05/31 9361.97 10286.15 1987/06/30 9626.52 10805.60 1987/07/31 10214.39 11353.44 1987/08/31 10670.00 11776.92 1987/09/30 10919.85 11519.01 1987/10/31 6635.68 9037.81 1987/11/30 6334.39 8293.10 1987/12/31 7088.94 8924.20 1988/01/31 6960.73 9299.91 1988/02/29 7594.21 9733.29 1988/03/31 7707.34 9432.53 1988/04/30 7933.58 9537.23 1988/05/31 7888.33 9620.20 1988/06/30 8446.40 10061.77 1988/07/31 8001.45 10023.54 1988/08/31 7277.47 9682.74 1988/09/30 7413.22 10095.22 1988/10/31 7292.56 10375.87 1988/11/30 7058.77 10227.49 1988/12/31 7435.84 10406.47 1989/01/31 7978.83 11168.23 1989/02/28 7662.09 10890.14 1989/03/31 7775.21 11143.88 1989/04/30 8333.27 11722.25 1989/05/31 8785.76 12197.00 1989/06/30 8408.69 12127.48 1989/07/31 8944.13 13222.59 1989/08/31 9110.04 13481.75 1989/09/30 8981.84 13426.47 1989/10/31 8386.06 13114.98 1989/11/30 8619.85 13382.52 1989/12/31 8770.68 13703.71 1990/01/31 8476.56 12784.19 1990/02/28 8906.42 12949.10 1990/03/31 9434.32 13292.25 1990/04/30 9358.91 12959.95 1990/05/31 10226.17 14223.54 1990/06/30 10044.42 14126.82 1990/07/31 9854.61 14081.62 1990/08/31 8229.89 12808.64 1990/09/30 7113.85 12184.86 1990/10/31 6924.04 12132.46 1990/11/30 7151.81 12916.22 1990/12/31 7409.94 13276.58 1991/01/31 8199.52 13855.44 1991/02/28 8973.92 14846.11 1991/03/31 8898.00 15205.38 1991/04/30 8806.90 15241.87 1991/05/31 9178.91 15900.32 1991/06/30 8882.58 15172.09 1991/07/31 8958.57 15879.11 1991/08/31 9095.34 16255.44 1991/09/30 9308.10 15983.98 1991/10/31 9254.91 16198.16 1991/11/30 8814.20 15545.38 1991/12/31 9398.80 17323.77 1992/01/31 10242.08 17001.55 1992/02/29 10970.37 17222.57 1992/03/31 10648.39 16886.73 1992/04/30 10648.39 17383.20 1992/05/31 10732.72 17468.37 1992/06/30 10073.43 17208.09 1992/07/31 10165.42 17911.90 1992/08/31 9636.45 17544.71 1992/09/30 9835.77 17751.74 1992/10/31 9797.44 17813.87 1992/11/30 10265.08 18421.32 1992/12/31 10464.40 18647.90 1993/01/31 10955.04 18804.55 1993/02/28 11530.01 19060.29 1993/03/31 11737.00 19462.46 1993/04/30 12273.99 18991.47 1993/05/31 12887.69 19500.44 1993/06/30 13056.46 19556.99 1993/07/31 13240.57 19478.76 1993/08/31 14145.77 20217.01 1993/09/30 13984.68 20061.34 1993/10/31 14452.62 20476.61 1993/11/30 14437.28 20282.08 1993/12/31 14998.52 20527.49 1994/01/31 15703.78 21225.43 1994/02/28 16150.44 20650.22 1994/03/31 15217.93 19749.87 1994/04/30 15080.20 20002.67 1994/05/31 14771.95 20330.71 1994/06/30 14013.20 19832.61 1994/07/31 14677.11 20483.12 1994/08/31 15720.39 21322.93 1994/09/30 15767.82 20800.52 1994/10/31 15965.41 21268.53 1994/11/30 15190.85 20493.93 1994/12/31 15467.48 20797.85 1995/01/31 15380.54 21337.14 1995/02/28 15838.95 22168.65 1995/03/31 17150.96 22822.85 1995/04/30 17957.34 23494.98 1995/05/31 18321.07 24434.07 1995/06/30 19016.91 25001.68 1995/07/31 20803.94 25830.73 1995/08/31 20400.67 25895.57 1995/09/30 19467.62 26988.36 1995/10/31 19428.08 26892.01 1995/11/30 20092.29 28072.57 1995/12/31 19769.62 28613.25 1996/01/31 20563.86 29587.24 1996/02/29 21677.52 29861.52 1996/03/31 21832.91 30149.08 1996/04/30 22234.04 30593.48 1996/05/31 22395.62 31382.49 1996/06/30 22296.88 31502.05 1996/07/31 21183.83 30110.29 1996/08/31 22099.40 30745.32 1996/09/30 23149.62 32475.67 1996/10/31 23006.00 33371.34 1996/11/30 24873.05 35893.88 1996/12/31 25050.17 35182.83 1997/01/31 25944.46 37381.05 1997/02/28 25632.96 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Industrial Equipment Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $25,633 - a 156.33% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS General Electric Co. 3.6 Pitney Bowes, Inc. 3.4 Eaton Corp. 3.0 New Holland NV 3.0 Boeing Co. 2.9 Case Corp. 2.7 Westinghouse Electric Corp. 2.5 Illinois Tool Works, Inc. 2.5 Emerson Electric Co. 2.5 Baldor Electric Co. 2.4 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Row: 1, Col: 1, Value: 57.9 Row: 1, Col: 2, Value: 5.2 Row: 1, Col: 3, Value: 5.7 Row: 1, Col: 4, Value: 9.6 Row: 1, Col: 5, Value: 10.6 Row: 1, Col: 6, Value: 11.0 Electrical Machinery 11.0% General Industrial Machinery 10.6% Farm Machinery & Equipment 9.6% Electrical, Industrial Apparatus 5.7% Office Automation 5.2% All Others 57.9% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS INDUSTRIAL EQUIPMENT PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: Effective February 14, 1997, Minerva Butler became Portfolio Manager of Select Industrial Equipment Portfolio. The following is in an interview with Paul Antico, who managed the fund during most of the period covered by this report, and Minerva Butler, who discusses her outlook. Q. PAUL, HOW DID THE FUND PERFORM? P.A. For the 12-month period ending February 28, 1997, the fund returned 18.25%, while the Standard & Poor's 500 Index returned 26.16% for the same time period. Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE DURING THE PERIOD? P.A. This was not the best environment for investing in capital equipment stocks. Looking internationally, Europe was weak, and Brazil and Mexico were weakening. Domestically, margins on U.S. business were high already, so there wasn't margin growth here offsetting weakness in world markets. The U.S. market was growing, but very modestly. In all, it wasn't the best investing climate for cyclical stocks. The best environment for investing in cyclical stocks would be when margins are growing dramatically and when we're emerging from a recession, not in the late stages of an expansion. Q. WHAT INVESTMENT STRATEGIES HELPED THE FUND'S PERFORMANCE? P.A. Given the investing backdrop, I'm very pleased with the fund's performance. It was an uncertain environment, but one where my investment mission was made crystal clear. I only invested in capital equipment companies with margin improvement potential and strong potential cash flows, or in electrical equipment companies, which proved to be more stable industries. Electrical equipment companies included General Electric, Honeywell and Baldor Electric, companies which were not very sensitive to the economy. Demand for their products has been very steady regardless of where we have been in the economic cycle. Q. HOW DID YOUR TOP HOLDINGS PERFORM? P.A. The fund's third largest holding at the end of the period, Eaton Corp., owns trucking and electrical equipment. Trucking was in a slump last year, but we saw signs in the last few months of the year that the market was improving, so I purchased the stock. The fund profited from the investment, and I had the added benefit of owning the company's electrical equipment side of the business that was the more stable part of the sector in this environment. Another holding was New Holland, an agricultural equipment company owned primarily by Fiat. It is the fourth largest of four major agricultural equipment companies and, of the four, I believed it to have the best global mix of business. It was up nicely over the last several months of the period. Illinois Tool Works and Emerson Electric are both very solid companies. For 20 years, Illinois Tool Works' year-end stock price has been higher than the previous year-end, and its stock rose by nearly a third over the period. Emerson also has an impressively consistent long-term track record; during the period its stock was up by more than 25%. Q. WERE THERE ANY DISAPPOINTMENTS? P.A. The biggest disappointment was Stewart & Stevenson Services. This company buys General Electric aircraft engines and repackages them for electric generation equipment. It sells mostly to developing countries and, during the period, potential customers couldn't get financing, so demand slowed dramatically. Q. GOING FORWARD, MINERVA, WHAT'S YOUR OUTLOOK? M.B. Fidelity's team of analysts call hundreds of companies and we share ideas, giving me exposure to hundreds of companies each year. At this stage of the cycle, I will focus on those companies that show good steady growth regardless of the economic cycle, and those companies with strong demand for their products. Industrial equipment companies typically do not offer high revenue growth, making margin expansion important to good earnings growth. 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: 510 TRADING SYMBOL: FSCGX SIZE: as of February 28, 1997, more than $102 million MANAGER: Minerva Butler, since February 1997; manager, Fidelity Select Developing Communications Portfolio, August 1996- February 1997; equity analyst covering cellular, paging, cable and wireless cable industries, since 1995; joined Fidelity in 1995 (checkmark) INDUSTRIAL EQUIPMENT PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 88.2% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 5.1% AIRCRAFT - 2.9% Boeing Co. 31,700 $ 3,225,475 AIRCRAFT & PARTS - 1.0% Sundstrand Corp. 25,000 1,090,625 AIRCRAFT EQUIPMENT - 1.2% BE Aerospace, Inc. (a) 55,000 1,333,750 TOTAL AEROSPACE & DEFENSE 5,649,850 AUTOS, TIRES, & ACCESSORIES - 5.5% AUTO & TRUCK PARTS - 5.1% Boyds Wheels, Inc. (a) 27,600 196,650 Cummins Engine Co., Inc. 20,000 1,012,500 Eaton Corp. 45,800 3,286,150 Snap-on Tools Corp. 30,100 1,170,138 5,665,438 MOTOR VEHICLES & CAR BODIES - 0.4% PACCAR, Inc. 7,000 459,375 TOTAL AUTOS, TIRES, & ACCESSORIES 6,124,813 BROADCASTING - 0.5% CABLE TV OPERATORS - 0.5% People's Choice TV Corp. 130,000 503,750 BUILDING MATERIALS - 1.0% SCREW MACHINE PRODUCTS - 1.0% Fastenal Co. 31,100 1,127,375 CHEMICALS & PLASTICS - 1.2% PLASTIC FOAM PRODUCTS - 1.2% Foamex International, Inc. (a) 73,600 1,370,800 COMMUNICATIONS EQUIPMENT - 2.0% DATACOMMUNICATIONS EQUIPMENT - 0.8% Dynatech Corp. 30,000 840,000 TELEPHONE EQUIPMENT - 1.2% Tellabs, Inc. (a) 19,800 789,525 Viasat, Inc. 60,000 600,000 1,389,525 TOTAL COMMUNICATIONS EQUIPMENT 2,229,525 COMPUTERS & OFFICE EQUIPMENT - 8.0% COMPUTER PERIPHERALS - 2.8% Accent Color Sciences, Inc. 70,000 665,000 SCI Systems, Inc. (a) 20,000 1,070,000 Symbol Technologies, Inc. (a) 28,000 1,407,000 3,142,000 OFFICE AUTOMATION - 5.2% FileNet Corp. 15,000 285,000 General Binding Corp. 54,900 1,722,488 Pitney Bowes, Inc. 61,200 3,802,050 5,809,538 TOTAL COMPUTERS & OFFICE EQUIPMENT 8,951,538 CONGLOMERATES - 5.1% American Standard Companies, Inc. (a) 57,900 2,605,500 Kysor Industrial Corp. 15,300 654,068 Tyco International Ltd. 20,000 1,180,000 United Technologies Corp. 17,000 1,279,250 5,718,818 SHARES VALUE (NOTE 1) DEFENSE ELECTRONICS - 3.0% BEI Electronics, Inc. 1,700 $ 19,338 Doncasters PLC sponsored ADR 1,000 19,875 Ducommun, Inc. (a) 56,400 1,353,600 NovAtel, Inc. 133,000 997,500 Raytheon Co. 20,000 942,500 3,332,813 ELECTRICAL EQUIPMENT - 22.5% ELECTRICAL EQUIPMENT - 0.4% BMC Industries, Inc. 5,800 166,025 Vicor Corp. 16,000 262,000 428,025 ELECTRICAL EQUIPMENT - WHOLESALE - 0.4% Grainger (W.W.), Inc. 5,900 467,575 ELECTRICAL MACHINERY - 11.0% Alcatel Alsthom sponsored ADR 60,000 1,230,000 Emerson Electric Co. 28,100 2,781,900 General Electric Co. 39,100 4,022,413 General Signal Corp. 15,000 654,375 Honeywell, Inc. 10,000 711,250 Westinghouse Electric Corp. 164,300 2,834,175 12,234,113 ELECTRICAL, INDUSTRIAL APPARATUS - 5.7% AMETEK, Inc. 109,800 2,360,700 Baldor Electric Co. 108,300 2,680,425 Hubbell, Inc. Class B 30,000 1,271,250 6,312,375 FLUID METERS - 0.6% Roper Industries, Inc. 17,000 684,250 RESIDENTIAL ELECRIC LIGHTING - 1.5% Holophane Corp. (a) 78,600 1,699,725 TV & RADIO COMMUNICATION EQUIPMENT - 2.9% California Amplifier, Inc. 29,300 157,488 General Instrument Corp. 40,000 950,000 Ortel Corp. 50,000 650,000 Pinnacle Systems 20,000 265,000 Scientific-Atlanta, Inc. 69,500 1,164,125 3,186,613 TOTAL ELECTRICAL EQUIPMENT 25,012,676 ELECTRONIC INSTRUMENTS - 1.4% SEMI-CONDUCTOR CAPITAL EQUIPMENT - 1.4% Applied Materials, Inc. (a) 30,300 1,533,938 ELECTRONICS - 3.8% CONNECTORS - 0.9% Thomas & Betts Corp. 21,000 937,125 ELECTRONIC CAPACITORS - 0.0% Maxwell Technologies, Inc. 1,200 27,600 ELECTRONIC PARTS - WHOLESALE - 0.6% Zero Corp. 26,900 591,800 ELECTRONICS & ELECRONIC COMPONENTS - 2.1% Alpine Group, Inc. 33,300 278,888 Sanmina Corp. (a) 15,750 728,438 Solectron Corp. (a) 25,700 1,358,888 2,366,214 PRINTED CIRCUIT BOARDS - 0.2% Elexsys International, Inc. (a) 15,000 253,125 TOTAL ELECTRONICS 4,175,864 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ENGINEERING - 0.9% ARCHITECTS & ENGINEERS - 0.9% EG&G, Inc. 23,000 $ 500,250 Fluor Corp. 9,000 545,625 1,045,875 INDUSTRIAL MACHINERY & EQUIPMENT - 23.8% BALL & ROLLER BEARINGS - 0.8% Kaydon Corp. 20,900 903,925 CONSTRUCTION EQUIPMENT - 1.0% JLG Industries, Inc. 60,000 1,110,000 ENGINES & TURBINES - 0.7% Stewart & Stevenson Services, Inc. 31,100 812,488 FARM MACHINERY & EQUIPMENT - 9.6% AGCO Corp. 40,000 1,135,000 Case Corp. 57,400 2,977,625 Deere & Co. 40,000 1,705,000 Lindsay Manufacturing Co. 33,900 1,576,350 New Holland NV (a) 142,000 3,283,750 10,677,725 GENERAL INDUSTRIAL MACHINERY - 10.6% Cooper Industries, Inc. 12,500 553,125 Harnischfeger Industries, Inc. 53,417 2,343,671 Illinois Tool Works, Inc. 33,400 2,818,125 Ingersoll-Rand Co. 46,700 2,218,250 Manitowoc Co., Inc. 16,000 538,000 Regal-Beloit Corp. 64,400 1,440,950 TRINOVA Corp. 50,000 1,856,250 11,768,371 PUMPING EQUIPMENT - 0.9% IDEX Corp. 39,000 989,625 SPECIAL INDUSTRIAL MACHINERY - 0.2% ATS Automation 15,000 257,647 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 26,519,781 IRON & STEEL - 0.8% IRON & STEEL FOUNDRIES - 0.4% Steel of West Virginia, Inc. (a) 70,000 446,250 METAL FORGINGS & STAMPINGS - 0.4% TriMas Corp. 17,100 416,813 TOTAL IRON & STEEL 863,063 METALS & MINING - 1.7% NONFERROUS WIRE - 1.7% Belden, Inc. 20,000 712,500 Superior Telecom, Inc. (a) 46,700 1,173,338 1,885,838 PAPER & FOREST PRODUCTS - 1.4% ENVELOPES - 1.2% Mail-Well, Inc. (a) 69,300 1,377,338 PAPER - 0.2% Albany International Corp. Class A 10,000 217,500 TOTAL PAPER & FOREST PRODUCTS 1,594,838 PHOTOGRAPHIC EQUIPMENT - 0.5% Imation Corp. (a) 20,100 535,163 TOTAL COMMON STOCKS (Cost $92,926,287) 98,176,318 CASH EQUIVALENTS - 11.8% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $13,078,852) 13,078,852 $ 13,078,852 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $106,005,139) $ 111,255,170 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $225,911,170 and $259,952,614, respectively (see Note 3 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 $79,440 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $2,514,000 and $2,331,750, respectively. The weighted average interest rate was 5.7% (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $106,120,916. Net unrealized appreciation aggregated $5,134,254, of which $6,888,094 related to appreciated investment securities and $1,753,840 related to depreciated investment securities. The fund hereby designates approximately $6,195,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 24% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. 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 $37,000 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 FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 111,255,170 (cost $106,005,139) - See accompanying schedule Cash 410,700 Receivable for investments sold 744,885 Receivable for fund shares sold 234,025 Dividends receivable 113,190 Interest receivable 72,724 Redemption fees receivable 459 Other receivables 18,463 TOTAL ASSETS 112,849,616 LIABILITIES Payable for investments purchased $ 8,730,116 Payable for fund shares redeemed 1,114,939 Accrued management fee 55,211 Other payables and accrued expenses 67,067 TOTAL LIABILITIES 9,967,333 NET ASSETS $ 102,882,283 Net Assets consist of: Paid in capital $ 85,922,659 Undistributed net investment income 126,009 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 11,583,584 Net unrealized appreciation (depreciation) on investments 5,250,031 NET ASSETS, for 4,033,023 $ 102,882,283 shares outstanding NET ASSET VALUE and redemption price per share ($102,882,283 (divided by) 4,033,023 shares) $25.51 Maximum offering price per share (100/97.00 of $25.51) $26.30
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 1,180,620 Dividends Interest 382,473 TOTAL INCOME 1,563,093 EXPENSES Management fee $ 560,442 Transfer agent fees 651,519 Accounting fees and expenses 93,288 Non-interested trustees' compensation 565 Custodian fees and expenses 20,715 Registration fees 38,023 Audit 27,558 Legal 749 Interest 1,468 Miscellaneous 6,958 Total expenses before reductions 1,401,285 Expense reductions (66,135 1,335,150 ) NET INVESTMENT INCOME 227,943 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 20,826,870 Foreign currency transactions 4,220 20,831,090 Change in net unrealized appreciation (depreciation) on investment securities (7,537,624 ) NET GAIN (LOSS) 13,293,466 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 13,521,409 OTHER INFORMATION $ 252,021 Sales charges paid to FDC Deferred sales charges withheld $ 2,660 by FDC Exchange fees withheld by FSC $ 35,115 Expense Reductions $ 64,879 Directed brokerage arrangements Custodian interest credits 967 Transfer agent interest credits 289 $ 66,135
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 227,943 $ 191,568 Net investment income Net realized 20,831,090 16,163,635 gain (loss) Change in (7,537,624 13,213,429 net ) unrealized appreciation (depreciation ) NET INCREASE 13,521,409 29,568,632 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (140,245 (185,403 shareholders ) ) From net investment income From net (13,222,285 (7,003,238 realized gain ) ) TOTAL (13,362,530 (7,188,641 DISTRIBUTION ) ) S Share 90,579,551 176,105,552 transactions Net proceeds from sales of shares Reinvestmen 13,206,101 7,099,056 t of distributions Cost of (138,841,270 (178,150,788 shares ) ) redeemed Paid in 259,034 118,239 capital portion of redemption fees NET INCREASE (34,796,584 5,172,059 (DECREASE) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (34,637,705 27,552,050 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 137,519,988 109,967,938 period End of period $ 102,882,283 $ 137,519,988 (including undistributed net investment income of $126,009 and $51,339, respectively) OTHER INFORMATION Shares Sold 3,535,843 7,343,923 Issued in 542,236 311,832 reinvestment of distributions Redeemed (5,521,656 (7,667,655 ) ) Net increase (1,443,577) (11,900) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 25.11 $ 20.04 $ 20.61 $ 15.04 $ 13.89 value, beginning of period Income from Investment Operations Net .06 .04 .01 - .02 investment income Net realized 4.15 7.10 (.44) 5.92 1.09 and unrealized gain (loss) Total from 4.21 7.14 (.43) 5.92 1.11 investment operations Less Distributions From net (.04) (.05) (.01) (.01) - investment income From net (3.84) (2.05) (.16) (.40) - realized gain Total (3.88) (2.10) (.17) (.41) - distributions Redemption .07 .03 .03 .06 .04 fees added to paid in capital Net asset $ 25.51 $ 25.11 $ 20.04 $ 20.61 $ 15.04 value, end of period TOTAL 18.25% 36.86% (1.93)% 40.07% 8.28% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 102,882 $ 137,520 $ 109,968 $ 206,012 $ 14,601 end of period (000 omitted) Ratio of 1.51% 1.54% 1.80% 1.69% 2.49% A, expenses to E average net assets Ratio of 1.44% F 1.53% F 1.78% F 1.68% F 2.49% A expenses to average net assets after expense reductions Ratio of net .25% .19% .06% .01% .15% A investment income to average net assets Portfolio 261% 115% 131% 95% 407% A turnover rate Average $ .0401 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 8 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 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS INDUSTRIAL MATERIALS 12.69% 81.44% 135.13% INDUSTRIAL MATERIALS 9.31% 76.00% 128.08% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS INDUSTRIAL MATERIALS 12.69% 12.65% 8.93% INDUSTRIAL MATERIALS 9.31% 11.97% 8.59% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 10401.12 10289.00 1987/04/30 10523.99 10197.43 1987/05/31 10256.56 10286.15 1987/06/30 10791.43 10805.60 1987/07/31 11788.90 11353.44 1987/08/31 12193.67 11776.92 1987/09/30 12374.37 11519.01 1987/10/31 7676.15 9037.81 1987/11/30 7640.01 8293.10 1987/12/31 8818.92 8924.20 1988/01/31 8362.39 9299.91 1988/02/29 9347.91 9733.29 1988/03/31 9514.58 9432.53 1988/04/30 9529.07 9537.23 1988/05/31 9297.18 9620.20 1988/06/30 10311.69 10061.77 1988/07/31 9927.62 10023.54 1988/08/31 9391.39 9682.74 1988/09/30 9471.10 10095.22 1988/10/31 9297.18 10375.87 1988/11/30 9210.23 10227.49 1988/12/31 9774.53 10406.47 1989/01/31 10363.80 11168.23 1989/02/28 9914.49 10890.14 1989/03/31 9811.36 11143.88 1989/04/30 10113.36 11722.25 1989/05/31 10245.95 12197.00 1989/06/30 9649.31 12127.48 1989/07/31 10518.49 13222.59 1989/08/31 11358.20 13481.75 1989/09/30 10665.81 13426.47 1989/10/31 9789.26 13114.98 1989/11/30 9929.22 13382.52 1989/12/31 10209.12 13703.71 1990/01/31 9428.34 12784.19 1990/02/28 9590.39 12949.10 1990/03/31 9870.29 13292.25 1990/04/30 9155.80 12959.95 1990/05/31 9708.24 14223.54 1990/06/30 9605.21 14126.82 1990/07/31 9491.86 14081.62 1990/08/31 8396.06 12808.64 1990/09/30 7799.04 12184.86 1990/10/31 7708.35 12132.46 1990/11/30 8116.44 12916.22 1990/12/31 8456.52 13276.58 1991/01/31 8758.81 13855.44 1991/02/28 9401.17 14846.11 1991/03/31 9529.64 15205.38 1991/04/30 9544.76 15241.87 1991/05/31 10360.93 15900.32 1991/06/30 10247.54 15172.09 1991/07/31 10657.44 15879.11 1991/08/31 10907.94 16255.44 1991/09/30 10763.72 15983.98 1991/10/31 11226.75 16198.16 1991/11/30 10331.04 15545.38 1991/12/31 11484.84 17323.77 1992/01/31 11985.83 17001.55 1992/02/29 12570.32 17222.57 1992/03/31 12350.19 16886.73 1992/04/30 12995.40 17383.20 1992/05/31 13147.22 17468.37 1992/06/30 12828.10 17208.09 1992/07/31 13116.71 17911.90 1992/08/31 12288.85 17544.71 1992/09/30 12121.76 17751.74 1992/10/31 12258.47 17813.87 1992/11/30 12714.17 18421.32 1992/12/31 12905.37 18647.90 1993/01/31 13179.95 18804.55 1993/02/28 13301.98 19060.29 1993/03/31 13523.18 19462.46 1993/04/30 13324.87 18991.47 1993/05/31 13874.03 19500.44 1993/06/30 13911.92 19556.99 1993/07/31 14103.23 19478.76 1993/08/31 14470.54 20217.01 1993/09/30 14019.05 20061.34 1993/10/31 14845.50 20476.61 1993/11/30 15044.46 20282.08 1993/12/31 15664.30 20527.49 1994/01/31 16934.58 21225.43 1994/02/28 16582.58 20650.22 1994/03/31 16115.79 19749.87 1994/04/30 16720.67 20002.67 1994/05/31 16889.41 20330.71 1994/06/30 16713.00 19832.61 1994/07/31 17334.28 20483.12 1994/08/31 18270.02 21322.93 1994/09/30 18039.92 20800.52 1994/10/31 17802.15 21268.53 1994/11/30 16544.26 20493.93 1994/12/31 16947.81 20797.85 1995/01/31 16469.32 21337.14 1995/02/28 17850.77 22168.65 1995/03/31 18259.80 22822.85 1995/04/30 18344.36 23494.98 1995/05/31 18158.83 24434.07 1995/06/30 18970.53 25001.68 1995/07/31 20609.38 25830.73 1995/08/31 20555.27 25895.57 1995/09/30 19975.48 26988.36 1995/10/31 18815.92 26892.01 1995/11/30 20547.54 28072.57 1995/12/31 19556.06 28613.25 1996/01/31 19858.83 29587.24 1996/02/29 20239.24 29861.52 1996/03/31 21264.01 30149.08 1996/04/30 21762.30 30593.48 1996/05/31 21628.30 31382.49 1996/06/30 20911.04 31502.05 1996/07/31 20044.01 30110.29 1996/08/31 21131.73 30745.32 1996/09/30 21596.77 32475.67 1996/10/31 21549.48 33371.34 1996/11/30 22203.69 35893.88 1996/12/31 22296.57 35182.83 1997/01/31 22395.52 37381.05 1997/02/28 22807.81 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Industrial Materials Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $22,808 - a 128.08% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Alumax, Inc. 10.3 QNI Ltd. 10.3 Pechiney SA Class A 7.0 Cytec Industries, Inc. 4.5 Monsanto Co. 4.5 Aluminum Co. of America 4.3 Raychem Corp. 4.2 Eramet SA 4.1 Newmont Mining Corp. 4.1 Boise Cascade Corp. 4.0 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Metal Ores 17.3% Chemicals 13.2% Gold Ores 12.6% Aluminum, Extruded Products 10.3% Prime Nonferrous Smelting 7.5% All Others 39.1% * Row: 1, Col: 1, Value: 39.1 Row: 1, Col: 2, Value: 7.5 Row: 1, Col: 3, Value: 10.3 Row: 1, Col: 4, Value: 12.6 Row: 1, Col: 5, Value: 13.2 Row: 1, Col: 6, Value: 17.3 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S 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. Not as well as I would have liked. For the 12 months that ended February 28, 1997, the fund returned 12.69%. The Standard & Poor's 500 Index returned 26.16% over the same period. Q. WHAT HELD THE FUND BACK? A. Cyclical stocks generally continued to underperform the overall stock market while the U.S. market continued to outperform most international markets. The fund had considerable positions in both non-ferrous metal and international stocks, and both proved to be disappointing. In North America, non-ferrous metals - basically non-steel metals - didn't fare too badly relative to the strong performance of the overall stock market. However, the fund's foreign non-ferrous holdings and its overall positions in international stocks - which entail more risk than U.S. investments - suffered due to pricing trends. North American stocks followed the industry's positive fundamental characteristics - such as valuations and earnings - while international stocks tended to track the price of industrial materials, which fell. In addition, I underweighted the portfolio in chemical stocks relative to the index due to what I felt were excessive valuations. While the fund's individual chemical stocks performed well relative to the index, an underweighting in chemical stocks hurt. This strategy worked against the fund, but I still feel those stocks were too rich. Q. ANALYZING ECONOMIC CYCLES IS A KEY COMPONENT OF YOUR STOCK PICKING STRATEGY. CAN YOU COMPARE THE U.S. AND EUROPEAN ECONOMIC CYCLES? A. I really think U.S. investors are too bullish on how fast the European economy will recover. I'd put Japan's economy in that category as well. Both Europe and Japan have a litany of issues to fight through and may have to abandon long-held social structures if they're going to be competitive with the United States. Companies in the U.S. are succeeding by reducing costs, either through personnel reduction or balance sheet restructuring. In Europe, where unemployment is extremely high, it's a bit harder to cut personnel. I'm not as optimistic that these economies will be as strong as soon as some market followers think. Q. THE FUND'S POSITION IN PRECIOUS METAL STOCKS ROSE FROM APPROXIMATELY 4% TO OVER 12%. WHAT WAS THE STORY THERE? A. When gold fell to $340 per ounce, its price was at a 12-year low and I decided to step to the plate. The market consensus was that many central banks in Europe were going to sell enormous amounts of gold in order to meet European Monetary Union requirements. When gold prices fell, many of the world's mines became uneconomical and lots of new projects faced postponement. At the close of the period, gold prices were hovering around $360, so this move helped. It will likely take a couple of quarters, however, before this strategy plays out completely. Q. WHICH INDIVIDUAL STOCKS CONTRIBUTED POSITIVELY TO PERFORMANCE? WHICH WERE DISAPPOINTMENTS? A. Aluminum Co. of America, also known as Alcoa, was a positive contributor. In addition, some of the non-commodity chemical stocks I owned - - such as Monsanto, Cytec and du Pont - realized strong performance as a result of successful cost-cutting programs. On the flip side, Huntco, a metals manufacturer, turned in a subpar performance, and the portfolio's railroad stocks performed below expectations. Q. WHAT'S YOUR OUTLOOK GOING FORWARD? A. Toward the end of the period, I began to look more closely at paper and forest stocks. For much of the period, the fundamental characteristics of paper stocks didn't appeal to me. As the period drew to an end, though, these characteristics improved and I started to nibble. I may continue this strategy and can envision de-emphasizing chemical stocks in the process. I don't expect to increase my international holdings, and we'll have to see how the gold market progresses before I make any changes in that area. 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 February 28, 1997, more than $66 million MANAGER: Doug 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 FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 97.0% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 1.2% AUTO & TRUCK PARTS - 1.2% Cummins Engine Co., Inc. 16,300 $ 825,184 BUILDING MATERIALS - 3.6% PAINT & VARNISH - 1.4% Sherwin-Williams Co. 16,300 914,838 PLUMBING SUPPLIES - WHOLESALE - 2.2% Masco Corp. 41,500 1,457,688 TOTAL BUILDING MATERIALS 2,372,526 CHEMICALS & PLASTICS - 16.5% AGRICULTURAL CHEMICALS - 1.5% FMC Corp. (a) 12,300 845,625 OM Group, Inc. 6,100 176,900 1,022,525 CHEMICALS - 13.2% Cytec Industries, Inc. (a) 76,000 3,011,500 Monsanto Co. 81,700 2,971,838 Raychem Corp. 32,810 2,792,951 8,776,289 CHEMICALS, GENERAL - 0.6% Great Lakes Chemical Corp. 8,200 380,275 INDUSTRIAL GASES - 1.2% Air Products & Chemicals, Inc. 11,000 815,375 TOTAL CHEMICALS & PLASTICS 10,994,464 IRON & STEEL - 6.7% BLAST FURNACES - 3.3% Huntco, Inc. Class A 154,500 1,776,750 LTV Corp. 28,600 357,500 Steel Dynamics, Inc. (a) 2,500 50,000 2,184,250 IRON & STEEL BLAST FURNACES, MILLS - 3.4% Birmingham Steel Corp. 125,000 2,265,625 TOTAL IRON & STEEL 4,449,875 METALS & MINING - 41.6% ALUMINUM, EXTRUDED PRODUCTS - 10.3% Alumax, Inc. (a) 174,700 6,835,138 COPPER ORES - 1.6% Freeport McMoRan Copper & Gold, Inc. Class A 32,700 1,066,838 METAL MINING - 0.4% Pasminco Ltd. 139,800 261,286 METAL MINING SERVICES - 4.1% Eramet SA 55,254 2,756,894 METAL ORES - 17.3% Pechiney SA Class A 110,475 4,660,845 QNI Ltd. 3,295,000 6,825,510 11,486,355 PRIME NONFERROUS SMELTING - 7.5% Aluminum Co. of America 40,400 2,878,500 Inco Ltd. 60,500 2,129,207 5,007,707 SHARES VALUE (NOTE 1) SECONDARY NONFERROUS SMELTING - 0.4% IMCO Recycling, Inc. 16,300 $ 256,725 TOTAL METALS & MINING 27,670,943 PAPER & FOREST PRODUCTS - 10.8% CONVERTED PAPER & PAPERBOARD - 4.1% Boise Cascade Corp. 81,700 2,685,888 PAPER - 3.6% Champion International Corp. 32,700 1,442,888 Chesapeake Corp. 32,700 968,738 2,411,626 PAPERBOARD MILLS - 3.1% Jefferson Smurfit Corp. (a) 152,600 2,079,175 TOTAL PAPER & FOREST PRODUCTS 7,176,689 PRECIOUS METALS - 12.6% GOLD ORES - 12.6% Bre-X Minerals Ltd. (a) 65,400 936,915 Bresea Resources Ltd. (a) 57,200 432,716 Bro-X Minerals Ltd. 6,500 11,165 Golden Knight Resources, Inc. (a) 228,800 836,166 Kinross Gold Corp. (a) 119,700 853,031 Newmont Gold Co. 32,700 1,594,125 Newmont Mining Corp. 57,200 2,717,000 TVX Gold, Inc. (a) 112,400 998,180 8,379,298 RAILROADS - 3.5% Burlington Northern Santa Fe Corp. 14,392 1,198,134 CSX Corp. 23,700 1,093,163 2,291,297 SHIPPING - 0.5% Kirby Corp. (a) 17,200 318,200 TOTAL COMMON STOCKS (Cost $61,068,027) 64,478,476 CASH EQUIVALENTS - 3.0% Taxable Central Cash Fund (b) (Cost $2,024,053) 2,024,053 2,024,053 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $63,092,080) $ 66,502,529 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $93,482,166 and $122,109,816, respectively (see Note 3 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 $37,253 for the period (see Note 4 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 68.9% France 11.1 Australia 10.7 Canada 9.3 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $63,320,541. Net unrealized appreciation aggregated $3,181,988 of which $5,904,964 related to appreciated investment securities and $2,722,976 related to depreciated investment securities. The fund hereby designates approximately $2,683,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 61% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. INDUSTRIAL MATERIALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 66,502,529 (cost $63,092,080) - See accompanying schedule Receivable for investments sold 264,858 Receivable for fund shares sold 212,756 Dividends receivable 171,024 Interest receivable 12,280 Redemption fees receivable 105 Other receivables 650 TOTAL ASSETS 67,164,202 LIABILITIES Payable for fund shares redeemed $ 595,353 Accrued management fee 40,649 Other payables and accrued expenses 66,330 TOTAL LIABILITIES 702,332 NET ASSETS $ 66,461,870 Net Assets consist of: Paid in capital $ 58,094,123 Undistributed net investment income 67,759 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 4,896,930 Net unrealized appreciation (depreciation) on investments 3,403,058 and assets and liabilities in foreign currencies NET ASSETS, for 2,402,786 $ 66,461,870 shares outstanding NET ASSET VALUE and redemption price per share ($66,461,870 (divided by) 2,402,786 shares) $27.66 Maximum offering price per share (100/97.00 of $27.66) $28.52
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 1,337,285 Dividends Interest 356,908 TOTAL INCOME 1,694,193 EXPENSES Management fee $ 590,927 Transfer agent fees 750,324 Accounting fees and expenses 98,357 Non-interested trustees' compensation 668 Custodian fees and expenses 20,877 Registration fees 16,703 Audit 25,436 Legal 708 Miscellaneous 6,391 Total expenses before reductions 1,510,391 Expense reductions (36,563 1,473,828 ) NET INVESTMENT INCOME 220,365 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 8,999,281 Foreign currency transactions 171 8,999,452 Change in net unrealized appreciation (depreciation) on: Investment securities 1,209,228 Assets and liabilities in (7,685 1,201,543 foreign currencies ) NET GAIN (LOSS) 10,200,995 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 10,421,360 OTHER INFORMATION $ 866,268 Sales charges paid to FDC Deferred sales charges withheld $ 4,072 by FDC Exchange fees withheld by FSC $ 40,763 Expense reductions $ 33,612 Directed brokerage arrangements Custodian interest credits 209 Transfer agent interest credits 2,742 $ 36,563
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 220,365 $ 627,773 Net investment income Net realized 8,999,452 13,688,969 gain (loss) Change in 1,201,543 (3,691,387 net ) unrealized appreciation (depreciation ) NET INCREASE 10,421,360 10,625,355 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (200,673 (782,540 shareholders ) ) From net investment income From net (5,508,154 - realized gain ) TOTAL (5,708,827 (782,540 DISTRIBUTION ) ) S Share 113,772,805 164,160,384 transactions Net proceeds from sales of shares Reinvestmen 5,651,415 774,191 t of distributions Cost of (144,145,096 (272,164,952 shares ) ) redeemed Paid in 131,891 271,871 capital portion of redemption fees NET INCREASE (24,588,985 (106,958,506 (DECREASE) ) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (19,876,452 (97,115,691 INCREASE ) ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 86,338,322 183,454,013 period End of period $ 66,461,870 $ 86,338,322 (including undistribute d net investment income of $67,759 and $81,888, respectivel y) OTHER INFORMATION Shares Sold 4,147,616 6,349,116 Issued in 212,018 30,728 reinvestment of distributions Redeemed (5,268,325 (10,999,650 ) ) Net increase (908,691) (4,619,806) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 26.07 $ 23.13 $ 21.67 $ 17.44 $ 17.12 value, beginning of period Income from Investment Operations Net .06 .12 .17 .15 .12 investment income Net realized 3.12 2.92 1.43 4.07 .19 and unrealized gain (loss) Total from 3.18 3.04 1.60 4.22 .31 investment operations Less Distributions From net (.06) (.15) (.18) (.06) (.08) investment income From net (1.57) - - - - realized gain Total (1.63) (.15) (.18) (.06) (.08) distributions Redemption .04 .05 .04 .07 .09 fees added to paid in capital Net asset $ 27.66 $ 26.07 $ 23.13 $ 21.67 $ 17.44 value, end of period TOTAL 12.69% 13.38% 7.65% 24.66% 2.36% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 66,462 $ 86,338 $ 183,454 $ 155,721 $ 25,041 end of period (000 omitted) Ratio of 1.54% 1.64% 1.56% 2.10% 2.02% A expenses to average net assets Ratio of 1.51% E 1.61% E 1.53% E 2.08% E 2.02% A expenses to average net assets after expense reductions Ratio of net .23% .49% .77% .75% .86% A investment income to average net assets Portfolio 105% 138% 139% 185% 273% A turnover rate Average $ .0242 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 8 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 8 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.
PAPER AND FOREST PRODUCTS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS PAPER AND FOREST PRODUCTS 10.87% 82.69% 103.28% PAPER AND FOREST PRODUCTS 7.55% 77.21% 97.18% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS PAPER AND FOREST PRODUCTS 10.87% 12.81% 7.35% PAPER AND FOREST PRODUCTS 7.55% 12.12% 7.03% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 10443.30 10289.00 1987/04/30 9823.88 10197.43 1987/05/31 9260.22 10286.15 1987/06/30 9669.03 10805.60 1987/07/31 9786.72 11353.44 1987/08/31 10499.04 11776.92 1987/09/30 10183.14 11519.01 1987/10/31 7160.41 9037.81 1987/11/30 6912.64 8293.10 1987/12/31 7738.47 8924.20 1988/01/31 7425.94 9299.91 1988/02/29 8125.74 9733.29 1988/03/31 7867.56 9432.53 1988/04/30 7955.88 9537.23 1988/05/31 7867.56 9620.20 1988/06/30 8682.85 10061.77 1988/07/31 8295.59 10023.54 1988/08/31 7887.94 9682.74 1988/09/30 8044.21 10095.22 1988/10/31 7867.56 10375.87 1988/11/30 7697.71 10227.49 1988/12/31 8262.42 10406.47 1989/01/31 8344.16 11168.23 1989/02/28 8098.94 10890.14 1989/03/31 8105.76 11143.88 1989/04/30 8398.65 11722.25 1989/05/31 8548.51 12197.00 1989/06/30 8003.58 12127.48 1989/07/31 8773.29 13222.59 1989/08/31 9399.95 13481.75 1989/09/30 8882.27 13426.47 1989/10/31 8480.39 13114.98 1989/11/30 8419.09 13382.52 1989/12/31 8599.40 13703.71 1990/01/31 7813.25 12784.19 1990/02/28 7889.10 12949.10 1990/03/31 8109.78 13292.25 1990/04/30 7585.68 12959.95 1990/05/31 8089.09 14223.54 1990/06/30 7896.00 14126.82 1990/07/31 8013.23 14081.62 1990/08/31 7054.68 12808.64 1990/09/30 6371.97 12184.86 1990/10/31 6171.98 12132.46 1990/11/30 6792.63 12916.22 1990/12/31 7300.24 13276.58 1991/01/31 7903.34 13855.44 1991/02/28 8282.02 14846.11 1991/03/31 8450.33 15205.38 1991/04/30 8864.08 15241.87 1991/05/31 9880.92 15900.32 1991/06/30 9628.47 15172.09 1991/07/31 9635.48 15879.11 1991/08/31 9684.57 16255.44 1991/09/30 9312.89 15983.98 1991/10/31 9663.53 16198.16 1991/11/30 8927.19 15545.38 1991/12/31 9838.19 17323.77 1992/01/31 10743.02 17001.55 1992/02/29 10793.28 17222.57 1992/03/31 10865.10 16886.73 1992/04/30 11037.44 17383.20 1992/05/31 10728.65 17468.37 1992/06/30 10657.38 17208.09 1992/07/31 10578.22 17911.90 1992/08/31 10153.65 17544.71 1992/09/30 10045.71 17751.74 1992/10/31 10535.05 17813.87 1992/11/30 10923.63 18421.32 1992/12/31 11024.18 18647.90 1993/01/31 11363.72 18804.55 1993/02/28 11616.57 19060.29 1993/03/31 11602.12 19462.46 1993/04/30 12129.90 18991.47 1993/05/31 12166.04 19500.44 1993/06/30 11905.81 19556.99 1993/07/31 11782.92 19478.76 1993/08/31 12100.98 20217.01 1993/09/30 11522.68 20061.34 1993/10/31 11970.87 20476.61 1993/11/30 12715.43 20282.08 1993/12/31 13069.64 20527.49 1994/01/31 14587.68 21225.43 1994/02/28 14175.64 20650.22 1994/03/31 12672.06 19749.87 1994/04/30 12657.89 20002.67 1994/05/31 13174.24 20330.71 1994/06/30 13041.47 19832.61 1994/07/31 14147.93 20483.12 1994/08/31 15726.48 21322.93 1994/09/30 16006.78 20800.52 1994/10/31 15010.97 21268.53 1994/11/30 14354.47 20493.93 1994/12/31 14917.47 20797.85 1995/01/31 14817.30 21337.14 1995/02/28 16289.01 22168.65 1995/03/31 16404.59 22822.85 1995/04/30 16472.43 23494.98 1995/05/31 16744.76 24434.07 1995/06/30 18262.06 25001.68 1995/07/31 18884.55 25830.73 1995/08/31 18868.98 25895.57 1995/09/30 18557.74 26988.36 1995/10/31 18285.41 26892.01 1995/11/30 18557.74 28072.57 1995/12/31 18186.60 28613.25 1996/01/31 18640.19 29587.24 1996/02/29 17784.35 29861.52 1996/03/31 18691.55 30149.08 1996/04/30 19508.80 30593.48 1996/05/31 19115.59 31382.49 1996/06/30 18043.19 31502.05 1996/07/31 17569.54 30110.29 1996/08/31 18552.58 30745.32 1996/09/30 19222.83 32475.67 1996/10/31 19187.08 33371.34 1996/11/30 19410.50 35893.88 1996/12/31 19471.65 35182.83 1997/01/31 19672.20 37381.05 1997/02/28 19717.78 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Paper and Forest Products Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $19,718 - a 97.18% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Boise Cascade Corp. 7.0 Willamette Industries, Inc. 5.7 Hollinger International, Inc. Class A 5.1 Kimberly-Clark Corp. 4.9 Chesapeake Corp. 4.8 Specialty Paperboard, Inc. 4.5 IKON Office Solutions, Inc. 4.5 Fort Howard Corp. 4.1 Jefferson Smurfit Corp. 3.8 James River Corp. of Virginia 3.8 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Paper & Forest Products 73.9% Publishing 5.2% Retail & Wholesale, Miscellaneous 4.5% Insurance 3.5% Tobacco 3.4% All Others 9.5% * Row: 1, Col: 1, Value: 9.5 Row: 1, Col: 2, Value: 3.4 Row: 1, Col: 3, Value: 3.5 Row: 1, Col: 4, Value: 4.5 Row: 1, Col: 5, Value: 5.2 Row: 1, Col: 6, Value: 73.90000000000001 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S 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 DID THE FUND PERFORM, LARRY? A. The fund was up 10.87% for the 12 months that ended February 28, 1997, while the Standard & Poor's 500 Index gained 26.16% over the same period. Q. WHAT CONTRIBUTED TO THE FUND'S PERFORMANCE DURING THE PERIOD? A. The fundamentals for paper were terrible last year. Producers added a lot of new capacity over the last several years, which depressed the prices of commodity paper products. For example, pulp was down about 40% last year, and paper was down about 35%. The demand for paper and forest products is very sensitive to how fast the economy is growing. When producers add production capacity at a faster rate than Gross Domestic Product (GDP) growth, as they have been doing, it's a recipe for disaster. GDP growth in 1994, 1995 and 1996 averaged somewhere around 3.5%. The problem was that the industry added capacity at an annual rate of about 5%. Supply outstripped demand, and the result was collapsing commodity paper prices. Q. WHY WOULD PAPER PRODUCERS DO THAT - CUT THEIR OWN THROATS, SO TO SPEAK? A. When everything is going well, as it was a few years ago in the paper industry, companies naturally want a bigger piece of the pie. So they add capacity. But in fairness to the paper producers, planning their production is a very difficult thing to do. They have to estimate how fast the economy is going to grow, and how much capacity their competitors will add. No one has that kind of forecasting down to an exact science. Q. WHAT KIND OF STRATEGY DID YOU USE LAST YEAR? A. I was very selective. Tissue and lumber companies were two bright spots in this industry, so my strategy was to overweight the fund in those two areas. In addition, I tried to retain meaningful exposure in the commodity paper area in case the prices of pulp, paper and newsprint recovered. Most of the companies we invested in were based in the United States, though in a few cases, where we judged the added risk to be worthwhile, we also owned foreign stocks. Q. WHAT WERE SOME OF THE STOCKS THAT DID WELL FOR THE FUND DURING THE PERIOD? A. Tissue producers such as Kimberly-Clark, Chesapeake Corp., Fort Howard Corp. and James River did well for us. In the lumber area, Timberwest was put up for sale, the stock rose as a result and we took profits. Weyerhaeuser and Slocan Forest Products were also beneficial holdings with significant lumber components. There were a few specialty paper producers that performed well, too. For instance, Schweitzer-Mauduit International is a producer of cigarette paper. Specialty Paperboard was another stock that helped the fund. Q. HOW ABOUT STOCKS THAT DIDN'T PERFORM WELL? A. As a category, I'd say that the commodity pulp and paper producers had difficulty last year, including such stocks as Stone Container. Union Camp was also a disappointment, although its return was slightly positive. Q. WHAT ARE THE PROSPECTS FOR THE IMMEDIATE FUTURE, LARRY? A. A lot depends on the economy. Producers have drastically scaled back how much capacity they are adding; those numbers should be about 2.5% to 3% this year, and about 1% in 1998 and 1999. So the big question is whether GDP growth will continue at its current slow but steady rate. If it does, pulp and paper prices should recover. On the other hand, if the economy slips into recession and GDP falls or is flat, there will be continued downward pressure on commodity paper prices and, consequently, on the stocks of companies with exposure in that area. My own view is that the economy will continue on a slow but positive growth path and, as a result, there's a good chance we'll see higher commodity paper prices later on this year or in 1998. So that bodes well for many of the fund's holdings. 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 February 28, 1997, more than $19 million MANAGER: Larry Rakers, since 1996; manager, Fidelity Select Energy Portfolio, since January 1997; Fidelity Select American Gold Portfolio, 1995-February 1997; Fidelity Select Precious Metals and Minerals Portfolio, July 1996- February 1997; joined Fidelity in 1993 (checkmark) PAPER AND FOREST PRODUCTS PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.5% SHARES VALUE (NOTE 1) BASIC INDUSTRIES - 75.9% CHEMICALS & PLASTICS - 0.6% Minerals Technologies, Inc. 3,200 $ 121,198 METALS & MINING - 0.4% English China Clay PLC 21,500 74,973 PACKAGING & CONTAINERS - 1.8% Gaylord Container Corp. Class A (a) 53,200 339,150 PAPER & FOREST PRODUCTS - 73.1% Alliance Forest Products, Inc. (a) 19,000 409,677 Assi Doman AB Free shares 5,000 129,160 Boise Cascade Corp. 40,400 1,328,150 Bowater, Inc. 11,700 495,788 Buckeye Cellulose Corp. (a) 20,000 602,500 Caraustar Industries, Inc. 3,000 89,250 Champion International Corp. 7,900 348,588 Chesapeake Corp. 31,000 918,375 Consolidated Papers, Inc. 2,000 101,250 Crown Pacific Partners LP unit 4,400 96,800 Domtar, Inc. 14,700 133,768 Donohue, Inc. (vtg.) 12,210 234,713 Enso OY Class R 13,000 112,215 Fletcher Challenge Canada Ltd. Class A 3,400 56,412 Fort Howard Corp. (a) 26,500 788,375 Georgia-Pacific Corp. 2,400 187,200 Glatfelter (P.H.) Co. 19,100 327,088 International Paper Co. 1,500 62,625 James River Corp. of Virginia 22,000 720,500 Jefferson Smurfit Group PLC sponsored ADR (a) 3,200 80,800 Jefferson Smurfit Corp. (a) 53,400 727,575 Kimberly-Clark Corp. 8,830 935,980 Louisiana-Pacific Corp. 1,400 29,750 Mead Corp. 5,200 302,900 Mercer International, Inc. SBI 69,000 655,500 Plum Creek Timber Co. LP depositary unit 3,000 86,625 Rayonier, Inc. 5,100 193,800 Slocan Forest Products Ltd. 12,800 137,529 Specialty Paperboard, Inc. (a) 34,900 863,775 Stone Consolidated Corp. 2,000 32,526 Stone Container Corp. 4,000 52,000 Stora Kopparbergs B Free shares 3,000 40,441 Svenska Cellulosa AB (SCA) Class B Ord. 32,000 707,621 Temple-Inland, Inc. 400 22,050 Union Camp Corp. 2,800 135,100 UPM-Kymmene Corp. (a) 7,200 151,445 Wausau Paper Mills Co. 11,037 219,360 Westvaco Corp. 700 20,650 Weyerhaeuser Co. 6,900 319,125 Willamette Industries, Inc. 17,100 1,094,400 13,951,386 TOTAL BASIC INDUSTRIES 14,486,707 FINANCE - 3.5% INSURANCE - 3.5% Arbatax International, Inc. (a) 95,800 675,390 MEDIA & LEISURE - 5.2% PUBLISHING - 5.2% Hollinger International, Inc. Class A 96,900 981,113 SHARES VALUE (NOTE 1) NONDURABLES - 3.4% TOBACCO - 3.4% Schweitzer-Mauduit International, Inc. 19,100 $ 651,788 RETAIL & WHOLESALE - 4.5% RETAIL & WHOLESALE, MISCELLANEOUS - 4.5% IKON Office Solutions, Inc. 20,900 862,125 TOTAL COMMON STOCKS (Cost $17,697,838) 17,657,123 CONVERTIBLE PREFERRED STOCKS - 0.8% BASIC INDUSTRIES - 0.8% PAPER & FOREST PRODUCTS - 0.8% James River Corp., Series P, $1.55 depositary shares representing 1/100 share (dividend enhanced) (Cost $122,507) 4,600 140,875 CASH EQUIVALENTS - 6.7% Taxable Central Cash Fund (b) (Cost $1,285,499) 1,285,499 1,285,499 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $19,105,844) $ 19,083,497 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $51,584,813 and $60,498,409, respectively (see Note 3 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 com-missions paid to these affiliated firms were $23,792 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $2,916,000. The weighted average interest rate was 5.9%. (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 81.0% Canada 12.2 Sweden 4.6 Finland 1.4 Others (individually less than 1%) 0.8 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $19,211,810. Net unrealized depreciation aggregated $128,313, of which $1,389,817 related to appreciated investment securities and $1,518,130 related to depreciated investment securities. The fund hereby designates approximately $716,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 35% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. PAPER AND FOREST PRODUCTS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 19,083,497 (cost $19,105,844) - See accompanying schedule Receivable for investments sold 846,137 Receivable for fund shares sold 110,945 Dividends receivable 23,332 Interest receivable 1,571 Redemption fees receivable 49 Other receivables 13,959 TOTAL ASSETS 20,079,490 LIABILITIES Payable for investments purchased $ 281,699 Payable for fund shares redeemed 259,514 Accrued management fee 11,052 Other payables and accrued expenses 43,711 TOTAL LIABILITIES 595,976 NET ASSETS $ 19,483,514 Net Assets consist of: Paid in capital $ 18,614,191 Distributions in excess of net investment income (45,703 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 937,391 Net unrealized appreciation (depreciation) on investments (22,365 and assets and liabilities in ) foreign currencies NET ASSETS, for 900,736 $ 19,483,514 shares outstanding NET ASSET VALUE and redemption price per share ($19,483,514 (divided by) 900,736 shares) $21.63 Maximum offering price per share (100/97.00 of $21.63) $22.30
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 586,040 Dividends Interest 124,395 TOTAL INCOME 710,435 EXPENSES Management fee $ 194,763 Transfer agent fees 385,303 Accounting fees and expenses 60,429 Non-interested trustees' compensation 228 Custodian fees and expenses 15,959 Registration fees 18,385 Audit 25,496 Legal 246 Interest 1,434 Miscellaneous 2,693 Total expenses before reductions 704,936 Expense reductions (7,444 697,492 ) NET INVESTMENT INCOME 12,943 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 1,735,499 Foreign currency transactions (287 1,735,212 ) Change in net unrealized appreciation (depreciation) on: Investment securities 336,375 Assets and liabilities in (62 336,313 foreign currencies ) NET GAIN (LOSS) 2,071,525 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 2,084,468 OTHER INFORMATION $ 126,407 Sales charges paid to FDC Deferred sales charges withheld $ 2,892 by FDC Exchange fees withheld by FSC $ 31,583 Expense reductions $ 5,585 Directed brokerage arrangements Custodian interest credits 148 Transfer agent interest credits 1,711 $ 7,444
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 12,943 $ 196,357 Net investment income Net realized 1,735,212 10,192,650 gain (loss) Change in 336,313 (5,417,439 net ) unrealized appreciation (depreciation ) NET INCREASE 2,084,468 4,971,568 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (29,671 (148,185 shareholders ) ) From net investment income In excess of (84,325 - net ) investment income From net (2,413,337 (4,557,795 realized gain ) ) TOTAL (2,527,333 (4,705,980 DISTRIBUTION ) ) S Share 84,816,161 89,748,449 transactions Net proceeds from sales of shares Reinvestmen 2,489,372 4,602,520 t of distributions Cost of (94,819,778 (161,775,476 shares ) ) redeemed Paid in 170,585 210,077 capital portion of redemption fees NET INCREASE (7,343,660 (67,214,430 (DECREASE) ) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (7,786,525 (66,948,842 INCREASE ) ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 27,270,039 94,218,881 period End of period $ 19,483,514 $ 27,270,039 (including under (over) distribution of net investment income of $(45,703) and $46,687, respectivel y) OTHER INFORMATION Shares Sold 3,914,858 3,969,187 Issued in 118,411 214,948 reinvestment of distributions Redeemed (4,444,689 (7,328,171 ) ) Net increase (411,420) (3,144,036) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 20.78 $ 21.14 $ 19.61 $ 16.08 $ 15.37 value, beginning of period Income from Investment Operations Net .01 .08 .01 (.01) .06 investment income (loss) Net realized 2.08 1.83 2.53 3.38 .65 and unrealized gain (loss) Total from 2.09 1.91 2.54 3.37 .71 investment operations Less Distributions From net (.03) (.08) - (.01) (.09) investment income In excess of (.07) - - - - net investment income From net (1.25) (2.27) (1.17) - - realized gain Total (1.35) (2.35) (1.17) (.01) (.09) distributions Redemption .11 .08 .16 .17 .09 fees added to paid in capital Net asset $ 21.63 $ 20.78 $ 21.14 $ 19.61 $ 16.08 value, end of period TOTAL 10.87% 9.18% 14.91% 22.03% 5.25% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 19,484 $ 27,270 $ 94,219 $ 66,908 $ 25,098 end of period (000 omitted) Ratio of 2.19% 1.91% 1.88% 2.08% 2.21% A expenses to average net assets Ratio of 2.16% E 1.90% E 1.87% E 2.07% E 2.21% A expenses to average net assets after expense reductions Ratio of net .04% .34% .05% (.08)% .49% A investment income (loss) to average net assets Portfolio 180% 78% 209% 176% 222% A turnover rate Average $ .0306 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 8 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS TRANSPORTATION 4.67% 96.78% 226.97% TRANSPORTATION 1.53% 90.88% 217.16% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS TRANSPORTATION 4.67% 14.50% 12.58% TRANSPORTATION 1.53% 13.80% 12.23% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9700.00 10289.00 1987/04/30 9766.04 10197.43 1987/05/31 9914.64 10286.15 1987/06/30 10211.83 10805.60 1987/07/31 10616.34 11353.44 1987/08/31 10616.34 11776.92 1987/09/30 10038.47 11519.01 1987/10/31 6802.38 9037.81 1987/11/30 6406.13 8293.10 1987/12/31 7050.64 8924.20 1988/01/31 7403.17 9299.91 1988/02/29 8015.90 9733.29 1988/03/31 8259.32 9432.53 1988/04/30 8284.50 9537.23 1988/05/31 8234.14 9620.20 1988/06/30 9073.50 10061.77 1988/07/31 8955.99 10023.54 1988/08/31 8536.31 9682.74 1988/09/30 9098.68 10095.22 1988/10/31 9392.46 10375.87 1988/11/30 9476.39 10227.49 1988/12/31 9761.78 10406.47 1989/01/31 10601.14 11168.23 1989/02/28 10710.26 10890.14 1989/03/31 11037.61 11143.88 1989/04/30 11406.93 11722.25 1989/05/31 11893.76 12197.00 1989/06/30 11820.43 12127.48 1989/07/31 12536.82 13222.59 1989/08/31 13351.72 13481.75 1989/09/30 13092.02 13426.47 1989/10/31 12259.22 13114.98 1989/11/30 12366.68 13382.52 1989/12/31 12542.73 13703.71 1990/01/31 11755.07 12784.19 1990/02/28 12303.44 12949.10 1990/03/31 12672.35 13292.25 1990/04/30 12193.77 12959.95 1990/05/31 12642.43 14223.54 1990/06/30 12503.26 14126.82 1990/07/31 12461.72 14081.62 1990/08/31 10634.00 12808.64 1990/09/30 9263.22 12184.86 1990/10/31 9117.83 12132.46 1990/11/30 9491.68 12916.22 1990/12/31 9834.38 13276.58 1991/01/31 10675.54 13855.44 1991/02/28 11714.02 14846.11 1991/03/31 11724.41 15205.38 1991/04/30 11693.25 15241.87 1991/05/31 12617.50 15900.32 1991/06/30 12512.74 15172.09 1991/07/31 13273.29 15879.11 1991/08/31 13512.92 16255.44 1991/09/30 13262.87 15983.98 1991/10/31 14242.22 16198.16 1991/11/30 13356.64 15545.38 1991/12/31 15159.06 17323.77 1992/01/31 15294.50 17001.55 1992/02/29 16117.57 17222.57 1992/03/31 15732.08 16886.73 1992/04/30 16138.41 17383.20 1992/05/31 16471.80 17468.37 1992/06/30 15763.34 17208.09 1992/07/31 15992.55 17911.90 1992/08/31 15513.29 17544.71 1992/09/30 16127.99 17751.74 1992/10/31 16815.62 17813.87 1992/11/30 18034.59 18421.32 1992/12/31 18765.77 18647.90 1993/01/31 19606.19 18804.55 1993/02/28 19872.14 19060.29 1993/03/31 21201.92 19462.46 1993/04/30 21149.07 18991.47 1993/05/31 21939.09 19500.44 1993/06/30 22003.14 19556.99 1993/07/31 22003.14 19478.76 1993/08/31 22408.83 20217.01 1993/09/30 22462.21 20061.34 1993/10/31 22931.95 20476.61 1993/11/30 23060.06 20282.08 1993/12/31 24267.18 20527.49 1994/01/31 25330.92 21225.43 1994/02/28 25330.92 20650.22 1994/03/31 24652.93 19749.87 1994/04/30 25113.62 20002.67 1994/05/31 24709.90 20330.71 1994/06/30 24686.15 19832.61 1994/07/31 25517.34 20483.12 1994/08/31 26277.28 21322.93 1994/09/30 25576.71 20800.52 1994/10/31 25956.68 21268.53 1994/11/30 24401.18 20493.93 1994/12/31 25205.44 20797.85 1995/01/31 25035.58 21337.14 1995/02/28 26825.70 22168.65 1995/03/31 27178.50 22822.85 1995/04/30 27583.56 23494.98 1995/05/31 26760.37 24434.07 1995/06/30 26472.90 25001.68 1995/07/31 28746.49 25830.73 1995/08/31 28720.35 25895.57 1995/09/30 28459.02 26988.36 1995/10/31 28106.23 26892.01 1995/11/30 29073.15 28072.57 1995/12/31 29028.66 28613.25 1996/01/31 29471.00 29587.24 1996/02/29 30300.39 29861.52 1996/03/31 31033.02 30149.08 1996/04/30 32049.63 30593.48 1996/05/31 32091.32 31382.49 1996/06/30 32244.20 31502.05 1996/07/31 29909.28 30110.29 1996/08/31 29937.08 30745.32 1996/09/30 30076.06 32475.67 1996/10/31 29839.79 33371.34 1996/11/30 31952.34 35893.88 1996/12/31 31787.40 35182.83 1997/01/31 32015.68 37381.05 1997/02/28 31716.07 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Transportation Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $31,716 - a 217.16% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Delta Air Lines, Inc. 6.6 AMR Corp. 6.4 Burlington Northern Santa Fe Corp. 6.3 Eaton Corp. 5.4 Boeing Co. 5.3 UAL Corp. 5.3 Federal Express Corp. 4.8 Airborne Freight Corp. 4.8 Cummins Engine Co., Inc. 4.7 Union Pacific Corp. 3.7 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Row: 1, Col: 1, Value: 24.3 Row: 1, Col: 2, Value: 9.5 Row: 1, Col: 3, Value: 12.8 Row: 1, Col: 4, Value: 12.9 Row: 1, Col: 5, Value: 13.8 Row: 1, Col: 6, Value: 26.7 Air Transport, Major National 26.7% Railroads 13.8% Trucking, Local & Long Distance 12.9% Auto & Truck Parts 12.8% Air Courier Services 9.5% All Others 24.3% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS TRANSPORTATION PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Jean-Marc Berteaux became Portfolio Manager of Fidelity Select Transportation Portfolio on January 7, 1997. Q. HOW DID THE FUND PERFORM, JEAN-MARC? A. For the 12 months that ended February 28, 1997, the fund returned 4.67%. The Standard & Poor's 500 Index had a return of 26.16% over the same period. Q. CAN YOU HIGHLIGHT ANY FACTORS THAT CONTRIBUTED TO PERFORMANCE? A. Two factors simply involved timing. One of the key groups in the portfolio was truck manufacturing stocks. The fund's considerable position in these stocks reflected the belief that truck orders would accelerate during the period. Orders did indeed pick up, but not until three or four months later than anticipated. Also, companies were engaging in a decent amount of restructuring activity designed to increase earnings potential. The market looks favorably upon such activity, but we didn't begin to see the benefits of these restructurings until late in the fourth quarter. Two additional issues I'd point to would be the widespread speculation and ensuing uncertainty over possible mergers and acquisitions, and the subpar performance of both airline and railroad stocks. Q. WITH RESPECT TO MERGERS AND ACQUISITIONS, WAS THERE A GOOD AMOUNT OF CONSOLIDATION GOING ON DURING THE PERIOD? A. There weren't a lot of significant deals finalized, but, as I mentioned, there was no shortage of speculation. In the railroad sector, for instance, much investor attention was paid to a potential merger between CSX and Conrail - two of the biggest players in the industry. The possibility of this deal becoming reality resulted in a slew of questions. What was true and fair value? Would the deal fuel other takeover possibilities? Who else might be considered takeover targets? This speculation certainly had a negative effect on the fundamental characteristics of rail stocks. In terms of other segments within the transportation industry, consolidation talk also had an impact on the regional, less-than-truckload (LTL) truck market, air freight forwarders and companies specializing in logistics planning. Q. CAN YOU EXPLAIN WHAT LTLS ARE? A. Sure. Trucking companies can be split into two groups: those that make one stop, fill the truck up completely and deliver the goods to one destination, and those that make two or three stops, fill the truck up with goods from different manufacturers and then deliver the products to the respective outlets. We refer to the latter group as less-than-truckloads, or LTLs. I've built a significant position in LTL and truckload stocks because I've felt they have good growth potential and, as I mentioned earlier, I think consolidation will occur in this area. Q. CAN YOU ISOLATE SOME OF THE CHANGES YOU'VE MADE SINCE YOU BEGAN MANAGING THE FUND? A. My main focus was on reducing a few of my larger positions and using that money to broaden the number of stocks in the portfolio. In doing so, I'm making less of an industry bet than an individual stock bet, and I'm also spreading out my risk exposure. Q. WHICH INDIVIDUAL STOCKS PERFORMED WELL? WHICH WERE DISAPPOINTMENTS? A. Yellow Corp., one of the bigger companies in the trucking business, was a very good stock. The company restructured itself and improved its earnings potential in the process. On the other hand, J.B. Hunt, another trucking firm, was a disappointment. The company announced an unforeseen increase in pay to its drivers - about a 35% hike - that had a negative impact on the stock price. Another negative concerned the fund's position in Federal Express. The price of the stock appeared too expensive, but in hindsight the portfolio would have benefited from holding a higher stake in the company because the stock did quite well. Q. WHAT'S YOUR OUTLOOK? A. I'll continue to emphasize truck manufacturing stocks, based on favorable valuations, earnings prospects and expected new truck demand. Pricing trends in the trucking sector are encouraging as well. While airlines were a drag on performance during this past period, I think the group is poised to rebound so I'll look for opportunities there. 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 February 28, 1997, more than $8 million MANAGER: Jean-Marc Berteaux, since January 1997; equity analyst, trucking, air freight and shipping industries, since 1997; equity analyst, European conglomerates, 1996; equity analyst, European paper, 1994-1995; joined Fidelity in 1994 (checkmark) TRANSPORTATION PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 96.9% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 8.6% AIRCRAFT - 8.6% Boeing Co. 4,500 $ 457,875 McDonnell Douglas Corp. 4,500 285,750 743,625 AIR TRANSPORTATION - 26.7% AIR TRANSPORT, MAJOR NATIONAL - 26.7% AMR Corp. (a) 7,000 550,375 ASA Holdings, Inc. 3,200 72,400 Continental Airlines, Inc. Class B (a) 10,000 286,250 Delta Air Lines, Inc. 7,000 563,500 Northwest Airlines Corp. Class A (a) 9,000 318,375 Southwest Airlines Co. 2,000 47,000 UAL Corp. (a) 8,000 454,000 2,291,900 AUTOS, TIRES, & ACCESSORIES - 13.8% AUTO & TRUCK PARTS - 12.8% Cummins Engine Co., Inc. 8,000 405,000 Eaton Corp. 6,500 466,375 Modine Manufacturing Co. 8,200 225,500 1,096,875 MOTOR VEHICLES & CAR BODIES - 1.0% Navistar International Corp. (a) 9,600 92,400 TOTAL AUTOS, TIRES, & ACCESSORIES 1,189,275 INDUSTRIAL MACHINERY & EQUIPMENT - 0.4% ENGINES & TURBINES - 0.4% Detroit Diesel Corp. 2,000 34,750 RAILROADS - 13.8% Burlington Northern Santa Fe Corp. 6,500 541,125 CSX Corp. 1,600 73,800 Illinois Central Corp., Series A 2,000 68,750 Union Pacific Corp. 5,300 319,325 Wisconsin Central Transportation Corp. (a) 5,000 179,375 1,182,375 SHIPPING - 3.8% DEEP SEA TRANSPORT - 0.0% Pacific Basin Bulk Shipping Ltd. (warrants) (a) 1,000 - SHIPPING - 3.8% Kirby Corp. (a) 11,500 212,750 Knightsbridge Tankers Ltd. 5,000 110,625 TOTAL SHIPPING 323,375 TRUCKING & FREIGHT - 29.8% AIR COURIER SERVICES - 9.5% Airborne Freight Corp. 15,000 410,625 Federal Express Corp. (a) 8,000 412,000 822,625 FREIGHT FORWARDING - 0.6% Eagle USA Airfreight, Inc. (a) 1,500 50,250 TRUCKING, LOCAL & LONG DISTANCE - 12.9% Consolidated Freightways Corp. 3,600 30,600 Consolidated Freightways, Inc. 10,600 262,350 Heartland Express, Inc. 5,000 105,000 Knight Transportation, Inc. (a) 4,500 104,625 M.S. Carriers, Inc. (a) 11,900 205,275 Swift Transportation Co., Inc. (a) 3,600 95,850 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) Werner Enterprises, Inc. 6,600 $ 115,500 XTRA Corp. 4,700 190,350 1,109,550 TRUCKING, LONG DISTANCE - 6.8% Hunt (J.B.) Transport Services, Inc. 7,200 99,900 Simon Transportation Services, Inc. Class A (a) 6,000 102,000 USFreightways Corp. 10,800 260,550 Yellow Corp. (a) 7,600 118,750 581,200 TOTAL TRUCKING & FREIGHT 2,563,625 TOTAL COMMON STOCKS (Cost $8,082,027) 8,328,925 CASH EQUIVALENTS - 3.1% Taxable Central Cash Fund (b) (Cost $266,673) 266,673 266,673 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $8,348,700) $ 8,595,598 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $17,241,655 and $19,693,750, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $4,045 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $8,413,216. Net unrealized appreciation aggregated $182,382, of which $467,647 related to appreciated investment securities and $285,265 related to depreciated investment securities. The fund hereby designates approximately $436,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 8,595,598 (cost $8,348,700) - See accompanying schedule Receivable for investments sold 917,769 Receivable for fund shares sold 7,695 Dividends receivable 10,303 Interest receivable 1,830 Redemption fees receivable 25 Other receivables 7,738 Receivable from investment adviser for expense reductions 385 TOTAL ASSETS 9,541,343 LIABILITIES Payable for investments purchased $ 472,184 Payable for fund shares redeemed 148,193 Other payables and accrued expenses 30,591 TOTAL LIABILITIES 650,968 NET ASSETS $ 8,890,375 Net Assets consist of: Paid in capital $ 8,081,169 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 562,308 Net unrealized appreciation (depreciation) on investments 246,898 NET ASSETS, for 399,961 $ 8,890,375 shares outstanding NET ASSET VALUE and redemption price per share ($8,890,375 (divided by) 399,961 shares) $22.23 Maximum offering price per share (100/97.00 of $22.23) $22.92
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 198,398 Dividends Interest 42,100 TOTAL INCOME 240,498 EXPENSES Management fee $ 75,979 Transfer agent fees 155,420 Accounting fees and expenses 60,368 Non-interested trustees' compensation 52 Custodian fees and expenses 10,715 Registration fees 9,500 Audit 27,340 Legal 137 Miscellaneous 704 Total expenses before reductions 340,215 Expense reductions (27,211 313,004 ) NET INVESTMENT INCOME (LOSS) (72,506 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 966,297 Foreign currency transactions (109 966,188 ) Change in net unrealized appreciation (depreciation) on investment securities (640,423 ) NET GAIN (LOSS) 325,765 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 253,259 OTHER INFORMATION $ 101,332 Sales charges paid to FDC Deferred sales charges withheld $ 682 by FDC Exchange fees withheld by FSC $ 13,643 Expense reductions $ 1,476 Directed brokerage arrangements Custodian interest credits 124 FMR reimbursement 25,611 $ 27,211
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 29, 1997 1996 Operations $ (72,506 $ (46,898 Net ) ) investment income (loss) Net realized 966,188 1,654,188 gain (loss) Change in (640,423 (414,468 net ) ) unrealized appreciation (depreciation ) NET INCREASE 253,259 1,192,822 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (369,344 (578,339 shareholders ) ) from net realized gains Share 27,406,552 23,608,416 transactions Net proceeds from sales of shares Reinvestmen 362,964 567,930 t of distributions Cost of (30,259,063 (26,101,274 shares ) ) redeemed Paid in 50,774 51,261 capital portion of redemption fees NET INCREASE (2,438,773 (1,873,667 (DECREASE) ) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (2,554,858 (1,259,184 INCREASE ) ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 11,445,233 12,704,417 period End of period $ 8,890,375 $ 11,445,233 OTHER INFORMATION Shares Sold 1,216,922 1,097,987 Issued in 16,356 26,954 reinvestment of distributions Redeemed (1,355,455 (1,221,676 ) ) Net increase (122,177) (96,735) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 21.92 $ 20.53 $ 21.67 $ 18.68 $ 15.49 value, beginning of period Income from Investment Operations Net (.13) (.09) E (.17) (.20) (.07) investment income (loss) Net realized 1.06 2.60 1.17 5.07 3.55 and unrealized gain (loss) Total from .93 2.51 1.00 4.87 3.48 investment operations Less Distributions From net (.71) (1.22) (2.19) (1.96) (.36) realized gain Redemption .09 .10 .05 .08 .07 fees added to paid in capital Net asset $ 22.23 $ 21.92 $ 20.53 $ 21.67 $ 18.68 value, end of period TOTAL 4.67% 12.95% 5.90% 27.47% 23.14% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 8,890 $ 11,445 $ 12,704 $ 13,077 $ 10,780 end of period (000 omitted) Ratio of 2.50% F 2.47% F 2.37% 2.40% 2.48% A, expenses to F average net assets Ratio of 2.48% G 2.44% G 2.36% G 2.39% G 2.48% A expenses to average net assets after expense reductions Ratio of net (.58)% (.43)% (.83)% (.96)% (.53)% investment A income (loss) to average net assets Portfolio 148% 175% 178% 115% 116% A turnover rate Average $ .0313 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 8 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 (LOSS) PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.05 PER SHARE. 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 (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). G 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 8 OF NOTES TO FINANCIAL STATEMENTS). 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.
BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS BROKERAGE AND INVESTMENT MANAGEMENT 44.27% 147.27% 167.68% BROKERAGE AND INVESTMENT MANAGEMENT (INCL. 3% SALES CHARGE) 39.94% 139.85% 159.65% S&P 500 26.16% 118.75% 276.74%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS BROKERAGE AND INVESTMENT MANAGEMENT 44.27% 19.85% 10.35% BROKERAGE AND INVESTMENT MANAGEMENT (INCL. 3% SALES CHARGE) 39.94% 19.12% 10.01% S&P 500 26.16% 16.94% 14.16%
AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9660.46 10289.00 1987/04/30 8606.11 10197.43 1987/05/31 8223.91 10286.15 1987/06/30 8210.73 10805.60 1987/07/31 8230.50 11353.44 1987/08/31 8494.09 11776.92 1987/09/30 8204.14 11519.01 1987/10/31 5186.07 9037.81 1987/11/30 4797.28 8293.10 1987/12/31 5043.61 8924.20 1988/01/31 5404.99 9299.91 1988/02/29 5664.24 9733.29 1988/03/31 5514.98 9432.53 1988/04/30 5609.25 9537.23 1988/05/31 5397.14 9620.20 1988/06/30 5970.67 10061.77 1988/07/31 5923.47 10023.54 1988/08/31 5884.14 9682.74 1988/09/30 6033.60 10095.22 1988/10/31 6057.20 10375.87 1988/11/30 5923.47 10227.49 1988/12/31 5979.13 10406.47 1989/01/31 6758.33 11168.23 1989/02/28 6599.31 10890.14 1989/03/31 6607.26 11143.88 1989/04/30 6670.86 11722.25 1989/05/31 7108.17 12197.00 1989/06/30 6908.32 12127.48 1989/07/31 7739.88 13222.59 1989/08/31 7931.77 13481.75 1989/09/30 7683.91 13426.47 1989/10/31 7060.24 13114.98 1989/11/30 6988.28 13382.52 1989/12/31 6819.74 13703.71 1990/01/31 6520.06 12784.19 1990/02/28 6738.75 12949.10 1990/03/31 6925.04 13292.25 1990/04/30 6455.27 12959.95 1990/05/31 7070.83 14223.54 1990/06/30 7062.53 14126.82 1990/07/31 6811.16 14081.62 1990/08/31 5886.79 12808.64 1990/09/30 5384.06 12184.86 1990/10/31 5051.61 12132.46 1990/11/30 5384.06 12916.22 1990/12/31 5716.51 13276.58 1991/01/31 6192.21 13855.44 1991/02/28 6807.32 14846.11 1991/03/31 7504.46 15205.38 1991/04/30 7611.08 15241.87 1991/05/31 8012.96 15900.32 1991/06/30 7479.41 15172.09 1991/07/31 8054.12 15879.11 1991/08/31 8234.74 16255.44 1991/09/30 8661.67 15983.98 1991/10/31 9236.38 16198.16 1991/11/30 8727.35 15545.38 1991/12/31 10418.63 17323.77 1992/01/31 10566.42 17001.55 1992/02/29 10500.73 17222.57 1992/03/31 10221.59 16886.73 1992/04/30 9425.21 17383.20 1992/05/31 9400.58 17468.37 1992/06/30 9178.91 17208.09 1992/07/31 9696.14 17911.90 1992/08/31 9417.00 17544.71 1992/09/30 9351.32 17751.74 1992/10/31 9770.03 17813.87 1992/11/30 10648.52 18421.32 1992/12/31 10952.29 18647.90 1993/01/31 11600.89 18804.55 1993/02/28 11674.78 19060.29 1993/03/31 12610.73 19462.46 1993/04/30 12569.67 18991.47 1993/05/31 12980.44 19500.44 1993/06/30 13596.60 19556.99 1993/07/31 14048.45 19478.76 1993/08/31 15157.54 20217.01 1993/09/30 15436.87 20061.34 1993/10/31 14935.72 20476.61 1993/11/30 14524.95 20282.08 1993/12/31 16354.52 20527.49 1994/01/31 16703.06 21225.43 1994/02/28 15862.99 20650.22 1994/03/31 14084.55 19749.87 1994/04/30 13968.37 20002.67 1994/05/31 14307.97 20330.71 1994/06/30 14853.13 19832.61 1994/07/31 14504.59 20483.12 1994/08/31 14611.83 21322.93 1994/09/30 14057.74 20800.52 1994/10/31 14048.80 21268.53 1994/11/30 13074.68 20493.93 1994/12/31 13530.46 20797.85 1995/01/31 13360.66 21337.14 1995/02/28 13861.13 22168.65 1995/03/31 14004.12 22822.85 1995/04/30 14428.39 23494.98 1995/05/31 15239.70 24434.07 1995/06/30 16097.11 25001.68 1995/07/31 16871.54 25830.73 1995/08/31 16714.81 25895.57 1995/09/30 17728.94 26988.36 1995/10/31 16742.47 26892.01 1995/11/30 17148.12 28072.57 1995/12/31 16722.87 28613.25 1996/01/31 17813.07 29587.24 1996/02/29 17998.02 29861.52 1996/03/31 18805.93 30149.08 1996/04/30 18920.39 30593.48 1996/05/31 19547.09 31382.49 1996/06/30 19487.40 31502.05 1996/07/31 18293.69 30110.29 1996/08/31 18990.02 30745.32 1996/09/30 19964.89 32475.67 1996/10/31 20671.17 33371.34 1996/11/30 22700.49 35893.88 1996/12/31 23354.70 35182.83 1997/01/31 25058.18 37381.05 1997/02/28 25965.35 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Brokerage and Investment Management Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $25,965 - a 159.65% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Bear Stearns Companies, Inc. 4.5 Schwab (Charles) Corp. 4.5 Alex Brown, Inc. 4.3 Travelers Group, Inc. (The) 4.3 Merrill Lynch & Co., Inc. 4.1 Marsh & McLennan Companies, Inc. 3.6 Equitable Companies, Inc. 3.6 Morgan Stanley Group, Inc. 3.5 Salomon, Inc. 3.4 Morgan (J.P.) & Co., Inc. 2.6 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Security & Commodity Brokers 32.5% National Commercial Banks 11.9% Financial Services 8.1% Security Brokers & Dealers 6.0% Investment Managers 5.3% All Others 36.2% * 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 % OF FUND'S INVESTMENTS BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: Effective February 14, 1997, Peter Fruzzetti (right) became Portfolio Manager of Fidelity Select Brokerage and Investment Management Portfolio. The following is an interview with Louis Salemy, who managed the fund during most of the period covered by the report, and Peter Fruzzetti, who discusses his investing style and outlook. Q. HOW DID THE FUND PERFORM, LOUIS? L.S. Very well. For the 12 months that ended February 28, 1997, the fund had a return of 44.27%. That beat the 26.16% return of the Standard & Poor's 500 Index for the same period. Q. WHY WAS IT SUCH A FAVORABLE PERIOD FOR BROKERAGE STOCKS? L.S. There were a number of reasons. During the first half of 1996, interest rates rose and brokerage stocks suffered. In August, however, investor perceptions changed, rates declined and this group of stocks did very well. Initial public offerings (IPOs) as well as mergers and acquisitions also played significant roles. Q. WHAT FACTORS DROVE THIS IPO AND MERGER/ACQUISITION ACTIVITY? L.S. One of the trends I noticed during the period was the enormous amount of money being poured into mutual funds. This money needed to be put to work, and companies realized that their IPOs would help satisfy that demand. With the economy progressing at moderate speed and with low interest rates throughout the period, consolidation became a prevalent theme. One transaction involved the acquisition of Dean Witter by Morgan Stanley. Q. WHICH INDIVIDUAL STOCKS MADE POSITIVE CONTRIBUTIONS TO THE PORTFOLIO? WERE THERE ANY DISAPPOINTMENTS? L.S. Merrill Lynch and Bear Stearns were good performers and contributed to the fund's return. PaineWebber was also a good stock, with much of its strong performance occurring due to takeover speculation. In terms of disappointments, I can't think of a stock that performed poorly. It was really a banner period for this group. Q. TURNING TO YOU PETER, THE FUND HAD A SIGNIFICANT CASH POSITION - APPROXIMATELY 20% - AT THE END OF THE PERIOD. WHY? P.F. The fund's cash position had more to do with timing than anything else. From the end of 1996 through February 28, 1997, assets in the portfolio increased dramatically, from around $120 million to over $400 million. Much of this inflow came in January and February and I hadn't put that new money to work yet. The 20% cash position is not a fund policy, nor is it indicative of the way I manage. Q. WHAT SORTS OF STRATEGIES WILL YOU EMPLOY IN MANAGING THE FUND? P.F. Going forward, I think the consolidation theme is going to get more and more popular. Commercial banks may join the fray, particularly considering a rule proposal put forth that would allow commercial banks to derive 25% of their revenues from investment banks. I'll continue to look for opportunities in these areas. Q. WHAT'S YOUR OUTLOOK? P.F. 1996 was a great year for the industry as brokerage and investment management stocks posted strong results. Although business conditions remain solid, few are anticipating that 1997 will be as robust as this past year. However, with consolidation expected to occur, stock valuations in many cases are likely to benefit. 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 29, 1985 FUND NUMBER: 068 TRADING SYMBOL: FSLBX SIZE: as of February 28, 1997, more than $458 million MANAGER: Peter Fruzzetti, since February 1997; equity analyst, insurance and health care industries, 1993-1996; equity analyst, insurance industry, since 1996; joined Fidelity in 1993 (checkmark) BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 80.9% SHARES VALUE (NOTE 1) BANKS - 14.5% INTERNATIONAL BANKS - 0.1% Toronto Dominion Bank 14,443 $ 406,426 NATIONAL COMMERCIAL BANKS - 11.9% BankAmerica Corp. 70,000 7,962,500 Chase Manhattan Corp. 95,000 9,511,875 Citicorp 110,000 12,842,500 Mellon Bank Corp. 115,000 9,243,125 Morgan (J.P.) & Co., Inc. 125,000 13,140,625 NationsBank Corp. 130,000 7,783,750 60,484,375 STATE BANKS FEDERAL RESERVE - 2.5% Bankers Trust New York Corp. 140,000 12,705,000 TOTAL BANKS 73,595,801 COMPUTER SERVICES & SOFTWARE - 0.1% ELECTRONIC INFORMATION RETRIEVAL - 0.1% E Trade Group, Inc. 20,000 480,000 CREDIT & OTHER FINANCE - 8.1% FINANCIAL SERVICES - 8.1% American Express Co. 40,000 2,615,000 Dean Witter, Discover & Co. 285,000 10,936,875 Equitable Companies, Inc. 575,000 18,040,625 First Chicago NBD Corp. 140,000 8,190,000 Investors Financial Services Corp. 6,297 199,930 Investors Financial Services Corp. Class A 1,210 34,485 Perpetual PLC 20,000 844,081 Phoenix Duff & Phelps Corp. 30,000 240,000 41,100,996 MORTGAGE BANKERS - 0.0% Homeside, Inc. 3,000 54,375 TOTAL CREDIT & OTHER FINANCE 41,155,371 INSURANCE - 10.7% INSURANCE BROKERS & SERVICES - 3.6% Marsh & McLennan Companies, Inc. 155,000 18,135,000 INSURANCE CARRIERS - 0.7% AFLAC, Inc. 90,000 3,633,750 LIFE INSURANCE - 2.0% Amerus Life Holdings, Inc. 15,500 325,500 Conseco, Inc. 50,000 1,962,500 Delphi Financial Group, Inc. Class A 20,000 680,000 Equitable of Iowa Companies 30,000 1,593,750 Liberty Financial Companies, Inc. 12,000 513,000 Life RE Corp. 7,600 326,800 Protective Life Corp. 8,900 382,700 SunAmerica, Inc. 95,000 4,358,125 10,142,375 PROPERTY-CASUALTY & REINSURANCE - 4.4% Reinsurance Group of America, Inc. 10,000 490,000 Travelers Group, Inc. (The) 404,000 21,664,500 22,154,500 TOTAL INSURANCE 54,065,625 SHARES VALUE (NOTE 1) SAVINGS & LOANS - 0.8% SAVINGS BANKS, FEDERAL CHARTER - 0.8% Dime Bancorp., Inc. (a) 220,000 $ 3,850,000 SECURITIES INDUSTRY - 46.7% INVESTMENT ADVICE - 2.9% Mutual Fund Co. Ltd. (For. Reg.) 27,600 111,926 New England Investment Companies LP 94,100 2,317,213 Oppenheimer Capital L P unit (a) 50,000 1,881,250 PIMCO Advisors LP Class A unit 72,700 1,781,150 Trimark Financial Corp. 33,200 1,019,186 United Asset Management Corp. 290,000 7,830,000 14,940,725 INVESTMENT MANAGERS - 5.3% Alliance Capital Management LP 20,000 560,000 Eaton Vance Corp. 22,500 995,625 Franklin Resources, Inc. 188,350 11,018,475 John Nuveen Co. Class A 50,000 1,518,750 Pioneer Group, Inc. 150,000 3,506,250 Price (T. Rowe) Associates, Inc. 208,000 9,178,000 26,777,100 SECURITY & COMMODITY BROKERS - 32.5% Advest Group, Inc. (The) (a) 235,800 3,212,775 Alex Brown, Inc. 374,500 21,767,813 BHC Financial, Inc. 45,000 900,000 Bear Stearns Companies, Inc. 763,172 22,895,160 Edwards (A.G.), Inc. 347,000 12,318,500 Fahnestock Viner Holdings, Inc. Class A 77,600 1,361,254 First Marathon, Inc. Class A (non-vtg.) 33,100 453,624 Jefferies Group, Inc. 61,800 2,726,925 Legg Mason, Inc. 76,700 3,413,150 McDonald & Co. Investments, Inc. 48,000 1,854,000 Merrill Lynch & Co., Inc. 219,000 21,024,000 Morgan Keegan, Inc. 91,950 1,712,569 Morgan Stanley Group, Inc. 281,100 17,744,438 Nomura Securities Co. Ltd. 160,000 2,142,649 Peregrine Investments Holdings Ltd. (warrants) (a) 84,300 29,122 Piper Jaffray Inc. 32,600 554,200 Quick & Reilly Group, Inc. (The) 129,375 4,528,125 Raymond James Financial, Inc. 147,900 4,936,163 Salomon, Inc. 314,000 17,466,250 Schwab (Charles) Corp. 605,400 22,702,500 Southwest Securities Group, Inc. 60,000 975,000 164,718,217 SECURITY BROKERS & DEALERS - 6.0% Donaldson Lufkin & Jenrette, Inc. 120,000 5,160,000 Everen Capital Corp. 20,000 522,500 Interra Financial, Inc. 56,250 2,299,219 Lehman Brothers Holdings, Inc. 373,600 12,562,300 PaineWebber Group, Inc. 295,700 9,647,213 30,191,232 TOTAL SECURITIES INDUSTRY 236,627,274 TOTAL COMMON STOCKS (Cost $389,528,114) 409,774,071 CASH EQUIVALENTS - 19.1% MATURITY VALUE AMOUNT (NOTE 1) Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.37%, dated 2/28/97 due 3/3/97 $2,005,897 $ 2,005,000 SHARES Taxable Central Cash Fund (b) 94,915,476 94,915,476 TOTAL CASH EQUIVALENTS (Cost $96,920,476) 96,920,476 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $486,448,590) $ 506,694,547 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $369,502,797 and $11,693,904, respectively (see Note 3 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 $61,662 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $486,519,928. Net unrealized appreciation aggregated $20,174,619, of which $31,741,241 related to appreciated investment securities and $11,566,622 related to depreciated investment securities. The fund hereby designates approximately $532,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 29% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value (including repurchase agreements of $2,005,000) (cost $486,448,590) - See $ 506,694,547 accompanying schedule Cash 1,275,037 Receivable for fund shares sold 5,602,027 Dividends receivable 211,646 Interest receivable 229,908 Redemption fees receivable 36,662 Other receivables 4,752 TOTAL ASSETS 514,054,579 LIABILITIES Payable for investments purchased $ 43,817,088 Payable for fund shares redeemed 10,909,356 Accrued management fee 157,357 Other payables and 383,598 accrued expenses TOTAL LIABILITIES 55,267,399 NET ASSETS $ 458,787,180 Net Assets consist of: Paid in capital $ 437,740,159 Undistributed net investment income 162,209 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 638,855 Net unrealized appreciation (depreciation) on investments 20,245,957 NET ASSETS, for 17,810,662 $ 458,787,180 shares outstanding NET ASSET VALUE and redemption price per share ($458,787,180 (divided by) 17,810,662 shares) $25.76 Maximum offering price per share (100/97.00 of $25.76) $26.56
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 928,425 Dividends Interest 739,269 TOTAL INCOME 1,667,694 EXPENSES Management fee $ 448,938 Transfer agent fees 523,823 Accounting fees and expenses 88,697 Non-interested trustees' compensation 218 Custodian fees and expenses 7,000 Registration fees 309,323 Audit 26,537 Legal 259 Miscellaneous 1,633 Total expenses before reductions 1,406,428 Expense reductions (8,471 1,397,957 ) NET INVESTMENT INCOME 269,737 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 1,506,713 Foreign currency transactions (217 1,506,496 ) Change in net unrealized appreciation (depreciation) 16,730,770 on investment securities NET GAIN (LOSS) 18,237,266 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 18,507,003 OTHER INFORMATION $ 903,649 Sales charges paid to FDC Deferred sales charges withheld $ 1,311 by FDC Exchange fees withheld by FSC $ 38,168 Expense reductions $ 8,471 Directed brokerage arrangement
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 269,737 $ 166,720 Net investment income Net realized 1,506,496 5,390,883 gain (loss) Change in 16,730,770 2,887,650 net unrealized appreciation (depreciation ) NET INCREASE 18,507,003 8,445,253 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (152,473 (62,341 shareholders ) ) From net investment income From net (1,573,937 (1,755,263 realized gain ) ) In excess of - (564,639 net realized ) gain TOTAL (1,726,410 (2,382,243 DISTRIBUTION ) ) S Share 516,393,133 73,164,616 transactions Net proceeds from sales of shares Reinvestmen 1,697,946 2,335,190 t of distributions Cost of (114,791,803 (70,682,177 shares ) ) redeemed Paid in 325,639 155,181 capital portion of redemption fees NET INCREASE 403,624,915 4,972,810 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 420,405,508 11,035,820 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 38,381,672 27,345,852 period End of period $ 458,787,180 $ 38,381,672 (including undistribute d net investment income of $162,209 and $115,192, respectivel y) OTHER INFORMATION Shares Sold 20,890,431 4,209,639 Issued in 83,782 138,315 reinvestment of distributions Redeemed (5,239,816 (4,034,436 ) ) Net increase 15,734,397 313,518 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 18.49 $ 15.51 $ 17.75 $ 14.22 $ 11.48 value, beginning of period Income from .08 .09 (.03) (.02) - Investment Operations Net investment income Net realized 7.80 4.29 (2.25) 4.95 2.65 and unrealized gain (loss) Total from 7.88 4.38 (2.28) 4.93 2.65 investment operations Less (.06) (.04) - (.01) - Distributions From net investment income From net (.65) (1.09) - (1.47) - realized gain In excess of - (.35) - - - net realized gain Total (.71) (1.48) - (1.48) - distributions Redemption .10 .08 .04 .08 .09 fees added to paid in capital Net asset $ 25.76 $ 18.49 $ 15.51 $ 17.75 $ 14.22 value, end of period TOTAL 44.27% 29.85% (12.62)% 35.87% 23.87% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 458,787 $ 38,382 $ 27,346 $ 59,810 $ 24,687 end of period (000 omitted) Ratio of 1.94% 1.64% E 2.54% E 1.79% 2.21% A expenses to average net assets Ratio of 1.93% F 1.61% F 2.54% 1.77% F 2.21% A expenses to average net assets after expense reductions Ratio of net .37% .50% (.20)% (.14)% .02% A investment income (loss) to average net assets Portfolio 16% 166% 139% 295% 111% A turnover rate Average $ .0392 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 8 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS FINANCIAL SERVICES 35.54% 203.06% 307.71% FINANCIAL SERVICES 31.47% 193.97% 295.48% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS FINANCIAL SERVICES 35.54% 24.83% 15.09% FINANCIAL SERVICES 31.47% 24.07% 14.74% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9331.07 10289.00 1987/04/30 8744.00 10197.43 1987/05/31 8682.07 10286.15 1987/06/30 9002.53 10805.60 1987/07/31 9107.55 11353.44 1987/08/31 9635.37 11776.92 1987/09/30 9293.36 11519.01 1987/10/31 7190.17 9037.81 1987/11/30 6751.22 8293.10 1987/12/31 7093.29 8924.20 1988/01/31 7627.38 9299.91 1988/02/29 7881.43 9733.29 1988/03/31 7745.74 9432.53 1988/04/30 7610.06 9537.23 1988/05/31 7685.12 9620.20 1988/06/30 8158.58 10061.77 1988/07/31 8103.73 10023.54 1988/08/31 8080.63 9682.74 1988/09/30 8415.52 10095.22 1988/10/31 8438.62 10375.87 1988/11/30 8089.29 10227.49 1988/12/31 7945.50 10406.47 1989/01/31 8352.74 11168.23 1989/02/28 8334.90 10890.14 1989/03/31 8944.26 11143.88 1989/04/30 9107.75 11722.25 1989/05/31 9678.47 12197.00 1989/06/30 9611.03 12127.48 1989/07/31 10380.27 13222.59 1989/08/31 10673.60 13481.75 1989/09/30 10895.10 13426.47 1989/10/31 9856.47 13114.98 1989/11/30 9721.78 13382.52 1989/12/31 9482.35 13703.71 1990/01/31 8681.84 12784.19 1990/02/28 8996.00 12949.10 1990/03/31 8857.04 13292.25 1990/04/30 8542.88 12959.95 1990/05/31 9295.06 14223.54 1990/06/30 9035.27 14126.82 1990/07/31 8455.27 14081.62 1990/08/31 7443.30 12808.64 1990/09/30 6334.66 12184.86 1990/10/31 5781.85 12132.46 1990/11/30 6597.47 12916.22 1990/12/31 7175.31 13276.58 1991/01/31 7827.33 13855.44 1991/02/28 8726.56 14846.11 1991/03/31 9143.73 15205.38 1991/04/30 9440.38 15241.87 1991/05/31 10163.48 15900.32 1991/06/30 9338.41 15172.09 1991/07/31 10076.95 15879.11 1991/08/31 10744.42 16255.44 1991/09/30 10679.53 15983.98 1991/10/31 10914.38 16198.16 1991/11/30 10104.76 15545.38 1991/12/31 11597.34 17323.77 1992/01/31 12175.02 17001.55 1992/02/29 13049.35 17222.57 1992/03/31 12755.82 16886.73 1992/04/30 13246.07 17383.20 1992/05/31 13814.39 17468.37 1992/06/30 14132.25 17208.09 1992/07/31 14536.39 17911.90 1992/08/31 13702.65 17544.71 1992/09/30 14129.07 17751.74 1992/10/31 14689.14 17813.87 1992/11/30 15793.37 18421.32 1992/12/31 16563.33 18647.90 1993/01/31 17608.08 18804.55 1993/02/28 18076.18 19060.29 1993/03/31 19022.56 19462.46 1993/04/30 18111.89 18991.47 1993/05/31 18118.76 19500.44 1993/06/30 18795.17 19556.99 1993/07/31 19299.90 19478.76 1993/08/31 19900.77 20217.01 1993/09/30 20360.86 20061.34 1993/10/31 19814.93 20476.61 1993/11/30 18932.51 20282.08 1993/12/31 19470.92 20527.49 1994/01/31 20792.70 21225.43 1994/02/28 20037.95 20650.22 1994/03/31 19122.87 19749.87 1994/04/30 19849.04 20002.67 1994/05/31 20696.28 20330.71 1994/06/30 20207.64 19832.61 1994/07/31 20913.02 20483.12 1994/08/31 21645.98 21322.93 1994/09/30 20014.55 20800.52 1994/10/31 19908.15 21268.53 1994/11/30 18647.14 20493.93 1994/12/31 18760.72 20797.85 1995/01/31 19730.95 21337.14 1995/02/28 20983.99 22168.65 1995/03/31 21353.81 22822.85 1995/04/30 22023.83 23494.98 1995/05/31 23246.41 24434.07 1995/06/30 23355.18 25001.68 1995/07/31 24138.33 25830.73 1995/08/31 25078.10 25895.57 1995/09/30 26509.52 26988.36 1995/10/31 25830.80 26892.01 1995/11/30 27571.12 28072.57 1995/12/31 27642.08 28613.25 1996/01/31 28934.47 29587.24 1996/02/29 29178.74 29861.52 1996/03/31 29525.15 30149.08 1996/04/30 29197.47 30593.48 1996/05/31 29875.95 31382.49 1996/06/30 30313.10 31502.05 1996/07/31 29652.83 30110.29 1996/08/31 30536.22 30745.32 1996/09/30 32562.56 32475.67 1996/10/31 34625.32 33371.34 1996/11/30 37598.80 35893.88 1996/12/31 36520.06 35182.83 1997/01/31 38694.38 37381.05 1997/02/28 39543.13 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Financial Services Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $39,548 - a 295.48% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS First Chicago NBD Corp. 4.9 Wachovia Corp. 4.8 National City Corp. 4.7 Household International, Inc. 4.7 American Express Co. 4.5 Bank of New York Co., Inc. 4.4 Barnett Banks, Inc. 4.3 Associates First Capital Corp. 4.2 Allstate Corp. 4.2 Citicorp 4.2 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 National Commercial Banks 31.4% Personal Credit Institutions 15.6% Financial Services 10.9% Property-Casualty & Reinsurance 9.2% Federal & Federally Sponsored Credit Agencies 7.7% All Others 25.2% * Row: 1, Col: 1, Value: 25.2 Row: 1, Col: 2, Value: 7.7 Row: 1, Col: 3, Value: 9.199999999999999 Row: 1, Col: 4, Value: 10.9 Row: 1, Col: 5, Value: 15.6 Row: 1, Col: 6, Value: 31.4 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS FINANCIAL SERVICES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Louis Salemy, Portfolio Manager of Fidelity Select Financial Services Portfolio Q. HOW DID THE FUND PERFORM, LOUIS? A. Very well. For the 12 months that ended February 28, 1997, the fund provided a total return of 35.54%. The Standard & Poor's 500 Index had a return of 26.16% over the same time period. Q. IT WAS A STRONG PERIOD FOR FINANCIAL SERVICE STOCKS. WHAT FACTORS WERE CONDUCIVE TO THIS PERFORMANCE? A. The main factor I'd point to was the friendly investing environment. The interest rate situation stayed fairly moderate throughout the period - rates weren't going down and they weren't going up. This climate typically leads to strong performance in the financial service sector. Additionally, there was a decent amount of takeover activity going on, and the market reacted favorably to some of those deals. Q. WHY WERE COMPANIES ENGAGING IN TAKEOVER ACTIVITY, AND WHY DOES THE MARKET LOOK FAVORABLY UPON THOSE TRANSACTIONS? A. In an economy like we've seen, scale - or size - becomes an overriding factor. By that, I mean companies are of the mindset that bigger is better. Companies also needed to become more competitive; if a company was to run its business on a daily basis without doing anything proactively, its returns would most likely be on the down slope. In seeking to gain a competitive edge, the bigger is better mentality took shape. To answer the second part of the question, the market thinks highly of takeovers if it feels the deal is logical. In such instances, both sides in the transaction can come out winners. Q. VALUATIONS THROUGHOUT THE EQUITY MARKETS WERE QUITE HIGH DURING THE PERIOD. HOW DID THIS AFFECT YOUR INVESTING UNIVERSE? A. Stocks were quite expensive, and this was true of the overall market. In that kind of environment, I try to consider the share price relative to where the market is. On an absolute basis, I've never seen such high valuation levels. In selecting stocks for the portfolio, I'm willing to pay a higher price, but I need to see positive future return prospects. Q. WITHIN THE FINANCIAL SERVICE SECTOR, BANKS PERFORMED QUITE WELL. WHAT WAS GOING ON IN THIS AREA? A. Overall, the performance of the larger-capitalization banks exceeded that of the smaller caps. The fund had more of a bias toward the larger-cap banks, which worked in my favor. When looking at bank stocks, I tend to gravitate toward the ones that are taking proactive steps to improve their businesses. During the period, the larger banks fell into this category more so than their smaller counterparts. Q. WHICH INDIVIDUAL STOCKS PERFORMED WELL? WHICH WOULD YOU IDENTIFY AS DISAPPOINTMENTS? A. American Express was a very solid contributor to the fund's overall performance. There was some speculation during the period that American Express was going to merge with Citicorp, and this may have fueled an uptick in the share price. Household International, a consumer credit company, also performed well. In terms of disappointments, Mercury Finance, a consumer credit company no longer owned by the fund, was a disappointment due to the company's internal accounting problems. I also could have owned more large-cap regional banks, but valuations and my perception of overall business prospects in that area kept me conservative. Q. WHAT'S YOUR OUTLOOK? A. I'll continue to seek out stocks of companies that are taking steps to increase their returns. If interest rates were to rise and credit losses increased, this would have a negative effect on the financial service sector as a whole. 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 February 28, 1997, more than $426 million MANAGER: Louis Salemy, since 1994; manager, Fidelity Select Brokerage and Investment Management Portfolio, 1995- February 1997; joined Fidelity in 1992 (checkmark) FINANCIAL SERVICES PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 89.4% SHARES VALUE (NOTE 1) BANKS - 37.1% NATIONAL COMMERCIAL BANKS - 31.4% Bank of New York Co., Inc. 494,468 $ 19,160,632 BankAmerica Corp. 100,000 11,375,000 Capital One Financial Corp. 400,000 15,900,000 Citicorp 155,000 18,096,250 Comerica, Inc. 109,445 6,580,381 First Bank System, Inc. 100,000 7,850,000 First Union Corp. 1 88 Mercantile Bancorp., Inc. 22,050 1,276,144 National City Corp. 405,000 20,452,500 NationsBank Corp. 120,000 7,185,000 Republic New York Corp. 3,000 278,625 U.S. Bancorp 152,000 7,505,000 Wachovia Corp. 344,500 20,971,438 136,631,058 STATE BANKS FEDERAL RESERVE - 5.7% Barnett Banks, Inc. 405,600 18,759,000 Northern Trust Corp. 140,000 5,950,000 24,709,000 TOTAL BANKS 161,340,058 CREDIT & OTHER FINANCE - 29.6% BANK HOLDING COMPANY OFFICES - 3.1% Fleet Financial Group, Inc. 224,167 13,674,187 FINANCIAL SERVICES - 10.9% American Express Co. 297,300 19,435,988 Equitable Companies, Inc. 44,200 1,386,775 First Chicago NBD Corp. 367,000 21,469,500 First USA, Inc. 100,000 4,862,500 47,154,763 PERSONAL CREDIT INSTITUTIONS - 15.6% Associates First Capital Corp. 379,000 18,286,750 Beneficial Corp. 211,800 14,640,675 Household International, Inc. 209,300 20,275,938 MBNA Corp. 450,000 14,400,000 67,603,363 TOTAL CREDIT & OTHER FINANCE 128,432,313 FEDERAL SPONSORED CREDIT - 7.7% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 7.7% Federal Home Loan Mortgage Corporation 369,600 10,995,600 Federal National Mortgage Association 229,900 9,196,000 Student Loan Marketing Association 126,000 13,340,250 33,531,850 INSURANCE - 12.4% INSURANCE CARRIERS - 2.0% AMBAC, Inc. 92,400 6,167,700 MGIC Investment Corp. 35,000 2,751,875 8,919,575 LIFE INSURANCE - 1.2% American Bankers Insurance Group, Inc. 6,400 352,800 Aon Corp. 50,000 3,168,750 Conseco, Inc. 694 27,240 Providian Corp. 21,800 1,218,075 Torchmark Corp. 5,000 294,375 5,061,240 SHARES VALUE (NOTE 1) PROPERTY-CASUALTY & REINSURANCE - 9.2% Allstate Corp. 286,400 $ 18,150,600 Berkley (W.R.) Corp. 50,000 2,568,750 Chubb Corp. (The) 31,200 1,829,100 General Re Corp. 70,000 11,873,750 PMI Group, Inc. 50,000 2,737,500 Progressive Corp. 40,000 2,645,000 39,804,700 TOTAL INSURANCE 53,785,515 SAVINGS & LOANS - 0.5% SAVINGS BANKS & SAVINGS & LOANS - 0.5% Standard Federal Bancorp., Inc. 39,300 2,264,663 SECURITIES INDUSTRY - 2.1% SECURITY BROKERS & DEALERS - 2.1% Lehman Brothers Holdings, Inc. 274,000 9,213,250 TOTAL COMMON STOCKS (Cost $307,070,630) 388,567,649 CASH EQUIVALENTS - 10.6% Taxable Central Cash Fund (a) (Cost $46,014,339) 46,014,339 46,014,339 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $353,084,969) $ 434,581,988 LEGEND 1. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $279,579,444 and $204,300,098, respectively. (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $77,580 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $353,308,112. Net unrealized appreciation aggregated $81,273,876, of which $84,222,602 related to appreciated investment securities and $2,948,726 related to depreciated investment securities. The fund hereby designates approximately $9,742,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 44% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. FINANCIAL SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 434,581,988 (cost $353,084,969) - See accompanying schedule Receivable for fund shares sold 3,382,642 Dividends receivable 642,019 Interest receivable 139,755 Redemption fees receivable 5,774 Other receivables 9,347 TOTAL ASSETS 438,761,525 LIABILITIES Payable for investments purchased $ 8,601,972 Payable for fund shares redeemed 3,270,342 Accrued management fee 203,721 Other payables and accrued expenses 261,303 TOTAL LIABILITIES 12,337,338 NET ASSETS $ 426,424,187 Net Assets consist of: Paid in capital $ 319,358,050 Undistributed net investment income 1,356,398 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 24,212,720 Net unrealized appreciation (depreciation) on investments 81,497,019 NET ASSETS, for 5,141,533 $ 426,424,187 shares outstanding NET ASSET VALUE and redemption price per share ($426,424,187 (divided by) 5,141,533 shares) $82.94 Maximum offering price per share (100/97.00 of $82.94) $85.51
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 5,424,124 Dividends Interest 1,294,392 TOTAL INCOME 6,718,516 EXPENSES Management fee $ 1,661,452 Transfer agent fees 1,891,458 Accounting fees and expenses 276,349 Non-interested trustees' compensation 1,304 Custodian fees and expenses 8,058 Registration fees 71,847 Audit 41,756 Legal 1,735 Miscellaneous 7,536 Total expenses before reductions 3,961,495 Expense reductions (54,595 3,906,900 ) NET INVESTMENT INCOME 2,811,616 REALIZED AND UNREALIZED GAIN (LOSS) 37,306,366 Net realized gain (loss) on investment securities Change in net unrealized appreciation (depreciation) on investment securities 40,110,184 NET GAIN (LOSS) 77,416,550 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 80,228,166 OTHER INFORMATION $ 1,400,884 Sales charges paid to FDC Deferred sales charges withheld $ 8,487 by FDC Exchange fees withheld by FSC $ 97,155 Expense reductions $ 54,119 Directed brokerage arrangements Custodian interest credits 66 Transfer agent interest credits 410 $ 54,595
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 2,811,616 $ 3,488,580 Net investment income Net realized 37,306,366 13,966,548 gain (loss) Change in 40,110,184 35,177,894 net unrealized appreciation (depreciation ) NET INCREASE 80,228,166 52,633,022 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (2,448,822 (1,512,445 shareholders ) ) From net investment income From net (17,755,935 (3,719,914 realized gain ) ) TOTAL (20,204,757 (5,232,359 DISTRIBUTION ) ) S Share 393,395,549 434,251,303 transactions Net proceeds from sales of shares Reinvestmen 19,821,424 5,143,919 t of distributions Cost of (317,821,398 (369,962,899 shares ) ) redeemed Paid in 538,820 544,495 capital portion of redemption fees NET INCREASE 95,934,395 69,976,818 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 155,957,804 117,377,481 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 270,466,383 153,088,902 period End of period $ 426,424,187 $ 270,466,383 (including undistribute d net investment income of $1,356,398 and $1,976,083 , respectivel y) OTHER INFORMATION Shares Sold 5,282,928 7,271,619 Issued in 276,585 83,493 reinvestment of distributions Redeemed (4,534,794 (6,412,630 ) ) Net increase 1,024,719 942,482 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 65.70 $ 48.23 $ 51.24 $ 53.29 $ 42.42 value, beginning of period Income from Investment Operations Net .74 1.03 .76 .29 .33 investment income Net realized 21.55 17.56 .87 5.02 14.30 and unrealized gain (loss) Total from 22.29 18.59 1.63 5.31 14.63 investment operations Less Distributions From net (.63) (.37) (.79) (.20) (.51) investment income From net (4.56) (.91) (3.93) (7.32) (3.38) realized gain Total (5.19) (1.28) (4.72) (7.52) (3.89) distributions Redemption .14 .16 .08 .16 .13 fees added to paid in capital Net asset $ 82.94 $ 65.70 $ 48.23 $ 51.24 $ 53.29 value, end of period TOTAL 35.54% 39.05% 4.72% 10.85% 36.46% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 426,424 $ 270,466 $ 153,089 $ 116,195 $ 214,612 end of period (000 omitted) Ratio of 1.45% 1.42% 1.56% 1.64% 1.54% A expenses to average net assets Ratio of 1.43% E 1.41% E 1.54% E 1.63% E 1.54% A expenses to average net assets after expense reductions Ratio of net 1.03% 1.78% 1.52% .53% .86% A investment income to average net assets Portfolio 80% 125% 107% 93% 100% A turnover rate Average $ .0433 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 8 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS HOME FINANCE 47.50% 317.69% 545.07% HOME FINANCE 43.07% 305.16% 525.72% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS HOME FINANCE 47.50% 33.10% 20.49% HOME FINANCE 43.07% 32.29% 20.13% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9121.70 10289.00 1987/04/30 8608.97 10197.43 1987/05/31 8310.88 10286.15 1987/06/30 8465.89 10805.60 1987/07/31 8436.08 11353.44 1987/08/31 9199.20 11776.92 1987/09/30 8608.97 11519.01 1987/10/31 6933.68 9037.81 1987/11/30 6367.30 8293.10 1987/12/31 7068.72 8924.20 1988/01/31 7921.23 9299.91 1988/02/29 7699.22 9733.29 1988/03/31 7486.09 9432.53 1988/04/30 7610.42 9537.23 1988/05/31 7601.54 9620.20 1988/06/30 8081.08 10061.77 1988/07/31 8223.16 10023.54 1988/08/31 8018.91 9682.74 1988/09/30 8427.41 10095.22 1988/10/31 8667.17 10375.87 1988/11/30 8232.04 10227.49 1988/12/31 8376.15 10406.47 1989/01/31 9078.66 11168.23 1989/02/28 9276.81 10890.14 1989/03/31 9321.84 11143.88 1989/04/30 9799.19 11722.25 1989/05/31 10222.50 12197.00 1989/06/30 10428.26 12127.48 1989/07/31 10791.62 13222.59 1989/08/31 11454.74 13481.75 1989/09/30 11881.68 13426.47 1989/10/31 10401.01 13114.98 1989/11/30 10064.91 13382.52 1989/12/31 9157.33 13703.71 1990/01/31 8398.18 12784.19 1990/02/28 8711.33 12949.10 1990/03/31 8730.31 13292.25 1990/04/30 8521.54 12959.95 1990/05/31 9328.14 14223.54 1990/06/30 9233.25 14126.82 1990/07/31 8436.13 14081.62 1990/08/31 7582.08 12808.64 1990/09/30 6927.31 12184.86 1990/10/31 6405.39 12132.46 1990/11/30 7098.12 12916.22 1990/12/31 7776.13 13276.58 1991/01/31 8519.93 13855.44 1991/02/28 9679.11 14846.11 1991/03/31 10123.46 15205.38 1991/04/30 10471.21 15241.87 1991/05/31 10905.90 15900.32 1991/06/30 10297.34 15172.09 1991/07/31 11398.55 15879.11 1991/08/31 11833.24 16255.44 1991/09/30 11736.64 15983.98 1991/10/31 11533.79 16198.16 1991/11/30 11002.50 15545.38 1991/12/31 12799.95 17323.77 1992/01/31 14061.37 17001.55 1992/02/29 14980.54 17222.57 1992/03/31 14726.30 16886.73 1992/04/30 15039.21 17383.20 1992/05/31 16525.53 17468.37 1992/06/30 16546.23 17208.09 1992/07/31 17359.82 17911.90 1992/08/31 16418.80 17544.71 1992/09/30 16683.46 17751.74 1992/10/31 16997.13 17813.87 1992/11/30 18741.94 18421.32 1992/12/31 20205.07 18647.90 1993/01/31 21654.67 18804.55 1993/02/28 22022.04 19060.29 1993/03/31 22806.41 19462.46 1993/04/30 21571.11 18991.47 1993/05/31 21201.95 19500.44 1993/06/30 21730.75 19556.99 1993/07/31 23127.58 19478.76 1993/08/31 24344.82 20217.01 1993/09/30 25901.30 20061.34 1993/10/31 26100.84 20476.61 1993/11/30 24933.49 20282.08 1993/12/31 25720.04 20527.49 1994/01/31 26846.08 21225.43 1994/02/28 26340.94 20650.22 1994/03/31 25846.32 19749.87 1994/04/30 26845.62 20002.67 1994/05/31 28501.40 20330.71 1994/06/30 28976.05 19832.61 1994/07/31 29616.29 20483.12 1994/08/31 30576.63 21322.93 1994/09/30 29527.98 20800.52 1994/10/31 27761.82 21268.53 1994/11/30 26326.81 20493.93 1994/12/31 26409.62 20797.85 1995/01/31 27573.47 21337.14 1995/02/28 29616.41 22168.65 1995/03/31 29566.89 22822.85 1995/04/30 31114.57 23494.98 1995/05/31 32959.40 24434.07 1995/06/30 33306.08 25001.68 1995/07/31 34643.28 25830.73 1995/08/31 37837.69 25895.57 1995/09/30 38630.10 26988.36 1995/10/31 37924.36 26892.01 1995/11/30 40016.82 28072.57 1995/12/31 40536.49 28613.25 1996/01/31 41644.81 29587.24 1996/02/29 42421.90 29861.52 1996/03/31 43390.09 30149.08 1996/04/30 42836.12 30593.48 1996/05/31 43790.94 31382.49 1996/06/30 43987.14 31502.05 1996/07/31 44771.92 30110.29 1996/08/31 46616.16 30745.32 1996/09/30 48970.52 32475.67 1996/10/31 52410.49 33371.34 1996/11/30 56334.40 35893.88 1996/12/31 55484.70 35182.83 1997/01/31 59089.36 37381.05 1997/02/28 62571.61 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Home Finance Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $62,572 - a 525.72% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Charter One Financial Corp. 3.5 Student Loan Marketing Association 2.9 Greenpoint Financial Corp. 2.7 TCF Financial Corp. 2.3 Washington Mutual, Inc. 2.1 Peoples Heritage Financial Group, Inc. 2.1 Aames Financial Corp. 1.9 Chase Manhattan Corp. 1.9 Bank United Corp. Class A 1.9 Dime Bancorp., Inc. 1.8 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Savings Banks & Savings & Loans 21.8% National Commercial Banks 21.4% Savings Banks, Federal Charter 15.6% Federal & Federally Sponsored Credit Agencies 6.2% Mortgage Bankers 5.4% All Others 29.6% * Row: 1, Col: 1, Value: 29.6 Row: 1, Col: 2, Value: 5.4 Row: 1, Col: 3, Value: 6.2 Row: 1, Col: 4, Value: 15.6 Row: 1, Col: 5, Value: 21.4 Row: 1, Col: 6, Value: 21.8 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS HOME FINANCE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Bill Rubin, Portfolio Manager of Fidelity Select Home Finance Portfolio Q. HOW DID THE FUND PERFORM, BILL? A. Very well. For the 12 months that ended February 28, 1997, the portfolio had a return of 47.50%. This topped the 26.16% return of the Standard & Poor's 500 Index over the same period. Q. CAN YOU POINT TO ANY OF THE FACTORS THAT INFLUENCED THIS STRONG PERFORMANCE? A. I believe it's helpful first to look at the investing climate over the past year from a macroeconomic standpoint. In terms of interest rates, we saw long-term rates climb during much of the first half of the period. As a result, financial services stocks didn't perform too well. By the midpoint of the period, rates started to come down and financial services stocks fared better. The financial services sector also benefited from a relatively strong economy. In periods of good economic growth, housing starts rise, consumer income and confidence levels are high, housing prices are typically stable to up, and demand increases for mortgages. With this backdrop, plus improving profitability and earnings growth, savings and loan institutions, or thrifts - which make up about 40% of the portfolio - and banks performed exceptionally well. Q. HOW HAVE THE MUCH-MALIGNED THRIFTS MANAGED TO RIGHT THEIR SHIP? A. The mid-1990s have revealed that the thrift industry is much healthier than any time in the last 20 years. Four themes - balance sheet restructuring, improved asset quality, industry consolidation and stock buybacks - have played leading roles in this turnaround. In the liability column of the balance sheet, many thrifts are reducing their cost of deposits by increasing the percentage of low-cost checking accounts and decreasing the percentage of high-cost CDs. This shift also generates more non-interest fee income. On the asset side, thrifts are increasing the percentage of higher-yielding consumer and commercial loans and decreasing the percentage of lower-yielding mortgage loans. These actions have resulted in increased net interest margins and increased return on assets and equity. Companies also are redeploying excess capital into stock buybacks and acquisitions, boosting earnings per share growth. Q. HOW DID THE REGIONAL BANKS STACK UP DURING THE PERIOD? A. Regional banks, which account for approximately 26% of the portfolio, were trading at higher multiples than thrifts. Overall, the banks are operating quite efficiently and effectively. They have been driving down operating expenses. Their returns have steadily improved, earnings have been strong, and they've been using their excess capital to buy back stock and make acquisitions. Q. SINCE YOU TOOK OVER THE FUND IN OCTOBER 1996, YOU SEEM TO BE MAKING SMALLER BETS IN THE TOP HOLDINGS . . . A. I've made a conscious effort to do that. By spreading out and diversifying as much as I can within the industry, I feel that I can get a little extra boost in overall performance with a bit less portfolio risk. I've added about 40 companies to the fund's list of holdings and, while this was partly driven by the need to put increased cash inflows to work, it also reflects my strategy of broadening out. While I'm underweighted relative to my benchmarks in some of the larger companies, I'm heavily overweighted in many of the smaller ones that may be currently overlooked or undervalued. Also, by diversifying the fund's positions, I'm able to reduce overall portfolio risk. Q. WHICH INDIVIDUAL STOCKS CONTRIBUTED POSITIVELY TO THE FUND'S RETURN? WERE THERE ANY DISAPPOINTMENTS? A. One of the best contributors was Washington Mutual, a thrift that has been a very aggressive acquiror of other companies and has enjoyed strong earnings growth. Another stock that generated good earnings was Greenpoint Financial, driven by very strong loan originations. BankAmerica, Charter One Financial, Nationsbank and Astoria Financial also contributed handsomely. In terms of disappointments, most of the stocks within the portfolio did well. There were no positions that were significant detractors. Q. WHAT'S YOUR OUTLOOK? A. While the stocks in this group should perform well, we most likely won't equal the performance levels we saw during the period. Company fundamentals should continue to improve and, as consolidation progresses, valuations should remain at elevated levels. We may start to see selected banks join thrifts in terms of consolidation activity. The overall credit and asset quality outlook is 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: December 16, 1985 FUND NUMBER: 098 TRADING SYMBOL: FSVLX SIZE: as of February 28, 1997, more than $1.1 billion MANAGER: Bill Rubin, since October 1996; manager, Fidelity Select Defense & Aerospace Portfolio, 1994 - January 1997; equity analyst, various industry sectors since 1994; joined Fidelity in 1994 (checkmark) HOME FINANCE PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.7% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 0.2% MISSILES & SPACE VEHICLES - 0.2% Orbital Sciences Corp. (a) 165,100 $ 2,847,975 BANKS - 25.9% COMMERCIAL BANKS - 0.1% Norwalk Savings Society 35,000 883,750 NATIONAL COMMERCIAL BANKS - 21.4% Bank of Boston Corp. 199,648 15,048,457 Bank of New York Co., Inc. 450,800 17,468,500 Bank of New York Co., Inc. (warrants) (a) 32,500 3,055,000 BankAmerica Corp. 166,900 18,984,875 Chase Manhattan Corp. 221,300 22,157,663 Citicorp 166,100 19,392,175 Comerica, Inc. 85,000 5,110,625 CoreStates Financial Corp. 100,000 5,262,500 First Bank System, Inc. 75,000 5,887,500 First Savings Bank of Washington Bancorp, Inc. 70,000 1,382,500 First Tennessee National Corp. 45,000 2,103,750 First Union Corp. 103,930 9,119,858 KeyCorp 95,000 5,082,500 Mellon Bank Corp. 77,800 6,253,175 National City Corp. 90,387 4,564,544 NationsBank Corp. 343,000 20,537,125 Norwest Corp. 70,000 3,482,500 PNC Financial Corp. 130,000 5,508,750 Peoples Heritage Financial Group, Inc. 795,800 24,968,225 Republic New York Corp. 149,900 13,921,963 Riggs National Corp. 270,000 5,383,125 St. Francis Capital Corp. 10,000 290,000 SouthTrust Corp. 40,000 1,585,000 TF Financial Corp. (c) 250,400 4,695,000 UnionBanCal Corp. 134,400 8,097,600 Union Planters Corp. 252,421 11,295,839 Wachovia Corp. 149,200 9,082,550 Wells Fargo & Co. 17,000 5,172,250 254,893,549 STATE BANKS FEDERAL RESERVE - 4.4% Bank Plus Corp. (a) 353,000 4,765,500 Crestar Financial Corp. 90,000 3,307,500 Dime Community Bancorp, Inc. 580,900 10,746,650 North Fork Bancorp., Inc. 483,708 19,650,638 R&G Financial Corp. Class B 102,000 2,728,500 TR Financial Corp. 190,000 6,709,375 UST Corp. 208,240 4,307,965 52,216,128 TOTAL BANKS 307,993,427 COMMUNICATIONS EQUIPMENT - 0.4% DATACOMMUNICATIONS EQUIPMENT - 0.4% 3Com Corp. (a) 150,000 4,966,406 COMPUTER SERVICES & SOFTWARE - 0.0% CAD/CAM/CAE - 0.0% Ultradata Corp. 91,000 341,250 SHARES VALUE (NOTE 1) CREDIT & OTHER FINANCE - 12.0% BANK HOLDING COMPANY OFFICES - 3.4% Fleet Financial Group, Inc. 114,800 $ 7,002,800 Greenpoint Financial Corp. 534,300 32,058,000 Little Falls Bancorp, Inc. 135,000 1,788,750 40,849,550 BUSINESS CREDIT - 0.1% Federal Agricultural Mortgage Corporation: Class A (vtg.) 10,000 270,000 Class C (non-vtg.) (a) 29,000 913,500 1,183,500 FINANCIAL SERVICES - 2.4% Delta Financial Corp. (a) 176,600 3,708,600 First Chicago NBD Corp. 240,300 14,057,550 RAC Financial Group, Inc. (a) 235,000 7,666,875 RCSB Financial, Inc. 55,000 1,849,375 Wilshire Financial Services Group, Inc. (a)(c) 81,300 1,361,775 28,644,175 MORTGAGE BANKERS - 5.4% Aames Financial Corp. 738,750 22,254,844 Cityscape Financial Corp. (a) 207,000 5,666,625 Countrywide Credit Industries, Inc. 50,000 1,456,250 First Alliance Mortgage Co. (a) 20,000 545,000 Green Tree Financial Corp. 50,000 1,875,000 Homeside, Inc. 116,000 2,102,500 Imperial Credit Industries 40,000 965,000 Imperial Credit Mortgage Holdings, Inc. 177,800 4,289,425 Money Store, Inc. 220,000 5,692,500 North American Mortgage Co. 120,000 2,445,000 PFF Bancorp, Inc. 737,500 11,984,375 Resource Bancshares Mortgage Group, Inc. 47,500 712,500 Southern Pacific Funding Corp. (a) 110,000 2,406,250 United Companies Financial Corp. 80,000 2,080,000 64,475,269 PERSONAL CREDIT INSTITUTIONS - 0.7% Associates First Capital Corp. 50,000 2,412,500 Beneficial Corp. 80,700 5,578,388 7,990,888 TOTAL CREDIT & OTHER FINANCE 143,143,382 ELECTRICAL EQUIPMENT - 2.2% CURRENT-CARRYING WIRING DEVICE - 0.1% Adflex Solutions (a) 109,800 1,482,300 ELECTRICAL EQUIPMENT - WHOLESALE - 0.2% Antec Corp. (a) 274,300 2,331,550 ELECTRICAL MACHINERY - 0.2% Amphenol Corp. Class A (a) 118,400 3,019,200 TV & RADIO COMMUNICATION EQUIPMENT - 1.1% C-COR Electronics, Inc. (a) 128,100 1,761,375 California Amplifier, Inc. (a) 438,400 2,356,400 General Instrument Corp. (a) 190,700 4,529,125 Ortel Corp. (a) 174,700 2,271,100 Scientific-Atlanta, Inc. 118,000 1,976,500 12,894,500 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRICAL EQUIPMENT - CONTINUED WIRING & LIGHTING - 0.6% Oak Industries, Inc. (a) 345,000 $ 6,986,250 TOTAL ELECTRICAL EQUIPMENT 26,713,800 ELECTRONICS - 0.6% CONNECTORS - 0.4% AMP, Inc. 104,100 4,046,888 ELECTRONIC PARTS - WHOLESALE - 0.2% Harmonic Lightwaves, Inc. (a) 163,000 2,730,250 TOTAL ELECTRONICS 6,777,138 FEDERAL SPONSORED CREDIT - 6.2% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 6.2% Federal Home Loan Mortgage Corporation 683,800 20,343,050 Federal National Mortgage Association 463,900 18,556,000 Student Loan Marketing Association 328,200 34,748,175 73,647,225 INSURANCE - 0.8% INSURANCE BROKERS & SERVICES - 0.1% Fidelity National Financial, Inc. 79,750 1,056,688 Stewart Information Services Corp. 12,900 259,613 1,316,301 PROPERTY-CASUALTY & REINSURANCE - 0.7% PMI Group, Inc. 140,000 7,665,000 TOTAL INSURANCE 8,981,301 METALS & MINING - 0.4% NONFERROUS WIRE - 0.4% Cable Design Technology Corp. (a) 188,300 4,989,950 REAL ESTATE INVESTMENT TRUSTS - 1.7% Capstead Mortgage Corp. 451,402 10,946,499 Criimi Mae, Inc. 320,000 5,160,000 Redwood Trust, Inc. 10,000 477,500 Thornburg Mortgage Asset Corp. 162,000 3,483,000 20,066,999 SAVINGS & LOANS - 40.4% SAVINGS BANKS & SAVINGS & LOANS - 21.8% Andover Bancorp., Inc. 42,500 1,195,313 Astoria Financial Corp. 494,400 21,259,200 Bankers Corp. 79,500 1,957,688 Bay View Capital, Inc. 151,780 8,499,680 BostonFed Bancorp, Inc. 79,700 1,295,125 Cameron Financial Corp. 110,000 1,828,750 Charter One Financial Corp. 872,800 41,567,100 Coast Savings Financial, Inc. (a) 235,800 11,023,650 Collective Bancorp., Inc. 530,990 21,836,964 Commercial Federal Corp. 607,650 21,799,444 Eagle Financial Corp. 10,000 295,000 First Bell Bancorp, Inc. 182,400 2,941,200 First Federal Savings & Loan Association 118,400 3,019,200 First Financial Corp. 358,925 9,601,244 FirstFed Financial Corp. (a) 442,400 11,502,400 GA Financial, Inc. 277,700 4,477,913 Glendale Federal Bank FSB (a) 574,500 15,296,063 Golden West Financial Corp. 82,300 5,575,825 Great Western Financial Corp. 471,873 20,703,428 SHARES VALUE (NOTE 1) Greater New York Savings Bank 255,000 $ 4,016,250 MAF Bancorp., Inc. 100,000 4,062,500 Pamrapo Bancorp, Inc. 35,000 695,625 Sovereign Bancorp., Inc. 797,520 10,068,690 Statewide Financial Corp. 215,000 3,762,500 TCF Financial Corp. 598,700 27,166,013 Webster Financial Corp. 108,600 4,262,550 259,709,315 SAVINGS BANKS, NO FEDERAL CHARTER - 3.0% Acadiana Bancshares, Inc. (c) 153,300 2,663,588 Avondale Financial Corp. (a)(c) 360,500 6,669,250 Century Bancorp, Inc. Class A (non-vtg.) 35,000 463,750 Dime Financial Corp. (c) 270,300 5,574,938 Downey Financial Corp. 75,000 1,771,875 First Mutual Bancorp., Inc. 67,500 1,080,000 ITLA Capital Corp. (a) 158,000 2,587,250 Ocean Financial Corp. (a) 345,000 10,479,375 People's Bancshares, Inc. 87,500 1,121,094 SIS Bancorp., Inc. 114,200 3,026,300 35,437,420 SAVINGS BANKS, FEDERAL CHARTER - 15.6% Affiliated Community Bancorp., Inc. 85,000 2,093,125 Ahmanson (H.F.) & Co. 425,000 17,478,125 Albank Financial Corp. 232,500 8,166,563 American National Bancorp., Inc. 70,200 921,375 Bank United Corp. Class A 672,800 22,034,200 Carver Bancorp, Inc. (a)(c) 142,000 1,402,250 Catskill Financial Corp. 80,000 1,270,000 CenFed Financial Corp. 137,629 4,679,386 Citizens First Financial Corp. (a)(c) 174,700 2,707,850 Coastal Bancorp, Inc. 30,000 813,750 Dime Bancorp., Inc. (a) 1,251,800 21,906,500 First Bergen Bancorp (c) 235,000 3,436,875 First Defiance Financial Corp. 482,900 6,307,881 First Federal Bancshares of Arkansas, Inc. 75,000 1,415,625 First Palm Beach Bancorp, Inc. 40,000 1,180,000 HF Bancorp, Inc. (a) 100,000 1,337,500 Haven Bancorp., Inc. 180,000 5,985,000 Interwest Bancorp., Inc. 27,000 945,000 Long Island Bancorp., Inc. 501,300 18,360,113 ML Bancorp, Inc. 138,900 2,361,300 Provident Financial Holdings, Inc. 190,000 3,040,000 Quaker City Bancorp (a) 90,000 1,755,000 RedFed Bancorp, Inc. (a) 350,000 4,987,500 Roosevelt Financial Group, Inc. 265,000 6,095,000 SGV Bancorp., Inc. (a)(c) 140,000 1,907,500 Teche Holding Co. 10,000 150,000 Washington Federal, Inc. 630,680 16,082,340 Washington Mutual, Inc. 472,500 24,983,438 Yonkers Financial Corp. 85,000 1,147,500 184,950,696 TOTAL SAVINGS & LOANS 480,097,431 SECURITIES INDUSTRY - 1.6% SECURITY & COMMODITY BROKERS - 1.6% Advest Group, Inc. (The) (a) 97,400 1,327,075 Alex Brown, Inc. 151,050 8,779,781 Edwards (A.G.), Inc. 100,000 3,550,000 McDonald & Co. Investments, Inc. 99,300 3,835,463 Morgan Keegan, Inc. 112,000 2,086,000 19,578,319 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SERVICES - 0.3% MANAGEMENT CONSULTING SERVICES - 0.3% Aresco, Inc. (a) 141,000 $ 2,890,500 Firstmark Corp. (a) 103,400 258,500 3,149,000 TOTAL COMMON STOCKS (Cost $860,680,002) 1,103,293,603 CONVERTIBLE PREFERRED STOCKS - 0.8% REAL ESTATE INVESTMENT TRUSTS - 0.8% Criimi Mae, Inc. $2.7188 200,000 7,375,000 Walden Residential Properties, Inc., Series B, $2.29 80,000 2,340,000 TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $8,486,250) 9,715,000 CASH EQUIVALENTS - 6.5% MATURITY VALUE AMOUNT (NOTE 1) Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account 5.39%, dated 2/28/97 due 3/3/97 $ 2,519,131 2,518,000 SHARES Taxable Central Cash Fund (b) 74,171,983 74,171,983 TOTAL CASH EQUIVALENTS (Cost $76,689,983) 76,689,983 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $945,856,235) $ 1,189,698,586 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 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 Acadiana Bancshares, Inc. $ - $ 118,000 $ 28,494 $ 2,663,588 Avondale Financial Corp. 1,491,614 602,263 - 6,669,250 Cameron Financial Corp. - 1,061,406 22,204 - Carver Bancorp, Inc. - 603,477 - 1,402,250 Citizens First Financial Corp. - - - 2,707,850 Dime Financial Corp. - - 45,951 5,574,938 Farmers & Mechanics Bank - 72,600 - - First Bergen Bancorp - - - 3,436,875 Mississippi View Holding Co. - 309,375 - - North Side Savings Bank 515,650 920,416 206,125 - SGV Bancorp., Inc. - 1,163,938 - 1,907,500 TF Financial Corp. 565,779 - - 4,695,000 Wells Financial Corp. - 1,074,813 - - Wilshire Financial Services Group, Inc. - - - 1,361,775 Totals $ 2,573,043 $ 5,926,288 $ 302,774 $ 30,419,026 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $788,129,655 and $500,497,099, respectively (see Note 3 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 $201,617 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the bank borrowing program.The maximum loan and the average daily balances during the period for which loans were outstanding amounted to $7,933,000 and $4,429,000, respectively. The weighted average interest rate was 5.6% (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $946,282,633. Net unrealized appreciation aggregated $243,415,953, of which $253,216,475 related to appreciated investment securities and $9,800,522 related to depreciated investment securities. The fund hereby designates approximately $32,867,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 46% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. HOME FINANCE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at $ 1,189,698,586 value (including repurchase agreements of $2,518,000) (cost $945,856,235) - See accompanying schedule Cash 833 Receivable for fund shares sold 19,872,119 Dividends receivable 928,412 Interest receivable 253,221 Redemption fees receivable 11,685 Other receivables 31,812 TOTAL ASSETS 1,210,796,668 LIABILITIES Payable for investments purchased $ 24,182,300 Payable for fund shares redeemed 8,624,153 Accrued management fee 526,094 Other payables and accrued expenses 636,091 TOTAL LIABILITIES 33,968,638 NET ASSETS $ 1,176,828,030 Net Assets consist of: Paid in capital $ 842,131,589 Undistributed net investment income 4,942,441 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 85,911,649 Net unrealized appreciation (depreciation) on investments 243,842,351 NET ASSETS, for 25,582,585 $ 1,176,828,030 shares outstanding NET ASSET VALUE and redemption price per share ($1,176,828,030 (divided by) 25,582,585 shares) $46.00 Maximum offering price per share (100/97.00 of $46.00) $47.42
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 15,114,348 Dividends (including $302,774 received from affiliated issuers) Interest 3,898,863 TOTAL INCOME 19,013,211 EXPENSES Management fee $ 4,201,147 Transfer agent fees 4,319,789 Accounting fees and expenses 596,198 Non-interested trustees' compensation 3,399 Custodian fees and expenses 21,561 Registration fees 284,637 Audit 62,420 Legal 4,231 Interest 2,753 Miscellaneous 17,893 Total expenses before reductions 9,514,028 Expense reductions (249,618 9,264,410 ) NET INVESTMENT INCOME 9,748,801 REALIZED AND UNREALIZED GAIN (LOSS) 116,726,321 Net realized gain (loss) on investment securities (including realized gain (loss) of $3,720,046 on sales of investments in affiliated issuers) Change in net unrealized appreciation (depreciation) on investment securities 155,888,034 NET GAIN (LOSS) 272,614,355 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 282,363,156 OTHER INFORMATION $ 5,869,188 Sales charges paid to FDC Deferred sales charges withheld $ 4,653 by FDC Exchange fees withheld by FSC $ 242,828 Expense reductions $ 241,830 Directed brokerage arrangements Custodian interest credits 2,076 Transfer agent interest credits 5,712 $ 249,618
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 9,748,801 $ 7,032,404 Net investment income Net realized 116,726,321 39,131,196 gain (loss) Change in 155,888,034 72,785,221 net unrealized appreciation (depreciation ) NET INCREASE 282,363,156 118,948,821 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (6,671,424) (3,332,255) shareholders From net investment income From net (44,835,125) (12,803,251) realized gain TOTAL (51,506,549) (16,135,506) DISTRIBUTION S Share 1,276,779,331 936,625,637 transactions Net proceeds from sales of shares Reinvestmen 50,762,550 15,962,916 t of distributions Cost of (999,588,979) (669,013,084) shares redeemed Paid in 983,081 722,441 capital portion of redemption fees NET INCREASE 328,935,983 284,297,910 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 559,792,590 387,111,225 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 617,035,440 229,924,215 period End of period $ 1,176,828,030 $ 617,035,440 (including undistribute d net investment income of $4,942,441 and $3,690,897 , respectivel y) OTHER INFORMATION Shares Sold 32,961,709 31,755,939 Issued in 1,354,504 501,513 reinvestment of distributions Redeemed (27,265,709) (23,337,483) Net increase 7,050,504 8,919,969 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 33.30 $ 23.92 $ 25.03 $ 22.18 $ 15.38 value, beginning of period Income from Investment Operations Net .53 .53 .20 .03 .09 investment income Net realized 14.60 9.72 2.34 4.15 6.80 and unrealized gain (loss) Total from 15.13 10.25 2.54 4.18 6.89 investment operations Less Distributions From net (.32) (.19) (.12) (.01) (.01) investment income From net (2.16) (.73) (3.60) (1.40) (.28) realized gain Total (2.48) (.92) (3.72) (1.41) (.29) distributions Redemption .05 .05 .07 .08 .20 fees added to paid in capital Net asset $ 46.00 $ 33.30 $ 23.92 $ 25.03 $ 22.18 value, end of period TOTAL 47.50% 43.24% 12.43% 19.61% 46.43% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 1,176,828 $ 617,035 $ 229,924 $ 155,563 $ 337,903 end of period (000 omitted) Ratio of 1.38% 1.35% 1.47% 1.58% 1.55% A expenses to average net assets Ratio of 1.34% E 1.32% E 1.45% E 1.58% 1.55% A expenses to average net assets after expense reductions Ratio of net 1.41% 1.80% .80% .11% .61% A investment income to average net assets Portfolio 78% 81% 124% 95% 61% A turnover rate Average $ .0417 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 8 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past five and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS INSURANCE 28.28% 128.36% 246.84% INSURANCE 24.43% 121.51% 236.44% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS INSURANCE 28.28% 17.96% 13.24% INSURANCE 24.43% 17.24% 12.90% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9206.78 10289.00 1987/04/30 8444.53 10197.43 1987/05/31 8332.43 10286.15 1987/06/30 8601.46 10805.60 1987/07/31 8683.67 11353.44 1987/08/31 9311.40 11776.92 1987/09/30 9311.40 11519.01 1987/10/31 7562.71 9037.81 1987/11/30 7032.13 8293.10 1987/12/31 7201.14 8924.20 1988/01/31 7755.07 9299.91 1988/02/29 7747.48 9733.29 1988/03/31 7565.37 9432.53 1988/04/30 7512.25 9537.23 1988/05/31 7717.13 9620.20 1988/06/30 8066.18 10061.77 1988/07/31 8104.12 10023.54 1988/08/31 8187.59 9682.74 1988/09/30 8468.35 10095.22 1988/10/31 8430.41 10375.87 1988/11/30 8248.30 10227.49 1988/12/31 8454.25 10406.47 1989/01/31 9096.92 11168.23 1989/02/28 9158.13 10890.14 1989/03/31 9372.35 11143.88 1989/04/30 9678.39 11722.25 1989/05/31 9731.95 12197.00 1989/06/30 9946.08 12127.48 1989/07/31 10781.30 13222.59 1989/08/31 11110.80 13481.75 1989/09/30 11264.05 13426.47 1989/10/31 11631.85 13114.98 1989/11/30 11946.02 13382.52 1989/12/31 11652.58 13703.71 1990/01/31 10663.50 12784.19 1990/02/28 10964.86 12949.10 1990/03/31 10910.77 13292.25 1990/04/30 10532.14 12959.95 1990/05/31 11498.04 14223.54 1990/06/30 11528.95 14126.82 1990/07/31 11358.95 14081.62 1990/08/31 10176.69 12808.64 1990/09/30 9295.79 12184.86 1990/10/31 8924.89 12132.46 1990/11/30 10107.15 12916.22 1990/12/31 10508.96 13276.58 1991/01/31 11073.04 13855.44 1991/02/28 12193.48 14846.11 1991/03/31 12997.11 15205.38 1991/04/30 12927.57 15241.87 1991/05/31 13252.11 15900.32 1991/06/30 12428.31 15172.09 1991/07/31 12889.78 15879.11 1991/08/31 12811.56 16255.44 1991/09/30 12936.71 15983.98 1991/10/31 13327.78 16198.16 1991/11/30 13210.46 15545.38 1991/12/31 14363.68 17323.77 1992/01/31 14347.99 17001.55 1992/02/29 14732.59 17222.57 1992/03/31 14520.67 16886.73 1992/04/30 14151.76 17383.20 1992/05/31 14340.14 17468.37 1992/06/30 14640.14 17208.09 1992/07/31 15469.64 17911.90 1992/08/31 15016.41 17544.71 1992/09/30 15811.70 17751.74 1992/10/31 16487.26 17813.87 1992/11/30 17051.66 18421.32 1992/12/31 17595.69 18647.90 1993/01/31 18331.36 18804.55 1993/02/28 18677.56 19060.29 1993/03/31 19664.24 19462.46 1993/04/30 19196.33 18991.47 1993/05/31 18701.89 19500.44 1993/06/30 18901.40 19556.99 1993/07/31 19560.65 19478.76 1993/08/31 20558.20 20217.01 1993/09/30 20627.59 20061.34 1993/10/31 20029.06 20476.61 1993/11/30 18805.98 20282.08 1993/12/31 19034.39 20527.49 1994/01/31 19290.97 21225.43 1994/02/28 18445.21 20650.22 1994/03/31 17580.44 19749.87 1994/04/30 17770.50 20002.67 1994/05/31 18587.75 20330.71 1994/06/30 18483.22 19832.61 1994/07/31 18825.32 20483.12 1994/08/31 19338.48 21322.93 1994/09/30 19205.44 20800.52 1994/10/31 18967.87 21268.53 1994/11/30 18008.07 20493.93 1994/12/31 18967.87 20797.85 1995/01/31 19652.08 21337.14 1995/02/28 20250.76 22168.65 1995/03/31 20573.86 22822.85 1995/04/30 20763.94 23494.98 1995/05/31 21220.92 24434.07 1995/06/30 21887.34 25001.68 1995/07/31 22544.25 25830.73 1995/08/31 23201.16 25895.57 1995/09/30 24353.12 26988.36 1995/10/31 23620.05 26892.01 1995/11/30 25029.07 28072.57 1995/12/31 25570.51 28613.25 1996/01/31 26315.09 29587.24 1996/02/29 26226.92 29861.52 1996/03/31 25933.01 30149.08 1996/04/30 25611.35 30593.48 1996/05/31 26128.95 31382.49 1996/06/30 26596.78 31502.05 1996/07/31 26009.50 30110.29 1996/08/31 27104.43 30745.32 1996/09/30 28428.30 32475.67 1996/10/31 29921.38 33371.34 1996/11/30 31762.85 35893.88 1996/12/31 31632.38 35182.83 1997/01/31 32931.91 37381.05 1997/02/28 33633.25 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Insurance Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $33,644 - a 236.44% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Travelers Group, Inc. (The) 4.8 Allstate Corp. 4.4 CIGNA Corp. 4.0 Marsh & McLennan Companies, Inc. 3.4 General Re Corp. 3.4 American International Group, Inc. 2.8 UNUM Corp. 2.7 Aetna, Inc. 2.7 Progressive Corp. 2.6 AFLAC, Inc. 2.5 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Row: 1, Col: 1, Value: 19.7 Row: 1, Col: 2, Value: 5.6 Row: 1, Col: 3, Value: 8.1 Row: 1, Col: 4, Value: 9.800000000000001 Row: 1, Col: 5, Value: 22.0 Row: 1, Col: 6, Value: 34.8 Property-Casualty & Reinsurance 34.8% Life Insurance 22.0% Multi-Line Insurance 9.8% Insurance Carriers 8.1% Insurance Brokers & Services 5.6% All Others 19.7% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS INSURANCE PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW Effective February 14, 1997, Thomas Allen (right) became Portfolio Manager of Fidelity Select Insurance Portfolio. The following is an interview with Michael Tempero, who managed the portfolio during most of the period covered by this report, and Tom Allen, who discusses his outlook. Q. HOW DID THE FUND PERFORM OVER THE PAST YEAR, MIKE? M.T. The fund did well, although the second half of the period saw far better returns than the first half. For the 12 months that ended February 28, 1997, the fund was up 28.28%, compared to an increase of 26.16% for the Standard & Poor's 500 Index. Q. WHAT WERE THE KEY FACTORS BEHIND THE STRONG PERFORMANCE? M.T. In the first half of the year, there were several issues. First, some of the commercial carriers were facing larger-than-expected price decreases in their lines of business. That, in turn, prompted some of these carriers to hold onto their business, rather than spreading some of it to re-insurers; so the re-insurers had a more difficult time generating business. Third, the bond market was down during the first half of the year, and that always weighs upon these stocks because insurance companies have huge bond portfolios. The past six months, in contrast, have been great. While the bond market has rebounded, it still hasn't reached its previous highs; many insurance stocks, however, reached and then surpassed their earlier peaks. Q. WHAT TOP HOLDINGS PLAYED A SIGNIFICANT ROLE IN THE PERFORMANCE STORY? M.T. Our second-largest holding, Allstate, has been a long-time favorite of the fund and continued to generate better results, particularly in their auto insurance line. Travelers, the fund's largest holding and up over 60% during the past six months, saw good results from its Smith Barney brokerage subsidiary and its property/casualty business. CIGNA and Aetna both have been positioning themselves as life and health insurance companies. After a flat first half of the period, CIGNA was up about 30% over the past six months. Aetna was down during the first six months, but was up over 20% since late last summer. Q. LET'S TAKE A BRIEF LOOK AT THE DIFFERENT SEGMENTS WITHIN THE INSURANCE INDUSTRY . . . M.T. Sure. In the disability market, many of these companies had severe problems a couple of years ago, but have been turning their businesses around, raising prices to get them back in line with the liabilities they were facing. As an example, UNUM and Provident, both top holdings within the fund, performed well over the past six months. The auto insurance industry did well, led by Allstate. The re-insurers had a tough go of it over the past year, although some of the companies in the portfolio were bought out, to the fund's benefit. Other than the firms that were bought out, the rest of the re-insurers we owned, such as one of my top 10 holdings, General Re, had slower growth rates and didn't help the fund's performance. Q. TURNING TO YOU, TOM, WHAT'S YOUR OUTLOOK FOR THE INSURANCE INDUSTRY? T.A. You have to look at it in two pieces - the life insurers on the one hand, and the property and casualty insurers on the other. The life insurers are less cyclical - less sensitive to the economy's strength - as a rule, and there's been a lot of consolidation going on, particularly with the smaller-cap names. I expect this consolidation to continue with the small-cap life names. With the property and casualty companies, the fundamental outlook is not very good. There's excess capacity globally and poor pricing as a result. A key determinant will be how the insurance companies use their capital; they've been over-capitalized for some time. I think those companies that can achieve a better return on equity by using their capital wisely will tend to perform better. In general, insurance stocks - both life and property/casualty - are very interest rate sensitive. I would expect them to underperform if interest rates rise significantly. 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: 045 TRADING SYMBOL: FSPCX SIZE: as of February 28, 1997, more than $42 million MANAGER: Tom Allen, since February 1997; analyst, property, casualty and multi-line insurance, since 1995; joined Fidelity in 1995 (checkmark) INSURANCE PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.6% SHARES VALUE (NOTE 1) CREDIT & OTHER FINANCE - 7.0% BUSINESS CREDIT - 0.4% Granite Financial, Inc. 10,000 $ 115,000 HealthCare Financial Partners, Inc. 3,000 54,750 169,750 FINANCIAL SERVICES - 2.5% AmeriCredit Corp. (a) 15,000 292,494 Transamerica Corp. 9,200 806,150 1,098,644 MORTGAGE BANKERS - 4.1% Aames Financial Corp. 24,000 723,000 Cityscape Financial Corp. (a) 38,500 1,053,938 1,776,938 TOTAL CREDIT & OTHER FINANCE 3,045,332 HOLDING COMPANIES - 0.5% HOLDING COMPANY OFFICES - 0.5% Leucadia National Corp. 8,000 213,000 INSURANCE - 84.1% ACCIDENT & HEALTH INSURANCE - 2.5% Provident Companies, Inc. 20,200 1,100,900 INSURANCE BROKERS & SERVICES - 5.6% Frontier Insurance Group, Inc. 22,240 961,880 Marsh & McLennan Companies, Inc. 12,600 1,474,200 2,436,080 INSURANCE CARRIERS - 8.1% AFLAC, Inc. 27,300 1,102,238 AMBAC, Inc. 10,000 667,500 MBIA, Inc. 10,000 976,250 MGIC Investment Corp. 9,400 739,075 3,485,063 LIFE INSURANCE - 22.0% American Bankers Insurance Group, Inc. 6,500 358,313 Amerus Life Holdings, Inc. 3,000 63,000 Aon Corp. 7,000 443,625 Conseco, Inc. 21,400 839,950 Equitable of Iowa Companies 4,900 260,313 Jefferson Pilot Corp. 10,900 643,100 Life RE Corp. 7,900 339,700 Life USA Holding, Inc. (a) 64,500 674,227 Penn Treaty American Corp. (a) 500 14,000 Penncorp Financial Group, Inc. 4,800 168,000 Protective Life Corp. 17,300 743,900 Providian Corp. 14,000 782,250 Reliastar Financial Corp. 4,711 292,082 SunAmerica, Inc. 18,300 839,513 Torchmark Corp. 10,200 600,525 UICI (a) 20,700 610,650 UNUM Corp. 15,000 1,153,125 USLIFE Corp. 3,900 185,738 Western National Corp. 21,500 494,500 9,506,511 MULTI-LINE INSURANCE - 9.8% Aetna, Inc. 13,900 1,151,963 American Financial Group, Inc. 6,500 243,750 CIGNA Corp. 11,200 1,712,200 CNA Financial Corp. (a) 3,600 400,500 SHARES VALUE (NOTE 1) Lincoln National Corp. 6,000 $ 348,750 US Facilities Corp. 16,000 306,000 Unitrin, Inc. 1,800 97,200 4,260,363 PROPERTY-CASUALTY& REINSURANCE - 34.8% Acceptance Insurance Co., Inc. (a) 14,000 295,750 ACE Ltd. 5,200 338,000 Allmerica Financial Corp. 2,900 108,388 Allstate Corp. 30,200 1,913,925 American International Group, Inc. 10,000 1,210,000 Berkley (W.R.) Corp. 2,900 148,988 Capital Re Corp. 3,800 164,350 Chubb Corp. (The) 16,000 938,000 Enhance Financial Services Group Corp. 31,300 1,079,850 Everest Reinsurance Holdings, Inc. 7,000 220,500 Fremont General Corp. 7,700 222,338 General Re Corp. 8,600 1,458,775 HCC Insurance Holdings Inc. 11,700 288,113 Mercury General Corp. 17,500 1,074,063 PMI Group, Inc. 16,700 914,325 Progressive Corp. 16,900 1,117,513 Reinsurance Group of America, Inc. 4,700 230,300 Terra Nova Holdings Ltd. 4,900 100,450 Transatlantic Holdings, Inc. 7,000 590,625 Travelers Group, Inc. (The) 38,866 2,084,189 Unionamerica Holdings PLC sponsored ADR 8,800 143,000 Vesta Insurance Group Corp. 10,000 391,250 15,032,692 SURETY INSURANCE - 1.3% MMI Companies, Inc. 24,000 546,000 TOTAL INSURANCE 36,367,609 TOTAL COMMON STOCKS (Cost $34,243,480) 39,625,941 CASH EQUIVALENTS - 8.4% Taxable Central Cash Fund (b) (Cost $3,633,885) 3,633,885 3,633,885 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $37,877,365) $ 43,259,826 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $44,979,901 and $50,061,462, respectively (see Note 3 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 $12,029 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $37,911,795. Net unrealized appreciation aggregated $5,348,031, of which $5,749,615 related to appreciated investment securities and $401,584 related to depreciated investment securities. The fund hereby designates approximately $1,624,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 38% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. INSURANCE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 43,259,826 (cost $37,877,365) - See accompanying schedule Receivable for fund shares sold 1,144,401 Dividends receivable 34,027 Interest receivable 13,730 Redemption fees receivable 290 TOTAL ASSETS 44,452,274 LIABILITIES Payable for investments purchased $ 1,891,038 Payable for fund shares redeemed 132,129 Accrued management fee 19,034 Other payables and accrued expenses 43,200 TOTAL LIABILITIES 2,085,401 NET ASSETS $ 42,366,873 Net Assets consist of: Paid in capital $ 32,854,226 Undistributed net investment income 5,935 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 4,124,251 Net unrealized appreciation (depreciation) on investments 5,382,461 NET ASSETS, for 1,298,993 $ 42,366,873 shares outstanding NET ASSET VALUE and redemption price per share ($42,366,873 (divided by) 1,298,993 shares) $32.62 Maximum offering price per share (100/97.00 of $32.62) $33.63
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 476,091 Dividends Interest 140,572 TOTAL INCOME 616,663 EXPENSES Management fee $ 204,881 Transfer agent fees 289,430 Accounting fees and expenses 60,415 Non-interested trustees' compensation 154 Custodian fees and expenses 12,589 Registration fees 18,901 Audit 27,995 Legal 215 Miscellaneous 1,783 Total expenses before reductions 616,363 Expense reductions (17,062 599,301 ) NET INVESTMENT INCOME 17,362 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 5,349,480 Foreign currency transactions 8 5,349,488 Change in net unrealized appreciation (depreciation) on investment securities 2,095,799 NET GAIN (LOSS) 7,445,287 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 7,462,649 OTHER INFORMATION $ 248,750 Sales charges paid to FDC Deferred sales charges withheld $ 1,364 by FDC Exchange fees withheld by FSC $ 26,445 Expense Reductions $ 16,749 Directed brokerage arrangements Custodian interest credits 313 $ 17,062
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 17,362 $ 54,801 Net investment income Net realized 5,349,488 2,892,996 gain (loss) Change in 2,095,799 1,911,651 net unrealized appreciation (depreciation ) NET INCREASE 7,462,649 4,859,448 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (35,964 (62,008 shareholders ) ) From net investment income From net (1,652,709 (753,776 realized gain ) ) TOTAL (1,688,673 (815,784 DISTRIBUTION ) ) S Share 82,947,138 47,521,158 transactions Net proceeds from sales of shares Reinvestmen 1,660,671 802,788 t of distributions Cost of (87,137,695 (35,249,916 shares ) ) redeemed Paid in 129,084 37,695 capital portion of redemption fees NET INCREASE (2,400,802 13,111,725 (DECREASE) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 3,373,174 17,155,389 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 38,993,699 21,838,310 period End of period $ 42,366,873 $ 38,993,699 (including undistribute d net investment income of $5,935 and $55,083, respectivel y) OTHER INFORMATION Shares Sold 2,922,405 1,872,126 Issued in 58,747 31,329 reinvestment of distributions Redeemed (3,138,702 (1,471,921 ) ) Net increase (157,550) 431,534 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 26.77 $ 21.31 $ 19.41 $ 21.58 $ 18.03 value, beginning of period Income from Investment Operations Net .01 .06 .05 - (.04) investment income (loss) Net realized 7.21 6.15 1.78 (.24) 5.12 and unrealized gain (loss) Total from 7.22 6.21 1.83 (.24) 5.08 investment operations Less Distributions From net (.03) (.07) - (.01) - investment income In excess of - - - - (.03) net investment income From net (1.45) (.72) - (1.96) (1.71) realized gain Total (1.48) (.79) - (1.97) (1.74) distributions Redemption .11 .04 .07 .04 .21 fees added to paid in capital Net asset $ 32.62 $ 26.77 $ 21.31 $ 19.41 $ 21.58 value, end of period TOTAL 28.28% 29.51% 9.79% (1.24)% 31.98% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 42,367 $ 38,994 $ 21,838 $ 18,419 $ 26,367 end of period (000 omitted) Ratio of 1.82% 1.77% 2.36% 1.93% 2.49% A, expenses to F average net assets Ratio of 1.77% E 1.74% E 2.34% E 1.93% 2.49% A expenses to average net assets after expense reductions Ratio of net .05% .26% .25% (.02)% (.26)% investment A income (loss) to average net assets Portfolio 142% 164% 265% 101% 81% A turnover rate Average $ .0261 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 8 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS REGIONAL BANKS 43.33% 222.02% 555.53% REGIONAL BANKS 39.03% 212.36% 535.86% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS REGIONAL BANKS 43.33% 26.35% 20.69% REGIONAL BANKS 39.03% 25.58% 20.32% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9719.84 10289.00 1987/04/30 9134.66 10197.43 1987/05/31 9184.25 10286.15 1987/06/30 9511.55 10805.60 1987/07/31 9511.55 11353.44 1987/08/31 9947.96 11776.92 1987/09/30 9690.08 11519.01 1987/10/31 8103.17 9037.81 1987/11/30 7845.30 8293.10 1987/12/31 8211.96 8924.20 1988/01/31 8793.43 9299.91 1988/02/29 9017.85 9733.29 1988/03/31 9221.88 9432.53 1988/04/30 9119.87 9537.23 1988/05/31 9283.09 9620.20 1988/06/30 9935.96 10061.77 1988/07/31 9986.97 10023.54 1988/08/31 9854.35 9682.74 1988/09/30 10231.80 10095.22 1988/10/31 10354.21 10375.87 1988/11/30 10099.18 10227.49 1988/12/31 10322.88 10406.47 1989/01/31 10978.31 11168.23 1989/02/28 11142.16 10890.14 1989/03/31 12059.75 11143.88 1989/04/30 12376.54 11722.25 1989/05/31 13326.90 12197.00 1989/06/30 13105.23 12127.48 1989/07/31 14271.61 13222.59 1989/08/31 14623.72 13481.75 1989/09/30 14744.76 13426.47 1989/10/31 13380.32 13114.98 1989/11/30 13358.31 13382.52 1989/12/31 13073.54 13703.71 1990/01/31 11895.64 12784.19 1990/02/28 12385.46 12949.10 1990/03/31 12082.23 13292.25 1990/04/30 11394.15 12959.95 1990/05/31 12187.20 14223.54 1990/06/30 11709.04 14126.82 1990/07/31 10997.63 14081.62 1990/08/31 9971.34 12808.64 1990/09/30 8758.45 12184.86 1990/10/31 8501.88 12132.46 1990/11/30 9633.13 12916.22 1990/12/31 10371.33 13276.58 1991/01/31 11059.59 13855.44 1991/02/28 11997.05 14846.11 1991/03/31 12673.44 15205.38 1991/04/30 13527.83 15241.87 1991/05/31 14405.95 15900.32 1991/06/30 13551.56 15172.09 1991/07/31 14678.88 15879.11 1991/08/31 15735.00 16255.44 1991/09/30 15426.47 15983.98 1991/10/31 16067.26 16198.16 1991/11/30 15331.54 15545.38 1991/12/31 17194.94 17323.77 1992/01/31 18270.40 17001.55 1992/02/29 19746.04 17222.57 1992/03/31 19470.92 16886.73 1992/04/30 20608.91 17383.20 1992/05/31 21484.29 17468.37 1992/06/30 21698.66 17208.09 1992/07/31 21723.83 17911.90 1992/08/31 20565.90 17544.71 1992/09/30 21522.45 17751.74 1992/10/31 22441.25 17813.87 1992/11/30 24278.84 18421.32 1992/12/31 25538.34 18647.90 1993/01/31 26602.44 18804.55 1993/02/28 27430.07 19060.29 1993/03/31 28599.26 19462.46 1993/04/30 27126.96 18991.47 1993/05/31 26861.78 19500.44 1993/06/30 28360.00 19556.99 1993/07/31 28439.55 19478.76 1993/08/31 28837.31 20217.01 1993/09/30 29831.70 20061.34 1993/10/31 28227.41 20476.61 1993/11/30 27339.09 20282.08 1993/12/31 28391.61 20527.49 1994/01/31 30047.38 21225.43 1994/02/28 29203.26 20650.22 1994/03/31 28716.27 19749.87 1994/04/30 30237.96 20002.67 1994/05/31 31749.04 20330.71 1994/06/30 30960.65 19832.61 1994/07/31 31781.89 20483.12 1994/08/31 32603.13 21322.93 1994/09/30 30665.01 20800.52 1994/10/31 30533.61 21268.53 1994/11/30 28562.64 20493.93 1994/12/31 28453.56 20797.85 1995/01/31 29886.73 21337.14 1995/02/28 31477.19 22168.65 1995/03/31 31739.35 22822.85 1995/04/30 32525.85 23494.98 1995/05/31 34658.12 24434.07 1995/06/30 35095.06 25001.68 1995/07/31 36458.31 25830.73 1995/08/31 37821.56 25895.57 1995/09/30 39534.37 26988.36 1995/10/31 39342.12 26892.01 1995/11/30 41596.73 28072.57 1995/12/31 41760.64 28613.25 1996/01/31 43125.96 29587.24 1996/02/29 44363.86 29861.52 1996/03/31 45674.57 30149.08 1996/04/30 45284.52 30593.48 1996/05/31 46050.16 31382.49 1996/06/30 45695.35 31502.05 1996/07/31 45770.05 30110.29 1996/08/31 48085.63 30745.32 1996/09/30 50457.23 32475.67 1996/10/31 53687.83 33371.34 1996/11/30 58225.62 35893.88 1996/12/31 56747.10 35182.83 1997/01/31 60931.93 37381.05 1997/02/28 63586.20 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Regional Banks Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $63,586 - a 535.86% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS NationsBank Corp. 4.9 BankAmerica Corp. 4.9 Wells Fargo & Co. 4.6 Citicorp 4.2 First Chicago NBD Corp. 3.2 National City Corp. 3.2 Bank of New York Co., Inc. 3.0 Comerica, Inc. 3.0 Chase Manhattan Corp. 3.0 First Union Corp. 2.9 TOP REGIONS AS OF FEBRUARY 28, 1997 Northeast 15.1% Midwest 14.1% West 14.1% Southeast 10.6% Multi-Regional 4.9% All Others 41.2% * Row: 1, Col: 1, Value: 41.2 Row: 1, Col: 2, Value: 4.9 Row: 1, Col: 3, Value: 10.6 Row: 1, Col: 4, Value: 14.1 Row: 1, Col: 5, Value: 14.1 Row: 1, Col: 6, Value: 15.1 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS REGIONAL BANKS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW John Avery, Portfolio Manager of Fidelity Select Regional Banks Portfolio Q. JOHN, HOW DID THE FUND PERFORM? A. Very well. For the 12 months that ended February 28, 1997, the fund had a return of 43.33%. This outdistanced the Standard & Poor's 500 Index, which returned 26.16% over the same period. Q. CAN YOU ISOLATE SOME OF THE FACTORS THAT LED TO THE STRONG PERFORMANCE OF BANK STOCKS? A. Ideal economic conditions and strong fundamental characteristics, such as valuations and earnings, converged and resulted in a very favorable climate for bank stocks. Much of the strong performance within the industry can be attributed to valuation upgrades, meaning that at some point in 1996 investors came to the realization that bank stocks as a group could generate higher earnings growth than the S&P 500. This demand led to share price increases. Also, banks generally are being better managed than they have been in the past. Q. IT SEEMS THAT BANKS HAVE BEEN DELVING INTO OTHER TYPES OF BUSINESSES, SUCH AS OFFERING MUTUAL FUNDS AND CREDIT CARD SERVICES. HOW HAS THIS TREND AFFECTED THE INDUSTRY? A. As a whole, I feel the banking industry is overcapitalized - there are too many branches and too much capital. As a result, banks have been taking that excess capital and trying to reinvest in fee-driven businesses. From an investing standpoint, I try to determine if a bank has sufficient knowledge to take on a new area of business. The Barnett Bank chain in Florida, for instance, has been the top auto lender in that state for 30 years. That made its recent purchase of an auto financing company perfectly logical. Q. WITH REGARD TO VALUATION, WHICH YOU MENTIONED EARLIER, ARE INVESTORS WORRIED THAT THE CARRIAGE MAY TURN BACK INTO THE PUMPKIN? A. I think people are nervous about the high valuations, but I think you have to look at the whole stock market. On a relative basis, valuations within the banking industry aren't that much higher than what we've seen in the general market. If you look back over the past 30 years, bank stocks on average have traded in a range between 60-70% of the market. As the period closed, bank stocks were trading at 75% of the market. I still think there's upside over the long-term. Q. WERE THERE ANY PARTICULAR REGIONS OR STOCKS THAT PERFORMED WELL? WERE THERE ANY DISAPPOINTMENTS? A. The Southeast and, interestingly, California have done quite well. California's economy has taken longer to recover than that of the U.S., but it has been showing recent signs of life. Stocks of California-based companies such as BankAmerica and Wells Fargo turned in strong showings. In the Southeast, banks such as Barnett and First Union each generated higher-than-average revenue growth. There hasn't been a lot of growth in the Northeast corridor, but some restructurings have helped turn that around. In general, smaller- and medium-cap stocks stayed fairly flat as large-cap stocks rallied. Q. THE 1996 EQUITY MARKET WILL BE REMEMBERED FOR THE STRENGTH OF THE LARGE-CAP STOCKS. DID THIS TREND SEEP INTO THE BANK STOCKS AS WELL? A. Absolutely. Much of the fund's strong return can be traced to the big-cap move. Well-known banks such as NationsBank, which is the fund's top holding, Citicorp and Bank of America all posted healthy earnings. This development also contributed to the rise in valuations. Q. WHAT'S YOUR OUTLOOK? A. The key is earnings growth. Earnings growth among bank stocks has been moving at a quicker pace than that of the S&P 500. If earnings targets continue to be met, I don't see why this pace can't continue. Credit quality is a concern, simply because it's been so good. It's hard to improve upon the credit quality situation, so I think investors may need to show some caution. If the Federal Reserve Board follows through on its threat to raise interest rates, that might have a short-term negative impact. 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: 507 TRADING SYMBOL: FSRBX SIZE: as of February 28, 1997, more than $837 million MANAGER: John Avery, since September 1996; manager, Fidelity Select Chemicals Portfolio, since 1995; joined Fidelity in 1994 (checkmark) REGIONAL BANKS PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 83.9% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 0.2% MOTOR VEHICLE DEALERS (NEW & USED) - 0.2% Ugly Duckling Corp. (a) 103,300 $ 2,156,388 CLOSED END INVESTMENT COMPANY - 0.2% REGISTERED INVESTMENT COMPANIES - 0.2% Sirrom Capital Corp. 48,900 1,980,450 COMPUTER SERVICES & SOFTWARE - 0.1% COMPUTER SERVICES - 0.1% DST Systems, Inc. (a) 20,000 657,500 BANKS - 68.7% INTERNATIONAL - 4.2% Allied Irish Bank sponsored ADR 100,000 4,350,000 Barclays PLC Ord. 99,178 1,790,645 Canadian Imperial Bank of Commerce 409,700 19,853,898 HSBC Holdings PLC 210,720 5,270,702 National Bank of Canada 19,600 226,349 Royal Bank of Canada 100,100 4,035,022 35,526,616 MID-ATLANTIC - 1.2% Crestar Financial Corp. 43,566 1,601,051 HUBCO, Inc. 25,265 663,206 PNC Financial Corp. 176,200 7,466,475 Signet Banking Corp. 9,800 311,150 10,041,882 MIDWEST - 14.1% Banc One Corp. 77,600 3,424,100 Charter One Financial Corp. 30,800 1,466,850 Comerica, Inc. 418,900 25,186,363 Commercial Federal Corp. 29,400 1,054,725 Corus Bankshares, Inc. 9,800 338,100 Fifth Third Bancorp 25,200 2,101,050 First Bank System, Inc. 307,100 24,107,350 KeyCorp 48,900 2,616,150 National City Corp. 529,409 26,735,155 Northern Trust Corp. 255,600 10,863,000 Norwest Corp. 229,400 11,412,650 Pinnacle Financial Services, Inc. 48,900 1,356,975 Star Banc Corp. 207,300 8,136,525 118,798,993 NORTHEAST - 15.1% Bank of Boston Corp. 154,100 11,615,288 Bank of New York Co., Inc. 654,848 25,375,360 Bankers Trust New York Corp. 19,800 1,796,850 Chase Manhattan Corp. 250,100 25,041,263 Dime Bancorp., Inc. (a) 17,100 299,250 Eastern Bancorp 36,700 940,438 Long Island Bancorp., Inc. 98,500 3,607,563 Mellon Bank Corp. 257,200 20,672,450 North Fork Bancorp., Inc. 159,800 6,491,875 Norwalk Savings Society 29,400 742,350 ONBANCorp, Inc. 33,100 1,477,088 State Street Boston Corp. 98,900 7,949,088 U.S. Bancorp 399,800 19,740,125 Webster Financial Corp. 44,749 1,756,398 127,505,386 SHARES VALUE (NOTE 1) SOUTHEAST - 10.6% BanPonce Corp. 329,902 $ 11,876,472 Barnett Banks, Inc. 200,000 9,250,000 First Tennessee National Corp. 199,900 9,345,325 First Union Corp. 278,900 24,473,475 Meritor Savings Bank (a) 664,300 1,743,788 SouthTrust Corp. 10,900 431,913 SunTrust Banks, Inc. 60,700 3,118,463 Synovus Financial Corp. 79,200 2,762,100 Union Planters Corp. 76,800 3,436,800 Wachovia Corp. 381,900 23,248,163 89,686,499 SOUTHWEST - 0.3% FirstFed Financial Corp. (a) 24,500 637,000 Texas Regional Bancshares, Inc. Class A (vtg) 59,300 1,934,663 2,571,663 WEST - 14.1% BankAmerica Corp. 364,100 41,416,375 California Federal Bank FSB secondary contingent litigation recovery participation interest (a) 8,550 160,313 Coast Savings Financial, Inc. (a) 58,700 2,744,225 First Regional Bancorp (a) 24,500 180,688 First Security Corp. 20,000 697,500 Glendale Federal Bank FSB (a) 125,300 3,336,113 Great Western Financial Corp. 200,000 8,775,000 ITLA Capital Corp. (a) 9,800 160,475 Quaker City Bancorp (a) 24,500 477,750 Silicon Valley Bancshares (a) 83,200 3,140,800 Sterling Financial Corp. (a) 66,600 1,140,525 UnionBanCal Corp. 25,500 1,536,375 Washington Mutual, Inc. 40,000 2,115,000 Wells Fargo & Co. 128,766 39,177,056 Westcorp, Inc. 8,800 162,800 Zions Bancorp 107,600 13,396,200 118,617,195 MONEY CENTER - 4.2% Citicorp 300,800 35,118,400 MULTI-REGIONAL - 4.9% NationsBank Corp. 697,236 41,747,006 TOTAL BANKS 579,613,640 CREDIT & OTHER FINANCE - 14.5% BANK HOLDING COMPANY OFFICES - 1.3% Fleet Financial Group, Inc. 183,367 11,185,387 FINANCE LESSORS - 0.0% Onyx Acceptance Corp. 16,200 129,600 FINANCIAL SERVICES - 7.0% American Express Co. 261,400 17,089,025 First Chicago NBD Corp. 457,900 26,787,150 First USA, Inc. 284,000 13,809,500 RCSB Financial, Inc. 39,200 1,318,100 59,003,775 MORTGAGE BANKERS - 1.1% Aames Financial Corp. 17,550 528,694 Cityscape Financial Corp. (a) 44,800 1,226,400 Newcourt Credit Group, Inc. 88,100 3,300,168 Newcourt Credit Group, Inc. (c) 58,700 2,198,853 North American Mortgage Co. 88,100 1,795,038 9,049,153 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) CREDIT & OTHER FINANCE - CONTINUED PERSONAL CREDIT INSTITUTIONS - 5.1% Associates First Capital Corp. 203,800 $ 9,833,350 Beneficial Corp. 190,300 13,154,488 Household International, Inc. 170,000 16,468,750 MBNA Corp. 100,000 3,200,000 Union Acceptance Corp. Class A (a) 19,600 352,800 43,009,388 TOTAL CREDIT & OTHER FINANCE 122,377,303 INSURANCE - 0.2% MULTI-LINE INSURANCE - 0.2% US Facilities Corp. 67,200 1,285,200 PROPERTY-CASUALTY & REINSURANCE - 0.0% First Central Financial Corp. 3,700 8,325 TOTAL INSURANCE 1,293,525 TOTAL COMMON STOCKS (Cost $534,061,575) 708,078,806 CASH EQUIVALENTS - 16.1% Taxable Central Cash Fund (b) (Cost 135,894,978) 135,894,978 135,894,978 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $669,956,553) $ 843,973,784 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. 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 $2,198,853 or 0.3% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $432,627,554 and $171,029,679, respectively (see Note 3 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 $86,165 for the period (see Note 4 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $3,382,788 and $3,527,000, respectively (see Note 6 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and the average daily balances during the period for which loans were outstanding amounted to $2,363,000 and $1,558,400, respectively. The weighted average interest rate was 5.7% (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $670,450,803. Net unrealized appreciation aggregated $173,522,981, of which $176,902,785 related to appreciated investment securities and $3,379,804 related to depreciated investment securities. The fund hereby designates approximately $11,170,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 59% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. REGIONAL BANKS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 843,973,784 (cost $669,956,553) - See accompanying schedule Receivable for fund shares sold 13,462,336 Dividends receivable 1,047,713 Interest receivable 388,746 Redemption fees receivable 11,704 Other receivables 94 TOTAL ASSETS 858,884,377 LIABILITIES Payable for investments purchased $ 9,597,596 Payable for fund shares redeemed 6,916,739 Accrued management fee 365,656 Other payables and accrued expenses 525,710 Collateral on securities loaned, 3,527,000 at value TOTAL LIABILITIES 20,932,701 NET ASSETS $ 837,951,676 Net Assets consist of: Paid in capital $ 649,302,594 Undistributed net investment income 2,586,443 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 12,045,276 Net unrealized appreciation (depreciation) on investments 174,017,363 and assets and liabilities in foreign currencies NET ASSETS, for 25,528,360 $ 837,951,676 shares outstanding NET ASSET VALUE and redemption price per share ($837,951,676 (divided by) 25,528,360 shares) $32.82 Maximum offering price per share (100/97.00 of $32.82) $33.84
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 9,813,650 Dividends Interest (including income on securities loaned of $54,838) 1,896,747 TOTAL INCOME 11,710,397 EXPENSES Management fee $ 2,534,699 Transfer agent fees 2,777,054 Accounting and security lending fees 412,710 Non-interested trustees' compensation 1,863 Custodian fees and expenses 18,860 Registration fees 279,085 Audit 46,974 Legal 2,286 Interest 1,239 Miscellaneous 11,146 Total expenses before reductions 6,085,916 Expense reductions (49,887 6,036,029 ) NET INVESTMENT INCOME 5,674,368 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 27,628,253 Foreign currency transactions 2,967 27,631,220 Change in net unrealized appreciation (depreciation) on: Investment securities 124,367,985 Assets and liabilities in 132 124,368,117 foreign currencies NET GAIN (LOSS) 151,999,337 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 157,673,705 OTHER INFORMATION $ 3,497,512 Sales charges paid to FDC Deferred sales charges withheld $ 3,702 by FDC Exchange fees withheld by FSC $ 129,713 Expense reductions $ 46,524 Directed brokerage arrangements Custodian interest credits 4 Transfer agent interest credits 3,359 $ 49,887
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 5,674,368 $ 5,565,530 Net investment income Net realized 27,631,220 22,328,052 gain (loss) Change in 124,368,117 44,057,165 net unrealized appreciation (depreciation ) NET INCREASE 157,673,705 71,950,747 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (4,305,859 (3,155,657 shareholders ) ) From net investment income From net (22,112,110 (9,088,286 realized gain ) ) TOTAL (26,417,969 (12,243,943 DISTRIBUTION ) ) S Share 797,514,088 388,478,435 transactions Net proceeds from sales of shares Reinvestmen 25,807,948 11,963,979 t of distributions Cost of (432,510,460 (309,887,067 shares ) ) redeemed Paid in 706,766 312,663 capital portion of redemption fees NET INCREASE 391,518,342 90,868,010 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 522,774,078 150,574,814 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 315,177,598 164,602,784 period End of period $ 837,951,676 $ 315,177,598 (including undistribute d net investment income of $2,586,443 and $2,409,873 , respectivel y) OTHER INFORMATION Shares Sold 27,686,494 17,599,773 Issued in 968,599 512,815 reinvestment of distributions Redeemed (16,057,387 (14,323,517 ) ) Net increase 12,597,706 3,789,071 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 24.37 $ 18.01 $ 17.99 $ 20.88 $ 16.48 value, beginning of period Income from Investment Operations Net .37 .52 .37 .19 .16 investment income Net realized 9.70 6.78 .87 .93 5.09 and unrealized gain (loss) Total from 10.07 7.30 1.24 1.12 5.25 investment operations Less Distributions From net (.27) (.25) (.29) (.15) (.11) investment income From net (1.40) (.72) (.98) (3.92) (.81) realized gain Total (1.67) (.97) (1.27) (4.07) (.92) distributions Redemption .05 .03 .05 .06 .07 fees added to paid in capital Net asset $ 32.82 $ 24.37 $ 18.01 $ 17.99 $ 20.88 value, end of period TOTAL 43.33% 40.94% 7.79% 6.46% 33.10% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 837,952 $ 315,178 $ 164,603 $ 97,429 $ 315,520 end of period (000 omitted) Ratio of 1.46% 1.41% 1.58% 1.62% 1.49% A expenses to average net assets Ratio of 1.45% E 1.40% E 1.56% E 1.60% E 1.49% A expenses to average net assets after expense reductions Ratio of net 1.36% 2.42% 1.99% .88% 1.06% A investment income to average net assets Portfolio 43% 103% 106% 74% 63% A turnover rate Average $ .0384 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 8 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS BIOTECHNOLOGY 5.85% 35.42% 273.14% BIOTECHNOLOGY 2.67% 31.36% 261.95% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS BIOTECHNOLOGY 5.85% 6.25% 14.07% BIOTECHNOLOGY 2.67% 5.61% 13.73% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9658.84 10289.00 1987/04/30 9535.36 10197.43 1987/05/31 9494.20 10286.15 1987/06/30 9425.60 10805.60 1987/07/31 9439.32 11353.44 1987/08/31 9823.48 11776.92 1987/09/30 9679.42 11519.01 1987/10/31 6702.19 9037.81 1987/11/30 6050.50 8293.10 1987/12/31 6860.73 8924.20 1988/01/31 7207.31 9299.91 1988/02/29 7476.08 9733.29 1988/03/31 7426.57 9432.53 1988/04/30 7292.18 9537.23 1988/05/31 7150.72 9620.20 1988/06/30 7391.20 10061.77 1988/07/31 7384.13 10023.54 1988/08/31 7179.01 9682.74 1988/09/30 7327.54 10095.22 1988/10/31 7249.74 10375.87 1988/11/30 6910.24 10227.49 1988/12/31 7143.65 10406.47 1989/01/31 7638.75 11168.23 1989/02/28 7582.17 10890.14 1989/03/31 8140.93 11143.88 1989/04/30 8416.77 11722.25 1989/05/31 8798.71 12197.00 1989/06/30 8572.38 12127.48 1989/07/31 9364.55 13222.59 1989/08/31 9718.19 13481.75 1989/09/30 10128.42 13426.47 1989/10/31 10163.79 13114.98 1989/11/30 10482.07 13382.52 1989/12/31 10282.03 13703.71 1990/01/31 9512.68 12784.19 1990/02/28 10411.46 12949.10 1990/03/31 10850.06 13292.25 1990/04/30 10986.67 12959.95 1990/05/31 12532.57 14223.54 1990/06/30 13407.76 14126.82 1990/07/31 13444.12 14081.62 1990/08/31 13029.67 12808.64 1990/09/30 12738.83 12184.86 1990/10/31 12847.89 12132.46 1990/11/30 14403.89 12916.22 1990/12/31 14841.88 13276.58 1991/01/31 16546.38 13855.44 1991/02/28 18891.01 14846.11 1991/03/31 20841.15 15205.38 1991/04/30 19933.07 15241.87 1991/05/31 21198.43 15900.32 1991/06/30 20072.92 15172.09 1991/07/31 21879.95 15879.11 1991/08/31 23413.19 16255.44 1991/09/30 24625.70 15983.98 1991/10/31 27050.73 16198.16 1991/11/30 25243.69 15545.38 1991/12/31 29542.04 17323.77 1992/01/31 28949.90 17001.55 1992/02/29 26727.35 17222.57 1992/03/31 24699.48 16886.73 1992/04/30 22395.82 17383.20 1992/05/31 24001.89 17468.37 1992/06/30 23580.61 17208.09 1992/07/31 24813.30 17911.90 1992/08/31 23261.36 17544.71 1992/09/30 23181.54 17751.74 1992/10/31 24316.67 17813.87 1992/11/30 26711.10 18421.32 1992/12/31 26486.44 18647.90 1993/01/31 25125.29 18804.55 1993/02/28 21069.82 19060.29 1993/03/31 21386.79 19462.46 1993/04/30 21936.85 18991.47 1993/05/31 23353.93 19500.44 1993/06/30 23493.78 19556.99 1993/07/31 22719.97 19478.76 1993/08/31 23577.68 20217.01 1993/09/30 24547.27 20061.34 1993/10/31 26374.56 20476.61 1993/11/30 26169.46 20282.08 1993/12/31 26672.89 20527.49 1994/01/31 27586.54 21225.43 1994/02/28 25740.60 20650.22 1994/03/31 23139.50 19749.87 1994/04/30 22719.97 20002.67 1994/05/31 22337.73 20330.71 1994/06/30 21452.06 19832.61 1994/07/31 21507.99 20483.12 1994/08/31 23521.74 21322.93 1994/09/30 23447.16 20800.52 1994/10/31 22645.39 21268.53 1994/11/30 22225.86 20493.93 1994/12/31 21824.97 20797.85 1995/01/31 22803.88 21337.14 1995/02/28 23587.01 22168.65 1995/03/31 23969.25 22822.85 1995/04/30 24715.08 23494.98 1995/05/31 24938.83 24434.07 1995/06/30 25843.15 25001.68 1995/07/31 26999.20 25830.73 1995/08/31 28080.66 25895.57 1995/09/30 29339.25 26988.36 1995/10/31 29106.18 26892.01 1995/11/30 30075.76 28072.57 1995/12/31 32541.08 28613.25 1996/01/31 34465.70 29587.24 1996/02/29 34194.76 29861.52 1996/03/31 33652.87 30149.08 1996/04/30 34379.47 30593.48 1996/05/31 34780.67 31382.49 1996/06/30 32679.12 31502.05 1996/07/31 30281.44 30110.29 1996/08/31 31676.11 30745.32 1996/09/30 33529.29 32475.67 1996/10/31 32363.89 33371.34 1996/11/30 32554.94 35893.88 1996/12/31 34366.15 35182.83 1997/01/31 35941.23 37381.05 1997/02/28 36194.93 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Biotechnology Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $36,195 - a 261.95% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Amgen, Inc. 9.8 Genentech, Inc. special 8.6 Immunex Corp. 3.7 Biogen, Inc. 3.7 Schering-Plough Corp. 2.9 Protein Design Labs, Inc. 2.8 Guilford Pharmaceuticals, Inc. 2.1 Gilead Sciences, Inc. 1.9 Interneuron Pharmaceuticals, Inc. 1.9 Alkermes, Inc. 1.8 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Biotechnology 46.9% Drugs 18.8% Pharmaceutical Preparations 17.0% Commercial Laboratory Research 3.6% Medical Supplies & Appliances 1.5% All Others 12.2% * Row: 1, Col: 1, Value: 12.2 Row: 1, Col: 2, Value: 1.5 Row: 1, Col: 3, Value: 3.6 Row: 1, Col: 4, Value: 17.0 Row: 1, Col: 5, Value: 18.8 Row: 1, Col: 6, Value: 46.9 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS BIOTECHNOLOGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Karen Firestone, Portfolio Manager of Fidelity Select Biotechnology Portfolio Q. KAREN, HOW DID THE FUND PERFORM? A. For the one-year period that ended February 28, 1997, the fund returned 5.85%. By comparison, the Standard & Poor's 500 Index returned 26.16% over the same time period. Q. WHAT WAS THE ENVIRONMENT LIKE FOR BIOTECHNOLOGY COMPANIES DURING THE PERIOD? A. Quite weak. During 1996, the industry was not favored by Wall Street, which liked companies with earnings momentum. That ruled out the biotechnology industry since many biotech companies don't have any earnings. That's because a large portion of biotech firms are in the process of developing a new drug or product, but have not yet marketed it. So in 1996, the biotech industry dropped by 8% to 10%. Given the industry's downturn, I think the fund's return over the past year was respectable and can be traced to a couple of factors. First, the stocks I picked tended to outperform other biotech stocks, and, second, the fund benefited from its sizable holdings in large drug companies - some of 1996's strongest stocks. Without these companies, especially excellent performers such as Schering-Plough, the fund would have turned in a negative performance. I should point out that biotech stocks picked up during the first two months of 1997. So, I have dropped some of the fund's drug stocks and added more biotech companies. Q. A YEAR AGO, THE FUND RETURNED 44.97% FOR THE ONE-YEAR PERIOD ENDING FEBRUARY 29, 1996, BUT RETURNED LESS THAN 6% FOR THE PAST YEAR. THAT'S A LOT OF MOVEMENT UP AND DOWN. IS BIOTECHNOLOGY CONSIDERED ONE OF THE MOST VOLATILE INDUSTRIES? A. Definitely. A major reason this industry is so volatile is that it is quite difficult to determine the value of research and development companies that are introducing their first drug or product. The market has to value what each company's potential future revenue is going to be. When the market is optimistic about biotech, as it has been since the beginning of 1997, you tend to get higher valuations. When it's pessimistic, like it was in 1996, valuations are lower. As a result, there's a huge range of potential value that one could give the same company. Q. SO, HOW DO YOU MAKE INVESTMENT DECISIONS IN SUCH A VOLATILE ENVIRONMENT? A. The way I manage the fund is to have a combination of large, established biotech companies with earnings momentum, such as Amgen, Genentech and Biogen, and companies that I consider to be late-stage, pre-earnings companies. By this I mean companies in the late stage of clinical development that I believe will be successful. Q. WHAT ARE SOME EXAMPLES OF LATE-STAGE COMPANIES THE FUND OWNED DURING THE PERIOD? A. The best example is Protein Design Labs. This company has been around for about 10 years, and it looked good over the period because it was frugal about spending and had five drugs in various stages of development. Most notably, the company has a new drug that studies show can lessen the chance of a transplanted kidney being rejected by up to 40%. The company expects this drug to be on the market in 1998. Another interesting story is Guilford Pharmaceuticals, which has a drug for brain cancer that's been approved but hasn't been launched yet. Q. WERE THERE ANY INVESTMENT DECISIONS YOU WISH YOU HAD MADE DIFFERENTLY OVER THE PERIOD? A. Sure. I wish I had owned more of several little names that turned in strong performances. For instance, I could have bought Pathogenisis, a small biotech company, which I thought was too highly valued at 10 times earnings. Over the period, it went as high as 30 times earnings. Q. HOW DOES THE INDUSTRY LOOK GOING FORWARD? A. I think it looks good. As I said earlier, biotech has picked up in 1997. So right now, investors like biotech stocks, and I think the fund is well-positioned. I will continue to try to put the fund in the right place. However, as we've discussed, the biotech industry is very volatile. So even though it looks good today, I need to keep in mind that the industry can change very quickly. 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: 042 TRADING SYMBOL: FBIOX SIZE: as of February 28, 1997, more than $674 million MANAGER: Karen Firestone, since 1992; manager, Fidelity Advisor Health Care Fund, since September 1996; 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) BIOTECHNOLOGY PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.3% SHARES VALUE (NOTE 1) AGRICULTURE - 0.7% CROPS - 0.7% DEKALB Genetics Corp. Class B 71,100 $ 4,639,273 CHEMICALS & PLASTICS - 0.8% CHEMICALS - 0.7% Hoechst AG Ord. 125,000 5,282,055 CHEMICALS, GENERAL - 0.1% Ciba Specialty Chemicals Holding, Inc. (rights) (a) 8,686 548,512 TOTAL CHEMICALS & PLASTICS 5,830,567 DRUGS & PHARMACEUTICALS - 86.3% BIOTECHNOLOGY - 46.9% Advanced Tissue Sciences Corp. Class A (a) 50,000 643,750 Alkermes, Inc. (a) 495,900 12,335,513 Amgen, Inc. (a) 1,092,600 66,785,175 Amylin Pharmaceuticals, Inc. (a) 163,100 2,426,113 Biochem Pharmaceuticals, Inc. (a) 54,000 2,867,449 Biogen, Inc. (a) 505,800 24,910,650 Cambridge Neuroscience, Inc. (a) 108,100 1,351,250 Cell Genesys, Inc. (a) 592,600 4,518,575 Cephalon, Inc. (a) 70,000 1,653,750 Chiron Corp. (a) 446,400 9,262,800 COR Therapeutics, Inc. (a) 945,500 11,641,469 Creative Biomolecules, Inc. (a) 200,000 2,125,000 Genentech, Inc. special (a) 1,063,800 58,641,975 Genome Therapeutics Corp. (a) 670,000 6,281,250 Genzyme Corp. (a) 330,000 8,497,500 Gilead Sciences, Inc. (a) 423,100 12,904,550 Human Genome Sciences, Inc. (a) 322,000 12,236,000 Idexx Laboratories, Inc. (a) 80,000 2,980,000 Imclone Systems, Inc. (a) 200,000 1,712,500 Interneuron Pharmaceuticals, Inc. (a) 470,600 12,882,675 Magainin Pharmaceuticals, Inc. (a) 529,800 4,304,625 Medimmune, Inc. (a) 230,000 3,335,000 Molecular Biosystems, Inc. (a) 200,000 2,225,000 Neurex Corp. (a) 350,000 5,075,000 Neurogen Corp. (a) 167,700 2,934,750 North American Vaccine, Inc. (a) 100,000 2,262,500 Protein Design Labs, Inc. (a) 513,400 19,252,500 Regeneron Pharmaceuticals, Inc. (a) 449,900 4,499,000 Sepracor, Inc. (a) 228,000 5,500,500 Sequana Therapeutics, Inc. (a)(c) 370,900 5,656,225 Sugen, Inc. (a) 343,900 4,384,725 Vical, Inc. (a) 118,900 2,080,750 Virus Research Institute, Inc. 50,000 400,000 318,568,519 COMMERCIAL LABORATORY RESEARCH - 3.6% Arqule, Inc. (c) 161,400 3,187,650 INCYTE Pharmaceuticals, Inc. (a) 87,600 4,642,800 Intercardia, Inc. 225,000 6,131,250 Medarex, Inc. (a) 204,750 1,817,156 Millennium Pharmaceuticals, Inc. (a) 525,300 8,798,775 24,577,631 DRUGS - 18.8% Allergan, Inc. 101,600 3,454,400 Anesta Corp. (a) 346,900 6,244,200 Ares Serono Class B (Bearer) 11,400 11,721,969 Barr Laboratories, Inc. (a) 54,100 1,961,125 Bristol-Myers Squibb Co. 60,000 7,830,000 Dura Pharmaceuticals, Inc. (a) 160,000 5,380,000 SHARES VALUE (NOTE 1) Elan Corp. PLC (a): ADR 157,276 $ 5,445,682 ADR (warrants) 14,339 449,886 Merck & Co., Inc. 50,000 4,600,000 Novo-Nordisk AS Class B 88,000 8,434,374 Novo Industri A/S ADR 16,000 770,000 Pfizer, Inc. 75,600 6,926,850 Roche Holding AG participation certificates 1,280 10,750,008 Schering-Plough Corp. 260,900 19,991,463 Sequus Pharmaceuticals, Inc. (a) 729,400 8,388,100 Takeda Chemical Industries Ltd. 361,000 7,266,542 Vertex Pharmaceuticals, Inc. (a) 81,000 3,746,250 Warner-Lambert Co. 25,000 2,100,000 Watson Pharmaceuticals, Inc. (a) 178,894 7,804,251 Yamanouchi Pharmaceutical Co. Ltd. 233,000 4,883,843 128,148,943 PHARMACEUTICAL PREPARATIONS - 17.0% Alpharma, Inc. Class A 216,700 2,898,363 Ariad Pharmaceuticals, Inc. (a)(c) 1,029,100 7,203,700 Arris Pharmaceutical Corp. (a) 573,500 7,527,188 Astra AB: Class A Free shares 20,000 956,245 Class B Free shares 143,000 6,666,224 GelTex Pharmaceuticals, Inc. (a) 100,000 2,100,000 Guilford Pharmaceuticals, Inc. (a) 550,550 14,176,663 Houghten Pharmaceuticals, Inc. 100,000 687,500 Ilex Oncology, Inc. 100,000 1,287,500 Immunex Corp. (a) 893,200 25,232,900 Inhale Therapeutic Systems (a) 427,500 8,443,125 Ligand Pharmaceuticals, Inc. Class B (a) 907,065 10,998,163 NPS Pharmaceuticals, Inc. (a) 365,000 4,288,750 NeXstar Pharmaceuticals, Inc. 350,800 5,218,150 Novartis AG (Reg.) (a) 8,686 9,906,711 Noven Pharmaceuticals, Inc. (a) 50,000 675,000 Sangstat Medical Corp. (a) 136,900 4,380,800 T Cell Sciences, Inc. (a) 247,100 467,173 Theratech, Inc. (a) 195,000 2,535,000 115,649,155 TOTAL DRUGS & PHARMACEUTICALS 586,944,248 ELECTRICAL EQUIPMENT - 0.0% TV & RADIO COMMUNICATION EQUIPMENT - 0.0% ASN (warrants) (a) 5,000 - MEDICAL EQUIPMENT & SUPPLIES - 2.2% MEDICAL SUPPLIES & APPLIANCES - 1.5% Cygnus, Inc. (a) 100,000 1,537,500 Johnson & Johnson 150,000 8,643,750 10,181,250 MEDICAL TECHNOLOGY - 0.7% Conceptus, Inc. 132,000 1,683,000 Sonus Pharmaceuticals, Inc. (a) 70,000 2,021,250 Stryker Corp. 30,000 870,000 4,574,250 TOTAL MEDICAL EQUIPMENT & SUPPLIES 14,755,500 MEDICAL FACILITIES MANAGEMENT - 1.3% HOSPITALS - 1.0% Columbia/HCA Healthcare Corp. 155,550 6,533,100 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) MEDICAL FACILITIES MANAGEMENT - CONTINUED SKILLED NURSING CARE FACILITIES - 0.3% TheraTx, Inc. (a) 128,200 $ 2,115,300 TOTAL MEDICAL FACILITIES MANAGEMENT 8,648,400 TOTAL COMMON STOCKS (Cost $528,351,231) 620,817,988 CASH EQUIVALENTS - 8.7% Taxable Central Cash Fund (b) (Cost $58,929,873) 58,929,873 58,929,873 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $587,281,104) $ 679,747,861 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 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 Ariad Pharmaceuticals, Inc. $ 266,250 $ - $ - $ 7,203,700 Arqule, Inc. 180,409 - - 3,187,650 Arris Pharmaceutical Corp. 1,962,500 475,000 - - COR Therapeutics, Inc. - 144,375 - - Guilford Pharmaceuticals, Inc. 1,000,000 - - - Inhale Therapeutic Systems - 822,515 - - Insite Vision, Inc. - 82,613 - - Protein Design Labs, Inc. - 1,014,182 - - Sequana Therapeutics,Inc. - - - 5,656,225 Totals $ 3,409,159 $ 2,538,685 $ - $ 16,047,575 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $272,190,274 and $626,553,296, respectively (see Note 3 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 $64,458 for the period (see Note 4 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $5,443,050 and $5,502,000, respectively (see Note 6 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and average daily balance during the period for which the loan was outstanding amounted to $10,839,000. The weighted average interest rate was 5.65% (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 88.5% Switzerland 4.8 Japan 1.8 Denmark 1.4 Sweden 1.1 Others (individually less than 1%) 2.4 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $587,865,580. Net unrealized appreciation aggregated $91,882,281, of which $121,701,367 related to appreciated investment securities and $29,819,086 related to depreciated investment securities. The fund hereby designates approximately $37,190,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 17% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. BIOTECHNOLOGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 679,747,861 (cost $587,281,104) - See accompanying schedule Receivable for investments sold 5,743,901 Receivable for fund shares sold 2,450,829 Dividends receivable 94,500 Interest receivable 374,058 Redemption fees receivable 4,661 Other receivables 293,211 TOTAL ASSETS 688,709,021 LIABILITIES Payable to custodian bank $ 263 Payable for fund shares redeemed 7,417,420 Accrued management fee 352,724 Other payables and accrued expenses 534,250 Collateral on securities loaned, 5,502,000 at value TOTAL LIABILITIES 13,806,657 NET ASSETS $ 674,902,364 Net Assets consist of: Paid in capital $ 535,512,409 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 46,923,198 Net unrealized appreciation (depreciation) on investments 92,466,757 NET ASSETS, for 19,712,465 $ 674,902,364 shares outstanding NET ASSET VALUE and redemption price per share ($674,902,364 (divided by) 19,712,465 shares) $34.24 Maximum offering price per share (100/97.00 of $34.24) $35.30
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 3,261,708 Dividends Interest (including income on securities loaned of $154,561) 3,699,384 TOTAL INCOME 6,961,092 EXPENSES Management fee $ 4,324,960 Transfer agent fees 6,104,217 Accounting and security lending fees 621,995 Non-interested trustees' compensation 3,081 Custodian fees and expenses 60,081 Registration fees 30,500 Audit 56,516 Legal 14,803 Interest 1,701 Miscellaneous 26,913 Total expenses before reductions 11,244,767 Expense reductions (52,739 11,192,028 ) NET INVESTMENT INCOME (LOSS) (4,230,936 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including 107,766,950 realized gain of $1,782,746 on sales of investments in affiliated issuers) Foreign currency transactions (8,785 107,758,165 ) Change in net unrealized appreciation (depreciation) on investment securities (82,231,616 ) NET GAIN (LOSS) 25,526,549 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 21,295,613 OTHER INFORMATION $ 1,854,442 Sales charges paid to FDC Deferred sales charges withheld $ 41,551 by FDC Exchange fees withheld by FSC $ 327,173 Expense reductions $ 45,667 Directed brokerage arrangements Custodian interest credits 1,812 Transfer agent interest credits 5,260 $ 52,739
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ (4,230,936) $ 2,118,503 Net investment income (loss) Net realized 107,758,165 60,844,285 gain (loss) Change in (82,231,616) 158,651,823 net unrealized appreciation (depreciation ) NET INCREASE 21,295,613 221,614,611 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (758,609) (1,392,589) shareholders From net investment income From net (74,788,474) - realized gain TOTAL (75,547,083) (1,392,589) DISTRIBUTION S Share 434,127,456 886,867,937 transactions Net proceeds from sales of shares Reinvestmen 73,785,664 1,358,134 t of distributions Cost of (876,553,990) (460,786,384) shares redeemed Paid in 930,907 1,005,318 capital portion of redemption fees NET INCREASE (367,709,963) 428,445,005 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (421,961,433) 648,667,027 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 1,096,863,797 448,196,770 period End of period $ 674,902,364 $ 1,096,863,797 (including undistribute d net investment income of $0 and $729,404, respectivel y) OTHER INFORMATION Shares Sold 12,636,024 26,953,463 Issued in 2,313,606 41,419 reinvestment of distributions Redeemed (25,208,094) (14,737,686) Net increase (10,258,464) 12,257,196 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 36.60 $ 25.30 $ 27.61 $ 22.60 $ 27.61 value, beginning of period Income from Investment Operations Net (.20) .11 (.06) (.18) (.08) investment income (loss) Net realized 1.89 11.21 (2.26) 5.15 (1.09) and unrealized gain (loss) Total from 1.69 11.32 (2.32) 4.97 (1.17) investment operations Less Distributions From net (.03) (.07) - - - investment income From net (4.06) - - - (3.89) realized gain Total (4.09) (.07) - - (3.89) distributions Redemption .04 .05 .01 .04 .05 fees added to paid in capital Net asset $ 34.24 $ 36.60 $ 25.30 $ 27.61 $ 22.60 value, end of period TOTAL 5.85% 44.97% (8.37)% 22.17% (5.92)% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 674,902 $ 1,096,864 $ 448,197 $ 481,146 $ 507,993 end of period (000 omitted) Ratio of 1.57% 1.44% F 1.59% 1.62% 1.50% A expenses to average net assets Ratio of 1.56% E 1.43% E 1.59% 1.61% E 1.50% A expenses to average net assets after expense reductions Ratio of net (.59)% .35% (.27)% (.69)% (.37)% investment A income (loss) to average net assets Portfolio 41% 67% 77% 51% 79% A turnover rate Average $ .0376 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 8 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS HEALTH CARE 20.41% 100.83% 395.25% HEALTH CARE 16.80% 94.80% 380.39% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS HEALTH CARE 20.41% 14.96% 17.35% HEALTH CARE 16.80% 14.27% 16.99% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9641.70 10289.00 1987/04/30 9412.99 10197.43 1987/05/31 9504.92 10286.15 1987/06/30 9731.39 10805.60 1987/07/31 10103.61 11353.44 1987/08/31 10401.83 11776.92 1987/09/30 10206.75 11519.01 1987/10/31 7513.80 9037.81 1987/11/30 6785.07 8293.10 1987/12/31 7303.18 8924.20 1988/01/31 7845.95 9299.91 1988/02/29 8081.54 9733.29 1988/03/31 7880.60 9432.53 1988/04/30 7758.18 9537.23 1988/05/31 7737.40 9620.20 1988/06/30 7940.65 10061.77 1988/07/31 7929.10 10023.54 1988/08/31 7714.30 9682.74 1988/09/30 7972.98 10095.22 1988/10/31 8072.30 10375.87 1988/11/30 7836.71 10227.49 1988/12/31 7947.96 10406.47 1989/01/31 8509.18 11168.23 1989/02/28 8346.17 10890.14 1989/03/31 8786.30 11143.88 1989/04/30 9266.02 11722.25 1989/05/31 9554.78 12197.00 1989/06/30 9339.41 12127.48 1989/07/31 10496.25 13222.59 1989/08/31 10750.20 13481.75 1989/09/30 10827.79 13426.47 1989/10/31 10747.84 13114.98 1989/11/30 11211.05 13382.52 1989/12/31 11324.93 13703.71 1990/01/31 10675.14 12784.19 1990/02/28 10563.27 12949.10 1990/03/31 10984.56 13292.25 1990/04/30 10984.56 12959.95 1990/05/31 12495.98 14223.54 1990/06/30 12921.75 14126.82 1990/07/31 13100.15 14081.62 1990/08/31 12512.91 12808.64 1990/09/30 12136.28 12184.86 1990/10/31 12413.80 12132.46 1990/11/30 13734.47 12916.22 1990/12/31 14078.74 13276.58 1991/01/31 15468.54 13855.44 1991/02/28 17379.19 14846.11 1991/03/31 18928.44 15205.38 1991/04/30 18598.92 15241.87 1991/05/31 19608.72 15900.32 1991/06/30 18724.52 15172.09 1991/07/31 20381.35 15879.11 1991/08/31 21399.85 16255.44 1991/09/30 21831.09 15983.98 1991/10/31 23269.47 16198.16 1991/11/30 21998.47 15545.38 1991/12/31 25861.59 17323.77 1992/01/31 25013.08 17001.55 1992/02/29 23920.84 17222.57 1992/03/31 22461.52 16886.73 1992/04/30 21188.75 17383.20 1992/05/31 21625.04 17468.37 1992/06/30 20791.53 17208.09 1992/07/31 22042.27 17911.90 1992/08/31 21447.76 17544.71 1992/09/30 19963.12 17751.74 1992/10/31 20577.12 17813.87 1992/11/30 21704.41 18421.32 1992/12/31 21352.82 18647.90 1993/01/31 20206.04 18804.55 1993/02/28 18049.81 19060.29 1993/03/31 18547.67 19462.46 1993/04/30 18540.80 18991.47 1993/05/31 19282.43 19500.44 1993/06/30 19213.76 19556.99 1993/07/31 18588.87 19478.76 1993/08/31 19251.53 20217.01 1993/09/30 19852.39 20061.34 1993/10/31 21328.79 20476.61 1993/11/30 21256.68 20282.08 1993/12/31 21868.84 20527.49 1994/01/31 22301.96 21225.43 1994/02/28 21762.28 20650.22 1994/03/31 20342.63 19749.87 1994/04/30 21158.73 20002.67 1994/05/31 22353.73 20330.71 1994/06/30 21999.02 19832.61 1994/07/31 22439.82 20483.12 1994/08/31 25384.27 21322.93 1994/09/30 25566.80 20800.52 1994/10/31 25921.51 21268.53 1994/11/30 26482.85 20493.93 1994/12/31 26561.59 20797.85 1995/01/31 27968.46 21337.14 1995/02/28 28561.22 22168.65 1995/03/31 29337.81 22822.85 1995/04/30 29746.73 23494.98 1995/05/31 30033.34 24434.07 1995/06/30 31553.11 25001.68 1995/07/31 33359.48 25830.73 1995/08/31 33642.32 25895.57 1995/09/30 35527.89 26988.36 1995/10/31 35614.62 26892.01 1995/11/30 37115.54 28072.57 1995/12/31 38744.04 28613.25 1996/01/31 40129.88 29587.24 1996/02/29 39895.60 29861.52 1996/03/31 40034.58 30149.08 1996/04/30 39866.98 30593.48 1996/05/31 40590.19 31382.49 1996/06/30 40618.96 31502.05 1996/07/31 39032.82 30110.29 1996/08/31 40355.97 30745.32 1996/09/30 43133.76 32475.67 1996/10/31 42287.27 33371.34 1996/11/30 44559.63 35893.88 1996/12/31 44733.57 35182.83 1997/01/31 47434.46 37381.05 1997/02/28 48039.35 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Health Care Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $48,039 - a 380.39% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Schering-Plough Corp. 6.2 Pfizer, Inc. 5.9 Merck & Co., Inc. 4.7 Bristol-Myers Squibb Co. 4.5 Warner-Lambert Co. 4.4 American Home Products Corp. 4.1 Johnson & Johnson 3.3 Abbott Laboratories 2.2 SmithKline Beecham PLC ADR 1.9 Lilly (Eli) & Co. 1.9 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Drugs 40.3% Medical Supplies & Appliances 10.5% Medical Technology 8.2% Biotechnology 6.2% Pharmaceutical Preparations 5.6% All Others 29.2% * Row: 1, Col: 1, Value: 29.2 Row: 1, Col: 2, Value: 5.6 Row: 1, Col: 3, Value: 6.2 Row: 1, Col: 4, Value: 8.199999999999999 Row: 1, Col: 5, Value: 10.5 Row: 1, Col: 6, Value: 40.3 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS HEALTH CARE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Karen Firestone, Portfolio Manager of Fidelity Select Health Care Portfolio Q. KAREN, HOW DID THE FUND PERFORM? A. For the one-year period that ended February 28, 1997, the fund returned 20.41%. By comparison, the Standard & Poor's 500 Index returned 26.16% over the same time period. Q. WHY DID THE FUND UNDERPERFORM THE S&P 500 INDEX? A. There were several reasons. Health care companies showed solid growth and steady profits during the period, but they certainly did not perform as well as technology and financial services stocks, which led the market and made up a notable part of the index. I did try to take advantage of the technology trend by buying some medical equipment and supplies companies, which make products such as defibrillators and pacemakers. However, these companies underperformed the overall health care sector. Also, while the health care sector turned in a strong performance during the first part of 1996, it underperformed the index for much of the rest of the period. This was due to a market rotation out of health care and into cyclical - or more economically sensitive - stocks, which also made up a significant portion of the index. I should note that health care companies picked up tremendously in February of 1997, turning in average returns of 5% to 10% and beating the overall market. In fact, it was one of the sector's best months in a long time. Q. WERE THERE REASONS FOR THE FUND'S PERFORMANCE THAT WERE MORE SPECIFIC TO THE FUND ITSELF? A. Yes. As I mentioned, medical equipment and supplies companies - which made up about 22% of the fund at the end of the period - underperformed. One example was St. Jude Medical, a fairly large holding of the fund during the period, which fell on rough times soon after it acquired a company called Ventrotechs. That's because Ventrotechs almost immediately announced that two patients who used its cardiac device had died. Another company, Medtronic, the leading defibrillator maker, slowed in 1996 when the demand for medical equipment and supplies lessened somewhat. When I purchased these companies, their pricing was attractive and they looked like solid values. The fund was also hurt by its holdings in HMOs and hospitals. HMOs were weak performers for most of the period because they did not meet earnings expectations, and hospitals underperformed during much of 1996 due mostly to pricing issues. Q. CERTAINLY THE PRIMARY FOCUS OF THE FUND WAS DRUG STOCKS, WHICH MADE UP ABOUT 40% OF ITS TOTAL INVESTMENTS AT THE END OF THE PERIOD. WHY WERE THEY SO ATTRACTIVE? A. Drug companies turned in excellent performance in terms of revenue growth and earnings growth over the period, and many are expected to do well in the upcoming year. Schering-Plough, the fund's top holding at the end of the period, was a real growth machine. It turned in its strong performance largely because of Claritin, the company's billion dollar antihistamine. Another top 10 stock during the period, Warner-Lambert, also had two hot new drugs: Lipitor, which helps lower cholesterol, and a new diabetes drug, Rezulin. Q. IF DRUG STOCKS WERE PERFORMING SO WELL, WHY DIDN'T YOU OWN MORE OF THEM? A. That's a good question. Basically, I thought it was too risky. If the fund had a bigger weighting in pharmaceuticals and the bet didn't work, shareholders could have really been whipsawed. Having a heavier weighting means that I would have had about 50% of the fund in a handful of big names. If there had been a disappointment in one big holding, the fund could have lost a notable portion of its return. Clearly, this point is hard to see when the stocks are going up, but it's very easy to see when they're going down. Q. HOW DOES THE FUND LOOK GOING FORWARD? A. I think health care is a good place to be right now. There's a lot of uncertainty in both the economy and the market, and it's not clear where interest rates are going. I will stick to my approach of trying to buy companies that have strong sales and earnings momentum. The stocks that tend to look good going forward are those that have proven themselves winners in the past. I'll also continue to look for smaller and newer companies with great product potential. 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 February 28, 1997, more than $1.3 billion MANAGER: Karen Firestone, since 1995; manager, Fidelity Advisor Health Care Fund, since September 1996; 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 FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 86.3% SHARES VALUE (NOTE 1) CHEMICALS & PLASTICS - 0.7% CHEMICALS - 0.6% Hoechst AG Ord. 210,000 $ 8,873,849 CHEMICALS, GENERAL - 0.1% Ciba Specialty Chemicals Holding, Inc. (rights) (a) 15,900 1,004,069 TOTAL CHEMICALS & PLASTICS 9,877,918 COMPUTER SERVICES & SOFTWARE - 0.1% CAD/CAM/CAE - 0.1% Healthdyne Information Enterprises, Inc. (a) 258,200 1,226,450 DEFENSE ELECTRONICS - 0.0% BEI Electronics, Inc. 21,800 247,975 DRUGS & PHARMACEUTICALS - 52.9% BIOTECHNOLOGY - 6.2% Alkermes, Inc. (a) 179,400 4,462,575 Amgen, Inc. (a) 307,600 18,802,050 Amylin Pharmaceuticals, Inc. (a) 1,100 16,363 COR Therapeutics, Inc. (a) 337,100 4,150,544 Cytyc Corp. (a) 150,000 4,106,250 Elf Sanofi SA 70,000 6,914,186 Genentech, Inc. special (a) 397,400 21,906,675 Gilead Sciences, Inc. (a) 100,000 3,050,000 Human Genome Sciences, Inc. (a) 100,000 3,800,000 IGI, Inc. (a) 100,000 568,750 Idexx Laboratories, Inc. (a) 143,300 5,337,925 Interneuron Pharmaceuticals, Inc. (a) 100,000 2,737,500 Perseptive Biosystem, Inc. Class G (warrants) (a) 390 414 Pharmacia & Upjohn, Inc. 168,800 6,224,500 Regeneron Pharmaceuticals, Inc. (a) 119,600 1,196,000 Sequana Therapeutics, Inc. (a) 100,000 1,525,000 Sugen, Inc. (a) 50,000 637,500 85,436,232 COMMERCIAL LABORATORY RESEARCH - 0.8% Arqule, Inc. (c) 150,000 2,962,500 INCYTE Pharmaceuticals, Inc. (a) 70,000 3,710,000 Millennium Pharmaceuticals, Inc. 217,100 3,636,425 10,308,925 DRUGS - 40.3% Allergan, Inc. 143,300 4,872,200 ALZA Corp. Class A (a) 240,000 6,810,000 American Home Products Corp. 869,100 55,622,400 Barr Laboratories, Inc. (a) 287,500 10,421,875 Bristol-Myers Squibb Co. 471,100 61,478,550 Dura Pharmaceuticals, Inc. (a) 122,900 4,132,513 Elan Corp. PLC ADR (a) 198,520 6,873,755 Glaxo PLC sponsored ADR 260,000 8,807,500 Glaxo Holdings PLC 220,000 3,724,711 Lilly (Eli) & Co. 291,806 25,496,549 Merck & Co., Inc. 703,100 64,685,200 Mylan Laboratories, Inc. 300,000 5,025,000 Novo-Nordisk AS Class B 80,000 7,667,613 Pfizer, Inc. 883,600 80,959,850 Roche Holding AG participation certificates 1,930 16,208,997 Schering-Plough Corp. 1,108,400 84,931,150 SmithKline Beecham PLC ADR 345,000 25,616,250 Takeda Chemical Industries Ltd. 361,000 7,266,542 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) Warner-Lambert Co. 722,500 $ 60,690,000 Watson Pharmaceuticals, Inc. (a) 136,200 5,941,725 Yamanouchi Pharmaceutical Co. Ltd. 233,000 4,883,843 552,116,223 PHARMACEUTICAL PREPARATIONS - 5.6% Alpharma, Inc. Class A 325,000 4,346,875 Andrx Corp. 248,500 4,845,750 Arris Pharmaceutical Corp. (a) 200,000 2,625,000 Astra AB Class A Free shares 510,000 24,384,251 Ilex Oncology, Inc. 100,000 1,287,500 Inhale Therapeutic Systems (a) 39,000 770,250 Ligand Pharmaceuticals, Inc. Class B (a) 332,800 4,035,200 Novartis AG (Reg.) (a) 15,900 18,134,551 Rhone Poulenc Rorer, Inc. 108,200 7,682,200 Sangstat Medical Corp. (a) 50,000 1,600,000 Zeneca Group PLC Ord. 240,000 7,051,172 76,762,749 TOTAL DRUGS & PHARMACEUTICALS 724,624,129 ELECTRONICS - 0.3% ELECTRONIC CAPACITORS - 0.3% Maxwell Technologies, Inc. (a) 199,100 4,579,300 MEDICAL EQUIPMENT & SUPPLIES - 22.3% DENTAL EQUIPMENT - 0.6% Sybron International Corp. (a) 282,300 8,398,425 DRUG DISTRIBUTORS - WHOLESALE - 2.8% Allegiance Corp. 124,600 3,286,325 AmeriSource Health Corp. Class A (a) 43,900 2,211,463 Bergen Brunswig Corp. Class A 609,590 19,583,079 Cardinal Health, Inc. 211,499 13,007,189 38,088,056 MEDICAL SUPPLIES & APPLIANCES - 10.5% Abbott Laboratories 530,000 29,812,500 Bard (C.R.), Inc. 100,000 2,737,500 Baxter International, Inc. 273,000 12,558,000 Becton, Dickinson & Co. 373,700 18,404,725 Boston Scientific Corp. (a) 228,668 15,149,255 Closure Medical Corp. 75,000 1,275,000 Depuy, Inc. (a) 200,000 4,300,000 Johnson & Johnson 794,000 45,754,250 Sofamor/Danek Group, Inc. (a) 350,500 13,888,563 143,879,793 MEDICAL TECHNOLOGY - 8.2% Arterial Vascular Engineering, Inc. (a) 157,000 2,472,750 Beckman Instruments, Inc. 315,000 13,072,500 Biomet, Inc. 10,000 152,500 Cardiac Pathways Corp. 252,500 2,398,750 Cardiogenesis Corp. 97,900 1,492,975 Datascope Corp. (a) 192,600 4,044,600 Guidant Corp. 151,830 10,172,610 Heartport, Inc. (a) 166,900 4,944,413 InControl, Inc. (a) 502,200 4,519,800 Medtronic, Inc. 370,000 23,957,500 Micro Therapeutics, Inc. (c) 100,000 700,000 Nellcor, Inc. (a) 182,800 3,176,150 St. Jude Medical, Inc. (a) 333,100 13,157,450 Sonus Pharmaceuticals, Inc. (a) 206,600 5,965,575 Stryker Corp. 220,000 6,380,000 U.S. Surgical Corp. 350,000 14,918,750 Ventana Medical Systems, Inc. 67,000 1,206,000 112,732,323 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) MEDICAL EQUIPMENT & SUPPLIES - CONTINUED X-RAY & RELATED APPARATUS - 0.1% Axogen Ltd. unit (a) 50,000 $ 1,225,000 X-RAY ELECTRO-MEDICAL APPARATUS - 0.1% Fischer Imaging Corp. (a) 100,000 662,500 TOTAL MEDICAL EQUIPMENT & SUPPLIES 304,986,097 MEDICAL FACILITIES MANAGEMENT - 10.0% HEALTH PRACTITIONERS - 0.2% FPA Medical Management, Inc. (a) 95,100 2,448,825 HOME HEALTH CARE AGENCIES - 0.2% Matria Healthcare, Inc. (a) 258,200 1,484,650 Sunrise Assisted Living, Inc. (a) 47,100 1,318,800 2,803,450 HOSPITALS - 4.5% Columbia/HCA Healthcare Corp. 583,507 24,507,294 HEALTHSOUTH Rehabilitation Corp. (a) 389,300 15,669,325 Health Management Associates, Inc. Class A (a) 203,900 5,403,350 Tenet Healthcare Corp. (a) 611,800 16,595,075 62,175,044 HMO'S & OUTPATIENT CARE - 3.3% Oxford Health Plans, Inc. (a) 322,900 18,001,675 PacifiCare Health Systems Class B 118,800 9,949,500 Trigon Healthcare, Inc. 61,500 1,099,313 United HealthCare Corp. 321,690 16,044,289 45,094,777 MEDICAL LABORATORIES - 0.1% Cambridge Heart, Inc. 100,000 1,362,500 MEDICAL SERVICES - 0.8% Carematrix Corp. (a) 74,300 1,290,963 Lincare Holdings, Inc. (a) 176,800 7,624,500 Physician Reliance Network, Inc. (a) 400,000 2,525,000 11,440,463 NURSING CARE & NURSING HOMES - 0.1% ARV Assisted Living, Inc. (a) 109,000 1,035,500 NURSING, PERSONAL CARE FACILITIES - 0.2% Integrated Living Communities, Inc. (a)(c) 373,800 2,476,425 SKILLED NURSING CARE FACILITIES - 0.2% Beverly Enterprises, Inc. (a) 188,400 2,708,250 SPECIALTY HOSPITAL EXCEPT PSYCHIATRIC - 0.4% Vencor, Inc. (a) 138,000 4,778,250 TOTAL MEDICAL FACILITIES MANAGEMENT 136,323,484 TOTAL COMMON STOCKS (Cost $911,710,463) 1,181,865,353 CONVERTIBLE PREFERRED STOCKS - 0.6% MEDICAL EQUIPMENT & SUPPLIES - 0.6% MEDICAL TECHNOLOGY - 0.6% U.S. Surgical Corp. $2.20 (d) (Cost $4,652,386) 197,200 7,961,950 CASH EQUIVALENTS - 13.1% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $179,225,337) 179,225,337 $179,225,337 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $1,095,588,186) $ 1,369,052,640 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 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 Arqule, Inc. $ - $ - $ - $ 2,962,500 Integrated Living Communities, Inc. 363,150 - - 2,476,425 Micro Therapeutics, Inc. - - - 700,000 Protocol Systems, Inc. - 977,901 - - Spacelabs Medical, Inc. - 2,270,615 - - Totals $ 363,150 $ 3,248,516 $ - $ 6,138,925 4. 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 $7,961,950 or 0.6% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $679,358,509 and $1,029,114,229, respectively (see Note 3 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 $227,981 for the period (see Note 4 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $12,576,075 and $12,738,000, respectively (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 88.6% United Kingdom 3.3 Switzerland 2.6 Sweden 1.8 France 1.1 Others (individually less than 1%) 2.6 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $1,096,569,759. Net unrealized appreciation aggregated $272,482,881, of which $288,820,437 related to appreciated investment securities and $16,337,556 related to depreciated investment securities. The fund hereby designates approximately $50,739,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 30% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. HEALTH CARE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 1,369,052,640 (cost $1,095,588,186) - See accompanying schedule Receivable for investments sold 16,169,937 Receivable for fund shares sold 4,654,617 Dividends receivable 1,724,163 Interest receivable 523,247 Redemption fees receivable 10,893 Other receivables 761,125 TOTAL ASSETS 1,392,896,622 LIABILITIES Payable for investments purchased $ 1,158,124 Payable for fund shares redeemed 4,986,423 Accrued management fee 672,924 Other payables and accrued expenses 786,709 Collateral on securities loaned, 12,738,000 at value TOTAL LIABILITIES 20,342,180 NET ASSETS $ 1,372,554,442 Net Assets consist of: Paid in capital $ 967,141,664 Undistributed net investment income 1,993,284 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 129,963,171 Net unrealized appreciation (depreciation) on investments 273,456,323 and assets and liabilities in foreign currencies NET ASSETS, for 13,397,524 $ 1,372,554,442 shares outstanding NET ASSET VALUE and redemption $102.45 price per share ($1,372,554,442 (divided by) 13,397,524 shares) Maximum offering price per share (100/97.00 of $102.45) $105.62
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 15,986,852 Dividends Interest (including income on securities loaned of $245,947) 7,324,244 TOTAL INCOME 23,311,096 EXPENSES Management fee $ 7,661,331 Transfer agent fees 8,040,876 Accounting and security lending fees 813,015 Non-interested trustees' compensation 6,309 Custodian fees and expenses 89,305 Registration fees 98,543 Audit 88,357 Legal 20,372 Miscellaneous 38,510 Total expenses before reductions 16,856,618 Expense reductions (182,396 16,674,222 ) NET INVESTMENT INCOME 6,636,874 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including 276,153,050 realized gain of $1,743,407 on sales of investments in affiliated issuers) Foreign currency transactions (14,987 276,138,063 ) Change in net unrealized appreciation (depreciation) on: Investment securities (55,045,713 ) Assets and liabilities in (8,131 (55,053,844) foreign currencies ) NET GAIN (LOSS) 221,084,219 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 227,721,093 OTHER INFORMATION $ 2,553,184 Sales charges paid to FDC Deferred sales charges withheld $ 69,909 by FDC Exchange fees withheld by FSC $ 286,088 Expense Reductions $ 171,822 Directed brokerage arrangements Custodian interest credits 3,836 Transfer agent interest credits 6,738 $ 182,396
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 6,636,874 $ 11,861,909 Net investment income Net realized 276,138,063 127,563,700 gain (loss) Change in (55,053,844) 221,015,172 net unrealized appreciation (depreciation ) NET INCREASE 227,721,093 360,440,781 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (7,843,463) (7,988,345) shareholders From net investment income From net (188,056,633) (66,667,821) realized gain TOTAL (195,900,096) (74,656,166) DISTRIBUTION S Share 445,765,805 1,031,303,280 transactions Net proceeds from sales of shares Reinvestmen 191,246,667 73,110,795 t of distributions Cost of (822,846,541) (808,071,923) shares redeemed Paid in 657,588 642,187 capital portion of redemption fees NET INCREASE (185,176,481) 296,984,339 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (153,355,484) 582,768,954 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 1,525,909,926 943,140,972 period End of period $ 1,372,554,442 $ 1,525,909,926 (including undistributed net investment income of $1,993,284 and $4,463,587, respectively) OTHER INFORMATION Shares Sold 4,420,102 11,376,458 Issued in 2,023,821 771,121 reinvestment of distributions Redeemed (8,234,436) (9,348,659) Net increase (1,790,513) 2,798,920 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D Net asset $ 100.47 $ 76.13 $ 63.31 $ 52.57 $ 70.42 value, beginning of period Income from Investment Operations Net .52 .95 .75 .15 .13 investment income Net realized 18.01 28.85 18.38 10.61 (9.34) and unrealized gain (loss) Total from 18.53 29.80 19.13 10.76 (9.21) investment operations Less Distributions From net (.65) (.59) (.62) (.07) (.16) investment income From net (15.95) (4.92) (5.74) - (8.51) realized gain Total (16.60) (5.51) (6.36) (.07) (8.67) distributions Redemption .05 .05 .05 .05 .03 fees added to paid in capital Net asset $ 102.45 $ 100.47 $ 76.13 $ 63.31 $ 52.57 value, end of period TOTAL 20.41% 39.68% 31.24% 20.57% (14.81)% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 1,372,554 $ 1,525,910 $ 943,141 $ 522,890 $ 536,367 end of period (000 omitted) Ratio of 1.33% 1.31% 1.39% 1.59% 1.46% A expenses to average net assets Ratio of 1.32% E 1.30% E 1.36% E 1.55% E 1.46% A expenses to average net assets after expense reductions Ratio of net .52% 1.06% 1.08% .26% .24% A investment income to average net assets Portfolio 59% 54% 151% 213% 112% A turnover rate Average $ .0466 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 8 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS MEDICAL DELIVERY 10.50% 79.27% 408.97% MEDICAL DELIVERY 7.19% 73.89% 393.70% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS MEDICAL DELIVERY 10.50% 12.38% 17.67% MEDICAL DELIVERY 7.19% 11.70% 17.31% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 10162.41 10289.00 1987/04/30 9111.48 10197.43 1987/05/31 9395.23 10286.15 1987/06/30 10036.29 10805.60 1987/07/31 10467.17 11353.44 1987/08/31 10225.46 11776.92 1987/09/30 10067.82 11519.01 1987/10/31 7198.81 9037.81 1987/11/30 6767.93 8293.10 1987/12/31 7566.94 8924.20 1988/01/31 7611.58 9299.91 1988/02/29 8002.21 9733.29 1988/03/31 8214.26 9432.53 1988/04/30 8281.22 9537.23 1988/05/31 8147.29 9620.20 1988/06/30 8403.99 10061.77 1988/07/31 8314.70 10023.54 1988/08/31 8080.33 9682.74 1988/09/30 8537.92 10095.22 1988/10/31 8761.13 10375.87 1988/11/30 8482.11 10227.49 1988/12/31 8761.13 10406.47 1989/01/31 9408.45 11168.23 1989/02/28 9754.43 10890.14 1989/03/31 10290.14 11143.88 1989/04/30 10993.27 11722.25 1989/05/31 11562.46 12197.00 1989/06/30 11428.04 12127.48 1989/07/31 12725.16 13222.59 1989/08/31 13317.81 13481.75 1989/09/30 13686.81 13426.47 1989/10/31 13228.35 13114.98 1989/11/30 13843.36 13382.52 1989/12/31 13844.17 13703.71 1990/01/31 11805.90 12784.19 1990/02/28 12103.63 12949.10 1990/03/31 12664.72 13292.25 1990/04/30 12790.68 12959.95 1990/05/31 14599.93 14223.54 1990/06/30 15298.44 14126.82 1990/07/31 15355.69 14081.62 1990/08/31 14130.44 12808.64 1990/09/30 13191.47 12184.86 1990/10/31 13031.15 12132.46 1990/11/30 14840.40 12916.22 1990/12/31 16095.49 13276.58 1991/01/31 18689.64 13855.44 1991/02/28 19845.21 14846.11 1991/03/31 22793.11 15205.38 1991/04/30 22109.20 15241.87 1991/05/31 23936.89 15900.32 1991/06/30 21920.32 15172.09 1991/07/31 24119.73 15879.11 1991/08/31 24402.33 16255.44 1991/09/30 24623.50 15983.98 1991/10/31 25164.14 16198.16 1991/11/30 24463.77 15545.38 1991/12/31 28621.82 17323.77 1992/01/31 28646.97 17001.55 1992/02/29 27540.33 17222.57 1992/03/31 25716.88 16886.73 1992/04/30 24698.27 17383.20 1992/05/31 24446.76 17468.37 1992/06/30 23159.45 17208.09 1992/07/31 24477.35 17911.90 1992/08/31 24449.90 17544.71 1992/09/30 21580.71 17751.74 1992/10/31 22651.51 17813.87 1992/11/30 24875.47 18421.32 1992/12/31 24848.01 18647.90 1993/01/31 23585.02 18804.55 1993/02/28 19850.96 19060.29 1993/03/31 20290.26 19462.46 1993/04/30 20043.15 18991.47 1993/05/31 20660.92 19500.44 1993/06/30 20866.84 19556.99 1993/07/31 21388.51 19478.76 1993/08/31 21319.87 20217.01 1993/09/30 23077.08 20061.34 1993/10/31 24161.61 20476.61 1993/11/30 24559.72 20282.08 1993/12/31 26220.83 20527.49 1994/01/31 27689.75 21225.43 1994/02/28 27840.76 20650.22 1994/03/31 26454.21 19749.87 1994/04/30 27305.36 20002.67 1994/05/31 28225.15 20330.71 1994/06/30 26481.67 19832.61 1994/07/31 27662.29 20483.12 1994/08/31 30462.84 21322.93 1994/09/30 31547.37 20800.52 1994/10/31 32576.98 21268.53 1994/11/30 31176.71 20493.93 1994/12/31 31423.07 20797.85 1995/01/31 32802.41 21337.14 1995/02/28 33305.29 22168.65 1995/03/31 35417.40 22822.85 1995/04/30 34266.33 23494.98 1995/05/31 33142.37 24434.07 1995/06/30 33675.53 25001.68 1995/07/31 37076.23 25830.73 1995/08/31 37249.15 25895.57 1995/09/30 38027.27 26988.36 1995/10/31 37378.83 26892.01 1995/11/30 40505.74 28072.57 1995/12/31 41535.90 28613.25 1996/01/31 43769.84 29587.24 1996/02/29 44678.82 29861.52 1996/03/31 45110.20 30149.08 1996/04/30 45623.84 30593.48 1996/05/31 45527.48 31382.49 1996/06/30 44451.53 31502.05 1996/07/31 39633.80 30110.29 1996/08/31 43295.27 30745.32 1996/09/30 46394.67 32475.67 1996/10/31 42893.80 33371.34 1996/11/30 45318.72 35893.88 1996/12/31 46106.82 35182.83 1997/01/31 48288.25 37381.05 1997/02/28 49352.79 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Medical Delivery Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $49,370 - a 393.70% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Tenet Healthcare Corp. 9.3 HEALTHSOUTH Rehabilitation Corp. 6.9 PacifiCare Health Systems, Inc. Class A 6.4 United HealthCare Corp. 5.8 Health Management Associates, Inc. Class A 5.6 Lincare Holdings, Inc. 4.9 Universal Health Services, Inc. Class B 4.4 Oxford Health Plans, Inc. 4.2 Columbia/HCA Healthcare Corp. 3.2 HealthCare COMPARE Corp. 2.0 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Hospitals 29.4% HMOs & Outpatient Care 21.3% Medical Services 5.7% Drugs 2.6% Drug Distributors - Wholesale 2.6% All Others 38.4% * Row: 1, Col: 1, Value: 38.4 Row: 1, Col: 2, Value: 2.6 Row: 1, Col: 3, Value: 2.6 Row: 1, Col: 4, Value: 5.7 Row: 1, Col: 5, Value: 21.3 Row: 1, Col: 6, Value: 29.4 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS MEDICAL DELIVERY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Deborah Wheeler became Portfolio Manager of Fidelity Select Medical Delivery Portfolio on November 1, 1996. Q. HOW DID THE FUND PERFORM? A. The fund had a total return of 10.50% for the 12 months ended February 28, 1997, compared to a 26.16% return for the Standard & Poor's 500 Index over the same time period. Q. WHAT ACCOUNTED FOR THE DIFFERENCE BETWEEN THE PERFORMANCES OF THE FUND AND THE BROADER INDEX? A. The medical delivery market is driven largely by shares of managed care companies, hospitals and outpatient service providers. Managed care companies and outpatient service providers both significantly trailed the market during the recent period. Q. WHAT OCCURRED IN THE GROUP? A. The managed care industry, which includes providers of HMOs and other types of managed care, suffered because the companies' 1996 price increases failed to keep up with medical cost inflation. For example, managed care firms experienced 15% to 20% increases in drug costs per member, in part due to a proliferation of new and more expensive drugs. But the stocks rebounded late in the period, as managed care companies began to implement higher price increases for 1997. They are currently negotiating for further price hikes in 1998. Q. WHAT ABOUT HOSPITALS? A. For-profit hospitals continued to acquire non-profit hospitals, a trend that allows the for-profits to consolidate industry capacity and make cost reductions that offset declining acute care utilization. As a result, hospital companies reported solid earnings growth during 1996. However, the federal budget for 1998 currently being negotiated by President Clinton and Congress may include cuts in Medicare reimbursements, which account for almost half of the typical hospital's revenues. Concerns about such cuts also affected the stocks. Q. WHAT CHANGES HAVE YOU MADE SINCE YOU TOOK OVER THE PORTFOLIO IN NOVEMBER? A. I altered the weightings of the fund's top holdings, reflecting changes in the outlook for various companies. For example, hospital management firm Columbia/HCA fell from first place when I took over the fund in November to ninth place among the fund's largest investments. With 325 hospitals, Columbia has a large base and, consequently, will grow at a slower rate than in the past. The fund's largest holding at the end of the period was Tenet Healthcare, the nation's second-largest hospital management company with 75 hospitals. During the period, Tenet acquired Ornda, the third-biggest hospital chain, and has since accelerated its acquisition of non-profit hospitals, and consequently its growth rate. The decisions to reduce the fund's investment in Columbia and increase its stake in Tenet have worked out well. Q. YOU ALSO BOOSTED THE FUND'S INVESTMENT IN SOME MANAGED CARE FIRMS. A. That's right. Managed care stocks climbed from a low of around 19% of the fund's total assets to around 21% at the end of the period. United HealthCare, which sells HMO and other health insurance products, became the fund's fourth-largest investment. After taking over the portfolio, I also doubled the fund's investment in Oxford Health, a managed care company that operates primarily in New York City. Oxford is now the fund's eighth-largest holding. Those moves helped the fund participate in the managed care rally late in the period. Q. WHAT'S AHEAD FOR THE MEDICAL DELIVERY MARKET? A. Profit margins should continue to improve in 1997 and 1998 at managed care companies as they increase prices to offset medical cost inflation. I believe these firms' shares could perform more strongly during the year ahead, justifying a reasonably large investment in the group. Hospital shares may fluctuate with political news until a federal budget is approved, which probably won't happen until late summer. Cuts to Medicare are not likely to be as bad as Clinton's current proposal calls for, and long-term opportunities for consolidation in the hospital industry remain good. Finally, the industry and the fund should benefit from growth among niche providers that serve the aging population. 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 February 28, 1997, more than $192 million MANAGER: Deborah Wheeler, since November 1996; manager, Fidelity Select Construction and Housing Portfolio, 1986-1988; Fidelity Select Retail Portfolio, 1990-1991; Fidelity Select Food and Agriculture Portfolio, 1991- 1993; Fidelity Select Leisure Portfolio, 1991- 1996; assistant, Fidelity Magellan Fund, 1988-1990; joined Fidelity in 1986 (checkmark) MEDICAL DELIVERY PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 76.5% SHARES VALUE (NOTE 1) COMPUTER SERVICES & SOFTWARE - 0.1% CAD/CAM/CAE - 0.1% Apache Medical Systems, Inc. 30,000 $ 202,498 DRUG STORES - 0.3% Vitalink Pharmacy Services, Inc. (a) 35,000 739,375 DRUGS & PHARMACEUTICALS - 4.8% BIOTECHNOLOGY - 1.9% Idexx Laboratories, Inc. (a) 100,000 3,725,000 DRUGS - 2.6% Bristol-Myers Squibb Co. 10,000 1,305,000 Lilly (Eli) & Co. 5,000 436,875 Pfizer, Inc. 10,000 916,250 Schering-Plough Corp. 20,000 1,532,500 SmithKline Beecham PLC ADR 15,000 1,113,750 5,304,375 IN VITRO, IN VIVO DIAGNOSTIC SUBSTANCE - 0.3% Serologicals Corp. (a) 18,600 511,500 TOTAL DRUGS & PHARMACEUTICALS 9,540,875 INSURANCE - 0.3% INSURANCE BROKERS & SERVICES - 0.0% CRA Managed Care, Inc. (a) 1,000 39,750 MULTI-LINE INSURANCE - 0.3% Aetna, Inc. 6,400 530,400 TOTAL INSURANCE 570,150 MEDICAL EQUIPMENT & SUPPLIES - 5.3% DRUG DISTRIBUTORS - WHOLESALE - 2.6% AmeriSource Health Corp. Class A (a) 49,800 2,508,675 Cardinal Health, Inc. 42,600 2,619,900 5,128,575 MEDICAL SUPPLIES & APPLIANCES - 1.2% Abbott Laboratories 5,000 281,250 Baxter International, Inc. 20,000 920,000 Becton, Dickinson & Co. 5,000 246,250 Boston Scientific Corp. (a) 10,600 702,250 Johnson & Johnson 5,000 288,125 2,437,875 MEDICAL TECHNOLOGY - 0.9% Medtronic, Inc. 11,400 738,150 St. Jude Medical, Inc. (a) 29,650 1,171,175 1,909,325 OPHTHALMIC GOODS - 0.6% Cooper Companies, Inc. (a) 53,500 1,116,813 TOTAL MEDICAL EQUIPMENT & SUPPLIES 10,592,588 MEDICAL FACILITIES MANAGEMENT - 62.9% HEALTH SERVICES - 0.4% Rotech Medical Corp. (a) 40,000 740,000 HOME HEALTH CARE AGENCIES - 1.2% American Homepatient, Inc. (a) 1,700 40,375 Home Health Corp. of America, Inc. (a) 47,900 529,894 Vivra, Inc. (a) 59,200 1,761,200 2,331,469 HOSPITALS - 29.4% Columbia/HCA Healthcare Corp. 153,523 6,447,966 HEALTHSOUTH Rehabilitation Corp. (a) 344,600 13,870,150 SHARES VALUE (NOTE 1) Health Management Associates, Inc. Class A (a) 422,652 $ 11,200,278 Tenet Healthcare Corp. (a) 684,400 18,564,350 Universal Health Services, Inc. Class B (a) 257,200 8,776,950 58,859,694 HMOS & OUTPATIENT CARE - 21.3% Health Systems International, Inc. (a) 34,200 1,004,625 Healthsource, Inc. 10,000 208,750 Humana, Inc. (a) 10,000 196,250 Maxicare Health Plans, Inc. (a) 1,000 22,125 Oxford Health Plans, Inc. (a) 151,000 8,418,250 PacifiCare Health Systems, Inc.: Class A 159,000 12,720,000 Class B 31,300 2,621,375 Safeguard Health Enterprises, Inc. (a) 21,400 315,650 Sierra Health Services, Inc. (a) 114,400 3,017,300 Trigon Healthcare, Inc. 8,400 150,150 United HealthCare Corp. 231,100 11,526,113 Wellpoint Health Networks, Inc. 55,000 2,358,125 42,558,713 KIDNEY DIALYSIS CENTERS - 1.5% Fresenius Medical Care AG sponsored ADR (a) 50,000 1,575,000 Renal Care Group, Inc. (a) 40,000 1,440,000 3,015,000 MEDICAL SERVICES - 5.7% Carematrix Corp. 4,900 85,138 Foundation Health Corp. (a) 9,900 373,725 Lincare Holdings, Inc. (a) 226,600 9,772,125 National Surgery Centers, Inc. (a) 32,500 983,125 Total Renal Care Holdings, Inc. (a) 5,000 174,375 11,388,488 MISCELLANEOUS HEALTH & ALLIED SERVICES - 1.2% Renal Treatment Centers, Inc. (a) 95,300 2,477,800 NURSING CARE & NURSING HOMES - 0.5% Health Care & Retirement Corp. (a) 40,000 1,085,000 NURSING, PERSONAL CARE FACILITIES - 0.3% NovaCare, Inc. (a) 45,000 562,500 PSYCHIATRIC HOSPITALS - 0.6% Magellan Health Services, Inc. (a) 45,000 1,108,125 SKILLED NURSING CARE FACILITIES - 0.8% Multicare Companies, Inc. (a) 63,950 1,183,075 TheraTx, Inc. (a) 27,675 456,638 1,639,713 TOTAL MEDICAL FACILITIES MANAGEMENT 125,766,502 REAL ESTATE INVESTMENT TRUSTS - 0.5% Capstone Capital Corp. 41,900 995,125 RETAIL & WHOLESALE, MISCELLANEOUS - 0.3% RETAIL, GENERAL - 0.3% Gulf South Medical Supply, Inc. (a) 26,800 566,150 SERVICES - 2.0% MANAGEMENT CONSULTING SERVICES - 2.0% HealthCare COMPARE Corp. (a) 93,700 3,999,819 TOTAL COMMON STOCKS (Cost $127,376,372) 152,973,082 CASH EQUIVALENTS - 23.5% MATURITY VALUE AMOUNT (NOTE 1) Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account dated 2/28/97 due 3/3/97: at 5.37%, $ 6,105,731 $ 6,103,000 at 5.39%, 2,125,954 2,125,000 8,228,000 SHARES Taxable Central Cash Fund (b) 38,752,502 38,752,502 TOTAL CASH EQUIVALENTS (Cost $46,980,502) 46,980,502 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $174,356,874) $ 199,953,584 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $157,705,195 and $294,151,683, respectively (see Note 3 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 $62,985 for the period (see Note 4 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $7,991,025 and $8,188,500, respectively (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $174,614,201. Net unrealized appreciation aggregated $25,339,383, of which $27,292,502 related to appreciated investment securities and $1,953,119 related to depreciated investment securities. The fund hereby designates approximately $11,872,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 6% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. MEDICAL DELIVERY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at $ 199,953,584 value (including repurchase agreements of $8,228,000) (cost $174,356,874) - See accompanying schedule Cash 994 Receivable for investments sold 6,230,417 Receivable for fund shares sold 1,942,263 Dividends receivable 17,991 Interest receivable 134,987 Redemption fees receivable 2,130 Other receivables 367,293 TOTAL ASSETS 208,649,659 LIABILITIES Payable for investments purchased $ 6,032,500 Payable for fund shares redeemed 1,795,350 Accrued management fee 89,285 Other payables and accrued expenses 159,258 Collateral on securities loaned, 8,188,500 at value TOTAL LIABILITIES 16,264,893 NET ASSETS $ 192,384,766 Net Assets consist of: Paid in capital $ 143,109,135 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 23,678,921 Net unrealized appreciation (depreciation) on investments 25,596,710 NET ASSETS, for 6,800,520 $ 192,384,766 shares outstanding NET ASSET VALUE and redemption price per share ($192,384,766 (divided by) 6,800,520 shares) $28.29 Maximum offering price per share (100/97.00 of $28.29) $29.16
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 669,533 Dividends Interest (including income on securities loaned of $203,955) 818,231 TOTAL INCOME 1,487,764 EXPENSES Management fee $ 1,307,251 Transfer agent fees 1,771,354 Accounting and security lending fees 224,725 Non-interested trustees' compensation 1,089 Custodian fees and expenses 25,708 Registration fees 30,031 Audit 27,142 Legal 6,792 Miscellaneous 8,595 Total expenses before reductions 3,402,687 Expense reductions (98,944 3,303,743 ) NET INVESTMENT INCOME (LOSS) (1,815,979 ) REALIZED AND UNREALIZED GAIN (LOSS) 39,056,721 Net realized gain (loss) on investment securities Change in net unrealized appreciation (depreciation) on investment securities (20,650,234 ) NET GAIN (LOSS) 18,406,487 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 16,590,508 OTHER INFORMATION $ 567,463 Sales charges paid to FDC Deferred sales charges withheld $ 6,016 by FDC Exchange fees withheld by FSC $ 109,463 Expense reductions $ 92,830 Directed brokerage arrangement Custodian interest credits 2,514 Transfer agent interest credits 3,600 $ 98,944
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ (1,815,979 $ (256,812 Net ) ) investment income (loss) Net realized 39,056,721 39,973,448 gain (loss) Change in (20,650,234 14,596,764 net ) unrealized appreciation (depreciation ) NET INCREASE 16,590,508 54,313,400 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (25,354,918 (13,085,061 shareholders ) ) from net realized gains Share 213,043,160 327,500,676 transactions Net proceeds from sales of shares Reinvestmen 24,874,771 12,820,140 t of distributions Cost of (332,613,257 (385,938,068 shares ) ) redeemed Paid in 355,703 307,864 capital portion of redemption fees NET INCREASE (94,339,623 (45,309,388 (DECREASE) ) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (103,104,033 (4,081,049 INCREASE ) ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 295,488,799 299,569,848 period End of period $ 192,384,766 $ 295,488,799 OTHER INFORMATION Shares Sold 7,704,445 12,483,087 Issued in 921,317 484,557 reinvestment of distributions Redeemed (12,015,996 (15,700,950 ) ) Net increase (3,390,234) (2,733,306) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 29.00 $ 23.18 $ 20.28 $ 14.46 $ 19.64 value, beginning of period Income from Investment Operations Net (.23) (.03) .06 (.10) (.13) investment income (loss) Net realized 2.92 7.72 3.74 5.84 (3.56) and unrealized gain (loss) Total from 2.69 7.69 3.80 5.74 (3.69) investment operations Less Distributions From net - - (.06) - - investment income From net (3.45) (1.91) (.89) - (1.55) realized gain Total (3.45) (1.91) (.95) - (1.55) distributions Redemption .05 .04 .05 .08 .06 fees added to paid in capital Net asset $ 28.29 $ 29.00 $ 23.18 $ 20.28 $ 14.46 value, end of period TOTAL 10.50% 34.15% 19.63% 40.25% (19.63)% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 192,385 $ 295,489 $ 299,570 $ 188,553 $ 71,809 end of period (000 omitted) Ratio of 1.57% 1.65% 1.48% 1.82% 1.77% A expenses to average net assets Ratio of 1.53% E 1.62% E 1.45% E 1.79% E 1.77% A expenses to average net assets after expense reductions Ratio of net (.84)% (.13)% .29% (.57)% (.89)% investment A income (loss) to average net assets Portfolio 78% 132% 123% 164% 155% A turnover rate Average $ .0434 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 8 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 8 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.
AMERICAN GOLD PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS AMERICAN GOLD 6.10% 113.06% 94.06% AMERICAN GOLD 2.91% 106.67% 88.24% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS AMERICAN GOLD 6.10% 16.33% 6.85% AMERICAN GOLD 2.91% 15.63% 6.53% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 11286.57 10289.00 1987/04/30 11989.56 10197.43 1987/05/31 11351.06 10286.15 1987/06/30 10996.34 10805.60 1987/07/31 13124.67 11353.44 1987/08/31 12905.39 11776.92 1987/09/30 13453.59 11519.01 1987/10/31 9525.86 9037.81 1987/11/30 11047.94 8293.10 1987/12/31 10720.06 8924.20 1988/01/31 9110.09 9299.91 1988/02/29 9352.24 9733.29 1988/03/31 10288.12 9432.53 1988/04/30 10353.56 9537.23 1988/05/31 10288.12 9620.20 1988/06/30 10491.00 10061.77 1988/07/31 10464.82 10023.54 1988/08/31 9849.63 9682.74 1988/09/30 9424.23 10095.22 1988/10/31 9522.40 10375.87 1988/11/30 9653.29 10227.49 1988/12/31 9384.96 10406.47 1989/01/31 9725.28 11168.23 1989/02/28 10235.76 10890.14 1989/03/31 9875.81 11143.88 1989/04/30 9398.05 11722.25 1989/05/31 9057.73 12197.00 1989/06/30 9568.21 12127.48 1989/07/31 9666.38 13222.59 1989/08/31 10157.23 13481.75 1989/09/30 10216.13 13426.47 1989/10/31 10320.84 13114.98 1989/11/30 11636.31 13382.52 1989/12/31 11453.06 13703.71 1990/01/31 11956.99 12784.19 1990/02/28 11623.22 12949.10 1990/03/31 11171.64 13292.25 1990/04/30 9960.89 12959.95 1990/05/31 10837.87 14223.54 1990/06/30 10144.14 14126.82 1990/07/31 10850.95 14081.62 1990/08/31 10654.62 12808.64 1990/09/30 10648.07 12184.86 1990/10/31 8900.66 12132.46 1990/11/30 8789.40 12916.22 1990/12/31 9483.13 13276.58 1991/01/31 8167.67 13855.44 1991/02/28 8907.21 14846.11 1991/03/31 8874.48 15205.38 1991/04/30 8560.34 15241.87 1991/05/31 8854.85 15900.32 1991/06/30 9450.41 15172.09 1991/07/31 9345.70 15879.11 1991/08/31 8586.52 16255.44 1991/09/30 8442.54 15983.98 1991/10/31 9090.46 16198.16 1991/11/30 9070.82 15545.38 1991/12/31 8900.66 17323.77 1992/01/31 9116.63 17001.55 1992/02/29 8835.22 17222.57 1992/03/31 8233.11 16886.73 1992/04/30 7814.26 17383.20 1992/05/31 8370.55 17468.37 1992/06/30 8913.75 17208.09 1992/07/31 9476.59 17911.90 1992/08/31 9299.88 17544.71 1992/09/30 9247.53 17751.74 1992/10/31 8972.65 17813.87 1992/11/30 8213.48 18421.32 1992/12/31 8625.79 18647.90 1993/01/31 8462.17 18804.55 1993/02/28 9260.62 19060.29 1993/03/31 10301.21 19462.46 1993/04/30 11603.58 18991.47 1993/05/31 12892.87 19500.44 1993/06/30 13645.50 19556.99 1993/07/31 14731.91 19478.76 1993/08/31 13959.64 20217.01 1993/09/30 12480.56 20061.34 1993/10/31 14345.77 20476.61 1993/11/30 14358.86 20282.08 1993/12/31 15412.54 20527.49 1994/01/31 15419.09 21225.43 1994/02/28 14830.07 20650.22 1994/03/31 15190.03 19749.87 1994/04/30 13907.28 20002.67 1994/05/31 14509.39 20330.71 1994/06/30 13796.03 19832.61 1994/07/31 13593.14 20483.12 1994/08/31 14234.52 21322.93 1994/09/30 15477.99 20800.52 1994/10/31 14358.86 21268.53 1994/11/30 12657.27 20493.93 1994/12/31 13030.31 20797.85 1995/01/31 11669.03 21337.14 1995/02/28 12068.25 22168.65 1995/03/31 13920.37 22822.85 1995/04/30 13868.02 23494.98 1995/05/31 14155.98 24434.07 1995/06/30 14352.32 25001.68 1995/07/31 14738.45 25830.73 1995/08/31 14771.17 25895.57 1995/09/30 14764.63 26988.36 1995/10/31 12984.50 26892.01 1995/11/30 14188.70 28072.57 1995/12/31 14489.75 28613.25 1996/01/31 17061.78 29587.24 1996/02/29 17742.42 29861.52 1996/03/31 18167.82 30149.08 1996/04/30 18599.77 30593.48 1996/05/31 20628.59 31382.49 1996/06/30 17716.24 31502.05 1996/07/31 17389.01 30110.29 1996/08/31 19162.60 30745.32 1996/09/30 18809.19 32475.67 1996/10/31 18292.17 33371.34 1996/11/30 17506.82 35893.88 1996/12/31 17376.18 35182.83 1997/01/31 16635.49 37381.05 1997/02/28 18824.19 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select American Gold Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $18,824 - an 88.24% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Getchell Gold Corp. 10.0 Euro-Nevada Mining Ltd. 9.1 Barrick Gold Corp. 8.2 Newmont Mining Corp. 6.9 Franco-Nevada Mining Corp. 5.9 Newmont Gold Co. 4.5 Greenstone Resources Ltd. 3.6 Agnico Eagle Mines Ltd. 2.8 Freeport McMoRan Copper & Gold, Inc. Class A 2.6 Stillwater Mining Co. 2.5 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Gold Ores 85.4% Copper Ores 3.4% Investment Managers 1.5% Silver Ores 0.8% Gold & Silver Ores 0.7% All Others 8.2% * Row: 1, Col: 1, Value: 8.199999999999999 Row: 1, Col: 2, Value: 0.7000000000000001 Row: 1, Col: 3, Value: 0.8 Row: 1, Col: 4, Value: 1.5 Row: 1, Col: 5, Value: 3.4 Row: 1, Col: 6, Value: 85.40000000000001 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS AMERICAN GOLD PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: Effective February 14, 1997, George Domolky (right) became Portfolio Manager of Fidelity Select American Gold Portfolio. The following is an interview with Lawrence Rakers, who managed the fund during most of the period covered by this report, and George Domolky, who discusses his outlook. Q. LARRY, HOW DID THE FUND PERFORM? L.R. It did well given the investment climate in 1996. In the face of sharply falling gold prices, the fund actually gained 6.10% over the 12-month period ending February 28, 1997, compared to a gain of 26.16% for the Standard & Poor's 500 Index over the same period. Q. HOW WERE YOU ABLE TO POST A GAIN IN SUCH A CHALLENGING ENVIRONMENT? L.R. The fund's emphasis on low-cost producers that are increasing production and reserves stood us in good stead during the period. We try to stay away from high-cost, no-growth companies precisely because they are so sensitive to the price of gold. When the price of gold goes up, those companies do extremely well because they can mine their high-cost facilities at a profit. But when gold goes down, they get hurt badly. In contrast, when a company actively engaged in exploration finds a new lode of ore, the stock price may go up even when the price of gold drops. That's what happened with some of our better performers last year. Our shareholders should realize, though, that some of our stocks performed extraordinarily well in 1996. Achieving a positive return for the fund when gold drops as it did over the past period is extremely difficult. Q. WHAT WERE SOME OF THE FUND'S PROFITABLE HOLDINGS? L.R. Our best holdings were great examples of the high-growth strategy I mentioned before. Getchell Gold was spun off of a chemical company and installed a new management team that includes experienced mining people, while also substantially increasing its exploration budget. Euro-Nevada and Franco-Nevada are sister companies that derive a lot of their revenue from royalties on other companies' properties. They also recently discovered the Midas Property, a potentially very large find in Nevada. Greenstone Resources added low-cost capacity in Nicaragua, Panama and Honduras. And Golden Star benefited from improvements in its diverse portfolio of exploration properties. Q. WHAT HOLDINGS DETRACTED FROM THE FUND'S PERFORMANCE? L.R. We had high hopes for Stillwater Mining, but increases in its reserves couldn't overcome falling platinum and palladium prices. TVI Pacific was an exploration play in the Philippines. Unfortunately, the political situation in the Philippines has deteriorated in the last year, making investors hesitant to keep their money there. The company also disappointed investors with a lack of significant exploration news. TVI is a good example of the rule that foreign investments have more risk than U.S. investments. Q. TURNING TO YOU, GEORGE, WHAT'S YOUR OUTLOOK FOR THE FUND? G.D. The charter of this fund requires it to focus on gold companies based on the American continents and/or registered in the U.S. or Canada. The advantage of such a policy is that the fund can concentrate its holdings in the United States and Canada, which are both very stable politically and socially, and contain many fertile areas for gold mining. In particular, Nevada is the third largest gold-producing area in the world. I feel comfortable with this asset allocation because I like the prospects for Nevada, and for the U.S. and Canada generally. I expect the recent trend of increasing demand for gold jewelry from such areas as the Far East, the Gulf countries, China and India to continue. The positive picture for gold is somewhat clouded by central bank selling and producer forward selling. However, I will try to minimize our reliance on gold price increases by seeking out companies actively engaged in exploration and the discovery of new reserves, which will put more ounces of gold on the books. 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: 041 TRADING SYMBOL: FSAGX SIZE: as of February 28, 1997, more than $428 million MANAGER: George Domolky, since February 1997; manager, Fidelity Select Precious Metals and Minerals Portfolio, since February 1997; Fidelity Canada Fund, 1987-1996; Fidelity Select Food and Agriculture Portfolio, 1985-1987; joined Fidelity in 1981 (checkmark) AMERICAN GOLD PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.7% SHARES VALUE (NOTE 1) CANADA - 55.5% HOLDING COMPANIES - 0.1% HOLDING COMPANY OFFICES - 0.1% Bolivar Goldfields Ltd. (a) 546,700 $ 339,652 METALS & MINING - 1.0% METAL MINING - 0.5% Morgain Minerals, Inc. (a) 295,000 862,479 Southernera Resources Ltd. (a) 248,900 1,564,551 2,427,030 METAL MINING SERVICES - 0.1% Pentland Firth Ventures Ltd. (a) 447,300 441,366 MISCELLANEOUS NONMETAL MINERALS - 0.4% DIA Metropolitan Minerals Ltd. (a): Class A 27,450 413,310 Class B 81,500 1,370,098 1,783,408 TOTAL METALS & MINING 4,651,804 OIL & GAS - 0.5% OIL & GAS EXPLORATION - 0.5% Southwestern Gold Corp. (a) 192,500 2,251,215 PRECIOUS METALS - 53.9% GOLD & SILVER ORES - 0.7% Mentor Exploration & Development Co. Ltd. (a)(f) 188,000 1,758,871 Minorca Resources Ltd. (a) 261,100 1,135,508 2,894,379 GOLD ORES - 52.5% Aber Resources Ltd. (a) 39,900 772,832 Agnico Eagle Mines Ltd. 866,900 12,387,454 Argosy Mining Corp. (a) 25,000 28,506 Argosy Mining Corp. (warrants) (a)(d) 187,500 - Argosy Mining Corp. (a)(d) 375,000 427,586 Barrick Gold Corp. 1,265,700 35,802,061 Bema Gold Corp. 43,500 362,460 Brazilian Resources, Inc. (a) 750,000 208,310 Bre-X Minerals Ltd. (a) 746,800 10,698,593 Bresea Resources Ltd. (a) 508,300 3,845,269 Bro-X Minerals Ltd. 190,680 327,521 Cambior, Inc. 607,800 9,729,065 Canaarc Resources Corp. (a) 530,000 770,895 Canaarc Resources Corp. (warrants) (a) 125,000 - Cathedral Gold Corp. (a) 201,000 267,384 Crown Resources Corp. (a) 214,600 1,475,375 Crystallex International Corp. (a) 561,500 1,703,194 Eldorado Gold Corp. (a) 211,100 1,465,812 Euro-Nevada Mining Ltd. 1,215,400 39,798,209 First Dynasty Mines Ltd. (a) 120,000 394,694 Franco-Nevada Mining Corp. 548,100 25,799,540 Golden Knight Resources, Inc. (a) 576,300 2,106,129 Golden Queen Mining Co. Ltd. (a) 120,800 326,689 Golden Star Resources Ltd. (a) 730,100 10,405,986 Greenstone Resources Ltd. (a) 1,303,300 15,860,794 Iamgold International African Mining Gold Corp. (a) 100,000 453,167 Indochina Goldfields Ltd. (a) 175,500 2,417,991 Indochina Goldfields Ltd. (a)(d) 33,900 467,065 Indochina Goldfields Ltd. (special warrants) 100,000 1,329,551 SHARES VALUE (NOTE 1) International Pursuit Corp. (a) 300,000 $ 1,030,589 International Pursuit Corp. (warrants) (a) 150,000 - Java Gold Corp. (a) 108,000 78,940 Kinross Gold Corp. (a) 1,078,100 7,682,984 Meridian Gold, Inc. 50,000 230,238 Meridian Gold, Inc. Installment Receipt (e) 2,538,000 7,049,227 Metallica Resources, Inc. (a) 489,500 1,735,245 Mountain Province Mining, Inc. (a) 565,800 1,819,625 Nelson Gold Ltd. (a) 525,000 441,289 Nevsun Resources Ltd. (a) 562,000 3,491,576 Oliver Gold Corp. (a) 273,800 606,376 Oliver Gold Corp. (warrants)(a) 50,000 21,927 Oliver Gold Corp. (d) 100,000 221,467 Orvana Minerals Corp. (a) 959,200 5,959,288 Prime Resources Group, Inc. 251,200 2,267,529 Queenston Mining, Inc. (a) 204,000 341,454 Rayrock Yellowknife Resources Inc. (a) 183,800 792,618 Repadre Capital Corp. (a) 21,900 141,662 Repadre Capital Corp. (a)(d) 255,000 1,649,490 Samax Gold, Inc. (a)(d) 240,000 1,078,829 Silver Standard Resources, Inc. (a) 157,700 847,199 Sudbury Contact Mines Ltd. (a)(f) 603,600 3,970,617 TVI Pacific, Inc. (a) 3,153,000 2,903,761 TVI Pacific, Inc. (a)(d) 96,000 88,411 TVX Gold, Inc. 250,000 2,220,151 Valerie Gold Resources Ltd. (a)(d) 50,000 237,547 Valerie Gold Resources Ltd. (warrants) (a)(d) 25,000 - Vista Gold Corp. (a) 1,335,600 1,561,934 War Eagle Mining, Inc. (a) 493,900 721,997 William Resources, Inc. (a) 950,000 1,041,552 William Resources, Inc. (a)(d) 442,000 484,596 230,350,250 SILVER ORES - 0.7% Pan American Silver Corp. (a) 182,700 1,602,456 Pan American Silver Corp. (warrants) (a) 87,500 - Pan American Silver Corp. (d) 175,000 1,534,920 3,137,376 TOTAL PRECIOUS METALS 236,382,005 TOTAL CANADA 243,624,676 FRANCE - 0.5% PRECIOUS METALS - 0.5% GOLD ORES - 0.5% Guyanor Resources SA Class B (a) 493,440 2,434,470 GHANA - 1.6% PRECIOUS METALS - 1.6% GOLD ORES - 1.6% Ashanti Goldfields Co. Ltd. GDR 452,452 6,843,337 PERU - 3.1% PRECIOUS METALS - 3.1% GOLD ORES - 3.0% Compania de Minas Buenaventura SA: Class A 278,182 2,260,787 Class B 92,846 890,381 Class T 1,208,703 10,051,584 13,202,752 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PERU - CONTINUED PRECIOUS METALS - CONTINUED SILVER ORES - 0.1% Compania de Minas Buenaventura SA Class B sponsored ADR 27,000 $ 526,500 TOTAL PERU 13,729,252 UNITED STATES OF AMERICA - 32.0% METALS & MINING - 3.4% COPPER ORES - 3.4% Freeport McMoRan Copper & Gold, Inc.: Class A 350,000 11,418,751 Class B 100,000 3,400,000 14,818,751 PRECIOUS METALS - 27.1% GOLD ORES - 27.1% Canyon Resources Corp. (a) 519,834 1,786,929 Getchell Gold Corp. (a) 849,948 43,772,322 Newmont Gold Co. 402,000 19,597,500 Newmont Mining Corp. 634,190 30,124,025 Santa Fe Pacific Gold Corp. 325,000 6,093,750 Stillwater Mining Co. (a) 292,300 6,850,781 Stillwater Mining Co. (a)(d) 460,600 10,795,313 119,020,620 SECURITIES INDUSTRY - 1.5% INVESTMENT MANAGERS - 1.5% Pioneer Group, Inc. 272,600 6,372,025 TOTAL UNITED STATES OF AMERICA 140,211,396 TOTAL COMMON STOCKS (Cost $317,329,988) 406,843,131 CONVERTIBLE BONDS - 0.7% PRINCIPAL AMOUNT CANADA - 0.7% PRECIOUS METALS - 0.7% GOLD ORES - 0.7% Pegasus Gold, Inc. euro 6 1/4%, 4/30/02 (d) $ 1,360,000 1,203,600 William Resources, Inc. 9.66%, 1/23/02 (c) 2,250,000 1,825,458 TOTAL CONVERTIBLE BONDS (Cost $3,250,931) 3,029,058 CASH EQUIVALENTS - 6.6% SHARES Taxable Central Cash Fund (b) (Cost $28,857,834) 28,857,834 28,857,834 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $349,438,753) $ 438,730,023 CURRENCY ABBREVIATIONS CAD - Canadian dollar LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. 4. 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 $18,188,824 or 4.2% of net assets. 5. Purchased on an installment basis. Market value reflects only those payments made through February 28, 1997. The remaining installment aggregating CAD 6,345,000 is due July 31, 1997. 6. 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 $ - $ - $ - Mentor Exploration & Development Co. Ltd. - - - 1,758,871 Silver Standard Resources, Inc. - - - - Southernera Resources Ltd. - - - - Sudbury Contact Mines Ltd. 11,343 9,334 - 3,970,617 Winspear Resources Ltd. 71,799 - - - Totals $ 89,662 $ 9,334 $ - $ 5,729,488 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $251,273,781 and $276,071,243, respectively (see Note 3 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 $82,611 for the period (see Note 4 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $3,567,111 and $3,805,000, respectively (see Note 6 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and average daily balance during the period for which the loan was outstanding amounted to $9,652,000. The weighted average interest rate was 5.7% (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $350,158,713. Net unrealized appreciation aggregated $88,571,310, of which $112,390,352 related to appreciated investment securities and $23,819,042 related to depreciated investment securities. The fund hereby designates approximately $717,000 as a capital gain dividend for the purpose of the dividend paid deduction. AMERICAN GOLD PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value (cost $349,438,753) - See accompanying schedule $ 438,730,023 Receivable for investments sold 9,944,814 Receivable for fund shares sold 13,376,785 Dividends receivable 90,035 Interest receivable 135,875 Redemption fees receivable 42,094 Other receivables 3,500 TOTAL ASSETS 462,323,126 LIABILITIES Payable for investments purchased $ 21,795,209 Payable for fund shares redeemed 8,174,011 Accrued management fee 176,648 Other payables and accrued expenses 269,283 Collateral on securities loaned, 3,805,000 at value TOTAL LIABILITIES 34,220,151 NET ASSETS $ 428,102,975 Net Assets consist of: Paid in capital $ 325,028,542 Accumulated net investment (loss) (3,491,165 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 17,274,621 Net unrealized appreciation (depreciation) on investments 89,290,977 and assets and liabilities in foreign currencies NET ASSETS, for 15,177,663 $ 428,102,975 shares outstanding NET ASSET VALUE and redemption price per share ($428,102,975 (divided by) 15,177,663 shares) $28.21 Maximum offering price per share (100/97.00 of $28.21) $29.08
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 2,058,827 Dividends Interest (including income on securities loaned of $25,324) 1,352,691 TOTAL INCOME 3,411,518 EXPENSES Management fee $ 2,501,556 Transfer agent fees 2,756,985 Accounting and security lending fees 419,475 Non-interested trustees' compensation 1,764 Custodian fees and expenses 96,582 Registration fees 103,545 Audit 33,832 Legal 2,744 Interest 1,525 Reports to shareholders 35,727 Miscellaneous 3,670 Total expenses before reductions 5,957,405 Expense reductions (84,046 5,873,359 ) NET INVESTMENT INCOME (LOSS) (2,461,841 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including 35,931,097 realized gain (loss) of $10,989 and $(546,651) on sales of investments in affiliated issuers and precious metals, respectively) Foreign currency transactions (6,030 35,925,067 ) Change in net unrealized appreciation (depreciation) on: Investment securities (16,651,985 ) Assets and liabilities in (293 (16,652,278 foreign currencies ) ) NET GAIN (LOSS) 19,272,789 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 16,810,948 OTHER INFORMATION $ 1,162,696 Sales charges paid to FDC Deferred sales charges withheld $ 43,678 by FDC Exchange fees withheld by FSC $ 214,508 Expense reductions $ 80,704 Directed brokerage arrangements Custodian interest credits 1,812 Transfer agent interest credits 1,530 $ 84,046
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ (2,461,841 $ (952,464 Net ) ) investment income (loss) Net realized 35,925,067 25,985,654 gain (loss) Change in (16,652,278 105,571,674 net ) unrealized appreciation (depreciation ) NET INCREASE 16,810,948 130,604,864 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (6,827,284 - shareholders ) from net realized gains Share 757,145,884 656,288,557 transactions Net proceeds from sales of shares Reinvestmen 6,693,065 - t of distributions Cost of (799,571,083 (615,297,920 shares ) ) redeemed Paid in 2,358,350 1,700,313 capital portion of redemption fees NET INCREASE (33,373,784 42,690,950 (DECREASE) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (23,390,120 173,295,814 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 451,493,095 278,197,281 period End of period $ 428,102,975 $ 451,493,095 (including accumulate d net investment loss of $3,491,165 and $458,668, respectivel y) OTHER INFORMATION Shares Sold 27,099,046 28,496,378 Issued in 262,370 - reinvestment of distributions Redeemed (28,839,831 (26,927,012 ) ) Net increase (1,478,415) 1,569,366 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 27.11 $ 18.44 $ 22.66 $ 14.15 $ 11.94 value, beginning of period Income from Investment Operations Net (.16) (.06) (.05) (.11) (.05) investment income (loss) Net realized 1.60 8.62 (4.25) 8.44 2.16 and unrealized gain (loss) Total from 1.44 8.56 (4.30) 8.33 2.11 investment operations Less Distributions From net (.50) - - - - realized gain Redemption .16 .11 .08 .18 .10 fees added to paid in capital Net asset $ 28.21 $ 27.11 $ 18.44 $ 22.66 $ 14.15 value, end of period TOTAL 6.10% 47.02% (18.62)% 60.14% 18.51% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 428,103 $ 451,493 $ 278,197 $ 347,406 $ 168,033 end of period (000 omitted) Ratio of 1.44% 1.39% 1.41% 1.50% 1.59% A expenses to average net assets Ratio of 1.42% E 1.39% 1.41% 1.49% E 1.59% A expenses to average net assets after expense reductions Ratio of net (.59)% (.27)% (.22)% (.51)% (.44)% investment A income (loss) to average net assets Portfolio 63% 56% 34% 39% 30% A turnover rate Average $ .0270 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 8 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS ENERGY 20.35% 81.91% 137.59% ENERGY 16.74% 76.46% 130.46% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS ENERGY 20.35% 12.71% 9.04% ENERGY 16.74% 12.03% 8.71% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 10505.85 10289.00 1987/04/30 10207.38 10197.43 1987/05/31 10565.54 10286.15 1987/06/30 10931.15 10805.60 1987/07/31 11498.23 11353.44 1987/08/31 11431.08 11776.92 1987/09/30 11184.85 11519.01 1987/10/31 8230.08 9037.81 1987/11/30 7886.85 8293.10 1987/12/31 8448.32 8924.20 1988/01/31 8762.92 9299.91 1988/02/29 9077.53 9733.29 1988/03/31 9722.09 9432.53 1988/04/30 10090.41 9537.23 1988/05/31 9722.09 9620.20 1988/06/30 9829.51 10061.77 1988/07/31 9890.90 10023.54 1988/08/31 9514.91 9682.74 1988/09/30 9407.48 10095.22 1988/10/31 9491.89 10375.87 1988/11/30 9514.91 10227.49 1988/12/31 9795.16 10406.47 1989/01/31 10535.31 11168.23 1989/02/28 10369.96 10890.14 1989/03/31 10968.37 11143.88 1989/04/30 11338.45 11722.25 1989/05/31 11472.31 12197.00 1989/06/30 11708.52 12127.48 1989/07/31 12196.71 13222.59 1989/08/31 12464.42 13481.75 1989/09/30 12661.27 13426.47 1989/10/31 12574.65 13114.98 1989/11/30 13047.09 13382.52 1989/12/31 13989.99 13703.71 1990/01/31 13365.36 12784.19 1990/02/28 13781.78 12949.10 1990/03/31 13789.79 13292.25 1990/04/30 13325.32 12959.95 1990/05/31 14134.13 14223.54 1990/06/30 13801.02 14126.82 1990/07/31 14741.03 14081.62 1990/08/31 15005.94 12808.64 1990/09/30 14963.21 12184.86 1990/10/31 14194.11 12132.46 1990/11/30 14040.29 12916.22 1990/12/31 13361.51 13276.58 1991/01/31 12496.06 13855.44 1991/02/28 13661.77 14846.11 1991/03/31 13476.31 15205.38 1991/04/30 13626.44 15241.87 1991/05/31 13705.92 15900.32 1991/06/30 13095.31 15172.09 1991/07/31 13767.77 15879.11 1991/08/31 14033.22 16255.44 1991/09/30 13891.65 15983.98 1991/10/31 14307.51 16198.16 1991/11/30 13245.73 15545.38 1991/12/31 13366.21 17323.77 1992/01/31 12650.96 17001.55 1992/02/29 12668.84 17222.57 1992/03/31 12302.28 16886.73 1992/04/30 13142.70 17383.20 1992/05/31 13768.54 17468.37 1992/06/30 13087.22 17208.09 1992/07/31 13436.81 17911.90 1992/08/31 13678.83 17544.71 1992/09/30 13759.50 17751.74 1992/10/31 13167.89 17813.87 1992/11/30 12863.12 18421.32 1992/12/31 13046.96 18647.90 1993/01/31 13538.95 18804.55 1993/02/28 14431.83 19060.29 1993/03/31 15169.82 19462.46 1993/04/30 15461.63 18991.47 1993/05/31 15926.57 19500.44 1993/06/30 16136.25 19556.99 1993/07/31 16017.74 19478.76 1993/08/31 17284.93 20217.01 1993/09/30 17184.65 20061.34 1993/10/31 16938.51 20476.61 1993/11/30 14887.29 20282.08 1993/12/31 15546.04 20527.49 1994/01/31 16378.69 21225.43 1994/02/28 15829.90 20650.22 1994/03/31 15063.48 19749.87 1994/04/30 16214.13 20002.67 1994/05/31 16385.71 20330.71 1994/06/30 16299.92 19832.61 1994/07/31 16547.75 20483.12 1994/08/31 16271.32 21322.93 1994/09/30 16147.40 20800.52 1994/10/31 17062.49 21268.53 1994/11/30 16013.95 20493.93 1994/12/31 15610.15 20797.85 1995/01/31 15236.38 21337.14 1995/02/28 15836.39 22168.65 1995/03/31 16701.98 22822.85 1995/04/30 17215.28 23494.98 1995/05/31 17659.48 24434.07 1995/06/30 17146.18 25001.68 1995/07/31 17550.90 25830.73 1995/08/31 17422.57 25895.57 1995/09/30 17432.45 26988.36 1995/10/31 16682.24 26892.01 1995/11/30 17639.74 28072.57 1995/12/31 18948.07 28613.25 1996/01/31 19240.82 29587.24 1996/02/29 19149.97 29861.52 1996/03/31 20432.02 30149.08 1996/04/30 21421.44 30593.48 1996/05/31 21642.82 31382.49 1996/06/30 22043.42 31502.05 1996/07/31 21052.47 30110.29 1996/08/31 21874.75 30745.32 1996/09/30 23034.37 32475.67 1996/10/31 23972.62 33371.34 1996/11/30 25300.91 35893.88 1996/12/31 25101.17 35182.83 1997/01/31 25674.36 37381.05 1997/02/28 23046.36 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Energy Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $23,046 - a 130.46% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Total SA sponsored ADR 5.9 British Petroleum PLC ADR 4.4 du Pont (E.I.) de Nemours & Co. 4.1 Unocal Corp. 3.9 Royal Dutch Petroleum Co. ADR 3.7 Schlumberger Ltd. 3.5 Transocean Offshore, Inc. 3.4 Halliburton Co. 2.8 Diamond Offshore Drilling, Inc. 2.7 Burlington Resources, Inc. 2.5 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Crude Petroleum & Gas 34.7% Oil & Gas Exploration 16.5% Petroleum Refiners 16.1% Oil & Gas Services 10.3% Drilling 9.6% All Others 12.8% * 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 % OF FUND'S INVESTMENTS ENERGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Lawrence Rakers became Portfolio Manager of Fidelity Select Energy Portfolio on January 7, 1997. Q. HOW DID THE FUND PERFORM, LARRY? A. We had a respectable year. For the 12 months that ended February 28, 1997, the fund was up 20.35%, compared to a rise of 26.16% in the Standard & Poor's 500 Index over the same period. Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE DURING THE PERIOD? A. We benefited from favorable oil and gas prices - largely the result of the cold winter in 1995-96 and healthy economic growth. These two factors put upward pressure on oil prices at a time when inventories were at their lowest levels in several years. So when Iraq re-entered the oil market last fall, demand was robust enough to easily absorb the extra supply. Q. WHAT ABOUT THE OTHER PRODUCERS? DO THEY HAVE A LOT OF EXCESS CAPACITY? A. The overall operating rate for the world's oil and gas fields is about 96%. That means there is relatively little unused capacity in the world. If demand should increase sharply or supply be disrupted for any reason, as it was during the Gulf War, there's not a lot of supply to fill the gap. The most dominant player in the Arab world in terms of excess oil supply continues to be Saudi Arabia. With about 2,000,000 barrels a day of unused capacity, the Saudis have the ability to control prices under normal circumstances. Of course, lower oil prices hurt their revenues, so there's an incentive not to let prices drop too low. Q. ARE THERE ANY OTHER FACTORS AFFECTING THIS MARKET? A. Yes. Supply in the energy markets is also limited by the number of rigs that are available to drill oil and natural gas wells. Current capacity utilization of this equipment is running at around 80% to 95%, and there are virtually no new drill rigs under construction. This type of equipment tends to have a long manufacturing cycle, and presently the rental rate is low enough that building new ones is not economically justifiable. This means that there is no room for surprises on either the supply or the demand side that would suddenly necessitate a lot more drill rigs; they simply aren't available right now. Q. THE SCENARIO YOU'RE PAINTING SOUNDS BULLISH. ASIDE FROM THE SAUDIS, WHO OR WHAT COULD RUIN IT? A. Unusually warm winter weather or deterioration in the world economy could reduce demand. Q. AGAINST THE BACKDROP YOU'VE DESCRIBED, WHAT WERE SOME OF YOUR STANDOUT PERFORMERS DURING THE PERIOD? A. As you can imagine, energy service companies - the companies that assist exploration and production activities - did well last year. Some of our holdings in that area included Schlumberger, Halliburton and Transocean Offshore. And projections are that rental prices for drill rigs could increase substantially from current levels before it would make economic sense to build new ones. So we expect these types of stocks to continue to do well. In the category of high-growth oil producers, the fund's holdings in United Meridian Corp. and Vintage Petroleum did well for us. Total SA and British Petroleum both are implementing extensive cost-cutting measures and are expected to have robust earnings growth. Q. WHAT WERE WEAK AREAS FOR THE FUND? A. The disappointments were in refining and chemical production. As the price of oil rises, those kinds of companies tend to experience declining profit margins. Q. WHAT'S YOUR OUTLOOK FOR THE REST OF THE CURRENT PERIOD, LARRY? A. I expect demand for oil - and especially for drilling equipment - to remain strong. So my strategy going forward will be pretty much the same - to overweight the fund with energy service stocks while also looking for high-growth oil and natural gas producers. In addition, I expect that we'll continue to hold some integrated oil companies, such as Exxon and Atlantic Richfield, for their stable growth in earnings and cash flow. We will continue to look for investment opportunities both in U.S. stocks and, where we can justify the added risk, in selected foreign securities. 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: 060 TRADING SYMBOL: FSENX SIZE: as of February 28, 1997, more than $203 million MANAGER: Larry Rakers, since January 1997; manager, Fidelity Select Paper and Forest Products Portfolio, since 1996; Fidelity Select American Gold Portfolio, 1995-February 1997; Fidelity Select Precious Metals and Minerals Portfolio, 1996-February 1997; joined Fidelity in 1993 (checkmark) ENERGY PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.2% SHARES VALUE (NOTE 1) CHEMICALS & PLASTICS - 4.1% CHEMICALS - 4.1% du Pont (E.I.) de Nemours & Co. 78,000 $ 8,365,500 COAL - 0.3% MAPCO, Inc. 20,000 635,000 CONSTRUCTION - 0.9% HEAVY CONSTRUCTION - 0.9% McDermott (J. Ray) SA 79,200 1,821,600 ENERGY SERVICES - 19.9% DRILLING - 9.6% Atwood Oceanics, Inc. (a) 10,000 525,000 Cliffs Drilling Co. (a) 19,200 890,400 Diamond Offshore Drilling, Inc. (a) 94,100 5,551,900 Falcon Drilling, Inc. (a) 80,300 2,720,163 Nabors Industries, Inc. (a) 90,000 1,383,750 Noble Drilling Corp. (a) 83,500 1,482,125 Transocean Offshore, Inc. 122,466 6,842,788 19,396,126 OIL & GAS SERVICES - 10.3% BJ Services Co. (a) 27,500 1,093,125 Eni Spa sponsored ADR 40,000 1,990,000 Energy Ventures, Inc. (a) 45,000 2,295,000 Halliburton Co. 86,900 5,615,913 Schlumberger Ltd. 69,500 6,993,438 Weatherford Enterra, Inc. (a) 15,000 450,000 Western Atlas, Inc. (a) 37,800 2,301,075 20,738,551 TOTAL ENERGY SERVICES 40,134,677 GAS - 0.7% GAS & OTHER SERVICES - 0.1% Enron Global Power & Pipelines 10,000 287,500 GAS TRANSMISSION - 0.6% Enron Corp. 27,900 1,112,513 TOTAL GAS 1,400,013 OIL & GAS - 68.3% CRUDE PETROLEUM & GAS - 34.7% Alberta Energy Co. Ltd. 25,000 525,344 Amber Energy, Inc. (a) 51,400 1,051,931 Amber Energy, Inc. (a)(c) 21,000 429,777 Anadarko Petroleum Corp. 31,700 1,783,125 Apache Corp. 4,015 129,986 Atlantic Richfield Co. 14,800 1,850,000 Barrett Resources Corp. (a) 22,100 726,538 Burlington Resources, Inc. 115,300 5,058,788 Canadian Natural Resources Ltd. (a) 25,000 595,695 Canada Occidental Petroleum Ltd. 50,000 844,206 Cavell Energy Corp. (a) 120,800 525,352 Chesapeake Energy Corp. (a) 126,200 2,618,650 Comstock Resources, Inc. (a) 100,000 900,000 Devon Energy Corp. 50,000 1,562,500 Enron Oil & Gas Co. 49,300 998,325 Flores & Rucks, Inc. (a) 80,700 3,631,500 Forcenergy Gas Exploration, Inc. (a) 110,000 2,860,000 Gulf Canada Corp. (a) 100,000 701,677 Noble Affiliates, Inc. 20,000 780,000 SHARES VALUE (NOTE 1) Occidental Petroleum Corp. 168,600 $ 4,299,300 Oryx Energy Co. (a) 110,000 2,200,000 Pogo Producing Co. 24,500 842,188 Renaissance Energy Ltd. (a) 92,208 2,611,600 Renaissance Energy Ltd. (a)(c) 10,300 291,726 Rio Alto Exploration Ltd. (a) 237,500 1,466,853 Saga Petroleum AS Class B 13,100 201,218 Santa Fe Energy Resources, Inc. (a) 369,000 4,750,875 Stone Energy Corp. (a) 35,000 770,000 Swift Energy Co. (a) 75,000 1,612,500 Total SA sponsored ADR 300,200 11,895,425 Tullow Oil PLC (a) 846,360 1,275,708 Ulster Petroleums Ltd. (a) 48,500 352,721 United Meridian Corp. (a) 160,500 4,835,063 Vastar Resources, Inc. 44,800 1,299,200 Vintage Petroleum, Inc. 125,700 3,786,713 70,064,484 GENERAL PETROLEUM PRODUCTS - 1.0% KCS Group, Inc. 55,000 1,980,000 OIL & GAS EXPLORATION - 16.5% Abacan Resource Corp. (a) 200,000 1,837,500 Amerada Hess Corp. 66,600 3,554,775 Anderson Exploration Ltd. (a) 60,000 712,641 Chieftain International, Inc. (a) 108,700 2,196,802 Exxon Corp. 10,000 998,750 Kerr-McGee Corp. 62,700 3,926,588 Louisiana Land & Exploration Co. 45,400 2,167,850 Phillips Petroleum Co. 48,300 1,998,413 Total Petroleum (North America) Ltd. 30,000 306,984 USX-Marathon Group 140,100 3,730,163 Union Pacific Resources Group, Inc. 169,200 4,124,250 Unocal Corp. 201,774 7,793,521 33,348,237 PETROLEUM REFINERS - 16.1% British Petroleum PLC ADR 67,561 8,943,381 Coastal Corp. 75,000 3,412,500 Murphy Oil Corp. 38,400 1,780,800 Pennzoil Co. 37,600 2,157,300 Royal Dutch Petroleum Co. ADR 42,700 7,387,100 Shell Transport & Trading Co. PLC ADR 36,000 3,649,500 Tosco Corp. 104,100 2,901,788 Valero Energy Corp. 75,000 2,362,500 32,594,869 TOTAL OIL & GAS 137,987,590 TOTAL COMMON STOCKS (Cost $183,363,109) 190,344,380 CASH EQUIVALENTS - 5.8% Taxable Central Cash Fund (b) (Cost $11,700,753) 11,700,753 11,700,753 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $195,063,862) $ 202,045,133 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. 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 $721,503 or 0.4% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $197,125,029 and $144,218,739, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $53,327 for the period (see Note 4 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $2,618,650 and $2,776,400, respectively (see Note 6 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $2,721,000 and $2,678,500, respectively. The weighted average interest rate was 5.6% (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 74.4% Canada 7.2 United Kingdom 6.2 France 5.9 Netherlands 3.7 Italy 1.0 Others (individually less than 1%) 1.6 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $195,369,213. Net unrealized appreciation aggregated $6,675,920, of which $18,939,028 related to appreciated investment securities and $12,263,108 related to depreciated investment securities. The fund hereby designates approximately $6,259,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 29% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. ENERGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 202,045,133 (cost $195,063,862) - See accompanying schedule Receivable for investments sold 6,537,201 Receivable for fund shares sold 336,391 Dividends receivable 372,572 Interest receivable 64,137 Redemption fees receivable 1,298 Other receivables 36,323 TOTAL ASSETS 209,393,055 LIABILITIES Payable for fund shares redeemed $ 3,042,532 Accrued management fee 120,272 Other payables and 189,293 accrued expenses Collateral on securities loaned, 2,776,400 at value TOTAL LIABILITIES 6,128,497 NET ASSETS $ 203,264,558 Net Assets consist of: Paid in capital $ 179,721,354 Undistributed net investment income 428,529 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 16,133,404 Net unrealized appreciation (depreciation) on investments 6,981,271 NET ASSETS, for 9,537,827 $ 203,264,558 shares outstanding NET ASSET VALUE and redemption price per share ($203,264,558 (divided by) 9,537,827 shares) $21.31 Maximum offering price per share (100/97.00 of $21.31) $21.97
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 3,092,351 Dividends Interest (including income on 722,840 securities loaned of $115,247) TOTAL INCOME 3,815,191 EXPENSES Management fee $ 1,066,783 Transfer agent fees 1,422,758 Accounting and security lending fees 180,001 Non-interested trustees' compensation 636 Custodian fees and expenses 13,455 Registration fees 44,116 Audit 31,609 Legal 969 Interest 833 Miscellaneous 5,278 Total expenses before reductions 2,766,438 Expense reductions (37,917 2,728,521 ) NET INVESTMENT INCOME 1,086,670 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 20,643,327 Foreign currency transactions (6,136 20,637,191 ) Change in net unrealized appreciation (depreciation) on: Investment securities (2,355,967 ) Assets and liabilities in 184 (2,355,783 foreign currencies ) NET GAIN (LOSS) 18,281,408 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 19,368,078 OTHER INFORMATION $ 1,029,850 Sales charges paid to FDC Deferred sales charges withheld $ 14,667 by FDC Exchange fees withheld by FSC $ 95,265 Expense Reductions $ 31,750 Directed brokerage arrangements Custodian interest credits 5,079 Transfer agent interest credits 1,088 $ 37,917
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 1,086,670 $ 1,171,293 Net investment income Net realized 20,637,191 9,827,602 gain (loss) Change in (2,355,783 9,441,160 net ) unrealized appreciation (depreciation ) NET INCREASE 19,368,078 20,440,055 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (1,000,086 (687,111 shareholders ) ) From net investment income From net (9,661,247 (2,283,890 realized gain ) ) TOTAL (10,661,333 (2,971,001 DISTRIBUTION ) ) S Share 338,291,399 161,715,061 transactions Net proceeds from sales of shares Reinvestmen 10,462,236 2,918,567 t of distributions Cost of (274,385,798 (158,608,994 shares ) ) redeemed Paid in 514,459 159,215 capital portion of redemption fees NET INCREASE 74,882,296 6,183,849 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 83,589,041 23,652,903 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 119,675,517 96,022,614 period End of period $ 203,264,558 $ 119,675,517 (including undistribute d net investment income of $428,529 and $486,372, respectivel y) OTHER INFORMATION Shares Sold 15,419,263 8,981,770 Issued in 507,572 162,874 reinvestment of distributions Redeemed (12,698,556 (8,799,673 ) ) Net increase 3,228,279 344,971 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 18.97 $ 16.10 $ 16.73 $ 15.84 $ 14.70 value, beginning of period Income from Investment Operations Net .13 .18 .07 .06 .23 investment income Net realized 3.59 3.13 (.11) 1.35 1.16 and unrealized gain (loss) Total from 3.72 3.31 (.04) 1.41 1.39 investment operations Less Distributions From net (.13) (.11) (.08) (.03) (.27) investment income From net (1.31) (.36) (.54) (.57) - realized gain Total (1.44) (.47) (.62) (.60) (.27) distributions Redemption .06 .03 .03 .08 .02 fees added to paid in capital Net asset $ 21.31 $ 18.97 $ 16.10 $ 16.73 $ 15.84 value, end of period TOTAL 20.35% 20.92% .04% 9.69% 9.81% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 203,265 $ 119,676 $ 96,023 $ 145,490 $ 179,133 end of period (000 omitted) Ratio of 1.57% 1.63% 1.85% 1.67% 1.71% A expenses to average net assets Ratio of 1.55% E 1.63% 1.85% 1.66% E 1.71% A expenses to average net assets after expense reductions Ratio of net .62% 1.04% .42% .37% 1.88% A investment income to average net assets Portfolio 87% 97% 106% 157% 72% A turnover rate Average $ .0399 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 8 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS ENERGY SERVICE 32.26% 147.21% 134.15% ENERGY SERVICE 28.29% 139.80% 127.12% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS ENERGY SERVICE 32.26% 19.84% 8.88% ENERGY SERVICE 28.29% 19.12% 8.55% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 10619.15 10289.00 1987/04/30 10619.15 10197.43 1987/05/31 11440.52 10286.15 1987/06/30 12565.02 10805.60 1987/07/31 13386.39 11353.44 1987/08/31 12369.46 11776.92 1987/09/30 11968.55 11519.01 1987/10/31 7695.46 9037.81 1987/11/30 6854.54 8293.10 1987/12/31 7382.56 8924.20 1988/01/31 7675.91 9299.91 1988/02/29 8350.60 9733.29 1988/03/31 8839.52 9432.53 1988/04/30 9015.52 9537.23 1988/05/31 8399.50 9620.20 1988/06/30 7920.36 10061.77 1988/07/31 7793.25 10023.54 1988/08/31 7939.92 9682.74 1988/09/30 7597.68 10095.22 1988/10/31 7343.45 10375.87 1988/11/30 7030.54 10227.49 1988/12/31 7353.23 10406.47 1989/01/31 7803.02 11168.23 1989/02/28 7891.03 10890.14 1989/03/31 8389.72 11143.88 1989/04/30 8790.63 11722.25 1989/05/31 8947.08 12197.00 1989/06/30 9240.42 12127.48 1989/07/31 9758.67 13222.59 1989/08/31 10218.25 13481.75 1989/09/30 10071.57 13426.47 1989/10/31 9572.88 13114.98 1989/11/30 10394.25 13382.52 1989/12/31 11724.09 13703.71 1990/01/31 10971.17 12784.19 1990/02/28 12007.66 12949.10 1990/03/31 12584.58 13292.25 1990/04/30 11919.66 12959.95 1990/05/31 13924.19 14223.54 1990/06/30 13210.38 14126.82 1990/07/31 14452.22 14081.62 1990/08/31 14197.98 12808.64 1990/09/30 13924.19 12184.86 1990/10/31 12173.89 12132.46 1990/11/30 12359.68 12916.22 1990/12/31 11929.85 13276.58 1991/01/31 11391.14 13855.44 1991/02/28 13222.73 14846.11 1991/03/31 12194.30 15205.38 1991/04/30 12253.07 15241.87 1991/05/31 12576.29 15900.32 1991/06/30 10930.79 15172.09 1991/07/31 11753.54 15879.11 1991/08/31 11626.21 16255.44 1991/09/30 10558.60 15983.98 1991/10/31 10715.31 16198.16 1991/11/30 9432.22 15545.38 1991/12/31 9128.58 17323.77 1992/01/31 9001.25 17001.55 1992/02/29 9187.35 17222.57 1992/03/31 8531.11 16886.73 1992/04/30 9236.33 17383.20 1992/05/31 9970.92 17468.37 1992/06/30 9393.04 17208.09 1992/07/31 9784.82 17911.90 1992/08/31 10284.35 17544.71 1992/09/30 10597.78 17751.74 1992/10/31 10049.28 17813.87 1992/11/30 9843.59 18421.32 1992/12/31 9442.01 18647.90 1993/01/31 9814.21 18804.55 1993/02/28 10783.87 19060.29 1993/03/31 11636.01 19462.46 1993/04/30 12263.25 18991.47 1993/05/31 12831.81 19500.44 1993/06/30 12763.19 19556.99 1993/07/31 12939.64 19478.76 1993/08/31 13390.57 20217.01 1993/09/30 12998.46 20061.34 1993/10/31 12812.21 20476.61 1993/11/30 11459.43 20282.08 1993/12/31 11420.73 20527.49 1994/01/31 11528.94 21225.43 1994/02/28 11469.91 20650.22 1994/03/31 10614.10 19749.87 1994/04/30 11169.05 20002.67 1994/05/31 11666.58 20330.71 1994/06/30 12021.96 19832.61 1994/07/31 12245.34 20483.12 1994/08/31 11757.96 21322.93 1994/09/30 12204.72 20800.52 1994/10/31 12692.10 21268.53 1994/11/30 12032.11 20493.93 1994/12/31 11485.53 20797.85 1995/01/31 11557.70 21337.14 1995/02/28 12341.28 22168.65 1995/03/31 13021.75 22822.85 1995/04/30 13815.63 23494.98 1995/05/31 14176.49 24434.07 1995/06/30 13691.91 25001.68 1995/07/31 14372.38 25830.73 1995/08/31 14949.75 25895.57 1995/09/30 14990.99 26988.36 1995/10/31 13691.91 26892.01 1995/11/30 14465.17 28072.57 1995/12/31 16180.13 28613.25 1996/01/31 16532.34 29587.24 1996/02/29 17172.71 29861.52 1996/03/31 18528.17 30149.08 1996/04/30 19921.54 30593.48 1996/05/31 19631.73 31382.49 1996/06/30 19674.67 31502.05 1996/07/31 18590.57 30110.29 1996/08/31 19771.27 30745.32 1996/09/30 20511.89 32475.67 1996/10/31 22798.14 33371.34 1996/11/30 23721.23 35893.88 1996/12/31 24121.98 35182.83 1997/01/31 25465.18 37381.05 1997/02/28 22701.09 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Energy Service Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $22,712 - a 127.12% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Schlumberger Ltd. 7.6 Halliburton Co. 6.0 Baker Hughes, Inc. 5.9 Western Atlas, Inc. 5.6 Weatherford Enterra, Inc. 4.6 BJ Services Co. 4.0 Cooper Cameron Corp. 3.9 Dresser Industries, Inc. 3.4 McDermott (J. Ray) SA 3.3 Transocean Offshore, Inc. 3.2 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Oil & Gas Services 51.3% Drilling 22.5% Oil Field Equipment 5.6% Crude Petroleum & Gas 3.7% Heavy Construction 3.3% All Others 13.6% * Row: 1, Col: 1, Value: 13.6 Row: 1, Col: 2, Value: 3.3 Row: 1, Col: 3, Value: 3.7 Row: 1, Col: 4, Value: 5.6 Row: 1, Col: 5, Value: 22.5 Row: 1, Col: 6, Value: 51.3 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS ENERGY SERVICE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Robert Ewing became Portfolio Manager of Fidelity Select Energy Service Portfolio on November 12, 1996. Q. BOB, HOW DID THE FUND PERFORM? A. For the 12 months that ended February 28, 1997, the fund had a total return of 32.26%. The Standard & Poor's 500 Index posted a return of 26.16% during the same 12-month period. Q. WHAT HELPED THE FUND BEAT THE S&P 500? A. Stocks in the energy service group benefited from a positive supply and demand backdrop. On the supply side, the industry is operating at a very high rate; at the end of the period, roughly 95% of possible oil and gas production facilities were operating. At the same time, demand worldwide remained quite strong, having grown at about 2% to 3% over the past four years, even though demand in the former Soviet republics has decreased by 50 percent over the same time period. Worldwide demand has been driven by increased consumption in the developing world, especially the Far East and Latin America, and by economic stability in the developed world. The combination of high operating rates and robust worldwide demand helped push the price of oil from the high teens to as much as $26 a barrel, and natural gas from $1.80 to almost $4.00 per thousand cubic feet. These price increases were very helpful, because they increased the cash flow for exploration and production companies, encouraging them to look for more oil and gas. And when they do so, they need the help of energy service companies. Q. WHAT THEMES HAVE YOU PURSUED SINCE TAKING OVER THE FUND? A. I've tried to invest in companies that have the opportunity to increase their prices, and avoid those that are reaching the point where prices have gone up so much that added capacity may come on line and hurt the supply/demand dynamic. For example, the day rate for supply boats has reached a point where many companies are considering taking advantage of the higher prices and investing in more boats. What happens if they do so? More boats eventually lead to overcapacity and lower day rates. On the other hand, I've added to investments in offshore construction and shallow water drilling companies because they have more potential to increase day rates going forward. Q. WHICH STOCKS WERE GOOD PERFORMERS FOR THE FUND? A. I'd mention Schlumberger, Halliburton and Cliffs Drilling. Schlumberger is considered the premier energy service company, and has ridden the wave of higher commodity prices to post strong performance. It owns one of the largest offshore drilling fleets, which is benefiting from heightened demand for drilling capacity and higher prices. Halliburton performed well on the strength of a solid reorganization. Its biggest oil service business is pressure pumping, where it has been able to drive prices higher for its services. Cliffs Drilling, a shallow water drilling company, benefited from increasing utilization rates and positive pricing dynamics. Q. WHAT WERE THE DISAPPOINTMENTS? A. In a sector that showed such strength, most of the fund's laggards were among its smaller holdings. For example, Drilex International, a specialized onshore drilling company, suffered from cost overruns. Another disappointment since I took over the fund was United Meridian, which hit a couple of dry holes while exploring in Africa. Q. WHAT'S YOUR OUTLOOK FOR 1997? A. I believe it will be a more challenging year. We'll have to see commodity price stabilization or commodity price increases for the stocks to continue to outperform so dramatically. That being said, the sector fundamentally is in very good shape. Overall, operating rates are running at 93% of current available capacity. That's a constructive backdrop for keeping commodity prices reasonably stable. As a result, I believe the group will do well in 1997. 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 February 28, 1997, more than $439 million MANAGER: Robert Ewing, since November 1996; manager, Fidelity Select Environmental Services Portfolio, since January 1996; joined Fidelity in 1990 (checkmark) ENERGY SERVICE PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 96.6% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 2.4% FABRICATED PIPE & FITTINGS - 2.4% Coflexip sponsored ADR (a) 382,000 $ 10,624,372 CONSTRUCTION - 3.3% HEAVY CONSTRUCTION - 3.3% McDermott (J. Ray) SA 640,400 14,729,200 ENERGY SERVICES - 73.8% DRILLING - 22.5% Atwood Oceanics, Inc. (a) 70,000 3,675,000 Cliffs Drilling Co. (a) 246,000 11,408,250 Diamond Offshore Drilling, Inc. (a) 173,300 10,224,700 ENSCO International, Inc. (a) 263,000 11,407,625 Falcon Drilling, Inc. (a) 394,100 13,350,138 Helmerich & Payne, Inc. 34,100 1,440,725 Marine Drilling Companies, Inc. (a) 128,800 1,948,100 Nabors Industries, Inc. (a) 718,900 11,053,088 Noble Drilling Corp. (a) 779,250 13,831,688 Smedvig AS 182,900 4,505,862 Smedvig AS, Series B (a) 75,725 1,843,059 Transocean Offshore, Inc. 255,777 14,291,540 UTI Energy Corp. (a) 37,800 897,750 99,877,525 OIL & GAS SERVICES - 51.3% BJ Services Co. (a) 447,088 17,771,748 Baker Hughes, Inc. 734,500 26,074,750 Carbo Ceramics, Inc. 15,700 298,300 Computalog Ltd. (a) 15,400 182,348 Dawson Geophysical Co. (a) 69,500 868,750 Dreco Energy Services Ltd. Class A (a) 125,000 4,375,000 Dresser Industries, Inc. 502,600 15,266,475 Energy Ventures, Inc. (a) 242,600 12,372,600 Global Industries Ltd. (a) 190,400 3,474,800 Gulfmark International, Inc. (a) 17,000 1,003,000 Halliburton Co. 410,419 26,523,328 Input/Output, Inc. (a) 109,600 2,342,700 Lone Star Technologies, Inc. (a) 35,100 552,825 McDermott International, Inc. 281,600 6,265,600 Numar Corp. (a) 40,000 670,000 Oceaneering International, Inc. (a) 290,000 4,603,750 Pool Energy Services Co. (a) 265,000 3,676,875 Pride Petroleum Services, Inc. (a) 35,600 596,300 Schlumberger Ltd. 336,400 33,850,250 Seacor Holdings, Inc. (a) 125,300 5,810,788 Smith International, Inc. (a) 30,800 1,251,250 Tidewater, Inc. 271,565 11,677,295 Varco International, Inc. (a) 138,000 3,105,000 Weatherford Enterra, Inc. (a) 678,600 20,358,000 Western Atlas, Inc. (a) 406,800 24,763,950 227,735,682 TOTAL ENERGY SERVICES 327,613,207 ENGINEERING - 1.8% ARCHITECTS & ENGINEERS - 1.8% Stolt Comex Seaway SA (a)(c) 450,000 7,987,500 GAS - 0.0% GAS DISTRIBUTION - 0.0% Aquila Gas Pipeline Corp. 8,500 111,563 SHARES VALUE (NOTE 1) GAS TRANSMISSION & DISTRIBUTION - 0.0% Tejas Gas Corp. (a) 200 $ 8,750 TOTAL GAS 120,313 INDUSTRIAL MACHINERY & EQUIPMENT - 0.4% ENGINES & TURBINES - 0.4% Stewart & Stevenson Services, Inc. 60,000 1,567,500 OIL & GAS - 13.0% CRUDE PETROLEUM & GAS - 3.7% Anadarko Petroleum Corp. 71,600 4,027,500 Flores & Rucks, Inc. (a) 74,500 3,352,500 Houston Exploration Co. (a) 140,000 1,960,000 Total SA sponsored ADR 50,000 1,981,250 Unit Corp. (a) 320,400 2,523,150 United Meridian Corp. (a) 78,000 2,349,750 16,194,150 OIL & GAS EXPLORATION - 1.6% Petroleum Geo-Services AS sponsored ADR (a) 60,400 2,536,800 Union Pacific Resources Group, Inc. 189,900 4,628,813 7,165,613 OIL FIELD EQUIPMENT - 5.6% Camco International, Inc. 25,700 992,663 Cooper Cameron Corp. (a) 265,888 17,415,664 Dailey Petroleum Services Corp. 60,000 600,000 Drilex International, Inc. 120,000 1,320,000 National-Oilwell, Inc. (a) 143,200 4,403,400 24,731,727 PETROLEUM REFINERS - 2.1% Murphy Oil Corp. 25,000 1,159,375 Royal Dutch Petroleum Co. ADR 48,100 8,321,300 9,480,675 TOTAL OIL & GAS 57,572,165 SERVICES - 0.3% MANAGEMENT SERVICES - 0.3% Metzler Group, Inc. 55,900 1,341,600 SHIP BUILDING & REPAIR - 0.1% Halter Marine Group, Inc. (a) 12,000 196,500 SHIPPING - 1.5% DEEP SEA DOMESTIC TRANSPORT - 1.0% Trico Marine Services, Inc. (a) 112,300 4,548,150 SHIPPING - 0.5% Hvide Marine, Inc. 105,900 2,197,425 TOTAL SHIPPING 6,745,575 TOTAL COMMON STOCKS (Cost $418,068,967) 428,497,932 CASH EQUIVALENTS - 3.4% Taxable Central Cash Fund (b) (Cost $15,284,242) 15,284,242 15,284,242 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $433,353,209) $ 443,782,174 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions during the period with companies which are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Stolt Comex Seaway SA $ 3,765,492 $ - $ - $ 7,987,500 TOTALS $ 3,765,492 $ - $ - $ 7,987,500 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $791,388,003 and $672,450,989, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $264,406 for the period (see Note 4 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $596,300 and $640,800, respectively (see Note 6 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 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 87.2% France 4.6 Panama 3.3 Norway 2.0 Netherland 1.9 Canada 1.0 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $434,079,862. Net unrealized appreciation aggregated $9,702,312, of which $34,395,708 related to appreciated investment securities and $24,693,396 related to depreciated investment securities. The fund hereby designates approximately $27,919,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 16% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. ENERGY SERVICE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 443,782,174 (cost $433,353,209) - See accompanying schedule Receivable for investments sold 9,646,227 Receivable for fund shares sold 2,488,164 Dividends receivable 308,272 Interest receivable 171,314 Redemption fees receivable 5,076 Other receivables 359 TOTAL ASSETS 456,401,586 LIABILITIES Payable for fund shares redeemed $ 15,532,189 Accrued management fee 290,627 Other payables and accrued expenses 434,261 Collateral on securities loaned, 640,800 at value TOTAL LIABILITIES 16,897,877 NET ASSETS $ 439,503,709 Net Assets consist of: Paid in capital $ 356,442,100 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 72,632,644 Net unrealized appreciation (depreciation) on investments 10,428,965 NET ASSETS, for 21,485,542 $ 439,503,709 shares outstanding NET ASSET VALUE and redemption price per share ($439,503,709 (divided by) 21,485,542 shares) $20.46 Maximum offering price per share (100/97.00 of $20.46) $21.09
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 3,234,859 Dividends Interest (including income on securities loaned of $24,314) 3,109,422 TOTAL INCOME 6,344,281 EXPENSES Management fee $ 2,790,650 Transfer agent fees 3,169,285 Accounting and security lending fees 446,857 Non-interested trustees' compensation 2,012 Custodian fees and expenses 34,707 Registration fees 266,294 Audit 41,363 Legal 1,950 Interest 4,099 Miscellaneous 8,535 Total expenses before reductions 6,765,752 Expense reductions (77,340 6,688,412 ) NET INVESTMENT INCOME (LOSS) (344,131 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 90,051,691 Foreign currency transactions (4,033 90,047,658 ) Change in net unrealized appreciation (depreciation) on investment securities (16,245,487 ) NET GAIN (LOSS) 73,802,171 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 73,458,040 OTHER INFORMATION $ 4,165,989 Sales charges paid to FDC Deferred sales charges withheld $ 10,974 by FDC Exchange fees withheld by FSC $ 405,398 Expense reductions $ 63,322 Directed brokerage arrangements Custodian interest credits 2,975 Transfer agent interest credits 11,043 $ 77,340
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ (344,131) $ 963,116 Net investment income (loss) Net realized 90,047,658 18,797,151 gain (loss) Change in (16,245,487) 27,955,663 net unrealized appreciation (depreciation ) NET INCREASE 73,458,040 47,715,930 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to - (345,905) shareholders From net investment income From net (17,911,527) (4,150,860) realized gain TOTAL (17,911,527) (4,496,765) DISTRIBUTION S Share 1,555,976,986 762,157,835 transactions Net proceeds from sales of shares Reinvestmen 17,660,042 4,455,875 t of distributions Cost of (1,466,322,715) (600,660,872) shares redeemed Paid in 2,837,620 838,814 capital portion of redemption fees NET INCREASE 110,151,933 166,791,652 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 165,698,446 210,010,817 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 273,805,263 63,794,446 period End of period $ 439,503,709 $ 273,805,263 (including undistribute d net investment income of $0 and $619,525, respectivel y) OTHER INFORMATION Shares Sold 78,524,862 54,578,475 Issued in 891,837 301,480 reinvestment of distributions Redeemed (74,951,258) (43,190,194) Net increase 4,465,441 11,689,761 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 16.09 $ 11.97 $ 11.66 $ 11.01 $ 9.43 value, beginning of period Income from Investment Operations Net (.01) .08 E .02 .03 .01 investment income (loss) Net realized 5.05 4.49 .67 .51 1.47 and unrealized gain (loss) Total from 5.04 4.57 .69 .54 1.48 investment operations Less Distributions From net - (.04) (.01) (.05) - investment income In excess of - - (.01) - - net investment income From net (.79) H (.48) (.35) - - realized gain In excess of - - (.13) - - net realized gain Total (.79) (.52) (.50) (.05) - distributions Redemption .12 .07 .12 .16 .10 fees added to paid in capital Net asset $ 20.46 $ 16.09 $ 11.97 $ 11.66 $ 11.01 value, end of period TOTAL 32.26% 39.15% 7.60% 6.36% 16.76% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 439,504 $ 273,805 $ 63,794 $ 40,857 $ 85,234 end of period (000 omitted) Ratio of 1.47% 1.59% 1.81% 1.66% 1.76% A expenses to average net assets Ratio of 1.45% F 1.58% F 1.79% F 1.65% F 1.76% A expenses to average net assets after expense reductions Ratio of net (.07)% .60% .19% .23% .13% A investment income (loss) to average net assets Portfolio 167% 223% 209% 137% 236% A turnover rate Average $ .0374 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 8 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 $.02 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 8 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 AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
PRECIOUS METALS AND MINERALS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 1 PAST 5 PAST FEBRUARY 28, 1997 YEAR YEARS 10 YEARS PRECIOUS METALS AND -6.26% 88.29% 68.58% MINERALS PRECIOUS METALS AND -9.07% 82.64% 63.53% MINERALS (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS PRECIOUS METALS AND MINERALS -6.26% 13.49% 5.36% PRECIOUS METALS AND MINERALS -9.07% 12.80% 5.04% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 12471.43 10289.00 1987/04/30 13334.78 10197.43 1987/05/31 12144.95 10286.15 1987/06/30 11970.83 10805.60 1987/07/31 14408.53 11353.44 1987/08/31 14031.26 11776.92 1987/09/30 14466.57 11519.01 1987/10/31 10476.29 9037.81 1987/11/30 11796.71 8293.10 1987/12/31 11123.55 8924.20 1988/01/31 9169.22 9299.91 1988/02/29 9183.91 9733.29 1988/03/31 9948.01 9432.53 1988/04/30 9617.39 9537.23 1988/05/31 9668.82 9620.20 1988/06/30 9316.16 10061.77 1988/07/31 9374.94 10023.54 1988/08/31 8816.56 9682.74 1988/09/30 8221.44 10095.22 1988/10/31 8522.67 10375.87 1988/11/30 8838.60 10227.49 1988/12/31 8469.49 10406.47 1989/01/31 8821.74 11168.23 1989/02/28 9105.08 10890.14 1989/03/31 9105.08 11143.88 1989/04/30 8691.56 11722.25 1989/05/31 8278.04 12197.00 1989/06/30 8928.95 12127.48 1989/07/31 9174.00 13222.59 1989/08/31 9357.79 13481.75 1989/09/30 9687.07 13426.47 1989/10/31 9679.41 13114.98 1989/11/30 10912.31 13382.52 1989/12/31 11193.49 13703.71 1990/01/31 12084.94 12784.19 1990/02/28 11046.20 12949.10 1990/03/31 10565.60 13292.25 1990/04/30 9480.36 12959.95 1990/05/31 10022.98 14223.54 1990/06/30 9294.32 14126.82 1990/07/31 9860.19 14081.62 1990/08/31 9960.96 12808.64 1990/09/30 9736.16 12184.86 1990/10/31 8643.17 12132.46 1990/11/30 8488.14 12916.22 1990/12/31 8834.63 13276.58 1991/01/31 7875.71 13855.44 1991/02/28 8583.11 14846.11 1991/03/31 8418.05 15205.38 1991/04/30 8394.47 15241.87 1991/05/31 8866.07 15900.32 1991/06/30 9447.70 15172.09 1991/07/31 9447.70 15879.11 1991/08/31 8457.35 16255.44 1991/09/30 8630.27 15983.98 1991/10/31 9211.90 16198.16 1991/11/30 9502.72 15545.38 1991/12/31 8970.46 17323.77 1992/01/31 9160.81 17001.55 1992/02/29 8684.93 17222.57 1992/03/31 8343.88 16886.73 1992/04/30 7852.13 17383.20 1992/05/31 8367.67 17468.37 1992/06/30 8414.88 17208.09 1992/07/31 8526.12 17911.90 1992/08/31 8144.71 17544.71 1992/09/30 7810.98 17751.74 1992/10/31 7310.38 17813.87 1992/11/30 6881.29 18421.32 1992/12/31 7008.98 18647.90 1993/01/31 7178.75 18804.55 1993/02/28 7971.00 19060.29 1993/03/31 9054.27 19462.46 1993/04/30 10517.51 18991.47 1993/05/31 11907.99 19500.44 1993/06/30 12102.01 19556.99 1993/07/31 13678.42 19478.76 1993/08/31 12304.11 20217.01 1993/09/30 11334.01 20061.34 1993/10/31 12942.76 20476.61 1993/11/30 12918.51 20282.08 1993/12/31 14832.69 20527.49 1994/01/31 14219.09 21225.43 1994/02/28 13597.31 20650.22 1994/03/31 13458.23 19749.87 1994/04/30 13458.77 20002.67 1994/05/31 13483.33 20330.71 1994/06/30 13753.49 19832.61 1994/07/31 14277.43 20483.12 1994/08/31 15292.57 21322.93 1994/09/30 16463.25 20800.52 1994/10/31 15824.70 21268.53 1994/11/30 14130.07 20493.93 1994/12/31 14663.45 20797.85 1995/01/31 12108.96 21337.14 1995/02/28 12664.64 22168.65 1995/03/31 13950.18 22822.85 1995/04/30 14066.30 23494.98 1995/05/31 13892.13 24434.07 1995/06/30 14058.00 25001.68 1995/07/31 14638.57 25830.73 1995/08/31 14837.62 25895.57 1995/09/30 14879.09 26988.36 1995/10/31 13021.28 26892.01 1995/11/30 13933.59 28072.57 1995/12/31 14173.80 28613.25 1996/01/31 17145.05 29587.24 1996/02/29 17444.67 29861.52 1996/03/31 17344.80 30149.08 1996/04/30 17737.49 30593.48 1996/05/31 18763.70 31382.49 1996/06/30 16152.30 31502.05 1996/07/31 15952.06 30110.29 1996/08/31 16819.75 30745.32 1996/09/30 16118.93 32475.67 1996/10/31 15985.44 33371.34 1996/11/30 15184.49 35893.88 1996/12/31 14942.54 35182.83 1997/01/31 14300.12 37381.05 1997/02/28 16344.19 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Precious Metals and Minerals Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $16,353 - a 63.53% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Barrick Gold Corp. 8.9 Newmont Mining Corp. 7.8 Getchell Gold Corp. 6.0 Euro-Nevada Mining Ltd. 5.7 Vaal Reefs Exploration & Mining ADR 3.8 Franco-Nevada Mining Corp. 3.5 Western Deep Levels Ltd. ADR 3.0 JCI Ltd. 2.9 Western Areas Gold Mining Ltd. Ord. 2.6 Stillwater Mining Co. 2.5 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Gold Ores (Canada) 33.1% Gold Ores (South Africa) 23.1% Gold Ores (U.S.) 19.3% Gold Ores (Australia) 5.4% Metal Mining (South Africa) 2.9% All Others 16.2% * Row: 1, Col: 1, Value: 16.2 Row: 1, Col: 2, Value: 2.9 Row: 1, Col: 3, Value: 5.4 Row: 1, Col: 4, Value: 19.3 Row: 1, Col: 5, Value: 23.4 Row: 1, Col: 6, Value: 33.1 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS PRECIOUS METALS AND MINERALS PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: Effective February 14, 1997, George Domolky (right) became Portfolio Manager of Fidelity Select Precious Metals and Minerals Portfolio. The following is an interview with Larry Rakers, who managed the fund during most of the period covered by the report, and George Domolky, who discusses his outlook. Q. HOW DID THE FUND PERFORM, LARRY? L.R. This year's performance was disappointing. For the 12 months that ended February 28, 1997, the fund was down 6.26% versus a gain of 26.16% for the Standard & Poor's 500 Index. Q. THE SHARP DECLINE IN THE PRICE OF GOLD WAS OBVIOUSLY A MAJOR FACTOR, RIGHT? L.R. Absolutely. Gold fell from $410 an ounce near the beginning of the year to around $370 by the end of 1996. That's about a 10% decline. And the average gold stock falls or rises much faster than gold itself. So we were swimming against a strong current and, viewed from that perspective, our performance was very respectable. Q. WHAT'S BEEN THE SUPPLY/DEMAND PICTURE FOR GOLD RECENTLY? L.R. The world is actually consuming about 15% to 20% more gold than is mined each year. So based purely on consumption and production, there is an annual deficit of gold. However, European central banks have been selling gold because at the present time they consider it more advantageous to own U.S. dollars than gold bullion. The fact that the U.S. dollar has been so strong has exacerbated the problem. If the dollar should begin to weaken, we could see central banks switch from selling gold to buying it. But even if they don't make any new gold purchases and simply stop selling it, that would be bullish for gold because of the imbalance I mentioned earlier. Q. SO WHAT HAS YOUR STRATEGY BEEN IN THIS KIND OF ENVIRONMENT? L.R. My strategy has always been "gold price-neutral" as much as possible. That is, I've tried to position the fund to benefit whether gold goes up or not. The way you do that is by buying companies that are expanding their production and reserves, and by staying away from producers that have high-cost, no-growth profiles. At the same time, the central purpose of the fund is to provide an investment vehicle for those who are bullish on the price of precious metals. In line with that mandate, the fund holds many South African mining stocks that are sensitive to gold's ups and downs. While it's true that foreign investments involve greater risk than U.S. investments, we continue to feel that their potential justifies the added risk. Q. WHAT ARE SOME OF THE STOCKS THAT PERFORMED WELL FOR YOU LAST YEAR? L.R. The stocks that did well were the ones that were able to generate the most rapid growth in their production and reserves - companies such as Getchell Gold Corp., Euro-Nevada Mining Ltd. and Franco-Nevada Mining Corp. Q. AND THE DISAPPOINTMENTS? L.R. As a group, the South African mining stocks were weak because they are so sensitive to the price of gold. And Stillwater Mining was a disappointment because even though the company had great growth in reserves last year, that growth was offset by declines in the prices of platinum and palladium. Q. GEORGE, WHAT'S YOUR OUTLOOK FOR THE FUND? G.D. During the last four years, gold has remained in a range of $335 to $410 per ounce. At the current price of around $360, it is trading near the low end of that range. If gold should rally even as far as the range's midpoint in the $370 to $375 area, that would create a very favorable environment for gold stocks. In any event, my strategy will not be based on second-guessing the price of gold. The fund will continue to focus on companies offering the prospect of consistently increasing production and reserves. 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: 061 TRADING SYMBOL: FDPMX SIZE: as of February 28, 1997, more than $325 million MANAGER: George Domolky, since February 1997; manager, Fidelity Select American Gold Portfolio, since February 1997; Fidelity Canada Fund, 1987-1996; Fidelity Select Food and Agriculture Portfolio, 1985-1987; joined Fidelity in 1981 (checkmark) PRECIOUS METALS AND MINERALS PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 89.7% SHARES VALUE (NOTE 1) AUSTRALIA - 8.6% METALS & MINING - 0.8% METAL MINING - 0.2% Panorama Resources NL (warrants) (a) 2,650,000 $ 823,406 METAL MINING SERVICES - 0.5% Acacia Resources Ltd. (a) 900,000 1,555,943 MISCELLANEOUS METAL ORES - 0.1% Helix Resources NL 150,000 381,977 TOTAL METALS & MINING 2,761,326 PRECIOUS METALS - 7.8% GOLD & SILVER ORES - 2.4% Normandy Mining Ltd. 2,000,000 2,772,350 North Flinders Mines Ltd. 349,060 1,984,362 Plutonic Resources Ltd. 625,000 2,487,133 Sons of Gwalia NL 150,000 838,714 8,082,559 GOLD ORES - 5.4% Centaur Mining & Exploration Ltd. (a) 4,500,000 6,693,356 Great Central Mines NL 3,094,600 8,025,033 Great Central Mines NL sponsored ADR. 90,000 703,125 Leo Shield Exploration NL 412,000 221,383 Resolute Samantha Ltd. 1,000,000 2,336,250 Ross Mining NL 414,285 380,697 18,359,844 TOTAL PRECIOUS METALS 26,442,403 TOTAL AUSTRALIA 29,203,729 CANADA - 33.7% OIL & GAS - 0.6% CRUDE PETROLEUM & GAS - 0.1% Solomon Resources Ltd. (a) 200,000 233,892 OIL & GAS EXPLORATION - 0.5% Southwestern Gold Corp. 135,000 1,578,774 TOTAL OIL & GAS 1,812,666 PRECIOUS METALS - 33.1% GOLD & SILVER ORES - 0.6% Consolidated Nevada Goldfields Corp. (a) 743,000 651,683 Consolidated Nevada Goldfields (warrants) (a) 371,500 3 Minorca Resources Ltd. (a) 342,000 1,487,337 2,139,023 GOLD ORES - 32.4% Agnico Eagle Mines Ltd. 587,200 8,390,717 Argosy Mining Corp. (a) 169,200 192,926 Barrick Gold Corp. 1,070,000 30,266,418 Bema Gold Corp. 33,400 278,303 Bre-X Minerals Ltd. (a) 431,300 6,178,767 Bresea Resources Ltd. (a) 111,100 840,467 Bro-X Minerals Ltd. 150,000 257,647 Cambior, Inc. 60,000 960,421 Eldorado Gold Corp. (a) 200,000 1,388,737 Euro-Nevada Mining Ltd. 588,400 19,267,127 First Dynasty Mines Ltd. (a) 100,000 328,911 Franco-Nevada Mining Corp. 250,200 11,777,130 Greenstone Resources Ltd. (a) 83,000 1,010,087 Indochina Goldfields Ltd. (a) 156,900 2,161,726 Indochina Goldfields Ltd. (a)(c) 34,000 468,443 SHARES VALUE (NOTE 1) Indochina Goldfields Ltd. (special warrants) (a) 70,000 $ 930,686 Kinross Gold Corp. (a) 238,500 1,699,649 Meridian Gold, Inc. 50,000 230,238 Meridian Gold, Inc. Install- ment Receipt (d) 2,212,000 6,143,771 Metallica Resources, Inc. (a) 177,500 629,226 Mountain Province Mining, Inc. (a) 200,000 643,204 Nelson Gold Ltd. (a) 1,048,900 881,654 Nevsun Resources Ltd. (a) 108,600 674,707 Orvana Minerals Corp. (a) 597,900 3,714,615 Prime Resources Group, Inc. 283,100 2,555,484 Repadre Capital Corp. (c) 100,000 646,859 Rio Narcea Gold Mines Ltd. (a) 700,000 2,941,929 South Pacific Resources, Inc. (a) 59,500 163,085 Sudbury Contact Mines Ltd. (a) 172,600 1,135,402 Sutton Resources (a) 30,000 592,040 TVI Pacific, Inc. (a) 1,318,000 1,213,814 TVX Gold, Inc. (a) 170,000 1,509,703 William Resources, Inc. (a)(c) 328,000 359,610 110,433,503 SILVER ORES - 0.1% Pan American Silver Corp. (a) 30,000 263,129 TOTAL PRECIOUS METALS 112,835,655 TOTAL CANADA 114,648,321 GHANA - 0.5% PRECIOUS METALS - 0.5% GOLD ORES - 0.5% Ashanti Goldfields Co. Ltd. GDR 122,548 1,853,539 SOUTH AFRICA - 26.1% METALS & MINING - 3.0% METAL MINING - 2.9% JCI Ltd. 912,500 9,935,092 MISCELLANEOUS METAL ORES - 0.1% Potgietersrust Platinums Ltd. (a) 72,000 450,251 TOTAL METALS & MINING 10,385,343 PRECIOUS METALS - 23.1% GOLD ORES - 23.1% Avgold Ltd. (a) 686,605 1,527,322 Buffelsfontein Gold Mines Ltd. (a) 373,900 1,503,116 Consolidated Mining Corporation Ltd. (a) 33,000,000 8,402,011 De Beers Consolidated Mines Ltd. ADR 73,300 2,549,466 Driefontein Consolidated Ltd.: ADR 280,000 3,220,000 Ord. 275,900 3,157,984 Durban Roodepoort Deep Ltd (a): sponsored ADR 25,000 223,438 (Reg.) 278,700 2,396,415 East Daggafontein Mining unit (a) 300,000 931,323 Gold Fields of South Africa Ltd. 24,400 697,532 Gold Fields of South Africa Ltd. sponsored ADR 163,700 4,685,913 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PRECIOUS METALS - CONTINUED GOLD ORES - CONTINUED Harmony Gold Mining Co. Ltd. Class R (a) 858,200 $ 7,398,441 Oryx Gold Holdings Ltd. (a) 833,600 1,169,181 Randex Ltd. (a) 400,000 244,779 Randgold & Exploration Co. Ltd. (a) 553,000 4,662,367 Rustenberg Platinum Holdings Ltd. ADR (a) 30,204 502,142 Vaal Reefs Exploration & Mining ADR 1,662,000 12,880,500 (Reg.) 29,300 2,231,446West Rand Consolidated Mines Ltd. (Reg.) 14,000 40,648 Western Areas Gold Mining Ltd. Ord. 628,000 8,695,924 Western Deep Levels Ltd.: ADR 290,500 10,122,109 Ord. 45,500 1,585,260 TOTAL PRECIOUS METALS 78,827,317 TOTAL SOUTH AFRICA 89,212,660 UNITED KINGDOM - 0.1% PRECIOUS METALS - 0.1% GOLD ORES - 0.1% Bakyrchik Gold PLC (a) 70,900 232,218 UNITED STATES OF AMERICA - 20.7% METALS & MINING - 0.2% COPPER ORES - 0.2% Freeport McMoRan Copper & Gold, Inc. Class A 20,000 652,500 PRECIOUS METALS - 19.3% GOLD ORES - 19.3% Getchell Gold Corp. (a) 394,600 20,321,900 Newmont Gold Co. 49,000 2,388,750 Newmont Mining Corp. 561,600 26,676,000 Santa Fe Pacific Gold Corp. 257,000 4,818,750 Stillwater Mining Co. (a) 132,900 3,114,844 Stillwater Mining Co. (a)(c) 366,600 8,592,188 TOTAL PRECIOUS METALS 65,912,432 SECURITIES INDUSTRY - 1.2% INVESTMENT MANAGERS - 1.2% Pioneer Group, Inc. 170,000 3,973,750 TOTAL UNITED STATES OF AMERICA 70,538,682 TOTAL COMMON STOCKS (Cost $268,294,534) 305,689,149 CORPORATE BONDS - 0.7% PRINCIPAL VALUE (NOTE 1) AMOUNT CANADA - 0.7% PRECIOUS METALS - 0.7% GOLD ORES - 0.7% William Resources, Inc. 9.66%, 1/23/02 (f) $ 2,250,000 $ 1,825,459 Randgold Financial 7%, 9/30/01 (c) 500,000 552,500 TOTAL CORPORATE BONDS (Cost $2,190,331) 2,377,959 CASH EQUIVALENTS - 9.6% SHARES Taxable Central Cash Fund (b) (Cost $32,625,058) 32,625,058 32,625,058 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $303,109,923) $ 340,692,166 CURRENCY ABBREVIATIONS CAD - Canadian dollar LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. 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 $10,619,600 or 3.3% of net assets. 4. Purchased on an installment basis. Market value reflects only those payments made through February 28, 1997. The remaining installment aggregating CAD 5,530,000 is due July 31, 1997. 5. An affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Transactions during the period with companies which are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Buffelsfonstein Gold Mines Ltd. $ 1,073,541 $ 1,255,425 $ - $ - TOTALS $ 1,073,541 $ 1,255,425 $ - $ - 6. Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $175,532,403 and $272,617,295, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $43,075 for the period (see Note 4 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $2,343,700 and $2,500,000, respectively (see Note 6 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $6,590,000 and $4,105,250, respectively. The weighted average interest rate was 5.7% (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $303,803,712. Net unrealized appreciation aggregated $36,888,454 of which $54,884,084 related to appreciated investment securities and $17,995,630 related to depreciated investment securities. At February 28, 1997, the fund had a capital loss carryforward of approximately $1,376,000 which will expire on February 28, 2001. A total of 35% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. PRECIOUS METALS AND MINERALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 340,692,166 (cost $303,109,923) - See accompanying schedule Receivable for investments sold 8,387,739 Receivable for fund shares sold 12,495,132 Dividends receivable 787,264 Interest receivable 98,928 Redemption fees receivable 20,055 TOTAL ASSETS 362,481,284 LIABILITIES Payable for investments purchased $ 28,275,047 Payable for fund shares redeemed 5,749,348 Accrued management fee 132,653 Other payables and 237,891 accrued expenses Collateral on securities loaned, 2,500,000 at value TOTAL LIABILITIES 36,894,939 NET ASSETS $ 325,586,345 Net Assets consist of: Paid in capital $ 290,084,509 Distributions in excess of net investment income (44,636 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (2,036,173 ) Net unrealized appreciation (depreciation) on investments 37,582,645 and assets and liabilities in foreign currencies NET ASSETS, for 16,610,630 $ 325,586,345 shares outstanding NET ASSET VALUE and redemption price per share ($325,586,345 (divided by) 16,610,630 shares) $19.60 Maximum offering price per share (100/97.00 of $19.60) $20.21
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 4,551,720 Dividends Interest (including income on 624,578 securities loaned of $6,008) TOTAL INCOME 5,176,298 EXPENSES Management fee $ 2,005,219 Transfer agent fees 2,756,564 Accounting and security lending fees 333,834 Non-interested trustees' compensation 1,519 Custodian fees and expenses 109,106 Registration fees 99,822 Audit 23,859 Legal 2,393 Interest 2,579 Reports to shareholders 40,158 Miscellaneous 3,961 Total expenses before reductions 5,379,014 Expense reductions (21,297 5,357,717 ) NET INVESTMENT INCOME (LOSS) (181,419 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including 16,412,355 realized gain/(loss) of $467,365 and $558,714 on sale of investments in precious metals and affiliated issuers, respectively) Foreign currency transactions 440 16,412,795 Change in net unrealized appreciation (depreciation) on: Investment securities (43,174,276 ) Assets and liabilities in 836 (43,173,440 foreign currencies ) NET GAIN (LOSS) (26,760,645 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (26,942,064 ) OTHER INFORMATION $ 669,762 Sales charges paid to FDC Deferred sales charges withheld $ 45,427 by FDC Exchange fees withheld by FSC $ 151,170 Expense reductions $ 18,764 Directed brokerage arrangements Custodian interest credits 2,224 Transfer agent interest credits 309 $ 21,297
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ (181,419 $ 1,477,464 Net ) investment income (loss) Net realized 16,412,795 29,509,771 gain (loss) Change in (43,173,440 86,598,754 net ) unrealized appreciation (depreciation ) NET INCREASE (26,942,064 117,585,989 (DECREASE) ) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (846,595 (1,115,809 shareholders ) ) From net investment income In excess of (176,411 - net ) investment income TOTAL (1,023,006 (1,115,809 DISTRIBUTION ) ) S Share 435,994,024 820,033,799 transactions Net proceeds from sales of shares Reinvestmen 1,004,423 1,089,810 t of distributions Cost of (552,635,513 (837,693,561 shares ) ) redeemed Paid in 1,992,596 3,091,710 capital portion of redemption fees NET INCREASE (113,644,470 (13,478,242 (DECREASE) ) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (141,609,540 102,991,938 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 467,195,885 364,203,947 period End of period $ 325,586,345 $ 467,195,885 (including under (over) distribution of net investment income of $(44,636) and $846,595, respectivel y) OTHER INFORMATION Shares Sold 22,221,455 44,966,074 Issued in 48,973 63,583 reinvestment of distributions Redeemed (27,946,037 (46,598,892 ) ) Net increase (5,675,609) (1,569,235) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 20.96 $ 15.27 $ 16.62 $ 9.86 $ 9.90 value, beginning of period Income from Investment Operations Net (.01) .07 .17 .21 .09 investment income (loss) Net realized (1.42) 5.54 (1.42) 6.48 (.05) and unrealized gain (loss) Total from (1.43) 5.61 (1.25) 6.69 .04 investment operations Less Distributions From net (.04) (.06) (.18) (.19) (.17) investment income In excess of (.01) - (.05) (.02) - net investment income Total (.05) (.06) (.23) (.21) (.17) distributions Redemption .12 .14 .13 .28 .09 fees added to paid in capital Net asset $ 19.60 $ 20.96 $ 15.27 $ 16.62 $ 9.86 value, end of period TOTAL (6.26)% 37.74% (6.86)% 70.58% 1.51% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 325,586 $ 467,196 $ 364,204 $ 409,212 $ 137,922 end of period (000 omitted) Ratio of 1.62% 1.52% 1.46% 1.55% 1.73% expenses to A average net assets Ratio of 1.61% 1.52% 1.46% 1.55% 1.73% expenses to E A average net assets after expense reductions Ratio of net (.05)% .39% .99% 1.38% 1.12% investment A income (loss) to average net assets Portfolio 54% 53% 43% 73% 36% turnover rate A Average $ .0141 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 8 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS COMPUTERS 23.97% 217.71% 318.23% COMPUTERS 20.25% 208.18% 305.68% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS COMPUTERS 23.97% 26.01% 15.38% COMPUTERS 20.25% 25.25% 15.03% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9766.27 10289.00 1987/04/30 10001.24 10197.43 1987/05/31 9959.07 10286.15 1987/06/30 9754.22 10805.60 1987/07/31 9916.89 11353.44 1987/08/31 10597.70 11776.92 1987/09/30 10688.07 11519.01 1987/10/31 6916.52 9037.81 1987/11/30 5982.67 8293.10 1987/12/31 6889.21 8924.20 1988/01/31 6528.91 9299.91 1988/02/29 7119.05 9733.29 1988/03/31 7007.24 9432.53 1988/04/30 7367.54 9537.23 1988/05/31 7150.11 9620.20 1988/06/30 7827.23 10061.77 1988/07/31 7237.08 10023.54 1988/08/31 6547.54 9682.74 1988/09/30 6721.48 10095.22 1988/10/31 6181.03 10375.87 1988/11/30 6143.76 10227.49 1988/12/31 6541.33 10406.47 1989/01/31 6926.48 11168.23 1989/02/28 6802.24 10890.14 1989/03/31 6479.21 11143.88 1989/04/30 7206.02 11722.25 1989/05/31 7845.87 12197.00 1989/06/30 6914.05 12127.48 1989/07/31 7038.30 13222.59 1989/08/31 7143.90 13481.75 1989/09/30 7311.63 13426.47 1989/10/31 7069.36 13114.98 1989/11/30 6914.05 13382.52 1989/12/31 6988.60 13703.71 1990/01/31 6926.48 12784.19 1990/02/28 7553.90 12949.10 1990/03/31 8094.35 13292.25 1990/04/30 7876.93 12959.95 1990/05/31 8901.92 14223.54 1990/06/30 9063.44 14126.82 1990/07/31 8417.38 14081.62 1990/08/31 7081.78 12808.64 1990/09/30 6615.87 12184.86 1990/10/31 6864.36 12132.46 1990/11/30 7994.96 12916.22 1990/12/31 8274.97 13276.58 1991/01/31 9685.48 13855.44 1991/02/28 10312.37 14846.11 1991/03/31 11127.33 15205.38 1991/04/30 10406.41 15241.87 1991/05/31 10932.99 15900.32 1991/06/30 9444.29 15172.09 1991/07/31 10393.24 15879.11 1991/08/31 11038.78 16255.44 1991/09/30 10457.79 15983.98 1991/10/31 10251.22 16198.16 1991/11/30 9547.57 15545.38 1991/12/31 10819.29 17323.77 1992/01/31 11948.99 17001.55 1992/02/29 12768.83 17222.57 1992/03/31 11761.79 16886.73 1992/04/30 11380.92 17383.20 1992/05/31 11522.93 17468.37 1992/06/30 10412.60 17208.09 1992/07/31 10922.58 17911.90 1992/08/31 10296.40 17544.71 1992/09/30 10806.38 17751.74 1992/10/31 11658.50 17813.87 1992/11/30 12381.51 18421.32 1992/12/31 13194.89 18647.90 1993/01/31 13963.09 18804.55 1993/02/28 13007.68 19060.29 1993/03/31 13265.90 19462.46 1993/04/30 12889.13 18991.47 1993/05/31 14399.27 19500.44 1993/06/30 13823.03 19556.99 1993/07/31 14399.27 19478.76 1993/08/31 15253.69 20217.01 1993/09/30 15684.21 20061.34 1993/10/31 15684.21 20476.61 1993/11/30 16353.17 20282.08 1993/12/31 17003.98 20527.49 1994/01/31 18100.33 21225.43 1994/02/28 18868.48 20650.22 1994/03/31 18672.95 19749.87 1994/04/30 18554.24 20002.67 1994/05/31 18540.27 20330.71 1994/06/30 17017.95 19832.61 1994/07/31 17555.65 20483.12 1994/08/31 19657.58 21322.93 1994/09/30 19517.91 20800.52 1994/10/31 20251.15 21268.53 1994/11/30 20369.86 20493.93 1994/12/31 20481.59 20797.85 1995/01/31 19853.11 21337.14 1995/02/28 21417.33 22168.65 1995/03/31 23065.36 22822.85 1995/04/30 24897.97 23494.98 1995/05/31 26128.72 24434.07 1995/06/30 28986.33 25001.68 1995/07/31 32629.07 25830.73 1995/08/31 33357.62 25895.57 1995/09/30 35267.41 26988.36 1995/10/31 33987.14 26892.01 1995/11/30 33166.64 28072.57 1995/12/31 31097.27 28613.25 1996/01/31 30897.88 29587.24 1996/02/29 32724.32 29861.52 1996/03/31 29956.75 30149.08 1996/04/30 33249.52 30593.48 1996/05/31 34398.56 31382.49 1996/06/30 31898.17 31502.05 1996/07/31 29761.92 30110.29 1996/08/31 31048.53 30745.32 1996/09/30 34859.80 32475.67 1996/10/31 36696.66 33371.34 1996/11/30 41689.34 35893.88 1996/12/31 40929.72 35182.83 1997/01/31 46176.26 37381.05 1997/02/28 40568.18 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Computers Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $40,568 - a 305.68% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Seagate Technology 11.3 Intel Corp. 6.7 Applied Magnetics Corp. 4.7 Ascend Communications, Inc. 4.1 Quantum Corp. 3.9 Read-Rite Corp. 3.4 Silicon Graphics, Inc. 3.4 Western Digital Corp. 3.4 Atmel Corp. 2.8 International Business Machines Corp. 2.6 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Row: 1, Col: 1, Value: 33.4 Row: 1, Col: 2, Value: 3.7 Row: 1, Col: 3, Value: 8.800000000000001 Row: 1, Col: 4, Value: 12.2 Row: 1, Col: 5, Value: 19.7 Row: 1, Col: 6, Value: 22.2 Semiconductors 22.2% Computer Storage Devices 19.7% Computer Peripherals 12.2% Telephone Equipment 8.8% Computers & Office Equipment 3.7% All Others 33.4% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS COMPUTERS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Michael Tempero became Portfolio Manager of Fidelity Select Computers Portfolio on January 17, 1997. Q. HOW DID THE FUND PERFORM, MIKE? A. The fund performed pretty well over the course of the year, posting strong growth during the second half after a trying first six months. For the 12 months that ended February 28, 1997, the fund was up 23.97%, slightly below the 26.16% rise in the Standard & Poor's 500 Index over the same time frame. Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE OVER THE PAST YEAR? A. There were different circumstances affecting the industry during each half of the period. Over the first six months, we saw some disappointing earnings reports from a couple of key computer companies, as well as a downturn in the sector during the late spring. During that downturn, the technology sector, which had high valuations and is generally one of the most volatile sectors of the market, was hurt quite badly. Another important factor was that PC manufacturers had high inventory levels of component parts. This affected the business of the component suppliers, particularly the manufacturers of PC disk drives. During the second half of the period, the overly high inventory levels were reduced, and demand picked up again for the component suppliers, led by the disk drive companies. In short, the story of the fund's performance over the past six months has been the story of the outstanding performance of the disk drive manufacturers and their suppliers - including Seagate, Applied Magnetics, Quantum and Read-Rite. Shareholders should note that computers remain a most volatile industry; while the fund appreciated more than 30% during the second half of the period, it was down over 14% in February due to a downturn in the broader technology sector. Volatility comes with this territory, and sometimes there are no safe havens. Q. WHILE SEVEN OF THE FUND'S TOP 10 HOLDINGS AT THE END OF THE PERIOD WERE DIFFERENT THAN SIX MONTHS AGO, SEAGATE REMAINS ONE OF THE LARGEST INVESTMENTS. WHAT'S THE STORY THERE? A. Seagate represented more than 11% of the fund's investments on February 28, more than twice its position six months ago and a stake that helped the fund's performance quite a bit; its stock price almost doubled over the period. There's been a shortage of supply in the disk drive market lately and Seagate, one of the industry leaders, has been able to command premium prices for its products. Of the two other holdovers, Intel, the industry's leading semiconductor manufacturer, was up over 70% during the past six months and more than doubled during the past year; Ascend Communications, a networking company, performed well, but has retreated recently following some key mergers and earnings disappointments in its market. Q. LET'S LOOK AT SOME OF THE NEW TOP 10 HOLDINGS. TWO OF THEM, APPLIED MAGNETICS AND READ-RITE, ARE IN POTENTIAL MERGER DISCUSSIONS. WHAT EFFECT HAS THIS HAD ON THEIR STOCKS? A. These two companies make the heads for the disk drives I mentioned earlier, and the stocks of both more than doubled over the past six months. Applied Magnetics' stock has retreated significantly during the past month over what I believe are investor concerns about the dilution of its stock should the merger take place; Read-Rite's stock has held on to its gains. Another new large holding is EMC, a leader in storage devices for larger systems. Its stock almost doubled over the past six months as it continued both to take market share from its competitors and to introduce new products. Q. WHAT WERE THE DISAPPOINTMENTS OVER THE PERIOD? A. The fund lost a lot of ground in February as the market began to feel that the shortage in disk drives, as well as the premium prices disk drive manufacturers have been commanding, was coming to an end. I believe the market is incorrect in its assessment, but the fund did see some of its top holdings drop in price during the last month of the period. Q. WHAT'S YOUR OUTLOOK FOR THE FUTURE? A. That's a tough question. I think PC demand will continue to be strong. There could be pressures on this market in 1997, including the fear that corporate capital spending - which represents about 70% of the PC market - might slow. On the other hand, there's the feeling that corporations need to upgrade their systems. While things might not be as good as they were in the second half of 1996, I don't think they'll be poor. 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 February 28, 1997, more than $604 million MANAGER: Michael Tempero, since January 1997; manager, Fidelity Select Insurance Portfolio, 1995-February 1997; Fidelity Select Natural Gas Portfolio, 1994-1995; analyst, oil and gas exploration and production, conglomerates and household products; joined Fidelity in 1993 (checkmark) COMPUTERS PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.2% SHARES VALUE (NOTE 1) COMMUNICATIONS EQUIPMENT - 10.5% DATACOMMUNICATIONS EQUIPMENT - 1.7% Cisco Systems, Inc. (a) 102,900 $ 5,723,809 Dynatech Corp. (a) 900 25,200 3Com Corp. (a) 145,500 4,817,414 10,566,423 TELEPHONE EQUIPMENT - 8.8% Ascend Communications, Inc. (a) 493,100 25,764,475 Lucent Technologies, Inc. 57,500 3,097,813 Nokia Corp. AB sponsored ADR 200,000 11,700,000 Northern Telecom Ltd. 200,000 14,377,079 54,939,367 TOTAL COMMUNICATIONS EQUIPMENT 65,505,790 COMPUTER SERVICES & SOFTWARE - 7.7% COMPUTER & SOFTWARE STORES - 0.1% Intelligent Electronics, Inc. (a) 100,000 350,000 COMPUTER SERVICES - 2.0% BDM International, Inc. (a) 27,800 1,167,600 Clarify, Inc. (a) 36,500 935,313 CompuCom Systems, Inc. (a) 887,800 6,658,500 Computer Learning Centers, Inc. (a) 128,000 3,936,000 12,697,413 CUSTOM COMPUTER PROGRAMMING SERVICES - 0.3% Analysts International Corp. 33,400 901,800 CACI International, Inc. Class A (a) 50,000 843,750 1,745,550 DATA PROCESSING - 2.7% First Data Corp. 60,000 2,197,500 NCR Corp. (a) 450,000 14,850,000 17,047,500 ELECTRONIC INFORMATION RETRIEVE - 0.0% Ontrack Data International, Inc. (a) 4,000 73,500 PREPACKAGED COMPUTER SOFTWARE - 2.6% Electronic Arts, Inc. (a) 110,200 3,443,750 Electronics for Imaging, Inc. (a) 289,200 11,134,200 Fuji Soft, Inc. 900 24,180 Remedy Corp. (a) 2,800 107,450 Scopus Technology, Inc. (a) 19,800 433,125 Vantive Corp. (a) 35,000 778,750 15,921,455 TOTAL COMPUTER SERVICES & SOFTWARE 47,835,418 COMPUTERS & OFFICE EQUIPMENT - 44.1% COMPUTER EQUIPMENT - 0.7% GVC Corp. GDR (a)(c) 113,071 1,158,978 Stratus Computer, Inc. (a) 87,600 2,967,450 4,126,428 COMPUTER EQUIPMENT - WHOLESALE - 0.6% Pomeroy Computer Resources, Inc. (a) 161,800 4,004,550 COMPUTER PERIPHERALS - 12.2% Applied Magnetics Corp. (a) 757,600 29,451,700 Creative Technology Corp. Ltd. 452,600 5,579,709 EMC Corp. (a) 439,500 15,822,000 Procom Technology, Inc. (d) 162,200 2,493,825 Sigma Designs, Inc. (a) 305,100 1,525,500 Stormedia, Inc. Class A (a) 15,600 222,300 Western Digital Corp. (a) 354,200 20,897,800 75,992,834 SHARES VALUE (NOTE 1) COMPUTER RENTAL & LEASING - 1.1% Comdisco, Inc. 213,800 $ 6,654,525 COMPUTER STORAGE DEVICES - 19.7% Adaptec, Inc. (a) 148,700 5,659,894 Apex PC Solutions, Inc. 100,000 925,000 Quantum Corp. (a) 619,400 24,621,150 Read-Rite Corp. (a) 700,000 21,481,250 Seagate Technology (a) 1,487,200 70,270,200 122,957,494 COMPUTERS & OFFICE EQUIPMENT - 3.7% Canon, Inc. 46,000 964,192 Data General Corp. (a) 250,000 4,843,750 Diebold, Inc. 18,150 762,300 International Business Machines Corp. 114,300 16,430,625 23,000,867 ELECTRONIC COMPUTERS - 0.8% Micron Electronics, Inc. (a) 250,000 4,843,750 GRAPHICS WORKSTATIONS - 3.5% Silicon Graphics, Inc. (a) 868,900 20,962,213 Sun Microsystems, Inc. (a) 33,400 1,031,225 21,993,438 MAINFRAME COMPUTERS - 0.6% Amdahl Corp. (a) 392,300 3,873,963 MINI & MICRO COMPUTERS - 1.2% Compaq Computer Corp. (a) 73,200 5,801,100 Sequent Computer Systems, Inc. (a) 100,000 1,718,750 7,519,850 TOTAL COMPUTERS & OFFICE EQUIPMENT 274,967,699 ELECTRICAL EQUIPMENT - 1.2% American Power Conversion Corp. (a) 350,000 7,306,250 ELECTRONICS - 23.4% ELECTRONIC PARTS - WHOLESALE - 0.1% PC Service Source, Inc. (a) 49,000 373,625 ELECTRONICS & ELECTRONIC COMPONENTS - 1.1% Photronics, Inc. (a) 83,200 2,870,400 TDK Corp. 60,000 4,032,439 6,902,839 SEMICONDUCTORS - 22.2% Advanced Micro Devices, Inc. (a) 100,000 3,587,500 Altera Corp. (a) 150,000 6,806,250 Analog Devices, Inc. (a) 185,000 4,301,250 Atmel Corp. (a) 462,200 17,274,725 Chips & Technologies, Inc. (a) 39,400 502,350 Etec Systems, Inc. (a) 195,000 7,068,750 Integrated Device Technology, Inc. (a) 494,800 5,442,800 Intel Corp. 292,400 41,484,250 Linear Technology Corp. 264,500 12,034,750 Maxim Integrated Products, Inc. (a) 195,900 9,721,538 Motorola, Inc. 71,000 3,967,125 National Semiconductor Corp. (a) 331,300 8,655,213 SGS Thomson Microelectronics NV (a) 120,000 7,920,000 Storage Technology Corp. (a) 100 4,175 Unitrode Corp. (a) 44,700 1,631,550 VLSI Technology, Inc. (a) 50,000 934,375 Vitesse Semiconductor Corp. (a) 50,000 2,096,875 Zilog, Inc. (a) 216,400 5,112,450 138,545,926 TOTAL ELECTRONICS 145,822,390 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) MEDICAL EQUIPMENT & SUPPLIES - 0.7% OPHTHALMIC GOODS - 0.7% Hoya Corp. 102,000 $ 4,360,824 PHOTOGRAPHIC EQUIPMENT - 0.1% Minolta Camera Co. Ltd. 154,000 954,294 PRINTING - 1.4% COMMERCIAL PRINTING, LITHOGRAPHIC - 1.4% ASM Lithography Holding NV (a) 137,000 9,110,500 RETAIL & WHOLESALE, MISCELLANEOUS - 0.3% MAIL ORDER - 0.3% Global Directmail Corp. (a) 50,000 1,675,000 TELEPHONE SERVICES - 0.8% WorldCom, Inc. (a) 200,000 5,325,000 TOTAL COMMON STOCKS (Cost $488,532,134) 562,863,165 CASH EQUIVALENTS - 9.8% Taxable Central Cash Fund (b) (Cost $60,931,333) 60,931,333 60,931,333 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $549,463,467) $ 623,794,498 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. 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 $1,158,978 or 0.2% of net assets. 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 C.P. Clare Corp. $ - $ - $ - $ - Insignia Solutions PLC sponsored ADR - - - - Procom Technology, Inc. 60,888 - - 2,493,825 Totals $ 60,888 $ - $ - $ 2,493,825 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $1,295,474,250 and $1,297,209,430, respectively (see Note 3 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 $198,215 for the period (see Note 4 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $27,960,672 and $28,453,500, respectively (see Note 6 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and average daily balance during the period for which the loan was outstanding amounted to $4,844,000. The weighted average interest rate was 5.60% (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $550,640,034. Net unrealized appreciation aggregated $73,154,464, of which $106,399,791 related to appreciated investment securities and $33,245,327 related to depreciated investment securities. The fund hereby designates approximately $29,796,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 6% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. COMPUTERS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 623,794,498 (cost $549,463,467) - See accompanying schedule Receivable for investments sold 16,057,076 Receivable for fund shares sold 5,065,740 Dividends receivable 76,668 Interest receivable 351,072 Redemption fees receivable 6,265 Other receivables 52,187 TOTAL ASSETS 645,403,506 LIABILITIES Payable for investments purchased $ 196,071 Payable for fund shares redeemed 11,642,455 Accrued management fee 354,151 Other payables and accrued expenses 470,850 Collateral on securities loaned, 28,453,500 at value TOTAL LIABILITIES 41,117,027 NET ASSETS $ 604,286,479 Net Assets consist of: Paid in capital $ 456,253,076 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 73,702,512 Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 74,330,891 NET ASSETS, for 12,523,508 shares outstanding $ 604,286,479 NET ASSET VALUE and redemption price per share ($604,286,479 (divided by) 12,523,508 shares) $48.25 Maximum offering price per share (100/97.00 of $48.25) $49.74
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 731,493 Dividends Interest (including income on 2,618,872 securities loaned of $136,306) TOTAL INCOME 3,350,365 EXPENSES Management fee $ 3,309,228 Transfer agent fees 4,038,434 Accounting and security lending fees 526,894 Non-interested trustees' compensation 3,231 Custodian fees and expenses 32,244 Registration fees 51,988 Audit 57,762 Legal 24,291 Interest 2,261 Miscellaneous 19,458 Total expenses before reductions 8,065,791 Expense reductions (198,933 7,866,858 ) NET INVESTMENT INCOME (LOSS) (4,516,493 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 104,429,723 Foreign currency transactions (888 104,428,835 ) Change in net unrealized appreciation (depreciation) on: Investment securities 8,120,089 Assets and liabilities in (116 8,119,973 foreign currencies ) NET GAIN (LOSS) 112,548,808 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 108,032,315 OTHER INFORMATION $ 2,540,952 Sales charges paid to FDC Deferred sales charges withheld $ 5,155 by FDC Exchange fees withheld by FSC $ 196,275 Expense Reductions $ 192,125 Directed brokerage arrangements Custodian interest credits 3,562 Transfer agent interest credits 3,246 $ 198,933
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ (4,516,493 $ (2,669,832 Net ) ) investment income (loss) Net realized 104,428,835 102,860,639 gain (loss) Change in 8,119,973 47,678,623 net unrealized appreciation (depreciation ) NET INCREASE 108,032,315 147,869,430 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (31,596,668 (63,147,066 shareholders ) ) from net realized gains Share 659,275,361 837,037,606 transactions Net proceeds from sales of shares Reinvestmen 31,233,988 62,103,715 t of distributions Cost of (691,302,094 (672,703,503 shares ) ) redeemed Paid in 1,306,734 1,162,861 capital portion of redemption fees NET INCREASE 513,989 227,600,679 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 76,949,636 312,323,043 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 527,336,843 215,013,800 period End of period $ 604,286,479 $ 527,336,843 OTHER INFORMATION Shares Sold 14,415,549 20,220,825 Issued in 674,688 1,547,662 reinvestment of distributions Redeemed (15,418,220 (15,928,239 ) ) Net increase (327,983) 5,840,248 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 41.03 $ 30.67 $ 27.02 $ 20.15 $ 17.63 value, beginning of period Income from Investment Operations Net (.36) (.23) (.31) (.21) F (.15) investment income (loss) Net realized 9.94 16.10 3.68 8.66 2.44 and unrealized gain (loss) Total from 9.58 15.87 3.37 8.45 2.29 investment operations Less (2.47) (5.61) - (1.80) - distributions from net realized gain Redemption .11 .10 .28 .22 .23 fees added to paid in capital Net asset $ 48.25 $ 41.03 $ 30.67 $ 27.02 $ 20.15 value, end of period TOTAL 23.97% 52.79% 13.51% 45.06% 14.29% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 604,286 $ 527,337 $ 215,014 $ 120,435 $ 47,596 end of period (000 omitted) Ratio of 1.48% 1.40% 1.71% 1.90% 1.81% A expenses to average net assets Ratio of 1.44% E 1.38% E 1.69% E 1.89% E 1.81% A expenses to average net assets after expense reductions Ratio of net (.83)% (.56)% (1.12)% (.91)% (.98)% investment A income (loss) to average net assets Portfolio 255% 129% 189% 145% 254% A turnover rate Average $ .0432 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 8 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 8 OF NOTES TO FINANCIAL STATEMENTS). F INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.07 PER SHARE. 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.
DEVELOPING COMMUNICATIONS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1997 YEAR YEARS FUND DEVELOPING COMMUNICATIONS 1.34% 108.58% 222.52% DEVELOPING COMMUNICATIONS -1.70% 102.32% 212.84% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 167.01% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on June 29, 1990. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1997 YEAR YEARS FUND DEVELOPING COMMUNICATIONS 1.34% 15.84% 19.17% DEVELOPING COMMUNICATIONS -1.70% 15.14% 18.63% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 15.85% AVERAGE ANNUAL RETURNS take the fund's 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 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 1996/08/31 31570.61 21790.58 1996/09/30 34416.10 23016.95 1996/10/31 32969.51 23651.76 1996/11/30 34527.37 25439.60 1996/12/31 33796.13 24935.64 1997/01/31 35226.82 26493.62 1997/02/28 31252.68 26701.33 Let's say hypothetically that $10,000 was invested in Fidelity Select Developing Communications Portfolio on June 29, 1990, when the fund started, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $31,284 - a 212.84% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $26,701 - a 167.01% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Oracle Systems Corp. 5.6 Nokia Corp. AB sponsored ADR 5.3 WorldCom, Inc. 4.0 Brightpoint, Inc. 3.6 Alcatel Alsthom Compagnie Generale d'Electricite SA 3.4 Ascend Communications, Inc. 3.3 ASM Lithography Holding NV 3.2 Lucent Technologies, Inc. 3.1 AccuStaff, Inc. 2.9 Unitrode Corp. 2.6 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Row: 1, Col: 1, Value: 51.0 Row: 1, Col: 2, Value: 4.3 Row: 1, Col: 3, Value: 5.4 Row: 1, Col: 4, Value: 9.6 Row: 1, Col: 5, Value: 10.5 Row: 1, Col: 6, Value: 19.2 Telephone Equipment 19.2% Semiconductors 10.5% Prepackaged Computer Software 9.6% Telephone Services 5.4% Electrical Machinery 4.3% All Others 51.0%* * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS DEVELOPING COMMUNICATIONS PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: Effective February 14, 1997, Nicholas Romano (right) became Portfolio Manager of Fidelity Select Developing Communications Portfolio. The following is an interview with Minerva Butler, who managed the fund during most of the period covered by the report, and Nicholas Romano, who discusses his outlook. Q. HOW DID THE FUND PERFORM, MINERVA? M.B. It was a disappointing period. For the 12 months that ended February 28, 1997, the fund returned 1.34%. The Standard & Poor's 500 Index had a return of 26.16% over the same time period. Q. WHAT HELD DEVELOPING COMMUNICATIONS STOCKS BACK? M.B. I break the developing communications universe into two areas: service providers and infrastructure companies. Service provider stocks continued to underperform in all key categories during the period. Exposure to cellular-related stocks hurt the fund as cellular stocks continued to suffer from widespread fear of personal communications services (PCS) competition and its impact on growth prospects, prices and profitability. However, there's still room for growth. The U.S. has an approximate penetration rate of 14%, meaning only 14% of people own cellular phones. Other regions of the world - Scandinavia, for instance - have higher penetration rates. The fund's limited investments in paging, PCS, cable TV service and satellite companies all helped performance. The bankruptcy of one of the largest paging companies, Mobilemedia, had a negative impact on the paging group. There was also concern that PCS, which will provide for increased communication flow, will displace paging. While I don't think that's the case, I remained cautious on paging stocks. While I was bullish on wireless stocks, I stayed away from many of the PCS providers. These companies should be large consumers of capital as infrastructures need to be built and their business plans are not yet clear. While cable valuations were at attractive levels relative to their history, I believe tough times are ahead for these stocks. Cable operators will be faced with increased competition from direct broadcast satellite systems and will need to spend large amounts of capital to upgrade their infrastructures. Q. WERE THERE ANY THEMES DURING THE PERIOD? M.B. The broad, recurring theme from my analysis of the service providers was the level of spending required by all the players. Cellular service providers continue to expand network capacity, and PCS is in the early stages of having its network built. Capital expenditure budgets remained at very high levels for most cable companies, as they continue to enhance their networks to provide more channels, cable modems and telephony. Q. WHICH STOCKS CONTRIBUTED POSITIVELY TO THE FUND'S RETURN? WHICH WERE DISAPPOINTMENTS? M.B. Stocks such as Newbridge Networks, Lucent Technologies, Allen Group and Alcatel, which stand to benefit from increased infrastructure demand, helped performance. Brightpoint, which acts as a sort of "middle man" for cellular phone order fulfillment, also contributed. On the other hand, cable equipment stocks Oak Industries and Antec, both of which the fund no longer owns, and Scientific-Atlanta hurt performance. Q. TURNING TO YOU, NICK, WHAT EFFECT DO YOU SEE DEREGULATION HAVING ON THE INDUSTRY? N.R. I think it's important to realize that telecommunications deregulation isn't just happening in the U.S.; it's also taking place in Europe. Asia and Latin America are experiencing rapid network buildup as well. As such, a number of European countries will have basic infrastructure needs. I believe the service providers will continue to experience significant competition, which should benefit the equipment suppliers. Q. WHAT'S YOUR OUTLOOK FOR THE FORESEEABLE FUTURE? N.R. While consolidation among service providers and legislative delays in the U.S. could have a negative effect on carrier spending patterns, I'm pretty optimistic on the industry as a whole. Wireless communications are clearly growing, and I'll consider the different ways in which to play that trend. I may also look at component suppliers, such as semiconductor stocks, and networking stocks that deal more with data transfer. Valuations may remain at their high levels, but I'm bullish on the long-term outlook. 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 February 28, 1997, more than $220 million MANAGER: Nicholas Romano, since February 1997; equity analyst, telecommunications equipment industry and conglomerates, since 1995; joined Fidelity in 1995 (checkmark) DEVELOPING COMMUNICATIONS PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.6% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 1.7% MISSILES & SPACE VEHICLES - 1.7% Orbital Sciences Corp. (a) 211,200 $ 3,643,198 APPLIANCE STORES - 2.5% ELECTRIC APPLIANCES - WHOLESALE - 2.5% Cellstar Corp. (a) 200,000 5,175,000 BROADCASTING - 0.9% COMMUNICATIONS SERVICES - 0.9% APT Satellite Holdings Ltd. sponsored ADR 105,500 1,477,000 Metro One Telecommunications, Inc. 60,500 491,563 1,968,563 CELLULAR - 3.3% CELLULAR & COMMUNICATION SERVICES - 3.3% AirTouch Communications, Inc. (a) 79,525 2,167,056 Arch Communications Group, Inc. (a) 76,887 562,236 Boston Communications Group, Inc. 99,000 445,500 Lightbridge, Inc. 120,000 1,050,000 Palmer Wireless, Inc. (a) 185,700 2,785,500 7,010,292 COMMUNICATIONS EQUIPMENT - 21.3% DATACOMMUNICATIONS EQUIPMENT - 2.1% Dynatech Corp. (a) 155,950 4,366,600 TELEPHONE EQUIPMENT - 19.2% ADC Telecommunications, Inc. 52,600 1,420,200 Andrew Corp. (a) 40,000 2,200,000 Ascend Communications, Inc. (a) 133,000 6,949,250 Brooktrout Technology, Inc. (a) 100,000 1,862,500 DSP Communications, Inc. (a) 21,600 252,450 Lucent Technologies, Inc. 121,760 6,559,820 Newbridge Networks Corp. (a) 140,000 4,462,500 Nokia Corp. AB sponsored ADR 191,900 11,226,150 Tellabs, Inc. (a) 100,800 4,019,400 Viasat, Inc. 147,500 1,475,000 40,427,270 TOTAL COMMUNICATIONS EQUIPMENT 44,793,870 COMPUTER SERVICES & SOFTWARE - 12.4% COMPUTER SERVICES - 1.8% America Online, Inc. 35,000 1,312,500 Clarify, Inc. (a) 92,800 2,378,000 3,690,500 CUSTOM COMPUTER PROGRAMMING SERVICES - 1.0% Keane, Inc. (a) 62,800 2,213,700 PREPACKAGED COMPUTER SOFTWARE - 9.6% Black Box Corp. (a) 110,700 3,348,675 Microsoft Corp. (a) 25,000 2,437,500 Oracle Systems Corp. (a) 300,500 11,794,625 Sykes Enterprises, Inc. (a) 25,000 809,375 Vantive Corp. (a) 51,900 1,154,775 Wind River Systems, Inc. (a) 19,600 735,000 20,279,950 TOTAL COMPUTER SERVICES & SOFTWARE 26,184,150 COMPUTERS & OFFICE EQUIPMENT - 5.0% COMPUTER COMMUNICATIONS EQUIPMENT - 0.6% Proxim, Inc. (a) 70,000 1,330,000 SHARES VALUE (NOTE 1) COMPUTER PERIPHERALS - 1.9% Applied Magnetics Corp. (a) 100,000 $ 3,887,500 COMPUTER STORAGE DEVICES - 2.5% Adaptec, Inc. (a) 62,200 2,367,488 Quantum Corp. 12,500 496,875 Seagate Technology 50,000 2,362,500 5,226,863 TOTAL COMPUTERS & OFFICE EQUIPMENT 10,444,363 CONSUMER ELECTRONICS - 0.3% RADIOS, TELEVISIONS, STEREOS - 0.3% Powerwave Technologies, Inc. 25,500 567,375 DEFENSE ELECTRONICS - 1.0% Remec, Inc. 75,000 2,043,750 ELECTRICAL EQUIPMENT - 6.1% ELECTRICAL EQUIPMENT - 0.6% AML Communications, Inc. (a) 132,500 1,192,500 ELECTRICAL MACHINERY - 4.3% Alcatel Alsthom Compagnie Generale d'Electricite SA 70,000 7,171,629 Amphenol Corp. Class A (a) 75,800 1,932,900 9,104,529 TV & RADIO COMMUNICATION EQUIPMENT - 1.2% Allen Group, Inc. (The) 66,800 1,394,450 Ortel Corp. (a) 12,100 157,300 Scientific-Atlanta, Inc. 65,400 1,095,450 2,647,200 TOTAL ELECTRICAL EQUIPMENT 12,944,229 ELECTRONIC INSTRUMENTS - 4.2% SEMI-CONDUCTOR CAPITAL EQUIPMENT - 4.2% Applied Materials, Inc. 50,000 2,531,250 KLA Instruments Corp. 50,000 2,075,000 Novellus System, Inc. (a) 51,000 4,169,250 8,775,500 ELECTRONICS - 15.9% ELECTRONIC CAPACITORS - 0.3% Maxwell Technologies, Inc. (a) 24,900 572,700 ELECTRONIC PARTS - WHOLESALE - 3.8% Brightpoint, Inc. (a) 279,250 7,539,750 Intellicell Corp. 70,000 560,000 8,099,750 ELECTRONICS & ELECTRONIC COMPONENTS - 1.3% Sanmina Corp. (a) 45,900 2,122,875 Solectron Corp. (a) 12,000 634,500 2,757,375 SEMICONDUCTORS - 10.5% Atmel Corp. (a) 65,000 2,429,375 Intel Corp. 26,500 3,759,688 MEMC Electronic Materials, Inc. (a) 35,000 857,500 Motorola, Inc. 84,000 4,693,500 Tencor Instruments (a) 103,400 4,142,463 Unitrode Corp. (a) 151,500 5,529,750 Zilog, Inc. 24,800 585,900 21,998,176 TOTAL ELECTRONICS 33,428,001 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) METALS & MINING - 2.3% NONFERROUS WIRE - 2.3% Superior Telecom, Inc. (a) 192,600 $ 4,839,075 PRINTING - 3.1% COMMERCIAL PRINTING, LITHOGRAPHIC - 3.1% ASM Lithography Holding NV (a) 100,000 6,650,000 SERVICES - 9.2% BUSINESS SERVICES - 4.1% Premier Technologies, Inc. (a) 30,100 564,375 Sitel Corp. (a) 286,900 4,769,713 Teletech Holdings, Inc. (a) 133,700 3,267,294 8,601,382 MISCELLANEOUS BUSINESS SERVICES - 2.2% APAC Teleservices, Inc. (a) 155,000 4,611,250 PERSONNEL SUPPLY SERVICES - 2.9% AccuStaff, Inc. (a) 293,000 6,079,750 TOTAL SERVICES 19,292,382 TELEPHONE SERVICES - 5.4% ALLTEL Corp. 80,600 2,851,225 WorldCom, Inc. (a) 319,170 8,497,901 11,349,126 TOTAL COMMON STOCKS (Cost $188,385,406) 199,108,874 CASH EQUIVALENTS - 5.4% Taxable Central Cash Fund (b) (Cost $11,401,870) 11,401,870 $ 11,401,870 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $199,787,276) $ 210,510,744 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $553,605,632 and $645,628,505, respectively (see Note 3 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 $116,574 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $200,733,661. Net unrealized appreciation aggregated $9,777,083, of which $21,991,559 related to appreciated investment securities and $12,214,476 related to depreciated investment securities. At February 28,1997, the fund had a capital loss carryforward of approximately $1,633,000 which will expire on February 28, 2005. DEVELOPING COMMUNICATIONS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 210,510,744 (cost $199,787,276) - See accompanying schedule Receivable for investments sold 23,844,527 Receivable for fund shares sold 304,741 Dividends receivable 69,571 Interest receivable 71,798 Redemption fees receivable 1,033 Other receivables 35,088 TOTAL ASSETS 234,837,502 LIABILITIES Payable for investments purchased $ 11,654,484 Payable for fund shares redeemed 2,471,387 Accrued management fee 124,479 Other payables and accrued expenses 227,430 TOTAL LIABILITIES 14,477,780 NET ASSETS $ 220,359,722 Net Assets consist of: Paid in capital $ 212,183,100 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (2,544,171 ) Net unrealized appreciation (depreciation) on investments 10,720,793 and assets and liabilities in foreign currencies NET ASSETS, for 11,199,603 shares outstanding $ 220,359,722 NET ASSET VALUE and redemption price per share ($220,359,722 (divided by) 11,199,603 shares) $19.68 Maximum offering price per share (100/97.00 of $19.68) $20.29
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 739,868 Dividends Interest 1,597,559 TOTAL INCOME 2,337,427 EXPENSES Management fee $ 1,856,888 Transfer agent fees 2,791,043 Accounting fees and expenses 308,377 Non-interested trustees' compensation 1,964 Custodian fees and expenses 29,755 Registration fees 9,041 Audit 33,524 Legal 2,168 Miscellaneous 13,636 Total expenses before reductions 5,046,396 Expense reductions (63,570 4,982,826 ) NET INVESTMENT INCOME (LOSS) (2,645,399 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 20,142,820 Foreign currency transactions 66 20,142,886 Change in net unrealized appreciation (depreciation) on: Investment securities (10,185,043 ) Assets and liabilities in (2,683 (10,187,726 foreign currencies ) ) NET GAIN (LOSS) 9,955,160 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 7,309,761 OTHER INFORMATION $ 733,692 Sales charges paid to FDC Deferred sales charges withheld $ 7,987 by FDC Exchange fees withheld by FSC $ 117,788 Expense reductions $ 61,494 Directed brokerage arrangements Custodian interest credits 2,076 $ 63,570
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ (2,645,399 $ (2,597,260 Net ) ) investment income (loss) Net realized 20,142,886 52,212,710 gain (loss) Change in (10,187,726 9,525,013 net ) unrealized appreciation (depreciation ) NET INCREASE 7,309,761 59,140,463 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to - (64,709,372 shareholders ) from net realized gains Share 146,934,555 436,869,315 transactions Net proceeds from sales of shares Reinvestmen - 63,769,821 t of distributions Cost of (267,415,417 (416,608,338 shares ) ) redeemed Paid in 345,334 297,961 capital portion of redemption fees NET INCREASE (120,135,528 84,328,759 (DECREASE) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (112,825,767 78,759,850 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 333,185,489 254,425,639 period End of period $ 220,359,722 $ 333,185,489 OTHER INFORMATION Shares Sold 7,119,930 19,756,179 Issued in - 3,380,520 reinvestment of distributions Redeemed (13,076,634 (18,449,215 ) ) Net increase (5,956,704) 4,687,484 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 19.42 $ 20.40 $ 19.65 $ 16.44 $ 13.54 value, beginning of period Income from Investment Operations Net (.18) (.17) (.16) (.16) (.07) investment income (loss) Net realized .42 4.17 2.55 4.82 2.98 and unrealized gain (loss) Total from .24 4.00 2.39 4.66 2.91 investment operations Less Distributions From net - (5.00) (1.67) (1.47) (.03) realized gain Redemption .02 .02 .03 .02 .02 fees added to paid in capital Net asset $ 19.68 $ 19.42 $ 20.40 $ 19.65 $ 16.44 value, end of period TOTAL 1.34% 21.84% 13.63% 30.24% 21.66% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 220,360 $ 333,185 $ 254,426 $ 222,109 $ 83,383 end of period (000 omitted) Ratio of 1.64% 1.53% 1.58% 1.56% 1.88% A expenses to average net assets Ratio of 1.62% E 1.51% E 1.56% E 1.56% 1.88% A expenses to average net assets after expense reductions Ratio of net (.86)% (.78)% (.83)% (.88)% (.59)% investment A income (loss) to average net assets Portfolio 202% 249% 266% 280% 77% A turnover rate Average $ .0346 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 8 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 8 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.
ELECTRONICS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS ELECTRONICS 34.67% 316.52% 411.79% ELECTRONICS 30.63% 304.02% 396.44% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS ELECTRONICS 34.67% 33.02% 17.74% ELECTRONICS 30.63% 32.22% 17.38% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9545.16 10289.00 1987/04/30 9827.51 10197.43 1987/05/31 9627.14 10286.15 1987/06/30 9417.65 10805.60 1987/07/31 9709.11 11353.44 1987/08/31 10410.42 11776.92 1987/09/30 10401.31 11519.01 1987/10/31 6867.42 9037.81 1987/11/30 5792.68 8293.10 1987/12/31 6667.04 8924.20 1988/01/31 6284.51 9299.91 1988/02/29 6949.39 9733.29 1988/03/31 6849.20 9432.53 1988/04/30 7158.87 9537.23 1988/05/31 6912.96 9620.20 1988/06/30 7586.95 10061.77 1988/07/31 7122.44 10023.54 1988/08/31 6412.02 9682.74 1988/09/30 6512.21 10095.22 1988/10/31 6038.59 10375.87 1988/11/30 5738.03 10227.49 1988/12/31 6102.35 10406.47 1989/01/31 6320.94 11168.23 1989/02/28 6229.86 10890.14 1989/03/31 6184.32 11143.88 1989/04/30 6667.04 11722.25 1989/05/31 7304.60 12197.00 1989/06/30 6585.07 12127.48 1989/07/31 6657.93 13222.59 1989/08/31 6885.63 13481.75 1989/09/30 7076.90 13426.47 1989/10/31 6758.12 13114.98 1989/11/30 6776.34 13382.52 1989/12/31 7058.69 13703.71 1990/01/31 7295.49 12784.19 1990/02/28 7878.40 12949.10 1990/03/31 8260.94 13292.25 1990/04/30 8297.37 12959.95 1990/05/31 9517.84 14223.54 1990/06/30 9663.57 14126.82 1990/07/31 9208.17 14081.62 1990/08/31 7769.11 12808.64 1990/09/30 6594.18 12184.86 1990/10/31 6357.37 12132.46 1990/11/30 7013.15 12916.22 1990/12/31 7468.63 13276.58 1991/01/31 8508.22 13855.44 1991/02/28 9256.00 14846.11 1991/03/31 9748.44 15205.38 1991/04/30 9803.15 15241.87 1991/05/31 10122.33 15900.32 1991/06/30 8891.23 15172.09 1991/07/31 9502.22 15879.11 1991/08/31 9894.34 16255.44 1991/09/30 9137.45 15983.98 1991/10/31 9584.29 16198.16 1991/11/30 9000.66 15545.38 1991/12/31 10104.09 17323.77 1992/01/31 11298.70 17001.55 1992/02/29 11918.81 17222.57 1992/03/31 10979.53 16886.73 1992/04/30 10769.79 17383.20 1992/05/31 10788.03 17468.37 1992/06/30 10003.78 17208.09 1992/07/31 10532.69 17911.90 1992/08/31 10642.12 17544.71 1992/09/30 11025.13 17751.74 1992/10/31 11854.98 17813.87 1992/11/30 12630.11 18421.32 1992/12/31 12876.33 18647.90 1993/01/31 13314.05 18804.55 1993/02/28 13022.23 19060.29 1993/03/31 13478.20 19462.46 1993/04/30 13240.61 18991.47 1993/05/31 14569.26 19500.44 1993/06/30 14834.98 19556.99 1993/07/31 15256.49 19478.76 1993/08/31 16566.80 20217.01 1993/09/30 16841.69 20061.34 1993/10/31 16520.99 20476.61 1993/11/30 16392.70 20282.08 1993/12/31 17007.03 20527.49 1994/01/31 18181.78 21225.43 1994/02/28 19043.99 20650.22 1994/03/31 18839.22 19749.87 1994/04/30 18785.33 20002.67 1994/05/31 18731.44 20330.71 1994/06/30 17729.12 19832.61 1994/07/31 18095.56 20483.12 1994/08/31 19863.09 21322.93 1994/09/30 19291.87 20800.52 1994/10/31 20078.64 21268.53 1994/11/30 19819.98 20493.93 1994/12/31 19927.75 20797.85 1995/01/31 19356.54 21337.14 1995/02/28 21339.61 22168.65 1995/03/31 23538.24 22822.85 1995/04/30 26167.97 23494.98 1995/05/31 28075.60 24434.07 1995/06/30 32074.09 25001.68 1995/07/31 36870.11 25830.73 1995/08/31 37355.10 25895.57 1995/09/30 38023.31 26988.36 1995/10/31 36977.89 26892.01 1995/11/30 36051.02 28072.57 1995/12/31 33671.58 28613.25 1996/01/31 34809.67 29587.24 1996/02/29 36863.45 29861.52 1996/03/31 34705.02 30149.08 1996/04/30 38668.69 30593.48 1996/05/31 39689.04 31382.49 1996/06/30 36353.27 31502.05 1996/07/31 34600.36 30110.29 1996/08/31 36274.79 30745.32 1996/09/30 41167.24 32475.67 1996/10/31 41494.27 33371.34 1996/11/30 47721.03 35893.88 1996/12/31 47721.03 35182.83 1997/01/31 55177.44 37381.05 1997/02/28 49644.00 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Electronics Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $49,644 - a 396.44% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Texas Instruments, Inc. 6.8 Atmel Corp. 5.9 ASM Lithography Holding NV 5.5 Seagate Technology 4.5 Altera Corp. 3.3 Intel Corp. 2.7 LSI Logic Corp. 2.6 Applied Magnetics Corp. 2.5 Read-Rite Corp. 2.4 Maxim Integrated Products, Inc. 2.1 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Semiconductors 45.2% Computer Storage Devices 9.8% Commercial Printing, Lithographic 5.5% Computer Peripherals 4.7% Semiconductor Capital Equipment 3.5% All Others 31.3% * Row: 1, Col: 1, Value: 31.3 Row: 1, Col: 2, Value: 3.5 Row: 1, Col: 3, Value: 4.7 Row: 1, Col: 4, Value: 5.5 Row: 1, Col: 5, Value: 9.800000000000001 Row: 1, Col: 6, Value: 45.2 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS ELECTRONICS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Andrew Kaplan, Portfolio Manager of Fidelity Select Electronics Portfolio Q. HOW DID THE FUND PERFORM, ANDY? A. The fund had an excellent year, although like most technology funds it had a much stronger second half than first half. For the period ending February 28, 1997, the fund had a return of 34.67%, compared to a 26.16% increase in the Standard & Poor's 500 Index over the same time. Q. WHAT WAS THE INVESTMENT ENVIRONMENT LIKE OVER THE PAST YEAR? A. There were two dramatically different investing environments during the past year, as evidenced by the fund's return of -1.60% during the first six months of the period, and more than 36% over the second six months. Performance during the spring and early summer of 1996 was governed by dramatic oversupply of commodity semiconductors, a major inventory correction that hurt even proprietary semiconductor suppliers and a harsh correction in the technology sector. In the most recent six months, by far the single most important factor affecting the fund's performance was the decline in memory chip prices, which reduced the price of the average PC by about $300. Q. WHAT TYPES OF COMPANIES BENEFITED FROM THE DROP IN MEMORY PRICES? A. The pricing windfall helped the PC manufacturers and most other companies involved in the PC "food chain," most notably the chip, semiconductor capital equipment and component suppliers. With memory so much cheaper, PC manufacturers could cut prices - stimulating demand for their products, while still improving their gross margins and helping their earnings. They could also increase the amount of storage in the systems they sold, which improved the landscape for the disk drive companies. Finally, proprietary, value-added chip manufacturers, such as industry-leader Intel, could slow down the price cuts they traditionally make during the winter, which improved their earnings. Q. GIVEN THE CHANGE IN THE INVESTMENT ENVIRONMENT FROM SIX MONTHS AGO, IT'S NOT SURPRISING THAT NINE OF THE FUND'S 10 LARGEST HOLDINGS HAVE CHANGED SINCE THE END OF AUGUST. HOW DID THE TOP HOLDINGS PERFORM? A. The fund's largest holdings at the end of the period all performed extremely well. Texas Instruments, the fund's largest holding, was up more than 60% over the past six months. It's been undergoing a successful transition from a commodity supplier of memory to a proprietary supplier of digital signal processors, or DSPs; these are the microprocessors in such high bandwith communications devices as cellular phones, pagers and modems. Altera, another proprietary chip company, more than doubled over the past six months based on strong demand for its products from the networking and communications industries. ASM Lithography, a Dutch semiconductor cap equipment company, also was up over 60% over the past six months based on the competitive edge in its products for manufacturing integrated circuits. Seagate, which manufactures disk drives for high-end PCs and workstations, had a terrific six months. Intel was up more than 70% over the past six months - and more than doubled over the past year, the largest increase in market capitalization of any company in history. Q. DID YOU HAVE ANY REGRETS OVER THE PAST SIX MONTHS? A. Even though the fund did great, I probably could have invested even more in the semiconductor equipment companies. While ASM Lithography and Applied Materials were big positions for the fund, this whole segment of the electronics industry recovered very strongly since last summer. In hindsight, I probably could have been more aggressive in owning them. Q. WHAT'S YOUR OUTLOOK FOR THE FUTURE? A. I'm more cautious than I was in my last report to shareholders at the end of August. The past six-month period - because of the drop in memory prices - was unusual in the profit opportunities for just about every company in the PC industry. I see the next six months as a period of digestion for this sector, as earnings catch up to the tremendous gains in share prices. Going forward, I think the opportunities will be on a stock-by-stock basis, rather than across industry segments. 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 February 28, 1997, more than $1.7 billion MANAGER: Andrew Kaplan, since August 1996; analyst, semiconductor equipment companies and producers; joined Fidelity in 1995 (checkmark) ELECTRONICS PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 89.6% SHARES VALUE (NOTE 1) ADVERTISING - 0.4% ADVERTISING AGENCIES - 0.4% Snyder Communications, Inc. (a) 260,000 $ 7,020,000 COMMUNICATIONS EQUIPMENT - 3.5% DATACOMMUNICATIONS EQUIPMENT - 0.8% Cisco Systems, Inc. (a) 127,100 7,069,938 Davox Corp. (a) 66,300 1,897,838 Dynatech Corp. (a) 3,800 106,400 Level One Communications, Inc. (a) 179,300 5,894,488 14,968,664 TELEPHONE EQUIPMENT - 2.7% Ascend Communications, Inc. (a) 318,900 16,662,525 Lucent Technologies, Inc. 131,300 7,073,788 Newbridge Networks Corp. (a) 400,400 12,762,750 Nokia Corp. AB sponsored ADR 200,000 11,700,000 48,199,063 TOTAL COMMUNICATIONS EQUIPMENT 63,167,727 COMPUTER SERVICES & SOFTWARE - 2.8% CAD/CAM/CAE - 0.3% Parametric Technology Corp. (a) 91,700 5,169,588 Quickturn Design Systems, Inc. (a) 40,000 637,500 5,807,088 COMPUTER & SOFTWARE STORES - 0.0% MicroAge, Inc. (a) 200 2,600 COMPUTER SERVICES - 0.1% Clarify, Inc. (a) 71,000 1,819,375 DATA PROCESSING - 0.7% NCR Corp. (a) 382,200 12,612,600 PREPACKAGED COMPUTER SOFTWARE - 1.7% Cadence Design Systems, Inc. (a) 57,300 2,112,938 Electronics for Imaging, Inc. (a) 165,600 6,375,600 McAfee Associates, Inc. (a) 312,500 14,335,938 Oracle Systems Corp. (a) 105,100 4,125,175 Remedy Corp. (a) 50,000 1,918,750 Vantive Corp. (a) 100,000 2,225,000 31,093,401 TOTAL COMPUTER SERVICES & SOFTWARE 51,335,064 COMPUTERS & OFFICE EQUIPMENT - 18.3% COMPUTER PERIPHERALS - 4.7% Applied Magnetics Corp. (a) 1,185,000 46,066,875 Creative Technology Corp. Ltd. (a) 1,000,500 12,334,289 EMC Corp. (a) 500,000 18,000,000 Sigma Designs, Inc. (a) 247,400 1,237,000 Western Digital Corp. (a) 125,000 7,375,000 85,013,164 COMPUTER STORAGE DEVICES - 9.8% Adaptec, Inc. (a) 753,980 28,698,364 Hutchinson Technology, Inc. (a) 85,900 2,759,538 Quantum Corp. (a) 385,600 15,327,600 Read-Rite Corp. (a) 1,451,400 44,539,838 Seagate Technology (a) 1,728,600 81,676,350 Trident Microsystems, Inc. (a) 248,000 5,549,000 178,550,690 COMPUTERS & OFFICE EQUIPMENT - 0.8% International Business Machines Corp. 100,700 14,475,625 SHARES VALUE (NOTE 1) ELECTRONIC COMPUTERS - 1.1% Gateway 2000, Inc. (a) 200,000 $ 11,750,000 Micron Electronics, Inc. 400,000 7,750,000 19,500,000 MINI & MICRO COMPUTERS - 1.9% Compaq Computer Corp. (a) 63,900 5,064,075 Dell Computer Corp. (a) 371,300 26,408,713 Sequent Computer Systems, Inc. (a) 225,000 3,867,188 35,339,976 TOTAL COMPUTERS & OFFICE EQUIPMENT 332,879,455 CONGLOMERATES - 0.4% Harris Corp. 100,000 7,375,000 CONSUMER DURABLES - 0.0% PRESSED & BLOWN GLASS - 0.0% Ciena Corp. 1,000 39,250 ELECTRICAL EQUIPMENT - 0.3% ELECTRICAL EQUIPMENT - 0.3% Vicor Corporation (a) 294,100 4,815,877 ELECTRONIC INSTRUMENTS - 4.9% ELECTRONIC EQUIPMENT - 1.0% Anadigics, Inc. (a) 225,000 5,793,750 Helix Technology Corp. 156,500 5,438,375 Smart Modular Technologies, Inc. (a) 111,400 3,244,525 Teradyne, Inc. (a) 100,000 2,725,000 17,201,650 MEASURING INSTRUMENTS - 0.4% Perkin-Elmer Corp. 103,400 7,341,400 SEMICONDUCTOR CAPITAL EQUIPMENT - 3.5% Applied Materials, Inc. (a) 650,000 32,906,250 KLA Instruments Corp. (a) 300,000 12,450,000 Kulicke & Soffa Industries, Inc. (a) 362,000 9,593,000 Novellus System, Inc. (a) 74,400 6,082,200 Silicon Valley Group, Inc. (a) 135,500 2,896,313 63,927,763 TOTAL ELECTRONIC INSTRUMENTS 88,470,813 ELECTRONICS - 50.3% ELECTRONIC CAPACITORS - 1.2% KEMET Corp. (a) 1,017,900 22,648,275 ELECTRONIC COMPONENTS & ACCESSORIES - 0.3% Benchmarq Microelectronics, Inc. (a) 300,000 5,325,000 ELECTRONIC PARTS - WHOLESALE - 0.3% Brightpoint, Inc. (a) 212,250 5,730,750 ELECTRONICS & ELECTRONIC COMPONENTS - 3.1% Hadco Corp. (a) 273,600 11,080,800 Photronics, Inc. (a) (c) 706,500 24,374,250 Sanmina Corp. (a) 65,000 3,006,250 Sipex Corp. (c) 473,300 15,027,275 Solectron Corp. (a) 50,800 2,686,050 56,174,625 PRINTED CIRCUIT BOARDS - 0.2% Altron Inc. (a) 72,500 1,341,250 Flextronics International (a) 100,000 2,262,500 3,603,750 SEMICONDUCTORS - 45.2% Actel Corp. (a) (c) 987,000 19,246,500 Altera Corp. (a) 1,307,000 59,305,125 Analog Devices, Inc. (a) 325,900 7,577,175 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRONICS - CONTINUED SEMICONDUCTORS - CONTINUED Atmel Corp. (a) 2,881,900 $ 107,711,013 Burr-Brown Corp. 114,700 3,756,425 CFM Technologies, Inc. 45,500 1,820,000 Chips & Technologies, Inc. (a) 34,700 442,425 Dallas Semiconductor Corp. 689,900 17,937,400 ESS Technology, Inc. (a) 597,800 15,729,613 Etec Systems, Inc. (a) 490,700 17,787,875 Integrated Device Technology, Inc. (a) 733,000 8,063,000 Integrated Silicon Solution (a) 73,800 673,425 Intel Corp. 347,400 49,287,375 Intel Corp. (warrants) (a) 84,500 8,596,555 International Rectifier Corp. (a) 900,000 12,150,000 LSI Logic Corp. (a) 1,350,000 46,575,000 Lattice Semiconductor Corp. (a) 683,900 32,656,225 Linear Technology Corp. 526,810 23,969,855 Maxim Integrated Products, Inc. (a) 755,100 37,471,838 Micrel, Inc. (a) (c) 525,000 17,850,000 Microchip Technology, Inc. (a) 81,050 3,029,244 Micron Technology, Inc. 800,000 30,000,000 Motorola, Inc. 461,500 25,786,313 National Semiconductor Corp. (a) 1,150,000 30,043,750 Speedfam International, Inc. (a) 300,000 11,175,000 Storage Technology Corp. (a) 35,300 1,473,775 Tencor Instruments (a) 729,900 29,241,619 Texas Instruments, Inc. 1,600,000 123,400,000 Tower Semiconductor Ltd. (a) 266,100 2,594,475 Triquint Semiconductor, Inc. (a) (c) 529,500 16,613,063 Uniphase Corp. (a) 262,200 8,587,050 Unitrode Corp. (a) 414,300 15,121,950 Vitesse Semiconductor Corp. (a) 266,700 11,184,731 Zilog, Inc. (a) (c) 1,079,100 25,493,738 822,351,532 TOTAL ELECTRONICS 915,833,932 ENGINEERING - 0.6% ARCHITECTS & ENGINEERS - 0.6% EG & G, Inc. 500,000 10,875,000 INDUSTRIAL MACHINERY & EQUIPMENT - 1.0% SPECIAL INDUSTRIAL MACHINERY - 1.0% Gasonics International Corp. (a) 262,500 4,396,875 PRI Automation, Inc. (a) 285,700 14,106,438 18,503,313 PRINTING - 5.5% COMMERCIAL PRINTING, LITHOGRAPHIC - 5.5% ASM Lithography Holding NV (a) 1,514,400 100,707,600 SERVICES - 1.3% BUSINESS SERVICES - 0.4% Sitel Corp. (a) 400,000 6,650,000 PERSONNEL SUPPLY SERVICES - 0.9% AccuStaff, Inc. (a) 800,000 16,600,000 TOTAL SERVICES 23,250,000 TELEPHONE SERVICES - 0.3% WorldCom, Inc. (a) 231,300 6,158,363 TOTAL COMMON STOCKS (Cost $1,485,230,214) 1,630,431,394 CASH EQUIVALENTS - 10.4% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $189,972,529) 189,972,529 $189,972,529 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $1,675,202,743) $ 1,820,403,923 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 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 Actel Corp. $ 13,732,776 $ 13,752,950 $ - $ 19,246,500 Micrel, Inc. 1,501,564 - - 17,850,000 Photronics, Inc. 7,551,067 3,552,248 - 24,374,250 Sipex Corp. 2,267,813 - - 15,027,275 Triquint Semiconductor, Inc. 2,957,130 - - 16,613,063 Unitrode Corp. - 1,808,487 - - Zilog, Inc. 1,806,250 - - 25,493,738 Totals $ 29,816,600 $ 19,113,685 $ - $ 118,604,826 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $4,443,321,532 and $4,104,602,801, respectively (see Note 3 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 $595,711 for the period (see Note 4 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 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $52,160,625 and $53,065,000, respectively (see Note 6 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and average daily balance during the period for which the loan was outstanding amounted to $5,338,000. The weighted average interest rate was 5.8%. (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $1,680,852,555. Net unrealized appreciation aggregated $139,551,368, of which $203,524,257 related to appreciated investment securities and $63,972,889 related to depreciated investment securities. The fund hereby designates approximately $169,000 as a capital gain dividend for the purpose of the dividend paid deduction. ELECTRONICS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 1,820,403,923 (cost $1,675,202,743) - See accompanying schedule Receivable for investments sold 72,178,225 Receivable for fund shares sold 21,475,150 Dividends receivable 126,747 Interest receivable 880,097 Redemption fees receivable 60,090 Other receivables 30,978 TOTAL ASSETS 1,915,155,210 LIABILITIES Payable for investments purchased $ 42,035,482 Payable for fund shares redeemed 73,834,256 Accrued management fee 995,677 Other payables and accrued expenses 1,208,282 Collateral on securities loaned, 53,065,000 at value TOTAL LIABILITIES 171,138,697 NET ASSETS $ 1,744,016,513 Net Assets consist of: Paid in capital $ 1,415,316,374 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 183,498,959 Net unrealized appreciation (depreciation) on investments 145,201,180 NET ASSETS, for 45,957,428 $ 1,744,016,513 shares outstanding NET ASSET VALUE and redemption price per share ($1,744,016,513 (divided by) 45,957,428 shares) $37.95 Maximum offering price per share (100/97.00 of $37.95) $39.12
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 2,114,290 Dividends Interest (including income on securities loaned of $330,076) 7,700,604 TOTAL INCOME 9,814,894 EXPENSES Management fee $ 7,859,173 Transfer agent fees 7,986,832 Accounting and security lending fees 813,448 Non-interested trustees' compensation 7,215 Custodian fees and expenses 60,669 Registration fees 396,388 Audit 81,957 Legal 7,397 Interest 853 Miscellaneous 36,268 Total expenses before reductions 17,250,200 Expense reductions (471,050 16,779,150 ) NET INVESTMENT INCOME (LOSS) (6,964,256 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including 272,104,613 realized gain (loss) of $8,239,809 on sale of investments in affiliated issuers) Foreign currency transactions (741 272,103,872 ) Change in net unrealized appreciation (depreciation) on investment securities 64,022,840 NET GAIN (LOSS) 336,126,712 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 329,162,456 OTHER INFORMATION $ 9,021,074 Sales charges paid to FDC Deferred sales charges withheld $ 9,923 by FDC Exchange fees withheld by FSC $ 431,003 Expense reductions $ 436,181 Directed brokerage arrangements Custodian interest credits 24,246 Transfer agent interest credits 10,623 $ 471,050
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ (6,964,256) $ (2,596,453) Net investment income (loss) Net realized 272,103,872 270,475,690 gain (loss) Change in 64,022,840 60,817,847 net unrealized appreciation (depreciation ) NET INCREASE 329,162,456 328,697,084 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to - (151,485,297) shareholders from net realized gains Share 2,439,060,498 2,894,540,424 transactions Net proceeds from sales of shares Reinvestmen - 148,005,751 t of distributions Cost of (2,163,322,518) (2,308,922,665) shares redeemed Paid in 5,754,283 6,093,960 capital portion of redemption fees NET INCREASE 281,492,263 739,717,470 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 610,654,719 916,929,257 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 1,133,361,794 216,432,537 period End of period $ 1,774,016,513 $ 1,133,361,794 OTHER INFORMATION Shares Sold 73,288,709 99,523,034 Issued in - 6,026,277 reinvestment of distributions Redeemed (67,555,816) (76,257,043) Net increase 5,732,893 29,292,268 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 28.18 $ 19.80 $ 17.67 $ 14.28 $ 11.81 value, beginning of period Income from Investment Operations Net (.17) (.08) (.18) (.09) (.05) investment income (loss) Net realized 9.80 13.51 2.11 6.09 2.33 and unrealized gain (loss) Total from 9.63 13.43 1.93 6.00 2.28 investment operations Less Distributions From net - (5.25) - (2.75) - realized gain Redemption .14 .20 .20 .14 .19 fees added to paid in capital Net asset $ 37.95 $ 28.18 $ 19.80 $ 17.67 $ 14.28 value, end of period TOTAL 34.67% 72.75% 12.05% 46.24% 20.91% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 1,744,017 $ 1,133,362 $ 216,433 $ 110,993 $ 48,027 end of period (000 omitted) Ratio of 1.33% 1.25% 1.72% 1.67% 1.69% A expenses to average net assets Ratio of 1.29% E 1.22% E 1.71% E 1.67% 1.69% A expenses to average net assets after expense reductions Ratio of net (.54)% (.28)% (.98)% (.52)% (.50)% investment A income (loss) to average net assets Portfolio 341% 366% 205% 163% 293% A turnover rate Average $ .0421 commission rate F
A ANNUALIZED A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D 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 8 OF NOTES TO FINANCIAL STATEMENTS). 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.
SOFTWARE AND COMPUTER SERVICES PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS SOFTWARE AND COMPUTER SERVICES 16.14% 162.00% 364.43% SOFTWARE AND COMPUTER SERVICES 12.66% 154.14% 350.50% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS SOFTWARE AND COMPUTER SERVICES 16.14% 21.24% 16.60% SOFTWARE AND COMPUTER SERVICES 12.66% 20.51% 16.24% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9861.86 10289.00 1987/04/30 10029.50 10197.43 1987/05/31 10075.74 10286.15 1987/06/30 9723.12 10805.60 1987/07/31 9694.22 11353.44 1987/08/31 10376.34 11776.92 1987/09/30 10486.17 11519.01 1987/10/31 7711.44 9037.81 1987/11/30 6977.29 8293.10 1987/12/31 8002.94 8924.20 1988/01/31 7771.67 9299.91 1988/02/29 8410.69 9733.29 1988/03/31 8483.72 9432.53 1988/04/30 8739.33 9537.23 1988/05/31 8501.98 9620.20 1988/06/30 9171.43 10061.77 1988/07/31 8714.98 10023.54 1988/08/31 8112.48 9682.74 1988/09/30 8635.87 10095.22 1988/10/31 8179.43 10375.87 1988/11/30 8057.71 10227.49 1988/12/31 8727.16 10406.47 1989/01/31 9378.35 11168.23 1989/02/28 8958.42 10890.14 1989/03/31 8739.33 11143.88 1989/04/30 9585.27 11722.25 1989/05/31 9932.16 12197.00 1989/06/30 8948.51 12127.48 1989/07/31 8684.39 13222.59 1989/08/31 9080.57 13481.75 1989/09/30 9262.93 13426.47 1989/10/31 9457.88 13114.98 1989/11/30 9734.57 13382.52 1989/12/31 9778.71 13703.71 1990/01/31 9431.08 12784.19 1990/02/28 9675.71 12949.10 1990/03/31 10061.97 13292.25 1990/04/30 10029.78 12959.95 1990/05/31 11291.55 14223.54 1990/06/30 11555.49 14126.82 1990/07/31 10499.72 14081.62 1990/08/31 9031.95 12808.64 1990/09/30 7995.50 12184.86 1990/10/31 8156.44 12132.46 1990/11/30 9205.77 12916.22 1990/12/31 9862.40 13276.58 1991/01/31 11310.86 13855.44 1991/02/28 12134.87 14846.11 1991/03/31 12823.70 15205.38 1991/04/30 12727.13 15241.87 1991/05/31 12958.88 15900.32 1991/06/30 12009.09 15172.09 1991/07/31 12746.80 15879.11 1991/08/31 13782.44 16255.44 1991/09/30 13328.46 15983.98 1991/10/31 13995.24 16198.16 1991/11/30 12463.07 15545.38 1991/12/31 14383.80 17323.77 1992/01/31 16692.58 17001.55 1992/02/29 17194.17 17222.57 1992/03/31 16368.03 16886.73 1992/04/30 15954.95 17383.20 1992/05/31 16205.75 17468.37 1992/06/30 15327.97 17208.09 1992/07/31 16412.28 17911.90 1992/08/31 15187.82 17544.71 1992/09/30 16286.89 17751.74 1992/10/31 17599.87 17813.87 1992/11/30 19134.14 18421.32 1992/12/31 19495.58 18647.90 1993/01/31 20498.76 18804.55 1993/02/28 20373.36 19060.29 1993/03/31 20808.56 19462.46 1993/04/30 20458.37 18991.47 1993/05/31 22765.77 19500.44 1993/06/30 23940.29 19556.99 1993/07/31 23215.59 19478.76 1993/08/31 24781.62 20217.01 1993/09/30 25281.42 20061.34 1993/10/31 25223.11 20476.61 1993/11/30 24598.36 20282.08 1993/12/31 25876.65 20527.49 1994/01/31 26778.34 21225.43 1994/02/28 27135.26 20650.22 1994/03/31 24223.55 19749.87 1994/04/30 24348.87 20002.67 1994/05/31 21912.08 20330.71 1994/06/30 19989.30 19832.61 1994/07/31 20969.73 20483.12 1994/08/31 23244.70 21322.93 1994/09/30 24301.28 20800.52 1994/10/31 25795.71 21268.53 1994/11/30 25205.55 20493.93 1994/12/31 25976.57 20797.85 1995/01/31 25548.23 21337.14 1995/02/28 27670.90 22168.65 1995/03/31 29251.01 22822.85 1995/04/30 30164.80 23494.98 1995/05/31 30983.41 24434.07 1995/06/30 33724.80 25001.68 1995/07/31 35761.81 25830.73 1995/08/31 36009.29 25895.57 1995/09/30 37494.21 26988.36 1995/10/31 37941.59 26892.01 1995/11/30 39017.21 28072.57 1995/12/31 37994.43 28613.25 1996/01/31 36537.22 29587.24 1996/02/29 38787.32 29861.52 1996/03/31 37801.56 30149.08 1996/04/30 41607.18 30593.48 1996/05/31 43057.94 31382.49 1996/06/30 40909.48 31502.05 1996/07/31 37764.30 30110.29 1996/08/31 38550.59 30745.32 1996/09/30 43589.52 32475.67 1996/10/31 43744.57 33371.34 1996/11/30 47210.91 35893.88 1996/12/31 46263.92 35182.83 1997/01/31 49977.17 37381.05 1997/02/28 45061.20 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Software and Computer Services Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $45,050 - a 350.50% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Microsoft Corp. 7.5 Electronics for Imaging, Inc. 6.8 Dell Computer Corp. 4.6 Parametric Technology Corp. 4.4 Adaptec, Inc. 4.2 SunGard Data Systems, Inc. 3.8 Baan Co. NV 3.4 BMC Software, Inc. 3.2 Teradyne, Inc. 3.1 Scopus Technology, Inc. 3.0 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Row: 1, Col: 1, Value: 39.0 Row: 1, Col: 2, Value: 4.7 Row: 1, Col: 3, Value: 5.2 Row: 1, Col: 4, Value: 5.3 Row: 1, Col: 5, Value: 5.7 Row: 1, Col: 6, Value: 40.1 Prepackaged Computer Software 40.1% CAD/CAM/CAE 5.7% Computer Storage Devices 5.3% Computer Services 5.2% Mini & Micro Computers 4.7% All Others 39.0% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS SOFTWARE AND COMPUTER SERVICES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Erin Sullivan became Portfolio Manager of Fidelity Select Software and Computer Services Portfolio on January 7, 1997. Q. HOW DID THE FUND PERFORM, ERIN? A. For the 12-month period ending February 28, 1997, the portfolio returned 16.14%, compared to a 26.16% increase in the Standard & Poor's 500 Index. Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE OVER THE PAST YEAR AND HOW DID IT AFFECT THE FUND'S PERFORMANCE? A. The fund's returns were flat for the first half of the period, with all of its one-year performance coming in the second half after the technology sector rebounded from a late spring correction. On the whole, I'd say the past year was a very difficult period for many software companies, primarily because of the competitive pressures they faced. A few companies did well, with PC software leader Microsoft, the fund's largest holding at the end of the period, doubling during the past year and up close to 60% in the past six months alone. By and large though, the software segment didn't perform as well as many of the other segments of the broader technology sector. As an example, the Standard & Poor's Computer Software Index was up 47% on a market capitalization-weighted basis during the period with Microsoft, which makes up the bulk of the index, included, but up only about 6% without Microsoft. Q. WHY SUCH A DISPARITY? A. Microsoft is a dominant company that has been very successful. Based on the features it includes in a new software product, for example, Microsoft can have a major impact on its competitors. For instance, it announced recently that it would soon be including - or "bundling" - in its products features similar to those found in products sold by Citrix Systems. After the announcement, Citrix's stock dropped by more than 70% in a matter of days, a pretty good example of Microsoft's influence in the industry. Q. GIVEN THIS ENVIRONMENT, WHERE DOES ONE FIND INVESTMENT OPPORTUNITIES? A. One area of opportunity is companies that have staked out good niches for themselves in places where Microsoft isn't. The "help desk" companies - those that sell software to improve customer service and sales automation - are good examples. Scopus, whose stock almost doubled since the last report to you, as well as Remedy fall into this category. Also doing well were companies that provide enterprise-wide or client-server software, including PeopleSoft and Baan, a Dutch company up about 40% over the last six months. Q. WHAT WERE THE DISAPPOINTMENTS OVER THE PAST SIX MONTHS? A. Other than the overall competitive pressures affecting many of the smaller companies within this sector, I'd point to BMC, which makes mainframe software, as a negative for the fund. One of the fund's top holdings at the end of the period, its stock went down, largely as a result of disappointing earnings during one of its quarters. Q. HAVE YOU MADE ANY SIGNIFICANT CHANGES TO THE FUND'S HOLDINGS SINCE TAKING OVER IN EARLY JANUARY? A. I added more Microsoft to the fund because I felt that its business fundamentals - meaning its prospects for earnings and growth - were very strong, it has a dominant position in its market and its Windows NT operating system appears to be selling well. I also added to our holdings in Parametric, a developer of automated design and manufacturing software for the automobile and other industries. I liked its dominant market position, high operating margins and upcoming products. Q. WHAT'S YOUR OUTLOOK FOR THE FUTURE? A. I think it will continue to be a very competitive sector, particularly for the smaller companies that don't have a well-defined niche. However, despite the downturn among technology stocks in February, I don't have the fund positioned defensively. I believe stock prices follow earnings growth, and I'll continue to pick stocks for the long term based on earnings outlook, as well as product pipelines and management quality. 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 February 28, 1997, more than $389 million MANAGER: Erin Sullivan, since January 1997; manager, Fidelity Select Retailing Portfolio, 1995-January 1997; equity analyst, medical technology and hospital supply industries, 1993-1995; analyst, initial public offerings, 1991-1992; joined Fidelity in 1991 (checkmark) SOFTWARE AND COMPUTER SERVICES PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 85.7% SHARES VALUE (NOTE 1) COMMUNICATIONS EQUIPMENT - 2.5% TELEPHONE EQUIPMENT - 2.5% Ascend Communications, Inc. 10,000 $ 522,500 DSC Communications Corp. (a) 420,000 8,820,000 Pairgain Technologies, Inc. (a) 30,000 886,875 10,229,375 COMPUTER SERVICES & SOFTWARE - 55.1% CAD/CAM/CAE - 5.7% Forte Software, Inc. (a) 215,800 5,502,900 New Dimension Software Ltd. (a) 7,500 100,313 Parametric Technology Corp. (a) 325,000 18,321,875 23,925,088 COMPUTER & SOFTWARE STORES - 1.2% CompUSA, Inc. (a) 238,800 4,776,000 COMPUTER SERVICES - 5.2% American Management Systems, Inc. (a) 11,400 199,500 Equifax, Inc. 50,000 1,487,500 Metro Information Services, Inc. 1,000 18,375 Midway Games, Inc. (a) 158,700 2,479,682 Paychex, Inc. 33,750 1,468,125 SunGard Data Systems, Inc. (a) 315,100 15,991,325 21,644,507 DATA PROCESSING - 2.4% Affiliated Computer Services, Inc. Class A (a) 7,700 158,813 Ceridian Corp. (a) 30,000 1,173,750 First Data Corp. 80,000 2,930,000 Fiserv, Inc. (a) 180,000 5,895,000 10,157,563 ELECTRONIC INFORMATION RETRIEVAL - 0.5% CUC International, Inc. (a) 80,000 1,910,000 E Trade Group, Inc. 10,000 240,000 2,150,000 PREPACKAGED COMPUTER SOFTWARE - 40.1% Arbor Software Corp. 50,000 1,643,750 Aspect Development, Inc. (a) 2,000 49,500 Aurum Software, Inc. 500 9,188 BMC Software, Inc. (a) 309,800 13,263,313 Boole & Babbage, Inc. (a) 228,375 5,994,844 Baan Co. NV (a) 315,000 13,978,125 Business Objects SA sponsored ADR (a) 559,900 6,543,831 Cadence Design Systems, Inc. (a) 170,000 6,268,750 Eidos PLC sponsored ADR 200,000 3,300,000 Electronics for Imaging, Inc. (a) 741,000 28,528,500 General Magic, Inc. (a) 89,400 106,163 Infinium Software, Inc. 50,000 350,000 I2 Technologies, Inc. 10,000 291,250 Legato Systems, Inc. 20,000 405,000 Maxis, Inc. (a) 100,000 1,037,500 McAfee Associates, Inc. 6,500 298,188 Metrowerks, Inc. (a) 108,300 926,148 Microsoft Corp. (a) 320,000 31,200,000 Openvision Technologies, Inc. (a) 62,000 682,000 Oracle Systems Corp. (a) 127,800 5,016,150 PeopleSoft, Inc. (a) 286,000 11,404,250 Platinum Technology, Inc. 20,000 297,500 Policy Management Systems Corp. (a) 139,200 5,985,600 Rational Software Corp. (a) 52,700 1,363,613 Red Brick Systems, Inc. 10,000 197,500 Remedy Corp. (a) 50,400 1,934,100 SHARES VALUE (NOTE 1) Restrac, Inc. 110,000 $ 412,500 Scopus Technology, Inc. (a) 564,900 12,357,188 Spectrum Holobyte, Inc. (a) 302,800 2,498,100 Sybase, Inc. (a) 70,200 1,149,525 Symantec Corp. (a) 10,000 156,250 Trusted Information Systems, Inc. (a) 600 8,925 Vantive Corp. (a) 389,100 8,657,475 Veritas Software Corp. (a) 20,000 635,000 166,949,726 TOTAL COMPUTER SERVICES & SOFTWARE 229,602,884 COMPUTERS & OFFICE EQUIPMENT - 17.7% COMPUTER EQUIPMENT - WHOLESALE - 1.8% CDW Computer Centers, Inc. 10,000 525,625 Ingram Micro, Inc. Class A (a) 12,000 273,000 Tech Data Corp. (a) 275,400 6,609,600 7,408,225 COMPUTER PERIPHERALS - 3.0% Applied Magnetics Corp. (a) 200,000 7,775,000 Western Digital Corp. (a) 80,000 4,720,000 12,495,000 COMPUTER STORAGE DEVICES - 5.3% Adaptec, Inc. (a) 460,800 17,539,200 Quantum Corp. (a) 24,700 981,825 Seagate Technology (a) 75,000 3,543,750 22,064,775 COMPUTERS & OFFICE EQUIPMENT - 0.1% MICROS Systems, Inc. (a) 10,000 386,250 ELECTRONIC COMPUTERS - 1.4% Auspex Systems, Inc. (a) 250,000 2,906,250 Gateway 2000, Inc. (a) 10,000 587,500 Wang Laboratories, Inc. (a) 110,000 2,413,125 5,906,875 GRAPHICS WORKSTATIONS - 1.4% Silicon Graphics, Inc. (a) 148,000 3,570,500 Sun Microsystems, Inc. (a) 80,000 2,470,000 6,040,500 MINI & MICRO COMPUTERS - 4.7% Dell Computer Corp. (a) 270,000 19,203,750 Sequent Computer Systems, Inc. (a) 20,000 343,750 19,547,500 TOTAL COMPUTERS & OFFICE EQUIPMENT 73,849,125 ELECTRONIC INSTRUMENTS - 3.1% Teradyne, Inc. (a) 470,000 12,807,500 ELECTRONICS - 2.4% SEMICONDUCTORS - 2.4% Integrated Device Technology, Inc. (a) 147,000 1,617,000 Intel Corp. 10,000 1,418,750 Intel Corp. (warrants) (a) 41,500 4,221,977 LSI Logic Corp. (a) 20,000 690,000 Micro Linear Corp. (a) 20,000 265,000 Micron Technology, Inc. 10,000 375,000 Texas Instruments, Inc. 20,000 1,542,500 10,130,227 LODGING & GAMING - 0.7% RACING & GAMING - 0.7% WMS Industries, Inc. (a) 147,100 2,923,613 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PRINTING - 0.3% COMMERCIAL PRINTING, LITHOGRAPHIC - 0.3% ASM Lithography Holding NV (a) 20,000 $ 1,330,000 RETAIL & WHOLESALE, MISCELLANEOUS - 2.0% RETAIL, GENERAL - 2.0% Office Depot, Inc. (a) 50,000 950,000 Staples, Inc. (a) 332,700 7,194,638 8,144,638 SERVICES - 1.9% ACCOUNTING & BOOKKEEPING SERVICES - 0.2% NCO Group, Inc. 37,000 999,000 MANAGEMENT CONSULTING SERVICES - 1.7% Registry, Inc. 170,000 6,927,500 TOTAL SERVICES 7,926,500 TOTAL COMMON STOCKS (Cost $321,590,445) 356,943,862 CASH EQUIVALENTS - 14.3% Taxable Central Cash Fund (b) (Cost $59,676,806) 59,676,806 59,676,806 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $381,267,251) $ 416,620,668 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $1,057,054,943 and $1,029,695,461, respectively (see Note 3 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 $86,634 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the interfund lending program as a lender. The maximum loan and 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 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $32,589,625 and $34,517,400, respectively (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $381,507,021. Net unrealized appreciation aggregated $35,113,647, of which $58,121,276 related to appreciated investment securities and $23,007,629 related to depreciated investment securities. The fund hereby designates approximately $12,796,000 as a capital gain dividend for the purpose of the dividend paid deduction. The fund intends to elect to defer to its fiscal year ending February 28, 1998 approximately $2,232,000 of losses recognized during the period November 1, 1996 to February 28, 1997. A total of 4% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. SOFTWARE AND COMPUTER SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 416,620,668 (cost $381,267,251) - See accompanying schedule Cash 582,463 Receivable for investments sold 13,978,226 Receivable for fund shares sold 1,652,951 Dividends receivable 6,625 Interest receivable 246,196 Redemption fees receivable 1,765 Other receivables 95,918 TOTAL ASSETS 433,184,812 LIABILITIES Payable for investments purchased $ 4,826,784 Payable for fund shares redeemed 3,554,152 Accrued management fee 211,187 Other payables and accrued expenses 376,433 Collateral on securities loaned, 34,517,400 at value TOTAL LIABILITIES 43,485,956 NET ASSETS $ 389,698,856 Net Assets consist of: Paid in capital $ 318,889,040 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 35,456,399 Net unrealized appreciation (depreciation) on investments 35,353,417 NET ASSETS, for 10,100,162 $ 389,698,856 shares outstanding NET ASSET VALUE and redemption price per share ($389,698,856 (divided by) 10,100,162 shares) $38.58 Maximum offering price per share (100/97.00 of $38.58) $39.77
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 571,975 Dividends Interest (including income on securities loaned of $260,631) 3,009,667 TOTAL INCOME 3,581,642 EXPENSES Management fee $ 2,546,782 Transfer agent fees 3,288,164 Accounting and security lending fees 425,626 Non-interested trustees' compensation 2,327 Custodian fees and expenses 22,682 Registration fees 123,547 Audit 43,292 Legal 3,194 Miscellaneous 13,810 Total expenses before reductions 6,469,424 Expense reductions (90,683 6,378,741 ) NET INVESTMENT INCOME (LOSS) (2,797,099 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 61,215,387 Foreign currency transactions (4,419 61,210,968 ) Change in net unrealized appreciation (depreciation) on investment securities (9,105,850 ) NET GAIN (LOSS) 52,105,118 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 49,308,019 OTHER INFORMATION $ 1,921,006 Sales charges paid to FDC Deferred sales charges withheld $ 5,034 by FDC Exchange fees withheld by FSC $ 156,188 Expense reductions $ 86,927 Directed brokerage arrangements Custodian interest credits 3,171 Transfer agent interest credits 585 $ 90,683
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ (2,797,099 $ (1,677,670 Net ) ) investment income (loss) Net realized 61,210,968 78,787,493 gain (loss) Change in (9,105,850 11,995,871 net ) unrealized appreciation (depreciation ) NET INCREASE 49,308,019 89,105,694 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (32,120,784 (42,462,985 shareholders ) ) from net realized gains Share 568,629,736 441,404,241 transactions Net proceeds from sales of shares Reinvestmen 31,720,922 41,961,776 t of distributions Cost of (566,265,440 (429,413,822 shares ) ) redeemed Paid in 793,106 593,307 capital portion of redemption fees NET INCREASE 34,878,324 54,545,502 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 52,065,559 101,188,211 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 337,633,297 236,445,086 period End of period $ 389,698,856 $ 337,633,297 OTHER INFORMATION Shares Sold 14,976,546 12,357,143 Issued in 840,597 1,146,186 reinvestment of distributions Redeemed (15,044,201 (12,309,713 ) ) Net increase 772,942 1,193,616 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 36.20 $ 29.07 $ 28.89 $ 27.62 $ 21.63 value, beginning of period Income from Investment Operations Net (.25) (.19) (.26) (.34) (.07) E investment income (loss) Net realized 5.87 11.85 .67 7.92 5.88 and unrealized gain (loss) Total from 5.62 11.66 .41 7.58 5.81 investment operations Less Distributions From net (3.31) (4.60) (.33) (6.48) - realized gain Redemption .07 .07 .10 .17 .18 fees added to paid in capital Net asset $ 38.58 $ 36.20 $ 29.07 $ 28.89 $ 27.62 value, end of period TOTAL 16.14% 40.17% 1.97% 33.19% 27.69% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 389,699 $ 337,633 $ 236,445 $ 178,034 $ 151,212 end of period (000 omitted) Ratio of 1.54% 1.48% 1.52% 1.57% 1.64% A expenses to average net assets Ratio of 1.51% F 1.47% F 1.50% F 1.57% 1.64% A expenses to average net assets after expense reductions Ratio of net (.66)% (.54)% (1.01)% (1.19)% (.37)% investment A income (loss) to average net assets Portfolio 279% 183% 164% 376% 402% A turnover rate Average $ .0427 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 8 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 8 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. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS TECHNOLOGY 12.64% 154.48% 258.38% TECHNOLOGY 9.26% 146.84% 247.63% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS TECHNOLOGY 12.64% 20.54% 13.61% TECHNOLOGY 9.26% 19.81% 13.27% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9149.23 10289.00 1987/04/30 9413.75 10197.43 1987/05/31 9627.53 10286.15 1987/06/30 9341.28 10805.60 1987/07/31 9435.49 11353.44 1987/08/31 9989.88 11776.92 1987/09/30 10040.61 11519.01 1987/10/31 6507.73 9037.81 1987/11/30 5659.84 8293.10 1987/12/31 6479.71 8924.20 1988/01/31 6130.28 9299.91 1988/02/29 6737.99 9733.29 1988/03/31 6665.82 9432.53 1988/04/30 6920.30 9537.23 1988/05/31 6730.39 9620.20 1988/06/30 7349.50 10061.77 1988/07/31 6802.56 10023.54 1988/08/31 6175.86 9682.74 1988/09/30 6342.98 10095.22 1988/10/31 6080.90 10375.87 1988/11/30 5898.59 10227.49 1988/12/31 6304.99 10406.47 1989/01/31 6813.95 11168.23 1989/02/28 6627.84 10890.14 1989/03/31 6506.30 11143.88 1989/04/30 6977.27 11722.25 1989/05/31 7547.00 12197.00 1989/06/30 6878.52 12127.48 1989/07/31 7000.06 13222.59 1989/08/31 7151.99 13481.75 1989/09/30 7322.91 13426.47 1989/10/31 7269.73 13114.98 1989/11/30 7288.72 13382.52 1989/12/31 7376.08 13703.71 1990/01/31 7224.16 12784.19 1990/02/28 7630.56 12949.10 1990/03/31 7987.59 13292.25 1990/04/30 7626.76 12959.95 1990/05/31 8610.49 14223.54 1990/06/30 8686.46 14126.82 1990/07/31 8223.08 14081.62 1990/08/31 7102.61 12808.64 1990/09/30 6498.70 12184.86 1990/10/31 6684.81 12132.46 1990/11/30 7687.53 12916.22 1990/12/31 8150.91 13276.58 1991/01/31 9525.86 13855.44 1991/02/28 10008.23 14846.11 1991/03/31 10809.65 15205.38 1991/04/30 10277.90 15241.87 1991/05/31 10847.63 15900.32 1991/06/30 9795.28 15172.09 1991/07/31 10879.83 15879.11 1991/08/31 11414.46 16255.44 1991/09/30 11471.75 15983.98 1991/10/31 11781.07 16198.16 1991/11/30 11395.37 15545.38 1991/12/31 12957.62 17323.77 1992/01/31 13450.41 17001.55 1992/02/29 13660.51 17222.57 1992/03/31 12575.61 16886.73 1992/04/30 12392.25 17383.20 1992/05/31 12514.49 17468.37 1992/06/30 11619.82 17208.09 1992/07/31 12211.86 17911.90 1992/08/31 11586.47 17544.71 1992/09/30 12153.49 17751.74 1992/10/31 12870.61 17813.87 1992/11/30 13912.93 18421.32 1992/12/31 14088.04 18647.90 1993/01/31 14517.48 18804.55 1993/02/28 14434.09 19060.29 1993/03/31 14621.71 19462.46 1993/04/30 14579.79 18991.47 1993/05/31 16050.68 19500.44 1993/06/30 16834.54 19556.99 1993/07/31 16387.27 19478.76 1993/08/31 17263.35 20217.01 1993/09/30 17530.79 20061.34 1993/10/31 17184.97 20476.61 1993/11/30 17018.97 20282.08 1993/12/31 18124.28 20527.49 1994/01/31 19036.81 21225.43 1994/02/28 19574.97 20650.22 1994/03/31 18915.14 19749.87 1994/04/30 18534.17 20002.67 1994/05/31 18563.39 20330.71 1994/06/30 16990.47 19832.61 1994/07/31 17647.88 20483.12 1994/08/31 19508.11 21322.93 1994/09/30 19410.72 20800.52 1994/10/31 20136.31 21268.53 1994/11/30 19858.73 20493.93 1994/12/31 20141.18 20797.85 1995/01/31 19357.15 21337.14 1995/02/28 20477.19 22168.65 1995/03/31 21723.84 22822.85 1995/04/30 23361.19 23494.98 1995/05/31 24264.91 24434.07 1995/06/30 26519.19 25001.68 1995/07/31 29200.23 25830.73 1995/08/31 30103.95 25895.57 1995/09/30 31489.65 26988.36 1995/10/31 31017.71 26892.01 1995/11/30 30857.05 28072.57 1995/12/31 28964.39 28613.25 1996/01/31 29257.93 29587.24 1996/02/29 30861.10 29861.52 1996/03/31 28473.28 30149.08 1996/04/30 30925.31 30593.48 1996/05/31 31764.06 31382.49 1996/06/30 29504.57 31502.05 1996/07/31 26354.98 30110.29 1996/08/31 27376.32 30745.32 1996/09/30 30885.37 32475.67 1996/10/31 30662.85 33371.34 1996/11/30 34445.78 35893.88 1996/12/31 33546.03 35182.83 1997/01/31 37516.37 37381.05 1997/02/28 34763.04 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Technology Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $34,763 - a 247.63% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Applied Materials, Inc. 6.8 Electronic Arts, Inc. 5.0 ASM Lithography Holding NV 4.4 Lattice Semiconductor Corp. 3.6 Altera Corp. 3.3 Ciena Corp. 3.2 Ascend Communications, Inc. 3.0 Teradyne, Inc. 2.9 Texas Instruments, Inc. 2.6 Tencor Instruments 2.1 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Row: 1, Col: 1, Value: 50.0 Row: 1, Col: 2, Value: 4.0 Row: 1, Col: 3, Value: 4.4 Row: 1, Col: 4, Value: 8.699999999999999 Row: 1, Col: 5, Value: 9.300000000000001 Row: 1, Col: 6, Value: 23.6 Semiconductors 23.6% Semiconductor Capital Equipment 9.3% Prepackaged Computer Software 8.7% Commercial Printing, Lithographic 4.4% Telephone Equipment 4.0% All Others 50.0% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS TECHNOLOGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Adam Hetnarski, Portfolio Manager of Fidelity Select Technology Portfolio Q. HOW DID THE FUND PERFORM, ADAM? A. The first six months were very difficult, while the past six months of the period experienced excellent performance. During the 12 months ending February 28, 1997, the fund was up 12.64%, compared to a rise of 26.16% by the Standard & Poor's 500 Index over the same time. Q. WHAT FACTORS AFFECTED THE FUND'S RETURNS OVER THE PAST 12 MONTHS? A. Shareholders might want to look at the past year as two rather distinct six-month periods. During the first half of the year, the fund suffered because of a market correction in technology stocks in May and June. This downturn had a major impact on the fund's large holdings in networking companies as well as its overall performance, with the fund's net asset value actually dropping over the period's first six months. Since the summer, the fund has rebounded thanks to strong stock selection and an emphasis on certain top-performing industries of the technology market, including semiconductor capital equipment companies and proprietary chip manufacturers. Relative to the S&P 500, though, the fund's 27% appreciation over the past six months could not offset the disappointing first half. Q. YOU MENTIONED SEMICONDUCTOR CAPITAL EQUIPMENT COMPANIES AND PROPRIETARY CHIP MANUFACTURERS AS TOP-PERFORMING SECTORS. COULD YOU GO INTO MORE DETAIL? A. Sure. Among semiconductor capital equipment companies, four of the fund's top holdings - Applied Materials, Teradyne, Tencor Instruments and Novellus - took off over the past six months, with their stocks more than doubling in price in some cases. These companies benefited from three factors: their customers - mostly communications and computer companies - had reduced inventories, thereby creating new demand for their products; their business fundamentals - as seen in their balance sheets and income statements - were improving; and they had proprietary technologies their competitors would have difficulty matching. Q. AND THE PROPRIETARY CHIP COMPANIES? WHAT HAPPENED THERE? A. Intel, another of the fund's larger holdings, chose not to make price cuts late in the year, a departure from its recent history. As a result, its margins were great, its earnings were huge and the stock was a home run, up over 70% since my previous report to shareholders. Lattice Semiconductor and Altera Corp., whose stocks were either flat or down during the first half of the period, had tremendous gains over the past six months. Altera has done well with its proprietary programmable logic devices, seeing enormous unit volume growth. Q. WHAT WERE THE DISAPPOINTMENTS, ADAM? A. The first half of the period was a real disappointment, given the market correction in technology stocks in the late spring. But technology had a great rally before the correction, and the sector has bounced back since then. As far as the fund's larger holdings during the past six months, neither Electronic Arts, the video and computer game company, nor Ascend Communications, the networking company, did as well as I hoped. I continued to believe in the business prospects of these companies, however, and they remained among the fund's biggest investments as of the end of the period. Q. THE FUND HAD ABOUT 18% OF ITS INVESTMENTS IN CASH AND CASH EQUIVALENTS AT THE PERIOD'S END. THAT SEEMS HIGH . . . A. It certainly is high for this fund, and it's not typical of my investment approach in general or how I manage Select Technology. Generally speaking, the fund will hold 5%-10% in cash week to week. Occasionally, I may hold more cash than that if I'm waiting to invest in a specific opportunity I've been following, or if I see an impending event that might drive the technology market down. These are rare occasions, though. As a rule I try to have the fund as fully invested as possible in the market, and I see the cash position at the end of the period as an aberration. Q. WHAT'S YOUR OUTLOOK FOR THE FUTURE? A. I think we'll exit 1997 on a more positive note than we did leaving 1996, with the additional software being written for 32-bit PC platforms and video-capable PCs driving demand on both the hardware and software sides. I also see good demand for networking products for corporate infrastructures. On the whole, I'm fairly positive about the opportunities ahead for the technology 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: 064 TRADING SYMBOL: FSPTX SIZE: as of February 28, 1997, more than $478 million MANAGER: Adam Hetnarski, since 1996; joined Fidelity in 1991 (checkmark) TECHNOLOGY PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 81.9% SHARES VALUE (NOTE 1) AIR TRANSPORTATION - 1.8% AIR TRANSPORT, MAJOR NATIONAL - 1.3% America West Holding Corp. Class B (a) 132,500 $ 1,838,424 AMR Corp. (a) 60,000 4,717,500 6,555,924 AIR TRANSPORTATION, REGIONAL - 0.5% Comair Holdings, Inc. 112,200 2,314,125 TOTAL AIR TRANSPORTATION 8,870,049 BANKS - 0.9% NATIONAL COMMERCIAL BANKS - 0.9% Capital One Financial Corp. 109,800 4,364,550 COMMUNICATIONS EQUIPMENT - 4.2% DATACOMMUNICATIONS EQUIPMENT - 0.2% Amati Communications Corp. (a) 100 1,388 Cisco Systems, Inc. (a) 4,900 272,563 Dynatech Corp. (a) 100 2,800 Level One Communications, Inc. 21,700 713,388 3Com Corp. (a) 100 3,311 993,450 TELEPHONE EQUIPMENT - 4.0% Ascend Communications, Inc. (a) 291,500 15,230,875 DSC Communications Corp. (a) 100 2,100 Ericsson (L.M.) Telephone Co. Class B ADR 31,700 1,000,036 Nokia Corp. AB sponsored ADR 34,600 2,024,100 Pairgain Technologies, Inc. (a) 31,900 943,044 U.S. Robotics Corp. 100 5,581 Yurie Systems, Inc. 55,500 707,625 19,913,361 TOTAL COMMUNICATIONS EQUIPMENT 20,906,811 COMPUTER SERVICES & SOFTWARE - 13.9% CAD/CAM/CAE - 0.0% Parametric Technology Corp. (a) 100 5,638 COMPUTER FACILITIES MANAGEMENT - 0.1% Alternative Resources Corp. (a) 40,000 615,000 COMPUTER SERVICES - 2.6% America Online, Inc. (a) 52,400 1,965,000 Clarify, Inc. (a) 21,800 558,625 HBO & Co. 1,600 92,200 Midway Games, Inc. (a)(c) 276,800 4,325,000 SunGard Data Systems, Inc. (a) 33,400 1,695,050 Viasoft, Inc. (a) 122,800 4,420,800 13,056,675 CUSTOM COMP PROGRAMMING SERVICES - 2.5% Keane, Inc. (a) 120,200 4,237,050 Softdesk, Inc. (a)(c) 577,200 8,008,650 Walsh International, Inc. 34,900 292,288 12,537,988 PREPACKAGED COMPUTER SOFTWARE - 8.7% Activision, Inc. (a) 361,000 4,828,375 Autodesk, Inc. 100 3,388 Baan Co. NV (a) 100 4,438 Cadence Design Systems, Inc. (a) 7,000 258,125 Eagle Point Software Corp. (a) 80,200 310,775 Electronic Arts, Inc. (a) 794,100 24,815,625 IONA Technologies PLC sponsored ADR 500 10,063 SHARES VALUE (NOTE 1) Lycos, Inc. 94,900 $ 1,779,375 Maxis, Inc. (a) 100 1,038 Microsoft Corp. (a) 2,000 195,000 Netscape Communications Corp. (a) 100 2,913 Oracle Systems Corp. (a) 150 5,888 Peerless Systems Corp. 67,500 1,096,875 Rational Software Corp. (a) 37,700 975,488 Scopus Technology, Inc. (a) 8,250 180,469 Spectrum Holobyte, Inc. (a) 765,500 6,315,375 Symantec Corp. (a) 111,400 1,740,625 Vantive Corp. (a) 7,900 175,775 Yahoo, Inc. 27,900 843,975 43,543,585 TOTAL COMPUTER SERVICES & SOFTWARE 69,758,886 COMPUTERS & OFFICE EQUIPMENT - 3.5% COMPUTER EQUIPMENT - WHOLESALE - 0.0% Ingram Micro, Inc. Class A (a) 100 2,275 COMPUTER PERIPHERALS - 2.9% Applied Magnetics Corp. (a) 59,700 2,320,838 Creative Technology Corp. Ltd. (a) 37,400 461,072 EMC Corp. (a) 193,700 6,973,200 Fore Systems, Inc. (a) 39,100 1,309,850 SCI Systems, Inc. (a) 60,000 3,210,000 Sigma Designs, Inc. (a) 66,300 331,500 Western Digital Corp. (a) 100 5,900 14,612,360 COMPUTER RENTAL & LEASING - 0.2% Comdisco, Inc. 36,850 1,146,956 COMPUTER STORAGE DEVICES - 0.4% Adaptec, Inc. (a) 100 3,806 Quantum Corp. 7,100 282,225 Seagate Technology (a) 34,600 1,634,850 1,920,881 MINI & MICRO COMPUTERS - 0.0% Compaq Computer Corp. (a) 100 7,925 Dell Computer Corp. (a) 100 7,113 15,038 TOTAL COMPUTERS & OFFICE EQUIPMENT 17,697,510 CONSUMER DURABLES - 3.9% MANUFACTURING INDUSTRIES - 0.3% Wireless Telecom Group, Inc. 160,000 1,720,000 PRESSED & BLOWN GLASS - 3.6% Ciena Corp. (c) 404,900 15,892,325 Dupont Photomasks, Inc. (a) 39,100 1,837,700 17,730,025 TOTAL CONSUMER DURABLES 19,450,025 CREDIT & OTHER FINANCE - 0.3% MORTGAGE BANKERS - 0.3% Imperial Credit Industries (a) 60,000 1,447,500 DRUGS & PHARMACEUTICALS - 5.2% BIOTECHNOLOGY - 1.8% Biogen, Inc. (a) 115,400 5,683,450 COR Therapeutics, Inc. (a) 100 1,231 Protein Design Labs, Inc. (a) 43,600 1,635,000 Sepracor, Inc. (a) 70,500 1,700,813 9,020,494 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) DRUGS & PHARMACEUTICALS - CONTINUED COMMERCIAL LABORATORY RESEARCH - 0.6% Integrated Process Equipment Corp. (a) 115,000 $ 2,903,750 Millennium Pharmaceuticals, Inc. 100 1,675 2,905,425 DRUGS - 2.8% Merck & Co., Inc. 54,700 5,032,400 Pfizer, Inc. 50,000 4,581,250 Warner-Lambert Co. 50,000 4,200,000 13,813,650 TOTAL DRUGS & PHARMACEUTICALS 25,739,569 ELECTRONIC INSTRUMENTS - 13.0% ELECTRONIC EQUIPMENT - 3.7% Advantest Corp. (a) 79,200 4,492,776 Credence Systems Corp. (a) 100 2,325 Teradyne, Inc. (a) 523,900 14,276,275 18,771,376 SEMICONDUCTOR CAPITAL EQUIPMENT - 9.3% Applied Materials, Inc. (a) 667,700 33,802,313 Kulicke & Soffa Industries, Inc. (a) 6,200 164,300 Lam Research Corp. (a) 44,500 1,696,563 Novellus System, Inc. (a) 121,800 9,957,150 Silicon Valley Group, Inc. (a) 35,300 754,538 46,374,864 TOTAL ELECTRONIC INSTRUMENTS 65,146,240 ELECTRONICS - 25.6% ELECTRONIC PARTS - WHOLESALE - 0.6% Brightpoint, Inc. (a) 103,200 2,786,400 ELECTRONICS & ELECTRONIC COMPONENTS - 1.3% Photronics, Inc. (a) 167,100 5,764,950 Sipex Corp. 29,100 923,925 6,688,875 PRINTED CIRCUIT BOARDS - 0.1% Elexsys International, Inc. (a) 42,400 715,500 SEMICONDUCTORS - 23.6% Actel Corp. (a) 101,000 1,969,500 Altera Corp. (a) 365,000 16,561,875 Atmel Corp. (a) 79,500 2,971,313 Chips & Technologies, Inc. (a) 100 1,275 Cypress Semiconductor Corp. (a) 100 1,325 Dallas Semiconductor Corp. 50,500 1,313,000 ESS Technology, Inc. 42,600 1,120,913 Etec Systems, Inc. (a) 111,600 4,045,500 Integrated Device Technology, Inc. (a) 52,700 579,700 Integrated Silicon Solution (a) 58,100 530,163 Intel Corp. 75,000 10,640,625 Intel Corp. (warrants) (a) 10,000 1,017,344 LSI Logic Corp. (a) 138,100 4,764,450 Lattice Semiconductor Corp. (a) 374,800 17,896,700 Linear Technology Corp. 117,600 5,350,800 Maxim Integrated Products, Inc. (a) 74,800 3,711,950 Micrel, Inc. (a) 74,700 2,539,800 Micro Linear Corp. (a) 127,300 1,686,725 Microchip Technology, Inc. (a) 15,250 569,969 Micron Technology, Inc. 47,300 1,773,750 Motorola, Inc. 58,400 3,263,100 Speedfam International, Inc. (a) 110,100 4,101,225 Tencor Instruments (a) 267,100 10,700,694 Texas Instruments, Inc. 165,800 12,787,325 SHARES VALUE (NOTE 1) Tokyo Electron Ltd. 82,000 $ 2,878,270 Uniphase Corp. (a) 100 3,275 Unitrode Corp. (a) 58,800 2,146,200 Xilinx, Inc. (a) 5,300 239,163 Zilog, Inc. (a) 123,100 2,908,238 118,074,167 TOTAL ELECTRONICS 128,264,942 ENERGY SERVICES - 0.0% DRILLING - 0.0% Cliffs Drilling Co. (a) 100 4,638 Falcon Drilling, Inc. (a) 100 3,388 8,026 ENGINEERING - 0.3% ARCHITECTS & ENGINEERS - 0.3% EG & G, Inc. 77,900 1,694,325 INDUSTRIAL MACHINERY & EQUIPMENT - 0.7% SPECIAL INDUSTRIAL MACHINERY, - 0.7% PRI Automation, Inc. (a) 74,300 3,668,563 LEISURE DURABLES & TOYS - 0.0% TOYS & GAMES - 0.0% Nintendo Co. Ltd. Ord. 2,500 176,960 LODGING & GAMING - 0.8% RACING & GAMING - 0.8% WMS Industries, Inc. (a) 204,375 4,061,953 MEDICAL EQUIPMENT & SUPPLIES - 0.5% MEDICAL, DENTAL, HOSPITAL EQUIPMENT - WHOLESALE - 0.5% ESC Medical Systems Ltd. (a) 70,000 2,397,500 MEDICAL TECHNOLOGY - 0.0% Medtronic, Inc. 100 6,475 TOTAL MEDICAL EQUIPMENT & SUPPLIES 2,403,975 PACKAGING & CONTAINERS - 0.0% METAL CANS & SHIPPING CONTAINERS - 0.0% Silgan Holdings, Inc. 1,300 33,150 PRINTING - 4.4% COMMERCIAL PRINTING, LITHOGRAPHIC - 4.4% ASM Lithography Holding NV (a) 329,900 21,938,350 RETAIL & WHOLESALE, MISCELLANEOUS - 1.0% BUILDING MATERIALS - RETAIL - 0.5% Home Depot, Inc. (The) 40,000 2,180,000 RETAIL STORES - 0.5% Gadzooks, Inc. (a) 112,000 2,744,000 RETAIL, GENERAL - 0.0% Staples, Inc. (a) 100 2,163 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 4,926,163 SERVICES - 0.2% MANAGEMENT CONSULTING SERVICES - 0.2% Registry, Inc. 18,600 757,950 TELEPHONE SERVICES - 1.7% LCI International, Inc. (a) 20,000 380,000 Tel-Save Holdings, Inc. (a) 40,000 715,000 WorldCom, Inc. (a) 271,000 7,215,375 8,310,375 TOTAL COMMON STOCKS (Cost $398,461,300) 409,625,872 CASH EQUIVALENTS - 18.1% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $90,653,406) 90,653,406 $ 90,653,406 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $489,114,706) $ 500,279,278 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 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 Ciena Corp. $ 4,457,725 $ - $ - $ 15,892,325 Midway Games, Inc. 283,938 - - 4,325,000 Softdesk, Inc. 3,164,378 122,278 - 8,008,650 Target Technologies, Inc. - 441,075 - - Telechips Corp. - - - - Totals $ 7,906,041 $ 563,353 $ - $ 28,225,975 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $2,316,984,876 and $2,376,300,491, respectively (see Note 3 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 $339,803 for the period (see Note 4 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $18,652,763 and $19,378,100, respectively (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $493,247,122. Net unrealized appreciation aggregated $7,032,156, of which $28,627,470 related to appreciated investment securities and $21,595,314 related to depreciated investment securities. The fund hereby designates approximately $32,750,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 13% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. TECHNOLOGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 500,279,278 (cost $489,114,706) - See accompanying schedule Receivable for investments sold 42,820,414 Receivable for fund shares sold 4,423,750 Dividends receivable 41,538 Interest receivable 306,989 Redemption fees receivable 2,504 Other receivables 54,079 TOTAL ASSETS 547,928,552 LIABILITIES Payable to custodian bank $ 151,064 Payable for investments purchased 32,168,532 Payable for fund shares redeemed 17,121,464 Accrued management fee 260,380 Other payables and accrued expenses 404,809 Collateral on securities loaned, 19,378,100 at value TOTAL LIABILITIES 69,484,349 NET ASSETS $ 478,444,203 Net Assets consist of: Paid in capital $ 379,270,691 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 88,008,940 Net unrealized appreciation (depreciation) on investments 11,164,572 NET ASSETS, for 8,291,694 $ 478,444,203 shares outstanding NET ASSET VALUE and redemption price per share ($478,444,203 (divided by) 8,291,694 shares) $57.70 Maximum offering price per share (100/97.00 of $57.70) $59.48
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 757,234 Dividends Interest (including income on securities loaned of $294,362) 2,572,217 TOTAL INCOME 3,329,451 EXPENSES Management fee $ 2,800,144 Transfer agent fees 3,384,527 Accounting and security lending fees 482,779 Non-interested trustees' compensation 2,423 Custodian fees and expenses 60,403 Registration fees 71,854 Audit 47,030 Legal 30,673 Miscellaneous 14,319 Total expenses before reductions 6,894,152 Expense reductions (239,984 6,654,168 ) NET INVESTMENT INCOME (LOSS) (3,324,717 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including 119,124,997 realized gain (loss) of $(88,619) on sales of investments in affiliated issuers) Foreign currency transactions (10,018 119,114,979 ) Change in net unrealized appreciation (depreciation) on: Investment securities (64,794,351 ) Assets and liabilities in 641 (64,793,710 foreign currencies ) NET GAIN (LOSS) 54,321,269 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 50,996,552 OTHER INFORMATION $ 1,543,709 Sales charges paid to FDC Deferred sales charges withheld $ 36,252 by FDC Exchange fees withheld by FSC $ 154,238 Expense reductions $ 225,797 Directed brokerage arrangements Custodian interest credits 12,047 Transfer agent interest credits 2,140 $ 239,984
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ (3,324,717 $ (1,983,084 Net ) ) investment income (loss) Net realized 119,114,979 81,893,509 gain (loss) Change in (64,793,710 45,607,438 net ) unrealized appreciation (depreciation ) NET INCREASE 50,996,552 125,517,863 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (30,475,050 (54,900,757 shareholders ) ) from net realized gains Share 480,116,219 586,067,139 transactions Net proceeds from sales of shares Reinvestmen 29,879,560 53,878,429 t of distributions Cost of (536,349,238 (458,176,007 shares ) ) redeemed Paid in 1,250,125 878,697 capital portion of redemption fees NET INCREASE (25,103,334 182,648,258 (DECREASE) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (4,581,832 253,265,364 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 483,026,035 229,760,671 period End of period $ 478,444,203 483,026,035 OTHER INFORMATION Shares Sold 8,803,236 10,597,931 Issued in 541,096 1,032,983 reinvestment of distributions Redeemed (9,887,922 (8,259,673 ) ) Net increase (543,590) 3,371,241 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 54.67 $ 42.05 $ 41.83 $ 34.62 $ 32.44 value, beginning of period Income from Investment Operations Net (.39) (.28) (.39) (.24) F .13 G investment income (loss) Net realized 6.95 20.83 1.95 11.04 4.68 and unrealized gain (loss) Total from 6.56 20.55 1.56 10.80 4.81 investment operations Less Distributions From net - - - (.13) - investment income From net (3.68) (8.05) (1.50) (3.70) (2.75) realized gain Total (3.68) (8.05) (1.50) (3.83) (2.75) distributions Redemption .15 .12 .16 .24 .12 fees added to paid in capital Net asset $ 57.70 $ 54.67 $ 42.05 $ 41.83 $ 34.62 value, end of period TOTAL 12.64% 50.71% 4.61% 35.62% 16.48% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 478,444 $ 483,026 $ 229,761 $ 202,475 $ 132,689 end of period (000 omitted) Ratio of 1.49% 1.40% 1.57% 1.55% 1.64% A expenses to average net assets Ratio of 1.44% E 1.39% E 1.56% E 1.54% E 1.64% A expenses to average net assets after expense reductions Ratio of net (.72)% (.52)% (.98)% (.65)% .52% A investment income (loss) to average net assets Portfolio 549% 112% 102% 213% 259% A turnover rate Average $ .0191 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 8 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 8 OF NOTES TO FINANCIAL STATEMENTS). F INVESTMENT INCOME (LOSS) 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.
NATURAL GAS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 1 LIFE OF FEBRUARY 28, 1997 YEAR FUND NATURAL GAS 12.45% 30.49% NATURAL GAS 9.07% 26.58% (INCL. 3% SALES CHARGE) S&P 500 26.16% 96.27% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, or since the fund started on April 21, 1993. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF FEBRUARY 28, 1997 YEAR FUND NATURAL GAS 12.45% 7.13% NATURAL GAS 9.07% 6.29% (INCL. 3% SALES CHARGE) S&P 500 26.16% 19.07% AVERAGE ANNUAL RETURNS take the fund's 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 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 1996/08/31 12867.47 16017.09 1996/09/30 13406.94 16918.54 1996/10/31 14376.00 17385.15 1996/11/30 15195.20 18699.29 1996/12/31 15026.99 18328.86 1997/01/31 14794.09 19474.05 1997/02/28 12657.51 19626.72 Let's say hypothetically that $10,000 was invested in Fidelity Select Natural Gas Portfolio on April 21, 1993, when the fund started, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $12,658 - a 26.58% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $19,627 - a 96.27% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS Coastal Corp. (The) 5.2 Burlington Resources, Inc. 5.1 Louisiana Land & Exploration Co. 4.6 Chesapeake Energy Corp. 4.5 Anadarko Petroleum Corp. 4.3 Flores & Rucks, Inc. 4.0 Noble Affiliates, Inc. 3.1 Cabot Oil & Gas Corp. Class A 3.1 Renaissance Energy Ltd. 3.0 Questar Corp. 3.0 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Crude Petroleum & Gas 61.8% Oil & Gas Exploration 12.1% Gas Transmission 7.2% Petroleum Refiners 5.3% Gas Transmission & Distribution 4.0% All Others 9.6% * Row: 1, Col: 1, Value: 9.6 Row: 1, Col: 2, Value: 4.0 Row: 1, Col: 3, Value: 5.3 Row: 1, Col: 4, Value: 7.2 Row: 1, Col: 5, Value: 12.1 Row: 1, Col: 6, Value: 61.8 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS NATURAL GAS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Stephen Binder became Portfolio Manager of Fidelity Select Natural Gas Portfolio on November 1, 1996. Q. STEVE, HOW DID THE FUND PERFORM? A. For the 12-month period that ended February 28, 1997, the fund returned 12.45%. By comparison, the Standard & Poor's 500 Index was up 26.16% over the same time period. Q. HOW WOULD YOU DESCRIBE THE NATURAL GAS ENVIRONMENT DURING THE ONE-YEAR PERIOD? A. One of the most important factors in determining how this sector and the fund perform is the weather. How cold a winter is or how hot a summer is strongly influences the demand for and price of natural gas. The winter of 1995/1996 was unusually cold, and that triggered higher demand and increased prices of natural gas. At the end of that winter, inventories of natural gas were at record lows. Even though the summer of 1996 was cooler than normal, and demand and prices dropped somewhat, natural gas inventories remained at very low levels. Inventories were so low in fact that when there was a period of extremely cold weather in November and December, the market panicked about the small supply of natural gas and bid its price up to a five-year high. Then, in January and February of 1997, gas prices dropped significantly because of milder-than-normal winter weather across the U.S. Overall, the fund outperformed the S&P 500 index during 1996, but the index beat the fund in early 1997. Q. IS THERE ANYTHING YOU COULD HAVE DONE DIFFERENTLY TO OFFSET HOW THE DROP IN NATURAL GAS PRICES AFFECTED THE FUND IN EARLY 1997? A. Yes. I could have reduced the fund's holdings in the exploration and production (E&P) industry, which made up a majority of the fund at the end of the period. E&P stocks, such as Louisiana Land & Exploration, were strongly leveraged to the price of gas, so they performed well for most of 1996, but dropped dramatically this January and February. In hindsight, I wish I'd owned more integrated pipeline companies, local distribution companies and gas utilities over those two months. These types of businesses were off their highs in early 1997, but not nearly as much as E&P companies. Q. WHAT HAVE BEEN THE MAJOR TRENDS IN THE NATURAL GAS SECTOR DURING THIS PERIOD? A. As a result of upcoming deregulation in the gas and electric industries, one major trend we're seeing is the convergence of natural gas and electricity distribution companies. The basic idea behind convergence is that when gas and electricity are freely tradable, consumers can take advantage of whichever commodity is the most cost effective. In addition, convergence allows one company to market all of its customers' energy needs. Another trend, at least over the past six months, was that Western gas prices improved dramatically relative to the East. One of the fund's top 10 stocks, Burlington Resources, a New Mexico company, was helped by this trend in 1996. Q. HOW DID YOU TAKE ADVANTAGE OF THE CONVERGENCE TREND? A. During the period, the fund built up a heavy weighting in Enron Corp., a company that's been at the forefront of the convergence of gas and electric distribution companies. However, I sold it when I thought it was too expensive and replaced it with additional shares of Coastal Corporation, a very reasonably priced peer. Questar, an integrated gas, pipeline and local distribution company, also benefited from this convergence theme. Q. HOW DOES THE INDUSTRY LOOK GOING FORWARD? A. I expect the natural gas supply and demand balance to maintain a delicate equilibrium throughout 1997 and 1998. However, recent high gas prices have induced a lot of new drilling. As a result, it is unclear whether the industry will suffer from too much new gas supply. 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 February 28, 1997, more than $81 million MANAGER: Stephen Binder, since November 1996; manager, Fidelity Select Medical Delivery Portfolio, 1994-1996; Fidelity Select Financial Services Portfolio, 1993-1994; Fidelity Select Defense and Aerospace Portfolio, 1992-1994; Fidelity Select Regional Banks Portfolio, 1990-1994; joined Fidelity in 1989 (checkmark) NATURAL GAS PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 98.3% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 1.4% PETROLEUM - WHOLESALE - 1.4% NGC Corp. 55,023 $ 1,086,697 ENERGY SERVICES - 3.1% DRILLING - 1.3% Cliffs Drilling Co. (a) 8,900 412,738 Noble Drilling Corp. (a) 35,600 631,900 1,044,638 OIL & GAS SERVICES - 1.8% BJ Services Co. (a) 13,800 548,550 Weatherford Enterra, Inc. (a) 27,800 834,000 1,382,550 TOTAL ENERGY SERVICES 2,427,188 GAS - 13.8% GAS DISTRIBUTION - 2.6% Aquila Gas Pipeline Corp. 70,300 922,688 K N Energy, Inc. 28,000 1,106,000 2,028,688 GAS TRANSMISSION - 7.2% Leviathan Gas Pipeline Partners LP unit 35,200 704,000 ONEOK, Inc. 34,297 977,465 Sonat, Inc. 39,900 1,835,400 Williams Companies, Inc. 47,850 2,093,438 5,610,303 GAS TRANSMISSION & DISTRIBUTION - 4.0% Questar Corp. 64,600 2,341,750 Tejas Gas Corp. (a) 17,405 761,469 3,103,219 TOTAL GAS 10,742,210 OIL & GAS - 79.6% CRUDE PETROLEUM & GAS - 61.8% Anadarko Petroleum Corp. 60,075 3,379,219 Apache Corp. 25,325 819,897 Barrett Resources Corp. (a) 43,200 1,420,200 Belco Oil & Gas Corp. (a) 92,800 1,902,400 Burlington Resources, Inc. 90,257 3,960,026 Cabot Oil & Gas Corp. Class A 150,800 2,393,950 Canadian Natural Resources Ltd. (a) 41,900 998,385 Chesapeake Energy Corp. (a) 168,500 3,496,375 Comstock Resources, Inc. (a) 82,200 739,800 DLB Oil & Gas, Inc. (a) 6,100 79,300 Devon Energy Corp. 37,200 1,162,500 Enron Oil & Gas Co. 76,800 1,555,200 Flores & Rucks, Inc. (a) 68,700 3,091,500 Forcenergy Gas Exploration, Inc. (a) 26,700 694,200 Forest Oil Corp. (a) 17,700 236,738 Fortune Petroleum Corp. (a) 50,000 125,000 Houston Exploration Co. (a) 85,200 1,192,800 Monterey Resources, Inc. (a) 53,300 839,475 Noble Affiliates, Inc. 62,850 2,451,150 Oryx Energy Co. (a) 75,600 1,512,000 Parker & Parsley Petroleum Co. 46,200 1,362,900 Petroleum Securities Australia Ltd. (a) 79,823 341,892 Pogo Producing Co. 29,700 1,020,938 Renaissance Energy Ltd. (a) 82,800 2,345,138 Rio Alto Exploration Ltd. (a) 123,500 762,764 Rutherford-Moran Oil Corp. (a) 56,900 1,159,338 SHARES VALUE (NOTE 1) Santa Fe Energy Resources, Inc. (a) 65,200 $ 839,450 Snyder Oil Corp. 82,300 1,316,800 Swift Energy Co. (a) 45,200 971,800 Texas Meridian Resources Corp. (a) 51,900 733,088 Union Texas Petroleum Holdings, Inc. 40,000 740,000 Unit Corp. (a) 117,500 925,313 United Meridian Corp. (a) 59,000 1,777,375 Vastar Resources, Inc. 64,000 1,856,000 48,202,911 GENERAL PETROLEUM PRODUCTS - 0.4% KCS Group, Inc. 8,700 313,200 OIL & GAS EXPLORATION - 12.1% Abacan Resource Corp. (a) 222,200 2,041,463 Chieftain International, Inc. (a) 61,700 1,246,943 Cross Timbers Oil Co. 42,800 1,155,600 Denbury Resources, Inc. (a) 42,400 523,744 Louisiana Land & Exploration Co. 75,000 3,581,250 Forcenergy AB Class B Free shares 86,600 914,370 9,463,370 PETROLEUM REFINERS - 5.3% Coastal Corp. (The) 89,900 4,090,450 TOTAL OIL & GAS 62,069,931 SERVICES - 0.4% MANAGEMENT SERVICES - 0.4% Metzler Group, Inc. 14,100 338,400 TOTAL COMMON STOCKS (Cost $79,532,015) 76,664,426 CASH EQUIVALENTS - 1.7% Taxable Central Cash Fund (b) (Cost $1,317,933) 1,317,933 1,317,933 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $80,849,948) $ 77,982,359 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $292,395,114 and $275,955,815, respectively (see Note 3 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 $76,807 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $12,125,000 and $2,170,000, respectively. The weighted average interest rate was 5.7% (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 88.2% Canada 10.2 Sweden 1.2 Australia 0.4 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $82,165,526. Net unrealized depreciation aggregated $4,183,167, of which $4,767,931 related to appreciated investment securities and $8,951,098 related to depreciated investment securities. The fund hereby designates approximately $4,048,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. NATURAL GAS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 77,982,359 (cost $80,849,948) - See accompanying schedule Receivable for investments sold 4,856,490 Receivable for fund shares sold 1,053,403 Dividends receivable 55,028 Interest receivable 2,999 Redemption fees receivable 1,495 Other receivables 84 TOTAL ASSETS 83,951,858 LIABILITIES Payable for fund shares redeemed $ 2,224,457 Accrued management fee 50,703 Other payables and accrued expenses 110,535 TOTAL LIABILITIES 2,385,695 NET ASSETS $ 81,566,163 Net Assets consist of: Paid in capital $ 79,461,231 Unistributed net investment income 168,814 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 4,803,707 Net unrealized appreciation (depreciation) on investments (2,867,589 ) NET ASSETS, for 6,522,783 $ 81,566,163 shares outstanding NET ASSET VALUE and redemption price per share ($81,566,163 (divided by) 6,522,783 shares) $12.50 Maximum offering price per share (100/97.00 of $12.50) $12.89
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 816,231 Dividends Interest 544,750 TOTAL INCOME 1,360,981 EXPENSES Management fee $ 679,330 Transfer agent fees 993,719 Accounting fees and expenses 113,435 Non-interested trustees' compensation 591 Custodian fees and expenses 18,851 Registration fees 74,515 Audit 28,434 Legal 516 Interest 4,460 Miscellaneous 3,390 Total expenses before reductions 1,917,241 Expense reductions (42,055 1,875,186 ) NET INVESTMENT INCOME (LOSS) (514,205 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 7,807,128 Foreign currency transactions (334 7,806,794 ) Change in net unrealized appreciation (depreciation) on: Investment securities (8,433,538 ) Assets and liabilities in (10 (8,433,548 foreign currencies ) ) NET GAIN (LOSS) (626,754 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (1,140,959 ) OTHER INFORMATION $ 682,901 Sales charges paid to FDC Deferred sales charges withheld $ 2,332 by FDC Exchange fees withheld by FSC $ 126,578 Expense reductions $ 37,173 Directed brokerage arrangements Custodian interest credits 4,165 Transfer agent interest credits 717 $ 42,055
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ (514,205 $ 320,851 Net ) investment income (loss) Net realized 7,806,794 9,256,256 gain (loss) Change in (8,433,548 7,236,487 net ) unrealized appreciation (depreciation ) NET INCREASE (1,140,959 16,813,594 (DECREASE) ) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (52,511 (323,738 shareholders ) ) From net investment income From net (2,534,533 - realized gain ) TOTAL (2,587,044 (323,738 DISTRIBUTION ) ) S Share 455,349,313 96,403,538 transactions Net proceeds from sales of shares Reinvestmen 2,542,586 314,856 t of distributions Cost of (434,506,274 (132,986,230 shares ) ) redeemed Paid in 1,680,459 112,239 capital portion of redemption fees NET INCREASE 25,066,084 (36,155,597 (DECREASE) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 21,338,081 (19,665,741 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 60,228,082 79,893,823 period End of period $ 81,566,163 $ 60,228,082 (including undistribute d net investment income of $168,814 and $56,526, respectivel y) OTHER INFORMATION Shares Sold 33,713,794 9,263,323 Issued in 179,967 30,032 reinvestment of distributions Redeemed (32,674,374 (12,883,616 ) ) Net increase 1,219,387 (3,590,261) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS YEAR ENDED YEAR ENDED YEARS ENDED APRIL 21, 1993 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, SELECTED 1997 1996 1995 1994 PER-SHARE DATA D Net asset $ 11.36 $ 8.98 $ 9.48 $ 10.00 value, beginning of period Income from Investment Operations Net (.06) .05 .03 .02 investment income (loss) Net realized 1.30 G 2.36 (.53) (.46) and unrealized gain (loss) Total from 1.24 2.41 (.50) (.44) investment operations Less Distributions From net (.01) (.05) (.02) - investment income From net (.29) - - (.07) realized gain In excess of - - - (.06) net realized gain Total (.30) (.05) (.02) (.13) distributions Redemption .20 .02 .02 .05 fees added to paid in capital Net asset $ 12.50 $ 11.36 $ 8.98 $ 9.48 value, end of period TOTAL 12.45% 27.10% (5.06)% (3.84)% RETURN B, C RATIOS AND $ 81,566 $ 60,228 $ 79,894 $ 63,073 SUPPLEMENT AL DATA Net assets, end of period (000 omitted) Ratio of 1.70% 1.68% 1.70% 1.94% A expenses to average net assets Ratio of 1.66% E 1.67% E 1.66% E 1.93% A, expenses to E average net assets after expense reductions Ratio of net (.46)% .46% .30% .17% A investment income (loss) to average net assets Portfolio 283% 79% 177% 44% A turnover rate Average $ .0361 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 8 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 8 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.
TELECOMMUNICATIONS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS TELECOMMUNICATIONS 7.85% 113.60% 331.02% TELECOMMUNICATIONS 4.61% 107.19% 318.09% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS TELECOMMUNICATIONS 7.85% 16.39% 15.73% TELECOMMUNICATIONS 4.61% 15.68% 15.38% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9579.43 10289.00 1987/04/30 9434.74 10197.43 1987/05/31 9796.46 10286.15 1987/06/30 10170.23 10805.60 1987/07/31 10489.75 11353.44 1987/08/31 10984.09 11776.92 1987/09/30 11207.15 11519.01 1987/10/31 9235.80 9037.81 1987/11/30 8602.80 8293.10 1987/12/31 9154.55 8924.20 1988/01/31 9581.92 9299.91 1988/02/29 9866.84 9733.29 1988/03/31 9910.20 9432.53 1988/04/30 10232.28 9537.23 1988/05/31 10362.35 9620.20 1988/06/30 10901.22 10061.77 1988/07/31 10746.37 10023.54 1988/08/31 10349.97 9682.74 1988/09/30 10987.93 10095.22 1988/10/31 11210.91 10375.87 1988/11/30 11310.02 10227.49 1988/12/31 11696.06 10406.47 1989/01/31 12645.24 11168.23 1989/02/28 12695.19 10890.14 1989/03/31 13213.49 11143.88 1989/04/30 14212.62 11722.25 1989/05/31 15261.71 12197.00 1989/06/30 14888.87 12127.48 1989/07/31 16019.19 13222.59 1989/08/31 16402.24 13481.75 1989/09/30 17005.08 13426.47 1989/10/31 16402.24 13114.98 1989/11/30 16816.70 13382.52 1989/12/31 17647.22 13703.71 1990/01/31 15733.43 12784.19 1990/02/28 15674.85 12949.10 1990/03/31 16039.38 13292.25 1990/04/30 15095.50 12959.95 1990/05/31 16683.82 14223.54 1990/06/30 16351.84 14126.82 1990/07/31 15603.24 14081.62 1990/08/31 13787.10 12808.64 1990/09/30 12895.30 12184.86 1990/10/31 13344.45 12132.46 1990/11/30 14106.06 12916.22 1990/12/31 14753.69 13276.58 1991/01/31 15278.00 13855.44 1991/02/28 15789.03 14846.11 1991/03/31 16233.70 15205.38 1991/04/30 16578.82 15241.87 1991/05/31 16751.37 15900.32 1991/06/30 16054.51 15172.09 1991/07/31 16963.75 15879.11 1991/08/31 17468.15 16255.44 1991/09/30 17693.80 15983.98 1991/10/31 18390.67 16198.16 1991/11/30 17687.17 15545.38 1991/12/31 19305.45 17323.77 1992/01/31 19332.28 17001.55 1992/02/29 19573.68 17222.57 1992/03/31 18883.00 16886.73 1992/04/30 19593.80 17383.20 1992/05/31 19365.80 17468.37 1992/06/30 18916.05 17208.09 1992/07/31 19931.09 17911.90 1992/08/31 19695.82 17544.71 1992/09/30 20078.98 17751.74 1992/10/31 20280.64 17813.87 1992/11/30 21336.01 18421.32 1992/12/31 22262.68 18647.90 1993/01/31 22194.20 18804.55 1993/02/28 23413.13 19060.29 1993/03/31 24371.85 19462.46 1993/04/30 24423.27 18991.47 1993/05/31 25406.38 19500.44 1993/06/30 26501.84 19556.99 1993/07/31 27274.29 19478.76 1993/08/31 29331.80 20217.01 1993/09/30 29753.13 20061.34 1993/10/31 30609.84 20476.61 1993/11/30 28102.91 20282.08 1993/12/31 28878.17 20527.49 1994/01/31 29462.81 21225.43 1994/02/28 28539.70 20650.22 1994/03/31 27647.35 19749.87 1994/04/30 28140.82 20002.67 1994/05/31 27975.57 20330.71 1994/06/30 27951.96 19832.61 1994/07/31 29502.22 20483.12 1994/08/31 30359.98 21322.93 1994/09/30 30005.86 20800.52 1994/10/31 31438.08 21268.53 1994/11/30 29769.78 20493.93 1994/12/31 30125.46 20797.85 1995/01/31 30543.42 21337.14 1995/02/28 30816.71 22168.65 1995/03/31 31202.52 22822.85 1995/04/30 32172.30 23494.98 1995/05/31 33050.47 24434.07 1995/06/30 34642.67 25001.68 1995/07/31 36842.21 25830.73 1995/08/31 37933.77 25895.57 1995/09/30 39181.27 26988.36 1995/10/31 37539.82 26892.01 1995/11/30 38368.75 28072.57 1995/12/31 39059.50 28613.25 1996/01/31 39335.97 29587.24 1996/02/29 38765.75 29861.52 1996/03/31 38584.32 30149.08 1996/04/30 40385.76 30593.48 1996/05/31 41281.98 31382.49 1996/06/30 41702.08 31502.05 1996/07/31 38546.65 30110.29 1996/08/31 39349.51 30745.32 1996/09/30 40507.12 32475.67 1996/10/31 39704.26 33371.34 1996/11/30 40908.55 35893.88 1996/12/31 41168.58 35182.83 1997/01/31 41448.64 37381.05 1997/02/28 41808.72 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Telecommunications Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $41,809 - a 318.09% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS WorldCom, Inc. 16.9 Tel-Save Holdings, Inc. 12.1 MCI Communications Corp. 10.1 APT Satellite Holdings Ltd. sponsored ADR 3.8 LCI International, Inc. 3.7 Viatel, Inc. 3.4 Alcatel Alsthom Compagnie Generale d'Electricite SA 3.4 Telebras PN (Pfd. Reg.) 3.2 Newbridge Networks Corp. 3.1 Nokia Corp. AB sponsored ADR 2.5 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Row: 1, Col: 1, Value: 16.5 Row: 1, Col: 2, Value: 3.4 Row: 1, Col: 3, Value: 3.8 Row: 1, Col: 4, Value: 6.2 Row: 1, Col: 5, Value: 9.300000000000001 Row: 1, Col: 6, Value: 60.8 Telephone Services 60.8% Telephone Equipment 9.3% Cellular & Communication Services 6.2% Communications Services 3.8% Electrical Machinery 3.4% All Others 16.5% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS TELECOMMUNICATIONS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Nick Thakore, Portfolio Manager of Fidelity Select Telecommunications Portfolio Q. HOW DID THE FUND PERFORM, NICK? A. It was a tough period for telecommunications stocks. For the 12 months that ended February 28, 1997, the fund returned 7.85%. The Standard & Poor's 500 Index had a return of 26.16% over the same time frame. Q. CAN YOU PINPOINT THE REASONS BEHIND THIS UNDERPERFORMANCE? A. The telecommunications industry as a whole suffered from competitive fears. This was reflected in the performance of many of the industry's bellwether stocks, including AT&T and the regional Bell operating companies (RBOCs). These companies make up a considerable portion of the industry, and their results were very disappointing. Q. WHAT WERE THE PRIMARY FACTORS BEHIND THESE COMPETITIVE FEARS? A. The fear is that as both local and long-distance markets continue to open, the increased level of competition will hurt earnings. Uncertainty related to timing and competition guidelines, combined with the earnings growth disappointments of some of the larger stocks in the industry, made for rough going. Q. IT SEEMS THAT THERE IS ALWAYS SOME TYPE OF FEDERAL LEGISLATION THAT DICTATES THE PERFORMANCE OF TELECOMMUNICATION STOCKS . . . A. Legislative action is really a huge issue with these stocks. There were rulings during the period where we're still awaiting the outcomes and there are a number of rulings on the table for 1997. To give an example, the Federal Communications Commission (FCC) issued the "rules of competition" back in August. These guidelines were drawn up in anticipation of the local and long-distance competition I mentioned above. The RBOCs weren't happy with the rules and an appeals court delayed their implementation. The issue is still hanging in the balance and any resolution will have a significant impact on the telecommunications industry. Q. DID YOU PLAY ANY THEMES AS YOU SOUGHT ATTRACTIVE INVESTMENT OPPORTUNITIES? A. I tried to shift out of some of the bigger companies that I thought might be adversely affected by the local/long-distance competition. Instead, I focused on smaller growth names with strong market positions. I also began emphasizing equipment providers. As service companies spend large sums of money in order to compete, equipment providers should be in high demand when the markets open up and infrastructures need to be built. While competitive fears have hurt the industry, I've tried to find segments of the industry that may have an advantage in that type of environment. Q. WERE THERE ANY NOTEWORTHY MERGERS OR ACQUISITIONS DURING THE YEAR? A. There's been an increased amount of consolidation within the industry, which has been a positive sign. One of the more significant deals - involving two of the fund's holdings - was the acquisition of MFS by WorldCom. While WorldCom's stock price sagged immediately after the transaction, the stock bounced back and, with facilities in both local and long-distance markets, I think the company is well-positioned for the future. Q. WHICH INDIVIDUAL STOCKS PERFORMED WELL? WERE THERE ANY DISAPPOINTMENTS? A. As a whole, the fund's international holdings, including French-based Alcatel, did well. I'd point out to shareholders, however, that foreign investments involve greater risks than U.S. investments. Tel-Save, a company that joined forces with America Online, also performed well. On the negative side, LCI International was a disappointment. Q. WHAT'S YOUR OUTLOOK? A. While I'm still cautious on the outlook for the larger service providers, I think opportunities can be found through sound individual security selection. I'll also continue to emphasize the equipment provider theme. 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 February 28, 1997, more than $388 million MANAGER: Nick Thakore, since July 1996; equity analyst, telecommunications and gaming industries, since 1996; equity analyst, furniture, carpet, appliance, textile and apparel industries, 1993-1995; joined Fidelity in 1993 (checkmark) TELECOMMUNICATIONS PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 97.2% SHARES VALUE (NOTE 1) ADVERTISING - 1.3% ADVERTISING AGENCIES - 1.3% Snyder Communications, Inc. (a) 180,000 $ 4,860,000 BROADCASTING - 3.8% COMMUNICATIONS SERVICES - 3.8% APT Satellite Holdings Ltd. sponsored ADR 1,023,200 14,324,800 RADIO BROADCASTING - 0.0% Jacor Communications, Inc. Class A (a) 800 23,551 TOTAL BROADCASTING 14,348,351 CELLULAR - 6.2% CELLULAR & COMMUNICATION SERVICES - 6.2% Associated Group, Inc. Class A (a) 9,300 378,975 McLeod, Inc. 278,200 4,972,825 Millicom International Cellular SA (a) 140,000 5,390,000 Mobile Telecommunications Technologies, Inc. (a) 94,200 730,050 Rogers Communications, Inc. Class B (a) 149,900 1,024,423 Telephone & Data Systems, Inc. 310 12,400 Vodafone Group PLC sponsored ADR 152,000 7,220,000 Vodafone Group PLC 825,000 3,918,744 23,647,417 COMMUNICATIONS EQUIPMENT - 10.9% DATACOMMUNICATIONS EQUIPMENT - 0.5% Dynatech Corp. (a) 65,500 1,834,000 TELEPHONE EQUIPMENT - 9.3% Ascend Communications, Inc. 100,000 5,225,000 DSC Communications Corp. (a) 400,000 8,400,000 Newbridge Networks Corp. (a) 375,000 11,953,125 Nokia Corp. AB sponsored ADR 165,000 9,652,500 35,230,625 TELEPHONE INTERCONNECT SYSTEMS - 1.1% P-COM, Inc. (a) 130,000 4,176,250 TOTAL COMMUNICATIONS EQUIPMENT 41,240,875 DEFENSE ELECTRONICS - 0.3% Remec, Inc. 40,000 1,090,000 ELECTRICAL EQUIPMENT - 5.4% ELECTRICAL MACHINERY - 3.4% Alcatel Alsthom Compagnie Generale d'Electricite SA 125,000 12,806,480 TV & RADIO COMMUNICATION EQUIPMENT - 2.0% Allen Group, Inc. (The) 92,000 1,920,500 California Amplifier, Inc. (a)(d) 654,300 3,516,863 Omnipoint Corp. (a) 130,000 2,226,250 7,663,613 TOTAL ELECTRICAL EQUIPMENT 20,470,093 ELECTRONICS - 3.5% ELECTRONIC PARTS - WHOLESALE - 1.1% Brightpoint, Inc. (a) 165,000 4,455,000 SHARES VALUE (NOTE 1) SEMICONDUCTORS - 2.4% LSI Logic Corp. (a) 150,000 $ 5,175,000 Motorola, Inc. 71,000 3,967,125 9,142,125 TOTAL ELECTRONICS 13,597,125 LODGING & GAMING - 0.0% HOTELS, MOTELS, & TOURIST CENTERS - 0.0% ITT Corp. (a) 300 16,950 PRINTING - 2.1% COMMERCIAL PRINTING, LITHOGRAPHIC - 2.1% ASM Lithography Holding NV (a)(c) 120,000 7,969,711 SERVICES - 2.9% BUSINESS SERVICES - 2.9% ABR Information Services, Inc. (a) 90,000 2,103,750 Premier Technologies, Inc. (a) 149,800 2,808,750 Sitel Corp. (a) 150,000 2,493,750 Teletech Holdings, Inc. (a) 150,000 3,665,625 11,071,875 TELEPHONE SERVICES - 60.8% Brooks Fiber Properties, Inc. 80,000 1,700,000 C-TEC Corp. (a) 101,300 2,887,050 Cable & Wireless PLC Ord. 1,100,000 8,998,099 Cincinnati Bell, Inc. 140,400 8,704,800 LCI International, Inc. (a) 732,700 13,921,300 MCI Communications Corp. 1,075,000 38,431,250 Primus Telecommunications Group, Inc. (d) 457,300 3,772,725 Smartalk Teleservices, Inc. (a) 100,300 1,429,275 Sprint Corp. 175,600 7,989,800 Tel-Save Holdings, Inc. (a) 2,577,200 46,067,450 Telco Communications Group, Inc. 207,500 3,760,938 Telebras PN (Pfd. Reg.) 126,221,131 12,321,871 Telus Corp. 150,000 2,269,488 Viatel, Inc. (a)(d) 1,656,000 12,834,000 Winstar Communications, Inc. (a) 124,300 1,678,050 WorldCom, Inc. (a) 2,408,845 64,135,498 230,901,594 TOTAL COMMON STOCKS (Cost $343,898,632) 369,213,991 CONVERTIBLE PREFERRED STOCKS - 0.0% CELLULAR - 0.0% CELLULAR & COMMUNICATION SERVICES - 0.0% AirTouch Communications, Inc. Class C $2.125 (Cost $92,160) 1,920 92,640 CASH EQUIVALENTS - 2.8% Taxable Central Cash Fund (b) (Cost $10,456,813) 10,456,813 10,456,813 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $354,447,605) $ 379,763,444 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. 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 $7,969,711 or 2.1% of net assets. 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 California Amplifier, Inc. $ 617,317 $ - $ - $ 3,516,863 Primus Telecommunications Group, Inc. 86,185 1,584,535 - 3,772,725 Viatel, Inc. 1,550,564 471,316 - 12,834,000 Totals $ 2,254,066 $ 2,055,851 $ - $ 20,123,588 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $769,439,169 and $831,227,181, respectively (see Note 3 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 $162,456 for the period (see Note 4 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $3,665,550 and $3,900,000, respectively (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 73.8% United Kingdom 5.3 Canada 4.0 Bermuda 3.8 France 3.4 Brazil 3.2 Netherland 2.6 Finland 2.5 Luxembourg 1.4 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $354,648,622. Net unrealized appreciation aggregated $25,114,822, of which $56,089,610 related to appreciated investment securities and $30,974,788 related to depreciated investment securities. The fund hereby designates approximately $8,694,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 94% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. TELECOMMUNICATIONS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 379,763,444 (cost $354,447,605) - See accompanying schedule Receivable for investments sold 13,672,637 Receivable for fund shares sold 2,700,234 Dividends receivable 5,547 Interest receivable 120,079 Redemption fees receivable 1,100 Other receivables 79,951 TOTAL ASSETS 396,342,992 LIABILITIES Payable for fund shares redeemed $ 3,381,054 Accrued management fee 205,344 Other payables and accrued expenses 321,363 Collateral on securities loaned, 3,900,000 at value TOTAL LIABILITIES 7,807,761 NET ASSETS $ 388,535,231 Net Assets consist of: Paid in capital $ 346,680,508 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 16,538,884 Net unrealized appreciation (depreciation) on investments 25,315,839 NET ASSETS, for 9,296,172 $ 388,535,231 shares outstanding NET ASSET VALUE and redemption price per share ($388,535,231 (divided by) 9,296,172 shares) $41.80 Maximum offering price per share (100/97.00 of $41.80) $43.09
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 5,665,837 Dividends Special dividend from ADVO, Inc. 795,000 Interest (including income on securities loaned of $259,248) 1,851,981 TOTAL INCOME 8,312,818 EXPENSES Management fee $ 2,878,937 Transfer agent fees 3,696,269 Accounting and security lending fees 490,123 Non-interested trustees' compensation 2,602 Custodian fees and expenses 57,470 Audit 39,701 Legal 3,470 Miscellaneous 22,675 Total expenses before reductions 7,191,247 Expense reductions (169,746 7,021,501 ) NET INVESTMENT INCOME 1,291,317 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including 45,431,551 realized gain of $370,018 on sales of investments in affiliated issuers) Foreign currency transactions (6,870 45,424,681 ) Change in net unrealized appreciation (depreciation) on: Investment securities (11,984,770 ) Assets and liabilities in (26 (11,984,796 foreign currencies ) ) NET GAIN (LOSS) 33,439,885 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 34,731,202 OTHER INFORMATION $ 1,182,016 Sales charges paid to FDC Deferred sales charges withheld $ 30,536 by FDC Exchange fees withheld by FSC $ 135,135 Expense reductions $ 167,497 Directed brokerage arrangements Custodian interest credits 2,062 Transfer agent interest credits 187 $ 169,746
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 1,291,317 $ 4,937,209 Net investment income Net realized 45,424,681 57,156,039 gain (loss) Change in (11,984,796 28,358,016 net ) unrealized appreciation (depreciation ) NET INCREASE 34,731,202 90,451,264 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (1,643,666 (3,666,827 shareholders ) ) From net investment income From net (63,334,526 (25,859,291 realized gain ) ) TOTAL (64,978,192 (29,526,118 DISTRIBUTION ) ) S Share 194,213,580 183,961,070 transactions Net proceeds from sales of shares Reinvestmen 63,659,054 28,851,878 t of distributions Cost of (307,709,801 (175,053,917 shares ) ) redeemed Paid in 319,443 139,366 capital portion of redemption fees NET INCREASE (49,517,724 37,898,397 (DECREASE) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (79,764,714 98,823,543 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 468,299,945 369,476,402 period End of period $ 388,535,231 $ 468,299,945 (including undistribute d net investment income of $0 and $1,251,216 , respectivel y) OTHER INFORMATION Shares Sold 4,489,283 4,122,731 Issued in 1,575,164 677,781 reinvestment of distributions Redeemed (7,203,986 (4,001,104 ) ) Net increase (1,139,539) 799,408 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 44.87 $ 38.34 $ 37.10 $ 34.19 $ 29.22 value, beginning of period Income from Investment Operations Net .12 E .51 .29 .25 .29 investment income Net realized 2.92 9.15 2.54 7.00 5.29 and unrealized gain (loss) Total from 3.04 9.66 2.83 7.25 5.58 investment operations Less Distributions From net (.16) H (.39) (.33) (.20) (.18) investment income From net (5.98) H (2.75) (1.27) (4.18) (.48) realized gain Total (6.14) (3.14) (1.60) (4.38) (.66) distributions Redemption .03 .01 .01 .04 .05 fees added to paid in capital Net asset $ 41.80 $ 44.87 $ 38.34 $ 37.10 $ 34.19 value, end of period TOTAL 7.85% 25.79% 7.98% 21.90% 19.49% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 388,535 $ 468,300 $ 369,476 $ 371,025 $ 134,338 end of period (000 omitted) Ratio of 1.51% 1.52% 1.56% 1.54% 1.74% A expenses to average net assets Ratio of 1.47% F 1.52% 1.55% F 1.53% F 1.74% A expenses to average net assets after expense reductions Ratio of net .27% 1.17% .77% .64% 1.16% A investment income to average net assets Portfolio 175% 89% 107% 241% 115% A turnover rate Average $ .0321 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 8 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 INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM ADVO, INC. WHICH AMOUNTED TO $.07 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 8 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 AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS).
UTILITIES GROWTH PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of 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 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS UTILITIES GROWTH 18.13% 87.72% 209.65% UTILITIES GROWTH 14.59% 82.09% 200.36% (INCL. 3% SALES CHARGE) S&P 500 26.16% 118.75% 276.74% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one, five, or 10 years. You can compare the fund's returns 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, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS UTILITIES GROWTH 18.13% 13.42% 11.97% UTILITIES GROWTH 14.59% 12.73% 11.63% (INCL. 3% SALES CHARGE) S&P 500 26.16% 16.94% 14.16% AVERAGE ANNUAL RETURNS take the fund's 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 1987/02/28 9700.00 10000.00 1987/03/31 9505.86 10289.00 1987/04/30 8960.92 10197.43 1987/05/31 8817.87 10286.15 1987/06/30 9131.21 10805.60 1987/07/31 9005.20 11353.44 1987/08/31 9287.89 11776.92 1987/09/30 9212.96 11519.01 1987/10/31 8657.79 9037.81 1987/11/30 8368.29 8293.10 1987/12/31 8440.57 8924.20 1988/01/31 9170.00 9299.91 1988/02/29 9098.13 9733.29 1988/03/31 8839.42 9432.53 1988/04/30 8864.57 9537.23 1988/05/31 9141.25 9620.20 1988/06/30 9382.00 10061.77 1988/07/31 9352.22 10023.54 1988/08/31 9337.44 9682.74 1988/09/30 9662.73 10095.22 1988/10/31 9866.04 10375.87 1988/11/30 9847.56 10227.49 1988/12/31 9829.57 10406.47 1989/01/31 10292.58 11168.23 1989/02/28 10228.06 10890.14 1989/03/31 10402.64 11143.88 1989/04/30 10937.77 11722.25 1989/05/31 11457.71 12197.00 1989/06/30 11747.11 12127.48 1989/07/31 12390.42 13222.59 1989/08/31 12445.00 13481.75 1989/09/30 12624.35 13426.47 1989/10/31 12565.86 13114.98 1989/11/30 12979.14 13382.52 1989/12/31 13665.33 13703.71 1990/01/31 12990.84 12784.19 1990/02/28 12967.44 12949.10 1990/03/31 12897.26 13292.25 1990/04/30 12359.23 12959.95 1990/05/31 13002.53 14223.54 1990/06/30 13156.61 14126.82 1990/07/31 13264.62 14081.62 1990/08/31 12536.58 12808.64 1990/09/30 12568.59 12184.86 1990/10/31 13212.62 12132.46 1990/11/30 13560.63 12916.22 1990/12/31 13741.11 13276.58 1991/01/31 13680.52 13855.44 1991/02/28 14270.23 14846.11 1991/03/31 14431.80 15205.38 1991/04/30 14367.17 15241.87 1991/05/31 14371.21 15900.32 1991/06/30 14196.88 15172.09 1991/07/31 14658.91 15879.11 1991/08/31 14994.93 16255.44 1991/09/30 15456.96 15983.98 1991/10/31 15671.18 16198.16 1991/11/30 15851.79 15545.38 1991/12/31 16630.59 17323.77 1992/01/31 16118.68 17001.55 1992/02/29 16000.55 17222.57 1992/03/31 15834.28 16886.73 1992/04/30 16267.44 17383.20 1992/05/31 16582.46 17468.37 1992/06/30 16774.29 17208.09 1992/07/31 17666.20 17911.90 1992/08/31 17657.15 17544.71 1992/09/30 17752.22 17751.74 1992/10/31 17747.70 17813.87 1992/11/30 17869.94 18421.32 1992/12/31 18392.16 18647.90 1993/01/31 18705.01 18804.55 1993/02/28 19667.28 19060.29 1993/03/31 20198.19 19462.46 1993/04/30 20087.80 18991.47 1993/05/31 20130.89 19500.44 1993/06/30 20901.65 19556.99 1993/07/31 21141.02 19478.76 1993/08/31 22060.20 20217.01 1993/09/30 22060.20 20061.34 1993/10/31 21835.19 20476.61 1993/11/30 20767.61 20282.08 1993/12/31 20699.40 20527.49 1994/01/31 21123.52 21225.43 1994/02/28 20165.12 20650.22 1994/03/31 19438.05 19749.87 1994/04/30 19997.20 20002.67 1994/05/31 19597.93 20330.71 1994/06/30 19536.07 19832.61 1994/07/31 20098.42 20483.12 1994/08/31 20019.69 21322.93 1994/09/30 19507.95 20800.52 1994/10/31 19755.39 21268.53 1994/11/30 19041.20 20493.93 1994/12/31 19165.43 20797.85 1995/01/31 19947.57 21337.14 1995/02/28 20208.29 22168.65 1995/03/31 20289.40 22822.85 1995/04/30 20996.64 23494.98 1995/05/31 21321.54 24434.07 1995/06/30 21530.40 25001.68 1995/07/31 22110.58 25830.73 1995/08/31 22673.35 25895.57 1995/09/30 23752.49 26988.36 1995/10/31 23984.56 26892.01 1995/11/30 24512.52 28072.57 1995/12/31 25756.32 28613.25 1996/01/31 26028.13 29587.24 1996/02/29 25425.43 29861.52 1996/03/31 25200.90 30149.08 1996/04/30 26218.41 30593.48 1996/05/31 26237.38 31382.49 1996/06/30 26642.20 31502.05 1996/07/31 25478.35 30110.29 1996/08/31 25484.67 30745.32 1996/09/30 25946.42 32475.67 1996/10/31 27034.37 33371.34 1996/11/30 28305.76 35893.88 1996/12/31 28683.76 35182.83 1997/01/31 29546.23 37381.05 1997/02/28 30036.28 37674.12 Let's say hypothetically that $10,000 was invested in Fidelity Select Utilities Growth Portfolio on February 28, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by February 28, 1997, the value of the investment would have grown to $30,036 - a 200.36% increase on the initial investment. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $37,674 - a 276.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1997 % OF FUND'S INVESTMENTS WorldCom, Inc. 8.1 Sprint Corp. 6.2 MCI Communications Corp. 4.8 BellSouth Corp. 4.7 SBC Communications, Inc. 4.4 Pacific Telesis Group 4.3 Ameritech Corp. 4.2 AirTouch Communications, Inc. 4.0 GTE Corp. 4.0 NYNEX Corp. 3.7 TOP INDUSTRIES AS OF FEBRUARY 28, 1997 Telephone Services 55.6% Gas Transmission & Distribution 9.1% Gas Distribution 7.2% Electric Power 6.3% Gas Transmission 6.0% All Others 15.8% * Row: 1, Col: 1, Value: 15.8 Row: 1, Col: 2, Value: 6.0 Row: 1, Col: 3, Value: 6.3 Row: 1, Col: 4, Value: 7.2 Row: 1, Col: 5, Value: 9.1 Row: 1, Col: 6, Value: 55.6 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS UTILITIES GROWTH PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW John Muresianu, Portfolio Manager of Fidelity Select Utilities Growth Portfolio Q. JOHN, HOW DID THE FUND PERFORM? A. For the 12 months that ended February 28, 1997, the fund had a total return of 18.13%, while the Standard & Poor's 500 Index posted a return of 26.16%. Q. WHAT FACTORS AFFECTED THE SECTOR'S PERFORMANCE? A. The utilities sector underperformed the broad market as investors became concerned about how ongoing deregulation would affect utilities companies, especially the telephone and electric industries. In addition, utilities stocks tend to trade in concert with the bond market, which underperformed the stock market significantly during the period. The stock market, as represented by the S&P 500, performed well largely on the basis of the strong technology and financial services stock sectors. Q. CAN YOU GIVE US A MORE DETAILED OVERVIEW OF THE RECENT INVESTING ENVIRONMENT FOR THE THREE UTILITY INDUSTRIES - GAS, TELEPHONE AND ELECTRIC? A. Gas stocks performed the best because prices spiked upward as a result of very cold weather. In addition, there was a significant amount of consolidation that helped stocks in the group. Further, the supply and demand dynamic improved, partially due to a slowdown in Canadian imports because of restricted pipeline capacity. On the telephone side, there continued to be broad concern over the impact of increasing competition in the cellular and local telephone service areas. At the same time, however, telephone companies reported steady revenue and earnings growth; over the near term, business prospects for telephone companies looked fine, helping the telephone utility industry post modest gains. Q. WHAT ABOUT ELECTRIC UTILITY STOCKS? A. Electrics struggled. While all utility stocks are sensitive to what happens in the bond market, electrics are more attuned than the telephone and gas stocks. That's because they have the highest yields, are the most income-oriented and have less prospects for earnings growth. The bond market has had its ups and downs and utility stocks, as a result, bounced around as well. Electric utility stocks also were negatively affected by continued evidence that the Nuclear Regulatory Commission has been getting tougher on nuclear operations. While deregulation has been a concern among all utility sectors, especially telephones, it hasn't affected electrics too negatively thus far. Regulators appear more likely to create a transition to competition that is friendlier to utility companies than was feared a few years ago. Q. WHICH STOCKS TURNED IN STRONG PERFORMANCES FOR THE FUND? A. CINergy has done very well. It is a low-cost electric producer and appears to be a winner under deregulation over the long term. It also has a very growth-oriented management team. On the gas side, Sonat has been a very strong performer. And in the telephone arena, Pacific Telesis has done very well. Q. AT THE SAME TIME, THERE MUST HAVE BEEN SOME DISAPPOINTMENTS . . . A. AirTouch Communications was one. This stock lagged because of concern about slowing cellular subscriber growth and increased price competition. Enron was another disappointment. Even though it saw some stock price appreciation, it lagged the gas group because of contract litigation in the United Kingdom and a slowdown in earnings growth related to heavy spending in anticipation of a fully competitive retail electricity market. Q. WHAT'S YOUR OUTLOOK? A. It's important for me to reiterate that my strategy will continue to be based on individual stock picking. That's because it's nearly impossible to predict the direction of the economy and interest rates. I will continue to look for those companies that are able to show the best earnings growth. For some time, most of these prospects have been in gas and telephone companies. As a result, I'll probably continue to favor them over 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 February 28, 1997, more than $256 million MANAGER: John Muresianu, since 1992; manager, Fidelity Utilities Fund, since 1992; Fidelity Advisor Utilities Growth Fund, since 1996; Fidelity Select Natural Gas Portfolio, 1993- 1994; joined Fidelity in 1986 (checkmark) UTILITIES GROWTH PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 98.0% SHARES VALUE (NOTE 1) BROADCASTING - 0.0% CABLE TV OPERATORS - 0.0% TCI Group Class A 4,500 $ 53,430 TELEVISION BROADCASTING - 0.0% TCI Satellite Entertainment, Inc. Class A (a) 450 3,600 TOTAL BROADCASTING 57,030 CELLULAR - 4.5% CELLULAR & COMMUNICATION SERVICES - 4.5% AirTouch Communications, Inc. (a) 381,600 10,398,600 Cellnet Data Systems, Inc. (a) 25,000 225,000 Telephone & Data Systems, Inc. 8,063 322,520 Vodafone Group PLC sponsored ADR 15,200 722,000 11,668,120 COAL - 0.3% MAPCO, Inc. 22,600 717,550 COMMUNICATIONS EQUIPMENT - 1.2% TELEPHONE EQUIPMENT - 1.2% Lucent Technologies, Inc. 55,256 2,976,917 COMPUTER SERVICES & SOFTWARE - 0.1% DATA PROCESSING - 0.1% NCR Corp. (a) 10,656 351,648 ELECTRIC UTILITY - 9.5% ELECTRIC & OTHER SERVICES - 3.2% DPL, Inc. 33,300 820,013 Enova Corp. 28,300 633,213 Hidroelectrica de Cantabrico SA 10,650 362,651 IES Industries, Inc. 10,100 306,788 LG&E Energy Corp. 8,700 215,325 Montana Power Co. 30,600 669,375 NIPSCO Industries, Inc. 26,300 1,048,713 PECO Energy Co. 30,000 675,000 PacifiCorp. 44,800 924,000 Public Service Co. of New Mexico 32,200 591,675 Rochester Gas & Electric Corp. 8,800 174,900 Sierra Pacific Resources 5,400 157,950 Utilicorp United, Inc. 3,907 105,001 Veba AG Ord. 25,000 1,432,188 WPL Holdings, Inc. 900 24,975 8,141,767 ELECTRIC POWER - 6.3% AES Corp. (a) 133,949 8,756,916 American Electric Power Co., Inc. 14,900 622,075 Baycorp Holdings Ltd. (a) 1,729 14,048 Boston Edison Co. 10,000 267,500 CESC Ltd. GDR (c) 34,300 41,160 Central & South West Corp. 40,000 975,000 Central Louisiana Electric Co., Inc. 37,706 1,003,922 DQE, Inc. 28,050 830,981 Entergy Corp. 15,200 400,900 Kansas City Power & Light Co. 8,500 242,250 Korea Electric Power Corp. sponsored ADR 20,000 360,000 Pinnacle West Capital Corp. 22,700 709,375 Portland General Corp. 30,300 1,185,488 Southern Co. 20,000 435,000 SHARES VALUE (NOTE 1) TECO Energy, Inc. 7,000 $ 170,625 United Illuminating Co. 8,000 233,000 16,248,240 TOTAL ELECTRIC UTILITY 24,390,007 GAS - 23.2% GAS & OTHER SERVICES - 0.9% MDU Resources Group, Inc. 51,900 1,102,875 UGI Corp. 43,251 1,075,869 Western Resources, Inc. 6,500 196,625 2,375,369 GAS DISTRIBUTION - 7.2% Eastern Enterprises Co. 69,000 2,320,125 Energen Corp. 33,600 1,008,000 K N Energy, Inc. 60,600 2,393,700 MCN Corp. 212,600 6,431,150 NUI Corp. 17,500 367,500 National Fuel Gas Co. 7,800 335,400 New Jersey Resources Corp. 8,600 247,250 NICOR, Inc. 17,000 569,500 Northwest Natural Gas Co. 4,350 105,488 Pacific Enterprises 133,400 4,068,700 Peoples Energy Corp. 9,700 328,588 WICOR, Inc. 11,800 414,475 18,589,876 GAS TRANSMISSION - 6.0% Enron Corp. 105,400 4,202,825 ONEOK, Inc. 28,200 803,700 Sonat, Inc. 124,700 5,736,200 TPC Corp. (a) 39,000 404,625 USX-Delhi Group 5,700 85,500 Williams Companies, Inc. 93,034 4,070,238 15,303,088 GAS TRANSMISSION & DISTRIBUTION - 9.1% Bay State Gas Co. 14,100 375,413 Columbia Gas System, Inc. 73,500 4,318,125 Consolidated Natural Gas Co. 17,300 882,300 ENSERCH Corp. 206,100 4,328,100 Equitable Resources, Inc. 18,450 546,581 Noram Energy Corp. 78,471 1,177,065 PanEnergy Corp. 114,100 4,863,513 Questar Corp. 133,000 4,821,250 Tejas Gas Corp. (a) 35,895 1,570,406 Yankee Energy System, Inc. 16,500 381,563 23,264,316 TOTAL GAS 59,532,649 HOLDING COMPANIES - 0.6% CINergy Corp. 44,406 1,532,007 INDEPENDENT POWER - 0.0% STEAM SUPPLY - 0.0% Bonneville Pacific Corp. (a) 11,300 7,063 OIL & GAS - 3.0% CRUDE PETROLEUM & GAS - 0.2% Nuevo Energy Corp. (a) 800 33,200 Occidental Petroleum Corp. 12,100 308,550 341,750 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) OIL & GAS - CONTINUED PETROLEUM REFINERS - 2.8% Coastal Corp. 159,900 $ 7,275,450 TOTAL OIL & GAS 7,617,200 TELEPHONE SERVICES - 55.6% AT&T Corp. 170,500 6,798,688 ALLTEL Corp. 7,400 261,775 Ameritech Corp. 170,700 10,882,125 BCE, Inc. 33,573 1,629,388 Bell Atlantic Corp. 119,700 8,274,263 BellSouth Corp. 258,200 12,103,125 Cincinnati Bell, Inc. 14,000 868,000 Frontier Corp. 800 17,700 GTE Corp. 218,800 10,228,900 MCI Communications Corp. 346,500 12,387,375 NYNEX Corp. 182,800 9,414,200 Pacific Telesis Group 271,200 11,051,400 SBC Communications, Inc. 196,300 11,287,250 Sprint Corp. 350,000 15,925,000 U.S. West Communications Group 209,159 7,529,724 U.S. West Media Group (a) 192,359 3,534,597 WorldCom, Inc. (a) 777,000 20,687,625 142,881,135 TOTAL COMMON STOCKS (Cost $203,091,776) 251,731,326 CONVERTIBLE PREFERRED STOCKS - 0.7% ELECTRIC UTILITY - 0.7% COMBINATION UTILITIES - 0.7% Citizens Utilities Trust $2.50 (Cost $1,705,000) 34,100 1,722,050 CASH EQUIVALENTS - 1.3% Taxable Central Cash Fund (b) (Cost $3,493,627) 3,493,627 3,493,627 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $208,290,403) $ 256,947,003 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.31%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. 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 $41,160 or 0.0% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $72,761,217 and $108,817,571, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms were $26,333 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1997, the aggregate cost of investment securities for income tax purposes was $208,443,537. Net unrealized appreciation aggregated $48,503,466, of which $52,024,627 related to appreciated investment securities and $3,521,161 related to depreciated investment securities. The fund hereby designates approximately $3,803,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. UTILITIES GROWTH PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at value $ 256,947,003 (cost $208,290,403) - See accompanying schedule Receivable for fund shares sold 424,621 Dividends receivable 391,211 Interest receivable 22,695 Redemption fees receivable 400 TOTAL ASSETS 257,785,930 LIABILITIES Payable to custodian bank $ 11,622 Payable for fund shares redeemed 619,770 Accrued management fee 130,697 Other payables and accrued expenses 179,465 TOTAL LIABILITIES 941,554 NET ASSETS $ 256,844,376 Net Assets consist of: Paid in capital $ 198,908,551 Undistributed net investment income 1,654,360 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 7,624,901 Net unrealized appreciation (depreciation) on investments 48,656,564 and assets and liabilities in foreign currencies NET ASSETS, for 5,586,895 $ 256,844,376 shares outstanding NET ASSET VALUE and redemption price per share ($256,844,376 (divided by) 5,586,895 shares) $45.97 Maximum offering price per share (100/97.00 of $45.97) $47.39
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME $ 7,189,433 Dividends Interest (including income on securities loaned of $12,011) 405,654 TOTAL INCOME 7,595,087 EXPENSES Management fee $ 1,440,039 Transfer agent fees 1,743,986 Accounting and security lending fees 240,183 Non-interested trustees' compensation 803 Custodian fees and expenses 16,816 Registration fees 15,337 Audit 36,433 Legal 1,846 Miscellaneous 12,137 Total expenses before reductions 3,507,580 Expense reductions (23,250 3,484,330 ) NET INVESTMENT INCOME 4,110,757 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 12,601,138 Foreign currency transactions (2,297 12,598,841 ) Change in net unrealized appreciation (depreciation) on: Investment securities 21,791,398 Assets and liabilities in (101 21,791,297 foreign currencies ) NET GAIN (LOSS) 34,390,138 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 38,500,895 OTHER INFORMATION $ 238,618 Sales charges paid to FDC Deferred sales charges withheld $ 38,523 by FDC Exchange fees withheld by FSC $ 61,523 Expense reductions $ 22,741 Directed brokerage arrangements Custodian interest credits 56 Transfer agent interest credits 453 $ 23,250
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 4,110,757 $ 7,298,546 Net investment income Net realized 12,598,841 23,321,198 gain (loss) Change in 21,791,297 27,286,486 net unrealized appreciation (depreciation ) NET INCREASE 38,500,895 57,906,230 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (3,870,074 (5,508,527 shareholders ) ) From net investment income From net (20,286,738 - realized gain ) TOTAL (24,156,812 (5,508,527 DISTRIBUTION ) ) S Share 128,552,346 283,936,618 transactions Net proceeds from sales of shares Reinvestmen 23,344,588 5,265,104 t of distributions Cost of (176,372,790 (312,698,789 shares ) ) redeemed Paid in 208,569 231,738 capital portion of redemption fees NET INCREASE (24,267,287 (23,265,329 (DECREASE) ) ) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL (9,923,204 29,132,374 INCREASE ) (DECREASE) IN NET ASSETS NET ASSETS Beginning of 266,767,580 237,635,206 period End of period $ 256,844,376 $ 266,767,580 (including undistribute d net investment income of $1,654,360 and $2,165,391 , respectivel y) OTHER INFORMATION Shares Sold 2,986,768 6,910,440 Issued in 570,027 124,287 reinvestment of distributions Redeemed (4,168,871 (7,649,316 ) ) Net increase (612,076) (614,589) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA D
Net asset $ 43.03 $ 34.88 $ 36.61 $ 41.49 $ 37.18 value, beginning of period Income from Investment Operations Net .73 1.10 1.13 1.33 1.19 investment income Net realized 6.41 7.86 (1.17) (.16) 6.14 and unrealized gain (loss) Total from 7.14 8.96 (.04) 1.17 7.33 investment operations Less Distributions From net (.70) (.84) (1.05) (1.13) (1.33) investment income From net (3.54) - (.67) (4.94) (1.70) realized gain Total (4.24) (.84) (1.72) (6.07) (3.03) distributions Redemption .04 .03 .03 .02 .01 fees added to paid in capital Net asset $ 45.97 $ 43.03 $ 34.88 $ 36.61 $ 41.49 value, end of period TOTAL 18.13% 25.82% .21% 2.53% 20.90% RETURN B, C RATIOS AND SUPPLEMENT AL DATA Net assets, $ 256,844 $ 266,768 $ 237,635 $ 250,522 $ 290,718 end of period (000 omitted) Ratio of 1.47% 1.39% 1.43% 1.36% 1.42% A expenses to average net assets Ratio of 1.46% E 1.38% E 1.42% E 1.35% E 1.42% A expenses to average net assets after expense reductions Ratio of net 1.73% 2.76% 3.24% 3.11% 3.71% A investment income to average net assets Portfolio 31% 65% 24% 61% 34% A turnover rate Average $ .0287 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 8 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 8 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 evaluate a money market fund's performance, you can look at either total return or yield. Total return reflects the change in value of an investment, assuming reinvestment of the fund's dividend 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 1 PAST 5 PAST FEBRUARY 28, 1997 YEAR YEARS 10 YEARS MONEY MARKET 5.02% 22.53% 72.59% MONEY MARKET 1.87% 18.85% 67.41% (INCL. 3% SALES CHARGE) All Taxable 4.91% 22.12% 71.83% Money Market Funds Average CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, 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 823 all taxable money market funds with similar objectives tracked by IBC Financial Data, Inc. over the past one year. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1997 YEAR YEARS YEARS MONEY MARKET 5.02% 4.15% 5.61% MONEY MARKET 1.87% 3.51% 5.29% (INCL. 3% SALES CHARGE) All Taxable 4.91% 4.08% 5.56% Money Market Funds Average AVERAGE ANNUAL TOTAL RETURNS take the fund's 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: 4.71 Row: 1, Col: 2, Value: 4.84 Row: 1, Col: 3, Value: 2.63 Row: 2, Col: 1, Value: 4.819999999999999 Row: 2, Col: 2, Value: 4.88 Row: 2, Col: 3, Value: 2.65 Row: 3, Col: 1, Value: 4.87 Row: 3, Col: 2, Value: 4.83 Row: 3, Col: 3, Value: 2.68 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: 5.31 Row: 5, Col: 2, Value: 4.78 Row: 5, Col: 3, Value: 2.76 6% - 4% - 2% - 0% Money Market All Taxable Money Market Funds Average MMDA 2/25/97 12/3/96 9/3/96 5/28/96 2/27/96 MONEY MARKET 4.71% 4.82% 4.87% 4.86% 5.31% All Taxable Money Market Funds Average 4.84% 4.88% 4.83% 4.74% 4.78% 2/26/97 11/27/96 8/28/96 5/29/96 2/28/96 MMDA 2.63% 2.65% 2.68% 2.66% 2.76% 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 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 market 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 HAS THE INVESTING ENVIRONMENT BEEN LIKE OVER THE PAST YEAR? A. At the beginning of the period, we had just emerged from six or seven months during which the Federal Reserve Board had been lowering the rate banks charge each other for overnight loans - known as the fed funds rate. It had done so in order to stimulate the economy, which had generally been weak for most of 1995. Investors expected this more accommodating Fed policy to continue; however, in the spring it became evident that the economy was bouncing back, and the market adjusted to reflect the sentiment that rates were not likely to decline further. As we moved through the spring and summer, the economy appeared to pick up even more steam, and investors started to look for the Fed to raise the fed funds rate to head off potential inflation pressures that economic strength can produce. During the rest of 1996, overall interest rates fluctuated. They tended to rise prior to Fed meetings in anticipation of rate increase announcements, then drop after the meetings when the Fed, each time, decided to keep official rates unchanged at the 5.25% level it had maintained since January 1996. As we moved into 1997, the markets became complacent as it appeared the economy was slowing and that the Fed would continue to stand pat. Toward the end of the period, however, it became clear that the economy remained strong, and market sentiment again shifted to reflect the belief that the Fed might indeed raise the fed funds rate in 1997. Q. HOW DID YOU POSITION THE FUND OVER THE COURSE OF THE YEAR? A. At the beginning of the period, the fund's average maturity ranged from the mid 50- to the mid 60-day range as a hedge against further rate declines. When it became evident that the interest rate environment had shifted and rates were no longer likely to decline, I brought the average maturity back in to the low 40-day range. In the fourth quarter of 1996, I lengthened the maturity again as I was able to find attractive yield opportunities in longer-term securities. The fund's maturity was extended even further at the end of the period to 66 days, as, again, the fund was being adequately compensated with additional yield for buying the longer maturities. Q. HOW DID THE FUND PERFORM? A. The fund's seven-day yield on February 28, 1997, was 4.75%, compared to 5.21% 12 months ago. The fund's total return during the 12-month period was 5.02%, compared to 4.91% for the all taxable money market funds average, according to IBC Financial Data, Inc. Q. JUST BEFORE THE END OF THE PERIOD, FED CHAIRMAN ALAN GREENSPAN INDICATED TO CONGRESS THAT THE FED MIGHT RAISE THE FED FUNDS RATE AT SOME POINT IN 1997. WHAT'S YOUR OUTLOOK GIVEN THE FED'S STANCE? A. I believe that the Fed will begin to raise rates at some point in the first half of 1997. These rate increases will probably be moderate - probably two but perhaps three moves of .25% each - because Greenspan, in his comments, explained that the Fed would like to make only small adjustments to interest rates in order to pre-empt inflation before we have any real problems. He was fairly adamant about defending this notion in his February testimony, suggesting that the Fed probably will start to raise rates sooner rather than later. Greenspan pointed out that while we don't see any price pressures on goods or services at this time, wages have begun to accelerate. Forces that in the past tended to moderate wage increases - such as corporate downsizing and reductions in health care benefits in the overall compensation scheme - appear to be subsiding. If these business costs start to rise, companies may start to pass them on to the consumer in the form of price increases. At the same time, Greenspan mentioned that the situation is not similar to 1994, when the Fed doubled the fed funds rate to prevent the economy from overheating. At that point, the real fed funds rate - the stated fed funds rate minus the rate of inflation - was essentially at zero. At the end of February, the real fed funds rate was somewhere around 2.0%, close to its long-term average, because inflation has remained fairly low. Given that, it seems only a modest adjustment is called for at this time. As far as the fund is concerned, I'll likely keep its maturity out toward the 60-day range as long as I can maximize the fund's yield by doing so. If we get into a situation where yields on longer-term securities become less attractive, I'll probably bring the fund's maturity back to around 45-50 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 February 28, 1997, more than $848 million MANAGER: John Todd, since 1991; manager various Fidelity and Spartan taxable money market funds; joined Fidelity in 1982 (checkmark) MONEY MARKET PORTFOLIO INVESTMENTS FEBRUARY 28, 1997 Showing Percentage of Total Value of Investment in Securities BANKERS' ACCEPTANCES - 0.2% ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) DOMESTIC BANKERS' ACCEPTANCES CHASE MANHATTAN BANK 4/28/97 5.40% $ 1,887,976 $ 1,871,733 CERTIFICATES OF DEPOSIT - 46.3% DOMESTIC CERTIFICATES OF DEPOSIT - 3.2% WACHOVIA BANK OF NORTH CAROLINA, NA 3/12/97 5.30 25,000,000 25,000,152 NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 36.0% ABN-AMRO BANK 3/3/97 5.77 25,000,000 25,000,000 BANK OF TOKYO - MITSUBISHI LTD. 5/5/97 5.60 3,000,000 3,000,000 5/7/97 5.48 2,000,000 2,000,294 5/27/97 5.48 4,000,000 4,000,000 5/30/97 5.48 2,000,000 2,000,000 6/3/97 5.53 4,000,000 4,000,000 BANQUE NATIONALE DE PARIS 3/26/97 5.40 25,000,000 25,000,000 BARCLAYS BANK, PLC 5/12/97 5.37 35,000,000 35,000,000 BAYERISCHE LANDESBANK GIROZENTRALE 4/22/97 5.58 (a) 4,000,000 4,000,000 CAISSE NATIONALE DE CREDIT AGRICOLE 3/24/97 5.62 10,000,000 10,000,000 6/16/97 5.50 10,000,000 10,000,000 COMMERZBANK, GERMANY 3/13/97 5.30 15,000,000 15,000,000 3/14/97 5.30 15,000,000 15,000,000 DEUTSCHE BANK, GERMANY 5/28/97 5.34 14,000,000 14,000,000 LANDESBANK HESSEN - THURINGEN 4/29/97 5.90 14,000,000 13,993,677 1/27/98 5.80 6,000,000 5,997,253 NATIONAL WESTMINSTER BANK PLC 5/1/97 5.42 2,000,000 2,000,055 RABOBANK NEDERLAND, N.V. 3/3/97 5.30 5,000,000 5,000,040 7/29/97 5.50 25,000,000 25,000,000 ROYAL BANK OF CANADA 1/14/98 5.80 17,000,000 16,997,852 SANWA BANK, LTD. 3/26/97 5.42 4,000,000 4,000,113 3/27/97 5.71 2,000,000 2,000,000 4/18/97 5.50 4,000,000 4,000,000 SOCIETE GENERALE, FRANCE 4/9/97 5.42 2,000,000 2,000,000 7/28/97 5.55 15,000,000 15,000,000 8/7/97 5.52 5,000,000 5,000,000 SUMITOMO BANK, LTD. 3/6/97 5.57 2,000,000 2,000,000 4/1/97 5.51 2,000,000 2,000,000 4/3/97 5.60 1,000,000 1,000,000 4/8/97 5.58 2,000,000 2,000,000 5/19/97 5.52 3,000,000 3,000,000 5/19/97 5.54 1,000,000 1,000,000 5/27/97 5.50 1,000,000 1,000,000 ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) SWISS BANK CORP. 7/16/97 5.40% $ 5,000,000 $ 5,000,000 285,989,284 LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 7.1% ABBEY NATIONAL, TREASURY SERVICES 3/17/97 5.43 10,000,000 10,000,000 BANCO BILBAO VIZCAYA, S.A. 5/19/97 5.39 5,000,000 5,000,108 BANK OF NOVA SCOTIA 3/6/97 5.40 10,000,000 10,000,000 BANK OF TOKYO - MITSUBISHI LTD. 3/3/97 5.48 3,000,000 3,000,002 BAYERISCHE HYPOTHEKEN-UND WESCHEL 4/7/97 5.37 5,000,000 5,000,051 BAYERISCHE VEREINSBANK A.G. 8/26/97 5.44 15,000,000 14,999,940 CANADIAN IMPERIAL BANK OF COMMERCE 3/19/97 5.45 5,000,000 5,000,000 SANWA BANK, LTD. 4/11/97 5.54 3,000,000 3,000,068 56,000,169 TOTAL CERTIFICATES OF DEPOSIT 366,989,605 COMMERCIAL PAPER - 33.3% AMERICAN BRANDS, INC. 4/2/97 5.41 4,346,000 4,325,294 ASSOCIATES CORP. OF NORTH AMERICA 3/25/97 5.49 4,000,000 3,985,573 BMW U.S. CAPITAL CORP. 4/24/97 5.34 21,381,000 21,211,342 BEAR STEARNS COS., INC. 5/21/97 5.37 2,000,000 1,976,195 CIT GROUP HOLDINGS, INC. 3/17/97 5.48 6,000,000 5,985,573 CHRYSLER FINANCIAL CORPORATION 3/12/97 5.49 1,000,000 998,335 3/24/97 5.38 5,000,000 4,982,926 4/21/97 5.45 1,000,000 992,350 4/29/97 5.45 1,000,000 991,150 CITIBANK CREDIT CARD MASTER TRUST I (DAKOTA CERTIFICATE PROGRAM) 3/5/97 5.37 4,367,000 4,364,404 3/6/97 5.36 5,000,000 4,996,292 3/12/97 5.47 4,724,000 4,716,205 COMMONWEALTH BANK OF AUSTRALIA 3/5/97 5.38 7,000,000 6,995,870 DEN DANSKE BANK A/S 3/17/97 5.50 5,000,000 4,988,044 ELECTRICITE DE FRANCE 7/28/97 5.47 8,000,000 7,823,518 FORD MOTOR CREDIT CORP. 4/23/97 5.37 20,000,000 19,843,650 GTE CORP. 3/10/97 5.36 3,000,000 2,995,995 COMMERCIAL PAPER - CONTINUED ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) GENERAL ELECTRIC CAPITAL CORP. 3/5/97 5.76% $ 10,000,000 $ 9,993,778 3/12/97 5.76 4,000,000 3,993,156 5/29/97 5.34 10,000,000 9,869,714 6/3/97 5.44 15,000,000 14,792,808 GENERAL ELECTRIC CO. 3/10/97 5.33% 10,000,000 9,986,750 GENERAL MOTORS ACCEPTANCE CORP. 4/28/97 5.50 10,000,000 9,913,000 8/27/97 5.50 3,000,000 2,920,196 GOLDMAN SACHS GROUP, L.P. (THE) 4/29/97 5.50 10,000,000 9,912,320 IBM CREDIT CORP. 3/3/97 5.39 2,000,000 1,999,411 MERRILL LYNCH & CO., INC. 3/12/97 5.68 1,000,000 998,312 MONSANTO CO. 6/16/97 5.40 8,300,000 8,169,252 MORGAN STANLEY GROUP, INC. 4/15/97 5.40 10,000,000 9,933,250 5/21/97 5.35 9,000,000 8,893,080 NATIONAL BANK OF CANADA 3/3/97 5.43 3,000,000 2,999,107 NATIONWIDE BUILDING SOCIETY 5/13/97 5.38 15,000,000 14,838,488 NORFOLK SOUTHERN CORP. 5/12/97 5.42 3,000,000 2,967,900 5/19/97 5.43 2,000,000 1,976,520 PREFERRED RECEIVABLES FUNDING CORP. 4/22/97 5.36 1,467,000 1,455,748 SBC FINANCE (DELAWARE), INC. 3/11/97 5.76 20,000,000 19,968,889 TEXTRON, INC. 3/4/97 5.50 1,000,000 999,544 WOOL INTERNATIONAL 3/7/97 5.65 15,000,000 14,986,249 TOTAL COMMERCIAL PAPER 263,740,188 FEDERAL AGENCIES (A) - 4.4% FEDERAL NATIONAL MORTGAGE ASSOC. - AGENCY COUPONS 3/2/97 5.38 25,000,000 24,996,702 3/13/97 5.43 5,000,000 4,996,902 3/29/97 5.31 5,000,000 4,999,176 TOTAL FEDERAL AGENCIES 34,992,780 U.S. TREASURY OBLIGATIONS - 3.0% U.S. TREASURY BILLS (NOTE) 3/5/98 5.36 25,000,000 23,643,847 BANK NOTES (A) - 0.8% PNC BANK 3/10/97 5.44 3,000,000 2,998,539 3/11/97 5.35 3,000,000 2,999,559 TOTAL BANK NOTES 5,998,098 MASTER NOTES (A) - 2.0% ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) J.P. MORGAN SECURITIES 3/7/97 5.41% $ 3,000,000 $ 3,000,000 3/7/97 5.44 13,000,000 13,000,000 TOTAL MASTER NOTES 16,000,000 MEDIUM-TERM NOTES (A) - 1.1% GENERAL MOTORS ACCEPTANCE CORP. 5/1/97 5.56 5,000,000 5,000,000 NORWEST CORP. 4/22/97 5.55 4,000,000 4,000,000 TOTAL MEDIUM-TERM NOTES 9,000,000 SHORT-TERM NOTES (A)(B) - 2.5% SMM TRUST (1996-I) 3/31/97 5.43 7,000,000 7,000,000 SMM TRUST (1996-P) 3/17/97 5.46 5,000,000 5,000,000 SMM TRUST (1996-V) 3/26/97 5.64 8,000,000 8,000,000 TOTAL SHORT-TERM NOTES 20,000,000 TIME DEPOSITS - 0.4% BANK OF TOKYO - MITSUBISHI LTD. 4/3/97 5.50 3,000,000 3,000,000 REPURCHASE AGREEMENTS - 6.0% MATURITY AMOUNT In a joint trading account (U.S. Government Obligations): dated 2/28/97 due 3/3/97 At 5.43% $ 2,894,309 2,893,000 dated 2/25/97 due 3/4/97 At 5.37% 25,026,104 25,000,000 dated 2/19/97 due 3/12/97 At 5.30% 20,061,833 20,000,000 TOTAL REPURCHASE AGREEMENTS 47,893,000 TOTAL INVESTMENTS - 100% $ 793,129,251 TOTAL COST FOR INCOME TAX PURPOSES - $793,129,251 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 $20,000,000 or 2.4% of net assets. INCOME TAX INFORMATION A total of 2.7% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax. The fund will notify shareholders in January 1998 of the applicable percentage for use in preparing 1997 income tax returns. MONEY MARKET PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
ASSETS Investment in securities, at $ 793,129,251 value (including repurchase agreements of $47,893,000) - See accompanying schedule Receivable for fund shares sold 142,610,719 Interest receivable 3,917,317 TOTAL ASSETS 939,657,287 LIABILITIES Payable for investments purchased $ 56,812,267 Payable for fund shares redeemed 34,331,836 Accrued management fee 115,104 Other payables and accrued expenses 230,196 TOTAL LIABILITIES 91,489,403 NET ASSETS $ 848,167,884 Net Assets consist of: Paid in capital $ 848,155,015 Accumulated net realized gain (loss) on investments 12,869 NET ASSETS, for 848,149,757 $ 848,167,884 shares outstanding NET ASSET VALUE and redemption price per share ($848,167,884 (divided by) 848,149,757 shares) $1.00 Maximum offering price per share (100/97.00 of $1.00) $1.03
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INTEREST INCOME $ 42,743,060 EXPENSES Management fee $ 1,584,080 Transfer agent fees 1,976,166 Accounting fees and expenses 108,892 Non-interested trustees' compensation 2,158 Custodian fees and expenses 17,070 Registration fees 616,029 Audit 24,503 Legal 4,826 Miscellaneous 31,877 Total expenses before reductions 4,365,601 Expense reductions (521 4,365,080 ) NET INTEREST INCOME 38,377,980 NET REALIZED GAIN (LOSS) 9,751 ON INVESTMENTS NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 38,387,731 OTHER INFORMATION $ 2,788,424 Sales charges paid to FDC Deferred sales charges withheld $ 97,630 by FDC Expense reductions $ 521 Custodian interest credits
STATEMENT OF CHANGES IN NET ASSETS INCREASE YEAR ENDED YEAR ENDED (DECREASE) IN FEBRUARY 28, FEBRUARY 29, NET ASSETS 1997 1996 Operations $ 38,377,980 $ 35,253,224 Net interest income Net realized 9,751 33,656 gain (loss) NET INCREASE 38,387,731 35,286,880 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (38,377,980) (35,253,224) shareholders from net interest income Share 7,030,225,686 6,107,173,652 transactions at net asset value of $1.00 per share Proceeds from sales of shares Reinvestmen 35,577,810 32,687,547 t of distributions from net interest income Cost of (6,828,466,797) (6,102,217,401) shares redeemed NET INCREASE 237,336,699 37,643,798 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIO NS TOTAL 237,346,450 37,677,454 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 610,821,434 573,143,980 period End of period $ 848,167,884 $ 610,821,434
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS FEBRUARY 28, FEBRUARY 29, ENDED FEBRUARY 28, SELECTED 1997 1996 1995 1994 1993 PER-SHARE DATA
Net asset $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 value, beginning of period Income from .049 .054 .042 .026 .026 Investment Operations Net interest income Less Distributions From net (.049) (.054) (.042) (.026) (.026) interest income Net asset $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 value, end of period TOTAL RETURN B 5.02% 5.56% 4.28% 2.62% 2.63% RATIOS AND SUPPLEMENT AL DATA Net assets, $ 848,168 $ 610,821 $ 573,144 $ 518,657 $ 431,133 end of period (000 omitted) Ratio of .56% .59% .65% .72% .56% A expenses to average net assets Ratio of net 4.92% 5.39% 4.19% 2.59% 3.09% A interest income to average net assets
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 February 28, 1997 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 (the fund or 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 with remaining maturities of sixty days or less for which quotations are not readily available 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 the funds 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. Income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Purchases and sales of securities are translated into U.S. dollars at the contractual currency exchange rates established at the time of each trade. 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, 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. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. 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. Shareholders are also subject to an additional $7.50 fee for shares exchanged into another Fidelity fund (see Note 4). 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. FOREIGN CURRENCY CONTRACTS. Certain funds use foreign currency contracts to facilitate transactions in foreign-denominated securities. 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 foreign currency contracts is determined using contractual currency exchange rates established at the time of each trade. The cost of the foreign currency contracts is included in the cost basis of the associated investment. 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 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. TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the SEC, the funds may invest in the Taxable Central Cash Fund (the Cash Fund) managed by FMR Texas, an affiliate of FMR. The Cash Fund is an open-end money market fund available only to investment companies and other accounts managed by FMR and its affiliates. The Cash Fund seeks preservation of capital, liquidity, and current income by investing in U.S. Treasury securities and repurchase agreements for these securities, and may be utilized by the funds as an additional cash management option. Dividends from the Cash Fund are declared daily and paid monthly from net interest income. Income distributions received by the funds are recorded as interest income. 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. 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. 4. 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 annual rate which ranged between .60% and .62% of average net assets for the equity funds. 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% of average net assets. For the period, the management fee was equivalent to an annual 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. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED 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 each fund's accounting records and administers the 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 receives the proceeds 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 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. 5. 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. 6. 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. 7. 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. 8. 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 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 $25,611 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. 9. 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 Consumer Industries 1 10.3 Retailing 1 13.3 Transportation 1 10.5 10. 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. 11. LITIGATION. In December 1995, a single individual who purchased shares of Apple Computer, Inc. ("Apple") in September 1995 filed a purported class action complaint in the United States District Court in Boston 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. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees and the Shareholders of Fidelity Select Portfolios: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of each of the thirty-six funds constituting Fidelity Select Portfolios at February 28, 1997, the results of each of their operations for the year then ended, and the changes in each of their net assets and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Select Portfolios' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 1997 by correspondence with the custodians and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Boston, Massachusetts April 18, 1997 DISTRIBUTIONS The Board of Trustees of Fidelity Select Portfolios voted to pay to shareholders of record at the opening of business on record date, the following distributions derived from capital gains realized from sales of portfolio securities, and dividends derived from net investment income for each of the following funds: AMOUNTS PER SHARE RECORD & REINVESTMENT FUND EX-DATE PAY DATE DIVIDENDS CAPITAL GAINS TOTAL PRICE American Gold 4/4/97 4/7/97 $ - $ 1.29 $ 1.29 $ 22.55 Automotive 4/4/97 4/7/97 .06 .86 .92 23.56 Biotechnology 4/4/97 4/7/97 - .59 .59 29.64 Brokerage and Investment Management 4/4/97 4/7/97 .01 .04 .05 23.52 Chemicals 4/4/97 4/7/97 .01 .03 .04 40.65 Computers 4/4/97 4/7/97 - 3.79 3.79 42.18 Construction and Housing 4/4/97 4/7/97 .02 2.17 2.19 18.90 Defense and Aerospace 4/4/97 4/7/97 - .39 .39 27.82 Electronics 4/4/97 4/7/97 - 3.25 3.25 32.90 Energy 4/4/97 4/7/97 .03 1.00 1.03 20.17 Energy Service 4/4/97 4/7/97 - 1.21 1.21 19.63 Financial Services 4/4/97 4/7/97 .19 3.46 3.65 72.81 Food and Agriculture 4/4/97 4/7/97 .14 2.68 2.82 39.84 Health Care 4/4/97 4/7/97 .10 6.28 6.38 89.96 Home Finance 4/11/97 4/14/97 .14 2.49 2.63 39.23 Industrial Equipment 4/11/97 4/14/97 .02 1.86 1.88 22.55 Industrial Materials 4/11/97 4/14/97 .03 2.00 2.03 23.48 Insurance 4/11/97 4/14/97 - 1.44 1.44 29.70 Leisure 4/11/97 4/14/97 - 2.21 2.21 43.99 Medical Delivery 4/11/97 4/14/97 - 2.03 2.03 24.37 Multimedia 4/11/97 4/14/97 - .55 .55 23.28 Natural Gas 4/11/97 4/14/97 - .33 .33 11.71 Paper and Forest Products 4/11/97 4/14/97 .04 .51 .55 19.70 Regional Banks 4/11/97 4/14/97 .03 .14 .17 30.30 Retailing 4/11/97 4/14/97 - .35 .35 33.16 Software and Computer Services 4/11/97 4/14/97 - 2.46 2.46 34.11 Technology 4/11/97 4/14/97 - 7.16 7.16 47.71 Telecommunications 4/11/97 4/14/97 - 1.04 1.04 38.15 Transportation 4/11/97 4/14/97 - .39 .39 22.81 Utilities Growth 4/11/97 4/14/97 .19 .89 1.08 42.09 FEDERAL TAX STATUS Dividend and capital gain distributions will be taxable regardless of whether you take them in cash or in additional shares. You will be notified at a later date as to the tax treatment of these distributions and dividends. If you receive additional shares, the amount received should be treated as an additional purchase and added to your cost basis. The reinvestment price is the 10:00 A.M. price on each fund's ex-date. NOTE: IF YOUR ACCOUNT IS A FIDELITY PROTOTYPE RETIREMENT PLAN SUCH AS AN INDIVIDUAL RETIREMENT ACCOUNT (IRA), A KEOGH PLAN, A 403(B), OR A QUALIFIED PENSION OR PROFIT SHARING PLAN, THE ABOVE DATA IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND IS NOT REPORTABLE FOR TAX PURPOSES IN 1997. INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS FMR Texas Inc., Irving, TX, MONEY MARKET FUND 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 * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Marvin L. Mann * William O. McCoy * Gerald C. McDonough * Thomas R. Williams * GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Company, Inc. 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 Cyclical Industries * * Construction and Housing Defense and Aerospace Environmental Services Industrial Equipment Industrial Materials Paper and Forest Products Transportation FINANCIAL SERVICES SECTOR Brokerage and Investment Management Financial Services Home Finance Insurance Regional Banks HEALTH CARE SECTOR Biotechnology Health Care Medical Delivery NATURAL RESOURCES SECTOR American Gold Energy Energy Service Natural Resources * * Precious Metals and Minerals TECHNOLOGY SECTOR Computers Developing Communications Electronics Software and Computer Services Technology UTILITIES SECTOR Natural Gas Telecommunications Utilities Growth 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 * * FUND LAUNCHED 3/3/97 BULK RATE U.S. Postage PAID Fidelity Investments (registered trademark) P.O. Box 193 Boston, MA 02101 -----END PRIVACY-ENHANCED MESSAGE-----