-----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, JVRDoOk1FE9cDBh7MLrCF6aomdPONxBU4lmrLV+Yx+lqCwdqSEAa724QYdoielbq 4TJUhJ50I/7BbjBAugp8LQ== 0000320351-97-000031.txt : 19971107 0000320351-97-000031.hdr.sgml : 19971107 ACCESSION NUMBER: 0000320351-97-000031 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19971106 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: SEC FILE NUMBER: 811-03114 FILM NUMBER: 97708759 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 SEMIANNUAL REPORT AUGUST 31, 1997 CONTENTS PERFORMANCE OVERVIEW AND 4 MARKET RECAP FUND UPDATES* CONSUMER SECTOR 6 CONSUMER INDUSTRIES 13 FOOD AND AGRICULTURE 19 LEISURE 25 MULTIMEDIA 31 RETAILING CYCLICALS SECTOR 37 AIR TRANSPORTATION 42 AUTOMOTIVE 47 CHEMICALS 53 CYCLICAL INDUSTRIES 60 CONSTRUCTION AND HOUSING 66 DEFENSE AND AEROSPACE 72 ENVIRONMENTAL SERVICES 78 INDUSTRIAL EQUIPMENT 84 INDUSTRIAL MATERIALS 90 PAPER AND FOREST PRODUCTS 95 TRANSPORTATION FINANCIAL SERVICES SECTOR 101 BROKERAGE AND INVESTMENT MANAGEMENT 107 FINANCIAL SERVICES 112 HOME FINANCE 119 INSURANCE 125 REGIONAL BANKS HEALTH CARE SECTOR 130 BIOTECHNOLOGY 136 HEALTH CARE 142 MEDICAL DELIVERY NATURAL RESOURCES SECTOR 148 AMERICAN GOLD 154 ENERGY 160 ENERGY SERVICE 166 NATURAL RESOURCES 173 PRECIOUS METALS AND MINERALS * FUND UPDATES FOR EACH SELECT PORTFOLIO INCLUDE: PERFORMANCE AND INVESTMENT SUMMARY, MANAGER'S OVERVIEW, INVESTMENTS, AND FINANCIAL STATEMENTS. TECHNOLOGY SECTOR 179 COMPUTERS 185 DEVELOPING COMMUNICATIONS 191 ELECTRONICS 198 SOFTWARE AND COMPUTER SERVICES 204 TECHNOLOGY UTILITIES SECTOR 211 NATURAL GAS 216 TELECOMMUNICATIONS 222 UTILITIES GROWTH 228 MONEY MARKET NOTES TO FINANCIAL STATEMENTS 235 FOOTNOTES TO THE FINANCIAL STATEMENTS To reduce expenses and demonstrate respect for our environment, we have initiated a project through which we will begin eliminating duplicate copies of most financial reports and prospectuses to most households, even if they have more than one account in the fund. If additional copies of financial reports, prospectuses or historical account information are needed, please call 1-800-544-6666. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. DEAR SHAREHOLDER: While not quite matching its phenomenal returns of recent periods, the U.S. stock market still managed to perform extremely well for the six months that ended August 31, 1997. The Standard & Poor's 500 Index (S&P 500) returned 14.78% in that time, easily ahead of its historical annual average of around 11%. Of the 37 Select equity portfolios, 20 outperformed the S&P 500 over the past six months. To put that in perspective, only seven Select funds had outperformed the index for the 12 months ended February 28, 1997. The top-performing Select portfolio was Energy Service, compiling a six-month return of 59.09%. Precious Metals and Minerals was the worst performer, losing 30.05%. Through the first half of the period, the eye-popping performance of a narrow group of well-known, blue chip stocks continued to fuel the market's upward surge. Favorable corporate earnings reports, large cash inflows into mutual funds and a generally beneficial interest-rate environment pushed stock prices - especially those of certain blue chip stocks - to lofty levels. Along the way, there were two interruptions that tested the market's fortitude. The first came in March when the Federal Reserve Board raised a key short-term interest rate by 0.25%. While this resulted in a sharp equity sell-off through mid-April, the market was off and running again through much of the summer as the Dow Jones Industrial Average reached the 8000 mark for the first time in its history. The dog days of August, however, took back some of that gain as investors grew concerned over inflation, a weakened dollar and sluggish corporate earnings, particularly among the heretofore reliable blue chips. In terms of the Select Portfolios themselves, we introduced two new funds earlier in the year - Cyclical Industries and Natural Resources - - as well as a new framework designed to help investors navigate our product line more easily. Under this new alignment, the 37 Select equity funds are divided into seven industry groupings: Consumer, Cyclicals, Financial Services, Health Care, Natural Resources, Technology and Utilities. Each group contains a "broad sector" fund as well as additional industry-specific funds. Whereas the broad sector fund can invest in a variety of industries within its sector, the industry-specific funds concentrate on particular segments of that industry. Results in the CONSUMER sector were mixed. Retailing performed well, as inventory levels were reduced and sales were better than expected. With its increased exposure to advertising agency stocks, Multimedia also performed well. Leisure and Consumer Industries underperformed the S&P 500, as earnings disappointments in the apparel industry brought negative results. Lastly, Food and Agriculture stocks - many of which are capable of sustaining steady, predictable earnings growth - - tend to perform better when the direction of the economy is uncertain. With the U.S. economy continuing its strong run, many investors looked elsewhere for higher returns. On the other hand, CYCLICAL stocks - those that parallel the ups and downs of the economy - benefited from economic growth. Transportation, and Construction and Housing fared well, while Defense and Aerospace, and Air Transportation thrived due to an increase in new airplane orders. Favorable supply/demand conditions made for nice gains for Paper and Forest Products, but slower new car sales put a brake on Automotive's performance. Poor pricing trends and a significant exposure to gold-related stocks hurt Industrial Materials, while the weak performance of several key companies detracted from Environmental Services' return. Increased consolidation, as well as positive industry trends and a benign interest-rate climate, helped FINANCIAL SERVICES funds perform well, particularly Brokerage and Investment Management, and Insurance. Financial Services, Home Finance and Regional Banks performed moderately well, but were unable to match their return levels of six months ago. For a variety of reasons, the HEALTH CARE sector registered subpar results over the past six months. The market's narrow large-cap advance didn't help, nor did negative publicity surrounding certain experimental drugs or increased government scrutiny over Medicare billing practices. These developments held back the performance of Biotechnology, Health Care and Medical Delivery. The performance of Select portfolios in the NATURAL RESOURCES area covered the entire spectrum. Increased oil and gas exploration activity, spurred on by new technology, spelled good times for both Energy and Energy Service. On a down note, a sharp decline in gold prices hurt both American Gold, and Precious Metals and Minerals. With companies worldwide looking to increase productivity, TECHNOLOGY stocks were the clear beneficiaries. Steady orders and revenue growth were prevalent throughout the sector - particularly for personal computer and semiconductor manufacturers - and this benefited Computers, Electronics, Software and Computer Services and Technology. Additionally, rising demand for enhanced communications infrastructure helped Developing Communications. Uncertainty over the effects of deregulation continued to haunt the UTILITIES group, as returns for Telecommunications and Utilities Growth were somewhat disappointing. Natural Gas, however, capitalized on favorable supply and demand conditions within its industry. As we enter September 1997, the market is still trying to assess the aforementioned developments of August. Stocks had reached record valuation levels despite earnings growth that many felt didn't support those valuations. The consensus among market followers is that with large-cap stocks taking a step back, investors will realize that good opportunities also exist in the small- and mid-cap arenas. A broader market should also benefit the Select funds, many of which emphasize smaller stocks. In the meantime, if the economy can maintain its moderate growth rate and companies continue to increase their business prospects through smarter capital management, it could bode well for investors. In the pages that follow, you'll find detailed summaries for each of the Select funds. We hope that you find them informative and 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 SIX MONTHS ENDED AUGUST 31, 1997 Row: 1, Col: 1, Value: 59.09 Row: 2, Col: 1, Value: 36.63 Row: 3, Col: 1, Value: 30.03 Row: 4, Col: 1, Value: 29.92 Row: 5, Col: 1, Value: 27.56 Row: 6, Col: 1, Value: 25.97 Row: 7, Col: 1, Value: 25.0 Row: 8, Col: 1, Value: 23.53 Row: 9, Col: 1, Value: 22.56 Row: 10, Col: 1, Value: 22.54 Row: 11, Col: 1, Value: 21.84 Row: 12, Col: 1, Value: 21.78 Row: 13, Col: 1, Value: 21.58 Row: 14, Col: 1, Value: 21.38 Row: 15, Col: 1, Value: 18.7 Row: 16, Col: 1, Value: 18.6 Row: 17, Col: 1, Value: 18.47 Row: 18, Col: 1, Value: 17.28 Row: 19, Col: 1, Value: 17.21 Row: 20, Col: 1, Value: 16.31 Row: 21, Col: 1, Value: 14.78 Row: 22, Col: 1, Value: 14.41 Row: 23, Col: 1, Value: 14.29 Row: 24, Col: 1, Value: 13.52 Row: 25, Col: 1, Value: 13.21 Row: 26, Col: 1, Value: 13.2 Row: 27, Col: 1, Value: 13.08 Row: 28, Col: 1, Value: 11.93 Row: 29, Col: 1, Value: 10.73 Row: 30, Col: 1, Value: 10.47 Row: 31, Col: 1, Value: 9.93 Row: 32, Col: 1, Value: 8.33 Row: 33, Col: 1, Value: 8.33 Row: 34, Col: 1, Value: 6.430000000000001 Row: 35, Col: 1, Value: 5.33 Row: 36, Col: 1, Value: 0.47 Row: 37, Col: 1, Value: -24.07 Row: 38, Col: 1, Value: -30.05 Energy Service 59.09%Electronics 36.66%Defense & Aerospace 30.03%Computers 29.92%Technology 27.56%Developing Communications 25.97%Transportation 25.00%Air Transportation 23.53%Industrial Equipment 22.56%Retailing 22.54%Brokerage and Investment Management 21.84%Construction and Housing 21.78%Software and Computer Services 21.58%Energy 21.38%Insurance 18.70%Cyclical Industries 1 18.60%Paper & Forest 18.47%Multimedia 17.28%Chemicals 17.21%Natural Gas 16.31%S&P 500 14.78%Financial Services 14.41%Leisure 14.29%Home Finance 13.52%Consumer Industries 13.21%Natural Resources 1 13.20%Automotive 13.08%Regional Banks 11.93%Health Care 10.73%Telecommunications 10.47%Environmental Services 9.93%Industrial Materials 8.33%Medical Delivery 8.33%Food & Agriculture 6.43%Utilities Growth 5.33%Biotechnology 0.47%American Gold -24.07%Precious Metals & Minerals -30.05% 1 RETURNS ARE FROM INCEPTION DATE MARCH 3, 1997. 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 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 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1997 MONTHS YEAR YEARS FUND CONSUMER INDUSTRIES 13.21% 29.37% 118.28% 198.24% CONSUMER INDUSTRIES 9.82% 25.49% 111.73% 189.29% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 206.48% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or since the fund started on June 29, 1990. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS FUND CONSUMER INDUSTRIES 29.37% 16.90% 16.44% CONSUMER INDUSTRIES 25.49% 16.19% 15.94% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 16.88% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19970831 19970909 114814 S00000000000001 Consumer Industries S&P 500 00517 SP001 1990/06/29 9700.00 10000.00 1990/07/31 9670.90 9980.27 1990/08/31 8943.40 9078.05 1990/09/30 8439.00 8635.95 1990/10/31 8749.40 8598.82 1990/11/30 9234.40 9154.30 1990/12/31 9593.72 9409.71 1991/01/31 9808.43 9819.97 1991/02/28 10569.68 10522.10 1991/03/31 11077.18 10776.73 1991/04/30 10950.31 10802.60 1991/05/31 11477.33 11269.27 1991/06/30 10911.27 10753.14 1991/07/31 11623.72 11254.23 1991/08/31 12101.94 11520.96 1991/09/30 11994.59 11328.56 1991/10/31 12375.21 11480.36 1991/11/30 11857.95 11017.70 1991/12/31 13290.07 12278.13 1992/01/31 13379.46 12049.75 1992/02/29 13836.37 12206.40 1992/03/31 13677.45 11968.38 1992/04/30 13717.18 12320.25 1992/05/31 13627.78 12380.62 1992/06/30 13015.69 12196.14 1992/07/31 13388.15 12694.97 1992/08/31 13253.65 12434.72 1992/09/30 13377.81 12581.45 1992/10/31 13595.08 12625.48 1992/11/30 14246.90 13056.01 1992/12/31 14427.78 13216.60 1993/01/31 14331.67 13327.62 1993/02/28 13851.10 13508.88 1993/03/31 14662.73 13793.92 1993/04/30 14566.61 13460.10 1993/05/31 15719.98 13820.83 1993/06/30 15730.66 13860.91 1993/07/31 15880.17 13805.47 1993/08/31 16916.07 14328.70 1993/09/30 17289.85 14218.37 1993/10/31 17823.81 14512.69 1993/11/30 17428.68 14374.82 1993/12/31 17987.73 14548.75 1994/01/31 17835.98 15043.41 1994/02/28 17789.29 14635.73 1994/03/31 16645.36 13997.61 1994/04/30 16823.06 14176.78 1994/05/31 16600.01 14409.28 1994/06/30 15684.31 14056.26 1994/07/31 16106.94 14517.30 1994/08/31 17046.12 15112.51 1994/09/30 16729.15 14742.25 1994/10/31 17057.86 15073.95 1994/11/30 16224.34 14524.96 1994/12/31 16716.09 14740.37 1995/01/31 16569.67 15122.58 1995/02/28 16972.32 15711.91 1995/03/31 17435.98 16175.57 1995/04/30 17815.10 16651.94 1995/05/31 18145.91 17317.52 1995/06/30 18133.66 17719.80 1995/07/31 18893.31 18307.39 1995/08/31 18856.56 18353.34 1995/09/30 19861.26 19127.86 1995/10/31 20755.69 19059.57 1995/11/30 21980.94 19896.28 1995/12/31 21446.67 20279.49 1996/01/31 21446.67 20969.80 1996/02/29 22065.08 21164.19 1996/03/31 22844.29 21368.00 1996/04/30 23611.12 21682.97 1996/05/31 24835.58 22242.17 1996/06/30 24711.90 22326.91 1996/07/31 22015.61 21340.51 1996/08/31 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 1997/03/31 24798.48 25604.17 1997/04/30 24984.00 27132.74 1997/05/31 26715.57 28784.58 1997/06/30 28026.61 30074.13 1997/07/31 29646.86 32467.13 1997/08/29 28917.13 30648.32 IMATRL PRASUN SHR__CHT 19970831 19970909 114820 R00000000000089 $10,000 OVER LIFE OF FUND: 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 August 31, 1997, the value of the investment would have grown to $28,929 - a 189.29% 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 $30,648 - a 206.48% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS HFS, INC. 6.8 UNIVERSAL OUTDOOR HOLDINGS, INC. 3.0 BET HOLDINGS, INC. CLASS A 3.0 TJX COMPANIES, INC. 2.9 VIACOM, INC. CLASS B (NON-VTG.) 2.7 TIME WARNER, INC. 2.7 WAL-MART STORES, INC. 2.4 OUTDOOR SYSTEMS, INC. 2.3 STEINER LEISURE LTD. 2.1 GILLETTE CO. 2.1 TOP INDUSTRIES AS OF AUGUST 31, 1997 HOTELS, MOTELS, & TOURIST COURTS 10.0% CABLE TV OPERATORS 5.6% ADVERTISING 5.4% RESTAURANTS 4.2% MOTION PICTURE PRODUCTION 4.0% ALL OTHERS 70.8% ROW: 1, COL: 1, VALUE: 70.8 ROW: 1, COL: 2, VALUE: 4.0 ROW: 1, COL: 3, VALUE: 4.2 ROW: 1, COL: 4, VALUE: 5.4 ROW: 1, COL: 5, VALUE: 5.6 ROW: 1, COL: 6, VALUE: 10.0 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS CONSUMER INDUSTRIES PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: Effective August 18, 1997, Doug Chase (right) became Portfolio Manager of Select Consumer Industries Portfolio. The following is an interview with Paul Antico, who managed the fund during most of the period covered by the report, and Doug Chase, who discusses his investment philosophy and outlook. Q. PAUL, HOW DID THE FUND PERFORM? P.A. For the six- and 12-month periods that ended August 31, 1997, the fund returned 13.21% and 29.37%, respectively. By comparison, the Standard & Poor's 500 Index returned 14.78% and 40.65% for the same time periods. Q. DID YOU MAKE ANY SIGNIFICANT CHANGES IN THE FUND'S HOLDINGS DURING THE PERIOD? P.A. I increased the fund's weighting in outdoor advertising, specifically such positions in the billboard industry as Outdoor Systems and Universal Outdoor Holdings. This industry has similar dynamics to the TV and radio industries. It's very fragmented, quite dependent on advertising dollars and going through a period of consolidation that should help it over time. In the cable television industry, I increased the fund's positions in the networks to a greater degree than the operators. With the operators - those providing cable service to consumers - I was concerned about the lack of industry standards for both cable and telephone service and how that might increase operating costs and slow market penetration. On the other hand, I was much more optimistic about cable networks. Their ratings have been going up dramatically relative to the broadcast channels, so their advertising rates have gone up. During the period, I increased the fund's positions in such cable networks as BET Holdings. Q. YOU ALSO SEEMED TO REDUCE YOUR HOLDINGS IN CONSUMER STAPLES . . . P.A. That's right. Later in the period I began to feel that valuations in this sector were too high and that a contraction was starting in this part of the market. I felt that Coca-Cola's stock, for example, was too expensive based on an over-valuing of its bottlers, so I sold it. With respect to Procter & Gamble and Gillette, I began to feel that their valuations were high as well and didn't see the same opportunities for appreciation going forward. Q. WHAT STOCKS PERFORMED WELL DURING THE PERIOD? P.A. The fund benefited from the strong performance of such diversified companies as Nokia and General Electric. Computer Learning Centers, which has training centers around the nation, was an excellent stock. Starbucks also performed very well. I liked the company's plans for expansion both domestically and internationally, its record of terrific growth and its potential to exploit the Starbucks brand name in supermarkets. Q. WERE THERE ANY DISAPPOINTMENTS? P.A. Apparel stocks have been a terribly disappointing group for the fund. Gadzooks, for example, had to pre-announce an earnings disappointment, which hurt its stock. Other disappointments included Viacom, which was affected by problems experienced by its Blockbuster Video subsidiary. Another related disappointment was Hollywood Entertainment, the number two company in its market after Blockbuster. Hollywood's stock was dragged down by Blockbuster's tumble. Q. TURNING TO YOU, DOUG, WHAT IS YOUR INVESTMENT PHILOSOPHY AND OUTLOOK? D.C. Like Paul, I tend to take a bottom-up approach to stock selection. I work with a team of analysts to use the best ideas of individuals who have thorough knowledge of the consumer sector. Where I differ from Paul is that I place a greater emphasis on blending a variety of large-, mid-, and small-cap companies in the fund's portfolio. Going forward, my research team and I will continue to follow the Fidelity tradition of identifying those companies that have the greatest potential for appreciation before the rest of the market has had the opportunity to do so. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: June 29, 1990 FUND NUMBER: 517 TRADING SYMBOL: FSCPX SIZE: as of August 31, 1997, more than $15 million MANAGER: Doug Chase, since August 1997; manager, Fidelity Select Automotive Portfolio, since 1994; Fidelity Select Industrial Materials Portfolio, 1994-August 1997; joined Fidelity in 1993 (checkmark) CONSUMER INDUSTRIES PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.1% SHARES VALUE (NOTE 1) ADVERTISING - 5.8% ADVERTISING - 5.4% Outdoor Systems, Inc. (a) 13,800 $ 364,838 69005710 Universal Outdoor Holdings, Inc. (a) 14,100 482,925 91377M10 847,763 ADVERTISING AGENCIES - 0.4% Omnicom Group, Inc. 1,000 67,750 68191910 TOTAL ADVERTISING 915,513 APPAREL STORES - 5.7% FOOTWEAR - WHOLESALE - 0.5% Kenneth Cole Productions, Inc. Class A (a) 5,700 78,731 19329410 GENERAL APPAREL STORES - 3.4% Ross Stores, Inc. 2,800 82,250 77829610 TJX Companies, Inc. 16,500 453,750 87254010 536,000 SHOE STORES - 1.8% Baker (J.), Inc. 17,200 161,250 05723210 Payless ShoeSource, Inc. (a) 2,000 128,250 70437910 289,500 WOMEN'S CLOTHING STORES - 0.0% Charming Shoppes, Inc. (a) 200 1,206 16113310 TOTAL APPAREL STORES 905,437 BEVERAGES - 0.9% SOFT DRINKS - 0.9% PepsiCo, Inc. 4,100 147,600 71344810 BROADCASTING - 7.9% CABLE TV OPERATORS - 5.6% BET Holdings, Inc. Class A (a) 12,000 472,500 08658510 Cox Communications, Inc. Class A (a) 4,000 108,250 22404410 TCA Cable TV, Inc. 4,200 159,600 87224110 Tele Communications, Inc. (TCI) Series A (a) 8,000 140,000 87924V10 880,350 RADIO BROADCASTING - 1.3% Clear Channel Communications, Inc. (a) 3,000 203,813 18450210 TELEVISION BROADCASTING - 1.0% HSN, Inc. 5,000 165,000 40429R10 TOTAL BROADCASTING 1,249,163 CELLULAR - 3.9% CELLULAR & COMMUNICATION SERVICES - 3.9% AirTouch Communications, Inc. (a) 7,000 236,688 00949T10 Mobile Telecommunications Technologies, Inc. (a) 6,000 73,500 60740610 Nextel Communications, Inc. Class A (a) 4,000 100,250 65332V10 United States Cellular Corp. (a) 7,000 210,875 91168410 621,313 COMMUNICATIONS EQUIPMENT - 1.0% TELEPHONE EQUIPMENT - 1.0% Nokia Corp. AB sponsored ADR 2,000 155,000 65490220 COMPUTER SERVICES & SOFTWARE - 2.6% COMPUTER & SOFTWARE STORES - 1.4% CompUSA, Inc. (a) 6,900 213,469 20493210 COMPUTER SERVICES - 1.0% America Online, Inc. (a) 2,500 161,250 02364J10 SHARES VALUE (NOTE 1) PREPACKAGED COMPUTER SOFTWARE - 0.2% Spectrum Holobyte, Inc. (a) 8,100 $ 38,981 84762J10 TOTAL COMPUTER SERVICES & SOFTWARE 413,700 CONSUMER ELECTRONICS - 0.7% RADIOS, TELEVISIONS, STEREOS - 0.7% Philips Electronics NV 1,500 107,438 71833750 DRUG STORES - 2.0% CVS Corp. 3,877 218,566 12665010 Rite Aid Corp. 2,000 100,125 76775410 318,691 DRUGS & PHARMACEUTICALS - 1.0% PHARMACEUTICAL PREPARATIONS - 1.0% NBTY, Inc. (a) 3,000 66,750 62878210 Twinlab Corp. 4,000 84,000 90177410 150,750 ELECTRICAL EQUIPMENT - 1.2% ELECTRICAL MACHINERY - 1.2% General Electric Co. 1,000 62,500 36960410 Westinghouse Electric Corp. 5,150 132,613 96040210 195,113 ELECTRONICS - 0.7% ELECTRONIC PARTS - WHOLESALE - 0.7% Brightpoint, Inc. (a) 3,100 116,250 10947310 ENTERTAINMENT - 8.2% AMUSEMENT & RECREATIONAL SERVICES - 0.6% IMAX Corp. 4,000 95,118 45245E10 MOTION PICTURE DISTRIBUTION - 0.7% All American Communications, Inc. Class B (non-vtg.) (a) 7,700 107,800 01648040 MOTION PICTURE PRODUCTION - 4.0% Viacom, Inc. Class B (non-vtg.) (a) 14,500 429,556 92552430 King World Productions, Inc. 5,000 198,750 49566710 628,306 RECORDS & CD'S - 2.6% Time Warner, Inc. 8,200 422,300 88731510 RECREATIONAL SERVICES - 0.3% MGM Grand, Inc. (a) 1,200 48,150 55295310 TOTAL ENTERTAINMENT 1,301,674 FOODS - 2.4% CANNED SPECIALTIES - 0.9% Campbell Soup Co. 3,000 139,125 13442910 PACKAGED & FROZEN FOODS - 1.5% Dreyer's Grand Ice Cream, Inc. 5,100 238,425 26187810 TOTAL FOODS 377,550 GENERAL MERCHANDISE STORES - 7.0% DEPARTMENT STORES - 1.8% Federated Department Stores, Inc. (a) 5,300 222,600 31410H10 Stein Mart, Inc. (a) 2,000 56,000 85837510 278,600 GENERAL MERCHANDISE STORES - 2.4% Wal-Mart Stores, Inc. 10,900 386,950 93114210 VARIETY STORES - 2.8% Dollar Tree Stores (a) 7,000 272,125 25674710 99 Cents Only Stores (a) 5,100 163,838 65440K10 435,963 TOTAL GENERAL MERCHANDISE STORES 1,101,513 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) GROCERY STORES - 1.2% Safeway, Inc. (a) 3,700 $ 188,469 78651420 HOUSEHOLD PRODUCTS - 3.5% COSMETICS - 2.7% Avon Products, Inc. 1,400 89,688 05430310 Gillette Co. 4,000 331,250 37576610 420,938 SOAPS & DETERGENTS - 0.8% Procter & Gamble Co. 1,000 133,063 74271810 TOTAL HOUSEHOLD PRODUCTS 554,001 LEASING & RENTAL - 1.5% VIDEO TAPE RENTAL - 1.5% Hollywood Entertainment Corp. (a) 14,600 239,075 43614110 LEISURE DURABLES & TOYS - 3.0% SPORTING & ATHLETIC GOODS - 1.2% Callaway Golf Co. 1,700 57,269 13119310 K2, Inc. 4,300 133,300 48273210 190,569 TOYS & GAMES - 1.3% Mattel, Inc. 6,000 200,625 57708110 TRAVEL TRAILERS AND CAMPERS - 0.5% Brunswick Corp. 2,500 76,250 11704310 TOTAL LEISURE DURABLES & TOYS 467,444 LODGING & GAMING - 10.0% HOTELS, MOTELS, & TOURIST COURTS - 10.0% HFS, Inc. (a) 19,400 1,080,338 40418110 ITT Corp. (a) 2,900 182,156 45091210 Mirage Resorts, Inc. (a) 9,200 246,675 60462E10 Servico, Inc. (a) 5,000 81,875 81764810 1,591,044 MEDICAL FACILITIES MANAGEMENT - 0.0% HOME HEALTH CARE AGENCIES - 0.0% Coram Healthcare Corp. warrants 7/11/99 (a) 216 - 21810311 PAPER & FOREST PRODUCTS - 1.7% PAPER - 1.7% Kimberly-Clark Corp. 5,700 270,394 49436810 RESTAURANTS - 4.2% CKE Restaurants, Inc. 2,000 64,500 12561E10 Logan's Roadhouse, Inc. (a) 3,700 90,650 54119810 NPC International, Inc. 7,000 79,625 62936030 PJ America, Inc. 5,100 81,600 72585Q10 Rainforest Cafe, Inc. (a) 8,200 220,375 75086K10 Starbucks Corp. (a) 3,000 123,000 85524410 659,750 RETAIL & WHOLESALE, MISCELLANEOUS - 6.0% HOBBY, TOY, & GAME SHOPS - 0.8% Toys "R" Us, Inc. (a) 3,800 131,338 89233510 RETAIL STORES - 0.9% Gadzooks, Inc. (a) 7,100 134,900 36255310 SHARES VALUE (NOTE 1) RETAIL, GENERAL - 2.5% Bed Bath & Beyond, Inc. (a) 5,700 $ 176,700 07589610 Officemax, Inc. (a) 8,000 118,500 67622M10 Pier 1 Imports, Inc. 6,000 102,000 72027910 397,200 SEWING STORES - 0.6% Fabri-Centers of America, Inc. Class A (a) 4,100 99,938 30284620 STATIONERY & OFFICE SUPPLIES - WHOLESALE - 1.2% U.S. Office Products Co. 6,000 194,625 91232510 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 958,001 SERVICES - 2.9% BEAUTY SHOPS - 2.1% Steiner Leisure Ltd. 11,000 335,500 85899J22 BUSINESS SERVICES - 0.8% Premier Technologies, Inc. (a) 4,100 127,356 74058F10 TOTAL SERVICES 462,856 TELEPHONE SERVICES - 1.0% U.S. WEST Media Group 7,700 154,000 91288920 TEXTILES & APPAREL - 7.7% APPAREL - 0.6% Liz Claiborne, Inc. 2,200 98,038 53932010 COTTON MILLS - 0.6% Galey & Lord, Inc. (a) 4,800 85,500 36352K10 FOOTWEAR - 3.5% NIKE, Inc. Class B 2,800 149,450 65410610 Reebok International Ltd. 3,000 131,813 75811010 Timberland Co. Class A 4,100 270,856 88710010 552,119 KNIT OUTERWEAR MILLS - 0.2% Tultex Corp. (a) 5,300 30,475 89990010 MEN'S & BOYS' CLOTHING - 2.8% Cutter & Buck, Inc. (a) 7,000 138,250 23221710 Tommy Hilfiger (a) 7,100 309,738 89299B92 447,988 TOTAL TEXTILES & APPAREL 1,214,120 TOBACCO - 0.4% TOBACCO MANUFACTURERS - 0.4% Philip Morris Companies, Inc. 1,600 69,800 71815410 TOTAL COMMON STOCKS (Cost $13,873,746) 14,905,659 CONVERTIBLE PREFERRED STOCKS - 1.5% CELLULAR - 1.5% CELLULAR & COMMUNICATION SERVICES - 1.5% AirTouch Communications, Inc. Class B $1.74 (Cost $182,350) 7,000 229,250 00949T20 CASH EQUIVALENTS - 4.4% Taxable Central Cash Fund (b) (Cost $702,384) 702,384 702,384 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $14,758,480) $ 15,837,293 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $19,633,267 and $24,400,019, 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 $5,120 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $14,765,922. Net unrealized appreciation aggregated $1,071,371, of which $1,660,146 related to appreciated investment securities and $588,775 related to depreciated investment securities. CONSUMER INDUSTRIES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 15,837,293 SECURITIES, AT VALUE (COST $14,758,480 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 12,488 FUND SHARES SOLD DIVIDENDS 4,390 RECEIVABLE INTEREST 2,732 RECEIVABLE REDEMPTION FEES 23 RECEIVABLE OTHER 16,014 RECEIVABLES TOTAL ASSETS 15,872,940 LIABILITIES PAYABLE FOR $ 55,823 FUND SHARES REDEEMED ACCRUED 8,380 MANAGEMENT FEE OTHER PAYABLES 32,712 AND ACCRUED EXPENSES TOTAL LIABILITIES 96,915 NET ASSETS $ 15,776,025 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 12,484,103 ACCUMULATED (117,903) NET INVESTMENT (LOSS) ACCUMULATED 2,331,012 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 1,078,813 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 15,776,025 674,413 SHARES OUTSTANDING NET ASSET $23.39 VALUE AND REDEMPTION PRICE PER SHARE ($15,776,02 5 (DIVIDED BY) 674,413 SHARES) MAXIMUM $24.11 OFFERING PRICE PER SHARE (100/97.00 OF $23.39) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 46,438 INCOME DIVIDENDS INTEREST 26,649 TOTAL INCOME 73,087 EXPENSES MANAGEMENT $ 51,378 FEE TRANSFER AGENT 82,640 FEES ACCOUNTING FEES 30,304 AND EXPENSES NON-INTERESTED 39 TRUSTEES' COMPENSATION CUSTODIAN FEES 9,899 AND EXPENSES REGISTRATION FEES 12,194 AUDIT 9,482 LEGAL 70 MISCELLANEOUS 43 TOTAL EXPENSES 196,049 BEFORE REDUCTIONS EXPENSE (5,059) 190,990 REDUCTIONS NET INVESTMENT (117,903) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 2,396,206 SECURITIES FOREIGN 73 2,396,279 CURRENCY TRANSACTIONS CHANGE IN NET (224,613) UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) 2,171,666 NET INCREASE $ 2,053,763 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 19,065 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 472 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 5,153 WITHHELD BY FSC EXPENSE $ 4,964 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 95 CREDITS $ 5,059 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (117,903) $ (287,928) NET INVESTMENT INCOME (LOSS) NET REALIZED 2,396,279 2,053,365 GAIN (LOSS) CHANGE IN NET (224,613) (1,279,001) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 2,053,763 486,436 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS SHARE 8,584,373 64,681,737 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES COST OF SHARES (13,281,210) (69,290,503) REDEEMED REDEMPTION 26,989 152,149 FEES NET INCREASE (4,669,848) (4,456,617) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (2,616,085) (3,970,181) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 18,392,110 22,362,291 PERIOD END OF PERIOD $ 15,776,025 $ 18,392,110 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $117,903 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 404,342 3,299,962 REDEEMED (620,307) (3,662,924) NET INCREASE (215,965) (362,962) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 20.66 $ 17.84 $ 13.91 $ 15.24 $ 12.97 $ 13.81 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.15) (.22) .08 (.15) (.20) (.09) INVESTMENT INCOME (LOSS) D NET REALIZED 2.85 2.93 3.97 (.60) 3.84 .20 AND UNREALIZED GAIN (LOSS) TOTAL FROM 2.70 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 FEES .03 .11 .11 .02 .03 .02 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 23.39 $ 20.66 $ 17.84 $ 13.91 $ 15.24 $ 12.97 END OF PERIOD TOTAL RETURN B, C 13.21% 15.81% 30.01% (4.59)% 28.43% .98% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 15,776 $ 18,392 $ 22,362 $ 20,501 $ 8,374 $ 7,005 OF PERIOD (000 OMITTED) RATIO OF 2.27% A 2.49% 1.53% E 2.49% E 2.48% E 2.47% A, E EXPENSES TO AVERAGE NET ASSETS RATIO OF 2.21% A, F 2.44% F 1.48% F 2.49% 2.48% 2.47% A EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (1.36)% A (1.13)% .46% (1.08)% (1.34)% (.80)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 239% A 340% 601% 190% 169% 215% A TURNOVER RATE AVERAGE $ .0321 $ .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 DURIN G 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS FOOD AND AGRICULTURE 6.43% 26.36% 122.08% 329.80% FOOD AND AGRICULTURE 3.24% 22.57% 115.42% 316.91% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS FOOD AND AGRICULTURE 26.36% 17.30% 15.70% FOOD AND AGRICULTURE 22.57% 16.59% 15.35% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970923 094135 S00000000000001 Food & Agriculture S&P 500 00009 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9601.77 9781.00 1987/10/31 7435.85 7674.17 1987/11/30 7106.78 7041.82 1987/12/31 7445.33 7577.70 1988/01/31 7736.60 7896.72 1988/02/29 8119.85 8264.71 1988/03/31 8176.06 8009.33 1988/04/30 8201.61 8098.24 1988/05/31 8262.93 8168.69 1988/06/30 8600.20 8543.63 1988/07/31 8661.52 8511.17 1988/08/31 8656.41 8221.79 1988/09/30 9003.89 8572.04 1988/10/31 9422.91 8810.34 1988/11/30 9203.18 8684.35 1988/12/31 9438.77 8836.33 1989/01/31 9925.57 9483.15 1989/02/28 9746.22 9247.02 1989/03/31 10115.16 9462.47 1989/04/30 10637.83 9953.57 1989/05/31 11293.73 10356.69 1989/06/30 11515.64 10297.66 1989/07/31 12614.11 11227.54 1989/08/31 12419.65 11447.60 1989/09/30 12472.21 11400.66 1989/10/31 12346.06 11136.17 1989/11/30 12813.84 11363.35 1989/12/31 13107.38 11636.07 1990/01/31 12195.66 10855.29 1990/02/28 12370.12 10995.32 1990/03/31 12904.77 11286.70 1990/04/30 12854.12 11004.53 1990/05/31 13974.07 12077.47 1990/06/30 14427.37 11995.34 1990/07/31 14421.68 11956.96 1990/08/31 13369.62 10876.05 1990/09/30 12943.12 10346.39 1990/10/31 13250.20 10301.90 1990/11/30 13796.13 10967.40 1990/12/31 14329.91 11273.39 1991/01/31 14741.18 11764.91 1991/02/28 15851.61 12606.10 1991/03/31 16627.16 12911.17 1991/04/30 16374.52 12942.15 1991/05/31 16973.80 13501.25 1991/06/30 16274.46 12882.90 1991/07/31 16955.55 13483.24 1991/08/31 17630.67 13802.79 1991/09/30 17320.00 13572.29 1991/10/31 17325.97 13754.15 1991/11/30 17206.48 13199.86 1991/12/31 19214.92 14709.93 1992/01/31 18928.51 14436.32 1992/02/29 18822.66 14623.99 1992/03/31 18405.48 14338.83 1992/04/30 18193.78 14760.39 1992/05/31 18355.67 14832.71 1992/06/30 18154.97 14611.71 1992/07/31 18856.21 15209.33 1992/08/31 18772.58 14897.53 1992/09/30 19087.81 15073.32 1992/10/31 19293.68 15126.08 1992/11/30 20033.52 15641.88 1992/12/31 20372.81 15834.28 1993/01/31 20379.40 15967.28 1993/02/28 20326.70 16184.44 1993/03/31 20879.99 16525.93 1993/04/30 20069.26 16126.00 1993/05/31 20701.14 16558.18 1993/06/30 20495.09 16606.20 1993/07/31 20240.96 16539.77 1993/08/31 21209.40 17166.63 1993/09/30 21140.71 17034.45 1993/10/31 21937.44 17387.06 1993/11/30 21683.31 17221.88 1993/12/31 22169.17 17430.27 1994/01/31 22839.65 18022.90 1994/02/28 22702.67 17534.48 1994/03/31 21642.88 16769.97 1994/04/30 21401.05 16984.63 1994/05/31 21245.54 17263.18 1994/06/30 21408.45 16840.23 1994/07/31 22126.76 17392.59 1994/08/31 23533.75 18105.69 1994/09/30 23578.18 17662.10 1994/10/31 24022.49 18059.49 1994/11/30 23437.48 17401.77 1994/12/31 23520.15 17659.84 1995/01/31 24511.69 18117.75 1995/02/28 25003.61 18823.80 1995/03/31 25572.40 19379.29 1995/04/30 26131.32 19950.01 1995/05/31 27069.05 20747.42 1995/06/30 27709.83 21229.38 1995/07/31 28014.59 21933.35 1995/08/31 27967.70 21988.40 1995/09/30 30163.55 22916.31 1995/10/31 30210.43 22834.50 1995/11/30 31398.22 23836.93 1995/12/31 32137.65 24296.03 1996/01/31 33463.08 25123.07 1996/02/29 34485.79 25355.96 1996/03/31 33904.89 25600.14 1996/04/30 33286.85 25977.48 1996/05/31 34514.71 26647.44 1996/06/30 34548.35 26748.97 1996/07/31 34077.39 25567.20 1996/08/31 32992.50 26106.41 1996/09/30 34111.03 27575.68 1996/10/31 34741.78 28336.22 1996/11/30 36491.07 30478.15 1996/12/31 36427.86 29874.38 1997/01/31 38002.50 31740.93 1997/02/28 39172.48 31989.78 1997/03/31 38152.05 30675.32 1997/04/30 39665.70 32506.64 1997/05/31 40833.73 34485.64 1997/06/30 42190.14 36030.60 1997/07/31 43706.69 38897.55 1997/08/29 41690.91 36718.51 IMATRL PRASUN SHR__CHT 19970831 19970923 094139 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Food and Agriculture Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $41,691 - a 316.91% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS PHILIP MORRIS COMPANIES, INC. 8.0 CAMPBELL SOUP CO. 5.6 HERSHEY FOODS CORP. 4.7 CPC INTERNATIONAL, INC. 4.7 PEPSICO, INC. 4.6 RALSTON PURINA CO. 4.5 RJR NABISCO HOLDINGS CORP. 4.4 SARA LEE CORP. 4.0 NABISCO HOLDINGS CORP. CLASS A 4.0 HEINZ (H.J.) CO. 3.7 TOP INDUSTRIES AS OF AUGUST 31, 1997 FOOD 18.0% GRAIN MILL PRODUCTS 8.9% TOBACCO MANUFACTURERS 8.2% SOFT DRINKS 7.6% CANNED SPECIALTIES 5.6% ALL OTHERS 51.7% ROW: 1, COL: 1, VALUE: 51.7 ROW: 1, COL: 2, VALUE: 5.6 ROW: 1, COL: 3, VALUE: 7.6 ROW: 1, COL: 4, VALUE: 8.199999999999999 ROW: 1, COL: 5, VALUE: 8.9 ROW: 1, COL: 6, VALUE: 18.0 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS FOOD AND AGRICULTURE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Scott Offen, Portfolio Manager of Fidelity Select Food and Agriculture Portfolio Q. HOW DID THE FUND PERFORM, SCOTT? D.C. For the six months that ended August 31, 1997, the fund had a total return of 6.43%, while the Standard & Poor's 500 Index returned 14.78%. For the 12 months that ended August 31, 1997, the fund returned 26.36% and the S&P 500 returned 40.65%. Q. WHY DID THE FUND AND THE SECTOR LAG THE OVERALL PERFORMANCE OF THE S&P 500? D.C. When the future of the economy is uncertain, this sector generally performs best. That's because many of the companies within the sector are capable of sustaining steady, reliable and predictable earnings growth. However, over the past six months the economy has been strong. As a result, other segments of the market posted much better earnings growth and became more attractive to investors. Q. WHAT SORTS OF THEMES HAVE YOU PURSUED? D.C. My strategy hasn't changed over the past six months. I've continued to focus on large-capitalization companies that have the resources to cut costs from their operations and take advantage of economies of scale. Examples of this in the fund would be Sara Lee, H.J. Heinz and Hershey Foods - each of which performed well over the past six months. By undertaking this strategy, these companies can reinvest their cost savings back into their businesses through capital expenditures or marketing, in order to increase volume growth to add to market share. I've also focused on some commodity companies, those that I call "close to the farm." Q. TWO OF THE FUND'S TOP 10 INVESTMENTS AT THE END OF THE PERIOD WERE TOBACCO STOCKS, PHILIP MORRIS AND RJR NABISCO. WHAT'S YOUR READ ON THE RECENT TOBACCO SETTLEMENT AND ITS EFFECT ON THIS GROUP? D.C. While the market seems to hope that the settlement might be finalized by the end of 1997, I believe it will take longer. At this point, it's difficult to predict either the time frame or the final structure of the settlement. I continued to invest in these companies despite these concerns because of their attractive business prospects. While their stocks struggled somewhat during the period, these companies have demonstrated strength and positive earnings growth both domestically and overseas. In the U.S., the companies enjoy pricing flexibility and margin expansion. Overseas, they've posted solid unit growth. It's a business that has unusually good financial characteristics. Further, I believe the stock prices in this group reflect negative effects of litigation above and beyond the worst-case scenario. Q. WHAT'S YOUR OUTLOOK? D.C. There's nothing I can see on the horizon indicating things will be much different in the near future. We may see some action on the tobacco front, but that also may take some time to reach closure. I'll continue to look for companies that are trying to control their destinies by reducing costs, increasing market share, pursuing aggressive marketing tactics or introducing new products to create demand. By doing so, they can create shareholder value. Beyond that, I might look to add some small- and mid-capitalization companies to the fund, because that area of the market has been less expensive and may have more upside in the near future. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 009 TRADING SYMBOL: FDFAX SIZE: as of August 31, 1997, more than $220 million MANAGER: Scott Offen, since 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 AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.7% SHARES VALUE (NOTE 1) AGRICULTURE - 2.9% CROPS - 2.9% DEKALB Genetics Corp. Class B 44,500 $ 1,746,625 24487820 Pioneer Hi-Bred International, Inc. 57,000 4,884,188 72368610 6,630,813 BEVERAGES - 8.4% MALT BEVERAGE - 0.8% Anheuser-Busch Companies, Inc. 43,300 1,845,663 03522910 SOFT DRINKS - 7.6% Coca-Cola Co. (The) 104,900 6,012,081 19121610 PepsiCo, Inc. 293,900 10,580,400 71344810 Whitman Corp. 38,800 950,600 96647K10 17,543,081 TOTAL BEVERAGES 19,388,744 FOODS - 58.3% BAKERY PRODUCTS - 1.8% Earthgrains Co. 10,000 410,000 27031910 Flowers Industries, Inc. 124,100 2,295,850 34349610 Interstate Bakeries Corp. 24,700 1,448,038 46072H10 4,153,888 CANDY - 4.7% Hershey Foods Corp. 203,300 10,851,138 42786610 CANNED SPECIALTIES - 5.6% Campbell Soup Co. 280,300 12,998,913 13442910 COOKIES & CRACKERS - 4.0% Nabisco Holdings Corp. Class A 220,600 9,154,900 62952610 DAIRY - 2.5% Dean Foods Co. 60,200 2,671,375 24236110 Suiza Foods Corp. (a) 73,200 3,019,500 86507710 5,690,875 FOOD - 18.0% Chiquita Brands International, Inc. 278,300 3,965,775 17003210 Dole Food, Inc. 86,800 3,390,625 25660510 General Mills, Inc. 102,511 6,573,518 37033410 Heinz (H.J.) Co. 206,100 8,578,913 42307410 Kellogg Co. 153,800 6,882,550 48783610 Nestle SA ADR (Reg.) 42,300 2,479,838 64106940 Nestle SA (Reg.) 480 556,382 64106992 Sara Lee Corp. 229,100 9,221,275 80311110 41,648,876 GENERAL FOOD PREPARATIONS - 5.5% CPC International, Inc. 121,500 10,828,688 12614910 McCormick & Co., Inc. (non-vtg.) 76,400 1,804,950 57978020 12,633,638 GRAIN MILL PRODUCTS - 8.9% Archer-Daniels-Midland Co. 277,885 6,009,263 03948310 Quaker Oats Co. 85,600 4,023,200 74740210 Ralston Purina Co. 115,900 10,431,000 75127730 20,463,463 MEAT & FISH - 5.0% ConAgra, Inc. 92,000 5,916,750 20588710 Tyson Foods, Inc. 267,925 5,693,406 90249410 11,610,156 POULTRY, SLAUGHTER & PROCESSING - 0.0% Pilgrim's Pride Corp. 2,000 23,500 72146710 SHARES VALUE (NOTE 1) SUGAR & CANDIES - 2.3% Tootsie Roll Industries, Inc. 23,754 $ 1,160,977 89051610 Wrigley (Wm.) Jr. Co. 57,900 4,197,750 98252610 5,358,727 TOTAL FOODS 134,588,074 GENERAL MERCHANDISE STORES - 0.3% VARIETY STORES - 0.3% Costco Companies, Inc. (a) 20,800 750,100 22160Q10 GROCERY STORES - 3.4% GROCERY - RETAIL - 3.4% American Stores Co. 45,900 1,087,256 03009610 Dominick's Supermarkets, Inc. (a) 52,400 1,441,000 25715910 Safeway, Inc. (a) 106,200 5,409,563 78651420 7,937,819 HOUSEHOLD PRODUCTS - 1.5% SOAPS & DETERGENTS - 1.5% Unilever: PLC Ord. 64,600 1,788,531 90476710 NV ADR 7,900 1,589,875 90478450 3,378,406 RESTAURANTS - 3.2% CKE Restaurants, Inc. 18,300 590,175 12561E10 McDonald's Corp. 117,400 5,554,483 58013510 Rainforest Cafe, Inc. (a) 49,600 1,333,000 75086K10 7,477,658 TOBACCO - 12.7% CIGARETTES - 4.4% RJR Nabisco Holdings Corp. 288,620 10,047,584 74960K87 TOBACCO & TOBACCO PRODUCTS - WHOLESALE - 0.1% Dimon, Inc. 14,000 336,000 25439410 TOBACCO MANUFACTURERS - 8.2% Philip Morris Companies, Inc. 422,900 18,449,013 71815410 Standard Commercial Corp. 1,100 15,950 85325810 Universal Corp. 10,000 363,750 91345610 18,828,713 TOTAL TOBACCO 29,212,297 TOTAL COMMON STOCKS (Cost $183,379,118) 209,363,911 CASH EQUIVALENTS - 9.3% Taxable Central Cash Fund (b) (Cost $21,445,450) 21,445,450 21,445,450 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $204,824,568) $ 230,809,361 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $67,436,700 and $73,839,465, 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 $24,896 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, the value of securities loaned and the value of collateral amounted to $9,100,950 and $9,569,200, respectively (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $205,483,846. Net unrealized appreciation aggregated $25,325,515, of which $26,599,187 related to appreciated investment securities and $1,273,672 related to depreciated investment securities. FOOD AND AGRICULTURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, ) ) 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 230,809,361 SECURITIES, AT VALUE (COST $204,824,56 8) - SEE ACCOMPANYIN G SCHEDULE CASH 139,300 RECEIVABLE FOR 1,439,126 INVESTMENTS SOLD RECEIVABLE FOR 346,868 FUND SHARES SOLD DIVIDENDS 259,949 RECEIVABLE INTEREST 104,122 RECEIVABLE REDEMPTION FEES 385 RECEIVABLE OTHER 3,623 RECEIVABLES TOTAL ASSETS 233,102,734 LIABILITIES PAYABLE FOR $ 1,377,609 INVESTMENTS PURCHASED PAYABLE FOR 1,376,682 FUND SHARES REDEEMED ACCRUED 115,727 MANAGEMENT FEE OTHER PAYABLES 232,221 AND ACCRUED EXPENSES COLLATERAL ON 9,569,200 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 12,671,439 NET ASSETS $ 220,431,295 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 181,769,108 UNDISTRIBUTED 1,021,898 NET INVESTMENT INCOME ACCUMULATED 11,655,565 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 25,984,724 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 220,431,295 4,979,945 SHARES OUTSTANDING NET ASSET $44.26 VALUE AND REDEMPTION PRICE PER SHARE ($220,431,2 95 (DIVIDED BY) 4,979,945 SHARES) MAXIMUM $45.63 OFFERING PRICE PER SHARE (100/97.00 OF $44.26) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 2,273,494 INCOME DIVIDENDS INTEREST 546,891 (INCLUDING INCOME ON SECURITIES LOANED OF $37,608) TOTAL INCOME 2,820,385 EXPENSES MANAGEMENT $ 712,935 FEE TRANSFER AGENT 931,697 FEES ACCOUNTING AND 121,223 SECURITY LENDING FEES NON-INTERESTED 528 TRUSTEES' COMPENSATION CUSTODIAN FEES 7,456 AND EXPENSES REGISTRATION FEES 29,313 AUDIT 13,829 LEGAL 665 MISCELLANEOUS 1,746 TOTAL EXPENSES 1,819,392 BEFORE REDUCTIONS EXPENSE (18,084) 1,801,308 REDUCTIONS NET INVESTMENT 1,019,077 INCOME REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 12,361,946 SECURITIES FOREIGN (44) 12,361,902 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT 1,928,449 SECURITIES ASSETS AND (73) 1,928,376 LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 14,290,278 NET INCREASE $ 15,309,355 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 378,816 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 2,529 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 37,283 WITHHELD BY FSC EXPENSE $ 18,063 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 4 CREDITS TRANSFER 17 AGENT CREDITS $ 18,084 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ 1,019,077 $ 2,814,245 NET INVESTMENT INCOME NET REALIZED 12,361,902 41,584,137 GAIN (LOSS) CHANGE IN NET 1,928,376 (16,830,573) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 15,309,355 27,567,809 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (704,594) (1,549,005) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (13,500,766) (17,656,169) REALIZED GAIN TOTAL (14,205,360) (19,205,174) DISTRIBUTIONS SHARE 95,882,663 332,131,288 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 13,983,611 18,966,497 OF DISTRIBUTIONS COST OF SHARES (114,130,384) (437,551,907) REDEEMED REDEMPTION 168,848 411,716 FEES NET INCREASE (4,095,262) (86,042,406) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (2,991,267) (77,679,771) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 223,422,562 301,102,333 PERIOD END OF PERIOD $ 220,431,295 $ 223,422,562 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $1,021,89 8 AND $1,614,81 8, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 2,219,930 8,035,192 ISSUED IN 350,995 465,609 REINVESTMENT OF DISTRIBUTIONS REDEEMED (2,608,334) (10,627,722) NET INCREASE (37,409) (2,126,921) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 44.53 $ 42.15 $ 32.53 $ 31.49 $ 30.86 $ 29.22 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET .19 .42 .37 .15 .09 .05 INVESTMENT INCOME D NET REALIZED 2.33 4.91 11.61 2.80 3.29 3.26 AND UNREALIZED GAIN (LOSS) TOTAL FROM 2.52 5.33 11.98 2.95 3.38 3.31 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.14) (.24) (.20) (.08) (.06) (.10) INVESTMENT INCOME FROM NET (2.68) (2.77) (2.20) (1.85) (2.70) (1.57) REALIZED GAIN TOTAL (2.82) (3.01) (2.40) (1.93) (2.76) (1.67) DISTRIBUTIONS REDEMPTION FEES .03 .06 .04 .02 .01 - ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 44.26 $ 44.53 $ 42.15 $ 32.53 $ 31.49 $ 30.86 END OF PERIOD TOTAL RETURN B, C 6.43% 13.59% 37.92% 10.14% 11.69% 11.72% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 220,431 $ 223,423 $ 301,102 $ 197,130 $ 95,010 $ 108,377 OF PERIOD (000 OMITTED) RATIO OF 1.51% A 1.52% 1.43% 1.70% 1.65% 1.67% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.50% A, E 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 .85% A 1.01% .99% .49% .29% .21% A INVESTMENT INCOME TO AVERAGE NET ASSETS PORTFOLIO 61% A 91% 124% 126% 96% 515% A TURNOVER RATE AVERAGE $ .0329 $ .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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS LEISURE 14.29% 21.96% 151.06% 223.56% LEISURE 10.86% 18.30% 143.53% 213.85% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS LEISURE 21.96% 20.21% 12.46% LEISURE 18.30% 19.48% 12.12% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970916 120851 S00000000000001 Leisure S&P 500 00062 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9489.92 9781.00 1987/10/31 6781.79 7674.17 1987/11/30 6309.10 7041.82 1987/12/31 7116.06 7577.70 1988/01/31 7225.60 7896.72 1988/02/29 7857.24 8264.71 1988/03/31 8120.12 8009.33 1988/04/30 8171.24 8098.24 1988/05/31 7959.47 8168.69 1988/06/30 8491.09 8543.63 1988/07/31 8561.70 8511.17 1988/08/31 8227.26 8221.79 1988/09/30 8799.52 8572.04 1988/10/31 8799.52 8810.34 1988/11/30 8461.37 8684.35 1988/12/31 8966.74 8836.33 1989/01/31 9732.24 9483.15 1989/02/28 9576.17 9247.02 1989/03/31 10025.81 9462.47 1989/04/30 10594.36 9953.57 1989/05/31 11122.03 10356.69 1989/06/30 11227.50 10297.66 1989/07/31 12169.69 11227.54 1989/08/31 12267.29 11447.60 1989/09/30 12346.12 11400.66 1989/10/31 11456.48 11136.17 1989/11/30 11591.61 11363.35 1989/12/31 11765.07 11636.07 1990/01/31 10338.28 10855.29 1990/02/28 10246.61 10995.32 1990/03/31 10326.32 11286.70 1990/04/30 9923.79 11004.53 1990/05/31 10744.79 12077.47 1990/06/30 10621.24 11995.34 1990/07/31 10254.58 11956.96 1990/08/31 9070.90 10876.05 1990/09/30 8210.04 10346.39 1990/10/31 8114.39 10301.90 1990/11/30 8760.04 10967.40 1990/12/31 9143.17 11273.39 1991/01/31 9654.48 11764.91 1991/02/28 10395.27 12606.10 1991/03/31 10568.39 12911.17 1991/04/30 10596.57 12942.15 1991/05/31 10962.94 13501.25 1991/06/30 10346.96 12882.90 1991/07/31 10842.16 13483.24 1991/08/31 10954.89 13802.79 1991/09/30 11236.71 13572.29 1991/10/31 11574.90 13754.15 1991/11/30 11019.31 13199.86 1991/12/31 12154.65 14709.93 1992/01/31 12428.43 14436.32 1992/02/29 12863.24 14623.99 1992/03/31 12601.55 14338.83 1992/04/30 12742.46 14760.39 1992/05/31 12818.95 14832.71 1992/06/30 12621.68 14611.71 1992/07/31 12682.07 15209.33 1992/08/31 12500.90 14897.53 1992/09/30 12746.48 15073.32 1992/10/31 12843.11 15126.08 1992/11/30 13716.76 15641.88 1992/12/31 14127.42 15834.28 1993/01/31 14477.69 15967.28 1993/02/28 14401.19 16184.44 1993/03/31 15150.04 16525.93 1993/04/30 14808.61 16126.00 1993/05/31 15872.35 16558.18 1993/06/30 16299.52 16606.20 1993/07/31 16735.07 16539.77 1993/08/31 17886.76 17166.63 1993/09/30 18778.79 17034.45 1993/10/31 19817.41 17387.06 1993/11/30 19080.33 17221.88 1993/12/31 19715.34 17430.27 1994/01/31 19920.25 18022.90 1994/02/28 19750.21 17534.48 1994/03/31 18555.61 16769.97 1994/04/30 18593.02 16984.63 1994/05/31 18396.24 17263.18 1994/06/30 17618.73 16840.23 1994/07/31 18300.25 17392.59 1994/08/31 19029.77 18105.69 1994/09/30 19024.97 17662.10 1994/10/31 18957.78 18059.49 1994/11/30 18146.67 17401.77 1994/12/31 18367.44 17659.84 1995/01/31 18703.41 18117.75 1995/02/28 19538.51 18823.80 1995/03/31 20052.05 19379.29 1995/04/30 20229.69 19950.01 1995/05/31 20621.14 20747.42 1995/06/30 21418.54 21229.38 1995/07/31 22907.01 21933.35 1995/08/31 23641.58 21988.40 1995/09/30 23680.24 22916.31 1995/10/31 22539.72 22834.50 1995/11/30 23274.30 23836.93 1995/12/31 23318.90 24296.03 1996/01/31 23664.52 25123.07 1996/02/29 24933.61 25355.96 1996/03/31 25057.82 25600.14 1996/04/30 26086.66 25977.48 1996/05/31 27157.06 26647.44 1996/06/30 27052.22 26748.97 1996/07/31 25110.07 25567.20 1996/08/31 25733.55 26106.41 1996/09/30 26986.01 27575.68 1996/10/31 26246.67 28336.22 1996/11/30 26991.53 30478.15 1996/12/31 26444.87 29874.38 1997/01/31 27621.86 31740.93 1997/02/28 27461.10 31989.78 1997/03/31 26444.87 30675.32 1997/04/30 26694.09 32506.64 1997/05/31 29196.47 34485.64 1997/06/30 30348.17 36030.60 1997/07/31 31897.83 38897.55 1997/08/29 31385.30 36718.51 IMATRL PRASUN SHR__CHT 19970831 19970916 120855 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Leisure Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $31,385 - a 213.85% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS HFS, INC. 8.2 STARBUCKS CORP. 6.3 TIME WARNER, INC. 5.3 VIACOM, INC. CLASS B (NON-VTG.) 4.3 BET HOLDINGS, INC. CLASS A 3.8 NIKE, INC. CLASS B 3.3 WESTINGHOUSE ELECTRIC CORP. 3.2 DISNEY (WALT) CO. 3.1 STEINER LEISURE LTD 2.9 TELE-COMMUNICATIONS LIBERTY MEDIA GROUP, SERIES A 2.5 TOP INDUSTRIES AS OF AUGUST 31, 1997 ROW: 1, COL: 1, VALUE: 52.0 ROW: 1, COL: 2, VALUE: 4.0 ROW: 1, COL: 3, VALUE: 7.6 ROW: 1, COL: 4, VALUE: 9.1 ROW: 1, COL: 5, VALUE: 13.0 ROW: 1, COL: 6, VALUE: 14.3 CABLE TV OPERATORS 14.3% HOTELS, MOTELS, & TOURIST COURTS 13.0% MOTION PICTURE PRODUCTION 9.1% RESTAURANTS 7.6% FOOTWEAR 4.0% ALL OTHERS 52.0% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS LEISURE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Paul Antico, Portfolio Manager of Fidelity Select Leisure Portfolio Q. HOW DID THE FUND PERFORM, PAUL? D.C. For the six- and 12-month periods that ended August 31, 1997, the fund returned 14.29% and 21.96%, respectively. By comparison, the Standard & Poor's 500 Index returned 14.78% and 40.65% for the same time periods. Q. WHAT FACTORS ACCOUNTED FOR THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS? D.C. The key factors helping the fund's performance during the period were the portfolio's weighting in large-capitalization, blue chip stocks, plus selected investments in attractively valued mid- and small-cap stocks, which helped lift returns nearer to that of the S&P over the past several months. I found excellent value in such companies as Coca-Cola and General Electric, as well as large-cap entertainment stocks such as Walt Disney. Q. DID YOU MAKE ANY SIGNIFICANT CHANGES IN THE FUND'S BROADCASTING HOLDINGS DURING THE PERIOD? D.C. Overall, I reduced the fund's weighting in radio broadcasting, while increasing positions in cable television. In the cable television industry, I increased the fund's positions in the networks to a greater degree than the cable operators. With the operators - those companies providing cable service to consumers - I was concerned about the lack of industry standards for both cable and telephone service and how that might increase operating costs and slow market penetration. On the other hand, I was much more optimistic about cable networks. Their ratings have been going up dramatically relative to the broadcast channels, so their advertising rates have gone up. During the period, I increased the fund's positions in such cable networks as BET Holdings. Q. YOU ALSO SEEMED TO REDUCE YOUR HOLDINGS IN MANY OF THE BLUE-CHIP CONSUMER ISSUES . . . D.C. That's right. Later in the period I began to feel that valuations in this sector were too high, and that a contraction was starting in this part of the market. I felt that Coca-Cola's stock, for example, was too expensive based on an over-valuing of its bottlers, so I sold some of it. With other companies, such as Procter & Gamble, I began to feel that their valuations were high as well, and I didn't see the same opportunities for appreciation going forward. Q. WHAT STOCKS PERFORMED WELL DURING THE PERIOD? D.C. The fund benefited from the strong performance of such diversified companies as General Electric and Nokia. Starbucks also performed very well. I liked this company's plans for expansion both domestically and internationally, its record of terrific growth and its potential to exploit the Starbucks brand name in supermarkets. Q. WERE THERE ANY DISAPPOINTMENTS? D.C. Apparel stocks have been a very disappointing group for the fund. Gadzooks, for example, had to pre-announce an earnings disappointment, which hurt its stock. Other disappointments included Viacom, which was affected by problems experienced by its Blockbuster Video subsidiary. Another related disappointment was Hollywood Entertainment, the number two company in its market after Blockbuster. Hollywood's stock was dragged down by Blockbuster's tumble. Q. HOW ARE YOU POSITIONING THE FUND GOING FORWARD, PAUL? D.C. Currently, I am optimistic about the market's potential. Change is occurring in many leisure industries, such as cellular, cable and broadcasting, and with change comes opportunity. That having been said, the fund continues to employ a bottom-up stock picking strategy, but is more aggressively investing in cable systems and networks, cellular operators and suppliers, and diversified entertainment companies. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: May 8, 1984 FUND NUMBER: 062 TRADING SYMBOL: FDLSX SIZE: as of August 31, 1997, more than $98 million MANAGER: Paul Antico, since January 1997; manager, Fidelity Select Consumer Industries Portfolio, since January 1997; Fidelity Advisor Consumer Industries Portfolio, since January 1997; Fidelity Select Industrial Equipment Portfolio, 1996-February 1997; Fidelity Select Developing Communications Portfolio, 1993-1996; joined Fidelity in 1991 (checkmark) LEISURE PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.8% SHARES VALUE (NOTE 1) ADVERTISING - 4.5% ADVERTISING - 3.7% Outdoor Systems, Inc. (a) 61,800 $ 1,633,833 69005710 Universal Outdoor Holdings, Inc. (a) 58,700 2,010,475 91377M10 3,644,308 ADVERTISING AGENCIES - 0.8% Omnicom Group, Inc. 12,200 826,550 68191910 TOTAL ADVERTISING 4,470,858 APPAREL STORES - 1.1% GENERAL APPAREL STORES - 1.1% TJX Companies, Inc. 40,000 1,100,000 87254010 BEVERAGES - 3.0% DISTILLED & BLENDED LIQUOR - 1.1% Seagram Co. Ltd. 30,000 1,048,460 81185010 SOFT DRINKS - 1.9% Coca-Cola Co. (The) 10,000 573,125 19121610 PepsiCo, Inc. 37,382 1,345,752 71344810 1,918,877 TOTAL BEVERAGES 2,967,337 BROADCASTING - 15.3% CABLE TV OPERATORS - 14.3% BET Holdings, Inc. Class A (a) 94,400 3,717,000 08658510 Cox Communications, Inc. Class A (a) 60,700 1,642,694 22404410 TCA Cable TV, Inc. 24,800 942,400 87224110 Tele-Communications Liberty Media Group, Series A (a) 95,000 2,505,625 87924V50 Time Warner, Inc. 101,900 5,247,850 88731510 14,055,569 TELEVISION BROADCASTING - 1.0% HSN, Inc. 30,000 990,000 40429R10 TOTAL BROADCASTING 15,045,569 CELLULAR - 3.8% CELLULAR & COMMUNICATION SERVICES - 3.8% AirTouch Communications, Inc. (a) 50,000 1,690,625 00949T10 Nextel Communications, Inc. Class A (a) 45,000 1,127,813 65332V10 United States Cellular Corp. 30,000 903,750 91168410 3,722,188 COMMUNICATIONS EQUIPMENT - 0.1% TELEPHONE EQUIPMENT - 0.1% Nokia Corp. AB sponsored ADR 1,000 77,500 65490220 COMPUTER SERVICES & SOFTWARE - 2.1% COMPUTER SERVICES - 1.1% America Online, Inc. (a) 16,600 1,070,700 02364J10 ELECTRONIC INFORMATION RETRIEVAL - 1.0% CUC International, Inc. (a) 43,800 1,029,300 12654510 TOTAL COMPUTER SERVICES & SOFTWARE 2,100,000 DRUG STORES - 0.6% DRUG STORES - 0.6% CVS Corp. 11,000 620,125 12665010 ELECTRICAL EQUIPMENT - 3.5% ELECTRICAL MACHINERY - 3.5% General Electric Co. 4,800 300,000 36960410 Westinghouse Electric Corp. 121,817 3,136,788 96040210 3,436,788 SHARES VALUE (NOTE 1) TV & RADIO COMMUNICATION EQUIPMENT - 0.0% Leitch Technology Corp. 600 $ 16,343 52543H10 TOTAL ELECTRICAL EQUIPMENT 3,453,131 ELECTRONICS - 0.9% ELECTRONIC PARTS - WHOLESALE - 0.9% Brightpoint, Inc. (a) 24,250 909,375 10947310 ENTERTAINMENT - 14.0% AMUSEMENT & RECREATIONAL SERVICES - 1.3% IMAX Corp. (a) 55,000 1,307,872 45245E10 MOTION PICTURE DISTRIBUTION - 1.7% All American Communications, Inc. Class B (non-vtg.) (a) 116,800 1,635,200 01648040 MOTION PICTURE PRODUCTION - 9.1% Cinar Films, Inc. Class B (sub-vtg.) (a) 8,800 281,232 17190530 Disney (Walt) Co. 39,452 3,030,407 25468710 King World Productions, Inc. 35,000 1,391,250 49566710 Viacom, Inc. Class B (non-vtg.) (a) 142,500 4,221,563 92552430 8,924,452 RECREATIONAL SERVICES - 1.9% MGM Grand, Inc. (a) 25,100 1,007,138 55295310 Premier Parks, Inc. (a) 25,900 835,275 74054020 1,842,413 TOTAL ENTERTAINMENT 13,709,937 FOODS - 1.2% PACKAGED & FROZEN FOODS - 1.2% Dreyer's Grand Ice Cream, Inc. 25,000 1,168,750 26187810 GENERAL MERCHANDISE STORES - 0.2% VARIETY STORES - 0.2% Michaels Stores, Inc. 10,000 244,375 59408710 LEASING & RENTAL - 2.3% VIDEO TAPE RENTAL - 2.3% Hollywood Entertainment Corp. (a) 139,500 2,284,313 43614110 LEISURE DURABLES & TOYS - 4.0% MOTORCYCLES - 0.3% Harley-Davidson, Inc. 5,000 270,625 41282210 SPORTING & ATHLETIC GOODS - 0.5% Callaway Golf Co. 14,800 498,575 13119310 TOYS & GAMES - 2.1% Mattel, Inc. 63,000 2,106,563 57708110 TRAVEL TRAILERS AND CAMPERS - 1.1% Brunswick Corp. 34,300 1,046,150 11704310 TOTAL LEISURE DURABLES & TOYS 3,921,913 LODGING & GAMING - 14.5% HOTELS, MOTELS, & TOURIST COURTS - 13.0% HFS, Inc. (a) 144,400 8,041,275 40418110 Host Marriott Corp. (a) 40,000 780,000 44107810 ITT Corp. (New) (a) 26,200 1,645,688 45091210 Mirage Resorts, Inc. (a) 50,800 1,362,075 60462E10 Sun International Hotels Ltd. Ord. (a) 29,300 985,213 86699N22 12,814,251 LODGING PLACES, OTHER THAN HOTELS - 1.0% Doubletree Corp. (a) 19,700 985,000 25862410 RACING & GAMING - 0.5% Players International, Inc. (a) 130,800 474,150 72790310 TOTAL LODGING & GAMING 14,273,401 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PUBLISHING - 0.8% PERIODICALS - 0.8% Playboy Enterprises, Inc. Class B (a) 63,600 $ 802,950 72811730 REAL ESTATE INVESTMENT TRUSTS - 0.6% Felcor Suite Hotels, Inc. (REIT) 14,500 551,000 31430510 RESTAURANTS - 7.6% Rainforest Cafe, Inc. (a) 44,700 1,201,313 75086K10 Starbucks Corp. (a) 152,300 6,244,300 85524410 7,445,613 RETAIL & WHOLESALE, MISCELLANEOUS - 1.6% HOBBY, TOY, & GAME SHOPS - 0.5% Toys "R" Us, Inc. (a) 13,400 463,138 89233510 MAIL ORDER - 0.2% Comcast Corp. Class A special 10,000 234,375 20030020 RETAIL STORES - 0.9% Gadzooks, Inc. (a) 45,000 855,000 36255310 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 1,552,513 SERVICES - 5.1% BEAUTY SHOPS - 2.9% Steiner Leisure Ltd. 93,600 2,854,800 85899J22 MISCELLANEOUS BUSINESS SERVICES - 2.2% Medialink Worldwide, Inc. 200,500 2,205,500 58445P10 TOTAL SERVICES 5,060,300 TELEPHONE SERVICES - 2.0% TELEPHONE SERVICES - 2.0% US WEST Media Group 100,100 2,002,000 91288920 TEXTILES & APPAREL - 6.0% FOOTWEAR - 4.0% NIKE, Inc. Class B 60,400 3,223,850 65410610 Reebok International Ltd. 16,000 703,000 75811010 3,926,850 KNIT OUTERWEAR MILLS - 0.2% Tultex Corp. (a) 43,200 248,400 89990010 MEN'S & BOYS' CLOTHING - 1.8% Tommy Hilfiger (a) 40,000 1,745,000 89299B92 TOTAL TEXTILES & APPAREL 5,920,250 TOTAL COMMON STOCKS (Cost $88,273,940) 93,403,398 CONVERTIBLE PREFERRED STOCKS - 1.1% CELLULAR - 1.1% CELLULAR & COMMUNICATION SERVICES - 1.1% AirTouch Communications, Inc. Class B $1.74 28,167 922,469 00949T20 Class C $2.125 2,034 111,234 00949T30 TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $861,809) 1,033,703 CASH EQUIVALENTS - 4.1% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (Cost $4,080,569) (b) 4,080,569 $ 4,080,569 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $93,216,318) $ 98,517,670 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $111,536,602 and $120,571,271, 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 $46,372 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $93,216,318. Net unrealized appreciation aggregated $5,301,352, of which $8,476,035 related to appreciated investment securities and $3,174,683 related to depreciated investment securities. LEISURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, ) ) 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 98,517,670 SECURITIES, AT VALUE (COST $93,216,318 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 2,484,960 INVESTMENTS SOLD RECEIVABLE FOR 15,686 FUND SHARES SOLD DIVIDENDS 50,016 RECEIVABLE REDEMPTION FEES 83 RECEIVABLE OTHER 47,310 RECEIVABLES TOTAL ASSETS 101,115,725 LIABILITIES PAYABLE FOR $ 1,868,727 INVESTMENTS PURCHASED PAYABLE FOR 232,839 FUND SHARES REDEEMED ACCRUED 49,463 MANAGEMENT FEE OTHER PAYABLES 81,722 AND ACCRUED EXPENSES TOTAL LIABILITIES 2,232,751 NET ASSETS $ 98,882,974 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 80,090,341 UNDISTRIBUTED 105,875 NET INVESTMENT INCOME ACCUMULATED 13,385,406 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 5,301,352 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 98,882,974 1,899,710 SHARES OUTSTANDING NET ASSET $52.05 VALUE AND REDEMPTION PRICE PER SHARE ($98,882,97 4 (DIVIDED BY) 1,899,710 SHARES) MAXIMUM $53.66 OFFERING PRICE PER SHARE (100/97.00 OF $52.05) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 147,235 INCOME DIVIDENDS INTEREST 275,875 TOTAL INCOME 423,110 EXPENSES MANAGEMENT $ 286,271 FEE TRANSFER AGENT 354,222 FEES ACCOUNTING FEES 48,219 AND EXPENSES NON-INTERESTED 214 TRUSTEES' COMPENSATION CUSTODIAN FEES 11,823 AND EXPENSES REGISTRATION FEES 14,801 AUDIT 11,147 LEGAL 618 MISCELLANEOUS 291 TOTAL EXPENSES 727,606 BEFORE REDUCTIONS EXPENSE (33,792) 693,814 REDUCTIONS NET INVESTMENT (270,704) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 13,435,557 SECURITIES FOREIGN 429 13,435,986 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (1,081,476) SECURITIES ASSETS AND 55 (1,081,421) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 12,354,565 NET INCREASE $ 12,083,861 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 42,417 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 8,261 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 7,913 WITHHELD BY FSC EXPENSE $ 31,755 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 2,037 CREDITS $ 33,792 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (270,704) $ (130,873) NET INVESTMENT INCOME (LOSS) NET REALIZED 13,435,986 12,370,765 GAIN (LOSS) CHANGE IN NET (1,081,421) (3,321,479) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 12,083,861 8,918,413 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (4,403,002) (6,329,218) SHAREHOLDERS FROM NET REALIZED GAINS SHARE 20,304,635 109,666,003 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 4,315,001 6,225,261 OF DISTRIBUTIONS COST OF SHARES (31,573,100) (105,536,133) REDEEMED REDEMPTION 22,193 176,193 FEES NET INCREASE (6,931,271) 10,531,324 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 749,588 13,120,519 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 98,133,386 85,012,867 PERIOD END OF PERIOD $ 98,882,974 $ 98,133,386 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $105,875 AND $376,579, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 410,783 2,311,420 ISSUED IN 98,091 136,974 REINVESTMENT OF DISTRIBUTIONS REDEEMED (660,890) (2,238,078) NET INCREASE (152,016) 210,316 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 47.83 $ 46.17 $ 40.71 $ 45.30 $ 35.77 $ 31.65 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.14) (.06) G (.21) (.21) (.29) (.11) INVESTMENT INCOME (LOSS) D NET REALIZED 6.56 4.47 10.97 (.48) 12.98 4.21 AND UNREALIZED GAIN (LOSS) TOTAL FROM 6.42 4.41 10.76 (.69) 12.69 4.10 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (2.21) (2.83) (5.32) (3.93) (3.26) - REALIZED GAIN REDEMPTION FEES .01 .08 .02 .03 .10 .02 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 52.05 $ 47.83 $ 46.17 $ 40.71 $ 45.30 $ 35.77 END OF PERIOD TOTAL RETURN B, C 14.29% 10.14% 27.61% (1.07)% 37.14% 13.02% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 98,883 $ 98,133 $ 85,013 $ 69,569 $ 105,833 $ 44,824 OF PERIOD (000 OMITTED) RATIO OF 1.51% A 1.56% 1.64% 1.64% 1.55% 1.90% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.44% A, E 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 (.56)% A (.12)% (.46)% (.52)% (.69)% (.39)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 255% A 127% 141% 103% 170% 109% A TURNOVER RATE AVERAGE $ .0390 $ .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 INVEST MENT INCOME (LOSS) PER SHARE REFLECTS A SPECIAL DIVIDEND 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS MULTIMEDIA 17.28% 17.25% 151.22% 284.91% MULTIMEDIA 13.76% 13.73% 143.69% 273.36% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS MULTIMEDIA 17.25% 20.23% 14.43% MULTIMEDIA 13.73% 19.50% 14.08% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 145507 S00000000000001 Multimedia S&P 500 00503 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9466.76 9781.00 1987/10/31 7539.11 7674.17 1987/11/30 7017.75 7041.82 1987/12/31 8046.47 7577.70 1988/01/31 8179.71 7896.72 1988/02/29 8727.49 8264.71 1988/03/31 9105.02 8009.33 1988/04/30 9216.05 8098.24 1988/05/31 9060.60 8168.69 1988/06/30 9373.55 8543.63 1988/07/31 9358.23 8511.17 1988/08/31 9005.96 8221.79 1988/09/30 9572.66 8572.04 1988/10/31 9679.87 8810.34 1988/11/30 9603.29 8684.35 1988/12/31 10206.72 8836.33 1989/01/31 11425.55 9483.15 1989/02/28 11401.96 9247.02 1989/03/31 11936.68 9462.47 1989/04/30 12738.75 9953.57 1989/05/31 13352.09 10356.69 1989/06/30 13625.49 10297.66 1989/07/31 14662.04 11227.54 1989/08/31 14646.22 11447.60 1989/09/30 14416.75 11400.66 1989/10/31 13443.50 11136.17 1989/11/30 13522.63 11363.35 1989/12/31 13528.36 11636.07 1990/01/31 11731.98 10855.29 1990/02/28 11435.68 10995.32 1990/03/31 11324.56 11286.70 1990/04/30 10787.50 11004.53 1990/05/31 11815.32 12077.47 1990/06/30 11713.47 11995.34 1990/07/31 11065.29 11956.96 1990/08/31 9630.04 10876.05 1990/09/30 8805.93 10346.39 1990/10/31 8426.29 10301.90 1990/11/30 9296.70 10967.40 1990/12/31 9981.91 11273.39 1991/01/31 10518.97 11764.91 1991/02/28 11296.78 12606.10 1991/03/31 11602.35 12911.17 1991/04/30 12000.51 12942.15 1991/05/31 12065.33 13501.25 1991/06/30 11111.59 12882.90 1991/07/31 11528.27 13483.24 1991/08/31 11889.40 13802.79 1991/09/30 12611.65 13572.29 1991/10/31 13250.57 13754.15 1991/11/30 12343.12 13199.86 1991/12/31 13759.85 14709.93 1992/01/31 14120.98 14436.32 1992/02/29 14908.05 14623.99 1992/03/31 14528.40 14338.83 1992/04/30 14750.63 14760.39 1992/05/31 14972.86 14832.71 1992/06/30 15028.42 14611.71 1992/07/31 15065.46 15209.33 1992/08/31 14861.75 14897.53 1992/09/30 14769.15 15073.32 1992/10/31 15009.90 15126.08 1992/11/30 16102.54 15641.88 1992/12/31 16717.95 15834.28 1993/01/31 17055.68 15967.28 1993/02/28 17130.74 16184.44 1993/03/31 17806.21 16525.93 1993/04/30 17345.74 16126.00 1993/05/31 18528.19 16558.18 1993/06/30 19109.88 16606.20 1993/07/31 19825.06 16539.77 1993/08/31 21512.91 17166.63 1993/09/30 22027.85 17034.45 1993/10/31 23677.55 17387.06 1993/11/30 22132.34 17221.88 1993/12/31 23074.19 17430.27 1994/01/31 23403.27 18022.90 1994/02/28 23103.23 17534.48 1994/03/31 21690.13 16769.97 1994/04/30 21700.65 16984.63 1994/05/31 22498.71 17263.18 1994/06/30 21995.82 16840.23 1994/07/31 22531.51 17392.59 1994/08/31 23887.11 18105.69 1994/09/30 23723.13 17662.10 1994/10/31 24258.81 18059.49 1994/11/30 23493.55 17401.77 1994/12/31 23997.98 17659.84 1995/01/31 24269.27 18117.75 1995/02/28 25264.00 18823.80 1995/03/31 26869.14 19379.29 1995/04/30 27490.85 19950.01 1995/05/31 27637.80 20747.42 1995/06/30 28700.36 21229.38 1995/07/31 30395.93 21933.35 1995/08/31 31356.75 21988.40 1995/09/30 32249.75 22916.31 1995/10/31 31300.23 22834.50 1995/11/30 32509.74 23836.93 1995/12/31 32078.78 24296.03 1996/01/31 32275.06 25123.07 1996/02/29 33342.31 25355.96 1996/03/31 32900.69 25600.14 1996/04/30 34432.31 25977.48 1996/05/31 35575.86 26647.44 1996/06/30 33929.65 26748.97 1996/07/31 30700.05 25567.20 1996/08/31 31843.60 26106.41 1996/09/30 33866.81 27575.68 1996/10/31 32911.76 28336.22 1996/11/30 33514.95 30478.15 1996/12/31 32423.16 29874.38 1997/01/31 32257.02 31740.93 1997/02/28 31835.27 31989.78 1997/03/31 30288.88 30675.32 1997/04/30 30965.22 32506.64 1997/05/31 33921.76 34485.64 1997/06/30 36145.71 36030.60 1997/07/31 38081.86 38897.55 1997/08/29 37336.18 36718.51 IMATRL PRASUN SHR__CHT 19970831 19970909 145530 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Multimedia Portfolio on August 31, 1987 and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $37,336 - a 273.36% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS OMNICOM GROUP, INC. 6.9 WORLDCOM, INC. 5.8 MICROSOFT CORP. 5.4 TIMES MIRROR CO. CLASS A 5.4 COMPAQ COMPUTER CORP. 5.0 COGNIZANT CORP. 4.3 ORACLE CORP. 4.1 MOBILE TELECOMMUNICATIONS TECHNOLOGIES, INC. 4.0 GIBSON GREETINGS, INC. 3.7 ADVO, INC. 3.6 TOP INDUSTRIES AS OF AUGUST 31, 1997 7.7 PREPACKAGED COMPUTER SOFTWARE 14.0% NEWSPAPERS 11.5% ADVERTISING AGENCIES 11.4% BOOK PUBLISHING & PRINTING 9.0% TELEPHONE SERVICES 8.2% ALL OTHERS 45.9% ROW: 1, COL: 1, VALUE: 45.9 ROW: 1, COL: 2, VALUE: 8.199999999999999 ROW: 1, COL: 3, VALUE: 9.0 ROW: 1, COL: 4, VALUE: 11.4 ROW: 1, COL: 5, VALUE: 11.5 ROW: 1, COL: 6, VALUE: 14.0 * * 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. HOW DID THE FUND PERFORM, JOHN? D.C. For the six months that ended on August 31, 1997 the fund had a total return of 17.28%. For the year that ended on August 31, 1997, it returned 17.25%. For the same periods, the Standard & Poor's 500 Index returned 14.78% and 40.65%, respectively. Q. THE FUND'S PERFORMANCE RELATIVE TO THE OVERALL MARKET IMPROVED SUBSTANTIALLY OVER THE PAST SIX MONTHS. WHAT WERE THE PRINCIPAL REASONS? D.C. I think there were three major factors that contributed to the performance. First, the fund had a significant exposure to advertising agencies, which had a very good year, particularly a very good past six months. We have significant positions in two large advertising agencies, Omnicom Group, Inc., and Interpublic Group, both of which were fantastic stocks over the period. Omnicom, for example, was the largest position in the fund for the past six months. It is up 48% year-to-date. Second, I made a decision early this year to reduce the exposure to publishing stocks, which had been strong contributors to the fund in 1996. During the past six months, market expectations of rising paper costs hurt the performance of print media stocks. The decision to redeploy assets from publishing companies to other areas turned out to be a good one. Third, we started to look more at technology companies. Q. WOULD YOU ELABORATE ON THE EMPHASIS ON TECHNOLOGY? D.C. Certainly. Early this year, I started to think critically about multimedia from a technology perspective. I began to look at hardware and software companies in terms of the Internet and access to information, and to take positions in companies such as Microsoft, Intel and Compaq. Q. HOW ELSE HAS YOUR DEFINITION OF MULTIMEDIA EVOLVED? D.C. Early this year, the fund became more precisely focused on how information is distributed. I thought more in terms of television distribution, radio distribution, newspaper distribution and, on the software side, on-line access to information. So the fund has become more focused on media/information access. Q. WHICH INDIVIDUAL STOCKS CONTRIBUTED POSITIVELY TO THE FUND'S PERFORMANCE? D.C. I've already mentioned Omnicom, Interpublic and the technology companies. Cognizant Corporation has been one of the best performing stocks. This is a strong growth company with some wonderful franchises and a management team focused on its core businesses. It was spun out of Dun & Bradstreet late in 1996. The company has a 20% growth rate, yet was trading at a lower price-to-earnings multiple than companies with comparable growth. It owns Nielson Media Research, the television rating service, and IMS, which keeps track of pharmaceutical industry market share. It also owns a large position in the Gartner Group, which provides information technology consulting services. Another strong contributor was the Tribune Company, best known for owning the Chicago Tribune. The stock made a solid comeback this year. Q. WERE THERE ANY DISAPPOINTMENTS? D.C. Probably the biggest disappointment was the Times-Mirror Co. This newspaper stock was one of the best contributors in 1996 and early 1997, and it's been one of the top five positions in the fund all year long. However, in the last two quarters, concern has grown about a couple of its businesses, especially a legal publishing business whose turnaround has been slower than investors expected. However, the basic story of the company continues to be strong. Q. WHAT IS YOUR OUTLOOK FOR THE FUND? D.C. It's very difficult to talk about what may happen over the next six months, and I've tried to position the fund for the next three to five years. I've continued to modestly reduce the exposure to publishing and newspapers, where earnings are slowing. I've readjusted the fund to increase the exposure to technology, geared around access to information. We are witnessing very powerful trends involving Internet usage and on-line access to information. I think the fund is very well positioned for the future. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 503 TRADING SYMBOL: FBMPX SIZE: as of August 31, 1997, more than $48 million MANAGER: John Porter, since 1996; equity analyst, newspaper and publishing industries, since 1996; joined Fidelity in 1995 (checkmark) MULTIMEDIA PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.5% SHARES VALUE (NOTE 1) ADVERTISING - 12.0% ADVERTISING - 0.6% Cordiant PLC sponsored ADR 50,000 $ 281,250 21851410 ADVERTISING AGENCIES - 11.4% ADVO, Inc. (a) 95,800 1,766,313 00758510 Interpublic Group of Companies, Inc. 9,000 438,750 46069010 Omnicom Group, Inc. 50,000 3,387,500 68191910 5,592,563 TOTAL ADVERTISING 5,873,813 BROADCASTING - 4.0% CABLE TV OPERATORS - 0.9% TCI Group Class A 25,000 437,500 87924V10 TELEVISION BROADCASTING - 3.1% Central European Media Class C (a) 15,000 388,125 15399422 HSN, Inc. (a) 35,000 1,155,000 40429R10 1,543,125 TOTAL BROADCASTING 1,980,625 CELLULAR - 4.0% CELLULAR & COMMUNICATION SERVICES - 4.0% Mobile Telecommunications Technologies, Inc. (a) 160,000 1,960,000 60740610 COMPUTER SERVICES & SOFTWARE - 18.6% COMPUTER RELATED SERVICES, NEC - 0.7% Desktop Data, Inc. 34,500 351,469 25057H10 COMPUTER SERVICES - 3.9% Barra, Inc. (a) 30,000 1,046,250 06831310 FactSet Research Systems, Inc. (a) 32,000 878,000 30307510 1,924,250 PREPACKAGED COMPUTER SOFTWARE - 14.0% CBT Group PLC sponsored ADR (a) 10,000 650,000 12485310 Mapix, Inc. 2,400 28,200 56491010 Microsoft Corp. (a) 20,000 2,643,750 59491810 Netscape Communications Corp. 30,000 1,194,375 64114910 Oracle Corp. 52,500 2,001,563 68389X10 PeopleSoft, Inc. (a) 5,000 281,250 71271310 6,799,138 TOTAL COMPUTER SERVICES & SOFTWARE 9,074,857 COMPUTERS & OFFICE EQUIPMENT - 6.2% MINI & MICRO COMPUTERS - 5.0% Compaq Computer Corp. (a) 37,000 2,423,500 20449310 OFFICE AUTOMATION - 1.2% Bell & Howell Co. (a) 20,000 612,500 07785210 TOTAL COMPUTERS & OFFICE EQUIPMENT 3,036,000 ELECTRICAL EQUIPMENT - 4.8% ELECTRICAL MACHINERY - 2.3% Westinghouse Electric Corp. 43,250 1,113,688 96040210 TV & RADIO COMMUNICATION EQUIPMENT - 2.5% Scientific-Atlanta, Inc. 56,900 1,237,575 80865510 TOTAL ELECTRICAL EQUIPMENT 2,351,263 ELECTRONICS - 1.9% SEMICONDUCTORS - 1.9% Intel Corp. 10,000 921,250 45814010 SHARES VALUE (NOTE 1) ENTERTAINMENT - 3.1% MOTION PICTURE PRODUCTION - 3.1% Disney (Walt) Co. 20,000 $ 1,536,250 25468710 PRINTING - 1.2% COMMERCIAL PRINTING, NEC - 1.2% Donnelley (R.R.) & Sons Co. 15,000 584,063 25786710 PUBLISHING - 28.5% BOOK PUBLISHING & PRINTING - 9.0% ACNielsen Corp. (a) 15,000 341,250 00483310 Cognizant Corp. 50,000 2,100,000 19244110 Harcourt General, Inc. 34,500 1,640,902 41163G10 McGraw-Hill, Inc. 5,000 306,563 58064510 4,388,715 GREETING CARDS - 3.7% Gibson Greetings, Inc. (a) 80,000 1,800,000 37482710 NEWSPAPERS - 11.5% Gannett Co., Inc. 7,000 682,063 36473010 New York Times Co. (The) Class A 11,900 562,275 65011110 Times Mirror Co. Class A 51,900 2,630,681 88736410 Tribune Co. 35,000 1,730,313 89604710 5,605,332 PERIODICALS - 4.3% Meredith Corp. 33,000 990,000 58943310 Playboy Enterprises, Inc. Class B (a) 90,000 1,136,250 72811730 2,126,250 TOTAL PUBLISHING 13,920,297 SERVICES - 2.0% BUSINESS SERVICES - 0.9% Snyder Communications, Inc. (a) 15,000 429,375 83291410 COMMERCIAL, ECONOMIC, SOCIAL & EDUCATIONAL RESEARCH - 1.1% Gartner Group, Inc. Class A (a) 20,000 528,750 36665110 TOTAL SERVICES 958,125 TELEPHONE SERVICES - 8.2% AT&T Corp. 5,000 195,000 00195710 Tel-Save Holdings, Inc. (a) 20,000 357,500 87917610 Telebras sponsored ADR 5,000 590,000 87928710 WorldCom, Inc. (a) 95,000 2,844,063 98155K10 3,986,563 TOTAL COMMON STOCKS (Cost $38,391,654) 46,183,106 CASH EQUIVALENTS - 5.5% Taxable Central Cash Fund (b) (Cost $2,696,596) 2,696,596 2,696,596 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $41,088,250) $ 48,879,702 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $23,295,503 and $36,332,695, 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 $6,753 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 $2,952,000 and $2,610,500, respectively. The weighted average interest rate was 5.8% (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $41,408,517. Net unrealized appreciation aggregated $7,471,185 of which $8,326,069 related to appreciated investment securities and $854,884 related to depreciated investment securities. MULTIMEDIA PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 48,879,702 SECURITIES, AT VALUE (COST $41,088,250 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 1,084,857 INVESTMENTS SOLD RECEIVABLE FOR 23,764 FUND SHARES SOLD DIVIDENDS 28,132 RECEIVABLE INTEREST 16,881 RECEIVABLE REDEMPTION FEES 363 RECEIVABLE TOTAL ASSETS 50,033,699 LIABILITIES PAYABLE FOR $ 632,213 INVESTMENTS PURCHASED PAYABLE FOR 721,838 FUND SHARES REDEEMED ACCRUED 25,467 MANAGEMENT FEE OTHER PAYABLES 60,863 AND ACCRUED EXPENSES TOTAL LIABILITIES 1,440,381 NET ASSETS $ 48,593,318 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 40,693,103 UNDISTRIBUTED 1,309,754 NET INVESTMENT INCOME ACCUMULATED (1,200,991) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 7,791,452 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 48,593,318 1,702,376 SHARES OUTSTANDING NET ASSET $28.54 VALUE AND REDEMPTION PRICE PER SHARE ($48,593,31 8 (DIVIDED BY) 1,702,376 SHARES) MAXIMUM $29.42 OFFERING PRICE PER SHARE (100/97.00 OF $28.54) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 145,157 INCOME DIVIDENDS INTEREST 117,156 TOTAL INCOME 262,313 EXPENSES MANAGEMENT $ 147,498 FEE TRANSFER AGENT 235,236 FEES ACCOUNTING FEES 30,567 AND EXPENSES NON-INTERESTED 115 TRUSTEES' COMPENSATION CUSTODIAN FEES 6,729 AND EXPENSES REGISTRATION FEES 8,532 AUDIT 10,514 LEGAL 153 INTEREST 843 MISCELLANEOUS 250 TOTAL EXPENSES 440,437 BEFORE REDUCTIONS EXPENSE (3,788) 436,649 REDUCTIONS NET INVESTMENT (174,336) INCOME (LOSS) REALIZED AND (492,929) UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES CHANGE IN NET 7,852,235 UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) 7,359,306 NET INCREASE $ 7,184,970 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 46,710 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 524 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 8,805 WITHHELD BY FSC EXPENSE $ 3,770 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 18 CREDITS $ 3,788 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (174,336) $ 1,133,306 NET INVESTMENT INCOME (LOSS) NET REALIZED (492,929) 3,649,321 GAIN (LOSS) CHANGE IN NET 7,852,235 (9,287,117) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 7,184,970 (4,504,490) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (432,239) (3,347,638) SHAREHOLDERS FROM NET REALIZED GAINS IN EXCESS OF (708,062) - NET REALIZED GAIN TOTAL (1,140,301) (3,347,638) DISTRIBUTIONS SHARE 15,054,039 42,427,132 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 1,126,619 3,294,839 OF DISTRIBUTIONS COST OF SHARES (27,830,697) (78,777,876) REDEEMED REDEMPTION 27,859 109,141 FEES NET INCREASE (11,622,180) (32,946,764) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (5,577,511) (40,798,892) INCREASE (DECREASE) IN NET ASSETS NET ASSETS 54,170,829 94,969,721 BEGINNING OF PERIOD END OF $ 48,593,318 $ 54,170,829 PERIOD (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $1,309,75 4 AND $1,484,09 0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 570,703 1,577,831 ISSUED IN 48,395 127,316 REINVESTMENT OF DISTRIBUTIONS REDEEMED (1,091,162) (3,024,499) NET INCREASE (472,064) (1,319,352) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 24.91 $ 27.18 $ 22.35 $ 23.87 $ 18.26 $ 15.93 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.09) .35 E .02 (.01) (.10) (.07) INVESTMENT INCOME (LOSS) D NET REALIZED 4.26 (1.58) 7.00 1.67 6.28 2.61 AND UNREALIZED GAIN (LOSS) TOTAL FROM 4.17 (1.23) 7.02 1.66 6.18 2.54 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET - - (.02) - - - INVESTMENT INCOME FROM NET (.21) (1.07) (2.19) (3.21) (.65) (.23) REALIZED GAIN IN EXCESS OF (.34) - - - - - NET REALIZED GAIN TOTAL (.55) (1.07) (2.21) (3.21) (.65) (.23) DISTRIBUTIONS REDEMPTION FEES .01 .03 .02 .03 .08 .02 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 28.54 $ 24.91 $ 27.18 $ 22.35 $ 23.87 $ 18.26 END OF PERIOD TOTAL RETURN B, C 17.28% (4.52)% 31.98% 9.35% 34.86% 16.14% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 48,593 $ 54,171 $ 94,970 $ 38,157 $ 49,177 $ 16,647 OF PERIOD (000 OMITTED) RATIO OF 1.77% A 1.60% 1.56% 2.05% 1.66% 2.49% A, G EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.76% A, F 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 (.70)% A 1.33% .08% (.07)% (.42)% (.52)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 101% A 99% 223% 107% 340% 70% A TURNOVER RATE AVERAGE $ .0369 $ .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 INVES TMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND 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 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS RETAILING 22.54% 26.49% 117.01% 328.19% RETAILING 18.87% 22.70% 110.50% 315.34% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare 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 AUGUST 31, 1997 YEAR YEARS YEARS RETAILING 26.49% 16.76% 15.65% RETAILING 22.70% 16.05% 15.30% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970912 162814 S00000000000001 Retailing S&P 500 00046 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9008.48 9781.00 1987/10/31 6317.15 7674.17 1987/11/30 5881.05 7041.82 1987/12/31 6458.11 7577.70 1988/01/31 6866.06 7896.72 1988/02/29 7661.22 8264.71 1988/03/31 7758.03 8009.33 1988/04/30 8000.03 8098.24 1988/05/31 7771.85 8168.69 1988/06/30 8456.39 8543.63 1988/07/31 8380.33 8511.17 1988/08/31 8359.58 8221.79 1988/09/30 8850.51 8572.04 1988/10/31 9037.20 8810.34 1988/11/30 8912.74 8684.35 1988/12/31 8957.73 8836.33 1989/01/31 9400.69 9483.15 1989/02/28 9274.13 9247.02 1989/03/31 9717.10 9462.47 1989/04/30 10265.53 9953.57 1989/05/31 10975.68 10356.69 1989/06/30 10780.28 10297.66 1989/07/31 11649.66 11227.54 1989/08/31 12214.76 11447.60 1989/09/30 12185.78 11400.66 1989/10/31 11598.95 11136.17 1989/11/30 11671.39 11363.35 1989/12/31 11603.03 11636.07 1990/01/31 10696.81 10855.29 1990/02/28 11069.46 10995.32 1990/03/31 11975.68 11286.70 1990/04/30 11806.29 11004.53 1990/05/31 13381.60 12077.47 1990/06/30 13212.21 11995.34 1990/07/31 12670.17 11956.96 1990/08/31 10849.26 10876.05 1990/09/30 9638.14 10346.39 1990/10/31 9189.26 10301.90 1990/11/30 10442.73 10967.40 1990/12/31 11019.31 11273.39 1991/01/31 12088.98 11764.91 1991/02/28 13209.58 12606.10 1991/03/31 14584.88 12911.17 1991/04/30 14788.62 12942.15 1991/05/31 16019.59 13501.25 1991/06/30 15510.23 12882.90 1991/07/31 16503.49 13483.24 1991/08/31 17377.90 13802.79 1991/09/30 17191.14 13572.29 1991/10/31 16868.54 13754.15 1991/11/30 16545.94 13199.86 1991/12/31 18527.11 14709.93 1992/01/31 19554.46 14436.32 1992/02/29 20494.75 14623.99 1992/03/31 20085.55 14338.83 1992/04/30 19267.15 14760.39 1992/05/31 19667.64 14832.71 1992/06/30 18749.58 14611.71 1992/07/31 19583.70 15209.33 1992/08/31 19139.44 14897.53 1992/09/30 19710.63 15073.32 1992/10/31 21061.54 15126.08 1992/11/30 22657.25 15641.88 1992/12/31 22617.21 15834.28 1993/01/31 22773.25 15967.28 1993/02/28 21910.42 16184.44 1993/03/31 23599.37 16525.93 1993/04/30 22244.82 16126.00 1993/05/31 23476.98 16558.18 1993/06/30 22912.63 16606.20 1993/07/31 23025.50 16539.77 1993/08/31 24078.96 17166.63 1993/09/30 24812.61 17034.45 1993/10/31 25198.25 17387.06 1993/11/30 25442.80 17221.88 1993/12/31 25564.58 17430.27 1994/01/31 24425.67 18022.90 1994/02/28 25330.70 17534.48 1994/03/31 24801.92 16769.97 1994/04/30 25554.41 16984.63 1994/05/31 24293.47 17263.18 1994/06/30 24090.09 16840.23 1994/07/31 24496.85 17392.59 1994/08/31 26052.69 18105.69 1994/09/30 25544.24 17662.10 1994/10/31 25656.10 18059.49 1994/11/30 24761.24 17401.77 1994/12/31 24283.30 17659.84 1995/01/31 24090.09 18117.75 1995/02/28 24313.81 18823.80 1995/03/31 24588.37 19379.29 1995/04/30 23632.49 19950.01 1995/05/31 24049.42 20747.42 1995/06/30 25584.92 21229.38 1995/07/31 27150.93 21933.35 1995/08/31 26774.68 21988.40 1995/09/30 27578.02 22916.31 1995/10/31 26347.59 22834.50 1995/11/30 27669.54 23836.93 1995/12/31 27191.60 24296.03 1996/01/31 26398.43 25123.07 1996/02/29 28340.69 25355.96 1996/03/31 30445.65 25600.14 1996/04/30 32225.20 25977.48 1996/05/31 33770.87 26647.44 1996/06/30 33170.91 26748.97 1996/07/31 29998.22 25567.20 1996/08/31 32835.34 26106.41 1996/09/30 34014.93 27575.68 1996/10/31 33343.78 28336.22 1996/11/30 34625.06 30478.15 1996/12/31 32863.92 29874.38 1997/01/31 32711.02 31740.93 1997/02/28 33893.47 31989.78 1997/03/31 34321.59 30675.32 1997/04/30 34848.67 32506.64 1997/05/31 36465.95 34485.64 1997/06/30 38783.70 36030.60 1997/07/31 42976.25 38897.55 1997/08/29 41534.10 36718.51 IMATRL PRASUN SHR__CHT 19970831 19970912 162820 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Retailing Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $41,534 - a 315.34% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS CVS CORP. 7.5 FEDERATED DEPARTMENT STORES, INC. 6.3 WAL-MART STORES, INC. 5.9 PAYLESS SHOESOURCE, INC. 5.4 HOME DEPOT, INC. 5.4 CONSOLIDATED STORES CORP. 5.1 SAFEWAY, INC. (NEW) 5.1 TJX COMPANIES, INC. 5.1 DAYTON HUDSON CORP. 4.9 PROFFITTS, INC. 4.7 TOP INDUSTRIES AS OF AUGUST 31, 1997 DEPARTMENT STORES 19.1% DRUG STORES 13.0% GENERAL MERCHANDISE STORES 10.9% GENERAL APPAREL STORES 10.1% GROCERY-RETAIL 9.4% ALL OTHERS 37.5% * ROW: 1, COL: 1, VALUE: 37.5 ROW: 1, COL: 2, VALUE: 9.4 ROW: 1, COL: 3, VALUE: 10.1 ROW: 1, COL: 4, VALUE: 10.9 ROW: 1, COL: 5, VALUE: 13.0 ROW: 1, COL: 6, VALUE: 19.1 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS RETAILING PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Ramin Arani, Portfolio Manager of Fidelity Select Retailing Portfolio Q. HOW DID THE FUND PERFORM, RAMIN? D.C. For the six-month and 12-month periods ending August 31, 1997, the fund returned 22.54% and 26.49%, outperforming its benchmark index, the Standard & Poor's 500 Index, for the past six months and underperforming it for the past 12 months. The index returned 14.78% and 40.65% for the six- and 12-month periods, respectively. Q. HOW DID THE OVERALL RETAIL SECTOR LOOK DURING THE PAST SIX MONTHS? D.C. The retail sector outperformed the market mostly because retailers planned their inventory levels quite conservatively and sales were better than expected. These two factors resulted in the sector beating earnings expectations. Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE OVER THE SIX-MONTH PERIOD? D.C. In general, I think there were three reasons why the fund performed so well over the past six months. First, it was overweighted in the drug store industry. This strategy paid off since drug stores were very strong performers due to consolidation in the industry, strong store sales in the front end of the store and the pharmacy, and an increase in third-party penetration. By this I mean that an increasing number of customers belong to an HMO or third-party payer through which the consumer makes only a small co-payment for prescription drugs. As a result, more customers are buying prescription drugs because they're more affordable. A good example of a company that is benefiting from these trends is drug-store chain CVS, the fund's top holding at the end of the period. CVS not only benefited from the third-party trend, but also adjusted its promotional strategy in the front end of the store and notably increased its sales of non-prescription products. In addition, the company has benefited from its acquisition of Revco. Q. AND THE OTHER REASONS THAT THE FUND LOOKED GOOD? D.C. The fund was overweighted in two discount stores, Wal-Mart and Dayton Hudson, both solid performers over the period. About 12 months ago, Wal-Mart initiated a plan to reduce inventories, which improved its margins dramatically and allowed it to drive sales at a higher rate. In terms of Dayton Hudson, its Target stores grew their square footage very aggressively, and its Mervyns' division showed a turnaround in earnings. The other reason the fund did well was that it was underweighted in restaurants and supermarkets, which generally were poor performers all year. One notable exception was the supermarket chain Safeway, one of the fund's top holdings. Safeway acquired Vons last year, which has dramatically accelerated its earnings growth outlook. Q. SO YOU BENEFITED FROM SOME TRENDS IN THE RETAIL SECTOR OVER THE PERIOD? D.C. It appears so. However, I should note that generally I don't look for trends. My focus is on specific stocks. I look for companies that are cutting costs and where there are a lot of margin expansion opportunities. I'm also interested in companies with management teams that do smart things with the cash they generate and have aggressive returns on investment targets. Q. DID YOU EXPERIENCE ANY REGRETS OVER THE PERIOD? D.C. Sure. Department stores as a group performed very well, and I probably should have owned more of the top performers than I did. I owned Federated, which had superior earnings growth. But I wish I also had owned J.C. Penny's and Dillards, which both turned in stronger-than-expected performances. Q. RAMIN, HOW DOES THE FUND LOOK GOING FORWARD? D.C. I continue to be cautious about the sales environment, especially as we approach the Christmas season. Over the past couple of years, Christmas-time sales have been very unpredictable and generally disappointing. Going forward, I'll continue to focus on companies that offer profit margin expansion and generation of strong free cash flow that can be returned to 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: December 16, 1985 FUND NUMBER: 046 TRADING SYMBOL: FSRPX SIZE: as of August 31, 1997, more than $117 million MANAGER: Ramin Arani, since January 1997; joined Fidelity in 1992 (checkmark) RETAILING PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.7% SHARES VALUE (NOTE 1) APPAREL STORES - 16.1% GENERAL APPAREL STORES - 10.1% Gap, Inc. 123,500 $ 5,488,028 36476010 Men's Wearhouse, Inc. (The) (a) 13,000 472,063 58711810 Ross Stores, Inc. 2,900 85,188 77829610 TJX Companies, Inc. 221,200 6,083,000 87254010 12,128,279 SHOE STORES - 6.0% Footstar, Inc. (a) 25,930 643,388 34491210 Payless ShoeSource, Inc. (a) 102,000 6,540,750 70437910 7,184,138 TOTAL APPAREL STORES 19,312,417 COMPUTER SERVICES & SOFTWARE - 0.4% COMPUTER & SOFTWARE STORES - 0.4% CompUSA, Inc. (a) 17,100 529,031 20493210 DRUG STORES - 13.0% CVS Corp. 159,459 8,989,501 12665010 Long Drug Stores, Inc. 2,100 53,156 54316210 Rite Aid Corp. 51,800 2,593,238 76775410 Walgreen Co. 148,200 3,992,138 93142210 15,628,033 GENERAL MERCHANDISE STORES - 37.9% DEPARTMENT STORES - 19.1% Federated Department Stores, Inc. (a) 179,900 7,555,800 31410H10 Kohls Corp. (a) 29,000 1,999,188 50025510 May Department Stores Co. (The) 8,000 430,500 57777810 Meyer (Fred), Inc. (a) 11,900 618,800 59309810 Neiman-Marcus Group, Inc. (a) 9,200 284,050 64020410 Nordstrom, Inc. 22,000 1,287,000 65566410 Proffitts, Inc. (a) 104,752 5,623,873 74292510 Sears, Roebuck & Co. 72,200 4,097,350 81238710 Stein Mart, Inc. 40,000 1,120,000 85837510 23,016,561 GENERAL MERCHANDISE STORES - 10.9% Dayton Hudson Corp. 104,400 5,950,800 23975310 Family Dollar Stores, Inc. 3,000 63,750 30700010 Wal-Mart Stores, Inc. 200,100 7,103,550 93114210 13,118,100 VARIETY STORES - 7.9% Consolidated Stores Corp. (a) 164,218 6,147,911 21014910 Costco Companies, Inc. (a) 33,700 1,215,306 22160Q10 Dollar Tree Stores (a) 17,700 688,088 25674710 Michaels Stores, Inc. 47,500 1,160,781 59408710 Woolworth Corp. (a) 11,700 261,788 98088310 9,473,874 TOTAL GENERAL MERCHANDISE STORES 45,608,535 GROCERY STORES - 9.4% GROCERY - RETAIL - 9.4% American Stores Co. 102,400 2,425,600 03009610 Dominick's Supermarkets, Inc. (a) 62,000 1,705,000 25715910 Hannaford Brothers Co. 15,000 510,000 41055010 Kroger Co. (The) (a) 18,400 554,300 50104410 Safeway, Inc. (New) (a) 119,487 6,086,369 78651420 11,281,269 SHARES VALUE (NOTE 1) LODGING & GAMING - 0.7% HOTELS, MOTELS, & TOURIST COURTS - 0.7% HFS, Inc. (a) 15,000 $ 835,313 40418110 REAL ESTATE INVESTMENT TRUSTS - 0.0% REAL ESTATE INVESTMENT TRUSTS - 0.0% Equity Office Properties Trust (REIT) 100 2,919 29474110 RESTAURANTS - 1.2% RESTAURANTS - 1.2% McDonald's Corp. 7,800 369,038 58013510 Starbucks Corp. (a) 26,500 1,086,500 85524410 1,455,538 RETAIL & WHOLESALE, MISCELLANEOUS - 15.5% BUILDING MATERIALS - RETAIL - 5.4% Home Depot, Inc. 137,300 6,478,844 43707610 HOBBY, TOY, & GAME SHOPS - 3.0% Toys "R" Us, Inc. (a) 106,391 3,677,139 89233510 JEWELRY STORES - 0.2% Tiffany & Co., Inc. 4,600 208,150 88654710 LUMBER & BUILDING MATERIALS - RETAIL - 2.2% Lowe's Companies, Inc. 75,700 2,616,381 54866110 MAIL ORDER - 0.0% Viking Office Products, Inc. (a) 200 4,225 92691310 RETAIL STORES - 0.5% Gadzooks, Inc. 30,000 570,000 36255310 RETAIL, GENERAL - 2.2% Bed Bath & Beyond, Inc. (a) 27,000 837,000 07589610 Staples, Inc. (a) 76,000 1,786,000 85503010 2,623,000 STATIONERY & OFFICE SUPPLIES - WHOLESALE - 2.0% Corporate Express, Inc. 104,500 1,783,031 21988810 U.S. Office Products Co. 20,500 664,969 91232510 2,448,000 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 18,625,739 TEXTILES & APPAREL - 0.5% APPAREL - 0.5% Liz Claiborne, Inc. 13,500 601,594 53932010 Polo Ralph Lauren Corp. Class A 400 10,500 73157210 612,094 TOTAL COMMON STOCKS (Cost $100,640,681) 113,890,888 CASH EQUIVALENTS - 5.3% Taxable Central Cash Fund (b) (Cost $6,404,511) 6,404,511 6,404,511 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $107,045,192) $ 120,295,399 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $213,013,910 and $159,377,357, 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 $44,282 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At the period end, there were no loans outstanding (see Note 6 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $9,812,000 and $4,757,778, respectively. The weighted average interest rate paid was 5.8% (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $107,427,188. Net unrealized appreciation aggregated $12,868,211, of which $14,270,164 related to appreciated investment securities and $1,401,953 related to depreciated investment securities. RETAILING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 120,295,399 SECURITIES, AT VALUE (COST $107,045,19 2) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 402,371 INVESTMENTS SOLD RECEIVABLE FOR 119,956 FUND SHARES SOLD DIVIDENDS 50,663 RECEIVABLE INTEREST 42,344 RECEIVABLE REDEMPTION FEES 334 RECEIVABLE OTHER 21,910 RECEIVABLES TOTAL ASSETS 120,932,977 LIABILITIES PAYABLE FOR $ 3,031,890 FUND SHARES REDEEMED ACCRUED 63,910 MANAGEMENT FEE OTHER PAYABLES 126,005 AND ACCRUED EXPENSES TOTAL LIABILITIES 3,221,805 NET ASSETS $ 117,711,172 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 106,870,412 ACCUMULATED (486,709) NET INVESTMENT (LOSS) ACCUMULATED (1,922,738) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 13,250,207 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 117,711,172 2,919,205 SHARES OUTSTANDING NET ASSET $40.32 VALUE AND REDEMPTION PRICE PER SHARE ($117,711,1 72 (DIVIDED BY) 2,919,205 SHARES) MAXIMUM $41.57 OFFERING PRICE PER SHARE (100/97.00 OF $40.32) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 245,299 INCOME DIVIDENDS INTEREST 246,357 (INCLUDING INCOME ON SECURITIES LOANED OF $30,943) TOTAL INCOME 491,656 EXPENSES MANAGEMENT $ 330,132 FEE TRANSFER AGENT 556,876 FEES ACCOUNTING AND 57,391 SECURITY LENDING FEES NON-INTERESTED 248 TRUSTEES' COMPENSATION CUSTODIAN FEES 13,304 AND EXPENSES REGISTRATION FEES 34,341 AUDIT 12,070 LEGAL 443 INTEREST 6,942 MISCELLANEOUS 259 TOTAL EXPENSES 1,012,006 BEFORE REDUCTIONS EXPENSE (33,641) 978,365 REDUCTIONS NET INVESTMENT (486,709) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT (954,961) SECURITIES FOREIGN (2) (954,963) CURRENCY TRANSACTIONS CHANGE IN NET 8,538,926 UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) 7,583,963 NET INCREASE $ 7,097,254 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 143,483 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 1,268 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 48,608 WITHHELD BY FSC EXPENSE $ 32,653 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 988 CREDITS $ 33,641 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (486,709) $ (863,712) NET INVESTMENT INCOME (LOSS) NET REALIZED (954,963) 7,830,939 GAIN (LOSS) CHANGE IN NET 8,538,926 2,577,741 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 7,097,254 9,544,968 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (1,103,164) (523,662) SHAREHOLDERS FROM NET REALIZED GAIN IN EXCESS OF (967,775) - NET REALIZED GAIN TOTAL (2,070,939) (523,662) DISTRIBUTIONS SHARE 280,507,349 606,855,160 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 2,058,854 520,661 OF DISTRIBUTIONS COST OF SHARES (230,149,606) (601,757,660) REDEEMED REDEMPTION 919,895 657,715 FEES NET INCREASE 53,336,492 6,275,876 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 58,362,807 15,297,182 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 59,348,365 44,051,183 PERIOD END OF PERIOD $ 117,711,172 $ 59,348,365 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $486,709 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 7,769,945 19,012,106 ISSUED IN 62,088 15,768 REINVESTMENT OF DISTRIBUTIONS REDEEMED (6,697,887) (18,823,522) NET INCREASE 1,134,146 204,352 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 33.25 $ 27.87 $ 23.91 $ 24.91 $ 23.87 $ 22.13 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.16) (.13) (.14) (.18) (.22) (.08) INVESTMENT INCOME (LOSS) D NET REALIZED 7.28 5.49 4.07 (.96) 3.85 2.93 AND UNREALIZED GAIN (LOSS) TOTAL FROM 7.12 5.36 3.93 (1.14) 3.63 2.85 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.19) (.08) - - (2.63) (1.17) REALIZED GAIN IN EXCESS OF (.16) - - - - - NET REALIZED GAIN TOTAL (.35) (.08) - - (2.63) (1.17) DISTRIBUTIONS REDEMPTION FEES .30 .10 .03 .14 .04 .06 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 40.32 $ 33.25 $ 27.87 $ 23.91 $ 24.91 $ 23.87 END OF PERIOD TOTAL RETURN B, C 22.54% 19.59% 16.56% (4.01)% 15.61% 13.72% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 117,711 $ 59,348 $ 44,051 $ 31,090 $ 52,790 $ 74,878 OF PERIOD (000 OMITTED) RATIO OF 1.82% A 1.45% 1.94% 2.07% 1.86% 1.77% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.76% A, E 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 (.87)% A (.39)% (.53)% (.74)% (.87)% (.44)% A INVESTMENT INCOME TO AVERAGE NET ASSETS PORTFOLIO 312% A 278% 235% 481% 154% 171% A TURNOVER RATE AVERAGE $ .0392 $ .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 N ET 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS AIR TRANSPORTATION 23.53% 26.31% 115.79% 137.50% AIR TRANSPORTATION 19.83% 22.52% 109.32% 130.38% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS AIR TRANSPORTATION 26.31% 16.63% 9.04% AIR TRANSPORTATION 22.52% 15.92% 8.70% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 114323 S00000000000001 Air Transportation S&P 500 00034 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9345.39 9781.00 1987/10/31 6523.31 7674.17 1987/11/30 6080.05 7041.82 1987/12/31 6336.57 7577.70 1988/01/31 6514.00 7896.72 1988/02/29 7054.72 8264.71 1988/03/31 7358.87 8009.33 1988/04/30 7274.38 8098.24 1988/05/31 7164.55 8168.69 1988/06/30 8085.47 8543.63 1988/07/31 7848.90 8511.17 1988/08/31 7409.56 8221.79 1988/09/30 7899.59 8572.04 1988/10/31 8051.67 8810.34 1988/11/30 7865.80 8684.35 1988/12/31 8178.40 8836.33 1989/01/31 8938.79 9483.15 1989/02/28 9107.77 9247.02 1989/03/31 9564.00 9462.47 1989/04/30 9944.19 9953.57 1989/05/31 10197.66 10356.69 1989/06/30 10146.68 10297.66 1989/07/31 10861.12 11227.54 1989/08/31 11686.12 11447.60 1989/09/30 11226.84 11400.66 1989/10/31 10342.30 11136.17 1989/11/30 10240.24 11363.35 1989/12/31 10332.02 11636.07 1990/01/31 9268.69 10855.29 1990/02/28 9658.57 10995.32 1990/03/31 10163.66 11286.70 1990/04/30 9791.49 11004.53 1990/05/31 10473.79 12077.47 1990/06/30 10500.38 11995.34 1990/07/31 10181.38 11956.96 1990/08/31 8568.66 10876.05 1990/09/30 7709.14 10346.39 1990/10/31 8116.75 10301.90 1990/11/30 7992.69 10967.40 1990/12/31 8453.47 11273.39 1991/01/31 9454.77 11764.91 1991/02/28 10518.10 12606.10 1991/03/31 10473.79 12911.17 1991/04/30 10216.82 12942.15 1991/05/31 10819.38 13501.25 1991/06/30 10591.24 12882.90 1991/07/31 10916.85 13483.24 1991/08/31 10781.18 13802.79 1991/09/30 10419.39 13572.29 1991/10/31 10925.89 13754.15 1991/11/30 10437.48 13199.86 1991/12/31 11586.15 14709.93 1992/01/31 12255.45 14436.32 1992/02/29 12807.17 14623.99 1992/03/31 12056.47 14338.83 1992/04/30 11432.39 14760.39 1992/05/31 11586.15 14832.71 1992/06/30 11209.92 14611.71 1992/07/31 11145.49 15209.33 1992/08/31 10676.11 14897.53 1992/09/30 11025.84 15073.32 1992/10/31 11421.60 15126.08 1992/11/30 11697.70 15641.88 1992/12/31 12347.10 15834.28 1993/01/31 12458.76 15967.28 1993/02/28 12654.15 16184.44 1993/03/31 14049.83 16525.93 1993/04/30 14208.65 16126.00 1993/05/31 15020.31 16558.18 1993/06/30 13900.78 16606.20 1993/07/31 14376.58 16539.77 1993/08/31 15234.88 17166.63 1993/09/30 14927.01 17034.45 1993/10/31 15785.32 17387.06 1993/11/30 15822.64 17221.88 1993/12/31 16160.78 17430.27 1994/01/31 16784.89 18022.90 1994/02/28 16189.15 17534.48 1994/03/31 15252.98 16769.97 1994/04/30 15152.67 16984.63 1994/05/31 14519.21 17263.18 1994/06/30 14076.80 16840.23 1994/07/31 14810.80 17392.59 1994/08/31 15373.88 18105.69 1994/09/30 13654.49 17662.10 1994/10/31 13765.10 18059.49 1994/11/30 12850.11 17401.77 1994/12/31 12646.86 17659.84 1995/01/31 13053.83 18117.75 1995/02/28 14173.03 18823.80 1995/03/31 15088.73 19379.29 1995/04/30 16299.49 19950.01 1995/05/31 16564.02 20747.42 1995/06/30 18659.96 21229.38 1995/07/31 19290.78 21933.35 1995/08/31 18548.04 21988.40 1995/09/30 19229.73 22916.31 1995/10/31 19005.90 22834.50 1995/11/30 21457.94 23836.93 1995/12/31 20176.67 24296.03 1996/01/31 19719.05 25123.07 1996/02/29 21955.12 25355.96 1996/03/31 23078.36 25600.14 1996/04/30 22111.83 25977.48 1996/05/31 22322.32 26647.44 1996/06/30 22217.07 26748.97 1996/07/31 18575.62 25567.20 1996/08/31 18238.84 26106.41 1996/09/30 18017.82 27575.68 1996/10/31 17849.43 28336.22 1996/11/30 20027.99 30478.15 1996/12/31 20427.92 29874.38 1997/01/31 19628.06 31740.93 1997/02/28 18649.29 31989.78 1997/03/31 19796.45 30675.32 1997/04/30 20880.47 32506.64 1997/05/31 22332.84 34485.64 1997/06/30 22595.95 36030.60 1997/07/31 23953.60 38897.55 1997/08/29 23037.98 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970909 114327 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Air Transportation Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $23,038 - a 130.38% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS SABRE GROUP HOLDINGS, INC. CLASS A 7.5 AIR NEW ZEALAND LTD. CLASS B 6.2 ATLAS AIR, INC. 5.5 DELTA AIR LINES, INC. 4.9 AMR CORP. 4.9 UAL CORP. 4.6 COMAIR HOLDINGS, INC. 4.5 CONTINENTAL AIRLINES, INC. CLASS B 4.4 AIR EXPRESS INTERNATIONAL CORP. 4.3 BOEING CO. 4.2 TOP INDUSTRIES AS OF AUGUST 31, 1997 AIR TRANSPORT, MAJOR NATIONAL 52.5% AIR TRANSPORTATION, REGIONAL 8.1% FREIGHT FORWARDING 8.0% CAD/CAM/CAE 7.5% AIRCRAFT 4.2% ALL OTHERS 19.7% ROW: 1, COL: 1, VALUE: 19.7 ROW: 1, COL: 2, VALUE: 4.2 ROW: 1, COL: 3, VALUE: 7.5 ROW: 1, COL: 4, VALUE: 8.0 ROW: 1, COL: 5, VALUE: 8.1 ROW: 1, COL: 6, VALUE: 52.5 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS AIR TRANSPORTATION PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Peter Saperstone became Portfolio Manager of Fidelity Select Air Transportation Portfolio on June 23, 1997. Q. HOW DID THE FUND PERFORM, PETER? A. For the six-month period that ended August 31, 1997, the fund returned 23.53%. This topped the Standard & Poor's 500 Index, which returned 14.78% in that same time span. For the 12 months that ended August 31, 1997, the fund returned 26.31% while the index returned 40.65%. Q. WHAT FACTORS DROVE PERFORMANCE? A. Several industry variables came together to create a positive atmosphere. One of the chief hindrances to good stock performance in this sector is overcapacity, or when airlines buy too many jets. Over the past six months, airlines as a group have controlled capacity growth, and the market has recognized this. Second, air traffic has been strong and airlines have been able to increase business fares due to strong demand. Finally, cash flows have risen throughout the industry and some airlines have used this extra cash to initiate stock buyback programs. Q. SIX MONTHS AGO, WE DISCUSSED THE STATUS OF THE EXCISE TAX BEING LEVIED ON AIRLINES BY THE GOVERNMENT. CAN YOU GIVE AN UPDATE? A. The excise tax situation was finalized in late July. The plan calls for an increase in taxes on international routes, an initiation of a domestic per-head tax and a decrease in the tax rate on domestic fare revenue. All in all, I'd say the revised tax plan will be a slight negative for the airline industry, with some of the shorter-haul, pure domestic carriers feeling the greatest pinch. Q. WHAT CHANGES HAVE YOU MADE TO THE FUND SINCE TAKING OVER IN JUNE? A. I'd say the most obvious change is that I've decreased the fund's exposure to smaller, foreign carriers while emphasizing larger U.S. airlines. The U.S. economy has been strong, traffic flows have risen and carriers based in the U.S. have benefited. Q. WITH RESPECT TO INDIVIDUAL POSITIONS, WERE THERE ANY UNIQUE STORIES? A. Sabre - a company that provides computerized reservation systems to the airlines - was a pleasant surprise. Sabre's revenues are tied to the number of tickets being purchased, so strong air traffic flow has contributed to the company's success. Q. WHICH INDIVIDUAL STOCKS CONTRIBUTED POSITIVELY TO PERFORMANCE? WERE THERE ANY DISAPPOINTMENTS? A. Airlines typically trade as a group. Since the last six months were a strong period for the sector, most of the fund's positions - such as Delta, American and Continental - performed well. In terms of disappointments, America West has been under pressure due to competitive pricing in its key markets of Phoenix and Las Vegas. Q. WHAT'S YOUR OUTLOOK? A. The favorable conditions I mentioned at the outset seem to be sustainable. Traffic flow should remain strong and airlines will most likely continue to exercise caution with respect to capacity. As for the fund itself, I may look for opportunities among regional airlines if their earnings prospects look bright. I don't expect to make any considerable allocation changes in the near-term. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 034 TRADING SYMBOL: FSAIX SIZE: as of August 31, 1997, more than $34 million MANAGER: Peter Saperstone, since June 1997; manager, Fidelity Select Defense & Aerospace Portfolio, since June 1997; Fidelity Select Construction and Housing Portfolio, since 1996; equity analyst, defense/aerospace and airlines, since 1997; building materials and appliances, since 1996; textile, apparel and footwear industries, since 1995; joined Fidelity in 1995 (checkmark) AIR TRANSPORTATION PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 87.8% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 10.9% AIRCRAFT - 4.2% Boeing Co. 27,000 $ 1,469,813 09702310 AIRCRAFT & PARTS - 2.9% Precision Castparts Corp. 7,000 452,375 74018910 Sundstrand Corp. 9,500 560,500 86732310 1,012,875 AIRCRAFT ENGINES & PARTS - 3.8% United Technologies Corp. 17,000 1,327,063 91301710 TOTAL AEROSPACE & DEFENSE 3,809,751 AIR TRANSPORTATION - 60.6% AIR TRANSPORT, MAJOR NATIONAL - 52.5% AMR Corp. (a) 17,000 1,712,750 00176510 Air Canada, Inc. 10,000 78,544 00891110 Air New Zealand Ltd. Class B 800,000 2,161,868 00999E92 Alaska Air Group, Inc. (a) 51,500 1,413,031 01165910 America West Airlines, Inc. Class B warrants 8/25/99 (a) 196,700 774,506 02365011 America West Holding Corp. Class B (a) 80,600 972,238 02365720 ASA Holdings, Inc. 30,000 892,500 04338Q10 Atlas Air, Inc. 70,000 1,942,500 04916410 British Airways PLC ADR 1,000 103,313 11041930 Continental Airlines, Inc. Class B (a) 42,500 1,556,563 21079530 Delta Air Lines, Inc. 20,000 1,730,000 24736110 KLM Royal Dutch Airlines NV 20,246 663,057 48251610 Mesaba Holdings, Inc. 4,700 92,238 59066B10 Northwest Airlines Corp. Class A (a) 20,900 764,156 66728010 Pan Am Corp. (a) 5,900 69775710 - Ryanair Holdings PLC sponsored ADR 21,000 577,500 78351310 Southwest Airlines Co. 47,000 1,316,000 84474110 UAL Corp. (a) 21,000 1,599,938 90254950 US Airways Group, Inc. 1,000 34,125 91190510 18,384,827 AIR TRANSPORTATION, REGIONAL - 8.1% Comair Holdings, Inc. 58,500 1,572,188 19978910 Midwest Express Holdings, Inc. (a) 18,100 523,765 59791110 SkyWest, Inc. 39,000 745,875 83087910 2,841,828 TOTAL AIR TRANSPORTATION 21,226,655 AUTOS, TIRES & ACCESSORIES - 0.8% AUTO DEALERS, NEC - RETAIL - 0.8% Aviation Sales Co. 10,000 282,500 05367210 COMPUTER SERVICES & SOFTWARE - 7.5% CAD/CAM/CAE - 7.5% Sabre Group Holdings, Inc. Class A (a) 85,600 2,632,200 78590510 TRUCKING & FREIGHT - 8.0% FREIGHT FORWARDING - 8.0% Air Express International Corp. 50,000 1,518,750 00910410 Expeditors International of Washington, Inc. 35,100 1,285,538 30213010 2,804,288 TOTAL COMMON STOCKS (Cost $29,933,239) 30,755,394 CASH EQUIVALENTS - 12.2% MATURITY AMOUNT VALUE (NOTE 1) Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.33%, dated 8/29/97 due 9/2/97 $ 43,025 $ 43,000 66199GRV SHARES Taxable Central Cash Fund (b) 4,216,344 4,216,344 31635A10 TOTAL CASH EQUIVALENTS (Cost $4,259,344) 4,259,344 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $34,192,583) $ 35,014,738 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $100,108,006 and $116,006,597, 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 $27,401 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 loan balances during the periods for which loans were outstanding amounted to $9,339,000 and $3,746,400, respectively. The weighted average interest rate paid 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 89.8% New Zealand 6.2 Netherlands 1.9 Ireland 1.6 Others (individually less than 1%) 0.5 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $34,227,578. Net unrealized appreciation aggregated $787,160, of which $2,445,283 related to appreciated investment securities and $1,658,123 related to depreciated investment securities. At February 28,1997, the fund had a capital loss carryforward of approximately $4,508,000 which will expire on February 28, 2005. AIR TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 35,014,738 SECURITIES, AT VALUE (INCLUDING REPURCHASE AGREEMENTS OF $43,000) (COST $34,192,583 ) - SEE ACCOMPANYIN G SCHEDULE CASH 916 RECEIVABLE FOR 24,994 INVESTMENTS SOLD RECEIVABLE FOR 146,095 FUND SHARES SOLD DIVIDENDS 10,428 RECEIVABLE INTEREST 15,419 RECEIVABLE REDEMPTION FEES 146 RECEIVABLE OTHER 2,313 RECEIVABLES TOTAL ASSETS 35,215,049 LIABILITIES PAYABLE FOR $ 280,200 INVESTMENTS PURCHASED PAYABLE FOR 447,374 FUND SHARES REDEEMED ACCRUED 17,520 MANAGEMENT FEE OTHER PAYABLES 69,289 AND ACCRUED EXPENSES TOTAL LIABILITIES 814,383 NET ASSETS $ 34,400,666 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 29,874,012 ACCUMULATED (225,859) NET INVESTMENT (LOSS) ACCUMULATED 3,930,358 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 822,155 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 34,400,666 1,571,460 SHARES OUTSTANDING NET ASSET $21.89 VALUE AND REDEMPTION PRICE PER SHARE ($34,400,66 6 (DIVIDED BY) 1,571,460 SHARES) MAXIMUM $22.57 OFFERING PRICE PER SHARE (100/97.00 OF $21.89) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 249,164 INCOME DIVIDENDS INTEREST 82,537 TOTAL INCOME 331,701 EXPENSES MANAGEMENT $ 170,983 FEE TRANSFER AGENT 317,917 FEES ACCOUNTING FEES 34,180 AND EXPENSES NON-INTERESTED 138 TRUSTEES' COMPENSATION CUSTODIAN FEES 19,209 AND EXPENSES REGISTRATION FEES 23,771 AUDIT 14,286 LEGAL 151 INTEREST 6,029 MISCELLANEOUS 251 TOTAL EXPENSES 586,915 BEFORE REDUCTIONS EXPENSE (29,355) 557,560 REDUCTIONS NET INVESTMENT (225,859) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 8,837,633 SECURITIES FOREIGN 402 8,838,035 CURRENCY TRANSACTIONS CHANGE IN NET 3,398,914 UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) 12,236,949 NET INCREASE $ 12,011,090 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 79,659 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 787 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 30,765 WITHHELD BY FSC EXPENSE $ 26,987 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 1,364 CREDITS TRANSFER 1,004 AGENT CREDITS $ 29,355 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (225,859) $ (979,722) NET INVESTMENT INCOME (LOSS) NET REALIZED 8,838,035 (3,349,104) GAIN (LOSS) CHANGE IN NET 3,398,914 (6,154,936) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 12,011,090 (10,483,762) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO - (609,796) SHAREHOLDERS FROM NET REALIZED GAIN IN EXCESS OF - (1,596,628) NET REALIZED GAIN TOTAL - (2,206,424) DISTRIBUTIONS SHARE 108,718,560 442,243,515 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT - 2,188,450 OF DISTRIBUTIONS COST OF SHARES (122,518,035) (472,146,987) REDEEMED REDEMPTION 231,473 1,004,107 FEES NET INCREASE (13,568,002) (26,710,915) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (1,556,912) (39,401,101) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 35,957,578 75,358,679 PERIOD END OF PERIOD $ 34,400,666 $ 39,957,578 (INCLUDING NET ACCUMULATED INVESTMENT LOSS OF $225,859 AND 0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 5,511,346 22,183,259 ISSUED IN - 96,706 REINVESTMENT OF DISTRIBUTIONS REDEEMED (5,968,963) (23,821,393) NET INCREASE (457,617) (1,541,428) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 17.72 $ 21.11 $ 13.93 $ 17.12 $ 13.60 $ 12.64 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT (.08) (.22) (.01) (.18) (.18) (.09) E INCOME (LOSS) D NET REALIZED 4.17 (3.12) 7.47 (2.01) 3.78 1.33 AND UNREALIZED GAIN (LOSS) TOTAL FROM 4.09 (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 FEES .08 .22 .18 .09 .19 .08 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 21.89 $ 17.72 $ 21.11 $ 13.93 $ 17.12 $ 13.60 END OF PERIOD TOTAL RETURN B, C 23.53% (15.06)% 54.91% (12.45)% 27.94% 10.69% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 34,401 $ 35,958 $ 75,359 $ 18,633 $ 11,035 $ 11,868 OF PERIOD (000 OMITTED) RATIO OF 2.04% A 1.89% 1.47% 2.50% F 2.33% 2.48% A, F EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.94% A, G 1.80% G 1.41% G 2.50% 2.31% G 2.48% A EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.78)% A (1.10)% (.07)% (1.31)% (1.11)% (.90)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 392% A 469% 504% 200% 171% 96% A TURNOVER RATE AVERAGE $ .0242 $ .0409 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 N ET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVEST MENT INCOME (LOSS) PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.01 PER SHARE. F FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. 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. 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS AUTOMOTIVE 13.08% 25.30% 106.54% 198.44% AUTOMOTIVE 9.68% 21.54% 100.35% 189.48% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS AUTOMOTIVE 25.30% 15.61% 11.55% AUTOMOTIVE 21.54% 14.91% 11.21% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 114450 S00000000000001 Automotive S&P 500 00502 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9556.25 9781.00 1987/10/31 6688.00 7674.17 1987/11/30 6421.03 7041.82 1987/12/31 7023.43 7577.70 1988/01/31 7341.36 7896.72 1988/02/29 7811.04 8264.71 1988/03/31 8374.65 8009.33 1988/04/30 8519.16 8098.24 1988/05/31 8490.26 8168.69 1988/06/30 8981.61 8543.63 1988/07/31 8880.45 8511.17 1988/08/31 8468.58 8221.79 1988/09/30 8504.71 8572.04 1988/10/31 8439.68 8810.34 1988/11/30 8259.03 8684.35 1988/12/31 8432.45 8836.33 1989/01/31 8822.64 9483.15 1989/02/28 8728.71 9247.02 1989/03/31 8894.90 9462.47 1989/04/30 9292.32 9953.57 1989/05/31 9429.60 10356.69 1989/06/30 9263.41 10297.66 1989/07/31 9588.57 11227.54 1989/08/31 9682.51 11447.60 1989/09/30 9458.51 11400.66 1989/10/31 8670.90 11136.17 1989/11/30 8750.38 11363.35 1989/12/31 8778.28 11636.07 1990/01/31 8546.49 10855.29 1990/02/28 8800.71 10995.32 1990/03/31 9129.71 11286.70 1990/04/30 9099.80 11004.53 1990/05/31 9615.73 12077.47 1990/06/30 9787.92 11995.34 1990/07/31 9818.24 11956.96 1990/08/31 8408.06 10876.05 1990/09/30 7604.40 10346.39 1990/10/31 7452.77 10301.90 1990/11/30 7892.50 10967.40 1990/12/31 8188.19 11273.39 1991/01/31 8650.67 11764.91 1991/02/28 9355.76 12606.10 1991/03/31 9431.58 12911.17 1991/04/30 9537.72 12942.15 1991/05/31 10303.47 13501.25 1991/06/30 10280.73 12882.90 1991/07/31 10705.30 13483.24 1991/08/31 11054.05 13802.79 1991/09/30 10728.04 13572.29 1991/10/31 11008.56 13754.15 1991/11/30 10462.69 13199.86 1991/12/31 11244.45 14709.93 1992/01/31 12459.20 14436.32 1992/02/29 13713.91 14623.99 1992/03/31 14009.61 14338.83 1992/04/30 14904.69 14760.39 1992/05/31 14896.70 14832.71 1992/06/30 14808.07 14611.71 1992/07/31 14944.15 15209.33 1992/08/31 14015.64 14897.53 1992/09/30 13783.51 15073.32 1992/10/31 14359.83 15126.08 1992/11/30 15056.21 15641.88 1992/12/31 15923.79 15834.28 1993/01/31 16659.11 15967.28 1993/02/28 16904.22 16184.44 1993/03/31 17811.11 16525.93 1993/04/30 17708.21 16126.00 1993/05/31 18786.54 16558.18 1993/06/30 19115.09 16606.20 1993/07/31 19334.13 16539.77 1993/08/31 20008.08 17166.63 1993/09/30 20218.69 17034.45 1993/10/31 20648.34 17387.06 1993/11/30 20648.34 17221.88 1993/12/31 21558.36 17430.27 1994/01/31 22787.29 18022.90 1994/02/28 22051.66 17534.48 1994/03/31 20502.51 16769.97 1994/04/30 20085.62 16984.63 1994/05/31 19788.05 17263.18 1994/06/30 19534.25 16840.23 1994/07/31 20120.62 17392.59 1994/08/31 19788.05 18105.69 1994/09/30 18947.87 17662.10 1994/10/31 19306.70 18059.49 1994/11/30 18142.69 17401.77 1994/12/31 18809.04 17659.84 1995/01/31 18362.13 18117.75 1995/02/28 19275.38 18823.80 1995/03/31 19178.23 19379.29 1995/04/30 19119.94 19950.01 1995/05/31 19508.55 20747.42 1995/06/30 19994.32 21229.38 1995/07/31 21432.20 21933.35 1995/08/31 21237.90 21988.40 1995/09/30 21344.77 22916.31 1995/10/31 20353.79 22834.50 1995/11/30 20858.99 23836.93 1995/12/31 21335.05 24296.03 1996/01/31 21082.45 25123.07 1996/02/29 21228.18 25355.96 1996/03/31 22520.33 25600.14 1996/04/30 23658.13 25977.48 1996/05/31 24202.89 26647.44 1996/06/30 23920.78 26748.97 1996/07/31 22529.70 25567.20 1996/08/31 23103.64 26106.41 1996/09/30 23298.20 27575.68 1996/10/31 23405.20 28336.22 1996/11/30 24592.00 30478.15 1996/12/31 24763.81 29874.38 1997/01/31 25197.56 31740.93 1997/02/28 25601.04 31989.78 1997/03/31 25096.69 30675.32 1997/04/30 25657.45 32506.64 1997/05/31 27124.79 34485.64 1997/06/30 27942.31 36030.60 1997/07/31 29168.58 38897.55 1997/08/29 28948.48 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970909 114454 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Select Automotive Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $28,948 - a 189.48% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS TOWER AUTOMOTIVE, INC. 13.0 JOHNSON CONTROLS, INC. 7.4 VOLVO AB ADR CLASS B 5.6 EATON CORP. 5.6 MARK IV INDUSTRIES, INC. 4.9 SNAP-ON TOOLS CORP. 4.1 MAGNA INTERNATIONAL, INC. CLASS A 4.1 GOODYEAR TIRE & RUBBER CO. 4.0 ITT INDUSTRIES, INC. 3.9 BORG-WARNER AUTOMOTIVE, INC. 3.8 TOP INDUSTRIES AS OF AUGUST 31, 1997 AUTO & TRUCK PARTS 57.5% MOTOR VEHICLES & CAR BODIES 15.6% PUBLIC BUILDING & RELATED FURNITURE 7.4% TIRES & INNER TUBES 6.2% GASKETS, HOSES, BELTS 4.9% ALL OTHERS 8.4% ROW: 1, COL: 1, VALUE: 8.4 ROW: 1, COL: 2, VALUE: 4.9 ROW: 1, COL: 3, VALUE: 6.2 ROW: 1, COL: 4, VALUE: 7.4 ROW: 1, COL: 5, VALUE: 15.6 ROW: 1, COL: 6, VALUE: 57.5 * * 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 six- and 12-month periods that ended August 31, 1997, the fund returned 13.08% and 25.30%, respectively. By comparison, the Standard & Poor's 500 Index returned 14.78% and 40.65% for the same periods. Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE OVER THE PAST SIX MONTHS? A. It was an atypical period for auto stocks. The stock market was willing to bid up companies in this sector that simply were talking about planned improvements or new products. That didn't happen in 1996, when the market waited for concrete proof. In 1997, investors appeared to be willing to pay more for the possibility of gains because cyclicals had lagged growth stocks for so long that it now seemed to be the right buying opportunity for cyclical stocks such as auto companies and their suppliers. In June and July, we saw investors move over to cyclical stocks, and that has meant strong performance for many automotive stocks, which are cheap on a near-term price-to-earnings (P/E) basis. While there have been some companies in particular whose consensus earnings outlooks have improved, that has not been generally true for the group. Q. WHAT ABOUT FOREIGN STOCKS? A. Owning foreign stocks was generally detrimental. Even companies with good performance, such as Honda, did not see that performance reflected in the stock price because of worries about the Japanese economy. Those worries were unjustified, in my opinion, because Honda, one of the fund's largest holdings, makes most of its money on U.S. sales, and the company is very well-positioned for future success. On the other hand there were exceptions to this rule; Volvo proved to be a good addition to the fund. The company performed well, and showed good sales results, both in Europe and in the States. If the new models turn out to be a hit, it will make a big difference in the company's volumes and margins. Volvo has worked hard to realize the value of under-appreciated assets for shareholders by selling those assets, always a good sign. Q. WHICH STOCKS PERFORMED WELL? A. Tower, Borg-Warner and Lear were three very strong performers. Borg-Warner had been 20%-owned by an investment bank, which subsequently sold its stock, and outside investors became willing to pay more for the stock. Lear is a very well-known company, but lowered its earnings estimates last fall, the first time it did so since going public, and the stock got hurt. It took some time, but investors finally realized that Lear is a terrific company and a good buy; its stock appreciated nicely over the last three months of the period. Q. WHAT STOCKS DISAPPOINTED? A. Mark IV Industries, an auto parts supplier, has not been recognized as an attractive company by the market and didn't do as well as expected. I liked Mark IV because it's cheaply priced, and I believe in what their management is doing, but it's a relatively illiquid stock. The company has a great long-term track record, but it has suffered by not being well-covered on Wall Street. Q. WHAT'S YOUR INVESTMENT STRATEGY AND OUTLOOK IN THIS ENVIRONMENT, DOUG? A. With the market so reactive and sensitive to valuations, I have positioned the portfolio to be in stocks where there is potential for earnings estimates to increase and where valuations relative to the automotive group look good. My strategy continues to be to own the cheapest stocks where fundamentals are strong. When the market gets a hint of something positive, a company's stock can move up dramatically right now. As a rule, I look for companies where management is effective and the company is solid, and I search for the best buys. I have been most successful when I find companies doing things better than the rest of the group, and I can usually buy great companies at a discount in this 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: June 30, 1986 FUND NUMBER: 502 TRADING SYMBOL: FSAVX SIZE: as of August 31, 1997, more than $64 million MANAGER: Doug Chase, since 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 AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.0% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 80.9% AUTO & TRUCK PARTS - 57.5% Amcast Industrial Corp. 90,000 $ 2,182,499 02339510 Borg-Warner Automotive, Inc. 47,200 2,460,300 09972410 Danaher Corp. 37,700 2,019,306 23585110 Eaton Corp. 40,000 3,602,500 27805810 Echlin, Inc. 19,800 733,838 27874910 Intermet Corp. 42,200 730,588 45881K10 ITT Industries, Inc. 80,000 2,520,000 45091110 Johnson Controls, Inc. 100,000 4,768,750 47836610 Magna International, Inc. Class A 40,000 2,651,774 55922240 Modine Manufacturing Co. 65,800 2,015,125 60782810 Snap-On Tools Corp. 63,600 2,671,200 83303410 SPX Corp. 40,000 2,325,000 78463510 Standard Products Co. 6,700 177,550 85383610 Tower Automotive, Inc. (a) 188,400 8,454,450 89170710 37,312,880 MOTOR VEHICLE SUPPLIES & NEW PARTS - 0.5% APS Holding Corp. Class A (a) 35,200 272,800 00193710 MOTOR VEHICLES & CAR BODIES - 15.6% Chrysler Corp. 25,000 878,125 17119610 Ford Motor Co. 15,000 645,000 34537010 General Motors Corp. 10,000 627,500 37044210 Honda Motor Co. Ltd. 78,000 2,401,987 43812810 Lear Corp. (a) 42,800 1,960,775 52186510 Volvo AB ADR Class B 140,400 3,615,300 92885640 10,128,687 TIRES & INNER TUBES - 6.2% Bandag, Inc. 8,500 453,156 05981510 Cooper Tire & Rubber Co. 25,000 628,125 21683110 Goodyear Tire & Rubber Co. 42,000 2,588,250 38255010 Michelin SA (Compagnie Generale des Etablissements) Class B 6,732 377,189 59410020 4,046,720 TRUCK & BUS BODIES - 1.1% Miller Industries, Inc. (a) 47,150 698,409 60055110 TOTAL AUTOS, TIRES, & ACCESSORIES 52,459,496 BUILDING MATERIALS - 4.9% GASKETS, HOSES, BELTS - 4.9% Mark IV Industries, Inc. 125,700 3,158,213 57038710 ELECTRICAL EQUIPMENT - 2.4% MOTORS & GENERATORS - 2.4% Smith (A.O.) Corp. Class B 43,900 1,547,475 83186520 IRON & STEEL - 1.2% FABRICATED METAL PRODUCTS - 1.2% SPS Technologies, Inc. (a) 19,000 815,813 78462610 LEASING & RENTAL - 3.7% TRUCK RENT & LEASE, NO DRIVER - 3.7% Hertz Corp. Class A 70,000 2,419,375 42804010 TRUCKING & FREIGHT - 1.9% AIR COURIER SERVICES - 1.7% CNF Transportation, Inc. 30,000 1,083,750 12612W10 TRUCKING, LONG DISTANCE - 0.2% Consolidated Freightways Corp. (a) 10,000 156,250 20923210 TOTAL TRUCKING & FREIGHT 1,240,000 TOTAL COMMON STOCKS (Cost $53,997,112) 61,640,372 CASH EQUIVALENTS - 5.0% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $3,225,127) 3,225,127 $ 3,225,127 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $57,222,239) $ 64,865,499 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $38,088,396 and $65,555,035, 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 $18,806 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 86.0% Sweden 5.6 Canada 4.1 Japan 3.7 Others (individually less than 1%) 0.6 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $57,257,467. Net unrealized appreciation aggregated $7,608,032, of which $8,333,357 related to appreciated investment securities and $725,325 related to depreciated investment securities. AUTOMOTIVE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 64,865,499 SECURITIES, AT VALUE (COST $57,222,239 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 80,850 FUND SHARES SOLD DIVIDENDS 77,642 RECEIVABLE INTEREST 19,167 RECEIVABLE REDEMPTION FEES 31 RECEIVABLE OTHER 4,808 RECEIVABLES TOTAL ASSETS 65,047,997 LIABILITIES PAYABLE TO $ 10,476 CUSTODIAN BANK PAYABLE FOR 174,354 FUND SHARES REDEEMED ACCRUED 31,662 MANAGEMENT FEE OTHER PAYABLES 63,600 AND ACCRUED EXPENSES TOTAL LIABILITIES 280,092 NET ASSETS $ 64,767,905 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 52,186,298 UNDISTRIBUTED 82,949 NET INVESTMENT INCOME ACCUMULATED 4,858,074 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 7,640,584 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 64,767,905 2,345,234 SHARES OUTSTANDING NET ASSET $27.62 VALUE AND REDEMPTION PRICE PER SHARE ($64,767,90 5 (DIVIDED BY) 2,345,234 SHARES) MAXIMUM $28.47 OFFERING PRICE PER SHARE (100/97.00 OF $27.62) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 434,173 INCOME DIVIDENDS INTEREST 195,171 TOTAL INCOME 629,344 EXPENSES MANAGEMENT $ 202,543 FEE TRANSFER AGENT 265,548 FEES ACCOUNTING FEES 34,195 AND EXPENSES NON-INTERESTED 162 TRUSTEES' COMPENSATION CUSTODIAN FEES 6,172 AND EXPENSES REGISTRATION FEES 18,015 AUDIT 10,424 LEGAL 269 MISCELLANEOUS 2,180 TOTAL EXPENSES 539,508 BEFORE REDUCTIONS EXPENSE (12,173) 527,335 REDUCTIONS NET INVESTMENT 102,009 INCOME REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 5,444,436 SECURITIES FOREIGN 856 5,445,292 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT 2,760,392 SECURITIES ASSETS AND (1,012) 2,759,380 LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 8,204,672 NET INCREASE $ 8,306,681 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 27,318 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 367 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 9,908 WITHHELD BY FSC EXPENSE $ 12,166 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 7 CREDITS $ 12,173 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ 102,009 $ 643,042 NET INVESTMENT INCOME NET REALIZED 5,445,292 8,357,523 GAIN (LOSS) CHANGE IN NET 2,759,380 2,143,826 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 8,306,681 11,144,391 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (159,578) (492,439) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (2,267,665) (2,049,624) REALIZED GAIN TOTAL (2,427,243) (2,542,063) DISTRIBUTIONS SHARE 21,986,329 256,027,701 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 2,411,607 2,523,772 OF DISTRIBUTIONS COST OF SHARES (51,881,078) (236,749,789) REDEEMED REDEMPTION 25,043 189,071 FEES NET INCREASE (27,458,099) 21,990,755 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (21,578,661) 30,593,083 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 86,346,566 55,753,483 PERIOD END OF PERIOD $ 64,767,905 $ 86,346,566 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $82,949 AND $225,693, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 850,024 10,548,479 ISSUED IN 102,360 104,848 REINVESTMENT OF DISTRIBUTIONS REDEEMED (2,008,718) (9,803,178) NET INCREASE (1,056,334) 850,149 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 25.38 $ 21.85 $ 19.84 $ 25.48 $ 20.69 $ 18.65 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET .04 .13 .03 .08 .05 .13 INVESTMENT INCOME D NET REALIZED 3.11 4.28 1.95 (3.46) 6.00 2.26 AND UNREALIZED GAIN (LOSS) TOTAL FROM 3.15 4.41 1.98 (3.38) 6.05 2.39 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.06) (.17) - (.05) (.05) (.06) INVESTMENT INCOME FROM NET (.86) (.75) - (2.26) (1.26) (.36) REALIZED GAIN TOTAL (.92) (.92) - (2.31) (1.31) (.42) DISTRIBUTIONS REDEMPTION FEES .01 .04 .03 .05 .05 .07 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 27.62 $ 25.38 $ 21.85 $ 19.84 $ 25.48 $ 20.69 END OF PERIOD TOTAL RETURN B, C 13.08% 20.60% 10.13% (12.59)% 30.45% 13.42% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 64,768 $ 86,347 $ 55,753 $ 60,075 $ 228,698 $ 110,360 OF PERIOD (000 OMITTED) RATIO OF 1.58% A 1.56% 1.81% 1.82% 1.69% 1.57% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.55% A, E 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 .30% A .54% .13% .34% .22% .72% A INVESTMENT INCOME TO AVERAGE NET ASSETS PORTFOLIO 121% A 175% 61% 63% 64% 140% A TURNOVER RATE AVERAGE $ .0429 $ .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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS CHEMICALS 17.21% 29.00% 139.09% 260.20% CHEMICALS 13.69% 25.13% 131.92% 249.40% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS CHEMICALS 29.00% 19.05% 13.67% CHEMICALS 25.13% 18.32% 13.33% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 114614 S00000000000001 Chemicals S&P 500 00069 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9873.29 9781.00 1987/10/31 6869.63 7674.17 1987/11/30 6638.58 7041.82 1987/12/31 7418.95 7577.70 1988/01/31 7236.99 7896.72 1988/02/29 8039.26 8264.71 1988/03/31 8448.67 8009.33 1988/04/30 8547.92 8098.24 1988/05/31 8225.35 8168.69 1988/06/30 9312.97 8543.63 1988/07/31 9031.76 8511.17 1988/08/31 8638.90 8221.79 1988/09/30 8746.42 8572.04 1988/10/31 8882.89 8810.34 1988/11/30 8585.14 8684.35 1988/12/31 8973.86 8836.33 1989/01/31 9573.50 9483.15 1989/02/28 9453.57 9247.02 1989/03/31 9556.96 9462.47 1989/04/30 9829.90 9953.57 1989/05/31 10057.35 10356.69 1989/06/30 9937.26 10297.66 1989/07/31 10570.50 11227.54 1989/08/31 11054.74 11447.60 1989/09/30 10661.55 11400.66 1989/10/31 9908.29 11136.17 1989/11/30 10119.37 11363.35 1989/12/31 10527.36 11636.07 1990/01/31 9777.27 10855.29 1990/02/28 9842.69 10995.32 1990/03/31 10134.87 11286.70 1990/04/30 9899.38 11004.53 1990/05/31 10762.85 12077.47 1990/06/30 10850.70 11995.34 1990/07/31 10886.60 11956.96 1990/08/31 9432.66 10876.05 1990/09/30 8965.96 10346.39 1990/10/31 9069.18 10301.90 1990/11/30 9674.98 10967.40 1990/12/31 10092.32 11273.39 1991/01/31 10769.93 11764.91 1991/02/28 11595.62 12606.10 1991/03/31 11873.85 12911.17 1991/04/30 11779.61 12942.15 1991/05/31 12596.33 13501.25 1991/06/30 12254.00 12882.90 1991/07/31 12844.61 13483.24 1991/08/31 13097.08 13802.79 1991/09/30 12997.90 13572.29 1991/10/31 13205.28 13754.15 1991/11/30 12547.05 13199.86 1991/12/31 13994.18 14709.93 1992/01/31 14262.94 14436.32 1992/02/29 14777.30 14623.99 1992/03/31 14670.72 14338.83 1992/04/30 15203.61 14760.39 1992/05/31 15115.57 14832.71 1992/06/30 14667.52 14611.71 1992/07/31 15130.34 15209.33 1992/08/31 14613.36 14897.53 1992/09/30 14628.13 15073.32 1992/10/31 14480.42 15126.08 1992/11/30 14918.63 15641.88 1992/12/31 15240.32 15834.28 1993/01/31 15224.65 15967.28 1993/02/28 14958.10 16184.44 1993/03/31 15313.49 16525.93 1993/04/30 15597.53 16126.00 1993/05/31 15833.69 16558.18 1993/06/30 15436.51 16606.20 1993/07/31 15672.67 16539.77 1993/08/31 16440.20 17166.63 1993/09/30 15919.57 17034.45 1993/10/31 16520.71 17387.06 1993/11/30 16644.16 17221.88 1993/12/31 17184.54 17430.27 1994/01/31 18522.16 18022.90 1994/02/28 18492.95 17534.48 1994/03/31 17938.05 16769.97 1994/04/30 18805.52 16984.63 1994/05/31 19258.31 17263.18 1994/06/30 19017.21 16840.23 1994/07/31 19875.75 17392.59 1994/08/31 21028.31 18105.69 1994/09/30 20875.42 17662.10 1994/10/31 20840.13 18059.49 1994/11/30 19205.38 17401.77 1994/12/31 19723.62 17659.84 1995/01/31 19208.20 18117.75 1995/02/28 20322.94 18823.80 1995/03/31 20946.23 19379.29 1995/04/30 21395.25 19950.01 1995/05/31 21608.29 20747.42 1995/06/30 21973.50 21229.38 1995/07/31 23014.35 21933.35 1995/08/31 23111.74 21988.40 1995/09/30 23476.95 22916.31 1995/10/31 22308.28 22834.50 1995/11/30 23282.17 23836.93 1995/12/31 23953.99 24296.03 1996/01/31 25055.03 25123.07 1996/02/29 25907.01 25355.96 1996/03/31 27158.78 25600.14 1996/04/30 27441.79 25977.48 1996/05/31 27382.44 26647.44 1996/06/30 27032.90 26748.97 1996/07/31 25938.13 25567.20 1996/08/31 27085.66 26106.41 1996/09/30 28285.95 27575.68 1996/10/31 28477.21 28336.22 1996/11/30 29525.81 30478.15 1996/12/31 29108.70 29874.38 1997/01/31 29564.29 31740.93 1997/02/28 29809.61 31989.78 1997/03/31 28849.36 30675.32 1997/04/30 29916.12 32506.64 1997/05/31 31389.47 34485.64 1997/06/30 32252.44 36030.60 1997/07/31 34834.31 38897.55 1997/08/29 34940.00 36718.51 IMATRL PRASUN SHR__CHT 19970831 19970909 114622 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Chemicals Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $34,940 - a 249.40% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS CYTEC INDUSTRIES, INC. 7.5 PRAXAIR, INC. 7.3 AIR PRODUCTS & CHEMICALS, INC. 5.9 ICI (IMPERIAL CHEMICAL INDUSTRIES) PLC ADR CLASS L 5.8 SEALED AIR CORP. 4.9 WITCO CORP. 4.9 UNION CARBIDE CORP. 4.8 RAYCHEM CORP. 4.7 MINNESOTA MINING & MANUFACTURING CO. 4.4 W.R. GRACE & CO. 4.0 TOP INDUSTRIES AS OF AUGUST 31, 1997 36 CHEMICALS 35.9% INDUSTRIAL GASES 16.4% UNSUPPORTED PLASTICS FILM & SHEET 8.9% MANUFACTURING INDUSTRIES, NEC 4.4% PAINT & VARNISH 3.6% ALL OTHERS 30.8% ROW: 1, COL: 1, VALUE: 30.8 ROW: 1, COL: 2, VALUE: 3.6 ROW: 1, COL: 3, VALUE: 4.4 ROW: 1, COL: 4, VALUE: 8.9 ROW: 1, COL: 5, VALUE: 16.4 ROW: 1, COL: 6, VALUE: 35.9 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS CHEMICALS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Audra Barranco became Portfolio Manager of Fidelity Select Chemicals Portfolio on June 2, 1997. Q. HOW DID THE FUND PERFORM, AUDRA? A. For the six months that ended on August 31, 1997, the fund had a total return of 17.21%. For the 12 months, the fund's return was 29.00%. For the same periods, the Standard & Poor's 500 Index returned 14.78% and 40.65%, respectively. Q. THE FUND HAD A RELATIVELY STRONG SIX MONTHS. WHAT ACCOUNTED FOR THIS? A. By the nature of the specialty and diversified chemical industries, stock selection on a case-by-case basis is more the fund's strategy, versus an industry call. The chemical companies in which we invest produce a variety of highly specialized products and serve widely diversified markets, and because the companies differ as much as they do from each other, individual stock picking is very important. Therefore, reducing the number of holdings in the portfolio from about 60 to about 45 and concentrating more of the assets in our favorite chemical selections seemed to be an appropriate strategy for outperforming the fund's benchmark. Q. WHAT COMPANIES CONTRIBUTED TO THIS STRONG PERFORMANCE? A. We had four companies in the top 10 holdings that had very large moves. The fund's largest holding at the end of the period, Cytec Industries, went up 20% following its acquisition of the majority of Fiberite, Inc. Two other top 10 holdings, Sealed Air Corp. and W.R. Grace & Co., merged their packaging divisions, which led to significant appreciation in their stocks' prices. Another top holding in the fund, Imperial Chemical Industries, PLC, a company based in the United Kingdom, performed well when the market finally recognized its potential. A fifth strong contributor was another top 10 holding, Witco Corp., a specialty chemicals company, which continues to make progress in its major restructuring. We added to existing weightings in Grace, Cytec and Witco. In all these cases, we knew they were great stories. We were waiting for their value to be recognized, and it has begun to happen after a slow start in the beginning of 1997. Q. WERE THERE ANY DISAPPOINTMENTS? A. Commodity companies in general have not performed well. They are the most affected by the business cycle and are capacity-driven. One example of a portfolio holding that we own but whose value we believe was not recognized by the market during the six months was Union Carbide, which is a commodity-chemical company. We started the six-month period underweighted in commodities, and we have reduced our commodity weightings even more. We believe this is the best strategy, as we are heading into a cyclical trough with commodity chemicals, as new capacity is coming on and ethylene margins will be declining. Q. WHY ARE SPECIALTY AND DIVERSIFIED COMPANIES LESS AFFECTED BY THE BUSINESS CYCLE? A. Because these companies take commodity raw materials and turn them into such value-added or "specialized" products for their customers, the pricing strategy is different for them than for commodity chemical companies. The specialty companies' product pricing is based largely on the value the products bring the customers, and therefore pricing is not as affected by the capacity-driven issues that affect commodity chemicals' product prices. Hence, the specialty/diversifieds tend to have smaller fluctuations in prices/margins and earnings over the course of a cycle. Q. WHAT IS YOUR OUTLOOK? A. The outlook for a number of specialty and diversified companies is great. I see plenty of opportunities for revenue growth, margin improvements and earnings growth. With a number of companies there is a lot of opportunity for strategic acquisitions. Cytec is a case in point. It already had been in the aerospace composites business, but it solidified and enlarged its presence in this business through a strategic acquisition. In addition, many of the chemical companies want to grow and add to their business outside the United States and are looking for growth in Latin America and Asia Pacific through strategic acquisitions. Right now, I plan to stay more heavily weighted in specialty and diversified companies, rather than commodities, for reasons I explained earlier. Within the specialty and diversified companies, it's a case-by-case, stock-picking strategy. This is definitely not an industry call. It is by no means a homogeneous industry. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 069 TRADING SYMBOL: FSCHX SIZE: as of August 31, 1997, more than $84 million MANAGER: Audra Barranco, since June 1997; equity analyst, specialty and diversified chemicals; joined Fidelity in 1996 (checkmark) CHEMICALS PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.1% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 0.7% ORDNANCE - 0.7% Primex Technologies, Inc. 19,560 $ 572,130 74159710 BUILDING MATERIALS - 6.9% ABRASIVES AND ASBESTOS - 3.3% Hexcel Corp. (a) 105,000 2,920,313 42829110 PAINT & VARNISH - 3.6% Lilly Industrial Coatings, Inc. Class A 104,000 2,301,000 53249110 Sherwin-Williams Co. 29,500 809,406 82434810 3,110,406 TOTAL BUILDING MATERIALS 6,030,719 CHEMICALS & PLASTICS - 71.3% ADHESIVES & SEALANTS - 1.9% Ferro Corp. 19,100 718,638 31540510 International Specialty Products, Inc. (a) 48,900 699,881 46033410 Lydall, Inc. (a) 10,500 249,375 55081910 1,667,894 AGRICULTURAL CHEMICALS - 3.2% IMC Global, Inc. 19,740 694,601 44966910 OM Group, Inc. 27,900 1,021,838 Potash Corp. of Saskatchewan 14,400 1,067,220 73755L10 2,783,659 CHEMICALS - 35.9% Bayer AG 4,800 179,074 07273010 Cabot Corp. 14,700 402,413 12705510 Cytec Industries, Inc. (a) 133,713 6,526,866 23282010 du Pont (E.I.) de Nemours & Co. 33,800 2,106,163 26353410 ICI (Imperial Chemical Industries) PLC ADR Class L 77,500 5,085,938 45270450 Monsanto Co. 70,000 3,075,625 61166210 NL Industries, Inc. 19,800 262,350 62915640 Olin Corp. 24,800 1,103,600 68066520 Raychem Corp. 44,500 4,141,281 75460310 Union Carbide Corp. 82,200 4,217,888 90558110 Witco Corp. 90,700 4,262,900 97738510 31,364,098 INDUSTRIAL GASES - 16.4% AGA AB Series B shares 83,100 1,188,104 00107010 Air Products & Chemicals, Inc. 63,200 5,154,750 00915810 BOC Group PLC 48,441 835,618 09676210 L'Air Liquide 3,970 605,992 00867810 NuCo2, Inc. (a) 12,000 198,000 62942810 Praxair, Inc. 118,553 6,335,176 74005P10 14,317,640 INORGANIC CHEMICALS - 1.8% Minerals Technologies, Inc. 7,700 306,075 60315810 Valspar Corp. 42,100 1,297,206 92035510 1,603,281 NITROGENOUS FERTILIZERS - 1.0% Soc Quimica y Minera de Chile ADR 14,300 863,363 83363510 PLASTICS & SYNTHETIC RESINS - 2.2% Geon Co. 2,100 41,738 37246W10 Spartech Corp. 118,200 1,876,425 84722020 1,918,163 SHARES VALUE (NOTE 1) UNSUPPORTED PLASTICS FILM & SHEET - 8.9% Sealed Air Corp. (a) 82,500 $ 4,279,688 81211510 W.R. Grace & Co. 51,100 3,516,319 38391110 7,796,007 TOTAL CHEMICALS & PLASTICS 62,314,105 CONSUMER DURABLES - 4.4% MANUFACTURING INDUSTRIES, NEC - 4.4% Minnesota Mining & Manufacturing Co. 42,400 3,810,700 60405910 DRUGS & PHARMACEUTICALS - 1.3% BIOTECHNOLOGY - 1.3% Sigma Aldrich Corp. 33,600 1,096,200 82655210 ELECTRONIC INSTRUMENTS - 0.0% SEMI-CONDUCTOR CAPITAL EQUIPMENT - 0.0% Lam Research Corp. 373 21,075 51280710 HOUSEHOLD PRODUCTS - 1.0% COSMETICS - 1.0% Gillette Co. 11,100 919,219 37576610 PACKAGING & CONTAINERS - 3.2% GLASS CONTAINERS - 1.5% Owens-Illinois, Inc. (a) 36,900 1,284,581 69076840 METAL CANS & CONTAINERS - 1.7% Silgan Holdings, Inc. 37,700 1,545,700 82704810 TOTAL PACKAGING & CONTAINERS 2,830,281 PRECIOUS METALS - 0.4% GOLD ORES - 0.4% Stillwater Mining Co. (a)(c) 15,300 321,300 86074Q90 RETAIL & WHOLESALE, MISCELLANEOUS - 0.9% RETAIL STORES - 0.9% Gadzooks, Inc. (a) 40,000 760,000 36255310 TOTAL COMMON STOCKS (Cost $62,073,652) 78,675,729 CASH EQUIVALENTS - 9.9% Taxable Central Cash Fund (b) (Cost $8,619,397) 8,619,397 8,619,397 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $70,693,049) $ 87,295,126 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $321,300 or 0.4% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $8,788,619 and $50,039,464, 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 $16,086 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, the value of securities loaned and the value of collateral amounted to $4,279,688 and $4,455,000, 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 7.0 Sweden 1.3 Canada 1.2 Others (individually less than 1%) 1.9 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $70,693,049. Net unrealized appreciation aggregated $16,602,077, of which $17,200,816 related to appreciated investment securities and $598,739 related to depreciated investment securities. CHEMICALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 87,295,126 SECURITIES, AT VALUE (COST $70,693,049 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 2,282,994 INVESTMENTS SOLD RECEIVABLE FOR 82,305 FUND SHARES SOLD DIVIDENDS 162,670 RECEIVABLE INTEREST 55,404 RECEIVABLE REDEMPTION FEES 85 RECEIVABLE OTHER 1,658 RECEIVABLES TOTAL ASSETS 89,880,242 LIABILITIES PAYABLE FOR $ 281,550 FUND SHARES REDEEMED ACCRUED 42,475 MANAGEMENT FEE OTHER PAYABLES 110,449 AND ACCRUED EXPENSES COLLATERAL ON 4,455,000 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 4,889,474 NET ASSETS $ 84,990,768 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 61,348,723 UNDISTRIBUTED 125,558 NET INVESTMENT INCOME ACCUMULATED 6,914,580 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 16,601,907 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 84,990,768 1,706,651 SHARES OUTSTANDING NET ASSET $49.80 VALUE AND REDEMPTION PRICE PER SHARE ($84,990,76 8 (DIVIDED BY) 1,706,651 SHARES) MAXIMUM $51.34 OFFERING PRICE PER SHARE (100/97.00 OF $49.80) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 733,000 INCOME DIVIDENDS INTEREST 196,260 (INCLUDING INCOME ON SECURITIES LOANED OF $56,611) TOTAL INCOME 929,260 EXPENSES MANAGEMENT $ 281,952 FEE TRANSFER AGENT 410,704 FEES ACCOUNTING AND 50,085 SECURITY LENDING FEES NON-INTERESTED 224 TRUSTEES' COMPENSATION CUSTODIAN FEES 7,380 AND EXPENSES REGISTRATION FEES 24,622 AUDIT 11,190 LEGAL 701 MISCELLANEOUS 176 TOTAL EXPENSES 787,034 BEFORE REDUCTIONS EXPENSE (5,307) 781,727 REDUCTIONS NET INVESTMENT 147,533 INCOME REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 7,160,710 SECURITIES FOREIGN (1,675) 7,159,035 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT 5,970,958 SECURITIES ASSETS AND 500 5,971,458 LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 13,130,493 NET INCREASE $ 13,278,026 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 56,959 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 2,731 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 33,263 WITHHELD BY FSC EXPENSE $ 5,293 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 14 CREDITS $ 5,307 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ 147,533 $ 822,641 NET INVESTMENT INCOME NET REALIZED 7,159,035 14,200,355 GAIN (LOSS) CHANGE IN NET 5,971,458 (2,755,765) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 13,278,026 12,267,231 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (26,599) (228,367) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (79,366) (6,676,304) REALIZED GAIN TOTAL (105,965) (6,904,671) DISTRIBUTIONS SHARE 22,119,627 349,364,954 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 104,505 6,799,944 OF DISTRIBUTIONS COST OF SHARES (61,886,033) (339,611,033) REDEEMED REDEMPTION 71,326 262,393 FEES NET INCREASE (39,590,575) 16,816,258 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (26,418,514) 22,178,818 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 111,409,282 89,230,464 PERIOD END OF PERIOD $ 84,990,768 $ 111,409,282 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $125,558 AND $583,830, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 493,654 8,409,682 ISSUED IN 2,571 164,313 REINVESTMENT OF DISTRIBUTIONS REDEEMED (1,409,097) (8,211,486) NET INCREASE (912,872) 362,509 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 42.53 $ 39.53 $ 33.91 $ 31.66 $ 28.62 $ 32.81 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET .07 .28 .01 .36 .29 .30 INVESTMENT INCOME D NET REALIZED 7.21 5.49 8.89 2.65 5.97 (.84) AND UNREALIZED GAIN (LOSS) TOTAL FROM 7.28 5.77 8.90 3.01 6.26 (.54) INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.01) (.12) (.08) (.22) (.23) (.31) INVESTMENT INCOME FROM NET (.03) (2.74) (3.22) (.60) (3.05) (3.36) REALIZED GAIN TOTAL (.04) (2.86) (3.30) (.82) (3.28) (3.67) DISTRIBUTIONS REDEMPTION FEES .03 .09 .02 .06 .06 .02 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 49.80 $ 42.53 $ 39.53 $ 33.91 $ 31.66 $ 28.62 END OF PERIOD TOTAL RETURN B, C 17.21% 15.06% 27.48% 9.90% 23.63% (1.61)% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 84,991 $ 111,409 $ 89,230 $ 97,511 $ 62,217 $ 28,796 OF PERIOD (000 OMITTED) RATIO OF 1.66% A 1.83% 1.99% 1.52% 1.93% 1.89% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.65% A, E 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 .31% A .67% .04% 1.07% .97% 1.21% A INVESTMENT INCOME TO AVERAGE NET ASSETS PORTFOLIO 19% A 207% 87% 106% 81% 214% A TURNOVER RATE AVERAGE $ .0405 $ .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. CYCLICAL INDUSTRIES 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 PERIOD ENDED LIFE OF AUGUST 31, 1997 FUND CYCLICAL INDUSTRIES 18.60% CYCLICAL INDUSTRIES 15.04% (INCL. 3% SALES CHARGE) S&P 500 14.77% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, since the fund started on March 3, 1997. 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 includes reinvestment of dividends and capital gains, if any, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS 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. Average annual total returns will appear once the fund is a year old, and the growth of a hypothetical $10,000 investment in the fund will appear in the fund's next report six months from now. 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. 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) INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS GENERAL ELECTRIC CO. 5.6 FORT JAMES CORP. 3.2 WESTINGHOUSE ELECTRIC CORP. 2.5 MINNESOTA MINING & MANUFACTURING CO. 2.4 QUANEX CORP. 2.4 DU PONT (E.I.) DE NEMOURS & CO. 2.2 ALUMINUM CO. OF AMERICA 2.2 DOFASCO INC. 2.2 EMERSON ELECTRIC CO. 2.0 W.R. GRACE & CO. 1.7 TOP INDUSTRIES AS OF AUGUST 31, 1997 ELECTRICAL MACHINERY 10.1% PAPER 6.5% CHEMICALS 5.4% IRON & STEEL BLAST FURNACES, MILLS 4.6% PAPER MILLS 4.4% ALL OTHERS 69.0% ROW: 1, COL: 1, VALUE: 69.0 ROW: 1, COL: 2, VALUE: 4.4 ROW: 1, COL: 3, VALUE: 4.6 ROW: 1, COL: 4, VALUE: 5.4 ROW: 1, COL: 5, VALUE: 6.5 ROW: 1, COL: 6, VALUE: 10.1 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS CYCLICAL INDUSTRIES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Albert Ruback, Portfolio Manager of Fidelity Select Cyclical Industries Portfolio Q. HOW DID THE FUND PERFORM, ALBERT? A. From its inception on March 3, 1997, through August 31, 1997, the fund had a return of 18.60%, outperforming the Standard & Poor's 500 Index, which returned 14.77% during the same time frame. Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE DURING THE PERIOD? A. Almost without exception until the last month of the period, the stock market was led - dominated, in fact - by a relatively small group of the largest-capitalization stocks, such as Gillette and Coca-Cola. Companies such as these and a couple of dozen others have been responsible for an unusually large portion of the S&P 500's gains over the past couple of years. The cyclical sector performed well due to a generally strong economy, one characterized by moderate growth, low unemployment and low interest rates. All in all, it was an excellent environment for cyclical stocks. Q. WHAT WAS YOUR INVESTING STRATEGY OVER THE PAST SIX MONTHS? A. I generally favored three sectors over the course of the period - paper and forest products, metals and mining, and aerospace and defense, although I also held significant positions in iron and steel, chemicals and plastics, and electrical equipment. Business prospects for companies in the paper and forest products sector continued to improve, and valuations were still attractive even as many of the stocks appreciated in price. Fort James - the fund's second-largest holding at the end of the period - is a good example of my investments in this sector. On the metals side, particularly aluminum, there were low inventory levels and what I believed to be an inflection point for commodity prices - meaning a point where I felt commodity metal prices were going to increase. Alcoa - the Aluminum Company of America - and Alumax helped the fund in this area. As far as aerospace and defense, I felt we were in the early phases of a huge backlog-building cycle where cash-flow generation would be enormous and stocks in this area would appreciate. Northrop Grumman, a defense electronics company, and Lockheed Martin were two holdings that reflected this strategy. Q. HOW DID THE FUND'S LARGEST HOLDINGS PERFORM? WHICH CONTRIBUTED TO THE FUND'S PERFORMANCE DURING THE PERIOD? A. General Electric, which represented almost 6% of the fund's holdings at the end of the period as my top position, was up over 20% during the past six months, although it retreated pretty significantly late in the period, as did many of the stock market's largest-cap companies. Fort James, manufacturer of Quilted Northern bathroom tissues, Brawny paper towels and Dixie cups, also appreciated over 20% over the past six months. Westinghouse Electric, the fund's third-largest position at the end of August, had a stellar performance, with its stock jumping almost 50%. Quanex, a metals manufacturer, and W.R. Grace, the specialty chemical and health care company, also contributed nicely during the period. Q. DESPITE THE PORTFOLIO'S STRONG SHOWING SINCE INCEPTION, THERE MUST HAVE BEEN SOME DISAPPOINTMENTS . . . A. That's true. Minnesota Mining & Manufacturing - 3M to most of us - was basically flat during the period and, as the fund's fourth-largest position at the end of August, it detracted from the fund's return. The stocks of DuPont, Alcoa and Emerson Electric, all top 10 holdings, each appreciated over the past six months, but not as impressively as the fund in general or the S&P. Q. WHAT'S YOUR OUTLOOK FOR THE REST OF THE YEAR, ALBERT? A. Generally speaking, the only two areas within the cyclicals that I'm worried about are autos and chemicals, where I think possible over-capacity by the producers could hurt their profitability. Right now, everything seems to be holding up all right, so I'm not that concerned, although I will be watching these sectors closely. I think the key question, though, is what the Federal Reserve Board will do with interest rates. Cyclical industries, by definition, are tied to the performance of the economy. If the Fed raises rates to slow down economic growth, it will most likely have a negative effect on cyclical companies. 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: March 3, 1997 FUND NUMBER: 515 TRADING SYMBOL: FCYCF SIZE: as of August 31, 1997, more than $4 million MANAGER: Albert Ruback, since inception; manager, Fidelity Select Energy Portfolio, 1994-1996; Fidelity Select Industrial Equipment Portfolio, 1991-1994; sector leader, cyclical industries, since 1996; joined Fidelity in 1991 (checkmark) CYCLICAL INDUSTRIES PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 96.9% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 6.4% AIRCRAFT - 1.6% Boeing Co. 540 $ 29,396 09702310 Lockheed Martin Corp. 400 41,475 53983010 70,871 AIRCRAFT & PARTS - 2.0% Precision Castparts Corp. 200 12,925 74018910 Rohr Industries, Inc. (a) 400 10,825 77542210 Sundstrand Corp. 900 53,100 86732310 Textron, Inc. 200 12,463 88320310 89,313 AIRCRAFT ENGINES & PARTS - 2.2% AlliedSignal, Inc. 600 49,521 01951210 United Technologies Corp. 600 46,838 91301710 96,359 AIRCRAFT EQUIPMENT - 0.3% Aviall, Inc. (a) 700 11,463 05366B10 MISSILES & SPACE VEHICLES - 0.3% Thiokol Corp. 200 15,925 88410310 TOTAL AEROSPACE & DEFENSE 283,931 AIR TRANSPORTATION - 2.6% AIR TRANSPORT, MAJOR NATIONAL - 2.6% AMR Corp. (a) 700 70,525 00176510 America West Holding Corp. Class B (a) 1,100 13,269 02365720 Continental Airlines, Inc. Class B (a) 700 25,638 21079530 Ryanair Holdings PLC sponsored ADR 300 8,250 78351310 117,682 AUTOS, TIRES, & ACCESSORIES - 3.6% AUTO & TRUCK PARTS - 2.3% Eaton Corp. 500 45,031 27805810 SPX Corp. 800 46,500 78463510 Wynn's International, Inc. 400 11,550 98319510 103,081 MOTOR VEHICLES & CAR BODIES - 1.3% Chrysler Corp. 1,100 38,638 17119610 Lear Corp. (a) 400 18,325 52186510 56,963 TOTAL AUTOS, TIRES & ACCESSORIES 160,044 BUILDING MATERIALS - 1.8% AIRCONDITIONING EQUIPMENT - 0.8% American Standard Companies, Inc. (a) 600 28,200 02971210 York International Corp. 200 8,975 98667010 37,175 PAINT & VARNISH - 0.6% Lilly Industrial Coatings, Inc. Class A 1,100 24,338 53249110 PLUMBING SUPPLIES - WHOLESALE - 0.4% Masco Corp. 400 17,775 57459910 TOTAL BUILDING MATERIALS 79,288 CHEMICALS & PLASTICS - 10.5% ADHESIVES & SEALANTS - 1.1% Ferro Corp. 700 26,338 31540510 Nalco Chemical Co. 600 24,000 62985310 50,338 AGRICULTURAL CHEMICALS - 0.3% OM Group, Inc. 400 14,650 67087210 SHARES VALUE (NOTE 1) CHEMICALS - 5.4% Cytec Industries, Inc. (a) 1,300 $ 63,456 23282010 du Pont (E.I.) de Nemours & Co. 1,600 99,700 26353410 Monsanto Co. 1,200 52,725 61166210 NL Industries, Inc. 1,300 17,225 62915640 Witco Corp. 200 9,400 97738510 242,506 INDUSTRIAL GASES - 1.5% Air Products & Chemicals, Inc. 400 32,625 00915810 Praxair, Inc. 600 32,063 74005P10 64,688 PLASTICS & SYNTHETIC RESINS - 0.3% Spartech Corp. 800 12,700 84722020 UNSUPPORTED PLASTICS FILM & SHEET - 1.9% Sealed Air Corp. (a) 200 10,375 81211510 W.R. Grace & Co. 1,100 75,694 38391110 86,069 TOTAL CHEMICALS & PLASTICS 470,951 COMMUNICATIONS EQUIPMENT - 0.4% TELEPHONE EQUIPMENT - 0.4% Perceptron, Inc. (a) 600 15,750 71361F10 COMPUTERS & OFFICE EQUIPMENT - 0.3% OFFICE AUTOMATION - 0.3% Pitney Bowes, Inc. 200 15,275 72447910 CONSTRUCTION - 0.6% GENERAL BUILDING - 0.3% D.R. Horton, Inc. 800 12,600 23331A10 OPERATIVE BUILDERS - 0.3% Kaufman & Broad Home Corp. 700 14,000 48616810 TOTAL CONSTRUCTION 26,600 CONSUMER DURABLES - 2.4% MANUFACTURING INDUSTRIES, NEC - 2.4% Minnesota Mining & Manufacturing Co. 1,200 107,850 60405910 CONSUMER ELECTRONICS - 0.6% APPLIANCES - 0.6% Maytag Co. 700 19,206 57859210 Whirlpool Corp. 100 5,725 96332010 24,931 DEFENSE ELECTRONICS - 2.2% Litton Industries, Inc. (a) 300 14,963 53802110 Northrop Grumman Corp. 500 58,531 66680710 Raytheon Co. 400 22,000 75511110 95,494 ELECTRICAL EQUIPMENT - 11.3% ELECTRICAL MACHINERY - 10.1% Emerson Electric Co. 1,600 87,500 29101110 General Electric Co. 4,000 250,000 36960410 Westinghouse Electric Corp. 4,400 113,300 96040210 450,800 TV & RADIO COMMUNICATION EQUIPMENT - 1.2% Gilat Satellite Networks Ltd. (a) 1,600 52,000 40199892 TOTAL ELECTRICAL EQUIPMENT 502,800 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ENGINEERING - 0.4% ARCHITECTS & ENGINEERS - 0.4% EG & G, Inc. 600 $ 12,750 26845710 Fluor Corp. 100 5,613 34386110 18,363 HOLDING COMPANIES - 1.3% HOLDING COMPANY OFFICES, NEC - 1.3% Norfolk Southern Corp. 600 58,800 65584410 INDUSTRIAL MACHINERY & EQUIPMENT - 5.2% CONSTRUCTION EQUIPMENT - 1.6% Caterpillar, Inc. 1,200 69,675 14912310 ACCESSORIES & MEASURING CUTTING TOOLS - 0.2% Stanley Works 200 8,513 85461610 FARM MACHINERY & EQUIPMENT - 1.5% Case Corp. 1,000 67,063 14743R10 GENERAL INDUSTRIAL MACHINERY - 1.9% Illinois Tool Works, Inc. 600 29,025 45230810 Ingersoll-Rand Co. 700 42,088 45686610 Tyco International Ltd. 200 15,688 90212410 86,801 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 232,052 IRON & STEEL - 8.8% BLAST FURNACES - 1.3% AK Steel Holding Corp. 200 9,050 00154710 Steel Dynamics, Inc. 1,900 47,975 85811910 57,025 FABRICATED METAL PRODUCTS - 0.7% Aeroquip Vickers, Inc. 200 11,175 00786910 SPS Technologies, Inc. (a) 200 17,175 78462610 28,350 IRON & STEEL BLAST FURNACES, MILLS - 4.6% Inland Steel Industries, Inc. 2,000 42,125 45747210 Nucor Corp. 1,000 56,688 67034610 Quanex Corp. 2,900 105,306 74762010 204,119 IRON & STEEL FOUNDRIES - 2.1% Dofasco Inc. 4,700 95,846 25690070 METAL FORGINGS & STAMPINGS - 0.1% TriMas Corp. 200 5,725 89621510 TOTAL IRON & STEEL 391,065 METALS & MINING - 9.3% ALUMINUM, EXTRUDED PRODUCTS - 1.3% Alumax, Inc. (a) 1,400 58,013 02219710 METAL MINING - 1.1% Phelps Dodge Corp. 600 48,263 71726510 METALS SERVICE CENTERS - WHOLESALE - 0.3% Ryerson Tull, Inc. Class A (a) 700 11,419 78375510 NON-METALLIC MINERAL MINING - 0.3% Martin Marietta Materials, Inc. 400 13,975 57328410 NONFERROUS ROLLING & DRAWING - 2.6% Essex International, Inc. 1,400 53,813 29702510 Special Metals Corp. 600 10,575 84741Y10 Superior Telecom, Inc. (a) 1,400 52,938 86836510 117,326 SHARES VALUE (NOTE 1) PRIME NONFERROUS SMELTING - 3.4% Alcan Aluminium Ltd. 1,100 $ 38,444 01371610 Aluminum Co. of America 1,200 98,700 02224910 Inco Ltd. 600 16,235 45325840 153,379 SECONDARY NONFERROUS SMELTING - 0.3% IMCO Recycling, Inc. 600 11,513 44968110 TOTAL METALS & MINING 413,888 PACKAGING & CONTAINERS - 2.7% GLASS CONTAINERS - 1.4% Owens-Illinois, Inc. (a) 1,800 62,663 69076840 METAL CANS & CONTAINERS - 1.3% Silgan Holdings, Inc. 1,400 57,400 82704810 TOTAL PACKAGING & CONTAINERS 120,063 PAPER & FOREST PRODUCTS - 13.7% CONVERTED PAPER & PAPERBOARD - 0.5% Boise Cascade Corp. 600 23,738 09738310 LUMBER & WOOD - 0.8% Weyerhaeuser Co. 600 34,650 96216610 PAPER - 6.5% Champion International Corp. 600 35,513 15852510 Chesapeake Corp. 2,000 68,750 16515910 Georgia-Pacific Corp. 200 18,250 37329810 Stone Container Corp. 1,700 29,325 86158910 Temple-Inland, Inc. 600 38,700 87986810 Union Camp Corp. 600 35,588 90553010 Westvaco Corp. 900 30,488 96154810 Willamette Industries, Inc. 400 31,900 96913310 288,514 PAPER MILLS - 4.4% Bowater, Inc. 1,000 51,188 10218310 Fort James Corp. 3,387 142,254 34747110 193,442 PAPERBOARD MILLS - 0.6% Mead Corp. 400 28,375 58283410 PULP MILLS - 0.9% Tembec, Inc. Class A (a) 4,400 41,218 87992010 TOTAL PAPER & FOREST PRODUCTS 609,937 PHOTOGRAPHIC EQUIPMENT - 0.3% Imation Corp. (a) 500 13,531 45245A10 POLLUTION CONTROL - 2.8% POLLUTION EQUIPMENT & DESIGN - 0.3% Ogden Corp. 600 13,913 67634610 REFUSE SYSTEMS - 1.5% Browning-Ferris Industries, Inc. 700 24,456 11588510 Waste Management, Inc. 1,300 41,600 94106K10 66,056 SANITARY SERVICES - 1.0% USA Waste Services, Inc. (a) 1,037 43,554 90291710 TOTAL POLLUTION CONTROL 123,523 RAILROADS - 4.5% RAILROAD EQUIPMENT - 0.1% Bombardier, Inc. Class B 300 5,826 09775120 RAILROADS - 4.4% CSX Corp. 1,000 57,188 12640810 Canadian National Railway Co. 1,200 59,362 13637510 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) RAILROADS - CONTINUED RAILROADS - CONTINUED Union Pacific Corp. 800 $ 51,950 90781810 Wisconsin Central Transportation Corp. (a) 800 24,800 97659210 193,300 TOTAL RAILROADS 199,126 SHIP BUILDING & REPAIR - 1.8% SHIP BUILDERS - 1.8% Avondale Industries, Inc. (a) 1,300 29,738 05435010 General Dynamics Corp. 500 39,813 36955010 Newport News Shipbuilding, Inc. 600 11,625 65222810 81,176 TEXTILES & APPAREL - 0.8% COTTON MILLS - 0.2% Galey & Lord, Inc. (a) 600 10,688 36352K10 TEXTILE MILL PRODUCTS - 0.6% Unifi, Inc. 700 26,863 90467710 TOTAL TEXTILES & APPAREL 37,551 TRUCKING & FREIGHT - 2.6% AIR COURIER SERVICES - 0.3% CNF Transportation, Inc. 400 14,450 12612W10 FREIGHT FORWARDING - 0.6% Air Express International Corp. 300 9,113 00910410 Expeditors International of Washington, Inc. 500 18,313 30213010 27,426 TRUCKING, LOCAL & LONG DISTANCE - 0.4% Werner Enterprises, Inc. 900 19,688 95075510 TRUCKING, LONG DISTANCE - 1.3% USFreightways Corp. 600 18,000 91690610 Yellow Corp. (a) 1,200 37,650 98550910 55,650 TOTAL TRUCKING & FREIGHT 117,214 TOTAL COMMON STOCKS (Cost $3,923,560) 4,316,885 CASH EQUIVALENTS - 3.1% Taxable Central Cash Fund (b) (Cost $135,953) 135,953 135,953 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $4,059,513) $ 4,452,838 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $5,531,758 and $1,779,835, 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 $202 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $4,059,513. Net unrealized appreciation aggregated $393,325, of which $457,735 related to appreciated investment securities and $64,410 related to depreciated investment securities. CYCLICAL INDUSTRIES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 4,452,838 SECURITIES, AT VALUE (COST $4,059,513) - - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 95,491 INVESTMENTS SOLD RECEIVABLE FOR 29,828 FUND SHARES SOLD DIVIDENDS 6,178 RECEIVABLE INTEREST 1,124 RECEIVABLE REDEMPTION FEES 93 RECEIVABLE PREPAID 9,213 EXPENSES RECEIVABLE FROM 6,414 INVESTMENT ADVISER FOR EXPENSE REDUCTIONS TOTAL ASSETS 4,601,179 LIABILITIES PAYABLE TO $ 18,357 CUSTODIAN BANK PAYABLE FOR 221,241 FUND SHARES REDEEMED OTHER PAYABLES 22,850 AND ACCRUED EXPENSES TOTAL LIABILITIES 262,448 NET ASSETS $ 4,338,731 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 3,788,902 ACCUMULATED (15,133) NET INVESTMENT (LOSS) ACCUMULATED 171,637 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS NET UNREALIZED 393,325 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 4,338,731 365,841 SHARES OUTSTANDING NET ASSET $11.86 VALUE AND REDEMPTION PRICE PER SHARE ($4,338,731 (DIVIDED BY) 365,841 SHARES) MAXIMUM $12.23 OFFERING PRICE PER SHARE (100/97.00 OF $11.86) STATEMENT OF OPERATIONS MARCH 3, 1997 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 19,204 INCOME DIVIDENDS INTEREST 6,767 TOTAL INCOME 25,971 EXPENSES MANAGEMENT $ 9,699 FEE TRANSFER AGENT 11,037 FEES ACCOUNTING FEES 29,751 AND EXPENSES NON-INTERESTED 2 TRUSTEES' COMPENSATION CUSTODIAN FEES 10,334 AND EXPENSES REGISTRATION FEES 29,681 AUDIT 9,000 TOTAL EXPENSES 99,504 BEFORE REDUCTIONS EXPENSE (58,400) 41,104 REDUCTIONS NET INVESTMENT (15,133) INCOME (LOSS) REALIZED AND 171,637 UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES CHANGE IN NET 393,325 UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) 564,962 NET INCREASE $ 549,829 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 23,036 INFORMATION SALES CHARGES PAID TO FDC EXCHANGE FEES $ 1,620 WITHHELD BY FSC EXPENSE $ 39 REDUCTIONS CUSTODIAN CREDITS FMR 58,361 REIMBURSEMEN T $ 58,400 STATEMENT OF CHANGES IN NET ASSETS INCREASE MARCH 3, 1997 (DECREASE) IN (COMMENCEMENT NET ASSETS OF OPERATIONS) TO AUGUST 31, 1997 (UNAUDITED) OPERATIONS $ (15,133) NET INVESTMENT INCOME (LOSS) NET REALIZED 171,637 GAIN (LOSS) CHANGE IN NET 393,325 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 549,829 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS SHARE 7,729,625 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES COST OF SHARES (3,951,442) REDEEMED REDEMPTION 10,719 FEES NET INCREASE 3,788,902 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 4,338,731 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF - PERIOD END OF PERIOD $ 4,338,731 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $15,133) OTHER INFORMATION SHARES SOLD 710,250 REDEEMED (344,409) NET INCREASE 365,841 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS MARCH 3, 1997 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31, 1997 SELECTED (UNAUDITED) PER-SHARE DATA NET ASSET VALUE, $ 10.00 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.05) INVESTMENT INCOME (LOSS) D NET REALIZED 1.87 AND UNREALIZED GAIN (LOSS) TOTAL FROM 1.82 INVESTMENT OPERATIONS REDEMPTION FEES .04 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 11.86 END OF PERIOD TOTAL RETURN B, C 18.60% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 4,339 OF PERIOD (000 OMITTED) RATIO OF 2.50% A, EXPENSES TO E AVERAGE NET ASSETS RATIO OF NET (.92)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 128% A TURNOVER RATE AVERAGE $ .0194 COMMISSION RATE F ANNUALIZED THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). 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 total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS CONSTRUCTION AND HOUSING 21.78% 33.88% 136.90% 212.56% CONSTRUCTION AND HOUSING 18.13% 29.86% 129.79% 203.18% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS CONSTRUCTION AND HOUSING 33.88% 18.83% 12.07% CONSTRUCTION AND HOUSING 29.86% 18.10% 11.73% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 123925 S00000000000001 Construction & Housing S&P 500 00511 SP001 1987/08/31 9700.00 10000.00 1987/09/30 8954.89 9781.00 1987/10/31 6109.92 7674.17 1987/11/30 5662.85 7041.82 1987/12/31 6383.55 7577.70 1988/01/31 6610.55 7896.72 1988/02/29 7229.65 8264.71 1988/03/31 7518.56 8009.33 1988/04/30 7738.68 8098.24 1988/05/31 7690.53 8168.69 1988/06/30 8144.53 8543.63 1988/07/31 8061.98 8511.17 1988/08/31 7649.25 8221.79 1988/09/30 7883.13 8572.04 1988/10/31 7938.16 8810.34 1988/11/30 7841.86 8684.35 1988/12/31 8246.83 8836.33 1989/01/31 8749.43 9483.15 1989/02/28 8643.25 9247.02 1989/03/31 8862.69 9462.47 1989/04/30 9209.55 9953.57 1989/05/31 9535.18 10356.69 1989/06/30 9529.15 10297.66 1989/07/31 9915.78 11227.54 1989/08/31 10082.56 11447.60 1989/09/30 10264.50 11400.66 1989/10/31 9688.35 11136.17 1989/11/30 9832.39 11363.35 1989/12/31 9615.57 11636.07 1990/01/31 9009.04 10855.29 1990/02/28 9195.04 10995.32 1990/03/31 9712.61 11286.70 1990/04/30 9429.57 11004.53 1990/05/31 10302.97 12077.47 1990/06/30 10116.97 11995.34 1990/07/31 9589.29 11956.96 1990/08/31 8370.15 10876.05 1990/09/30 7505.84 10346.39 1990/10/31 7242.00 10301.90 1990/11/30 7942.55 10967.40 1990/12/31 8688.58 11273.39 1991/01/31 9452.82 11764.91 1991/02/28 10280.73 12606.10 1991/03/31 10535.48 12911.17 1991/04/30 10699.24 12942.15 1991/05/31 11763.71 13501.25 1991/06/30 11163.24 12882.90 1991/07/31 11454.37 13483.24 1991/08/31 11927.47 13802.79 1991/09/30 11663.63 13572.29 1991/10/31 11463.47 13754.15 1991/11/30 10890.30 13199.86 1991/12/31 12278.26 14709.93 1992/01/31 13191.03 14436.32 1992/02/29 13406.96 14623.99 1992/03/31 13397.14 14338.83 1992/04/30 13583.62 14760.39 1992/05/31 14015.47 14832.71 1992/06/30 13014.01 14611.71 1992/07/31 13249.73 15209.33 1992/08/31 12797.93 14897.53 1992/09/30 12964.90 15073.32 1992/10/31 13416.71 15126.08 1992/11/30 14192.64 15641.88 1992/12/31 14575.69 15834.28 1993/01/31 15184.65 15967.28 1993/02/28 15459.66 16184.44 1993/03/31 15823.07 16525.93 1993/04/30 15449.70 16126.00 1993/05/31 15616.78 16558.18 1993/06/30 15803.51 16606.20 1993/07/31 16344.06 16539.77 1993/08/31 17022.19 17166.63 1993/09/30 17572.56 17034.45 1993/10/31 18211.39 17387.06 1993/11/30 17926.37 17221.88 1993/12/31 19474.70 17430.27 1994/01/31 20110.94 18022.90 1994/02/28 19703.35 17534.48 1994/03/31 18550.18 16769.97 1994/04/30 18508.21 16984.63 1994/05/31 17528.83 17263.18 1994/06/30 17099.11 16840.23 1994/07/31 17588.79 17392.59 1994/08/31 18258.37 18105.69 1994/09/30 17239.02 17662.10 1994/10/31 16729.34 18059.49 1994/11/30 16049.78 17401.77 1994/12/31 16369.55 17659.84 1995/01/31 16441.39 18117.75 1995/02/28 17231.64 18823.80 1995/03/31 17539.53 19379.29 1995/04/30 17560.06 19950.01 1995/05/31 18422.15 20747.42 1995/06/30 18596.62 21229.38 1995/07/31 19458.72 21933.35 1995/08/31 19468.98 21988.40 1995/09/30 19356.09 22916.31 1995/10/31 19345.83 22834.50 1995/11/30 20536.34 23836.93 1995/12/31 21080.24 24296.03 1996/01/31 21037.33 25123.07 1996/02/29 20983.69 25355.96 1996/03/31 21702.46 25600.14 1996/04/30 21730.01 25977.48 1996/05/31 22445.03 26647.44 1996/06/30 22579.10 26748.97 1996/07/31 21629.46 25567.20 1996/08/31 22646.13 26106.41 1996/09/30 23875.08 27575.68 1996/10/31 23517.57 28336.22 1996/11/30 24590.10 30478.15 1996/12/31 23865.49 29874.38 1997/01/31 24103.13 31740.93 1997/02/28 24895.25 31989.78 1997/03/31 24182.34 30675.32 1997/04/30 24673.63 32506.64 1997/05/31 27034.93 34485.64 1997/06/30 27514.76 36030.60 1997/07/31 30406.40 38897.55 1997/08/29 30318.01 36718.51 IMATRL PRASUN SHR__CHT 19970831 19970909 123928 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Construction and Housing Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $30,318 - a 203.18% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS AMERICAN STANDARD COMPANIES, INC. 6.8 ELCOR CORP. 5.5 HOME DEPOT, INC. 5.2 CASE CORP. 5.0 MASCO CORP. 4.9 LOWE'S COMPANIES, INC. 4.8 LAFARGE CORP. 4.7 CHAMPION ENTERPRISES, INC. 4.6 STONE CONTAINER CORP. 3.8 SHERWIN-WILLIAMS CO. 3.7 TOP INDUSTRIES AS OF AUGUST 31, 1997 CEMENT 7.5% PAPER 7.3% AIR-CONDITIONING EQUIPMENT 6.8% PAVING, ROOFING & SIDING 5.5% BUILDING MATERIALS - RETAIL 5.2% ALL OTHERS 67.7% ROW: 1, COL: 1, VALUE: 67.7 ROW: 1, COL: 2, VALUE: 5.5 ROW: 1, COL: 3, VALUE: 5.2 ROW: 1, COL: 4, VALUE: 6.8 ROW: 1, COL: 5, VALUE: 7.3 ROW: 1, COL: 6, VALUE: 7.5 * * 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. HOW DID THE FUND PERFORM, PETER? A. For the six-month period that ended August 31, 1997, the fund returned 21.78%. This topped the Standard & Poor's 500 Index, which returned 14.78% in that time. For the 12 months that ended August 31, 1997, the fund returned 33.88% while the index returned 40.65%. Q. WHAT FACTORS DROVE PERFORMANCE? A. With a healthy U.S. economy serving as a backdrop, the sector experienced strong housing activity. The interest-rate environment has also been conducive to good performance. The Federal Reserve Board raised interest rates by 0.25% in March, but deemed further hikes unnecessary from that point through the end of August. Mortgage rates continued to hover in the 7%-8% range, and housing-related companies continued to report nice gains in both sales and earnings. Q. WHICH PARTICULAR SEGMENTS OF THE INDUSTRY CONTRIBUTED THE MOST TO PERFORMANCE? A. I continued to focus on the repair/remodel segment of the group, as well as cement and paper companies. While new housing starts remained strong, many established homeowners continued to upgrade their existing properties - remodeling either a kitchen or bathroom, for example. Masco - one of the fund's larger positions and a leading manufacturer of kitchen and bathroom products - benefited from this trend. Cement manufacturers thrived due to a favorable supply/demand situation, as increased public infrastructure building - such as highway projects - easily satisfied industry supply. The fund's cement-related positions included Medusa, Southdown and Lafarge. Paper manufacturers - which either can be involved in lumber products or home consumer goods, such as tissues or toilet paper - also prospered. Examples of positions the fund held in this area included Fort James and Georgia-Pacific. Q. SINCE YOU TOOK OVER THE FUND, YOU'VE KEPT THE NUMBER OF POSITIONS AT AROUND 35. WHAT'S BEHIND THIS STRATEGY? A. My rationale is that fewer names allow me to condense my research efforts and know those companies better. Also, directing more of the fund's assets into its top positions reflects my confidence in those stocks. Q. WHICH INDIVIDUAL STOCKS CONTRIBUTED POSITIVELY TO PERFORMANCE? WERE THERE ANY DISAPPOINTMENTS? A. Home Depot did very well, as the company's low-cost approach and superior price/value relationship continued to equate to strong stock performance. Green Tree Financial was another positive contributor. American Standard - a company specializing in plumbing and air conditioning fixtures - was somewhat disappointing. Cool summers in many pockets of the country hurt American Standard's air conditioning business during the period. Q. WHAT'S YOUR OUTLOOK? A. As long as interest rates stay flat and inflation remains in check, I think the sector will continue to perform well. Paper and cement stocks have gotten a bit expensive after a nice run-up, and I may look to reduce the fund's exposure in those areas. Companies specializing in building materials and furniture may offer attractive opportunities in the coming months. 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 August 31, 1997, more than $36 million MANAGER: Peter Saperstone, since 1996; manager, Fidelity Select Defense & Aerospace Portfolio and Fidelity Select Air Transportation Portfolio, since June 1997; equity analyst, defense/aerospace and airlines, since 1997; building materials and appliances, since 1996; textile, apparel and footwear industries, since 1995; joined Fidelity in 1995 (checkmark) CONSTRUCTION AND HOUSING PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 84.8% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 32.6% AIR-CONDITIONING EQUIPMENT - 6.8% American Standard Companies, Inc. (a) 55,500 $ 2,608,500 02971210 CEMENT - 7.5% Lafarge Corp. 56,000 1,820,000 50586210 Medusa Corp. 12,100 568,700 58507230 St. Lawrence Cement, Inc. Class A 11,600 114,934 79106010 Southdown, Inc. 7,900 370,806 84129710 2,874,440 CONCRETE, GYPSUM, PLASTER - 1.6% USG Corp. (a) 14,400 617,400 90329340 PAINT & VARNISH - 3.7% Sherwin-Williams Co. 51,900 1,424,006 82434810 PAVING, ROOFING & SIDING - 5.5% Elcor Corp. 67,900 2,100,656 28444310 PLUMBING SUPPLIES - WHOLESALE - 4.9% Masco Corp. 42,100 1,870,819 57459910 STRUCTURAL METAL & WOOD PRODUCT - 2.6% American Woodmark Corp. 63,500 992,188 03050610 TOTAL BUILDING MATERIALS 12,488,009 CONSTRUCTION - 2.5% CONSTRUCTION - 1.3% Walter Industries, Inc. (a) 27,600 501,975 93317Q10 MOBILE HOMES - 0.4% Oakwood Homes Corp. 5,500 149,188 67409810 OPERATIVE BUILDERS - 0.2% U.S. Home Corp. (a) 2,600 91,813 91192010 SINGLE-FAMILY HOUSING CONSTRUCTION - 0.6% Beazer Homes USA, Inc. (a) 12,100 228,388 07556Q10 TOTAL CONSTRUCTION 971,364 CONSUMER ELECTRONICS - 1.8% APPLIANCES - 1.8% Maytag Co. 25,000 685,938 57859210 CREDIT & OTHER FINANCE - 1.1% PERSONAL CREDIT INSTITUTIONS - 1.1% Green Tree Financial Corp. 9,200 404,225 39350510 ENGINEERING - 0.4% ARCHITECTS & ENGINEERS - 0.4% Fluor Corp. 2,600 145,925 34386110 FEDERAL SPONSORED CREDIT - 2.2% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 2.2% Federal National Mortgage Association 18,800 827,200 31358610 HOME FURNISHINGS - 7.5% FURNITURE - 0.1% Leggett & Platt, Inc. 1,200 51,600 52466010 FURNITURE STORES - 2.6% Ethan Allen Interiors, Inc. 6,600 485,100 29760210 Heilig-Meyers Co. 33,500 502,500 42289310 987,600 NON-WOOD OFFICE FURNITURE - 3.9% HON Industries, Inc. 7,000 409,500 43809210 Miller (Herman), Inc. 20,900 1,081,575 60054410 1,491,075 WOOD HOUSEHOLD FURNITURE - 0.9% Ladd Furniture, Inc. 23,300 364,063 50573920 TOTAL HOME FURNISHINGS 2,894,338 SHARES VALUE (NOTE 1) INDUSTRIAL MACHINERY & EQUIPMENT - 6.5% ACCESSORIES & MEASURING CUTTING TOOLS - 1.5% Stanley Works 14,200 $ 604,388 85461610 FARM MACHINERY & EQUIPMENT - 5.0% Case Corp. 28,400 1,904,575 14743R10 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 2,508,963 LEISURE DURABLES & TOYS - 4.6% TRAVEL TRAILERS AND CAMPERS - 4.6% Champion Enterprises, Inc. (a) 102,200 1,762,950 15849610 PAPER & FOREST PRODUCTS - 14.5% CONVERTED PAPER & PAPERBOARD - 3.7% Boise Cascade Corp. 35,500 1,404,469 09738310 PAPER - 7.3% Georgia-Pacific Corp. 14,900 1,359,625 37329810 Stone Container Corp. 83,600 1,442,100 86158910 2,801,725 PAPER MILLS - 3.5% Fort James Corp. 32,000 1,344,000 34747110 TOTAL PAPER & FOREST PRODUCTS 5,550,194 RETAIL & WHOLESALE, MISCELLANEOUS - 10.0% BUILDING MATERIALS - RETAIL - 5.2% Home Depot, Inc. 42,000 1,981,875 43707610 LUMBER & BUILDING MATERIALS - RETAIL - 4.8% Lowe's Companies, Inc. 53,700 1,856,003 54866110 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 3,837,878 TEXTILES & APPAREL - 1.1% CARPETS & RUGS - 0.5% Mohawk Industries, Inc. (a) 7,400 191,475 60819010 SILK MILLS - 0.6% Quaker Fabric Corp. (a) 10,800 248,400 74739910 TOTAL TEXTILES & APPAREL 439,875 TOTAL COMMON STOCKS (Cost $30,686,232) 32,516,859 CASH EQUIVALENTS - 15.2% Taxable Central Cash Fund (b) (Cost $5,846,578) 5,846,578 5,846,578 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $36,532,810) $ 38,363,437 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $53,062,867 and $51,942,101, 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 $29,541 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, there were no loans outstanding (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $36,567,571. Net unrealized appreciation aggregated $1,795,866, of which $2,289,385 related to appreciated investment securities and $493,519 related to depreciated investment securities. CONSTRUCTION AND HOUSING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 38,363,437 SECURITIES, AT VALUE (COST $36,532,810 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 662,899 INVESTMENTS SOLD RECEIVABLE FOR 187,200 FUND SHARES SOLD DIVIDENDS 11,588 RECEIVABLE INTEREST 21,116 RECEIVABLE REDEMPTION FEES 268 RECEIVABLE OTHER 275 RECEIVABLES TOTAL ASSETS 39,246,783 LIABILITIES PAYABLE FOR $ 1,719,631 INVESTMENTS PURCHASED PAYABLE FOR 711,513 FUND SHARES REDEEMED ACCRUED 18,879 MANAGEMENT FEE OTHER PAYABLES 50,811 AND ACCRUED EXPENSES TOTAL LIABILITIES 2,500,834 NET ASSETS $ 36,745,949 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 33,019,160 DISTRIBUTIONS IN (136,932) EXCESS OF NET INVESTMENT INCOME ACCUMULATED 2,033,094 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 1,830,627 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 36,745,949 1,530,297 SHARES OUTSTANDING NET ASSET $24.01 VALUE AND REDEMPTION PRICE PER SHARE ($36,745,94 9 (DIVIDED BY) 1,530,297 SHARES) MAXIMUM $24.75 OFFERING PRICE PER SHARE (100/97.00 OF $24.01) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 99,795 INCOME DIVIDENDS INTEREST 73,001 (INCLUDING INCOME ON SECURITIES LOANED OF $2,250) TOTAL INCOME 172,796 EXPENSES MANAGEMENT $ 74,081 FEE TRANSFER AGENT 191,928 FEES ACCOUNTING AND 30,475 SECURITY LENDING FEES NON-INTERESTED 64 TRUSTEES' COMPENSATION CUSTODIAN FEES 11,529 AND EXPENSES REGISTRATION FEES 16,412 AUDIT 10,724 LEGAL 113 MISCELLANEOUS 64 TOTAL EXPENSES 335,390 BEFORE REDUCTIONS EXPENSE (31,140) 304,250 REDUCTIONS NET INVESTMENT (131,454) INCOME (LOSS) REALIZED AND 2,524,668 UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES CHANGE IN NET 920,719 UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) 3,445,387 NET INCREASE $ 3,313,933 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 59,022 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 121 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 9,345 WITHHELD BY FSC EXPENSE $ 6,604 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENT CUSTODIAN 241 CREDITS FMR 24,295 REIMBURSEMEN T $ 31,140 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (131,454) $ 181,247 NET INVESTMENT INCOME (LOSS) NET REALIZED 2,524,668 10,158,974 GAIN (LOSS) CHANGE IN NET 920,719 (2,418,313) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 3,313,933 7,921,908 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (23,292) (112,820) SHAREHOLDERS FROM NET INVESTMENT INCOME IN EXCESS OF (5,478) - NET INVESTMENT INCOME FROM NET (3,121,581) (3,093,992) REALIZED GAIN TOTAL (3,150,351) (3,206,812) DISTRIBUTIONS SHARE 52,131,354 137,278,007 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 3,127,504 3,185,271 OF DISTRIBUTIONS COST OF SHARES (49,332,645) (157,413,712) REDEEMED REDEMPTION 75,528 147,951 FEES NET INCREASE 6,001,741 (16,802,483) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 6,165,323 (12,087,387) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 30,580,626 42,668,013 PERIOD END OF PERIOD $ 36,745,949 $ 30,580,626 (INCLUDING UNDER (OVER) DISTRIBUTION OF NET INVESTMENT INCOME OF $(136,932) AND $68,372, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 2,288,045 6,539,196 ISSUED IN 165,477 160,947 REINVESTMENT OF DISTRIBUTIONS REDEEMED (2,313,356) (7,491,813) NET INCREASE 140,166 (791,670) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 22.00 $ 19.56 $ 16.79 $ 19.82 $ 15.74 $ 13.84 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.12) .06 .07 (.02) .01 .02 INVESTMENT INCOME (LOSS) D NET REALIZED 4.25 3.38 3.55 (2.50) 4.26 1.87 AND UNREALIZED GAIN (LOSS) TOTAL FROM 4.13 3.44 3.62 (2.52) 4.27 1.89 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.02) (.02) (.07) - - - INVESTMENT INCOME FROM NET (2.17) (1.03) (.81) (.52) (.22) (.01) REALIZED GAIN TOTAL (2.19) (1.05) (.88) (.52) (.22) (.01) DISTRIBUTIONS REDEMPTION FEES .07 .05 .03 .01 .03 .02 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 24.01 $ 22.00 $ 19.56 $ 16.79 $ 19.82 $ 15.74 END OF PERIOD TOTAL RETURN B, C 21.78% 18.64% 21.77% (12.54)% 27.45% 13.81% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 36,746 $ 30,581 $ 42,668 $ 16,863 $ 80,999 $ 31,111 OF PERIOD (000 OMITTED) RATIO OF 2.50% A, G 1.41% 1.43% 1.76% 1.67% 2.02% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 2.45% A, E 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 (1.06)% A .27% .39% (.11)% .03% .20% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 426% A 270% 139% 45% 35% 60% A TURNOVER RATE AVERAGE $ .0305 $ .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 N ET 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 FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS DEFENSE AND AEROSPACE 30.03% 41.31% 247.52% 206.02% DEFENSE AND AEROSPACE 26.13% 37.07% 237.10% 196.84% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS DEFENSE AND AEROSPACE 41.31% 28.29% 11.83% DEFENSE AND AEROSPACE 37.07% 27.51% 11.49% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970923 140050 S00000000000001 Defense & Aerospace S&P 500 00067 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9505.15 9781.00 1987/10/31 7081.67 7674.17 1987/11/30 6716.32 7041.82 1987/12/31 6916.61 7577.70 1988/01/31 7361.61 7896.72 1988/02/29 7800.26 8264.71 1988/03/31 7781.19 8009.33 1988/04/30 7730.33 8098.24 1988/05/31 7437.90 8168.69 1988/06/30 7743.04 8543.63 1988/07/31 7590.47 8511.17 1988/08/31 7406.11 8221.79 1988/09/30 7628.61 8572.04 1988/10/31 7615.90 8810.34 1988/11/30 7278.97 8684.35 1988/12/31 7215.40 8836.33 1989/01/31 7501.47 9483.15 1989/02/28 7469.68 9247.02 1989/03/31 7622.26 9462.47 1989/04/30 7895.62 9953.57 1989/05/31 8035.47 10356.69 1989/06/30 7940.12 10297.66 1989/07/31 8455.05 11227.54 1989/08/31 8671.19 11447.60 1989/09/30 8512.26 11400.66 1989/10/31 8029.12 11136.17 1989/11/30 7723.97 11363.35 1989/12/31 7851.12 11636.07 1990/01/31 7406.11 10855.29 1990/02/28 7431.54 10995.32 1990/03/31 7889.26 11286.70 1990/04/30 7565.04 11004.53 1990/05/31 8124.47 12077.47 1990/06/30 8130.32 11995.34 1990/07/31 7804.08 11956.96 1990/08/31 7119.62 10876.05 1990/09/30 6889.34 10346.39 1990/10/31 6799.78 10301.90 1990/11/30 7164.40 10967.40 1990/12/31 7491.22 11273.39 1991/01/31 8152.40 11764.91 1991/02/28 8312.88 12606.10 1991/03/31 8954.80 12911.17 1991/04/30 8807.16 12942.15 1991/05/31 9217.99 13501.25 1991/06/30 8754.20 12882.90 1991/07/31 9134.54 13483.24 1991/08/31 9037.84 13802.79 1991/09/30 8825.11 13572.29 1991/10/31 9250.57 13754.15 1991/11/30 8831.56 13199.86 1991/12/31 9508.43 14709.93 1992/01/31 9476.20 14436.32 1992/02/29 9624.47 14623.99 1992/03/31 9431.07 14338.83 1992/04/30 9263.47 14760.39 1992/05/31 8799.33 14832.71 1992/06/30 8386.76 14611.71 1992/07/31 8709.08 15209.33 1992/08/31 8541.47 14897.53 1992/09/30 8663.95 15073.32 1992/10/31 8734.86 15126.08 1992/11/30 9037.84 15641.88 1992/12/31 9508.43 15834.28 1993/01/31 9792.07 15967.28 1993/02/28 9721.16 16184.44 1993/03/31 10236.87 16525.93 1993/04/30 10269.10 16126.00 1993/05/31 10584.98 16558.18 1993/06/30 11029.78 16606.20 1993/07/31 11481.03 16539.77 1993/08/31 11461.69 17166.63 1993/09/30 11758.22 17034.45 1993/10/31 12228.81 17387.06 1993/11/30 11867.81 17221.88 1993/12/31 12252.36 17430.27 1994/01/31 12835.80 18022.90 1994/02/28 12835.80 17534.48 1994/03/31 12319.42 16769.97 1994/04/30 12386.28 16984.63 1994/05/31 12427.12 17263.18 1994/06/30 12114.06 16840.23 1994/07/31 12291.00 17392.59 1994/08/31 12842.26 18105.69 1994/09/30 12195.72 17662.10 1994/10/31 12495.17 18059.49 1994/11/30 12005.17 17401.77 1994/12/31 12467.95 17659.84 1995/01/31 12461.14 18117.75 1995/02/28 13366.30 18823.80 1995/03/31 13937.97 19379.29 1995/04/30 14707.01 19950.01 1995/05/31 15612.16 20747.42 1995/06/30 16190.64 21229.38 1995/07/31 17082.18 21933.35 1995/08/31 17075.38 21988.40 1995/09/30 17551.77 22916.31 1995/10/31 16912.04 22834.50 1995/11/30 18130.25 23836.93 1995/12/31 18372.32 24296.03 1996/01/31 18701.05 25123.07 1996/02/29 19701.85 25355.96 1996/03/31 20154.76 25600.14 1996/04/30 21125.82 25977.48 1996/05/31 21915.78 26647.44 1996/06/30 21396.67 26748.97 1996/07/31 19952.17 25567.20 1996/08/31 21005.45 26106.41 1996/09/30 22036.16 27575.68 1996/10/31 21652.46 28336.22 1996/11/30 22833.64 30478.15 1996/12/31 22970.48 29874.38 1997/01/31 22473.52 31740.93 1997/02/28 22828.49 31989.78 1997/03/31 22678.61 30675.32 1997/04/30 23284.50 32506.64 1997/05/31 25148.22 34485.64 1997/06/30 25748.12 36030.60 1997/07/31 28131.77 38897.55 1997/08/29 29683.53 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970923 140053 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Defense and Aerospace Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $29,684 - a 196.84% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS REMEC, INC. 6.0 MAXWELL TECHNOLOGIES, INC. 5.7 GENERAL MOTORS CORP. CLASS H 5.1 LOCKHEED MARTIN CORP. 5.0 NORTHROP GRUMMAN CORP. 4.5 LORAL SPACE & COMMUNICATIONS LTD. 4.4 GULFSTREAM AEROSPACE CORP. 4.3 FAIRCHILD CORP. CLASS A 3.9 UNITED TECHNOLOGIES CORP. 3.8 BOEING CO. 3.7 TOP INDUSTRIES AS OF AUGUST 31, 1997 AEROSPACE & DEFENSE 27.6% DEFENSE ELECTRONICS 17.3% ELECTRICAL EQUIPMENT 12.8% ELECTRONICS 8.0% AUTOS, TIRES, & ACCESSORIES 5.1% ALL OTHERS 29.2% ROW: 1, COL: 1, VALUE: 29.2 ROW: 1, COL: 2, VALUE: 5.1 ROW: 1, COL: 3, VALUE: 8.0 ROW: 1, COL: 4, VALUE: 12.8 ROW: 1, COL: 5, VALUE: 17.3 ROW: 1, COL: 6, VALUE: 27.6 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS DEFENSE AND AEROSPACE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Peter Saperstone became Portfolio Manager of Fidelity Select Defense and Aerospace Portfolio on June 23, 1997. Q. HOW DID THE FUND PERFORM, PETER? A. For the six-month period that ended August 31, 1997, the fund returned 30.03%. This topped the Standard & Poor's 500 Index, which returned 14.78% in that same time span. For the 12 months that ended August 31, 1997, the fund returned 41.31% while the index returned 40.65%. Q. WHAT FACTORS FIGURED INTO THE FUND'S STRONG PERFORMANCE OVER THE PAST SIX MONTHS? A. The sector has prospered from a favorable aerospace cycle. As is typical in an up cycle, aircraft manufacturers have experienced a significant increase in new jet orders. To illustrate, the number of plane deliveries for 1995 was approximately 480. We should see 650 new deliveries this year and 1,100 by the year 2000. This surge in demand not only has benefited the primary jet builders, but also those smaller firms that make many of the planes' components. Q. WHAT HAS DRIVEN THESE NEW ORDERS? A. Global air traffic - a key industry measure that typically grows around 5%-6% each year - has been one of the primary influences spurring this activity. The industry also benefited from increased replacement demand and from fleet expansion in emerging-market countries. Government regulation has played a role here as well, as some replacement demand has been driven by regulations to reduce noise. Q. DID YOU PLAY ANY PARTICULAR THEMES DURING THE PERIOD? A. The fund has significant positions in satellite-related stocks, with approximately 25% of its assets currently allocated to this group. Demand for satellites has grown over the past few years, fueled mostly by three satellite-dependent technologies: video programming, mobile telecommunications and high-speed data transmission. As a result, satellite manufacturers such as Lockheed-Martin and Loral have benefited quite significantly. The service providers - such as PanAmSat - that actually own the satellite and lease the transponder space to one of the three technology sources also have benefited. I think people are gradually beginning to understand the need for this type of technology and, as a result, the satellite group is becoming a more viable industry. Q. THERE HAS BEEN A LOT OF CONSOLIDATION IN THE DEFENSE INDUSTRY OVER THE PAST FEW YEARS. HAS THIS ACTIVITY FIZZLED? A. When Lockheed-Martin acquired Northrop Grumman during the period - both of which are positions in the fund - it signaled a probable end to large-scale mergers in the industry. With the consolidation we've seen in recent years - including McDonnell-Douglas/Boeing and Raytheon/Hughes - the number of major defense firms has been reduced from 20 five years ago to just three. These consolidations have been positive for the sector, since the acquired company is typically bought at a premium, and the acquiring company gains scale. We may see a number of smaller acquisitions involving sub-contractors, though, and that could translate into some interesting buying opportunities. Q. WHICH INDIVIDUAL STOCKS CONTRIBUTED POSITIVELY TO PERFORMANCE? WERE THERE ANY DISAPPOINTMENTS? A. Most of the fund's satellite-related stocks performed well, including Remec and PanAmSat. In terms of disappointments, I'd point to Boeing. While the plane ordering cycle I mentioned earlier has helped Boeing, the company has had some trouble translating volume into profits. Q. WHAT'S YOUR OUTLOOK? A. All in all, I'm upbeat. I think the aerospace cycle we've seen thus far has another one to two years left, and I'm very bullish on the satellite group over the long-term. In terms of the fund, I like how it's allocated currently and don't foresee any significant changes at this time. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: May 8, 1984 FUND NUMBER: 067 TRADING SYMBOL: FSDAX SIZE: as of August 31, 1997, more than $61 million MANAGER: Peter Saperstone, since June 1997; manager, Fidelity Select Air Transportation Portfolio, since June 1997; Fidelity Select Construction and Housing Portfolio, since 1996; equity analyst, defense/aerospace and airlines, since 1997; building materials and appliances, since 1996; textile, apparel and footwear industries, since 1995; joined Fidelity in 1995 (checkmark) DEFENSE AND AEROSPACE PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 84.2% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 27.6% AIRCRAFT - 13.0% Boeing Co. 42,400 $ 2,308,150 09702310 Gulfstream Aerospace Corp. (a) 90,200 2,672,175 40273410 Lockheed Martin Corp. 30,200 3,131,363 53983010 8,111,688 AIRCRAFT & PARTS - 2.4% Rohr Industries, Inc. 20,000 541,250 77542210 Sundstrand Corp. 15,700 926,300 86732310 1,467,550 AIRCRAFT ENGINES & PARTS - 7.6% Doncasters PLC sponsored ADR 67,200 1,730,400 25769210 Sequa Corp. Class A (a) 12,500 640,625 81732010 United Technologies Corp. 30,000 2,341,875 91301710 4,712,900 AIRCRAFT EQUIPMENT - 3.9% Fairchild Corp. Class A (a) 115,400 2,430,613 30369810 MISSILES & SPACE VEHICLES - 0.0% Thiokol Corp. 300 23,888 88410310 ORDNANCE - 0.7% Primex Technologies, Inc. 15,400 450,450 74159710 TOTAL AEROSPACE & DEFENSE 17,197,089 AIR TRANSPORTATION - 2.2% AIR TRANSPORT, MAJOR NATIONAL - 2.2% AMR Corp. (a) 9,000 906,750 00176510 Alaska Air Group, Inc. (a) 300 8,231 01165910 America West Airlines, Inc. Class B (warrants) (a) 17,000 66,938 02365011 Continental Airlines, Inc. Class B (a) 10,700 391,888 21079530 1,373,807 AUTOS, TIRES, & ACCESSORIES - 5.1% MOTOR VEHICLES & CAR BODIES - 5.1% General Motors Corp. Class H 50,000 3,178,125 37044250 BROADCASTING - 4.0% COMMUNICATIONS SERVICES - 4.0% APT Satellite Holdings Ltd. sponsored ADR 18,900 281,138 00203R10 Asia Satellite Telecommunications Holdings Ltd. sponsored ADR 8,800 253,000 04516X10 Asia Satellite Telecommunications Holdings Ltd. 130,000 362,346 04699K22 PanAmSat Corp. (a) 43,800 1,593,225 69793310 2,489,709 BUILDING MATERIALS - 2.2% ABRASIVES AND ASBESTOS - 2.2% Hexcel Corp. 50,000 1,390,625 42829110 COMMUNICATIONS EQUIPMENT - 1.8% DATACOMMUNICATIONS EQUIPMENT - 0.2% IFR Systems, Inc. 6,200 158,875 44950710 TELEPHONE EQUIPMENT - 1.6% Globalstar Telecommunications Ltd. 25,000 970,313 37999822 TOTAL COMMUNICATIONS EQUIPMENT 1,129,188 COMPUTERS & OFFICE EQUIPMENT - 1.1% COMPUTERS - 1.1% Evans & Sutherland Computer Corp. (a) 22,700 683,838 29909610 SHARES VALUE (NOTE 1) DEFENSE ELECTRONICS - 17.3% Litton Industries, Inc. 40,200 $ 2,004,975 53802110 Northrop Grumman Corp. 23,800 2,786,082 66680710 Raytheon Co. 40,000 2,200,000 75511110 Remec, Inc. (a) 112,300 3,748,013 75954310 10,739,070 ELECTRICAL EQUIPMENT - 12.8% TV & RADIO COMMUNICATION EQUIPMENT - 12.8% Globecomm Systems, Inc. 600 7,875 37956X10 Gilat Satellite Networks Ltd. (a) 42,300 1,374,750 40199892 Innova Corp. 100 2,200 45766A10 Loral Space & Communications Ltd. (a) 155,100 2,714,250 54399E22 Titan Corp. (a) 300,000 2,137,500 88826610 Viasat, Inc. 98,100 1,741,275 92552V10 7,977,850 ELECTRONIC INSTRUMENTS - 0.7% ORBIT/FR, Inc. 15,900 433,275 68592910 ELECTRONICS - 8.0% ELECTRONIC CAPACITORS - 5.7% Maxwell Technologies, Inc. (a) 115,300 3,516,650 57776710 ELECTRONIC PARTS - WHOLESALE - 2.3% Airport Systems International, Inc. (a)(c) 209,700 1,441,688 00949N10 TOTAL ELECTRONICS 4,958,338 SERVICES - 0.4% BUSINESS SERVICES - 0.4% Orion Network Systems, Inc. (a) 15,500 236,375 68628K10 SHIP BUILDING & REPAIR - 1.0% SHIP BUILDERS - 1.0% General Dynamics Corp. 7,500 597,188 36955010 TOTAL COMMON STOCKS (Cost $44,870,997) 52,384,477 CASH EQUIVALENTS - 15.8% Taxable Central Cash Fund (b) (Cost $9,846,118) 9,846,118 9,846,118 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $54,717,115) $ 62,230,595 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. Affiliated company (see Note 10 of Notes to Financial Statements). OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $73,931,355 and $100,385,501, 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 $30,121 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 87.7% Bermuda 5.9 United Kingdom 2.8 Israel 2.2 Hong Kong 1.4 100.0% 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. $ - $ 72,025 $ - $ 1,441,688 INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $54,717,115. Net unrealized appreciation aggregated $7,513,480, of which $7,819,274 related to appreciated investment securities and $305,794 related to depreciated investment securities. DEFENSE AND AEROSPACE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 62,230,595 SECURITIES, AT VALUE (COST $54,717,115 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 1,824,265 INVESTMENTS SOLD RECEIVABLE FOR 3,149,331 FUND SHARES SOLD DIVIDENDS 46,797 RECEIVABLE INTEREST 23,480 RECEIVABLE REDEMPTION FEES 177 RECEIVABLE TOTAL ASSETS 67,274,645 LIABILITIES PAYABLE FOR $ 5,351,004 INVESTMENTS PURCHASED PAYABLE FOR 603,182 FUND SHARES REDEEMED ACCRUED 25,352 MANAGEMENT FEE OTHER PAYABLES 68,020 AND ACCRUED EXPENSES TOTAL LIABILITIES 6,047,558 NET ASSETS $ 61,227,087 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 47,593,948 ACCUMULATED (216,508) NET INVESTMENT (LOSS) ACCUMULATED 6,336,167 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 7,513,480 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 61,227,087 1,649,875 SHARES OUTSTANDING NET ASSET $37.11 VALUE AND REDEMPTION PRICE PER SHARE ($61,227,08 7 (DIVIDED BY) 1,649,875 SHARES) MAXIMUM $38.26 OFFERING PRICE PER SHARE (100/97.00 OF $37.11) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 164,299 INCOME DIVIDENDS INTEREST 116,611 TOTAL INCOME 280,910 EXPENSES MANAGEMENT $ 174,014 FEE TRANSFER AGENT 270,183 FEES ACCOUNTING FEES 30,712 AND EXPENSES NON-INTERESTED 137 TRUSTEES' COMPENSATION CUSTODIAN FEES 12,405 AND EXPENSES REGISTRATION FEES 19,418 AUDIT 12,273 LEGAL 116 MISCELLANEOUS 97 TOTAL EXPENSES 519,355 BEFORE REDUCTIONS EXPENSE (21,937) 497,418 REDUCTIONS NET INVESTMENT (216,508) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 6,427,158 SECURITIES (INCLUDING REALIZED GAIN OF $28,439 ON SALES OF INVESTMENTS IN AFFILIATED ISSUERS) FOREIGN 443 6,427,601 CURRENCY TRANSACTIONS CHANGE IN NET 5,927,584 UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) 12,355,185 NET INCREASE $ 12,138,677 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 88,140 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 855 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 40,755 WITHHELD BY FSC EXCHANGE $ 17,860 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 4,077 CREDITS $ 21,937 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (216,508) $ (173,302) NET INVESTMENT INCOME (LOSS) NET REALIZED 6,427,601 4,765,161 GAIN (LOSS) CHANGE IN NET 5,927,584 (539,108) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 12,138,677 4,052,751 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (885,294) (2,799,166) SHAREHOLDERS FROM NET REALIZED GAINS SHARE 67,347,117 127,346,343 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 876,630 2,752,265 OF DISTRIBUTIONS COST OF SHARES (87,168,878) (89,310,784) REDEEMED REDEMPTION 116,295 112,916 FEES NET INCREASE (18,828,836) 40,900,740 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (7,575,453) 42,154,325 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 68,802,540 26,648,215 PERIOD END OF PERIOD $ 61,227,087 $ 68,802,540 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $216,508 AND $0 RESPECTIVELY) OTHER INFORMATION SHARES SOLD 2,025,847 4,464,416 ISSUED IN 31,511 99,462 REINVESTMENT OF DISTRIBUTIONS REDEEMED (2,784,884) (3,174,693) NET INCREASE (727,526) 1,389,185 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 28.94 $ 26.97 $ 19.64 $ 19.14 $ 15.08 $ 14.37 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.12) (.11) (.05) (.06) .07 (.02) INVESTMENT INCOME (LOSS) D NET REALIZED 8.62 4.18 9.09 .70 4.57 .69 AND UNREALIZED GAIN (LOSS) TOTAL FROM 8.50 4.07 9.04 .64 4.64 .67 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET - - - - (.10) - INVESTMENT INCOME FROM NET (.39) (2.17) (1.82) (.27) (.62) - REALIZED GAIN TOTAL (.39) (2.17) (1.82) (.27) (.72) - DISTRIBUTIONS REDEMPTION FEES .06 .07 .11 .13 .14 .04 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 37.11 $ 28.94 $ 26.97 $ 19.64 $ 19.14 $ 15.08 END OF PERIOD TOTAL RETURN B, C 30.03% 15.87% 47.40% 4.13% 32.04% 4.94% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 61,227 $ 68,803 $ 26,648 $ 4,985 $ 11,136 $ 1,463 OF PERIOD (000 OMITTED) RATIO OF 1.77% A 1.84% 1.77% G 2.49% G 2.53% G 2.48% A, G EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.70% A, E 1.81% E 1.75% E 2.49% 2.53% 2.48% A EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.74)% A (.39)% (.20)% (.32)% .40% (.14)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 268% A 219% 267% 146% 324% 87% A TURNOVER RATE AVERAGE $ .0367 $ .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 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1997 MONTHS YEAR YEARS FUND ENVIRONMENTAL SERVICES 9.93% 19.76% 68.30% 81.24% ENVIRONMENTAL SERVICES 6.63% 16.17% 63.25% 75.81% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 248.05% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or since the fund started on June 29, 1989. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS FUND ENVIRONMENTAL SERVICES 19.76% 10.97% 7.54% ENVIRONMENTAL SERVICES 16.17% 10.30% 7.14% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 16.47% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19970831 19970909 115127 S00000000000001 Environmental Services S&P 500 00516 SP001 1989/06/29 9700.00 10000.00 1989/06/30 9573.90 9761.13 1989/07/31 10485.70 10642.57 1989/08/31 10621.50 10851.16 1989/09/30 11193.80 10806.67 1989/10/31 10941.60 10555.96 1989/11/30 11009.50 10771.30 1989/12/31 11368.64 11029.81 1990/01/31 10358.96 10289.71 1990/02/28 10562.83 10422.44 1990/03/31 11019.13 10698.64 1990/04/30 11077.38 10431.17 1990/05/31 12106.48 11448.21 1990/06/30 12485.11 11370.37 1990/07/31 12407.45 11333.98 1990/08/31 10863.80 10309.39 1990/09/30 10281.29 9807.32 1990/10/31 10135.66 9765.15 1990/11/30 10485.17 10395.98 1990/12/31 11087.09 10686.03 1991/01/31 12057.94 11151.94 1991/02/28 12611.32 11949.30 1991/03/31 12611.32 12238.47 1991/04/30 12572.49 12267.85 1991/05/31 12601.62 12797.82 1991/06/30 11650.18 12211.68 1991/07/31 12019.11 12780.74 1991/08/31 12232.69 13083.64 1991/09/30 11941.44 12865.15 1991/10/31 11494.85 13037.54 1991/11/30 10863.80 12512.13 1991/12/31 11936.55 13943.51 1992/01/31 13005.20 13684.17 1992/02/29 13146.34 13862.06 1992/03/31 11835.74 13591.75 1992/04/30 11482.88 13991.35 1992/05/31 11190.52 14059.90 1992/06/30 10592.18 13850.41 1992/07/31 10665.31 14416.89 1992/08/31 10445.94 14121.35 1992/09/30 10571.29 14287.98 1992/10/31 11072.70 14337.99 1992/11/30 11762.13 14826.91 1992/12/31 11772.58 15009.28 1993/01/31 12002.39 15135.36 1993/02/28 11866.59 15341.20 1993/03/31 11574.10 15664.90 1993/04/30 11333.85 15285.81 1993/05/31 11584.55 15695.47 1993/06/30 11438.31 15740.99 1993/07/31 10957.79 15678.02 1993/08/31 11542.77 16272.22 1993/09/30 11553.21 16146.93 1993/10/31 11877.04 16481.17 1993/11/30 11354.74 16324.60 1993/12/31 11699.45 16522.12 1994/01/31 12691.82 17083.88 1994/02/28 12462.01 16620.90 1994/03/31 11333.85 15896.23 1994/04/30 11521.87 16099.70 1994/05/31 11490.54 16363.74 1994/06/30 10801.10 15962.83 1994/07/31 11030.91 16486.41 1994/08/31 11417.41 17162.35 1994/09/30 11344.29 16741.87 1994/10/31 10957.79 17118.56 1994/11/30 10341.48 16495.11 1994/12/31 10581.74 16739.73 1995/01/31 10592.18 17173.79 1995/02/28 10727.98 17843.05 1995/03/31 11239.83 18369.60 1995/04/30 12044.17 18910.59 1995/05/31 12232.20 19666.44 1995/06/30 12733.60 20123.29 1995/07/31 13214.12 20790.58 1995/08/31 13402.14 20842.77 1995/09/30 13872.21 21722.33 1995/10/31 12890.29 21644.78 1995/11/30 13339.47 22594.99 1995/12/31 13346.83 23030.17 1996/01/31 13809.34 23814.11 1996/02/29 13677.20 24034.87 1996/03/31 14282.87 24266.33 1996/04/30 14757.09 24624.01 1996/05/31 15893.10 25259.07 1996/06/30 15606.34 25355.30 1996/07/31 13808.58 24235.11 1996/08/31 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 1997/03/31 15087.97 29077.08 1997/04/30 14999.73 30812.99 1997/05/31 16025.45 32688.88 1997/06/30 16918.82 34153.34 1997/07/31 17348.96 36870.92 1997/08/29 17580.57 34805.42 IMATRL PRASUN SHR__CHT 19970831 19970909 115133 R00000000000102 $10,000 OVER LIFE OF FUND: 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 August 31, 1997, the value of the investment would have grown to $17,581 - a 75.81% 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 $34,805 - a 248.05% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS USA WASTE SERVICES, INC. 13.5 WASTE MANAGEMENT, INC. 6.1 ALLIED WASTE INDUSTRIES, INC. 6.0 BROWNING-FERRIS INDUSTRIES, INC. 5.0 THERMO ELECTRON CORP. 4.8 LAIDLAW, INC. 3.7 OGDEN CORP. 3.6 SAFETY KLEEN CORP. 3.3 NEWPARK RESOURCES, INC. 3.0 NALCO CHEMICAL CO. 2.9 TOP INDUSTRIES AS OF AUGUST 31, 1997 REFUSE SYSTEMS 23.0% SANITARY SERVICES 16.7% POLLUTION EQUIPMENT & DESIGN 9.7% MEASURING INSTRUMENTS 4.8% BUS & TRAIN LINES 3.7% ALL OTHERS 42.1% ROW: 1, COL: 1, VALUE: 42.1 ROW: 1, COL: 2, VALUE: 3.7 ROW: 1, COL: 3, VALUE: 4.8 ROW: 1, COL: 4, VALUE: 9.699999999999999 ROW: 1, COL: 5, VALUE: 16.7 ROW: 1, COL: 6, VALUE: 23.0 * * 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 Q. HOW DID THE FUND PERFORM, BOB? A. We had a respectable six months given the environment in our sector. For the six months that ended August 31, 1997, the fund was up 9.93%, compared to a gain of 14.78% in the Standard & Poor's 500 Index over the same period. For the 12 months that ended August 31, 1997, the fund gained 19.76%, while the S&P 500 gained 40.65%. Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE OVER THE PERIOD? A. The environmental services sector is performing better after going through some rough years earlier in the decade. Unrealistic expectations for solid waste disposal operations had led to many companies being overvalued and to the creation of excess capacity. The result was a number of years of disappointing earnings. What we are now seeing is what I call a "rationalization of assets." Larger companies are selling off unproductive assets and acquiring ones that make more economic sense given their existing operations. Many of the small- to medium-sized growth companies have added assets that will make them more competitive as well. For example, we'll see more vertical integration, which means that there will be more opportunities for companies to collect solid waste and then transport it to one of their own landfills instead of someone else's - at a lower cost. Many of the stocks in the sector are now beginning to reflect these improving fundamentals. Q. WHAT STRATEGY HAVE YOU USED IN THIS ENVIRONMENT? A. We still have significant though somewhat smaller positions in some of the major players in the industry. At the same time, we've tried to increase our holdings of some of the small- and medium-sized companies that we think will benefit most from the synergies arising from the consolidation process I spoke of earlier. There are two categories that I am generally avoiding at this time: hazardous waste disposal and consulting services. Hazardous waste disposal operations are plagued by excess capacity and shrinking demand, as more companies phase out processes that produce hazardous waste. Consulting has suffered as a result of less activity by the federal government in projects requiring environmental consulting. There's been more competition for the work that's available in the private sector, with a resulting decline in profit margins. Q. WHAT STOCKS PERFORMED WELL DURING THE PERIOD? A. United Waste Systems performed well, and we took profits in the stock. The company has concentrated on developing its rural operations, and has acquired a high percentage of the existing landfills in its areas. Another stock that helped the fund was USA Waste Services. Its strategy is to target urban areas, and the company has been very successful at it. In August of this year, these two profitable companies with complementary operations merged, and the new company will use the USA Waste Systems name. Another stock that helped us, Allied Waste Industries, acquired Laidlaw Environmental Services, and that union looks to be beneficial, too. Q. WHAT ABOUT DISAPPOINTMENTS? A. One of the industry's major players, WMX Technologies, has not kept pace with the market's expectations for it, and the stock struggled as a result. We felt there were better opportunities elsewhere, so we sold our position in that stock. Memtec, a manufacturer of commercial, industrial and residential water filtration systems, had disappointing earnings. Q. WHAT'S YOUR OUTLOOK FOR THE ENVIRONMENTAL SERVICES SECTOR, BOB? A. I think the industry has a more positive outlook now than at any time in the last seven years or so. The merger and acquisition activity that has been taking place is very constructive. For the most part, companies and assets that should, for economic reasons, be getting together are doing so. As a result, I think we'll see an overall improvement in revenues and earnings going forward. Equity prices should reflect that improvement. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: June 29, 1989 FUND NUMBER: 516 TRADING SYMBOL: FSLEX SIZE: as of August 31, 1997, more than $27 million MANAGER: Robert Ewing, since 1996; manager, Fidelity Select Energy Service, since 1996; joined Fidelity in 1990 (checkmark) ENVIRONMENTAL SERVICES PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.4% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 2.1% ORDNANCE - 2.1% Harsco Corp. 13,200 $ 594,825 41586410 BUILDING MATERIALS - 0.4% AIR CONDITIONING EQUIPMENT - 0.4% Thermo Power Corp. 15,000 103,122 88358910 CHEMICALS & PLASTICS - 5.2% ADHESIVES & SEALANTS - 2.9% Nalco Chemical Co. 20,000 800,000 62985310 CHEMICALS - 2.3% Betz Dearborn, Inc. 10,000 651,875 08777910 TOTAL CHEMICALS & PLASTICS 1,451,875 ENGINEERING - 2.1% ARCHITECTS & ENGINEERS - 2.1% Fluor Corp. 10,200 572,475 34386110 ELECTRONIC INSTRUMENTS - 7.9% INDUSTRIAL MEASUREMENT INSTRUMENTS - 0.6% TSI, Inc. 19,300 173,700 87287610 LAB & RESEARCH EQUIPMENT - 0.1% Microfluidics International Corp. (a) 9,300 17,438 59507310 LAB ANALYTICAL INSTRUMENTS - 2.4% Thermo Optek Corp. 15,000 258,750 88358210 Thermoquest Corp. (a) 25,000 418,750 88365510 677,500 MEASURING INSTRUMENTS - 4.8% Thermo Electron Corp. (a) 32,950 1,326,238 88355610 TOTAL ELECTRONIC INSTRUMENTS 2,194,876 ENERGY SERVICES - 3.0% OIL & GAS SERVICES - 3.0% Newpark Resources, Inc. (a) 24,800 840,100 65171850 HOUSEHOLD PRODUCTS - 0.8% MANUFACTURED PRODUCTS - 0.8% Memtec Ltd. sponsored ADR 11,600 230,550 58626530 INDUSTRIAL MACHINERY & EQUIPMENT - 2.5% SERVICE INDUSTRY MACHINERY, NEC - 1.5% Ionics, Inc. (a) 6,000 256,500 46221810 Trojan Technologies Corp. (a) 10,300 149,184 89692410 405,684 SPECIAL INDUSTRIAL MACHINERY - 1.0% Thermo Fibertek, Inc. (a) 23,275 282,209 88355W10 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 687,893 LEASING & RENTAL - 2.8% AUTO RENTAL & LEASING - 2.8% Republic Industries, Inc. (a) 31,280 768,315 76051610 MEDICAL EQUIPMENT & SUPPLIES - 1.7% MEDICAL TECHNOLOGY - 0.9% Thermedics, Inc. (a) 13,000 238,875 88390110 X-RAY & RELATED APPARATUS - 0.8% Trex Medical Corp. 15,000 232,500 89531R10 TOTAL MEDICAL EQUIPMENT & SUPPLIES 471,375 SHARES VALUE (NOTE 1) METALS & MINING - 2.5% SECONDARY NONFERROUS SMELTING - 2.5% IMCO Recycling, Inc. 35,800 $ 686,913 44968110 POLLUTION CONTROL - 51.6% HAZARDOUS WASTE MANAGEMENT - 2.2% Laidlaw Environmental Services, Inc. (a) 75,000 346,875 50730L10 Stericycle, Inc. 25,000 250,000 85891210 596,875 POLLUTION EQUIPMENT & DESIGN - 9.7% Dames & Moore, Inc. 10,000 131,250 23571310 Ogden Corp. 43,400 1,006,338 67634610 Sevenson Environmental Services, Inc. 15,300 321,300 81806310 TETRA Technologies, Inc. (a) 6,900 144,900 88162F10 Thermo Instrument Systems, Inc. (a) 19,200 766,800 88355910 Waste Management International PLC sponsored ADR (a) 42,000 341,250 94090610 2,711,838 REFUSE SYSTEMS - 23.0% Allied Waste Industries, Inc. (a) 110,300 1,661,394 01958930 American Disposal Services, Inc. (a) 15,000 412,500 02538910 Browning-Ferris Industries, Inc. 39,500 1,380,031 11588510 Eastern Environmental Services, Inc. (a) 10,000 200,000 27636910 Superior Services, Inc. (a) 11,300 303,688 86831610 Waste Industries, Inc. 30,100 549,325 94105810 Waste Management, Inc. 53,000 1,696,000 94106K10 Wheelabrator Technologies, Inc. 12,800 200,800 96290130 6,403,738 SANITARY SERVICES - 16.7% Safety Kleen Corp. 45,100 910,456 78648410 USA Waste Services, Inc. (a) 89,340 3,752,280 90291710 4,662,736 TOTAL POLLUTION CONTROL 14,375,187 RETAIL & WHOLESALE, MISCELLANEOUS - 2.3% MISCELLANEOUS DURABLE GOODS - WHOLESALE - 2.3% Philip Services Corp. (a) 35,719 640,896 71819M10 TRUCKING & FREIGHT - 3.7% BUS & TRAIN LINES - 3.7% Laidlaw, Inc. 71,000 1,038,588 50730K50 WATER - 1.8% WATER SUPPLY - 1.8% American Water Works, Inc. 25,000 518,750 03041110 TOTAL COMMON STOCKS (Cost $22,071,734) 25,175,740 CASH EQUIVALENTS - 9.6% Taxable Central Cash Fund (b) (Cost $2,674,652) 2,674,652 2,674,652 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $24,746,386) $ 27,850,392 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $4,143,989 and $12,236,870, 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 $1,564 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $24,792,864. Net unrealized appreciation aggregated $3,057,528, of which $4,109,046 related to appreciated investment securities and $1,051,518 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. ENVIRONMENTAL SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 27,850,392 SECURITIES, AT VALUE (COST $24,746,386 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 96,292 FUND SHARES SOLD DIVIDENDS 11,216 RECEIVABLE INTEREST 13,816 RECEIVABLE REDEMPTION FEES 59 RECEIVABLE OTHER 10,141 RECEIVABLES TOTAL ASSETS 27,981,916 LIABILITIES PAYABLE TO $ 28,189 CUSTODIAN BANK PAYABLE FOR 11,400 INVESTMENTS PURCHASED PAYABLE FOR 101,582 FUND SHARES REDEEMED ACCRUED 13,795 MANAGEMENT FEE OTHER PAYABLES 47,913 AND ACCRUED EXPENSES TOTAL LIABILITIES 202,879 NET ASSETS $ 27,779,037 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 27,374,029 ACCUMULATED (113,430) NET INVESTMENT (LOSS) ACCUMULATED (2,585,280) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 3,103,718 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 27,779,037 1,742,349 SHARES OUTSTANDING NET ASSET $15.94 VALUE AND REDEMPTION PRICE PER SHARE ($27,779,03 7 (DIVIDED BY) 1,742,349 SHARES) MAXIMUM $16.43 OFFERING PRICE PER SHARE (100/97.00 OF $15.94) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 143,824 INCOME DIVIDENDS INTEREST 59,134 TOTAL INCOME 202,958 EXPENSES MANAGEMENT $ 80,643 FEE TRANSFER AGENT 169,110 FEES ACCOUNTING FEES 30,312 AND EXPENSES NON-INTERESTED 62 TRUSTEES' COMPENSATION CUSTODIAN FEES 6,097 AND EXPENSES REGISTRATION FEES 17,775 AUDIT 9,695 LEGAL 149 MISCELLANEOUS 3,264 TOTAL EXPENSES 317,107 BEFORE REDUCTIONS EXPENSE (719) 316,388 REDUCTIONS NET INVESTMENT (113,430) INCOME (LOSS) REALIZED AND (1,739,049) UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT 4,255,371 SECURITIES ASSETS AND (354) 4,255,017 LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 2,515,968 NET INCREASE $ 2,402,538 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 17,578 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 4,409 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 5,783 WITHHELD BY FSC EXPENSE $ 719 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (113,430) $ (244,407) NET INVESTMENT INCOME (LOSS) NET REALIZED (1,739,049) (600,025) GAIN (LOSS) CHANGE IN NET 4,255,017 (1,589,539) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 2,402,538 (2,433,971) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO - (48,255) SHAREHOLDERS IN EXCESS OF NET REALIZED GAIN SHARE 4,849,616 138,035,351 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT - 47,653 OF DISTRIBUTIONS COST OF SHARES (12,018,382) (131,078,192) REDEEMED REDEMPTION 19,828 415,631 FEES NET INCREASE (7,148,938) 7,420,443 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (4,746,400) 4,938,217 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 32,525,437 27,587,220 PERIOD END OF PERIOD $ 27,779,037 $ 32,525,437 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $113,430 AND 0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 325,375 9,698,891 ISSUED IN - 3,673 REINVESTMENT OF DISTRIBUTIONS REDEEMED (825,504) (9,681,633) NET INCREASE (500,129) 20,931 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 14.50 $ 12.42 $ 10.27 $ 11.93 $ 11.36 $ 11.39 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.06) (.08) (.17) (.14) (.11) (.06) INVESTMENT INCOME (LOSS) D NET REALIZED 1.49 2.04 G 2.95 (1.53) .67 .42 AND UNREALIZED GAIN (LOSS) TOTAL FROM 1.43 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 FEES .01 .14 .02 .01 .01 - ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 15.94 $ 14.50 $ 12.42 $ 10.27 $ 11.93 $ 11.36 END OF PERIOD TOTAL RETURN B, C 9.93% 16.93% 27.49% (13.91)% 5.02% 3.34% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 27,779 $ 32,525 $ 27,587 $ 31,270 $ 65,956 $ 65,913 OF PERIOD (000 OMITTED) RATIO OF 2.34% A 2.18% 2.36% 2.04% 2.07% 1.99% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 2.33% A, E 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 (.84)% A (.59)% (1.43)% (1.32)% (1.02)% (.70)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 33% A 252% 138% 82% 191% 176% A TURNOVER RATE AVERAGE $ .0330 $ .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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS INDUSTRIAL EQUIPMENT 22.56% 42.16% 226.02% 194.44% INDUSTRIAL EQUIPMENT 18.89% 37.90% 216.24% 185.61% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS INDUSTRIAL EQUIPMENT 42.16% 26.66% 11.40% INDUSTRIAL EQUIPMENT 37.90% 25.89% 11.06% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 115542 S00000000000001 Industrial Equipment S&P 500 00510 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9927.13 9781.00 1987/10/31 6032.44 7674.17 1987/11/30 5758.54 7041.82 1987/12/31 6444.49 7577.70 1988/01/31 6327.94 7896.72 1988/02/29 6903.83 8264.71 1988/03/31 7006.67 8009.33 1988/04/30 7212.34 8098.24 1988/05/31 7171.21 8168.69 1988/06/30 7678.54 8543.63 1988/07/31 7274.05 8511.17 1988/08/31 6615.89 8221.79 1988/09/30 6739.29 8572.04 1988/10/31 6629.60 8810.34 1988/11/30 6417.07 8684.35 1988/12/31 6759.86 8836.33 1989/01/31 7253.48 9483.15 1989/02/28 6965.53 9247.02 1989/03/31 7068.37 9462.47 1989/04/30 7575.70 9953.57 1989/05/31 7987.05 10356.69 1989/06/30 7644.26 10297.66 1989/07/31 8131.03 11227.54 1989/08/31 8281.86 11447.60 1989/09/30 8165.31 11400.66 1989/10/31 7623.69 11136.17 1989/11/30 7836.23 11363.35 1989/12/31 7973.34 11636.07 1990/01/31 7705.96 10855.29 1990/02/28 8096.75 10995.32 1990/03/31 8576.66 11286.70 1990/04/30 8508.10 11004.53 1990/05/31 9296.52 12077.47 1990/06/30 9131.29 11995.34 1990/07/31 8958.74 11956.96 1990/08/31 7481.72 10876.05 1990/09/30 6467.13 10346.39 1990/10/31 6294.58 10301.90 1990/11/30 6501.64 10967.40 1990/12/31 6736.31 11273.39 1991/01/31 7454.11 11764.91 1991/02/28 8158.11 12606.10 1991/03/31 8089.09 12911.17 1991/04/30 8006.27 12942.15 1991/05/31 8344.46 13501.25 1991/06/30 8075.08 12882.90 1991/07/31 8144.15 13483.24 1991/08/31 8268.49 13802.79 1991/09/30 8461.91 13572.29 1991/10/31 8413.55 13754.15 1991/11/30 8012.91 13199.86 1991/12/31 8544.36 14709.93 1992/01/31 9310.98 14436.32 1992/02/29 9973.07 14623.99 1992/03/31 9680.36 14338.83 1992/04/30 9680.36 14760.39 1992/05/31 9757.02 14832.71 1992/06/30 9157.66 14611.71 1992/07/31 9241.29 15209.33 1992/08/31 8760.41 14897.53 1992/09/30 8941.61 15073.32 1992/10/31 8906.77 15126.08 1992/11/30 9331.89 15641.88 1992/12/31 9513.09 15834.28 1993/01/31 9959.13 15967.28 1993/02/28 10481.83 16184.44 1993/03/31 10670.00 16525.93 1993/04/30 11158.17 16126.00 1993/05/31 11716.08 16558.18 1993/06/30 11869.51 16606.20 1993/07/31 12036.88 16539.77 1993/08/31 12859.79 17166.63 1993/09/30 12713.34 17034.45 1993/10/31 13138.75 17387.06 1993/11/30 13124.80 17221.88 1993/12/31 13635.02 17430.27 1994/01/31 14276.16 18022.90 1994/02/28 14682.22 17534.48 1994/03/31 13834.48 16769.97 1994/04/30 13709.27 16984.63 1994/05/31 13429.05 17263.18 1994/06/30 12739.27 16840.23 1994/07/31 13342.83 17392.59 1994/08/31 14291.27 18105.69 1994/09/30 14334.38 17662.10 1994/10/31 14514.01 18059.49 1994/11/30 13809.86 17401.77 1994/12/31 14061.34 17659.84 1995/01/31 13982.31 18117.75 1995/02/28 14399.05 18823.80 1995/03/31 15591.78 19379.29 1995/04/30 16324.85 19950.01 1995/05/31 16655.52 20747.42 1995/06/30 17288.10 21229.38 1995/07/31 18912.67 21933.35 1995/08/31 18546.07 21988.40 1995/09/30 17697.83 22916.31 1995/10/31 17661.89 22834.50 1995/11/30 18265.72 23836.93 1995/12/31 17972.38 24296.03 1996/01/31 18694.42 25123.07 1996/02/29 19706.84 25355.96 1996/03/31 19848.10 25600.14 1996/04/30 20212.77 25977.48 1996/05/31 20359.65 26647.44 1996/06/30 20269.89 26748.97 1996/07/31 19258.03 25567.20 1996/08/31 20090.36 26106.41 1996/09/30 21045.11 27575.68 1996/10/31 20914.54 28336.22 1996/11/30 22611.86 30478.15 1996/12/31 22772.88 29874.38 1997/01/31 23585.87 31740.93 1997/02/28 23302.70 31989.78 1997/03/31 22361.82 30675.32 1997/04/30 23177.12 32506.64 1997/05/31 25235.55 34485.64 1997/06/30 26809.06 36030.60 1997/07/31 28738.84 38897.55 1997/08/29 28560.71 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970909 115549 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Industrial Equipment Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $28,561 - a 185.61% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS APPLIED MATERIALS, INC. 4.6 PITNEY BOWES, INC. 3.0 COOPER INDUSTRIES, INC. 3.0 TYCO INTERNATIONAL LTD. 2.9 CASE CORP. 2.8 ROCKWELL INTERNATIONAL CORP. 2.8 EMERSON ELECTRIC CO. 2.7 GENERAL ELECTRIC CO. 2.7 INGERSOLL-RAND CO. 2.6 DOVER CORP. 2.3 TOP INDUSTRIES AS OF AUGUST 31, 1997 ROW: 1, COL: 1, VALUE: 54.1 ROW: 1, COL: 2, VALUE: 5.7 ROW: 1, COL: 3, VALUE: 7.0 ROW: 1, COL: 4, VALUE: 7.6 ROW: 1, COL: 5, VALUE: 10.5 ROW: 1, COL: 6, VALUE: 15.1 GENERAL INDUSTRIAL MACHINERY 15.1% ELECTRICAL MACHINERY 10.5% SEMICONDUCTOR CAPITAL EQUIPMENT 7.6% FARM MACHINERY & EQUIPMENT 7.0% TV & RADIO COMMUNICATION EQUIPMENT 5.7% ALL OTHERS 54.1% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS INDUSTRIAL EQUIPMENT PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Simon Wolf became Portfolio Manager of Fidelity Select Industrial Equipment Portfolio on August 12, 1997. Q. HOW DID THE FUND PERFORM, SIMON? A. For the six months that ended on August 31, 1997, the fund had a total return of 22.56%. For the year that ended on August 31, 1997, it returned 42.16%. For the same periods, the Standard & Poor's 500 Index returned 14.78% and 40.65%, respectively. Q. WHAT ACCOUNTED FOR THE STRONG PERFORMANCE? A. The fund was helped by very strong construction in the semiconductor industry, as companies involved in building and supplying equipment for chip fabrication plants did well. In addition, many larger capital-equipment companies, including farm equipment and some construction companies, continued to perform well, due to the amazing economic environment we've seen lately, with soaring productivity and benign inflation. This environment has helped some of the larger construction companies continue to improve their margins above previous peaks. Q. WHAT COMPANIES HELPED SUPPORT THIS STRONG PERFORMANCE? A. Two portfolio holdings in particular were helped by the return to investment in the semiconductor industry, including both plant expansion and technology-enabling capacity. Applied Materials and Teradyne, both of which develop, manufacture and market specialized equipment for the manufacturing process of semiconductors, were strong performers. The proliferation of outsourcing in networking and telecommunications helped Sanmina. Other major contributors to performance included: Cummins Engine Co., a designer and manufacturer of diesel engines; Ingersoll-Rand, a manufacturer of industrial machinery; Superior Telecom, which provides copper wire for the telecommunications industry; and Pitney Bowes, Inc., a provider of business equipment services and industrial financing. Q. WERE THERE ANY DISAPPOINTMENTS? A. The biggest disappointment was Rockwell International Corp. Problems in developing its 56.6K speed modem and intense competition from U.S. Robotics put pressure on Rockwell's stock. Q. WHAT IS YOUR CURRENT STRATEGY? A. Basically, we are looking for industries growing independently of the economic cycle. As we go through the economic cycle, there is always an industry that is just beginning a building cycle. Now, we are seeing substantial capital investments, or build-outs, in the satellite, aerospace and telecommunications industries. We are moving some of the fund into smaller-cap companies, a little farther down in the chain of supply. As orders come in, they tend first to benefit the larger companies and then the smaller companies. We are looking at these trends and trying to find smaller companies that can benefit by providing a specialized component or technology that other companies need. Q. WHAT KINDS OF STOCKS ARE YOU LOOKING FOR IN MANAGING THE FUND? A. We are looking for companies whose earnings outlooks are improving dramatically due to changes or catalysts that would allow the firms to accelerate their growth beyond what analysts would expect, based on past performance. We also are looking for companies whose current stock valuations versus their growth rates are compelling when compared with the valuations and growth rates of comparable companies. Q. WHAT IS YOUR OUTLOOK? A. We always have to keep in mind that we are looking at the high valuations in the market and an uncertain economic outlook. However, we believe that, with the help of Fidelity's research department, we can find good values that should help the fund continue to perform well. In this context, we'll continue to look at smaller-cap companies to tap undiscovered value. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 510 TRADING SYMBOL: FSCGX SIZE: as of August 31, 1997, more than $61 million MANAGER: Simon Wolf, since August 1997; research analyst, industrial and electrical equipment industries, since 1997; joined Fidelity in 1996 (checkmark) INDUSTRIAL EQUIPMENT PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.6% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 9.8% AIRCRAFT & PARTS - 1.7% Sundstrand Corp. 17,300 $ 1,020,693 86732310 AIRCRAFT ENGINES & PARTS - 2.5% AlliedSignal, Inc. 8,900 734,806 01951210 Kellstrom Industries, Inc. 10,000 153,750 48803510 United Technologies Corp. 8,100 632,306 91301710 1,520,862 AIRCRAFT EQUIPMENT - 1.7% BE Aerospace, Inc. (a) 28,400 1,008,200 07330210 GUIDED MISSILES & SPACE VEHICLES - 2.8% Rockwell International Corp. 27,900 1,674,000 77390310 ORDNANCE - 1.1% Harsco Corp. 14,100 635,381 41586410 TOTAL AEROSPACE & DEFENSE 5,859,136 AUTOS, TIRES, & ACCESSORIES - 3.1% AUTO & TRUCK PARTS - 3.1% Cummins Engine Co., Inc. 8,100 623,194 23102110 Eaton Corp. 10,300 927,644 27805810 LucasVarity PLC sponsored ADR 10,000 316,875 54939510 1,867,713 MOTOR VEHICLES & CAR BODIES - 0.0% Navistar International Corp. 500 12,406 63934E10 TOTAL AUTOS, TIRES, & ACCESSORIES 1,880,119 BUILDING MATERIALS - 2.2% AIR-CONDITIONING EQUIPMENT - 1.1% American Standard Companies, Inc. (a) 14,300 672,100 02971210 GASKETS, HOSES, BELTS - 1.1% Coltec Industries, Inc. (a) 29,000 648,875 19687910 TOTAL BUILDING MATERIALS 1,320,975 COMMUNICATIONS EQUIPMENT - 0.6% DATACOMMUNICATIONS EQUIPMENT - 0.6% Aspect Telecommunications Corp. (a) 6,500 143,000 04523710 IFR Systems, Inc. 7,300 187,063 44950710 330,063 COMPUTER SERVICES & SOFTWARE - 0.3% CAD/CAM/CAE - 0.3% JetFax, Inc. 20,000 197,500 47690910 COMPUTERS & OFFICE EQUIPMENT - 5.6% COMPUTER PERIPHERALS - 1.5% SCI Systems, Inc. (a) 22,600 888,463 78389010 OFFICE AUTOMATION - 4.1% General Binding Corp. 20,600 638,600 36915410 Pitney Bowes, Inc. 23,600 1,802,450 72447910 2,441,050 TOTAL COMPUTERS & OFFICE EQUIPMENT 3,329,513 DEFENSE ELECTRONICS - 1.8% Ducommun, Inc. (a) 25,000 931,250 26414710 Stanford Telecommunications, Inc. 5,100 126,225 85440210 1,057,475 SHARES VALUE (NOTE 1) ELECTRICAL EQUIPMENT - 22.3% ELECTRICAL MACHINERY - 10.5% Alcatel Alsthom Compagnie Generale d'Electricite SA sponsored ADR 22,300 $ 549,138 01390430 Emerson Electric Co. 30,000 1,640,625 29101110 General Electric Co. 25,500 1,593,750 36960410 General Signal Corp. 9,200 399,050 37083810 Honeywell, Inc. 19,800 1,368,675 43850610 Westinghouse Electric Corp. 28,600 736,450 96040210 6,287,688 ELECTRICAL, INDUSTRIAL APPARATUS - 3.3% Baldor Electric Co. 35,900 1,094,950 05774110 Hubbell, Inc. Class B 20,000 917,500 44351020 2,012,450 MOTORS & GENERATORS - 1.5% AMETEK, Inc. 40,000 920,000 03110010 RESIDENTIAL ELECTRIC LIGHTING - 0.7% Holophane Corp. (a) 16,800 390,600 43645B10 TV & RADIO COMMUNICATION EQUIPMENT - 5.7% Loral Space & Communications Ltd. (a) 41,538 726,915 54399E22 Mas Technology Ltd. 7,600 163,400 55263A10 Scientific-Atlanta, Inc. 39,200 852,600 80865510 Titan Corp. 123,900 882,788 88826610 Viasat, Inc. 43,700 775,675 92552V10 3,401,378 WIRING & LIGHTING - 0.6% Chicago Miniature Lamp, Inc. (a) 11,300 369,369 16778110 TOTAL ELECTRICAL EQUIPMENT 13,381,485 ELECTRONIC INSTRUMENTS - 8.9% ELECTRONIC EQUIPMENT - 1.2% Teradyne, Inc. 12,500 696,094 88077010 LAB & RESEARCH EQUIPMENT - 0.1% Newport Corp. 5,000 65,000 65182410 SEMICONDUCTOR CAPITAL EQUIPMENT - 7.6% Applied Materials, Inc. (a) 29,500 2,784,063 03822210 KLA-Tencor Corp. 12,580 891,608 48248010 Novellus Systems, Inc. 7,600 871,150 67000810 4,546,821 TOTAL ELECTRONIC INSTRUMENTS 5,307,915 ELECTRONICS - 6.8% CONNECTORS - 0.8% Methode Electronics, Inc. Class A 400 9,500 59152020 Thomas & Betts Corp. 8,000 448,000 88431510 457,500 ELECTRONIC CAPACITORS - 0.1% Maxwell Technologies, Inc. 1,800 54,900 57776710 ELECTRONICS & ELECTRONIC COMPONENTS - 5.0% Advanced Energy Industries, Inc. (a) 10,000 315,000 00797310 Alpine Group, Inc. (a) 33,300 470,363 02082510 Sanmina Corp. (a) 16,050 1,271,963 80090710 Solectron Corp. (a) 22,600 946,375 83418210 3,003,701 SEMICONDUCTORS - 0.9% Etec Systems, Inc. (a) 8,100 542,700 26922C10 TOTAL ELECTRONICS 4,058,801 ENERGY SERVICES - 0.5% OIL & GAS SERVICES - 0.5% Dresser Industries, Inc. 7,500 313,125 26159710 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) INDUSTRIAL MACHINERY & EQUIPMENT - 23.8% CONSTRUCTION EQUIPMENT - 1.4% Caterpillar, Inc. 15,000 $ 870,938 14912310 FARM MACHINERY & EQUIPMENT - 7.0% AGCO Corp. 30,900 1,004,250 00108410 Case Corp. 25,000 1,676,563 14743R10 Deere & Co. 15,500 868,000 24419910 Lindsay Manufacturing Co. 16,550 645,450 53555510 4,194,263 GENERAL INDUSTRIAL MACHINERY - 15.1% Cooper Industries, Inc. 33,700 1,796,631 21666910 Dover Corp. 20,200 1,395,063 26000310 Harnischfeger Industries, Inc. 11,717 470,145 41334510 Illinois Tool Works, Inc. 25,500 1,233,563 45230810 Ingersoll-Rand Co. 26,300 1,581,288 45686610 Manitowoc Co., Inc. 5,250 189,656 56357110 Regal-Beloit Corp. 21,800 655,363 75875010 Tyco International Ltd. 21,833 1,712,526 90212410 9,034,235 PUMPING EQUIPMENT - 0.3% IDEX Corp. 5,600 181,300 45167R10 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 14,280,736 IRON & STEEL - 1.6% FABRICATED METAL PRODUCTS - 1.0% Aeroquip Vickers, Inc. 10,600 592,275 00786910 IRON & STEEL FOUNDRIES - 0.6% Steel of West Virginia, Inc. (a) 35,000 350,000 85815410 TOTAL IRON & STEEL 942,275 METALS & MINING - 4.1% NONFERROUS ROLLING & DRAWING - 2.9% Essex International, Inc. 9,300 357,469 29702510 Superior Telecom, Inc. (a) 36,000 1,361,250 86836510 1,718,719 NONFERROUS WIRE - 1.2% AFC Cable Systems, Inc. (a) 13,600 408,000 00095010 Belden, Inc. 8,000 310,000 07745910 718,000 TOTAL METALS & MINING 2,436,719 PAPER & FOREST PRODUCTS - 1.5% ENVELOPES - 1.5% Mail-Well, Inc. (a) 33,000 921,938 56032120 PHOTOGRAPHIC EQUIPMENT - 1.7% Imation Corp. (a) 38,400 1,039,200 45245A10 TOTAL COMMON STOCKS (Cost $45,444,424) 56,656,975 CASH EQUIVALENTS - 5.4% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $3,239,371) 3,239,371 $ 3,239,371 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $48,683,795) $ 59,896,346 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $37,295,945 and $91,653,106, 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 $20,998 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $48,701,740. Net unrealized appreciation aggregated $11,194,606, of which $11,651,788 related to appreciated investment securities and $457,182 related to depreciated investment securities. On October 26, 1990, the fund acquired substantially all of the assets of Automation and Machinery Portfolio in a tax-free exchange for shares of Industrial Equipment Portfolio. Automation and Machinery Portfolio has a capital loss carryover of approximately $33,000 available to offset future realized capital gains in Industrial Equipment Portfolio, to the extent provided by regulations. INDUSTRIAL EQUIPMENT PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 59,896,346 SECURITIES, AT VALUE (COST $48,683,795 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 2,784,081 INVESTMENTS SOLD RECEIVABLE FOR 65,212 FUND SHARES SOLD DIVIDENDS 62,064 RECEIVABLE INTEREST 20,526 RECEIVABLE REDEMPTION FEES 60 RECEIVABLE OTHER 16,504 RECEIVABLES TOTAL ASSETS 62,844,793 LIABILITIES PAYABLE FOR $ 569,184 INVESTMENTS PURCHASED PAYABLE FOR 356,870 FUND SHARES REDEEMED ACCRUED 30,641 MANAGEMENT FEE OTHER PAYABLES 63,326 AND ACCRUED EXPENSES TOTAL LIABILITIES 1,020,021 NET ASSETS $ 61,824,772 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 43,943,530 ACCUMULATED (81,948) NET INVESTMENT (LOSS) ACCUMULATED 6,750,639 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 11,212,551 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 61,824,772 2,142,177 SHARES OUTSTANDING NET ASSET $28.86 VALUE AND REDEMPTION PRICE PER SHARE ($61,824,77 2 (DIVIDED BY) 2,142,177 SHARES) MAXIMUM $29.75 OFFERING PRICE PER SHARE (100/97.00 OF $28.86) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 309,155 INCOME DIVIDENDS INTEREST 153,117 TOTAL INCOME 462,272 EXPENSES MANAGEMENT $ 205,478 FEE TRANSFER AGENT 287,351 FEES ACCOUNTING FEES 34,903 AND EXPENSES NON-INTERESTED 172 TRUSTEES' COMPENSATION CUSTODIAN FEES 8,566 AND EXPENSES REGISTRATION FEES 16,054 AUDIT 10,764 LEGAL 318 MISCELLANEOUS 135 TOTAL EXPENSES 563,741 BEFORE REDUCTIONS EXPENSE (19,577) 544,164 REDUCTIONS NET INVESTMENT (81,892) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 6,875,298 SECURITIES FOREIGN (4,148) 6,871,150 CURRENCY TRANSACTIONS CHANGE IN NET 5,962,520 UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) 12,833,670 NET INCREASE $ 12,751,778 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 35,388 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 1,084 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 28,455 WITHHELD BY FSC EXPENSE $ 19,577 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (81,892) $ 227,943 NET INVESTMENT INCOME (LOSS) NET REALIZED 6,871,150 20,831,090 GAIN (LOSS) CHANGE IN NET 5,962,520 (7,537,624) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 12,751,778 13,521,409 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (59,949) (140,245) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (5,575,247) (13,222,285) REALIZED GAIN TOTAL (5,635,196) (13,362,530) DISTRIBUTIONS SHARE 16,590,368 90,579,551 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 5,555,038 13,206,101 OF DISTRIBUTIONS COST OF SHARES (70,360,065) (138,841,270) REDEEMED REDEMPTION 40,566 259,034 FEES NET INCREASE (48,174,093) (34,796,584) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (41,057,511) (34,637,705) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 102,882,283 137,519,988 PERIOD END OF PERIOD $ 61,824,772 $ 102,882,283 (INCLUDING ACCUMULATE D NET INVESTMENT (LOSS)/INCOM E OF $(81,948) AND $126,009, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 624,686 3,535,843 ISSUED IN 246,343 542,236 REINVESTMENT OF DISTRIBUTIONS REDEEMED (2,761,875) (5,521,656) NET INCREASE (1,890,846) (1,443,577) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 25.51 $ 25.11 $ 20.04 $ 20.61 $ 15.04 $ 13.89 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.03) .06 .04 .01 - .02 INVESTMENT INCOME (LOSS) D NET REALIZED 5.24 4.15 7.10 (.44) 5.92 1.09 AND UNREALIZED GAIN (LOSS) TOTAL FROM 5.21 4.21 7.14 (.43) 5.92 1.11 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.02) (.04) (.05) (.01) (.01) - INVESTMENT INCOME FROM NET (1.86) (3.84) (2.05) (.16) (.40) - REALIZED GAIN TOTAL (1.88) (3.88) (2.10) (.17) (.41) - DISTRIBUTIONS REDEMPTION FEES .02 .07 .03 .03 .06 .04 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 28.86 $ 25.51 $ 25.11 $ 20.04 $ 20.61 $ 15.04 END OF PERIOD TOTAL RETURN B, C 22.56% 18.25% 36.86% (1.93)% 40.07% 8.28% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 61,825 $ 102,882 $ 137,520 $ 109,968 $ 206,012 $ 14,601 OF PERIOD (000 OMITTED) RATIO OF 1.63% A 1.51% 1.54% 1.80% 1.69% 2.49% A, EXPENSES TO E AVERAGE NET ASSETS RATIO OF 1.58% A, 1.44% F 1.53% F 1.78% F 1.68% F 2.49% A EXPENSES TO F AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.24)% A .25% .19% .06% .01% .15% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 113% A 261% 115% 131% 95% 407% A TURNOVER RATE AVERAGE $ .0370 $ .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 N ET 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 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS INDUSTRIAL MATERIALS 8.33% 16.92% 101.06% 102.63% INDUSTRIAL MATERIALS 5.08% 13.42% 95.03% 96.55% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS INDUSTRIAL MATERIALS 16.92% 14.99% 7.32% INDUSTRIAL MATERIALS 13.42% 14.29% 6.99% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. 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 Fidelity Select Industrial Materials Standard & Poor's 500 $36,619 $19,655 $ $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Industrial Materials Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $19,655 - a 96.55% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS CYTEC INDUSTRIES, INC. 9.7 PECHINEY SA CLASS A 5.7 BOISE CASCADE CORP. 4.5 MINNESOTA MINING & MANUFACTURING CO. 4.4 RAYCHEM CORP. 4.2 KIMBERLY-CLARK CORP. 4.1 MEAD CORP. 4.1 ALUMINUM CO. OF AMERICA 3.3 WISCONSIN CENTRAL TRANSPORTATION CORP. 3.1 BOWATER, INC. 2.9 TOP INDUSTRIES AS OF AUGUST 31, 1997 CHEMICALS 21.6% PAPER 6.0% GOLD ORES 5.9% PRIME NONFERROUS SMELTING 5.8% METAL ORES 5.7% ALL OTHERS 55.0% ROW: 1, COL: 1, VALUE: 55.0 ROW: 1, COL: 2, VALUE: 5.7 ROW: 1, COL: 3, VALUE: 5.8 ROW: 1, COL: 4, VALUE: 5.9 ROW: 1, COL: 5, VALUE: 6.0 ROW: 1, COL: 6, VALUE: 21.6 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS INDUSTRIAL MATERIALS PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: On August 18, 1997, James Catudal (right) became Portfolio Manager of Fidelity Select Industrial Materials Portfolio. The following is an interview with Doug Chase, who managed the fund during most of the period covered by the report, and James Catudal, who discusses his investment philosophy and outlook. Q. DOUG, HOW DID THE FUND PERFORM? D.C. The fund did not perform as well as I would have liked. For the six- and 12-month periods that ended August 31, 1997, the fund returned 8.33% and 16.92%, respectively. By comparison, the Standard & Poor's 500 Index returned 14.78% and 40.65% for the same periods. Q. WHAT ACCOUNTED FOR THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS? D.C. Through most of the period, cyclical stocks such as those in this sector continued to lag the overall stock market. International stocks underperformed U.S. stocks, as Japan, Germany and Southeast Asia struggled. For many industrial materials, including steel, non-ferrous metals, and paper, the pricing outlook improved later in the period. Q. WHERE DID YOU FIND THE BEST OPPORTUNITIES? WHAT STOCKS HELPED PERFORMANCE? D.C. The paper industry had strong performance. Prices had dropped to low levels and the supply/demand scenario appeared attractive relative to valuations. So I increased holdings significantly in a variety of paper producers. Paper capacity was absorbed by the market, demand was stronger than expected, prices started to improve, and sentiment changed in the market. Then, when company valuations exceeded fundamentals, I reduced the fund's weighting. Paper companies Champion International Corp. and Georgia-Pacific performed strongly. Newsprint companies, such as Bowater, also contributed to the fund's performance. Bowater benefited from a strong increase in demand for newsprint, reflecting growth in classified advertising as the U.S. economy continued to grow. Cytec, the fund's top holding, performed very well during the period. Q. HOW DID EVENTS IN THE GOLD MARKET NEGATIVELY AFFECT THE FUND'S PERFORMANCE? D.C. Previously, I had increased the weighting in gold producers significantly, because sentiment was at a 14-year low and gold was priced cheaply, at around $320 per ounce. Normally, the time to buy cyclical stocks such as gold is when they are out of favor and, initially, this strategy appeared to work when the price of gold increased to $360. However, central banks continued to sell gold, and the threat of ongoing sell-offs by European central banks weighed on the market more than I anticipated. The price of gold has since stabilized at $320, but has not appreciated. As the U.S. dollar has strengthened, its appreciation could hurt gold consumption. Newmont Mining Corp. is representative of the general underperformance of gold-related stocks during the period. Q. TURNING TO YOU, JIM, WHAT'S YOUR INVESTMENT PHILOSOPHY AND OUTLOOK? A. When adding a company to the fund, I focus on three factors: growth prospects, the fundamentals of the underlying material and management's ability to create shareholder value. I believe that demand drives industrial material price increases, which leads to higher earnings and stock prices. Capacity expansion in an industry can depress material prices, especially if demand is low. Specifically, demand has been strong for aluminum, industrial gases and zinc, and companies in this sector have looked attractive. Chemical and paper stocks also look relatively attractive. However, I'm cautious in my outlook for industrial material stocks generally. Demand usually weakens in the summer, and future order trends are not apparent until the fall. In addition, the current economic slowdown in Asia could reduce demand for industrial materials and depress prices. If economic growth in the rest of the world continues and Asia's economic growth improves, the fund could perform very well. No matter what the outlook, I will continue to search for those companies that have the potential to perform well relative to the sector. 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: 509 TRADING SYMBOL: FSDPX SIZE: as of August 31, 1997, more than $34 million MANAGER: James Catudal, since August 1997; analyst, North American non-ferrous metals companies; joined Fidelity in 1997 (checkmark) INDUSTRIAL MATERIALS PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.8% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 2.2% AIRCRAFT ENGINES & PARTS - 2.2% AlliedSignal, Inc. 6,000 $ 495,375 01951210 Doncasters PLC sponsored ADR 10,000 257,500 25769210 752,875 BUILDING MATERIALS - 4.7% CEMENT - 1.1% Lafarge Corp. 12,000 390,000 50586210 METAL WORK - 0.0% SIFCO Industries, Inc. 400 7,725 82654610 PAINT & VARNISH - 1.0% Sherwin-Williams Co. 12,600 345,713 82434810 PLUMBING SUPPLIES - WHOLESALE - 2.6% Masco Corp. 19,900 884,306 57459910 TOTAL BUILDING MATERIALS 1,627,744 CHEMICALS & PLASTICS - 28.2% AGRICULTURAL CHEMICALS - 0.7% FMC Corp. (a) 2,900 240,881 30249130 CHEMICALS - 21.6% Cytec Industries, Inc. (a) 68,700 3,353,419 23282010 du Pont (E.I.) de Nemours & Co. 14,000 872,375 26353410 Monsanto Co. 19,400 852,388 61166210 Raychem Corp. 15,610 1,452,706 75460310 Union Carbide Corp. 9,000 461,813 90558110 Witco Corp. 11,000 517,000 97738510 7,509,701 INDUSTRIAL GASES - 3.2% Air Products & Chemicals, Inc. 2,500 203,906 00915810 Praxair, Inc. 17,000 908,438 74005P10 1,112,344 ORGANIC CHEMICALS - 1.0% Cambrex Corp. 7,000 340,813 13201110 PLASTICS & SYNTHETIC RESINS - 0.5% Spartech Corp. 12,000 190,500 84722020 UNSUPPORTED PLASTICS FILM & SHEET - 1.2% W.R. Grace & Co. 6,000 412,875 38391110 TOTAL CHEMICALS & PLASTICS 9,807,114 CONSUMER DURABLES - 4.4% MANUFACTURING INDUSTRIES, NEC - 4.4% Minnesota Mining & Manufacturing Co. 17,000 1,527,875 60405910 ELECTRONICS - 1.2% ELECTRONIC CAPACITORS - 0.4% Maxwell Technologies, Inc. 4,000 122,000 57776710 ELECTRONICS & ELECTRIC COMPONENTS - 0.8% Alpine Group, Inc. 20,000 282,500 02082510 TOTAL ELECTRONICS 404,500 HOLDING COMPANIES - 0.8% HOLDING COMPANY OFFICES, NEC - 0.8% Norfolk Southern Corp. 3,000 294,000 65584410 IRON & STEEL - 0.6% IRON & STEEL FOUNDRIES - 0.6% Dofasco, Inc. 10,000 203,927 25690070 SHARES VALUE (NOTE 1) METALS & MINING - 13.3% METAL ORES - 5.7% Pechiney SA Class A 45,954 $ 1,981,290 70599396 NONFERROUS ROLLING & DRAWING - 1.6% Essex International, Inc. 7,000 269,063 29702510 Superior Telecom, Inc. 8,000 302,500 86836510 571,563 PRIME NONFERROUS SMELTING - 5.8% Alcan Aluminium Ltd. 25,000 873,716 01371610 Aluminum Co. of America 14,000 1,151,500 02224910 2,025,216 SECONDARY NONFERROUS SMELTING - 0.2% IMCO Recycling, Inc. 2,900 55,644 44968110 TOTAL METALS & MINING 4,633,713 PACKAGING & CONTAINERS - 5.1% GLASS CONTAINERS - 2.7% Owens-Illinois, Inc. 27,000 939,938 69076840 METAL CANS & CONTAINERS - 2.4% Silgan Holdings, Inc. 20,000 820,000 82704810 TOTAL PACKAGING & CONTAINERS 1,759,938 PAPER & FOREST PRODUCTS - 18.1% CONVERTED PAPER & PAPERBOARD - 4.5% Boise Cascade Corp. 39,487 1,562,204 09738310 PAPER - 6.0% Champion International Corp. 3,400 201,238 15852510 Georgia-Pacific Corp. 5,000 456,250 37329810 Kimberly-Clark Corp. 30,000 1,423,125 49436810 2,080,613 PAPER MILLS - 3.5% Bowater, Inc. 20,000 1,023,750 10218310 Fort James Corp. 5,000 210,000 34747110 1,233,750 PAPERBOARD MILLS - 4.1% Mead Corp. 20,000 1,418,750 58283410 TOTAL PAPER & FOREST PRODUCTS 6,295,317 PRECIOUS METALS - 5.9% GOLD ORES - 5.9% Breakwater Resources Ltd. 80,000 371,825 10690230 Golden Knight Resources, Inc. (a) 54,300 123,253 38109010 Kinross Gold Corp. (a) 29,100 126,864 49690210 Newmont Gold Co. 11,700 506,025 65163710 Newmont Mining Corp. 21,700 918,181 65163910 2,046,148 RAILROADS - 5.5% CSX Corp. 8,900 508,966 12640810 Kansas City Southern Industries, Inc. 4,000 299,500 48517010 Wisconsin Central Transportation Corp. 35,000 1,085,000 97659210 1,893,466 TRUCKING & FREIGHT - 0.8% TRUCKING, LOCAL & LONG DISTANCE - 0.4% Heartland Express, Inc. 6,000 148,500 42234710 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TRUCKING & FREIGHT - CONTINUED TRUCKING, LONG DISTANCE - 0.4% USFreightways Corp. 5,000 $ 150,000 91690610 TOTAL TRUCKING & FREIGHT 298,500 TOTAL COMMON STOCKS (Cost $28,639,207) 31,545,117 CASH EQUIVALENTS - 9.2% Taxable Central Cash Fund (b) (Cost $3,195,106) 3,195,106 3,195,106 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $31,834,313) $ 34,740,223 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $25,763,657 and $61,046,649, 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 $15,145 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 loan balance during the periods for which the loan was outstanding amounted to $2,443,000. The weighted average interest rate paid 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 88.7% France 5.7 Canada 4.9 Others (individually less than 1%) 0.7 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $31,903,840. Net unrealized appreciation aggregated $2,836,383 of which $3,521,535 related to appreciated investment securities and $685,152 related to depreciated investment securities. INDUSTRIAL MATERIALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 34,740,223 SECURITIES, AT VALUE (COST $31,834,313 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 310,187 INVESTMENTS SOLD RECEIVABLE FOR 388,161 FUND SHARES SOLD DIVIDENDS 59,367 RECEIVABLE INTEREST 9,427 RECEIVABLE REDEMPTION FEES 68 RECEIVABLE OTHER 3,942 RECEIVABLES TOTAL ASSETS 35,511,375 LIABILITIES PAYABLE TO $ 3,292 CUSTODIAN BANK PAYABLE FOR 633,708 INVESTMENTS PURCHASED PAYABLE FOR 337,458 FUND SHARES REDEEMED ACCRUED 16,639 MANAGEMENT FEE OTHER PAYABLES 49,793 AND ACCRUED EXPENSES TOTAL LIABILITIES 1,040,890 NET ASSETS $ 34,470,485 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 28,991,517 DISTRIBUTIONS IN (33,494) EXCESS OF NET INVESTMENT INCOME ACCUMULATED 2,609,558 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 2,902,904 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 34,470,485 1,249,933 SHARES OUTSTANDING NET ASSET $27.58 VALUE AND REDEMPTION PRICE PER SHARE ($34,470,48 5 (DIVIDED BY) 1,249,933 SHARES) MAXIMUM $28.43 OFFERING PRICE PER SHARE (100/97.00 OF $27.58) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 205,811 INCOME DIVIDENDS INTEREST 88,961 TOTAL INCOME 294,772 EXPENSES MANAGEMENT $ 102,515 FEE TRANSFER AGENT 159,019 FEES ACCOUNTING FEES 30,320 AND EXPENSES NON-INTERESTED 95 TRUSTEES' COMPENSATION CUSTODIAN FEES 9,639 AND EXPENSES REGISTRATION FEES 16,506 AUDIT 13,127 LEGAL 155 INTEREST 390 MISCELLANEOUS 213 TOTAL EXPENSES 331,979 BEFORE REDUCTIONS EXPENSE (8,238) 323,741 REDUCTIONS NET INVESTMENT (28,969) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 2,854,173 SECURITIES FOREIGN (8,839) 2,845,334 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (504,539) SECURITIES ASSETS AND 4,385 (500,154) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 2,345,180 NET INCREASE $ 2,316,211 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 12,958 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 1,288 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 8,483 WITHHELD BY FSC EXPENSE $ 8,238 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (28,969) $ 220,365 NET INVESTMENT INCOME (LOSS) NET REALIZED 2,845,334 8,999,452 GAIN (LOSS) CHANGE IN NET (500,154) 1,201,543 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 2,316,211 10,421,360 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (32,754) (200,673) SHAREHOLDERS FROM NET INVESTMENT INCOME IN EXCESS OF (4,525) - NET INVESTMENT INCOME FROM NET (2,485,229) (5,508,154) REALIZED GAIN TOTAL (2,522,508) (5,708,827) DISTRIBUTIONS SHARE 10,729,683 113,772,805 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 2,473,198 5,651,415 OF DISTRIBUTIONS COST OF SHARES (45,010,939) (144,145,096) REDEEMED REDEMPTION 22,970 131,891 FEES NET INCREASE (31,785,088) (24,588,985) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (31,991,385) (19,876,452) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 66,461,870 86,338,322 PERIOD END OF PERIOD $ 34,470,485 $ 66,461,870 (INCLUDING UNDER (OVER) DISTRIBUTION OF $(33,494) AND $67,759, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 405,131 4,147,616 ISSUED IN 105,332 212,018 REINVESTMENT OF DISTRIBUTIONS REDEEMED (1,663,316) (5,268,325) NET INCREASE (1,152,853) (908,691) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 27.66 $ 26.07 $ 23.13 $ 21.67 $ 17.44 $ 17.12 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT (.02) .06 .12 .17 .15 .12 INCOME (LOSS) D NET REALIZED 1.95 3.12 2.92 1.43 4.07 .19 AND UNREALIZED GAIN (LOSS) TOTAL FROM 1.93 3.18 3.04 1.60 4.22 .31 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.03) (.06) (.15) (.18) (.06) (.08) INVESTMENT INCOME FROM NET (2.00) (1.57) - - - - REALIZED GAIN TOTAL (2.03) (1.63) (.15) (.18) (.06) (.08) DISTRIBUTIONS REDEMPTION FEES .02 .04 .05 .04 .07 .09 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 27.58 $ 27.66 $ 26.07 $ 23.13 $ 21.67 $ 17.44 END OF PERIOD TOTAL RETURN B, C 8.33% 12.69% 13.38% 7.65% 24.66% 2.36% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 34,470 $ 66,462 $ 86,338 $ 183,454 $ 155,721 $ 25,041 OF PERIOD (000 OMITTED) RATIO OF 1.93% A 1.54% 1.64% 1.56% 2.10% 2.02% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.88% A, E 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 (.17)% A .23% .49% .77% .75% .86% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 148% A 105% 138% 139% 185% 273% A TURNOVER RATE AVERAGE $ .0197 $ .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 (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. 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS PAPER AND FOREST PRODUCTS 18.47% 25.92% 130.07% 122.50% PAPER AND FOREST PRODUCTS 14.92% 22.14% 123.17% 115.83% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS PAPER AND FOREST PRODUCTS 25.92% 18.13% 8.33% PAPER AND FOREST PRODUCTS 22.14% 17.42% 8.00% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970912 162814 S00000000000001 Paper & Forest S&P 500 00506 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9408.14 9781.00 1987/10/31 6615.46 7674.17 1987/11/30 6386.55 7041.82 1987/12/31 7149.53 7577.70 1988/01/31 6860.78 7896.72 1988/02/29 7507.32 8264.71 1988/03/31 7268.79 8009.33 1988/04/30 7350.39 8098.24 1988/05/31 7268.79 8168.69 1988/06/30 8022.03 8543.63 1988/07/31 7664.24 8511.17 1988/08/31 7287.62 8221.79 1988/09/30 7431.99 8572.04 1988/10/31 7268.79 8810.34 1988/11/30 7111.87 8684.35 1988/12/31 7633.60 8836.33 1989/01/31 7709.12 9483.15 1989/02/28 7482.56 9247.02 1989/03/31 7488.86 9462.47 1989/04/30 7759.46 9953.57 1989/05/31 7897.91 10356.69 1989/06/30 7394.46 10297.66 1989/07/31 8105.59 11227.54 1989/08/31 8684.56 11447.60 1989/09/30 8206.28 11400.66 1989/10/31 7834.98 11136.17 1989/11/30 7778.34 11363.35 1989/12/31 7944.93 11636.07 1990/01/31 7218.61 10855.29 1990/02/28 7288.69 10995.32 1990/03/31 7492.57 11286.70 1990/04/30 7008.36 11004.53 1990/05/31 7473.46 12077.47 1990/06/30 7295.07 11995.34 1990/07/31 7403.38 11956.96 1990/08/31 6517.78 10876.05 1990/09/30 5887.02 10346.39 1990/10/31 5702.26 10301.90 1990/11/30 6275.67 10967.40 1990/12/31 6744.65 11273.39 1991/01/31 7301.84 11764.91 1991/02/28 7651.71 12606.10 1991/03/31 7807.21 12911.17 1991/04/30 8189.47 12942.15 1991/05/31 9128.92 13501.25 1991/06/30 8895.68 12882.90 1991/07/31 8902.16 13483.24 1991/08/31 8947.51 13802.79 1991/09/30 8604.12 13572.29 1991/10/31 8928.07 13754.15 1991/11/30 8247.78 13199.86 1991/12/31 9089.44 14709.93 1992/01/31 9925.41 14436.32 1992/02/29 9971.85 14623.99 1992/03/31 10038.19 14338.83 1992/04/30 10197.43 14760.39 1992/05/31 9912.14 14832.71 1992/06/30 9846.29 14611.71 1992/07/31 9773.15 15209.33 1992/08/31 9380.90 14897.53 1992/09/30 9281.17 15073.32 1992/10/31 9733.26 15126.08 1992/11/30 10092.28 15641.88 1992/12/31 10185.17 15834.28 1993/01/31 10498.87 15967.28 1993/02/28 10732.48 16184.44 1993/03/31 10719.13 16525.93 1993/04/30 11206.74 16126.00 1993/05/31 11240.13 16558.18 1993/06/30 10999.70 16606.20 1993/07/31 10886.16 16539.77 1993/08/31 11180.02 17166.63 1993/09/30 10645.73 17034.45 1993/10/31 11059.81 17387.06 1993/11/30 11747.71 17221.88 1993/12/31 12074.96 17430.27 1994/01/31 13477.47 18022.90 1994/02/28 13096.79 17534.48 1994/03/31 11707.64 16769.97 1994/04/30 11694.55 16984.63 1994/05/31 12171.60 17263.18 1994/06/30 12048.93 16840.23 1994/07/31 13071.18 17392.59 1994/08/31 14529.59 18105.69 1994/09/30 14788.56 17662.10 1994/10/31 13868.54 18059.49 1994/11/30 13262.00 17401.77 1994/12/31 13782.16 17659.84 1995/01/31 13689.61 18117.75 1995/02/28 15049.32 18823.80 1995/03/31 15156.10 19379.29 1995/04/30 15218.77 19950.01 1995/05/31 15470.38 20747.42 1995/06/30 16872.21 21229.38 1995/07/31 17447.31 21933.35 1995/08/31 17432.94 21988.40 1995/09/30 17145.38 22916.31 1995/10/31 16893.77 22834.50 1995/11/30 17145.38 23836.93 1995/12/31 16802.49 24296.03 1996/01/31 17221.56 25123.07 1996/02/29 16430.86 25355.96 1996/03/31 17269.00 25600.14 1996/04/30 18024.06 25977.48 1996/05/31 17660.77 26647.44 1996/06/30 16669.99 26748.97 1996/07/31 16232.39 25567.20 1996/08/31 17140.61 26106.41 1996/09/30 17759.85 27575.68 1996/10/31 17726.83 28336.22 1996/11/30 17933.24 30478.15 1996/12/31 17989.74 29874.38 1997/01/31 18175.02 31740.93 1997/02/28 18217.13 31989.78 1997/03/31 17231.74 30675.32 1997/04/30 17747.46 32506.64 1997/05/31 19937.76 34485.64 1997/06/30 20093.59 36030.60 1997/07/31 21660.56 38897.55 1997/08/29 21582.64 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970912 162818 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Paper and Forest Products Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $21,583 - a 115.83% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS FORT JAMES CORP. 10.8 CHESAPEAKE CORP. 7.9 BOISE CASCADE CORP. 6.0 GEORGIA-PACIFIC CORP. 5.1 MEAD CORP. 4.5 BUCKEYE CELLULOSE CORP. 3.9 BOWATER, INC. 3.9 FIBERMARK, INC. 3.9 KIMBERLY-CLARK CORP. 3.4 INTERNATIONAL PAPER CO. 3.4 TOP INDUSTRIES AS OF AUGUST 31, 1997 PAPER & FOREST PRODUCTS 83.9% TOBACCO 2.7% RETAIL & WHOLESALE, MISCELLANEOUS 1.9% PACKAGING & CONTAINERS 1.3% METALS & MINING 0.9% ALL OTHERS 9.3% ROW: 1, COL: 1, VALUE: 8.300000000000001 ROW: 1, COL: 2, VALUE: 1.8 ROW: 1, COL: 3, VALUE: 1.5 ROW: 1, COL: 4, VALUE: 2.4 ROW: 1, COL: 5, VALUE: 3.2 ROW: 1, COL: 6, VALUE: 82.90000000000001 * * 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 returned 18.47% during the six months that ended August 31, 1997, compared to the 14.78% return of the Standard & Poor's 500 Index. For the 12 months that ended August 31, 1997, the fund generated a return of 25.92%, compared to a 40.65% return by the S&P 500. Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE DURING THE PERIOD? A. The paper market, which bottomed out in February and March, began an upward cycle during the period, helping many paper stocks to perform well. Paper companies are adding less capacity and demand is growing, which helps boost prices. Demand generally follows the growth in worldwide Gross Domestic Product, or GDP, and right now we have reasonably strong economies throughout the world - all of which bodes well for the current state of the paper market. Q. WHAT DRIVES DEMAND IN THE PAPER MARKET? A. As I said, demand for paper products is pretty consistent with GDP growth. But, there is one other factor that drives demand - customer panic. When consumers see the price of paper going up, they build inventories. For example, if a buyer typically keeps three weeks of inventory, but hears that prices are going up, he immediately wants four weeks of inventory. If everyone builds inventory in front of a price increase, then demand increases. Over the past few months, this cycle started to work - a few price increases came down the pike during a period of steady economic growth and it appears that we have started to see consumers build inventory. All of these things drove demand and pushed the paper market into an upswing. Q. AT THE END OF THE PERIOD, FORT JAMES REPRESENTED ALMOST 11% OF THE FUND'S INVESTMENTS. WHAT DID YOU FIND ATTRACTIVE ABOUT THIS STOCK? A. Fort James is the end product of a merger between Fort Howard and James River, two tissue companies. Management of the new company promised substantial cost savings from the merger and, at the time the deal was announced, I believed the individual stocks were undervalued. The performance of the stocks was bound to improve on the cost-cutting prospects alone. I bought the stocks to reap the rewards of cost savings and multiple expansion - meaning that their price-to-earnings ratios (PEs) could increase. Fort Howard and James River both appreciated considerably before the merger was completed at the end of August. Q. WHAT OTHER STOCKS HELPED THE FUND'S PERFORMANCE? A. I felt that Buckeye Cellulose, a specialty pulp producer, was undervalued because the market didn't understand its business. The company makes specialty pulp that is used in such consumer applications as air filters and shampoo, rather than in paper products. The market is starting to treat the company as more of a specialty chemical company than a paper company by giving it a higher P/E. In addition, the company recently has completed a few acquisitions that should drive earnings and cash flow. Mead is another company that has driven earnings and cash flow by making some key acquisitions - helping to boost its share price during the period. Q. WERE THERE ANY DISAPPOINTMENTS DURING THE PERIOD? A. Mercer International, a maker of pulp and linerboard, was flat during the period. The company is working to upgrade its pulp facility in East Germany, but has had problems finalizing certain aspects of the deal. The uncertainty surrounding these assets held the company's stock back during the period. Q. WHAT'S YOUR SHORT-TERM OUTLOOK FOR THE PAPER AND FOREST PRODUCTS MARKET? A. The direction of the market is difficult to predict since it is heavily tied to the growth of the economy. As long as the economy stays reasonably strong, it appears that operating rates will continue to improve and paper prices will continue to strengthen, which would help paper stocks. If the economy slows, however, the stocks could fall as a result of decreased demand. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 506 TRADING SYMBOL: FSPFX SIZE: as of August 31, 1997, more than $29 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, 1996-February 1997; joined Fidelity in 1993 (checkmark) PAPER AND FOREST PRODUCTS PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.7% SHARES VALUE (NOTE 1) BASIC INDUSTRIES - 86.1% METALS & MINING - 0.9% English China Clay PLC 74,000 $ 279,407 29321792 PACKAGING & CONTAINERS - 1.3% Gaylord Container Corp. Class A (a) 25,100 236,881 36814510 Sonoco Products Co. 5,000 162,813 83549510 399,694 PAPER & FOREST PRODUCTS - 83.9% Abitibi-Consolidated, Inc. 15,000 262,655 00392410 Alliance Forest Products, Inc. 25,000 591,785 01859J10 Alliance Forest Products, Inc. (c) 16,400 388,211 01859J93 American Pad & Paper Co. (a) 15,700 361,100 02881610 Assi Doman AB Free shares 3,000 90,718 04699G22 Boise Cascade Corp. 45,400 1,796,138 09738310 Bowater, Inc. 23,100 1,182,431 10218310 Buckeye Cellulose Corp. (a) 30,100 1,185,188 11815H10 Caraustar Industries, Inc. 5,000 179,688 14090910 Champion International Corp. 6,400 378,800 15852510 Chesapeake Corp. 69,300 2,382,188 16515910 Consolidated Papers, Inc. 7,700 449,006 20975910 Domtar, Inc. 39,400 326,500 25756110 Enso OY Class R 3,700 32,082 29399Q22 FiberMark, Inc. (a) 56,550 1,162,809 31564610 Fort James Corp. 77,462 3,253,404 34747110 Georgia-Pacific Corp. 16,700 1,523,875 37329810 International Paper Co. 19,400 1,023,350 46014610 Jefferson Smurfit Corp. (a) 10,000 194,375 47508710 Kimberly-Clark Corp. 21,760 1,032,240 49436810 Louisiana-Pacific Corp. 3,100 68,588 54634710 Mail-Well, Inc. (a) 27,900 779,454 56032120 Mead Corp. 19,200 1,362,000 58283410 Mercer International, Inc. (SBI) 63,600 659,850 58805610 Metsa-Serla Ltd. Class B 31,400 259,571 59299992 Stone Container Corp. 53,800 928,050 86158910 Svenska Cellulosa AB (SCA) Class B Ord. 27,000 596,121 86958730 Tembec, Inc. Class A (a) 52,500 491,803 87992010 Triangle Pacific Corp. 5,000 157,500 89591210 Union Camp Corp. 10,000 593,125 90553010 UPM-Kymmene Corp. 3,200 75,538 91599K22 Wausau Paper Mills Co. 4,337 94,872 94331710 Weyerhaeuser Co. 7,600 438,900 96216610 Willamette Industries, Inc. 12,000 957,000 96913310 25,258,915 TOTAL BASIC INDUSTRIES 25,938,016 NONDURABLES - 2.7% TOBACCO - 2.7% Schweitzer-Mauduit International, Inc. 20,100 804,000 80854110 RETAIL & WHOLESALE - 1.9% RETAIL & WHOLESALE, MISCELLANEOUS - 1.9% Boise Cascade Office Products Corp. 5,000 105,313 09740310 IKON Office Solutions, Inc. 18,300 475,800 45171310 581,113 TOTAL COMMON STOCKS (Cost $25,582,464) 27,323,129 CASH EQUIVALENTS - 9.3% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $2,788,960) 2,788,960 $ 2,788,960 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $28,371,424) $ 30,112,089 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $388,211 or 1.3% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $23,492,203 and $17,821,081, 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 $4,428 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 86.6% Canada 9.0 Sweden 2.3 Finland 1.2 Others (individually less than 1%) 0.9 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $28,418,085. Net unrealized appreciation aggregated $1,694,004, of which $2,832,188 related to appreciated investment securities and $1,138,184 related to depreciated investment securities. PAPER AND FOREST PRODUCTS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 30,112,089 SECURITIES, AT VALUE (COST $28,371,424 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 122,846 INVESTMENTS SOLD RECEIVABLE FOR 126,708 FUND SHARES SOLD DIVIDENDS 14,050 RECEIVABLE INTEREST 11,325 RECEIVABLE REDEMPTION FEES 76 RECEIVABLE OTHER 13,959 RECEIVABLES TOTAL ASSETS 30,401,053 LIABILITIES PAYABLE FOR $ 259,150 INVESTMENTS PURCHASED PAYABLE FOR 368,647 FUND SHARES REDEEMED ACCRUED 14,525 MANAGEMENT FEE OTHER PAYABLES 43,609 AND ACCRUED EXPENSES TOTAL LIABILITIES 685,931 NET ASSETS $ 29,715,122 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 26,195,890 DISTRIBUTIONS IN (188,891) EXCESS OF NET INVESTMENT INCOME ACCUMULATED 1,967,456 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 1,740,667 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 29,715,122 1,191,937 SHARES OUTSTANDING NET ASSET $24.93 VALUE AND REDEMPTION PRICE PER SHARE ($29,715,12 2 (DIVIDED BY) 1,191,937 SHARES) MAXIMUM $25.70 OFFERING PRICE PER SHARE (100/97.00 OF $24.93) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 147,754 INCOME DIVIDENDS INTEREST 56,067 TOTAL INCOME 203,821 EXPENSES MANAGEMENT $ 72,849 FEE TRANSFER AGENT 123,324 FEES ACCOUNTING FEES 30,310 AND EXPENSES NON-INTERESTED 50 TRUSTEES' COMPENSATION CUSTODIAN FEES 11,512 AND EXPENSES REGISTRATION FEES 13,660 AUDIT 9,557 LEGAL 114 MISCELLANEOUS 97 TOTAL EXPENSES 261,473 BEFORE REDUCTIONS EXPENSE (3,497) 257,976 REDUCTIONS NET INVESTMENT (54,155) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 2,090,997 SECURITIES FOREIGN (646) 2,090,351 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT 1,763,012 SECURITIES ASSETS AND 20 1,763,032 LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 3,853,383 NET INCREASE $ 3,799,228 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 52,840 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 913 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 10,800 WITHHELD BY FSC EXPENSE $ 3,445 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 52 CREDITS $ 3,497 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (54,155) $ 12,943 NET INVESTMENT INCOME (LOSS) NET REALIZED 2,090,351 1,735,212 GAIN (LOSS) CHANGE IN NET 1,763,032 336,313 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 3,799,228 2,084,468 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO - (29,671) SHAREHOLDERS FROM NET INVESTMENT INCOME IN EXCESS OF (31,544) (84,325) NET INVESTMENT INCOME FROM NET (402,189) (2,413,337) REALIZED GAIN TOTAL (433,733) (2,527,333) DISTRIBUTIONS SHARE 36,705,390 84,816,161 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 414,828 2,489,372 OF DISTRIBUTIONS COST OF SHARES (30,334,477) (94,819,778) REDEEMED REDEMPTION 80,372 170,585 FEES NET INCREASE 6,866,113 (7,343,660) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 10,231,608 (7,786,525) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 19,483,514 27,270,039 PERIOD END OF PERIOD $ 29,715,122 $ 19,483,514 (INCLUDING DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME OF $(188,891) AND $(45,703), RESPECTIVELY) OTHER INFORMATION SHARES SOLD 1,565,370 3,914,858 ISSUED IN 21,057 118,411 REINVESTMENT OF DISTRIBUTIONS REDEEMED (1,295,226) (4,444,689) NET INCREASE 291,201 (411,420) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 21.63 $ 20.78 $ 21.14 $ 19.61 $ 16.08 $ 15.37 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.05) .01 .08 .01 (.01) .06 INVESTMENT INCOME (LOSS) D NET REALIZED 3.82 2.08 1.83 2.53 3.38 .65 AND UNREALIZED GAIN TOTAL FROM 3.77 2.09 1.91 2.54 3.37 .71 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET - (.03) (.08) - (.01) (.09) INVESTMENT INCOME IN EXCESS OF (.04) (.07) - - - - NET INVESTMENT INCOME FROM NET (.51) (1.25) (2.27) (1.17) - - REALIZED GAIN TOTAL (.55) (1.35) (2.35) (1.17) (.01) (.09) DISTRIBUTIONS REDEMPTION FEES .08 .11 .08 .16 .17 .09 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 24.93 $ 21.63 $ 20.78 $ 21.14 $ 19.61 $ 16.08 END OF PERIOD TOTAL RETURN B, C 18.47% 10.87% 9.18% 14.91% 22.03% 5.25% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 29,715 $ 19,484 $ 27,270 $ 94,219 $ 66,908 $ 25,098 OF PERIOD (000 OMITTED) RATIO OF 2.13% A 2.19% 1.91% 1.88% 2.08% 2.21% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 2.10% A, E 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 (.44)% A .04% .34% .05% (.08)% .49% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 160% A 180% 78% 209% 176% 222% A TURNOVER RATE AVERAGE $ .0299 $ .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 past one year, past five years and past 10 years total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS TRANSPORTATION 25.00% 32.43% 155.55% 273.43% TRANSPORTATION 21.25% 28.45% 147.89% 262.23% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS TRANSPORTATION 32.43% 20.64% 14.08% TRANSPORTATION 28.45% 19.91% 13.74% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970916 122520 S00000000000001 Transportation S&P 500 00512 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9172.01 9781.00 1987/10/31 6215.24 7674.17 1987/11/30 5853.19 7041.82 1987/12/31 6442.07 7577.70 1988/01/31 6764.17 7896.72 1988/02/29 7324.02 8264.71 1988/03/31 7546.42 8009.33 1988/04/30 7569.43 8098.24 1988/05/31 7523.42 8168.69 1988/06/30 8290.33 8543.63 1988/07/31 8182.96 8511.17 1988/08/31 7799.50 8221.79 1988/09/30 8313.34 8572.04 1988/10/31 8581.76 8810.34 1988/11/30 8658.45 8684.35 1988/12/31 8919.20 8836.33 1989/01/31 9686.11 9483.15 1989/02/28 9785.81 9247.02 1989/03/31 10084.90 9462.47 1989/04/30 10422.35 9953.57 1989/05/31 10867.16 10356.69 1989/06/30 10800.16 10297.66 1989/07/31 11454.72 11227.54 1989/08/31 12199.27 11447.60 1989/09/30 11962.00 11400.66 1989/10/31 11201.08 11136.17 1989/11/30 11299.26 11363.35 1989/12/31 11460.12 11636.07 1990/01/31 10740.44 10855.29 1990/02/28 11241.48 10995.32 1990/03/31 11578.54 11286.70 1990/04/30 11141.27 11004.53 1990/05/31 11551.21 12077.47 1990/06/30 11424.06 11995.34 1990/07/31 11386.10 11956.96 1990/08/31 9716.14 10876.05 1990/09/30 8463.67 10346.39 1990/10/31 8330.83 10301.90 1990/11/30 8672.41 10967.40 1990/12/31 8985.53 11273.39 1991/01/31 9754.09 11764.91 1991/02/28 10702.94 12606.10 1991/03/31 10712.42 12911.17 1991/04/30 10683.96 12942.15 1991/05/31 11528.43 13501.25 1991/06/30 11432.71 12882.90 1991/07/31 12127.62 13483.24 1991/08/31 12346.56 13802.79 1991/09/30 12118.10 13572.29 1991/10/31 13012.92 13754.15 1991/11/30 12203.77 13199.86 1991/12/31 13850.62 14709.93 1992/01/31 13974.37 14436.32 1992/02/29 14726.40 14623.99 1992/03/31 14374.18 14338.83 1992/04/30 14745.43 14760.39 1992/05/31 15050.05 14832.71 1992/06/30 14402.74 14611.71 1992/07/31 14612.16 15209.33 1992/08/31 14174.27 14897.53 1992/09/30 14735.91 15073.32 1992/10/31 15364.19 15126.08 1992/11/30 16477.95 15641.88 1992/12/31 17146.02 15834.28 1993/01/31 17913.90 15967.28 1993/02/28 18156.90 16184.44 1993/03/31 19371.89 16525.93 1993/04/30 19323.60 16126.00 1993/05/31 20045.43 16558.18 1993/06/30 20103.96 16606.20 1993/07/31 20103.96 16539.77 1993/08/31 20474.63 17166.63 1993/09/30 20523.40 17034.45 1993/10/31 20952.60 17387.06 1993/11/30 21069.65 17221.88 1993/12/31 22172.58 17430.27 1994/01/31 23144.50 18022.90 1994/02/28 23144.50 17534.48 1994/03/31 22525.03 16769.97 1994/04/30 22945.96 16984.63 1994/05/31 22577.09 17263.18 1994/06/30 22555.39 16840.23 1994/07/31 23314.83 17392.59 1994/08/31 24009.17 18105.69 1994/09/30 23369.07 17662.10 1994/10/31 23716.25 18059.49 1994/11/30 22295.01 17401.77 1994/12/31 23029.86 17659.84 1995/01/31 22874.65 18117.75 1995/02/28 24510.26 18823.80 1995/03/31 24832.61 19379.29 1995/04/30 25202.71 19950.01 1995/05/31 24450.57 20747.42 1995/06/30 24187.92 21229.38 1995/07/31 26265.26 21933.35 1995/08/31 26241.38 21988.40 1995/09/30 26002.61 22916.31 1995/10/31 25680.26 22834.50 1995/11/30 26563.73 23836.93 1995/12/31 26523.07 24296.03 1996/01/31 26927.23 25123.07 1996/02/29 27685.04 25355.96 1996/03/31 28354.43 25600.14 1996/04/30 29283.29 25977.48 1996/05/31 29321.39 26647.44 1996/06/30 29461.07 26748.97 1996/07/31 27327.69 25567.20 1996/08/31 27353.08 26106.41 1996/09/30 27480.07 27575.68 1996/10/31 27264.19 28336.22 1996/11/30 29194.40 30478.15 1996/12/31 29043.70 29874.38 1997/01/31 29252.27 31740.93 1997/02/28 28978.52 31989.78 1997/03/31 29864.95 30675.32 1997/04/30 31409.75 32506.64 1997/05/31 33544.40 34485.64 1997/06/30 34552.05 36030.60 1997/07/31 36965.13 38897.55 1997/08/29 36222.64 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970916 122524 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Transportation Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $36,223 - a 262.23% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS AIRBORNE FREIGHT CORP. 6.1 EATON CORP. 5.4 NORFOLK SOUTHERN CORP. 5.3 CSX CORP. 5.1 UNION PACIFIC CORP. 4.9 CNF TRANSPORTATION, INC. 4.3 UAL CORP. 4.1 AIR EXPRESS INTERNATIONAL CORP. 4.1 EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. 3.9 AMR CORP. 3.7 TOP INDUSTRIES AS OF AUGUST 31, 1997 ROW: 1, COL: 1, VALUE: 32.5 ROW: 1, COL: 2, VALUE: 8.800000000000001 ROW: 1, COL: 3, VALUE: 10.6 ROW: 1, COL: 4, VALUE: 13.3 ROW: 1, COL: 5, VALUE: 15.1 ROW: 1, COL: 6, VALUE: 19.7 AIR TRANSPORT, MAJOR NATIONAL 19.7% RAILROADS 15.1% AIR COURIER SERVICES 13.3% AUTO & TRUCK PARTS 10.6% FREIGHT FORWARDING 8.8% ALL OTHERS 32.5% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS TRANSPORTATION PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Jean-Marc Berteaux, Portfolio Manager of Fidelity Select Transportation Portfolio Q. HOW DID THE FUND PERFORM, JEAN-MARC? A. For the six months that ended August 31, 1997, the fund returned 25.00%, compared to the 14.78% return of the Standard & Poor's 500 Index. For the 12-month period that ended August 31, 1997, the fund generated a return of 32.43%, while the S&P 500 returned 40.65%. Q. WHAT FACTORS HELPED THE FUND OUTPERFORM THE S&P 500 INDEX DURING THE LATEST SIX-MONTH PERIOD? A. My stock selection strategy worked well for the fund. I invested in companies that I believed would benefit from consolidation in the industry and improving business fundamentals, as well as stocks that I felt were undervalued relative to their peers and their earnings potential. The overall economic climate also bolstered the fund's performance. Transportation companies thrive in a solid, moderate-growth environment because they can improve earnings by quietly raising prices and eliminating excess capacity. Q. ABOUT 33% OF THE PORTFOLIO WAS INVESTED IN TRUCKING AND FREIGHT STOCKS AT THE END OF THE PERIOD. WHAT DID YOU FIND ATTRACTIVE ABOUT THESE COMPANIES? A. I never make investments in an entire sector, but rather I invest on a stock-by-stock basis. I liked the business fundamentals of many companies in these two areas of the transportation industry. As an example, about 6% of the fund was invested in Airborne Freight at the end of the period. I felt that the market dramatically underestimated Airborne's earnings power, so I made that stock the fund's largest holding. That investment turned out to be a significant contributor to the fund's performance during the period because the company reported higher-than-expected earnings and the market rewarded the stock with a higher valuation. Q. YOU MENTIONED CONSOLIDATION TRENDS EARLIER. WAS THIS HAPPENING IN ALL AREAS OF THE TRANSPORTATION INDUSTRY? A. Mergers have been very evident in trucking and freight-forwarding. It's an especially interesting story among freight-forwarding companies - pure service companies that organize shipping for other companies - because technology is forcing the issue. There is a huge gap between the companies that have good internal software and information technology (IT) systems, and the smaller companies that can't afford to keep pace with the technological advancements. Therefore, we're seeing the bigger companies snapping up the little companies at a rapid pace. Consolidation also was evident in railroads and shipping companies. The only place we didn't see a lot of merger activity was in the airline sector. Q. DID THE UPS STRIKE LATE IN THE PERIOD AFFECT YOUR INVESTMENT STRATEGY IN ANY WAY? A. Not really. I saw it as a short-term blip and I invest for long-term returns, so I thought it would be foolhardy to change my strategy to try and benefit from a two-week strike. By happenstance, several companies in the fund's portfolio - such as Airborne Freight, Federal Express and CNF Transportation - reaped short-term benefits from the strike. Q. WERE THERE ANY DISAPPOINTMENTS DURING THE PERIOD? A. Most of the airlines appreciated significantly through the early part of 1997. The fund reduced many of these positions to take advantage of these gains before hitting the airlines' traditionally slow summer months. However, the fund had a fairly significant position in America West during the period and that stock was flat. I sold the fund's shares in America West by the end of the period. Q. WHAT'S YOUR OUTLOOK FOR THE TRANSPORTATION MARKET IN THE NEAR TERM? A. If this period of solid, contained economic growth continues, the transportation industry should continue to thrive. If the economy grows too quickly, transportation companies tend to order too much capacity, and if the economy then slows, they are left with excess capacity and high fixed costs. Overall, I think we'll see more consolidation in the industry and transportation companies will continue to improve their business fundamentals. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 512 TRADING SYMBOL: FSRFX SIZE: as of August 31, 1997, more than $54 million MANAGER: Jean-Marc Berteaux, since January 1997; equity analyst, European paper and European diversified industrial industries, since 1994; joined Fidelity in 1994 (checkmark) TRANSPORTATION PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.5% SHARES VALUE (NOTE 1) AIR TRANSPORTATION - 19.7% AIR TRANSPORT, MAJOR NATIONAL - 19.7% AMR Corp. (a) 20,500 $ 2,065,375 00176510 Alaska Air Group, Inc. (a) 60,100 1,648,994 01165910 Atlas Air, Inc. (a) 18,500 513,375 04916410 Continental Airlines, Inc. Class B (a) 31,000 1,135,375 21079530 Delta Air Lines, Inc. 20,000 1,730,000 24736110 Kitty Hawk, Inc. 30,000 596,250 49832610 KLM Royal Dutch Airlines NV (NY Reg.) 10,000 327,500 48251610 Northwest Airlines Corp. Class A (a) 20,100 734,906 66728010 UAL Corp. (a) 30,000 2,285,625 90254950 11,037,400 AUTOS, TIRES, & ACCESSORIES - 13.9% AUTO & TRUCK PARTS - 10.6% Cummins Engine Co., Inc. 20,800 1,600,300 23102110 Eaton Corp. 33,400 3,008,088 27805810 Modine Manufacturing Co. 14,800 453,250 60782810 Wabash National Corp. 30,000 881,250 92956610 5,942,888 MOTOR VEHICLES & CAR BODIES - 3.3% Navistar International Corp. (a) 37,300 925,506 63934E10 PACCAR, Inc. 20,000 947,500 69371810 1,873,006 TOTAL AUTOS, TIRES, & ACCESSORIES 7,815,894 COMPUTER SERVICES & SOFTWARE - 0.3% CAD/CAM/CAE - 0.3% Sabre Group Holdings, Inc. Class A (a) 5,300 162,975 78590510 HOLDING COMPANIES - 6.1% HOLDING COMPANY OFFICES, NEC - 6.1% Lagardere S.C.A. (Reg.) 17,334 462,821 50699S22 Norfolk Southern Corp. 30,000 2,940,000 65584410 3,402,821 INDUSTRIAL MACHINERY & EQUIPMENT - 0.4% ENGINES & TURBINES - 0.4% Detroit Diesel Corp. (a) 10,000 216,875 25083710 LEASING & RENTAL - 2.2% EQUIPMENT RENTAL & LEASING, NEC- 2.2% Ryder Systems, Inc. 35,000 1,249,063 78354910 RAILROADS - 15.1% CSX Corp. 50,000 2,859,375 12640810 Canadian Pacific Ltd. 20,000 583,679 13592310 Canadian National Railway Co. 26,500 1,310,917 13637510 Union Pacific Corp. 42,000 2,727,375 90781810 Wisconsin Central Transportation Corp. (a) 30,800 954,800 97659210 8,436,146 SERVICES - 0.9% DETECTIVE, GUARD & ARMORED CAR - 0.9% Pittston Co. (Burlington Group) 20,000 480,000 72570188 SHIPPING - 2.0% DEEP SEA TRANSPORT - 0.3% Teekay Shipping Corp. 5,000 164,688 88099J22 SHARES VALUE (NOTE 1) SHIPPING - 1.7% ICB Shipping Class B 20,000 $ 253,049 44999B92 Knightsbridge Tankers Ltd. 26,000 679,250 49999N22 932,299 TOTAL SHIPPING 1,096,987 TRUCKING & FREIGHT - 32.9% AIR COURIER SERVICES - 13.3% Airborne Freight Corp. 69,300 3,413,025 00926610 CNF Transportation, Inc. 66,000 2,384,250 12612W10 Federal Express Corp. 25,000 1,660,938 31330910 7,458,213 FREIGHT FORWARDING - 8.8% Air Express International Corp. 75,000 2,278,125 00910410 Circle International Group, Inc. 18,300 459,784 17257410 Expeditors International of Washington, Inc. 60,000 2,197,500 30213010 4,935,409 TRUCKING, LOCAL & LONG DISTANCE - 4.5% Knight Transportation, Inc. (a) 20,000 510,000 49906410 Roadway Express, Inc. 10,000 230,000 76974210 Swift Transportation Co., Inc. (a) 33,800 988,650 87075610 Werner Enterprises, Inc. 25,000 546,875 95075510 XTRA Corp. 5,000 234,688 98413810 2,510,213 TRUCKING, LONG DISTANCE - 6.3% Consolidated Freightways Corp. (a) 23,500 367,188 20923210 Professional Transportation Group, Inc. 30,000 105,000 74296310 Simon Transportation Services, Inc. Class A (a) 18,100 404,988 82881310 Trimac Ltd. 50,000 376,509 89620810 US Xpress Enterprises, Inc. (a) 28,500 546,844 90338N10 USFreightways Corp. 36,600 1,098,000 91690610 Yellow Corp. (a) 20,000 627,500 98550910 3,526,029 TOTAL TRUCKING & FREIGHT 18,429,864 TOTAL COMMON STOCKS (Cost $46,888,789) 52,328,025 CASH EQUIVALENTS - 6.5% Taxable Central Cash Fund (b) (Cost $3,653,263) 3,653,263 3,653,263 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $50,542,052) $ 55,981,288 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $97,167,715 and $64,952,422, 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 $8,071 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, the value of securities loaned and the value of collateral amounted to $1,648,964 and $1,682,800, respectively (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $50,574,044. Net unrealized appreciation aggregated $5,407,244, of which $6,285,608 related to appreciated investment securities and $878,364 related to depreciated investment securities. TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 55,981,288 SECURITIES, AT VALUE (COST $50,542,052 ) - SEE ACCOMPANYIN G SCHEDULE CASH 758,800 RECEIVABLE FOR 48,142 FUND SHARES SOLD DIVIDENDS 59,407 RECEIVABLE INTEREST 19,581 RECEIVABLE REDEMPTION FEES 212 RECEIVABLE OTHER 6,675 RECEIVABLES TOTAL ASSETS 56,874,105 LIABILITIES PAYABLE FOR $ 175,463 INVESTMENTS PURCHASED PAYABLE FOR 539,583 FUND SHARES REDEEMED ACCRUED 27,994 MANAGEMENT FEE OTHER PAYABLES 64,781 AND ACCRUED EXPENSES COLLATERAL ON 1,682,800 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 2,490,621 NET ASSETS $ 54,383,484 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 42,451,333 ACCUMULATED (38,485) NET INVESTMENT (LOSS) ACCUMULATED 6,531,554 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 5,439,082 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 54,383,484 1,990,448 SHARES OUTSTANDING NET ASSET $27.32 VALUE AND REDEMPTION PRICE PER SHARE ($54,383,48 4 (DIVIDED BY) 1,990,448 SHARES) MAXIMUM $28.16 OFFERING PRICE PER SHARE (100/97.00 OF $27.32) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 248,102 INCOME DIVIDENDS INTEREST 131,649 (INCLUDING INCOME ON SECURITIES LOANED OF $16,944) TOTAL INCOME 379,751 EXPENSES MANAGEMENT $ 155,974 FEE TRANSFER AGENT 185,756 FEES ACCOUNTING AND 34,676 SECURITY LENDING FEES NON-INTERESTED 91 TRUSTEES' COMPENSATION CUSTODIAN FEES 10,515 AND EXPENSES REGISTRATION FEES 31,766 AUDIT 9,417 LEGAL 91 MISCELLANEOUS 277 TOTAL EXPENSES 428,563 BEFORE REDUCTIONS EXPENSE (10,327) 418,236 REDUCTIONS NET INVESTMENT (38,485) INCOME (LOSS) REALIZED AND 6,591,469 UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT 5,192,338 SECURITIES ASSETS AND (154) 5,192,184 LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 11,783,653 NET INCREASE $ 11,745,168 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 73,151 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 374 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 15,038 WITHHELD BY FSC EXPENSE $ 9,368 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 959 CREDITS $ 10,327 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (38,485) $ (72,506) NET INVESTMENT INCOME (LOSS) NET REALIZED 6,591,469 966,188 GAIN (LOSS) CHANGE IN NET 5,192,184 (640,423) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 11,745,168 253,259 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (186,230) (369,344) SHAREHOLDERS FROM NET REALIZED GAINS SHARE 107,021,358 27,406,552 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 183,741 362,964 OF DISTRIBUTIONS COST OF SHARES (73,352,524) (30,259,063) REDEEMED REDEMPTION 81,596 50,774 FEES NET INCREASE 33,934,171 (2,438,773) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 45,493,109 (2,554,858) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 8,890,375 11,445,233 PERIOD END OF PERIOD $ 54,383,484 $ 8,890,375 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $38,485 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 4,431,956 1,216,922 ISSUED IN 8,055 16,356 REINVESTMENT OF DISTRIBUTIONS REDEEMED (2,849,524) (1,355,455) NET INCREASE 1,590,487 (122,177) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED FEBRUARY 28, TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 22.23 $ 21.92 $ 20.53 $ 21.67 $ 18.68 $ 15.49 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.02) (.13) (.09) F (.17) (.20) (.07) INVESTMENT INCOME (LOSS) D NET REALIZED 5.46 1.06 2.60 1.17 5.07 3.55 AND UNREALIZED GAIN (LOSS) TOTAL FROM 5.44 .93 2.51 1.00 4.87 3.48 INVESTMENT OPERATIONS LESS (.39) (.71) (1.22) (2.19) (1.96) (.36) DISTRIBUTIONS FROM NET REALIZED GAIN REDEMPTION FEES .04 .09 .10 .05 .08 .07 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 27.32 $ 22.23 $ 21.92 $ 20.53 $ 21.67 $ 18.68 END OF PERIOD TOTAL RETURN B, C 25.00% 4.67% 12.95% 5.90% 27.47% 23.14% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 54,383 $ 8,890 $ 11,445 $ 12,704 $ 13,077 $ 10,780 OF PERIOD (000 OMITTED) RATIO OF 1.62% A 2.50% G 2.47% G 2.37% 2.40% 2.48% A, G EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.58% A, E 2.48% E 2.44% E 2.36% E 2.39% E 2.48% A EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.15)% A (.58)% (.43)% (.83)% (.96)% (.53)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 280% A 148% 175% 178% 115% 116% A TURNOVER RATE AVERAGE $ .0314 $ .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 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 $.05 PER SHARE. G DURING THE PERIOD, FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. H FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS BROKERAGE AND INVESTMENT 21.84% 66.60% 235.95% 272.46% MANAGEMENT BROKERAGE AND INVESTMENT 18.19% 61.60% 225.88% 261.28% MANAGEMENT (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS BROKERAGE AND INVESTMENT MANAGEMENT 66.60% 27.43% 14.05% BROKERAGE AND INVESTMENT 61.60% 26.65% 13.71% MANAGEMENT (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 114602 S00000000000001 Brokerage/Invt. Mgt S&P 500 00068 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9368.89 9781.00 1987/10/31 5922.34 7674.17 1987/11/30 5478.36 7041.82 1987/12/31 5759.66 7577.70 1988/01/31 6172.34 7896.72 1988/02/29 6468.40 8264.71 1988/03/31 6297.94 8009.33 1988/04/30 6405.60 8098.24 1988/05/31 6163.37 8168.69 1988/06/30 6818.33 8543.63 1988/07/31 6764.43 8511.17 1988/08/31 6719.52 8221.79 1988/09/30 6890.20 8572.04 1988/10/31 6917.15 8810.34 1988/11/30 6764.43 8684.35 1988/12/31 6827.99 8836.33 1989/01/31 7717.81 9483.15 1989/02/28 7536.21 9247.02 1989/03/31 7545.29 9462.47 1989/04/30 7617.93 9953.57 1989/05/31 8117.32 10356.69 1989/06/30 7889.10 10297.66 1989/07/31 8838.71 11227.54 1989/08/31 9057.85 11447.60 1989/09/30 8774.79 11400.66 1989/10/31 8062.58 11136.17 1989/11/30 7980.41 11363.35 1989/12/31 7787.95 11636.07 1990/01/31 7445.72 10855.29 1990/02/28 7695.45 10995.32 1990/03/31 7908.19 11286.70 1990/04/30 7371.73 11004.53 1990/05/31 8074.68 12077.47 1990/06/30 8065.20 11995.34 1990/07/31 7778.15 11956.96 1990/08/31 6722.54 10876.05 1990/09/30 6148.44 10346.39 1990/10/31 5768.79 10301.90 1990/11/30 6148.44 10967.40 1990/12/31 6528.09 11273.39 1991/01/31 7071.32 11764.91 1991/02/28 7773.76 12606.10 1991/03/31 8569.87 12911.17 1991/04/30 8691.63 12942.15 1991/05/31 9150.56 13501.25 1991/06/30 8541.27 12882.90 1991/07/31 9197.57 13483.24 1991/08/31 9403.83 13802.79 1991/09/30 9891.37 13572.29 1991/10/31 10547.67 13754.15 1991/11/30 9966.38 13199.86 1991/12/31 11897.77 14709.93 1992/01/31 12066.53 14436.32 1992/02/29 11991.53 14623.99 1992/03/31 11672.76 14338.83 1992/04/30 10763.31 14760.39 1992/05/31 10735.18 14832.71 1992/06/30 10482.04 14611.71 1992/07/31 11072.71 15209.33 1992/08/31 10753.94 14897.53 1992/09/30 10678.93 15073.32 1992/10/31 11157.09 15126.08 1992/11/30 12160.29 15641.88 1992/12/31 12507.19 15834.28 1993/01/31 13247.87 15967.28 1993/02/28 13332.26 16184.44 1993/03/31 14401.09 16525.93 1993/04/30 14354.19 16126.00 1993/05/31 14823.28 16558.18 1993/06/30 15526.92 16606.20 1993/07/31 16042.92 16539.77 1993/08/31 17309.46 17166.63 1993/09/30 17628.45 17034.45 1993/10/31 17056.15 17387.06 1993/11/30 16587.06 17221.88 1993/12/31 18676.38 17430.27 1994/01/31 19074.41 18022.90 1994/02/28 18115.07 17534.48 1994/03/31 16084.14 16769.97 1994/04/30 15951.47 16984.63 1994/05/31 16339.29 17263.18 1994/06/30 16961.83 16840.23 1994/07/31 16563.81 17392.59 1994/08/31 16686.28 18105.69 1994/09/30 16053.53 17662.10 1994/10/31 16043.32 18059.49 1994/11/30 14930.90 17401.77 1994/12/31 15451.39 17659.84 1995/01/31 15257.48 18117.75 1995/02/28 15829.00 18823.80 1995/03/31 15992.29 19379.29 1995/04/30 16476.80 19950.01 1995/05/31 17403.29 20747.42 1995/06/30 18382.42 21229.38 1995/07/31 19266.80 21933.35 1995/08/31 19087.82 21988.40 1995/09/30 20245.93 22916.31 1995/10/31 19119.40 22834.50 1995/11/30 19582.65 23836.93 1995/12/31 19097.03 24296.03 1996/01/31 20342.00 25123.07 1996/02/29 20553.21 25355.96 1996/03/31 21475.82 25600.14 1996/04/30 21606.53 25977.48 1996/05/31 22322.20 26647.44 1996/06/30 22254.04 26748.97 1996/07/31 20890.85 25567.20 1996/08/31 21686.05 26106.41 1996/09/30 22799.32 27575.68 1996/10/31 23605.87 28336.22 1996/11/30 25923.29 30478.15 1996/12/31 26670.38 29874.38 1997/01/31 28615.70 31740.93 1997/02/28 29651.66 31989.78 1997/03/31 26647.36 30675.32 1997/04/30 29530.14 32506.64 1997/05/31 31733.36 34485.64 1997/06/30 33578.99 36030.60 1997/07/31 37270.26 38897.55 1997/08/29 36128.28 36718.51 IMATRL PRASUN SHR__CHT 19970831 19970909 114607 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Brokerage and Investment Management Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $36,128 - a 261.28% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS MORGAN STANLEY DEAN WITTER DISCOVER AND CO. 6.5 LEHMAN BROTHERS HOLDINGS, INC. 5.0 PAINEWEBBER GROUP, INC. 4.9 BEAR STEARNS COMPANIES, INC. 4.7 TRAVELERS GROUP, INC. (THE) 4.3 BANKERS TRUST NEW YORK CORP. 3.9 EDWARDS (A.G.), INC. 3.8 SALOMON, INC. 3.3 MERRILL LYNCH & CO., INC. 3.3 CREDIT SUISSE GROUP (REG.) 2.4 TOP INDUSTRIES AS OF AUGUST 31, 1997 SECURITY & COMMODITY BROKERS 35.2% SECURITY BROKERS & DEALERS 15.1% INVESTMENT MANAGERS 8.5% LIFE INSURANCE 7.1% STATE BANKS FEDERAL RESERVE 6.3% ALL OTHERS 27.8%* ROW: 1, COL: 1, VALUE: 27.8 ROW: 1, COL: 2, VALUE: 6.3 ROW: 1, COL: 3, VALUE: 7.1 ROW: 1, COL: 4, VALUE: 8.5 ROW: 1, COL: 5, VALUE: 15.1 ROW: 1, COL: 6, VALUE: 35.2 * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Peter Fruzzetti, Portfolio Manager of Fidelity Select Brokerage and Investment Management Portfolio Q. HOW DID THE FUND PERFORM, PETER? A. Very well. For the six months that ended on August 31, 1997, the fund had a total return of 21.84%. For the year that ended August 31, 1997, it returned 66.60%. For the same periods, the Standard & Poor's 500 Index returned 14.78% and 40.65%, respectively. Q. WHAT ACCOUNTED FOR THE STRONG PERFORMANCE? A. There was a combination of factors. Investment banking conditions remained robust, with companies seeing good results from the equity markets, debt offerings and continued strength in mergers and acquisitions. We've also seen strong asset management in-flows into mutual funds. Additionally, there has been more takeover speculation and activity, especially in investment banking, driving stocks in many cases to new highs. Q. WHAT WAS THE INVESTMENT ENVIRONMENT LIKE OVER THE PAST SIX MONTHS, AND HOW DID IT AFFECT THE BROKERAGE AND INVESTMENT MANAGEMENT AREAS? A. Long interest rates have gone from 7.2% to 6.3% in just the past three or four months and to some extent, interest-rate speculation has driven the stock market higher. Additionally, in 1997, with the anticipated fall of the Glass-Steagall Act, which prohibited commercial banks from competing in the investment banking sector, we have seen more takeover activity, and I assume this will continue. European banks and U.S. commercial banks desire a presence in equity underwriting, which is perceived to be a more profitable business with better returns on equity than traditional banking. We have seen a number of commercial banks investing excess capital into investment banking. Q. HOW HAS THIS MERGER AND ACQUISITION ACTIVITY AFFECTED PORTFOLIO STRATEGY? A. We try to buy companies with the best fundamentals and the best valuations. That's one part of the strategy. In addition, because we are in a period of consolidation, we try to pick the most likely takeover candidates. We have seen a number of portfolio holdings in merger announcements to the benefit of the fund's performance. One of our positions was in Alex Brown, for example, which is being merged with Bankers Trust. Q. WHAT OTHER STOCKS HAD A STRONG, POSITIVE EFFECT ON PERFORMANCE? A. Most of our larger positions did well. Merrill Lynch, Lehman Brothers and Bear Stearns all had very strong performance. One of the best performing stocks was Donaldson Lufkin & Jenrette, due mostly to takeover speculation. Q. WERE THERE ANY DISAPPOINTMENTS? A. With large in-flows at the beginning of the year, we started the six-month period with a rather large cash position. The fact that this money was not invested held back performance a bit. Right now, one challenge is that valuations of the group have drifted higher. It's more difficult to find compelling values today than one year ago. Q. WHAT IS YOUR OUTLOOK? A. So far, 1997 has been better than anticipated. While 1997 has not experienced the same growth as 1996, business has nonetheless remained very solid. There are a lot of variables, including both the direction of interest rates and the stock market. Because the last 12 months have been so robust, I would not anticipate comparable growth over the next 12 months. However, with consolidation within the industry, there still are a lot of names in this group whose valuations can be sustained and enhanced. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 068 TRADING SYMBOL: FSLBX SIZE: as of August 31, 1997, more than $344 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 AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.7% SHARES VALUE (NOTE 1) BANKS - 12.3% INTERNATIONAL BANKS - 2.0% Bank of Nova Scotia (Halifax) 50,000 $ 2,159,971 06414910 Deutsche Bank AG 30,000 1,766,657 25152592 Julius Baer Holding AG 2,000 2,814,070 48199K22 Toronto Dominion Bank 14,443 437,115 89116050 7,177,813 NATIONAL COMMERCIAL BANKS - 4.0% BankAmerica Corp. 40,000 2,632,500 06605010 Citicorp 65,000 8,295,625 17303410 Mellon Bank Corp. 60,000 2,887,500 58550910 13,815,625 STATE BANKS FEDERAL RESERVE - 6.3% Bankers Trust New York Corp. 130,000 13,487,500 06636510 Credit Suisse Group (Reg.) 70,900 8,491,374 22540192 21,978,874 TOTAL BANKS 42,972,312 COMPUTER SERVICES & SOFTWARE - 1.1% DATA PROCESSING - 1.1% Fiserv, Inc. (a) 83,116 3,740,220 33773810 CREDIT & OTHER FINANCE - 3.4% FINANCIAL SERVICES - 3.4% American Express Co. 40,000 3,110,000 02581610 Equitable Companies, Inc. 145,000 6,307,500 29444G10 Investors Financial Services Corp. 6,297 279,429 46191510 Investors Financial Services Corp. Class A 1,210 41,745 46191520 Perpetual PLC 20,000 832,937 71499822 Phoenix Duff & Phelps Corp. 160,000 1,220,000 71892410 11,791,611 MORTGAGE BANKERS - 0.0% Homeside, Inc. 3,000 68,250 43760810 TOTAL CREDIT & OTHER FINANCE 11,859,861 INSURANCE - 13.8% ACCIDENT & HEALTH INSURANCE - 0.1% UICI (a) 15,000 450,000 90273710 INSURANCE BROKERS & SERVICES - 0.6% Marsh & McLennan Companies, Inc. 30,000 2,047,500 57174810 INSURANCE CARRIERS - 1.4% AFLAC, Inc. 90,000 4,955,625 00105510 LIFE INSURANCE - 7.1% ARM Financial Group, Inc. Class A 400 7,775 00194410 Amerus Life Holdings, Inc. 15,500 445,625 03073210 Conseco, Inc. 110,000 4,730,000 20846410 Delphi Financial Group, Inc. Class A 20,400 893,775 24713110 Liberty Financial Companies, Inc. 82,000 4,064,125 53051210 Life RE Corp. 14,300 733,769 53216010 Nationwide Financial Services, Inc. Class A 2,000 55,500 63861210 Protective Life Corp. 19,000 945,250 74367410 Providian Financial Corp. 200,000 7,450,000 74406A10 SunAmerica, Inc. 149,250 5,360,562 86693010 24,686,381 PROPERTY-CASUALTY & REINSURANCE - 4.6% Reinsurance Group of America, Inc. 30,000 1,198,750 75935110 Travelers Group, Inc. (The) 234,000 14,859,000 89419010 16,057,750 TOTAL INSURANCE 48,197,256 SHARES VALUE (NOTE 1) SAVINGS & LOANS - 0.1% SAVINGS BANKS, FEDERAL CHARTER - 0.1% Dime Bancorp., Inc. 20,000 $ 386,250 25429Q10 SECURITIES INDUSTRY - 63.0% INVESTMENT ADVICE - 4.2% Mutual Fund Co., Ltd. (For. Reg.) 27,600 79,111 65499B23 New England Investment Companies LP 109,100 2,945,700 64409510 Oppenheimer Capital LP unit 50,000 2,487,500 68392810 PIMCO Advisors LP Class A unit 72,700 2,112,844 69338X10 Trimark Financial Corp. 67,000 3,140,587 89621H10 United Asset Management Corp. 140,000 3,753,750 90942010 14,519,492 INVESTMENT MANAGERS - 8.5% Alliance Capital Management LP 55,000 1,859,688 01854810 Eaton Vance Corp. 45,000 1,288,125 27826510 Franklin Resources, Inc. 93,350 7,222,956 35461310 Investors Group, Inc. 65,800 1,574,174 46152H10 John Nuveen Co. Class A 50,000 1,521,875 47803510 Mackenzie Financial Corp. 103,100 2,165,639 55453110 Pioneer Group, Inc. 170,000 5,525,000 72368410 Price (T. Rowe) Associates, Inc. 153,000 8,415,000 74147710 29,572,457 SECURITY & COMMODITY BROKERS - 35.2% Advest Group, Inc. (The) 275,800 6,274,450 00756610 Alex Brown, Inc. 30,000 2,540,625 01390210 Bear Stearns Companies, Inc. 413,172 16,346,117 07390210 Edwards (A.G.), Inc. 337,000 13,395,750 28176010 Fahnestock Viner Holdings, Inc. Class A 77,600 1,411,926 30292110 First Marathon, Inc. Class A (non-vtg.) 44,700 644,208 32076L20 Jefferies Group, Inc. 61,800 4,202,400 47231810 Legg Mason, Inc. 76,700 4,736,225 52490110 McDonald & Co. Investments, Inc. 48,000 2,118,000 58004710 Merrill Lynch & Co., Inc. 188,000 11,562,000 59018810 Midland Walwyn, Inc. 335,000 4,236,534 59780110 Morgan Keegan, Inc. 91,950 2,350,472 61741010 Morgan Stanley Dean Witter Discover and Co. 474,065 22,814,376 61744644 Peregrine Investments Holdings Ltd. 84,300 156,645 71399492 Piper Jaffray Inc. 32,600 737,575 72408110 Quick & Reilly Group, Inc. (The) 129,162 4,423,799 74837610 Raymond James Financial, Inc. 236,850 6,868,650 75473010 Salomon, Inc. 194,000 11,615,750 79549B10 Schwab (Charles) Corp. 95,400 4,048,538 80851310 Southwest Securities Group, Inc. 71,400 1,713,600 84522410 Stifel Financial Corp. 50,000 540,625 86063010 122,738,265 SECURITY BROKERS & DEALERS - 15.1% Donaldson Lufkin & Jenrette, Inc. 99,500 5,907,813 25766110 Everen Capital Corp. 90,400 2,971,900 29976110 Hambrecht & Quist Group 45,000 1,420,313 40654510 Interra Financial, Inc. 177,950 7,740,825 46069M10 Lehman Brothers Holdings, Inc. 397,000 17,418,375 52490810 PaineWebber Group, Inc. 440,700 16,939,406 69562910 52,398,632 TOTAL SECURITIES INDUSTRY 219,228,846 TOTAL COMMON STOCKS (Cost $268,883,769) 326,384,745 CASH EQUIVALENTS - 6.3% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $21,999,370) 21,999,370 $ 21,999,370 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $290,883,139) $ 348,384,115 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $142,274,696 and $266,905,436, 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 $47,603 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 $11,972,000 and $8,206,500, respectively. The weighted average interest rate was 5.7% (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $290,925,485. Net unrealized appreciation aggregated $57,458,630, of which $60,606,046 related to appreciated investment securities and $3,147,416 related to depreciated investment securities. BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 348,384,115 SECURITIES, AT VALUE (COST $290,883,13 9) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 1,261,946 FUND SHARES SOLD DIVIDENDS 179,762 RECEIVABLE INTEREST 107,047 RECEIVABLE REDEMPTION FEES 4,094 RECEIVABLE OTHER 4,752 RECEIVABLES TOTAL ASSETS 349,941,716 LIABILITIES PAYABLE FOR $ 1,111,374 INVESTMENTS PURCHASED PAYABLE FOR 3,913,884 FUND SHARES REDEEMED ACCRUED 172,009 MANAGEMENT FEE OTHER PAYABLES 222,213 AND ACCRUED EXPENSES TOTAL LIABILITIES 5,419,480 NET ASSETS $ 344,522,236 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 282,243,602 UNDISTRIBUTED 901,694 NET INVESTMENT INCOME ACCUMULATED 3,877,037 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 57,499,903 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 344,522,236 10,998,653 SHARES OUTSTANDING NET ASSET $31.32 VALUE AND REDEMPTION PRICE PER SHARE ($344,522,2 36 (DIVIDED BY) 10,998,653 SHARES) MAXIMUM $32.29 OFFERING PRICE PER SHARE (100/97.00 OF $31.32) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 2,039,550 INCOME DIVIDENDS INTEREST 874,165 TOTAL INCOME 2,913,715 EXPENSES MANAGEMENT $ 881,304 FEE TRANSFER AGENT 1,033,050 FEES ACCOUNTING FEES 147,859 AND EXPENSES NON-INTERESTED 612 TRUSTEES' COMPENSATION CUSTODIAN FEES 13,439 AND EXPENSES REGISTRATION FEES 23,731 AUDIT 15,169 LEGAL 507 INTEREST 2,595 MISCELLANEOUS 313 TOTAL EXPENSES 2,118,579 BEFORE REDUCTIONS EXPENSE (104,050) 2,014,529 REDUCTIONS NET INVESTMENT 899,186 INCOME REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 3,986,396 SECURITIES FOREIGN (403) 3,985,993 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT 37,255,019 SECURITIES ASSETS AND (1,073) 37,253,946 LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 41,239,939 NET INCREASE $ 42,139,125 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 1,126,581 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 848 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 99,075 WITHHELD BY FSC EXPENSE $ 100,727 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 1,678 CREDITS TRANSFER 1,645 AGENT CREDITS $ 104,050 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ 899,186 $ 269,737 NET INVESTMENT INCOME NET REALIZED 3,985,993 1,506,496 GAIN (LOSS) CHANGE IN NET 37,253,946 16,730,770 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 42,139,125 18,507,003 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (75,185) (152,473) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (300,702) (1,573,937) REALIZED GAIN TOTAL (375,887) (1,726,410) DISTRIBUTIONS SHARE 259,257,341 516,393,133 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 372,115 1,697,946 OF DISTRIBUTIONS COST OF SHARES (416,164,710) (114,791,803) REDEEMED REDEMPTION 507,072 325,639 FEES NET INCREASE (156,028,182) 403,624,915 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (114,264,944) 420,405,508 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 458,787,180 38,381,672 PERIOD END OF PERIOD $ 344,522,236 $ 458,787,180 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $901,694 AND $162,209, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 9,189,862 20,890,431 ISSUED IN 15,821 83,782 REINVESTMENT OF DISTRIBUTIONS REDEEMED (16,017,692) (5,239,816) NET INCREASE (6,812,009) 15,734,397 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 25.76 $ 18.49 $ 15.51 $ 17.75 $ 14.22 $ 11.48 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET .09 .08 .09 (.03) (.02) - INVESTMENT INCOME (LOSS) D NET REALIZED 5.47 7.80 4.29 (2.25) 4.95 2.65 AND UNREALIZED GAIN (LOSS) TOTAL FROM 5.56 7.88 4.38 (2.28) 4.93 2.65 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.01) (.06) (.04) - (.01) - INVESTMENT INCOME FROM NET (.04) (.65) (1.09) - (1.47) - REALIZED GAIN IN EXCESS OF - - (.35) - - - NET REALIZED GAIN TOTAL (.05) (.71) (1.48) - (1.48) - DISTRIBUTIONS REDEMPTION FEES .05 .10 .08 .04 .08 .09 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 31.32 $ 25.76 $ 18.49 $ 15.51 $ 17.75 $ 14.22 END OF PERIOD TOTAL RETURN B, C 21.84% 44.27% 29.85% (12.62)% 35.87% 23.87% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 344,522 $ 458,787 $ 38,382 $ 27,346 $ 59,810 $ 24,687 OF PERIOD (000 OMITTED) RATIO OF 1.43% A 1.94% 1.64% E 2.54% E 1.79% 2.21% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.36% A, F 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 .61% A .37% .50% (.20)% (.14)% .02% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 104% A 16% 166% 139% 295% 111% A TURNOVER RATE AVERAGE $ .0452 $ .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 N ET 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS FINANCIAL SERVICES 14.41% 48.17% 230.20% 369.58% FINANCIAL SERVICES 10.98% 43.73% 220.29% 355.49% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS FINANCIAL SERVICES 48.17% 26.99% 16.73% FINANCIAL SERVICES 43.73% 26.21% 16.37% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970923 094102 S00000000000001 Financial Services S&P 500 00066 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9355.70 9781.00 1987/10/31 7238.40 7674.17 1987/11/30 6796.51 7041.82 1987/12/31 7140.87 7577.70 1988/01/31 7678.54 7896.72 1988/02/29 7934.30 8264.71 1988/03/31 7797.70 8009.33 1988/04/30 7661.10 8098.24 1988/05/31 7736.67 8168.69 1988/06/30 8213.31 8543.63 1988/07/31 8158.09 8511.17 1988/08/31 8134.84 8221.79 1988/09/30 8471.97 8572.04 1988/10/31 8495.22 8810.34 1988/11/30 8143.55 8684.35 1988/12/31 7998.80 8836.33 1989/01/31 8408.76 9483.15 1989/02/28 8390.81 9247.02 1989/03/31 9004.26 9462.47 1989/04/30 9168.84 9953.57 1989/05/31 9743.39 10356.69 1989/06/30 9675.50 10297.66 1989/07/31 10449.90 11227.54 1989/08/31 10745.20 11447.60 1989/09/30 10968.18 11400.66 1989/10/31 9922.58 11136.17 1989/11/30 9786.99 11363.35 1989/12/31 9545.96 11636.07 1990/01/31 8740.07 10855.29 1990/02/28 9056.34 10995.32 1990/03/31 8916.45 11286.70 1990/04/30 8600.18 11004.53 1990/05/31 9357.41 12077.47 1990/06/30 9095.88 11995.34 1990/07/31 8511.99 11956.96 1990/08/31 7493.23 10876.05 1990/09/30 6377.15 10346.39 1990/10/31 5820.63 10301.90 1990/11/30 6641.72 10967.40 1990/12/31 7223.44 11273.39 1991/01/31 7879.83 11764.91 1991/02/28 8785.09 12606.10 1991/03/31 9205.06 12911.17 1991/04/30 9503.71 12942.15 1991/05/31 10231.65 13501.25 1991/06/30 9401.05 12882.90 1991/07/31 10144.54 13483.24 1991/08/31 10816.49 13802.79 1991/09/30 10751.16 13572.29 1991/10/31 10987.59 13754.15 1991/11/30 10172.54 13199.86 1991/12/31 11675.13 14709.93 1992/01/31 12256.69 14436.32 1992/02/29 13136.88 14623.99 1992/03/31 12841.39 14338.83 1992/04/30 13334.92 14760.39 1992/05/31 13907.05 14832.71 1992/06/30 14227.05 14611.71 1992/07/31 14633.90 15209.33 1992/08/31 13794.56 14897.53 1992/09/30 14223.84 15073.32 1992/10/31 14787.67 15126.08 1992/11/30 15899.31 15641.88 1992/12/31 16674.43 15834.28 1993/01/31 17726.19 15967.28 1993/02/28 18197.43 16184.44 1993/03/31 19150.15 16525.93 1993/04/30 18233.38 16126.00 1993/05/31 18240.30 16558.18 1993/06/30 18921.24 16606.20 1993/07/31 19429.35 16539.77 1993/08/31 20034.25 17166.63 1993/09/30 20497.43 17034.45 1993/10/31 19947.84 17387.06 1993/11/30 19059.50 17221.88 1993/12/31 19601.52 17430.27 1994/01/31 20932.17 18022.90 1994/02/28 20172.36 17534.48 1994/03/31 19251.14 16769.97 1994/04/30 19982.18 16984.63 1994/05/31 20835.11 17263.18 1994/06/30 20343.19 16840.23 1994/07/31 21053.29 17392.59 1994/08/31 21791.17 18105.69 1994/09/30 20148.80 17662.10 1994/10/31 20041.69 18059.49 1994/11/30 18772.22 17401.77 1994/12/31 18886.56 17659.84 1995/01/31 19863.30 18117.75 1995/02/28 21124.74 18823.80 1995/03/31 21497.04 19379.29 1995/04/30 22171.56 19950.01 1995/05/31 23402.34 20747.42 1995/06/30 23511.84 21229.38 1995/07/31 24300.24 21933.35 1995/08/31 25246.32 21988.40 1995/09/30 26687.34 22916.31 1995/10/31 26004.06 22834.50 1995/11/30 27756.06 23836.93 1995/12/31 27827.49 24296.03 1996/01/31 29128.55 25123.07 1996/02/29 29374.46 25355.96 1996/03/31 29723.20 25600.14 1996/04/30 29393.32 25977.48 1996/05/31 30076.35 26647.44 1996/06/30 30516.43 26748.97 1996/07/31 29851.73 25567.20 1996/08/31 30741.05 26106.41 1996/09/30 32780.98 27575.68 1996/10/31 34857.58 28336.22 1996/11/30 37851.00 30478.15 1996/12/31 36765.02 29874.38 1997/01/31 38953.93 31740.93 1997/02/28 39813.17 31989.78 1997/03/31 36822.63 30675.32 1997/04/30 39923.74 32506.64 1997/05/31 41234.37 34485.64 1997/06/30 43427.15 36030.60 1997/07/31 48291.60 38897.55 1997/08/29 45549.36 36718.51 IMATRL PRASUN SHR__CHT 19970831 19970923 094112 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Financial Services Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $45,549 - a 355.49% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS BARNETT BANKS, INC. 6.6 ASSOCIATES FIRST CAPITAL CORP. 6.3 FIRST CHICAGO NBD CORP. 6.1 HOUSEHOLD INTERNATIONAL, INC. 5.8 CITICORP 5.5 BANC ONE CORP. 5.5 NATIONAL CITY CORP. 5.5 AMERICAN EXPRESS CO. 5.3 BENEFICIAL CORP. 5.1 MBNA CORP. 4.8 TOP INDUSTRIES AS OF AUGUST 31, 1997 NATIONAL COMMERCIAL BANKS 31.8% PERSONAL CREDIT INSTITUTIONS 22.0% FINANCIAL SERVICES 11.9% STATE BANKS FEDERAL RESERVE 10.4% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES 8.1% ALL OTHERS 15.8% ROW: 1, COL: 1, VALUE: 15.8 ROW: 1, COL: 2, VALUE: 8.1 ROW: 1, COL: 3, VALUE: 10.4 ROW: 1, COL: 4, VALUE: 11.9 ROW: 1, COL: 5, VALUE: 22.0 ROW: 1, COL: 6, VALUE: 31.8 * * 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. For the six months that ended August 31, 1997, the fund returned 14.41%. This slightly trailed the Standard & Poor's 500 Index, which returned 14.78% over the same period. For the 12 months that ended August 31, 1997, the fund returned 48.17%, while the S&P 500 returned 40.65%. Q. CAN YOU DESCRIBE THE INVESTING CLIMATE FOR FINANCIAL STOCKS AND HOW IT RELATED TO FUND PERFORMANCE? A. Throughout the first quarter of 1997, financial stock investors expressed concern over the direction of interest rates and wondered whether the economy could sustain its steady growth pace. In March, the Federal Reserve Board announced it was raising interest rates by a quarter of a percentage point and, since finance stocks are especially susceptible to rate movement, we witnessed some pretty tough sledding through the end of April. In the spring and early summer, economic news came out indicating that while the economy was still growing at a good clip, the pace had slowed some. Additionally, the Fed indicated no desire to raise rates again, as many had suspected. These developments had a favorable effect on the fund's performance, as investors gradually regained confidence in the sector. As a result, financial stocks bounced back through the end of July. Q. AUGUST WAS A FAIRLY VOLATILE MONTH FOR THE MARKET. WHAT HAPPENED AND HOW WAS THE FUND AFFECTED? A. Part of the reason for the bumpy ride in August was that the large-cap stocks that had been driving the market for so long finally took a break. Several key companies announced earnings disappointments and investors showed their concern by seeking alternatives. At the same time, Citicorp - one of the fund's top positions - suffered from a currency devaluation in Malaysia, where it has substantial operations, raising questions about the company's ability to operate efficiently there. Q. TWO OF THE FUND'S LARGER POSITIONS - BARNETT BANKS AND NATIONSBANK - - WERE INVOLVED IN A SIGNIFICANT MERGER DURING THE PERIOD. WHAT IMPACT DID THIS HAVE ON THE PORTFOLIO? A. The late-August acquisition of the Barnett bank chain by NationsBank caught a lot of industry insiders by surprise. Barnett was a really solid franchise and had a good foothold in the Southeast, one of the nation's better growth regions. On the day the deal was announced, NationsBank stock fell by around 10% and Barnett's stock rose sharply. In order to buy Barnett, NationsBank had to issue 245 million shares in addition to its existing share base. Investor concern centered around the fact that NationsBank may have overpaid for Barnett and, in doing so, may have reduced its future earnings growth rate. Because the fund owned significantly more Barnett stock than NationsBank stock, the immediate effect on the portfolio was positive. Q. WHICH INDIVIDUAL STOCKS PERFORMED WELL? WHICH PROVED DISAPPOINTING? A. First Chicago and Household International - two companies with credit card-related businesses - performed well on the heels of an improving credit situation within the sector. American Express was also a positive contributor. Disappointments included Capital One, a credit-card issuer that experienced scaled-back earnings expectations. Q. WHAT'S YOUR OUTLOOK? A. I think we'll see a continuation of the benign rate environment that existed at the end of the period, and I fully expect the consumer credit situation to keep improving. Enhanced credit conditions would play a big role in prolonging the sector's strong performance. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: December 10, 1981 FUND NUMBER: 066 TRADING SYMBOL: FIDSX SIZE: as of August 31, 1997, more than $436 million MANAGER: Louis Salemy, since 1994; manager, Fidelity Select Brokerage and Investment Management Portfolio, 1995-1997; joined Fidelity in 1992 (checkmark) FINANCIAL SERVICES PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.8% SHARES VALUE (NOTE 1) BANKS - 42.2% NATIONAL COMMERCIAL BANKS - 31.8% Banc One Corp. 449,290 $ 24,093,176 05943810 Bank of New York Co., Inc. 451,068 20,128,910 06405710 Capital One Financial Corp. 291,700 11,230,450 14040H10 Citicorp 190,000 24,248,750 17303410 Comerica, Inc. 109,445 7,750,074 20034010 First Union Corp. 2 96 33735810 Mercantile Bancorp., Inc. 22,050 1,520,070 58734210 National City Corp. 425,000 24,012,500 63540510 NationsBank Corp. 340,000 20,187,500 63858510 Republic New York Corp. 3,000 321,188 76071910 U.S. Bancorp 63 5,516 90297310 Wachovia Corp. 89,500 5,571,375 92977110 139,069,605 STATE BANKS FEDERAL RESERVE - 10.4% Barnett Banks, Inc. 425,600 28,994,000 06805510 Northern Trust Corp. 315,000 16,734,375 66585910 45,728,375 TOTAL BANKS 184,797,980 CREDIT & OTHER FINANCE - 37.2% BANK HOLDING COMPANY OFFICES - 3.3% Fleet Financial Group, Inc. 224,167 14,444,761 33891510 FINANCIAL SERVICES - 11.9% American Express Co. 297,300 23,115,075 02581610 Equitable Companies, Inc. 44,200 1,922,700 29444G10 First Chicago NBD Corp. 375,000 26,906,250 31945A10 51,944,025 PERSONAL CREDIT INSTITUTIONS - 22.0% Associates First Capital Corp. 472,000 27,405,500 04600810 Beneficial Corp. 311,800 22,313,188 08172110 Household International, Inc. 229,300 25,437,969 44181510 MBNA Corp. 550,000 21,140,625 55262L10 96,297,282 TOTAL CREDIT & OTHER FINANCE 162,686,068 FEDERAL SPONSORED CREDIT - 8.1% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 8.1% Federal Home Loan Mortgage Corporation 369,600 12,035,100 31340030 Federal National Mortgage Association 300,000 13,200,000 31358610 SLM Holding Corp. 76,000 10,298,000 78442A10 35,533,100 INSURANCE - 8.3% INSURANCE CARRIERS - 0.8% MGIC Investment Corp. 70,000 3,521,875 55284810 LIFE INSURANCE - 0.4% American Bankers Insurance Group, Inc. 6,400 422,400 02445610 Conseco, Inc. 694 29,842 20846410 Providian Financial Corp. 21,800 812,050 74406A10 Torchmark Corp. 10,000 376,875 89102710 1,641,167 PROPERTY-CASUALTY & REINSURANCE - 7.1% Aegon NV (Reg.) 9,470 703,148 00792410 Allstate Corp. 287,400 20,998,163 02000210 Berkley (W.R.) Corp. 50,000 2,765,625 08442310 SHARES VALUE (NOTE 1) PMI Group, Inc. 50,000 $ 2,890,625 69344M10 Progressive Corp. 40,000 3,960,000 74331510 31,317,561 TOTAL INSURANCE 36,480,603 TOTAL COMMON STOCKS (Cost $307,329,637) 419,497,751 CASH EQUIVALENTS - 4.2% Taxable Central Cash Fund (a) (Cost $18,314,086) 18,314,086 18,314,086 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $325,643,723) $ 437,811,837 LEGEND 1. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $113,457,745 and $135,754,308, 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 $18,336 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, there were no loans outstanding (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 $5,445,000 and $4,251,000, respectively. The weighted average interest rate was 5.9%. Interest expense includes $1,387 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 $21,034,000. The weighted average interest rate was 5.8%. Interest expense includes $3,363 paid under the interfund lending program (see Note 5 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $325,653,109. Net unrealized appreciation aggregated $112,158,728, of which $114,496,211 related to appreciated investment securities and $2,337,483 related to depreciated investment securities. FINANCIAL SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 437,811,837 SECURITIES, AT VALUE (COST $325,643,72 3) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 7,144,667 INVESTMENTS SOLD RECEIVABLE FOR 637,228 FUND SHARES SOLD DIVIDENDS 545,892 RECEIVABLE INTEREST 88,750 RECEIVABLE REDEMPTION FEES 3,938 RECEIVABLE OTHER 9,347 RECEIVABLES TOTAL ASSETS 446,241,659 LIABILITIES PAYABLE FOR $ 9,316,173 FUND SHARES REDEEMED ACCRUED 231,056 MANAGEMENT FEE OTHER PAYABLES 287,907 AND ACCRUED EXPENSES TOTAL LIABILITIES 9,835,136 NET ASSETS $ 436,406,523 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 300,279,924 UNDISTRIBUTED 1,648,602 NET INVESTMENT INCOME ACCUMULATED 22,309,883 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 112,168,114 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 436,406,523 4,829,630 SHARES OUTSTANDING NET ASSET $90.36 VALUE AND REDEMPTION PRICE PER SHARE ($436,406,5 23 (DIVIDED BY) 4,829,630 SHARES) MAXIMUM $93.15 OFFERING PRICE PER SHARE (100/97.00 OF $90.36) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 3,516,427 INCOME DIVIDENDS INTEREST 985,786 (INCLUDING INCOME ON SECURITIES LOANED OF $8,163) TOTAL INCOME 4,502,213 EXPENSES MANAGEMENT $ 1,306,697 FEE TRANSFER AGENT 1,288,309 FEES ACCOUNTING AND 219,644 SECURITY LENDING FEES NON-INTERESTED 927 TRUSTEES' COMPENSATION CUSTODIAN FEES 6,767 AND EXPENSES REGISTRATION FEES 54,456 AUDIT 15,387 LEGAL 845 INTEREST 4,750 MISCELLANEOUS 920 TOTAL EXPENSES 2,898,702 BEFORE REDUCTIONS EXPENSE (37,426) 2,861,276 REDUCTIONS NET INVESTMENT 1,640,937 INCOME REALIZED AND 22,555,571 UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES CHANGE IN NET 30,671,095 UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) 53,226,666 NET INCREASE $ 54,867,603 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 951,563 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 3,759 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 76,920 WITHHELD BY FSC EXPENSE $ 36,449 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 45 CREDITS TRANSFER 932 AGENT CREDITS $ 37,426 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ 1,640,937 $ 2,811,616 NET INVESTMENT INCOME NET REALIZED 22,555,571 37,306,366 GAIN (LOSS) CHANGE IN NET 30,671,095 40,110,184 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 54,867,603 80,228,166 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (836,263) (2,448,822) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (15,229,661) (17,755,935) REALIZED GAIN TOTAL (16,065,924) (20,204,757) DISTRIBUTIONS SHARE 268,348,398 393,395,549 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 15,772,391 19,821,424 OF DISTRIBUTIONS COST OF SHARES (313,466,689) (317,821,398) REDEEMED REDEMPTION 526,557 538,820 FEES NET INCREASE (28,819,343) 95,934,395 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 9,982,336 155,957,804 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 426,424,187 270,466,383 PERIOD END OF PERIOD $ 436,406,523 $ 426,424,187 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $1,648,60 2 AND $1,356,39 8, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 3,209,041 5,282,928 ISSUED IN 216,625 276,585 REINVESTMENT OF DISTRIBUTIONS REDEEMED (3,737,569) (4,534,794) NET INCREASE (311,903) 1,024,719 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 82.94 $ 65.70 $ 48.23 $ 51.24 $ 53.29 $ 42.42 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET .32 .74 1.03 .76 .29 .33 INVESTMENT INCOME D NET REALIZED 10.65 21.55 17.56 .87 5.02 14.30 AND UNREALIZED GAIN (LOSS) TOTAL FROM 10.97 22.29 18.59 1.63 5.31 14.63 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.19) (.63) (.37) (.79) (.20) (.51) INVESTMENT INCOME FROM NET (3.46) (4.56) (.91) (3.93) (7.32) (3.38) REALIZED GAIN TOTAL (3.65) (5.19) (1.28) (4.72) (7.52) (3.89) DISTRIBUTIONS REDEMPTION FEES .10 .14 .16 .08 .16 .13 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 90.36 $ 82.94 $ 65.70 $ 48.23 $ 51.24 $ 53.29 END OF PERIOD TOTAL RETURN B, C 14.41% 35.54% 39.05% 4.72% 10.85% 36.46% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 436,407 $ 426,424 $ 270,466 $ 153,089 $ 116,195 $ 214,612 OF PERIOD (000 OMITTED) RATIO OF 1.32% A 1.45% 1.42% 1.56% 1.64% 1.54% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.30% A, E 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 .75% A 1.03% 1.78% 1.52% .53% .86% A INVESTMENT INCOME TO AVERAGE NET ASSETS PORTFOLIO 56% A 80% 125% 107% 93% 100% A TURNOVER RATE AVERAGE $ .0467 $ .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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS HOME FINANCE 13.52% 52.38% 332.64% 672.17% HOME FINANCE 10.12% 47.81% 319.66% 649.01% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS HOME FINANCE 52.38% 34.04% 22.68% HOME FINANCE 47.81% 33.22% 22.31% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 115404 S00000000000001 Home Finance S&P 500 00098 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9077.64 9781.00 1987/10/31 7311.15 7674.17 1987/11/30 6713.93 7041.82 1987/12/31 7453.54 7577.70 1988/01/31 8352.46 7896.72 1988/02/29 8118.36 8264.71 1988/03/31 7893.63 8009.33 1988/04/30 8024.73 8098.24 1988/05/31 8015.36 8168.69 1988/06/30 8521.00 8543.63 1988/07/31 8670.82 8511.17 1988/08/31 8455.46 8221.79 1988/09/30 8886.19 8572.04 1988/10/31 9139.01 8810.34 1988/11/30 8680.19 8684.35 1988/12/31 8832.14 8836.33 1989/01/31 9572.90 9483.15 1989/02/28 9781.83 9247.02 1989/03/31 9829.32 9462.47 1989/04/30 10332.65 9953.57 1989/05/31 10779.01 10356.69 1989/06/30 10995.97 10297.66 1989/07/31 11379.11 11227.54 1989/08/31 12078.33 11447.60 1989/09/30 12528.51 11400.66 1989/10/31 10967.24 11136.17 1989/11/30 10612.84 11363.35 1989/12/31 9655.85 11636.07 1990/01/31 8855.37 10855.29 1990/02/28 9185.57 10995.32 1990/03/31 9205.58 11286.70 1990/04/30 8985.45 11004.53 1990/05/31 9835.96 12077.47 1990/06/30 9735.90 11995.34 1990/07/31 8895.39 11956.96 1990/08/31 7994.85 10876.05 1990/09/30 7304.43 10346.39 1990/10/31 6754.09 10301.90 1990/11/30 7484.54 10967.40 1990/12/31 8199.46 11273.39 1991/01/31 8983.75 11764.91 1991/02/28 10206.03 12606.10 1991/03/31 10674.57 12911.17 1991/04/30 11041.26 12942.15 1991/05/31 11499.61 13501.25 1991/06/30 10857.92 12882.90 1991/07/31 12019.08 13483.24 1991/08/31 12477.44 13802.79 1991/09/30 12375.58 13572.29 1991/10/31 12161.68 13754.15 1991/11/30 11601.47 13199.86 1991/12/31 13496.77 14709.93 1992/01/31 14826.86 14436.32 1992/02/29 15796.07 14623.99 1992/03/31 15527.99 14338.83 1992/04/30 15857.93 14760.39 1992/05/31 17425.17 14832.71 1992/06/30 17447.00 14611.71 1992/07/31 18304.87 15209.33 1992/08/31 17312.63 14897.53 1992/09/30 17591.70 15073.32 1992/10/31 17922.45 15126.08 1992/11/30 19762.24 15641.88 1992/12/31 21305.02 15834.28 1993/01/31 22833.54 15967.28 1993/02/28 23220.90 16184.44 1993/03/31 24047.98 16525.93 1993/04/30 22745.43 16126.00 1993/05/31 22356.17 16558.18 1993/06/30 22913.76 16606.20 1993/07/31 24386.64 16539.77 1993/08/31 25670.14 17166.63 1993/09/30 27311.35 17034.45 1993/10/31 27521.76 17387.06 1993/11/30 26290.85 17221.88 1993/12/31 27120.22 17430.27 1994/01/31 28307.57 18022.90 1994/02/28 27774.93 17534.48 1994/03/31 27253.38 16769.97 1994/04/30 28307.08 16984.63 1994/05/31 30053.00 17263.18 1994/06/30 30553.49 16840.23 1994/07/31 31228.58 17392.59 1994/08/31 32241.21 18105.69 1994/09/30 31135.46 17662.10 1994/10/31 29273.16 18059.49 1994/11/30 27760.03 17401.77 1994/12/31 27847.34 17659.84 1995/01/31 29074.56 18117.75 1995/02/28 31228.71 18823.80 1995/03/31 31176.49 19379.29 1995/04/30 32808.43 19950.01 1995/05/31 34753.69 20747.42 1995/06/30 35119.25 21229.38 1995/07/31 36529.24 21933.35 1995/08/31 39897.55 21988.40 1995/09/30 40733.10 22916.31 1995/10/31 39988.94 22834.50 1995/11/30 42195.32 23836.93 1995/12/31 42743.27 24296.03 1996/01/31 43911.93 25123.07 1996/02/29 44731.33 25355.96 1996/03/31 45752.22 25600.14 1996/04/30 45168.09 25977.48 1996/05/31 46174.89 26647.44 1996/06/30 46381.77 26748.97 1996/07/31 47209.28 25567.20 1996/08/31 49153.92 26106.41 1996/09/30 51636.44 27575.68 1996/10/31 55263.68 28336.22 1996/11/30 59401.22 30478.15 1996/12/31 58505.25 29874.38 1997/01/31 62306.15 31740.93 1997/02/28 65977.97 31989.78 1997/03/31 59867.84 30675.32 1997/04/30 61662.24 32506.64 1997/05/31 65794.48 34485.64 1997/06/30 71411.27 36030.60 1997/07/31 78129.99 38897.55 1997/08/29 74900.72 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970909 115408 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Home Finance Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $74,901 - a 649.01% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS WASHINGTON MUTUAL, INC. 4.5 CHARTER ONE FINANCIAL CORP. 3.4 GREENPOINT FINANCIAL CORP. 3.0 AHMANSON (H.F.) & CO. 2.6 DIME BANCORP., INC. 2.5 TCF FINANCIAL CORP. 2.5 ASTORIA FINANCIAL CORP. 2.2 CHASE MANHATTAN CORP. 2.2 COMMERCIAL FEDERAL CORP. 2.1 PEOPLES HERITAGE FINANCIAL GROUP, INC. 2.1 TOP INDUSTRIES AS OF AUGUST 31, 1997 SAVINGS BANKS, FEDERAL CHARTER 23.2% NATIONAL COMMERCIAL BANKS 18.9% SAVINGS BANKS & SAVINGS & LOANS 17.3% MORTGAGE BANKERS 8.2% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES 4.1% ALL OTHERS 28.3% ROW: 1, COL: 1, VALUE: 28.3 ROW: 1, COL: 2, VALUE: 4.1 ROW: 1, COL: 3, VALUE: 8.199999999999999 ROW: 1, COL: 4, VALUE: 17.3 ROW: 1, COL: 5, VALUE: 18.9 ROW: 1, COL: 6, VALUE: 23.2 * * 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. For the six-month period that ended August 31, 1997, the fund returned 13.52%. The Standard & Poor's 500 Index returned 14.78% in that same time. For the 12 months that ended August 31, 1997, the fund returned 52.38% while the index returned 40.65%. Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE? A. The fund's performance was hurt early in the period - as the Federal Reserve Board raised interest rates in March - but has rebounded nicely from that point due to positive economic trends, a favorable backdrop in the mortgage finance industry and positive developments concerning individual companies. In the housing area, home prices in the U.S. continued to rise at a modest to healthy pace, supporting both mortgage loan business and credit quality. Many financial services companies - through smarter overall management - continued to improve their profit margins and returns, and experienced rapid earnings growth. Also, more dependable earnings, acquisitions, consolidation and stock buybacks played a key role in helping to support stock valuations. Q. YOU MENTIONED THAT BUSINESS MANAGEMENT HAS IMPROVED. WHAT ARE THRIFTS AND BANKS DOING DIFFERENTLY? A. Company managements are aggressively controlling operating expenses, improving efficiency and taking advantage of fee-income opportunities with customers. Managements also are scrutinizing more closely their lending practices, as well as decisions on how to redeploy capital. If they cannot make loans that will result in a higher profit margin or return, managements are using the capital to buy back their stock, which increases a company's earnings per share. Managements also are using this cash - as well as their stock - to acquire other companies. Ideally, because of excess capital and smarter decision-making, these companies are finding ways to simultaneously grow their loan business, make acquisitions and buy back stock. Q. Q: CAN YOU DISCUSS THE RECENT TRANSACTION INVOLVING GREAT WESTERN, WASHINGTON MUTUAL AND AHMANSON AND EXPLAIN ITS EFFECT ON THE FUND? A. Washington Mutual and Ahmanson engaged in a spirited bidding war for Great Western, an attractive West Coast thrift, with Washington Mutual emerging as the victor. The fund has held all three stocks for quite some time, and the takeover situation boosted the value of each - - it was a win/win/win proposition. Great Western's stock rose on the takeover valuation, while Washington Mutual's stock climbed on the prospects for cost savings and revenue enhancement. Ahmanson's stock rose as well, as its own prospects for strong earnings per share growth and future consolidation involvement played a role. Q. WHICH INDIVIDUAL STOCKS CONTRIBUTED POSITIVELY TO PERFORMANCE? WERE THERE ANY DISAPPOINTMENTS? A. Prior to its conversion to Washington Mutual stock, Great Western was a leading contributor to performance. I'd also add Charter One Financial, Greenpoint Financial, Ahmanson, Green Tree Financial and People's Heritage to the list of big pluses. On the down side, home equity lenders Cityscape and Aames Financial were disappointments. Q. WHAT'S YOUR OUTLOOK? A. The positive, near-term growth outlook for thrifts and banks should remain in place if companies continue the proactive management I've mentioned. In addition, continued acquisitions will keep the industry consolidation trend intact and should support the high valuations we've seen. In terms of the portfolio, I'm pleased with its current allocation and feel confident that the fund can continue to achieve solid returns. 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 August 31, 1997, more than $1.3 billion MANAGER: Bill Rubin, since 1996; manager, Fidelity Select Defense & Aerospace Portfolio, 1994-1997; equity analyst, various industry sectors since 1994; joined Fidelity in 1994 (checkmark) HOME FINANCE PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.6% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 0.6% MISSILES & SPACE VEHICLES - 0.6% Orbital Sciences Corp. (a) 380,100 $ 8,243,419 68556410 AUTOS, TIRES, & ACCESSORIES - 0.5% AUTO DEALERS, GAS STATIONS - RETAIL - 0.5% Ugly Duckling Corp. (a) 475,000 6,590,625 90351210 BANKS - 22.6% COMMERCIAL BANKS, NEC - 0.1% Norwalk Savings Society 35,000 1,220,625 66920410 NATIONAL COMMERCIAL BANKS - 18.9% Advanta Corp. 150,000 4,968,750 00794210 Banc One Corp. 50,200 2,691,975 05943810 Bank of New York Co., Inc. 325,100 14,507,588 06405710 BankBoston Corp. 172,148 14,309,803 06605R10 BankAmerica Corp. 288,600 18,993,488 06605010 Chase Manhattan Corp. 257,500 28,630,781 16161A10 Citicorp 168,800 21,543,100 17303410 Comerica, Inc. 106,400 7,534,450 20034010 CoreStates Financial Corp. 79,900 4,913,850 21869510 First Savings Bank of Washington Bancorp, Inc. 87,000 2,153,250 33620W10 First Tennessee National Corp. 45,000 2,396,250 33716210 First Union Corp. 169,374 8,140,538 33735810 Mellon Bank Corp. 162,600 7,825,125 58550910 National City Corp. 106,721 6,029,737 63540510 NationsBank Corp. 305,300 18,127,188 63858510 Norwest Corp. 105,000 6,030,938 66938010 PNC Financial Corp. 145,000 6,271,250 69347510 Peoples Heritage Financial Group, Inc. 743,500 27,695,375 71114710 Republic New York Corp. 90,900 9,731,981 76071910 Riggs National Corp. 210,000 4,410,000 76657010 St. Francis Capital Corp. 10,000 337,500 78937410 SouthTrust Corp. 40,000 1,790,000 84473010 T.F. Financial Corp. (c) 245,400 4,723,950 87239110 U.S. Bancorp 83,400 7,302,713 90297310 Union Planters Corp. 195,203 10,004,154 90806810 UnionBanCal Corp. 51,900 4,012,519 90890610 Wells Fargo & Co. 23,900 6,076,575 94974010 251,152,828 STATE BANKS FEDERAL RESERVE - 3.6% Crestar Financial Corp. 100,732 4,532,161 22609110 North Fork Bancorp., Inc. 885,016 22,070,087 65942410 R&G Financial Corp. Class B (c) 185,000 6,752,500 74913610 T.R. Financial Corp. 354,600 9,795,825 87263010 Trust Co. of New Jersey 17,000 310,250 89830410 U.S. Trust Corp. 183,240 3,939,660 90290010 47,400,483 TOTAL BANKS 299,773,936 CREDIT & OTHER FINANCE - 16.4% BANK HOLDING COMPANY OFFICES - 3.7% Fleet Financial Group, Inc. 106,400 6,856,150 33891510 Greenpoint Financial Corp. 656,600 40,421,938 39538410 Little Falls Bancorp, Inc. 110,000 1,911,250 53710110 49,189,338 BUSINESS CREDIT - 0.2% Federal Agricultural Mortgage Corp. Class C (non-vtg.) (a) 60,000 2,205,000 31314830 SHARES VALUE (NOTE 1) FINANCIAL SERVICES - 0.7% ContiFinancial Corp. (a) 103,300 $ 3,395,988 21075V10 RCSB Financial, Inc. 95,000 4,643,125 74937110 Wilshire Financial Services Group, Inc. (a) 81,300 1,382,100 97186710 9,421,213 MORTGAGE BANKERS - 8.2% Aames Financial Corp. 882,450 15,718,641 00253A10 Cityscape Financial Corp. (a) 324,900 3,350,531 17877810 Countrywide Credit Industries, Inc. 219,600 7,397,775 22237210 Delta Financial Corp. (a) 413,300 8,136,844 24791810 First Alliance Mortgage Co. (a) 113,500 3,121,250 31793610 Homeside, Inc. 338,100 7,691,775 43760810 IMC Mortgage Co. (a) 270,000 4,505,625 44992310 Imperial Credit Industries (a) 227,000 4,227,875 45272910 Imperial Credit Mortgage Holdings, Inc. 177,800 4,389,438 45292210 Life Financial Corp. 209,200 3,582,550 53184P10 Long Beach Financial Corp. 858,600 9,766,575 54244610 Money Store, Inc. 489,800 13,959,300 60934T10 New Century Financial Corp. 143,400 2,419,875 64352D10 North American Mortgage Co. 383,200 9,915,300 65703710 Resource Bancshares Mortgage Group, Inc. 97,500 1,645,313 76119710 Southern Pacific Funding Corp. (a) 233,000 3,480,438 84357610 United Companies Financial Corp. 212,600 6,059,100 90987010 109,368,205 PERSONAL CREDIT INSTITUTIONS - 3.6% Associates First Capital Corp. 50,000 2,903,125 04600810 Beneficial Corp. 96,200 6,884,313 08172110 FIRSTPLUS Financial Group, Inc. (a) 280,600 12,907,600 33763B10 Green Tree Financial Corp. 575,100 25,268,456 39350510 47,963,494 TOTAL CREDIT & OTHER FINANCE 218,147,250 FEDERAL SPONSORED CREDIT - 4.1% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 4.1% Federal Home Loan Mortgage Corporation 720,600 23,464,538 31340030 Federal National Mortgage Association 588,900 25,911,600 31358610 SLM Holding Corp. 40,900 5,541,950 78442A10 54,918,088 INSURANCE - 2.8% INSURANCE BROKERS & SERVICES - 0.0% Stewart Information Services Corp. 12,900 316,856 86037210 INSURANCE CARRIERS - 0.5% MGIC Investment Corp. 120,000 6,037,500 55284810 LIFE INSURANCE - 0.7% Providian Financial Corp. 102,500 3,818,125 74406A10 SunAmerica, Inc. 101,300 5,457,537 86693010 9,275,662 PROPERTY-CASUALTY & REINSURANCE - 1.6% PMI Group, Inc. 374,600 21,656,563 69344M10 TOTAL INSURANCE 37,286,581 LODGING & GAMING - 1.1% HOTELS, MOTELS, & TOURIST COURTS - 1.1% HFS, Inc. (a) 256,500 14,283,844 40418110 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) REAL ESTATE INVESTMENT TRUSTS - 2.5% Capstead Mortgage Corp. 453,531 $ 11,905,189 14067E10 Criimi Mae, Inc. 92,000 1,535,250 22660310 INMC Mortgage Holdings, Inc. 150,000 3,590,625 44977L10 Ocwen Asset Investment Corp. 200,000 4,675,000 67574M10 Redwood Trust, Inc. 100,142 3,842,949 75807540 Thornburg Mortgage Asset Corp. 302,000 6,983,750 88521810 32,532,763 SAVINGS & LOANS - 42.6% SAVINGS BANKS & SAVINGS & LOANS - 17.3% Andover Bancorp., Inc. 87,500 2,668,750 03425810 Astoria Financial Corp. 604,400 29,086,750 04626510 Bankers Corp. 79,500 2,245,875 06612010 Bay View Capital, Inc. 422,598 10,934,723 07262L10 BostonFed Bancorp, Inc. 11,535 217,723 10117810 Cameron Financial Corp. 110,000 1,911,250 13342510 Charter One Financial Corp. 833,000 45,294,375 16090310 Coast Savings Financial, Inc. (a) 276,800 12,750,100 19039M10 Commercial Federal Corp. 673,550 28,331,197 20164710 First Federal Savings & Loan Association 118,400 3,848,000 31994410 First Financial Corp. of Wisconsin 332,425 10,720,706 32022710 FirstFed Financial Corp. (a) 406,600 13,722,750 33790710 GA Financial, Inc. 292,700 5,488,125 36143710 Golden West Financial Corp. 6,800 559,725 38131710 MAF Bancorp., Inc. 150,000 4,612,500 55261R10 Pamrapo Bancorp, Inc. 35,000 726,250 69773810 Sovereign Bancorp., Inc. 969,020 15,019,810 84590510 TCF Financial Corp. 631,100 33,645,519 87227510 Webster Financial Corp. 118,600 6,270,975 94789010 Westcorp, Inc. 90,900 1,960,031 95790710 230,015,134 SAVINGS BANKS, NO FEDERAL CHARTER - 2.1% Acadiana Bancshares, Inc. (c) 153,300 3,295,950 00428010 Avondale Financial Corp. (a)(c) 297,700 4,242,225 05434110 Dime Financial Corp. (c) 262,800 7,424,100 25432H10 Downey Financial Corp. 129,250 2,859,656 26101810 ITLA Capital Corp. (a) 158,000 2,804,500 45056510 People's Bancshares, Inc. 102,500 1,716,875 70979510 SIS Bancorp., Inc. 189,200 5,534,100 78427E10 27,877,406 SAVINGS BANKS, FEDERAL CHARTER - 23.2% Affiliated Community Bancorp., Inc. 153,750 4,035,938 00818810 Ahmanson (H.F.) & Co. 684,600 34,743,450 00867710 Albank Financial Corp. 207,500 7,988,750 01204610 Bank Plus Corp. (a) 518,000 5,633,250 06444610 Bank United Corp. Class A 569,300 20,565,963 06541210 Carver Bancorp, Inc. (c) 142,000 1,757,250 14687510 Catskill Financial Corp. 80,000 1,310,000 14934810 CenFed Financial Corp. 132,270 4,364,910 15131U10 Citizens First Financial Corp. (a)(c) 174,700 2,751,525 17462310 Coastal Bancorp, Inc. 30,000 885,000 19041P10 D & N Financial Corp. (a) 65,000 1,210,625 23286410 Dime Community Bancorp, Inc. 475,900 9,339,538 25392210 Dime Bancorp., Inc. 1,747,100 33,740,869 25429Q10 First Bergen Bancorp (c) 235,000 4,171,250 31891510 First Defiance Financial Corp. (c) 457,900 6,754,025 32006W10 First Federal Bancshares of Arkansas, Inc. 75,000 1,575,000 32020F10 First Palm Beach Bancorp, Inc. 40,000 1,400,000 33589B10 Flagstar Bancorp, Inc. (c) 320,000 6,280,000 33793010 Golden State Bancorp 602,200 17,388,525 38119710 HF Bancorp, Inc. (a) 115,000 1,681,875 40391010 Haven Bancorp., Inc. 200,400 7,590,150 41935210 SHARES VALUE (NOTE 1) Long Island Bancorp., Inc. 488,300 $ 19,470,963 54266210 ML Bancorp, Inc. 138,900 2,847,450 55305M10 Ocean Financial Corp. 247,500 8,322,188 67490410 Ocwen Financial Corp. 50,000 2,134,375 67574610 PFF Bancorp, Inc. (a) 489,300 9,419,025 69331W10 Provident Financial Holdings, Inc. (a) 180,000 3,465,000 74386810 Quaker City Bancorp (a) 112,500 2,306,250 74731K10 RedFed Bancorp, Inc. (a)(c) 387,500 6,732,813 75734110 SGV Bancorp., Inc. (a)(c) 140,000 2,117,500 78422T10 Washington Federal, Inc. 575,280 15,676,380 93882410 Washington Mutual, Inc. 1,000,015 59,875,886 93932210 Yonkers Financial Corp. 85,000 1,476,875 98607310 309,012,598 TOTAL SAVINGS & LOANS 566,905,138 SECURITIES INDUSTRY - 1.8% SECURITY & COMMODITY BROKERS - 1.7% Advest Group, Inc. (The) 100,100 2,277,275 00756610 Edwards (A.G.), Inc. 100,000 3,975,000 28176010 McDonald & Co. Investments, Inc. 99,300 4,381,613 58004710 Morgan Keegan, Inc. 130,000 3,323,125 61741010 Morgan Stanley Dean Witter Discover and Co. 150,000 7,218,750 61744644 Quick & Reilly Group, Inc. (The) 42,500 1,455,625 74837610 22,631,388 SECURITY BROKERS & DEALERS - 0.1% Interra Financial, Inc. 28,800 1,252,800 46069M10 TOTAL SECURITIES INDUSTRY 23,884,188 SERVICES - 0.6% LEGAL SERVICES - 0.2% Lawyers Title Corp. 104,100 2,901,788 52102910 MANAGEMENT CONSULTING SERVICES - 0.4% Aresco, Inc. (a) 171,000 5,097,938 03190910 Firstmark Corp. (a) 103,400 180,950 33790820 5,278,888 TOTAL SERVICES 8,180,676 TOTAL COMMON STOCKS (Cost $976,572,064) 1,270,746,508 CONVERTIBLE PREFERRED STOCKS - 0.7% REAL ESTATE INVESTMENT TRUSTS - 0.7% Criimi Mae, Inc. $2.71875 179,500 6,877,094 22660320 Walden Residential Properties, Inc., Series B, $2.29 80,000 2,280,000 93121030 TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $7,973,750) 9,157,094 CASH EQUIVALENTS - 3.7% Taxable Central Cash Fund (b) (Cost $49,686,145) 49,686,145 49,686,145 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $1,034,231,959) $ 1,329,589,747 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. Affiliated company (see Note 10 of Notes to Financial Statements) OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $389,848,620 and $355,109,533, 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 $142,929 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 $6,191,000 and $3,951,400, respectively. The weighted average interest rate was 5.8% (see Note 7 of Notes to Financial Statements). 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. $ - $ - $ 27,594 $ 3,295,950 Avondale Financial Corp. 667,400 1,284,963 - 4,242,225 Carver Bancorp, Inc. - - 7,100 1,757,250 Citizens First Financial Corp. - - - 2,751,525 Dime Financial Corp. - 96,563 52,560 7,424,100 First Bergen Bancorp - - 14,100 4,171,250 First Defiance Financial Corp. - 282,813 76,464 6,754,025 Flagstar Bancorp, Inc. 270,000 - - 6,280,000 R&G Financial Corp. Class B 985,625 - 12,904 6,752,500 RedFed Bancorp, Inc. 312,500 - - 6,732,813 SGV Bancorp., Inc. - - - 2,117,500 TF Financial Corp. - 73,125 49,080 4,723,950 Wilshire Financial Services Group, Inc. - - - - Totals $ 2,235,525 $ 1,737,464 $ 239,802 $ 57,003,088 INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $1,034,578,609. Net unrealized appreciation aggregated $295,011,138, of which $309,980,053 related to appreciated investment securities and $14,968,915 related to depreciated investment securities. HOME FINANCE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 1,329,589,747 SECURITIES, AT VALUE (COST $1,034,231, 959) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 1,504,864 INVESTMENTS SOLD RECEIVABLE FOR 3,503,098 FUND SHARES SOLD DIVIDENDS 1,060,359 RECEIVABLE INTEREST 241,069 RECEIVABLE REDEMPTION FEES 7,028 RECEIVABLE OTHER 35,856 RECEIVABLES TOTAL ASSETS 1,335,942,021 LIABILITIES PAYABLE FOR $ 29,756 INVESTMENTS PURCHASED PAYABLE FOR 13,529,714 FUND SHARES REDEEMED ACCRUED 676,701 MANAGEMENT FEE OTHER PAYABLES 696,050 AND ACCRUED EXPENSES TOTAL LIABILITIES 14,932,221 NET ASSETS $ 1,321,009,800 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 941,341,737 UNDISTRIBUTED 4,169,881 NET INVESTMENT INCOME ACCUMULATED 80,140,394 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 295,357,788 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 1,321,009,800 26,991,768 SHARES OUTSTANDING NET ASSET $48.94 VALUE AND REDEMPTION PRICE PER SHARE ($1,321,009, 800 (DIVIDED BY) 26,991,768 SHARES) MAXIMUM $50.45 OFFERING PRICE PER SHARE (100/97.00 OF $48.94) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 9,699,840 INCOME DIVIDENDS (INCLUDING $239,802 RECEIVED FROM AFFILIATED ISSUERS) INTEREST 1,380,458 TOTAL INCOME 11,080,298 EXPENSES MANAGEMENT $ 3,426,860 FEE TRANSFER AGENT 3,147,844 FEES ACCOUNTING FEES 390,061 AND EXPENSES NON-INTERESTED 2,381 TRUSTEES' COMPENSATION CUSTODIAN FEES 37,967 AND EXPENSES REGISTRATION FEES 49,401 AUDIT 23,791 LEGAL 2,379 INTEREST 3,195 MISCELLANEOUS 3,833 TOTAL EXPENSES 7,087,712 BEFORE REDUCTIONS EXPENSE (101,863) 6,985,849 REDUCTIONS NET INVESTMENT 4,094,449 INCOME REALIZED AND 80,640,475 UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES (INCLUDING REALIZED GAIN OF $240,404 ON SALES OF INVESTMENTS IN AFFILIATED ISSUERS) CHANGE IN NET 51,515,437 UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) 132,155,912 NET INCREASE $ 136,250,361 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 4,432,761 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 3,273 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 131,625 WITHHELD BY FSC EXPENSE $ 90,480 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 5,972 CREDITS TRANSFER 5,411 AGENT CREDITS $ 101,863 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ 4,094,449 $ 9,748,801 NET INVESTMENT INCOME NET REALIZED 80,640,475 116,726,321 GAIN (LOSS) CHANGE IN NET 51,515,437 155,888,034 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 136,250,361 282,363,156 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (3,115,273) (6,671,424) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (55,297,244) (44,835,125) REALIZED GAIN TOTAL (58,412,517) (51,506,549) DISTRIBUTIONS SHARE 560,037,727 1,276,779,331 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 57,568,932 50,762,550 OF DISTRIBUTIONS COST OF SHARES (552,210,699) (999,588,979) REDEEMED REDEMPTION 947,966 983,081 FEES NET INCREASE 66,343,926 328,935,983 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 144,181,770 559,792,590 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 1,176,828,030 617,035,440 PERIOD END OF PERIOD $ 1,321,009,800 $ 1,176,828,030 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $4,169,88 1 AND $4,942,44 1, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 12,214,689 32,961,709 ISSUED IN 1,467,475 1,354,504 REINVESTMENT OF DISTRIBUTIONS REDEEMED (12,272,981) (27,265,709) NET INCREASE 1,409,183 7,050,504 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 46.00 $ 33.30 $ 23.92 $ 25.03 $ 22.18 $ 15.38 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET .16 .53 .53 .20 .03 .09 INVESTMENT INCOME D NET REALIZED 5.37 14.60 9.72 2.34 4.15 6.80 AND UNREALIZED GAIN (LOSS) TOTAL FROM 5.53 15.13 10.25 2.54 4.18 6.89 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.14) (.32) (.19) (.12) (.01) (.01) INVESTMENT INCOME FROM NET (2.49) (2.16) (.73) (3.60) (1.40) (.28) REALIZED GAIN TOTAL (2.63) (2.48) (.92) (3.72) (1.41) (.29) DISTRIBUTIONS REDEMPTION FEES .04 .05 .05 .07 .08 .20 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 48.94 $ 46.00 $ 33.30 $ 23.92 $ 25.03 $ 22.18 END OF PERIOD TOTAL RETURN B, C 13.52% 47.50% 43.24% 12.43% 19.61% 46.43% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 1,321,010 $ 1,176,828 $ 617,035 $ 229,924 $ 155,563 $ 337,903 OF PERIOD (000 OMITTED) RATIO OF 1.23% A 1.38% 1.35% 1.47% 1.58% 1.55% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.21% A, E 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 .71% A 1.41% 1.80% .80% .11% .61% A INVESTMENT INCOME TO AVERAGE NET ASSETS PORTFOLIO 64% A 78% 81% 124% 95% 61% A TURNOVER RATE AVERAGE $ .0410 $ .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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS INSURANCE 18.70% 47.34% 165.95% 328.89% INSURANCE 15.14% 42.92% 157.97% 316.02% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS INSURANCE 47.34% 21.61% 15.67% INSURANCE 42.92% 20.87% 15.32% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 115550 S00000000000001 Insurance S&P 500 00045 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9700.00 9781.00 1987/10/31 7878.33 7674.17 1987/11/30 7325.60 7041.82 1987/12/31 7501.67 7577.70 1988/01/31 8078.72 7896.72 1988/02/29 8070.81 8264.71 1988/03/31 7881.10 8009.33 1988/04/30 7825.76 8098.24 1988/05/31 8039.19 8168.69 1988/06/30 8402.81 8543.63 1988/07/31 8442.34 8511.17 1988/08/31 8529.29 8221.79 1988/09/30 8821.77 8572.04 1988/10/31 8782.25 8810.34 1988/11/30 8592.53 8684.35 1988/12/31 8807.07 8836.33 1989/01/31 9476.57 9483.15 1989/02/28 9540.33 9247.02 1989/03/31 9763.50 9462.47 1989/04/30 10082.30 9953.57 1989/05/31 10138.09 10356.69 1989/06/30 10361.16 10297.66 1989/07/31 11231.25 11227.54 1989/08/31 11574.49 11447.60 1989/09/30 11734.14 11400.66 1989/10/31 12117.29 11136.17 1989/11/30 12444.57 11363.35 1989/12/31 12138.89 11636.07 1990/01/31 11108.53 10855.29 1990/02/28 11422.47 10995.32 1990/03/31 11366.12 11286.70 1990/04/30 10971.69 11004.53 1990/05/31 11977.89 12077.47 1990/06/30 12010.09 11995.34 1990/07/31 11833.00 11956.96 1990/08/31 10601.40 10876.05 1990/09/30 9683.74 10346.39 1990/10/31 9297.36 10301.90 1990/11/30 10528.95 10967.40 1990/12/31 10947.54 11273.39 1991/01/31 11535.16 11764.91 1991/02/28 12702.36 12606.10 1991/03/31 13539.53 12911.17 1991/04/30 13467.08 12942.15 1991/05/31 13805.16 13501.25 1991/06/30 12946.99 12882.90 1991/07/31 13427.72 13483.24 1991/08/31 13346.24 13802.79 1991/09/30 13476.60 13572.29 1991/10/31 13884.00 13754.15 1991/11/30 13761.78 13199.86 1991/12/31 14963.13 14709.93 1992/01/31 14946.78 14436.32 1992/02/29 15347.43 14623.99 1992/03/31 15126.66 14338.83 1992/04/30 14742.36 14760.39 1992/05/31 14938.60 14832.71 1992/06/30 15251.13 14611.71 1992/07/31 16115.24 15209.33 1992/08/31 15643.10 14897.53 1992/09/30 16471.57 15073.32 1992/10/31 17175.33 15126.08 1992/11/30 17763.29 15641.88 1992/12/31 18330.02 15834.28 1993/01/31 19096.40 15967.28 1993/02/28 19457.05 16184.44 1993/03/31 20484.90 16525.93 1993/04/30 19997.46 16126.00 1993/05/31 19482.38 16558.18 1993/06/30 19690.22 16606.20 1993/07/31 20376.98 16539.77 1993/08/31 21416.17 17166.63 1993/09/30 21488.46 17034.45 1993/10/31 20864.95 17387.06 1993/11/30 19590.82 17221.88 1993/12/31 19828.76 17430.27 1994/01/31 20096.05 18022.90 1994/02/28 19214.99 17534.48 1994/03/31 18314.13 16769.97 1994/04/30 18512.12 16984.63 1994/05/31 19363.48 17263.18 1994/06/30 19254.59 16840.23 1994/07/31 19610.97 17392.59 1994/08/31 20145.55 18105.69 1994/09/30 20006.95 17662.10 1994/10/31 19759.46 18059.49 1994/11/30 18759.61 17401.77 1994/12/31 19759.46 17659.84 1995/01/31 20472.23 18117.75 1995/02/28 21095.90 18823.80 1995/03/31 21432.48 19379.29 1995/04/30 21630.49 19950.01 1995/05/31 22106.54 20747.42 1995/06/30 22800.78 21229.38 1995/07/31 23485.10 21933.35 1995/08/31 24169.42 21988.40 1995/09/30 25369.46 22916.31 1995/10/31 24605.80 22834.50 1995/11/30 26073.62 23836.93 1995/12/31 26637.66 24296.03 1996/01/31 27413.32 25123.07 1996/02/29 27321.46 25355.96 1996/03/31 27015.28 25600.14 1996/04/30 26680.20 25977.48 1996/05/31 27219.40 26647.44 1996/06/30 27706.76 26748.97 1996/07/31 27094.97 25567.20 1996/08/31 28235.59 26106.41 1996/09/30 29614.71 27575.68 1996/10/31 31170.10 28336.22 1996/11/30 33088.42 30478.15 1996/12/31 32952.51 29874.38 1997/01/31 34306.28 31740.93 1997/02/28 35047.63 31989.78 1997/03/31 33156.65 30675.32 1997/04/30 35113.46 32506.64 1997/05/31 37693.18 34485.64 1997/06/30 40453.14 36030.60 1997/07/31 43866.48 38897.55 1997/08/29 41602.19 36718.51 IMATRL PRASUN SHR__CHT 19970831 19970909 115553 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Insurance Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $41,602 - a 316.02% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS HARTFORD FINANCIAL SERVICES GROUP, INC. 4.5 ALLSTATE CORP. 4.4 AMERICAN INTERNATIONAL GROUP, INC. 4.4 CIGNA CORP. 4.0 SUNAMERICA, INC. 3.4 AMERICAN BANKERS INSURANCE GROUP, INC. 3.2 PROGRESSIVE CORP. 3.1 TRAVELERS GROUP, INC. (THE) 3.0 UNUM CORP. 2.9 FRONTIER INSURANCE GROUP, INC. 2.7 TOP INDUSTRIES AS OF AUGUST 31, 1997 ROW: 1, COL: 1, VALUE: 14.4 ROW: 1, COL: 2, VALUE: 4.8 ROW: 1, COL: 3, VALUE: 5.8 ROW: 1, COL: 4, VALUE: 7.4 ROW: 1, COL: 5, VALUE: 21.5 ROW: 1, COL: 6, VALUE: 46.1 PROPERTY-CASUALTY & REINSURANCE 46.1% LIFE INSURANCE 21.5% INSURANCE CARRIERS 7.4% MULTI-LINE INSURANCE 5.8% INSURANCE BROKERS & SERVICES 4.8% ALL OTHERS 14.4% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS INSURANCE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Thomas Allen, Portfolio Manager of Fidelity Select Insurance Portfolio Q. HOW DID THE FUND PERFORM, TOM? A. For the six months that ended on August 31, 1997, the fund had a total return of 18.70%. For the 12 months, the fund returned 47.34%. During the same periods, the Standard & Poor's 500 Index returned 14.78% and 40.65%, respectively. Q. WHAT WAS THE INVESTMENT ENVIRONMENT LIKE DURING THIS PERIOD? A. We've had the best of all worlds: good earnings and industry consolidation. We've also had a relatively benign interest-rate environment, which has been particularly important in the interest-rate-sensitive insurance industry. Both the property and casualty companies and the life insurance companies had strong earnings growth as well as price/earnings (P/E) expansion, as the market has been willing to pay more for their earnings. Q. HOW DID PROPERTY AND CASUALTY COMPANIES DO IN THIS ENVIRONMENT? A. They had relatively strong results, helped by modest claim losses. An absence of major storms helped this area, as well as limited automobile claim losses. Given this favorable loss pattern, companies with strong balance sheets have been able to release money from reserves set aside to cover losses and to treat this money as current income. The only area that could be better is revenue growth. The property and casualty industry is over-capitalized. When you have too much capital in this industry, you have too much capacity and you see price competition, which limits premium growth. So far, this hasn't shown up in earnings. Q. HOW DID LIFE INSURANCE COMPANIES DO? A. Life insurance companies have done well. They have continued to undergo consolidation, particularly among small- and mid-cap companies. Life companies also have experienced P/E multiple expansion and delivered strong earnings growth. They are now being seen as asset gatherers, similar to mutual fund companies, particularly because of the strength of annuities, which are a retirement savings product similar to mutual funds, but with an insurance wrapper. Q. WHAT COMPANIES, IN PARTICULAR, CONTRIBUTED TO THE FUND'S STRONG PERFORMANCE? A. The fund had four small- and mid-cap companies that were taken over by larger companies, and this helped performance. The portfolio companies that were acquired were Equitable of Iowa, Integon, Western National and Unionamerica. We also were helped by the performance of large-cap companies, notably American International Group and two automobile insurers, Allstate Corporation and Progressive Corp. (Ohio). Q. WERE THERE ANY DISAPPOINTMENTS? A. In hindsight, the main disappointment was the relatively poor performance of a handful of small specialty companies. Lately, though, the smaller-cap companies appeared to be gaining momentum. Q. WHAT IS YOUR OUTLOOK, AND HOW DOES THIS OUTLOOK AFFECT YOUR STRATEGY? A. Insurance stocks are very interest-rate sensitive, more interest-rate sensitive than the market as a whole. Regardless of the individual company business prospects, if interest rates increase in the short term, I would expect this group to underperform because the stocks tend to trade like bond surrogates. Longer term, the outlook for the fund is to invest in good underwriters with top-line revenue growth. I am looking for growth at a reasonable price. In the property and casualty group, I'm also focusing on companies with strong balance sheets. As the pricing environment worsens, companies with strong balance sheets have greater ability to make good on their earnings estimates. Consolidation should continue among insurance companies, and the fund will be interested in selected acquisition candidates. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: DECEMBER 16, 1985 FUND NUMBER: 045 TRADING SYMBOL: FSPCX SIZE: AS OF AUGUST 31, 1997, MORE THAN $138 MILLION MANAGER: TOM ALLEN, SINCE FEBRUARY 1997; ANALYST, PROPERTY, CASUALTY AND MULTI-LINE INSURANCE, SINCE 1995; JOINED FIDELITY IN 1995 (CHECKMARK) INSURANCE PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 96.7% SHARES VALUE (NOTE 1) CREDIT & OTHER FINANCE - 2.2% FINANCIAL SERVICES - 1.8% Equitable Companies, Inc. 23,000 $ 1,000,496 29444G10 Transamerica Corp. 15,600 1,537,575 89348510 2,538,071 MORTGAGE BANKERS - 0.4% Triad Guaranty, Inc. (a) 8,700 487,200 89592510 TOTAL CREDIT & OTHER FINANCE 3,025,271 HOLDING COMPANIES - 2.4% Leucadia National Corp. 58,700 1,871,063 52728810 Partner Re Ltd. 36,400 1,446,900 70299522 3,317,963 INSURANCE - 92.1% ACCIDENT & HEALTH INSURANCE - 3.9% Aetna, Inc. 30,200 2,882,213 00811710 Provident Companies, Inc. 17,400 1,133,175 74386210 UICI (a) 45,700 1,371,000 90273710 5,386,388 INSURANCE BROKERS & SERVICES - 4.8% Frontier Insurance Group, Inc. 107,780 3,772,300 35908110 Gallagher (Arthur J.) & Co. 34,900 1,247,675 36357610 Marsh & McLennan Companies, Inc. 13,800 941,850 57174810 Mutual Risk Management Ltd. 12,600 582,750 62835110 Poe & Associates, Inc. 2,200 81,950 73044410 6,626,525 INSURANCE CARRIERS - 7.4% AFLAC, Inc. 62,400 3,435,900 00105510 AMBAC, Inc. 28,100 2,270,831 02313910 Blanch E.W. Holdings, Inc. 52,400 1,539,250 09321010 MBIA, Inc. 13,217 1,496,825 55262C10 MGIC Investment Corp. 28,400 1,428,875 55284810 10,171,681 LIFE INSURANCE - 21.5% American Bankers Insurance Group, Inc. 66,000 4,356,000 02445610 American Heritage Life Investment Corp. 7,600 268,375 02652210 Amerus Life Holdings, Inc. 6,932 199,295 03073210 Amvestors Financial Corp. 24,600 581,175 03234330 Aon Corp. 54,100 2,755,719 03738910 Life USA Holding, Inc. (a) 64,500 975,563 53191820 Life RE Corp. 7,500 384,844 53216010 Penn Treaty American Corp. (a) 9,000 289,125 70787410 Protective Life Corp. 21,900 1,089,525 74367410 Providian Financial Corp. 100,200 3,732,450 74406A10 Reliastar Financial Corp. 25,474 1,904,182 75952U10 SunAmerica, Inc. 128,700 4,622,475 86693010 Torchmark Corp. 91,100 3,433,331 89102710 UNUM Corp. 95,500 3,939,375 90319210 Western National Corp. 35,100 978,413 95884510 29,509,847 MULTI-LINE INSURANCE - 5.8% American Financial Group, Inc. 44,500 1,924,625 02608W10 CIGNA Corp. 30,200 5,537,925 12550910 Exel Ltd. 8,400 460,950 30199F22 7,923,500 PROPERTY-CASUALTY & REINSURANCE - 46.1% Acceptance Insurance Co., Inc. 10,900 242,525 00430810 ACE Ltd. 40,200 3,341,625 00499G92 Allmerica Financial Corp. 6,300 260,663 01975410 SHARES VALUE (NOTE 1) Allstate Corp. 83,100 $ 6,071,494 02000210 American International Group, Inc. 64,000 6,040,000 02687410 Berkley (W.R.) Corp. 2,500 138,281 08442310 Capital Re Corp. 29,300 1,488,806 14043210 Chubb Corp. (The) 51,700 3,457,438 17123210 Enhance Financial Services Group Corp. 46,000 2,127,500 29331010 Executive Risk, Inc. 19,900 1,150,469 30158610 Fremont General Corp. 28,900 1,152,388 35728810 General Re Corp. 11,100 2,152,013 37056310 HCC Insurance Holdings Inc. 54,200 1,432,913 40413210 Hartford Financial Services Group, Inc. 77,900 6,212,525 41651510 Highlands Insurance Group, Inc. (a) 10,500 247,406 43103210 Horace Mann Educators Corp. 15,500 846,688 44032710 Mercury General Corp. 15,100 1,321,250 58940010 Mid Ocean Ltd. 17,900 1,015,825 59599D23 NAC Re Corp. 14,600 688,025 62890710 Old Republic International Corp. 41,500 1,491,406 68022310 PMI Group, Inc. 58,000 3,353,125 69344M10 Philadelphia Consolidated Holding Corp. (a) 34,000 1,406,750 71752810 Progressive Corp. 42,500 4,207,500 74331510 Reinsurance Group of America, Inc. 21,300 851,112 75935110 St. Paul Companies, Inc. (The) 11,600 851,150 79286010 Selective Insurance Group, Inc. 7,600 374,300 81630010 Transatlantic Holdings, Inc. 23,300 1,647,019 89352110 Travelers Group, Inc. (The) 64,566 4,099,941 89419010 USF&G Corp. 52,800 1,158,300 90329010 Terra Nova (Bermuda) Holdings Ltd. 33,800 764,725 90699Q22 Unionamerica Holdings PLC sponsored ADR 44,900 898,000 90904810 Vesta Insurance Group Corp. 56,000 2,761,500 92539110 63,252,662 SURETY INSURANCE - 2.6% Amerin Corp. (a) 8,000 185,000 03070X10 CapMAC Holdings, Inc. 80,000 2,220,000 14064910 MMI Companies, Inc. 36,300 909,769 55308710 Penn-America Group, Inc. 11,200 204,400 70724710 3,519,169 TOTAL INSURANCE 126,389,772 TOTAL COMMON STOCKS (Cost $120,452,989) 132,733,006 CASH EQUIVALENTS - 3.3% Taxable Central Cash Fund (b) (Cost $4,576,671) 4,576,671 4,576,671 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $125,029,660) $ 137,309,677 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $133,461,507 and $56,066,619, 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 $20,823 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $125,061,650. Net unrealized appreciation aggregated $12,248,027, of which $13,762,059 related to appreciated investment securities and $1,514,032 related to depreciated investment securities. INSURANCE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 137,309,677 SECURITIES, AT VALUE (COST $125,029,66 0) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 8,685,482 INVESTMENTS SOLD RECEIVABLE FOR 391,726 FUND SHARES SOLD DIVIDENDS 118,536 RECEIVABLE INTEREST 29,083 RECEIVABLE REDEMPTION FEES 1,248 RECEIVABLE TOTAL ASSETS 146,535,752 LIABILITIES PAYABLE FOR $ 8,027,961 FUND SHARES REDEEMED ACCRUED 79,784 MANAGEMENT FEE OTHER PAYABLES 130,753 AND ACCRUED EXPENSES TOTAL LIABILITIES 8,238,498 NET ASSETS $ 138,297,254 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 117,241,020 UNDISTRIBUTED 7,556 NET INVESTMENT INCOME ACCUMULATED 8,768,661 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 12,280,017 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 138,297,254 3,744,649 SHARES OUTSTANDING NET ASSET $36.93 VALUE AND REDEMPTION PRICE PER SHARE ($138,297,2 54 (DIVIDED BY) 3,744,649 SHARES) MAXIMUM $38.07 OFFERING PRICE PER SHARE (100/97.00 OF $36.93) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 554,662 INCOME DIVIDENDS INTEREST 188,198 TOTAL INCOME 742,860 EXPENSES MANAGEMENT $ 294,496 FEE TRANSFER AGENT 321,066 FEES ACCOUNTING FEES 52,964 AND EXPENSES NON-INTERESTED 157 TRUSTEES' COMPENSATION CUSTODIAN FEES 7,599 AND EXPENSES REGISTRATION FEES 60,252 AUDIT 9,822 LEGAL 95 MISCELLANEOUS 113 TOTAL EXPENSES 746,564 BEFORE REDUCTIONS EXPENSE (8,880) 737,684 REDUCTIONS NET INVESTMENT 5,176 INCOME REALIZED AND 8,814,620 UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES CHANGE IN NET 6,897,556 UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) 15,712,176 NET INCREASE $ 15,717,352 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 359,940 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 134 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 23,610 WITHHELD BY FSC EXPENSE $ 8,776 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 104 CREDITS $ 8,880 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ 5,176 $ 17,362 NET INVESTMENT INCOME NET REALIZED 8,814,620 5,349,488 GAIN (LOSS) CHANGE IN NET 6,897,556 2,095,799 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 15,717,352 7,462,649 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO - (35,964) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (1,679,356) (1,652,709) REALIZED GAIN TOTAL (1,679,356) (1,688,673) DISTRIBUTIONS SHARE 163,747,222 82,947,138 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 1,650,586 1,660,671 OF DISTRIBUTIONS COST OF SHARES (83,614,297) (87,137,695) REDEEMED REDEMPTION 108,874 129,084 FEES NET INCREASE 81,892,385 (2,400,802) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 95,930,381 3,373,174 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 42,366,873 38,993,699 PERIOD END OF PERIOD $ 138,297,254 $ 42,366,873 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $7,556 AND $5,935, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 4,697,329 2,922,405 ISSUED IN 55,575 58,747 REINVESTMENT OF DISTRIBUTIONS REDEEMED (2,307,248) (3,138,702) NET INCREASE 2,445,656 (157,550) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 32.62 $ 26.77 $ 21.31 $ 19.41 $ 21.58 $ 18.03 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET - .01 .06 .05 - (.04) INVESTMENT INCOME (LOSS) D NET REALIZED 5.71 7.21 6.15 1.78 (.24) 5.12 AND UNREALIZED GAIN (LOSS) TOTAL FROM 5.71 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 (1.44) (1.45) (.72) - (1.96) (1.71) REALIZED GAIN TOTAL (1.44) (1.48) (.79) - (1.97) (1.74) DISTRIBUTIONS REDEMPTION FEES .04 .11 .04 .07 .04 .21 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 36.93 $ 32.62 $ 26.77 $ 21.31 $ 19.41 $ 21.58 END OF PERIOD TOTAL RETURN B, C 18.70% 28.28% 29.51% 9.79% (1.24)% 31.98% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 138,297 $ 42,367 $ 38,994 $ 21,838 $ 18,419 $ 26,367 OF PERIOD (000 OMITTED) RATIO OF 1.49% A 1.82% 1.77% 2.36% 1.93% 2.49% A, F EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.48% A, E 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 .01% A .05% .26% .25% (.02)% (.26)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 122% A 142% 164% 265% 101% 81% A TURNOVER RATE AVERAGE $ .0351 $ .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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS REGIONAL BANKS 11.93% 48.01% 246.06% 615.43% REGIONAL BANKS 8.57% 43.57% 235.68% 593.97% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS REGIONAL BANKS 48.01% 28.18% 21.75% REGIONAL BANKS 43.57% 27.40% 21.38% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 145939 S00000000000001 Regional Banks S&P 500 00507 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9448.55 9781.00 1987/10/31 7901.20 7674.17 1987/11/30 7649.75 7041.82 1987/12/31 8007.28 7577.70 1988/01/31 8574.25 7896.72 1988/02/29 8793.08 8264.71 1988/03/31 8992.02 8009.33 1988/04/30 8892.55 8098.24 1988/05/31 9051.70 8168.69 1988/06/30 9688.31 8543.63 1988/07/31 9738.04 8511.17 1988/08/31 9608.73 8221.79 1988/09/30 9976.77 8572.04 1988/10/31 10096.13 8810.34 1988/11/30 9847.46 8684.35 1988/12/31 10065.58 8836.33 1989/01/31 10704.67 9483.15 1989/02/28 10864.44 9247.02 1989/03/31 11759.16 9462.47 1989/04/30 12068.05 9953.57 1989/05/31 12994.72 10356.69 1989/06/30 12778.58 10297.66 1989/07/31 13915.88 11227.54 1989/08/31 14259.22 11447.60 1989/09/30 14377.24 11400.66 1989/10/31 13046.81 11136.17 1989/11/30 13025.35 11363.35 1989/12/31 12747.68 11636.07 1990/01/31 11599.13 10855.29 1990/02/28 12076.75 10995.32 1990/03/31 11781.08 11286.70 1990/04/30 11110.15 11004.53 1990/05/31 11883.43 12077.47 1990/06/30 11417.19 11995.34 1990/07/31 10723.51 11956.96 1990/08/31 9722.80 10876.05 1990/09/30 8540.15 10346.39 1990/10/31 8289.97 10301.90 1990/11/30 9393.02 10967.40 1990/12/31 10112.83 11273.39 1991/01/31 10783.93 11764.91 1991/02/28 11698.02 12606.10 1991/03/31 12357.55 12911.17 1991/04/30 13190.64 12942.15 1991/05/31 14046.88 13501.25 1991/06/30 13213.78 12882.90 1991/07/31 14313.00 13483.24 1991/08/31 15342.80 13802.79 1991/09/30 15041.96 13572.29 1991/10/31 15666.78 13754.15 1991/11/30 14949.39 13199.86 1991/12/31 16766.35 14709.93 1992/01/31 17815.01 14436.32 1992/02/29 19253.86 14623.99 1992/03/31 18985.60 14338.83 1992/04/30 20095.23 14760.39 1992/05/31 20948.79 14832.71 1992/06/30 21157.82 14611.71 1992/07/31 21182.36 15209.33 1992/08/31 20053.29 14897.53 1992/09/30 20986.00 15073.32 1992/10/31 21881.89 15126.08 1992/11/30 23673.68 15641.88 1992/12/31 24901.79 15834.28 1993/01/31 25939.36 15967.28 1993/02/28 26746.37 16184.44 1993/03/31 27886.42 16525.93 1993/04/30 26450.81 16126.00 1993/05/31 26192.25 16558.18 1993/06/30 27653.12 16606.20 1993/07/31 27730.69 16539.77 1993/08/31 28118.53 17166.63 1993/09/30 29088.13 17034.45 1993/10/31 27523.84 17387.06 1993/11/30 26657.66 17221.88 1993/12/31 27683.94 17430.27 1994/01/31 29298.45 18022.90 1994/02/28 28475.37 17534.48 1994/03/31 28000.51 16769.97 1994/04/30 29484.27 16984.63 1994/05/31 30957.69 17263.18 1994/06/30 30188.95 16840.23 1994/07/31 30989.72 17392.59 1994/08/31 31790.49 18105.69 1994/09/30 29900.67 17662.10 1994/10/31 29772.55 18059.49 1994/11/30 27850.71 17401.77 1994/12/31 27744.35 17659.84 1995/01/31 29141.79 18117.75 1995/02/28 30692.61 18823.80 1995/03/31 30948.24 19379.29 1995/04/30 31715.13 19950.01 1995/05/31 33794.25 20747.42 1995/06/30 34220.30 21229.38 1995/07/31 35549.58 21933.35 1995/08/31 36878.85 21988.40 1995/09/30 38548.97 22916.31 1995/10/31 38361.51 22834.50 1995/11/30 40559.92 23836.93 1995/12/31 40719.75 24296.03 1996/01/31 42051.04 25123.07 1996/02/29 43258.08 25355.96 1996/03/31 44536.12 25600.14 1996/04/30 44155.79 25977.48 1996/05/31 44902.35 26647.44 1996/06/30 44556.38 26748.97 1996/07/31 44629.22 25567.20 1996/08/31 46887.08 26106.41 1996/09/30 49199.57 27575.68 1996/10/31 52349.65 28336.22 1996/11/30 56774.34 30478.15 1996/12/31 55332.66 29874.38 1997/01/31 59413.19 31740.93 1997/02/28 62001.30 31989.78 1997/03/31 57826.32 30675.32 1997/04/30 60962.36 32506.64 1997/05/31 63109.05 34485.64 1997/06/30 66699.54 36030.60 1997/07/31 73880.53 38897.55 1997/08/29 69397.16 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970909 145959 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Regional Banks Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $69,397 - a 593.97% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS BANKAMERICA CORP. 7.5 U.S. BANCORP 6.3 BANK OF NEW YORK CO., INC. 5.5 NATIONSBANK CORP. 5.4 FIRST CHICAGO NBD CORP. 5.3 CITICORP 5.2 WELLS FARGO & CO. 5.1 BANC ONE CORP. 4.0 FIRST UNION CORP. 3.9 COMERICA, INC. 3.9 TOP REGIONS AS OF AUGUST 31, 1997 WEST 17.3% NORTHEAST 13.8% MIDWEST 15.1% MULTI-REGIONAL 11.6% MONEY CENTER 11.5% ALL OTHERS 30.8% ROW: 1, COL: 1, VALUE: 30.8 ROW: 1, COL: 2, VALUE: 11.5 ROW: 1, COL: 3, VALUE: 11.6 ROW: 1, COL: 4, VALUE: 15.1 ROW: 1, COL: 5, VALUE: 13.8 ROW: 1, COL: 6, VALUE: 17.3 * * 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. HOW DID THE FUND PERFORM, JOHN? A. For the six-month period that ended August 31, 1997, the fund returned 11.93%. The Standard & Poor's 500 Index returned 14.78% in that same time span. For the 12 months ended August 31, 1997, the fund returned 48.01%, while the S&P returned 40.65%. Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE? A. Though the fund trailed its index over the past six months, I would still characterize the past six months as being a positive period for bank stocks. While the interest-rate hike by the Federal Reserve Board in March hurt the sector, the same climate I've mentioned in previous reports remained intact. Banks continued to generate strong earnings growth - some have been able to produce revenue growth two to three times greater than their expenses - and they've done so on a consistent basis. The market has begun to realize this consistency, and investors have displayed prolonged confidence in the sector. Q. HOW HAVE BANKS BEEN ABLE TO SUSTAIN THIS GROWTH? A. Bank stocks typically do well amidst the economic backdrop we've seen over the past couple years, namely moderate growth and nonexistent inflation. These conditions are conducive to better borrowing demand from both businesses and consumers, and have resulted in increased cash flows within the industry. Another factor is the increasingly proactive role bank managements are playing. In the past, the conditions I just mentioned would often get banks into hot water. They'd often take their excess cash and use it to generate more loan business. In doing so, though, banks would often lower their credit-quality requirements. This time around, speculative lending has taken a backseat. Instead, banks are being more disciplined in their lending processes, are buying back their own shares and many are making huge investments in technology, which can increase efficiency and lower costs. Q. SCANNING THE FUND'S TOP 20 POSITIONS, TWO THOUGHTS COME TO MIND: 1) YOU'VE DEVOTED MORE OF THE FUND'S ASSETS TO THESE TOP NAMES, AND 2) THE FUND HAS A DECIDED BIAS TOWARD LARGER BANKS . . . A. Both issues are actually intertwined. As the fund's assets have increased, I've made larger bets in the top 20 positions because those are the names with which I'm most comfortable. At the end of the period, in fact, approximately 75% of the fund's assets were allocated among the top 20 exposures. The majority of these positions also happen to be large-cap banks, or those with market capitalizations of $5 billion or more. In this industry, where the ability to cut costs and make large technology investments is essential, the bigger banks often have a leg up on their smaller counterparts. Q. WHICH INDIVIDUAL STOCKS CONTRIBUTED POSITIVELY TO PERFORMANCE? WERE THERE ANY DISAPPOINTMENTS? A. BankAmerica and US Bancorp performed extremely well, as both banks benefited from favorable regional economies. BankAmerica rode the economic wave in California while US Bancorp boasted significant exposure in the bustling Pacific Northwest area. Other stocks that did well included Comerica and American Express. On the downside, Wells-Fargo was the biggest disappointment. The company acquired a bank in California just over a year ago and everything that could go wrong seems to have gone wrong. Q. WHAT'S YOUR OUTLOOK? A. Not to sound boring, but I think we're in for more of the same. I don't see anything on the horizon that would upset the economic conditions we've seen, and I think bank managements will continue to stress internal efficiency. I don't have any reason to believe that the good growth we've seen can't be sustained. 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 August 31, 1997, more than $971 million MANAGER: John Avery, since 1996; manager, Fidelity Select Chemicals Portfolio, 1995-1997; joined Fidelity in 1994 (checkmark) REGIONAL BANKS PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.9% SHARES VALUE (NOTE 1) BANKS - 84.0% INTERNATIONAL - 4.2% Allied Irish Bank sponsored ADR 88,900 $ 4,467,225 01922840 Bank of Nova Scotia 183,000 7,905,495 06414910 Canadian Imperial Bank of Commerce 399,700 10,354,325 13606910 HSBC Holdings PLC 194,825 5,834,393 42199192 National Bank of Canada 300,000 3,869,573 63306710 Royal Bank of Canada 188,600 8,854,109 78008710 41,285,120 MID-ATLANTIC - 0.9% Crestar Financial Corp. 30,466 1,361,449 22609110 HUBCO, Inc. 5,565 170,428 40438210 PNC Financial Corp. 164,800 7,127,600 69347510 8,659,477 MIDWEST - 15.1% Banc One Corp. 735,273 39,429,015 05943810 Charter One Financial Corp. 20,400 1,109,250 16090310 Comerica, Inc. 535,900 37,948,419 20034010 Fifth Third Bancorp 28,950 1,693,575 31677310 KeyCorp. 22,200 1,345,875 49326710 National City Corp. 369,809 20,894,209 63540510 Northern Trust Corp. 243,500 12,935,938 66585910 Norwest Corp. 419,700 24,106,519 66938010 Star Banc Corp. 196,300 8,870,306 85508310 148,333,106 NORTHEAST - 13.8% Bank of New York Co., Inc. 1,214,848 54,212,592 06405710 Bankers Trust New York Corp. 14,300 1,483,625 06636510 Chase Manhattan Corp. 295,300 32,833,669 16161A10 Mellon Bank Corp. 602,000 28,971,250 58550910 North Fork Bancorp., Inc. 295,200 7,361,550 65942410 State Street Corp. 197,800 9,865,275 85747710 134,727,961 SOUTHEAST - 9.6% Barnett Banks, Inc. 190,400 12,971,000 06805510 First Tennessee National Corp. 189,700 10,101,525 33716210 First Union Corp. 796,600 38,286,588 33735810 Meritor Savings Bank (a) 51,100 103,797 59000710 Popular, Inc. 517,302 22,373,312 73317410 SunTrust Banks, Inc. 50,900 3,181,250 86791410 Synovus Financial Corp. 131,450 3,442,347 87161C10 Union Planters Corp. 66,200 3,392,750 90806810 93,852,569 WEST - 17.3% BankAmerica Corp. 1,109,200 72,999,225 06605010 First Security Corp. 209,750 5,925,438 33629410 Silicon Valley Bancshares (a) 87,300 4,692,375 82706410 UnionBanCal Corp. 16,900 1,306,581 90890610 Washington Mutual, Inc. 200,600 12,010,920 93932210 Wells Fargo & Co. 197,166 50,129,456 94974010 Westamerica Bancorporation 65,000 5,330,000 95709010 Zions Bancorp 427,300 16,557,875 98970110 168,951,870 MONEY CENTER - 11.5% BankBoston Corp. 122,400 10,174,500 06605R10 Citicorp 396,700 50,628,838 17303410 First Chicago NBD Corp. 719,300 51,609,775 31945A10 112,413,113 SHARES VALUE (NOTE 1) MULTI-REGIONAL - 11.6% NationsBank Corp. 889,036 $ 52,786,513 63858510 U.S. Bancorp 699,232 61,226,502 90297310 114,013,015 TOTAL BANKS 822,236,231 CREDIT & OTHER FINANCE - 11.8% BANK HOLDING COMPANY OFFICES - 1.9% Fleet Financial Group, Inc. 284,367 18,323,899 33891510 FINANCIAL SERVICES - 3.2% American Express Co. 411,400 31,986,350 02581610 PERSONAL CREDIT INSTITUTIONS - 6.7% Associates First Capital Corp. 493,700 28,665,456 04600810 Beneficial Corp. 200,400 14,341,125 08172110 Household International, Inc. 176,600 19,591,563 44181510 MBNA Corp. 84,000 3,228,750 55262L10 65,826,894 TOTAL CREDIT & OTHER FINANCE 116,137,143 INSURANCE - 0.1% SURETY INSURANCE - 0.1% Centris Group, Inc. 44,700 991,781 15590410 TOTAL COMMON STOCKS (Cost $703,625,100) 939,365,155 CASH EQUIVALENTS - 4.1% Taxable Central Cash Fund (b) (Cost $39,859,566) 39,859,566 39,859,566 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $743,484,666) $ 979,224,721 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $250,758,600 and $109,932,438, 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 $36,419 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the end of the period, there were no loans outstanding (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $743,942,536. Net unrealized appreciation aggregated $235,282,185, of which $247,854,805 related to appreciated investment securities and $12,572,620 related to depreciated investment securities. REGIONAL BANKS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 979,224,721 SECURITIES, AT VALUE (COST $743,484,66 6) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 19,999 INVESTMENTS SOLD RECEIVABLE FOR 2,051,785 FUND SHARES SOLD DIVIDENDS 1,602,093 RECEIVABLE INTEREST 208,083 RECEIVABLE REDEMPTION FEES 2,839 RECEIVABLE OTHER 94 RECEIVABLES TOTAL ASSETS 983,109,614 LIABILITIES PAYABLE FOR $ 10,964,541 FUND SHARES REDEEMED ACCRUED 504,612 MANAGEMENT FEE OTHER PAYABLES 580,623 AND ACCRUED EXPENSES TOTAL LIABILITIES 12,049,776 NET ASSETS $ 971,059,838 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 702,228,371 UNDISTRIBUTED 4,962,366 NET INVESTMENT INCOME ACCUMULATED 28,129,102 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 235,739,999 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 971,059,838 26,580,829 SHARES OUTSTANDING NET ASSET $36.53 VALUE AND REDEMPTION PRICE PER SHARE ($971,059,8 38 (DIVIDED BY) 26,580,829 SHARES) MAXIMUM $37.66 OFFERING PRICE PER SHARE (100/97.00 OF $36.53) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 9,118,370 INCOME DIVIDENDS INTEREST 1,659,356 (INCLUDING INCOME ON SECURITIES LOANED OF $31,954) TOTAL INCOME 10,777,726 EXPENSES MANAGEMENT $ 2,712,207 FEE TRANSFER AGENT 2,684,032 FEES ACCOUNTING AND 355,698 SECURITY LENDING FEES NON-INTERESTED 1,864 TRUSTEES' COMPENSATION CUSTODIAN FEES 18,803 AND EXPENSES REGISTRATION FEES 15,973 AUDIT 20,640 LEGAL 1,461 MISCELLANEOUS 3,147 TOTAL EXPENSES 5,813,825 BEFORE REDUCTIONS EXPENSE (47,310) 5,766,515 REDUCTIONS NET INVESTMENT 5,011,211 INCOME REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 28,737,363 SECURITIES FOREIGN (9,298) 28,728,065 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT 61,722,824 SECURITIES ASSETS AND (188) 61,722,636 LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 90,450,701 NET INCREASE $ 95,461,912 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 3,791,454 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 2,844 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 125,175 WITHHELD BY FSC EXPENSE $ 41,812 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 654 CREDITS TRANSFER 4,844 AGENT CREDITS $ 47,310 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ 5,011,211 $ 5,674,368 NET INVESTMENT INCOME NET REALIZED 28,728,065 27,631,220 GAIN (LOSS) CHANGE IN NET 61,722,636 124,368,117 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 95,461,912 157,673,705 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (725,360) (4,305,859) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (3,384,646) (22,112,110) REALIZED GAIN TOTAL (4,110,006) (26,417,969) DISTRIBUTIONS SHARE 505,311,058 797,514,088 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 4,026,132 25,807,948 OF DISTRIBUTIONS COST OF SHARES (468,429,577) (432,510,460) REDEEMED REDEMPTION 848,643 706,766 FEES NET INCREASE 41,756,256 391,518,342 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 133,108,162 522,774,078 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 837,951,676 315,177,598 PERIOD END OF PERIOD $ 971,059,838 $ 837,951,676 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $4,962,36 6 AND $2,586,44 3, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 14,846,412 27,686,494 ISSUED IN 132,875 968,599 REINVESTMENT OF DISTRIBUTIONS REDEEMED (13,926,818) (16,057,387) NET INCREASE 1,052,469 12,597,706 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 32.82 $ 24.37 $ 18.01 $ 17.99 $ 20.88 $ 16.48 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET .19 .37 .52 .37 .19 .16 INVESTMENT INCOME D NET REALIZED 3.66 9.70 6.78 .87 .93 5.09 AND UNREALIZED GAIN (LOSS) TOTAL FROM 3.85 10.07 7.30 1.24 1.12 5.25 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.03) (.27) (.25) (.29) (.15) (.11) INVESTMENT INCOME FROM NET (.14) (1.40) (.72) (.98) (3.92) (.81) REALIZED GAIN TOTAL (.17) (1.67) (.97) (1.27) (4.07) (.92) DISTRIBUTIONS REDEMPTION FEES .03 .05 .03 .05 .06 .07 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 36.53 $ 32.82 $ 24.37 $ 18.01 $ 17.99 $ 20.88 END OF PERIOD TOTAL RETURN B, C 11.93% 43.33% 40.94% 7.79% 6.46% 33.10% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 971,060 $ 837,952 $ 315,178 $ 164,603 $ 97,429 $ 315,520 OF PERIOD (000 OMITTED) RATIO OF 1.27% A 1.46% 1.41% 1.58% 1.62% 1.49% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.26% A, E 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 1.10% A 1.36% 2.42% 1.99% .88% 1.06% A INVESTMENT INCOME TO AVERAGE NET ASSETS PORTFOLIO 26% A 43% 103% 106% 74% 63% A TURNOVER RATE AVERAGE $ .0375 $ .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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS BIOTECHNOLOGY 0.47% 14.80% 56.33% 270.19% BIOTECHNOLOGY -2.54% 11.36% 51.64% 259.08% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS BIOTECHNOLOGY 14.80% 9.35% 13.98% BIOTECHNOLOGY 11.36% 8.68% 13.64% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 114515 S00000000000001 Biotechnology S&P 500 00042 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9557.75 9781.00 1987/10/31 6617.95 7674.17 1987/11/30 5974.44 7041.82 1987/12/31 6774.49 7577.70 1988/01/31 7116.71 7896.72 1988/02/29 7382.10 8264.71 1988/03/31 7333.22 8009.33 1988/04/30 7200.52 8098.24 1988/05/31 7060.84 8168.69 1988/06/30 7298.30 8543.63 1988/07/31 7291.31 8511.17 1988/08/31 7088.77 8221.79 1988/09/30 7235.44 8572.04 1988/10/31 7158.61 8810.34 1988/11/30 6823.38 8684.35 1988/12/31 7053.85 8836.33 1989/01/31 7542.74 9483.15 1989/02/28 7486.86 9247.02 1989/03/31 8038.60 9462.47 1989/04/30 8310.98 9953.57 1989/05/31 8688.11 10356.69 1989/06/30 8464.63 10297.66 1989/07/31 9246.84 11227.54 1989/08/31 9596.04 11447.60 1989/09/30 10001.11 11400.66 1989/10/31 10036.03 11136.17 1989/11/30 10350.31 11363.35 1989/12/31 10152.79 11636.07 1990/01/31 9393.10 10855.29 1990/02/28 10280.59 10995.32 1990/03/31 10713.68 11286.70 1990/04/30 10848.57 11004.53 1990/05/31 12375.04 12077.47 1990/06/30 13239.23 11995.34 1990/07/31 13275.13 11956.96 1990/08/31 12865.89 10876.05 1990/09/30 12578.70 10346.39 1990/10/31 12686.40 10301.90 1990/11/30 14222.84 10967.40 1990/12/31 14655.32 11273.39 1991/01/31 16338.40 11764.91 1991/02/28 18653.56 12606.10 1991/03/31 20579.18 12911.17 1991/04/30 19682.52 12942.15 1991/05/31 20931.97 13501.25 1991/06/30 19820.61 12882.90 1991/07/31 21604.93 13483.24 1991/08/31 23118.89 13802.79 1991/09/30 24316.16 13572.29 1991/10/31 26710.70 13754.15 1991/11/30 24926.38 13199.86 1991/12/31 29170.70 14709.93 1992/01/31 28586.00 14436.32 1992/02/29 26391.39 14623.99 1992/03/31 24389.01 14338.83 1992/04/30 22114.30 14760.39 1992/05/31 23700.19 14832.71 1992/06/30 23284.21 14611.71 1992/07/31 24501.40 15209.33 1992/08/31 22968.96 14897.53 1992/09/30 22890.15 15073.32 1992/10/31 24011.02 15126.08 1992/11/30 26375.34 15641.88 1992/12/31 26153.51 15834.28 1993/01/31 24809.47 15967.28 1993/02/28 20804.97 16184.44 1993/03/31 21117.97 16525.93 1993/04/30 21661.10 16126.00 1993/05/31 23060.38 16558.18 1993/06/30 23198.46 16606.20 1993/07/31 22434.39 16539.77 1993/08/31 23281.31 17166.63 1993/09/30 24238.71 17034.45 1993/10/31 26043.04 17387.06 1993/11/30 25840.51 17221.88 1993/12/31 26337.62 17430.27 1994/01/31 27239.78 18022.90 1994/02/28 25417.05 17534.48 1994/03/31 22848.65 16769.97 1994/04/30 22434.39 16984.63 1994/05/31 22056.95 17263.18 1994/06/30 21182.41 16840.23 1994/07/31 21237.64 17392.59 1994/08/31 23226.08 18105.69 1994/09/30 23152.43 17662.10 1994/10/31 22360.74 18059.49 1994/11/30 21946.48 17401.77 1994/12/31 21550.64 17659.84 1995/01/31 22517.24 18117.75 1995/02/28 23290.52 18823.80 1995/03/31 23667.96 19379.29 1995/04/30 24404.42 19950.01 1995/05/31 24625.35 20747.42 1995/06/30 25518.31 21229.38 1995/07/31 26659.82 21933.35 1995/08/31 27727.69 21988.40 1995/09/30 28970.46 22916.31 1995/10/31 28740.32 22834.50 1995/11/30 29697.72 23836.93 1995/12/31 32132.04 24296.03 1996/01/31 34032.47 25123.07 1996/02/29 33764.93 25355.96 1996/03/31 33229.86 25600.14 1996/04/30 33947.32 25977.48 1996/05/31 34343.49 26647.44 1996/06/30 32268.35 26748.97 1996/07/31 29900.81 25567.20 1996/08/31 31277.94 26106.41 1996/09/30 33107.84 27575.68 1996/10/31 31957.08 28336.22 1996/11/30 32145.73 30478.15 1996/12/31 33934.18 29874.38 1997/01/31 35489.45 31740.93 1997/02/28 35739.96 31989.78 1997/03/31 32055.32 30675.32 1997/04/30 30649.40 32506.64 1997/05/31 34545.78 34485.64 1997/06/30 35450.68 36030.60 1997/07/31 35663.59 38897.55 1997/08/29 35908.45 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970909 114522 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Biotechnology Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $35,908 - a 259.08% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS GENENTECH, INC. SPECIAL 10.1 SCHERING-PLOUGH CORP. 4.4 ALKERMES, INC. 4.2 GENZYME CORP. 4.0 MERCK & CO., INC. 3.7 GILEAD SCIENCES, INC. 3.6 PROTEIN DESIGN LABS, INC. 3.6 ICN PHARMACEUTICALS, INC. 3.5 BEVERLY ENTERPRISES, INC. 3.2 INTERNEURON PHARMACEUTICALS, INC. 3.0 TOP INDUSTRIES AS OF AUGUST 31, 1997 BIOTECHNOLOGY 46.3% PHARMACEUTICAL PREPARATIONS 18.2% DRUGS 13.5% SKILLED NURSING CARE FACILITIES 3.1% LAB ANALYTICAL INSTRUMENTS 2.1% ALL OTHERS 16.8% ROW: 1, COL: 1, VALUE: 16.8 ROW: 1, COL: 2, VALUE: 2.1 ROW: 1, COL: 3, VALUE: 3.1 ROW: 1, COL: 4, VALUE: 13.5 ROW: 1, COL: 5, VALUE: 18.2 ROW: 1, COL: 6, VALUE: 46.3 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS BIOTECHNOLOGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: James Harmon became Portfolio Manager of Fidelity Select Biotechnology Portfolio on June 2, 1997. Q. HOW DID THE FUND PERFORM, JAMIE? A. For the six-month and 12-month periods ending August 31, 1997, the fund returned 0.47% and 14.80%, underperforming its benchmark index, the Standard & Poor's 500 Index, which returned 14.78% and 40.65%, respectively. Q. WHY DID THE FUND UNDERPERFORM THE INDEX OVER THE PAST SIX MONTHS? A. It was not just the fund; the entire biotechnology sector was flat or down over most of the period. In fact, I think the fund did fairly well when you look at the industry as a whole. There are two major reasons behind the sector's poor performance over the period. First, there were a number of high-profile product failures, which increased investors' concerns about the likelihood of clinical success for the whole sector. As of the end of the period, the success rate of late-phase clinical drug trials in 1997 was 38% - far below the 63% success rate in 1996. The sector also was hurt by a number of biotech and pharmaceutical companies that had disappointing drug sales. Q. YOU MENTIONED A SECOND REASON . . . A. Yes. The sector was negatively affected by heightened concerns that the Federal Reserve Board might raise interest rates over the period. Rising interest rates are considered to be especially bad news for the biotechnology sector because the value of biotechnology companies is usually based on their future, not present, earnings. That's because most biotech companies are in the process of developing new drugs that won't be marketed until a later date. When you try to calculate a company's future earnings to determine its present value, interest rates play a key role because the higher the interest rate, the lower the present value of future earnings. Q. SINCE YOU TOOK OVER THE FUND, YOU'VE ADDED SEVERAL NEW STOCKS TO ITS TOP 10 HOLDINGS. HOW DID THEY DO? A. They've generally done well. One new top 10 holding, Genzyme Corporation, looked strong mostly because of upcoming new products. Leading pharmaceutical company Merck, another addition to the top 10, produced phenomenally high returns on assets and strong earnings growth. Q. AT THE END OF THE PERIOD, GENENTECH MADE UP MORE THAN 10% OF THE FUND. HOW DID IT LOOK? A. I saw Genentech as a very low-risk and potentially high-return investment. First, investors in the company's common stock, such as the fund, have the right the sell their stock to Swiss pharmaceutical company Roche Holdings in 1999 at a guaranteed profit. In addition, I believe Genentech has the best pipeline of upcoming products of any biotech company right now. Over the period, this stock boosted the fund's performance. Q. DID YOU EXPERIENCE ANY REGRETS OVER THE PERIOD? A. Sure. I wish I had sold the fund's holdings in Amgen sooner. The fund's largest holding six months ago, Amgen was hurt by disappointing sales of some of its key drugs. Q. JAMIE, HOW DOES THE FUND LOOK GOING FORWARD? A. I'm optimistic about specific biotechnology stocks. I think there will be certain companies that will dramatically outperform the market as they develop novel therapeutic treatments. I'm much more cautious about the group as a whole. There is a lot of clinical data on new products that should be coming out over the next few years. However, as we've seen during this period, simply introducing a new product is no guarantee of success. Still, I think there is potential for some real home runs in the biotechnology sector in the near future. 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 August 31, 1997, more than $517 million MANAGER: James Harmon, since June 1997; research associate covering nursing homes, non-technology IPOs and petroleum refining, 1995-1997; research analyst covering biotechnology and nursing homes, since 1997; joined Fidelity in 1995 (checkmark) BIOTECHNOLOGY PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.6% SHARES VALUE (NOTE 1) DRUGS & PHARMACEUTICALS - 79.9% BIOTECHNOLOGY - 46.3% Alkermes, Inc. (a)(c) 1,210,300 $ 22,541,838 01642T10 Ariad Pharmaceuticals, Inc. (a) 749,200 4,307,900 04033A10 Aviron 461,800 11,545,000 05376210 Cell Genesys, Inc. (a) 342,600 1,713,000 15092110 Chiron Corp. (a) 600,300 13,431,713 17004010 COR Therapeutics, Inc. (a) 496,800 8,197,200 21775310 Creative Biomolecules, Inc. (a) 250,000 2,109,375 22527010 Genentech, Inc. special (a) 946,600 54,074,525 36871030 Genome Therapeutics Corp. (a) 425,000 3,373,438 37243010 Genzyme Corp. 771,200 21,690,000 37291710 Genzyme Corp.-Tissue Repair (a) 24,300 261,225 37291740 Gilead Sciences, Inc. (a) 605,200 19,593,350 37555810 IDEC Pharmaceuticals Corp. (a) 135,100 4,103,663 44937010 Imclone Systems, Inc. (a) 200,000 1,350,000 45245W10 Interneuron Pharmaceuticals, Inc. (a) 868,200 16,061,700 46057310 Magainin Pharmaceuticals, Inc. (a) 559,800 4,688,325 55903610 Medimmune, Inc. (a) 350,000 9,275,000 58469910 Molecular Biosystems, Inc. (a) 48,400 426,525 60851310 Neurex Corp. (a) 175,000 2,275,000 64123810 Neurogen Corp. (a) 167,700 3,301,594 64124E10 Protein Design Labs, Inc. (a) 537,800 19,159,125 74369L10 Regeneron Pharmaceuticals, Inc. (a) 164,200 1,518,850 75886F10 Sangstat Medical Corp. (a) 328,700 7,560,100 80100310 Sepracor, Inc. (a) 526,800 11,589,600 81731510 Sequana Therapeutics, Inc. (a) 263,300 2,863,388 81732210 Sugen, Inc. (a) 125,700 1,775,513 86504110 248,786,947 COMMERCIAL LABORATORY RESEARCH - 1.6% Arqule, Inc. 193,400 3,529,550 04269E10 BioReliance Corp. 600 13,050 09095110 Intercardia, Inc. (a) 225,000 4,725,000 45844M10 Millennium Pharmaceuticals, Inc. (a) 25,700 346,950 59990210 8,614,550 DRUGS - 13.5% American Home Products Corp. 121,200 8,726,400 02660910 Anesta Corp. (a) 371,900 7,159,075 03460310 Forest Laboratories, Inc. 273,400 11,226,488 34583810 Merck & Co., Inc. 215,000 19,739,688 58933110 Schering-Plough Corp. 489,800 23,510,400 80660510 Sequus Pharmaceuticals, Inc. (a) 343,000 2,315,250 81747110 72,677,301 IN VITRO, IN VIVO DIAGNOSTIC SUBSTANCES - 0.3% Human Genome Sciences, Inc. (a) 3,900 145,275 44490310 Hyseq, Inc. 100,200 1,415,325 44916330 1,560,600 PHARMACEUTICAL PREPARATIONS - 18.2% Alpharma, Inc.: Class A 29,300 642,769 02081310 Class A rights 11/25/97 4,883 26,857 02081313 Arris Pharmaceutical Corp. (a) 603,500 8,222,688 04269W10 GelTex Pharmaceuticals, Inc. (a) 100,000 2,012,500 36853810 Guilford Pharmaceuticals, Inc. (a) 131,750 3,540,781 40182910 ICN Pharmaceuticals, Inc. 520,000 18,785,000 44892410 Immunex Corp. (a) 298,600 13,063,750 45252810 Inhale Therapeutic Systems (a) 446,800 10,053,000 45719110 LeukoSite, Inc. (c) 250,000 1,515,625 52728R10 Ligand Pharmaceuticals, Inc. Class B (a) 911,965 13,223,493 53220K20 Novartis AG (Reg.) 6,236 8,807,690 66999Q22 NPS Pharmaceuticals, Inc. (a) 307,500 2,613,750 62936P10 SHARES VALUE (NOTE 1) Nexstar Pharmaceuticals, Inc. (a) 350,800 $ 5,327,775 65333B10 T Cell Sciences, Inc. (a) 247,100 532,809 87234210 Theratech, Inc. (a) 195,000 2,023,125 88338310 ViroPharma, Inc. 449,600 7,193,600 92824110 97,585,212 TOTAL DRUGS & PHARMACEUTICALS 429,224,610 ELECTRICAL EQUIPMENT - 0.0% TV & RADIO COMMUNICATION EQUIPMENT - 0.0% ASN (warrants) (a) 5,000 - 04599F22 ENGINEERING - 1.9% WATER & SEWER PIPES - 1.9% MasTec, Inc. (a) 219,800 10,261,913 57632310 MEDICAL EQUIPMENT & SUPPLIES - 1.9% DRUG DISTRIBUTORS - WHOLESALE - 0.6% Allegiance Corp. 95,000 2,980,625 01747510 MEDICAL SUPPLIES & APPLIANCES - 0.3% Cygnus, Inc. (a) 100,000 1,875,000 23256010 MEDICAL TECHNOLOGY - 0.9% Ballard Medical Products 204,300 4,724,438 05856610 OPHTHALMIC GOODS - 0.1% Cooper Companies, Inc. 18,000 594,000 21664840 TOTAL MEDICAL EQUIPMENT & SUPPLIES 10,174,063 MEDICAL FACILITIES MANAGEMENT - 6.9% MEDICAL SERVICES - 0.2% Carematrix Corp. (a) 47,300 969,650 14170610 NURSING CARE & NURSING HOMES - 1.7% Integrated Health Services, Inc. 270,900 8,939,700 45812C10 NURSING, PERSONAL CARE FACILITIES - 1.9% NovaCare, Inc. 679,600 10,236,475 66993010 SKILLED NURSING CARE FACILITIES - 3.1% Beverly Enterprises, Inc. (a) 1,037,900 16,930,744 08785110 TOTAL MEDICAL FACILITIES MANAGEMENT 37,076,569 TOTAL COMMON STOCKS (Cost $462,148,538) 486,737,155 CASH EQUIVALENTS - 9.4% Taxable Central Cash Fund (b) (Cost $50,297,221) 50,297,221 50,297,221 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $512,445,759) $ 537,034,376 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. Affiliated company (see Note 10 of Notes to Financial Statements) OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $326,215,587 and $456,786,611, 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 $77,706 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, the value of securities loaned and the value of collateral amounted to $15,796,384 and $16,554,400, respectively (see Note 6 of Notes to Financial Statements). Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Alkermes, Inc. $ 2,494,377 $ - $ - $ 22,541,838 Ariad Pharmaceuticals, Inc. - 327,813 - - Arqule, Inc. 509,516 - - - LeukoSite, Inc. - - - 1,515,625 Sequana Therapeutics, Inc. - 387,900 - - TOTALS $ 3,003,893 $ 715,713 $ - $ 24,057,463 INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $512,745,805. Net unrealized appreciation aggregated $24,288,571, of which $59,221,794 related to appreciated investment securities and $34,933,223 related to depreciated investment securities. BIOTECHNOLOGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 537,034,376 SECURITIES, AT VALUE (COST $512,445,75 9) - SEE ACCOMPANYIN G SCHEDULE CASH 377,988 RECEIVABLE FOR 3,726,057 INVESTMENTS SOLD RECEIVABLE FOR 2,966,545 FUND SHARES SOLD DIVIDENDS 80,752 RECEIVABLE INTEREST 224,188 RECEIVABLE REDEMPTION FEES 1,050 RECEIVABLE OTHER 107,235 RECEIVABLES TOTAL ASSETS 544,518,191 LIABILITIES PAYABLE FOR $ 5,197,207 INVESTMENTS PURCHASED PAYABLE FOR 4,181,968 FUND SHARES REDEEMED ACCRUED 254,999 MANAGEMENT FEE OTHER PAYABLES 527,230 AND ACCRUED EXPENSES COLLATERAL ON 16,554,400 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 26,715,804 NET ASSETS $ 517,802,387 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 431,555,039 ACCUMULATED (2,249,554) NET INVESTMENT (LOSS) ACCUMULATED 63,909,115 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 24,587,787 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 517,802,387 15,350,467 SHARES OUTSTANDING NET ASSET $33.73 VALUE AND REDEMPTION PRICE PER SHARE ($517,802,3 87 (DIVIDED BY) 15,350,467 SHARES) MAXIMUM $34.77 OFFERING PRICE PER SHARE (100/97.00 OF $33.73) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 603,067 INCOME DIVIDENDS INTEREST 1,414,403 (INCLUDING INCOME ON SECURITIES LOANED OF $58,119) TOTAL INCOME 2,017,470 EXPENSES MANAGEMENT $ 1,672,014 FEE TRANSFER AGENT 2,252,185 FEES ACCOUNTING AND 266,734 SECURITY LENDING FEES NON-INTERESTED 1,305 TRUSTEES' COMPENSATION CUSTODIAN FEES 32,012 AND EXPENSES REGISTRATION FEES 35,036 AUDIT 20,861 LEGAL 3,650 MISCELLANEOUS 3,319 TOTAL EXPENSES 4,287,116 BEFORE REDUCTIONS EXPENSE (20,092) 4,267,024 REDUCTIONS NET INVESTMENT (2,249,554) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 64,368,331 SECURITIES (INCLUDING REALIZED GAIN OF $383,302 ON SALE OF INVESTMENTS IN AFFILIATED ISSUES) FOREIGN 903 64,369,234 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (67,878,140) SECURITIES ASSETS AND (830) (67,878,970) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (3,509,736) NET INCREASE $ (5,759,290) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 394,816 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 19,598 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 93,330 WITHHELD BY FSC EXPENSE $ 18,945 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 976 CREDITS TRANSFER 171 AGENT CREDITS $ 20,092 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (2,249,554) $ (4,230,936) NET INVESTMENT INCOME (LOSS) NET REALIZED 64,369,234 107,758,165 GAIN (LOSS) CHANGE IN NET (67,878,970) (82,231,616) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (5,759,290) 21,295,613 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO - (758,609) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (10,193,633) (74,788,474) REALIZED GAIN TOTAL (10,193,633) (75,547,083) DISTRIBUTIONS SHARE 126,046,332 434,127,456 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 9,940,373 73,785,664 OF DISTRIBUTIONS COST OF SHARES (277,665,839) (876,553,990) REDEEMED REDEMPTION 532,080 930,907 FEES NET INCREASE (141,147,054) (367,709,963) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (157,099,977) (421,961,433) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 674,902,364 1,096,863,797 PERIOD END OF PERIOD $ 517,802,387 $ 674,902,364 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $2,249,554 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 3,816,616 12,636,024 ISSUED IN 335,372 2,313,606 REINVESTMENT OF DISTRIBUTIONS REDEEMED (8,513,986) (25,208,094) NET INCREASE (4,361,998) (10,258,464) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 34.24 $ 36.60 $ 25.30 $ 27.61 $ 22.60 $ 27.61 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT (.13) (.20) .11 (.06) (.18) (.08) INCOME (LOSS) D NET REALIZED .18 H 1.89 11.21 (2.26) 5.15 (1.09) AND UNREALIZED GAIN (LOSS) TOTAL FROM .05 1.69 11.32 (2.32) 4.97 (1.17) INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET - (.03) (.07) - - - INVESTMENT INCOME FROM NET (.59) (4.06) - - - (3.89) REALIZED GAIN TOTAL (.59) (4.09) (.07) - - (3.89) DISTRIBUTIONS REDEMPTION FEES .03 .04 .05 .01 .04 .05 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 33.73 $ 34.24 $ 36.60 $ 25.30 $ 27.61 $ 22.60 END OF PERIOD TOTAL RETURN B, C 0.47% 5.85% 44.97% (8.37)% 22.17% (5.92)% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 517,802 $ 674,902 $ 1,096,864 $ 448,197 $ 481,146 $ 507,993 OF PERIOD (000 OMITTED) RATIO OF 1.53% A 1.57% 1.44% F 1.59% 1.62% 1.50% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.52% A, E 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 (.80)% A (.59)% .35% (.27)% (.69)% (.37)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 126% A 41% 67% 77% 51% 79% A TURNOVER RATE AVERAGE $ .0486 $ .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. H THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND. 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS HEALTH CARE 10.73% 31.81% 148.02% 411.39% HEALTH CARE 7.41% 27.86% 140.58% 396.05% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS HEALTH CARE 31.81% 19.92% 17.73% HEALTH CARE 27.86% 19.19% 17.37% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 115337 S00000000000001 Health Care S&P 500 00063 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9518.09 9781.00 1987/10/31 7006.83 7674.17 1987/11/30 6327.27 7041.82 1987/12/31 6810.42 7577.70 1988/01/31 7316.57 7896.72 1988/02/29 7536.26 8264.71 1988/03/31 7348.88 8009.33 1988/04/30 7234.73 8098.24 1988/05/31 7215.34 8168.69 1988/06/30 7404.88 8543.63 1988/07/31 7394.11 8511.17 1988/08/31 7193.80 8221.79 1988/09/30 7435.03 8572.04 1988/10/31 7527.65 8810.34 1988/11/30 7307.96 8684.35 1988/12/31 7411.70 8836.33 1989/01/31 7935.05 9483.15 1989/02/28 7783.04 9247.02 1989/03/31 8193.48 9462.47 1989/04/30 8640.83 9953.57 1989/05/31 8910.11 10356.69 1989/06/30 8709.27 10297.66 1989/07/31 9788.06 11227.54 1989/08/31 10024.86 11447.60 1989/09/30 10097.22 11400.66 1989/10/31 10022.67 11136.17 1989/11/30 10454.63 11363.35 1989/12/31 10560.82 11636.07 1990/01/31 9954.87 10855.29 1990/02/28 9850.55 10995.32 1990/03/31 10243.42 11286.70 1990/04/30 10243.42 11004.53 1990/05/31 11652.86 12077.47 1990/06/30 12049.90 11995.34 1990/07/31 12216.26 11956.96 1990/08/31 11668.64 10876.05 1990/09/30 11317.43 10346.39 1990/10/31 11576.22 10301.90 1990/11/30 12807.78 10967.40 1990/12/31 13128.83 11273.39 1991/01/31 14424.86 11764.91 1991/02/28 16206.59 12606.10 1991/03/31 17651.31 12911.17 1991/04/30 17344.03 12942.15 1991/05/31 18285.69 13501.25 1991/06/30 17461.15 12882.90 1991/07/31 19006.20 13483.24 1991/08/31 19955.98 13802.79 1991/09/30 20358.11 13572.29 1991/10/31 21699.45 13754.15 1991/11/30 20514.20 13199.86 1991/12/31 24116.67 14709.93 1992/01/31 23325.41 14436.32 1992/02/29 22306.87 14623.99 1992/03/31 20946.01 14338.83 1992/04/30 19759.12 14760.39 1992/05/31 20165.97 14832.71 1992/06/30 19388.69 14611.71 1992/07/31 20555.05 15209.33 1992/08/31 20000.65 14897.53 1992/09/30 18616.18 15073.32 1992/10/31 19188.75 15126.08 1992/11/30 20239.98 15641.88 1992/12/31 19912.11 15834.28 1993/01/31 18842.71 15967.28 1993/02/28 16831.96 16184.44 1993/03/31 17296.23 16525.93 1993/04/30 17289.82 16126.00 1993/05/31 17981.42 16558.18 1993/06/30 17917.38 16606.20 1993/07/31 17334.65 16539.77 1993/08/31 17952.60 17166.63 1993/09/30 18512.92 17034.45 1993/10/31 19889.70 17387.06 1993/11/30 19822.46 17221.88 1993/12/31 20393.32 17430.27 1994/01/31 20797.21 18022.90 1994/02/28 20293.95 17534.48 1994/03/31 18970.08 16769.97 1994/04/30 19731.12 16984.63 1994/05/31 20845.49 17263.18 1994/06/30 20514.71 16840.23 1994/07/31 20925.78 17392.59 1994/08/31 23671.56 18105.69 1994/09/30 23841.77 17662.10 1994/10/31 24172.55 18059.49 1994/11/30 24696.01 17401.77 1994/12/31 24769.44 17659.84 1995/01/31 26081.39 18117.75 1995/02/28 26634.15 18823.80 1995/03/31 27358.34 19379.29 1995/04/30 27739.68 19950.01 1995/05/31 28006.95 20747.42 1995/06/30 29424.18 21229.38 1995/07/31 31108.67 21933.35 1995/08/31 31372.42 21988.40 1995/09/30 33130.77 22916.31 1995/10/31 33211.65 22834.50 1995/11/30 34611.30 23836.93 1995/12/31 36129.92 24296.03 1996/01/31 37422.26 25123.07 1996/02/29 37203.79 25355.96 1996/03/31 37333.39 25600.14 1996/04/30 37177.10 25977.48 1996/05/31 37851.51 26647.44 1996/06/30 37878.34 26748.97 1996/07/31 36399.22 25567.20 1996/08/31 37633.09 26106.41 1996/09/30 40223.46 27575.68 1996/10/31 39434.09 28336.22 1996/11/30 41553.13 30478.15 1996/12/31 41715.33 29874.38 1997/01/31 44233.99 31740.93 1997/02/28 44798.07 31989.78 1997/03/31 42340.62 30675.32 1997/04/30 44453.71 32506.64 1997/05/31 47839.36 34485.64 1997/06/30 51398.28 36030.60 1997/07/31 53318.23 38897.55 1997/08/29 49600.09 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970909 115344 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Health Care Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $49,605 - a 396.05% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS AMERICAN HOME PRODUCTS CORP. 8.4 WARNER-LAMBERT CO. 7.8 SCHERING-PLOUGH CORP. 7.0 BRISTOL-MYERS SQUIBB CO. 6.4 MERCK & CO., INC. 5.9 LILLY (ELI) & CO. 5.0 JOHNSON & JOHNSON 4.1 ABBOTT LABORATORIES 3.9 MEDTRONIC, INC. 2.6 BAXTER INTERNATIONAL, INC. 2.4 TOP INDUSTRIES AS OF AUGUST 31, 1997 DRUGS 49.3% MEDICAL SUPPLIES & APPLIANCES 16.2% MEDICAL TECHNOLOGY 5.9% HOSPITALS 4.4% PHARMACEUTICAL PREPARATIONS 3.0% ALL OTHERS 21.2% ROW: 1, COL: 1, VALUE: 21.2 ROW: 1, COL: 2, VALUE: 3.0 ROW: 1, COL: 3, VALUE: 4.4 ROW: 1, COL: 4, VALUE: 5.9 ROW: 1, COL: 5, VALUE: 16.2 ROW: 1, COL: 6, VALUE: 49.3 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS HEALTH CARE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: Beso Sikharulidze became Portfolio Manager of Fidelity Select Health Care Portfolio on June 2, 1997. Q. HOW DID THE FUND PERFORM, BESO? A. During the six months that ended August 31, 1997, the fund generated a return of 10.73%, compared to the 14.78% return of the Standard & Poor's 500 Index. For the 12-month period that ended August 31, 1997, the fund returned 31.81%, underperforming the 40.65% return of the S&P 500 Index. Q. WHY DID THE FUND UNDERPERFORM THE S&P 500 DURING THE PERIOD? A. Much of the S&P 500's strong performance was driven by a narrow group of the larger-cap stocks at the top of the index. If you had exposure to smaller-cap stocks, as this fund did, you underperformed the broader benchmark. Larger-cap health care stocks, particularly pharmaceuticals, performed well during much of the period, but suffered a correction in the late summer months. Q. WHAT FACTORS HELPED HEALTH CARE STOCKS DURING THE PERIOD? A. Pharmaceutical companies have reaped the benefits of some new trends in the industry, including acceleration of reviews by the Food and Drug Administration (FDA) and allowances for direct-to-consumer marketing of drugs. Considering drugs are moving through the FDA review process more quickly, they're coming to market sooner. And that's good news for pharmaceutical companies that are spending a lot of money on research and development. Direct marketing also has allowed companies to introduce new categories of drugs to consumers, such as those that lower cholesterol. As a result, people are visiting their doctors and saying that they'd like to try a certain antihistamine or antidepressant, for example, rather than waiting for the doctor to prescribe something. This trend is triggering demand for new drugs and accelerating unit volume growth. We've also seen a revolution in medical devices, especially cardiac devices that are making surgery easier, more accurate and more effective. Q. WERE THERE ANY PARTICULAR STOCKS THAT STOOD OUT DURING THE PERIOD? A. At the end of the period, almost 8% of the fund's portfolio was invested in Warner-Lambert. The company's shares appreciated considerably during the period on stronger-than-expected sales of two new drugs: Lipitor, which helps lower cholesterol, and Rezulin, a diabetes drug. Six of the fund's top 10 holdings at the end of the period were pharmaceutical stocks - five of which contributed to performance. Medtronic, a maker of cardiac devices, also performed well, benefiting from the demand for innovative products. Q. WERE THERE ANY DISAPPOINTMENTS DURING THE PERIOD? A. By the end of the period, about 6% of the fund was invested in Merck & Co. - the one pharmaceutical stock among the fund's top 10 holdings that didn't help performance. In fact, the company's shares were flat during the six-month period. Merck's share price suffered a correction in August, when many large-cap stocks that had appreciated considerably in the first half of the year were knocked down a notch. St. Jude Medical's stock also was flat during the period. The company reported lower-than-expected earnings in the second quarter as it continued to wrestle with the integration of its Telectronics and Ventritex acquisitions. Q. WHAT IS YOUR OUTLOOK FOR THE HEALTH CARE SECTOR? A. I'm optimistic about health care stocks over the next six to 12 months. Pharmaceutical companies should continue to do well on the strength of their business fundamentals, such as earnings and revenues. I think medical device companies will continue to benefit from product innovations. Overall, the health care sector should be strong. Even if the economy slows down, the sector can still be a strong performer since demand for health services remains fairly constant in any environment. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 063 TRADING SYMBOL: FSPHX SIZE: as of August 31, 1997, more than $1.5 billion MANAGER: Beso Sikharulidze, since June 1997; manager, Fidelity Select Transportation Portfolio, 1993-1994; security analyst, appliance trucking and shipping industries, 1992-1993; joined Fidelity in 1992 (checkmark) HEALTH CARE PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.4% SHARES VALUE (NOTE 1) CHEMICALS & PLASTICS - 1.2% CHEMICALS - 1.2% AKZO Nobel NV 60,000 $ 9,281,963 01019910 AKZO NV sponsored ADR 7,300 571,225 01019930 Hoechst AG Ord. 210,000 8,093,448 43439010 17,946,636 COMPUTER SERVICES & SOFTWARE - 1.0% COMPUTER SERVICES - 1.0% HBO & Co. 221,000 15,829,125 40410010 DRUGS & PHARMACEUTICALS - 55.2% BIOTECHNOLOGY - 2.9% Cytyc Corp. (a) 493,500 9,870,000 23294610 Elf Sanofi SA 70,000 6,705,444 91399A92 Genentech, Inc. special (a) 397,400 22,701,475 36871030 Sangstat Medical Corp. (a) 78,900 1,814,700 80100310 Sepracor, Inc. (a) 128,700 2,831,400 81731510 43,923,019 COMMERCIAL LABORATORY RESEARCH - 0.0% Millennium Pharmaceuticals, Inc. (a) 13,600 183,600 59990210 DRUGS - 49.3% American Home Products Corp. 1,781,800 128,289,600 02660910 Barr Laboratories, Inc. (a) 438,600 17,215,050 06830610 Bristol-Myers Squibb Co. 1,281,200 97,371,200 11012210 Elan Corp. PLC ADR (a) 297,020 13,514,410 28413120 Glaxo PLC sponsored ADR 230,000 9,171,250 37733W10 Glaxo Holdings PLC 220,000 4,402,899 37733W92 Lilly (Eli) & Co. 730,806 76,460,578 53245710 Merck & Co., Inc. 980,800 90,049,700 58933110 Pfizer, Inc. 499,200 27,643,200 71708110 Rhone Poulenc Sponsored ADR representing 1/4 share 702,000 26,588,250 76242660 Sankyo Co. Ltd. 432,000 13,088,742 80029710 Schering-Plough Corp. 2,238,600 107,452,800 80660510 Takeda Chemical Industries Ltd. 448,000 11,904,636 87405810 Warner-Lambert Co. 935,000 118,803,438 93448810 Watson Pharmaceuticals, Inc. (a) 126,400 6,643,900 94268310 Yamanouchi Pharmaceutical Co. Ltd. 233,000 5,554,967 98414010 754,154,620 PHARMACEUTICAL PREPARATIONS - 3.0% Astra AB Class A Free shares 1,547,200 24,567,741 04632292 ICN Pharmaceuticals, Inc. 5,552 200,566 44892410 Novartis AG (Reg.) 14,600 20,620,972 66999Q22 45,389,279 TOTAL DRUGS & PHARMACEUTICALS 843,650,518 ELECTRONIC INSTRUMENTS - 0.2% LAB ANALYTICAL INSTRUMENTS - 0.2% Waters Corp. (a) 100,000 3,331,250 94184810 ELECTRONICS - 0.6% ELECTRONIC CAPACITORS - 0.6% Maxwell Technologies, Inc. (a) 283,000 8,631,500 57776710 HOUSEHOLD PRODUCTS - 0.5% FABRICATED RUBBER PRODUCTS - 0.5% Safeskin Corp. (a) 240,000 7,980,000 78645410 SHARES VALUE (NOTE 1) MEDICAL EQUIPMENT & SUPPLIES - 26.8% DENTAL EQUIPMENT - 0.7% Sybron International Corp. (a) 282,300 $ 11,274,356 87114F10 DRUG DISTRIBUTORS - WHOLESALE - 2.3% Bergen Brunswig Corp. Class A 687,237 28,863,954 08373910 Cardinal Health, Inc. 18,200 1,205,750 14149Y10 McKesson Corp. 64,500 6,042,844 58155710 36,112,548 MEDICAL SUPPLIES & APPLIANCES - 16.2% Abbott Laboratories 997,200 59,769,675 00282410 Baxter International, Inc. 683,000 36,327,063 07181310 Becton, Dickinson & Co. 590,600 28,311,888 07588710 Boston Scientific Corp. (a) 489,768 34,528,644 10113710 Depuy, Inc. 267,900 6,195,188 24972610 Johnson & Johnson 1,103,900 62,577,331 47816010 Sofamor/Danek Group, Inc. (a) 400,500 19,198,969 83400510 246,908,758 MEDICAL TECHNOLOGY - 5.9% Arterial Vascular Engineering, Inc. (a) 300,000 11,100,000 04301310 Medtronic, Inc. 441,200 39,873,450 58505510 Micro Therapeutics, Inc. 52,300 209,200 59500W10 St. Jude Medical, Inc. (a) 439,400 16,724,663 79084910 Sonus Pharmaceuticals, Inc. (a) 258,200 10,295,725 83569210 Stryker Corp. 220,000 8,786,250 86366710 U.S. Surgical Corp. 105,931 3,489,102 91270710 90,478,390 X-RAY & RELATED APPARATUS - 0.5% Hologic, Inc. (a) 293,700 7,122,225 43644010 X-RAY ELECTRO-MED. APPARATUS - 1.2% Guidant Corp. 202,730 17,802,228 40169810 TOTAL MEDICAL EQUIPMENT & SUPPLIES 409,698,505 MEDICAL FACILITIES MANAGEMENT - 7.9% HOME HEALTH CARE AGENCIES - 0.0% Coram Healthcare Corp. warrants 7/11/99 (a) 19,069 - 21810311 HOSPITALS - 4.4% Columbia/HCA Healthcare Corp. 571,000 18,022,188 19767710 HEALTHSOUTH Corp. (a) 472,000 11,770,500 42192410 Health Management Associates, Inc. Class A (a) 293,400 8,673,638 42193310 Quorum Health Group, Inc. (a) 390,000 13,284,375 74908410 Tenet Healthcare Corp. (a) 582,700 15,878,570 88033G10 67,629,271 HMOS & OUTPATIENT CARE - 2.6% Humana, Inc. (a) 511,500 12,052,219 44485910 Oxford Health Plans, Inc. (a) 343,900 25,147,688 69147110 United HealthCare Corp. 47,090 2,289,751 91058110 39,489,658 SKILLED NURSING CARE FACILITIES - 0.9% Beverly Enterprises, Inc. (a) 433,100 7,064,944 08785110 Vencor, Inc. (a) 167,100 6,704,888 92260210 13,769,832 TOTAL MEDICAL FACILITIES MANAGEMENT 120,888,761 TOTAL COMMON STOCKS (Cost $1,126,142,727) 1,427,956,295 CASH EQUIVALENTS - 6.6% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $100,227,537) 100,227,537 $ 100,227,537 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $1,226,370,264) $ 1,528,183,832 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $672,069,400 and $580,471,354, 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 $116,067 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, the value of securities loaned and the value of collateral amounted to $16,185,468 and $16,987,100, 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 89.9% France 2.2 Japan 2.0 Sweden 1.6 Switzerland 1.3 Others (individually less than 1%) 3.0 TOTAL 100.0% Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Arqule, Inc. $ - $ 349,200 $ - $ - Intergrated Living Communities, Inc. 249,320 3,172,470 - - Micro Therapeutics, Inc. - 166,200 - - TOTALS $ 249,320 $ 3,687,870 $ - $ - INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $1,226,508,826. Net unrealized appreciation aggregated $301,675,006, of which $332,285,586 related to appreciated investment securities and $30,610,580 related to depreciated investment securities. HEALTH CARE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 1,528,183,832 SECURITIES, AT VALUE (COST $1,226,370, 264) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 404,395 INVESTMENTS SOLD RECEIVABLE FOR 3,211,363 FUND SHARES SOLD DIVIDENDS 2,158,453 RECEIVABLE INTEREST 394,432 RECEIVABLE REDEMPTION FEES 2,591 RECEIVABLE OTHER 423,072 RECEIVABLES TOTAL ASSETS 1,534,778,138 LIABILITIES PAYABLE FOR $ 6,164,734 FUND SHARES REDEEMED ACCRUED 776,647 MANAGEMENT FEE OTHER PAYABLES 937,280 AND ACCRUED EXPENSES COLLATERAL ON 16,987,100 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 24,865,761 NET ASSETS $ 1,509,912,377 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 1,087,929,095 UNDISTRIBUTED 2,197,052 NET INVESTMENT INCOME ACCUMULATED 117,974,322 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 301,811,908 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 1,509,912,377 14,253,902 SHARES OUTSTANDING NET ASSET $105.93 VALUE AND REDEMPTION PRICE PER SHARE ($1,509,912, 377 (DIVIDED BY) 14,253,902 SHARES) MAXIMUM $109.21 OFFERING PRICE PER SHARE (100/97.00 OF $105.93) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 7,997,288 INCOME DIVIDENDS INTEREST 3,073,814 (INCLUDING INCOME ON SECURITIES LOANED OF $55,680) TOTAL INCOME 11,071,102 EXPENSES MANAGEMENT $ 4,439,785 FEE TRANSFER AGENT 3,892,926 FEES ACCOUNTING AND 403,744 SECURITY LENDING FEES NON-INTERESTED 1,435 TRUSTEES' COMPENSATION CUSTODIAN FEES 66,241 AND EXPENSES REGISTRATION FEES 108,351 AUDIT 32,033 LEGAL 10,636 MISCELLANEOUS 3,550 TOTAL EXPENSES 8,958,701 BEFORE REDUCTIONS EXPENSE (130,211) 8,828,490 REDUCTIONS NET INVESTMENT 2,242,612 INCOME REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 118,181,832 SECURITIES (INCLUDING REALIZED GAIN OF $1,751,840 ON SALES OF INVESTMENTS OF AFFILIATED ISSUERS) FOREIGN (16,708) 118,165,124 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT 28,349,114 SECURITIES ASSETS AND 6,471 28,355,585 LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 146,520,709 NET INCREASE $ 148,763,321 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 1,645,625 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 32,568 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 100,358 WITHHELD BY FSC EXPENSE $ 126,561 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 1,323 CREDITS TRANSFER 2,327 AGENT CREDITS $ 130,211 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ 2,242,612 $ 6,636,874 NET INVESTMENT INCOME NET REALIZED 118,165,124 276,138,063 GAIN (LOSS) CHANGE IN NET 28,355,585 (55,053,844) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 148,763,321 227,721,093 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (1,273,612) (7,843,463) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (80,180,371) (188,056,633) REALIZED GAIN TOTAL (81,453,983) (195,900,096) DISTRIBUTIONS SHARE 412,890,162 445,765,805 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 79,533,093 191,246,667 OF DISTRIBUTIONS COST OF SHARES (422,894,145) (822,846,541) REDEEMED REDEMPTION 519,487 657,588 FEES NET INCREASE 70,048,597 (185,176,481) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 137,357,935 (153,355,484) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 1,372,554,442 1,525,909,926 PERIOD END OF PERIOD $ 1,509,912,377 $ 1,372,554,442 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $2,197,05 2 AND $1,993,28 4, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 3,970,354 4,420,102 ISSUED IN 884,100 2,023,821 REINVESTMENT OF DISTRIBUTIONS REDEEMED (3,998,076) (8,234,436) NET INCREASE 856,378 (1,790,513) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 102.45 $ 100.47 $ 76.13 $ 63.31 $ 52.57 $ 70.42 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET INVESTMENT .16 .52 .95 .75 .15 .13 INCOME D NET REALIZED 9.66 18.01 28.85 18.38 10.61 (9.34) AND UNREALIZED GAIN (LOSS) TOTAL FROM 9.82 18.53 29.80 19.13 10.76 (9.21) INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.10) (.65) (.59) (.62) (.07) (.16) INVESTMENT INCOME FROM NET (6.28) (15.95) (4.92) (5.74) - (8.51) REALIZED GAIN TOTAL (6.38) (16.60) (5.51) (6.36) (.07) (8.67) DISTRIBUTIONS REDEMPTION FEES .04 .05 .05 .05 .05 .03 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 105.93 $ 102.45 $ 100.47 $ 76.13 $ 63.31 $ 52.57 END OF PERIOD TOTAL RETURN B, C 10.73% 20.41% 39.68% 31.24% 20.57% (14.81)% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 1,509,912 $ 1,372,554 $ 1,525,910 $ 943,141 $ 522,890 $ 536,367 OF PERIOD (000 OMITTED) RATIO OF 1.20% A 1.33% 1.31% 1.39% 1.59% 1.46% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.18% A, E 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 .30% A .52% 1.06% 1.08% .26% .24% A INVESTMENT INCOME TO AVERAGE NET ASSETS PORTFOLIO 85% A 59% 54% 151% 213% 112% A TURNOVER RATE AVERAGE $ .0469 $ .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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS MEDICAL DELIVERY 8.33% 23.53% 118.74% 423.04% MEDICAL DELIVERY 5.08% 19.82% 112.18% 407.34% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS MEDICAL DELIVERY 23.53% 16.95% 17.99% MEDICAL DELIVERY 19.82% 16.24% 17.63% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970923 144541 S00000000000001 Medical Delivery S&P 500 00505 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9550.46 9781.00 1987/10/31 6828.88 7674.17 1987/11/30 6420.14 7041.82 1987/12/31 7178.09 7577.70 1988/01/31 7220.44 7896.72 1988/02/29 7590.99 8264.71 1988/03/31 7792.15 8009.33 1988/04/30 7855.67 8098.24 1988/05/31 7728.63 8168.69 1988/06/30 7972.13 8543.63 1988/07/31 7887.43 8511.17 1988/08/31 7665.10 8221.79 1988/09/30 8099.18 8572.04 1988/10/31 8310.92 8810.34 1988/11/30 8046.24 8684.35 1988/12/31 8310.92 8836.33 1989/01/31 8924.97 9483.15 1989/02/28 9253.18 9247.02 1989/03/31 9761.36 9462.47 1989/04/30 10428.35 9953.57 1989/05/31 10968.30 10356.69 1989/06/30 10840.78 10297.66 1989/07/31 12071.24 11227.54 1989/08/31 12633.44 11447.60 1989/09/30 12983.48 11400.66 1989/10/31 12548.58 11136.17 1989/11/30 13131.99 11363.35 1989/12/31 13132.75 11636.07 1990/01/31 11199.23 10855.29 1990/02/28 11481.65 10995.32 1990/03/31 12013.92 11286.70 1990/04/30 12133.40 11004.53 1990/05/31 13849.68 12077.47 1990/06/30 14512.29 11995.34 1990/07/31 14566.60 11956.96 1990/08/31 13404.31 10876.05 1990/09/30 12513.59 10346.39 1990/10/31 12361.52 10301.90 1990/11/30 14077.79 10967.40 1990/12/31 15268.39 11273.39 1991/01/31 17729.23 11764.91 1991/02/28 18825.42 12606.10 1991/03/31 21621.83 12911.17 1991/04/30 20973.06 12942.15 1991/05/31 22706.83 13501.25 1991/06/30 20793.89 12882.90 1991/07/31 22880.28 13483.24 1991/08/31 23148.36 13802.79 1991/09/30 23358.16 13572.29 1991/10/31 23871.02 13754.15 1991/11/30 23206.64 13199.86 1991/12/31 27151.02 14709.93 1992/01/31 27174.88 14436.32 1992/02/29 26125.10 14623.99 1992/03/31 24395.36 14338.83 1992/04/30 23429.09 14760.39 1992/05/31 23190.50 14832.71 1992/06/30 21969.34 14611.71 1992/07/31 23219.52 15209.33 1992/08/31 23193.48 14897.53 1992/09/30 20471.73 15073.32 1992/10/31 21487.50 15126.08 1992/11/30 23597.18 15641.88 1992/12/31 23571.14 15834.28 1993/01/31 22373.05 15967.28 1993/02/28 18830.87 16184.44 1993/03/31 19247.59 16525.93 1993/04/30 19013.18 16126.00 1993/05/31 19599.21 16558.18 1993/06/30 19794.55 16606.20 1993/07/31 20289.41 16539.77 1993/08/31 20224.30 17166.63 1993/09/30 21891.21 17034.45 1993/10/31 22920.00 17387.06 1993/11/30 23297.66 17221.88 1993/12/31 24873.41 17430.27 1994/01/31 26266.84 18022.90 1994/02/28 26410.09 17534.48 1994/03/31 25094.80 16769.97 1994/04/30 25902.21 16984.63 1994/05/31 26774.73 17263.18 1994/06/30 25120.84 16840.23 1994/07/31 26240.80 17392.59 1994/08/31 28897.43 18105.69 1994/09/30 29926.23 17662.10 1994/10/31 30902.93 18059.49 1994/11/30 29574.62 17401.77 1994/12/31 29808.32 17659.84 1995/01/31 31116.77 18117.75 1995/02/28 31593.82 18823.80 1995/03/31 33597.39 19379.29 1995/04/30 32505.47 19950.01 1995/05/31 31439.27 20747.42 1995/06/30 31945.03 21229.38 1995/07/31 35170.98 21933.35 1995/08/31 35335.01 21988.40 1995/09/30 36073.15 22916.31 1995/10/31 35458.03 22834.50 1995/11/30 38424.26 23836.93 1995/12/31 39401.47 24296.03 1996/01/31 41520.62 25123.07 1996/02/29 42382.89 25355.96 1996/03/31 42792.11 25600.14 1996/04/30 43279.35 25977.48 1996/05/31 43187.94 26647.44 1996/06/30 42167.28 26748.97 1996/07/31 37597.12 25567.20 1996/08/31 41070.44 26106.41 1996/09/30 44010.57 27575.68 1996/10/31 40689.59 28336.22 1996/11/30 42989.90 30478.15 1996/12/31 43737.51 29874.38 1997/01/31 45806.84 31740.93 1997/02/28 46833.23 31989.78 1997/03/31 43869.94 30675.32 1997/04/30 44870.09 32506.64 1997/05/31 49030.70 34485.64 1997/06/30 49371.44 36030.60 1997/07/31 52545.70 38897.55 1997/08/29 50734.40 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970923 144544 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Medical Delivery Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $50,734 - a 407.34% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS HEALTHSOUTH CORP. 8.0 HEALTH MANAGEMENT ASSOCIATES, INC. CLASS A 7.6 COLUMBIA/HCA HEALTHCARE CORP. 7.5 UNITED HEALTHCARE CORP. 7.1 UNIVERSAL HEALTH SERVICES, INC. CLASS B 6.9 TENET HEALTHCARE CORP. 6.8 WELLPOINT HEALTH NETWORKS, INC. 5.5 LINCARE HOLDINGS, INC. 3.9 OXFORD HEALTH PLANS, INC. 3.4 CIGNA CORP. 3.4 TOP INDUSTRIES AS OF AUGUST 31, 1997 HOSPITALS 40.1% HMO'S & OUTPATIENT CARE 27.0% MISCELLANEOUS HEALTH & ALLIED SERVICES, NEC 6.5% MEDICAL SUPPLIES & APPLIANCES 4.2% MEDICAL SERVICES 3.9% ALL OTHERS 18.3% ROW: 1, COL: 1, VALUE: 18.3 ROW: 1, COL: 2, VALUE: 3.9 ROW: 1, COL: 3, VALUE: 4.2 ROW: 1, COL: 4, VALUE: 6.5 ROW: 1, COL: 5, VALUE: 27.0 ROW: 1, COL: 6, VALUE: 40.1 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS MEDICAL DELIVERY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Deborah Wheeler, Portfolio Manager of Fidelity Select Medical Delivery Portfolio Q. HOW DID THE FUND PERFORM, DEBORAH? A. The fund had a total return of 8.33% for the six months through August 31, 1997. That compared to a return of 14.78% for the Standard & Poor's 500 Index during the same period. The fund's 12-month return was 23.53%, compared to a 40.65% return for the S&P 500 for the year that ended August 31, 1997. Q. WHY DID THE FUND LAG THE S&P 500 DURING THE RECENT SIX-MONTH PERIOD? A. The medical delivery industry is largely driven by two sectors: managed-care companies and hospitals. Each of these sectors trailed the broader stock market during the recent six-month period as well as during the past 12 months. Q. WHAT INFLUENCED THE PERFORMANCE OF THE HOSPITAL STOCKS? A. The hospital stocks as a group actually experienced good business fundamentals. They benefited from rising admissions as well as historically high profit margins, which reflected their continued success in taking market share away from non-profit hospitals. In fact, stocks of many hospital companies posted respectable gains. However, increased federal government scrutiny of Medicare billing practices in the industry caused concern among investors. It especially hurt the performance of Columbia/HCA, which is by far the largest company in the group. As a result, hospital stocks as a group underperformed on a market-cap weighted basis -stocks such as Columbia/HCA. Q. WHAT WAS GOING ON IN THE MANAGED-CARE SECTOR? A. The managed-care sector includes HMOs as well as other types of managed care. These companies' stocks posted sizable gains during January and February, just before the start of the recent six-month period. Investors began to realize that the companies had raised their prices sufficiently to keep up with medical cost inflation after failing to do so in 1996. During the past six months, however, managed-care stocks generally trailed the market as a whole - partly because they previously had climbed sharply. During the period, I increased the fund's weighting in the managed-care group from around 21% to 27% for two reasons. First, it became increasingly clear that the firms are negotiating better pricing arrangements and will benefit from higher profit margins this year and in 1998. Second, they became more attractive on a relative basis as other stocks outpaced them. Q. WHAT OTHER FACTORS AFFECTED THE FUND'S PERFORMANCE? A. Pacificare, one of California's largest HMOs, was the fund's third-largest holding at the beginning of the period. Its stock suffered because the firm's acquisition of FHP, another California HMO, depressed Pacificare's earnings. I have reduced the fund's exposure to Pacificare. HEALTHSOUTH, a rehabilitation services company, accounted for 7% of the fund's assets at the end of February, and was a strong performer during the recent six months due to solid earnings growth. It is now the fund's biggest position. Q. WHY DID YOU REDUCE THE FUND'S EXPOSURE TO PHARMACEUTICAL MANUFACTURERS AND DISTRIBUTORS? A. Those stocks have done very well thanks to drug price inflation. But it seems likely that in the long run that trend will abate. In light of the stocks' sizable gains, this seemed like a good time to take profits. Q. WHAT'S AHEAD FOR THE MEDICAL DELIVERY SECTOR? A. Profit margins for managed-care companies should continue to rise in 1998 as those companies benefit from better pricing. Managed-care stocks also look inexpensive relative to other stock market sectors. At the same time, hospital stocks will likely be volatile amid continued concerns that the government will crack down on Medicare billing fraud. I will try to overweight hospital stocks that already reflect those risks, and stay clear of those that seem to run the greatest risk of receiving special government scrutiny. Those are short-term considerations, however. Over the long-term, health services in general should benefit from the aging population, and thus continue to grow faster than the economy. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 505 TRADING SYMBOL: FSHCX SIZE: as of August 31, 1997, more than $150 million MANAGER: Deborah Wheeler, since 1996; manager, Fidelity Select Leisure Portfolio, 1991-1996; Fidelity Select Food and Agriculture Portfolio, 1991-1993; Fidelity Select Retailing Portfolio, 1990-1991; Fidelity Select Construction and Housing Portfolio, 1986-1988; assistant, Fidelity Magellan Fund, 1988-1990; joined Fidelity in 1986 (checkmark) MEDICAL DELIVERY PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.9% SHARES VALUE (NOTE 1) COMPUTER SERVICES & SOFTWARE - 0.8% COMPUTER SERVICES - 0.8% HBO & Co. 17,800 $ 1,274,921 40410010 DRUGS & PHARMACEUTICALS - 2.6% BIOTECHNOLOGY - 0.5% Gilead Sciences, Inc. 3,500 113,313 37555810 Idexx Laboratories, Inc. (a) 34,800 654,675 45168D10 767,988 DRUGS - 2.1% Bristol-Myers Squibb Co. 10,000 760,000 11012210 Lilly (Eli) & Co. 5,000 523,125 53245710 Pfizer, Inc. 10,000 553,750 71708110 Schering-Plough Corp. 25,000 1,200,000 80660510 3,036,875 TOTAL DRUGS & PHARMACEUTICALS 3,804,863 INSURANCE - 5.0% ACCIDENT & HEALTH INSURANCE - 0.7% Aetna, Inc. 11,400 1,087,988 00811710 LIFE INSURANCE - 0.9% United Wisconsin Services, Inc. 40,100 1,310,769 91323610 MULTI-LINE INSURANCE - 3.4% CIGNA Corp. 27,000 4,951,125 12550910 TOTAL INSURANCE 7,349,882 MEDICAL EQUIPMENT & SUPPLIES - 6.7% DRUG DISTRIBUTORS - WHOLESALE - 1.2% Cardinal Health, Inc. 27,600 1,828,500 14149Y10 MEDICAL SUPPLIES & APPLIANCES - 4.2% Abbott Laboratories 27,900 1,672,256 00282410 Baxter International, Inc. 35,000 1,861,563 07181310 Boston Scientific Corp. (a) 25,600 1,804,800 10113710 Johnson & Johnson 15,000 850,313 47816010 6,188,932 MEDICAL TECHNOLOGY - 0.2% Fresenius Medical Care AG sponsored ADR (a) 1,000 23,188 35802910 Medtronic, Inc. 400 36,150 58505510 St. Jude Medical, Inc. (a) 4,650 176,991 79084910 236,329 OPHTHALMIC GOODS - 1.1% Cooper Companies, Inc. (a) 48,500 1,600,500 21664840 TOTAL MEDICAL EQUIPMENT & SUPPLIES 9,854,261 MEDICAL FACILITIES MANAGEMENT - 79.3% HOME HEALTH CARE AGENCIES - 0.4% American HomePatient, Inc. (a) 1,700 28,475 02664910 Coram Healthcare Corp. warrants 7/11/99 (a) 9,740 - Home Health Corp. of America, Inc. (a) 47,900 586,775 43693610 615,250 HOSPITALS - 40.1% Columbia/HCA Healthcare Corp. 349,823 11,041,288 19767710 HEALTHSOUTH Corp. 472,800 11,790,450 42192410 Health Management Associates, Inc. Class A (a) 376,752 11,137,731 42193310 Magellan Health Services, Inc. (a) 10,000 305,000 55907910 SHARES VALUE (NOTE 1) Quorum Health Group, Inc. (a) 130,000 $ 4,428,125 74908410 Tenet Healthcare Corp. (a) 370,400 10,093,400 88033G10 Universal Health Services, Inc. Class B (a) 233,700 10,238,981 91390310 59,034,975 HMO'S & OUTPATIENT CARE - 27.0% Coventry Corp. (a) 180,600 3,002,475 22285310 Foundation Health Systems, Inc. Class A (a) 42,070 1,338,352 35040410 Humana, Inc. (a) 205,100 4,832,669 44485910 Maxicare Health Plans, Inc. (a) 1,000 18,000 57790420 Mid-Atlantic Medical Services, Inc. (a) 80,000 1,235,000 59523C10 Oxford Health Plans, Inc. (a) 69,000 5,045,625 69147110 PacifiCare Health Systems, Inc. Class A (a) 26,500 1,755,625 69511210 Sierra Health Services, Inc. (a) 114,400 3,768,050 82632210 Trigon Healthcare, Inc. 8,400 200,550 89618L10 United HealthCare Corp. 216,100 10,507,863 91058110 Wellpoint Health Networks, Inc. (a) 150,000 8,156,250 94973H10 39,860,459 MEDICAL SERVICES - 3.9% Lincare Holdings, Inc. (a) 119,900 5,717,731 53279110 National Surgery Centers, Inc. (a) 3,750 74,375 63804410 5,792,106 MISCELLANEOUS HEALTH & ALLIED SERVICES, NEC - 6.5% Renal Treatment Centers, Inc. (a) 130,300 4,413,913 75967110 Renal Care Group, Inc. (a) 125,000 4,078,125 75993010 Total Renal Care Holdings, Inc. (a) 25,000 1,143,750 89151A10 9,635,788 NURSING CARE & NURSING HOMES - 0.4% Health Care & Retirement Corp. (a) 15,000 546,563 42193710 NURSING, PERSONAL CARE FACILITIES - 0.5% NovaCare, Inc. (a) 45,000 677,813 66993010 SKILLED NURSING CARE FACILITIES - 0.5% Multicare Companies, Inc. (a) 24,950 689,244 62543V10 TOTAL MEDICAL FACILITIES MANAGEMENT 116,852,198 SERVICES - 0.5% MANAGEMENT CONSULTING SERVICES - 0.5% HealthCare COMPARE Corp. (a) 13,700 763,775 42192810 MANAGEMENT SERVICES - 0.0% Medpartners, Inc. (a) 1,000 21,375 58503X10 TOTAL SERVICES 785,150 TOTAL COMMON STOCKS (Cost $119,237,879) 139,921,275 CASH EQUIVALENTS - 5.1% Taxable Central Cash Fund (b) (Cost $7,485,118) 7,485,118 7,485,118 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $126,722,997) $ 147,406,393 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $94,250,369 and $114,996,187, 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 $38,647 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, there were no loans outstanding (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $126,747,691. Net unrealized appreciation aggregated $20,658,702, of which $24,798,883 related to appreciated investment securities and $4,140,181 related to depreciated investment securities. MEDICAL DELIVERY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 147,406,393 SECURITIES, AT VALUE (COST $126,722,99 7) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 3,440,185 INVESTMENTS SOLD RECEIVABLE FOR 471,736 FUND SHARES SOLD DIVIDENDS 13,096 RECEIVABLE INTEREST 39,759 RECEIVABLE REDEMPTION FEES 614 RECEIVABLE OTHER 167,822 RECEIVABLES TOTAL ASSETS 151,539,605 LIABILITIES PAYABLE FOR $ 935,816 FUND SHARES REDEEMED ACCRUED 77,649 MANAGEMENT FEE OTHER PAYABLES 147,554 AND ACCRUED EXPENSES TOTAL LIABILITIES 1,161,019 NET ASSETS $ 150,378,586 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 114,776,035 ACCUMULATED (768,614) NET INVESTMENT (LOSS) ACCUMULATED 15,687,769 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 20,683,396 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 150,378,586 5,316,495 SHARES OUTSTANDING NET ASSET $28.29 VALUE AND REDEMPTION PRICE PER SHARE ($150,378,5 86 (DIVIDED BY) 5,316,495 SHARES) MAXIMUM $29.16 OFFERING PRICE PER SHARE (100/97.00 OF $28.29) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 121,963 INCOME DIVIDENDS INTEREST 431,909 (INCLUDING INCOME ON SECURITIES LOANED OF $16,029) TOTAL INCOME 553,872 EXPENSES MANAGEMENT $ 511,471 FEE TRANSFER AGENT 680,323 FEES ACCOUNTING AND 88,447 SECURITY LENDING FEES NON-INTERESTED 385 TRUSTEES' COMPENSATION CUSTODIAN FEES 13,290 AND EXPENSES REGISTRATION FEES 29,592 AUDIT 12,543 LEGAL 3,588 MISCELLANEOUS 592 TOTAL EXPENSES 1,340,231 BEFORE REDUCTIONS EXPENSE (17,745) 1,322,486 REDUCTIONS NET INVESTMENT (768,614) INCOME (LOSS) REALIZED AND 15,632,176 UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES CHANGE IN NET (4,913,314) UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) 10,718,862 NET INCREASE $ 9,950,248 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 111,679 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 2,510 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 34,185 WITHHELD BY FSC EXPENSE $ 15,787 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 887 CREDITS TRANSFER 1,071 AGENT CREDITS $ 17,745 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (768,614) $ (1,815,979) NET INVESTMENT INCOME (LOSS) NET REALIZED 15,632,176 39,056,721 GAIN (LOSS) CHANGE IN NET (4,913,314) (20,650,234) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 9,950,248 16,590,508 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (11,752,213) (25,354,918) SHAREHOLDERS FROM NET REALIZED GAINS SHARE 82,246,266 213,043,160 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 11,578,782 24,874,771 OF DISTRIBUTIONS COST OF SHARES (134,286,482) (332,613,257) REDEEMED REDEMPTION 257,219 355,703 FEES NET INCREASE (40,204,215) (94,339,623) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (42,006,180) (103,104,033) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 192,384,766 295,488,799 PERIOD END OF PERIOD $ 150,378,586 $ 192,384,766 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $768,614 AND 0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 2,922,405 7,704,445 ISSUED IN 475,127 921,317 REINVESTMENT OF DISTRIBUTIONS REDEEMED (4,881,557) (12,015,996) NET INCREASE (1,484,025) (3,390,234) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 28.29 $ 29.00 $ 23.18 $ 20.28 $ 14.46 $ 19.64 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.12) (.23) (.03) .06 (.10) (.13) INVESTMENT INCOME (LOSS) D NET REALIZED 2.11 2.92 7.72 3.74 5.84 (3.56) AND UNREALIZED GAIN (LOSS) TOTAL FROM 1.99 2.69 7.69 3.80 5.74 (3.69) INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET - - - (.06) - - INVESTMENT INCOME FROM NET (2.03) (3.45) (1.91) (.89) - (1.55) REALIZED GAIN TOTAL (2.03) (3.45) (1.91) (.95) - (1.55) DISTRIBUTIONS REDEMPTION FEES .04 .05 .04 .05 .08 .06 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 28.29 $ 28.29 $ 29.00 $ 23.18 $ 20.28 $ 14.46 END OF PERIOD TOTAL RETURN B, C 8.33% 10.50% 34.15% 19.63% 40.25% (19.63)% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 150,379 $ 192,385 $ 295,489 $ 299,570 $ 188,553 $ 71,809 OF PERIOD (000 OMITTED) RATIO OF 1.56% A 1.57% 1.65% 1.48% 1.82% 1.77% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.54% A, E 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 (.89)% A (.84)% (.13)% .29% (.57)% (.89)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 123% A 78% 132% 123% 164% 155% A TURNOVER RATE AVERAGE $ .0421 $ .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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS AMERICAN GOLD -24.07% -25.41% 53.69% 10.75% AMERICAN GOLD -26.35% -27.65% 49.08% 7.43% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS AMERICAN GOLD -25.41% 8.98% 1.03% AMERICAN GOLD -27.65% 8.31% 0.72% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 114427 S00000000000001 American Gold S&P 500 00041 SP001 1987/08/31 9700.00 10000.00 1987/09/30 10112.04 9781.00 1987/10/31 7159.87 7674.17 1987/11/30 8303.90 7041.82 1987/12/31 8057.46 7577.70 1988/01/31 6847.36 7896.72 1988/02/29 7029.37 8264.71 1988/03/31 7732.80 8009.33 1988/04/30 7781.99 8098.24 1988/05/31 7732.80 8168.69 1988/06/30 7885.29 8543.63 1988/07/31 7865.61 8511.17 1988/08/31 7403.22 8221.79 1988/09/30 7083.48 8572.04 1988/10/31 7157.27 8810.34 1988/11/30 7255.65 8684.35 1988/12/31 7053.97 8836.33 1989/01/31 7309.76 9483.15 1989/02/28 7693.45 9247.02 1989/03/31 7422.90 9462.47 1989/04/30 7063.80 9953.57 1989/05/31 6808.01 10356.69 1989/06/30 7191.70 10297.66 1989/07/31 7265.49 11227.54 1989/08/31 7634.42 11447.60 1989/09/30 7678.69 11400.66 1989/10/31 7757.39 11136.17 1989/11/30 8746.13 11363.35 1989/12/31 8608.40 11636.07 1990/01/31 8987.16 10855.29 1990/02/28 8736.29 10995.32 1990/03/31 8396.87 11286.70 1990/04/30 7486.84 11004.53 1990/05/31 8146.00 12077.47 1990/06/30 7624.58 11995.34 1990/07/31 8155.84 11956.96 1990/08/31 8008.27 10876.05 1990/09/30 8003.35 10346.39 1990/10/31 6689.95 10301.90 1990/11/30 6606.33 10967.40 1990/12/31 7127.75 11273.39 1991/01/31 6139.02 11764.91 1991/02/28 6694.87 12606.10 1991/03/31 6670.28 12911.17 1991/04/30 6434.16 12942.15 1991/05/31 6655.52 13501.25 1991/06/30 7103.16 12882.90 1991/07/31 7024.45 13483.24 1991/08/31 6453.84 13802.79 1991/09/30 6345.62 13572.29 1991/10/31 6832.61 13754.15 1991/11/30 6817.85 13199.86 1991/12/31 6689.95 14709.93 1992/01/31 6852.28 14436.32 1992/02/29 6640.76 14623.99 1992/03/31 6188.21 14338.83 1992/04/30 5873.39 14760.39 1992/05/31 6291.51 14832.71 1992/06/30 6699.79 14611.71 1992/07/31 7122.83 15209.33 1992/08/31 6990.02 14897.53 1992/09/30 6950.66 15073.32 1992/10/31 6744.06 15126.08 1992/11/30 6173.45 15641.88 1992/12/31 6483.35 15834.28 1993/01/31 6360.37 15967.28 1993/02/28 6960.50 16184.44 1993/03/31 7742.64 16525.93 1993/04/30 8721.53 16126.00 1993/05/31 9690.59 16558.18 1993/06/30 10256.29 16606.20 1993/07/31 11072.86 16539.77 1993/08/31 10492.40 17166.63 1993/09/30 9380.69 17034.45 1993/10/31 10782.63 17387.06 1993/11/30 10792.47 17221.88 1993/12/31 11584.44 17430.27 1994/01/31 11589.36 18022.90 1994/02/28 11146.64 17534.48 1994/03/31 11417.19 16769.97 1994/04/30 10453.05 16984.63 1994/05/31 10905.61 17263.18 1994/06/30 10369.43 16840.23 1994/07/31 10216.94 17392.59 1994/08/31 10699.01 18105.69 1994/09/30 11633.63 17662.10 1994/10/31 10792.47 18059.49 1994/11/30 9513.51 17401.77 1994/12/31 9793.89 17659.84 1995/01/31 8770.73 18117.75 1995/02/28 9070.79 18823.80 1995/03/31 10462.89 19379.29 1995/04/30 10423.54 19950.01 1995/05/31 10639.98 20747.42 1995/06/30 10787.55 21229.38 1995/07/31 11077.78 21933.35 1995/08/31 11102.37 21988.40 1995/09/30 11097.45 22916.31 1995/10/31 9759.46 22834.50 1995/11/30 10664.57 23836.93 1995/12/31 10890.85 24296.03 1996/01/31 12824.05 25123.07 1996/02/29 13335.63 25355.96 1996/03/31 13655.37 25600.14 1996/04/30 13980.03 25977.48 1996/05/31 15504.95 26647.44 1996/06/30 13315.96 26748.97 1996/07/31 13070.00 25567.20 1996/08/31 14403.08 26106.41 1996/09/30 14137.45 27575.68 1996/10/31 13748.84 28336.22 1996/11/30 13158.55 30478.15 1996/12/31 13060.36 29874.38 1997/01/31 12503.64 31740.93 1997/02/28 14148.72 31989.78 1997/03/31 11901.78 30675.32 1997/04/30 11182.79 32506.64 1997/05/31 11824.39 34485.64 1997/06/30 10811.63 36030.60 1997/07/31 10641.95 38897.55 1997/08/29 10742.69 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970909 114432 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select American Gold Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $10,743 - a 7.43% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS GETCHELL GOLD CORP. 9.6 PLACER DOME, INC. 8.6 EURO-NEVADA MINING LTD. 8.4 NEWMONT MINING CORP. 7.8 NEWMONT GOLD CO. 5.8 GREENSTONE RESOURCES LTD. 4.6 MERIDIAN GOLD, INC. 4.4 FRANCO-NEVADA MINING CORP. 4.4 PIONEER GROUP, INC. 3.2 CAMBIOR, INC. 3.0 TOP INDUSTRIES AS OF AUGUST 31, 1997 GOLD ORES 75.8% GOLD & SILVER ORES 10.4% INVESTMENT MANAGERS 3.2% COPPER ORES 2.3% METAL MINING 1.9% ALL OTHERS 6.4% ROW: 1, COL: 1, VALUE: 6.4 ROW: 1, COL: 2, VALUE: 1.9 ROW: 1, COL: 3, VALUE: 2.3 ROW: 1, COL: 4, VALUE: 3.2 ROW: 1, COL: 5, VALUE: 10.4 ROW: 1, COL: 6, VALUE: 75.8 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS AMERICAN GOLD PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW George Domolky, Portfolio Manager of Fidelity Select American Gold Q. GEORGE, HOW DID THE FUND PERFORM DURING THE PERIOD? A. Like most gold funds, we've struggled recently. For the six months that ended August 31, 1997, the fund was down 24.07%, compared to a gain of 14.78% in the Standard & Poor's 500 Index over the same period. For the 12 months that ended August 31, 1997, the fund lost 25.41%, while the S&P 500 gained 40.65%. Q. WHAT INFLUENCED THE FUND'S PERFORMANCE OVER THE PERIOD? A. Without question, the most important factor was the sharp decline in the price of gold - from roughly $360 an ounce at the time of our last report in February to about $320 an ounce currently. The combination of low inflation, a strong dollar and an explosive U.S. stock market has made gold unattractive to many people as an alternative investment. Q. WHAT IS THE CURRENT SUPPLY/DEMAND SITUATION FOR GOLD? A. The supply/demand situation is largely unchanged from what it was six months ago. Overall, there is an annual production shortfall that is currently being offset by central bank sales. Demand for gold jewelry continues to increase, especially in the Far East and India. However, the gap between production and consumption continues to be more than offset by central bank selling. In July, for example, there was a large sale by Australia that caused a sharp selloff. With the U.S. dollar as strong as it is, there is considerable incentive for central bankers to hold dollars rather than gold. If the dollar should weaken or we get a resurgence of inflation, it would reduce that incentive. Q. WHAT WAS YOUR STRATEGY DURING THE PERIOD? A. The fund's strategy had two main components. First, we concentrated on established companies with strong production profiles, low cash costs and proven managements. These companies generally held up reasonably well due to the high quality of earnings. Second, we looked for smaller companies with excellent exploration and production opportunities, and with cash on hand. In addition, the fund had approximately 4% of its holdings in diamond equities, which were some of the better performers in our portfolio during the period. Q. CAN YOU PROVIDE THE NAMES OF SOME SPECIFIC STOCKS IN THOSE CATEGORIES? A. Certainly. In the category of established companies, Newmont Mining, Placer Dome and Barrick Gold performed as well as can be expected considering the decline in gold's price. Some of the better-performing small-company stocks included Getchell Gold, Greenstone Resources, Meridian Gold, Euro-Nevada Mining Corp, and Franco-Nevada. In the category of diamond equities, SouthernEra Resources and DIA Metropolitan Minerals were excellent performers due to new exploration successes. Q. WHAT ABOUT DISAPPOINTMENTS? A. TVI Pacific showed very poor results because its joint venture with Echo Bay in the Philippines did not materialize. This is a good example of the rule that foreign investments generally carry greater risk than U.S. investments. William Resources was also a disappointment due to the effect lower gold prices had on its high cash-cost structure, and we have liquidated our position as a result. Q. WHAT'S YOUR OUTLOOK, GEORGE? A. Low gold prices have led to a decline in exploration activities because many mines are economically unfeasible at the current gold price level. Eventually, that should result in a contraction in supply and provide some support for the price of gold. We will continue the fund's policy of identifying and purchasing low-cost producers and promising exploration companies with cash in the bank. The stock of these companies typically has a greater capacity to move independently of the price of gold and offers the most promising investment opportunities in the current economic environment. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 041 TRADING SYMBOL: FSAGX SIZE: as of August 31, 1997, more than $297 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 AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 97.4% SHARES VALUE (NOTE 1) CANADA - 55.9% METALS & MINING - 3.2% METAL MINING - 1.9% Arizona Star Resource Corp. (a) 494,900 $ 2,496,343 04059G10 Morgain Minerals, Inc. (a) 295,000 408,143 61688E10 Romarco Minerals, Inc. (a) 160,800 480,865 77590310 SouthernEra Resources Ltd. (a) 268,900 2,325,203 84390110 5,710,554 METAL MINING SERVICES - 0.3% Minefinders Corp. Ltd. (a) 300,000 756,620 60290010 MISCELLANEOUS NONMETAL MINERALS - 1.0% Camphor Ventures, Inc. 14,100 25,299 13461V10 DIA Metropolitan Minerals Ltd. (a): Class A 50,650 958,071 25243K20 Class B 102,500 2,167,808 25243K30 3,151,178 TOTAL METALS & MINING 9,618,352 OIL & GAS - 0.4% OIL & GAS EXPLORATION - 0.4% Southwestern Gold Corp. (a) 207,500 1,241,038 84548W10 PRECIOUS METALS - 52.3% GOLD & SILVER ORES - 0.8% Gold Corp, Inc. Class A (a) 34,500 211,313 38095610 Mentor Exploration & Development Co. Ltd. (a)(d) 188,000 1,557,917 58719310 Richmont Mines, Inc. (a) 187,300 647,840 76547T10 2,417,070 GOLD ORES - 50.7% Aber Resources Ltd. (a) 99,900 1,310,164 00291610 Agnico Eagle Mines Ltd. 100,600 880,771 00847410 Argosy Mining Corp. (a) 55,000 29,725 04022W10 Argosy Mining Corp. (warrants) (a)(c) 187,500 - 04022W94 Argosy Mining Corp. (a)(c) 375,000 202,666 04022W99 Barrick Gold Corp. 350,000 7,919,294 06790110 Bema Gold Corp. (a) 415,000 2,183,030 08135F10 Brazilian Resources, Inc. (a) 580,000 125,383 10591310 Cambior, Inc. 830,700 8,889,133 13201L10 Canaarc Resources Corp. (a) 530,000 225,330 13722D10 Canaarc Resources Corp. (warrants) (a) 125,000 - 13722D92 Cathedral Gold Corp. (a) 79,000 39,279 14890710 Crown Resources Corp. (a) 214,600 1,368,075 22856910 Echo Bay Mines Ltd. 405,000 2,042,875 27875110 Euro-Nevada Mining Ltd. 1,651,600 25,290,218 29870P10 Franco-Nevada Mining Corp. 552,600 13,120,641 35186010 Francisco Gold Corp. (a) 161,200 2,468,384 35190210 Francisco Gold Corp. (a)(c) 82,000 1,255,630 35190294 Geomaque Explorations Ltd. (a) 555,900 1,237,781 37247E10 Golden Knight Resources, Inc. (a) 530,800 1,204,842 38109010 Golden Queen Mining Co. Ltd. (a) 120,800 139,276 38115J10 Greenstone Resources Ltd. (a) 1,486,700 13,659,107 39573W10 Iamgold International African Mining Gold Corp. (a) 100,000 421,546 45091310 Indochina Goldfields Ltd. 20,000 89,353 45591310 Indochina Goldfields Ltd. (a)(c) 100,000 446,767 45591392 International Pursuit Corp. (warrants) (a) 150,000 - 46022D92 Kinross Gold Corp. (a) 938,100 4,089,717 49690210 Meridian Gold, Inc. (a) 2,975,100 13,291,746 58997510 Metallica Resources, Inc. (a) 1,011,600 2,004,612 59125J10 SHARES VALUE (NOTE 1) Mountain Province Mining, Inc. (a) 722,400 $ 2,863,052 62426E10 Nevsun Resources Ltd. (a) 582,000 2,180,796 64156L10 Oliver Gold Corp. (a) 273,800 155,865 68085H10 Oliver Gold Corp. (warrants) (a) 50,000 - 68085H92 Orvana Minerals Corp. (a) 228,100 821,834 68759M10 Placer Dome, Inc. 1,550,000 25,912,448 72590610 Prime Resources Group, Inc. 1,069,100 8,628,298 74157L10 Queenston Mining, Inc. (a) 254,000 210,485 74832E10 Repadre Capital Corp. (a) 121,900 658,800 76026J10 Repadre Capital Corp. (a)(c) 155,000 837,687 76026J92 Rio Narcea Gold Mines Ltd. (a) 57,900 183,578 76690910 Samax Gold, Inc. (a)(c) 240,000 864,709 79591592 Silver Standard Resources, Inc. (a) 157,700 562,504 82823L10 Sudbury Contact Mines Ltd. (a) 114,800 521,160 86462610 Sutton Resources Ltd. (a) 51,700 489,897 86947440 TVI Pacific, Inc. (a)(d) 6,779,500 1,319,015 87291710 TVI Pacific, Inc. (a)(c) 96,000 18,678 87291792 Teck Corp. Class B (sub-vtg.) 46,000 861,827 87874220 Valerie Gold Resources Ltd. (warrants) (a) 25,000 - 91890897 Viceroy Resources Corp. (a) 70,000 166,456 92564C10 Vista Gold Corp. (a) 1,335,600 885,427 92792610 152,077,861 SILVER ORES - 0.8% Pan American Silver Corp. (a) 182,700 1,184,869 69790010 Pan American Silver Corp. (warrants) (a) 87,500 - 69790092 Pan American Silver Corp. (a)(c) 175,000 1,134,931 69790096 2,319,800 TOTAL PRECIOUS METALS 156,814,731 TOTAL CANADA 167,674,121 FRANCE - 0.3% PRECIOUS METALS - 0.3% GOLD ORES - 0.3% Guyanor Resources SA Class B (a) 493,440 977,813 40299D23 GHANA - 1.4% PRECIOUS METALS - 1.4% GOLD ORES - 1.4% Ashanti Goldfields Co. Ltd. GDR 389,152 4,037,452 04374320 PERU - 4.8% PRECIOUS METALS - 4.8% GOLD ORES - 3.9% Compania de Minas Buenaventura SA: Class A 278,182 2,432,192 17999B23 Class B 92,846 843,259 17999B27 Class T 1,208,703 8,472,537 17999B22 11,747,988 SILVER ORES - 0.9% Compania de Minas Buenaventura SA Class B sponsored ADR 144,200 2,667,700 20444810 TOTAL PERU 14,415,688 UNITED STATES OF AMERICA - 35.0% METALS & MINING - 2.3% COPPER ORES - 2.3% Freeport McMoRan Copper & Gold, Inc. Class A 250,000 6,687,500 35671D10 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) UNITED STATES OF AMERICA - CONTINUED PRECIOUS METALS - 29.1% GOLD & SILVER ORES - 9.6% Getchell Gold Corp. (a) 849,948 $ 28,898,232 37426510 GOLD ORES - 19.5% Battle Mountain Gold Co. 305,000 1,734,688 07159310 Canyon Resources Corp. (a) 678,734 1,527,152 13886910 Homestake Mining Co. 350,000 4,900,000 43761410 Newmont Gold Co. 401,900 17,382,175 65163710 Newmont Mining Corp. 549,240 23,239,718 65163910 Stillwater Mining Co. (a) 185,000 3,885,000 86074Q10 Stillwater Mining Co. (a)(c) 271,800 5,707,800 86074Q90 58,376,533 TOTAL PRECIOUS METALS 87,274,765 SECURITIES INDUSTRY - 3.2% INVESTMENT MANAGERS - 3.2% Pioneer Group, Inc. 297,600 9,672,000 72368410 SERVICES - 0.4% JEWELRY, PRECIOUS METAL - 0.4% Lazare Kaplan International, Inc. (a) 74,300 1,221,306 52107810 TOTAL UNITED STATES OF AMERICA 104,855,571 TOTAL COMMON STOCKS (Cost $283,011,383) 291,960,645 CASH EQUIVALENTS - 2.6% Taxable Central Cash Fund (b) (Cost $7,860,245) 7,860,245 7,860,245 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $290,871,628) $ 299,820,890 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $10,468,868 or 3.5% of net assets. 4. Affiliated company (see Note 10 of Notes to Financial Statements). OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $158,620,375 and $179,046,880, 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 $47,728 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, there were no loans outstanding (see Note 6 of Notes to Financial Statements). Transactions during the period with companies which are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Mentor Exploration & Development Co. Ltd. $ - $ - $ - $ 1,557,917 Sudbury Contact Mines Ltd. - 454,796 - - TVI Pacific, Inc. 1,480,536 908,277 - 1,319,015 TOTALS $ 1,480,536 $ 1,363,073 $ - $ 2,876,932 INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $290,942,765. Net unrealized appreciation aggregated $8,878,125, of which $51,272,043 related to appreciated investment securities and $42,393,918 related to depreciated investment securities. AMERICAN GOLD PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 299,820,890 SECURITIES, AT VALUE (COST $290,871,62 8) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 1,040,164 INVESTMENTS SOLD RECEIVABLE FOR 608,971 FUND SHARES SOLD DIVIDENDS 172,388 RECEIVABLE INTEREST 76,510 RECEIVABLE REDEMPTION FEES 3,904 RECEIVABLE OTHER 3,500 RECEIVABLES TOTAL ASSETS 301,726,327 LIABILITIES PAYABLE TO $ 446,985 CUSTODIAN BANK PAYABLE FOR 3,399,551 FUND SHARES REDEEMED ACCRUED 148,060 MANAGEMENT FEE OTHER PAYABLES 247,189 AND ACCRUED EXPENSES TOTAL LIABILITIES 4,241,785 NET ASSETS $ 297,484,542 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 310,777,056 ACCUMULATED (4,255,325) NET INVESTMENT (LOSS) ACCUMULATED (17,986,898) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 8,949,709 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 297,484,542 14,679,793 SHARES OUTSTANDING NET ASSET $20.26 VALUE AND REDEMPTION PRICE PER SHARE ($297,484,5 42 (DIVIDED BY) 14,679,793 SHARES) MAXIMUM $20.89 OFFERING PRICE PER SHARE (100/97.00 OF $20.26) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 1,068,174 INCOME DIVIDENDS INTEREST 427,456 (INCLUDING INCOME ON SECURITIES LOANED OF $9,885) TOTAL INCOME 1,495,630 EXPENSES MANAGEMENT $ 947,981 FEE TRANSFER AGENT 1,139,478 FEES ACCOUNTING AND 159,930 SECURITY LENDING FEES NON-INTERESTED 733 TRUSTEES' COMPENSATION CUSTODIAN FEES 51,894 AND EXPENSES REGISTRATION FEES 46,092 AUDIT 15,704 LEGAL 936 MISCELLANEOUS 1,016 TOTAL EXPENSES 2,363,764 BEFORE REDUCTIONS EXPENSE (103,974) 2,259,790 REDUCTIONS NET INVESTMENT (764,160) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT (17,143,031) SECURITIES (INCLUDING REALIZED GAIN (LOSS) OF $(491,416) ON SALES OF INVESTMENTS IN AFFILIATED ISSUERS) FOREIGN (13,432) (17,156,463) CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (80,342,008) SECURITIES ASSETS AND 740 (80,341,268) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (97,497,731) NET INCREASE $ (98,261,891) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 446,086 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 16,189 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 76,823 WITHHELD BY FSC EXPENSE $ 102,869 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 288 CREDITS TRANSFER 817 AGENT CREDITS $ 103,974 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (764,160) $ (2,461,841) NET INVESTMENT INCOME (LOSS) NET REALIZED (17,156,463) 35,925,067 GAIN (LOSS) CHANGE IN NET (80,341,268) (16,652,278) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (98,261,891) 16,810,948 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (17,387,791) (6,827,284) SHAREHOLDERS FROM NET REALIZED GAINS SHARE 264,985,697 757,145,884 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 17,028,543 6,693,065 OF DISTRIBUTIONS COST OF SHARES (298,199,195) (799,571,083) REDEEMED REDEMPTION 1,216,204 2,358,350 FEES NET INCREASE (14,968,751) (33,373,784) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (130,618,433) (23,390,120) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 428,102,975 451,493,095 PERIOD END OF PERIOD $ 297,484,542 $ 428,102,975 (INCLUDING ACCUMULATE D NET INVESTMENT LOSS OF $4,255,32 5 AND $3,491,16 5, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 12,036,728 27,099,046 ISSUED IN 755,146 262,370 REINVESTMENT OF DISTRIBUTIONS REDEEMED (13,289,744) (28,839,831) NET INCREASE (497,870) (1,478,415) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 28.21 $ 27.11 $ 18.44 $ 22.66 $ 14.15 $ 11.94 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.05) (.16) (.06) (.05) (.11) (.05) INVESTMENT INCOME (LOSS) D NET REALIZED (6.69) 1.60 8.62 (4.25) 8.44 2.16 AND UNREALIZED GAIN (LOSS) TOTAL FROM (6.74) 1.44 8.56 (4.30) 8.33 2.11 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (1.29) (.50) - - - - REALIZED GAIN REDEMPTION FEES .08 .16 .11 .08 .18 .10 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 20.26 $ 28.21 $ 27.11 $ 18.44 $ 22.66 $ 14.15 END OF PERIOD TOTAL RETURN B, C (24.07)% 6.10% 47.02% (18.62)% 60.14% 18.51% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 297,485 $ 428,103 $ 451,493 $ 278,197 $ 347,406 $ 168,033 OF PERIOD (000 OMITTED) RATIO OF 1.49% A 1.44% 1.39% 1.41% 1.50% 1.59% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.42% A, E 1.42% E 1.39% 1.41% 1.49% E 1.59% A EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.48)% A (.59)% (.27)% (.22)% (.51)% (.44)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 103% A 63% 56% 34% 39% 30% A TURNOVER RATE AVERAGE $ .0243 $ .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 N ET 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS ENERGY 21.38% 27.88% 104.51% 144.72% ENERGY 17.74% 24.05% 98.37% 137.38% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark included 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 AUGUST 31, 1997 YEAR YEARS YEARS ENERGY 27.88% 15.38% 9.36% ENERGY 24.05% 14.68% 9.03% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 132832 S00000000000001 Energy S&P 500 00060 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9491.06 9781.00 1987/10/31 6983.75 7674.17 1987/11/30 6692.49 7041.82 1987/12/31 7168.94 7577.70 1988/01/31 7435.90 7896.72 1988/02/29 7702.86 8264.71 1988/03/31 8249.81 8009.33 1988/04/30 8562.36 8098.24 1988/05/31 8249.81 8168.69 1988/06/30 8340.97 8543.63 1988/07/31 8393.06 8511.17 1988/08/31 8074.01 8221.79 1988/09/30 7982.85 8572.04 1988/10/31 8054.47 8810.34 1988/11/30 8074.01 8684.35 1988/12/31 8311.82 8836.33 1989/01/31 8939.88 9483.15 1989/02/28 8799.57 9247.02 1989/03/31 9307.37 9462.47 1989/04/30 9621.40 9953.57 1989/05/31 9734.99 10356.69 1989/06/30 9935.43 10297.66 1989/07/31 10349.69 11227.54 1989/08/31 10576.86 11447.60 1989/09/30 10743.90 11400.66 1989/10/31 10670.40 11136.17 1989/11/30 11071.29 11363.35 1989/12/31 11871.40 11636.07 1990/01/31 11341.36 10855.29 1990/02/28 11694.72 10995.32 1990/03/31 11701.52 11286.70 1990/04/30 11307.39 11004.53 1990/05/31 11993.71 12077.47 1990/06/30 11711.05 11995.34 1990/07/31 12508.70 11956.96 1990/08/31 12733.50 10876.05 1990/09/30 12697.24 10346.39 1990/10/31 12044.61 10301.90 1990/11/30 11914.09 10967.40 1990/12/31 11338.09 11273.39 1991/01/31 10603.70 11764.91 1991/02/28 11592.88 12606.10 1991/03/31 11435.51 12911.17 1991/04/30 11562.91 12942.15 1991/05/31 11630.35 13501.25 1991/06/30 11112.21 12882.90 1991/07/31 11682.84 13483.24 1991/08/31 11908.08 13802.79 1991/09/30 11787.95 13572.29 1991/10/31 12140.84 13754.15 1991/11/30 11239.85 13199.86 1991/12/31 11342.08 14709.93 1992/01/31 10735.15 14436.32 1992/02/29 10750.32 14623.99 1992/03/31 10439.27 14338.83 1992/04/30 11152.42 14760.39 1992/05/31 11683.49 14832.71 1992/06/30 11105.34 14611.71 1992/07/31 11401.99 15209.33 1992/08/31 11607.36 14897.53 1992/09/30 11675.82 15073.32 1992/10/31 11173.80 15126.08 1992/11/30 10915.18 15641.88 1992/12/31 11071.18 15834.28 1993/01/31 11488.67 15967.28 1993/02/28 12246.33 16184.44 1993/03/31 12872.57 16525.93 1993/04/30 13120.18 16126.00 1993/05/31 13514.72 16558.18 1993/06/30 13692.64 16606.20 1993/07/31 13592.07 16539.77 1993/08/31 14667.37 17166.63 1993/09/30 14582.28 17034.45 1993/10/31 14373.41 17387.06 1993/11/30 12632.82 17221.88 1993/12/31 13191.81 17430.27 1994/01/31 13898.37 18022.90 1994/02/28 13432.68 17534.48 1994/03/31 12782.32 16769.97 1994/04/30 13758.72 16984.63 1994/05/31 13904.32 17263.18 1994/06/30 13831.52 16840.23 1994/07/31 14041.83 17392.59 1994/08/31 13807.26 18105.69 1994/09/30 13702.10 17662.10 1994/10/31 14478.61 18059.49 1994/11/30 13588.86 17401.77 1994/12/31 13246.22 17659.84 1995/01/31 12929.04 18117.75 1995/02/28 13438.19 18823.80 1995/03/31 14172.70 19379.29 1995/04/30 14608.27 19950.01 1995/05/31 14985.20 20747.42 1995/06/30 14549.63 21229.38 1995/07/31 14893.06 21933.35 1995/08/31 14784.17 21988.40 1995/09/30 14792.55 22916.31 1995/10/31 14155.95 22834.50 1995/11/30 14968.45 23836.93 1995/12/31 16078.65 24296.03 1996/01/31 16327.07 25123.07 1996/02/29 16249.97 25355.96 1996/03/31 17337.88 25600.14 1996/04/30 18177.46 25977.48 1996/05/31 18365.32 26647.44 1996/06/30 18705.25 26748.97 1996/07/31 17864.37 25567.20 1996/08/31 18562.12 26106.41 1996/09/30 19546.14 27575.68 1996/10/31 20342.30 28336.22 1996/11/30 21469.44 30478.15 1996/12/31 21299.95 29874.38 1997/01/31 21786.34 31740.93 1997/02/28 19556.31 31989.78 1997/03/31 20097.76 30675.32 1997/04/30 19918.36 32506.64 1997/05/31 21731.75 34485.64 1997/06/30 22050.05 36030.60 1997/07/31 23496.91 38897.55 1997/08/29 23738.05 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970909 132836 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Energy Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $23,738 - a 137.38% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS TOTAL SA SPONSORED ADR 7.2 BRITISH PETROLEUM PLC ADR 5.4 MOBIL CORP. 5.0 USX-MARATHON GROUP 4.3 TEXACO, INC. 4.0 COASTAL CORP. (THE) 3.9 EXXON CORP. 3.7 ROYAL DUTCH PETROLEUM CO. 3.7 TRANSOCEAN OFFSHORE, INC. 3.6 ELF AQUITAINE SA SPONSORED ADR 3.5 TOP INDUSTRIES AS OF AUGUST 31, 1997 OIL & GAS EXPLORATION 26.8% PETROLEUM REFINERS 22.6% CRUDE PETROLEUM & GAS 21.6% DRILLING 8.7% OIL & GAS SERVICES 5.9% ALL OTHERS 14.4% ROW: 1, COL: 1, VALUE: 14.4 ROW: 1, COL: 2, VALUE: 5.9 ROW: 1, COL: 3, VALUE: 8.699999999999999 ROW: 1, COL: 4, VALUE: 21.6 ROW: 1, COL: 5, VALUE: 22.6 ROW: 1, COL: 6, VALUE: 26.8 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS ENERGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Larry Rakers, Portfolio Manager of Fidelity Select Energy Portfolio Q. HOW DID THE FUND PERFORM, LARRY? A. For the six months that ended August 31, 1997, the fund generated a return of 21.38%, compared to the 14.78% return of the Standard & Poor's 500 Index. For the 12 months that ended August 31, 1997, the fund returned 27.88%, while the S&P 500 returned 40.65%. Q. WHAT FACTORS HELPED THE FUND OUTPERFORM THE S&P 500 DURING THE LATEST SIX-MONTH PERIOD? A. Since the energy market was fairly stable during the period, the fund didn't get much help from big changes in oil and natural gas prices. Therefore, stock selection was the key to the fund's strong performance during the period. The movement toward deep-water exploration and the investments I have made in those companies, such as Schlumberger, Halliburton, Transocean Offshore, Diamond Offshore Drilling and Noble Drilling, benefited the fund. Q. COULD YOU EXPLAIN THE MOVEMENT TO DEEP-WATER EXPLORATION? A. In the past five years, technology has been developed to extract oil and gas from large deep-water fields in cost-effective ways. Specifically, a company might be able to return its cost of capital on the average oil field when oil prices are about $20 a barrel. In deep waters, a company may be able to return its cost of capital when oil prices are as low as $12. On top of that, many shallow-water drilling opportunities have been exhausted. As a result, we've seen an explosion of exploration activity in the deep waters in the Gulf of Mexico, off the coast of the U.S., offshore from West Africa and in the North Sea. Q. TOTAL WAS AGAIN THE FUND'S LARGEST HOLDING AT THE END OF THE PERIOD. WHAT DID YOU FIND ATTRACTIVE ABOUT THIS STOCK? A. Total is a French integrated oil company that formerly was partially owned by the government and had a relatively high cost structure. Over the past few years, the company has transitioned into a more shareholder-focused company and, in an effort to grow earnings and cash flow, has cut costs and boosted production. The company has done a good job with this transition and was rewarded by a higher stock price during the period. Q. SEVERAL OF THE FUND'S TOP 10 HOLDINGS WERE INTEGRATED OIL COMPANIES, SUCH AS MOBIL, TEXACO AND EXXON. WHY? A. The price of oil recently has traded above $20 a barrel - a level at which most companies have a return above their cost of capital. As a result, companies have taken their excess returns and plowed the money back into exploration activities. Over time, I think the supply of oil will increase, which may drive down its price. Considering that possibility, I invested a large portion of the fund's assets in integrated oil companies because they are less sensitive to oil prices than pure exploration and production companies. Integrated oil companies look for oil, process it in their refineries, and make chemicals out of it or make gasoline and sell it to consumers at gasoline stations. If oil prices go down, these companies still make money by selling gasoline to consumers and from their chemical operations. Q. WHAT WERE THE WEAK AREAS FOR THE FUND? A. Chesapeake Energy, an exploration and production company, was a big disappointment. About two or three years ago, the company began drilling a few potentially interesting plays in Texas and Louisiana. Chesapeake produced a lot of gas in the first two or three years, and analysts projected the fields would last several more years into the future. However, recent exploration has been unsuccessful, causing the stock to fall during the period. The fund sold its position in Chesapeake by the end of the period. Q. WHAT'S YOUR OUTLOOK FOR THE ENERGY MARKET IN THE NEAR FUTURE? A. It's difficult to project short-term energy price movements because they are so dependent on three unpredictable factors: political instability, the weather and economic growth. If we see political instability in any oil-producing country, I think oil prices may go up. Weather can swing the markets, too. We've seen many reports about El Nino lately. This phenomenon occurs when the temperature in the Pacific Ocean is warmer than average, which some scientists believe is a precursor to a warmer-than-average winter. A warm winter likely would cause decreased demand for oil and gas, pushing prices down. Finally, economic growth helps boost demand, which would bolster the energy market. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: JULY 14, 1981 FUND NUMBER: 060 TRADING SYMBOL: FSENX SIZE: AS OF AUGUST 31, 1997, MORE THAN $179 MILLION MANAGER: LAWRENCE 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 AUGUST 31, 1997 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 94.2% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 0.4% PETROLEUM - WHOLESALE - 0.4% World Fuel Services Corp. 32,300 $ 747,445 98147510 CHEMICALS & PLASTICS - 5.2% CHEMICALS - 3.6% du Pont (E.I.) de Nemours & Co. 32,500 2,025,156 26353410 Monsanto Co. 46,100 2,025,519 61166210 Sasol, Ltd. 45,800 610,016 80386610 Solutia, Inc. 10,000 189,375 83437610 Witco Corp. 30,000 1,410,000 97738510 6,260,066 UNSUPPLIED PLASTICS FILM & SHEET - 1.6% W.R. Grace & Co. 40,000 2,752,500 38391110 TOTAL CHEMICALS & PLASTICS 9,012,566 COAL - 0.3% BITUMINOUS COAL, LIG SURFACE MINING - 0.3% Zeigler Coal Holding Co. 20,000 511,250 98928610 ELECTRICAL EQUIPMENT - 0.1% MOTORS & GENERATORS - 0.1% NQL Drilling Tools, Inc. Class A 20,000 147,721 62936W10 ENERGY SERVICES - 14.6% DRILLING - 8.7% Artisan Corp. 15,000 151,324 04314F10 Diamond Offshore Drilling, Inc. 96,200 5,254,925 25271C10 Noble Drilling Corp. (a) 123,800 3,520,563 65504210 Ryan Energy Technologies, Inc. 20,000 146,280 78348T10 Transocean Offshore, Inc. 65,566 6,232,868 89381710 15,305,960 OIL & GAS SERVICES - 5.9% Dresser Industries, Inc. 27,800 1,160,650 26159710 Eni Spa sponsored ADR 25,100 1,393,050 26874R10 Halliburton Co. 85,200 4,068,300 40621610 Schlumberger Ltd. 25,300 1,927,544 80685710 Weatherford Enterra, Inc. (a) 37,600 1,731,950 94707110 10,281,494 TOTAL ENERGY SERVICES 25,587,454 HOLDING COMPANIES - 1.3% HOLDING COMPANY OFFICES, NEC - 1.3% Norfolk Southern Corp. 23,600 2,312,800 65584410 IRON & STEEL - 0.2% FABRICATED METAL PRODUCTS - 0.2% Prudential Steel Ltd. 10,000 398,126 74435C10 OIL & GAS - 71.6% CRUDE PETROLEUM & GAS - 21.6% Anadarko Petroleum Corp. 27,800 2,041,563 03251110 Basin Exploration, Inc. (a) 41,800 428,450 07010710 Burlington Resources, Inc. 33,600 1,701,000 12201410 Elf Aquitaine SA sponsored ADR 108,500 6,048,875 28626910 Enserch Exploration, Inc. (a) 250,000 2,250,000 29356V10 Nuevo Energy Corp. 20,000 1,016,250 67050910 OEMV AG 9,000 1,183,736 67399592 Occidental Petroleum Corp. 40,000 937,500 67459910 Ocean Energy, Inc. (a) 49,500 3,183,469 67481210 Petrobras PN (Pfd. Reg.) 3,800,000 925,938 71699794 Rio Alto Exploration Ltd. (a) 159,600 1,483,581 76689210 Santa Fe Energy Resources, Inc. 130,600 1,444,763 80201210 Stone Energy Corp. 20,000 610,000 86164210 SHARES VALUE (NOTE 1) Total SA sponsored ADR 264,900 $ 12,549,638 89151E10 Tullow Oil PLC (a) 268,160 421,517 89999C22 United Meridian Corp. (a) 42,800 1,677,225 91086510 37,903,505 OIL & GAS EXPLORATION - 26.8% Abacan Resource Corp. (a) 187,200 514,800 00291910 Amerada Hess Corp. 55,700 3,237,563 02355110 Anderson Exploration Ltd. (a) 66,900 833,990 03390110 Chevron Corp. 50,100 3,879,619 16675110 Exxon Corp. 105,700 6,467,519 30229010 Kerr-McGee Corp. 34,100 2,118,463 49238610 Mobil Corp. 121,200 8,817,300 60705910 Petro-Canada 135,100 2,336,444 71644E10 Phillips Petroleum Co. 59,200 2,815,700 71850710 Texaco, Inc. 61,300 7,064,825 88169410 USX-Marathon Group 232,400 7,567,525 90290582 Unocal Corp. 7,635 298,242 91528910 Woodside Petroleum Ltd. 114,000 909,645 98022810 46,861,635 OIL FIELD EQUIPMENT - 0.6% EVI, Inc. (a) 19,000 998,688 26893910 PETROLEUM REFINERS - 22.6% British Petroleum PLC ADR 112,536 9,523,359 11088940 Coastal Corp. (The) 118,600 6,849,150 19044110 Pennzoil Co. 27,000 2,084,063 70990310 Royal Dutch Petroleum Co. 126,100 6,399,575 78025780 Shell Transport & Trading Co. PLC ADR 133,400 5,427,713 82270360 Tesoro Petroleum Corp. 4,100 69,700 88160910 Tosco Corp. 95,700 3,164,081 89149030 Ultramar Diamond Shamrock Corp. 12,000 391,500 90400010 Valero Energy Corp. 166,000 5,529,875 91913Y10 Wainoco Oil Corp. 33,100 153,088 93067610 39,592,104 TOTAL OIL & GAS 125,355,932 RAILROADS - 0.5% Wisconsin Central Transportation Corp. 30,000 930,000 97659210 TOTAL COMMON STOCKS (Cost $139,228,942) 165,003,294 CASH EQUIVALENTS - 5.8% Taxable Central Cash Fund (b) (Cost $10,159,125) 10,159,125 10,159,125 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $149,388,067) $ 175,162,419 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $104,557,732 and $168,414,345, 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 $31,210 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, there were no loans outstanding (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 70.7% France 10.6 United Kingdom 8.5 Netherlands 3.7 Canada 3.4 Others (individually less than 1%) 3.1 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $149,533,638. Net unrealized appreciation aggregated $25,628,781, of which $27,646,127 related to appreciated investment securities and $2,017,346 related to depreciated investment securities. ENERGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 175,162,419 SECURITIES, AT VALUE (COST $149,388,06 7) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 2,718,907 INVESTMENTS SOLD RECEIVABLE FOR 2,738,763 FUND SHARES SOLD DIVIDENDS 598,256 RECEIVABLE INTEREST 62,440 RECEIVABLE REDEMPTION FEES 584 RECEIVABLE TOTAL ASSETS 181,281,369 LIABILITIES PAYABLE FOR $ 1,123,475 INVESTMENTS PURCHASED PAYABLE FOR 797,155 FUND SHARES REDEEMED ACCRUED 86,661 MANAGEMENT FEE OTHER PAYABLES 170,330 AND ACCRUED EXPENSES TOTAL LIABILITIES 2,177,621 NET ASSETS $ 179,103,748 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 133,043,510 UNDISTRIBUTED 870,700 NET INVESTMENT INCOME ACCUMULATED 19,417,585 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 25,771,953 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 179,103,748 7,277,268 SHARES OUTSTANDING NET ASSET $24.61 VALUE AND REDEMPTION PRICE PER SHARE ($179,103,7 48 (DIVIDED BY) 7,277,268 SHARES) MAXIMUM $25.37 OFFERING PRICE PER SHARE (100/97.00 OF $24.61) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 2,022,077 INCOME DIVIDENDS INTEREST 478,227 (INCLUDING INCOME ON SECURITIES LOANED OF $21,107) TOTAL INCOME 2,500,304 EXPENSES MANAGEMENT $ 628,211 FEE TRANSFER AGENT 827,706 FEES ACCOUNTING AND 106,009 SECURITY LENDING FEES NON-INTERESTED 492 TRUSTEES' COMPENSATION CUSTODIAN FEES 23,246 AND EXPENSES REGISTRATION FEES 30,374 AUDIT 13,588 LEGAL 664 MISCELLANEOUS 2,930 TOTAL EXPENSES 1,633,220 BEFORE REDUCTIONS EXPENSE (43,683) 1,589,537 REDUCTIONS NET INVESTMENT 910,767 INCOME REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 19,722,447 SECURITIES FOREIGN (11,390) 19,711,057 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT 18,793,081 SECURITIES ASSETS AND (2,399) 18,790,682 LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 38,501,739 NET INCREASE $ 39,412,506 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 252,355 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 7,698 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 61,635 WITHHELD BY FSC EXPENSE $ 43,683 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ 910,767 $ 1,086,670 NET INVESTMENT INCOME NET REALIZED 19,711,057 20,637,191 GAIN (LOSS) CHANGE IN NET 18,790,682 (2,355,783) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 39,412,506 19,368,078 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (309,753) (1,000,086) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (10,331,545) (9,661,247) REALIZED GAIN TOTAL (10,641,298) (10,661,333) DISTRIBUTIONS SHARE 84,495,577 338,291,399 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 10,476,877 10,462,236 OF DISTRIBUTIONS COST OF SHARES (148,060,645) (274,385,798) REDEEMED REDEMPTION 156,173 514,459 FEES NET INCREASE (52,932,018) 74,882,296 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (24,160,810) 83,589,041 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 203,264,558 119,675,517 PERIOD END OF PERIOD $ 179,103,748 $ 203,264,558 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $870,700 AND $428,529, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 3,738,962 15,419,263 ISSUED IN 519,427 507,572 REINVESTMENT OF DISTRIBUTIONS REDEEMED (6,518,948) (12,698,556) NET INCREASE (2,260,559) 3,228,279 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY FEBRUARY 28, 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 21.31 $ 18.97 $ 16.10 $ 16.73 $ 15.84 $ 14.70 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET .10 .13 .18 .07 .06 .23 INVESTMENT INCOME D NET REALIZED 4.21 3.59 3.13 (.11) 1.35 1.16 AND UNREALIZED GAIN (LOSS) TOTAL FROM 4.31 3.72 3.31 (.04) 1.41 1.39 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.03) (.13) (.11) (.08) (.03) (.27) INVESTMENT INCOME FROM NET (1.00) (1.31) (.36) (.54) (.57) - REALIZED GAIN TOTAL (1.03) (1.44) (.47) (.62) (.60) (.27) DISTRIBUTIONS REDEMPTION FEES .02 .06 .03 .03 .08 .02 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 24.61 $ 21.31 $ 18.97 $ 16.10 $ 16.73 $ 15.84 END OF PERIOD TOTAL RETURN B, C 21.38% 20.35% 20.92% .04% 9.69% 9.81% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 179,104 $ 203,265 $ 119,676 $ 96,023 $ 145,490 $ 179,133 OF PERIOD (000 OMITTED) RATIO OF 1.54% A 1.57% 1.63% 1.85% 1.67% 1.71% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.50% A, 1.55% 1.63% 1.85% 1.66% 1.71% A EXPENSES TO E E E AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET .86% A .62% 1.04% .42% .37% 1.88% A INVESTMENT INCOME TO AVERAGE NET ASSETS PORTFOLIO 110% A 87% 97% 106% 157% 72% A TURNOVER RATE AVERAGE $ .0244 $ .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 N ET 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS ENERGY SERVICE 59.09% 82.75% 251.34% 192.11% ENERGY SERVICE 54.32% 77.27% 240.80% 183.35% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS ENERGY SERVICE 82.75% 28.57% 11.32% ENERGY SERVICE 77.27% 27.79% 10.98% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 115122 S00000000000001 Energy Service S&P 500 00043 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9385.61 9781.00 1987/10/31 6034.70 7674.17 1987/11/30 5375.26 7041.82 1987/12/31 5789.33 7577.70 1988/01/31 6019.37 7896.72 1988/02/29 6548.46 8264.71 1988/03/31 6931.86 8009.33 1988/04/30 7069.88 8098.24 1988/05/31 6586.80 8168.69 1988/06/30 6211.07 8543.63 1988/07/31 6111.38 8511.17 1988/08/31 6226.40 8221.79 1988/09/30 5958.02 8572.04 1988/10/31 5758.66 8810.34 1988/11/30 5513.28 8684.35 1988/12/31 5766.32 8836.33 1989/01/31 6119.05 9483.15 1989/02/28 6188.06 9247.02 1989/03/31 6579.13 9462.47 1989/04/30 6893.52 9953.57 1989/05/31 7016.21 10356.69 1989/06/30 7246.25 10297.66 1989/07/31 7652.65 11227.54 1989/08/31 8013.04 11447.60 1989/09/30 7898.02 11400.66 1989/10/31 7506.96 11136.17 1989/11/30 8151.07 11363.35 1989/12/31 9193.91 11636.07 1990/01/31 8603.48 10855.29 1990/02/28 9416.28 10995.32 1990/03/31 9868.70 11286.70 1990/04/30 9347.27 11004.53 1990/05/31 10919.21 12077.47 1990/06/30 10359.45 11995.34 1990/07/31 11333.28 11956.96 1990/08/31 11133.91 10876.05 1990/09/30 10919.21 10346.39 1990/10/31 9546.64 10301.90 1990/11/30 9692.33 10967.40 1990/12/31 9355.26 11273.39 1991/01/31 8932.82 11764.91 1991/02/28 10369.13 12606.10 1991/03/31 9562.64 12911.17 1991/04/30 9608.73 12942.15 1991/05/31 9862.20 13501.25 1991/06/30 8571.82 12882.90 1991/07/31 9217.01 13483.24 1991/08/31 9117.16 13802.79 1991/09/30 8279.94 13572.29 1991/10/31 8402.84 13754.15 1991/11/30 7396.65 13199.86 1991/12/31 7158.54 14709.93 1992/01/31 7058.69 14436.32 1992/02/29 7204.63 14623.99 1992/03/31 6690.01 14338.83 1992/04/30 7243.03 14760.39 1992/05/31 7819.09 14832.71 1992/06/30 7365.92 14611.71 1992/07/31 7673.16 15209.33 1992/08/31 8064.88 14897.53 1992/09/30 8310.67 15073.32 1992/10/31 7880.54 15126.08 1992/11/30 7719.24 15641.88 1992/12/31 7404.33 15834.28 1993/01/31 7696.20 15967.28 1993/02/28 8456.60 16184.44 1993/03/31 9124.84 16525.93 1993/04/30 9616.72 16126.00 1993/05/31 10062.58 16558.18 1993/06/30 10008.77 16606.20 1993/07/31 10147.14 16539.77 1993/08/31 10500.75 17166.63 1993/09/30 10193.26 17034.45 1993/10/31 10047.20 17387.06 1993/11/30 8986.36 17221.88 1993/12/31 8956.02 17430.27 1994/01/31 9040.87 18022.90 1994/02/28 8994.59 17534.48 1994/03/31 8323.47 16769.97 1994/04/30 8758.65 16984.63 1994/05/31 9148.81 17263.18 1994/06/30 9427.49 16840.23 1994/07/31 9602.67 17392.59 1994/08/31 9220.47 18105.69 1994/09/30 9570.82 17662.10 1994/10/31 9953.01 18059.49 1994/11/30 9435.46 17401.77 1994/12/31 9006.84 17659.84 1995/01/31 9063.43 18117.75 1995/02/28 9677.90 18823.80 1995/03/31 10211.52 19379.29 1995/04/30 10834.08 19950.01 1995/05/31 11117.06 20747.42 1995/06/30 10737.05 21229.38 1995/07/31 11270.67 21933.35 1995/08/31 11723.44 21988.40 1995/09/30 11755.78 22916.31 1995/10/31 10737.05 22834.50 1995/11/30 11343.44 23836.93 1995/12/31 12688.29 24296.03 1996/01/31 12964.49 25123.07 1996/02/29 13466.67 25355.96 1996/03/31 14529.60 25600.14 1996/04/30 15622.27 25977.48 1996/05/31 15395.00 26647.44 1996/06/30 15428.67 26748.97 1996/07/31 14578.54 25567.20 1996/08/31 15504.43 26106.41 1996/09/30 16085.21 27575.68 1996/10/31 17878.07 28336.22 1996/11/30 18601.94 30478.15 1996/12/31 18916.21 29874.38 1997/01/31 19969.53 31740.93 1997/02/28 17810.66 31989.78 1997/03/31 19064.20 30675.32 1997/04/30 18843.83 32506.64 1997/05/31 21459.23 34485.64 1997/06/30 22863.97 36030.60 1997/07/31 26458.99 38897.55 1997/08/29 28335.05 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970909 115131 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Energy Service Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $28,335 - a 183.35% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS COOPER CAMERON CORP. 5.7 HALLIBURTON CO. 5.2 SCHLUMBERGER LTD. 4.2 TRANSOCEAN OFFSHORE, INC. 4.1 NOBLE DRILLING CORP. 4.0 WESTERN ATLAS, INC. 3.9 DRESSER INDUSTRIES, INC. 3.7 WEATHERFORD ENTERRA, INC. 3.6 BAKER HUGHES, INC. 3.5 DIAMOND OFFSHORE DRILLING, INC. 3.0 TOP INDUSTRIES AS OF AUGUST 31, 1997 OIL & GAS SERVICES 39.9% DRILLING 25.3% OIL FIELD EQUIPMENT 10.8% FABRICATED PIPE & FITTINGS 2.7% ARCHITECTS & ENGINEERING 2.7% ALL OTHERS 18.6% ROW: 1, COL: 1, VALUE: 18.6 ROW: 1, COL: 2, VALUE: 2.7 ROW: 1, COL: 3, VALUE: 2.7 ROW: 1, COL: 4, VALUE: 10.8 ROW: 1, COL: 5, VALUE: 25.3 ROW: 1, COL: 6, VALUE: 42.6 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS ENERGY SERVICE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Robert Ewing, Portfolio Manager of Fidelity Select Energy Service Portfolio Q. HOW DID THE FUND PERFORM, BOB? A. It would be hard to beat our performance over the period just past. For the six months that ended August 31, 1997, the fund was up 59.09%, compared to a gain of 14.78% in the Standard & Poor's 500 Index over the same period. For the 12 months that ended August 31, 1997, the fund gained 82.75%, while the S&P 500 gained 40.65%. Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE OVER THE PERIOD? A. This sector is benefiting from an economic revival after about 15 years of tough times. As a result of high demand for hydrocarbons in the 1970s, we had increasing energy prices, which led to more exploration. People assumed that prices would keep going up, and when they didn't, a lot of firms were left with excess capacity. For example, the number of drill rigs in use worldwide in the early 1980s was roughly 5,000. By the early 1990s that number was down below 1,700. Currently, it is somewhere around 2,200, and utilization has reached the point at which many of the companies in our sector have benefited from favorable pricing. The demand for offshore equipment is especially strong. Q. AGAINST THIS BACKDROP, WHAT STRATEGY HAVE YOU USED? A. We've tried to expose the fund to those segments of the industry with the most pricing leverage. In the energy service sector, there are cycles of profitability that are predictable to some extent. First, the makers of drill rigs and related equipment do well when exploration activity is high. As wells are discovered and built, companies that manufacture the materials to build the wells benefit. In the next stage, an infrastructure must be built to transport oil and gas from the wells to the distribution points. We've tried to get in front of those waves of activity. In addition, now that many stocks in the sector have risen substantially, we've been using various valuation filters to prevent us from chasing stocks that are too expensive. Q. ARE THERE ANY OTHER THEMES YOU'D LIKE TO HIGHLIGHT? A. Yes, there are. We are particularly interested in companies involved in some facet of deep water drilling. Exploration results to date indicate that in size and flow rate, some deep water finds far exceed the typical shallow water site. Due to recent advances in drilling technology, many of these deep water sites have just become reachable in the last five years. Deep water drilling is really the frontier of this industry right now, and we are trying to position the fund to benefit from it. Q. WHAT STOCKS PERFORMED WELL FOR YOU OVER THE PERIOD? A. Cooper Cameron performed extremely well. The company manufactures pressure control equipment, risers, valves and other enabling technologies for deep water drilling. Schlumberger, with one of the biggest fleets of offshore drilling equipment in the industry, saw its revenues grow 25% to 30%, and earnings grew even faster. Halliburton has done well because of strong demand for its pressure pumping equipment and higher operating margins in its consulting business. Q. HOW ABOUT DISAPPOINTMENTS? A. United Meridian is an exploration and production company that, although it posted a positive return, was hurt by the decline in commodity prices. The same conditions applied to Union Pacific Resources, which we no longer hold. Q. WHAT'S THE CURRENT OUTLOOK FOR ENERGY SERVICE, BOB? A. Although capacity is still very tight in the sector, equity prices have increased to the point where it is much more difficult than it was even six months ago to find reasonably valued stocks. Our valuation screens will play a more important role in our strategy as we move forward. We also will continue to emphasize deep water opportunities because the economics of those fields makes them quite attractive. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 043 TRADING SYMBOL: FSESX SIZE: as of August 31, 1997, more than $1 billion MANAGER: Robert Ewing, since 1996; manager, Select Environmental Services Portfolio, since 1996; joined Fidelity in 1990 (checkmark) ENERGY SERVICE PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.1% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 2.7% FABRICATED PIPE & FITTINGS - 2.7% Coflexip sponsored ADR 582,000 $ 29,063,625 CONSTRUCTION - 2.5% HEAVY CONSTRUCTION, NEC - 2.5% McDermott (J. Ray) SA 668,100 26,389,944 58099A22 ELECTRICAL EQUIPMENT - 0.3% MOTORS & GENERATORS - 0.3% NQL Drilling Tools, Inc. Class A 460,400 3,400,540 62936W10 ENERGY SERVICES - 65.2% DRILLING - 25.3% Atwood Oceanics, Inc. (a) 40,000 3,627,500 05009510 Cliffs Drilling Co. (a) 342,000 16,309,125 18682C10 Diamond Offshore Drilling, Inc. 581,000 31,737,125 25271C10 Discoverer ASA (a) 90,666 2,664,723 25399L22 ENSCO International, Inc. (a) 238,000 15,113,000 26874Q10 Falcon Drilling, Inc. (a) 748,200 23,568,300 30591410 Helmerich & Payne, Inc. 150,100 10,600,813 42345210 Marine Drilling Companies, Inc. (a) 378,800 9,091,200 56824020 Nabors Industries, Inc. (a) 658,900 22,690,869 62956810 Noble Drilling Corp. (a) 1,489,250 42,350,547 65504210 Pride International, Inc. (a) 35,600 1,139,200 74193210 Reading & Bates Corp. (a) 855,000 31,047,188 75528180 Ryan Energy Technologies, Inc. 438,500 3,207,188 78348T10 Smedvig AS 182,900 5,033,452 79799892 Smedvig AS, Series B 75,725 2,094,086 79799897 Santa Fe International Corp. 5,100 228,225 80299J22 Transocean Offshore, Inc. 456,777 43,422,364 89381710 UTI Energy Corp. (a) 37,800 2,896,425 90338710 266,821,330 OIL & GAS SERVICES - 39.9% BJ Services Co. (a) 327,088 23,632,108 05548210 Baker Hughes, Inc. 859,456 36,419,448 05722410 CAL Dive International, Inc. 120,000 4,080,000 12791410 Canadian Fracmaster Ltd. Installment Receipt (c)(e) 250,000 1,990,632 13591392 Carbo Ceramics, Inc. 15,700 437,638 14078110 Computalog Ltd. (a) 15,400 242,472 20490830 Daniel Industries, Inc. 146,300 2,724,838 23623510 Dawson Geophysical Co. (a) 69,500 1,511,625 23935910 Dresser Industries, Inc. 928,800 38,777,400 26159710 Global Industries Ltd. (a) 509,400 18,561,263 37933610 Halliburton Co. 1,149,438 54,885,665 40621610 Input/Output, Inc. (a) 139,600 2,931,600 45765210 Lone Star Technologies, Inc. (a) 35,100 1,432,519 54231210 McDermott International, Inc. 631,600 20,369,100 58003710 Numar Corp. (a) 103,300 4,674,325 67052E10 Oceaneering International, Inc. (a) 560,000 13,055,000 67523210 Offshore Logistics, Inc. (a) 375,000 6,843,750 67625510 Pool Energy Services Co. (a) 269,000 8,423,063 73278810 Schlumberger Ltd. 576,900 43,952,569 80685710 SEACOR SMIT, Inc. (a) 135,300 7,323,113 81190410 Smith International, Inc. (a) 45,800 3,331,950 83211010 Tidewater, Inc. 176,565 9,269,663 88642310 Tuboscope, Inc. (a) 500,000 13,937,500 89860010 Varco International, Inc. (a) 567,400 22,554,150 92212610 Weatherford Enterra, Inc. (a) 824,600 37,983,138 94707110 Western Atlas, Inc. (a) 519,800 41,194,150 95767410 420,538,679 TOTAL ENERGY SERVICES 687,360,009 SHARES VALUE (NOTE 1) ENGINEERING - 2.7% ARCHITECTS & ENGINEERS - 2.7% Stolt Comex Seaway SA (a)(d) 530,000 $ 28,288,750 86199A22 IRON & STEEL - 0.6% FABRICATED METAL PRODUCTS - 0.6% Prudential Steel Ltd. 150,000 5,971,897 74435C10 OIL & GAS - 14.8% CRUDE PETROLEUM & GAS - 1.6% Ocean Energy, Inc. (a) 74,500 4,791,281 67481210 Total SA sponsored ADR 115,000 5,448,125 89151E10 Unit Corp. (a) 320,400 4,305,375 90921810 United Meridian Corp. (a) 48,000 1,881,000 91086510 16,425,781 OIL & GAS EXPLORATION - 1.6% Companie Generale de Geophysique SA 150,000 3,609,375 20438610 Petroleum Geo-Services AS sponsored ADR (a) 110,400 6,699,900 71659710 Veritas DGC, Inc. (a) 208,500 7,141,125 92343P10 17,450,400 OIL FIELD EQUIPMENT - 10.8% Camco International, Inc. 239,710 16,510,026 13263210 Cooper Cameron Corp. (a) 918,876 59,612,081 21664010 Dailey Petroleum Services Corp. 60,000 540,000 23380G10 EVI, Inc. (a) 549,600 28,888,350 26893910 Gulf Island Fabrication, Inc. (d) 136,000 5,508,000 40230710 National-Oilwell, Inc. (a) 46,800 2,881,125 63707110 113,939,582 PETROLEUM REFINERS - 0.8% British Petroleum PLC ADR 25,060 2,120,703 11088940 Royal Dutch Petroleum Co. 127,400 6,465,550 78025780 8,586,253 TOTAL OIL & GAS 156,402,016 SHIP BUILDING & REPAIR - 0.7% SHIP BUILDERS - 0.7% Halter Marine Group, Inc. (a) 185,700 7,346,756 40642Y10 SHIP BUILDING & REPAIRING - 0.0% Friede Goldman International, Inc. 1,000 40,250 35843010 TOTAL SHIP BUILDING & REPAIR 7,387,006 SHIPPING - 0.6% DEEP SEA TRANSPORT - 0.3% Farstad Shipping ASA (a) 750,000 3,296,417 31199C22 SHIPPING - 0.3% Hvide Marine, Inc. 80,900 2,497,788 44851510 TOTAL SHIPPING 5,794,205 TOTAL COMMON STOCKS (Cost $649,126,356) 950,057,992 CASH EQUIVALENTS - 9.9% Taxable Central Cash Fund (b) (Cost $104,318,062) 104,318,062 104,318,062 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $753,444,418) $ 1,054,376,054 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $1,990,632 or 0.2% of net assets. 4. Affiliated company (see Note 10 of Notes to Financial Statements). 5. Purchased on an installment basis. Market value reflects only those payments made through August 31, 1997. The remaining installment aggregating CAD 2,437,500 is due September 9, 1998. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $351,180,518 and $146,905,669, 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 $29,786 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, the value of securities loaned and the value of collateral amounted to $2,881,102 and $2,995,200, respectively (see Note 6 of Notes to Financial Statements). Transactions during the period with companies which are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Gulf Island Fabrication, Inc. $ 811,813 $ - $ - $ 5,508,000 Stolt Comex Seaway SA 2,063,124 - - 28,288,750 TOTALS $ 2,874,937 $ - $ - $ 33,796,750 INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $753,852,067. Net unrealized appreciation aggregated $300,523,987, of which $303,473,955 related to appreciated investment securities and $2,949,968 related to depreciated investment securities. ENERGY SERVICE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 1,054,376,054 SECURITIES, AT VALUE (COST $753,444,41 8) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 49,990,009 FUND SHARES SOLD DIVIDENDS 489,458 RECEIVABLE INTEREST 551,836 RECEIVABLE REDEMPTION FEES 16,627 RECEIVABLE TOTAL ASSETS 1,105,423,984 LIABILITIES PAYABLE FOR $ 1,752,841 INVESTMENTS PURCHASED PAYABLE FOR 15,243,625 FUND SHARES REDEEMED ACCRUED 485,702 MANAGEMENT FEE OTHER PAYABLES 608,222 AND ACCRUED EXPENSES COLLATERAL ON 2,995,200 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 21,085,590 NET ASSETS $ 1,084,338,394 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 758,652,322 ACCUMULATED (725,412) NET INVESTMENT (LOSS) ACCUMULATED 25,479,927 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 300,931,557 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 1,084,338,394 35,365,630 SHARES OUTSTANDING NET ASSET $30.66 VALUE AND REDEMPTION PRICE PER SHARE ($1,084,338, 394 (DIVIDED BY) 35,365,630 SHARES) MAXIMUM $31.61 OFFERING PRICE PER SHARE (100/97.00 OF $30.66) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 1,622,532 INCOME DIVIDENDS INTEREST 2,090,593 (INCLUDING INCOME ON SECURITIES LOANED OF $35,939) TOTAL INCOME 3,713,125 EXPENSES MANAGEMENT $ 2,005,416 FEE TRANSFER AGENT 2,006,293 FEES ACCOUNTING AND 293,185 SECURITY LENDING FEES NON-INTERESTED 1,305 TRUSTEES' COMPENSATION CUSTODIAN FEES 17,045 AND EXPENSES REGISTRATION FEES 171,837 AUDIT 22,117 LEGAL 982 MISCELLANEOUS 1,909 TOTAL EXPENSES 4,520,089 BEFORE REDUCTIONS EXPENSE (81,552) 4,438,537 REDUCTIONS NET INVESTMENT (725,412) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 26,782,539 SECURITIES FOREIGN 269 26,782,808 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT 290,502,671 SECURITIES ASSETS AND (79) 290,502,592 LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 317,285,400 NET INCREASE $ 316,559,988 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 2,211,761 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 4,617 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 131,250 WITHHELD BY FSC EXPENSE $ 77,441 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 2,514 CREDITS TRANSFER 1,597 AGENT CREDITS $ 81,552 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (725,412) $ (344,131) NET INVESTMENT INCOME (LOSS) NET REALIZED 26,782,808 90,047,658 GAIN (LOSS) CHANGE IN NET 290,502,592 (16,245,487) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 316,559,988 73,458,040 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (27,396,195) (17,911,527) SHAREHOLDERS FROM NET REALIZED GAINS SHARE 870,998,209 1,555,976,986 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 26,949,026 17,660,042 OF DISTRIBUTIONS COST OF SHARES (543,581,306) (1,466,322,715) REDEEMED REDEMPTION 1,304,963 2,837,620 FEES NET INCREASE 355,670,892 110,151,933 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 644,834,685 165,698,446 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 439,503,709 273,805,263 PERIOD END OF PERIOD $ 1,084,338,394 $ 439,503,709 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $725,412 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 35,522,784 78,524,862 ISSUED IN 1,372,849 891,837 REINVESTMENT OF DISTRIBUTIONS REDEEMED (23,015,545) (74,951,258) NET INCREASE 13,880,088 4,465,441 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 20.46 $ 16.09 $ 11.97 $ 11.66 $ 11.01 $ 9.43 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.03) (.01) .08 E .02 .03 .01 INVESTMENT INCOME (LOSS) D NET REALIZED 11.39 5.05 4.49 .67 .51 1.47 AND UNREALIZED GAIN (LOSS) TOTAL FROM 11.36 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 (1.21) (.79) (.48) (.35) - - REALIZED GAIN IN EXCESS OF - - - (.13) - - NET REALIZED GAIN TOTAL (1.21) (.79) (.52) (.50) (.05) - DISTRIBUTIONS REDEMPTION FEES .05 .12 .07 .12 .16 .10 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 30.66 $ 20.46 $ 16.09 $ 11.97 $ 11.66 $ 11.01 END OF PERIOD TOTAL RETURN B, C 59.09% 32.26% 39.15% 7.60% 6.36% 16.76% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 1,084,338 $ 439,504 $ 273,805 $ 63,794 $ 40,857 $ 85,234 OF PERIOD (000 OMITTED) RATIO OF 1.33% A 1.47% 1.59% 1.81% 1.66% 1.76% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.31% A, F 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 (.21)% A (.07)% .60% .19% .23% .13% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 48% A 167% 223% 209% 137% 236% A TURNOVER RATE AVERAGE $ .0374 $ .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 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 RESOURCES 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 PERIOD ENDED LIFE OF AUGUST 31, 1997 FUND NATURAL RESOURCES 13.20% NATURAL RESOURCES 9.80% (INCL. 3% SALES CHARGE) S&P 500 14.77% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, since the fund started on March 3, 1997. 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 includes reinvestment of dividends and capital gains, if any, and excludes the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS 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. Average annual total returns will appear once the fund is a year old, and the growth of a hypothetical $10,000 investment in the fund will appear in the fund's next report six months from now. 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. 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) INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS TOTAL SA SPONSORED ADR 3.0 TEXACO, INC. 2.9 GETCHELL GOLD CORP. 2.8 FORT JAMES CORP. 2.8 BRITISH PETROLEUM PLC ADR 2.4 COASTAL CORP. (THE) 2.1 TOSCO CORP. 2.0 MOBIL CORP. 1.9 EURO-NEVADA MINING LTD. 1.8 NORFOLK SOUTHERN CORP. 1.8 TOP INDUSTRIES AS OF AUGUST 31, 1997 ROW: 1, COL: 1, VALUE: 51.1 ROW: 1, COL: 2, VALUE: 4.9 ROW: 1, COL: 3, VALUE: 8.1 ROW: 1, COL: 4, VALUE: 10.5 ROW: 1, COL: 5, VALUE: 12.7 ROW: 1, COL: 6, VALUE: 12.7 PETROLEUM REFINERS 12.7% OIL & GAS EXPLORATION 12.7% CRUDE PETROLEUM & GAS 10.5% GOLD ORES 8.1% DRILLING 4.9% ALL OTHERS 51.1% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS NATURAL RESOURCES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Larry Rakers, Portfolio Manager of Fidelity Select Natural Resources Portfolio Q. HOW DID THE FUND PERFORM, LARRY? A. From inception on March 3, 1997 through August 31, 1997, the fund returned 13.20%. During the same time period, the Standard & Poor's 500 Index returned 14.77%. Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE DURING THE PERIOD? A. Although oil prices peaked at about $26 a barrel and natural gas hit a level of about $4 per thousand cubic feet in January, both commodity prices plummeted shortly thereafter. Since many of the fund's energy holdings were sensitive to the commodity prices, the fund underperformed the broader market index during the period. However, I was able to mute this effect by investing some of the fund's assets in companies that tend to do better in flat-to-declining oil price environments because their operations are more diversified. For example, I invested in integrated oil companies, which look for oil, process it in their refineries, and make chemicals out of it or make gasoline and sell it to consumers at gasoline stations. When oil prices go down, these companies still make money by selling gasoline to consumers and from their chemical operations. Q. AT THE END OF THE PERIOD, ABOUT 10% OF THE FUND WAS INVESTED IN THE PAPER AND FOREST PRODUCTS SECTOR. WHY? A. I saw a good opportunity to buy paper stocks in late March, when the paper and forest product market bottomed. In fact, the fund had an overweighted position in these stocks relative to its benchmark in the latter part of the period, which helped performance. Fort James and Boise Cascade were particularly good performers. Q. WHAT OTHER AREAS DID YOU TARGET? A. In the last five years, technology has made it possible to explore deep-water oil and gas prospects in a cost-effective way. This trend has gained even more steam lately, considering that most of the shallow-water plays have been exhausted. Companies such as Transocean Offshore, Schlumberger and Halliburton have benefited from the exploration activity in deep waters, and their share prices reflected this good fortune during the period. Q. WERE THERE ANY BIG DISAPPOINTMENTS DURING THE PERIOD? A. The biggest disappointment has been the price of gold. The absolute supply and demand for gold shows that we consume more gold than we mine. However, gauging the direction of the gold price is nearly impossible because central banks hold so much of it, which they can sell at any time and swing the market. We've had some big sales of gold by central banks recently, which has led to the decline in its price. When the dollar is strong and there is virtually no inflation - like the environment we've seen in the last six months - there's very little incentive for a central bank to own gold. On the other hand, when the dollar's weak and there's a lot of inflation, central banks want to own it. Many market watchers see the strength of the dollar and low inflation continuing, and the gold price reflects that outlook. If the environment changes, there could be a good opportunity in this precious metal. Q. WHAT'S YOUR OUTLOOK FOR THE NATURAL RESOURCES MARKET? A. In a slow-growth, no-inflation economy, the natural resource sector tends to underperform. Each commodity has its own supply/demand outlook, so I'm constantly searching for an area within natural resources where supply/demand is starting to look favorable. For example, in late fall and early winter, gas prices often benefit from seasonal trends, as demand strengthens due to the winter heating season. However, several large companies engaged in oil and gas exploration recently have begun to increase their production volume. While this should benefit these companies on a short-term basis, the industry as a whole could suffer because increased production means greater supply and weaker prices. Overall, I am emphasizing stocks that are less sensitive to energy prices. As far as sectors, I remain positive on deep-water drilling and service companies. Also, I think the fundamentals of paper and forest products companies are continuing to improve. 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: March 3, 1997 FUND NUMBER: 514 TRADING SYMBOL: FNATF SIZE: as of August 31, 1997, more than $7 million MANAGER: Lawrence Rakers, since inception; manager, Fidelity Select Energy Portfolio, since January 1997; 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) NATURAL RESOURCES PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 84.2% SHARES VALUE (NOTE 1) AUTO, TIRES & ACCESSORIES - 0.5% AUTO & TRUCK PARTS - 0.5% Eaton Corp. 500 $ 45,031 27805810 CHEMICALS & PLASTICS - 3.7% AGRICULTURAL CHEMICALS - 0.3% Agrium, Inc. 2,300 27,513 00891610 CHEMICALS - 2.1% Monsanto Co. 2,300 101,056 61166210 Sasol Ltd. 2,500 33,298 80386610 Solutia, Inc. (a) 1,000 18,938 83437610 Witco Corp. 500 23,500 97738510 176,792 UNSUPPORTED PLASTICS FILM & SHEET - 1.3% W.R. Grace & Co. 1,500 103,219 38391110 TOTAL CHEMICALS & PLASTICS 307,524 ELECTRICAL EQUIPMENT - 0.4% ELECTRICAL EQUIPMENT - WHOLESALE - 0.4% Anixter International, Inc. 1,900 30,756 03529010 ELECTRONIC INSTRUMENTS - 0.5% LAB ANALYTICAL INSTRUMENTS - 0.2% Thermoquest Corp. (a) 700 11,725 88365510 MEASURING INSTRUMENTS - 0.3% Thermo Electron Corp. (a) 700 28,175 88355610 TOTAL ELECTRONIC INSTRUMENTS 39,900 ENERGY SERVICES - 8.6% DRILLING - 4.9% Diamond Offshore Drilling, Inc. 2,000 109,250 25271C10 Maverick Tube Corp. (a) 900 29,363 57791410 Noble Drilling Corp. (a) 4,400 125,125 65504210 Transocean Offshore, Inc. 1,500 142,594 89381710 406,332 OIL & GAS SERVICES - 3.7% Dresser Industries, Inc. 1,100 45,925 26159710 Halliburton Co. 2,100 100,275 40621610 Schlumberger Ltd. 900 68,569 80685710 Weatherford Enterra, Inc. (a) 1,900 87,519 94707110 302,288 TOTAL ENERGY SERVICES 708,620 GAS - 0.1% GAS TRANSMISSION & DISTRIBUTION - 0.1% Consolidated Natural Gas Co. 200 11,813 20961510 HOLDING COMPANIES - 1.8% HOLDING COMPANY OFFICES, NEC - 1.8% Norfolk Southern Corp. 1,500 147,000 65584410 INDUSTRIAL MACHINERY & EQUIPMENT - 0.1% SPECIAL INDUSTRIAL MACHINERY, NEC - 0.1% Gasonics International Corp. (a) 300 5,325 36727810 IRON & STEEL - 0.4% FABRICATED METAL PRODUCTS - 0.1% Prudential Steel Ltd. 200 7,963 74435C10 IRON & STEEL BLAST FURNACE, MILLS - 0.0% Oregon Steel Mills, Inc. 200 5,388 68607910 SHARES VALUE (NOTE 1) IRON & STEEL FOUNDRIES - 0.3% Dofasco Inc. 1,100 $ 22,432 25690070 TOTAL IRON & STEEL 35,783 LODGING & GAMING - 0.1% HOTELS, MOTELS, & TOURIST COURTS - 0.1% HFS, Inc. (a) 200 11,138 40418110 METALS & MINING - 5.2% ALUMINUM, EXTRUDED PRODUCTS - 1.4% Alumax, Inc. (a) 2,700 111,881 02219710 KAOLIN & BALL CLAY - 0.1% English China Clay PLC 2,900 10,950 29321792 METAL MINING - 0.3% Arizona Star Resource Corp. (a) 1,000 5,044 04059G10 Pasminco Ltd. 2,400 4,327 70265092 Phelps Dodge Corp. 200 16,088 71726510 25,459 METAL MINING SERVICES - 0.1% Minefinders Corp. Ltd. (a) 2,500 6,305 60290010 METAL ORES - 1.0% Comalco Ltd. 2,900 14,436 19983099 Pechiney SA Class A 1,612 69,501 70599396 83,937 METALS & MINERALS - WHOLESALE - 0.1% Elkem ASA 500 8,884 28773299 MISCELLANEOUS NONMETAL MINERALS - 0.1% Camphor Ventures, Inc. (a) 3,500 6,280 13461V10 MISCELLANEOUS METAL ORES, NEC - 0.0% Helix Resources NL (a) 5,800 2,378 42399L22 PRIME NONFERROUS SMELTING - 2.1% Alcan Aluminium Ltd. 1,800 62,908 01371610 Aluminum Co. of America 1,000 82,250 02224910 Metaleurop SA (a) 2,000 26,947 60299892 172,105 TOTAL METALS & MINING 428,179 OIL & GAS - 36.4% CRUDE PETROLEUM & GAS - 10.5% Anadarko Petroleum Corp. 900 66,094 03251110 British Borneo Petroleum 1,464 11,032 11099D22 Burlington Resources, Inc. 400 20,250 12201410 Elf Aquitaine SA sponsored ADR 2,200 122,650 28626910 Enserch Exploration, Inc. 8,000 72,000 29356V10 Newfield Exploration Co. (a) 700 17,981 65129010 Nuevo Energy Corp. 300 15,301 67050910 Occidental Petroleum Corp. 1,100 25,781 67459910 Ocean Energy, Inc. (a) 1,100 70,744 67481210 Petrobras PN (Pfd. Reg.) 320,000 77,974 71699794 Petsec Energy Ltd. sponsored ADR (a) 1,000 24,375 71579610 Rio Alto Exploration Ltd. (a) 2,100 19,521 76689210 Santa Fe Energy Resources, Inc. 2,100 23,231 80201210 Total SA sponsored ADR 5,300 251,088 89151E10 Tullow Oil PLC (a) 5,100 8,017 89999C22 United Meridian Corp. (a) 800 31,350 91086510 YPF Sociedad Anonima Class D 400 13,050 98424592 870,439 OIL & GAS EXPLORATION - 12.7% Abacan Resource Corp. (a) 8,700 23,925 00291910 Amerada Hess Corp. 1,000 58,125 02355110 Chevron Corp. 600 46,463 16675110 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) OIL & GAS - CONTINUED OIL & GAS EXPLORATION - CONTINUED Exxon Corp. 1,500 $ 91,781 30229010 Gulfstream Resources Canada Ltd. 1,100 9,314 40274110 Kerr-McGee Corp. 900 55,913 49238610 Mobil Corp. 2,200 160,050 60705910 Petro-Canada 4,600 79,553 71644E10 Phillips Petroleum Co. 2,500 118,906 71850710 Texaco, Inc. 2,100 242,025 88169410 USX-Marathon Group 4,400 143,275 90290582 Woodside Petroleum Ltd. 2,200 17,555 98022810 1,046,885 OIL FIELD EQUIPMENT - 0.5% Cooper Cameron Corp. (a) 600 38,925 21664010 PETROLEUM REFINERS - 12.7% British Petroleum PLC ADR 2,306 195,145 11088940 Coastal Corp. (The) 3,000 173,250 19044110 Eni Spa 5,400 29,828 26874R93 Murphy Oil Corp. 900 48,597 62671710 Pennzoil Co. 1,300 100,344 70990310 Royal Dutch Petroleum Co. 2,400 121,800 78025780 Shell Transport & Trading Co. PLC ADR 2,100 85,444 82270360 Tosco Corp. 4,900 162,006 89149030 Ultramar Diamond Shamrock Corp. 100 3,250 90400010 Valero Energy Corp. 3,100 103,269 91913Y10 Wainoco Oil Corp. (a) 5,200 24,050 93067610 1,046,983 TOTAL OIL & GAS 3,003,232 PACKAGING & CONTAINERS - 0.8% GLASS CONTAINERS - 0.8% Owens-Illinois, Inc. (a) 1,800 62,663 69076840 PAPER & FOREST PRODUCTS - 9.9% CONVERTED PAPER & PAPERBOARD - 1.8% American Pad & Paper Co. (a) 800 18,400 02881610 Boise Cascade Corp. 3,300 130,556 09738310 148,956 ENVELOPES - 1.1% Mail-Well, Inc. (a) 3,150 88,003 56032120 PAPER - 2.3% Buckeye Cellulose Corp. (a) 1,200 47,250 11815H10 Chesapeake Corp. 1,300 44,688 16515910 Mercer International, Inc. (SBI) 2,200 22,825 58805610 Stone Container Corp. 1,200 20,700 86158910 Willamette Industries, Inc. 700 55,825 96913310 191,288 PAPER MILLS - 4.1% Alliance Forest Products, Inc. (a) 2,600 61,545 01859J10 Alliance Forest Products, Inc. (a)(c) 1,000 23,671 01859J93 Bowater, Inc. 500 25,594 10218310 Fort James Corp. 5,400 226,800 34747110 337,610 SHARES VALUE (NOTE 1) PAPERBOARD MILLS - 0.6% Fiber Mark, Inc. (a) 700 $ 14,394 31564610 Jefferson Smurfit Corp. (a) 700 13,606 47508710 Mead Corp. 300 21,281 58283410 49,281 TOTAL PAPER & FOREST PRODUCTS 815,138 PRECIOUS METALS - 12.0% GOLD & SILVER ORES - 3.3% Getchell Gold Corp. (a) 6,700 227,800 37426510 Industrias Penoles SA 9,500 42,472 78899A23 270,272 GOLD ORES - 8.1% Barrick Gold Corp. 2,500 56,567 06790110 Breakwater Resources Ltd. (a) 8,800 40,901 10690230 Euro-Nevada Mining Ltd. 9,600 147,001 29870P10 Franco-Nevada Mining Corp. 2,200 52,235 35186010 Indochina Goldfields Ltd. (a) 3,900 17,423 45591310 Placer Dome, Inc. 1,600 26,749 72590610 Francisco Gold Corp. (a) 3,000 45,938 35190210 Francisco Gold Corp. (a)(c) 700 10,719 35190294 Greenstone Resources Ltd. (a) 8,200 75,338 39573W10 Kalahari Goldridge Mining Co. Ltd. (a) 4,500 1,726 48699R22 Meridian Gold, Inc. (a) 14,000 62,547 58997510 Newmont Mining Corp. 2,015 85,260 65163910 Queenston Mining, Inc. (a) 20,000 16,574 74832E10 Stillwater Mining Co. (a) 1,300 27,300 86074Q10 TVI Pacific, Inc. (a) 10,000 1,946 87291710 668,224 SILVER ORES - 0.6% Compania de Minas Buenaventura SA Class B sponsored ADR 2,000 37,000 20444810 Pan American Silver Corp. (a) 1,500 9,728 69790010 46,728 TOTAL PRECIOUS METALS 985,224 RAILROADS - 2.3% CSX Corp. 1,800 102,958 12640810 Wisconsin Central Transportation Corp. (a) 2,700 83,700 97659210 186,658 RETAIL & WHOLESALE, MISCELLANEOUS - 0.3% STATIONERY & OFFICE SUPPLIES - WHOLESALE - 0.3% Boise Cascade Office Products Corp. (a) 1,000 21,063 09740310 TOBACCO - 0.2% CIGARETTES - 0.2% Schweitzer-Mauduit International, Inc. 500 20,000 80854110 TRUCKING & FREIGHT - 0.9% AIR COURIER SERVICES - 0.9% Airborne Freight Corp. 800 39,400 00926610 CNF Transportation, Inc. 1,000 36,125 12612W10 75,525 TOTAL COMMON STOCKS (Cost $6,530,985) 6,940,572 CASH EQUIVALENTS - 15.8% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $1,306,274) 1,306,274 $ 1,306,274 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $7,837,259) $ 8,246,846 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $34,390 or 0.5% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $9,333,009 and $3,027,394, 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 $609 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 73.9% Canada 11.4 France 5.7 United Kingdom 3.7 Netherlands 1.5 Others (individually less than 1%) 3.8 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $7,837,259. Net unrealized appreciation aggregated $409,587, of which $626,225 related to appreciated investment securities and $216,638 related to depreciated investment securities. NATURAL RESOURCES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 8,246,846 SECURITIES, AT VALUE (COST $7,837,259) - - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 95,903 INVESTMENTS SOLD RECEIVABLE FOR 195,852 FUND SHARES SOLD DIVIDENDS 11,105 RECEIVABLE INTEREST 3,735 RECEIVABLE REDEMPTION FEES 23 RECEIVABLE PREPAID 9,213 EXPENSES RECEIVABLE FROM 6,865 INVESTMENT ADVISER FOR EXPENSE REDUCTIONS TOTAL ASSETS 8,569,542 LIABILITIES PAYABLE FOR $ 1,032,359 INVESTMENTS PURCHASED PAYABLE FOR 57,112 FUND SHARES REDEEMED OTHER PAYABLES 28,181 AND ACCRUED EXPENSES TOTAL LIABILITIES 1,117,652 NET ASSETS $ 7,451,890 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 6,829,616 ACCUMULATED (12,646) NET INVESTMENT (LOSS) ACCUMULATED 225,350 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 409,570 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 7,451,890 658,391 SHARES OUTSTANDING NET ASSET $11.32 VALUE AND REDEMPTION PRICE PER SHARE ($7,451,890 (DIVIDED BY) 658,391 SHARES) MAXIMUM $11.67 OFFERING PRICE PER SHARE (100/97.00 OF $11.32) STATEMENT OF OPERATIONS MARCH 3, 1997 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 31,506 INCOME DIVIDENDS INTEREST 13,929 TOTAL INCOME 45,435 EXPENSES MANAGEMENT $ 13,729 FEE TRANSFER AGENT 18,419 FEES ACCOUNTING FEES 29,752 AND EXPENSES NON-INTERESTED 3 TRUSTEES' COMPENSATION CUSTODIAN FEES 19,551 AND EXPENSES REGISTRATION FEES 30,376 AUDIT 9,000 LEGAL 3 TOTAL EXPENSES 120,833 BEFORE REDUCTIONS EXPENSE (62,752) 58,081 REDUCTIONS NET INVESTMENT (12,646) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 225,370 SECURITIES FOREIGN (20) 225,350 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT 409,587 SECURITIES ASSETS AND (17) 409,570 LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 634,920 NET INCREASE $ 622,274 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 45,735 INFORMATION SALES CHARGES PAID TO FDC EXCHANGE FEES $ 2,048 WITHHELD BY FSC EXPENSE $ 23 REDUCTIONS CUSTODIAN CREDITS FMR 62,729 REIMBURSEMEN T $ 62,752 STATEMENT OF CHANGES IN NET ASSETS INCREASE MARCH 3, 1997 (DECREASE) IN (COMMENCEMENT NET ASSETS OF OPERATIONS) TO AUGUST 31, 1997 (UNAUDITED) OPERATIONS $ (12,646) NET INVESTMENT INCOME (LOSS) NET REALIZED 225,350 GAIN (LOSS) CHANGE IN NET 409,570 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 622,274 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS SHARE 10,989,894 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES COST OF SHARES (4,173,285) REDEEMED REDEMPTION 13,007 FEES NET INCREASE 6,829,616 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 7,451,890 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF - PERIOD END OF PERIOD $ 7,451,890 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $12,646) OTHER INFORMATION SHARES SOLD 1,056,014 REDEEMED (397,623) NET INCREASE 658,391 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS MARCH 3, 1997 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31, 1997 SELECTED (UNAUDITED) PER-SHARE DATA NET ASSET VALUE, $ 10.00 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.03) INVESTMENT INCOME (LOSS) D NET REALIZED 1.32 AND UNREALIZED GAIN (LOSS) TOTAL FROM 1.29 INVESTMENT OPERATIONS REDEMPTION FEES .03 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 11.32 END OF PERIOD TOTAL RETURN B, C 13.20% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 7,452 OF PERIOD (000 OMITTED) RATIO OF 2.50% A, EXPENSES TO E AVERAGE NET ASSETS RATIO OF NET (.54)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 148% A TURNOVER RATE AVERAGE $ .0222 COMMISSION RATE F ANNUALIZED THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). 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. 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS PRECIOUS METALS AND MINERALS -30.05% -31.99% 40.44% -18.48% PRECIOUS METALS AND MINERALS -32.15% -34.03% 36.23% -20.92% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS PRECIOUS METALS AND MINERALS -31.99% 7.03% -2.02% PRECIOUS METALS AND MINERALS -34.03% 6.38% -2.32% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 145503 S00000000000001 Precious Metals S&P 500 00061 SP001 1987/08/31 9700.00 10000.00 1987/09/30 10000.93 9781.00 1987/10/31 7242.40 7674.17 1987/11/30 8155.22 7041.82 1987/12/31 7689.86 7577.70 1988/01/31 6338.80 7896.72 1988/02/29 6348.96 8264.71 1988/03/31 6877.19 8009.33 1988/04/30 6648.63 8098.24 1988/05/31 6684.19 8168.69 1988/06/30 6440.39 8543.63 1988/07/31 6481.02 8511.17 1988/08/31 6095.00 8221.79 1988/09/30 5683.59 8572.04 1988/10/31 5891.84 8810.34 1988/11/30 6110.24 8684.35 1988/12/31 5855.07 8836.33 1989/01/31 6098.59 9483.15 1989/02/28 6294.46 9247.02 1989/03/31 6294.46 9462.47 1989/04/30 6008.59 9953.57 1989/05/31 5722.72 10356.69 1989/06/30 6172.70 10297.66 1989/07/31 6342.11 11227.54 1989/08/31 6469.16 11447.60 1989/09/30 6696.80 11400.66 1989/10/31 6691.51 11136.17 1989/11/30 7543.83 11363.35 1989/12/31 7738.21 11636.07 1990/01/31 8354.48 10855.29 1990/02/28 7636.39 10995.32 1990/03/31 7304.14 11286.70 1990/04/30 6553.90 11004.53 1990/05/31 6929.02 12077.47 1990/06/30 6425.28 11995.34 1990/07/31 6816.48 11956.96 1990/08/31 6886.15 10876.05 1990/09/30 6730.74 10346.39 1990/10/31 5975.14 10301.90 1990/11/30 5867.96 10967.40 1990/12/31 6107.49 11273.39 1991/01/31 5444.58 11764.91 1991/02/28 5933.62 12606.10 1991/03/31 5819.51 12911.17 1991/04/30 5803.21 12942.15 1991/05/31 6129.23 13501.25 1991/06/30 6531.32 12882.90 1991/07/31 6531.32 13483.24 1991/08/31 5846.68 13802.79 1991/09/30 5966.22 13572.29 1991/10/31 6368.31 13754.15 1991/11/30 6569.36 13199.86 1991/12/31 6201.40 14709.93 1992/01/31 6332.99 14436.32 1992/02/29 6004.01 14623.99 1992/03/31 5768.23 14338.83 1992/04/30 5428.28 14760.39 1992/05/31 5784.68 14832.71 1992/06/30 5817.32 14611.71 1992/07/31 5894.22 15209.33 1992/08/31 5630.55 14897.53 1992/09/30 5399.83 15073.32 1992/10/31 5053.76 15126.08 1992/11/30 4757.13 15641.88 1992/12/31 4845.40 15834.28 1993/01/31 4962.76 15967.28 1993/02/28 5510.46 16184.44 1993/03/31 6259.34 16525.93 1993/04/30 7270.90 16126.00 1993/05/31 8232.15 16558.18 1993/06/30 8366.28 16606.20 1993/07/31 9456.08 16539.77 1993/08/31 8506.00 17166.63 1993/09/30 7835.35 17034.45 1993/10/31 8947.50 17387.06 1993/11/30 8930.74 17221.88 1993/12/31 10254.03 17430.27 1994/01/31 9829.85 18022.90 1994/02/28 9400.00 17534.48 1994/03/31 9303.85 16769.97 1994/04/30 9304.23 16984.63 1994/05/31 9321.21 17263.18 1994/06/30 9507.97 16840.23 1994/07/31 9870.18 17392.59 1994/08/31 10571.96 18105.69 1994/09/30 11381.27 17662.10 1994/10/31 10939.83 18059.49 1994/11/30 9768.31 17401.77 1994/12/31 10137.04 17659.84 1995/01/31 8371.08 18117.75 1995/02/28 8755.24 18823.80 1995/03/31 9643.95 19379.29 1995/04/30 9724.22 19950.01 1995/05/31 9603.81 20747.42 1995/06/30 9718.48 21229.38 1995/07/31 10119.84 21933.35 1995/08/31 10257.44 21988.40 1995/09/30 10286.11 22916.31 1995/10/31 9001.78 22834.50 1995/11/30 9632.48 23836.93 1995/12/31 9798.53 24296.03 1996/01/31 11852.60 25123.07 1996/02/29 12059.73 25355.96 1996/03/31 11990.69 25600.14 1996/04/30 12262.16 25977.48 1996/05/31 12971.59 26647.44 1996/06/30 11166.30 26748.97 1996/07/31 11027.87 25567.20 1996/08/31 11627.72 26106.41 1996/09/30 11143.23 27575.68 1996/10/31 11050.94 28336.22 1996/11/30 10497.24 30478.15 1996/12/31 10329.98 29874.38 1997/01/31 9885.87 31740.93 1997/02/28 11304.72 31989.78 1997/03/31 9626.32 30675.32 1997/04/30 8986.10 32506.64 1997/05/31 9136.06 34485.64 1997/06/30 8190.16 36030.60 1997/07/31 7867.17 38897.55 1997/08/29 7907.54 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970909 145521 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Precious Metals and Minerals Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have been $7,908 - a 20.92% decrease 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS GETCHELL GOLD CORP. 9.5 EURO-NEVADA MINING LTD. 8.8 NEWMONT MINING CORP. 8.5 FRANCO-NEVADA MINING CORP. 5.6 MERIDIAN GOLD, INC. 5.3 NORMANDY MINING LTD. 4.3 PLACER DOME, INC. 3.2 GREAT CENTRAL MINES NL 3.0 PIONEER GROUP, INC. 2.8 CENTAUR MINING & EXPLORATION LTD. 2.8 TOP INDUSTRIES AS OF AUGUST 31, 1997 GOLD ORES (CANADA) 32.8% GOLD ORES (SOUTH AFRICA) 17.0% GOLD ORES (U.S.) 13.4% GOLD & SILVER ORES (U.S.) 9.5% GOLD ORES (AUSTRALIA) 6.9% ALL OTHERS 20.4% ROW: 1, COL: 1, VALUE: 20.4 ROW: 1, COL: 2, VALUE: 6.9 ROW: 1, COL: 3, VALUE: 9.5 ROW: 1, COL: 4, VALUE: 13.4 ROW: 1, COL: 5, VALUE: 17.0 ROW: 1, COL: 6, VALUE: 32.8 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS PRECIOUS METALS AND MINERALS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW George Domolky, Portfolio Manager of Fidelity Select Precious Metals and Minerals Portfolio Q. GEORGE, HOW WAS THE FUND'S PERFORMANCE? A. We've just come through a very difficult period. For the six months that ended August 31, 1997, the fund was down 30.05% compared to a gain of 14.78% in the Standard & Poor's 500 Index over the same period. For the 12 months that ended August 31, 1997, the fund lost 31.99%, while the Standard & Poor's 500 Index gained 40.65%. Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE OVER THE PERIOD? A. The biggest factor was the sharply falling price of gold, which fell from around $360 per ounce last February to the current level of approximately $320 an ounce. The recent economic environment has been characterized by low inflation, a strong dollar and an explosive stock market. That environment does not favor gold as an alternative investment. Q. WHAT CAN YOU SAY ABOUT THE CURRENT SUPPLY/DEMAND SITUATION FOR GOLD? A. Central bank selling has continued, culminating in a large sale by Australia in July that sent the market sharply lower and intensified its negative psychology. On the other side of the ledger, demand for gold as jewelry continues to increase, especially in the Far East and India. Overall, there is an annual production shortfall that is currently being offset by central bank sales. Q. WHAT FACTORS COULD IMPROVE GOLD'S ATTRACTIVENESS? A. It could be any number of things: a severe correction in the stock market, weakness in the dollar, a resurgence of inflation, reduced central bank sales, or some combination of those elements. Q. WHAT WAS YOUR STRATEGY DURING THE PERIOD? A. The decline in gold's price was especially hard on South African equities because they are, in general, higher-cost producers than mining companies located elsewhere. Accordingly, we tried to limit our exposure to South Africa while maintaining a position consistent with the worldwide mandate of the fund's charter. We also increased the fund's holdings in Australia, where the environment for gold producers has been more favorable. Finally, we have continued to add promising smaller companies with meaningful exploration and production potential. Q. WHAT STOCKS PERFORMED WELL DURING THE PERIOD? A. While none of our holdings performed well, some held their ground better than others. We developed a major position in a leading Australian producer, Normandy Mining, which helped the fund. Greenstone Resources and Buenaventura are good examples of smaller companies that helped to some extent because of increases in production and reserves. The same comments apply to Getchell Gold, a Nevada-based exploration company and our current number one holding. Q. WHAT STOCKS PERFORMED POORLY OVER THE PERIOD? A. The whole South African sector of the fund underperformed due to the factors I mentioned earlier. It's worth noting, though, that because of their leverage, the same South African stocks that are laggards now could well be the star performers of tomorrow if the price of gold recovers even a moderate amount. Although foreign stocks carry a greater risk than U.S. stocks we continue to feel that selected South African equities offer potential rewards that outweigh their risks. Q. WHAT'S YOUR OUTLOOK, GEORGE? A. I think it's important to put things in perspective. Just as we've had an uncommonly positive economic environment for U.S. equities during the period covered by this report, we've had an unusually bad one for precious metals stocks. Although I cannot make short-term predictions about where gold's price will go, it's reasonable to think that our so-called "Goldilocks" economy will not last forever, and eventually the environment will become more favorable for gold. In the meantime, we will continue to emphasize the acquisition of low-cost producers and exploration companies with strong cash positions. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 061 TRADING SYMBOL: FDPMX SIZE: as of August 31, 1997, more than $196 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 AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 96.7% SHARES VALUE (NOTE 1) AUSTRALIA - 13.5% METALS & MINING - 0.6% METAL MINING - 0.0% Panorama Resources NL (a) 120,000 $ 16,252 69999H23 METAL MINING SERVICES - 0.5% Acacia Resources Ltd. (a) 900,000 988,268 00399822 MISCELLANEOUS METAL ORES, NEC - 0.1% Helix Resources NL (a) 150,000 61,492 42399L22 TOTAL METALS & MINING 1,066,012 PRECIOUS METALS - 12.9% GOLD & SILVER ORES - 6.0% Normandy Mining Ltd. 6,969,585 8,418,440 65699J22 North Flinders Mines Ltd. 349,060 1,712,047 65940091 Plutonic Resources Ltd. 485,000 1,377,572 72999192 Sons of Gwalia NL 75,000 236,086 83568810 11,744,145 GOLD ORES - 6.9% Centaur Mining & Exploration Ltd. (a) 5,515,000 5,450,295 32399022 Great Central Mines NL 3,465,206 5,834,419 39029092 Great Central Mines NL sponsored ADR 90,000 450,000 39029010 Leo Shield Exploration NL (a) 412,000 54,289 52699L22 Lihir Gold Ltd. (a) 300,000 450,211 53234992 Resolute Samantha Ltd. 1,000,000 1,471,421 76099D22 13,710,635 TOTAL PRECIOUS METALS 25,454,780 TOTAL AUSTRALIA 26,520,792 CANADA - 33.4% OIL & GAS - 0.5% CRUDE PETROLEUM & GAS - 0.0% Solomon Resources Ltd. (a) 200,000 63,412 83427D10 OIL & GAS EXPLORATION - 0.5% Southwestern Gold Corp. (a) 135,000 807,422 84548W10 TOTAL OIL & GAS 870,834 PRECIOUS METALS - 32.9% GOLD & SILVER ORES - 0.0% Consolidated Nevada Goldfields (warrants) (a) 371,500 - 20965D92 GOLD ORES - 32.8% Agnico Eagle Mines Ltd. 444,800 3,894,304 00847410 Argosy Mining Corp. (a) 169,200 91,443 04022W10 Bema Gold Corp. (a) 50,000 263,016 08135F10 Cambior, Inc. 90,000 963,070 13201L10 Euro-Nevada Mining Ltd. 1,137,000 17,410,380 29870P10 Franco-Nevada Mining Corp. 461,000 10,945,740 35186010 Francisco Gold Corp. (a) 8,100 124,032 35190210 Francisco Gold Corp. (a)(c) 54,500 834,534 35190294 Geomaque Explorations Ltd. (a) 271,000 603,416 37247E10 Greenstone Resources Ltd. (a) 169,900 1,560,962 39573W10 Indochina Goldfields Ltd. 20,000 89,353 45591310 Indochina Goldfields Ltd. (a)(c) 70,000 312,736 45591392 Kinross Gold Corp. (a) 110,000 479,553 49690210 Meridian Gold, Inc. (a) 2,329,000 10,405,188 58997510 Metallica Resources, Inc. (a) 297,300 589,137 59125J10 Mountain Province Mining, Inc. (a) 284,000 1,125,563 62426E10 Nevsun Resources Ltd. (a) 108,600 406,932 64156L10 SHARES VALUE (NOTE 1) Orvana Minerals Corp. (a) 263,900 $ 950,820 68759M10 Placer Dome, Inc. 380,000 6,352,729 72590610 Prime Resources Group, Inc. 353,700 2,854,578 74157L10 Repadre Capital Corp. (a) 100,000 540,443 76026J10 Rio Narcea Gold Mines Ltd. (a) 788,900 2,501,286 76690910 South Pacific Resources, Inc. (a) 59,500 18,865 83890320 Sudbury Contact Mines Ltd. 87,600 397,680 86462610 Sutton Resources Ltd. (a) 70,000 663,304 86947440 TVI Pacific, Inc. (a) 1,146,800 223,121 87291710 Viceroy Resources Corp. (a) 25,000 59,449 92564C10 64,661,634 SILVER ORES - 0.1% Pan American Silver Corp. (a) 30,000 194,560 69790010 TOTAL PRECIOUS METALS 64,856,194 TOTAL CANADA 65,727,028 GHANA - 1.1% PRECIOUS METALS - 1.1% GOLD ORES - 1.1% Ashanti Goldfields Co. Ltd. GDR 210,554 2,184,498 04374320 PERU - 0.8% PRECIOUS METALS - 0.8% SILVER ORES - 0.8% Compania de Minas Buenaventura SA Class B sponsored ADR 85,800 1,587,300 20444810 SOUTH AFRICA - 20.8% HOLDING COMPANIES - 1.2% HOLDING COMPANY OFFICES, NEC - 1.2% Beatrix Mines Ltd. 503,600 2,361,044 07419010 METALS & MINING - 2.5% METAL MINING - 2.2% JCI Ltd. 700,000 4,400,639 46799A22 MISCELLANEOUS METAL ORES, NEC - 0.3% Potgietersrust Platinums Ltd. 72,785 499,452 73799922 TOTAL METALS & MINING 4,900,091 PRECIOUS METALS - 17.0% GOLD ORES - 17.0% Avgold Ltd. (a) 96,500 88,017 05399V22 Consolidated Mining Corporation Ltd. (a) 16,500,000 1,511,987 20999922 De Beers Consolidated Mines Ltd. ADR 20,000 641,250 24025330 Driefontein Consolidated Ltd.: Ord. 275,900 2,013,761 26202630 ADR 224,000 1,680,000 26202650 Durban Roodepoort Deep sponsored ADR (a) 15,000 49,688 26659730 Gold Fields of South Africa Ltd. 60,000 1,227,491 38059730 Gold Fields of South Africa Ltd. sponsored ADR 163,700 3,294,463 38059750 Harmony Gold Mining Co. Ltd. Class R 913,200 4,427,342 41321610 Randgold & Exploration Co. Ltd. (a) 815,900 2,868,908 75299A22 Rustenberg Platinum Holdings Ltd. ADR (a) 30,221 506,202 78307820 Vaal Reefs Exploration & Mining Co Ltd.: ADR 887,000 4,435,000 91850640 (Reg.) 8,200 408,908 91850610 West Rand Consolidated Mines Ltd. (Reg.) (a) 120,400 205,264 95599H22 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SOUTH AFRICA - CONTINUED PRECIOUS METALS - CONTINUED GOLD ORES - CONTINUED Western Areas Gold Mining Ltd. Ord. 582,064 $ 4,868,622 95765410 Western Deep Levels Ltd.: ADR 214,500 5,121,182 95807720 Ord. 6,200 148,641 95807710 TOTAL PRECIOUS METALS 33,496,726 SECURITIES INDUSTRY - 0.1% SECURITY BROKERS & DEALERS - 0.1% Genbel Securities Ltd. 19,640 255,310 36899L22 TOTAL SOUTH AFRICA 41,013,171 UNITED KINDOM - 0.0% PRECIOUS METALS - 0.0% GOLD ORES - 0.0% Bakyrchik Gold PLC (a) 70,900 49,404 05799422 UNITED STATES OF AMERICA - 27.1% METALS & MINING - 1.4% COPPER ORES - 1.4% Freeport McMoRan Copper & Gold, Inc. Class A 100,000 2,675,000 35671D10 PRECIOUS METALS - 22.9% GOLD & SILVER ORES - 9.5% Getchell Gold Corp. (a) 552,300 18,778,200 37426510 GOLD ORES - 13.4% Battle Mountain Gold Co. 150,000 853,125 07159310 Homestake Mining Co. 29,000 406,000 43761410 Newmont Gold Co. 59,000 2,551,750 65163710 Newmont Mining Corp. 393,610 16,654,623 65163910 Stillwater Mining Co. (a) 49,500 1,039,500 86074Q10 Stillwater Mining Co. (a)(c) 231,200 4,855,200 86074Q90 26,360,198 TOTAL PRECIOUS METALS 45,138,398 SECURITIES INDUSTRY - 2.8% INVESTMENT MANAGERS - 2.8% Pioneer Group, Inc. 170,000 5,525,000 72368410 TOTAL UNITED STATES OF AMERICA 53,338,398 TOTAL COMMON STOCKS (Cost $209,651,605) 190,420,591 CONVERTIBLE BONDS - 0.2% PRINCIPAL AMOUNT SOUTH AFRICA - 0.2% PRECIOUS METALS - 0.2% GOLD ORES - 0.2% Randgold Financial 7%, 9/30/01 (c) (Cost $500,000) $ 500,000 415,000 752341AA CASH EQUIVALENTS - 3.1% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $6,095,719) 6,095,719 $ 6,095,719 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $216,247,324) $ 196,931,310 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $6,417,470 or 3.3% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $69,663,995 and $100,590,383, 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 $11,635 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, there were no loans outstanding (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 $5,198,000. The weighted average interest rate was 5.9% (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $216,435,589. Net unrealized depreciation aggregated $19,504,279, of which $29,278,803 related to appreciated investment securities and $48,783,082 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. PRECIOUS METALS AND MINERALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 196,931,310 SECURITIES, AT VALUE (COST $216,247,32 4) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 1,173,980 INVESTMENTS SOLD RECEIVABLE FOR 455,888 FUND SHARES SOLD DIVIDENDS 640,300 RECEIVABLE INTEREST 54,833 RECEIVABLE REDEMPTION FEES 769 RECEIVABLE TOTAL ASSETS 199,257,080 LIABILITIES PAYABLE FOR $ 2,721,767 FUND SHARES REDEEMED ACCRUED 99,130 MANAGEMENT FEE OTHER PAYABLES 225,805 AND ACCRUED EXPENSES TOTAL LIABILITIES 3,046,702 NET ASSETS $ 196,210,378 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 250,940,604 ACCUMULATED (2,779,323) NET INVESTMENT (LOSS) ACCUMULATED (32,628,918) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (19,321,985) APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 196,210,378 14,310,830 SHARES OUTSTANDING NET ASSET $13.71 VALUE AND REDEMPTION PRICE PER SHARE ($196,210,3 78 (DIVIDED BY) 14,310,830 SHARES) MAXIMUM $14.13 OFFERING PRICE PER SHARE (100/97.00 OF $13.71) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 1,472,764 INCOME DIVIDENDS INTEREST 315,679 (INCLUDING INCOME ON SECURITIES LOANED OF $5,038) TOTAL INCOME 1,788,443 EXPENSES MANAGEMENT $ 674,554 FEE TRANSFER AGENT 1,036,930 FEES ACCOUNTING AND 113,663 SECURITY LENDING FEES NON-INTERESTED 533 TRUSTEES' COMPENSATION CUSTODIAN FEES 60,590 AND EXPENSES REGISTRATION FEES 50,526 AUDIT 13,939 LEGAL 675 INTEREST 857 MISCELLANEOUS 1,126 TOTAL EXPENSES 1,953,393 BEFORE REDUCTIONS EXPENSE (61,322) 1,892,071 REDUCTIONS NET INVESTMENT (103,628) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT (30,585,141) SECURITIES FOREIGN (7,604) (30,592,745) CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (56,898,257) SECURITIES ASSETS AND (6,373) (56,904,630) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (87,497,375) NET INCREASE $ (87,601,003) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 296,236 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 17,657 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 49,950 WITHHELD BY FSC EXPENSE $ 59,637 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 34 CREDITS TRANSFER 1,651 AGENT CREDITS $ 61,322 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (103,628) $ (181,419) NET INVESTMENT INCOME (LOSS) NET REALIZED (30,592,745) 16,412,795 GAIN (LOSS) CHANGE IN NET (56,904,630) (43,173,440) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (87,601,003) (26,942,064) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO - (846,595) SHAREHOLDERS FROM NET INVESTMENT INCOME IN EXCESS OF - (176,411) NET INVESTMENT INCOME TOTAL - (1,023,006) DISTRIBUTIONS SHARE 128,416,975 435,994,024 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT - 1,004,423 OF DISTRIBUTIONS COST OF SHARES (170,859,321) (552,635,513) REDEEMED REDEMPTION 667,382 1,992,596 FEES NET INCREASE (41,774,964) (113,644,470) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (129,375,967) (141,609,540) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 325,586,345 467,195,885 PERIOD END OF PERIOD $ 196,210,378 $ 325,586,345 (INCLUDING ACCUMULATE D NET INVESTMENT LOSS OF $2,779,32 3 AND $44,636, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 8,375,247 22,221,455 ISSUED IN - 48,973 REINVESTMENT OF DISTRIBUTIONS REDEEMED (10,675,047) (27,946,037) NET INCREASE (2,299,800) (5,675,609) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 19.60 $ 20.96 $ 15.27 $ 16.62 $ 9.86 $ 9.90 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.01) (.01) .07 .17 .21 .09 INVESTMENT INCOME (LOSS) D NET REALIZED (5.93) (1.42) 5.54 (1.42) 6.48 (.05) AND UNREALIZED GAIN (LOSS) TOTAL FROM (5.94) (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 FEES .05 .12 .14 .13 .28 .09 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 13.71 $ 19.60 $ 20.96 $ 15.27 $ 16.62 $ 9.86 END OF PERIOD TOTAL RETURN B, C (30.05)% (6.26)% 37.74% (6.86)% 70.58% 1.51% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 196,210 $ 325,586 $ 467,196 $ 364,204 $ 409,212 $ 137,922 OF PERIOD (000 OMITTED) RATIO OF 1.73% A 1.62% 1.52% 1.46% 1.55% 1.73% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.67% A, E 1.61% E 1.52% 1.46% 1.55% 1.73% A EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.09)% A (.05)% .39% .99% 1.38% 1.12% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 63% A 54% 53% 43% 73% 36% A TURNOVER RATE AVERAGE $ .0074 $ .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 N ET 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS COMPUTERS 29.92% 69.76% 411.91% 397.35% COMPUTERS 26.03% 64.67% 396.55% 382.43% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS COMPUTERS 69.76% 38.62% 17.40% COMPUTERS 64.67% 37.78% 17.04% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 114622 S00000000000001 Computers S&P 500 00007 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9782.72 9781.00 1987/10/31 6330.64 7674.17 1987/11/30 5475.90 7041.82 1987/12/31 6305.64 7577.70 1988/01/31 5975.86 7896.72 1988/02/29 6516.02 8264.71 1988/03/31 6413.67 8009.33 1988/04/30 6743.45 8098.24 1988/05/31 6544.45 8168.69 1988/06/30 7164.21 8543.63 1988/07/31 6624.05 8511.17 1988/08/31 5992.92 8221.79 1988/09/30 6152.12 8572.04 1988/10/31 5657.45 8810.34 1988/11/30 5623.34 8684.35 1988/12/31 5987.23 8836.33 1989/01/31 6339.76 9483.15 1989/02/28 6226.04 9247.02 1989/03/31 5930.37 9462.47 1989/04/30 6595.62 9953.57 1989/05/31 7181.27 10356.69 1989/06/30 6328.38 10297.66 1989/07/31 6442.10 11227.54 1989/08/31 6538.76 11447.60 1989/09/30 6692.28 11400.66 1989/10/31 6470.53 11136.17 1989/11/30 6328.38 11363.35 1989/12/31 6396.61 11636.07 1990/01/31 6339.76 10855.29 1990/02/28 6914.03 10995.32 1990/03/31 7408.70 11286.70 1990/04/30 7209.70 11004.53 1990/05/31 8147.87 12077.47 1990/06/30 8295.70 11995.34 1990/07/31 7704.37 11956.96 1990/08/31 6481.90 10876.05 1990/09/30 6055.46 10346.39 1990/10/31 6282.90 10301.90 1990/11/30 7317.73 10967.40 1990/12/31 7574.02 11273.39 1991/01/31 8865.05 11764.91 1991/02/28 9438.84 12606.10 1991/03/31 10184.77 12911.17 1991/04/30 9524.91 12942.15 1991/05/31 10006.89 13501.25 1991/06/30 8644.29 12882.90 1991/07/31 9512.85 13483.24 1991/08/31 10103.71 13802.79 1991/09/30 9571.94 13572.29 1991/10/31 9382.86 13754.15 1991/11/30 8738.83 13199.86 1991/12/31 9902.82 14709.93 1992/01/31 10936.83 14436.32 1992/02/29 11687.22 14623.99 1992/03/31 10765.48 14338.83 1992/04/30 10416.87 14760.39 1992/05/31 10546.86 14832.71 1992/06/30 9530.58 14611.71 1992/07/31 9997.36 15209.33 1992/08/31 9424.22 14897.53 1992/09/30 9891.00 15073.32 1992/10/31 10670.94 15126.08 1992/11/30 11332.70 15641.88 1992/12/31 12077.19 15834.28 1993/01/31 12780.31 15967.28 1993/02/28 11905.84 16184.44 1993/03/31 12142.18 16525.93 1993/04/30 11797.33 16126.00 1993/05/31 13179.55 16558.18 1993/06/30 12652.12 16606.20 1993/07/31 13179.55 16539.77 1993/08/31 13961.59 17166.63 1993/09/30 14355.64 17034.45 1993/10/31 14355.64 17387.06 1993/11/30 14967.94 17221.88 1993/12/31 15563.62 17430.27 1994/01/31 16567.11 18022.90 1994/02/28 17270.18 17534.48 1994/03/31 17091.22 16769.97 1994/04/30 16982.56 16984.63 1994/05/31 16969.78 17263.18 1994/06/30 15576.40 16840.23 1994/07/31 16068.56 17392.59 1994/08/31 17992.44 18105.69 1994/09/30 17864.61 17662.10 1994/10/31 18535.73 18059.49 1994/11/30 18644.39 17401.77 1994/12/31 18746.65 17659.84 1995/01/31 18171.40 18117.75 1995/02/28 19603.13 18823.80 1995/03/31 21111.55 19379.29 1995/04/30 22788.93 19950.01 1995/05/31 23915.43 20747.42 1995/06/30 26530.98 21229.38 1995/07/31 29865.15 21933.35 1995/08/31 30531.99 21988.40 1995/09/30 32280.00 22916.31 1995/10/31 31108.19 22834.50 1995/11/30 30357.19 23836.93 1995/12/31 28463.11 24296.03 1996/01/31 28280.61 25123.07 1996/02/29 29952.33 25355.96 1996/03/31 27419.19 25600.14 1996/04/30 30433.04 25977.48 1996/05/31 31484.76 26647.44 1996/06/30 29196.17 26748.97 1996/07/31 27240.87 25567.20 1996/08/31 28418.49 26106.41 1996/09/30 31906.92 27575.68 1996/10/31 33588.19 28336.22 1996/11/30 38157.96 30478.15 1996/12/31 37462.68 29874.38 1997/01/31 42264.80 31740.93 1997/02/28 37131.76 31989.78 1997/03/31 34207.40 30675.32 1997/04/30 36073.28 32506.64 1997/05/31 38673.31 34485.64 1997/06/30 38421.69 36030.60 1997/07/31 47286.95 38897.55 1997/08/29 48243.09 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970909 114629 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Computers Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $48,243 - a 382.43% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS COMPAQ COMPUTER CORP. 10.3 DELL COMPUTER CORP. 7.0 QUANTUM CORP. 6.2 EMC CORP. 5.9 TERADYNE, INC. 4.4 WESTERN DIGITAL CORP. 3.9 TEXAS INSTRUMENTS, INC. 3.8 APPLIED MATERIALS, INC. 3.5 INTEL CORP. 3.4 HEWLETT-PACKARD CO. 2.6 TOP INDUSTRIES AS OF AUGUST 31, 1997 ROW: 1, COL: 1, VALUE: 38.5 ROW: 1, COL: 2, VALUE: 5.6 ROW: 1, COL: 3, VALUE: 10.6 ROW: 1, COL: 4, VALUE: 11.5 ROW: 1, COL: 5, VALUE: 13.6 ROW: 1, COL: 6, VALUE: 20.2 MINI & MICRO COMPUTERS 20.2% SEMICONDUCTORS 13.6% COMPUTER PERIPHERALS 11.5% COMPUTER STORAGE DEVICES 10.6% ELECTRONIC EQUIPMENT 5.6% ALL OTHERS 38.5% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS COMPUTERS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Michael Tempero, Portfolio Manager of Fidelity Select Computers Portfolio Q. HOW DID THE FUND PERFORM, MICHAEL? A. The fund outperformed the broader market in the latest period. The fund generated a return of 29.92% in the six months that ended August 31, 1997, about doubling the 14.78% return of the Standard & Poor's 500 Index. During the 12 months that ended August 31, 1997, the fund returned 69.76%, compared to the 40.65% return of the S&P 500. Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S STRONG PERFORMANCE? A. The fund performed well because it's invested in the right sector of the market - technology. Over the past few years, technology has improved productivity across the board in corporate America. This trend has benefited the overall economy, as well as technology companies - particularly PC and semiconductor makers. In fact, much of the long-running bull market has been led by large-cap technology stocks, such as Intel and Dell Computer. Q. DELL AND COMPAQ TOGETHER REPRESENTED MORE THAN 17% OF THE FUND'S INVESTMENTS . . . A. That's right. Dell Computer is growing faster than any other company in the PC market because it's done an outstanding job of executing throughout all stages of its business, including manufacturing, managing inventory, marketing and sales. Its stock has appreciated considerably as analysts have raised earnings estimates to reflect the fact that the company is growing so quickly. Compaq hasn't been growing quite as fast, but the outlook for the company is improving. These two companies have established themselves as leaders in the PC market and stand to benefit the most from increased demand. Q. THE FUND REDUCED ITS POSITION IN DISK-DRIVE MANUFACTURER SEAGATE TECHNOLOGY FROM ABOUT 11% OF THE FUND AT THE END OF FEBRUARY TO LESS THAN 1% AT THE END OF THIS PERIOD. WHY? A. Late last year, Seagate was benefiting from a shortage of disk-drive heads in the market, but the shortage eased up during the period. Seagate also faced new competition at the high end of its product line, which was very important for its profitability. These factors caused the company to miss earnings estimates in the June quarter. As these circumstances came to light, I began reducing the fund's position in Seagate. As it turned out, the stock was down significantly during the period. Q. QUANTUM, WESTERN DIGITAL AND INTEL WERE AGAIN AMONG THE FUND'S TOP 10 HOLDINGS AT THE END OF THE PERIOD. WHAT DID YOU LIKE ABOUT THESE INVESTMENTS? A. Quantum and Western Digital are Seagate's new competitors in the high end of the disk-drive market, and have the leading technology in the desktop segment of the PC market. Both stocks benefited from Seagate's earnings shortfall late in the period. I invested in these companies because I thought they were undervalued relative to their earnings growth potential. I liked Intel because most PCs that go out the door are made with its processors. The company has an incredibly powerful market position and can generate strong cash flow. All three stocks appreciated considerably during the period. Q. WERE THERE ANY DISAPPOINTMENTS DURING THE PERIOD? A. I think I had too many large holdings in the disk-drive business at the beginning of the period. That area of the industry has improved since June, but before that time, those investments didn't perform as well as I had expected. In hindsight, I would've invested some of those assets in the PC makers. Q. WHAT IS YOUR SHORT-TERM OUTLOOK FOR THE COMPUTER MARKET? A. I'm pretty optimistic about the PC market in the fourth quarter. A good Christmas shopping season could boost already healthy sales of PCs. Overall, technology companies should continue to perform well, considering they have better operating margins, return on equity and return on assets than most other segments of the market. This sector continues to benefit from government, corporate and consumer spending as technological change becomes more of a driving force behind the growing global economy. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 007 TRADING SYMBOL: FDCPX SIZE: as of August 31, 1997, more than $801 million MANAGER: Michael Tempero, since January 1997; manager, Fidelity Select Insurance Portfolio, 1995-February 1997; Fidelity Select Natural Gas Portfolio, 1994-1995; joined Fidelity in 1993 (checkmark) COMPUTERS PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 89.9% SHARES VALUE (NOTE 1) COMMUNICATIONS EQUIPMENT - 1.2% DATACOMMUNICATIONS EQUIPMENT - 0.0% Dynatech Corp. (a) 2,900 $ 110,925 26813810 TELEPHONE EQUIPMENT - 1.2% Ascend Communications, Inc. 200,000 8,487,500 04349110 Newbridge Networks Corp. (a) 26,500 1,205,750 65090110 9,693,250 TOTAL COMMUNICATIONS EQUIPMENT 9,804,175 COMPUTER SERVICES & SOFTWARE - 8.1% COMPUTER & SOFTWARE STORES - 0.2% MicroAge, Inc. (a) 50,000 1,359,375 59492810 COMPUTER SERVICES - 1.2% Computer Learning Centers, Inc. (a) 163,300 7,838,400 20519910 Equifax, Inc. 68,800 2,025,300 29442910 9,863,700 CAD/CAM/CAE - 0.3% JetFax, Inc. 100,000 987,500 47690910 Synopsys, Inc. 46,100 1,596,213 87160710 2,583,713 DATA PROCESSING - 0.8% Ceridian Corp. 200,000 6,912,500 15677T10 PREPACKAGED COMPUTER SOFTWARE - 5.6% Cadence Design Systems, Inc. (a) 38,800 1,845,425 12738710 Electronics for Imaging, Inc. (a) 352,400 18,853,400 28608210 McAfee Associates, Inc. (a) 800 45,300 57905710 Netscape Communications Corp. (a) 362,400 14,428,050 64114910 Peerless Systems Corp. 60,000 877,500 70553610 PeopleSoft, Inc. (a) 165,000 9,281,250 71271310 Siebel Systems, Inc. 2,200 79,475 82617010 45,410,400 TOTAL COMPUTER SERVICES & SOFTWARE 66,129,688 COMPUTERS & OFFICE EQUIPMENT - 51.3% COMPUTER COMMUNICATIONS EQUIPMENT - 3.9% Apex PC Solutions, Inc. 355,000 14,200,000 03794510 Bay Networks, Inc. 500,000 17,687,500 07251010 31,887,500 COMPUTER EQUIPMENT - 0.3% Stratus Computer, Inc. 41,100 2,281,050 86315510 COMPUTER EQUIPMENT - WHOLESALE - 0.6% Allstar Systems, Inc. (c) 100,000 731,250 01989210 Insight Enterprises, Inc. 25,000 1,081,250 45765U10 Pomeroy Computer Resources, Inc. (a) 97,000 3,201,000 73182210 5,013,500 COMPUTER PERIPHERALS - 11.5% Applied Magnetics Corp. (a) 200,000 7,387,500 03821310 Creative Technology Corp. Ltd. (a) 143,400 2,760,450 22599992 EMC Corp. (a) 939,500 48,208,094 26864810 Fore Systems, Inc. 200,000 4,087,500 34544910 Western Digital Corp. (a) 654,900 31,517,063 95810210 93,960,607 COMPUTER RENTAL & LEASING - 0.3% Comdisco, Inc. 80,600 2,191,313 20033610 COMPUTER STORAGE DEVICES - 10.6% Adaptec, Inc. 15,400 739,200 00651F10 Advanced Digital Information Corp. (a) 100,700 1,837,775 00752510 Iomega Corp. (a) 700,000 17,937,500 46203010 Quantum Corp. (a) 1,433,200 50,251,575 74790610 SHARES VALUE (NOTE 1) Read-Rite Corp. 297,400 $ 8,531,663 75524610 Seagate Technology (a) 184,600 7,049,413 81180410 86,347,126 COMPUTERS & OFFICE EQUIPMENT - 3.0% Diebold, Inc. 54,900 2,545,988 25365110 Hewlett-Packard Co. 350,000 21,459,375 42823610 24,005,363 ELECTRONIC COMPUTERS - 0.0% Micron Electronics, Inc. (a) 5,100 83,194 59510010 GRAPHICS WORKSTATIONS - 0.9% Silicon Graphics, Inc. 100,000 2,743,750 82705610 Sun Microsystems, Inc. 100,000 4,800,000 86681010 7,543,750 MINI & MICRO COMPUTERS - 20.2% Compaq Computer Corp. (a) 1,283,000 84,036,500 20449310 Dell Computer Corp. (a) 700,000 57,443,750 24702510 Sequent Computer Systems, Inc. 114,800 3,235,925 81733810 Tandem Computers, Inc. 600,000 20,400,000 87537010 165,116,175 TOTAL COMPUTERS & OFFICE EQUIPMENT 418,429,578 DRUGS & PHARMACEUTICALS - 0.4% COMMERCIAL LABORATORY RESEARCH - 0.4% Integrated Process Equipment Corp. 100,000 3,300,000 45812K10 ELECTRICAL EQUIPMENT - 0.0% ELECTRICAL MACHINERY - 0.0% Alcatel Alsthom Compagnie Generale d'Electricite SA sponsored ADR 5,900 145,288 01390430 ELECTRONIC INSTRUMENTS - 11.3% ELECTRONIC EQUIPMENT - 5.6% Advantest Corp. 100,000 9,105,961 00799010 Sawtek, Inc. 3,200 126,000 80546810 Teradyne, Inc. (a) 650,000 36,196,875 88077010 45,428,836 OPTICAL INSTRUMENTS - 0.2% Zygo Corporation 50,000 1,550,000 98985510 SEMICONDUCTOR CAPITAL EQUIPMENT - 5.5% Applied Materials, Inc. (a) 300,000 28,312,500 03822210 KLA-Tencor Corp. (a) 234,500 16,620,188 48248010 Lam Research Corp. 8,100 457,650 51280710 45,390,338 TOTAL ELECTRONIC INSTRUMENTS 92,369,174 ELECTRONICS - 14.0% ELECTRONICS & ELECTRONIC COMPONENTS - 0.4% Cirrus Logic, Inc. 190,500 3,274,219 17275510 SEMICONDUCTORS - 13.6% Altera Corp. (a) 122,500 6,523,125 02144110 Etec Systems, Inc. 14,400 964,800 26922C10 Integrated Device Technology, Inc. 200,000 2,725,000 45811810 Integrated Silicon Solution 100,000 1,462,500 45812P10 Intel Corp. 300,800 27,711,200 45814010 Linear Technology Corp. 64,500 4,228,781 53567810 Maxim Integrated Products, Inc. (a) 149,600 10,341,100 57772K10 Micron Technology, Inc. (a) 402,000 17,914,125 59511210 S3, Inc. 266,700 4,283,869 78484910 Texas Instruments, Inc. 270,000 30,678,750 88250810 VLSI Technology, Inc. 78,200 2,580,600 91827010 Xilinx, Inc. (a) 26,200 1,244,500 98391910 110,658,350 TOTAL ELECTRONICS 113,932,569 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) INDUSTRIAL MACHINERY & EQUIPMENT - 1.9% SPECIAL INDUSTRIAL MACHINERY - 1.9% ASM Lithography Holding NV (a) 181,500 $ 15,427,500 04599S23 PUBLISHING - 0.8% BOOK PUBLISHING & PRINTING - 0.8% Cognizant Corp. 154,900 6,505,800 19244110 RETAIL & WHOLESALE, MISCELLANEOUS - 0.3% MAIL ORDER - 0.3% Micro Warehouse, Inc. 100,000 2,612,500 59501B10 SERVICES - 0.0% PERSONNEL SUPPLY SERVICES - 0.0% AccuStaff, Inc. (a) 14,100 374,531 00440110 TELEPHONE SERVICES - 0.6% Tel-Save Holdings, Inc. (a) 185,000 3,306,870 87917610 WorldCom, Inc. (a) 57,500 1,721,406 98155K10 5,028,276 TOTAL COMMON STOCKS (Cost $597,369,179) 734,059,079 CASH EQUIVALENTS - 10.1% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations) in a joint trading account at 5.35%, dated 8/29/97 due 9/2/97 $ 3,902,318 3,900,000 66199GSA SHARES Taxable Central Cash Fund (b) 78,386,230 78,386,230 31635A10 TOTAL CASH EQUIVALENTS (Cost $82,286,230) 82,286,230 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $679,655,409) $ 816,345,309 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. Affiliated company (see Note 10 of Notes to Financial Statements). OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $952,027,420 and $944,418,927, 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 $116,853 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, the value of securities loaned and the value of collateral amounted to $23,523,306 and $23,701,500, respectively (see Note 6 of Notes to Financial Statements). Transactions during the period with companies which are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Allstar Systems, Inc. $ - $ - $ - $ 731,250 Procom Technology, Inc. - 105,300 - - TOTALS $ - $ 105,300 $ - $ 731,250 INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $679,659,335. Net unrealized appreciation aggregated $136,685,974, of which $149,279,054 related to appreciated investment securities and $12,593,080 related to depreciated investment securities. COMPUTERS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 816,345,309 SECURITIES, AT VALUE (INCLUDING REPURCHASE AGREEMENTS OF $3,900,000) (COST $679,655,40 9) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 73,138,928 INVESTMENTS SOLD RECEIVABLE FOR 18,753,879 FUND SHARES SOLD DIVIDENDS 76,529 RECEIVABLE INTEREST 366,132 RECEIVABLE REDEMPTION FEES 12,741 RECEIVABLE OTHER 83,101 RECEIVABLES TOTAL ASSETS 908,776,619 LIABILITIES PAYABLE FOR $ 73,607,708 INVESTMENTS PURCHASED PAYABLE FOR 9,292,973 FUND SHARES REDEEMED ACCRUED 384,682 MANAGEMENT FEE OTHER PAYABLES 484,524 AND ACCRUED EXPENSES COLLATERAL ON 23,701,500 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 107,471,387 NET ASSETS $ 801,305,232 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 566,619,648 ACCUMULATED (2,027,800) NET INVESTMENT (LOSS) ACCUMULATED 100,023,484 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 136,689,900 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 801,305,232 13,930,854 SHARES OUTSTANDING NET ASSET $57.52 VALUE AND REDEMPTION PRICE PER SHARE ($801,305,2 32 (DIVIDED BY) 13,930,854 SHARES) MAXIMUM $59.30 OFFERING PRICE PER SHARE (100/97.00 OF $57.52) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 437,675 INCOME DIVIDENDS INTEREST 1,751,728 (INCLUDING INCOME ON SECURITIES LOANED OF $135,680) TOTAL INCOME 2,189,403 EXPENSES MANAGEMENT $ 1,859,999 FEE TRANSFER AGENT 2,077,820 FEES ACCOUNTING AND 284,542 SECURITY LENDING FEES NON-INTERESTED 1,345 TRUSTEES' COMPENSATION CUSTODIAN FEES 40,724 AND EXPENSES REGISTRATION FEES 87,512 AUDIT 21,394 LEGAL 11,079 MISCELLANEOUS 2,206 TOTAL EXPENSES 4,386,621 BEFORE REDUCTIONS EXPENSE (169,418) 4,217,203 REDUCTIONS NET INVESTMENT (2,027,800) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 101,228,552 SECURITIES (INCLUDING REALIZED GAIN OF $32,708 ON SALES OF INVESTMENTS IN AFFILIATED ISSUES) FOREIGN 1,811 101,230,363 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT 62,358,869 SECURITIES ASSETS AND 140 62,359,009 LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 163,589,372 NET INCREASE $ 161,561,572 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 1,597,494 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 4,236 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 104,348 WITHHELD BY FSC EXPENSE $ 168,111 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 541 CREDITS TRANSFER 766 AGENT CREDITS $ 169,418 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (2,027,800) $ (4,516,493) NET INVESTMENT INCOME (LOSS) NET REALIZED 101,230,363 104,428,835 GAIN (LOSS) CHANGE IN NET 62,359,009 8,119,973 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 161,561,572 108,032,315 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (44,870,274) (31,596,668) SHAREHOLDERS FROM NET REALIZED GAINS SHARE 413,709,907 659,275,361 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 44,278,958 31,233,988 OF DISTRIBUTIONS COST OF SHARES (378,531,674) (691,302,094) REDEEMED REDEMPTION 870,264 1,306,734 FEES NET INCREASE 80,327,455 513,989 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 197,018,753 76,949,636 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 604,286,479 527,336,843 PERIOD END OF PERIOD $ 801,305,232 $ 604,286,479 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $2,027,800 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 8,214,233 14,415,549 ISSUED IN 1,049,760 674,688 REINVESTMENT OF DISTRIBUTIONS REDEEMED (7,856,647) (15,418,220) NET INCREASE 1,407,346 (327,983) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 48.25 $ 41.03 $ 30.67 $ 27.02 $ 20.15 $ 17.63 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.16) (.36) (.23) (.31) (.21) F (.15) INVESTMENT INCOME (LOSS) D NET REALIZED 13.15 9.94 16.10 3.68 8.66 2.44 AND UNREALIZED GAIN (LOSS) TOTAL FROM 12.99 9.58 15.87 3.37 8.45 2.29 INVESTMENT OPERATIONS LESS (3.79) (2.47) (5.61) - (1.80) - DISTRIBUTIONS FROM NET REALIZED GAIN REDEMPTION FEES .07 .11 .10 .28 .22 .23 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 57.52 $ 48.25 $ 41.03 $ 30.67 $ 27.02 $ 20.15 END OF PERIOD TOTAL RETURN B, C 29.92% 23.97% 52.79% 13.51% 45.06% 14.29% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 801,305 $ 604,286 $ 527,337 $ 215,014 $ 120,435 $ 47,596 OF PERIOD (000 OMITTED) RATIO OF 1.40% 1.48% 1.40% 1.71% 1.90% 1.81% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.35% A, E 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 (.65)% A (.83)% (.56)% (1.12)% (.91)% (.98)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 327% A 255% 129% 189% 145% 254% A TURNOVER RATE AVERAGE $ .0450 $ .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 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1997 MONTHS YEAR YEARS FUND DEVELOPING COMMUNICATIONS 25.97% 24.82% 190.30% 306.26% DEVELOPING COMMUNICATIONS 22.19% 21.08% 181.59% 294.08% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 206.48% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or since the fund started on June 29, 1990. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS FUND DEVELOPING COMMUNICATIONS 24.82% 23.76% 21.56% DEVELOPING COMMUNICATIONS 21.08% 23.01% 21.04% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 16.88% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19970831 19970909 115030 S00000000000001 Developing Communications S&P 500 00518 SP001 1990/06/29 9700.00 10000.00 1990/07/31 8953.10 9980.27 1990/08/31 7866.70 9078.05 1990/09/30 6751.20 8635.95 1990/10/31 7081.00 8598.82 1990/11/30 8235.30 9154.30 1990/12/31 8759.10 9409.71 1991/01/31 10146.20 9819.97 1991/02/28 10776.70 10522.10 1991/03/31 11494.50 10776.73 1991/04/30 11591.50 10802.60 1991/05/31 11766.10 11269.27 1991/06/30 10841.06 10753.14 1991/07/31 11963.62 11254.23 1991/08/31 12670.42 11520.96 1991/09/30 12815.94 11328.56 1991/10/31 13564.32 11480.36 1991/11/30 12888.70 11017.70 1991/12/31 14135.99 12278.13 1992/01/31 14510.18 12049.75 1992/02/29 14998.70 12206.40 1992/03/31 14260.72 11968.38 1992/04/30 14073.63 12320.25 1992/05/31 14011.26 12380.62 1992/06/30 13512.35 12196.14 1992/07/31 14104.81 12694.97 1992/08/31 13574.71 12434.72 1992/09/30 14032.05 12581.45 1992/10/31 14655.70 12625.48 1992/11/30 15986.14 13056.01 1992/12/31 16569.33 13216.60 1993/01/31 17017.15 13327.62 1993/02/28 17121.30 13508.88 1993/03/31 17735.75 13793.92 1993/04/30 17206.93 13460.10 1993/05/31 18365.83 13820.83 1993/06/30 19160.51 13860.91 1993/07/31 19535.77 13805.47 1993/08/31 21323.79 14328.70 1993/09/30 21621.79 14218.37 1993/10/31 22372.32 14512.69 1993/11/30 20672.60 14374.82 1993/12/31 21833.52 14548.75 1994/01/31 22673.27 15043.41 1994/02/28 22298.78 14635.73 1994/03/31 20744.11 13997.61 1994/04/30 21598.03 14176.78 1994/05/31 20440.78 14409.28 1994/06/30 18918.07 14056.26 1994/07/31 20879.32 14517.30 1994/08/31 22657.83 15112.51 1994/09/30 22962.38 14742.25 1994/10/31 25021.07 15073.95 1994/11/30 24314.54 14524.96 1994/12/31 25138.57 14740.37 1995/01/31 24467.87 15122.58 1995/02/28 25337.29 15711.91 1995/03/31 25473.91 16175.57 1995/04/30 26593.13 16651.94 1995/05/31 27505.97 17317.52 1995/06/30 30405.58 17719.80 1995/07/31 33318.60 18307.39 1995/08/31 33399.15 18353.34 1995/09/30 34285.14 19127.86 1995/10/31 30875.42 19059.57 1995/11/30 31023.08 19896.28 1995/12/31 29504.05 20279.49 1996/01/31 28582.05 20969.80 1996/02/29 30871.16 21164.19 1996/03/31 30569.12 21368.00 1996/04/30 32572.09 21682.97 1996/05/31 34416.10 22242.17 1996/06/30 32921.82 22326.91 1996/07/31 30060.43 21340.51 1996/08/31 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 31284.47 26701.33 1997/03/31 28566.15 25604.17 1997/04/30 29742.50 27132.74 1997/05/31 33907.41 28784.58 1997/06/30 35099.65 30074.13 1997/07/31 39566.59 32467.13 1997/08/29 39407.62 30648.32 IMATRL PRASUN SHR__CHT 19970831 19970909 115035 R00000000000089 $10,000 OVER LIFE OF FUND: 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 August 31, 1997, the value of the investment would have grown to $39,408 - a 294.08% 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 $30,648 - a 206.48% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS VITESSE SEMICONDUCTOR CORP. 6.7 COMPAQ COMPUTER CORP. 6.1 MICRON TECHNOLOGY, INC. 4.8 NEXTEL COMMUNICATIONS, INC. CLASS A 4.4 ANDREW CORP. 3.5 TELLABS, INC. 3.5 BRIGHTPOINT, INC. 3.4 ADC TELECOMMUNICATIONS, INC. 3.3 ALCATEL ALSTHOM COMPAGNIE GENERALE D'ELECTRICITE SA 3.2 MOTOROLA, INC. 3.0 TOP INDUSTRIES AS OF AUGUST 31, 1997 ROW: 1, COL: 1, VALUE: 36.1 ROW: 1, COL: 2, VALUE: 4.0 ROW: 1, COL: 3, VALUE: 4.4 ROW: 1, COL: 4, VALUE: 7.0 ROW: 1, COL: 5, VALUE: 23.4 ROW: 1, COL: 6, VALUE: 25.1 SEMICONDUCTORS 25.1% TELEPHONE EQUIPMENT 23.4% MINI & MICRO COMPUTERS 7.0% CELLULAR & COMMUNICATION SERVICES 4.4% COMPUTER PERIPHERALS 4.0% ALL OTHERS 36.1% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS DEVELOPING COMMUNICATIONS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Nicholas Romano, Portfolio Manager of Fidelity Select Developing Communications Portfolio Q. HOW DID THE FUND PERFORM, NICK? A. For the six-month period that ended August 31, 1997, the fund returned 25.97%. This topped the Standard & Poor's 500 Index, which returned 14.78% in that same time span. For the 12 months that ended August 31, 1997, the fund returned 24.82%, while the index returned 40.65%. Q. WHAT FACTORS DROVE PERFORMANCE? A. Two of the more important sub-segments of this industry are the equipment suppliers and the service providers. When I took over the fund just prior to March, I decided to focus more heavily on the equipment supplier side and to de-emphasize the service providers. This move paid off nicely. In the past six months, service providers have been building extensive networks and overhauling existing networks, each of which have been aimed at meeting rapidly growing demand for advanced telephone networks, the Internet and wireless communications. Along the way, the service providers have experienced new competition, which increases the cost of doing business and, in many cases, reduces their ability to set prices. Meanwhile, the buildout of these new competing facilities and the upgrades to existing facilities have resulted in a significant increase in worldwide equipment spending. Q. DID THE SERVICE PROVIDERS PERFORM POORLY? A. Not at all. In many cases, service provider stocks performed capably, but couldn't match the dramatic upward move of the equipment suppliers. Some good service provider stocks to own included WorldCom, Brooks Fiber and NexTel. Q. TWO WELL-KNOWN STOCKS - COMPAQ AND MICRON - HAVE MADE THEIR WAY ONTO THE FUND'S LIST OF TOP HOLDINGS . . . A. These two positions benefited from the healthy demand for PCs as well as rapidly improving profitability. Compaq's stock did quite well during the period and, while Micron has not been as strong, I am hopeful that the upcoming holiday season will create a supply/demand imbalance in DRAMs. An imbalance could help drive near-term earnings. Q. WHICH INDIVIDUAL STOCKS CONTRIBUTED POSITIVELY TO PERFORMANCE? WERE THERE ANY DISAPPOINTMENTS? A. Vitesse, a manufacturer of semiconductors and the fund's top holding, performed extremely well due to high demand for high-speed communications equipment. French telecommunications company Alcatel - which is making progress as a restructuring story - also performed nicely. Wireless communications stocks Nokia and Ericsson continued to post strong performance, as worldwide demand for mobile phones and infrastructure stayed high. Disappointments included telemarketing outsourcing stocks Sitel Corp. and APAC TeleServices. In retrospect, I also could have had higher weightings in several stocks where I had more conviction that results would be strong, including Brightpoint, Nokia and Alcatel. Q. WHAT'S YOUR OUTLOOK? A. Many of the companies that I believe are best-positioned for the long-term are at high valuation levels, but I expect that the end demand for services such as the Internet and wireless communications - both long-term trends - will continue to keep demand for equipment at high levels. This should produce good additional investing 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: June 29, 1990 FUND NUMBER: 518 TRADING SYMBOL: FSDCX SIZE: as of August 31, 1997, more than $277 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 AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.5% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 0.7% MISSILES & SPACE VEHICLES - 0.7% Orbital Sciences Corp. (a) 86,200 $ 1,869,463 68556410 APPLIANCE STORES - 0.3% ELECTRIC APPLIANCES - WHOLESALE - 0.3% Cellstar Corp. (a) 25,350 844,472 15092510 BROADCASTING - 0.5% COMMUNICATIONS SERVICES, NEC - 0.5% APT Satellite Holdings Ltd. sponsored ADR 92,200 1,371,475 00203R10 CELLULAR - 4.4% CELLULAR & COMMUNICATION SERVICES - 4.4% Nextel Communications, Inc. Class A (a) 500,000 12,531,250 65332V10 COMMUNICATIONS EQUIPMENT - 21.1% DATACOMMUNICATIONS EQUIPMENT - 0.9% Dynatech Corp. (a) 69,550 2,660,288 26813810 TELEPHONE EQUIPMENT - 18.9% ADC Telecommunications, Inc. (a) 248,900 9,240,413 00088610 Advanced Fibre Communication, Inc. 33,600 2,091,600 00754A10 Andrew Corp. (a) 401,500 9,987,313 03442510 Applied Innovation, Inc. (a) 110,000 467,500 03791610 Boston Technology, Inc. (a) 100,400 2,955,525 10114330 DSP Communications, Inc. 169,800 3,268,650 23332K10 Ericsson (L.M.) Telephone Co. Class B 50,000 2,075,004 29482120 Newbridge Networks Corp. (a) 100,000 4,550,000 65090110 Nokia Corp. AB sponsored ADR 85,100 6,595,250 65490220 Tellabs, Inc. (a) 166,000 9,908,125 87966410 Teledata Communications Ltd. (a) 65,200 2,249,400 93799992 53,388,780 TELEPHONE INTERCONNECT SYSTEMS - 1.3% Intermedia Communications, Inc. (a) 100,000 3,575,000 45880110 TOTAL COMMUNICATIONS EQUIPMENT 59,624,068 COMPUTER SERVICES & SOFTWARE - 2.7% PREPACKAGED COMPUTER SOFTWARE - 2.7% Citrix Systems, Inc. (a) 100,000 5,050,000 17737610 Oracle Corp. (a) 68,700 2,619,188 68389X10 7,669,188 COMPUTERS & OFFICE EQUIPMENT - 13.6% COMPUTER COMMUNICATIONS EQUIPMENT - 1.4% Proxim, Inc. 160,000 3,960,000 74428410 COMPUTER PERIPHERALS - 4.0% Applied Magnetics Corp. (a) 100,000 3,693,750 03821310 EMC Corp. (a) 75,000 3,848,438 26864810 Western Digital Corp. 81,000 3,898,125 95810210 11,440,313 COMPUTER STORAGE DEVICES - 0.2% Quantum Corp. 16,000 561,000 74790610 GRAPHICS WORKSTATIONS - 1.0% Silicon Graphics, Inc. 100,000 2,743,750 82705610 MINI & MICRO COMPUTERS - 7.0% Compaq Computer Corp. (a) 262,500 17,193,750 20449310 Dell Computer Corp. (a) 30,000 2,461,875 24702510 19,655,625 TOTAL COMPUTERS & OFFICE EQUIPMENT 38,360,688 SHARES VALUE (NOTE 1) ELECTRICAL EQUIPMENT - 5.8% ELECTRICAL MACHINERY - 4.5% Alcatel Alsthom Compagnie Generale d'Electricite SA sponsored ADR 146,200 $ 3,600,175 01390430 Alcatel Alsthom Compagnie Generale d'Electricite SA 73,500 8,985,064 01390492 12,585,239 TV & RADIO COMMUNICATION EQUIPMENT - 1.3% Allen Telecom, Inc. (a) 78,600 1,876,575 01809110 Corsair Communications, Inc. 200 4,000 22040610 Viasat, Inc. 104,900 1,861,975 92552V10 3,742,550 TOTAL ELECTRICAL EQUIPMENT 16,327,789 ELECTRONIC INSTRUMENTS - 4.1% ELECTRONIC EQUIPMENT - 1.7% Sawtek, Inc. (a) 120,200 4,732,875 80546810 SEMI-CONDUCTOR CAPITAL EQUIPMENT - 2.4% Applied Materials, Inc. (a) 71,200 6,719,500 03822210 Novellus Systems, Inc. (a) 1,100 126,088 67000810 6,845,588 TOTAL ELECTRONIC INSTRUMENTS 11,578,463 ELECTRONICS - 30.7% ELECTRONIC COMP. & ACCESSORIES - 1.0% World Access, Inc. 100,000 2,650,000 98141A10 ELECTRONIC PARTS - WHOLESALE - 3.4% Brightpoint, Inc. 256,400 9,615,000 10947310 ELECTRONICS & ELECTRONIC COMPONENTS - 1.2% Sanmina Corp. (a) 34,400 2,726,200 80090710 Solectron Corp. (a) 17,000 711,875 83418210 3,438,075 SEMICONDUCTORS - 25.1% Altera Corp. (a) 55,900 2,976,675 02144110 Atmel Corp. (a) 37,700 1,333,638 04951310 Intel Corp. warrants 3/14/98 (a) 100,000 7,162,500 45814014 Linear Technology Corp. 41,000 2,688,063 53567810 MEMC Electronic Materials, Inc. (a) 60,000 1,740,000 55271510 Maxim Integrated Products, Inc. (a) 33,000 2,281,125 57772K10 Micron Technology, Inc. (a) 301,200 13,422,225 59511210 Motorola, Inc. 116,600 8,555,525 62007610 RF Micro Devices, Inc. 200 3,750 74994110 Texas Instruments, Inc. 72,600 8,249,175 88250810 Unitrode Corp. (a) 44,700 3,486,600 91328310 Vitesse Semiconductor Corp. (a) 401,800 18,934,825 92849710 70,834,101 TOTAL ELECTRONICS 86,537,176 INDUSTRIAL MACHINERY & EQUIPMENT - 2.1% SPECIAL INDUSTRIAL MACHINERY, NEC - 2.1% ASM Lithography Holding NV (a) 68,800 5,848,000 04599S23 SERVICES - 1.5% BUSINESS SERVICES - 1.5% Sitel Corp. (a) 399,300 4,242,563 82980K10 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TELEPHONE SERVICES - 4.0% Brooks Fiber Properties, Inc. (a) 150,000 $ 5,043,750 11439910 McLeod USA, Inc. Class A (a) 100,000 3,387,500 58226610 WorldCom, Inc. (a) 100,170 2,998,835 98155K10 11,430,085 TOTAL COMMON STOCKS (Cost $224,402,564) 258,234,680 CASH EQUIVALENTS - 8.5% Taxable Central Cash Fund (b) (Cost $24,002,468) 24,002,468 24,002,468 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $248,405,032) $ 282,237,148 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $338,976,813 and $335,327,521, 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 $58,469 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 87.5% France 4.5 Finland 2.3 Netherlands 2.1 Canada 1.6 Others (individually less than 1%) 2.0 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $248,491,292. Net unrealized appreciation aggregated $33,745,856, of which $38,976,072 related to appreciated investment securities and $5,230,216 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 AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 282,237,148 SECURITIES, AT VALUE (COST $248,405,03 2) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 1,557,287 INVESTMENTS SOLD RECEIVABLE FOR 372,445 FUND SHARES SOLD DIVIDENDS 65,834 RECEIVABLE INTEREST 100,135 RECEIVABLE REDEMPTION FEES 700 RECEIVABLE OTHER 35,088 RECEIVABLES TOTAL ASSETS 284,368,637 LIABILITIES PAYABLE FOR $ 298,438 INVESTMENTS PURCHASED PAYABLE FOR 6,375,887 FUND SHARES REDEEMED ACCRUED 145,145 MANAGEMENT FEE OTHER PAYABLES 237,920 AND ACCRUED EXPENSES TOTAL LIABILITIES 7,057,390 NET ASSETS $ 277,311,247 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 214,438,405 ACCUMULATED (774,725) NET INVESTMENT (LOSS) ACCUMULATED 29,817,811 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 33,829,756 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 277,311,247 11,185,609 SHARES OUTSTANDING NET ASSET $24.79 VALUE AND REDEMPTION PRICE PER SHARE ($277,311,2 47 (DIVIDED BY) 11,185,609 SHARES) MAXIMUM $25.56 OFFERING PRICE PER SHARE (100/97.00 OF $24.79) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 381,895 INCOME DIVIDENDS INTEREST 721,621 TOTAL INCOME 1,103,516 EXPENSES MANAGEMENT $ 711,502 FEE TRANSFER AGENT 1,068,013 FEES ACCOUNTING FEES 119,448 AND EXPENSES NON-INTERESTED 508 TRUSTEES' COMPENSATION CUSTODIAN FEES 16,632 AND EXPENSES REGISTRATION FEES 21,967 AUDIT 16,720 LEGAL 722 MISCELLANEOUS 1,113 TOTAL EXPENSES 1,956,625 BEFORE REDUCTIONS EXPENSE (78,384) 1,878,241 REDUCTIONS NET INVESTMENT (774,725) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 32,367,866 SECURITIES FOREIGN (5,884) 32,361,982 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT 23,108,648 SECURITIES ASSETS AND 315 23,108,963 LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 55,470,945 NET INCREASE $ 54,696,220 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 212,130 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 5,047 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 44,835 WITHHELD BY FSC EXPENSE $ 77,940 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 444 CREDITS $ 78,384 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (774,725) $ (2,645,399) NET INVESTMENT INCOME (LOSS) NET REALIZED 32,361,982 20,142,886 GAIN (LOSS) CHANGE IN NET 23,108,963 (10,187,726) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 54,696,220 7,309,761 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS SHARE 112,788,410 146,934,555 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES COST OF SHARES (110,761,059) (267,415,417) REDEEMED REDEMPTION 227,954 345,334 FEES NET INCREASE 2,255,305 (120,135,528) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 56,951,525 (112,825,767) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 220,359,722 333,185,489 PERIOD END OF PERIOD $ 277,311,247 $ 220,359,722 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $774,725 AND 0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 5,023,557 7,119,930 REDEEMED (5,037,551) (13,076,634) NET INCREASE (13,994) (5,956,704) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 19.68 $ 19.42 $ 20.40 $ 19.65 $ 16.44 $ 13.54 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.07) (.18) (.17) (.16) (.16) (.07) INVESTMENT INCOME (LOSS) D NET REALIZED 5.16 .42 4.17 2.55 4.82 2.98 AND UNREALIZED GAIN (LOSS) TOTAL FROM 5.09 .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 FEES .02 .02 .02 .03 .02 .02 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 24.79 $ 19.68 $ 19.42 $ 20.40 $ 19.65 $ 16.44 END OF PERIOD TOTAL RETURN B, C 25.97% 1.34% 21.84% 13.63% 30.24% 21.66% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 277,311 $ 220,360 $ 333,185 $ 254,426 $ 222,109 $ 83,383 OF PERIOD (000 OMITTED) RATIO OF 1.63% A 1.64% 1.53% 1.58% 1.56% 1.88% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.57% A, E 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 (.65)% A (.86)% (.78)% (.83)% (.88)% (.59)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 318% A 202% 249% 266% 280% 77% A TURNOVER RATE AVERAGE $ .0407 $ .0346 COMMISSION RATE F
ANNUALIZED 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 ). TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEME NTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS ). FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSION S 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS ELECTRONICS 36.66% 87.03% 537.50% 551.69% ELECTRONICS 32.56% 81.42% 518.38% 532.14% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS ELECTRONICS 87.03% 44.84% 20.62% ELECTRONICS 81.42% 43.96% 20.25% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 115038 S00000000000001 Electronics S&P 500 00008 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9691.51 9781.00 1987/10/31 6398.78 7674.17 1987/11/30 5397.38 7041.82 1987/12/31 6212.07 7577.70 1988/01/31 5855.64 7896.72 1988/02/29 6475.15 8264.71 1988/03/31 6381.80 8009.33 1988/04/30 6670.34 8098.24 1988/05/31 6441.21 8168.69 1988/06/30 7069.20 8543.63 1988/07/31 6636.40 8511.17 1988/08/31 5974.45 8221.79 1988/09/30 6067.80 8572.04 1988/10/31 5626.51 8810.34 1988/11/30 5346.46 8684.35 1988/12/31 5685.91 8836.33 1989/01/31 5889.59 9483.15 1989/02/28 5804.72 9247.02 1989/03/31 5762.29 9462.47 1989/04/30 6212.07 9953.57 1989/05/31 6806.12 10356.69 1989/06/30 6135.70 10297.66 1989/07/31 6203.59 11227.54 1989/08/31 6415.75 11447.60 1989/09/30 6593.96 11400.66 1989/10/31 6296.94 11136.17 1989/11/30 6313.91 11363.35 1989/12/31 6576.99 11636.07 1990/01/31 6797.64 10855.29 1990/02/28 7340.77 10995.32 1990/03/31 7697.20 11286.70 1990/04/30 7731.15 11004.53 1990/05/31 8868.33 12077.47 1990/06/30 9004.11 11995.34 1990/07/31 8579.79 11956.96 1990/08/31 7238.93 10876.05 1990/09/30 6144.18 10346.39 1990/10/31 5923.53 10301.90 1990/11/30 6534.56 10967.40 1990/12/31 6958.96 11273.39 1991/01/31 7927.61 11764.91 1991/02/28 8624.36 12606.10 1991/03/31 9083.19 12911.17 1991/04/30 9134.17 12942.15 1991/05/31 9431.56 13501.25 1991/06/30 8284.48 12882.90 1991/07/31 8853.77 13483.24 1991/08/31 9219.14 13802.79 1991/09/30 8513.90 13572.29 1991/10/31 8930.25 13754.15 1991/11/30 8386.44 13199.86 1991/12/31 9414.57 14709.93 1992/01/31 10527.66 14436.32 1992/02/29 11105.45 14623.99 1992/03/31 10230.27 14338.83 1992/04/30 10034.84 14760.39 1992/05/31 10051.84 14832.71 1992/06/30 9321.10 14611.71 1992/07/31 9813.92 15209.33 1992/08/31 9915.89 14897.53 1992/09/30 10272.76 15073.32 1992/10/31 11045.97 15126.08 1992/11/30 11768.21 15641.88 1992/12/31 11997.63 15834.28 1993/01/31 12405.48 15967.28 1993/02/28 12133.58 16184.44 1993/03/31 12558.42 16525.93 1993/04/30 12337.05 16126.00 1993/05/31 13575.03 16558.18 1993/06/30 13822.62 16606.20 1993/07/31 14215.36 16539.77 1993/08/31 15436.26 17166.63 1993/09/30 15692.39 17034.45 1993/10/31 15393.57 17387.06 1993/11/30 15274.04 17221.88 1993/12/31 15846.44 17430.27 1994/01/31 16941.03 18022.90 1994/02/28 17744.40 17534.48 1994/03/31 17553.60 16769.97 1994/04/30 17503.39 16984.63 1994/05/31 17453.18 17263.18 1994/06/30 16519.26 16840.23 1994/07/31 16860.69 17392.59 1994/08/31 18507.60 18105.69 1994/09/30 17975.37 17662.10 1994/10/31 18708.44 18059.49 1994/11/30 18467.43 17401.77 1994/12/31 18567.85 17659.84 1995/01/31 18035.62 18117.75 1995/02/28 19883.37 18823.80 1995/03/31 21931.96 19379.29 1995/04/30 24382.23 19950.01 1995/05/31 26159.68 20747.42 1995/06/30 29885.30 21229.38 1995/07/31 34354.04 21933.35 1995/08/31 34805.94 21988.40 1995/09/30 35428.55 22916.31 1995/10/31 34454.46 22834.50 1995/11/30 33590.84 23836.93 1995/12/31 31373.78 24296.03 1996/01/31 32434.20 25123.07 1996/02/29 34347.83 25355.96 1996/03/31 32336.69 25600.14 1996/04/30 36029.88 25977.48 1996/05/31 36980.60 26647.44 1996/06/30 33872.47 26748.97 1996/07/31 32239.18 25567.20 1996/08/31 33799.34 26106.41 1996/09/30 38357.93 27575.68 1996/10/31 38662.64 28336.22 1996/11/30 44464.48 30478.15 1996/12/31 44464.48 29874.38 1997/01/31 51412.05 31740.93 1997/02/28 46256.22 31989.78 1997/03/31 43038.40 30675.32 1997/04/30 47048.84 32506.64 1997/05/31 52218.45 34485.64 1997/06/30 51897.03 36030.60 1997/07/31 60910.37 38897.55 1997/08/29 63200.53 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970909 115051 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Electronics Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $63,214 - a 532.14% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS COMPAQ COMPUTER CORP. 8.0 TERADYNE, INC. 6.8 MICRON TECHNOLOGY, INC. 5.5 WESTERN DIGITAL CORP. 4.0 INTEL CORP. 3.4 KLA-TENCOR CORP. 3.1 TEXAS INSTRUMENTS, INC. 3.1 VLSI TECHNOLOGY, INC. 2.8 APPLIED MATERIALS, INC. 2.2 DELL COMPUTER CORP. 2.1 TOP INDUSTRIES AS OF AUGUST 31, 1997 SEMICONDUCTORS 30.0% ELECTRONIC EQUIPMENT 12.2% MINI & MICRO COMPUTERS 11.0% COMPUTER PERIPHERALS 6.6% SEMI-CONDUCTOR CAPITAL EQUIPMENT 6.1% ALL OTHERS 34.1% ROW: 1, COL: 1, VALUE: 34.1 ROW: 1, COL: 2, VALUE: 6.1 ROW: 1, COL: 3, VALUE: 6.6 ROW: 1, COL: 4, VALUE: 11.0 ROW: 1, COL: 5, VALUE: 12.2 ROW: 1, COL: 6, VALUE: 30.0 * * 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. During the six months that ended August 31, 1997, the fund generated a return of 36.66%, outperforming the 14.78% return of the broader Standard & Poor's 500 Index. For the 12 months that ended August 31, 1997, the fund returned 87.03%, compared to the 40.65% return of the S&P 500. Q. WHAT CONTRIBUTED TO THE FUND'S STRONG PERFORMANCE? A. In the first half of 1997, I invested some of the fund's assets in semiconductor capital equipment companies, hopeful that these stocks would stage a recovery after a downturn that lasted from late 1995 until early 1997. Several of these stocks - such as Applied Materials and KLA Tencor - rebounded so much that I would call them monumental outperformers. This happened for a few key reasons. This is a cyclical business, but I determined that these companies improved their business models so that margins at the bottom of a downturn weren't hit as hard by lost revenues as we've seen in previous cycles. For example, the companies are outsourcing more often, which lowers fixed costs and, in turn, allows for better margins when sales slow. In addition, there is more concentration in the industry among the lead players, so there's less pricing pressure. Considering margins would be less hurt by downturns, I recognized that investors may start treating these companies less like cyclicals and more like growth stocks - eventually causing a revaluation of the multiples. My wish came true and we saw a big upward revaluation in the first half of the year. Q. COMPAQ WAS THE FUND'S TOP POSITION AT THE END OF THE PERIOD, REPRESENTING 8% OF THE PORTFOLIO. WHAT DID YOU FIND ATTRACTIVE ABOUT THIS STOCK? A. I was bullish about PC makers and, specifically, I thought Compaq was starting to emulate Dell Computer, which has been the best performer in that sector over the past year. The company is managing its balance sheet better, which led to improved returns and a better-performing stock. Overall, the PC market is starting to divide itself into the haves and have-nots. In this environment, good executors - such as Compaq and Dell - are devouring the market share of their competitors at a rapid rate. Q. WERE THERE ANY OTHER STOCKS THAT STOOD OUT DURING THE PERIOD? A. Texas Instruments was a company-specific turnaround story. Historically, the company has been involved in dozens of different businesses - a lot of which weren't earning the return on capital that could be derived from its high-value-added semiconductor operations. About a year ago, the company's new management indicated a determination to divest non-core businesses and improve returns. The company has sold off several operations, such as its defense business, and refocused on semiconductors, improving its return on capital. The market started to recognize these improvements and boosted the company's share price during the period. Q. WERE THERE ANY DISAPPOINTMENTS? A. Atmel, a provider of non-volatile memory in the communications sector, was the fund's second-largest holding at the beginning of the six-month period. Non-volatile memory chips retain information even when a PC's power is off. The entire non-volatile memory market suffered a period of oversupply in the spring. I mis-estimated the supply and demand imbalance, thinking that Atmel would benefit from its focus on communications applications. The company actually reported lower-than-expected earnings as a result of the general oversupply and its stock suffered, so I reduced that position by the end of the period. Q. WHAT'S YOUR SHORT-TERM OUTLOOK FOR THE ELECTRONICS MARKET? A. Both PC retailers and manufacturers are optimistic that they are hitting the right price points with desirable products, which usually has a good effect up and down the technology supply chain. After all, if PC makers sell lots of computers during the Christmas shopping season, then the component suppliers and equipment makers will benefit, too. Clearly, valuations are higher than they were six months ago, so I'm not looking for the same dramatic upside that we saw during the past year. However, the demand in the end-market looks healthy, so I feel these stocks should continue to perform reasonably well in the near term. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 008 TRADING SYMBOL: FSELX SIZE: as of August 31, 1997, more than $2.8 billion MANAGER: Andrew Kaplan, since August 1996; analyst, semiconductor equipment companies and producers, since 1995; joined Fidelity in 1995 (checkmark) ELECTRONICS PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.1% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 0.0% AIRCRAFT ENGINES & PARTS - 0.0% Doncasters PLC sponsored ADR 37,500 $ 965,625 25769210 COMMUNICATIONS EQUIPMENT - 5.5% DATACOMMUNICATIONS EQUIPMENT - 1.1% Level One Communications, Inc. (a) 879,750 31,341,094 52729510 TELEPHONE EQUIPMENT - 4.4% Advanced Fibre Communication, Inc. 22,500 1,400,625 00754A10 Andrew Corp. (a) 1,000,000 24,875,000 03442510 DSP Communications, Inc. 1,155,100 22,235,675 23332K10 Dialogic Corp. (a) 97,400 3,896,000 25249910 Ericsson (L.M.) Telephone Co. Class B ADR 600,000 25,012,500 29482140 Lucent Technologies, Inc. 81,300 6,331,238 54946310 Matsushita Communication Industrial Co. Ltd. 600,000 19,519,868 57688099 Newbridge Networks Corp. (a) 228,500 10,396,750 65090110 Nokia Corp. AB sponsored ADR 263,200 20,398,000 65490220 134,065,656 TOTAL COMMUNICATIONS EQUIPMENT 165,406,750 COMPUTER SERVICES & SOFTWARE - 6.6% CAD/CAM/CAE - 0.7% Synopsys, Inc. (a) 636,800 22,049,200 87160710 CUSTOM COMPUTER PROGRAMMING SERVICES - 1.0% Saville Systems Ireland PLC sponsored ADR 450,000 30,093,750 80517410 PREPACKAGED COMPUTER SOFTWARE - 4.9% Advent Software, Inc. (a) 112,000 2,968,000 00797410 Advant Corp. (a)(c) 1,480,000 43,012,500 05348710 BMC Software, Inc. (a) 200,000 12,525,000 05592110 Cadence Design Systems, Inc. (a) 932,300 44,342,519 12738710 Citrix Systems, Inc. (a) 600,000 30,300,000 17737610 Electronics for Imaging, Inc. (a) 100,600 5,382,100 28608210 Midway Games, Inc. (a) 181,200 3,827,850 59814810 Oracle Corp. (a) 108,150 4,123,219 68389X10 146,481,188 TOTAL COMPUTER SERVICES & SOFTWARE 198,624,138 COMPUTERS & OFFICE EQUIPMENT - 21.6% COMPUTER PERIPHERALS - 6.6% Creative Technology Corp. Ltd. (a) 1,632,200 31,419,850 22599992 EMC Corp. (a) 750,000 38,484,375 26864810 Galileo Technology Ltd. (c) 276,300 8,599,838 36399N22 Western Digital Corp. 2,499,200 120,274,000 95810210 198,778,063 COMPUTER STORAGE DEVICES - 3.2% Iomega Corp. (a) 400,000 10,250,000 46203010 Quantum Corp. 1,360,500 47,702,531 74790610 Read-Rite Corp. 737,600 21,159,900 75524610 Sandisk Corp. (a) 284,900 7,727,913 80004C10 Trident Microsystems, Inc. (a) 601,200 10,746,450 89591910 97,586,794 COMPUTERS & OFFICE EQUIPMENT - 0.7% Fujitsu Ltd. 1,500,000 17,880,795 35959010 International Business Machines Corp. 41,600 4,196,400 45920010 22,077,195 MAGNETIC & OPTICAL RECORDING MEDIA - 0.1% HMT Technology Corp. 117,500 1,962,497 40391710 SHARES VALUE (NOTE 1) MINI & MICRO COMPUTERS - 11.0% Compaq Computer Corp. (a) 3,707,500 $ 242,841,250 20449310 Dell Computer Corp. (a) 766,200 62,876,288 24702510 Sequent Computer Systems, Inc. (a) 932,900 26,296,119 81733810 332,013,657 TOTAL COMPUTERS & OFFICE EQUIPMENT 652,418,206 CONSUMER ELECTRONICS - 0.9% RADIOS, TELEVISIONS, STEREOS - 0.9% Philips Electronics NV 400,000 28,650,000 71833750 DEFENSE ELECTRONICS - 0.1% Remec, Inc. (a) 60,300 2,012,513 75954310 ELECTRICAL EQUIPMENT - 1.7% ELECTRICAL EQUIPMENT, NEC - 0.9% Vicor Corp. (a) 1,115,600 28,029,450 92581510 ELECTRICAL MACHINERY - 0.7% Alcatel Alsthom Compagnie Generale d'Electricite SA sponsored ADR 900,000 22,162,500 01390430 TV & RADIO COMMUNICATION EQUIPMENT - 0.1% Ortel Corp. 65,000 1,535,625 68749W10 TOTAL ELECTRICAL EQUIPMENT 51,727,575 ELECTRONIC INSTRUMENTS - 19.9% ELECTRONIC EQUIPMENT - 12.2% Advantest Corp. 400,000 36,423,842 00799010 Aetrium, Inc. (a) 192,800 4,651,300 00817R10 Anadigics, Inc. 198,900 9,845,550 03251510 Cohu, Inc. 461,500 25,844,000 19257610 Credence Systems Corp. (a) 365,500 17,201,344 22530210 Helix Technology Corp. (c) 533,200 31,858,700 42331910 LTX Corp. 323,600 2,558,463 50239210 Sawtek, Inc. (a) 475,200 18,711,000 80546810 Smart Modular Technologies, Inc. (a) 257,300 15,180,700 83169010 Teradyne, Inc. (a) 3,671,100 204,434,381 88077010 366,709,280 INDUSTRIAL MEASUREMENT INSTRUMENTS - 0.1% ADE Corp. 49,100 2,013,100 00089C10 MEASURING INSTRUMENTS - 0.7% Perkin-Elmer Corp. 286,700 21,215,800 71404110 OPTICAL INSTRUMENTS - 0.8% Cognex Corp. (a) 669,500 25,608,375 19242210 SEMI-CONDUCTOR CAPITAL EQUIPMENT - 6.1% Applied Materials, Inc. (a) 690,000 65,118,750 03822210 Lam Research Corp. (a) 83,527 4,719,270 51280710 KLA-Tencor Corp. 1,323,800 93,824,325 48248010 Novellus Systems, Inc. (a) 184,200 21,113,925 67000810 184,776,270 TOTAL ELECTRONIC INSTRUMENTS 600,322,825 ELECTRONICS - 31.2% CONNECTORS - 0.0% PCD, Inc. 15,000 270,000 69318P10 ELECTRONIC CAPACITORS - 0.1% KEMET Corp. (a) 56,800 1,654,300 48836010 ELECTRONICS & ELECTRONIC COMPONENTS - 0.9% Advanced Energy Industries, Inc. 167,500 5,276,250 00797310 Sanmina Corp. (a) 65,000 5,151,250 80090710 Solectron Corp. (a) 101,600 4,254,500 83418210 TDK Corp. 150,000 11,498,345 87235110 26,180,345 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRONICS - CONTINUED PRINTED CIRCUIT BOARDS - 0.2% DII Group, Inc. 124,900 $ 6,838,275 23294910 SEMICONDUCTORS - 30.0% Actel Corp. (a) 628,300 12,762,344 00493410 Altera Corp. (a) 407,000 21,672,750 02144110 Analog Devices, Inc. 177,000 5,863,125 03265410 Atmel Corp. (a) 242,000 8,560,750 04951310 Benchmarq Microelectronics, Inc. (a) 246,700 7,647,700 08160310 Burr-Brown Corp. (a) 200,000 7,100,000 12257410 C-Cube Microsystems, Inc. 400,000 12,000,000 12501510 CFM Technologies, Inc. (a) 110,500 3,577,438 12525K10 Electroglas, Inc. (a) 728,500 23,312,000 28532410 Integrated Circuit Systems, Inc. 74,400 2,566,800 45811K10 Integrated Device Technology, Inc. (a) 200,000 2,725,000 45811810 Intel Corp. 1,110,000 102,258,750 45814010 International Rectifier Corp. (a)(c) 2,643,200 60,298,000 46025410 Lattice Semiconductor Corp. (a) 686,000 43,689,625 51841510 Linear Technology Corp. 229,310 15,034,137 53567810 MEMC Electronic Materials, Inc. (a) 282,100 8,180,900 55271510 Maxim Integrated Products, Inc. (a) 395,700 27,352,763 57772K10 Micrel, Inc. 30,000 1,072,500 59479310 Microchip Technology, Inc. (a) 301,600 12,195,950 59501710 Micron Technology, Inc. (a) 3,752,800 167,234,150 59511210 PMC-Sierra, Inc. (a) 324,500 9,309,094 69344F10 QLogic Corp. 240,000 9,420,000 74727710 Semtech Corp. 158,400 9,365,400 81685010 Sipex Corp. (a) 186,800 5,277,100 82990910 Speedfam International, Inc. (a) 225,700 12,385,288 84770610 3D Labs, Inc. Ltd. 275,000 10,896,875 92199N22 Texas Instruments, Inc. 822,600 93,467,925 88250810 Transwitch Corp. 208,000 2,379,000 89406510 Triquint Semiconductor, Inc. (a) 185,900 6,878,300 89674K10 Uniphase Corp. (a) 62,200 4,245,150 90914910 Unitrode Corp. (a)(c) 731,700 57,072,600 91328310 VLSI Technology, Inc. (a)(c) 2,582,100 85,209,300 91827010 Vitesse Semiconductor Corp. (a) 983,350 46,340,369 92849710 Xilinx, Inc. (a) 28,200 1,339,500 98391910 Zilog, Inc. (a) 332,000 8,134,000 98952410 906,824,583 TOTAL ELECTRONICS 941,767,503 ENGINEERING - 0.6% ARCHITECTS & ENGINEERS - 0.6% DSP Group, Inc. (c) 558,000 17,088,750 23332B10 INDUSTRIAL MACHINERY & EQUIPMENT - 2.0% SPECIAL INDUSTRIAL MACHINERY, NEC - 2.0% ASM Lithography Holding NV (a) 597,200 50,762,000 04599S23 Gasonics International Corp. (a) 467,800 8,303,450 36727810 59,065,450 PUBLISHING - 0.0% GENERAL PUBLISHING - 0.0% Applied Graphics Technologies 22,500 928,125 03793710 TOTAL COMMON STOCKS (Cost $2,351,912,642) 2,718,977,460 CASH EQUIVALENTS - 9.9% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $299,087,293) 299,087,293 $299,087,293 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $2,650,999,935) $ 3,018,064,753 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. Affiliated company (see Note 10 of Notes to Financial Statements) OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $4,086,040,135 and $3,671,526,472, 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 $520,131 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, the value of securities loaned and the value of collateral amounted to $76,286,950 and $80,452,900, 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 $10,536,000 and $9,468,000, respectively. 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 89.3% Japan 2.8 Netherlands 2.6 Singapore 1.0 Ireland 1.0 Others (individually less than 1%) 3.3 TOTAL 100.0% Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Actel Corp. $ 12,337,016 $ 14,094,480 $ - $ - Advant Corp. 6,120,392 - - 43,012,500 DSP Group, Inc. 383,252 - - 17,088,750 Galileo Technology Ltd. 682,365 - - 8,599,838 Helix Technology Corp. 9,431,309 6,797,837 221,620 31,858,700 International Rectifier Corp. 1,467,778 - - 60,298,000 Micrel, Inc. 14,215,494 16,008,213 - - Photronics, Inc. - 4,435,876 - - Sipex Corp. 9,793,050 13,095,651 - - Triquint Semiconductor, Inc. 8,204,770 10,899,837 - - Unitrode Corp. 14,733,708 4,974,109 - 57,072,600 VLSI Technology, Inc. 6,136,387 - - 85,209,300 Zilog, Inc. - 1,546,962 - - TOTALS $ 83,505,521 $ 71,852,965 $ 221,620 $ 303,139,688 INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $2,651,435,193. Net unrealized appreciation aggregated $366,629,560, of which $408,668,693 related to appreciated investment securities and $42,039,133 related to depreciated investment securities. ELECTRONICS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 3,018,064,753 SECURITIES, AT VALUE (COST $2,650,999, 935) - SEE ACCOMPANYIN G SCHEDULE CASH 2,354,784 RECEIVABLE FOR 72,278,541 INVESTMENTS SOLD RECEIVABLE FOR 30,489,266 FUND SHARES SOLD DIVIDENDS 200,314 RECEIVABLE INTEREST 1,291,472 RECEIVABLE REDEMPTION FEES 24,199 RECEIVABLE OTHER 54,685 RECEIVABLES TOTAL ASSETS 3,124,758,014 LIABILITIES PAYABLE FOR $ 121,881,575 INVESTMENTS PURCHASED PAYABLE FOR 23,617,350 FUND SHARES REDEEMED ACCRUED 1,381,147 MANAGEMENT FEE OTHER PAYABLES 1,355,483 AND ACCRUED EXPENSES COLLATERAL ON 80,452,900 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 228,688,455 NET ASSETS $ 2,896,069,559 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 2,086,684,068 ACCUMULATED (4,234,085) NET INVESTMENT (LOSS) ACCUMULATED 446,554,758 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 367,064,818 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 2,896,069,559 61,360,151 SHARES OUTSTANDING NET ASSET $47.20 VALUE AND REDEMPTION PRICE PER SHARE ($2,896,069, 559 (DIVIDED BY) 61,360,151 SHARES) MAXIMUM $48.66 OFFERING PRICE PER SHARE (100/97.00 OF $47.20) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 1,621,776 INCOME DIVIDENDS (INCLUDING $221,620 RECEIVED FROM AFFILIATED ISSUERS) INTEREST 6,228,315 (INCLUDING INCOME ON SECURITIES LOANED OF $168,046) TOTAL INCOME 7,850,091 EXPENSES MANAGEMENT $ 6,355,784 FEE TRANSFER AGENT 5,317,887 FEES ACCOUNTING AND 408,097 SECURITY LENDING FEES NON-INTERESTED 4,313 TRUSTEES' COMPENSATION CUSTODIAN FEES 58,321 AND EXPENSES REGISTRATION FEES 349,249 AUDIT 38,459 LEGAL 3,393 INTEREST 3,064 MISCELLANEOUS 7,475 TOTAL EXPENSES 12,546,042 BEFORE REDUCTIONS EXPENSE (461,866) 12,084,176 REDUCTIONS NET INVESTMENT (4,234,085) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 452,168,765 SECURITIES (INCLUDING REALIZED GAIN OF $10,888,545 ON SALE OF INVESTMENTS IN AFFILIATED ISSUERS) FOREIGN 95 452,168,860 CURRENCY TRANSACTIONS CHANGE IN NET 221,863,638 UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) 674,032,498 NET INCREASE $ 669,798,413 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 9,049,728 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 5,784 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 260,528 WITHHELD BY FSC EXPENSE $ 443,065 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 12,176 CREDITS TRANSFER 6,625 AGENT CREDITS $ 461,866 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (4,234,085) $ (6,964,256) NET INVESTMENT INCOME (LOSS) NET REALIZED 452,168,860 272,103,872 GAIN (LOSS) CHANGE IN NET 221,863,638 64,022,840 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 669,798,413 329,162,456 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (143,127,869) - SHAREHOLDERS FROM NET REALIZED GAINS SHARE 1,768,596,559 2,439,060,498 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 140,892,552 - OF DISTRIBUTIONS COST OF SHARES (1,287,468,408) (2,163,322,518) REDEEMED REDEMPTION 3,361,799 5,754,283 FEES NET INCREASE 625,382,502 281,492,263 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 1,152,053,046 610,654,719 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 1,744,016,513 1,133,361,794 PERIOD END OF PERIOD 2,896,069,559 1,744,016,513 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $4,234,085 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 44,239,799 73,288,709 ISSUED IN 4,282,459 - REINVESTMENT OF DISTRIBUTIONS REDEEMED (33,119,535) (67,555,816) NET INCREASE 15,402,723 5,732,893 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 37.95 $ 28.18 $ 19.80 $ 17.67 $ 14.28 $ 11.81 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.08) (.17) (.08) (.18) (.09) (.05) INVESTMENT INCOME (LOSS) D NET REALIZED 12.52 9.80 13.51 2.11 6.09 2.33 AND UNREALIZED GAIN (LOSS) TOTAL FROM 12.44 9.63 13.43 1.93 6.00 2.28 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (3.25) - (5.25) - (2.75) - REALIZED GAIN REDEMPTION FEES .06 .14 .20 .20 .14 .19 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 47.20 $ 37.95 $ 28.18 $ 19.80 $ 17.67 $ 14.28 END OF PERIOD TOTAL RETURN B, C 36.66% 34.67% 72.75% 12.05% 46.24% 20.91% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 2,896,070 $ 1,744,017 $ 1,133,362 $ 216,433 $ 110,993 $ 48,027 OF PERIOD (000 OMITTED) RATIO OF 1.17% A 1.33% 1.25% 1.72% 1.67% 1.69% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.13% A, E 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 (.40)% A (.54)% (.28)% (.98)% (.52)% (.50)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 378% A 341% 366% 205% 163% 293% A TURNOVER RATE AVERAGE $ .0427 $ .0421 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. 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS SOFTWARE AND 21.58% 42.08% 260.62% 427.84% COMPUTER SERVICES SOFTWARE AND 17.93% 37.81% 249.80% 412.01% COMPUTER SERVICES (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS SOFTWARE AND COMPUTER SERVICES 42.08% 29.24% 18.10% SOFTWARE AND COMPUTER SERVICES 37.81% 28.46% 17.74% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970916 120940 S00000000000001 Software/Computer Svcs S&P 500 00028 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9802.67 9781.00 1987/10/31 7208.80 7674.17 1987/11/30 6522.51 7041.82 1987/12/31 7481.30 7577.70 1988/01/31 7265.11 7896.72 1988/02/29 7862.47 8264.71 1988/03/31 7930.74 8009.33 1988/04/30 8169.69 8098.24 1988/05/31 7947.81 8168.69 1988/06/30 8573.62 8543.63 1988/07/31 8146.93 8511.17 1988/08/31 7583.70 8221.79 1988/09/30 8072.97 8572.04 1988/10/31 7646.28 8810.34 1988/11/30 7532.50 8684.35 1988/12/31 8158.31 8836.33 1989/01/31 8767.06 9483.15 1989/02/28 8374.50 9247.02 1989/03/31 8169.69 9462.47 1989/04/30 8960.49 9953.57 1989/05/31 9284.77 10356.69 1989/06/30 8365.24 10297.66 1989/07/31 8118.33 11227.54 1989/08/31 8488.69 11447.60 1989/09/30 8659.16 11400.66 1989/10/31 8841.40 11136.17 1989/11/30 9100.06 11363.35 1989/12/31 9141.32 11636.07 1990/01/31 8816.35 10855.29 1990/02/28 9045.04 10995.32 1990/03/31 9406.12 11286.70 1990/04/30 9376.03 11004.53 1990/05/31 10555.55 12077.47 1990/06/30 10802.29 11995.34 1990/07/31 9815.34 11956.96 1990/08/31 8443.24 10876.05 1990/09/30 7474.34 10346.39 1990/10/31 7624.79 10301.90 1990/11/30 8605.72 10967.40 1990/12/31 9219.56 11273.39 1991/01/31 10573.61 11764.91 1991/02/28 11343.91 12606.10 1991/03/31 11987.83 12911.17 1991/04/30 11897.56 12942.15 1991/05/31 12114.21 13501.25 1991/06/30 11226.33 12882.90 1991/07/31 11915.95 13483.24 1991/08/31 12884.08 13802.79 1991/09/30 12459.70 13572.29 1991/10/31 13083.02 13754.15 1991/11/30 11650.71 13199.86 1991/12/31 13446.25 14709.93 1992/01/31 15604.54 14436.32 1992/02/29 16073.44 14623.99 1992/03/31 15301.14 14338.83 1992/04/30 14914.99 14760.39 1992/05/31 15149.44 14832.71 1992/06/30 14328.87 14611.71 1992/07/31 15342.51 15209.33 1992/08/31 14197.86 14897.53 1992/09/30 15225.29 15073.32 1992/10/31 16452.69 15126.08 1992/11/30 17886.96 15641.88 1992/12/31 18224.84 15834.28 1993/01/31 19162.63 15967.28 1993/02/28 19045.40 16184.44 1993/03/31 19452.24 16525.93 1993/04/30 19124.87 16126.00 1993/05/31 21281.87 16558.18 1993/06/30 22379.84 16606.20 1993/07/31 21702.37 16539.77 1993/08/31 23166.33 17166.63 1993/09/30 23633.55 17034.45 1993/10/31 23579.04 17387.06 1993/11/30 22995.01 17221.88 1993/12/31 24189.98 17430.27 1994/01/31 25032.90 18022.90 1994/02/28 25366.55 17534.48 1994/03/31 22644.63 16769.97 1994/04/30 22761.78 16984.63 1994/05/31 20483.83 17263.18 1994/06/30 18686.38 16840.23 1994/07/31 19602.90 17392.59 1994/08/31 21729.58 18105.69 1994/09/30 22717.29 17662.10 1994/10/31 24114.32 18059.49 1994/11/30 23562.63 17401.77 1994/12/31 24283.39 17659.84 1995/01/31 23882.97 18117.75 1995/02/28 25867.28 18823.80 1995/03/31 27344.40 19379.29 1995/04/30 28198.63 19950.01 1995/05/31 28963.88 20747.42 1995/06/30 31526.58 21229.38 1995/07/31 33430.82 21933.35 1995/08/31 33662.17 21988.40 1995/09/30 35050.30 22916.31 1995/10/31 35468.52 22834.50 1995/11/30 36474.02 23836.93 1995/12/31 35517.91 24296.03 1996/01/31 34155.69 25123.07 1996/02/29 36259.12 25355.96 1996/03/31 35337.61 25600.14 1996/04/30 38895.18 25977.48 1996/05/31 40251.38 26647.44 1996/06/30 38242.95 26748.97 1996/07/31 35302.78 25567.20 1996/08/31 36037.82 26106.41 1996/09/30 40748.31 27575.68 1996/10/31 40893.25 28336.22 1996/11/30 44133.65 30478.15 1996/12/31 43248.39 29874.38 1997/01/31 46719.61 31740.93 1997/02/28 42113.14 31989.78 1997/03/31 39951.82 30675.32 1997/04/30 42294.79 32506.64 1997/05/31 45875.92 34485.64 1997/06/30 45899.32 36030.60 1997/07/31 51446.56 38897.55 1997/08/29 51200.80 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970916 120944 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Software and Computer Services Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $51,201 - a 412.01% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS MICROSOFT CORP. 9.4 ORACLE CORP. 5.5 BMC SOFTWARE, INC. 5.1 PEOPLESOFT, INC. 4.8 ELECTRONICS FOR IMAGING, INC. 4.3 COMPAQ COMPUTER CORP. 4.1 SUNGARD DATA SYSTEMS, INC. 3.8 TEXAS INSTRUMENTS, INC. 3.5 DELL COMPUTER CORP. 3.0 NETSCAPE COMMUNICATIONS CORP. 2.5 TOP INDUSTRIES AS OF AUGUST 31, 1997 ROW: 1, COL: 1, VALUE: 29.7 ROW: 1, COL: 2, VALUE: 3.1 ROW: 1, COL: 3, VALUE: 5.1 ROW: 1, COL: 4, VALUE: 7.1 ROW: 1, COL: 5, VALUE: 9.1 ROW: 1, COL: 6, VALUE: 45.9 PREPACKAGED COMPUTER SOFTWARE 45.9% SEMICONDUCTORS 9.1% MINI & MICRO COMPUTERS 7.1% COMPUTER SERVICES 5.1% DATA PROCESSING 3.1% ALL OTHERS 29.7% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS SOFTWARE AND COMPUTER SERVICES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW NOTE TO SHAREHOLDERS: John Porter became Portfolio Manager of Fidelity Select Software and Computer Services Portfolio on June 2, 1997. Q. HOW DID THE FUND PERFORM, JOHN? A. For the six months that ended on August 31, 1997, the fund had a total return of 21.58%. For the 12 months, it returned 42.08%. For the same periods, the Standard & Poor's 500 Index returned 14.78% and 40.65%, respectively. Q. WHAT WAS THE INVESTMENT ENVIRONMENT LIKE OVER THE PAST SIX MONTHS AND HOW DID IT AFFECT PERFORMANCE? A. The environment for software and computer stocks improved significantly toward the latter part of the six-month period. Through March and early April, the overall market was concerned about valuations of stocks as well as the prospects for specific companies. This changed, however, as a number of companies reported very solid earnings results for the first calendar quarter of 1997. From mid-April on, the software and computer services area, with very few exceptions, was very strong, and that's reflected in strong stock performance for a number of companies with solid earnings. We have had very strong market demand for software and computer services. Revenues are growing at a 15-to-20% annual rate, much faster than the revenue growth of the underlying S&P 500 companies. In the March-April period, we had valuations that did not reflect this much-faster growth. Earlier, the market had been concerned about the valuations of companies such as Oracle and PeopleSoft, and their stocks wound up being crushed. The stock prices came down to the level where they were really fantastic opportunities and prices rebounded. Q. THE FUND CONTINUES TO HAVE A MAJOR INVESTMENT IN MICROSOFT, WHICH AT THE END OF THE PERIOD WAS ABOUT 9% OF TOTAL INVESTMENTS. HOW DID THIS INVESTMENT AFFECT FUND PERFORMANCE? A. Microsoft performed very well, continuing to outperform the overall software market. This is largely reflective of Microsoft's fundamentals, including revenues and earnings, which were much stronger than expected. In April, the company reported results for the March quarter that were, by any definition, fantastic. This announcement proved to be a catalyst for the performance of the stock. To a lesser extent, Microsoft also has benefited from a market that has moved to blue chip companies. Q. WHAT WERE THE BEST OPPORTUNITIES OVER THE PAST SIX MONTHS? A. The whole enterprise-software area has been very strong. This sector includes data base companies, primarily Oracle, as well as companies that produce software for mission-critical areas, such as financial or human resource operations. Strong performers in this area have included PeopleSoft; SAP AG, a German holding company; Computer Associates; and BMC Software. Q. WERE THERE ANY DISAPPOINTMENTS? A. The only disappointing area - and this was a common theme across the market - was in the small-cap stock area. There were a number of attractive stories among small-cap companies, but the market has not fully appreciated them, and the stocks have been mediocre performers. Q. WHAT IS YOUR OUTLOOK? A. I am very upbeat about software and computer services. There is a very strong secular outlook for a continued healthy, 15% compounded annual growth rate for information technology budgets, and the computer services segment is going to get an ever-increasing piece of that pie. Software companies continue to roll out new products with high returns that are good investments for corporations as they reduce complexity and enhance productivity. Probably the one concern in software is corporate spending to deal with the "year 2000 problem." A lot of existing software is written for two-digit dates, and not for four-digit dates. Companies are spending very aggressively to buy new software or to fix old software, and the concern is that today's spending may be cannibalizing the spending of two years from now. One concern in computer services is that intensive competition has tightened the profit margins of some companies, particularly those competing for large contracts. However, the fundamental outlook still is very strong for both software and computer services. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 028 TRADING SYMBOL: FSCSX SIZE: as of August 31, 1997, more than $450 million MANAGER: John Porter, since June 1997; manager, Fidelity Select Multimedia Portfolio, since 1996; joined Fidelity in 1995 (checkmark) SOFTWARE AND COMPUTER SERVICES PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 88.9% SHARES VALUE (NOTE 1) COMMUNICATIONS EQUIPMENT - 2.1% TELEPHONE EQUIPMENT - 2.1% Ericsson (L.M.) Telephone Co. Class B ADR 20,000 $ 833,750 29482140 Nokia Corp. AB sponsored ADR 115,400 8,943,500 65490220 9,777,250 COMPUTER SERVICES & SOFTWARE - 58.8% CAD/CAM/CAE - 2.4% Cambridge Technology Partners Massachusetts, Inc. (a) 150,000 4,837,500 13252410 JDA Software Group, Inc. (a) 30,000 937,500 46612K10 Parametric Technology Corp. (a) 119,700 5,558,569 69917310 11,333,569 COMPUTER & SOFTWARE STORES - 1.1% CompUSA, Inc. (a) 162,600 5,030,438 20493210 COMPUTER SERVICES - 5.1% Bisys Group, Inc. (The) (a) 100,000 3,375,000 05547210 Electronic Data Systems Corp. 29,600 1,119,250 28566110 Paychex, Inc. 35,625 1,220,156 70432610 SunGard Data Systems, Inc. (a) 335,100 17,467,088 86736310 Technology Solutions, Inc. (a) 30,000 697,500 87872T10 23,878,994 DATA PROCESSING - 3.1% Automatic Data Processing, Inc. 140,000 6,378,750 05301510 Fiserv, Inc. (a) 180,000 8,100,000 33773810 14,478,750 ELECTRONIC INFORMATION RETRIEVAL - 1.2% CUC International, Inc. (a) 140,000 3,290,000 12654510 Galileo International, Inc. 80,000 2,115,000 36354710 5,405,000 PREPACKAGED COMPUTER SOFTWARE - 45.9% Arbor Software Corp. (a) 25,900 1,026,288 03891810 BMC Software, Inc. (a) 379,800 23,784,975 05592110 Business Objects SA sponsored ADR (a) 379,900 2,991,713 12328X10 Cadence Design Systems, Inc. (a) 144,100 6,853,750 12738710Citrix Systems, Inc. 150,000 7,575,000 17737610 Computer Associates International, Inc. 26,100 1,745,438 20491210 Eidos PLC sponsored ADR 146,000 1,113,250 28248510 Electronic Arts, Inc. (a) 59,152 1,822,621 28551210 Electronics for Imaging, Inc. (a) 375,400 20,083,900 28608210 i2 Technologies, Inc. (a) 100,000 4,625,000 46575410 Mapix, Inc. 20,000 235,000 56491010 Manugistics Group, Inc. (a) 114,200 4,839,225 56501110 McAfee Associates, Inc. (a) 20,000 1,132,500 57905710 Microsoft Corp. (a) 330,900 43,740,844 59491810 Midway Games, Inc. (a) 98,700 2,085,038 59814810 Netscape Communications Corp. (a) 298,000 11,864,125 64114910 New Era of Networks, Inc. 24,000 330,000 64431210 Oracle Corp. (a) 675,600 25,757,250 68389X10 PeopleSoft, Inc. (a) 396,000 22,275,000 71271310 Policy Management Systems Corp. (a) 119,200 7,159,450 73110810 Remedy Corp. (a) 90,000 3,470,625 75954810 Scopus Technology, Inc. (a) 117,600 2,910,600 80917210 Segue Software, Inc. (a) 20,000 167,500 81580710 Siebel Systems, Inc. 174,100 6,289,363 82617010 Sybase, Inc. 45,000 838,125 87113010 Symantec Corp. (a) 100,000 2,406,250 87150310 SHARES VALUE (NOTE 1) Vantive Corp. (a) 192,100 $ 5,859,050 92209110 Veritas Software Corp. (a) 11,072 698,920 92343610 213,680,800 TOTAL COMPUTER SERVICES & SOFTWARE 273,807,551 COMPUTERS & OFFICE EQUIPMENT - 11.8% COMPUTER EQUIPMENT - WHOLESALE - 1.7% CDW Computer Centers, Inc. (a) 25,700 1,872,888 12512910 Tech Data Corp. (a) 159,600 6,214,425 87823710 8,087,313 COMPUTER STORAGE DEVICES - 1.4% Adaptec, Inc. 139,800 6,710,400 00651F10 COMPUTERS & OFFICE EQUIPMENT - 1.6% International Business Machines Corp. 65,000 6,556,875 45920010 MICROS Systems, Inc. (a) 20,000 935,000 59490110 7,491,875 MINI & MICRO COMPUTERS - 7.1% Compaq Computer Corp. (a) 288,750 18,913,125 20449310 Dell Computer Corp. (a) 170,000 13,950,625 24702510 32,863,750 TOTAL COMPUTERS & OFFICE EQUIPMENT 55,153,338 ELECTRONIC INSTRUMENTS - 1.7% Teradyne, Inc. (a) 145,900 8,124,806 88077010 ELECTRONICS - 9.1% SEMICONDUCTORS - 9.1% Altera Corp. (a) 47,800 2,545,350 02144110 Intel Corp. 77,000 7,093,625 45814010 Intel Corp. warrants 3/14/98 (a) 23,000 1,647,375 45814014 LSI Logic Corp. (a) 40,000 1,287,500 50216110 Micron Technology, Inc. (a) 175,000 7,798,438 59511210 Texas Instruments, Inc. 145,000 16,475,625 88250810 VLSI Technology, Inc. (a) 20,000 660,000 91827010 Xilinx, Inc. (a) 100,000 4,750,000 98391910 42,257,913 INDUSTRIAL MACHINERY & EQUIPMENT - 0.1% SPECIAL INDUSTRIAL MACHINERY, NEC - 0.1% ASM Lithography Holding NV (a) 5,000 425,000 04599S23 LODGING & GAMING - 1.1% HOTELS, MOTELS, & TOURIST COURTS - 0.6% HFS, Inc. 50,000 2,784,375 40418110 RACING & GAMING - 0.5% WMS Industries, Inc. 87,100 2,150,281 92929710 TOTAL LODGING & GAMING 4,934,656 PUBLISHING - 0.7% BOOK PUBLISHING & PRINTING - 0.7% Cognizant Corp. 81,300 3,414,600 19244110 SERVICES - 3.5% COMMERCIAL, ECONOMIC, SOCIAL & EDUCATIONAL RESEARCH - 0.9% Gartner Group, Inc. Class A (a) 155,000 4,097,813 36665110 MANAGEMENT CONSULTING SERVICES - 1.7% Registry, Inc. (a) 169,700 7,784,988 75913U10 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SERVICES - CONTINUED PERSONNEL SUPPLY SERVICES - 0.9% AccuStaff, Inc. (a) 105,000 $ 2,789,063 00440110 Computer Horizons Corp. (a) 36,300 1,442,925 20590810 4,231,988 TOTAL SERVICES 16,114,789 TOTAL COMMON STOCKS (Cost $332,709,757) 414,009,903 NONCONVERTIBLE PREFERRED STOCKS - 1.0% COMPUTER SERVICES & SOFTWARE - 1.0% PREPACKAGED COMPUTER SOFTWARE - 1.0% SAP AG 20,000 4,600,498 80899893 TOTAL NONCONVERTIBLE PREFERRED STOCKS (Cost $4,833,043) 4,600,498 CASH EQUIVALENTS - 10.1% Taxable Central Cash Fund (b) (Cost $46,872,089) 46,872,089 46,872,089 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $384,414,889) $ 465,482,490 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $384,420,702 and $403,614,891, 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 $44,528 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, the value of securities loaned and the value of collateral amounted to $19,889,489 and $20,300,500, respectively (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $384,482,072. Net unrealized appreciation aggregated $81,000,418, of which $89,039,311 related to appreciated investment securities and $8,038,893 related to depreciated investment securities. SOFTWARE AND COMPUTER SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 465,482,490 SECURITIES, AT VALUE (COST $384,414,88 9) - SEE ACCOMPANYIN G SCHEDULE CASH 709,500 RECEIVABLE FOR 15,244,433 INVESTMENTS SOLD RECEIVABLE FOR 628,554 FUND SHARES SOLD DIVIDENDS 21,000 RECEIVABLE INTEREST 257,203 RECEIVABLE REDEMPTION FEES 1,425 RECEIVABLE OTHER 105,377 RECEIVABLES TOTAL ASSETS 482,449,982 LIABILITIES PAYABLE FOR $ 8,749,856 INVESTMENTS PURCHASED PAYABLE FOR 2,170,409 FUND SHARES REDEEMED ACCRUED 228,872 MANAGEMENT FEE OTHER PAYABLES 366,073 AND ACCRUED EXPENSES COLLATERAL ON 20,300,500 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 31,815,710 NET ASSETS $ 450,634,272 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 335,434,757 ACCUMULATED (1,578,281) NET INVESTMENT (LOSS) ACCUMULATED 35,710,195 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 81,067,601 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 450,634,272 10,299,395 SHARES OUTSTANDING NET ASSET $43.75 VALUE AND REDEMPTION PRICE PER SHARE ($450,634,2 72 (DIVIDED BY) 10,299,395 SHARES) MAXIMUM $45.10 OFFERING PRICE PER SHARE (100/97.00 OF $43.75) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 121,940 INCOME DIVIDENDS INTEREST 1,351,065 (INCLUDING INCOME ON SECURITIES LOANED OF $542,405) TOTAL INCOME 1,473,005 EXPENSES MANAGEMENT $ 1,264,853 FEE TRANSFER AGENT 1,523,008 FEES ACCOUNTING AND 225,078 SECURITY LENDING FEES NON-INTERESTED 917 TRUSTEES' COMPENSATION CUSTODIAN FEES 21,659 AND EXPENSES REGISTRATION FEES 36,150 AUDIT 16,565 LEGAL 1,633 MISCELLANEOUS 3,877 TOTAL EXPENSES 3,093,740 BEFORE REDUCTIONS EXPENSE (42,454) 3,051,286 REDUCTIONS NET INVESTMENT (1,578,281) INCOME (LOSS) REALIZED AND 38,095,197 UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES CHANGE IN NET 45,714,184 UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) 83,809,381 NET INCREASE $ 82,231,100 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 673,530 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 3,621 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 60,825 WITHHELD BY FSC EXPENSE $ 34,649 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 7,805 CREDITS $ 42,454 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (1,578,281) $ (2,797,099) NET INVESTMENT INCOME (LOSS) NET REALIZED 38,095,197 61,210,968 GAIN (LOSS) CHANGE IN NET 45,714,184 (9,105,850) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 82,231,100 49,308,019 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (24,600,090) (32,120,784) SHAREHOLDERS FROM NET REALIZED GAINS SHARE 142,902,523 568,629,736 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 24,279,066 31,720,922 OF DISTRIBUTIONS COST OF SHARES (164,142,098) (566,265,440) REDEEMED REDEMPTION 264,915 793,106 FEES NET INCREASE 3,304,406 34,878,324 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 60,935,416 52,065,559 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 389,698,856 337,633,297 PERIOD END OF PERIOD $ 450,634,272 $ 389,698,856 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $1,578,281 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 3,627,845 14,976,546 ISSUED IN 711,794 840,597 REINVESTMENT OF DISTRIBUTIONS REDEEMED (4,140,406) (15,044,201) NET INCREASE 199,233 772,942 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 38.58 $ 36.20 $ 29.07 $ 28.89 $ 27.62 $ 21.63 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.15) (.25) (.19) (.26) (.34) (.07) E INVESTMENT INCOME (LOSS) D NET REALIZED 7.76 5.87 11.85 .67 7.92 5.88 AND UNREALIZED GAIN TOTAL FROM 7.61 5.62 11.66 .41 7.58 5.81 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (2.46) (3.31) (4.60) (.33) (6.48) - REALIZED GAIN REDEMPTION FEES .02 .07 .07 .10 .17 .18 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 43.75 $ 38.58 $ 36.20 $ 29.07 $ 28.89 $ 27.62 END OF PERIOD TOTAL RETURN B, C 21.58% 16.14% 40.17% 1.97% 33.19% 27.69% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 450,634 $ 389,699 $ 337,633 $ 236,445 $ 178,034 $ 151,212 OF PERIOD (000 OMITTED) RATIO OF 1.45% A 1.54% 1.48% 1.52% 1.57% 1.64% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.43% A, F 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 (.74)% A (.66)% (.54)% (1.01)% (1.19)% (.37)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 197% A 279% 183% 164% 376% 402% A TURNOVER RATE AVERAGE $ .0356 $ .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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS TECHNOLOGY 27.56% 61.98% 282.73% 343.90% TECHNOLOGY 23.74% 57.12% 271.25% 330.59% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS TECHNOLOGY 61.98% 30.79% 16.07% TECHNOLOGY 57.12% 30.00% 15.72% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 151130 S00000000000001 Technology S&P 500 00064 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9749.26 9781.00 1987/10/31 6318.90 7674.17 1987/11/30 5495.61 7041.82 1987/12/31 6291.69 7577.70 1988/01/31 5952.39 7896.72 1988/02/29 6542.47 8264.71 1988/03/31 6472.40 8009.33 1988/04/30 6719.49 8098.24 1988/05/31 6535.09 8168.69 1988/06/30 7136.23 8543.63 1988/07/31 6605.17 8511.17 1988/08/31 5996.65 8221.79 1988/09/30 6158.92 8572.04 1988/10/31 5904.45 8810.34 1988/11/30 5727.43 8684.35 1988/12/31 6122.04 8836.33 1989/01/31 6616.23 9483.15 1989/02/28 6435.52 9247.02 1989/03/31 6317.50 9462.47 1989/04/30 6774.81 9953.57 1989/05/31 7328.01 10356.69 1989/06/30 6678.93 10297.66 1989/07/31 6796.94 11227.54 1989/08/31 6944.46 11447.60 1989/09/30 7110.42 11400.66 1989/10/31 7058.79 11136.17 1989/11/30 7077.23 11363.35 1989/12/31 7162.05 11636.07 1990/01/31 7014.53 10855.29 1990/02/28 7409.15 10995.32 1990/03/31 7755.81 11286.70 1990/04/30 7405.46 11004.53 1990/05/31 8360.64 12077.47 1990/06/30 8434.40 11995.34 1990/07/31 7984.47 11956.96 1990/08/31 6896.52 10876.05 1990/09/30 6310.13 10346.39 1990/10/31 6490.84 10301.90 1990/11/30 7464.46 10967.40 1990/12/31 7914.40 11273.39 1991/01/31 9249.45 11764.91 1991/02/28 9717.82 12606.10 1991/03/31 10495.98 12911.17 1991/04/30 9979.66 12942.15 1991/05/31 10532.86 13501.25 1991/06/30 9511.05 12882.90 1991/07/31 10564.13 13483.24 1991/08/31 11083.25 13802.79 1991/09/30 11138.87 13572.29 1991/10/31 11439.22 13754.15 1991/11/30 11064.71 13199.86 1991/12/31 12581.63 14709.93 1992/01/31 13060.12 14436.32 1992/02/29 13264.12 14623.99 1992/03/31 12210.71 14338.83 1992/04/30 12032.66 14760.39 1992/05/31 12151.36 14832.71 1992/06/30 11282.65 14611.71 1992/07/31 11857.51 15209.33 1992/08/31 11250.26 14897.53 1992/09/30 11800.83 15073.32 1992/10/31 12497.14 15126.08 1992/11/30 13509.22 15641.88 1992/12/31 13679.25 15834.28 1993/01/31 14096.22 15967.28 1993/02/28 14015.26 16184.44 1993/03/31 14197.43 16525.93 1993/04/30 14156.72 16126.00 1993/05/31 15584.93 16558.18 1993/06/30 16346.05 16606.20 1993/07/31 15911.76 16539.77 1993/08/31 16762.42 17166.63 1993/09/30 17022.10 17034.45 1993/10/31 16686.31 17387.06 1993/11/30 16525.13 17221.88 1993/12/31 17598.37 17430.27 1994/01/31 18484.42 18022.90 1994/02/28 19006.96 17534.48 1994/03/31 18366.28 16769.97 1994/04/30 17996.36 16984.63 1994/05/31 18024.73 17263.18 1994/06/30 16497.45 16840.23 1994/07/31 17135.79 17392.59 1994/08/31 18942.04 18105.69 1994/09/30 18847.48 17662.10 1994/10/31 19552.01 18059.49 1994/11/30 19282.49 17401.77 1994/12/31 19556.74 17659.84 1995/01/31 18795.46 18117.75 1995/02/28 19883.00 18823.80 1995/03/31 21093.47 19379.29 1995/04/30 22683.31 19950.01 1995/05/31 23560.81 20747.42 1995/06/30 25749.68 21229.38 1995/07/31 28352.92 21933.35 1995/08/31 29230.42 21988.40 1995/09/30 30575.92 22916.31 1995/10/31 30117.67 22834.50 1995/11/30 29961.67 23836.93 1995/12/31 28123.93 24296.03 1996/01/31 28408.95 25123.07 1996/02/29 29965.61 25355.96 1996/03/31 27647.07 25600.14 1996/04/30 30027.95 25977.48 1996/05/31 30842.36 26647.44 1996/06/30 28648.44 26748.97 1996/07/31 25590.24 25567.20 1996/08/31 26581.94 26106.41 1996/09/30 29989.17 27575.68 1996/10/31 29773.10 28336.22 1996/11/30 33446.26 30478.15 1996/12/31 32572.63 29874.38 1997/01/31 36427.75 31740.93 1997/02/28 33754.32 31989.78 1997/03/31 31519.63 30675.32 1997/04/30 33356.89 32506.64 1997/05/31 36902.49 34485.64 1997/06/30 37582.01 36030.60 1997/07/31 41887.86 38897.55 1997/08/29 43058.52 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970909 151156 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Technology Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $43,059 - a 330.59% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS COMPAQ COMPUTER CORP. 10.0 APPLIED MATERIALS, INC. 9.3 TERADYNE, INC. 5.9 ADVANTEST CORP. 5.2 KLA-TENCOR CORP. 2.7 LUCENT TECHNOLOGIES, INC. 2.6 LAM RESEARCH CORP. 1.7 READ-RITE CORP. 1.7 WESTERN DIGITAL CORP. 1.6 SILICON GRAPHICS, INC. 1.5 TOP INDUSTRIES AS OF AUGUST 31, 1997 ROW: 1, COL: 1, VALUE: 43.3 ROW: 1, COL: 2, VALUE: 4.7 ROW: 1, COL: 3, VALUE: 10.1 ROW: 1, COL: 4, VALUE: 13.6 ROW: 1, COL: 5, VALUE: 14.1 ROW: 1, COL: 6, VALUE: 14.2 SEMICONDUCTOR CAPITAL EQUIPMENT 14.5% ELECTRONIC EQUIPMENT 14.2% SEMICONDUCTORS 13.6% MINI & MICRO COMPUTERS 10.1% TELEPHONE EQUIPMENT 4.7% ALL OTHERS 42.9% * * 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 fund performed very well. For the six months that ended August 31, 1997, the fund returned 27.56%, compared to a return of 14.78% by the Standard & Poor's 500 Index. During the 12 months that ended August 31, 1997, the fund generated a return of 61.98%, far outpacing the 40.65% return of the S&P 500 over the same period. Q. WHAT HELPED THE FUND OUTPERFORM THE S&P 500? A. Being invested in the right stocks at the right time paid off for the fund. For example, the fund was heavily overweighted in semiconductor capital equipment companies during the period. These companies reported robust order and revenue growth throughout the first half of 1997, which helped the fund's performance. Conversely, staying away from the wrong stocks at the right time also helped performance. For instance, the fund was underweighted in networking stocks when the companies in that sector imploded in March and April. By that I mean pricing pressures surfaced in the industry and many analysts cut first-quarter earnings estimates for several large networking companies. I anticipated problems in the industry, so the fund reduced its exposure to those stocks. Therefore, the fund's performance wasn't hurt as much when the market dipped during those months. Q. HOW WOULD YOU DESCRIBE THE INVESTING ENVIRONMENT DURING THE PERIOD? A. The stock market achieved substantial gains over the past 12 months, largely fueled by a narrow group of the larger-cap stocks at the top of the S&P 500 Index. Several of the best-performing stocks in the index were technology stocks, including Microsoft, Compaq and Intel. Even in August when many of the large-cap stocks in the S&P 500 experienced a slight correction, the fund was able to outperform the index because of its focus on technology stocks. Q. AT THE END OF THE PERIOD, APPLIED MATERIALS REPRESENTED ABOUT 9% OF THE FUND'S INVESTMENTS AND COMPAQ ACCOUNTED FOR ABOUT 10%. WHAT DID YOU FIND ATTRACTIVE ABOUT THESE STOCKS? A. These companies are involved in different industries, but the story for both is the same: improving fundamentals. Compaq's year-over-year unit growth last quarter was stronger than it's been in two or three years. Margins continued to improve, along with return on assets and return on equity. The same holds true for Applied Materials, a semiconductor capital equipment company. Orders improved and, even in the trough of the cycle, the company generated net margins of more than 10%. Q. WHAT WOULD YOU CHARACTERIZE AS THE BIGGEST DISAPPOINTMENT DURING THE PERIOD? A. I had the fund positioned too defensively late in the period because I thought the technology sector might underperform the broad market, especially after Intel missed expectations for its second-quarter sales and warned that revenue in the September quarter would be flat compared to its previous quarter. Seagate Technologies and Western Digital also reported earnings that came in lower than analysts' estimates. In short, there was every indication that PC sales were going to be weak, and I positioned the fund accordingly. However, the technology market actually rallied dramatically in July, and the fund's positioning didn't allow it to reap all of the rewards of that upswing. Q. WHAT'S YOUR OUTLOOK FOR THE TECHNOLOGY MARKET OVER THE NEXT SIX MONTHS? A. It's hard to say, since so many technology stocks are trading close to peak valuations. In addition, it's difficult to predict PC unit growth going forward. Basically, I'm more cautious going into the next six to 12 months. However, technology represents about 12%-14% of the S&P 500 and it's growing faster than any other segment of the index. Technology companies also have better operating margins, return on equity and return on assets than most other segments. They are the beneficiaries of government, corporate and consumer spending as technological change becomes more of a driving force behind the growing global economy. Therefore, I think technology can outperform the broader market in the long run. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 064 TRADING SYMBOL: FSPTX SIZE: as of August 31, 1997, more than $636 million MANAGER: Adam Hetnarski, since 1996; analyst, networking, electronics, CAD/CAM, and technology sectors, since 1994; structured equity analyst and portfolio manager, Fidelity Management Trust Company, 1992-1994; joined Fidelity in 1991 (checkmark) TECHNOLOGY PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 88.0% SHARES VALUE (NOTE 1) ADVERTISING - 0.3% Lycos, Inc. (a) 68,600 $ 2,148,038 55081810 AEROSPACE & DEFENSE - 0.4% AIRCRAFT EQUIPMENT - 0.4% BE Aerospace, Inc. (a) 84,000 2,982,000 BROADCASTING - 0.3% COMMUNICATIONS SERVICES - 0.1% Advanced Communication Systems, Inc. 45,600 501,600 00750X10 RADIO BROADCASTING - 0.2% American Radio Systems Corp. Class A 35,300 1,738,525 02916110 TOTAL BROADCASTING 2,240,125 BUILDING MATERIALS - 0.7% FLAT GLASS - 0.7% Toshiba Ceramics Co., Ltd. 427,000 4,383,107 89149499 COMMUNICATIONS EQUIPMENT - 5.6% DATACOMMUNICATIONS EQUIPMENT - 0.9% Aspect Telecommunications Corp. (a) 1,600 35,200 04523710 Level One Communications, Inc. (a) 91,500 3,259,688 52729510 Network General Corp. (a) 179,200 2,979,200 64121010 6,274,088 TELEPHONE EQUIPMENT - 4.7% Ascend Communications, Inc. (a) 217,600 9,234,400 04349110 Ericsson (L.M.) Telephone Co. Class B ADR 26,500 1,104,719 29482140 Lucent Technologies, Inc. 225,900 17,591,963 54946310 Matsushita Communication Industrial Co. Ltd. 45,000 1,463,990 57688099 Nokia Corp. AB sponsored ADR 22,700 1,759,250 65490220 31,154,322 TOTAL COMMUNICATIONS EQUIPMENT 37,428,410 COMPUTER SERVICES & SOFTWARE - 5.2% COMPUTER SERVICES - 1.0% Cerner Corp. (a) 43,700 1,289,150 15678210 Computer Learning Centers, Inc. (a) 83,900 4,027,200 20519910 HBO & Co. 6,362 455,678 40410010 Software Artistry, Inc. 26,400 323,400 83402810 Syntel, Inc. 13,900 234,563 87162H10 6,329,991 CUSTOM COMPUTER PROGRAMMING SERVICES - 0.7% Saville Systems Ireland PLC sponsored ADR 65,700 4,393,688 80517410 PREPACKAGED COMPUTER SOFTWARE - 3.5% Broderbund Software, Inc. (a) 117,900 3,478,050 11201410 Eagle Point Software Corp. (a) 227,900 740,675 26982410 Electronic Arts, Inc. (a) 32,108 989,328 28551210 Microsoft Corp. (a) 25,000 3,304,688 59491810 PeopleSoft, Inc. 23,200 1,305,000 71271310 Siebel Systems, Inc. 46,400 1,676,200 82617010 Spectrum Holobyte, Inc. (a) 1,336,600 6,432,388 84762J10 Systems & Computer Technology Corp. (a) 97,200 3,426,300 87187310 Vantive Corp. 71,300 2,174,650 92209110 23,527,279 TOTAL COMPUTER SERVICES & SOFTWARE 34,250,958 SHARES VALUE (NOTE 1) COMPUTERS & OFFICE EQUIPMENT - 17.7% COMPUTER PERIPHERALS - 3.0% EMC Corp. 49,000 $ 2,514,313 26864810 Fore Systems, Inc. (a) 242,800 4,962,225 34544910 Galileo Technology Ltd. 57,400 1,786,575 36399N22 Western Digital Corp. 220,900 10,630,813 95810210 19,893,926 COMPUTER STORAGE DEVICES - 2.4% Quantum Corp. 137,100 4,807,069 74790610 Read-Rite Corp. 385,000 11,044,688 75524610 15,851,757 GRAPHICS WORKSTATIONS - 1.5% Silicon Graphics, Inc. (a) 368,500 10,110,719 82705610 MINI & MICRO COMPUTERS - 10.1% Compaq Computer Corp. (a) 1,017,450 66,642,975 20449310 Dell Computer Corp. 8,600 705,738 24702510 67,348,713 OFFICE AUTOMATION - 0.7% Nam Tai Electronics, Inc. 184,200 4,605,000 62986520 TOTAL COMPUTERS & OFFICE EQUIPMENT 117,810,115 CREDIT & OTHER FINANCE - 0.2% MORTGAGE BANKERS - 0.2% New Century Financial Corp. 71,300 1,203,188 64352D10 DRUGS & PHARMACEUTICALS - 1.1% COMMERCIAL LABORATORY RESEARCH - 0.0% Millennium Pharmaceuticals, Inc. (a) 14,900 201,150 59990210 DRUGS - 1.1% Barr Laboratories, Inc. (a) 61,800 2,425,650 06830610 Bristol-Myers Squibb Co. 61,700 4,689,200 11012210 7,114,850 TOTAL DRUGS & PHARMACEUTICALS 7,316,000 ELECTRICAL EQUIPMENT - 0.1% Vicor Corp. 20,900 525,113 92581510 ELECTRONIC INSTRUMENTS - 29.4% ELECTRONIC EQUIPMENT - 14.2% Advantest Corp. 379,400 34,548,015 00799010 Anadigics, Inc. 46,900 2,321,550 03251510 Cohu, Inc. 35,400 1,982,400 19257610 Credence Systems Corp. (a) 92,200 4,339,163 22530210 Helix Technology Corp. 140,500 8,394,875 42331910 LTX Corp. (a) 490,100 3,874,853 50239210 Teradyne, Inc. (a) 699,600 38,958,975 88077010 94,419,831 INDUSTRIAL MEASUREMENT INSTRUMENTS - 0.2% ADE Corp. 33,300 1,365,300 00089C10 LAB. & RESEARCH EQUIPMENT - 0.9% Newport Corp. 26,900 349,700 65182410 Tokyo Seimitsu Co. Ltd. 229,000 5,781,871 89799792 6,131,571 SEMICONDUCTOR CAPITAL EQUIPMENT - 14.1% Applied Materials, Inc. (a) 653,800 61,702,375 03822210 KLA-Tencor Corp. (a) 257,000 18,214,875 48248010 Lam Research Corp. 203,682 11,508,033 51280710 Novellus Systems, Inc. 2,500 286,563 67000810 Silicon Valley Group, Inc. (a) 61,600 2,079,000 82706610 93,790,846 TOTAL ELECTRONIC INSTRUMENTS 195,707,548 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRONICS - 15.3% ELECTRONIC PARTS - WHOLESALE - 0.4% Audiovox Corp. Class A (a) 289,200 $ 2,259,375 05075710 ELECTRONICS & ELECTRONIC COMPONENTS - 0.4% Advanced Energy Industries, Inc. (a) 84,700 2,668,050 00797310 PRINTED CIRCUIT BOARDS - 0.9% DII Group, Inc. (a) 111,400 6,099,150 23294910 SEMICONDUCTORS - 13.6% Actel Corp. 35,100 712,969 00493410 Alliance Semiconductor Corp. 385,400 5,106,550 01877H10 Electroglas, Inc. (a) 190,000 6,080,000 28532410 Integrated Circuit Systems, Inc. (a) 71,700 2,473,650 45811K10 Integrated Device Technology, Inc. 697,900 9,508,888 45811810 Intel Corp. 70,100 6,457,963 45814010 Intel Corp. warrants 3/14/98 (a) 141,900 10,163,588 45814014 International Rectifier Corp. 19,200 438,000 46025410 Lattice Semiconductor Corp. (a) 26,600 1,694,088 51841510 Linear Technology Corp. 100 6,556 53567810 Maxim Integrated Products, Inc. 14,300 988,488 57772K10 Micron Technology, Inc. 7,000 311,938 59511210 PMC-Sierra, Inc. (a) 31,700 909,394 69344F10 Quality Semiconductor, Inc. (a) (d) 369,400 5,587,175 74758B10 RF Micro Devices, Inc. (d) 228,000 4,275,000 74994110 Texas Instruments, Inc. 75,100 8,533,238 88250810 Tokyo Electron Ltd. 184,000 9,976,822 89499999 Unitrode Corp. 6,700 522,600 91328310 VLSI Technology, Inc. 273,000 9,009,000 91827010 Vitesse Semiconductor Corp. (a) 162,900 7,676,663 92849710 90,432,570 TOTAL ELECTRONICS 101,459,145 ENERGY SERVICES - 2.3% DRILLING - 2.3% Cliffs Drilling Co. (a) 99,900 4,763,981 18682C10 ENSCO International, Inc. 56,500 3,587,750 26874Q10 Falcon Drilling, Inc. (a) 146,900 4,627,350 30591410 Transocean Offshore, Inc. 21,100 2,005,813 89381710 14,984,894 INDUSTRIAL MACHINERY & EQUIPMENT - 3.6% FARM MACHINERY & EQUIPMENT - 0.5% Case Corp. 47,000 3,151,938 14743R10 GENERAL INDUSTRIAL MACHINERY - 1.0% Tyco International Ltd. 90,160 7,071,925 90212410 SPECIAL INDUSTRIAL MACHINERY - 2.1% ASM Lithography Holding NV 105,800 8,993,000 04599S23 Semitool, Inc. 57,600 1,123,200 81690910 Asyst Technologies, Inc. (a) 111,400 3,808,488 04648X10 13,924,688 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 24,148,551 LEASING & RENTAL - 0.2% EQUIPMENT RENTAL & LEASING - 0.2% Alrenco, Inc. (a) 33,200 522,900 02109K10 Rent-Way, Inc. (a) 34,700 628,938 76009U10 1,151,838 SHARES VALUE (NOTE 1) LODGING & GAMING - 0.3% RACING & GAMING - 0.3% Penn National Gaming, Inc. (a) 122,900 $ 2,181,475 70756910 MEDICAL FACILITIES MANAGEMENT - 0.2% HOSPITALS - 0.1% Health Management Associates, Inc. Class A (a) 26,500 783,406 42193310 HMOS & OUTPATIENT CARE - 0.1% United HealthCare Corp. 17,700 860,663 91058110 TOTAL MEDICAL FACILITIES MANAGEMENT 1,644,069 METALS & MINING - 0.4% NONFERROUS WIRE - 0.4% AFC Cable Systems, Inc. (a) 78,800 2,364,000 00095010 OIL & GAS - 0.3% CRUDE PETROLEUM & GAS - 0.3% Ocean Energy, Inc. 31,300 2,012,981 67481210 PACKAGING & CONTAINERS - 0.0% GLASS CONTAINERS - 0.0% Corning, Inc. 2,700 142,763 21935010 PAPER & FOREST PRODUCTS - 0.5% PAPER - 0.5% Champion International Corp. 53,800 3,184,282 15852510 PRECIOUS METALS - 0.3% GOLD ORES - 0.3% Newmont Mining Corp. 53,400 2,259,488 65163910 RAILROADS - 0.5% Kansas City Southern Industries, Inc. 45,300 3,391,838 48517010 RESTAURANTS - 0.4% Starbucks Corp. (a) 60,100 2,464,100 85524410 RETAIL & WHOLESALE, MISCELLANEOUS - 0.8% STATIONERY & OFFICE SUPPLIES - WHOLESALE - 0.8% Corporate Express, Inc. 209,100 3,567,769 21988810 IKON Office Solutions, Inc. 74,900 1,947,400 45171310 5,515,169 SERVICES - 0.9% MANAGEMENT CONSULTING SERVICES - 0.4% Hagler Bailly, Inc. 124,300 2,687,988 40518310 MANAGEMENT SERVICES - 0.5% Maximus, Inc. 146,600 3,353,475 57793310 TOTAL SERVICES 6,041,463 SHIPPING - 0.2% Trico Marine Services, Inc. 36,900 1,143,900 89610610 TELEPHONE SERVICES - 0.8% Brooks Fiber Properties, Inc. (a) 67,800 2,279,775 11439910 Teleport Communications Group, Inc. Class A (a) 89,400 3,251,92 879463106 5,531,701 TOTAL COMMON STOCKS (Cost $515,803,663) 585,616,259 CONVERTIBLE BONDS - 0.8% PRINCIPAL VALUE AMOUNT (NOTE 1) COMPUTER SERVICES & SOFTWARE - 0.4% PREPACKAGED COMPUTER SOFTWARE - 0.4% Vantive Corp. 4 3/4%, 9/1/02 (c) $ 2,650,000 $ 2,669,875 922091AA ELECTRONIC INSTRUMENTS - 0.4% SEMICONDUCTOR CAPITAL EQUIPMENT - 0.4% Lam Research Corp. 5%, 9/1/02 (c) 2,640,000 2,640,000 512807AB TOTAL CONVERTIBLE BONDS (Cost $5,402,200) 5,309,875 CASH EQUIVALENTS - 11.2% SHARES Taxable Central Cash Fund (b) (Cost $74,208,651) 74,208,651 74,208,651 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $595,414,514) $ 665,134,785 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $5,309,875 or 0.8% of net assets. 4. Affiliated company (see Note 10 of the Notes to Financial Statements). OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $1,453,178,400 and $1,402,741,259, 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 $192,656 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, the value of securities loaned and the value of collateral amounted to $10,626,065 and $11,202,600, 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 87.6% Japan 8.8 Netherland 1.4 Others (individually less than 1%) 2.2 TOTAL 100.0% Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Ciena Corp $ 3,855,911 $ 9,674,051 $ - $ - Midway Games, Inc. 908,129 1,325,956 - - Quality Semiconductor, Inc. 132,825 - - 5,587,175 Softdesk, Inc. - - - - RF Micro Devices, Inc. 1,280,701 - - 4,275,000 TOTALS $ 6,177,566 $ 11,000,007 $ - $ 9,862,175 INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $595,453,010. Net unrealized appreciation aggregated $69,681,775, of which $79,762,120 related to appreciated investment securities and $10,080,345 related to depreciated investment securities. TECHNOLOGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 665,134,785 SECURITIES, AT VALUE (COST $595,414,51 4) - SEE ACCOMPANYIN G SCHEDULE CASH 1,020,582 RECEIVABLE FOR 25,541,864 INVESTMENTS SOLD RECEIVABLE FOR 3,029,775 FUND SHARES SOLD DIVIDENDS 19,628 RECEIVABLE INTEREST 254,976 RECEIVABLE REDEMPTION FEES 4,409 RECEIVABLE OTHER 69,758 RECEIVABLES TOTAL ASSETS 695,075,777 LIABILITIES PAYABLE FOR $ 43,075,250 INVESTMENTS PURCHASED PAYABLE FOR 3,807,025 FUND SHARES REDEEMED ACCRUED 298,665 MANAGEMENT FEE OTHER PAYABLES 445,549 AND ACCRUED EXPENSES COLLATERAL ON 11,202,600 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 58,829,089 NET ASSETS $ 636,246,688 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 499,349,023 ACCUMULATED (984,848) NET INVESTMENT (LOSS) ACCUMULATED 68,162,527 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 69,719,986 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 636,246,688 9,940,826 SHARES OUTSTANDING NET ASSET $64.00 VALUE AND REDEMPTION PRICE PER SHARE ($636,246,6 88 (DIVIDED BY) 9,940,826 SHARES) MAXIMUM $65.98 OFFERING PRICE PER SHARE (100/97.00 OF $64.00) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 652,586 INCOME DIVIDENDS INTEREST 1,838,105 (INCLUDING INCOME ON SECURITIES LOANED OF $206,475) TOTAL INCOME 2,490,691 EXPENSES MANAGEMENT $ 1,566,145 FEE TRANSFER AGENT 1,612,660 FEES ACCOUNTING AND 267,523 SECURITY LENDING FEES NON-INTERESTED 1,107 TRUSTEES' COMPENSATION CUSTODIAN FEES 68,376 AND EXPENSES REGISTRATION FEES 77,172 AUDIT 18,216 LEGAL 11,990 MISCELLANEOUS 1,419 TOTAL EXPENSES 3,624,608 BEFORE REDUCTIONS EXPENSE (149,069) 3,475,539 REDUCTIONS NET INVESTMENT (984,848) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 72,307,421 SECURITIES (INCLUDING REALIZED LOSS OF $649,353 ON SALES OF INVESTMENTS IN AFFILIATED ISSUERS) FOREIGN 203 72,307,624 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT 58,555,699 SECURITIES ASSETS AND (285) 58,555,414 LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 130,863,038 NET INCREASE $ 129,878,190 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 817,866 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 13,060 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 59,790 WITHHELD BY FSC EXPENSE $ 137,226 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 11,095 CREDITS TRANSFER 748 AGENT CREDITS $ 149,069 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (984,848) $ (3,324,717) NET INVESTMENT INCOME (LOSS) NET REALIZED 72,307,624 119,114,979 GAIN (LOSS) CHANGE IN NET 58,555,414 (64,793,710) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 129,878,190 50,996,552 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (59,404,224) (30,475,050) SHAREHOLDERS FROM NET REALIZED GAINS SHARE 240,498,662 480,116,219 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 57,937,549 29,879,560 OF DISTRIBUTIONS COST OF SHARES (211,478,406) (536,349,238) REDEEMED REDEMPTION 370,714 1,250,125 FEES NET INCREASE 87,328,519 (25,103,334) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 157,802,485 (4,581,832) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 478,444,203 483,026,035 PERIOD END OF $ 636,246,688 $ 478,444,203 PERIOD (INCLUDING ACCUMULATE D NET INVESTMENT LOSS OF $984,848 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 4,224,186 8,803,236 ISSUED IN 1,214,372 541,096 REINVESTMENT OF DISTRIBUTIONS REDEEMED (3,789,426) (9,887,922) NET INCREASE 1,649,132 (543,590) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 57.70 $ 54.67 $ 42.05 $ 41.83 $ 34.62 $ 32.44 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.11) (.39) (.28) (.39) (.24) F .13 G INVESTMENT INCOME (LOSS) D NET REALIZED 13.53 6.95 20.83 1.95 11.04 4.68 AND UNREALIZED GAIN (LOSS) TOTAL FROM 13.42 6.56 20.55 1.56 10.80 4.81 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET - - - - (.13) - INVESTMENT INCOME FROM NET (7.16) (3.68) (8.05) (1.50) (3.70) (2.75) REALIZED GAIN TOTAL (7.16) (3.68) (8.05) (1.50) (3.83) (2.75) DISTRIBUTIONS REDEMPTION FEES .04 .15 .12 .16 .24 .12 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 64.00 $ 57.70 $ 54.67 $ 42.05 $ 41.83 $ 34.62 END OF PERIOD TOTAL RETURN B, C 27.56% 12.64% 50.71% 4.61% 35.62% 16.48% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 636,247 $ 478,444 $ 483,026 $ 229,761 $ 202,475 $ 132,689 OF PERIOD (000 OMITTED) RATIO OF 1.37% A 1.49% 1.40% 1.57% 1.55% 1.64% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.32% A, E 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 (.37)% A (.72)% (.52)% (.98)% (.65)% .52% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 601% A 549% 112% 102% 213% 259% A TURNOVER RATE AVERAGE $ .0448 $ .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 INVEST MENT 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 6 PAST 1 LIFE OF AUGUST 31, 1997 MONTHS YEAR FUND NATURAL GAS 16.31% 14.41% 51.77% NATURAL GAS 12.82% 10.98% 47.22% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 125.28% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year or since the fund started on April 21, 1993. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR FUND NATURAL GAS 14.41% 10.02% NATURAL GAS 10.98% 9.26% (INCL. 3% SALES CHARGE) S&P 500 40.65% 20.44% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER LIFE OF FUND IMAHDR PRASUN SHR__CHT 19970831 19970917 083411 S00000000000001 Natural Gas S&P 500 00513 SP001 1993/04/21 9700.00 10000.00 1993/04/30 9515.70 9893.80 1993/05/31 9670.90 10158.96 1993/06/30 9952.20 10188.42 1993/07/31 9913.40 10147.66 1993/08/31 10767.00 10532.26 1993/09/30 10582.70 10451.16 1993/10/31 10010.40 10667.50 1993/11/30 9156.80 10566.16 1993/12/31 9209.91 10694.01 1994/01/31 9672.37 11057.61 1994/02/28 9327.98 10757.95 1994/03/31 8993.44 10288.90 1994/04/30 9692.05 10420.60 1994/05/31 9613.33 10591.50 1994/06/30 9662.53 10332.00 1994/07/31 9603.49 10670.89 1994/08/31 9288.63 11108.40 1994/09/30 9229.59 10836.24 1994/10/31 9554.30 11080.06 1994/11/30 8717.93 10676.52 1994/12/31 8580.06 10834.86 1995/01/31 8313.78 11115.81 1995/02/28 8856.20 11548.99 1995/03/31 9378.89 11889.80 1995/04/30 9536.79 12239.95 1995/05/31 9902.07 12729.18 1995/06/30 9665.13 13024.88 1995/07/31 9665.13 13456.79 1995/08/31 9951.43 13490.56 1995/09/30 10237.73 14059.87 1995/10/31 9793.47 14009.67 1995/11/30 10632.63 14624.70 1995/12/31 11187.09 14906.37 1996/01/31 11236.63 15413.78 1996/02/29 11256.45 15556.67 1996/03/31 11761.80 15706.48 1996/04/30 12587.74 15937.99 1996/05/31 12687.64 16349.03 1996/06/30 13356.99 16411.32 1996/07/31 12397.92 15686.27 1996/08/31 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 1997/03/31 12617.00 18820.26 1997/04/30 12431.17 19943.83 1997/05/31 13607.66 21158.01 1997/06/30 13097.50 22105.89 1997/07/31 13670.13 23864.86 1997/08/29 14721.67 22527.95 IMATRL PRASUN SHR__CHT 19970831 19970917 083415 R00000000000056 $10,000 OVER LIFE OF FUND: 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 August 31, 1997, the value of the investment would have grown to $14,722 - a 47.22% 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 $22,528 - a 125.28% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS OCEAN ENERGY, INC. 6.1 ANADARKO PETROLEUM CORP. 5.2 COASTAL CORP. (THE) 5.0 AMOCO CORP. 4.6 BURLINGTON RESOURCES, INC. 3.8 ENRON OIL & GAS CO. 3.2 CABOT OIL & GAS CORP. CLASS A 3.0 APACHE CORP. 3.0 UNION PACIFIC RESOURCES GROUP, INC. 2.9 CONSOLIDATED NATURAL GAS CO. 2.6 TOP INDUSTRIES AS OF AUGUST 31, 1997 CRUDE PETROLEUM & GAS 53.4% OIL & GAS EXPLORATION 11.5% GAS TRANSMISSION & DISTRIBUTION 7.4% GAS TRANSMISSION 5.1% PETROLEUM REFINERS 5.0% ALL OTHERS 17.6% ROW: 1, COL: 1, VALUE: 17.6 ROW: 1, COL: 2, VALUE: 5.0 ROW: 1, COL: 3, VALUE: 5.1 ROW: 1, COL: 4, VALUE: 7.4 ROW: 1, COL: 5, VALUE: 11.5 ROW: 1, COL: 6, VALUE: 53.4 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS NATURAL GAS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Stephen Binder, Portfolio Manager of Fidelity Select Natural Gas Portfolio Q. HOW DID THE FUND PERFORM, STEVE? A. For the six- and 12-month periods ending August 31, 1997, the fund returned 16.31% and 14.41%, outperforming its benchmark, the Standard & Poor's 500 Index, for the past six months and underperforming it for the past 12 months. The index returned 14.78% and 40.65% for the six- and 12-month periods, respectively Q. WHY DID THE FUND PERFORM WELL OVER THE PAST SIX MONTHS? A. Mostly because of its extremely strong performance over the last few months of the period. Overall, the fund's performance was hurt by unfavorable weather conditions over the first part of the period and boosted by a drop in natural gas supply at the end of the period that raised gas prices. Q. CAN YOU EXPLAIN THESE CIRCUMSTANCES IN MORE DETAIL? A. At the beginning of the period, the fund had pretty much bottomed following a warmer-than-average winter - a period of lower-than-normal natural gas demand - which caused a build up of natural gas inventories, or storage. While a cool April produced a stronger-than-normal heating demand that helped consume some of the surplus supply, a cooler-than-normal late spring and early summer reduced the need for air conditioning and thus negatively affected demand, and storage built up again. Then in mid- to- late-summer something unexpected happened - the surplus started to shrink as less natural gas was injected into storage. Apparently, demand was outpacing supply, which was great news for the fund and the sector because it dramatically boosted the price of natural gas. The relative shortfall in supply seemed especially strange because, as I noted in the last shareholder report, I had been concerned that an increase in drilling activity would deliver too much new natural gas supply. Q. SO WHAT WAS BEHIND THE DROP IN THE SUPPLY? A. It was a somewhat inexplicable situation. As I had expected, the number of rigs drilling for natural gas increased over the period, from about 510 at the beginning of March to 600 at the end of August. This should have meant that the supply of natural gas would increase as well. Instead, as I noted earlier, production growth was lagging demand growth at the end of the period. There are a couple of theories as to why this situation existed. One is that the depletion of natural gas in existing wells was greater than expected. The other is that exploration success was worse than expected. Q. WHAT TYPES OF NATURAL GAS COMPANIES DID WELL OVER THE PERIOD? A. Exploration and production (E&P) companies did well largely because of rising gas prices and a notable increase in the number of mergers and acquisitions in this group, which made investors more positive toward E&P companies. One good example is that top 10 holding Burlington Resources agreed to buy Louisiana Land & Exploration. This benefited the fund's positions in both stocks. Another E&P company in the fund's top 10 holdings was Ocean Energy, formerly known as Flores & Rucks. This company experienced very rapid growth in its offshore drilling in the Gulf of Mexico. In addition, E&P company Anadarko, another top 10 holding, has a big oil exploration and development project in Algeria. Q. DO YOU WISH YOU HAD AVOIDED SOME STOCKS OVER THE PERIOD? A. Yes. Two stocks definitely hurt the fund. The harder hit of the two was Chesapeake Energy, which drilled too many unsuccessful wells. Another problem stock was Abacan Resources. This Canadian company ran into production problems and needed financing. The stock plummeted as shareholders feared too much equity dilution would result. I sold both of these stocks during the period. Q. STEVE, HOW DOES THE FUND LOOK GOING FORWARD? A. I think it will be affected by two positive and two negative factors. In the fund's favor, strong merger and acquisition activity should continue to help. It also should continue to benefit from the low storage levels that we discussed. On the negative side, the rig count remains high, so gas supply could increase too much. In addition, the global weather system called El Nio tends to indicate a warm winter - bad news for natural gas demand. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: APRIL 21, 1993 FUND NUMBER: 513 TRADING SYMBOL: FSNGX SIZE: AS OF AUGUST 31, 1997, MORE THAN $99 MILLION MANAGER: STEPHEN BINDER, SINCE 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 AUGUST 31, 1997 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 92.5% SHARES VALUE (NOTE 1) ENERGY SERVICES - 3.6% DRILLING - 2.5% Diamond Offshore Drilling, Inc. 20,000 $ 1,092,500 25271C10 Noble Drilling Corp. (a) 42,600 1,211,438 65504210 2,303,938 OIL & GAS SERVICES - 1.1% Weatherford Enterra, Inc. (a) 22,800 1,050,225 94707110 TOTAL ENERGY SERVICES 3,354,163 GAS - 17.1% GAS DISTRIBUTION - 4.6% Aquila Gas Pipeline Corp. 40,300 420,631 03839B10 K N Energy, Inc. 23,000 954,500 48262010 MCN Corp. 27,400 840,838 55267J10 Pacific Enterprises 60,000 1,976,250 69423210 4,192,219 GAS TRANSMISSION - 5.1% Leviathan Gas Pipeline Partners LP unit 35,200 906,400 52736710 ONEOK, Inc. 49,123 1,590,357 68267810 Sonat, Inc. 19,900 991,269 83541510 Williams Companies, Inc. 25,850 1,203,641 96945710 4,691,667 GAS TRANSMISSION & DISTRIBUTION - 7.4% Consolidated Natural Gas Co. 41,000 2,421,563 20961510 El Paso Natural Gas Co. 30,000 1,687,500 28369587 Midcoast Energy Resources, Inc. 25,000 496,875 59563W10 Questar Corp. 32,600 1,304,000 74835610 Tejas Gas Corp. 18,200 864,500 87907510 6,774,438 TOTAL GAS 15,658,324 OIL & GAS - 70.9% CRUDE PETROLEUM & GAS - 53.4% Anadarko Petroleum Corp. 64,575 4,742,227 03251110 Apache Corp. 69,325 2,751,336 03741110 Burlington Resources, Inc. 69,257 3,506,136 12201410 Cabot Oil & Gas Corp. Class A 119,300 2,766,269 12709710 Canadian Natural Resources Ltd. (a) 46,900 1,208,049 13638510 Comstock Resources, Inc. (a) 56,200 688,450 20576820 Devon Energy Corp. 19,200 819,600 25179910 Enron Oil & Gas Co. 121,200 2,923,950 29356210 Houston Exploration Co. (a) 39,200 737,450 44212010 Meridian Resource Corp. (a) 49,900 545,781 58977Q10 Newfield Exploration Co. 37,000 950,438 65129010 Noble Affiliates, Inc. 21,000 973,875 65489410 Nuevo Energy Corp. 20,000 1,016,250 67050910 Ocean Energy, Inc. (a) 87,000 5,595,188 67481210 Oryx Energy Co. (a) 85,600 2,263,050 68763F10 Pioneer Natural Resources Co. 26,200 1,046,363 72378710 Pogo Producing Co. 29,700 1,288,238 73044810 Renaissance Energy Ltd. (a) 90,800 2,339,110 75966610 Rio Alto Exploration Ltd. (a) 135,100 1,255,985 76689210 Rutherford-Moran Oil Corp. (a) 38,400 859,200 78328610 Santa Fe Energy Resources, Inc. 71,200 787,650 80201210 Snyder Oil Corp. 76,300 1,502,156 83348210 Swift Energy Co. (a) 34,200 887,063 87073810 Union Pacific Resources Group, Inc. 105,000 2,625,000 90783410 United Meridian Corp. (a) 60,000 2,351,250 91086510 Vastar Resources, Inc. 31,100 1,327,581 92238010 Vintage Petroleum, Inc. 30,000 1,288,125 92746010 49,045,770 SHARES VALUE (NOTE 1) GENERAL PETROLEUM PRODUCTS - 1.0% KCS Group, Inc. 35,400 $ 944,733 48243420 OIL & GAS EXPLORATION - 11.5% Amoco Corp. 44,300 4,189,119 03190510 Anderson Exploration Ltd. 60,000 747,973 03390110 Chieftain International, Inc. (a) 17,900 435,327 16867C10 Cross Timbers Oil Co. 28,200 608,063 22757310 Denbury Resources, Inc. (a) 25,900 425,523 24791620 Louisiana Land & Exploration Co. 18,000 1,378,125 54626810 Seagull Energy Corp. 63,800 1,559,113 81200710 USX-Marathon Group 37,000 1,204,813 90290582 10,548,056 PETROLEUM REFINERS - 5.0% Coastal Corp. (The) 79,900 4,614,225 19044110 TOTAL OIL & GAS 65,152,784 SERVICES - 0.9% MANAGEMENT CONSULTING SERVICES - 0.9% Metzler Group, Inc. 23,200 794,600 59290310 TOTAL COMMON STOCKS (Cost $73,893,671) 84,959,871 CASH EQUIVALENTS - 7.5% Taxable Central Cash Fund (b) (Cost $6,858,707) 6,858,707 6,858,707 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $80,752,378) $ 91,818,578 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $42,287,729 and $46,210,364, 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 $17,071 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $81,071,930. Net unrealized appreciation aggregated $10,746,648, of which $11,844,633 related to appreciated investment securities and $1,097,985 related to depreciated investment securities. NATURAL GAS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 91,818,578 SECURITIES, AT VALUE (COST $80,752,378 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 13,584,914 FUND SHARES SOLD DIVIDENDS 69,564 RECEIVABLE INTEREST 32,810 RECEIVABLE REDEMPTION FEES 1,913 RECEIVABLE TOTAL ASSETS 105,507,779 LIABILITIES PAYABLE FOR $ 5,172,012 INVESTMENTS PURCHASED PAYABLE FOR 903,652 FUND SHARES REDEEMED ACCRUED 39,443 MANAGEMENT FEE OTHER PAYABLES 99,752 AND ACCRUED EXPENSES TOTAL LIABILITIES 6,214,859 NET ASSETS $ 99,292,920 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 91,280,248 ACCUMULATED (6,894) NET INVESTMENT (LOSS) ACCUMULATED (3,046,634) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 11,066,200 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 99,292,920 7,022,828 SHARES OUTSTANDING NET ASSET $14.14 VALUE AND REDEMPTION PRICE PER SHARE ($99,292,92 0 (DIVIDED BY) 7,022,828 SHARES) MAXIMUM $14.58 OFFERING PRICE PER SHARE (100/97.00 OF $14.14) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 352,816 INCOME DIVIDENDS INTEREST 227,973 TOTAL INCOME 580,789 EXPENSES MANAGEMENT $ 242,575 FEE TRANSFER AGENT 435,353 FEES ACCOUNTING FEES 40,899 AND EXPENSES NON-INTERESTED 191 TRUSTEES' COMPENSATION CUSTODIAN FEES 10,063 AND EXPENSES REGISTRATION FEES 23,482 AUDIT 11,994 LEGAL 217 MISCELLANEOUS 255 TOTAL EXPENSES 765,029 BEFORE REDUCTIONS EXPENSE (8,532) 756,497 REDUCTIONS NET INVESTMENT (175,708) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT (1,715,709) SECURITIES FOREIGN (237) (1,715,946) CURRENCY TRANSACTIONS CHANGE IN NET 13,933,789 UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) 12,217,843 NET INCREASE $ 12,042,135 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 127,288 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 789 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 26,535 WITHHELD BY FSC EXPENSE $ 8,532 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (175,708) $ (514,205) NET INVESTMENT INCOME (LOSS) NET REALIZED (1,715,946) 7,806,794 GAIN (LOSS) CHANGE IN NET 13,933,789 (8,433,548) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 12,042,135 (1,140,959) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO - (52,511) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (755,502) (2,534,533) REALIZED GAIN IN EXCESS OF (1,330,688) - NET REALIZED GAIN TOTAL (2,086,190) (2,587,044) DISTRIBUTIONS SHARE 59,735,910 455,349,313 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 2,046,549 2,542,586 OF DISTRIBUTIONS COST OF SHARES (54,110,645) (434,506,274) REDEEMED REDEMPTION 98,998 1,680,459 FEES NET INCREASE 7,770,812 25,066,084 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL 17,726,757 21,338,081 INCREASE (DECREASE) IN NET ASSETS NET ASSETS 81,566,163 60,228,082 BEGINNING OF PERIOD END OF PERIOD $ 99,292,920 $ 81,566,163 (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME (LOSS) OF $(6,894) AND $168,814, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 4,559,075 33,713,794 ISSUED IN 174,766 179,967 REINVESTMENT OF DISTRIBUTIONS REDEEMED (4,233,796) (32,674,374) NET INCREASE 500,045 1,219,387 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED APRIL 21, 1993 AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 PER-SHARE DATA
NET ASSET VALUE, $ 12.50 $ 11.36 $ 8.98 $ 9.48 $ 10.00 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.03) (.06) .05 .03 .02 INVESTMENT INCOME (LOSS) D NET REALIZED 1.98 1.30 F 2.36 (.53) (.46) AND UNREALIZED GAIN (LOSS) TOTAL FROM 1.95 1.24 2.41 (.50) (.44) INVESTMENT OPERATIONS LESS - (.01) (.05) (.02) - DISTRIBUTIONS FROM NET INVESTMENT INCOME FROM NET (.12) (.29) - - (.07) REALIZED GAIN IN EXCESS OF (.21) - - - (.06) NET REALIZED GAIN TOTAL (.33) (.30) (.05) (.02) (.13) DISTRIBUTIONS REDEMPTION FEES .02 .20 .02 .02 .05 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 14.14 $ 12.50 $ 11.36 $ 8.98 $ 9.48 END OF PERIOD TOTAL RETURN B, C 16.31% 12.45% 27.10% (5.06)% (3.84)% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 99,293 $ 81,566 $ 60,228 $ 79,894 $ 63,073 OF PERIOD (000 OMITTED) RATIO OF 1.87% A 1.70% 1.68% 1.70% 1.94% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.85% A, E 1.66% E 1.67% E 1.66% E 1.93% A, E EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.43)% A (.46)% .46% .30% .17% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 112% A 283% 79% 177% 44% A TURNOVER RATE AVERAGE $ .0370 $ .0361 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 F MR 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 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. 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. 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS TELECOMMUNICATIONS 10.47% 17.37% 134.49% 320.47% TELECOMMUNICATIONS 7.15% 13.85% 127.46% 307.86% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS TELECOMMUNICATIONS 17.37% 18.58% 15.44% TELECOMMUNICATIONS 13.85% 17.86% 15.09% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 151130 S00000000000001 Telecommunications S&P 500 00096 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9896.98 9781.00 1987/10/31 8156.09 7674.17 1987/11/30 7597.09 7041.82 1987/12/31 8084.34 7577.70 1988/01/31 8461.75 7896.72 1988/02/29 8713.36 8264.71 1988/03/31 8751.65 8009.33 1988/04/30 9036.08 8098.24 1988/05/31 9150.95 8168.69 1988/06/30 9626.82 8543.63 1988/07/31 9490.07 8511.17 1988/08/31 9140.01 8221.79 1988/09/30 9703.40 8572.04 1988/10/31 9900.31 8810.34 1988/11/30 9987.82 8684.35 1988/12/31 10328.74 8836.33 1989/01/31 11166.95 9483.15 1989/02/28 11211.07 9247.02 1989/03/31 11668.78 9462.47 1989/04/30 12551.10 9953.57 1989/05/31 13477.55 10356.69 1989/06/30 13148.29 10297.66 1989/07/31 14146.48 11227.54 1989/08/31 14484.75 11447.60 1989/09/30 15017.11 11400.66 1989/10/31 14484.75 11136.17 1989/11/30 14850.75 11363.35 1989/12/31 15584.18 11636.07 1990/01/31 13894.13 10855.29 1990/02/28 13842.39 10995.32 1990/03/31 14164.30 11286.70 1990/04/30 13330.77 11004.53 1990/05/31 14733.41 12077.47 1990/06/30 14440.23 11995.34 1990/07/31 13779.16 11956.96 1990/08/31 12175.32 10876.05 1990/09/30 11387.78 10346.39 1990/10/31 11784.43 10301.90 1990/11/30 12457.00 10967.40 1990/12/31 13028.91 11273.39 1991/01/31 13491.93 11764.91 1991/02/28 13943.22 12606.10 1991/03/31 14335.91 12911.17 1991/04/30 14640.68 12942.15 1991/05/31 14793.06 13501.25 1991/06/30 14177.66 12882.90 1991/07/31 14980.61 13483.24 1991/08/31 15426.05 13802.79 1991/09/30 15625.32 13572.29 1991/10/31 16240.72 13754.15 1991/11/30 15619.46 13199.86 1991/12/31 17048.56 14709.93 1992/01/31 17072.25 14436.32 1992/02/29 17285.43 14623.99 1992/03/31 16675.49 14338.83 1992/04/30 17303.19 14760.39 1992/05/31 17101.85 14832.71 1992/06/30 16704.68 14611.71 1992/07/31 17601.06 15209.33 1992/08/31 17393.29 14897.53 1992/09/30 17731.65 15073.32 1992/10/31 17909.74 15126.08 1992/11/30 18841.74 15641.88 1992/12/31 19660.07 15834.28 1993/01/31 19599.60 15967.28 1993/02/28 20676.03 16184.44 1993/03/31 21522.67 16525.93 1993/04/30 21568.08 16126.00 1993/05/31 22436.26 16558.18 1993/06/30 23403.66 16606.20 1993/07/31 24085.80 16539.77 1993/08/31 25902.78 17166.63 1993/09/30 26274.86 17034.45 1993/10/31 27031.41 17387.06 1993/11/30 24817.55 17221.88 1993/12/31 25502.18 17430.27 1994/01/31 26018.48 18022.90 1994/02/28 25203.28 17534.48 1994/03/31 24415.25 16769.97 1994/04/30 24851.03 16984.63 1994/05/31 24705.10 17263.18 1994/06/30 24684.25 16840.23 1994/07/31 26053.28 17392.59 1994/08/31 26810.76 18105.69 1994/09/30 26498.04 17662.10 1994/10/31 27762.83 18059.49 1994/11/30 26289.56 17401.77 1994/12/31 26603.66 17659.84 1995/01/31 26972.76 18117.75 1995/02/28 27214.09 18823.80 1995/03/31 27554.80 19379.29 1995/04/30 28411.21 19950.01 1995/05/31 29186.72 20747.42 1995/06/30 30592.79 21229.38 1995/07/31 32535.19 21933.35 1995/08/31 33499.14 21988.40 1995/09/30 34600.80 22916.31 1995/10/31 33151.25 22834.50 1995/11/30 33883.27 23836.93 1995/12/31 34493.27 24296.03 1996/01/31 34737.42 25123.07 1996/02/29 34233.86 25355.96 1996/03/31 34073.64 25600.14 1996/04/30 35664.48 25977.48 1996/05/31 36455.93 26647.44 1996/06/30 36826.92 26748.97 1996/07/31 34040.37 25567.20 1996/08/31 34749.38 26106.41 1996/09/30 35771.66 27575.68 1996/10/31 35062.66 28336.22 1996/11/30 36126.16 30478.15 1996/12/31 36355.79 29874.38 1997/01/31 36603.11 31740.93 1997/02/28 36921.09 31989.78 1997/03/31 33811.95 30675.32 1997/04/30 34869.79 32506.64 1997/05/31 39833.04 34485.64 1997/06/30 42028.85 36030.60 1997/07/31 42881.77 38897.55 1997/08/29 40785.77 36718.51 IMATRL PRASUN SHR__CHT 19970831 19970909 151150 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Telecommunications Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $40,786 - a 307.86% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS WORLDCOM, INC. 14.3 TEL-SAVE HOLDINGS, INC. 13.2 ALCATEL ALSTHOM COMPAGNIE GENERALE D'ELECTRICITE SA 7.3 MCI COMMUNICATIONS CORP. 6.8 APT SATELLITE HOLDINGS LTD. SPONSORED ADR 5.1 MOTOROLA, INC. 4.1 BROOKS FIBER PROPERTIES, INC. 4.0 TELCO COMMUNICATIONS GROUP, INC. 3.7 NOKIA CORP. AB SPONSORED ADR 3.6 BCE, INC. 3.3 TOP INDUSTRIES AS OF AUGUST 31, 1997 ROW: 1, COL: 1, VALUE: 14.6 ROW: 1, COL: 2, VALUE: 3.1 ROW: 1, COL: 3, VALUE: 4.4 ROW: 1, COL: 4, VALUE: 5.8 ROW: 1, COL: 5, VALUE: 15.4 ROW: 1, COL: 6, VALUE: 56.7 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 56.7% TELEPHONE EQUIPMENT 15.4% COMMUNICATIONS SERVICES 5.8% SEMICONDUCTORS 4.4% NONFERROUS ROLLING & DRAWING 3.1% ALL OTHERS 14.6% * * 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. For the six months that ended August 31, 1997, the fund had a total return of 10.47%, while the Standard & Poor's 500 Index returned 14.78%. For the 12 months that ended August 31, 1997, the fund returned 17.37% and the S&P 500 returned 40.65%. Q. WHY DID THE FUND'S PERFORMANCE LAG THAT OF THE S&P 500? A. The story in the telecommunications sector really hasn't changed for some time now. Fears over how and when deregulation will shape the competitive landscape continued to plague telecommunications stocks, including AT&T and the regional Bell operating companies (RBOCs). As in the past, investors during the past six months were concerned that as both local and long-distance markets continue to open, increased competition will hurt earnings. Uncertainty over the timing of deregulation and competitive guidelines, combined with deteriorating business prospects, hurt many stocks in the group. Q. WHAT FACTORS HURT BUSINESS PROSPECTS FOR COMPANIES IN THE SECTOR? A. Among the long distance providers, increased competition and more aggressive pricing made it tougher for companies to increase their earnings. On the local side, line growth has slowed and we've started to see competitive local exchange companies (CLECs) eat into the market share of the RBOCs. Q. WHAT SORTS OF THEMES HAVE YOU PURSUED IN THIS UNCERTAIN ENVIRONMENT? A. I've tried to focus on those stocks that I feel have a noteworthy advantage. I believe the industry is biased against the larger incumbent, or existing, telephone providers, and favors companies that don't have incumbent market share but have strategies or assets in place that should allow them to gain much more market share going forward. In essence, the incumbents have more to lose, while the new competitors have more to gain. I also emphasized equipment providers, which have been in high demand due to companies' focus on infrastructure improvements. Finally, as this industry continued to consolidate, I've looked for companies that are likely to be acquired at a premium. Q. WHAT STOCKS HAVE DONE WELL FOR THE FUND? WHICH WERE DISAPPOINTING? A. The fund's two largest holdings, WorldCom and Tel-Save, performed quite well. WorldCom was well-positioned because of the assets it has in place in terms of local, Internet, long-distance and international networks. Shares of Tel-Save rose in anticipation of its long-distance service that will be sold over America Online. In addition, Tel-Save recently started a CLEC to diversify its fiberoptic product line. In general, CLECs performed well, including Brooks Fiber, one of the fund's top 10 investments. The equipment providers also generally saw share price gains, including Alcatel. On the minus side, MCI struggled as it encountered some difficulties in finalizing its acquisition by British Telecommunications. Beyond that, some smaller equipment providers and phone service stocks proved disappointing. Among these was Viatel, an international long-distance provider that fell due to concerns over its long-term growth potential, given the intense competitive environment. Q. YOU HAVE MORE THAN 25% OF THE FUND CONCENTRATED IN THE TOP TWO STOCKS, AND ALMOST 50% OF THE FUND INVESTED IN THE TOP FIVE. WHY IS THAT, AND DOES THAT MAKE THE FUND MORE VOLATILE? A. In managing the fund, I'm dealing with an industry in which competition is intense. I've concentrated the fund among its larger holdings because I have a great deal of conviction in them when compared to the alternatives. In a sector where the environment is uncertain, I feel I would be watering down my ability to perform well if I spread my investments out. The concentration of the fund may have created more volatility, but the fund's top holdings contributed significantly to the fund's performance. Q. WHAT'S YOUR OUTLOOK? A. I don't believe the investing environment for the sector will change appreciably in the near future. Increased competition is coming, but slowly. There is still a great deal of uncertainty over the ultimate form of regulations within the industry. But enough competition is developing to weaken the incumbents' growth. As a result, I'll probably continue to pursue my theme of focusing on smaller, developing companies with some kind of competitive advantage that will help them capture market share. And, I think the telephone services group as a whole will have a difficult operating outlook for the next couple of years, which is why I'll probably continue to maintain a stake in the equipment providers as well. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 096 TRADING SYMBOL: FSTCX SIZE: as of August 31, 1997, more than $352 million MANAGER: Nick Thakore, since 1996; manager, Fidelity Utilities Fund, Fidelity Advisor Utilities Fund and Fidelity Select Utilities Growth Portfolio, since August 1997; analyst, various industries, 1993-1996; joined Fidelity in 1993 (checkmark) TELECOMMUNICATIONS PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.6% SHARES VALUE (NOTE 1) APPLIANCE STORES - 2.8% ELECTRIC APPLIANCES - WHOLESALE - 2.8% Cellstar Corp. 300,000 $ 9,993,750 BROADCASTING - 5.8% COMMUNICATIONS SERVICES - 5.8% APT Satellite Holdings Ltd. sponsored ADR 1,223,200 18,195,100 00203R10 Smartalk Teleservices, Inc. (a) 100,300 2,306,900 83169A10 20,502,000 CELLULAR - 0.7% CELLULAR & COMMUNICATION SERVICES - 0.7% Nextel Communications, Inc. Class A (a) 100,000 2,506,250 65332V10 COMMUNICATIONS EQUIPMENT - 8.1% TELEPHONE EQUIPMENT - 8.1% Advanced Fibre Communication, Inc. 5,800 361,050 00754A10 Andrew Corp. (a) 384,700 9,569,413 03442510 Nokia Corp. AB sponsored ADR 165,000 12,787,500 65490220 Tellabs, Inc. (a) 100,000 5,968,750 87966410 28,686,713 COMPUTER SERVICES & SOFTWARE - 1.0% COMPUTER SERVICES - 1.0% NETCOM On-Line Communication Services, Inc. (a) 279,000 3,644,438 64108110 ELECTRICAL EQUIPMENT - 8.2% ELECTRICAL MACHINERY - 7.3% Alcatel Alsthom Compagnie Generale d'Electricite SA sponsored ADR 900 22,163 01390430 Alcatel Alsthom Compagnie Generale d'Electricite SA 213,000 26,038,350 01390492 26,060,513 TV & RADIO COMMUNICATION EQUIPMENT - 0.9% California Amplifier, Inc. (a)(c) 654,300 3,251,053 12990010 TOTAL ELECTRICAL EQUIPMENT 29,311,566 ELECTRONICS - 6.0% ELECTRONICS & ELECTRONIC COMPONENTS - 1.6% Alpine Group, Inc. 401,600 5,672,600 02082510 SEMICONDUCTORS - 4.4% Intel Corp. warrants 3/14/98 (a) 14,900 1,067,213 45814014 Motorola, Inc. 200,000 14,675,000 62007610 15,742,213 TOTAL ELECTRONICS 21,414,813 METALS & MINING - 3.1% NONFERROUS ROLLING & DRAWING - 3.1% Superior Telecom, Inc. 288,300 10,901,342 86836510 SERVICES - 1.2% BUSINESS SERVICES - 1.2% Sitel Corp. (a) 150,000 1,593,750 82980K10 Snyder Communications, Inc. (a) 90,000 2,576,250 83291410 4,170,000 MANAGEMENT CONSULTING SERVICES - 0.0% Hagler Bailly, Inc. 300 6,488 40518310 TOTAL SERVICES 4,176,488 TELEPHONE SERVICES - 56.7% BCE, Inc. 415,100 11,770,265 05534B10 Brooks Fiber Properties, Inc. (a) 428,000 14,391,500 11439910 SHARES VALUE (NOTE 1) Cincinnati Bell, Inc. 280,800 $ 7,564,050 17187010 MCI Communications Corp. 850,000 24,225,000 55267310 McLeodUSA, Inc. Class A (a) 328,200 11,117,775 58226610 Nippon Telegraph & Telephone Corp. Ord. 1,054 9,859,437 65462492 Primus Telecommunications Group, Inc. 457,300 3,658,400 74192910 Qwest Communications International, Inc. 1,200 48,900 74912110 STAR Telecommunications, Inc. 11,800 202,075 85492310 Tel-Save Holdings, Inc. (a) 2,622,000 46,868,250 87917610 Telco Communications Group, Inc. 438,800 12,999,450 87920510 Viatel, Inc. (a)(c) 1,656,000 7,866,000 92552920 WorldCom, Inc. (a) 1,699,245 50,871,147 98155K10 201,442,249 TOTAL COMMON STOCKS (Cost $301,457,932) 332,579,609 CASH EQUIVALENTS - 6.4% Taxable Central Cash Fund (b) (Cost $22,925,645) 22,925,645 22,925,645 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $324,383,577) $ 355,505,254 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. 3. Affiliated company (see Note 10 of Notes to Financial Statements). OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $204,743,940 and $277,408,563 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 $40,625 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, the value of securities loaned and the value of collateral amounted to $2,300,000 and $2,400,000 respectively (see Note 6 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $4,576,000 and $3,806,167, respectively. The weighted average interest rate paid was 5.86% (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 77.9% France 7.3 Hong Kong 5.1 Finland 3.6 Canada 3.3 Japan 2.8 TOTAL 100.0% Transactions during the period with companies which are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME California Amplifier, Inc. $ - $ - $ - $ 3,251,053 Viatel, Inc. - - - 7,866,000 TOTALS $ - $ - $ - $ 11,117,053 INCOME TAX INFORMATION At August 31,1997, the aggregate cost of investment securities for income tax purposes was $324,394,082. Net unrealized appreciation aggregated $31,111,172, of which $57,592,812 related to appreciated investment securities and $26,481,640 related to depreciated investment securities. TELECOMMUNICATIONS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 355,505,254 SECURITIES, AT VALUE (COST $324,383,57 7) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 917,420 INVESTMENTS SOLD RECEIVABLE FOR 214,675 FUND SHARES SOLD DIVIDENDS 155,197 RECEIVABLE INTEREST 75,093 RECEIVABLE REDEMPTION FEES 350 RECEIVABLE OTHER 62,732 RECEIVABLES TOTAL ASSETS 356,930,721 LIABILITIES PAYABLE FOR $ 1,110,052 FUND SHARES REDEEMED ACCRUED 183,082 MANAGEMENT FEE OTHER PAYABLES 324,890 AND ACCRUED EXPENSES COLLATERAL ON 2,400,000 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 4,018,024 NET ASSETS $ 352,912,697 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 292,893,853 ACCUMULATED (1,013,876) NET INVESTMENT (LOSS) ACCUMULATED 29,918,107 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 31,114,613 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 352,912,697 7,851,395 SHARES OUTSTANDING NET ASSET $44.95 VALUE AND REDEMPTION PRICE PER SHARE ($352,912,6 97 (DIVIDED BY) 7,851,395 SHARES) MAXIMUM $46.34 OFFERING PRICE PER SHARE (100/97.00 OF $44.95) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 1,222,949 INCOME DIVIDENDS INTEREST 651,648 (INCLUDING INCOME ON SECURITIES LOANED OF $55,434) TOTAL INCOME 1,874,597 EXPENSES MANAGEMENT $ 1,102,938 FEE TRANSFER AGENT 1,490,200 FEES ACCOUNTING AND 188,981 SECURITY LENDING FEES NON-INTERESTED 834 TRUSTEES' COMPENSATION CUSTODIAN FEES 45,187 AND EXPENSES REGISTRATION FEES 25,537 AUDIT 17,217 LEGAL 1,532 INTEREST 3,719 MISCELLANEOUS 37,992 TOTAL EXPENSES 2,914,137 BEFORE REDUCTIONS EXPENSE (25,664) 2,888,473 REDUCTIONS NET INVESTMENT (1,013,876) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 30,131,763 SECURITIES FOREIGN (48,671) 30,083,092 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT 5,805,838 SECURITIES ASSETS AND (7,064) 5,798,774 LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 35,881,866 NET INCREASE $ 34,867,990 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 233,224 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 9,425 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 41,910 WITHHELD BY FSC EXPENSE $ 24,693 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 929 CREDITS TRANSFER 42 AGENT CREDITS $ 25,664 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ (1,013,876) $ 1,291,317 NET INVESTMENT INCOME (LOSS) NET REALIZED 30,083,092 45,424,681 GAIN (LOSS) CHANGE IN NET 5,798,774 (11,984,796) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 34,867,990 34,731,202 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO - (1,643,666) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (9,196,271) (63,334,526) REALIZED GAIN TOTAL (9,196,271) (64,978,192) DISTRIBUTIONS SHARE 55,830,112 194,213,580 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 8,968,860 63,659,054 OF DISTRIBUTIONS COST OF SHARES (126,236,043) (307,709,801) REDEEMED REDEMPTION 142,818 319,443 FEES NET INCREASE (61,294,253) (49,517,724) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (35,622,534) (79,764,714) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 388,535,231 468,299,945 PERIOD END OF PERIOD $ 352,912,697 $ 388,535,231 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $1,013,876 AND $0 RESPECTIVELY) OTHER INFORMATION SHARES SOLD 1,268,785 4,489,283 ISSUED IN 235,092 1,575,164 REINVESTMENT OF DISTRIBUTIONS REDEEMED (2,948,654) (7,203,986) NET INCREASE (1,444,777) (1,139,539) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 41.80 $ 44.87 $ 38.34 $ 37.10 $ 34.19 $ 29.22 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.12) .12 G .51 .29 .25 .29 INVESTMENT INCOME (LOSS) D NET REALIZED 4.29 2.92 9.15 2.54 7.00 5.29 AND UNREALIZED GAIN (LOSS) TOTAL FROM 4.17 3.04 9.66 2.83 7.25 5.58 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET - (.16) (.39) (.33) (.20) (.18) INVESTMENT INCOME FROM NET (1.04) (5.98) (2.75) (1.27) (4.18) (.48) REALIZED GAIN TOTAL (1.04) (6.14) (3.14) (1.60) (4.38) (.66) DISTRIBUTIONS REDEMPTION FEES .02 .03 .01 .01 .04 .05 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 44.95 $ 41.80 $ 44.87 $ 38.34 $ 37.10 $ 34.19 END OF PERIOD TOTAL RETURN B, C 10.47% 7.85% 25.79% 7.98% 21.90% 19.49% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 352,913 $ 388,535 $ 468,300 $ 369,476 $ 371,025 $ 134,338 OF PERIOD (000 OMITTED) RATIO OF 1.57% A 1.51% 1.52% 1.56% 1.54% 1.74% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.55% A, E 1.47% E 1.52% 1.55% E 1.53% E 1.74% A EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.55)% A .27% 1.17% .77% .64% 1.16% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 117% A 175% 89% 107% 241% 115% A TURNOVER RATE AVERAGE $ .0035 $ .0321 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 INVEST MENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.07 PER SHARE. 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS UTILITIES GROWTH 5.33% 24.15% 79.18% 240.64% UTILITIES GROWTH 2.17% 20.42% 73.80% 230.42% (INCL. 3% SALES CHARGE) S&P 500 14.78% 40.65% 146.47% 266.19% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five or 10 years. You can compare the fund's returns to the performance of the S&P 500 - a widely recognized, unmanaged index of common stocks. This benchmark includes 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 AUGUST 31, 1997 YEAR YEARS YEARS UTILITIES GROWTH 24.15% 12.37% 13.04% UTILITIES GROWTH 20.42% 11.69% 12.70% (INCL. 3% SALES CHARGE) S&P 500 40.65% 19.77% 13.86% 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 LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. THAT MEANS IF YOU SELL YOUR SHARES DURING A SECTOR DOWNTURN, YOU MIGHT LOSE MONEY. BUT IF YOU CAN IDENTIFY A SECTOR THAT IS ABOUT TO EXPERIENCE RAPID GROWTH YOU MAY HAVE THE POTENTIAL FOR ABOVE-AVERAGE GAINS. (CHECKMARK) $10,000 OVER 10 YEARS IMAHDR PRASUN SHR__CHT 19970831 19970909 151200 S00000000000001 Utilities Growth S&P 500 00065 SP001 1987/08/31 9700.00 10000.00 1987/09/30 9621.75 9781.00 1987/10/31 9041.95 7674.17 1987/11/30 8739.60 7041.82 1987/12/31 8815.08 7577.70 1988/01/31 9576.88 7896.72 1988/02/29 9501.83 8264.71 1988/03/31 9231.63 8009.33 1988/04/30 9257.90 8098.24 1988/05/31 9546.86 8168.69 1988/06/30 9798.29 8543.63 1988/07/31 9767.19 8511.17 1988/08/31 9751.75 8221.79 1988/09/30 10091.48 8572.04 1988/10/31 10303.81 8810.34 1988/11/30 10284.50 8684.35 1988/12/31 10265.72 8836.33 1989/01/31 10749.28 9483.15 1989/02/28 10681.89 9247.02 1989/03/31 10864.22 9462.47 1989/04/30 11423.09 9953.57 1989/05/31 11966.10 10356.69 1989/06/30 12268.35 10297.66 1989/07/31 12940.19 11227.54 1989/08/31 12997.20 11447.60 1989/09/30 13184.50 11400.66 1989/10/31 13123.43 11136.17 1989/11/30 13555.04 11363.35 1989/12/31 14271.68 11636.07 1990/01/31 13567.25 10855.29 1990/02/28 13542.82 10995.32 1990/03/31 13469.53 11286.70 1990/04/30 12907.62 11004.53 1990/05/31 13579.47 12077.47 1990/06/30 13740.39 11995.34 1990/07/31 13853.18 11956.96 1990/08/31 13092.85 10876.05 1990/09/30 13126.27 10346.39 1990/10/31 13798.87 10301.90 1990/11/30 14162.33 10967.40 1990/12/31 14350.82 11273.39 1991/01/31 14287.54 11764.91 1991/02/28 14903.42 12606.10 1991/03/31 15072.15 12911.17 1991/04/30 15004.66 12942.15 1991/05/31 15008.88 13501.25 1991/06/30 14826.82 12882.90 1991/07/31 15309.34 13483.24 1991/08/31 15660.28 13802.79 1991/09/30 16142.80 13572.29 1991/10/31 16366.52 13754.15 1991/11/30 16555.15 13199.86 1991/12/31 17368.51 14709.93 1992/01/31 16833.88 14436.32 1992/02/29 16710.51 14623.99 1992/03/31 16536.87 14338.83 1992/04/30 16989.24 14760.39 1992/05/31 17318.25 14832.71 1992/06/30 17518.58 14611.71 1992/07/31 18450.07 15209.33 1992/08/31 18440.62 14897.53 1992/09/30 18539.91 15073.32 1992/10/31 18535.18 15126.08 1992/11/30 18662.85 15641.88 1992/12/31 19208.24 15834.28 1993/01/31 19534.98 15967.28 1993/02/28 20539.94 16184.44 1993/03/31 21094.41 16525.93 1993/04/30 20979.12 16126.00 1993/05/31 21024.12 16558.18 1993/06/30 21829.08 16606.20 1993/07/31 22079.07 16539.77 1993/08/31 23039.03 17166.63 1993/09/30 23039.03 17034.45 1993/10/31 22804.04 17387.06 1993/11/30 21689.09 17221.88 1993/12/31 21617.85 17430.27 1994/01/31 22060.80 18022.90 1994/02/28 21059.86 17534.48 1994/03/31 20300.53 16769.97 1994/04/30 20884.50 16984.63 1994/05/31 20467.51 17263.18 1994/06/30 20402.91 16840.23 1994/07/31 20990.21 17392.59 1994/08/31 20907.99 18105.69 1994/09/30 20373.54 17662.10 1994/10/31 20631.96 18059.49 1994/11/30 19886.08 17401.77 1994/12/31 20015.82 17659.84 1995/01/31 20832.67 18117.75 1995/02/28 21104.95 18823.80 1995/03/31 21189.66 19379.29 1995/04/30 21928.28 19950.01 1995/05/31 22267.60 20747.42 1995/06/30 22485.73 21229.38 1995/07/31 23091.65 21933.35 1995/08/31 23679.40 21988.40 1995/09/30 24806.41 22916.31 1995/10/31 25048.78 22834.50 1995/11/30 25600.17 23836.93 1995/12/31 26899.16 24296.03 1996/01/31 27183.02 25123.07 1996/02/29 26553.59 25355.96 1996/03/31 26319.09 25600.14 1996/04/30 27381.75 25977.48 1996/05/31 27401.57 26647.44 1996/06/30 27824.35 26748.97 1996/07/31 26608.85 25567.20 1996/08/31 26615.46 26106.41 1996/09/30 27097.69 27575.68 1996/10/31 28233.92 28336.22 1996/11/30 29561.72 30478.15 1996/12/31 29956.49 29874.38 1997/01/31 30857.23 31740.93 1997/02/28 31369.02 31989.78 1997/03/31 29704.01 30675.32 1997/04/30 30767.15 32506.64 1997/05/31 32789.83 34485.64 1997/06/30 33790.67 36030.60 1997/07/31 34595.54 38897.55 1997/08/29 33041.79 36618.51 IMATRL PRASUN SHR__CHT 19970831 19970909 151217 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Utilities Growth Portfolio on August 31, 1987, and the current maximum 3% sales charge was paid. As the chart shows, by August 31, 1997, the value of the investment would have grown to $33,042 - a 230.42% 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 $36,619 - a 266.19% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS SBC COMMUNICATIONS, INC. 9.5 WORLDCOM, INC. 9.3 BELLSOUTH CORP. 4.8 BELL ATLANTIC CORP. 4.7 AMERITECH CORP. 4.5 AES CORP. 4.2 GTE CORP. 4.0 U.S. WEST COMMUNICATIONS GROUP 3.3 AIRTOUCH COMMUNICATIONS, INC. 3.2 MCI COMMUNICATIONS CORP. 3.2 TOP INDUSTRIES AS OF AUGUST 31, 1997 TELEPHONE SERVICES 50.7% ELECTRIC POWER 10.1% GAS DISTRIBUTION 8.2% GAS TRANSMISSION & DISTRIBUTION 5.8% GAS TRANSMISSION 4.7% ALL OTHERS 20.5% ROW: 1, COL: 1, VALUE: 20.5 ROW: 1, COL: 2, VALUE: 4.7 ROW: 1, COL: 3, VALUE: 5.8 ROW: 1, COL: 4, VALUE: 8.199999999999999 ROW: 1, COL: 5, VALUE: 10.1 ROW: 1, COL: 6, VALUE: 50.7 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS UTILITIES GROWTH PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW NOTE TO SHAREHOLDERS: On August 18, 1997, Nick Thakore (right) became Portfolio Manager of Fidelity Select Utilities Growth Portfolio. The following is an interview with John Muresianu (left), who managed the fund during most of the period covered by this report, with comments from Nick Thakore on his outlook. Q. JOHN, HOW DID THE FUND PERFORM? J.M. For the six months that ended August 31, 1997, the fund had a total return of 5.33%, while the Standard & Poor's 500 Index returned 14.78%. For the 12 months that ended August 31, 1997, the fund returned 24.15% and the S&P 500 returned 40.65%. Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE? J.M. The sector underperformed the broad market as investors continued to be concerned about how ongoing deregulation would affect utilities companies, especially in the telephone and electric industries. Overall, though, the fund benefited from two factors. First, it had a solid concentration in telephone and gas utility stocks. During the period, telephone utility stocks performed the best among the three industries, with gas utility stocks and electric utility stocks falling in line, respectively. Second, strong individual stock selection had a positive effect on performance as well. Q. WHAT HELPED TELEPHONE STOCKS PERFORM THE BEST AMONG THE UTILITY SECTOR? J.M. In general, telephone companies posted the best earnings growth - and stock prices generally follow earnings - even though there was some concern about future competition due to deregulation. Gas companies, on the other hand, after performing quite well in 1995 and 1996, were hurt by weaker-than-expected natural gas prices due to unexpectedly mild weather. Nevertheless, the price of natural gas did not fall to levels that would have caused major problems, and the expectation of industry consolidation helped sustain stock prices somewhat. Stocks in the electric utility industry were stalled by three factors: These stocks tend to trade in concert with bonds and, because of an uncertain interest-rate backdrop, the bond market proved to be fairly volatile; operating costs have increased for most electric utilities with nuclear power plants as a result of regulatory pressure; and earnings suffered due to the mild weather over the period. Q. ELECTRIC UTILITY STOCKS LAGGED THE PHONE AND GAS UTILITIES, YET YOU INCREASED THE FUND'S INVESTMENTS IN THE ELECTRICS. WHY WAS THAT? J.M. In my judgment, selected electric utility stocks were oversold and became too cheap to ignore. I took profits by selling stocks in other areas to replace them with a higher weighting in these attractive electric stocks. Q. WHAT WERE SOME OF THE FUND'S STRONGER-PERFORMING STOCKS OVER THE PERIOD? WHAT WERE THE DISAPPOINTMENTS? J.M. WorldCom was one of the fund's top performers. It posted very strong earnings growth as it consistently beat expectations. AirTouch Communications also proved to be a positive contributor, turning around its earnings more than the market expected. It was helped by strong domestic and international subscriber additions for its wireless communications services. Sprint also did well, as many investors anticipated that the company would be acquired. On the minus side, Enron was hurt by declining natural gas prices and disappointing earnings from its pipeline and trading operations. Q. TURNING TO YOU, NICK, WHAT'S YOUR OUTLOOK? A. Deregulation - in all of the utilities industries, but especially in the telephones - should lead to tremendous changes in the competitive landscape. My goal will be to find the companies that will be the net beneficiaries of this competition and that show superior earnings growth relative to their group. In the past, there hasn't been much of a difference among many of the stocks in the sector, but we're entering an era where the differences should become much more dramatic. With the sector going through such significant changes, it will be important to differentiate between the winners and the losers. I'll focus on newer companies that may be less vulnerable to deregulation, as well as companies that are likely to be acquired through consolidation. 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 10, 1981 FUND NUMBER: 065 TRADING SYMBOL: FSUTX SIZE: AS OF AUGUST 31, 1997, MORE THAN $223 MILLION MANAGER: NICK THAKORE, SINCE AUGUST 1997; MANAGER, FIDELITY SELECT TELECOMMUNICATIONS PORTFOLIO, SINCE 1996; FIDELITY UTILITIES FUND AND FIDELITY ADVISOR UTILITIES GROWTH FUND, SINCE AUGUST 1997; JOINED FIDELITY IN 1993 (CHECKMARK) UTILITIES GROWTH PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 94.1% SHARES VALUE (NOTE 1) BROADCASTING - 0.0% CABLE TV OPERATORS - 0.0% TCI Satellite Entertainment, Inc. Class A (a) 450 $ 3,108 87229810 Tele Communications, Inc. (TCI), Series A (a) 4,300 75,250 87924V10 78,358 CELLULAR - 3.8% CELLULAR & COMMUNICATION SERVICES - 3.8% AirTouch Communications, Inc. (a) 212,300 7,178,394 00949T10 Cellnet Data Systems, Inc. (a) 23,700 284,400 15115M10 Telephone & Data Systems, Inc. 7,706 304,387 87943310 Vodafone Group PLC sponsored ADR 14,400 733,500 92857T10 8,500,681 COAL - 0.3% MAPCO, Inc. 21,500 645,000 56509710 COMMUNICATIONS EQUIPMENT - 1.8% TELEPHONE EQUIPMENT - 1.8% Lucent Technologies, Inc. 52,456 4,085,011 54946310 COMPUTER SERVICES & SOFTWARE - 0.2% DATA PROCESSING - 0.2% NCR Corp. (a) 10,156 359,903 62886E10 ELECTRIC UTILITY - 13.1% ELECTRIC & OTHER SERVICES - 3.0% DPL, Inc. 31,600 748,525 23329310 Enova Corp. 26,900 645,600 29355210 Hidroelectrica de Cantabrico SA 10,150 381,764 42899999 IES Industries, Inc. 9,600 294,000 44949M10 LG&E Energy Corp. 8,300 187,788 50191710 Montana Power Co. 29,100 671,119 61208510 NIPSCO Industries, Inc. 25,000 1,020,313 62914010 PECO Energy Co. 30,000 714,375 69330410 PacifiCorp. 42,500 881,875 69511410 Public Service Co. of New Mexico 30,600 558,450 74449910 Rochester Gas & Electric Corp. 8,400 197,925 77136710 Sierra Pacific Resources 5,100 159,375 82642510 Utilicorp United, Inc. 3,838 114,181 91800510 WPL Holdings, Inc. 900 24,919 92930510 6,600,209 ELECTRIC POWER - 10.1% AES Corp. (a) 254,298 9,409,026 00130H10 American Electric Power Co., Inc. 14,100 615,994 02553710 Baycorp Holdings Ltd. (a) 1,629 13,236 07272810 Boston Edison Co. 9,500 268,375 10059910 Central & South West Corp. 38,000 786,125 15235710 Central Louisiana Electric Co., Inc. 35,806 939,908 15389760 CESC Ltd. GDR (c) 32,600 32,600 15712810 DQE, Inc. 28,050 890,588 23329J10 Duke Energy Corp. 113,108 5,478,669 26439910 Entergy Corp. 15,200 377,150 29364G10 Houston Industries, Inc. 9,636 195,129 44216110 Kansas City Power & Light Co. 8,100 231,863 48513410 Korea Electric Power Corp. sponsored ADR 19,000 309,938 50063110 Pinnacle West Capital Corp. 22,700 733,494 72348410 Southern Co. 19,000 400,188 84258710 TECO Energy, Inc. 6,600 158,813 87237510 Texas Utilities Co. 39,757 1,386,525 88284810 United Illuminating Co. 7,600 265,525 91063710 22,493,146 TOTAL ELECTRIC UTILITY 29,093,355 SHARES VALUE (NOTE 1) GAS - 19.8% GAS & OTHER SERVICES - 1.1% MDU Resources Group, Inc. 49,300 $ 1,180,119 55269010 UGI Corp. 41,051 1,072,457 90268110 Western Resources, Inc. 6,200 207,700 95942510 2,460,276 GAS DISTRIBUTION - 8.2% Eastern Enterprises Co. 65,500 2,337,531 27637F10 Energen Corp. 31,900 1,150,394 29265N10 K N Energy, Inc. 60,600 2,514,900 48262010 MCN Corp. 182,400 5,597,400 55267J10 NUI Corp. 16,600 381,800 62943010 National Fuel Gas Co. 7,400 328,838 63618010 New Jersey Resources Corp. 8,200 262,913 64602510 NICOR, Inc. 16,100 584,631 65408610 Northwest Natural Gas Co. 4,150 103,750 66765510 Pacific Enterprises 126,700 4,173,181 69423210 Peoples Energy Corp. 9,200 346,725 71103010 WICOR, Inc. 11,200 443,100 92925310 18,225,163 GAS TRANSMISSION - 4.7% Enron Corp. 83,696 3,227,527 29356110 ONEOK, Inc. 28,759 931,073 68267810 Sonat, Inc. 81,000 4,034,813 83541510 USX-Delhi Group 5,400 72,225 90336X10 Williams Companies, Inc. 49,334 2,297,114 96945710 10,562,752 GAS TRANSMISSION & DISTRIBUTION - 5.8% Bay State Gas Co. 13,400 391,113 07261260 Columbia Gas System, Inc. (The) 65,000 4,290,000 19764810 Consolidated Natural Gas Co. 17,300 1,021,781 20961510 Equitable Resources, Inc. 17,550 536,372 29454910 Questar Corp. 116,300 4,652,000 74835610 Tejas Gas Corp (a). 34,995 1,662,263 87907510 Yankee Energy System, Inc. 15,700 370,913 98477910 12,924,442 TOTAL GAS 44,172,633 HOLDING COMPANIES - 0.6% CINergy Corp. 42,206 1,395,436 17247410 INDEPENDENT POWER - 0.0% STEAM SUPPLY - 0.0% Bonneville Pacific Corp. (a) 10,700 21,400 09890410 OIL & GAS - 3.8% CRUDE PETROLEUM & GAS - 1.2% Enserch Exploration, Inc. 264,962 2,384,658 29356V10 Nuevo Energy Corp. (a) 800 40,650 67050910 Occidental Petroleum Corp. 11,500 269,531 67459910 2,694,839 PETROLEUM REFINERS - 2.6% Coastal Corp. (The) 97,800 5,647,940 19044110 TOTAL OIL & GAS 8,342,779 TELEPHONE SERVICES - 50.7% AT&T Corp. 80,500 3,139,500 00195710 ALLTEL Corp. 7,000 221,375 02003910 Ameritech Corp. 160,400 10,055,075 03095410 BCE, Inc. 55,520 1,574,284 05534B10 Bell Atlantic Corp. 145,084 10,500,455 07785310 BellSouth Corp. 243,600 10,718,400 07986010 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TELEPHONE SERVICES - CONTINUED Cincinnati Bell, Inc. 26,600 $ 716,538 17187010 Frontier Corp. 800 17,650 35906P10 GTE Corp. 201,500 8,979,344 36232010 MCI Communications Corp. 249,000 7,096,500 55267310 SBC Communications, Inc. 390,196 21,216,908 78387G10 Sprint Corp. 144,800 6,805,600 85206110 U.S. West Communications Group 204,159 7,311,444 91288910 U.S. West Media Group (a) 192,359 3,847,180 91288920 WorldCom, Inc. (a) 687,700 20,588,019 98155K10 112,788,272 TOTAL COMMON STOCKS (Cost $162,471,312) 209,482,828 CONVERTIBLE PREFERRED STOCKS - 0.7% ELECTRIC UTILITY - 0.7% COMBINATION UTILITIES - 0.7% Citizens Utilities Trust $2.50 (Cost $1,620,000) 32,400 1,445,850 17735120 CASH EQUIVALENTS - 5.2% Taxable Central Cash Fund (b) (Cost $11,619,511) 11,619,511 11,619,511 31635A10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $175,710,823) $ 222,548,189 LEGEND 1. Non-income producing 2. At period end, the seven-day yield on the Taxable Central Cash Fund was 5.65%. 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 $32,600 or 0.0% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $4,922,694 and $58,038,140 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 $5,309 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1997, the aggregate cost of investment securities for income tax purposes was $175,862,642. Net unrealized appreciation aggregated $46,685,547, of which $48,575,288 related to appreciated investment securities and $1,889,741 related to depreciated investment securities. UTILITIES GROWTH PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 (UNAUDITED) ASSETS INVESTMENT IN $ 222,548,189 SECURITIES, AT VALUE (COST $175,710,82 3) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 4,019,165 INVESTMENTS SOLD RECEIVABLE FOR 130,441 FUND SHARES SOLD DIVIDENDS 409,185 RECEIVABLE INTEREST 26,927 RECEIVABLE REDEMPTION FEES 362 RECEIVABLE TOTAL ASSETS 227,134,269 LIABILITIES PAYABLE TO $ 33,385 CUSTODIAN BANK PAYABLE FOR 2,503,192 INVESTMENTS PURCHASED PAYABLE FOR 955,624 FUND SHARES REDEEMED ACCRUED 116,384 MANAGEMENT FEE OTHER PAYABLES 169,271 AND ACCRUED EXPENSES TOTAL LIABILITIES 3,777,856 NET ASSETS $ 223,356,413 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 162,551,866 UNDISTRIBUTED 1,681,031 NET INVESTMENT INCOME ACCUMULATED 12,286,243 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 46,837,273 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 223,356,413 4,731,014 SHARES OUTSTANDING NET ASSET $47.21 VALUE AND REDEMPTION PRICE PER SHARE ($223,356,4 13 (DIVIDED BY) 4,731,014 SHARES) MAXIMUM $48.67 OFFERING PRICE PER SHARE (100/97.00 OF $47.21) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED) INVESTMENT $ 3,139,937 INCOME DIVIDENDS INTEREST 111,026 TOTAL INCOME 3,250,963 EXPENSES MANAGEMENT $ 713,494 FEE TRANSFER AGENT 728,643 FEES ACCOUNTING FEES 119,740 AND EXPENSES NON-INTERESTED 537 TRUSTEES' COMPENSATION CUSTODIAN FEES 13,078 AND EXPENSES REGISTRATION FEES 23,460 AUDIT 13,882 LEGAL 512 MISCELLANEOUS 1,401 TOTAL EXPENSES 1,614,747 BEFORE REDUCTIONS EXPENSE (16,415) 1,598,332 REDUCTIONS NET INVESTMENT 1,652,631 INCOME REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 12,409,982 SECURITIES FOREIGN (494) 12,409,488 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (1,819,234) SECURITIES ASSETS AND (57) (1,819,291) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) 10,590,197 NET INCREASE $ 12,242,828 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 104,820 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 12,846 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 23,453 WITHHELD BY FSC EXPENSE $ 16,390 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS TRANSFER 25 AGENT CREDITS $ 16,415 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ 1,652,631 $ 4,110,757 NET INVESTMENT INCOME NET REALIZED 12,409,488 12,598,841 GAIN (LOSS) CHANGE IN NET (1,819,291) 21,791,297 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE 12,242,828 38,500,895 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (984,947) (3,870,074) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (4,614,511) (20,286,738) REALIZED GAIN TOTAL (5,599,458) (24,156,812) DISTRIBUTIONS SHARE 21,469,535 128,552,346 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 5,426,243 23,344,588 OF DISTRIBUTIONS COST OF SHARES (67,082,856) (176,372,790) REDEEMED REDEMPTION 55,745 208,569 FEES NET INCREASE (40,131,333) (24,267,287) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (33,487,963) (9,923,204) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 256,844,376 266,767,580 PERIOD END OF PERIOD $ 223,356,413 $ 256,844,376 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $1,681,03 1 AND $1,654,36 0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 463,544 2,986,768 ISSUED IN 128,919 570,027 REINVESTMENT OF DISTRIBUTIONS REDEEMED (1,448,344) (4,168,871) NET INCREASE (855,881) (612,076) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 45.97 $ 43.03 $ 34.88 $ 36.61 $ 41.49 $ 37.18 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET .32 .73 1.10 1.13 1.33 1.19 INVESTMENT INCOME D NET REALIZED 1.99 6.41 7.86 (1.17) (.16) 6.14 AND UNREALIZED GAIN (LOSS) TOTAL FROM 2.31 7.14 8.96 (.04) 1.17 7.33 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.19) (.70) (.84) (1.05) (1.13) (1.33) INVESTMENT INCOME FROM NET (.89) (3.54) - (.67) (4.94) (1.70) REALIZED GAIN TOTAL (1.08) (4.24) (.84) (1.72) (6.07) (3.03) DISTRIBUTIONS REDEMPTION FEES .01 .04 .03 .03 .02 .01 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 47.21 $ 45.97 $ 43.03 $ 34.88 $ 36.61 $ 41.49 END OF PERIOD TOTAL RETURN B, C 5.33% 18.13% 25.82% .21% 2.53% 20.90% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 223,356 $ 256,844 $ 266,768 $ 237,635 $ 250,522 $ 290,718 OF PERIOD (000 OMITTED) RATIO OF 1.34% A 1.47% 1.39% 1.43% 1.36% 1.42% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.33% A, E 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 1.38% A 1.73% 2.76% 3.24% 3.11% 3.71% A INVESTMENT INCOME TO AVERAGE NET ASSETS PORTFOLIO 4% A 31% 65% 24% 61% 34% A TURNOVER RATE AVERAGE $ .0394 $ .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 historical performance, you can look at either total return or yield. Total return reflects the change in the 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1997 MONTHS YEAR YEARS YEARS MONEY MARKET 2.60% 5.14% 23.54% 72.20% MONEY MARKET -0.48% 1.99% 19.83% 67.03% (INCL. 3% SALES CHARGE) ALL TAXABLE 2.53% 5.02% 22.98% 70.73% MONEY MARKET FUNDS AVERAGE CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. For example, if you had 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 867 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 AUGUST 31, 1997 YEAR YEARS YEARS MONEY MARKET 5.14% 4.32% 5.59% MONEY MARKET 1.99% 3.68% 5.26% (INCL. 3% SALES CHARGE) ALL TAXABLE 5.02% 4.22% 5.49% 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: 5.25 ROW: 1, COL: 2, VALUE: 5.04 ROW: 1, COL: 3, VALUE: 2.67 ROW: 2, COL: 1, VALUE: 5.25 ROW: 2, COL: 2, VALUE: 5.02 ROW: 2, COL: 3, VALUE: 2.66 ROW: 3, COL: 1, VALUE: 4.71 ROW: 3, COL: 2, VALUE: 4.84 ROW: 3, COL: 3, VALUE: 2.63 ROW: 4, COL: 1, VALUE: 4.819999999999999 ROW: 4, COL: 2, VALUE: 4.88 ROW: 4, COL: 3, VALUE: 2.65 ROW: 5, COL: 1, VALUE: 4.87 ROW: 5, COL: 2, VALUE: 4.83 ROW: 5, COL: 3, VALUE: 2.68 6% - 4% - 2% - 0% MONEY MARKET ALL TAXABLE MONEY MARKET FUNDS AVERAGE MMDA 9/2/97 6/3/97 2/25/97 12/3/96 9/3/96 MONEY MARKET 5.09% 5.12% 4.71% 4.82% 4.87% All Taxable Money Market Funds Average 5.04% 5.02% 4.84% 4.88% 4.83% 9/3/97 5/28/97 2/26/97 11/27/96 8/28/96 MMDA 2.67% 2.66% 2.63% 2.65% 2.68% YIELD refers to the income paid by the fund over a given period. Yields for money market funds are usually for seven-day periods, expressed as annual percentage rates. A yield that assumes income earned is reinvested or compounded is called an effective yield. The chart above shows the fund's current seven-day yield at quarterly intervals over the past year. You can compare these yields to the all taxable money market funds average and the bank money market deposit account average (MMDA). Figures for the all taxable money market funds average are from 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 WAS THE INVESTING ENVIRONMENT LIKE OVER THE PAST SIX MONTHS? A. Just before the beginning of the period, Federal Reserve Board Chairman Alan Greenspan, in testimony before both houses of Congress, warned of the risk of inflation picking up if the Fed failed to respond to an economy that was growing at too rapid a pace. Growth in real gross domestic product (GDP) - meaning stated growth minus inflation - in the first quarter was unusually strong at an annual rate of 4.9%, and marked the first time in three years the real GDP grew in excess of 3% in back-to-back quarters. Given this momentum in the economy, the Fed chose to raise the rate banks charge each other for overnight loans - known as the fed funds rate - by 0.25% to 5.50% at its March meeting. However, when the early evidence suggested that growth in the second quarter would slow, the Fed chose not raise rates in subsequent meetings. Q. WHAT'S HAPPENED SINCE THEN? A. Growth in the second quarter came in at a 3.3% annual rate, showing that the economy continued to grow at an above-trend rate - that is, a rate that is believed to be above its capacity to expand without generating inflation. Much of this strength stemmed from export growth and from inventory investment. While growth in inventories may leave some with the impression that third- and fourth-quarter growth may soften, our research indicates that most companies purposely increased their inventories and have no plans to alter their production levels going forward. In addition, job and income growth remain strong, and consumer confidence is at or near record highs. So, all signs point to a continuation of consumer spending that in turn will continue to propel the economy. However, there has been little sign of inflation: The most recent data showed the consumer price index (CPI) up at only a 2.2% annual rate. Because of the lack of inflation, the Fed has held off raising interest rates since its March meeting, apparently abandoning the notion of heading off inflation before it emerges. At this point, the Fed appears willing to respond with higher interest rates only if actual evidence of inflation appears. Q. GIVEN THIS BACKDROP, WHAT STRATEGY DID YOU PURSUE? A. The fund started the period with an average maturity in the mid-60-day range. Progressing through March - when the Fed raised rates - I brought the maturity back to the low 50-day-range, a more neutral stance. In late April and early May, yields in the market started to factor in a more aggressive Fed posture than I expected to occur. As a result, I purchased more longer-term securities and extended the average maturity to the low 70s. As each of its meetings passed without the Fed taking action, it became evident that the Fed was going to hold pat in spite of strong economic growth, as long as inflation remained tame. Consequently, longer-term rates fell, with yields for shorter-term maturities becoming more attractive on a relative basis. In turn, the fund's maturity crept back down to 49 days by the end of the period, because we weren't being rewarded for purchasing investments on the longer end of the spectrum. Q. HOW DID THE FUND PERFORM? A. The fund's seven-day yield on August 31, 1997, was 5.12%, compared to 4.75% six months ago. The fund's total return during the six-month period was 2.60%, compared to 2.53% for the all taxable money market funds average, according to IBC Financial Data, Inc. Q. WHAT'S YOUR OUTLOOK? A. The Fed has been patient, willing to accept strong economic growth because trends in the broader inflation indices have been so favorable. The risk is that the best of the inflation news is behind us and that some degradation is experienced before the end of the year. If we continue to experience robust, above-trend economic growth and low unemployment, combined with any indication of emerging inflation, the Fed - which maintains a bias toward raising rates - will be quick to respond. In the meantime, while there is some chance the Fed will raise rates before the year is out, the most likely timing is early next year when wage pressures are likely to become evident. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: August 30, 1985 FUND NUMBER: 085 TRADING SYMBOL: FSMMKT SIZE: as of August 31, 1997, more than $808 million MANAGER: John Todd, since 1991; manager, Fidelity Cash Reserves, since April 1997; Spartan Money Market Fund, since 1989; short-term and money market investment for the Fidelity Asset Manager funds, since 1996; joined Fidelity in 1981 (checkmark) MONEY MARKET PORTFOLIO INVESTMENTS AUGUST 31, 1997 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities CERTIFICATES OF DEPOSIT - 44.1% ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) DOMESTIC CERTIFICATES OF DEPOSIT - 0.3% CHASE MANHATTAN BANK (U.S.A.) DELAWARE 9/9/97 5.57% $ 3,000,000 $ 3,000,000 NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 38.0% BANK OF TOKYO - MITSUBISHI LTD. 9/30/97 5.76 4,000,000 4,000,000 BANQUE NATIONALE DE PARIS 9/22/97 5.56 2,000,000 2,000,000 9/24/97 5.58 5,000,000 5,000,437 10/3/97 5.88 3,000,000 2,999,342 BARCLAYS BANK, PLC 9/22/97 5.55 5,000,000 5,000,000 BAYERISCHE HYPOTHEKEN-UND WESCHEL 9/8/97 5.53 16,000,000 16,000,000 9/23/97 5.85 10,000,000 9,999,888 BAYERISCHE LANDESBANK GIROZENTRALE 7/17/98 5.90 5,000,000 4,998,288 CAISSE NATIONALE DE CREDIT AGRICOLE 9/8/97 5.57 3,000,000 3,000,000 10/20/97 5.60 4,000,000 4,000,000 CANADIAN IMPERIAL BANK OF COMMERCE 9/22/97 5.53 40,000,000 40,000,000 COMMERZBANK, GERMANY 9/23/97 5.85 10,000,000 9,999,888 DEUTSCHE BANK, GERMANY 9/8/97 5.64 1,000,000 1,000,002 9/22/97 5.56 6,000,000 6,000,000 4/14/98 6.25 25,000,000 24,985,306 DRESDNER BANK A.G. 9/8/97 5.53 5,000,000 5,000,000 LANDESBANK HESSEN - THURINGEN 1/27/98 5.80 6,000,000 5,998,768 MIDLAND BANK, PLC 9/5/97 5.57 2,000,000 2,000,020 NATIONAL BANK OF CANADA 9/11/97 5.66 5,000,000 5,000,019 NATIONAL WESTMINSTER BANK, PLC 10/3/97 5.94 20,000,000 19,998,261 RABOBANK NEDERLAND, N.V. 3/20/98 6.00 5,000,000 4,999,214 3/24/98 6.05 5,000,000 4,998,398 ROYAL BANK OF CANADA 1/14/98 5.80 17,000,000 16,999,085 SANWA BANK, LTD. 9/25/97 5.75 4,000,000 4,000,026 10/2/97 5.65 3,000,000 3,000,000 SOCIETE GENERALE, FRANCE 10/20/97 5.56 24,000,000 24,000,000 2/3/98 5.70 7,700,000 7,698,001 SUMITOMO BANK, LTD. 10/9/97 5.75 1,000,000 1,000,000 SWISS BANK CORP. 12/30/97 6.04 15,000,000 15,000,000 1/20/98 5.70 10,000,000 10,000,000 8/19/98 5.91 5,000,000 4,998,155 8/28/98 5.97 5,000,000 4,997,636 ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) WESTDEUTSCHE LANDESBANK 9/16/97 5.53% $ 15,000,000 $ 15,000,000 12/22/97 5.62 2,000,000 2,000,000 295,670,734 LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 5.8% ABBEY NATIONAL, TREASURY SERVICES 9/24/97 5.65 3,000,000 3,000,000 ABN-AMRO BANK 1/14/98 5.70 3,000,000 3,000,100 BANK OF NOVA SCOTIA 9/9/97 5.58 3,000,000 3,000,000 BANQUE BRUXELLES LAMBERT S.A. 10/21/97 5.60 1,000,000 1,000,027 BANQUE NATIONALE DE PARIS 1/7/98 5.72 10,000,000 9,999,276 BARCLAYS BANK, PLC 10/3/97 5.55 8,000,000 8,000,000 BAYERISCHE VEREINSBANK A.G. 9/17/97 5.65 1,000,000 999,994 9/30/97 5.66 5,000,000 5,000,040 1/26/98 5.70 2,000,000 1,999,939 NATIONAL WESTMINSTER BANK, PLC 10/1/97 5.54 4,000,000 3,999,937 RABOBANK NEDERLAND, N.V. 3/9/98 5.96 5,000,000 4,998,766 44,998,079 TOTAL CERTIFICATES OF DEPOSIT 343,668,813 COMMERCIAL PAPER - 35.8% AC AQUISITION HOLDING CO. 9/9/97 5.58 2,000,000 1,997,542 9/10/97 5.60 1,000,000 998,615 AMERICAN EXPRESS CREDIT CORP. 9/8/97 5.57 10,000,000 9,989,267 ASSET SECURITIZATION COOP. CORP. 9/9/97 5.54 2,000,000 1,997,556 ASSOCIATES CORP. OF NORTH AMERICA 9/17/97 5.65 2,000,000 1,995,049 BANK OF NOVA SCOTIA 9/18/97 5.64 1,000,000 997,374 BELLATLANTIC FINANCIAL SERVICES 9/18/97 5.53 8,000,000 7,979,222 9/25/97 5.53 32,000,000 31,882,667 CIESCO, L.P. 9/3/97 5.57 2,000,000 1,999,387 9/8/97 5.57 2,000,000 1,997,854 CIT GROUP HOLDINGS, INC. 10/2/97 5.54 3,000,000 2,985,792 CREGEM NORTH AMERICA, INC. 9/11/97 5.66 2,000,000 1,996,900 9/18/97 5.65 1,000,000 997,370 9/23/97 5.66 1,000,000 996,590 9/24/97 5.66 1,000,000 996,435 EIGER CAPITAL CORP. 9/4/97 5.56 2,000,000 1,999,078 9/9/97 5.55 4,000,000 3,995,093 COMMERCIAL PAPER - CONTINUED ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) ENTERPRISE FUNDING CORP. 9/5/97 5.60% $ 2,000,000 $ 1,998,767 FINA OIL AND CHEMICAL COMPANY 9/17/97 5.57 1,000,000 997,538 FORD MOTOR CREDIT CORP. 10/17/97 5.57 1,700,000 1,688,053 GENERAL ELECTRIC CAPITAL CORP. 9/22/97 5.54 5,000,000 4,983,958 9/22/97 5.80 7,000,000 6,976,970 9/23/97 5.80 10,000,000 9,965,533 GENERAL ELECTRIC CAPITAL SERVICES, INC. 9/23/97 5.80 10,000,000 9,965,533 GENERAL MOTORS ACCEPTANCE CORP. 9/10/97 5.61 4,000,000 3,994,400 9/15/97 5.55 3,000,000 2,993,549 9/22/97 5.56 1,000,000 996,780 10/14/97 6.00 10,000,000 9,930,484 10/16/97 6.01 2,000,000 1,985,438 10/20/97 6.03 5,000,000 4,960,222 10/29/97 6.02 2,000,000 1,981,166 11/3/97 6.02 3,000,000 2,969,366 GTE CORP. 9/5/97 5.58 2,500,000 2,498,458 9/16/97 5.58 1,000,000 997,688 HOUSEHOLD FINANCE CORP. 9/17/97 5.53 25,000,000 24,938,889 MERRILL LYNCH & CO., INC. 9/23/97 5.54 3,000,000 2,989,898 MORGAN STANLEY DEAN WITTER DISCOVER, INC. 9/23/97 5.58 (a) 5,000,000 5,000,000 10/27/97 5.57 2,000,000 1,982,858 NATIONWIDE BUILDING SOCIETY 10/10/97 5.62 1,000,000 993,998 NORFOLK SOUTHERN CORP. 9/15/97 5.70 1,000,000 997,791 9/18/97 5.73 1,000,000 997,308 10/2/97 5.75 2,000,000 1,990,149 PREFERRED RECEIVABLES FUNDING CORP. 9/15/97 5.53 10,000,000 9,978,572 9/18/97 5.54 6,100,000 6,084,128 9/18/97 5.56 1,000,000 997,393 10/2/97 5.55 10,200,000 10,151,604 SEARS ROEBUCK ACCEPTANCE CORP. 9/17/97 5.56 1,000,000 997,547 TEXTRON, INC. 9/12/97 5.70 1,000,000 998,267 9/18/97 5.71 1,000,000 997,308 9/18/97 5.73 1,000,000 997,318 TRANSAMERICA FINANCIAL CORP. 9/22/97 5.53 10,000,000 9,967,917 TRIPLE A ONE FUNDING CORP. 9/8/97 5.55 2,000,000 1,997,853 9/11/97 5.68 1,000,000 998,444 9/12/97 5.55 11,000,000 10,981,413 9/16/97 5.54 2,000,000 1,995,400 UBS FINANCE, INC. 9/2/97 5.63 34,520,000 34,514,601 UNIFUNDING, INC. 9/10/97 5.68 1,000,000 998,600 TOTAL COMMERCIAL PAPER 278,232,950 FEDERAL AGENCIES - 0.6% ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) FEDERAL NATIONAL MORTGAGE ASSOC. - AGENCY COUPONS (A) 9/13/97 5.71% $ 5,000,000 $ 4,998,120 BANK NOTES - 1.5% KEY BANK NATIONAL ASSOCIATION (A) 9/24/97 5.58 4,000,000 3,997,915 MORGAN GUARANTY TRUST CO., NY (A) 9/2/97 5.77 5,000,000 4,998,556 PNC BANK (A) 9/11/97 5.59 3,000,000 2,999,478 TOTAL BANK NOTES 11,995,949 MASTER NOTES (A) - 2.2% J.P. MORGAN SECURITIES 9/2/97 5.75 17,000,000 17,000,000 MEDIUM-TERM NOTES (A) - 2.3% BANK ONE, COLUMBUS, N.A. 9/2/97 5.73 6,000,000 5,996,784 GENERAL MOTORS ACCEPTANCE CORP. 11/1/97 5.71 5,000,000 5,000,000 NORWEST CORP. 10/22/97 5.77 4,000,000 4,000,000 PNC BANK 9/27/97 5.59 3,000,000 2,998,715 TOTAL MEDIUM-TERM NOTES 17,995,499 SHORT-TERM NOTES (A) - 2.3% SMM TRUST (1996-P) (B) 9/16/97 5.66 5,000,000 5,000,000 SMM TRUST (1997-V) (B) 9/26/97 5.63 7,000,000 7,000,000 SMM TRUST (1997-W) (B) 9/16/97 5.64 6,000,000 6,000,000 TOTAL SHORT-TERM NOTES 18,000,000 TIME DEPOSITS - 11.1% BANK OF TOKYO - MITSUBISHI LTD. 9/2/97 5.63 1,000,000 1,000,000 9/8/97 5.63 2,000,000 2,000,000 9/22/97 5.61 2,000,000 2,000,000 10/2/97 5.66 3,000,000 3,000,000 DEN DANSKE BANK A/S 9/2/97 5.63 35,000,000 35,000,000 FIRST NATIONAL BANK OF CHICAGO 9/2/97 5.63 35,000,000 35,000,000 SUMITOMO BANK, LTD. 9/3/97 5.69 1,000,000 1,000,000 9/9/97 5.66 3,000,000 3,000,000 9/19/97 5.65 2,000,000 2,000,000 9/25/97 5.63 2,000,000 2,000,000 TOTAL TIME DEPOSITS 86,000,000 REPURCHASE AGREEMENTS - 0.1% MATURITY VALUE AMOUNT (NOTE 1) In a joint trading account (U.S. Treasury Obligations) dated 8/29/97 due 9/2/97 At 5.58% $ 631,391 $ 631,000 TOTAL INVESTMENTS - 100% $ 778,522,331 TOTAL COST FOR INCOME TAX PURPOSES - $778,522,331 LEGEND 1. The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due dates 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 $18,000,000 or 2.3% of net assets. MONEY MARKET PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1997 ASSETS INVESTMENT IN $ 778,522,331 SECURITIES, AT VALUE (INCLUDING REPURCHASE AGREEMENTS OF $631,000) - SEE ACCOMPANYIN G SCHEDULE CASH 42,017,070 INTEREST 5,978,810 RECEIVABLE TOTAL ASSETS 826,518,211 LIABILITIES PAYABLE FOR $ 18,007,311 INVESTMENTS PURCHASED DISTRIBUTIONS 30,709 PAYABLE ACCRUED 132,411 MANAGEMENT FEE OTHER PAYABLES 291,760 AND ACCRUED EXPENSES TOTAL LIABILITIES 18,462,191 NET ASSETS $ 808,056,020 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 808,048,742 ACCUMULATED 7,278 NET REALIZED GAIN (LOSS) ON INVESTMENTS NET ASSETS, FOR $ 808,056,020 808,043,484 SHARES OUTSTANDING NET ASSET $1.00 VALUE AND REDEMPTION PRICE PER SHARE ($808,056,0 20 (DIVIDED BY) 808,043,484 SHARES) MAXIMUM $1.03 OFFERING PRICE PER SHARE (100/97.00 OF $1.00) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1997 INTEREST INCOME $ 23,888,436 EXPENSES MANAGEMENT $ 885,196 FEE TRANSFER AGENT 993,116 FEES ACCOUNTING FEES 56,696 AND EXPENSES NON-INTERESTED 3,047 TRUSTEES' COMPENSATION CUSTODIAN FEES 14,048 AND EXPENSES REGISTRATION FEES 299,436 AUDIT 15,927 LEGAL 2,171 MISCELLANEOUS 7,365 TOTAL EXPENSES 2,277,002 BEFORE REDUCTIONS EXPENSE (1,117) 2,275,885 REDUCTIONS NET INTEREST 21,612,551 INCOME NET REALIZED (5,591) GAIN (LOSS) ON INVESTMENTS NET INCREASE IN $ 21,606,960 NET ASSETS RESULTING FROM OPERATIONS OTHER $ 1,165,228 INFORMATION SALES CHARGES PAID TO FDC DEFERRED SALES $ 54,557 CHARGES WITHHELD BY FDC EXPENSE $ 47 REDUCTIONS CUSTODIAN CREDITS TRANSFER 1,070 AGENT CREDITS $ 1,117 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1997 FEBRUARY 28, NET ASSETS (UNAUDITED) 1997 OPERATIONS $ 21,612,551 $ 38,377,980 NET INTEREST INCOME NET REALIZED (5,591) 9,751 GAIN (LOSS) NET INCREASE 21,606,960 38,387,731 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (21,612,551) (38,377,980) SHAREHOLDERS FROM NET INTEREST INCOME SHARE 3,710,441,632 7,030,225,686 TRANSACTIONS AT NET ASSET VALUE OF $1.00 PER SHARE PROCEEDS FROM SALES OF SHARES REINVESTMENT 20,023,609 35,577,810 OF DISTRIBUTIONS FROM NET INTEREST INCOME COST OF SHARES (3,770,571,514) (6,828,466,797) REDEEMED NET INCREASE (40,106,273) 237,336,699 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS TOTAL (40,111,864) 237,346,450 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 848,167,884 610,821,434 PERIOD END OF PERIOD $ 808,056,020 $ 848,167,884
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEARS ENDED TEN MONTHS ENDED AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 28, SELECTED (UNAUDITED) 1997 1996 1995 1994 1993 PER-SHARE DATA
NET ASSET VALUE, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 BEGINNING OF PERIOD INCOME FROM .026 .049 .054 .042 .026 .026 INVESTMENT OPERATIONS NET INTEREST INCOME LESS DISTRIBUTIONS FROM NET (.026) (.049) (.054) (.042) (.026) (.026) INTEREST INCOME NET ASSET VALUE, $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 END OF PERIOD TOTAL RETURN B 2.60% 5.02% 5.56% 4.28% 2.62% 2.63% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 808,056 $ 848,168 $ 610,821 $ 573,144 $ 518,657 $ 431,133 OF PERIOD (000 OMITTED) RATIO OF .54% A .56% .58% .65% .72% .56% A EXPENSES TO AVERAGE NET ASSETS RATIO OF NET 5.10% A 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 AUGUST 31, 1997 (UNAUDITED) 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Select Portfolios (the trust) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The trust has thirty-seven 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 (except for Cyclical Industries Portfolio and Natural Resources Portfolio) is not subject to U.S. federal income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. Cyclical Industries Portfolio and Natural Resources Portfolio intend to qualify as regulated investment companies under Subchapter M of the Internal Revenue Code. By so qualifying, each fund will not be subject to income taxes to the extent that it distributes substantially all of its taxable income for its fiscal year. The schedule of investments includes 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. PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears all organizational expenses except for registering and qualifying Cyclical Industries and Natural Resources, and shares of Cyclical Industries and Natural Resources for distribution under federal and state securities law. These expenses are borne by the funds and amortized over one year. 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. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED 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 (loss), distributions in excess of 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. 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 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. RESTRICTED SECURITIES. Certain funds are permitted to invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. 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 annual individual fund fee rate is .30%. For the period, the management fee was equivalent to an annualized rate that ranged from .59% to .60% of average net assets for the equity funds. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED MANAGEMENT FEE - CONTINUED For the money market fund, FMR receives a monthly fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund and an income-based fee. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .1100% to .3700% for the period. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The annual individual fund fee rate is .03%. The income-based fee is added only when the fund's gross yield exceeds 5%. At that time, the fee would equal 6% of that portion of the fund's gross income that represents a gross yield of more than 5% per year. The maximum income-based component is .24% of average net assets. For the period, the management fee was equivalent to an annualized rate of .21% of the fund's average net assets. SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FMR Texas Inc., a wholly owned subsidiary of FMR, receives a fee from FMR of 50% of the management fee payable to FMR. The fee is paid prior to any voluntary expense reimbursements which may be in effect. SALES LOAD. Fidelity Distributors Corporation (FDC), an affiliate of FMR, is the general distributor of each fund. FDC is paid a 3% sales charge on sales of shares of each fund. Prior to October 12, 1990, FDC was paid a 2% sales charge and a 1% deferred sales charge. Shares purchased before October 12, 1990 are subject to the deferred sales charge upon redemption or exchange to any other Fidelity fund (other than Select funds). The amounts received by FDC for sales charges and deferred sales charges are shown under the caption "Other Information" on each fund's Statement of Operations. TRANSFER AGENT FEES. Fidelity Service Co., Inc. (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. 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 $24,295 for Construction and Housing Portfolio, $58,361 for Cyclical Industries Portfolio and $62,729 for Natural Resources Portfolio. FMR has directed certain portfolio trades to brokers who paid a portion of certain equity fund's expenses. In addition, certain funds have entered into arrangements with their custodian and transfer agent whereby interest earned on uninvested cash 8. EXPENSE REDUCTIONS - CONTINUED 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 FMR Capital, an affiliate of FMR, was record owner of 5% or more of the outstanding shares, and certain unaffiliated shareholders were record owners of 10% or more of the total outstanding shares of the following funds: BENEFICIAL INTEREST NUMBER OF FMR CAPITAL UNAFFILIATED % OF UNAFFILIATED FUND % OF OWNERSHIP SHAREHOLDERS OWNERSHIP Construction and Housing - 1 12.5% Cyclical Industries 26.7% - - Natural Resources 15.2% - - 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 shown under the caption "Other Information" following each applicable fund's schedule of investments. 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 Robert C. Pozen, SENIOR VICE PRESIDENT William J. Hayes, VICE PRESIDENT Fred L. Henning Jr., VICE PRESIDENT, MONEY MARKET FUND Boyce I. Greer, VICE PRESIDENT, MONEY MARKET FUND Arthur S. Loring, SECRETARY Richard A. Silver, 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 Ralph F. Cox * Phyllis Burke Davis * Robert M. Gates * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Marvin L. Mann * William O. McCoy * Gerald C. McDonough * Robert C. Pozen Thomas R. Williams * ADVISORY BOARD J. Gary Burkhead 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 SUPPLEMENT TO THE FIDELITY SELECT PORTFOLIOS(registered trademark) AUGUST 31, 1997 SEMIANNUAL REPORT The following information replaces the similar information found on pages 185 and 216 of the Performance and Investment Summary section in the enclosed report. DEVELOPING COMMUNICATIONS PORTFOLIO (PAGE 185) TOP INDUSTRIES AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS ROW: 1, COL: 1, VALUE: 40.1 ROW: 1, COL: 2, VALUE: 4.4 ROW: 1, COL: 3, VALUE: 4.5 ROW: 1, COL: 4, VALUE: 7.0 ROW: 1, COL: 5, VALUE: 18.9 ROW: 1, COL: 6, VALUE: 25.1 SEMICONDUCTORS 25.1% TELEPHONE EQUIPMENT 18.9% MINI & MICRO COMPUTERS 7.0% ELECTRICAL MACHINERY 4.5% CELLULAR & COMMUNICATION SERVICES 4.4% ALL OTHERS 40.1% * * INCLUDES SHORT-TERM INVESTMENTS TELECOMMUNICATIONS PORTFOLIO (PAGE 216) TOP INDUSTRIES AS OF AUGUST 31, 1997 % OF FUND'S INVESTMENTS ROW: 1, COL: 1, VALUE: 17.7 ROW: 1, COL: 2, VALUE: 4.4 ROW: 1, COL: 3, VALUE: 5.8 ROW: 1, COL: 4, VALUE: 7.3 ROW: 1, COL: 5, VALUE: 8.1 ROW: 1, COL: 6, VALUE: 56.7 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 56.7% TELEPHONE EQUIPMENT 8.1% ELECTRICAL MACHINERY 7.3% COMMUNICATIONS SERVICES 5.8% SEMICONDUCTORS 4.4% ALL OTHERS 17.7% * * INCLUDES SHORT-TERM INVESTMENTS
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