-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, dv/fqLtj6YMtaj44FP2i+ItKrS2wUmP28fLaavCLBiDa1eCpPyQRTThvnbBF5sWe g0WUQN3WkvvIlS00TKeobg== 0000320351-95-000015.txt : 19950427 0000320351-95-000015.hdr.sgml : 19950427 ACCESSION NUMBER: 0000320351-95-000015 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950228 FILED AS OF DATE: 19950426 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY SELECT PORTFOLIOS CENTRAL INDEX KEY: 0000320351 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 042732797 STATE OF INCORPORATION: MA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-03114 FILM NUMBER: 95531264 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 PRODUCTS DEFENSE AND AEROSPACE DEVELOPING COMMUNICATIONS ELECTRONICS ENERGY ENERGY SERVICE ENVIRONMENTAL SERVICES FINANCIAL SERVICES FOOD AND AGRICULTURE HEALTH CARE HOME FINANCE INDUSTRIAL EQUIPMENT INDUSTRIAL MATERIALS INSURANCE LEISURE MEDICAL DELIVERY MONEY MARKET MULTIMEDIA NATURAL GAS PAPER AND FOREST PRODUCTS PRECIOUS METALS AND MINERALS REGIONAL BANKS RETAILING SOFTWARE AND COMPUTER SERVICES TECHNOLOGY TELECOMMUNICATIONS TRANSPORTATION UTILITIES GROWTH ANNUAL REPORT FOR THE YEAR ENDING FEBRUARY 28, 1995 AND PROSPECTUS DATED APRIL 29, 1995 CONTENTS
PERFORMANCE OVERVIEW AND MARKET RECAP A-2 FUND UPDATES* CONSUMER SECTOR CONSUMER PRODUCTS FOOD AND AGRICULTURE LEISURE MULTIMEDIA RETAILING CYCLICALS SECTOR AIR TRANSPORTATION AUTOMOTIVE CHEMICALS CONSTRUCTION AND HOUSING ENVIRONMENTAL SERVICES INDUSTRIAL EQUIPMENT INDUSTRIAL MATERIALS PAPER AND FOREST PRODUCTS TRANSPORTATION ENERGY, UTILITIES AND AMERICAN GOLD NATURAL RESOURCES SECTOR ENERGY ENERGY SERVICE NATURAL GAS PRECIOUS METALS AND MINERALS UTILITIES GROWTH FINANCIAL SERVICES SECTOR BROKERAGE AND INVESTMENT MANAGEMENT FINANCIAL SERVICES HOME FINANCE INSURANCE REGIONAL BANKS HEALTH CARE SECTOR BIOTECHNOLOGY HEALTH CARE MEDICAL DELIVERY TECHNOLOGY SECTOR COMPUTERS DEFENSE AND AEROSPACE DEVELOPING COMMUNICATIONS ELECTRONICS SOFTWARE AND COMPUTER SERVICES TECHNOLOGY TELECOMMUNICATIONS MONEY MARKET NOTES TO FINANCIAL STATEMENTS FOOTNOTES TO THE FINANCIAL STATEMENTS REPORT OF INDEPENDENT ACCOUNTANTS THE AUDITOR'S OPINION DISTRIBUTIONS STATISTICAL ROUNDUP FIDELITY SELECT PORTFOLIOS PROSPECTUS P-1 * FUND UPDATES FOR EACH SELECT PORTFOLIO INCLUDE: PERFORMANCE AND INVESTMENT SUMMARY, MANAGER'S OVERVIEW, INVESTMENTS, AND FINANCIAL STATEMENTS.
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, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. PERFORMANCE OVERVIEW DEAR SHAREHOLDER: The 12-month period ended February 28, 1995, was a relatively good year for equity investors, considering that it was one of the worst ever for fixed-income investors. The Standard & Poor's Composite Index of 500 Stocks returned 7.36% during the period, including reinvested dividends. Overall, 15 of our 35 Select equity funds outperformed the S&P 500, with considerable variation among the funds' returns. On balance, 22 of the 35 funds generated positive returns. On top was Health Care, which generated a return of 31.24%, while at the bottom was American Gold, which produced a loss of 18.62%. Strong economic activity in the United States and rising prices for certain commodities caused the Federal Reserve Board to raise short-term interest rates six times over the past 12 months. Rising interest rates negatively impacted funds such as Construction and Housing, and Brokerage and Investment Management, which produced losses of 12.54% and 12.62%, respectively. Rising commodity prices that resulted from the improving economy, however, benefited Paper and Forest Products, and Chemicals, as these funds generated returns of 14.91% and 9.90%, respectively. Interestingly, as calendar 1994 progressed, the perception that prior interest rate increases were having the desired effect of slowing economic growth and relieving pressures on capital demands benefited the FINANCIAL SERVICES sector. In addition, strong loan growth and adequate profit margins, combined with merger activity, provided a favorable market environment for this group. As a result, Financial Services, Home Finance, Insurance, and Regional Banks all posted positive returns for the 12-month period. These same forces served to reduce perceived inflationary pressures and the NATURAL RESOURCES sector suffered as a result. Precious Metals and Minerals, and American Gold suffered losses for the year. The TECHNOLOGY sector continued to benefit from the upswing in capital spending geared toward enhancing corporate productivity. Higher shipments of personal computers and cellular telephones resulted from falling prices for these products. All of the funds in this sector posted positive returns over the past year, with Developing Communications, Computers, and Electronics leading the way. As mentioned, two of the HEALTH CARE sector funds - Health Care and Medical Delivery - achieved the highest returns for the 12 months. As the industry has found it increasingly difficult to pass along rising costs to consumers, companies have attempted to reconcile oversupply conditions through merger and acquisition activity. As a result, health care companies have enjoyed higher profitability levels due to improving operating efficiencies that stem from these activities. Also, the lack of regulatory actions under President Clinton's health care reform agenda lifted a major cloud over the entire sector. All of these factors combined led to a positive environment for this industry and mostly higher stock prices. After a period of good performance in the first half of 1994, Select funds which purchase CYCLICALS - those stocks that tend to rise and fall in step with the economy - generally posted lackluster returns. Largely, this stemmed from the market anticipating a slowdown in economic activity resulting from the environment of higher interest rates. Such a slowdown would result in lower profitability levels for the cyclical group. As a result, Industrial Equipment, Air Transportation, and Automotive posted losses for the year. The results, however, were not uniform as both Industrial Materials and Transportation were able to post modest positive returns. Returns in the CONSUMER PRODUCTS sector were divergent. Food and Agriculture - another fund that benefited from merger and acquisition activity - posted a solid gain of 10.14% over the one-year period. Retailing, however, suffered from an environment in which competition forced retailers to discount prices heavily. And the corresponding negative effects on retailers' earnings more than offset the positive effects of a more robust economy. This environment is symptomatic of an oversupply condition in the United States; there are simply too many stores competing for consumers' dollars. Consumer Products, meanwhile, generated a modest loss as companies in this sector found it increasingly difficult to exact higher prices for their products to offset rising internal costs. The ENERGY sector continued to turn in mixed results. Energy Service and Energy generated positive returns while Natural Gas produced a loss. Oil prices, though volatile, were largely flat during the year; however, the price of natural gas was certainly lower. Hence, Energy Service and Energy were able to adjust holdings to take advantage of oil fundamentals while Natural Gas, given its objective, suffered due to poor natural gas fundamentals. Rising interest rates and increasing competition in the UTILITY sector provided the backdrop for a hostile operating environment. Nevertheless, Utilities Growth was able to post a small positive return by focusing on telephone utilities over electric utilities. The past 12 months have been a very interesting period for financial investments, considering the very rapid rise in interest rates. Surprisingly, the stock market performed remarkably well considering stocks were fairly expensive relative to historical benchmarks. However, higher yields have made fixed-income investments a more competitive alternative to stocks over the past year. So Select investors should maintain reasonable expectations in the months ahead. What follows are detailed summaries of all the funds. We hope you find them useful in evaluating your investments. As always, we thank you for your continued interest in Fidelity Select Portfolios. Sincerely, Bart A. Grenier Select Group Leader CUMULATIVE TOTAL RETURNS* FOR THE YEAR ENDED FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 31.24 Row: 2, Col: 1, Value: 19.63 Row: 3, Col: 1, Value: 14.91 Row: 4, Col: 1, Value: 13.63 Row: 5, Col: 1, Value: 13.51 Row: 6, Col: 1, Value: 12.43 Row: 7, Col: 1, Value: 12.05 Row: 8, Col: 1, Value: 10.14 Row: 9, Col: 1, Value: 9.9 Row: 10, Col: 1, Value: 9.789999999999999 Row: 11, Col: 1, Value: 9.350000000000001 Row: 12, Col: 1, Value: 7.98 Row: 13, Col: 1, Value: 7.79 Row: 14, Col: 1, Value: 7.649999999999999 Row: 15, Col: 1, Value: 7.6 Row: 16, Col: 1, Value: 7.359999999999999 Row: 17, Col: 1, Value: 5.9 Row: 18, Col: 1, Value: 4.72 Row: 19, Col: 1, Value: 4.609999999999999 Row: 20, Col: 1, Value: 4.13 Row: 21, Col: 1, Value: 1.97 Row: 22, Col: 1, Value: 0.21 Row: 23, Col: 1, Value: 0.04 Row: 24, Col: 1, Value: -1.07 Row: 25, Col: 1, Value: -1.93 Row: 26, Col: 1, Value: -4.01 Row: 27, Col: 1, Value: -4.59 Row: 28, Col: 1, Value: -5.06 Row: 29, Col: 1, Value: -6.859999999999999 Row: 30, Col: 1, Value: -8.370000000000001 Row: 31, Col: 1, Value: -12.45 Row: 32, Col: 1, Value: -12.54 Row: 33, Col: 1, Value: -12.59 Row: 34, Col: 1, Value: -12.62 Row: 35, Col: 1, Value: -13.91 Row: 36, Col: 1, Value: -18.62 Health Care 31.24%Medical Delivery 19.63%Paper and Forest Products 14.91%Developing Communications 13.63%Computers 13.51%Home Finance 12.43%Electronics 12.05%Food and Agriculture 10.14%Chemicals 9.90%Insurance 9.79%Multimedia 9.35%Telecommunications 7.98%Regional Banks 7.79%Industrial Materials 7.65%Energy Service 7.60%S&P 500 7.36%Transportation 5.90%Financial Services 4.72%Technology 4.61%Defense and Aerospace 4.13%Software and Computer Services 1.97%Utilities Growth 0.21%Energy 0.04%Leisure -1.07%Industrial Equipment -1.93%Retailing - -4.01%Consumer Products -4.59%Natural Gas -5.06%Precious Metals and Minerals -6.86%Biotechnology -8.37%Air Transportation - -12.45%Construction and Housing -12.54%Automotive -12.59%Brokerage and Investment Management -12.62%Environmental Services -13.91%American Gold - -18.62% CONSUMER PRODUCTS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). If Fidelity had not reimbursed certain fund expenses during the period, the fund's total return would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF FEBRUARY 28, 1995 YEAR FUND CONSUMER PRODUCTS -4.59% 74.97% CONSUMER PRODUCTS (INCL. 3% SALES CHARGE) -7.45% 69.72% S&P 500 7.36% 57.13% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year or since the fund started on June 29, 1990. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF FEBRUARY 28, 1995 YEAR FUND CONSUMER PRODUCTS -4.59% 12.72% CONSUMER PRODUCTS (INCL. 3% SALES CHARGE) -7.45% 11.98% S&P 500 7.36% 10.14% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Consumer Products (5Standard & Poor's 50 06/29/90 9700.00 10000.00 06/30/90 9700.00 10013.01 07/31/90 9670.90 9980.97 08/31/90 8943.40 9078.69 09/30/90 8439.00 8636.56 10/31/90 8749.40 8599.42 11/30/90 9234.40 9154.94 12/31/90 9593.72 9410.37 01/31/91 9808.43 9820.66 02/28/91 10569.68 10522.84 03/31/91 11077.18 10777.49 04/30/91 10950.30 10803.35 05/31/91 11477.32 11270.06 06/30/91 10911.27 10753.89 07/31/91 11623.72 11255.02 08/31/91 12101.94 11521.77 09/30/91 11994.59 11329.35 10/31/91 12375.21 11481.17 11/30/91 11857.95 11018.48 12/31/91 13290.06 12278.99 01/31/92 13379.45 12050.60 02/29/92 13836.36 12207.26 03/31/92 13677.44 11969.22 04/30/92 13717.17 12321.11 05/31/92 13627.77 12381.48 06/30/92 13015.68 12197.00 07/31/92 13388.15 12695.86 08/31/92 13253.65 12435.59 09/30/92 13377.80 12582.33 10/31/92 13595.08 12626.37 11/30/92 14246.90 13056.93 12/31/92 14427.77 13217.53 01/31/93 14331.66 13328.56 02/28/93 13851.09 13509.83 03/31/93 14662.72 13794.88 04/30/93 14566.61 13461.05 05/31/93 15719.97 13821.80 06/30/93 15730.65 13861.89 07/31/93 15880.16 13806.44 08/31/93 16916.06 14329.70 09/30/93 17289.84 14219.36 10/31/93 17823.80 14513.70 11/30/93 17428.67 14375.82 12/31/93 17987.72 14549.77 01/31/94 17835.98 15044.46 02/28/94 17789.29 14636.76 03/31/94 16645.36 13998.60 04/30/94 16823.06 14177.78 05/31/94 16600.01 14410.29 06/30/94 15684.31 14057.24 07/31/94 16106.94 14518.32 08/31/94 17046.12 15113.57 09/30/94 16729.14 14743.29 10/31/94 17057.86 15075.01 11/30/94 16224.33 14525.98 12/31/94 16716.10 14741.40 01/31/95 16569.68 15123.64 02/28/95 16972.33 15713.01 Let's say you invested $10,000 in Fidelity Select Consumer Products Portfolio on June 29, 1990, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $16,972 - a 69.72% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $15,713 over the same period - a 57.13% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS PepsiCo, Inc. 5.2 Philip Morris Companies, Inc. 5.2 Disney (Walt) Co. 4.9 Gillette Co. 4.5 Johnson & Johnson 4.4 Coca-Cola Company (The) 4.0 RJR Nabisco Holdings Corp. 3.9 Procter & Gamble Co. 3.8 Avon Products, Inc. 3.8 Alberto-Culver Co. Class A 3.5 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 59.2 Row: 1, Col: 2, Value: 5.5 Row: 1, Col: 3, Value: 5.5 Row: 1, Col: 4, Value: 6.2 Row: 1, Col: 5, Value: 9.199999999999999 Row: 1, Col: 6, Value: 14.4 Cosmetics 14.4% Soft Drinks 9.2% Drugs 6.2% Cellular & Communication Services 5.5% Soaps & Detergents 5.5% All Others 59.2%* * INCLUDES SHORT-TERM INVESTMENTS CONSUMER PRODUCTS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Mary English, Portfolio Manager of Fidelity Select Consumer Products Portfolio Q. HOW HAS THE FUND PERFORMED, MARY? A. The fund's return of -4.59% for the year ended February 28, 1995, trailed the S&P 500's return of 7.36% for the same period. Q. WHY DIDN'T THE FUND PERFORM BETTER? A. During the first half of the year, cyclical stocks - those that perform well when the economy is strong - outperformed growth stocks. Technology, in which the fund was underweighted, was also particularly strong. By the second half, cyclicals began to lag and consumer non-durables began to look more stable. These defensive stocks are more attractive, especially if interest rates rise. While this was good for the fund, in hindsight I wish the fund was more heavily weighted in non-durables such as Kimberly Clark and General Mills. Despite technology stock as a group being strong, the fund was hurt when specific holdings such as Nokia, a Finnish cellular phone manufacturer, and Compaq, a personal computer manufacturer, fell early in 1995. Q. WHAT HAPPENED TO THOSE STOCKS? A. Nokia is a Finnish cellular telephone company with strong earnings growth. The stock suffered when Motorola, one of its leading competitors, announced it had an excess supply of cellular phones. This drove down the stock price for all competitors. Compaq, a well-run personal computer manufacturer, lost more than 20% of its value early in the year when the company released earnings that were good, but slightly below Wall Street's expectations. These two stories are good examples of why I didn't have more technology exposure in the fund; I don't like the volatility that may go along with them. Q. YOU'VE MADE A LOT OF CHANGES TO THE FUND'S TOP 10 HOLDINGS IN THE PAST SIX MONTHS. WHAT WAS YOUR STRATEGY? A. The fund was heavily weighted in basic consumer goods; typically recession-resistant, defensive stocks that have good growth prospects. I especially favor those with a strong global presence. Although nobody knows what the economy will do next, I think the top stocks in the fund should fare well in a recession, and are good values if economic factors remain unchanged. For example, PepsiCo is new to the fund, and was its largest holding at the end of February. Pepsi is a food company as well as a beverage company; and people still eat and drink regardless of what the economy is doing. I also like the tobacco companies such as Philip Morris and RJR Nabisco, which are both inexpensive and have been excellent cash flow generators. Q. WHAT OTHER STOCKS DO YOU LIKE? A. I've increased the fund's holding in Disney. The company's feature releases and subsequent video sales have been strong and it's been a great investment for the fund. I also like companies that sell basic products and are able to raise prices while maintaining earnings growth. Gillette is a good example. The company is unusual because it's been able to raise prices every year, even during a period of non-inflation. Finally, Tambrands is another favorite with an extraordinarily strong brand name. Q. THE FUND HAS A BROAD UNIVERSE OF STOCKS IN WHICH TO INVEST. WHAT SECTORS ARE YOU STAYING AWAY FROM? A. I've cut the number of the fund's holdings from about 80 stocks to about 50 because I think the fund can benefit from a more narrow focus. I've stayed away from industries in which I perceive a deterioration in business prospects, such as airlines. I also think the auto cycle has peaked, so I'm staying away from auto-related stocks. Retail, with few exceptions, does not excite me. In addition, I'm convinced that the current interest rate environment is a negative for industries that have anything to do with the home such as appliances, furniture and carpet. Q. WHAT'S YOUR OUTLOOK GOING FORWARD? A. I think there will continue to be a significant degree of uncertainty in the market, and the economy in general. Uncertainty, however, is good for basic, consumer stocks in which the fund has invested. I'll probably maintain the fund's defensive strategy and continue to reduce the number of stocks that the fund holds. However, I may add some entertainment and apparel stocks if their valuations - prices relative to earnings - become more attractive. FUND FACTS START DATE: June 29, 1990 SIZE: as of February 28, 1995, more than $20 million MANAGER: Mary English, since February 1994; manager, Fidelity Select Retailing Portfolio, 1993-1994; equity analyst, specialty retail and advertising industries, 1991-1993; joined Fidelity in 1991 (checkmark) CONSUMER PRODUCTS PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 96.3% SHARES VALUE (NOTE 1) ADVERTISING - 0.4% ADVERTISING AGENCIES - 0.4% Saatchi & Saatchi Co. sponsored ADR (a) 20,000 $ 90,000 78514340 AIR TRANSPORTATION - 3.2% AIR TRANSPORTATION, REGIONAL - 3.2% Pittston Company Services Group 27,000 675,000 72570110 AUTOS, TIRES, & ACCESSORIES - 2.0% AUTO & TRUCK PARTS - 2.0% Echlin, Inc. 12,000 415,500 27874910 BEVERAGES - 10.3% MALT BEVERAGE - 1.1% Anheuser-Busch Companies, Inc. 4,000 225,500 03522910 SOFT DRINKS - 9.2% Coca-Cola Company (The) 15,000 825,000 19121610 PepsiCo, Inc. 28,000 1,095,500 71344810 1,920,500 TOTAL BEVERAGES 2,146,000 BROADCASTING - 1.9% CABLE TV OPERATORS - 1.9% Viacom, Inc. Class A (a) 8,600 397,750 92552410 CELLULAR - 5.5% CELLULAR & COMMUNICATION SERVICES - 5.5% Airtouch Communications (a) 24,000 654,000 00949T10 BCE Mobile Communications, Inc. (a) 12,100 406,004 05534G10 Vodafone Group PLC sponsored ADR 3,000 91,500 92857T10 TOTAL CELLULAR 1,151,504 COMMUNICATIONS EQUIPMENT - 1.8% DATACOMMUNICATIONS EQUIPMENT - 0.2% ITI Technologies (a) 2,000 49,500 45056410 TELEPHONE EQUIPMENT - 0.9% DSC Communications Corp. (a) 5,000 180,000 23331110 TELEPHONE INTERCONNECT SYSTEMS - 0.7% General Instrument Corp. (a) 4,500 142,875 37012110 TOTAL COMMUNICATIONS EQUIPMENT 372,375 COMPUTER SERVICES & SOFTWARE - 1.1% COMPUTER RELATED SERVICES - 0.0% TGV Software (a) 200 3,200 87242310 COMPUTER SERVICES - 0.4% America Online, Inc. (a) 1,000 71,000 02364J10 PREPACKAGED COMPUTER SOFTWARE - 0.7% Intuit (a) 2,000 132,500 46120210 Softkey International, Inc. (a) 800 20,400 83402N10 152,900 TOTAL COMPUTER SERVICES & SOFTWARE 227,100 COMPUTERS & OFFICE EQUIPMENT - 2.1% MINI & MICRO COMPUTERS - 2.1% Compaq Computer Corp. (a) 13,000 448,500 20449310 CONGLOMERATES - 0.3% Dial Corp. (The) 2,600 65,000 25247010 CONSUMER ELECTRONICS - 1.3% APPLIANCES - 1.3% Black & Decker Corp. 10,000 267,500 09179710 SHARES VALUE (NOTE 1) DRUGS & PHARMACEUTICALS - 6.2% DRUGS - 6.2% Pfizer, Inc. 7,000 $ 579,250 71708110 Schering-Plough Corp. 9,000 705,375 80660510 TOTAL DRUGS & PHARMACEUTICALS 1,284,625 ELECTRICAL EQUIPMENT - 0.9% ALARMS & SIGNAL DEVICES - 0.9% Pittway Corp. (Del.) Class A 2,000 90,000 72579020 Sensormatic Electronics Corp. 3,600 102,150 81726510 TOTAL ELECTRICAL EQUIPMENT 192,150 ELECTRONIC INSTRUMENTS - 1.7% INDUSTRY MEASUREMENT INSTRUMENTS - 1.7% American Sensors, Inc. (a) 34,000 361,250 02957910 ENTERTAINMENT - 4.9% MOTION PICTURE PRODUCTION - 4.9% Disney (Walt) Co. 19,000 1,014,125 25468710 FOODS - 0.9% COOKIES & CRACKERS - 0.9% Nabisco Holdings Class A 7,000 194,250 62952610 GENERAL MERCHANDISE STORES - 0.6% Wal-Mart Stores, Inc. 5,000 118,750 93114210 GROCERY STORES - 0.2% GROCERY - RETAIL - 0.2% Stop & Shop Companies, Inc. (a) 2,000 48,500 86209910 HOUSEHOLD PRODUCTS - 23.0% COSMETICS - 14.4% Alberto-Culver Co. Class A 29,000 721,375 01306820 Avon Products, Inc. 14,000 787,500 05430310 Gillette Co. 12,000 949,500 37576610 Helene Curtis Industries, Inc. 14,000 406,000 42323610 Tambrands, Inc. 3,000 129,750 87508010 2,994,125 FABRICATED RUBBER PRODUCTS - 0.7% Premark International, Inc. 3,500 151,375 74045910 MANUFACTURED PRODUCTS - 2.4% Luxottica Group Spa sponsored ADR 13,000 505,375 55068R20 SOAPS & DETERGENTS - 5.5% Guest Supply, Inc. (a) 10,000 182,500 40163010 Procter & Gamble Co. 12,000 798,000 74271810 Rubbermaid, Inc. 5,000 158,125 78108810 1,138,625 TOTAL HOUSEHOLD PRODUCTS 4,789,500 LEISURE DURABLES & TOYS - 0.9% SPORTING & ATHLETIC GOODS - 0.6% Cobra Golf, Inc. (a) 3,600 117,225 19090710 TOYS & GAMES - 0.3% Mattel, Inc. 3,000 67,125 57708110 TOTAL LEISURE DURABLES & TOYS 184,350 LODGING & GAMING - 1.7% HOTELS, MOTELS, & TOURIST COURTS - 1.7% Host Marriott Corp. (a) 16,000 176,000 44107810 Promus Companies, Inc. (a) 5,000 178,750 74342A10 TOTAL LODGING & GAMING 354,750 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) MEDICAL EQUIPMENT & SUPPLIES - 4.4% MEDICAL SUPPLIES & APPLIANCES - 4.4% Johnson & Johnson 16,000 $ 908,000 47816010 SERVICES - 11.9% BUILDING MAINTENANCE - 0.6% ADT Ltd. (a) 11,000 126,500 00091530 BUSINESS SERVICES - 2.6% Franklin Quest Co. (a) 15,000 534,375 35459610 COMMERCIAL, ECONOMIC, SOCIOLOGICAL, & EDUCATIONAL RESEARCH - 1.0% Gartner Group, Inc. Class A (a) 5,000 207,500 36665110 CREDIT REPORTING AGENCIES - 0.3% First Financial Management Corp. 1,000 69,125 32024510 GENERAL SERVICES - 0.5% Children's Discovery Centers of America, Inc. (a) 7,000 107,625 16875720 PERSONAL SERVICES - 1.8% Block (H & R), Inc. 10,000 376,250 09367110 PERSONNEL SUPPLY SERVICES - 5.1% Adia SA (BR) (a) 500 92,892 00699793 CDI Corp. (a) 8,000 176,000 12507110 Career Horizons, Inc. (a) 10,000 192,500 14167210 Manpower, Inc. 2,000 58,500 56418H10 Norrell Corp. GA 27,000 533,250 65630110 1,053,142 TOTAL SERVICES 2,474,517 TOBACCO - 9.1% CIGARETTES - 3.9% RJR Nabisco Holdings Corp. 146,000 821,250 74960K10 TOBACCO MANUFACTURERS - 5.2% Philip Morris Companies, Inc. 18,000 1,093,500 71815410 TOTAL TOBACCO 1,914,750 TOTAL COMMON STOCKS (Cost $19,800,458) 20,095,746 REPURCHASE AGREEMENTS - 3.7% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $ 774,131 774,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $20,574,458) $ 20,869,746 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $28,154,852 and $15,065,584, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $14,756 for the period (see Note 5 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $20,586,329. Net unrealized appreciation aggregated $283,417 of which $762,046 related to appreciated investment securities and $478,629 related to depreciated investment securities. CONSUMER PRODUCTS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $774,000) (cost $20,574,458) - See $ 20,869,746 accompanying schedule Cash 318 Receivable for investments sold 296,936 Receivable for fund shares sold 93,861 Dividends receivable 10,895 Redemption fees receivable 148 TOTAL ASSETS 21,271,904 LIABILITIES Payable for investments purchased $ 672,914 Payable for fund shares redeemed 61,288 Accrued management fee 7,738 Other payables and 28,658 accrued expenses TOTAL LIABILITIES 770,598 NET ASSETS $ 20,501,306 Net Assets consist of: Paid in capital $ 20,136,706 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 69,312 Net unrealized appreciation (depreciation) on investments 295,288 NET ASSETS, for 1,474,086 $ 20,501,306 shares outstanding NET ASSET VALUE and redemption price per share ($20,501,306 (divided by) 1,474,086 shares) $13.91 Maximum offering price per share (100/97.00 of $13.91) $14.34
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 78,196 Dividends Interest 33,699 TOTAL INCOME 111,895 EXPENSES Management fee $ 49,334 Transfer agent 85,795 Fees Redemption fees (6,173 ) Accounting fees and expenses 45,039 Non-interested trustees' compensation 110 Custodian fees and expenses 14,974 Registration fees 13,528 Audit 19,244 Legal 142 Reports to shareholders 798 Miscellaneous 52 Total expenses before reductions 222,843 Expense reductions (25,822 197,021 ) NET INVESTMENT INCOME (LOSS) (85,126 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 323,209 Foreign currency transactions (2 323,207 ) Change in net unrealized appreciation (depreciation) on investment securities (648,664 ) NET GAIN (LOSS) (325,457 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (410,583 ) OTHER INFORMATION $28,529 Sales Charges Paid to FDC Deferred sales charges $1,621 withheld by FDC Exchange fees withheld by FSC $4,928
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ (85,126 $ (120,101 Net investment income (loss) ) ) Net realized gain (loss) 323,207 1,327,222 Change in net unrealized appreciation (depreciation) (648,664 607,019 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (410,583 1,814,140 ) Distributions to shareholders from net realized gains (290,362 (829,580 ) ) Share transactions 18,706,244 15,679,102 Net proceeds from sales of shares Reinvestment of distributions 284,767 814,217 Cost of shares redeemed (6,171,937 (16,130,050 ) ) Paid in capital portion of redemption fees 9,205 20,663 Net increase (decrease) in net assets resulting from share transactions 12,828,279 383,932 TOTAL INCREASE (DECREASE) IN NET ASSETS 12,127,334 1,368,492 NET ASSETS Beginning of period 8,373,972 7,005,480 End of period (including undistributed net investment income of $0 and $70, respectively) $ 20,501,306 $ 8,373,972 OTHER INFORMATION Shares Sold 1,341,627 1,044,542 Issued in reinvestment of distributions 21,383 54,101 Redeemed (438,536 (1,089,262 ) ) Net increase (decrease) 924,474 9,381
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEAR JUNE 29, 1990 FEBRUARY 28, ENDED ENDED (COMMENCEMEN FEBRUARY 28, APRIL 30, T OF OPERATIONS) TO APRIL 30, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 15.24 $ 12.97 $ 13.81 $ 11.22 $ 10.00 Income from Investment Operations Net investment income (loss) (.15) (.20) (.09) (.07) .05 E Net realized and unrealized gain (loss) (.60) 3.84 .20 2.86 1.18 Total from investment operations (.75) 3.64 .11 2.79 1.23 Less Distributions - - - - (.06) From net investment income From net realized gain (.60) (1.40) (.97) (.22) - Total distributions (.60) (1.40) (.97) (.22) (.06) Redemption fees added to paid in capital .02 .03 .02 .02 .05 Net asset value, end of period $ 13.91 $ 15.24 $ 12.97 $ 13.81 $ 11.22 TOTAL RETURN B, C (4.59)% 28.43% .98% 25.27% 12.89% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 20,501 $ 8,374 $ 7,005 $ 7,553 $ 1,877 Ratio of expenses to average net assets 2.49% 2.48% 2.47% A 2.48% 2.43% A Ratio of expenses to average net assets before expense reductions 2.82% 2.62% 3.17% A 2.83% 3.11% A Ratio of net investment income (loss) to average net assets (1.08)% (1.34)% (.80)% (.56)% .62% A A Portfolio turnover rate 190% 169% 215% A 140% 108% A
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.02 PER SHARE. FOOD AND AGRICULTURE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND FOOD AND AGRICULTURE 10.14% 102.13% 409.09% FOOD AND AGRICULTURE (INCL. 3% SALES CHARGE) 6.83% 96.07% 393.82% S&P 500 7.36% 71.20% 246.77% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on July 29, 1985. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND FOOD AND AGRICULTURE 10.14% 15.11% 18.48% FOOD AND AGRICULTURE (INCL. 3% SALES CHARGE) 6.83% 14.41% 18.11% S&P 500 7.36% 11.35% 13.84% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Food & AgricuStandard & Poor's 50 07/29/85 9700.00 10000.00 07/31/85 9583.60 9926.31 08/31/85 9651.50 9841.93 09/30/85 9467.20 9533.88 10/31/85 10194.70 9974.35 11/30/85 10864.00 10658.59 12/31/85 11164.70 11174.46 01/31/86 11116.20 11237.04 02/28/86 12328.70 12077.57 03/31/86 13143.50 12751.50 04/30/86 13628.50 12607.41 05/31/86 14152.30 13278.12 06/30/86 14947.70 13502.52 07/31/86 14103.80 12747.73 08/31/86 14782.80 13693.61 09/30/86 13589.70 12561.15 10/31/86 13890.40 13285.93 11/30/86 14055.30 13608.78 12/31/86 13677.00 13261.75 01/31/87 15345.40 15048.11 02/28/87 16538.50 15642.51 03/31/87 17042.90 16094.58 04/30/87 16984.70 15951.34 05/31/87 16878.00 16090.11 06/30/87 17857.70 16902.66 07/31/87 18507.60 17759.63 08/31/87 19157.50 18422.06 09/30/87 18963.50 18018.62 10/31/87 14685.80 14137.41 11/30/87 14035.90 12972.49 12/31/87 14704.52 13959.69 01/31/88 15279.79 14547.40 02/29/88 16036.71 15225.31 03/31/88 16147.73 14754.84 04/30/88 16198.19 14918.62 05/31/88 16319.30 15048.41 06/30/88 16985.39 15739.14 07/31/88 17106.50 15679.33 08/31/88 17096.41 15146.23 09/30/88 17782.69 15791.46 10/31/88 18610.26 16230.46 11/30/88 18176.29 15998.37 12/31/88 18641.57 16278.34 01/31/89 19603.00 17469.91 02/28/89 19248.79 17034.91 03/31/89 19977.45 17431.83 04/30/89 21009.72 18336.54 05/31/89 22305.12 19079.17 06/30/89 22743.39 18970.42 07/31/89 24912.89 20683.44 08/31/89 24528.81 21088.84 09/30/89 24632.62 21002.38 10/31/89 24383.49 20515.12 11/30/89 25307.34 20933.63 12/31/89 25887.07 21436.04 01/31/90 24086.42 19997.68 02/28/90 24430.99 20255.65 03/31/90 25486.92 20792.42 04/30/90 25386.89 20272.61 05/31/90 27598.79 22249.19 06/30/90 28494.04 22097.90 07/31/90 28482.81 22027.18 08/31/90 26405.00 20035.93 09/30/90 25562.64 19060.18 10/31/90 26169.14 18978.22 11/30/90 27247.35 20204.21 12/31/90 28301.55 20767.91 01/31/91 29113.81 21673.39 02/28/91 31306.92 23223.04 03/31/91 32838.61 23785.03 04/30/91 32339.65 23842.12 05/31/91 33523.23 24872.10 06/30/91 32142.06 23732.96 07/31/91 33487.21 24838.91 08/31/91 34820.56 25427.59 09/30/91 34206.98 25002.95 10/31/91 34218.78 25337.99 11/30/91 33982.79 24316.87 12/31/91 37949.47 27098.72 01/31/92 37383.79 26594.68 02/29/92 37174.74 26940.42 03/31/92 36350.82 26415.08 04/30/92 35932.71 27191.68 05/31/92 36252.44 27324.92 06/30/92 35856.08 26917.78 07/31/92 37241.02 28018.72 08/31/92 37075.85 27444.33 09/30/92 37698.43 27768.18 10/31/92 38105.02 27865.36 11/30/92 39566.20 28815.57 12/31/92 40236.31 29170.00 01/31/93 40249.32 29415.03 02/28/93 40145.25 29815.08 03/31/93 41237.99 30444.17 04/30/93 39636.78 29707.43 05/31/93 40884.76 30503.58 06/30/93 40477.81 30592.05 07/31/93 39975.91 30469.68 08/31/93 41888.57 31624.48 09/30/93 41752.92 31380.97 10/31/93 43326.45 32030.56 11/30/93 42824.55 31726.27 12/31/93 43784.13 32110.15 01/31/94 45108.33 33201.90 02/28/94 44837.79 32302.13 03/31/94 42744.70 30893.75 04/30/94 42267.09 31289.19 05/31/94 41959.96 31802.34 06/30/94 42281.71 31023.18 07/31/94 43700.37 32040.74 08/31/94 46479.17 33354.41 09/30/94 46566.92 32537.23 10/31/94 47444.44 33269.31 11/30/94 46289.04 32057.65 12/31/94 46452.33 32533.06 01/31/95 48410.61 33376.64 02/28/95 49382.17 34677.33 Let's say you invested $10,000 in Fidelity Select Food and Agriculture Portfolio on July 29, 1985, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $49,382 - a 393.82% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $34,677 over the same period - a 246.77% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Philip Morris Companies, Inc. 8.5 Ralston Purina Co. 8.3 PepsiCo, Inc. 7.2 RalCorp Holdings, Inc. 4.7 Tyson Foods, Inc. 4.4 RJR Nabisco Holdings Corp. 4.3 IBP, Inc. 3.3 Anheuser-Busch Companies, Inc. 2.8 CPC International, Inc. 2.3 Dr. Pepper/Seven-Up Companies, Inc. 2.1 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 48.1 Row: 1, Col: 2, Value: 8.9 Row: 1, Col: 3, Value: 9.300000000000001 Row: 1, Col: 4, Value: 10.1 Row: 1, Col: 5, Value: 11.4 Row: 1, Col: 6, Value: 12.2 Meat & Fish 12.2% Soft Drinks 11.4% Grain Mill Products 10.1% Tobacco Manufacturers 9.3% Food 8.9% All Others 48.1%* * INCLUDES SHORT-TERM INVESTMENTS FOOD AND AGRICULTURE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW William Mankivsky, Portfolio Manager of Fidelity Select Food and Agriculture Portfolio Q. BILL, HOW HAS THE FUND PERFORMED? A. Very well. For the 12 months ended February 28, 1995, the fund had a total return of 10.14%, beating the S&P 500, which returned 7.36% during the same period. Q. WHAT HELPED THE FUND OUTPERFORM THE S&P 500? A. It came down to individual stock selection. A number of the companies the fund has owned for some time have helped its performance over the past year. Some of these investments performed well because of improving business prospects or important strategic moves. Some added value because they were acquired by other companies that paid a higher price per share than the fund paid for them. Q. CAN YOU GIVE US SOME EXAMPLES? A. Sure. I'll start with Ralston Purina. I found the stock's price to be inexpensive on a relative basis. The company has two basic businesses: pet foods and Energizer batteries. The pet food business has enjoyed good cash flow, which enabled the company to pay down debt or buy back stock. Energizer is second only to Duracell in market share, and was trading at a much lower implied value - how much the company probably would trade for if it stood alone - than its competitor and I believe was worth more than the market indicated. Furthermore, in the past, Ralston Purina's management has tried to unlock value by splitting off pieces of its business and letting them trade on their own. That's what happened about a year ago with RalCorp. Q. WHICH WAS ALSO ONE OF THE FUND'S TOP INVESTMENTS AT THE END OF THE PERIOD . . . A. Yes. This stock also helped the fund. All of its businesses have been doing well. The cereal division benefited from a better pricing environment. The cookie and cracker division lost money last year, but appears to be on track, which would provide a significant swing in the company's operating profits. The baby food business did well. In addition, the company owns three ski areas and some real estate which I expect it will sell. If the company does so, it would reduce its debt. Q. WHAT ARE SOME EXAMPLES OF ACQUISITION STORIES THAT BENEFITED THE FUND? A. Pet was one. I felt that as long as the company continued to increase earnings and expand distribution of its two core food lines - Old El Paso Mexican Foods and Progresso soups - that it could remain independent. However, I also saw the company as an attractive takeover candidate, because it had high profit margins and market share. When the company reported a poor September quarter, the stock decreased in price and I started buying more shares. In January, Grand Metropolitan, a large British distilling and food company, acquired Pet at a price that gave the fund close to a 50% return. The fund also profited when Cadbury Schweppes, which already owned about 25% of Dr. Pepper/Seven-Up, decided to acquire the soft drink company completely. Q. WHAT STOCKS HAVE TURNED IN DISAPPOINTING PERFORMANCES? A. RJR Nabisco is one. That stock lagged because the company's majority shareholder - Kohlberg Kravis Roberts - sold a significant portion of its RJR investment in order to finance its acquisition of Borden, causing the market to be flooded temporarily with RJR stock. However, while the stock price performance has been disappointing, I believe the overall operating performance of the company is healthy, and I find the stock inexpensive at this point in time. Another disappointing stock, Dean Foods, acquired Birds Eye in late 1993, which I thought was the beginning of acquisition activity that might bring the company higher earnings and bolster its stock price. But nothing has materialized, so the stock has treaded water for much of the year. Finally, the banana stocks - such as Dole and Chiquita - have been hurt by price wars in Japan and a cut in European demand due to import restrictions, as well as other problems particular to each company. Q. WHAT KIND OF STOCKS WILL YOU BE LOOKING FOR GOING FORWARD? A. Many of the brand-name companies, especially in the cereal and carbonated soft drink businesses, have been changing the way they are approaching the market through what's called efficient consumer response. This process involves trying to reduce inventories throughout the supply chain, hoping to achieve a more efficient product flow. This, in turn, should lead to fresher, lower-priced products that would still maintain or increase profits per unit sold. To a certain extent, looking at companies taking positive steps in the way they go to market will be one of my investment focuses going forward. I'll look to find companies that seem to be restructuring successfully in this manner, but whose stocks are inexpensive because they are not yet perceived to be doing so. If the market comes around to such stories, stock prices can really expand. FUND FACTS START DATE: July 29, 1985 SIZE: as of February 28, 1995, more than $197 million MANAGER: William Mankivsky, since 1993; manager, Fidelity Select Energy Service Portfolio, 1991-1994; joined Fidelity in 1991 (checkmark) FOOD AND AGRICULTURE PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 78.0% SHARES VALUE (NOTE 1) AGRICULTURE - 2.8% CROPS - 2.8% DEKALB Genetics Corp. Class B 140,900 $ 4,024,451 24487820 Pioneer Hi-Bred International, Inc. 68,700 2,318,625 72368610 6,343,076 BEVERAGES - 16.1% DISTILLED BEVERAGES - 1.4% Canadaigua Wine Co. Class A (a) 19,400 719,013 13721920 Seagram Co. Ltd. 80,600 2,486,938 81185010 3,205,951 MALT BEVERAGE - 3.3% Anheuser-Busch Companies, Inc. 116,000 6,539,500 03522910 Coors (Adolph) Co. Class B 8,900 144,625 21701610 Fomento Economico Mexicano SA de CV Class B 41,000 61,723 34441892 Greenalls Group PLC 35,000 223,212 39499193 Guinness PLC Ord. 33,000 216,985 40203310 Quilmes Industries SA 29,000 495,900 74899692 7,681,945 SOFT DRINKS - 11.4% Cadbury-Schweppes PLC Ord. 78,400 525,428 12720910 Celestial Seasonings, Inc. (a) 25,700 449,750 15101610 Coca-Cola Company (The) 34,000 1,870,000 19121610 Dr. Pepper/Seven-Up Companies, Inc. (a) 150,000 4,931,250 25613130 Panamerican Beverages, Inc. Class A 61,600 1,501,500 69829W10 PepsiCo, Inc. 425,000 16,628,125 71344810 Serm Suk Co. Ltd. 40,000 445,870 81799999 26,351,923 TOTAL BEVERAGES 37,239,819 CHEMICALS & PLASTICS - 0.3% AGRICULTURAL CHEMICALS - 0.3% Potash Corp. of Saskatchewan 18,000 650,930 73755L10 CONGLOMERATES - 0.2% Whitman Corp. 25,000 471,875 96647K10 FOODS - 42.1% BAKERY PRODUCTS - 0.2% Interstate Bakeries Corp. (Del.) 8,000 122,000 46072H10 Grupo Industries Bimbo SA de CV Series A Ord. 62,200 239,311 60899995 361,311 CANDY - 1.0% Hershey Foods Corp. 47,000 2,303,000 42786610 CEREAL BREAKFAST FOODS - 4.7% RalCorp Holdings, Inc. (a) 431,366 10,891,992 75102510 COOKIES & CRACKERS - 0.2% Nabisco Holdings Class A 20,000 555,000 62952610 DAIRY - 1.7% Dean Foods Co. 123,400 3,825,400 24236110 FOOD - 8.9% Chiquita Brands International, Inc. 234,500 3,136,438 17003210 Dole Food, Inc. 165,500 4,303,000 25660510 General Mills, Inc. 62,000 3,758,750 37033410 Grand Metropolitan PLC 240,000 1,452,734 38559099 Hazlewood Foods Ord. 95,000 154,848 42199292 Hillsdown Holdings PLC 47,990 134,801 43258610 Kellogg Co. 91,000 4,925,375 48783610 Nestle SA (Reg.) 2,380 2,295,412 64106992 SHARES VALUE (NOTE 1) Perkins Foods PLC 290,000 $ 289,124 71499492 Sylvan Foods Holdings, Inc. (a) 14,900 172,281 87137110 20,622,763 GENERAL FOOD PREPARATIONS - 2.5% CPC International, Inc. 100,000 5,350,000 12614910 Herdez SA de CV Class B 458,846 156,925 42799F23 McCormick & Co., Inc. (non-vtg) 16,000 354,000 57978020 5,860,925 GRAIN MILL PRODUCTS - 10.1% Archer-Daniels-Midland Co. 220,236 4,184,484 03948310 Ralston Purina Co. 399,900 19,095,225 75127730 23,279,709 MEAT & FISH - 12.2% ConAgra, Inc. 43,900 1,437,725 20588710 GoodMark Foods, Inc. 265,500 4,065,469 38238710 Hormel (George A) & Co. 177,400 4,745,450 44045210 IBP, Inc. 241,300 7,691,438 44922310 Smithfield Foods, Inc. (a) 5,400 142,763 83224810 Tyson Foods, Inc. 413,600 10,184,900 90249410 28,267,745 SUGAR & CANDIES - 0.6% Tate & Lyle PLC 27,574 190,252 87657010 Tootsie Roll Industries, Inc. 16,152 1,082,184 89051610 1,272,436 TOTAL FOODS 97,240,281 INDUSTRIAL MACHINERY & EQUIPMENT - 0.8% FARM MACHINERY & EQUIPMENT - 0.8% Case Corp. 23,000 537,625 14743R10 Deere & Co. 16,000 1,226,000 24419910 1,763,625 RESTAURANTS - 2.1% McDonald's Corp. 143,000 4,754,750 58013510 TOBACCO - 13.6% CIGARETTES - 4.3% RJR Nabisco Holdings Corp. 1,756,100 9,878,063 74960K10 TOBACCO MANUFACTURERS - 9.3% Philip Morris Companies, Inc. (a) 324,000 19,683,000 71815410 UST, Inc. 63,000 1,874,250 90291110 21,557,250 TOTAL TOBACCO 31,435,313 TOTAL COMMON STOCKS (Cost $170,034,845) $ 179,899,669 REPURCHASE AGREEMENTS - 22.0% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 (Note 3) $ 50,886,593 50,878,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $220,912,845) $ 230,777,669 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $191,430,266 and $110,114,061, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $168,049 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $3,357,000 and $3,207,500, respectively. The weighted average interest rate paid was 4.2% (see Note 8 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $221,090,390. Net unrealized appreciation aggregated $9,687,279, of which $12,917,817 related to appreciated investment securities and $3,230,538 related to depreciated investment securities. The fund hereby designates $1,628,000 as a capital gain dividend for the purpose of the dividend paid deduction. FOOD AND AGRICULTURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $50,878,000) (cost $220,912,845) - See $ 230,777,669 accompanying schedule Cash 50 Receivable for investments sold 5,237,207 Receivable for fund shares sold 1,958,911 Dividends receivable 250,683 Redemption fees receivable 652 TOTAL ASSETS 238,225,172 LIABILITIES Payable for investments purchased $ 38,171,200 Payable for fund shares redeemed 2,702,931 Accrued management fee 86,249 Other payables and accrued expenses 134,802 TOTAL LIABILITIES 41,095,182 NET ASSETS $ 197,129,990 Net Assets consist of: Paid in capital $ 182,538,002 Undistributed net investment income 245,442 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 4,481,688 Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 9,864,858 NET ASSETS, for 6,059,183 shares outstanding $ 197,129,990 NET ASSET VALUE and redemption price per share ($197,129,990 (divided by) 6,059,183 shares) $32.53 Maximum offering price per share (100/97.00 of $32.53) $33.54
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 1,488,260 Dividends Interest 525,937 TOTAL INCOME 2,014,197 EXPENSES Management fee $ 577,884 Transfer agent 835,915 Fees Redemption fees (41,414 ) Accounting fees and expenses 93,455 Non-interested trustees' compensation 1,657 Custodian fees and expenses 21,727 Registration fees 43,628 Audit 30,959 Legal 2,294 Interest 1,505 Reports to shareholders 7,516 Miscellaneous 856 Total expenses before reductions 1,575,982 Expense reductions (18,731 1,557,251 ) NET INVESTMENT INCOME 456,946 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 7,639,160 Foreign currency transactions 1,863 7,641,023 Change in net unrealized appreciation (depreciation) on: Investment securities 1,271,937 Assets and liabilities in foreign currencies 34 1,271,971 NET GAIN (LOSS) 8,912,994 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 9,369,940 OTHER INFORMATION $288,346 Sales Charges Paid to FDC Deferred sales charges withheld $6,662 by FDC Exchange fees withheld by FSC $27,060
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ 456,946 $ 314,450 Net investment income Net realized gain (loss) 7,641,023 12,506,767 Change in net unrealized appreciation (depreciation) 1,271,971 (1,004,065 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 9,369,940 11,817,152 Distributions to shareholders: (213,103 (310,254 From net investment income ) ) From net realized gain (5,012,131 (12,323,186 ) ) TOTAL DISTRIBUTIONS (5,225,234 (12,633,440 ) ) Share transactions 177,269,912 124,680,275 Net proceeds from sales of shares Reinvestment of distributions 5,111,970 12,440,857 Cost of shares redeemed (84,479,607 (149,706,361 ) ) Redemption fees 72,669 34,844 Net increase (decrease) in net assets resulting from share transactions 97,974,944 (12,550,385 ) TOTAL INCREASE (DECREASE) IN NET ASSETS 102,119,650 (13,366,673 ) NET ASSETS Beginning of period 95,010,340 108,377,013 End of period (including undistributed net investment income of $245,442 and $946, respectively) $ 197,129,990 $ 95,010,340 OTHER INFORMATION Shares Sold 5,597,630 3,975,362 Issued in reinvestment of distributions 172,511 414,802 Redeemed (2,728,534 (4,884,544 ) ) Net increase (decrease) 3,041,607 (494,380 )
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 31.49 $ 30.86 $ 29.22 $ 27.87 $ 22.84 Income from Investment Operations Net investment income .15 .09 .05 .13 .21 Net realized and unrealized gain (loss) 2.80 3.29 3.26 2.89 5.78 Total from investment operations 2.95 3.38 3.31 3.02 5.99 Less Distributions (.08) (.06) (.10) (.11) (.27) From net investment income From net realized gain (1.85) (2.70) (1.57) (1.59) (.79) Total distributions (1.93) (2.76) (1.67) (1.70) (1.06) Redemption fees added to paid in capital .02 .01 - .03 .10 Net asset value, end of period $ 32.53 $ 31.49 $ 30.86 $ 29.22 $ 27.87 TOTAL RETURN B, C 10.14% 11.69% 11.72% 11.11% 27.39% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 197,130 $ 95,010 $ 108,377 $ 108,922 $ 64,490 Ratio of expenses to average net assets 1.68% 1.64% 1.67% A 1.83% 2.22% Ratio of expenses to average net assets before expense reductions 1.70% 1.65% 1.67% A 1.83% 2.22% Ratio of net investment income to average net assets .49% .29% .21% A .46% .85% Portfolio turnover rate 126% 96% 515% A 63% 124%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. LEISURE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1995 YEAR YEARS YEARS LEISURE -1.07% 90.68% 339.01% LEISURE (INCL. 3% SALES CHARGE) -4.04% 84.96% 325.84% S&P 500 7.36% 71.20% 274.70% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or 10 years. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1995 YEAR YEARS YEARS LEISURE -1.07% 13.78% 15.94% LEISURE (INCL. 3% SALES CHARGE) -4.04% 13.09% 15.59% S&P 500 7.36% 11.35% 14.12% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER TEN YEARS Select Leisure (062)Standard & Poor's 50 02/28/85 9700.00 10000.00 03/31/85 10056.35 10007.00 04/30/85 9942.32 9997.99 05/31/85 10526.74 10575.88 06/30/85 11143.62 10741.92 07/31/85 11086.51 10725.81 08/31/85 11336.37 10634.64 09/30/85 10558.24 10301.77 10/31/85 11122.20 10777.71 11/30/85 12057.38 11517.07 12/31/85 12678.46 12074.49 01/31/86 13113.92 12142.11 02/28/86 14477.43 13050.34 03/31/86 15619.63 13778.55 04/30/86 16090.79 13622.85 05/31/86 17140.19 14347.59 06/30/86 17539.96 14590.06 07/31/86 15861.15 13774.48 08/31/86 16383.42 14796.54 09/30/86 14788.00 13572.87 10/31/86 15546.36 14356.02 11/30/86 15353.19 14704.87 12/31/86 14673.53 14329.90 01/31/87 16218.87 16260.14 02/28/87 17964.52 16902.41 03/31/87 18179.15 17390.89 04/30/87 17764.20 17236.11 05/31/87 18493.94 17386.07 06/30/87 19288.07 18264.06 07/31/87 20711.79 19190.05 08/31/87 21141.05 19905.84 09/30/87 20683.17 19469.90 10/31/87 14780.85 15276.09 11/30/87 13750.62 14017.34 12/31/87 15509.38 15084.06 01/31/88 15748.11 15719.09 02/29/88 17124.78 16451.60 03/31/88 17697.72 15943.25 04/30/88 17809.13 16120.22 05/31/88 17347.59 16260.46 06/30/88 18506.26 17006.82 07/31/88 18660.14 16942.19 08/31/88 17931.23 16366.16 09/30/88 19178.48 17063.36 10/31/88 19178.48 17537.72 11/30/88 18441.47 17286.93 12/31/88 19542.94 17589.45 01/31/89 21211.33 18877.00 02/28/89 20871.17 18406.96 03/31/89 21851.16 18835.84 04/30/89 23090.31 19813.42 05/31/89 24240.37 20615.87 06/30/89 24470.21 20498.36 07/31/89 26523.71 22349.36 08/31/89 26736.42 22787.41 09/30/89 26908.23 22693.98 10/31/89 24969.27 22167.48 11/30/89 25263.79 22619.69 12/31/89 25641.84 23162.57 01/31/90 22532.16 21608.36 02/28/90 22332.37 21887.11 03/31/90 22506.10 22467.12 04/30/90 21628.79 21905.44 05/31/90 23418.16 24041.22 06/30/90 23148.88 23877.74 07/31/90 22349.75 23801.33 08/31/90 19769.93 21649.69 09/30/90 17893.70 20595.35 10/31/90 17685.23 20506.79 11/30/90 19092.40 21831.53 12/31/90 19927.43 22440.63 01/31/91 21041.83 23419.04 02/28/91 22656.38 25093.50 03/31/91 23033.69 25700.76 04/30/91 23095.12 25762.44 05/31/91 23893.62 26875.38 06/30/91 22551.08 25644.49 07/31/91 23630.37 26839.52 08/31/91 23876.07 27475.62 09/30/91 24490.30 27016.78 10/31/91 25227.38 27378.80 11/30/91 24016.46 26275.44 12/31/91 26490.94 29281.34 01/31/92 27087.62 28736.71 02/29/92 28035.29 29110.29 03/31/92 27464.94 28542.64 04/30/92 27772.05 29381.79 05/31/92 27938.77 29525.76 06/30/92 27508.81 29085.83 07/31/92 27640.43 30275.44 08/31/92 27245.57 29654.79 09/30/92 27780.83 30004.72 10/31/92 27991.42 30109.74 11/30/92 29895.54 31136.48 12/31/92 30790.56 31519.46 01/31/93 31553.97 31784.22 02/28/93 31387.24 32216.49 03/31/93 33019.35 32896.25 04/30/93 32275.19 32100.16 05/31/93 34593.60 32960.45 06/30/93 35524.62 33056.03 07/31/93 36473.89 32923.81 08/31/93 38983.98 34171.62 09/30/93 40928.16 33908.50 10/31/93 43191.80 34610.41 11/30/93 41585.35 34281.61 12/31/93 42969.36 34696.42 01/31/94 43415.96 35876.09 02/28/94 43045.37 34903.85 03/31/94 40441.75 33382.04 04/30/94 40523.28 33809.33 05/31/94 40094.41 34363.81 06/30/94 38399.83 33521.89 07/31/94 39885.20 34621.41 08/31/94 41475.17 36040.89 09/30/94 41464.71 35157.89 10/31/94 41318.26 35948.94 11/30/94 39550.47 34639.68 12/31/94 40031.64 35153.39 01/31/95 40763.87 36064.91 02/28/95 42583.96 37470.36 Let's say you invested $10,000 in Fidelity Select Leisure Portfolio on February 28, 1985 and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $42,584 - a 325.84% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $37,470 over the same period - a 274.70% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Capital Cities/ABC, Inc. 5.7 Viacom, Inc. Class B (non-vtg.) 4.9 Disney (Walt) Co. 3.7 Omnicom Group, Inc. 2.2 Scientific-Atlanta, Inc. 2.2 General Instrument Corp. 2.1 Gaylord Entertainment Co. Class A 2.1 Carmike Cinemas, Inc. Class A 1.9 News Corp. Ltd. (vtg.) pfd. sponsored ADR 1.9 ADVO-Systems, Inc. 1.9 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 53.8 Row: 1, Col: 2, Value: 5.1 Row: 1, Col: 3, Value: 6.0 Row: 1, Col: 4, Value: 6.1 Row: 1, Col: 5, Value: 14.0 Row: 1, Col: 6, Value: 15.0 Television Broadcasting 15.0% Cable TV Operators 14.0% Advertising Agencies 6.1% Motion Picture Production 6.0% Hotels, Motels, & Tourist Courts 5.1% All Others 53.8%* * INCLUDES SHORT-TERM INVESTMENTS LEISURE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Deborah Wheeler, Portfolio Manager of Fidelity Select Leisure Portfolio Q. DEBORAH, HOW DID THE FUND PERFORM? A. The fund returned -1.07% for the twelve months ended February 28, 1995. That trailed the S&P 500's 7.36% return during the same period. Q. WHAT FACTORS LED TO DISAPPOINTING RESULTS? A. Few of the stocks in the fund were terrible performers, but a number of investments lagged the market by a modest margin. Stocks of boat manufacturers such as Brunswick Corp. suffered because investors worried that higher interest rates would make for slower boat sales. The fund owned golf equipment makers such as Calloway Golf and Cobra, and their stocks lost ground because investors don't anticipate exciting new products that will drive their future sales. Q. WHAT ABOUT THE FUND'S INVESTMENT IN THEATER CHAINS? A. Theater chains such as Regal Cinemas and AMC Cinemas were a disappointment. I had expected them to perform well because the number of new movies made each year has grown faster than the number of theater screens to show them on. As a result, theater owners should be able to negotiate better prices with movie studios. There weren't many hit movies during the first two months of 1995, so the stocks haven't performed well recently-but I haven't sold a single share. There will be many new movies looking for screens this summer, and I think these companies and their stocks may benefit. Q. WHICH INVESTMENTS CONTRIBUTED MOST TO THE FUND'S PERFORMANCE DURING THE PERIOD? A. The fund's three largest positions all posted strong returns. Capital Cities/ABC, which has delivered better than 20% earnings growth for six consecutive quarters, continued to beat analysts' earnings estimates. It has the No. 1 rated network, and along with other broadcasters benefited from a very strong advertising climate. Viacom completed its purchases of Paramount and Blockbuster in September, and management proceeded to restructure operations. For example, they cut Paramount's overhead sharply and integrated its television operations with Viacom's. Those moves helped boost the stock price significantly. Finally, Disney benefited from the success of THE LION KING in theaters last summer, as well as the beginnings of a turnaround in its Florida and California theme parks, where attendance was up for the first time in two years. Q. DID YOU MAKE SIGNIFICANT CHANGES IN THE FUND'S INVESTMENTS DURING THE PERIOD? A. Yes. The fund had a large investment in hotels such as La Quinta Inns, Hilton Hotels and Marriott at the end of the period. As those stocks' prices climbed sharply, I reduced the fund's positions in them. Several of the fund's investments in gaming shares also posted significant gains, and I took profits in those stocks as well. For example, the fund had a 3% investment in Caesars, but its stock price moved higher when ITT acquired the firm, and I sold the fund's shares at that point. I also sold most of the fund's investment in hotel and gaming company Promus when its share price rose after management announced that the firm was spinning off its casinos. Q. ARE YOU STILL OPTIMISTIC ABOUT THE BROADCASTING INDUSTRY'S PROSPECTS? A. Broadcasting stocks remain the fund's greatest single sector investment. For example, apart from ABC/Capital Cities, the fund holds shares of News Corp., a newspaper conglomerate, which owns Fox Broadcasting and its television stations. The fund also owns radio broadcasters such as Infinity Broadcasting and Clear Channel. Demand for advertising has remained strong in 1995, which should fuel profit growth among broadcasters. Moreover, new federal regulations in 1992 let companies own more radio stations, and under proposed telecommunications legislation now pending in Congress, they would be able to own even more stations. Broadcasters such as Cap Cities, News Corp. and Infinity could take advantage of those rule changes, if implemented, to make acquisitions that will give them access to wider markets. Q. WHAT IS YOUR STRATEGY GOING FORWARD? A. The fund has made a significant recent investment in cable equipment providers. I don't know whether telephone or cable companies will win the battle for consumers' hearts as the information superhighway develops, but I do know that they will spend billions of dollars on wiring to allow consumers to have video on demand. I have invested 5% of the fund's assets in General Instrument and Scientific-Atlanta, which make converter boxes that are used for interactive television. I also plan to maintain the fund's sizable investment in the broadcasting industry. Beyond that, I am choosing stocks mostly on an individual company basis rather than making large sector bets. In the current market environment, the best performers are likely to be companies that show strong earnings momentum, which is my focus. FUND FACTS START DATE: May 8, 1984 SIZE: as of February 28, 1995, more than $69 million MANAGER: Deborah Wheeler, since 1992; manager, Fidelity Select Food and Agriculture Portfolio, 1991-1993; Fidelity Select Retailing Portfolio 1989-1991; Fidelity Select Housing Portfolio, 1986-1988; joined Fidelity in 1986 (checkmark) LEISURE PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 88.1% SHARES VALUE (NOTE 1) ADVERTISING - 6.1% ADVERTISING AGENCIES - 6.1% ADVO-Systems, Inc. 70,400 $ 1,328,789 00758510 Interpublic Group of Companies, Inc. 12,500 426,563 46069010 Omnicom Group, Inc. 30,100 1,599,063 68191910 Saatchi & Saatchi Co. sponsored ADR (a) 165,000 742,500 78514340 WPP Group PLC ADR 75,000 253,125 92930920 4,350,040 AIR TRANSPORTATION - 0.8% AIR TRANSPORTATION, MAJOR NATIONAL - 0.8% KLM Royal Dutch Airlines (a) 20,000 585,000 48251610 BEVERAGES - 1.1% SOFT DRINKS - 1.1% Celestial Seasonings, Inc. (a) 2,000 35,000 15101610 Dr. Pepper/Seven-Up Companies, Inc. (a) 9,900 325,463 25613130 Emvasa del Valle de Enah Ord. (a) 51,500 64,580 29299E22 PepsiCo, Inc. 8,441 330,254 71344810 755,297 BROADCASTING - 32.8% CABLE TV OPERATORS - 14.0% BET Holdings, Inc. Class A (a) 16,600 251,075 08658510 Cablevision Systems Corp. (a) 10,000 560,000 12686C10 Gaylord Entertainment Co. Class A 55,900 1,467,375 36790110 Interactive Network, Inc. (a) 100 175 45837P10 International Family Entertainment Class B (a) 7,000 91,000 45950M10 NTN Communications, Inc. (a) 1,000 6,625 62941030 People's Choice TV Corp. (a) 9,100 180,294 71084710 Tele-Communications, Inc. Class A (a) 6,500 147,875 87924V10 Time Warner, Inc. 19,225 742,566 88731510 Turner Broadcasting System, Inc. Class B 61,100 1,153,263 90026250 Valuevision International, Inc. (a) 132,900 764,175 92047K10 Viacom, Inc. Class B (a): (non-vtg.) 77,855 3,484,011 92552430 (warrants) 285,000 1,140,000 92552412 Video Jukebox Network, Inc. (a) 500 1,000 92656G10 9,989,434 RADIO BROADCASTING - 3.8% Broadcasting Partners, Inc. Class A (a) 2,300 39,100 11131910 Clear Channel Communications, Inc. (a) 8,625 490,547 18450210 EZ Communications, Inc. (a) 48,700 693,975 26928810 Emmis Broadcasting Corp. Class A (a) 40,900 654,400 29152510 Evergreen Media Corp. Class A (a) 500 7,031 30024810 Infinity Broadcasting Corp. (a) 12,500 440,625 45662610 SFX Broadcasting, Inc. (a) 5,600 109,200 78417410 Saga Communications, Inc. Class A (a) 15,400 271,425 78659810 2,706,303 TELEVISION BROADCASTING - 15.0% British Sky Broadcasting Group ADR 10,000 241,250 11101310 CBS, Inc. 505 32,573 12484510 Capital Cities/ABC, Inc. 46,100 4,079,850 13985910 Carlton Communications 75,000 1,031,395 14399999 Central European Media Class C (a) 12,000 115,500 15399422 Chris-Craft Industries, Inc. 30 1,065 17052010 Citicasters, Inc. (a) 25,000 700,000 17293610 Granite Broadcasting Corp. (a) 84,700 582,313 38724110 Grupo Televisa GDS (b) 10,000 165,000 40049J20 Heritage Media Corp. Class A (a) 45,000 1,153,125 42724120 Home Shopping Network, Inc. (a) 96,300 854,663 43735110 Jacor Communications, Inc. Class A (a) 100 1,388 46985840 Lin Television Corp. (a) 1,500 44,250 53277610 SHARES VALUE (NOTE 1) Multimedia, Inc. (a) 800 $ 30,400 62545K10 New World Communications Group, Inc. Class A (a) 39,000 614,250 64927A10 Renaissance Communications Corp. (a) 13,500 394,875 75966110 Scandinavian Broadcasting Corp. (a) 18,100 434,400 80699E92 Silver King Communications, Inc. (a) 20,700 207,000 82774010 Westwood One, Inc. (a) 5,000 56,563 96181510 10,739,860 TOTAL BROADCASTING 23,435,597 CELLULAR - 2.8% CELLULAR & COMMUNICATION SERVICES - 2.8% Cellular Communications, Inc. (a): Class P 19,000 989,710 15091793 Series A (redeemable) 9,600 487,200 15091710 LIN Broadcasting Corp. 1,000 129,375 53276310 Rogers Communications, Inc. Class B (a) 32,000 400,130 77510920 2,006,415 COMMUNICATIONS EQUIPMENT - 2.1% TELEPHONE INTERCONNECT SYSTEMS - 2.1% General Instrument Corp. (a) 47,000 1,492,250 37012110 COMPUTER SERVICES & SOFTWARE - 1.7% PREPACKAGED COMPUTER SOFTWARE - 1.7% Sierra On-Line, Inc. (a) 30,500 1,181,875 82640910 Spectrum Holobyte, Inc. (a) 1,900 25,650 84762J10 1,207,525 CONSUMER ELECTRONICS - 1.1% RADIOS, TELEVISIONS, STEREOS - 1.1% Harman International Industries, Inc. 19,500 819,000 41308610 CREDIT & OTHER FINANCE - 0.7% FINANCIAL SERVICES - 0.7% American Express Co. 14,200 479,250 02581610 DRUGS & PHARMACEUTICALS - 0.8% BIOTECHNOLOGY - 0.8% Idexx Laboratories (a) 15,000 570,000 45168D10 ELECTRICAL EQUIPMENT - 4.0% ELECTRICAL MACHINERY - 1.0% Philips Electronics NV 22,900 752,838 71833750 TV & RADIO COMMUNICATION EQUIPMENT - 3.0% California Amplifier, Inc. (a) 32,300 209,950 12990010 Leitch Technology (a) 30,600 357,850 52543H10 Scientific-Atlanta, Inc. 67,000 1,566,125 80865510 2,133,925 TOTAL ELECTRICAL EQUIPMENT 2,886,763 ENTERTAINMENT - 12.9% AMUSEMENT - 0.4% Iwerks Entertainment, Inc. (a) 200 900 46591610 Mountasia Entertainment International (a) 26,000 214,500 62454710 Scientific Games Holdings Corp. (a) 1,900 85,500 80874710 300,900 CRUISES - 0.2% Carnival Cruise Lines, Inc. Class A 3,000 71,250 14365810 Royal Caribbean Cruises Ltd. 1,000 25,500 78015392 96,750 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ENTERTAINMENT - CONTINUED MOTION PICTURE DISTRIBUTION - 0.0% All American Communications (a) 2,500 $ 21,875 01648020 MOTION PICTURE PRODUCTION - 6.0% Cinergi Pictures Entertainment, Inc. (a) 118,100 804,556 17247010 Disney (Walt) Co. 50,000 2,668,750 25468710 Samuel Goldwyn Company (a) 10,500 97,125 38157530 King World Productions, Inc. (a) 100 3,563 49566710 Spelling Entertainment Group, Inc. 65,000 690,625 84780710 4,264,619 MOVIE THEATERS - 4.1% AMC Entertainment, Inc. (a) 53,900 626,588 00166910 Carmike Cinemas, Inc. Class A (a) 60,400 1,389,200 14343610 Cineplex Odeon Corp. (a) 100 230 17245510 GC Cos., Inc. (a) 500 15,125 36155Q10 Regal Cinemas, Inc. (a) 42,400 916,900 75875410 2,948,043 RECORDS & CDS - 0.3% PolyGram NV ADR 4,200 207,900 73173310 RECREATIONAL SERVICES - 1.5% Cedar Fair LP (depositary units) 6,000 192,000 15018510 Discovery Zone, Inc. (a) 100 694 25468B10 Players International, Inc. (a) 30,000 720,000 72790310 S-K-I Ltd. 10,000 153,750 78440610 1,066,444 THEATRICAL PRODUCERS & SERVICES - 0.4% Live Entertainment of Canada, Inc. (a) 40,000 302,256 53790110 TOTAL ENTERTAINMENT 9,208,787 FOODS - 0.5% CEREAL BREAKFAST FOODS - 0.5% RalCorp Holdings, Inc. (a) 14,800 373,700 75102510 HOUSEHOLD PRODUCTS - 0.0% MANUFACTURED PRODUCTS - 0.0% Windmere Corp. (warrants) (a) 845 - 97341193 LEISURE DURABLES & TOYS - 3.2% MOTORCYCLES - 0.8% Harley Davidson, Inc. 19,600 529,200 41282210 SPORTING & ATHLETIC GOODS - 1.7% Cobra Golf, Inc. (a) 4,200 136,763 19090710 Coleman, Inc. (a) 30,000 1,057,500 19355910 1,194,263 TOYS & GAMES - 0.6% Hasbro, Inc. 11,000 346,500 41805610 Mattel, Inc. 4,375 97,891 57708110 444,391 TRAVEL TRAILERS AND CAMPERS - 0.1% Brunswick Corp. 4,600 91,425 11704310 TOTAL LEISURE DURABLES & TOYS 2,259,279 LODGING & GAMING - 6.5% HOTELS, MOTELS, & TOURIST COURTS - 5.1% Club Med, Inc. 1,700 38,463 18947010 Hammons (John Q.) Hotels, Inc. Class A (a) 15,000 198,750 40862310 Hospitality Franchise Systems, Inc. 4,600 130,525 44091210 Host Marriott Corp. (a) 60,000 660,000 44107810 La Quinta Motor Inns, Inc. 23,100 574,613 50419510 Marriott International, Inc. 24,600 762,600 57190010 SHARES VALUE (NOTE 1) Mirage Resorts, Inc. (a) 41,400 $ 988,425 60462E10 Promus Companies, Inc. (a) 7,450 266,338 74342A10 3,619,714 LODGING PLACES, OTHER THAN HOTEL, MOTEL - 0.6% Sholodge, Inc. (a) 20,333 421,910 82503410 RACING & GAMING - 0.8% President Casinos, Inc. (a) 32,700 212,550 74082210 Speedway Motorsports (a) 1,500 27,000 84778810 WMS Industries, Inc. (a) 15,000 326,250 92929710 565,800 TOTAL LODGING & GAMING 4,607,424 PRINTING - 1.2% COMMERCIAL PRINTING - 1.2% Skybox International, Inc. (a) 66,700 800,400 83091410 Valassis Communications, Inc. (a) 5,000 85,625 91886610 886,025 PUBLISHING - 3.1% NEWSPAPERS - 3.1% News Corp. Ltd. : ADR 32,000 580,000 65248770 (vtg.) pfd. sponsored ADR 83,000 1,338,375 65248780 Scripps (E.W.) Co. Class A 9,700 282,513 81103910 2,200,888 RETAIL & WHOLESALE, MISCELLANEOUS - 1.9% DURABLE GOODS - WHOLESALE - 1.2% Integrity Music, Inc. Class A (a) 17,500 124,688 45813H10 Sodak Gaming, Inc. (a) 45,000 720,000 83377710 844,688 HOBBY, TOY, & GAME SHOPS - 0.5% Toys "R" Us, Inc. (a) 14,200 395,825 89233510 RETAIL, GENERAL - 0.2% Sotheby's Holdings, Inc. Class A 12,500 140,625 83589810 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 1,381,138 SERVICES - 1.8% GENERAL SERVICES - 0.8% Children's Discovery Centers of America, Inc. (a) 37,300 573,488 16875720 MANAGEMENT CONSULTING SERVICES - 1.0% Dimac Corp. (a) 50,000 693,750 25391430 PUBLIC RELATIONS SERVICES - 0.0% True North Communications 3,000 47,625 89784410 TOTAL SERVICES 1,314,863 TELEPHONE SERVICES - 0.9% SBC Communications, Inc. 15,000 624,375 84533310 TOBACCO - 2.1% CIGARETTES - 0.8% RJR Nabisco Holdings Corp. 103,400 581,625 74960K10 TOBACCO MANUFACTURERS - 1.3% Philip Morris Companies, Inc. 15,000 911,250 71815410 TOTAL TOBACCO 1,492,875 TOTAL COMMON STOCKS (Cost $56,753,315) 62,936,491 CONVERTIBLE BONDS - 1.1% PRINCIPAL VALUE (NOTE 1) AMOUNT LODGING & GAMING - 1.1% LODGING PLACES, OTHER THAN HOTEL, MOTEL - 0.4% Sholodge, Inc. 7 1/2%, 5/1/04 $ 250,000 $ 258,750 825034AA RACING & GAMING - 0.7% Argosy Gaming Co. 12%, 6/1/01 550,000 500,500 040228AB TOTAL CONVERTIBLE BONDS (Cost $861,220) 759,250 REPURCHASE AGREEMENTS - 10.8% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $7,699,300 7,698,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $65,312,535) $ 71,393,741 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of this security amounted to $165,000 or 0.2% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $69,352,783 and $102,708,412, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $55,302 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $2,127,000 and $2,043,200, respectively. The weighted average interest rate paid was 4.7% (see Note 8 of Notes to Financial Statements). Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: United States 89.3% United Kingdom 3.2 Australia 2.7 Netherlands 2.2 Canada 1.5 Others (individually less than 1%) 1.1 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $65,835,024. Net unrealized appreciation aggregated $5,558,717, of which $8,209,813 related to appreciated investment securities and $2,651,096 related to depreciated investment securities. The fund hereby designates $389,000 as a capital gain dividend for the purpose of the dividend paid deduction. LEISURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $7,698,000) (cost $65,312,535) - See $ 71,393,741 accompanying schedule Cash 800 Receivable for investments sold 1,477,766 Receivable for fund shares sold 296,558 Dividends receivable 16,502 Interest receivable 22,515 Redemption fees receivable 145 Other receivables 30,007 TOTAL ASSETS 73,238,034 LIABILITIES Payable for investments purchased $ 3,052,233 Payable for fund shares redeemed 508,102 Accrued management fee 34,887 Other payables and 73,582 accrued expenses TOTAL LIABILITIES 3,668,804 NET ASSETS $ 69,569,230 Net Assets consist of: Paid in capital $ 63,319,916 Accumulated net investment (loss) (68,073 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 236,173 Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 6,081,214 NET ASSETS, for 1,708,954 shares outstanding $ 69,569,230 NET ASSET VALUE and redemption price per share ($69,569,230 (divided by) 1,708,954 shares) $40.71 Maximum offering price per share (100/97.00 of $40.71) $41.97
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 459,991 Dividends Interest 343,376 TOTAL INCOME 803,367 EXPENSES Management fee $ 452,572 Transfer agent 632,252 Fees Redemption fees (32,502 ) Accounting fees and expenses 73,182 Non-interested trustees' compensation 1,360 Custodian fees and expenses 17,793 Registration fees 19,745 Audit 26,591 Legal 1,716 Interest 1,333 Reports to shareholders 4,985 Miscellaneous 751 Total expenses before reductions 1,199,778 Expense reductions (15,509 1,184,269 ) NET INVESTMENT INCOME (LOSS) (380,902 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 211,310 Foreign currency transactions (7,409 203,901 ) Change in net unrealized appreciation (depreciation) on: Investment securities (3,201,878 ) Assets and liabilities in foreign currencies 8 (3,201,870 ) NET GAIN (LOSS) (2,997,969 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (3,378,871 ) OTHER INFORMATION $210,050 Sales Charges Paid to FDC Deferred sales charges withheld $24,969 by FDC Exchange fees withheld by FSC $21,998
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ (380,902 $ (603,590 Net investment income (loss) ) ) Net realized gain (loss) 203,901 19,779,082 Change in net unrealized appreciation (depreciation) (3,201,870 3,359,954 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (3,378,871 22,535,446 ) Distributions to shareholders from net realized gains (8,699,446 (6,700,464 ) ) Share transactions 28,459,652 171,635,469 Net proceeds from sales of shares Reinvestment of distributions 8,558,337 6,615,913 Cost of shares redeemed (61,250,156 (133,273,761 ) ) Paid in capital portion of redemption fees 46,644 196,293 Net increase (decrease) in net assets resulting from share transactions (24,185,523 45,173,914 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (36,263,840 61,008,896 ) NET ASSETS Beginning of period 105,833,070 44,824,174 End of period (including undistributed net investment income (loss) of $(68,073) and $167,185, respectively) $ 69,569,230 $ 105,833,070 OTHER INFORMATION Shares Sold 715,555 3,957,420 Issued in reinvestment of distributions 219,557 158,780 Redeemed (1,562,185 (3,033,266 ) ) Net increase (decrease) (627,073) 1,082,934
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 45.30 $ 35.77 $ 31.65 $ 26.32 $ 24.90 Income from Investment Operations Net investment income (loss) (.21) (.29) (.11) (.08) .08 Net realized and unrealized gain (loss) (.48) 12.98 4.21 5.40 1.55 Total from investment operations (.69) 12.69 4.10 5.32 1.63 Less Distributions - - - - (.23) From net investment income From net realized gain (3.93) (3.26) - - - Total distributions (3.93) (3.26) - - (.23) Redemption fees added to paid in capital .03 .10 .02 .01 .02 Net asset value, end of period $ 40.71 $ 45.30 $ 35.77 $ 31.65 $ 26.32 TOTAL RETURN B, C (1.07)% 37.14% 13.02% 20.25% 6.78% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 69,569 $ 105,833 $ 44,824 $ 40,051 $ 40,727 Ratio of expenses to average net assets 1.62% 1.53% 1.90% A 2.21% 2.27% Ratio of expenses to average net assets before expense reductions 1.64% 1.55% 1.90% A 2.21% 2.27% Ratio of net investment income (loss) to average net assets (.52)% (.69)% (.39)% (.28)% .34% A Portfolio turnover rate 103% 170% 109% A 45% 75%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. MULTIMEDIA PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND MULTIMEDIA 9.35% 120.92% 268.28% MULTIMEDIA (INCL. 3% SALES CHARGE) 6.07% 114.30% 257.23% S&P 500 7.36% 71.20% 158.12% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on June 30, 1986. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND MULTIMEDIA 9.35% 17.18% 16.22% MULTIMEDIA (INCL. 3% SALES CHARGE) 6.07% 16.47% 15.81% S&P 500 7.36% 11.35% 11.55% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Multimedia (5Standard & Poor's 50 06/30/86 9700.00 10000.00 07/31/86 9253.80 9488.77 08/31/86 9777.60 10192.84 09/30/86 9263.50 9349.89 10/31/86 9700.00 9889.38 11/30/86 9777.60 10129.69 12/31/86 9486.60 9871.39 01/31/87 10621.50 11201.06 02/28/87 11911.60 11643.50 03/31/87 11872.80 11980.00 04/30/87 11688.50 11873.38 05/31/87 12231.70 11976.68 06/30/87 12745.80 12581.50 07/31/87 13725.50 13219.38 08/31/87 13715.80 13712.46 09/30/87 13386.00 13412.16 10/31/87 10660.30 10523.18 11/30/87 9923.10 9656.07 12/31/87 11377.71 10390.90 01/31/88 11566.11 10828.35 02/29/88 12340.68 11332.96 03/31/88 12874.50 10982.77 04/30/88 13031.50 11104.68 05/31/88 12811.69 11201.29 06/30/88 13254.21 11715.43 07/31/88 13232.55 11670.91 08/31/88 12734.43 11274.10 09/30/88 13535.75 11754.37 10/31/88 13687.35 12081.14 11/30/88 13579.06 11908.38 12/31/88 14432.32 12116.78 01/31/89 16155.75 13003.73 02/28/89 16122.39 12679.94 03/31/89 16878.48 12975.38 04/30/89 18012.60 13648.80 05/31/89 18879.88 14201.58 06/30/89 19266.46 14120.63 07/31/89 20732.14 15395.72 08/31/89 20709.77 15697.48 09/30/89 20385.30 15633.12 10/31/89 19009.13 15270.43 11/30/89 19121.01 15581.95 12/31/89 19129.11 15955.91 01/31/90 16589.03 14885.27 02/28/90 16170.05 15077.29 03/31/90 16012.93 15476.84 04/30/90 15253.53 15089.92 05/31/90 16706.87 16561.19 06/30/90 16562.85 16448.57 07/31/90 15646.33 16395.93 08/31/90 13616.89 14913.74 09/30/90 12451.60 14187.44 10/31/90 11914.78 14126.44 11/30/90 13145.53 15039.00 12/31/90 14114.43 15458.59 01/31/91 14873.83 16132.59 02/28/91 15973.66 17286.07 03/31/91 16405.73 17704.39 04/30/91 16968.74 17746.88 05/31/91 17060.39 18513.55 06/30/91 15711.79 17665.63 07/31/91 16300.98 18488.84 08/31/91 16811.62 18927.03 09/30/91 17832.88 18610.95 10/31/91 18736.31 18860.33 11/30/91 17453.18 18100.26 12/31/91 19456.44 20170.93 01/31/92 19967.07 19795.75 02/29/92 21079.99 20053.10 03/31/92 20543.17 19662.06 04/30/92 20857.40 20240.13 05/31/92 21171.64 20339.30 06/30/92 21250.20 20036.25 07/31/92 21302.57 20855.73 08/31/92 21014.52 20428.19 09/30/92 20883.59 20669.24 10/31/92 21224.01 20741.58 11/30/92 22769.01 21448.87 12/31/92 23639.19 21712.69 01/31/93 24116.75 21895.08 02/28/93 24222.88 22192.85 03/31/93 25177.99 22661.12 04/30/93 24526.89 22112.72 05/31/93 26198.87 22705.34 06/30/93 27021.37 22771.19 07/31/93 28032.65 22680.10 08/31/93 30419.27 23539.68 09/30/93 31147.39 23358.43 10/31/93 33480.08 23841.94 11/30/93 31295.15 23615.45 12/31/93 32626.92 23901.19 01/31/94 33092.24 24713.83 02/28/94 32667.98 24044.09 03/31/94 30669.86 22995.77 04/30/94 30684.73 23290.11 05/31/94 31813.18 23672.07 06/30/94 31102.10 23092.10 07/31/94 31859.56 23849.53 08/31/94 33776.39 24827.36 09/30/94 33544.51 24219.09 10/31/94 34301.97 24764.01 11/30/94 33219.89 23862.11 12/31/94 33933.14 24215.98 01/31/95 34316.75 24843.91 02/28/95 35723.30 25812.07 Let's say you invested $10,000 in Fidelity Select Multimedia Portfolio on June 30, 1986, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $35,723 - a 257.23% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $25,812 over the same period - a 158.12% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Viacom, Inc. Class B (non-vtg.) 7.9 News Corp. Ltd. (vtg.) pfd. sponsored ADR 7.4 Scientific-Atlanta, Inc. 5.5 General Instrument Corp. 4.9 Capital Cities/ABC, Inc. 3.8 Rogers Communications, Inc. Class B 3.8 NYNEX Corp. 3.7 Meredith Corp. 3.6 People's Choice TV Corp. 3.4 California Amplifier, Inc. 3.2 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 40.2 Row: 1, Col: 2, Value: 7.4 Row: 1, Col: 3, Value: 7.7 Row: 1, Col: 4, Value: 11.3 Row: 1, Col: 5, Value: 14.5 Row: 1, Col: 6, Value: 18.9 Cable TV Operators 18.9% Newspapers 14.5% TV & Radio Communication Equipment 11.3% Telephone Services 7.7% Television Broadcasting 7.4% All Others 40.2%* * INCLUDES SHORT-TERM INVESTMENTS MULTIMEDIA PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Stephen DuFour, Portfolio Manager of Fidelity Select Multimedia Portfolio Q. STEVE, WHAT WAS PERFORMANCE LIKE? A. The fund did pretty well, especially given that so many stocks in the sector did poorly. For the year ended February 28, 1995, the fund had a 9.35% return compared to the S&P 500's 7.36% return. Q. WHICH GROUPS IN PARTICULAR WERE DOWN? A. Generally, cable, newspapers and wireless cable. U.S. cable stocks were affected by increased competition, federal regulation and rising capital expenditures related to rewiring and the installation of advanced electronics. Mediocre revenue growth and rising newsprint costs hurt newspaper stocks, while higher interest rates undermined wireless cable stocks. Q. WHAT WAS YOUR STRATEGY? A. I avoided companies with huge capital expenditures, such as cable operators, and emphasized those that didn't have large capital expenditures, such as equipment suppliers and entertainment companies. During the period, as much as 20% of the fund was in equipment stocks such as General Instrument and Scientific-Atlanta, which sell to cable and phone companies; California Amplifier, the leading supplier to wireless cable companies; and Leitch Technology, which helps broadcasters upgrade their studios from analog to digital. All were top contributors to performance. Q. HOW DO YOU EXPLAIN THE FACT THAT ONE OF THE FUND'S LARGEST CONCENTRATIONS -19% OF ASSETS - WAS IN CABLE OPERATORS AT THE END OF FEBRUARY? A. Sometimes stocks are classified as cable companies, but actually have other businesses. For example, I consider Viacom to be an entertainment company. It's selling its cable system, which means lower capital spending. That, along with the acquisition of Paramount and Blockbuster, should make the company more of a supplier of entertainment than a distributor. Viacom - - up over 50% for the period - definitely helped performance. Some companies represent newer technologies that don't have high capital expenditures. Wireless cable, for instance, broadcasts a signal in microwave to a home antenna, avoiding the wiring expenses of conventional cable. The fund also owned some Canadian cable companies - such as Shaw Cablesystems - which have been selling at better prices, currently face fewer regulations, and enjoyed less competition than U.S. cable companies. Q. HAVE YOU MADE ANY CHANGES SINCE SEPTEMBER? A. I increased our investment in entertainment companies like Viacom and News Corp. The latter's stock price fell 24% in 1994 as the company faced higher newsprint prices, a cover price war in the U.K., and high start-up costs for its Australian newspaper plant. Since then, the stock has rebounded as News Corp. has taken steps to minimize the newsprint problem and raised its U.K. cover prices. I also cut back on book publishers, whose stock prices fell as forecasted demand for textbooks failed to materialize and paper costs continued to rise. Finally, I sold Time Warner because its plans to buy more cable companies and increase capital spending didn't fit my strategy. Q. MANY INVESTORS SEEM TO HAVE WRITTEN OFF THE BROADCASTERS. WHAT'S YOUR THINKING? A. Many people thought the cable companies would take market share away from the major networks. But I think the networks will retain the market share and be able to charge higher rates. Another positive is that the government recently expanded the amount of programming broadcasters can produce or own. The fund owned Capital Cities/ABC - a top contributor to performance. Q. WERE THERE ANY DISAPPOINTMENTS? A. Sure. People's Choice TV, a large wireless cable operator, fell 60% during the period. As interest rates rose, wireless cable companies - which used to finance their growth with debt - had to instead raise money by issuing new stock. That hurt stock prices. Then several operators ran out of money and had to stop adding new subscribers. As investors speculated that the industry might never amount to anything, prices fell further. But some companies, including People's Choice, seem to have successfully weathered the storm and may see improvement ahead. Q. WHAT'S YOUR OUTLOOK FOR 1995? A. More of the same, unless there are legislative changes that give cable companies freedom to raise their prices or prohibit phone companies from entering the cable business. Since I don't see either happening soon, I'll continue to focus on equipment providers and entertainment companies. FUND FACTS START DATE: June 30, 1986 SIZE: as of February 28, 1995, more than $38 million MANAGER: Stephen DuFour, since 1993; manager, Fidelity Select Transportation Portfolio, since December 1994; equity analyst, media, 1992-1993; joined Fidelity in 1992 (checkmark) MULTIMEDIA PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 85.0% SHARES VALUE (NOTE 1) ADVERTISING - 1.3% ADVERTISING AGENCIES - 1.3% ADVO-Systems, Inc. 26,400 $ 498,294 00758510 BROADCASTING - 26.3% CABLE TV OPERATORS - 18.9% ACS Enterprises, Inc. (a) 72,000 864,000 00087230 American Telecasting, Inc. (a) 5,800 68,150 03015110 Cablemaxx, Inc. (a) 26,500 129,188 12685910 Comcast Corp. Class A (Special) 9,600 151,200 20030020 Gaylord Entertainment Co. Class A 20,000 525,000 36790110 People's Choice TV Corp. (a) 65,000 1,287,813 71084710 Shaw Cablesystems Ltd. Class B (b) 50,000 305,855 82028K20 Turner Broadcasting System, Inc. Class B 20,000 377,500 90026250 Valuevision International, Inc. (a) 100 575 92047K10 Viacom, Inc. Class B (a): (non-vtg.) 67,284 3,010,959 92552430 (warrants) 125,000 500,000 92552412 7,220,240 TELEVISION BROADCASTING - 7.4% British Sky Broadcasting Group ADR 22,500 542,813 11101310 Capital Cities/ABC, Inc. 16,500 1,460,250 13985910 Central European Media Class C (a) 2,000 19,250 15399422 Grupo Televisa GDS (b) 10,000 165,000 40049J20 Heritage Media Corp. Class A (a) 24,900 638,063 42724120 2,825,376 TOTAL BROADCASTING 10,045,616 CELLULAR - 5.6% CELLULAR & COMMUNICATION SERVICES - 5.6% Airtouch Communications (a) 20,000 545,000 00949T10 Rogers Communications, Inc. Class B (a) 114,700 1,434,215 77510920 Vodafone Group PLC sponsored ADR 5,300 161,650 92857T10 2,140,865 COMMUNICATIONS EQUIPMENT - 5.6% TELEPHONE EQUIPMENT - 0.7% Ericsson (L.M.) Telephone Co. Class B ADR 5,000 284,375 29482140 TELEPHONE INTERCONNECT SYSTEMS - 4.9% General Instrument Corp. (a) 58,700 1,863,725 37012110 TOTAL COMMUNICATIONS EQUIPMENT 2,148,100 COMPUTER SERVICES & SOFTWARE - 2.8% COMPUTER SERVICES - 1.1% Reuters Holdings PLC ADR Class B 10,000 423,750 76132420 PREPACKAGED COMPUTER SOFTWARE - 1.7% Electronic Arts, Inc. (a) 30,000 645,000 28551210 General Magic, Inc. (a) 200 3,650 37025310 Spectrum Holobyte, Inc. (a) 300 4,050 84762J10 652,700 TOTAL COMPUTER SERVICES & SOFTWARE 1,076,450 CREDIT & OTHER FINANCE - 0.1% FINANCIAL SERVICES - 0.1% Benpress Holdings Corp. GDR (a) 4,860 40,095 08230093 ELECTRICAL EQUIPMENT - 13.6% ELECTRICAL EQUIPMENT - WHOLESALE - 2.3% Itel Corp. (a) 25,200 878,850 46564210 SHARES VALUE (NOTE 1) TV & RADIO COMMUNICATION EQUIPMENT - 11.3% California Amplifier, Inc. (a) 189,200 $ 1,229,800 12990010 Leitch Technology (a) 83,200 972,977 52543H10 Scientific-Atlanta, Inc. 89,500 2,092,063 80865510 4,294,840 TOTAL ELECTRICAL EQUIPMENT 5,173,690 ENTERTAINMENT - 1.9% MOTION PICTURE PRODUCTION - 1.9% Alliance Communications Corp. (a) 25,000 251,880 01855R10 Cinergi Pictures Entertainment, Inc. (a) 5,000 34,063 17247010 Disney (Walt) Co. 8,300 443,013 25468710 728,956 MEDICAL FACILITIES MANAGEMENT - 0.1% HEALTH SERVICES - 0.1% Lambert Communications, Inc. (a) 150,000 36,000 51328G10 PUBLISHING - 19.4% BOOK PUBLISHING & PRINTING - 1.2% Nelson Thomas, Inc. 18,500 453,250 64037610 NEWSPAPERS - 14.0% American Publishing Co. Class A 5,000 57,500 02913910 McClatchy Newspapers, Inc. Class A 20,000 472,500 57948910 News Corp. Ltd. (vtg.) pfd. sponsored ADR 175,000 2,821,875 65248780 Pulitzer Publishing Co. 20,250 683,438 74577110 Scripps (E.W.) Co. Class A 36,000 1,048,500 81103910 Washington Post Co. Class B 1,000 253,250 93964010 5,337,063 PERIODICALS - 4.2% American Media, Inc. Class A 36,700 266,075 02744L10 Meredith Corp. 28,000 1,361,500 58943310 1,627,575 TOTAL PUBLISHING 7,417,888 SECURITIES INDUSTRY - 0.0% SECURITY BROKERS & DEALERS - 0.0% PaineWebber Group, Inc. 100 1,713 69562910 SERVICES - 0.6% GENERAL SERVICES - 0.6% Flextech PLC (a) 40,000 219,651 33999392 TELEPHONE SERVICES - 7.7% Ameritech Corp. 15,000 643,125 03095410 NYNEX Corp. 35,800 1,405,150 67076810 SBC Communications, Inc. 10,000 416,250 84533310 Telephone & Data Systems, Inc. 10,000 456,250 87943310 2,920,775 TOTAL COMMON STOCKS (Cost $30,267,007) 32,448,093 NONCONVERTIBLE PREFERRED STOCKS - 0.5% PUBLISHING - 0.5% NEWSPAPERS - 0.5% News Corp. Ltd. (ltd. vtg.) (Cost $175,099) 50,000 198,832 65199093 REPURCHASE AGREEMENTS - 14.5% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $5,536,935 $ 5,536,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $35,978,106) $ 38,182,925 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $470,855 or 1.2% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggre- gated $31,002,590 and $46,031,616, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $12,190 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $3,305,000 and $2,996,000, respectively. The weighted average interest rate paid was 4.3% (see Note 8 of Notes to Financial Statements). Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: United States 79.5% Australia 7.9 Canada 7.8 United Kingdom 3.5 Others (individually less than 1%) 1.3 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $36,148,320. Net unrealized appreciation aggregated $2,034,605, of which $4,394,513 related to appreciated investment securities and $2,359,908 related to depreciated investment securities. MULTIMEDIA PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $5,536,000) (cost $35,978,106) - See $ 38,182,925 accompanying schedule Cash 101 Receivable for fund shares sold 432,914 Dividends receivable 9,784 Redemption fees receivable 205 Other receivables 3,800 TOTAL ASSETS 38,629,729 LIABILITIES Payable for investments purchased $ 4,448 Payable for fund shares redeemed 407,671 Accrued management fee 17,774 Other payables and accrued expenses 42,731 TOTAL LIABILITIES 472,624 NET ASSETS $ 38,157,105 Net Assets consist of: Paid in capital $ 36,118,699 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (166,413 ) Net unrealized appreciation (depreciation) on investments 2,204,819 NET ASSETS, for 1,706,892 shares outstanding $ 38,157,105 NET ASSET VALUE and redemption price per share ($38,157,105 (divided by) 1,706,892 shares) $22.35 Maximum offering price per share (100/97.00 of $22.35) $23.04
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 489,346 Dividends Interest 130,368 TOTAL INCOME 619,714 EXPENSES Management fee $ 195,423 Transfer agent 359,438 Fees Redemption fees (25,406 ) Accounting fees and expenses 45,584 Non-interested trustees' compensation 506 Custodian fees and expenses 16,553 Registration fees 27,308 Audit 23,059 Legal 936 Interest 1,418 Reports to shareholders 1,416 Miscellaneous 368 Total expenses before reductions 646,603 Expense reductions (5,649 640,954 ) NET INVESTMENT INCOME (LOSS) (21,240 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 713,640 Foreign currency transactions (20 713,620 ) Change in net unrealized appreciation (depreciation) on investment securities (46,862 ) NET GAIN (LOSS) 666,758 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 645,518 OTHER INFORMATION $177,841 Sales Charges Paid to FDC Deferred sales charges withheld $3,103 by FDC Exchange fees withheld by FSC $18,278
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ (21,240 $ (263,237 Net investment income (loss) ) ) Net realized gain (loss) 713,620 10,978,209 Change in net unrealized appreciation (depreciation) (46,862 135,110 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 645,518 10,850,082 Distributions to shareholders (5,781,614 (1,336,869 From net realized gains ) ) Share transactions 35,047,458 242,015,079 Net proceeds from sales of shares Reinvestment of distributions 5,728,603 1,323,568 Cost of shares redeemed (46,707,859 (220,542,573 ) ) Paid in capital portion of redemption fees 48,397 219,824 Net increase (decrease) in net assets resulting from share transactions (5,883,401 23,015,898 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (11,019,497 32,529,111 ) NET ASSETS Beginning of period 49,176,602 16,647,491 End of period (including undistributed net investment income of $0 and $3,010, respectively) $ 38,157,105 $ 49,176,602 OTHER INFORMATION Shares Sold 1,606,026 10,652,395 Issued in reinvestment of distributions 293,006 60,047 Redeemed (2,252,403 (9,563,667 ) ) Net increase (decrease) (353,371 1,148,775 )
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 23.87 $ 18.26 $ 15.93 $ 12.96 $ 11.65 Income from Investment Operations Net investment income (loss) (.01) (.10) (.07) (.17) (.05) Net realized and unrealized gain (loss) 1.67 6.28 2.61 3.08 1.29 Total from investment operations 1.66 6.18 2.54 2.91 1.24 Less Distributions From net realized gains (3.21) (.65) (.23) - - Redemption fees added to paid in capital .03 .08 .02 .06 .07 Net asset value, end of period $ 22.35 $ 23.87 $ 18.26 $ 15.93 $ 12.96 TOTAL RETURN B, C 9.35% 34.86% 16.14% 22.92% 11.24% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 38,157 $ 49,177 $ 16,647 $ 8,393 $ 5,177 Ratio of expenses to average net assets 2.03% 1.63% 2.49% A 2.49% 2.53% Ratio of expenses to average net assets before expense reductions 2.05% 1.66% 2.54% A 2.78% 2.77% Ratio of net investment income (loss) to average net assets (.07)% (.42)% (.52)% (1.22)% (.43)% A Portfolio turnover rate 107% 340% 70% A 111% 150%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. RETAILING PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND RETAILING -4.01% 119.65% 290.27% RETAILING (INCL. 3% SALES CHARGE) -6.89% 113.06% 278.57% S&P 500 7.36% 71.20% 212.82% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on December 16, 1985. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND RETAILING -4.01% 17.04% 15.93% RETAILING (INCL. 3% SALES CHARGE) -6.89% 16.33% 15.55% S&P 500 7.36% 11.35% 13.18% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Retailing (04Standard & Poor's 50 12/16/85 9700.00 10000.00 12/31/85 9506.00 10080.42 01/31/86 9583.60 10136.87 02/28/86 10252.90 10895.11 03/31/86 11174.40 11503.06 04/30/86 11378.10 11373.07 05/31/86 12668.20 11978.12 06/30/86 12978.60 12180.55 07/31/86 11271.40 11499.66 08/31/86 11271.40 12352.93 09/30/86 10446.90 11331.35 10/31/86 11368.40 11985.16 11/30/86 11678.80 12276.40 12/31/86 10854.30 11963.36 01/31/87 11756.40 13574.82 02/28/87 13124.10 14111.03 03/31/87 13521.80 14518.83 04/30/87 13104.70 14389.62 05/31/87 13337.50 14514.81 06/30/87 14065.00 15247.80 07/31/87 14773.10 16020.87 08/31/87 15102.90 16618.45 09/30/87 14026.20 16254.50 10/31/87 9835.80 12753.28 11/30/87 9156.80 11702.41 12/31/87 10055.28 12592.97 01/31/88 10690.46 13123.13 02/29/88 11928.53 13734.67 03/31/88 12079.25 13310.27 04/30/88 12456.05 13458.01 05/31/88 12100.78 13575.09 06/30/88 13166.60 14198.19 07/31/88 13048.17 14144.24 08/31/88 13015.88 13663.33 09/30/88 13780.25 14245.39 10/31/88 14070.93 14641.41 11/30/88 13877.14 14432.04 12/31/88 13947.19 14684.60 01/31/89 14636.89 15759.52 02/28/89 14439.83 15367.10 03/31/89 15129.53 15725.16 04/30/89 15983.44 16541.29 05/31/89 17089.14 17211.21 06/30/89 16784.91 17113.11 07/31/89 18138.53 18658.42 08/31/89 19018.38 19024.13 09/30/89 18973.26 18946.13 10/31/89 18059.57 18506.58 11/30/89 18172.37 18884.12 12/31/89 18065.93 19337.33 01/31/90 16654.94 18039.80 02/28/90 17235.16 18272.51 03/31/90 18646.15 18756.73 04/30/90 18382.41 18287.82 05/31/90 20835.16 20070.88 06/30/90 20571.42 19934.40 07/31/90 19727.47 19870.61 08/31/90 16892.30 18074.30 09/30/90 15006.59 17194.08 10/31/90 14307.69 17120.15 11/30/90 16259.34 18226.11 12/31/90 17157.07 18734.62 01/31/91 18822.55 19551.45 02/28/91 20567.33 20949.38 03/31/91 22708.66 21456.35 04/30/91 23025.90 21507.85 05/31/91 24942.52 22436.99 06/30/91 24149.43 21409.37 07/31/91 25695.95 22407.05 08/31/91 27057.41 22938.10 09/30/91 26766.61 22555.03 10/31/91 26264.32 22857.27 11/30/91 25762.04 21936.12 12/31/91 28846.72 24445.61 01/31/92 30446.30 23990.92 02/29/92 31910.33 24302.81 03/31/92 31273.21 23828.90 04/30/92 29998.96 24529.47 05/31/92 30622.53 24649.67 06/30/92 29193.11 24282.39 07/31/92 30491.83 25275.53 08/31/92 29800.12 24757.39 09/30/92 30689.47 25049.52 10/31/92 32792.84 25137.20 11/30/92 35277.36 25994.38 12/31/92 35215.02 26314.11 01/31/93 35457.98 26535.14 02/28/93 34114.55 26896.02 03/31/93 36744.24 27463.53 04/30/93 34635.21 26798.91 05/31/93 36553.70 27517.12 06/30/93 35675.00 27596.92 07/31/93 35850.74 27486.53 08/31/93 37490.97 28528.27 09/30/93 38633.27 28308.61 10/31/93 39233.71 28894.59 11/30/93 39614.48 28620.10 12/31/93 39804.09 28966.40 01/31/94 38030.79 29951.26 02/28/94 39439.93 29139.58 03/31/94 38616.61 27869.09 04/30/94 39788.25 28225.82 05/31/94 37824.97 28688.72 06/30/94 37508.31 27985.85 07/31/94 38141.62 28903.78 08/31/94 40564.07 30088.84 09/30/94 39772.42 29351.66 10/31/94 39946.58 30012.07 11/30/94 38553.28 28919.03 12/31/94 37809.13 29347.90 01/31/95 37508.31 30108.89 02/28/95 37856.63 31282.24 Let's say you invested $10,000 in Fidelity Select Retailing Portfolio on December 16, 1985, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $37,857 - a 278.57% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $31,282 over the same period - a 212.82% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Old American Stores, Inc. 6.8 Sears, Roebuck & Co. 6.7 Circuit City Stores, Inc. 2.9 Lowe's Companies, Inc. 2.9 AnnTaylor Stores Corp. 2.8 Sunglass Hut International, Inc. 2.6 Home Depot, Inc. (The) 2.6 Friedmans, Inc. Class A 2.5 Dayton Hudson Corp. 2.4 Autozone, Inc. 2.2 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 55.2 Row: 1, Col: 2, Value: 5.8 Row: 1, Col: 3, Value: 6.1 Row: 1, Col: 4, Value: 6.2 Row: 1, Col: 5, Value: 10.6 Row: 1, Col: 6, Value: 16.1 Retail, General 16.1% Department Stores 10.6% Women's Clothing Stores 6.2% Music, TV, & Electronic Stores 6.1% Drug Stores 5.8% All Others 55.2%* * INCLUDES SHORT-TERM INVESTMENTS RETAILING PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Erin Sullivan, Portfolio Manager of Fidelity Select Retailing Portfolio Q. HOW DID THE FUND PERFORM, ERIN? A. The fund had generally disappointing performance over the 12 months ended February 28, 1995. It returned -4.01% for the period, compared with a 7.36% gain for the S&P 500. Q. WHAT CAUSED THE FUND TO TRAIL THE MARKET? A. Actually, the fund's performance was more favorable when compared with the industry in general, where the average retail stock was down about 12% over the year. But measured against the broad market, retail stocks have lagged for about the past three years. The primary reason for this is that there simply are too many retail stores. This over-supply, a trend which began with new construction of retail space in the mid-1970s and continues today, has created a super-charged competitive environment in which retailers are finding it more and more difficult to grow market share. In addition, retail demand began to show some sluggishness during the period. Q. WHICH OF THE FUND'S INVESTMENTS HELPED PERFORMANCE? A. Despite the overall pressure on retail stocks, a number of the fund's holdings did well over the past 12 months. And fortunately, some of the best performers also were among the fund's largest holdings. Best Buy, a consumer appliance retailer, did very well during the early part of the period. Sears and AnnTaylor, both among the fund's top 10 investments at the end of February, showed consistently solid performances and achieved their earnings goals. In addition, Old American Stores capitalized on its strong presence in the craft supplies niche and appreciated by about 25%. Q. WERE THERE ANY BIG DISAPPOINTMENTS? A. There were a great number of stocks in the retail industry that lost more than 25% of their value during the period. Fortunately, the fund avoided most of the big losers, or "blow-ups" as they're called in the trade. But yes, there were some big disappointments in the portfolio. Burlington Coat Factory, for example, experienced a steep decline in its stock price when it announced, late in the period, that its inventories were too high and its earnings below expectations. Hechinger's, a lumber and building materials company, also was a disappointment, though not of the same magnitude, as its once-promising sales were hurt by increased competition in that sector. The fund sold its positions in both of these stocks during the period and protected itself from further declines. Q. WHAT HAS BEEN THE STRATEGY IN MANAGING THE FUND DURING THIS UNFAVORABLE RETAILING ENVIRONMENT? A. As a general rule, the fund has tried to limit its exposure in sectors where competitive pressures are greatest. This has meant staying away from discount stores and warehouse clubs, for example, and focusing more on certain specialty retailers where the market is more fragmented and there is more room for growth in market share even when the overall environment is so challenging. For instance, home improvement and consumer electronics are groups that have been among the fund's top performers. Certain other niche businesses, such as bath and linen retailers and pet supply stores, also have supported this strategy. Q. WHAT IS YOUR OUTLOOK FOR THE INDUSTRY AND HOW WILL IT AFFECT YOUR STRATEGY GOING FORWARD? A. I believe the retail environment will continue to be a challenging one. There still is far too much capacity in the system - too many stores and not enough evidence of industry consolidation - which will continue putting intense competitive pressure on retailers and could hold back their earnings. Also, I am not very optimistic about improvements on the demand side, which generally means that it's a stock picker's market. I began running the fund in February and expect to maintain the strategy it has been following. I'll continue focusing on value stocks and on those companies that are eliminating overhead or are able to fund their future growth internally, without having to go to the market for capital. FUND FACTS START DATE: December 16, 1985 SIZE: as of February 28, 1995, more than $31 million MANAGER: Erin Sullivan, since February 1995; equity analyst, medical technology and hospital supply industries, 1993-95; analyst, initial public offerings, 1991-92; joined Fidelity in 1991 (checkmark) RETAILING PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.6% SHARES VALUE (NOTE 1) APPAREL STORES - 12.9% GENERAL APPAREL STORES - 4.9% BON-TON Stores, Inc. (a) 41,700 $ 469,121 09776J10 Buckle, Inc. (The) (a) 11,000 159,500 11844010 Filene's Basement Corp. (a) 66,900 263,419 31686610 Gap, Inc. 13,000 422,500 36476010 Gymboree Corp. (a) 13,000 312,000 40377710 1,626,540 MISCELLANEOUS APPAREL, ACCESSORIES - 1.2% Urban Outfitters, Inc. (a) 17,200 404,200 91704710 PROFESSIONAL & COMMERCIAL EQUIPMENT & SUPPLY - WHOLESALE - 0.6% Sportmart, Inc. Class A (non-vtg) (a) 30,000 202,500 84892220 WOMEN'S CLOTHING STORES - 6.2% AnnTaylor Stores Corp. (a) 28,200 930,600 03611510 Cache, Inc. (a) 80,000 560,000 12715030 Talbots, Inc. 17,000 537,625 87416110 2,028,225 TOTAL APPAREL STORES 4,261,465 AUTOS, TIRES, & ACCESSORIES - 2.2% AUTO PARTS - RETAIL - 2.2% Autozone, Inc. (a) 27,850 738,025 05333210 DRUG STORES - 5.8% Big B, Inc. 33,000 474,375 08889110 Eckerd Corp. (a) 13,900 364,875 27876310 Revco (D.S.), Inc. (a) 35,400 650,475 76133910 Rite Aid Corp. 18,000 445,500 76775410 1,935,225 GENERAL MERCHANDISE STORES - 19.6% CONVENIENCE STORES - 1.2% National Convenience Stores (a) 45,000 405,000 63557050 DEPARTMENT STORES - 10.6% Carson Pirie Scott & Co. (a) 21,900 372,300 14590310 Federated Department Stores, Inc. (a) 16,000 352,000 31410H10 Sears, Roebuck & Co. 45,200 2,226,100 81238710 Stein Mart, Inc. (a) 30,000 333,750 85837510 Younkers, Inc. (a) 11,700 210,600 98776710 3,494,750 GENERAL MERCHANDISE STORES - 5.3% Dayton Hudson Corp. 11,100 782,550 23975310 Dollar General Corp. 13,500 469,125 25666910 Price/Costco, Inc. (a) 36,100 491,863 74143W10 1,743,538 VARIETY STORES - 2.5% Consolidated Stores Corp. (a) 25,000 475,000 21014910 Mac Frugals Bargains C/O, Inc. (a) 21,000 357,000 55415210 832,000 TOTAL GENERAL MERCHANDISE STORES 6,475,288 GROCERY STORES - 3.6% GROCERY - RETAIL - 3.6% Hannaford Brothers Co. 15,000 386,250 41055010 Kroger Co. (The) (a) 16,000 420,000 50104410 Safeway, Inc. (a) 10,700 383,863 78651420 1,190,113 SHARES VALUE (NOTE 1) HOUSEHOLD PRODUCTS - 1.3% COSMETICS - 1.3% Alberto-Culver Co. Class A 17,000 $ 422,875 01306820 LEASING & RENTAL - 0.5% EQUIPMENT RENTAL & LEASING, NEC - 0.5% Renters Choice, Inc. (a) 11,000 167,750 76011410 LEISURE DURABLES & TOYS - 3.5% BOAT DEALERS - RETAIL - 2.1% West Marine, Inc. (a) 29,500 693,250 95423510 SPORTING & ATHLETIC GOODS - 1.4% Leslie's Poolmart 32,670 453,296 52706910 TOTAL LEISURE DURABLES & TOYS 1,146,546 RETAIL & WHOLESALE, MISCELLANEOUS - 39.4% BUILDING MATERIALS - RETAIL - 2.6% Home Depot, Inc. (The) 19,500 875,063 43707610 DURABLE GOODS - WHOLESALE - 1.4% Waban, Inc. (a) 23,100 456,225 92939410 JEWELRY STORES - 2.5% Friedmans, Inc. Class A (a) 44,100 837,900 35843810 LUMBER & BUILDING MATERIALS - RETAIL - 5.6% Hechinger Co. Class A 35,000 404,688 42266020 Lowe's Companies, Inc. 28,300 951,588 54866110 Wickes Lumber Co. (a) 31,500 480,375 96744610 1,836,651 MAIL ORDER - 1.5% Land's End, Inc. (a) 30,500 507,063 51508610 MUSIC, TV, & ELECTRONIC STORES - 6.1% Best Buy Co., Inc. (a) 10,770 232,901 08651610 Campo Electronics Appliances and Computers, Inc. (a) 20,500 194,750 13462410 Circuit City Stores, Inc. 44,600 964,475 17273710 InterTan, Inc. (a) 44,500 328,188 46112010 Rex Stores Corp. (a) 24,600 310,575 76162410 2,030,889 PAINT, VARNISH & SUPPLIES - WHOLESALE - 1.3% Finish Line, Inc. Class A (a) 66,600 424,575 31792310 RETAIL, GENERAL - 16.1% Bed Bath & Beyond, Inc. (a) 21,500 521,375 07589610 Officemax, Inc. (a) 16,000 400,000 67622M10 Office Depot, Inc. (a) 15,650 365,819 67622010 Old American Stores, Inc. (a) 145,000 2,247,500 67950310 Petco Animal Supplies, Inc. (a) 22,000 412,500 71601610 Pier 1 Imports, Inc. 52,000 513,500 72027910 Sunglass Hut International, Inc. (a) 32,000 876,000 86736F10 5,336,694 SEWING STORES - 1.3% Fabri-Centers of America, Inc. (a) 25,000 425,000 30284610 SPORTING GOODS & BIKES STORES - 1.0% Forzani Group Ltd. Class A (a) 60,300 314,616 34990710 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 13,044,676 SERVICES - 1.1% GENERAL SERVICES - 1.1% Regis Corp. (a) 20,400 367,200 75893210 TEXTILES & APPAREL - 2.7% APPAREL - 1.3% Fila Holding Spa sponsored ADR 19,600 426,300 31685010 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TEXTILES & APPAREL - CONTINUED FOOTWEAR - 1.4% Nine West Group, Inc. (a) 16,300 $ 458,438 65440D10 TOTAL TEXTILES & APPAREL 884,738 TOTAL COMMON STOCKS (Cost $31,566,425) 30,633,901 REPURCHASE AGREEMENTS - 7.4% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $2,453,414 2,453,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $34,019,425) $ 33,086,901 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $252,110,602 and $249,755,581, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $163,684 for the period (see Note 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $328,188 and $356,000, respectively (see Note 7 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $23,218,000 and $4,482,786, respectively. The weighted average interest rate paid was 4.6% (see Note 8 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $34,163,978. Net unrealized depreciation aggregated $1,077,077, of which $1,448,253 related to appreciated investment securities and $2,525,330 related to depreciated investment securities. At February 28, 1995, the fund had a capital loss carryforward of approximately $3,094,000 which will expire on February 28, 2003. RETAILING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $2,453,000) (cost $34,019,425) - See $ 33,086,901 accompanying schedule Cash 695 Receivable for fund shares sold 12,225 Dividends receivable 24,197 Redemption fees receivable 146 Other receivables 5,795 TOTAL ASSETS 33,129,959 LIABILITIES Payable for fund shares redeemed $ 724,426 Accrued management fee 16,928 Other payables and accrued expenses 942,148 Collateral on securities loaned, 356,000 at value TOTAL LIABILITIES 2,039,502 NET ASSETS $ 31,090,457 Net Assets consist of: Paid in capital $ 35,284,826 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (3,261,845 ) Net unrealized appreciation (depreciation) on investments (932,524 ) NET ASSETS, for 1,300,473 $ 31,090,457 shares outstanding NET ASSET VALUE and redemption price per share ($31,090,457 (divided by) 1,300,473 shares) $23.91 Maximum offering price per share (100/97.00 of $23.91) $24.65
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 461,929 Dividends Interest (including security lending fees of $30,256) 283,233 TOTAL INCOME 745,162 EXPENSES Management fee $ 377,628 Transfer agent 780,357 Fees Redemption fees (92,842 ) Accounting and security lending fees 67,016 Non-interested trustees' compensation 1,037 Custodian fees and expenses 26,214 Registration fees 58,439 Audit 22,784 Legal 1,260 Interest 10,243 Reports to shareholders 4,204 Miscellaneous 443 Total expenses before reductions 1,256,783 Expense reductions (63,543 1,193,240 ) NET INVESTMENT INCOME (LOSS) (448,078 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (3,125,762 ) Foreign currency transactions (168 (3,125,930 ) ) Change in net unrealized appreciation (depreciation) on investment securities (4,256,876 ) NET GAIN (LOSS) (7,382,806 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (7,830,884 ) OTHER INFORMATION $307,005 Sales Charges Paid to FDC Deferred sales charges withheld $2,778 by FDC Exchange fees withheld by FSC $65,258
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ (448,078 $ (499,992 Net investment income (loss) ) ) Net realized gain (loss) (3,125,930 8,382,130 ) Change in net unrealized appreciation (depreciation) (4,256,876 (727,175 ) ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (7,830,884 7,154,963 ) Distributions to shareholders from net realized gains - (7,142,724 ) Share transactions 159,368,155 83,392,727 Net proceeds from sales of shares Reinvestment of distributions - 7,020,042 Cost of shares redeemed (173,586,110 (112,598,899 ) ) Paid in capital portion of redemption fees 349,164 86,108 Net increase (decrease) in net assets resulting from share transactions (13,868,791 (22,100,022 ) ) TOTAL INCREASE (DECREASE) IN NET ASSETS (21,699,675 (22,087,783 ) ) NET ASSETS Beginning of period 52,790,132 74,877,915 End of period $ 31,090,457 $ 52,790,132 OTHER INFORMATION Shares Sold 6,306,112 3,246,217 Issued in reinvestment of distributions - 282,598 Redeemed (7,124,678 (4,546,561 ) ) Net increase (decrease) (818,566 (1,017,746 ) )
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 24.91 $ 23.87 $ 22.13 $ 17.42 $ 13.94 Income from Investment Operations Net investment income (loss) (.18) (.22) (.08) (.03) (.05) Net realized and unrealized gain (loss) (.96) 3.85 2.93 5.09 3.43 Total from investment operations (1.14) 3.63 2.85 5.06 3.38 Less Distributions From net realized gain - (2.63) (1.17) (.50) (.03) Redemption fees added to paid in capital .14 .04 .06 .15 .13 Net asset value, end of period $ 23.91 $ 24.91 $ 23.87 $ 22.13 $ 17.42 TOTAL RETURN B, C (4.01)% 15.61% 13.72% 30.28% 25.26% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 31,090 $ 52,790 $ 74,878 $ 48,441 $ 18,069 Ratio of expenses to average net assets 1.96% 1.83% 1.77% A 1.87% 2.54% Ratio of expenses to average net assets before expense reductions 2.07% 1.86% 1.77% A 1.87% 2.87% Ratio of net investment income (loss) to average net assets (.74)% (.87)% (.44)% (.13)% (.34)% A Portfolio turnover rate 481% 154% 171% A 205% 115%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. AIR TRANSPORTATION PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). If Fidelity had not reimbursed certain fund expenses during the period, the fund's total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND AIR TRANSPORTATION -12.45% 46.74% 91.85% AIR TRANSPORTATION (INCL. 3% SALES CHARGE) -15.08% 42.34% 86.09% S&P 500 7.36% 71.20% 212.82% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on December 16, 1985. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND AIR TRANSPORTATION -12.45% 7.97% 7.33% AIR TRANSPORTATION (INCL. 3% SALES CHARGE) -15.08% 7.32% 6.98% S&P 500 7.36% 11.35% 13.18% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Air TransportStandard & Poor's 50 12/16/85 9700.00 10000.00 12/31/85 9215.00 10080.42 01/31/86 9961.90 10136.87 02/28/86 10553.60 10895.11 03/31/86 10573.00 11503.06 04/30/86 10388.70 11373.07 05/31/86 10408.10 11978.12 06/30/86 9826.10 12180.55 07/31/86 9234.40 11499.66 08/31/86 9486.60 12352.93 09/30/86 9680.60 11331.35 10/31/86 10194.70 11985.16 11/30/86 10320.80 12276.40 12/31/86 10485.70 11963.36 01/31/87 11426.60 13574.82 02/28/87 11911.60 14111.03 03/31/87 11504.20 14518.83 04/30/87 11513.90 14389.62 05/31/87 12202.60 14514.81 06/30/87 12357.80 15247.80 07/31/87 12629.40 16020.87 08/31/87 12736.10 16618.45 09/30/87 12270.50 16254.50 10/31/87 8565.10 12753.28 11/30/87 7983.10 11702.41 12/31/87 8319.92 12592.97 01/31/88 8552.87 13123.13 02/29/88 9262.84 13734.67 03/31/88 9662.19 13310.27 04/30/88 9551.26 13458.01 05/31/88 9407.05 13575.09 06/30/88 10616.21 14198.19 07/31/88 10305.60 14144.24 08/31/88 9728.75 13663.33 09/30/88 10372.16 14245.39 10/31/88 10571.84 14641.41 11/30/88 10327.79 14432.04 12/31/88 10738.24 14684.60 01/31/89 11736.63 15759.52 02/28/89 11958.49 15367.10 03/31/89 12557.53 15725.16 04/30/89 13056.72 16541.29 05/31/89 13389.52 17211.21 06/30/89 13322.59 17113.11 07/31/89 14260.64 18658.42 08/31/89 15343.87 19024.13 09/30/89 14740.84 18946.13 10/31/89 13579.44 18506.58 11/30/89 13445.43 18884.12 12/31/89 13565.93 19337.33 01/31/90 12169.78 18039.80 02/28/90 12681.70 18272.51 03/31/90 13344.87 18756.73 04/30/90 12856.22 18287.82 05/31/90 13752.09 20070.88 06/30/90 13786.99 19934.40 07/31/90 13368.14 19870.61 08/31/90 11250.65 18074.30 09/30/90 10122.09 17194.08 10/31/90 10657.28 17120.15 11/30/90 10494.40 18226.11 12/31/90 11099.40 18734.62 01/31/91 12414.11 19551.45 02/28/91 13810.26 20949.38 03/31/91 13752.09 21456.35 04/30/91 13414.68 21507.85 05/31/91 14205.83 22436.99 06/30/91 13906.29 21409.37 07/31/91 14333.81 22407.05 08/31/91 14155.68 22938.10 09/30/91 13680.66 22555.03 10/31/91 14345.69 22857.27 11/30/91 13704.41 21936.12 12/31/91 15212.61 24445.61 01/31/92 16091.40 23990.92 02/29/92 16815.81 24302.81 03/31/92 15830.13 23828.90 04/30/92 15010.72 24529.47 05/31/92 15212.61 24649.67 06/30/92 14718.62 24282.39 07/31/92 14634.03 25275.53 08/31/92 14017.73 24757.39 09/30/92 14476.93 25049.52 10/31/92 14996.55 25137.20 11/30/92 15359.08 25994.38 12/31/92 16211.75 26314.11 01/31/93 16358.35 26535.14 02/28/93 16614.90 26896.02 03/31/93 18447.43 27463.53 04/30/93 18655.96 26798.91 05/31/93 19721.66 27517.12 06/30/93 18251.73 27596.92 07/31/93 18876.45 27486.53 08/31/93 20003.40 28528.27 09/30/93 19599.17 28308.61 10/31/93 20726.12 28894.59 11/30/93 20775.12 28620.10 12/31/93 21219.10 28966.40 01/31/94 22038.56 29951.26 02/28/94 21256.35 29139.58 03/31/94 20027.15 27869.09 04/30/94 19895.44 28225.82 05/31/94 19063.72 28688.72 06/30/94 18482.83 27985.85 07/31/94 19446.58 28903.78 08/31/94 20185.89 30088.84 09/30/94 17928.34 29351.66 10/31/94 18073.57 30012.07 11/30/94 16872.18 28919.03 12/31/94 16605.31 29347.90 01/31/95 17139.67 30108.89 02/28/95 18609.17 31282.24 Let's say you invested $10,000 in Fidelity Select Air Transportation Portfolio on December 16, 1985, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $18,609 - a 86.09% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $31,282 over the same period - a 212.82% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Northwest Airlines Corp. Class A 9.0 AMR Corp. 8.4 KLM Royal Dutch Airlines 7.5 Lufthansa 6.2 Delta Air Lines, Inc. 5.3 British Airways PLC ADR 4.5 Kobenhaven Lufthave AS 4.5 McDonnell Douglas Corp. 3.8 Bombardier, Inc. Class B 3.8 Pittston Company Services Group 3.7 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 20.2 Row: 1, Col: 2, Value: 3.8 Row: 1, Col: 3, Value: 3.8 Row: 1, Col: 4, Value: 4.4 Row: 1, Col: 5, Value: 7.4 Row: 1, Col: 6, Value: 60.4 Air Transportation, Major National 60.4% Conglomerates 7.4% Airports & Terminal Services 4.4% Aircraft 3.8% Railroad Equipment 3.8% All Others 20.2%* * INCLUDES SHORT-TERM INVESTMENTS AIR TRANSPORTATION PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Jason Weiner, Portfolio Manager of Fidelity Select Air Transportation Portfolio Q. JASON, HOW DID THE FUND PERFORM? A. The fund encountered problems, although it has rebounded somewhat during January and February. Its total return for the year ended February 28, 1995 was -12.45%. That trailed the S&P 500, which returned 7.36% during the same period. Q. WHAT CAUSED THE FUND'S DIFFICULTIES? A. Most domestic airlines, including regional and major carriers, were under pressure from eroding ticket prices. Low-cost carriers such as Continental Lite, USAir and America West expanded the number of inexpensive seats available, and airlines had to reduce their regular fares to compete. As a result, industry revenues were flat even though the economy was growing at a rapid pace, and share prices declined sharply. Since December, however, airline stocks have rebounded significantly. That isn't surprising. In fact, the sector has staged similar winter rallies during 14 of the past 15 years. Q. WHAT KIND OF INVESTMENTS SUFFERED THE MOST? A. The fund had a significant stake in Continental, which experienced difficulties when it expanded Continental Lite. The fund also held shares of Southwest Airlines, which opened new routes in too many cities at a time when demand wasn't growing rapidly enough to support such expansion. Q. SINCE YOU TOOK OVER THE FUND ON DECEMBER 1, HAVE YOU MADE MAJOR CHANGES? A. Yes. I have given the fund a more international flavor. Overseas holdings now amount to about half of the fund's total investments. I have purchased stocks of European carriers mainly for two reasons. First, those economies are in earlier stages of recovery, which should boost air travel. Second, carriers such as KLM, Lufthansa and British Airways have reduced their costs sharply. Q. WHAT KIND OF DOMESTIC CARRIERS DID YOU INVEST IN? A. I shifted the fund's assets toward domestic carriers with exposure to strong international markets. Air traffic over the Atlantic should increase as European economies recover. Meanwhile, carriers such as Delta, TWA and USAir are reducing their capacity on those routes. The combination of higher demand and lower capacity should support fares, which will benefit companies with strong Atlantic routes, such as American Airlines and Northwest. Q. AREN'T THOSE DOMESTIC AIRLINES VULNERABLE TO CONTINUED FARE WARS IN THIS COUNTRY? A. Among U.S. companies, I am investing the fund in carriers that are limiting their exposure to strong competition from the low-cost carriers that serve short-haul markets. For example, I invested the fund in shares of Northwest, which has U.S. hubs in Detroit and Minneapolis, where there is little low-cost competition. Northwest only flies in 10 of the top 100 short-haul markets, and those markets account for only 5% of its revenues. By contrast, USAir gets 35% of its revenues from these short-haul markets, so it competes much more with low-cost carriers. American Airlines also has been moving out of domestic markets with the fiercest price competition. I also have invested the fund in ValuJet, which boasts the lowest costs in the industry. Q. DO YOU LIKE SHARES OF ANY REGIONAL AIRLINES? A. No. The regionals are quite vulnerable to low-cost competition. They also have suffered from safety concerns. Hence, they have had more problems than even the average airline. Q. WHAT'S THE OUTLOOK FOR THE SECTOR? A. That depends upon a number of factors, including fuel prices. There is also the potential for labor problems, although they aren't an immediate concern. Meanwhile, carriers with strong international exposure should continue to have growth potential. In addition to the Atlantic, I'm very optimistic about Latin America, where economic growth should stimulate air travel and stringent capacity controls exist. So far, the problems in Mexico have not had a noticeable impact on traffic flows to other Latin American countries. I also have hopes that traffic in the Pacific will improve as the Japanese economy recovers. And there is the possibility that the domestic market will improve, although I'm not counting on it. For now, I will continue to invest mostly in overseas carriers or U.S. firms that can benefit from growth in international markets. FUND FACTS START DATE: December 16, 1985 SIZE: as of February 28, 1995, more than $18 million MANAGER: Jason Weiner, since December 1994; equity analyst, biotechnology, technology and retail products industries, 1993-1994; retail office products since December 1994; joined Fidelity in 1991 (checkmark) AIR TRANSPORTATION PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 88.3% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 4.3% AIRCRAFT - 3.8% McDonnell Douglas Corp. 12,700 $ 711,197 58016910 TRAINING EQUIPMENT & SIMULATORS - 0.5% Flightsafety International, Inc. 2,200 97,625 33942310 TOTAL AEROSPACE & DEFENSE 808,822 AIR TRANSPORTATION - 65.6% AIR TRANSPORTION, MAJOR NATIONAL - 57.5% AMR Corp. (a) 25,850 1,580,081 00176510 Aerovias De Mexico SA de CV sponsored ADR representing B shares (a) (b) 15,400 6,930 00806510 Air Canada, Inc. (a) 122,600 661,725 00891110 British Airways PLC ADR. 13,500 837,000 11041930 Braathens Safe (a) 2,400 88,984 11299722 Delta Air Lines, Inc. 17,200 997,600 24736110 Finnair OY 75,000 560,602 31799S22 Japan Airlines Co. Ltd. 25,000 153,739 47103420 KLM Royal Dutch Airlines (a) 47,700 1,395,225 48251610 Lufthansa (a) 8,500 1,164,702 54976510 Northwest Airlines Corp. Class A (a) 68,100 1,676,963 66728010 Pan Am Corp. (a) 5,900 15 69775710 Singapore International Airlines 40,000 400,414 82868910 UAL Corp. 7,100 672,725 90254950 ValuJet Airlines (a) 19,300 557,288 92047Q10 10,753,993 AIR TRANSPORTATION, REGIONAL - 3.7% Comair Holdings, Inc. 50 838 19978910 Pittston Company Services Group 27,500 687,500 72570110 688,338 AIRPORTS & TERMINAL SERVICES - 4.4% Kobenhaven Lufthave AS 14,000 835,275 49999B22 TOTAL AIR TRANSPORTATION 12,277,606 AUTOS, TIRES, & ACCESSORIES - 2.4% PETROLEUM - WHOLESALE - 2.4% Mercury Air Group 51,000 452,625 58935410 CONGLOMERATES - 7.4% Allied-Signal, Inc. 12,400 471,200 01951210 Dial Corp. (The) 5,000 125,000 25247010 Textron, Inc. 6,000 328,500 88320310 United Technologies Corp. 7,000 464,625 91301710 1,389,325 OIL & GAS - 0.0% OIL & GAS EXPLORATION - 0.0% British Petroleum PLC ADR 23 1,760 11088940 RAILROADS - 3.8% RAILROAD EQUIPMENT - 3.8% Bombardier, Inc. Class B 37,000 708,953 09775120 RETAIL & WHOLESALE, MISCELLANEOUS - 2.0% RETAIL, GENERAL - 2.0% Officemax, Inc. (a) 14,000 350,000 67622M10 Staples, Inc. (a) 700 16,975 85503010 366,975 TRUCKING & FREIGHT - 2.8% AIR COURIER SERVICES - 2.8% Airborne Freight Corp. 21,700 518,088 00926610 TOTAL COMMON STOCKS (Cost $15,837,568) 16,524,154 CORPORATE BONDS - 2.9% PRINCIPAL VALUE (NOTE 1) AMOUNT CONVERTIBLE BONDS - 2.4% AIR TRANSPORTATION - 2.4% AIR TRANSPORTION, MAJOR NATIONAL - 2.4% Delta Air Lines, Inc. 3.23%, 6/15/03 $ 570,000 $ 443,175 247361YA NONCONVERTIBLE BONDS - 0.5% AIR TRANSPORTATION - 0.5% AIR TRANSPORTION, MAJOR NATIONAL - 0.5% AMR Corp. 9 1/2%, 7/15/98 100,000 103,008 001765AN TOTAL CORPORATE BONDS (Cost $481,530) 546,183 REPURCHASE AGREEMENTS - 8.8% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $1,638,277 1,638,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $17,957,098) $ 18,708,337 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of this security amounted to $6,930 or .04% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $24,300,088 and $18,370,480, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $11,905 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $1,349,000 and $1,207,000, respectively. The weighted average interest rate paid was 3.8% (see Note 8 of Notes to Financial Statements). Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: United States 63.6% Netherlands 7.5 Canada 7.3 Germany 6.2 United Kingdom 4.5 Denmark 4.5 Finland 3.0 Singapore 2.1 Others (individually less than 1%) 1.3 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $18,073,955. Net unrealized appreciation aggregated $634,382, of which $1,171,099 related to appreciated investment securities and $536,717 related to depreciated investment securities. The fund hereby designates $62,000 as a capital gain dividend for the purpose of the dividend paid deduction. The fund has elected to defer to its fiscal year ending February 28, 1996 $998,000 of losses recognized during the period November 1, 1994 to February 28, 1995. AIR TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $1,638,000) (cost $17,957,098) - See $ 18,708,337 accompanying schedule Cash 265 Receivable for investments sold 499,441 Receivable for fund shares sold 3,562,231 Dividends receivable 6,811 Interest receivable 5,023 Redemption fees receivable 23 Other receivables 225 Receivable from investment adviser for expense reductions 780 TOTAL ASSETS 22,783,136 LIABILITIES Payable for investments purchased $ 3,727,063 Payable for fund shares redeemed 390,849 Accrued management fee 6,909 Other payables and accrued expenses 25,584 TOTAL LIABILITIES 4,150,405 NET ASSETS $ 18,632,731 Net Assets consist of: Paid in capital $ 18,978,669 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (1,097,177 ) Net unrealized appreciation (depreciation) on investments 751,239 NET ASSETS, for 1,337,455 shares outstanding $ 18,632,731 NET ASSET VALUE and redemption price per share ($18,632,731 (divided by) 1,337,455 shares) $13.93 Maximum offering price per share (100/97.00 of $13.93) $14.36
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 59,583 Dividends Interest 53,295 TOTAL INCOME 112,878 EXPENSES Management fee $ 58,574 Transfer agent 134,833 Fees Redemption fees (14,903 ) Accounting fees and expenses 45,044 Non-interested trustees' compensation 201 Custodian fees and expenses 12,584 Registration fees 13,472 Audit 20,506 Legal 231 Interest 251 Reports to shareholders 1,067 Miscellaneous 99 Total expenses before reductions 271,959 Expense reductions (35,969 235,990 ) NET INVESTMENT INCOME (LOSS) (123,112 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (856,145 ) Foreign currency transactions 64 (856,081 ) Change in net unrealized appreciation (depreciation) on investment securities 121,242 NET GAIN (LOSS) (734,839 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (857,951 ) OTHER INFORMATION $105,357 Sales Charges Paid to FDC Deferred sales charges withheld $1,000 by FDC Exchange fees withheld by FSC $14,783
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994 Operations $ (123,112 $ (198,334 Net investment income (loss) ) ) Net realized gain (loss) (856,081 2,844,048 ) Change in net unrealized appreciation (depreciation) 121,242 638,748 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (857,951 3,284,462 ) Distributions to shareholders (527,219 (252,463 From net realized gain ) ) In excess of net realized gain (98,627 (52,807 ) ) TOTAL DISTRIBUTIONS (625,846 (305,270 ) ) Share transactions 30,972,770 74,183,528 Net proceeds from sales of shares Reinvestment of distributions 593,907 292,761 Cost of shares redeemed (22,544,984 (78,501,131 ) ) Paid in capital portion of redemption fees 60,093 212,184 Net increase (decrease) in net assets resulting from share transactions 9,081,786 (3,812,658 ) TOTAL INCREASE (DECREASE) IN NET ASSETS 7,597,989 (833,466 ) NET ASSETS Beginning of period 11,034,742 11,868,208 End of period 18,632,731 11,034,742 OTHER INFORMATION Shares Sold 2,243,732 4,831,385 Issued in reinvestment of distributions 41,090 17,788 Redeemed (1,592,005 (5,077,239 ) ) Net increase (decrease) 692,817 (228,066 )
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 17.12 $ 13.60 $ 12.64 $ 11.53 $ 11.05 Income from Investment Operations Net investment income (loss) (.18) (.18) (.09) E (.13) (.04) Net realized and unrealized gain (loss) (2.01) 3.78 1.33 1.40 .38 Total from investment operations (2.19) 3.60 1.24 1.27 .34 Less Distributions From net realized gain (.92) (.22) (.36) (.25) - In excess of net realized gain (.17) (.05) - - - Total distributions (1.09) (.27) (.36) (.25) - Redemption fees added to paid in capital .09 .19 .08 .09 .14 Net asset value, end of period $ 13.93 $ 17.12 $ 13.60 $ 12.64 $ 11.53 TOTAL RETURN B, C (12.45)% 27.94% 10.69% 11.90% 4.34% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 18,633 $ 11,035 $ 11,868 $ 6,971 $ 4,372 Ratio of expenses to average net assets 2.50% 2.31% 2.48% A 2.51% 2.48% Ratio of expenses to average net assets before expense reductions 2.88% 2.33% 2.64% A 3.06% 3.03% Ratio of net investment income (loss) to average net assets (1.31)% (1.11)% (.90)% (1.04)% (.34)% A Portfolio turnover rate 200% 171% 96% A 261% 106%
a ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME (LOSS) PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.01 PER SHARE. AUTOMOTIVE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND AUTOMOTIVE -12.59% 119.02% 181.58% AUTOMOTIVE (INCL. 3% SALES CHARGE) -15.21% 112.45% 173.13% S&P 500 7.36% 71.20% 158.12% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on June 30, 1986. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND AUTOMOTIVE -12.59% 16.98% 12.68% AUTOMOTIVE (INCL. 3% SALES CHARGE) -15.21% 16.27% 12.28% S&P 500 7.36% 11.35% 11.55% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Automotive (5Standard & Poor's 50 06/30/86 9700.00 10000.00 07/31/86 9176.20 9488.77 08/31/86 9603.00 10192.84 09/30/86 8943.40 9349.89 10/31/86 9399.30 9889.38 11/30/86 9506.00 10129.69 12/31/86 9341.10 9871.39 01/31/87 10747.60 11201.06 02/28/87 11707.90 11643.50 03/31/87 12028.00 11980.00 04/30/87 12202.60 11873.38 05/31/87 12183.20 11976.68 06/30/87 12367.50 12581.50 07/31/87 13230.80 13219.38 08/31/87 13744.90 13712.46 09/30/87 13541.20 13412.16 10/31/87 9476.90 10523.18 11/30/87 9098.60 9656.07 12/31/87 9952.20 10390.90 01/31/88 10402.71 10828.35 02/29/88 11068.24 11332.96 03/31/88 11866.87 10982.77 04/30/88 12071.65 11104.68 05/31/88 12030.70 11201.29 06/30/88 12726.94 11715.43 07/31/88 12583.60 11670.91 08/31/88 11999.98 11274.10 09/30/88 12051.17 11754.37 10/31/88 11959.02 12081.14 11/30/88 11703.05 11908.38 12/31/88 11948.78 12116.78 01/31/89 12501.68 13003.73 02/28/89 12368.58 12679.94 03/31/89 12604.07 12975.38 04/30/89 13167.21 13648.80 05/31/89 13361.75 14201.58 06/30/89 13126.26 14120.63 07/31/89 13587.01 15395.72 08/31/89 13720.11 15697.48 09/30/89 13402.71 15633.12 10/31/89 12286.67 15270.43 11/30/89 12399.30 15581.95 12/31/89 12438.82 15955.91 01/31/90 12110.37 14885.27 02/28/90 12470.61 15077.29 03/31/90 12936.80 15476.84 04/30/90 12894.42 15089.92 05/31/90 13625.49 16561.19 06/30/90 13869.48 16448.57 07/31/90 13912.46 16395.93 08/31/90 11914.22 14913.74 09/30/90 10775.44 14187.44 10/31/90 10560.58 14126.44 11/30/90 11183.68 15039.00 12/31/90 11602.67 15458.59 01/31/91 12258.00 16132.59 02/28/91 13257.12 17286.07 03/31/91 13364.55 17704.39 04/30/91 13514.96 17746.88 05/31/91 14600.02 18513.55 06/30/91 14567.79 17665.63 07/31/91 15169.41 18488.84 08/31/91 15663.60 18927.03 09/30/91 15201.64 18610.95 10/31/91 15599.14 18860.33 11/30/91 14825.63 18100.26 12/31/91 15933.39 20170.93 01/31/92 17654.69 19795.75 02/29/92 19432.62 20053.10 03/31/92 19851.62 19662.06 04/30/92 21119.95 20240.13 05/31/92 21108.63 20339.30 06/30/92 20983.03 20036.25 07/31/92 21175.85 20855.73 08/31/92 19860.16 20428.19 09/30/92 19531.23 20669.24 10/31/92 20347.87 20741.58 11/30/92 21334.64 21448.87 12/31/92 22564.00 21712.69 01/31/93 23605.95 21895.08 02/28/93 23953.27 22192.85 03/31/93 25238.34 22661.12 04/30/93 25092.52 22112.72 05/31/93 26620.51 22705.34 06/30/93 27086.07 22771.19 07/31/93 27396.45 22680.10 08/31/93 28351.44 23539.68 09/30/93 28649.88 23358.43 10/31/93 29258.69 23841.94 11/30/93 29258.69 23615.45 12/31/93 30548.18 23901.19 01/31/94 32289.58 24713.83 02/28/94 31247.19 24044.09 03/31/94 29052.04 22995.77 04/30/94 28461.30 23290.11 05/31/94 28039.66 23672.07 06/30/94 27680.01 23092.10 07/31/94 28510.91 23849.53 08/31/94 28039.66 24827.36 09/30/94 26849.12 24219.09 10/31/94 27357.58 24764.01 11/30/94 25708.19 23862.11 12/31/94 26652.41 24215.98 01/31/95 26019.14 24843.91 02/28/95 27313.21 25812.07 Let's say you invested $10,000 in Select Automotive Portfolio on June 30, 1986, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $27,313 - a 173.13% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $25,812 over the same period - a 158.12% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Echlin, Inc. 9.9 Magna International, Inc. Class A 8.7 Dana Corp. 6.3 Genuine Parts Co. 6.1 Bandag, Inc. 5.8 Cooper Tire & Rubber Co. 5.1 Smith (A.O.) Corp. Class B 5.0 Danaher Corp. 5.0 General Motors Corp. 4.2 Volvo Aktiebolaget Class B 3.4 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Durables 80.8% Industrial Machinery & Equment 8.4% Autos & Truck Parts 49.4% Motor Vehicles & Car Bodies 17.0% Tires & Inner Tubes 10.9% Auto Parts - Retail 8.7% Autos & Other Motor Vehicles 6.1% All Others 7.9% Row: 1, Col: 1, Value: 7.9 Row: 1, Col: 2, Value: 6.1 Row: 1, Col: 3, Value: 8.699999999999999 Row: 1, Col: 4, Value: 10.9 Row: 1, Col: 5, Value: 17.0 Row: 1, Col: 6, Value: 49.4 AUTOMOTIVE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Brenda Reed, Portfolio Manager of Fidelity Select Automotive Portfolio Q. BRENDA, HOW DID THE FUND PERFORM? A. I'm afraid it was a disappointing year for automotive stocks. The fund's total return for the 12 months ended February 28, 1995, was -12.59%, which compares with a 7.36% return for the S&P 500. Q. WHAT CAUSED THE FUND TO LAG THE MARKET BY SUCH A MARGIN? A. Fear and uncertainty about the direction of the economy and interest rates are the story here. Automotive stocks, particularly the Big Three domestic manufacturers - General Motors, Ford and Chrysler - peaked within a few days of the Federal Reserve's first interest rate hike in early 1994. As rates continued rising, investors worried that consumers would stop buying cars. And from there, automotive-related stocks continued to underperform. Q. BUT THE BIG THREE HAD RECORD EARNINGS IN 1994 . . . A. That's right. The Big Three, and many others in the industry, met or exceeded earnings estimates. GM, Ford and Chrysler each had huge years. Their earnings were great and their cash flows were strong, allowing them to fund pension liabilities and clean up their balance sheets. But their stock prices still took big hits as investors made a mass exodus from the industry based on their view of impending changes in the business cycle. Q. DID THE MARKET OVERREACT? A. The industry is cyclical; it does tend to rise and fall with the economy, and there typically is an inverse correlation between interest rates and automotive stock prices. But it's also true that earnings growth tends to drive stock prices over time. So what's most surprising to me is that stock prices dropped as sharply as they did when earnings came through so strong and while there was evidence of continuing consumer demand. Q. HOW DID YOU POSITION THE FUND TO COMPENSATE FOR THE SELL-OFF, AND WERE THERE ANY BRIGHT SPOTS ALONG THE WAY? A. It was a pretty tough year across the board. The auto manufacturers' stocks did poorly, and to a certain extent, so did the original equipment parts suppliers, despite the fact that the manufacturers have been outsourcing a lot of their original parts contracts to these suppliers. There were, however, two areas of relative strength in the portfolio that helped break the fall; parts retailers and after-market suppliers both did well. AutoZone and Pep Boys, which sell to the do-it-yourself market, both performed fairly well, as did Genuine Parts, which sells mostly to mechanics. Echlin, the fund's largest holding at the end of the period, was also up for the year based on solid demand for after-market repair products. Given the comparative strength of these holdings, I increased the fund's positions there. Q. DO YOU SEE ANY ENCOURAGING SIGNS FOR THE AUTO MANUFACTURERS? A. The bullish case is that if the economy continues to grow, there will be pent-up demand for autos from the last recession, and if interest rates don't rise significantly, demand should remain relatively strong. The flip side is that if the economy slips into recession, consumer demand is sure to fall. In terms of fundamentals, I think there are encouraging signs at General Motors. Its management restructuring, cost-cutting initiatives and product re-designs should lift its competitive prospects; its large and profitable presence in Europe and Latin America should continue to help drive earnings; and I think its non-automotive businesses are undervalued. I've recently re-established the fund's GM position, and the stock did pretty well late in the period. In Europe, where auto stocks have been relatively flat over the past six months, Volvo could begin benefiting from extra cash received from selling off some of its diversified holdings, and Fiat, which I bought in the second half of the period, has become more competitive in the European markets as a result of the lira's devaluation. Conversely, the current strength of the yen versus the dollar makes the Japanese manufacturers a less attractive play. Q. WHAT IS YOUR OUTLOOK AND GAME PLAN GOING FORWARD? A. It comes down to what the economy does from here. If the economy stabilizes at a slow growth rate, the Big Three and original equipment parts suppliers could do well over the next couple of years. If we move into recession, I don't see much impetus for auto stocks to appreciate. My strategy at the moment is to maintain a defensive positioning, emphasizing the parts retailers and after-market suppliers, until there's a stronger indication of domestic economic stability. In the longer term, however, I think the industry is in a very healthy position for future growth. FUND FACTS START DATE: June 30, 1986 SIZE: as February 28, 1995, more than $60 million MANAGER: Brenda Reed, since May 1994; manager, Fidelity Select Air Transportation Portfolio, 1992-1994; joined Fidelity in 1992 (checkmark) AUTOMOTIVE PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 100% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 94.5% AUTO & TRUCK PARTS - 49.4% Automotive Industries Holding, Inc. (a) 84,000 $ 1,648,500 05329E10 Dana Corp. 151,800 3,738,075 23581110 Danaher Corp. 100,000 2,950,000 23585110 Donnelly Corp. Class A 33,000 577,500 25787010 Echlin, Inc. 170,000 5,886,250 27874910 Federal-Mogul Corp. 35,000 682,500 31354910 Gentex Corp. (a) 63,000 1,417,500 37190110 Johnson Controls, Inc. 22,700 1,129,325 47836610 Lear Seating Corp. 60,000 1,252,500 52189310 Magna International, Inc. Class A 133,500 5,139,973 55922240 Masland Corp. 20,000 287,500 57480610 Smith (A.O.) Corp. Class B 136,600 2,988,125 83186520 Superior Industries International, Inc. 30,040 818,590 86816810 Tower Automotive (a) 92,500 745,781 89170710 29,262,119 AUTO PARTS - RETAIL - 8.7% AutoZone, Inc. (a) 73,100 1,937,150 05333210 Monro Muffler Brake, Inc. 100,410 1,757,175 61023610 Pep Boys-Manny, Moe & Jack 45,000 1,473,750 71327810 5,168,075 AUTOS & OTHER MOTOR VEHICLES - 6.1% Genuine Parts Co. 93,200 3,623,150 37246010 MOTOR VEHICLE SUPPLIES & NEW PARTS - 2.4% APS Holding Corp. Class A (a) 49,000 1,433,250 00193710 MOTOR VEHICLES & CAR BODIES - 17.0% BMW AG 1,000 518,025 05528310 Chrysler Corp. 40,100 1,744,350 17119610 Fiat Spa (a) 125,000 480,550 31562110 Fiat Spa ADR (a) 30,000 573,750 31562160 Ford Motor Co. 30,000 783,750 34537010 General Motors Corp. 58,078 2,475,575 37044210 Honda Motor Co. Ltd. 38,000 573,407 43812810 Renault SA Ord. (a) 13,000 431,647 75999F93 Suzuki Motor Corp. 55,000 517,286 86958592 Volvo Aktiebolaget Class B 100,000 2,000,259 92885630 10,098,599 TIRES & INNER TUBES - 10.9% Bandag, Inc. 56,800 3,408,000 05981510 Cooper Tire & Rubber Co. 107,700 3,015,600 21683110 6,423,600 TOTAL AUTOS, TIRES, & ACCESSORIES 56,008,793 CONSUMER ELECTRONICS - 1.4% RADIOS, TELEVISIONS, STEREOS - 1.4% Harman International Industries, Inc. 20,300 852,600 41308610 ELECTRICAL EQUIPMENT - 0.2% ELECTRICAL EQUIPMENT, NEC - 0.2% Satcon Technology Corp. (a) 10,000 90,000 80389310 INDUSTRIAL MACHINERY & EQUIPMENT - 3.0% METAL WORKING MACHINERY - 0.8% Exco Technologies Ltd. (a) 79,500 457,702 30150P10 STORAGE BATTERIES - 2.2% Exide Corp. 25,400 1,308,100 30205110 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,765,802 SHARES VALUE (NOTE 1) IRON & STEEL - 0.9% METAL FORGINGS & STAMPINGS - 0.9% Linamar Corp. 40,000 $ 518,153 53278L10 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $59,586,624) $ 59,235,348 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggre- gated $57,691,960 and $190,744,854, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $68,846 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $8,939,000 and $2,866,840, respectively. The weighted average interest rate paid was 5.0% (see Note 8 of Notes to Financial Statements). Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: United States 81.1% Canada 10.3 Sweden 3.4 Japan 1.8 Italy 1.8 Others (individually less than 1%) 1.6 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $60,208,495. Net unrealized depreciation aggregated $973,147, of which $3,463,412 related to appreciated investment securities and $4,436,559 related to depreciated investment securities. The fund has elected to defer to its fiscal year ending February 28, 1996 $3,944,000 of losses recognized during the period November 1, 1994 to February 28, 1995. The fund hereby designates $11,789,000 as a capital gain dividend for the purpose of the dividend paid deduction. AUTOMOTIVE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (cost $59,586,624) - See accompanying schedule $ 59,235,348 Receivable for investments sold 2,890,840 Receivable for fund shares sold 367,177 Dividends receivable 88,889 Redemption fees receivable 154 TOTAL ASSETS 62,582,408 LIABILITIES Payable to custodian bank $ 161,876 Payable for investments purchased 507,170 Payable for fund shares redeemed 1,726,166 Accrued management fee 32,760 Other payables and 79,218 accrued expenses TOTAL LIABILITIES 2,507,190 NET ASSETS $ 60,075,218 Net Assets consist of: Paid in capital $ 54,926,990 Undistributed net investment income 165,781 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 5,333,723 Net unrealized appreciation (depreciation) on investments (351,276 ) NET ASSETS, for 3,028,585 shares outstanding $ 60,075,218 NET ASSET VALUE and redemption price per share ($60,075,218 (divided by) 3,028,585 shares) $19.84 Maximum offering price per share (100/97.00 of $19.84) $20.45
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 1,747,661 Dividends Interest 440,624 TOTAL INCOME 2,188,285 EXPENSES Management fee $ 628,194 Transfer agent 1,188,955 Fees Redemption fees (180,650 ) Accounting fees and expenses 101,598 Non-interested trustees' compensation 1,333 Custodian fees and expenses 17,654 Registration fees 43,899 Audit 32,016 Legal 2,669 Interest 9,963 Reports to shareholders 13,318 Miscellaneous 1,207 Total expenses before reductions 1,860,156 Expense reductions (17,986 1,842,170 ) NET INVESTMENT INCOME 346,115 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 11,567,549 Foreign currency transactions (25,832 11,541,717 ) Change in net unrealized appreciation (depreciation) on investment securities (31,661,358 ) NET GAIN (LOSS) (20,119,641 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (19,773,526 ) OTHER INFORMATION $444,228 Sales Charges Paid to FDC Deferred sales charges withheld $7,057 by FDC Exchange fees withheld by FSC $129,360
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ 346,115 $ 300,002 Net investment income Net realized gain (loss) 11,541,717 9,992,964 Change in net unrealized appreciation (depreciation) (31,661,358 22,125,239 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (19,773,526 32,418,205 ) Distributions to shareholders: (154,502 (277,866 From net investment income ) ) From net realized gain (7,650,364 (8,000,284 ) ) TOTAL DISTRIBUTIONS (7,804,866 (8,278,150 ) ) Share transactions 91,986,801 296,617,520 Net proceeds from sales of shares Reinvestment of distributions 7,692,677 8,140,832 Cost of shares redeemed (240,957,682 (210,814,302 ) ) Paid in capital portion of redemption fees 233,563 254,484 Net increase (decrease) in net assets resulting from share transactions (141,044,641 94,198,534 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (168,623,033 118,338,589 ) NET ASSETS Beginning of period 228,698,251 110,359,662 End of period (including undistributed net investment income of $165,781 and $230,333, respectively)$ 60,075,218 $ 228,698,251 OTHER INFORMATION Shares Sold 4,119,242 12,377,664 Issued in reinvestment of distributions 397,089 357,869 Redeemed (10,463,135 (9,094,036 ) ) Net increase (decrease) (5,946,804) 3,641,497
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 25.48 $ 20.69 $ 18.65 $ 12.58 $ 12.17 Income from Investment Operations Net investment income .08 .05 .13 .06 .25 Net realized and unrealized gain (loss) (3.46) 6.00 2.26 6.55 .29 Total from investment operations (3.38) 6.05 2.39 6.61 .54 Less Distributions (.05) (.05) (.06) - (.18) From net investment income From net realized gain (2.26) (1.26) (.36) (.70) - Total distributions (2.31) (1.31) (.42) (.70) (.18) Redemption fees added to paid in capital .05 .05 .07 .16 .05 Net asset value, end of period $ 19.84 $ 25.48 $ 20.69 $ 18.65 $ 12.58 TOTAL RETURN B, C (12.59)% 30.45% 13.42% 56.27% 4.81% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 60,075 $ 228,698 $ 110,360 $ 178,445 $ 974 Ratio of expenses to average net assets 1.80% 1.68% 1.57% A 2.48% 2.25% Ratio of expenses to average net assets before expense reductions 1.82% 1.69% 1.57% A 2.48% 2.85% Ratio of net investment income to average net assets .34% .22% .72% A .36% 2.06% Portfolio turnover rate 63% 64% 140% A 29% 219%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. CHEMICALS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND CHEMICALS 9.90% 106.48% 394.52% CHEMICALS (INCL. 3% SALES CHARGE) 6.60% 100.28% 379.68% S&P 500 7.36% 71.20% 246.77% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on July 29, 1985. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND CHEMICALS 9.90% 15.60% 18.13% CHEMICALS (INCL. 3% SALES CHARGE) 6.60% 14.90% 17.75% S&P 500 7.36% 11.35% 13.84% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select ChemicalS (06Standard & Poor's 50 07/29/85 9700.00 10000.00 07/31/85 9641.80 9926.31 08/31/85 9981.30 9841.93 09/30/85 9991.00 9533.88 10/31/85 10631.20 9974.35 11/30/85 11300.50 10658.59 12/31/85 12018.30 11174.46 01/31/86 12532.40 11237.04 02/28/86 13977.70 12077.57 03/31/86 14724.60 12751.50 04/30/86 14782.80 12607.41 05/31/86 15199.90 13278.12 06/30/86 15568.50 13502.52 07/31/86 14549.20 12747.73 08/31/86 15630.16 13693.61 09/30/86 14393.38 12561.15 10/31/86 15269.84 13285.93 11/30/86 15532.78 13608.78 12/31/86 15250.37 13261.75 01/31/87 17285.70 15048.11 02/28/87 18892.53 15642.51 03/31/87 19467.10 16094.58 04/30/87 19895.59 15951.34 05/31/87 19632.65 16090.11 06/30/87 20733.10 16902.66 07/31/87 22086.74 17759.63 08/31/87 22895.03 18422.06 09/30/87 23304.04 18018.62 10/31/87 16214.47 14137.41 11/30/87 15669.12 12972.49 12/31/87 17511.02 13959.69 01/31/88 17081.54 14547.40 02/29/88 18975.15 15225.31 03/31/88 19941.48 14754.84 04/30/88 20175.74 14918.62 05/31/88 19414.39 15048.41 06/30/88 21981.50 15739.14 07/31/88 21317.76 15679.33 08/31/88 20390.48 15146.23 09/30/88 20644.26 15791.46 10/31/88 20966.37 16230.46 11/30/88 20263.59 15998.37 12/31/88 21181.11 16278.34 01/31/89 22596.44 17469.91 02/28/89 22313.37 17034.91 03/31/89 22557.39 17431.83 04/30/89 23201.61 18336.54 05/31/89 23738.46 19079.17 06/30/89 23455.03 18970.42 07/31/89 24949.67 20683.44 08/31/89 26092.63 21088.84 09/30/89 25164.58 21002.38 10/31/89 23386.65 20515.12 11/30/89 23884.86 20933.63 12/31/89 24847.83 21436.04 01/31/90 23077.40 19997.68 02/28/90 23231.80 20255.65 03/31/90 23921.44 20792.42 04/30/90 23365.61 20272.61 05/31/90 25403.67 22249.19 06/30/90 25611.02 22097.90 07/31/90 25695.76 22027.18 08/31/90 22264.01 20035.93 09/30/90 21162.46 19060.18 10/31/90 21406.07 18978.22 11/30/90 22835.96 20204.21 12/31/90 23821.00 20767.91 01/31/91 25420.37 21673.39 02/28/91 27369.26 23223.04 03/31/91 28025.96 23785.03 04/30/91 27803.53 23842.12 05/31/91 29731.24 24872.10 06/30/91 28923.24 23732.96 07/31/91 30317.26 24838.91 08/31/91 30913.18 25427.59 09/30/91 30679.07 25002.95 10/31/91 31168.57 25337.99 11/30/91 29614.93 24316.87 12/31/91 33030.62 27098.72 01/31/92 33664.98 26594.68 02/29/92 34879.02 26940.42 03/31/92 34627.46 26415.08 04/30/92 35885.25 27191.68 05/31/92 35677.44 27324.92 06/30/92 34619.91 26917.78 07/31/92 35712.32 28018.72 08/31/92 34492.08 27444.33 09/30/92 34526.94 27768.18 10/31/92 34178.30 27865.36 11/30/92 35212.60 28815.57 12/31/92 35971.89 29170.00 01/31/93 35934.88 29415.03 02/28/93 35305.75 29815.08 03/31/93 36144.60 30444.17 04/30/93 36815.01 29707.43 05/31/93 37372.43 30503.58 06/30/93 36434.95 30592.05 07/31/93 36992.37 30469.68 08/31/93 38803.98 31624.48 09/30/93 37575.13 31380.97 10/31/93 38994.01 32030.56 11/30/93 39285.39 31726.27 12/31/93 40560.85 32110.15 01/31/94 43718.04 33201.90 02/28/94 43649.10 32302.13 03/31/94 42339.35 30893.75 04/30/94 44386.86 31289.19 05/31/94 45455.59 31802.34 06/30/94 44886.53 31023.18 07/31/94 46912.95 32040.74 08/31/94 49633.34 33354.41 09/30/94 49272.47 32537.23 10/31/94 49189.20 33269.31 11/30/94 45330.68 32057.65 12/31/94 46553.86 32533.06 01/31/95 45337.32 33376.64 02/28/95 47968.44 34677.33 Let's say you invested $10,000 in Fidelity Select Chemicals Portfolio on July 29, 1985, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $47,968 - a 379.68% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $34,677 over the same period - a 246.77% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Union Carbide Corp. 9.0 Grace (W.R.) & Co. 7.5 Eastman Chemical Co. 5.4 Dow Chemical Co. 3.9 Ferro Corp. 3.7 Geon Co. 3.5 Cytec Industries, Inc. 3.0 Minnesota Mining & Manufacturing Co. 2.8 Hanna (M.A.) Co. 2.8 Olin Corp. 2.8 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 26.3 Row: 1, Col: 2, Value: 3.8 Row: 1, Col: 3, Value: 7.1 Row: 1, Col: 4, Value: 7.2 Row: 1, Col: 5, Value: 9.6 Row: 1, Col: 6, Value: 46.0 Chemicals 46.0% Plastics, Resins & Elastomers 9.6% Adhesives & Sealants 7.2% Plastics & Synthetic Resins 7.1% Agricultural Chemicals 3.8% All Others 26.3%* * INCLUDES SHORT-TERM INVESTMENTS CHEMICALS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW David Felman, Portfolio Manager of Fidelity Select Chemicals Portfolio Q. DAVID, HOW HAS THE FUND PERFORMED? A. Results generally have been quite good. For the 12 months ended February 28, 1995, the fund returned 9.90%, which compares with a 7.36% return for the S&P 500. Q. WHAT HAVE BEEN THE MAIN DRIVERS OF FUND PERFORMANCE? A. There were three major factors that supported the fund's growth. Chemical stocks generally are cyclical: when the economy is growing, demand for chemicals grows as well. So the relative strength of the domestic economy probably has been the biggest factor in fund performance; increasing demand, especially for "raw material" commodity chemicals, helped those manufacturers generate strong earnings and improved cash flows. Economic growth in selected parts of the world also helped fuel increased demand. A third and related factor was that growing demand caught some of the commodity companies with low inventories, which in turn drove product prices much higher. In early spring 1994, for example, the price of polyethylene, a core commodity in the manufacturing of plastics, soared from $600 to $1,150 a ton. The combined effect of these factors was that the many of the commodity chemical companies - among them Union Carbide, Sterling Chemicals and Lyondell - showed very strong performance for the period. Q. HOW DID THE SPECIALTY CHEMICAL COMPANIES DO? A. The specialty chemical group had a generally lackluster year, with one notable exception. Cytec Industries, a diversified manufacturer that was recently spun off from American Cyanamid, saw spectacular growth and was the biggest single contributor to overall fund performance. However, the group as a whole had a tough year. The specialty companies, which typically buy commodity chemicals and create value-added products, were caught between dramatic commodity price increases and their somewhat limited ability to pass along those increases to end-users. Lubrizol and Great Lakes Chemical, for example, are two companies that were hurt by this price dynamic and whose earnings just didn't come through for the period. Q. IT SOUNDS AS IF THE PROSPECTS OF THE SPECIALTY GROUP COULD IMPROVE AS THEY CATCH UP IN THE PRICING CYCLE . . . A. I think that's right. Many of the specialty companies have already absorbed the price increases from their raw materials suppliers and now may be in a better position to pass through those increases. But the issue for these companies is whether commodity chemical prices will continue to rise and how successful the specialty chemical companies may be in raising prices for their finished products. Q. YOU'VE BEEN RUNNING THE FUND SINCE JANUARY 1995, DAVID. WHAT IS YOUR INDUSTRY OUTLOOK AND HOW WILL IT AFFECT YOUR STRATEGY FOR THE FUTURE? A. The fund's recent performance has benefited from the strength of the commodity chemical group in response to market demand. Looking forward, there are a number of questions. Principal among them is whether the domestic economy will continue to be good enough to sustain the commodity chemical group's growth, or whether it will weaken and put a lid on near-term prospects. Also important is whether there will be sufficient strength in the international economies if any weakness develops domestically. I think it's a very tough call as to where the markets are headed. Another area I'm watching is the industry's discipline in maintaining its current production capacity; if too many new facilities come on line, oversupply could put a damper on growth. At the moment, I believe it is important for the fund to be positioned in commodity stocks, like Union Carbide, whose valuations - prices relative to other measures such as earnings - offer a certain amount of cushion in the event of an economic slowdown. I've also begun to shift the fund's emphasis more toward the specialty chemical stocks, which are usually safer in this kind of environment. I'll probably continue to give them greater emphasis going forward. FUND FACTS START DATE: July 29, 1985 SIZE: as of February 28, 1995, more than $97 million MANAGER: David Felman, since January 1995; manager, Fidelity Select Telecommunications Portfolio, since April 1994; analyst, specialty chemicals, construction and engineering industries; joined Fidelity in 1992 (checkmark) CHEMICALS PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.4% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 0.8% CEMENT - 0.3% Vulcan Materials Co. 5,000 $ 266,245 92916010 PAINT & VARNISH - 0.5% Dexter Corp. 15,200 324,900 25216510 RPM, Inc. 10,000 183,750 74968510 508,650 TOTAL BUILDING MATERIALS 774,895 CHEMICALS & PLASTICS - 88.4% ADHESIVES & SEALANTS - 7.2% Ferro Corp. 142,200 3,643,875 31540510 Fuller (H.B.) Co. 29,553 982,637 35969410 Loctite Corp. 4,400 202,400 54013710 Methanex Corp. (a) 6,500 66,658 59151K10 Nalco Chemical Co. 62,700 2,155,313 62985310 7,050,883 AGRICULTURAL CHEMICALS - 3.8% Cominco Fertilizer Ltd. (a) 58,600 1,555,090 20043C10 Indo Gulf Fertilizer and Chemicals Corp. Ltd. GDR (a)(b) 1,000 2,050 45577P10 OM Group, Inc. 80,600 1,934,400 67087210 Vigoro Corp. 7,000 246,750 92675410 3,738,290 CHEMICALS - 46.0% AKZO NV sponsored ADR 10,000 582,500 01019930 Avery Dennison Corp. 8,300 311,250 05361110 Cytec Industries, Inc. (a) 76,171 2,951,626 23282010 Dow Chemical Co. 56,600 3,792,200 26054310 du Pont (E.I.) de Nemours & Co. 45,400 2,548,075 26353410 Grace (W.R.) & Co. 164,700 7,411,500 38388310 Hercules, Inc. 22,400 982,800 42705610 Hoechst AG Ord. 5,200 1,142,881 43439010 Imperial Chemical Industries PLC ADR 16,700 745,238 45270450 Lawter International, Inc. 8,988 115,721 52078610 Lyondell Petrochemical Co. 60,300 1,454,738 55207810 Minnesota Mining & Manufacturing Co. 50,000 2,737,500 60405910 Monsanto Co. 16,200 1,283,850 61166210 Morton International, Inc. 18,900 552,825 61933110 NL Industries, Inc. (a) 20,000 237,500 62915640 Olin Corp. 53,400 2,716,725 68066520 PPG Industries, Inc. 43,600 1,602,300 69350610 Raychem Corp. 48,000 1,938,000 75460310 Reliance Industries Ltd. GDS (b) 17,000 272,000 75947010 Rohm & Haas Co. 5,000 280,625 77537110 Sterling Chemical, Inc. (a) 165,500 1,861,875 85890310 Union Carbide Corp. 309,100 8,847,988 90558110 Witco Corp. 30,200 864,475 97738510 45,234,192 CHEMICALS & ALLIED PRODUCTS - 2.9% Kemira OY sponsored ADR (a)(b) 43,200 680,400 48836510 Kemira OY (a) 260,000 2,133,724 48836592 2,814,124 CHEMICALS, GENERAL - 3.6% Albemarle Corp. 114,600 1,633,050 01265310 Great Lakes Chemical Corp. 30,800 1,851,850 39056810 Sybron Chemical Industry Corp. (a) 7,200 90,000 87090310 3,574,900 INDUSTRIAL GASES - 1.6% Airgas, Inc. (a) 50,000 1,293,750 00936310 CBI Industries, Inc. 10,000 242,500 12480010 1,536,250 SHARES VALUE (NOTE 1) NITROGENOUS FERTILIZERS - 1.2% Mississippi Chemical Corp. 67,600 $ 1,233,700 60528820 NONCELLULOSIC MAN-MADE ORGANIC FIBERS - 0.0% Yizheng Chemical Fibre Co. Class H 110,000 38,770 99599E22 ORGANIC CHEMICALS - 2.1% Lubrizol Corp. 61,000 2,043,500 54927110 PLASTICS & SYNTHETIC RESINS - 7.1% AEP Industries, Inc. 150 2,850 00103110 ARCO Chemical Co. 42,300 1,797,750 00192010 Geon Co. 118,700 3,442,300 37246W10 Schulman (A.), Inc. 6,562 187,017 80819410 Wellman, Inc. 58,660 1,583,820 94970210 7,013,737 PLASTICS - 3.3% Carlisle Plastics, Inc. Class A (a) 27,700 152,350 14252210 Hanna (M.A.) Co. 111,850 2,726,344 41052210 Sealed Air Corp. (a) 8,300 347,563 81211510 3,226,257 PLASTICS, RESINS & ELASTOMERS - 9.6% Eastman Chemical Co. 96,450 5,280,638 27743210 EVC International NV (a)(b) 12,000 532,146 29999E23 PT Tri Polyta Indonesia sponsored ADR (a) 61,000 1,448,750 69365B10 Praxair, Inc. 90,153 2,039,712 74005P10 Rexene Corp. (a) 14,600 153,300 76168310 9,454,546 TOTAL CHEMICALS & PLASTICS 86,959,149 DRUGS & PHARMACEUTICALS - 1.3% DRUGS - 0.4% Rhone Poulenc: Sponsored ADR representing 1/4 share 6,700 159,963 76242660 SA Class A 10,000 238,420 76242695 398,383 PHARMACEUTICAL PREPARATIONS - 0.9% Copley Pharmaceutical, Inc. (a) 55,000 893,750 21745K10 TOTAL DRUGS & PHARMACEUTICALS 1,292,133 FOODS - 0.3% Montedison Spa ADR 40,000 290,000 61237630 INDUSTRIAL MACHINERY & EQUIPMENT - 0.5% PUMPING EQUIPMENT - 0.5% Duriron Company, Inc. 25,000 468,750 26684910 METALS & MINING - 0.3% NON-METALLIC MINERAL MINING - 0.3% American Colloid Co. 23,500 304,031 02516810 OIL & GAS - 0.9% CRUDE PETROLEUM & GAS - 0.7% Burlington Resources, Inc. 1,500 57,750 12201410 Occidental Petroleum Corp. 33,000 655,875 67459910 713,625 GENERAL PETROLEUM PRODUCTS - 0.2% Shanghai Petrochemical Ltd. Class H ADR 5,000 156,250 81942410 TOTAL OIL & GAS 869,875 POLLUTION CONTROL - 0.1% POLLUTION EQUIPMENT & DESIGN - 0.1% Harding Associates, Inc. (a) 13,500 81,000 41226410 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TEXTILES & APPAREL - 0.8% CARPETS & RUGS - 0.7% Image Industries, Inc. (a) 45,000 $ 714,375 45244B10 SILK MILLS - 0.1% Worldtex Corp. (a) 28,000 112,000 98190710 TOTAL TEXTILES & APPAREL 826,375 TOTAL COMMON STOCKS (Cost $87,365,605) 91,866,208 REPURCHASE AGREEMENTS - 6.6% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $ 6,503,098 6,502,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $93,867,605) $ 98,368,208 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $1,486,596 or 1.5% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $161,552,268 and $133,753,617, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $130,974 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $6,825,000 and $5,790,000, respectively. The weighted average interest rate paid was 3.9% (see Note 8 of Notes to Financial Statements). Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: United States 90.0% Finland 2.9 Canada 1.6 Indonesia 1.5 Germany 1.2 Netherlands 1.1 Others (individually less than 1%) 1.7 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $94,087,232. Net unrealized appreciation aggregated $4,280,976, of which $6,558,476 related to appreciated investment securities and $2,277,500 related to depreciated investment securities. The fund hereby designates $2,225,000 as a capital gain dividend for the purpose of the dividend paid deduction. CHEMICALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $6,502,000) (cost $93,867,605) - See $ 98,368,208 accompanying schedule Cash 491 Receivable for investments sold 1,426,187 Receivable for fund shares sold 639,972 Dividends receivable 413,004 Redemption fees receivable 243 Other receivables 11,945 TOTAL ASSETS 100,860,050 LIABILITIES Payable for investments purchased $ 642,840 Payable for fund shares redeemed 2,528,298 Accrued management fee 59,110 Other payables and accrued expenses 118,953 TOTAL LIABILITIES 3,349,201 NET ASSETS $ 97,510,849 Net Assets consist of: Paid in capital $ 89,656,771 Undistributed net investment income 426,403 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 2,927,072 Net unrealized appreciation (depreciation) on investments 4,500,603 NET ASSETS, for 2,875,933 shares outstanding $ 97,510,849 NET ASSET VALUE and redemption price per share ($97,510,849 (divided by) 2,875,933 shares) $33.91 Maximum offering price per share (100/97.00 of $33.91) $34.96
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 2,974,778 Dividends Interest (including security lending 734,740 fees of $7,345) TOTAL INCOME 3,709,518 EXPENSES Management fee $ 888,515 Transfer agent 1,200,369 Fees Redemption fees (145,881 ) Accounting and security lending fees 144,351 Non-interested trustees' compensation 1,150 Custodian fees and expenses 22,329 Registration fees 52,255 Audit 23,252 Legal 927 Interest 2,538 Reports to shareholders 1,836 Miscellaneous 1,002 Total expenses before reductions 2,192,643 Expense reductions (18,109 2,174,534 ) NET INVESTMENT INCOME 1,534,984 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 4,787,500 Foreign currency transactions 46 4,787,546 Change in net unrealized appreciation (depreciation) on investment securities 576,053 NET GAIN (LOSS) 5,363,599 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 6,898,583 OTHER INFORMATION $1,051,981 Sales Charges Paid to FDC Deferred sales charges withheld $6,676 by FDC Exchange fees withheld by FSC $115,725
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ 1,534,984 $ 265,602 Net investment income Net realized gain (loss) 4,787,546 2,851,580 Change in net unrealized appreciation (depreciation) 576,053 2,343,419 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 6,898,583 5,460,601 Distributions to shareholders: (1,029,165 (189,427 From net investment income ) ) From net realized gain (2,261,141 (2,552,992 ) ) TOTAL DISTRIBUTIONS (3,290,306 (2,742,419 ) ) Share transactions 295,805,417 59,344,504 Net proceeds from sales of shares Reinvestment of distributions 3,230,231 2,653,509 Cost of shares redeemed (267,599,716 (31,346,756 ) ) Paid in capital portion of redemption fees 249,480 51,531 Net increase (decrease) in net assets resulting from share transactions 31,685,412 30,702,788 TOTAL INCREASE (DECREASE) IN NET ASSETS 35,293,689 33,420,970 NET ASSETS Beginning of period 62,217,160 28,796,190 End of period (including undistributed net investment income of $426,403 and $96,969, respectively) $ 97,510,849 $ 62,217,160 OTHER INFORMATION Shares Sold 8,887,417 1,911,622 Issued in reinvestment of distributions 101,777 93,252 Redeemed (8,078,436 (1,045,994 ) ) Net increase (decrease) 910,758 958,880
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 31.66 $ 28.62 $ 32.81 $ 26.25 $ 22.70 Income from Investment Operations Net investment income .36 .29 .30 .12 .28 Net realized and unrealized gain (loss) 2.65 5.97 (.84) 7.27 3.94 Total from investment operations 3.01 6.26 (.54) 7.39 4.22 Less Distributions (.22) (.23) (.31) (.18) (.10) From net investment income From net realized gain (.60) (3.05) (3.36) (.71) (.60) Total distributions (.82) (3.28) (3.67) (.89) (.70) Redemption fees added to paid in capital .06 .06 .02 .06 .03 Net asset value, end of period $ 33.91 $ 31.66 $ 28.62 $ 32.81 $ 26.25 TOTAL RETURN B, C 9.90% 23.63% (1.61)% 29.07% 18.99% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 97,511 $ 62,217 $ 28,796 $ 39,566 $ 20,396 Ratio of expenses to average net assets 1.51% 1.93% 1.89% A 2.16% 2.50% Ratio of expenses to average net assets before expense reductions 1.52% 1.93% 1.89% A 2.16% 2.52% Ratio of net investment income to average net assets 1.07% .97% 1.21% A .40% 1.21% Portfolio turnover rate 106% 81% 214% A 87% 87%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. CONSTRUCTION AND HOUSING PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND CONSTRUCTION AND HOUSING -12.54% 87.40% 154.39% CONSTRUCTION AND HOUSING (INCL. 3% SALES CHARGE) -15.17% 81.78% 146.76% S&P 500 7.36% 71.20% 175.04% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on September 29, 1986. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND CONSTRUCTION AND HOUSING -12.54% 13.38% 11.72% CONSTRUCTION AND HOUSING (INCL. 3% SALES CHARGE) -15.17% 12.70% 11.32% S&P 500 7.36% 11.35% 12.76% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Construction Standard & Poor's 50 09/29/86 9700.00 10000.00 09/30/86 9709.70 9962.80 10/31/86 10262.60 10537.66 11/30/86 10369.30 10793.72 12/31/86 10437.20 10518.48 01/31/87 12192.90 11935.32 02/28/87 13483.00 12406.77 03/31/87 14307.50 12765.32 04/30/87 13327.80 12651.71 05/31/87 12949.50 12761.78 06/30/87 12804.00 13406.25 07/31/87 13599.40 14085.95 08/31/87 13890.40 14611.35 09/30/87 12823.40 14291.37 10/31/87 8749.40 11213.00 11/30/87 8109.20 10289.05 12/31/87 9141.25 11072.05 01/31/88 9466.31 11538.18 02/29/88 10352.85 12075.86 03/31/88 10766.57 11702.72 04/30/88 11081.79 11832.62 05/31/88 11012.84 11935.56 06/30/88 11662.97 12483.41 07/31/88 11544.76 12435.97 08/31/88 10953.73 12013.15 09/30/88 11288.65 12524.91 10/31/88 11367.45 12873.10 11/30/88 11229.55 12689.01 12/31/88 11809.47 12911.07 01/31/89 12529.18 13856.16 02/28/89 12377.13 13511.14 03/31/89 12691.37 13825.95 04/30/89 13188.08 14543.52 05/31/89 13654.38 15132.53 06/30/89 13645.75 15046.28 07/31/89 14199.40 16404.95 08/31/89 14438.23 16726.49 09/30/89 14698.77 16657.91 10/31/89 13873.73 16271.45 11/30/89 14079.99 16603.39 12/31/89 13769.50 17001.87 01/31/90 12900.94 15861.04 02/28/90 13167.30 16065.65 03/31/90 13908.47 16491.39 04/30/90 13503.14 16079.11 05/31/90 14753.86 17646.82 06/30/90 14487.50 17526.82 07/31/90 13731.86 17470.73 08/31/90 11986.06 15891.38 09/30/90 10748.37 15117.47 10/31/90 10370.55 15052.46 11/30/90 11373.73 16024.85 12/31/90 12442.06 16471.95 01/31/91 13536.43 17190.12 02/28/91 14722.01 18419.22 03/31/91 15086.81 18864.96 04/30/91 15321.32 18910.24 05/31/91 16845.63 19727.16 06/30/91 15985.76 18823.66 07/31/91 16402.67 19700.84 08/31/91 17080.14 20167.75 09/30/91 16702.32 19830.95 10/31/91 16415.70 20096.68 11/30/91 15594.91 19286.79 12/31/91 17582.47 21493.19 01/31/92 18889.56 21093.42 02/29/92 19198.76 21367.64 03/31/92 19184.71 20950.97 04/30/92 19451.75 21566.92 05/31/92 20070.15 21672.60 06/30/92 18636.06 21349.68 07/31/92 18973.62 22222.88 08/31/92 18326.63 21767.31 09/30/92 18565.73 22024.17 10/31/92 19212.72 22101.25 11/30/92 20323.85 22854.91 12/31/92 20872.39 23136.02 01/31/93 21744.41 23330.36 02/28/93 22138.23 23647.66 03/31/93 22658.63 24146.62 04/30/93 22123.97 23562.27 05/31/93 22363.22 24193.74 06/30/93 22630.62 24263.90 07/31/93 23404.68 24166.85 08/31/93 24375.77 25082.77 09/30/93 25163.90 24889.63 10/31/93 26078.70 25404.85 11/30/93 25670.56 25163.50 12/31/93 27887.76 25467.98 01/31/94 28798.84 26333.89 02/28/94 28215.18 25620.25 03/31/94 26563.83 24503.20 04/30/94 26503.73 24816.84 05/31/94 25101.27 25223.84 06/30/94 24485.90 24605.86 07/31/94 25187.13 25412.93 08/31/94 26145.96 26454.86 09/30/94 24686.25 25806.71 10/31/94 23956.40 26387.37 11/30/94 22983.26 25426.34 12/31/94 23441.17 25803.41 01/31/95 23544.05 26472.49 02/28/95 24675.69 27504.13 Let's say you invested $10,000 in Fidelity Select Construction and Housing Portfolio on September 29, 1986, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $24,676 - a 146.76% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $27,504 over the same period - a 175.04% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Medusa Corp. 8.6 Federal National Mortgage Association 7.4 Armstrong World Industries, Inc. 5.8 General Electric Co. 5.6 Pulte Corp. 5.1 Lafarge Corp. 5.1 Vulcan Materials Co. 4.7 National Gypsum Co. 4.6 Federal Home Loan Mortgage Corporation 4.6 Lennar Corp. 3.9 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 41.3 Row: 1, Col: 2, Value: 5.6 Row: 1, Col: 3, Value: 5.8 Row: 1, Col: 4, Value: 12.0 Row: 1, Col: 5, Value: 13.3 Row: 1, Col: 6, Value: 22.0 Cement 22.0% Operative Builders 13.3% Federal & Federally Sponsored Credit Agencies 12.0% Floor Coverings 5.8% Concrete, Gypsum, Plaster 5.6% All Others 41.3%* * INCLUDES SHORT-TERM INVESTMENTS CONSTRUCTION AND HOUSING PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Bill Bower, Portfolio Manager of Fidelity Select Construction and Housing Portfolio Q. BILL, IT'S BEEN A TOUGH YEAR FOR THE CONSTRUCTION AND HOUSING SECTOR. HOW HAS THE FUND HELD UP? A. The fund probably took a harder hit than the sector as a whole. For the year ended February 28, 1995, it had a -12.54% return, compared to the S&P 500, which returned 7.36%. Q. WHAT HURT THE FUND'S PERFORMANCE? A. The biggest factor was rising interest rates. The increase was dramatic and prolonged, and, in many cases, the market overreacted. Prices on home building stocks, for example, went down to recession-like levels. Unfortunately, they were one of our heaviest investments. The story was much the same with cement companies, another one of our concentrations. In addition, the fund lost half its assets through redemptions between September and February. As money left the fund, I've decided to take profits in companies like Lowe's, a retail lumber company, and Leggett & Platt, a furniture maker, both of which had done well for the fund and could have continued to do so. Finally, some of our more defensive investments - stocks like Federal National Mortgage Association (FNMA) that investors tend to hold onto even when rates rise - didn't work out as well as we'd hoped. Q. SINCE TAKING OVER THE FUND IN DECEMBER, HAVE YOU MADE ANY CHANGES? A. As assets declined, I cut the number of stocks in the fund - from 43 to 35 - and focused on the inexpensive companies. I also increased our stake in both builders and cement companies to make the fund as interest-rate insensitive as possible. My thinking was that if we didn't have a recession, the stocks would bounce back. And if we did, we wouldn't lose much because they were already priced like we were in a recession. Since December, the home builders - companies like Pulte and Lennar - have started to come up. But they're not back to their previous levels. Q. WHAT ABOUT THE CEMENT COMPANIES? A. Companies like Medusa, LaFarge, and Vulcan haven't bounced back yet, which has been a drag on performance. But I'm not surprised because they usually rally later than builders. Demand is still strong for cement since it goes into commercial buildings, highways and airports. That has helped cement companies maintain favorable pricing for their products, which should eventually translate into higher earnings. Q. IN HINDSIGHT, DO YOU HAVE ANY REGRETS? A. Sure. I wish I'd owned more National Gypsum, a company that makes the gypsum wallboards found in homes. Over the period, it was the fund's top performer, rising nearly 40%. National Gypsum is a good illustration of what can happen when the market overreacts and takes a strong company's stock down to extreme lows. The company still had solid earnings and good cash flow, which - in combination with its cheap price - led to a couple of takeover offers. They helped push the price up. Champion Enterprises, a manufacturer of mobile homes, was another top contributor to the fund's performance for the year. Again, I wish we'd owned more of it, as strong earnings and a decision to acquire another firm helped its price rise. Finally, another of our top investments, Armstrong, the floor covering company, hasn't rallied much, despite the fact that management is doing a great job. That has been disappointing. Q. DO YOU SEE ANY REASON TO BE OPTIMISTIC ABOUT THE SECTOR'S PROSPECTS? A. I'm guardedly optimistic. In past periods, we've seen investors come back to these stocks once interest rates start looking more attractive. As soon as it's clear that rates are coming down again, orders should pick up and so should the stocks. Although builders' earnings may have peaked, their stocks are still so cheap that their prices will probably rise anyway as investors recognize that they're earning more than they would in a recession - but are priced as if we were in a recession. I think there are also opportunities left to buy cheap companies that still have the potential to grow earnings, especially in the cement and building products areas. So that's where I'll probably focus in the months ahead. FUND FACTS START DATE: September 29, 1986 SIZE: as of February 28, 1995, more than $16 million MANAGER: William Bower, since December 1994; equity analyst, building materials, housing, recreational vehicle, and manufactured housing industries, since 1994; joined Fidelity in June 1994 (checkmark) CONSTRUCTION AND HOUSING PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.7% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 36.5% CEMENT - 22.0% Cemex SA, Series B 33,750 $ 84,644 15299293 Centex Construction Products (a) 15,900 196,763 15231R10 Lafarge Corp. 48,000 858,000 50586210 Medusa Corp. 58,700 1,452,825 58507230 St. Lawrence Cement, Inc. Class A (a) 12,700 91,396 79106010 Texas Industries, Inc. 8,000 250,000 88249110 Vulcan Materials Co. 15,100 804,075 92916010 3,737,703 CONCRETE, GYPSUM, PLASTER - 5.6% National Gypsum Co. (a) 15,900 783,075 63631710 USG Corp. (a) 7,200 172,800 90329340 955,875 FLOOR COVERINGS - 5.8% Armstrong World Industries, Inc. 21,600 988,196 04247610 PAVING, ROOFING & SIDING - 2.3% Bird Corp. (a) 4,900 41,038 09076310 Carlisle Companies, Inc. 9,600 342,000 14233910 383,038 PLUMBING SUPPLIES - WHOLESALE - 0.8% Masco Corp. 5,150 129,394 57459910 TOTAL BUILDING MATERIALS 6,194,206 CONSTRUCTION - 17.3% GENERAL BUILDING - 1.0% Schuler Homes, Inc. (a) 15,500 160,813 80818810 OPERATIVE BUILDERS - 13.3% Centex Corp. 18,100 461,550 15231210 Continental Homes Holding Corp. 10,400 135,200 21148C10 Lennar Corp. 38,950 662,150 52605710 Pulte Corp. 38,000 874,000 74586710 Standard Pacific Corp. 18,100 124,438 85375C10 2,257,338 SINGLE-FAMILY HOUSING CONSTRUCTION - 3.0% Beazer Homes USA, Inc. (a) 35,000 511,875 07556Q10 TOTAL CONSTRUCTION 2,930,026 ELECTRICAL EQUIPMENT- 5.6% ELECTRICAL MACHINERY - 5.6% General Electric Co. 17,400 954,825 36960410 ENGINEERING - 1.3% ARCHITECTS & ENGINEERS - 1.3% Fluor Corp. 4,500 219,375 34386110 FEDERAL SPONSORED CREDIT - 12.0% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 12.0% Federal Home Loan Mortgage Corporation 13,400 777,200 31340030 Federal National Mortgage Association 16,300 1,257,138 31358610 2,034,338 HOME FURNISHINGS - 8.0% FURNITURE - 3.1% Leggett & Platt, Inc. 12,800 523,200 52466010 FURNITURE STORES - 3.4% Ethan Allen Interiors, Inc. (a) 15,200 357,200 29760210 Haverty Furniture Companies, Inc. 16,750 221,938 41959610 579,138 NON-WOOD OFFICE FURNITURE - 1.5% Miller (Herman), Inc. 11,900 260,313 60054410 TOTAL HOME FURNISHINGS 1,362,651 SHARES VALUE (NOTE 1) LEISURE DURABLES & TOYS - 1.9% TRAVEL TRAILERS AND CAMPERS - 1.9% Champion Enterprises, Inc. (a) 9,700 $ 327,375 15849610 REAL ESTATE - 1.0% SUBDIVIDED REAL ESTATE DEVELOPMENT - 1.0% Newhall Land & Farming Co. 11,700 171,113 65142610 RETAIL & WHOLESALE, MISCELLANEOUS - 6.0% BUILDING MATERIALS - RETAIL - 3.2% BMC West Corp. (a) 5,600 75,600 05592610 Home Depot, Inc. (The) 10,466 469,662 43707610 545,262 LUMBER & BUILDING MATERIALS - RETAIL - 2.8% Lowe's Companies, Inc. 14,000 470,750 54866110 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 1,016,012 TEXTILES & APPAREL - 3.1% CARPETS & RUGS - 3.1% Interface, Inc. Class A 26,800 378,550 45866510 Mohawk Industries, Inc. (a) 10,206 137,781 60819010 TOTAL TEXTILES & APPAREL 516,331 TOTAL COMMON STOCKS (Cost $15,278,298) 15,726,252 REPURCHASE AGREEMENTS - 7.3% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $1,245,210 1,245,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $16,523,298) $ 16,971,252 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $16,981,644 and $62,122,255, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $22,274 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $2,951,000 and $1,993,222, respectively. The weighted average interest rate paid was 4.1% (see Note 8 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $16,703,454. Net unrealized appreciation aggregated $267,798, of which $1,594,485 related to appreciated investment securities and $1,326,687 related to depreciated investment securities. The fund hereby designates $1,344,000 as a capital gain dividend for the purpose of the dividend paid deduction. The fund has elected to defer to its fiscal year ending February 28, 1996 $335,000 of losses recognized during the period November 1, 1994 to February 28, 1995. CONSTRUCTION AND HOUSING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $1,245,000) (cost $16,523,298) - See $ 16,971,252 accompanying schedule Cash 785 Receivable for fund shares sold 74,688 Dividends receivable 23,853 Redemption fees receivable 60 Other receivables 346 TOTAL ASSETS 17,070,984 LIABILITIES Payable for investments purchased $ 10,205 Payable for fund shares redeemed 157,883 Accrued management fee 8,665 Other payables and accrued expenses 31,254 TOTAL LIABILITIES 208,007 NET ASSETS $ 16,862,977 Net Assets consist of: Paid in capital $ 16,059,627 Accumulated net investment (loss) 1,585 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 353,811 Net unrealized appreciation (depreciation) on investments 447,954 NET ASSETS, for 1,004,539 shares outstanding $ 16,862,977 NET ASSET VALUE and redemption price per share ($16,862,977 (divided by) 1,004,539 shares) $16.79 Maximum offering price per share (100/97.00 of $16.79) $17.31
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 586,413 Dividends Interest 80,724 TOTAL INCOME 667,137 EXPENSES Management fee $ 251,922 Transfer agent 384,874 Fees Redemption fees (47,480 ) Accounting fees and expenses 49,640 Non-interested trustees' compensation 463 Custodian fees and expenses 12,153 Registration fees 36,763 Audit 22,943 Legal 839 Interest 2,065 Reports to shareholders 4,092 Miscellaneous 473 Total expenses before reductions 718,747 Expense reductions (5,925 712,822 ) NET INVESTMENT INCOME (LOSS) (45,685 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 847,745 Foreign currency transactions (56 847,689 ) Change in net unrealized appreciation (depreciation) on investment securities (10,454,301 ) NET GAIN (LOSS) (9,606,612 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (9,652,297 ) OTHER INFORMATION $128,632 Sales Charges Paid to FDC Deferred sales charges withheld $4,159 by FDC Exchange fees withheld by FSC $37,088
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ (45,685 $ 11,881 Net investment income (loss) ) Net realized gain (loss) 847,689 1,149,357 Change in net unrealized appreciation (depreciation) (10,454,301 7,883,107 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (9,652,297 9,044,345 ) Distributions to shareholders from net realized gains (804,434 (529,457 ) ) Share transactions 23,825,749 103,244,564 Net proceeds from sales of shares Reinvestment of distributions 794,528 523,498 Cost of shares redeemed (78,326,758 (62,476,673 ) ) Paid in capital portion of redemption fees 27,046 81,997 Net increase (decrease) in net assets resulting from share transactions (53,679,435 41,373,386 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (64,136,166 49,888,274 ) NET ASSETS Beginning of period 80,999,143 31,110,869 End of period (including undistributed net investment income of $1,585 and $12,162, respectively) $ 16,862,977 $ 80,999,143 OTHER INFORMATION Shares Sold 1,308,527 5,578,570 Issued in reinvestment of distributions 47,271 28,856 Redeemed (4,437,862 (3,497,427 ) ) Net increase (decrease) (3,082,064) 2,109,999
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 19.82 $ 15.74 $ 13.84 $ 11.76 $ 11.66 Income from Investment Operations Net investment income (loss) (.02) .01 .02 (.06) .01 Net realized and unrealized gain (loss) (2.50) 4.26 1.87 2.93 1.45 Total from investment operations (2.52) 4.27 1.89 2.87 1.46 Less Distributions - - - - (.16) From net investment income From net realized gain (.52) (.22) (.01) (.88) (1.27) Total distributions (.52) (.22) (.01) (.88) (1.43) Redemption fees added to paid in capital .01 .03 .02 .09 .07 Net asset value, end of period $ 16.79 $ 19.82 $ 15.74 $ 13.84 $ 11.76 TOTAL RETURN B, C (12.54)% 27.45% 13.81% 26.96% 13.46% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 16,863 $ 80,999 $ 31,111 $ 26,687 $ 4,070 Ratio of expenses to average net assets 1.74% 1.66% 2.02% A 2.50% 2.48% Ratio of expenses to average net assets before expense reductions 1.76% 1.67% 2.02% A 3.10% 3.48% Ratio of net investment income (loss) to average net assets (.11)% .03% .20% A (.49)% .08% Portfolio turnover rate 45% 35% 60% A 183% 137%
a ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. ENVIRONMENTAL SERVICES PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND ENVIRONMENTAL SERVICES -13.91% 1.56% 10.60% ENVIRONMENTAL SERVICES (INCL. 3% SALES CHARGE) -16.50% -1.48% 7.28% S&P 500 7.36% 71.20% 78.43% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on June 29, 1989. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND ENVIRONMENTAL SERVICES -13.91% 0.31% 1.79% ENVIRONMENTAL SERVICES (INCL. 3% SALES CHARGE) -16.50% -0.30% 1.25% S&P 500 7.36% 11.35% 10.74% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select EnvironmentalStandard & Poor's 50 06/29/89 9700.00 10000.00 06/30/89 9573.90 9761.13 07/31/89 10485.70 10642.57 08/31/89 10621.50 10851.16 09/30/89 11193.80 10806.67 10/31/89 10941.60 10555.96 11/30/89 11009.50 10771.30 12/31/89 11368.64 11029.81 01/31/90 10358.96 10289.71 02/28/90 10562.84 10422.44 03/31/90 11019.14 10698.64 04/30/90 11077.39 10431.17 05/31/90 12106.49 11448.21 06/30/90 12485.12 11370.37 07/31/90 12407.45 11333.98 08/31/90 10863.80 10309.39 09/30/90 10281.29 9807.32 10/31/90 10135.66 9765.15 11/30/90 10485.17 10395.98 12/31/90 11087.10 10686.03 01/31/91 12057.94 11151.94 02/28/91 12611.33 11949.30 03/31/91 12611.33 12238.47 04/30/91 12572.49 12267.85 05/31/91 12601.62 12797.82 06/30/91 11650.19 12211.68 07/31/91 12019.11 12780.74 08/31/91 12232.70 13083.64 09/30/91 11941.44 12865.15 10/31/91 11494.85 13037.54 11/30/91 10863.80 12512.13 12/31/91 11936.56 13943.51 01/31/92 13005.20 13684.17 02/29/92 13146.34 13862.06 03/31/92 11835.74 13591.75 04/30/92 11482.89 13991.35 05/31/92 11190.52 14059.90 06/30/92 10592.18 13850.41 07/31/92 10665.30 14416.89 08/31/92 10445.94 14121.35 09/30/92 10571.29 14287.98 10/31/92 11072.70 14337.99 11/30/92 11762.13 14826.91 12/31/92 11772.57 15009.28 01/31/93 12002.39 15135.36 02/28/93 11866.59 15341.20 03/31/93 11574.10 15664.90 04/30/93 11333.84 15285.81 05/31/93 11584.55 15695.47 06/30/93 11438.30 15740.99 07/31/93 10957.79 15678.02 08/31/93 11542.76 16272.22 09/30/93 11553.21 16146.93 10/31/93 11877.03 16481.17 11/30/93 11354.74 16324.60 12/31/93 11699.45 16522.12 01/31/94 12691.82 17083.88 02/28/94 12462.01 16620.90 03/31/94 11333.84 15896.23 04/30/94 11521.87 16099.70 05/31/94 11490.53 16363.74 06/30/94 10801.10 15962.83 07/31/94 11030.91 16486.41 08/31/94 11417.41 17162.35 09/30/94 11344.29 16741.87 10/31/94 10957.79 17118.56 11/30/94 10341.48 16495.11 12/31/94 10581.74 16739.73 01/31/95 10592.18 17173.79 02/28/95 10727.98 17843.05 Let's say you invested $10,000 in Fidelity Select Environmental Services Portfolio on June 29, 1989, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $10,728 - a 7.28% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $17,843 over the same period - a 78.43% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Thermedics, Inc. 11.4 TETRA Technologies, Inc. 9.2 Browning-Ferris Industries, Inc. 6.3 United Waste Systems, Inc. 6.0 Heidemij NV 4.3 WMX Technologies, Inc. 4.3 Thermo Electron Corp. 4.1 Fluor Corp. 4.0 TRC Companies, Inc. 3.4 IMCO Recycling, Inc. 3.3 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 33.0 Row: 1, Col: 2, Value: 5.7 Row: 1, Col: 3, Value: 8.699999999999999 Row: 1, Col: 4, Value: 11.4 Row: 1, Col: 5, Value: 14.3 Row: 1, Col: 6, Value: 26.9 Refuse Systems 26.9% Pollution Equipment & Design 14.3% Medical Technology 11.4% Hazardous Waste Management 8.7% Business Consulting Services 5.2% All Others 33.5%* * INCLUDES SHORT-TERM INVESTMENTS ENVIRONMENTAL SERVICES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Philip Barton, Portfolio Manager of Fidelity Select Environmental Services Portfolio Q. PIP, HOW HAS THE FUND PERFORMED? A. For the 12 months ended February 28, 1995, the fund had a total return of -13.91%, lagging the S&P 500, which returned 7.36% during the same period. Q. WHAT WERE SOME OF THE FACTORS THAT CONTRIBUTED TO THE FUND'S PERFORMANCE? A. The sector suffered from decreasing investor interest due to the perception that the economy was slowing down. The sector is seen as cyclical - meaning that it rises and falls with the economy - and the market generally moved away from cyclicals, especially in the fourth quarter of 1994. On top of that, the Republican congressional victories in November hurt the sector, because the new leadership hinted at changes in environmental regulations. Finally, one of the fund's larger investors made a significant redemption from the fund in the fourth quarter, and I had to sell stocks into the weakness of the market in order to meet the redemption. Q. ENVIRONMENTAL SERVICES HAS STRUGGLED AS A SECTOR OVER THE PAST FIVE YEARS. WHAT WILL IT TAKE FOR IT TO REBOUND? A. The most important event would be for the largest company in the solid waste industry - WMX Technologies - to provide improved performance and pay down long-term debt. If the company can increase its earnings through restructuring and be rewarded for it with a higher stock price, you might see more general strength in the sector. WMX stock has been battered recently because, among other things, investors were disappointed about the pace of restructuring that was going on in the company. Like most solid waste companies, WMX grew during the 1980s through acquisition and volume. At that time, the company had solid pricing power - the ability to raise the prices of its services and still grow earnings - but that diminished in the first years of the 1990s. The company realized that while it was acquiring customers, its new revenues were not keeping pace with its new costs. WMX has spent the past year and a half trying to correct that imbalance of deteriorated profit margins. Q. AND THIS HAS HAPPENED TO MOST OF THE SOLID WASTE INDUSTRY? A. Yes. As the industry has matured, companies have focused more on pricing, customer relations, service, marketing and managing the mix of the waste they handle. I think WMX in 1995 and 1996 could generate higher cash flow that it can use to pay down debt. That debt reduction should help it increase earnings and, hopefully, help its stock price. As it stands now, WMX's performance makes it difficult for similar but smaller companies such as Browning-Ferris Industries to attract investor interest by virtue of positive earnings surprises, especially if their stocks trade at higher prices than that of WMX. Another factor that could help refuse systems companies going forward is the opportunity to secure municipal waste contracts factored on a price-per-house or per-site basis. At times when the economy slows down, the amount of waste produced per household usually declines. Since the companies would be paid per household, their earnings wouldn't drop along with the amount of trash. Q. WHAT CAN YOU TELL US ABOUT YOUR RECENT INVESTMENT STRATEGIES? A. I've tried to focus on companies with exposure to international growth opportunities, such as Thermedics, an instrumentation company. Thermedics was the fund's largest position at the end of February and it has generated about 40% of its revenues abroad. I've also added some companies with late cyclical engineering and construction exposure, such as Fluor Corporation. Q. AND WHAT ABOUT POSITIVE CONTRIBUTORS? A. TETRA Technologies continues to deliver impressive results. This company takes chemical waste and converts it to fluids used for oil and gas drilling. It also is entering the agricultural fertilizer market, which should increase its earnings even more. The GNI Group is another, even though earlier in the year the stock suffered when one of the company's deep well injection systems failed. The company has great visibility and was picking up a lot of business that Chem Waste, a WMX company, used to have. Q. WHAT'S YOUR OUTLOOK? A. I'm positive about the prospects for individual companies, especially in the solid waste area, but a lot depends on what happens with cyclical stocks in the broader market, because the sector - as well as most cyclicals - probably will be affected by broad market sentiment about the condition of the economy. I'll continue to focus on solid waste companies, looking to add to positions in some of the larger companies, such as Browning-Ferris, when their stock prices become attractive. FUND FACTS START DATE: June 29, 1989 SIZE: as of February 28, 1995, more than $31 million MANAGER: Philip Barton, since 1993; manager, Fidelity Select Developing Communications, 1993; senior European technology analyst, Fidelity International, London, 1989-1993; joined Fidelity in 1986 (checkmark) ENVIRONMENTAL SERVICES PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 98.8% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 1.8% AUTO & TRUCK PARTS - 1.8% Williams Controls, Inc. (a) 148,000 $ 550,371 96946510 BUILDING MATERIALS - 1.8% AIRCONDITIONING EQUIPMENT - 0.3% Thermo Power Corp. (a) 9,100 92,138 88358910 FURNACES - 1.5% Thermo Process Systems, Inc. (a) 12,900 103,200 88359010 Thermo Remediation 19,500 348,563 88359210 451,763 TOTAL BUILDING MATERIALS 543,901 COMPUTER SERVICES & SOFTWARE - 0.6% PREPACKAGED COMPUTER SOFTWARE - 0.6% Telepanel Systems, Inc. (a) 121,500 201,108 87943U20 DRUGS & PHARMACEUTICALS - 1.2% COMMERCIAL LABORATORY RESEARCH - 1.2% Thermotrex Corp. (a) 11,000 155,375 88366610 Zenon Environmental, Inc. (a) 44,000 229,571 98942B10 384,946 ELECTRIC UTILITY - 0.1% ELECTRIC POWER - 0.1% Thermo Ecotek (a) 1,662 21,191 88355R10 ELECTRICAL EQUIPMENT - 2.1% TV & RADIO COMMUNICATION EQUIPMENT - 2.1% California Amplifier, Inc. (a) 99,300 645,450 12990010 ELECTRONIC INSTRUMENTS - 7.3% INDUSTRIAL MEASUREMENT INSTRUMENTS - 2.2% TSI, Inc. 73,800 682,650 87287610 LABORATORY & RESEARCH EQUIPMENT - 3.1% Microfluidics International Corp. (a) 243,300 942,788 59507310 MEASURING INSTRUMENTS - 2.0% Liberty Technologies, Inc. (a) 149,900 618,338 53128110 TOTAL ELECTRONIC INSTRUMENTS 2,243,776 ENERGY SERVICES - 1.8% OIL & GAS SERVICES - 1.8% Serv-Tech, Inc. (a) 68,400 555,750 81753910 ENGINEERING - 5.1% ARCHITECTS & ENGINEERS - 5.1% EA Engineering Science & Technology, Inc. (a) 58,300 342,513 26791110 Fluor Corp. 25,000 1,218,750 34386110 1,561,263 INDEPENDENT POWER - 4.1% STEAM SUPPLY - 4.1% Thermo Electron Corp. (a) 26,550 1,257,806 88355610 INDUSTRIAL MACHINERY & EQUIPMENT - 2.5% MEASURING & DISPENSING PUMPS - 0.4% Total Containment, Inc. (a) 17,500 135,625 89149T10 SERVICE INDUSTRY MACHINERY - 2.1% Trojan Technologies. Inc. (a) 106,400 650,858 89692410 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 786,483 SHARES VALUE (NOTE 1) MEDICAL EQUIPMENT & SUPPLIES - 11.4% MEDICAL TECHNOLOGY - 11.4% Thermedics, Inc. (a) 237,400 $ 3,501,650 88390110 MEDICAL FACILITIES MANAGEMENT - 0.6% MEDICAL LABORATORIES - 0.6% Huntingdon International Holdings PLC ADR 53,000 192,125 44589120 METALS & MINING - 3.3% SECONDARY NONFERROUS SMELTING - 3.3% IMCO Recycling, Inc. 68,400 1,017,450 44968110 POLLUTION CONTROL - 49.9% HAZARDOUS WASTE MANAGEMENT - 8.7% American Ecology Corp. 107,800 687,225 02553310 GNI Group, Inc. (a) 130,000 715,000 36202210 International Technology Corp. (a) 32,300 88,825 46046510 OHM Corp. (a) 20,900 148,913 67083910 TRC Companies, Inc. (a) 118,100 1,033,375 87262510 2,673,338 POLLUTION EQUIPMENT & DESIGN - 14.3% Davis Water & Waste Industries, Inc. 21,900 194,363 23913310 GZA GeoEnvironmental Technologies, Inc. (a) 47,100 141,300 36238610 Harding Associates, Inc. (a) 52,300 313,800 41226410 MFRI, Inc. (a) 75,700 340,650 55272110 Sevenson Environmental Services, Inc. 36,900 599,625 81806310 TETRA Technologies, Inc. (a) 230,900 2,539,900 88162F10 TETRA Technologies, Inc. (New) (a) 15,000 285,000 88162G10 4,414,638 REFUSE SYSTEMS - 26.9% Biomedical Waste Systems, Inc. (a) 70,000 100,625 09061E10 Browning-Ferris Industries, Inc. 62,600 1,948,425 11588510 Chambers Development Co., Inc. Class A (a) 219,200 904,200 15782920 Continental Waste Industries, Inc. (a) 37,500 398,438 21215T10 Rollins Environmental Services, Inc. (a) 20,000 102,500 77570910 Sanifill, Inc. (a) 10,600 250,425 80101810 United Waste Systems, Inc. (a) 70,100 1,840,125 91317410 WMX Technologies, Inc. 50,000 1,318,750 92929Q10 Western Waste Industries, Inc. (a) 37,800 614,250 95988010 Wheelabrator Technologies, Inc. 59,100 812,625 96290130 8,290,363 TOTAL POLLUTION CONTROL 15,378,339 SERVICES - 5.2% BUSINESS CONSULTING SERVICES - 5.2% Earth Technology Corp. (USA) (a) 42,100 273,650 27031510 Heidemij NV 140,500 1,334,750 42099522 1,608,400 TOTAL COMMON STOCKS (Cost $32,849,827) 30,450,009 REPURCHASE AGREEMENTS - 1.2% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $380,064 $ 380,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $33,229,827) $ 30,830,009 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $35,878,084 and $62,701,255, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $44,929 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $2,682,000 and $1,323,417, respectively. The weighted average interest rate paid was 4.6% (see Note 8 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $33,413,045. Net unrealized depreciation aggregated $2,583,036, of which $2,049,277 related to appreciated investment securities and $4,632,313 related to depreciated investment securities. The fund has elected to defer to its fiscal year ending February 28, 1996 $3,161,000 of losses recognized during the period November 1, 1994 to February 28, 1995. ENVIRONMENTAL SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $380,000) (cost $33,229,827) - See $ 30,830,009 accompanying schedule Cash 84 Receivable for investments sold 865,448 Receivable for fund shares sold 21,199 Dividends receivable 8,949 Redemption fees receivable 106 Other receivables 63,421 TOTAL ASSETS 31,789,216 LIABILITIES Payable for fund shares redeemed $ 449,456 Accrued management fee 16,635 Other payables and accrued expenses 52,813 TOTAL LIABILITIES 518,904 NET ASSETS $ 31,270,312 Net Assets consist of: Paid in capital $ 36,965,983 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (3,295,853 ) Net unrealized appreciation (depreciation) on investments (2,399,818 ) NET ASSETS, for 3,045,636 $ 31,270,312 shares outstanding NET ASSET VALUE and redemption price per share ($31,270,312 (divided by) 3,045,636 shares) $10.27 Maximum offering price per share (100/97.00 of $10.27) $10.59
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 243,027 Dividends Interest 68,017 TOTAL INCOME 311,044 EXPENSES Management fee $ 277,824 Transfer agent 574,348 Fees Redemption fees (48,314 ) Accounting fees and expenses 49,038 Non-interested trustees' compensation 1,695 Custodian fees and expenses 16,113 Registration fees 16,452 Audit 21,980 Legal 809 Interest 2,023 Reports to shareholders 5,182 Miscellaneous 413 Total expenses before reductions 917,563 Expense reductions (11,050 906,513 ) NET INVESTMENT INCOME (LOSS) (595,469 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (2,723,515 ) Foreign currency transactions 35 (2,723,480 ) Change in net unrealized appreciation (depreciation) on investment securities (5,250,926 ) NET GAIN (LOSS) (7,974,406 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (8,569,875 ) OTHER INFORMATION $97,853 Sales Charges Paid to FDC Deferred sales charges withheld $24,202 by FDC Exchange fees withheld by FSC $37,282
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ (595,469 $ (575,756 Net investment income (loss) ) ) Net realized gain (loss) (2,723,480 1,694,174 ) Change in net unrealized appreciation (depreciation) (5,250,926 1,070,736 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (8,569,875 2,189,154 ) Share transactions 27,529,233 46,687,197 Net proceeds from sales of shares Cost of shares redeemed (53,674,761 (48,886,268 ) ) Paid in capital portion of redemption fees 29,932 53,169 Net increase (decrease) in net assets resulting from share transactions (26,115,596 (2,145,902 ) ) TOTAL INCREASE (DECREASE) IN NET ASSETS (34,685,471 43,252 ) NET ASSETS Beginning of period 65,955,783 65,912,531 End of period $ 31,270,312 $ 65,955,783 OTHER INFORMATION Shares Sold 2,591,147 4,126,128 Redeemed (5,072,812 (4,401,687 ) ) Net increase (decrease) (2,481,665) (275,559)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 11.93 $ 11.36 $ 11.39 $ 12.95 $ 11.41 Income from Investment Operations Net investment income (loss) (.14) (.11) (.06) (.09) (.04) Net realized and unrealized gain (loss) (1.53) .67 .42 (1.06) 1.55 Total from investment operations (1.67) .56 .36 (1.15) 1.51 Less Distributions From net realized gain - - (.39) (.42) - Total distributions - - (.39) (.42) - Redemption fees added to paid in capital .01 .01 - .01 .03 Net asset value, end of period $ 10.27 $ 11.93 $ 11.36 $ 11.39 $ 12.95 TOTAL RETURN B, C (13.91)% 5.02% 3.34% (8.67)% 13.50% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 31,270 $ 65,956 $ 65,913 $ 65,132 $ 100,263 Ratio of expenses to average net assets 2.01% 2.03% 1.99% A 2.03% 2.03% Ratio of expenses to average net assets before expense reductions 2.04% 2.07% 1.99% A 2.03% 2.03% Ratio of net investment income (loss) to average net assets (1.32)% (1.02)% (.70)% (.74)% (.30)% A Portfolio turnover rate 82% 191% 176% A 130% 122%
A ANNUALIZED B THE TOTAL RETURNSWOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. INDUSTRIAL EQUIPMENT PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND INDUSTRIAL EQUIPMENT -1.93% 77.84% 115.54% INDUSTRIAL EQUIPMENT (INCL. 3% SALES CHARGE) -4.87% 72.50% 109.07% S&P 500 7.36% 71.20% 175.04% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on September 29, 1986. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND INDUSTRIAL EQUIPMENT -1.93% 12.20% 9.54% INDUSTRIAL EQUIPMENT (INCL. 3% SALES CHARGE) -4.87% 11.52% 9.15% S&P 500 7.36% 11.35% 12.76% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Industrial EqStandard & Poor's 50 09/29/86 9700.00 10000.00 09/30/86 9729.10 9962.80 10/31/86 10039.50 10537.66 11/30/86 10291.70 10793.72 12/31/86 10311.10 10518.48 01/31/87 11804.90 11935.32 02/28/87 12804.00 12406.77 03/31/87 12580.90 12765.32 04/30/87 12367.50 12651.71 05/31/87 12357.80 12761.78 06/30/87 12707.00 13406.25 07/31/87 13483.00 14085.95 08/31/87 14084.40 14611.35 09/30/87 14414.20 14291.37 10/31/87 8759.10 11213.00 11/30/87 8361.40 10289.05 12/31/87 9357.40 11072.05 01/31/88 9188.17 11538.18 02/29/88 10024.36 12075.86 03/31/88 10173.68 11702.72 04/30/88 10472.32 11832.62 05/31/88 10412.60 11935.56 06/30/88 11149.24 12483.41 07/31/88 10561.92 12435.97 08/31/88 9606.27 12013.15 09/30/88 9785.45 12524.91 10/31/88 9626.18 12873.10 11/30/88 9317.58 12689.01 12/31/88 9815.31 12911.07 01/31/89 10532.05 13856.16 02/28/89 10113.95 13511.14 03/31/89 10263.28 13825.95 04/30/89 10999.92 14543.52 05/31/89 11597.20 15132.53 06/30/89 11099.47 15046.28 07/31/89 11806.25 16404.95 08/31/89 12025.25 16726.49 09/30/89 11856.02 16657.91 10/31/89 11069.60 16271.45 11/30/89 11378.20 16603.39 12/31/89 11577.29 17001.87 01/31/90 11189.06 15861.04 02/28/90 11756.48 16065.65 03/31/90 12453.30 16491.39 04/30/90 12353.76 16079.11 05/31/90 13498.55 17646.82 06/30/90 13258.63 17526.82 07/31/90 13008.09 17470.73 08/31/90 10863.46 15891.38 09/30/90 9390.28 15117.47 10/31/90 9139.74 15052.46 11/30/90 9440.38 16024.85 12/31/90 9781.12 16471.95 01/31/91 10823.37 17190.12 02/28/91 11845.58 18419.22 03/31/91 11745.36 18864.96 04/30/91 11625.10 18910.24 05/31/91 12116.16 19727.16 06/30/91 11725.01 18823.66 07/31/91 11825.31 19700.84 08/31/91 12005.85 20167.75 09/30/91 12286.69 19830.95 10/31/91 12216.48 20096.68 11/30/91 11634.74 19286.79 12/31/91 12406.41 21493.19 01/31/92 13519.55 21093.42 02/29/92 14480.89 21367.64 03/31/92 14055.87 20950.97 04/30/92 14055.87 21566.92 05/31/92 14167.19 21672.60 06/30/92 13296.92 21349.68 07/31/92 13418.35 22222.88 08/31/92 12720.11 21767.31 09/30/92 12983.22 22024.17 10/31/92 12932.62 22101.25 11/30/92 13549.90 22854.91 12/31/92 13813.01 23136.02 01/31/93 14460.65 23330.36 02/28/93 15219.61 23647.66 03/31/93 15492.83 24146.62 04/30/93 16201.66 23562.27 05/31/93 17011.75 24193.74 06/30/93 17234.52 24263.90 07/31/93 17477.55 24166.85 08/31/93 18672.42 25082.77 09/30/93 18459.77 24889.63 10/31/93 19077.46 25404.85 11/30/93 19057.21 25163.50 12/31/93 19798.03 25467.98 01/31/94 20728.98 26333.89 02/28/94 21318.57 25620.25 03/31/94 20087.66 24503.20 04/30/94 19905.86 24816.84 05/31/94 19498.98 25223.84 06/30/94 18497.43 24605.86 07/31/94 19373.78 25412.93 08/31/94 20750.92 26454.86 09/30/94 20813.52 25806.71 10/31/94 21074.34 26387.37 11/30/94 20051.92 25426.34 12/31/94 20417.07 25803.41 01/31/95 20302.31 26472.49 02/28/95 20907.41 27504.13 Let's say you invested $10,000 in Fidelity Select Industrial Equipment Portfolio on September 29, 1986, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $20,907 - a 109.07% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $27,504 over the same period - a 175.04% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Deere & Co. 8.3 Caterpillar, Inc. 8.2 Parker-Hannifin Corp. 5.0 Clark Equipment Co. 4.7 Harnischfeger Industries, Inc. 4.6 International Business Machines Corp. 4.6 Cooper Industries, Inc. 4.5 Case Corp. 4.0 Goulds Pumps, Inc. 3.8 Trinity Industries, Inc. 3.7 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 30.4 Row: 1, Col: 2, Value: 5.5 Row: 1, Col: 3, Value: 6.9 Row: 1, Col: 4, Value: 13.6 Row: 1, Col: 5, Value: 15.3 Row: 1, Col: 6, Value: 28.3 General Industrial Machinery 28.3% Construction Equipment 15.3% Farm Machinery & Equipment 13.6% Pumping Equipment 6.9% Semiconductors 5.5% All Others 30.4%* * INCLUDES SHORT-TERM INVESTMENTS INDUSTRIAL EQUIPMENT PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Robert Bertelson, Portfolio Manager of Fidelity Select Industrial Equipment Portfolio Q. HOW HAS THE FUND PERFORMED, BOB? A. For the 12 months ended February 28, 1995, the fund had a total return of -1.93%, lagging the S&P 500, which returned 7.36% for the same period. Q. WHAT ACCOUNTED FOR THE FUND'S PERFORMANCE? A. Despite the fact that many of the companies in the sector showed strong earnings growth, their stocks have been seen as highly cyclical, or susceptible to the health of the economy. Investors were concerned that the regular increases in short-term interest rates instituted by the Federal Reserve Board during 1994 would cause a slowdown in the domestic economic picture. As a result, stock prices in the sector went down. Q. CAN YOU GIVE SOME EXAMPLES OF COMPANIES THAT WERE SHOWING STRONG EARNINGS GROWTH, BUT WERE BUFFETED BY THIS NEGATIVE SENTIMENT? A. Caterpillar is a perfect case in point. The company's stock was a strong performer during 1994, because of strong earnings growth due to robust sales growth and solid returns from the company's investment in automation and manufacturing process. However, the stock recently has fallen victim to economic concerns. Clark Equipment is another example. Over the past several years, the company has been selling weaker divisions and buying businesses that are more similar to its core business, Melroe, a company that has about a 50% market share in small tractors and other equipment used by contractors. Clark's stock has gone down steadily since the fourth quarter of 1994 as a result of recessionary fears. Q. GIVEN THIS TYPE OF BACKDROP, HOW ARE YOU FOCUSING THE FUND'S INVESTMENTS? A. I'm targeting several different areas. The first is agricultural equipment. This industry also had a poor 1994 in terms of stock performance, despite good earnings performance. Again, this was due to concerns about the economy, as well as a feeling that Republican congressional victories in November would lead to changes in the Farm Bill - - which is up for its five-year review in 1995 - and cuts in farm subsidy programs. On the positive side, there are several factors that could help companies such as Deere. First, farmers are in a better financial position than they've been in for a while. One of the reasons is a boom in agricultural exports. This growth can have a powerful impact on companies such as Deere, and I believe the market will recognize this opportunity more fully by the end of 1995. Q. WHAT ARE THE OTHER AREAS? A. One is companies that have a large international exposure, on my belief that the economic recovery in Europe is about one year behind that of the U.S. I also expect companies with exposure to the Far East to do well, because those countries are making substantial infrastructure investments. Another area is highly diversified companies like Dover Corp., a general industrial machinery manufacturer. Its diversity should allay investor fears that the company's earnings will tumble because of an economic downturn. Finally, I've added to the fund's technology investments - including semiconductor manufacturers Intel and Motorola - because they can benefit from the move toward increasing industrial productivity. I am reducing investments in companies that are linked to parts of the economy that usually do well early in an economic recovery, such as housing or auto production. While many stocks related to these industries seem somewhat cheap, they may remain so due to investor concerns that autos and housing are at cyclical highs, and may stay flat or even fall. Q. WHAT'S YOUR OUTLOOK GOING FORWARD? A. Although I feel we'll probably see one or two more interest rate increases by the Fed, I think stock prices, for the most part, already reflect this possibility. I believe companies whose products improve other companies' productivity or capacity should do well irrespective of higher interest rates. If investors become convinced that the Fed has slowed the rate of growth - but not too much - industrial equipment companies that continue to show strong earnings growth could attract interest and see their stock prices rebound. The one wild card is emerging markets. If there are other countries such as Mexico, where currencies are vulnerable to devaluation, that could knock the legs out of earnings growth for some of the fund's companies that do business in these countries. If that happens, I'll have to reassess my strategy. FUND FACTS START DATE: September 29, 1986 SIZE: as of February 28, 1995, more than $109 million MANAGER: Robert Bertelson, since December 1994; manager, Fidelity Select Energy Portfolio, 1992 to December 1994; equity analyst, since 1991; joined Fidelity in 1991 (checkmark) INDUSTRIAL EQUIPMENT PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.0% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 5.9% AUTO & TRUCK PARTS - 2.3% Titan Wheel International, Inc. 91,700 $ 2,579,063 88832810 INDUSTRIAL TRUCKS - 2.7% NACCO Industries, Inc. Class A 57,600 2,959,200 62957910 MOTOR VEHICLES & CAR BODIES - 0.9% Spartan Motors, Inc. 86,500 1,048,813 84681910 TOTAL AUTOS, TIRES, & ACCESSORIES 6,587,076 BUILDING MATERIALS - 2.4% AIRCONDITIONING EQUIPMENT - 2.4% Tecumseh Products Co. Class A 58,200 2,720,848 87889520 COMPUTERS & OFFICE EQUIPMENT - 4.5% MAINFRAME COMPUTERS - 4.5% International Business Machines Corp. 66,700 5,019,175 45920010 ELECTRICAL EQUIPMENT - 1.0% ELECTRICAL MACHINERY - 1.0% General Electric Co. 20,000 1,097,500 36960410 ELECTRONICS - 5.5% SEMICONDUCTORS - 5.5% Intel Corp. 40,000 3,190,000 45814010 Motorola, Inc. 50,000 2,875,000 62007610 6,065,000 ENGINEERING - 0.8% ARCHITECTS & ENGINEERS - 0.8% Corrpro Companies, Inc. (a) 54,000 904,500 22031710 HOLDING COMPANIES - 0.1% HOLDING COMPANY OFFICES - 0.1% Brierley Investments Ltd. 143,106 103,456 10901410 INDUSTRIAL MACHINERY & EQUIPMENT - 71.5% BALL & ROLLER BEARINGS - 1.5% Bearings, Inc. 58,100 1,648,588 07400520 CONSTRUCTION & MINING EQUIPMENT - 0.2% Champion Road Machinery Ltd. (b) 22,800 184,592 15864C92 CONSTRUCTION EQUIPMENT - 15.3% Astec Industries, Inc. (a) 90,600 1,200,450 04622410 Caterpillar, Inc. 177,400 9,158,275 14912310 Clark Equipment Co. (a) 96,600 5,168,100 18139610 Finning Ltd. 117,300 1,508,933 31807140 17,035,758 FARM MACHINERY & EQUIPMENT - 13.6% AGCO Corp. 50,000 1,293,750 00108410 Allied Products Corp. (a) 30,000 483,750 01941110 Case Corp. 178,800 4,179,450 14743R10 Deere & Co. 120,000 9,195,000 24419910 15,151,950 GENERAL INDUSTRIAL MACHINERY - 28.3% Commercial Intertech Corp. 60,000 1,260,000 20170910 Cooper Industries, Inc. 112,900 4,431,325 21666910 Dover Corp. 60,000 3,570,000 26000310 Harnischfeger Industries, Inc. 183,717 5,121,111 41334510 Illinois Tool Works, Inc. 63,400 2,845,075 45230810 Ingersoll-Rand Co. 30,000 956,250 45686610 Park Ohio Industries, Inc. (a) 203,300 2,795,375 70067710 Parker-Hannifin Corp. 110,800 5,179,900 70109410 Regal-Beloit Corp. 152,800 2,387,500 75875010 Scottsman Industries, Inc. 43,000 768,625 80934010 TRINOVA Corp. 78,200 2,111,400 89667810 31,426,561 SHARES VALUE (NOTE 1) MACHINE TOOLS, METAL CUTTING - 3.9% Cincinnati Milacron, Inc. 113,400 $ 2,381,400 17217210 Giddings & Lewis, Inc. 60,000 1,020,000 37504810 Greenfield Industries, Inc. 36,800 947,600 39505810 4,349,000 PUMPING EQUIPMENT - 6.9% Amtrol, Inc. 30,200 490,750 03234A10 Duriron Company, Inc. 41,050 769,688 26684910 Goulds Pumps, Inc. 191,700 4,121,550 38355010 IDEX Corp. 49,800 1,444,200 45167R10 Keystone International, Inc. 48,000 894,000 49350310 7,720,188 SPECIAL INDUSTRIAL MACHINERY - 1.8% CMI Corp. Class A (a) 295,600 1,995,300 12576130 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 79,511,937 RAILROADS - 3.3% RAILROAD EQUIPMENT - 3.3% Trinity Industries, Inc. 110,450 3,672,463 89652210 TOTAL COMMON STOCKS (Cost $106,107,744) 105,681,955 REPURCHASE AGREEMENTS - 5.0% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $5,604,946 5,604,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $111,711,744) $ 111,285,955 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of this security amounted to $184,592 or 0.2% of net assets. 3. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. A summary of the transactions during the period in which the issuers were affiliates is as follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Rexworks, Inc. (a) $ - $ 63,125 $ - $ - OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $142,065,124 and $177,145,280, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $59,687 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $3,887,000 and $2,095,235, respectively. The weighted average interest rate paid was 4.5% (see Note 8 of Notes to Financial Statements. INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $111,815,237. Net unrealized depreciation aggregated $529,282, of which $6,801,412 related to appreciated investment securities and $7,330,694 related to depreciated investment securities. At February 28, 1995, the fund had a capital loss carryforward of approximately $907,000 which will expire on February 28, 2003. On October 26, 1990, the fund acquired 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 $106,000 available to offset future realized capital gains in Industrial Equipment Portfolio, to the extent provided by regulations. The fund has elected to defer to its fiscal year ending February 28, 1996 $412,000 of losses recognized during the period November 1, 1994 to February 28, 1995. INDUSTRIAL EQUIPMENT PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $5,604,000) (cost $111,711,744) - See $ 111,285,955 accompanying schedule Cash 1,717 Receivable for investments sold 125,988 Receivable for fund shares sold 337,121 Dividends receivable 171,691 Redemption fees receivable 280 TOTAL ASSETS 111,922,752 LIABILITIES Payable for fund shares redeemed $ 1,802,952 Accrued management fee 58,138 Other payables and accrued expenses 93,724 TOTAL LIABILITIES 1,954,814 NET ASSETS $ 109,967,938 Net Assets consist of: Paid in capital $ 111,872,772 Undistributed net investment income 45,655 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (1,524,715 ) Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies (425,774 ) NET ASSETS, for 5,488,500 shares outstanding $ 109,967,938 NET ASSET VALUE and redemption price per share ($109,967,938 (divided by) 5,488,500 shares) $20.04 Maximum offering price per share (100/97.00 of $20.04) $20.66
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 1,690,474 Dividends Interest 588,001 TOTAL INCOME 2,278,475 EXPENSES Management fee $ 767,043 Transfer agent 1,326,962 Fees Redemption fees (160,840 ) Accounting fees and expenses 123,986 Non-interested trustees' compensation 878 Custodian fees and expenses 15,778 Registration fees 121,642 Audit 24,424 Legal 1,746 Interest 4,453 Reports to shareholders 6,654 Miscellaneous 913 Total expenses before reductions 2,233,639 Expense reductions (34,799 2,198,840 ) NET INVESTMENT INCOME 79,635 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including (1,498,705 realized gain of $11,876 on ) sales of investments in affiliated issuers) Foreign currency transactions (241 (1,498,946 ) ) Change in net unrealized appreciation (depreciation) on: Investment securities (14,341,012 ) Assets and liabilities in foreign currencies 15 (14,340,997 ) NET GAIN (LOSS) (15,839,943 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (15,760,308 ) OTHER INFORMATION $1,442,065 Sales Charges Paid to FDC Deferred sales charges withheld $6,353 by FDC Exchange fees withheld by FSC $131,303
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ 79,635 $ 5,878 Net investment income Net realized gain (loss) (1,498,946 6,549,137 ) Change in net unrealized appreciation (depreciation) (14,340,997 13,055,339 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (15,760,308 19,610,354 ) Distributions to shareholders: (37,665 (9,388 From net investment income ) ) From net realized gain (1,765,984 (1,748,414 ) ) TOTAL DISTRIBUTIONS (1,803,649 (1,757,802 ) ) Share transactions 154,753,559 267,189,015 Net proceeds from sales of shares Reinvestment of distributions 1,784,486 1,738,476 Cost of shares redeemed (235,232,664 (95,571,492 ) ) Paid in capital portion of redemption fees 214,170 202,432 Net increase (decrease) in net assets resulting from share transactions (78,480,449 173,558,431 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (96,044,406 191,410,983 ) NET ASSETS Beginning of period 206,012,344 14,601,361 End of period (including undistributed net investment income of $45,655 and $3,928, respectively) $ 109,967,938 $ 206,012,344 OTHER INFORMATION Shares Sold 7,719,747 14,282,723 Issued in reinvestment of distributions 90,354 93,575 Redeemed (12,319,237 (5,349,531 ) ) Net increase (decrease) (4,509,136) 9,026,767
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 20.61 $ 15.04 $ 13.89 $ 11.60 $ 12.41 Income from Investment Operations Net investment income (loss) .01 - .02 (.07) .01 Net realized and unrealized gain (loss) (.44) 5.92 1.09 2.39 (.80) Total from investment operations (.43) 5.92 1.11 2.32 (.79) Less Distributions (.01) E (.01) - - - From net investment income In excess of net investment income - - - (.11) (.09) From net realized gain (.16) E (.40) - - - Total distributions (.17) (.41) - (.11) (.09) Redemption fees added to paid in capital .03 .06 .04 .08 .07 Net asset value, end of period $ 20.04 $ 20.61 $ 15.04 $ 13.89 $ 11.60 TOTAL RETURN B, C (1.93)% 40.07% 8.28% 20.91% (5.90)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 109,968 $ 206,012 $ 14,601 $ 7,529 $ 1,949 Ratio of expenses to average net assets 1.78% 1.68% 2.49% A 2.49% 2.52% Ratio of expenses to average net assets before expense reductions 1.80% 1.69% 3.40% A 2.86% 2.99% Ratio of net investment income (loss) to average net assets .06% .01% .15% A (.57)% .09% Portfolio turnover rate 131% 95% 407% A 167% 43%
a ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS). INDUSTRIAL MATERIALS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND INDUSTRIAL MATERIALS 7.65% 86.13% 146.97% INDUSTRIAL MATERIALS (INCL. 3% SALES CHARGE) 4.42% 80.55% 139.56% S&P 500 7.36% 71.20% 175.04% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on September 29, 1986. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND INDUSTRIAL MATERIALS 7.65% 13.23% 11.33% INDUSTRIAL MATERIALS (INCL. 3% SALES CHARGE) 4.42% 12.54% 10.93% S&P 500 7.36% 11.35% 12.76% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Industrial MaStandard & Poor's 50 09/29/86 10000.00 10000.00 09/30/86 10030.00 9962.80 10/31/86 10580.00 10537.66 11/30/86 10950.00 10793.72 12/31/86 10550.00 10518.48 01/31/87 12380.00 11935.32 02/28/87 13420.00 12406.77 03/31/87 14390.00 12765.32 04/30/87 14560.00 12651.71 05/31/87 14190.00 12761.78 06/30/87 14930.00 13406.25 07/31/87 16310.00 14085.95 08/31/87 16870.00 14611.35 09/30/87 17120.00 14291.37 10/31/87 10620.00 11213.00 11/30/87 10570.00 10289.05 12/31/87 12201.02 11072.05 01/31/88 11569.42 11538.18 02/29/88 12932.88 12075.86 03/31/88 13163.47 11702.72 04/30/88 13183.52 11832.62 05/31/88 12862.70 11935.56 06/30/88 14266.27 12483.41 07/31/88 13734.92 12435.97 08/31/88 12993.04 12013.15 09/30/88 13103.32 12524.91 10/31/88 12862.70 12873.10 11/30/88 12742.40 12689.01 12/31/88 13523.13 12911.07 01/31/89 14338.39 13856.16 02/28/89 13716.75 13511.14 03/31/89 13574.08 13825.95 04/30/89 13991.90 14543.52 05/31/89 14175.33 15132.53 06/30/89 13349.88 15046.28 07/31/89 14552.39 16404.95 08/31/89 15714.14 16726.49 09/30/89 14756.21 16657.91 10/31/89 13543.51 16271.45 11/30/89 13737.13 16603.39 12/31/89 14124.38 17001.87 01/31/90 13044.16 15861.04 02/28/90 13268.36 16065.65 03/31/90 13655.61 16491.39 04/30/90 12667.10 16079.11 05/31/90 13431.41 17646.82 06/30/90 13288.86 17526.82 07/31/90 13132.03 17470.73 08/31/90 11615.99 15891.38 09/30/90 10790.01 15117.47 10/31/90 10664.55 15052.46 11/30/90 11229.14 16024.85 12/31/90 11699.64 16471.95 01/31/91 12117.85 17190.12 02/28/91 13006.57 18419.22 03/31/91 13184.31 18864.96 04/30/91 13205.22 18910.24 05/31/91 14334.41 19727.16 06/30/91 14177.52 18823.66 07/31/91 14744.63 19700.84 08/31/91 15091.19 20167.75 09/30/91 14891.65 19830.95 10/31/91 15532.27 20096.68 11/30/91 14293.05 19286.79 12/31/91 15889.33 21493.19 01/31/92 16582.45 21093.42 02/29/92 17391.10 21367.64 03/31/92 17086.54 20950.97 04/30/92 17979.20 21566.92 05/31/92 18189.24 21672.60 06/30/92 17747.74 21349.68 07/31/92 18147.04 22222.88 08/31/92 17001.69 21767.31 09/30/92 16770.51 22024.17 10/31/92 16959.65 22101.25 11/30/92 17590.12 22854.91 12/31/92 17854.64 23136.02 01/31/93 18234.53 23330.36 02/28/93 18403.37 23647.66 03/31/93 18709.39 24146.62 04/30/93 18435.03 23562.27 05/31/93 19194.80 24193.74 06/30/93 19247.22 24263.90 07/31/93 19511.90 24166.85 08/31/93 20020.07 25082.77 09/30/93 19395.44 24889.63 10/31/93 20538.84 25404.85 11/30/93 20814.10 25163.50 12/31/93 21671.65 25467.98 01/31/94 23429.10 26333.89 02/28/94 22942.09 25620.25 03/31/94 22296.29 24503.20 04/30/94 23133.16 24816.84 05/31/94 23366.61 25223.84 06/30/94 23122.55 24605.86 07/31/94 23982.08 25412.93 08/31/94 25276.69 26454.86 09/30/94 24958.34 25806.71 10/31/94 24629.38 26387.37 11/30/94 22889.09 25426.34 12/31/94 23447.39 25803.41 01/31/95 22785.40 26472.49 02/28/95 24696.64 27504.13 Let's say you invested $10,000 in Fidelity Select Industrial Materials Portfolio on September 29, 1986, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $23,956 - a 139.56% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $27,504 over the same period - a 175.04% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Stone Container Corp. 13.1 Aluminum Co. of America 9.7 Reynolds Metals Co. 8.8 Union Carbide Corp. 8.6 Temple-Inland, Inc. 8.3 Alcan Aluminium Ltd. 4.8 Amerada Hess Corp. 4.6 Bowater, Inc. 4.3 Great Lakes Chemical Corp. 4.3 British Petroleum PLC ADR 3.5 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 32.3 Row: 1, Col: 2, Value: 8.699999999999999 Row: 1, Col: 3, Value: 8.800000000000001 Row: 1, Col: 4, Value: 12.0 Row: 1, Col: 5, Value: 14.5 Row: 1, Col: 6, Value: 23.7 Paper 23.7% Prime Nonferrous Smelting 14.5% Chemicals 12.0% Primary Production of Aluminum 8.8% Oil & Gas Exploration 8.7% All Others 32.3%* * INCLUDES SHORT-TERM INVESTMENTS INDUSTRIAL MATERIALS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Doug Chase, Portfolio Manager of Fidelity Select Industrial Materials Portfolio Q. DOUG, HOW HAS THE FUND PERFORMED? A. Pretty well. The fund was up 7.65% for the year ended February 28, 1995, slightly ahead of the S&P 500, which returned 7.36% for the same period. Q. WHY DID THE FUND PERFORM SO WELL? A. Industrial materials companies saw big price increases in 1994, propelling stock prices upward. When the Federal Reserve continued to raise interest rates in late 1994 and early 1995, investors started moving out of cyclical stocks -ones that rise and fall with the economy - to growth stocks. This exodus from all cyclicals hurt the fund - which is largely made up of cyclical stocks. In light of this, I've chosen to invest in sectors where I expect profits to continue to increase and be much less sensitive to overall economic conditions. Q. SPECIFICALLY, IN WHAT AREAS DID YOU FIND INVESTMENT OPPORTUNITIES? A. When I took over the fund in November, one of the first things I did was increase the fund's holdings in aluminum. I believe that aluminum stocks are poised to outperform the overall market going forward. Let me explain. During the past few years, Russian aluminum manufacturers have flooded the market. Western aluminum manufacturers have reacted to all-time low real prices for aluminum by curtailing capacity. Also, new plant construction hasn't begun in any significant fashion. North American producers such as Aluminum Company of American (Alcoa), Alcan Aluminum and Reynolds have aggressively cut costs to remain competitive. In short, North American producers' business prospects for the next few years look good but the stock prices are still acting as if the they've reached the end of the earnings cycle. I don't think they have. Q. WHAT ABOUT INTEREST RATES? IF THEY CONTINUE TO RISE, WON'T IT HURT THESE COMPANIES? A. Yes, but remember, the U.S. is only about 25% - 30% of world GNP. If the U.S. economy slows down, as some believe it will, we'll still see good global demand for aluminum. In other words, if demand in the U.S. plummets, it won't hurt global commodity companies as much as those geared solely to U.S. markets. Q. WHY NOT OWN MORE INTERNATIONAL ALUMINUM STOCKS? A. Pricing for North American aluminum manufacturers relies on world supply and demand for the commodity. With help from the decline in the dollar and cutting costs, North American companies are manufacturing more cheaply than companies abroad. Also, companies in the U.S. and Canada sell products all over the world. Q. WHERE ELSE HAVE YOU MADE STRATEGIC CHANGES TO THE FUND? A. In order to emphasize aluminum, I've had to de-emphasize some of the fund's other concentrations. I've cut back on companies where business prospects aren't as favorable. I've also altered the fund's paper position somewhat by replacing pulp companies, such as James River, with companies where the demand is greater, such as Stone Container, which produces liner board, and Bowater, which manufactures newsprint. Stone Container is undervalued and has been a great performer so far this year. Bowater's fortunes have begun to turn around as the demand for newsprint has grown with the economy. Q. WHAT INVESTMENTS HAVE BEEN DISAPPOINTING THIS YEAR? A. So far, aluminum has underperformed relative to the market. Aluminum stocks are reacting to the interest rate environment rather than the favorable supply and demand fundamentals for aluminum that I discussed earlier. Paper has underperformed - with the exception of Stone Container - for the same reason. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. Although no one knows what the market will do, as it continues to search for value, I think the stocks in the fund should be good investments. I think areas such as aluminum, paper and stainless steel should provide good supply-demand situations for the fund to invest in. FUND FACTS START DATE: September 29, 1986 SIZE: as of February 28, 1995, more than $183 million MANAGER: Douglas B. Chase, since November 1994; equity analyst, steel, non-ferrous metals, since 1993; joined Fidelity in 1993 (checkmark) INDUSTRIAL MATERIALS PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.5% SHARES VALUE (NOTE 1) CHEMICALS & PLASTICS - 17.3% CHEMICALS - 12.0% AKZO NV sponsored ADR 30,000 $ 1,747,500 01019930 Grace (W.R.) & Co. 56,600 2,547,000 38388310 Olin Corp. 10,400 529,100 68066520 Union Carbide Corp. 538,200 15,405,975 90558110 Witco Corp. 43,900 1,256,635 97738510 21,486,210 CHEMICALS, GENERAL - 4.3% Great Lakes Chemical Corp. 126,700 7,617,838 39056810 PLASTICS & SYNTHETIC RESINS - 1.0% ARCO Chemical Co. 1,100 46,750 00192010 Geon Co. 58,600 1,699,400 37246W10 1,746,150 TOTAL CHEMICALS & PLASTICS 30,850,198 INDUSTRIAL MACHINERY & EQUIPMENT - 0.3% FARM MACHINERY & EQUIPMENT - 0.3% Kverneland Gruppen AS 34,597 491,719 50599692 IRON & STEEL - 4.7% BLAST FURNACES - 2.0% Armco, Inc. (a) 100,000 662,500 04217010 J & L Specialty Steel, Inc. 150,800 2,902,900 46604610 3,565,400 IRON & STEEL BLAST FURNACE, MILLS - 2.7% Allegheny Ludlum Industries, Inc. 64,600 1,364,675 01690010 Nucor Corp. 60,000 3,367,500 67034610 Worthington Industries, Inc. 10,000 201,250 98181110 4,933,425 TOTAL IRON & STEEL 8,498,825 METALS & MINING - 27.9% ALUMINUM SHEET, PLATE & FOIL - 1.4% Kaiser Aluminum Corp. (a) 231,100 2,426,550 48300710 ALUMINUM, EXTRUDED PRODUCTS - 3.2% Alumax, Inc. (a) 200,000 5,725,000 02219710 PRIMARY PRODUCTION OF ALUMINUM - 8.8% Reynolds Metals Co. 314,800 15,740,000 76176310 PRIME NONFERROUS SMELTING - 14.5% Alcan Aluminium Ltd. 351,975 8,580,587 01371610 Aluminum Co. of America 441,800 17,230,200 02224910 25,810,787 TOTAL METALS & MINING 49,702,337 OIL & GAS - 8.7% OIL & GAS EXPLORATION - 8.7% Amerada Hess Corp. 168,300 8,246,700 02355110 British Petroleum PLC ADR 81,342 6,222,663 11088940 Phillips Petroleum Co. 30,000 1,001,250 71850710 15,470,613 PAPER & FOREST PRODUCTS - 28.0% PAPER - 23.7% Abitibi-Price, Inc. (a) 12,000 157,605 00368010 Federal Paper Board Co., Inc. 2,300 68,425 31369310 Georgia-Pacific Corp. 51,100 3,826,113 37329810 Stone Container Corp. (a) 1,000,000 23,375,000 86158910 Temple-Inland, Inc. 302,900 14,804,238 87986810 42,231,381 SHARES VALUE (NOTE 1) PAPER MILLS - 4.3% Bowater, Inc. 232,500 $ 7,730,625 10218310 TOTAL PAPER & FOREST PRODUCTS 49,962,006 PRECIOUS METALS - 1.6% GOLD ORES - 1.6% Hecla Mining Co. (a) 302,300 2,834,063 42270410 RAILROADS - 1.6% RAILROADS - 1.6% CSX Corp. 37,000 2,876,750 12640810 SERVICES - 1.4% SURVEYING SERVICES - 1.4% Western Atlas, Inc. 60,000 2,475,000 95767410 TOTAL COMMON STOCKS (Cost $157,268,999) 163,161,511 REPURCHASE AGREEMENTS - 8.5% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $15,091,548 15,089,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $172,357,999) $ 178,250,511 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $252,193,437 and $205,243,838, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $73,573 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the period for which the loan was outstanding amounted to $2,584,000. The weighted average interest rate paid was 4.2% (see Note 8 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $173,079,405. Net unrealized appreciation aggregated $5,171,106, of which $10,909,960 related to appreciated investment securities and $5,738,854 related to depreciated investment securities. At February 28, 1995, the fund had a capital loss carryforward of approximately $6,176,000 of which $5,277,000, $141,000 and $758,000 will expire on February 28, 1997, 1998 and 1999, respectively. The fund has elected to defer to its fiscal year ending February 28, 1996 $4,701,000 of losses recognized during the period November 1, 1994 to February 28, 1995. INDUSTRIAL MATERIALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $15,089,000) (cost $172,357,999) - See $ 178,250,511 accompanying schedule Cash 561 Receivable for investments sold 7,450,339 Receivable for fund shares sold 1,849,561 Dividends receivable 367,499 Redemption fees receivable 1,041 TOTAL ASSETS 187,919,512 LIABILITIES Payable for investments purchased $ 2,349,740 Payable for fund shares redeemed 1,877,597 Accrued management fee 94,591 Other payables and 143,571 accrued expenses TOTAL LIABILITIES 4,465,499 NET ASSETS $ 183,454,013 Net Assets consist of: Paid in capital $ 188,858,785 Undistributed net investment income 242,884 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (11,540,558 ) Net unrealized appreciation (depreciation) on investments 5,892,902 and assets and liabilities in foreign currencies NET ASSETS, for 7,931,283 $ 183,454,013 shares outstanding NET ASSET VALUE and redemption price per share ($183,454,013 (divided by) 7,931,283 shares) $23.13 Maximum offering price per share (100/97.00 of $23.13) $23.85
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 2,751,562 Dividends Interest (including security lending fees of $2,280) 1,330,170 TOTAL INCOME 4,081,732 EXPENSES Management fee $ 1,097,939 Transfer agent 1,450,957 Fees Redemption fees (134,588 ) Accounting and security lending fees 177,982 Non-interested trustees' compensation 1,094 Custodian fees and expenses 16,706 Registration fees 114,154 Audit 24,085 Legal 1,260 Interest 902 Reports to shareholders 6,245 Miscellaneous 1,126 Total expenses before reductions 2,757,862 Expense reductions (41,794 2,716,068 ) NET INVESTMENT INCOME 1,365,664 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (284,320 ) Foreign currency transactions (44 (284,364 ) ) Change in net unrealized appreciation (depreciation) on: Investment securities 5,771,838 Assets and liabilities in 390 5,772,228 foreign currencies NET GAIN (LOSS) 5,487,864 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 6,853,528 OTHER INFORMATION $1,749,955 Sales Charges Paid to FDC Deferred sales charges withheld $4,699 by FDC Exchange fees withheld by FSC $95,310
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ 1,365,664 $ 252,679 Net investment income Net realized gain (loss) (284,364 5,537,215 ) Change in net unrealized appreciation (depreciation) 5,772,228 584,391 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 6,853,528 6,374,285 Distributions to shareholders from net investment income (1,376,864 (63,962 ) ) Share transactions 260,333,131 184,699,746 Net proceeds from sales of shares Reinvestment of distributions 1,355,960 62,757 Cost of shares redeemed (239,750,488 (60,508,680 ) ) Paid in capital portion of redemption fees 318,123 115,446 Net increase (decrease) in net assets resulting from share transactions 22,256,726 124,369,269 TOTAL INCREASE (DECREASE) IN NET ASSETS 27,733,390 130,679,592 NET ASSETS Beginning of period 155,720,623 25,041,031 End of period (including undistributed net investment income of $242,884 and $246,597, respectively)$ 183,454,013 $ 155,720,623 OTHER INFORMATION Shares Sold 11,552,985 8,798,809 Issued in reinvestment of distributions 64,252 3,433 Redeemed (10,870,758 (3,053,659 ) ) Net increase (decrease) 746,479 5,748,583
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 21.67 $ 17.44 $ 17.12 $ 12.63 $ 12.43 Income from Investment Operations Net investment income .17 .15 .12 .04 .15 Net realized and unrealized gain (loss) 1.43 4.07 .19 4.32 .37 Total from investment operations 1.60 4.22 .31 4.36 .52 Less Distributions (.18) (.06) (.08) - - From net investment income In excess of net investment income - - - (.06) (.34) Total distributions (.18) (.06) (.08) (.06) (.34) Redemption fees added to paid in capital .04 .07 .09 .19 .02 Net asset value, end of period $ 23.13 $ 21.67 $ 17.44 $ 17.12 $ 12.63 TOTAL RETURN B, C 7.65% 24.66% 2.36% 36.15% 4.25% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 183,454 $ 155,721 $ 25,041 $ 22,184 $ 2,689 Ratio of expenses to average net assets 1.53% 2.08% 2.02% A 2.47% 2.49% Ratio of expenses to average net assets before expense reductions 1.56% 2.10% 2.02% A 2.81% 2.67% Ratio of net investment income to average net assets .77% .75% .86% A .25% 1.30% Portfolio turnover rate 139% 185% 273% A 222% 148%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. PAPER AND FOREST PRODUCTS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND PAPER AND FOREST PRODUCTS 14.91% 106.47% 162.98% PAPER AND FOREST PRODUCTS (INCL. 3% SALES CHARGE) 11.46% 100.28% 155.09% S&P 500 7.36% 71.20% 158.12% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on June 30, 1986. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND PAPER AND FOREST PRODUCTS 14.91% 15.60% 11.79% PAPER AND FOREST PRODUCTS (INCL. 3% SALES CHARGE) 11.46% 14.90% 11.40% S&P 500 7.36% 11.35% 11.55% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Paper & ForesStandard & Poor's 50 06/30/86 9700.00 10000.00 07/31/86 9515.70 9488.77 08/31/86 10689.40 10192.84 09/30/86 10573.00 9349.89 10/31/86 11358.70 9889.38 11/30/86 11834.00 10129.69 12/31/86 11659.40 9871.39 01/31/87 14714.90 11201.06 02/28/87 15190.20 11643.50 03/31/87 16354.20 11980.00 04/30/87 15384.20 11873.38 05/31/87 14501.50 11976.68 06/30/87 15141.70 12581.50 07/31/87 15326.00 13219.38 08/31/87 16441.50 13712.46 09/30/87 15946.80 13412.16 10/31/87 11213.20 10523.18 11/30/87 10825.20 9656.07 12/31/87 12118.45 10390.90 01/31/88 11629.03 10828.35 02/29/88 12724.90 11332.96 03/31/88 12320.60 10982.77 04/30/88 12458.91 11104.68 05/31/88 12320.60 11201.29 06/30/88 13597.34 11715.43 07/31/88 12990.89 11670.91 08/31/88 12352.52 11274.10 09/30/88 12597.23 11754.37 10/31/88 12320.60 12081.14 11/30/88 12054.61 11908.38 12/31/88 12938.95 12116.78 01/31/89 13066.95 13003.73 02/28/89 12682.94 12679.94 03/31/89 12693.61 12975.38 04/30/89 13152.29 13648.80 05/31/89 13386.96 14201.58 06/30/89 12533.61 14120.63 07/31/89 13738.97 15395.72 08/31/89 14720.32 15697.48 09/30/89 13909.64 15633.12 10/31/89 13280.29 15270.43 11/30/89 13184.29 15581.95 12/31/89 13466.65 15955.91 01/31/90 12235.54 14885.27 02/28/90 12354.33 15077.29 03/31/90 12699.91 15476.84 04/30/90 11879.16 15089.92 05/31/90 12667.51 16561.19 06/30/90 12365.13 16448.57 07/31/90 12548.72 16395.93 08/31/90 11047.62 14913.74 09/30/90 9978.50 14187.44 10/31/90 9665.32 14126.44 11/30/90 10637.25 15039.00 12/31/90 11432.17 15458.59 01/31/91 12376.61 16132.59 02/28/91 12969.64 17286.07 03/31/91 13233.20 17704.39 04/30/91 13881.13 17746.88 05/31/91 15473.51 18513.55 06/30/91 15078.16 17665.63 07/31/91 15089.14 18488.84 08/31/91 15166.02 18927.03 09/30/91 14583.98 18610.95 10/31/91 15133.07 18860.33 11/30/91 13979.97 18100.26 12/31/91 15406.60 20170.93 01/31/92 16823.55 19795.75 02/29/92 16902.27 20053.10 03/31/92 17014.73 19662.06 04/30/92 17284.63 20240.13 05/31/92 16801.06 20339.30 06/30/92 16689.45 20036.25 07/31/92 16565.49 20855.73 08/31/92 15900.62 20428.19 09/30/92 15731.58 20669.24 10/31/92 16497.87 20741.58 11/30/92 17106.40 21448.87 12/31/92 17263.87 21712.69 01/31/93 17795.58 21895.08 02/28/93 18191.55 22192.85 03/31/93 18168.92 22661.12 04/30/93 18995.41 22112.72 05/31/93 19052.01 22705.34 06/30/93 18644.48 22771.19 07/31/93 18452.04 22680.10 08/31/93 18950.13 23539.68 09/30/93 18044.51 23358.43 10/31/93 18746.37 23841.94 11/30/93 19912.35 23615.45 12/31/93 20467.05 23901.19 01/31/94 22844.30 24713.83 02/28/94 22199.05 24044.09 03/31/94 19844.43 22995.77 04/30/94 19822.25 23290.11 05/31/94 20630.85 23672.07 06/30/94 20422.93 23092.10 07/31/94 22155.64 23849.53 08/31/94 24627.65 24827.36 09/30/94 25066.60 24219.09 10/31/94 23507.16 24764.01 11/30/94 22479.08 23862.11 12/31/94 23360.74 24215.98 01/31/95 23203.88 24843.91 02/28/95 25508.58 25812.07 Let's say you invested $10,000 in Fidelity Select Paper and Forest Products Portfolio on June 30, 1986, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $25,509 - a 155.09% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $25,812 over the same period - a 158.12% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Stone Container Corp. 5.5 Champion International Corp. 5.3 Temple-Inland, Inc. 5.3 International Paper Co. 4.9 Georgia-Pacific Corp. 4.8 Union Camp Corp. 4.4 Mead Corp. 4.2 Willamette Industries, Inc. 3.9 Scott Paper Co. 3.8 Weyerhaeuser Co. 3.6 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 12.3 Row: 1, Col: 2, Value: 1.8 Row: 1, Col: 3, Value: 3.2 Row: 1, Col: 4, Value: 82.7 Paper & Allied Products 82.7% Services for Print Industry 3.2% Paper Containers 1.8% All Others 12.3%* * INCLUDES SHORT-TERM INVESTMENTS PAPER AND FOREST PRODUCTS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Scott Offen, Portfolio Manager of Fidelity Select Paper and Forest Products Portfolio Q. SCOTT, HOW DID THE FUND PERFORM? A. For the 12 months ended February 28, 1995, the fund had a total return of 14.91%, beating the S&P 500, which returned 7.36% during the same period. Q. YOU MUST BE PLEASED WITH THOSE RESULTS. A. Yes and no. There's no question that nearly doubling the return of the S&P 500 is quite satisfying. However, given the degree of improvement in the underlying business prospects throughout most of the paper industry, I'd say the results are even a bit disappointing. What's happening is a tug-of-war between positive earnings reports for paper companies on one side, and recession fears on the other. Paper and forest products are cyclical commodities. Demand for them - and, as a result, their prices - generally rises and falls with the economy. As sentiment that the economy might be slowing down has crept into the market, investors have become less positive about the sector's prospects. Given a more stable interest rate environment, the stocks probably would have been up even more. Q. STILL, THE SECTOR IS GOING STRONG . . . A. Yes. Paper prices were high over the period, supply was short and demand has continued to grow. However, we were starting to see signs that the industry is starting to add production capacity, or supply, specifically in liner board/packaging-grade products. Paper companies have focused on this grade because it has reached higher profitability levels more quickly than other grades. By year-end, I wouldn't be surprised to see capacity added for the production of other grades. Paper companies don't want paper prices to go so high that they squelch demand, or create a situation where there isn't enough supply. The trick will be for the industry to add just enough capacity to meet the new demand. But it's very easy to overbuild and create too much supply, depressing prices. If this happens, earnings for domestic paper producers may be sustained by exports because demand is very strong overseas, especially in Southeast Asia and China. Q. MOST OF YOUR DISCUSSION THUS FAR HAS BEEN ON PAPER PRODUCTS. WHAT ABOUT WOOD PRODUCTS? A. Wood products do well in the early part of an economic cycle, when growth in new housing tends to be stronger. I've moved more of the fund's investments into companies that are positioned to take advantage of positive business prospects related to the production of paper, because it's a commodity that typically does better late in a cycle, where it appears we are now. Q. LET'S TURN TO SPECIFIC STOCKS. WHICH ONES HAVE HELPED THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS? A. Stone Container has been a solid performer. It produces three major grades of paper, the prices of which were at or near all-time highs over the period: pulp, newsprint and liner board. I find the stock has been very inexpensive, even though the company is carrying a fair amount of debt. It appears the market is underestimating how much debt the company can pay off in the course of this commodity cycle. I believe Stone has leverage to take advantage of the positive commodity environment. Another big winner has been Scott Paper, a manufacturer of less volatile tissue, towel and napkin grades. Scott was a mediocre old-line company that has been restructured by a new chairman. The outlook there is very positive. Finally, I've increased the fund's stake in Champion. The stock has done well, and given the price/supply/demand backdrop - along with a stock price I found to be inexpensive - I think the prospects for continued strong performance are quite good. Q. WHAT ABOUT DISAPPOINTMENTS? A. Jefferson Smurfit was a disappointing stock. A majority shareholder has been trying to sell its interest, and every time it does so, the stock price goes down. Weyerhaeuser also underperformed, mainly because investors have been concerned that the wood component of its business might be a drag on earnings. Q. WHAT'S YOUR OUTLOOK GOING FORWARD? A. Looking at supply, demand and capacity, I think the outlook for the next year seems very good, barring a recession. It looks like paper fiber will stay in short supply, so paper prices should remain strong. I believe paper company earnings could continue to surprise on the upside. FUND FACTS START DATE: June 30, 1986 SIZE: as of February 28, 1995, more than $94 million MANAGER: Scott Offen, since 1993; manager Fidelity Select Brokerage and Investment Management Portfolio, 1990-1993; Fidelity Select Life Insurance Portfolio, 1988-1990; joined Fidelity in 1985 (checkmark) PAPER AND FOREST PRODUCTS PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.4% SHARES VALUE (NOTE 1) INDUSTRIAL MACHINERY & EQUIPMENT - 1.6% GENERAL INDUSTRIAL MACHINERY - 1.1% Harnischfeger Industries, Inc. 38,100 $ 1,062,038 41334510 SPECIAL INDUSTRIAL MACHINERY - 0.5% Valmet Corp. Ord. (a) 21,700 437,990 92029991 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,500,028 PACKAGING & CONTAINERS - 2.6% FIBER CANS, TUBES & DRUMS - 0.7% Sonoco Products Co. 26,400 640,200 83549510 FOLDING PAPERBOARD BOXES - 0.1% La Rochette (a) 7,300 82,406 52098099 PAPER CONTAINERS - 1.8% Gaylord Container Corp. (a): Class A 59,500 788,370 36814510 (warrants) 82,000 850,750 36814511 Mayr Melnhof Karton AG (a) 800 52,279 57847192 1,691,399 TOTAL PACKAGING & CONTAINERS 2,414,005 PAPER & FOREST PRODUCTS - 82.7% PAPER & ALLIED PRODUCTS - 82.7% Abitibi Price, Inc. 2nd installment receipt (a) (b) 105,400 1,024,001 00368080 Avenor, Inc. (a) 29,800 611,205 05356K10 Boise Cascade Corp. 80,100 2,573,213 09738310 Bowater, Inc. 58,600 1,948,450 10218310 Caraustar Industries, Inc. 37,800 718,200 14090910 Champion International Corp. 120,600 4,959,675 15852510 Chesapeake Corp. 41,000 1,353,000 16515910 Consolidated Papers, Inc. 41,300 1,997,888 20975910 Domtar Inc. (a) 137,800 1,177,629 25756110 Enso-Gutzeit OY Class R Free shares 48,300 374,954 29357810 Federal Paper Board Co., Inc. 63,700 1,895,075 31369310 Fletcher Challenge Canada Ltd. Class A (a) 14,900 199,714 33932D10 Georgia-Pacific Corp. (a) 59,800 4,477,525 37329810 International Paper Co. 60,100 4,590,138 46014610 James River Corp. of Virginia 89,500 2,203,938 47034910 Jefferson Smurfit Corp. (a) 83,400 1,636,725 47508710 Jefferson Smurfit Group PLC 122,670 772,619 84699793 Kimberly-Clark Corp. 20,000 1,040,000 49436810 KNP BT NV, Koninklijke 22,200 708,223 50099193 Kymmene Corp. 25,900 746,803 50699692 Leykam Muerstaler Pap Und. Zel (Ord.) (a) 3,600 171,287 52899092 MacMillan Bloedel Ltd. 62,300 807,024 55478320 Mead Corp. 70,900 3,881,775 58283410 Metsa-Serla Ltd. Class B 16,300 657,994 59299992 Mo Och Domsjoe AB (Modo) (a) 27,000 1,342,827 61399792 Pentair, Inc. 11,200 480,900 70963110 Potlatch Corp. 11,800 508,875 73762810 QUNO Corp. (a) 21,400 381,167 74726H10 Rayonier, Inc. 46,700 1,401,000 75490710 Repola OY 26,500 467,279 75999A92 Repap Enterprises, Inc. (a) 111,700 783,761 76026M30 Rock-Tenn Co. CLass A 30,300 552,975 77273920 St Laurent Paperboard, Inc. (a) 11,200 163,218 79090710 Scott Paper Co. 44,900 3,558,325 80987710 Smith Holdings PLC (DS) 18,500 154,579 83199792 Stone Consolidated Corp. (a) 42,200 546,652 86158K10 Stone Container Corp. (a) 220,700 5,158,863 86158910 Stora Kopparbergs B Free shares 22,200 1,428,838 86210998 SHARES VALUE (NOTE 1) Svenska Cellulosa Aktiebolaget SCA Ord. B 44,500 $ 787,177 86958730 Temple-Inland, Inc. 100,600 4,916,825 87986810 Union Camp Corp. 80,600 4,150,900 90553010 Wausau Paper Mills Co. 16,510 363,220 94331710 Westvaco Corp. 68,800 2,717,600 96154810 Weyerhaeuser Co. 82,000 3,341,500 96216610 Willamette Industries, Inc. 67,400 3,622,750 96913310 77,356,286 PRINTING - 3.2% SERVICES FOR PRINT INDUSTRY - 3.2% Alco Standard Corp. 44,700 3,039,600 01378810 SERVICES - 0.3% BUSINESS SERVICES - 0.3% De La Rue Co. 16,400 265,629 24642110 TOTAL COMMON STOCKS (Cost $79,516,843) 84,575,548 REPURCHASE AGREEMENTS - 9.6% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $ 8,942,510 8,941,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $88,457,843) $ 93,516,548 CURRENCY ABBREVIATION CAD - Canadian dollar LEGEND 1. Non-income producing 2. Purchased on an installment basis. Market value reflects only those payments made through January, 1995. The remaining installment aggregating CAD $527,000 is due October, 1995. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $122,743,514 and $110,312,028, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $71,722 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $9,240,000 and $3,589,000, respectively. The weighted average interest rate paid was 4.2% (see Note 8 of Notes to Financial Statements). Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: United States 84.9% Canada 6.1 Sweden 3.8 Finland 2.9 Others (individually less than 1%) 2.3 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $89,445,678. Net unrealized appreciation aggregated $4,070,870, of which $5,195,347 related to appreciated investment securities and $1,124,477 related to depreciated investment securities. The fund hereby designates $262,000 as a capital gain dividend for the purpose of the dividend paid deduction. PAPER AND FOREST PRODUCTS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $8,941,000) (cost $88,457,843) - See $ 93,516,548 accompanying schedule Cash 7,372 Receivable for fund shares sold 6,702,454 Dividends receivable 196,139 Redemption fees receivable 531 TOTAL ASSETS 100,423,044 LIABILITIES Payable for investments purchased $ 4,149,914 Payable for fund shares redeemed 1,930,016 Accrued management fee 45,010 Other payables and accrued expenses 79,223 TOTAL LIABILITIES 6,204,163 NET ASSETS $ 94,218,881 Net Assets consist of: Paid in capital $ 88,297,915 Undistributed net investment income 31,587 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 830,618 Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 5,058,761 NET ASSETS, for 4,456,192 shares outstanding $ 94,218,881 NET ASSET VALUE and redemption price per share ($94,218,881 (divided by) 4,456,192 shares) $21.14 Maximum offering price per share (100/97.00 of $21.14) $21.79
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 803,859 Dividends Interest (including security lending fees of $1,777) 274,366 TOTAL INCOME 1,078,225 EXPENSES Management fee $ 348,896 Transfer agent 636,949 Fees Redemption fees (100,378 ) Accounting and security lending fees 62,045 Non-interested trustees' compensation 546 Custodian fees and expenses 26,986 Registration fees 41,863 Audit 21,944 Legal 741 Interest 12,671 Reports to shareholders 3,948 Miscellaneous 336 Total expenses before reductions 1,056,547 Expense reductions (6,061 1,050,486 ) NET INVESTMENT INCOME 27,739 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 2,943,852 Foreign currency transactions 5,137 2,948,989 Change in net unrealized appreciation (depreciation) on: Investment securities 2,027,894 Assets and liabilities in 56 2,027,950 foreign currencies NET GAIN (LOSS) 4,976,939 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 5,004,678 OTHER INFORMATION $691,097 Sales Charges Paid to FDC Deferred sales charges withheld $2,973 by FDC Exchange fees withheld by FSC $81,960
STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994 Operations $ 27,739 $ (20,302 Net investment income (loss) ) Net realized gain (loss) 2,948,989 2,597,166 Change in net unrealized appreciation (depreciation) 2,027,950 2,559,400 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 5,004,678 5,136,264 Distributions to shareholders: - (10,601 From net investment income ) From net realized gain (2,454,993 - ) TOTAL DISTRIBUTIONS (2,454,993 (10,601 ) ) Share transactions 242,587,009 149,638,420 Net proceeds from sales of shares Reinvestment of distributions 2,407,320 10,249 Cost of shares redeemed (220,695,611 (113,224,182 ) ) Paid in capital portion of redemption fees 462,733 259,283 Net increase (decrease) in net assets resulting from share transactions 24,761,451 36,683,770 TOTAL INCREASE (DECREASE) IN NET ASSETS 27,311,136 41,809,433 NET ASSETS Beginning of period 66,907,745 25,098,312 End of period (including undistributed net investment income (loss) of $31,587 and $(1,289), respectively) $ 94,218,881 $ 66,907,745 OTHER INFORMATION Shares Sold 12,091,048 8,097,781 Issued in reinvestment of distributions 132,918 645 Redeemed (11,180,290 (6,246,980 ) ) Net increase (decrease) 1,043,676 1,851,446
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 19.61 $ 16.08 $ 15.37 $ 12.64 $ 11.00 Income from Investment Operations Net investment income (loss) .01 (.01) .06 .13 .19 Net realized and unrealized gain (loss) 2.53 3.38 .65 2.64 1.56 Total from investment operations 2.54 3.37 .71 2.77 1.75 Less Distributions - (.01) (.09) (.30) (.17) From net investment income From net realized gain (1.17) - - - - Total distributions (1.17) (.01) (.09) (.30) (.17) Redemption fees added to paid in capital .16 .17 .09 .26 .06 Net asset value, end of period $ 21.14 $ 19.61 $ 16.08 $ 15.37 $ 12.64 TOTAL RETURN B,C 14.91% 22.03% 5.25% 24.52% 16.85% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 94,219 $ 66,908 $ 25,098 $ 28,957 $ 12,579 Ratio of expenses to average net assets 1.87% 2.07% 2.21% A 2.05% 2.49% Ratio of expenses to average net assets before expense reductions 1.88% 2.08% 2.21% A 2.05% 2.72% Ratio of net investment income (loss) to average net assets .05% (.08)% .49% A .92% 1.73% Portfolio turnover rate 209% 176% 222% A 421% 171%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. TRANSPORTATION PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND TRANSPORTATION 5.90% 118.03% 224.95% TRANSPORTATION (INCL. 3% SALES CHARGE) 2.72% 111.49% 215.20% S&P 500 7.36% 71.20% 175.04% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on September 29, 1986. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND TRANSPORTATION 5.90% 16.87% 15.01% TRANSPORTATION (INCL. 3% SALES CHARGE) 2.72% 16.16% 14.60% S&P 500 7.36% 11.35% 12.76% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select TransportatioStandard & Poor's 50 09/29/86 9700.00 10000.00 09/30/86 9748.50 9962.80 10/31/86 10039.50 10537.66 11/30/86 10204.40 10793.72 12/31/86 10039.50 10518.48 01/31/87 10737.90 11935.32 02/28/87 11397.50 12406.77 03/31/87 11397.50 12765.32 04/30/87 11475.10 12651.71 05/31/87 11649.70 12761.78 06/30/87 11998.90 13406.25 07/31/87 12474.20 14085.95 08/31/87 12474.20 14611.35 09/30/87 11795.20 14291.37 10/31/87 7992.80 11213.00 11/30/87 7527.20 10289.05 12/31/87 8284.50 11072.05 01/31/88 8698.73 11538.18 02/29/88 9418.69 12075.86 03/31/88 9704.70 11702.72 04/30/88 9734.29 11832.62 05/31/88 9675.11 11935.56 06/30/88 10661.36 12483.41 07/31/88 10523.29 12435.97 08/31/88 10030.16 12013.15 09/30/88 10690.95 12524.91 10/31/88 11036.14 12873.10 11/30/88 11134.76 12689.01 12/31/88 11470.09 12911.07 01/31/89 12456.34 13856.16 02/28/89 12584.55 13511.14 03/31/89 12969.19 13825.95 04/30/89 13403.14 14543.52 05/31/89 13975.16 15132.53 06/30/89 13889.01 15046.28 07/31/89 14730.77 16404.95 08/31/89 15688.27 16726.49 09/30/89 15383.13 16657.91 10/31/89 14404.59 16271.45 11/30/89 14530.85 16603.39 12/31/89 14737.71 17001.87 01/31/90 13812.21 15861.04 02/28/90 14456.54 16065.65 03/31/90 14890.01 16491.39 04/30/90 14327.68 16079.11 05/31/90 14854.86 17646.82 06/30/90 14691.34 17526.82 07/31/90 14642.53 17470.73 08/31/90 12494.96 15891.38 09/30/90 10884.28 15117.47 10/31/90 10713.45 15052.46 11/30/90 11152.73 16024.85 12/31/90 11555.40 16471.95 01/31/91 12543.77 17190.12 02/28/91 13763.98 18419.22 03/31/91 13776.18 18864.96 04/30/91 13739.58 18910.24 05/31/91 14825.56 19727.16 06/30/91 14702.47 18823.66 07/31/91 15596.13 19700.84 08/31/91 15877.69 20167.75 09/30/91 15583.89 19830.95 10/31/91 16734.62 20096.68 11/30/91 15694.06 19286.79 12/31/91 17811.91 21493.19 01/31/92 17971.05 21093.42 02/29/92 18938.16 21367.64 03/31/92 18485.21 20950.97 04/30/92 18962.64 21566.92 05/31/92 19354.38 21672.60 06/30/92 18521.93 21349.68 07/31/92 18791.26 22222.88 08/31/92 18228.13 21767.31 09/30/92 18950.40 22024.17 10/31/92 19758.36 22101.25 11/30/92 21190.66 22854.91 12/31/92 22049.81 23136.02 01/31/93 23037.30 23330.36 02/28/93 23349.79 23647.66 03/31/93 24912.28 24146.62 04/30/93 24850.18 23562.27 05/31/93 25778.45 24193.74 06/30/93 25853.72 24263.90 07/31/93 25853.72 24166.85 08/31/93 26330.40 25082.77 09/30/93 26393.12 24889.63 10/31/93 26945.07 25404.85 11/30/93 27095.60 25163.50 12/31/93 28513.96 25467.98 01/31/94 29763.85 26333.89 02/28/94 29763.85 25620.25 03/31/94 28967.22 24503.20 04/30/94 29508.52 24816.84 05/31/94 29034.15 25223.84 06/30/94 29006.25 24605.86 07/31/94 29982.89 25412.93 08/31/94 30875.82 26454.86 09/30/94 30052.65 25806.71 10/31/94 30499.12 26387.37 11/30/94 28671.40 25426.34 12/31/94 29616.42 25803.41 01/31/95 29416.83 26472.49 02/28/95 31520.22 27504.13 Let's say you invested $10,000 in Fidelity Select Transportation Portfolio on September 29, 1986 when the fund started and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $31,520 - a 215.20% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $27,504 over the same period - a 175.04% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Burlington Northern, Inc. 9.1 CSX Corp. 9.0 Landstar System, Inc. 5.9 Wisconsin Central Transportation Corp. 5.2 Chicago & North Western Holdings Corp. 5.0 Carolina Freight Corp. 4.1 Consolidated Freightways, Inc. 3.8 TNT Freightways Corp. 3.7 Canadian Pacific Ltd. Ord. 3.6 Rollins Truck Leasing Corp. 3.2 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 23.7 Row: 1, Col: 2, Value: 2.8 Row: 1, Col: 3, Value: 2.9 Row: 1, Col: 4, Value: 9.9 Row: 1, Col: 5, Value: 20.2 Row: 1, Col: 6, Value: 40.5 Railroads 40.5% Trucking, Local & Long Distance 20.2% Trucking, Long Distance 9.9% Air Transport, Major National 2.9% Shipping 2.8% All Others 23.7%* * INCLUDES SHORT-TERM INVESTMENTS TRANSPORTATION PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Stephen DuFour, Portfolio Manager of Fidelity Select Transportation Portfolio Q. STEVE, HOW DID THE FUND STACK UP THIS YEAR? A. It did well in what was a poor year for the transportation sector. The group trades on expectations of future growth, not on today's results. So the market discounted the strong earnings that transportation companies were reporting, believing the economy would slow in 1995 and hurt earnings growth. The S&P 500 was up 7.36% for the year ended February 28, 1995. By comparison, the fund returned 5.90% over the same period. Q. WHAT ACCOUNTS FOR THE FUND'S PERFORMANCE? A. During the first nine months of the period, we successfully avoided weak railroad and trucking stocks in the U.S. As much as 20% of the fund was in foreign transportation stocks, which rose with prospects for an economic recovery in Europe and a market rebound in Japan. Although individually these were small investments, as a group they probably fared better than many U.S. companies. Several domestic truckers were also top contributors to performance. They included Landstar System, which attracted more owner-operators than the competition; Carolina Freight, which turned itself around through restructuring and new business ventures; and Swift Transport, a well-run company that benefited during the period as the industry consolidated. During the last three months of the period, we increased our stake in railroads, which also benefited the fund. Q. WHAT MADE YOU DECIDE TO SHIFT BACK TO RAILROADS? A. They were attractive because of the industry's strong barriers to entry, historically cheap stock prices and steady free cash flow - cash available after capital expenses and dividends that can be used to pay down debt, buy back stock or add cash to the balance sheet. Plus, they continued to cut costs, which makes each additional carload increasingly profitable. Q. IS THIS WHY YOU BOUGHT BACK CSX, ONCE AGAIN ONE OF THE FUND'S TOP INVESTMENTS? A. Yes, CSX's stock was attractive because its price had fallen along with other railroad stocks, yet it continued to generate very strong cash flow. From its December low to the end of February, CSX's stock price rose 18%, making it a top contributor to performance during the second half of the period. We also increased our stake in Burlington Northern, a railroad whose stock price rose 15% between late January and late February on news of its impending merger with Santa Fe Pacific. We also owned smaller regional railroads, such as Wisconsin Central, whose strategy of acquiring parts of other railroads and lowering their cost structures has been quite successful. It also did well for the fund during the period. Q. YOU TOOK OVER THE FUND IN DECEMBER. WHAT CHANGES HAVE YOU MADE SINCE THEN? A. I've cut back from 90 stocks to 50, so each can make more of a difference to performance. In particular, I pared back on overseas investments, as well as airline and shipping names. I'm not comfortable owning either airlines or shipping stocks because of the volatile pricing in those industries. And while many of the international stocks have good prospects, I think the domestic railroads and selected trucking stocks represent equally good or better opportunities. Q. LOOKING BACK, WHERE WERE THE DISAPPOINTMENTS? A. Our regional airline investments suffered from increased competition and an inability to grow passenger loads as fast as anticipated, which in turn hurt fund performance. Another disappointment was Canadian Pacific, a railroad and natural resource conglomerate. It struggled to deal with a strike in its U.S. operations, an impending strike in Canada, less-than-expected results from its railroad operations and declining natural gas prices. However, I still believe the stock is attractive and could rise before the company resolves these problems. Q. DO YOU THINK 1995 WILL BE A BETTER YEAR FOR TRANSPORTATION STOCKS THAN 1994 WAS? A. Yes, if their stock prices continue to move in anticipation of what's ahead. Once the economy slows, investors will most likely start moving back into transportation stocks looking for ways to benefit from an upturn. The railroads and selected trucking stocks seem to me to be in the best position to benefit, so that's where I'll continue to focus. Of course, no one can be certain what the market will do. FUND FACTS START DATE: September 29, 1986 SIZE: as of February 28, 1995, more than $12 million MANAGER: Stephen DuFour, since December 1994; manager, Fidelity Select Multimedia Portfolio, since 1993; equity analyst, media, 1992-1993; joined Fidelity in 1992 (checkmark) TRANSPORTATION PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 89.9% SHARES VALUE (NOTE 1) AIR TRANSPORTATION - 3.4% AIR TRANSPORT, MAJOR NATIONAL - 2.9% AMR Corp. (a) 3,000 $ 183,373 00176510 Lufthansa (a) 900 123,321 54976510 KLM Royal Dutch Airlines (a) 400 11,700 48251610 KLM Royal Dutch Airlines Ord. (a) 2,000 57,948 48251620 376,342 TRANSPORTATION SERVICES - 0.5% Helikopter Services AS 6,500 67,279 42499192 TOTAL AIR TRANSPORTATION 443,621 AUTOS, TIRES, & ACCESSORIES - 2.7% AUTO & TRUCK PARTS - 1.8% Cummins Engine Co., Inc. 5,000 227,500 23102110 MOTOR VEHICLES & CAR BODIES - 0.9% Renault SA Ord. (a)(b) 1,000 33,204 75967392 Sime Darby Hong Kong Ltd. 20,000 21,988 82899392 Volvo Aktiebolaget Class B 3,000 60,008 92885630 115,200 TRUCK & BUS BODIES - 0.0% Grupo Dina sponsored ADR, Series L 11 26 21030620 TOTAL AUTOS, TIRES, & ACCESSORIES 342,726 COMMUNICATIONS EQUIPMENT - 0.5% DATACOMMUNICATIONS EQUIPMENT - 0.5% Union Switch and Signal, Inc. (a) 5,000 62,500 90857310 ENGINEERING - 0.5% ELECTRICAL WORK - 0.5% Nippondenso Co. Ltd. 4,000 70,694 65463710 HOLDING COMPANIES - 0.4% Man AG Ord. 200 55,903 56154210 IRON & STEEL - 1.0% METAL STAMPINGS - 1.0% UPF Group PLC 50,000 130,557 91599G22 LEASING & RENTAL - 1.7% EQUIPMENT RENTAL & LEASING - 1.7% GATX Corp. 1,400 62,475 36144810 Ryder Systems, Inc. 6,600 153,450 78354910 TOTAL LEASING & RENTAL 215,925 LEISURE DURABLES & TOYS - 1.3% MOTORCYCLES - 0.2% Bajaj Auto Ltd. (GDR) (a)(b) 1,000 23,750 05710010 TRAVEL TRAILERS AND CAMPERS - 1.1% Champion Enterprises, Inc. (a) 4,300 145,125 15849610 TOTAL LEISURE DURABLES & TOYS 168,875 RAILROADS - 40.5% Burlington Northern, Inc. 20,900 1,170,400 12189710 CSX Corp. 15,000 1,166,250 12640810 Canadian Pacific Ltd. Ord. 32,900 461,696 13644030 ASG AB Class B Free shares Ord. 12,000 219,620 16599C22 Chicago & North Western Holdings Corp. (a) 25,600 640,000 16715510 Conrail, Inc. 5,000 276,250 20836810 Illinois Central Corp., Series A 4,300 145,663 45184110 Railtex, Inc. (a) 5,000 117,500 75076610 SHARES VALUE (NOTE 1) Santa Fe Pacific Corp. 2,148 $ 45,645 80218310 Southern Pacific Rail Corp. (a) 17,000 303,875 84358410 Wisconsin Central Transportation Corp. (a) 14,800 673,400 97659210 TOTAL RAILROADS 5,220,299 SERVICES - 2.3% COURIER SERVICES, NOT BY AIR - 2.3% U.S. Delivery Systems, Inc. 16,000 294,000 90329M10 SHIPPING - 4.2% DEEP SEA TRANSPORT - 1.4% London & Overseas Freighters PLC 75,000 86,642 54179492 Pacific Basin Bulk Shipping Ltd. unit (1 common & 1 warrant) (a) 1,000 13,625 69402720 Transportacion Maritima Mexicana SA de CV ADR representing L share 18,000 76,500 89386820 176,767 SHIPPING - 2.8% Anangel-American Shipholdings Ltd. ADR 10,000 147,500 03272120 MC Shipping, Inc. (a) 20,000 77,500 55267Q10 Storli Skibs Series `A' AS (a) 7,000 131,932 86229910 356,932 TOTAL SHIPPING 533,699 TRUCKING & FREIGHT - 31.4% TRANSPORTATION SERVICES - 1.3% Landair Services, Inc. (a) 10,000 167,500 51475910 TRUCKING, LOCAL & LONG DISTANCE - 20.2% Carolina Freight Corp. (a) 45,000 534,375 14389810 Consolidated Freightways, Inc. 20,500 486,875 20923710 Hitachi Transport System Co. 5,000 45,424 43699992 Landstar System, Inc. (a) 21,000 756,000 51509810 Matlack Systems, Inc. (a) 7,500 80,625 57690110 Roadway Services, Inc. 2,700 146,475 76974810 Rollins Truck Leasing Corp. 30,000 412,500 77574110 XTRA Corp. 3,000 150,750 98413810 2,613,024 TRUCKING, LONG DISTANCE - 9.9% Arkansas Best Corp. 10,600 132,500 04079010 Arnold Industries, Inc. 4,100 78,925 04259510 Hunt (J.B.) Transport Services Inc. 20,800 405,600 44565810 Old Dominion Freight Lines, Inc. (a) 10,000 177,500 67958010 TNT Freightways Corp. 17,400 478,500 87259J10 1,273,025 TOTAL TRUCKING & FREIGHT 4,053,549 TOTAL COMMON STOCKS (Cost $10,290,572) 11,592,348 REPURCHASE AGREEMENTS - 10.1% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $1,309,221 1,309,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $11,599,572) $ 12,901,348 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $56,954 or 0.4% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $20,567,548 and $21,845,648, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $13,867 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $1,946,000 and $1,744,000, respectively. The weighted average interest rate paid was 4.8% (see Note 8 of Notes to Financial Statements). Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: United States 85.5% Canada 3.6 Sweden 2.2 United Kingdom 1.7 Norway 1.6 Germany 1.4 Japan 1.0 Others (individually less than 1%) 3.0 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $11,604,551. Net unrealized appreciation aggregated $1,296,797, of which $1,539,032 related to appreciated investment securities and $242,235 related to depreciated investment securities. The fund has elected to defer to its fiscal year ending February 28, 1996 $314,000 of losses recognized during the period November 1, 1994 to February 28, 1995. The fund hereby designates $664,000 as a capital gain dividend for the purpose of the dividend paid deduction. TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $1,309,000) (cost $11,599,572) - See $ 12,901,348 accompanying schedule Cash 892 Receivable for investments sold 177,500 Receivable for fund shares sold 1,024,939 Dividends receivable 15,145 Redemption fees receivable 30 TOTAL ASSETS 14,119,854 LIABILITIES Payable for investments purchased $ 193,688 Payable for fund shares redeemed 1,190,409 Accrued management fee 6,350 Other payables and 24,990 accrued expenses TOTAL LIABILITIES 1,415,437 NET ASSETS $ 12,704,417 Net Assets consist of: Paid in capital $ 11,184,414 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 218,214 Net unrealized appreciation (depreciation) on investments 1,301,789 and assets and liabilities in foreign currencies NET ASSETS, for 618,873 $ 12,704,417 shares outstanding NET ASSET VALUE and redemption price per share ($12,704,417 (divided by) 618,873 shares) $20.53 Maximum offering price per share (100/97.00 of $20.53) $21.16
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 129,248 Dividends Interest 66,286 TOTAL INCOME 195,534 EXPENSES Management fee $ 79,035 Transfer agent 134,955 Fees Redemption fees (14,339 ) Accounting fees and expenses 45,053 Non-interested trustees' compensation 208 Custodian fees and expenses 23,579 Registration fees 11,965 Audit 18,363 Legal 183 Interest 2,074 Reports to shareholders 1,006 Miscellaneous 183 Total expenses before reductions 302,265 Expense reductions (1,283 300,982 ) NET INVESTMENT INCOME (LOSS) (105,448 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 1,297,899 Foreign currency transactions 644 1,298,543 Change in net unrealized appreciation (depreciation) on: Investment securities (804,943 ) Assets and liabilities in 13 (804,930 foreign currencies ) NET GAIN (LOSS) 493,613 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 388,165 Other Information $96,688 Sales charges paid to FDC Deferred sales charges withheld $771 by FDC Exchange fees withheld by FSC $10,995
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ (105,448 $ (100,747 Net investment income (loss) ) ) Net realized gain (loss) 1,298,543 1,441,309 Change in net unrealized appreciation (depreciation) (804,930 1,066,611 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 388,165 2,407,173 Distributions to shareholders from net realized gains (1,219,559 (827,694 ) ) Share transactions 21,385,934 25,059,536 Net proceeds from sales of shares Reinvestment of distributions 1,177,973 796,335 Cost of shares redeemed (22,133,063 (25,177,172 ) ) Paid in capital portion of redemption fees 28,174 39,052 Net increase (decrease) in net assets resulting from share transactions 459,018 717,751 TOTAL INCREASE (DECREASE) IN NET ASSETS (372,376 2,297,230 ) NET ASSETS Beginning of period 13,076,793 10,779,563 End of period $ 12,704,417 $ 13,076,793 OTHER INFORMATION Shares Sold 1,018,198 1,225,390 Issued in reinvestment of distributions 62,121 40,016 Redeemed (1,064,813 (1,239,184 ) ) Net increase (decrease) 15,506 26,222
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 21.67 $ 18.68 $ 15.49 $ 11.26 $ 12.23 Income from Investment Operations Net investment income (loss) (.17) (.20) (.07) (.05) .06 Net realized and unrealized gain (loss) 1.17 5.07 3.55 4.18 (.57) Total from investment operations 1.00 4.87 3.48 4.13 (.51) Less Distributions - - - (.04) - From net investment income From net realized gain (2.19) (1.96) (.36) - (.50) Total distributions (2.19) (1.96) (.36) (.04) (.50) Redemption fees added to paid in capital .05 .08 .07 .14 .04 Net asset value, end of period $ 20.53 $ 21.67 $ 18.68 $ 15.49 $ 11.26 TOTAL RETURN B, C 5.90% 27.47% 23.14% 38.01% (4.10)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 12,704 $ 13,077 $ 10,780 $ 2,998 $ 770 Ratio of expenses to average net assets 2.36% 2.39% 2.48% A 2.43% 2.39% Ratio of expenses to average net assets before expense reductions 2.37% 2.40% 4.20% A 3.13% 2.89% Ratio of net investment income (loss) to average net assets (.83)% (.96)% (.53)% (.34)% .52% A Portfolio turnover rate 178% 115% 116% A 423% 187%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. AMERICAN GOLD PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND AMERICAN GOLD -18.62% 3.83% 87.12% AMERICAN GOLD (INCL. 3% SALES CHARGE) -21.06% 0.71% 81.51% S&P 500 7.36% 71.20% 212.82% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on December 16, 1985. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND AMERICAN GOLD -18.62% 0.75% 7.04% AMERICAN GOLD (INCL. 3% SALES CHARGE) -21.06% 0.14% 6.69% S&P 500 7.36% 11.35% 13.18% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select American GoldStandard & Poor's 50 12/16/85 9700.00 10000.00 12/31/85 9719.40 10080.42 01/31/86 10097.70 10136.87 02/28/86 9622.40 10895.11 03/31/86 10010.40 11503.06 04/30/86 9806.70 11373.07 05/31/86 9855.20 11978.12 06/30/86 9874.60 12180.55 07/31/86 9826.10 11499.66 08/31/86 10941.60 12352.93 09/30/86 11475.10 11331.35 10/31/86 11310.20 11985.16 11/30/86 11494.50 12276.40 12/31/86 11475.10 11963.36 01/31/87 13221.10 13574.82 02/28/87 14588.80 14111.03 03/31/87 16975.00 14518.83 04/30/87 18032.30 14389.62 05/31/87 17072.00 14514.81 06/30/87 16538.50 15247.80 07/31/87 19739.50 16020.87 08/31/87 19409.70 16618.45 09/30/87 20234.20 16254.50 10/31/87 14326.90 12753.28 11/30/87 16616.10 11702.41 12/31/87 16122.98 12592.97 01/31/88 13701.58 13123.13 02/29/88 14065.78 13734.67 03/31/88 15473.34 13310.27 04/30/88 15571.77 13458.01 05/31/88 15473.34 13575.09 06/30/88 15778.47 14198.19 07/31/88 15739.10 14144.24 08/31/88 14813.85 13663.33 09/30/88 14174.05 14245.39 10/31/88 14321.70 14641.41 11/30/88 14518.56 14432.04 12/31/88 14114.99 14684.60 01/31/89 14626.83 15759.52 02/28/89 15394.59 15367.10 03/31/89 14853.22 15725.16 04/30/89 14134.68 16541.29 05/31/89 13622.84 17211.21 06/30/89 14390.60 17113.11 07/31/89 14538.24 18658.42 08/31/89 15276.48 19024.13 09/30/89 15365.06 18946.13 10/31/89 15522.55 18506.58 11/30/89 17501.01 18884.12 12/31/89 17225.41 19337.33 01/31/90 17983.33 18039.80 02/28/90 17481.33 18272.51 03/31/90 16802.15 18756.73 04/30/90 14981.18 18287.82 05/31/90 16300.16 20070.88 06/30/90 15256.79 19934.40 07/31/90 16319.84 19870.61 08/31/90 16024.55 18074.30 09/30/90 16014.71 17194.08 10/31/90 13386.60 17120.15 11/30/90 13219.27 18226.11 12/31/90 14262.64 18734.62 01/31/91 12284.18 19551.45 02/28/91 13396.45 20949.38 03/31/91 13347.23 21456.35 04/30/91 12874.76 21507.85 05/31/91 13317.70 22436.99 06/30/91 14213.42 21409.37 07/31/91 14055.93 22407.05 08/31/91 12914.13 22938.10 09/30/91 12697.59 22555.03 10/31/91 13672.05 22857.27 11/30/91 13642.52 21936.12 12/31/91 13386.60 24445.61 01/31/92 13711.42 23990.92 02/29/92 13288.17 24302.81 03/31/92 12382.61 23828.90 04/30/92 11752.65 24529.47 05/31/92 12589.31 24649.67 06/30/92 13406.29 24282.39 07/31/92 14252.79 25275.53 08/31/92 13987.03 24757.39 09/30/92 13908.29 25049.52 10/31/92 13494.88 25137.20 11/30/92 12353.08 25994.38 12/31/92 12973.19 26314.11 01/31/93 12727.12 26535.14 02/28/93 13927.97 26896.02 03/31/93 15493.02 27463.53 04/30/93 17451.80 26798.91 05/31/93 19390.89 27517.12 06/30/93 20522.84 27596.92 07/31/93 22156.80 27486.53 08/31/93 20995.31 28528.27 09/30/93 18770.77 28308.61 10/31/93 21576.05 28894.59 11/30/93 21595.74 28620.10 12/31/93 23180.48 28966.40 01/31/94 23190.32 29951.26 02/28/94 22304.44 29139.58 03/31/94 22845.81 27869.09 04/30/94 20916.57 28225.82 05/31/94 21822.13 28688.72 06/30/94 20749.23 27985.85 07/31/94 20444.10 28903.78 08/31/94 21408.72 30088.84 09/30/94 23278.91 29351.66 10/31/94 21595.74 30012.07 11/30/94 19036.54 28919.03 12/31/94 19597.59 29347.90 01/31/95 17550.23 30108.89 02/28/95 18150.66 31282.24 Let's say you invested $10,000 in Fidelity Select American Gold Portfolio on December 16, 1985, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $18,151 - an 81.51% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $31,282 over the same period - a 212.82% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Barrick Gold Corp. 13.7 Newmont Mining Corp. 8.1 Placer Dome Corp. 7.3 Homestake Mining Co. 5.9 Cambior, Inc. 4.3 Agnico Eagle Mines Ltd. 3.9 Euro-Nevada Mining Corp. 3.8 Franco Nevada Mining Corp. 3.8 Battle Mountain Gold Co. 3.7 Prime Resources Group, Inc. 2.9 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Gold Ores 81.4% Miscellaneous Metal Ores, NEC 1.9% Copper Ores 1.5% Gold & Silver Ores 1.0% Metal Mining 0.6% All Others 13.6%* Row: 1, Col: 1, Value: 13.6 Row: 1, Col: 2, Value: 1.0 Row: 1, Col: 3, Value: 1.0 Row: 1, Col: 4, Value: 1.5 Row: 1, Col: 5, Value: 1.9 Row: 1, Col: 6, Value: 81.40000000000001 * INCLUDES SHORT-TERM INVESTMENTS AMERICAN GOLD PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Malcolm MacNaught, Portfolio Manager of Fidelity Select American Gold Portfolio Q. HOW HAS THE FUND PERFORMED, MALCOLM? A. The fund's return of -18.62% for the year ended February 28, 1995, is disappointing. The S&P 500 returned 7.36% for the same period. But investors should remember this is a highly specialized sector of the market. Q. WHY HAS THE FUND'S PERFORMANCE BEEN DOWN? A. Gold is considered to be a hedge against inflation for investors who want to protect their wealth. However, the Federal Reserve increased interest rates twice during the past six months, and this has eased inflation fears. Also, North American gold shares ran up to very high price levels in 1993 and the market was due for a correction. Finally, the price of gold bullion moved down from its high and this directly influences the share price of the fund. Q. WHAT'S YOUR STRATEGY IN SUCH AN UNFAVORABLE ENVIRONMENT? A. The fund invests almost exclusively in North and South American gold stocks and has been in a holding pattern for the past six months. The only strategy that currently makes sense is to invest in the best companies with growing reserves, growing production and growing earnings. From my perspective, when the market for gold turns around, the fund will be well-positioned in quality companies, the ones that perform the best over time. I've also invested about 5% of the fund's assets in exploration companies that have the potential to be important gold producing companies in the next few years. Q. WHAT STOCKS DID YOU LIKE AT THE END OF FEBRUARY? A. Well, the fund's top 10 holdings didn't change much in the past six months. Barrick Gold Corp., the fund's largest investment at the end of the period, acquired Lac Minerals, making it even more attractive than it was previously. As I've stated before, I think Barrick can double its production over the next few years if its reserve growth continues to exceed expectations. Though the stock has moved up and down a bit, I think tremendous opportunities still exist for the company to find undiscovered ore bodies. Other holdings such as Placer Dome and Homestake Mining are good, defensive holdings for the fund. Newmont Mining Corp. has some very exciting new projects in South America, Russia and possibly the Pacific Basin. Q. WHAT ELSE HAVE YOU DONE TO TRY TO CONTAIN THE FUND'S LOSSES? A. The fund is permitted to have 50% of its assets in bullion, and I've invested 2.5% of the fund in silver. Q. SANTA FE PACIFIC, WHICH WAS A LARGE HOLDING IN THE FUND SIX MONTHS AGO, IS NOW GONE FROM THE FUND . . . A. Right. Santa Fe is illustrative of some of the risks associated with investing in gold stocks. The company suffered a pit failure in its major mine just before Christmas 1994, and its production may be as much as 10% lower as a result. This means costs will be higher going forward; I decided to sell the fund's position in the stock and let the market sort things out. Q. DO YOU REGRET SOME OF YOUR INVESTMENT DECISIONS OVER THE PAST SIX MONTHS? A. Sure. I could have had more of the fund in stable cash instruments such as short-term Treasury bills instead of being so heavily invested in gold shares. However, investors choose gold funds to track activities in the gold markets and should expect the fund's performance to reflect conditions in that market. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. With world production remaining high and the improbability of gold breaking much above $400 per ounce, the next few months could be frustrating. However, much depends on perceived inflation and foreign buying of gold, which is trading at very low prices in some currencies. For 1995, I had earlier expected a significant incremental increase in supply from Venezuela based on the number of projects under way. It now appears that many of them may be postponed indefinitely. Thus, Chile, Peru and Nevada may be the only geographic areas where there will be incremental growth in the production of gold. If so, the two major corporate benefactors should be Barrick Gold and Newmont Mining, two of the fund's largest North American holdings. Lastly, I'd like to remind shareholders that gold and precious metals are very volatile and anything can happen. FUND FACTS START DATE: December 16, 1985 SIZE: as of February 28, 1995, more than $278 million MANAGER: Malcolm MacNaught, since 1985; manager, Precious Metals and Minerals Portfolio, since 1991; Fidelity Advisor Global Resources Fund, since 1988; joined Fidelity in 1968 (checkmark) AMERICAN GOLD PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 85.1% SHARES VALUE (NOTE 1) CANADA - 59.2% HOLDING COMPANIES - 0.4% HOLDING COMPANY OFFICES - 0.4% Bolivar Goldfields Ltd. (a)(b) 941,100 $ 988,814 09760Q10 METALS & MINING - 1.2% METAL MINING - 0.6% Cominco Resources International Ltd. (a) 662,900 1,478,890 20044D10 Southernera Resources Ltd. (a)(b) 253,900 250,328 84390110 1,729,218 METAL MINING SERVICES - 0.0% Tombstone Exploration Co. (a) 30,400 16,190 88990410 MISCELLANEOUS NONMETAL MINERALS - 0.6% DIA Metropolitan Minerals Ltd. (a): Class A 46,050 314,832 25243K20 Class B 169,500 1,341,801 25243K30 1,656,633 TOTAL METALS & MINING 3,402,041 PRECIOUS METALS - 57.6% GOLD & SILVER ORES - 1.0% GoldCorp, Inc. Class A 100,000 557,735 38095610 Greenstone Resources Ltd. (a) 299,800 312,841 39573W10 Mentor Exploration & Development Co. Ltd. (a)(b) 188,000 1,860,315 58719310 2,730,891 GOLD ORES - 56.6% Aber Resources Ltd. (a) 60,000 404,807 00291610 Agnico Eagle Mines Ltd. 1,108,700 10,771,423 00847410 Baja Gold, Inc. (a) 200,000 316,650 05690210 Barrick Gold Corp. 1,760,000 38,314,566 06790110 Bema Gold Corp. (a) 350,000 506,279 08135F10 Breakwater Resources Ltd. (a) 429,500 30,911 10690210 Cambior, Inc. 1,150,000 12,000,285 13201L10 Campbell Resources, Inc. (a) 1,320,000 778,958 13442292 Canaarc Resources Corp. (a) 545,400 785,000 13722D10 Cathedral Gold Corp. (a) 211,000 212,587 14890710 Echo Bay Mines Ltd. 560,000 5,138,353 27875110 Euro-Nevada Mining Corp. 550,000 10,736,391 29870P10 Franco Nevada Mining Corp. 230,000 10,469,216 35186010 Golden Knight Resources, Inc. 406,200 2,155,894 38109010 Golden Star Resources, Ltd. (a) 842,700 5,761,329 38119T10 Hemlo Gold Mines, Inc. 770,000 6,649,635 42366F10 Kinross Gold Corp. (a) 1,604,100 6,926,408 49690210 Orvana Minerals Corp. (a)(b) 1,352,800 3,164,050 68759M10 Pegasus Gold, Inc. (a) 190,000 2,033,931 70556K10 Placer Dome, Inc. 1,000,000 20,510,240 72590610 Prime Equities, Inc. (a) 55,883 56,303 74155692 Prime Resources Group, Inc. (a) 1,447,000 8,070,425 74157L10 Rayrock Yellowknife Resources, Inc. (a) 289,500 3,125,112 75509N10 Royal Oak Mines, Inc. (warrants) (a) 100,000 39,581 78051D12 Sudbury Contact Mines, Ltd. (a) 396,500 4,708,180 86462610 Wharf Resources Ltd. 570,000 4,409,702 96226010 158,076,216 TOTAL PRECIOUS METALS 160,807,107 TOTAL CANADA 165,197,962 PERU - 0.3% PRECIOUS METALS - 0.3% GOLD ORES - 0.3% Buenaventura (CIA DE MIN) Class T (a) 227,904 814,670 17999B22 SHARES VALUE (NOTE 1) UNITED KINGDOM - 0.1% RETAIL & WHOLESALE, MISCELLANEOUS - 0.1% RETAIL, GENERAL - 0.1% Signet Group PLC (a) 737,500 $ 204,244 82999F22 USA - 25.5% METALS & MINING - 3.4% COPPER ORES - 1.5% Freeport McMoRan Copper Co. Class A 200,000 4,200,000 35671D10 MISCELLANEOUS METAL ORES - 1.9% Still Watermining Co. (a) 335,000 5,318,125 86074Q10 TOTAL METALS & MINING 9,518,125 PRECIOUS METALS - 21.4% GOLD ORES - 21.4% Amax Gold, Inc. (a) 833,100 4,269,638 02312010 Battle Mountain Gold Co. 1,100,000 10,450,000 07159310 Canyon Resources Corp. (a) 459,400 746,525 13886910 Coeur d'Alene Mines Corp. 151,700 2,294,463 19210810 Hecla Mining Co. (a) 300,000 2,812,500 42270410 Homestake Mining Co. 1,057,300 16,388,150 43761410 Newmont Mining Corp. 628,105 22,690,293 65163910 59,651,569 SECURITIES INDUSTRY - 0.6% INVESTMENT MANAGERS - 0.6% Pioneer Group, Inc. 85,000 1,657,500 72368410 SERVICES - 0.1% JEWELRY, PRECIOUS METAL - 0.1% Oroamerica, Inc. (a) 50,000 268,750 68702710 TOTAL USA 71,095,944 TOTAL COMMON STOCKS (Cost $234,837,207) 237,312,820 CONVERTIBLE PREFERRED STOCKS - 3.1% USA - 3.1% PRECIOUS METALS - 3.1% GOLD ORES - 3.1% Battle Mountain Gold Co. $.8125 29,000 1,537,000 07159330 Newmont Mining Corp. depository shares representing 1/2 share, $1.375 (c) 138,800 7,252,300 65163930 TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $10,365,123) 8,789,300 BULLION - 5.2% TROY OUNCES Gold Bullion (a) 20,431 7,694,142 68999410 Silver Bullion (5,000 oz Bar) 1,500,355 6,796,607 83799692 TOTAL BULLION (Cost $15,018,958) 14,490,749 REPURCHASE AGREEMENTS - 6.6% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $18,490,122 $ 18,487,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $278,708,288) $ 279,079,869 LEGEND 1. Non-income producing 2. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. A summary of the transactions during the period in which the issuers were affiliates is as follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Bolivar Goldfields Ltd. (a) $ - $ - $ - $ 988,814 Mentor Exploration & Development Co. Ltd. (a) - - - 1,860,315 Orvana Minerals Corp. (a) 795,400 287,541 - 3,164,050 Southernera Resources Ltd. (a) 234,550 - - 250,328 $ 1,029,950 $ 287,541 $ - $ 6,263,507 (a) Non-income producing 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 this security amounted to $7,252,300 or 2.6% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $138,449,496 and $104,133,274, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $66,393 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balance during the periods for which the loan was outstanding amounted to $3,380,000. The weighted average interest rate paid was 4.2% (see Note 8 of Notes to Financial Statements). Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: Canada 59.2% United States 40.4 Others (individually less than 1%) 0.4 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $280,178,878. Net unrealized depreciation aggregated $1,099,009, of which $47,733,632 related to appreciated investment securities and $48,832,641 related to depreciated investment securities. At February 28, 1995, the fund had a capital loss carryforward of approximately $35,816,000 of which $10,629,000, $2,503,000, $1,152,000, $13,193,000 and $8,339,000 will expire on February 28, 1997, 1998, 1999, 2000, and 2001, respectively. AMERICAN GOLD PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $18,487,000) (cost $278,708,288) - See $ 279,079,869 accompanying schedule Cash 881 Receivable for investments sold 78,037 Receivable for fund shares sold 2,386,602 Dividends receivable 179,298 Redemption fees receivable 695 Other receivables 10,156 TOTAL ASSETS 281,735,538 LIABILITIES Payable for fund shares redeemed $ 3,166,610 Accrued management fee 140,637 Other payables and 231,010 accrued expenses TOTAL LIABILITIES 3,538,257 NET ASSETS $ 278,197,281 Net Assets consist of: Paid in capital $ 315,204,296 Accumulated net investment (loss) (102,590 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (37,276,006 ) Net unrealized appreciation (depreciation) on investments 371,581 NET ASSETS, for 15,086,712 $ 278,197,281 shares outstanding NET ASSET VALUE and redemption price per share ($278,197,281 (divided by) 15,086,712 shares) $18.44 Maximum offering price per share (100/97.00 of $18.44) $19.01
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 2,239,101 Dividends Interest 1,909,550 TOTAL INCOME 4,148,651 EXPENSES Management fee $ 2,170,533 Transfer agent 2,398,852 Fees Redemption fees (229,334 ) Accounting fees and expenses 351,263 Non-interested trustees' compensation 5,975 Custodian fees and expenses 49,653 Registration fees 115,543 Audit 43,543 Legal 6,041 Interest 1,179 Reports to shareholders 13,457 Miscellaneous 3,497 Total expenses before reductions 4,930,202 Expense reductions (1,873 4,928,329 ) NET INVESTMENT INCOME (LOSS) (779,678 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including 3,341,799 realized gain (loss) of $251,691 and $(615,537) on sales of investments in affiliated issuers and precious metals, respectively) Foreign currency transactions (15,060 3,326,739 ) Change in net unrealized appreciation (depreciation) on investment securities (79,195,428 ) NET GAIN (LOSS) (75,868,689 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (76,648,367 ) OTHER INFORMATION $1,481,818 Sales Charges Paid to FDC Deferred sales charges withheld $43,732 by FDC Exchange fees withheld by FSC $181,215
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ (779,678 $ (1,607,332 Net investment income (loss) ) ) Net realized gain (loss) 3,326,739 5,091,181 Change in net unrealized appreciation (depreciation) (79,195,428 102,337,003 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (76,648,367 105,820,852 ) Share transactions 526,647,371 927,864,527 Net proceeds from sales of shares Cost of shares redeemed (520,560,579 (857,107,198 ) ) Paid in capital portion of redemption fees 1,352,412 2,794,982 Net increase (decrease) in net assets resulting from share transactions 7,439,204 73,552,311 TOTAL INCREASE (DECREASE) IN NET ASSETS (69,209,163 179,373,163 ) NET ASSETS Beginning of period 347,406,444 168,033,281 End of period (including accumulated net investment (loss) of $(102,590) and $(102,615), respectively) $ 278,197,281 $ 347,406,444 OTHER INFORMATION Shares Sold 24,289,524 46,202,228 Redeemed (24,535,614 (42,741,926 ) ) Net increase (decrease) (246,090 3,460,302 )
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 22.66 $ 14.15 $ 11.94 $ 13.08 $ 15.22 Income from Investment Operations Net investment (loss) (.05) (.11) (.05) (.06) (.04) Net realized and unrealized gain (loss) (4.25) 8.44 2.16 (1.17) (2.23) Total from investment operations (4.30) 8.33 2.11 (1.23) (2.27) Redemption fees added to paid in capital .08 .18 .10 .09 .13 Net asset value, end of period $ 18.44 $ 22.66 $ 14.15 $ 11.94 $ 13.08 TOTAL RETURN B, C (18.62)% 60.14% 18.51% (8.72)% (14.06)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 278,197 $ 347,406 $ 168,033 $ 130,407 $ 164,137 Ratio of expenses to average net assets 1.41% 1.49% 1.59% A 1.75% 1.75% Ratio of expenses to average net assets before expense reductions 1.41% 1.50% 1.59% A 1.75% 1.75% Ratio of net investment income (loss) to average net assets (.22)% (.51)% (.44)% (.47)% (.29)% A Portfolio turnover rate 34% 39% 30% A 40% 38%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. ENERGY PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1995 YEAR YEARS YEARS ENERGY 0.04% 14.91% 103.84% ENERGY (INCL. 3% SALES CHARGE) -2.96% 11.46% 97.73% S&P 500 7.36% 71.20% 274.70% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or ten years. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1995 YEAR YEARS YEARS ENERGY 0.04% 2.82% 7.38% ENERGY (INCL. 3% SALES CHARGE) -2.96% 2.19% 7.05% S&P 500 7.36% 11.35% 14.12% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER 10 YEARS Select Energy (060) Standard & Poor's 50 02/28/85 9700.00 10000.00 03/31/85 10077.47 10007.00 04/30/85 10217.92 9997.99 05/31/85 10077.47 10575.88 06/30/85 9679.58 10741.92 07/31/85 9782.06 10725.81 08/31/85 10136.08 10634.64 09/30/85 9819.33 10301.77 10/31/85 10406.25 10777.71 11/30/85 10573.94 11517.07 12/31/85 10182.66 12074.49 01/31/86 9483.94 12142.11 02/28/86 9269.67 13050.34 03/31/86 9223.09 13778.55 04/30/86 9241.72 13622.85 05/31/86 9670.27 14347.59 06/30/86 9698.22 14590.06 07/31/86 9092.66 13774.48 08/31/86 10294.46 14796.54 09/30/86 10182.66 13572.87 10/31/86 10452.83 14356.02 11/30/86 10667.11 14704.87 12/31/86 10741.64 14329.90 01/31/87 11878.22 16260.14 02/28/87 12111.13 16902.41 03/31/87 13117.28 17390.89 04/30/87 12744.63 17236.11 05/31/87 13191.81 17386.07 06/30/87 13648.31 18264.06 07/31/87 14356.34 19190.05 08/31/87 14272.50 19905.84 09/30/87 13965.06 19469.90 10/31/87 10275.82 15276.09 11/30/87 9847.28 14017.34 12/31/87 10548.32 15084.06 01/31/88 10941.13 15719.09 02/29/88 11333.93 16451.60 03/31/88 12138.71 15943.25 04/30/88 12598.58 16120.22 05/31/88 12138.71 16260.46 06/30/88 12272.84 17006.82 07/31/88 12349.48 16942.19 08/31/88 11880.03 16366.16 09/30/88 11745.90 17063.36 10/31/88 11851.29 17537.72 11/30/88 11880.03 17286.93 12/31/88 12229.95 17589.45 01/31/89 13154.08 18877.00 02/28/89 12947.62 18406.96 03/31/89 13694.79 18835.84 04/30/89 14156.86 19813.42 05/31/89 14323.99 20615.87 06/30/89 14618.92 20498.36 07/31/89 15228.45 22349.36 08/31/89 15562.71 22787.41 09/30/89 15808.49 22693.98 10/31/89 15700.35 22167.48 11/30/89 16290.22 22619.69 12/31/89 17467.48 23162.57 01/31/90 16687.60 21608.36 02/28/90 17207.52 21887.11 03/31/90 17217.52 22467.12 04/30/90 16637.60 21905.44 05/31/90 17647.46 24041.22 06/30/90 17231.55 23877.74 07/31/90 18405.22 23801.33 08/31/90 18735.98 21649.69 09/30/90 18682.63 20595.35 10/31/90 17722.36 20506.79 11/30/90 17530.30 21831.53 12/31/90 16682.79 22440.63 01/31/91 15602.21 23419.04 02/28/91 17057.69 25093.50 03/31/91 16826.13 25700.76 04/30/91 17013.58 25762.44 05/31/91 17112.82 26875.38 06/30/91 16350.43 25644.49 07/31/91 17190.05 26839.52 08/31/91 17521.48 27475.62 09/30/91 17344.72 27016.78 10/31/91 17863.95 27378.80 11/30/91 16538.24 26275.44 12/31/91 16688.67 29281.34 01/31/92 15795.63 28736.71 02/29/92 15817.96 29110.29 03/31/92 15360.27 28542.64 04/30/92 16409.60 29381.79 05/31/92 17191.00 29525.76 06/30/92 16340.32 29085.83 07/31/92 16776.81 30275.44 08/31/92 17078.99 29654.79 09/30/92 17179.72 30004.72 10/31/92 16441.05 30109.74 11/30/92 16060.52 31136.48 12/31/92 16290.06 31519.46 01/31/93 16904.35 31784.22 02/28/93 18019.17 32216.49 03/31/93 18940.61 32896.25 04/30/93 19304.94 32100.16 05/31/93 19885.45 32960.45 06/30/93 20147.26 33056.03 07/31/93 19999.28 32923.81 08/31/93 21581.47 34171.62 09/30/93 21456.26 33908.50 10/31/93 21148.93 34610.41 11/30/93 18587.83 34281.61 12/31/93 19410.34 34696.42 01/31/94 20449.96 35876.09 02/28/94 19764.76 34903.85 03/31/94 18807.82 33382.04 04/30/94 20244.49 33809.33 05/31/94 20458.71 34363.81 06/30/94 20351.60 33521.89 07/31/94 20661.04 34621.41 08/31/94 20315.89 36040.89 09/30/94 20161.17 35157.89 10/31/94 21303.72 35948.94 11/30/94 19994.55 34639.68 12/31/94 19490.38 35153.39 01/31/95 19023.69 36064.91 02/28/95 19772.84 37470.36 Let's say you invested $10,000 in Fidelity Select Energy Portfolio on February 28, 1985, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $19,773 - a 97.73% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $37,470 over the same period - a 274.70% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Elf Aquitaine sponsored ADR 8.5 Amerada Hess Corp. 7.9 Unocal Corp. 7.2 Phillips Petroleum Corp. 6.3 Total SA Class B sponsored ADR 5.9 Occidental Petroleum PLC ADR 4.2 Kerr-McGee Corp. 3.8 Schlumberger Ltd. 3.3 Amoco Corp. 3.1 Shell Transport & Trading PLC 2.9 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 7.8 Row: 1, Col: 2, Value: 2.1 Row: 1, Col: 3, Value: 2.9 Row: 1, Col: 4, Value: 6.2 Row: 1, Col: 5, Value: 39.0 Row: 1, Col: 6, Value: 42.0 Crude Petroleum & Gas 42.0% Oil & Gas Exploration 39.0% Oil & Gas Services 6.2% Holding Company Offices 2.9% Plastics & Synthetics Resins 2.1% All Others 7.8%* Includes short-term investments * ENERGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Albert Ruback, Portfolio Manager of Fidelity Select Energy Portfolio Q. ALBERT, HOW DID THE FUND PERFORM? A. For the 12 months ended February 28, 1995, the fund had a total return of 0.04%. The S&P 500 returned 7.36% for the same period. Q. WHY DID THE FUND LAG THE S&P 500? A. There are many factors that impact stocks in this sector, including oil prices, natural gas prices and refining margins - the difference between the cost of producing oil and the price received for the refined product. Over the past 12 months, fuel prices were hurt at different times by two things: the weather and excess inventories. A generally cool summer and warm winter drove down demand, and inventories kept supply high. The combination resulted in falling product prices and pressured refining margins. So as other parts of the economy were showing profit gains, investors focused elsewhere. Q. DOES THAT MEAN THAT ALL ENERGY COMPANIES WERE HURT BY THE COMMODITY PRICE ENVIRONMENT? A. No. Although prices definitely have an effect on energy companies, my analysis focuses more on each company's cost structure. In the past six months, the stocks that have done well are those of companies that are undergoing, or have announced, restructuring and cost-cutting programs. Examples include Amoco, Mobil and British Petroleum. The mindset of oil company executives has changed from hoping or planning for crude price increases to learning to live with essentially flat oil prices. Therefore, in order to increase earnings, the companies have to cut costs. The market rewards companies that increase earnings, and the best performer was British Petroleum. The company's earnings stream has increased dramatically because of a long-term cost-cutting program. Q. WHAT ABOUT NATURAL GAS COMPANIES? A. With natural gas, there are essentially two markets: North America and the rest of the world. Outside of North America, natural gas prices generally follow the direction of crude oil prices. In North America, prices have collapsed recently, due to higher U.S. and Canadian production, coupled with much higher inventory levels. The mild winter weather exacerbated this problem by reducing demand. This has hurt exploration and production - E&P - which affected stocks such as Apache, Burlington Resources and Anadarko. Naturally, because of excess production and higher inventories, I've cut back on these E&P stocks. Instead, I was moving toward more diversified energy companies that were cutting costs and whose stocks were cheap, as well as companies with profitable petrochemical aspects of their business. Demand for petrochemical products has been high as a result of worldwide growth. Q. WHAT ARE SOME EXAMPLES OF THESE KINDS OF COMPANIES? A. I found stocks of the domestic integrated companies to be more inexpensive than international integrated ones. Amerada Hess, ARCO, UNOCAL, Kerr-McGee and Phillips were attractive at the end of February. Occidental was attractive because of the potential profitability of the petrochemical aspect of its business. I expect the company may show solid earnings improvement if the economic recovery continues to push demand for chemicals worldwide. Q. BESIDES E&P COMPANIES, ARE THERE OTHERS WHOSE PROSPECTS YOU'RE LESS POSITIVE ABOUT IN THE NEAR FUTURE? A. I've reduced the fund's holdings in companies focused on the refining and marketing segment of the industry, such as Tosco, Ashland Oil, Diamond Shamrock and Sun. These companies have had to spend a lot of money upgrading their refineries in order to make them compatible with environmental regulations. Most of the companies have added capacity at a nominal cost while undergoing the upgrades. Even though refining margins have declined, the companies aren't cutting back on production because of the high fixed costs of the business. Because of the weakness in the U.S. refining market, Amerada Hess has been a disappointing stock for the fund. I'm optimistic about the stock, however, because of the company's cost cutting and exposure to opportunities in new oil fields in the North Sea. Q. AND WHAT POSITIONS HAVE YOU INCREASED? A. Elf Aquitaine is one, because it announced a major restructuring program, a major departure for a former French state-owned company. Total is another French company, one that may be in a good position to keep producing solid earnings and predictable flows of oil production. Q. WHAT'S YOUR OUTLOOK GOING FORWARD? A. As far as the oil group is concerned, I believe refiners will disappoint, while companies with petrochemical business could increase earnings significantly. If the economy weakens, energy stocks may go down because demand and earnings probably will decline. FUND FACTS START DATE: July 14, 1981 SIZE: as of February 28, 1995, more than $96 million MANAGER: Albert Ruback, since December 1994; manager Fidelity Select Industrial Equipment Portfolio, 1991-December 1994; joined Fidelity in 1991 (checkmark) ENERGY PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 98.2% TROY OUNCES CHEMICALS & PLASTICS - 2.1% PLASTICS & SYNTHETIC RESINS - 2.1% ARCO Chemical Co. 46,600 $ 1,980,503 00192010 ENERGY SERVICES - 6.5% DRILLING - 0.3% Precision Drilling Class A (a) 51,400 300,547 74022D10 OIL & GAS SERVICES - 6.2% Halliburton Co. 70,000 2,607,500 40621610 Nowsco Well Service Ltd. 11,100 101,849 67012210 Schlumberger Ltd. 55,000 3,128,125 80685710 5,837,474 TOTAL ENERGY SERVICES 6,138,021 GAS - 2.9% GAS TRANSMISSION - 1.5% Enron Corp. 30,000 990,000 29356110 Trident NGL Holding, Inc. 38,300 402,150 89592610 1,392,150 GAS TRANSMISSION & DISTRIBUTION - 1.4% Gas Natural SDG SA Series E 15,000 1,311,475 36699692 TOTAL GAS 2,703,625 HOLDING COMPANIES - 2.9% HOLDING COMPANY OFFICES - 2.9% Shell Transport & Trading PLC 40,700 2,726,900 82270360 INDUSTRIAL MACHINERY & EQUIPMENT - 0.0% AIR & GAS COMPRESSORS - 0.0% Enerflex Systems Ltd. 1,200 11,874 29265B10 OIL & GAS - 83.7% CRUDE PETROLEUM & GAS - 42.0% Apache Corp. 40,800 1,020,000 03741110 Atlantic Richfield Co. 20,000 2,192,500 04882510 Bellwether Exploration Co. (a) 50,000 243,750 07989520 British Borneo Petroleum 245,900 945,604 11099D22 Coho Resources, Inc. (a) 50,000 253,125 19248110 DEKALB Energy Corp. Class B (a) 29,000 623,500 24487410 Elf Aquitaine sponsored ADR 225,000 8,071,875 28626910 Global Natural Resources, Inc. (a) 50,000 375,000 37935510 Louis Dreyfus Natural Gas Corp. (a) 93,300 1,107,938 54601110 Maxus Energy Corp. (a) 500,000 2,687,500 57773010 Newfield Exploration Co. (a) 56,300 1,097,850 65129010 Norsk Hydro AS ADR 60,000 2,265,000 65653160 Nuevo Energy Corp. (a) 26,200 471,600 67050910 Occidental Petroleum Corp. 200,000 3,975,000 67459910 Paramount Resources Ltd. 31,000 295,599 69932010 Renaissance Energy Ltd. (a) 102,908 2,055,123 75966610 Renaissance Energy Ltd. (a)(b) 11,000 219,675 75966692 Rio Alto Exploration Ltd. (a) 317,500 971,086 76689210 Total SA Class B sponsored ADR 200,607 5,566,844 89151E10 Triton Energy Corp. (a) 40,000 1,245,000 89675010 Ulster Petroleums Ltd. (a) 168,900 516,587 90384010 United Meridian Corp. (a) 40,000 420,000 91086510 Vintage Petroleum, Inc. 96,400 1,674,950 92746010 YPF Sociedad Anonima sponsored ADR representing Class D shares 75,000 1,425,000 98424510 39,720,106 NATURAL GAS LIQUIDS - 0.6% Western Gas Resources, Inc. 32,100 585,825 95825910 TROY OUNCES OIL & GAS EXPLORATION - 39.0% Amerada Hess Corp. 152,400 $ 7,467,600 02355110 Amoco Corp. 50,000 2,962,500 03190510 British Petroleum PLC ADR 35,247 2,696,396 11088940 Chevron Corp. 44,000 2,090,000 16675110 Exxon Corp. 20,000 1,280,000 30229010 Kerr-McGee Corp. 70,600 3,556,475 49238610 Mobil Corp. 20,000 1,740,000 60705910 Phillips Petroleum Co. 178,900 5,970,788 71850710 Royal Dutch Petroleum Co. 20,000 2,242,500 78025770 Unocal Corp. 241,096 6,841,099 91528910 36,847,358 OIL FIELD EQUIPMENT - 1.1% Camco International, Inc. 58,700 1,085,950 13263210 PETROLEUM REFINERS - 1.0% Crown Central Petroleum Corp. Class B (a) 18,100 239,825 22821930 Diamond Shamrock R&M, Inc. 16,400 410,000 25274710 Tesoro Petroleum Corp. (a) 30,000 311,250 88160910 961,075 TOTAL OIL & GAS 79,200,314 TRUCKING & FREIGHT - 0.1% TRUCKING, LONG DISTANCE - 0.1% Trimac Ltd. (a) 15,500 133,856 89620810 TOTAL COMMON STOCKS (Cost $92,999,199) 92,895,093 REPURCHASE AGREEMENTS - 1.8% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $1,697,287 1,697,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $94,696,199) $ 94,592,093 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of this security amounted to $219,675 or 0.2% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $103,820,158 and $140,322,740, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $96,604 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $4,955,000 and $4,186,000, respectively. The weighted average interest rate paid was 6.0% (see Note 8 of Notes to Financial Statements). Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: United States 66.3% France 14.4 United Kingdom 6.7 Canada 4.9 Norway 2.4 Netherland 2.4 Argentina 1.5 Spain 1.4 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $95,198,672. Net unrealized depreciation aggregated $606,579, of which $3,932,965 related to appreciated investment securities and $4,539,544 related to depreciated investment securities. The fund hereby designates $1,258,000 as a capital gain dividend for the purpose of the dividend paid deduction. ENERGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $1,697,000) (cost $94,696,199) - See $ 94,592,093 accompanying schedule Cash 87 Receivable for investments sold 1,940,678 Receivable for fund shares sold 826,498 Dividends receivable 298,062 Redemption fees receivable 341 Other receivables 3,980 TOTAL ASSETS 97,661,739 LIABILITIES Payable for fund shares redeemed $ 1,491,339 Accrued management fee 49,128 Other payables and 98,658 accrued expenses TOTAL LIABILITIES 1,639,125 NET ASSETS $ 96,022,614 Net Assets consist of: Paid in capital $ 95,013,184 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 1,113,536 Net unrealized appreciation (depreciation) on investments (104,106 ) NET ASSETS, for 5,964,577 $ 96,022,614 shares outstanding NET ASSET VALUE and redemption price per share ($96,022,614 (divided by) 5,964,577 shares) $16.10 Maximum offering price per share (100/97.00 of $16.10) $16.60
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 1,966,681 Dividends Interest (including security lending fees of $2,915) 402,434 TOTAL INCOME 2,369,115 EXPENSES Management fee $ 646,577 Transfer agent 1,193,841 Fees Redemption fees (119,631 ) Accounting and security lending fees 116,560 Non-interested trustees' compensation 2,192 Custodian fees and expenses 15,899 Registration fees 47,477 Audit 24,154 Legal 1,354 Interest 2,107 Reports to shareholders 6,470 Miscellaneous 914 Total expenses before reductions 1,937,914 Expense reductions (9,979 1,927,935 ) NET INVESTMENT INCOME 441,180 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 3,967,349 Foreign currency transactions 304 3,967,653 Change in net unrealized appreciation (depreciation) on investment securities (6,553,635 ) NET GAIN (LOSS) (2,585,982 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (2,144,802 ) OTHER INFORMATION $508,448 Sales Charges Paid to FDC Deferred sales charges withheld $19,469 by FDC Exchange fees withheld by FSC $93,885
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ 441,180 $ 467,695 Net investment income Net realized gain (loss) 3,967,653 11,660,936 Change in net unrealized appreciation (depreciation) (6,553,635 35,273 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (2,144,802 12,163,904 ) Distributions to shareholders: (468,393 (210,175 From net investment income ) ) From net realized gain (3,119,569 (2,444,037 ) ) TOTAL DISTRIBUTIONS (3,587,962 (2,654,212 ) ) Share transactions 139,154,943 307,692,300 Net proceeds from sales of shares Reinvestment of distributions 3,509,410 2,596,445 Cost of shares redeemed (186,610,132 (353,996,623 ) ) Paid in capital portion of redemption fees 211,181 555,239 Net increase (decrease) in net assets resulting from share transactions (43,734,598 (43,152,639 ) ) TOTAL INCREASE (DECREASE) IN NET ASSETS (49,467,362 (33,642,947 ) ) NET ASSETS Beginning of period 145,489,976 179,132,923 End of period (including undistributed net investment income of $0 and $354,166, respectively) $ 96,022,614 $ 145,489,976 OTHER INFORMATION Shares Sold 8,177,307 17,743,944 Issued in reinvestment of distributions 222,729 166,316 Redeemed (11,129,608 (20,523,434 ) ) Net increase (decrease) (2,729,572 (2,613,174 ) )
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 16.73 $ 15.84 $ 14.70 $ 15.43 $ 16.64 Income from Investment Operations Net investment income .07 .06 .23 .17 .16 Net realized and unrealized gain (loss) (.11) 1.35 1.16 (.75) .15 Total from investment operations (.04) 1.41 1.39 (.58) .31 Less Distributions (.08) E (.03) (.27) (.16) (.15) From net investment income From net realized gain (.54) E (.57) - (.02) (1.43) Total distributions (.62) (.60) (.27) (.18) (1.58) Redemption fees added to paid in capital .03 .08 .02 .03 .06 Net asset value, end of period $ 16.10 $ 16.73 $ 15.84 $ 14.70 $ 15.43 TOTAL RETURN B, C .04% 9.69% 9.81% (3.55)% 2.26% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 96,023 $ 145,490 $ 179,133 $ 77,334 $ 92,611 Ratio of expenses to average net assets 1.85% 1.66% 1.71% A 1.78% 1.79% Ratio of expenses to average net assets before expense reductions 1.85% 1.67% 1.71% A 1.78% 1.79% Ratio of net investment income to average net assets .42% .37% 1.88% A 1.16% .99% Portfolio turnover rate 106% 157% 72% A 81% 61%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS). ENERGY SERVICE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND ENERGY SERVICE 7.60% 2.78% 26.21% ENERGY SERVICE (INCL. 3% SALES CHARGE) 4.37% -0.31% 22.43% S&P 500 7.36% 71.20% 212.82% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on December 16, 1985. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND ENERGY SERVICE 7.60% 0.55% 2.56% ENERGY SERVICE (INCL. 3% SALES CHARGE) 4.37% -0.06% 2.22% S&P 500 7.36% 11.35% 13.18% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Energy ServicStandard & Poor's 50 12/16/85 9700.00 10000.00 12/31/85 9855.20 10080.42 01/31/86 9118.00 10136.87 02/28/86 8739.70 10895.11 03/31/86 8671.80 11503.06 04/30/86 8555.40 11373.07 05/31/86 9050.10 11978.12 06/30/86 8885.20 12180.55 07/31/86 7614.50 11499.66 08/31/86 8371.10 12352.93 09/30/86 8235.30 11331.35 10/31/86 7944.30 11985.16 11/30/86 8215.90 12276.40 12/31/86 8303.20 11963.36 01/31/87 9234.40 13574.82 02/28/87 9622.40 14111.03 03/31/87 10534.20 14518.83 04/30/87 10534.20 14389.62 05/31/87 11349.00 14514.81 06/30/87 12464.50 15247.80 07/31/87 13279.30 16020.87 08/31/87 12270.50 16618.45 09/30/87 11872.80 16254.50 10/31/87 7633.90 12753.28 11/30/87 6799.70 11702.41 12/31/87 7323.50 12592.97 01/31/88 7614.50 13123.13 02/29/88 8283.80 13734.67 03/31/88 8768.80 13310.27 04/30/88 8943.40 13458.01 05/31/88 8332.30 13575.09 06/30/88 7857.00 14198.19 07/31/88 7730.90 14144.24 08/31/88 7876.40 13663.33 09/30/88 7536.90 14245.39 10/31/88 7284.70 14641.41 11/30/88 6974.30 14432.04 12/31/88 7294.40 14684.60 01/31/89 7740.60 15759.52 02/28/89 7827.90 15367.10 03/31/89 8322.60 15725.16 04/30/89 8720.30 16541.29 05/31/89 8875.50 17211.21 06/30/89 9166.50 17113.11 07/31/89 9680.60 18658.42 08/31/89 10136.50 19024.13 09/30/89 9991.00 18946.13 10/31/89 9496.30 18506.58 11/30/89 10311.10 18884.12 12/31/89 11630.30 19337.33 01/31/90 10883.40 18039.80 02/28/90 11911.60 18272.51 03/31/90 12483.90 18756.73 04/30/90 11824.30 18287.82 05/31/90 13812.80 20070.88 06/30/90 13104.70 19934.40 07/31/90 14336.60 19870.61 08/31/90 14084.40 18074.30 09/30/90 13812.80 17194.08 10/31/90 12076.50 17120.15 11/30/90 12260.80 18226.11 12/31/90 11834.40 18734.62 01/31/91 11300.01 19551.45 02/28/91 13116.95 20949.38 03/31/91 12096.74 21456.35 04/30/91 12155.04 21507.85 05/31/91 12475.68 22436.99 06/30/91 10843.35 21409.37 07/31/91 11659.51 22407.05 08/31/91 11533.20 22938.10 09/30/91 10474.13 22555.03 10/31/91 10629.59 22857.27 11/30/91 9356.76 21936.12 12/31/91 9055.55 24445.61 01/31/92 8929.24 23990.92 02/29/92 9113.85 24302.81 03/31/92 8462.86 23828.90 04/30/92 9162.43 24529.47 05/31/92 9891.15 24649.67 06/30/92 9317.89 24282.39 07/31/92 9706.54 25275.53 08/31/92 10202.07 24757.39 09/30/92 10512.99 25049.52 10/31/92 9968.88 25137.20 11/30/92 9764.84 25994.38 12/31/92 9366.47 26314.11 01/31/93 9735.69 26535.14 02/28/93 10697.60 26896.02 03/31/93 11542.92 27463.53 04/30/93 12165.15 26798.91 05/31/93 12729.16 27517.12 06/30/93 12661.09 27596.92 07/31/93 12836.13 27486.53 08/31/93 13283.45 28528.27 09/30/93 12894.47 28308.61 10/31/93 12709.71 28894.59 11/30/93 11367.75 28620.10 12/31/93 11329.36 28966.40 01/31/94 11436.70 29951.26 02/28/94 11378.15 29139.58 03/31/94 10529.18 27869.09 04/30/94 11079.70 28225.82 05/31/94 11573.25 28688.72 06/30/94 11925.78 27985.85 07/31/94 12147.37 28903.78 08/31/94 11663.90 30088.84 09/30/94 12107.08 29351.66 10/31/94 12590.56 30012.07 11/30/94 11935.85 28919.03 12/31/94 11393.65 29347.90 01/31/95 11465.24 30108.89 02/28/95 12242.54 31282.24 Let's say you invested $10,000 in Fidelity Select Energy Service Portfolio on December 16, 1985 when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $12,243 - a 22.43% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $31,282 over the same period - a 212.82% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Schlumberger Ltd. 10.3 Halliburton Co. 10.1 Western Atlas, Inc. 8.4 Western Co. of North America 6.3 Camco International, Inc. 3.9 BJ Services Co. 3.7 Baker Hughes, Inc. 3.6 Enterra Corp. 2.4 Coflexip sponsored ADR 2.3 McDermott International, Inc. 2.1 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 24.8 Row: 1, Col: 2, Value: 3.8 Row: 1, Col: 3, Value: 6.1 Row: 1, Col: 4, Value: 8.4 Row: 1, Col: 5, Value: 8.699999999999999 Row: 1, Col: 6, Value: 48.2 Oil & Gas Services 48.2% Drilling 8.7% Surveying Services 8.4% Oil & Gas Exploration 6.1% Oil Field Equipment 3.8% All others 24.8%* * INCLUDES SHORT-TERM INVESTMENTS ENERGY SERVICE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Daniel Pickering, Portfolio Manager of Fidelity Select Energy Service Portfolio Q. DAN, HOW HAS THE FUND PERFORMED? A. For the 12 months ended February 28, 1995, the fund had a total return of 7.60%, slightly beating the S&P 500, which returned 7.36% for the same period. Q. WHAT HELPED THE FUND MATCH THE PERFORMANCE OF THE BROAD MARKET? A. The fund performed well in part because I concentrated its investments on a small number of selected stocks that generally ended up doing well. These stocks performed well for several reasons. First, the international rig count - the indicator of oil and natural gas drilling activity - started to pick up in the latter half of the year, after having trended lower during the first six months. Second, many companies started showing improving earnings due to cost cutting and consolidation. Finally, stock prices in the sector had been so depressed during the past five years or so that inexpensive stock prices coupled with earnings turnarounds and cost-cutting stories attracted investors. Q. WHAT WERE SOME OF THE STOCKS WHOSE PERFORMANCE HELPED THE FUND? A. Western Company, which focuses on pressure pumping, was one. The company matched up well with BJ Services, which ended up acquiring Western at a profit to Western shareholders. Halliburton, another pressure pumping company, also did well mainly because of increased profit margins due to cost cutting. ICO is a small company that coats and inspects tubes for oil field work. It benefited from acquiring several similar companies, assimilating their operations and cutting costs. Finally, Coflexip, a flexible pipe company taking advantage of a trend toward deep water and sub-sea drilling, grew due to an acquisition, and attracted attention due to an inexpensive stock price. Q. WHAT HAS THE ENERGY SERVICE ENVIRONMENT BEEN LIKE, IN GENERAL? A. There has been an increase in drilling activity during the last half of 1994, but it hasn't seemed sustainable. There was a short-term increase in natural gas prices in the first half of 1994, but they have tailed off since, mainly due to increased supply and warm weather. There is generally a lag between a drop in prices and a drop in drilling activity, so energy service companies hadn't seen a marked drop in activity as of the end of the period. As far as the price of oil is concerned, it's been pretty stable and the companies that have done well are those that have cut costs to increase profit margins. They may do even better going forward, because demand has been growing while supply remained somewhat tight, meaning oil's price might rise. Looking forward, I'll try to position the fund toward companies that won't be affected by lower North American gas prices - which would highlight the more international oil-driven names in the fund's top 10 holdings at the end of February such as Schlumberger - as well as cost-cutting stories, inexpensive stocks and potential consolidations. Q. WHILE THE FUND PERFORMED WELL, THERE MUST HAVE BEEN SOME STOCKS THAT WERE DISAPPOINTMENTS . . . A. Sure. Drilling activity in the Gulf of Mexico has slowed, hurting Noble Drilling. The drilling industry has high fixed costs, so when gas prices dropped and drilling slowed, earnings suffered. The fund still owns Noble stock because the company has the most rigs in the Gulf and is poised to do well should the situation reverse. The stock of Western Atlas, a seismic and wire line company, dropped due to a weak outlook for its marine seismic business. And Weatherford International stumbled because of the drop in gas prices and a failure to meet earnings expectations. I've bought more of this stock because it appears most of its troubles are behind it, it has a good balance sheet and it has good international exposure. Q. WHAT'S YOUR OUTLOOK GOING FORWARD? A. I'd like to divide my outlook into two parts. The first is North America. Performance in energy service will be driven by gas and gas prices. We're in a down cycle now, but if the market anticipates a better price and drilling situation for early to middle 1996, the stocks could rebound. In that case, I'll start looking at the stocks that have been hardest hit, such as drilling companies. On the international side, it's likely things will get better due to a pick-up in activity in the North Sea and West Africa. I believe companies with strong international exposure such as Schlumberger, Baker-Hughes and Halliburton could benefit from this trend. I always look at stock valuations, so I'll be interested in trimming stocks that become expensive and adding to positions where the stock is cheap. Energy service stock prices have been low compared to their historical range, and I'm hoping they'll move up to at least the middle of that range, as the international outlook improves. FUND FACTS START DATE: December 16, 1985 SIZE: as of February 28, 1995, more than $63 million MANAGER: Daniel Pickering, since December 1994; manager Fidelity Select Natural Gas Portfolio, since February 1995; equity analyst, since August 1994; joined Fidelity in August 1994 (checkmark) ENERGY SERVICE PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 81.0% TROY OUNCES BUILDING MATERIALS - 2.3% FABRICATED PIPE & FITTINGS - 2.3% Coflexip sponsored ADR 59,711 $ 1,507,703 19238410 COMPUTER SERVICES & SOFTWARE - 0.6% CAD/CAM/CAE - 0.6% Landmark Graphics Corp. (a) 20,000 415,000 51491310 ELECTRONIC INSTRUMENTS - 0.3% LABORATORY ANALYTICAL INSTRUMENTS - 0.3% Numar Corp. (a) 20,000 185,000 67052E10 ENERGY SERVICES - 55.1% DRILLING - 8.7% Arethusa Offshore Ltd. (a) 57,100 720,888 03999792 Atwood Oceanics, Inc. (a) 89,200 1,115,000 05009510 Energy Service Co., Inc. (a) 50,000 587,500 29271940 Marine Drilling Cos., Inc. (a) 134,500 336,250 56824020 Nabors Industries, Inc. (a) 80,000 530,000 62956810 Noble Drilling Corp. (a) 233,950 1,286,725 65504210 Reading & Bates Corp. (a) 40,000 300,000 75528180 Sonat Offshore Drilling, Inc. 40,000 835,000 83542010 Tucker Drilling Co., Inc. (a) 7,000 46,813 89865210 5,758,176 OIL & GAS SERVICES - 46.4% BJ Services Co. (a) 130,931 2,438,590 05548210 Baker Hughes, Inc. 125,000 2,406,250 05722410 Dreco Energy Services Ltd. Class A (a) 60,000 525,000 26152820 Enterra Corp. (a) 89,300 1,607,400 29380510 Global Industries Ltd. (a) 13,900 337,075 37933610 Gulfmark International, Inc. (a) 15,100 241,600 40262810 Halliburton Co. 180,000 6,705,000 40621610 Input/Output, Inc. (a) 25,000 656,250 45765210 McDermott International, Inc. 50,000 1,400,000 58003710 Petroleum Helicopters, Inc. 28,000 245,000 71660410 Petroleum Helicopters, Inc. (non vtg.) 8,300 66,400 71660420 Pride Petroleum Services, Inc. (a) 90,000 495,000 74154110 Schlumberger Ltd. 120,000 6,825,000 80685710 Smith International, Inc. (a) 35,000 468,125 83211010 Tidewater, Inc. 37,200 730,050 88642310 Tuboscope Vetco International Corp. (a) 85,320 671,895 89860010 Weatherford International, Inc. (a) 87,600 755,550 94707610 Western Co. of North America (a) 221,000 4,171,375 95804340 30,745,560 TOTAL ENERGY SERVICES 36,503,736 INDUSTRIAL MACHINERY & EQUIPMENT - 1.5% STEAM, GAS, HYDRAULIC TURBINES - 1.5% McDermott (J. Ray) SA (a) 44,700 994,575 58099A22 IRON & STEEL - 2.0% FABRICATED METAL PRODUCTS - 2.0% ICO, Inc. 255,000 1,338,749 44929420 METALS & MINING - 0.2% MISCELLANEOUS METAL ORES - 0.2% Still Watermining Co. (a) 8,000 127,000 86074Q10 OIL & GAS - 10.6% CRUDE PETROLEUM & GAS - 0.7% Unit Corp. unit (3 common & 1 warrant) (a) 50,700 430,950 90921820 OIL & GAS EXPLORATION - 6.1% Amerada Hess Corp. 17,000 833,000 02355110 Amoco Corp. 4,000 237,000 03190510 British Petroleum PLC ADR 8,000 612,000 11088940 TROY OUNCES Mobil Corp. 6,000 $ 522,000 60705910 Phillips Petroleum Co. 30,000 1,001,250 71850710 Unocal Corp. 30,000 851,250 91528910 4,056,500 OIL FIELD EQUIPMENT - 3.8% Camco International, Inc. 138,100 2,554,850 13263210 TOTAL OIL & GAS 7,042,300 SERVICES - 8.4% SURVEYING SERVICES - 8.4% Western Atlas, Inc. 135,000 5,568,750 95767410 TOTAL COMMON STOCKS (Cost $55,221,675) 53,682,813 CONVERTIBLE PREFERRED STOCKS - 1.5% INDUSTRIAL MACHINERY & EQUIPMENT --1.5% STEAM, GAS, HYDRAULIC TURBINES - 1.5% McDermott (J. Ray) Series B $2.25 (Cost $722,849) 20,000 977,500 58099A23 CORPORATE BONDS - 1.8% PRINCIPAL AMOUNT NONCONVERTIBLE BONDS - 1.8% ENERGY SERVICES - 1.8% OIL & GAS SERVICES - 1.8% Tuboscope Vetco International, Inc. gtd. 10 3/4%, 4/15/03 (Cost 1,200,000) $ 1,200,000 1,203,000 898602AA REPURCHASE AGREEMENTS - 15.7% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $10,387,754 10,386,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $67,530,524) $ 66,249,313 LEGEND 1. Non-income producing 2. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. A summary of the transactions during the period in which the issuers were affiliates is as follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Service Fracturing Co. $ - $ 234,835 $ - $ - OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $125,237,626 and $110,386,326, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $105,206 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $14,032,000 and $3,891,059, respectively. The weighted average interest rate paid was 5.0% (see Note 8 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $68,331,070. Net unrealized depreciation aggregated $2,081,757, of which $2,770,157 related to appreciated investment securities and $4,851,914 related to depreciated investment securities. The fund hereby designates $1,508,000 as a capital gain dividend for the purpose of the dividend paid deduction. The fund has elected to defer to its fiscal year ending February 28,1996 $1,641,000 of losses recognized during the period November 1, 1994 to February 28, 1995. ENERGY SERVICE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $10,386,000) (cost $67,530,524) - See $ 66,249,313 accompanying schedule Cash 7,639 Receivable for investments sold 454,155 Receivable for fund shares sold 5,222,013 Dividends receivable 98,120 Interest receivable 48,375 Redemption fees receivable 60 TOTAL ASSETS 72,079,675 LIABILITIES Payable for investments purchased $ 7,021,565 Payable for fund shares redeemed 1,182,537 Accrued management fee 27,791 Other payables and accrued expenses 53,336 TOTAL LIABILITIES 8,285,229 NET ASSETS $ 63,794,446 Net Assets consist of: Paid in capital $ 66,602,711 Undistributed net investment income 66,450 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (1,593,504 ) Net unrealized appreciation (depreciation) on investments (1,281,211 ) NET ASSETS, for 5,330,340 shares outstanding $ 63,794,446 NET ASSET VALUE and redemption price per share ($63,794,446 (divided by) 5,330,340 shares) $11.97 Maximum offering price per share (100/97.00 of $11.97) $12.34
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 673,080 Dividends Interest (including security lending fees of $1,063) 507,639 TOTAL INCOME 1,180,719 EXPENSES Management fee $ 369,132 Transfer agent 636,213 Fees Redemption fees (83,835 ) Accounting and security lending fees 61,676 Non-interested trustees' compensation 1,517 Custodian fees and expenses 13,338 Registration fees 28,952 Audit 21,349 Legal 781 Interest 21,944 Reports to shareholders 3,311 Miscellaneous 846 Total expenses before reductions 1,075,224 Expense reductions (9,178 1,066,046 ) NET INVESTMENT INCOME 114,673 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities including realized gain (loss) $129,328 on sales of investments of affiliated issuers. 274,610 Foreign currency transactions (48 274,562 ) Change in net unrealized appreciation (depreciation) on investment securities 74,964 NET GAIN (LOSS) 349,526 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 464,199 OTHER INFORMATION $348,174 Sales Charges Paid to FDC Deferred sales charges withheld $8,516 by FDC Exchange fees withheld by FSC $68,663
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ 114,673 $ 214,893 Net investment income Net realized gain (loss) 274,562 17,604,019 Change in net unrealized appreciation (depreciation) 74,964 (4,993,642 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 464,199 12,825,270 Distributions to shareholders: (50,886 (269,046 From net investment income ) ) In excess of net investment income (42,014 - ) From net realized gain (1,312,181 - ) In excess of net realized gain (498,798 - ) TOTAL DISTRIBUTIONS (1,903,879 (269,046 ) ) Share transactions 244,302,548 359,408,419 Net proceeds from sales of shares Reinvestment of distributions 1,876,010 265,568 Cost of shares redeemed (222,407,429 (417,772,180 ) ) Paid in capital portion of redemption fees 606,169 1,164,835 Net increase (decrease) in net assets resulting from share transactions 24,377,298 (56,933,358 ) TOTAL INCREASE (DECREASE) IN NET ASSETS 22,937,618 (44,377,134 ) NET ASSETS Beginning of period 40,856,828 85,233,962 End of period (including undistributed net investment income of $66,450 and $44,725, respectively) $ 63,794,446 $ 40,856,828 OTHER INFORMATION Shares Sold 20,716,490 29,627,725 Issued in reinvestment of distributions 177,460 22,698 Redeemed (19,068,782 (33,889,248 ) ) Net increase (decrease) 1,825,168 (4,238,825 )
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991 Net asset value, beginning of period $ 11.66 $ 11.01 $ 9.43 $ 12.51 $ 12.19 Income from Investment Operations Net investment income (loss) .02 .03 .01 (.12) - Net realized and unrealized gain (loss) .67 .51 1.47 (3.11) .15 Total from investment operations .69 .54 1.48 (3.23) .15 Less Distributions (.01) (.05) - - (.02) From net investment income In excess of net investment income (.01) - - - - From net realized gain (.35) - - - - In excess of net realized gain (.13) - - - - Total distributions (.50) (.05) - - (.02) Redemption fees added to paid in capital .12 .16 .10 .15 .19 Net asset value, end of period $ 11.97 $ 11.66 $ 11.01 $ 9.43 $ 12.51 TOTAL RETURN B, C 7.60% 6.36% 16.76% (24.62)% 2.80% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 63,794 $ 40,857 $ 85,234 $ 41,322 $ 73,398 Ratio of expenses to average net assets 1.79% 1.65% 1.76% A 2.07% 1.82% Ratio of expenses to average net assets before expense reductions 1.81% 1.66% 1.76% A 2.07% 1.82% Ratio of net investment income (loss) to average net assets .19% .23% .13% A (1.13)% (.02)% Portfolio turnover rate 209% 137% 236% A 89% 62%
a ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. NATURAL GAS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF FEBRUARY 28, 1995 YEAR FUND NATURAL GAS -5.06% -8.70% NATURAL GAS (INCL. 3% SALES CHARGE) -7.91% -11.44% S&P 500 7.36% 15.59% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, or since the fund started on April 21, 1993. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 28, 1995 PAST 1 LIFE OF YEAR FUND NATURAL GAS -5.06% -4.78% NATURAL GAS (INCL. 3% SALES CHARGE) -7.91% -6.32% S&P 500 7.36% 8.10% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above average gains. (checkmark) $10,000 OVER LIFE OF FUND Fidelity Select NatuStandard & Poor's 50 04/21/93 9700.00 10000.00 04/30/93 9515.70 9902.04 05/31/93 9670.90 10167.41 06/30/93 9952.20 10196.90 07/31/93 9913.40 10156.11 08/31/93 10767.00 10541.02 09/30/93 10582.70 10459.86 10/31/93 10010.40 10676.38 11/30/93 9156.80 10574.95 12/31/93 9209.91 10702.91 01/31/94 9672.38 11066.81 02/28/94 9327.99 10766.90 03/31/94 8993.44 10297.46 04/30/94 9692.06 10429.27 05/31/94 9613.34 10600.31 06/30/94 9662.54 10340.60 07/31/94 9603.50 10679.77 08/31/94 9288.63 11117.64 09/30/94 9229.59 10845.26 10/31/94 9554.30 11089.28 11/30/94 8717.93 10685.41 12/31/94 8580.06 10843.87 01/31/95 8313.78 11125.05 02/28/95 8856.20 11558.60 Let's say you invested $10,000 in Fidelity Select Natural Gas Portfolio on April 21, 1993, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would be valued at $8,856 - an 11.44% decrease. That compares to $10,000 invested in the S&P 500, which would have grown to $11,559 over the same period - a 15.59% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Anadarko Petroleum Corp. 6.9 Burlington Resources, Inc. 6.5 Pacific Enterprises 4.1 Enron Corp. 3.9 Enron Oil & Gas Co. 3.9 Noble Affiliates, Inc. 3.6 Amerada Hess Corp. 3.5 British Petroleum PLC ADR 3.1 Columbia Gas System, Inc. (The) 3.0 Union Texas Petroleum Holdings, Inc. 2.7 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 18.6 Row: 1, Col: 2, Value: 8.800000000000001 Row: 1, Col: 3, Value: 9.6 Row: 1, Col: 4, Value: 10.5 Row: 1, Col: 5, Value: 10.6 Row: 1, Col: 6, Value: 41.9 Crude Petroleum & Gas 41.9% Oil & Gas Exploration 10.6% Gas Distribution 10.5 % Gas Transmission 9.6% Gas Transmission & Distribution 8.8% All Others 18.6%* * INCLUDES SHORT-TERM INVESTMENTS NATURAL GAS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Daniel Pickering, Portfolio Manager of Fidelity Select Natural Gas Portfolio Q. DAN, HOW HAS THE FUND PERFORMED? A. The fund had a -5.06% return for the year ended February 28. That was substantially behind the 7.36% return of the S&P 500 over the same period. That said, the fund came out ahead of many of the stocks that dominate the sector. Q. WERE WEAK GAS PRICES THE ROOT OF THE SECTOR'S PROBLEMS? A. In large part, yes. There was a lot of drilling in 1993 and 1994, which led to a rise in production. This only added to a decade-old glut in supply. As a result, the price of natural gas fell from $2.30 per thousand cubic feet in February 1994 to $1.48 a year later. That, of course, limited the gas companies' earnings. Another negative was the warm winter, which meant we didn't have the usual seasonal increase in demand pushing prices up. Gas stocks did, however, pick up in mid-January as investors anticipated a recovery in gas prices. It would take a slowdown in production or an unforeseen event - like Hurricane Andrew in 1992 - to knock out some supply and send gas prices up again. Q. GIVEN THE BLEAK PICTURE FOR MOST OF THE YEAR, WHAT STRATEGIES WORKED? A. Emphasizing gas producers definitely helped. They did better than pipelines or local distribution companies (LDCs) which, because investors often buy them for their dividends, were hurt by both lower gas prices and higher interest rates. When we thought the bond market was near its bottom early last fall, we started increasing our focus on pipelines - buying companies like Williams Companies and Sonat. But results were disappointing, so in November we cut back. In contrast, gas producers were just hurt by lower gas prices. So they didn't go down as much, although they did badly until the middle of January. Seven of the fund's top 10 stocks on February 28 were producers, including Anadarko Petroleum, Burlington Resources, Amerada Hess, and Enron Oil & Gas. Most of these had flat or small negative returns for the period. Q. WHICH STOCKS IN PARTICULAR HELPED CONTAIN THE FUND'S LOSSES? A. Anadarko made the biggest positive contribution for the year, although it went through a tough time from May to mid-January. It was an example of a good value - in this case, a cheap price compared to the company's potential for finding gas and oil reserves. Pacific Enterprises, an LDC, was a nice surprise; its price rose more than 15% from September through February. With a 5% dividend yield, the stock benefited from the bond market's turnaround during the first two months of 1995. Plus, late in 1994, regulators gave the company a higher ceiling for profits. Finally, Western Company of North America, an oil service company, was less than 2% of the fund. But it went up 80% during the period as it agreed to merge with BJ Services, another oil service firm. Q. YOU'VE RECENTLY TAKEN OVER MANAGING THE FUND. WHAT CHANGES DO YOU FORESEE? A. Nothing dramatic. I'll probably trim the fund from about 100 to 60 stocks, so each one can make more of a difference. For the near term, I'll de-emphasize gas producers and add to our stake in pipelines, which look more attractive now given that the bond market appears to be bottoming. Finally, I might look at Canadian companies later in the year. Their stocks have been getting cheap and their long-term business prospects are strong. Of course, if gas prices started rising quickly, I'd shift our focus back to gas producers. But I don't see that happening soon. Q. WHAT THEN DO YOU THINK ABOUT THE SECTOR'S PROSPECTS? A. I actually think they could be positive over the long term. First, demand has been growing steadily since 1986 as more houses convert to natural gas; independent producers use natural gas to produce electricity; and regulations encourage natural gas usage. Second, gas prices are depressed, but could firm quickly if drilling started to drop off. Because of increased efficiencies in distribution, there's a relatively tight balance today between supply and demand compared to 10 years ago. Gas prices can fluctuate by as much as 50% or 60%, and it wouldn't take much to swing prices around. FUND FACTS START DATE: April 21, 1993 SIZE: as of February 28, 1995, more than $79 million MANAGER: Daniel Pickering, since February 1995; manager, Fidelity Select Energy Services Portfolio, since December 1995; equity analyst, energy services and hotel industries, since 1994; joined Fidelity in August 1994; petroleum engineer and planning analyst, ARCO Alaska, 1988-1992 (checkmark) NATURAL GAS PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 97.7% TROY OUNCES BUILDING MATERIALS - 1.6% FABRICATED PIPE & FITTINGS - 1.6% Coflexip sponsored ADR 50,680 $ 1,279,666 19238410 COAL - 1.2% Eastern Enterprises Co. 36,100 952,138 27637F10 COMPUTER SERVICES & SOFTWARE - 0.8% CAD/CAM/CAE - 0.8% Landmark Graphics Corp. (a) 31,000 643,250 51491310 ENERGY SERVICES - 7.3% DRILLING - 0.0% Akita Drilling Ltd. Class A (non-vtg.) (a) 600 1,187 00990510 OIL & GAS SERVICES - 7.3% Computalog Ltd. (a) 1,250 6,297 20490830 Enterra Corp. (a) 20,000 360,000 29380510 Global Industries Ltd. (a) 5,000 121,250 37933610 Halliburton Co. 47,375 1,764,719 40621610 Schlumberger Ltd. 35,900 2,041,813 80685710 Tuboscope Vetco International Corp. (a) 20,000 157,500 89860010 Western Co. of North America (a) 65,000 1,226,875 95804340 5,678,454 TOTAL ENERGY SERVICES 5,679,641 GAS - 30.0% GAS & OTHER SERVICES - 1.1% UGI Corp. 40,910 828,428 90268110 GAS DISTRIBUTION - 10.5% Aquila Gas Pipeline Corp. 48,200 361,500 03839B10 Brooklyn Union Gas Co. (The) 20,000 490,000 11425910 Indiana Energy, Inc. 10,000 187,500 45470710 K N Energy, Inc. 24,400 524,600 48262010 MCN Corp. 30,000 551,250 55267J10 National Fuel Gas Co. 10,000 272,500 63618010 New Jersey Resources Corp. 1,000 23,125 64602510 NICOR, Inc. 20,000 495,000 65408610 Northwest Natural Gas Co. 9,000 272,250 66765510 Pacific Enterprises 130,000 3,185,000 69423210 Piedmont Natural Gas, Inc. 30,517 602,711 72018610 Public Service Co. of North Carolina, Inc. 10,000 162,500 74451610 WICOR, Inc. 10,000 290,000 92925310 Washington Gas Light Co. 20,000 762,500 93883710 8,180,436 GAS TRANSMISSION - 9.6% Enron Corp. 93,110 3,072,630 29356110 ONEOK, Inc. 24,700 426,075 68267810 Panhandle Eastern Corp. 93,950 2,113,875 69846210 Tejas Power Corp. (a) 41,000 404,875 87907910 Trident NGL Holding, Inc. 35,900 376,950 89592610 Williams Companies, Inc. 40,000 1,150,000 96945710 7,544,405 GAS TRANSMISSION & DISTRIBUTION - 8.8% Bay State Gas Co. 10,000 246,250 07261260 Columbia Gas System, Inc. (The) (a) 90,895 2,363,270 19764810 Consolidated Natural Gas Co. 25,000 925,000 20961510 El Paso Natural Gas Co. 17,400 535,050 28369587 Equitable Resources, Inc. 10,000 277,500 29454910 Questar Corp. 41,540 1,199,468 74835610 Seagull Energy Corp. (a) 2,100 35,438 81200710 South Jersey Industries, Inc. 5,000 100,000 83851810 Southern Union Company 10,000 165,000 84403010 Tejas Gas Corp. (Del.) (a) 19,700 847,100 87907510 Yankee Energy System, Inc. 10,000 217,500 98477910 6,911,576 TOTAL GAS 23,464,845 TROY OUNCES OIL & GAS - 54.7% CRUDE PETROLEUM & GAS - 41.9% Alberta Energy Co. Ltd. 10,000 $ 136,735 01287310 Alexander Energy Corp. (a) 20,000 108,750 01461720 American Exploration Co. (a) 120,000 105,000 02576210 Anadarko Petroleum Corp. 123,075 5,399,916 03251110 Apache Corp. 72,225 1,805,625 03741110 Ballistic Energy Corp. (a) 1,000 3,778 05865K10 Barrett Resources Corp. (a) 35,000 686,875 06848020 Basin Exploration, Inc. (a) 10,000 70,000 07010710 Benton Oil & Gas Co. (a) 20,000 185,000 08328810 Berry Petroleum Co. Class A 33,700 303,300 08578910 Burlington Resources, Inc. 130,957 5,041,845 12201410 Chancellor Energy Resources (a) 5,000 6,297 15882910 Chesapeake Energy Corp. (a) 10,000 157,500 16516710 Cimarron Petroleum Ltd. (a) 2,000 13,674 17183810 Devon Energy Corp. 10,000 180,000 25179910 Enron Oil & Gas Co. 145,600 3,039,400 29356210 Flores & Rucks, Inc. (a) 100,000 962,500 34039C10 Global Natural Resources, Inc. (a) 10,000 75,000 37935510 Gulf Canada Corp. (a) 100,000 368,824 40218L30 Inverness Petroleum Ltd. (a) 39,700 207,136 46190810 Mitchell Energy & Development Corp. Class A 20,000 330,000 60659220 Morgan Hydrocarbons, Inc. (a) 55,000 128,639 61790010 Newfield Exploration Co. (a) 44,000 858,000 65129010 Noble Affiliates, Inc. 110,950 2,829,225 65489410 Northrock Resources Ltd. (a) 5,000 28,786 66679810 Northstar Energy Corp. (a) 52,800 379,979 66703R10 Nuevo Energy Corp. (a) 10,000 180,000 67050910 Oryx Energy Co. (a) 41,900 460,900 68763F10 Pinnacle Resources Ltd. (a) 22,900 238,962 72348R10 Pogo Producing Co. 21,000 388,500 73044810 Renaissance Energy Ltd. (a) 54,500 1,088,392 75966610 St. Mary Land & Exploration Co. 2,000 27,000 79222810 Talisman Energy Inc. (a) 10,000 176,316 87425E10 Tarragon Oil & Gas Ltd. (a) 45,500 425,678 87629E20 Total SA Class B sponsored ADR 19,470 540,293 89151E10 Triton Energy Corp. (a) 45,000 1,400,625 89675010 Ulster Petroleums Ltd. (a) 10,000 30,585 90384010 Union Texas Petroleum Holdings, Inc. 110,000 2,117,500 90864010 United Meridian Corp. (a) 10,000 105,000 91086510 Vastar Resources, Inc. 70,000 1,811,250 92238010 Vintage Petroleum, Inc. 10,100 175,488 92746010 Wascana Energy, Inc. (a) 20,000 156,525 93690110 32,734,798 OIL & GAS EXPLORATION - 10.6% Amerada Hess Corp. 56,000 2,744,000 02355110 Ampolex Ltd. Ord. 151,801 375,882 03212792 Anderson Exploration Ltd. (a) 30,000 283,365 03390110 British Petroleum PLC ADR 31,822 2,434,383 11088940 Chauvco Resources Ltd. Class A (a) 47,500 555,485 16260010 Louisiana Land & Exploration Co. 50,000 1,731,250 54626810 Petro-Canada 10,000 82,761 71644E10 Plains Petroleum Co. 3,000 67,500 72652910 8,274,626 OIL FIELD EQUIPMENT - 0.4% Ensign Resource Service Group Ord. (a) 128,300 304,696 29357T10 PETROLEUM REFINERS - 1.8% Coastal Corp. (The) 47,600 1,362,550 19044110 Wainoco Oil Corp. (a) 10,000 42,500 93067610 1,405,050 TOTAL OIL & GAS 42,719,170 COMMON STOCKS - CONTINUED TROY OUNCES SERVICES - 2.1% SURVEYING SERVICES - 2.1% Western Atlas, Inc. 39,800 $ 1,641,750 95767410 TOTAL COMMON STOCKS (Cost $78,050,988) 76,380,460 REPURCHASE AGREEMENTS - 2.3% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $1,766,298 1,766,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $79,816,988) $ 78,146,460 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $148,201,325 and $123,868,734, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $165,488 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $1,931,000 and $1,422,400, respectively. The weighted average interest rate paid was 5.1% (see Note 8 of Notes to Financial Statements). Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: United States 88.2% Canada 5.9 United Kingdom 3.1 France 2.3 Others (individually less than 1%) 0.5 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $80,553,226. Net unrealized depreciation aggregated $2,406,766, of which $2,504,042 related to appreciated investment securities and $4,910,808 related to depreciated investment securities. At February 28, 1995, the fund had a capital loss carryforward of approximately $2,686,000 which will expire on February 28, 2003. The fund has elected to defer to its fiscal year ending February 28, 1996 $5,601,000 of losses recognized during the period November 1, 1994 to February 28, 1995. NATURAL GAS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $1,766,000) (cost $79,816,988) - See $ 78,146,460 accompanying schedule Cash 143 Receivable for investments sold 1,060,953 Receivable for fund shares sold 1,025,885 Dividends receivable 140,551 Redemption fees receivable 126 TOTAL ASSETS 80,374,118 LIABILITIES Payable for fund shares redeemed $ 356,785 Accrued management fee 40,179 Other payables and accrued expenses 83,331 TOTAL LIABILITIES 480,295 NET ASSETS $ 79,893,823 Net Assets consist of: Paid in capital $ 90,514,851 Undistributed net investment income 58,168 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (9,008,668 ) Net unrealized appreciation (depreciation) on investments (1,670,528 ) NET ASSETS, for 8,893,657 shares outstanding $ 79,893,823 NET ASSET VALUE and redemption price per share ($79,893,823 (divided by) 8,893,657 shares) $8.98 Maximum offering price per share (100/97.00 of $8.98) $9.26
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 1,182,551 Dividends Interest 332,789 TOTAL INCOME 1,515,340 EXPENSES Management fee $ 478,146 Transfer agent 698,790 Fees Redemption fees (60,975 ) Accounting fees and expenses 77,295 Non-interested trustees' compensation 545 Custodian fees and expenses 18,607 Registration fees 66,458 Audit 26,389 Legal 958 Interest 808 Reports to shareholders 4,343 Miscellaneous 686 Total expenses before reductions 1,312,050 Expense reductions (30,065 1,281,985 ) NET INVESTMENT INCOME 233,355 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (8,500,238 ) Foreign currency transactions (305 (8,500,543 ) ) Change in net unrealized appreciation (depreciation) on investment securities 3,240,598 NET GAIN (LOSS) (5,259,945 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (5,026,590 ) OTHER INFORMATION $367,823 Sales Charges Paid to FDC Deferred sales charges withheld $3,010 by FDC Exchange fees withheld by FSC $42,271
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED APRIL 21, 1993 FEBRUARY 28, (COMMENCEMENT 1995 OF OPERATIONS) TO FEBRUARY 28, 1994
Operations $ 233,355 $ 66,941 Net investment income Net realized gain (loss) (8,500,543) 390,296 Change in net unrealized appreciation (depreciation) 3,240,598 (4,911,126) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (5,026,590) (4,453,889) Distributions to shareholders: (174,881) - From net investment income From net realized gain - (390,296) In excess of net realized gain - (296,172) TOTAL DISTRIBUTIONS (174,881) (686,468) Share transactions 105,674,129 154,654,614 Net proceeds from sales of shares Reinvestment of distributions 162,769 673,872 Cost of shares redeemed (83,945,454) (87,329,043) Paid in capital portion of redemption fees 130,955 213,809 Net increase (decrease) in net assets resulting from share transactions 22,022,399 68,213,252 TOTAL INCREASE (DECREASE) IN NET ASSETS 16,820,928 63,072,895 NET ASSETS Beginning of period 63,072,895 - End of period (including undistributed net investment income of $58,168 and $66,827, respectively) $ 79,893,823 $ 63,072,895 OTHER INFORMATION Shares Sold 11,247,429 15,170,940 Issued in reinvestment of distributions 18,602 74,626 Redeemed (9,026,223) (8,591,717) Net increase (decrease) 2,239,808 6,653,849
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS YEAR ENDED APRIL 21, 1993 FEBRUARY 28, (COMMENCEMENT OF OPERATIONS) TO SELECTED PER-SHARE DATA D 1995 FEBRUARY 28, 1994
Net asset value, beginning of period $ 9.48 $ 10.00 Income from Investment Operations Net investment income .03 .02 Net realized and unrealized gain (loss) (.53) (.46) Total from investment operations (.50) (.44) Less Distributions (.02) - From net investment income From net realized gain - (.07) In excess of net realized gain - (.06) Total distributions (.02) (.13) Redemption fees added to paid in capital .02 .05 Net asset value, end of period $ 8.98 $ 9.48 TOTAL RETURN B, C (5.06)% (3.84)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 79,894 $ 63,073 Ratio of expenses to average net assets 1.66% 1.93% A Ratio of expenses to average net assets before expense reductions 1.70% 1.94% A Ratio of net investment income to average net assets .30% .17% A Portfolio turnover rate 177% 44% A
a ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. PRECIOUS METALS AND MINERALS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1995 YEAR YEARS YEARS PRECIOUS METALS AND MINERALS -6.86% 14.65% 92.30% PRECIOUS METALS AND MINERALS (INCL. 3% SALES CHARGE) -9.65% 11.21% 86.54% S&P 500 7.36% 71.20% 274.70% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or ten years. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1995 YEAR YEARS YEARS PRECIOUS METALS AND MINERALS -6.86% 2.77% 6.76% PRECIOUS METALS AND MINERALS (INCL. 3% SALES CHARGE) -9.65% 2.15% 6.43% S&P 500 7.36% 11.35% 14.12% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER TEN YEARS Select Precious MetaStandard & Poor's 50 02/28/85 9700.00 10000.00 03/31/85 11715.32 10007.00 04/30/85 11369.25 9997.99 05/31/85 11226.75 10575.88 06/30/85 10833.88 10741.92 07/31/85 9968.02 10725.81 08/31/85 9746.27 10634.64 09/30/85 9418.93 10301.77 10/31/85 8574.18 10777.71 11/30/85 9566.76 11517.07 12/31/85 8964.88 12074.49 01/31/86 10865.56 12142.11 02/28/86 11002.83 13050.34 03/31/86 10327.03 13778.55 04/30/86 9788.51 13622.85 05/31/86 8795.93 14347.59 06/30/86 8975.44 14590.06 07/31/86 8858.56 13774.48 08/31/86 10546.92 14796.54 09/30/86 11925.40 13572.87 10/31/86 10878.19 14356.02 11/30/86 12000.20 14704.87 12/31/86 11914.71 14329.90 01/31/87 13346.61 16260.14 02/28/87 14286.97 16902.41 03/31/87 18368.96 17390.89 04/30/87 19640.57 17236.11 05/31/87 17888.10 17386.07 06/30/87 17631.64 18264.06 07/31/87 21222.08 19190.05 08/31/87 20666.41 19905.84 09/30/87 21307.56 19469.90 10/31/87 15430.35 15276.09 11/30/87 17375.18 14017.34 12/31/87 16383.71 15084.06 01/31/88 13505.19 15719.09 02/29/88 13526.84 16451.60 03/31/88 14652.27 15943.25 04/30/88 14165.30 16120.22 05/31/88 14241.05 16260.46 06/30/88 13721.62 17006.82 07/31/88 13808.20 16942.19 08/31/88 12985.76 16366.16 09/30/88 12109.22 17063.36 10/31/88 12552.91 17537.72 11/30/88 13018.23 17286.93 12/31/88 12474.57 17589.45 01/31/89 12993.41 18877.00 02/28/89 13410.73 18406.96 03/31/89 13410.73 18835.84 04/30/89 12801.67 19813.42 05/31/89 12192.60 20615.87 06/30/89 13151.31 20498.36 07/31/89 13512.24 22349.36 08/31/89 13782.94 22787.41 09/30/89 14267.94 22693.98 10/31/89 14256.66 22167.48 11/30/89 16072.58 22619.69 12/31/89 16486.71 23162.57 01/31/90 17799.71 21608.36 02/28/90 16269.78 21887.11 03/31/90 15561.90 22467.12 04/30/90 13963.47 21905.44 05/31/90 14762.69 24041.22 06/30/90 13689.45 23877.74 07/31/90 14522.92 23801.33 08/31/90 14671.35 21649.69 09/30/90 14340.24 20595.35 10/31/90 12730.39 20506.79 11/30/90 12502.04 21831.53 12/31/90 13012.38 22440.63 01/31/91 11600.00 23419.04 02/28/91 12641.92 25093.50 03/31/91 12398.81 25700.76 04/30/91 12364.08 25762.44 05/31/91 13058.69 26875.38 06/30/91 13915.37 25644.49 07/31/91 13915.37 26839.52 08/31/91 12456.69 27475.62 09/30/91 12711.38 27016.78 10/31/91 13568.07 27378.80 11/30/91 13996.41 26275.44 12/31/91 13212.44 29281.34 01/31/92 13492.81 28736.71 02/29/92 12791.89 29110.29 03/31/92 12289.56 28542.64 04/30/92 11565.27 29381.79 05/31/92 12324.60 29525.76 06/30/92 12394.13 29085.83 07/31/92 12557.98 30275.44 08/31/92 11996.21 29654.79 09/30/92 11504.66 30004.72 10/31/92 10767.33 30109.74 11/30/92 10135.33 31136.48 12/31/92 10323.40 31519.46 01/31/93 10573.45 31784.22 02/28/93 11740.34 32216.49 03/31/93 13335.88 32896.25 04/30/93 15491.06 32100.16 05/31/93 17539.07 32960.45 06/30/93 17824.84 33056.03 07/31/93 20146.71 32923.81 08/31/93 18122.51 34171.62 09/30/93 16693.67 33908.50 10/31/93 19063.17 34610.41 11/30/93 19027.45 34281.61 12/31/93 21846.81 34696.42 01/31/94 20943.06 35876.09 02/28/94 20027.25 34903.85 03/31/94 19822.40 33382.04 04/30/94 19823.19 33809.33 05/31/94 19859.36 34363.81 06/30/94 20257.27 33521.89 07/31/94 21028.98 34621.41 08/31/94 22524.16 36040.89 09/30/94 24248.44 35157.89 10/31/94 23307.92 35948.94 11/30/94 20811.94 34639.68 12/31/94 21597.53 35153.39 01/31/95 17835.07 36064.91 02/28/95 18653.53 37470.36 Let's say you invested $10,000 in Fidelity Select Precious Metals and Minerals Portfolio ten years ago on February 28, 1985 and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $18,654 - an 86.54% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $37,470 over the same period - a 274.70% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Barrick Gold Corp. 12.5 Anglo American Corp. of South Africa Ltd. ADR 4.8 Free State Consolidated Gold Mines Ltd. ADR 4.0 Western Deep Levels Ltd. ADR 3.8 Kloof Gold Mining Co. Ltd. sponsored ADR 3.7 Vaal Reefs Exploration & Mining Co. Ltd. ADR 3.6 Newmont Mining Corp. 3.6 De Beers Consolidated Mines Ltd. ADR 3.0 Western Areas Gold Mining Ltd. Ord. 2.9 Gold Fields South Africa Ltd. sponsored ADR 2.5 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 27.9 Row: 1, Col: 2, Value: 5.0 Row: 1, Col: 3, Value: 7.9 Row: 1, Col: 4, Value: 26.7 Row: 1, Col: 5, Value: 32.5 Gold Ores (South Africa) 32.5% Gold Ores (Canada) 26.7% Gold Ores (U.S.) 7.9% Gold Ores (Australia) 5.0% All Others 27.9%* * INCLUDES SHORT-TERM INVESTMENTS PRECIOUS METALS AND MINERALS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Malcolm MacNaught, Portfolio Manager of Fidelity Select Precious Metals and Minerals Portfolio Q. HOW HAS THE FUND PERFORMED, MALCOLM? A. The fund's return of -6.86% for the year ended February 28, 1995, is disappointing when compared to the S&P 500's return of 7.36% for the same period. But investors should remember this is a highly specialized sector of the market. Q. WHY HAS THE FUND'S PERFORMANCE BEEN DOWN? A. One reason is because the worldwide price for gold and silver bullion has been down, and the price of metal directly impacts the share price of the fund. Investors should remember that gold stocks can be much more volatile than the underlying bullion both on the upside and the downside. For example, during the past 12 months, gold was down 2.47%, and companies have been hurt by labor problems. In addition, the fund had a significant investment in South Africa. Although the world had expected South African gold production to decline in 1994, which would have boosted gold prices, instead it was flat. Finally, North American gold stocks ran up to very high price levels in 1993 and the market needed to correct. Q. WHY IS THE FUND STILL SO HEAVILY WEIGHTED TOWARDS SOUTH AFRICA? A. The fund had about 35% of its assets in South African gold stocks because the country remains the largest producer of gold. The gold market in South Africa has been turbulent in the past but things have begun to turn around. From a political standpoint, labor unrest could lessen in the next six months now that the African National Congress (ANC) has taken an active role and understands the importance of labor and management working together. With fewer labor problems, they should be more attractive investments and foreign investors should begin to return to the stocks. Q. WHAT ABOUT THE SITUATION IN THE REST OF THE WORLD? A. Australian gold production also increased unexpectedly in 1994 and South American production was up. World production for last year was a little higher than what was expected, thereby driving down gold prices. Offsetting this is strong jewelry demand worldwide. This is very important since the jewelry trade consumes more than 80% of the gold produced each year. Q. WHAT'S YOUR STRATEGY IN SUCH AN UNFAVORABLE ENVIRONMENT? A. The fund has been in a holding pattern for the past six months. The only strategy that made sense was to invest in the best companies with growing reserves, growing production and growing earnings. From my perspective, when the market for gold turns around, the fund will be well positioned in quality companies, and these are the ones that I hope will perform the best over time. Q. WHAT ARE SOME EXAMPLES OF SUCH COMPANIES? A. Well, you'll notice that the fund's top 10 holdings haven't changed much in the past six months. Barrick Gold Corp., the fund's largest holding, acquired Lac Minerals, making it an even more attractive investment than it was before. As I've stated before, I think Barrick Gold Corp. can double its production over the next few years. Though the stock has moved up and down a bit, I think tremendous opportunities still exist for the company to find undiscovered ore bodies. Other holdings such as Anglo American Corp. and Kloof Gold Mining are good holdings for the fund. Newmont Mining Corp. has some very exciting new projects in South America, Russia and possibly the Pacific Basin. Finally, DeBeers is beginning to look attractive again. Q. DO YOU REGRET SOME OF YOUR INVESTMENT DECISIONS OVER THE PAST SIX MONTHS? A. Sure. I could have had more of the fund in stable cash instruments such as short-term Treasury bills instead of being so heavily invested in gold shares. However, investors choose precious metals funds to track activities in the precious metals market and should expect the fund's performance to reflect conditions in that market. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. With world production remaining high and the improbability of gold breaking much above $400 per ounce, the next few months could be frustrating. However, much depends on perceived inflation and foreign buying of gold, which is trading at very low prices in some currencies. I think geographic concentration will be important, especially if the situation in South Africa continues to improve. For 1996, we earlier had expected a significant incremental increase in supply from Venezuela based on the number of projects under way. It now appears that many of them may be postponed indefinitely. Thus, Chile, Peru and Nevada may be the only geographic areas where there will be incremental growth. The two major corporate benefactors should be Barrick Gold and Newmont Mining, the fund's two largest North American holdings. Shareholders should understand that gold and precious metals are very volatile and anything can happen. FUND FACTS START DATE: July 14, 1981 SIZE: as of February 28, 1995, more than $364 million MANAGER: Malcolm MacNaught, since 1981; manager, American Gold Portfolio, since December 1985; Fidelity Advisor Global Resources Fund, since 1988; joined Fidelity in 1968 (checkmark) PRECIOUS METALS AND MINERALS PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.1% TROY OUNCES AUSTRALIA - 9.7% METALS & MINING - 1.4% METAL MINING - 0.3% Samantha Gold NL 500,000 $ 942,412 93599C22 METAL MINING SERVICES - 1.1% Acacia Resources Ltd. (a) 2,250,000 4,124,453 00399822 TOTAL METALS & MINING 5,066,865 PRECIOUS METALS - 8.3% GOLD & SILVER ORES - 3.3% North Flindes 610,000 3,381,614 65940091 Plutonic Resources Ltd. 1,297,600 5,035,389 72999192 Zapopan NL (a) 3,000,000 3,592,260 98999293 12,009,263 GOLD ORES - 5.0% Aurora Gold Ltd. (a) 500,000 524,795 05199722 Delta Gold (a) 440,000 904,130 24763810 Poseidon Gold Ltd. 4,300,000 6,992,359 36899192 Gold Mines Kalgoorlie 4,750,000 3,300,300 38065310 Great Central Mines N.L. ADR (a) 125,000 671,875 39029010 Great Central Mines NL (a) 2,116,500 3,973,602 39029092 St. Barbara Mines Ltd. 2,400,000 2,057,784 79999H22 18,424,845 TOTAL PRECIOUS METALS 30,434,108 TOTAL AUSTRALIA 35,500,973 CANADA - 27.0% HOLDING COMPANIES - 0.2% HOLDING COMPANY OFFICES - 0.2% Bolivar Goldfields Ltd. (a) 807,200 848,125 09760Q10 METALS & MINING - 0.1% METAL ORES - 0.1% International Musto Explorations Ltd. (a) 50,200 329,657 45993110 PRECIOUS METALS - 26.7% GOLD ORES - 26.7% Agnico Eagle Mines Ltd. 851,100 8,268,760 00847410 Barrick Gold Corp. 2,090,000 45,498,548 06790110 Cambior Inc. 421,000 4,393,148 13201L10 Euro-Nevada Mining Corp. 310,000 6,051,420 29870P10 Franco Nevada Mining Corp. 150,000 6,827,750 35186010 Golden Star Resources, Ltd. Canada (a) 267,600 1,829,514 38119T10 Hemlo Gold Mines Inc. 331,400 2,861,934 42366F10 Kinross Gold Corp. (a) 1,250,000 5,397,425 49690210 Orvana Minerals Corp. (a) 967,200 2,262,174 68759M10 Pegasus Gold, Inc. (a) 100,000 1,070,490 70556K10 Placer Dome, Inc. 400,000 8,204,096 72590610 Prime Resources Group, Inc. (a) 866,956 4,835,317 74157L10 TOTAL PRECIOUS METALS 97,500,576 TOTAL CANADA 98,678,358 GHANA - 2.3% PRECIOUS METALS - 2.3% GOLD ORES - 2.3% Ashanti Goldfields Ltd. GDR 399,200 8,303,360 04374320 TROY OUNCES SOUTH AFRICA - 44.6% CREDIT & OTHER FINANCE - 0.8% FINANCIAL SERVICES - 0.8% Genbel Investments Ltd. Ord. 1,400,000 $ 3,000,004 36867310 HOLDING COMPANIES - 1.2% HOLDING COMPANY OFFICES - 1.2% Beatrix Mines Ltd. ADR 401,300 2,387,735 07419020 Gencor Ltd. (Reg.) 578,500 1,844,709 36868193 Johannesburg Consolidated Investment Co. Ltd. 10,000 244,898 47779010 4,477,342 METALS & MINING - 7.7% MISCELLANEOUS NONMETAL MINERALS - 3.0% De Beers Consolidated Mines Ltd. ADR 521,300 10,816,975 24025330 MISCELLANEOUS METAL ORES - 4.7% Impala Platinum Holdings Ltd.: ADR (a) 300,000 6,150,000 45255320 Ord. 114,700 2,370,077 45255310 Rustenberg Platinum Holding Ltd. ADR 380,000 8,550,000 78307820 17,070,077 TOTAL METALS & MINING 27,887,052 PRECIOUS METALS - 34.9% GOLD & SILVER ORES - 2.4% Eastvaal Gold Holdings Ltd. (a) 1,171,400 2,211,322 27799322 Southvaal Holdings Ltd. ADR 258,000 6,385,500 84473820 8,596,822 GOLD ORES - 32.5% Anglo American Corp. of South Africa Ltd. ADR 350,000 17,675,000 03486130 Driefontein Consolidated Ltd. sponsored ADR 685,000 8,990,625 26202650 Free State Consolidated Gold Mines Ltd. ADR 1,270,000 14,763,750 35614220 Gold Fields South Africa Ltd. sponsored ADR 380,200 9,029,750 38059750 Harmony Gold Mining Co. Ltd. ADR (a) 170,000 1,423,750 41321620 Hartebeestfontein Gold Mining Co., Ltd. ADR 1,203,800 4,694,820 41619840 Kloof Gold Mining Co. Ltd. sponsored ADR 1,150,000 13,656,250 49874660 Middle Witwatersrand West Area 300,000 746,172 59603410 Randfontein Estates Gold Mining Co. Ltd. ADR 890,700 6,234,900 75233640 Vaal Reefs Exploration & Mining Co. Ltd. ADR 1,929,600 13,266,000 91850640 Western Areas Gold Mining Ltd. Ord. 969,200 10,507,911 95765410 Western Deep Levels Ltd. Ord. 42,000 1,350,000 95807710 Western Deep Levels Ltd. ADR 431,300 14,017,250 95807720 Winkelhaak Mines Ltd. ADR 255,700 2,365,225 97420420 118,721,403 TOTAL PRECIOUS METALS 127,318,225 TOTAL SOUTH AFRICA 162,682,623 UNITED KINGDOM - 0.1% Signet Group PLC (a) 737,500 204,243 82999F22 COMMON STOCKS - CONTINUED TROY OUNCES USA - 10.4% METALS & MINING - 0.9% MISCELLANEOUS METAL ORES - 0.9% Still Watermining Co. (a) 200,000 $ 3,175,000 86074Q10 PRECIOUS METALS - 7.9% GOLD ORES - 7.9% Amax Gold, Inc. (a) 353,000 1,809,125 02312010 Battle Mountain Gold Co. 300,000 2,850,000 07159310 Hecla Mining Co. (a) 280,000 2,625,000 42270410 Homestake Mining Co. 545,000 8,447,500 43761410 Newmont Mining Corp. 360,000 13,005,000 65163910 Santa Fe Pacific Gold Corp. 2,000 21,750 80217610 28,758,375 SECURITIES INDUSTRY - 1.6% INVESTMENT MANAGERS - 1.6% Pioneer Group, Inc. 300,000 5,850,000 72368410 TOTAL USA 37,783,375 TOTAL COMMON STOCKS (Cost $348,378,591) 343,152,932 CONVERTIBLE PREFERRED STOCKS - 0.7% PRECIOUS METALS - 0.7% GOLD ORES - 0.7% Newmont Mining Corp. depository shares representing 1/2 $1.375 (b) (Cost $3,015,897) 46,000 2,403,500 65163930 BULLION - 0.0% TROY OUNCES Gold Bullion (a) 240 90,361 68999410 Silver Bullion (5,000 oz Bar) (a) 5,999 27,178 83799692 TOTAL BULLION (Cost $122,134) 117,539 REPURCHASE AGREEMENTS - 5.2% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $ 19,096,225 19,093,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $370,609,622) $364,766,971 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of this security amounted to $2,403,500 or 0.7% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $201,210,970 and $169,325,019, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $40,501 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $6,588,000 and $3,144,565, respectively. The weighted average interest rate paid was 4.9% (see Note 8 of Notes to Financial Statements). Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: South Africa 44.8% Canada 27.1 United States 16.0 Australia 9.7 Ghana 2.3 Others (individually less than 1%) 0.1 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $371,643,510. Net unrealized depreciation aggregated $6,876,539, of which $48,249,666 related to appreciated investment securities and $55,126,205 related to depreciated investment securities. At February 28, 1995, the fund had a capital loss carryforward of approximately $45,248,000 of which $17,296,000, $6,357,000, $2,070,000, $8,843,000 and $10,682,000 will expire on February 28, 1997, 1998, 1999, 2000 and 2001, respectively. PRECIOUS METALS AND MINERALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $19,093,000) (cost $370,609,622) - See $ 364,766,971 accompanying schedule Cash 80 Receivable for investments sold 1,025,406 Receivable for fund shares sold 5,608,877 Dividends receivable 1,320,506 Redemption fees receivable 2,682 Other receivables 33,422 TOTAL ASSETS 372,757,944 LIABILITIES Payable for investments purchased $ 1,710,936 Payable for fund shares redeemed 6,313,278 Accrued management fee 186,668 Other payables and accrued expenses 343,115 TOTAL LIABILITIES 8,553,997 NET ASSETS $ 364,203,947 Net Assets consist of: Paid in capital $ 417,207,218 Distributions in excess of net investment income (912,704 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (46,247,898 ) Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies (5,842,669 ) NET ASSETS, for 23,855,474 shares outstanding $ 364,203,947 NET ASSET VALUE and redemption price per share ($364,203,947 (divided by) 23,855,474 shares) $15.27 Maximum offering price per share (100/97.00 of $15.27) $15.74
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 8,890,966 Dividends Interest (including security lending 1,808,019 fees of $81) TOTAL INCOME 10,698,985 EXPENSES Management fee $ 2,704,371 Transfer agent 3,271,506 Fees Redemption fees (354,030 ) Accounting and security lending fees 431,938 Non-interested trustees' compensation 6,123 Custodian fees and expenses 125,699 Registration fees 106,697 Audit 52,456 Legal 7,168 Interest 9,874 Reports to shareholders 19,652 Miscellaneous 3,918 Total expenses before reductions 6,385,372 Expense reductions (1,739 6,383,633 ) NET INVESTMENT INCOME 4,315,352 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including realized loss of $760,009 on sale of investments in precious metals)25,230,795 Foreign currency transactions 36,384 25,267,179 Change in net unrealized appreciation (depreciation) on: Investment securities (77,536,130 ) Assets and liabilities in (18 (77,536,148 foreign currencies ) ) NET GAIN (LOSS) (52,268,969 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (47,953,617 ) OTHER INFORMATION $2,403,153 Sales Charges Paid to FDC Deferred sales charges withheld $55,156 by FDC Exchange fees withheld by FSC $258,263
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ 4,315,352 $ 5,207,951 Net investment income Net realized gain (loss) 25,267,179 18,030,231 Change in net unrealized appreciation (depreciation) (77,536,148) 112,846,238 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (47,953,617) 136,084,420 Distributions to shareholders: (4,315,352) (5,127,603) From net investment income In excess of net investment income (1,235,277) (551,255) TOTAL DISTRIBUTIONS (5,550,629) (5,678,858) Share transactions 934,524,938 1,777,546,533 Net proceeds from sales of shares Reinvestment of distributions 5,435,430 5,586,071 Cost of shares redeemed (934,775,405) (1,649,222,991) Paid in capital portion of redemption fees 3,310,757 6,974,855 Net increase (decrease) in net assets resulting from share transactions 8,495,720 140,884,468 TOTAL INCREASE (DECREASE) IN NET ASSETS (45,008,526) 271,290,030 NET ASSETS Beginning of period 409,212,473 137,922,443 End of period (including distributions in excess of net investment income of $(912,704) and $ 364,203,947 $ 409,212,473 $(449,228), respectively) OTHER INFORMATION Shares Sold 53,173,413 119,380,060 Issued in reinvestment of distributions 324,762 319,586 Redeemed (54,266,578) (109,070,745) Net increase (decrease) (768,403) 10,628,901
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 16.62 $ 9.86 $ 9.90 $ 10.68 $ 12.23 Income from Investment Operations Net investment income .17 .21 .09 .10 .18 Net realized and unrealized gain (loss) (1.42) 6.48 (.05) (.91) (1.71) Total from investment operations (1.25) 6.69 .04 (.81) (1.53) Less Distributions (.18) (.19) (.17) (.10) (.15) From net investment income In excess of net investment income (.05) (.02) - - - Total distributions (.23) (.21) (.17) (.10) (.15) Redemption fees added to paid in capital .13 .28 .09 .13 .13 Net asset value, end of period $ 15.27 $ 16.62 $ 9.86 $ 9.90 $ 10.68 TOTAL RETURN B, C (6.86)% 70.58% 1.51% (6.46)% (11.45)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 364,204 $ 409,212 $ 137,922 $ 130,002 $ 155,367 Ratio of expenses to average net assets 1.46% 1.55% 1.73% A 1.81% 1.79% Ratio of expenses to average net assets before expense reductions 1.46% 1.55% 1.73% A 1.81% 1.79% Ratio of net investment income to average net assets .99% 1.38% 1.12% A .92% 1.52% Portfolio turnover rate 43% 73% 36% A 44% 41%
A ANNUALIZED B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. UTILITIES GROWTH PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1995 YEAR YEARS YEARS UTILITIES GROWTH 0.21% 55.84% 244.63% UTILITIES GROWTH (INCL. 3% SALES CHARGE) -2.79% 51.16% 234.29% S&P 500 7.36% 71.20% 274.70% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or ten years. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1995 YEAR YEARS YEARS UTILITIES GROWTH 0.21% 9.28% 13.17% UTILITIES GROWTH (INCL. 3% SALES CHARGE) -2.79% 8.61% 12.83% S&P 500 7.36% 11.35% 14.12% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER TEN YEARS Select Utilities (06Standard & Poor's 50 02/28/85 9700.00 10000.00 03/31/85 10248.84 10007.00 04/30/85 10471.65 9997.99 05/31/85 11053.10 10575.88 06/30/85 11347.58 10741.92 07/31/85 10696.76 10725.81 08/31/85 11002.70 10634.64 09/30/85 10507.64 10301.77 10/31/85 11230.77 10777.71 11/30/85 11698.02 11517.07 12/31/85 12404.46 12074.49 01/31/86 12749.34 12142.11 02/28/86 13650.47 13050.34 03/31/86 14106.60 13778.55 04/30/86 13828.47 13622.85 05/31/86 14401.42 14347.59 06/30/86 15235.80 14590.06 07/31/86 15916.30 13774.48 08/31/86 16969.88 14796.54 09/30/86 15093.73 13572.87 10/31/86 15797.99 14356.02 11/30/86 15938.84 14704.87 12/31/86 15386.70 14329.90 01/31/87 16631.83 16260.14 02/28/87 16045.89 16902.41 03/31/87 15724.75 17390.89 04/30/87 14823.29 17236.11 05/31/87 14586.66 17386.07 06/30/87 15105.00 18264.06 07/31/87 14896.53 19190.05 08/31/87 15364.16 19905.84 09/30/87 15240.21 19469.90 10/31/87 14321.86 15276.09 11/30/87 13842.96 14017.34 12/31/87 13962.53 15084.06 01/31/88 15169.16 15719.09 02/29/88 15050.28 16451.60 03/31/88 14622.31 15943.25 04/30/88 14663.92 16120.22 05/31/88 15121.61 16260.46 06/30/88 15519.86 17006.82 07/31/88 15470.60 16942.19 08/31/88 15446.14 16366.16 09/30/88 15984.24 17063.36 10/31/88 16320.56 17537.72 11/30/88 16289.99 17286.93 12/31/88 16260.23 17589.45 01/31/89 17026.15 18877.00 02/28/89 16919.43 18406.96 03/31/89 17208.22 18835.84 04/30/89 18093.43 19813.42 05/31/89 18953.52 20615.87 06/30/89 19432.25 20498.36 07/31/89 20496.42 22349.36 08/31/89 20586.71 22787.41 09/30/89 20883.38 22693.98 10/31/89 20786.64 22167.48 11/30/89 21470.29 22619.69 12/31/89 22605.39 23162.57 01/31/90 21489.63 21608.36 02/28/90 21450.94 21887.11 03/31/90 21334.85 22467.12 04/30/90 20444.82 21905.44 05/31/90 21508.98 24041.22 06/30/90 21763.87 23877.74 07/31/90 21942.54 23801.33 08/31/90 20738.21 21649.69 09/30/90 20791.15 20595.35 10/31/90 21856.51 20506.79 11/30/90 22432.21 21831.53 12/31/90 22730.74 22440.63 01/31/91 22630.51 23419.04 02/28/91 23606.02 25093.50 03/31/91 23873.29 25700.76 04/30/91 23766.38 25762.44 05/31/91 23773.06 26875.38 06/30/91 23484.68 25644.49 07/31/91 24248.97 26839.52 08/31/91 24804.82 27475.62 09/30/91 25569.12 27016.78 10/31/91 25923.47 27378.80 11/30/91 26222.24 26275.44 12/31/91 27510.54 29281.34 01/31/92 26663.72 28736.71 02/29/92 26468.31 29110.29 03/31/92 26193.27 28542.64 04/30/92 26909.81 29381.79 05/31/92 27430.92 29525.76 06/30/92 27748.23 29085.83 07/31/92 29223.64 30275.44 08/31/92 29208.66 29654.79 09/30/92 29365.94 30004.72 10/31/92 29358.45 30109.74 11/30/92 29560.66 31136.48 12/31/92 30424.52 31519.46 01/31/93 30942.05 31784.22 02/28/93 32533.84 32216.49 03/31/93 33412.08 32896.25 04/30/93 33229.47 32100.16 05/31/93 33300.74 32960.45 06/30/93 34575.75 33056.03 07/31/93 34971.72 32923.81 08/31/93 36492.23 34171.62 09/30/93 36492.23 33908.50 10/31/93 36120.02 34610.41 11/30/93 34354.01 34281.61 12/31/93 34241.17 34696.42 01/31/94 34942.76 35876.09 02/28/94 33357.35 34903.85 03/31/94 32154.62 33382.04 04/30/94 33079.58 33809.33 05/31/94 32419.11 34363.81 06/30/94 32316.78 33521.89 07/31/94 33247.03 34621.41 08/31/94 33116.79 36040.89 09/30/94 32270.27 35157.89 10/31/94 32679.58 35948.94 11/30/94 31498.16 34639.68 12/31/94 31703.67 35153.39 01/31/95 32997.51 36064.91 02/28/95 33428.78 37470.36 Let's say you invested $10,000 in Fidelity Select Utilities Growth Portfolio on February 28, 1985 and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $33,429 - a 234.29% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $37,470 over the same period - a 274.70% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Ameritech Corp. 7.0 SBC Communications, Inc. 6.6 BellSouth Corp. 6.3 NYNEX Corp 5.9 U.S. West, Inc. 5.9 Bell Atlantic Corp. 4.7 GTE Corp. 3.8 Pacific Telesis Group 3.4 Enron Corp. 2.9 Williams Companies, Inc. 2.7 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 22.5 Row: 1, Col: 2, Value: 6.8 Row: 1, Col: 3, Value: 6.9 Row: 1, Col: 4, Value: 8.1 Row: 1, Col: 5, Value: 10.2 Row: 1, Col: 6, Value: 45.5 Telephone Services 45.5% Electric Power 10.2% Gas Transmission 8.1% Gas Distribution 6.9% Electric & Other Services 7.4% All Others 21.9%* * INCLUDES SHORT-TERM INVESTMENTS UTILITIES GROWTH PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW John Muresianu, Portfolio Manager of Fidelity Select Utilities Growth Portfolio Q. JOHN, HOW DID THE FUND PERFORM? A. For the 12 months ended February 28, 1995, the fund had a total return of 0.21%, lagging the S&P 500, which returned 7.36% during the same period. Q. WHAT HAS THE INVESTING ENVIRONMENT BEEN LIKE FOR UTILITY STOCKS? A. After sharply declining much of the year, utilities had a strong rally from October 1994 through January 1995. In February, there was a natural pullback in telephone and electric stocks, after an extremely strong rise, while gas utilities performed better. The performance of utility stocks has, for the most part, been a reflection of the market's reaction to the interest rate environment. As interest rates were rising through much of the year, investors turned away from interest-rate-sensitive utility stocks. However, more recently the general feeling has been that the economy is slowing down, making interest rate increases seem less likely and utility stocks more attractive. Q. HOW HAVE THE FUND'S TELEPHONE HOLDINGS FARED? A. The telephone group did better than the others in the first half of the year. I've focused on these stocks, which helped performance at that time. I believe - from a long-term perspective - that telephone utilities can be a much better investment than electric and gas utilities, because of volume growth potential, particularly on the cellular side. Two big relative winners for the fund over the period were Ameritech and SBC Communications. Both companies presently are enjoying about a 40% to 50% cellular subscriber growth rate and are controlling costs. However, in the second half of calendar 1994, telephones fared poorly and electric utilities did well. In January 1995, both telephone and electric utility stocks surged - with telephone utilities once again outperforming electrics - but both declined in February. Q. WHAT WAS BEHIND THE SURGE IN ELECTRICAL STOCKS? A. The group had declined so much that it attracted "bottom-fishers" - those who buy stocks after significant declines. The second factor was the perception that interest rates had peaked. A third factor was that in the second half of 1994, many portfolio strategists turned negative on the broad market, and recommended electric utilities as a "safe haven." Finally, many institutional investors - such as mutual funds, insurance companies, banks and pension funds - had shifted away from electric utilities. This added some fuel to the rally. Q. LET'S TURN TO GAS STOCKS . . . A. When you talk about gas companies, it's important to distinguish between local distribution companies - such as Brooklyn Union Gas and People's Energy in Chicago - and pipeline companies. By and large, the distribution companies are regulated. The biggest factor impacting earnings for these companies is the direction of interest rates. The higher rates go, the higher the earnings allowed by regulators. The paradox here, however, is that higher rates are good for company earnings, but generally bad for their stock prices. Q. WHAT ABOUT PIPELINE COMPANIES? A. Most stocks in this group are really diversified energy conglomerates. For example, Enron is a pipeline company, but its earnings will be driven for the most part by international power projects, oil and gas production, and electricity marketing. This group had been the most disappointing in the six months ended January 31, largely because of sharply weaker-than-expected gas prices. However, it - along with the gas distribution group - had a nice bounce in February, because of the perception that gas prices were bottoming out. The fund's holdings in ENSERCH, Coastal and Sonat were among the specific stocks in the pipeline group that suffered, then recovered. Q. WHY HAS THE FUND'S CASH AND SHORT-TERM INVESTMENTS POSITION - 10.2% AT THE END OF THE PERIOD - STAYED RELATIVELY HIGH? A. I'm still concerned about the broad market. Valuations - stock prices relative to earnings - are at historical highs, and interest rates have risen sharply over the past 12 months. The combination of high valuations and sharply higher rates traditionally has been a dangerous combination, making the stock market a lot riskier today than it has been for a while. FUND FACTS START DATE: December 10, 1981 SIZE: as of February 28, 1995, more than $237 million MANAGER: John Muresianu, since 1992; manager, Fidelity Utilities Fund, since 1993; Fidelity Select Natural Gas Portfolio, 1993 to 1994; U.S. Pension Accounts and Canadian Mutual Funds, 1990-1992; analyst, natural gas, life insurance, 1989-1992; joined Fidelity in 1986 (checkmark) Q. WHAT'S YOUR OUTLOOK GOING FORWARD? A. Stock performance in the utility sector probably will be driven largely by moves in interest rates. If rates continue to rise, stocks in the sector may continue to struggle. In that case, I'll continue to favor telephone stocks, because they have the best long-term outlook for earnings growth. UTILITIES GROWTH PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 88.8% TROY OUNCES CELLULAR - 1.9% CELLULAR & COMMUNICATION SERVICES - 1.9% Airtouch Communications (a) 163,600 $ 4,458,100 00949T10 COMPUTERS & OFFICE EQUIPMENT - 0.0% ELECTRONIC COMPUTERS - 0.0% Itron, Inc. (a) 1,100 27,213 46574110 ELECTRIC UTILITY - 17.0% ELECTRIC & OTHER SERVICES - 6.8% CIPSCO, Inc. 4,500 132,750 12553910 Hidro Cantabrico 33,050 879,785 42899999 IES Industries, Inc. 21,900 599,513 44949M10 Illinova Corp. 113,100 2,643,713 45231710 LG&E Energy Corp. 9,900 384,863 50191710 Long Island Lighting Co. 18,000 288,000 54267110 Montana Power Co. 73,300 1,740,875 61208510 NIPSCO Industries, Inc. 117,100 3,703,288 62914010 New York State Electric & Gas Corp. 300 6,450 64984010 Niagara Mohawk Power Corp. 127,300 1,893,588 65352210 Peco Energy Co. 52,600 1,407,050 69330410 Public Service Co. of Colorado 307 9,402 74444810 Public Service Co. of New Mexico (a) 125,500 1,615,813 74449910 Rochester Gas & Electric Corp. 21,200 463,750 77136710 Sierra Pacific Resources 12,400 251,100 82642510 Utilicorp United, Inc. 8,105 234,032 91800510 16,253,972 ELECTRIC POWER - 10.2% AES Corp. 252,249 4,666,607 00130H10 Boston Edison Co. 46,700 1,144,150 10059910 Centerior Energy Corp. 38,700 377,325 15188310 Central & South West Corp. 9,200 226,550 15235710 Central Louisiana Electric Co., Inc. 66,106 1,553,491 15389760 CESC Ltd. GDR (a)(b) 45,000 242,100 15712810 CESC Ltd. GDR (warrants) (a)(b) 18,000 180 15712811 DQE, Inc. 70,300 2,363,838 23329J10 Detroit Edison Company 14,500 415,063 25084710 Eastern Utilities Associates 118,244 2,793,515 27717310 El Paso Electric Co. (a) 76,900 124,963 28367710 Empresa Nacional De Electricidad SA sponsored ADR 24,300 1,060,088 29244720 General Public Utilities Corp. 14,600 441,650 37055010 Great Bay Power (a) 12,090 108,810 39013910 Hawaiian Electric Industries, Inc. 4,200 138,600 41987010 IPALCO Enterprises, Inc. 800 26,300 46261310 Kansas City Power & Light Co. 1,300 31,038 48513410 Maine Public Service Co. 44,200 1,038,700 56048310 New England Electric Systems 17,800 587,400 64400110 Northeast Utilities 23,000 523,250 66439710 Nova Scotia Power, Inc. 49,700 402,379 66981610 Ohio Edison Co. 26,500 556,500 67734710 Pinnacle West Capital Corp. 150,200 3,229,300 72348410 Portland General Corp. 47,100 959,663 73650610 Sithe Energies, Inc. (a) 27,200 258,400 82990410 TECO Energy, Inc. 16,900 363,350 87237510 United Illuminating Co. 22,500 748,125 91063710 24,381,335 TOTAL ELECTRIC UTILITY 40,635,307 GAS - 22.3% GAS & OTHER SERVICES - 1.4% MDU Resources Group, Inc. 66,600 1,789,875 55269010 UGI Corp. 56,188 1,137,807 90268110 Western Resources, Inc. 15,000 476,250 95942510 3,403,932 TROY OUNCES GAS DISTRIBUTION - 6.9% Energen Corp. 43,500 $ 957,000 29265N10 MCN Corp. 315,400 5,795,475 55267J10 NUI Corp. 27,100 406,500 62943010 National Fuel Gas Co. 16,800 457,800 63618010 New Jersey Resources Corp. 18,400 425,500 64602510 NICOR, Inc. 37,100 918,225 65408610 Pacific Enterprises 257,800 6,316,100 69423210 Peoples Energy Corp. 21,300 559,125 71103010 WICOR, Inc. 24,700 716,300 92925310 16,552,025 GAS TRANSMISSION - 8.1% Enron Corp. 211,600 6,982,800 29356110 ONEOK, Inc. 58,600 1,010,850 68267810 Sonat, Inc. 160,800 4,663,200 83541510 Tejas Power Corp. (a) 4,500 44,438 87907910 Transco Energy Co. 4,037 71,657 89353210 Williams Companies, Inc. 226,000 6,497,500 96945710 19,270,445 GAS TRANSMISSION & DISTRIBUTION- 5.9% Columbia Gas System, Inc. (The) (a) 129,900 3,377,400 19764810 Consolidated Natural Gas Co. 9,400 347,800 20961510 El Paso Natural Gas Co. 13,600 418,200 28369587 ENSERCH Corp. 87,400 1,223,600 29356710 Equitable Resources, Inc. 28,150 781,163 29454910 Noram Energy Corp. 58,900 331,313 65541910 Questar Corp. 102,300 2,953,913 74835610 Tejas Gas Corp. (a) 10,300 442,900 87907510 Westcoat Energy, Inc. 218,700 3,344,518 95751D10 Yankee Energy System, Inc. 36,600 796,050 98477910 14,016,857 TOTAL GAS 53,243,259 HOLDING COMPANIES - 1.1% HOLDING COMPANY OFFICES - 1.1% Cinergy Corp. 108,306 2,680,574 17247410 INDEPENDENT POWER - 0.0% STEAM SUPPLY - 0.0% Bonneville Pacific Corp. (a) 11,300 57 09890410 METALS & MINING - 0.3% METAL ORES - 0.3% Cameco, Inc. 32,500 795,221 13321L10 OIL & GAS - 0.7% CRUDE PETROLEUM & GAS - 0.2% Nuevo Energy Corp. (a) 1,400 25,200 67050910 Occidental Petroleum Corp. 26,500 526,688 67459910 551,888 PETROLEUM REFINERS - 0.5% Coastal Corp. (The) 39,700 1,136,413 19044110 TOTAL OIL & GAS 1,688,301 TELEPHONE SERVICES - 45.5% AT&T Corp. 3,500 181,125 00195710 ALLTEL Corp. 15,600 446,550 02003910 Ameritech Corp. 392,200 16,815,575 03095410 BCE, Inc. 19,153 596,141 05534B10 Bell Atlantic Corp. 207,300 11,116,463 07785310 BellSouth Corp. 254,900 15,039,100 07986010 British Telecommunications PLC ADR 23,200 1,386,200 11102140 COMMON STOCKS - CONTINUED TROY OUNCES TELEPHONE SERVICES - CONTINUED Cincinnati Bell, Inc. 23,200 $ 487,200 17187010 GTE Corp. 272,900 9,108,038 36232010 NYNEX Corp. 361,700 14,196,725 67076810 Pacific Telesis Group 271,800 8,154,000 69489010 SBC Communications, Inc. 380,600 15,842,475 84533310 Sprint Corp. 5,100 149,175 85206110 Telephone & Data Systems, Inc. 18,407 839,819 87943310 U.S. West, Inc. 362,259 14,037,536 91288910 TOTAL TELEPHONE SERVICES 108,396,122 TOTAL COMMON STOCKS (Cost $212,292,202) 211,924,154 NONCONVERTIBLE PREFERRED STOCKS - 0.6% ELECTRIC UTILITY - 0.6% ELECTRIC & OTHER SERVICES - 0.6% Long Island Lighting Co. $7.95 (Cost $1,595,000) 63,800 1,499,300 54267177 NONCONVERTIBLE BONDS - 0.4% PRINCIPAL AMOUNT ELECTRIC UTILITY - 0.4% ELECTRIC POWER - 0.4% Northern Indiana Public Service Co., 1st Mtg 8 1/4%, 7/15/03 (Cost $797,190) $ 845,000 839,719 665262AR REPURCHASE AGREEMENTS - 10.2% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $24,392,119 24,388,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $239,072,392) $ 238,651,173 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $242,280 or 0.1% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $51,484,784 and $74,722,319, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $47,308 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $2,759,000 and $1,301,615, respectively. The weighted average interest rate paid was 5.0% (see Note 8 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $238,953,646. Net unrealized depreciation aggregated $302,473, of which $10,830,403 related to appreciated investment securities and $11,132,876 related to depreciated investment securities. The fund has elected to defer to its fiscal year ending February 28, 1996 $853,000 of losses recognized during the period November 1, 1994 to February 28, 1995. The fund hereby designates $1,379,000 as a capital gain dividend for the purpose of the dividend paid deduction. UTILITIES GROWTH PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $24,388,000) (cost $239,072,392) - See $ 238,651,173 accompanying schedule Cash 15,943 Receivable for investments sold 473,924 Receivable for fund shares sold 994,338 Dividends receivable 529,634 Interest receivable 8,582 Redemption fees receivable 245 Other receivables 647 TOTAL ASSETS 240,674,486 LIABILITIES Payable for fund shares redeemed $ 2,727,691 Accrued management fee 122,071 Other payables and 189,518 accrued expenses TOTAL LIABILITIES 3,039,280 NET ASSETS $ 237,635,206 Net Assets consist of: Paid in capital $ 237,200,664 Undistributed net investment income 1,881,976 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (1,026,215 ) Net unrealized appreciation (depreciation) on investments (421,219 ) NET ASSETS, for 6,813,560 $ 237,635,206 shares outstanding NET ASSET VALUE and redemption price per share ($237,635,206 (divided by) 6,813,560 shares) $34.88 Maximum offering price per share (100/97.00 of $34.88) $35.96
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 9,840,815 Dividends Interest (including security lending fees of $1,155) 623,780 TOTAL INCOME 10,464,595 EXPENSES Management fee $ 1,391,823 Transfer agent 1,556,111 Fees Redemption fees (100,256 ) Accounting and security lending fees 225,235 Non-interested trustees' compensation 5,189 Custodian fees and expenses 20,725 Registration fees 53,181 Audit 37,541 Legal 4,296 Interest 2,339 Reports to shareholders 9,613 Miscellaneous 2,246 Total expenses before reductions 3,208,043 Expense reductions (19,897 3,188,146 ) NET INVESTMENT INCOME 7,276,449 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (690,134 ) Foreign currency transactions (1,518 (691,652 ) ) Change in net unrealized appreciation (depreciation) on investment securities (7,619,880 ) NET GAIN (LOSS) (8,311,532 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (1,035,083 ) OTHER INFORMATION $485,996 Sales Charges Paid to FDC Deferred sales charges withheld $58,366 by FDC Exchange fees withheld by FSC $64,493
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ 7,276,449 $ 9,675,531 Net investment income Net realized gain (loss) (691,652 46,918,583 ) Change in net unrealized appreciation (depreciation) (7,619,880 (44,694,870 ) ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (1,035,083 11,899,244 ) Distributions to shareholders: (6,365,877 (7,450,649 From net investment income ) ) From net realized gain (4,277,985 (32,195,614 ) ) TOTAL DISTRIBUTIONS (10,643,862 (39,646,263 ) ) Share transactions 155,428,275 246,579,723 Net proceeds from sales of shares Net asset value of shares issued in exchange for the net assets of Electric Utilities Portfolio (Note 10) - 16,679,364 Reinvestment of distributions 10,195,372 38,572,943 Cost of shares redeemed (167,054,799 (314,447,184 ) ) Paid in capital portion of redemption fees 223,028 166,488 Net increase (decrease) in net assets resulting from share transactions (1,208,124 (12,448,666 ) ) TOTAL INCREASE (DECREASE) IN NET ASSETS (12,887,069 (40,195,685 ) ) NET ASSETS Beginning of period 250,522,275 290,717,960 End of period (including undistributed net investment income of $1,881,976 and $3,613,887, respectively) $ 237,635,206 $ 250,522,275 OTHER INFORMATION Shares Sold 4,450,667 5,763,803 Issued in exchange for the net assets of Electric Utilites Portfolio (Note 10) - 458,728 Issued in reinvestment of distributions 303,279 1,019,080 Redeemed (4,783,040 (7,406,487 ) ) Net increase (decrease) (29,094 (164,876 ) ) SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 36.61 $ 41.49 $ 37.18 $ 35.57 $ 31.70 Income from Investment Operations Net investment income 1.13 1.33 1.19 1.66 1.59 Net realized and unrealized gain (loss) (1.17) (.16) E 6.14 2.82 3.41 Total from investment operations (.04) 1.17 7.33 4.48 5.00 Less Distributions (1.05) (1.13) (1.33) (1.69) (.60) From net investment income From net realized gain (.67) (4.94) (1.70) (1.19) (.58) Total distributions (1.72) (6.07) (3.03) (2.88) (1.18) Redemption fees added to paid in capital .03 .02 .01 .01 .05 Net asset value, end of period $ 34.88 $ 36.61 $ 41.49 $ 37.18 $ 35.57 TOTAL RETURN B, C .21% 2.53% 20.90% 13.23% 16.25% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 237,635 $ 250,522 $ 290,718 $ 206,872 $ 197,409 Ratio of expenses to average net assets 1.42% 1.35% 1.42% A 1.51% 1.65% Ratio of expenses to average net assets before expense reductions 1.43% 1.36% 1.42% A 1.51% 1.65% Ratio of net investment income to average net assets 3.24% 3.11% 3.71% A 4.58% 4.75% Portfolio turnover rate 24% 61% 34% A 45% 45%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD ENDED DUE TO THE TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND. BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). If Fidelity had not reimbursed certain fund expenses during the period, the fund's total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND BROKERAGE AND INVESTMENT MANAGEMENT -12.62% 105.69% 110.92% BROKERAGE AND INVESTMENT MANAGEMENT (INCL. 3% SALES CHARGE) -15.24% 99.52% 104.59% S&P 500 7.36% 71.20% 246.77% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on July 29, 1985. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND BROKERAGE AND INVESTMENT MANAGEMENT -12.62% 15.52% 8.09% BROKERAGE AND INVESTMENT MANAGEMENT (INCL. 3% SALES CHARGE) -15.24% 14.81% 7.75% S&P 500 7.36% 11.35% 13.84% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Brokerage (06Standard & Poor's 50 07/29/85 9700.00 10000.00 07/31/85 9564.20 9926.31 08/31/85 9263.50 9841.93 09/30/85 8671.80 9533.88 10/31/85 9418.70 9974.35 11/30/85 10340.20 10658.59 12/31/85 10757.30 11174.46 01/31/86 11989.20 11237.04 02/28/86 12852.50 12077.57 03/31/86 13192.00 12751.50 04/30/86 13075.60 12607.41 05/31/86 13211.40 13278.12 06/30/86 13201.70 13502.52 07/31/86 12002.55 12747.73 08/31/86 13072.47 13693.61 09/30/86 11545.40 12561.15 10/31/86 12809.85 13285.93 11/30/86 12177.63 13608.78 12/31/86 11788.57 13261.75 01/31/87 13996.49 15048.11 02/28/87 14317.47 15642.51 03/31/87 14259.11 16094.58 04/30/87 12702.86 15951.34 05/31/87 12138.72 16090.11 06/30/87 12119.27 16902.66 07/31/87 12148.45 17759.63 08/31/87 12537.51 18422.06 09/30/87 12109.54 18018.62 10/31/87 7654.79 14137.41 11/30/87 7080.92 12972.49 12/31/87 7444.51 13959.69 01/31/88 7977.92 14547.40 02/29/88 8360.58 15225.31 03/31/88 8140.26 14754.84 04/30/88 8279.41 14918.62 05/31/88 7966.32 15048.41 06/30/88 8812.88 15739.14 07/31/88 8743.21 15679.33 08/31/88 8685.16 15146.23 09/30/88 8905.77 15791.46 10/31/88 8940.60 16230.46 11/30/88 8743.21 15998.37 12/31/88 8825.36 16278.34 01/31/89 9975.47 17469.91 02/28/89 9740.76 17034.91 03/31/89 9752.49 17431.83 04/30/89 9846.38 18336.54 05/31/89 10491.85 19079.17 06/30/89 10196.87 18970.42 07/31/89 11424.27 20683.44 08/31/89 11707.51 21088.84 09/30/89 11341.65 21002.38 10/31/89 10421.10 20515.12 11/30/89 10314.89 20933.63 12/31/89 10066.13 21436.04 01/31/90 9623.79 19997.68 02/28/90 9946.58 20255.65 03/31/90 10221.54 20792.42 04/30/90 9528.15 20272.61 05/31/90 10436.73 22249.19 06/30/90 10424.49 22097.90 07/31/90 10053.46 22027.18 08/31/90 8689.07 20035.93 09/30/90 7947.02 19060.18 10/31/90 7456.32 18978.22 11/30/90 7947.02 20204.21 12/31/90 8437.73 20767.91 01/31/91 9139.86 21673.39 02/28/91 10047.80 23223.04 03/31/91 11076.79 23785.03 04/30/91 11234.16 23842.12 05/31/91 11827.35 24872.10 06/30/91 11039.82 23732.96 07/31/91 11888.10 24838.91 08/31/91 12154.71 25427.59 09/30/91 12784.86 25002.95 10/31/91 13633.14 25337.99 11/30/91 12881.81 24316.87 12/31/91 15378.19 27098.72 01/31/92 15596.32 26594.68 02/29/92 15499.37 26940.42 03/31/92 15087.35 26415.08 04/30/92 13911.87 27191.68 05/31/92 13875.51 27324.92 06/30/92 13548.32 26917.78 07/31/92 14311.77 28018.72 08/31/92 13899.75 27444.33 09/30/92 13802.80 27768.18 10/31/92 14420.84 27865.36 11/30/92 15717.50 28815.57 12/31/92 16165.88 29170.00 01/31/93 17123.23 29415.03 02/28/93 17232.29 29815.08 03/31/93 18613.79 30444.17 04/30/93 18553.16 29707.43 05/31/93 19159.48 30503.58 06/30/93 20068.94 30592.05 07/31/93 20735.89 30469.68 08/31/93 22372.93 31624.48 09/30/93 22785.22 31380.97 10/31/93 22045.52 32030.56 11/30/93 21439.21 31726.27 12/31/93 24139.71 32110.15 01/31/94 24654.17 33201.90 02/28/94 23414.20 32302.13 03/31/94 20789.17 30893.75 04/30/94 20617.69 31289.19 05/31/94 21118.95 31802.34 06/30/94 21923.61 31023.18 07/31/94 21409.16 32040.74 08/31/94 21567.45 33354.41 09/30/94 20749.60 32537.23 10/31/94 20736.41 33269.31 11/30/94 19298.58 32057.65 12/31/94 19971.33 32533.06 01/31/95 19720.69 33376.64 02/28/95 20459.40 34677.33 Let's say you invested $10,000 in Fidelity Select Brokerage and Investment Management Portfolio on July 29, 1985, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $20,459 - a 104.59% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $34,677 over the same period - a 246.77% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Edwards (A.G.), Inc. 5.7 Midland Walwyn, Inc. 5.3 Merrill Lynch & Co., Inc. 5.2 Schwab (Charles) Corp. 5.1 Morgan Stanley Group, Inc. 5.1 United Asset Management Corp. 4.7 American Express Co. 4.1 Piper Jaffray, Inc. 3.7 Perpetual PLC 3.5 Alex Brown, Inc. 3.4 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 16.9 Row: 1, Col: 2, Value: 4.1 Row: 1, Col: 3, Value: 6.6 Row: 1, Col: 4, Value: 10.1 Row: 1, Col: 5, Value: 10.6 Row: 1, Col: 6, Value: 51.7 Security & Commodity Brokers 51.7% Investment Managers 10.6% Financial Services 10.1% Investment Advice 6.6% Security Brokers & Dealers 4.1% All Others 16.9%* * INCLUDES SHORT-TERM INVESTMENTS BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Jeff Feinberg, Portfolio Manager of Fidelity Select Brokerage and Investment Management Portfolio Q. JEFF, HOW HAS THE FUND PERFORMED? A. The fund is down 12.62% for the year ended February 28, 1995. The S&P 500 returned 7.36% for the same period. Q. WHAT FACTORS LED TO THESE DISAPPOINTING RESULTS? A. Simply put, the fund's returns resulted from the sluggish market environment in 1994. The market was driven by increasing interest rates globally. In the U.S., the Federal Reserve Board's attempts to control inflation by increasing interest rates prevented corporations from issuing debt and equity, which negatively effected brokerage companies. However, by the end of the period things had already begun to turn around a bit. Investors realized that the earnings disappointments of brokerage companies wouldn't last indefinitely, and began to bid up these stocks from depressed levels. Q. WHAT CHANGES DID YOU MAKE WHEN YOU TOOK OVER IN FEBRUARY OF 1995? A. The fund was positioned defensively throughout 1994. Investments were made abroad in an effort to avoid the choppy stock market and unstable interest rate environment in the U.S. Unfortunately, foreign markets didn't perform much better than the U.S. last year. Since rates have temporarily stabilized, I've felt comfortable bringing those assets back to the U.S. and investing in American brokerage companies again. Q. WHAT ARE SOME OF THE CHALLENGES YOU FACE IN RUNNING THIS FUND? A. What differentiates this fund from many others is that it has some special limitations. For example, the SEC sets limits on the percentage of outstanding equity the fund may hold of any particular securities firm. In addition, there are only 65 to 70 public brokerage and investment management stocks available for this fund to invest in. For these reasons, stock selection is very important. Q. IS THAT WHY YOU HAVE THE MAXIMUM AMOUNT INVESTED IN THE FUND'S TOP FIVE HOLDINGS? A. Exactly. I am making the most concentrated investments I can on firms in which I have the most confidence. Q. WHAT HAVE YOU BEEN BUYING LATELY? A. I've been buying Merrill Lynch and Morgan Stanley; both are market leaders in the U.S. brokerage industry - and the U.S. is the brokerage market leader of the world. Both companies are very well managed and are doing an excellent job of managing expenses relative to the volatile revenue levels they experience in their industry. Secondly, both companies were trading at the low-to-middle end of their historic trading ranges, making them even more attractive. Q. YET THE FUND STILL HOLDS SOME INTERNATIONAL STOCKS . . . A. That's true. At the end of February, the fund still has positions in selected non-U.S. stocks. I've increased the fund's position in Midland Walwyn, a Canadian firm with good business prospects, and I've maintained the fund's position in Perpetual, a strong financial company in the U.K. With these two notable exceptions, I don't have much incentive to invest abroad since markets in the U.S. have begun to stabilize. In addition, I can get more information on U.S. companies without the potential hazards of language barriers and currency risks. For the record, the fund got lucky since I liquidated its position in Japanese stocks before the Kobe earthquake, avoiding subsequent losses there. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. Although no one can predict what the market will do, I'm optimistic. Stabilizing interest rates and quelled inflation fears are a beneficial backdrop to corporate and individual investors who want to commit capital to the stock market. I think that the quality companies in which the fund has invested, along with a stable-to-improving interest rate environment, will be a positive for the fund. FUND FACTS START DATE: July 29, 1985 SIZE: as of February 28, 1995, more than $27 million MANAGER: Jeff Feinberg, since February 1995; manager, Fidelity Select Retailing, February 1994-February 1995; equity analyst, footwear and specialty retail industries, 1992-1994; joined Fidelity in 1992 (checkmark) BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.6% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 0.0% AUTO & TRUCK PARTS - 0.0% Cummins Engine Co., Inc. 100 $ 4,539 23102110 BANKS - 1.4% NATIONAL COMMERCIAL BANKS - 1.4% Silicon Valley Bancshares (a) 25,900 382,025 82706410 COMPUTER SERVICES & SOFTWARE - 4.0% COMPUTER RELATED SERVICES - 1.6% Plaintree Systems, Inc. (a) 40,500 437,192 72663E10 PREPACKAGED COMPUTER SOFTWARE - 2.4% Electronics for Imaging, Inc. (a) 17,000 667,250 28608210 TOTAL COMPUTER SERVICES & SOFTWARE 1,104,442 CREDIT & OTHER FINANCE - 13.2% FINANCIAL SERVICES - 10.1% American Express Co. 33,500 1,130,625 02581610 McIntosh Securities Ltd. 1,098,900 698,538 58199522 Perpetual PLC 50,000 948,313 71499822 2,777,476 MANAGEMENT & INVESTMENT OFFICES - 3.1% Trimark Financial Corp. 28,300 855,385 89621H10 TOTAL CREDIT & OTHER FINANCE 3,632,861 SECURITIES INDUSTRY - 73.0% INVESTMENT ADVICE - 6.6% CI Fund Management, Inc. 38,400 293,620 12549K10 CI Fund Management, Inc. (b) 10,000 76,464 12549K92 Invesco Mim PLC 271,900 716,418 46199C92 Mutual Fund Co., Ltd.: (For.) 18,600 471,339 65499B23 (Loc.) 9,600 243,272 65499B22 1,801,113 INVESTMENT MANAGERS - 10.6% Peregrine Investments Holdings 447,000 546,355 71399492 Price (T. Rowe) Associates, Inc. 26,000 832,000 74147710 United Asset Management Corp. 35,100 1,303,088 90942010 Value Line, Inc. 7,400 236,800 92043710 2,918,243 SECURITY & COMMODITY BROKERS - 51.7% Alex Brown, Inc. 24,600 934,800 01390210 Bear Stearns Companies, Inc. (a) 25,200 472,500 07390210 Edwards (A.G.), Inc. 69,000 1,552,500 28176010 First Marathon, Inc. Class A (non-vtg.) 65,200 563,060 32076L20 Jefferies Group, Inc. 15,100 458,663 47231810 McDonald & Co. Investments, Inc. 49,700 677,163 58004710 Merrill Lynch & Co., Inc. 34,700 1,422,700 59018810 Midland Walwyn, Inc. 284,700 1,459,816 59780110 Morgan Keegan, Inc. 56,700 850,500 61741010 Morgan Stanley Group, Inc. 20,800 1,401,400 61744610 Piper Jaffray, Inc. 87,500 1,028,125 72408110 Quick & Reilly Group, Inc. 16,300 570,500 74837610 Raymond James Financial, Inc. 31,400 557,350 75473010 Salomon, Inc. 3,600 129,600 79549B10 Schwab (Charles) Corp. 31,600 1,402,250 80851310 Stifel Financial Corp. 49,100 319,150 86063010 Waterhouse Investor Services, Inc. 22,500 390,938 94154710 14,191,015 SECURITY BROKERS & DEALERS - 4.1% Finanza & Futuro Holdings SPA (a) 2,600 7,342 31799R23 PaineWebber Group, Inc. 46,600 809,675 69562910 20/20 Financial Corp. 40,100 295,797 90136T10 1,112,814 TOTAL SECURITIES INDUSTRY 20,023,185 VALUE (NOTE 1) TOTAL COMMON STOCKS (Cost $24,519,522) $ 25,147,052 REPURCHASE AGREEMENTS - 8.4% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $2,289,387 2,289,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $26,808,522) $ 27,436,052 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of this security amounted to $76,464 or 0.3% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $39,153,088 and $66,342,384, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $9,202 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $11,186,000 and $5,978,500, respectively. The weighted average interest rate paid was 4.0% (see Note 8 of Notes to Financial Statements). Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: United States 72.2% Canada 14.5 United Kingdom 6.1 Thailand 2.6 Australia 2.5 Hong Kong 2.0 Others (individually less than 1%) 0.1 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $26,826,681. Net unrealized appreciation aggregated $609,371, of which $1,587,648 related to appreciated investment securities and $978,277 related to depreciated investment securities. The fund hereby designates $257,000 as a capital gain dividend for the purpose of the dividend paid deduction. The fund has elected to defer to its fiscal year ending February 28, 1996 $1,913,000 of losses recognized during the period November 1, 1994 to February 28, 1995. BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $2,289,000) (cost $26,808,522) - See $ 27,436,052 accompanying schedule Receivable for investments sold 2,142,001 Receivable for fund shares sold 343,941 Dividends receivable 33,084 Redemption fees receivable 38 TOTAL ASSETS 29,955,116 LIABILITIES Payable to custodian bank $ 18,761 Payable for investments purchased 2,063,745 Payable for fund shares redeemed 463,018 Accrued management fee 13,894 Other payables and 49,846 accrued expenses TOTAL LIABILITIES 2,609,264 NET ASSETS $ 27,345,852 Net Assets consist of: Paid in capital $ 27,182,437 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (464,122 ) Net unrealized appreciation (depreciation) on investments 627,537 and assets and liabilities in foreign currencies NET ASSETS, for 1,762,747 $ 27,345,852 shares outstanding NET ASSET VALUE and redemption price per share ($27,345,852 (divided by) 1,762,747 shares) $15.51 Maximum offering price per share (100/97.00 of $15.51) $15.99
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 556,369 Dividends Interest 157,280 TOTAL INCOME 713,649 EXPENSES Management fee $ 188,068 Transfer agent 567,352 Fees Redemption fees (50,415 ) Accounting fees and expenses 45,614 Non-interested trustees' compensation 508 Custodian fees and expenses 58,421 Registration fees 30,107 Audit 24,944 Legal 969 Interest 13,385 Reports to shareholders 5,167 Miscellaneous 518 Total expenses before reductions 884,638 Expense reductions (111,530 773,108 ) NET INVESTMENT INCOME (LOSS) (59,459 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 137,593 Foreign currency transactions 6,959 144,552 Change in net unrealized appreciation (depreciation) on: Investment securities (6,407,636 ) Assets and liabilities in 7 (6,407,629 foreign currencies ) NET GAIN (LOSS) (6,263,077 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (6,322,536 ) OTHER INFORMATION $147,041 Sales Charges Paid to FDC Deferred sales charges withheld $3,502 by FDC Exchange fees withheld by FSC $39,068
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ (59,459 $ (95,196 Net investment income (loss) ) ) Net realized gain (loss) 144,552 9,170,168 Change in net unrealized appreciation (depreciation) (6,407,629 5,304,530 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (6,322,536 14,379,502 ) Distributions to shareholders: - (3,536 From net investment income ) From net realized gain - (5,264,467 ) TOTAL DISTRIBUTIONS - (5,268,003 ) Share transactions 41,178,684 254,155,679 Net proceeds from sales of shares Reinvestment of distributions - 5,046,669 Cost of shares redeemed (67,399,063 (233,513,002 ) ) Paid in capital portion of redemption fees 78,929 322,223 Net increase (decrease) in net assets resulting from share transactions (26,141,450 26,011,569 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (32,463,986 35,123,068 ) NET ASSETS Beginning of period 59,809,838 24,686,770 End of period (including accumulated net investment income (loss) of $0 and $(95,197), respectively) $ 27,345,852 $ 59,809,838 OTHER INFORMATION Shares Sold 2,575,103 14,759,782 Issued in reinvestment of distributions - 301,596 Redeemed (4,181,828 (13,428,141 ) ) Net increase (decrease) (1,606,725 1,633,237 )
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 17.75 $ 14.22 $ 11.48 $ 9.28 $ 7.97 Income from Investment Operations Net investment income (loss) (.03) (.02) - .02 .08 Net realized and unrealized gain (loss) (2.25) 4.95 2.65 1.96 1.15 Total from investment operations (2.28) 4.93 2.65 1.98 1.23 Less Distributions - (.01) - (.01) (.09) From net investment income From net realized gain - (1.47) - - - Total distributions - (1.48) - (.01) (.09) Redemption fees added to paid in capital .04 .08 .09 .23 .17 Net asset value, end of period $ 15.51 $ 17.75 $ 14.22 $ 11.48 $ 9.28 TOTAL RETURN B, C (12.62)% 35.87% 23.87% 23.84% 17.90% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 27,346 $ 59,810 $ 24,687 $ 17,915 $ 11,285 Ratio of expenses to average net assets 2.54% 1.77% 2.21% A 2.17% 2.50% Ratio of expenses to average net assets before expense reductions 2.90% 1.79% 2.21% A 2.17% 2.91% Ratio of net investment income (loss) to average net assets (.20)% (.14)% .02% A .16% .94% Portfolio turnover rate 139% 295% 111% A 254% 62%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. FINANCIAL SERVICES PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1995 YEAR YEARS YEARS FINANCIAL SERVICES 4.72% 133.26% 266.06% FINANCIAL SERVICES (INCL. 3% SALES CHARGE) 1.58% 126.26% 255.07% S&P 500 7.36% 71.20% 274.70% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or ten years. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1995 YEAR YEARS YEARS FINANCIAL SERVICES 4.72% 18.46% 13.86% FINANCIAL SERVICES (INCL. 3% SALES CHARGE) 1.58% 17.74% 13.51% S&P 500 7.36% 11.35% 14.12% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER TEN YEARS Select Financial SerStandard & Poor's 50 02/28/85 9700.00 10000.00 03/31/85 9633.47 10007.00 04/30/85 10097.85 9997.99 05/31/85 10658.03 10575.88 06/30/85 11090.00 10741.92 07/31/85 11072.04 10725.81 08/31/85 11152.83 10634.64 09/30/85 10672.61 10301.77 10/31/85 11372.74 10777.71 11/30/85 12045.95 11517.07 12/31/85 12503.74 12074.49 01/31/86 13244.27 12142.11 02/28/86 14617.61 13050.34 03/31/86 15564.59 13778.55 04/30/86 15420.97 13622.85 05/31/86 16053.79 14347.59 06/30/86 16525.04 14590.06 07/31/86 15342.75 13774.48 08/31/86 16313.34 14796.54 09/30/86 14568.09 13572.87 10/31/86 14891.62 14356.02 11/30/86 14745.80 14704.87 12/31/86 14381.26 14329.90 01/31/87 15392.87 16260.14 02/28/87 16413.59 16902.41 03/31/87 15789.31 17390.89 04/30/87 14795.93 17236.11 05/31/87 14691.12 17386.07 06/30/87 15233.38 18264.06 07/31/87 15411.10 19190.05 08/31/87 16304.23 19905.84 09/30/87 15725.52 19469.90 10/31/87 12166.66 15276.09 11/30/87 11423.90 14017.34 12/31/87 12002.72 15084.06 01/31/88 12906.46 15719.09 02/29/88 13336.35 16451.60 03/31/88 13106.75 15943.25 04/30/88 12877.15 16120.22 05/31/88 13004.16 16260.46 06/30/88 13805.32 17006.82 07/31/88 13712.50 16942.19 08/31/88 13673.42 16366.16 09/30/88 14240.10 17063.36 10/31/88 14279.18 17537.72 11/30/88 13688.08 17286.93 12/31/88 13444.76 17589.45 01/31/89 14133.85 18877.00 02/28/89 14103.67 18406.96 03/31/89 15134.79 18835.84 04/30/89 15411.43 19813.42 05/31/89 16377.16 20615.87 06/30/89 16263.04 20498.36 07/31/89 17564.69 22349.36 08/31/89 18061.04 22787.41 09/30/89 18435.84 22693.98 10/31/89 16678.35 22167.48 11/30/89 16450.44 22619.69 12/31/89 16045.31 23162.57 01/31/90 14690.74 21608.36 02/28/90 15222.34 21887.11 03/31/90 14987.21 22467.12 04/30/90 14455.60 21905.44 05/31/90 15728.39 24041.22 06/30/90 15288.80 23877.74 07/31/90 14307.37 23801.33 08/31/90 12594.98 21649.69 09/30/90 10719.03 20595.35 10/31/90 9783.60 20506.79 11/30/90 11163.73 21831.53 12/31/90 12141.51 22440.63 01/31/91 13244.80 23419.04 02/28/91 14766.41 25093.50 03/31/91 15472.32 25700.76 04/30/91 15974.29 25762.44 05/31/91 17197.85 26875.38 06/30/91 15801.74 25644.49 07/31/91 17051.44 26839.52 08/31/91 18180.89 27475.62 09/30/91 18071.08 27016.78 10/31/91 18468.47 27378.80 11/30/91 17098.50 26275.44 12/31/91 19624.14 29281.34 01/31/92 20601.65 28736.71 02/29/92 22081.13 29110.29 03/31/92 21584.45 28542.64 04/30/92 22414.01 29381.79 05/31/92 23375.66 29525.76 06/30/92 23913.54 29085.83 07/31/92 24597.40 30275.44 08/31/92 23186.60 29654.79 09/30/92 23908.16 30004.72 10/31/92 24855.87 30109.74 11/30/92 26724.37 31136.48 12/31/92 28027.25 31519.46 01/31/93 29795.09 31784.22 02/28/93 30587.18 32216.49 03/31/93 32188.57 32896.25 04/30/93 30647.59 32100.16 05/31/93 30659.21 32960.45 06/30/93 31803.78 33056.03 07/31/93 32657.84 32923.81 08/31/93 33674.59 34171.62 09/30/93 34453.12 33908.50 10/31/93 33529.34 34610.41 11/30/93 32036.17 34281.61 12/31/93 32947.24 34696.42 01/31/94 35183.87 35876.09 02/28/94 33906.74 34903.85 03/31/94 32358.30 33382.04 04/30/94 33587.07 33809.33 05/31/94 35020.70 34363.81 06/30/94 34193.86 33521.89 07/31/94 35387.45 34621.41 08/31/94 36627.71 36040.89 09/30/94 33867.13 35157.89 10/31/94 33687.09 35948.94 11/30/94 31553.31 34639.68 12/31/94 31745.50 35153.39 01/31/95 33387.26 36064.91 02/28/95 35507.49 37470.36 Let's say you invested $10,000 in Fidelity Select Financial Services Portfolio on February 28, 1985 and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $35,507 - a 255.07% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $37,470 over the same period - a 274.70% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Federal National Mortgage Association 4.8 Allstate Corp. 4.7 Federal Home Loan Mortgage Corporation 4.4 Bank of New York Co., Inc. 4.4 Travelers, Inc. (The) 4.4 Morgan Stanley Group, Inc. 4.3 American Express Co. 4.3 Bank of Boston Corp. 4.1 Beneficial Corp. 3.7 Equitable Companies, Inc. 3.1 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 National Commercial Banks 22.3% State Banks Federal Reserve 9.3% Federal & Federally Sponsored Credit Agencies 9.2% Property-Casualty & Reinsurance 9.1% Financial Services 7.4% All Others 42.7% Row: 1, Col: 1, Value: 42.7 Row: 1, Col: 2, Value: 7.4 Row: 1, Col: 3, Value: 9.1 Row: 1, Col: 4, Value: 9.199999999999999 Row: 1, Col: 5, Value: 9.300000000000001 Row: 1, Col: 6, Value: 22.3 * INCLUDES SHORT-TERM INVESTMENTS FINANCIAL SERVICES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Louis Salemy, Portfolio Manager of Fidelity Select Financial Services Portfolio Q. HOW DID THE FUND PERFORM, LOUIS? A. Reasonably well during the first half of the period; less so in the second half. For the 12 months ended February 28, 1995, the fund lagged the S&P 500. It returned 4.72% during that period, compared with the S&P's 7.36% return. Q. WHAT CAUSED THIS "SEE-SAW" EFFECT IN FUND PERFORMANCE? A. Interest rates played the most significant role. While rates began rising in the first half of 1994, their impact on "spreads" - the difference in rates between earning assets and owed liabilities - was minimal and had little effect on the industry's earnings estimates or stock prices. In the second half, as rates continued their rise, the impact of narrowing spreads began to take its toll. Earnings estimates were revised downward, and stock prices began to give back their previous gains. Thus, in the second half, as the impact of rising interest rates in effect "caught up" with earnings estimates, many financial services stocks were hit quite hard. Q. WAS THIS UNEVEN PERFORMANCE TRUE ACROSS ALL SECTORS OF THE FINANCIAL SERVICES INDUSTRY? A. Pretty much. When the yield curve flattens out, or spreads narrow, as occurred in the second half of 1994, it becomes extremely difficult for financial services companies to generate above-average returns or achieve above-market rates of growth. The fund mainly holds commercial banks, thrifts, secondary mortgage market agencies and brokerage and insurance companies. Increasing interest rates had a generally negative impact on these industry sectors across the board. Q. AMONG THE BANK GROUP, WHICH STOCKS HELPED PERFORMANCE? A. Bank of New York and Bank of Boston, two of the fund's largest investments, both had good earnings in 1994 and helped support the fund's overall performance. Both these companies are "asset-sensitive" institutions, meaning that their liabilities, or what they owe depositors and other funding sources, re-price more slowly than their assets, or what customers owe them. In a rising rate environment, this tends to widen their spreads, increase earnings and drive stock prices higher. Most banks, however, are liability-sensitive, where the opposite relationship is true: spreads contract when liabilities re-price more quickly than assets, which in turn slows earnings and depresses stock prices. Fortunately, the fund did not have big positions in banking companies with high degrees of liability sensitivity. Q. WERE THERE OTHER INDIVIDUAL HOLDINGS OR SECTOR GROUPS THAT HELPED THE FUND? A. A few names stand out. Even though the insurance industry in general tends to be negatively affected by rising interest rates, two of the fund's insurance stocks - Travelers and Allstate - made strong contributions to performance. In addition, when I took over the fund in December, I increased the fund's position in American Express, which was one of its top 10 holdings on February 28. American Express has done a good job of containing costs and has divested subsidiaries not directly aligned with its core consumer finance business. The company's earnings have shown stable growth, and I believe its stock price will continue to appreciate. Q. WHAT IS YOUR OUTLOOK FOR THE INDUSTRY AND YOUR STRATEGY FOR THE FUND THROUGH THE END OF 1995? A. The fund performed well over the first two months of 1995. However, my outlook for financial services stocks depends greatly on the future course of interest rates and the overall strength of the economy, both of which are difficult to forecast at this point. Of particular concern if interest rates continue rising is a further flattening of the yield curve and lower earnings growth; and if the economy slows dramatically, credit risk problems may ensue. I made some changes in the portfolio when I took it over in December, basically shifting away from regional banks with liability-sensitive balance sheets in favor of those that are more asset-sensitive. In general, my strategy is to buy, and continue to hold, good, well-run companies that have consistently grown book value over time and are value-priced. FUND FACTS START DATE: December 10, 1981 SIZE: as of February 28, 1995, more than $153 million MANAGER: Louis Salemy, since December 1994; manager, Fidelity Select Regional Banks Portfolio, since December 1994; manager, Fidelity Select Medical Delivery Portfolio, 1993-1994; manager, Fidelity Select Industrial Materials Portfolio, 1992-1994; joined Fidelity in 1992 (checkmark) FINANCIAL SERVICES PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 84.1% SHARES VALUE (NOTE 1) BANKS - 31.7% COMMERCIAL BANKS - 0.1% Norwalk Savings Society (Conn.) (a) 10,000 $ 141,250 66920410 NATIONAL COMMERCIAL BANKS - 22.3% Bank of Boston Corp. 200,000 6,025,000 06071610 Bank Atlantic Bancorp, Inc. 30,000 476,250 06590810 BanPonce Corp. 54,700 1,654,675 06670410 Barnett Banks, Inc. 59,200 2,634,400 06805510 Benson Financial Corp. (a) 30,000 352,500 08248710 Citicorp 6,413 288,585 17303410 Comerica, Inc. 84,445 2,375,016 20034010 First Chicago Corp. 36,103 1,827,714 31945510 First Commerce Corp. 1 27 31977910 Fleet Financial Group, Inc. 119,596 3,722,426 33891510 Mercantile Bancorporation, Inc. 22,050 813,094 58734210 Midlantic Corp. 51,900 1,595,925 59780E10 NBD Bancorp, Inc. 24,100 750,113 62890010 NationsBank Corp. 55,185 2,752,352 63858510 Shawmut National Corp. 140,000 3,587,500 82048410 West One Bancorp 52,700 1,439,369 95482810 Zions Bancorporation 58,000 2,320,000 98970110 32,614,946 STATE BANKS FEDERAL RESERVE - 9.3% Bank of New York Co., Inc. 191,334 6,409,689 06405710 Bank of New York Co., Inc. (warrants) (a) 72,700 826,963 06405711 Chemical Banking Corp. 63,700 2,555,963 16372210 Compass Bancshares, Inc. 17,200 473,000 20449H10 Crestar Financial Corp. 45,349 1,955,676 22609110 First Empire State Corp. 3,800 628,900 32007610 State Street Boston Corp. 12,600 401,625 85747310 TR Financial Corp. 18,000 288,000 87263010 13,539,816 TOTAL BANKS 46,296,012 CREDIT & OTHER FINANCE - 11.2% FINANCIAL SERVICES - 7.3% American Express Co. 185,000 6,243,750 02581610 Equitable Companies, Inc. 200,000 4,475,000 29444G10 10,718,750 PERSONAL CREDIT INSTITUTIONS - 3.9% Beneficial Corp. 147,300 5,468,513 08172110 Household International, Inc. 5,922 259,088 44181510 5,727,601 TOTAL CREDIT & OTHER FINANCE 16,446,351 FEDERAL SPONSORED CREDIT - 9.2% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 9.2% Federal Home Loan Mortgage Corporation 110,700 6,420,600 31340030 Federal National Mortgage Association 90,600 6,987,525 31358610 13,408,125 INSURANCE - 16.3% INSURANCE BROKERS & SERVICES - 2.2% Alexander & Alexander Services, Inc. 150,000 3,262,500 01447610 LIFE INSURANCE - 5.0% Providian Corp. 96,800 3,424,300 74406110 Torchmark Corp. 55,000 2,303,125 89102710 UNUM Corp. 38,500 1,636,250 90319210 7,363,675 SHARES VALUE (NOTE 1) PROPERTY-CASUALTY & REINSURANCE - 9.1% Allstate Corp. 251,700 $ 6,921,750 02000210 Travelers, Inc. (The) 164,633 6,400,108 89419010 13,321,858 TOTAL INSURANCE 23,948,033 REAL ESTATE INVESTMENT TRUSTS - 1.1% REAL ESTATE INVESTMENT TRUSTS - 1.1% Developers Diversified Realty 55,000 1,546,869 25159110 SAVINGS & LOANS - 7.8% SAVINGS BANKS & SAVINGS & LOANS - 4.2% Astoria Financial Corp. (a) 56,200 1,756,250 04626510 Boston Bancorp 8,500 280,500 10054810 Charter One Financial Corp. 28,000 577,500 16090310 Collective Bancorp, Inc. 37,900 739,050 19390110 Commercial Federal Corp. (a) 25,600 604,800 20164710 DS Bancor Inc. (a) 12,000 288,000 23290710 Firstbank Puerto Rico (a) 31,700 602,300 33761K10 FirstFed Michigan Corp. 5,100 123,675 33761R10 Standard Federal Bank 39,300 1,169,175 85338910 6,141,250 SAVINGS BANKS, NO FEDERAL CHARTER - 1.3% GP Financial Corp. 70,500 1,647,938 36193510 Lakeview Financial Corp. 15,730 233,984 51222210 1,881,922 SAVINGS BANKS, FEDERAL CHARTER - 2.3% Ahmanson (H.F.) & Co. 82,900 1,523,288 00867710 Amfed Financial, Inc. 6,400 156,800 03114410 Bay Ridge Bancorp, Inc. (a) 15,000 273,750 07253110 CSF Holdings, Inc. Class B (a) 10,200 290,700 12633510 CenFed Financial Corp. (a) 5,300 90,100 15131U10 Haven Bancorp, Inc. (a) 34,600 596,850 41935210 Quaker City Bancorp (a) 49,000 477,750 74731K10 3,409,238 TOTAL SAVINGS & LOANS 11,432,410 SECURITIES INDUSTRY - 6.8% INVESTMENT MANAGERS - 0.2% Mackenzie Financial Corporation 53,300 321,246 55453110 SECURITY & COMMODITY BROKERS - 4.3% Morgan Stanley Group, Inc. 94,200 6,346,725 61744610 SECURITY BROKERS & DEALERS - 2.3% Lehman Brothers Holdings, Inc. 120,200 2,178,625 52490810 PaineWebber Group, Inc. 67,250 1,168,469 69562910 3,347,094 TOTAL SECURITIES INDUSTRY 10,015,065 TOTAL COMMON STOCKS (Cost $116,889,924) 123,092,865 CONVERTIBLE BONDS - 0.1% PRINCIPAL AMOUNT CREDIT & OTHER FINANCE - 0.1% FINANCIAL SERVICES - 0.1% Lend Lease Finance International Ltd. gtd. 4 3/4%, 6/1/03 (b) (Cost $100,000) $ 100,000 106,000 526025AA REPURCHASE AGREEMENTS - 15.8% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $23,062,894 $ 23,059,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $140,048,924) $ 146,257,865 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of this security amounted to $106,000 or 0.1% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $110,342,627 and $106,888,195, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $56,906 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $5,632,000 and $2,476,257, respectively. The weighted average interest rate paid was 4.4% (see Note 8 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $140,316,516. Net unrealized appreciation aggregated $5,941,349, of which $8,753,390 related to appreciated investment securities and $2,812,041 related to depreciated investment securities. The fund hereby designates $3,721,000 as a capital gain dividend for the purpose of the dividend paid deduction. FINANCIAL SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $23,059,000) (cost $140,048,924) - $ 146,257,865 See accompanying schedule Cash 439 Receivable for investments sold 168,015 Receivable for fund shares sold 8,399,671 Dividends receivable 254,196 Interest receivable 1,174 Redemption fees receivable 596 Other receivables 22,310 TOTAL ASSETS 155,104,266 LIABILITIES Payable for investments purchased $ 295,418 Payable for fund shares redeemed 1,560,257 Accrued management fee 67,324 Other payables and accrued expenses 92,365 TOTAL LIABILITIES 2,015,364 NET ASSETS $ 153,088,902 Net Assets consist of: Paid in capital $ 143,524,725 Undistributed net investment income 304,699 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 3,050,537 Net unrealized appreciation (depreciation) on investments 6,208,941 NET ASSETS, for 3,174,332 shares outstanding $ 153,088,902 NET ASSET VALUE and redemption price per share ($153,088,902 (divided by) 3,174,332 shares) $48.23 Maximum offering price per share (100/97.00 of $48.23) $49.72
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 2,874,701 Dividends Interest 433,463 TOTAL INCOME 3,308,164 EXPENSES Management fee $ 671,165 Transfer agent 882,494 Fees Redemption fees (75,616 ) Accounting fees and expenses 108,517 Non-interested trustees' compensation 1,867 Custodian fees and expenses 21,385 Registration fees 24,324 Audit 27,188 Legal 1,970 Interest 10,621 Reports to shareholders 7,195 Miscellaneous 1,091 Total expenses before reductions 1,682,201 Expense reductions (20,618 1,661,583 ) NET INVESTMENT INCOME 1,646,581 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 9,346,092 Foreign currency transactions 2,071 9,348,163 Change in net unrealized appreciation (depreciation) on investment securities (5,791,837 ) NET GAIN (LOSS) 3,556,326 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 5,202,907 OTHER INFORMATION $350,591 Sales Charges Paid to FDC Deferred sales charges withheld $10,842 by FDC Exchange fees withheld by FSC $44,220
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ 1,646,581 $ 899,157 Net investment income Net realized gain (loss) 9,348,163 30,258,224 Change in net unrealized appreciation (depreciation) (5,791,837 (19,675,121 ) ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 5,202,907 11,482,260 Distributions to shareholders: (1,391,905 (452,372 From net investment income ) ) From net realized gain (6,998,318 (18,241,269 ) ) TOTAL DISTRIBUTIONS (8,390,223 (18,693,641 ) ) Share transactions 137,344,321 237,223,869 Net proceeds from sales of shares Reinvestment of distributions 8,148,541 18,154,544 Cost of shares redeemed (105,579,333 (347,083,133 ) ) Paid in capital portion of redemption fees 167,317 499,434 Net increase (decrease) in net assets resulting from share transactions 40,080,846 (91,205,286 ) TOTAL INCREASE (DECREASE) IN NET ASSETS 36,893,530 (98,416,667 ) NET ASSETS Beginning of period 116,195,372 214,612,039 End of period (including undistributed net investment income of $304,699 and $450,603, respectively)$ 153,088,902 $ 116,195,372 OTHER INFORMATION Shares Sold 2,833,201 4,310,339 Issued in reinvestment of distributions 192,390 361,878 Redeemed (2,118,831 (6,431,527 ) ) Net increase (decrease) 906,760 (1,759,310 )
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 51.24 $ 53.29 $ 42.42 $ 30.55 $ 28.28 Income from Investment Operations Net investment income .76 .29 .33 .54 .58 Net realized and unrealized gain (loss) .87 5.02 14.30 11.35 1.67 Total from investment operations 1.63 5.31 14.63 11.89 2.25 Less Distributions (.79) E (.20) (.51) (.35) (.52) From net investment income From net realized gain (3.93) E (7.32) (3.38) - - Total distributions (4.72) (7.52) (3.89) (.35) (.52) Redemption fees added to paid in capital .08 .16 .13 .33 .54 Net asset value, end of period $ 48.23 $ 51.24 $ 53.29 $ 42.42 $ 30.55 TOTAL RETURN B, C 4.72% 10.85% 36.46% 40.31% 10.51% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 153,089 $ 116,195 $ 214,612 $ 91,700 $ 35,962 Ratio of expenses to average net assets 1.54% 1.63% 1.54% A 1.85% 2.49% Ratio of expenses to average net assets before expense reductions 1.56% 1.64% 1.54% A 1.85% 2.49% Ratio of net investment income to average net assets 1.52% .53% .86% A 1.49% 2.22% Portfolio turnover rate 107% 93% 100% A 164% 237%
a ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS). HOME FINANCE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND HOME FINANCE 12.43% 239.98% 396.76% HOME FINANCE (INCL. 3% SALES CHARGE) 9.06% 229.78% 381.86% S&P 500 7.36% 71.20% 212.82% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on December 16, 1985. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND HOME FINANCE 12.43% 27.73% 19.01% HOME FINANCE (INCL. 3% SALES CHARGE) 9.06% 26.95% 18.62% S&P 500 7.36% 11.35% 13.18% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Home Finance Standard & Poor's 50 12/16/85 9700.00 10000.00 12/31/85 9797.00 10080.42 01/31/86 11378.10 10136.87 02/28/86 12794.30 10895.11 03/31/86 13065.90 11503.06 04/30/86 12920.40 11373.07 05/31/86 13065.90 11978.12 06/30/86 14132.90 12180.55 07/31/86 13259.90 11499.66 08/31/86 13405.40 12352.93 09/30/86 11804.90 11331.35 10/31/86 12241.40 11985.16 11/30/86 12464.50 12276.40 12/31/86 12493.60 11963.36 01/31/87 14423.90 13574.82 02/28/87 15781.90 14111.03 03/31/87 14841.00 14518.83 04/30/87 14006.80 14389.62 05/31/87 13521.80 14514.81 06/30/87 13774.00 15247.80 07/31/87 13725.50 16020.87 08/31/87 14967.10 16618.45 09/30/87 14006.80 16254.50 10/31/87 11281.10 12753.28 11/30/87 10359.60 11702.41 12/31/87 11500.81 12592.97 01/31/88 12887.84 13123.13 02/29/88 12526.63 13734.67 03/31/88 12179.87 13310.27 04/30/88 12382.15 13458.01 05/31/88 12367.70 13575.09 06/30/88 13147.91 14198.19 07/31/88 13379.08 14144.24 08/31/88 13046.77 13663.33 09/30/88 13711.39 14245.39 10/31/88 14101.49 14641.41 11/30/88 13393.53 14432.04 12/31/88 13627.99 14684.60 01/31/89 14770.98 15759.52 02/28/89 15093.36 15367.10 03/31/89 15166.63 15725.16 04/30/89 15943.28 16541.29 05/31/89 16632.01 17211.21 06/30/89 16966.79 17113.11 07/31/89 17557.96 18658.42 08/31/89 18636.86 19024.13 09/30/89 19331.49 18946.13 10/31/89 16922.45 18506.58 11/30/89 16375.61 18884.12 12/31/89 14898.98 19337.33 01/31/90 13663.83 18039.80 02/28/90 14173.33 18272.51 03/31/90 14204.21 18756.73 04/30/90 13864.55 18287.82 05/31/90 15176.89 20070.88 06/30/90 15022.50 19934.40 07/31/90 13725.59 19870.61 08/31/90 12336.05 18074.30 09/30/90 11270.73 17194.08 10/31/90 10421.57 17120.15 11/30/90 11548.64 18226.11 12/31/90 12651.77 18734.62 01/31/91 13861.94 19551.45 02/28/91 15747.91 20949.38 03/31/91 16470.87 21456.35 04/30/91 17036.66 21507.85 05/31/91 17743.91 22436.99 06/30/91 16753.77 21409.37 07/31/91 18545.45 22407.05 08/31/91 19252.69 22938.10 09/30/91 19095.52 22555.03 10/31/91 18765.48 22857.27 11/30/91 17901.07 21936.12 12/31/91 20825.52 24445.61 01/31/92 22877.85 23990.92 02/29/92 24373.34 24302.81 03/31/92 23959.69 23828.90 04/30/92 24468.80 24529.47 05/31/92 26887.04 24649.67 06/30/92 26920.71 24282.39 07/31/92 28244.42 25275.53 08/31/92 26713.39 24757.39 09/30/92 27143.99 25049.52 10/31/92 27654.33 25137.20 11/30/92 30493.13 25994.38 12/31/92 32873.65 26314.11 01/31/93 35232.16 26535.14 02/28/93 35829.86 26896.02 03/31/93 37106.04 27463.53 04/30/93 35096.20 26798.91 05/31/93 34495.57 27517.12 06/30/93 35355.93 27596.92 07/31/93 37628.58 27486.53 08/31/93 39609.03 28528.27 09/30/93 42141.41 28308.61 10/31/93 42466.08 28894.59 11/30/93 40566.79 28620.10 12/31/93 41846.51 28966.40 01/31/94 43678.58 29951.26 02/28/94 42856.72 29139.58 03/31/94 42051.98 27869.09 04/30/94 43677.84 28225.82 05/31/94 46371.79 28688.72 06/30/94 47144.06 27985.85 07/31/94 48185.71 28903.78 08/31/94 49748.20 30088.84 09/30/94 48042.04 29351.66 10/31/94 45168.49 30012.07 11/30/94 42833.74 28919.03 12/31/94 42968.47 29347.90 01/31/95 44862.07 30108.89 02/28/95 48185.93 31282.24 Let's say you invested $10,000 in Fidelity Select Home Finance Portfolio on December 16, 1985, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $48,186 - a 381.86% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $31,282 over the same period - a 212.82% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Astoria Financial Corp. 5.9 Standard Federal Bank 5.7 GP Financial Corp. 4.6 FirstFed Michigan Corp. 4.4 North Side Savings Bank (Bronx, NY) 4.2 Commercial Federal Corp. 3.6 Collective Bancorp, Inc. 3.2 Long Island Bancorp, Inc. 2.8 CenFed Financial Corp. 2.3 Reliance BanCorp, Inc. 1.8 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 40.6 Row: 1, Col: 2, Value: 1.6 Row: 1, Col: 3, Value: 4.6 Row: 1, Col: 4, Value: 5.7 Row: 1, Col: 5, Value: 16.0 Row: 1, Col: 6, Value: 32.0 Savings Banks and Savings & Loans 32.0% Savings Banks, Federal Charter 16.0% Savings Banks, No Federal Charter 5.7% National Commercial Banks 4.6% Commercial Banks 1.6% All Others 40.1%* * INCLUDES SHORT-TERM INVESTMENTS HOME FINANCE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW David Ellison, Portfolio Manager of Fidelity Select Home Finance Portfolio Q. DAVE, HOW DID THE FUND PERFORM OVER THE PAST 12 MONTHS? A. The first half of the period was much better than the second half, but on balance, the fund did quite well. It returned 12.43% for the 12 months ended February 28, 1995, outperforming the S&P 500's 7.36% return for the same period. Q. WHAT FACTORS AFFECTED PERFORMANCE? A. Rising interest rates and their effect on mortgage lending spreads had a dampening impact on the overall performance of the thrift institutions that constitute the largest portion of the fund's investments. During the first half of the period, performance among most thrift stocks was strong, buoyed by continued earnings momentum and higher-than-normal levels of takeover activity. Earnings were strong enough during the early part of the year to offset the multiple increases in interest rates that occurred during that period. But by the middle of 1994, rising rates began to narrow the thrifts' lending spreads - the difference between what they charge for loans and what they pay their depositors. Thinner spreads resulted in lower earnings, which in turn drove stock prices lower and slowed acquisition activity. By December, many stocks had receded to their 52-week lows. More recently, however, with the prospect that rates may have stabilized, thrift stocks have begun to come back. Fund performance in January and February 1995, in fact, was quite good. Q. WHY ARE COMPANIES INVOLVED IN HOME FINANCE SO SENSITIVE TO INTEREST RATES? A. Thrifts - savings and loans institutions that are primarily engaged in mortgage lending - generate earnings mainly through the yields produced in their loan portfolios. Earnings are generated in proportion to the difference, or spread, between the rate of interest the institution charges its borrowers and the rate that it pays depositors for use of their money. Since mortgages are long-term obligations, however, changes in short-term interest rates can have multiple effects on this equation, which makes a company's asset-liability management critically important in terms of generating earnings and supporting its stock price. In a falling rate environment, for example, deposit rates typically decrease and have the effect of widening the spread on loans originated at higher rates of interest. But falling rates can also have a harmful effect, as occurs when borrowers choose to refinance at lower fixed rates. This not only reduces the average yield of the loan portfolio, but also has the effect of shrinking the portfolio, because thrifts typically do not keep fixed-rate loans on their books. Similarly, when rates rise, a thrift's cost of funds increases, but so, too, do its lending rates. Rising rates usually make short-term, adjustable-rate mortgages (ARMs) more attractive, and since thrifts tend to keep ARMs in their portfolios, their yields tend to benefit over time as rates continue to rise and ARMs re-price at higher rates. Q. WHAT'S BEEN YOUR STRATEGY IN MANAGING THROUGH THIS PERIOD OF RISING RATES AND HOW HAS IT WORKED? A. I tend to be a very disciplined buyer and seller of stocks. This approach leads me to judge stocks mainly on the basis of their valuations. I look to buy companies with good growth potential that are selling at a discount to their book value or at a relatively small multiple of earnings. I tend to sell them when they reach certain established benchmarks, either on the up-side or down-side. The fund generally is invested in smaller institutions, and there now are about 75 companies in the portfolio. Fund performance is typically led by a group of good performers, rather than one or two standouts. I currently have a bigger position in companies located in the Eastern half of the country, a number of them in the metropolitan New York City area. The reason for this geographical emphasis is that several of these companies are thrifts that recently have converted to public ownership and have indicated a desire to be acquired. As a group, these stocks have done well across the board. Q. WHAT IS YOUR OUTLOOK FOR THE REST OF 1995? A. I think the first half of the year will continue to be a fairly difficult environment for the industry. Higher rates will continue to squeeze loan spreads and this will continue to put a drag on earnings. I believe the second half could be somewhat better if thrifts' ARM loans start to re-price at market rates and begin offsetting the spread pressure that's affected the industry since mid-1994. FUND FACTS START DATE: December 16, 1985 SIZE: as of February 28, 1995, more than $229 million MANAGER: David Ellison, since December 1985; manager, Fidelity Select Financial Services Portfolio, 1985-1987; Fidelity Select Brokerage and Investment Management Portfolio, 1987-1990; joined Fidelity in 1985 (checkmark) HOME FINANCE PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 66.0% SHARES VALUE (NOTE 1) BANKS - 7.3% COMMERCIAL BANKS - 1.6% MLF Bancorp, Inc. (a) 172,000 $ 2,708,995 55306W10 Norwalk Savings Society (Conn.) (a) 62,500 882,813 66920410 3,591,808 NATIONAL COMMERCIAL BANKS - 4.6% Bank Atlantic Bancorp, Inc. 53,900 855,663 06590810 Citicorp 71,490 3,217,050 17303410 Fed One Bancorp 36,000 423,000 31309110 Fleet Financial Group, Inc. 10,000 311,250 33891510 Midlantic Corp. 40,000 1,230,000 59780E10 Peoples Heritage Financial Group, Inc. 61,600 816,200 71114710 Shawmut National Corp. 60,000 1,537,500 82048410 TF Financial Corp. 62,500 781,250 87239110 UJB Financial Corp. 40,000 1,130,000 90276010 10,301,913 STATE BANKS FEDERAL RESERVE - 1.1% Bank of New York Co., Inc. 60,000 2,010,000 06405710 Letchworth Independent Bancshares 15,500 317,750 52725110 T R Financial Corp. 10,000 160,000 87263010 2,487,750 TOTAL BANKS 16,381,471 CONSTRUCTION - 0.3% OPERATIVE BUILDERS - 0.3% Kaufman & Broad Home Corp. 35,000 511,875 48616810 Standard Pacific Corp. 35,000 240,625 85375C10 752,500 CREDIT & OTHER FINANCE - 2.2% BANK HOLDING COMPANY OFFICES - 0.6% IBS Financial Corp. 60,000 705,000 44922Q10 Life Bancorp, Inc. 55,000 625,625 53193210 Mid Continent Bancshares, Inc. 500 6,688 59528210 1,337,313 FINANCIAL SERVICES - 0.4% American Express Co. 25,000 843,750 02581610 MORTGAGE BANKERS - 0.4% Countrywide Credit Industries,Inc. 60,000 975,000 22237210 PERSONAL CREDIT INSTITUTIONS - 0.8% Beneficial Corp. 45,000 1,670,625 08172110 TOTAL CREDIT & OTHER FINANCE 4,826,688 FEDERAL SPONSORED CREDIT - 1.6% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 1.6% Federal National Mortgage Association 45,000 3,470,625 31358610 REAL ESTATE INVESTMENT TRUSTS - 0.9% CWM Mortgage Holdings, Inc. 20,000 210,000 12669210 Capstead Mortgage Corp. 48,400 1,179,750 14067E10 Prime Multifamily, Inc. 45,000 703,125 74156H10 2,092,875 SAVINGS & LOANS - 53.7% SAVINGS BANKS AND SAVINGS & LOANS - 32.0% Andover Bancorp, Inc. (Del.) (b) 65,100 1,057,875 03425810 Astoria Financial Corp. (a) 425,400 13,293,750 04626510 Bankers Corp. 25,000 384,375 06612010 Bay View Capital, Inc. 103 2,330 07262L10 Boston Bancorp 16,100 531,300 10054810 Charter One Financial Corp. 113,500 2,340,938 16090310 Co-Operative Bank of Concord 17,000 272,000 18975110 Collective Bancorp, Inc. 367,800 7,172,100 19390110 SHARES VALUE (NOTE 1) Commercial Federal Corp. (a) 345,200 $ 8,155,350 20164710 First Federal Savings & Loan Association (East Hartford, Conn.) 59,300 963,625 31994410 Firstbank Puerto Rico (a) 1,695 32,205 33761K10 FirstFed Michigan Corp. 409,150 9,921,888 33761R10 Golden West Financial Corp. 3,300 126,225 38131710 Great Western Financial Corp. 6,889 129,169 39144210 Maryland Federal Bancorp, Inc. 15,000 375,000 57406110 Massbank for Savings 10,000 236,250 57615210 MidConn Bank 16,900 223,925 59564710 Monterey Bay Bancorp, Inc. 90,000 832,500 61239H10 North Side Savings Bank (Bronx, NY)(b) 434,312 9,337,708 66248810 Pamrapo Bancorp, Inc. (b) 70,600 1,429,650 69773810 SFFed Corp. 133,000 2,111,375 78413210 Standard Federal Bank 429,300 12,771,675 85338910 Webster Financial Corp. (Waterbury, Conn.) 7,000 152,250 94789010 71,853,463 SAVINGS BANKS, NO FEDERAL CHARTER - 5.7% Downey Financial Corp. 14,500 237,438 26101810 GP Financial Corp. 443,900 10,376,163 36193510 Medford Savings Bank (Mass.) 5,000 83,750 58430310 Queens County Bancorp, Inc. 40,000 1,140,000 74824210 Springfield Institution for Savings (a) 85,000 892,500 85071510 12,729,851 SAVINGS BANKS, FEDERAL CHARTER - 16.0% Ahmanson (H.F.) & Co. 29,000 532,875 00867710 Albank Financial Corp. 2,000 50,750 01204610 Brooklyn Bancorp, Inc. (a) 25,000 831,250 11380910 CenFed Financial Corp. (a)(b) 299,250 5,087,250 15131U10 Coastal Bancorp, Inc. (Tex.) 10,000 157,500 19041P10 Conestoga Bancorp, Inc. 10,000 140,000 20701410 D & N Financial Corp. (a)(b) 20,000 170,000 23286410 Dime Bancorp, Inc. (a) 131,236 1,164,720 25429Q10 FFVA Financial Corp. 30,000 656,250 30242X10 HMN Financial, Inc. (a) 100,000 1,300,000 40424G10 Haven Bancorp, Inc. (a)(b) 230,000 3,967,500 41935210 Long Island Bancorp, Inc. 385,000 6,256,250 54266210 Main Street Community Bancorp 98,300 1,339,338 56035010 Pennfed Financial Services, Inc. (a) 138,900 1,649,438 70816710 Quaker City Bancorp (a) 151,000 1,472,250 74731K10 RedFed Bancorp, Inc. (a) 60,000 506,250 75734110 Reliance BanCorp, Inc. 320,700 4,088,925 75945110 Standard Financial, Inc. (a) 220,000 2,392,500 85340310 Washington Mutual, Inc. 199,600 4,016,950 93932210 35,779,996 TOTAL SAVINGS & LOANS 120,363,310 TOTAL COMMON STOCKS (Cost $132,718,373) 147,887,469 REPURCHASE AGREEMENTS - 34.0% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 (Note 3) $76,222,871 76,210,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $208,928,373) $ 224,097,469 LEGEND 1. Non-income producing 2. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. A summary of the transactions during the period in which the issuers were affiliates is as follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Andover Bancorp, Inc. $ - $ 30,625 $ 33,490 $ - Cenfed Financial Corp. 1,787,174 558,750 73,575 5,087,250 D & N Financial Corp. (a) - 1,532,617 - - Eastern Bancorp. - 68,025 9,724 - Fidelity FSB (Garden City, NY) (a) - 1,432,275 - - Haven Bancorp, Inc. (a) 494,875 657,625 - 3,967,500 North Side Savings Bank (Bronx, NY) 481,775 - 100,848 9,337,708 Pamrapo Bancorp, Inc. 258,575 531,950 80,813 - Peterborough Savings Bank (a) - 298,342 - - Totals $ 3,022,399 $ 5,110,209 $ 298,450 $ 18,392,458 (a) Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $196,632,746 and $227,662,036, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $37,018 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $11,470,000 and $10,872,000, respectively. The weighted average interest rate paid was 3.8% (see Note 8 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $209,021,223. Net unrealized appreciation aggregated $15,076,246, of which $17,036,581 related to appreciated investment securities and $1,960,335 related to depreciated investment securities. The fund hereby designates $12,286,000 as a capital gain dividend for the purpose of the dividend paid deduction. The fund has elected to defer to its fiscal year ending February 28, 1996 $1,328,000 of losses recognized during the period November 1, 1994 to February 28, 1995. HOME FINANCE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $76,210,000) (cost $208,928,373) - $ 224,097,469 See accompanying schedule Cash 98 Receivable for investments sold 371,038 Receivable for fund shares sold 21,928,168 Dividends receivable 305,869 Redemption fees receivable 374 Other receivables 126,317 TOTAL ASSETS 246,829,333 LIABILITIES Payable for investments purchased $ 15,817,608 Payable for fund shares redeemed 872,421 Accrued management fee 94,979 Other payables and accrued expenses 120,110 TOTAL LIABILITIES 16,905,118 NET ASSETS $ 229,924,215 Net Assets consist of: Paid in capital $ 206,495,062 Undistributed net investment income 963,664 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 7,296,393 Net unrealized appreciation (depreciation) on investments 15,169,096 NET ASSETS, for 9,612,112 shares outstanding $ 229,924,215 NET ASSET VALUE and redemption price per share ($229,924,215 (divided by) 9,612,112 shares) $23.92 Maximum offering price per share (100/97.00 of $23.92) $24.66
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 2,612,130 Dividends (including $298,450 received from affiliated issuers) Interest 1,903,400 TOTAL INCOME 4,515,530 EXPENSES Management fee $ 1,238,263 Transfer agent fees 1,585,541 Redemption fees (185,020 ) Accounting fees and expenses 200,207 Non-interested trustees' compensation 2,413 Custodian fees and expenses 32,300 Registration fees 22,781 Audit 29,592 Legal 2,822 Interest 2,303 Reports to shareholders 10,471 Miscellaneous 2,281 Total expenses before reductions 2,943,954 Expense reductions (36,746 2,907,208 ) NET INVESTMENT INCOME 1,608,322 REALIZED AND UNREALIZED GAIN (LOSS) 20,398,138 Net realized gain (loss) on investment securities (including realized gain (loss) of $2,096,263 on sales of investment in affiliated issuers) Change in net unrealized appreciation (depreciation) on investment securities (3,449,716 ) NET GAIN (LOSS) 16,948,422 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 18,556,744 OTHER INFORMATION $1,612,246 Sales Charges Paid to FDC Deferred sales charges withheld $6,186 by FDC Exchange fees withheld by FSC $147,713
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ 1,608,322 $ 246,419 Net investment income Net realized gain (loss) 20,398,138 47,403,270 Change in net unrealized appreciation (depreciation) (3,449,716 (23,478,057 ) ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 18,556,744 24,171,632 Distributions to shareholders: (641,452 (144,027 From net investment income ) ) From net realized gain (19,377,299 (9,550,960 ) ) TOTAL DISTRIBUTIONS (20,018,751 (9,694,987 ) ) Share transactions 425,502,908 480,076,731 Net proceeds from sales of shares Reinvestment of distributions 19,534,918 9,482,227 Cost of shares redeemed (369,762,089 (687,125,356 ) ) Redemption fees 547,208 750,443 Net increase (decrease) in net assets resulting from share transactions 75,822,945 (196,815,955 ) TOTAL INCREASE (DECREASE) IN NET ASSETS 74,360,938 (182,339,310 ) NET ASSETS Beginning of period 155,563,277 337,902,587 End of period (including undistributed net investment income of $963,664 and $213,666, respectively)$ 229,924,215 $ 155,563,277 OTHER INFORMATION Shares Sold 16,880,752 19,770,402 Issued in reinvestment of distributions 895,378 403,141 Redeemed (14,378,596 (29,193,857 ) ) Net increase (decrease) 3,397,534 (9,020,314 )
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 25.03 $ 22.18 $ 15.38 $ 10.84 $ 8.98 Income from Investment Operations Net investment income .20 .03 .09 .05 .16 Net realized and unrealized gain (loss) 2.34 4.15 6.80 4.40 1.69 Total from investment operations 2.54 4.18 6.89 4.45 1.85 Less Distributions (.12) (.01) (.01) (.14) (.14) From net investment income From net realized gain (3.60) (1.40) (.28) - - Total distributions (3.72) (1.41) (.29) (.14) (.14) Redemption fees added to paid in capital .07 .08 .20 .23 .15 Net asset value, end of period $ 23.92 $ 25.03 $ 22.18 $ 15.38 $ 10.84 TOTAL RETURN B, C 12.43% 19.61% 46.43% 43.62% 22.88% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 229,924 $ 155,563 $ 337,903 $ 49,405 $ 8,782 Ratio of expenses to average net assets 1.45% 1.58% 1.55% A 2.08% 2.50% Ratio of expenses to average net assets before expense reductions 1.47% 1.58% 1.55% A 2.08% 2.82% Ratio of net investment income to average net assets .80% .11% .61% A .40% 1.78% Portfolio turnover rate 124% 95% 61% A 134% 159%
a ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. INSURANCE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND INSURANCE 9.79% 84.69% 170.98% INSURANCE (INCL. 3% SALES CHARGE) 6.50% 79.15% 162.86% S&P 500 7.36% 71.20% 212.82% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on December 16, 1985. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND INSURANCE 9.79% 13.05% 11.43% INSURANCE (INCL. 3% SALES CHARGE) 6.50% 12.37% 11.06% S&P 500 7.36% 11.35% 13.18% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Insurance (04Standard & Poor's 50 12/16/85 9700.00 10000.00 12/31/85 9884.30 10080.42 01/31/86 10660.30 10136.87 02/28/86 11475.10 10895.11 03/31/86 12018.30 11503.06 04/30/86 11649.70 11373.07 05/31/86 12299.60 11978.12 06/30/86 12241.40 12180.55 07/31/86 11824.30 11499.66 08/31/86 12901.00 12352.93 09/30/86 11222.90 11331.35 10/31/86 11106.50 11985.16 11/30/86 10737.90 12276.40 12/31/86 10640.90 11963.36 01/31/87 11387.80 13574.82 02/28/87 12590.60 14111.03 03/31/87 11950.40 14518.83 04/30/87 10961.00 14389.62 05/31/87 10815.50 14514.81 06/30/87 11164.70 15247.80 07/31/87 11271.40 16020.87 08/31/87 12086.20 16618.45 09/30/87 12086.20 16254.50 10/31/87 9816.40 12753.28 11/30/87 9127.70 11702.41 12/31/87 9347.07 12592.97 01/31/88 10066.08 13123.13 02/29/88 10056.23 13734.67 03/31/88 9819.84 13310.27 04/30/88 9750.90 13458.01 05/31/88 10016.83 13575.09 06/30/88 10469.90 14198.19 07/31/88 10519.15 14144.24 08/31/88 10627.49 13663.33 09/30/88 10991.92 14245.39 10/31/88 10942.67 14641.41 11/30/88 10706.29 14432.04 12/31/88 10973.60 14684.60 01/31/89 11807.79 15759.52 02/28/89 11887.24 15367.10 03/31/89 12165.30 15725.16 04/30/89 12562.54 16541.29 05/31/89 12632.05 17211.21 06/30/89 12910.00 17113.11 07/31/89 13994.12 18658.42 08/31/89 14421.80 19024.13 09/30/89 14620.72 18946.13 10/31/89 15098.13 18506.58 11/30/89 15505.92 18884.12 12/31/89 15125.04 19337.33 01/31/90 13841.22 18039.80 02/28/90 14232.39 18272.51 03/31/90 14162.18 18756.73 04/30/90 13670.71 18287.82 05/31/90 14924.45 20070.88 06/30/90 14964.57 19934.40 07/31/90 14743.91 19870.61 08/31/90 13209.34 18074.30 09/30/90 12065.93 17194.08 10/31/90 11584.50 17120.15 11/30/90 13119.07 18226.11 12/31/90 13640.62 18734.62 01/31/91 14372.80 19551.45 02/28/91 15827.13 20949.38 03/31/91 16870.24 21456.35 04/30/91 16779.97 21507.85 05/31/91 17201.23 22436.99 06/30/91 16131.94 21409.37 07/31/91 16730.92 22407.05 08/31/91 16629.40 22938.10 09/30/91 16791.84 22555.03 10/31/91 17299.45 22857.27 11/30/91 17147.17 21936.12 12/31/91 18644.06 24445.61 01/31/92 18623.68 23990.92 02/29/92 19122.89 24302.81 03/31/92 18847.82 23828.90 04/30/92 18368.98 24529.47 05/31/92 18613.49 24649.67 06/30/92 19002.89 24282.39 07/31/92 20079.57 25275.53 08/31/92 19491.28 24757.39 09/30/92 20523.57 25049.52 10/31/92 21400.45 25137.20 11/30/92 22133.04 25994.38 12/31/92 22839.19 26314.11 01/31/93 23794.10 26535.14 02/28/93 24243.47 26896.02 03/31/93 25524.17 27463.53 04/30/93 24916.83 26798.91 05/31/93 24275.05 27517.12 06/30/93 24534.01 27596.92 07/31/93 25389.72 27486.53 08/31/93 26684.54 28528.27 09/30/93 26774.62 28308.61 10/31/93 25997.72 28894.59 11/30/93 24410.16 28620.10 12/31/93 24706.64 28966.40 01/31/94 25039.68 29951.26 02/28/94 23941.89 29139.58 03/31/94 22819.42 27869.09 04/30/94 23066.11 28225.82 05/31/94 24126.91 28688.72 06/30/94 23991.22 27985.85 07/31/94 24435.28 28903.78 08/31/94 25101.36 30088.84 09/30/94 24928.67 29351.66 10/31/94 24620.30 30012.07 11/30/94 23374.48 28919.03 12/31/94 24620.30 29347.90 01/31/95 25508.41 30108.89 02/28/95 26285.50 31282.24 Let's say you invested $10,000 in Fidelity Select Insurance Portfolio on December 16, 1985, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $26,286 - a 162.86% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $31,282 over the same period - a 212.82% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Aetna Life & Casualty Co. 5.6 General Re Corp. 5.3 Continental Corp. 5.3 Transamerica Corp. 5.2 American Express Co. 4.8 Allstate Corp. 4.4 Cincinnati Financial Corp. 4.4 American International Group, Inc. 3.8 Progressive Corp. (Ohio) 3.5 TIG Holdings, Inc. 3.5 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 11.4 Row: 1, Col: 2, Value: 1.9 Row: 1, Col: 3, Value: 10.0 Row: 1, Col: 4, Value: 11.9 Row: 1, Col: 5, Value: 64.8 Property-Casualty & Reinsurance 64.8% Multi-Line Insurance 11.9% Financial Services 10.0% Surety Insurance 1.9% All Others 11.4%* * INCLUDES SHORT-TERM INVESTMENTS INSURANCE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Michael Tempero, Portfolio Manager of Fidelity Select Insurance Portfolio Q. MIKE, YOU RECENTLY TOOK OVER THE FUND. HOW DID IT FARE BEFORE YOU CAME ON BOARD? A. It did well, especially given the drop in insurance stocks during much of 1994. For the 12 months ended February 28, 1995, the fund had a 9.79% return, which was ahead of the S&P 500's return of 7.36%. As tends to be the case, the fund beat the sector as a whole when the industry was declining but lagged during the rally. Q. WHAT HAPPENED TO TURN INSURANCE STOCKS AROUND LAST FALL? A. Mainly changing expectations regarding interest rates. In the 1980s, insurance stocks tended to move in the opposite direction of interest rates. So when rates started to rise in February of 1994, investors expected insurance stocks to fall, which they did. But as rates kept rising, some people thought the economy would slow - causing rates to fall again. That prospect helped push up prices on insurance stocks. Q. WAS THERE ANY IMPROVEMENT IN THE INDUSTRY ITSELF? A. No. In 1994, the property and casualty companies had their second worst year ever in terms of claims paid out for disasters like the California earthquake. However, these losses didn't hurt the industry's capacity to write new policies. With supply remaining high, there was no pressure to raise prices. This in turn limited insurers' earnings potential. As rates rose, life insurers also lost business to other investment alternatives. Q. SO WHERE DID YOU FIND OPPORTUNITIES? A. In cheap stocks. Usually these were smaller companies with good business prospects and a market niche like NAC Re, which reinsures smaller regional property and casualty companies. It had the biggest impact on performance over the year, rising 25% from September through February. Harleysville Group, a company with a property and casualty franchise on the East Coast, was another example. In early September, the stock hit a low, but then rose 25%. By the end of February, some of our investments such as Gryphon Holdings, which specializes in California earthquake insurance, seem to have been forgotten in the recent rally. Although that has hurt short-term performance, we haven't cut back on what we own. Q. WHY AT THE END OF THE PERIOD WERE SO MANY OF YOUR TOP STOCKS LARGER COMPANIES? A. As insurance stocks began to rise, new money poured into the fund. From September to February, assets tripled. To put this new money to work quickly, we had to invest in larger companies, which are easier to buy and sell than smaller companies. We didn't decrease our investment in smaller companies; we just weren't able to add to them as fast as we'd have liked. Q. DID THE LARGER INSURERS HURT PERFORMANCE AT ALL? A. Many actually helped as large companies were the first to rise when insurance stocks headed back up. The fund's biggest investment at the end of February was Aetna, which we started buying in December after its price had fallen. This, combined with the fact that the company was going through a restructuring to cut costs and write better policies, made the stock attractive. Since then, Aetna has returned to its former level. Continental, a property and casualty insurer, and General Re, a reinsurer, were both top contributors to performance. In October, Continental's price fell as the company was looking for a new CEO and facing a lot of potential losses. It was so cheap, we decided to buy it. Then in December, a takeover offer helped push Continental's price up about 35%. Gen Re did especially well after announcing plans to buy a German reinsurance company. Of course, there were also disappointments like Allstate, which fell 20% on news that Sears was going to spin off the 80% it owns. Q. WHAT'S AHEAD FOR THE FUND? A. The industry's outlook isn't particularly positive: there's still too much capacity to push up prices. That said, I believe there will continue to be opportunities to make money by looking for cheap companies with strong business prospects. If the fund's assets stay stable or shrink, more of the smaller companies will probably again dominate the fund's top investments. FUND FACTS START DATE: December 16, 1985 SIZE: as of February 28, 1995, more than $21 million MANAGER: Michael Tempero, since February 1995; equity analyst, oil and gas domestic exploration and production, conglomerates and household products, since 1993; joined Fidelity in 1993 (checkmark) INSURANCE PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.9% SHARES VALUE (NOTE 1) CREDIT & OTHER FINANCE - 10.0% FINANCIAL SERVICES - 10.0% American Express Co. 31,000 $ 1,046,250 02581610 Transamerica Corp. 21,000 1,147,125 89348510 2,193,375 INSURANCE - 80.9% INSURANCE CARRIERS - 1.7% AFLAC, Inc. 10,000 377,500 00105510 LIFE INSURANCE - 0.6% American Bankers Insurance Group, Inc. 5,000 135,625 02445610 MULTI-LINE INSURANCE - 11.9% Aetna Life & Casualty Co. 23,000 1,236,250 00814010 CNA Financial Corp. (a) 10,000 738,750 12611710 Lincoln National Corp. 16,000 646,000 53418710 2,621,000 PROPERTY-CASUALTY & REINSURANCE - 64.8% Allmerica Property & Casualty Companies 35,000 682,500 01975T10 Allstate Corp. 35,000 962,500 02000210 American International Group, Inc. 8,000 830,000 02687410 Berkley (W.R.) Corp. 7,000 250,250 08442310 Chubb Corp. (The) 8,000 629,000 17123210 Cincinnati Financial Corp. 17,000 956,250 17206210 Continental Corp. 60,000 1,162,500 21132710 Exel Ltd. 12,000 511,500 30161610 General Re Corp. 9,000 1,172,250 37056310 Gryphon Holdings, Inc. (a) 35,000 481,250 40051510 Harleysville Group Inc. 23,500 587,500 41282410 Horace Mann Educators Corp. 30,000 720,000 44032710 Mid Ocean Ltd. (a) 10,000 253,750 59599D23 NAC Re Corp. 13,000 432,250 62890710 National Re Corp. 23,000 698,625 63734020 Progressive Corp. (Ohio) 20,000 777,500 74331510 St. Paul Companies, Inc. (The) 15,000 729,375 79286010 Selective Insurance Group, Inc. 21,000 593,250 81630010 TIG Holdings, Inc. 37,000 767,750 87246910 Travelers, Inc. (The) 14,000 544,250 89419010 USF&G Corp. 35,000 498,750 90329010 14,241,000 SURETY INSURANCE - 1.9% Financial Security Assurance Holdings Ltd. 20,000 405,000 31769P10 TOTAL INSURANCE 17,780,125 TOTAL COMMON STOCKS (Cost $18,598,489) 19,973,500 REPURCHASE AGREEMENTS - 9.1% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $1,993,337 1,993,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $20,591,489) $ 21,966,500 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $26,736,283 and $25,217,823, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $22,909 for the period (see Note 5 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $20,617,203. Net unrealized appreciation aggregated $1,349,297, of which $1,408,008 related to appreciated investment securities and $58,711 related to depreciated investment securities. At February 28, 1995, the fund had a capital loss carryforward of approximately $938,000 which will expire on February 28, 2003. On October 26, 1990, the fund acquired all of the assets of Life Insurance Portfolio in a tax-free exchange for shares of Insurance Portfolio. Life Insurance Portfolio has a capital loss carryover of approximately $97,000 available to offset future realized capital gains in Insurance Portfolio, to the extent provided by regulations. The fund has elected to defer to its fiscal year ending February 28, 1996 $73,000 of losses recognized during the period November 1, 1994 to February 28, 1995. INSURANCE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $1,993,000) (cost $20,591,489) - See $ 21,966,500 accompanying schedule Cash 359 Receivable for investments sold 605,663 Receivable for fund shares sold 583,530 Dividends receivable 13,150 Redemption fees receivable 280 Other receivables 1,992 TOTAL ASSETS 23,171,474 LIABILITIES Payable for fund shares redeemed $ 1,295,376 Accrued management fee 10,767 Other payables and accrued expenses 27,021 TOTAL LIABILITIES 1,333,164 NET ASSETS $ 21,838,310 Net Assets consist of: Paid in capital $ 21,475,052 Undistributed net investment income 25,733 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (1,037,486 ) Net unrealized appreciation (depreciation) on investments 1,375,011 NET ASSETS, for 1,025,009 shares outstanding $ 21,838,310 NET ASSET VALUE and redemption price per share ($21,838,310 (divided by) 1,025,009 shares) $21.31 Maximum offering price per share (100/97.00 of $21.31) $21.97
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 202,114 Dividends Interest 65,208 TOTAL INCOME 267,322 EXPENSES Management fee $ 64,796 Transfer agent 96,721 Fees Redemption fees (12,008 ) Accounting fees and expenses 45,049 Non-interested trustees' compensation 248 Custodian fees and expenses 13,769 Registration fees 11,143 Audit 19,876 Legal 265 Reports to shareholders 3,674 Miscellaneous 106 Total expenses before reductions 243,639 Expense reductions (2,050 241,589 ) NET INVESTMENT INCOME 25,733 REALIZED AND UNREALIZED GAIN (LOSS) (1,038,394 Net realized gain (loss) on investment securities ) Change in net unrealized appreciation (depreciation) on investment securities 1,757,862 NET GAIN (LOSS) 719,468 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 745,201 OTHER INFORMATION $103,690 Sales Charges Paid to FDC Deferred sales charges withheld $732 by FDC Exchange fees withheld by FSC $9,105
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ 25,733 $ (4,905 Net investment income (loss) ) Net realized gain (loss) (1,038,394 2,620,140 ) Change in net unrealized appreciation (depreciation) 1,757,862 (2,713,783 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 745,201 (98,548 ) Distributions to shareholders: - (8,586 From net investment income ) From net realized gain - (1,719,115 ) TOTAL DISTRIBUTIONS - (1,727,701 ) Share transactions 33,064,318 31,795,113 Net proceeds from sales of shares Reinvestment of distributions - 1,707,519 Cost of shares redeemed (30,429,283 (39,665,244 ) ) Paid in capital portion of redemption fees 39,347 40,196 Net increase (decrease) in net assets resulting from share transactions 2,674,382 (6,122,416 ) TOTAL INCREASE (DECREASE) IN NET ASSETS 3,419,583 (7,948,665 ) NET ASSETS Beginning of period 18,418,727 26,367,392 End of period (including undistributed net investment income of $25,733 and $0, respectively) $ 21,838,310 $ 18,418,727 OTHER INFORMATION Shares Sold 1,639,929 1,431,358 Issued in reinvestment of distributions - 84,550 Redeemed (1,564,065 (1,788,708 ) ) Net increase (decrease) 75,864 (272,800 )
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 19.41 $ 21.58 $ 18.03 $ 16.73 $ 13.63 Income from Investment Operations Net investment income (loss) .05 - (.04) .04 .23 Net realized and unrealized gain (loss) 1.78 (.24) 5.12 1.48 2.83 Total from investment operations 1.83 (.24) 5.08 1.52 3.06 Less Distributions - (.01) - (.26) - From net investment income In excess of net investment income - - (.03) - - From net realized gain - (1.96) (1.71) - - Total distributions - (1.97) (1.74) (.26) - Redemption fees added to paid in capital .07 .04 .21 .04 .04 Net asset value, end of period $ 21.31 $ 19.41 $ 21.58 $ 18.03 $ 16.73 TOTAL RETURN B, C 9.79% (1.24)% 31.98% 9.47% 22.74% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 21,838 $ 18,419 $ 26,367 $ 2,573 $ 2,176 Ratio of expenses to average net assets 2.34% 1.93% 2.49% A 2.47% 2.49% Ratio of expenses to average net assets before expense reductions 2.36% 1.93% 2.52% A 2.71% 2.73% Ratio of net investment income (loss) to average net assets .25% (.02)% (.26)% .22% 1.58% A Portfolio turnover rate 265% 101% 81% A 112% 98%
a ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. REGIONAL BANKS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND REGIONAL BANKS 7.79% 154.15% 217.37% REGIONAL BANKS (INCL. 3% SALES CHARGE) 4.55% 146.52% 207.85% S&P 500 7.36% 71.20% 158.12% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on June 30, 1986. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND REGIONAL BANKS 7.79% 20.51% 14.24% REGIONAL BANKS (INCL. 3% SALES CHARGE) 4.55% 19.78% 13.84% S&P 500 7.36% 11.35% 11.55% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Regional BankStandard & Poor's 50 06/30/86 9700.00 10000.00 07/31/86 9040.40 9488.77 08/31/86 9379.90 10192.84 09/30/86 8361.40 9349.89 10/31/86 8574.80 9889.38 11/30/86 8545.70 10129.69 12/31/86 8283.80 9871.39 01/31/87 8894.90 11201.06 02/28/87 9486.60 11643.50 03/31/87 9506.00 11980.00 04/30/87 8933.70 11873.38 05/31/87 8982.20 11976.68 06/30/87 9302.30 12581.50 07/31/87 9302.30 13219.38 08/31/87 9729.10 13712.46 09/30/87 9476.90 13412.16 10/31/87 7924.90 10523.18 11/30/87 7672.70 9656.07 12/31/87 8031.30 10390.90 01/31/88 8599.98 10828.35 02/29/88 8819.46 11332.96 03/31/88 9019.00 10982.77 04/30/88 8919.23 11104.68 05/31/88 9078.86 11201.29 06/30/88 9717.37 11715.43 07/31/88 9767.26 11670.91 08/31/88 9637.56 11274.10 09/30/88 10006.70 11754.37 10/31/88 10126.42 12081.14 11/30/88 9877.00 11908.38 12/31/88 10095.78 12116.78 01/31/89 10736.79 13003.73 02/28/89 10897.04 12679.94 03/31/89 11794.44 12975.38 04/30/89 12104.26 13648.80 05/31/89 13033.71 14201.58 06/30/89 12816.92 14120.63 07/31/89 13957.64 15395.72 08/31/89 14302.01 15697.48 09/30/89 14420.38 15633.12 10/31/89 13085.96 15270.43 11/30/89 13064.44 15581.95 12/31/89 12785.92 15955.91 01/31/90 11633.94 14885.27 02/28/90 12112.98 15077.29 03/31/90 11816.43 15476.84 04/30/90 11143.49 15089.92 05/31/90 11919.08 16561.19 06/30/90 11451.44 16448.57 07/31/90 10755.69 16395.93 08/31/90 9751.98 14913.74 09/30/90 8565.77 14187.44 10/31/90 8314.84 14126.44 11/30/90 9421.21 15039.00 12/31/90 10143.17 15458.59 01/31/91 10816.29 16132.59 02/28/91 11733.12 17286.07 03/31/91 12394.63 17704.39 04/30/91 13230.22 17746.88 05/31/91 14089.03 18513.55 06/30/91 13253.44 17665.63 07/31/91 14355.95 18488.84 08/31/91 15388.84 18927.03 09/30/91 15087.10 18610.95 10/31/91 15713.79 18860.33 11/30/91 14994.25 18100.26 12/31/91 16816.66 20170.93 01/31/92 17868.47 19795.75 02/29/92 19311.64 20053.10 03/31/92 19042.58 19662.06 04/30/92 20155.53 20240.13 05/31/92 21011.66 20339.30 06/30/92 21221.30 20036.25 07/31/92 21245.92 20855.73 08/31/92 20113.46 20428.19 09/30/92 21048.97 20669.24 10/31/92 21947.55 20741.58 11/30/92 23744.72 21448.87 12/31/92 24976.51 21712.69 01/31/93 26017.20 21895.08 02/28/93 26826.62 22192.85 03/31/93 27970.10 22661.12 04/30/93 26530.18 22112.72 05/31/93 26270.84 22705.34 06/30/93 27736.09 22771.19 07/31/93 27813.89 22680.10 08/31/93 28202.90 23539.68 09/30/93 29175.41 23358.43 10/31/93 27606.42 23841.94 11/30/93 26737.64 23615.45 12/31/93 27767.00 23901.19 01/31/94 29386.35 24713.83 02/28/94 28560.80 24044.09 03/31/94 28084.52 22995.77 04/30/94 29572.74 23290.11 05/31/94 31050.57 23672.07 06/30/94 30279.53 23092.10 07/31/94 31082.70 23849.53 08/31/94 31885.87 24827.36 09/30/94 29990.39 24219.09 10/31/94 29861.88 24764.01 11/30/94 27934.27 23862.11 12/31/94 27827.60 24215.98 01/31/95 29229.24 24843.91 02/28/95 30784.71 25812.07 Let's say you invested $10,000 in Fidelity Select Regional Banks Portfolio on June 30, 1986, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $30,785 - a 207.85% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $25,812 over the same period - a 158.12% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Bank of Boston Corp. 5.1 Bank of New York Co., Inc. 4.7 NBD Bancorp, Inc. 4.6 NationsBank Corp. 4.0 Boatmen's Bancshares, Inc. 3.8 Fleet Financial Group, Inc. 3.7 Barnett Banks, Inc. 3.6 Comerica, Inc. 3.6 BanPonce Corp. 3.3 Midlantic Corp. 3.2 TOP REGIONS AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 36.8 Row: 1, Col: 2, Value: 6.9 Row: 1, Col: 3, Value: 8.300000000000001 Row: 1, Col: 4, Value: 8.6 Row: 1, Col: 5, Value: 16.4 Row: 1, Col: 6, Value: 23.0 Northeast 23.0% Midwest 16.4% Southeast 8.6% Mid-Atlantic 8.3% West 6.9% All Others 36.8%* * INCLUDES SHORT-TERM INVESTMENTS REGIONAL BANKS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Louis Salemy, Portfolio Manager of Fidelity Select Regional Banks Portfolio Q. HOW DID THE FUND PERFORM, LOUIS? A. On balance, I'd say the fund did pretty well. It returned 7.79% for the 12 months ended February 28, 1995, slightly ahead of the S&P 500's 7.36% return. But the fund's performance worsened during the second half of the period. Q. WHAT CAUSED THIS DETERIORATION DURING THE SECOND HALF? A. In part, the dynamics of the interest rate environment. When rates began rising in early 1994, their initial impact on spreads - the difference in rates between a bank's loans and its deposits - was beneficial to some extent. Loans were re-priced at higher rates more quickly than customer deposits, which represent a bank's cost of funds, and the wider spreads helped bank earnings and propelled stock prices. What happened later in the period was that, while rates continued to rise, the banks' cost of funds started to increase, which narrowed spreads and squeezed earnings. In effect, rising rates caught up with the banks' earnings estimates. So during the second half, many regionals had to revise their earnings projections downward and, as a result, their stocks were punished rather severely. As an overall industry group, the regional bank stocks went down about 10% to 15% in the second half of 1994. Q. WAS THIS TREND TRUE FOR ALL COMPANIES IN THE CATEGORY? A. Fortunately, it was not. Some banks are liability-sensitive, which means that their liabilities, or what they owe depositors or other funding sources, usually re-price more quickly than their assets, or loans, which earn them money. In a rising-rate environment, liability-sensitive banks tend to fare worse than those that are asset-sensitive, where loan rates rise more quickly than deposit rates. The fund did not have big positions in banks with high degrees of liability sensitivity, which means it avoided some of the biggest losers in the second half. And fortunately, the fund owned a higher concentration of asset-sensitive institutions, which helped cushion the general downward pressure on regional bank stocks late in the period. Q. WHICH STOCKS DID MOST TO HELP PERFORMANCE? A. Among the asset-sensitive banks, there were two or three that really helped support performance, particularly in the second half. Bank of Boston put together two strong earnings quarters, and its stock price held its value for the most part. Bank of New York and Shawmut National also demonstrated their staying power, although Shawmut's stock price may have been supported more by news of its planned merger with Fleet Financial Group. Bank of Boston and Bank of New York were the fund's two largest holdings at the end of the period. Q. WERE THERE ANY MAJOR DISAPPOINTMENTS? A. No particular names stand out. As a group, the regional bank stocks were basically flat for the period - up in the first half and down in the second. Banks with higher degrees of liability sensitivity suffered more than those whose balance sheets were more asset-sensitive. Q. HAVE YOU MADE ANY SIGNIFICANT CHANGES IN THE FUND'S POSITIONING SINCE YOU TOOK IT OVER IN DECEMBER? A. I've made some changes. Given the generally better performance of the asset-sensitive banks recently, I've done some re-positioning that puts greater emphasis on these institutions. As a result, the fund is probably more concentrated than it's been in the past. In general, I look to buy regional banks that have good franchises in their markets and whose stocks are reasonably priced. Barnett Bank, which I bought recently, is a good example: it has a strong presence in Florida, it was an inexpensive buy, and it has a fairly consistent track record of growing its book value, or total net assets divided by stock shares outstanding. Q. WHAT IS YOUR OUTLOOK FOR THE REGIONAL BANKS AND YOUR GAME PLAN FOR THE FUND GOING FORWARD? A. I am not overly optimistic about the group. There are three major concerns I have. First, even though the domestic economy now appears to be fairly strong, bank spreads continue to be squeezed as a result of last year's rising interest rate environment. Second, this flattening out of the yield curve - or narrowing of the difference between long- and short-term interest rates - also reduces the margins banks recognize on their securities portfolios, which in turn affects earnings and stock prices. Third, if the economy really begins to slow down, banks will face the inevitable possibility of increased credit risk in their loan portfolios. I plan no major changes in strategy at the moment. FUND FACTS START DATE: June 30, 1986 SIZE: as of February 28, 1995, more than $164 million MANAGER: Louis Salemy, since December 1994; manager, Fidelity Select Financial Services Portfolio, since December 1994; manager, Fidelity Select Medical Delivery Portfolio, 1993-1994; manager, Fidelity Select Industrial Materials Portfolio, 1992-1994; joined Fidelity in 1992. (checkmark) REGIONAL BANKS PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 76.7% SHARES VALUE (NOTE 1) BANKS - 73.9% MID-ATLANTIC - 8.3% BB & T Financial Corp. 31,915 $ 1,017,291 Crestar Financial Corp. 62,283 2,685,954 22609110 HUBCO, Inc. 75,030 1,219,238 40438210 Integra Financial Corp. 28,280 1,208,970 45810410 Midlantic Corp. 168,400 5,178,300 59780E10 Pamrapo Bancorp, Inc. 14,000 283,500 69773810 Southern National Corp. 20,000 447,500 84344410 Wachovia Corp. 39,000 1,355,250 92977110 13,396,003 MIDWEST - 16.4% Boatmen's Bancshares, Inc. 199,100 6,172,100 09665010 Comerica, Inc. 207,300 5,830,313 20034010 Fifth Third Bancorp 20,300 1,045,450 31677310 First Bank System, Inc. 701 27,251 31927910 First Chicago Corp. 73,300 3,710,813 31945510 Mercantile Bancorporation, Inc. 40,500 1,493,438 58734210 National City Corp. 122,209 3,391,300 63540510 Northern Trust Corp. 4,700 159,800 66585910 Norwest Corp. 147,696 3,803,172 66938010 Standard Federal Bank 36,100 1,073,975 85338910 26,707,612 NORTHEAST - 23.0% Bank of Boston Corp. 273,839 8,249,400 06071610 Bank of New York Co., Inc. 228,924 7,668,951 06405710 Banknorth Group, Inc., 26,500 669,125 06646L10 First Empire State Corp. 4,600 761,300 32007610 Fleet Financial Group, Inc. 195,000 6,069,375 33891510 NBD Bancorp, Inc. 239,700 7,460,663 62890010 North Fork Bancorporation, Inc. 72,000 1,134,000 65942410 North Side Savings Bank (Bronx, NY) 6,019 129,409 66248810 Shawmut National Corp. 197,300 5,055,813 82048410 Webster Financial Corp. (Waterbury, Conn.) 8,200 178,350 94789010 37,376,386 SOUTHEAST - 8.6% BanPonce Corp. 178,501 5,399,655 06670410 Barnett Banks, Inc. 131,300 5,842,850 06805510 Compass Bancshares, Inc. 5,000 137,500 20449H10 Deposit Guaranty Corp. 8,600 277,350 24955510 First Commerce Corp. 32,000 848,000 31977910 Regions Financial Corp. 34,600 1,141,800 75894010 Whitney Holding Corp. 16,800 386,400 96661210 14,033,555 SOUTHWEST - 0.7% Liberty Bancorporation, Inc. 35,500 1,118,250 53017510 WEST - 6.9% Bancorp Hawaii, Inc. 20,000 560,000 05968510 BankAmerica Corp. 71,800 3,455,375 06605010 CenFed Financial Corp. (a) 23,950 407,150 15131U10 First Security Corp. 59,405 1,499,976 33629410 Silicon Valley Bancshares (a) 37,200 548,700 82706410 West One Bancorp 57,200 1,562,275 95482810 Westamerica Bancorp 24,900 778,125 95709010 Zions Bancorporation 60,000 2,400,000 98970110 11,211,601 MONEY CENTER - 6.0% Chemical Banking Corp. 126,800 5,087,850 16372210 Citicorp 103,600 4,662,000 17303410 9,749,850 SHARES VALUE (NOTE 1) MULTI-REGIONAL - 4.0% Keycorp 123 $ 3,567 49326710 NationsBank Corp. 131,253 6,546,243 63858510 6,549,810 TOTAL BANKS 120,143,067 CREDIT & OTHER FINANCE - 2.8% PERSONAL CREDIT INSTITUTIONS - 2.2% American Express Co. 50,000 1,687,500 02581610 Beneficial Corp. 50,000 1,856,250 08172110 3,543,750 SECURITY & COMMODITY BROKERS - 0.6% Morgan Stanley Group, Inc. 13,500 909,563 61744610 TOTAL CREDIT & OTHER FINANCE 4,453,313 TOTAL COMMON STOCKS (Cost $119,004,299) 124,596,380 REPURCHASE AGREEMENTS - 23.3% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 (Note 3) $ 37,970,412 37,964,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $156,968,299) $ 162,560,380 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $156,775,420 and $132,781,705, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $83,609 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $8,555,000 and $2,452,364, respectively. The weighted average interest rate paid was 4.4% (see Note 8 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $157,189,866. Net unrealized appreciation aggregated $5,370,514, of which $7,343,543 related to appreciated investment securities and $1,973,029 related to depreciated investment securities. The fund hereby designates $4,256,000 as a capital gain dividend for the purpose of the dividend paid deduction. REGIONAL BANKS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $37,964,000) (cost $156,968,299) - See $ 162,560,380 accompanying schedule Cash 606 Receivable for investments sold 3,633,629 Receivable for fund shares sold 3,946,325 Dividends receivable 411,154 Redemption fees receivable 298 Other receivables 1,133 TOTAL ASSETS 170,553,525 LIABILITIES Payable for investments purchased $ 4,370,130 Payable for fund shares redeemed 1,388,205 Accrued management fee 78,511 Other payables and 113,895 accrued expenses TOTAL LIABILITIES 5,950,741 NET ASSETS $ 164,602,784 Net Assets consist of: Paid in capital $ 156,446,216 Undistributed net investment income 1,047,856 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 1,516,631 Net unrealized appreciation (depreciation) on investments 5,592,081 NET ASSETS, for 9,141,583 $ 164,602,784 shares outstanding NET ASSET VALUE and redemption price per share ($164,602,784 (divided by) 9,141,583 shares) $18.01 Maximum offering price per share (100/97.00 of $18.01) $18.57
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 4,303,205 Dividends Interest 802,491 TOTAL INCOME 5,105,696 EXPENSES Management fee $ 892,544 Transfer agent 1,261,248 Fees Redemption fees (128,890 ) Accounting fees and expenses 144,275 Non-interested trustees' compensation 2,293 Custodian fees and expenses 15,145 Registration fees 42,759 Audit 26,429 Legal 2,105 Interest 3,286 Reports to shareholders 7,036 Miscellaneous 1,353 Total expenses before reductions 2,269,583 Expense reductions (22,069 2,247,514 ) NET INVESTMENT INCOME 2,858,182 REALIZED AND UNREALIZED GAIN (LOSS) 6,429,187 Net realized gain (loss) on investment securities Change in net unrealized appreciation (depreciation) on investment securities (2,016,821 ) NET GAIN (LOSS) 4,412,366 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 7,270,548 OTHER INFORMATION $1,112,238 Sales Charges Paid to FDC Deferred sales charges withheld $4,584 by FDC Exchange fees withheld by FSC $100,050
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ 2,858,182 $ 1,775,482 Net investment income Net realized gain (loss) 6,429,187 47,667,500 Change in net unrealized appreciation (depreciation) (2,016,821 (45,382,083 ) ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 7,270,548 4,060,899 Distributions to shareholders: (1,863,695 (1,037,780 From net investment income ) ) From net realized gain (6,217,044 (23,400,595 ) ) TOTAL DISTRIBUTIONS (8,080,739 (24,438,375 ) ) Share transactions 301,180,682 278,064,736 Net proceeds from sales of shares Reinvestment of distributions 7,855,119 23,731,357 Cost of shares redeemed (241,446,435 (500,062,192 ) ) Paid in capital portion of redemption fees 394,744 552,081 Net increase (decrease) in net assets resulting from share transactions 67,984,110 (197,714,018 ) TOTAL INCREASE (DECREASE) IN NET ASSETS 67,173,919 (218,091,494 ) NET ASSETS Beginning of period 97,428,865 315,520,359 End of period (including undistributed net investment income of $1,047,856 and $1,064,151, respectively) $ 164,602,784 $ 97,428,865 OTHER INFORMATION Shares Sold 16,228,773 13,266,789 Issued in reinvestment of distributions 468,963 1,338,190 Redeemed (12,971,096 (24,299,694 ) ) Net increase (decrease) 3,726,640 (9,694,715 )
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 17.99 $ 20.88 $ 16.48 $ 11.40 $ 9.77 Income from Investment Operations Net investment income .37 .19 .16 .25 .22 Net realized and unrealized gain (loss) .87 .93 5.09 5.37 1.41 Total from investment operations 1.24 1.12 5.25 5.62 1.63 Less Distributions (.29) E (.15) (.11) (.15) (.15) From net investment income From net realized gain (.98) E (3.92) (.81) (.53) - Total distributions (1.27) (4.07) (.92) (.68) (.15) Redemption fees added to paid in capital .05 .06 .07 .14 .15 Net asset value, end of period $ 18.01 $ 17.99 $ 20.88 $ 16.48 $ 11.40 TOTAL RETURN B, C 7.79% 6.46% 33.10% 52.34% 18.73% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 164,603 $ 97,429 $ 315,520 $ 156,570 $ 24,212 Ratio of expenses to average net assets 1.56% 1.60% 1.49% A 1.77% 2.51% Ratio of expenses to average net assets before expense reductions 1.58% 1.62% 1.49% A 1.77% 2.94% Ratio of net investment income to average net assets 1.99% .88% 1.06% A 1.80% 2.34% Portfolio turnover rate 106% 74% 63% A 89% 110%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS). BIOTECHNOLOGY PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND BIOTECHNOLOGY -8.37% 126.55% 243.84% BIOTECHNOLOGY (INCL. 3% SALES CHARGE) -11.12% 119.75% 233.52% S&P 500 7.36% 71.20% 212.82% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on December 16, 1985. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND BIOTECHNOLOGY -8.37% 17.77% 14.35% BIOTECHNOLOGY (INCL. 3% SALES CHARGE) -11.12% 17.05% 13.97% S&P 500 7.36% 11.35% 13.18% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select BiotechnologyStandard & Poor's 50 12/16/85 9700.00 10000.00 12/31/85 9700.00 10080.42 01/31/86 10175.30 10136.87 02/28/86 10417.80 10895.11 03/31/86 12192.90 11503.06 04/30/86 12377.20 11373.07 05/31/86 12988.30 11978.12 06/30/86 13715.80 12180.55 07/31/86 11863.10 11499.66 08/31/86 12328.70 12352.93 09/30/86 10214.10 11331.35 10/31/86 10970.70 11985.16 11/30/86 10728.20 12276.40 12/31/86 10039.50 11963.36 01/31/87 11378.10 13574.82 02/28/87 13715.80 14111.03 03/31/87 13657.60 14518.83 04/30/87 13483.00 14389.62 05/31/87 13424.80 14514.81 06/30/87 13327.80 15247.80 07/31/87 13347.20 16020.87 08/31/87 13890.40 16618.45 09/30/87 13686.70 16254.50 10/31/87 9476.90 12753.28 11/30/87 8555.40 11702.41 12/31/87 9701.08 12592.97 01/31/88 10191.13 13123.13 02/29/88 10571.17 13734.67 03/31/88 10501.17 13310.27 04/30/88 10311.14 13458.01 05/31/88 10111.12 13575.09 06/30/88 10451.16 14198.19 07/31/88 10441.16 14144.24 08/31/88 10151.13 13663.33 09/30/88 10361.15 14245.39 10/31/88 10251.14 14641.41 11/30/88 9771.08 14432.04 12/31/88 10101.12 14684.60 01/31/89 10801.20 15759.52 02/28/89 10721.19 15367.10 03/31/89 11511.28 15725.16 04/30/89 11901.32 16541.29 05/31/89 12441.38 17211.21 06/30/89 12121.35 17113.11 07/31/89 13241.47 18658.42 08/31/89 13741.53 19024.13 09/30/89 14321.59 18946.13 10/31/89 14371.60 18506.58 11/30/89 14821.65 18884.12 12/31/89 14538.80 19337.33 01/31/90 13450.93 18039.80 02/28/90 14721.80 18272.51 03/31/90 15341.99 18756.73 04/30/90 15535.16 18287.82 05/31/90 17721.06 20070.88 06/30/90 18958.59 19934.40 07/31/90 19009.99 19870.61 08/31/90 18423.96 18074.30 09/30/90 18012.71 17194.08 10/31/90 18166.93 17120.15 11/30/90 20367.12 18226.11 12/31/90 20986.43 18734.62 01/31/91 23396.61 19551.45 02/28/91 26711.92 20949.38 03/31/91 29469.41 21456.35 04/30/91 28185.39 21507.85 05/31/91 29974.60 22436.99 06/30/91 28383.14 21409.37 07/31/91 30938.29 22407.05 08/31/91 33106.29 22938.10 09/30/91 34820.78 22555.03 10/31/91 38249.77 22857.27 11/30/91 35694.62 21936.12 12/31/91 41772.50 24445.61 01/31/92 40935.22 23990.92 02/29/92 37792.53 24302.81 03/31/92 34925.11 23828.90 04/30/92 31667.73 24529.47 05/31/92 33938.72 24649.67 06/30/92 33343.04 24282.39 07/31/92 35086.05 25275.53 08/31/92 32891.61 24757.39 09/30/92 32778.75 25049.52 10/31/92 34383.83 25137.20 11/30/92 37769.55 25994.38 12/31/92 37451.88 26314.11 01/31/93 35527.21 26535.14 02/28/93 29792.77 26896.02 03/31/93 30240.98 27463.53 04/30/93 31018.75 26798.91 05/31/93 33022.51 27517.12 06/30/93 33220.25 27596.92 07/31/93 32126.09 27486.53 08/31/93 33338.90 28528.27 09/30/93 34709.89 28308.61 10/31/93 37293.69 28894.59 11/30/93 37003.67 28620.10 12/31/93 37715.53 28966.40 01/31/94 39007.43 29951.26 02/28/94 36397.27 29139.58 03/31/94 32719.31 27869.09 04/30/94 32126.09 28225.82 05/31/94 31585.61 28688.72 06/30/94 30333.25 27985.85 07/31/94 30412.35 28903.78 08/31/94 33259.80 30088.84 09/30/94 33154.34 29351.66 10/31/94 32020.63 30012.07 11/30/94 31427.41 28919.03 12/31/94 30860.56 29347.90 01/31/95 32244.74 30108.89 02/28/95 33352.08 31282.24 Let's say you invested $10,000 in Fidelity Select Biotechnology Portfolio on December 16, 1985, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $33,352 - a 233.52% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $31,282 over the same period - a 212.82% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Genetech, Inc. 6.1 Biogen, Inc. 5.2 Amgen, Inc. 4.5 Roche Holdings Ltd. participation certificates 4.4 COR Therapeutics, Inc. 2.9 Protein Design Labs, Inc. 2.5 Teva Pharmaceuticals Industries Ltd. ADR 2.3 Upjohn Co. 2.1 Schering-Plough Corp. 1.7 Abbott Laboratories 1.7 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 35.4 Row: 1, Col: 2, Value: 1.4 Row: 1, Col: 3, Value: 3.3 Row: 1, Col: 4, Value: 5.8 Row: 1, Col: 5, Value: 22.1 Row: 1, Col: 6, Value: 32.0 Biotechnology 32.0% Drugs 22.1% Pharmaceutical Preparations 5.8% Medical Supplies & Appliances 3.3% Medical Technology 1.4% All Others 35.4%* * INCLUDES SHORT-TERM INVESTMENTS BIOTECHNOLOGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Karen Firestone, Portfolio Manager of Fidelity Select Biotechnology Portfolio Q. HOW HAS THE FUND PERFORMED, KAREN? A. The fund is down 8.37% for the year ended February 28, 1995. The S&P 500 returned 7.36% for the same period. Q. WHAT FACTORS LED TO DISAPPOINTING RESULTS? A. Last year was a bleak one for the biotechnology industry in general. The market continued to be discouraged by lackluster clinical drug trial results, and only one new drug won Food and Drug Administration approval. So far, 1995 has been better with the fund returning 3.43% in February alone. Q. WHAT'S YOUR INVESTMENT STRATEGY IN SUCH A TOUGH MARKET ENVIRONMENT? A. I've reduced the fund's holdings in single-product companies whose fate is determined by the results of one clinical trial or FDA meeting. Those stocks aren't attractive to me right now since I don't believe the reward is commensurate with the risk. For example, if a drug trial goes well, the stock may go up 30%; if the drug doesn't work the stock may go down 75%. My feeling is that if the results are good, I can buy the stock afterwards and still get a good value. Q. WHAT TRENDS HAVE EMERGED IN THE BIOTECH FIELD RECENTLY? A. There's been a divergence between the companies that can attract investors and the money to spend on new product development and those companies that can't. The larger-capitalized, revenue-producing companies that the fund is heavily invested in - such as Genentech, Biogen and Amgen - - have been doing well. For that reason, I'm feeling less defensive than I was six months ago and generally more optimistic about the industry. Q. YOU'VE MORE THAN DOUBLED THE FUND'S HOLDING IN BIOGEN FROM 2.2% OF THE FUND SIX MONTHS AGO TO 5.2% AS OF FEBRUARY 28, 1995. IS BIOGEN ONE OF THE COMPANIES THAT HAS BEEN ABLE TO ATTRACT CAPITAL? A. Absolutely. I've been accumulating a larger position in Biogen because of the company's success with beta interferon, a drug to treat multiple sclerosis. The stock has traveled a bumpy road, but when it goes down I usually buy more. I think the drug will be approved and the company will be successful - especially since it currently has no meaningful competition. Q. WHAT'S BEEN HAPPENING WITH SOME OF THE FUND'S OTHER TOP HOLDINGS? A. Genentech, a very broad-based drug company, continues to be the fund's largest holding. The story there is that Hoffman La Roche, a Swiss drug company, has an option to buy 35% of the company it doesn't already own. I started selling my position in late December when it became obvious to me that the buyout wouldn't take place by the end of December as many people expected. After the first of the year the stock went down and I began aggressively buying the stock back. It's starting to look like the company will be bought by Hoffman La Roche at the end of the year. In the meantime, the company may have some good data coming out on a new allergy drug later this year. In addition, I've reduced my position in Amgen recently. The stock has had a good run and reached such a high price that I decided to take profits. Q. YOU'VE TALKED A LOT ABOUT SOME OF THE LARGER BIOTECH FIRMS. DOES THE FUND OWN ANY SMALLER COMPANIES. A. Yes. Even though the market is currently favoring larger-capitalized companies, there are some smaller stocks that are attractive. I've been investing in companies where the data supports higher stock prices. I'm looking for quality in this industry, not just size. Cor Therapeutics is a company that I believe has drugs that are going to work and will be good, long-term holdings for the fund. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. My emphasis continues to be on the top 20 holdings in the fund. I've positioned the fund in what I consider to be the strongest stocks in the industry that have begun to turn around and should continue to do well. Although there are risks involved, I believe the market is starting to look more positive for biotechnology stocks. FUND FACTS START DATE: December 16, 1985 SIZE: as of February 28, 1995, more than $448 million MANAGER: Karen Firestone, since August 1992; manager, Fidelity Select Health Care Fund since February 1995; manager, Fidelity Select Air Transportation Portfolio, September 1987- November 1992; Fidelity Select Leisure Portfolio, April 1989-August 1992; joined Fidelity in 1983 (checkmark) BIOTECHNOLOGY PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 69.0% SHARES VALUE (NOTE 1) AGRICULTURE - 0.1% CROPS - 0.1% DEKALB Genetics Corp. Class B 23,700 $ 676,922 24487820 CELLULAR - 0.2% CELLULAR & COMMUNICATION SERVICES - 0.2% Millicom International Cellular SA (a) 26,942 734,170 60081492 COMPUTER SERVICES & SOFTWARE - 0.8% COMPUTER SERVICES - 0.8% Cerner Corp. (a) 79,400 3,682,175 15678210 DRUGS & PHARMACEUTICALS - 61.4% BIOTECHNOLOGY - 32.0% Advanced Tissue Sciences Corp. Class A (a) 22,000 195,250 00755F10 Alkermes, Inc. (a)(c) 335,900 976,209 01642T10 Amgen, Inc. (a) 299,800 20,686,200 03116210 Athena Neurosciences, Inc. (a) 302,700 2,686,463 04685410 Bio-Rad Laboratories, Inc. Class A (a) 76,000 2,109,000 09057220 Biochem Pharmaceutical, Inc. (a) 100,000 1,385,341 09058T10 Biogen, Inc. (a) 579,700 23,912,625 09059710 Cambridge Neuroscience, Inc. (a) 93,900 528,188 13242610 Cell Genesys, Inc. (a) 139,000 903,500 15092110 Cellpro, Inc. (a) 136,900 1,557,238 15115610 Celtrix Laboratories, Inc. (a) 213,700 400,688 15118610 Centocor, Inc. (a) 138,400 2,638,250 15234210 Cephalon, Inc. (a) 100,000 812,500 15670810 Chiron Corp. (a) 49,086 2,981,975 17004010 Collagen Corp. 30,300 825,675 19419410 COR Therapeutics, Inc. (a)(c) 978,000 13,203,000 21775310 Creative Biomolecules, Inc. (a) 58,100 188,825 22527010 Dynagen, Inc. (warrants) (a) 40,000 43,750 26791712 Genentech, Inc. (a) 557,800 28,029,450 36871020 Genetics Institute, Inc.(a): depositary share 167,380 6,025,680 37185530 (warrants) 40,000 420,000 37185511 Genzyme Corp. 81,400 3,154,250 37291710 Genzyme Corp.-Tissue Repair (a) 28,539 114,156 37291740 Gilead Sciences, Inc. (a) 21,300 303,525 37555810 Idexx Laboratories (a) 51,000 1,938,000 45168D10 Imclone Systems, Inc. (a) 146,500 54,938 45245W10 Insite Vision, Inc. (a)(c) 689,700 2,586,375 45766010 Liposome Co, Inc. (a)(c) 100,000 675,000 53631110 Magainin Pharmaceuticals, Inc. (a) 342,400 1,326,800 55903610 Neurogen Corp. (a)(c) 317,900 2,861,100 64124E10 North American Biologicals, Inc. (a) 32,000 272,000 65675510 North American Vaccine, Inc. (a) 393,300 3,146,400 65720110 Protein Design Labs, Inc. (a) 687,100 11,594,813 74369L10 SciGenics, Inc. (a)(c) 122,000 1,433,500 80890410 Somatix Therapy Corp. (a) 649,600 2,923,200 83444710 Univax Biologics, Inc. (a) 462,700 3,123,225 91335G10 Vical, Inc. (a) 248,900 2,053,425 92560210 148,070,514 COMMERCIAL LABORATORY RESEARCH - 0.7% Cantab Pharmaceutical Sponsored ADR (a) 5,000 18,750 13808410 Cryomedical Sciences, Inc. (a) 343,000 1,114,750 22904910 Medarex Inc. (a)(b) 175,000 678,125 58391692 Medarex, Inc. (warrants) (a) 175,000 153,125 58391611 Scios, Inc. (a) 176,303 1,454,500 80890510 3,419,250 SHARES VALUE (NOTE 1) DRUGS - 22.1% A.L. Laboratories, Inc. Class A 116,700 $ 2,377,763 00162910 Allergan, Inc. 164,100 4,738,388 01849010 Astra AB Free shares 40,000 1,006,933 04632292 Astra AB Class B Free Shares 165,000 4,075,017 04632299 Elan Corp. PLC (a): ADR 182,315 6,426,604 28413120 (warrants) 76,575 1,512,356 28413112 therapeutic systems unit (1 Common & 1 ADR warrant) 30,339 841,907 28413140 IVAX Corp. 332,532 7,191,005 46582310 Lilly (Eli) & Co. 115,000 7,705,000 53245710 Lynx Therapeutics, Inc. (a) 193,995 2 55181210 Mylan Laboratories, Inc. 123,400 3,856,250 62853010 Novo-Nordisk AS Class B 15,500 1,559,048 67010010 Novo Industri A/S ADR 16,000 402,000 67010020 Pfizer, Inc. 52,800 4,369,200 71708110 Roche Holdings Ltd. (participation certificates) 3,650 20,181,139 77157092 Schering-Plough Corp. 100,000 7,837,500 80660510 Schering Plough Corp. (a)(d) 6,300 177,849 80660540 Teva Pharmaceutical Industries Ltd. ADR 414,600 10,753,688 88162420 Upjohn Co. 275,000 9,693,750 91530210 Vertex Pharmaceuticals, Inc. (a) 28,500 463,125 92532F10 Warner-Lambert Co. 22,000 1,680,250 93448810 Watson Pharmaceuticals, Inc. (a) 221,100 5,707,144 94268310 102,555,918 IN VITRO, IN VIVO DIAGNOSTIC SUBSTANCES - 0.1% Igen, Inc. (a) 123,900 696,938 44953610 MEDICINAL CHEMICALS - 0.7% Martek Biosciences (a) 300,000 3,150,000 57290110 PHARMACEUTICAL PREPARATIONS - 5.8% Circa Pharmaceuticals, Inc. (a) 417,900 7,156,538 17253C10 Cocensys, Inc. (a) 206,000 824,000 19126310 Guilford Pharmaceuticals, Inc. (a) 140,000 752,500 40182910 Immunex Corp. (a) 297,500 4,983,125 45252810 Inhale Therapeutic Systems (a) 174,000 1,696,500 45719110 Ligand Pharmaceuticals, Inc. Class B (a) 201,665 1,386,447 53220K20 Neurobiological Technologies, Inc. (a) 57,900 285,881 64124W10 Rhone Poulenc Rorer, Inc. 12,200 497,150 76242T10 T Cell Sciences, Inc. (a) 394,100 1,182,300 87234210 Theratech, Inc. (a) 130,000 1,365,000 88338310 Wellcome PLC sponsored ADR 100,000 1,612,500 94947820 Zeneca Group PLC: Ord. 225,000 3,110,207 98934D92 sponsored ADR 45,000 1,861,875 98934D10 26,714,023 TOTAL DRUGS & PHARMACEUTICALS 284,606,643 ELECTRICAL EQUIPMENT - 0.0% TV & RADIO COMMUNICATION EQUIPMENT - 0.0% ASN (warrants) (a) 5,000 - 04599F22 INDUSTRIAL MACHINERY & EQUIPMENT - 0.1% SPECIAL INDUSTRIAL MACHINERY - 0.1% Perseptive Technologies Corp. unit (1 Common & 1 warrant) (a) 100,000 512,500 71527520 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) MEDICAL EQUIPMENT & SUPPLIES - 4.7% MEDICAL SUPPLIES & APPLIANCES - 3.3% Abaxis, Inc. (a) 118,000 $ 501,500 00256710 Abbott Laboratories 220,000 7,810,000 00282410 Baxter International, Inc. 50,000 1,556,250 07181310 Boston Scientific Corp. (a) 249,005 5,384,733 10113710 15,252,483 MEDICAL TECHNOLOGY - 1.4% Advanced Technology Laboratories, Inc. (a) 108,700 1,684,850 00755N10 St. Jude Medical, Inc. 127,400 4,618,250 79084910 6,303,100 TOTAL MEDICAL EQUIPMENT & SUPPLIES 21,555,583 MEDICAL FACILITIES MANAGEMENT - 1.7% HEALTH SERVICES - 0.2% Healthwise America, Inc. (a) 22,950 740,138 42221L10 HMO'S & OUTPATIENT CARE - 0.3% U.S. Healthcare, Inc. 31,200 1,341,600 91191010 MEDICAL LABORATORIES - 0.2% Health Images, Inc. 71,200 391,600 42217810 Spectral Diagnostics, Inc. (a) 24,600 497,913 84757410 889,513 MEDICAL SERVICES - 0.8% Surgical Care Affiliates, Inc. 188,000 3,948,000 86881810 SKILLED NURSING CARE FACILITIES - 0.2% Mariner Health Group, Inc. (a) 50,000 862,500 56845J10 TOTAL MEDICAL FACILITIES MANAGEMENT 7,781,751 TOTAL COMMON STOCKS (Cost $303,503,194) 319,549,744 REPURCHASE AGREEMENTS - 31.0% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 (Note 3) $143,675,261 143,651,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $447,154,194) $ 463,200,744 LEGEND 1. Non-income producing 2. Restricted securities - Investment in securities not registered under the Securities Act of 1933 (see Note 2 of Notes to Financial Statements). Additional information on each holding is as follows: ACQUISITION ACQUISITION SECURITY DATE COST Medarex, Inc. 12/18/92 $ 853,125 3. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. A summary of the transactions during the period in which the issuers were affiliates is as follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Alkermes, Inc. (a) $ 68,750 $ 720,113 $ - $ - COR Therapeutics, Inc. (a) 502,925 195,413 - 13,203,000 Insite Vision, Inc. (a) 432,068 - - 2,586,375 Liposome Co, Inc. (a) - 1,831,434 - - Neurogen Corp. (a) - 123,750 - - SciGenics, Inc. (a) 151,250 - - 1,433,500 Totals $ 1,154,993 $ 2,870,710 $ - $ 17,222,875 (a) Non-income producing 4. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of this security amounted to $177,849 or 0.0% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $260,414,253 and $337,510,812, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $86,356 for the period (see Note 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $3,956,700 and $4,164,600, respectively (see Note 7 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $1,448,000 and $1,390,500, respectively. The weighted average interest rate paid was 4.1% (see Note 8 of Notes to Financial Statements). Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: United States 87.1% Switzerland 4.4 Israel 2.3 Ireland 1.9 United Kingdom 1.4 Sweden 1.1 Canada 1.1 Others (individually less than 1%) 0.7 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $449,705,000. Net unrealized appreciation aggregated $13,495,744, of which $43,570,547 related to appreciated investment securities and $30,074,803 related to depreciated investment securities. At February 28, 1995, the fund had a capital loss carryforward of approximately $33,875,000 of which $10,904,000 and $22,971,000 will expire on February 28, 2002 and February 28, 2003, respectively. The fund has elected to defer to its fiscal year ending February 28, 1996 $5,719,000 of losses recognized during the period November 1, 1994 to February 28, 1995. BIOTECHNOLOGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $143,651,000) (cost $447,154,194) - $ 463,200,744 See accompanying schedule Cash 791 Receivable for investments sold 2,228,972 Receivable for fund shares sold 2,609,578 Dividends receivable 245,096 Redemption fees receivable 660 Other receivables 418,916 TOTAL ASSETS 468,704,757 LIABILITIES Payable for investments purchased $ 8,040,462 Payable for fund shares redeemed 4,159,272 Accrued management fee 228,703 Other payables and 3,914,950 accrued expenses Collateral on securities loaned, at value 4,164,600 TOTAL LIABILITIES 20,507,987 NET ASSETS $ 448,196,770 Net Assets consist of: Paid in capital $ 473,873,209 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (41,722,989 ) Net unrealized appreciation (depreciation) on investments 16,046,550 NET ASSETS, for 17,713,733 $ 448,196,770 shares outstanding NET ASSET VALUE and redemption price per share ($448,196,770 (divided by) 17,713,733 shares) $25.30 Maximum offering price per share (100/97.00 of $25.30) $26.08
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 1,609,631 Dividends Interest (including security lending fees of $151,227) 3,861,105 TOTAL INCOME 5,470,736 EXPENSES Management fee $ 2,565,447 Transfer agent 3,575,952 Fees Redemption fees (182,721 ) Accounting and security lending fees 427,062 Non-interested trustees' compensation 9,257 Custodian fees and expenses 50,409 Registration fees 41,774 Audit 56,230 Legal 8,781 Interest 636 Reports to shareholders 28,758 Miscellaneous 3,929 Total expenses before reductions 6,585,514 Expense reductions (17,224 6,568,290 ) NET INVESTMENT INCOME (LOSS) (1,097,554 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including realized gain (loss) of $(1,194,801) on sales of investment in affiliated (28,005,811 issuers) ) Foreign currency transactions 5,354 (28,000,457 ) Change in net unrealized appreciation (depreciation) on investment securities (10,252,135 ) NET GAIN (LOSS) (38,252,592 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (39,350,146 ) OTHER INFORMATION $937,105 Sales Charges Paid to FDC Deferred sales charges withheld $38,451 by FDC Exchange fees withheld by FSC $122,513
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ (1,097,554 $ (3,787,601 Net investment income (loss) ) ) Net realized gain (loss) (28,000,457 (8,338,254 ) ) Change in net unrealized appreciation (depreciation) (10,252,135 118,233,161 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (39,350,146 106,107,306 ) Share transactions 208,388,703 439,265,841 Net proceeds from sales of shares Cost of shares redeemed (202,202,871 (573,106,933 ) ) Paid in capital portion of redemption fees 214,866 886,916 Net increase (decrease) in net assets resulting from share transactions 6,400,698 (132,954,176 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (32,949,448 (26,846,870 ) ) NET ASSETS Beginning of period 481,146,218 507,993,088 End of period (including accumulated net investment loss of $0 and $(3,787,602), respectively) $ 448,196,770 $ 481,146,218 OTHER INFORMATION Shares Sold 8,583,014 16,958,709 Redeemed (8,294,600 (22,006,765 ) ) Net increase (decrease) 288,414 (5,048,056)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 27.61 $ 22.60 $ 27.61 $ 26.78 $ 15.28 Income from Investment Operations Net investment income (loss) (.06) (.18) (.08) (.11) .05 E Net realized and unrealized gain (loss) (2.26) 5.15 (1.09) 3.36 11.80 Total from investment operations (2.32) 4.97 (1.17) 3.25 11.85 Less Distributions - - - (.02) - In excess of net investment income From net realized gain - - (3.89) (2.52) (.67) Total distributions - - (3.89) (2.54) (.67) Redemption fees added to paid in capital .01 .04 .05 .12 .32 Net asset value, end of period $ 25.30 $ 27.61 $ 22.60 $ 27.61 $ 26.78 TOTAL RETURN B, C (8.37)% 22.17% (5.92)% 12.36% 81.43% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 448,197 $ 481,146 $ 507,993 $ 679,877 $ 482,271 Ratio of expenses to average net assets 1.59% 1.61% 1.50% A 1.50% 1.63% Ratio of expenses to average net assets before expense reductions 1.59% 1.62% 1.50% A 1.50% 1.63% Ratio of net investment income (loss) to average net assets (.27)% (.69)% (.37)% (.34)% .24% A Portfolio turnover rate 77% 51% 79% A 160% 166%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME (LOSS) PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.02 PER SHARE. HEALTH CARE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1995 YEAR YEARS YEARS HEALTH CARE 31.24% 170.38% 528.89% HEALTH CARE (INCL. 3% SALES CHARGE) 27.30% 162.27% 510.03% S&P 500 7.36% 71.20% 274.70% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or ten years. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1995 YEAR YEARS YEARS HEALTH CARE 31.24% 22.01% 20.19% HEALTH CARE (INCL. 3% SALES CHARGE) 27.30% 21.27% 19.82% S&P 500 7.36% 11.35% 14.12% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER TEN YEARS Select Health (063) Standard & Poor's 50 02/28/85 9700.01 10000.00 03/31/85 9922.40 10007.00 04/30/85 10329.32 9997.99 05/31/85 11602.15 10575.88 06/30/85 11860.36 10741.92 07/31/85 11969.38 10725.81 08/31/85 11694.44 10634.64 09/30/85 10751.11 10301.77 10/31/85 11457.43 10777.71 11/30/85 12533.49 11517.07 12/31/85 12870.05 12074.49 01/31/86 12955.38 12142.11 02/28/86 13870.26 13050.34 03/31/86 15723.74 13778.55 04/30/86 15913.35 13622.85 05/31/86 16899.35 14347.59 06/30/86 18032.29 14590.06 07/31/86 16742.87 13774.48 08/31/86 17360.67 14796.54 09/30/86 14990.04 13572.87 10/31/86 16297.48 14356.02 11/30/86 16058.02 14704.87 12/31/86 15698.83 14329.90 01/31/87 18040.73 16260.14 02/28/87 20717.86 16902.41 03/31/87 20593.35 17390.89 04/30/87 20104.85 17236.11 05/31/87 20301.21 17386.07 06/30/87 20784.91 18264.06 07/31/87 21579.91 19190.05 08/31/87 22216.87 19905.84 09/30/87 21800.21 19469.90 10/31/87 16048.44 15276.09 11/30/87 14491.97 14017.34 12/31/87 15598.59 15084.06 01/31/88 16757.88 15719.09 02/29/88 17261.06 16451.60 03/31/88 16831.87 15943.25 04/30/88 16570.42 16120.22 05/31/88 16526.02 16260.46 06/30/88 16960.14 17006.82 07/31/88 16935.47 16942.19 08/31/88 16476.69 16366.16 09/30/88 17029.20 17063.36 10/31/88 17241.32 17537.72 11/30/88 16738.14 17286.93 12/31/88 16975.75 17589.45 01/31/89 18174.45 18877.00 02/28/89 17826.28 18406.96 03/31/89 18766.34 18835.84 04/30/89 19790.95 19813.42 05/31/89 20407.71 20615.87 06/30/89 19947.70 20498.36 07/31/89 22418.57 22349.36 08/31/89 22960.95 22787.41 09/30/89 23126.68 22693.98 10/31/89 22955.93 22167.48 11/30/89 23945.28 22619.69 12/31/89 24188.48 23162.57 01/31/90 22800.62 21608.36 02/28/90 22561.68 21887.11 03/31/90 23461.51 22467.12 04/30/90 23461.51 21905.44 05/31/90 26689.69 24041.22 06/30/90 27599.08 23877.74 07/31/90 27980.13 23801.33 08/31/90 26725.86 21649.69 09/30/90 25921.44 20595.35 10/31/90 26514.17 20506.79 11/30/90 29334.94 21831.53 12/31/90 30070.28 22440.63 01/31/91 33038.72 23419.04 02/28/91 37119.60 25093.50 03/31/91 40428.58 25700.76 04/30/91 39724.78 25762.44 05/31/91 41881.58 26875.38 06/30/91 39993.03 25644.49 07/31/91 43531.81 26839.52 08/31/91 45707.19 27475.62 09/30/91 46628.24 27016.78 10/31/91 49700.43 27378.80 11/30/91 46985.75 26275.44 12/31/91 55236.88 29281.34 01/31/92 53424.58 28736.71 02/29/92 51091.71 29110.29 03/31/92 47974.79 28542.64 04/30/92 45256.33 29381.79 05/31/92 46188.19 29525.76 06/30/92 44407.94 29085.83 07/31/92 47079.35 30275.44 08/31/92 45809.56 29654.79 09/30/92 42638.56 30004.72 10/31/92 43949.98 30109.74 11/30/92 46357.72 31136.48 12/31/92 45606.79 31519.46 01/31/93 43157.41 31784.22 02/28/93 38552.00 32216.49 03/31/93 39615.35 32896.25 04/30/93 39600.68 32100.16 05/31/93 41184.71 32960.45 06/30/93 41038.04 33056.03 07/31/93 39703.35 32923.81 08/31/93 41118.71 34171.62 09/30/93 42402.07 33908.50 10/31/93 45555.45 34610.41 11/30/93 45401.45 34281.61 12/31/93 46708.91 34696.42 01/31/94 47633.99 35876.09 02/28/94 46481.32 34903.85 03/31/94 43449.13 33382.04 04/30/94 45192.19 33809.33 05/31/94 47744.55 34363.81 06/30/94 46986.93 33521.89 07/31/94 47928.44 34621.41 08/31/94 54217.39 36040.89 09/30/94 54607.23 35157.89 10/31/94 55364.85 35948.94 11/30/94 56563.80 34639.68 12/31/94 56731.97 35153.39 01/31/95 59736.84 36064.91 02/28/95 61002.89 37470.36 Let's say you invested $10,000 in Fidelity Select Health Care Portfolio on February 28, 1985 and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $61,003 - a 510.03% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $37,470 over the same period - a 274.70% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Schering-Plough Corp. 8.1 Pfizer, Inc. 7.8 Johnson & Johnson 7.0 Bristol-Myers Squibb Co. 5.9 American Home Products Corp. 5.5 Allergan, Inc. 4.2 St. Jude Medical, Inc. 3.6 Bergen Brunswig Corp. Class A 3.5 Boston Scientific Corp. 3.2 Rhone Poulenc Rorer, Inc. 3.1 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 26.3 Row: 1, Col: 2, Value: 3.6 Row: 1, Col: 3, Value: 4.0 Row: 1, Col: 4, Value: 11.0 Row: 1, Col: 5, Value: 16.1 Row: 1, Col: 6, Value: 39.0 Drugs 39.0% Medical Supplies & Appliances 16.1% Medical Technology 11.0% Drug Distributors - Wholesale 4.0% Pharmaceutical Preparations 3.6% All Others 26.3%* * INCLUDES SHORT-TERM INVESTMENTS HEALTH CARE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Karen Firestone, Portfolio Manager of Fidelity Select Health Care Portfolio Q. HOW HAS THE FUND PERFORMED, KAREN? A. Very well. For the year ended February 28, 1995, the fund had a total return of 31.24%. That far outpaced the S&P 500, which returned 7.36% for the same time period. Q. WHY HAS THE FUND'S PERFORMANCE BEEN SO GOOD? A. In February I took over the fund from Charles Mangum. He had invested heavily in drug stocks and medical device companies - both of which enjoyed pretty good runs over the past six months. Consolidation within the industry has helped drug stocks rally as companies such as Syntex and American Cyanamid were acquired during the past 12 months. Despite all the merger activity, I still believe drug stocks are reasonably valued. We've also seen the same trend within the medical device industry. As hospitals consolidate nationwide, the largest companies in the medical device sector have been getting even larger as they acquire the smaller players and the number of suppliers drops. Q. SPECIFICALLY, WHICH COMPANIES HAVE PERFORMED WELL? A. The fund's large positions in Pfizer - a pharmaceutical company - and Johnson & Johnson did quite well during the period. During the past six months, Pfizer's stock price climbed from $61 a share to $83 a share between September and February. I added to the fund's J&J position as earnings growth continued to exceed expectations. Since the end of August, the stock has moved from $50 to $56. On the medical device side, Becton Dickinson has also enjoyed a healthy increase in its stock price. Q. SCHERING-PLOUGH REMAINS THE FUND'S LARGEST HOLDING, AND IN FACT YOU'VE ADDED TO THE POSITION DURING THE PAST SIX MONTHS. WHAT'S THE STORY THERE? A. I think Schering-Plough has been one of the best financially managed companies in the drug industry. The company has consistently grown earnings by about 15% to 20% per year for the past decade and the stock moved from about $70 in September to about $78 in late February. When the stock price occasionally dips - as it did during the period - I usually take the opportunity to buy more. Q. THERE ARE ALSO SOME NEW NAMES IN THE FUND'S TOP 10 HOLDINGS . . . A. That's right. I've added to the fund's positions in Bergen Brunswig and Boston Scientific. Bergen Brunswig supplies pharmaceuticals and health care products to hospitals and pharmacies. The company recently cut costs and accelerated earnings, making it a possible take-over candidate in the current consolidation environment. Boston Scientific, which manufactures and sells medical devices worldwide, announced two major acquisitions during the period and its stock has nearly doubled. The company has been growing revenues by 15% to 20% per year and has had enormous free cash flow. In addition, Boston Scientific recently was added to the S&P 500, which increases demand for the stock by mutual funds that track the index. Q. THOUGH IT'S BEEN A GREAT YEAR, WHICH INVESTMENTS WERE DISAPPOINTING? A. Well, the fund's position in Warner Lambert - its second largest holding six months ago - has been significantly reduced. The company posted a series of earnings disappointments, and while I still believe in the asset value of the company, I've decided to allocate the fund's assets elsewhere. I've purposely stayed away from investing in health maintenance organizations, or HMOs, because I think their profit margins will not be sustainable over time. That said, I regret missing out on some of the recent activity in HMO's, such as Oxford Health Plans, whose stocks have risen recently. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. On a broad level, the perceived slowdown of the U.S. economy makes these stocks - with growth rates of 10% to 15% - look more attractive relative to some cyclical, or economically sensitive, stocks that have begun to post more modest returns than they had during the past year or so. I expect these drug and medical device stocks to continue to be good performers. I expect the strongest companies to continue to stay strong, and the trend of consolidation to continue. Though the extraordinarily strong performance we've seen during the past six to 12 months is not likely to be sustainable for a long period, I think the stocks in the fund should stay relatively strong. FUND FACTS START DATE: July 14, 1981 SIZE: as of February 28, 1995, more than $943 million MANAGER: Karen Firestone, since February 1995; manager Fidelity Select Biotechnology Portfolio since 1992; manager, Fidelity Select Air Transportation portfolio, 1987 - 1992; Fidelity Select Leisure Portfolio, 1989 - 1992; joined Fidelity in 1983 (checkmark) HEALTH CARE PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 80.8% SHARES VALUE (NOTE 1) DRUGS & PHARMACEUTICALS - 45.4% BIOTECHNOLOGY - 2.7% Biogen, Inc. (a) 20,000 $ 825,000 09059710 Cephalon, Inc. (a) 49,900 405,438 15670810 COR Therapeutics, Inc. (a) 87,100 1,175,850 21775310 Genentech, Inc. (a) 324,700 16,316,175 36871020 Genetics Institute, Inc. (depositary share) (a) 72,000 2,592,000 37185530 Genzyme Corp. 140,000 5,425,000 37291710 Genzyme Corp.-Tissue Repair (a) 9,450 37,800 37291740 North American Biologicals, Inc. (a) 52,000 442,000 65675510 27,219,263 DRUGS - 39.0% ALZA Corp. Class A (a) 395,200 8,990,800 02261510 Allergan, Inc. 1,429,400 41,273,925 01849010 American Home Products Corp. 762,600 54,525,900 02660910 Astra A Free 5,000 125,867 04632292 Bristol-Myers Squibb Co. 941,100 58,348,200 11012210 Elan Corp. PLC: ADR (a) 682,050 24,042,263 28413120 unit (Therapeutic Systems, Inc. (common & 1 ADR warrant) (a) 56,806 1,576,367 28413140 Pfizer, Inc. 936,800 77,520,200 71708110 Pharmacia AB A Free Shares 461,000 8,468,441 71713093 Roche Holdings Ltd. (participation certificates) 2,000 11,058,158 77157092 Schering AG 11,100 8,465,812 80658510 Schering-Plough Corp. 1,019,200 79,879,800 80660510 Teva Pharmaceutical Industries Ltd. ADR 90,000 2,334,375 88162420 Vertex Pharmaceuticals, Inc. (a) 23,900 388,375 92532F10 Warner-Lambert Co. 115,900 8,851,863 93448810 385,850,346 IN VITRO, IN VIVO DIAGNOSTIC SUBSTANCE - 0.1% Igen, Inc. (a) 174,000 978,750 44953610 PHARMACEUTICAL PREPARATIONS - 3.6% Immunex Corp. (a) 165,300 2,768,775 45252810 Ligand Pharmaceuticals, Inc. Class B (a) 232,800 1,600,500 53220K20 Rhone Poulenc Rorer, Inc. 754,500 30,745,875 76242T10 Zeneca Group PLC sponsored ADR 3,000 124,125 98934D10 35,239,275 TOTAL DRUGS & PHARMACEUTICALS 449,287,634 MEDICAL EQUIPMENT & SUPPLIES - 31.0% DRUG DISTRIBUTORS - WHOLESALE - 4.0% Bergen Brunswig Corp. Class A 1,275,490 34,757,103 08373910 Cardinal Health, Inc. 97,666 4,834,467 14149Y10 39,591,570 MEDICAL, DENTAL, HOSPITAL EQUIPMENT - WHOLESALE - 0.3% Sterile Concepts Holdings 202,200 3,336,300 85915P10 MEDICAL SUPPLIES & APPLIANCES - 16.1% Abbott Laboratories 85,000 3,017,500 00282410 Baxter International, Inc. 673,000 20,947,125 07181310 Becton, Dickinson & Co. 585,300 30,728,250 07588710 Boston Scientific Corp. (a) 1,478,668 31,976,196 10113710 Healthdyne, Inc. (a) 258,200 2,452,900 42220310 Johnson & Johnson 1,229,600 69,779,800 47816010 Molecular Dynamics, Inc. (a) 25,000 153,125 60851410 Orthofix International (a) 50,000 712,500 68799992 159,767,396 SHARES VALUE (NOTE 1) MEDICAL TECHNOLOGY - 10.0% AMSCO International, Inc. (a) 210,800 $ 2,898,500 03216110 Advanced Medical, Inc. (a) 198,373 619,916 Advanced Technology Laboratories, Inc. (a) 484,400 7,508,200 00755N10 Beckman Instruments, Inc. (a) 454,000 13,847,000 07581610 Gish Biomedical, Inc. (a) 141,700 921,050 37636010 Haemonetics Corp. (a) 220,000 3,492,500 40502410 Mentor Corp. 166,900 4,047,323 58718810 Nellcor, Inc. (a) 371,400 12,627,600 64027510 St. Jude Medical, Inc. 974,600 35,329,250 79084910 Spacelabs Medical, Inc. (b) 574,300 13,926,775 84624710 Vital Signs, Inc. 234,400 3,281,600 92846910 98,499,714 X-RAY ELECTRO-MEDICAL APPARATUS - 0.6% American Medical Electronics, Inc. (a) 20,900 135,850 02742510 Circon Corp. (a) 45,700 788,325 17273610 Marquette Electronics, Inc. Class A (a) 25,500 567,375 57147410 Protocol Systems, Inc. (a) (b) 466,500 4,081,875 74371R10 5,573,425 TOTAL MEDICAL EQUIPMENT & SUPPLIES 306,768,405 MEDICAL FACILITIES MANAGEMENT - 4.4% HEALTH SERVICES - 0.0% Healthwise America, Inc. (a) 3,960 127,710 42221L10 HOME HEALTH CARE AGENCIES - 2.0% Abbey Healthcare Group, Inc. (a) 450,500 12,782,938 00278610 Coram Healthcare Corp. (a) 269,334 6,329,349 21810310 19,112,287 HOSPITALS - 1.8% Columbia/HCA Healthcare Corp. 421,705 17,448,044 19767710 NovaCare, Inc. (a) 50,000 431,250 66993010 17,879,294 HMOS & OUTPATIENT CARE - 0.0% FHP International Corp. (a) 5,000 134,375 30242610 MEDICAL SERVICES - 0.5% Surgical Care Affiliates, Inc. 202,500 4,252,500 86881810 Syncor International Corp. (a) 107,500 806,250 87157J10 5,058,750 SKILLED NURSING CARE FACILITIES - 0.1% Theratx, Inc. (a) 55,000 1,093,125 88338410 TOTAL MEDICAL FACILITIES MANAGEMENT 43,405,541 SERVICES - 0.0% PERSONNEL SUPPLY SERVICES - 0.0% CDI Corp. (a) 1,600 35,200 12507110 TOTAL COMMON STOCKS (Cost $693,287,501) 799,496,780 CONVERTIBLE PREFERRED STOCKS - 0.8% MEDICAL EQUIPMENT & SUPPLIES - 0.8% MEDICAL TECHNOLOGY - 0.8% U.S. Surgical Corp. $2.20 (c) (Cost $7,710,166) 332,800 8,486,400 91270720 CORPORATE BONDS - 0.2% PRINCIPAL VALUE (NOTE 1) AMOUNT MEDICAL EQUIPMENT & SUPPLIES - 0.2% MEDICAL TECHNOLOGY - 0.2% Advanced Medical 15%, 7/15/99 P/P (Cost $1,496,918) $ 2,090,000 $ 2,006,400 00754CAA REPURCHASE AGREEMENTS - 18.2% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $179,893,377 179,863,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $882,357,585) $ 989,852,580 LEGEND 1. Non-income producing 2. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. A summary of the transactions during the period in which the issuers were affiliates is as follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Protocol Systems. Inc. (a) $ 968,087 $ - $ - $ 4,081,875 Spacelabs Medical, Inc. (a) $ 1,041,195 $ - $ - $ 13,926,775 Totals $ 2,009,282 $ - $ - $ 18,008,650 (a) Non-income producing 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 this security amounted to $8,486,400 or 0.9% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $1,040,973,872 and $883,189,848, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $272,806 for the period (see Note 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $39,320,375 and $40,776,000, respectively (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $885,130,966. Net unrealized appreciation aggregated $104,721,614, of which $109,246,223 related to appreciated investment securities and $4,524,609 related to depreciated investment securities. The fund hereby designates $11,010,000 as a capital gain dividend for the purpose of the dividend paid deduction. HEALTH CARE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $179,863,000) (cost $882,357,585) - $ 989,852,580 See accompanying schedule Cash 141 Receivable for investments sold 2,122,729 Receivable for fund shares sold 12,406,769 Dividends receivable 2,952,349 Interest receivable 37,881 Redemption fees receivable 857 Other receivables 292,319 TOTAL ASSETS 1,007,665,625 LIABILITIES Payable for investments purchased $ 1,112,204 Payable for fund shares redeemed 5,154,161 Accrued management fee 469,451 Other payables and accrued expenses 17,012,837 Collateral on securities loaned, 40,776,000 at value TOTAL LIABILITIES 64,524,653 NET ASSETS $ 943,140,972 Net Assets consist of: Paid in capital $ 820,792,838 Undistributed net investment income 2,008,371 Accumulated undistributed net realized gain (loss) on investments 12,844,768 Net unrealized appreciation (depreciation) on investments 107,494,995 NET ASSETS, for 12,389,117 shares outstanding $ 943,140,972 NET ASSET VALUE and redemption price per share ($943,140,972 (divided by) 12,389,117 shares) $76.13 Maximum offering price per share (100/97.00 of $76.13) $78.48
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 11,784,880 Dividends Interest (including security lending fees of $338,591) 3,914,312 TOTAL INCOME 15,699,192 EXPENSES Management fee $ 3,999,219 Transfer agent 4,301,599 Fees Redemption fees (208,126 ) Accounting and security lending fees 593,155 Non-interested trustees' compensation 12,084 Custodian fees and expenses 50,733 Registration fees 80,573 Audit 57,745 Legal 9,068 Reports to shareholders 26,974 Miscellaneous 4,857 Total expenses before reductions 8,927,881 Expense reductions (172,406 8,755,475 ) NET INVESTMENT INCOME 6,943,717 REALIZED AND UNREALIZED GAIN (LOSS) 79,587,152 Net realized gain (loss) on investment securities Change in net unrealized appreciation (depreciation) on investment securities 91,979,090 NET GAIN (LOSS) 171,566,242 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 178,509,959 OTHER INFORMATION $1,959,254 Sales Charges Paid to FDC Deferred sales charges withheld $69,232 by FDC Exchange fees withheld by FSC $122,790
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ 6,943,717 $ 1,451,437 Net investment income Net realized gain (loss) 79,587,152 (3,984,876 ) Change in net unrealized appreciation (depreciation) 91,979,090 103,530,466 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 178,509,959 100,997,027 Distributions to shareholders: (5,882,332 (631,397 From net investment income ) ) From net realized gain (56,259,930 - ) TOTAL DISTRIBUTIONS (62,142,262 (631,397 ) ) Share transactions 608,744,670 255,996,151 Net proceeds from sales of shares Reinvestment of distributions 60,781,787 614,017 Cost of shares redeemed (366,138,010 (370,922,213 ) ) Paid in capital portion of redemption fees 495,264 469,371 Net increase (decrease) in net assets resulting from share transactions 303,883,711 (113,842,674 ) TOTAL INCREASE (DECREASE) IN NET ASSETS 420,251,408 (13,477,044 ) NET ASSETS Beginning of period 522,889,564 536,366,608 End of period (including undistributed net investment income of $2,008,371 and $820,040, respectively) $ 943,140,972 $ 522,889,564 OTHER INFORMATION Shares Sold 8,512,762 4,521,405 Issued in reinvestment of distributions 871,512 10,053 Redeemed (5,254,899 (6,474,354 ) ) Net increase (decrease) 4,129,375 (1,942,896 )
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 63.31 $ 52.57 $ 70.42 $ 69.99 $ 46.15 Income from Investment Operations Net investment income (loss) .75 .15 .13 (.02) .73 E Net realized and unrealized gain (loss) 18.38 10.61 (9.34) 9.47 28.70 Total from investment operations 19.13 10.76 (9.21) 9.45 29.43 Less Distributions (.62) (.07) (.16) (.34) (.20) From net investment income From net realized gain (5.74) - (8.51) (8.81) (5.67) Total distributions (6.36) (.07) (8.67) (9.15) (5.87) Redemption fees added to paid in capital .05 .05 .03 .13 .28 Net asset value, end of period $ 76.13 $ 63.31 $ 52.57 $ 70.42 $ 69.99 TOTAL RETURN B, C 31.24% 20.57% (14.81)% 13.92% 69.32% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 943,141 $ 522,890 $ 536,367 $ 838,814 $ 624,018 Ratio of expenses to average net assets 1.36% 1.55% 1.46% A 1.44% 1.53% Ratio of expenses to average net assets before expense reductions 1.39% 1.59% 1.46% A 1.44% 1.53% Ratio of net investment income (loss) to average net assets 1.08% .26% .24% A (.02)% 1.28% Portfolio turnover rate 151% 213% 112% A 154% 159%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.55 PER SHARE. MEDICAL DELIVERY PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND MEDICAL DELIVERY 19.63% 175.17% 216.92% MEDICAL DELIVERY (INCL. 3% SALES CHARGE) 16.04% 166.91% 207.41% S&P 500 7.36% 71.20% 158.12% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on June 30, 1986. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND MEDICAL DELIVERY 19.63% 22.44% 14.22% MEDICAL DELIVERY (INCL. 3% SALES CHARGE) 16.04% 21.70% 13.82% S&P 500 7.36% 11.35% 11.55% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Medical DelivStandard & Poor's 50 06/30/86 9700.00 10000.00 07/31/86 9011.30 9488.77 08/31/86 9108.30 10192.84 09/30/86 8380.80 9349.89 10/31/86 9040.40 9889.38 11/30/86 8506.90 10129.69 12/31/86 7944.30 9871.39 01/31/87 8342.00 11201.06 02/28/87 8953.10 11643.50 03/31/87 9379.90 11980.00 04/30/87 8409.90 11873.38 05/31/87 8671.80 11976.68 06/30/87 9263.50 12581.50 07/31/87 9661.20 13219.38 08/31/87 9438.10 13712.46 09/30/87 9292.60 13412.16 10/31/87 6644.50 10523.18 11/30/87 6246.80 9656.07 12/31/87 6984.29 10390.90 01/31/88 7025.49 10828.35 02/29/88 7386.04 11332.96 03/31/88 7581.76 10982.77 04/30/88 7643.57 11104.68 05/31/88 7519.96 11201.29 06/30/88 7756.89 11715.43 07/31/88 7674.48 11670.91 08/31/88 7458.15 11274.10 09/30/88 7880.50 11754.37 10/31/88 8086.53 12081.14 11/30/88 7829.00 11908.38 12/31/88 8086.53 12116.78 01/31/89 8684.00 13003.73 02/28/89 9003.34 12679.94 03/31/89 9497.81 12975.38 04/30/89 10146.79 13648.80 05/31/89 10672.16 14201.58 06/30/89 10548.09 14120.63 07/31/89 11745.33 15395.72 08/31/89 12292.35 15697.48 09/30/89 12632.94 15633.12 10/31/89 12209.78 15270.43 11/30/89 12777.44 15581.95 12/31/89 12778.17 15955.91 01/31/90 10896.86 14885.27 02/28/90 11171.65 15077.29 03/31/90 11689.55 15476.84 04/30/90 11805.81 15089.92 05/31/90 13475.74 16561.19 06/30/90 14120.46 16448.57 07/31/90 14173.31 16395.93 08/31/90 13042.41 14913.74 09/30/90 12175.73 14187.44 10/31/90 12027.76 14126.44 11/30/90 13697.70 15039.00 12/31/90 14856.15 15458.59 01/31/91 17250.55 16132.59 02/28/91 18317.15 17286.07 03/31/91 21038.06 17704.39 04/30/91 20406.81 17746.88 05/31/91 22093.77 18513.55 06/30/91 20232.49 17665.63 07/31/91 22262.54 18488.84 08/31/91 22523.38 18927.03 09/30/91 22727.52 18610.95 10/31/91 23226.53 18860.33 11/30/91 22580.09 18100.26 12/31/91 26417.99 20170.93 01/31/92 26441.20 19795.75 02/29/92 25419.77 20053.10 03/31/92 23736.72 19662.06 04/30/92 22796.54 20240.13 05/31/92 22564.40 20339.30 06/30/92 21376.21 20036.25 07/31/92 22592.64 20855.73 08/31/92 22567.30 20428.19 09/30/92 19919.03 20669.24 10/31/92 20907.38 20741.58 11/30/92 22960.11 21448.87 12/31/92 22934.76 21712.69 01/31/93 21769.02 21895.08 02/28/93 18322.47 22192.85 03/31/93 18727.94 22661.12 04/30/93 18499.86 22112.72 05/31/93 19070.07 22705.34 06/30/93 19260.13 22771.19 07/31/93 19741.64 22680.10 08/31/93 19678.28 23539.68 09/30/93 21300.19 23358.43 10/31/93 22301.21 23841.94 11/30/93 22668.67 23615.45 12/31/93 24201.88 23901.19 01/31/94 25557.69 24713.83 02/28/94 25697.07 24044.09 03/31/94 24417.29 22995.77 04/30/94 25202.90 23290.11 05/31/94 26051.86 23672.07 06/30/94 24442.63 23092.10 07/31/94 25532.35 23849.53 08/31/94 28117.26 24827.36 09/30/94 29118.28 24219.09 10/31/94 30068.62 24764.01 11/30/94 28776.16 23862.11 12/31/94 29003.56 24215.98 01/31/95 30276.69 24843.91 02/28/95 30740.85 25812.07 Let's say you invested $10,000 in Fidelity Select Medical Delivery Portfolio on June 30, 1986, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $30,741 - a 207.41% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $25,812 over the same period - a 158.12% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Columbia/HCA Healthcare Corp. 8.6 Health Management Associates, Inc. Class A 7.7 U.S. Healthcare, Inc. 7.2 Lincare Holdings, Inc. 6.9 Homedco Group, Inc. 5.3 Baxter International, Inc. 5.0 United HealthCare Corp. 4.8 Universal Health Services, Inc. 3.4 Community Psychiatric Centers 3.1 Coventry Corp. 2.7 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 35.4 Row: 1, Col: 2, Value: 5.2 Row: 1, Col: 3, Value: 6.9 Row: 1, Col: 4, Value: 7.9 Row: 1, Col: 5, Value: 17.4 Row: 1, Col: 6, Value: 27.2 Hospitals 27.2% HMO's & Outpatient Care 17.4% Medical Services 7.9% Home Health Care Agencies 6.9% Medical Supplies & Appliances 5.2% All Others 35.4%* * INCLUDES SHORT-TERM INVESTMENTS MEDICAL DELIVERY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Stephen Binder, Portfolio Manager of Fidelity Select Medical Delivery Portfolio Q. STEVE, HOW DID THE FUND DO? A. Very well. For the 12 months ended February 28, 1995, the fund returned 19.63%, outperforming the S&P 500, which returned 7.36%. Q. WHAT'S BEHIND THIS STRONG RETURN? A. In general, health care funds had a solid year because investors stopped worrying about government health care reform, which could have negatively impacted the sector. In fact, once the market realized that the Clinton plan would definitely not pass in August 1994, health care stocks took off. The fund also benefited from its heavy investments in HMOs, an increasingly popular approach to controlling medical costs. Q. HOW DID HMOS LOOK AT THE END OF THE PERIOD? A. As of February 1995, I was less bullish on HMOs for a number of reasons. These stocks were fairly expensive and increasingly volatile. More importantly, I think HMOs may start to suffer from shrinking profit margins - - the spread between the premiums they charge customers and their medical costs. This could happen if HMOs try to gain market share too aggressively by cutting prices. Q. STILL, YOU HAD SEVERAL LARGE HMOS IN YOUR TOP 10 STOCKS. WHY? A. The HMOs I've included in my top 10 stocks are very large companies that, I think, would be the last to crack under profit margin pressures. Both of the fund's largest HMO holdings, U.S. Healthcare and United HealthCare, currently have very healthy profit margins, and I see them as reasonably defensive holdings. I also think HMOs may benefit as more state governments and the federal government try to control their health care costs through managed care. Medicaid and Medicare HMOs have already gained a lot of momentum, and I expect this trend to continue as Republican legislators push for more federal and state budget cuts. Q. HOW ABOUT HOSPITALS? WHAT PART DID THEY PLAY IN THE FUND? A. At the end of the period, for-profit hospitals were my largest investment. I should note that many non-profit hospitals - which describes 95% of U.S. hospitals - have been hurt by HMOs' cost-cutting measures, such as reducing the length of hospital stays. However, large, for-profit hospitals have been rising above these pricing constraints by consolidating among themselves and acquiring not-for-profit hospitals. Q. WHICH FOR-PROFIT HOSPITALS DID YOU LIKE? A. Columbia/HCA, the fund's largest holding, is forming statewide networks of mostly urban hospitals that can give payers, such as HMOs, pricing discounts in exchange for an increase in the volume of patients. Another large fund holding, Health Management Associates, buys rural hospitals at low prices and upgrades them. This company has been very successful in producing high profit margins over the past four years. Q. WHAT OTHER MEDICAL DELIVERY STOCKS LOOKED GOOD? A. Lincare and Homedco, two companies that provide respiratory therapy at home, turned in solid results over the past year. Q. STEVE, YOU'VE BEEN THE MANAGER OF THIS FUND SINCE THE BEGINNING OF DECEMBER. HAVE YOU MADE ANY CHANGES TO ITS STRATEGY? A. Some. While, I don't think the general philosophy of the fund has changed, I do have some differing views from the previous manager. I may tend to be a bit more skeptical about HMOs and to favor hospitals more. And I am less likely to weight my top 10 stocks as heavily as the previous manager. Q. ANY REGRETS? A. There are some stocks that I wish I had purchased, such as Omnicare, a company that distributes pharmaceuticals to nursing home patients. Its stock has shot up about 25% since late November 1994. Q. WHAT'S YOUR OUTLOOK GOING FORWARD? A. I expect the medical delivery market to remain volatile. However, I think the hospital sector may do well and some home service providers could be sound performers. FUND FACTS START DATE: June 30, 1986 SIZE: as of February 28, 1995, more than $299 million MANAGER: Stephen Binder, since December 1994; manager Select Financial Services Portfolio, November 1993 - November 1994; Select Defense and Aerospace Portfolio,1992 - - 1994; Regional Banks Portfolio, 1990 - 1994; joined Fidelity in 1989 (checkmark) MEDICAL DELIVERY PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 82.4% SHARES VALUE (NOTE 1) CHEMICALS & PLASTICS - 2.5% CHEMICALS - 2.5% Grace (W.R.) & Co. 175,000 $ 7,874,998 38388310 DRUGS & PHARMACEUTICALS - 1.9% DRUGS - 1.9% Warner-Lambert Co. 80,000 6,110,000 93448810 HOME FURNISHINGS - 0.2% FURNITURE - 0.2% Kinetic Concepts, Inc. 65,000 503,750 49460W10 MEDICAL EQUIPMENT & SUPPLIES - 7.5% DRUG DISTRIBUTORS - WHOLESALE - 1.4% Bergen Brunswig Corp. Class A 139,465 3,800,421 08373910 Cardinal Health, Inc. 10,000 495,000 14149Y10 4,295,421 MEDICAL SUPPLIES & APPLIANCES - 5.2% Baxter International, Inc. 500,200 15,568,725 07181310 Boston Scientific Corp. (a) 40,000 865,000 10113710 16,433,725 MEDICAL TECHNOLOGY - 0.4% Beckman Instruments, Inc. 20,000 610,000 07581610 St. Jude Medical, Inc. 20,100 728,625 79084910 1,338,625 X-RAY ELECTRO-MEDICAL APPARATUS - 0.5% Medisense, Inc. (a) 75,000 1,537,500 58496010 TOTAL MEDICAL EQUIPMENT & SUPPLIES 23,605,271 MEDICAL FACILITIES MANAGEMENT - 67.7% HEALTH PRACTITIONERS - 0.4% Apogee, Inc. (a) 56,500 1,158,250 03759T10 HOME HEALTH CARE AGENCIES - 6.9% Abbey Healthcare Group, Inc. (a) 75,000 2,128,125 00278610 Coram Healthcare Corp. (a) 117,600 2,763,600 21810310 Homedco Group, Inc. (a) 369,800 16,641,000 43739A10 21,532,725 HOSPITALS - 27.2% Columbia/HCA Healthcare Corp. 653,282 27,029,543 19767710 Community Psychiatric Centers 843,900 9,810,338 20401510 HEALTHSOUTH Rehabilitation Corp. (a) 95,100 3,827,775 42192410 Health Management Associates, Inc. Class A (a) 901,512 24,002,757 42193310 National Medical Enterprises, Inc. (a) 373,600 5,790,800 63688610 Quorum Health Group, Inc. (a) 205,700 3,908,300 74908410 Universal Health Services, Inc. Class B (a) 426,600 10,665,000 91390310 Vencor, Inc. (a) 10,000 317,500 92260210 85,352,013 HOSPITALS, GENERAL MEDICAL - 0.4% Ornda Healthcorp (a) 75,000 1,139,063 68685710 HMO'S & OUTPATIENT CARE - 17.4% Coventry Corp. (a) 319,000 8,613,000 22285310 Oxford Health Plans, Inc. (a) 48,900 4,449,900 69147110 Pacificare Health Systems, Inc. Class B (a) 10,000 702,500 69511020 Sierra Health Services, Inc. (a) 107,700 3,271,388 82632210 United HealthCare Corp. 349,000 15,007,000 91058110 U.S. Healthcare, Inc. 523,700 22,519,100 91191010 54,562,888 MEDICAL SERVICES - 7.9% Lincare Holdings, Inc. (a) 772,400 21,627,200 53279110 Medpartners, Inc. 1,000 17,500 58496210 Surgical Care Affiliates, Inc. 155,000 3,255,000 86881810 24,899,700 COMMON STOCKS - 82.4% SHARES VALUE (NOTE 1) MISCELLANEOUS HEALTH & ALLIED SERVICES - 0.1% Renal Treatment Centers, Inc. (a) 20,000 $ 435,000 75967110 NURSING CARE & NURSING HOMES - 3.1% Integrated Health Services, Inc. 159,500 6,100,875 45812C10 Manor Care, Inc. 120,000 3,555,000 56405410 9,655,875 SKILLED NURSING CARE FACILITIES - 2.9% Multicare Companies, Inc. (a) 374,900 7,943,194 62543V10 Theratx, Inc. (a) 62,500 1,242,188 88338410 9,185,382 SPECIALTY OUTPATIENT CLINICS - 1.4% Coastal Healthcare Group, Inc. 170,000 4,420,000 19046510 TOTAL MEDICAL FACILITIES MANAGEMENT 212,340,896 REAL ESTATE INVESTMENT TRUSTS - 2.3% Capstone Capital Corp. (b) 375,000 6,234,375 14066R10 Meditrust (SBI) 30,600 979,200 58501T10 7,213,575 SERVICES - 0.3% MANAGEMENT SERVICES - 0.3% Emcare Holdings (a) 50,600 853,875 29082010 TOTAL COMMON STOCKS (Cost $226,852,185) 258,502,365 REPURCHASE AGREEMENTS - 17.6% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $ 55,100,304 55,091,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100.0% (Cost $281,943,185) $ 313,593,365 LEGEND 1. Non-income producing 2. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. A summary of the transactions during the period in which the issuers were affiliates is as follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Capstone Capital Corp. $ 87,750 $ 540,000 $ 344,250 $ 6,234,375 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $293,063,797 and $210,358,062, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $112,144 for the period (see Note 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $2,071,375 and $2,117,000, respectively (see Note 7 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $12,310,000 and $4,586,286, respectively. The weighted average interest rate paid was 4.1% (see Note 8 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $281,943,185. Net unrealized appreciation aggregated $31,650,180, of which $36,195,249 related to appreciated investment securities and $4,545,069 related to depreciated investment securities. The fund hereby designates $2,284,000 as a capital gain dividend for the purpose of the dividend paid deduction. MEDICAL DELIVERY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $55,091,000) (cost $281,943,185) - See $ 313,593,365 accompanying schedule Cash 729 Receivable for investments sold 1,863,396 Receivable for fund shares sold 2,872,170 Dividends receivable 91,150 Redemption fees receivable 1,801 Other receivables 82,791 TOTAL ASSETS 318,505,402 LIABILITIES Payable for investments purchased $ 11,227,909 Payable for fund shares redeemed 5,228,249 Accrued management fee 151,347 Other payables and accrued expenses 211,049 Collateral on securities loaned, at value 2,117,000 TOTAL LIABILITIES 18,935,554 NET ASSETS $ 299,569,848 Net Assets consist of: Paid in capital $ 264,915,352 Accumulated undistributed 3,004,316 net realized gain (loss) on investments Net unrealized appreciation (depreciation) on investments 31,650,180 NET ASSETS, for 12,924,060 shares outstanding $ 299,569,848 NET ASSET VALUE and redemption price per share ($299,569,848 (divided by) 12,924,060 shares) $23.18 Maximum offering price per share (100/97.00 of $23.18) $23.90
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 1,422,660 Dividends (including $344,250 received from affiliated issuers) Interest (including security lending fees of $24,214) 2,295,318 TOTAL INCOME 3,717,978 EXPENSES Management fee $ 1,329,801 Transfer agent 1,583,373 Fees Redemption fees (142,228 ) Accounting and security lending fees 217,243 Non-interested trustees' compensation 2,741 Custodian fees and expenses 18,240 Registration fees 104,421 Audit 28,662 Legal 2,414 Interest 3,624 Reports to shareholders 7,722 Miscellaneous 1,444 Total expenses before reductions 3,157,457 Expense reductions (60,316 3,097,141 ) NET INVESTMENT INCOME 620,837 REALIZED AND UNREALIZED GAIN (LOSS) 25,519,856 Net realized gain (loss) on investment securities (including realized gain (loss) of $(60,273) on sales of investment in affiliated issuers) Change in net unrealized appreciation (depreciation) on investment securities 5,905,629 NET GAIN (LOSS) 31,425,485 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 32,046,322 OTHER INFORMATION $1,314,731 Sales Charges Paid to FDC Deferred sales charges withheld $8,345 by FDC Exchange fees withheld by FSC $113,445
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ 620,837 $ (606,248 Net investment income (loss) ) Net realized gain (loss) 25,519,856 (9,573,815 ) Change in net unrealized appreciation (depreciation) 5,905,629 46,689,562 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 32,046,322 36,509,499 Distributions to shareholders: (620,837 - From net investment income ) From net realized gain (9,893,316 - ) TOTAL DISTRIBUTIONS (10,514,153 - ) Share transactions 408,339,151 293,157,307 Net proceeds from sales of shares Reinvestment of distributions 10,314,005 - Cost of shares redeemed (329,680,344 (213,446,953 ) ) Paid in capital portion of redemption fees 512,240 523,366 Net increase (decrease) in net assets resulting from share transactions 89,485,052 80,233,720 TOTAL INCREASE (DECREASE) IN NET ASSETS 111,017,221 116,743,219 NET ASSETS Beginning of period 188,552,627 71,809,408 End of period $ 299,569,848 $ 188,552,627 OTHER INFORMATION Shares Sold 18,773,290 17,052,395 Issued in reinvestment of distributions 506,086 - Redeemed (15,651,245 (12,723,955 ) ) Net increase (decrease) 3,628,131 4,328,440
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 20.28 $ 14.46 $ 19.64 $ 18.75 $ 11.17 Income from Investment Operations Net investment income (loss) .06 (.10) (.13) (.15) (.01) Net realized and unrealized gain (loss) 3.74 5.84 (3.56) 2.16 7.76 Total from investment operations 3.80 5.74 (3.69) 2.01 7.75 Less Distributions (.06) E - - - - From net investment income From net realized gain (.89) E - (1.55) (1.24) (.39) Total distributions (.95) - (1.55) (1.24) (.39) Redemption fees added to paid in capital .05 .08 .06 .12 .22 Net asset value, end of period $ 23.18 $ 20.28 $ 14.46 $ 19.64 $ 18.75 TOTAL RETURN B, C 19.63% 40.25% (19.63)% 11.71% 72.85% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 299,570 $ 188,553 $ 71,809 $ 129,361 $ 131,622 Ratio of expenses to average net assets 1.45% 1.79% 1.77% a 1.69% 1.94% Ratio of expenses to average net assets before expense reductions 1.48% 1.82% 1.77% a 1.69% 1.94% Ratio of net investment income (loss) to average net assets .29% (.57)% (.89)% (.71)% (.07)% a Portfolio turnover rate 123% 164% 155% a 181% 165%
a ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS). COMPUTERS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND COMPUTERS 13.51% 183.53% 256.75% COMPUTERS (INCL. 3% SALES CHARGE) 10.10% 175.02% 246.05% S&P 500 7.36% 71.20% 246.77% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on July 29, 1985. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND COMPUTERS 13.51% 23.17% 14.17% COMPUTERS (INCL. 3% SALES CHARGE) 10.10% 22.43% 13.81% S&P 500 7.36% 11.35% 13.84% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Computer (007Standard & Poor's 50 07/29/85 9700.00 10000.00 07/31/85 9515.70 9926.31 08/31/85 9312.00 9841.93 09/30/85 8904.60 9533.88 10/31/85 9438.10 9974.35 11/30/85 10476.00 10658.59 12/31/85 11019.20 11174.46 01/31/86 11145.30 11237.04 02/28/86 11727.30 12077.57 03/31/86 11727.30 12751.50 04/30/86 12901.00 12607.41 05/31/86 13405.40 13278.12 06/30/86 12513.00 13502.52 07/31/86 10571.75 12747.73 08/31/86 11603.62 13693.61 09/30/86 10708.04 12561.15 10/31/86 11759.37 13285.93 11/30/86 11837.25 13608.78 12/31/86 11885.92 13261.75 01/31/87 14251.43 15048.11 02/28/87 15672.67 15642.51 03/31/87 15779.75 16094.58 04/30/87 16159.40 15951.34 05/31/87 16091.26 16090.11 06/30/87 15760.29 16902.66 07/31/87 16023.12 17759.63 08/31/87 17123.13 18422.06 09/30/87 17269.14 18018.62 10/31/87 11175.30 14137.41 11/30/87 9666.44 12972.49 12/31/87 11131.17 13959.69 01/31/88 10549.01 14547.40 02/29/88 11502.54 15225.31 03/31/88 11321.87 14754.84 04/30/88 11904.02 14918.62 05/31/88 11552.73 15048.41 06/30/88 12646.77 15739.14 07/31/88 11693.24 15679.33 08/31/88 10579.12 15146.23 09/30/88 10860.16 15791.46 10/31/88 9986.93 16230.46 11/30/88 9926.71 15998.37 12/31/88 10569.09 16278.34 01/31/89 11191.39 17469.91 02/28/89 10990.65 17034.91 03/31/89 10468.72 17431.83 04/30/89 11643.06 18336.54 05/31/89 12676.88 19079.17 06/30/89 11171.31 18970.42 07/31/89 11372.06 20683.44 08/31/89 11542.69 21088.84 09/30/89 11813.69 21002.38 10/31/89 11422.24 20515.12 11/30/89 11171.31 20933.63 12/31/89 11291.76 21436.04 01/31/90 11191.39 19997.68 02/28/90 12205.14 20255.65 03/31/90 13078.37 20792.42 04/30/90 12727.07 20272.61 05/31/90 14383.19 22249.19 06/30/90 14644.16 22097.90 07/31/90 13600.30 22027.18 08/31/90 11442.32 20035.93 09/30/90 10689.53 19060.18 10/31/90 11091.02 18978.22 11/30/90 12917.77 20204.21 12/31/90 13370.20 20767.91 01/31/91 15649.21 21673.39 02/28/91 16662.11 23223.04 03/31/91 17978.87 23785.03 04/30/91 16814.04 23842.12 05/31/91 17664.87 24872.10 06/30/91 15259.51 23732.96 07/31/91 16792.77 24838.91 08/31/91 17835.80 25427.59 09/30/91 16897.07 25002.95 10/31/91 16563.30 25337.99 11/30/91 15426.40 24316.87 12/31/91 17481.17 27098.72 01/31/92 19306.47 26594.68 02/29/92 20631.11 26940.42 03/31/92 19003.99 26415.08 04/30/92 18388.60 27191.68 05/31/92 18618.07 27324.92 06/30/92 16824.06 26917.78 07/31/92 17648.05 28018.72 08/31/92 16636.31 27444.33 09/30/92 17460.31 27768.18 10/31/92 18837.10 27865.36 11/30/92 20005.30 28815.57 12/31/92 21319.51 29170.00 01/31/93 22560.72 29415.03 02/28/93 21017.03 29815.08 03/31/93 21434.25 30444.17 04/30/93 20825.49 29707.43 05/31/93 23265.47 30503.58 06/30/93 22334.43 30592.05 07/31/93 23265.47 30469.68 08/31/93 24645.99 31624.48 09/30/93 25341.60 31380.97 10/31/93 25341.60 32030.56 11/30/93 26422.47 31726.27 12/31/93 27474.01 32110.15 01/31/94 29245.43 33201.90 02/28/94 30486.56 32302.13 03/31/94 30170.64 30893.75 04/30/94 29978.82 31289.19 05/31/94 29956.26 31802.34 06/30/94 27496.57 31023.18 07/31/94 28365.36 32040.74 08/31/94 31761.53 33354.41 09/30/94 31535.87 32537.23 10/31/94 32720.58 33269.31 11/30/94 32912.39 32057.65 12/31/94 33092.92 32533.06 01/31/95 32077.46 33376.64 02/28/95 34605.00 34677.33 Let's say you invested $10,000 in Fidelity Select Computers Portfolio on July 29, 1985, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $34,605 - a 246.05% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $34,677 over the same period - a 246.77% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Micron Technology, Inc. 9.0 Compaq Computer Corp. 8.5 International Business Machines Corp. 5.2 Digital Equipment Corp. 4.4 Sun Microsystems, Inc. 3.3 LSI Logic Corp. 3.1 Texas Instruments, Inc. 2.9 Amdahl Corp. 2.5 Xilinx, Inc. 2.2 Data General Corp. 2.1 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 34.2 Row: 1, Col: 2, Value: 4.6 Row: 1, Col: 3, Value: 6.7 Row: 1, Col: 4, Value: 7.7 Row: 1, Col: 5, Value: 15.5 Row: 1, Col: 6, Value: 31.3 Semiconductors 31.3% Mini & Micro Computers 15.5% Mainframe Computers 7.7% Prepackaged Computer Software 6.7% Semiconductor Capital Equipment 4.6% All Others 34.2%* * INCLUDES SHORT-TERM INVESTMENTS COMPUTERS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Harry Lange, Portfolio Manager of Fidelity Select Computers Portfolio Q. HOW DID THE FUND DO, HARRY? A. Quite well. The fund had a total return of 13.51% for the 12 months ended February 28, 1995. That topped the S&P 500, which had a total return of 7.36% during the same period. Q. WHAT CONTRIBUTED TO THE FUND'S SUCCESS? A. In short, very strong earnings growth among its companies. Christmas 1994 marked the second strong holiday season in a row for the personal computer industry. And, so far, there has been no post-Christmas let-up in sales. There seems to be a "keep up with the Joneses" attitude in America's neighborhoods regarding computers: when one person buys one, others usually follow. And once the PC is purchased, people usually add accessories - printers, software and the like. In addition, there have been some unique business dynamics in the marketplace recently that have benefited the fund. Q. CAN YOU EXPLAIN? A. Sure. Back in 1992, Compaq Computer triggered a price war that changed the industry. During that year, the average selling price of PCs fell roughly 10%, but the boom in orders spurred by lower prices more than made up for the corresponding loss in revenues. Selling prices then remained relatively flat in 1993 and early 1994. Lately, though, prices have begun to rise, while demand has stayed very strong. That has resulted in a bigger pie to split among companies whose products are used to build a computer - mainly, makers of microprocessors, memory chips and computer hardware. So far there's been a good balance in earnings growth among each of these groups, which has helped to boost stock prices. Q. CAN YOU GIVE US SOME EXAMPLES? A. Micron Technology - the fund's largest investment on February 28, 1995 - has done extremely well. The company is one of the few manufacturers of memory chips known as DRAMS. Micron has been operating at full capacity for some time now, and demand remains strong. In addition, the stocks of semiconductor manufacturers such as LSI Logic and Intel have risen, again thanks to strong demand. Intel had a brief public relations problem surrounding a flaw in its flagship Pentium microprocessor. But the Pentium has gained wider acceptance than many analysts thought possible, and I think the company's recent troubles are behind it. Q. WHAT ABOUT THE PC MANUFACTURERS, SUCH AS COMPAQ? A. Compaq's stock has languished recently due to concerns surrounding the launch of a new line of products. But I'm a long-term believer in the company. Although it's the PC industry leader, Compaq still only has a 14% worldwide market share. In most consumer product industries, whether it's autos or washing machines, the leader usually ends up with a 30% market share or more. As they increase their dominance, companies often acquire greater economic advantages, and are able to spend more money on product research and development. I think Compaq has the opportunity to become a dominant market leader. Q. DID THE STRENGTH OF PC-RELATED STOCKS COME AT THE EXPENSE OF MAINFRAME COMPUTER MANUFACTURERS? A. Not at all. IBM's stock has risen more than 40% over the past year on the strength of improving profit margins. Although the PC side of IBM's business is still struggling, revenues from the mainframe side are increasing. And the company's effective cost cutting has been the kicker for profits. Amdahl also has done well in the mainframe arena. With demand strong, the company has been able to increase revenues and earnings. Q. THERE MUST HAVE BEEN A FEW DISAPPOINTMENTS . . . A. There were. The earnings of computer distributors such as Merisel and Tech Data suffered for a variety of reasons. In addition, some of the fund's overseas investments haven't performed as well as I had hoped over the past six months. Taiwanese semiconductor manufacturer United Micro and PC maker Acer are fast-growing companies, but their stocks have fallen recently. Investors fled smaller emerging markets such as Taiwan in the wake of peso troubles in Mexico. Q. WHAT DO YOU SEE LOOKING OUT SIX MONTHS? A. It's hard not to be optimistic. Over the past few years, companies that sell computers and related products generally have been fighting declining profit margins by lowering internal costs. But now costs are low, demand is strong and margins are improving. The recent success of these stocks is reason for caution, though. They're not as cheap as they were six months ago, and a downturn in the overall market would probably spell trouble for the fund. FUND FACTS START DATE: July 29, 1985 SIZE: as of February 28, 1995, more than $215 million MANAGER: Harry Lange, since 1992; manager, Fidelity Select Electronics Portfolio, since January 1994; Fidelity Select Technology Portfolio, since 1993; research director, Fidelity Investments Far East, 1988-1992; manager, Fidelity Select Capital Goods and Automation and Machinery Portfolios, 1988; joined Fidelity in 1987 (checkmark) COMPUTERS PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.8% SHARES VALUE (NOTE 1) COMMUNICATIONS EQUIPMENT - 3.5% DATACOMMUNICATIONS EQUIPMENT - 0.7% Cisco Systems, Inc. (a) 20,000 $ 675,000 17275R10 3Com Corp. (a) 10,000 521,250 88553510 US Robotics, Inc. (a) 8,032 433,721 91246610 1,629,971 TELEPHONE EQUIPMENT - 2.8% DSC Communications Corp. (a) 11,000 396,000 23331110 Global Village Communication (a) 20,000 240,000 37935Q10 Natural Microsystems (a) 87,700 1,315,500 63888210 Network Equipment Technologies (a) 61,700 1,565,638 64120810 Newbridge Networks Corp. (a) 13,900 470,863 65090110 Perceptron, Inc. (a) 88,300 1,633,550 71361F10 Target Technologies, Inc. (a) 50,000 375,000 87612N10 5,996,551 TOTAL COMMUNICATIONS EQUIPMENT 7,626,522 COMPUTER SERVICES & SOFTWARE - 10.8% CAD/CAM/CAE - 2.9% Brooktrout Technology (a) 17,100 269,325 11458010 Chipcom Corp. (a) 30,000 1,335,000 16961710 Integrated Silicon Systems, Inc. (a) 500 13,625 45812Q10 Structural Dynamics Research Corp. (a) 587,800 4,335,025 86355510 Tecnomatix Technologies (a) 7,500 39,375 91299A92 Viewlogic Systems, Inc. (a) 20,000 195,000 92672110 6,187,350 COMPUTER & SOFTWARE STORES - 0.9% MicroAge, Inc. (a) 192,800 1,879,800 59492810 COMPUTER SERVICES - 0.1% CompuCom Systems, Inc. (a) 50,000 168,750 20478010 CUSTOM COMPUTER PROGRAMMING SERVICES - 0.3% Softdesk, Inc. (a) 29,100 625,650 83402010 ELECTRONIC INFORMATION RETRIEVAL - 0.0% Data Broadcasting Corp. (a) 15,000 63,750 23759610 PREPACKAGED COMPUTER SOFTWARE - 6.6% Autodesk, Inc. 30,000 1,162,500 05276910 Broderbund Software, Inc. (a) 20,000 1,037,500 11201410 Delrina Corporation (a) 10,000 143,932 24735L10 Fuji Software, Inc. 13,000 220,350 36599392 Geoworks (a) 6,600 54,450 37369210 Globalink, Inc. (a) 144,300 1,551,225 37936V10 Informix Corp. (a) 100,000 3,775,000 45677910 Infosoft International, Inc. (a) 20,800 878,800 45678310 Learning Co. (a) 10,000 297,500 52200610 LEGENT Corp. (a) 10,000 290,000 52465R10 Novell, Inc. (a) 27,000 548,860 67000610 Oracle Systems Corp. (a) 60,000 1,882,500 68389X10 Parcplace Systems, Inc. (a) 15,000 270,000 69942110 Softkey International, Inc. (a) 78,900 2,011,950 83402N10 Wonderware Corp. (a) 4,000 111,750 97817910 14,236,317 TOTAL COMPUTER SERVICES & SOFTWARE 23,161,617 COMPUTERS & OFFICE EQUIPMENT - 35.7% COMPUTER EQUIPMENT - WHOLESALE - 1.8% GBC Technologies, Inc. (a) 149,200 1,119,000 36149F10 Merisel, Inc. (a) 100,000 525,000 58984910 Southern Electronics Corp. (a) 20,000 107,500 84281110 Tech Data Corp. (a) 158,300 2,048,006 87823710 3,799,506 SHARES VALUE (NOTE 1) COMPUTER PERIPHERALS - 0.9% Komag, Inc. (a) 19,700 $ 497,425 50045310 Liuski International, Inc. (a) 22,500 101,250 53802910 Plannar Systems, Inc. (a) 5,000 101,250 72690010 Radius, Inc. (a) 117,757 1,118,692 75047020 Western Digital Corp. (a) 6,200 93,000 95810210 1,911,617 COMPUTER RENTAL & LEASING - 1.2% Comdisco, Inc. 97,200 2,478,600 20033610 COMPUTER STORAGE DEVICES - 1.3% ADAPTEC, Inc. (a) 1,800 59,400 00651F10 Hutchinson Technology, Inc. (a) 72,100 2,036,825 44840710 Maxtor Corporation (a) 110,000 453,750 57772910 Read Rite Corp. (a) 10,300 164,800 75524610 Seagate Technology (a) 1,900 45,600 81180410 2,760,375 COMPUTERS & OFFICE EQUIPMENT - 3.0% Canon, Inc. 15,000 223,244 13780199 Data General Corp. (a) 565,600 4,454,100 23768810 Diebold, Inc. 10,000 353,750 25365110 Hewlett-Packard Co. 13,500 1,552,500 42823610 6,583,594 ELECTRONIC COMPUTERS - 0.1% Intergrated Micro Products sponsored ADR (a) 25,000 181,250 45812R10 GRAPHICS WORKSTATIONS - 4.2% Silicon Graphics, Inc. (a) 54,400 1,883,600 82705610 Sun Microsystems, Inc. (a) 223,400 7,148,800 86681010 9,032,400 MAINFRAME COMPUTERS - 7.7% Amdahl Corp. (a) 477,800 5,315,525 02390510 International Business Machines Corp. 149,300 11,234,825 45920010 16,550,350 MINI & MICRO COMPUTERS - 15.5% AST Research, Inc. (a) 159,700 2,555,200 00190710 Apple Computer, Inc. 50,000 1,975,000 03783310 Compaq Computer Corp. (a) 528,400 18,229,800 20449310 Digital Equipment Corp. (a) 282,800 9,473,800 25384910 Sequent Computer Systems, Inc. (a) 10,000 171,250 81733810 Tandem Computers, Inc. (a) 60,000 1,020,000 87537010 33,425,050 OFFICE AUTOMATION - 0.0% Filenet Corp. (a) 2,400 75,000 31686910 TOTAL COMPUTERS & OFFICE EQUIPMENT 76,797,742 CONSUMER ELECTRONICS - 0.1% RADIOS, TELEVISIONS, STEREOS - 0.1% Foster Electric Co. Ltd. 20,000 118,237 34999192 Odetics, Inc. Class A (a) 26,000 130,000 67606520 248,237 ELECTRICAL EQUIPMENT - 0.1% TV & RADIO COMMUNICATION EQUIPMENT - 0.1% Avid Technology, Inc. (a) 500 16,455 05367P10 Leitch Technology (a) 20,000 233,889 52543H10 250,344 ELECTRONIC INSTRUMENTS - 8.3% ELECTRONIC EQUIPMENT - 3.7% ASECO Corp. (a) 63,200 537,200 04365910 Credence Systems Corp. (a) 116,300 2,820,275 22530210 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRONIC INSTRUMENTS - CONTINUED ELECTRONIC EQUIPMENT - CONTINUED GenRad, Inc. (a) 51,500 $ 302,563 37244710 LTX Corp. (a) 10,000 60,000 50239210 Megatest Corp. (a) 355,200 3,951,600 58495810 Micro Component Technology, Inc. (a) 200 525 59479Q10 Mosaid Technologies, Inc. (a) 7,400 55,252 61945Q10 Tektronix, Inc. 10,000 342,500 87913110 8,069,915 SEMICONDUCTOR CAPITAL EQUIPMENT - 4.6% Applied Materials, Inc. (a) 22,900 1,056,263 03822210 Electro Scientific Industries, Inc. (a) 79,500 1,500,563 28522910 KLA Instruments Corp. (a) 70,700 4,100,600 48248010 Lam Research Corp. (a) 10,000 400,000 51280710 Silicon Valley Group, Inc. (a) 118,200 2,770,313 82706610 9,827,739 TOTAL ELECTRONIC INSTRUMENTS 17,897,654 ELECTRONICS - 29.8% ELECTRONIC PARTS - WHOLESALE - 0.2% Pioneer-Standard Electronics, Inc. 4,950 86,625 72387710 Sterling Electronics Corp. (a) 32,800 385,400 85928110 472,025 ELECTRONICS & ELECTRIC COMPONENTS - 1.1% Cirrus Logic, Inc. (a) 45,000 1,513,125 17275510 Sanmina Corp. (a) 10,000 290,000 80090710 Videonics, Inc. (a) 29,400 492,450 92657Q10 2,295,575 SEMICONDUCTORS - 28.5% Advanced Micro Devices, Inc. (a) 32,600 990,225 00790310 Alliance Semiconductor Corp. (a) 15,000 573,750 01877H10 Altera Corp. (a) 5,800 329,875 02144110 Atmel Corp. (a) 21,500 733,688 04951310 Austria Mikro Systeme International (a)(b) 10,000 839,928 05299B22 Cypress Semiconductor Corp. (a) 10,100 286,588 23280610 Electroglas, Inc. (a) 20,600 795,675 28532410 Geotek Industries, Inc. (a) 80,000 560,000 37365410 IMP, Inc. (a) 160,000 260,000 44969310 Information Storage Devices (a) 600 12,750 45675310 Integrated Device Technology, Inc. (a) 6,200 236,375 45811810 Intel Corp. 50,000 3,987,500 45814010 International Rectifier Corp. (a) 4,000 97,000 46025410 Interpoint Corp. (a) 10,000 86,250 46062710 LSI Logic Corp. (a) 122,800 6,692,600 50216110 Lattice Semiconductor Corp. (a) 26,000 685,750 51841510 Linear Technology Corp. 10,000 545,000 53567810 Logic Devices, Inc. (a) 30,000 112,500 54140210 Micro Linear Corp. (a) 37,900 364,788 59485010 Micron Technology, Inc. 314,000 19,468,000 59511210 National Semiconductor Corp. (a) 43,300 730,688 63764010 Quality Semiconductor, Inc. (a) 92,400 1,108,800 74758B10 SGS-Thomson Microelectronic NV (a) 112,500 2,812,500 78421310 S-3, Inc. (a) 72,400 1,321,300 78484910 Samsung Electronics Co. Ltd.: GDR (a)(b) 5,420 336,040 GDS (a)(b) 59,675 2,267,650 79605020 GDS (Reg.)(non-vtg.) (a) 71,600 2,720,800 79611093 Siliconix, Inc. (a) 600 7,350 82707920 Supertex, Inc. (a) 20,000 157,500 86853210 Tencor Instruments (a) 24,200 1,149,500 88032310 Texas Instruments, Inc. 79,300 6,244,875 88250810 SHARES VALUE (NOTE 1) Uniphase Corp. (a) 14,300 $ 250,250 90914910 Xilinx, Inc. (a) 70,000 4,681,250 98391910 61,446,745 TOTAL ELECTRONICS 64,214,345 INDUSTRIAL MACHINERY & EQUIPMENT - 2.2% GENERAL INDUSTRIAL MACHINERY - 0.0% Robotic Vision Systems, Inc. (a) 15,000 93,750 77107410 SPECIAL INDUSTRIAL MACHINERY - 2.2% Asyst Technologies, Inc. (a) 48,200 1,566,500 04648X10 Fuji Machine Manufacturing Co. Ltd. Ord. 30,000 781,355 36099892 Gasonics International Corp. (a) 65,800 1,151,500 36727810 PRI Automation, Inc. (a) 67,500 1,215,000 69357H10 4,714,355 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 4,808,105 LEASING & RENTAL - 0.0% EQUIPMENT RENTAL & LEASING - 0.0% Leasing Solutions, Inc. (a) 14,000 101,500 52211310 MEDICAL EQUIPMENT & SUPPLIES - 0.2% MEDICAL SUPPLIES & APPLIANCES - 0.2% Steris Corporation (a) 10,000 331,250 85915210 RETAIL & WHOLESALE, MISCELLANEOUS - 1.0% MAIL ORDER - 1.0% Gateway 2000, Inc. (a) 120,800 2,219,700 36783310 STATIONARY & OFFICE SUPPLIES - WHOLESALE - 0.0% Daisytek International Corp. (a) 1,000 17,750 23405310 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 2,237,450 SERVICES - 0.1% ELECTRICAL REPAIR SHOPS - 0.1% Cerplex Group, Inc. (a) 20,000 160,000 15691320 TOTAL COMMON STOCKS (Cost $179,761,236) 197,834,766 NONCONVERTIBLE PREFERRED STOCKS - 0.1% COMPUTER SERVICES & SOFTWARE - 0.1% PREPACKAGED COMPUTER SOFTWARE - 0.1% Sap AG (Cost $122,656) 200 164,702 80899893 CONVERTIBLE BONDS - 6.4% PRINCIPAL AMOUNT COMPUTERS & OFFICE EQUIPMENT - 3.6% ELECTRONIC COMPUTERS - 3.3% Acer, Inc. 4%, 6/10/01 $ 2,890,000 7,051,600 004993AC OFFICE EQUIPMENT - WHOLESALE - 0.3% Kinpo Electronics, Inc. euro 3%, 7/21/01 950,000 707,750 4971269A TOTAL COMPUTERS & OFFICE EQUIPMENT 7,759,350 CONVERTIBLE BONDS - CONTINUED PRINCIPAL VALUE (NOTE 1) AMOUNT ELECTRONICS - 2.8% SEMICONDUCTORS - 2.8% United Microelectronics Corp. 1 1/4%, 6/8/04 cv (b) $ 1,070,000 $ 1,465,900 910873AA 1 1/4%, 6/8/04 ecv 3,330,000 4,562,100 911993AB 6,028,000 TOTAL CONVERTIBLE BONDS (Cost $13,497,459) 13,787,350 OTHER SECURITIES - 0.3% INDEXED SECURITIES - 0.3% Hewlett Packard Finance Co. 0%, 4/25/95 (indexed to price of Hewlett Packard common stock) (b) (Cost $424,000) 400,000 550,800 4282399A REPURCHASE AGREEMENTS - 1.4% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $2,957,499 2,957,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $196,762,351) $ 215,294,618 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $5,460,318 or 2.5% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $356,502,723 and $233,611,366, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $154,477 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $14,435,000 and $4,045,945, respectively. The weighted average interest rate paid was 4.6% (see Note 8 of Notes to Financial Statements). Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: United States 88.3% Taiwan (Free China) 6.4 Korea 2.4 Netherlands 1.3 Others (individually less than 1%) 1.6 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $198,158,933. Net unrealized appreciation aggregated $17,135,685, of which $29,576,859 related to appreciated investment securities and $12,441,174 related to depreciated investment securities. The fund hereby designates $1,275,000 as a capital gain dividend for the purpose of the dividend paid deduction. COMPUTERS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $2,957,000) (cost $196,762,351) - See $ 215,294,618 accompanying schedule Cash 866 Receivable for investments sold 6,396,828 Receivable for fund shares sold 4,563,260 Dividends receivable 47,797 Interest receivable 106,810 Redemption fees receivable 931 Other receivables 25,818 TOTAL ASSETS 226,436,928 LIABILITIES Payable for investments purchased $ 2,938,279 Payable for fund shares redeemed 8,209,376 Accrued management fee 107,020 Other payables and accrued expenses 168,453 TOTAL LIABILITIES 11,423,128 NET ASSETS $ 215,013,800 Net Assets consist of: Paid in capital $ 193,194,067 Accumulated net investment (loss) (21,983 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 3,309,421 Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 18,532,295 NET ASSETS, for 7,011,243 shares outstanding $ 215,013,800 NET ASSET VALUE and redemption price per share ($215,013,800 (divided by) 7,011,243 shares) $30.67 Maximum offering price per share (100/97.00 of $30.67) $31.62
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 342,259 Dividends Interest 415,256 TOTAL INCOME 757,515 EXPENSES Management fee $ 818,112 Transfer agent 1,232,736 Fees Redemption fees (159,546 ) Accounting fees and expenses 132,274 Non-interested trustees' compensation 1,246 Custodian fees and expenses 21,543 Registration fees 131,497 Audit 22,837 Legal 1,252 Interest 39,442 Reports to shareholders 4,156 Miscellaneous 750 Total expenses before reductions 2,246,299 Expense reductions (19,027 2,227,272 ) NET INVESTMENT INCOME (LOSS) (1,469,757 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 3,563,806 Foreign currency transactions 321 3,564,127 Change in net unrealized appreciation (depreciation) on: Investment securities 2,952,712 Assets and liabilities in foreign currencies 28 2,952,740 NET GAIN (LOSS) 6,516,867 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 5,047,110 OTHER INFORMATION $2,229,925 Sales Charges Paid to FDC Deferred sales charges withheld $6,636 by FDC Exchange fees withheld by FSC $134,438
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ (1,469,757 $ (377,060 Net investment income (loss) ) ) Net realized gain (loss) 3,564,127 5,305,912 Change in net unrealized appreciation (depreciation) 2,952,740 11,882,729 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 5,047,110 16,811,581 Distributions to shareholders from net realized gains - (3,924,122 ) Share transactions 529,347,764 184,130,331 Net proceeds from sales of shares Reinvestment of distributions - 3,842,739 Cost of shares redeemed (441,147,769 (128,419,730 ) ) Paid in capital portion of redemption fees 1,332,121 398,209 Net increase (decrease) in net assets resulting from share transactions 89,532,116 59,951,549 TOTAL INCREASE (DECREASE) IN NET ASSETS 94,579,226 72,839,008 NET ASSETS Beginning of period 120,434,574 47,595,566 End of period (including accumulated net investment loss of $(21,983) and $(10,697), respectively) $ 215,013,800 $ 120,434,574 OTHER INFORMATION Shares Sold 18,730,329 7,631,888 Issued in reinvestment of distributions - 169,028 Redeemed (16,175,513 (5,706,315 ) ) Net increase (decrease) 2,554,816 2,094,601
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 27.02 $ 20.15 $ 17.63 $ 16.60 $ 12.68 Income from Investment Operations Net investment income (loss) (.31) (.21) G (.15) (.03) F .42 E Net realized and unrealized gain (loss) 3.68 8.66 2.44 1.18 3.21 Total from investment operations 3.37 8.45 2.29 1.15 3.63 Less Distributions - - - - (.12) From net investment income In excess of net investment income - - - (.27) - From net realized gain - (1.80) - (.22) - Total distributions - (1.80) - (.49) (.12) Redemption fees added to paid in capital .28 .22 .23 .37 .41 Net asset value, end of period $ 30.67 $ 27.02 $ 20.15 $ 17.63 $ 16.60 TOTAL RETURN B, C 13.51% 45.06% 14.29% 9.36% 32.11% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 215,014 $ 120,435 $ 47,596 $ 32,810 $ 29,455 Ratio of expenses to average net assets 1.69% 1.89% 1.81% A 2.17% 2.26% Ratio of expenses to average net assets before expense reductions 1.71% 1.90% 1.81% A 2.17% 2.26% Ratio of net investment income (loss) to average net assets (1.12)% (.91)% (.98)% (.18)% 2.94% A Portfolio turnover rate 189% 145% 254% A 568% 695%
1 ANNUALIZED 2 THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). 3 TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. 4 NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING EACH PERIOD. 5 INVESTMENT INCOME PER SHARE REFLECTS SPECIAL DIVIDENDS WHICH AMOUNTED TO $.08 PER SHARE AND $.36 PER SHARE RELATING TO A NONRECURRING INITIATIVE TO INVEST IN DIVIDEND INCOME PRODUCING SECURITIES WHICH WAS IN EFFECT FOR A PORTION OF 1991. 6 INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.22 PER SHARE RELATING TO A NONRECURRING INITIATIVE TO INVEST IN DIVIDEND INCOME PRODUCING SECURITIES WHICH WAS IN EFFECT FOR A PORTION OF 1992. 7 INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM INTELLIGENT ELECTRONICS WHICH AMOUNTED TO $.07 PER SHARE. DEFENSE AND AEROSPACE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). If Fidelity had not reimbursed certain fund expenses during the period, the fund's total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1995 YEAR YEARS YEARS DEFENSE AND AEROSPACE 4.13% 79.86% 67.93% DEFENSE AND AEROSPACE (INCL. 3% SALES CHARGE) 1.01% 74.46% 62.90% S&P 500 7.36% 71.20% 274.70% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or ten years. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1995 YEAR YEARS YEARS DEFENSE AND AEROSPACE 4.13% 12.46% 5.32% DEFENSE AND AEROSPACE (INCL. 3% SALES CHARGE) 1.01% 11.77% 5.00% S&P 500 7.36% 11.35% 14.12% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER TEN YEARS Select Defense (067)Standard & Poor's 50 02/28/85 9700.00 10000.00 03/31/85 9424.10 10007.00 04/30/85 9082.86 9997.99 05/31/85 9300.67 10575.88 06/30/85 9695.12 10741.92 07/31/85 9973.17 10725.81 08/31/85 9943.90 10634.64 09/30/85 9365.85 10301.77 10/31/85 9534.14 10777.71 11/30/85 10046.34 11517.07 12/31/85 10470.73 12074.49 01/31/86 10339.02 12142.11 02/28/86 10902.43 13050.34 03/31/86 11524.39 13778.55 04/30/86 11612.19 13622.85 05/31/86 11897.56 14347.59 06/30/86 12146.34 14590.06 07/31/86 11391.04 13774.48 08/31/86 11977.28 14796.54 09/30/86 11012.57 13572.87 10/31/86 11160.99 14356.02 11/30/86 11517.19 14704.87 12/31/86 10975.47 14329.90 01/31/87 11932.76 16260.14 02/28/87 12689.69 16902.41 03/31/87 12452.22 17390.89 04/30/87 11910.50 17236.11 05/31/87 11747.24 17386.07 06/30/87 11635.92 18264.06 07/31/87 11947.60 19190.05 08/31/87 11821.45 19905.84 09/30/87 11583.98 19469.90 10/31/87 8630.47 15276.09 11/30/87 8185.22 14017.34 12/31/87 8429.31 15084.06 01/31/88 8971.64 15719.09 02/29/88 9506.22 16451.60 03/31/88 9482.98 15943.25 04/30/88 9421.00 16120.22 05/31/88 9064.61 16260.46 06/30/88 9436.49 17006.82 07/31/88 9250.55 16942.19 08/31/88 9025.87 16366.16 09/30/88 9297.04 17063.36 10/31/88 9281.54 17537.72 11/30/88 8870.92 17286.93 12/31/88 8793.45 17589.45 01/31/89 9142.09 18877.00 02/28/89 9103.35 18406.96 03/31/89 9289.29 18835.84 04/30/89 9622.43 19813.42 05/31/89 9792.88 20615.87 06/30/89 9676.66 20498.36 07/31/89 10304.21 22349.36 08/31/89 10567.63 22787.41 09/30/89 10373.94 22693.98 10/31/89 9785.13 22167.48 11/30/89 9413.25 22619.69 12/31/89 9568.20 23162.57 01/31/90 9025.87 21608.36 02/28/90 9056.86 21887.11 03/31/90 9614.68 22467.12 04/30/90 9219.56 21905.44 05/31/90 9901.34 24041.22 06/30/90 9908.46 23877.74 07/31/90 9510.88 23801.33 08/31/90 8676.73 21649.69 09/30/90 8396.08 20595.35 10/31/90 8286.94 20506.79 11/30/90 8731.30 21831.53 12/31/90 9129.59 22440.63 01/31/91 9935.38 23419.04 02/28/91 10130.95 25093.50 03/31/91 10913.27 25700.76 04/30/91 10733.33 25762.44 05/31/91 11234.01 26875.38 06/30/91 10668.80 25644.49 07/31/91 11132.32 26839.52 08/31/91 11014.48 27475.62 09/30/91 10755.22 27016.78 10/31/91 11273.73 27378.80 11/30/91 10763.08 26275.44 12/31/91 11587.98 29281.34 01/31/92 11548.70 28736.71 02/29/92 11729.40 29110.29 03/31/92 11493.71 28542.64 04/30/92 11289.45 29381.79 05/31/92 10723.79 29525.76 06/30/92 10220.99 29085.83 07/31/92 10613.81 30275.44 08/31/92 10409.54 29654.79 09/30/92 10558.81 30004.72 10/31/92 10645.23 30109.74 11/30/92 11014.48 31136.48 12/31/92 11587.98 31519.46 01/31/93 11933.66 31784.22 02/28/93 11847.24 32216.49 03/31/93 12475.74 32896.25 04/30/93 12515.02 32100.16 05/31/93 12899.98 32960.45 06/30/93 13442.06 33056.03 07/31/93 13992.00 32923.81 08/31/93 13968.43 34171.62 09/30/93 14329.82 33908.50 10/31/93 14903.33 34610.41 11/30/93 14463.37 34281.61 12/31/93 14932.02 34696.42 01/31/94 15643.06 35876.09 02/28/94 15643.06 34903.85 03/31/94 15013.75 33382.04 04/30/94 15095.23 33809.33 05/31/94 15144.99 34363.81 06/30/94 14763.46 33521.89 07/31/94 14979.11 34621.41 08/31/94 15650.93 36040.89 09/30/94 14862.99 35157.89 10/31/94 15227.93 35948.94 11/30/94 14630.76 34639.68 12/31/94 15194.75 35153.39 01/31/95 15186.46 36064.91 02/28/95 16289.57 37470.36 Let's say you invested $10,000 in Fidelity Select Defense and Aerospace Portfolio on February 28, 1985, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $16,290 - a 62.90% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $37,470 over the same period - a 274.70% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS McDonnell Douglas Corp. 8.0 Martin Marietta Corp. 8.0 Lockheed Corp. 7.9 United Technologies Corp. 6.8 Rockwell International Corp. 5.6 Amphenol Corp. Class A 4.0 General Dynamics Corp. 3.8 General Motors Corp. Class H 3.8 Watkins-Johnson Co. 3.7 Loral Corp. 3.3 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 29.0 Row: 1, Col: 2, Value: 6.3 Row: 1, Col: 3, Value: 10.7 Row: 1, Col: 4, Value: 14.3 Row: 1, Col: 5, Value: 16.1 Row: 1, Col: 6, Value: 23.6 Missiles & Space Vehicles 23.6% Defense Electronics 16.1% Conglomerates 14.3% Aircraft 10.7% Electrical Machinery 6.3% All Others 29.0%* * INCLUDES SHORT-TERM INVESTMENTS DEFENSE AND AEROSPACE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Bill Rubin, Portfolio Manager of Fidelity Select Defense and Aerospace Portfolio Q. HOW DID THE FUND PERFORM, BILL? A. The fund returned 4.13% for the 12 months ended February 28, 1995, which lagged the S&P 500's 7.36% return. Q. WHAT FACTORS HAD THE GREATEST EFFECT ON PERFORMANCE OVER THE PAST 12 MONTHS? A. During most of 1994, the fund underperformed the broad market. A substantial portion of the fund's stocks are multi-industry conglomerates that are cyclical in nature - meaning they generally rise and fall with the economy. As interest rates rose, investors feared that the economy might slow, which caused cyclical stocks to fall out of favor. However, these conglomerates and other defense companies have continued to rapidly improve their profit margins, generate very strong cash flows and grow their earnings. Their balance sheets have shown impressive improvements as a result of their various corporate restructuring and cost-cutting initiatives to enhance shareholder value, including stock buy-backs, additive acquisitions and higher dividends. All of these factors have helped the fund outperform the S&P 500 over the last three months of the period. Q. WHICH INDIVIDUAL STOCKS HELPED PERFORMANCE DURING THE YEAR? A. Among the fund's top 10 holdings, McDonnell Douglas, United Technologies, Martin Marietta, and Lockheed all have been strong performers. McDonnell Douglas has improved its balance sheet significantly and has been generating higher profit margins and strong cash flows from the maturing of many of its long-term military production contracts. The company's C-17 military transport aircraft program got back on track and has the potential to produce excellent profit margin improvement in 1995 and beyond. Also, McDonnell Douglas' stock repurchase program has been very aggressive. The merger between Martin Marietta and Lockheed will create the country's largest defense contractor, which should capitalize on numerous financial and marketing synergies. As a combined entity, Lockheed Martin should generate better operating profit margins, tremendous cash flow and steady earnings growth, despite flat revenues. In anticipation of the benefits of consolidation, the prices of both stocks recently have been rising. Q. WHAT ABOUT THE MULTI-INDUSTRY CONGLOMERATES? HOW HAVE THEY PERFORMED? A. United Technologies (UT), the fund's largest investment in the conglomerates, has continued to enjoy good earnings growth and cash flow as a result of stronger global economic growth. It also has benefited from downsizing and cost-cutting in certain of its segments. As a result, the company's balance sheet has improved greatly as it has used its excess cash to pay down debt and repurchase stock. The improvement of these operating fundamentals is an encouraging sign going forward for UT and for other conglomerates - Rockwell and Raytheon, for example - that have followed similar strategies. I expect the multi-industry conglomerate stocks to continue to rise in price over the next couple years. Q. COMMERCIAL AEROSPACE COMPANIES HAVE BEEN SOMEWHAT DE-EMPHASIZED IN THE PORTFOLIO RECENTLY. WHAT IS YOUR CURRENT VIEW OF THIS INDUSTRY SECTOR? A. Commercial aerospace is more cyclical in nature, driven by economic factors as well as the serviceability of existing commercial aircraft, and I believe the sector may reach the trough of its current down-cycle this year. Worldwide demand for commercial aircraft should soon begin to grow, driven by noise reduction requirements, the normal aging of fleets now in service, continued growth in worldwide air traffic, and the improving financial condition of airlines. Demand should be especially high in Asia over the next decade. Q. WHAT IS YOUR GAME PLAN FOR THE FUND GOING FORWARD? A. Of course, it's impossible to predict short-term movements in the market. However, the fund is currently positioned to take advantage of continued good prospects in the defense and multi-industry stocks. I believe there will continue to be good appreciation in these sectors, driven by continued profit margin improvement, strong cash flow, stock buy-backs, and merger and acquisition activity. I plan to keep the fund invested in these sectors, but also soon plan to become more heavily invested in commercial aerospace stocks. I believe these stocks could begin to appreciate, and would expect to continue holding them over the next couple years of their up-cycle. In particular, I plan to keep a close eye on Boeing and its sub-contractors as potential buys. FUND FACTS START DATE: May 8, 1984 SIZE: as of February 28, 1995, more than $4 million MANAGER: Bill Rubin, since December 1, 1994; equity analyst, defense electronics, aerospace, and electronic connectors industries, since August 1994; joined Fidelity in 1994 (checkmark) DEFENSE AND AEROSPACE PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 86.6% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 44.6% AIRCRAFT - 10.7% McDonnell Douglas Corp. 7,000 $ 392,000 58016910 Northrop Corp. 3,000 133,125 66680710 525,125 AIRCRAFT & PARTS - 3.6% Precision Castparts Corp. 5,000 116,250 74018910 ROHR Industries, Inc. (a) 5,000 56,250 77542210 172,500 AIRCRAFT ENGINES & PARTS - 3.9% General Motors Corp. Class H 5,000 188,125 AIRCRAFT EQUIPMENT - 1.5% Transtechnology Corp. 6,400 75,200 89388910 MISSILES & SPACE VEHICLES - 23.1% Lockheed Corp. 5,000 388,125 53982110 Martin Marietta Corp. 8,200 391,550 57290010 Orbital Sciences Corporation (a) 3,000 53,250 68556410 Rockwell International Corp. 7,100 273,350 77434710 Thiokol Corp. 1,000 25,875 88410310 1,132,150 ORDNANCE - 0.9% Alliant Techsystems, Inc. (a) 1,200 45,300 01880410 TRAINING EQUIPMENT & SIMULATORS - 0.9% Flightsafety International, Inc. 1,000 44,375 33942310 TOTAL AEROSPACE & DEFENSE 2,182,775 AIR TRANSPORTATION - 0.2% AIR TRANSPORT, MAJOR NATIONAL - 0.2% KLM Royal Dutch Airlines (a) 400 11,700 48251610 AUTOS, TIRES, & ACCESSORIES - 1.3% AUTO & TRUCK PARTS - 1.3% TRW, Inc. 1,000 65,750 87264910 CONGLOMERATES - 14.3% Allied-Signal, Inc. 2,000 76,000 01951210 Harris Corp. 3,000 135,000 41387510 Sequa Corp. Class A (a) 3,000 84,375 81732010 Textron, Inc. 1,300 71,175 88320310 United Technologies Corp. 5,000 331,875 91301710 TOTAL CONGLOMERATES 698,425 DEFENSE ELECTRONICS - 16.1% E-Systems, Inc. 2,000 87,500 26915730 Litton Industries, Inc. 3,000 109,500 53802110 Loral Corp. 4,000 163,500 54385910 Raytheon Co. 2,000 141,000 75511110 Tracor, Inc. (a) 10,000 106,250 89234920 Watkins-Johnson Co. 5,000 182,500 94248610 TOTAL DEFENSE ELECTRONICS 790,250 ELECTRICAL EQUIPMENT - 6.3% ELECTRICAL MACHINERY - 6.3% Amphenol Corp. Class A (a) 8,000 197,000 03209420 General Electric Co. 2,000 109,750 36960410 TOTAL ELECTRICAL EQUIPMENT 306,750 SHIP BUILDING & REPAIR - 3.8% SHIP BUILDERS - 3.8% General Dynamics Corp. 4,000 188,500 36955010 TOTAL COMMON STOCKS (Cost $3,968,434) 4,244,150 CORPORATE BONDS - 0.5% PRINCIPAL AMOUNT CONVERTIBLE BONDS - 0.5% AEROSPACE & DEFENSE - 0.5% MISSILES & SPACE VEHICLES - 0.5% Orbital Sciences Corp. 6 3/4%, 3/1/03 (Cost $18,000) $ 18,000 $ 22,860 685564AA REPURCHASE AGREEMENTS - 12.9% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $630,106 630,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $4,616,434) $ 4,897,010 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $7,088,793 and $11,539,752, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $6,197 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $2,032,000 and $2,009,750, respectively. The weighted average interest rate paid was 4.2% (see Note 8 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $4,642,048. Net unrealized appreciation aggregated $254,962, of which $294,908 related to appreciated investment securities and $39,946 related to depreciated investment securities. At February 28, 1995, the fund had a capital loss carryforward of approximately $293,000 all of which will expire on February 28, 2003. DEFENSE AND AEROSPACE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $630,000) (cost $4,616,434) - See $ 4,897,010 accompanying schedule Cash 712 Receivable for fund shares sold 229,583 Dividends receivable 16,036 Interest receivable 604 Other receivables 1,172 Receivable from investment adviser for expense reductions 5,370 TOTAL ASSETS 5,150,487 LIABILITIES Payable for investments purchased $ 110,000 Payable for fund shares redeemed 35,853 Accrued management fee 2,437 Other payables and accrued expenses 17,545 TOTAL LIABILITIES 165,835 NET ASSETS $ 4,984,652 Net Assets consist of: Paid in capital $ 5,015,331 Accumulated undistributed (311,255 net realized gain (loss) ) on investments Net unrealized appreciation (depreciation) on investments 280,576 NET ASSETS, for 253,837 shares outstanding $ 4,984,652 NET ASSET VALUE and redemption price per share ($4,984,652 (divided by) 253,837 shares) $19.64 Maximum offering price per share (100/97.00 of $19.64) $20.25
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 91,033 Dividends Interest 23,640 TOTAL INCOME 114,673 EXPENSES Management fee $ 32,632 Transfer agent 93,309 Fees Redemption fees (14,321 ) Accounting fees and expenses 45,035 Non-interested trustees' compensation 73 Custodian fees and expenses 10,469 Registration fees 21,554 Audit 18,159 Legal 68 Interest 942 Reports to shareholders 845 Miscellaneous 40 Total expenses before reductions 208,805 Expense reductions (77,299 131,506 ) NET INVESTMENT INCOME (LOSS) (16,833 ) REALIZED AND UNREALIZED GAIN (LOSS) (307,440 Net realized gain (loss) on investment securities ) Change in net unrealized appreciation (depreciation) on investment securities (46,619 ) NET GAIN (LOSS) (354,059 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (370,892 ) OTHER INFORMATION $55,192 Sales Charges Paid to FDC Deferred sales charges withheld $654 by FDC Exchange fees withheld by FSC $12,218
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ (16,833 $ 18,345 Net investment income (loss) ) Net realized gain (loss) (307,440 629,513 ) Change in net unrealized appreciation (depreciation) (46,619 236,253 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (370,892 884,111 ) Distributions to shareholders: - (15,420 From net investment income ) From net realized gain (145,443 (95,604 ) ) TOTAL DISTRIBUTIONS (145,443 (111,024 ) ) Share transactions 13,049,647 29,885,117 Net proceeds from sales of shares Reinvestment of distributions 142,332 109,302 Cost of shares redeemed (18,865,024 (21,129,974 ) ) Paid in capital portion of redemption fees 38,135 35,674 Net increase (decrease) in net assets resulting from share transactions (5,634,910 8,900,119 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (6,151,245 9,673,206 ) NET ASSETS Beginning of period 11,135,897 1,462,691 End of period (including undistributed net investment income (loss) of $0 and $2,925, respectively) $ 4,984,652 $ 11,135,897 OTHER INFORMATION Shares Sold 690,722 1,666,363 Issued in reinvestment of distributions 7,812 6,120 Redeemed (1,026,621 (1,187,524 ) ) Net increase (decrease) (328,087) 484,959
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 19.14 $ 15.08 $ 14.37 $ 13.72 $ 11.90 Income from Investment Operations Net investment income (loss) (.06) .07 (.02) (.01) .10 Net realized and unrealized gain (loss) .70 E 4.57 .69 .67 1.72 Total from investment operations .64 4.64 .67 .66 1.82 Less Distributions - (.10) - (.04) (.12) From net investment income In excess of net investment income - - - (.02) - From net realized gain (.27) (.62) - - - Total distributions (.27) (.72) - (.06) (.12) Redemption fees added to paid in capital .13 .14 .04 .05 .12 Net asset value, end of period $ 19.64 $ 19.14 $ 15.08 $ 14.37 $ 13.72 TOTAL RETURN B, C 4.13% 32.04% 4.94% 5.18% 16.42% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 4,985 $ 11,136 $ 1,463 $ 1,280 $ 3,070 Ratio of expenses to average net assets 2.49% 2.53% 2.48% A 2.46% 2.49% Ratio of expenses to average net assets before expense reductions 3.95% 3.58% 9.63% A 2.72% 3.11% Ratio of net investment income (loss) to average net assets (.32)% .40% (.14)% (.10)% .78% A Portfolio turnover rate 146% 324% 87% A 32% 162%
a ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET GAIN (LOSS) ON INVESTMENTS FOR THE PERIOD ENDED DUE TO THE TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND. DEVELOPING COMMUNICATIONS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF FEBRUARY 28, 1995 YEAR FUND DEVELOPING COMMUNICATIONS 13.63% 161.21% DEVELOPING COMMUNICATIONS (INCL. 3% SALES CHARGE) 10.22% 153.37% S&P 500 7.36% 57.13% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, or since the fund started on June 29, 1990. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF FEBRUARY 28, 1995 YEAR FUND DEVELOPING COMMUNICATIONS 13.63% 22.80% DEVELOPING COMMUNICATIONS (INCL. 3% SALES CHARGE) 10.22% 22.01% S&P 500 7.36% 10.14% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Let's say you invested $10,000 in Fidelity Select Developing Communications Portfolio on June 29, 1990, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $25,337 - a 153.37% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $15,713 over the same period - a 57.13% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS DSC Communications Corp. 6.1 Airtouch Communications 4.0 BCE Mobile Communications, Inc. 3.6 Vodafone Group PLC sponsored ADR 3.3 Tellabs, Inc. 3.2 Allen Group, Inc. 2.8 Newbridge Networks Corp. 2.3 Cellular Communications Puerto Rico Inc. 2.2 Nokia Corp. AB sponsored ADR 2.1 Dialogic Corp. 2.1 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 34.5 Row: 1, Col: 2, Value: 3.8 Row: 1, Col: 3, Value: 3.9 Row: 1, Col: 4, Value: 6.9 Row: 1, Col: 5, Value: 23.1 Row: 1, Col: 6, Value: 27.8 Cellular & Communication Services 27.8% Telephone Equipment 23.1% Telephone Services 6.9% Electronics & Electric Components 3.9% Semiconductors 3.8% All Others 34.5%* * INCLUDES SHORT-TERM INVESTMENTS DEVELOPING COMMUNICATIONS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Paul Antico, Portfolio Manager of Fidelity Select Developing Communications Portfolio Q. PAUL, HOW DID THE FUND DO? A. Quite well. For the 12 months ended February 28, 1995, the fund returned 13.63%, beating the S&P 500, which had a return of 7.36%. Q. WHY DID THE FUND OUTPERFORM THE S&P 500? A. Mostly because it was heavily weighted in cellular telephone stocks, and those stocks were strong performers throughout the year. In addition, I chose stocks that were strong performers and managed to avoid most of the stocks that were "land mines." Q. LET'S LOOK AT THE YEAR IN REVIEW. AT THE BEGINNING OF 1994, THERE WAS A SHIFT OUT OF DIVERSIFIED TECHNOLOGY AND INTO TELECOMMUNICATIONS EQUIPMENT SUPPLIERS, AND MID-YEAR A SHIFT INTO CELLULAR COMPANIES. WHAT PAID OFF AND WHAT DIDN'T? A. My initial move into equipment suppliers, shortly after I took over as manager, was an attempt to gain tighter control of the fund. I wanted to focus on making it a more strictly defined developing communications fund, instead of another broad technology fund. Unfortunately, equipment suppliers performed poorly for the first half of the year. However, many of these companies -such as DSC Communications and Newbridge Networks - -continued to demonstrate strong growth characteristics and turned in better than expected second half returns. That said, my increased focus in the second half of the year on cellular stocks proved to be very beneficial. As I noted, these stocks turned out to be excellent performers. Q. WHAT CELLULAR STOCKS LOOKED GOOD OVER THE PERIOD? A. At the beginning of the 12-month period, Glenayre Technologies, which benefited from the world-wide growth of paging devices, turned in great results. Finnish cellular provider Nokia also was a strong performer. However, I pared back the fund's investments in the company shortly before Motorola reported a handset glut in the U.S. market, which negatively affected the psychology around Nokia. I should point out that Nokia still remained one of my top holdings at the end of the period. Q. WHAT NEW HOLDINGS WERE ATTRACTIVE? A. I liked other foreign cellular providers, such as BCE Mobile Communications in Canada and Vodafone in Great Britain. In general, foreign cellular stocks look good because market penetration is lower than it is in the United States and subscriber growth is even more rapid. In addition, many foreign markets' profit margins are improving quite notably. Q. DID ANY OTHER CELLULAR STOCKS STAND OUT? A. Yes. Cellular service companies that target rural U.S. markets, such as Vanguard and Commnet Cellular, were strong performers. Like international cellular providers, these companies are growing very quickly and have improving margins. That's mostly because market penetration is lower in rural than in urban areas. Q. ARE THERE FUTURE TRENDS IN DEVELOPING COMMUNICATIONS THAT ARE WORTH NOTING? A. Besides remaining committed to cellular and attractive telecommunications equipment stocks, I'm keeping my eye on a few other longer-term trends. I'm fascinated with the buzz around the Internet and am investing in it through a small investment in modems. Another theme is U.K. cable/telephone companies, which provide British consumers telephone and cable TV services through one coaxial cable - a service prohibited in the United States. This means there's one carrier and one service bill for customers. These stocks have no earnings yet, so I'm just looking at their potential. Another theme is the privatization and deregulation of Europe's entire communication system by 1998. Basically, I think it will be an opportunity similar to the 1984 breakup of the AT&T monopoly. Q. DO YOU HAVE ANY REGRETS OVER THE PAST YEAR? A. Sometimes I wish I'd had more invested in the computer technology market, which has turned in a strong performance this year. However, I am very comfortable with the cellular market's strong and, what I consider to be, much safer returns. Frankly, I feel uncomfortable timing the technology market because you can end up with tremendous losses. Q. PAUL, HOW DOES THE FUND LOOK GOING FORWARD? A. I think its outlook is good. The fund is invested in stocks that are cheap relative to their fundamentals and growth and ones that I anticipate will keep getting better as we move ahead. FUND FACTS START DATE: June 29, 1990 SIZE: as of February 28, 1995, more than $254 million MANAGER: Paul Antico, since 1993; equity analyst, telecommunications equipment, since 1992, restaurant industry, 1992-1993, and wireless communications, since 1993; assistant, Fidelity Balanced Fund and Fidelity Equity Income II Fund, 1991-1992; joined Fidelity in 1991 (checkmark) DEVELOPING COMMUNICATIONS PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.6% SHARES VALUE (NOTE 1) APPLIANCE STORES - 1.3% ELECTRIC APPLIANCES - WHOLESALE - 1.3% Cellstar Corp. (a) 152,000 $ 3,381,995 15092510 AUTOS, TIRES, & ACCESSORIES - 2.8% AUTO & TRUCK PARTS - 2.8% Allen Group, Inc. (The) 312,000 7,332,000 01763410 BROADCASTING - 3.6% CABLE TV OPERATORS - 2.9% Bell Cablemedia PLC ADR (a) 99,200 2,033,600 07791010 Comcast UK Cable Partners Ltd. Class A (a) 132,900 2,118,094 20099622 Viacom, Inc. Class B (non-vtg.) (a) 80,000 3,580,000 92552430 7,731,694 COMMUNICATIONS SERVICES - 0.6% International Cabletel, Inc. (a) 45,200 1,446,400 45921610 RADIO BROADCASTING - 0.1% International Cablecasting Technologies, Inc. (a) 96,000 264,000 45921L10 TOTAL BROADCASTING 9,442,094 CELLULAR - 27.8% CELLULAR & COMMUNICATION SERVICES - 27.8% Airtouch Communications (a) 383,425 10,448,331 00949T10 Arch Communications Group, Inc. (a) 157,700 2,976,588 03938110 BCE Mobile Communications, Inc. (a) 279,700 9,385,062 05534G10 Cellular Communications, Inc. Series A (redeemable) (a) 116,200 5,897,150 15091710 Cellular Communications, Inc. Class P (a) 19,550 1,018,360 15091793 Cellular Communications International, Inc. (a) 25,000 1,056,250 15091810 Cellular Communications Puerto Rico Inc. (a) 140,000 4,830,000 15091910 Commnet Cellular, Inc. (a) 213,000 4,899,000 20260410 LIN Broadcasting Corp. 29,800 3,855,375 53276310 Metrocall, Inc. (a) 152,800 2,674,000 59164710 Millicom International Cellular SA (a) 60,000 1,635,000 60081492 Nationwide Cellular Service, Inc. (a) 176,000 3,168,000 63859510 Nera SA (a) 75,000 1,512,038 64099722 USA Mobile Communications (a) 307,544 3,844,300 90329B10 United States Cellular Corp. (a) 84,200 2,810,175 91168410 Vanguard Cellular Systems, Inc. Class A (a) 164,550 4,278,300 92202210 Vodafone Group PLC sponsored ADR 287,700 8,774,850 92857T10 TOTAL CELLULAR 73,062,779 COMMUNICATIONS EQUIPMENT - 25.2% DATACOMMUNICATIONS EQUIPMENT - 1.1% Bolt Beranek & Newman, Inc. (a) 54,300 862,013 09768910 Dynatech Corp. (a) 27,700 1,004,125 26813810 US Robotics, Inc. (a) 20,000 1,080,000 91246610 2,946,138 TELEPHONE EQUIPMENT - 23.1% ADC Telecommunications, Inc. (a) 57,400 3,200,050 00088610 Andrew Corp. (a) 24,400 1,415,200 03442510 Brite Voice Systems, Inc. (a) 119,700 2,364,075 11041110 DSC Communications Corp. (a) 444,900 16,016,400 23331110 Dialogic Corp. (a) 220,000 5,500,000 25249910 Ericsson (L.M.) Telephone Co. Class B ADR 46,100 2,621,938 29482140 Filtronic Comtek PLC (a) 134,500 515,088 31799V22 Inter-Tel, Inc. (a) 226,400 2,575,300 45837210 Network Equipment Technologies (a) 129,500 3,286,063 64120810 SHARES VALUE (NOTE 1) Newbridge Networks Corp. (a) 177,800 $ 6,022,975 65090110 Nokia Corp. AB sponsored ADR (a) 73,200 5,508,300 65490220 Nokia Corp. AB 19,700 2,949,396 65599910 Telco Systems, Inc. (a) 22,400 266,000 87890410 Tellabs, Inc. (a) 161,300 8,387,600 87966410 60,628,385 TELEPHONE INTERCONNECT SYSTEMS - 1.0% General Instrument Corp. (a) 81,300 2,581,275 37012110 TOTAL COMMUNICATIONS EQUIPMENT 66,155,798 COMPUTER SERVICES & SOFTWARE - 4.0% CAD/CAM/CAE - 1.4% EIS International, Inc. (a) 235,400 3,648,700 26853910 PREPACKAGED COMPUTER SOFTWARE - 2.6% Lotus Development Corp. (a) 44,400 1,853,700 54570010 Novell, Inc. (a) 139,500 2,835,774 67000610 Oracle Systems Corp. (a) 72,000 2,259,000 68389X10 6,948,474 TOTAL COMPUTER SERVICES & SOFTWARE 10,597,174 COMPUTERS & OFFICE EQUIPMENT - 3.3% COMPUTER COMMUNICATIONS EQUIPMENT - 0.6% Comverse Technology, Inc. (a) 140,000 1,540,000 20586240 COMPUTER PERIPHERALS - 0.8% Micom Communication Corp. (a) 285,933 2,215,981 59478P10 MAINFRAME COMPUTERS - 0.9% International Business Machines Corp. 30,000 2,257,500 45920010 MINI & MICRO COMPUTERS - 1.0% Compaq Computer Corp. (a) 75,000 2,587,500 20449310 TOTAL COMPUTERS & OFFICE EQUIPMENT 8,600,981 CONGLOMERATES - 0.6% Harris Corp. 34,500 1,552,500 41387510 ELECTRICAL EQUIPMENT - 7.0% ELECTRICAL MACHINERY - 3.5% Alcatel Alsthom sponsored ADR 123,000 1,998,750 01390430 Amphenol Corp. Class A (a) 176,500 4,346,313 03209420 Murata Manufacturing Co. Ord. 38,000 1,252,855 62699110 Philips Electronics NV 48,100 1,581,288 71833750 9,179,206 TV & RADIO COMMUNICATION EQUIPMENT - 3.5% California Microwave Corp. (a) 59,800 1,749,150 13044210 Leitch Technology (a) 99,500 1,163,596 52543H10 Scientific-Atlanta, Inc. 216,100 5,051,338 80865510 Telular Corp. (a) 48,700 493,088 87970T10 Vertex Communications Corp. (a) 49,500 693,000 92532010 9,150,172 TOTAL ELECTRICAL EQUIPMENT 18,329,378 ELECTRONICS - 8.6% ELECTRONIC PARTS - WHOLESALE - 0.9% ARC International Corp. (a) 481,200 1,443,600 00190510 Wholesale Cellular USA, Inc. (a) 64,300 892,163 96683P10 2,335,763 ELECTRONICS & ELECTRIC COMPONENTS - 3.9% Allgon AB B Free shares 100,000 1,632,864 01899822 Hirose Electric Co. Ltd. 32,000 1,703,271 43354399 Kyocera Corp. 16,000 1,034,972 50155610 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRONICS - CONTINUED ELECTRONICS & ELECTRIC COMPONENTS - CONTINUED Merix Corp. (a) 65,000 $ 1,584,375 59004910 Sanmina Corp. (a) 148,700 4,312,300 80090710 10,267,782 SEMICONDUCTORS - 3.8% Analog Devices, Inc. (a) 90,900 2,283,863 03265410 Austria Mikro Systeme International (b) 27,500 2,309,802 05299B22 Intel Corp. 20,000 1,595,000 45814010 LSI Logic Corp. (a) 69,900 3,809,550 50216110 9,998,215 TOTAL ELECTRONICS 22,601,760 ENGINEERING - 0.5% WATER & SEWER PIPES - 0.5% MasTec, Inc. (a) 100,000 1,275,000 57632310 TELEPHONE SERVICES - 6.9% ALC Communications Corp. (a) 86,900 2,563,550 00157530 AT&T Corp. 5,000 258,750 00195710 Ameritech Corp. 99,200 4,253,200 03095410 BellSouth Corp. 76,100 4,489,900 07986010 Pakistan Telecommunications Voucher GDR (a)(b) 11,200 1,086,400 69584910 SBC Communications, Inc. 82,200 3,421,575 84533310 Telebras PN (Pfd. Reg.) 836,650 24,690 95499792 Telephone & Data Systems, Inc. 42,300 1,929,938 87943310 TOTAL TELEPHONE SERVICES 18,028,003 TOTAL COMMON STOCKS (Cost $228,975,956) 240,359,462 REPURCHASE AGREEMENTS - 8.4% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $21,942,705 21,939,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $250,914,956) $ 262,298,462 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $3,396,202 or 1.3% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $549,663,608 and $546,172,639, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $181,128 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $16,231,000 and $3,648,600, respectively. The weighted average interest rate paid was 4.1% (see Note 8 of Notes to Financial Statements). Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: United States 78.4% Canada 6.3 United Kingdom 5.1 Finland 3.2 Sweden 1.6 Japan 1.5 Others (individually less than 1%) 3.9 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $251,346,170. Net unrealized appreciation aggregated $10,952,292, of which $19,945,594 related to appreciated investment securities and $8,993,302 related to depreciated investment securities. The fund hereby designates $2,764,000 as a capital gain dividend for the purpose of the dividend paid deduction. DEVELOPING COMMUNICATIONS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $21,939,000) (cost $250,914,956) - See $ 262,298,462 accompanying schedule Cash 889 Receivable for investments sold 17,840,219 Receivable for fund shares sold 1,096,318 Dividends receivable 11,250 Redemption fees receivable 740 Other receivables 91,331 TOTAL ASSETS 281,339,209 LIABILITIES Payable for investments purchased $ 15,182,055 Payable for fund shares redeemed 11,374,151 Accrued management fee 139,026 Other payables and accrued expenses 218,338 TOTAL LIABILITIES 26,913,570 NET ASSETS $ 254,425,639 Net Assets consist of: Paid in capital $ 221,265,637 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 21,776,496 Net unrealized appreciation (depreciation) on investments 11,383,506 NET ASSETS, for 12,468,823 $ 254,425,639 shares outstanding NET ASSET VALUE and redemption price per share ($254,425,639 (divided by) 12,468,823 shares) $20.40 Maximum offering price per share (100/97.00 of $20.40) $21.03
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 707,113 Dividends Interest 919,670 TOTAL INCOME 1,626,783 EXPENSES Management fee $ 1,383,242 Transfer agent 1,833,314 Fees Redemption fees (134,533 ) Accounting fees and expenses 223,703 Non-interested trustees' compensation 1,890 Custodian fees and expenses 60,390 Registration fees 93,893 Audit 34,920 Legal 3,701 Interest 4,140 Reports to shareholders 11,033 Miscellaneous 1,667 Total expenses before reductions 3,517,360 Expense reductions (50,458 3,466,902 ) NET INVESTMENT INCOME (LOSS) (1,840,119 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 30,223,359 Foreign currency transactions (20,991 30,202,368 ) Change in net unrealized appreciation (depreciation) on investment securities (4,667,340 ) NET GAIN (LOSS) 25,535,028 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 23,694,909 OTHER INFORMATION $1,273,859 Sales Charges Paid to FDC Deferred sales charges withheld $6,404 by FDC Exchange fees withheld by FSC $99,579
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ (1,840,119 $ (1,552,126 Net investment income (loss) ) ) Net realized gain (loss) 30,202,368 27,786,284 Change in net unrealized appreciation (depreciation) (4,667,340 9,550,677 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 23,694,909 35,784,835 Distributions to shareholders from net realized gains (19,859,395 (12,078,883 ) ) Share transactions 296,420,644 326,209,686 Net proceeds from sales of shares Reinvestment of distributions 19,590,893 11,939,467 Cost of shares redeemed (287,865,261 (223,354,110 ) ) Paid in capital portion of redemption fees 334,629 225,044 Net increase (decrease) in net assets resulting from share transactions 28,480,905 115,020,087 TOTAL INCREASE (DECREASE) IN NET ASSETS 32,316,419 138,726,039 NET ASSETS Beginning of period 222,109,220 83,383,181 End of period (including accumulated net investment loss of $0 and $(276), respectively) $ 254,425,639 $ 222,109,220 OTHER INFORMATION Shares Sold 15,233,264 17,423,530 Issued in reinvestment of distributions 1,085,216 685,710 Redeemed (15,155,323 (11,874,788 ) ) Net increase (decrease) 1,163,157 6,234,452
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEAR JUNE 29, 1990 FEBRUARY 28, ENDED ENDED (COMMENCEMEN FEBRUARY 28, APRIL 30, T OF OPERATIONS TO) APRIL 30, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 19.65 $ 16.44 $ 13.54 $ 11.95 $ 10.00 Income from Investment Operations Net investment income (loss) (.16) (.16) (.07) (.08) E (.10) Net realized and unrealized gain (loss) 2.55 4.82 2.98 2.42 1.86 Total from investment operations 2.39 4.66 2.91 2.34 1.76 Less Distributions (1.67) (1.47) (.03) (.79) - From net realized gain Redemption fees added to paid in capital .03 .02 .02 .04 .19 Net asset value, end of period $ 20.40 $ 19.65 $ 16.44 $ 13.54 $ 11.95 TOTAL RETURN B, C 13.63% 30.24% 21.66% 21.41% 19.50% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 254,426 $ 222,109 $ 83,383 $ 39,261 $ 7,745 Ratio of expenses to average net assets 1.56% 1.56% 1.88% A 2.50% 2.50% A Ratio of expenses to average net assets before expense reductions 1.58% 1.56% 1.88% A 2.50% 3.29% A Ratio of net investment income (loss) to average net assets (.83)% (.88)% (.59)% (.61)% (1.23)% A A Portfolio turnover rate 266% 280% 77% A 25% 469% A
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.06 PER SHARE. ELECTRONICS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND ELECTRONICS 12.05% 170.86% 134.30% ELECTRONICS (INCL. 3% SALES CHARGE) 8.69% 162.74% 127.27% S&P 500 7.36% 71.20% 246.77% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on July 29, 1985. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND ELECTRONICS 12.05% 22.05% 9.28% ELECTRONICS (INCL. 3% SALES CHARGE) 8.69% 21.31% 8.93% S&P 500 7.36% 11.35% 13.84% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Electronics (Standard & Poor's 50 07/29/85 9700.00 10000.00 07/31/85 9544.80 9926.31 08/31/85 10126.80 9841.93 09/30/85 9030.70 9533.88 10/31/85 8982.20 9974.35 11/30/85 10078.30 10658.59 12/31/85 10776.70 11174.46 01/31/86 10883.40 11237.04 02/28/86 11096.80 12077.57 03/31/86 10883.40 12751.50 04/30/86 11775.80 12607.41 05/31/86 10854.30 13278.12 06/30/86 9797.00 13502.52 07/31/86 8623.30 12747.73 08/31/86 9360.50 13693.61 09/30/86 8322.60 12561.15 10/31/86 8351.70 13285.93 11/30/86 8351.70 13608.78 12/31/86 8206.20 13261.75 01/31/87 9564.20 15048.11 02/28/87 10330.50 15642.51 03/31/87 10165.60 16094.58 04/30/87 10466.30 15951.34 05/31/87 10252.90 16090.11 06/30/87 10029.80 16902.66 07/31/87 10340.20 17759.63 08/31/87 11087.10 18422.06 09/30/87 11077.40 18018.62 10/31/87 7313.80 14137.41 11/30/87 6169.20 12972.49 12/31/87 7100.40 13959.69 01/31/88 6693.00 14547.40 02/29/88 7401.10 15225.31 03/31/88 7294.40 14754.84 04/30/88 7624.20 14918.62 05/31/88 7362.30 15048.41 06/30/88 8080.10 15739.14 07/31/88 7585.40 15679.33 08/31/88 6828.80 15146.23 09/30/88 6935.50 15791.46 10/31/88 6431.10 16230.46 11/30/88 6111.00 15998.37 12/31/88 6499.00 16278.34 01/31/89 6731.80 17469.91 02/28/89 6634.80 17034.91 03/31/89 6586.30 17431.83 04/30/89 7100.40 18336.54 05/31/89 7779.40 19079.17 06/30/89 7013.10 18970.42 07/31/89 7090.70 20683.44 08/31/89 7333.20 21088.84 09/30/89 7536.90 21002.38 10/31/89 7197.40 20515.12 11/30/89 7216.80 20933.63 12/31/89 7517.50 21436.04 01/31/90 7769.70 19997.68 02/28/90 8390.50 20255.65 03/31/90 8797.90 20792.42 04/30/90 8836.70 20272.61 05/31/90 10136.50 22249.19 06/30/90 10291.70 22097.90 07/31/90 9806.70 22027.18 08/31/90 8274.10 20035.93 09/30/90 7022.80 19060.18 10/31/90 6770.60 18978.22 11/30/90 7469.00 20204.21 12/31/90 7954.10 20767.91 01/31/91 9061.26 21673.39 02/28/91 9857.64 23223.04 03/31/91 10382.09 23785.03 04/30/91 10440.36 23842.12 05/31/91 10780.28 24872.10 06/30/91 9469.16 23732.96 07/31/91 10119.86 24838.91 08/31/91 10537.48 25427.59 09/30/91 9731.38 25002.95 10/31/91 10207.27 25337.99 11/30/91 9585.70 24316.87 12/31/91 10760.85 27098.72 01/31/92 12033.12 26594.68 02/29/92 12693.53 26940.42 03/31/92 11693.20 26415.08 04/30/92 11469.82 27191.68 05/31/92 11489.25 27324.92 06/30/92 10654.02 26917.78 07/31/92 11217.31 28018.72 08/31/92 11333.86 27444.33 09/30/92 11741.76 27768.18 10/31/92 12625.55 27865.36 11/30/92 13451.06 28815.57 12/31/92 13713.29 29170.00 01/31/93 14179.46 29415.03 02/28/93 13868.68 29815.08 03/31/93 14354.28 30444.17 04/30/93 14101.25 29707.43 05/31/93 15516.25 30503.58 06/30/93 15799.25 30592.05 07/31/93 16248.15 30469.68 08/31/93 17643.64 31624.48 09/30/93 17936.40 31380.97 10/31/93 17594.85 32030.56 11/30/93 17458.22 31726.27 12/31/93 18112.47 32110.15 01/31/94 19363.59 33201.90 02/28/94 20281.84 32302.13 03/31/94 20063.75 30893.75 04/30/94 20006.36 31289.19 05/31/94 19948.97 31802.34 06/30/94 18881.51 31023.18 07/31/94 19271.76 32040.74 08/31/94 21154.18 33354.41 09/30/94 20545.83 32537.23 10/31/94 21383.74 33269.31 11/30/94 21108.26 32057.65 12/31/94 21223.04 32533.06 01/31/95 20614.70 33376.64 02/28/95 22727.00 34677.33 Let's say you invested $10,000 in Fidelity Select Electronics Portfolio on July 29, 1985, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $22,727 - a 127.27% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $34,677 over the same period - a 246.77% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Micron Technology, Inc. 10.1 Applied Materials, Inc. 5.2 Texas Instruments, Inc. 4.9 Xilinx, Inc. 3.3 Intel Corp. 3.2 KLA Instruments Corp. 2.9 Compaq Computer Corp. 2.6 International Business Machines Corp. 2.5 LSI Logic Corp. 2.4 Asyst Technologies, Inc. 1.9 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 30.7 Row: 1, Col: 2, Value: 3.6 Row: 1, Col: 3, Value: 3.6 Row: 1, Col: 4, Value: 4.6 Row: 1, Col: 5, Value: 12.7 Row: 1, Col: 6, Value: 44.8 Semiconductors 44.8% Semi-conductor Capital Equipment 12.7% Prepackaged Computer Software 4.6% Electronic Equipment 3.6% Mini & Micro Computers 3.6% All Others 30.7%* * INCLUDES SHORT-TERM INVESTMENTS ELECTRONICS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Harry Lange, Portfolio Manager of Fidelity Select Electronics Portfolio Q. HARRY, HOW DID THE FUND PERFORM? A. It's been a volatile, but ultimately rewarding year for the fund's shareholders. For the 12 months ended February 28, 1995, the fund had a total return of 12.05%. That topped the S&P 500, which returned 7.36% during the same period. Q. IS THE FUND'S RECENT SUCCESS TIED TO THE CONTINUED GOOD HEALTH OF THE PERSONAL COMPUTER INDUSTRY? A. To a large extent, yes. More than half of the fund's investments are in semiconductor companies or related businesses. And these stocks generally have risen over the past year on the strength of PC sales. In addition, computers are requiring larger and more powerful chips, which also is helping drive the industry. Any talk of semiconductors inevitably gets around to supply and demand. Although demand has been very strong, many have been worried that excess capacity, or supply, was coming on line too quickly, which could dampen chip prices. But that simply hasn't happened. The Koreans and Japanese are investing more heavily than others in new semiconductor plants. However, my estimates show they're growing capacity at a yearly rate of only about 25% to 30%, which is not that fast compared to projections of worldwide demand. Q. WON'T SUPPLY CATCH UP TO DEMAND AT SOME POINT? A. Sure. It is a cyclical business with ups and downs. However, I think the peak in semiconductor sales that many analysts were expecting in 1994 has been pushed back at least a year. And, because of tight control of orders and inventory, the next downturn should not be as severe. Q. WHICH STOCKS HAD THE BIGGEST IMPACT ON THE FUND'S PERFORMANCE? A. Micron Technology - the fund's largest investment at the end of February - - has done very well. The company is one of the few makers of memory chips known as dynamic RAMS. And it manufactures these chips more efficiently than its overseas competitors. Earnings have remained strong and Micron's stock price is up 133% from 12 months ago. Other semiconductor stocks that have helped boost the fund's performance recently include Altera, LSI Logic and Xilinx. Strong semiconductor demand also has helped KLA Instruments, which manufactures the equipment used to make computer chips. For those semiconductor stocks that didn't do as well, there was usually a specific reason why. Q. CAN YOU GIVE US SOME EXAMPLES? A. Sure. Intel ran into some trouble in late 1994. A relatively obscure flaw was discovered in its flagship Pentium microprocessor, and the company took some heat for how it handled the situation. However, the Pentium has gained wide acceptance, the PR problem appeared short-lived, and the stock bounced back strongly in January and February. Texas Instruments' stock remained relatively flat due to worries that too much of the company's income is from royalties, and is at risk due to an adverse court ruling in Japan. I'm concerned about that as well, but not enough to keep me away from the stock, which has been very cheap. Finally, some of the fund's foreign semiconductor stocks - Samsung in Korea and United Micro in Taiwan - - suffered from the fall in emerging market stocks following Mexico's devaluation of the peso. Q. LOOKING BEYOND THE SEMICONDUCTOR COMPANIES, COMPAQ COMPUTER AND IBM ALSO APPEAR AMONG THE FUND'S TOP 10 INVESTMENTS AT THE END OF FEBRUARY . . . A. And I'm optimistic about both. IBM's stock has risen steadily over the past year on the strength of improving profit margins. Compaq's stock has been flat to down recently, but that's allowed me to buy it at attractive valuations - prices relative to earnings. Investors have been jittery about the company's upcoming launch of a new product line. While I share some of those concerns, the stock was simply too inexpensive to ignore. Q. YOU SOUND GENERALLY OPTIMISTIC ABOUT THE ENTIRE FUND OVER NEXT SIX MONTHS . . . A. I am. Due to the supply and demand situation for semiconductors, I expect we could see strong earnings from the fund's companies over the next six to 12 months. But while stock prices tend to follow earnings over the long term, there always can be short-term corrections. These stocks have shown strength recently, which is cause for concern. While I don't think they're terribly expensive yet, semiconductor stocks almost never enjoy a 20% to 30% run up without some sort of downward move. If shareholders are prepared for the inevitable ups and downs, I think they'll be rewarded over the long haul. FUND FACTS START DATE: July 29, 1985 SIZE: as of February 28, 1995, more than $216 million MANAGER: Harry Lange, since January 1994; manager, Fidelity Select Technology Portfolio, since 1993; Fidelity Select Computers Portfolio, since 1992; research director, Fidelity Investments Far East, 1988-1992; manager, Fidelity Select Capital Goods and Automation and Machinery Portfolios, 1988; joined Fidelity in 1987 (checkmark) ELECTRONICS PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 88.8% SHARES VALUE (NOTE 1) COMMUNICATIONS EQUIPMENT - 2.4% DATACOMMUNICATIONS EQUIPMENT - 0.3% General DataComm Industries, Inc. (a) 15,000 $ 315,000 36948710 US Robotics, Inc. 5,467 295,210 91246610 610,210 TELEPHONE EQUIPMENT - 2.1% Natural Microsystems (a) 69,000 1,035,000 63888210 Network Equipment Technologies (a) 50,500 1,281,438 64120810 Newbridge Networks Corp. (a) 9,000 304,875 65090110 Nokia Corp. AB sponsored ADR (a) 15,000 1,128,750 65490220 Perceptron, Inc. (a) 52,300 967,550 71361F10 4,717,613 TOTAL COMMUNICATIONS EQUIPMENT 5,327,823 COMPUTER SERVICES & SOFTWARE - 5.8% CAD/CAM/CAE - 0.7% Brooktrout Technology (a) 13,600 214,200 11458010 Chipcom Corp. (a) 10,000 445,000 16961710 Integrated Silicon Systems, Inc. (a) 500 13,625 45812Q10 Structural Dynamics Research Corp. (a) 126,700 934,413 86355510 1,607,238 COMPUTER & SOFTWARE STORES - 0.3% Inacom Corp. (a) 18,200 163,800 45323G10 MicroAge, Inc. (a) 58,450 569,888 59492810 733,688 COMPUTER RELATED SERVICES- 0.0% Wave Systems Corp. Class A (a) 26,700 66,750 94352610 COMPUTER SERVICES - 0.0% CompuCom Systems, Inc. (a) 15,000 50,625 20478010 CUSTOM COMPUTER PROGRAMMING SERVICES - 0.2% Softdesk, Inc. (a) 22,500 483,750 83402010 PREPACKAGED COMPUTER SOFTWARE - 4.6% Geoworks (a) 106,600 879,450 37369210 Globalink, Inc. (a) 131,900 1,417,925 37936V10 Informix Corp. (a) 40,000 1,510,000 45677910 Infosoft International, Inc. (a) 30,000 1,267,500 45678310 Learning Co. (a) 10,000 297,500 52200610 LEGENT Corp. (a) 10,000 290,000 52465R10 Lotus Development Corp. (a) 63,000 2,630,250 54570010 Media Logic, Inc. (a) 15,000 32,813 58441B10 Microsoft Corp. (a) 13,000 819,000 59491810 Novell, Inc. (a) 20,000 406,563 67000610 Softkey International, Inc. (a) 24,100 614,550 83402N10 10,165,551 TOTAL COMPUTER SERVICES & SOFTWARE 13,107,602 COMPUTERS & OFFICE EQUIPMENT - 11.7% COMPUTER EQUIPMENT - WHOLESALE - 1.0% GBC Technologies, Inc. (a) 99,700 747,750 36149F10 Merisel, Inc. (a) 50,000 262,500 58984910 Southern Electronics Corp. (a) 20,000 107,500 84281110 Tech Data Corp. (a) 88,500 1,144,969 87823710 2,262,719 COMPUTER PERIPHERALS - 0.4% Fore Systems, Inc. (a) 10,000 367,500 34544910 Komag, Inc. (a) 19,100 482,275 50045310 Radius, Inc. (a) 10,000 95,000 75047020 944,775 COMPUTER RENTAL & LEASING - 0.8% Comdisco, Inc. 65,800 1,677,900 20033610 SHARES VALUE (NOTE 1) COMPUTER STORAGE DEVICES - 1.5% ADAPTEC, Inc. (a) 28,500 $ 940,500 00651F10 Exabyte (a) 26,300 496,413 30061510 Hutchinson Technology, Inc. (a) 32,200 909,650 44840710 Maxtor Corporation (a) 10,000 41,250 57772910 Read Rite Corp. (a) 50,000 800,000 75524610 Seagate Technology (a) 2,300 55,200 81180410 3,243,013 COMPUTERS & OFFICE EQUIPMENT - 0.0% Hewlett-Packard Co. 400 46,000 42823610 ELECTRONIC COMPUTERS - 0.1% Integrated Micro Products sponsored ADR (a) 25,000 181,250 45812R10 GRAPHICS WORKSTATIONS - 1.8% Silicon Graphics, Inc. (a) 30,200 1,045,675 82705610 Sun Microsystems, Inc. (a) 93,300 2,985,600 86681010 4,031,275 MAINFRAME COMPUTERS - 2.5% International Business Machines Corp. 72,300 5,440,575 45920010 MINI & MICRO COMPUTERS - 3.6% Compaq Computer Corp. (a) 168,900 5,827,050 20449310 Digital Equipment Corp. (a) 61,900 2,073,650 25384910 7,900,700 TOTAL COMPUTERS & OFFICE EQUIPMENT 25,728,207 CONSUMER ELECTRONICS - 0.5% RADIOS, TELEVISIONS, STEREOS - 0.5% Sony Corp. ADR 26,200 1,142,975 83569930 DEFENSE ELECTRONICS - 0.1% Watkins-Johnson Co. 5,300 193,450 94248610 ELECTRICAL EQUIPMENT - 1.5% ELECTRICAL EQUIPMENT - 1.1% Fusion Systems Corp. (a) 100,000 2,400,000 36112910 ELECTRICAL MACHINERY - 0.4% Murata Manufacturing Co. Ord. 30,100 992,393 62699110 TOTAL ELECTRICAL EQUIPMENT 3,392,393 ELECTRONIC INSTRUMENTS - 16.3% ELECTRONIC EQUIPMENT - 3.6% ASECO Corp. (a) 63,000 535,500 04365910 Credence Systems Corp. (a) 158,400 3,841,200 22530210 Megatest Corp. (a) 232,000 2,581,000 58495810 Micrion Corp. (a) 35,300 370,650 59479P10 Mosaid Technologies, Inc. (a) 7,500 55,998 61945Q10 Tektronix, Inc. 10,000 342,500 87913110 Teradyne, Inc. (a) 5,100 185,513 88077010 7,912,361 SEMICONDUCTOR CAPITAL EQUIPMENT - 12.7% Applied Materials, Inc. (a) 250,300 11,545,088 03822210 Electro Scientific Industries, Inc. (a) 161,100 3,040,763 28522910 KLA Instruments Corp. (a) 109,500 6,351,000 48248010 Kulicke & Soffa Industries, Inc. (a) 10,700 260,813 50124210 Lam Research Corp. (a) 71,400 2,856,000 51280710 Silicon Valley Group, Inc. (a) 170,700 4,000,781 82706610 28,054,445 TOTAL ELECTRONIC INSTRUMENTS 35,966,806 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRONICS - 46.8% CONNECTORS - 0.1% Methode Electronics, Inc. Class A 20,000 $ 315,000 59152020 ELECTRONIC PARTS - WHOLESALE - 1.7% Kent Electronics Corp. (a) 12,300 508,913 49055310 Marshall Industries (a) 16,100 418,600 57239310 Pioneer-Standard Electronics, Inc. 69,950 1,224,125 72387710 Sterling Electronics Corp. (a) 106,500 1,251,375 85928110 Wyle Laboratories 14,500 297,250 98305110 3,700,263 ELECTRONIC RESISTORS - 0.1% Yageo Corp. GDR (b) 11,000 182,930 98432610 ELECTRONICS & ELECTRONIC COMPONENTS - 2.4% CTS Corp. 4,500 135,000 12650110 Cirrus Logic, Inc. (a) 60,000 2,017,500 17275510 Kyocera Corporation 20,000 1,287,789 50155610 Microsemi Corp. (a) 50,000 231,250 59513710 Photronics, Inc. (a) 6,200 198,400 71940510 Sanmina Corp. (a) 30,000 870,000 80090710 Toshiba Corp. 100,000 631,492 89149310 5,371,431 SEMICONDUCTORS - 42.5% Advanced Micro Devices, Inc. (a) 87,673 2,663,067 00790310 Alliance Semiconductor Corp. (a) 50,000 1,912,500 01877H10 Altera Corp. (a) 56,000 3,185,000 02144110 Analog Devices, Inc. (a) 79,900 2,007,488 03265410 Atmel Corp. (a) 61,500 2,098,688 04951310 Burr-Brown Corp. (a) 25,000 334,375 12257410 Cypress Semiconductor Corp. (a) 10,100 286,588 23280610 Cyrix Corp. 50,000 1,168,750 23281510 Electroglas, Inc. (a) 58,300 2,251,838 28532410 Geotek Industries, Inc. (a) 40,000 280,000 37365410 Information Storage Devices (a) 600 12,750 45675310 Integrated Device Technology, Inc. (a) 22,000 838,750 45811810 Integrated Silicon Solution (a) 100,000 2,850,000 45812P10 Intel Corp. 90,000 7,177,500 45814010 International Rectifier Corp. (a) 4,000 97,000 46025410 Interpoint Corp. (a) 10,000 86,250 46062710 LSI Logic Corp. (a) 97,300 5,302,850 50216110 Lattice Semiconductor Corp. (a) 63,000 1,661,625 51841510 Linear Technology Corp. 31,100 1,694,950 53567810 Logic Devices, Inc. (a) 30,000 112,500 54140210 Micro Linear Corp. (a) 36,400 350,350 59485010 Microchip Technology, Inc. (a) 54,900 1,386,225 59501710 Micron Technology, Inc. 361,800 22,431,600 59511210 National Semiconductor Corp. (a) 214,500 3,619,688 63764010 Quality Semiconductor, Inc. (a) 127,000 1,524,000 74758B10 SGS-Thomson Microelectronic NV (a) 102,700 2,567,500 78421310 S-3, Inc. (a) 100,800 1,839,600 78484910 Samsung Electronics Co. Ltd.: GDR (a)(b) 2,447 151,714 79605030 GDS (a)(b) 43,475 1,652,050 79605020 GDS (Reg.) (non-vtg.) (a) 64,100 2,435,800 79611093 Tencor Instruments (a) 8,800 418,000 88032310 Texas Instruments, Inc. 136,700 10,765,125 88250810 Tokyo Electron Ltd. 25,000 658,881 89499999 Uniphase Corp. (a) 13,700 239,750 90914910 VLSI Technology, Inc. 50,000 765,625 91827010 Xilinx, Inc. (a) 110,000 7,356,250 98391910 94,184,627 TOTAL ELECTRONICS 103,754,251 SHARES VALUE (NOTE 1) INDUSTRIAL MACHINERY & EQUIPMENT - 3.3% GENERAL INDUSTRIAL MACHINERY - 0.0% Robotic Vision Systems, Inc. (a) 10,000 $ 62,500 77107410 SPECIAL INDUSTRIAL MACHINERY - 3.3% Asyst Technologies, Inc. (a) 131,900 4,286,750 04648X10 Fuji Machine Manufacturing Co. Ltd. Ord. 20,000 520,903 36099892 Gasonics International Corp. (a) 52,500 918,750 36727810 PRI Automation, Inc. (a) 27,500 495,000 69357H10 Tylan General, Inc. (a) 33,000 272,250 90216910 Veeco Instruments, Inc. (a) 70,000 708,750 92241710 7,202,403 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 7,264,903 LEASING & RENTAL - 0.0% EQUIPMENT RENTAL & LEASING - 0.0% Leasing Solutions, Inc. (a) 11,000 79,750 52211310 RETAIL & WHOLESALE, MISCELLANEOUS - 0.4% MAIL ORDER - 0.4% Gateway 2000, Inc. (a) 50,000 918,750 36783310 STATIONERY & OFFICE SUPPLIES - WHOLESALE - 0.0% Daisytek International Corp. (a) 1,000 17,750 23405310 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 936,500 SERVICES - 0.0% ELECTRICAL REPAIR SHOPS - 0.0% Cerplex Group, Inc. (a) 10,000 80,000 15691320 TOTAL COMMON STOCKS (Cost $176,055,495) 196,974,660 CONVERTIBLE BONDS - 3.4% PRINCIPAL AMOUNT COMPUTERS & OFFICE EQUIPMENT - 1.1% COMPUTER STORAGE DEVICES - 0.2% Maxtor Corporation 5 3/4%, 3/1/12 $ 1,000,000 525,000 577729AA ELECTRONIC COMPUTERS - 0.7% Acer, Inc. 4%, 6/10/01 630,000 1,537,200 004993AC OFFICE EQUIPMENT - WHOLESALE - 0.2% Kinpo Electronics, Inc. euro 3%, 7/21/01 540,000 402,300 4971269A TOTAL COMPUTERS & OFFICE EQUIPMENT 2,464,500 ELECTRONICS - 2.3% SEMICONDUCTORS - 2.3% United Microelectronics Corp. 1 1/4%, 6/8/04 (b) 1,120,000 1,534,400 910873AA United Microelectronics Corp. 1 1/4%, 6/8/04 euro 2,580,000 3,534,600 911993AB 5,069,000 TOTAL CONVERTIBLE BONDS (Cost $8,092,172) 7,533,500 REPURCHASE AGREEMENTS - 7.8% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $17,208,906 $ 17,206,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $201,353,667) $ 221,714,160 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $3,521,094 or 1.6% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $433,178,811 and $291,318,374, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $138,231 for the period (see Note 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $2,308,100 and $2,404,700, respectively (see Note 7 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $11,441,000 and $4,121,750, respectively. The weighted average interest rate paid was 4.4% (see Note 8 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $203,375,914. Net unrealized appreciation aggregated $18,338,246, of which $27,530,177 related to appreciated investment securities and $9,191,931 related to depreciated investment securities. At February 28, 1995, the fund had a capital loss carryforward of approximately $7,516,000 which will expire on February 28, 2003. ELECTRONICS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $17,206,000) (cost $201,353,667) - See $ 221,714,160 accompanying schedule Cash 10,333 Receivable for investments sold 4,337,850 Receivable for fund shares sold 5,445,530 Dividends receivable 28,597 Interest receivable 70,298 Redemption fees receivable 812 Other receivables 70,740 TOTAL ASSETS 231,678,320 LIABILITIES Payable for investments purchased $ 9,606,147 Payable for fund shares redeemed 2,963,999 Accrued management fee 99,745 Other payables and accrued expenses 171,192 Collateral on securities loaned, 2,404,700 at value TOTAL LIABILITIES 15,245,783 NET ASSETS $ 216,432,537 Net Assets consist of: Paid in capital $ 205,487,965 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (9,415,921 ) Net unrealized appreciation (depreciation) on investments 20,360,493 NET ASSETS, for 10,932,267 shares outstanding $ 216,432,537 NET ASSET VALUE and redemption price per share ($216,432,537 (divided by) 10,932,267 shares) $19.80 Maximum offering price per share (100/97.00 of $19.80) $20.41
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 579,202 Dividends Interest (including security lending fees of $32,787) 551,532 TOTAL INCOME 1,130,734 EXPENSES Management fee $ 967,445 Transfer agent 1,526,637 Fees Redemption fees (202,515 ) Accounting and security lending fees 159,153 Non-interested trustees' compensation 1,410 Custodian fees and expenses 22,570 Registration fees 162,214 Audit 22,679 Legal 1,397 Interest 20,840 Reports to shareholders 3,941 Miscellaneous 1,012 Total expenses before reductions 2,686,783 Expense reductions (21,469 2,665,314 ) NET INVESTMENT INCOME (LOSS) (1,534,580 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (9,362,686 ) Foreign currency transactions 334 (9,362,352 ) Change in net unrealized appreciation (depreciation) on investment securities 8,764,347 NET GAIN (LOSS) (598,005 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (2,132,585 ) OTHER INFORMATION $2,406,616 Sales Charges Paid to FDC Deferred sales charges withheld $6,916 by FDC Exchange fees withheld by FSC $178,538
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ (1,534,580 $ (283,946 Net investment income (loss) ) ) Net realized gain (loss) (9,362,352 10,940,991 ) Change in net unrealized appreciation (depreciation) 8,764,347 7,342,630 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (2,132,585 17,999,675 ) Distributions to shareholders from net realized gains - (6,751,718 ) Share transactions 612,603,897 234,477,570 Net proceeds from sales of shares Reinvestment of distributions - 6,551,694 Cost of shares redeemed (506,775,203 (189,780,938 ) ) Paid in capital portion of redemption fees 1,742,948 469,729 Net increase (decrease) in net assets resulting from share transactions 107,571,642 51,718,055 TOTAL INCREASE (DECREASE) IN NET ASSETS 105,439,057 62,966,012 NET ASSETS Beginning of period 110,993,480 48,027,468 End of period $ 216,432,537 $ 110,993,480 OTHER INFORMATION Shares Sold 33,789,699 13,902,581 Issued in reinvestment of distributions - 431,270 Redeemed (29,140,209 (11,413,385 ) ) Net increase (decrease) 4,649,490 2,920,466
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 17.67 $ 14.28 $ 11.81 $ 10.75 $ 9.11 Income from Investment Operations Net investment income (.18) (.09) (.05) (.12) (.04) Net realized and unrealized gain (loss) 2.11 E 6.09 2.33 1.00 1.53 Total from investment operations 1.93 6.00 2.28 .88 1.49 Less Distributions - - - - (.01) From net investment income From net realized gain - (2.75) - - - Total distributions - (2.75) - - (.01) Redemption fees added to paid in capital .20 .14 .19 .18 .16 Net asset value, end of period $ 19.80 $ 17.67 $ 14.28 $ 11.81 $ 10.75 TOTAL RETURN B, C 12.05% 46.24% 20.91% 9.86% 18.15% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 216,433 $ 110,993 $ 48,027 $ 34,222 $ 18,178 Ratio of expenses to average net assets 1.71% 1.67% 1.69% A 2.16% 2.26% Ratio of expenses to average net assets before expense reductions 1.72% 1.67% 1.69% A 2.16% 2.26% Ratio of net investment income to average net assets (.98)% (.52)% (.50)% (1.07)% (.45)% A Portfolio turnover rate 205% 163% 293% A 299% 268%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET GAIN (LOSS) ON INVESTMENTS FOR THE PERIOD ENDED DUE TO THE TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND. SOFTWARE AND COMPUTER SERVICES PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND SOFTWARE AND COMPUTER SERVICES 1.97% 185.98% 378.68% SOFTWARE AND COMPUTER SERVICES (INCL. 3% SALES CHARGE) -1.09% 177.40% 364.32% S&P 500 7.36% 71.20% 246.77% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on July 29, 1985. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND SOFTWARE AND COMPUTER SERVICES 1.97% 23.39% 17.73% SOFTWARE AND COMPUTER SERVICES (INCL. 3% SALES CHARGE) -1.09% 22.64% 17.35% S&P 500 7.36% 11.35% 13.84% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select Software (028Standard & Poor's 50 07/29/85 9700.00 10000.00 07/31/85 9622.40 9926.31 08/31/85 9515.70 9841.93 09/30/85 8933.70 9533.88 10/31/85 9215.00 9974.35 11/30/85 10282.00 10658.59 12/31/85 10776.70 11174.46 01/31/86 11019.20 11237.04 02/28/86 11775.80 12077.57 03/31/86 11853.40 12751.50 04/30/86 12959.20 12607.41 05/31/86 13483.00 13278.12 06/30/86 13143.50 13502.52 07/31/86 11232.60 12747.73 08/31/86 12163.80 13693.61 09/30/86 11232.60 12561.15 10/31/86 12280.20 13285.93 11/30/86 12551.80 13608.78 12/31/86 12270.50 13261.75 01/31/87 14879.80 15048.11 02/28/87 16276.60 15642.51 03/31/87 16548.20 16094.58 04/30/87 16829.50 15951.34 05/31/87 16907.10 16090.11 06/30/87 16315.40 16902.66 07/31/87 16266.90 17759.63 08/31/87 17411.50 18422.06 09/30/87 17595.80 18018.62 10/31/87 12939.80 14137.41 11/30/87 11707.90 12972.49 12/31/87 13428.92 13959.69 01/31/88 13040.86 14547.40 02/29/88 14113.14 15225.31 03/31/88 14235.68 14754.84 04/30/88 14664.59 14918.62 05/31/88 14266.32 15048.41 06/30/88 15389.65 15739.14 07/31/88 14623.74 15679.33 08/31/88 13612.74 15146.23 09/30/88 14490.98 15791.46 10/31/88 13725.08 16230.46 11/30/88 13520.83 15998.37 12/31/88 14644.17 16278.34 01/31/89 15736.86 17469.91 02/28/89 15032.23 17034.91 03/31/89 14664.59 17431.83 04/30/89 16084.07 18336.54 05/31/89 16666.16 19079.17 06/30/89 15015.60 18970.42 07/31/89 14572.41 20683.44 08/31/89 15237.19 21088.84 09/30/89 15543.20 21002.38 10/31/89 15870.31 20515.12 11/30/89 16334.60 20933.63 12/31/89 16408.68 21436.04 01/31/90 15825.35 19997.68 02/28/90 16235.84 20255.65 03/31/90 16883.98 20792.42 04/30/90 16829.97 20272.61 05/31/90 18947.22 22249.19 06/30/90 19390.11 22097.90 07/31/90 17618.53 22027.18 08/31/90 15155.61 20035.93 09/30/90 13416.44 19060.18 10/31/90 13686.50 18978.22 11/30/90 15447.27 20204.21 12/31/90 16549.11 20767.91 01/31/91 18979.62 21673.39 02/28/91 20362.32 23223.04 03/31/91 21518.16 23785.03 04/30/91 21356.13 23842.12 05/31/91 21745.01 24872.10 06/30/91 20151.25 23732.96 07/31/91 21389.13 24838.91 08/31/91 23126.93 25427.59 09/30/91 22365.15 25002.95 10/31/91 23484.01 25337.99 11/30/91 20913.03 24316.87 12/31/91 24136.01 27098.72 01/31/92 28010.15 26594.68 02/29/92 28851.81 26940.42 03/31/92 27465.54 26415.08 04/30/92 26772.40 27191.68 05/31/92 27193.24 27324.92 06/30/92 25720.32 26917.78 07/31/92 27539.80 28018.72 08/31/92 25485.15 27444.33 09/30/92 27329.39 27768.18 10/31/92 29532.57 27865.36 11/30/92 32107.08 28815.57 12/31/92 32713.57 29170.00 01/31/93 34396.91 29415.03 02/28/93 34186.49 29815.08 03/31/93 34916.76 30444.17 04/30/93 34329.13 29707.43 05/31/93 38200.94 30503.58 06/30/93 40171.79 30592.05 07/31/93 38955.74 30469.68 08/31/93 41583.54 31624.48 09/30/93 42422.20 31380.97 10/31/93 42324.35 32030.56 11/30/93 41276.03 31726.27 12/31/93 43421.00 32110.15 01/31/94 44934.04 33201.90 02/28/94 45532.95 32302.13 03/31/94 40647.10 30893.75 04/30/94 40857.40 31289.19 05/31/94 36768.46 31802.34 06/30/94 33542.04 31023.18 07/31/94 35187.20 32040.74 08/31/94 39004.60 33354.41 09/30/94 40777.54 32537.23 10/31/94 43285.20 33269.31 11/30/94 42294.92 32057.65 12/31/94 43588.68 32533.06 01/31/95 42869.92 33376.64 02/28/95 46399.82 34677.33 Let's say you invested $10,000 in Fidelity Select Software and Computer Services Portfolio on July 29, 1985, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $46,432 - a 364.32% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $34,677 over the same period - a 246.77% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Oracle Systems Corp. 9.6 Novell, Inc. 8.9 Electronics for Imaging Incorporated 6.4 SunGard Data Systems, Inc. 6.0 Compaq Computer Corp. 5.6 Micron Technology, Inc. 5.3 Compuware Corp. 5.2 Microsoft Corp. 2.6 Lotus Development Corp. 2.5 Platinum Technology, Inc. 2.4 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 23.0 Row: 1, Col: 2, Value: 3.8 Row: 1, Col: 3, Value: 5.3 Row: 1, Col: 4, Value: 7.4 Row: 1, Col: 5, Value: 8.800000000000001 Row: 1, Col: 6, Value: 51.7 Prepackaged Computer Software 53.9% Mini & Micro Computers 8.8% Computer Services 7.4% Semiconductors 5.2% Telephone Equipment 3.8% All Others 20.9%* * INCLUDES SHORT-TERM INVESTMENTS SOFTWARE & COMPUTER SERVICES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW John Hurley, Portfolio Manager of Fidelity Select Software and Computer Services Portfolio Q. HOW DID THE FUND DO OVER THE PAST YEAR, JOHN? A. The fund fell significantly during the first six months of the period, then rebounded over the past six months. For the 12 months ended February 28, 1995, the fund had a total return of 1.97%. That trailed the S&P 500, which returned 7.36% during the same period. Over the past six months, however, the fund was up four-fold over the S&P 500. Q. WHAT ACCOUNTED FOR THESE WIDE SWINGS? A. Although I've only been managing the fund since August, I can pass along a couple of key reasons why the fund lagged. Early in 1994, the fund had a significant investment in the stocks of computer networking companies such as Cisco Systems, Cabletron, 3Com and Chipcom, which sell hubs, routers and the like. These stocks plummeted in the spring of 1994 on fears of a decline in business prospects - fears that turned out to be unfounded. In addition, the fund's largest investment at that time, Cheyenne Software, quickly lost half its value on the heels of very disappointing earnings. However, as summer progressed into fall, the networking stocks recovered nicely. My only regret is that the fund sold Cisco Systems before it bounced back. Q. WHAT FACTORS LED TO THE FUND'S STRONG PERFORMANCE IN THE SECOND HALF OF THE YEAR? A. As the networking stocks rose again, I began to take profits and thin out the fund's investments. In addition, the fund's software stocks began to improve later in the year. These stocks often go through a strange cycle of performance. They tend to slump over the summer, when investors are concerned about a seasonal slowdown in orders. But traditionally, earnings are strong through the fall and winter and the stocks bounce back. There are not always good reasons to back up why this happens, it just does. But while software stocks trended upward over the past six months, they also were quite volatile. The fund benefited from effective trading in and out of these stocks. Q. CAN YOU GIVE US SOME EXAMPLES? A. Sure. Over the past 12 months, the stock price of relational database software manufacturer Oracle Systems hasn't risen much, but it did go up and down quite a bit. The company is capitalizing on the move from mainframe computer systems to client-server set-ups - PCs tied together through networks. Because I was a firm believer in the earnings prospects of Oracle, I bought more shares when the price dipped. And by February 28, the stock made up nearly 10% of the fund. Network software manufacturer Novell is another such example. New management has effectively cut costs, and the company's new products have been well received. The stock has helped the fund quite a bit. Q. WHERE ELSE DID YOU FIND OPPORTUNITIES? A. Because it has been a difficult market due, in part, to rising interest rates, I've had to employ a slightly different strategy. In more favorable market conditions, stocks of companies with fast-growing earnings and high valuations - prices relative to earnings - tend to perform well despite the fact that they're expensive. But in this market, expensive stocks often have fallen further than others at a hint of bad news. So recently I've found some success taking a contrarian approach: focusing on cheap stocks that either are disliked or little followed, but which I believe have excellent prospects. Q. SUCH AS? A. Electronics for Imaging. The company makes a workstation that allows a PC to print copies in color. Some investors shun the stock because they think this product would be easy to replicate. Yet no one has succeeded in doing that, and the company's earnings, and recently its stock price, have kept rising. SunGard Data Systems is another little-followed company that has helped the fund recently. SunGard provides disaster recovery services for computers in the financial services industry. The company has faced little competition and has generated a strong cash flow, which makes it an attractive takeover candidate. Q. LET'S LOOK TO THE FUTURE. WHAT DO YOU SEE WHEN YOU LOOK SIX MONTHS OUT? A. I believe the fate of personal computer software stocks hinges on the success of Microsoft's new Windows '95 product. If the product is shipped on time in August - as I expect - and is a success, I think these stocks will have an excellent second half of the year. If there's trouble, Microsoft will most likely drag other PC software stocks down with it. On the enterprise software side, the move from mainframe to client-server architecture appears to be a decade-long event. And I think companies such as Oracle, Sybase and Informix may continue to benefit from this trend. Although I may trade in and out of these stocks as they become cheaper or more expensive, all three could be solid long-term investments for the fund. FUND FACTS START DATE: July 29, 1985 SIZE: as of February 28, 1995, more than $236 million MANAGER: John Hurley, since August 1994; analyst, PC software, database software and mainframe software industries, since 1994; joined Fidelity in 1993 (checkmark) SOFTWARE AND COMPUTER SERVICES PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 88.1% SHARES VALUE (NOTE 1) COMMUNICATIONS EQUIPMENT - 7.2% DATACOMMUNICATIONS EQUIPMENT - 3.4% Cabletron Systems, Inc. (a) 98,000 $ 3,883,243 12692010 3Com Corp. (a) 85,800 4,472,325 88553510 8,355,568 TELEPHONE EQUIPMENT - 3.8% DSC Communications Corp. (a) 102,000 3,672,000 23331110 Inter-Tel, Inc. (a) 203,100 2,310,263 45837210 Nokia Corp. Free shares 23,800 3,272,893 65599992 9,255,156 TOTAL COMMUNICATIONS EQUIPMENT 17,610,724 COMPUTER SERVICES & SOFTWARE - 62.8% CAD/CAM/CAE - 2.4% Ascend Communications, Inc. (a) 4,000 217,000 04349110 Computer Data Systems, Inc. 50,000 456,250 20501710 ECI Telecom Ltd. 100,000 1,525,000 26825810 Network Peripherals, Inc. (a) 100,000 2,325,000 64121R10 State of The Art, Inc. (a) 80,000 770,000 85730710 Stratacom, Inc. (a) 8,800 325,600 86268310 Viewlogic Systems, Inc. (a) 30,000 292,500 92672110 5,911,350 COMPUTER RELATED SERVICES - 0.0% TGV Software, Inc. (a) 300 4800 COMPUTER SERVICES - 7.4% SHL Systemhouse, Inc. (a) 546,000 3,276,000 78424R10 SunGard Data Systems, Inc. (a) 358,900 14,804,625 86736310 18,080,625 DATA PROCESSING - 1.3% Ceridian Corp. (a) 75,800 2,387,700 15677T10 Investment Technology Group, Inc. (a) 106,000 702,250 46145010 3,089,950 PREPACKAGED COMPUTER SOFTWARE - 51.7% Adobe Systems, Inc. 150,000 5,362,500 00724F10 Boole & Babbage, Inc. (a) 1,500 45,375 09858610 Computer Associates International, Inc. 66,300 3,779,100 20491210 Compuware Corp. (a) 350,000 12,862,500 20563810 EICON Technology Corp. (a) 221,200 1,890,360 28248F10 Electronics for Imaging, Inc. (a) 397,800 15,613,650 28608210 General Magic, Inc. (a) 89,400 1,631,550 37025310 Informix Corp. (a) 155,000 5,851,250 45677910 Lotus Development Corp. (a) 144,900 6,049,575 54570010 Manugistics Group, Inc. (a) 55,000 584,375 56501110 Mercury Interactive Group Corp. (a) 145,100 1,886,300 58940510 Microsoft Corp. (a) 100,000 6,300,000 59491810 Midisoft Corp. (a) 80,000 800,000 59741310 Novell, Inc. (a) 1,073,100 21,814,116 67000610 Oracle Systems Corp. (a) 750,000 23,531,250 68389X10 Peoplesoft, Inc. (a) 56,500 1,963,375 71271310 Platinum Technology, Inc. (a) 248,100 5,892,375 72764T10 Ross Systems P/P (a)(b) 763,333 3,244,165 77830392 SPSS, Inc. (a) 71,100 808,763 78462K10 Sanctuary Woods Multimedia Corp. (a) 53,300 149,595 79971E10 Sterling Software, Inc. (a) 100,000 3,612,500 85954710 Sybase, Inc. (a) 84,800 3,455,600 87113010 Xcellenet, Inc. (a) 3,000 81,375 98388R10 127,209,649 TOTAL COMPUTER SERVICES & SOFTWARE 154,296,374 SHARES VALUE (NOTE 1) COMPUTERS & OFFICE EQUIPMENT - 10.7% COMPUTER STORAGE DEVICES - 1.9% ADAPTEC, Inc. (a) 10,000 $ 330,000 00651F10 Read Rite Corp. (a) 50,000 800,000 75524610 Xylogics, Inc. (a) 147,800 3,399,400 98415210 4,529,400 MINI & MICRO COMPUTERS - 8.8% Apple Computer, Inc. 50,000 1,975,000 03783310 Compaq Computer Corp. (a) 400,000 13,800,000 20449310 Dell Computer Corp. (a) 50,000 2,075,000 24702510 General Motors Corp. Class E 100,000 3,837,500 37044240 21,687,500 TOTAL COMPUTERS & OFFICE EQUIPMENT 26,216,900 ELECTRONICS - 6.7% ELECTRONIC PARTS - WHOLESALE - 0.2% ARC International Corp. (a) 133,500 400,500 00190510 ELECTRONICS & ELECTRONIC COMPONENTS - 1.3% Sanmina Corp. (a) 109,200 3,166,800 80090710 SEMICONDUCTORS - 5.2% Micron Technology, Inc. 208,400 12,920,800 59511210 TOTAL ELECTRONICS 16,488,100 RETAIL & WHOLESALE, MISCELLANEOUS - 0.4% MUSIC, TV, & ELECTRONIC STORES - 0.4% Best Buy Co., Inc. (a) 50,000 1,081,250 08651610 SECURITIES INDUSTRY - 0.0% SECURITY & COMMODITY BROKERS - 0.0% Kim Eng Holdings Ltd. 3 1/2% 90,600 57,544 49499D95 TELEPHONE SERVICES - 0.3% ALC Communications Corp. (a) 26,200 772,900 00157530 TOTAL COMMON STOCKS (Cost $186,323,947) 216,523,792 NONCONVERTIBLE PREFERRED STOCKS - 2.2% COMPUTER SERVICES & SOFTWARE - 2.2% PREPACKAGED COMPUTER SOFTWARE - 2.2% Sap AG (Cost $3,089,260) 6,500 5,352,811 80899893 REPURCHASE AGREEMENTS - 9.7% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $ 23,923,040 23,919,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $213,332,207) $ 245,795,603 LEGEND 1. Non-income producing 2. Restricted securities - Investment in securities not registered under the Securities Act of 1933 (see Note 2 of Notes to Financial Statements). Additional information on each holding is as follows: ACQUISITION ACQUISITION SECURITY DATE COST Ross Systems P/P 1/4/95 $ 2,862,499 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $321,010,367 and $282,829,090, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $49,029 for the period (see Note 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $2,223,450 and $2,354,900, respectively (see Note 7 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $2,092,000 and $1,470,154, respectively. The weighted average interest rate paid was 4.7% (see Note 8 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $213,934,092. Net unrealized appreciation aggregated $31,861,511, of which $39,927,523 related to appreciated investment securities and $8,066,012 related to depreciated investment securities. At February 28, 1995, the fund had a capital loss carryforward of approximately $6,020,000 which will expire on February 28, 2003. The fund has elected to defer to its fiscal year ending February 28, 1996 $1,988,000 of losses recognized during the period November 1, 1994 to February 28, 1995. SOFTWARE AND COMPUTER SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $23,919,000) (cost $213,332,207) - See $ 245,795,603 accompanying schedule Cash 416 Receivable for investments sold 8,955,984 Receivable for fund shares sold 3,389,488 Dividends receivable 39,418 Redemption fees receivable 1,513 Other receivables 109,749 TOTAL ASSETS 258,292,171 LIABILITIES Payable for investments purchased $ 8,939,480 Payable for fund shares redeemed 10,154,267 Accrued management fee 121,247 Other payables and 277,191 accrued expenses Collateral on securities loaned, 2,354,900 at value TOTAL LIABILITIES 21,847,085 NET ASSETS $ 236,445,086 Net Assets consist of: Paid in capital $ 212,481,359 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (8,499,669 ) Net unrealized appreciation (depreciation) on investments 32,463,396 NET ASSETS, for 8,133,604 $ 236,445,086 shares outstanding NET ASSET VALUE and redemption price per share ($236,445,086 (divided by) 8,133,604 shares) $29.07 Maximum offering price per share (100/97.00 of $29.07) $29.97
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 226,110 Dividends Interest (including security lending 664,417 fees of $33,248) TOTAL INCOME 890,527 EXPENSES Management fee $ 1,132,169 Transfer agent 1,427,504 Fees Redemption fees (144,281 ) Accounting and security lending fees 188,418 Non-interested trustees' compensation 2,204 Custodian fees and expenses 36,124 Registration fees 74,938 Audit 32,651 Legal 2,634 Interest 2,486 Reports to shareholders 8,542 Miscellaneous 1,359 Total expenses before reductions 2,764,748 Expense reductions (38,257 2,726,491 ) NET INVESTMENT INCOME (LOSS) (1,835,964 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (7,444,187 ) Foreign currency transactions 62,064 (7,382,123 ) Change in net unrealized appreciation (depreciation) on investment securities 17,246,063 NET GAIN (LOSS) 9,863,940 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 8,027,976 OTHER INFORMATION $1,239,048 Sales Charges Paid to FDC Deferred sales charges withheld $8,732 by FDC Exchange fees withheld by FSC $100,725
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ (1,835,964 $ (2,049,464 Net investment income (loss) ) ) Net realized gain (loss) (7,382,123 35,000,477 ) Change in net unrealized appreciation (depreciation) 17,246,063 10,379,359 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 8,027,976 43,330,372 Distributions to shareholders from net realized gains (2,015,425 (32,503,084 ) ) Share transactions 367,638,603 412,354,230 Net proceeds from sales of shares Reinvestment of distributions 1,989,953 32,019,820 Cost of shares redeemed (317,960,229 (429,424,876 ) ) Paid in capital portion of redemption fees 730,383 1,045,419 Net increase (decrease) in net assets resulting from share transactions 52,398,710 15,994,593 TOTAL INCREASE (DECREASE) IN NET ASSETS 58,411,261 26,821,881 NET ASSETS Beginning of period 178,033,825 151,211,944 End of period $ 236,445,086 $ 178,033,825 OTHER INFORMATION Shares Sold 14,345,417 14,575,603 Issued in reinvestment of distributions 80,950 1,265,940 Redeemed (12,454,413 (15,154,744 ) ) Net increase (decrease) 1,971,954 686,799
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 28.89 $ 27.62 $ 21.63 $ 19.77 $ 15.58 Income from Investment Operations Net investment income (loss) (.26) (.34) (.07) F (.28) (.14) E Net realized and unrealized gain (loss) .67 7.92 5.88 4.37 4.06 Total from investment operations .41 7.58 5.81 4.09 3.92 Less Distributions (.33) (6.48) - (2.50) - From net realized gain Redemption fees added to paid in capital .10 .17 .18 .27 .27 Net asset value, end of period $ 29.07 $ 28.89 $ 27.62 $ 21.63 $ 19.77 TOTAL RETURN B, C 1.97% 33.19% 27.69% 25.36% 26.89% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 236,445 $ 178,034 $ 151,212 $ 89,571 $ 17,290 Ratio of expenses to average net assets 1.50% 1.57% 1.64% A 1.98% 2.50% Ratio of expenses to average net assets before expense reductions 1.52% 1.57% 1.64% A 1.98% 2.82% Ratio of net investment income (loss) to average net assets (1.01)% (1.19)% (.37)% (1.30)% (.84)% A Portfolio turnover rate 164% 376% 402% A 348% 326%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.02 PER SHARE. F INVESTMENT INCOME PER SHARE REFLECTS DIVIDENDS RECEIVED IN ARREARS FROM UNISYS CORP., WHICH AMOUNTED TO $.03 PER SHARE. TECHNOLOGY PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1995 YEAR YEARS YEARS TECHNOLOGY 4.61% 168.36% 147.86% TECHNOLOGY (INCL. 3% SALES CHARGE) 1.47% 160.31% 140.42% S&P 500 7.36% 71.20% 274.70% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or ten years. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 FEBRUARY 28, 1995 YEAR YEARS YEARS TECHNOLOGY 4.61% 21.83% 9.50% TECHNOLOGY (INCL. 3% SALES CHARGE) 1.47% 21.09% 9.17% S&P 500 7.36% 11.35% 14.12% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER TEN YEARS Select Technology (0Standard & Poor's 50 02/28/85 9700.01 10000.00 03/31/85 8877.83 10007.00 04/30/85 8209.29 9997.99 05/31/85 8342.17 10575.88 06/30/85 8361.55 10741.92 07/31/85 8751.45 10725.81 08/31/85 8391.22 10634.64 09/30/85 7764.00 10301.77 10/31/85 7980.14 10777.71 11/30/85 8848.92 11517.07 12/31/85 9319.34 12074.49 01/31/86 9412.58 12142.11 02/28/86 10031.32 13050.34 03/31/86 10052.51 13778.55 04/30/86 10565.31 13622.85 05/31/86 10238.98 14347.59 06/30/86 9603.29 14590.06 07/31/86 8372.42 13774.48 08/31/86 8793.60 14796.54 09/30/86 8015.06 13572.87 10/31/86 8474.53 14356.02 11/30/86 8810.61 14704.87 12/31/86 8623.43 14329.90 01/31/87 10231.54 16260.14 02/28/87 11388.71 16902.41 03/31/87 10742.06 17390.89 04/30/87 11052.62 17236.11 05/31/87 11303.62 17386.07 06/30/87 10967.53 18264.06 07/31/87 11078.15 19190.05 08/31/87 11729.05 19905.84 09/30/87 11788.61 19469.90 10/31/87 7640.69 15276.09 11/30/87 6645.19 14017.34 12/31/87 7607.79 15084.06 01/31/88 7197.52 15719.09 02/29/88 7911.03 16451.60 03/31/88 7826.30 15943.25 04/30/88 8125.08 16120.22 05/31/88 7902.11 16260.46 06/30/88 8629.00 17006.82 07/31/88 7986.84 16942.19 08/31/88 7251.03 16366.16 09/30/88 7447.25 17063.36 10/31/88 7139.55 17537.72 11/30/88 6925.49 17286.93 12/31/88 7402.65 17589.45 01/31/89 8000.22 18877.00 02/28/89 7781.71 18406.96 03/31/89 7639.00 18835.84 04/30/89 8191.97 19813.42 05/31/89 8860.89 20615.87 06/30/89 8076.03 20498.36 07/31/89 8218.73 22349.36 08/31/89 8397.11 22787.41 09/30/89 8597.78 22693.98 10/31/89 8535.35 22167.48 11/30/89 8557.65 22619.69 12/31/89 8660.21 23162.57 01/31/90 8481.84 21608.36 02/28/90 8958.99 21887.11 03/31/90 9378.18 22467.12 04/30/90 8954.54 21905.44 05/31/90 10109.53 24041.22 06/30/90 10198.72 23877.74 07/31/90 9654.67 23801.33 08/31/90 8339.13 21649.69 09/30/90 7630.08 20595.35 10/31/90 7848.60 20506.79 11/30/90 9025.89 21831.53 12/31/90 9569.94 22440.63 01/31/91 11184.25 23419.04 02/28/91 11750.60 25093.50 03/31/91 12691.54 25700.76 04/30/91 12067.22 25762.44 05/31/91 12736.13 26875.38 06/30/91 11500.59 25644.49 07/31/91 12773.95 26839.52 08/31/91 13401.66 27475.62 09/30/91 13468.91 27016.78 10/31/91 13832.09 27378.80 11/30/91 13379.24 26275.44 12/31/91 15213.46 29281.34 01/31/92 15792.04 28736.71 02/29/92 16038.72 29110.29 03/31/92 14764.95 28542.64 04/30/92 14549.66 29381.79 05/31/92 14693.19 29525.76 06/30/92 13642.76 29085.83 07/31/92 14337.87 30275.44 08/31/92 13603.59 29654.79 09/30/92 14269.33 30004.72 10/31/92 15111.30 30109.74 11/30/92 16335.08 31136.48 12/31/92 16540.68 31519.46 01/31/93 17044.88 31784.22 02/28/93 16946.97 32216.49 03/31/93 17167.26 32896.25 04/30/93 17118.02 32100.16 05/31/93 18844.99 32960.45 06/30/93 19765.31 33056.03 07/31/93 19240.18 32923.81 08/31/93 20268.78 34171.62 09/30/93 20582.77 33908.50 10/31/93 20176.75 34610.41 11/30/93 19981.86 34281.61 12/31/93 21279.58 34696.42 01/31/94 22350.98 35876.09 02/28/94 22982.82 34903.85 03/31/94 22208.12 33382.04 04/30/94 21760.84 33809.33 05/31/94 21795.15 34363.81 06/30/94 19948.39 33521.89 07/31/94 20720.26 34621.41 08/31/94 22904.35 36040.89 09/30/94 22789.99 35157.89 10/31/94 23641.90 35948.94 11/30/94 23316.01 34639.68 12/31/94 23647.62 35153.39 01/31/95 22727.10 36064.91 02/28/95 24030.69 37470.36 Let's say you invested $10,000 in Fidelity Select Technology Portfolio on February 28, 1985, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $24,042 - a 140.42% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $37,470 over the same period - a 274.70% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Compaq Computer Corp. 6.4 International Business Machines Corp. 5.4 Oracle Systems Corp. 5.1 Micron Technology, Inc. 4.8 Digital Equipment Corp. 4.2 Cisco Systems, Inc. 3.3 Informix Corp. 3.1 Sun Microsystems, Inc. 2.9 LSI Logic Corp. 2.5 Texas Instruments, Inc. 2.5 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 38.9 Row: 1, Col: 2, Value: 6.0 Row: 1, Col: 3, Value: 6.4 Row: 1, Col: 4, Value: 12.5 Row: 1, Col: 5, Value: 17.0 Row: 1, Col: 6, Value: 19.2 Semiconductors 19.2% Prepackaged Computer Software 17.0% Mini & Micro Computers 12.5% Mainframe Computers 6.4% Datacommunications Equipment 6.0% All Others 38.9% TECHNOLOGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Harry Lange, Portfolio Manager of Fidelity Select Technology Portfolio Q. HARRY, HOW HAS THE FUND PERFORMED OVER THE PAST YEAR? A. For the 12 months ended February 28, 1995, the fund had a total return of 4.61%. That compared to a 7.36% return for the S&P 500 during the same period. Q. WHY DID THE FUND UNDERPERFORM THE BROAD MARKET OVER THE YEAR? A. Most of the trouble came early in 1994. As the stock market corrected when interest rates spiked upward, technology stocks fell harder. First, a few key technology companies reported earnings figures that fell below analysts' expectations. Second, investors were worried about a potential summer slowdown in product orders. However, through the fall and winter, earnings came in consistently strong. That helped technology stocks outperform the broad market over the past six months and technology stocks rebounded. Q. WHAT FACTORS BOOSTED EARNINGS, AND WHICH COMPANIES BENEFITED? A. While the prices of technology stocks fluctuate more than most, the underlying story behind them remains positive. On the corporate side, companies worldwide continue to improve productivity through technology. On the consumer side, the love affair with personal computers and related products currently shows no signs of letting up. And since PCs are the cornerstone of the industry, strong demand for them helps most technology companies. For example, hardware companies such as Digital Equipment are showing improving profit margins. In addition, high demand for computer workstations has helped Sun Microsystems string together a few quarters of strong earnings. And continued high demand for semiconductors and memory chips has boosted the stocks of companies such as LSI Logic and Micron Technology, which rose 175% and 133% over the past 12 months, respectively. Q. WHAT ABOUT COMPAQ COMPUTER - THE FUND'S LARGEST INVESTMENT AT THE END OF FEBRUARY? A. Though a solid company, Compaq's stock has been flat to down recently due to concerns about future earnings. The company will be launching a new line of products in 1995, and investors are cautious. I agree that some caution is warranted, but I think Compaq's stock price already reflects a lot of downside risk. I recently added significantly to the fund's investment when the stock reached historically cheap levels. Q. HOW DOES IBM FIT INTO THE PC STORY? A. For the most part, it hasn't yet. IBM's personal computer division has struggled, but I believe is showing signs of turning around. Nevertheless, the stock has been one of the fund's top performers over the past year. The company's mainframe computer business is going gangbusters. Orders are backlogged several months. And because IBM has significantly reduced internal costs, profit margins are rising. Q. IN THE PAST YOU'VE TALKED ABOUT THE TREND IN BUSINESS AWAY FROM MAINFRAME COMPUTERS TOWARD CLIENT-SERVER ARRANGEMENTS - PERSONAL COMPUTERS TIED TOGETHER THROUGH NETWORKS. HOW DOES THAT SQUARE WITH IBM'S SUCCESS? A. First, the progression into client-server architecture is gradual, and will continue over several years. In the meantime, there's a strong demand among mainframe users to increase their computers' processing power, which has helped mainframe companies such as IBM. That said, the fund has benefited from the growth of client-server set-ups. Oracle, which makes the software used in these systems, is growing earnings at roughly a 50% annual rate. The stock slowed recently when it became quite expensive, but I'm very optimistic about Oracle over the long run. Q. WHICH STOCK PICKS DIDN'T WORK OUT AS YOU HAD HOPED? A. A slump in international markets has helped drag down the stocks of Korean semiconductor manufacturer Samsung, and Taiwanese chip maker United Micro and PC maker Acer, despite strong earnings. In addition, disappointing earnings due to increased competition has hurt U.S.-based personal computer distributors such as Tech Data and Merisel. Q. WILL THIS POSITIVE MOMENTUM CONTINUE? A. The Christmas season was excellent for PCs, and there's been no letdown since. Judging from the supply/demand characteristics of the market, I think technology companies are more likely to see more positive earnings surprises than disappointments over the next six months. That said, these stocks can be very sensitive to economic swings. If the U.S. economy slows enough to negatively impact earnings growth, the fund will most likely correct harder than the broad stock market. FUND FACTS START DATE: July 14, 1981 SIZE: as of February 28, 1995, more than $229 million MANAGER: Harry Lange, since 1993; manager, Fidelity Select Electronics Portfolio, since January 1994; Fidelity Select Computers Portfolio, since 1992; research director, Fidelity Investments Far East, 1988-1992; manager, Fidelity Select Capital Goods and Automation and Machinery Portfolios, 1988; joined Fidelity in 1987 (checkmark) TECHNOLOGY PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.3% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 0.1% AIRCRAFT & PARTS - 0.1% Hong Kong Aircraft & Engineering Co. 50,000 $ 161,018 43899410 AUTOS, TIRES, & ACCESSORIES - 0.0% AUTO & TRUCK PARTS - 0.0% Allen Group, Inc. (The) 2,400 56,400 01763410 BROADCASTING - 0.7% CABLE TV OPERATORS - 0.0% NTN Communications, Inc. (a) 3,800 25,175 62941030 TELEVISION BROADCASTING - 0.7% Scandinavian Broadcasting Corp. (a) 60,000 1,440,000 80699E92 TOTAL BROADCASTING 1,465,175 CELLULAR - 0.1% CELLULAR & COMMUNICATION SERVICES - 0.1% Advanced Information Services (For. Reg.) 7,500 100,441 00799793 Millicom International Cellular SA (a) 2,800 76,300 60081492 176,741 COMMUNICATIONS EQUIPMENT - 8.6% DATACOMMUNICATIONS EQUIPMENT - 6.0% Broadband Technologies, Inc. (a) 20,000 480,000 11130910 Cabletron Systems, Inc. (a) 49,000 1,941,625 12692010 Cisco Systems, Inc. (a) 215,900 7,286,625 17275R10 General DataComm Industries, Inc. (a) 15,000 315,000 36948710 Network General Corp. (a) 127,500 3,394,688 64121010 13,417,938 TELEPHONE EQUIPMENT - 2.6% Global Village Communication (a) 20,000 240,000 37935Q10 Natural Microsystems (a) 28,800 432,000 63888210 Network Equipment Technologies (a) 121,300 3,077,988 64120810 Newbridge Networks Corp. (a) 41,000 1,388,875 65090110 Perceptron, Inc. (a) 30,400 562,400 71361F10 Teledata Communications Ltd. (a) 7,300 43,800 93799992 5,745,063 TOTAL COMMUNICATIONS EQUIPMENT 19,163,001 COMPUTER SERVICES & SOFTWARE - 21.4% CAD/CAM/CAE - 2.8% Brooktrout Technology (a) 17,900 281,925 11458010 Chipcom Corp. (a) 29,300 1,303,850 16961710 Integrated Silicon Systems, Inc. (a) 5,000 136,250 45812Q10 Network Peripherals, Inc. (a) 14,300 332,475 64121R10 Parametric Technology Corp. (a) 10,000 382,500 69917310 Structural Dynamics Research Corp. (a) 515,800 3,804,025 86355510 6,241,025 COMPUTER & SOFTWARE STORES - 1.3% Inacom Corp. (a) 37,300 335,700 45323G10 MicroAge, Inc. (a) 238,000 2,320,500 59492810 Software Spectrum, Inc. (a) 8,000 148,000 83396010 2,804,200 COMPUTER RELATED SERVICES - 0.0% Wave Systems Corp. Class A (a) 43,300 108,250 94352610 COMPUTER SERVICES - 0.0% CompuCom Systems, Inc. (a) 8,400 28,350 20478010 CUSTOM COMPUTER PROGRAMMING SERVICES - 0.3% Softdesk, Inc. (a) 35,000 752,500 83402010 SHARES VALUE (NOTE 1) ELECTRONIC INFORMATION RETRIEVAL - 0.0% Data Broadcasting Corp. (a) 15,000 $ 63,750 23759610 Quickresponse Services, Inc. (a) 1,500 24,000 74837W10 87,750 PREPACKAGED COMPUTER SOFTWARE - 17.0% Acclaim Entertainment, Inc. (a) 20,000 285,000 00432520 Autodesk, Inc. 10,000 392,500 05276910 Brock Control Systems, Inc. (a) 82,400 515,000 11162610 Broderbund Software, Inc. (a) 10,000 518,750 11201410 Corel Systems Corp. (a) 158,700 2,169,983 21868Q10 Delrina Corp. (a) 10,000 143,932 24735L10 EICON Technology Corp. (a) 21,000 179,465 28248F10 FTP Software, Inc. (a) 34,900 959,750 30266010 Fourth Shift Corp. (a) 54,000 162,000 35112810 Fourth Dimension Software (a) 38,000 171,000 35199792 Geoworks (a) 106,800 881,100 37369210 Globalink, Inc. (a) 162,600 1,747,950 37936V10 Informix Corp. (a) 186,000 7,021,500 45677910 Infosoft International, Inc. (a) 14,200 599,950 45678310 Learning Co. (a) 7,500 223,125 52200610 Lotus Development Corp. (a) 20,000 835,000 54570010 MDL Information Systems, Inc. (a) 16,000 170,000 55267R10 Media Logic, Inc. (a) 65,000 142,188 58441B10 Microsoft Corp. (a) 32,100 2,022,300 59491810 Midisoft Corp. (a) 40,000 400,000 59741310 Novell, Inc. (a) 201,400 4,094,085 67000610 Oracle Systems Corp. (a) 365,700 11,473,838 68389X10 Platinum Technology, Inc. (a) 4,000 95,000 72764T10 Softkey International, Inc. (a) 45,200 1,152,600 83402N10 Sybase, Inc. (a) 28,200 1,149,150 87113010 Tulip Computers NV 20,000 240,332 89917799 Wonderware Corp. (a) 9,300 259,819 97817910 38,005,317 TOTAL COMPUTER SERVICES & SOFTWARE 48,027,392 COMPUTERS & OFFICE EQUIPMENT - 30.2% COMPUTER EQUIPMENT - 0.1% Stratus Computer, Inc. (a) 12,000 316,500 86315510 COMPUTER EQUIPMENT - WHOLESALE - 1.2% GBC Technologies, Inc. (a) 206,000 1,545,000 36149F10 Merisel, Inc. (a) 140,000 735,000 58984910 Tech Data Corp. (a) 24,700 319,556 87823710 2,599,556 COMPUTER PERIPHERALS - 1.0% Fore Systems, Inc. (a) 20,000 735,000 34544910 Komag, Inc. (a) 23,800 600,950 50045310 Liuski International, Inc. (a) 2,500 11,250 53802910 Plannar Systems, Inc. (a) 5,000 101,250 72690010 Radius, Inc. (a) 79,150 751,925 75047020 Western Digital Corp. (a) 3,900 58,500 95810210 2,258,875 COMPUTER RENTAL & LEASING - 0.3% Comdisco, Inc. 23,300 594,150 20033610 COMPUTER STORAGE DEVICES - 1.1% Ameriquest Technologies, Inc. (a) 19,142 52,641 03070P10 Hutchinson Technology, Inc. (a) 30,000 847,500 44840710 Maxtor Corp. (a) 100,000 412,500 57772910 Pinnacle Micro, Inc. (a) 84,500 1,119,625 72346910 Seagate Technology (a) 3,400 81,600 81180410 2,513,866 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) COMPUTERS & OFFICE EQUIPMENT - CONTINUED COMPUTERS & OFFICE EQUIPMENT - 2.0% Data General Corp. (a) 120,000 $ 945,000 23768810 Fujitsu Ltd. 50,000 455,791 35959010 Hewlett-Packard Co. 27,000 3,105,000 42823610 4,505,791 ELECTRONIC COMPUTERS - 0.8% Bay Networks, Inc. (a) 50,000 1,568,750 07251010 TSL Holding, Inc. (a) 10,864 326 87291810 Tricord Systems, Inc. (a) 40,500 222,750 89612110 1,791,826 GRAPHICS WORKSTATIONS - 3.2% Silicon Graphics, Inc. (a) 24,600 851,775 82705610 Sun Microsystems, Inc. (a) 201,500 6,448,000 86681010 7,299,775 MAINFRAME COMPUTERS - 6.4% Amdahl Corp. (a) 193,100 2,148,238 02390510 Control Data Systems, Inc. (a) 5,000 35,625 21238F10 International Business Machines Corp. 160,800 12,100,200 45920010 14,284,063 MINI & MICRO COMPUTERS - 12.5% AST Research, Inc. (a) 52,300 836,800 00190710 Apple Computer, Inc. 50,000 1,975,000 03783310 Compaq Computer Corp. (a) 413,900 14,279,550 20449310 Digital Equipment Corp. (a) 281,100 9,416,850 25384910 Pyramid Technology Corp. (a) 41,400 657,225 74723610 Tandem Computers, Inc. (a) 50,000 850,000 87537010 28,015,425 OFFICE AUTOMATION - 0.3% Filenet Corp. (a) 3,500 109,375 31686910 Xerox Corp. 5,000 554,375 98412110 663,750 PENS, PENCILS, OFFICE SUPPLIES - 1.3% International Imaging Materials, Inc. (a) 99,700 2,866,375 45968C10 TOTAL COMPUTERS & OFFICE EQUIPMENT 67,709,952 CONSUMER ELECTRONICS - 0.2% RADIOS, TELEVISIONS, STEREOS - 0.2% Foster Electric Co. Ltd. 40,000 236,474 34999192 Odetics, Inc. Class A (a) 57,000 285,000 67606520 521,474 DEFENSE ELECTRONICS - 0.0% Stanford Telecommunications, Inc. (a) 200 2,900 85440210 DRUGS & PHARMACEUTICALS - 3.9% BIOTECHNOLOGY - 1.4% Amgen, Inc. (a) 10,000 690,000 03116210 Applied Immune Sciences, Inc. (a) 1,100 5,913 03820F10 COR Therapeutics, Inc. (a) 110,000 1,485,000 21775310 Genentech, Inc. (redeemable) (a) 20,000 1,005,000 36871020 3,185,913 DRUGS - 2.5% A.L. Laboratories, Inc. Class A 5,000 101,875 00162910 Pfizer, Inc. 20,000 1,655,000 71708110 Schering-Plough Corp. 30,000 2,351,250 80660510 Warner-Lambert Co. 20,000 1,527,500 93448810 Watson Pharmaceuticals, Inc. (a) 400 10,325 94268310 5,645,950 TOTAL DRUGS & PHARMACEUTICALS 8,831,863 SHARES VALUE (NOTE 1) ELECTRICAL EQUIPMENT - 0.3% ELECTRICAL EQUIPMENT - 0.0% IEC Electronics Corp. (a) 5,000 $ 42,500 44949L10 ELECTRICAL MACHINERY - 0.0% General Signal (warrants) (a) 1 1 37083899 TV & RADIO COMMUNICATION EQUIPMENT - 0.3% Avid Technology, Inc. (a) 12,000 402,000 05367P10 Leitch Technology (a) 20,000 233,889 52543H10 635,889 TOTAL ELECTRICAL EQUIPMENT 678,390 ELECTRONIC INSTRUMENTS - 4.3% ELECTRONIC EQUIPMENT - 1.9% ASECO Corp. (a) 15,000 127,500 04365910 Credence Systems Corp. (a) 100,500 2,437,125 22530210 GenRad, Inc. (a) 41,500 243,813 37244710 Megatest Corp. (a) 43,000 478,375 58495810 Micrion Corp. (a) 30,700 322,350 59479P10 Micro Component Technology, Inc. (a) 600 1,575 59479Q10 Teradyne, Inc. (a) 20,000 727,500 88077010 4,338,238 SEMICONDUCTOR CAPITAL EQUIPMENT - 2.4% Applied Materials, Inc. (a) 3,300 152,213 03822210 Electro Scientific Industries, Inc. (a) 32,300 609,663 28522910 KLA Instruments Corp. (a) 39,100 2,267,800 48248010 Kulicke & Soffa Industries, Inc. (a) 10,800 263,250 50124210 Lam Research Corp. (a) 18,400 736,000 51280710 Silicon Valley Group, Inc. (a) 58,100 1,361,719 82706610 5,390,645 TOTAL ELECTRONIC INSTRUMENTS 9,728,883 ELECTRONICS - 18.6% CONNECTORS - 0.1% Thomas & Betts Corp. 2,000 133,250 88431510 ELECTRONIC PARTS - WHOLESALE - 0.3% Pioneer-Standard Electronics, Inc. 5,100 89,250 72387710 Sterling Electronics Corp. (a) 40,000 470,000 85928110 559,250 ELECTRONIC RESISTORS - 0.1% Yageo Corp. GDR (a)(b) 11,000 182,930 98432610 ELECTRONICS & ELECTRONIC COMPONENTS - 0.7% CTS Corp. 2,800 84,000 12650110 GTI Corp. (a) 20,000 210,000 36236010 Hitachi Ltd. ADR 10,800 938,250 43357850 Photronics, Inc. (a) 1,700 54,400 71940510 Toshiba Corp. 50,000 315,746 89149310 1,602,396 SEMICONDUCTORS - 17.4% Advanced Micro Devices, Inc. (a) 124,200 3,772,575 00790310 Altera Corp. (a) 6,400 364,000 02144110 Atmel Corp. (a) 1,500 51,188 04951310 Electroglas, Inc. (a) 20,000 772,500 28532410 Geotek Industries, Inc. (a) 99,000 693,000 37365410 Information Storage Devices (a) 600 12,750 45675310 Integrated Device Technology, Inc. (a) 2,600 99,125 45811810 Intel Corp. 20,000 1,595,000 45814010 International Rectifier Corp. (a) 6,000 145,500 46025410 Interpoint Corp. (a) 10,000 86,250 46062710 LSI Logic Corp. (a) 101,500 5,531,750 50216110 Lattice Semiconductor Corp. (a) 30,000 791,250 51841510 Linear Technology Corp. 20,000 1,090,000 53567810 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRONICS - CONTINUED SEMICONDUCTORS- CONTINUED Micro Linear Corp. (a) 40,700 $ 391,738 59485010 Micron Technology, Inc. 175,000 10,850,000 59511210 National Semiconductor Corp. (a) 35,500 599,063 63764010 Quality Semiconductor, Inc. (a) 2,000 24,000 74758B10 SGS-Thomson Microelectronic NV (a) 67,400 1,685,000 78421310 Samsung Electronics Co. Ltd.: GDR (a)(b) 4,258 263,996 79605030 GDS (a)(b) 102,775 3,905,450 79605020 GDS (Reg.) (non-vtg.) (a) 11,800 448,400 79611093 Siliconix, Inc. (a) 600 7,350 82707920 Tencor Instruments (a) 4,700 223,250 88032310 Texas Instruments, Inc. 69,400 5,465,250 88250810 Uniphase Corp. (a) 17,000 297,500 90914910 39,165,885 TOTAL ELECTRONICS 41,643,711 INDUSTRIAL MACHINERY & EQUIPMENT - 2.2% GENERAL INDUSTRIAL MACHINERY - 0.0% Robotic Vision Systems, Inc. (a) 15,000 93,750 77107410 SPECIAL INDUSTRIAL MACHINERY - 2.2% Asyst Technologies, Inc. (a) 79,500 2,583,750 04648X10 Fuji Machine Manufacturing Co. Ltd. Ord. 50,000 1,302,259 36099892 Gasonics International Corp. (a) 10,000 175,000 36727810 PRI Automation, Inc. (a) 20,000 360,000 69357H10 Tylan General, Inc. (a) 57,000 470,250 90216910 4,891,259 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 4,985,009 MEDICAL EQUIPMENT & SUPPLIES - 1.3% MEDICAL SUPPLIES & APPLIANCES - 0.6% Healthdyne, Inc. (a) 25,000 237,500 42220310 Johnson & Johnson 17,300 981,775 47816010 Medical Technology Systems, Inc. (a) 9,800 66,150 58462R50 1,285,425 MEDICAL TECHNOLOGY - 0.7% Mallinckrodt Group, Inc. 11,900 389,725 56122610 Medtronic, Inc. 20,000 1,200,000 58505510 1,589,725 TOTAL MEDICAL EQUIPMENT & SUPPLIES 2,875,150 MEDICAL FACILITIES MANAGEMENT - 0.5% HOME HEALTH CARE AGENCIES - 0.1% Abbey Healthcare Group, Inc. (a) 375 10,641 00278610 Homedco Group, Inc. (a) 5,900 265,500 43739A10 276,141 HOSPITALS - 0.4% Columbia/HCA Healthcare Corp. 5,404 223,591 19767710 Health Management Associates, Inc. Class A (a) 19,575 521,184 42193310 744,775 HOSPITALS, GENERAL MEDICAL - 0.0% Charter Medical Corp. (a) 5,000 91,875 16124170 TOTAL MEDICAL FACILITIES MANAGEMENT 1,112,791 SHARES VALUE (NOTE 1) RETAIL & WHOLESALE, MISCELLANEOUS - 1.9% MAIL ORDER - 1.9% Gateway 2000, Inc. (a) 90,000 $ 1,653,750 36783310 Micro Warehouse, Inc. (a) 87,400 2,512,750 59501B10 4,166,500 STATIONARY & OFFICE SUPPLIES - WHOLESALE - 0.0% Daisytek International Corp. (a) 1,000 17,750 23405310 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 4,184,250 SERVICES - 0.0% ELECTRICAL REPAIR SHOPS - 0.0% Cerplex Group, Inc. (a) 10,000 80,000 15691320 JEWELRY, SILVERWARE, & PLATED - 0.0% Aurora Electronics (a) 7,000 30,188 05162910 TOTAL SERVICES 110,188 TELEPHONE SERVICES - 1.0% MFS Communications, Inc. (a) 3,300 114,675 55272T10 Japan Telecom Co. Ltd. (b) 5 109,555 81799K23 SBC Communications, Inc. 10,000 416,250 84533310 Telebras PN (Pfd. Reg.) 48,000,000 1,416,578 95499792 US Long Distance Corp (a) 12,500 181,250 91191220 2,238,308 TOTAL COMMON STOCKS (Cost $183,243,513) 213,672,596 NONCONVERTIBLE PREFERRED STOCKS - 0.8% TELEPHONE SERVICES - 0.8% Stet (Societa Finanziaria Telefonica) Spa (Cost $1,121,566) 735,100 1,685,276 85982592 CONVERTIBLE BONDS - 3.9% PRINCIPAL AMOUNT COMPUTER SERVICES & SOFTWARE - 0.0% PREPACKAGED COMPUTER SOFTWARE - 0.0% Sterling Software, Inc. 5 3/4%, 2/01/03 $ 62,000 82,150 859547AD COMPUTERS & OFFICE EQUIPMENT - 2.1% COMPUTERS & OFFICE EQUIPMENT - 0.3% Data General Corp. 7 3/4%, 6/1/01 770,000 639,100 237688AD ELECTRONIC COMPUTERS - 1.5% Acer, Inc. 4%, 6/10/01 1,410,000 3,440,400 004993AC OFFICE EQUIPMENT - WHOLESALE - 0.3% Kinpo Electronics, Inc. 3%, 7/21/01 860,000 640,700 4971269A TOTAL COMPUTERS & OFFICE EQUIPMENT 4,720,200 CONVERTIBLE BONDS - CONTINUED PRINCIPAL VALUE (NOTE 1) AMOUNT ELECTRONICS - 1.8% SEMICONDUCTORS - 1.8% United Microelectronics Corp.: euro 1 1/4%, 6/8/04 $ 1,995,000 $ 2,733,150 911993AB 1 1/4%,6/8/04 (b) 870,000 1,191,900 910873AA 3,925,050 TOTAL CONVERTIBLE BONDS (Cost $9,369,349) 8,727,400 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $193,734,428) $ 224,085,272 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $5,653,831 or 2.5% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $235,943,772 and $201,461,712, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $110,367 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $12,443,000 and $4,735,538, respectively. The weighted average interest rate paid was 4.7% (see Note 8 of Notes to Financial Statements). Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: United States 87.9% Free China 3.7 Korea 2.0 Canada 1.8 Japan 1.5 Others (individually less than 1%) 3.1 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $194,817,538. Net unrealized appreciation aggregated $29,267,734 of which $43,416,429 related to appreciated investment securities and $14,148,695 related to depreciated investment securities. The fund hereby designates $2,470,000 as a capital gain dividend for the purpose of the dividend paid deduction. TECHNOLOGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (cost $193,734,428) - See accompanying schedule $ 224,085,272 Cash 263 Receivable for investments sold 12,912,468 Receivable for fund shares sold 1,405,280 Dividends receivable 110,379 Interest receivable 76,904 Redemption fees receivable 809 Other receivables 148,260 TOTAL ASSETS 238,739,635 LIABILITIES Payable for investments purchased $ 1,173,009 Payable for fund shares redeemed 4,161,059 Accrued management fee 121,134 Notes payable 3,341,000 Other payables and accrued expenses 182,762 TOTAL LIABILITIES 8,978,964 NET ASSETS $ 229,760,671 Net Assets consist of: Paid in capital $ 190,276,213 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 9,133,614 Net unrealized appreciation (depreciation) on investments 30,350,844 NET ASSETS, for 5,464,043 shares outstanding $ 229,760,671 NET ASSET VALUE and redemption price per share ($229,760,671 (divided by) 5,464,043 shares) $42.05 Maximum offering price per share (100/97.00 of $42.05) $43.35
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 790,160 Dividends Interest 405,594 TOTAL INCOME 1,195,754 EXPENSES Management fee $ 1,278,290 Transfer agent 1,725,783 Fees Redemption fees (131,119 ) Accounting fees and expenses 206,675 Non-interested trustees' compensation 3,174 Custodian fees and expenses 30,650 Registration fees 46,057 Audit 34,069 Legal 2,919 Interest 16,168 Reports to shareholders 12,069 Miscellaneous 2,155 Total expenses before reductions 3,226,890 Expense reductions (14,681 3,212,209 ) NET INVESTMENT INCOME (LOSS) (2,016,455 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 11,171,783 Foreign currency transactions (13,975 11,157,808 ) Change in net unrealized appreciation (depreciation) on investment securities (4,708,436 ) NET GAIN (LOSS) 6,449,372 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 4,432,917 OTHER INFORMATION $1,145,527 Sales Charges Paid to FDC Deferred sales charges withheld $25,706 by FDC Exchange fees withheld by FSC $91,335
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ (2,016,455 $ (1,061,686 Net investment income (loss) ) ) Net realized gain (loss) 11,157,808 20,812,741 Change in net unrealized appreciation (depreciation) (4,708,436 26,720,283 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 4,432,917 46,471,338 Distributions to shareholders: - (436,840 From net investment income ) From net realized gain (7,172,823 (13,053,941 ) ) TOTAL DISTRIBUTIONS (7,172,823 (13,490,781 ) ) Share transactions 291,385,384 372,847,019 Net proceeds from sales of shares Reinvestment of distributions 6,939,366 13,219,760 Cost of shares redeemed (269,114,732 (350,325,262 ) ) Paid in capital portion of redemption fees 815,900 1,063,853 Net increase (decrease) in net assets resulting from share transactions 30,025,918 36,805,370 TOTAL INCREASE (DECREASE) IN NET ASSETS 27,286,012 69,785,927 NET ASSETS Beginning of period 202,474,659 132,688,732 End of period $ 229,760,671 $ 202,474,659 OTHER INFORMATION Shares Sold 7,232,669 10,038,649 Issued in reinvestment of distributions 187,906 415,252 Redeemed (6,796,592 (9,446,149 ) ) Net increase (decrease) 623,983 1,007,752
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 41.83 $ 34.62 $ 32.44 $ 27.06 $ 20.08 Income from Investment Operations Net investment income (loss) (.39) (.24) E .13 F (.26) .14 G Net realized and unrealized gain (loss) 1.95 11.04 4.68 5.56 6.46 Total from investment operations 1.56 10.80 4.81 5.30 6.60 Less Distributions - (.13) - - - From net investment income In excess of net investment income - - - (.16) - From net realized gain (1.50) (3.70) (2.75) - - Total distributions (1.50) (3.83) (2.75) (.16) - Redemption fees added to paid in capital .16 .24 .12 .24 .38 Net asset value, end of period $ 42.05 $ 41.83 $ 34.62 $ 32.44 $ 27.06 TOTAL RETURN B, C 4.61% 35.62% 16.48% 20.57% 34.76% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 229,761 $ 202,475 $ 132,689 $ 105,954 $ 117,055 Ratio of expenses to average net assets 1.56% 1.54% 1.64% A 1.72% 1.83% Ratio of expenses to average net assets before expense reductions 1.57% 1.55% 1.64% A 1.72% 1.83% Ratio of net investment income (loss) to average net assets (.98)% (.65)% .52% A (.84)% .61% Portfolio turnover rate 102% 213% 259% A 353% 442%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS DIVIDEND RECEIVED IN ARREARS RECEIVED FROM UNISYS CORP. $3.75 SERIES A WHICH AMOUNTED TO $.03 PER SHARE. F INVESTMENT INCOME PER SHARE REFLECTS DIVIDEND RECEIVED IN ARREARS WHICH AMOUNTED TO $.10 PER SHARE. G INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.06 PER SHARE AND $.20 PER SHARE RELATING TO A NONRECURRING INITIATIVE TO INVEST IN DIVIDEND INCOME PRODUCING SECURITIES WHICH WAS IN EFFECT FOR A PORTION OF 1991. TELECOMMUNICATIONS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance: total percentage change in value, the average annual percentage change, or the growth of a hypothetical $10,000 investment. Each performance figure includes changes in a fund's share price, plus reinvestment of any dividends (income) and capital gains (the profits the fund earns when it sells stocks that have grown in value). CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND TELECOMMUNICATIONS 7.98% 96.60% 411.18% TELECOMMUNICATIONS (INCL. 3% SALES CHARGE) 4.74% 90.70% 395.84% S&P 500 7.36% 71.20% 246.77% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on July 29, 1985. You can compare these figures to the performance of the S&P 500 - a common proxy for the U.S. stock market. This benchmark includes reinvested dividends and capital gains, if any. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND TELECOMMUNICATIONS 7.98% 14.48% 18.54% TELECOMMUNICATIONS (INCL. 3% SALES CHARGE) 4.74% 13.78% 18.16% S&P 500 7.36% 11.35% 13.84% AVERAGE ANNUAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had performed at a constant rate each year. UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of growth in the long run and volatility in the short run. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. That means if you sell your shares during a sector downturn, you might lose money. But if you can identify a sector that is about to experience rapid growth you may have the potential for above-average gains. (checkmark) $10,000 OVER LIFE OF FUND Select TelecommunicaStandard & Poor's 50 07/29/85 9700.00 10000.00 07/31/85 9612.70 9926.31 08/31/85 9641.80 9841.93 09/30/85 9263.50 9533.88 10/31/85 9612.70 9974.35 11/30/85 10020.10 10658.59 12/31/85 10670.00 11174.46 01/31/86 10893.10 11237.04 02/28/86 11649.70 12077.57 03/31/86 11892.20 12751.50 04/30/86 12348.10 12607.41 05/31/86 12658.50 13278.12 06/30/86 12716.70 13502.52 07/31/86 12095.90 12747.73 08/31/86 12920.40 13693.61 09/30/86 12125.00 12561.15 10/31/86 12745.80 13285.93 11/30/86 12968.90 13608.78 12/31/86 12784.60 13261.75 01/31/87 14394.80 15048.11 02/28/87 15607.30 15642.51 03/31/87 15413.30 16094.58 04/30/87 15180.50 15951.34 05/31/87 15762.50 16090.11 06/30/87 16363.90 16902.66 07/31/87 16878.00 17759.63 08/31/87 17673.40 18422.06 09/30/87 18032.30 18018.62 10/31/87 14860.40 14137.41 11/30/87 13841.90 12972.49 12/31/87 14729.67 13959.69 01/31/88 15417.32 14547.40 02/29/88 15875.76 15225.31 03/31/88 15945.52 14754.84 04/30/88 16463.75 14918.62 05/31/88 16673.03 15048.41 06/30/88 17540.07 15739.14 07/31/88 17290.92 15679.33 08/31/88 16653.10 15146.23 09/30/88 17679.60 15791.46 10/31/88 18038.37 16230.46 11/30/88 18197.82 15998.37 12/31/88 18818.97 16278.34 01/31/89 20346.19 17469.91 02/28/89 20426.57 17034.91 03/31/89 21260.51 17431.83 04/30/89 22868.11 18336.54 05/31/89 24556.09 19079.17 06/30/89 23956.18 18970.42 07/31/89 25774.87 20683.44 08/31/89 26391.20 21088.84 09/30/89 27361.17 21002.38 10/31/89 26391.20 20515.12 11/30/89 27058.06 20933.63 12/31/89 28394.36 21436.04 01/31/90 25315.08 19997.68 02/28/90 25220.81 20255.65 03/31/90 25807.34 20792.42 04/30/90 24288.65 20272.61 05/31/90 26844.25 22249.19 06/30/90 26310.09 22097.90 07/31/90 25105.60 22027.18 08/31/90 22183.42 20035.93 09/30/90 20748.52 19060.18 10/31/90 21471.21 18978.22 11/30/90 22696.64 20204.21 12/31/90 23738.66 20767.91 01/31/91 24582.28 21673.39 02/28/91 25404.53 23223.04 03/31/91 26120.00 23785.03 04/30/91 26675.29 23842.12 05/31/91 26952.94 24872.10 06/30/91 25831.68 23732.96 07/31/91 27294.65 24838.91 08/31/91 28106.23 25427.59 09/30/91 28469.31 25002.95 10/31/91 29590.57 25337.99 11/30/91 28458.63 24316.87 12/31/91 31062.45 27098.72 01/31/92 31105.61 26594.68 02/29/92 31494.03 26940.42 03/31/92 30382.73 26415.08 04/30/92 31526.39 27191.68 05/31/92 31159.56 27324.92 06/30/92 30435.91 26917.78 07/31/92 32069.11 28018.72 08/31/92 31690.56 27444.33 09/30/92 32307.06 27768.18 10/31/92 32631.54 27865.36 11/30/92 34329.63 28815.57 12/31/92 35820.62 29170.00 01/31/93 35710.44 29415.03 02/28/93 37671.70 29815.08 03/31/93 39214.27 30444.17 04/30/93 39297.02 29707.43 05/31/93 40878.84 30503.58 06/30/93 42641.44 30592.05 07/31/93 43884.31 30469.68 08/31/93 47194.84 31624.48 09/30/93 47872.76 31380.97 10/31/93 49251.21 32030.56 11/30/93 45217.56 31726.27 12/31/93 46464.95 32110.15 01/31/94 47405.63 33201.90 02/28/94 45920.34 32302.13 03/31/94 44484.56 30893.75 04/30/94 45278.56 31289.19 05/31/94 45012.66 31802.34 06/30/94 44974.68 31023.18 07/31/94 47469.05 32040.74 08/31/94 48849.19 33354.41 09/30/94 48279.41 32537.23 10/31/94 50583.85 33269.31 11/30/94 47899.55 32057.65 12/31/94 48471.83 32533.06 01/31/95 49144.34 33376.64 02/28/95 49584.05 34677.33 Let's say you invested $10,000 in Fidelity Select Telecommunications Portfolio on July 29, 1985, when the fund started, and paid a 3% sales charge. By February 28, 1995, your investment would have grown to $49,584 - a 395.84% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $34,677 over the same period - a 246.77% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1995 % OF FUND'S INVESTMENTS Ameritech Corp. 6.5 SBC Communications, Inc. 6.2 Nokia Corp. 6.0 Bell Atlantic Corp. 4.4 Ericsson (L.M.) Telephone Co. 3.9 Viacom, Inc. 3.8 ALC Communications Corp. 3.8 BellSouth Corp. 3.7 Koninklijke PPT Nederland 3.6 NYNEX Corp. 2.8 TOP INDUSTRIES AS OF FEBRUARY 28, 1995 Row: 1, Col: 1, Value: 24.5 Row: 1, Col: 2, Value: 2.1 Row: 1, Col: 3, Value: 4.3 Row: 1, Col: 4, Value: 7.2 Row: 1, Col: 5, Value: 12.1 Row: 1, Col: 6, Value: 49.8 Telephone Services 49.8% Telephone Equipment 12.1% Cellular & Communication Services 7.2% Cable TV Operators 4.3% Semiconductors 2.1% All Others 24.5%* * INCLUDES SHORT-TERM INVESTMENTS TELECOMMUNICATIONS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW David Felman, Portfolio Manager of Fidelity Select Telecommunications Portfolio Q. HOW DID THE FUND PERFORM, DAVID? A. The fund's performance has been mixed, with results improving in the second half of the period. For the 12 months ended February 28, 1995, the fund returned 7.98%, slightly ahead of the S&P 500's 7.36% return. Q. WHAT DROVE THE IMPROVEMENTS IN THE SECOND HALF? A. Wireless communications - the cellular phone operators and particularly the wireless equipment manufacturers - was the key to the fund's strong second-half performance. I increased the fund's investments in these areas during the year, and they continue to show great growth potential. Wireless equipment has been an amazing growth industry and should continue to do very well. Nokia, Ericsson and Motorola, which produce cellular equipment, each made strong contributions to overall fund performance for the period. Q. WHAT'S BEEN HAPPENING IN THE OTHER PARTS OF THE INDUSTRY? A. The telecommunications industry is in the process of a dramatic reshaping. Previously protected markets have begun to open up, new markets and technology-based products have begun to be created, and as a result, competition among the many different players in the industry has started to intensify. Within this environment, some segments of the industry have not been performing as well as others. The domestic long distance companies, for example, generally have been weak. Their core business has come under some pressure as pricing has become more sensitive, but the bigger issue for these companies is that they are now entering a heavy spending cycle. AT&T, for example, will be bidding on new personal communications service (PCS) licenses; Sprint recently has made forays into cable television; and MCI also appears ready to make investments to improve its competitive position. The possible dilutive effect of this upcoming spending activity has depressed the long distance stocks, and generally I have kept the fund out of them. Q. HOW HAVE THE "BABY BELLS" BEEN DOING? A. The regional operating companies have performed pretty well as a group, especially since interest rates have begun to stabilize. Some of the Baby Bells did better than others. Ameritech and Southwestern Bell, for instance, both turned in strong results during the period and made substantial contributions to overall fund performance. Local phone companies tend to move in step with local economic conditions, so if the interest rate environment continues to improve, I would expect other of the regional operators to start showing improvements as well. Overall, I believe the Baby Bells are in a good competitive position and should remain a major area of focus for the fund. Q. WHAT'S YOUR TAKE ON THE INTERNATIONAL MARKETS? A. I think there may be some exciting overseas opportunities over the next few years, both in equipment sales and phone service. Asia comes to mind as an area with great growth potential, and several of the fund's holdings are well positioned to capitalize on that potential, particularly in terms of supplying equipment. However, I've generally tried to keep the fund out of the foreign telecommunications stocks, and I'm pleased, for instance, that the fund has not played heavily in the Latin American markets, which have been severely depressed. Q. WHAT WERE YOUR BIGGEST DISAPPOINTMENTS DURING THE PERIOD? A. Even my very limited exposures to local Latin American phone companies hurt the fund. Two in particular -Telefonos de Mexico and Telefonica Argentina - have to be called major disappointments. To a lesser extent, I'd have to say that I was somewhat disappointed that the domestic long distance carriers - particularly AT&T - were hit so hard by competitive pricing pressures and the discounting effect of their upcoming spend cycles. Q. WHAT'S YOUR VIEW LOOKING FORWARD? ANY BIG CHANGES ON THE HORIZON? A. Of course, telecommunications stocks can be volatile over any short period. However, when you think about where the industry may be 10 or so years down the road, the prospects are very exciting. The industry is reshaping itself, and I believe there will be many opportunities to benefit from this in the future. At present, I have the fund positioned pretty much as I want it to be. My current emphasis is on the wireless businesses, which should continue to grow briskly and benefit from the long distance companies' future spending plans, and on the regional operating companies, which also should continue to support fund growth. If carefully selected, I believe there could be some real bargains available in the international markets, and I may begin focusing some future attention there. FUND FACTS START DATE: July 29, 1985 SIZE: As of February 28, 1995, more than $369 million MANAGER: David Felman, since April 1994; manager, Fidelity Select Chemicals Portfolio, since January 1995; analyst, specialty chemicals, construction and engineering industries; joined Fidelity in 1992 (checkmark) TELECOMMUNICATIONS PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 80.7% SHARES VALUE (NOTE 1) ADVERTISING - 0.4% ADVERTISING AGENCIES - 0.4% ADVO-Systems, Inc. 79,500 $ 1,500,580 00758510 BROADCASTING - 5.0% CABLE TV OPERATORS - 4.3% Gaylord Entertainment Co. Class A 57,400 1,506,750 36790110 International Family Entertainment Class B (a) 1,500 19,500 45950M10 Tele-Communications, Inc. Class A (a) 9,750 221,813 87924V10 Time Warner, Inc. 200 7,725 88731510 Viacom, Inc. (a): Class A 88,628 4,099,045 92552410 Class B (non-vtg.) 217,285 9,723,504 92552430 (rights) 36,600 36,600 92552414 15,614,937 TELEVISION BROADCASTING - 0.7% Grupo Televisa GDS (b) 5,000 82,500 40049J20 Heritage Media Corp. Class A (a) 19,700 504,813 42724120 Multimedia, Inc. (a) 50,000 1,900,000 62545K10 2,487,313 TOTAL BROADCASTING 18,102,250 CELLULAR - 7.2% CELLULAR & COMMUNICATION SERVICES - 7.2% Airtouch Communications (a) 125,900 3,430,775 00949T10 BCE Mobile Communications, Inc. (a) 30,000 1,006,621 05534G10 Call-Net Enterprises Class B (a)(b) 20,000 98,953 13091030 Cellular Communications, Inc. (a) Class P 51,100 2,661,799 15091793 Series A (redeemable) 13,000 659,750 15091710 Century Telephone Enterprises,Inc. 200,887 6,252,608 15668610 Onecomm Corp. (a) 15,000 176,250 68243510 Rogers Cantel Mobile Communications, Inc. Class B (non-vtg.) (a) 120,600 3,113,616 77510210 Rogers Communications, Inc. Class B (a) 520,000 6,502,106 77510920 Vanguard Cellular Systems, Inc. Class A (a) 9,300 241,800 92202210 Vodafone Group PLC sponsored ADR 73,600 2,244,800 92857T10 26,389,078 COMMUNICATIONS EQUIPMENT - 11.9% TELEPHONE EQUIPMENT - 11.9% ADC Telecommunications, Inc. (a) 3,300 183,975 00088610 Boston Technology, Inc. (a) 18,800 294,925 10114330 DSC Communications Corp. (a) 121,200 4,363,200 23331110 Ericsson (L.M.) Telephone Co.: Class B 20,000 1,104,905 29482120 Class B ADR 251,500 14,304,063 29482140 Inter-Tel, Inc. (a) 6,500 73,938 45837210 InterVoice, Inc. (a) 10,000 151,250 46114210 Newbridge Networks Corp. (a) 18,400 623,300 65090110 Nokia Corp. AB sponsored ADR (a) 48,400 3,642,100 65490220 Nokia Corp. AB 88,700 13,279,768 65599910 Nokia Corp. Free shares 37,900 5,211,875 65599992 43,233,299 COMPUTER SERVICES & SOFTWARE - 1.1% CAD/CAM/CAE - 0.3% ECI Telecom Ltd. 10,000 152,500 26825810 EIS International, Inc. (a) 55,500 860,250 26853910 1,012,750 SHARES VALUE (NOTE 1) DATA PROCESSING - 0.8% Automatic Data Processing, Inc. 10,000 $ 615,000 05301510 Ceridian Corp. (a) 70,000 2,205,000 15677T10 2,820,000 TOTAL COMPUTER SERVICES & SOFTWARE 3,832,750 COMPUTERS & OFFICE EQUIPMENT - 0.7% COMPUTER PERIPHERALS - 0.7% Norand Corp. (a) 65,000 2,551,250 65542110 ELECTRICAL EQUIPMENT - 1.7% ELECTRICAL EQUIPMENT - WHOLESALE - 0.1% Antec Corp. (a) 5,900 128,325 03664P10 ELECTRICAL MACHINERY - 1.6% Philips Electronics NV 180,000 5,917,500 71833750 TOTAL ELECTRICAL EQUIPMENT 6,045,825 ELECTRONIC INSTRUMENTS - 0.1% ELECTRONIC EQUIPMENT - 0.1% Teradyne, Inc. (a) 7,700 280,088 88077010 ELECTRONICS - 2.4% ELECTRONIC PARTS - WHOLESALE - 0.3% Marshall Industries (a) 40,600 1,055,600 57239310 SEMICONDUCTORS - 2.1% Intel Corp. 30,300 2,416,425 45814010 Motorola, Inc. 93,000 5,347,500 62007610 Texas Instruments, Inc. 100 7,875 88250810 7,771,800 TOTAL ELECTRONICS 8,827,400 ENGINEERING - 1.1% WATER & SEWER PIPES - 1.1% Glenayre Technologies, Inc. (a) 103,950 4,183,988 37789910 MEDICAL FACILITIES MANAGEMENT - 0.0% HEALTH SERVICES - 0.0% Lambert Communications, Inc. (a) 190,000 45,600 51328G10 PRINTING - 0.9% MANIFOLD BUSINESS FORMS - 0.9% Reynolds & Reynolds Co. Class A 118,900 3,284,613 76169510 SERVICES - 0.1% PUBLIC RELATIONS SERVICES - 0.1% True North Communications 25,000 396,875 89784410 TELEPHONE SERVICES - 48.1% ALC Communications Corp. (a) 465,100 13,720,450 00157530 AT&T Corp. 82,800 4,284,900 00195710 ALLTEL Corp. 1,300 37,213 02003910 Ameritech Corp. 553,500 23,731,313 03095410 Bell Atlantic Corp. 273,700 14,677,163 07785310 BellSouth Corp. 226,800 13,381,200 07986010 British Telecommunications PLC ADR 5,000 298,750 11102140 Cincinnati Bell, Inc. 30,000 630,000 17187010 Comsat Corp., Series 1 41,750 741,063 20564D10 DDI Corp. Ord. 897 6,647,191 23399J22 Frontier Corp. 436,600 9,987,225 35906P10 GTE Corp. 167,773 5,599,424 36232010 Koninklijke PPT Nederland 305,000 10,753,324 72699422 Koninklijke PPT Nederland (a)(b) 44,200 1,558,351 72699423 Koninklijke PTT Nederland sponsored ADR (b) 20,000 702,500 78064110 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TELEPHONE SERVICES - CONTINUED LCI International, Inc. (a) 143,900 $ 3,165,800 50181310 LDDS Communications, Inc. (a) 139,712 3,274,500 50182L10 MFS Communications, Inc. (a) 60,000 2,085,000 55272T10 Nippon Telegraph & Telephone Corp. Ord. 142 1,012,661 65462492 NYNEX Corp. 258,700 10,153,975 67076810 Pacific Telesis Group 22,600 678,000 69489010 Southern New England Telecommunications Corp. 58,800 1,947,750 84348510 SBC Communications, Inc. 545,600 22,710,600 84533310 Sprint Corp. 45,600 1,333,800 85206110 Tele Denmark Class B AS (a) 30,000 1,526,810 87924292 Telecom Argentina Stet France Telecom SA 53,500 184,566 90899992 Telebras PN (Pfd. Reg.) 9,921,131 292,773 95499792 Telefonica de Argentina SA Class B 191,000 349,513 87999D92 Telefonica de Espana SA sponsored ADR 20,000 750,000 87938220 Telefonos de Mexico SA sponsored ADR representing shares Ord. Class L 130,000 3,591,250 87940378 Telephone & Data Systems, Inc. 179,855 8,205,884 87943310 Telus Corp. 10,000 119,643 87970R10 Telecom Italia Ord. 350,000 846,559 87999R22 US Long Distance Corp (a) 1,300 18,850 91191220 U.S. West, Inc. 156,700 6,072,125 91288910 175,070,126 TOTAL COMMON STOCKS (Cost $284,631,441) 293,743,722 PREFERRED STOCKS - 1.7% CONVERTIBLE PREFERRED STOCKS - 0.6% TELEPHONE SERVICES - 0.6% LCI International 10,000 300,000 50181320 Philippine Long Distance Telephone (GDR) 34,000 1,853,000 71825270 TOTAL CONVERTIBLE PREFERRED STOCKS 2,153,000 NONCONVERTIBLE PREFERRED STOCKS - 1.1% TELEPHONE SERVICES - 1.1% Stet (Societa Finanziaria Telefonica) Spa 945,200 2,166,947 85982592 Telecom Italia Ord. 1,000,000 1,941,720 87999R24 TOTAL NONCONVERTIBLE PREFERRED STOCKS 4,108,667 TOTAL PREFERRED STOCKS (Cost $6,586,975) 6,261,667 CONVERTIBLE BONDS - 0.2% PRINCIPAL AMOUNT COMMUNICATIONS EQUIPMENT - 0.2% TELEPHONE EQUIPMENT - 0.2% Ericsson (L.M.) Telephone Co. 4 1/4%, 6/30/00 (Cost $480,442) $ 345,700 636,088 294821AA REPURCHASE AGREEMENTS - 17.4% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 6.08% dated 2/28/95 due 3/1/95 $63,438,712 $ 63,428,000 99799QTW TOTAL INVESTMENT IN SECURITIES - 100% (Cost $355,126,858) $ 364,069,477 LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $2,442,304 or 0.7% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $352,762,383 and $411,539,600, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $164,640 for the period (see Note 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $3,014,000 and $3,151,000, respectively (see Note 7 of Notes to Financial Statements). The maximum loan and average daily loan balances during the periods for which loans were outstanding amounted to $6,463,000 and $5,133,250, respectively. The weighted average interest rate paid was 4.1% (see Note 8 of Notes to Financial Statements). Distribution of investments by country, as a percentage of total value of investment in securities, is as follows: United States 74.6% Finland 6.1 Netherland 5.2 Sweden 4.4 Canada 3.1 Japan 2.1 Italy 1.4 Mexico 1.0 Others (individually less than 1%) 2.1 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1995, the aggregate cost of investment securities for income tax purposes was $356,148,060. Net unrealized appreciation aggregated $7,921,417, of which $23,370,713 related to appreciated investment securities and $15,449,296 related to depreciated investment securities. The fund hereby designates $748,000 as a capital gain dividend for the purpose of the dividend paid deduction. TELECOMMUNICATIONS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $63,428,000) (cost $355,126,858) - $ 364,069,477 See accompanying schedule Cash 977 Receivable for investments sold 16,510,796 Receivable for fund shares sold 1,311,586 Dividends receivable 204,489 Interest receivable 612 Redemption fees receivable 603 Other receivables 57,054 TOTAL ASSETS 382,155,594 LIABILITIES Payable for investments purchased $ 6,639,369 Payable for fund shares redeemed 2,363,919 Accrued management fee 192,544 Other payables and 332,360 accrued expenses Collateral on securities loaned, 3,151,000 at value TOTAL LIABILITIES 12,679,192 NET ASSETS $ 369,476,402 Net Assets consist of: Paid in capital $ 353,058,870 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 7,474,913 Net unrealized appreciation (depreciation) on investments 8,942,619 NET ASSETS, for 9,636,303 shares outstanding $ 369,476,402 NET ASSET VALUE and redemption price per share ($369,476,402 (divided by) 9,636,303 shares) $38.34 Maximum offering price per share (100/97.00 of $38.34) $39.53
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INVESTMENT INCOME $ 6,730,453 Dividends Interest (including security lending fees of $83,828) 1,951,912 TOTAL INCOME 8,682,365 EXPENSES Management fee $ 2,320,344 Transfer agent 3,078,197 Fees Redemption fees (173,417 ) Accounting and security lending fees 380,164 Non-interested trustees' compensation 4,163 Custodian fees and expenses 63,987 Registration fees 100,369 Audit 46,870 Legal 6,462 Interest 2,332 Reports to shareholders 20,787 Miscellaneous 3,430 Total expenses before reductions 5,853,688 Expense reductions (46,248 5,807,440 ) NET INVESTMENT INCOME 2,874,925 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 13,111,872 Foreign currency transactions (3,416 13,108,456 ) Change in net unrealized appreciation (depreciation) on investment securities 10,501,018 NET GAIN (LOSS) 23,609,474 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 26,484,399 OTHER INFORMATION $1,442,750 Sales Charges Paid to FDC Deferred sales charges withheld $19,309 by FDC Exchange fees withheld by FSC $126,753
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ 2,874,925 $ 2,274,500 Net investment income Net realized gain (loss) 13,108,456 68,364,890 Change in net unrealized appreciation (depreciation) 10,501,018 (16,004,271 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 26,484,399 54,635,119 Distributions to shareholders: (3,125,414 (1,564,699 From net investment income ) ) From net realized gain (12,275,476 (37,644,735 ) ) TOTAL DISTRIBUTIONS (15,400,890 (39,209,434 ) ) Share transactions 199,692,240 778,655,072 Net proceeds from sales of shares Reinvestment of distributions 15,044,524 38,499,190 Cost of shares redeemed (227,502,551 (596,254,864 ) ) Paid in capital portion of redemption fees 133,502 361,815 Net increase (decrease) in net assets resulting from share transactions (12,632,285 221,261,213 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (1,548,776 236,686,898 ) NET ASSETS Beginning of period 371,025,178 134,338,280 End of period (including undistributed net investment income of $0 $ 369,476,402 $ 371,025,178 and $1,033,664, respectively) OTHER INFORMATION Shares Sold 5,395,122 19,999,193 Issued in reinvestment of distributions 417,307 1,056,452 Redeemed (6,175,717 (14,984,685 ) ) Net increase (decrease) (363,288) 6,070,960
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 37.10 $ 34.19 $ 29.22 $ 24.98 $ 23.19 Income from Investment Operations Net investment income .29 .25 .29 .36 .31 Net realized and unrealized gain (loss) 2.54 7.00 5.29 4.13 1.86 Total from investment operations 2.83 7.25 5.58 4.49 2.17 Less Distributions (.33) E (.20) (.18) (.28) (.43) From net investment income From net realized gain (1.27) E (4.18) (.48) - - Total distributions (1.60) (4.38) (.66) (.28) (.43) Redemption fees added to paid in capital .01 .04 .05 .03 .05 Net asset value, end of period $ 38.34 $ 37.10 $ 34.19 $ 29.22 $ 24.98 TOTAL RETURN B, C 7.98% 21.90% 19.49% 18.19% 9.83% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 369,476 $ 371,025 $ 134,338 $ 78,533 $ 55,162 Ratio of expenses to average net assets 1.55% 1.53% 1.74% A 1.90% 1.97% Ratio of expenses to average net assets before expense reductions 1.56% 1.54% 1.74% A 1.90% 1.97% Ratio of net investment income to average net assets .77% .64% 1.16% A 1.32% 1.35% Portfolio turnover rate 107% 241% 115% A 20% 262%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 9 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES (SEE NOTE 1 OF NOTES TO FINANCIAL STATEMENTS). MONEY MARKET PORTFOLIO PERFORMANCE PERFORMANCE To measure a money market fund's performance, you can look at either total return or yield. Total return reflects both the change in a fund's share price over a given period, and reinvestment of its dividends (or income). Yield measures the income paid by a fund. Since a money market fund tries to maintain a $1 share price, yield is an important measure of performance. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND MONEY MARKET 4.28% 25.45% 71.57% MONEY MARKET (INCL. 3% SALES CHARGE) 1.16% 21.69% 66.43% Average All Taxable Money Market Fund 4.18% 25.06% 70.53% Consumer Price Index 2.86% 17.89% 39.72% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or since the fund started on August 30, 1985. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050. To measure how the fund's performance stacked up against its peers, you can compare it to the average all taxable money market fund, which reflects the performance of 713 all taxable money market funds with similar objectives tracked by IBC/Donoghue's MONEY FUND REPORT(registered trademark) during the period covered by this report. Comparing the fund's performance to the consumer price index (CPI) helps show how your investment did compared to inflation. (The CPI and IBC/Donoghue returns are the closest available match to those covered by the fund.) AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF FEBRUARY 28, 1995 YEAR YEARS FUND MONEY MARKET 4.28% 4.64% 5.84% MONEY MARKET (INCL. 3% SALES CHARGE) 1.16% 4.00% 5.50% Average All Taxable Money Market Fund 4.18% 4.57% 5.78% Consumer Price Index 2.86% 3.35% 3.58% AVERAGE ANNUAL TOTAL RETURNS take the fund's actual (or cumulative) return and show you what would have happened if the fund had achieved that return by performing at a constant rate each year. YIELD Row: 1, Col: 1, Value: 2.48 Row: 1, Col: 2, Value: 2.79 Row: 1, Col: 3, Value: 2.32 Row: 2, Col: 1, Value: 3.64 Row: 2, Col: 2, Value: 3.51 Row: 2, Col: 3, Value: 2.38 Row: 3, Col: 1, Value: 4.26 Row: 3, Col: 2, Value: 4.08 Row: 3, Col: 3, Value: 2.45 Row: 4, Col: 1, Value: 4.470000000000001 Row: 4, Col: 2, Value: 4.84 Row: 4, Col: 3, Value: 2.68 Row: 5, Col: 1, Value: 5.85 Row: 5, Col: 2, Value: 5.49 Row: 5, Col: 3, Value: 2.88 6% - 4% - 2% - 0% Money Market Average All Taxable Money Market Fund MMDA 3/1/94 5/31/94 8/30/94 11/29/94 2/28/95 Money Market 2.48% 3.64% 4.26% 4.47% 5.85% Average All Taxable Money Market Fund 2.79% 3.51% 4.08% 4.84% 5.49% 2/23/94 6/1/94 8/25/94 11/30/94 3/1/95 MMDA 2.32% 2.38% 2.45% 2.68% 2.88% 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 average all taxable money market fund and the average bank money market deposit account (MMDA). Figures for the average all taxable money market fund are from the IBC/Donoghue's MONEY FUND REPORT.(registered trademark) The MMDA average is supplied by BANK RATE MONITOR.(Trademark) COMPARING PERFORMANCE There are some important differences between a bank money market deposit account (MMDA) and a money market fund. First, the U.S. government neither insures nor guarantees a money market fund. In fact, there is no assurance that a money fund will maintain a $1 share price. Second, a money market fund returns to its shareholders income earned by the fund's investments after expenses. This is in contrast to banks, which set their MMDA rates periodically based on current interest rates, competitors' rates, and internal criteria. (checkmark) John Todd, Portfolio Manager of Fidelity Select Money Market Portfolio Q. JOHN, WE'VE BEEN IN A RISING-RATE ENVIRONMENT NOW FOR MORE THAN A YEAR. CAN YOU BRING US UP TO DATE ON DEVELOPMENTS DURING THE PAST YEAR? A. Sure. The current cycle of rate increases began in February 1994, when the Federal Reserve Board raised the federal funds rate - what banks charge each other for overnight loans - from 3.00% to 3.25%. It was the first increase in five years and it signaled an important shift in monetary policy: the Fed's new aim was to slow the pace of economic growth and prevent a fresh outbreak of inflation. By the end of August, after five separate rate increases totaling one and three-quarters percentage points, the federal funds rate was 4.75%. It's worth noting that with the rate increase in August, the Fed hinted it had arrived at what it felt was a neutral monetary policy. Nevertheless, economic growth continued at what the Fed presumed was an inflationary pace, resulting in two more rate increases: three-quarters of a percentage point in November, and one-half percentage point in February 1995. In fact, until the final weeks of December, most market participants were anticipating several more rate increases in the first half of 1995. Then, suddenly, the mood shifted. The consensus now seems to be that rates may have peaked, or that only one more round of rate increases is in store. Q. WHY DID THE OUTLOOK SHIFT AT THE END OF THE PERIOD? A. It's hard to say, and I hasten to add that I don't share the market's optimism. During the fourth quarter of 1994, the economy grew at an annualized rate of 4.6%. That was the fastest growth rate we'd seen all year, well above the Fed's target rate of 2.5%. Then in late January and continuing through February we began to see signs - mainly in the employment and consumer spending numbers - that perhaps the growth rate was finally slowing down. The market reacted positively, and we saw a dramatic narrowing of the spread between short-term rates and long-term rates. But whether that indicates a fundamental shift in the interest rate environment, or simply a breather before rates head back up again, I think remains to be seen. Q. WHAT WAS YOUR STRATEGY DURING THE PAST SIX MONTHS? A. From last August through the fall months, I generally kept the fund's average maturity in the neutral range - between 40 and 50 days. Toward the end of the year, I extended the fund slightly, to as many as 52 days in November. I did so not because I believed rates had peaked, but because I felt the market had already factored the possibility of future rate increases into current yields. Then as 1995 began, I shortened the fund dramatically - to less than 28 days by the end of January - to prepare for what I assumed would be another rate increase in February. Since then, I've stayed shorter than my competitors on the theory that the market may be overreacting to recent signs of an economic slowdown. The fund's average maturity was 31 days at the end of February. Q. HOW DID THE FUND PERFORM? A. The fund's seven-day yield on February 28, 1995, was 5.85%, compared to 2.45% a year ago. The fund's total return during the past year was 4.28%. That beat the average total return of 4.18% for all taxable money market funds during the same period, according to IBC/Donoghue. Q. WHAT CAN WE EXPECT IN THE MONTHS AHEAD? A. The consensus in the market seems to be that the economy is indeed slowing down, and that interest rates have peaked. Again, I don't share that view. I still see ample evidence in the economy of what I would call a self-sustaining growth dynamic. That's not to say there won't be pauses along the way; that may be what's happening now. Moreover, I think you have to look at the economic crisis in Mexico, and consider the possible negative impact of that on U.S. exports and, by extension, the U.S. economy. So it may well be that the current pause in the growth rate will last longer than I originally anticipated. Still, I think it's only a matter of time before growth resumes at a pace that will cause the Fed to once again consider raising interest rates. That's enough for me to want to keep the fund's average maturity within the neutral to defensive range - from 30 to 40 days - for the foreseeable future. FUND FACTS START DATE: August 30, 1985 SIZE: as of February 28, 1995, more than $573 million MANAGER: John Todd, since January 1991; manager, Spartan Money Market Fund, since 1989; Daily Money Fund: Money Market and Fidelity Institutional Cash Portfolios: Money Market, since 1992; joined Fidelity in 1981 (checkmark) MONEY MARKET PORTFOLIO INVESTMENTS FEBRUARY 28, 1995 Showing Percentage of Total Value of Investment in Securities BANKERS' ACCEPTANCES - 4.6% ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) DOMESTIC BANKERS' ACCEPTANCES - 3.6% BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOC. 3/30/95 5.98% $ 23,000,000 $ 22,889,760 06399ACF NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 1.0% FUJI BANK, LTD. 3/28/95 6.15 6,000,000 5,972,595 35999CKD 28,862,355 CERTIFICATES OF DEPOSIT - 25.6% DOMESTIC CERTIFICATES OF DEPOSIT - 3.2% CHEMICAL BANK 3/31/95 6.03 20,000,000 20,000,000 163994QN NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 16.9% BANK OF NOVA SCOTIA 6/6/95 6.30 1,000,000 1,000,629 669991EB BANK OF TOKYO 3/24/95 6.04 2,000,000 2,000,286 0659935W BANQUE NATIONALE DE PARIS 4/6/95 5.72 10,000,000 10,000,371 055992NT BAYERISCHE LANDESBANK GIROZENTRALE 3/9/95 6.00 20,000,000 20,000,000 072990EJ CAISSE NATIONALE DE CREDIT AGRICOLE 4/28/95 5.91 5,000,000 4,999,478 1280059T COMMERZBANK, GERMANY 4/13/95 5.73 1,000,000 999,506 202990NY 4/14/95 5.73 10,000,000 10,000,000 202990NX FUJI BANK, LTD. 3/1/95 6.06 5,000,000 5,000,000 35999CJJ 4/10/95 6.13 5,000,000 5,000,000 35999CKG SANWA BANK, LTD. 3/24/95 6.08 3,000,000 3,000,424 804999TP SOCIETE GENERALE 3/17/95 5.93 20,000,000 20,000,000 833991VC SWISS BANK CORP. 3/6/95 6.32 10,000,000 10,000,000 870990YN 3/27/95 5.63 15,000,000 15,000,000 870990YK 107,000,694 LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 5.5% COMMERZBANK, GERMANY 4/13/95 6.07 10,000,000 10,000,070 202990PL NATIONAL WESTMINSTER BANK, PLC 5/9/95 6.01 25,000,000 25,000,138 638990JH 35,000,208 162,000,902 COMMERCIAL PAPER - 36.5% ABN-AMRO NORTH AMERICA FINANCE, INC. 4/14/95 5.71 5,000,000 4,966,083 03299BAR AMERICAN EXPRESS CREDIT CORP. 3/20/95 6.10 7,000,000 6,977,649 025990JA AMERICAN HOME PRODUCTS 3/6/95 6.01 3,275,000 3,272,271 026993CG ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) BEAR STEARNS COS., INC. 3/1/95 6.15% $ 10,000,000 $ 10,000,000 07399C4L 4/13/95 6.16 3,000,000 2,978,142 07399C2K CHRYSLER FINANCIAL CORPORATION 4/11/95 6.22 5,000,000 4,964,979 175992BU 4/17/95 6.25 5,000,000 4,959,658 175992BX 4/18/95 6.27 5,000,000 4,958,667 175992CB 4/24/95 6.20 5,000,000 4,954,025 175992CG COOPER INDUSTRIES, INC. 3/7/95 6.07 10,000,000 9,989,900 217990PT DAYTON HUDSON CORP. 3/29/95 6.05 7,000,000 6,967,224 239992KJ EIGER CAPITAL CORP. 3/21/95 6.03 8,000,000 7,973,333 278997BQ FORD MOTOR CREDIT CORP. 4/5/95 6.16 11,000,000 10,934,764 34599BYB 5/23/95 6.14 10,000,000 9,860,514 34599B2A GENERAL ELECTRIC CAPITAL CORP. 3/1/95 6.09 (a) 5,000,000 5,000,000 369998SA 4/24/95 5.87 10,000,000 9,914,500 369998RF 6/8/95 6.27 1,000,000 983,087 369998TS 6/12/95 6.27 1,000,000 982,404 369998TT GENERAL MOTORS ACCEPTANCE CORP. 5/8/95 6.36 8,000,000 7,905,253 638998XR 5/15/95 6.37 5,000,000 4,934,687 638998XN GENERALE BANK 3/27/95 5.66 15,000,000 14,940,417 371995CR ITT FINANCIAL 3/9/95 6.13 5,000,000 4,993,222 450990NU 3/10/95 6.13 5,000,000 4,992,375 450990NT 3/20/95 6.16 5,000,000 4,983,850 450990NY KREDIETBANK, N.A. FINANCE CORP. 4/28/95 5.89 5,000,000 4,953,922 50099DAP MERRILL LYNCH & CO., INC. 5/15/95 6.19 5,000,000 4,937,500 59099GDV MORGAN STANLEY GROUP, INC. 3/13/95 6.38 10,000,000 9,979,067 61799ELN NEW CENTER ASSET TRUST 4/17/95 6.17 5,000,000 4,960,181 643995EF PEPSICO 3/1/95 6.03 10,000,000 10,000,000 713991GG SIEMENS CORP. 4/25/95 5.86 10,000,000 9,912,917 8269909T TEXTRON, INC. 3/13/95 6.17 2,000,000 1,995,907 88599CEQ 3/20/95 6.16 2,000,000 1,993,529 88599CER TORONTO DOMINION HOLDINGS USA, INC. 3/1/95 5.20 10,000,000 10,000,000 89199AAK 3/1/95 5.21 5,000,000 5,000,000 89199AAJ 8/15/95 6.40 10,000,000 9,712,389 89199AAP U.S. WEST COMMUNICATIONS 4/3/95 6.09 3,900,000 3,878,371 91299DAC 230,710,787 FEDERAL AGENCIES - 3.9% ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) FEDERAL FARM CREDIT BANK - AGENCY COUPONS - 0.8% (A) 3/1/95 6.17% $ 5,000,000 $ 4,995,823 31331NMK FEDERAL HOME LOAN MORTGAGE CORP. - DISCOUNT NOTES - 2.3% 5/22/95 6.05 14,600,000 14,401,797 3559935D FEDERAL NATIONAL MORTGAGE ASSOC. - DISCOUNT NOTES - 0.8% 8/14/95 6.40 5,370,000 5,216,478 9950248W 24,614,098 BANK NOTES - 9.0% COMERICA BANK-DETROIT (A) 3/1/95 6.69 10,000,000 10,000,000 226990AX HUNTINGTON NATIONAL BANK (A) 3/1/95 6.15 12,000,000 11,995,792 4464389T NBD BANK, N.A. 4/7/95 5.80 10,000,000 10,000,000 634990BC PNC BANK, N.A. (A) 3/1/95 6.17 10,000,000 9,993,653 69399EAN 3/7/95 6.13 15,000,000 14,992,751 69399EAK 56,982,196 MASTER NOTES (A) - 1.1% J.P. MORGAN SECURITIES 3/1/95 6.33 7,000,000 7,000,000 61699B2A MEDIUM-TERM NOTES (A) - 8.5% ABBEY NATIONAL TREASURY SERVICE (B) 3/1/95 6.73 15,000,000 14,999,548 007994GT 3/31/95 6.50 15,000,000 15,000,000 010998AJ BENEFICIAL CORP. 3/1/95 6.53 3,000,000 3,000,000 08199BAX GENERAL MOTORS ACCEPTANCE CORP. 5/7/95 6.35 5,000,000 5,000,000 638998SX GOLDMAN SACHS GROUP, L.P. (THE) (B) 3/1/95 6.03 4,000,000 4,000,000 696992MK 5/16/95 6.30 4,000,000 4,000,000 696992ML NORWEST CORP. 3/15/95 6.37 8,000,000 8,000,000 66899CBK 53,999,548 SHORT-TERM NOTES (A) (C) - 2.2% SMM TRUST COMPANY (1994-E) 4/13/95 6.33 12,000,000 12,000,000 83199GAF 4/13/95 6.42 2,000,000 1,999,806 83199GAF 13,999,806 TIME DEPOSITS - 3.9% DAI-ICHI KANGYO BANK, LTD. 3/6/95 6.00 15,000,000 15,000,000 233991DD SAKURA BANK, LTD. 3/8/95 6.06 10,000,000 10,000,000 793999QD 25,000,000 MUNICIPAL SECURITIES - 0.7% ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) LOS ANGELES COUNTY TRANSPORTATION COMMISSION 3/1/95 6.28% $ 4,600,000 $ 4,600,000 545994BT REPURCHASE AGREEMENTS - 4.0% MATURITY AMOUNT Investments in repurchase agreements (U.S. Government Obligations), in a joint trading account, at 6.14%, dated 2/28/95 due 3/1/95 $ 25,440,339 25,436,000 99799QTU TOTAL INVESTMENTS - 100% $ 633,205,692 TOTAL COST FOR INCOME TAX PURPOSES - $633,205,692 LEGEND (a) The due dates on these types of securities reflect the next interest rate reset date or, when applicable, the final maturity date. (b) 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 $37,999,548 or 6.6% of net assets. (c) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (see Note 2 of Notes to Financial Statements). Additional information on each holding is as follows: ACQUISITION ACQUISITION SECURITY DATE COST SMM Trust Company: (1994-E) 4/13/94 $12,000,000 (1994-E) 5/23/94 $1,998,534 INCOME TAX INFORMATION At February 28, 1995, the fund had a capital loss carryforward of approximately $30,600 of which $3,200, $21,400, and $6,000 will expire on February 28, 1998, 2000, and 2002, respectively. MONEY MARKET PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1995 ASSETS Investment in securities, at value (including repurchase agreements of $25,436,000) - See accompanying $ 633,205,692 schedule Receivable for fund shares sold 64,892,605 Interest receivable 3,393,309 TOTAL ASSETS 701,491,606 LIABILITIES Payable for investments purchased $ 32,889,760 Payable for fund shares redeemed 94,915,260 Dividends payable 87,834 Accrued management fee 111,850 Other payables and accrued expenses 342,922 TOTAL LIABILITIES 128,347,626 NET ASSETS $ 573,143,980 Net Assets consist of: Paid in capital $ 573,174,518 Accumulated net realized gain (loss) on investments (30,538 ) NET ASSETS, for 573,169,260 shares outstanding $ 573,143,980 NET ASSET VALUE, offering price and redemption price per share ($573,143,980 (divided by) 573,169,260 shares) $1.00 Maximum offering price per share (100/97 of $1.00) $1.03
STATEMENT OF OPERATIONS
YEAR ENDED FEBRUARY 28, 1995 INTEREST INCOME $ 32,932,977 EXPENSES Management fee $ 1,380,366 Transfer agent fees 2,350,014 Accounting fees and expenses 100,919 Non-interested trustees' compensation 8,844 Custodian fees and expenses 36,670 Registration fees 479,209 Audit 57,704 Legal 10,014 Reports to shareholders 13,087 Miscellaneous 6,197 TOTAL EXPENSES 4,443,024 NET INTEREST INCOME 28,489,953 NET REALIZED GAIN (LOSS) 34,131 ON INVESTMENTS NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 28,524,084
OTHER INFORMATION Sales charges paid to FDC $3,280,023 Deferred sales charges withheld $156,149 by FDC STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS YEAR ENDED YEAR ENDED FEBRUARY 28, FEBRUARY 28, 1995 1994
Operations $ 28,489,953 $ 11,974,045 Net interest income Net realized gain (loss) 34,131 (5,966) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 28,524,084 11,968,079 Dividends to shareholders from net interest income (28,489,953) (11,974,045) Share transactions at net asset value of $1.00 per share 4,782,122,991 4,535,732,020 Proceeds from sales of shares Reinvestment of dividends from net interest income 26,192,515 10,826,362 Cost of shares redeemed (4,753,862,525) (4,459,028,175) Net increase (decrease) in net assets and shares resulting from share transactions 54,452,981 87,530,207 TOTAL INCREASE (DECREASE) IN NET ASSETS 54,487,112 87,524,241 NET ASSETS Beginning of period 518,656,868 431,132,627 End of period $ 573,143,980 $ 518,656,868
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
YEARS ENDED TEN MONTHS YEARS ENDED FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 Income from Investment Operations .042 .026 .026 .048 .073 Net interest income Less Distributions (.042) (.026) (.026) (.048) (.073) From net interest income Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 TOTAL RETURN B 4.28% 2.62% 2.63% 4.93% 7.50% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 573,144 $ 518,657 $ 431,133 $ 542,620 $ 608,394 Ratio of expenses to average net assets .65% .72% .56% A .64% .73% Ratio of net interest income to average net assets 4.19% 2.59% 3.09% A 4.84% 7.20%
A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. NOTES TO FINANCIAL STATEMENTS For the period ended February 28, 1995 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Select Portfolios (the trust) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The trust has thirty-five equity funds (the fund or the funds) which invest primarily in securities of companies whose principal business activities fall within specific industries; and a money market fund which invests in high quality money market instruments. Each fund is authorized to issue an unlimited number of shares. The American Gold Portfolio and the Precious Metals and Minerals Portfolio may also invest in certain precious metals. The 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 following consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities maturing within sixty days are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. Direct investments in precious metals in the form of bullion are valued at the most recent bid price quoted by a major bank on the New York Commodities Exchange. MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and certain conditions therein, securities are valued initially at cost and thereafter assume a constant amortization to maturity of any discount or premium. FOREIGN CURRENCY TRANSLATION. The accounting records of each fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts, and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Effective March 1, 1994, each fund adopted Statement of Position (SOP) 93-4: Foreign Currency Accounting and Financial Statement Presentation for Investment Companies. In accordance with this SOP, reported net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. Further, as permitted under the SOP, the effects of changes in foreign currency exchange rates on investments in securities are not segregated in the Statement of Operations from the effects of changes in market prices of those securities, but are included with the net realized and unrealized gain or loss on investment in securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, each fund is not subject to income taxes to the extent that it distributes all of its taxable income for the fiscal year. The schedules of investments include information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME: EQUITY FUNDS. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the funds are informed of the ex-dividend date. Interest income, which includes accretion of original issue discount, is accrued as earned. Dividend and interest income is recorded net of foreign taxes 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. Each equity fund prepays all expenses for registering fund shares for distribution under federal and state securities law. Prepaid expenses are 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 are primarily due to differing treatments for partnerships, non-taxable dividends, net operating losses, litigation, expiring capital loss carryforwards and losses deferred due to wash sales and excise tax regulations. The 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. REDEMPTION FEES. Shares redeemed 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 long-term redemption fee and the first $7.50 of the short-term redemption fee are accounted for as a reduction of transfer agent expenses. This portion of the redemption fee is used to offset the transaction costs and other expenses that short-term trading imposes on 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED REDEMPTION FEES - CONTINUED each fund and its shareholders. The remainder of the short-term redemption fee is accounted for as an addition to paid in capital. There is a $7.50 fee for shares exchanged into another Fidelity fund (see Note 5 of Notes to Financial Statements). This is in addition to the applicable redemption fees. SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FORWARD FOREIGN CURRENCY CONTRACTS. The equity funds may use forward foreign currency contracts to facilitate transactions in foreign securities and to manage each funds' currency exposure. Contracts to buy generally are used to acquire exposure to foreign currencies, while contracts to sell are used to hedge a fund's investments against currency fluctuations. Also, a contract to buy or sell can offset a previous contract. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of forward foreign currency contracts is determined using forward currency exchange rates supplied by a quotation service. Purchases and sales of forward foreign currency contracts having the same settlement date and broker are offset and any realized gain (loss) is recognized on the date of offset; otherwise, gain (loss) is recognized on settlement date. REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery of the underlying securities, whose market value is required to be at least 102% of the resale price at the time of purchase. The funds' investment adviser, Fidelity Management & Research Company (FMR), is responsible for determining that the value of these underlying securities remains at least equal to the resale price. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC), the funds, along with other registered investment companies having management contracts with FMR, may transfer uninvested cash balances into a joint trading account. These balances are invested in one or more repurchase agreements that are collateralized by U.S. Treasury or Federal Agency obligations. 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. INDEXED SECURITIES. The funds may invest in indexed securities whose values are linked either directly or inversely to changes in foreign currencies, interest rates, commodities, indices, or other underlying instruments. The funds use these securities to increase or decrease their exposure to different underlying instruments and to gain exposure to markets that might be difficult to invest in through conventional securities. Indexed securities may be more volatile than their underlying instruments, but any loss is limited to the amount of the original investment. RESTRICTED SECURITIES. The funds are permitted to invest in privately placed restricted securities. These securities 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. At the end of the period, restricted securities (excluding 144A issues) amounted to $678,125, $3,244,165 and $13,999,806, or 0.2%, 1.4% and 2.4% of the net assets of Biotechnology Portfolio, Software and Computer Services Portfolio and Money Market Portfolio, respectively. 3. JOINT TRADING ACCOUNT. At the end of the period, the following funds had 20% or more of their total investments in repurchase agreements through a joint trading account. These repurchase agreements were with entities whose creditworthiness has been reviewed and found satisfactory by FMR. The repurchase agreements were dated February 28, 1995 and due March 1, 1995. The maturity values of the joint trading account investments were $50,886,593 for Food and Agriculture Portfolio, $76,222,871 for Home Finance Portfolio, $37,970,412 for Regional Banks Portfolio, and $143,675,261 for Biotechnology Portfolio, all at 6.08%. The investments in repurchase agreements through the joint trading account are summarized as follows: SUMMARY OF JOINT TRADING Number of dealers or banks 21 Maximum amount with one dealer or bank 12 1/2% Aggregate principal amount of agreements $15,952,334,000 Aggregate maturity amount of agreements $15,955,030,324 Aggregate market value of collateral $16,296,226,313 Coupon rates of collateral 0% to 15 3/4% Maturity dates of collateral 3/1/95 to 2/15/25 4. PURCHASES AND SALES OF INVESTMENTS. Information regarding purchases and sales of securities (other than short-term securities) is included under the caption "Other Information" at the end of each equity fund's schedule of investments. 5. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As each fund's investment adviser, FMR receives a monthly fee. For each equity fund, the monthly fee is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of each fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The 5. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED MANAGEMENT FEE - CONTINUED rates ranged from .2850% to .5200% for the period March 1, 1994 to July 31, 1994, and .2700% to .5200% for the period August 1, 1994 to February 28, 1995. In the event that these rates were lower than the contractual rates in effect during those periods, 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 annual rate of .62% of average net assets for each equity fund. 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 .1325% to .3700% for the period March 1, 1994 to July 31, 1994, and from .1200% to .3700% for the period August 1, 1994 to February 28, 1995. In the event that these rates were lower than the contractual rates in effect during those periods, 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 yield exceeds 5%. At that time, the fee would equal 6% of that portion of the fund's gross income that represents a gross yield of more than 5% per year. The maximum income-based component is .24% (annualized) of average net assets. For the period, the management fee was equivalent to an annual rate of .20% of 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, and after reducing the fee for any payments by FMR pursuant to the fund's Distribution and Service Plan. 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 FEE. Fidelity Service Co. (FSC), an affiliate of FMR, is the funds' transfer, dividend disbursing and shareholder servicing agent. During the period March 1, 1994 to December 31, 1994, FSC received fees based on the type, size, number of accounts and the number of transactions made by shareholders. Effective January 1, 1995, the Board of Trustees approved a revised transfer agent fee contract pursuant to which FSC receives account fees and asset-based fees that vary according to account size. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the funds' accounting records and administers their security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses. EXCHANGE FEES. FSC charges an exchange fee of $7.50 to cover administrative costs associated with exchanges out of an equity fund to any other Fidelity fund. The exchange fees retained by FSC are shown under the caption "Other Information" on each fund's Statement of Operations. BROKERAGE COMMISSIONS. Each equity fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms are shown under the caption "Other Information" on each fund's schedule of investments. 6. INTERFUND LENDING PROGRAM. Certain funds participated in the interfund lending program as a borrower. The maximum loan, average daily loan balances and the weighted average interest rates, during the periods for which loans were outstanding are as follows: AVERAGE WEIGHTED MAXIMUM DAILY AVERAGE LOAN LOAN BALANCE INTEREST RATE Computers Portfolio $32,836,000 $14,692,467 4.0% Electronics Portfolio $28,856,000 $19,714,500 4.0% Energy Service Portfolio $20,020,000 $14,261,429 4.6% Retailing Portfolio $17,178,000 $17,178,000 4.5% Interest expense includes $24,406, $8,656, $12,675 and $2,161 paid under the interfund lending program for Computers Portfolio, Electronics Portfolio, Energy Service Portfolio and Retailing Portfolio, respectively. Certain funds participated in the interfund lending program as a lender. The maximum loan, the average daily loan balances and the weighted average interest rates, during the periods for which loans were outstanding are as follows: AVERAGE WEIGHTED MAXIMUM DAILY AVERAGE LOAN LOAN BALANCE INTEREST RATE American Gold Portfolio $21,109,000 $19,072,286 4.0% Health Care Portfolio $12,452,000 $4,786,500 3.9% Precious Metals and Minerals Portfolio $15,357,000 $7,849,667 3.9% Interest income includes $14,727, $4,190 and $5,087, earned from the interfund lending program for American Gold Portfolio, Health Care Portfolio, and Precious Metals and Minerals Portfolio, respectively. 7. SECURITY LENDING. Certain equity funds loaned securities to certain brokers who paid the fund negotiated lenders' fees during the period. These fees are included in interest income. Each fund receives U.S. Treasury 7. SECURITY LENDING FEES - CONTINUED 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" on each fund's schedule of investments. 8. BANK BORROWINGS. Each fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. The funds have 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. At the period end, the maximum loan and average daily loan balances during the periods for which loans were outstanding are shown under the caption "Other Information" on each fund's schedule of investments. 9. EXPENSE REDUCTIONS. FMR voluntarily limits expenses, excluding interest, taxes, brokerage commissions and extraordinary expenses of each fund to 2.5% of average net assets. In addition, FMR has agreed to reimburse each fund in accordance with a state expense limitation if, and to the extent that, the total operating expenses of each fund, excluding interest, taxes, brokerage commissions and extraordinary expenses, are in excess of specified percentages of the average net assets of the fund for its fiscal year. The lowest limitation applicable to the fund is either the lesser of 2.5% of average net assets; or 2.5% of the first $30 million of average net assets, 2% of the next $70 million and 1.5% of the excess. FMR retains the ability to be repaid by a fund for these expense reimbursements in the amount that the expenses fall below the limit prior to the end of the fiscal year. The reimbursement under these arrangements amounted to $35,895, $111,215, $25,374 and $75,680 for Air Transportation Portfolio, Brokerage and Investment Management Portfolio, Consumer Products Portfolio, and Defense and Aerospace Portfolio, respectively. In addition, FMR directed certain portfolio trades to brokers who paid a portion of the funds' expenses (soft-dollar arrangement). For the period, the aggregate reductions under this arrangement totalled $837,195. Funds are not eligible for expense reductions under a soft-dollar arrangement while under any voluntary or state expense limitation. Funds may have a combination of any three of the aforementioned expense reductions during the year. 10. MERGERS. Pursuant to an Agreement and Plan of Reorganization approved by the shareholders of Electric Utilities Portfolio at a meeting held on February 16, 1994, Utilities Growth Portfolio (formerly Utilities Portfolio) acquired substantially all of the assets of the Electric Utilities Portfolio on February 25, 1994. The acquisition was accomplished by a tax-free exchange of assets of Electric Utilities Portfolio in exchange for 458,728 shares of Utilities Growth Portfolio (valued at $36.36 per share). Electric Utilities Portfolio's net assets at that date (valued at $16,679,364), including $1,838,111 of unrealized appreciation were combined with those of Utilities Growth Portfolio. The aggregate net assets of Utilities Growth Portfolio and Electric Utilities Portfolio immediately before the acquisition were $233,107,469 and $16,679,364, respectively. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees and the Shareholders of Fidelity Select Portfolios: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of each of the thirty-six funds constituting Fidelity Select Portfolios at February 28, 1995, the results of their operations for the year then ended, the changes in their net assets and the financial highlights for the periods indicated in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Select Portfolios' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities owned at February 28, 1995 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmations from brokers were not received, provide a reasonable basis for the opinion expressed above. /s/PRICE WATERHOUSE LLP PRICE WATERHOUSE LLP Boston, Massachusetts April 19, 1995 TO THE SHAREHOLDERS The Board of Trustees of Fidelity Select Portfolios voted to pay on each fund's pay date, to shareholders of record at the opening of business on each fund's respective record date, a distribution derived from capital gains realized from the sale of portfolio securities, and a dividend derived from net investment income, for each of the following funds: AMOUNTS PER SHARE RECORD & FUND EX-DATE PAY DATE DIVIDENDS CAPITAL GAINS TOTAL REINVESTMENT PRICE Brokerage and Investment Management 4/13/95 4/17/95 $ - $ .49 $ .49 $15.50 Chemicals 4/7/95 4/10/95 .08 .46 .54 34.56 Computers 4/7/95 4/10/95 - .42 .42 32.54 Consumer Products 4/7/95 4/10/95 - .06 .06 14.37 Developing Communications 4/7/95 4/10/95 - 1.53 1.53 18.93 Energy 4/13/95 4/17/95 - .06 .06 16.92 Food and Agriculture 4/7/95 4/10/95 .03 .52 .55 33.01 Health Care 4/7/95 4/10/95 .05 .36 .41 78.88 Industrial Equipment 4/13/95 4/17/95 .01 - .01 22.14 Industrial Materials 4/13/95 4/17/95 .04 - .04 23.99 Insurance 4/7/95 4/10/95 .04 - .04 21.80 Leisure 4/13/95 4/17/95 - .29 .29 41.84 Medical Delivery 4/7/95 4/10/95 - .07 .07 24.17 Natural Gas 4/13/95 4/17/95 .01 - .01 9.56 Paper and Forest Products 4/13/95 4/17/95 - .21 .21 21.37 Technology 4/13/95 4/17/95 - 1.38 1.38 44.52 Telecommunications 4/13/95 4/17/95 - .82 .82 38.89 Utilities Growth 4/7/95 4/10/95 .05 - .05 35.68 FEDERAL TAX STATUS Dividend and capital gain distributions will be taxable regardless of whether you take them in cash or in additional shares. You will be notified at a later date as to the tax treatment of these distributions and dividends. If you receive additional shares, the amount received should be treated as an additional purchase and added to your cost basis. The reinvestment price is the 10:00 A.M. price on each fund's ex-date. NOTE: IF YOUR ACCOUNT IS A FIDELITY PROTOTYPE RETIREMENT PLAN SUCH AS AN INDIVIDUAL RETIREMENT ACCOUNT (IRA), A KEOGH PLAN, A 403(B), OR A QUALIFIED PENSION OR PROFIT SHARING PLAN, THE ABOVE DATA IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND IS NOT REPORTABLE FOR TAX PURPOSES IN 1995. STATISTICAL ROUNDUP: FIDELITY SELECT PORTFOLIOS(REGISTERED TRADEMARK) LEGEND TOTAL RETURNS include change in share price and reinvestment of dividends and capital gains. CUMULATIVE TOTAL RETURNS do not reflect Select's 3% sales charge. However, each Fund Update includes load-adjusted cumulative total returns. AVERAGE ANNUAL RETURNS are load-adjusted. Average Annual Returns assume a steady compounded rate of return and are not year-by-year results, which fluctuated over the periods shown. LIFE OF FUND figures are from commencement of operations to February 28, 1995. Figures for the 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 Corporation. If the advisor had not reimbursed certain expenses for some of the funds during the periods shown, those funds' returns would have been lower. Air Transportation, Brokerage and Investment Management, Consumer Products and Defense and Aerospace received reimbursement from the advisor for the year ended February 28, 1995. Expense reimbursements may be revised at any time. 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. VOLATILITY Volatility measures the variability of a return from its mean, in terms of STANDARD DEVIATIONS. (Standard deviation measures the variation from the mean for a series of numbers.) Measures of volatility are based on historical performance and seek to compare each fund's relative share price fluctuations or total returns compared to the S&P 500. (Volatility measures are not calculated for funds which are less than three years old.) Volatility measures are given to investors to assist in determining the historical risk versus return relationship between the fund and a benchmark index. THE CALCULATIONS ARE NOT MEANT TO PREDICT PERFORMANCE and may change quickly as fund composition and company fundamentals change. A fund's RELATIVE VOLATILITY is a ratio that compares the fund's volatility to the volatility of a benchmark index, such as the S&P 500. By definition, the S&P 500 has a relative volatility of 1.0. A fund with a relative volatility greater than 1.0 has had returns that have been more variable than those returns of the benchmark index, while a fund with a relative volatility less than 1.0 would have had less volatility than the benchmark index. MEDIAN PRICE/SALES This figure represents the median price-to-sales ratio for all the stocks in a fund on a given date. A stock's price-to-sales ratio compares the company's market value with its total revenue. The ratio is calculated by dividing the stock price by the most recent 12 months' revenues per share. All price-to-sales ratios are from company 10Q filings. Excluded from the median price/sales calculations are foreign companies without ADRs (American Depository Receipts), IPOs (Initial Public Offerings) and certain financial companies. As a result, figures are not available for Precious Metals and Minerals Portfolio. MEDIAN PRICE/BOOK This figure represents the median price-to-book ratio of all the stocks in a fund on a given date. A stock's price-to-book ratio compares the company's market value with its book value or net asset value. The ratio is calculated by dividing the stock price by the book value per share. All price-to-book ratios are from company 10Q filings. Excluded from the median price/book calculations are foreign companies without ADRs and certain financial companies. As a result, figures are not available for Precious Metals and Minerals Portfolio. STATISTICAL ROUNDUP(DAGGER) (UNAUDITED) CUMULATIVE TOTAL RETURNS AVERAGE ANNUAL RETURNS OPENING CLOSING FOR PERIODS ENDED 2/28/95 FOR PERIODS ENDED 2/28/95 NAV NAV YTD 1 YEAR LIFE OF FUND 1 YEAR 5 YEARS LIFE OF FUND 3/1/94 2/28/95 Air Transportation (12/16/85) 12.07% -12.45% 91.85% -15.08% 7.32% 6.98% $ 17.12 $13.93 American Gold (12/16/85) -7.38 -18.62 87.12 -21.06 0.14 6.69 22.66 18.44 Automotive (6/30/86) 2.48 -12.59 181.58 -15.21 16.27 12.28 25.48 19.84 Biotechnology (12/16/85) 8.07 -8.37 243.84 -11.12 17.05 13.97 27.61 25.30 Brokerage and Investment Mgmt. (7/29/85) 2.44 -12.62 110.92 -15.24 14.81 7.75 17.75 15.51 Chemicals (7/29/85) 3.04 9.90 394.52 6.60 14.90 17.75 31.66 33.91 Computers (7/29/85) 4.57 13.51 256.75 10.10 22.43 13.81 27.02 30.67 Construction and Housing (9/29/86) 5.27 -12.54 154.39 -15.17 12.70 11.32 19.82 16.79 Consumer Products (6/29/90) 1.53 -4.59 74.97 -7.45 - 11.98 15.24 13.91 Defense and Aerospace* (5/8/84) 7.21 4.13 124.36 1.01 11.77 7.45 19.14 19.64 Developing Communications (6/29/90) 0.79 13.63 161.21 10.22 - 22.01 19.65 20.40 Electronics (7/29/85) 7.08 12.05 134.30 8.69 21.31 8.93 17.67 19.80 Energy* (7/14/81) 1.45 0.04 128.25 -2.96 2.19 6.00 16.73 16.10 Energy Service (12/16/85) 7.45 7.60 26.21 4.37 -0.06 2.22 11.66 11.97 Environmental Services (6/29/89) 1.38 -13.91 10.60 -16.50 -0.30 1.25 11.93 10.27 Financial Services* (12/10/81) 11.85 4.72 706.87 1.58 17.74 16.83 51.24 48.23 Food and Agriculture (7/29/85) 6.31 10.14 409.09 6.83 14.41 18.11 31.49 32.53 Health Care* (7/14/81) 7.53 31.24 1,204.49 27.30 21.27 20.45 63.31 76.13 Home Finance (12/16/85) 12.14 12.43 396.76 9.06 26.95 18.62 25.03 23.92 Industrial Equipment (9/29/86) 2.40 -1.93 115.54 -4.87 11.52 9.15 20.61 20.04 Industrial Materials (9/29/86) 5.33 7.65 146.97 4.42 12.54 10.93 21.67 23.13 Insurance (12/16/85) 6.76 9.79 170.98 6.50 12.37 11.06 19.41 21.31 Leisure* (5/8/84) 6.38 -1.07 497.49 -4.04 13.09 17.63 45.30 40.71 Medical Delivery (6/30/86) 5.99 19.63 216.92 16.04 21.70 13.82 20.28 23.18 Multimedia (6/30/86) 5.28 9.35 268.28 6.07 16.47 15.81 23.87 22.35 Natural Gas (4/21/93) 3.22 -5.06 -8.70 -7.91 - -6.32 9.48 8.98 Paper and Forest Products (6/30/86) 9.19 14.91 162.98 11.46 14.90 11.40 19.61 21.14 Precious Metals and Minerals* (7/14/81) -13.63 -6.86 86.26 -9.65 2.15 4.43 16.62 15.27 Regional Banks (6/30/86) 10.63 7.79 217.37 4.55 19.78 13.84 17.99 18.01 Retailing (12/16/85) 0.13 -4.01 290.27 -6.89 16.33 15.55 24.91 23.91 Software and Computer Services (7/29/85) 6.52 1.97 378.68 -1.09 22.64 17.35 28.89 29.07 Technology* (7/14/81) 1.67 4.61 491.33 1.47 21.09 13.66 41.83 42.05 Telecommunications (7/29/85) 2.29 7.98 411.18 4.74 13.78 18.16 37.10 38.34 Transportation (9/29/86) 6.43 5.90 224.95 2.72 16.16 14.60 21.67 20.53 Utilities Growth*(diamond) (12/10/81) 5.44 0.21 525.12 -2.79 8.61 14.59 36.61 34.88 S&P 500 6.59 7.36 - 7.36 11.35 - 467.14 487.39 * Ten-year Average Annual Total Returns for the period ended 2/28/95 for these funds were as follows: Defense and Aerospace = 5.00%; Energy = 7.05%; Financial Services = 13.51%; Health Care = 19.82%; Leisure = 15.59%; Precious Metals and Minerals = 6.43%; Technology = 9.17%; Utilities Growth = 12.83%. (dagger) See "Legend" on page for explanation of information on this table. (dagger)(dagger) Total net assets are based on 4:00 p.m. prices. (diamond) Formerly Utilities ** High/Low NAVs are based on 4:00 p.m. prices for the period 3/1/94 - 2/28/95. HIGH LOW TOTAL NET ASSETS(DAGGER)(DAGGER) DISTRIBUTIONS MEDIAN MEDIAN NAV** NAV** $MM 1/1/94-12/31/94 PRICE/SALES PRICE/BOOK FOR 12 MONTHS ENDED 2/28/95 2/28/94 2/28/95 CAP GAINS DIVS RELATIVE VOLATILITY AS OF 2/28/95 $17.25 $11.99 $ 11.0 $18.6 $31.09 $ - 2.06 $0.51 $2.34 23.97 17.83 347.4 278.2 - - 3.06 3.61 2.98 26.01 18.01 228.7 60.1 2.26 0.05 1.54 0.69 2.86 27.41 22.54 481.1 448.2 - - 2.41 7.90 3.24 17.62 14.37 59.8 27.3 - - 2.08 0.84 1.49 35.79 30.29 62.2 97.5 0.60 0.22 1.38 0.87 2.70 31.11 23.79 120.4 215.0 - - 2.26 1.08 2.63 20.17 15.07 81.0 16.9 0.52 - 1.53 0.73 1.83 15.38 12.91 8.4 20.5 0.60 - 1.41 1.60 4.62 19.64 17.43 11.1 5.0 0.27 - 1.40 0.51 1.91 20.74 15.25 222.1 254.4 1.67 - 2.09 2.15 3.95 19.87 15.86 111.0 216.4 - - 1.93 2.03 3.37 17.90 15.39 145.5 96.0 0.54 0.08 1.85 1.04 2.01 12.50 10.61 40.9 63.8 0.48 0.02 2.14 1.21 1.69 11.85 9.62 66.0 31.3 - - 1.70 1.20 1.88 54.93 41.61 116.2 153.1 3.93 0.79 1.74 0.97 1.54 32.69 28.20 95.0 197.1 1.85 0.08 1.05 0.84 3.07 76.90 58.13 522.9 943.1 5.74 0.62 2.00 1.48 2.39 27.74 20.99 155.6 229.9 3.60 0.12 1.85 1.22 0.96 20.92 17.73 206.0 110.0 0.16 0.01 1.50 0.69 2.22 23.82 20.73 155.7 183.5 - 0.18 1.49 0.85 2.18 21.31 18.17 18.4 21.8 - - 1.41 0.87 1.40 45.73 36.25 105.8 69.6 3.93 - 1.39 1.76 3.12 23.73 19.22 188.6 299.6 0.89 0.06 2.36 1.45 3.23 24.27 19.00 49.2 38.2 3.21 - 1.48 1.47 2.52 10.05 8.41 63.1 79.9 - 0.02 - 1.04 1.70 21.90 16.42 66.9 94.2 1.17 - 2.00 0.76 1.92 20.33 14.60 409.2 364.2 - 0.23 3.40 - - 19.85 16.27 97.4 164.6 0.98 0.29 1.70 1.46 1.41 25.90 22.85 52.8 31.1 - - 1.57 0.46 2.37 29.39 19.81 178.0 236.4 0.33 - 2.42 3.50 4.84 44.41 34.13 202.5 229.8 1.50 - 1.98 1.32 2.98 39.95 34.86 371.0 369.5 1.27 0.33 1.43 1.65 2.76 22.23 17.94 13.1 12.7 2.19 - 1.33 0.79 2.41 36.88 32.95 250.5 237.6 0.67 1.05 1.08 1.08 1.44 488.11 438.92 - - - - - 0.97 3.24 INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Management & Research FMR Texas Inc., Irving, TX Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, PRESIDENT J. Gary Burkhead, SENIOR VICE PRESIDENT William J. Hayes, VICE PRESIDENT Arthur S. Loring, SECRETARY Stephen P. Jonas, TREASURER Thomas D. Maher, ASSISTANT VICE PRESIDENT, MONEY MARKET FUND John H. Costello, ASSISTANT TREASURER Leonard M. Rush, ASSISTANT TREASURER Michael D. Conway, ASSISTANT TREASURER, MONEY MARKET FUND Robert H. Morrison, MANAGER, SECURITY TRANSACTIONS BOARD OF TRUSTEES J. Gary Burkhead Ralph F. Cox * Phyllis Burke Davis * Richard J. Flynn * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Edward H. Malone * Marvin L. Mann * Gerald C. McDonough * Thomas R. Williams * GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Co. Boston, MA CUSTODIANS Brown Brothers Harriman & Co. Boston, MA and The Bank of New York New York, NY CORPORATE HEADQUARTERS 82 Devonshire Street Boston, MA 02109 1-800-544-8888 * INDEPENDENT TRUSTEES FIDELITY SELECT PORTFOLIOS CONSUMER SECTOR Consumer Products Food and Agriculture Leisure Multimedia Retailing CYCLICALS SECTOR Air Transportation Automotive Chemicals Construction and Housing Environmental Services Industrial Equipment Industrial Materials Paper and Forest Products Transportation ENERGY, UTILITIES & NATURAL RESOURCES SECTOR American Gold Energy Energy Service Natural Gas Precious Metals and Minerals Utilities Growth FINANCIAL SERVICES SECTOR Brokerage and Investment Management Financial Services Home Finance Insurance Regional Banks HEALTH CARE SECTOR Biotechnology Health Care Medical Delivery TECHNOLOGY SECTOR Computers Defense and Aerospace Developing Communications Electronics Software and Computer Services Technology Telecommunications Money Market THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Account Balances 1-800-544-7544 Exchanges/Redemptions 1-800-544-7777 Mutual Fund Quotes 1-800-544-8544 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) AUTOMATED LINES FOR QUICKEST SERVICE FIDELITY INVESTMENTS P.O. Box 193 BOSTON, MA 02101 BULK RATE U.S. Postage PAID Fidelity Investments -----END PRIVACY-ENHANCED MESSAGE-----