-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Lz8Ul8/1JKKQ2+YmI/9vAks3ohs2Ff6xrfs+uBSIDx0Pk+qNHMOgjel40VtKFSDW bwbf9nGgP0etxtB2gDfLkw== 0000320351-95-000040.txt : 19951018 0000320351-95-000040.hdr.sgml : 19951018 ACCESSION NUMBER: 0000320351-95-000040 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19951017 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: 95581164 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 SEMIANNUAL REPORT AUGUST 31, 1995 CONTENTS
PERFORMANCE OVERVIEW AND MARKET RECAP 2 FUND UPDATES* CONSUMER SECTOR 4 CONSUMER PRODUCTS 10 FOOD AND AGRICULTURE 15 LEISURE 22 MULTIMEDIA 28 RETAILING CYCLICALS SECTOR 34 AIR TRANSPORTATION 40 AUTOMOTIVE 46 CHEMICALS 52 CONSTRUCTION AND HOUSING 58 ENVIRONMENTAL SERVICES 64 INDUSTRIAL EQUIPMENT 70 INDUSTRIAL MATERIALS 76 PAPER AND FOREST PRODUCTS 81 TRANSPORTATION ENERGY, UTILITIES AND 86 AMERICAN GOLD NATURAL RESOURCES SECTOR 92 ENERGY 98 ENERGY SERVICE 103 NATURAL GAS 109 PRECIOUS METALS AND MINERALS 115 UTILITIES GROWTH FINANCIAL SERVICES SECTOR 121 BROKERAGE AND INVESTMENT MANAGEMENT 126 FINANCIAL SERVICES 131 HOME FINANCE 137 INSURANCE 142 REGIONAL BANKS HEALTH CARE SECTOR 147 BIOTECHNOLOGY 153 HEALTH CARE 159 MEDICAL DELIVERY TECHNOLOGY SECTOR 165 COMPUTERS 172 DEFENSE AND AEROSPACE 178 DEVELOPING COMMUNICATIONS 184 ELECTRONICS 191 SOFTWARE AND COMPUTER SERVICES 197 TECHNOLOGY 205 TELECOMMUNICATIONS 211 MONEY MARKET NOTES TO FINANCIAL STATEMENTS 217 FOOTNOTES TO THE FINANCIAL STATEMENTS STATISTICAL ROUNDUP 221 * 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 six-month period ended August 31, 1995, was an excellent period for most equity investors. The Standard & Poor's Composite Index of 500 Stocks (S&P 500) returned 16.81% during the period, including reinvested dividends. Overall, 21 out of 35 Select equity portfolios outperformed the S&P 500 during the period. As one would expect with this group of individually focused portfolios, returns among the portfolios varied considerably. For example, Electronics generated a return of 75.05% over the six-month period while Transportation produced a return of 7.06%. All portfolios produced positive returns during the six-month period. For the 12 months ended August 31, 1995, the S&P 500 returned 21.45% and 14 out of 35 Select equity portfolios outperformed the index. The backdrop for the very positive market environment over the six-month period was a favorable interest rate environment, a somewhat slower but steady economy and diminishing inflationary pressures. In addition, capital spending geared toward enhancing corporate productivity remained at a very high level. Accordingly, this environment was very favorable for companies that produce TECHNOLOGY-related products. Electronics, Computers, Technology, Developing Communications, and Software and Computer Services produced impressive returns which ranged from 30.13% to 75.05%. This level of returns, however, is unlikely to be repeated over such a brief period and Select investors should temper and maintain moderate expectations for the months ahead. Despite what would normally be a positive environment for CYCLICALS - those stocks that tend to rise and fall in step with the economy - the Select portfolios that invest in this sector generally lagged the S&P 500. Certainly, at this late stage of the economic upswing, the prospect of a slower economy impacted this sector. Paper and Forest Products, Industrial Materials, and Chemicals underperformed the S&P 500 mainly due to the prospects for pricing pressures on key products resulting from growing supplies for companies in these sectors. Companies in the Construction and Housing, Automotive, and Transportation portfolios were certainly impacted by lower levels of demand for their products. Two portfolios which bucked the trend were Air Transportation and Industrial Equipment. Air Transportation benefited from special factors affecting the competitive environment for airlines in the U.S., while Industrial Equipment companies continued to work down high profit margin backlogs of demand. Interest rate-sensitive stocks in the FINANCIAL SERVICES sector performed nicely over the past six months. However, the catalyst for the good performance was not necessarily interest rates. The main driver of performance was a continuation of merger and acquisition activity spurred by recent regulatory changes which indirectly gave banks and financial services companies incentives to broaden products and services over larger geographical areas. The steady economy also kept loan growth at good levels and credit problems relative to reserves at manageable levels. These factors benefited Home Finance, Brokerage and Investment Management, Regional Banks, Financial Services, and Insurance. Companies that focus their activities in the CONSUMER products sector continued to be challenged by cyclical and, in some cases, secular pressures. The absence of pricing flexibility in many areas has forced many consumer products companies to restructure operations and rationalize distribution methods and channels. In some cases, these activities have been best accomplished through mergers and acquisitions. These trends seemed to be most evident at the points closest to the consumer, such as retailing, which has suffered from an oversupply condition. Hence, it is not surprising that Retailing, Consumer Products, and Food and Agriculture lagged the S&P 500 over the past six months. One very positive note, however, is that the entertainment and media sectors experienced some very high profile merger and acquisition transactions. Again, a changing regulatory environment spurred some of these activities. Beneficiaries were Multimedia and Leisure. The HEALTH CARE sector continued to face many crosscurrents leading to divergent returns among various subsegments of the industry. Companies that manufacture products or provide services that improve the efficiency of the overall health care system continued to produce generous returns for shareholders. Companies involved in the delivery and administration of these products and services, however, have been under continued pressure to reduce prices. Hence, it is not surprising that Biotechnology and Health Care outperformed the S&P 500 over the six-month period and that Medical Delivery underperformed. Despite a rather benign inflationary environment, the NATURAL RESOURCE area, namely companies involved with precious metals, generated solid returns in the latest six-month period. Supply and demand factors were starting to have a larger influence over these areas than historical inflationary considerations. Overall, American Gold, and Precious Metals and Minerals, generated returns of 22.40% and 17.16%, respectively. The ENERGY sector turned in mixed results over the six-month period, while the UTILITIES sector continued to struggle. Utility companies, namely electric utilities, continued to face the prospect of increased competition as regulators attempted to reduce the monopoly powers these companies have long enjoyed in their regions of operation. Certainly, the electric utility customer appears to be the beneficiary of these actions as opposed to the shareholder. In the energy sector, energy producers lagged the S&P 500 return by a wide margin, reflecting steady but unspectacular business prospects. The energy service sector, however, performed nicely as drilling and workover activity has moved higher and the sector benefits from the past decade of consolidation. What follows are detailed reports for all the funds. We hope you find them useful in evaluating your investments. As always, thank you for your continued interest in the Fidelity Select Portfolios. Sincerely, Bart A. Grenier Select Group Leader CUMULATIVE TOTAL RETURNS* FOR THE SIX-MONTH PERIOD ENDED AUGUST 31, 1995 Row: 1, Col: 1, Value: 75.05 Row: 2, Col: 1, Value: 55.75 Row: 3, Col: 1, Value: 47.01 Row: 4, Col: 1, Value: 31.82 Row: 5, Col: 1, Value: 30.87 Row: 6, Col: 1, Value: 30.13 Row: 7, Col: 1, Value: 28.8 Row: 8, Col: 1, Value: 27.76 Row: 9, Col: 1, Value: 27.75 Row: 10, Col: 1, Value: 24.93 Row: 11, Col: 1, Value: 24.12 Row: 12, Col: 1, Value: 23.09 Row: 13, Col: 1, Value: 22.4 Row: 14, Col: 1, Value: 21.14 Row: 15, Col: 1, Value: 21.0 Row: 16, Col: 1, Value: 20.59 Row: 17, Col: 1, Value: 20.16 Row: 18, Col: 1, Value: 19.51 Row: 19, Col: 1, Value: 19.05 Row: 20, Col: 1, Value: 17.79 Row: 21, Col: 1, Value: 17.16 Row: 22, Col: 1, Value: 16.81 Row: 23, Col: 1, Value: 15.84 Row: 24, Col: 1, Value: 15.15 Row: 25, Col: 1, Value: 14.57 Row: 26, Col: 1, Value: 13.72 Row: 27, Col: 1, Value: 12.98 Row: 28, Col: 1, Value: 12.37 Row: 29, Col: 1, Value: 12.2 Row: 30, Col: 1, Value: 11.85 Row: 31, Col: 1, Value: 11.84 Row: 32, Col: 1, Value: 11.1 Row: 33, Col: 1, Value: 10.18 Row: 34, Col: 1, Value: 10.12 Row: 35, Col: 1, Value: 10.02 Row: 36, Col: 1, Value: 7.06 Electronics 75.05%Computers 55.75%Technology 47.01%Developing Communications 31.82%Air Transportation 30.87%Software and Computer Services 30.13%Industrial Equipment 28.80%Home Finance 27.76%Defense and Aerospace 27.75%Environmental Services 24.93%Multimedia 24.12%Telecommunications 23.09%American Gold 22.40%Energy Service 21.14%Leisure 21.00%Brokerage and Investment Management 20.59%Regional Banks 20.16%Financial Services 19.51%Biotechnology 19.05%Health Care 17.79%Precious Metals and Minerals 17.16%S&P 500 16.81%Paper and Forest Products 15.84%Industrial Materials 15.15%Insurance 14.57%Chemicals 13.72%Construction and Housing 12.98%Natural Gas 12.37%Utilities Growth 12.20%Food and Agriculture 11.85%Medical Delivery 11.84%Consumer Products 11.10%Automotive 10.18%Retailing 10.12%Energy 10.02%Transportation 7.06% 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 expenses, the past one year, five years and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S CONSUMER PRODUCTS 11.10% 10.62% 110.84% 94.40% CONSUMER PRODUCTS (INCL. 3% SALES CHARGE) 7.77% 7.30% 104.52% 88.57% S&P 500 16.81% 21.45% 102.17% 83.53% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on June 29, 1990. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS FUND CONSUMER PRODUCTS 10.62% 16.09% 13.70% CONSUMER PRODUCTS (INCL. 3% SALES CHARGE) 7.30% 15.38% 13.03% S&P 500 21.45% 15.12% 12.44% 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 ProducStandard & Po 06/29/90 9700.00 10000.00 06/30/90 9700.00 10012.31 07/31/90 9670.90 9980.27 08/31/90 8943.40 9078.05 09/30/90 8439.00 8635.95 10/31/90 8749.40 8598.82 11/30/90 9234.40 9154.30 12/31/90 9593.72 9409.71 01/31/91 9808.43 9819.97 02/28/91 10569.68 10522.10 03/31/91 11077.18 10776.73 04/30/91 10950.31 10802.60 05/31/91 11477.33 11269.27 06/30/91 10911.27 10753.14 07/31/91 11623.72 11254.23 08/31/91 12101.94 11520.96 09/30/91 11994.59 11328.56 10/31/91 12375.21 11480.36 11/30/91 11857.95 11017.70 12/31/91 13290.07 12278.13 01/31/92 13379.46 12049.75 02/29/92 13836.37 12206.40 03/31/92 13677.45 11968.38 04/30/92 13717.18 12320.25 05/31/92 13627.78 12380.62 06/30/92 13015.69 12196.14 07/31/92 13388.15 12694.97 08/31/92 13253.65 12434.72 09/30/92 13377.81 12581.45 10/31/92 13595.08 12625.48 11/30/92 14246.90 13056.01 12/31/92 14427.78 13216.60 01/31/93 14331.67 13327.62 02/28/93 13851.10 13508.88 03/31/93 14662.73 13793.92 04/30/93 14566.61 13460.10 05/31/93 15719.98 13820.83 06/30/93 15730.66 13860.91 07/31/93 15880.17 13805.47 08/31/93 16916.07 14328.70 09/30/93 17289.85 14218.37 10/31/93 17823.81 14512.69 11/30/93 17428.68 14374.82 12/31/93 17987.73 14548.75 01/31/94 17835.98 15043.41 02/28/94 17789.29 14635.73 03/31/94 16645.36 13997.61 04/30/94 16823.06 14176.78 05/31/94 16600.01 14409.28 06/30/94 15684.31 14056.26 07/31/94 16106.94 14517.30 08/31/94 17046.12 15112.51 09/30/94 16729.15 14742.25 10/31/94 17057.86 15073.95 11/30/94 16224.34 14524.96 12/31/94 16716.09 14740.37 01/31/95 16569.67 15122.58 02/28/95 16972.32 15711.91 03/31/95 17435.98 16175.57 04/30/95 17815.10 16651.94 05/31/95 18145.91 17317.52 06/30/95 18133.66 17719.80 07/31/95 18893.31 18307.39 08/31/95 18856.56 18353.34 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 August 31, 1995, your investment would have grown to $18,857 - a 88.57% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $18,353 over the same period - a 83.53% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Procter & Gamble Co. 6.3 Avon Products, Inc. 5.5 AirTouch Communications, Inc. 5.5 Gillette Co. 4.9 PepsiCo, Inc. 4.7 Medaphis Corp. 4.5 Federated Department Stores, Inc. 3.5 Nokia Corp. AB sponsored ADR 3.4 Ralston Purina Co. 3.4 UUNET Technologies, Inc. 3.2 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 59.6 Row: 1, Col: 2, Value: 6.3 Row: 1, Col: 3, Value: 6.3 Row: 1, Col: 4, Value: 6.9 Row: 1, Col: 5, Value: 7.5 Row: 1, Col: 6, Value: 13.4 Cosmetics 13.4% Soaps & Detergents 7.5% Business Services 6.9% Soft Drinks 6.3% Cellular & Communication Services 6.3% All Others 59.6%* * INCLUDES SHORT-TERM INVESTMENTS CONSUMER PRODUCTS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Mary English, Portfolio Manager of Fidelity Select Consumer Products Portfolio Q. MARY, HOW HAS THE FUND PERFORMED? A. For the six months ended August 31, 1995, the fund returned 11.10%. The S&P 500 returned 16.81% for the same time period. For the 12 months ended August 31, 1995, the fund returned 10.62% while the S&P 500 returned 21.45%. Q. WHY DID THE FUND'S RETURNS LAG THE S&P? A. Technology stocks have been a key driver behind the S&P Index for the past six months. In consumer stocks, the problems that have plagued this group in the past - such as too many brands chasing too little shelf space - - continue. While it's true that the fund lagged the S&P, it still performed well given its limited exposure to technology. At the end of the period, the fund did have some exposure to technology, but it was established late in the technology cycle. Q. WHAT TECHNOLOGY STOCKS HAVE YOU ADDED TO THE FUND, AND WHY? A. During the past six months, I added to what I call "consumerology" stocks. That is, technology stocks that appeal directly to the consumer such as cellular phone manufacturers, on-line services providers and Internet companies. Also, during the past six months the fund has benefited from its holdings in stocks such as AirTouch Communications, Nokia and America Online that compete in these areas. Q. HOW HAVE RECENT ECONOMIC FACTORS IMPACTED THE FUND? A. The current slow-growth environment is not especially favorable to traditional consumer stocks such as retailers. Slow growth generally means that consumers are concerned about the economy worsening and are keeping their wallets closed. At the same time, because inflation is so low, companies are unable to raise prices or pass on rising raw materials costs to the consumer. Wages haven't increased and the consumer marketplace continues to be very competitive. Q. WHAT STOCKS DID YOU LIKE AT THE END OF AUGUST? A. Procter & Gamble, Avon and Gillette. All three are large, successful multi-national corporations that I think are being unjustly penalized for world-wide currency swings. They are multi-national plays on the continued consumer global recovery, and I think they're likely to do well in a continued slow-growth economy. Q. WHAT ABOUT RETAILING . . . A. Retailing performance has been dismal, but I've initiated a couple of positions in selected stocks where I see a potential for superior performance. When I look at retailers, I look for clean inventories, and companies that are in position to acquire other retailers. I don't think there's a lot of natural growth potential for retailers and I prefer that they don't open an excess number of new stores - I think it gets them into trouble. Federated Department Stores is new to the fund. Even though overall retail sales have been weak, I think Federated can benefit if retail begins to recover. Q. WHAT INVESTMENTS HAVE BEEN DISAPPOINTING DURING THE PAST SIX MONTHS? A. A couple of the fund's investments haven't performed as well as I would have liked. I sold the fund's holding in Franklin Quest because of sluggish sales at retail for their time management products and time management seminars. The fund also suffered from its investment in IBM, which traded down in August. Q. WHAT'S AHEAD FOR THE FUND? A. I think the fund is rather well-positioned now. I plan to continue to rotate it as necessary to take advantage of what the economy is doing. The fund's mix of consumer durable and non-durable stocks - with a smattering of "consumerology" stocks - will probably continue throughout the next six months; but I am considering increasing the defensive posture of the fund to include more consumer staples such as food, beverages and tobacco. In this type of investing environment, the best approach is investing on a stock-by-stock basis. FUND FACTS START DATE: June 29, 1990 TRADING SYMBOL: FSCPX SIZE: as of August 31, 1995, more than $7 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.9% SHARES VALUE (NOTE 1) AIR TRANSPORTATION - 2.0% AIR TRANSPORT, MAJOR NATIONAL - 2.0% UAL Corp. (a) 1,000 $ 157,500 AUTOS, TIRES, & ACCESSORIES - 1.7% MOTOR VEHICLES & CAR BODIES - 1.7% Chrysler Corp. 700 37,713 General Motors Corp. 2,000 94,000 131,713 BEVERAGES - 6.3% SOFT DRINKS - 6.3% Coca-Cola Company (The) 2,000 128,500 PepsiCo, Inc. 8,000 362,000 490,500 BROADCASTING - 2.9% CABLE TV OPERATORS - 2.9% Viacom, Inc. Class A (a) 4,600 223,675 CELLULAR - 6.3% CELLULAR & COMMUNICATION SERVICES - 6.3% AirTouch Communications, Inc. (a) 13,000 422,500 Vodafone Group PLC sponsored ADR 1,500 62,813 485,313 COMMUNICATIONS EQUIPMENT - 5.4% TELEPHONE EQUIPMENT - 5.4% DSC Communications Corp. (a) 3,000 157,500 Nokia Corp. AB sponsored ADR 3,800 263,625 421,125 COMPUTER SERVICES & SOFTWARE - 8.5% COMPUTER RELATED SERVICES - 0.2% Desktop Data, Inc. (a) 500 14,188 COMPUTER SERVICES - 5.4% America Online, Inc. (a) 2,000 131,750 Performance Systems International, Inc. (a) 2,000 37,000 UUNET Technologies, Inc. (a) 5,500 249,563 418,313 PREPACKAGED COMPUTER SOFTWARE - 2.9% Netscape Communications Corp. (a) 400 19,800 Spyglass, Inc. (a) 4,800 204,600 224,400 TOTAL COMPUTER SERVICES & SOFTWARE 656,901 COMPUTERS & OFFICE EQUIPMENT - 3.6% ELECTRONIC COMPUTERS - 1.7% International Business Machines Corp. 1,300 134,388 MINI & MICRO COMPUTERS - 1.9% Compaq Computer Corp. (a) 3,000 143,250 TOTAL COMPUTERS & OFFICE EQUIPMENT 277,638 CONSUMER ELECTRONICS - 1.0% APPLIANCES - 1.0% Black & Decker Corp. 2,500 80,938 DRUGS & PHARMACEUTICALS - 1.5% DRUGS - 1.2% Schering-Plough Corp. 2,000 93,250 SHARES VALUE (NOTE 1) PHARMACEUTICAL PREPARATIONS - 0.3% Nature's Sunshine Products, Inc. 800 $ 18,800 Rexall Sundown, Inc. 400 6,250 25,050 TOTAL DRUGS & PHARMACEUTICALS 118,300 ELECTRICAL EQUIPMENT - 2.9% ALARMS & SIGNAL DEVICES - 1.4% Pittway Corp. Class A 2,000 107,000 ELECTRICAL MACHINERY - 1.5% General Electric Co. 2,000 117,750 TOTAL ELECTRICAL EQUIPMENT 224,750 ELECTRONICS - 2.4% SEMICONDUCTORS - 2.4% Motorola, Inc. 2,500 186,875 ENTERTAINMENT - 2.0% AMUSEMENT - 2.0% Scientific Games Holdings Corp. 4,000 152,000 FOODS - 5.1% FOOD - 1.7% Kellogg Co. 2,000 135,000 GRAIN MILL PRODUCTS - 3.4% Ralston Purina Co. 5,000 260,000 TOTAL FOODS 395,000 GENERAL MERCHANDISE STORES - 4.2% DEPARTMENT STORES - 3.5% Federated Department Stores, Inc. 10,000 270,000 VARIETY STORES - 0.7% Consolidated Stores Corp. (a) 2,500 55,000 TOTAL GENERAL MERCHANDISE STORES 325,000 HOUSEHOLD PRODUCTS - 21.1% COSMETICS - 13.4% Alberto-Culver Co. Class A 2,300 57,788 Avon Products, Inc. 6,000 423,750 Gillette Co. 9,000 375,750 Tambrands, Inc. 4,000 179,500 1,036,788 MANUFACTURED PRODUCTS - 0.2% Helen of Troy Corp. (a) 900 18,675 SOAPS & DETERGENTS - 7.5% Procter & Gamble Co. 7,000 485,625 Rubbermaid, Inc. 3,000 89,250 574,875 TOTAL HOUSEHOLD PRODUCTS 1,630,338 LODGING & GAMING - 2.4% HOTELS, MOTELS, & TOURIST COURTS - 2.4% Harrah's Entertainment, Inc. 3,000 95,625 Host Marriott Corp. (a) 8,000 92,000 187,625 PAPER & FOREST PRODUCTS - 1.7% PAPER - 1.7% Kimberly-Clark Corp. 2,000 127,750 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PHOTOGRAPHIC EQUIPMENT - 0.8% Eastman Kodak Co. 1,000 $ 57,625 RESTAURANTS - 0.2% McDonald's Corp. 500 18,250 RETAIL & WHOLESALE, MISCELLANEOUS - 1.2% DURABLE GOODS - WHOLESALE - 1.2% Sodak Gaming, Inc. 5,000 90,000 SERVICES - 12.1% BUSINESS SERVICES - 6.9% Medaphis Corp. (a) 15,000 346,875 NETCOM On-Line Communication Services, Inc. (a) 5,000 186,872 533,747 COMMUNICATION, ECONOMY, SOCIAL & EDUCATION RESEARCH - 1.8% Gartner Group, Inc. Class A (a) 5,000 141,875 PERSONNEL SUPPLY SERVICES - 1.5% Manpower, Inc. 2,000 57,500 Norrell Corp. GA 2,000 53,000 Romac International, Inc. 500 8,125 118,625 SECURITY SYSTEMS - 1.9% ADT Ltd. (a) 11,000 143,000 TOTAL SERVICES 937,247 TEXTILES & APPAREL - 0.6% FOOTWEAR - 0.6% Nine West Group, Inc. (a) 1,000 42,625 TOTAL COMMON STOCKS (Cost $6,561,803) 7,418,688 REPURCHASE AGREEMENTS - 4.1% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 314,051 314,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $6,875,803) $ 7,732,688 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $9,991,263 and $24,939,628, 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 $11,120 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $2,642,000 and $1,695,200, respectively. The weighted average interest rate paid was 6.3% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $6,877,574. Net unrealized appreciation aggregated $855,114, of which $902,000 related to appreciated investment securities and $46,886 related to depreciated investment securities. CONSUMER PRODUCTS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $314,000) (cost $6,875,803) - See $ 7,732,688 accompanying schedule Cash 742 Receivable for investments sold 1,419 Receivable for fund shares sold 12,170 Dividends receivable 11,624 Redemption fees receivable 45 Other receivables 1,311 Prepaid expenses 8,071 TOTAL ASSETS 7,768,070 LIABILITIES Payable for investments purchased $ 5,263 Payable for fund shares redeemed 154,010 Accrued management fee 5,096 Other payables and accrued expenses 20,230 TOTAL LIABILITIES 184,599 NET ASSETS $ 7,583,471 Net Assets consist of: Paid in capital $ 5,022,268 Undistributed net investment income 14,203 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 1,690,115 Net unrealized appreciation (depreciation) on investments 856,885 NET ASSETS, for 492,751 shares outstanding $ 7,583,471 NET ASSET VALUE and redemption price per share ($7,583,471 (divided by) 492,751 shares) $15.39 Maximum offering price per share (100/97.00 of $15.39) $15.87
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 137,182 Dividends Interest 41,216 TOTAL INCOME 178,398 EXPENSES Management fee $ 61,646 Transfer agent 58,759 Fees Redemption fees (6,997 ) Accounting fees and expenses 22,665 Non-interested trustees' compensation 49 Custodian fees and expenses 10,125 Registration fees 8,071 Audit 8,191 Legal 117 Interest 1,472 Miscellaneous 243 Total expenses before reductions 164,341 Expense reductions (146 164,195 ) NET INVESTMENT INCOME 14,203 REALIZED AND UNREALIZED GAIN (LOSS) 1,709,710 Net realized gain (loss) on investment securities Change in net unrealized appreciation (depreciation) on investment securities 561,597 NET GAIN (LOSS) 2,271,307 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 2,285,510 OTHER INFORMATION $126,536 Sales Charges Paid to FDC Deferred sales charges withheld $460 by FDC Exchange fees withheld by FSC $4,883
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 14,203 $ (85,126 Net investment income (loss) ) Net realized gain (loss) 1,709,710 323,207 Change in net unrealized appreciation (depreciation) 561,597 (648,664 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 2,285,510 (410,583 ) Distributions to shareholders (77,616 (290,362 From net realized gains ) ) In excess of net realized gains (11,291 - ) TOTAL DISTRIBUTIONS (88,907 (290,362 ) ) Share transactions 8,029,439 18,706,244 Net proceeds from sales of shares Reinvestment of distributions 88,457 284,767 Cost of shares redeemed (23,238,093 (6,171,937 ) ) Paid in capital portion of redemption fees 5,759 9,205 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (15,114,438 12,828,279 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (12,917,835 12,127,334 ) NET ASSETS Beginning of period 20,501,306 8,373,972 End of period (including undistributed net investment income of $14,203 and $0, respectively) $ 7,583,471 $ 20,501,306 OTHER INFORMATION Shares Sold 547,860 1,341,627 Issued in reinvestment of distributions 6,156 21,383 Redeemed (1,535,351 (438,536 ) ) Net increase (decrease) (981,335 924,474 )
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEAR ENDED JUNE 29, 1990 ENDED FEBRUARY 28, ENDED APRIL 30, (COMMENCEMENT AUGUST 31, 1995 FEBRUARY 28, OF OPERATIONS) TO APRIL 30, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 13.91 $ 15.24 $ 12.97 $ 13.81 $ 11.22 $ 10.00 Income from Investment Operations Net investment income (loss) .01 (.15) (.20) (.09) (.07) .05 E Net realized and unrealized gain (loss) 1.53 (.60) 3.84 .20 2.86 1.18 Total from investment operations 1.54 (.75) 3.64 .11 2.79 1.23 Less Distributions - - - - - (.06) From net investment income From net realized gain (.05) (.60) (1.40) (.97) (.22) - In excess of net realized gain (.01) - - - - - Total distributions (.06) (.60) (1.40) (.97) (.22) (.06) Redemption fees added to paid in capital - .02 .03 .02 .02 .05 Net asset value, end of period $ 15.39 $ 13.91 $ 15.24 $ 12.97 $ 13.81 $ 11.22 TOTAL RETURN B, C 11.10% (4.59)% 28.43% .98% 25.27% 12.89% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 7,583 $ 20,501 $ 8,374 $ 7,005 $ 7,553 $ 1,877 Ratio of expenses to average net assets 1.63% A 2.49% 2.48% 2.47% A 2.48% 2.43% A Ratio of expenses to average net assets before 1.63% A 2.82% 2.62% 3.17% A 2.83% 3.11% A expense reductions Ratio of net investment income (loss) to average .14% A (1.08)% (1.34)% (.80)% (.56)% .62% A net assets A Portfolio turnover rate 108% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.02 PER SHARE.
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). If Fidelity had not reimbursed certain expenses, the past 10 years total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1995 MONTH YEAR YEARS YEARS S FOOD AND AGRICULTURE 11.85% 18.84% 109.19% 472.31% FOOD AND AGRICULTURE (INCL. 3% SALES CHARGE) 8.50% 15.28% 102.91% 455.14% S&P 500 16.81% 21.45% 102.17% 311.58% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS YEARS FOOD AND AGRICULTURE 18.84% 15.91% 19.06% FOOD AND AGRICULTURE (INCL. 3% SALES CHARGE) 15.28% 15.20% 18.70% S&P 500 21.45% 15.12% 15.20% 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 Food & AStandard & Po 08/31/85 9700.00 10000.00 09/30/85 9514.77 9687.00 10/31/85 10245.93 10134.54 11/30/85 10918.59 10829.77 12/31/85 11220.80 11353.93 01/31/86 11172.06 11417.51 02/28/86 12390.65 12271.54 03/31/86 13209.55 12956.29 04/30/86 13696.98 12809.89 05/31/86 14223.42 13491.37 06/30/86 15022.81 13719.38 07/31/86 14174.67 12952.46 08/31/86 14857.09 13913.54 09/30/86 13657.99 12762.89 10/31/86 13960.20 13499.31 11/30/86 14125.93 13827.34 12/31/86 13745.73 13474.74 01/31/87 15422.51 15289.79 02/28/87 16621.61 15893.74 03/31/87 17128.54 16353.07 04/30/87 17070.05 16207.52 05/31/87 16962.81 16348.53 06/30/87 17947.44 17174.13 07/31/87 18600.60 18044.86 08/31/87 19253.77 18717.93 09/30/87 19058.79 18308.01 10/31/87 14759.60 14364.46 11/30/87 14106.43 13180.83 12/31/87 14778.42 14183.89 01/31/88 15356.57 14781.03 02/29/88 16117.30 15469.83 03/31/88 16228.87 14991.81 04/30/88 16279.59 15158.22 05/31/88 16401.30 15290.10 06/30/88 17070.74 15991.91 07/31/88 17192.46 15931.15 08/31/88 17182.32 15389.49 09/30/88 17872.04 16045.08 10/31/88 18703.77 16491.13 11/30/88 18267.62 16255.31 12/31/88 18735.24 16539.78 01/31/89 19701.50 17750.49 02/28/89 19345.51 17308.50 03/31/89 20077.83 17711.79 04/30/89 21115.29 18631.03 05/31/89 22417.20 19385.59 06/30/89 22857.67 19275.09 07/31/89 25038.07 21015.63 08/31/89 24652.06 21427.54 09/30/89 24756.39 21339.68 10/31/89 24506.01 20844.60 11/30/89 25434.50 21269.83 12/31/89 26017.15 21780.31 01/31/90 24207.46 20318.85 02/28/90 24553.76 20580.96 03/31/90 25615.00 21126.36 04/30/90 25514.46 20598.20 05/31/90 27737.48 22606.52 06/30/90 28637.23 22452.80 07/31/90 28625.95 22380.95 08/31/90 26537.70 20357.71 09/30/90 25691.11 19366.29 10/31/90 26300.65 19283.02 11/30/90 27384.28 20528.70 12/31/90 28443.78 21101.45 01/31/91 29260.13 22021.47 02/28/91 31464.26 23596.01 03/31/91 33003.65 24167.03 04/30/91 32502.18 24225.03 05/31/91 33691.71 25271.56 06/30/91 32303.58 24114.12 07/31/91 33655.50 25237.84 08/31/91 34995.55 25835.97 09/30/91 34378.89 25404.51 10/31/91 34390.75 25744.93 11/30/91 34153.57 24707.41 12/31/91 38140.18 27533.94 01/31/92 37571.66 27021.81 02/29/92 37361.55 27373.09 03/31/92 36533.49 26839.32 04/30/92 36113.29 27628.39 05/31/92 36434.62 27763.77 06/30/92 36036.26 27350.09 07/31/92 37428.16 28468.71 08/31/92 37262.15 27885.10 09/30/92 37887.87 28214.15 10/31/92 38296.50 28312.90 11/30/92 39765.03 29278.37 12/31/92 40438.49 29638.49 01/31/93 40451.56 29887.45 02/28/93 40346.97 30293.92 03/31/93 41445.20 30933.12 04/30/93 39835.96 30184.54 05/31/93 41090.21 30993.49 06/30/93 40681.21 31083.37 07/31/93 40176.79 30959.04 08/31/93 42099.06 32132.38 09/30/93 41962.73 31884.96 10/31/93 43544.17 32544.98 11/30/93 43039.74 32235.80 12/31/93 44004.13 32625.86 01/31/94 45334.98 33735.14 02/28/94 45063.09 32820.92 03/31/94 42959.48 31389.92 04/30/94 42479.47 31791.71 05/31/94 42170.79 32313.10 06/30/94 42494.17 31521.43 07/31/94 43919.95 32555.33 08/31/94 46712.72 33890.10 09/30/94 46800.91 33059.79 10/31/94 47682.83 33803.64 11/30/94 46521.63 32572.51 12/31/94 46685.73 33055.56 01/31/95 48653.85 33912.69 02/28/95 49630.28 35234.27 03/31/95 50759.28 36274.03 04/30/95 51868.70 37342.30 05/31/95 53730.02 38834.87 06/30/95 55001.92 39737.01 07/31/95 55606.85 41054.68 08/31/95 55513.78 41157.73 Let's say you invested $10,000 in Fidelity Select Food and Agriculture Portfolio on August 31, 1985, and paid a 3% sales charge. By August 31, 1995, your investment would have grown to $55,514 - a 455.14% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $41,158 over the same period - a 311.58% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS RalCorp Holdings, Inc. 10.9 Ralston Purina Co. 8.9 Philip Morris Companies, Inc. 8.7 Pioneer Hi-Bred International, Inc. 7.8 PepsiCo, Inc. 6.4 RJR Nabisco Holdings Corp. 6.4 Kellogg Co. 6.0 GoodMark Foods, Inc. 4.9 DEKALB Genetics Corp. Class B 4.6 General Mills, Inc. 3.3 TOP INDUSTRIES AS OF AUGUST 31, 1995 Crops 12.6% Food 12.0% Cereal Breakfast Foods 10.9% Soft Drinks 9.5% Grain Mill Products 8.9% All Others 46.1%* Row: 1, Col: 1, Value: 46.1 Row: 1, Col: 2, Value: 8.9 Row: 1, Col: 3, Value: 9.5 Row: 1, Col: 4, Value: 10.9 Row: 1, Col: 5, Value: 12.0 Row: 1, Col: 6, Value: 12.6 * 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. For the six months ended August 31, 1995, the fund had a total return of 11.85%. The Standard & Poor's Composite Index of 500 Stocks returned 16.81% for the same period. For the 12 months ended August 31, 1995, the fund returned 18.84%, while the S&P 500 returned 21.45%. Q. HOW DO YOU FEEL ABOUT THE FUND'S PERFORMANCE? A. Given the return of this sector, I'm pleased with it. The stocks in the fund are those of companies that generally have provided consistent earnings growth regardless of the economic backdrop, usually in the high single digits to low teens. So you can see that the fund's return is in line with that kind of expectation. The S&P 500 has provided extraordinary returns - well above its historical annual average of around 12% - driven by exceptional performance in technology, finance and capital goods stocks. It's hard to say whether those stocks can sustain that kind of pace. Q. WHAT ARE SOME OF THE INVESTMENTS THAT HAVE HELPED THE FUND'S PERFORMANCE? A. Philip Morris, the fund's third largest investment at the end of August, has shown good earnings growth despite concerns about litigation. It has divested itself of underperforming food businesses. It's repurchasing about $2 billion worth of stock - which is beneficial to shareholders because it shows the company believes its stock is undervalued - and is continuing its history of significantly increasing dividends . Kellogg has benefited from strong growth in its convenience foods and international sales. It's buying back more than $300 million in stock, and looks like it will buy back $400 million to $500 million more next year. The fund also has benefited from two companies that specialize in corn seed, DEKALB Genetics and Pioneer Hi-Bred. A mediocre corn crop this year should increase demand for high-performance seed in 1996. At the end of the year, we'll probably see record-low corn inventories, which should lead to increased planting. Pioneer has virtually no debt and is buying back shares. DEKALB has ironed out some operating problems and has new high-performance hybrids that should hit the market in the next year or two. Q. WHAT STOCKS HAVE TURNED IN DISAPPOINTING PERFORMANCES? A. General Mills is one. It had some problems with pesticide-laced oats last year and has seen a substantial short-term drop in the volume of its cereal sales. I continue to hold the stock because it's relatively cheap and the company is poised to take advantage if the cereal business recovers. If it doesn't succeed, I would suspect it would be a prime candidate for acquisition. RalCorp - which has been a good contributor to performance since it was spun off from Ralston Purina in 1994 - suffered from a poor winter at the ski areas the company owns in Colorado. There has been talk the company may sell the ski areas - which should help the stock - - but RalCorp may hold on to them to get a better price in a few years. Q. A PRICE-FIXING SCANDAL AT ARCHER-DANIELS-MIDLAND - AN AGRICULTURAL PRODUCTS COMPANY IN WHICH THE FUND ONCE HELD A POSITION - HAS BEEN IN THE NEWS. WHAT ARE THE RAMIFICATIONS FOR THE SECTOR OR THE FUND THERE? A. I believe it's relevant to the extent that there has been some investigation into the U.S. corn processing industry. However, the questions and problems in the news revolve exclusively around ADM itself, and shouldn't have much of an effect on the sector or the fund. Q. WHAT'S YOUR OUTLOOK? A. I wouldn't be surprised if the market slows from the torrid pace it has set so far in 1995. In today's market, those companies that benefit from strong economic growth are showing the best earnings growth. With most of the stocks in the fund, I feel that time is on my side. They tend to show consistent returns in varied economic environments. If the market corrects, the stocks in the fund could do better, relative to the market, because they are seen as safe havens, providing consistent earnings growth no matter what the economy is doing. FUND FACTS START DATE: July 29, 1985 TRADING SYMBOL: FDFAX SIZE: as of August 31, 1995, more than $116 million MANAGER: William Mankivsky, since 1993; manager, Fidelity Select Energy Service Portfolio, 1991-1994; joined Fidelity in 1991 (checkmark) FOOD AND AGRICULTURE PORTFOLIO INVESTMENTS AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.8% SHARES VALUE (NOTE 1) AGRICULTURE - 12.6% CROPS - 12.6% DEKALB Genetics Corp. Class B 127,100 $ 5,068,109 Pioneer Hi-Bred International, Inc. 201,400 8,660,200 Sylvan Foods Holdings, Inc. (a) 14,900 165,763 13,894,072 BEVERAGES - 12.2% MALT BEVERAGE - 2.7% Anheuser-Busch Companies, Inc. 42,000 2,399,250 Fomento Economico Mexicano SA de CV Class B 36,000 99,489 Quilmes Industries SA 28,000 546,000 3,044,739 SOFT DRINKS - 9.5% Celestial Seasonings, Inc. (a) 95,400 1,741,050 Coca-Cola Company (The) 4,000 257,000 Panamerican Beverages, Inc. Class A 28,700 853,825 PepsiCo, Inc. 157,400 7,122,350 Serm Suk Co. Ltd. 38,800 511,342 10,485,567 TOTAL BEVERAGES 13,530,306 CONGLOMERATES - 2.3% Whitman Corp. 127,800 2,571,975 FOODS - 47.1% BAKERY PRODUCTS - 0.4% Interstate Bakeries Corp. 21,400 417,300 CANNED SPECIALTIES - 0.2% Campbell Soup Co. 4,000 183,000 CEREAL BREAKFAST FOODS - 10.9% RalCorp Holdings, Inc. (a) 531,666 12,028,943 COOKIES & CRACKERS - 2.2% Nabisco Holdings Class A 85,300 2,441,713 DAIRY - 1.1% Dean Foods Co. 46,600 1,234,900 FOOD - 12.0% Chiquita Brands International, Inc. 34,000 535,500 Dole Food, Inc. 32,100 1,051,275 General Mills, Inc. 71,500 3,691,188 Kellogg Co. 98,600 6,655,500 Nestle SA (Reg.) 1,280 1,297,549 13,231,012 GENERAL FOOD PREPARATIONS - 2.2% CPC International, Inc. 36,200 2,276,075 Herdez SA de CV Class B (a) 438,846 143,713 2,419,788 GRAIN MILL PRODUCTS - 8.9% Ralston Purina Co. 188,900 9,822,800 MEAT & FISH - 8.2% GoodMark Foods, Inc. 313,400 5,406,150 Hormel (George A) & Co. 62,500 1,500,000 Tyson Foods, Inc. 83,700 2,155,275 9,061,425 SUGAR & CANDIES - 1.0% Grist Mill Co. (a) 4,000 41,500 Tootsie Roll Industries, Inc. 27,472 1,095,446 1,136,946 TOTAL FOODS 51,977,827 SHARES VALUE (NOTE 1) GROCERY STORES - 1.2% GROCERY - RETAIL - 1.2% Giant Food, Inc. Class A 43,600 $ 1,357,050 HOUSEHOLD PRODUCTS - 0.2% COSMETICS - 0.2% Gillette Co. 4,000 167,000 INDUSTRIAL MACHINERY & EQUIPMENT - 0.8% FARM MACHINERY & EQUIPMENT - 0.8% Case Corp. 24,200 913,550 Deere & Co. 200 17,100 930,650 RESTAURANTS - 2.3% Darden Restaurants, Inc. (a) 237,600 2,435,400 McDonald's Corp. 4,000 146,000 2,581,400 TOBACCO - 15.1% CIGARETTES - 6.4% RJR Nabisco Holdings Corp. 248,020 7,068,570 TOBACCO MANUFACTURERS - 8.7% Philip Morris Companies, Inc. 129,400 9,656,475 TOTAL TOBACCO 16,725,045 TOTAL COMMON STOCKS (Cost $90,949,546) 103,735,325 REPURCHASE AGREEMENTS - 6.2% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $6,912,117 6,911,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $97,860,546) $ 110,646,325 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $72,062,449 and $169,686,213, 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 $99,038 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the period for which the loan was outstanding amounted to $2,871,000. The weighted average interest rate paid was 6.1% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $97,936,835. Net unrealized appreciation aggregated $12,709,490, of which $14,103,870 related to appreciated investment securities and $1,394,380 related to depreciated investment securities. FOOD AND AGRICULTURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $6,911,000) (cost $97,860,546) - See $ 110,646,325 accompanying schedule Cash 301 Receivable for investments sold 13,090,726 Receivable for fund shares sold 264,836 Dividends receivable 310,090 Redemption fees receivable 579 Prepaid expenses 17,524 TOTAL ASSETS 124,330,381 LIABILITIES Payable for investments purchased $ 1,470,462 Payable for fund shares redeemed 5,985,669 Accrued management fee 94,330 Other payables and accrued expenses 125,070 TOTAL LIABILITIES 7,675,531 NET ASSETS $ 116,654,850 Net Assets consist of: Paid in capital $ 84,320,675 Undistributed net investment income 1,223,166 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 18,326,303 Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 12,784,706 NET ASSETS, for 3,259,564 shares outstanding $ 116,654,850 NET ASSET VALUE and redemption price per share ($116,654,850 (divided by) 3,259,564 shares) $35.79 Maximum offering price per share (100/97.00 of $35.79) $36.90
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 2,053,081 Dividends Interest 554,665 TOTAL INCOME 2,607,746 EXPENSES Management fee $ 634,693 Transfer agent 676,183 Fees Redemption fees (81,114 ) Accounting fees and expenses 103,505 Non-interested trustees' compensation 523 Custodian fees and expenses 6,747 Registration fees 17,524 Audit 10,608 Legal 359 Interest 488 Miscellaneous 937 Total expenses before reductions 1,370,453 Expense reductions (3,463 1,366,990 ) NET INVESTMENT INCOME 1,240,756 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 18,538,465 Foreign currency transactions (661 18,537,804 ) Change in net unrealized appreciation (depreciation) on: Investment securities 2,920,955 Assets and liabilities in foreign currencies (1,107 2,919,848 ) NET GAIN (LOSS) 21,457,652 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 22,698,408 OTHER INFORMATION $503,868 Sales Charges Paid to FDC Deferred sales charges withheld $1,427 by FDC Exchange fees withheld by FSC $67,208
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 1,240,756 $ 456,946 Net investment income Net realized gain (loss) 18,537,804 7,641,023 Change in net unrealized appreciation (depreciation) 2,919,848 1,271,971 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 22,698,408 9,369,940 Distributions to shareholders (181,541 (213,103 From net investment income ) ) From net realized gain (3,146,388 (5,012,131 ) ) TOTAL DISTRIBUTIONS (3,327,929 (5,225,234 ) ) Share transactions 72,108,016 177,269,912 Net proceeds from sales of shares Reinvestment of distributions 3,259,492 5,111,970 Cost of shares redeemed (175,258,770 (84,479,607 ) ) Paid in capital portion of redemption fees 45,643 72,669 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (99,845,619 97,974,944 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (80,475,140 102,119,650 ) NET ASSETS Beginning of period 197,129,990 95,010,340 End of period (including undistributed net investment income of $1,223,166 and $245,442, respectively) $ 116,654,850 $ 197,129,990 OTHER INFORMATION Shares Sold 2,110,734 5,597,630 Issued in reinvestment of distributions 98,743 172,511 Redeemed (5,009,096 (2,728,534 ) ) Net increase (decrease) (2,799,619 3,041,607 )
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 32.53 $ 31.49 $ 30.86 $ 29.22 $ 27.87 $ 22.84 Income from Investment Operations Net investment income .21 .15 .09 .05 .13 .21 Net realized and unrealized gain (loss) 3.59 2.80 3.29 3.26 2.89 5.78 Total from investment operations 3.80 2.95 3.38 3.31 3.02 5.99 Less Distributions (.03) (.08) (.06) (.10) (.11) (.27) From net investment income From net realized gain (.52) (1.85) (2.70) (1.57) (1.59) (.79) Total distributions (.55) (1.93) (2.76) (1.67) (1.70) (1.06) Redemption fees added to paid in capital .01 .02 .01 - .03 .10 Net asset value, end of period $ 35.79 $ 32.53 $ 31.49 $ 30.86 $ 29.22 $ 27.87 TOTAL RETURN B, C 11.85% 10.14% 11.69% 11.72% 11.11% 27.39% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 116,655 $ 197,130 $ 95,010 $ 108,377 $ 108,922 $ 64,490 Ratio of expenses to average net assets 1.31% A 1.68% 1.64% 1.67% A 1.83% 2.22% Ratio of expenses to average net assets before 1.31% A 1.70% 1.65% 1.67% A 1.83% 2.22% expense reductions Ratio of net investment income to average net assets 1.19% A .49% .29% .21% A .46% .85% Portfolio turnover rate 80% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1995 MONTHS YEAR YEARS YEARS LEISURE 21.00% 24.23% 160.63% 354.52% LEISURE (INCL. 3% SALES CHARGE) 17.37% 20.51% 152.81% 340.89% S&P 500 16.81% 21.45% 102.17% 311.58% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS YEARS LEISURE 24.23% 21.12% 16.35% LEISURE (INCL. 3% SALES CHARGE) 20.51% 20.38% 15.99% S&P 500 21.45% 15.12% 15.20% 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 LeisureStandard & Poor' 08/31/85 9700.00 10000.00 09/30/85 9034.19 9687.00 10/31/85 9516.75 10134.54 11/30/85 10316.94 10829.77 12/31/85 10848.36 11353.93 01/31/86 11220.97 11417.51 02/28/86 12387.66 12271.54 03/31/86 13364.99 12956.29 04/30/86 13768.14 12809.89 05/31/86 14666.06 13491.37 06/30/86 15008.12 13719.38 07/31/86 13571.64 12952.46 08/31/86 14018.52 13913.54 09/30/86 12653.40 12762.89 10/31/86 13302.29 13499.31 11/30/86 13137.01 13827.34 12/31/86 12555.45 13474.74 01/31/87 13877.73 15289.79 02/28/87 15371.40 15893.74 03/31/87 15555.05 16353.07 04/30/87 15200.00 16207.52 05/31/87 15824.40 16348.53 06/30/87 16503.90 17174.13 07/31/87 17722.11 18044.86 08/31/87 18089.40 18717.93 09/30/87 17697.62 18308.01 10/31/87 12647.28 14364.46 11/30/87 11765.77 13180.83 12/31/87 13270.65 14183.89 01/31/88 13474.92 14781.03 02/29/88 14652.87 15469.83 03/31/88 15143.12 14991.81 04/30/88 15238.44 15158.22 05/31/88 14843.52 15290.10 06/30/88 15834.93 15991.91 07/31/88 15966.60 15931.15 08/31/88 15342.91 15389.49 09/30/88 16410.12 16045.08 10/31/88 16410.12 16491.13 11/30/88 15779.49 16255.31 12/31/88 16721.97 16539.78 01/31/89 18149.54 17750.49 02/28/89 17858.48 17308.50 03/31/89 18697.00 17711.79 04/30/89 19757.28 18631.03 05/31/89 20741.34 19385.59 06/30/89 20938.01 19275.09 07/31/89 22695.10 21015.63 08/31/89 22877.11 21427.54 09/30/89 23024.11 21339.68 10/31/89 21365.03 20844.60 11/30/89 21617.04 21269.83 12/31/89 21940.53 21780.31 01/31/90 19279.72 20318.85 02/28/90 19108.77 20580.96 03/31/90 19257.42 21126.36 04/30/90 18506.75 20598.20 05/31/90 20037.83 22606.52 06/30/90 19807.42 22452.80 07/31/90 19123.64 22380.95 08/31/90 16916.21 20357.71 09/30/90 15310.80 19366.29 10/31/90 15132.42 19283.02 11/30/90 16336.48 20528.70 12/31/90 17050.97 21101.45 01/31/91 18004.51 22021.47 02/28/91 19386.00 23596.01 03/31/91 19708.85 24167.03 04/30/91 19761.41 24225.03 05/31/91 20444.65 25271.56 06/30/91 19295.91 24114.12 07/31/91 20219.41 25237.84 08/31/91 20429.64 25835.97 09/30/91 20955.20 25404.51 10/31/91 21585.89 25744.93 11/30/91 20549.77 24707.41 12/31/91 22667.06 27533.94 01/31/92 23177.61 27021.81 02/29/92 23988.49 27373.09 03/31/92 23500.46 26839.32 04/30/92 23763.25 27628.39 05/31/92 23905.90 27763.77 06/30/92 23538.00 27350.09 07/31/92 23650.62 28468.71 08/31/92 23312.76 27885.10 09/30/92 23770.76 28214.15 10/31/92 23950.95 28312.90 11/30/92 25580.22 29278.37 12/31/92 26346.05 29638.49 01/31/93 26999.25 29887.45 02/28/93 26856.60 30293.92 03/31/93 28253.11 30933.12 04/30/93 27616.39 30184.54 05/31/93 29600.15 30993.49 06/30/93 30396.77 31083.37 07/31/93 31209.02 30959.04 08/31/93 33356.79 32132.38 09/30/93 35020.33 31884.96 10/31/93 36957.23 32544.98 11/30/93 35582.66 32235.80 12/31/93 36766.87 32625.86 01/31/94 37149.02 33735.14 02/28/94 36831.92 32820.92 03/31/94 34604.12 31389.92 04/30/94 34673.88 31791.71 05/31/94 34306.91 32313.10 06/30/94 32856.95 31521.43 07/31/94 34127.91 32555.33 08/31/94 35488.37 33890.10 09/30/94 35479.42 33059.79 10/31/94 35354.11 33803.64 11/30/94 33841.49 32572.51 12/31/94 34253.21 33055.56 01/31/95 34879.74 33912.69 02/28/95 36437.11 35234.27 03/31/95 37394.80 36274.03 04/30/95 37726.09 37342.30 05/31/95 38456.10 38834.87 06/30/95 39943.15 39737.01 07/31/95 42718.99 41054.68 08/31/95 44088.88 41157.73 Let's say you invested $10,000 in Fidelity Select Leisure Portfolio on August 31, 1985 and paid a 3% sales charge. By August 31, 1995, your investment would have grown to $44,089 - a 340.89% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $41,158 over the same period - a 311.58% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS News Corp. Ltd. sponsored ADR (vtg.) (Pfd. Reg.) 2.4 Omnicom Group, Inc. 2.2 Viacom, Inc. Class B (non-vtg.) 2.2 Silver King Communications, Inc. 2.1 Citicasters, Inc. 2.0 Meredith Corp. 1.7 Sierra On-Line, Inc. 1.6 WPP Group PLC ADR 1.5 TCI Group Class A 1.4 American Express Co. 1.3 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 60.8 Row: 1, Col: 2, Value: 4.0 Row: 1, Col: 3, Value: 4.2 Row: 1, Col: 4, Value: 5.3 Row: 1, Col: 5, Value: 12.5 Row: 1, Col: 6, Value: 13.2 Cable TV Operators 13.2% Television Broadcasting 12.5% Newspapers 5.3% Advertising Agencies 4.2% Prepackaged Computer Software 4.0% All Others 60.8%* * 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. Quite well. The fund returned 21.00% during the six months ended August 31, 1995, compared to a 16.81% gain for the S&P 500. For the 12 months ended August 31, 1995, the fund rose 24.23%, compared to a gain of 21.45% for the S&P 500. Q. WHAT HELPED THE FUND OUTPACE THE MARKET? A. The fund's excess return came during the most recent three months, when it climbed 14.65% versus 5.98% for the S&P 500. That surge was led by strong gains in many entertainment and broadcasting stocks, which together accounted for almost half of the fund's holdings at the start of the period. Q. WHAT DROVE THE RECENT GAINS IN BROADCASTING AND ENTERTAINMENT STOCKS? A. Broadcasting companies continued to benefit from a strong advertising environment and regulatory changes that have relaxed ownership limits on radio and television stations. That helped such companies as News Corp., which owns Fox Broadcasting and its television stations; it remained the fund's largest holding at the end of the period. The fund also held entertainment companies such as Walt Disney, which benefited from improving earnings and expansion of its valuation - the increase of its price relative to earnings. Finally, many broadcasting and entertainment stocks were driven higher by a series of acquisitions and mergers. The biggest deal was Disney's agreement to acquire Capital Cities/ABC. I sold most of the fund's stake in Disney to take profits. Discussions about a possible acquisition of Turner Broadcasting by Time Warner also drew investors' attention to companies in the sector. Q. WHAT OTHER FACTORS HELPED THE FUND? A. The fund held a 4.2% stake in advertising and marketing firms at the end of the period. Their commission income continued to climb as strong demand for advertising boosted prices. The fund also has maintained about a 14% investment in shares of cable systems operators and firms that manufacture cable-related equipment. Such stocks posted strong gains after the Senate followed the House in passing a bill to deregulate cable prices. Investors apparently believed the new rules would lead to higher profits for cable system operators. That perception helped the performance of the fund's investment in operators such as Cablevision and TCA Cable. Q. WHAT SIGNIFICANT CHANGES HAVE YOU MADE IN THE FUND'S PORTFOLIO? A. I increased the fund's stake in consumer electronics and software. I invested in shares of two Japanese consumer electronics companies - Matsushita and Sony. They have suffered greatly from the yen's strong performance during the past five years, which has reduced demand for Japanese exports. I'm betting that the Japanese cannot afford to support their currency anymore. A declining yen would stimulate demand for Japanese exports, including consumer electronics. Moreover, those companies have done massive restructuring during recent years, and are much leaner as a result. I more than doubled the fund's investment in companies that make educational and entertainment software. I think demand for such software will soar in the coming year, particularly with the explosive growth in multimedia personal computers and new game player platforms. Software companies that can place their programs on retailers' shelves would make excellent acquisition targets for publishing and media conglomerates - and even if they aren't bought out, these companies should enjoy rapid earnings growth. At the same time, I've taken profits in sectors such as entertainment, which shrank from 13% to 7% of the fund's investments during the six-month period. Q. CASH ACCOUNTED FOR SOME 20% OF THE FUND'S ASSETS AT THE END OF AUGUST. WHY? A. A good deal of money flowed into the fund in the past two months to take advantage of the surge in broadcasting and entertainment stocks. The inflow accounted for more than half of the growth of the fund's assets, which climbed from $69 million to $112 million during the period. I will continue to invest that cash in a deliberate fashion as I find attractively valued stocks of companies with good fundamentals. Q. WHAT IS YOUR STRATEGY GOING FORWARD? A. I'm currently not inclined to increase investments in broadcasting or entertainment stocks, which are trading at relatively high valuations right now. I'll probably maintain a significant stake in cable and advertising stocks, which should continue to perform well during the next year given the relatively stable economy and favorable political climate. I also will look for bargains in different groups on a company-by-company basis. In general, my favorite choice will continue to be reasonably priced shares of companies that I think can produce above- average earnings growth in the current environment. FUND FACTS START DATE: May 8, 1984 TRADING SYMBOL: FDLSX SIZE: as of August 31, 1995, more than $112 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 78.2% SHARES VALUE (NOTE 1) ADVERTISING - 4.7% ADVERTISING - 0.5% Cordiant PLC Sponsored ADR (a) 115,000 $ 589,371 ADVERTISING AGENCIES - 4.2% ADVO-Systems, Inc. 18,500 344,563 Interpublic Group of Companies, Inc. 4,500 174,938 Omnicom Group, Inc. 40,100 2,516,275 WPP Group PLC ADR 325,000 1,706,250 4,742,026 TOTAL ADVERTISING 5,331,397 AIR TRANSPORTATION - 0.5% AIR TRANSPORT, MAJOR NATIONAL - 0.5% KLM Royal Dutch Airlines 18,487 612,382 BEVERAGES - 0.4% SOFT DRINKS - 0.4% Emvasa del Valle de Enah Ord. (a) 41,600 49,840 PepsiCo, Inc. 8,441 381,955 431,795 BROADCASTING - 29.7% CABLE TV OPERATORS - 13.2% American Telecasting, Inc. (a) 27,500 295,625 Bell Cablemedia PLC ADR (a) 1,000 19,000 BET Holdings, Inc. Class A (a) 17,200 316,050 CAI Wireless Systems, Inc. (a) 33,600 357,000 Cablemaxx, Inc. (a) 15,300 109,013 Cablevision Systems Corp. 19,000 1,244,500 Century Communications Corp. Class A (a) 33,500 330,813 Comcast Corp. Class A 21,000 448,875 Cox Communications, Inc. Class A (a) 5,000 98,750 Gaylord Entertainment Co. Class A (a) 40,500 1,123,875 International Family Entertainment Class B (a) 2,000 36,250 Liberty Media Group, Series A 13,875 368,555 NTN Communications, Inc. (a) 100 575 Nynex CableComms Group ADR Units (a) 1,000 18,063 People's Choice TV Corp. (a) 14,500 279,125 Preferred Entertainment, Inc. (a) 37,600 526,400 TCA Cable TV, Inc. 34,000 1,075,250 TCI Group Class A 85,500 1,581,750 Time Warner, Inc. 4,283 180,421 Turner Broadcasting System, Inc. Class B 46,100 1,417,575 Valuevision International, Inc. (a) 126,900 864,506 Viacom, Inc. Class B: (non-vtg.) (a) 49,855 2,424,199 (warrants C) (a) 172,000 731,000 (warrants E) (a) 70,000 490,000 Videotron Holdings PLC sponsored ADR (a) 35,000 511,875 14,849,045 RADIO BROADCASTING - 4.0% American Radio Systems Corp. Class A (a) 11,300 322,050 Clear Channel Communications, Inc. (a) 12,225 912,291 EZ Communications, Inc. Class A (a) 32,400 656,100 Emmis Broadcasting Corp. Class A (a) 48,000 1,464,000 Evergreen Media Corp. Class A (a) 3,858 130,208 Grupo Radio Centro SA de CV sponsored ADR 29,400 246,225 Heftel Broadcasting Corp. Class A (a) 30,000 562,500 SHARES VALUE (NOTE 1) Infinity Broadcasting Corp. Class A (a) 4,150 $ 148,881 Saga Communications, Inc. Class A (a) 5,000 85,000 4,527,255 TELEVISION BROADCASTING - 12.5% Australis Media Ltd. (a) 300,000 175,815 BHC Communications, Inc. Class A 3,400 308,550 British Sky Broadcasting Group sponsored ADR (a) 10,000 317,500 CBS, Inc. 505 40,274 Capital Cities/ABC, Inc. 9,100 1,046,500 Carlton Communications 25,000 402,948 Chris-Craft Industries, Inc. (a) 15,030 676,350 Citicasters, Inc. (a) 59,000 2,256,750 Granite Broadcasting Corp. (a) 2,200 28,875 Groupo Televisa GDS (b) 44,000 1,045,000 Heritage Media Corp. Class A (a) 25,500 720,375 Home Shopping Network, Inc. (a) 61,300 643,650 Jacor Communications, Inc. Class A (a) 15,200 252,700 Lin Television Corp. (a) 10,500 383,250 Multimedia, Inc. (a) 15,300 650,250 New World Communications Group, Inc. Class A (a) 21,100 490,575 Renaissance Communications Corp. (a) 34,300 1,269,100 Scandinavian Broadcasting Corp. (a) 8,100 219,713 Silver King Communications, Inc. (a) 65,700 2,385,731 Sinclair Broadcast Group, Inc. Class A (a) 22,400 677,600 Westwood One, Inc. (a) 3,000 55,500 14,047,006 TOTAL BROADCASTING 33,423,306 CELLULAR - 2.5% CELLULAR & COMMUNICATION SERVICES - 2.5% AirTouch Communications, Inc. (a) 20,000 650,000 Cellular Communications, Inc.: Class P 19,000 1,068,560 Series A (redeemable) (a) 9,600 523,200 International Cabletel, Inc. (a) 20,000 540,000 Rogers Communications, Inc. Class B (a) 2,000 20,462 2,802,222 COMMUNICATIONS EQUIPMENT - 0.4% TELEPHONE EQUIPMENT - 0.4% Ericsson (L.M.) Telephone Co. Class B ADR 20,000 425,000 COMPUTER SERVICES & SOFTWARE - 4.2% COMPUTER SERVICES - 0.2% UUNET Technologies, Inc. (a) 6,000 272,250 PREPACKAGED COMPUTER SOFTWARE - 4.0% Broderbund Software, Inc. (a) 6,000 441,750 Edmark Corp. (a) 15,000 600,000 Electronic Arts, Inc. (a) 14,000 532,000 Maxis, Inc. (a) 14,200 520,075 Netscape Communications Corp. (a) 200 9,900 Sierra On-Line, Inc. (a) 47,000 1,833,000 Spectrum Holobyte, Inc. (a) 34,500 595,125 4,531,850 TOTAL COMPUTER SERVICES & SOFTWARE 4,804,100 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) CONSUMER ELECTRONICS - 2.3% APPLIANCES - 1.2% Matsushita Electric Industrial Co. Ltd. 89,000 $ 1,397,332 RADIOS, TELEVISIONS, STEREOS - 1.1% Sony Corp. 23,200 1,271,298 TOTAL CONSUMER ELECTRONICS 2,668,630 CREDIT & OTHER FINANCE - 1.3% FINANCIAL SERVICES - 1.3% American Express Co. 37,200 1,501,950 DRUGS & PHARMACEUTICALS - 0.2% BIOTECHNOLOGY - 0.2% Idexx Laboratories 8,000 271,000 ELECTRICAL EQUIPMENT - 3.2% ELECTRICAL MACHINERY - 1.4% Amphenol Corp. Class A (a) 35,500 869,750 Philips Electronics NV 16,900 760,500 1,630,250 TV & RADIO COMMUNICATION EQUIPMENT - 1.8% Avid Technology, Inc. (a) 17,000 675,750 California Amplifier, Inc. (a) 32,300 468,350 Pinnacle Systems (a) 4,100 109,675 Scientific-Atlanta, Inc. 37,200 744,000 1,997,775 TOTAL ELECTRICAL EQUIPMENT 3,628,025 ELECTRONICS - 0.3% ELECTRONIC COMPONENTS & ACCESSORIES - 0.3% General Cable PLC Sponsored ADR (a) 21,500 306,375 General Cable PLC (a) 10,000 28,051 334,426 ENTERTAINMENT - 5.0% AMUSEMENT - 0.0% Iwerks Entertainment, Inc. (a) 200 1,000 Mountasia Entertainment International (a) 6,000 44,250 45,250 AMUSEMENT & RECREATION SERVICES - 0.6% IMAX Corp. (a) 45,000 714,375 MOTION PICTURE DISTRIBUTION - 0.1% All American Communications (a) 2,500 30,938 Savoy Pictures Entertainment, Inc. (a) 5,000 45,000 75,938 MOTION PICTURE PRODUCTION - 1.5% Cinergi Pictures Entertainment, Inc. (a) 86,400 410,400 Disney (Walt) Co. 12,200 684,725 Samuel Goldwyn Company (a) 500 3,875 King World Productions, Inc. (a) 100 3,800 Spelling Entertainment Group, Inc. 45,000 590,625 1,693,425 MOVIE THEATERS - 1.7% AMC Entertainment, Inc. (a) 53,900 875,875 Carmike Cinemas, Inc. Class A (a) 11,600 237,800 Cineplex Odeon Corp. (a) 255,100 493,516 GC Companies, Inc. (a) 500 16,750 Regal Cinemas, Inc. (a) 9,800 333,200 1,957,141 RECORDS & CDS - 0.2% PolyGram NV ADR 4,200 257,250 SHARES VALUE (NOTE 1) RECREATIONAL SERVICES - 0.9% Cedar Fair LP (depositary units) 6,000 $ 182,250 Discovery Zone, Inc. (a) 100 756 Granada Group PLC 85,000 818,721 1,001,727 TOTAL ENTERTAINMENT 5,745,106 FOODS - 0.2% CEREAL BREAKFAST FOODS - 0.2% RalCorp Holdings, Inc. (a) 9,800 221,725 GENERAL MERCHANDISE STORES - 1.6% DEPARTMENT STORES - 0.8% Federated Department Stores, Inc. 10,000 270,000 May Department Stores Co. (The) 5,000 211,875 Younkers, Inc. (a) 23,800 410,550 892,425 GENERAL MERCHANDISE STORES - 0.8% Dayton Hudson Corp. 5,000 365,625 Wal-Mart Stores, Inc. 20,000 492,500 858,125 TOTAL GENERAL MERCHANDISE STORES 1,750,550 HOUSEHOLD PRODUCTS - 0.0% MANUFACTURED PRODUCTS - 0.0% Windmere Corp. (warrants) (a) 845 - LEISURE DURABLES & TOYS - 2.2% MOTORCYCLES - 0.2% Harley Davidson, Inc. 8,400 233,100 SPORTING & ATHLETIC GOODS - 0.8% Coleman, Inc. (a) 24,000 906,000 TOYS & GAMES - 1.2% Hasbro, Inc. 24,000 777,000 Mattel, Inc. 375 10,875 Namco Ltd. 6,900 179,139 Toy Biz, Inc. Class A (a) 14,700 367,500 1,334,514 TOTAL LEISURE DURABLES & TOYS 2,473,614 LODGING & GAMING - 5.3% HOTELS, MOTELS, & TOURIST COURTS - 2.7% Hospitality Franchise Systems, Inc. 4,600 215,625 Host Marriott Corp. (a) 60,000 690,000 La Quinta Motor Inns, Inc. 30,100 903,000 Marriott International, Inc. 30,600 1,086,300 Mirage Resorts, Inc. (a) 3,400 116,875 3,011,800 RACING & GAMING - 2.6% Grand Casinos, Inc. (a) 10,000 366,250 International Speedway Corp. 1,700 353,600 Players International, Inc. (a) 66,150 1,397,419 Speedway Motorsports (a) 500 12,438 WMS Industries, Inc. (a) 36,900 839,475 2,969,182 TOTAL LODGING & GAMING 5,980,982 PHOTOGRAPHIC EQUIPMENT - 0.4% Eastman Kodak Co. 7,000 403,375 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PRINTING - 0.0% COMMERCIAL PRINTING - 0.0% Valassis Communications, Inc. (a) 1,000 $ 14,875 PUBLISHING - 7.0% NEWSPAPERS - 5.3% Belo (A.H.) Corp. Class A 5,200 182,650 News International PLC 150,000 767,151 News Corp. Ltd.: ADR 7,900 179,725 sponsored ADR (vtg.)(Pfd. Reg.) 135,000 2,733,750 Pulitzer Publishing Co. 20,000 970,000 Scripps (E.W.) Co. Class A 33,400 1,123,075 5,956,351 PERIODICALS - 1.7% Meredith Corp. 49,900 1,958,575 TOTAL PUBLISHING 7,914,926 RESTAURANTS - 0.5% RESTAURANTS - 0.5% Rainforest Cafe, Inc. (a) 30,000 547,500 RETAIL & WHOLESALE, MISCELLANEOUS - 1.7% DURABLE GOODS - WHOLESALE - 0.6% Sodak Gaming, Inc. (a) 34,400 619,200 LUMBER & BUILDING MATERIALS - RETAIL - 0.7% Lowe's Companies, Inc. 23,000 764,750 RETAIL, GENERAL - 0.4% Sotheby's Holdings, Inc. Class A 32,500 450,938 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 1,834,888 SERVICES - 1.3% GENERAL SERVICES - 0.3% Children's Discovery Centers of America, Inc. (a) 4,100 55,350 Flextech PLC (a) 35,000 238,669 294,019 MANAGEMENT CONSULTING SERVICES - 0.9% Dimac Corp. (a) 52,000 994,500 PUBLIC RELATIONS SERVICES - 0.1% True North Communications 3,000 64,500 TOTAL SERVICES 1,353,019 TELEPHONE SERVICES - 0.9% SBC Communications, Inc. 19,000 961,875 TEXTILES & APPAREL - 1.4% APPAREL - 0.8% Warnaco Group, Inc. Class A 40,000 870,000 FOOTWEAR - 0.6% Nine West Group, Inc. (a) 15,000 639,375 TOTAL TEXTILES & APPAREL 1,509,375 TOBACCO - 1.0% TOBACCO MANUFACTURERS - 1.0% Philip Morris Companies, Inc. 15,000 1,119,375 TOTAL COMMON STOCKS (Cost $74,306,735) 88,065,418 CONVERTIBLE PREFERRED STOCKS - 0.9% SHARES VALUE (NOTE 1) ENTERTAINMENT - 0.9% MOTION PICTURE PRODUCTION - 0.9% Time Warner Financing Trust $.31 (Cost $968,347) 28,600 $ 968,825 CONVERTIBLE BONDS - 0.6% PRINCIPAL AMOUNT ENTERTAINMENT - 0.6% RECREATIONAL SERVICES - 0.6% Discovery Zone, Inc. liquid yield option notes 0%, 10/14/13 (Cost $660,531) $ 1,960,000 627,200 REPURCHASE AGREEMENTS - 20.3% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 (Note 3) $ 22,783,683 22,780,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $98,715,613) $ 112,441,443 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 $1,045,000 or 0.9% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $58,776,438 and $47,297,762, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $25,971 for the period (see Note 5 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 86.0% United Kingdom 5.1 Australia 2.7 Japan 2.5 Netherlands 1.5 Mexico 1.2 Others (individually less than 1%) 1.0 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $98,788,075. Net unrealized appreciation aggregated $13,653,368, of which $15,435,182 related to appreciated investment securities and $1,781,814 related to depreciated investment securities. LEISURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $22,780,000) (cost $98,715,613) - See $ 112,441,443 accompanying schedule Cash 64 Receivable for investments sold 51,335 Receivable for fund shares sold 2,943,301 Dividends receivable 35,476 Redemption fees receivable 956 Other receivables 33,989 Prepaid expenses 3,858 TOTAL ASSETS 115,510,422 LIABILITIES Payable for investments purchased $ 1,949,334 Payable for fund shares redeemed 632,928 Accrued management fee 50,255 Other payables and accrued expenses 106,293 TOTAL LIABILITIES 2,738,810 NET ASSETS $ 112,771,612 Net Assets consist of: Paid in capital $ 93,089,645 Accumulated net investment (loss) (129,506 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 6,085,793 Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 13,725,680 NET ASSETS, for 2,305,334 shares outstanding $ 112,771,612 NET ASSET VALUE and redemption price per share ($112,771,612 (divided by) 2,305,334 shares) $48.92 Maximum offering price per share (100/97.00 of $48.92) $50.43
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 207,212 Dividends Interest 272,621 TOTAL INCOME 479,833 EXPENSES Management fee $ 229,319 Transfer agent 352,743 Fees Redemption fees (15,605 ) Accounting fees and expenses 37,539 Non-interested trustees' compensation 365 Custodian fees and expenses 12,666 Registration fees 8,177 Audit 9,846 Legal 251 Miscellaneous 488 Total expenses before reductions 635,789 Expense reductions (3,611 632,178 ) NET INVESTMENT INCOME (LOSS) (152,345 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 6,833,128 Foreign currency transactions 33 6,833,161 Change in net unrealized appreciation (depreciation) on: Investment securities 7,644,624 Assets and liabilities in (158 7,644,466 foreign currencies ) NET GAIN (LOSS) 14,477,627 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 14,325,282 OTHER INFORMATION $235,842 Sales Charges Paid to FDC Deferred sales charges withheld $8,982 by FDC Exchange fees withheld by FSC $10,410
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ (152,345 $ (380,902 Net investment income (loss) ) ) Net realized gain (loss) 6,833,161 203,901 Change in net unrealized appreciation (depreciation) 7,644,466 (3,201,870 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 14,325,282 (3,378,871 ) Distributions to shareholders (315,836 (8,699,446 From net realized gain ) ) In excess of net realized gain (159,238 - ) TOTAL DISTRIBUTIONS (475,074 (8,699,446 ) ) Share transactions 46,378,032 28,459,652 Net proceeds from sales of shares Reinvestment of distributions 464,539 8,558,337 Cost of shares redeemed (17,515,496 (61,250,156 ) ) Paid in capital portion of redemption fees 25,099 46,644 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 29,352,174 (24,185,523 ) TOTAL INCREASE (DECREASE) IN NET ASSETS 43,202,382 (36,263,840 ) NET ASSETS Beginning of period 69,569,230 105,833,070 End of period (including accumulated net investment loss of $129,506 and $68,073, respectively) $ 112,771,612 $ 69,569,230 OTHER INFORMATION Shares Sold 985,607 715,555 Issued in reinvestment of distributions 11,103 219,557 Redeemed (400,330 (1,562,185 ) ) Net increase (decrease) 596,380 (627,073)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 40.71 $ 45.30 $ 35.77 $ 31.65 $ 26.32 $ 24.90 Income from Investment Operations Net investment income (loss) (.09) (.21) (.29) (.11) (.08) .08 Net realized and unrealized gain (loss) 8.58 (.48) 12.98 4.21 5.40 1.55 Total from investment operations 8.49 (.69) 12.69 4.10 5.32 1.63 Less Distributions - - - - - (.23) From net investment income From net realized gain (.19) (3.93) (3.26) - - - In excess of net realized gain (.10) - - - - - Total distributions (.29) (3.93) (3.26) - - (.23) Redemption fees added to paid in capital .01 .03 .10 .02 .01 .02 Net asset value, end of period $ 48.92 $ 40.71 $ 45.30 $ 35.77 $ 31.65 $ 26.32 TOTAL RETURN B, C 21.00% (1.07)% 37.14% 13.02% 20.25% 6.78% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 112,772 $ 69,569 $ 105,833 $ 44,824 $ 40,051 $ 40,727 Ratio of expenses to average net assets 1.66% A 1.62% 1.53% 1.90% A 2.21% 2.27% Ratio of expenses to average net assets before 1.67% A 1.64% 1.55% 1.90% A 2.21% 2.27% expense reductions Ratio of net investment income (loss) to average net (.40)% (.52)% (.69)% (.39)% (.28)% .34% assets A A Portfolio turnover rate 137% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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). If Fidelity had not reimbursed certain expenses, the past five years and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S MULTIMEDIA 24.12% 31.27% 225.61% 357.10% MULTIMEDIA (INCL. 3% SALES CHARGE) 20.39% 27.33% 215.85% 343.38% S&P 500 16.81% 21.45% 102.17% 201.52% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on June 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 AUGUST 31, 1995 YEAR YEARS FUND MULTIMEDIA 31.27% 26.33% 18.01% MULTIMEDIA (INCL. 3% SALES CHARGE) 27.33% 25.86% 17.62% S&P 500 21.45% 15.12% 12.78% 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 MultimedStandard & Poor's 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 11377.70 10390.90 01/31/88 11566.11 10828.35 02/29/88 12340.67 11332.96 03/31/88 12874.49 10982.77 04/30/88 13031.50 11104.68 05/31/88 12811.69 11201.29 06/30/88 13254.20 11715.43 07/31/88 13232.54 11670.91 08/31/88 12734.43 11274.10 09/30/88 13535.74 11754.37 10/31/88 13687.34 12081.14 11/30/88 13579.06 11908.38 12/31/88 14432.31 12116.78 01/31/89 16155.73 13003.73 02/28/89 16122.38 12679.94 03/31/89 16878.46 12975.38 04/30/89 18012.59 13648.80 05/31/89 18879.86 14201.58 06/30/89 19266.45 14120.63 07/31/89 20732.13 15395.72 08/31/89 20709.75 15697.48 09/30/89 20385.29 15633.12 10/31/89 19009.12 15270.43 11/30/89 19121.00 15581.95 12/31/89 19129.10 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 15253.52 15089.92 05/31/90 16706.86 16561.19 06/30/90 16562.84 16448.57 07/31/90 15646.32 16395.93 08/31/90 13616.88 14913.74 09/30/90 12451.59 14187.44 10/31/90 11914.77 14126.44 11/30/90 13145.53 15039.00 12/31/90 14114.42 15458.59 01/31/91 14873.82 16132.59 02/28/91 15973.65 17286.07 03/31/91 16405.72 17704.39 04/30/91 16968.73 17746.88 05/31/91 17060.38 18513.55 06/30/91 15711.78 17665.63 07/31/91 16300.98 18488.84 08/31/91 16811.61 18927.03 09/30/91 17832.88 18610.95 10/31/91 18736.30 18860.33 11/30/91 17453.17 18100.26 12/31/91 19456.43 20170.93 01/31/92 19967.06 19795.75 02/29/92 21079.98 20053.10 03/31/92 20543.16 19662.06 04/30/92 20857.39 20240.13 05/31/92 21171.63 20339.30 06/30/92 21250.19 20036.25 07/31/92 21302.56 20855.73 08/31/92 21014.51 20428.19 09/30/92 20883.58 20669.24 10/31/92 21224.00 20741.58 11/30/92 22769.00 21448.87 12/31/92 23639.18 21712.69 01/31/93 24116.74 21895.08 02/28/93 24222.86 22192.85 03/31/93 25177.98 22661.12 04/30/93 24526.88 22112.72 05/31/93 26198.86 22705.34 06/30/93 27021.36 22771.19 07/31/93 28032.64 22680.10 08/31/93 30419.26 23539.68 09/30/93 31147.38 23358.43 10/31/93 33480.06 23841.94 11/30/93 31295.13 23615.45 12/31/93 32626.91 23901.19 01/31/94 33092.22 24713.83 02/28/94 32667.96 24044.09 03/31/94 30669.84 22995.77 04/30/94 30684.72 23290.11 05/31/94 31813.18 23672.07 06/30/94 31102.09 23092.10 07/31/94 31859.55 23849.53 08/31/94 33776.38 24827.36 09/30/94 33544.50 24219.09 10/31/94 34301.96 24764.01 11/30/94 33219.88 23862.11 12/31/94 33933.14 24215.98 01/31/95 34316.74 24843.91 02/28/95 35723.30 25812.07 03/31/95 37992.97 26573.79 04/30/95 38872.06 27356.38 05/31/95 39079.85 28449.82 06/30/95 40582.31 29110.71 07/31/95 42979.84 30076.02 08/31/95 44338.45 30151.51 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 August 31, 1995, your investment would have grown to $44,338 - a 343.38% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $30,152 over the same period - a 201.52% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Viacom, Inc. Class B (non-vtg.) 8.6 Meredith Corp. 7.6 NYNEX Corp. 4.9 Scripps (E.W.) Co. Class A 4.1 AirTouch Communications, Inc. 3.5 TCI Group Class A 3.2 AT&T Corp. 3.1 Disney (Walt) Co. 2.6 California Amplifier, Inc. 2.6 Scientific-Atlanta, Inc. 2.5 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 43.9 Row: 1, Col: 2, Value: 7.8 Row: 1, Col: 3, Value: 9.199999999999999 Row: 1, Col: 4, Value: 9.199999999999999 Row: 1, Col: 5, Value: 9.9 Row: 1, Col: 6, Value: 20.0 Cable TV Operators 20.0% Telephone Services 9.9% Newspapers 9.2% TV & Radio Communication Equipment 9.2% Periodicals 7.8% All Others 43.9%* * INCLUDES SHORT-TERM INVESTMENTS MULTIMEDIA PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Stephen DuFour, Portfolio Manager of Fidelity Select Multimedia Portfolio Q. STEVE, HOW HAS THE FUND PERFORMED? A. It has done very well. The fund had a total return of 24.12% from March 1, 1995, through August 31, 1995. During the same period, the Standard & Poor's Composite Index of 500 Stocks returned 16.81%. For the 12 months ended August 31, 1995, the fund rose 31.27%, while the S&P 500 was up 21.45%. Q. WHAT HELPED THE FUND TOP THE RETURNS OF THE BROAD MARKET? A. A very strong climate for television network and print advertising. In addition, the value of television stations has gone up dramatically due to new regulations currently under discussion in Congress. A year ago, a company could own TV stations that, in sum, covered 25% of the U.S. If the proposed legislation passes, broadcast companies would be able to own TV assets that reach up to 35% of the country. This has been a very positive move for a number of the fund's stocks, including News Corp. and Pulitzer Publishing. Q. ARE THERE OTHER STOCKS THAT HAVE PERFORMED WELL OVER THE PERIOD? A. Meredith has been the fund's strongest performer during the period. It has done a great job diversifying the mix of its magazines by focusing on those that are more dependent on subscriptions, rather than magazines that are dependent on advertising. That helps protect the company if and when there is an economic slowdown. Q. ARE YOU FOLLOWING ANY PARTICULAR THEMES? A. Yes. First of all, let me remind investors that multimedia can be separated broadly into five different industries: newspapers, publishing, equipment, cable and content. Content refers to the movie studios primarily, but includes any company that produces programming. I have focused the fund's investments on the content and equipment side and invested less in newspapers, publishing and cable. In addition, I've avoided owning the stocks of companies that have high fixed costs associated with maintaining equipment. That's because companies with high fixed costs have to put a lot of money back into the business every year. Viacom, the fund's largest position at the end of August, sold its capital-intensive cable business and is focusing on its recently acquired Paramount and Blockbuster Video businesses. Q. THERE HAS BEEN A LOT OF MERGER AND ACQUISITION ACTIVITY IN THE SECTOR - DISNEY JOINING FORCES WITH CAPITAL CITIES/ABC, FOR EXAMPLE. WHAT HAS THIS MEANT TO THE SECTOR AND THE FUND? A. The merger activity seen in the media industry is an indication of the battle going on within the sector. Looking out over the next five or 10 years, the question remains whether the content side of the industry or the distribution side, such as cable or networks, will perform better. For example, if you order a pay-per-view movie at your house five years from now and pay $5 for it, will $4 go to Viacom or another content company, with the distribution company - the cable operator - receiving $1? Or, will Viacom get $1 and the cable company $4? Some cable companies such as Time Warner and TCI are expanding their cable presence to gain leverage over content providers. The Disney/ABC merger is an attempt by Disney to get into the distribution side, again to gain a competitive advantage. For the moment, it's hard to predict how the battle will play out. Q. LET'S TAKE A LOOK AT WHICH STOCKS DIDN'T PERFORM AS WELL AS YOU WOULD HAVE HOPED. A. Cable equipment providers have struggled for two reasons. First, the cash flow for cable companies has slowed because new regulations have capped or decreased subscriber rates. Second, the new telecommunications bill being debated in Congress makes it uncertain whether cable companies or telephone companies will gain the upper hand in bringing voice, data and video into the home. As a result, investments such as General Instruments - which the fund no longer owns - and Scientific-Atlanta haven't performed well. Q. WHAT DO YOU SEE LOOKING OUT OVER THE NEXT SIX MONTHS? A. The industry is changing so rapidly that it's difficult to predict. The demand for entertainment and information continues to grow, which should benefit the large media properties that are the leading providers of content. With increasing competition, a new telecommunications bill in Congress and additional auctions of frequencies for TV and wireless cable coming up, the road ahead may be rocky. But long term, the outlook for the industry looks very good. FUND FACTS START DATE: June 30, 1986 TRADING SYMBOL: FBMPX SIZE: as of August 31, 1995, more than $93 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 84.8% SHARES VALUE (NOTE 1) BEVERAGES - 0.5% DISTILLED BEVERAGES - 0.5% Seagram Co. Ltd. 11,900 $ 438,298 BROADCASTING - 27.4% CABLE TV OPERATORS - 20.0% ACS Enterprises, Inc. (a) 82,000 1,486,250 CAI Wireless Systems, Inc. (a) 63,100 670,438 Cablemaxx, Inc. (a) 26,500 188,813 Gaylord Entertainment Co. Class A (a) 33,000 915,750 People's Choice TV Corp. (a) 116,100 2,234,925 Preferred Entertainment, Inc. (a) 54,600 764,400 TCI Group Class A 155,000 2,867,500 Liberty Media Group, Series A 28,750 763,672 Viacom, Inc. Class B (a): (non-vtg.) 159,984 7,779,222 (warrants) 125,000 531,250 18,202,220 RADIO BROADCASTING - 1.6% Grupo Radio Centro SA de CV sponsored ADR (a) 176,900 1,481,533 TELEVISION BROADCASTING - 5.8% British Sky Broadcasting Group ADR (a) 9,200 292,100 Central European Media Class C (a) 55,000 1,381,875 Citicasters, Inc. (a) 13,300 508,725 Groupo Televisa GDS (b) 63,100 1,498,625 Heritage Media Corp. Class A (a) 20,300 573,475 Jacor Communications, Inc. Class A (a) 15,200 252,700 New World Communications Group, Inc. Class A (a) 30,300 704,475 Sinclair Broadcast Group, Inc. Class A (a) 1,000 30,250 5,242,225 TOTAL BROADCASTING 24,925,978 CELLULAR - 4.9% CELLULAR & COMMUNICATION SERVICES - 4.9% AirTouch Communications, Inc. (a) 98,400 3,198,000 Vodafone Group PLC sponsored ADR 30,300 1,268,813 4,466,813 COMMUNICATIONS EQUIPMENT - 3.8% TELEPHONE EQUIPMENT - 3.8% Ericsson (L.M.) Telephone Co. Class B ADR 80,000 1,710,000 Nokia Corp. AB sponsored ADR 25,000 1,734,375 3,444,375 COMPUTER SERVICES & SOFTWARE - 3.7% COMPUTER SERVICES - 1.1% Reuters Holdings PLC ADR Class B 20,000 1,047,500 PREPACKAGED COMPUTER SOFTWARE - 2.6% Electronic Arts, Inc. (a) 42,000 1,596,000 Oracle Systems Corp. (a) 19,000 762,375 2,358,375 TOTAL COMPUTER SERVICES & SOFTWARE 3,405,875 SHARES VALUE (NOTE 1) COMPUTERS & OFFICE EQUIPMENT - 2.9% COMPUTER EQUIPMENT - WHOLESALE - 0.0% Beamscope Canada, Inc. (a) 500 $ 5,581 ELECTRONIC COMPUTERS - 2.1% International Business Machines Corp. 18,100 1,871,088 MINI & MICRO COMPUTERS - 0.8% Compaq Computer Corp. (a) 16,000 764,000 TOTAL COMPUTERS & OFFICE EQUIPMENT 2,640,669 CONSUMER ELECTRONICS - 0.6% RADIOS, TELEVISIONS, STEREOS - 0.6% Sony Corp. ADR 9,300 512,663 CREDIT & OTHER FINANCE - 0.0% FINANCIAL SERVICES - 0.0% Benpress Holdings Corp. GDR (a) 486 3,524 ELECTRICAL EQUIPMENT - 9.2% TV & RADIO COMMUNICATION EQUIPMENT - 9.2% C-COR Electronics, Inc. (a) 49,400 1,580,800 California Amplifier, Inc. (a) 164,200 2,380,900 Leitch Technology (a) 88,200 1,337,159 Ortel Corp. (a) 47,100 765,375 Scientific-Atlanta, Inc. 113,300 2,266,000 8,330,234 ELECTRONICS - 0.8% SEMICONDUCTORS - 0.8% Motorola, Inc. 10,000 747,500 ENTERTAINMENT - 3.0% MOTION PICTURE PRODUCTION - 3.0% Alliance Communications Corp. (a): Class A (vtg.) 12,500 134,864 Class B (non-vtg.) 12,500 120,912 Cinergi Pictures Entertainment, Inc. (a) 4,900 23,275 Disney (Walt) Co. 42,900 2,407,763 2,686,814 MEDICAL FACILITIES MANAGEMENT - 0.0% HEALTH SERVICES - 0.0% Lambert Communications, Inc. (a) 150,000 7,032 PUBLISHING - 16.9% BOOK PUBLISHING & PRINTING - 0.2% Nelson Thomas, Inc. 5,425 138,338 NEWSPAPERS - 8.9% Belo (A.H.) Corp. Class A 10,000 351,250 Gannett Co., Inc. 15,000 802,500 News Corp. Ltd. (vtg.) sponsored ADR (Pfd. Reg.) 41,700 844,425 Pulitzer Publishing Co. 43,050 2,087,925 Scripps (E.W.) Co. Class A 111,200 3,739,100 Washington Post Co. Class B 1,000 287,375 8,112,575 PERIODICALS - 7.8% Marvel Entertainment Group, Inc. (a) 16,400 235,750 Meredith Corp. 175,500 6,888,375 7,124,125 TOTAL PUBLISHING 15,375,038 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SERVICES - 1.2% GENERAL SERVICES - 1.2% Flextech PLC (a) 160,000 $ 1,091,059 TELEPHONE SERVICES - 9.9% AT&T Corp. 50,000 2,825,000 Frontier Corp. 19,000 529,625 NYNEX Corp. 100,000 4,500,000 SBC Communications, Inc. 22,400 1,134,000 Telephone & Data Systems, Inc. 810 33,210 9,021,835 TOTAL COMMON STOCKS (Cost $67,699,272) 77,097,707 NONCONVERTIBLE PREFERRED STOCKS - 0.3% PUBLISHING - 0.3% NEWSPAPERS - 0.3% News Corp. Ltd. (ltd. vtg.) (Cost $176,252) 50,353 259,532 REPURCHASE AGREEMENTS - 14.9% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 13,586,196 13,584,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $81,459,524) $ 90,941,239 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 $1,498,625 or 1.6% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $134,891,907 and $107,331,976, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $50,460 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $7,608,000 and $1,754,000, respectively. The weighted average interest rate paid was 6.5% (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 83.3% United Kingdom 4.1 Mexico 3.3 Canada 2.2 Finland 1.9 Sweden 1.9 Bermuda 1.5 Australia 1.2 Others (individually less than 1%) 0.6 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $81,464,212. Net unrealized appreciation aggregated $9,477,027, of which $12,321,270 related to appreciated investment securities and $2,844,243 related to depreciated investment securities. MULTIMEDIA PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $13,584,000) (cost $81,459,524) - See $ 90,941,239 accompanying schedule Cash 679 Receivable for investments sold 87,500 Receivable for fund shares sold 4,760,278 Dividends receivable 42,806 Redemption fees receivable 273 Other receivables 687 Prepaid expenses 537 TOTAL ASSETS 95,833,999 LIABILITIES Payable for investments purchased $ 1,620,117 Payable for fund shares redeemed 463,104 Accrued management fee 41,043 Other payables and accrued expenses 102,069 TOTAL LIABILITIES 2,226,333 NET ASSETS $ 93,607,666 Net Assets consist of: Paid in capital $ 74,382,473 Undistributed net investment income 36,433 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 9,707,045 Net unrealized appreciation (depreciation) on investments 9,481,715 NET ASSETS, for 3,374,261 shares outstanding $ 93,607,666 NET ASSET VALUE and redemption price per share ($93,607,666 (divided by) 3,374,261 shares) $27.74 Maximum offering price per share (100/97.00 of $27.74) $28.60
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 269,677 Dividends Interest 472,693 TOTAL INCOME 742,370 EXPENSES Management fee $ 301,172 Transfer agent 403,242 Fees Redemption fees (74,141 ) Accounting fees and expenses 49,540 Non-interested trustees' compensation 207 Custodian fees and expenses 12,204 Registration fees 11,970 Audit 8,748 Legal 115 Interest 1,893 Miscellaneous 378 Total expenses before reductions 715,328 Expense reductions (9,391 705,937 ) NET INVESTMENT INCOME 36,433 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 9,873,487 Foreign currency transactions (29 9,873,458 ) Change in net unrealized appreciation (depreciation) on investment securities 7,276,896 NET GAIN (LOSS) 17,150,354 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 17,186,787 OTHER INFORMATION $526,723 Sales Charges Paid to FDC Deferred sales charges withheld $895 by FDC Exchange fees withheld by FSC $63,877
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 36,433 $ (21,240 Net investment income (loss) ) Net realized gain (loss) 9,873,458 713,620 Change in net unrealized appreciation (depreciation) 7,276,896 (46,862 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 17,186,787 645,518 Distributions to shareholders from net realized gains - (5,781,614 ) Share transactions 173,402,210 35,047,458 Net proceeds from sales of shares Reinvestment of distributions - 5,728,603 Cost of shares redeemed (135,189,849 (46,707,859 ) ) Paid in capital portion of redemption fees 51,413 48,397 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 38,263,774 (5,883,401 ) TOTAL INCREASE (DECREASE) IN NET ASSETS 55,450,561 (11,019,497 ) NET ASSETS Beginning of period 38,157,105 49,176,602 End of period (including undistributed net investment income of $36,433 and $0, respectively) $ 93,607,666 $ 38,157,105 OTHER INFORMATION Shares Sold 7,053,126 1,606,026 Issued in reinvestment of distributions - 293,006 Redeemed (5,385,757 (2,252,403 ) ) Net increase (decrease) 1,667,369 (353,371)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 22.35 $ 23.87 $ 18.26 $ 15.93 $ 12.96 $ 11.65 Income from Investment Operations Net investment income (loss) .01 (.01) (.10) (.07) (.17) (.05) Net realized and unrealized gain (loss) 5.37 1.67 6.28 2.61 3.08 1.29 Total from investment operations 5.38 1.66 6.18 2.54 2.91 1.24 Less Distributions - (3.21) (.65) (.23) - - From net realized gain Redemption fees added to paid in capital .01 .03 .08 .02 .06 .07 Net asset value, end of period $ 27.74 $ 22.35 $ 23.87 $ 18.26 $ 15.93 $ 12.96 TOTAL RETURN B, C 24.12% 9.35% 34.86% 16.14% 22.92% 11.24% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 93,608 $ 38,157 $ 49,177 $ 16,647 $ 8,393 $ 5,177 Ratio of expenses to average net assets 1.42% A 2.03% 1.63% 2.49% A 2.49% 2.53% Ratio of expenses to average net assets before 1.44% A 2.05% 1.66% 2.54% A 2.78% 2.77% expense reductions Ratio of net investment income (loss) to average net .07% A (.07)% (.42)% (.52)% (1.22)% (.43)% assets A Portfolio turnover rate 273% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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). If Fidelity had not reimbursed certain expenses, the past five years and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S RETAILING 10.12% 2.77% 146.79% 329.78% RETAILING (INCL. 3% SALES CHARGE) 6.82% -0.31% 139.38% 316.88% S&P 500 16.81% 21.45% 102.17% 265.41% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on 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 AUGUST 31, 1995 YEAR YEARS FUND RETAILING 2.77% 19.80% 16.19% RETAILING (INCL. 3% SALES CHARGE) -0.31% 19.07% 15.83% S&P 500 21.45% 15.12% 14.27% 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 RetailStandard & Po 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 10055.27 12592.97 01/31/88 10690.46 13123.13 02/29/88 11928.52 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 13166.59 14198.19 07/31/88 13048.17 14144.24 08/31/88 13015.87 13663.33 09/30/88 13780.24 14245.39 10/31/88 14070.92 14641.41 11/30/88 13877.14 14432.04 12/31/88 13947.18 14684.60 01/31/89 14636.88 15759.52 02/28/89 14439.82 15367.10 03/31/89 15129.52 15725.16 04/30/89 15983.43 16541.29 05/31/89 17089.13 17211.21 06/30/89 16784.90 17113.11 07/31/89 18138.52 18658.42 08/31/89 19018.37 19024.13 09/30/89 18973.25 18946.13 10/31/89 18059.56 18506.58 11/30/89 18172.36 18884.12 12/31/89 18065.92 19337.33 01/31/90 16654.93 18039.80 02/28/90 17235.15 18272.51 03/31/90 18646.14 18756.73 04/30/90 18382.40 18287.82 05/31/90 20835.15 20070.88 06/30/90 20571.41 19934.40 07/31/90 19727.45 19870.61 08/31/90 16892.29 18074.30 09/30/90 15006.58 17194.08 10/31/90 14307.68 17120.15 11/30/90 16259.33 18226.11 12/31/90 17157.06 18734.62 01/31/91 18822.54 19551.45 02/28/91 20567.32 20949.38 03/31/91 22708.65 21456.35 04/30/91 23025.88 21507.85 05/31/91 24942.51 22436.99 06/30/91 24149.42 21409.37 07/31/91 25695.94 22407.05 08/31/91 27057.40 22938.10 09/30/91 26766.60 22555.03 10/31/91 26264.31 22857.27 11/30/91 25762.03 21936.12 12/31/91 28846.71 24445.61 01/31/92 30446.30 23990.92 02/29/92 31910.32 24302.81 03/31/92 31273.20 23828.90 04/30/92 29998.96 24529.47 05/31/92 30622.52 24649.67 06/30/92 29193.09 24282.39 07/31/92 30491.82 25275.53 08/31/92 29800.11 24757.39 09/30/92 30689.45 25049.52 10/31/92 32792.82 25137.20 11/30/92 35277.34 25994.38 12/31/92 35214.99 26314.11 01/31/93 35457.95 26535.14 02/28/93 34114.52 26896.02 03/31/93 36744.21 27463.53 04/30/93 34635.18 26798.91 05/31/93 36553.66 27517.12 06/30/93 35674.97 27596.92 07/31/93 35850.71 27486.53 08/31/93 37490.94 28528.27 09/30/93 38633.24 28308.61 10/31/93 39233.68 28894.59 11/30/93 39614.45 28620.10 12/31/93 39804.05 28966.40 01/31/94 38030.76 29951.26 02/28/94 39439.90 29139.58 03/31/94 38616.58 27869.09 04/30/94 39788.22 28225.82 05/31/94 37824.93 28688.72 06/30/94 37508.27 27985.85 07/31/94 38141.59 28903.78 08/31/94 40564.04 30088.84 09/30/94 39772.39 29351.66 10/31/94 39946.55 30012.07 11/30/94 38553.25 28919.03 12/31/94 37809.10 29347.90 01/31/95 37508.27 30108.89 02/28/95 37856.60 31282.24 03/31/95 38284.09 32205.38 04/30/95 36795.79 33153.82 05/31/95 37444.94 34478.98 06/30/95 39835.72 35279.93 07/31/95 42273.99 36449.81 08/31/95 41688.18 36541.30 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 August 31, 1995, your investment would have grown to $41,688 - a 316.88% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $36,541 over the same period - a 265.41% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Nine West Group, Inc. 8.1 Lowe's Companies, Inc. 7.2 Federated Department Stores, Inc. 5.9 Dayton Hudson Corp. 5.6 May Department Stores Co. (The) 4.3 Talbots, Inc. 4.1 Wal-Mart Stores, Inc. 3.7 Vons Companies, Inc. 3.4 Tandy Corp. 3.1 Hudsons Bay Co. Ord. 3.1 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 41.6 Row: 1, Col: 2, Value: 8.1 Row: 1, Col: 3, Value: 8.300000000000001 Row: 1, Col: 4, Value: 9.9 Row: 1, Col: 5, Value: 12.9 Row: 1, Col: 6, Value: 19.4 Department Stores 19.4% General Merchandise Stores 12.9% Grocery - Retail 9.9% Lumber & Building Materials - Retail 8.3% Footwear 8.1% All Others 41.4% RETAILING PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Erin Sullivan, Portfolio Manager of Fidelity Select Retailing Portfolio Q. HOW HAS THE FUND BEEN PERFORMING, ERIN? A. It did pretty well during the period, but the sector as a whole continues to lag the market by a substantial margin. For the six months ended August 31, 1995, the fund showed a 10.12% gain, compared with a total return of 16.81% for the S&P 500. In the 12-month comparison also ended August 31, the fund returned 2.77%, well behind the S&P's 21.45% gain for the period. Q. WAS EXCESS CAPACITY STILL THE MAIN REASON FOR THIS UNDERPERFORMANCE? A. Yes, I think that was still the case. There continued to be a significant over-supply of retail stores, and this continues to make it difficult for many retailers to deliver strong results. Competition has been extremely intense as retailers fight for market share. While there has been progress in some segments of the industry to reduce capacity, we are still very early in that process. In addition, general economic activity has been somewhat slow and demand for apparel has been weak. These factors also have made it a tough environment for retailers. Q. YET YOU DID MANAGE TO FIND OPPORTUNITIES WITHIN THIS ENVIRONMENT . . . A. A few. When I took over the fund about six months ago, I began to reposition it, scaling back on some of the more thinly-traded names and buying or adding to names where I saw healthier prospects. Nine West, a shoe manufacturer, was a consolidation story that I got excited about when the company acquired a unit of U.S. Shoe. I increased the fund's holdings in this stock, which appreciated more than 50% during the period. I also found that department stores were a fairly stable place to be in the last six months. Federated Department Stores, which acquired Macy's last year, started to come through in spite of a tough apparel environment, and Proffitts, a regional department store that has begun consolidating its local market in the southeastern U.S., also helped. Q. WHERE ELSE DID YOU FIND OPPORTUNITY? A. There was some selective opportunity within specialty apparel. On the manufacturing side, Kellwood benefited from its private label contract with Wal-Mart Stores, and Tommy Hilfiger saw a lot of growth of its brand in department store sales. Both these names did quite well. And on the retailing side, Talbots, the women's specialty apparel store, and Gymboree, a mall-based retailer of children's clothing, did very well in the period. The fund also benefited from its holdings in Sunglass Hut, a mall-based seller of sunglasses that has been expanding its franchise, and from Circuit City, a service-oriented consumer electronics chain that has been gaining market share. By the end of August, the fund no longer had positions in Gymboree and Circuit City due to profit taking. Q. WHERE DID YOU RUN INTO DIFFICULTIES? A. Unfortunately, Old American Stores and Ann Taylor, two of our top holdings at the beginning of the period, had some difficulties. Old American, a craft supplies retailer, had to make some inventory adjustments during the period, fell out of favor with the market and became a very thinly traded stock that took a long time to pare down. The problems at AnnTaylor, which was down nearly 25% during the period, were the result of sluggish apparel sales at a time when the company had committed to increasing its floor space substantially. I have eliminated the fund's holdings in AnnTaylor. Q. WHAT'S YOUR VIEW OF THE INDUSTRY AS YOU LOOK OUT SIX MONTHS OR SO? A. I think excess capacity and a slowing economy could continue to make it a difficult environment for retailers in general. The fall apparel season is starting off slowly, and I expect there to be con- tinuing weakness in this area. I think the off-price segment will continue to have difficulties as well. And I believe that, in general, we'll be seeing more retailers close their doors. That's why I'm tending to favor larger companies that have the financial strength to make acquisitions or close down stores. Also on the plus side, I think that demand is still pretty strong in the consumer electronics segment and would expect some continuing benefit from new products such as the recent introduction of Microsoft's Windows 95. Q. SO WHAT WILL BE YOUR STRATEGY GOING FORWARD? A. I'm pretty happy with how the fund is currently positioned, which is to be somewhat defensive in light of the continuing difficult environment, while selectively picking stocks whose fundamentals and market positioning look strongest. FUND FACTS START DATE: December 16, 1985 TRADING SYMBOL: FSRPX SIZE: as of August 31, 1995, more than $40 million MANAGER: Erin Sullivan, since February 1995; equity analyst, medical technology and hospital supply industries, 1993-1995; analyst, initial public offerings, 1991-1992; joined Fidelity in 1991 (checkmark) RETAILING PORTFOLIO INVESTMENTS AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 99.8% SHARES VALUE (NOTE 1) APPAREL STORES - 6.4% GENERAL APPAREL STORES - 1.7% Claire's Stores, Inc. 30,000 $ 648,748 WOMEN'S CLOTHING STORES - 4.7% Cache, Inc. (a) 64,100 232,363 Talbots, Inc. 47,400 1,635,300 1,867,663 TOTAL APPAREL STORES 2,516,411 COMPUTER SERVICES & SOFTWARE - 0.9% COMPUTER & SOFTWARE STORES - 0.9% CompUSA, Inc. (a) 10,000 370,000 DRUG STORES - 2.5% Eckerd Corp. (a) 3,900 142,838 Revco (D.S.), Inc. (a) 42,900 847,275 990,113 GENERAL MERCHANDISE STORES - 35.0% DEPARTMENT STORES - 19.2% Carson Pirie Scott & Co. (a) 29,072 523,296 Federated Department Stores, Inc. (a) 86,000 2,322,000 Hudsons Bay Co. Ord. 60,000 1,205,402 May Department Stores Co. (The) 40,000 1,695,000 Proffitts, Inc. (a) 35,000 923,125 Sears, Roebuck & Co. 200 6,475 Younkers, Inc. (a) 52,400 903,900 7,579,198 GENERAL MERCHANDISE STORES - 12.9% Dayton Hudson Corp. 30,000 2,193,750 Dollar General Corp. 21,875 574,219 Price/Costco, Inc. (a) 51,100 862,313 Wal-Mart Stores, Inc. 60,000 1,477,500 5,107,782 VARIETY STORES - 2.9% Consolidated Stores Corp. (a) 35,000 770,000 Mac Frugals Bargains Closeouts, Inc. (a) 21,000 351,750 1,121,750 TOTAL GENERAL MERCHANDISE STORES 13,808,730 GROCERY STORES - 11.8% GROCERIES & RELATED PRODUCTS - WHOLESALE - 0.4% Provigo, Inc. 25,000 148,815 GROCERIES, GENERAL LINE - WHOLESALE - 1.5% Metro Richelieu, Inc. Class A 43,300 592,014 GROCERY - RETAIL - 9.9% Albertson's, Inc. 10,000 318,750 Giant Food, Inc. Class A 30,000 933,750 Safeway, Inc. (a) 20,700 815,063 Stop & Shop Companies, Inc. (a) 20,000 485,000 Vons Companies, Inc. (a) 60,800 1,360,400 3,912,963 TOTAL GROCERY STORES 4,653,792 LEASING & RENTAL - 0.6% EQUIPMENT RENTAL & LEASING - 0.6% Renters Choice, Inc. (a) 9,000 256,500 SHARES VALUE (NOTE 1) LEISURE DURABLES & TOYS - 1.3% BOAT DEALERS - RETAIL - 1.3% West Marine, Inc. (a) 19,500 $ 511,875 RETAIL & WHOLESALE, MISCELLANEOUS - 24.3% JEWELRY STORES - 3.0% Friedmans, Inc. Class A (a) 24,100 560,325 Tiffany & Co., Inc. 15,000 641,250 1,201,575 LUMBER & BUILDING MATERIALS - RETAIL - 8.3% Lowe's Companies, Inc. 85,300 2,836,225 Wickes Lumber Co. (a) 31,500 433,125 3,269,350 MUSIC, TV, & ELECTRONIC STORES - 5.3% InterTan, Inc. (a) 44,500 411,625 Rex Stores Corp. (a) 24,600 424,350 Sound Advice, Inc. (warrants) (a) 50 - Tandy Corp. 20,000 1,242,500 2,078,475 PAINT, VARNISH & SUPPLIES - WHOLESALE - 1.4% Finish Line, Inc. Class A (a) 66,600 557,775 RETAIL, GENERAL - 3.8% Old American Stores, Inc. (a) 4,000 43,000 Pier 1 Imports, Inc. 34,600 320,050 Sunglass Hut International, Inc. (a) 27,000 1,147,500 1,510,550 SEWING STORES - 1.6% Fabri-Centers of America, Inc. (a): Class A 25,000 340,625 Class B (non-vtg) 25,000 284,375 625,000 SPORTING GOODS & BIKES STORES - 0.9% Forzani Group Ltd. Class A (a) 60,300 342,116 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 9,584,841 SERVICES - 0.3% GENERAL SERVICES - 0.3% Regis Corp. 5,800 117,088 TEXTILES & APPAREL - 16.7% APPAREL - 5.6% Fila Holding Spa sponsored ADR 19,600 656,600 Kellwood Co. 54,600 1,146,600 Warnaco Group, Inc. Class A 20,000 435,000 2,238,200 FOOTWEAR - 8.1% Nine West Group, Inc. (a) 75,200 3,205,400 MEN'S & BOYS' CLOTHING - 3.0% Tommy Hilfiger (a) 35,000 1,172,500 TOTAL TEXTILES & APPAREL 6,616,100 TOTAL COMMON STOCKS (Cost $36,663,261) 39,425,450 NONCONVERTIBLE CORPORATE BONDS - 0.2% PRINCIPAL AMOUNT GENERAL MERCHANDISE STORES - 0.2% DEPARTMENT STORES - 0.2% Carson Pirie Scott & Co. 13%, 3/28/05 (Cost $75,110) $ 80,332 $ 80,332 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $36,738,371) $ 39,505,782 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $42,262,690 and $37,099,656, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $30,743 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 $411,625 and $445,000, respectively (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $36,798,313. Net unrealized appreciation aggregated $2,707,469, of which $3,940,923 related to appreciated investment securities and $1,233,454 related to depreciated investment securities. At February 28, 1995, the fund had a capital loss carryforward of approximately $3,124,000 which will expire on February 28, 2003. RETAILING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value $ 39,505,782 (cost $36,738,371) - See accompanying schedule Receivable for investments sold 9,378,964 Receivable for fund shares sold 84,062 Dividends receivable 62,908 Interest receivable 4,409 Redemption fees receivable 379 Other receivables 5,368 Prepaid expenses 7,301 TOTAL ASSETS 49,049,173 LIABILITIES Payable to custodian bank $ 272,471 Payable for investments purchased 522,200 Payable for fund shares redeemed 7,191,038 Accrued management fee 25,766 Other payables and 53,641 accrued expenses Collateral on securities loaned, 445,000 at value TOTAL LIABILITIES 8,510,116 NET ASSETS $ 40,539,057 Net Assets consist of: Paid in capital $ 41,099,115 Accumulated net investment (loss) (74,439 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (3,253,041 ) Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 2,767,422 NET ASSETS, for 1,539,407 shares outstanding $ 40,539,057 NET ASSET VALUE and redemption price per share ($40,539,057 (divided by) 1,539,407 shares) $26.33 Maximum offering price per share (100/97.00 of $26.33) $27.14
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 119,132 Dividends Interest (including income on securities loaned of $11,622) 139,155 TOTAL INCOME 258,287 EXPENSES Management fee $ 111,801 Transfer agent 204,904 Fees Redemption fees (23,445 ) Accounting and security lending fees 24,107 Non-interested trustees' compensation 246 Custodian fees and expenses 3,831 Registration fees 7,301 Audit 9,030 Legal 142 Miscellaneous 525 Total expenses before reductions 338,442 Expense reductions (5,716 332,726 ) NET INVESTMENT INCOME (LOSS) (74,439 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 8,912 Foreign currency transactions (108 8,804 ) Change in net unrealized appreciation (depreciation) on: Investment securities 3,699,935 Assets and liabilities in 11 3,699,946 foreign currencies NET GAIN (LOSS) 3,708,750 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 3,634,311 OTHER INFORMATION $137,749 Sales Charges Paid to FDC Deferred sales charges withheld $4,150 by FDC Exchange fees withheld by FSC $16,815
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ (74,439 $ (448,078 Net investment income (loss) ) ) Net realized gain (loss) 8,804 (3,125,930 ) Change in net unrealized appreciation (depreciation) 3,699,946 (4,256,876 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 3,634,311 (7,830,884 ) Share transactions 35,790,761 159,368,155 Net proceeds from sales of shares Cost of shares redeemed (30,004,051 (173,586,110 ) ) Paid in capital portion of redemption fees 27,579 349,164 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 5,814,289 (13,868,791 ) TOTAL INCREASE (DECREASE) IN NET ASSETS 9,448,600 (21,699,675 ) NET ASSETS Beginning of period 31,090,457 52,790,132 End of period (including accumulated net investment loss of $74,439 and $0, respectively) $ 40,539,057 $ 31,090,457 OTHER INFORMATION Shares Sold 1,427,939 6,306,112 Redeemed (1,189,005 (7,124,678 ) ) Net increase (decrease) 238,934 (818,566)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 23.91 $ 24.91 $ 23.87 $ 22.13 $ 17.42 $ 13.94 Income from Investment Operations Net investment income (loss) (.05) (.18) (.22) (.08) (.03) (.05) Net realized and unrealized gain (loss) 2.45 (.96) 3.85 2.93 5.09 3.43 Total from investment operations 2.40 (1.14) 3.63 2.85 5.06 3.38 Less Distributions - - (2.63) (1.17) (.50) (.03) From net realized gain Redemption fees added to paid in capital .02 .14 .04 .06 .15 .13 Net asset value, end of period $ 26.33 $ 23.91 $ 24.91 $ 23.87 $ 22.13 $ 17.42 TOTAL RETURN B, C 10.12% (4.01)% 15.61% 13.72% 30.28% 25.26% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 40,539 $ 31,090 $ 52,790 $ 74,878 $ 48,441 $ 18,069 Ratio of expenses to average net assets 1.80% A 1.96% 1.83% 1.77% A 1.87% 2.54% Ratio of expenses to average net assets before 1.83% A 2.07% 1.86% 1.77% A 1.87% 2.87% expense reductions Ratio of net investment income (loss) to average net (.40)% (.74)% (.87)% (.44)% (.13)% (.34)% assets A A Portfolio turnover rate 226% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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 expenses, the past one year, five years and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S AIR TRANSPORTATION 30.87% 20.65% 116.46% 151.07% AIR TRANSPORTATION (INCL. 3% SALES CHARGE) 26.94% 17.03% 109.97% 143.54% S&P 500 16.81% 21.45% 102.17% 265.41% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on 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 AUGUST 31, 1995 YEAR YEARS FUND AIR TRANSPORTATION 20.65% 16.70% 9.94% AIR TRANSPORTATION (INCL. 3% SALES CHARGE) 17.03% 15.99% 9.59% S&P 500 21.45% 15.12% 14.27% 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 TrStandard & P 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 8552.88 13123.13 02/29/88 9262.84 13734.67 03/31/88 9662.20 13310.27 04/30/88 9551.27 13458.01 05/31/88 9407.05 13575.09 06/30/88 10616.22 14198.19 07/31/88 10305.61 14144.24 08/31/88 9728.76 13663.33 09/30/88 10372.17 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 11958.50 15367.10 03/31/89 12557.53 15725.16 04/30/89 13056.73 16541.29 05/31/89 13389.52 17211.21 06/30/89 13322.59 17113.11 07/31/89 14260.65 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 13565.94 19337.33 01/31/90 12169.79 18039.80 02/28/90 12681.71 18272.51 03/31/90 13344.88 18756.73 04/30/90 12856.23 18287.82 05/31/90 13752.09 20070.88 06/30/90 13786.99 19934.40 07/31/90 13368.15 19870.61 08/31/90 11250.65 18074.30 09/30/90 10122.10 17194.08 10/31/90 10657.29 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 13414.69 21507.85 05/31/91 14205.84 22436.99 06/30/91 13906.30 21409.37 07/31/91 14333.82 22407.05 08/31/91 14155.69 22938.10 09/30/91 13680.66 22555.03 10/31/91 14345.70 22857.27 11/30/91 13704.41 21936.12 12/31/91 15212.61 24445.61 01/31/92 16091.41 23990.92 02/29/92 16815.82 24302.81 03/31/92 15830.14 23828.90 04/30/92 15010.73 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 14996.56 25137.20 11/30/92 15359.08 25994.38 12/31/92 16211.74 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 19721.67 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 20027.16 27869.09 04/30/94 19895.45 28225.82 05/31/94 19063.73 28688.72 06/30/94 18482.84 27985.85 07/31/94 19446.58 28903.78 08/31/94 20185.90 30088.84 09/30/94 17928.35 29351.66 10/31/94 18073.57 30012.07 11/30/94 16872.19 28919.03 12/31/94 16605.32 29347.90 01/31/95 17139.69 30108.89 02/28/95 18609.18 31282.24 03/31/95 19811.50 32205.38 04/30/95 21401.23 33153.82 05/31/95 21748.56 34478.98 06/30/95 24500.53 35279.93 07/31/95 25328.79 36449.81 08/31/95 24353.58 36541.30 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 August 31, 1995, your investment would have grown to $24,354 - a 143.54% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $36,541 over the same period - a 265.41% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Delta Air Lines, Inc. 13.6 Continental Airlines, Inc. 12.4 UAL Corp. 6.6 Lufthansa 6.3 KLM Royal Dutch Airlines 5.9 Northwest Airlines Corp. Class A 5.1 Japan Airlines Co. Ltd. 4.8 ValuJet Airlines 4.7 Comair Holdings, Inc. 4.0 AMR Corp. 3.6 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 6.2 Row: 1, Col: 2, Value: 2.1 Row: 1, Col: 3, Value: 2.3 Row: 1, Col: 4, Value: 3.5 Row: 1, Col: 5, Value: 6.3 Row: 1, Col: 6, Value: 79.59999999999999 Air Transportation, Major National 82.6% Air Transportation, Regional 6.3% Airports & Terminal Services 2.5% Railroad Equipment 1.3% Petroleum - Wholesale 1.1% All Others 6.2%* * 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 gained 30.87% during the six months ended August 31, 1995. That outpaced the S&P 500's 16.81% six-month return by a healthy margin. For the 12 months ended August 31, the fund returned 20.65%, while the S&P 500 returned 21.45%. Q. WHAT FACTORS HELPED THE FUND OUTPERFORM THE STOCK MARKET DURING THE PAST SIX MONTHS? A. Airlines experienced a dramatic recovery in domestic revenues. Continental Airlines dismantled its low-fare experiment, Continental Lite, which operated on the East Coast. That allowed other carriers such as US Air and Delta to raise fares, and beginning in May, helped generate the best revenue growth for the industry in more than two years. There also were some good things happening on the cost side. Fuel prices remained low by historical standards, and airlines also benefited from a new $50 cap on travel agent commissions for each leg of a journey. The cap was first imposed by Delta, and the other carriers followed. All told, the move probably will save the industry roughly $500 million annually. Companies also saw results from cost-cutting initiatives begun in previous periods - for example, Delta's $2 billion cost reduction program. Q. WHAT ABOUT DOMESTIC REGIONAL AND INTERNATIONAL CARRIERS? A. They also performed well. International carriers and some domestic airlines with overseas routes benefited from strong air traffic over the Atlantic and to Latin America. In addition, the strong yen was a boost for carriers with Pacific routes. Like the major airlines, domestic regionals benefited from less price competition - and some also rolled out jets that have lower costs and greater passenger acceptance than the turbo props they replaced. Q. WHAT WAS YOUR STRATEGY IN THIS ENVIRONMENT? A. I invested heavily in domestic airlines, especially large hub-and-spoke carriers - which connect traffic over major hub cities - such as Delta, Northwest, Continental, American - part of AMR - and United, or UAL. Their earnings were very depressed in 1994, and they were poised for a fairly dramatic recovery. I also had heavy investments in large European carriers such as KLM, Lufthansa and British Air. These three airlines are developing better cost structures and better international alliances than their competitors in Europe, and currently are benefiting from the worldwide aviation recovery. Although these and other foreign investments generally carry more risk than investing in U.S. stocks, I feel overseas opportunities are worth the additional risk at this time. I also bought shares of domestic regionals that have been deploying jets to serve their markets. Two of my biggest investments among regionals were Comair and Atlantic Southeast Airlines, which are Delta connection carriers. Q. THE FUND OWNS SOME AIR FREIGHT CARRIERS, AS WELL. ARE YOU CONCERNED ABOUT COMPETITION IN THAT INDUSTRY? A. Asset-based air freight companies - those that own their own planes - are experiencing strong competitive pressures and making heavy capital expenditures; I avoided them. But freight forwarders, which rent space on commercial jets, performed well. The fund owned shares of firms such as Air Express International, which experienced solid revenue growth and only modest pricing pressure. Q. WHAT'S AHEAD FOR THE INDUSTRY IN THE NEXT SIX TO 12 MONTHS? A. Now that much of the pricing irrationality has been squeezed out of the system, I find the big question to be the economy. It is likely that earnings will continue to grow modestly for companies in the sector, but revenue growth may slowly decelerate. Also, a fuel tax of 4.3 cents per gallon is set to take effect in October. There is a better-than-even chance that Congress will grant an exemption to the industry - but if not, the tax will add around $500 million to the industry's annual costs. Finally, low-cost, low-fare start-ups such as ValuJet are still a long-term threat to the industry, especially in a weaker economic environment. Q. HOW WILL YOU POSITION THE FUND? A. I recently invested in Air New Zealand and Qantas to increase the fund's exposure to Asian markets, which have underperformed the U.S. sector recently. Any improvement in Japan's economy should give a strong boost to traffic in the region - and in the long run, it appears Asia will continue to deliver the fastest traffic growth in the world. I plan to continue to hold domestic companies with strong international markets, such as Northwest, United and American, as well as firms such as ValuJet and Southwest, which boast the lowest costs in the industry and can compete well in a difficult economic environment. FUND FACTS START DATE: December 16, 1985 TRADING SYMBOL: FSAIX SIZE: as of August 31, 1995, more than $40 million MANGER: 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 96.3% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 1.1% AIRCRAFT ENGINES & PARTS - 0.2% Kellstrom Industries, Inc. (a) 18,500 $ 92,500 TRAINING EQUIPMENT & SIMULATORS - 0.9% Flightsafety International, Inc. 7,600 337,250 TOTAL AEROSPACE & DEFENSE 429,750 AIR TRANSPORTATION - 91.2% AIR TRANSPORTATION, MAJOR NATIONAL - 82.4% AMR Corp. (a) 18,800 1,325,400 Air New Zealand Ltd. Class B 147,500 490,881 Atlas Air, Inc. (a) 5,100 109,650 British Airways PLC ADR 10,000 662,500 Braathens Safe 2,200 105,178 Cathay Pacific Airways Ltd. 667,000 1,003,922 Continental Airlines, Inc. (a) 156,000 4,621,500 Delta Air Lines, Inc. 68,000 5,057,500 Finnair OY 19,800 154,717 Japan Airlines Co. Ltd. (a) 272,000 1,769,605 KLM Royal Dutch Airlines 66,500 2,202,813 Lufthansa 15,900 2,343,842 Malaysian Airlines Systems BHD 365,000 1,097,854 Mesa Airlines, Inc. (a) 28,300 300,688 Northwest Airlines Corp. Class A (a) 52,300 1,889,338 Pan Am Corp. (a) 5,900 15 Qantas Airways Ltd. sponsored ADR (a)(b) 67,500 1,113,750 Singapore International Airlines Ltd. 70,000 591,300 Southwest Airlines Co. 37,300 965,138 Swissair (Reg.) (a) 1,000 631,491 UAL Corp. (a) 15,500 2,441,250 ValuJet Airlines (a) 59,600 1,735,850 30,614,182 AIR TRANSPORTATION, REGIONAL - 6.3% Atlantic Southeast Airlines, Inc. 33,600 840,000 Comair Holdings, Inc. 59,475 1,501,744 2,341,744 AIRPORTS & TERMINAL SERVICES - 2.5% Kobenhaven Lufthave AS 12,700 924,811 TOTAL AIR TRANSPORTATION 33,880,737 AUTOS, TIRES, & ACCESSORIES - 1.1% PETROLEUM - WHOLESALE - 1.1% Mercury Air Group 50,260 402,080 RAILROADS - 1.3% RAILROAD EQUIPMENT - 1.3% Bombardier, Inc. Class B 38,800 472,745 SERVICES - 1.1% TRAVEL AGENCIES - 1.1% His Co. Ltd. (a) 9,000 390,662 SHARES VALUE (NOTE 1) TRUCKING & FREIGHT - 0.5% FREIGHT FORWARDING - 0.5% Air Express International Corp. (a) 4,000 $ 91,000 Harper Group 5,200 93,600 184,600 TOTAL COMMON STOCKS (Cost $32,201,854) 35,760,574 NONCONVERTIBLE BONDS - 0.2% PRINCIPAL AMOUNT AIR TRANSPORTATION - 0.2% AIR TRANSPORTATION, MAJOR NATIONAL - 0.2% AMR Corp. 9 1/2%, 7/15/98 (Cost $79,922) $ 80,000 85,341 REPURCHASE AGREEMENTS - 3.5% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 1,312,212 1,312,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $33,593,776) $ 37,157,915 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 $1,113,750 or 2.7% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $157,363,669 and $154,828,325, 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 $54,006 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $31,185,000 and $4,654,417, respectively. The weighted average interest rate paid was 6.2% (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 62.4% Germany 6.3 Netherlands 5.9 Japan 5.8 Australia 3.0 Malaysia 3.0 Hong Kong 2.7 Denmark 2.5 United Kingdom 1.8 Switzerland 1.7 Singapore 1.6 New Zealand 1.3 Canada 1.3 Others (individually less than 1%) 0.7 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $33,593,776. Net unrealized appreciation aggregated $3,564,139, of which $4,436,848 related to appreciated investment securities and $872,709 related to depreciated investment securities. The fund has elected to defer to its fiscal year ending February 28, 1996 $996,000 of losses recognized during the period November 1, 1994 to February 28, 1995. AIR TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $1,312,000) (cost $33,593,776) - See $ 37,157,915 accompanying schedule Cash 129 Receivable for investments sold 9,276,387 Receivable for fund shares sold 121,668 Dividends receivable 22,076 Interest receivable 950 Redemption fees receivable 1,747 Other receivables 510 Prepaid expenses 21,538 TOTAL ASSETS 46,602,920 LIABILITIES Payable for fund shares redeemed $ 5,672,025 Accrued management fee 34,541 Other payables and accrued expenses 59,829 TOTAL LIABILITIES 5,766,395 NET ASSETS $ 40,836,525 Net Assets consist of: Paid in capital $ 24,846,781 Undistributed net investment income 115,601 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 12,310,043 Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 3,564,100 NET ASSETS, for 2,239,972 shares outstanding $ 40,836,525 NET ASSET VALUE and redemption price per share ($40,836,525 (divided by) 2,239,972 shares) $18.23 Maximum offering price per share (100/97.00 of $18.23) $18.79
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 427,829 Dividends Interest 153,023 TOTAL INCOME 580,852 EXPENSES Management fee $ 221,864 Transfer agent 208,842 Fees Redemption fees (73,686 ) Accounting fees and expenses 37,861 Non-interested trustees' compensation 112 Custodian fees and expenses 24,898 Registration fees 25,216 Audit 8,148 Legal 51 Interest 19,386 Miscellaneous 502 Total expenses before reductions 473,194 Expense reductions (7,943 465,251 ) NET INVESTMENT INCOME 115,601 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 13,424,000 Foreign currency transactions (1,949 13,422,051 ) Change in net unrealized appreciation (depreciation) on: Investment securities 2,812,900 Assets and liabilities in (39 2,812,861 foreign currencies ) NET GAIN (LOSS) 16,234,912 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 16,350,513 OTHER INFORMATION $489,284 Sales Charges Paid to FDC Deferred sales charges withheld $781 by FDC Exchange fees withheld by FSC $58,073
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 115,601 $ (123,112 Net investment income (loss) ) Net realized gain (loss) 13,422,051 (856,081 ) Change in net unrealized appreciation (depreciation) 2,812,861 121,242 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 16,350,513 (857,951 ) Distributions to shareholders - (527,219 From net realized gain ) In excess of net realized gain - (98,627 ) TOTAL DISTRIBUTIONS - (625,846 ) Share transactions 211,857,002 30,972,770 Net proceeds from sales of shares Reinvestment of distributions - 593,907 Cost of shares redeemed (206,317,509 (22,544,984 ) ) Paid in capital portion of redemption fees 313,788 60,093 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 5,853,281 9,081,786 TOTAL INCREASE (DECREASE) IN NET ASSETS 22,203,794 7,597,989 NET ASSETS Beginning of period 18,632,731 11,034,742 End of period (including undistributed net investment income of $115,601 and $0, respectively) $ 40,836,525 $ 18,632,731 OTHER INFORMATION Shares Sold 12,350,014 2,243,732 Issued in reinvestment of distributions - 41,090 Redeemed (11,447,497 (1,592,005 ) ) Net increase (decrease) 902,517 692,817
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 13.93 $ 17.12 $ 13.60 $ 12.64 $ 11.53 $ 11.05 Income from Investment Operations Net investment income (loss) .03 (.18) (.18) (.09) E (.13) (.04) Net realized and unrealized gain (loss) 4.19 (2.01) 3.78 1.33 1.40 .38 Total from investment operations 4.22 (2.19) 3.60 1.24 1.27 .34 Less Distributions - (.92) (.22) (.36) (.25) - From net realized gain In excess of net realized gain - (.17) (.05) - - - Total distributions - (1.09) (.27) (.36) (.25) - Redemption fees added to paid in capital .08 .09 .19 .08 .09 .14 Net asset value, end of period $ 18.23 $ 13.93 $ 17.12 $ 13.60 $ 12.64 $ 11.53 TOTAL RETURN B, C 30.87% (12.45)% 27.94% 10.69% 11.90% 4.34% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 40,837 $ 18,633 $ 11,035 $ 11,868 $ 6,971 $ 4,372 Ratio of expenses to average net assets 1.28% A 2.50% 2.31% 2.48% A 2.51% 2.48% Ratio of expenses to average net assets before 1.30% A 2.88% 2.33% 2.64% A 3.06% 3.03% expense reductions Ratio of net investment income (loss) to average net .32% A (1.31)% (1.11)% (.90)% (1.04)% (.34)% assets A Portfolio turnover rate 494% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.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). If Fidelity had not reimbursed certain expenses, the past five years and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S AUTOMOTIVE 10.18% 7.33% 152.59% 210.25% AUTOMOTIVE (INCL. 3% SALES CHARGE) 6.88% 4.11% 145.01% 200.94% S&P 500 16.81% 21.45% 102.17% 201.52% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on June 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 AUGUST 31, 1995 YEAR YEARS FUND AUTOMOTIVE 7.33% 20.36% 13.13% AUTOMOTIVE (INCL. 3% SALES CHARGE) 4.11% 19.63% 12.75% S&P 500 21.45% 15.12% 12.78% 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 AutomotiStandard & Poo 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 12030.69 11201.29 06/30/88 12726.94 11715.43 07/31/88 12583.59 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 12399.29 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 13912.45 16395.93 08/31/90 11914.22 14913.74 09/30/90 10775.44 14187.44 10/31/90 10560.57 14126.44 11/30/90 11183.68 15039.00 12/31/90 11602.66 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 13514.95 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 15663.59 18927.03 09/30/91 15201.64 18610.95 10/31/91 15599.14 18860.33 11/30/91 14825.62 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 21108.62 20339.30 06/30/92 20983.04 20036.25 07/31/92 21175.86 20855.73 08/31/92 19860.16 20428.19 09/30/92 19531.24 20669.24 10/31/92 20347.88 20741.58 11/30/92 21334.65 21448.87 12/31/92 22564.01 21712.69 01/31/93 23605.96 21895.08 02/28/93 23953.28 22192.85 03/31/93 25238.35 22661.12 04/30/93 25092.53 22112.72 05/31/93 26620.52 22705.34 06/30/93 27086.08 22771.19 07/31/93 27396.46 22680.10 08/31/93 28351.45 23539.68 09/30/93 28649.89 23358.43 10/31/93 29258.70 23841.94 11/30/93 29258.70 23615.45 12/31/93 30548.19 23901.19 01/31/94 32289.60 24713.83 02/28/94 31247.21 24044.09 03/31/94 29052.05 22995.77 04/30/94 28461.32 23290.11 05/31/94 28039.67 23672.07 06/30/94 27680.03 23092.10 07/31/94 28510.92 23849.53 08/31/94 28039.67 24827.36 09/30/94 26849.13 24219.09 10/31/94 27357.59 24764.01 11/30/94 25708.20 23862.11 12/31/94 26652.41 24215.98 01/31/95 26019.14 24843.91 02/28/95 27313.22 25812.07 03/31/95 27175.55 26573.79 04/30/95 27092.95 27356.38 05/31/95 27643.62 28449.82 06/30/95 28331.96 29110.71 07/31/95 30369.43 30076.02 08/31/95 30094.10 30151.51 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 August 31, 1995, your investment would have grown to $30,094 - a 200.94% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $30,152 over the same period - a 201.52% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Echlin, Inc. 7.9 Magna International, Inc. Class A 6.2 General Motors Corp. 5.5 Genuine Parts Co. 4.6 Exide Corp. 4.1 Michelin SA Cie Generale des Etablissements, Class B 3.9 Lear Seating Corp. 3.8 Chrysler Corp. 3.7 Gentex Corp. 3.4 Dana Corp. 3.2 TOP INDUSTRIES AS OF AUGUST 31, 1995 Durables 80.8% Industrial Machinery & Equment 8.4% Auto & Truck Parts 45.7% Motor Vehicles & Car Bodies 14.7% Tires & Inner Tubes 8.2% Autos & Other Motor Vehicles 4.6% Storage batteries 4.1% All Others 22.7%* Row: 1, Col: 1, Value: 22.7 Row: 1, Col: 2, Value: 4.1 Row: 1, Col: 3, Value: 4.6 Row: 1, Col: 4, Value: 8.199999999999999 Row: 1, Col: 5, Value: 14.7 Row: 1, Col: 6, Value: 45.7 * INCLUDES SHORT-TERM INVESTMENTS 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. For the six months and year ended August 31, 1995, the fund returned 10.18% and 7.33%, respectively. It lagged the S&P 500, which - helped by technology stocks - returned 16.81% and 21.45% for the same periods. Q. WHAT DROVE THE AUTO SECTOR'S RECENT RESULTS? A. As usual, the economy. In 1994 and early 1995, auto stocks did poorly as the Federal Reserve raised interest rates and dimmed the prospects for new auto sales. As people held onto their old cars, the after-market companies - - which make and supply replacement parts - did well. By May 1995, the economy had slowed. It seemed likely that the Fed would lower rates to stimulate the economy, boosting demand and therefore improving sales and earnings. So the stocks of original equipment suppliers and the Big Three started looking more attractive. These companies did well for the rest of the period. Fortunately, I rotated the fund toward those areas last spring, which helped performance over the summer. Q. BESIDE THE ECONOMY, WHAT HELPED THE AUTO SUPPLIERS? A. Three trends. First, the Big Three are outsourcing a lot of their work to cut costs. Second, they're also consolidating the number of suppliers they use, so the good companies are getting bigger. Third, suppliers are merging to sell entire systems to the car manufacturers. That's what recently happened with Lear Seating and Automotive Industries, two of the fund's top performers. Lear makes car seats, and Automotive makes interior trim like side panels and door moldings. Once Lear bought out Automotive, it could supply almost the entire interior of a car. Automotive's stock rose 70% before being acquired; while Lear's was up 37% over the six-month period. Some of the fund's other top performers were also suppliers: Dana, which makes large chassis parts for light trucks; Tower Automotive, which does metal stampings for the sides of cars; and Magna International, which also makes metal stampings, as well as interior and engine parts. Q. WHAT HAPPENED WITH THE BIG THREE AUTO MAKERS? A. Both General Motors and Chrysler, which were among the fund's top 10 stocks, did well. Chrysler recovered from a difficult new minivan launch, announced a $2 billion share repurchase program and raised its dividend. GM continued with its restructuring, which has the potential to yield benefits soon. Over the next few years, I believe GM has the best prospects for improving its profit margins through lower costs. On the other hand, the fund owned very little Ford, whose higher than average development costs have hurt profits. Q. WHERE WERE THE DISAPPOINTMENTS? A. In the after-market business. Although after-market parts aren't as tied into the economic cycle, they do slow some with consumer purchasing. Historically, the industry as a whole has increased sales about 2% to 3% per year, but this year it's been about flat. As a result, companies like Pep Boys had modestly disappointing earnings, and their stocks were flat or down slightly. Tire companies like Cooper Tire and Rubber also had disappointing results, as rising raw materials prices hurt their profit margins. But there were also some pretty good performers like Exide, which benefited as the hot summer increased sales for replacement batteries. Echlin, which makes replacement brakes and emission control parts, was another exception as it increased earnings through acquisitions. Q. DO YOU SEE MUCH OPPORTUNITY OVERSEAS? A. I do. While the U.S. came out its recession in 1992, Europe just started coming out of its recession last year. And Japan may be about to turn the corner. So in both places we may be at the beginning of a rebound tied to the economy. That would mean they would have much higher demand in front of them. Plus, if the dollar strengthened, it would give an added boost to their U.S. sales. Recently, I've added selectively to some European and Japanese companies, including Peugeot, Volvo, Volkswagen, Michelin and Toyota. Q. WHAT WILL YOU DO IF THE ECONOMY AND AUTO SALES DON'T PICK UP? A. If it looked like the U.S. economy were going into a recession, I'd concentrate more on the after-market suppliers. But that's not what I expect. I believe lower interest rates will help demand to pick up later this year or early next year. If that happens, we should see better earnings growth, which would cause the Big Three and original equipment suppliers stocks to perform quite well. FUND FACTS START DATE: June 30, 1986 TRADING SYMBOL: FSAVX SIZE: as of August 31, 1995, more than $67 million MANAGER: Brenda Reed, since May 1994; manager, Fidelity Select Air Transportation Portfolio, 1992-1994; joined Fidelity in 1992 (checkmark) AUTOMOTIVE PORTFOLIO INVESTMENTS AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 86.6% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 0.1% MISSILES & SPACE VEHICLES - 0.1% Special Devices, Inc. (a) 4,800 $ 85,200 AUTOS, TIRES, & ACCESSORIES - 79.1% AUTO & TRUCK PARTS - 45.7% Borg-Warner Automotive, Inc. 60,000 1,785,000 Dana Corp. 71,800 2,145,025 Danaher Corp. 63,400 2,092,200 Donnelly Corp. Class A 33,000 528,000 Echlin, Inc. 155,000 5,347,500 Federal-Mogul Corp. 30,000 667,500 Gentex Corp. (a) 93,000 2,278,500 Harvard Industries, Inc. Class B (a) 30,000 735,000 Intermet Corp. (a) 45,000 500,625 Johnson Controls, Inc. 22,700 1,381,863 Lear Seating Corp. (a) 89,700 2,567,663 Magna International, Inc. Class A 93,500 4,174,263 Mascotech, Inc. 26,700 350,438 Masland Corp. 30,000 435,000 SPX Corp. 200 3,025 Smith (A.O.) Corp. Class B 66,600 1,656,675 Snap-on Tools Corp. 40,200 1,648,200 Titan Wheel International, Inc. 33,000 588,500 Tower Automotive (a) 132,500 1,722,500 Valeo SA 6,000 286,615 30,894,092 AUTO PARTS - RETAIL - 3.4% Autozone, Inc. (a) 18,100 486,438 Monro Muffler Brake, Inc. 105,430 1,607,808 Pep Boys-Manny, Moe & Jack 7,600 209,000 2,303,246 AUTOS & OTHER MOTOR VEHICLES - 4.6% Genuine Parts Co. 78,200 3,079,125 MOTOR VEHICLE SUPPLIES & NEW PARTS - 2.5% APS Holding Corp. Class A (a) 64,000 1,664,000 MOTOR VEHICLES & CAR BODIES - 14.7% Chrysler Corp. 46,300 2,494,413 Daimier Benz AG. Ord. 600 296,526 Ford Motor Co. 20,000 612,500 General Motors Corp. 78,823 3,704,681 Hyundai Motor Co. GDR Tranche #2 (a)(b) 5,500 90,750 Peugeot SA Ord. 6,700 886,159 Suzuki Motor Corp. 21,000 245,665 Toyota Motor Corp. 12,000 238,892 Volkswagen AG 2,200 673,188 Volvo AB Class B 35,000 694,582 9,937,356 TIRES & INNER TUBES - 8.2% Bandag, Inc. 26,700 1,585,313 Cooper Tire & Rubber Co. 29,300 761,800 Goodyear Tire & Rubber Co. 15,500 620,000 Michelin SA Cie Generale des Etablissements, Class B 60,000 2,605,592 5,572,705 TOTAL AUTOS, TIRES, & ACCESSORIES 53,450,524 SHARES VALUE (NOTE 1) CHEMICALS & PLASTICS - 0.4% CHEMICALS - 0.4% Quaker State Corp. 20,000 $ 300,000 COMMUNICATIONS EQUIPMENT - 1.2% DATACOMMUNICATIONS EQUIPMENT - 1.2% Lo Jack Corp. (a) 60,000 780,000 ELECTRICAL EQUIPMENT - 0.1% Satcon Technology Corp. (a) 5,000 62,500 INDUSTRIAL MACHINERY & EQUIPMENT - 4.9% METAL WORKING MACHINERY - 0.8% Exco Technologies Ltd. (a) 79,500 517,597 STORAGE BATTERIES - 4.1% Exide Corp. 53,400 2,783,475 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 3,301,072 IRON & STEEL - 0.8% METAL FORGINGS & STAMPINGS - 0.8% Linamar Corp. 35,000 540,380 TOTAL COMMON STOCKS (Cost $54,919,676) 58,519,676 REPURCHASE AGREEMENTS - 13.4% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 9,100,471 9,099,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $64,018,676) $ 67,618,676 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 $90,750 or 0.1% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $22,678,080 and $28,122,163, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $17,892 for the period (see Note 5 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 82.8% Canada 7.7 France 5.6 Germany 1.4 Sweden 1.0 Others (individually less than 1%) 1.5 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $64,556,063. Net unrealized appreciation aggregated $3,062,613, of which $4,775,834 related to appreciated investment securities and $1,713,221 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. AUTOMOTIVE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $9,099,000) (cost $64,018,676) - See $ 67,618,676 accompanying schedule Cash 927 Receivable for investments sold 472,903 Receivable for fund shares sold 374,128 Dividends receivable 73,520 Redemption fees receivable 161 Prepaid expenses 6,810 TOTAL ASSETS 68,547,125 LIABILITIES Payable for fund shares redeemed $ 507,699 Accrued management fee 35,724 Other payables and accrued expenses 93,873 TOTAL LIABILITIES 637,296 NET ASSETS $ 67,909,829 Net Assets consist of: Paid in capital $ 68,052,773 Undistributed net investment income 44,293 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (3,787,253 ) Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 3,600,016 NET ASSETS, for 3,106,474 shares outstanding $ 67,909,829 NET ASSET VALUE and redemption price per share ($67,909,829 (divided by) 3,106,474 shares) $21.86 Maximum offering price per share (100/97.00 of $21.86) $22.54
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 413,556 Dividends Interest 163,870 TOTAL INCOME 577,426 EXPENSES Management fee $ 176,252 Transfer agent 347,123 Fees Redemption fees (43,914 ) Accounting fees and expenses 28,915 Non-interested trustees' compensation 499 Custodian fees and expenses 8,413 Registration fees 7,890 Audit 9,930 Legal 279 Miscellaneous 731 Total expenses before reductions 536,118 Expense reductions (3,445 532,673 ) NET INVESTMENT INCOME 44,753 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 777,135 Foreign currency transactions 707 777,842 Change in net unrealized appreciation (depreciation) on: Investment securities 3,951,276 Assets and liabilities in 16 3,951,292 foreign currencies NET GAIN (LOSS) 4,729,134 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 4,773,887 OTHER INFORMATION $161,613 Sales Charges Paid to FDC Deferred sales charges withheld $1,665 by FDC Exchange fees withheld by FSC $33,510
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 44,753 $ 346,115 Net investment income Net realized gain (loss) 777,842 11,541,717 Change in net unrealized appreciation (depreciation) 3,951,292 (31,661,358 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 4,773,887 (19,773,526 ) Distributions to shareholders - (154,502 From net investment income ) From net realized gain - (7,650,364 ) TOTAL DISTRIBUTIONS - (7,804,866 ) Share transactions 54,136,239 91,986,801 Net proceeds from sales of shares Reinvestment of distributions - 7,692,677 Cost of shares redeemed (51,137,380 (240,957,682 ) ) Paid in capital portion of redemption fees 61,865 233,563 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 3,060,724(141,044,641 ) TOTAL INCREASE (DECREASE) IN NET ASSETS 7,834,611(168,623,033 ) NET ASSETS Beginning of period 60,075,218 228,698,251 End of period (including undistributed net investment income of $44,293 and $165,781, respectively) $ 67,909,829 $ 60,075,218 OTHER INFORMATION Shares Sold 2,588,456 4,119,242 Issued in reinvestment of distributions - 397,089 Redeemed (2,510,567 (10,463,135 ) ) Net increase (decrease) 77,889 (5,946,804)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 19.84 $ 25.48 $ 20.69 $ 18.65 $ 12.58 $ 12.17 Income from Investment Operations Net investment income .02 .08 .05 .13 .06 .25 Net realized and unrealized gain (loss) 1.98 (3.46) 6.00 2.26 6.55 .29 Total from investment operations 2.00 (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 .02 .05 .05 .07 .16 .05 Net asset value, end of period $ 21.86 $ 19.84 $ 25.48 $ 20.69 $ 18.65 $ 12.58 TOTAL RETURN B, C 10.18% (12.59)% 30.45% 13.42% 56.27% 4.81% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 67,910 $ 60,075 $ 228,698 $ 110,360 $ 178,445 $ 974 Ratio of expenses to average net assets 1.82% A 1.80% 1.68% 1.57% A 2.48% 2.25% Ratio of expenses to average net assets before 1.84% A 1.82% 1.69% 1.57% A 2.48% 2.85% expense reductions Ratio of net investment income to average net assets .15% A .34% .22% .72% A .36% 2.06% Portfolio turnover rate 84% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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). If Fidelity had not reimbursed certain expenses, the past five and 10 years total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1995 MONTH YEAR YEARS YEARS S CHEMICALS 13.72% 9.91% 145.02% 446.53% CHEMICALS (INCL. 3% SALES CHARGE) 10.31% 6.61% 137.67% 430.14% S&P 500 16.81% 21.45% 102.17% 311.58% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS YEARS CHEMICALS 9.91% 19.63% 18.51% CHEMICALS (INCL. 3% SALES CHARGE) 6.61% 18.90% 18.15% S&P 500 21.45% 15.12% 15.20% 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 ChemicaStandard & Poor 08/31/85 9700.00 10000.00 09/30/85 9709.43 9687.00 10/31/85 10331.58 10134.54 11/30/85 10982.02 10829.77 12/31/85 11679.59 11353.93 01/31/86 12179.20 11417.51 02/28/86 13583.77 12271.54 03/31/86 14309.62 12956.29 04/30/86 14366.18 12809.89 05/31/86 14771.53 13491.37 06/30/86 15129.74 13719.38 07/31/86 14139.16 12952.46 08/31/86 15189.66 13913.54 09/30/86 13987.73 12762.89 10/31/86 14839.49 13499.31 11/30/86 15095.02 13827.34 12/31/86 14820.56 13474.74 01/31/87 16798.53 15289.79 02/28/87 18360.08 15893.74 03/31/87 18918.46 16353.07 04/30/87 19334.87 16207.52 05/31/87 19079.35 16348.53 06/30/87 20148.77 17174.13 07/31/87 21464.26 18044.86 08/31/87 22249.77 18717.93 09/30/87 22647.26 18308.01 10/31/87 15757.50 14364.46 11/30/87 15227.51 13180.83 12/31/87 17017.51 14183.89 01/31/88 16600.14 14781.03 02/29/88 18440.38 15469.83 03/31/88 19379.47 14991.81 04/30/88 19607.13 15158.22 05/31/88 18867.24 15290.10 06/30/88 21362.00 15991.91 07/31/88 20716.97 15931.15 08/31/88 19815.82 15389.49 09/30/88 20062.45 16045.08 10/31/88 20375.48 16491.13 11/30/88 19692.51 16255.31 12/31/88 20584.17 16539.78 01/31/89 21959.61 17750.49 02/28/89 21684.52 17308.50 03/31/89 21921.67 17711.79 04/30/89 22547.73 18631.03 05/31/89 23069.45 19385.59 06/30/89 22794.00 19275.09 07/31/89 24246.52 21015.63 08/31/89 25357.26 21427.54 09/30/89 24455.37 21339.68 10/31/89 22727.55 20844.60 11/30/89 23211.72 21269.83 12/31/89 24147.56 21780.31 01/31/90 22427.02 20318.85 02/28/90 22577.07 20580.96 03/31/90 23247.28 21126.36 04/30/90 22707.11 20598.20 05/31/90 24687.73 22606.52 06/30/90 24889.24 22452.80 07/31/90 24971.59 22380.95 08/31/90 21636.55 20357.71 09/30/90 20566.05 19366.29 10/31/90 20802.79 19283.02 11/30/90 22192.39 20528.70 12/31/90 23149.67 21101.45 01/31/91 24703.96 22021.47 02/28/91 26597.93 23596.01 03/31/91 27236.12 24167.03 04/30/91 27019.96 24225.03 05/31/91 28893.34 25271.56 06/30/91 28108.11 24114.12 07/31/91 29462.85 25237.84 08/31/91 30041.97 25835.97 09/30/91 29814.46 25404.51 10/31/91 30290.16 25744.93 11/30/91 28780.31 24707.41 12/31/91 32099.72 27533.94 01/31/92 32716.21 27021.81 02/29/92 33896.03 27373.09 03/31/92 33651.56 26839.32 04/30/92 34873.90 27628.39 05/31/92 34671.95 27763.77 06/30/92 33644.23 27350.09 07/31/92 34705.85 28468.71 08/31/92 33520.00 27885.10 09/30/92 33553.88 28214.15 10/31/92 33215.07 28312.90 11/30/92 34220.21 29278.37 12/31/92 34958.12 29638.49 01/31/93 34922.15 29887.45 02/28/93 34310.75 30293.92 03/31/93 35125.96 30933.12 04/30/93 35777.47 30184.54 05/31/93 36319.18 30993.49 06/30/93 35408.12 31083.37 07/31/93 35949.83 30959.04 08/31/93 37710.39 32132.38 09/30/93 36516.17 31884.96 10/31/93 37895.06 32544.98 11/30/93 38178.23 32235.80 12/31/93 39417.75 32625.86 01/31/94 42485.96 33735.14 02/28/94 42418.97 32820.92 03/31/94 41146.13 31389.92 04/30/94 43135.92 31791.71 05/31/94 44174.53 32313.10 06/30/94 43621.51 31521.43 07/31/94 45590.81 32555.33 08/31/94 48234.54 33890.10 09/30/94 47883.84 33059.79 10/31/94 47802.91 33803.64 11/30/94 44053.14 32572.51 12/31/94 45241.86 33055.56 01/31/95 44059.60 33912.69 02/28/95 46616.57 35234.27 03/31/95 48046.28 36274.03 04/30/95 49076.24 37342.30 05/31/95 49564.91 38834.87 06/30/95 50402.62 39737.01 07/31/95 52790.12 41054.68 08/31/95 53013.51 41157.73 Let's say you invested $10,000 in Fidelity Select Chemicals Portfolio on August 31, 1985 and paid a 3% sales charge. By August 31, 1995, your investment would have grown to $53,014 - a 430.14% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $41,158 over the same period - a 311.58% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Grace (W.R.) & Co. 8.2 Cytec Industries, Inc. 5.8 Hercules, Inc. 5.7 du Pont (E.I.) de Nemours & Co. 5.3 Ferro Corp. 5.2 Hanna (M.A.) Co. 4.2 Airgas, Inc. 3.8 Agrium, Inc. 3.6 Albemarle Corp. 3.4 Sigma Aldrich Corp. 3.2 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 28.0 Row: 1, Col: 2, Value: 4.8 Row: 1, Col: 3, Value: 6.1 Row: 1, Col: 4, Value: 10.1 Row: 1, Col: 5, Value: 12.3 Row: 1, Col: 6, Value: 38.7 Chemicals 38.7% Adhesives & Sealants 12.3% Agricultural Chemicals 10.1% Plastics 6.1% Chemicals, General 4.8% All Others 28%* * INCLUDES SHORT-TERM INVESTMENTS CHEMICALS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW An interview with John Avery, Portfolio Manager of Fidelity Select Chemicals Portfolio Q. JOHN, HOW HAS THE FUND DONE? A. The fund returned 13.72% and 9.91% for the six months and year ended August 31, 1995. By comparison, the S&P 500 - spurred by strong performance in the technology sector - returned 16.81% and 21.45% for the same two periods. Q. WHAT HAPPENED WITH CHEMICALS OVER THE PAST SIX MONTHS? A. Diversified chemical companies were the best performers, followed by specialty chemical companies. Commodity chemical companies, however, lagged considerably. These are the companies that supply raw materials like ethylene and methanol, which - in terms of chemicals - are the basic building blocks of industry. Typically, when the economy is strong, commodity chemical companies make a lot of money because their products are in high demand, and they can raise prices. When that happens, they often add new plants to increase supply. But once the economy starts to slow, this extra capacity can drive prices down. The expectation that this eventually will happen can hurt stock prices. As a result, I sold commodity companies like Dow Chemical and Eastman Chemical. Q. SO HAVE YOU SHIFTED THE FUND'S FOCUS TOWARD DIVERSIFIED AND SPECIALTY COMPANIES? A. Yes. Among the fund's larger investments were W.R. Grace, Cytec, and du Pont - all diversified companies, which have been top contributors to performance. Business has been strong for each and earnings have been growing nicely. Plus, they're all currently going through major restructurings, which have the potential to increase their values significantly. Q. WHAT MAKES SPECIALTY CHEMICAL COMPANIES LOOK GOOD? A. Historically investors have bid up the prices of specialty chemical stocks late in the economic cycle. These are companies that provide technological services, such as chemical treatment systems to clean the water used in cooling power plants. They typically have steady earnings growth. But as the economy strengthens and demand rises, many of the companies that use their services start running at near capacity. To improve production efficiency and insure that their machines don't break down, they increase the amount of chemicals used in their processes. This means more business for the specialty chemical companies. In addition, the specialty companies benefit from lower commodity chemical costs, since these are their raw materials. Q. WHICH COMPANIES FALL INTO THE SPECIALTY CHEMICALS CATEGORY? A. Among the fund's largest investments were Hercules, Ferro, Hanna, and Albemarle. Ferro and Albemarle are both companies whose profit margins have been squeezed as ethylene prices have risen over the last year. But if those prices continue to fall - as they've already started to - their profit margins should improve. In addition, both Ferro and Hanna, which make resins, are big in Europe, where the economy is still very strong. So if things slow in the U.S., they still could have solid sales and earnings growth from Europe. Hercules - one of the fund's top performers - is a reorganization story with a management team whose number one goal has been to provide high returns to shareholders. Q. WHAT OTHER CHANGES HAVE YOU MADE TO THE FUND SINCE TAKING OVER? A. I've cut the number of stocks in the fund from about 120 to 52, so I can have bigger investments in the names I really believe in. Plus, in August I started increasing my stake in fertilizer stocks with Agrium being the largest. Right now, it looks like U.S. crop yields will be poor because of floods and drought. If that's the case, the government probably will allow farmers to grow more crops or plant more of their acreage next year. That would mean they'd need more fertilizer, which would push up product prices and help earnings grow. Q. WHAT HURT PERFORMANCE? A. Probably having as much in commodity chemical companies as we did early in the period. These stocks were up, but not nearly as much as the diversified and specialty companies. There were also some disappointments like Geon, which makes the PVC plastic that goes in pipes, and Image Industries, which recycles plastic bottles. Q. SO WHERE DO YOU GO FROM HERE? A. I'm optimistic. With its focus on diversified and specialty companies, the fund is in a good position to benefit from flat or slow economic growth in the U.S. I also expect economies abroad to grow faster than here, which is why I like companies with earnings outside the U.S. Only a very strong economy would cause me to shift back toward commodity chemical companies. FUND FACTS START DATE: July 29, 1985 TRADING SYMBOL: FSCHX SIZE: as of August 31, 1995, more than $75 million MANAGER: John Avery, since July 1995; equity analyst, specialty chemicals, since January 1995; joined Fidelity in December 1994 (checkmark) CHEMICALS PORTFOLIO INVESTMENTS AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.3% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 0.5% PAINT & VARNISH - 0.5% Dexter Corp. 15,200 $ 376,200 CHEMICALS & PLASTICS - 85.6% ADHESIVES & SEALANTS - 12.3% Arcadian Corp. (a) 42,000 782,250 Ferro Corp. 142,200 3,839,400 Fuller (H.B.) Co. 26,701 914,509 International Specialty Products, Inc. 105,000 931,875 Loctite Corp. 9,400 451,200 Nalco Chemical Co. 62,700 2,194,500 9,113,734 AGRICULTURAL CHEMICALS - 10.1% Agrium, Inc. 78,600 2,690,278 First Mississippi Corp. 25,500 844,688 IMC Fertilizer Group, Inc. 6,000 379,500 OM Group, Inc. 45,000 1,350,000 Potash Corp. of Saskatchewan 13,400 755,274 Terra Industries, Inc. 43,900 587,163 Vigoro Corp. (a) 19,700 866,800 7,473,703 CHEMICALS - 38.7% AKZO NV sponsored ADR 10,000 590,000 Cabot Corp. 10,000 481,250 Cytec Industries, Inc. (a) 71,271 4,311,896 du Pont (E.I.) de Nemours & Co. 59,900 3,915,963 Engelhard Corp. 25,000 706,250 Grace (W.R.) & Co. 91,400 6,089,525 Hercules, Inc. 75,400 4,194,125 Hoechst AG Ord. 5,200 1,251,826 Monsanto Co. 6,200 588,225 NL Industries, Inc. (a) 52,000 812,500 Olin Corp. 15,900 1,027,538 Raychem Corp. 16,300 715,163 Reliance Industries Ltd. GDR (b) 17,000 308,040 Rhodia Ster SA GDR (b) 25,000 346,875 Rohm & Haas Co. 17,000 1,015,750 Sasol Ltd. sponsored ADR 20,000 173,750 Union Carbide Corp. 43,700 1,551,350 Witco Corp. 15,000 498,750 28,578,776 CHEMICALS & ALLIED PRODUCTS - 2.6% Kemira OY sponsored ADR (b) 73,200 1,143,750 Kemira OY 100,000 785,958 1,929,708 CHEMICALS, GENERAL - 4.8% Albemarle Corp. 153,400 2,511,921 Great Lakes Chemical Corp. 15,800 1,044,775 3,556,696 INDUSTRIAL GASES - 3.8% Airgas, Inc. (a) 101,200 2,783,000 ORGANIC CHEMICALS - 2.0% Cambrex Corp. 20,000 800,000 Lubrizol Corp. 21,000 651,000 1,451,000 PLASTICS & SYNTHETIC RESINS - 0.5% Geon Co. 12,700 338,138 SHARES VALUE (NOTE 1) PLASTICS - 6.1% Applied Extrusion Technologies, Inc. (a) 50,000 $ 912,500 Hanna (M.A.) Co. 111,850 3,131,800 Sealed Air Corp. (a) 8,300 437,825 4,482,125 PLASTICS, RESINS & ELASTOMERS - 4.7% PT Tri Polyta Indonesia sponsored ADR 61,000 1,288,625 Praxair, Inc. 85,153 2,213,978 3,502,603 TOTAL CHEMICALS & PLASTICS 63,209,483 DRUGS & PHARMACEUTICALS - 4.6% BIOTECHNOLOGY - 3.3% Sigma Aldrich Corp. 50,000 2,400,000 PHARMACEUTICAL PREPARATIONS - 1.3% Copley Pharmaceutical, Inc. (a) 55,000 990,000 TOTAL DRUGS & PHARMACEUTICALS 3,390,000 INDUSTRIAL MACHINERY & EQUIPMENT --1.0% PUMPING EQUIPMENT - 1.0% Duriron Co., Inc. 30,000 765,000 METALS & MINING - 0.9% MISCELLANEOUS METAL ORES - 0.9% Stillwater Mining Co. (a) 9,700 212,188 Stillwater Mining Co. (b) 20,000 437,500 649,688 OIL & GAS - 1.0% CRUDE PETROLEUM & GAS - 1.0% Occidental Petroleum Corp. 33,000 717,750 TEXTILES & APPAREL - 0.7% CARPETS & RUGS - 0.7% Image Industries, Inc. (a) 45,000 551,250 TOTAL COMMON STOCKS (Cost $60,022,928) 69,659,371 REPURCHASE AGREEMENTS - 5.7% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $4,216,682 4,216,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $64,238,928) $ 73,875,371 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 $2,236,165 or 2.9% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $37,471,896 and $70,002,144, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $51,139 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $1,328,000 and $1,161,500, respectively. The weighted average interest rate paid was 6.5% (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 87.4% Canada 4.7 Finland 2.6 Indonesia 1.7 Germany 1.7 Others (individually less than 1%) 1.9 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $64,251,068. Net unrealized appreciation aggregated $9,624,303, of which $73,875,369 related to appreciated investment securities and $64,251,066 related to depreciated investment securities. CHEMICALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $4,216,000) (cost $64,238,928) - See $ 73,875,371 accompanying schedule Cash 492 Receivable for investments sold 3,411,071 Receivable for fund shares sold 585,034 Dividends receivable 192,777 Redemption fees receivable 319 Other receivables 3,800 Prepaid expenses 13,672 TOTAL ASSETS 78,082,536 LIABILITIES Payable for investments purchased $ 1,634,755 Payable for fund shares redeemed 379,819 Accrued management fee 39,219 Other payables and accrued expenses 107,660 TOTAL LIABILITIES 2,161,453 NET ASSETS $ 75,921,083 Net Assets consist of: Paid in capital $ 61,288,106 Undistributed net investment income 25,067 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 4,971,467 Net unrealized appreciation (depreciation) on investments 9,636,443 NET ASSETS, for 1,999,418 shares outstanding $ 75,921,083 NET ASSET VALUE and redemption price per share ($75,921,083 (divided by) 1,999,418 shares) $37.97 Maximum offering price per share (100/97.00 of $37.97) $39.14
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 860,779 Dividends Interest (including income on securities loaned of $1,234) 77,299 TOTAL INCOME 938,078 EXPENSES Management fee $ 261,233 Transfer agent 521,133 Fees Redemption fees (45,717 ) Accounting and security lending fees 42,939 Non-interested trustees' compensation 678 Custodian fees and expenses 7,562 Registration fees 13,672 Audit 18,463 Legal 657 Interest 835 Miscellaneous 706 Total expenses before reductions 822,161 Expense reductions (10,832 811,329 ) NET INVESTMENT INCOME 126,749 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 5,187,571 Foreign currency transactions (307 5,187,264 ) Change in net unrealized appreciation (depreciation) on investment securities 5,135,840 NET GAIN (LOSS) 10,323,104 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 10,449,853 OTHER INFORMATION $220,843 Sales Charges Paid to FDC Deferred sales charges withheld $13,312 by FDC Exchange fees withheld by FSC $31,800
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 126,749 $ 1,534,984 Net investment income Net realized gain (loss) 5,187,264 4,787,546 Change in net unrealized appreciation (depreciation) 5,135,840 576,053 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 10,449,853 6,898,583 Distributions to shareholders (214,326 (1,029,165 From net investment income ) ) From net realized gain (1,232,375 (2,261,141 ) ) TOTAL DISTRIBUTIONS (1,446,701 (3,290,306 ) ) Share transactions 27,262,158 295,805,417 Net proceeds from sales of shares Reinvestment of distributions 1,417,990 3,230,231 Cost of shares redeemed (59,287,336(267,599,716 ) ) Paid in capital portion of redemption fees 14,270 249,480 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (30,592,918 31,685,412 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (21,589,766 35,293,689 ) NET ASSETS Beginning of period 97,510,849 62,217,160 End of period (including undistributed net investment income of $25,067 and $426,403, respectively) $ 75,921,083 $ 97,510,849 OTHER INFORMATION Shares Sold 762,032 8,887,417 Issued in reinvestment of distributions 41,029 101,777 Redeemed (1,679,576 (8,078,436 ) ) Net increase (decrease) (876,515) 910,758
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 33.91 $ 31.66 $ 28.62 $ 32.81 $ 26.25 $ 22.70 Income from Investment Operations Net investment income .05 .36 .29 .30 .12 .28 Net realized and unrealized gain (loss) 4.54 2.65 5.97 (.84) 7.27 3.94 Total from investment operations 4.59 3.01 6.26 (.54) 7.39 4.22 Less Distributions (.08) (.22) (.23) (.31) (.18) (.10) From net investment income From net realized gain (.46) (.60) (3.05) (3.36) (.71) (.60) Total distributions (.54) (.82) (3.28) (3.67) (.89) (.70) Redemption fees added to paid in capital .01 .06 .06 .02 .06 .03 Net asset value, end of period $ 37.97 $ 33.91 $ 31.66 $ 28.62 $ 32.81 $ 26.25 TOTAL RETURN B, C 13.72% 9.90% 23.63% (1.61)% 29.07% 18.99% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 75,921 $ 97,511 $ 62,217 $ 28,796 $ 39,566 $ 20,396 Ratio of expenses to average net assets 1.88% A 1.51% 1.93% 1.89% A 2.16% 2.50% Ratio of expenses to average net assets before 1.91% A 1.52% 1.93% 1.89% A 2.16% 2.52% expense reductions Ratio of net investment income to average net assets .29% A 1.07% .97% 1.21% A .40% 1.21% Portfolio turnover rate 90% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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). If Fidelity had not reimbursed certain expenses, the past five years and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S CONSTRUCTION AND HOUSING 12.98% 6.63% 132.60% 187.42% CONSTRUCTION AND HOUSING (INCL. 3% SALES CHARGE) 9.59% 3.43% 125.62% 178.80% S&P 500 16.81% 21.45% 102.17% 221.28% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on September 29, 1986. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS FUND CONSTRUCTION AND HOUSING 6.63% 18.39% 12.55% CONSTRUCTION AND HOUSING (INCL. 3% SALES CHARGE) 3.43% 17.67% 12.17% S&P 500 21.45% 15.12% 13.96% 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 ConstruStandard & Poor 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 9141.24 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 11012.83 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 11229.54 12689.01 12/31/88 11809.46 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 14199.39 16404.95 08/31/89 14438.22 16726.49 09/30/89 14698.76 16657.91 10/31/89 13873.72 16271.45 11/30/89 14079.98 16603.39 12/31/89 13769.49 17001.87 01/31/90 12900.94 15861.04 02/28/90 13167.30 16065.65 03/31/90 13908.46 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 12442.05 16471.95 01/31/91 13536.43 17190.12 02/28/91 14722.01 18419.22 03/31/91 15086.80 18864.96 04/30/91 15321.31 18910.24 05/31/91 16845.63 19727.16 06/30/91 15985.76 18823.66 07/31/91 16402.66 19700.84 08/31/91 17080.14 20167.75 09/30/91 16702.32 19830.95 10/31/91 16415.69 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 20070.16 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 18565.74 22024.17 10/31/92 19212.72 22101.25 11/30/92 20323.86 22854.91 12/31/92 20872.39 23136.02 01/31/93 21744.42 23330.36 02/28/93 22138.23 23647.66 03/31/93 22658.64 24146.62 04/30/93 22123.98 23562.27 05/31/93 22363.23 24193.74 06/30/93 22630.63 24263.90 07/31/93 23404.69 24166.85 08/31/93 24375.78 25082.77 09/30/93 25163.91 24889.63 10/31/93 26078.71 25404.85 11/30/93 25670.57 25163.50 12/31/93 27887.78 25467.98 01/31/94 28798.86 26333.89 02/28/94 28215.20 25620.25 03/31/94 26563.85 24503.20 04/30/94 26503.76 24816.84 05/31/94 25101.29 25223.84 06/30/94 24485.92 24605.86 07/31/94 25187.15 25412.93 08/31/94 26145.98 26454.86 09/30/94 24686.27 25806.71 10/31/94 23956.42 26387.37 11/30/94 22983.28 25426.34 12/31/94 23441.19 25803.41 01/31/95 23544.07 26472.49 02/28/95 24675.71 27504.13 03/31/95 25116.61 28315.77 04/30/95 25146.00 29149.67 05/31/95 26380.52 30314.78 06/30/95 26630.37 31019.00 07/31/95 27864.89 32047.59 08/31/95 27879.58 32128.03 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 August 31, 1995, your investment would have grown to $27,880 - a 178.80% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $32,128 over the same period - a 221.28% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Vulcan Materials Co. 7.7 United Dominion Industries Ltd. 6.8 Fluor Corp. 5.8 Lowe's Companies, Inc. 5.4 Aluminum Co. of America 5.2 Masco Corp. 5.1 Sunbeam-Oster, Inc. 5.1 Heilig-Meyers Co. 4.2 Federal National Mortgage Association 3.9 Sherwin-Williams Co. 3.6 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 54.6 Row: 1, Col: 2, Value: 6.9 Row: 1, Col: 3, Value: 7.0 Row: 1, Col: 4, Value: 7.2 Row: 1, Col: 5, Value: 8.1 Row: 1, Col: 6, Value: 16.2 Cement 16.2% Operative Builders 8.1% Appliances 7.2% Federal & Federally Sponsored Credit Agencies 7.0% Prime Nonferrous Smelting 6.9% All Others 54.6% % % % % % %* CONSTRUCTION AND HOUSING PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Bill Bower, Portfolio Manager of Fidelity Select Construction and Housing Portfolio Q. BILL, CONSTRUCTION AND HOUSING STOCKS HAVE LAGGED THE MARKET IN RECENT MONTHS. HOW HAS THE FUND PERFORMED IN THAT ENVIRONMENT? A. Somewhat better than the sector, but still worse than the market as a whole. For the six months ended August 31, 1995, the fund had a 12.98% return, versus 16.81% for the S&P 500. During the 12 months ended August 31, 1995, the fund rose 6.63%, compared to a gain of 21.45% for the S&P 500. Q. WHAT FACTORS HELPED THE FUND'S PERFORMANCE? A. The significant decline in interest rates that took place during the period helped the stock prices of homebuilders, which were among the fund's largest investments. Homebuilders typically are among the first companies in the construction and housing sector to feel the impact of lower rates, which boost demand for new housing. The fund's investment in homebuilders such as Pulte and Lennar helped its performance. In addition, for most of the period, I avoided making sizable investments in retail home centers such as Lowe's and Home Depot. At the beginning of the period they still were suffering from the impact of slower home sales during 1994, which meant there were fewer new homeowners out there to shop at their stores. The fund's lack of investments in this area helped its performance. Q. WHY DID THE SECTOR TRAIL THE S&P 500? A. Although lower interest rates historically work their way through the sector and stimulate demand, that doesn't happen immediately. Some groups within the sector delivered disappointing earnings because of that lag effect. Q. HOW DID YOU CHANGE THE FUND'S STRATEGY DURING THE PERIOD? A. During the past few months, I have begun to shift the fund's investments into the sectors that should begin to revive later in the cycle. The fund increased its stake in home retail centers, which should start to feel additional demand from people who have been able to purchase new homes thanks to the recent declines in interest rates. The fund's investment in that group was Lowe's, which has been increasing its retail space at a rapid pace and whose shares trade at an attractive valuation - price relative to earnings. I also invested in building materials and furniture stocks that should revive when new homeowners start to buy furniture and remodel. The fund's new investments in those groups include Masco, which plans to spin off its furniture division and concentrate on its very well-managed building products business, and Heilig-Meyers, a furniture retailer that has been growing rapidly and has a terrific track record that isn't fully reflected in the stock price. Q. YOU ALSO CONTINUED TO HOLD A SIGNIFICANT INVESTMENT IN CEMENT COMPANIES. HOW DID THEY PERFORM? A. Quite well. Cement goes into commercial buildings, highways and airports. As a result, demand for cement stayed strong even when the housing industry slumped in 1994. But cement stocks declined sharply anyway, so I invested a significant portion of the fund's assets in them, to the point where this industry has the largest representation in the fund. As the construction cycle continued to mature, cement prices climbed and the stocks performed well. Q. ARE YOU TARGETING OTHER INDUSTRIES THAT USUALLY DO WELL AS THE CYCLE PROGRESSES? A. The fund's investments included shares of Texas Industries, which is virtually uncovered by Wall Street analysts. The firm owns a cement business and a structural steel division, both of which should benefit from a strong construction market in Texas. The fund purchased shares of structural steel producers - such as NorthWestern Steel & Wire - which tend to prosper during the later stages of the construction cycle. And I also bought shares of Aluminum Company of America, which is partly a play on emerging markets, where aluminum has a major role in construction projects. Q. ANY DISAPPOINTMENTS? A. The fund invested in Vulcan and Martin Marietta because I expected demand for their gravel and sand concrete additives used in heavy construction to rise. But a wet spring in their markets curtailed demand, and the firms delivered lower-than-expected earnings. That hurt the stocks, but I still like their prospects as they get past the impact of that wet weather. Q. WHAT'S YOUR OUTLOOK FOR THE SECTOR? A. There's a good chance that the sector will perform reasonably well during the next six to 12 months. Valuations in the sector are quite reasonable. Low interest rates likely will continue to support demand for housing, and many companies should benefit from the ripple effect of past interest rate cuts. I plan to continue to hold shares of retailers and firms that make building materials, as well as late cycle firms whose products go into heavy construction. FUND FACTS START DATE: September 29, 1986 TRADING SYMBOL: FSHOX SIZE: as of August 31, 1995, more than $39 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 100% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 33.7% CEMENT - 16.2% Centex Construction Products (a) 15,900 $ 206,700 Lafarge Corp. 50,000 1,056,250 Medusa Corp. 42,700 1,174,250 Texas Industries, Inc. 17,300 854,188 Vulcan Materials Co. 57,000 2,999,625 6,291,013 FABRICATED STRUCTURAL METAL - 6.7% United Dominion Industries Ltd. 109,100 2,628,158 HEATING & AIR-CONDITION EQUIPMENT - 0.3% Falcon Building Products, Inc. 10,000 111,250 PAINT & VARNISH - 3.6% Sherwin-Williams Co. 38,900 1,395,537 PAVING, ROOFING & SIDING - 1.8% Elcor Corp. 31,500 693,000 PLUMBING SUPPLIES - WHOLESALE - 5.1% Masco Corp. 71,050 1,989,400 TOTAL BUILDING MATERIALS 13,108,358 CONSTRUCTION - 11.9% CONSTRUCTION - 1.1% Walter Industries, Inc. 30,000 420,000 OPERATIVE BUILDERS - 8.1% Centex Corp. 18,100 529,425 Engle Homes, Inc. 20,000 175,000 Lennar Corp. 38,950 754,656 Pulte Corp. 44,500 1,201,500 Washington Homes, Inc. 101,000 467,125 3,127,706 PREFABRICATED WOOD BUILDINGS - 1.1% American Homestar Corp. 30,800 435,050 SINGLE-FAMILY HOUSING CONSTRUCTION - 1.6% Beazer Homes USA, Inc. (a) 40,000 635,000 TOTAL CONSTRUCTION 4,617,756 CONSUMER ELECTRONICS - 7.2% APPLIANCES - 7.2% Black & Decker Corp. 25,000 809,375 Sunbeam-Oster, Inc. 121,700 1,977,625 2,787,000 ENGINEERING - 5.8% ARCHITECTS & ENGINEERS - 5.8% Fluor Corp. 38,200 2,234,700 FEDERAL SPONSORED CREDIT - 7.0% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 7.0% Federal Home Loan Mortgage Corporation 18,800 1,207,900 Federal National Mortgage Association 15,800 1,506,925 2,714,825 SHARES VALUE (NOTE 1) HOME FURNISHINGS - 5.8% FURNITURE - 0.3% Interco, Inc. 15,000 $ 118,125 FURNITURE STORES - 5.5% Haverty Furniture Companies, Inc. 41,750 511,438 Heilig-Meyers Co. 73,900 1,625,800 2,137,238 TOTAL HOME FURNISHINGS 2,255,363 HOUSEHOLD PRODUCTS - 2.3% MANUFACTURED PRODUCTS - 1.1% First Brands Corp. 10,000 436,250 SOAPS & DETERGENTS - 1.2% Rubbermaid, Inc. 15,300 455,175 TOTAL HOUSEHOLD PRODUCTS 891,425 INDUSTRIAL MACHINERY & EQUIPMENT --0.9% CONSTRUCTION EQUIPMENT - 0.9% Caterpillar, Inc. 5,200 349,050 IRON & STEEL - 2.3% BLAST FURNACES - 2.3% Northwestern Steel & Wire Co. 92,300 899,925 LEISURE DURABLES & TOYS - 2.9% TRAVEL TRAILERS AND CAMPERS - 2.9% Champion Enterprises, Inc. (a) 67,000 1,139,000 METALS & MINING - 9.3% NON-METALLIC MINERAL MINING - 2.4% Martin Marietta Materials, Inc. 50,500 959,500 PRIME NONFERROUS SMELTING - 6.9% Alcan Aluminium Ltd. 20,000 652,926 Aluminum Co. of America 35,200 2,010,800 2,663,726 TOTAL METALS & MINING 3,623,226 PAPER & FOREST PRODUCTS - 3.2% PAPER - 3.2% Champion International Corp. 22,000 1,245,750 RETAIL & WHOLESALE, MISCELLANEOUS - 6.5% LUMBER & BUILDING MATERIALS-RETAIL - 5.4% Lowe's Companies, Inc. 63,000 2,094,750 LUMBER - WHOLESALE - 1.1% Cameron Ashley, Inc. 40,000 420,000 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 2,514,750 SHIPPING - 1.2% Kirby Corp. 30,000 465,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $35,541,974) $ 38,846,128 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $44,015,334 and $25,615,658, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $15,805 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $3,426,000 and $2,484,125, respectively. The weighted average interest rate paid was 6.5% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $35,593,533. Net unrealized appreciation aggregated $3,252,595, of which $4,081,148 related to appreciated investment securities and $828,553 related to depreciated investment securities. 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
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value $ 38,846,128 (cost $35,541,974) - See accompanying schedule Cash 768 Receivable for investments sold 2,530,277 Receivable for fund shares sold 231,989 Dividends receivable 58,902 Redemption fees receivable 129 Other receivables 427 Prepaid expenses 2,949 TOTAL ASSETS 41,671,569 LIABILITIES Payable for fund shares redeemed $ 546,522 Accrued management fee 24,069 Notes payable 1,983,000 Other payables and accrued expenses 36,739 TOTAL LIABILITIES 2,590,330 NET ASSETS $ 39,081,239 Net Assets consist of: Paid in capital $ 34,255,721 Undistributed net investment income 172,182 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 1,349,165 Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 3,304,171 NET ASSETS, for 2,060,460 shares outstanding $ 39,081,239 NET ASSET VALUE and redemption price per share ($39,081,239 (divided by) 2,060,460 shares) $18.97 Maximum offering price per share (100/97.00 of $18.97) $19.56
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 285,767 Dividends Interest 172,034 TOTAL INCOME 457,801 EXPENSES Management fee $ 132,025 Transfer agent 129,437 Fees Redemption fees (24,268 ) Accounting fees and expenses 24,349 Non-interested trustees' compensation 197 Custodian fees and expenses 9,059 Registration fees 9,038 Audit 8,466 Legal 74 Interest 3,602 Miscellaneous 687 Total expenses before reductions 292,666 Expense reductions (5,462 287,204 ) NET INVESTMENT INCOME 170,597 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 1,864,000 Foreign currency transactions 10 1,864,010 Change in net unrealized appreciation (depreciation) on: Investment securities 2,856,200 Assets and liabilities in 17 2,856,217 foreign currencies NET GAIN (LOSS) 4,720,227 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 4,890,824 OTHER INFORMATION $119,423 Sales Charges Paid to FDC Deferred sales charges withheld $1,006 by FDC Exchange fees withheld by FSC $16,830
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 170,597 $ (45,685 Net investment income (loss) ) Net realized gain (loss) 1,864,010 847,689 Change in net unrealized appreciation (depreciation) 2,856,217 (10,454,301 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 4,890,824 (9,652,297 ) Distributions to shareholders from net realized gains - (804,434 ) Share transactions 67,347,748 23,825,749 Net proceeds from sales of shares Reinvestment of distributions - 794,528 Cost of shares redeemed (50,065,472 (78,326,758 ) ) Paid in capital portion of redemption fees 45,162 27,046 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 17,327,438 (53,679,435 ) TOTAL INCREASE (DECREASE) IN NET ASSETS 22,218,262 (64,136,166 ) NET ASSETS Beginning of period 16,862,977 80,999,143 End of period (including undistributed net investment income of $172,182 and $1,585, respectively) $ 39,081,239 $ 16,862,977 OTHER INFORMATION Shares Sold 3,769,131 1,308,527 Issued in reinvestment of distributions - 47,271 Redeemed (2,713,210 (4,437,862 ) ) Net increase (decrease) 1,055,921 (3,082,064)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 16.79 $ 19.82 $ 15.74 $ 13.84 $ 11.76 $ 11.66 Income from Investment Operations Net investment income (loss) .07 (.02) .01 .02 (.06) .01 Net realized and unrealized gain (loss) 2.09 (2.50) 4.26 1.87 2.93 1.45 Total from investment operations 2.16 (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 .02 .01 .03 .02 .09 .07 Net asset value, end of period $ 18.97 $ 16.79 $ 19.82 $ 15.74 $ 13.84 $ 11.76 TOTAL RETURN B, C 12.98% (12.54)% 27.45% 13.81% 26.96% 13.46% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 39,081 $ 16,863 $ 80,999 $ 31,111 $ 26,687 $ 4,070 Ratio of expenses to average net assets 1.31% A 1.74% 1.66% 2.02% A 2.50% 2.48% Ratio of expenses to average net assets before 1.34% A 1.76% 1.67% 2.02% A 3.10% 3.48% expense reductions Ratio of net investment income (loss) to average net .78% A (.11)% .03% .20% A (.49)% .08% assets Portfolio turnover rate 142% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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). If Fidelity had not reimbursed certain expenses, the life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S ENVIRONMENTAL SERVICES 24.93% 17.38% 23.37% 38.17% ENVIRONMENTAL SERVICES (INCL. 3% SALES CHARGE) 21.18% 13.86% 19.66% 34.02% S&P 500 16.81% 21.45% 102.17% 108.43% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on June 29, 1989. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS FUND ENVIRONMENTAL SERVICES 17.38% 4.29% 5.37% ENVIRONMENTAL SERVICES (INCL. 3% SALES CHARGE) 13.86% 3.66% 4.85% S&P 500 21.45% 15.12% 12.62% 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 EnviroStandard & Poo 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 10562.83 10422.44 03/31/90 11019.13 10698.64 04/30/90 11077.38 10431.17 05/31/90 12106.48 11448.21 06/30/90 12485.11 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 11087.09 10686.03 01/31/91 12057.94 11151.94 02/28/91 12611.32 11949.30 03/31/91 12611.32 12238.47 04/30/91 12572.49 12267.85 05/31/91 12601.62 12797.82 06/30/91 11650.18 12211.68 07/31/91 12019.11 12780.74 08/31/91 12232.69 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 11936.55 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 11482.88 13991.35 05/31/92 11190.52 14059.90 06/30/92 10592.18 13850.41 07/31/92 10665.31 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 11772.58 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 11333.85 15285.81 05/31/93 11584.55 15695.47 06/30/93 11438.31 15740.99 07/31/93 10957.79 15678.02 08/31/93 11542.77 16272.22 09/30/93 11553.21 16146.93 10/31/93 11877.04 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 11333.85 15896.23 04/30/94 11521.87 16099.70 05/31/94 11490.54 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 03/31/95 11239.83 18369.60 04/30/95 12044.17 18910.59 05/31/95 12232.20 19666.44 06/30/95 12733.60 20123.29 07/31/95 13214.12 20790.58 08/31/95 13391.70 20842.77 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 August 31, 1995, your investment would have grown to $13,402 - a 34.02% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $20,843 over the same period - a 108.43% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Addington Resources, Inc. 10.8 Harsco Corp. 8.5 Memtec Ltd. sponsored ADR 8.0 Tetra Technologies, Inc. 5.0 IMCO Recycling, Inc. 4.4 Browning-Ferris Industries, Inc. 4.2 Microfluidics International Corp. 4.1 American Buildings Co. 4.0 Thermo Power Corp. 3.5 Continental Waste Industries, Inc. 3.2 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 44.7 Row: 1, Col: 2, Value: 8.0 Row: 1, Col: 3, Value: 8.300000000000001 Row: 1, Col: 4, Value: 8.5 Row: 1, Col: 5, Value: 10.8 Row: 1, Col: 6, Value: 19.7 Refuse Systems 19.7% Coal 10.8% Ordnance 8.5% Pollution Equipment & Design 8.3% Manufactured Products 8.0% All Others 44.7%* * INCLUDES SHORT-TERM INVESTMENTS ENVIRONMENTAL SERVICES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Philip Barton, Portfolio Manager of Fidelity Select Environmental Services Portfolio Q. HOW HAS THE FUND PERFORMED, PIP? A. It has done very well. The fund had a total return of 24.93% from March 1, 1995, through August 31, 1995. During the same period, the Standard & Poor's Composite Index of 500 Stocks returned 16.81%. For the 12 months ended August 31, 1995, the fund rose 17.38%, while the S&P 500 was up 21.45%. Q. WHAT HELPED THE FUND PERFORM SO WELL OVER THE PAST SIX MONTHS? A. It came down to individual stock selection, as well as a focus on two industries that posted very good results: recycling and secondary solid waste companies. Q. WHAT DO YOU MEAN BY SECONDARY SOLID WASTE COMPANIES? A. That's a term that refers to solid waste disposal in about 150 smaller metropolitan markets in the United States. Rapid consolidation is the main appeal of this industry at the moment. Companies such as United Waste and Continental Waste - two of the larger positions in the fund and two of the best performing stocks during the past six months - are in the process of acquiring local solid waste companies and setting up operations that, from an economic standpoint, are quite efficient and profitable. In essence, these companies establish themselves as local solid waste monopolies, both in terms of collection and landfill management. Once they do so, they can use pricing leverage to improve profit margins, and can create economies of scale to make their operations more efficient. Q. WHAT'S BEEN THE APPEAL OF RECYCLING STOCKS? A. The economics of the business has seen a dramatic improvement. For example, companies such as Thermo Fibertek have seen increased demand for white paper recycling equipment used to enable pulp mills to accept recycled input. Harsco, Tetra Technologies and IMCO Recycling are three recycling companies that were among the fund's top 10 investments and best performers during the period. Harsco provides a broad range of recycling services in steel and base metals. Tetra Technologies, 5% of the fund as of August 31, 1995, continued to do well in specialty chemicals recycling, including calcium chloride for offshore drilling and specialized applications in snow and ice melt products and food processing. It has made significant capacity increases over the past few months. And IMCO is the leader in the recovery and sales of aluminum scrap and recycled content. Q. YOU'VE TALKED ABOUT SOLID WASTE AND RECYCLING. HOW HAVE THE HAZARDOUS WASTE AND INSTRUMENTATION INDUSTRIES FARED? A. Both of these industries have suffered from the atmosphere of deregulation that arrived with the Republican sweep in 1994's Congressional elections. Hazardous waste businesses have been in decline since cuts in the budget for the Environmental Protection Agency were proposed by the Republicans. American Ecology, for example, has been a poor performer for the fund. And the instrumentation business has ebbed as government regulation tied to the Clean Air Act and Clean Water Act has been postponed. For example, TRC Companies and Earth Technology - which help businesses monitor emissions from smoke stacks - were disappointing investments for the fund. While these companies' businesses have been strong in the permitting of manufacturing facilities and Clean Air Act compliance, their hazardous waste consulting businesses have been disappointing. Uncertainty on the regulation and enforcement fronts continued to plague the hazardous waste industry. The fund still owned TRC Companies at the end of the period, but I've sold off its stake in Earth Technology. Q. ADDINGTON RESOURCES, AT 10.8% OF THE FUND'S INVESTMENTS, WAS THE FUND'S LARGEST HOLDING AT THE END OF AUGUST. WHAT'S THE STORY BEHIND THIS COMPANY? A. Addington used to be a coal mining company. It has established landfill sites at locations where it used to mine coal, while at the same time selling off its coal assets. Recently, there was a management coup, where shareholders wrested power from the family that ran the business. It appears to be an attractive takeover target and a value investment. Q. HOW ARE YOU POSITIONING THE FUND GOING FORWARD? A. I've tried to position the fund defensively, by focusing on the secondary solid waste companies and recycling stocks that should offer growth even with a difficult market backdrop. I'm also looking to get broader international exposure from companies in the U.S. that are successful abroad such as Browning-Ferris Industries and WMX Technologies. FUND FACTS START DATE: June 29, 1989 TRADING SYMBOL: FSLEX SIZE: as of August 31, 1995, more than $32 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.7% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 8.5% ORDNANCE - 8.5% Harsco Corp. 49,000 $ 2,744,000 BUILDING MATERIALS - 3.4% AIRCONDITIONING EQUIPMENT - 3.4% Thermo Power Corp. (a) 70,000 1,120,000 COAL - 10.8% Addington Resources, Inc. 254,000 3,476,623 COMPUTER SERVICES & SOFTWARE - 1.4% PREPACKAGED COMPUTER SOFTWARE - 1.4% Telepanel Systems, Inc. (a) 231,500 439,246 CONSTRUCTION - 4.0% PREFABRICATED METAL BUILDINGS - 4.0% American Buildings Co. 50,000 1,275,000 DEFENSE ELECTRONICS - 0.3% Comarco, Inc. 10,000 101,250 DRUGS & PHARMACEUTICALS - 0.4% COMMERCIAL LABORATORY RESEARCH - 0.4% Zenon Environmental, Inc. (a) 44,000 144,053 ELECTRIC UTILITY - 0.1% ELECTRIC POWER - 0.1% Thermo Ecotek (a) 1,662 26,177 ELECTRONIC INSTRUMENTS - 8.7% ELECTRONIC EQUIPMENT - 2.2% Thermo Voltek Corp. 25,000 393,750 Thermospectra Corp. 17,000 303,875 697,625 INDUSTRIAL MEASUREMENT INSTRUMENTS - 2.4% TSI, Inc. 71,800 789,800 LABORATORY & RESEARCH EQUIPMENT - 4.1% Microfluidics International Corp. (a)(c) 392,800 1,325,700 TOTAL ELECTRONIC INSTRUMENTS 2,813,125 ENERGY SERVICES - 1.4% OIL & GAS SERVICES - 1.4% Serv-Tech, Inc. (a) 70,400 466,400 ENGINEERING - 3.4% ARCHITECTS & ENGINEERS - 3.4% Fluor Corp. 11,000 643,500 VA Technologie AG 2,000 220,898 VA Technologie AG (b) 2,000 220,898 1,085,296 HOUSEHOLD PRODUCTS - 8.0% MANUFACTURED PRODUCTS - 8.0% Memtec Ltd. sponsored ADR 143,000 2,574,000 INDUSTRIAL MACHINERY & EQUIPMENT - 4.4% SERVICE INDUSTRY MACHINERY - 2.6% Trojan Technologies Corp. (a) 137,700 832,480 SPECIAL INDUSTRIAL MACHINERY - 1.8% Thermo Fibertek, Inc. 25,500 592,875 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,425,355 SHARES VALUE (NOTE 1) MEDICAL EQUIPMENT & SUPPLIES - 0.8% X-RAY ELECTRO-MEDICAL APPARATUS - 0.8% Imatron, Inc. 270,000 $ 270,000 METALS & MINING - 4.4% SECONDARY NONFERROUS SMELTING - 4.4% IMCO Recycling, Inc. 69,700 1,411,425 OIL & GAS - 0.4% CRUDE PETROLEUM & GAS - 0.4% Unimar Co., Indonesian (Participating Certificate) 20,000 135,000 POLLUTION CONTROL - 34.0% HAZARDOUS WASTE MANAGEMENT - 6.0% American Ecology Corp. 95,900 431,550 GNI Group, Inc. (a) 67,600 490,100 TRC Companies, Inc. (a) 127,100 1,016,800 1,938,450 POLLUTION EQUIPMENT & DESIGN - 8.3% Harding Associates, Inc. (a) 47,300 354,750 Sevenson Environmental Services, Inc. 40,900 715,750 TETRA Technologies, Inc. (a) 115,700 1,605,338 2,675,838 REFUSE SYSTEMS - 19.7% Browning-Ferris Industries, Inc. 40,600 1,365,175 Continental Waste Industries, Inc. (a) 69,800 1,047,000 Sanifill, Inc. (a) 25,700 819,188 United Waste Systems, Inc. (a) 13,600 527,000 WMX Technologies, Inc. 35,000 1,028,125 Western Waste Industries, Inc. (a) 32,780 741,648 Wheelabrator Technologies, Inc. 53,100 829,688 6,357,824 SANITARY SERVICES - 0.0% USA Waste Services, Inc. 1 20 TOTAL POLLUTION CONTROL 10,972,132 SECURITIES INDUSTRY - 1.3% PATENT OWNERS-LESSORS - 1.3% Western Water Co. 15,000 405,000 TOTAL COMMON STOCKS (Cost $29,865,306) 30,884,082 REPURCHASE AGREEMENTS - 4.3% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 1,373,222 1,373,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $31,238,306) $ 32,257,082 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 $220,898 or 0.7% of net assets. 3. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Microfluidics International Corp. $ 571,103 $ - $ - $ 1,325,700 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $26,005,948 and $33,019,664, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $30,797 for the period (see Note 5 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 86.2% Australia 8.0 Canada 4.4 Austria 1.4 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $31,265,597. Net unrealized appreciation aggregated $991,485, of which $3,557,440 related to appreciated investment securities and $2,565,955 related to depreciated investment securities. The fund has elected to defer to its fiscal year ending February 28, 1996 $3,177,000 of losses recognized during the period November 1,1994 to February 28, 1995. ENVIRONMENTAL SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $1,373,000) (cost $31,238,306) - See $ 32,257,082 accompanying schedule Cash 874 Receivable for investments sold 537,213 Receivable for fund shares sold 218,612 Dividends receivable 11,987 Redemption fees receivable 58 Other receivables 64,214 Prepaid expenses 5,900 TOTAL ASSETS 33,095,940 LIABILITIES Payable for investments purchased $ 206,875 Payable for fund shares redeemed 78,976 Accrued management fee 16,637 Other payables and accrued expenses 54,286 TOTAL LIABILITIES 356,774 NET ASSETS $ 32,739,166 Net Assets consist of: Paid in capital $ 31,210,214 Accumulated net investment (loss) (222,952 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 733,128 Net unrealized appreciation (depreciation) on investments 1,018,776 NET ASSETS, for 2,550,901 shares outstanding $ 32,739,166 NET ASSET VALUE and redemption price per share ($32,739,166 (divided by) 2,550,901 shares) $12.83 Maximum offering price per share (100/97.00 of $12.83) $13.23
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 84,633 Dividends Interest 61,472 TOTAL INCOME 146,105 EXPENSES Management fee $ 102,304 Transfer agent 241,063 Fees Redemption fees (17,997 ) Accounting fees and expenses 22,695 Non-interested trustees' compensation 209 Custodian fees and expenses 13,325 Registration fees 5,900 Audit 8,922 Legal 128 Miscellaneous 1,128 Total expenses before reductions 377,677 Expense reductions (8,620 369,057 ) NET INVESTMENT INCOME (LOSS) (222,952 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 4,029,194 Foreign currency transactions (213 4,028,981 ) Change in net unrealized appreciation (depreciation) on investment securities 3,418,594 NET GAIN (LOSS) 7,447,575 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 7,224,623 OTHER INFORMATION $29,064 Sales Charges Paid to FDC Deferred sales charges withheld $5,721 by FDC Exchange fees withheld by FSC $13,035
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ (222,952 $ (595,469 Net investment income (loss) ) ) Net realized gain (loss) 4,028,981 (2,723,480 ) Change in net unrealized appreciation (depreciation) 3,418,594 (5,250,926 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 7,224,623 (8,569,875 ) Share transactions 11,655,995 27,529,233 Net proceeds from sales of shares Cost of shares redeemed (17,428,601 (53,674,761 ) ) Paid in capital portion of redemption fees 16,837 29,932 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (5,755,769 (26,115,596 ) ) TOTAL INCREASE (DECREASE) IN NET ASSETS 1,468,854 (34,685,471 ) NET ASSETS Beginning of period 31,270,312 65,955,783 End of period (including accumulated net investment loss of $222,952 and $0, respectively) $ 32,739,166 $ 31,270,312 OTHER INFORMATION Shares Sold 1,006,170 2,591,147 Redeemed (1,500,905 (5,072,812 ) ) Net increase (decrease) (494,735) (2,481,665)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 10.27 $ 11.93 $ 11.36 $ 11.39 $ 12.95 $ 11.41 Income from Investment Operations Net investment income (loss) (.08) (.14) (.11) (.06) (.09) (.04) Net realized and unrealized gain (loss) 2.63 (1.53) .67 .42 (1.06) 1.55 Total from investment operations 2.55 (1.67) .56 .36 (1.15) 1.51 Less Distributions - - - (.39) (.42) - From net realized gain Redemption fees added to paid in capital .01 .01 .01 - .01 .03 Net asset value, end of period $ 12.83 $ 10.27 $ 11.93 $ 11.36 $ 11.39 $ 12.95 TOTAL RETURN B, C 24.93% (13.91)% 5.02% 3.34% (8.67)% 13.50% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 32,739 $ 31,270 $ 65,956 $ 65,913 $ 65,132 $ 100,263 Ratio of expenses to average net assets 2.18% A 2.01% 2.03% 1.99% A 2.03% 2.03% Ratio of expenses to average net assets before 2.23% A 2.04% 2.07% 1.99% A 2.03% 2.03% expense reductions Ratio of net investment income (loss) to average net (1.32)% (1.32)% (1.02)% (.70)% (.74)% (.30)% assets A A Portfolio turnover rate 165% A 82% 191% 176% A 130% 122% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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). If Fidelity had not reimbursed certain expenses, the past five years and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S INDUSTRIAL EQUIPMENT 28.80% 29.77% 147.89% 177.62% INDUSTRIAL EQUIPMENT (INCL. 3% SALES CHARGE) 24.94% 25.88% 140.45% 169.29% S&P 500 16.81% 21.45% 102.17% 221.28% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on September 29, 1986. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS FUND INDUSTRIAL EQUIPMENT 29.77% 19.91% 12.11% INDUSTRIAL EQUIPMENT (INCL. 3% SALES CHARGE) 25.88% 19.18% 11.73% S&P 500 21.45% 15.12% 13.96% 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 IndustriaStandard & Poor' 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 10113.96 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 12453.31 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 14055.88 20950.97 04/30/92 14055.88 21566.92 05/31/92 14167.19 21672.60 06/30/92 13296.92 21349.68 07/31/92 13418.36 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 13549.91 22854.91 12/31/92 13813.01 23136.02 01/31/93 14460.66 23330.36 02/28/93 15219.61 23647.66 03/31/93 15492.84 24146.62 04/30/93 16201.67 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 19798.04 25467.98 01/31/94 20728.99 26333.89 02/28/94 21318.58 25620.25 03/31/94 20087.67 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 19373.79 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 03/31/95 22639.27 28315.77 04/30/95 23703.68 29149.67 05/31/95 24183.81 30314.78 06/30/95 25102.32 31019.00 07/31/95 27461.20 32047.59 08/31/95 26928.89 32128.03 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 August 31, 1995, your investment would have grown to $26,929 - a 169.29% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $32,128 over the same period - a 221.28% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Caterpillar, Inc. 8.2 Deere & Co. 7.5 Compaq Computer Corp. 6.3 Harnischfeger Industries, Inc. 5.9 Case Corp. 5.7 Parker-Hannifin Corp. 5.5 Dover Corp. 5.3 Ingersoll-Rand Co. 4.3 International Business Machines Corp. 4.3 Intel Corp. 2.9 TOP INDUSTRIES AS OF AUGUST 31, 1995 General Industrial Machinery 26.4% Farm Machinery & Equipment 17.3% Construction Equipment 8.7% Mini & Micro Computers 6.4% Pumping Equipment 5.1% All Others 36.1%* Row: 1, Col: 1, Value: 36.1 Row: 1, Col: 2, Value: 5.1 Row: 1, Col: 3, Value: 6.4 Row: 1, Col: 4, Value: 8.699999999999999 Row: 1, Col: 5, Value: 17.3 Row: 1, Col: 6, Value: 26.4 * 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. Very well. The portfolio returned 28.80% for the six months ended August 31, 1995. The Standard & Poor's 500 Index returned 16.81% for the same time period. For the 12 months ended August 31, 1995, the portfolio returned 29.77% while the S&P returned 21.45%. Q. WHAT ACCOUNTS FOR THE FUND'S STRONG RETURNS? A. A couple of things. The first is that the overall market has done well and many of the stocks in this fund tend to do well when the market rises because they're economically sensitive. In 1994, there were a number of interest rate hikes which caused investors to become concerned about the economy in 1995 and be fearful that the U.S. was headed for a recession. However, in 1995 the economy rebounded strongly and investors who had sold out of industrial equipment stocks in 1994 started buying them again. Along with the favorable economic backdrop, many companies in this market sector posted better-than-expected earnings. Q. HAS YOUR INVESTMENT STRATEGY CHANGED DURING THE PAST SIX MONTHS? A. Not really. The themes in the fund today are similar to the ones six months ago. The fund remains heavily invested in agricultural equipment stocks. Stocks like Deere & Co., Case Corp. and AGCO could perform well if food demand continues to grow worldwide, particularly in Asia. Agricultural companies had a difficult time in the 1980s and had to restructure and cut costs. Now lean and efficient, they have been able to compete internationally, especially given the favorable industry backdrop. I believe we're on the brink of a multi-year agricultural expansion that should lead to higher earnings. Q. WHAT OTHER THEMES ARE EVIDENT IN THE FUND? A. I favor companies that are dominant globally in their industry. Caterpillar, the fund's largest holding at the end of the period, is a good example. Caterpillar currently is the leading global supplier of construction machinery with its market share approaching 50%. In addition, nearly 50% of its sales have come from outside the United States. While the U.S. recovery has been a boost to its earnings, the next leg of the story will happen if international economies extend the cycle. Against that backdrop we should see improving profits and large free cash flow generation. Caterpillar recently announced a significant stock buy-back program, which also should boost earnings. Q. WHERE ELSE HAVE YOU FOUND OPPORTUNITIES? A. I've begun to position the fund in late-cycle companies. Late-cycle companies usually benefit from capital spending that occurs at the end of the economic cycle, after companies have grown earnings and profits and begin to bump up against capacity constraints. An example is Harnischfeger Industries, a company that should get a boost from the capital spending trends in the mining and paper industries. Q. YOU'VE INCREASED THE FUND'S HOLDINGS IN TECHNOLOGY-RELATED INDUSTRIES. WHAT'S YOUR STRATEGY? A. Technology - hardware and peripherals - is one of the most important types of capital equipment that companies are investing in today. I've increased the fund's technology holdings during the past six months, initiating a large position in Compaq and increasing the fund's stake in Intel. My strategy is to increase the overall growth profile of companies in the fund and move away from those with slower growth rates. Investing in technology can be an efficient way to accomplish that goal. Q. WHAT INVESTMENTS DIDN'T TURN OUT AS YOU WOULD HAVE LIKED? A. The pump and valve industry didn't see the recovery I thought it would. Six months ago I thought this area would have been further along in its recovery by the end of August than it was. As an example, Goulds Pumps, one of the fund's top holdings six months ago, remained flat during the period and underperformed the fund. I also eliminated the fund's position in Trinity Industries because rail car orders haven't kept up the pace they were showing earlier in the year. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. The themes in the fund have worked well during the past six months and I think they still have some strength. I think there may be more earnings gains in store for investors if we stick to the themes the fund's been working on. FUND FACTS START DATE: September 29, 1986 TRADING SYMBOL: FSCGX SIZE: as of August 31, 1995, more than $116 million MANAGER: Robert Bertelson, since December 1994; manager Fidelity Select Energy Portfolio, 1992 - 1994; equity analyst, since 1991; joined Fidelity in 1991 (checkmark) INDUSTRIAL EQUIPMENT PORTFOLIO INVESTMENTS AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 88.9% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 4.0% AUTO & TRUCK PARTS - 1.8% Titan Wheel International, Inc. 78,250 $ 2,093,184 INDUSTRIAL TRUCKS - 2.2% NACCO Industries, Inc. Class A 43,800 2,518,500 TOTAL AUTOS, TIRES, & ACCESSORIES 4,611,684 BUILDING MATERIALS - 1.9% AIRCONDITIONING EQUIPMENT - 1.5% Tecumseh Products Co. Class A 36,100 1,750,850 FLUID VALVE & HOSE FITTINGS - 0.4% Cooper Cameron Corp. 17,399 411,051 TOTAL BUILDING MATERIALS 2,161,901 COMMUNICATIONS EQUIPMENT - 0.6% TELEPHONE INTERCONNECT SYSTEMS - 0.6% General Instrument Corp. 20,000 730,000 COMPUTERS & OFFICE EQUIPMENT - 10.7% ELECTRONIC COMPUTERS - 4.3% International Business Machines Corp. 47,700 4,930,988 MINI & MICRO COMPUTERS - 6.4% Compaq Computer Corp. 151,000 7,210,250 TOTAL COMPUTERS & OFFICE EQUIPMENT 12,141,238 ELECTRICAL EQUIPMENT - 2.5% ELECTRICAL MACHINERY - 1.6% General Signal Corp. 50,200 1,782,100 MOTORS & GENERATORS - 0.9% Pacific Scientific Co. 40,000 1,005,000 TOTAL ELECTRICAL EQUIPMENT 2,787,100 ELECTRONICS - 4.0% ELECTRONICS & ELECTRONIC COMPONENTS - 1.1% Hitachi Ltd. ADR 11,600 1,261,500 SEMICONDUCTORS - 2.9% Intel Corp. 54,400 3,338,800 TOTAL ELECTRONICS 4,600,300 INDUSTRIAL MACHINERY & EQUIPMENT - 63.1% BALL & ROLLER BEARINGS - 1.5% Bearings, Inc. 48,900 1,656,488 CONSTRUCTION EQUIPMENT - 8.7% Caterpillar, Inc. 139,100 9,337,088 Svedala Industrial 20,000 551,560 9,888,648 FARM MACHINERY & EQUIPMENT - 17.3% AGCO Corp. 50,000 2,431,250 Case Corp. 173,100 6,534,525 Deere & Co. 99,800 8,532,900 Varity Corp. 47,500 2,161,250 19,659,925 SHARES VALUE (NOTE 1) GENERAL INDUSTRIAL MACHINERY - 26.4% Commercial Intertech Corp. 42,500 $ 855,313 Cooper Industries, Inc. 22,767 865,146 Dover Corp. 75,800 6,045,050 Harnischfeger Industries, Inc. 183,717 6,751,600 Illinois Tool Works, Inc. 50,400 3,087,000 Ingersoll-Rand Co. 130,300 4,935,113 Parker-Hannifin Corp. 156,900 6,217,163 Scottsman Industries, Inc. 40,100 751,875 TRINOVA Corp. 14,200 521,850 30,030,110 GENERAL INDUSTRIAL MACHINERY & EQUIPMENT - 0.4% Hardinge Brothers, Inc. 21,800 506,850 MACHINE TOOLS, METAL CUTTING - 3.2% Gleason Corp. 70,000 2,345,000 Greenfield Industries, Inc. 37,000 1,248,750 3,593,750 PUMPING EQUIPMENT - 5.1% Duriron Co., Inc. 71,250 1,816,875 Goulds Pumps, Inc. 96,700 2,079,050 IDEX Corp. 47,000 1,891,750 5,787,675 SPECIAL INDUSTRIAL MACHINERY - 0.5% Valmet Corp. OY Ord. 20,000 574,091 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 71,697,537 IRON & STEEL - 0.7% METAL FORGINGS & STAMPINGS - 0.7% TriMas Corp. 37,800 807,975 PAPER & FOREST PRODUCTS - 1.4% PAPER - 1.4% Albany International Corp. Class A 65,800 1,595,650 TOTAL COMMON STOCKS (Cost $82,468,366) 101,133,385 REPURCHASE AGREEMENTS - 11.1% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 5.82% dated 8/31/95 due 9/1/95 $ 12,563,031 12,561,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $95,029,366) $ 113,694,385 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $40,880,253 and $71,366,722, 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 $26,235 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $4,448,000 and $2,102,125, respectively. The weighted average interest rate paid was 6.7% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $95,117,475. Net unrealized appreciation aggregated $18,576,910, of which $19,564,444 related to appreciated investment securities and $987,534 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 $515,000 of losses recognized during the period November 1,1994 to February 28, 1995. INDUSTRIAL EQUIPMENT PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $12,561,000) (cost $95,029,366) - See $ 113,694,385 accompanying schedule Cash 829 Receivable for investments sold 5,044,006 Receivable for fund shares sold 588,353 Dividends receivable 139,020 Redemption fees receivable 207 Prepaid expenses 10,589 TOTAL ASSETS 119,477,389 LIABILITIES Payable for investments purchased $ 1,906,250 Payable for fund shares redeemed 1,113,301 Accrued management fee 61,483 Other payables and accrued expenses 105,999 TOTAL LIABILITIES 3,187,033 NET ASSETS $ 116,290,356 Net Assets consist of: Paid in capital $ 92,161,075 Undistributed net investment income 142,369 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 5,321,893 Net unrealized appreciation (depreciation) on investments 18,665,019 NET ASSETS, for 4,507,585 shares outstanding $ 116,290,356 NET ASSET VALUE and redemption price per share ($116,290,356 (divided by) 4,507,585 shares) $25.80 Maximum offering price per share (100/97.00 of $25.80) $26.60
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 752,414 Dividends Interest 224,416 TOTAL INCOME 976,830 EXPENSES Management fee $ 348,957 Transfer agent 467,814 Fees Redemption fees (77,470 ) Accounting fees and expenses 57,048 Non-interested trustees' compensation 579 Custodian fees and expenses 8,541 Registration fees 10,589 Audit 12,642 Legal 427 Interest 6,226 Miscellaneous 1,007 Total expenses before reductions 836,360 Expense reductions (4,998 831,362 ) NET INVESTMENT INCOME 145,468 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 6,847,091 Foreign currency transactions (483 6,846,608 ) Change in net unrealized appreciation (depreciation) on: Investment securities 19,090,808 Assets and liabilities in (15 19,090,793 foreign currencies ) NET GAIN (LOSS) 25,937,401 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 26,082,869 OTHER INFORMATION $240,623 Sales Charges Paid to FDC Deferred sales charges withheld $5,145 by FDC Exchange fees withheld by FSC $58,043
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 145,468 $ 79,635 Net investment income Net realized gain (loss) 6,846,608 (1,498,946 ) Change in net unrealized appreciation (depreciation) 19,090,793 (14,340,997 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 26,082,869 (15,760,308 ) Distributions to shareholders (48,754 (37,665 From net investment income ) ) From net realized gain - (1,765,984 ) TOTAL DISTRIBUTIONS (48,754 (1,803,649 ) ) Share transactions 98,452,948 154,753,559 Net proceeds from sales of shares Reinvestment of distributions 47,496 1,784,486 Cost of shares redeemed (118,289,193 (235,232,664 ) ) Paid in capital portion of redemption fees 77,052 214,170 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (19,711,697 (78,480,449 ) ) TOTAL INCREASE (DECREASE) IN NET ASSETS 6,322,418 (96,044,406 ) NET ASSETS Beginning of period 109,967,938 206,012,344 End of period (including undistributed net investment income of $142,369 and $45,655, respectively)$ 116,290,356 $ 109,967,938 OTHER INFORMATION Shares Sold 4,247,679 7,719,747 Issued in reinvestment of distributions 2,145 90,354 Redeemed (5,230,739 (12,319,237 ) ) Net increase (decrease) (980,915) (4,509,136)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 20.04 $ 20.61 $ 15.04 $ 13.89 $ 11.60 $ 12.41 Income from Investment Operations Net investment income (loss) .03 .01 - .02 (.07) .01 Net realized and unrealized gain (loss) 5.72 (.44) 5.92 1.09 2.39 (.80) Total from investment operations 5.75 (.43) 5.92 1.11 2.32 (.79) Less Distributions (.01) (.01) E (.01) - - - From net investment income In excess of net investment income - - - - (.11) (.09) From net realized gain - (.16) E (.40) - - - Total distributions (.01) (.17) (.41) - (.11) (.09) Redemption fees added to paid in capital .02 .03 .06 .04 .08 .07 Net asset value, end of period $ 25.80 $ 20.04 $ 20.61 $ 15.04 $ 13.89 $ 11.60 TOTAL RETURN B, C 28.80% (1.93)% 40.07% 8.28% 20.91% (5.90)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 116,290 $ 109,968 $ 206,012 $ 14,601 $ 7,529 $ 1,949 Ratio of expenses to average net assets 1.44% A 1.78% 1.68% 2.49% A 2.49% 2.52% Ratio of expenses to average net assets before 1.45% A 1.80% 1.69% 3.40% A 2.86% 2.99% expense reductions Ratio of net investment income (loss) to average net .25% A .06% .01% .15% A (.57)% .09% assets Portfolio turnover rate 77% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E 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). If Fidelity had not reimbursed certain expenses, the past five years and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S INDUSTRIAL MATERIALS 15.15% 12.51% 144.82% 184.38% INDUSTRIAL MATERIALS (INCL. 3% SALES CHARGE) 11.70% 9.13% 137.48% 175.85% S&P 500 16.81% 21.45% 102.17% 221.28% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on September 29, 1986. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS FUND INDUSTRIAL MATERIALS 12.51% 19.61% 12.42% INDUSTRIAL MATERIALS (INCL. 3% SALES CHARGE) 9.13% 18.88% 12.03% S&P 500 21.45% 15.12% 13.96% 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 IndustriStandard & Poor 09/29/86 9700.00 10000.00 09/30/86 9729.10 9962.80 10/31/86 10262.60 10537.66 11/30/86 10621.50 10793.72 12/31/86 10233.50 10518.48 01/31/87 12008.60 11935.32 02/28/87 13017.40 12406.77 03/31/87 13958.30 12765.32 04/30/87 14123.20 12651.71 05/31/87 13764.30 12761.78 06/30/87 14482.10 13406.25 07/31/87 15820.70 14085.95 08/31/87 16363.90 14611.35 09/30/87 16606.40 14291.37 10/31/87 10301.40 11213.00 11/30/87 10252.90 10289.05 12/31/87 11834.99 11072.05 01/31/88 11222.33 11538.18 02/29/88 12544.89 12075.86 03/31/88 12768.56 11702.72 04/30/88 12788.01 11832.62 05/31/88 12476.82 11935.56 06/30/88 13838.28 12483.41 07/31/88 13322.87 12435.97 08/31/88 12603.24 12013.15 09/30/88 12710.21 12524.91 10/31/88 12476.82 12873.10 11/30/88 12360.12 12689.01 12/31/88 13117.42 12911.07 01/31/89 13908.23 13856.16 02/28/89 13305.24 13511.14 03/31/89 13166.85 13825.95 04/30/89 13572.13 14543.52 05/31/89 13750.06 15132.53 06/30/89 12949.38 15046.28 07/31/89 14115.81 16404.95 08/31/89 15242.70 16726.49 09/30/89 14313.51 16657.91 10/31/89 13137.19 16271.45 11/30/89 13325.01 16603.39 12/31/89 13700.64 17001.87 01/31/90 12652.83 15861.04 02/28/90 12870.30 16065.65 03/31/90 13245.93 16491.39 04/30/90 12287.08 16079.11 05/31/90 13028.46 17646.82 06/30/90 12890.20 17526.82 07/31/90 12738.07 17470.73 08/31/90 11267.51 15891.38 09/30/90 10466.31 15117.47 10/31/90 10344.61 15052.46 11/30/90 10892.27 16024.85 12/31/90 11348.65 16471.95 01/31/91 11754.32 17190.12 02/28/91 12616.37 18419.22 03/31/91 12788.78 18864.96 04/30/91 12809.06 18910.24 05/31/91 13904.37 19727.16 06/30/91 13752.20 18823.66 07/31/91 14302.29 19700.84 08/31/91 14638.46 20167.75 09/30/91 14444.91 19830.95 10/31/91 15066.30 20096.68 11/30/91 13864.26 19286.79 12/31/91 15412.65 21493.19 01/31/92 16084.98 21093.42 02/29/92 16869.37 21367.64 03/31/92 16573.95 20950.97 04/30/92 17439.83 21566.92 05/31/92 17643.57 21672.60 06/30/92 17215.31 21349.68 07/31/92 17602.63 22222.88 08/31/92 16491.63 21767.31 09/30/92 16267.40 22024.17 10/31/92 16450.86 22101.25 11/30/92 17062.42 22854.91 12/31/92 17319.00 23136.02 01/31/93 17687.49 23330.36 02/28/93 17851.26 23647.66 03/31/93 18148.10 24146.62 04/30/93 17881.97 23562.27 05/31/93 18618.95 24193.74 06/30/93 18669.79 24263.90 07/31/93 18926.53 24166.85 08/31/93 19419.46 25082.77 09/30/93 18813.56 24889.63 10/31/93 19922.66 25404.85 11/30/93 20189.67 25163.50 12/31/93 21021.49 25467.98 01/31/94 22726.21 26333.89 02/28/94 22253.82 25620.25 03/31/94 21627.38 24503.20 04/30/94 22439.14 24816.84 05/31/94 22665.59 25223.84 06/30/94 22428.85 24605.86 07/31/94 23262.60 25412.93 08/31/94 24518.37 26454.86 09/30/94 24209.57 25806.71 10/31/94 23890.48 26387.37 11/30/94 22202.40 25426.34 12/31/94 22743.96 25803.41 01/31/95 22101.83 26472.49 02/28/95 23955.73 27504.13 03/31/95 24504.65 28315.77 04/30/95 24618.13 29149.67 05/31/95 24369.15 30314.78 06/30/95 25458.44 31019.00 07/31/95 27657.79 32047.59 08/31/95 27595.54 32128.03 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 August 31, 1995, your investment would have grown to $27,585 - a 175.85% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $32,128 over the same period - a 221.28% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Aluminum Co. of America 9.1 Kaiser Aluminum Corp. 6.6 Alumax, Inc. 6.6 Alcan Aluminum Ltd. 5.4 Western Mining Holdings Ltd. 5.3 Reynolds Metals Co. 4.3 Inco Ltd. 3.9 Champion International Corp. 3.2 QNI Ltd. 2.6 British Petroleum PLC ADR 2.4 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 53.4 Row: 1, Col: 2, Value: 6.1 Row: 1, Col: 3, Value: 6.6 Row: 1, Col: 4, Value: 6.8 Row: 1, Col: 5, Value: 7.9 Row: 1, Col: 6, Value: 19.2 Prime Nonferrous Smelting 19.2% Gold Ores 7.9% Aluminum Sheet, Plate & Foil 6.8% Aluminum, Extruded Products 6.6% Metal Ores 6.1% All Others 53.4%* * 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 DID THE FUND DO? A. For the six months ended August 31, 1995, Select Industrial Materials returned 15.15%. The Standard & Poor's 500 Index returned 16.81% for the same time period. For the 12 months ended August 31, 1995, the portfolio returned 12.51%, while the S&P returned 21.45%. Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S RESULTS? A. I tried to own stocks where I thought the supply, demand and inventory fundamentals were the best, and where the values were attractive. That led me to make a large investment in aluminum stocks. Though it was impossible to forecast GNP growth exactly, I thought aluminum was going to outperform paper, chemicals and other materials or metals that the fund could invest in under any circumstances. Most people think that the economy today isn't as strong as they expected it to be six months ago. Although most industrial materials stocks lagged the market, aluminum stocks have done very well, despite the fact that they usually rise and fall with the economy. Q. WHAT CAUSED ALUMINUM STOCKS TO OUTPERFORM? A. The industry outlook was favorable because demand exceeded supply. Months ago, aluminum manufacturers curtailed capacity due to the low price for aluminum. During the period, stock prices began reacting to the business prospects for the industry and the tightening market for aluminum. In addition, when the Federal Reserve Board cut short-term interest rates during the summer, aluminum stocks really took off. Q. WHICH ALUMINUM STOCKS PERFORMED BEST? A. The five North American aluminum stocks have been in the fund's top 10 holdings for most of the six months ended August 31, 1995. Aluminum Company of America (ALCOA), the fund's top holding at the end of the period, was one of the best performing stocks in the fund. It started out at $39 and went as high as $60 during the period. Alcan Aluminum also appreciated markedly during the past six months. I bought a lot of Kaiser Aluminum in June when the stock price was between $10 - $12 per share; by mid-August, it was trading as high as $21 per share. Q. WHERE ELSE HAVE YOU FOUND INVESTMENT OPPORTUNITIES? A. I've begun to accumulate a large position in stocks that are exposed to nickel. Nickel looked extremely attractive as an investment. In its last price cycle, nickel was about $8 per pound, and had spiked as high as $11. For the last year, it's been hovering between $3 and $5. At the beginning of 1995, there was a sell-off and nickel dropped from $4.75 to $3.00 in three weeks. That was a huge move in the metal, and the stocks followed. Russia supplies about 25% of the world's nickel and the large amount of the material coming into the Western market was largely responsible for the big decline in nickel prices from the last peak. But something interesting has happened. We should have seen a big increase in nickel inventory this summer since Russia's nickel deposits are in the Arctic Circle and can only ship in warm weather. But inventories never increased. Therefore, I think the price of nickel has the potential to go up. Q. HOW IS NICKEL USED? A. The biggest use of nickel is in stainless steel. Unlike carbon steel, it's rust-proof, has a hardening characteristic and is very heat resistant. Though stainless is more expensive than carbon, it doesn't rust over its lifetime like carbon does. You'll find stainlees steel in everything from fast-food store counter tops to auto exhaust systems. Q. WHAT INVESTMENTS PROVED DISAPPOINTING? A. I held some paper stocks a little too long and that hurt the fund's performance. The first quarter of the year was great, but I should have reduced the fund's position in Stone Container and Temple Inland earlier than I did. I have kept the fund's position in Champion, which I still consider to be undervalued. Q. WHAT'S AHEAD FOR THE FUND? A. If we don't head into recession, I think aluminum can stay strong for some time to come. There's a correlation between the price of the metal and the price of the stocks and I think the price of the metal is going up. I also think the business prospects for nickel will continue to improve over the next six months. FUND FACTS START DATE: September 29, 1986 TRADING SYMBOL: FSDPX SIZE: as of August 31, 1995, more than $157 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 79.8% SHARES VALUE (NOTE 1) CHEMICALS & PLASTICS - 8.5% CHEMICALS - 6.0% AKZO NV sponsored ADR 30,000 $ 1,770,000 du Pont (E.I.) de Nemours & Co. 60,000 3,922,500 Grace (W.R.) & Co. 48,200 3,211,325 Union Carbide Corp. 6,200 220,100 Witco Corp. 43,900 1,459,675 10,583,600 CHEMICALS, GENERAL - 1.0% Great Lakes Chemical Corp. 26,700 1,765,538 PLASTICS, RESINS & ELASTOMERS - 1.5% Praxair, Inc. 100,000 2,600,000 TOTAL CHEMICALS & PLASTICS 14,949,138 CONGLOMERATES - 0.5% Brascan Ltd. Class A 50,000 818,483 INDUSTRIAL MACHINERY & EQUIPMENT - 2.8% CONSTRUCTION EQUIPMENT - 0.3% Caterpillar, Inc. 8,200 550,425 FARM MACHINERY & EQUIPMENT - 0.4% Kverneland Gruppen AS 50,000 751,382 GENERAL INDUSTRIAL MACHINERY - 0.0% Ingersoll-Rand Co. 1,900 71,963 STORAGE BATTERIES - 2.1% Exide Corp. 70,600 3,680,025 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 5,053,795 IRON & STEEL - 3.4% BLAST FURNACES - 3.4% Armco, Inc. (a) 125,000 781,250 Huntco, Inc. Class A 200,000 3,450,000 Republic Engineered Steels, Inc. 262,000 1,801,250 6,032,500 METALS & MINING - 44.9% ALUMINUM, EXTRUDED PRODUCTS - 6.6% Alumax, Inc. (a) 339,700 11,592,263 ALUMINUM SHEET, PLATE & FOIL - 6.6% Kaiser Aluminum Corp. (a) 671,100 11,660,363 COPPER ORES - 0.2% Freeport McMoRan Copper Co. Class A 20,000 467,500 METAL MINING SERVICES - 0.4% Eramet SA 10,000 719,810 METAL ORES - 6.1% Comalco Ltd. 296,800 1,511,944 Falconbridge Ltd. 50,000 1,064,958 Falconbridge Ltd. (1st Installment Receipt) (c) 250,000 2,139,218 Pechiney International SA 23,000 1,491,374 QNI Ltd. 2,260,400 4,540,460 10,747,954 MISCELLANEOUS METAL ORES - 0.6% Stillwater Mining Co. (b) 50,000 1,093,750 PRIMARY PRODUCTION OF ALUMINUM - 5.2% Capral Aluminium Ltd. 636,200 1,601,318 Reynolds Metals Co. 126,600 7,564,350 9,165,668 SHARES VALUE (NOTE 1) PRIME NONFERROUS SMELTING - 19.2% Alcan Aluminium Ltd. 291,975 $ 9,531,903 Aluminum Co. of America 281,800 16,097,825 Inco Ltd. 200,000 6,975,706 Noranda, Inc. 65,000 1,317,943 33,923,377 TOTAL METALS & MINING 79,370,685 OIL & GAS - 4.5% OIL & GAS EXPLORATION - 4.5% Amerada Hess Corp. 78,300 3,709,463 British Petroleum PLC ADR 46,342 4,176,573 7,886,036 PAPER & FOREST PRODUCTS - 4.4% PAPER - 4.4% Champion International Corp. 100,000 5,662,500 Domtar Inc. 151,900 1,426,941 Donohue, Inc. Class A 50,000 697,571 7,787,012 PRECIOUS METALS - 7.9% GOLD ORES - 7.9% Barrick Gold Corp. 95,400 2,404,609 Newmont Gold Co. 20,000 830,000 Newmont Mining Corp. 30,000 1,305,000 Western Mining Holdings Ltd. 1,399,400 9,389,358 13,928,967 RAILROADS - 1.4% CSX Corp. 27,000 2,227,500 Santa Fe Pacific Corp. 10,000 283,750 2,511,250 SERVICES - 1.5% SURVEYING SERVICES - 1.5% Western Atlas, Inc. (a) 60,000 2,722,500 TOTAL COMMON STOCKS (Cost $126,005,935) 141,060,366 CONVERTIBLE PREFERRED STOCKS - 0.2% METALS & MINING - 0.2% ALUMINUM SHEET, PLATE & FOIL - 0.2% Kaiser Aluminum Corp. depositary shares representing 1/10 share, Series A, $.65 (Cost $395,460) 31,200 358,800 REPURCHASE AGREEMENTS - 20.0% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 35,276,702 35,271,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $161,672,395) $ 176,690,166 CURRENCY ABBREVIATIONS CAD - Canadian dollar LEGEND 1. Non-income producing 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $1,093,750 or 0.7% of net assets. 3. Purchased on an installment basis. Market value reflects only those payments made through August 31, 1995. The remaining installments aggregating CAD 4,750,000 are due July 31, 1996 and January 31, 1997. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $101,707,445 and $138,466,140, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $80,178 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 $11,307,650 and $12,365,200, respectively (see Note 7 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 70.5% Canada 14.9 Australia 9.5 United Kingdom 2.4 France 1.3 Netherlands 1.0 Others (individually less than 1%) 0.4 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $162,205,713. Net unrealized appreciation aggregated $14,484,453, of which $16,791,340 related to appreciated investment securities and $2,306,887 related to depreciated investment securities. At February 28, 1995, the fund had a capital loss carryforward of approx- imately $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 $4,644,000 of losses recognized during the period November 1,1994 to February 28, 1995. INDUSTRIAL MATERIALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $35,271,000) (cost $161,672,395) - $ 176,690,166 See accompanying schedule Cash 953 Receivable for investments sold 265,250 Receivable for fund shares sold 987,113 Dividends receivable 139,388 Redemption fees receivable 3,480 Prepaid expenses 12,699 TOTAL ASSETS 178,099,049 LIABILITIES Payable for investments purchased $ 3,913,671 Payable for fund shares redeemed 3,876,663 Accrued management fee 81,322 Other payables and 195,581 accrued expenses Collateral on securities loaned, 12,365,200 at value TOTAL LIABILITIES 20,432,437 NET ASSETS $ 157,666,612 Net Assets consist of: Paid in capital $ 148,100,309 Undistributed net investment income 197,378 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (5,649,466 ) Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 15,018,391 NET ASSETS, for 5,928,741 shares outstanding $ 157,666,612 NET ASSET VALUE and redemption price per share ($157,666,612 (divided by) 5,928,741 shares) $26.59 Maximum offering price per share (100/97.00 of $26.59) $27.41
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 847,508 Dividends Interest (including income on securities loaned of $49,826) 467,817 TOTAL INCOME 1,315,325 EXPENSES Management fee $ 427,960 Transfer agent 696,654 Fees Redemption fees (105,618 ) Accounting and security lending fees 70,247 Non-interested trustees' compensation 835 Custodian fees and expenses 11,833 Registration fees 12,699 Audit 19,723 Legal 748 Miscellaneous 1,655 Total expenses before reductions 1,136,736 Expense reductions (23,152 1,113,584 ) NET INVESTMENT INCOME 201,741 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 5,891,091 Foreign currency transactions 1 5,891,092 Change in net unrealized appreciation (depreciation) on: Investment securities 9,125,259 Assets and liabilities in 230 9,125,489 foreign currencies NET GAIN (LOSS) 15,016,581 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 15,218,322 OTHER INFORMATION $227,602 Sales Charges Paid to FDC Deferred sales charges withheld $5,260 by FDC Exchange fees withheld by FSC $85,200
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 201,741 $ 1,365,664 Net investment income Net realized gain (loss) 5,891,092 (284,364 ) Change in net unrealized appreciation (depreciation) 9,125,489 5,772,228 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 15,218,322 6,853,528 Distributions to shareholders from net investment income (247,247 (1,376,864 ) ) Share transactions 104,749,320 260,333,131 Net proceeds from sales of shares Reinvestment of distributions 243,968 1,355,960 Cost of shares redeemed (145,869,137 (239,750,488 ) ) Paid in capital portion of redemption fees 117,373 318,123 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (40,758,476 22,256,726 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (25,787,401 27,733,390 ) NET ASSETS Beginning of period 183,454,013 155,720,623 End of period (including undistributed net investment income of $197,378 and $242,884, respectively)$ 157,666,612 $ 183,454,013 OTHER INFORMATION Shares Sold 4,056,454 11,552,985 Issued in reinvestment of distributions 10,169 64,252 Redeemed (6,069,165 (10,870,758 ) ) Net increase (decrease) (2,002,542) 746,479
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 23.13 $ 21.67 $ 17.44 $ 17.12 $ 12.63 $ 12.43 Income from Investment Operations Net investment income .04 .17 .15 .12 .04 .15 Net realized and unrealized gain (loss) 3.44 1.43 4.07 .19 4.32 .37 Total from investment operations 3.48 1.60 4.22 .31 4.36 .52 Less Distributions (.04) (.18) (.06) (.08) - - From net investment income In excess of net investment income - - - - (.06) (.34) Total distributions (.04) (.18) (.06) (.08) (.06) (.34) Redemption fees added to paid in capital .02 .04 .07 .09 .19 .02 Net asset value, end of period $ 26.59 $ 23.13 $ 21.67 $ 17.44 $ 17.12 $ 12.63 TOTAL RETURN B, C 15.15% 7.65% 24.66% 2.36% 36.15% 4.25% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 157,667 $ 183,454 $ 155,721 $ 25,041 $ 22,184 $ 2,689 Ratio of expenses to average net assets 1.57% A 1.53% 2.08% 2.02% A 2.47% 2.49% Ratio of expenses to average net assets before 1.60% A 1.56% 2.10% 2.02% A 2.81% 2.67% expense reductions Ratio of net investment income to average net assets .28% A .77% .75% .86% A .25% 1.30% Portfolio turnover rate 156% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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). If Fidelity had not reimbursed certain expenses, the past five years and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S PAPER AND FOREST PRODUCTS 15.84% 19.98% 167.47% 204.63% PAPER AND FOREST PRODUCTS (INCL. 3% SALES CHARGE) 12.36% 16.38% 159.44% 195.49% S&P 500 16.81% 21.45% 102.17% 201.52% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on June 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 AUGUST 31, 1995 YEAR YEARS FUND PAPER AND FOREST PRODUCTS 19.98% 21.75% 12.90% PAPER AND FOREST PRODUCTS (INCL. 3% SALES CHARGE) 16.38% 21.01% 12.53% S&P 500 21.45% 15.12% 12.78% 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 & Standard & Poor 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 13597.35 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 13066.96 13003.73 02/28/89 12682.95 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 14720.33 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 13466.66 15955.91 01/31/90 12235.55 14885.27 02/28/90 12354.34 15077.29 03/31/90 12699.91 15476.84 04/30/90 11879.17 15089.92 05/31/90 12667.52 16561.19 06/30/90 12365.14 16448.57 07/31/90 12548.72 16395.93 08/31/90 11047.63 14913.74 09/30/90 9978.50 14187.44 10/31/90 9665.33 14126.44 11/30/90 10637.26 15039.00 12/31/90 11432.18 15458.59 01/31/91 12376.62 16132.59 02/28/91 12969.65 17286.07 03/31/91 13233.21 17704.39 04/30/91 13881.15 17746.88 05/31/91 15473.53 18513.55 06/30/91 15078.18 17665.63 07/31/91 15089.16 18488.84 08/31/91 15166.03 18927.03 09/30/91 14583.99 18610.95 10/31/91 15133.09 18860.33 11/30/91 13979.98 18100.26 12/31/91 15406.61 20170.93 01/31/92 16823.56 19795.75 02/29/92 16902.28 20053.10 03/31/92 17014.74 19662.06 04/30/92 17284.64 20240.13 05/31/92 16801.07 20339.30 06/30/92 16689.46 20036.25 07/31/92 16565.50 20855.73 08/31/92 15900.62 20428.19 09/30/92 15731.59 20669.24 10/31/92 16497.88 20741.58 11/30/92 17106.41 21448.87 12/31/92 17263.87 21712.69 01/31/93 17795.59 21895.08 02/28/93 18191.55 22192.85 03/31/93 18168.92 22661.12 04/30/93 18995.42 22112.72 05/31/93 19052.02 22705.34 06/30/93 18644.49 22771.19 07/31/93 18452.05 22680.10 08/31/93 18950.14 23539.68 09/30/93 18044.52 23358.43 10/31/93 18746.37 23841.94 11/30/93 19912.36 23615.45 12/31/93 20467.06 23901.19 01/31/94 22844.31 24713.83 02/28/94 22199.06 24044.09 03/31/94 19844.44 22995.77 04/30/94 19822.26 23290.11 05/31/94 20630.86 23672.07 06/30/94 20422.94 23092.10 07/31/94 22155.65 23849.53 08/31/94 24627.66 24827.36 09/30/94 25066.62 24219.09 10/31/94 23507.17 24764.01 11/30/94 22479.09 23862.11 12/31/94 23360.76 24215.98 01/31/95 23203.89 24843.91 02/28/95 25508.60 25812.07 03/31/95 25689.59 26573.79 04/30/95 25795.82 27356.38 05/31/95 26222.30 28449.82 06/30/95 28598.39 29110.71 07/31/95 29573.20 30076.02 08/31/95 29548.83 30151.51 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 August 31, 1995, your investment would have grown to $29,549 - a 195.49% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $30,152 over the same period - a 201.52% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Champion International Corp. 9.2 Boise Cascade Corp. 5.7 Consolidated Papers, Inc. 5.7 Weyerhaeuser Co. 5.4 Bowater, Inc. 5.2 James River Corp. of Virginia 5.1 Mead Corp. 4.8 Kimberly-Clark Corp. 4.0 Willamette Industries, Inc. 3.8 Union Camp Corp. 3.6 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 3.6 Row: 1, Col: 2, Value: 1.0 Row: 1, Col: 3, Value: 2.2 Row: 1, Col: 4, Value: 93.2 Paper & Allied Products 93.2% Services for Print Industry 2.2% Paper Containers 1.0% All Others 3.6%* * 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 HAS THE FUND PERFORMED? A. The fund had a total return of 15.84% for the six months ended August 31, 1995. During the same period, the Standard & Poor's Composite Index of 500 Stocks returned 16.81%. For the 12 months ended August 31, 1995, the fund rose 19.98%, while the S&P 500 was up 21.45%. Q. WHY DID THE FUND LAG THE BROAD MARKET? A. Despite the fact that paper companies have posted record earnings, many investors believe we're near the peak of the paper cycle. Along with increasing investor anxiety, we've seen a drop in demand for paper products over the summer, leading to uncertainty about what's on the horizon. Given that backdrop, I'm very pleased with the returns of the fund. Its positive performance position was the result of the stocks I chose for the portfolio. Q. WHY HAS THERE BEEN UNCERTAINTY ABOUT PAPER STOCKS? A. Paper stock prices generally start to go up before paper company earnings do. And, paper stock prices tend to go down some time before paper company earnings. That's because investors try to stay ahead of the paper cycle. While paper companies have continued to post solid earnings, there was a more pronounced slowdown in demand this summer. With paper prices steadily rising, businesses that use paper inventoried excess supply to protect themselves from future price increases. When businesses started experiencing their typical summer slowdown, they started to liquidate their inventories rather than purchasing more paper. In addition, paper companies have started to post all-time high profit margins and most paper prices are at, or approaching, all-time highs. Typically, that's not a situation that lasts too long, and makes investors nervous that the next turn will be downward. Q. SO WHY HAVEN'T PAPER STOCKS UNDERPERFORMED EVEN MORE SHARPLY? A. For two reasons. First, it's uncertain whether or not demand will drop further. Unless we see a recession, it's hard for me to imagine a sustained downturn in demand. Second, and more important, while new capacity has been coming on line, it hasn't looked excessive across the board. Q. WHAT SORT OF THEMES HAVE YOU BEEN FOLLOWING? A. The one I've focused on is a move away from companies that produce brown paper - such as corrugated cardboard - to those that produce white - such as magazine and office paper, or newsprint. That's because white paper is a commodity that historically has done better later in the economic cycle. Prices for linerboard have reached a level where they've started to deter consumption, and capacity has been added there as well. As a result, the fund's investments in companies such as Stone Container, Gaylord Container and Jefferson Smurfit detracted from performance. I've sold out the last two stocks. Q. AND WHICH INVESTMENTS HAVE BEEN POSITIVE CONTRIBUTORS? A. Those focused on white paper production. Champion International, the fund's largest holding at the end of the period, was the strongest contributor to return. The stock was cheap, and management was taking concrete steps to restructure, cut costs and repurchase shares - a move seen as positive to shareholders because it shows management has confidence in its own stock and tends to increase the value of outstanding shares. James River currently is poised well from a cost and price perspective. It has announced a restructuring program designed to take $680 million in costs out by 1998, and is a major manufacturer of tissue, the grade that typically does best at the end of the economic cycle. Bowater is the largest U.S. producer of newsprint and is cutting costs. And Boise Cascade seems to have the right mix of grades and is cutting costs as well. Q. YOU'VE TALKED ABOUT THE UNCERTAINTY REGARDING PAPER STOCKS GOING FORWARD. WHAT'S YOUR READ ON THE SITUATION? A. For the first time in the almost two years I've managed the fund, I can see some clouds on the horizon. Some parts of the industry should benefit from price increases, while others could suffer from price cuts as a result of added capacity. FUND FACTS START DATE: June 30, 1986 TRADING SYMBOL: FSPFX SIZE: as of August 31, 1995, more than $66 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 97.4% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 0.4% ABRASIVES AND ASBESTOS - 0.4% Manville Corp. (a) 17,500 $ 258,125 INDUSTRIAL MACHINERY & EQUIPMENT - 0.6% SPECIAL INDUSTRIAL MACHINERY - 0.6% Valmet OY Class A 14,100 404,734 PACKAGING & CONTAINERS - 1.0% PAPER CONTAINERS - 1.0% Mayr Melnhof Karton AG 10,100 630,177 PAPER & FOREST PRODUCTS - 93.2% PAPER & ALLIED PRODUCTS - 93.2% Abitibi Price, Inc. 2nd installment receipt (a)(b) 57,700 756,697 Asia Pulp & Paper Co. Ltd. sponsored ADR (a) 40,000 525,000 Avenor, Inc. 40,200 893,616 Boise Cascade Corp. 85,900 3,682,963 Bowater, Inc. 70,500 3,366,375 Champion International Corp. 103,900 5,883,338 Consolidated Papers, Inc. 60,100 3,636,050 Domtar Inc. (a) 150,200 1,410,971 Enso-Gutzeit OY Class R Free shares 27,000 233,737 Federal Paper Board Co., Inc. 55,300 2,191,263 Fletcher Challenge Canada Ltd. Class A 49,500 805,694 Georgia-Pacific Corp. 20,000 1,800,000 International Paper Co. 21,700 1,776,688 James River Corp. of Virginia 94,800 3,294,300 Kimberly-Clark Corp. 40,300 2,574,163 Kymmene Corp. 15,300 449,636 Louisiana-Pacific Corp. 30,000 712,500 MacMillan Bloedel Ltd. 50,000 660,367 Mead Corp. 50,300 3,087,163 Metsa-Serla Ltd. Class B 7,000 275,882 Mo Och Domsjoe AB Class B 8,000 459,861 Portucel Industrial (a) 60,000 436,486 QUNO Corp. (a) 30,100 565,516 Rayonier, Inc. 48,600 1,865,025 Repola OY 14,000 267,590 Repap Enterprises, Inc. (a) 134,400 987,536 Scott Paper Co. 40,000 1,855,000 Stone Consolidated Corp. (a) 100,000 1,488,151 Stone Container Corp. (a) 43,000 935,250 Stora Kopparbergs B Free shares 40,000 498,183 Svenska Cellulosa AB Class B Free shares 23,000 377,743 Temple-Inland, Inc. 25,700 1,329,975 Union Camp Corp. 41,000 2,331,875 Wausau Paper Mills Co. 12,810 297,833 Westvaco Corp. 50,400 2,223,900 Weyerhaeuser Co. 75,800 3,486,800 Willamette Industries, Inc. 35,600 2,447,500 59,870,627 PRINTING - 2.2% SERVICES FOR PRINT INDUSTRY - 2.2% Alco Standard Corp. 17,200 1,384,600 TOTAL COMMON STOCKS (Cost $54,035,453) 62,548,263 REPURCHASE AGREEMENTS - 2.6% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 1,686,273 $ 1,686,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $55,721,453) $ 64,234,263 CURRENCY ABBREVIATIONS CAD - Canadian dollar LEGEND 1. Non-income producing 2. Purchased on an installment basis. Market value reflects only those payments made through August 31, 1995. The remaining installment aggregating CAD 288,500 is due October, 1995. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $25,709,751 and $55,234,605, 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 $20,018 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $2,982,000 and $2,948,000, respectively. The weighted average interest rate paid was 6.4% (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 81.1% Canada 11.8 Finland 2.5 Sweden 2.1 Austria 1.0 Others (individually less than 1%) 1.5 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $56,217,332. Net unrealized appreciation aggregated $8,016,931, of which $8,699,382 related to appreciated investment securities and $682,451 related to depreciated investment securities. PAPER AND FOREST PRODUCTS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $1,686,000) (cost $55,721,453) - See $ 64,234,263 accompanying schedule Cash 354 Receivable for investments sold 2,134,422 Receivable for fund shares sold 184,029 Dividends receivable 122,700 Redemption fees receivable 218 Prepaid expenses 12,267 TOTAL ASSETS 66,688,253 LIABILITIES Payable for fund shares redeemed $ 532,791 Accrued management fee 37,857 Other payables and accrued expenses 80,320 TOTAL LIABILITIES 650,968 NET ASSETS $ 66,037,285 Net Assets consist of: Paid in capital $ 54,273,430 Undistributed net investment income 220,287 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 3,030,724 Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 8,512,844 NET ASSETS, for 2,722,649 shares outstanding $ 66,037,285 NET ASSET VALUE and redemption price per share ($66,037,285 (divided by) 2,722,649 shares) $24.25 Maximum offering price per share (100/97.00 of $24.25) $25.00
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 665,759 Dividends Interest (including income on securities loaned of $2,764) 157,538 TOTAL INCOME 823,297 EXPENSES Management fee $ 218,218 Transfer agent 373,352 Fees Redemption fees (67,003 ) Accounting and security lending fees 35,888 Non-interested trustees' compensation 352 Custodian fees and expenses 19,574 Registration fees 12,267 Audit 10,845 Legal 324 Interest 2,093 Miscellaneous 652 Total expenses before reductions 606,562 Expense reductions (3,552 603,010 ) NET INVESTMENT INCOME 220,287 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 4,043,464 Foreign currency transactions (1,222 4,042,242 ) Change in net unrealized appreciation (depreciation) on: Investment securities 3,454,105 Assets and liabilities in (22 3,454,083 foreign currencies ) NET GAIN (LOSS) 7,496,325 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 7,716,612 OTHER INFORMATION $344,796 Sales Charges Paid to FDC Deferred sales charges withheld $1,262 by FDC Exchange fees withheld by FSC $45,338
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 220,287 $ 27,739 Net investment income Net realized gain (loss) 4,042,242 2,948,989 Change in net unrealized appreciation (depreciation) 3,454,083 2,027,950 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 7,716,612 5,004,678 Distributions to shareholders from net realized gains (742,026 (2,454,993 ) ) Share transactions 73,512,716 242,587,009 Net proceeds from sales of shares Reinvestment of distributions 713,862 2,407,320 Cost of shares redeemed (109,563,293 (220,695,611 ) ) Paid in capital portion of redemption fees 180,533 462,733 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (35,156,182 24,761,451 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (28,181,596 27,311,136 ) NET ASSETS Beginning of period 94,218,881 66,907,745 End of period (including undistributed net investment income of $220,287 and $31,587, respectively)$ 66,037,285 $ 94,218,881 OTHER INFORMATION Shares Sold 3,257,398 12,091,048 Issued in reinvestment of distributions 33,405 132,918 Redeemed (5,024,346 (11,180,290 ) ) Net increase (decrease) (1,733,543) 1,043,676
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 21.14 $ 19.61 $ 16.08 $ 15.37 $ 12.64 $ 11.00 Income from Investment Operations Net investment income (loss) .07 .01 (.01) .06 .13 .19 Net realized and unrealized gain (loss) 3.19 2.53 3.38 .65 2.64 1.56 Total from investment operations 3.26 2.54 3.37 .71 2.77 1.75 Less Distributions - - (.01) (.09) (.30) (.17) From net investment income From net realized gain (.21) (1.17) - - - - Total distributions (.21) (1.17) (.01) (.09) (.30) (.17) Redemption fees added to paid in capital .06 .16 .17 .09 .26 .06 Net asset value, end of period $ 24.25 $ 21.14 $ 19.61 $ 16.08 $ 15.37 $ 12.64 TOTAL RETURN B, C 15.84% 14.91% 22.03% 5.25% 24.52% 16.85% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 66,037 $ 94,219 $ 66,908 $ 25,098 $ 28,957 $ 12,579 Ratio of expenses to average net assets 1.67% A 1.87% 2.07% 2.21% A 2.05% 2.49% Ratio of expenses to average net assets before 1.68% A 1.88% 2.08% 2.21% A 2.05% 2.72% expense reductions Ratio of net investment income (loss) to average net .61% A .05% (.08)% .49% A .92% 1.73% assets Portfolio turnover rate 77% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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 expenses, the past five years and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S TRANSPORTATION 7.06% 9.30% 170.08% 247.90% TRANSPORTATION (INCL. 3% SALES CHARGE) 3.85% 6.02% 161.98% 237.46% S&P 500 16.81% 21.45% 102.17% 221.28% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on September 29, 1986. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS FUND TRANSPORTATION 9.30% 21.98% 14.98% TRANSPORTATION (INCL. 3% SALES CHARGE) 6.02% 21.24% 14.59% S&P 500 21.45% 15.12% 13.96% 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 TranspoStandard & Poor 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 14691.33 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 11152.72 16024.85 12/31/90 11555.39 16471.95 01/31/91 12543.76 17190.12 02/28/91 13763.97 18419.22 03/31/91 13776.18 18864.96 04/30/91 13739.57 18910.24 05/31/91 14825.56 19727.16 06/30/91 14702.46 18823.66 07/31/91 15596.12 19700.84 08/31/91 15877.68 20167.75 09/30/91 15583.88 19830.95 10/31/91 16734.61 20096.68 11/30/91 15694.05 19286.79 12/31/91 17811.89 21493.19 01/31/92 17971.04 21093.42 02/29/92 18938.14 21367.64 03/31/92 18485.20 20950.97 04/30/92 18962.63 21566.92 05/31/92 19354.37 21672.60 06/30/92 18521.92 21349.68 07/31/92 18791.24 22222.88 08/31/92 18228.12 21767.31 09/30/92 18950.39 22024.17 10/31/92 19758.35 22101.25 11/30/92 21190.65 22854.91 12/31/92 22049.78 23136.02 01/31/93 23037.27 23330.36 02/28/93 23349.77 23647.66 03/31/93 24912.25 24146.62 04/30/93 24850.15 23562.27 05/31/93 25778.43 24193.74 06/30/93 25853.69 24263.90 07/31/93 25853.69 24166.85 08/31/93 26330.38 25082.77 09/30/93 26393.10 24889.63 10/31/93 26945.04 25404.85 11/30/93 27095.57 25163.50 12/31/93 28513.94 25467.98 01/31/94 29763.83 26333.89 02/28/94 29763.83 25620.25 03/31/94 28967.19 24503.20 04/30/94 29508.50 24816.84 05/31/94 29034.13 25223.84 06/30/94 29006.23 24605.86 07/31/94 29982.87 25412.93 08/31/94 30875.80 26454.86 09/30/94 30052.63 25806.71 10/31/94 30499.09 26387.37 11/30/94 28671.38 25426.34 12/31/94 29616.40 25803.41 01/31/95 29416.80 26472.49 02/28/95 31520.20 27504.13 03/31/95 31934.73 28315.77 04/30/95 32410.69 29149.67 05/31/95 31443.43 30314.78 06/30/95 31105.66 31019.00 07/31/95 33777.12 32047.59 08/31/95 33746.42 32128.03 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 August 31, 1995, your investment would have grown to $33,746 - a 237.46% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $32,128 over the same period - a 221.28% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Burlington Northern, Inc. 11.6 CSX Corp. 9.7 Santa Fe Pacific Corp. 6.2 Chrysler Corp. 5.5 Landstar System, Inc. 5.0 PACCAR, Inc. 4.9 Southern Pacific Rail Corp. 4.9 Hunt (J.B.) Transport Services, Inc. 4.7 Roadway Services, Inc. 4.5 American President Companies Ltd. 4.4 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 13.5 Row: 1, Col: 2, Value: 8.800000000000001 Row: 1, Col: 3, Value: 10.1 Row: 1, Col: 4, Value: 11.5 Row: 1, Col: 5, Value: 12.5 Row: 1, Col: 6, Value: 43.6 Railroads 43.6% Motor Vehicles & Car Bodies 12.5% Trucking, Local & Long Distance 11.5% Shipping 10.1% Trucking, Long Distance 8.8% All Others 13.5% TRANSPORTATION PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Stephen DuFour, Portfolio Manager of Fidelity Select Transportation Portfolio Q. HOW DID THE FUND PERFORM, STEVE? A. For the six months ended August 31, 1995, the fund had a total return of 7.06%. During the same period, the Standard & Poor's Composite Index of 500 Stocks returned 16.81%. For the 12 months ended August 31, 1995, the fund rose 9.30%, while the S&P 500 was up 21.45%. Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE? A. The fund invests primarily in three industries: railroads, trucking and airlines. During the period, railroad stocks received the highest weighting in the fund. Railroads outperformed the overall market and were solid contributors to the fund's performance. Trucking stocks made up the second largest position, but they performed very poorly. Airline stocks received the lowest weighting of the three industries; they made a strong upward move. The fund would have been better off with more concentration in airlines and less in trucking. Going forward, the fund probably will continue to have a strong stake in railroad stocks, but I plan to increase its position in airlines and decrease holdings in truck stocks. Q. LET'S TAKE THESE INDUSTRIES ONE AT A TIME, STARTING WITH RAILROADS. A. I believe railroads are generally well positioned for the next 10 years. There has been a fair amount of consolidation within the industry. In addition, since most of the railroads have strong holds on regions or parts of the country, they're able to raise rates or handle excess capacity by adding a new car to the end of a train. When business improves for airlines or trucking, companies buy more planes or trucks, increasing supply and putting downward pressure on prices. Railroads don't have to deal with this. In addition, cost cutting over the past 10 years has made railroads more profitable. Q. LOOKING AT RAILROADS, WHICH INVESTMENTS HELPED THE FUND? A. Burlington Northern, the fund's largest position, was one. It's due to complete its acquisition of Santa Fe Pacific in September. This move should create a few hundred million dollars in cost savings. In addition, Burlington Northern is the nation's largest mover of grain. Due to increased demand for U.S. grain, combined with poor crop conditions elsewhere in the world, the company is in a position to prosper at least for the next six months. Other acquisitions also helped the fund during the period. Union Pacific purchased the Chicago & North Western railroad, and Union Pacific recently announced it was going to acquire Southern Pacific. The fund held each of these stocks, all of which helped its performance. CSX, an eastern railroad, has done a great job cutting costs and paying down debt; the investment there was another positive contributor. Q. LET'S TURN TO TRUCKING . . . A. The problem with trucking is that there are too many trucks. There's been a slowdown in industrial production, so demand has dropped off. At the same time, we've had record production of new trucks. As a result, there have been too many trucks chasing too few loads. Rates have gone down and the profitability of trucking companies has declined. The fund's investments in Rollins Truck Leasing, Carolina Freight, J.B. Hunt, TNT Freightways and Landstar System were among those that were drags on performance. Q. AND, FINALLY, AIRLINES . . . A. Airlines, in general, succeeded at increasing passenger loads and did a good job restraining capacity additions. AMR Corp., the parent company of American Airlines, was one airline stock that helped the fund. Q. WHAT DO YOU SEE HAPPENING IN THE SECTOR AND THE FUND OVER THE NEXT SIX MONTHS? A. There is a good chance that the sector will attract investors. One thing investors look at is comparable results from year to year. After a poor second and third quarter in 1995, it appears the sector is a bit better positioned looking toward the last quarter of 1995 and the first quarter of 1996, primarily due to rail and airlines. Improving trends, compared against weak results in 1995, will be good for attracting investors. All three industries behave like commodities, dependent upon pressures of supply and demand. My job is to keep a pulse on the supply/demand dynamic, then decide which industry within the sector is best positioned, and invest accordingly. FUND FACTS START DATE: September 29, 1986 TRADING SYMBOL: FSRFX SIZE: as of August 31, 1995, more than $10 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 100% SHARES VALUE (NOTE 1) AIR TRANSPORTATION - 7.5% AIR TRANSPORT, MAJOR NATIONAL - 7.5% AMR Corp. (a) 5,500 $ 387,748 Delta Air Lines, Inc. 5,000 371,875 759,623 AUTOS, TIRES, & ACCESSORIES - 14.3% AUTO & TRUCK PARTS - 1.8% Cummins Engine Co., Inc. 4,500 176,625 Snap-on Tools Corp. 200 8,200 184,825 MOTOR VEHICLES & CAR BODIES - 12.5% Chrysler Corp. 10,300 554,913 General Motors Corp. 4,000 188,000 PACCAR, Inc. 10,000 495,000 Sime Darby Hongkong Ltd. 20,000 24,289 1,262,202 TRUCK & BUS BODIES - 0.0% Grupo Dina sponsored ADR, Series L 11 25 TOTAL AUTOS, TIRES, & ACCESSORIES 1,447,052 HOLDING COMPANIES - 2.2% HOLDING COMPANY OFFICES - 2.2% Norfolk Southern Corp. 3,100 219,325 RAILROADS - 43.6% Burlington Northern, Inc. 16,900 1,170,325 CSX Corp. 11,900 981,750 Canadian Pacific Ltd. Ord. 10,000 166,487 Illinois Central Corp., Series A 7,200 276,300 Santa Fe Pacific Corp. 21,948 622,775 Southern Pacific Rail Corp. (a) 20,000 490,000 Union Pacific Corp. 5,000 327,500 Wisconsin Central Transportation Corp. (a) 6,000 357,000 4,392,137 SECURITIES INDUSTRY - 0.1% INVESTMENT MANAGERS - 0.1% Alleghany Corp. 30 5,078 SHIPPING - 12.0% DEEP SEA TRANSPORT - 1.9% Pacific Basin Bulk Shipping Ltd 1,000 14,250 Pacific Basin Bulk Shipping Ltd. (warrants) (a) 1,000 625 Transportacion Maritima Mexicana SA de CV ADR representing L share (a) 20,000 172,500 187,375 SHIPPING - 10.1% American President Companies Ltd. 15,000 440,625 IM Skaugen AS 100,000 66,963 Kirby Corp. 25,000 387,500 Storli Skibs, Series A AS 7,000 127,540 1,022,628 TOTAL SHIPPING 1,210,003 TRUCKING & FREIGHT - 20.3% TRUCKING, LOCAL & LONG DISTANCE- 11.5% Hitachi Transport System Co. 5,000 46,126 Landstar System, Inc. (a) 18,000 504,000 Roadway Services, Inc. 8,200 451,000 Rollins Truck Leasing Corp. 15,000 163,125 1,164,251 SHARES VALUE (NOTE 1) TRUCKING, LONG DISTANCE - 8.8% Aasche Transportation 5,000 $ 36,875 Hunt (J.B.) Transport Services Inc. 29,800 476,800 PST Vans, Inc. 15,000 108,750 TNT Freightways Corp. 12,800 265,600 888,025 TOTAL TRUCKING & FREIGHT 2,052,276 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $9,339,963) $ 10,085,494 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $11,241,234 and $13,500,806, 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 $4,400 for the period (see Note 5 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $9,339,963. Net unrealized appreciation aggregated $745,531, of which $1,040,529 related to appreciated investment securities and $294,998 related to depreciated investment securities. The fund has elected to defer to its fiscal year ending February 28, 1996 $313,000 of losses recognized during the period November 1,1994 to February 28, 1995. TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value $ 10,085,494 (cost $9,339,963) - See accompanying schedule Receivable for investments sold 1,450,815 Receivable for fund shares sold 3,680 Dividends receivable 19,023 Redemption fees receivable 3,270 Prepaid expenses 6,378 TOTAL ASSETS 11,568,660 LIABILITIES Payable to custodian bank $ 102,497 Payable for fund shares redeemed 1,090,705 Accrued management fee 6,782 Other payables and accrued expenses 25,937 TOTAL LIABILITIES 1,225,921 NET ASSETS $ 10,342,739 Net Assets consist of: Paid in capital $ 8,648,285 Accumulated net investment (loss) (42,657 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 991,580 Net unrealized appreciation (depreciation) on investments 745,531 NET ASSETS, for 470,531 shares outstanding $ 10,342,739 NET ASSET VALUE and redemption price per share ($10,342,739 (divided by) 470,531 shares) $21.98 Maximum offering price per share (100/97.00 of $21.98) $22.66
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 64,221 Dividends Interest 32,483 TOTAL INCOME 96,704 EXPENSES Management fee $ 36,739 Transfer agent 70,248 Fees Redemption fees (12,548 ) Accounting fees and expenses 22,668 Non-interested trustees' compensation 63 Custodian fees and expenses 9,129 Registration fees 6,378 Audit 8,479 Legal 47 Miscellaneous 152 Total expenses before reductions 141,355 Expense reductions (1,994 139,361 ) NET INVESTMENT INCOME (LOSS) (42,657 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 1,308,963 Foreign currency transactions 1,556 1,310,519 Change in net unrealized appreciation (depreciation) on: Investment securities (556,245 ) Assets and liabilities in (13 (556,258 foreign currencies ) ) NET GAIN (LOSS) 754,261 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 711,604 OTHER INFORMATION $82,175 Sales Charges Paid to FDC Deferred sales charges withheld $1,765 by FDC Exchange fees withheld by FSC $10,523
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ (42,657 $ (105,448 Net investment income (loss) ) ) Net realized gain (loss) 1,310,519 1,298,543 Change in net unrealized appreciation (depreciation) (556,258 (804,930 ) ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 711,604 388,165 Distributions to shareholders from net realized gains - (1,219,559 ) Share transactions 14,077,786 21,385,934 Net proceeds from sales of shares Reinvestment of distributions - 1,177,973 Cost of shares redeemed (17,184,921 (22,133,063 ) ) Paid in capital portion of redemption fees 33,853 28,174 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (3,073,282 459,018 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (2,361,678 (372,376 ) ) NET ASSETS Beginning of period 12,704,417 13,076,793 End of period (including accumulated net investment loss of $42,657 and $0, respectively) $ 10,342,739 $ 12,704,417 OTHER INFORMATION Shares Sold 661,060 1,018,198 Issued in reinvestment of distributions - 62,121 Redeemed (809,402 (1,064,813 ) ) Net increase (decrease) (148,342) 15,506
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 20.53 $ 21.67 $ 18.68 $ 15.49 $ 11.26 $ 12.23 Income from Investment Operations Net investment income (loss) (.08) (.17) (.20) (.07) (.05) .06 Net realized and unrealized gain (loss) 1.47 1.17 5.07 3.55 4.18 (.57) Total from investment operations 1.39 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 .06 .05 .08 .07 .14 .04 Net asset value, end of period $ 21.98 $ 20.53 $ 21.67 $ 18.68 $ 15.49 $ 11.26 TOTAL RETURN B, C 7.06% 5.90% 27.47% 23.14% 38.01% (4.10)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 10,343 $ 12,704 $ 13,077 $ 10,780 $ 2,998 $ 770 Ratio of expenses to average net assets 2.30% A 2.36% 2.39% 2.48% A 2.43% 2.39% Ratio of expenses to average net assets before 2.33% A 2.37% 2.40% 4.20% A 3.13% 2.89% expense reductions Ratio of net investment income (loss) to average net (.70)% (.83)% (.96)% (.53)% (.34)% .52% assets A A Portfolio turnover rate 205% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S AMERICAN GOLD 22.40% 3.77% 38.64% 129.03% AMERICAN GOLD (INCL. 3% SALES CHARGE) 18.73% 0.66% 34.48% 122.16% S&P 500 16.81% 21.45% 102.17% 265.41% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on 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 AUGUST 31, 1995 YEAR YEARS FUND AMERICAN GOLD 3.77% 6.75% 8.90% AMERICAN GOLD (INCL. 3% SALES CHARGE) 0.66% 6.10% 8.56% S&P 500 21.45% 15.12% 14.27% 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 AmericStandard & Po 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 16122.97 12592.97 01/31/88 13701.57 13123.13 02/29/88 14065.77 13734.67 03/31/88 15473.33 13310.27 04/30/88 15571.76 13458.01 05/31/88 15473.33 13575.09 06/30/88 15778.47 14198.19 07/31/88 15739.09 14144.24 08/31/88 14813.84 13663.33 09/30/88 14174.04 14245.39 10/31/88 14321.69 14641.41 11/30/88 14518.55 14432.04 12/31/88 14114.98 14684.60 01/31/89 14626.82 15759.52 02/28/89 15394.59 15367.10 03/31/89 14853.22 15725.16 04/30/89 14134.67 16541.29 05/31/89 13622.83 17211.21 06/30/89 14390.59 17113.11 07/31/89 14538.24 18658.42 08/31/89 15276.47 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 17225.40 19337.33 01/31/90 17983.32 18039.80 02/28/90 17481.32 18272.51 03/31/90 16802.15 18756.73 04/30/90 14981.18 18287.82 05/31/90 16300.15 20070.88 06/30/90 15256.78 19934.40 07/31/90 16319.84 19870.61 08/31/90 16024.54 18074.30 09/30/90 16014.70 17194.08 10/31/90 13386.60 17120.15 11/30/90 13219.26 18226.11 12/31/90 14262.63 18734.62 01/31/91 12284.17 19551.45 02/28/91 13396.44 20949.38 03/31/91 13347.22 21456.35 04/30/91 12874.76 21507.85 05/31/91 13317.69 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 12697.58 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 12382.60 23828.90 04/30/92 11752.64 24529.47 05/31/92 12589.31 24649.67 06/30/92 13406.28 24282.39 07/31/92 14252.79 25275.53 08/31/92 13987.02 24757.39 09/30/92 13908.28 25049.52 10/31/92 13494.87 25137.20 11/30/92 12353.07 25994.38 12/31/92 12973.19 26314.11 01/31/93 12727.11 26535.14 02/28/93 13927.97 26896.02 03/31/93 15493.02 27463.53 04/30/93 17451.79 26798.91 05/31/93 19390.88 27517.12 06/30/93 20522.83 27596.92 07/31/93 22156.79 27486.53 08/31/93 20995.30 28528.27 09/30/93 18770.76 28308.61 10/31/93 21576.04 28894.59 11/30/93 21595.73 28620.10 12/31/93 23180.47 28966.40 01/31/94 23190.31 29951.26 02/28/94 22304.43 29139.58 03/31/94 22845.80 27869.09 04/30/94 20916.56 28225.82 05/31/94 21822.12 28688.72 06/30/94 20749.22 27985.85 07/31/94 20444.09 28903.78 08/31/94 21408.71 30088.84 09/30/94 23278.90 29351.66 10/31/94 21595.73 30012.07 11/30/94 19036.53 28919.03 12/31/94 19597.58 29347.90 01/31/95 17550.22 30108.89 02/28/95 18150.65 31282.24 03/31/95 20936.24 32205.38 04/30/95 20857.50 33153.82 05/31/95 21290.59 34478.98 06/30/95 21585.89 35279.93 07/31/95 22166.63 36449.81 08/31/95 22215.84 36541.30 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 August 31, 1995, your investment would have grown to $22,216 - a 122.16% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $36,541 over the same period - a 265.41% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Barrick Gold Corp. 9.9 Newmont Mining Corp. 8.5 Placer Dome, Inc. 6.3 Euro-Nevada Mining Corp. 6.0 Kinross Gold Corp. 4.8 Cambior, Inc. 4.6 Agnico Eagle Mines Ltd. 4.3 Franco Nevada Mining Corp. 4.2 Freeport McMoRan Copper Co. Class A 2.6 Newmont Mining Corp. depositary shares 2.4 representing 1/2 share, $1.375 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 9.9 Row: 1, Col: 2, Value: 1.1 Row: 1, Col: 3, Value: 2.0 Row: 1, Col: 4, Value: 2.6 Row: 1, Col: 5, Value: 4.4 Row: 1, Col: 6, Value: 80.0 Gold Ores 80.0% Miscellaneous Metal Ores 4.4% Copper Ores 2.6% Investment Managers 2.0% Agricultural Chemicals 1.1% All Others 9.9%* * INCLUDES SHORT-TERM INVESTMENTS AMERICAN GOLD PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Larry Rakers, Portfolio Manager of Fidelity Select American Gold Portfolio Q. HOW HAS THE FUND PERFORMED, LARRY? A. For the six months ended August 31, 1995, the portfolio returned 22.40%. The Standard & Poor's 500 Index returned 16.81% for the same time period. For the 12 months ended August 31, 1995, the portfolio returned 3.77% while the S&P returned 21.45%. Q. WHY HAS THE FUND'S PERFORMANCE BEEN UP IN THE PAST SIX MONTHS? A. The fund was focused on gold companies which were increasing reserves and production. This has resulted in capital appreciation despite the fact that the price of gold has traded in a narrow range. Q. WHAT'S YOUR STRATEGY BEEN IN THE RECENT INVESTING ENVIRONMENT? A. The fund invests primarily in North, Central and South American precious metals companies and can also buy gold bullion. Although I was bullish on the outlook for the price of gold, I continued to invest in companies that have been growing production and reserves. This strategy should allow investors to enjoy modest capital appreciation in a flat gold price environment as well as more substantial gains in an improving gold price environment. Q. WHAT STOCKS DID YOU LIKE AT THE END OF AUGUST? A. The fund's top two holdings at the end of the period, Barrick Gold and Newmont Mining, have continued to experience strong production. Barrick had outstanding exploration success both in Nevada and Chile earlier this year. I think they can increase production from 3 million ounces this year to more than 4 million in the next two to three years. Newmont Mining, meanwhile, has developed a new technique by which it uses bacteria to process ore and extract gold. I believe this new technology has the potential to change the production and reserve profile of Newmont in the years to come. In addition, Newmont has been aggressive in seeking new gold properties internationally. Q. WHAT OTHER INVESTMENTS BENEFITED THE FUND DURING THE PERIOD? A. Pioneer Group, a Boston-based investment adviser, invested in a gold mine in Ghana that has been very successful, and the fund held a large position in Pioneer Group. It also has a similar project in Russia that looks interesting. Euro-Nevada Mining and Franco Nevada Mining have each appreciated nicely during the period. Most of their revenues have come from gold royalties in North American mines, which have been profitable so far this year. The most lucrative have been their royalties on Barrick Gold's Gold Strike Mine. Q. WHERE ELSE ARE YOU FINDING OPPORTUNITIES? A. I have been increasing the fund's investments in companies which deal with silver and platinum. The supply/demand picture for silver has looked very favorable. Stillwater Mining is the only platinum company available in North America and I've increased the fund's holding in it. Q. WHAT'S BEEN YOUR BIGGEST DISAPPOINTMENT OVER THE PAST SIX MONTHS? A. Despite increasing demand, the price of gold has been relatively flat. Sales of gold by central banks and producer forward selling has limited the upward movement in gold prices. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. I think the supply/demand picture looks favorable for all of the precious metals. However, additional central bank selling or producer forward selling could prevent upward movements in the metals prices. Shareholders should understand that gold and precious metals prices are very volatile and anything can happen. FUND FACTS START DATE: December 16, 1985 TRADING SYMBOL: FSAGX SIZE: as of August 31, 1995, more than $346 million MANAGER: Larry Rakers, since July 1995; research analyst following precious metals, coal and restaurants since 1993; joined Fidelity in 1993 (checkmark) AMERICAN GOLD PORTFOLIO INVESTMENTS AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 89.9% SHARES VALUE (NOTE 1) CANADA - 59.2% HOLDING COMPANIES - 0.3% HOLDING COMPANY OFFICES - 0.3% Bolivar Goldfields Ltd. (a)(c) 941,100 $ 1,120,398 METALS & MINING - 1.2% LEAD & ZINC ORES - 0.1% Cominco Ltd. (a) 17,789 352,418 METAL MINING - 0.5% Arlo Resources Ltd. 50,000 37,204 Dayton Mining Corp. (a) 200,000 837,084 Southernera Resources Ltd. (a)(c) 253,900 689,559 1,563,847 MISCELLANEOUS NONMETAL MINERALS - 0.6% DIA Metropolitan Minerals Ltd. (a): Class A 46,050 419,742 Class B 179,500 1,769,691 2,189,433 TOTAL METALS & MINING 4,105,698 PRECIOUS METALS - 57.7% GOLD & SILVER ORES - 0.9% Greenstone Resources Ltd. (a) 424,800 1,169,508 Mentor Exploration & Development Co. Ltd. (a)(c) 188,000 1,923,436 3,092,944 GOLD ORES - 56.6% Aber Resources Ltd. (a) 129,900 942,391 Adrian Resources Ltd. 113,900 476,719 Agnico Eagle Mines Ltd. 1,108,700 15,055,448 Barrick Gold Corp. 1,387,600 34,975,221 Bema Gold Corp. (a) 350,000 710,966 Breakwater Resources Ltd. (a) 21,475 37,551 Cambior, Inc. 1,497,900 16,160,978 Campbell Resources, Inc. (a) 1,320,000 1,070,573 Canaarc Resources Corp. (a) 300,000 412,962 Cathedral Gold Corp. (a) 211,000 463,149 Crown Resources Corp. (a) 84,600 465,300 Echo Bay Mines Ltd. 175,400 1,827,151 Euro-Nevada Mining Corp. 551,000 21,319,248 Franco Nevada Mining Corp. 232,000 14,953,681 Golden Knight Resources, Inc. 406,200 2,531,288 Golden Star Resources, Ltd. Canada (a) 1,078,000 6,216,373 Hemlo Gold Mines Inc. 622,500 5,905,633 International Gold Resources Corp. (a) 350,000 1,367,240 Kinross Gold Corp. (a) 2,090,000 17,106,295 Metallica Resources, Inc. (a) 50,000 120,912 Mountain Province Mining, Inc. (a) 232,300 1,339,577 Orvana Minerals Corp. (a)(c) 1,352,800 4,781,282 Pegasus Gold, Inc. (a) 609,300 7,537,193 Placer Dome, Inc. 863,400 22,404,911 Prime Equities, Inc. (a) 55,883 195,431 Prime Resources Group, Inc. (a) 953,900 7,630,065 Rayrock Yellowknife Resources Inc. (a) 264,500 2,952,119 Royal Oak Mines, Inc. (warrants) (a) 100,000 37,204 Sudbury Contact Mines, Ltd. (a) 420,100 4,376,203 TVI Pacific, Inc. (a) 1,268,000 1,368,058 TVX Gold, Inc. 10,000 70,687 War Eagle Mining, Inc. (a) 368,000 1,369,100 Wharf Resources Ltd. 570,000 4,294,243 200,475,152 SHARES VALUE (NOTE 1) SILVER ORES - 0.2% Pan American Silver Corp. (a) 58,600 $ 392,425 Rea Gold Corp. (a) 125,000 297,630 United Keno Hill Mines Ltd. 5,000 9,115 699,170 TOTAL PRECIOUS METALS 204,267,266 TOTAL CANADA 209,493,362 FRANCE - 0.3% PRECIOUS METALS - 0.3% GOLD ORES - 0.3% Guyanor Resources SA Class B (a)(b) 200,000 401,800 Guyanor Resources SA Class B (a) 313,440 629,701 1,031,501 GHANA - 1.6% PRECIOUS METALS - 1.6% GOLD ORES - 1.6% Ashanti Goldfields Ltd. GDR (b) 23,000 473,800 Ashanti Goldfields Ltd. GDR 252,000 5,191,200 5,665,000 PERU - 0.9% PRECIOUS METALS - 0.9% GOLD ORES - 0.9% Buenaventura (CIA DE MIN) Class T 573,923 3,325,465 UNITED STATES - 27.9% CHEMICALS & PLASTICS - 1.1% AGRICULTURAL CHEMICALS - 1.1% First Mississippi Corp. 111,700 3,700,063 METALS & MINING - 7.0% COPPER ORES - 2.6% Freeport McMoRan Copper Co. Class A 400,000 9,350,000 MISCELLANEOUS METAL ORES - 4.4% Stillwater Mining Co. (a)(b) 350,000 7,656,250 Stillwater Mining Co. (a) 360,000 7,875,000 15,531,250 TOTAL METALS & MINING 24,881,250 PRECIOUS METALS - 17.7% GOLD ORES - 17.7% Alta Gold Co. (a) 65,000 81,250 Amax Gold, Inc. (a) 1,013,100 6,585,150 Battle Mountain Gold Co. 520,400 5,138,950 Canyon Resources Corp. (a) 826,700 2,118,419 Centurion Mines Corp. (a) 5,000 10,469 Coeur d'Alene Mines Corp. 147,400 2,819,025 Firstmiss Gold, Inc. (a) 87,000 1,957,500 Hecla Mining Co. (a) 309,500 3,559,250 Homestake Mining Co. 392,300 6,472,950 Newmont Mining Corp. 688,105 29,932,568 Santa Fe Pacific Gold Corp. 340,000 4,122,500 TOTAL PRECIOUS METALS 62,798,031 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SECURITIES INDUSTRY - 2.0% INVESTMENT MANAGERS - 2.0% Pioneer Group, Inc. 247,500 $ 7,053,750 SERVICES - 0.1% JEWELRY, PRECIOUS METAL - 0.1% OroAmerica, Inc. (a) 50,000 200,000 TOTAL UNITED STATES 98,633,094 TOTAL COMMON STOCKS (Cost $265,707,987) 318,148,422 CONVERTIBLE PREFERRED STOCKS - 2.8% UNITED STATES - 2.8% PRECIOUS METALS - 2.8% GOLD ORES - 2.8% Battle Mountain Gold Co. $3.25 29,000 1,584,125 Newmont Mining Corp. depositary shares representing 1/2 share, $1.375 (b) 138,800 8,432,100 TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $10,365,123) 10,016,225 CONVERTIBLE BONDS - 0.1% PRINCIPAL AMOUNT UNITED STATES - 0.1% PRECIOUS METALS - 0.1% GOLD ORES - 0.1% Canyon Resources Corp. 6%, 6/1/98 (b) (Cost $249,000) $ 300,000 237,000 BULLION - 2.5% TROY OUNCES Silver Bullion (5,000 oz Bar) (Cost $8,840,321) 1,677,084 8,955,631 REPURCHASE AGREEMENTS - 4.7% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 16,566,678 16,564,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $301,726,431) $ 353,921,278 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 $17,200,950 or 5.0% of net assets. 3. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Bolivar Goldfields Ltd. $ - $ - $ - $ 1,120,398 Mentor Exploration & Development Co. Ltd. - - - 1,923,436 Orvana Minerals Corp. - - - 4,781,282 Southernera Resources Ltd. - - - 689,559 Totals $ - $ - $ - $ 8,514,675 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $80,528,673 and $68,178,649, 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 $146,957 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 $3,305,363 and $3,474,000, respectively (see Note 7 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the period for which the loan was outstanding amounted to $4,084,000. The weighted average interest rate paid was 6.4% (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: Canada 59.2% United States 38.0 Ghana 1.6 Others (individually less than 1%) 1.2 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $303,068,739. Net unrealized appreciation aggregated $50,852,539, of which $80,333,650 related to appreciated investment securities and $29,481,111 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
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $16,564,000) (cost $301,726,431) - $ 353,921,278 See accompanying schedule Cash 230 Receivable for investments sold 3,159,244 Receivable for fund shares sold 1,471,421 Dividends receivable 297,261 Interest receivable 4,450 Redemption fees receivable 1,363 Other receivables 10,156 Prepaid expenses 15,944 TOTAL ASSETS 358,881,347 LIABILITIES Payable for investments purchased $ 1,407,841 Payable for fund shares redeemed 6,464,665 Accrued management fee 181,860 Other payables and accrued expenses 373,356 Collateral on securities loaned, at value 3,474,000 TOTAL LIABILITIES 11,901,722 NET ASSETS $ 346,979,625 Net Assets consist of: Paid in capital $ 319,480,011 Accumulated net investment (loss) (9,753 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (24,686,210 ) Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 52,195,577 NET ASSETS, for 15,375,930 shares outstanding $ 346,979,625 NET ASSET VALUE and redemption price per share ($346,979,625 (divided by) 15,375,930 shares) $22.57 Maximum offering price per share (100/97.00 of $22.57) $23.27
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 1,674,408 Dividends Interest (including income on securities loaned of $33,752) 862,284 TOTAL INCOME 2,536,692 EXPENSES Management fee $ 1,090,282 Transfer agent 1,232,148 Fees Redemption fees (125,448 ) Accounting and security lending fees 179,498 Non-interested trustees' compensation 1,689 Custodian fees and expenses 33,711 Registration fees 15,944 Audit 17,808 Legal 1,204 Interest 2,191 Miscellaneous 2,436 Total expenses before reductions 2,451,463 Expense reductions (7,608 2,443,855 ) NET INVESTMENT INCOME 92,837 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including 12,591,119 realized gain of $998,618 on sales of investments in precious metals) Foreign currency transactions (1,323 12,589,796 ) Change in net unrealized appreciation (depreciation) on: Investment securities 51,823,266 Assets and liabilities in 730 51,823,996 foreign currencies NET GAIN (LOSS) 64,413,792 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 64,506,629 OTHER INFORMATION $598,412 Sales Charges Paid to FDC Deferred sales charges withheld $12,695 by FDC Exchange fees withheld by FSC $89,940
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 92,837 $ (779,678 Net investment income (loss) ) Net realized gain (loss) 12,589,796 3,326,739 Change in net unrealized appreciation (depreciation) 51,823,996 (79,195,428 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 64,506,629 (76,648,367 ) Share transactions 280,775,159 526,647,371 Net proceeds from sales of shares Cost of shares redeemed (277,201,391 (520,560,579 ) ) Paid in capital portion of redemption fees 701,947 1,352,412 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 4,275,715 7,439,204 TOTAL INCREASE (DECREASE) IN NET ASSETS 68,782,344 (69,209,163 ) NET ASSETS Beginning of period 278,197,281 347,406,444 End of period (including accumulated net investment loss of $9,753 and $102,590, respectively) $ 346,979,625 $ 278,197,281 OTHER INFORMATION Shares Sold 13,153,810 24,289,524 Redeemed (12,864,592 (24,535,614 ) ) Net increase (decrease) 289,218 (246,090)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 18.44 $ 22.66 $ 14.15 $ 11.94 $ 13.08 $ 15.22 Income from Investment Operations Net investment income (loss) .01 (.05) (.11) (.05) (.06) (.04) Net realized and unrealized gain (loss) 4.08 (4.25) 8.44 2.16 (1.17) (2.23) Total from investment operations 4.09 (4.30) 8.33 2.11 (1.23) (2.27) Redemption fees added to paid in capital .04 .08 .18 .10 .09 .13 Net asset value, end of period $ 22.57 $ 18.44 $ 22.66 $ 14.15 $ 11.94 $ 13.08 TOTAL RETURN B, C 22.40% (18.62)% 60.14% 18.51% (8.72)% (14.06)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 346,980 $ 278,197 $ 347,406 $ 168,033 $ 130,407 $ 164,137 Ratio of expenses to average net assets 1.36% A 1.41% 1.49% 1.59% A 1.75% 1.75% Ratio of expenses to average net assets before 1.37% A 1.41% 1.50% 1.59% A 1.75% 1.75% expense reductions Ratio of net investment income (loss) to average net .05% A (.22)% (.51)% (.44)% (.47)% (.29)% assets A Portfolio turnover rate 42% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1995 MONTH YEAR YEARS YEARS S ENERGY 10.02% 7.08% 16.10% 114.61% ENERGY (INCL. 3% SALES CHARGE) 6.72% 3.86% 12.62% 108.17% S&P 500 16.81% 21.45% 102.17% 311.58% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS YEARS ENERGY 7.08% 3.03% 7.94% ENERGY (INCL. 3% SALES CHARGE) 3.86% 2.41% 7.61% S&P 500 21.45% 15.12% 15.20% 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 EnergyStandard & Poo 08/31/85 9700.00 10000.00 09/30/85 9396.88 9687.00 10/31/85 9958.55 10134.54 11/30/85 10119.03 10829.77 12/31/85 9744.58 11353.93 01/31/86 9075.92 11417.51 02/28/86 8870.86 12271.54 03/31/86 8826.29 12956.29 04/30/86 8844.12 12809.89 05/31/86 9254.23 13491.37 06/30/86 9280.97 13719.38 07/31/86 8701.47 12952.46 08/31/86 9851.56 13913.54 09/30/86 9744.58 12762.89 10/31/86 10003.13 13499.31 11/30/86 10208.18 13827.34 12/31/86 10279.50 13474.74 01/31/87 11367.19 15289.79 02/28/87 11590.07 15893.74 03/31/87 12552.94 16353.07 04/30/87 12196.32 16207.52 05/31/87 12624.26 16348.53 06/30/87 13061.12 17174.13 07/31/87 13738.69 18044.86 08/31/87 13658.46 18717.93 09/30/87 13364.25 18308.01 10/31/87 9833.73 14364.46 11/30/87 9423.62 13180.83 12/31/87 10094.50 14183.89 01/31/88 10470.41 14781.03 02/29/88 10846.31 15469.83 03/31/88 11616.47 14991.81 04/30/88 12056.55 15158.22 05/31/88 11616.47 15290.10 06/30/88 11744.82 15991.91 07/31/88 11818.17 15931.15 08/31/88 11368.92 15389.49 09/30/88 11240.56 16045.08 10/31/88 11341.41 16491.13 11/30/88 11368.92 16255.31 12/31/88 11703.78 16539.78 01/31/89 12588.14 17750.49 02/28/89 12390.57 17308.50 03/31/89 13105.59 17711.79 04/30/89 13547.78 18631.03 05/31/89 13707.72 19385.59 06/30/89 13989.96 19275.09 07/31/89 14573.27 21015.63 08/31/89 14893.15 21427.54 09/30/89 15128.35 21339.68 10/31/89 15024.86 20844.60 11/30/89 15589.35 21269.83 12/31/89 16715.98 21780.31 01/31/90 15969.64 20318.85 02/28/90 16467.20 20580.96 03/31/90 16476.77 21126.36 04/30/90 15921.80 20598.20 05/31/90 16888.21 22606.52 06/30/90 16490.19 22452.80 07/31/90 17613.36 22380.95 08/31/90 17929.89 20357.71 09/30/90 17878.84 19366.29 10/31/90 16959.88 19283.02 11/30/90 16776.09 20528.70 12/31/90 15965.04 21101.45 01/31/91 14930.95 22021.47 02/28/91 16323.80 23596.01 03/31/91 16102.21 24167.03 04/30/91 16281.59 24225.03 05/31/91 16376.56 25271.56 06/30/91 15646.97 24114.12 07/31/91 16450.47 25237.84 08/31/91 16767.63 25835.97 09/30/91 16598.48 25404.51 10/31/91 17095.37 25744.93 11/30/91 15826.70 24707.41 12/31/91 15970.66 27533.94 01/31/92 15116.04 27021.81 02/29/92 15137.40 27373.09 03/31/92 14699.41 26839.32 04/30/92 15703.59 27628.39 05/31/92 16451.38 27763.77 06/30/92 15637.30 27350.09 07/31/92 16055.01 28468.71 08/31/92 16344.19 27885.10 09/30/92 16440.58 28214.15 10/31/92 15733.69 28312.90 11/30/92 15369.54 29278.37 12/31/92 15589.20 29638.49 01/31/93 16177.06 29887.45 02/28/93 17243.92 30293.92 03/31/93 18125.71 30933.12 04/30/93 18474.37 30184.54 05/31/93 19029.91 30993.49 06/30/93 19280.45 31083.37 07/31/93 19138.84 30959.04 08/31/93 20652.95 32132.38 09/30/93 20533.13 31884.96 10/31/93 20239.02 32544.98 11/30/93 17788.12 32235.80 12/31/93 18575.23 32625.86 01/31/94 19570.13 33735.14 02/28/94 18914.40 32820.92 03/31/94 17998.64 31389.92 04/30/94 19373.50 31791.71 05/31/94 19578.51 32313.10 06/30/94 19476.00 31521.43 07/31/94 19772.13 32555.33 08/31/94 19441.83 33890.10 09/30/94 19293.77 33059.79 10/31/94 20387.16 33803.64 11/30/94 19134.32 32572.51 12/31/94 18651.84 33055.56 01/31/95 18205.23 33912.69 02/28/95 18922.16 35234.27 03/31/95 19956.41 36274.03 04/30/95 20569.73 37342.30 05/31/95 21100.48 38834.87 06/30/95 20487.17 39737.01 07/31/95 20970.74 41054.68 08/31/95 20817.41 41157.73 Let's say you invested $10,000 in Fidelity Select Energy Portfolio on August 31, 1985, and paid a 3% sales charge. By August 31, 1995, your investment would have grown to $20,817 - a 108.17% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $41,158 over the same period - a 311.58% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Atlantic Richfield Co. 8.8 Amerada Hess Corp. 7.9 Unocal Corp. 7.0 Phillips Petroleum Co. 6.0 Total SA Class B sponsored ADR 4.6 Occidental Petroleum Corp. 4.5 Kerr-McGee Corp. 4.2 Schlumberger Ltd. 3.8 Norsk Hydro AS ADR 3.6 Newfield Exploration Co. 3.6 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 7.2 Row: 1, Col: 2, Value: 1.5 Row: 1, Col: 3, Value: 3.5 Row: 1, Col: 4, Value: 8.199999999999999 Row: 1, Col: 5, Value: 37.0 Row: 1, Col: 6, Value: 42.6 Crude Petroleum & Gas 42.6% Oil & Gas Exploration 37.0% Oil & Gas Services 8.2% Drilling 3.5% Oil Field Equipment 1.5% All Others 7.2% ENERGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Albert Ruback, Portfolio Manager of Fidelity Select Energy Portfolio Q. HOW HAS THE FUND PERFORMED, ALBERT? A. For the six months ended August 31, 1995, the fund had a total return of 10.02%. During the same period, the Standard & Poor's Composite Index of 500 Stocks returned 16.81%. For the 12 months ended August 31, 1995, the fund rose 7.08%, while the S&P was up 21.45%. Q. WHILE THE FUND RETURNED JUST OVER 10%, IT LAGGED THE BROAD MARKET. WHY IS THAT? A. Returns in the broad market were buoyed by the very strong performance of the technology sector. The fund's focus currently does not include tech stocks. At the same time, the fund achieved a solid 10% return, due in part to the strong performance of the chemical divisions within many of the companies whose stocks I had selected for the fund. A short-term increase in the price of oil in the second quarter also helped to bolster energy company earnings. In addition, the fund's small stake in refining and marketing (R&M) companies benefited from the seasonal strength they saw in the summer. Finally, some exploration and production (E&P) stocks that I bought at cheap valuations - something I look to do as a matter of course - rebounded from very low levels. Q. LET'S START WITH CHEMICALS. WHY HAVE ENERGY STOCKS WITH CHEMICAL DIVISIONS DONE WELL? A. With the economic growth we've seen sustained since the beginning of the year, demand for chemicals has been growing steadily. This is typical for a commodity at this point in the economic cycle. Chemical earnings reached a crescendo in the second quarter of 1995. In addition, there have been no significant capacity additions in the chemicals area, helping to keep supply down. This has caused a tightening of the supply/demand equation, which has enabled companies to increase product prices and improve profit margins. Occidental was one stock that reaped the benefits of this trend. The company also has been seeing improvements in its E&P business and has been using increased cash flow and selling assets to pay off its large debt burden. Amoco was another company helped by strong chemical earnings; it also is in the final stages of a cost-cutting program that has helped its balance sheet. Q. WHICH OTHER STOCKS PROVED SUCCESSFUL? A. An E&P company, Newfield Exploration, has benefited from improving commodity prices and growing production. Two energy service companies, Schlumberger and Halliburton, benefited from stronger demand for the high-end seismic exploration technology for which exploration companies have come to depend on them. Two French companies - Elf Acquitaine and Total - also were strong performers. Total should have strong production growth going forward and is emphasizing reducing its costs. I find it to be a premium company that was trading at what I consider to be an average or below-average valuation, or stock price relative to cash flow and earnings. Elf Acquitaine provided solid returns for the fund, although I've since reduced the stake there because I found the company wasn't being as aggressive in cost cutting as I had expected. Another stock that helped the fund was Gas Natural, a company that has the potential to take advantage of Spain's development and use of natural gas as an energy source. Q. WHAT STOCKS DIDN'T PERFORM AS WELL AS YOU HAD HOPED? A. Amerada Hess was a bit frustrating, because its story is taking longer to develop than I had hoped. I currently intend to stick with the investment, though, because the company has been cutting costs and selling assets that don't contribute to its core E&P business. In addition, the company holds attractive lease positions in the frontier West of Shetlands area. Atlantic Richfield has been down a bit, but is an extremely attractive investment. That's because it appears Congress will open the Alaska National Wildlife Refuge to exploration and production. Atlantic Richfield has a strong knowledge of the Alaskan geology and is well positioned to take advantage of new opportunities there. Petroleum Geo Services, a company focused on the latest seismic technology, had some short-term scheduling disruptions, but should benefit in the long run from demand for its products and services. Q. WHAT'S YOUR OUTLOOK? A. The next few months could prove difficult for energy companies. While chemical earnings should remain strong, they could come down off peak levels. On the E&P side, gas prices have remained sluggish and oil prices have declined which should pressure earnings. R&M is coming off the summer, its strongest season historically, which would suggest earnings here could decline as well. As far as my management is concerned, I'll continue to pick investments stock-by-stock, looking for those that are selling at attractive valuations. FUND FACTS START DATE: July 14, 1981 TRADING SYMBOL: FSENX SIZE: as of August 31, 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 100.0% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 0.5% FABRICATED PIPE & FITTINGS - 0.5% Coflexip sponsored ADR (a) 27,000 $ 472,500 CHEMICALS & PLASTICS - 1.2% PLASTICS & SYNTHETIC RESINS - 1.2% ARCO Chemical Co. 21,600 1,042,200 CONSTRUCTION - 0.6% HEAVY CONSTRUCTION - 0.6% McDermott (J. Ray) SA 21,500 505,250 ENERGY SERVICES - 11.7% DRILLING - 3.5% Noble Drilling Corp. (a) 102,600 820,800 Reading & Bates Corp. (a) 98,400 1,193,100 Sonat Offshore Drilling, Inc. 34,400 1,178,200 3,192,100 OIL & GAS SERVICES - 8.2% Halliburton Co. 70,000 2,966,250 Input/Output, Inc. (a) 13,300 495,425 Nowsco Well Service Ltd. (a) 11,100 118,726 Schlumberger Ltd. 53,200 3,431,400 Tidewater, Inc. 17,000 420,750 7,432,551 TOTAL ENERGY SERVICES 10,624,651 GAS - 2.5% GAS TRANSMISSION - 1.1% Enron Corp. 30,000 1,008,750 GAS TRANSMISSION & DISTRIBUTION - 1.4% Gas Natural SDG SA Series E 10,000 1,228,560 TOTAL GAS 2,237,310 HOLDING COMPANIES - 1.1% HOLDING COMPANY OFFICES - 1.1% Shell Transport & Trading PLC 14,800 1,026,750 INDUSTRIAL MACHINERY & EQUIPMENT - 0.0% AIR & GAS COMPRESSORS - 0.0% Enerflex Systems Ltd. (a) 1,200 14,956 OIL & GAS - 82.3% CRUDE PETROLEUM & GAS - 42.6% Apache Corp. 36,215 1,054,762 Atlantic Richfield Co. 73,100 7,977,038 Bellwether Exploration Co. (a) 50,000 293,750 British Borneo Petroleum 245,900 1,017,527 Burlington Resources, Inc. 25,000 1,015,625 Coho Resources, Inc. (a) 50,000 243,750 Elf Aquitaine sponsored ADR 5,500 201,438 Global Natural Resources, Inc. (a) 50,000 543,750 Louis Dreyfus Natural Gas Corp. (a) 63,300 862,463 NGC Corp. 18,995 180,453 Newfield Exploration Co. (a) 111,000 3,232,875 Norsk Hydro AS ADR 78,300 3,308,175 Nuevo Energy Corp. (a) 26,200 648,450 Occidental Petroleum Corp. 187,400 4,075,950 Paramount Resources Ltd. 31,000 322,929 Renaissance Energy Ltd. (a) 102,908 2,249,282 Renaissance Energy Ltd. (a)(b) 11,000 240,429 Rio Alto Exploration Ltd. (a) 317,500 885,914 Total SA Class B sponsored ADR 141,167 4,199,718 SHARES VALUE (NOTE 1) Triton Energy Corp. 40,000 $ 2,120,000 Tullow Oil PLC (a) 1,000,000 1,162,345 Ulster Petroleums Ltd. (a) 168,900 609,521 United Meridian Corp. (a) 20,000 357,500 Vintage Petroleum, Inc. 96,400 1,928,000 38,731,644 NATURAL GAS LIQUIDS - 0.2% Western Gas Resources, Inc. 10,100 172,963 OIL & GAS EXPLORATION - 37.0% Amerada Hess Corp. 151,000 7,153,625 Amoco Corp. 10,000 637,500 British Petroleum PLC ADR 35,247 3,176,636 Chevron Corp. 10,400 503,100 Exxon Corp. 14,800 1,017,500 Kerr-McGee Corp. 69,100 3,800,500 Louisiana Land & Exploration Co. 25,000 956,250 Mobil Corp. 11,100 1,057,275 Petroleum Geo-Services AS ADR (a) 110,900 2,841,813 Phillips Petroleum Co. 166,500 5,473,688 Royal Dutch Petroleum Co. 5,000 596,250 Unocal Corp. 218,261 6,356,852 33,570,989 OIL FIELD EQUIPMENT - 1.5% Camco International, Inc. 58,700 1,335,425 PETROLEUM REFINERS - 1.0% Repsol SA sponsored ADR 20,000 632,500 Tesoro Petroleum Corp. (a) 30,000 288,750 921,250 TOTAL OIL & GAS 74,732,271 TRUCKING & FREIGHT - 0.1% TRUCKING, LONG DISTANCE - 0.1% Trimac Ltd. 15,500 135,515 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $84,200,573) $ 90,791,403 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 $240,429 or 0.2% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $30,834,189 and $42,446,797, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $27,215 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balance during the period for which the loan was outstanding amounted to $3,833,000. The weighted average interest rate paid was 6.4% (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 72.4% Norway 6.8 United Kingdom 5.8 France 5.5 Canada 5.0 Spain 2.0 Ireland 1.3 Others (individually less than 1%) 1.2 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $84,694,509. Net unrealized appreciation aggregated $6,096,894, of which $8,623,910 related to appreciated investment securities and $2,527,016 related to depreciated investment securities. ENERGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (cost $84,200,573) - See accompanying schedule $ 90,791,403 Receivable for investments sold 7,052,084 Receivable for fund shares sold 198,826 Dividends receivable 347,951 Redemption fees receivable 315 Other receivables 3,980 Prepaid expenses 11,398 TOTAL ASSETS 98,405,957 LIABILITIES Payable to custodian bank $ 490,799 Payable for fund shares redeemed 1,440,210 Accrued management fee 51,981 Other payables and accrued expenses 109,416 TOTAL LIABILITIES 2,092,406 NET ASSETS $ 96,313,551 Net Assets consist of: Paid in capital $ 86,588,120 Undistributed net investment income 872,306 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 2,262,295 Net unrealized appreciation (depreciation) on investments 6,590,830 NET ASSETS, for 5,455,883 shares outstanding $ 96,313,551 NET ASSET VALUE and redemption price per share ($96,313,551 (divided by) 5,455,883 shares) $17.65 Maximum offering price per share (100/97.00 of $17.65) $18.20
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 1,485,135 Dividends Interest (including income on securities loaned of $6,603) 289,323 TOTAL INCOME 1,774,458 EXPENSES Management fee $ 351,153 Transfer agent 513,473 Fees Redemption fees (53,716 ) Accounting and security lending fees 57,635 Non-interested trustees' compensation 521 Custodian fees and expenses 7,480 Registration fees 11,398 Audit 12,843 Legal 394 Interest 2,056 Miscellaneous 1,063 Total expenses before reductions 904,300 Expense reductions (2,148 902,152 ) NET INVESTMENT INCOME 872,306 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 2,813,983 Foreign currency transactions 2,088 2,816,071 Change in net unrealized appreciation (depreciation) on investment securities 6,694,936 NET GAIN (LOSS) 9,511,007 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 10,383,313 OTHER INFORMATION $263,240 Sales Charges Paid to FDC Deferred sales charges withheld $12,018 by FDC Exchange fees withheld by FSC $40,560
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 872,306 $ 441,180 Net investment income Net realized gain (loss) 2,816,071 3,967,653 Change in net unrealized appreciation (depreciation) 6,694,936 (6,553,635 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 10,383,313 (2,144,802 ) Distributions to shareholders - (468,393 From net investment income ) From net realized gain (410,066 (3,119,569 ) ) TOTAL DISTRIBUTIONS (410,066 (3,587,962 ) ) Share transactions 62,436,553 139,154,943 Net proceeds from sales of shares Reinvestment of distributions 402,158 3,509,410 Cost of shares redeemed (72,567,570 (186,610,132 ) ) Paid in capital portion of redemption fees 46,549 211,181 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (9,682,310 (43,734,598 ) ) TOTAL INCREASE (DECREASE) IN NET ASSETS 290,937 (49,467,362 ) NET ASSETS Beginning of period 96,022,614 145,489,976 End of period (including undistributed net investment income of $872,306 and $0, respectively) $ 96,313,551 $ 96,022,614 OTHER INFORMATION Shares Sold 3,618,726 8,177,307 Issued in reinvestment of distributions 23,768 222,729 Redeemed (4,151,188 (11,129,608 ) ) Net increase (decrease) (508,694) (2,729,572)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 16.10 $ 16.73 $ 15.84 $ 14.70 $ 15.43 $ 16.64 Income from Investment Operations Net investment income .13 .07 .06 .23 .17 .16 Net realized and unrealized gain (loss) 1.47 (.11) 1.35 1.16 (.75) .15 Total from investment operations 1.60 (.04) 1.41 1.39 (.58) .31 Less Distributions - (.08) E (.03) (.27) (.16) (.15) From net investment income From net realized gain (.06) (.54) E (.57) - (.02) (1.43) Total distributions (.06) (.62) (.60) (.27) (.18) (1.58) Redemption fees added to paid in capital .01 .03 .08 .02 .03 .06 Net asset value, end of period $ 17.65 $ 16.10 $ 16.73 $ 15.84 $ 14.70 $ 15.43 TOTAL RETURN B, C 10.02% .04% 9.69% 9.81% (3.55)% 2.26% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 96,314 $ 96,023 $ 145,490 $ 179,133 $ 77,334 $ 92,611 Ratio of expenses to average net assets 1.56% A 1.85% 1.66% 1.71% A 1.78% 1.79% Ratio of expenses to average net assets before 1.56% A 1.85% 1.67% 1.71% A 1.78% 1.79% expense reductions Ratio of net investment income to average net assets 1.51% A .42% .37% 1.88% A 1.16% .99% Portfolio turnover rate 59% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E 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). If Fidelity had not reimbursed certain expenses, the life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S ENERGY SERVICE 21.14% 27.15% 5.29% 52.89% ENERGY SERVICE (INCL. 3% SALES CHARGE) 17.50% 23.33% 2.14% 48.30% S&P 500 16.81% 21.45% 102.17% 265.41% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on 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 AUGUST 31, 1995 YEAR YEARS FUND ENERGY SERVICE 27.15% 1.04% 4.47% ENERGY SERVICE (INCL. 3% SALES CHARGE) 23.33% 0.42% 4.14% S&P 500 21.45% 15.12% 14.27% 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 EnergyStandard & Poo 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 11834.41 18734.62 01/31/91 11300.01 19551.45 02/28/91 13116.95 20949.38 03/31/91 12096.75 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 9055.56 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 9706.55 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 9366.48 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 11079.69 28225.82 05/31/94 11573.24 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 12242.55 31282.24 03/31/95 12917.57 32205.38 04/30/95 13705.11 33153.82 05/31/95 14063.07 34478.98 06/30/95 13582.37 35279.93 07/31/95 14257.40 36449.81 08/31/95 14840.38 36541.30 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 August 31, 1995, your investment would have grown to $14,830 - a 48.30% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $36,541 over the same period - a 265.41% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Western Atlas, Inc. 9.2 Schlumberger Ltd. 8.9 Sonat Offshore Drilling, Inc. 8.8 BJ Services Co. 8.1 McDermott (J. Ray) SA 7.7 Baker Hughes, Inc. 6.9 Halliburton Co. 4.8 Reading & Bates Corp. 4.7 Nabors Industries, Inc. 3.4 Cooper Cameron Corp. 2.7 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 7.4 Row: 1, Col: 2, Value: 2.7 Row: 1, Col: 3, Value: 9.1 Row: 1, Col: 4, Value: 9.199999999999999 Row: 1, Col: 5, Value: 31.1 Row: 1, Col: 6, Value: 40.5 Oil & Gas Services 40.5% Drilling 31.1% Surveying Services 9.2% Heavy Construction 9.1% Fluid Valve & Hose Fittings 2.7% All Others 7.4% 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. It has done very well. The fund had a total return of 21.14% from March 1, 1995, through August 31, 1995. During the same period, the Standard & Poor's Composite Index of 500 Stocks returned 16.81%. For the 12 months ended August 31, 1995, the fund rose 27.15%, while the S&P 500 was up 21.45%. Q. WHAT HELPED THE FUND PERFORM SO WELL? A. Most of the large companies in the sector posted earnings improvements; many had significant positive earnings surprises. Improved oil prices early in the year gave energy service customers - diversified energy companies such as British Petroleum, Shell and Exxon - increased confidence and higher levels of free cash flow. These customers stepped up their drilling activity, which resulted in higher revenues and profits for the energy service sector. Q. DID YOU FOCUS ON ANY PARTICULAR SEGMENTS OF THE ENERGY SERVICE SECTOR? A. There were two areas. One was companies with international exposure. When drilling activity picks up internationally, the rigs involved tend to generate more revenue for a company such as Schlumberger than similar activity in the U.S. In addition, I also put about 15% to 20% of the fund's investments into companies that offer deep water drilling technology, such as Sonat Offshore and Reading & Bates. The combination of higher oil prices, increased oil company spending and successful exploration in the North Sea and the Gulf of Mexico increased demand for this specialized technology. There are currently 22 rigs capable of deep water drilling, and demand for rigs increased to 30. As a result, these companies were able to get better prices and lock up contracts for the next two years. Q. YOU'VE MENTIONED THREE STOCKS THAT HAVE DONE WELL - SCHLUMBERGER, SONAT OFFSHORE AND READING & BATES. WHAT WERE SOME OF THE OTHER SOLID PERFORMERS FOR THE FUND? A. Similar to Schlumberger, Baker Hughes and Western Atlas benefited from the pick-up in international drilling activity. All three companies also reaped the benefits of demand for the new high-end drilling products they've developed. BJ Services merged with Western Company. During the process, uncertainty over the merger forced both stocks down, at which point I bought more. As the deal went through, both stocks went up and made money for the fund. Camco, a company that sells drill bits and pumps, also saw earnings improvements due to increased drilling activity. Q. WHICH STOCKS DIDN'T PERFORM AS WELL AS YOU HAD HOPED? A. McDermott International - a company that supplies power generation equipment and a stock the fund no longer owns - stalled as the big international power projects it's involved in took longer to come to fruition than expected. Sonat, Inc., a gas pipeline company that owns 40% of Sonat Offshore, also stumbled. I bought the stock as another way to gain exposure to Sonat Offshore. During the time the fund owned the stock, I anticipated that investors would come to appreciate what was going on with Sonat Offshore and that Sonat, Inc., would also benefit. Unfortunately, natural gas prices weakened during the first half of the year, and that factor overwhelmed whatever positive influence Sonat Offshore had on investor interest in the stock. Q. WHAT DO YOU SEE HAPPENING IN THE ENERGY SERVICE SECTOR OVER THE NEXT SIX MONTHS? A. I expect we could see continued strength in international drilling activity based on improved commodity - oil and gas - prices. In addition, it appears that integrated oil companies such as Exxon will use the extra cash flow they've enjoyed from strength in their chemicals divisions to reinvest in the exploration and production side of their business. If improvements in international activity continue - along with higher projected earnings in 1996 compared to 1995 - there is a potential for ongoing enthusiasm for the sector as an investment, which would push the stocks higher. The risk to this story is in the commodity and in people's perception of the link between oil prices and energy service companies. The Organization of Petroleum Exporting Countries - OPEC - has a meeting coming up in November, and it might increase production to increase its share of worldwide production. That would lead to a drop in oil prices. At the same time, people need oil - demand is growing one million barrels a day per year - and somebody has to find new oil. The companies in this sector help to do so, so demand for their services should be sustained. FUND FACTS START DATE: December 16, 1985 TRADING SYMBOL: FSESX SIZE: as of August 31, 1995, more than $103 million MANAGER: Daniel Pickering, since December 1994; manager Fidelity Select Natural Gas Portfolio, since February 1995; equity analyst since August 1994; joined Fidelity in 1994 (checkmark) ENERGY SERVICE PORTFOLIO INVESTMENTS AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 97.6% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 2.7% FLUID VALVE & HOSE FITTINGS - 2.7% Cooper Cameron Corp. (a) 100,088 $ 2,364,579 COMPUTER SERVICES & SOFTWARE - 1.1% CAD/CAM/CAE - 1.1% Landmark Graphics Corp. (a) 38,500 981,750 CONSTRUCTION - 7.7% HEAVY CONSTRUCTION - 7.7% McDermott (J. Ray) SA 288,800 6,786,800 ELECTRONIC INSTRUMENTS - 0.8% LABORATORY ANALYTICAL INSTRUMENTS - 0.8% Numar Corp. (a) 58,000 714,125 ENERGY SERVICES - 70.6% DRILLING - 31.1% Arethusa Offshore Ltd. 108,800 2,284,800 Atwood Oceanics, Inc. (a) 49,200 1,055,494 ENSCO International, Inc. (a) 108,800 1,958,400 Falcon Drilling, Inc. (a) 30,000 345,000 Global Marine, Inc. (a) 110,000 742,500 Marine Drilling Cos., Inc. (a) 177,900 867,263 Nabors Industries, Inc. (a) 322,000 2,978,500 Noble Drilling Corp. (a) 294,250 2,354,000 Reading & Bates Corp. (a) 346,700 4,203,738 Rowan Companies, Inc. (a) 90,000 731,250 Smedvig AS 4,500 81,289 Sonat Offshore Drilling, Inc. 228,300 7,819,275 Transocean Drilling AS (a) 125,400 1,786,826 Wilrig AS (a) 28,100 299,747 27,508,082 OIL & GAS SERVICES - 39.5% BJ Services Co. (a) 287,088 7,177,200 Baker Hughes, Inc. 270,700 6,090,750 Canadian Fracmaster Ltd. 40,000 171,137 Dresser Industries, Inc. 21,200 508,800 Energy Ventures, Inc. (a) 59,000 1,180,000 Enterra Corp. (a) 20,000 437,500 Global Industries Ltd. (a) 22,100 491,725 Halliburton Co. 100,100 4,241,738 Hornbeck Offshore Services, Inc. (a) 30,000 451,875 Offshore Logistics, Inc. (a) 37,600 517,000 Petroleum Helicopters, Inc. (non-vtg.) 8,300 72,625 Pride Petroleum Services, Inc. (a) 128,400 1,139,550 Schlumberger Ltd. 121,800 7,856,100 Smith International, Inc. (a) 50,000 875,000 Tidewater, Inc. 57,600 1,425,600 Varco International, Inc. (a) 7,400 81,400 Weatherford International, Inc. (a) 176,500 2,316,563 35,034,563 TOTAL ENERGY SERVICES 62,542,645 OIL & GAS - 5.5% CRUDE PETROLEUM & GAS - 2.1% Canada Occidental Petroleum Ltd. 10,000 312,512 Chesapeake Energy Corp. (a) 35,600 907,800 Unit Corp. (a) 172,100 623,863 1,844,175 OIL & GAS EXPLORATION - 0.8% Petroleum Geo-Services AS ADR 30,000 768,750 OIL FIELD EQUIPMENT - 2.6% Camco International, Inc. 100,700 2,290,925 TOTAL OIL & GAS 4,903,850 SHARES VALUE (NOTE 1) SERVICES - 9.2% SURVEYING SERVICES - 9.2% Western Atlas, Inc. (a) 179,500 $ 8,144,813 TOTAL COMMON STOCKS (Cost $76,984,477) 86,438,562 CONVERTIBLE PREFERRED STOCKS - 1.4% CONSTRUCTION - 1.4% HEAVY CONSTRUCTION - 1.4% McDermott (J. Ray) SA Series B $2.25 (Cost $1,523,148) 25,100 1,242,450 NONCONVERTIBLE BONDS - 1.0% PRINCIPAL AMOUNT ENERGY SERVICES - 1.0% OIL & GAS SERVICES - 1.0% Tuboscope Vetco International, Inc. gtd. 10 3/4%, 4/15/03 (Cost $900,000) $ 900,000 906,750 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $79,407,625) $ 88,587,762 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $222,650,457 and $214,926,153, 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 $239,485 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $8,961,000 and $2,528,844, respectively. The weighted average interest rate paid was 6.3% (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 84.5% Panama 9.1 Norway 5.9 Others (individually less than 1%) 0.5 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $79,942,475. Net unrealized appreciation aggregated $8,645,287, of which $10,010,066 related to appreciated investment securities and $1,364,779 related to depreciated investment securities. 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
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value $ 88,587,762 (cost $79,407,625) - See accompanying schedule Cash 79 Receivable for investments sold 5,988,633 Receivable for fund shares sold 12,030,875 Dividends receivable 84,500 Interest receivable 36,281 Redemption fees receivable 620 Prepaid expenses 31,413 TOTAL ASSETS 106,760,163 LIABILITIES Payable for investments purchased $ 71,812 Payable for fund shares redeemed 2,995,946 Accrued management fee 55,178 Notes payable 171,000 Other payables and accrued expenses 126,514 TOTAL LIABILITIES 3,420,450 NET ASSETS $ 103,339,713 Net Assets consist of: Paid in capital $ 81,414,457 Undistributed net investment income 1,013,286 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 11,731,833 Net unrealized appreciation (depreciation) on investments 9,180,137 NET ASSETS, for 7,126,098 $ 103,339,713 shares outstanding NET ASSET VALUE and redemption price per share ($103,339,713 (divided by) 7,126,098 shares) $14.50 Maximum offering price per share (100/97.00 of $14.50) $14.95
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 1,332,767 Dividends Interest (including income on securities loaned of $7,429) 812,352 TOTAL INCOME 2,145,119 EXPENSES Management fee $ 501,026 Transfer agent 669,690 Fees Redemption fees (182,848 ) Accounting and security lending fees 81,765 Non-interested trustees' compensation 325 Custodian fees and expenses 16,393 Registration fees 31,413 Audit 11,056 Legal 220 Interest 14,224 Miscellaneous 1,153 Total expenses before reductions 1,144,417 Expense reductions (12,584 1,131,833 ) NET INVESTMENT INCOME 1,013,286 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 14,538,797 Foreign currency transactions (164 14,538,633 ) Change in net unrealized appreciation (depreciation) on investment securities 10,461,348 NET GAIN (LOSS) 24,999,981 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 26,013,267 OTHER INFORMATION $697,191 Sales Charges Paid to FDC Deferred sales charges withheld $2,469 by FDC Exchange fees withheld by FSC $154,568
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 1,013,286 $ 114,673 Net investment income Net realized gain (loss) 14,538,633 274,562 Change in net unrealized appreciation (depreciation) 10,461,348 74,964 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 26,013,267 464,199 Distributions to shareholders - (50,886 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 ) Share transactions 373,264,046 244,302,548 Net proceeds from sales of shares Reinvestment of distributions - 1,876,010 Cost of shares redeemed (360,084,596 (222,407,429 ) ) Paid in capital portion of redemption fees 352,550 606,169 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 13,532,000 24,377,298 TOTAL INCREASE (DECREASE) IN NET ASSETS 39,545,267 22,937,618 NET ASSETS Beginning of period 63,794,446 40,856,828 End of period (including undistributed net investment income of $1,013,286 and $66,450, respectively)$103,339,713 $ 63,794,446 OTHER INFORMATION Shares Sold 28,756,143 20,716,490 Issued in reinvestment of distributions - 177,460 Redeemed (26,960,385 (19,068,782 ) ) Net increase (decrease) 1,795,758 1,825,168
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 11.97 $ 11.66 $ 11.01 $ 9.43 $ 12.51 $ 12.19 Income from Investment Operations Net investment income (loss) .08 .02 .03 .01 (.12) - Net realized and unrealized gain (loss) 2.42 .67 .51 1.47 (3.11) .15 Total from investment operations 2.50 .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 .03 .12 .16 .10 .15 .19 Net asset value, end of period $ 14.50 $ 11.97 $ 11.66 $ 11.01 $ 9.43 $ 12.51 TOTAL RETURN B, C 21.14% 7.60% 6.36% 16.76% (24.62)% 2.80% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 103,340 $ 63,794 $ 40,857 $ 85,234 $ 41,322 $ 73,398 Ratio of expenses to average net assets 1.38% A 1.79% 1.65% 1.76% A 2.07% 1.82% Ratio of expenses to average net assets before 1.39% A 1.81% 1.66% 1.76% A 2.07% 1.82% expense reductions Ratio of net investment income (loss) to average net 1.23% A .19% .23% .13% A (1.13)% (.02)% assets Portfolio turnover rate 335% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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 6 PAST 1 LIFE OF AUGUST 31, 1995 MONTHS YEAR FUND NATURAL GAS 12.37% 7.14% 2.59% NATURAL GAS (INCL. 3% SALES CHARGE) 9.00% 3.92% -0.49% S&P 500 16.81% 21.45% 34.91% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, or since the fund started on April 21, 1993. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR FUND NATURAL GAS 7.14% 1.09% NATURAL GAS (INCL. 3% SALES CHARGE) 3.92% -0.21% S&P 500 21.45% 13.50% 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 SeleStandard & 04/21/93 9700.00 10000.00 04/30/93 9515.70 9893.80 05/31/93 9670.90 10158.96 06/30/93 9952.20 10188.42 07/31/93 9913.40 10147.66 08/31/93 10767.00 10532.26 09/30/93 10582.70 10451.16 10/31/93 10010.40 10667.50 11/30/93 9156.80 10566.16 12/31/93 9209.91 10694.01 01/31/94 9672.37 11057.61 02/28/94 9327.98 10757.95 03/31/94 8993.44 10288.90 04/30/94 9692.05 10420.60 05/31/94 9613.33 10591.50 06/30/94 9662.53 10332.00 07/31/94 9603.49 10670.89 08/31/94 9288.63 11108.40 09/30/94 9229.59 10836.24 10/31/94 9554.30 11080.06 11/30/94 8717.93 10676.52 12/31/94 8580.06 10834.86 01/31/95 8313.78 11115.81 02/28/95 8856.20 11548.99 03/31/95 9378.89 11889.80 04/30/95 9536.79 12239.95 05/31/95 9902.07 12729.18 06/30/95 9665.13 13024.88 07/31/95 9665.13 13456.79 08/31/95 9951.43 13490.56 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 August 31, 1995, your investment would be valued at $9,951 - a -0.49% decrease. That compares to $10,000 invested in the S&P 500, which would have grown to $13,491 over the same period - a 34.91% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Anadarko Petroleum Corp. 8.0 Chesapeake Energy Corp. 5.4 Burlington Resources, Inc. 4.6 Enron Corp. 3.3 Pacific Enterprises 3.2 Panhandle Eastern Corp. 3.2 Vastar Resources, Inc. 3.1 Global Natural Resources, Inc. 2.8 Louisiana Land & Exploration Co. 2.6 TransTexas Gas Corp. 2.3 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 16.6 Row: 1, Col: 2, Value: 3.3 Row: 1, Col: 3, Value: 9.5 Row: 1, Col: 4, Value: 10.1 Row: 1, Col: 5, Value: 13.1 Row: 1, Col: 6, Value: 47.4 Crude Petroleum & Gas 47.4% Gas Distribution 13.1% Gas Transmission 10.1% Gas Transmission & Distribution 9.5% Oil & Gas Exploration 3.3% All Others 16.6%* * 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. For the six months ended August 31, 1995, the fund had a total return of 12.37%. During the same period, the Standard & Poor's Composite Index of 500 Stocks returned 16.81%. For the 12 months ended August 31, 1995, the fund rose 7.14%, while the S&P 500 was up 21.45%. Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? A. Even though the fund trailed the broad market, I thought it performed well given the fact that the price of natural gas was low. When the commodity price is low, natural gas stocks generally suffer. And, except for a seasonal pick-up in prices toward the end of the period, natural gas prices generally decreased during most of the first eight months of 1995. The two factors that helped the fund overcome this price pressure were a concentration on gas pipeline and distribution companies and a focus on small exploration and production (E&P) companies that were showing strong production growth. Q. WHY DID NATURAL GAS PRICES FALL DURING MOST OF THE PERIOD? A. Because of oversupply. First of all, we had a warm winter, leading to a build-up in natural gas inventories. At the same time, drilling activity has been strong. The added supply from this activity, added to excess inventory, depressed prices. Prices picked back up a bit in March and April due to cooler weather, which increased demand and worked off some of the inventory. But prices stalled in the May-June-July timeframe because supply from rigs was still strong. Looking toward the winter, it appears prices could rebound because inventories need to be built back up. Q. WHY DID THE FUND BENEFIT FROM HOLDING PIPELINE AND DISTRIBUTION STOCKS, AS WELL AS SMALL E&P COMPANIES SHOWING STRONG PRODUCTION GROWTH? A. The pipeline and distribution stocks did well because their prices are strongly affected by interest rates. The interest rate environment has been positive for these stocks, because rates have fallen. As far as the small E&P companies are concerned, strong production growth can help to generate better financial results and stock prices, even when commodity prices are weak. At the same time, if one of these companies doesn't meet investors' production expectations, its stock can suffer. I try to mitigate this company risk by diversifying my investments in several of these opportunities. While these stocks may not have been among the top contributors for the period individually, in aggregate they helped. And several have been in the fund's top 10 investments, including Chesapeake Energy, Global Natural Resources and TransTexas Gas. Q. WHICH STOCKS WERE STRONG CONTRIBUTORS TO THE FUND'S PERFORMANCE? A. Columbia Gas was one. This pipeline company is coming out of bankruptcy, and its stock has done well as the uncertainties related to that process are resolved. Anadarko, a large E&P company and the fund's largest investment, performed well because of production prospects in Algeria and the Gulf of Mexico. Vastar, an E&P company spun out from Atlantic Richfield, has the fifth largest acreage position in the Gulf of Mexico and has strong production growth. Q. AND WHICH INVESTMENTS DIDN'T WORK OUT AS WELL AS YOU HAD HOPED? A. Tejas Power, a gas storage company, suffered because several high-profile projects are coming on slower than expected. Ampolex fell because there is a court challenge concerning the value of some convertible bonds the company issued previously; some holders of those notes contend they should receive more shares of stock from the conversion than the company is offering. As a result, investors are unsure of the value of their equity holdings. Tarragon and Inverness are two Canadian E&P stocks that haven't performed well because export capacity to the U.S. is limited and Canadian prices have fallen dramatically. Q. WHAT'S YOUR OUTLOOK? A. I continue to be concerned about the long-term supply and demand scenario. Demand is steady, but supply is growing stronger; it's become easier and cheaper to find gas. Therefore, I'm not optimistic about gas prices over the next few years. As a result, I'll continue to look for companies that are increasing production, because they'll be more immune from the effects of price. I also intend to focus on gas pipeline stocks because the interest rate backdrop looks favorable for the near future. FUND FACTS START DATE: April 21, 1993 TRADING SYMBOL: FSNGX SIZE: as of August 31, 1995, more than $62 million MANAGER: Daniel Pickering, since February 1995; manager, Fidelity Select Energy Service Portfolio, since December 1994; equity analyst, energy service and hotel industries, since 1994; joined Fidelity in August 1994 (checkmark) NATURAL GAS PORTFOLIO INVESTMENTS AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.4% SHARES VALUE (NOTE 1) COAL - 1.6% Eastern Enterprises Co. 34,400 $ 1,053,500 COMPUTER SERVICES & SOFTWARE - 0.8% CAD/CAM/CAE - 0.8% Landmark Graphics Corp. (a) 20,000 510,000 ENERGY SERVICES - 1.3% DRILLING - 0.1% Wilrig AS (a) 4,100 43,731 OIL & GAS SERVICES - 1.2% Schlumberger Ltd. 12,300 793,350 TOTAL ENERGY SERVICES 837,081 GAS - 33.9% GAS & OTHER SERVICES - 1.2% UGI Corp. 34,368 734,616 GAS DISTRIBUTION - 13.1% Aquila Gas Pipeline Corp. 94,000 904,750 Brooklyn Union Gas Co. (The) 20,000 502,500 Indiana Energy, Inc. 10,000 207,500 K N Energy, Inc. 34,400 898,700 MCN Corp. 30,000 558,750 NICOR, Inc. 20,000 512,500 National Fuel Gas Co. 10,000 281,250 Northwest Natural Gas Co. 9,000 279,000 Pacific Enterprises 85,100 2,042,400 Piedmont Natural Gas, Inc. 36,462 742,913 Public Service Co. of North Carolina, Inc. 10,282 156,801 WICOR, Inc. 10,000 293,750 Washington Gas Light Co. 50,000 956,250 8,337,064 GAS TRANSMISSION - 10.1% Enron Corp. 62,410 2,098,536 ONEOK, Inc. 24,700 540,313 Panhandle Eastern Corp. 81,550 2,038,750 Tejas Power Corp. (a) 71,000 639,000 Williams Companies, Inc. 31,400 1,150,025 6,466,624 GAS TRANSMISSION & DISTRIBUTION - 9.5% Bay State Gas Co. 10,000 235,000 Columbia Gas System, Inc. (The) (a) 34,695 1,222,999 Consolidated Natural Gas Co. 25,000 965,625 El Paso Natural Gas Co. 11,400 320,625 Equitable Resources, Inc. 20,000 557,500 Questar Corp. 42,740 1,303,570 South Jersey Industries, Inc. 5,000 99,375 Southern Union Company 10,000 175,000 Tejas Gas Corp. (a) 19,670 978,583 Yankee Energy System, Inc. 10,000 208,750 6,067,027 TOTAL GAS 21,605,331 OIL & GAS - 52.4% CRUDE PETROLEUM & GAS - 46.9% American Exploration Co. (a) 12,000 138,000 Anadarko Petroleum Corp. 107,075 5,112,831 Apache Corp. 3,225 93,928 SHARES VALUE (NOTE 1) Barrett Resources Corp. (a) 23,700 $ 509,550 Belden & Blake Corp. 30,000 487,500 Berry Petroleum Co. Class A (a) 36,600 356,850 Burlington Resources, Inc. 71,657 2,911,066 Canada Occidental Petroleum Ltd. 40,400 1,262,547 Chesapeake Energy Corp. (a) 136,200 3,473,100 Devon Energy Corp. (a) 18,100 382,363 Enron Oil & Gas Co. 43,900 1,020,675 Flores & Rucks, Inc. (a) 77,200 849,200 Fortune Petroleum Corp. 85,000 286,875 Global Natural Resources, Inc. (a) 165,500 1,799,813 Inverness Petroleum Ltd. (a) 32,000 154,768 NGC Corp. 17,805 169,148 Newfield Exploration Co. (a) 26,350 767,444 Noble Affiliates, Inc. 41,950 1,158,869 Northstar Energy Corp. (a) 47,800 404,573 Pancanadian Petroleum Ltd. 20,000 710,592 Pinnacle Resources Ltd. (a) 22,900 257,720 Renaissance Energy Ltd. (a) 23,000 502,716 Swift Energy Co. 40,000 360,000 Tarragon Oil & Gas Ltd. (a) 40,500 354,087 Texas Meridian Resources Corp. 60,000 660,000 Total SA sponsored ADR 12,470 370,983 TransTexas Gas Corp. 83,800 1,487,450 Triton Energy Corp. 9,900 524,700 Unit Corp. (a) 30,000 108,750 United Meridian Corp. (a) 30,000 536,250 Vastar Resources, Inc. 63,500 1,984,375 Vintage Petroleum, Inc. 30,100 602,000 Wascana Energy, Inc. (a) 15,000 129,748 29,928,471 OIL & GAS EXPLORATION - 3.3% Ampolex Ltd. Ord. 151,801 359,275 Louisiana Land & Exploration Co. 43,000 1,644,750 Petro-Canada 10,000 98,590 2,102,615 OIL FIELD EQUIPMENT - 0.5% Ensign Resource Service Group Ord. 93,300 347,111 PETROLEUM REFINERS - 1.7% Coastal Corp. (The) 32,900 1,077,475 TOTAL OIL & GAS 33,455,672 SERVICES - 1.4% SURVEYING SERVICES - 1.4% Western Atlas, Inc. (a) 19,800 898,425 TOTAL COMMON STOCKS (Cost $55,286,570) 58,360,009 NONCONVERTIBLE BONDS - 0.5% PRINCIPAL AMOUNT OIL & GAS - 0.5% CRUDE PETROLEUM & GAS - 0.5% Mesa Capital Corp. secured 12 3/4%, 6/30/98 (b) (Cost $319,056) $ 350,000 322,000 REPURCHASE AGREEMENTS - 8.1% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 5,180,837 $ 5,180,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $60,785,626) $ 63,862,009 LEGEND 1. Non-income producing 2. Debt obligation initially issued at one coupon which converts to a higher coupon at a specified date. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $21,060,469 and $47,623,093 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 $47,324 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $1,782,000 and $1,395,000, respectively. The weighted average interest rate paid was 6.5% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $61,095,580. Net unrealized appreciation aggregated $2,766,429, of which $4,377,294 related to appreciated investment securities and $1,610,865 related to depreciated investment securities. At February 28, 1995, the fund had a capital loss carryforward of approximately $2,687,000 which will expire on February 28, 2003. The fund has elected to defer to its fiscal year ending February 28, 1996 $5,603,000 of losses recognized during the period November 1,1994 to February 28, 1995. NATURAL GAS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $5,180,000) (cost $60,785,626) - See $ 63,862,009 accompanying schedule Cash 37 Receivable for investments sold 1,661,881 Receivable for fund shares sold 334,454 Dividends receivable 117,024 Interest receivable 7,438 Redemption fees receivable 159 Other receivables 230 Prepaid expenses 9,838 TOTAL ASSETS 65,993,070 LIABILITIES Payable for investments purchased $ 2,146,188 Payable for fund shares redeemed 850,333 Accrued management fee 32,327 Other payables and accrued expenses 78,207 TOTAL LIABILITIES 3,107,055 NET ASSETS $ 62,886,015 Net Assets consist of: Paid in capital $ 64,556,427 Undistributed net investment income 162,794 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (4,909,572 ) Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 3,076,366 NET ASSETS, for 6,239,225 $ 62,886,015 shares outstanding NET ASSET VALUE and redemption price per share ($62,886,015 (divided by) 6,239,225 shares) $10.08 Maximum offering price per share (100/97.00 of $10.08) $10.39
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 667,593 Dividends Interest 104,490 TOTAL INCOME 772,083 EXPENSES Management fee $ 228,563 Transfer agent 332,420 Fees Redemption fees (47,985 ) Accounting fees and expenses 37,404 Non-interested trustees' compensation 374 Custodian fees and expenses 10,418 Registration fees 9,838 Audit 12,480 Legal 306 Interest 1,504 Miscellaneous 598 Total expenses before reductions 585,920 Expense reductions (3,303 582,617 ) NET INVESTMENT INCOME 189,466 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 4,115,606 Foreign currency transactions (19 4,115,587 ) Change in net unrealized appreciation (depreciation) on: Investment securities 4,746,911 Assets and liabilities in foreign currencies (17 4,746,894 ) NET GAIN (LOSS) 8,862,481 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 9,051,947 OTHER INFORMATION $134,504 Sales Charges Paid to FDC Deferred sales charges withheld $3,979 by FDC Exchange fees withheld by FSC $27,563
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 189,466 $ 233,355 Net investment income Net realized gain (loss) 4,115,587 (8,500,543 ) Change in net unrealized appreciation (depreciation) 4,746,894 3,240,598 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 9,051,947 (5,026,590 ) Distributions to shareholders from net investment income (84,840 (174,881 ) ) Share transactions 31,952,927 105,674,129 Net proceeds from sales of shares Reinvestment of distributions 81,459 162,769 Cost of shares redeemed (58,034,344 (83,945,454 ) ) Paid in capital portion of redemption fees 25,043 130,955 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (25,974,915 22,022,399 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (17,007,808 16,820,928 ) NET ASSETS Beginning of period 79,893,823 63,072,895 End of period (including undistributed net investment income of $162,794 and $58,168, respectively) $ 62,886,015 $ 79,893,823 OTHER INFORMATION Shares Sold 3,334,514 11,247,429 Issued in reinvestment of distributions 8,521 18,602 Redeemed (5,997,467 (9,026,223 ) ) Net increase (decrease) (2,654,432) 2,239,808
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEAR ENDED APRIL 21, 1993 ENDED FEBRUARY 28, (COMMENCEMENT AUGUST 31, 1995 OF OPERATIONS) TO SELECTED PER-SHARE DATA D (UNAUDITED) 1995 FEBRUARY 28, 1994
Net asset value, beginning of period $ 8.98 $ 9.48 $ 10.00 Income from Investment Operations Net investment income .02 .03 .02 Net realized and unrealized gain (loss) 1.09 (.53) (.46) Total from investment operations 1.11 (.50) (.44) Less Distributions (.01) (.02) - From net investment income From net realized gain - - (.07) In excess of net realized gain - - (.06) Total distributions (.01) (.02) (.13) Redemption fees added to paid in capital - .02 .05 Net asset value, end of period $ 10.08 $ 8.98 $ 9.48 TOTAL RETURN B, C 12.37% (5.06)% (3.84)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 62,886 $ 79,894 $ 63,073 Ratio of expenses to average net assets 1.55% A 1.66% 1.93% A Ratio of expenses to average net assets before expense reductions 1.55% A 1.70% 1.94% A Ratio of net investment income to average net assets .50% A .30% .17% A Portfolio turnover rate 59% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1995 MONTH YEAR YEARS YEARS S PRECIOUS METALS AND MINERALS 17.16% -2.97% 48.96% 124.23% PRECIOUS METALS AND MINERALS (INCL. 3% SALES CHARGE) 13.64% -5.89% 44.49% 117.50% S&P 500 16.81% 21.45% 102.17% 311.58% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS YEARS PRECIOUS METALS AND MINERALS -2.97% 8.30% 8.41% PRECIOUS METALS AND MINERALS (INCL. 3% SALES CHARGE) -5.89% 7.64% 8.08% S&P 500 21.45% 15.12% 15.20% 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 Precious Standard & Poor 08/31/85 9700.00 10000.00 09/30/85 9374.21 9687.00 10/31/85 8533.48 10134.54 11/30/85 9521.34 10829.77 12/31/85 8922.32 11353.93 01/31/86 10813.98 11417.51 02/28/86 10950.60 12271.54 03/31/86 10278.01 12956.29 04/30/86 9742.04 12809.89 05/31/86 8754.17 13491.37 06/30/86 8932.83 13719.38 07/31/86 8816.50 12952.46 08/31/86 10496.85 13913.54 09/30/86 11868.78 12762.89 10/31/86 10826.54 13499.31 11/30/86 11943.23 13827.34 12/31/86 11858.14 13474.74 01/31/87 13283.25 15289.79 02/28/87 14219.14 15893.74 03/31/87 18281.75 16353.07 04/30/87 19547.33 16207.52 05/31/87 17803.17 16348.53 06/30/87 17547.93 17174.13 07/31/87 21121.32 18044.86 08/31/87 20568.30 18717.93 09/30/87 21206.40 18308.01 10/31/87 15357.10 14364.46 11/30/87 17292.68 13180.83 12/31/87 16305.91 14183.89 01/31/88 13441.07 14781.03 02/29/88 13462.61 15469.83 03/31/88 14582.70 14991.81 04/30/88 14098.05 15158.22 05/31/88 14173.44 15290.10 06/30/88 13656.47 15991.91 07/31/88 13742.63 15931.15 08/31/88 12924.11 15389.49 09/30/88 12051.73 16045.08 10/31/88 12493.30 16491.13 11/30/88 12956.42 16255.31 12/31/88 12415.34 16539.78 01/31/89 12931.71 17750.49 02/28/89 13347.05 17308.50 03/31/89 13347.05 17711.79 04/30/89 12740.88 18631.03 05/31/89 12134.70 19385.59 06/30/89 13088.87 19275.09 07/31/89 13448.08 21015.63 08/31/89 13717.49 21427.54 09/30/89 14200.18 21339.68 10/31/89 14188.96 20844.60 11/30/89 15996.25 21269.83 12/31/89 16408.43 21780.31 01/31/90 17715.19 20318.85 02/28/90 16192.53 20580.96 03/31/90 15488.01 21126.36 04/30/90 13897.17 20598.20 05/31/90 14692.59 22606.52 06/30/90 13624.45 22452.80 07/31/90 14453.96 22380.95 08/31/90 14601.68 20357.71 09/30/90 14272.15 19366.29 10/31/90 12669.94 19283.02 11/30/90 12442.68 20528.70 12/31/90 12950.59 21101.45 01/31/91 11544.92 22021.47 02/28/91 12581.89 23596.01 03/31/91 12339.93 24167.03 04/30/91 12305.37 24225.03 05/31/91 12996.68 25271.56 06/30/91 13849.30 24114.12 07/31/91 13849.30 25237.84 08/31/91 12397.54 25835.97 09/30/91 12651.03 25404.51 10/31/91 13503.64 25744.93 11/30/91 13929.95 24707.41 12/31/91 13149.71 27533.94 01/31/92 13428.75 27021.81 02/29/92 12731.15 27373.09 03/31/92 12231.21 26839.32 04/30/92 11510.36 27628.39 05/31/92 12266.09 27763.77 06/30/92 12335.29 27350.09 07/31/92 12498.37 28468.71 08/31/92 11939.26 27885.10 09/30/92 11450.04 28214.15 10/31/92 10716.21 28312.90 11/30/92 10087.22 29278.37 12/31/92 10274.40 29638.49 01/31/93 10523.26 29887.45 02/28/93 11684.61 30293.92 03/31/93 13272.58 30933.12 04/30/93 15417.52 30184.54 05/31/93 17455.81 30993.49 06/30/93 17740.22 31083.37 07/31/93 20051.07 30959.04 08/31/93 18036.48 32132.38 09/30/93 16614.42 31884.96 10/31/93 18972.67 32544.98 11/30/93 18937.12 32235.80 12/31/93 21743.10 32625.86 01/31/94 20843.63 33735.14 02/28/94 19932.17 32820.92 03/31/94 19728.29 31389.92 04/30/94 19729.09 31791.71 05/31/94 19765.09 32313.10 06/30/94 20161.11 31521.43 07/31/94 20929.15 32555.33 08/31/94 22417.23 33890.10 09/30/94 24133.33 33059.79 10/31/94 23197.28 33803.64 11/30/94 20713.14 32572.51 12/31/94 21495.01 33055.56 01/31/95 17750.41 33912.69 02/28/95 18564.98 35234.27 03/31/95 20449.44 36274.03 04/30/95 20619.65 37342.30 05/31/95 20364.34 38834.87 06/30/95 20607.49 39737.01 07/31/95 21458.54 41054.68 08/31/95 21750.33 41157.73 Let's say you invested $10,000 in Fidelity Select Precious Metals and Minerals Portfolio on August 31, 1985, and paid a 3% sales charge. By August 31, 1995, your investment would have grown to $21,750 - a 117.50% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $41,158 over the same period - a 311.58% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Barrick Gold Corp. 11.2 Western Areas Gold Mining Ltd. Ord. 4.4 Newmont Mining Corp. 3.9 Anglo American Corp. of South Africa Ltd. ADR 3.8 Western Deep Levels Ltd. ADR 3.7 De Beers Consolidated Mines Ltd. ADR 3.7 Vaal Reefs Exploration & Mining Co. Ltd. ADR 3.6 Free State Consolidated Gold Mines Ltd. ADR 3.5 Euro-Nevada Mining Corp. 3.1 Gold Fields South Africa Ltd. sponsored ADR 3.1 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 27.8 Row: 1, Col: 2, Value: 5.3 Row: 1, Col: 3, Value: 5.9 Row: 1, Col: 4, Value: 30.4 Row: 1, Col: 5, Value: 30.6 Gold Ores (South Africa) 30.6.% Gold Ores (Canada) 30.4% Gold Ores (U.S.) 5.9% Gold Ores (Australia) 5.3% All Others 27.8%* * 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. For the six months ended August 31, 1995, the fund returned 17.16%. That's a little better than the Standard & Poor's 500 Index which returned 16.81% for the same time period. For the 12 months ended August 31, 1995, the fund returned -2.97% and the S&P 500 returned 21.45%. Q. WHAT FACTORS CONTRIBUTED TO PERFORMANCE? A. While there's still no inflation out there, retail demand for gold stocks has grown due to inflation fears. Gold stocks can be much more volatile than the underlying bullion both on the upside and the downside. During the past 12 months, the price of gold is down approximately 1%. Q. WHAT'S YOUR STRATEGY IN THIS KIND OF ENVIRONMENT? A. The fund has been in a holding pattern for the past twelve months. South African and Australian markets have underperformed the gold index representing most North American companies. The fund is still invested in South African stocks because it's the largest producer of gold in the world. The market there continues to be plagued by labor disruptions - part of the new independence process for South Africans. I expect those problems to lessen eventually and I think we'll see the miners go from a five-and-a-half day mining schedule to a seven-day schedule at a number of mines. If that happens, productivity will improve immensely. In the meantime, 1995 South African production is down 5% to 7% and investors remain cautious in the face of these unpredictable labor problems. Q. WHAT ABOUT THE REST OF THE MARKET? A. Jewelry demand in developing countries is up so far in 1995. There's particularly strong demand from India, Southeast Asia and a number of Middle Eastern countries. This has offset heavy selling of gold by several central banks. Q. THE FUND'S TOP HOLDINGS HAVEN'T CHANGED MUCH DURING THE PAST SIX MONTHS . . . A. That's true. Barrick Gold was still the fund's largest holding at the end of August. During the past six months it's had outstanding exploration successes both in Nevada and Chile. I think Barrick has the potential to grow production from three million ounces of production this year to something over four million ounces in the next two to three years. In this environment, that's great news. I also increased the fund's holdings in Western Areas Gold Mining during the period. Western Areas completed a merger with South Deep Exploration and now is the longest life mine in South Africa. That means, it has reserves that will last longer than anyone else's. Earlier in the year I reduced the fund's holdings in Western Areas because I wasn't in favor of the acquisition. I used the subsequent drop in the price of the stock as a buying opportunity. Agnico-Eagle Mines continues to have outstanding development success at their La Ronde mine in Quebec. It's also in the process of deepening its main shaft and building a new deep shaft elsewhere on its property. Q. WHAT'S BEEN YOUR BIGGEST DISAPPOINTMENT DURING THE PAST SIX MONTHS? A. The price of gold. Its been trading between $365 and $400 per ounce and has been unable to break out of that range because of central bank selling and producer forward selling whenever the cash price approaches $400 per ounce. I also don't see any reason why it should during the next few months if economic factors remain the way they were at the end of August. The good news is that South African production is in a long-term decline and the former Soviet states will be fortunate to hold production flat. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. With the improbability of gold breaking much above $400 per ounce, the next few months could be tough. The only strategy that makes sense is to search for the best companies with growing reserves, production and earnings. When the market for gold improves, the fund will be well positioned in quality companies - the ones I expect to perform best over time. However, this is a highly specialized sector of the market which depends on perceived inflation and foreign buying of gold. Shareholders should understand that gold and precious metals are very volatile and anything can happen. FUND FACTS START DATE: July 14, 1981 TRADING SYMBOL: FDPMX SIZE: as of August 31, 1995, more than $372 million MANAGER: Malcolm MacNaught, since 1981; manager, Fidelity Select American Gold Portfolio, 1985-1995; Fidelity Advisor Global Resources Fund, since 1988; joined Fidelity in 1968 (checkmark) PRECIOUS METALS AND MINERALS PORTFOLIO INVESTMENTS AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.5% SHARES VALUE (NOTE 1) AUSTRALIA - 8.5% METALS & MINING - 0.9% METAL MINING SERVICES - 0.9% Acacia Resources Ltd. (a) 1,800,000 $ 3,448,692 PRECIOUS METALS - 7.6% GOLD & SILVER ORES - 2.3% Golden Shamrock Mines Ltd. (a) 1,000,000 691,240 North Flindes 540,000 3,042,970 Plutonic Resources Ltd. 1,074,900 5,007,282 8,741,492 GOLD ORES - 5.3% Aurora Gold Ltd. (a) 500,000 563,515 Gold Mines of Kalgoorlie Ltd. 3,900,000 3,340,506 Goldfields Ltd. (a) 125,860 313,955 Great Central Mines NL sponsored ADR (a) 100,000 656,250 Great Central Mines NL (a) 2,089,500 4,552,853 Poseidon Gold Ltd. 3,884,800 7,559,821 Ranger Minerals NL (a) 100,000 232,167 Resolute Samantha Ltd. 450,000 1,007,559 St. Barbara Mines Ltd. 2,500,000 1,803,250 20,029,876 TOTAL PRECIOUS METALS 28,771,368 TOTAL AUSTRALIA 32,220,060 CANADA - 31.1% HOLDING COMPANIES - 0.3% HOLDING COMPANY OFFICES - 0.3% Bolivar Goldfields Ltd. (a) 807,200 960,988 METALS & MINING - 0.3% METAL MINING - 0.3% Dayton Mining Corp. 255,000 1,067,282 PRECIOUS METALS - 30.5% GOLD & SILVER ORES - 0.1% Greenstone Resources Ltd. 200,000 550,616 GOLD ORES - 30.4% Agnico Eagle Mines Ltd. 851,100 11,557,402 Barrick Gold Corp. 1,700,000 42,849,435 Cambior, Inc. 391,000 4,218,534 Echo Bay Mines Ltd. 400,000 4,166,820 Euro-Nevada Mining Corp. 310,000 11,994,495 Franco Nevada Mining Corp. 140,000 9,023,773 Golden Star Resources Ltd. Canada (a) 347,600 2,004,463 Kinross Gold Corp. (a) 1,200,000 9,821,796 Orvana Minerals Corp. (a) 950,000 3,357,642 Pegasus Gold, Inc. (a) 427,900 5,293,230 Placer Dome, Inc. 170,000 4,411,437 Prime Resources Group, Inc. (a) 796,956 6,374,700 TVI Pacific, Inc. (a) 639,300 689,747 115,763,474 TOTAL PRECIOUS METALS 116,314,090 TOTAL CANADA 118,342,360 SHARES VALUE (NOTE 1) GHANA - 2.3% PRECIOUS METALS - 2.3% GOLD ORES - 2.3% Ashanti Goldfields Ltd. GDR 422,800 $ 8,709,680 SOUTH AFRICA - 42.5% CREDIT & OTHER FINANCE - 0.9% FINANCIAL SERVICES - 0.9% Genbel Investments Ltd. Ord. 1,400,000 3,331,048 HOLDING COMPANIES - 1.2% HOLDING COMPANY OFFICES - 1.2% Beatrix Mines Ltd. ADR 380,300 3,327,625 Gencor Ltd. (Reg.) 319,500 1,201,457 4,529,082 METALS & MINING - 8.4% MISCELLANEOUS NONMETAL MINERALS - 3.7% De Beers Consolidated Mines Ltd. ADR 548,300 14,084,456 MISCELLANEOUS METAL ORES - 4.7% Impala Platinum Holdings Ltd.: ADR (a) 300,000 7,500,000 Ord. 104,700 2,662,957 Rustenberg Platinum Holding Ltd. ADR 346,558 7,710,916 17,873,873 TOTAL METALS & MINING 31,958,329 PRECIOUS METALS - 32.0% GOLD & SILVER ORES - 1.4% Southvaal Holdings Ltd. ADR 194,800 5,503,100 GOLD ORES - 30.6% Anglo American Corp. of South Africa Ltd. ADR 270,000 14,411,250 Driefontein Consolidated Ltd.: ADR 707,500 10,435,625 Ord. 20,700 306,551 Free State Consolidated Gold Mines Ltd. ADR 1,147,800 13,343,175 Gold Fields of South Africa Ltd. 20,000 552,441 Gold Fields of South Africa Ltd. sponsored ADR 431,200 11,750,200 Kloof Gold Mining Co. Ltd. sponsored ADR 930,000 10,578,750 Middle Witwatersrand West Area 600,000 1,722,960 Randfontein Estates Gold Mining Co. Ltd. ADR (a) 890,700 5,678,213 Vaal Reefs Exploration & Mining Co. Ltd. ADR 1,947,900 13,757,044 Western Areas Gold Mining Ltd. Ord. 1,070,000 16,753,044 Western Deep Levels Ltd.: ADR 415,000 14,213,720 Ord. 37,000 1,274,990 Winkelhaak Mines Ltd. ADR 245,700 1,842,750 116,620,713 TOTAL PRECIOUS METALS 122,123,813 TOTAL SOUTH AFRICA 161,942,272 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) UNITED STATES OF AMERICA - 10.1% METALS & MINING - 2.6% MISCELLANEOUS METAL ORES - 2.6% Stillwater Mining Co. (b) 250,000 $ 5,468,750 Stillwater Mining Co. (a) 200,000 4,375,000 9,843,750 PRECIOUS METALS - 5.2% GOLD ORES - 5.2% Amax Gold, Inc. (a) 400,000 2,600,000 Hecla Mining Co. (a) 130,000 1,495,000 Newmont Mining Corp. 345,000 15,007,500 Santa Fe Pacific Gold Corp. 75,000 909,375 20,011,875 SECURITIES INDUSTRY - 2.3% INVESTMENT MANAGERS - 2.3% Pioneer Group, Inc. 310,000 8,835,000 TOTAL UNITED STATES OF AMERICA 38,690,625 TOTAL COMMON STOCKS (Cost $319,585,605) 359,904,997 CONVERTIBLE PREFERRED STOCKS - 0.7% UNITED STATES OF AMERICA - 0.7% PRECIOUS METALS - 0.7% GOLD ORES - 0.7% Newmont Mining Corp. depositary shares representing 1/2 share, $1.375 (b) (Cost $3,015,897) 46,000 2,794,500 BULLION - 0.0% TROY OUNCES Gold Bullion (a) 263 100,421 Silver Bullion (5,000 oz Bar) (a) 6,013 32,108 TOTAL BULLION (Cost $129,751) 132,529 REPURCHASE AGREEMENTS - 4.8% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account, at 5.82% dated 8/31/95 due 9/1/95 $ 18,135,932 18,133,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $340,864,253) $ 380,965,026 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 $8,263,250 or 2.2% of net assets. OTHER INFORMATION Purchases and sales of investments, other than short-term securities, aggregated $47,184,782 and $87,737,785, 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 $93,044 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $4,971,000 and $3,405,818, respectively. The weighted average interest rate paid was 6.6% (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: South Africa 42.5% Canada 31.1 United States 15.6 Australia 8.5 Ghana 2.3 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $341,793,909. Net unrealized appreciation aggregated $39,171,117, of which $69,126,172 related to appreciated investment securities and $29,955,055 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
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $18,133,000) (cost $340,864,253) - $ 380,965,026 See accompanying schedule Cash 255 Receivable for investments sold 992,130 Receivable for fund shares sold 492,094 Dividends receivable 1,144,176 Redemption fees receivable 2,691 Prepaid expenses 42,529 TOTAL ASSETS 383,638,901 LIABILITIES Payable for investments purchased $ 1,008,938 Payable for fund shares redeemed 9,291,135 Accrued management fee 195,663 Other payables and 376,652 accrued expenses TOTAL LIABILITIES 10,872,388 NET ASSETS $ 372,766,513 Net Assets consist of: Paid in capital $ 366,859,470 Undistributed net investment income 278,016 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (34,471,107 ) Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 40,100,134 NET ASSETS, for 20,842,261 shares outstanding $ 372,766,513 NET ASSET VALUE and redemption price per share ($372,766,513 (divided by) 20,842,261 shares) $17.89 Maximum offering price per share (100/97.00 of $17.89) $18.44
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 3,447,134 Dividends Interest 738,283 TOTAL INCOME 4,185,417 EXPENSES Management fee $ 1,232,674 Transfer agent 1,597,521 Fees Redemption fees (162,598 ) Accounting fees and expenses 201,124 Non-interested trustees' compensation 2,124 Custodian fees and expenses 48,035 Registration fees 42,529 Audit 22,306 Legal 1,650 Interest 6,869 Miscellaneous 3,722 Total expenses before reductions 2,995,956 Expense reductions (1,259 2,994,697 ) NET INVESTMENT INCOME 1,190,720 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including 11,767,634 realized loss of $12,243 on sale of investments in precious metals) Foreign currency transactions 9,157 11,776,791 Change in net unrealized appreciation (depreciation) on: Investment securities 45,943,424 Assets and liabilities in foreign currencies (621 45,942,803 ) NET GAIN (LOSS) 57,719,594 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 58,910,314 OTHER INFORMATION $531,133 Sales Charges Paid to FDC Deferred sales charges withheld $11,084 by FDC Exchange fees withheld by FSC $119,708
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 1,190,720 $ 4,315,352 Net investment income Net realized gain (loss) 11,776,791 25,267,179 Change in net unrealized appreciation (depreciation) 45,942,803 (77,536,148 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 58,910,314 (47,953,617 ) Distributions to shareholders - (4,315,352 From net investment income ) In excess of net investment income - (1,235,277 ) TOTAL DISTRIBUTIONS - (5,550,629 ) Share transactions 366,320,138 934,524,938 Net proceeds from sales of shares Reinvestment of distributions - 5,435,430 Cost of shares redeemed (418,245,736 (934,775,405 ) ) Paid in capital portion of redemption fees 1,577,850 3,310,757 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (50,347,748 8,495,720 ) TOTAL INCREASE (DECREASE) IN NET ASSETS 8,562,566 (45,008,526 ) NET ASSETS Beginning of period 364,203,947 409,212,473 End of period (including under (over) distribution of net investment income of $278,016 and $(912,704), $ 372,766,513 $ 364,203,947 respectively) OTHER INFORMATION Shares Sold 21,633,292 53,173,413 Issued in reinvestment of distributions - 324,762 Redeemed (24,646,505 (54,266,578 ) ) Net increase (decrease) (3,013,213) (768,403)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 15.27 $ 16.62 $ 9.86 $ 9.90 $ 10.68 $ 12.23 Income from Investment Operations Net investment income .05 .17 .21 .09 .10 .18 Net realized and unrealized gain (loss) 2.50 (1.42) 6.48 (.05) (.91) (1.71) Total from investment operations 2.55 (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 .07 .13 .28 .09 .13 .13 Net asset value, end of period $ 17.89 $ 15.27 $ 16.62 $ 9.86 $ 9.90 $ 10.68 TOTAL RETURN B, C 17.16% (6.86)% 70.58% 1.51% (6.46)% (11.45)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 372,767 $ 364,204 $ 409,212 $ 137,922 $ 130,002 $ 155,367 Ratio of expenses to average net assets 1.48% A 1.46% 1.55% 1.73% A 1.81% 1.79% Ratio of expenses to average net assets before 1.48% A 1.46% 1.55% 1.73% A 1.81% 1.79% expense reductions Ratio of net investment income to average net assets .59% A .99% 1.38% 1.12% A .92% 1.52% Portfolio turnover rate 25% A 43% 73% 36% A 44% 41%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1995 MONTH YEAR YEARS YEARS S UTILITIES GROWTH 12.20% 13.26% 80.86% 240.89% UTILITIES GROWTH (INCL. 3% SALES CHARGE) 8.83% 9.86% 75.43% 230.66% S&P 500 16.81% 21.45% 102.17% 311.58% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS YEARS UTILITIES GROWTH 13.26% 12.58% 13.05% UTILITIES GROWTH (INCL. 3% SALES CHARGE) 9.86% 11.90% 12.70% S&P 500 21.45% 15.12% 15.20% 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 UtilitiStandard & Poor's 08/31/85 9700.00 10000.00 09/30/85 9263.55 9687.00 10/31/85 9901.06 10134.54 11/30/85 10312.99 10829.77 12/31/85 10935.79 11353.93 01/31/86 11239.84 11417.51 02/28/86 12034.28 12271.54 03/31/86 12436.40 12956.29 04/30/86 12191.20 12809.89 05/31/86 12696.31 13491.37 06/30/86 13431.90 13719.38 07/31/86 14031.83 12952.46 08/31/86 14960.66 13913.54 09/30/86 13306.65 12762.89 10/31/86 13927.52 13499.31 11/30/86 14051.70 13827.34 12/31/86 13564.93 13474.74 01/31/87 14662.64 15289.79 02/28/87 14146.07 15893.74 03/31/87 13862.95 16353.07 04/30/87 13068.23 16207.52 05/31/87 12859.61 16348.53 06/30/87 13316.58 17174.13 07/31/87 13132.80 18044.86 08/31/87 13545.06 18717.93 09/30/87 13435.79 18308.01 10/31/87 12626.16 14364.46 11/30/87 12203.97 13180.83 12/31/87 12309.37 14183.89 01/31/88 13373.14 14781.03 02/29/88 13268.33 15469.83 03/31/88 12891.04 14991.81 04/30/88 12927.72 15158.22 05/31/88 13331.22 15290.10 06/30/88 13682.31 15991.91 07/31/88 13638.89 15931.15 08/31/88 13617.32 15389.49 09/30/88 14091.72 16045.08 10/31/88 14388.22 16491.13 11/30/88 14361.26 16255.31 12/31/88 14335.03 16539.78 01/31/89 15010.27 17750.49 02/28/89 14916.18 17308.50 03/31/89 15170.78 17711.79 04/30/89 15951.18 18631.03 05/31/89 16709.44 19385.59 06/30/89 17131.50 19275.09 07/31/89 18069.66 21015.63 08/31/89 18149.27 21427.54 09/30/89 18410.82 21339.68 10/31/89 18325.53 20844.60 11/30/89 18928.23 21269.83 12/31/89 19928.94 21780.31 01/31/90 18945.29 20318.85 02/28/90 18911.17 20580.96 03/31/90 18808.83 21126.36 04/30/90 18024.18 20598.20 05/31/90 18962.34 22606.52 06/30/90 19187.05 22452.80 07/31/90 19344.56 22380.95 08/31/90 18282.83 20357.71 09/30/90 18329.50 19366.29 10/31/90 19268.72 19283.02 11/30/90 19776.25 20528.70 12/31/90 20039.45 21101.45 01/31/91 19951.09 22021.47 02/28/91 20811.11 23596.01 03/31/91 21046.73 24167.03 04/30/91 20952.48 24225.03 05/31/91 20958.37 25271.56 06/30/91 20704.14 24114.12 07/31/91 21377.94 25237.84 08/31/91 21867.98 25835.97 09/30/91 22541.78 25404.51 10/31/91 22854.18 25744.93 11/30/91 23117.58 24707.41 12/31/91 24253.35 27533.94 01/31/92 23506.80 27021.81 02/29/92 23334.52 27373.09 03/31/92 23092.05 26839.32 04/30/92 23723.75 27628.39 05/31/92 24183.17 27763.77 06/30/92 24462.92 27350.09 07/31/92 25763.65 28468.71 08/31/92 25750.44 27885.10 09/30/92 25889.10 28214.15 10/31/92 25882.49 28312.90 11/30/92 26060.77 29278.37 12/31/92 26822.35 29638.49 01/31/93 27278.61 29887.45 02/28/93 28681.94 30293.92 03/31/93 29456.19 30933.12 04/30/93 29295.20 30184.54 05/31/93 29358.04 30993.49 06/30/93 30482.09 31083.37 07/31/93 30831.18 30959.04 08/31/93 32171.66 32132.38 09/30/93 32171.66 31884.96 10/31/93 31843.52 32544.98 11/30/93 30286.60 32235.80 12/31/93 30187.13 32625.86 01/31/94 30805.66 33735.14 02/28/94 29407.95 32820.92 03/31/94 28347.63 31389.92 04/30/94 29163.07 31791.71 05/31/94 28580.79 32313.10 06/30/94 28490.58 31521.43 07/31/94 29310.69 32555.33 08/31/94 29195.88 33890.10 09/30/94 28449.58 33059.79 10/31/94 28810.43 33803.64 11/30/94 27768.89 32572.51 12/31/94 27950.06 33055.56 01/31/95 29090.70 33912.69 02/28/95 29470.92 35234.27 03/31/95 29589.21 36274.03 04/30/95 30620.62 37342.30 05/31/95 31094.44 38834.87 06/30/95 31399.03 39737.01 07/31/95 32245.14 41054.68 08/31/95 33065.87 41157.73 Let's say you invested $10,000 in Fidelity Select Utilities Growth Portfolio on August 31, 1985, and paid a 3% sales charge. By August 31, 1995, your investment would have grown to $33,066 - a 230.66% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $41,158 over the same period - a 311.58% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Ameritech Corp. 8.5 SBC Communications, Inc. 8.2 BellSouth Corp. 7.9 NYNEX Corp. 6.9 U.S. West, Inc. 6.7 Bell Atlantic Corp. 5.6 GTE Corp. 4.3 Williams Companies, Inc. 3.6 Enron Corp. 2.9 Pacific Enterprises 2.8 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 16.6 Row: 1, Col: 2, Value: 7.2 Row: 1, Col: 3, Value: 7.4 Row: 1, Col: 4, Value: 9.300000000000001 Row: 1, Col: 5, Value: 10.7 Row: 1, Col: 6, Value: 48.8 Telephone Services 48.8% Electric Power 10.7% Gas Transmission 9.3% Gas Distribution 7.4% Electric & Other Services 7.2% All Others 16.6%* * INCLUDES SHORT-TERM INVESTMENTS UTILITIES GROWTH PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW John Muresianu, Portfolio Manager of Fidelity Select Utilities Growth Portfolio Q. JOHN, HOW HAS THE FUND PERFORMED? A. For the six months ended August 31, 1995, the fund had a total return of 12.20%, lagging the Standard & Poor's Composite Index of 500 Stocks, which returned 16.81% for the same period. For the 12 months ended August 31, 1995, the fund returned 13.26%, while the S&P 500 returned 21.45%. Q. WHAT HAS THE INVESTING ENVIRONMENT BEEN LIKE? A. Looking broadly, we've seen a strong six months, with the market rising more than 16%. That was driven by a combination of two factors. First, corporate earnings continued to be strong, especially in the technology sector. Second, bond yields dropped significantly - and bond prices rose - as it became apparent that the economy was slowing. Bond investors often perceive a slower economy to be a positive backdrop, because it usually is an environment in which inflation does not threaten to erode the value of a bond's fixed-income payments. In general, the lower the bond yields, the higher the stock market, as competition from bonds diminishes. In addition, with lower bond yields, investors are willing to pay higher valuations - yardsticks such as price-to-earnings ratios - for corporate earnings. Remember that utility stocks, in particular, more closely track bonds in price terms than the market, in general, because of their relatively high yields and slow growth. Like bonds, utility stocks did well over the past six months, but not as well as the broad market. Q. HOW HAVE THE THREE MAJOR SEGMENTS OF THE UTILITIES SECTOR - GAS, ELECTRIC AND TELEPHONE - PERFORMED? A. In general, natural gas utility stocks started out well, and then stumbled. They performed well initially due to the combination of lower bond yields and the expectation that natural gas prices would rebound from low levels seen at the beginning of the period. When gas prices did not recover - and fell further - gas stocks suffered. Electrics - historically the highest yielding of the three industries - did well initially, because they are seen as most sensitive to what's going on in the bond market. When that market gave back some of its gains from mid-July to mid-August, electrics were quick to do so as well. In addition, concerns about deregulation and competition can surface from time to time, leading to some volatility. The same is true for telephone utility stocks, which were volatile over the period, but ended up performing better than the other sectors. Q. YOU'VE CONTINUED TO FOCUS MOST OF THE FUND ON TELEPHONE STOCKS . . . A. Right. Currently, it appears that the move in the utilities sector is toward deregulation and competition. Deregulation will bring price competition to every local monopoly, whether it's an electric, gas or phone utility. What I think telephone stocks have that electrics and gas don't have is some growth potential to offset price erosion in the core business. Cellular service is one area that provides growth potential. Q. WHAT STOCKS HAVE PROVIDED STRONG PERFORMANCE FOR THE FUND? A. Earnings growth drove strong performances by several telephone company stocks, including Ameritech, BellSouth, NYNEX, SBC Communications, U.S. West, Bell Atlantic and GTE. Williams Companies, an interstate gas pipeline company with an interest in telecommunications, posted strong performance as its acquisition of Transco last year was seen in a more favorable light by investors. Q. AND WHICH STOCKS DIDN'T DO AS WELL AS YOU WOULD HAVE LIKED? A. Disappointing earnings caused by a difficult regulatory environment hurt Pacific Telesis. Regulators set a high productivity hurdle for the company to meet, and assumed a stronger demand response that didn't materialize when the company lowered its rates. The low level of earnings raised the specter of a dividend reduction. El Paso Natural Gas posted disappointing earnings caused by weak natural gas prices and unusually strong hydro-power conditions in California that took away market share. And Niagara Mohawk was hurt by fears that some of its high-priced contracts would be at risk as the result of the deregulation of the electric utility business in New York. Q. WHAT'S YOUR OUTLOOK? A. It's very uncertain where the market will go from here. On the one hand, valuations in the market are at historically high levels and profit margins are near the historical highs seen in the 1960s. That might lead one to think a correction is in the cards. On the other hand, inflation is at 30-year lows and corporate earnings continue to surprise on the upside as companies slash costs and benefit from the relatively weak dollar. So the market could surprise everyone again and go up another 20%. Or, we could stay right about where we are right now; or it could go down. Given this uncertainty, I'm focusing on adding value one company at a time, and having big-picture considerations weigh less in determining how I position the portfolio. FUND FACTS START DATE: December 10, 1981 TRADING SYMBOL: FSUTX SIZE: as of August 31, 1995, more than $224 million MANAGER: John Muresianu, since 1992; manager, Fidelity Utilities Fund, since 1992; Fidelity Select Natural Gas Portfolio, 1993-1994; U.S. pension accounts and Canadian mutual funds, 1990-1992; analyst, natural gas, life insurance, 1989-1992; joined Fidelity in 1986 (checkmark) UTILITIES GROWTH PORTFOLIO INVESTMENTS AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.7% SHARES VALUE (NOTE 1) CELLULAR - 2.2% CELLULAR & COMMUNICATION SERVICES - 2.2% AirTouch Communications, Inc. (a) 153,600 $ 4,992,000 COMPUTERS & OFFICE EQUIPMENT - 0.0% ELECTRONIC COMPUTERS - 0.0% Itron, Inc. (a) 1,100 27,500 ELECTRIC UTILITY - 17.2% ELECTRIC & OTHER SERVICES - 6.5% Hidroelectrisa de Cantabrico SA 16,550 514,918 IES Industries, Inc. 21,900 552,975 Illinova Corp. 113,100 2,841,638 LG&E Energy Corp. 9,900 383,625 Montana Power Co. 73,300 1,612,600 NIPSCO Industries, Inc. 117,100 3,835,025 New York State Electric & Gas Corp. 300 7,238 Niagara Mohawk Power Corp. 32,100 385,200 Peco Energy Co. 52,600 1,400,475 Public Service Co. of New Mexico (a) 125,500 1,913,875 Rochester Gas & Electric Corp. 21,200 471,700 Sierra Pacific Resources 12,400 266,600 Utilicorp United, Inc. 8,366 226,928 14,412,797 ELECTRIC POWER - 10.7% AES Corp. (a) 252,249 4,666,607 Boston Edison Co. 46,700 1,196,688 Centerior Energy Corp. 36,700 394,525 Central & South West Corp. 9,200 225,400 Central Louisiana Electric Co., Inc. 66,106 1,619,597 CESC Ltd. GDR (a)(b) 45,000 174,600 CESC Ltd. GDR (warrants) (a)(b) 18,000 - DQE, Inc. 105,450 2,517,619 Detroit Edison Co. 14,500 444,063 Eastern Utilities Associates 118,244 2,763,954 General Public Utilities Corp. 14,600 417,925 Great Bay Power (a) 12,090 93,698 IPALCO Enterprises, Inc. 800 27,700 Maine Public Service Co. 44,200 988,975 New England Electric Systems 17,800 623,000 Northeast Utilities 23,000 526,125 Nova Scotia Power, Inc. 49,700 425,276 Ohio Edison Co. 26,500 573,063 Pinnacle West Capital Corp. 150,200 3,736,225 Portland General Corp. 47,100 1,130,400 Sithe Energies, Inc. (a) 27,200 244,800 TECO Energy, Inc. 16,900 365,463 United Illuminating Co. 22,500 753,750 23,909,453 TOTAL ELECTRIC UTILITY 38,322,250 GAS - 25.0% GAS & OTHER SERVICES - 1.7% MDU Resources Group, Inc. 66,600 2,014,650 UGI Corp. 58,190 1,243,811 Western Resources, Inc. 15,000 453,750 3,712,211 GAS DISTRIBUTION - 7.4% Energen Corp. 43,500 951,563 MCN Corp. 305,400 5,688,075 NUI Corp. 27,100 409,888 National Fuel Gas Co. 16,800 472,500 New Jersey Resources Corp. 18,400 441,600 NICOR, Inc. 37,100 950,688 SHARES VALUE (NOTE 1) Pacific Enterprises 257,800 $ 6,187,200 Peoples Energy Corp. 21,300 580,425 WICOR, Inc. 24,700 725,563 16,407,502 GAS TRANSMISSION - 9.3% Enron Corp. 191,600 6,442,550 ONEOK, Inc. 58,600 1,281,875 Sonat, Inc. 160,800 5,105,400 Tejas Power Corp. (a) 4,500 40,500 Williams Companies, Inc. 217,523 7,966,780 20,837,105 GAS TRANSMISSION & DISTRIBUTION - 6.6% Columbia Gas System, Inc. (The) (a) 111,900 3,944,475 Consolidated Natural Gas Co. 9,400 363,075 ENSERCH Corp. 87,400 1,431,175 Equitable Resources, Inc. 28,150 784,681 Noram Energy Corp. 58,900 419,663 Questar Corp. 102,300 3,120,150 Tejas Gas Corp. (a) 11,330 563,668 Westcoast Energy, Inc. 218,700 3,335,949 Yankee Energy System, Inc. 36,600 764,025 14,726,861 TOTAL GAS 55,683,679 HOLDING COMPANIES - 1.2% HOLDING COMPANY OFFICES - 1.2% CINergy Corp. 102,706 2,631,841 INDEPENDENT POWER - 0.0% STEAM SUPPLY - 0.0% Bonneville Pacific Corp. (a) 11,300 57 METALS & MINING - 0.4% METAL ORES - 0.4% Cameco, Inc. 32,500 1,015,663 OIL & GAS - 0.9% CRUDE PETROLEUM & GAS - 0.3% Nuevo Energy Corp. (a) 1,400 34,650 Occidental Petroleum Corp. 26,500 576,375 611,025 PETROLEUM REFINERS - 0.6% Coastal Corp. (The) 39,700 1,300,175 TOTAL OIL & GAS 1,911,200 TELEPHONE SERVICES - 48.8% ALLTEL Corp. 15,600 440,700 Ameritech Corp. 372,100 19,070,125 BCE, Inc. 257 8,271 Bell Atlantic Corp. 207,300 12,386,175 BellSouth Corp. 254,900 17,524,375 Cincinnati Bell, Inc. 22,000 599,500 GTE Corp. 258,900 9,482,213 NYNEX Corp. 343,100 15,439,500 SBC Communications, Inc. 361,100 18,280,680 Telephone & Data Systems, Inc. 17,604 721,764 U.S. West, Inc. 343,659 14,949,167 108,902,470 TOTAL COMMON STOCKS (Cost $191,777,107) 213,486,660 NONCONVERTIBLE PREFERRED STOCKS - 0.7% SHARES VALUE (NOTE 1) ELECTRIC UTILITY - 0.7% ELECTRIC & OTHER SERVICES - 0.7% Long Island Lighting Co. $7.95 (Cost $1,595,000) 63,800 $ 1,563,100 REPURCHASE AGREEMENTS - 3.6% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 7,999,293 7,998,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $201,370,107) $ 223,047,760 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 $174,600 or 0.1% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $67,932 and $20,838,979, 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 $3,344 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $1,078,000 and $776,600, respectively. The weighted average interest rate paid was 6.2% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $201,593,946. Net unrealized appreciation aggregated $21,453,814, of which $25,948,781 related to appreciated investment securities and $4,494,967 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. UTILITIES GROWTH PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $7,998,000) (cost $201,370,107) - See $ 223,047,760 accompanying schedule Cash 392 Receivable for investments sold 1,019,533 Receivable for fund shares sold 879,957 Dividends receivable 506,090 Redemption fees receivable 287 Other receivables 13,518 Prepaid expenses 15,214 TOTAL ASSETS 225,482,751 LIABILITIES Payable for fund shares redeemed $ 479,996 Accrued management fee 113,188 Other payables and accrued expenses 179,430 TOTAL LIABILITIES 772,614 NET ASSETS $ 224,710,137 Net Assets consist of: Paid in capital $ 200,906,202 Undistributed net investment income 3,693,801 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (1,567,519 ) Net unrealized appreciation (depreciation) on investments 21,677,653 NET ASSETS, for 5,749,690 $ 224,710,137 shares outstanding NET ASSET VALUE and redemption price per share ($224,710,137 (divided by) 5,749,690 shares) $39.08 Maximum offering price per share (100/97.00 of $39.08) $40.29
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 4,872,284 Dividends Interest 203,994 TOTAL INCOME 5,076,278 EXPENSES Management fee $ 682,815 Transfer agent 795,626 Fees Redemption fees (53,553 ) Accounting fees and expenses 111,468 Non-interested trustees' compensation 1,098 Custodian fees and expenses 7,190 Registration fees 15,214 Audit 14,286 Legal 825 Interest 665 Miscellaneous 3,626 Total expenses before reductions 1,579,260 Expense reductions (4,015 1,575,245 ) NET INVESTMENT INCOME 3,501,033 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (541,238 ) Foreign currency transactions (66 (541,304 ) ) Change in net unrealized appreciation (depreciation) on investment securities 22,098,872 NET GAIN (LOSS) 21,557,568 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 25,058,601 OTHER INFORMATION $154,999 Sales Charges Paid to FDC Deferred sales charges withheld $10,623 by FDC Exchange fees withheld by FSC $35,655
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 3,501,033 $ 7,276,449 Net investment income Net realized gain (loss) (541,304 (691,652 ) ) Change in net unrealized appreciation (depreciation) 22,098,872 (7,619,880 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 25,058,601 (1,035,083 ) Distributions to shareholders (310,459 (6,365,877 From net investment income ) ) From net realized gain - (4,277,985 ) TOTAL DISTRIBUTIONS (310,459 (10,643,862 ) ) Share transactions 37,728,222 155,428,275 Net proceeds from sales of shares Reinvestment of distributions 295,707 10,195,372 Cost of shares redeemed (75,723,614 (167,054,799 ) ) Paid in capital portion of redemption fees 26,474 223,028 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (37,673,211 (1,208,124 ) ) TOTAL INCREASE (DECREASE) IN NET ASSETS (12,925,069 (12,887,069 ) ) NET ASSETS Beginning of period 237,635,206 250,522,275 End of period (including undistributed net investment income of $3,693,801 and $1,881,976, respectively) $ 224,710,137 $ 237,635,206 OTHER INFORMATION Shares Sold 1,033,619 4,450,667 Issued in reinvestment of distributions 8,287 303,279 Redeemed (2,105,776 (4,783,040 ) ) Net increase (decrease) (1,063,870) (29,094)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 34.88 $ 36.61 $ 41.49 $ 37.18 $ 35.57 $ 31.70 Income from Investment Operations Net investment income .58 1.13 1.33 1.19 1.66 1.59 Net realized and unrealized gain (loss) 3.67 (1.17) (.16) 6.14 2.82 3.41 Total from investment operations 4.25 (.04) 1.17 7.33 4.48 5.00 Less Distributions (.05) (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 (.05) (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 $ 39.08 $ 34.88 $ 36.61 $ 41.49 $ 37.18 $ 35.57 TOTAL RETURN B, C 12.20% .21% 2.53% 20.90% 13.23% 16.25% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 224,710 $ 237,635 $ 250,522 $ 290,718 $ 206,872 $ 197,409 Ratio of expenses to average net assets 1.40% A 1.42% 1.35% 1.42% A 1.51% 1.65% Ratio of expenses to average net assets before 1.40% A 1.43% 1.36% 1.42% A 1.51% 1.65% expense reductions Ratio of net investment income to average net assets 3.10% A 3.24% 3.11% 3.71% A 4.58% 4.75% Portfolio turnover rate 0% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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 expenses, the past one, five and 10 years total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1995 MONTH YEAR YEARS YEARS S BROKERAGE AND INVESTMENT MANAGEMENT 20.59% 14.39% 183.94% 166.33% BROKERAGE AND INVESTMENT MANAGEMENT (INCL. 3% SALES CHARGE) 16.97% 10.96% 175.42% 158.34% S&P 500 16.81% 21.45% 102.17% 311.58% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS YEARS BROKERAGE AND INVESTMENT MANAGEMENT 14.39% 23.21% 10.29% BROKERAGE AND INVESTMENT MANAGEMENT (INCL. 3% SALES CHARGE) 10.96% 22.46% 9.96% S&P 500 21.45% 15.12% 15.20% 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 BrokeraStandard & Poo 08/31/85 9700.00 10000.00 09/30/85 9080.42 9687.00 10/31/85 9862.51 10134.54 11/30/85 10827.43 10829.77 12/31/85 11264.19 11353.93 01/31/86 12554.14 11417.51 02/28/86 13458.12 12271.54 03/31/86 13813.61 12956.29 04/30/86 13691.73 12809.89 05/31/86 13833.93 13491.37 06/30/86 13823.77 13719.38 07/31/86 12568.12 12952.46 08/31/86 13688.46 13913.54 09/30/86 12089.43 12762.89 10/31/86 13413.46 13499.31 11/30/86 12751.45 13827.34 12/31/86 12344.05 13474.74 01/31/87 14656.02 15289.79 02/28/87 14992.12 15893.74 03/31/87 14931.01 16353.07 04/30/87 13301.43 16207.52 05/31/87 12710.71 16348.53 06/30/87 12690.34 17174.13 07/31/87 12720.89 18044.86 08/31/87 13128.29 18717.93 09/30/87 12680.15 18308.01 10/31/87 8015.49 14364.46 11/30/87 7414.58 13180.83 12/31/87 7795.30 14183.89 01/31/88 8353.84 14781.03 02/29/88 8754.54 15469.83 03/31/88 8523.83 14991.81 04/30/88 8669.54 15158.22 05/31/88 8341.70 15290.10 06/30/88 9228.15 15991.91 07/31/88 9155.20 15931.15 08/31/88 9094.41 15389.49 09/30/88 9325.41 16045.08 10/31/88 9361.89 16491.13 11/30/88 9155.20 16255.31 12/31/88 9241.22 16539.78 01/31/89 10445.53 17750.49 02/28/89 10199.75 17308.50 03/31/89 10212.04 17711.79 04/30/89 10310.35 18631.03 05/31/89 10986.24 19385.59 06/30/89 10677.36 19275.09 07/31/89 11962.59 21015.63 08/31/89 12259.19 21427.54 09/30/89 11876.09 21339.68 10/31/89 10912.16 20844.60 11/30/89 10800.94 21269.83 12/31/89 10540.45 21780.31 01/31/90 10077.28 20318.85 02/28/90 10415.27 20580.96 03/31/90 10703.19 21126.36 04/30/90 9977.13 20598.20 05/31/90 10928.52 22606.52 06/30/90 10915.70 22452.80 07/31/90 10527.19 22380.95 08/31/90 9098.50 20357.71 09/30/90 8321.50 19366.29 10/31/90 7807.67 19283.02 11/30/90 8321.50 20528.70 12/31/90 8835.32 21101.45 01/31/91 9570.54 22021.47 02/28/91 10521.26 23596.01 03/31/91 11598.74 24167.03 04/30/91 11763.53 24225.03 05/31/91 12384.66 25271.56 06/30/91 11560.03 24114.12 07/31/91 12448.28 25237.84 08/31/91 12727.45 25835.97 09/30/91 13387.30 25404.51 10/31/91 14275.55 25744.93 11/30/91 13488.81 24707.41 12/31/91 16102.82 27533.94 01/31/92 16331.23 27021.81 02/29/92 16229.72 27373.09 03/31/92 15798.28 26839.32 04/30/92 14567.41 27628.39 05/31/92 14529.34 27763.77 06/30/92 14186.73 27350.09 07/31/92 14986.16 28468.71 08/31/92 14554.72 27885.10 09/30/92 14453.20 28214.15 10/31/92 15100.36 28312.90 11/30/92 16458.13 29278.37 12/31/92 16927.63 29638.49 01/31/93 17930.09 29887.45 02/28/93 18044.30 30293.92 03/31/93 19490.89 30933.12 04/30/93 19427.42 30184.54 05/31/93 20062.30 30993.49 06/30/93 21014.62 31083.37 07/31/93 21712.99 30959.04 08/31/93 23427.18 32132.38 09/30/93 23858.90 31884.96 10/31/93 23084.34 32544.98 11/30/93 22449.46 32235.80 12/31/93 25277.21 32625.86 01/31/94 25815.91 33735.14 02/28/94 24517.52 32820.92 03/31/94 21768.79 31389.92 04/30/94 21589.23 31791.71 05/31/94 22114.11 32313.10 06/30/94 22956.68 31521.43 07/31/94 22417.99 32555.33 08/31/94 22583.74 33890.10 09/30/94 21727.35 33059.79 10/31/94 21713.54 33803.64 11/30/94 20207.96 32572.51 12/31/94 20912.40 33055.56 01/31/95 20649.96 33912.69 02/28/95 21423.47 35234.27 03/31/95 21644.48 36274.03 04/30/95 22300.22 37342.30 05/31/95 23554.17 38834.87 06/30/95 24879.35 39737.01 07/31/95 26076.30 41054.68 08/31/95 25834.06 41157.73 Let's say you invested $10,000 in Fidelity Select Brokerage and Investment Management Portfolio on August 31, 1985, and paid a 3% sales charge. By August 31, 1995, your investment would have grown to $25,834 - a 158.34% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $41,158 over the same period - a 311.58% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Waterhouse Investor Services, Inc. 6.6 Legg Mason, Inc. 6.5 Quick & Reilly Group, Inc. (The) 6.2 Jefferies Group, Inc. 6.1 Inter-Regional Financial Group, Inc. 5.9 Morgan Stanley Group, Inc. 5.7 Edwards (A.G.), Inc. 5.3 Morgan Keegan, Inc. 4.9 Raymond James Financial, Inc. 4.7 Perpetual PLC 4.6 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 6.6 Row: 1, Col: 2, Value: 4.6 Row: 1, Col: 3, Value: 5.3 Row: 1, Col: 4, Value: 7.3 Row: 1, Col: 5, Value: 7.8 Row: 1, Col: 6, Value: 68.40000000000001 Security & Commodity Brokers 68.4% Investment Managers 7.8% Security Brokers & Dealers 7.3% Investment Advice 5.3% Financial Services 4.6% All Others 6.6%* * 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. For the six months ended August 31, 1995, the fund returned 20.59%. That beat the S&P 500 which returned 16.81% for the same time period. For the 12 months ended August 31, 1995, the fund returned 14.39% while the S&P 500 returned 21.45%. Q. HOW DO YOU EXPLAIN THE FUND'S STRONG PERFORMANCE DURING THE PAST SIX MONTHS? A. The business prospects for the brokerage and investment management industries were very strong during the past six months. Both are tied to the economy; when interest rates decline, volumes and profits both increase. For example, when interest rates decline, securities prices typically increase which benefits brokers in a variety of ways: 1) their existing inventories increase in value; 2) underwriting levels for new issues increase, and 3) overall trading values typically increase. There also seems to be a trend in the current slow growth environment in which higher stock prices propel industry consolidations, particularly in the banking, communications and entertainment industries. For every corporate action, whether a company is going public, merging or issuing new stock, investment advisors are hired and fees are earned. This kind of activity is very positive news for brokerage and investment management stocks. Q. WHAT CHANGES HAVE YOU MADE TO THE FUND DURING THE PAST SIX MONTHS? A. I've added several regional names to the fund recently. I've been quite bullish on the domestic market and think many regional firms are attractively valued. My goal has been to make larger investments in those stocks I have the most confidence in. Q. SPECIFICALLY, WHAT ARE SOME OF THE REGIONAL FIRMS THAT YOU'VE FOUND ATTRACTIVE? A. Legg Mason in Baltimore is both new to the fund, and one of the top holdings as of August 31, 1995. It's an investment manager and a brokerage firm with a stable earnings stream, and a very reasonably priced stock that I expect will provide positive earnings surprises. Inter-Regional Financial Group owns brokers Dain Bosworth and Raucher Pierce and as of August 31, 1995, the stock was trading at only six times next year's earnings; many similar firms are trading at about eight- to 10-times earnings. Q. WHAT OTHER INVESTMENT THEMES HAVE YOU EMPLOYED DURING THE PAST SIX MONTHS? A. I'm interested in discount and deep-discount brokers. Their revenues are driven solely by the number of trades they execute per day. July 1995 was a record-breaking month for discount brokers. Waterhouse Investor Services is a deep-discount brokerage firm. When volume goes up, this fixed-cost operation enjoys very profitable incremental trades. As of August, it was trading at less than 10 times earnings and was a very attractively priced stock. The Quick & Reilly Group is another discount broker and large holding in the fund. It has been experiencing tremendous volume and should surpass earnings expectations in the next couple of quarters. As of August, Quick & Reilly also was trading at an attractive eight times earnings. Q. OF COURSE, YOU STILL HAVE SOME OF THE LARGER, WELL-KNOWN NAMES IN THE FUND . . . A. Yes. Morgan Stanley, Merrill Lynch and AG Edwards are still very attractive stocks with good prospects. However, the SEC sets limits on the percentage of outstanding equity the fund may hold of any individual securities firm, and I'm at the maximum on Morgan Stanley and AG Edwards. You'll notice that the fund holds a small number of stocks and that there's usually not a big difference in percentage weighting between the largest holding and the tenth largest holding. Q. HAVE THERE BEEN ANY DISAPPOINTMENTS DURING THE PAST SIX MONTHS? A. The investing environment has been very positive and the fund hasn't suffered many major disappointments. I reduced the fund's holdings in Charles Schwab and eliminated the fund's holdings in stocks such as Midland Walwyn and American Express, but that was profit taking, not loss cutting. Q. WHAT'S AHEAD FOR THE FUND? A. As long as interest rates are stable to down, I think brokerage and investment management stocks have the potential to outperform the market. Brokerage stocks aren't exactly cheap, but they aren't overly expensive either. My plans are to fine tune the fund and monitor the holdings to make sure they produce the way I think they should. FUND FACTS START DATE: July 29, 1985 TRADING SYMBOL: FSLBX SIZE: as of August 31, 1995, more than $31 million MANAGER: Jeff Feinberg, since January 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 98.1% SHARES VALUE (NOTE 1) BANKS - 3.4% NATIONAL COMMERCIAL BANKS - 3.4% Bank of New York Co., Inc. 25,000 $ 1,087,500 CREDIT & OTHER FINANCE - 5.9% FINANCIAL SERVICES - 4.6% Perpetual PLC 55,000 1,449,063 MANAGEMENT & INVESTMENT OFFICES - 1.3% Trimark Financial Corp. 18,900 418,375 TOTAL CREDIT & OTHER FINANCE 1,867,438 SECURITIES INDUSTRY - 88.8% INVESTMENT ADVICE - 5.3% CI Fund Management, Inc. 85,400 762,528 CI Fund Management, Inc. (a)(b) 10,000 89,289 Mutual Fund Co. Ltd. (For.) (a) 34,900 847,412 1,699,229 INVESTMENT MANAGERS - 7.8% Eaton Vance Corp. 14,000 535,500 Franklin Resources, Inc. 1,100 60,500 Peregrine Investments Holdings Ltd. 843,000 1,203,475 Price (T. Rowe) Associates, Inc. 14,000 665,000 2,464,475 SECURITY & COMMODITY BROKERS - 68.4% Advest Group, Inc. (The) (a) 100,000 800,000 BHC Financial, Inc. 65,000 1,129,375 Bear Stearns Companies, Inc. 26,460 545,738 Edwards (A.G.), Inc. 69,000 1,681,875 First Marathon, Inc. Class A (non-vtg.) 100,200 987,872 Interstate/Johnson Lane, Inc. 38,900 403,588 Jefferies Group, Inc. 49,100 1,939,450 Legg Mason, Inc. 69,700 2,056,150 McDonald & Co. Investments, Inc. 34,200 577,125 Merrill Lynch & Co., Inc. 17,700 1,019,963 Morgan Keegan, Inc. 134,950 1,551,925 Morgan Stanley Group, Inc. 20,800 1,807,000 Piper Jaffray, Inc. 53,600 777,200 Quick & Reilly Group, Inc. (The) 53,050 1,982,744 Raymond James Financial, Inc. 67,900 1,493,800 Schwab (Charles) Corp. 8,100 376,650 Southwest Securities Group, Inc. 40,000 365,000 Stifel Financial Corp. (a) 29,600 192,400 Waterhouse Investor Services, Inc. 73,000 2,089,625 21,777,480 SECURITY BROKERS & DEALERS - 7.3% Finanza & Futuro Holdings SPA 2,600 10,346 Inter-Regional Financial Group, Inc. 58,500 1,872,000 Lehman Brothers Holdings, Inc. 1,100 26,125 Sherwood Group, Inc. (a) 48,300 410,550 2,319,021 TOTAL SECURITIES INDUSTRY 28,260,205 TOTAL COMMON STOCKS (Cost $27,457,216) 31,215,143 REPURCHASE AGREEMENTS - 1.9% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 610,099 $ 610,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $28,067,216) $ 31,825,143 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 $89,289 or 0.3% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $32,986,260 and $33,511,944, 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 $11,593 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $3,294,000 and $1,941,875, respectively. The weighted average interest rate paid was 6.3% (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 81.8% Canada 7.1 United Kingdom 4.6 Hong Kong 3.8 Thailand 2.7 Others (individually less than 1%) 0.0 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $28,081,835. Net unrealized appreciation aggregated $3,743,308, of which $4,090,398 related to appreciated investment securities and $347,090 related to depreciated investment securities. The fund has elected to defer to its fiscal year ending February 28, 1996 $1,914,000 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
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $610,000) (cost $28,067,216) - See $ 31,825,143 accompanying schedule Cash 160,803 Receivable for investments sold 1,071,045 Receivable for fund shares sold 125,151 Dividends receivable 57,253 Redemption fees receivable 179 Other receivables 11,242 Prepaid expenses 7,219 TOTAL ASSETS 33,258,035 LIABILITIES Payable for investments purchased $ 568,688 Payable for fund shares redeemed 1,021,205 Accrued management fee 19,116 Other payables and accrued expenses 43,856 TOTAL LIABILITIES 1,652,865 NET ASSETS $ 31,605,170 Net Assets consist of: Paid in capital $ 26,232,243 Undistributed net investment income 105,427 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 1,509,579 Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 3,757,921 NET ASSETS, for 1,743,328 $ 31,605,170 shares outstanding NET ASSET VALUE and redemption price per share ($31,605,170 (divided by) 1,743,328 shares) $18.13 Maximum offering price per share (100/97.00 of $18.13) $18.69
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 310,540 Dividends Interest 87,144 TOTAL INCOME 397,684 EXPENSES Management fee $ 109,119 Transfer agent 158,182 Fees Redemption fees (25,066 ) Accounting fees and expenses 22,772 Non-interested trustees' compensation 171 Custodian fees and expenses 14,494 Registration fees 7,219 Audit 8,604 Legal 93 Interest 2,146 Miscellaneous 276 Total expenses before reductions 298,010 Expense reductions (5,753 292,257 ) NET INVESTMENT INCOME 105,427 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 3,463,378 Foreign currency transactions (828 3,462,550 ) Change in net unrealized appreciation (depreciation) on: Investment securities 3,130,397 Assets and liabilities in (13 3,130,384 foreign currencies ) NET GAIN (LOSS) 6,592,934 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 6,698,361 OTHER INFORMATION $106,555 Sales Charges Paid to FDC Deferred sales charges withheld $3,682 by FDC Exchange fees withheld by FSC $16,740
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 105,427 $ (59,459 Net investment income (loss) ) Net realized gain (loss) 3,462,550 144,552 Change in net unrealized appreciation (depreciation) 3,130,384 (6,407,629 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 6,698,361 (6,322,536 ) Distributions to shareholders (152,294 - From net realized gain ) In excess of net realized gain (687,018 - ) TOTAL DISTRIBUTIONS (839,312 - ) Share transactions 42,589,290 41,178,684 Net proceeds from sales of shares Reinvestment of distributions 820,067 - Cost of shares redeemed (45,052,331 (67,399,063 ) ) Paid in capital portion of redemption fees 43,243 78,929 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (1,599,731 (26,141,450 ) ) TOTAL INCREASE (DECREASE) IN NET ASSETS 4,259,318 (32,463,986 ) NET ASSETS Beginning of period 27,345,852 59,809,838 End of period (including undistributed net investment income of $105,427 and $0, respectively) $ 31,605,170 $ 27,345,852 OTHER INFORMATION Shares Sold 2,548,030 2,575,103 Issued in reinvestment of distributions 52,908 - Redeemed (2,620,357 (4,181,828 ) ) Net increase (decrease) (19,419) (1,606,725)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 15.51 $ 17.75 $ 14.22 $ 11.48 $ 9.28 $ 7.97 Income from Investment Operations Net investment income (loss) .05 (.03) (.02) - .02 .08 Net realized and unrealized gain (loss) 3.04 (2.25) 4.95 2.65 1.96 1.15 Total from investment operations 3.09 (2.28) 4.93 2.65 1.98 1.23 Less Distributions - - (.01) - (.01) (.09) From net investment income From net realized gain (.09) - (1.47) - - - In excess of net realized gain (.40) - - - - - Total distributions (.49) - (1.48) - (.01) (.09) Redemption fees added to paid in capital .02 .04 .08 .09 .23 .17 Net asset value, end of period $ 18.13 $ 15.51 $ 17.75 $ 14.22 $ 11.48 $ 9.28 TOTAL RETURN B, C 20.59% (12.62)% 35.87% 23.87% 23.84% 17.90% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 31,605 $ 27,346 $ 59,810 $ 24,687 $ 17,915 $ 11,285 Ratio of expenses to average net assets 1.62% A 2.54% 1.77% 2.21% A 2.17% 2.50% Ratio of expenses to average net assets before 1.65% A 2.90% 1.79% 2.21% A 2.17% 2.91% expense reductions Ratio of net investment income (loss) to average net .59% A (.20)% (.14)% .02% A .16% .94% assets Portfolio turnover rate 206% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1995 MONTH YEAR YEARS YEARS S FINANCIAL SERVICES 19.51% 15.86% 236.92% 280.49% FINANCIAL SERVICES (INCL. 3% SALES CHARGE) 15.93% 12.38% 226.81% 269.07% S&P 500 16.81% 21.45% 102.17% 311.58% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS YEARS FINANCIAL SERVICES 15.86% 27.50% 14.30% FINANCIAL SERVICES (INCL. 3% SALES CHARGE) 12.38% 26.72% 13.95% S&P 500 21.45% 15.12% 15.20% 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 FinanciStandard & Poo 08/31/85 9700.00 10000.00 09/30/85 9282.33 9687.00 10/31/85 9891.27 10134.54 11/30/85 10476.78 10829.77 12/31/85 10874.93 11353.93 01/31/86 11518.99 11417.51 02/28/86 12713.44 12271.54 03/31/86 13537.06 12956.29 04/30/86 13412.15 12809.89 05/31/86 13962.54 13491.37 06/30/86 14372.39 13719.38 07/31/86 13344.12 12952.46 08/31/86 14188.28 13913.54 09/30/86 12670.37 12762.89 10/31/86 12951.76 13499.31 11/30/86 12824.94 13827.34 12/31/86 12507.88 13474.74 01/31/87 13387.71 15289.79 02/28/87 14275.47 15893.74 03/31/87 13732.51 16353.07 04/30/87 12868.53 16207.52 05/31/87 12777.38 16348.53 06/30/87 13249.00 17174.13 07/31/87 13403.56 18044.86 08/31/87 14180.35 18717.93 09/30/87 13677.03 18308.01 10/31/87 10581.76 14364.46 11/30/87 9935.76 13180.83 12/31/87 10439.18 14183.89 01/31/88 11225.20 14781.03 02/29/88 11599.09 15469.83 03/31/88 11399.40 14991.81 04/30/88 11199.71 15158.22 05/31/88 11310.17 15290.10 06/30/88 12006.97 15991.91 07/31/88 11926.24 15931.15 08/31/88 11892.25 15389.49 09/30/88 12385.11 16045.08 10/31/88 12419.10 16491.13 11/30/88 11905.00 16255.31 12/31/88 11693.38 16539.78 01/31/89 12292.70 17750.49 02/28/89 12266.46 17308.50 03/31/89 13163.25 17711.79 04/30/89 13403.86 18631.03 05/31/89 14243.79 19385.59 06/30/89 14144.54 19275.09 07/31/89 15276.63 21015.63 08/31/89 15708.32 21427.54 09/30/89 16034.29 21339.68 10/31/89 14505.75 20844.60 11/30/89 14307.52 21269.83 12/31/89 13955.16 21780.31 01/31/90 12777.04 20318.85 02/28/90 13239.40 20580.96 03/31/90 13034.89 21126.36 04/30/90 12572.54 20598.20 05/31/90 13679.53 22606.52 06/30/90 13297.19 22452.80 07/31/90 12443.61 22380.95 08/31/90 10954.29 20357.71 09/30/90 9322.71 19366.29 10/31/90 8509.14 19283.02 11/30/90 9709.48 20528.70 12/31/90 10559.89 21101.45 01/31/91 11519.46 22021.47 02/28/91 12842.86 23596.01 03/31/91 13456.81 24167.03 04/30/91 13893.39 24225.03 05/31/91 14957.57 25271.56 06/30/91 13743.32 24114.12 07/31/91 14830.23 25237.84 08/31/91 15812.54 25835.97 09/30/91 15717.04 25404.51 10/31/91 16062.67 25744.93 11/30/91 14871.16 24707.41 12/31/91 17067.78 27533.94 01/31/92 17917.95 27021.81 02/29/92 19204.70 27373.09 03/31/92 18772.72 26839.32 04/30/92 19494.22 27628.39 05/31/92 20330.60 27763.77 06/30/92 20798.41 27350.09 07/31/92 21393.18 28468.71 08/31/92 20166.16 27885.10 09/30/92 20793.72 28214.15 10/31/92 21617.98 28312.90 11/30/92 23243.07 29278.37 12/31/92 24376.22 29638.49 01/31/93 25913.77 29887.45 02/28/93 26602.68 30293.92 03/31/93 27995.46 30933.12 04/30/93 26655.24 30184.54 05/31/93 26665.34 30993.49 06/30/93 27660.81 31083.37 07/31/93 28403.62 30959.04 08/31/93 29287.92 32132.38 09/30/93 29965.03 31884.96 10/31/93 29161.59 32544.98 11/30/93 27862.93 32235.80 12/31/93 28655.31 32625.86 01/31/94 30600.58 33735.14 02/28/94 29489.82 32820.92 03/31/94 28143.09 31389.92 04/30/94 29211.80 31791.71 05/31/94 30458.68 32313.10 06/30/94 29739.55 31521.43 07/31/94 30777.65 32555.33 08/31/94 31856.34 33890.10 09/30/94 29455.37 33059.79 10/31/94 29298.79 33803.64 11/30/94 27442.97 32572.51 12/31/94 27610.11 33055.56 01/31/95 29038.00 33912.69 02/28/95 30882.09 35234.27 03/31/95 31426.35 36274.03 04/30/95 32412.43 37342.30 05/31/95 34211.70 38834.87 06/30/95 34371.77 39737.01 07/31/95 35524.33 41054.68 08/31/95 36907.39 41157.73 Let's say you invested $10,000 in Fidelity Select Financial Services Portfolio on August 31, 1985 and paid a 3% sales charge. By August 31, 1995, your investment would have grown to $36,907 - a 269.07% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $41,158 over the same period - a 311.58% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS American Express Co. 5.6 Bank of New York Co., Inc. 5.1 Household International, Inc. 5.1 Beneficial Corp. 5.0 Allstate Corp. 4.8 First Bank System, Inc. 4.7 Shawmut National Corp. 4.7 Federal Home Loan Mortgage Corporation 4.7 Banc One Corp. 4.4 Federal National Mortgage Association 4.3 TOP INDUSTRIES AS OF AUGUST 31, 1995 National Commercial Banks 37.4% Personal Credit Institutions 10.1% Federal & Federally Sponsored Credit Agencies 9.0% Financial Services 8.7% Property-Casualty & Reinsurance 6.3% All Others 28.5%* Row: 1, Col: 1, Value: 28.5 Row: 1, Col: 2, Value: 6.3 Row: 1, Col: 3, Value: 8.699999999999999 Row: 1, Col: 4, Value: 9.0 Row: 1, Col: 5, Value: 10.1 Row: 1, Col: 6, Value: 37.4 * 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 HAS THE FUND PERFORMED, LOUIS? A. The fund has done fairly well over the recent past. For the six months ended August 31, 1995, it outpaced the market, gaining 19.51% compared with a 16.81% return for the S&P 500. In the 12- month comparison, the fund trailed the index, returning 15.86% compared with the S&P 500's 21.45% gain. Q. WHAT FACTORS CONTRIBUTED TO FUND PERFORMANCE? A. The stabilization and slight lowering of interest rates probably played the biggest role in the fund's recent performance. Short-term rates were only down about 25 basis points during the period, but longer-term rates improved to a greater degree. Investors seemed to believe that improvements in the rate environment also would improve the fundamentals of many of the companies in the sector, and in many cases, this proved to be accurate. Lower rates probably had the greatest positive impact on the brokerage segment; they also helped spur new mortgage refinancing activity, which benefited companies that operate in the secondary mortgage market, such as Fannie Mae and Freddie Mac. At the same time, I should point out that a lot of what was gained in the period was simply a recapture of depressed valuations caused by the run-up in short-term interest rates during much of 1994. Q. WERE THERE OTHER FACTORS THAT HELPED THE FUND? A. Many companies in the sector have continued to reshape and reposition their businesses, and this kind of internal dynamics at certain individual companies had a positive impact on the fund. American Express, for example, has been focusing on cutting costs and growing its core businesses, instead of diversifying. Its cardholder base is growing again, its personal investment services business (American Express Financial Advisors) has been doing well in a higher stock market, the fundamentals of the company have been improving, and all of this has been reflected in a higher stock price. The fund also has benefited from acquisition activity, particularly in the banking sector, where names like Midlantic Bank - which the fund no longer owns - and Shawmut Bank have done quite well. Q. WHAT OTHER NAMES DID YOU LIKE? A. Among the bank group, there were three others that did especially well during the period. Bank of New York continues to be a strong contributor. As an asset-sensitive institution - one whose assets, or loans, tend to re-price more quickly than its liabilities, or deposits - the company showed good earnings during last year's rising rate environment, which eventually was reflected in a higher stock price. Bank of Boston is a similar story, although I recently liquidated the position. The company has had a phenomenal run, based on consistently strong earnings and takeover speculation. I also liked Banc One, which is a financial turnaround story. Q. HAVE YOU MADE ANY MAJOR CHANGES IN INVESTMENT STRATEGY? A. Nothing major. I've sold a number of the bank positions that have reached my price targets. Over time, I've been trying to diversify the fund. So what I'm seeking to own now are basically good, solid core financial institutions that don't appear to be subject to any takeover speculation and that have consistently generated higher returns than their peers. I generally like the portfolio the way it's currently structured and don't plan to make any changes in strategy right now. Q. WHAT IS YOUR OUTLOOK FOR THE SECTOR AND FOR ITS FUTURE PERFORMANCE? A. I'm somewhat concerned about the sector because I think valuations for a lot of the stocks are at their upper end. But as long as the rate environment remains positive, I think the fund should continue to do fairly well. FUND FACTS START DATE: December 10, 1981 TRADING SYMBOL: FIDSX SIZE: as of August 31, 1995, more than $171 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 83.7% SHARES VALUE (NOTE 1) BANKS - 37.4% NATIONAL COMMERCIAL BANKS - 37.4% Banc One Corp. 219,400 $ 7,377,322 Bank of New York Co., Inc. 195,334 8,497,029 BankAmerica Corp. 100,000 5,650,000 Comerica, Inc. 84,445 3,008,353 First Bank System, Inc. 172,400 7,865,750 First Chicago Corp. 85,800 5,437,575 First Union Corp. 1 50 Fleet Financial Group, Inc. 119,596 4,425,052 Mercantile Bancorporation, Inc. 22,050 997,763 Morgan (J.P.) & Co., Inc. 96,300 7,017,863 NBD Bancorp, Inc. 24,100 861,575 Shawmut National Corp. 240,000 7,770,000 Zions Bancorporation 58,000 3,204,500 62,112,832 CREDIT & OTHER FINANCE - 18.8% FINANCIAL SERVICES - 8.7% American Express Co. 230,000 9,286,250 Equitable Companies, Inc. 200,000 5,150,000 14,436,250 PERSONAL CREDIT INSTITUTIONS - 10.1% Beneficial Corp. 167,900 8,248,088 Household International, Inc. 150,500 8,446,813 16,694,901 TOTAL CREDIT & OTHER FINANCE 31,131,151 FEDERAL SPONSORED CREDIT - 9.0% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 9.0% Federal Home Loan Mortgage Corporation 120,700 7,754,975 Federal National Mortgage Association 75,600 7,210,350 14,965,325 INSURANCE - 13.3% INSURANCE BROKERS & SERVICES - 3.4% Alexander & Alexander Services, Inc. 250,000 5,781,250 LIFE INSURANCE - 3.6% Providian Corp. 96,800 3,714,700 Torchmark Corp. 55,000 2,200,000 5,914,700 PROPERTY-CASUALTY& REINSURANCE - 6.3% Allstate Corp. 236,700 8,018,213 Travelers, Inc. (The) 49,633 2,382,384 10,400,597 TOTAL INSURANCE 22,096,547 SAVINGS & LOANS - 2.1% SAVINGS BANKS & SAVINGS & LOANS - 0.9% Standard Federal Bancorporation, Inc. 39,300 1,532,700 SAVINGS BANKS, FEDERAL CHARTER - 1.2% Ahmanson (H.F.) & Co. 82,900 1,968,875 TOTAL SAVINGS & LOANS 3,501,575 SECURITIES INDUSTRY - 1.8% SECURITY & COMMODITY BROKERS - 1.8% Morgan Stanley Group, Inc. 34,300 2,979,813 SHARES VALUE (NOTE 1) SERVICES - 1.3% CREDIT REPORTING AGENCIES - 1.3% First Financial Management Corp. 25,000 $ 2,234,090 TOTAL COMMON STOCKS (Cost $117,285,160) 139,021,333 REPURCHASE AGREEMENTS - 16.3% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 27,083,378 27,079,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $144,364,160) $ 166,100,333 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggre- gated $68,796,866 and $75,288,901, 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 $40,395 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the period for which the loan was outstanding amounted to $1,601,000. The weighted average interest rate paid was 6.5% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $144,613,332. Net unrealized appreciation aggregated $21,487,001, of which $21,755,917 related to appreciated investment securities and $268,916 related to depreciated investment securities. FINANCIAL SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $27,079,000) (cost $144,364,160) - $ 166,100,333 See accompanying schedule Cash 766 Receivable for fund shares sold 16,202,382 Dividends receivable 282,250 Redemption fees receivable 16,328 Other receivables 5,478 Prepaid expenses 12,205 TOTAL ASSETS 182,619,742 LIABILITIES Payable for investments purchased $ 8,195,858 Payable for fund shares redeemed 2,690,069 Accrued management fee 72,512 Other payables and accrued expenses 128,179 TOTAL LIABILITIES 11,086,618 NET ASSETS $ 171,533,124 Net Assets consist of: Paid in capital $ 141,943,940 Undistributed net investment income 1,311,150 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 6,541,861 Net unrealized appreciation (depreciation) on investments 21,736,173 NET ASSETS, for 2,975,687 shares outstanding $ 171,533,124 NET ASSET VALUE and redemption price per share ($171,533,124 (divided by) 2,975,687 shares) $57.64 Maximum offering price per share (100/97.00 of $57.64) $59.42
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 1,676,645 Dividends Interest 663,336 TOTAL INCOME 2,339,981 EXPENSES Management fee $ 433,183 Transfer agent 558,536 Fees Redemption fees (58,745 ) Accounting fees and expenses 70,746 Non-interested trustees' compensation 555 Custodian fees and expenses 7,666 Registration fees 12,205 Audit 10,878 Legal 384 Interest 290 Miscellaneous 983 Total expenses before reductions 1,036,681 Expense reductions (7,722 1,028,959 ) NET INVESTMENT INCOME 1,311,022 REALIZED AND UNREALIZED GAIN (LOSS) 6,787,271 Net realized gain (loss) on investment securities Change in net unrealized appreciation (depreciation) on investment securities 15,527,232 NET GAIN (LOSS) 22,314,503 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 23,625,525 OTHER INFORMATION $375,839 Sales Charges Paid to FDC Deferred sales charges withheld $8,153 by FDC Exchange fees withheld by FSC $41,483
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 1,311,022 $ 1,646,581 Net investment income Net realized gain (loss) 6,787,271 9,348,163 Change in net unrealized appreciation (depreciation) 15,527,232 (5,791,837 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 23,625,525 5,202,907 Distributions to shareholders - (1,391,905 From net investment income ) From net realized gain - (6,998,318 ) TOTAL DISTRIBUTIONS - (8,390,223 ) Share transactions 112,467,831 137,344,321 Net proceeds from sales of shares Reinvestment of distributions - 8,148,541 Cost of shares redeemed (117,775,019 (105,579,333 ) ) Paid in capital portion of redemption fees 125,885 167,317 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (5,181,303 40,080,846 ) TOTAL INCREASE (DECREASE) IN NET ASSETS 18,444,222 36,893,530 NET ASSETS Beginning of period 153,088,902 116,195,372 End of period (including undistributed net investment income of $1,311,150 and $304,699, respectively) $ 171,533,124 $ 153,088,902 OTHER INFORMATION Shares Sold 2,094,573 2,833,201 Issued in reinvestment of distributions - 192,390 Redeemed (2,293,218 (2,118,831 ) ) Net increase (decrease) (198,645) 906,760
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 48.23 $ 51.24 $ 53.29 $ 42.42 $ 30.55 $ 28.28 Income from Investment Operations Net investment income .49 .76 .29 .33 .54 .58 Net realized and unrealized gain (loss) 8.87 .87 5.02 14.30 11.35 1.67 Total from investment operations 9.36 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 .05 .08 .16 .13 .33 .54 Net asset value, end of period $ 57.64 $ 48.23 $ 51.24 $ 53.29 $ 42.42 $ 30.55 TOTAL RETURN B, C 19.51% 4.72% 10.85% 36.46% 40.31% 10.51% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 171,533 $ 153,089 $ 116,195 $ 214,612 $ 91,700 $ 35,962 Ratio of expenses to average net assets 1.44% A 1.54% 1.63% 1.54% A 1.85% 2.49% Ratio of expenses to average net assets before 1.45% A 1.56% 1.64% 1.54% A 1.85% 2.49% expense reductions Ratio of net investment income to average net assets 1.83% A 1.52% .53% .86% A 1.49% 2.22% Portfolio turnover rate 113% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E 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). If Fidelity had not reimbursed certain expenses, the past five years and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S HOME FINANCE 27.76% 23.75% 399.04% 534.66% HOME FINANCE (INCL. 3% SALES CHARGE) 23.93% 20.03% 384.07% 515.62% S&P 500 16.81% 21.45% 102.17% 265.41% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on 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 AUGUST 31, 1995 YEAR YEARS FUND HOME FINANCE 23.75% 37.92% 20.95% HOME FINANCE (INCL. 3% SALES CHARGE) 20.03% 37.08% 20.57% S&P 500 21.45% 15.12% 14.27% 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 FinanStandard & Poor's 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 12179.88 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 16966.78 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 16922.44 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 12651.76 18734.62 01/31/91 13861.93 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 17743.90 22436.99 06/30/91 16753.76 21409.37 07/31/91 18545.44 22407.05 08/31/91 19252.68 22938.10 09/30/91 19095.52 22555.03 10/31/91 18765.47 22857.27 11/30/91 17901.07 21936.12 12/31/91 20825.52 24445.61 01/31/92 22877.84 23990.92 02/29/92 24373.33 24302.81 03/31/92 23959.69 23828.90 04/30/92 24468.79 24529.47 05/31/92 26887.03 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 35232.15 26535.14 02/28/93 35829.85 26896.02 03/31/93 37106.03 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 42466.07 28894.59 11/30/93 40566.79 28620.10 12/31/93 41846.50 28966.40 01/31/94 43678.57 29951.26 02/28/94 42856.71 29139.58 03/31/94 42051.97 27869.09 04/30/94 43677.83 28225.82 05/31/94 46371.77 28688.72 06/30/94 47144.04 27985.85 07/31/94 48185.70 28903.78 08/31/94 49748.18 30088.84 09/30/94 48042.02 29351.66 10/31/94 45168.48 30012.07 11/30/94 42833.73 28919.03 12/31/94 42968.45 29347.90 01/31/95 44862.04 30108.89 02/28/95 48185.90 31282.24 03/31/95 48105.32 32205.38 04/30/95 50623.40 33153.82 05/31/95 53624.95 34478.98 06/30/95 54189.00 35279.93 07/31/95 56364.61 36449.81 08/31/95 61561.92 36541.30 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 August 31, 1995, your investment would have grown to $61,562 - a 515.62% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $36,541 over the same period - a 265.41% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Standard Federal Bancorporation, Inc. 6.1 Astoria Financial Corp. 5.3 FirstFed Michigan Corp. 5.3 North Side Savings Bank 4.1 Greenpoint Financial Corp. 3.9 Federal National Mortgage Association 3.8 Collective Bancorp, Inc. 3.2 Capstead Mortgage Corp. 2.9 Long Island Bancorp, Inc. 2.5 Washington Mutual, Inc. 2.5 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 25.9 Row: 1, Col: 2, Value: 4.1 Row: 1, Col: 3, Value: 5.7 Row: 1, Col: 4, Value: 6.3 Row: 1, Col: 5, Value: 21.0 Row: 1, Col: 6, Value: 37.0 Savings Banks & Savings & Loans 37.0% Savings Banks, Federal Charter 21.0% National Commercial Banks 6.3% Federal & Federally Sponsored Credit Agencies 5.7% Bank Holding Company Offices 4.1% All Others 25.9%* * INCLUDES SHORT-TERM INVESTMENTS HOME FINANCE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW David Ellison, Portfolio Manager of Fidelity Select Home Finance Portfolio Q. HOW HAS THE FUND BEEN PERFORMING, DAVE? A. Quite well, actually, particularly over the last six months. For the six-month period ended August 31, 1995, the fund returned 27.76%, well ahead of the S&P 500's 16.81% return. For the 12 months ended August 31, it was up 23.75%, compared with a 21.45% gain for the S&P 500. Q. WHAT FACTORS HELPED THE FUND OUTPERFORM THE MARKET? A. There were four major factors. First, the leveling off of interest rates from their large increases during much of 1994 had a net positive effect, particularly insofar as the market was discounting for higher rates that did not materialize. Second, there was above-average takeover activity that got investors excited and drove some stock prices higher. Third, there was continuing activity in stock-repurchase programs, which I see as a manifestation of a depository institutions industry that is in good health. Fourth, and more recently, there was a significant court ruling that may increase the book value and strengthen the balance sheets of certain institutions in the industry, which had the effect of giving stock prices for the entire group a nice lift. Q. THE INDUSTRY HAS BEEN LOOKING PRETTY GOOD THEN . . . A. Yes, from a fundamental point of view, I'd say things looked pretty healthy. Capital levels have been extraordinarily high. Credit quality and demand have been very good. And from an earnings point of view, in terms of the quality of balance sheets and income statements, I think the industry was as strong as I've seen it in the last 10-12 years. Q. WERE THERE ANY NEGATIVE FACTORS AFFECTING THE INDUSTRY DURING THE PERIOD? A. The only real negative for the group as a whole has been that lending spreads - the difference between rates institutions charge for loans and what they pay for deposits - have been under pressure for the past 18 months or so. Even though interest rates stabilized in the first half of 1995, spreads have not yet improved in any bona fide way. Many institutions have been able to make up for this through increasing loan growth and by various cost-cutting programs, but the yield curve still has been somewhat flat. Q. DO YOU EXPECT TO SEE BETTER SPREADS GOING FORWARD? A. I think there could be some improvement in the next six months. The cost of funds has stabilized, and this should eventually have a positive effect on spreads. But the real question is how much of an impact will widening spreads have on earnings in the near term and how will that affect stock prices. Q. WHAT IS YOUR OUTLOOK FOR THE INDUSTRY? A. There has been a large run-up in industry stock prices recently, and I'm not sure how long it will last. Periods of appreciation are always followed by periods of correction, so I'd have to say I'm cautious in my outlook. I'm not sure what interest rates will do going forward. I believe that credit quality in the industry is currently pretty solid, but some observers are becoming concerned about growing levels of consumer loans held by the industry. Q. HOW WILL THIS AFFECT YOUR INVESTMENT STRATEGY LOOKING AHEAD? A. It really should not affect my game plan. I manage the portfolio in a very disciplined way. I don't make bets on yield curves and don't buy companies based on "good stories." I judge stocks mainly on their valuations. I buy on my analysis of a company's growth potential and its value relative to earnings or price-to-book ratio. This strategy allowed me to take advantage of a number of good values among smaller thrift institutions that converted to public ownership over the past year or so. I bought about 20 newly converted thrifts over the last 12 months, and even though they were all relatively small positions, they added a fair amount of horsepower to fund performance. I believe there will be a continuing trend toward thrift conversions, which means there are likely to be a number of new names to consider buying if their fundamentals look good. FUND FACTS START DATE: December 16, 1985 TRADING SYMBOL: FSVLX SIZE: as of August 31, 1995, more than $353 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 86.7% SHARES VALUE (NOTE 1) BANKS - 7.9% COMMERCIAL BANKS - 0.7% MLF Bancorp, Inc. 76,900 $ 1,826,367 Norwalk Savings Society (a) 15,000 283,125 2,109,492 NATIONAL COMMERCIAL BANKS - 6.3% Bank Atlantic Bancorp, Inc. (a) 2,750 51,563 Bank of New York Co., Inc. 46,100 2,005,350 Chase Manhattan Corp. 30,000 1,725,000 Citicorp 6,490 430,774 First Interstate Bancorp 52,900 5,051,950 NationsBank Corp. 50,000 3,068,750 PNC Financial Corp. 95,000 2,493,750 Peoples Heritage Financial Group, Inc. 196,800 4,009,800 Union Bank of San Francisco 27,500 1,409,375 20,246,312 STATE BANKS FEDERAL RESERVE - 0.9% Chemical Banking Corp. 40,000 2,330,000 TR Financial Corp. 30,000 678,750 3,008,750 TOTAL BANKS 25,364,554 CONSTRUCTION - 0.3% OPERATIVE BUILDERS - 0.3% Kaufman & Broad Home Corp. 65,000 869,375 CREDIT & OTHER FINANCE - 5.3% BANK HOLDING COMPANY OFFICES - 4.1% First Keystone Financial, Inc. (a) 12,800 211,200 Greenpoint Financial Corp. 445,690 12,367,898 IBS Financial Corp. 33,400 501,000 13,080,098 FINANCIAL SERVICES - 0.0% Fidelity Federal Bank FSB Class A (a) 40,000 60,000 LOAN BROKERS - 0.3% Aames Financial Corp. 40,000 1,090,000 MORTGAGE BANKERS - 0.9% Countrywide Credit Industries, Inc. 98,900 2,175,800 First Financial Caribbean Corp. 7,743 113,241 Money Store, Inc. 10,000 656,250 2,945,291 TOTAL CREDIT & OTHER FINANCE 17,175,389 FEDERAL SPONSORED CREDIT - 5.7% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 5.7% Federal Home Loan Mortgage Corporation 93,700 6,020,225 Federal National Mortgage Association 127,100 12,122,163 18,142,388 INSURANCE - 1.9% INSURANCE BROKERS & SERVICES - 0.9% Fidelity National Financial, Inc. 154,000 2,002,000 Stewart Information Services Corp. 45,000 843,750 2,845,750 PROPERTY-CASUALTY & REINSURANCE - 1.0% First American Financial Corp. 102,900 2,469,600 Old Republic International Corp. 24,200 668,525 3,138,125 TOTAL INSURANCE 5,983,875 SHARES VALUE (NOTE 1) REAL ESTATE INVESTMENT TRUSTS - 4.0% Capstead Mortgage Corp. 302,497 $ 9,377,407 Prime Multifamily, Inc. 37,800 590,625 Thornburg Mortgage Asset Corp. 185,000 2,751,875 12,719,907 SAVINGS & LOANS - 60.6% SAVINGS BANKS & SAVINGS & LOANS - 37.0% Andover Bancorp, Inc. 6,900 146,625 Astoria Financial Corp. 395,400 17,002,200 Bankers Corp. 20,000 355,000 Cameron Financial Corp. (a)(b) 207,900 3,014,550 Charter One Financial Corp. 113,500 3,419,188 Coast Savings Financial, Inc. (a) 5,000 139,375 Collective Bancorp, Inc. 410,200 10,255,000 Commercial Federal Corp. (a) 140,000 4,935,000 Co-Operative Bank of Concord 99,600 1,718,100 First Federal Savings & Loan Association 44,700 888,413 First Financial Corp. of Wisconsin 126,300 2,494,425 FirstFed Michigan Corp. 476,450 16,854,419 FirstFed Financial Corp. (a) 230,600 3,804,900 Glendale Federal Bank FSB (a) 133,900 2,108,925 Golden West Financial Corp. 134,200 6,408,050 Great Western Financial Corp. 280,516 6,557,062 Loyola Capital Corp. 15,000 525,000 MidConn Bank 31,900 470,525 Monterey Bay Bancorp, Inc. (a)(b) 225,000 2,840,625 North Side Savings Bank (b) 452,292 13,116,468 Standard Federal Bancorporation, Inc. 501,400 19,554,600 Wells Financial Corp. (a)(b) 200,000 2,050,000 118,658,450 SAVINGS BANKS, NO FEDERAL CHARTER - 2.9% Avondale Financial Corp. (a)(b) 220,400 3,307,875 Farmers & Mechanics Bank (a) 52,500 892,500 First Republic Bancorp, Inc. (a) 14,200 195,250 Lakeview Financial Corp. 50,500 883,750 Northwest Savings Bank 55,000 1,182,500 Queens County Bancorp, Inc. 30,000 1,095,000 Springfield Institution for Savings (a) 101,800 1,590,625 Sterling Financial Corp. (a) 15,700 200,175 9,347,675 SAVINGS BANKS, FEDERAL CHARTER - 20.7% Ahmanson (H.F.) & Co. 168,953 4,012,634 Brooklyn Bancorp, Inc. (a) 112,500 4,204,688 Carver Federal Savings Bank (a)(b) 155,500 1,263,438 CenFed Financial Corp. (b) 249,250 5,795,063 Coastal Bancorp, Inc. 10,000 168,750 D & N Financial Corp. (a) 8,500 106,250 Dime Bancorp, Inc. (a) 246,236 2,985,612 HF Bancorp, Inc. (a) 40,400 388,850 HMN Financial, Inc. (a) 120,000 1,770,000 Haven Bancorp, Inc. (a)(b) 202,500 4,682,813 Long Island Bancorp, Inc. 319,980 8,119,493 Main Street Community Bancorp 95,000 1,615,000 Mississippi View Holding Co. (a)(b) 75,000 731,250 Pennfed Financial Services, Inc. (a) 94,900 1,387,913 Primary Bank (a) 84,200 1,199,850 Quaker City Bancorp (a) 199,900 2,723,638 RedFed Bancorp, Inc. (a) 109,400 1,011,950 Reliance BanCorp, Inc. 188,200 2,658,325 Roosevelt Financial Group, Inc. 20,000 362,500 SGV Bancorp, Inc. 75,000 703,125 Standard Financial, Inc. (a) 263,700 3,823,650 Teche Holding Co. 182,000 2,434,250 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SAVINGS & LOANS - CONTINUED SAVINGS BANKS, FEDERAL CHARTER - CONTINUED Washington Federal, Inc. 262,900 $ 6,112,425 Washington Mutual, Inc. 312,300 8,080,763 66,342,230 TOTAL SAVINGS & LOANS 194,348,355 SECURITIES INDUSTRY - 0.6% INVESTMENT MANAGERS - 0.6% Duff & Phelps Credit Rating Co. 131,100 1,900,950 SERVICES - 0.4% LEGAL SERVICES - 0.4% Lawyers Title Corp. 94,500 1,393,875 TOTAL COMMON STOCKS (Cost $219,267,512) 277,898,668 NONCONVERTIBLE PREFERRED STOCKS - 0.3% SAVINGS & LOANS - 0.3% SAVINGS BANKS, FEDERAL CHARTER - 0.3% First Nationwide Bank 11 1/2% (cost $1,076,250) 10,000 1,070,000 REPURCHASE AGREEMENTS - 13.0% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 41,614,727 41,608,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $261,951,762) $ 320,576,668 LEGEND 1. Non-income producing 2. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Avondale Financial Corp. $ - $ - $ - $ 3,307,875 Cameron Financial Corp. 606,239 - - 3,014,550 Carver Federal Savings Bank 225,625 - - 1,263,438 CenFed Financial Corp. - 933,650 51,165 5,795,063 Mississippi View Holding Co. 191,875 - - 731,250 Monterey Bay Bancorp, Inc. 288,750 - - 2,840,625 Haven Bancorp, Inc. - - - 4,682,813 North Side Savings Bank 410,413 - 243,468 13,116,468 Wells Financial Corp. 853,438 - - 2,050,000 Totals $ 2,576,340 $ 933,650 $ 294,633 $ 36,802,082 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $181,578,389 and $111,045,254, 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 $94,013 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $7,920,000 and $3,381,417, respectively. The weighted average interest rate paid was 6.3% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $262,029,769. Net unrealized appreciation aggregated $58,546,899, of which $59,239,149 related to appreciated investment securities and $692,250 related to depreciated investment securities. 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
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $41,608,000) (cost $261,951,762) - $ 320,576,668 See accompanying schedule Cash 522 Receivable for investments sold 19,671 Receivable for fund shares sold 42,313,064 Dividends receivable 428,579 Redemption fees receivable 955 Other receivables 3,475 Prepaid expenses 22,195 TOTAL ASSETS 363,365,129 LIABILITIES Payable for investments purchased $ 8,719,560 Payable for fund shares redeemed 1,308,401 Accrued management fee 133,748 Other payables and 193,387 accrued expenses TOTAL LIABILITIES 10,355,096 NET ASSETS $ 353,010,033 Net Assets consist of: Paid in capital $ 276,245,676 Undistributed net investment income 2,324,599 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 15,814,852 Net unrealized appreciation (depreciation) on investments 58,624,906 NET ASSETS, for 11,549,925 $ 353,010,033 shares outstanding NET ASSET VALUE and redemption price per share ($353,010,033 (divided by) 11,549,925 shares) $30.56 Maximum offering price per share (100/97.00 of $30.56) $31.51
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 2,644,065 Dividends (including $294,633 received from affiliated issuers) Interest 1,426,765 TOTAL INCOME 4,070,830 EXPENSES Management fee $ 811,968 Transfer agent 927,851 Fees Redemption fees (142,043 ) Accounting fees and expenses 132,449 Non-interested trustees' compensation 985 Custodian fees and expenses 14,460 Registration fees 22,195 Audit 12,012 Legal 563 Interest 7,076 Miscellaneous 2,179 Total expenses before reductions 1,789,695 Expense reductions (43,543 1,746,152 ) NET INVESTMENT INCOME 2,324,678 REALIZED AND UNREALIZED GAIN (LOSS) 17,092,253 Net realized gain (loss) on investment securities (including realized gain (loss) of $503,598 on sales of investment in affiliated issuers) Change in net unrealized appreciation (depreciation) on investment securities 43,455,810 NET GAIN (LOSS) 60,548,063 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 62,872,741 OTHER INFORMATION $1,135,474 Sales Charges Paid to FDC Deferred sales charges withheld $671 by FDC Exchange fees withheld by FSC $115,125
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 2,324,678 $ 1,608,322 Net investment income Net realized gain (loss) 17,092,253 20,398,138 Change in net unrealized appreciation (depreciation) 43,455,810 (3,449,716 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 62,872,741 18,556,744 Distributions to shareholders - (641,452 From net investment income ) From net realized gain - (19,377,299 ) TOTAL DISTRIBUTIONS - (20,018,751 ) Share transactions 376,180,036 425,502,908 Net proceeds from sales of shares Reinvestment of distributions - 19,534,918 Cost of shares redeemed (316,271,025 (369,762,089 ) ) Paid in capital portion of redemption fees 304,066 547,208 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 60,213,077 75,822,945 TOTAL INCREASE (DECREASE) IN NET ASSETS 123,085,818 74,360,938 NET ASSETS Beginning of period 229,924,215 155,563,277 End of period (including undistributed net investment income of $2,324,599 and $963,664, respectively) $ 353,010,033 $ 229,924,215 OTHER INFORMATION Shares Sold 14,042,559 16,880,752 Issued in reinvestment of distributions - 895,378 Redeemed (12,104,746 (14,378,596 ) ) Net increase (decrease) 1,937,813 3,397,534
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 23.92 $ 25.03 $ 22.18 $ 15.38 $ 10.84 $ 8.98 Income from Investment Operations Net investment income .23 .20 .03 .09 .05 .16 Net realized and unrealized gain (loss) 6.38 2.34 4.15 6.80 4.40 1.69 Total from investment operations 6.61 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 .03 .07 .08 .20 .23 .15 Net asset value, end of period $ 30.56 $ 23.92 $ 25.03 $ 22.18 $ 15.38 $ 10.84 TOTAL RETURN B, C 27.76% 12.43% 19.61% 46.43% 43.62% 22.88% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 353,010 $ 229,924 $ 155,563 $ 337,903 $ 49,405 $ 8,782 Ratio of expenses to average net assets 1.30% A 1.45% 1.58% 1.55% A 2.08% 2.50% Ratio of expenses to average net assets before 1.33% A 1.47% 1.58% 1.55% A 2.08% 2.82% expense reductions Ratio of net investment income to average net assets 1.73% A .80% .11% .61% A .40% 1.78% Portfolio turnover rate 100% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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). If Fidelity had not reimbursed certain expenses, the past five years and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S INSURANCE 14.57% 19.97% 127.98% 210.46% INSURANCE (INCL. 3% SALES CHARGE) 11.13% 16.37% 121.14% 201.15% S&P 500 16.81% 21.45% 102.17% 265.41% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on 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 AUGUST 31, 1995 YEAR YEARS FUND INSURANCE 19.97% 17.92% 12.37% INSURANCE (INCL. 3% SALES CHARGE) 16.37% 17.20% 12.02% S&P 500 21.45% 15.12% 14.27% 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 InsurStandard & P 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 9347.08 12592.97 01/31/88 10066.08 13123.13 02/29/88 10056.23 13734.67 03/31/88 9819.85 13310.27 04/30/88 9750.90 13458.01 05/31/88 10016.83 13575.09 06/30/88 10469.91 14198.19 07/31/88 10519.15 14144.24 08/31/88 10627.50 13663.33 09/30/88 10991.92 14245.39 10/31/88 10942.68 14641.41 11/30/88 10706.29 14432.04 12/31/88 10973.61 14684.60 01/31/89 11807.80 15759.52 02/28/89 11887.25 15367.10 03/31/89 12165.32 15725.16 04/30/89 12562.55 16541.29 05/31/89 12632.07 17211.21 06/30/89 12910.01 17113.11 07/31/89 13994.13 18658.42 08/31/89 14421.81 19024.13 09/30/89 14620.73 18946.13 10/31/89 15098.15 18506.58 11/30/89 15505.94 18884.12 12/31/89 15125.05 19337.33 01/31/90 13841.23 18039.80 02/28/90 14232.39 18272.51 03/31/90 14162.18 18756.73 04/30/90 13670.72 18287.82 05/31/90 14924.45 20070.88 06/30/90 14964.57 19934.40 07/31/90 14743.92 19870.61 08/31/90 13209.35 18074.30 09/30/90 12065.94 17194.08 10/31/90 11584.51 17120.15 11/30/90 13119.08 18226.11 12/31/90 13640.63 18734.62 01/31/91 14372.81 19551.45 02/28/91 15827.14 20949.38 03/31/91 16870.25 21456.35 04/30/91 16779.98 21507.85 05/31/91 17201.24 22436.99 06/30/91 16131.95 21409.37 07/31/91 16730.93 22407.05 08/31/91 16629.41 22938.10 09/30/91 16791.85 22555.03 10/31/91 17299.46 22857.27 11/30/91 17147.18 21936.12 12/31/91 18644.06 24445.61 01/31/92 18623.69 23990.92 02/29/92 19122.90 24302.81 03/31/92 18847.82 23828.90 04/30/92 18368.99 24529.47 05/31/92 18613.50 24649.67 06/30/92 19002.90 24282.39 07/31/92 20079.59 25275.53 08/31/92 19491.30 24757.39 09/30/92 20523.58 25049.52 10/31/92 21400.47 25137.20 11/30/92 22133.06 25994.38 12/31/92 22839.20 26314.11 01/31/93 23794.11 26535.14 02/28/93 24243.48 26896.02 03/31/93 25524.18 27463.53 04/30/93 24916.83 26798.91 05/31/93 24275.05 27517.12 06/30/93 24534.02 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 23941.88 29139.58 03/31/94 22819.41 27869.09 04/30/94 23066.11 28225.82 05/31/94 24126.90 28688.72 06/30/94 23991.22 27985.85 07/31/94 24435.27 28903.78 08/31/94 25101.35 30088.84 09/30/94 24928.66 29351.66 10/31/94 24620.29 30012.07 11/30/94 23374.48 28919.03 12/31/94 24620.29 29347.90 01/31/95 25508.40 30108.89 02/28/95 26285.49 31282.24 03/31/95 26704.88 32205.38 04/30/95 26951.59 33153.82 05/31/95 27544.75 34478.98 06/30/95 28409.77 35279.93 07/31/95 29262.44 36449.81 08/31/95 30115.10 36541.30 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 August 31, 1995, your investment would have grown to $30,115 - a 201.15% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $36,541 over the same period - a 265.41% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Federal Home Loan Mortgage Corporation 7.4 General Re Corp. 5.8 Allstate Corp. 5.5 Equitable Iowa Companies 5.3 Aetna Life & Casualty Co. 5.1 Conseco, Inc. 4.9 National Re Corp. 4.7 American International Group, Inc. 4.7 Triad Guaranty, Inc. 3.8 Gryphon Holdings, Inc. 3.2 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 28.9 Row: 1, Col: 2, Value: 7.1 Row: 1, Col: 3, Value: 7.4 Row: 1, Col: 4, Value: 10.2 Row: 1, Col: 5, Value: 46.4 Property-Casualty & Reinsurance 46.4% Life Insurance 10.2% Federal & Federally Sponsored Credit Agencies 7.4% Insurance Brokers & Services 7.1% All Others 28.9%* * INCLUDES SHORT-TERM INVESTMENTS 28.9 INSURANCE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Michael Tempero, Portfolio Manager of Fidelity Select Insurance Portfolio Q. HOW HAS THE FUND BEEN PERFORMING, MIKE? A. It's done pretty well, but the insurance sector as a whole has been struggling just to stay even with the broad market. For the six months ended August 31, 1995, Select Insurance had a total return of 14.57%, compared with the S&P 500's 16.81% gain; for the 12 months ended August 31, the fund was up by 19.97%, again slightly lower than the S&P, which had a 21.45% return over the same period. Q. EXPECTATIONS FOR FALLING INTEREST RATES HELPED THE SECTOR RALLY SOMEWHAT LAST FALL. WERE RATES ALSO A FACTOR IN DRIVING RECENT PERFORMANCE? A. Yes, the stable and somewhat lower rate environment has had a positive effect on performance. Lower rates have contributed to a generally stronger bond market over the past six months, and this has been reflected in higher stock prices for many stocks in the group. The reason for this is that insurance companies' portfolios are typically quite heavily invested in bonds; thus, when bond prices strengthen (as they do when interest rates decline), company assets grow in value, increasing their earnings, which the market often rewards with higher stock prices. Q. WHAT STOCKS DID WELL FOR YOU? A. The fund's large-company stocks - Aetna and Allstate, for example - generally performed quite well as rates turned. But there were other, more fundamental, company-specific factors that also helped performance. Aetna, for instance, is actively working to create more shareholder value. It has been replenishing reserves for environmental exposure in its property and casualty business. It has gone through various cost-cutting programs, and is considering new ways to configure its businesses to create better value for shareholders. Allstate began to show a nice rebound from a tough 1994, when it was hit with huge claims from the California earthquake. The company is planning to expand its auto insurance business, which it believes should show increasing profit potential as a maturing population and safer cars improve the economics of this business. Q. WHERE ELSE DID YOU FIND OPPORTUNITIES? A. American Express was one of the top contributors to fund performance. The company is seeing good success in turning around its credit card business, and its stock has had a good run over the recent past. I sold the position during the period and took some nice profit. Insurance names that did well included TIG Holdings (Transamerica), Conseco, and General Re, a reinsurer, whose recent acquisition of a European firm shows good prospects for future growth. Q. ANY BIG DISAPPOINTMENTS? A. Nothing big, but there were some names - mostly smaller companies - that didn't perform as well as I'd hoped. Crop Growers Corp., for instance, which writes crop/hail insurance for farmers, showed some weakness when its earnings failed to meet the expectations that were built into its stock price. Alexander & Alexander, an insurance broker, didn't really do much during the period, although I continue to like the stock's prospects going forward. For a number of the stocks that didn't do especially well, it wasn't so much that their fundamentals were poor, but more a case of the market moving toward names whose stocks were rising faster in the positive interest rate environment. Q. MIKE, YOU STARTED MANAGING THE FUND ONLY ABOUT SIX MONTHS AGO. WHAT CHANGES IN STRATEGY DID YOU MAKE? A. Since taking over the fund, I've emphasized a bottom-up approach to analyzing the industry. That is, I've been selecting stocks one at a time based on visits with a lot of companies and seeking out the best values and growth stories. I've also done some repositioning around the theme of mortgage insurance, a business that is benefiting from the recent bounce in the housing market and from more stringent requirements for mortgage insurance. Q. WHAT'S YOUR VIEW TO THE FUTURE? A. I'm somewhat cautious. There has been no real improvement in the underlying fundamentals of supply and demand in the insurance market. Even though many stocks have done well in the current declining rate environment (and probably can continue doing well for a while), there's likely to be more value in the sector when industry fundamentals are improving. So I'll continue to look for value-oriented stocks in segments of the industry, like mortgage insurance, for instance, where fundamentals are getting better. FUND FACTS START DATE: December 16, 1985 TRADING SYMBOL: FSPCX SIZE: as of August 31, 1995, more than $15 million MANAGER: Michael Tempero, since February 1995; equity analyst, insurance industry; analyst, domestic oil and gas exploration and production, conglomerates and household products, 1993-1995; joined Fidelity in 1993. (checkmark) INSURANCE PORTFOLIO INVESTMENTS AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.3% SHARES VALUE (NOTE 1) BANKS - 4.2% NATIONAL COMMERCIAL BANKS - 4.2% BankAmerica Corp. 5,000 $ 282,500 Mercantile Bancorporation, Inc. 7,000 316,750 Merchants Bancorp 2,000 52,000 651,250 COMPUTER SERVICES & SOFTWARE - 3.2% PREPACKAGED COMPUTER SOFTWARE - 3.2% Policy Management Systems Corp. (a) 10,000 495,000 CREDIT & OTHER FINANCE - 3.8% MORTGAGE BANKERS - 3.8% Triad Guaranty, Inc. (a) 25,500 596,063 FEDERAL SPONSORED CREDIT - 7.4% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 7.4% Federal Home Loan Mortgage Corporation 17,900 1,150,075 INSURANCE - 71.7% INSURANCE BROKERS & SERVICES - 7.1% Alexander & Alexander Services, Inc. 20,000 462,500 Crop Growers Corp. (a) 13,000 178,750 Frontier Insurance Group, Inc. 16,000 464,000 1,105,250 INSURANCE CARRIERS - 1.1% AMBAC, Inc. 1,000 42,250 MBIA, Inc. 1,000 68,000 MGIC Investment Corp. 1,000 56,000 166,250 LIFE INSURANCE - 10.2% Conseco, Inc. 15,000 753,750 Equitable Iowa Companies 22,000 819,500 1,573,250 MULTI-LINE INSURANCE - 6.9% Aetna Life & Casualty Co. 11,500 784,875 CIGNA Corp. 2,000 193,500 CNA Financial Corp. 1,000 95,875 1,074,250 PROPERTY-CASUALTY & REINSURANCE - 46.4% ACE Ltd. 15,000 461,250 Allstate Corp. 25,000 846,875 American International Group, Inc. 9,000 725,625 Berkley (W.R.) Corp. 7,000 300,125 Chubb Corp. (The) 5,000 456,250 Enhance Financial Services Group Corp. 5,000 101,250 Fremont General Corp. 2,000 54,500 General Re Corp. 6,000 891,750 Gryphon Holdings, Inc. (a) 35,000 503,125 NAC Re Corp. 13,000 474,500 National Re Corp. 23,000 730,249 Old Republic International Corp. 14,100 389,513 Renaissance RE Holdings (a) 5,000 122,500 SAFECO Corp. 1,000 64,625 St. Paul Companies, Inc. (The) 3,000 162,750 Selective Insurance Group, Inc. 14,500 496,625 TIG Holdings, Inc. 15,500 397,188 7,178,700 TOTAL INSURANCE 11,097,700 TOTAL COMMON STOCKS (Cost $12,734,977) 13,990,088 REPURCHASE AGREEMENTS - 9.7% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $1,497,242 $ 1,497,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $14,231,977) $ 15,487,088 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $9,390,161 and $17,308,988, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $10,083 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $2,042,000 and $1,168,385, respectively. The weighted average interest rate paid was 6.5% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $14,247,036. Net unrealized appreciation aggregated $1,240,052, of which $1,315,146 related to appreciated investment securities and $75,094 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 $77,000 of losses recognized during the period November 1,1994 to February 28, 1995. INSURANCE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $1,497,000) (cost $14,231,977) - See $ 15,487,088 accompanying schedule Cash 954 Receivable for investments sold 1,598,968 Receivable for fund shares sold 928,798 Dividends receivable 15,025 Redemption fees receivable 545 Other receivables 2,046 Prepaid expenses 4,824 TOTAL ASSETS 18,038,248 LIABILITIES Payable for investments purchased $ 2,534,612 Payable for fund shares redeemed 134,413 Accrued management fee 6,744 Other payables and accrued expenses 34,846 TOTAL LIABILITIES 2,710,615 NET ASSETS $ 15,327,633 Net Assets consist of: Paid in capital $ 13,053,619 Undistributed net investment income 1,074 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 1,017,829 Net unrealized appreciation (depreciation) on investments 1,255,111 NET ASSETS, for 629,080 $ 15,327,633 shares outstanding NET ASSET VALUE and redemption price per share ($15,327,633 (divided by) 629,080 shares) $24.37 Maximum offering price per share (100/97.00 of $24.37) $25.12
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 131,766 Dividends Interest 19,085 TOTAL INCOME 150,851 EXPENSES Management fee $ 46,328 Transfer agent 64,865 Fees Redemption fees (9,046 ) Accounting fees and expenses 22,671 Non-interested trustees' compensation 62 Custodian fees and expenses 6,635 Registration fees 4,824 Audit 8,232 Legal 45 Interest 2,753 Miscellaneous 764 Total expenses before reductions 148,133 Expense reductions (3,224 144,909 ) NET INVESTMENT INCOME 5,942 REALIZED AND UNREALIZED GAIN (LOSS) 2,055,315 Net realized gain (loss) on investment securities Change in net unrealized appreciation (depreciation) on investment securities (119,900 ) NET GAIN (LOSS) 1,935,415 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 1,941,357 OTHER INFORMATION $40,310 Sales Charges Paid to FDC Deferred sales charges withheld $5,834 by FDC Exchange fees withheld by FSC $6,720
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 5,942 $ 25,733 Net investment income Net realized gain (loss) 2,055,315 (1,038,394 ) Change in net unrealized appreciation (depreciation) (119,900 1,757,862 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 1,941,357 745,201 Distributions to shareholders from net investment income (30,601 - ) Share transactions 7,402,124 33,064,318 Net proceeds from sales of shares Reinvestment of distributions 29,922 - Cost of shares redeemed (15,859,190 (30,429,283 ) ) Paid in capital portion of redemption fees 5,711 39,347 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (8,421,433 2,674,382 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (6,510,677 3,419,583 ) NET ASSETS Beginning of period 21,838,310 18,418,727 End of period (including undistributed net investment income of $1,074 and $25,733, respectively) $ 15,327,633 $ 21,838,310 OTHER INFORMATION Shares Sold 324,862 1,639,929 Issued in reinvestment of distributions 1,373 - Redeemed (722,164 (1,564,065 ) ) Net increase (decrease) (395,929) 75,864
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 21.31 $ 19.41 $ 21.58 $ 18.03 $ 16.73 $ 13.63 Income from Investment Operations Net investment income (loss) .01 .05 - (.04) .04 .23 Net realized and unrealized gain (loss) 3.08 1.78 (.24) 5.12 1.48 2.83 Total from investment operations 3.09 1.83 (.24) 5.08 1.52 3.06 Less Distributions (.04) - (.01) - (.26) - From net investment income In excess of net investment income - - - (.03) - - From net realized gain - - (1.96) (1.71) - - Total distributions (.04) - (1.97) (1.74) (.26) - Redemption fees added to paid in capital .01 .07 .04 .21 .04 .04 Net asset value, end of period $ 24.37 $ 21.31 $ 19.41 $ 21.58 $ 18.03 $ 16.73 TOTAL RETURN B, C 14.57% 9.79% (1.24)% 31.98% 9.47% 22.74% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 15,328 $ 21,838 $ 18,419 $ 26,367 $ 2,573 $ 2,176 Ratio of expenses to average net assets 1.89% A 2.34% 1.93% 2.49% A 2.47% 2.49% Ratio of expenses to average net assets before 1.93% A 2.36% 1.93% 2.52% A 2.71% 2.73% expense reductions Ratio of net investment income (loss) to average net .08% A .25% (.02)% (.26)% .22% 1.58% assets A Portfolio turnover rate 126% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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). If Fidelity had not reimbursed certain expenses, the past five years and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S REGIONAL BANKS 20.16% 16.01% 279.30% 281.33% REGIONAL BANKS (INCL. 3% SALES CHARGE) 16.55% 12.53% 267.92% 269.89% S&P 500 16.81% 21.45% 102.17% 201.52% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on June 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 AUGUST 31, 1995 YEAR YEARS FUND REGIONAL BANKS 16.01% 30.56% 15.70% REGIONAL BANKS (INCL. 3% SALES CHARGE) 12.53% 29.76% 15.32% S&P 500 21.45% 15.12% 12.78% 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 RegionalStandard & Poor's 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 8599.97 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 9767.25 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 10736.78 13003.73 02/28/89 10897.03 12679.94 03/31/89 11794.44 12975.38 04/30/89 12104.25 13648.80 05/31/89 13033.71 14201.58 06/30/89 12816.91 14120.63 07/31/89 13957.63 15395.72 08/31/89 14302.00 15697.48 09/30/89 14420.37 15633.12 10/31/89 13085.95 15270.43 11/30/89 13064.43 15581.95 12/31/89 12785.92 15955.91 01/31/90 11633.93 14885.27 02/28/90 12112.98 15077.29 03/31/90 11816.42 15476.84 04/30/90 11143.48 15089.92 05/31/90 11919.08 16561.19 06/30/90 11451.44 16448.57 07/31/90 10755.68 16395.93 08/31/90 9751.97 14913.74 09/30/90 8565.77 14187.44 10/31/90 8314.84 14126.44 11/30/90 9421.20 15039.00 12/31/90 10143.16 15458.59 01/31/91 10816.28 16132.59 02/28/91 11733.11 17286.07 03/31/91 12394.62 17704.39 04/30/91 13230.21 17746.88 05/31/91 14089.02 18513.55 06/30/91 13253.42 17665.63 07/31/91 14355.94 18488.84 08/31/91 15388.83 18927.03 09/30/91 15087.09 18610.95 10/31/91 15713.78 18860.33 11/30/91 14994.24 18100.26 12/31/91 16816.65 20170.93 01/31/92 17868.45 19795.75 02/29/92 19311.63 20053.10 03/31/92 19042.56 19662.06 04/30/92 20155.52 20240.13 05/31/92 21011.64 20339.30 06/30/92 21221.29 20036.25 07/31/92 21245.91 20855.73 08/31/92 20113.45 20428.19 09/30/92 21048.96 20669.24 10/31/92 21947.54 20741.58 11/30/92 23744.70 21448.87 12/31/92 24976.49 21712.69 01/31/93 26017.18 21895.08 02/28/93 26826.61 22192.85 03/31/93 27970.08 22661.12 04/30/93 26530.16 22112.72 05/31/93 26270.83 22705.34 06/30/93 27736.08 22771.19 07/31/93 27813.88 22680.10 08/31/93 28202.89 23539.68 09/30/93 29175.40 23358.43 10/31/93 27606.41 23841.94 11/30/93 26737.63 23615.45 12/31/93 27767.00 23901.19 01/31/94 29386.34 24713.83 02/28/94 28560.79 24044.09 03/31/94 28084.51 22995.77 04/30/94 29572.73 23290.11 05/31/94 31050.56 23672.07 06/30/94 30279.52 23092.10 07/31/94 31082.69 23849.53 08/31/94 31885.86 24827.36 09/30/94 29990.38 24219.09 10/31/94 29861.87 24764.01 11/30/94 27934.26 23862.11 12/31/94 27827.58 24215.98 01/31/95 29229.22 24843.91 02/28/95 30784.69 25812.07 03/31/95 31041.09 26573.79 04/30/95 31810.28 27356.38 05/31/95 33895.64 28449.82 06/30/95 34322.96 29110.71 07/31/95 35656.23 30076.02 08/31/95 36989.49 30151.51 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 August 31, 1995, your investment would have grown to $36,989 - a 269.89% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $30,152 over the same period - a 201.52% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS American Express Co. 4.9 First Bank System, Inc. 4.9 Shawmut National Corp. 4.9 Bank of New York Co., Inc. 4.8 Crestar Financial Corp. 4.7 BankAmerica Corp. 4.5 First Chicago Corp. 4.4 NBD Bancorp, Inc. 4.4 Banc One Corp. 4.2 Morgan (J.P.) & Co., Inc. 4.0 TOP REGIONS AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 31.8 Row: 1, Col: 2, Value: 4.7 Row: 1, Col: 3, Value: 6.2 Row: 1, Col: 4, Value: 8.9 Row: 1, Col: 5, Value: 21.1 Row: 1, Col: 6, Value: 27.3 Northeast 27.3% Midwest 21.1% Mid-Atlantic 8.9% West 6.2% Multi-Regional 4.7% All Others 31.8%* * 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 HAS THE FUND BEEN DOING, LOUIS? A. Performance generally has been good, particularly of late. For the six months ended August 31, 1995, the fund outperformed the broad market, gaining 20.16% compared with the S&P 500's 16.81% return. For the 12 months ended August 31, it lagged the average a bit, showing a 16.01% gain versus the S&P 500's total return of 21.45%. Q. WHAT WERE THE MAJOR FACTORS THAT INFLUENCED FUND PERFORMANCE? A. A lot of the gain in regional banks simply has been a rebound from the second half of 1994, when the group really was out of favor, due in large part to the negative effects of higher interest rates on lending spreads and earnings. The fundamentals remained fairly strong during this period for a number of the names in the group, and credit quality never became an issue. So when the rate environment began to stabilize earlier this year, regional bank stocks started to move higher, based initially on an improving interest rate scenario and subsequently, in many cases, on real or anticipated takeover activity. Q. BANK OF BOSTON, YOUR TOP HOLDING SIX MONTHS AGO, IS NO LONGER IN THE PORTFOLIO. WHY? A. Bank of Boston has had a phenomenal run over the past several quarters. It turned in very strong earnings, even when rates were high, and the stock also has received a substantial lift from recent takeover speculation. I sold the position because I thought the stock was valued quite high and because I questioned whether a buyer would pay a high premium to acquire the Bank of Boston franchise. In any event, Bank of Boston was one of the top contributors to fund performance during the period. Q. WHAT OTHER REGIONAL BANKS HAVE DONE WELL FOR YOU THIS YEAR? A. Midlantic Bank - which I've since sold - and Shawmut National, both of which are in the process of being taken over by larger institutions, were top performers in both the six months and full-year comparisons. So too was Bank of New York, which has been generating good results from its fee-based processing businesses and has been very profitable. Q. WHAT STOCKS ARE YOU PARTICULARLY HIGH ON AT THE MOMENT? A. Fleet Financial is by far my favorite name within the group. I think Fleet will do a good job integrating its acquisition of Shawmut. There are great cost-cutting opportunities between the two companies, and when that occurs, I think returns will improve substantially and result in a higher multiple. I like Banc One, which has a financial turnaround story in progress, and I'm also very high on First Bank System in Minneapolis, which is very shareholder-oriented. Q. FIRST BANK SYSTEM WAS, IN FACT, THE SECOND LARGEST HOLDING IN THE PORTFOLIO AT THE END OF AUGUST. WHY ARE YOU SO KEEN ON THIS STOCK? A. What's exciting about this company is that it is aggressively growing its corporate credit card business. The market for this product, which is similar to the American Express corporate card, is massive, there is very low credit risk, and as a fee-service business, it requires little capital to grow. So I think this is a huge growth opportunity for the company. In addition, First Bank System runs a very lean ship, and I have little worry that they will overpay for any future acquisitions. Q. HAS YOUR INVESTMENT STRATEGY CHANGED TO ANY GREAT DEGREE? A. In the past, I've tended to focus on stocks that were valued inexpensively. But with the group as a whole now valued at rather high levels, I'm looking more at companies that are committed to increasing shareholder value and those with superior franchises that generate high returns. For example, I recently bought First Bank System, which we've already talked about, and I increased the fund's positions in Crestar Financial and Wachovia, both of which I consider to be high-quality banks. When the group as a whole is expensive, I want to hold the names that generate the highest returns, because they are the ones likely to hold up the best in the event of a market correction. Q. WHAT IS YOUR OUTLOOK FOR THE SECTOR? A. I have some basic concerns. First, I think that net interest margins will remain under pressure. Second, I think that loan growth is likely to slow as the general economy weakens. And third, I am concerned that credit quality may weaken down the road. None of these factors leads me to be overly optimistic about the group. FUND FACTS START DATE: June 30, 1986 TRADING SYMBOL: FSRBX SIZE: as of August 31, 1995, more than $209 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 80.0% SHARES VALUE (NOTE 1) BANKS - 71.6% MID-ATLANTIC - 8.9% Crestar Financial Corp. 162,283 $ 9,148,704 HUBCO, Inc. 75,030 1,481,843 Wachovia Corp. 172,600 6,860,850 17,491,397 MIDWEST - 21.1% Boatmen's Bancshares, Inc. 199,100 7,366,700 Comerica, Inc. 207,300 7,385,063 First Bank System, Inc. 211,100 9,631,438 First Chicago Corp. 137,500 8,714,063 Mercantile Bancorporation, Inc. 40,500 1,832,625 National City Corp. 172,209 5,123,218 Norwest Corp. 47,696 1,436,842 41,489,949 NORTHEAST - 27.3% Banc One Corp. 246,600 8,291,925 Bank of New York Co., Inc. 214,924 9,349,190 Fleet Financial Group, Inc. 195,000 7,215,000 Morgan (J.P.) & Co., Inc. 107,500 7,834,063 NBD Bancorp, Inc. 239,700 8,569,275 Shawmut National Corp. 297,300 9,625,088 U.S. Bancorp 100,000 2,862,500 53,747,041 SOUTHEAST - 3.4% BanPonce Corp. 178,501 6,626,850 WEST - 6.2% BankAmerica Corp. 156,800 8,859,200 Zions Bancorporation 60,000 3,315,000 12,174,200 MULTI-REGIONAL - 4.7% Keycorp 100,000 3,100,000 NationsBank Corp. 101,253 6,214,403 9,314,403 TOTAL BANKS 140,843,840 CREDIT & OTHER FINANCE - 8.4% FINANCIAL SERVICES - 4.9% American Express Co. 240,000 9,690,000 PERSONAL CREDIT INSTITUTIONS - 3.5% Beneficial Corp. 140,500 6,902,063 TOTAL CREDIT & OTHER FINANCE 16,592,063 TOTAL COMMON STOCKS (Cost $134,971,916) 157,435,903 REPURCHASE AGREEMENTS - 20.0% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 (Note 3) $ 39,247,344 39,241,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $174,212,916) $ 196,676,903 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $80,480,378 and $74,985,924, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $45,925 for the period (see Note 5 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $174,418,447. Net unrealized appreciation aggregated $22,258,456, of which $22,398,176 related to appreciated investment securities and $139,720 related to depreciated investment securities. REGIONAL BANKS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $39,241,000) (cost $174,212,916) - $ 196,676,903 See accompanying schedule Cash 24 Receivable for fund shares sold 12,791,361 Dividends receivable 461,294 Redemption fees receivable 1,680 Other receivables 8,970 Prepaid expenses 10,046 TOTAL ASSETS 209,950,278 LIABILITIES Payable for fund shares redeemed $ 700,945 Accrued management fee 94,492 Other payables and 146,522 accrued expenses TOTAL LIABILITIES 941,959 NET ASSETS $ 209,008,319 Net Assets consist of: Paid in capital $ 174,146,432 Undistributed net investment income 2,145,172 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 10,252,728 Net unrealized appreciation (depreciation) on investments 22,463,987 NET ASSETS, for 9,659,485 $ 209,008,319 shares outstanding NET ASSET VALUE and redemption price per share ($209,008,319 (divided by) 9,659,485 shares) $21.64 Maximum offering price per share (100/97.00 of $21.64) $22.31
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 2,321,106 Dividends Interest 1,027,873 TOTAL INCOME 3,348,979 EXPENSES Management fee $ 509,612 Transfer agent 642,779 Fees Redemption fees (56,422 ) Accounting fees and expenses 83,217 Non-interested trustees' compensation 683 Custodian fees and expenses 7,202 Registration fees 10,046 Audit 11,747 Legal 470 Miscellaneous 1,765 Total expenses before reductions 1,211,099 Expense reductions (7,292 1,203,807 ) NET INVESTMENT INCOME 2,145,172 REALIZED AND UNREALIZED GAIN (LOSS) 10,473,162 Net realized gain (loss) on investment securities Change in net unrealized appreciation (depreciation) on investment securities 16,871,906 NET GAIN (LOSS) 27,345,068 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 29,490,240 OTHER INFORMATION $587,669 Sales Charges Paid to FDC Deferred sales charges withheld $1,104 by FDC Exchange fees withheld by FSC $39,135
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 2,145,172 $ 2,858,182 Net investment income Net realized gain (loss) 10,473,162 6,429,187 Change in net unrealized appreciation (depreciation) 16,871,906 (2,016,821 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 29,490,240 7,270,548 Distributions to shareholders - (1,863,695 From net investment income ) From net realized gain - (6,217,044 ) TOTAL DISTRIBUTIONS - (8,080,739 ) Share transactions 115,561,425 301,180,682 Net proceeds from sales of shares Reinvestment of distributions - 7,855,119 Cost of shares redeemed (100,729,619 (241,446,435 ) ) Paid in capital portion of redemption fees 83,489 394,744 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 14,915,295 67,984,110 TOTAL INCREASE (DECREASE) IN NET ASSETS 44,405,535 67,173,919 NET ASSETS Beginning of period 164,602,784 97,428,865 End of period (including undistributed net investment income of $2,145,172 and $1,047,856, respectively) $ 209,008,319 $ 164,602,784 OTHER INFORMATION Shares Sold 5,756,757 16,228,773 Issued in reinvestment of distributions - 468,963 Redeemed (5,238,855 (12,971,096 ) ) Net increase (decrease) 517,902 3,726,640
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 18.01 $ 17.99 $ 20.88 $ 16.48 $ 11.40 $ 9.77 Income from Investment Operations Net investment income .25 .37 .19 .16 .25 .22 Net realized and unrealized gain (loss) 3.37 .87 .93 5.09 5.37 1.41 Total from investment operations 3.62 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 .01 .05 .06 .07 .14 .15 Net asset value, end of period $ 21.64 $ 18.01 $ 17.99 $ 20.88 $ 16.48 $ 11.40 TOTAL RETURN B, C 20.16% 7.79% 6.46% 33.10% 52.34% 18.73% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 209,008 $ 164,603 $ 97,429 $ 315,520 $ 156,570 $ 24,212 Ratio of expenses to average net assets 1.43% A 1.56% 1.60% 1.49% A 1.77% 2.51% Ratio of expenses to average net assets before 1.44% A 1.58% 1.62% 1.49% A 1.77% 2.94% expense reductions Ratio of net investment income to average net assets 2.54% A 1.99% .88% 1.06% A 1.80% 2.34% Portfolio turnover rate 113% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E 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). If Fidelity had not reimbursed certain expenses, the life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S BIOTECHNOLOGY 19.05% 19.38% 115.51% 309.34% BIOTECHNOLOGY (INCL. 3% SALES CHARGE) 15.48% 15.80% 109.05% 297.06% S&P 500 16.81% 21.45% 102.17% 265.41% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on 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 AUGUST 31, 1995 YEAR YEARS FUND BIOTECHNOLOGY 19.38% 16.60% 15.61% BIOTECHNOLOGY (INCL. 3% SALES CHARGE) 15.80% 15.89% 15.25% S&P 500 21.45% 15.12% 14.27% 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 BiotechnoStandard & Poor' 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 10501.16 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 12121.34 17113.11 07/31/89 13241.47 18658.42 08/31/89 13741.52 19024.13 09/30/89 14321.59 18946.13 10/31/89 14371.59 18506.58 11/30/89 14821.64 18884.12 12/31/89 14538.79 19337.33 01/31/90 13450.92 18039.80 02/28/90 14721.80 18272.51 03/31/90 15341.98 18756.73 04/30/90 15535.16 18287.82 05/31/90 17721.06 20070.88 06/30/90 18958.58 19934.40 07/31/90 19009.98 19870.61 08/31/90 18423.95 18074.30 09/30/90 18012.70 17194.08 10/31/90 18166.92 17120.15 11/30/90 20367.10 18226.11 12/31/90 20986.41 18734.62 01/31/91 23396.59 19551.45 02/28/91 26711.89 20949.38 03/31/91 29469.39 21456.35 04/30/91 28185.36 21507.85 05/31/91 29974.57 22436.99 06/30/91 28383.11 21409.37 07/31/91 30938.25 22407.05 08/31/91 33106.26 22938.10 09/30/91 34820.75 22555.03 10/31/91 38249.73 22857.27 11/30/91 35694.58 21936.12 12/31/91 41772.44 24445.61 01/31/92 40935.15 23990.92 02/29/92 37792.47 24302.81 03/31/92 34925.06 23828.90 04/30/92 31667.68 24529.47 05/31/92 33938.67 24649.67 06/30/92 33342.98 24282.39 07/31/92 35086.00 25275.53 08/31/92 32891.56 24757.39 09/30/92 32778.70 25049.52 10/31/92 34383.78 25137.20 11/30/92 37769.49 25994.38 12/31/92 37451.82 26314.11 01/31/93 35527.16 26535.14 02/28/93 29792.72 26896.02 03/31/93 30240.93 27463.53 04/30/93 31018.70 26798.91 05/31/93 33022.46 27517.12 06/30/93 33220.20 27596.92 07/31/93 32126.04 27486.53 08/31/93 33338.84 28528.27 09/30/93 34709.84 28308.61 10/31/93 37293.63 28894.59 11/30/93 37003.61 28620.10 12/31/93 37715.47 28966.40 01/31/94 39007.37 29951.26 02/28/94 36397.21 29139.58 03/31/94 32719.26 27869.09 04/30/94 32126.04 28225.82 05/31/94 31585.55 28688.72 06/30/94 30333.21 27985.85 07/31/94 30412.30 28903.78 08/31/94 33259.75 30088.84 09/30/94 33154.29 29351.66 10/31/94 32020.58 30012.07 11/30/94 31427.36 28919.03 12/31/94 30860.51 29347.90 01/31/95 32244.69 30108.89 02/28/95 33352.03 31282.24 03/31/95 33892.51 32205.38 04/30/95 34947.12 33153.82 05/31/95 35263.51 34478.98 06/30/95 36542.22 35279.93 07/31/95 38176.86 36449.81 08/31/95 39706.05 36541.30 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 August 31, 1995, your investment would have grown to $39,706 - a 297.06% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $36,541 over the same period - a 265.41% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Amgen, Inc. 9.0 Biogen, Inc. 4.5 Roche Holdings Ltd. participation certificates 3.9 Genentech, Inc. 3.2 Schering-Plough Corp. 3.0 Merck & Co., Inc. 2.4 COR Therapeutics, Inc. 1.8 Protein Design Labs, Inc. 1.7 Genetics Institute, Inc. depositary share 1.7 SmithKline Beecham PLC ADR 1.6 TOP INDUSTRIES AS OF AUGUST 31, 1995 Biotechnology 33.5% Drugs 21.3% Pharmaceutical Preparations 4.7% Medical Supplies & Appliances 1.8% Medical Technology 1.6% All Others 37.1%* Row: 1, Col: 1, Value: 37.1 Row: 1, Col: 2, Value: 1.6 Row: 1, Col: 3, Value: 1.8 Row: 1, Col: 4, Value: 4.7 Row: 1, Col: 5, Value: 21.3 Row: 1, Col: 6, Value: 33.5 * INCLUDES SHORT-TERM INVESTMENTS BIOTECHNOLOGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Karen Firestone, Portfolio Manager of Fidelity Select Biotechnology Portfolio Q. KAREN, HOW DID THE FUND PERFORM? A. The fund has performed very well. For the six months ended August 31, 1995, the fund returned 19.05% versus the Standard & Poor's Index which returned 16.81% for the same time period. For the 12 months ended August 31, 1995, the fund returned 19.38% and the S&P returned 21.45%. Q. WHAT LED THE FUND TO OUTPERFORM THE STANDARD & POOR'S 500 INDEX? A. I think it was a combination of factors. First of all, market participants were attracted to technology and higher-risk stocks during the past six months. The investors who fueled the demand for semiconductor and computer stocks are the same type of investors who are looking for risk in other areas. Although biotechnology isn't the same as technology, they are related in terms of risk/reward. Secondly, the low interest rate environment and strong stock market we've been experiencing is favorable for biotech companies since they are better able to raise money under such favorable economic conditions. Finally, there have been some successful drug trials that have occurred during the past six months that have propelled the entire sector. Q. CAN YOU GIVE AN EXAMPLE OF A SUCCESSFUL DRUG TRIAL THAT OCCURRED DURING THE PERIOD? A. Sure. Cephalon kicked off the recent rally in biotech when they announced in the spring that their drug, Myotrophin, was successful in the treatment of amyotrophic lateral sclerosis (Lou Gehrig's disease). At first, I was skeptical about what they were saying and I only bought the stock after I went through Cephalon's data with their biostatistician. During the period, the stock has risen more than 75%. In this kind of market, interest in biotechnology stocks transcends the skepticism that was prevalent a few years ago. Sometimes I have to suspend my own skepticism to take advantage of what's happening in the market. Q. THE FUND'S TOP COUPLE OF HOLDINGS HAVEN'T CHANGED MUCH DURING THE PAST SIX MONTHS . . . A. That's right. Amgen continues to be the largest and most successful biotech company. Its earnings have grown faster than expected, and sales have been better than expected. During the past six months I've doubled the fund's holding in Amgen because I'm optimistic about the company's earnings over the next year. I'm still bullish on Biogen as well. The company has a drug for multiple sclerosis that I think will be approved in the near future. The stock has performed well during the period, increasing more than 30%. Q. WHERE HAVE YOU FOUND OPPORTUNITIES DURING THE PAST SIX MONTHS? A. Merck is a large addition to the fund's holdings. The company is working on a couple of new drugs that I think will prove beneficial. One in particular, Fosamax, is for use in the treatment of osteoporosis. The drug was presented to the FDA and was met with a positive reaction. I believe the drug will receive approval within the next several months. Most biotech drugs, such as Fosamax, can't fit neatly into a pure pharmaceutical or biotechnology category. The only real distinction is that biotech uses living cells as their manufacturing plants. Today, almost every large drug company has a biotechnology component and Merck has one of the largest. Q. WHAT INVESTMENTS PROVED DISAPPOINTING DURING THE PAST SIX MONTHS. A. COR Therapeutics, one of the fund's largest holdings, had a negative impact on results during the past six months. The company reported some unfavorable results and the stock dropped by almost 50% in one day. I'm not as negative as the market is on their cardiovascular drug. I think it's a product that will ultimately be approved, and I used the drop in the stock's value as a buying opportunity. Another disappointment was the fund's holding in Teva. Six months ago it was one of the fund's top 10 holdings, but I later became dissatisfied with the company's data on their multiple sclerosis drug and sold the position. I also wish I'd owned more Cephalon and Chiron, two drug stocks that performed very well during the period. Q. HOW DOES THE FUND LOOK GOING FORWARD? A. I think the biotechnology stocks will continue to outperform the market. After more than three years of trending downward, they've turned up and aren't ready to turn down again. I also think the larger names such as Amgen and Biogen are in a particularly strong position. Good clinical results will help the group a lot, and poor reports probably won't negatively impact these stocks as much as they would have two or three years ago. FUND FACTS START DATE: December 16, 1985 TRADING SYMBOL: FBIOX SIZE: as of August 31, 1995, more than $597 million MANAGER: Karen Firestone, since 1992; manager, Fidelity Select Health Care Portfolio since February 1995; manager, Fidelity Select Air Transportation Portfolio, 1987-1992; Fidelity Select Leisure Portfolio, 1989-1992; joined Fidelity in 1983 (checkmark) BIOTECHNOLOGY PORTFOLIO INVESTMENTS AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 66.8% SHARES VALUE (NOTE 1) AGRICULTURE - 0.2% CROPS - 0.2% DEKALB Genetics Corp. Class B 23,700 $ 945,038 CELLULAR - 0.1% CELLULAR & COMMUNICATION SERVICES - 0.1% Millicom International Cellular SA (a) 26,942 794,789 DRUG STORES - 1.0% Eckerd Corp. (a) 125,000 4,578,125 Revco (D.S.), Inc. 100,000 1,975,000 6,553,125 DRUGS & PHARMACEUTICALS - 60.9% BIOTECHNOLOGY - 33.5% Alkermes, Inc. (a) 432,100 2,970,688 Amgen, Inc. (a) 1,181,600 56,569,100 Athena Neurosciences, Inc. (a) 402,700 4,178,013 Bio-Rad Laboratories, Inc. Class A (a) 36,000 1,377,000 Biochem Pharmaceuticals, Inc. (a) 124,000 3,702,146 Biogen, Inc. (a) 519,800 28,459,050 Cambridge Neuroscience, Inc. (a) 358,000 3,848,500 Cell Genesys, Inc. (a) 149,000 1,005,750 Centocor, Inc. (a) 88,400 1,071,850 Cephalon, Inc. (a) 326,000 7,905,500 Chiron Corp. (a) 59,086 5,302,969 Collagen Corp. (a) 30,300 545,400 COR Therapeutics, Inc. (a)(c) 975,500 11,340,188 Creative Biomolecules, Inc. (a) 58,100 275,975 Dynagen, Inc. (warrants) (a) 40,000 60,000 Genentech, Inc. (redeemable) (a) 426,200 20,084,675 Genetics Institute, Inc. (warrants) (a) 40,000 300,000 Genetics Institute, Inc. depositary share (a) 279,180 10,957,815 Genzyme Corp. 165,200 9,230,550 Genzyme Corp.-Tissue Repair (a) 28,539 410,248 Gilead Sciences, Inc. (a) 218,700 4,756,725 Idexx Laboratories (a) 30,000 1,016,250 Insite Vision, Inc. (a)(c) 612,200 2,448,800 Magainin Pharmaceuticals, Inc. (a) 136,700 1,332,825 Neurogen Corp. (a) 112,400 1,882,700 North American Biologicals, Inc. (a) 171,400 1,564,025 North American Vaccine, Inc. (a) 393,300 3,982,163 Protein Design Labs, Inc. (a) 605,400 10,972,875 Quidel Corp. (a) 95,500 561,063 SciGenics, Inc. (a)(c) 122,000 1,616,500 Sequana Therapeutics, Inc. (a) 160,000 1,680,000 Somatix Therapy Corp. (a) 659,600 4,081,275 Sugen, Inc. (a) 185,000 2,173,750 Univax Biologics, Inc. (a) 46,000 365,125 Vical, Inc. (a) 198,900 2,312,213 210,341,706 COMMERCIAL LABORATORY RESEARCH - 0.4% Cantab Pharmaceutical Sponsored ADR (a) 5,000 12,500 Cryomedical Sciences, Inc. (a) 393,000 1,228,125 Medarex, Inc. (warrants) (a) 175,000 267,969 Medarex Inc. (a)(b) 175,000 1,050,000 2,558,594 DRUGS - 21.3% A.L. Laboratories, Inc. Class A 116,700 2,450,700 Allergan, Inc. 247,400 7,514,775 Astra AB Class A Free shares 60,000 1,987,258 Astra AB Class B Free Shares 165,000 5,352,047 SHARES VALUE (NOTE 1) Barr Laboratories, Inc. (a) 50,000 $ 1,093,750 Dura Pharmaceuticals, Inc. (a) 160,000 3,920,000 Elan PLC (warrants) (a) 76,575 1,837,800 Elan Corp. PLC ADR (warrants) (a) 14,339 175,653 Elan Corp. PLC ADR (a) 83,215 3,266,189 Glaxo Holdings PLC 47,000 557,049 IVAX Corp. 32 820 Lynx Therapeutics, Inc. (a) 193,995 2 Marsam Pharmaceuticals, Inc. (a) 50,000 1,044,532 Merck & Co., Inc. 300,000 14,962,500 Mylan Laboratories, Inc. 140,100 3,204,788 Novo-Nordisk AS Class B 15,500 1,776,013 Novo Industri A/S ADR 16,000 456,000 Pfizer, Inc. 115,600 5,707,750 Pharmacia AB Class A Free shares 302,300 8,254,081 Roche Holdings Ltd. (part. certs.) 3,650 24,474,865 Schering-Plough Corp. 400,000 18,650,000 Schering-Plough Corp. Unit (a)(d) 6,300 450,765 Sequus Pharmaceuticals, Inc. (a) 70,000 918,750 SmithKline Beecham PLC ADR 220,000 9,845,000 Upjohn Co. 200,000 8,475,000 Watson Pharmaceuticals, Inc. (a) 188,894 7,815,489 134,191,576 IN VITRO, IN VIVO DIAGNOSTIC SUBSTANCES - 0.2% Igen, Inc. (a) 173,900 1,173,825 Serologicals Corp. 3,000 48,750 1,222,575 MEDICINAL CHEMICALS - 0.8% Martek Biosciences (a) 350,000 4,987,500 PHARMACEUTICAL PREPARATIONS - 4.7% Advanced Therapeutic Systems Ltd. (a) 14,339 392,530 Arris Pharmaceutical Corp. (a) 55,000 694,375 Cocensys, Inc. (a) 206,000 1,751,000 Copley Pharmaceutical, Inc. (a) 210,300 3,785,400 Guilford Pharmaceuticals, Inc. (a) 185,000 1,641,875 Immunex Corp. (a) 379,900 5,888,450 Inhale Therapeutic Systems (a) 224,000 2,716,000 La Jolla Pharmaceutical Co. (a) 227,300 923,406 Ligand Pharmaceuticals, Inc. Class B (a) 431,265 3,989,201 Neurobiological Technologies, Inc. (a) 57,900 260,550 Procept, Inc. (a) 306,100 2,066,175 Rhone Poulenc Rorer, Inc. 37,400 1,654,950 T Cell Sciences, Inc. (a) 394,100 1,921,238 Theratech, Inc. (a) 130,000 1,950,000 29,635,150 TOTAL DRUGS & PHARMACEUTICALS 382,937,101 ELECTRICAL EQUIPMENT - 0.0% TV & RADIO COMMUNICATION EQUIPMENT - 0.0% ASN (warrants) (a) 5,000 - MEDICAL EQUIPMENT & SUPPLIES - 3.6% DRUG DISTRIBUTORS - WHOLESALE - 0.2% Bergen Brunswig Corp. Class A 60,000 1,252,500 MEDICAL SUPPLIES & APPLIANCES - 1.8% Abaxis, Inc. (a) 118,000 885,000 Abbott Laboratories 135,000 5,231,250 Boston Scientific Corp. (a) 119,005 4,730,449 Exogen, Inc. (a) 42,500 555,150 11,401,849 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) MEDICAL EQUIPMENT & SUPPLIES - CONTINUED MEDICAL TECHNOLOGY - 1.6% Advanced Technology Laboratories, Inc. (a) 108,700 $ 1,847,900 Haemonetics Corp. (a) 240,700 5,175,050 St. Jude Medical, Inc. 51,600 3,076,650 10,099,600 TOTAL MEDICAL EQUIPMENT & SUPPLIES 22,753,949 MEDICAL FACILITIES MANAGEMENT - 1.0% HEALTH SERVICES - 0.1% Healthwise America, Inc. (a) 22,950 619,650 HOME HEALTH CARE AGENCIES - 0.4% Apria Healthcare Group, Inc. (a) 75,620 2,117,360 HOSPITALS - 0.1% Vencor, Inc. (a) 24,300 719,888 SKILLED NURSING CARE FACILITIES - 0.4% Mariner Health Group, Inc. (a) 50,000 687,500 TheraTx, Inc. (a) 149,500 1,980,875 2,668,375 TOTAL MEDICAL FACILITIES MANAGEMENT 6,125,273 TOTAL COMMON STOCKS (Cost $362,035,283) 420,109,275 REPURCHASE AGREEMENTS - 33.2% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 (Note 3) $ 208,456,695 208,423,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $570,458,283) $ 628,532,275 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. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE COR Therapeutics, Inc. $ 966,405 $ 1,821,825 $ - $ 11,340,188 Insite Vision, Inc. 468,125 468,438 - 2,448,800 SciGenics, Inc. - - - 1,616,500 Totals $ 1,434,530 $ 2,290,263 $ - $ 15,405,488 4. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $450,765 or 0.1% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $208,631,980 and $180,075,918 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 $75,019 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 $10,524,025 and $11,169,300, respectively (see Note 7 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 89.1% Switzerland 3.9 Sweden 2.5 United Kingdom 1.7 Canada 1.2 Others (individually less than 1%) 1.6 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $571,567,769. Net unrealized appreciation aggregated $56,964,506, of which $73,919,987 related to appreciated investment securities and $16,955,481 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
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $208,423,000) (cost $570,458,283) - $ 628,532,275 See accompanying schedule Cash 114 Receivable for investments sold 1,782,249 Receivable for fund shares sold 11,567,988 Dividends receivable 198,048 Redemption fees receivable 1,450 Other receivables 1,147,706 Prepaid expenses 12,941 TOTAL ASSETS 643,242,771 LIABILITIES Payable for investments purchased $ 29,516,598 Payable for fund shares redeemed 4,276,293 Accrued management fee 249,853 Other payables and 831,725 accrued expenses Collateral on securities loaned, 11,169,300 at value TOTAL LIABILITIES 46,043,769 NET ASSETS $ 597,199,002 Net Assets consist of: Paid in capital $ 550,048,222 Undistributed net investment income 827,273 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions (11,750,485 ) Net unrealized appreciation (depreciation) on investments 58,073,992 NET ASSETS, for 19,829,443 $ 597,199,002 shares outstanding NET ASSET VALUE and redemption price per share ($597,199,002 (divided by) 19,829,443 shares) $30.12 Maximum offering price per share (100/97.00 of $30.12) $31.05
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 1,147,393 Dividends Interest (including income on 3,212,928 securities loaned of $97,231) TOTAL INCOME 4,360,321 EXPENSES Management fee $ 1,321,594 Transfer agent 2,026,998 Fees Redemption fees (94,351 ) Accounting and security lending fees 218,808 Non-interested trustees' compensation 2,066 Custodian fees and expenses 24,487 Registration fees 12,941 Audit 20,388 Legal 1,575 Miscellaneous 7,366 Total expenses before reductions 3,541,872 Expense reductions (8,824 3,533,048 ) NET INVESTMENT INCOME 827,273 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including 29,976,027 realized gain (loss) of $(692,463) on sales of investment in affiliated issuers) Foreign currency transactions (3,523 29,972,504 ) Change in net unrealized appreciation (depreciation) on investment securities 42,027,442 NET GAIN (LOSS) 71,999,946 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 72,827,219 OTHER INFORMATION $697,828 Sales Charges Paid to FDC Deferred sales charges withheld $13,776 by FDC Exchange fees withheld by FSC $62,618
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 827,273 $ (1,097,554 Net investment income (loss) ) Net realized gain (loss) 29,972,504 (28,000,457 ) Change in net unrealized appreciation (depreciation) 42,027,442 (10,252,135 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 72,827,219 (39,350,146 ) Share transactions 229,814,217 208,388,703 Net proceeds from sales of shares Cost of shares redeemed (153,771,903 (202,202,871 ) ) Paid in capital portion of redemption fees 132,699 214,866 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 76,175,013 6,400,698 TOTAL INCREASE (DECREASE) IN NET ASSETS 149,002,232 (32,949,448 ) NET ASSETS Beginning of period 448,196,770 481,146,218 End of period (including undistributed net investment income of $827,273 and $0, respectively) $ 597,199,002 $ 448,196,770 OTHER INFORMATION Shares Sold 7,866,977 8,583,014 Redeemed (5,751,267 (8,294,600 ) ) Net increase (decrease) 2,115,710 288,414
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 25.30 $ 27.61 $ 22.60 $ 27.61 $ 26.78 $ 15.28 Income from Investment Operations Net investment income (loss) .05 (.06) (.18) (.08) (.11) .05 E Net realized and unrealized gain (loss) 4.76 (2.26) 5.15 (1.09) 3.36 11.80 Total from investment operations 4.81 (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 .01 .04 .05 .12 .32 Net asset value, end of period $ 30.12 $ 25.30 $ 27.61 $ 22.60 $ 27.61 $ 26.78 TOTAL RETURN B, C 19.05% (8.37)% 22.17% (5.92)% 12.36% 81.43% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 597,199 $ 448,197 $ 481,146 $ 507,993 $ 679,877 $ 482,271 Ratio of expenses to average net assets 1.62% A 1.59% 1.61% 1.50% A 1.50% 1.63% Ratio of expenses to average net assets before 1.62% A 1.59% 1.62% 1.50% A 1.50% 1.63% expense reductions Ratio of net investment income (loss) to average net .38% A (.27)% (.69)% (.37)% (.34)% .24% assets A Portfolio turnover rate 105% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.02 PER SHARE.
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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1995 MONTH YEAR YEARS YEARS S HEALTH CARE 17.79% 32.53% 168.86% 514.44% HEALTH CARE (INCL. 3% SALES CHARGE) 14.26% 28.56% 160.80% 496.01% S&P 500 16.81% 21.45% 102.17% 311.58% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS YEARS HEALTH CARE 32.53% 21.87% 19.91% HEALTH CARE (INCL. 3% SALES CHARGE) 28.56% 21.13% 19.54% S&P 500 21.45% 15.12% 15.20% 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 Health (Standard & Poor 08/31/85 9700.00 10000.00 09/30/85 8917.55 9687.00 10/31/85 9503.40 10134.54 11/30/85 10395.95 10829.77 12/31/85 10675.11 11353.93 01/31/86 10745.89 11417.51 02/28/86 11504.74 12271.54 03/31/86 13042.12 12956.29 04/30/86 13199.39 12809.89 05/31/86 14017.23 13491.37 06/30/86 14956.95 13719.38 07/31/86 13887.43 12952.46 08/31/86 14399.87 13913.54 09/30/86 12433.54 12762.89 10/31/86 13518.00 13499.31 11/30/86 13319.38 13827.34 12/31/86 13021.46 13474.74 01/31/87 14963.95 15289.79 02/28/87 17184.51 15893.74 03/31/87 17081.23 16353.07 04/30/87 16676.04 16207.52 05/31/87 16838.91 16348.53 06/30/87 17240.12 17174.13 07/31/87 17899.54 18044.86 08/31/87 18427.86 18717.93 09/30/87 18082.27 18308.01 10/31/87 13311.44 14364.46 11/30/87 12020.42 13180.83 12/31/87 12938.30 14183.89 01/31/88 13899.88 14781.03 02/29/88 14317.24 15469.83 03/31/88 13961.25 14991.81 04/30/88 13744.39 15158.22 05/31/88 13707.56 15290.10 06/30/88 14067.64 15991.91 07/31/88 14047.18 15931.15 08/31/88 13666.64 15389.49 09/30/88 14124.93 16045.08 10/31/88 14300.87 16491.13 11/30/88 13883.51 16255.31 12/31/88 14080.59 16539.78 01/31/89 15074.85 17750.49 02/28/89 14786.06 17308.50 03/31/89 15565.80 17711.79 04/30/89 16415.67 18631.03 05/31/89 16927.24 19385.59 06/30/89 16545.68 19275.09 07/31/89 18595.15 21015.63 08/31/89 19045.03 21427.54 09/30/89 19182.50 21339.68 10/31/89 19040.87 20844.60 11/30/89 19861.49 21269.83 12/31/89 20063.23 21780.31 01/31/90 18912.06 20318.85 02/28/90 18713.87 20580.96 03/31/90 19460.23 21126.36 04/30/90 19460.23 20598.20 05/31/90 22137.86 22606.52 06/30/90 22892.15 22452.80 07/31/90 23208.21 22380.95 08/31/90 22167.85 20357.71 09/30/90 21500.62 19366.29 10/31/90 21992.27 19283.02 11/30/90 24331.96 20528.70 12/31/90 24941.88 21101.45 01/31/91 27404.05 22021.47 02/28/91 30788.95 23596.01 03/31/91 33533.59 24167.03 04/30/91 32949.83 24225.03 05/31/91 34738.79 25271.56 06/30/91 33172.33 24114.12 07/31/91 36107.58 25237.84 08/31/91 37911.96 25835.97 09/30/91 38675.93 25404.51 10/31/91 41224.16 25744.93 11/30/91 38972.47 24707.41 12/31/91 45816.36 27533.94 01/31/92 44313.14 27021.81 02/29/92 42378.14 27373.09 03/31/92 39792.80 26839.32 04/30/92 37537.97 27628.39 05/31/92 38310.90 27763.77 06/30/92 36834.25 27350.09 07/31/92 39050.06 28468.71 08/31/92 37996.83 27885.10 09/30/92 35366.63 28214.15 10/31/92 36454.39 28312.90 11/30/92 38451.50 29278.37 12/31/92 37828.63 29638.49 01/31/93 35796.99 29887.45 02/28/93 31977.02 30293.92 03/31/93 32859.02 30933.12 04/30/93 32846.86 30184.54 05/31/93 34160.73 30993.49 06/30/93 34039.08 31083.37 07/31/93 32932.02 30959.04 08/31/93 34105.99 32132.38 09/30/93 35170.47 31884.96 10/31/93 37786.05 32544.98 11/30/93 37658.31 32235.80 12/31/93 38742.81 32625.86 01/31/94 39510.12 33735.14 02/28/94 38554.03 32820.92 03/31/94 36038.98 31389.92 04/30/94 37484.78 31791.71 05/31/94 39601.84 32313.10 06/30/94 38973.43 31521.43 07/31/94 39754.36 32555.33 08/31/94 44970.75 33890.10 09/30/94 45294.10 33059.79 10/31/94 45922.51 33803.64 11/30/94 46916.98 32572.51 12/31/94 47056.49 33055.56 01/31/95 49548.89 33912.69 02/28/95 50599.02 35234.27 03/31/95 51974.82 36274.03 04/30/95 52699.28 37342.30 05/31/95 53207.03 38834.87 06/30/95 55899.45 39737.01 07/31/95 59099.62 41054.68 08/31/95 59600.69 41157.73 Let's say you invested $10,000 in Fidelity Select Health Care Portfolio on August 31, 1985, and paid a 3% sales charge. By August 31, 1995, your investment would have grown to $59,601 - a 496.01% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $41,158 over the same period - a 311.58% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Schering-Plough Corp. 7.9 Bristol-Myers Squibb Co. 6.1 Johnson & Johnson 5.4 St. Jude Medical, Inc. 4.8 Allergan, Inc. 4.4 American Home Products Corp. 4.1 Boston Scientific Corp. 3.3 Pfizer, Inc. 2.9 Becton, Dickinson & Co. 2.8 Amgen, Inc. 2.6 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 25.4 Row: 1, Col: 2, Value: 3.7 Row: 1, Col: 3, Value: 7.4 Row: 1, Col: 4, Value: 12.8 Row: 1, Col: 5, Value: 14.0 Row: 1, Col: 6, Value: 36.7 Drugs 36.7% Medical Supplies & Appliances 14.0% Medical Technology 12.8% Biotechnology 7.4% Drug Distributors - Wholesale 3.7% All Others 25.4%* * 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. Quite well. For the six months ended August 31, 1995, the fund returned 17.79% while the Standard & Poor's 500 Index returned 16.81% for the same time period. For the 12 months ended August 31, 1995, the fund returned 32.53% and the S&P returned 21.45%. Q. WHY DOES THE FUND'S PERFORMANCE CONTINUE TO BE STRONG? A. Let's start with the drug stocks. Many pharmaceutical companies have shown sales and earnings growth in the double digits during the past six months. The industry is adjusting to managed care better than expected, and many investors are attracted to the non-cyclical nature of the pharmaceutical industry - people are sick regardless of what the economy is doing. In addition, many companies in this market sector have been aided by the weak dollar. Larger drug companies have a high degree of overseas sales and their revenues in dollars go up when the dollar is weak. Q. WHAT OTHER FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? A. The medical device industry has also been strong. I've owned companies such as St. Jude Medical and Boston Scientific for some time now. They've contributed to performance based on the momentum they've generated with strong sales revenues, international demand and strong unit growth. Both companies have several new products that have gained market share and surpassed market expectations. I also added some biotechnology stocks such as Amgen and Biogen, which helped the fund outperform during the period. Finally, I didn't own many HMO stocks, many of which suffered declines in their stock prices during the past six months. Q. THE FUND'S TOP 10 HOLDINGS HAVEN'T CHANGED MUCH DURING THE PAST SIX MONTHS. WHAT'S HAPPENED IN THOSE STOCKS? A. Schering-Plough continues to be the fund's largest holding and should continue to have strong earnings over the next couple of years. Claritin, their leading asthma drug, should be facing generic competition, but thus far no one has developed anything as effective. Bristol-Myers Squibb has been a good stock. It's continued to show earnings growth and a large number of its products are gaining market share. Not only that, it's trading at a reasonable 12 times next year's earnings. Johnson & Johnson has also increased earnings and is growing very rapidly. The company had a great second quarter in 1995, a trend I expect to continue. Q. WE'VE TALKED ABOUT SOME OF THE MORE FAMILIAR NAMES IN THE FUND. HAVE YOU ADDED ANY NEW STOCKS DURING THE PAST SIX MONTHS? A. Yes. I've found some interesting stocks that I think will benefit the fund. Allergan is primarily an eye care company that makes products to treat cataracts. However, recently they've come up with a drug for psoriasis that I think will receive FDA approval. Another new stock, Apria Healthcare, is a home healthcare company which has begun to show strong earnings growth in a rapidly expanding industry. Q. WHICH INVESTMENTS DIDN'T TURN OUT AS YOU'D HOPED? A. Most of the stocks in the fund performed pretty well during the past six months - I don't have many complaints. However, I do regret not owning more high-tech related healthcare stocks. Some major technology companies, such as Compaq and Oracle, have begun to sell into the healthcare market by customizing their products for the healthcare industry and the fund could have benefited from the rally in technology. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. Healthcare is an industry that has undergone wrenching change during the past several years. Those companies that have been able to adapt to everything from managed care to mail order drugs have been the most successful. Whether they're trying to please buyers of drugs or adapt to the consolidation in the hospital industry, companies in this competitive industry must provide products and services for the lowest cost and for the best therapeutic value. I believe that those companies that can meet the challenges inherent to the industry will outperform the market, and I'll continue to try to position the fund in those names. FUND FACTS START DATE: July 14, 1981 TRADING SYMBOL: FSPHX SIZE: as of August 31, 1995, more than $1.0 billion 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 81.8% SHARES VALUE (NOTE 1) DEFENSE ELECTRONICS - 0.0% Maxwell Laboratories, Inc. 10,000 $ 86,243 DRUG STORES - 0.5% Eckerd Corp. (a) 50,000 1,831,250 Revco (D.S.), Inc. 200,060 3,951,185 5,782,435 DRUGS & PHARMACEUTICALS - 45.5% BIOTECHNOLOGY - 7.4% Amgen, Inc. (a) 590,000 28,246,250 Athena Neurosciences, Inc. (a) 100,000 1,037,500 Biochem Pharmaceuticals, Inc. (a) 31,200 931,508 Biogen, Inc. (a) 344,700 18,872,325 Cambridge Neuroscience, Inc. (a) 45,900 493,425 Cephalon, Inc. (a) 175,000 4,243,750 COR Therapeutics, Inc. (a) 387,100 4,500,038 Genentech, Inc. (redeemable) (a) 207,400 9,773,725 Genetics Institute, Inc. depositary share (a) 72,000 2,826,000 Gilead Sciences, Inc. 251,000 5,459,250 Magainin Pharmaceuticals, Inc. 100,000 975,000 North American Biologicals, Inc. (a) 51,800 472,675 Sequana Therapeutics, Inc. (a) 100,000 1,050,000 78,881,446 DRUGS - 36.7% Allergan, Inc. 1,529,400 46,455,525 American Home Products Corp. 562,400 43,304,800 Astra AB Class A Free shares 225,000 7,452,218 Bristol-Myers Squibb Co. 941,100 64,582,988 Dura Pharmaceuticals, Inc. (a) 100,000 2,450,000 Elan Corp. PLC ADR (a) 130,850 5,135,863 Elan Corp. PLC ADR (warrants) (a) 27,111 332,110 Glaxo PLC sponsored ADR 145,000 3,443,750 Lilly (Eli) & Co. 100,000 8,187,500 Merck & Co., Inc. 440,000 21,945,000 Pfizer, Inc. 633,600 31,284,000 Pharmacia AB Class A Free shares 807,300 22,042,737 Roche Holdings Ltd. (part. certs.) 2,000 13,410,885 Sabdoz AG 11,000 7,967,902 Schering-Plough Corp. 1,808,400 84,316,650 SmithKline Beecham PLC ADR 450,000 20,137,500 Upjohn Co. 50,000 2,118,750 Warner-Lambert Co. 75,900 6,859,463 391,427,641 IN VITRO, IN VIVO DIAGNOSTIC SUBSTANCES - 0.1% Igen, Inc. (a) 174,000 1,174,500 PHARMACEUTICAL PREPARATIONS - 1.3% Advanced Therapeutic Systems Ltd. (a) 27,111 742,164 Copley Pharmaceutical, Inc. (a) 220,500 3,969,000 Immunex Corp. (a) 386,300 5,987,650 Inhale Therapeutic Systems (a) 39,000 472,875 Ligand Pharmaceuticals, Inc. Class B (a) 232,800 2,153,400 13,325,089 TOTAL DRUGS & PHARMACEUTICALS 484,808,676 MEDICAL EQUIPMENT & SUPPLIES - 30.5% DRUG DISTRIBUTORS - WHOLESALE - 3.7% Bergen Brunswig Corp. Class A 1,150,490 24,016,479 Cardinal Health, Inc. 297,666 15,925,131 39,941,610 MEDICAL, DENTAL, HOSPITALS EQUIPMENT - WHOLESALE - 0.3% Sterile Concepts Holdings 252,200 3,625,375 SHARES VALUE (NOTE 1) MEDICAL SUPPLIES & APPLIANCES - 14.0% Abbott Laboratories 5,000 $ 193,750 Baxter International, Inc. 623,000 24,297,000 Becton, Dickinson & Co. 535,300 30,177,538 Boston Scientific Corp. (a) 888,668 35,324,553 Healthdyne, Inc. (a) 258,200 2,501,313 Johnson & Johnson 829,600 57,242,400 149,736,554 MEDICAL TECHNOLOGY - 11.7% Advanced Medical, Inc. (a) 196,460 577,101 Advanced Technology Laboratories, Inc. 477,600 8,119,200 AMSCO International, Inc. (a) 210,800 3,768,050 Beckman Instruments, Inc. 354,000 10,133,250 Gish Biomedical, Inc. (a) 141,700 1,169,025 Haemonetics Corp. (a) 270,000 5,805,000 Mentor Corp. 142,600 5,454,450 Nellcor, Inc. (a) 371,400 19,312,800 St. Jude Medical, Inc. 864,600 51,551,775 Spacelabs Medical, Inc. (a)(c) 574,300 15,003,588 Vital Signs, Inc. 179,300 3,429,113 124,323,352 X-RAY ELECTRO-MEDICAL APPARATUS - 0.8% Healthdyne Technologies, Inc. (a) 168,013 2,247,174 Protocol Systems, Inc. (a)(c) 503,000 5,941,688 8,188,862 TOTAL MEDICAL EQUIPMENT & SUPPLIES 325,815,753 MEDICAL FACILITIES MANAGEMENT - 5.3% HOME HEALTH CARE AGENCIES - 1.8% Apria Healthcare Group, Inc. (a) 691,880 19,372,640 HOSPITALS - 2.1% Columbia/HCA Healthcare Corp. 341,705 16,060,135 NovaCare, Inc. (a) 50,000 412,500 Tenet Healthcare Corp. (a) 200,000 3,175,000 Vencor, Inc. (a) 80,600 2,387,775 22,035,410 MEDICAL SERVICES - 0.5% Lincare Holdings, Inc. (a) 150,000 4,481,250 Syncor International Corp. (a) 107,500 1,075,000 5,556,250 SKILLED NURSING CARE FACILITIES - 0.3% TheraTx, Inc. (a) 205,600 2,724,200 SPECIALTY OUTPATIENT CLINICS - 0.6% Foundation Health Corp. (a) 200,000 6,925,000 TOTAL MEDICAL FACILITIES MANAGEMENT 56,613,500 SERVICES - 0.0% BUILDING MAINTENANCE - 0.0% Health Care Services Group, Inc. 577 6,419 TOTAL COMMON STOCKS (Cost $685,267,369) 873,113,026 CONVERTIBLE PREFERRED STOCKS - 0.9% MEDICAL EQUIPMENT & SUPPLIES - 0.9% MEDICAL TECHNOLOGY - 0.9% U.S. Surgical Corp. $2.20 (b) (Cost $7,710,166) 332,800 9,526,400 NONCONVERTIBLE BONDS - 0.2% PRINCIPAL VALUE (NOTE 1) AMOUNT MEDICAL EQUIPMENT & SUPPLIES - 0.2% MEDICAL TECHNOLOGY - 0.2% Advanced Medical, Inc. 15%, 7/15/99 (Cost $1,542,097) $ 2,090,000 $ 2,090,000 REPURCHASE AGREEMENTS - 17.1% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 182,089,433 182,060,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $876,579,632) $1,066,789,426 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 $9,526,400 or 0.9% of net assets. 3. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Protocol Systems, Inc. $ 430,525 $ - $ - $ 5,941,688 Spacelabs Medical, Inc. - - - 15,003,588 Totals $ 430,525 $ - $ - $ 20,945,276 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $219,588,173 and $282,640,714, 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 $134,054 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 $19,368,638 and $20,312,400, respectively (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $878,486,293. Net unrealized appreciation aggregated $188,303,133, of which $194,782,598 related to appreciated investment securities and $6,479,465 related to depreciated investment securities. HEALTH CARE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $182,060,000) (cost $876,579,632) - $ 1,066,789,426 See accompanying schedule Cash 418 Receivable for investments sold 1,032,496 Receivable for fund shares sold 4,488,127 Dividends receivable 1,673,342 Interest receivable 39,188 Redemption fees receivable 1,760 Other receivables 929,674 Prepaid expenses 46,703 TOTAL ASSETS 1,075,001,134 LIABILITIES Payable for investments purchased $ 13,635,606 Payable for fund shares redeemed 2,882,497 Accrued management fee 503,612 Other payables and 911,603 accrued expenses Collateral on securities loaned, 20,312,400 at value TOTAL LIABILITIES 38,245,718 NET ASSETS $ 1,036,755,416 Net Assets consist of: Paid in capital $ 789,096,207 Undistributed net investment income 4,878,205 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 52,571,210 Net unrealized appreciation (depreciation) on investments 190,209,794 NET ASSETS, for 11,621,586 shares outstanding $ 1,036,755,416 NET ASSET VALUE and redemption price per share ($1,036,755,416 (divided by) 11,621,586 shares) $89.21 Maximum offering price per share (100/97.00 of $89.21) $91.97
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 7,583,253 Dividends Interest (including income on securities loaned of $131,422) 3,542,204 TOTAL INCOME 11,125,457 EXPENSES Management fee $ 2,805,055 Transfer agent 3,184,785 Fees Redemption fees (246,354 ) Accounting and security lending fees 360,962 Non-interested trustees' compensation 3,489 Custodian fees and expenses 31,573 Registration fees 46,703 Audit 41,735 Legal 3,191 Miscellaneous 7,912 Total expenses before reductions 6,239,051 Expense reductions (29,280 6,209,771 ) NET INVESTMENT INCOME 4,915,686 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 55,077,588 Foreign currency transactions (10,157 55,067,431 ) Change in net unrealized appreciation (depreciation) on investment securities 82,714,799 NET GAIN (LOSS) 137,782,230 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 142,697,916 OTHER INFORMATION $2,480,069 Sales Charges Paid to FDC Deferred sales charges withheld $28,470 by FDC Exchange fees withheld by FSC $184,875
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 4,915,686 $ 6,943,717 Net investment income Net realized gain (loss) 55,067,431 79,587,152 Change in net unrealized appreciation (depreciation) 82,714,799 91,979,090 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 142,697,916 178,509,959 Distributions to shareholders (637,345) (5,882,332 From net investment income ) From net realized gain (4,592,709) (56,259,930 ) TOTAL DISTRIBUTIONS (5,230,054) (62,142,262 ) Share transactions 400,461,685 608,744,670 Net proceeds from sales of shares Reinvestment of distributions 5,130,212 60,781,787 Cost of shares redeemed (449,648,143) (366,138,010 ) Paid in capital portion of redemption fees 202,828 495,264 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (43,853,418) 303,883,711 TOTAL INCREASE (DECREASE) IN NET ASSETS 93,614,444 420,251,408 NET ASSETS Beginning of period 943,140,972 522,889,564 End of period (including undistributed net investment income of $4,878,205 and $2,008,371, respectively) $ 1,036,755,416 $ 943,140,972 OTHER INFORMATION Shares Sold 4,811,357 8,512,762 Issued in reinvestment of distributions 65,049 871,512 Redeemed (5,643,937) (5,254,899 ) Net increase (decrease) (767,531) 4,129,375
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 76.13 $ 63.31 $ 52.57 $ 70.42 $ 69.99 $ 46.15 Income from Investment Operations Net investment income (loss) .44 .75 .15 .13 (.02) .73 E Net realized and unrealized gain (loss) 13.03 18.38 10.61 (9.34) 9.47 28.70 Total from investment operations 13.47 19.13 10.76 (9.21) 9.45 29.43 Less Distributions (.05) (.62) (.07) (.16) (.34) (.20) From net investment income From net realized gain (.36) (5.74) - (8.51) (8.81) (5.67) Total distributions (.41) (6.36) (.07) (8.67) (9.15) (5.87) Redemption fees added to paid in capital .02 .05 .05 .03 .13 .28 Net asset value, end of period $ 89.21 $ 76.13 $ 63.31 $ 52.57 $ 70.42 $ 69.99 TOTAL RETURN B, C 17.79% 31.24% 20.57% (14.81)% 13.92% 69.32% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 1,036,755 $ 943,141 $ 522,890 $ 536,367 $ 838,814 $ 624,018 Ratio of expenses to average net assets 1.34% A 1.36% 1.55% 1.46% A 1.44% 1.53% Ratio of expenses to average net assets before expense 1.35% A 1.39% 1.59% 1.46% A 1.44% 1.53% reductions Ratio of net investment income (loss) to average net 1.06% A 1.08% .26% .24% A (.02)% 1.28% assets Portfolio turnover rate 54% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.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). If Fidelity had not reimbursed certain expenses, the life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S MEDICAL DELIVERY 11.84% 22.28% 163.61% 254.44% MEDICAL DELIVERY (INCL. 3% SALES CHARGE) 8.49% 18.61% 155.70% 243.81% S&P 500 16.81% 21.45% 102.17% 201.52% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on June 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 AUGUST 31, 1995 YEAR YEARS FUND MEDICAL DELIVERY 22.28% 21.39% 14.78% MEDICAL DELIVERY (INCL. 3% SALES CHARGE) 18.61% 20.66% 14.40% S&P 500 21.45% 15.12% 12.78% 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 Standard & Poor' 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 6984.28 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 7519.95 11201.29 06/30/88 7756.88 11715.43 07/31/88 7674.47 11670.91 08/31/88 7458.14 11274.10 09/30/88 7880.50 11754.37 10/31/88 8086.52 12081.14 11/30/88 7828.99 11908.38 12/31/88 8086.52 12116.78 01/31/89 8684.00 13003.73 02/28/89 9003.34 12679.94 03/31/89 9497.80 12975.38 04/30/89 10146.79 13648.80 05/31/89 10672.15 14201.58 06/30/89 10548.08 14120.63 07/31/89 11745.32 15395.72 08/31/89 12292.34 15697.48 09/30/89 12632.93 15633.12 10/31/89 12209.77 15270.43 11/30/89 12777.42 15581.95 12/31/89 12778.17 15955.91 01/31/90 10896.85 14885.27 02/28/90 11171.65 15077.29 03/31/90 11689.54 15476.84 04/30/90 11805.80 15089.92 05/31/90 13475.74 16561.19 06/30/90 14120.46 16448.57 07/31/90 14173.30 16395.93 08/31/90 13042.40 14913.74 09/30/90 12175.72 14187.44 10/31/90 12027.75 14126.44 11/30/90 13697.69 15039.00 12/31/90 14856.14 15458.59 01/31/91 17250.54 16132.59 02/28/91 18317.13 17286.07 03/31/91 21038.04 17704.39 04/30/91 20406.79 17746.88 05/31/91 22093.75 18513.55 06/30/91 20232.46 17665.63 07/31/91 22262.51 18488.84 08/31/91 22523.35 18927.03 09/30/91 22727.49 18610.95 10/31/91 23226.50 18860.33 11/30/91 22580.06 18100.26 12/31/91 26417.94 20170.93 01/31/92 26441.16 19795.75 02/29/92 25419.73 20053.10 03/31/92 23736.68 19662.06 04/30/92 22796.50 20240.13 05/31/92 22564.36 20339.30 06/30/92 21376.17 20036.25 07/31/92 22592.60 20855.73 08/31/92 22567.26 20428.19 09/30/92 19918.99 20669.24 10/31/92 20907.34 20741.58 11/30/92 22960.06 21448.87 12/31/92 22934.72 21712.69 01/31/93 21768.98 21895.08 02/28/93 18322.43 22192.85 03/31/93 18727.91 22661.12 04/30/93 18499.83 22112.72 05/31/93 19070.03 22705.34 06/30/93 19260.09 22771.19 07/31/93 19741.60 22680.10 08/31/93 19678.24 23539.68 09/30/93 21300.14 23358.43 10/31/93 22301.16 23841.94 11/30/93 22668.62 23615.45 12/31/93 24201.83 23901.19 01/31/94 25557.64 24713.83 02/28/94 25697.02 24044.09 03/31/94 24417.24 22995.77 04/30/94 25202.85 23290.11 05/31/94 26051.81 23672.07 06/30/94 24442.58 23092.10 07/31/94 25532.30 23849.53 08/31/94 28117.20 24827.36 09/30/94 29118.22 24219.09 10/31/94 30068.56 24764.01 11/30/94 28776.10 23862.11 12/31/94 29003.49 24215.98 01/31/95 30276.62 24843.91 02/28/95 30740.78 25812.07 03/31/95 32690.26 26573.79 04/30/95 31627.82 27356.38 05/31/95 30590.41 28449.82 06/30/95 31082.52 29110.71 07/31/95 34221.36 30076.02 08/31/95 34380.96 30151.51 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 August 31, 1995, your investment would have grown to $34,381 - a 243.81% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $30,152 over the same period - a 201.52% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Columbia/HCA Healthcare Corp. 7.4 Apria Healthcare Group, Inc. 7.2 Baxter International, Inc. 7.1 Health Management Associates, Inc. Class A 6.4 Universal Health Services, Inc. Class B 5.8 Lincare Holdings, Inc. 5.0 Tenet Healthcare Corp. 4.3 HEALTHSOUTH Rehabilitation Corp. 3.6 Warner-Lambert Co. 3.0 Capstone Capital Corp. 2.3 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 43.0 Row: 1, Col: 2, Value: 5.9 Row: 1, Col: 3, Value: 6.5 Row: 1, Col: 4, Value: 7.7 Row: 1, Col: 5, Value: 7.8 Row: 1, Col: 6, Value: 29.1 Hospitals 29.1% Medical Supplies & Appliances 7.8% Home Health Care Agencies 7.7% Medical Services 6.5% Drug Distributors - Wholesale 5.9% All Others 43.0%* * INCLUDES SHORT-TERM INVESTMENTS MEDICAL DELIVERY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Stephen Binder, Portfolio Manager of Fidelity Select Medical Delivery Portfolio Q. HOW HAS THE FUND PERFORMED, STEVE? A. For the six months ended August 31, 1995, Select Medical Delivery returned 11.84%. The Standard & Poor's 500 Index returned 16.81% for the same time period. For the 12 months ended August 31, 1995, the fund returned 22.28%, while the S&P returned 21.45% Q. WHAT FACTORS CONTRIBUTED TO RESULTS? A. There were several themes during the past six months. The gross underperformance of HMO stocks had a negative impact on the fund, but was partially offset by the strong performance of most hospital stocks. Q. WHAT HAPPENED TO HEALTH MAINTENANCE ORGANIZATION, OR HMO, STOCKS DURING THE PERIOD? A. They got clobbered. Ironically, HMO enrollment growth accelerated, but new members are much less profitable than existing, and earnings have slowed. U.S. Healthcare, which was one of the fund's largest holdings six months ago, hasn't held up well. Its profit margins dramatically compressed when they cut prices in order to gain market share. This strategy backfired and the stock collapsed. By March, I'd decreased the fund's holdings in U.S. Healthcare nearly in half and was out of the stock completely by May. Another disappointment was United HealthCare. It maintained its price discipline, but enrollment growth slowed and earnings were disappointing. I liquidated the fund's position in United HealthCare as well. Q. DID THE FUND OWN ANY HMO STOCKS AT THE END OF AUGUST? A. Yes, but I've cut the fund's holdings by about 75%. Oxford Health Plans is the fund's largest HMO position. I owned it six months ago but have added to the position during the past six months. Located in the New York metropolitan area, Oxford is an HMO that is growing enrollment by more than 100 percent per year in a market that's under-penetrated by managed care. In short, Oxford Health Plans is growing so rapidly it's overwhelming the competitive pressures that are plaguing the industry. Q. YOU SAID THE HOSPITAL STOCKS PERFORMED BETTER THAN THE HMOS AS A GROUP. WHAT'S THE STORY THERE? A. In contrast to HMOs, hospital stocks equaled or exceeded Wall Street expectations. During the past six months, Columbia/HCA was up about 50%, Health Management Associates was up about 30%, and Universal Health Services was up about 36%. Hospitals benefited from an increase in surgeries and outpatient visits. In general, hospital admissions have been stronger this year than they were last year. Many hospitals have experienced strong revenue growth, employed effective cost control strategies and have begun to use ample free cash flow to acquire other hospitals. Q. OBVIOUSLY HMOS WERE THE MAJOR DISAPPOINTMENT OF THE PAST SIX MONTHS. WHAT OTHER INVESTMENTS DIDN'T WORK OUT AS YOU WOULD HAVE LIKED? A. Nursing homes underperformed, but fortunately the fund was not heavily weighted in them anyway. Longer term, nursing homes are an attractive industry, but there are a couple of near-term issues that are causing the stocks to be more volatile than usual. One is the prospect of Medicaid block grants to the states by the federal government. States could be released from their obligations to make adequate reimbursements to nursing homes for their Medicaid patients. Another is the investigation into the level of payment to contract therapists for Medicare patients. There is a movement afoot to reduce the rates paid to speech and occupational therapists, which could hurt nursing home earnings. Q. WHAT'S AHEAD FOR THE FUND? A. I have already begun to cut back on the fund's hospital stocks that have run up in recent months. They've had a decent move and their valuations are no longer compelling. I'm interested in adding some HMOs again, but am still cautious. FUND FACTS START DATE: June 30, 1986 TRADING SYMBOL: FSHCX SIZE: as of August 31, 1995, more than $183 million MANAGER: Stephen Binder, since December 1994; manager, Fidelity Select Financial Services Portfolio 1993-1994; Fidelity Select Defense and Aerospace Portfolio, 1992-1994; Fidelity Select Regional Banks Portfolio, 1990-1994; joined Fidelity in 1989 (checkmark) MEDICAL DELIVERY PORTFOLIO INVESTMENTS AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 82.9% SHARES VALUE (NOTE 1) CHEMICALS & PLASTICS - 1.6% CHEMICALS - 1.6% Grace (W.R.) & Co. 43,900 $ 2,924,833 DRUGS & PHARMACEUTICALS - 3.2% DRUGS - 3.0% Warner-Lambert Co. 63,500 5,738,813 IN VITRO, IN VIVO DIAGNOSTIC SUBSTANCES - 0.2% Serologicals Corp. (a) 22,600 367,250 TOTAL DRUGS & PHARMACEUTICALS 6,106,063 ELECTRICAL EQUIPMENT - 0.0% TV & RADIO COMMUNICATION EQUIPMENT - 0.0% Lifeline Systems, Inc. 4,800 53,400 INSURANCE - 0.1% INSURANCE BROKERS & SERVICES - 0.1% HealthCare COMPARE Corp. 5,000 187,813 MEDICAL EQUIPMENT & SUPPLIES - 15.4% DRUG DISTRIBUTORS - WHOLESALE - 5.9% Amerisource Distribution Corp. Class A 85,000 1,933,750 Bergen Brunswig Corp. Class A 200,965 4,195,144 Cardinal Health, Inc. 50,000 2,675,000 McKesson Corp. 55,000 2,392,500 11,196,394 MEDICAL SUPPLIES & APPLIANCES - 7.8% Baxter International, Inc. 347,300 13,544,700 Boston Scientific Corp. (a) 30,000 1,192,500 14,737,200 MEDICAL TECHNOLOGY - 0.6% St. Jude Medical, Inc. 20,100 1,198,463 X-RAY & RELATED APPARATUS - 0.4% Hologic, Inc. 41,400 693,450 X-RAY ELECTRO-MEDICAL APPARATUS - 0.7% Fischer Imaging Corp. (a) 100,000 750,000 Protocol Systems, Inc. (a) 43,800 517,388 1,267,388 TOTAL MEDICAL EQUIPMENT & SUPPLIES 29,092,895 MEDICAL FACILITIES MANAGEMENT - 59.9% HMO'S & OUTPATIENT CARE - 4.5% Oxford Health Plans, Inc. (a) 85,200 4,174,800 Pacificare Health Systems, Inc. Class B (a) 20,100 1,150,725 Physician Corp of America 100,000 1,600,000 Sierra Health Services, Inc. (a) 59,700 1,596,975 8,522,500 HEALTH SERVICES - 0.8% Rotech Medical Corp. (a) 56,300 1,449,725 HOME HEALTH CARE AGENCIES - 7.7% Apria Healthcare Group, Inc. (a) 487,800 13,658,400 Vivra, Inc. (a) 30,000 993,750 14,652,150 HOSPITALS - 29.1% Columbia/HCA Healthcare Corp. 299,682 14,085,054 Community Psychiatric Centers 166,300 1,954,025 Health Management Associates, Inc. Class A (a) 364,712 12,217,852 HEALTHSOUTH Rehabilitation Corp. (a) 285,200 6,737,850 Quorum Health Group, Inc. (a) 45,400 964,750 Tenet Healthcare Corp. (a) 510,800 8,108,950 SHARES VALUE (NOTE 1) Universal Health Services, Inc. Class B (a) 319,300 $ 10,975,938 Vencor, Inc. (a) 1,200 35,550 55,079,969 MEDICAL SERVICES - 6.5% Laboratory Corp. of America Holdings 150,000 2,081,250 Lincare Holdings, Inc. (a) 317,900 9,497,263 Surgical Care Affiliates, Inc. 30,000 656,250 12,234,763 MISCELLANEOUS HEALTH & ALLIED SERVICES - 0.4% Renal Treatment Centers, Inc. (a) 25,000 812,500 NURSING CARE & NURSING HOMES - 3.9% Arbor Health Care Co. (a) 17,000 365,500 Health Care & Retirement Corp. (a) 40,000 1,260,000 Integrated Health Services, Inc. 91,100 2,721,613 Manor Care, Inc. 95,000 3,075,625 7,422,738 PSYCHIATRIC HOSPITALS - 0.6% Horizon Mental Health Management, Inc. (a) 75,300 1,129,500 SKILLED NURSING CARE FACILITIES - 5.5% Beverly Enterprises, Inc. (a) 65,000 861,250 Hillhaven Corp. (a) 86,900 2,422,338 Horizon/CMS Healthcare Corp. (a) 80,955 1,770,891 Multicare Companies, Inc. (a) 166,100 3,550,388 TheraTx, Inc. (a) 140,400 1,860,300 10,465,167 SPECIALTY OUTPATIENT CLINICS - 0.9% Foundation Health Corp. (a) 50,000 1,731,250 TOTAL MEDICAL FACILITIES MANAGEMENT 113,500,262 REAL ESTATE INVESTMENT TRUSTS - 2.3% Capstone Capital Corp. (b) 247,400 4,422,275 SERVICES - 0.4% BUILDING MAINTENANCE - 0.0% Health Care Services Group, Inc. 1,004 11,170 MANAGEMENT SERVICES - 0.4% Emcare Holdings (a) 39,200 764,400 TOTAL SERVICES 775,570 TOTAL COMMON STOCKS (Cost $128,559,149) 157,063,111 REPURCHASE AGREEMENTS - 17.1% MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 32,388,235 32,383,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $160,942,149) $ 189,446,111 LEGEND 1. Non-income producing 2. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Capstone Capital Corp. $ - $ 1,200,956 $ 234,151 $ 4,422,275 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $65,150,649 and $183,628,625, 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 $61,720 for the period (see Note 5 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $1,731,250 and $1,800,000, respectively (see Note 7 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $1,760,000 and $945,700, respectively. The weighted average interest rate paid was 6.2% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $160,942,149. Net unrealized appreciation aggregated $28,503,962, of which $29,674,359 related to appreciated investment securities and $1,170,397 related to depreciated investment securities. MEDICAL DELIVERY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $32,383,000) (cost $160,942,149) - $ 189,446,111 See accompanying schedule Cash 815 Receivable for investments sold 2,320,615 Receivable for fund shares sold 403,814 Dividends receivable 114,906 Redemption fees receivable 209 Other receivables 322,714 Prepaid expenses 19,241 TOTAL ASSETS 192,628,425 LIABILITIES Payable for investments purchased $ 3,024,417 Payable for fund shares redeemed 4,063,404 Accrued management fee 95,153 Other payables and 262,002 accrued expenses Collateral on securities loaned, 1,800,000 at value TOTAL LIABILITIES 9,244,976 NET ASSETS $ 183,383,449 Net Assets consist of: Paid in capital $ 134,779,342 Accumulated net investment (loss) (104,940 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 20,205,085 Net unrealized appreciation (depreciation) on investments 28,503,962 NET ASSETS, for 7,095,261 $ 183,383,449 shares outstanding NET ASSET VALUE and redemption price per share ($183,383,449 (divided by) 7,095,261 shares) $25.85 Maximum offering price per share (100/97.00 of $25.85) $26.65
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 847,172 Dividends (including $234,151 received from affiliated issuers) Interest (including income on securities loaned of $138,325) 588,029 TOTAL INCOME 1,435,201 EXPENSES Management fee $ 598,094 Transfer agent 972,681 Fees Redemption fees (162,493 ) Accounting and security lending fees 99,201 Non-interested trustees' compensation 1,043 Custodian fees and expenses 8,555 Registration fees 19,241 Audit 22,142 Legal 979 Interest 1,624 Miscellaneous 2,319 Total expenses before reductions 1,563,386 Expense reductions (23,245 1,540,141 ) NET INVESTMENT INCOME (LOSS) (104,940 ) REALIZED AND UNREALIZED GAIN (LOSS) 20,184,940 Net realized gain (loss) on investment securities (including realized gain (loss) of $(177,843) on sales of investment in affiliated issuers) Change in net unrealized appreciation (depreciation) on investment securities (3,146,218 ) NET GAIN (LOSS) 17,038,722 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 16,933,782 OTHER INFORMATION $649,615 Sales Charges Paid to FDC Deferred sales charges withheld $2,504 by FDC Exchange fees withheld by FSC $131,138
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ (104,940 $ 620,837 Net investment income (loss) ) Net realized gain (loss) 20,184,940 25,519,856 Change in net unrealized appreciation (depreciation) (3,146,218 5,905,629 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 16,933,782 32,046,322 Distributions to shareholders - (620,837 From net investment income ) From net realized gain (700,387 (9,893,316 ) ) TOTAL DISTRIBUTIONS (700,387 (10,514,153 ) ) Share transactions 137,076,585 408,339,151 Net proceeds from sales of shares Reinvestment of distributions 685,465 10,314,005 Cost of shares redeemed (270,397,857 (329,680,344 ) ) Paid in capital portion of redemption fees 216,013 512,240 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (132,419,794 89,485,052 ) TOTAL INCREASE (DECREASE) IN NET ASSETS (116,186,399 111,017,221 ) NET ASSETS Beginning of period 299,569,848 188,552,627 End of period (including accumulated net investment loss of $104,940 and $0, respectively) $ 183,383,449 $ 299,569,848 OTHER INFORMATION Shares Sold 5,577,687 18,773,290 Issued in reinvestment of distributions 28,359 506,086 Redeemed (11,434,845 (15,651,245 ) ) Net increase (decrease) (5,828,799) 3,628,131
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 23.18 $ 20.28 $ 14.46 $ 19.64 $ 18.75 $ 11.17 Income from Investment Operations Net investment income (loss) (.01) .06 (.10) (.13) (.15) (.01) Net realized and unrealized gain (loss) 2.72 3.74 5.84 (3.56) 2.16 7.76 Total from investment operations 2.71 3.80 5.74 (3.69) 2.01 7.75 Less Distributions - (.06) E - - - - From net investment income From net realized gain (.07) (.89) E - (1.55) (1.24) (.39) Total distributions (.07) (.95) - (1.55) (1.24) (.39) Redemption fees added to paid in capital .03 .05 .08 .06 .12 .22 Net asset value, end of period $ 25.85 $ 23.18 $ 20.28 $ 14.46 $ 19.64 $ 18.75 TOTAL RETURN B, C 11.84% 19.63% 40.25% (19.63)% 11.71% 72.85% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 183,383 $ 299,570 $ 188,553 $ 71,809 $ 129,361 $ 131,622 Ratio of expenses to average net assets 1.56% A 1.45% 1.79% 1.77% A 1.69% 1.94% Ratio of expenses to average net assets before expense 1.58% A 1.48% 1.82% 1.77% A 1.69% 1.94% reductions Ratio of net investment income (loss) to average net (.11)% .29% (.57)% (.89)% (.71)% (.07)% assets A A Portfolio turnover rate 70% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E 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). If Fidelity had not reimbursed certain expenses, the past 10 years total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1995 MONTH YEAR YEARS YEARS S COMPUTERS 55.75% 69.69% 371.03% 478.79% COMPUTERS (INCL. 3% SALES CHARGE) 51.08% 64.60% 356.90% 461.43% S&P 500 16.81% 21.45% 102.17% 311.58% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS YEARS COMPUTERS 69.69% 36.34% 19.19% COMPUTERS (INCL. 3% SALES CHARGE) 64.60% 35.51% 18.83% S&P 500 21.45% 15.12% 15.20% 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 CompuStandard & Poor 08/31/85 9700.00 10000.00 09/30/85 9275.63 9687.00 10/31/85 9831.35 10134.54 11/30/85 10912.50 10829.77 12/31/85 11478.33 11353.93 01/31/86 11609.69 11417.51 02/28/86 12215.94 12271.54 03/31/86 12215.94 12956.29 04/30/86 13438.54 12809.89 05/31/86 13963.96 13491.37 06/30/86 13034.38 13719.38 07/31/86 11012.24 12952.46 08/31/86 12087.10 13913.54 09/30/86 11154.21 12762.89 10/31/86 12249.35 13499.31 11/30/86 12330.47 13827.34 12/31/86 12381.17 13474.74 01/31/87 14845.24 15289.79 02/28/87 16325.70 15893.74 03/31/87 16437.25 16353.07 04/30/87 16832.71 16207.52 05/31/87 16761.73 16348.53 06/30/87 16416.97 17174.13 07/31/87 16690.75 18044.86 08/31/87 17836.59 18717.93 09/30/87 17988.69 18308.01 10/31/87 11640.94 14364.46 11/30/87 10069.21 13180.83 12/31/87 11594.96 14183.89 01/31/88 10988.55 14781.03 02/29/88 11981.81 15469.83 03/31/88 11793.61 14991.81 04/30/88 12400.02 15158.22 05/31/88 12034.09 15290.10 06/30/88 13173.72 15991.91 07/31/88 12180.46 15931.15 08/31/88 11019.92 15389.49 09/30/88 11312.67 16045.08 10/31/88 10403.05 16491.13 11/30/88 10340.32 16255.31 12/31/88 11009.46 16539.78 01/31/89 11657.69 17750.49 02/28/89 11448.59 17308.50 03/31/89 10904.91 17711.79 04/30/89 12128.18 18631.03 05/31/89 13205.08 19385.59 06/30/89 11636.78 19275.09 07/31/89 11845.89 21015.63 08/31/89 12023.63 21427.54 09/30/89 12305.93 21339.68 10/31/89 11898.17 20844.60 11/30/89 11636.78 21269.83 12/31/89 11762.25 21780.31 01/31/90 11657.69 20318.85 02/28/90 12713.68 20580.96 03/31/90 13623.30 21126.36 04/30/90 13257.36 20598.20 05/31/90 14982.49 22606.52 06/30/90 15254.33 22452.80 07/31/90 14166.97 22380.95 08/31/90 11919.08 20357.71 09/30/90 11134.93 19366.29 10/31/90 11553.14 19283.02 11/30/90 13456.01 20528.70 12/31/90 13927.29 21101.45 01/31/91 16301.26 22021.47 02/28/91 17356.36 23596.01 03/31/91 18727.99 24167.03 04/30/91 17514.63 24225.03 05/31/91 18400.91 25271.56 06/30/91 15895.32 24114.12 07/31/91 17492.46 25237.84 08/31/91 18578.95 25835.97 09/30/91 17601.11 25404.51 10/31/91 17253.43 25744.93 11/30/91 16069.16 24707.41 12/31/91 18209.54 27533.94 01/31/92 20110.90 27021.81 02/29/92 21490.74 27373.09 03/31/92 19795.82 26839.32 04/30/92 19154.79 27628.39 05/31/92 19393.82 27763.77 06/30/92 17525.06 27350.09 07/31/92 18383.38 28468.71 08/31/92 17329.49 27885.10 09/30/92 18187.81 28214.15 10/31/92 19621.98 28312.90 11/30/92 20838.85 29278.37 12/31/92 22207.82 29638.49 01/31/93 23500.74 29887.45 02/28/93 21892.74 30293.92 03/31/93 22327.34 30933.12 04/30/93 21693.21 30184.54 05/31/93 24234.87 30993.49 06/30/93 23265.02 31083.37 07/31/93 24234.87 30959.04 08/31/93 25672.90 32132.38 09/30/93 26397.50 31884.96 10/31/93 26397.50 32544.98 11/30/93 27523.40 32235.80 12/31/93 28618.76 32625.86 01/31/94 30463.99 33735.14 02/28/94 31756.83 32820.92 03/31/94 31427.74 31389.92 04/30/94 31227.94 31791.71 05/31/94 31204.43 32313.10 06/30/94 28642.26 31521.43 07/31/94 29547.25 32555.33 08/31/94 33084.93 33890.10 09/30/94 32849.86 33059.79 10/31/94 34083.94 33803.64 11/30/94 34283.74 32572.51 12/31/94 34471.79 33055.56 01/31/95 33414.01 33912.69 02/28/95 36046.70 35234.27 03/31/95 38820.43 36274.03 04/30/95 41904.83 37342.30 05/31/95 43976.26 38834.87 06/30/95 48785.79 39737.01 07/31/95 54916.76 41054.68 08/31/95 56142.95 41157.73 Let's say you invested $10,000 in Fidelity Select Computers Portfolio on August 31, 1985, and paid a 3% sales charge. By August 31, 1995, your investment would have grown to $56,143 - a 461.43% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $41,158 over the same period - a 311.58% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Micron Technology, Inc. 9.0 Compaq Computer Corp. 5.0 Nippon Steel Semiconductor Corp. 3.8 SGS-Thomson Microelectronic NV 2.5 Structural Dynamics Research Corp. 2.4 Digital Equipment Corp. 2.3 Sun Microsystems, Inc. 2.1 International Business Machines Corp. 2.1 LSI Logic Corp. 2.0 Apple Computer, Inc. 2.0 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 43.7 Row: 1, Col: 2, Value: 4.2 Row: 1, Col: 3, Value: 5.5 Row: 1, Col: 4, Value: 6.2 Row: 1, Col: 5, Value: 9.4 Row: 1, Col: 6, Value: 31.0 Semiconductors 31.0% Mini & Micro Computers 9.4% Electronic Equipment 6.2% Electronic Computers 5.5% Prepackaged Computer Software 4.2% All Others 43.7%* * INCLUDES SHORT-TERM INVESTMENTS COMPUTERS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Harry Lange, Portfolio Manager of Fidelity Select Computers Portfolio Q. HARRY, HOW DID THE FUND PERFORM? A. It's been a strong six months for computer-related stocks. The fund had a total return of 55.75% from March 1, 1995, through August 31, 1995. During the same period, the S&P 500 returned 16.81%. For the 12 months ended August 31, 1995, the fund rose 69.69%, while the S&P 500 was up 21.45%. Q. HOW DID THE FUND SO HANDILY TOP THE RETURNS OF THE BROAD MARKET? A. Over the past six months, the technology sector has shown the strongest earnings gains and stock performance in the market, and computer and semiconductor stocks - which make up most of this fund - have led the technology rally. Essentially, the story hasn't changed much. The 20%-plus growth of the personal computer industry has continued uninterrupted. Businesses have continued to embrace PCs to improve productivity, while consumers have continued to be enamored with the ever-growing capabilities of computers and software products. If ever there were a time that PC growth would have slowed, it would have been in advance of Microsoft's release of its new PC software program, Windows 95; it's simply such a large-scale product transition. However, the growth continued right through the release, and it even appears to be accelerating as we look to year-end and the holiday season. Q. LET'S START WITH COMPUTER STOCKS. WHICH PROVED SUCCESSFUL? A. Compaq Computer - the fund's second largest investment at the end of the period - made solid gains. Compaq launched a new product line earlier this year, and the stock hesitated for a time as investors waited to see how the transition would go. Ultimately, the transition was successful, and the stock rose quickly from mid-April through August. IBM was another strong performer. The company had huge up-side earnings surprises in the first two quarters of 1995. Overall revenues were strong and a multi-year cost-cutting effort boosted profits. Q. HOW ABOUT THE SEMICONDUCTOR COMPANIES? A. Broadly speaking, worldwide demand for computer chips has far outstripped existing supply, which has helped keep prices steady and earnings strong. Micron Technology - the fund's largest investment at the end of the period - made, by far, the strongest positive contribution to the fund's performance over the past six months. The company has back orders for its DRAMs - or memory chips - for the next six months at constant prices. And Windows 95 requires greater memory power, which should further boost demand for Micron's products. In addition, Micron has developed ways to produce a far greater number of chips at little additional cost, which should enhance profits going forward. Other semiconductor companies that helped the fund included Texas Instruments, Intel, LSI Logic, and SGS-Thomson Microelectric. Also, I've made a small investment - less than 5% of the fund - in Japanese semiconductor manufacturers. Nippon Steel Semiconductor is a good example of a Japanese company benefiting from the same worldwide supply/demand dynamics as the U.S. companies, but whose stock was significantly cheaper. Q. WHICH STOCKS DIDN'T PERFORM AS WELL AS YOU HAD HOPED? A. Fortunately, most of the few disappointments were among the fund's smaller holdings. The exception was Amdahl, which manufactures mainframe computers. The company had trouble producing its next generation of disk drives, which led to lower-than-expected earnings. Q. LET'S TURN TO YOUR OUTLOOK. CAN THESE STOCKS CONTINUE TO OUTPERFORM THE REST OF THE MARKET? A. It's a good possibility, though these stocks are historically volatile, and a 10% to 15% correction can occur at any time. But, overall, I'm optimistic about the fund's prospects through the end of the year and into 1996. There seems to be no let-up in the demand for PCs and related products, with a greater share of the new demand coming from overseas countries that are increasingly making the transition to computer-based operations. In addition, although these stocks are somewhat more expensive than they were six months ago, their valuations - prices relative to earnings - generally are still quite attractive. Of course, if earnings for these companies come in below expectations at any point during the rest of the year, investors who have been looking for a reason to sell will certainly have found it. FUND FACTS START DATE: July 29, 1985 TRADING SYMBOL: FDCPX SIZE: as of August 31, 1995, more than $598 million MANAGER: Harry Lange, since 1992; manager, Fidelity Select Technology Portfolio since 1993; Fidelity Select Electronics Portfolio, January 1994-March 1995; research director, Fidelity Investments Far East 1988-1992; manager, Fidelity Select Capital Goods Portfolio, and Fidelity Select Automation and Machinery Portfolio, 1988; joined Fidelity in 1987 (checkmark) COMPUTERS PORTFOLIO INVESTMENTS AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 85.2% SHARES VALUE (NOTE 1) BROADCASTING - 0.2% CABLE TV OPERATORS - 0.2% Heartland Wireless Communications, Inc. (a) 50,000 $ 1,087,500 COMMUNICATIONS EQUIPMENT - 4.2% DATACOMMUNICATIONS EQUIPMENT - 1.1% Cisco Systems, Inc. (a) 70,000 4,593,750 General DataComm Industries, Inc. (a) 100,000 1,175,000 3Com Corp. (a) 20,000 780,000 6,548,750 TELEPHONE EQUIPMENT - 3.1% Colonial Data Technologies, Inc. (a) 50,000 906,250 DSC Communications Corp. (a) 11,000 577,500 Data Race, Inc. (a) 35,000 225,313 Global Village Communication (a) 20,000 312,500 Natural Microsystems (a) 87,700 2,170,575 Network Equipment Technologies (a) 61,700 2,313,750 Newbridge Networks Corp. (a) 13,900 401,363 Nokia Corp. AB sponsored ADR 100,000 6,937,500 Perceptron, Inc. (a) 130,600 3,526,200 Target Technologies, Inc. (a) 70,000 455,000 U.S. Robotics Corp. 8,032 1,126,488 18,952,439 TOTAL COMMUNICATIONS EQUIPMENT 25,501,189 COMPUTER SERVICES & SOFTWARE - 7.7% CAD/CAM/CAE - 2.7% Brooktrout Technology (a) 17,100 329,175 Chipcom Corp. (a) 30,000 1,203,750 Integrated Silicon Systems, Inc. (a) 1,000 28,500 Structural Dynamics Research Corp. (a) 800,000 14,500,000 Tecnomatix Technologies (a) 7,500 78,750 Viewlogic Systems, Inc. (a) 20,000 260,000 16,400,175 COMPUTER & SOFTWARE STORES - 0.4% MicroAge, Inc. (a) 192,800 2,265,400 COMPUTER RELATED SERVICES - 0.2% Inso Corp. (a) 20,800 1,302,600 COMPUTER SERVICES - 0.2% CompuCom Systems, Inc. (a) 50,000 268,750 Datastream Systems, Inc. (a) 20,000 630,000 898,750 CUSTOM COMPUTER PROGRAMMING SERVICES - 0.0% Harris Computer Systems Corp. (a) 9,100 133,088 ELECTRONIC INFORMATION RETRIEVAL - 0.0% Data Broadcasting Corp. (a) 15,000 133,125 PREPACKAGED COMPUTER SOFTWARE - 4.2% Broderbund Software, Inc. (a) 20,000 1,472,500 CBT Group PLC sponsored ADR (a) 21,000 829,500 Delrina Corp. (a) 10,000 167,417 Fuji Soft, Inc. 13,000 305,490 Geoworks (a) 94,200 1,201,050 Globalink, Inc. (a) 174,300 1,786,575 Inference Corp. Class A (a) 600 10,800 Learning Co. (a) 10,000 585,000 National Instrument Corp. (a) 51,000 1,102,875 Novell, Inc. (a) 27,000 486,000 Oracle Systems Corp. (a) 30,000 1,203,750 Parcplace Systems, Inc. (a) 15,000 150,000 Softkey International, Inc. (a) 278,900 11,121,138 SHARES VALUE (NOTE 1) Systems & Computer Technology Corp. (a) 106,400 $ 2,832,900 Systems Software Associates, Inc. 68,500 2,162,031 Wonderware Corp. (a) 4,000 138,000 25,555,026 TOTAL COMPUTER SERVICES & SOFTWARE 46,688,164 COMPUTERS & OFFICE EQUIPMENT - 25.6% COMPUTER EQUIPMENT - 0.5% GVC Corp. GDR (a)(b) 324,000 2,835,000 COMPUTER EQUIPMENT - WHOLESALE - 0.9% GBC Technologies, Inc. (a) 249,200 1,962,450 Merisel, Inc. (a) 278,800 1,777,350 Southern Electronics Corp. (a) 20,000 125,000 Tech Data Corp. (a) 158,300 1,879,813 5,744,613 COMPUTER PERIPHERALS - 1.7% In Focus Systems, Inc. (a) 100,000 3,112,500 Key Tronic Corp. (a) 357,500 5,451,875 Komag, Inc. (a) 19,700 1,226,325 Liuski International, Inc. (a) 22,500 98,438 Plannar Systems, Inc. (a) 5,000 100,000 Western Digital Corp. (a) 6,200 127,875 10,117,013 COMPUTER RENTAL & LEASING - 1.5% Comdisco, Inc. 297,200 9,064,600 COMPUTER STORAGE DEVICES - 2.0% ADAPTEC, Inc. (a) 1,800 76,500 Hutchinson Technology, Inc. (a) 122,100 9,554,325 Maxtor Corp. (a) 110,000 598,125 Read Rite Corp. (a) 10,300 421,013 Seagate Technology (a) 34,000 1,504,500 12,154,463 COMPUTERS - 1.2% Gateway 2000, Inc. (a) 270,800 7,210,050 COMPUTERS & OFFICE EQUIPMENT - 0.4% Canon, Inc. 15,000 272,447 Data General Corp. (a) 59,400 579,150 Diebold, Inc. 35,000 1,631,875 2,483,472 ELECTRONIC COMPUTERS - 3.7% Bay Networks, Inc. (a) 40,000 1,900,000 Hewlett-Packard Co. (a) 100,000 8,000,000 International Business Machines Corp. 122,600 12,673,775 22,573,775 GRAPHICS WORKSTATIONS - 2.5% Silicon Graphics, Inc. (a) 58,000 2,450,500 Sun Microsystems, Inc. (a) 223,400 12,929,275 15,379,775 MAGNETIC & OPTICAL RECORDING MEDIA - 0.5% Boca Research, Inc. (a) 120,000 2,850,000 MAINFRAME COMPUTERS - 1.2% Amdahl Corp. (a) 820,100 7,483,413 MINI & MICRO COMPUTERS - 9.4% Apple Computer, Inc. 280,000 12,040,000 Compaq Computer Corp. (a) 633,400 30,244,850 Digital Equipment Corp. (a) 333,800 13,936,150 Tandem Computers, Inc. (a) 60,000 735,000 56,956,000 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) COMPUTERS & OFFICE EQUIPMENT - CONTINUED OFFICE AUTOMATION - 0.1% Filenet Corp. (a) 13,000 $ 594,750 TOTAL COMPUTERS & OFFICE EQUIPMENT 155,446,924 CONSUMER ELECTRONICS - 0.0% RADIOS, TELEVISIONS, STEREOS - 0.0% Foster Electric Co. Ltd. 20,000 110,826 Odetics, Inc. Class A (a) 26,000 130,000 240,826 ELECTRICAL EQUIPMENT - 0.1% ELECTRICAL EQUIPMENT - 0.0% Fusion Systems Corp. (a) 7,500 213,750 TV & RADIO COMMUNICATION EQUIPMENT - 0.1% Avid Technology, Inc. (a) 500 19,875 Leitch Technology (a) 20,000 303,211 323,086 TOTAL ELECTRICAL EQUIPMENT 536,836 ELECTRONIC INSTRUMENTS - 10.3% ELECTRONIC EQUIPMENT - 6.2% Advantest Corp. 84,000 4,844,330 ASECO Corp. (a) 63,200 1,169,200 Credence Systems Corp. (a) 174,600 6,154,650 Fluke (John) Mfg. Co., Inc. 98,700 3,799,950 GenRad, Inc. (a) 51,500 424,875 LTX Corp. (a) 990,000 11,261,250 Megatest Corp. (a) 355,200 8,569,200 Micro Component Technology, Inc. (a) 200 1,200 Mosaid Technologies, Inc. (a) 107,400 1,448,435 37,673,090 SEMI-CONDUCTOR CAPITAL EQUIPMENT - 4.1% Applied Materials, Inc. (a) 51,600 5,366,400 Electro Scientific Industries, Inc. (a) 79,500 2,683,125 KLA Instruments Corp. (a) 70,700 6,044,850 Lam Research Corp. (a) 10,000 602,500 Silicon Valley Group, Inc. (a) 240,700 10,350,100 25,046,975 TOTAL ELECTRONIC INSTRUMENTS 62,720,065 ELECTRONICS - 33.4% ELECTRONIC CAPACITORS - 0.2% AVX Corp. (a) 32,000 1,016,000 ELECTRONIC PARTS - WHOLESALE - 0.1% Pioneer Standard Electronics, Inc. 4,950 127,463 Sterling Electronics Corp. (a) 32,800 643,700 771,163 ELECTRONICS & ELECTRONIC COMPONENTS - 3.6% Cirrus Logic, Inc. (a) 190,000 10,355,000 Kyocera Corp. (warrants) (a) 4,000 7,900,000 Photronics, Inc. (a) 65,000 2,273,985 Sanmina Corp. (a) 10,000 455,000 Smartflex Systems, Inc. (a) 3,000 54,750 Solectron Corp. (a) 30,800 1,093,400 22,132,135 SEMICONDUCTORS - 29.5% Act Manufacturing, Inc. 13,000 251,875 Alliance Semiconductor Corp. (a) 22,500 880,313 Altera Corp. (a) 11,600 726,450 Atmel Corp. (a) 43,000 1,359,875 SHARES VALUE (NOTE 1) Austria Mikro Systeme International (a) 10,000 $ 1,754,590 Burr-Brown Corp. (a) 331,900 10,952,700 Catalyst Semiconductor, Inc. (a) 65,600 344,400 Cypress Semiconductor Corp. (a) 10,100 460,813 Electroglas, Inc. (a) 20,600 1,555,300 Genus, Inc. (a) 100,000 1,375,000 Geotek Industries, Inc. (a) 80,000 625,000 IMP, Inc. (a) 260,000 1,430,000 Information Storage Devices (a) 600 16,350 Integrated Device Technology, Inc. (a) 56,200 3,238,525 Integrated Silicon Solution (a) 48,000 2,388,000 International Rectifier Corp. (a) 4,000 162,000 Interpoint Corp. (a) 10,000 110,000 LSI Logic Corp. (a) 245,600 12,095,800 Lattice Semiconductor Corp. (a) 26,000 854,750 Linear Technology Corp. 10,000 810,000 Logic Devices, Inc. (a) 30,000 356,250 Micro Linear Corp. (a) 118,300 1,863,225 Micron Technology, Inc. 713,300 54,834,938 National Semiconductor Corp. (a) 343,600 9,706,700 Nippon Steel Semiconductor Corp. (a) 850 23,288,859 Quality Semiconductor, Inc. (a) 92,400 1,593,900 SGS-Thomson Microelectronic NV (a) 315,900 15,202,688 S-3, Inc. (a) 72,400 2,841,700 Samsung Electronics Co. Ltd.: (vtg.) (a) 1,062 106,200 GDR (non-vtg.) (a) 14,168 887,625 GDR partial dividend (a)(b) 980 98,000 GDR representing shares (a)(b) 1,287 128,224 GDR representing shares (non-vtg.) (a)(b) 11,809 739,834 GDR (vtg.) (a) 87 8,700 GDR (vtg.) (New) (a) 18 1,793 GDR (vtg.) (b) 6,507 650,700 GDS (b) 59,675 3,759,525 GDS (non-vtg.) (Reg.)(a) 71,600 4,510,800 Siliconix, Inc. (a) 600 18,300 Supertex, Inc. (a) 20,000 220,000 Tencor Instruments (a) 48,400 2,099,350 Texas Instruments, Inc. 58,600 4,387,675 Tokyo Electron Ltd. 105,000 4,245,254 Tower Semiconductor Ltd. (a) 30,000 933,750 Uniphase Corp. (a) 14,300 452,238 Xilinx, Inc. (a) 114,000 4,887,750 179,215,719 TOTAL ELECTRONICS 203,135,017 INDUSTRIAL MACHINERY & EQUIPMENT - 2.1% SPECIAL INDUSTRIAL MACHINERY - 2.1% Fuji Machine Manufacturing Co. Ltd. Ord. 30,000 1,145,203 Gasonics International Corp. (a) 65,800 2,286,550 PRI Automation, Inc. (a) 67,500 2,548,125 Tylan General, Inc. (a) 175,000 2,931,250 Veeco Instruments, Inc. (a) 160,800 3,618,000 12,529,128 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) LEASING & RENTAL - 0.0% EQUIPMENT RENTAL & LEASING - 0.0% Leasing Solutions, Inc. (a) 14,000 $ 173,250 MEDICAL EQUIPMENT & SUPPLIES - 0.1% MEDICAL SUPPLIES & APPLIANCES - 0.1% Steris Corp. (a) 20,000 587,500 METALS & MINING - 0.7% METAL ORES - 0.7% Sumitomo Sitix Corp. 300,000 4,556,184 PRINTING - 0.8% COMMERCIAL PRINTING, LITHOGRAPHIC - 0.8% ASM Lithography Holding NV (a) 109,300 5,150,763 RETAIL & WHOLESALE, MISCELLANEOUS - 0.0% STATIONARY & OFFICE SUPPLIES - WHOLESALE - 0.0% Daisytek International Corp. (a) 1,000 23,500 SERVICES - 0.0% ELECTRICAL REPAIR SHOPS - 0.0% Cerplex Group, Inc. (a) 20,000 120,000 TOTAL COMMON STOCKS (Cost $374,120,038) 518,496,846 NONCONVERTIBLE PREFERRED STOCKS - 0.0% COMPUTER SERVICES & SOFTWARE - 0.0% PREPACKAGED COMPUTER SOFTWARE - 0.0% SAP AG (cost $122,656) 2,000 295,913 CONVERTIBLE BONDS - 3.4% PRINCIPAL AMOUNT COMPUTERS & OFFICE EQUIPMENT - 1.9% ELECTRONIC COMPUTERS - 1.8% Acer, Inc. 4%, 6/10/01 $ 3,570,000 10,888,500 OFFICE EQUIPMENT - WHOLESALE - 0.1% Kinpo Electronics, Inc. euro 3%, 7/21/01 950,000 717,250 TOTAL COMPUTERS & OFFICE EQUIPMENT 11,605,750 ELECTRONICS - 1.5% SEMICONDUCTORS - 1.5% United Microelectronics Corp.: 1 1/4%, 6/8/04 (b) 1,070,000 1,789,575 euro 1 1/4%, 6/8/04 4,330,000 7,241,925 9,031,500 TOTAL CONVERTIBLE BONDS (Cost $17,457,228) 20,637,250 REPURCHASE AGREEMENTS - 11.4% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 69,292,200 $ 69,281,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $460,980,922) $ 608,711,009 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 $10,000,858 or 1.7% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $306,365,802 and $150,084,631, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $50,235 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 $8,559,325 and $8,556,000, respectively (see Note 7 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 84.0% Japan 4.9 Taiwan (Free China) 3.9 Netherlands 3.3 Korea 1.8 Finland 1.1 Others (individually less than 1%) 1.0 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $461,606,190. Net unrealized appreciation aggregated $147,104,819, of which $157,344,242 related to appreciated investment securities and $10,239,423 related to depreciated investment securities. COMPUTERS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $69,281,000) (cost $460,980,922) - $ 608,711,009 See accompanying schedule Receivable for investments sold 14,048,811 Receivable for fund shares sold 5,273,190 Dividends receivable 112,516 Interest receivable 16,487 Redemption fees receivable 690 Other receivables 49,240 Prepaid expenses 14,215 TOTAL ASSETS 628,226,158 LIABILITIES Payable to custodian bank $ 6,170 Payable for investments purchased 5,337,021 Payable for fund shares redeemed 14,898,869 Accrued management fee 302,926 Other payables and 1,097,892 accrued expenses Collateral on securities loaned, 8,556,000 at value TOTAL LIABILITIES 30,198,878 NET ASSETS $ 598,027,280 Net Assets consist of: Paid in capital $ 411,248,810 Accumulated net investment (loss) (1,137,882 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 40,186,392 Net unrealized appreciation (depreciation) on investments 147,729,960 and assets and liabilities in foreign currencies NET ASSETS, for 12,680,993 $ 598,027,280 shares outstanding NET ASSET VALUE and redemption price per share ($598,027,280 (divided by) 12,680,993 shares) $47.16 Maximum offering price per share (100/97.00 of $47.16) $48.62
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 389,784 Dividends Interest (including income on securities loaned of $49,012) 1,295,609 TOTAL INCOME 1,685,393 EXPENSES Management fee $ 1,248,771 Transfer agent 1,367,450 Fees Redemption fees (123,992 ) Accounting and security lending fees 200,740 Non-interested trustees' compensation 918 Custodian fees and expenses 17,170 Registration fees 87,085 Audit 17,853 Legal 768 Miscellaneous 2,323 Total expenses before reductions 2,819,086 Expense reductions (17,794 2,801,292 ) NET INVESTMENT INCOME (LOSS) (1,115,899 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 41,613,400 Foreign currency transactions 90 41,613,490 Change in net unrealized appreciation (depreciation) on: Investment securities 129,197,820 Assets and liabilities in (155 129,197,665 foreign currencies ) NET GAIN (LOSS) 170,811,155 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 169,695,256 OTHER INFORMATION $4,607,027 Sales Charges Paid to FDC Deferred sales charges withheld $5,877 by FDC Exchange fees withheld by FSC $89,655
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ (1,115,899 $ (1,469,757 Net investment income (loss) ) ) Net realized gain (loss) 41,613,490 3,564,127 Change in net unrealized appreciation (depreciation) 129,197,665 2,952,740 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 169,695,256 5,047,110 Distributions to shareholders from net realized gains (3,461,715 - ) Share transactions 470,147,822 529,347,764 Net proceeds from sales of shares Reinvestment of distributions 3,418,258 - Cost of shares redeemed (257,243,074 (441,147,769 ) ) Paid in capital portion of redemption fees 456,933 1,332,121 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 216,779,939 89,532,116 TOTAL INCREASE (DECREASE) IN NET ASSETS 383,013,480 94,579,226 NET ASSETS Beginning of period 215,013,800 120,434,574 End of period (including accumulated net investment loss of $1,137,882 and $21,983, respectively) $ 598,027,280 $ 215,013,800 OTHER INFORMATION Shares Sold 12,018,644 18,730,329 Issued in reinvestment of distributions 105,048 - Redeemed (6,453,942 (16,175,513 ) ) Net increase (decrease) 5,669,750 2,554,816
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 30.67 $ 27.02 $ 20.15 $ 17.63 $ 16.60 $ 12.68 Income from Investment Operations Net investment income (loss) (.11) (.31) (.21) E (.15) (.03) G .42 F Net realized and unrealized gain (loss) 16.98 3.68 8.66 2.44 1.18 3.21 Total from investment operations 16.87 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 (.42) - (1.80) - (.22) - Total distributions (.42) - (1.80) - (.49) (.12) Redemption fees added to paid in capital .04 .28 .22 .23 .37 .41 Net asset value, end of period $ 47.16 $ 30.67 $ 27.02 $ 20.15 $ 17.63 $ 16.60 TOTAL RETURN B, C 55.75% 13.51% 45.06% 14.29% 9.36% 32.11% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 598,027 $ 215,014 $ 120,435 $ 47,596 $ 32,810 $ 29,455 Ratio of expenses to average net assets 1.35% A 1.69% 1.89% 1.81% A 2.17% 2.26% Ratio of expenses to average net assets before 1.36% A 1.71% 1.90% 1.81% A 2.17% 2.26% expense reductions Ratio of net investment income (loss) to average net (.54)% (1.12)% (.91)% (.98)% (.18)% 2.94% assets A A Portfolio turnover rate 80% A 189% 145% 254% A 568% 695% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM INTELLIGENT ELECTRONICS WHICH AMOUNTED TO $.07 PER SHARE. F 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. G 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.
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 expenses, the past one, five, and 10 years total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1995 MONTH YEAR YEARS YEARS S DEFENSE AND AEROSPACE 27.75% 32.96% 139.84% 109.27% DEFENSE AND AEROSPACE (INCL. 3% SALES CHARGE) 23.92% 28.97% 132.64% 102.99% S&P 500 16.81% 21.45% 102.17% 311.58% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS YEARS DEFENSE AND AEROSPACE 32.96% 19.12% 7.66% DEFENSE AND AEROSPACE (INCL. 3% SALES CHARGE) 28.97% 18.40% 7.34% S&P 500 21.45% 15.12% 15.20% 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 DefenseStandard & Poor 08/31/85 9700.00 10000.00 09/30/85 9136.13 9687.00 10/31/85 9300.29 10134.54 11/30/85 9799.93 10829.77 12/31/85 10213.91 11353.93 01/31/86 10085.43 11417.51 02/28/86 10635.03 12271.54 03/31/86 11241.72 12956.29 04/30/86 11327.37 12809.89 05/31/86 11605.74 13491.37 06/30/86 11848.42 13719.38 07/31/86 11111.65 12952.46 08/31/86 11683.52 13913.54 09/30/86 10742.47 12762.89 10/31/86 10887.24 13499.31 11/30/86 11234.71 13827.34 12/31/86 10706.27 13474.74 01/31/87 11640.09 15289.79 02/28/87 12378.45 15893.74 03/31/87 12146.81 16353.07 04/30/87 11618.37 16207.52 05/31/87 11459.11 16348.53 06/30/87 11350.53 17174.13 07/31/87 11654.56 18044.86 08/31/87 11531.50 18717.93 09/30/87 11299.86 18308.01 10/31/87 8418.79 14364.46 11/30/87 7984.46 13180.83 12/31/87 8222.57 14183.89 01/31/88 8751.59 14781.03 02/29/88 9273.06 15469.83 03/31/88 9250.39 14991.81 04/30/88 9189.93 15158.22 05/31/88 8842.28 15290.10 06/30/88 9205.04 15991.91 07/31/88 9023.66 15931.15 08/31/88 8804.50 15389.49 09/30/88 9069.01 16045.08 10/31/88 9053.89 16491.13 11/30/88 8653.35 16255.31 12/31/88 8577.77 16539.78 01/31/89 8917.86 17750.49 02/28/89 8880.07 17308.50 03/31/89 9061.45 17711.79 04/30/89 9386.43 18631.03 05/31/89 9552.69 19385.59 06/30/89 9439.33 19275.09 07/31/89 10051.49 21015.63 08/31/89 10308.44 21427.54 09/30/89 10119.50 21339.68 10/31/89 9545.13 20844.60 11/30/89 9182.37 21269.83 12/31/89 9333.52 21780.31 01/31/90 8804.50 20318.85 02/28/90 8834.73 20580.96 03/31/90 9378.87 21126.36 04/30/90 8993.43 20598.20 05/31/90 9658.50 22606.52 06/30/90 9665.44 22452.80 07/31/90 9277.61 22380.95 08/31/90 8463.91 20357.71 09/30/90 8190.15 19366.29 10/31/90 8083.68 19283.02 11/30/90 8517.15 20528.70 12/31/90 8905.67 21101.45 01/31/91 9691.69 22021.47 02/28/91 9882.47 23596.01 03/31/91 10645.60 24167.03 04/30/91 10470.08 24225.03 05/31/91 10958.48 25271.56 06/30/91 10407.13 24114.12 07/31/91 10859.28 25237.84 08/31/91 10744.32 25835.97 09/30/91 10491.42 25404.51 10/31/91 10997.22 25744.93 11/30/91 10499.09 24707.41 12/31/91 11303.76 27533.94 01/31/92 11265.44 27021.81 02/29/92 11441.71 27373.09 03/31/92 11211.80 26839.32 04/30/92 11012.55 27628.39 05/31/92 10460.77 27763.77 06/30/92 9970.30 27350.09 07/31/92 10353.48 28468.71 08/31/92 10154.23 27885.10 09/30/92 10299.84 28214.15 10/31/92 10384.13 28312.90 11/30/92 10744.32 29278.37 12/31/92 11303.76 29638.49 01/31/93 11640.96 29887.45 02/28/93 11556.66 30293.92 03/31/93 12169.75 30933.12 04/30/93 12208.06 30184.54 05/31/93 12583.58 30993.49 06/30/93 13112.36 31083.37 07/31/93 13648.81 30959.04 08/31/93 13625.82 32132.38 09/30/93 13978.35 31884.96 10/31/93 14537.79 32544.98 11/30/93 14108.63 32235.80 12/31/93 14565.78 32625.86 01/31/94 15259.39 33735.14 02/28/94 15259.39 32820.92 03/31/94 14645.51 31389.92 04/30/94 14725.00 31791.71 05/31/94 14773.54 32313.10 06/30/94 14401.37 31521.43 07/31/94 14611.73 32555.33 08/31/94 15267.07 33890.10 09/30/94 14498.46 33059.79 10/31/94 14854.45 33803.64 11/30/94 14271.92 32572.51 12/31/94 14822.08 33055.56 01/31/95 14813.99 33912.69 02/28/95 15890.05 35234.27 03/31/95 16569.67 36274.03 04/30/95 17483.91 37342.30 05/31/95 18559.97 38834.87 06/30/95 19247.67 39737.01 07/31/95 20307.55 41054.68 08/31/95 20299.46 41157.73 Let's say you invested $10,000 in Fidelity Select Defense and Aerospace Portfolio on August 31, 1985, and paid a 3% sales charge. By August 31, 1995, your investment would have grown to $20,299 - a 102.99% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $41,158 over the same period - a 311.58% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS United Technologies Corp. 6.1 Vishay Intertechnology, Inc. 5.1 Boeing Co. 4.9 Litton Industries, Inc. 4.3 Rockwell International Corp. 4.2 Loral Corp. 3.5 McDonnell Douglas Corp. 3.4 AMP, Inc. 3.2 Thiokol Corp. 2.8 Sundstrand Corp. 2.8 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 41.5 Row: 1, Col: 2, Value: 7.4 Row: 1, Col: 3, Value: 9.4 Row: 1, Col: 4, Value: 10.2 Row: 1, Col: 5, Value: 13.2 Row: 1, Col: 6, Value: 18.3 Defense Electronics 18.3% Aircraft 13.2% Conglomerates 10.2% Missiles & Space Vehicles 9.4% Aircraft & Parts 7.4% All Others 41.5%* * 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 HAS THE FUND BEEN DOING, BILL? A. The fund has performed extremely well. For the six months ended August 31, 1995, the fund was up 27.75%, compared to the S&P 500's 16.81% gain during the same period. For the 12 months ended August 31, it also outperformed the market significantly, gaining 32.96% to the S&P's 21.45% total return. Q. WHAT ACCOUNTED FOR THESE BIG GAINS? A. There certainly has been rising public interest in defense and aerospace stocks and a growing awareness of the industry's ability to generate strong earnings and cash flow. Profit margins in most of the companies the fund owned continued to rise, cash flow remained very strong, and the companies exhibited aggressive cash redeployment strategies aimed at enhancing shareholder value. They have done a good job of lowering their cost structures, through consolidation and downsizing, while they accrue higher profit margins from maturing defense programs. Another positive factor is that Congress appears to be comfortable with higher 1996 levels of funding for the defense budget. Q. TOTAL FUND ASSETS HAVE GROWN BY A FACTOR OF FOUR OR FIVE TIMES OVER THE LAST SIX MONTHS, BILL. WHAT'S THE STORY HERE? A. Actually, by mid-July this year, assets saw an almost 10-fold increase, rising from about $5 million at the beginning of the period to a high of about $48 million. This increase was driven by substantial appreciation in fund asset values and also by very high inflows of cash, in part, in recognition of the fund's strong performance. Shortly after mid-year, when performance statistics for all such funds were announced, we saw a period of steep outflows, which probably suggests that investors did not believe the industry could sustain its strong performance in the second half. The fund now has total assets of about $22 million. Q. WHICH INDIVIDUAL STOCKS DROVE PERFORMANCE? A. In fact, nearly all of the stocks owned by the fund at the beginning of the period were up by the end of the period, many by wide margins. Among the top 25 holdings, almost all were up substantially. On the defense side, McDonnell Douglas was up 43% and continued to grow profits beyond expectations. Tracor was up 60% on good program performance and acquisition growth. General Dynamics was somewhat of a surprise winner in the later stages of the period, based on Congress's apparent comfort with funding a third Seawolf submarine program and the company's recent announcement that it would acquire Bath Iron Works, the Maine-based naval shipbuilder. United Technologies, our top holding and up 26%, continued to show good results, as did Northrop Grumman (up 37%) and Loral (up 34%). In general, the commercial aerospace stocks all have taken off impressively, led by Boeing (up 39%), Precision Castparts (up 46%), Rohr Industries (up 38%) and Sundstrand (up 49%), which have done especially well in anticipation of rising production of new commercial aircraft, following a large uptick in plane orders over the past 12 months. Q. SIX MONTHS AGO YOU INDICATED YOU PLANNED TO BECOME MORE HEAVILY INVESTED IN THE COMMERCIAL AEROSPACE SECTOR. HAVE YOU MADE THAT SHIFT? A. Yes, I have. Nearly half of the fund's top 25 holdings at the end of the period had commercial aerospace exposure. All of them have performed very well, and I would expect they could continue to do well as plane orders, particularly from foreign airlines, continue rising, and as they prove they've become much more efficient and profitable. Q. ANY OTHER CHANGES IN STRATEGY? A. Not really. I'm very comfortable with the fund's current positioning, but I did add many new names to the portfolio during the period. Most of these are smaller cap stocks, companies that were not being followed to a great degree, but which have high growth potential - which can entail higher risk- and were inexpensive. Q. YOU SOUND PRETTY OPTIMISTIC ABOUT THE FUND GOING FORWARD . . . A. I am. I continue to be bullish on both the defense and commercial aerospace segments of the industry. I think defense contractors generally should continue to experience expanding valuations - stock prices relative to other measures such as earnings - and should continue to show rising profits. As new aircraft orders make it onto the production line in the next 18 months, I believe the commercial aerospace segment should raise production rates and generate impressive earnings and cash flow growth. The stocks in both groups should follow these improving business prospects. I believe both groups could continue to outperform the broad market for the next couple of years. FUND FACTS START DATE: May 8, 1984 TRADING SYMBOL: FSDAX SIZE: as of August 31, 1995, more than $22 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 97.4% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 40.0% AIRCRAFT - 13.2% Boeing Co. 16,900 $ 1,077,370 British Aerospace 12,000 122,558 Lockheed Martin Corp. 8,750 532,656 McDonnell Douglas Corp. 9,200 738,300 Northrop Grumman Corp. 7,000 426,125 2,897,009 AIRCRAFT & PARTS - 7.4% Precision Castparts Corp. 11,800 399,725 Rohr Industries, Inc. (a) 26,600 412,300 Sundstrand Corp. 9,000 613,125 Wyman-Gordon Co. (a) 16,000 206,000 1,631,150 AIRCRAFT ENGINES & PARTS - 2.0% General Motors Corp. Class H 9,500 378,813 UNC, Inc. (a) 10,000 58,750 437,563 AIRCRAFT EQUIPMENT - 3.3% Aviall, Inc. 7,000 54,250 BE Aerospace, Inc. (a) 10,000 75,000 Cobham PLC 15,000 97,637 Teleflex, Inc. 10,400 419,900 Transtechnology Corp. 6,200 78,275 725,062 MISSILES & SPACE VEHICLES - 9.3% Orbital Sciences Corp. (a) 11,400 195,225 Rockwell International Corp. 20,500 917,375 Special Devices, Inc. (a) 17,200 305,300 Thiokol Corp. 17,900 624,263 2,042,163 ORDNANCE - 1.2% Alliant Techsystems, Inc. (a) 5,600 263,200 TRAINING EQUIPMENT & SIMULATORS - 3.6% BVR Technologies Ltd. (a) 10,000 58,750 C A E Industries Ltd. 36,000 241,080 Flightsafety International, Inc. 11,300 501,438 801,268 TOTAL AEROSPACE & DEFENSE 8,797,415 AIR TRANSPORTATION - 0.4% AIR TRANSPORT, MAJOR NATIONAL - 0.4% KLM Royal Dutch Airlines 2,458 81,421 AUTOS, TIRES, & ACCESSORIES - 1.6% AUTO & TRUCK PARTS - 1.6% Safety Components International, Inc. (a) 7,500 135,000 Sparton Corp. (a) 10,000 43,750 TRW, Inc. 2,300 179,113 357,863 COMMUNICATIONS EQUIPMENT - 0.5% TELEPHONE EQUIPMENT - 0.5% Tadiran Ltd. 5,000 113,750 COMPUTER SERVICES & SOFTWARE - 0.6% CAD/CAM/CAE - 0.4% Dynamics Research Corp. (a) 15,000 84,375 COMPUTER SERVICES - 0.0% BDM International, Inc. (a) 100 2,513 SHARES VALUE (NOTE 1) CUSTOM COMPUTER PROGRAMMING SERVICES - 0.2% CACI International, Inc. Class A (a) 3,300 $ 40,838 TOTAL COMPUTER SERVICES & SOFTWARE 127,726 COMPUTERS & OFFICE EQUIPMENT - 0.5% COMPUTER PERIPHERALS - 0.1% Miltope Group, Inc. (a) 5,000 15,625 GRAPHICS WORKSTATIONS - 0.4% Scitex Ltd. Ord. 5,000 101,875 TOTAL COMPUTERS & OFFICE EQUIPMENT 117,500 CONGLOMERATES - 10.2% Allied-Signal, Inc. 5,300 235,188 GenCorp, Inc. 5,000 59,375 Harris Corp. 4,500 259,313 Sequa Corp. Class A (a) 6,000 159,750 Textron, Inc. 2,900 198,650 United Technologies Corp. 16,000 1,334,000 2,246,276 DEFENSE ELECTRONICS - 18.3% Alpha Industries, Inc. (a) 5,000 85,625 Anaren Microwave Inc. (a) 5,000 38,125 ESCO Electronics Corp. (trust receipt) (a) 10,000 92,500 Geodynamics Corp. 12,500 152,344 Litton Industries, Inc. (a) 24,300 941,625 Logicon, Inc. 3,300 181,500 Loral Corp. 14,000 766,500 Nichols Research Corp. (a) 10,000 185,000 Raytheon Co. 3,900 315,413 Tech-Sym Corp. (a) 6,300 183,488 Tracor, Inc. (a) 9,900 168,300 Trimble Navigation Ltd. (a) 15,400 494,725 Watkins-Johnson Co. 4,500 226,125 Whittaker Corp. (a) 10,600 206,700 4,037,970 ELECTRICAL EQUIPMENT - 3.6% CURRENT-CARRYING WIRING DEVICE - 1.1% Adflex Solutions (a) 8,900 241,413 ELECTRICAL MACHINERY - 1.6% Amphenol Corp. Class A (a) 9,700 237,650 General Electric Co. 2,000 117,750 355,400 MOTORS & GENERATORS - 0.9% Pacific Scientific Co. 7,600 190,950 TOTAL ELECTRICAL EQUIPMENT 787,763 ELECTRONICS - 15.8% CONNECTORS - 4.8% AMP, Inc. 17,500 710,938 Augat, Inc. 4,000 88,000 Thomas & Betts Corp. 3,700 249,750 1,048,688 ELECTRONIC CAPACITORS - 1.1% AVX Corp. 500 15,875 Kemet Corp. (a) 3,800 216,600 232,475 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRONICS - CONTINUED ELECTRONIC PARTS - WHOLESALE - 3.0% Kent Electronics Corp. (a) 6,100 $ 247,050 Richey Electronics, Inc. (a) 33,500 259,625 Zero Corp. 10,000 157,500 664,175 ELECTRONICS & ELECTRONIC COMPONENTS - 6.9% Alpine Group Inc. 4,100 23,831 Molex, Inc. 9,700 383,150 Vishay Intertechnology, Inc. 27,700 1,121,850 1,528,831 TOTAL ELECTRONICS 3,474,169 METALS & MINING - 0.7% NONFERROUS ROLLING & DRAWING - 0.3% Oregon Metallurgical Corp. (a) 5,000 61,250 PRIME NONFERROUS SMELTING - 0.4% Tremont Corp (a). 5,000 95,625 TOTAL METALS & MINING 156,875 RAILROADS - 2.8% RAILROAD EQUIPMENT - 2.8% Bombardier, Inc. Class B 50,000 609,212 SHIP BUILDING & REPAIR - 1.8% SHIP BUILDERS - 1.8% General Dynamics Corp. 7,400 389,425 TELEPHONE SERVICES - 0.6% Globalstar Telecommunications Ltd. (a) 9,500 147,250 TOTAL COMMON STOCKS (Cost $19,426,367) 21,444,615 CONVERTIBLE CORPORATE BONDS - 0.1% PRINCIPAL AMOUNT AEROSPACE & DEFENSE - 0.1% MISSILES & SPACE VEHICLES - 0.1% Orbital Sciences Corp. 6 3/4%, 3/1/03 (Cost $18,000) $ 18,000 22,320 REPURCHASE AGREEMENTS - 2.5% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 546,088 $ 546,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $19,990,367) $ 22,012,935 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $38,319,412 and $26,390,225, 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 $20,501 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $4,697,000 and $1,793,188, respectively The weighted average interest rate paid was 6.2% (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $19,995,908. Net unrealized appreciation aggregated $2,017,027, of which $2,225,969 related to appreciated investment securities and $208,942 related to depreciated investment securities. At February 28, 1995, the fund had a capital loss carryforward of approximately $287,000 which will expire on February 28, 2003. DEFENSE AND AEROSPACE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $546,000) (cost $19,990,367) - See $ 22,012,935 accompanying schedule Cash 917 Receivable for investments sold 881,841 Receivable for fund shares sold 202,860 Dividends receivable 50,792 Interest receivable 604 Redemption fees receivable 164 Other receivables 88 Prepaid expenses 2,940 TOTAL ASSETS 23,153,141 LIABILITIES Payable for fund shares redeemed $ 720,418 Accrued management fee 12,593 Other payables and accrued expenses 27,777 TOTAL LIABILITIES 760,788 NET ASSETS $ 22,392,353 Net Assets consist of: Paid in capital $ 17,122,690 Undistributed net investment income 29,638 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 3,217,457 Net unrealized appreciation (depreciation) on investments 2,022,568 NET ASSETS, for 892,494 shares outstanding $ 22,392,353 NET ASSET VALUE and redemption price per share ($22,392,353 (divided by) 892,494 shares) $25.09 Maximum offering price per share (100/97.00 of $25.09) $25.87
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 154,934 Dividends Interest 59,677 TOTAL INCOME 214,611 EXPENSES Management fee $ 69,426 Transfer agent 81,852 Fees Redemption fees (17,711 ) Accounting fees and expenses 22,664 Non-interested trustees' compensation 44 Custodian fees and expenses 10,231 Registration fees 7,222 Audit 8,217 Legal 20 Interest 4,971 Miscellaneous 53 Total expenses before reductions 186,989 Expense reductions (2,016 184,973 ) NET INVESTMENT INCOME 29,638 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 3,528,746 Foreign currency transactions (34 3,528,712 ) Change in net unrealized appreciation (depreciation) on investment securities 1,741,992 NET GAIN (LOSS) 5,270,704 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 5,300,342 OTHER INFORMATION $163,730 Sales Charges Paid to FDC Deferred sales charges withheld $3,864 by FDC Exchange fees withheld by FSC $14,603
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 29,638 $ (16,833 Net investment income (loss) ) Net realized gain (loss) 3,528,712 (307,440 ) Change in net unrealized appreciation (depreciation) 1,741,992 (46,619 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 5,300,342 (370,892 ) Distributions to shareholders from net realized gains - (145,443 ) Share transactions 50,636,279 13,049,647 Net proceeds from sales of shares Reinvestment of distributions - 142,332 Cost of shares redeemed (38,571,233 (18,865,024 ) ) Paid in capital portion of redemption fees 42,313 38,135 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 12,107,359 (5,634,910 ) TOTAL INCREASE (DECREASE) IN NET ASSETS 17,407,701 (6,151,245 ) NET ASSETS Beginning of period 4,984,652 11,135,897 End of period (including undistributed net investment income of $29,638 and $0, respectively) $ 22,392,353 $ 4,984,652 OTHER INFORMATION Shares Sold 2,242,849 690,722 Issued in reinvestment of distributions - 7,812 Redeemed (1,604,192 (1,026,621 ) ) Net increase (decrease) 638,657 (328,087)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 19.64 $ 19.14 $ 15.08 $ 14.37 $ 13.72 $ 11.90 Income from Investment Operations Net investment income (loss) .03 (.06) .07 (.02) (.01) .10 Net realized and unrealized gain (loss) 5.38 .70 E 4.57 .69 .67 1.72 Total from investment operations 5.41 .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 .04 .13 .14 .04 .05 .12 Net asset value, end of period $ 25.09 $ 19.64 $ 19.14 $ 15.08 $ 14.37 $ 13.72 TOTAL RETURN B, C 27.75% 4.13% 32.04% 4.94% 5.18% 16.42% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 22,392 $ 4,985 $ 11,136 $ 1,463 $ 1,280 $ 3,070 Ratio of expenses to average net assets 1.61% A 2.49% 2.53% 2.48% A 2.46% 2.49% Ratio of expenses to average net assets before 1.63% A 3.95% 3.58% 9.63% A 2.72% 3.11% expense reductions Ratio of net investment income (loss) to average net .26% A (.32)% .40% (.14)% (.10)% .78% assets A Portfolio turnover rate 265% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E 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). If Fidelity had not reimbursed certain expenses, the past five years and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS
PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1995 MONTH YEAR YEARS FUND S DEVELOPING COMMUNICATIONS 31.82% 47.41% 324.56% 244.32% DEVELOPING COMMUNICATIONS (INCL. 3% SALES CHARGE) 27.86% 42.98% 311.83% 233.99% S&P 500 16.81% 21.45% 102.17% 83.53%
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or since the fund started on June 29, 1990. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS FUND DEVELOPING COMMUNICATIONS 47.41% 33.53% 26.97% DEVELOPING COMMUNICATIONS (INCL. 3% SALES CHARGE) 42.98% 32.72% 26.23% S&P 500 21.45% 15.12% 12.44% 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 Developing CommuStandard & Poor's 06/29/90 9700.00 10000.00 06/30/90 9700.00 10012.31 07/31/90 8953.10 9980.27 08/31/90 7866.70 9078.05 09/30/90 6751.20 8635.95 10/31/90 7081.00 8598.82 11/30/90 8235.30 9154.30 12/31/90 8759.10 9409.71 01/31/91 10146.20 9819.97 02/28/91 10776.70 10522.10 03/31/91 11494.50 10776.73 04/30/91 11591.50 10802.60 05/31/91 11766.10 11269.27 06/30/91 10841.06 10753.14 07/31/91 11963.62 11254.23 08/31/91 12670.42 11520.96 09/30/91 12815.94 11328.56 10/31/91 13564.32 11480.36 11/30/91 12888.70 11017.70 12/31/91 14135.99 12278.13 01/31/92 14510.18 12049.75 02/29/92 14998.70 12206.40 03/31/92 14260.72 11968.38 04/30/92 14073.63 12320.25 05/31/92 14011.26 12380.62 06/30/92 13512.35 12196.14 07/31/92 14104.81 12694.97 08/31/92 13574.71 12434.72 09/30/92 14032.05 12581.45 10/31/92 14655.70 12625.48 11/30/92 15986.14 13056.01 12/31/92 16569.33 13216.60 01/31/93 17017.15 13327.62 02/28/93 17121.30 13508.88 03/31/93 17735.75 13793.92 04/30/93 17206.93 13460.10 05/31/93 18365.83 13820.83 06/30/93 19160.51 13860.91 07/31/93 19535.77 13805.47 08/31/93 21323.79 14328.70 09/30/93 21621.79 14218.37 10/31/93 22372.32 14512.69 11/30/93 20672.60 14374.82 12/31/93 21833.52 14548.75 01/31/94 22673.27 15043.41 02/28/94 22298.78 14635.73 03/31/94 20744.11 13997.61 04/30/94 21598.03 14176.78 05/31/94 20440.78 14409.28 06/30/94 18918.07 14056.26 07/31/94 20879.32 14517.30 08/31/94 22657.83 15112.51 09/30/94 22962.38 14742.25 10/31/94 25021.07 15073.95 11/30/94 24314.54 14524.96 12/31/94 25138.57 14740.37 01/31/95 24467.87 15122.58 02/28/95 25337.29 15711.91 03/31/95 25473.91 16175.57 04/30/95 26593.13 16651.94 05/31/95 27505.97 17317.52 06/30/95 30405.58 17719.80 07/31/95 33318.60 18307.39 08/31/95 33399.15 18353.34 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 August 31, 1995, your investment would have grown to $33,399 - a 233.99% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $18,353 over the same period - an 83.53% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS DSC Communications Corp. 9.5 AirTouch Communications, Inc. 7.6 Vodafone Group PLC sponsored ADR 5.1 Nokia Corp. AB sponsored ADR 4.4 Glenayre Technologies, Inc. 4.4 Cellular Communications, Inc. Series A (redeemable) 2.8 LSI Logic Corp. 2.7 California Microwave Corp. 2.5 United States Cellular Corp. 2.3 Allen Group, Inc. (The) 2.3 TOP INDUSTRIES AS OF AUGUST 31, 1995 Cellular & Communication Services 30.6% Telephone Equipment 23.0% TV & Radio Communication Equipment 12.6% Electronics & Electronic Components 4.6% Semiconductors 4.5% All Others 24.7%* Row: 1, Col: 1, Value: 24.7 Row: 1, Col: 2, Value: 4.5 Row: 1, Col: 3, Value: 4.6 Row: 1, Col: 4, Value: 12.6 Row: 1, Col: 5, Value: 23.0 Row: 1, Col: 6, Value: 30.6 * INCLUDES SHORT-TERM INVESTMENTS DEVELOPING COMMUNICATIONS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Paul Antico, Portfolio Manager of Fidelity Select Developing Communications Portfolio Q. HOW DID THE FUND PERFORM, PAUL? A. It did extremely well. For the six-months ended August 31, 1995, the fund returned 31.82%, compared with a 16.81% gain for the S&P 500 Index. For the 12 months ended August 31, it gained 47.41%, more than double the S&P's 21.45% return over the same period. Q. WHAT FACTORS DROVE THIS IMPRESSIVE SHOWING? A. There certainly has been heightened interest in technology stocks over the recent past, and I think the fund benefited to some extent from this broad level of investor interest. But more specifically, I believe performance was driven by the continuing rapid growth of wireless communications and the continuing build-out of land-line telecommunications services, both domestically and internationally. The portfolio is about evenly split between wireless stocks and telecommunications technology stocks. Q. DID BOTH THESE SEGMENTS PERFORM EQUALLY WELL? A. No, they didn't. The wireless services stocks did not perform as well as I had hoped, although the underlying business of providing cellular phone and paging services continues to grow at very impressive rates and represent a tremendous future opportunity. I think the problems with their current stock performance is that investors are not yet comfortable about how to value these companies since many of them are relatively immature and still don't have earnings. The wireless equipment manufacturers, however, have done extremely well and more than made up for the lagging performance of the service providers. The other telecommunications technology stocks also have done very well, driven by what I call the "broadband revolution," or the growing demand for more high speed data services and broader communications bandwidths, in the U.S. and developed economies throughout the world. In addition, there is strong demand in the developing economies of the world - China, India, and areas of Latin America, for example - to build basic telecommunications infrastructure, which should continue to strengthen earnings for the industry. Q. WERE THERE ANY INDIVIDUAL STOCKS THAT PERFORMED BETTER THAN YOU EXPECTED? A. There were three equipment manufacturers that did especially well. Glenayre Technologies continues to capitalize on the phenomenal growth of paging systems, both in the U.S., where growth is accelerating briskly, and internationally, where the market for paging is absolutely booming. Nokia, the Finnish cellular equipment provider, continues to gain market share worldwide in both the infrastructure and handset sides of the business. Both these stocks, which were among the fund's top 10 holdings on August 31, made strong performance contributions. Another stock that performed above expectations was ADC Telecommunications, a supplier of a broad range of products, which is well positioned to meet the growing demands of the broadband revolution and whose earnings continue to accelerate year after year. Q. EVEN THOUGH THEIR RETURNS HAVEN'T BEEN PARTICULARLY STRONG OF LATE, ARE YOU STILL COMFORTABLE WITH YOUR POSITIONING IN CELLULAR SERVICE STOCKS? A. Yes, because I think the fundamentals in the cellular service industry are still very good. Many of the smaller companies I owned in this segment have been growing their subscriber bases and increasing their cash flows and margins faster than the industry as a whole. In spite of this, the market seems not to know what to make of these smaller cellular companies, particularly in anticipation of competition from the emerging personal communication service (PCS) technologies. While these stocks have not done much lately, I believe their strong fundamentals should show good upside for the future. Actually, two of the fund's larger holdings, AirTouch Communications and Vodafone, a British cellular service company, both did very well over the period. Q. CAN WE EXPECT ANY CHANGES TO YOUR GAME PLAN GOING FORWARD, PAUL? A. Nothing radical. I continue to have a very strong focus on wireless communications, including both the cellular service and cellular equipment providers, as well as selective plays on the broadband revolution. I recently have invested a bit more internationally because some of these overseas companies, particularly on the equipment side, have been more attractive from a valuation point of view. My outlook for the fund continues to be very positive. FUND FACTS START DATE: June 29, 1990 TRADING SYMBOL: FSDCX SIZE: as of August 31, 1995, more than $477 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.9% SHARES VALUE (NOTE 1) APPLIANCE STORES - 0.8% ELECTRIC APPLIANCES - WHOLESALE - 0.8% Cellstar Corp. 129,200 $ 4,118,250 BROADCASTING - 1.0% CABLE TV OPERATORS - 1.0% Viacom, Inc. Class B (non-vtg.) (a) 60,000 2,917,500 Videotron Holdings PLC sponsored ADR 129,000 1,886,625 4,804,125 CELLULAR - 30.6% CELLULAR & COMMUNICATION SERVICES - 30.6% A Plus Communications, Inc. 217,500 2,881,875 AirTouch Communications, Inc. 1,153,425 37,486,313 Arch Communications Group, Inc. 111,400 3,042,613 BCE Mobile Communications, Inc. 139,500 4,346,562 Cellular Communications, Inc. Series A (redeemable) 252,100 13,739,450 Cellular Communications, Inc. Class P 19,550 1,099,492 Cellular Communications International, Inc. 49,000 1,862,000 Cellular Communications Puerto Rico Inc. 336,100 10,335,075 Metrocall, Inc. (a) 159,400 3,666,200 Mobile Telecommunications Technologies, Inc. 155,200 4,772,400 Nera SA 92,100 2,983,229 Palmer Wireless, Inc. 367,500 8,452,500 USA Mobile Communications (a) 396,742 8,629,139 United States Cellular Corp. (a) 324,200 11,347,000 Vanguard Cellular Systems, Inc. Class A (a) 407,050 11,041,231 Vodafone Group PLC sponsored ADR (a) 601,900 25,204,563 150,889,642 COMMUNICATIONS EQUIPMENT - 25.6% DATACOMMUNICATIONS EQUIPMENT - 2.2% Ascom Holding Ltd. (Bearer) 500 567,096 Cisco Systems, Inc. 40,000 2,625,000 Dynatech Corp. (a) 282,500 5,650,000 Microcom, Inc. 92,000 1,840,000 10,682,096 TELEPHONE EQUIPMENT - 23.0% ADC Telecommunications, Inc. 120,200 4,657,750 Andrew Corp. 50,600 2,947,450 Brite Voice Systems, Inc. 221,200 5,115,250 DSC Communications Corp. (a) 890,800 46,767,000 DSP Communications, Inc. 106,700 2,720,850 Dialogic Corp. (a) 71,800 1,768,075 Ericsson (L.M.) Telephone Co. Class B ADR 119,400 2,552,175 Filtronic Comtek PLC 588,400 3,602,014 Inter-Tel, Inc. (a) 271,600 4,515,350 InterVoice, Inc. 116,000 2,566,500 Network Equipment Technologies (a) 134,400 5,040,000 Nokia Corp. AB sponsored ADR 315,100 21,860,063 Octel Communications Corp. 75,000 2,559,375 Tellabs, Inc. (a) 70,000 3,272,500 U.S. Robotics Corp. 25,100 3,520,275 113,464,627 TELEPHONE INTERCONNECT SYSTEMS - 0.4% P-COM, Inc. 64,200 2,198,850 TOTAL COMMUNICATIONS EQUIPMENT 126,345,573 SHARES VALUE (NOTE 1) COMPUTER SERVICES & SOFTWARE - 0.5% CAD/CAM/CAE - 0.5% Ascend Communications, Inc. 35,000 $ 2,257,500 COMPUTERS & OFFICE EQUIPMENT - 1.1% COMPUTER COMMUNICATIONS EQUIPMENT - 0.1% Comverse Technology, Inc. 36,900 738,000 COMPUTER PERIPHERALS - 0.7% Micom Communication Corp. (a) 145,033 1,269,039 Safeguard Scientifics, Inc. 41,900 2,100,238 3,369,277 MAGNETIC & OPTICAL RECORDING MEDIA - 0.3% Boca Research, Inc. 56,000 1,330,000 TOTAL COMPUTERS & OFFICE EQUIPMENT 5,437,277 DEFENSE ELECTRONICS - 2.4% Alpha Industries, Inc. 49,100 840,838 Datum, Inc. (b) 263,000 3,484,750 Whittaker Corp. 390,500 7,614,750 11,940,338 ELECTRICAL EQUIPMENT - 15.1% ELECTRICAL MACHINERY - 2.5% Amphenol Corp. Class A 228,700 5,603,150 Murata Manufacturing Co. Ltd. 23,000 920,472 Philips Electronics NV 129,400 5,823,000 12,346,622 TV & RADIO COMMUNICATION EQUIPMENT - 12.6% Allen Group, Inc. (The) 343,500 11,206,688 Avid Technology, Inc. 163,000 6,479,250 C-COR Electronics, Inc. 64,700 2,070,400 California Microwave Corp. 464,200 12,185,250 Glenayre Technologies, Inc. 332,750 21,711,938 Leitch Technology (a) 99,500 1,508,473 Pinnacle Systems 71,500 1,912,625 TSX Corp. 71,100 2,017,463 Telular Corp. (a) 100,000 1,407,813 Vertex Communications Corp. (a) 103,400 1,744,875 62,244,775 TOTAL ELECTRICAL EQUIPMENT 74,591,397 ELECTRONICS - 11.1% ELECTRONIC COMPONENTS & ACCESSORIES - 0.4% General Cable PLC sponsored ADR 127,000 1,809,750 ELECTRONIC PARTS - WHOLESALE - 1.2% ARC International Corp. (b) 549,700 2,164,444 Wholesale Cellular USA, Inc. 190,800 3,792,150 5,956,594 ELECTRONICS & ELECTRONIC COMPONENTS - 4.6% Allgon AB Class B Free shares 192,900 3,854,541 Benefon Oy 49,400 1,643,084 Hirose Electric Co. Ltd. 32,000 2,183,684 Kyocera Corp. 80,000 7,092,868 Sanmina Corp. (a) 152,200 6,925,100 Tokin Corp. 56,000 844,741 22,544,018 PRINTED CIRCUIT BOARDS - 0.4% Altron Inc. 80,000 2,180,000 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRONICS - CONTINUED SEMICONDUCTORS - 4.5% Austria Mikro Systeme International 21,600 $ 3,789,914 LSI Logic Corp. (a) 266,100 13,105,425 Motorola, Inc. 70,000 5,232,500 22,127,839 TOTAL ELECTRONICS 54,618,201 ENGINEERING - 0.3% WATER & SEWER PIPES - 0.3% MasTec, Inc. (a) 125,000 1,312,500 IRON & STEEL - 1.4% IRON & STEEL BLAST FURNACES, MILLS - 0.1% UNR Industries, Inc. 63,400 499,275 STEEL PIPES & TUBES - 1.3% Mannesmann AG Ord. 20,000 6,310,627 TOTAL IRON & STEEL 6,809,902 PACKAGING & CONTAINERS - 0.3% GLASS CONTAINERS - 0.3% Corning, Inc. 49,100 1,601,888 TELEPHONE SERVICES - 3.7% ALLTEL Corp. 40,000 1,130,000 BellSouth Corp. 20,000 1,375,000 DDI Corp. Ord. 50 423,807 Telephone & Data Systems, Inc. 137,100 5,621,100 WorldCom, Inc. 283,400 9,547,032 18,096,939 TOTAL COMMON STOCKS (Cost $395,536,245) 462,823,532 REPURCHASE AGREEMENTS 6.1% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/01/95 $30,248,889 30,244,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $425,780,245) $ 493,067,532 LEGEND 1. Non-income producing 2. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE ARC International Corp. $ - $ - $ - $ 2,164,444 Datum, Inc. 883,863 - - 3,484,750 Total $ 883,863 $ - $ - $ 5,649,194 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $421,633,542 and $287,613,002, 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 $101,162 for the period (see Note 5 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 79.8% United Kingdom 6.6 Finland 4.8 Japan 2.3 Germany 1.3 Sweden 1.3 Canada 1.2 Netherlands 1.2 Others (individually less than 1%) 1.5 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $425,787,917. Net unrealized appreciation aggregated $67,279,615, of which $74,880,886 related to appreciated investment securities and $7,601,271 related to depreciated investment securities. DEVELOPING COMMUNICATIONS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $30,244,000) (cost $425,780,245) - $ 493,067,532 See accompanying schedule Cash 849 Receivable for investments sold 16,709,506 Receivable for fund shares sold 2,182,413 Dividends receivable 15,677 Redemption fees receivable 1,322 Other receivables 89,469 Prepaid expenses 10,768 TOTAL ASSETS 512,077,536 LIABILITIES Payable for investments purchased $ 23,161,632 Payable for fund shares redeemed 10,966,976 Accrued management fee 244,949 Other payables and 329,384 accrued expenses TOTAL LIABILITIES 34,702,941 NET ASSETS $ 477,374,595 Net Assets consist of: Paid in capital $ 378,900,388 Accumulated net investment (loss) (895,591 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 32,082,609 Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies 67,287,189 NET ASSETS, for 19,185,205 $ 477,374,595 shares outstanding NET ASSET VALUE and redemption price per share ($477,374,595 (divided by) 19,185,205 shares) $24.88 Maximum offering price per share (100/97.00 of $24.88) $25.65
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 676,316 Dividends Interest 794,419 TOTAL INCOME 1,470,735 EXPENSES Management fee $ 986,687 Transfer agent 1,228,329 Fees Redemption fees (88,300 ) Accounting fees and expenses 161,133 Non-interested trustees' compensation 1,282 Custodian fees and expenses 23,635 Registration fees 58,569 Audit 20,365 Legal 1,144 Miscellaneous 2,388 Total expenses before reductions 2,395,232 Expense reductions (28,906 2,366,326 ) NET INVESTMENT INCOME (LOSS) (895,591 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 32,539,749 Foreign currency transactions (18,127 32,521,622 ) Change in net unrealized appreciation (depreciation) on: Investment securities 55,903,781 Assets and liabilities in foreign (98 55,903,683 currencies ) NET GAIN (LOSS) 88,425,305 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 87,529,714 OTHER INFORMATION $1,224,619 Sales Charges Paid to FDC Deferred sales charges withheld $2,013 by FDC Exchange fees withheld by FSC $62,385
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ (895,591 $ (1,840,119 Net investment income (loss) ) ) Net realized gain (loss) 32,521,622 30,202,368 Change in net unrealized appreciation (depreciation) 55,903,683 (4,667,340 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 87,529,714 23,694,909 Distributions to shareholders from net realized gains (17,239,478 (19,859,395 ) ) Share transactions 282,219,803 296,420,644 Net proceeds from sales of shares Reinvestment of distributions 16,999,404 19,590,893 Cost of shares redeemed (146,701,008 (287,865,261 ) ) Paid in capital portion of redemption fees 140,521 334,629 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 152,658,720 28,480,905 TOTAL INCREASE (DECREASE) IN NET ASSETS 222,948,956 32,316,419 NET ASSETS Beginning of period 254,425,639 222,109,220 End of period (including accumulated net investment loss of $895,591 and $0, respectively) $ 477,374,595 $ 254,425,639 OTHER INFORMATION Shares Sold 12,449,183 15,233,264 Issued in reinvestment of distributions 898,014 1,085,216 Redeemed (6,630,815 (15,155,323 ) ) Net increase (decrease) 6,716,382 1,163,157
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEAR JUNE 29, 1990 ENDED FEBRUARY 28, ENDED ENDED (COMMENCEMEN AUGUST 31, 1995 FEBRUARY 28, APRIL 30, T OF OPERATIONS TO) APRIL 30, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 20.40 $ 19.65 $ 16.44 $ 13.54 $ 11.95 $ 10.00 Income from Investment Operations Net investment income (loss) (.06) (.16) (.16) (.07) (.08) E (.10) Net realized and unrealized gain (loss) 6.06 2.55 4.82 2.98 2.42 1.86 Total from investment operations 6.00 2.39 4.66 2.91 2.34 1.76 Less Distributions (1.53) (1.67) (1.47) (.03) (.79) - From net realized gain Redemption fees added to paid in capital .01 .03 .02 .02 .04 .19 Net asset value, end of period $ 24.88 $ 20.40 $ 19.65 $ 16.44 $ 13.54 $ 11.95 TOTAL RETURN B, C 31.82% 13.63% 30.24% 21.66% 21.41% 19.50% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 477,375 $ 254,426 $ 222,109 $ 83,383 $ 39,261 $ 7,745 Ratio of expenses to average net assets 1.45% A 1.56% 1.56% 1.88% A 2.50% 2.50% A Ratio of expenses to average net assets before 1.46% A 1.58% 1.56% 1.88% A 2.50% 3.29% A expense reductions Ratio of net investment income (loss) to average (.55)% (.83)% (.88)% (.59)% (.61)% (1.23)% net assets A A A Portfolio turnover rate 186% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.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). If Fidelity had not reimbursed certain expenses, the past 10 years total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1995 MONTH YEAR YEARS YEARS S ELECTRONICS 75.05% 88.06% 380.82% 292.85% ELECTRONICS (INCL. 3% SALES CHARGE) 69.80% 82.42% 366.39% 281.06% S&P 500 16.81% 21.45% 102.17% 311.58% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS YEARS ELECTRONICS 88.06% 36.90% 14.66% ELECTRONICS (INCL. 3% SALES CHARGE) 82.42% 36.07% 14.31% S&P 500 21.45% 15.12% 15.20% 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 ElectrStandard & Po 08/31/85 9700.00 10000.00 09/30/85 8650.10 9687.00 10/31/85 8603.64 10134.54 11/30/85 9653.54 10829.77 12/31/85 10322.51 11353.93 01/31/86 10424.71 11417.51 02/28/86 10629.12 12271.54 03/31/86 10424.71 12956.29 04/30/86 11279.50 12809.89 05/31/86 10396.84 13491.37 06/30/86 9384.10 13719.38 07/31/86 8259.87 12952.46 08/31/86 8966.00 13913.54 09/30/86 7971.84 12762.89 10/31/86 7999.71 13499.31 11/30/86 7999.71 13827.34 12/31/86 7860.34 13474.74 01/31/87 9161.11 15289.79 02/28/87 9895.11 15893.74 03/31/87 9737.16 16353.07 04/30/87 10025.19 16207.52 05/31/87 9820.79 16348.53 06/30/87 9607.09 17174.13 07/31/87 9904.41 18044.86 08/31/87 10619.83 18717.93 09/30/87 10610.54 18308.01 10/31/87 7005.56 14364.46 11/30/87 5909.20 13180.83 12/31/87 6801.15 14183.89 01/31/88 6410.92 14781.03 02/29/88 7089.18 15469.83 03/31/88 6986.97 14991.81 04/30/88 7302.87 15158.22 05/31/88 7052.01 15290.10 06/30/88 7739.56 15991.91 07/31/88 7265.71 15931.15 08/31/88 6541.00 15389.49 09/30/88 6643.20 16045.08 10/31/88 6160.06 16491.13 11/30/88 5853.45 16255.31 12/31/88 6225.10 16539.78 01/31/89 6448.08 17750.49 02/28/89 6355.17 17308.50 03/31/89 6308.72 17711.79 04/30/89 6801.15 18631.03 05/31/89 7451.53 19385.59 06/30/89 6717.53 19275.09 07/31/89 6791.86 21015.63 08/31/89 7024.14 21427.54 09/30/89 7219.25 21339.68 10/31/89 6894.06 20844.60 11/30/89 6912.64 21269.83 12/31/89 7200.67 21780.31 01/31/90 7442.24 20318.85 02/28/90 8036.88 20580.96 03/31/90 8427.11 21126.36 04/30/90 8464.27 20598.20 05/31/90 9709.29 22606.52 06/30/90 9857.95 22452.80 07/31/90 9393.39 22380.95 08/31/90 7925.38 20357.71 09/30/90 6726.82 19366.29 10/31/90 6485.25 19283.02 11/30/90 7154.21 20528.70 12/31/90 7618.87 21101.45 01/31/91 8679.37 22021.47 02/28/91 9442.18 23596.01 03/31/91 9944.53 24167.03 04/30/91 10000.34 24225.03 05/31/91 10325.94 25271.56 06/30/91 9070.08 24114.12 07/31/91 9693.36 25237.84 08/31/91 10093.37 25835.97 09/30/91 9321.25 25404.51 10/31/91 9777.08 25744.93 11/30/91 9181.71 24707.41 12/31/91 10307.33 27533.94 01/31/92 11525.98 27021.81 02/29/92 12158.56 27373.09 03/31/92 11200.38 26839.32 04/30/92 10986.42 27628.39 05/31/92 11005.03 27763.77 06/30/92 10205.00 27350.09 07/31/92 10744.55 28468.71 08/31/92 10856.19 27885.10 09/30/92 11246.90 28214.15 10/31/92 12093.44 28312.90 11/30/92 12884.16 29278.37 12/31/92 13135.33 29638.49 01/31/93 13581.86 29887.45 02/28/93 13284.18 30293.92 03/31/93 13749.31 30933.12 04/30/93 13506.95 30184.54 05/31/93 14862.32 30993.49 06/30/93 15133.39 31083.37 07/31/93 15563.37 30959.04 08/31/93 16900.04 32132.38 09/30/93 17180.46 31884.96 10/31/93 16853.31 32544.98 11/30/93 16722.44 32235.80 12/31/93 17349.12 32625.86 01/31/94 18547.51 33735.14 02/28/94 19427.06 32820.92 03/31/94 19218.16 31389.92 04/30/94 19163.19 31791.71 05/31/94 19108.22 32313.10 06/30/94 18085.74 31521.43 07/31/94 18459.55 32555.33 08/31/94 20262.63 33890.10 09/30/94 19679.93 33059.79 10/31/94 20482.52 33803.64 11/30/94 20218.65 32572.51 12/31/94 20328.60 33055.56 01/31/95 19745.89 33912.69 02/28/95 21768.86 35234.27 03/31/95 24011.71 36274.03 04/30/95 26694.34 37342.30 05/31/95 28640.34 38834.87 06/30/95 32719.26 39737.01 07/31/95 37611.75 41054.68 08/31/95 38106.50 41157.73 Let's say you invested $10,000 in Fidelity Select Electronics Portfolio on August 31, 1985, and paid a 3% sales charge. By August 31, 1995, your investment would have grown to $38,106 - a 281.06% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $41,158 over the same period - a 311.58% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Micron Technology, Inc. 9.2 Analog Devices, Inc. 5.5 Xilinx, Inc. 3.6 Silicon Valley Group, Inc. 3.5 Advantest Corp. 3.3 Tokyo Electron Ltd. 3.2 Burr-Brown Corp. 3.2 LSI Logic Corp. 2.9 Nokia Corp. AB sponsored ADR 2.9 Cirrus Logic, Inc. 2.9 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 13.4 Row: 1, Col: 2, Value: 4.8 Row: 1, Col: 3, Value: 7.2 Row: 1, Col: 4, Value: 8.1 Row: 1, Col: 5, Value: 11.1 Row: 1, Col: 6, Value: 55.4 Semiconductors 55.4% Semi-Conductor Capital Equipment 11.1% Electronics & Electronic Components 8.1% Electronic Equipment 7.2% Telephone Equipment 4.8% All Others 13.4%* * INCLUDES SHORT-TERM INVESTMENTS ELECTRONICS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Marc Kaufman, Portfolio Manager of Fidelity Select Electronics Portfolio Q. HOW HAS THE FUND PERFORMED, MARC? A. I am extremely pleased with its performance. For the six months ended August 31, 1995, the fund was the highest performer of any in its category, gaining 75.05% compared with the S&P 500's 16.81% total return for the period. For the 12 months ended August 31, the fund was up 88.06%, more than four times the S&P's 21.45% return for the comparable period. Q. THAT'S A HUGE LEAP FROM WHAT THE FUND DID SIX MONTHS AGO. WHAT'S THE STORY BEHIND THIS IMPRESSIVE GAIN? A. Probably the biggest factor is that the portfolio was very heavily invested in semiconductor companies and other related businesses, and these stocks have had an extremely good run over the recent past. In fact, the semiconductor industry is probably as strong now as it has ever been, driven by such factors as the growing strength of PC sales on a global basis, the advent of the Pentium chip and Windows 95, the rapid growth of wireless communications, and a marketplace with very favorable supply and demand characteristics. The long and short of it is that demand for larger and more powerful chips has been moving faster than the industry's ability to supply them. Since I took over the fund in March of this year, I've increased the fund's holdings in semiconductors from about half the portfolio to as much as two-thirds at times. Q. WHICH OF THE FUND'S HOLDINGS HAD THE GREATEST IMPACT ON PERFORMANCE? A. There were several, particularly in the semiconductor group. Micron Technology, the fund's top position on August 31, continued to do very well: its stock price gained nearly 150% during the period. Right now, Micron is arguably the best manufacturer of dynamic RAM chips in the world and has been able to hold its chip prices high in a tight supply market. Xilinx, a maker of programmable logic chips, is another good growth story. Burr-Brown Corporation, which produces analog chips, also did extremely well, as did Altera, Applied Materials and LSI Logic. Q. WHAT OPPORTUNITIES DID YOU FIND OUTSIDE THE SEMICONDUCTOR GROUP? A. The recent boom in technology stocks provided growth in most areas. In addition to semiconductor companies, I also owned a variety of computer, telecommunications and networking stocks. The dynamic growth of PC sales drove good returns from such computer makers as Compaq, Dell and IBM. On the telecommunications side, Nokia, Ericsson, DSC Communications and Motorola all benefited from worldwide growth in the wireless arena. Such networking names as Cisco Systems and Baynet also made strong contributions to fund performance. Q. GIVEN THE RECENT PERFORMANCE, I SUPPOSE IT SHOULDN'T BE A SURPRISE THAT FUND ASSETS GREW MORE THAN FIVE-FOLD DURING THE PERIOD . . . A. Part of that growth was asset appreciation, but inflows of new money were very significant during the period. Fund assets grew from a little over $200 million at the end of February to about $1.2 billion now. Q. ARE YOU AT ALL CONCERNED ABOUT THE FUND'S ABILITY TO SUSTAIN ITS DRAMATIC INCREASES? A. Anytime a group of stocks is up this much, there always is concern that there may be a correction. And I do expect there to be some near-term volatility in the group. At the same time, I think the market fundamentals remain very strong. Demand shows little sign of abating, and the pricing environment continues to be favorable. I also believe that Microsoft's recent introduction of Windows 95 will provide another leg of growth for the PC market, which should help the semiconductor companies sustain their robust earnings growth. All of which leads me to believe that the outlook for further growth, especially within the semiconductor segment, remains positive. Q. WHAT WILL BE YOUR GAME PLAN GOING FORWARD? A. I don't plan any changes in strategy. Since taking over the portfolio, I've positioned it more heavily on "pure plays" in the semiconductor industry, and I think that strategy should continue to provide solid performance. I believe the growth prospects in semiconductors should remain quite strong for at least the next six months and possibly longer. FUND FACTS START DATE: July 29, 1985 TRADING SYMBOL: FSELX SIZE: as of August 31, 1995, more than $1.2 billion MANAGER: Marc Kaufman, since March 1995; analyst, semiconductor industry, 1992-1995; joined Fidelity in 1992 (checkmark) ELECTRONICS PORTFOLIO INVESTMENTS AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 98.6% SHARES VALUE (NOTE 1) CELLULAR - 0.5% CELLULAR & COMMUNICATION SERVICES - 0.5% AirTouch Communications, Inc. (a) 100,000 $ 3,250,000 Vodafone Group PLC sponsored ADR 50,000 2,093,750 5,343,750 COMMUNICATIONS EQUIPMENT - 5.6% DATACOMMUNICATIONS EQUIPMENT - 0.8% Cisco Systems, Inc. (a) 110,000 7,218,750 3Com Corp. (a) 50,000 1,950,000 9,168,750 TELEPHONE EQUIPMENT - 4.8% ADC Telecommunications, Inc. (a) 6,100 235,350 DSC Communications Corp. (a) 129,000 6,772,500 Ericsson (L.M.) Telephone Co. Class B ADR 210,000 4,488,750 Network Equipment Technologies (a) 45,500 1,706,250 Nokia Corp. AB sponsored ADR 487,600 33,827,250 Tellabs, Inc. (a) 50,000 2,322,265 U.S. Robotics Corp. 45,000 6,311,250 55,663,615 TOTAL COMMUNICATIONS EQUIPMENT 64,832,365 COMPUTER SERVICES & SOFTWARE - 0.4% CUSTOM COMPUTER PROGRAMMING SERVICES - 0.1% Epic Design Technology (a) 29,000 1,250,625 PREPACKAGED COMPUTER SOFTWARE - 0.3% Microsoft Corp. (a) 40,400 3,737,000 TOTAL COMPUTER SERVICES & SOFTWARE 4,987,625 COMPUTERS & OFFICE EQUIPMENT - 6.0% COMPUTER PERIPHERALS - 0.2% Cambex Corp. (a) 170,000 2,018,750 COMPUTER STORAGE DEVICES - 2.5% ADAPTEC, Inc. (a) 694,100 29,499,250 COMPUTERS & OFFICE EQUIPMENT - 0.5% NEC Corp. 421,000 5,529,810 ELECTRONIC COMPUTERS - 1.0% International Business Machines Corp. 113,900 11,774,413 GRAPHICS WORKSTATIONS - 0.1% Silicon Graphics, Inc. (a) 27,200 1,149,200 MINI & MICRO COMPUTERS - 1.7% Apple Computer, Inc. 89,100 3,831,300 Compaq Computer Corp. (a) 240,100 11,464,775 Dell Computer Corp. (a) 56,000 4,312,000 19,608,075 TOTAL COMPUTERS & OFFICE EQUIPMENT 69,579,498 DRUGS & PHARMACEUTICALS - 0.1% COMMERCIAL LABORATORY RESEARCH - 0.1% Integrated Process Equipment Corp. (a) 41,500 1,499,188 ELECTRICAL EQUIPMENT - 1.6% ELECTRICAL EQUIPMENT - 0.2% Shinko Electric Industries Co. Ltd. 78,000 2,641,355 ELECTRICAL MACHINERY - 1.2% Murata Manufacturing Co. Ltd. 362,000 14,487,428 RELAYS & INDUSTRIAL CONTROLS - 0.2% Omron Corp. 97,000 2,140,072 TOTAL ELECTRICAL EQUIPMENT 19,268,855 SHARES VALUE (NOTE 1) ELECTRONIC INSTRUMENTS - 18.3% ELECTRONIC EQUIPMENT - 7.2% Advantest Corp. 668,000 $ 38,523,961 Credence Systems Corp. (a) 322,110 11,354,378 LTX Corp. (a) 100,000 1,137,500 Megatest Corp. (a) 207,000 4,993,875 Plasma & Materials Technologies, Inc. 2,000 38,000 Teradyne, Inc. (a) 641,000 24,277,875 Varian Associates, Inc. 60,600 3,272,400 83,597,989 SEMI-CONDUCTOR CAPITAL EQUIPMENT - 11.1% Applied Materials, Inc. (a) 286,800 29,827,200 Electro Scientific Industries, Inc. (a) 20,900 705,375 KLA Instruments Corp. (a) 164,500 14,064,750 Kulicke & Soffa Industries, Inc. (a) 579,100 22,512,513 Lam Research Corp. 30,000 1,807,500 Novellus System, Inc. (a) 278,000 20,485,125 Silicon Valley Group, Inc. (a) 947,500 40,742,500 130,144,963 TOTAL ELECTRONIC INSTRUMENTS 213,742,952 ELECTRONICS - 64.3% ELECTRONIC CAPACITORS - 0.5% Kemet Corp. (a) 100,000 5,700,000 ELECTRONIC PARTS - WHOLESALE - 1.3% Arrow Electronics, Inc. (a) 58,600 3,179,050 Avnet, Inc. 148,500 7,647,750 Marshall Industries (a) 16,100 511,175 NU Horizons Electronics Corp. (a) 100,000 1,062,500 Sterling Electronics Corp. (a) 153,200 3,006,550 15,407,025 ELECTRONIC RESISTORS - 0.2% Yageo Corp. GDR (a) 174,643 2,095,716 ELECTRONICS & ELECTRONIC COMPONENTS - 8.1% Cirrus Logic, Inc. (a) 620,000 33,790,000 Hitachi Ltd. 1,312,000 14,405,747 Kyocera Corp. 217,000 19,239,404 Kyocera Corp. ADR 10,000 1,782,500 Kyocera Corp. (warrants) (a) 2,000 3,950,000 Microsemi Corp. (a) 350,000 4,462,500 Rohm Co. Ltd. 165,000 10,209,852 Rohm Co. Ltd. (warrants) (a) 2,800 2,047,362 Vishay Intertechnology, Inc. 125,000 5,062,500 94,949,865 SEMICONDUCTORS - 54.2% Actel Corp. (a) 353,000 5,868,625 Alliance Semiconductor Corp. (a) 212,450 8,312,106 Altera Corp. (a) 323,220 20,241,653 Analog Devices, Inc. (a) 1,867,900 64,676,038 Apollo Electronics Co. Ltd. (a) 9,000 221,652 Atmel Corp. (a) 775,200 24,515,700 Austria Mikro Systeme International (a) 18,000 3,158,262 Burr-Brown Corp. (a)(c) 1,126,300 37,167,900 Chips & Technologies, Inc. (a) 160,500 2,206,875 Cypress Semiconductor Corp. (a) 183,700 8,381,313 Electroglas, Inc. (a) 114,300 8,629,650 Genus, Inc. (a) 100,000 1,375,000 Integrated Device Technology, Inc. (a) 475,000 27,371,875 Integrated Silicon Solution (a)(c) 365,500 18,183,625 International Rectifier Corp. (a) 95,000 3,847,500 LSI Logic Corp. (a) 696,600 34,307,550 Linear Technology Corp. 234,300 18,978,300 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRONICS - CONTINUED SEMICONDUCTORS - CONTINUED Maxim Integrated Products, Inc. (a) 179,900 $ 13,717,375 Microchip Technology, Inc. (a) 336,900 12,802,200 Micron Technology, Inc. 1,398,600 107,517,375 Motorola, Inc. 230,000 17,192,500 National Semiconductor Corp. (a) 193,500 5,466,375 Nippon Steel Semiconductor Corp. 102 2,794,667 Opti, Inc. (a) 39,100 786,888 Quality Semiconductor, Inc. (a) 152,000 2,622,000 SGS-Thomson Microelectronic NV (a) 137,700 6,626,813 S-3, Inc. (a) 518,800 20,362,900 Samsung Electronics Co. Ltd.: GDR partial dividend (b) 990 99,000 GDR representing shares (a)(b) 615 61,272 GDR representing shares (non-vtg.) (a)(b) 8,603 538,978 GDR (vtg.) (a) 174 17,400 GDR (vtg.) (b) 664 66,400 GDR (vtg.) (New) (a) 34 3,387 GDS (b) 39,475 2,486,925 GDS (non-vtg.) (a) 12,685 794,715 GDS (non-vtg.) (Reg.) (a) 472,100 29,742,300 GDS (vtg.) 4,934 493,400 GDS (vtg.) (b) 35,500 4,650,500 (New) 163 20,660 (vtg.) 17,600 3,640,868 Siliconix, Inc. (a) 26,600 811,300 Tencor Instruments (a) 150,600 6,532,275 Texas Instruments, Inc. 100,200 7,502,475 Tower Semiconductor Ltd. (a) 27,500 855,938 Tokyo Electron Ltd. 920,000 37,196,511 Unitrode Corp. (a) 508,200 15,246,000 Wako Electric Co. Ltd. 10,000 219,600 Xilinx, Inc. (a) 994,600 42,643,475 Xicor, Inc. (a) 480,000 3,480,000 634,436,096 TOTAL ELECTRONICS 752,588,702 INDUSTRIAL MACHINERY & EQUIPMENT - 0.7% SPECIAL INDUSTRIAL MACHINERY - 0.7% Gasonics International Corp. (a) 57,500 1,998,125 Shinkawa Ltd. 124,000 4,657,157 Tylan General, Inc. (a) 123,000 2,060,250 8,715,532 PHOTOGRAPHIC EQUIPMENT - 1.1% Nikon Corp. 933,000 12,829,347 TOTAL COMMON STOCKS (Cost $968,999,348) 1,153,387,814 NONCONVERTIBLE PREFERRED STOCKS - 0.0% SHARES VALUE (NOTE 1) ELECTRONICS - 0.0% SEMICONDUCTORS - 0.0% Samsung Electronics Co. Ltd. (Cost $40,304) 400 $ 36,463 CONVERTIBLE BONDS - 1.2% PRINCIPAL AMOUNT COMPUTERS & OFFICE EQUIPMENT - 0.0% ELECTRONIC COMPUTERS - 0.0% Acer, Inc. euro 4%, 6/10/01 $ 110,000 335,500 ELECTRONICS - 1.2% SEMICONDUCTORS - 1.2% United Microelectronics Corp. 1 1/4%, 6/8/04 (b) 1,120,000 1,873,200 euro 1 1/4%, 6/8/04 6,765,000 11,314,463 13,187,663 TOTAL CONVERTIBLE BONDS (Cost $12,395,196) 13,523,163 REPURCHASE AGREEMENTS - 0.2% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 2,756,446 2,756,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $984,190,848) $ 1,169,703,440 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 $9,776,275 or 0.8% of net assets. 3. A company in which the fund has ownership of at least 5% of the voting securities is an affiliated company. Transactions during the period with companies that are or were affiliates are as follows: PURCHASES SALES DIVIDEND MARKET AFFILIATE COST COST INCOME VALUE Burr-Brown Corp. $ 435,925 $ 693,400 $ - $ 37,167,900 Integrated Silicon Solution - - - 18,183,625 Totals $ 435,925 $ 693,400 $ - $ 55,351,525 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $1,477,651,859 and $895,661,755, 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 $118,543 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $8,528,000 and $7,079,000, respectively. The weighted average interest rate paid was 6.2% (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 76.0% Japan 14.6 Korea 3.7 Finland 2.9 Taiwan (Free China) 1.3 Others (individually less than 1%) 1.5 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $984,535,699. Net unrealized appreciation aggregated $185,167,741, of which $195,744,641 related to appreciated investment securities and $10,576,900 related to depreciated investment securities. At February 28, 1995, the fund had a capital loss carryforward of approximately $7,628,000 which will expire on February 28, 2003. ELECTRONICS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $2,756,000) (cost $984,190,848) - $ 1,169,703,440 See accompanying schedule Receivable for investments sold 127,676,737 Receivable for fund shares sold 26,275,380 Dividends receivable 80,700 Interest receivable 2,557 Redemption fees receivable 5,305 Other receivables 33,192 Prepaid expenses 39,846 TOTAL ASSETS 1,323,817,157 LIABILITIES Payable to custodian bank $ 6,410 Payable for investments purchased 35,745,221 Payable for fund shares redeemed 50,619,614 Accrued management fee 654,912 Other payables and accrued expenses 641,548 TOTAL LIABILITIES 87,667,705 NET ASSETS $ 1,236,149,452 Net Assets consist of: Paid in capital $ 846,960,976 Accumulated net investment (loss) (2,202,898) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 205,878,782 Net unrealized appreciation (depreciation) on investments 185,512,592 NET ASSETS, for 35,660,374 shares outstanding $ 1,236,149,452 NET ASSET VALUE and redemption price per share ($1,236,149,452 (divided by) 35,660,374 shares) $34.66 Maximum offering price per share (100/97.00 of $34.66) $35.73
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 608,278 Dividends Interest (including income on securities loaned of $26,866) 1,798,810 TOTAL INCOME 2,407,088 EXPENSES Management fee $ 2,424,710 Transfer agent 1,989,628 Fees Redemption fees (345,576 ) Accounting and security lending fees 294,274 Non-interested trustees' compensation 1,249 Custodian fees and expenses 32,769 Registration fees 255,961 Audit 18,590 Legal 748 Interest 2,458 Miscellaneous 3,920 Total expenses before reductions 4,678,731 Expense reductions (68,745 4,609,986 ) NET INVESTMENT INCOME (LOSS) (2,202,898 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (including 215,297,077 realized gain of $419,017 on sales of investment in affiliated issuers) Foreign currency transactions (2,374 215,294,703 ) Change in net unrealized appreciation (depreciation) on investment securities 165,152,099 NET GAIN (LOSS) 380,446,802 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 378,243,904 OTHER INFORMATION $9,319,434 Sales Charges Paid to FDC Deferred sales charges withheld $9,500 by FDC Exchange fees withheld by FSC $258,975
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ (2,202,898) $ (1,534,580 Net investment income (loss) ) Net realized gain (loss) 215,294,703 (9,362,352 ) Change in net unrealized appreciation (depreciation) 165,152,099 8,764,347 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 378,243,904 (2,132,585 ) Share transactions 1,736,033,652 612,603,897 Net proceeds from sales of shares Cost of shares redeemed (1,097,721,827) (506,775,203 ) Paid in capital portion of redemption fees 3,161,186 1,742,948 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 641,473,011 107,571,642 TOTAL INCREASE (DECREASE) IN NET ASSETS 1,019,716,915 105,439,057 NET ASSETS Beginning of period 216,432,537 110,993,480 End of period (including accumulated net investment loss of $2,202,898 and $0, respectively) $ 1,236,149,452 $ 216,432,537 OTHER INFORMATION Shares Sold 61,890,203 33,789,699 Redeemed (37,162,096) (29,140,209 ) Net increase (decrease) 24,728,107 4,649,490
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED TEN MONTHS YEARS ENDED AUGUST 31, 1995 FEBRUARY 28, ENDED APRIL 30, FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 19.80 $ 17.67 $ 14.28 $ 11.81 $ 10.75 $ 9.11 Income from Investment Operations Net investment income (loss) (.08) (.18) (.09) (.05) (.12) (.04) Net realized and unrealized gain (loss) 14.83 2.11 6.09 2.33 1.00 1.53 Total from investment operations 14.75 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 .11 .20 .14 .19 .18 .16 Net asset value, end of period $ 34.66 $ 19.80 $ 17.67 $ 14.28 $ 11.81 $ 10.75 TOTAL RETURN B, C 75.05% 12.05% 46.24% 20.91% 9.86% 18.15% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 1,236,149 $ 216,433 $ 110,993 $ 48,027 $ 34,222 $ 18,178 Ratio of expenses to average net assets 1.15% A 1.71% 1.67% 1.69% A 2.16% 2.26% Ratio of expenses to average net assets before 1.16% A 1.72% 1.67% 1.69% A 2.16% 2.26% expense reductions Ratio of net investment income (loss) to average (.55)% (.98)% (.52)% (.50)% (1.07)% (.45)% net assets A A Portfolio turnover rate 241% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD.
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). If Fidelity had not reimbursed certain expenses, the past five and 10 years total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1995 MONTH YEAR YEARS YEARS S SOFTWARE AND COMPUTER 30.13% 54.91% 298.69% 534.99% SERVICES SOFTWARE AND COMPUTER SERVICES (INCL. 3% SALES CHARGE) 26.23% 50.27% 286.73% 515.94% S&P 500 16.81% 21.45% 102.17% 311.58% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS YEARS SOFTWARE AND COMPUTER SERVICES 54.91% 31.86% 20.30% SOFTWARE AND COMPUTER SERVICES (INCL. 3% SALES CHARGE) 50.27% 31.06% 19.94% S&P 500 21.45% 15.12% 15.20% 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 SoftwStandard & Po 08/31/85 9700.00 10000.00 09/30/85 9106.73 9687.00 10/31/85 9393.48 10134.54 11/30/85 10481.14 10829.77 12/31/85 10985.42 11353.93 01/31/86 11232.62 11417.51 02/28/86 12003.87 12271.54 03/31/86 12082.98 12956.29 04/30/86 13210.19 12809.89 05/31/86 13744.14 13491.37 06/30/86 13398.06 13719.38 07/31/86 11450.15 12952.46 08/31/86 12399.39 13913.54 09/30/86 11450.15 12762.89 10/31/86 12518.04 13499.31 11/30/86 12794.90 13827.34 12/31/86 12508.15 13474.74 01/31/87 15167.99 15289.79 02/28/87 16591.85 15893.74 03/31/87 16868.71 16353.07 04/30/87 17155.45 16207.52 05/31/87 17234.56 16348.53 06/30/87 16631.40 17174.13 07/31/87 16581.96 18044.86 08/31/87 17748.73 18717.93 09/30/87 17936.60 18308.01 10/31/87 13190.42 14364.46 11/30/87 11934.66 13180.83 12/31/87 13689.02 14183.89 01/31/88 13293.44 14781.03 02/29/88 14386.48 15469.83 03/31/88 14511.40 14991.81 04/30/88 14948.62 15158.22 05/31/88 14542.63 15290.10 06/30/88 15687.72 15991.91 07/31/88 14906.98 15931.15 08/31/88 13876.40 15389.49 09/30/88 14771.65 16045.08 10/31/88 13990.91 16491.13 11/30/88 13782.71 16255.31 12/31/88 14927.80 16539.78 01/31/89 16041.66 17750.49 02/28/89 15323.37 17308.50 03/31/89 14948.62 17711.79 04/30/89 16395.59 18631.03 05/31/89 16988.96 19385.59 06/30/89 15306.42 19275.09 07/31/89 14854.65 21015.63 08/31/89 15532.30 21427.54 09/30/89 15844.24 21339.68 10/31/89 16177.69 20844.60 11/30/89 16650.97 21269.83 12/31/89 16726.48 21780.31 01/31/90 16131.86 20318.85 02/28/90 16550.30 20580.96 03/31/90 17210.99 21126.36 04/30/90 17155.93 20598.20 05/31/90 19314.19 22606.52 06/30/90 19765.66 22452.80 07/31/90 17959.77 22380.95 08/31/90 15449.15 20357.71 09/30/90 13676.29 19366.29 10/31/90 13951.58 19283.02 11/30/90 15746.46 20528.70 12/31/90 16869.63 21101.45 01/31/91 19347.22 22021.47 02/28/91 20756.69 23596.01 03/31/91 21934.92 24167.03 04/30/91 21769.75 24225.03 05/31/91 22166.17 25271.56 06/30/91 20541.55 24114.12 07/31/91 21803.40 25237.84 08/31/91 23574.85 25835.97 09/30/91 22798.33 25404.51 10/31/91 23938.85 25744.93 11/30/91 21318.07 24707.41 12/31/91 24603.48 27533.94 01/31/92 28552.66 27021.81 02/29/92 29410.62 27373.09 03/31/92 27997.50 26839.32 04/30/92 27290.94 27628.39 05/31/92 27719.92 27763.77 06/30/92 26218.48 27350.09 07/31/92 28073.20 28468.71 08/31/92 25978.75 27885.10 09/30/92 27858.71 28214.15 10/31/92 30104.57 28312.90 11/30/92 32728.94 29278.37 12/31/92 33347.18 29638.49 01/31/93 35063.12 29887.45 02/28/93 34848.62 30293.92 03/31/93 35593.04 30933.12 04/30/93 34994.04 30184.54 05/31/93 38940.84 30993.49 06/30/93 40949.86 31083.37 07/31/93 39710.25 30959.04 08/31/93 42388.95 32132.38 09/30/93 43243.85 31884.96 10/31/93 43144.11 32544.98 11/30/93 42075.48 32235.80 12/31/93 44261.99 32625.86 01/31/94 45804.34 33735.14 02/28/94 46414.85 32820.92 03/31/94 41434.37 31389.92 04/30/94 41648.73 31791.71 05/31/94 37480.60 32313.10 06/30/94 34191.69 31521.43 07/31/94 35868.71 32555.33 08/31/94 39760.05 33890.10 09/30/94 41567.32 33059.79 10/31/94 44123.56 33803.64 11/30/94 43114.09 32572.51 12/31/94 44432.91 33055.56 01/31/95 43700.23 33912.69 02/28/95 47331.06 35234.27 03/31/95 50033.83 36274.03 04/30/95 51596.88 37342.30 05/31/95 52997.11 38834.87 06/30/95 57686.26 39737.01 07/31/95 61170.55 41054.68 08/31/95 61593.88 41157.73 Let's say you invested $10,000 in Fidelity Select Software and Computer Services Portfolio on August 31, 1985 and paid a 3% sales charge. By August 31, 1995, your investment would have grown to $61,594 - a 515.94% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $41,158 over the same period - a 311.58% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Microsoft Corp. 9.5 Micron Technology, Inc. 9.4 Oracle Systems Corp. 9.4 Novell, Inc. 7.3 Symantec Corp. 5.3 Intel Corp. 5.0 SAP AG 4.1 First Data Corp. 3.4 General Motors Corp. Class E 3.4 Computer Sciences Corp. 3.1 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 23.5 Row: 1, Col: 2, Value: 2.8 Row: 1, Col: 3, Value: 7.5 Row: 1, Col: 4, Value: 9.199999999999999 Row: 1, Col: 5, Value: 14.4 Row: 1, Col: 6, Value: 42.6 Prepackaged Computer Software 42.6% Semiconductors 14.4% Data Processing 9.2% Computer Services 7.5% Mini & Micro Computers 2.8% All Others 23.5%* * 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 HAS THE FUND PERFORMED, JOHN? A. I think it performed well. For the six months ended August 31, 1995, the fund was up 30.13%, compared with the S&P 500's 16.81% gain. For the 12 months also ended August 31, it outperformed the market by a larger margin, gaining 54.91% for the period, compared with a 21.45% return for the S&P. Q. WHAT FACTORS INFLUENCED PERFORMANCE? A. Software and computer service companies generally have performed pretty well over the last six months, though they haven't really matched the extraordinary returns seen in many of the other technology sectors. But while the industry as a whole has done only okay, our fund actually did quite a bit better than the norm. The reasons for that are two-fold: first, the fund avoided most of the major "blow-ups" that occurred in the software industry, where a number of stocks were severely punished; and second, I was fortunate to have made good bets in a couple of places. Q. WHERE DID YOU FIND THOSE GOOD OPPORTUNITIES? A. One stock that helped quite a bit was Microsoft. I had not been a major holder of this company in the past, but I got aggressive in buying it at $60-$70 a share in March, mainly on the strength of its dominant position in supplying operating systems for the PC market and also in anticipation of its Windows 95 launch. And by the end of the period, Microsoft had risen by about 45%. I also went a bit beyond the fund's usual holdings and made a significant investment in Micron Technology, a top manufacturer of dynamic RAM chips, for which there currently is huge worldwide demand. Micron has done extraordinarily well - it rose about 150% during the period - and helped the fund quite a bit. Another name that's done very well is Oracle Systems, a producer of relational database and applications software for the client-server market, which returned about 28% for the period. I also bought into a couple of computer services stocks - Ceridian and First Data - - that gave the fund a nice lift. Q. ANY OTHER NAMES THAT YOU REALLY LIKED? A. One in particular comes to mind - Electronics for Imaging - which makes a product that allows you to use a copying machine as a printer off your computer network, enabling creation of very high quality color images. The company now virtually owns the market, when its stock price went up by about 65% during the period, the fund took profits. Q. WHAT DIDN'T WORK AS WELL AS YOU'D HOPED? A. Unfortunately, I was not able to avoid entirely the problems at Compuware, whose stock suffered significantly when their merger with Uniface failed to pan out. Novell also hurt the fund a bit, when its Netware and WordPerfect upgrades did not take off as quickly as expected. While I continue to like Novell and have a big position in its stock, it didn't really perform to my expectations during the period. Q. SOUNDS LIKE IT'S BEEN AN UP-AND-DOWN YEAR FOR THE SOFTWARE STOCKS . . . A. It really has been a tough year. For every ten stocks you show me that are up, I'll show ten that are down. And I think that's always going to be true about the industry; you'll probably never see a situation where a rising tide lifts all boats. The reason for this is that software companies all are special situations. The industry is not really constrained by issues of production capacity, but rather by the market's perception of product quality and overall marketing strategy. So, it's always going to be a stock picker's market. Q. WHAT'S YOUR OUTLOOK AND GAME PLAN AS WE MOVE FORWARD? A. Actually, I'm feeling a bit better about software than I have in the past. I think fundamentals are improving for a lot of companies. I believe there is another upside leg to the Windows 95 story that will basically help everyone who is writing applications programs for this new operating system. I think mainframe software companies may have a tough road ahead and, consequently, would expect enterprise software stocks could do well in the next six months. I think there may be some good values in select computer services stocks. So looking ahead, I'll continue looking for good names to play in these areas. FUND FACTS START DATE: July 29, 1985 TRADING SYMBOL: FSCSX SIZE: as of August 31, 1995, more than $333 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 83.6% SHARES VALUE (NOTE 1) COMMUNICATIONS EQUIPMENT - 4.6% DATACOMMUNICATIONS EQUIPMENT - 2.0% 3Com Corp. (a) 171,600 $ 6,692,400 TELEPHONE EQUIPMENT - 2.6% DSC Communications Corp. (a) 102,000 5,355,000 Inter-Tel, Inc. 203,100 3,376,538 8,731,538 TOTAL COMMUNICATIONS EQUIPMENT 15,423,938 COMPUTER SERVICES & SOFTWARE - 56.2% CAD/CAM/CAE - 1.0% Ascend Communications, Inc. (a) 8,000 516,000 Computer Data Systems, Inc. 50,000 481,250 Network Peripherals, Inc. (a) 100,000 1,412,500 State of The Art, Inc. (a) 63,100 560,013 Stratacom, Inc. (a) 8,300 406,700 3,376,463 COMPUTER RELATED SERVICES - 0.0% Thrustmaster, Inc. (a) 10,000 80,000 COMPUTER SERVICES - 7.5% Bisys Group, Inc. (The) (a) 70,000 1,715,000 Computer Sciences Corp. (a) 174,100 10,489,525 Firefox Communications, Inc. (a) 500 9,750 SHL Systemhouse, Inc. (a) 546,000 3,605,600 SunGard Data Systems, Inc. (a) 350,000 9,712,500 25,532,375 DATA PROCESSING - 9.2% Ceridian Corp. (a) 175,800 7,691,250 First Data Corp. 200,000 11,675,000 General Motors Corp. Class E 250,000 11,656,250 31,022,500 PREPACKAGED COMPUTER SOFTWARE - 38.5% Boole & Babbage, Inc. (a) 1,500 45,188 Computron Software, Inc. 500 9,500 General Magic, Inc. (a) 89,400 1,463,925 Intuit (a) 50,000 2,153,125 Manugistics Group, Inc. (a) 55,000 852,500 Marcam Corp. (a) 72,500 815,625 Mercury Interactive Group Corp. (a) 169,300 3,830,413 Metrowerks, Inc. (a) 158,300 853,957 Microsoft Corp. (a) 350,000 32,375,000 Midisoft Corp. (a) 80,000 520,000 Novell, Inc. (a) 1,373,100 24,715,800 On Technology Corp. (a) 400 6,400 Oracle Systems Corp. (a) 796,800 31,971,600 Peoplesoft, Inc. (a) 56,500 3,898,500 Platinum Technology, Inc. (a) 183,800 4,342,275 SPSS, Inc. (a) 71,100 1,128,713 Sanctuary Woods Multimedia Corp. (a) 53,300 347,018 Symantec Corp. (a) 626,500 18,090,188 Systems Software Associates, Inc. 100,000 3,156,250 Xcellenet, Inc. 3,000 53,250 130,629,227 TOTAL COMPUTER SERVICES & SOFTWARE 190,640,565 COMPUTERS & OFFICE EQUIPMENT - 4.1% COMPUTER PERIPHERALS - 1.0% Applied Magnetics Corp. 300,000 3,450,000 SHARES VALUE (NOTE 1) COMPUTER STORAGE DEVICES - 0.2% ADAPTEC, Inc. (a) 10,000 $ 425,000 ELECTRONIC COMPUTERS - 0.1% International Business Machines Corp. 3,200 330,800 MINI & MICRO COMPUTERS - 2.8% Compaq Computer Corp. (a) 200,000 9,550,000 TOTAL COMPUTERS & OFFICE EQUIPMENT 13,755,800 ELECTRONIC INSTRUMENTS - 1.5% SEMI-CONDUCTOR CAPITAL EQUIPMENT 1.5% Applied Materials, Inc. (a) 50,000 5,200,000 ELECTRONICS - 16.0% ELECTRONIC PARTS - WHOLESALE - 0.1% ARC International Corp. (a) 133,500 525,656 ELECTRONICS & ELECTRONIC COMPONENTS - 1.5% Sanmina Corp. (a) 109,200 4,968,600 SEMICONDUCTORS - 14.4% Intel Corp. 275,000 16,878,125 Micron Technology, Inc. 416,800 32,041,500 48,919,625 TOTAL ELECTRONICS 54,413,881 METALS & MINING - 0.1% PRIME NONFERROUS SMELTING - 0.1% Tremont Corp. (a) 15,000 286,875 PHOTOGRAPHIC EQUIPMENT - 0.3% 3D Systems Corp. (a) 69,000 1,129,875 RETAIL & WHOLESALE, MISCELLANEOUS - 0.4% MUSIC, TV, & ELECTRONIC STORES - 0.4% Best Buy Co., Inc. (a) 50,000 1,362,500 TELEPHONE SERVICES - 0.4% Frontier Corp. 52,400 1,460,650 TOTAL COMMON STOCKS (Cost $213,914,845) 283,674,084 PREFERRED STOCKS - 4.9% CONVERTIBLE PREFERRED STOCKS - 0.8% PUBLISHING - 0.8% BOOK PUBLISHING & PRINTING - 0.8% Houghton Mifflin Co. $1.02 (stock appreciation income linked) 43,200 2,721,600 NONCONVERTIBLE PREFERRED STOCKS - 4.1% COMPUTER SERVICES & SOFTWARE - 4.1% PREPACKAGED COMPUTER SOFTWARE - 4.1% SAP AG 95,000 14,055,858 TOTAL PREFERRED STOCKS (Cost $8,543,216) 16,777,458 REPURCHASE AGREEMENTS - 11.5% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 39,031,309 $ 39,025,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $261,483,061) $ 339,476,542 LEGEND 1. Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $145,622,525 and $137,066,461, 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 $12,172 for the period (see Note 5 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $261,839,642. Net unrealized appreciation aggregated $77,636,900, of which $83,378,956 related to appreciated investment securities and $5,742,056 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
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $39,025,000) (cost $261,483,061) - $ 339,476,542 See accompanying schedule Cash 121 Receivable for investments sold 1,405,174 Receivable for fund shares sold 1,766,113 Dividends receivable 44,300 Redemption fees receivable 403 Other receivables 130,063 Prepaid expenses 17,979 TOTAL ASSETS 342,840,695 LIABILITIES Payable for investments purchased $ 2,725,000 Payable for fund shares redeemed 6,527,800 Accrued management fee 168,460 Other payables and accrued expenses 274,314 TOTAL LIABILITIES 9,695,574 NET ASSETS $ 333,145,121 Net Assets consist of: Paid in capital $ 240,095,020 Accumulated net investment (loss) (932,402 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 15,989,022 Net unrealized appreciation (depreciation) on investments 77,993,481 NET ASSETS, for 8,805,829 shares outstanding $ 333,145,121 NET ASSET VALUE and redemption price per share ($333,145,121 (divided by) 8,805,829 shares) $37.83 Maximum offering price per share (100/97.00 of $37.83) $39.00
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 218,790 Dividends Interest (including income on securities loaned of $11,657) 857,989 TOTAL INCOME 1,076,779 EXPENSES Management fee $ 858,810 Transfer agent 1,060,202 Fees Redemption fees (105,667 ) Accounting and security lending fees 141,561 Non-interested trustees' compensation 1,022 Custodian fees and expenses 10,762 Registration fees 27,564 Audit 17,965 Legal 867 Miscellaneous 2,488 Total expenses before reductions 2,015,574 Expense reductions (6,393 2,009,181 ) NET INVESTMENT INCOME (LOSS) (932,402 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 24,488,790 Foreign currency transactions (99 24,488,691 ) Change in net unrealized appreciation (depreciation) on investment securities 45,530,085 NET GAIN (LOSS) 70,018,776 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 69,086,374 OTHER INFORMATION $1,856,656 Sales Charges Paid to FDC Deferred sales charges withheld $2,746 by FDC Exchange fees withheld by FSC $69,705
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ (932,402 $ (1,835,964 Net investment income (loss) ) ) Net realized gain (loss) 24,488,691 (7,382,123 ) Change in net unrealized appreciation (depreciation) 45,530,085 17,246,063 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 69,086,374 8,027,976 Distributions to shareholders from net realized gains - (2,015,425 ) Share transactions 224,648,665 367,638,603 Net proceeds from sales of shares Reinvestment of distributions - 1,989,953 Cost of shares redeemed (197,275,262 (317,960,229 ) ) Paid in capital portion of redemption fees 240,258 730,383 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 27,613,661 52,398,710 TOTAL INCREASE (DECREASE) IN NET ASSETS 96,700,035 58,411,261 NET ASSETS Beginning of period 236,445,086 178,033,825 End of period (including undistributed net investment loss of $932,402 and $0, respectively) $ 333,145,121 $ 236,445,086 OTHER INFORMATION Shares Sold 6,660,514 14,345,417 Issued in reinvestment of distributions - 80,950 Redeemed (5,988,289 (12,454,413 ) ) Net increase (decrease) 672,225 1,971,954
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 29.07 $ 28.89 $ 27.62 $ 21.63 $ 19.77 $ 15.58 Income from Investment Operations Net investment income (loss) (.11) (.26) (.34) (.07) F (.28) (.14) E Net realized and unrealized gain (loss) 8.84 .67 7.92 5.88 4.37 4.06 Total from investment operations 8.73 .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 .03 .10 .17 .18 .27 .27 Net asset value, end of period $ 37.83 $ 29.07 $ 28.89 $ 27.62 $ 21.63 $ 19.77 TOTAL RETURN B, C 30.13% 1.97% 33.19% 27.69% 25.36% 26.89% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 333,145 $ 236,445 $ 178,034 $ 151,212 $ 89,571 $ 17,290 Ratio of expenses to average net assets 1.41% A 1.50% 1.57% 1.64% A 1.98% 2.50% Ratio of expenses to average net assets before 1.42% A 1.52% 1.57% 1.64% A 1.98% 2.82% expense reductions Ratio of net investment income (loss) to average (.66)% (1.01)% (1.19)% (.37)% (1.30)% (.84)% net assets A A Portfolio turnover rate 107% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.02 PER SHARE. F 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1995 MONTH YEAR YEARS YEARS S TECHNOLOGY 47.01% 54.32% 323.84% 321.21% TECHNOLOGY (INCL. 3% SALES CHARGE) 42.60% 49.69% 311.13% 308.58% S&P 500 16.81% 21.45% 102.17% 311.58% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS YEARS TECHNOLOGY 54.32% 33.49% 15.46% TECHNOLOGY (INCL. 3% SALES CHARGE) 49.69% 32.68% 15.11% S&P 500 21.45% 15.12% 15.20% 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 TechnoStandard & Poor' 08/31/85 9700.00 10000.00 09/30/85 8974.95 9687.00 10/31/85 9224.80 10134.54 11/30/85 10229.09 10829.77 12/31/85 10772.88 11353.93 01/31/86 10880.66 11417.51 02/28/86 11595.91 12271.54 03/31/86 11620.40 12956.29 04/30/86 12213.18 12809.89 05/31/86 11835.96 13491.37 06/30/86 11101.11 13719.38 07/31/86 9678.28 12952.46 08/31/86 10165.14 13913.54 09/30/86 9265.18 12762.89 10/31/86 9796.30 13499.31 11/30/86 10184.81 13827.34 12/31/86 9968.43 13474.74 01/31/87 11827.36 15289.79 02/28/87 13165.01 15893.74 03/31/87 12417.50 16353.07 04/30/87 12776.50 16207.52 05/31/87 13066.66 16348.53 06/30/87 12678.15 17174.13 07/31/87 12806.01 18044.86 08/31/87 13558.44 18717.93 09/30/87 13627.29 18308.01 10/31/87 8832.41 14364.46 11/30/87 7681.64 13180.83 12/31/87 8794.38 14183.89 01/31/88 8320.12 14781.03 02/29/88 9144.92 15469.83 03/31/88 9046.97 14991.81 04/30/88 9392.35 15158.22 05/31/88 9134.61 15290.10 06/30/88 9974.87 15991.91 07/31/88 9232.55 15931.15 08/31/88 8381.98 15389.49 09/30/88 8608.80 16045.08 10/31/88 8253.11 16491.13 11/30/88 8005.67 16255.31 12/31/88 8557.25 16539.78 01/31/89 9248.02 17750.49 02/28/89 8995.42 17308.50 03/31/89 8830.46 17711.79 04/30/89 9469.68 18631.03 05/31/89 10242.92 19385.59 06/30/89 9335.65 19275.09 07/31/89 9500.61 21015.63 08/31/89 9706.81 21427.54 09/30/89 9938.78 21339.68 10/31/89 9866.61 20844.60 11/30/89 9892.39 21269.83 12/31/89 10010.95 21780.31 01/31/90 9804.75 20318.85 02/28/90 10356.33 20580.96 03/31/90 10840.90 21126.36 04/30/90 10351.18 20598.20 05/31/90 11686.32 22606.52 06/30/90 11789.42 22452.80 07/31/90 11160.51 22380.95 08/31/90 9639.79 20357.71 09/30/90 8820.15 19366.29 10/31/90 9072.75 19283.02 11/30/90 10433.66 20528.70 12/31/90 11062.56 21101.45 01/31/91 12928.66 22021.47 02/28/91 13583.34 23596.01 03/31/91 14671.04 24167.03 04/30/91 13949.35 24225.03 05/31/91 14722.59 25271.56 06/30/91 13294.33 24114.12 07/31/91 14766.30 25237.84 08/31/91 15491.91 25835.97 09/30/91 15569.66 25404.51 10/31/91 15989.48 25744.93 11/30/91 15466.00 24707.41 12/31/91 17586.31 27533.94 01/31/92 18255.13 27021.81 02/29/92 18540.29 27373.09 03/31/92 17067.85 26839.32 04/30/92 16818.98 27628.39 05/31/92 16984.89 27763.77 06/30/92 15770.63 27350.09 07/31/92 16574.15 28468.71 08/31/92 15725.36 27885.10 09/30/92 16494.93 28214.15 10/31/92 17468.22 28312.90 11/30/92 18882.88 29278.37 12/31/92 19120.54 29638.49 01/31/93 19703.38 29887.45 02/28/93 19590.21 30293.92 03/31/93 19844.85 30933.12 04/30/93 19787.95 30184.54 05/31/93 21784.26 30993.49 06/30/93 22848.13 31083.37 07/31/93 22241.10 30959.04 08/31/93 23430.13 32132.38 09/30/93 23793.10 31884.96 10/31/93 23323.74 32544.98 11/30/93 23098.45 32235.80 12/31/93 24598.59 32625.86 01/31/94 25837.10 33735.14 02/28/94 26567.50 32820.92 03/31/94 25671.96 31389.92 04/30/94 25154.90 31791.71 05/31/94 25194.56 32313.10 06/30/94 23059.76 31521.43 07/31/94 23952.01 32555.33 08/31/94 26476.76 33890.10 09/30/94 26344.57 33059.79 10/31/94 27329.35 33803.64 11/30/94 26952.62 32572.51 12/31/94 27335.96 33055.56 01/31/95 26271.87 33912.69 02/28/95 27792.00 35234.27 03/31/95 29483.98 36274.03 04/30/95 31706.22 37342.30 05/31/95 32932.76 38834.87 06/30/95 35992.31 39737.01 07/31/95 39631.07 41054.68 08/31/95 40857.61 41157.73 Let's say you invested $10,000 in Fidelity Select Technology Portfolio on August 31, 1985, and paid a 3% sales charge. By August 31, 1995, your investment would have grown to $40,858 - a 308.58% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $41,158 over the same period - a 311.58% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Micron Technology, Inc. 8.7 Compaq Computer Corp. 4.3 Cisco Systems, Inc. 3.4 International Business Machines Corp. 2.9 Digital Equipment Corp. 2.7 Sun Microsystems, Inc. 2.5 Nippon Steel Semiconductor Corp. 2.3 Nokia Corp. AB sponsored ADR 2.2 LSI Logic Corp. 2.1 Oracle Systems Corp. 1.4 TOP INDUSTRIES AS OF AUGUST 31, 1995 Row: 1, Col: 1, Value: 53.3 Row: 1, Col: 2, Value: 5.5 Row: 1, Col: 3, Value: 5.5 Row: 1, Col: 4, Value: 5.9 Row: 1, Col: 5, Value: 8.0 Row: 1, Col: 6, Value: 21.8 Semiconductors 21.8% Mini & Micro Computers 8.0% Electronic Computers 5.9% Prepackaged Computer Software 5.5% Datacommunications Equipment 5.5% All Others 53.3%* * INCLUDES SHORT-TERM INVESTMENTS TECHNOLOGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW Harry Lange, Portfolio Manager of Fidelity Select Technology Portfolio Q. HARRY, HOW DID THE FUND DO? A. It's been a powerful past six months for the technology sector. The fund had a total return of 47.01% from March 1, 1995, through August 31, 1995. That topped the performance of the S&P 500, which returned 16.81% during the same period. For the 12 months ended August 31, the fund returned 54.32%, compared to 21.45% for the S&P 500. Q. WHAT FUELED THE FUND'S PERFORMANCE? A. Very strong earnings growth across the technology sector. In addition, technology stocks experienced increases in valuation - a stock's price relative to its earnings. This happened because more and more investors began to view technology as a maturing growth industry, rather than as a cyclical commodity industry prone to volatile swings in earnings. As a result, they were willing to pay higher stock prices to achieve strong earnings growth. Typically, technology cycles last two or three years, but this year tech stocks have continued to rise right through what would have been the typical end of their cycle. Q. WHAT HAS TRIGGERED THIS CHANGE? A. Two things. First, the industry has matured and ordering has become much more efficient. For example, in years past, if a semiconductor company received a big order from a personal computer company that didn't seem to make sense given the business environment, it would usually fill the order anyway. In the process, the semiconductor company might build a new plant, and that excess capacity would eventually trigger volatility in the company's earnings stream and stock price. Now, companies are communicating better and are much smarter about adding capacity. The second factor causing tech stocks to blow through their traditional cycle is the continued strong sales of personal computers and related products. If anything, the PC story has improved since the beginning of the year. Q. WHICH OF THE FUND'S STOCKS HAVE BENEFITED MOST? A. Semiconductor companies have shown the strongest gains as a group. These include Micron Technology, Texas Instruments, LSI Logic and Intel. Because PC sales remain strong, the demand for computer chips worldwide is still far greater than the supply, which has resulted in significant earnings gains for these companies. In addition, millions of personal computers will need greater memory capacity to run Microsoft's new PC software product, Windows 95. Micron, the fund's largest investment on August 31, manufactures memory chips and could benefit from this increased demand. Also, Micron has found ways to improve productivity - make more chips - without a substantial increase in costs. Although the stock has risen nearly 150% over the past six months, it remains relatively cheap on a price-to-earnings basis, and I continue to like its prospects going forward. Q. WHERE ELSE HAVE YOU FOUND OPPORTUNITIES? A. IBM continued to benefit from its multi-year restructuring program and showed surprisingly strong earnings growth during the first two quarters of 1995. Compaq Computer - the fund's second largest investment at the end of the period - successfully navigated through a new product cycle and turned in strong performance. Other stocks that benefited from the favorable PC environment included Cisco Systems, which manufactures computer networking equipment, and Sun Microsystems, which makes workstations. Q. AREN'T TECHNOLOGY STOCKS EXPENSIVE, NOW THAT PRICES HAVE RISEN SO SHARPLY OVER THE PAST SIX MONTHS? A. Broadly speaking, they're only somewhat more expensive than they were six months ago on a price-to-earnings basis because earnings growth has nearly kept pace with rising stock prices. And it's important to keep in mind that many tech stocks were quite cheap at the beginning of the year. So, although stock valuations are somewhat higher, in most cases they're still very attractive relative to the broad market. Q. WERE THERE ANY STOCKS THAT DIDN'T DO AS WELL AS YOU HAD HOPED? A. Sure. Some companies disappointed for various reasons. Mainframe computer manufacturer Amdahl turned in lower-than-expected earnings after the company had trouble turning out its new generation of disk drives. Software manufacturer Novell's revenues were hurt because customers have put off buying its products until the company starts selling programs geared toward Windows 95. Q. HOW ABOUT THE NEXT SIX MONTHS? A. I'm optimistic, based on my projections for PC sales for the rest of 1995 and 1996 and the windfall many companies should experience on the heels of Windows 95. However, it's important to keep in mind that sharp, rapid, short-term corrections can happen at any time. These stocks have a history of volatility. But unless companies begin to report lower-than-expected earnings, my long-term outlook remains quite positive. FUND FACTS START DATE: July 14, 1981 TRADING SYMBOL: FSPTX SIZE: as of August 31, 1995, more than $468 million MANAGER: Harry Lange, since 1993; manager, Fidelity Select Computers Portfolio, since 1992; research director, Fidelity Investments Far East, 1988-1992; manager, Fidelity Select Capital Goods Portfolio and Fidelity Select Automation and Machinery Portfolio, 1988; joined Fidelity in 1987 (checkmark) TECHNOLOGY PORTFOLIO INVESTMENTS AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 82.5% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 0.0% AIRCRAFT & PARTS - 0.0% Hong Kong Aircraft & Engineering Co. 50,000 $ 117,568 BROADCASTING - 0.6% CABLE TV OPERATORS - 0.2% Heartland Wireless Communications, Inc. (a) 50,000 1,087,500 NTN Communications, Inc. (a) 3,800 21,850 1,109,350 TELEVISION BROADCASTING - 0.4% Scandinavian Broadcasting Corp. (a) 60,000 1,627,500 TOTAL BROADCASTING 2,736,850 CELLULAR - 0.0% CELLULAR & COMMUNICATION SERVICES - 0.0% Advanced Information Services (For. Reg.) 7,500 115,615 Millicom International Cellular SA (a) 2,800 82,600 198,215 COMMUNICATIONS EQUIPMENT - 9.6% DATACOMMUNICATIONS EQUIPMENT - 5.5% Broadband Technologies, Inc. (a) 20,000 490,000 Cisco Systems, Inc. (a) 245,900 16,137,188 General DataComm Industries, Inc. (a) 115,000 1,351,250 Network General Corp. (a) 127,500 4,486,406 Telebit Corp. (a) 100,000 406,250 3Com Corp. (a) 70,000 2,730,000 25,601,094 TELEPHONE EQUIPMENT - 4.1% Colonial Data Technologies, Inc. (a) 50,000 906,250 Global Village Communication (a) 20,000 312,500 Natural Microsystems (a) 28,800 712,800 Network Equipment Technologies (a) 121,300 4,548,750 Newbridge Networks Corp. (a) 41,000 1,183,875 Nokia Corp. AB sponsored ADR (a) 150,000 10,406,250 Perceptron, Inc. (a) 30,400 820,800 Teledata Communications Ltd. (a) 7,300 69,350 18,960,575 TOTAL COMMUNICATIONS EQUIPMENT 44,561,669 COMPUTER SERVICES & SOFTWARE - 7.8% CAD/CAM/CAE - 1.2% Brooktrout Technology (a) 17,900 344,575 Chipcom Corp. (a) 29,300 1,175,663 Integrated Silicon Systems, Inc. (a) 10,000 285,000 Mentor Graphics Corp. (a) 1,900 36,575 Network Peripherals, Inc. (a) 14,300 201,988 Structural Dynamics Research Corp. (a) 200,000 3,625,000 5,668,801 COMPUTER & SOFTWARE STORES - 0.8% Inacom Corp. (a) 37,300 466,250 MicroAge, Inc. (a) 238,000 2,796,500 Software Spectrum, Inc. (a) 8,000 192,000 3,454,750 COMPUTER RELATED SERVICES - 0.2% Inso Corp. (a) 14,200 889,275 Wave Systems Corp. Class A (a) 43,300 184,025 1,073,300 SHARES VALUE (NOTE 1) COMPUTER SERVICES - 0.1% CompuCom Systems, Inc. (a) 8,400 $ 45,150 Datastream Systems, Inc. (a) 20,000 630,000 675,150 ELECTRONIC INFORMATION RETRIEVAL - 0.0% Data Broadcasting Corp. (a) 15,000 133,125 Quickresponse Services, Inc. (a) 1,500 34,500 167,625 PREPACKAGED COMPUTER SOFTWARE - 5.5% Acclaim Entertainment, Inc. (a) 20,000 505,000 Brock Control Systems, Inc. (a) 82,400 618,000 Broderbund Software, Inc. (a) 10,000 736,250 CBT Group PLC sponsored ADR (a) 19,000 750,500 Delrina Corp. (a) 10,000 167,417 EICON Technology Corp. (a) 21,000 187,507 Fourth Dimension Software (a) 38,000 247,000 Fourth Shift Corp. (a) 54,000 297,000 Geoworks (a) 101,800 1,297,950 Globalink, Inc. (a) 162,600 1,666,650 Inference Corp. Class A (a) 300 5,400 Learning Co. (a) 7,500 438,750 MDL Information Systems, Inc. (a) 16,000 272,000 Media Logic, Inc. (a) 65,000 211,250 Microsoft Corp. (a) 32,100 2,969,250 National Instrument Corp. (a) 51,000 1,102,875 Novell, Inc. (a) 101,400 1,825,200 Oracle Systems Corp. (a) 165,700 6,648,713 Platinum Technology, Inc. (a) 4,000 94,500 Softkey International, Inc. (a) 95,200 3,796,100 Systems Software Associates, Inc. 52,900 1,669,656 Wonderware Corp. (a) 9,300 320,850 25,827,818 TOTAL COMPUTER SERVICES & SOFTWARE 36,867,444 COMPUTERS & OFFICE EQUIPMENT - 24.5% COMPUTER EQUIPMENT - 0.2% GVC Corp. GDR (a)(b) 90,000 787,500 Stratus Computer, Inc. (a) 12,000 336,000 1,123,500 COMPUTER EQUIPMENT - WHOLESALE - 0.8% GBC Technologies, Inc. (a) 206,000 1,622,250 Merisel, Inc. (a) 308,300 1,965,413 Tech Data Corp. (a) 24,700 293,313 3,880,976 COMPUTER PERIPHERALS - 1.5% Fore Systems, Inc. (a) 20,000 675,000 In Focus Systems, Inc. (a) 100,000 3,112,500 Key Tronic Corp. (a) 104,000 1,586,000 Komag, Inc. (a) 23,800 1,481,550 Liuski International, Inc. (a) 2,500 10,938 Plannar Systems, Inc. (a) 5,000 100,000 Western Digital Corp. (a) 3,900 80,438 7,046,426 COMPUTER RENTAL & LEASING - 0.2% Comdisco, Inc. 23,300 710,650 COMPUTER STORAGE DEVICES - 1.9% Ameriquest Technologies, Inc. (a) 19,142 28,713 Hutchinson Technology, Inc. (a) 80,000 6,260,000 Maxtor Corp. (a) 100,000 543,750 Pinnacle Micro, Inc. (a) 84,500 1,795,625 Seagate Technology (a) 3,400 150,450 8,778,538 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) COMPUTERS & OFFICE EQUIPMENT - CONTINUED COMPUTERS - 0.8% Gateway 2000, Inc. (a) 140,000 $ 3,727,500 COMPUTERS & OFFICE EQUIPMENT - 1.5% Diebold, Inc. 25,000 1,165,625 Fujitsu Ltd. 50,000 543,869 OKI Electric Industry Co. Ltd. (a) 639,000 5,494,940 7,204,434 ELECTRONIC COMPUTERS - 5.0% Bay Networks, Inc. (a) 80,000 3,800,000 Hewlett-Packard Co. 75,000 6,000,000 International Business Machines Corp. 130,090 13,448,054 TSL Holding, Inc. (a) 10,864 326 Tricord Systems, Inc. (a) 40,500 156,938 23,405,318 GRAPHICS WORKSTATIONS - 2.7% Silicon Graphics, Inc. (a) 27,400 1,157,650 Sun Microsystems, Inc. (a) 201,500 11,661,813 12,819,463 MAGNETIC & OPTICAL RECORDING MEDIA - 0.4% Boca Research, Inc. (a) 70,000 1,662,500 MAINFRAME COMPUTERS - 0.7% Amdahl Corp. (a) 348,000 3,175,500 Control Data Systems, Inc. (a) 5,000 50,313 3,225,813 MINI & MICRO COMPUTERS - 8.0% Apple Computer, Inc. 100,000 4,300,000 Compaq Computer Corp. (a) 418,600 19,988,150 Digital Equipment Corp. (a) 301,900 12,604,325 Tandem Computers, Inc. (a) 50,000 612,500 37,504,975 OFFICE AUTOMATION - 0.3% Filenet Corp. (a) 11,400 521,550 Xerox Corp. 5,000 603,750 1,125,300 PENS, PENCILS, OFFICE SUPPLIES - 0.5% International Imaging Materials, Inc. (a) 99,700 2,342,950 TOTAL COMPUTERS & OFFICE EQUIPMENT 114,558,343 CONSUMER ELECTRONICS - 1.1% APPLIANCES - 1.0% Sanyo Electric Co. Ltd. 868,000 4,809,848 RADIOS, TELEVISIONS, STEREOS - 0.1% Foster Electric Co. Ltd. 40,000 221,652 Odetics, Inc. Class A (a) 57,000 285,000 506,652 TOTAL CONSUMER ELECTRONICS 5,316,500 DEFENSE ELECTRONICS - 0.0% Stanford Telecommunications, Inc. (a) 200 4,350 DRUGS & PHARMACEUTICALS - 2.3% BIOTECHNOLOGY - 0.9% Amgen, Inc. (a) 20,000 957,500 Applied Immune Sciences, Inc. (a) 1,100 8,525 COR Therapeutics, Inc. (a) 210,000 2,441,250 Genentech, Inc. (redeemable) (a) 20,000 942,500 Molecular Biosystems, Inc. (a) 871 7,404 4,357,179 SHARES VALUE (NOTE 1) DRUGS - 1.4% A.L. Laboratories, Inc. Class A 5,000 $ 105,000 Pfizer, Inc. 40,000 1,975,000 Schering-Plough Corp. 60,000 2,797,500 Warner-Lambert Co. 20,000 1,807,500 Watson Pharmaceuticals, Inc. (a) 400 16,550 6,701,550 TOTAL DRUGS & PHARMACEUTICALS 11,058,729 ELECTRICAL EQUIPMENT - 0.9% ELECTRICAL EQUIPMENT - 0.7% Fusion Systems Corp. (a) 7,500 213,750 IEC Electronics Corp. (a) 5,000 51,875 Shinko Electric Industries Co. Ltd. 84,000 2,844,536 3,110,161 TV & RADIO COMMUNICATION EQUIPMENT - 0.2% Allen Group, Inc. (The) 2,400 78,300 Avid Technology, Inc. (a) 12,000 477,000 Leitch Technology (a) 20,000 303,211 858,511 TOTAL ELECTRICAL EQUIPMENT 3,968,672 ELECTRONIC INSTRUMENTS - 5.6% ELECTRONIC EQUIPMENT - 3.2% Advantest Corp. 48,000 2,768,189 ASECO Corp. (a) 15,000 277,500 Credence Systems Corp. (a) 163,350 5,758,088 Fluke (John) Manufacturing Co., Inc. 73,600 2,833,600 GenRad, Inc. (a) 41,500 342,375 Megatest Corp. (a) 43,000 1,037,375 Micrion Corp. (a) 30,700 383,750 Micro Component Technology, Inc. (a) 600 3,600 Teradyne, Inc. (a) 40,000 1,515,000 14,919,477 SEMI-CONDUCTOR CAPITAL EQUIPMENT - 2.4% Applied Materials, Inc. (a) 3,300 343,200 Electro Scientific Industries, Inc. (a) 32,300 1,090,125 KLA Instruments Corp. (a) 39,100 3,343,050 Kulicke & Soffa Industries, Inc. (a) 21,600 839,700 Lam Research Corp. (a) 18,400 1,108,600 Silicon Valley Group, Inc. (a) 104,100 4,476,300 11,200,975 TOTAL ELECTRONIC INSTRUMENTS 26,120,452 ELECTRONICS - 23.6% CONNECTORS - 0.0% Thomas & Betts Corp. 2,000 135,000 ELECTRONIC CAPACITORS - 0.2% AVX Corp. (a) 31,500 1,000,125 ELECTRONIC PARTS - WHOLESALE - 0.2% Pioneer Standard Electronics, Inc. 5,100 131,325 Sterling Electronics Corp. (a) 40,000 785,000 916,325 ELECTRONIC RESISTORS - 0.1% Yageo Corp. GDR (a)(b) 21,322 255,864 ELECTRONICS & ELECTRONIC COMPONENTS - 2.3% CTS Corp. 2,800 88,550 Cirrus Logic, Inc. (a) 50,000 2,725,000 GTI Corp. (a) 20,000 437,500 Hitachi Ltd. ADR 10,800 1,174,500 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRONICS - CONTINUED ELECTRONICS & ELECTRONIC COMPONENTS - CONTINUED Kyocera Corp. (warrants) (a) 3,000 $ 5,925,000 Photronics, Inc. (a) 2,550 89,210 Smartflex Systems, Inc. (a) 2,000 36,500 Toshiba Corp. 50,000 362,237 10,838,497 SEMICONDUCTORS - 20.8% Act Manufacturing, Inc. (a) 13,000 251,875 Altera Corp. (a) 12,800 801,600 Atmel Corp. (a) 3,000 94,875 Burr-Brown Corp. (a) 98,000 3,234,000 Catalyst Semiconductor, Inc. (a) 67,500 354,375 Electroglas, Inc. (a) 20,000 1,510,000 Geotek Industries, Inc. (a) 99,000 773,438 Information Storage Devices (a) 600 16,350 Integrated Device Technology, Inc. (a) 32,600 1,878,575 International Rectifier Corp. (a) 6,000 243,000 Interpoint Corp. (a) 10,000 110,000 LSI Logic Corp. (a) 203,000 9,997,750 Lattice Semiconductor Corp. (a) 30,000 986,250 Linear Technology Corp. 20,000 1,620,000 Micro Linear Corp. (a) 90,300 1,422,225 Micron Technology, Inc. (a) 530,000 40,743,876 National Semiconductor Corp. (a) 100,900 2,850,425 Nippon Steel Semiconductor Corp. (a) 400 10,959,467 Quality Semiconductor, Inc. (a) 2,000 34,500 SGS-Thomson Microelectronic NV 70,900 3,412,063 Samsung Electronics Co. Ltd.: GDR partial dividend (b) 1,614 161,400 GDR representing shares (a)(b) 1,209 120,453 GDR representing shares (non-vtg.) (a)(b) 20,339 1,274,238 GDR (vtg.) (b) 6,113 611,300 GDS (b) 102,775 6,474,825 GDS (non-vtg.) (a) 2,335 146,288 GDS (non-vtg.) (Reg.) (a) 11,800 743,400 GDS (vtg.) (a) 174 17,400 Siliconix, Inc. (a) 600 18,300 Tencor Instruments (a) 9,400 407,725 Texas Instruments, Inc. 38,800 2,905,150 Tower Semiconductor Ltd. (a) 20,000 622,500 Tokyo Electron Ltd. 53,000 2,142,842 Uniphase Corp. (a) 17,000 537,625 97,478,090 TOTAL ELECTRONICS 110,623,901 INDUSTRIAL MACHINERY & EQUIPMENT - 1.5% SPECIAL INDUSTRIAL MACHINERY - 1.5% Fuji Machine Manufacturing Co. Ltd. Ord. 50,000 1,908,671 Gasonics International Corp. (a) 10,000 347,500 PRI Automation, Inc. (a) 20,000 755,000 Tylan General, Inc. (a) 57,000 954,750 Veeco Instruments, Inc. (a) 140,400 3,159,000 7,124,921 SHARES VALUE (NOTE 1) MEDICAL EQUIPMENT & SUPPLIES - 0.9% MEDICAL SUPPLIES & APPLIANCES - 0.3% Healthdyne, Inc. (a) 25,000 $ 242,188 Johnson & Johnson 17,300 1,193,700 Medical Technology Systems, Inc. (a) 9,800 49,613 1,485,501 MEDICAL TECHNOLOGY - 0.5% Mallinckrodt Group, Inc. 11,900 447,738 Medtronic, Inc. 20,000 1,887,500 2,335,238 X-RAY ELECTRO-MEDICAL APPARATUS - 0.1% Healthdyne Technologies, Inc. (a) 16,267 217,571 TOTAL MEDICAL EQUIPMENT & SUPPLIES 4,038,310 MEDICAL FACILITIES MANAGEMENT - 0.3% HOME HEALTH CARE AGENCIES - 0.1% Apria Healthcare Group, Inc. (a) 12,325 345,100 HOSPITALS - 0.2% Columbia/HCA Healthcare Corp. 5,404 253,988 Health Management Associates, Inc. Class A (a) 19,575 655,763 909,751 HOSPITALS, GENERAL MEDICAL - 0.0% Charter Medical Corp. (a) 5,000 100,625 TOTAL MEDICAL FACILITIES MANAGEMENT 1,355,476 METALS & MINING - 0.5% METAL ORES - 0.5% Sumitomo Sitix Corp. 150,000 2,278,092 PHOTOGRAPHIC EQUIPMENT - 0.6% Nikon Corp. 184,000 2,530,118 PRINTING - 1.1% COMMERCIAL PRINTING, LITHOGRAPHIC - 1.1% ASM Lithography Holding NV (a) 109,400 5,155,475 RETAIL & WHOLESALE, MISCELLANEOUS - 0.9% MAIL ORDER - 0.9% Micro Warehouse, Inc. (a) 87,400 4,173,350 STATIONARY & OFFICE SUPPLIES - WHOLESALE - 0.0% Daisytek International Corp. (a) 1,000 23,500 TOTAL RETAIL & WHOLESALE, MISCELLEANOUS 4,196,850 SERVICES - 0.0% ELECTRICAL REPAIR SHOPS - 0.0% Cerplex Group, Inc. (a) 10,000 60,000 JEWELRY, SILVERWARE, & PLATED - 0.0% Aurora Electronics (a) 7,000 24,500 TOTAL SERVICES 84,500 TELEPHONE SERVICES - 0.7% Japan Telecom Co. Ltd. (b) 6 126,834 MFS Communications, Inc. (a) 3,300 146,025 SBC Communications, Inc. 10,000 506,250 Telebras PN (Pfd. Reg.) 48,000,000 2,083,200 U.S. Long Distance Corp. (a) 12,500 184,375 3,046,684 TOTAL COMMON STOCKS (Cost $277,715,774) 385,943,119 NONCONVERTIBLE PREFERRED STOCKS - 0.3% SHARES VALUE (NOTE 1) TELEPHONE SERVICES - 0.3% Stet (Societa Finanziaria Telefonica) Spa (Cost $970,657) 635,100 $ 1,554,547 CONVERTIBLE BONDS - 2.3% PRINCIPAL AMOUNT COMPUTER SERVICES & SOFTWARE - 0.0% PREPACKAGED COMPUTER SOFTWARE - 0.0% Sterling Software, Inc. 5 3/4%, 2/01/03 $ 62,000 98,270 COMPUTERS & OFFICE EQUIPMENT - 1.3% COMPUTERS & OFFICE EQUIPMENT - 0.2% Data General Corp. 7 3/4%, 6/1/01 770,000 693,000 ELECTRONIC COMPUTERS - 0.9% Acer, Inc. euro 4%, 6/10/01 1,410,000 4,300,500 OFFICE EQUIPMENT - WHOLESALE - 0.2% Kinpo Electronics, Inc. euro 3%, 7/21/01 860,000 649,300 TOTAL COMPUTERS & OFFICE EQUIPMENT 5,642,800 ELECTRONICS - 1.0% SEMICONDUCTORS - 1.0% United Microelectronics Corp.: 1 1/4%, 6/8/04 (b) 870,000 1,455,075 euro 1 1/4%, 6/8/04 1,995,000 3,336,638 4,791,713 TOTAL CONVERTIBLE BONDS (Cost $9,369,359) 10,532,783 REPURCHASE AGREEMENTS - 14.9% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 69,975,311 69,964,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $358,019,790) $ 467,994,449 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 $11,267,489 or 2.4% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $173,079,782 and $119,674,503, 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 $29,058 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 $3,890,375 and $3,977,300, respectively (see Note 7 of Notes to Financial Statements). The maximum loan and the average daily loan balances during the periods for which loans were outstanding amounted to $6,151,000 and $4,944,625, respectively. The weighted average interest rate paid was 6.4% (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 82.0% Japan 7.7 Taiwan (Free China) 2.3 Finland 2.2 Korea 2.0 Netherlands 1.8 Others (individually less than 1%) 2.0 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $358,752,932. Net unrealized appreciation aggregated $109,241,517, of which $119,875,778 related to appreciated investment securities and $10,634,261 related to depreciated investment securities. TECHNOLOGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $69,964,000) (cost $358,019,790) - $ 467,994,449 See accompanying schedule Receivable for investments sold 16,574,962 Receivable for fund shares sold 3,100,017 Dividends receivable 105,482 Interest receivable 23,331 Redemption fees receivable 1,327 Other receivables 168,633 Prepaid expenses 36,278 TOTAL ASSETS 488,004,479 LIABILITIES Payable to custodian bank $ 5,096 Payable for investments purchased 5,819,841 Payable for fund shares redeemed 8,658,299 Accrued management fee 234,245 Other payables and 731,297 accrued expenses Collateral on securities loaned, 3,977,300 at value TOTAL LIABILITIES 19,426,078 NET ASSETS $ 468,578,401 Net Assets consist of: Paid in capital $ 319,630,719 Accumulated net investment (loss) (955,452 ) Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 39,928,475 Net unrealized appreciation (depreciation) on investments 109,974,659 NET ASSETS, for 7,814,829 $ 468,578,401 shares outstanding NET ASSET VALUE and redemption price per share ($468,578,401 (divided by) 7,814,829 shares) $59.96 Maximum offering price per share (100/97.00 of $59.96) $61.81
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 474,587 Dividends Interest (including income on securities loaned of $46,851) 868,971 TOTAL INCOME 1,343,558 EXPENSES Management fee $ 1,004,429 Transfer agent 1,144,545 Fees Redemption fees (86,767 ) Accounting and security lending fees 166,276 Non-interested trustees' compensation 1,154 Custodian fees and expenses 17,718 Registration fees 36,278 Audit 15,078 Legal 922 Interest 7,071 Miscellaneous 2,042 Total expenses before reductions 2,308,746 Expense reductions (9,736 2,299,010 ) NET INVESTMENT INCOME (LOSS) (955,452 ) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 40,916,082 Foreign currency transactions (381 40,915,701 ) Change in net unrealized appreciation (depreciation) on investment securities 79,623,815 NET GAIN (LOSS) 120,539,516 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 119,584,064 OTHER INFORMATION $1,841,280 Sales Charges Paid to FDC Deferred sales charges withheld $21,418 by FDC Exchange fees withheld by FSC $59,558
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ (955,452 $ (2,016,455 Net investment income (loss) ) ) Net realized gain (loss) 40,915,701 11,157,808 Change in net unrealized appreciation (depreciation) 79,623,815 (4,708,436 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 119,584,064 4,432,917 Distributions to shareholders from net realized gains (7,650,644 (7,172,823 ) ) Share transactions 273,551,161 291,385,384 Net proceeds from sales of shares Reinvestment of distributions 7,471,243 6,939,366 Cost of shares redeemed (154,411,973 (269,114,732 ) ) Paid in capital portion of redemption fees 273,879 815,900 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 126,884,310 30,025,918 TOTAL INCREASE (DECREASE) IN NET ASSETS 238,817,730 27,286,012 NET ASSETS Beginning of period 229,760,671 202,474,659 End of period (including net investment loss of $955,452 and $0, respectively) $ 468,578,401 $ 229,760,671 OTHER INFORMATION Shares Sold 5,164,094 7,232,669 Issued in reinvestment of distributions 167,818 187,906 Redeemed (2,981,126 (6,796,592 ) ) Net increase (decrease) 2,350,786 623,983
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 42.05 $ 41.83 $ 34.62 $ 32.44 $ 27.06 $ 20.08 Income from Investment Operations Net investment income (loss) (.15) (.39) (.24) E .13 F (.26) .14 G Net realized and unrealized gain (loss) 19.40 1.95 11.04 4.68 5.56 6.46 Total from investment operations 19.25 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 (1.38) (1.50) (3.70) (2.75) - - Total distributions (1.38) (1.50) (3.83) (2.75) (.16) - Redemption fees added to paid in capital .04 .16 .24 .12 .24 .38 Net asset value, end of period $ 59.96 $ 42.05 $ 41.83 $ 34.62 $ 32.44 $ 27.06 TOTAL RETURN B, C 47.01% 4.61% 35.62% 16.48% 20.57% 34.76% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 468,578 $ 229,761 $ 202,475 $ 132,689 $ 105,954 $ 117,055 Ratio of expenses to average net assets 1.38% A 1.56% 1.54% 1.64% A 1.72% 1.83% Ratio of expenses to average net assets before 1.39% A 1.57% 1.55% 1.64% A 1.72% 1.83% expense reductions Ratio of net investment income (loss) to average net (.57)% (.98)% (.65)% .52% A (.84)% .61% assets A Portfolio turnover rate 78% A 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 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS DIVIDENDS RECEIVED IN ARREARS WHICH AMOUNTED TO $.03 PER SHARE. F INVESTMENT INCOME PER SHARE REFLECTS DIVIDENDS RECEIVED IN ARREARS WHICH AMOUNTED TO $.10 PER SHARE. G INVESTMENT INCOME PER SHARE REFLECTS SPECIAL DIVIDENDS 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). If Fidelity had not reimbursed certain expenses, the past 10 years total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1995 MONTH YEAR YEARS YEARS S TELECOMMUNICATIONS 23.09% 24.95% 175.14% 533.03% TELECOMMUNICATIONS (INCL. 3% SALES CHARGE) 19.40% 21.20% 166.89% 514.04% S&P 500 16.81% 21.45% 102.17% 311.58% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. You can compare these figures to the performance of the S&P 500 - a 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 AUGUST 31, 1995 YEAR YEARS YEARS TELECOMMUNICATIONS 24.95% 22.44% 20.27% TELECOMMUNICATIONS (INCL. 3% SALES CHARGE) 21.20% 21.69% 19.90% S&P 500 21.45% 15.12% 15.20% 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 TelecommStandard & Poor's 08/31/85 9700.00 10000.00 09/30/85 9319.42 9687.00 10/31/85 9670.72 10134.54 11/30/85 10080.58 10829.77 12/31/85 10734.41 11353.93 01/31/86 10958.85 11417.51 02/28/86 11720.02 12271.54 03/31/86 11963.98 12956.29 04/30/86 12422.64 12809.89 05/31/86 12734.91 13491.37 06/30/86 12793.46 13719.38 07/31/86 12168.91 12952.46 08/31/86 12998.39 13913.54 09/30/86 12198.19 12762.89 10/31/86 12822.74 13499.31 11/30/86 13047.18 13827.34 12/31/86 12861.77 13474.74 01/31/87 14481.69 15289.79 02/28/87 15701.51 15893.74 03/31/87 15506.34 16353.07 04/30/87 15272.13 16207.52 05/31/87 15857.65 16348.53 06/30/87 16462.68 17174.13 07/31/87 16979.88 18044.86 08/31/87 17780.08 18717.93 09/30/87 18141.15 18308.01 10/31/87 14950.10 14364.46 11/30/87 13925.45 13180.83 12/31/87 14818.58 14183.89 01/31/88 15510.38 14781.03 02/29/88 15971.58 15469.83 03/31/88 16041.76 14991.81 04/30/88 16563.12 15158.22 05/31/88 16773.67 15290.10 06/30/88 17645.94 15991.91 07/31/88 17395.29 15931.15 08/31/88 16753.62 15389.49 09/30/88 17786.30 16045.08 10/31/88 18147.24 16491.13 11/30/88 18307.66 16255.31 12/31/88 18932.56 16539.78 01/31/89 20469.00 17750.49 02/28/89 20549.87 17308.50 03/31/89 21388.84 17711.79 04/30/89 23006.15 18631.03 05/31/89 24704.31 19385.59 06/30/89 24100.79 19275.09 07/31/89 25930.46 21015.63 08/31/89 26550.52 21427.54 09/30/89 27526.34 21339.68 10/31/89 26550.52 20844.60 11/30/89 27221.39 21269.83 12/31/89 28565.78 21780.31 01/31/90 25467.90 20318.85 02/28/90 25373.07 20580.96 03/31/90 25963.14 21126.36 04/30/90 24435.28 20598.20 05/31/90 27006.30 22606.52 06/30/90 26468.92 22452.80 07/31/90 25257.16 22380.95 08/31/90 22317.34 20357.71 09/30/90 20873.78 19366.29 10/31/90 21600.83 19283.02 11/30/90 22833.66 20528.70 12/31/90 23881.97 21101.45 01/31/91 24730.68 22021.47 02/28/91 25557.90 23596.01 03/31/91 26277.69 24167.03 04/30/91 26836.33 24225.03 05/31/91 27115.65 25271.56 06/30/91 25987.62 24114.12 07/31/91 27459.43 25237.84 08/31/91 28275.91 25835.97 09/30/91 28641.18 25404.51 10/31/91 29769.21 25744.93 11/30/91 28630.43 24707.41 12/31/91 31249.98 27533.94 01/31/92 31293.39 27021.81 02/29/92 31684.15 27373.09 03/31/92 30566.14 26839.32 04/30/92 31716.72 27628.39 05/31/92 31347.67 27763.77 06/30/92 30619.64 27350.09 07/31/92 32262.70 28468.71 08/31/92 31881.86 27885.10 09/30/92 32502.09 28214.15 10/31/92 32828.52 28312.90 11/30/92 34536.87 29278.37 12/31/92 36036.87 29638.49 01/31/93 35926.02 29887.45 02/28/93 37899.13 30293.92 03/31/93 39451.01 30933.12 04/30/93 39534.24 30184.54 05/31/93 41125.62 30993.49 06/30/93 42898.86 31083.37 07/31/93 44149.22 30959.04 08/31/93 47479.74 32132.38 09/30/93 48161.76 31884.96 10/31/93 49548.52 32544.98 11/30/93 45490.52 32235.80 12/31/93 46745.45 32625.86 01/31/94 47691.82 33735.14 02/28/94 46197.56 32820.92 03/31/94 44753.11 31389.92 04/30/94 45551.89 31791.71 05/31/94 45284.39 32313.10 06/30/94 45246.18 31521.43 07/31/94 47755.61 32555.33 08/31/94 49144.07 33890.10 09/30/94 48570.85 33059.79 10/31/94 50889.21 33803.64 11/30/94 48188.71 32572.51 12/31/94 48764.45 33055.56 01/31/95 49441.01 33912.69 02/28/95 49883.38 35234.27 03/31/95 50507.90 36274.03 04/30/95 52077.70 37342.30 05/31/95 53499.21 38834.87 06/30/95 56076.52 39737.01 07/31/95 59636.94 41054.68 08/31/95 61403.86 41157.73 Let's say you invested $10,000 in Fidelity Select Telecommunications Portfolio on August 31, 1985, and paid a 3% sales charge. By August 31, 1995, your investment would have grown to $61,404 - a 514.04% increase. That compares to $10,000 invested in the S&P 500, which would have grown to $41,158 over the same period - a 311.58% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1995 % OF FUND'S INVESTMENTS Ericsson (L.M.) Telephone Co. Class B ADR 7.7 Frontier Corp. 7.3 Ameritech Corp. 5.5 NYNEX Corp. 5.0 SBC Communications, Inc. 4.2 BellSouth Corp. 4.0 WorldCom, Inc. 3.9 Bell Atlantic Corp. 3.6 Phillips Electronics NV 2.8 MFS Communications, Inc. 2.8 TOP INDUSTRIES AS OF AUGUST 31, 1995 Telephone Services 53.9% Telephone Equipment 16.9% Cellular & Communication Services 5.3% Cable TV Operators 3.1% Electrical Machinery 2.8% All Others 18%* Row: 1, Col: 1, Value: 18.0 Row: 1, Col: 2, Value: 2.8 Row: 1, Col: 3, Value: 3.1 Row: 1, Col: 4, Value: 5.3 Row: 1, Col: 5, Value: 16.9 Row: 1, Col: 6, Value: 53.9 * INCLUDES SHORT-TERM INVESTMENTS TELECOMMUNICATIONS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW David Felman, Portfolio Manager of Fidelity Select Telecommunications Portfolio Q. DAVID, HOW DID THE FUND PERFORM? A. For the six months ended August 31, 1995, the fund had a total return of 23.09%. That beat the S&P 500's return of 16.81% for the same period. For the year ended August 31, the fund was up 24.95%, compared to 21.45% for the S&P. Q. WHAT BOOSTED THE FUND'S RECENT RESULTS? A. First, strong worldwide cellular growth continued to help the stocks of wireless equipment providers. As long as people continue to buy cellular phones - and cellular penetration globally is under 1% - these companies benefit. The fund had large stakes in Ericsson and Nokia, for example, both of which returned over 50% during the past six months. Second, many of the regional Bell operating companies, or Baby Bells, did quite well. Q. WHAT HELPED THE BABY BELLS? A. Last year there was concern that the Baby Bells - which are basically monopolies - might suffer if legislation opened up their markets. But investors' fears started to ease as people began believing that entering new markets such as long distance and cable could help offset the increase in competition. As a result, the stocks of companies like Ameritech with its midwest franchise and Bell South posted solid returns of about 20% for the six months ended August 31. Q. WHAT WAS THE STORY WITH LONG DISTANCE? A. The winners were long-distance resellers - small companies that buy excess capacity in bulk from carriers like AT&T and then resell it at a 10% or 20% discount; they posted strong returns as they grew revenues at rates usually better than 30% per year. The big carriers had plenty of excess to sell, plus there was no problem reselling it at discount prices to small and mid-size businesses. The resellers also did well on the prospect that they might be bought out. In August, for example, Frontier, which used to be Rochester Telephone, bought out Michigan-based ALC Communications. Clearly, Frontier - and other regional carriers - want to become long-distance powers. And the quickest way to do that is through the acquisition of these smaller long-distance resellers. Fortunately, the fund benefited from this particular merger since it had a sizable stake in ALC. As a result of the merger, Frontier became the fund's second largest investment. I also built a sizable stake in WorldCom, another long-distance reseller. Q. HAVE YOU CHANGED YOUR THINKING ON THE BIG LONG-DISTANCE CARRIERS? A. No, I still think their prospects aren't as attractive as other areas of the telecommunications sector. My concern is that at some point the Baby Bells are going to be allowed to sell long distance services. Once that happens, they'll be able to take business away from companies like AT&T, MCI, and Sprint. With this in mind, I've steered clear of the large, long-distance carriers and focused on the Baby Bells instead. If you look at the fund's top 10 names, at the end of August half of them are Baby Bells. They include NYNEX, which is attractive because of its cost-cutting strategy, and SBC Communications (formerly Southwestern Bell), which has in place a diversification strategy that has produced superior earnings growth. Q. WERE THERE ANY DISAPPOINTMENTS? A. Several of the fund's smaller investments had flat or slightly negative returns for the period, but nothing that had a major impact on the fund's results. I was, however, disappointed that I didn't have bigger stakes in the top performers. I also missed some companies that did quite well. For example, last spring I sold the fund's stake in QualComm. The company had developed a proprietary technology for boosting the number of phone calls that wireless phone companies could carry over their networks. But acceptance was slow, and the stock suffered. Once its prospects brightened, the stock rebounded nicely. Q. THE FUND HAS DONE WELL OVER THE PAST SIX MONTHS. CAN THE GOOD TIMES CONTINUE? A. It's hard to say, although I'm cautiously optimistic about the sector's prospects. On the one hand, I think the telecommunications industry has great potential over time, because a lot more data will be going over phone lines whether they're wireless or not. On the other hand, it's always complicated when you have new markets opening up. Federal legislation may pass soon to open up markets. But if not, competition probably will increase anyway as markets open on a state-by-state basis. Regardless, my strategy will be the same: to invest in those companies with solid revenue and earnings growth wherever I can find them. FUND FACTS START DATE: July 29, 1985 TRADING SYMBOL: FSTCX SIZE: As of August 31, 1995, more than $448 million MANAGER: David Felman, since April 1994; manager, Fidelity Select Chemicals Portfolio, January 1995-July 1995; analyst, specialty chemicals, construction and engineering industries; joined Fidelity in 1992 (checkmark) TELECOMMUNICATIONS PORTFOLIO INVESTMENTS AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 89.6% SHARES VALUE (NOTE 1) ADVERTISING - 0.3% ADVERTISING AGENCIES - 0.3% ADVO-Systems, Inc. 79,500 $ 1,480,715 APPLIANCE STORES - 0.1% ELECTRIC APPLIANCES - WHOLESALE - 0.1% Cellstar Corp. (a) 10,000 318,750 BROADCASTING - 3.7% CABLE TV OPERATORS - 3.1% Gaylord Entertainment Co. Class A (a) 60,270 1,672,493 Viacom, Inc. (a): Class A 88,628 4,309,537 Class B (non-vtg.) 172,285 8,377,358 14,359,388 TELEVISION BROADCASTING - 0.6% Heritage Media Corp. Class A (a) 19,700 556,525 Multimedia, Inc. (a) 50,000 2,125,000 2,681,525 TOTAL BROADCASTING 17,040,913 CELLULAR - 5.3% CELLULAR & COMMUNICATION SERVICES - 5.3% AirTouch Communications, Inc. (a) 60,200 1,956,500 BCE Mobile Communications, Inc. (a) 30,000 934,745 Cellular Communications, Inc. (a): Class P 51,100 2,873,864 Series A (redeemable) 13,000 708,500 Century Telephone Enterprises, Inc. 180,887 5,042,225 Nextel Communications, Inc. Class A (a) 116,155 2,076,271 Rogers Cantel Mobile Communications, Inc. Class B (non-vtg.) (a) 120,600 2,893,969 Rogers Communications, Inc. Class B (a) 420,000 4,297,037 Vanguard Cellular Systems, Inc. Class A (a) 9,300 252,263 Vodafone Group PLC sponsored ADR 74,000 3,098,750 24,134,124 COMMUNICATIONS EQUIPMENT - 16.7% TELEPHONE EQUIPMENT - 16.7% ADC Telecommunications, Inc. (a) 6,600 255,750 DSC Communications Corp. (a) 121,200 6,363,000 Ericsson (L.M.) Telephone Co.: Class B (a) 80,000 1,708,057 Class B ADR 1,656,000 35,397,000 InterVoice, Inc. (a) 10,000 221,250 Newbridge Networks Corp. (a) 18,400 531,300 Nokia Corp. AB: Series A 154,800 10,579,673 sponsored ADR 166,800 11,571,750 Northern Telecom Ltd. 259,600 9,513,226 76,141,006 COMPUTER SERVICES & SOFTWARE - 3.1% CAD/CAM/CAE - 0.7% ECI Telecom Ltd. 110,000 2,268,750 EIS International, Inc. (a) 55,500 1,047,563 3,316,313 DATA PROCESSING - 0.8% Automatic Data Processing, Inc. 10,000 650,000 Ceridian Corp. (a) 70,000 3,062,500 3,712,500 SHARES VALUE (NOTE 1) PREPACKAGED COMPUTER SOFTWARE - 1.6% Microsoft Corp. (a) 65,000 $ 6,012,500 Sybase, Inc. (a) 30,000 963,750 6,976,250 TOTAL COMPUTER SERVICES & SOFTWARE 14,005,063 COMPUTERS & OFFICE EQUIPMENT - 0.5% COMPUTER PERIPHERALS - 0.5% Norand Corp. (a) 65,000 2,502,500 ELECTRICAL EQUIPMENT - 5.4% ELECTRICAL MACHINERY - 2.8% Philips Electronics NV 285,800 12,861,000 TV & RADIO COMMUNICATION EQUIPMENT - 2.6% Glenayre Technologies, Inc. 155,925 10,174,106 Ortel Corp. (a) 115,000 1,868,750 12,042,856 TOTAL ELECTRICAL EQUIPMENT 24,903,856 ELECTRONIC INSTRUMENTS - 0.1% ELECTRONIC EQUIPMENT - 0.1% Teradyne, Inc. (a) 15,400 583,275 ELECTRONICS - 2.1% ELECTRONIC PARTS - WHOLESALE - 0.0% Marshall Industries (a) 4,800 152,400 SEMICONDUCTORS - 2.1% Intel Corp. 70,400 4,320,800 Motorola, Inc. 68,000 5,083,000 9,403,800 TOTAL ELECTRONICS 9,556,200 PRINTING - 0.7% MANIFOLD BUSINESS FORMS - 0.7% Reynolds & Reynolds Co. Class A 102,800 3,302,450 SERVICES - 0.1% PUBLIC RELATIONS SERVICES - 0.1% True North Communications 14,700 316,050 TELEPHONE SERVICES - 51.5% Ameritech Corp. 493,500 25,291,875 Bell Atlantic Corp. 273,700 16,353,575 BellSouth Corp. 266,800 18,342,500 British Telecommunications PLC ADR 5,000 313,750 Cincinnati Bell, Inc. 54,100 1,474,225 Comsat Corp., Series 1 41,750 970,688 DDI Corp. Ord. 797 6,755,485 Frontier Corp. 1,196,800 33,360,800 GTE Corp. 187,773 6,877,186 Incomnet, Inc. (a) 119,000 1,829,625 Koninklijke PPT Nederland 236,000 8,144,865 Koninklijke PPT Nederland (a)(b) 44,200 1,525,437 Koninklijke PTT Nederland sponsored ADR (b) 20,000 665,000 LCI International, Inc. (a) 143,900 5,738,013 MFS Communications, Inc. (a) 285,962 12,653,819 Nippon Telegraph & Telephone Corp. Ord. 142 1,288,127 NYNEX Corp. 503,700 22,666,500 Pacific Telesis Group 193,400 5,487,725 SBC Communications, Inc. 380,600 19,267,875 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TELEPHONE SERVICES - CONTINUED Southern New England Telecommunications Corp. 58,800 $ 1,977,150 Sprint Corp. 25,600 908,800 Tele Danmark AS Class B 30,000 1,573,960 Tele Danmark AS Class B ADR 217,700 5,796,263 Telecom Argentina Stet France Telecom SA 53,500 236,576 Telecom Italia Ord. 350,000 561,162 Telecom Italia Mobile Spa (a) 350,000 514,021 Telebras PN (Pfd. Reg.) 9,921,131 430,577 Telefonica de Argentina SA Class B 191,000 483,448 Telefonica de Espana SA sponsored ADR 20,000 812,500 Telephone & Data Systems, Inc. 180,805 7,413,005 U.S. West, Inc. 176,700 7,686,450 WorldCom, Inc. (a) 524,212 17,659,392 235,060,374 TOTAL COMMON STOCKS (Cost $329,112,335) 409,345,276 PREFERRED STOCKS - 2.4% CONVERTIBLE PREFERRED STOCKS - 1.4% TELEPHONE SERVICES - 1.4% LCI International, Inc. $1.25 10,000 526,250 MFS Communications, Inc. $2.68 90,000 3,735,000 Philippine Long Distance Telephone GDR 34,000 1,972,000 6,233,250 NONCONVERTIBLE PREFERRED STOCKS - 1.0% TELEPHONE SERVICES - 1.0% Stet (Societa Finanziaria Telefonica) Spa (a) 945,200 2,313,585 Telecom Italia Mobile SA De Risp (a) 1,000,000 1,003,070 Telecom Italia Ord. 1,000,000 1,282,290 4,598,945 TOTAL PREFERRED STOCKS (Cost $9,540,921) 10,832,195 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) $ 345,700 971,417 REPURCHASE AGREEMENTS - 7.8% MATURITY VALUE (NOTE 1) AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.82% dated 8/31/95 due 9/1/95 $ 35,665,765 35,660,000 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $374,793,698) $ 456,808,888 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 $2,190,437 or 0.5% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $122,353,660 and $81,419,118, respectively (see Note 4 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $45,200 for the period (see Note 5 of Notes to Financial Statements). The maximum loan and the average daily loan balance during the period for which the loan was outstanding amounted to $4,178,000. The weighted aver- age interest rate paid was 6.4% (see Note 6 of Notes to Financial Statements). At the period end, the value of securities loaned and the value of collateral amounted to $7,292,500 and $7,402,000, respectively (see Note 7 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 71.0% Sweden 8.3 Netherlands 5.1 Finland 4.9 Canada 4.0 Japan 1.8 Denmark 1.6 Italy 1.2 Others (individually less than 1%) 2.1 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1995, the aggregate cost of investment securities for income tax purposes was $375,734,047. Net unrealized appreciation aggregated $81,074,841, of which $88,974,598 related to appreciated investment securities and $7,899,757 related to depreciated investment securities. TELECOMMUNICATIONS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $35,660,000) (cost $374,793,698) - $ 456,808,888 See accompanying schedule Cash 844 Receivable for fund shares sold 1,330,835 Dividends receivable 141,533 Interest receivable 7,958 Other receivables 70,538 Prepaid expenses 13,885 TOTAL ASSETS 458,374,481 LIABILITIES Payable for fund shares redeemed $ 1,733,479 Accrued management fee 221,946 Other payables and 406,482 accrued expenses Collateral on securities loaned, 7,402,000 at value TOTAL LIABILITIES 9,763,907 NET ASSETS $ 448,610,574 Net Assets consist of: Paid in capital $ 358,407,236 Undistributed net investment income 2,674,059 Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions 5,514,089 Net unrealized appreciation (depreciation) on investments 82,015,190 NET ASSETS, for 9,705,069 shares outstanding $ 448,610,574 NET ASSET VALUE and redemption price per share ($448,610,574 (divided by) 9,705,069 shares) $46.22 Maximum offering price per share (100/97.00 of $46.22) $47.65
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INVESTMENT INCOME $ 4,290,750 Dividends Interest (including income on securities loaned of $57,164) 1,343,052 TOTAL INCOME 5,633,802 EXPENSES Management fee $ 1,207,405 Transfer agent 1,556,698 Fees Redemption fees (65,722 ) Accounting and security lending fees 199,970 Non-interested trustees' compensation 1,880 Custodian fees and expenses 20,312 Registration fees 13,885 Audit 19,374 Legal 1,477 Interest 2,241 Miscellaneous 6,034 Total expenses before reductions 2,963,554 Expense reductions (3,811 2,959,743 ) NET INVESTMENT INCOME 2,674,059 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 6,500,298 Foreign currency transactions 552 6,500,850 Change in net unrealized appreciation (depreciation) on investment securities 73,072,571 NET GAIN (LOSS) 79,573,421 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 82,247,480 OTHER INFORMATION $710,028 Sales Charges Paid to FDC Deferred sales charges withheld $19,307 by FDC Exchange fees withheld by FSC $42,863
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 2,674,059 $ 2,874,925 Net investment income Net realized gain (loss) 6,500,850 13,108,456 Change in net unrealized appreciation (depreciation) 73,072,571 10,501,018 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 82,247,480 26,484,399 Distributions to shareholders - (3,125,414 From net investment income ) From net realized gain (7,713,250 (12,275,476 ) ) TOTAL DISTRIBUTIONS (7,713,250 (15,400,890 ) ) Share transactions 71,749,768 199,692,240 Net proceeds from sales of shares Reinvestment of distributions 7,533,453 15,044,524 Cost of shares redeemed (74,721,229 (227,502,551 ) ) Paid in capital portion of redemption fees 37,950 133,502 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 4,599,942 (12,632,285 ) TOTAL INCREASE (DECREASE) IN NET ASSETS 79,134,172 (1,548,776 ) NET ASSETS Beginning of period 369,476,402 371,025,178 End of period (including undistributed net investment income of $2,674,059 and $0, respectively) $ 448,610,574 $ 369,476,402 OTHER INFORMATION Shares Sold 1,689,230 5,395,122 Issued in reinvestment of distributions 193,712 417,307 Redeemed (1,814,176 (6,175,717 ) ) Net increase (decrease) 68,766 (363,288)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED TEN MONTHS YEARS ENDED ENDED FEBRUARY 28, ENDED APRIL 30, AUGUST 31, 1995 FEBRUARY 28, SELECTED PER-SHARE DATA D (UNAUDITED) 1995 1994 1993 1992 1991
Net asset value, beginning of period $ 38.34 $ 37.10 $ 34.19 $ 29.22 $ 24.98 $ 23.19 Income from Investment Operations Net investment income .28 .29 .25 .29 .36 .31 Net realized and unrealized gain (loss) 8.42 2.54 7.00 5.29 4.13 1.86 Total from investment operations 8.70 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 (.82) (1.27) E (4.18) (.48) - - Total distributions (.82) (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 $ 46.22 $ 38.34 $ 37.10 $ 34.19 $ 29.22 $ 24.98 TOTAL RETURN B, C 23.09% 7.98% 21.90% 19.49% 18.19% 9.83% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 448,611 $ 369,476 $ 371,025 $ 134,338 $ 78,533 $ 55,162 Ratio of expenses to average net assets 1.48% A 1.55% 1.53% 1.74% A 1.90% 1.97% Ratio of expenses to average net assets before expense 1.48% A 1.56% 1.54% 1.74% A 1.90% 1.97% reductions Ratio of net investment income to average net assets 1.34% A .77% .64% 1.16% A 1.32% 1.35% Portfolio turnover rate 45% 107% 241% 115% A 20% 262% A A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E 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 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1995 MONTH YEAR YEARS YEARS S MONEY MARKET 2.85% 5.39% 24.19% 76.46% MONEY MARKET (INCL. 3% SALES CHARGE) -0.23% 2.22% 20.46% 71.17% Average All Taxable Money Market Fund 2.78% 5.25% 23.68% 75.30% Consumer Price Index 1.33% 2.62% 16.19% 41.57% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one, five, or 10 years. For example, if you invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050 without including the effect of the 3% sales charge. To measure how the fund's performance stacked up against its peers, you can compare it to the average all taxable money market fund, which reflects the performance of 756 all taxable money market funds with similar objectives tracked by IBC/Donoghue's MONEY FUND REPORT(registered trademark) over the past six months. Comparing the fund's performance to the consumer price index helps show how your investment did compared to inflation. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1995 YEAR YEARS YEARS MONEY MARKET 5.39% 4.43% 5.84% MONEY MARKET (INCL. 3% SALES CHARGE) 2.22% 3.79% 5.52% Average All Taxable Money Market Fund 5.25% 4.34% 5.77% Consumer Price Index 2.62% 3.05% 3.54% 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: 4.26 Row: 1, Col: 2, Value: 4.08 Row: 1, Col: 3, Value: 2.45 Row: 2, Col: 1, Value: 4.470000000000001 Row: 2, Col: 2, Value: 4.84 Row: 2, Col: 3, Value: 2.68 Row: 3, Col: 1, Value: 5.85 Row: 3, Col: 2, Value: 5.49 Row: 3, Col: 3, Value: 2.88 Row: 4, Col: 1, Value: 5.970000000000001 Row: 4, Col: 2, Value: 5.51 Row: 4, Col: 3, Value: 2.89 Row: 5, Col: 1, Value: 5.41 Row: 5, Col: 2, Value: 5.25 Row: 5, Col: 3, Value: 2.84 6% - 4% - 2% - 0% Money Market Average All Taxable Money Market Fund MMDA 8/30/94 11/29/94 2/28/95 5/30/95 8/29/95 Money Market 4.26% 4.47% 5.85% 5.97% 5.41% Average All Taxable Money Market Fund 4.08% 4.84% 5.49% 5.51% 5.25% 8/25/94 11/30/94 3/1/95 5/31/95 8/30/95 MMDA 2.45% 2.68% 2.88% 2.89% 2.84% 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) MONEY MARKET PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW John Todd, Portfolio Manager of Fidelity Select Money Market Portfolio Q. JOHN, CAN YOU BRING US UP TO DATE ON DEVELOPMENTS IN THE INVESTMENT CLIMATE DURING THE PAST SIX MONTH? A. Sure. Last February, when the period began, we were coming off a very strong 1994, during which the economy expanded at a rapid pace and interest rates rose dramatically. During the fourth quarter of 1994, gross domestic product grew at an annual rate of 5.1%. Responding to continued rapid growth and the threat of inflation, the Federal Reserve in February 1995 raised the federal funds rate - the interest rate banks charge each other for overnight loans - one- half percentage point. It was the seventh rate increase in little more than a year and lifted the federal funds rate to 6%, exactly double what it had been when the cycle of rate increases began. But by then, the seeds of an eventual slowdown had already been planted. Q. WHY DID THE ECONOMIC GROWTH RATE SUDDENLY SLOW DOWN IN EARLY 1995? A. There were many reasons, of course, but one of the most important was the impact of the Mexican currency crisis in December 1994. The collapse of the peso led to a sudden, sharp decline in U.S. exports to Mexico, which had a ripple effect throughout the U.S. economy, especially in the manufacturing sector, leading to slower growth, layoffs, and a decline in consumer confidence. Consequently, economic growth declined during the first quarter of 1995 to an annual rate of 2.7%. That was close to the Fed's long-term target growth rate of 2.5%, and so throughout the spring and early summer the Fed stood pat. But as time passed, it became apparent that the hoped-for soft landing of the economy was in jeopardy, and indeed was in danger of slipping into recession. In July, after a slow second quarter in which the economy expanded at a rate of only 1.1%, the Fed reversed policy, cutting the federal funds rate one-quarter percentage point. Q. WHERE DID THAT LEAVE THINGS AT THE END OF THE PERIOD? A. The economy seems to have stabilized. We've seen some improvement in job growth lately, as well as a modest rebound in the housing and auto sectors. Car and home sales had fallen off dramatically during the second quarter of 1995 but were helped later in the summer by declining consumer interest rates. Overall, we've seen a so-called flattening of the yield curve, with longer-term interest rates falling more sharply than short-term rates. That partly reflects a growing consensus among market participants that despite stirrings of new growth, the inflation risk remains low. Q. WHAT WAS YOUR STRATEGY DURING THE PERIOD? A. The fund's average maturity at the beginning of the period was 31 days, reflecting the continuing uncertainty in the market and the possibility of further rate increases. As it became clear that the Fed was finished raising rates, at least for the time being, I moved gradually out the yield curve, buying longer-term securities and extending the fund's average maturity to almost 52 days by the end of June. Since then, as the yield curve has flattened, I've brought the fund's average maturity back down to around 36 days. Q. HOW DID THE FUND PERFORM? A. The fund's seven-day yield on August 31, 1995 was 5.31%, compared to 5.85% on February 28, 1995. The fund's six month total return was 2.85%, compared to 2.78% for the all average taxable money market fund, according to IBC/Donoghue. Q. WHAT'S THE OUTLOOK? A. The consensus in the market seems to be that conditions have stabilized and there's no immediate need for the Fed to cut rates again. Those who see the next rate cut coming sooner rather than later argue the Fed may anticipate the restrictive impact of possible Congressional deficit reduction initiatives by taking steps now to ease money market rates. My view is that, with elections coming in 1996, Congress is unlikely to make the kind of dramatic cuts that would result in an economic slowdown so there's no need for the Fed to act right away. In any case, there's enough uncertainty that I'll probably want to preserve some flexibility by moving the fund's average maturity back out to around 50 days as opportunities present themselves. FUND FACTS START DATE: August 30, 1985 TRADING SYMBOL: FSMMKT SIZE: As of August 31, 1995 more than $644 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 AUGUST 31, 1995 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities BANKERS' ACCEPTANCES - 0.5% ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) DOMESTIC BANKERS' ACCEPTANCES - 0.5% CHEMICAL BANK 11/1/95 6.06% $ 2,100,000 $ 2,079,006 11/20/95 6.08 1,060,167 1,046,267 3,125,273 CERTIFICATES OF DEPOSIT - 39.9% CHICAGO BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 0.8% ABN-AMRO BANK 9/11/95 6.00 5,000,000 5,000,000 NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 25.1% BANK OF MONTREAL 9/29/95 5.90 10,000,000 10,000,000 BANQUE NATIONALE DE PARIS 11/28/95 5.75 10,000,000 10,000,000 BAYERISCHE LANDESBANK GIROZENTRALE 10/23/95 5.75 25,000,000 25,000,000 BAYERISCHE VEREINSBANK A.G. 9/19/95 5.77 10,000,000 10,000,000 9/20/95 5.77 10,000,000 10,000,000 9/22/95 5.77 10,000,000 10,000,000 CANADIAN IMPERIAL BANK OF COMMERCE 9/29/95 5.90 10,000,000 10,000,000 FUJI BANK, LTD. 9/26/95 5.89 6,000,000 6,000,000 INDUSTRIAL BANK OF JAPAN, LTD. 10/11/95 5.85 6,000,000 6,000,000 NATIONAL WESTMINSTER BANK, PLC 11/8/95 6.05 20,000,000 20,002,711 11/13/95 5.80 5,000,000 5,000,000 ROYAL BANK OF CANADA 12/13/95 6.31 5,000,000 5,012,959 SUMITOMO BANK, LTD. 10/13/95 5.88 5,000,000 5,000,110 SWISS BANK CORP. 11/6/95 5.77 25,000,000 25,000,000 12/4/95 5.77 5,000,000 5,000,000 162,015,780 LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 14.0% BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOC. 9/29/95 5.91 10,000,000 10,000,000 CHEMICAL BANK 11/20/95 5.76 10,000,000 10,000,000 LANDESBANK HESSEN - THURINGEN 9/21/95 5.75 25,000,000 24,999,724 MITSUBISHI BANK, LTD. 9/25/95 5.89 5,000,000 4,999,993 TORONTO-DOMINION BANK 10/10/95 6.02 15,000,000 15,000,776 WESTDEUTSCHE LANDESBANK 11/1/95 5.75 25,000,000 25,000,417 90,000,910 257,016,690 COMMERCIAL PAPER - 33.1% ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) AMERICAN HOME PRODUCTS 9/15/95 5.80% $ 5,000,000 $ 4,988,819 10/24/95 5.82 5,000,000 4,957,747 ASSET SECURITIZATION COOP. CORP. 9/11/95 5.79 10,000,000 9,984,028 A.H. ROBINS COMPANY, INCORPORATED 9/7/95 5.99 5,000,000 4,995,067 BENEFICIAL CORP. 9/29/95 5.81 10,000,000 9,955,667 CHRYSLER FINANCIAL CORPORATION 9/13/95 5.87 1,000,000 998,050 10/16/95 5.88 5,000,000 4,963,625 11/7/95 5.85 2,000,000 1,978,467 COMMERZBANK U.S. FINANCE, INC. 9/12/95 5.77 10,000,000 9,982,553 9/13/95 5.77 10,000,000 9,980,967 12/14/95 5.88 3,075,000 3,024,276 12/15/95 5.88 1,900,000 1,868,357 CORESTATES CAPITAL CORP. (A) 9/8/95 5.84 15,000,000 15,000,000 CORPORATE ASSET FUNDING CO., INC. 10/11/95 5.76 16,000,000 15,898,667 DEAN WITTER, DISCOVER & CO. 9/1/95 5.78 15,000,000 15,000,000 ENTERPRISE FUNDING CORP. 9/12/95 5.82 10,000,000 9,982,339 FORD MOTOR CREDIT, PLC 10/16/95 5.76 4,000,000 3,971,600 GENERAL ELECTRIC CAPITAL CORP. 9/1/95 5.82 (a) 5,000,000 5,000,000 9/7/95 5.95 2,000,000 1,998,040 GENERAL MOTORS ACCEPTANCE CORP. 9/14/95 6.05 5,000,000 4,989,221 11/22/95 5.89 8,000,000 7,894,311 GLAXO HOLDINGS, PLC 11/28/9 5.81 5,000,000 4,930,089 GOLDMAN SACHS GROUP, L.P. (THE) 9/18/95 6.02 5,000,000 4,986,046 HOUSEHOLD FINANCE CORP. 9/25/95 5.91 15,000,000 14,941,800 MONSANTO CO. 10/20/95 6.00 10,000,000 9,920,103 PREFERRED RECEIVABLES FUNDING CORP. 9/19/95 5.78 5,000,000 4,985,625 9/27/95 5.78 5,000,000 4,979,236 SEARS ROEBUCK ACCEPTANCE CORP. 9/18/95 6.00 10,000,000 9,972,092 11/8/95 5.82 1,000,000 989,139 VICTORIA, TREASURY CORP. OF 9/25/95 5.78 10,000,000 9,961,666 213,077,597 FEDERAL AGENCIES - 0.8% ANNUALIZED YIELD DUE AT TIME OF PRINCIPAL VALUE DATE PURCHASE AMOUNT (NOTE 1) FEDERAL FARM CREDIT BANK - AGENCY COUPONS (A) - 0.8% 9/1/95 5.99% $ 5,000,000 $ 4,998,006 BANK NOTES - 7.6% BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOC. 9/1/95 5.82 (a) 3,000,000 2,998,248 10/20/95 5.75 17,000,000 16,999,964 BOATMEN'S NATIONAL BANK OF ST. LOUIS (A) 9/15/95 5.86 4,000,000 3,999,377 COMERICA BANK - DETROIT (A) 12/1/95 5.81 5,000,000 4,996,300 NATIONSBANK OF TEXAS 9/28/95 6.15 5,000,000 5,000,319 WACHOVIA BANK OF NORTH CAROLINA, N.A. 9/26/95 5.75 5,000,000 4,999,947 9/27/95 5.75 10,000,000 9,999,889 48,994,044 MASTER NOTES (A) - 1.1% J.P. MORGAN SECURITIES 9/1/95 6.08 7,000,000 7,000,000 MEDIUM-TERM NOTES (A) - 5.3% ABBEY NATIONAL TREASURY SERVICES (B) 9/30/95 6.00 8,000,000 8,000,000 GENERAL ELECTRIC CAPITAL CORP. 9/1/95 5.96 5,000,000 4,999,225 GENERAL MOTORS ACCEPTANCE CORP. 11/7/95 5.98 5,000,000 5,000,000 GOLDMAN SACHS GROUP, L.P. (THE) (B) 9/1/95 5.97 4,000,000 4,000,000 12/16/95 5.89 4,000,000 4,000,000 NORWEST CORP. 9/15/95 6.00 8,000,000 8,000,000 33,999,225 SHORT-TERM NOTES (A) (C) - 3.1% SMM TRUST COMPANY (1995-I) 9/13/95 5.98 6,000,000 5,998,707 SMM TRUST COMPANY (1995-J) 9/15/95 5.88 14,000,000 14,000,000 19,998,707 TIME DEPOSITS - 1.5% MITSUBISHI BANK, LTD. 9/7/95 5.91 10,000,000 10,000,000 REPURCHASE AGREEMENTS - 7.1% MATURITY VALUE AMOUNT (NOTE 1) Investments in repurchase agreements (U.S. Government obligations), in a joint trading account at 5.87% dated 8/31/95 due 9/1/95 $ 46,064,511 $ 46,057,000 TOTAL INVESTMENTS - 100% $ 644,266,542 TOTAL COST FOR INCOME TAX PURPOSES - $644,266,542 LEGEND 1. The coupon rate shown on floating or adjustable rate securities represents the rate at period end. The due dates on these types of securities reflects the next interest rate reset date or, when applicable, the final maturity date. 2. Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $16,000,000 or 2.5% of net assets. 3. 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: (1995-I) 5/31/95 $ 5,998,263 (1995-J) 5/31/95 $ 14,000,000 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
AUGUST 31, 1995 (UNAUDITED) ASSETS Investment in securities, at value (including repurchase agreements of $46,057,000) - See accompanying $ 644,266,542 schedule Cash 5,441,260 Interest receivable 3,226,791 TOTAL ASSETS 652,934,593 LIABILITIES Payable for investments purchased $ 7,994,548 Accrued management fee 130,699 Other payables and accrued expenses 207,876 TOTAL LIABILITIES 8,333,123 NET ASSETS $ 644,601,470 Net Assets consist of: Paid in capital $ 644,612,050 Accumulated net realized gain (loss) on investments (10,580 ) NET ASSETS, for 644,606,792 $ 644,601,470 shares outstanding NET ASSET VALUE, offering price and redemption price per share ($644,601,470 (divided by) 644,606,792 shares) $1.00 Maximum offering price per share (100/97 of $1.00) $1.03
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1995 (UNAUDITED) INTEREST INCOME $ 19,104,894 EXPENSES Management fee $ 777,175 Transfer agent fees 816,033 Accounting fees and expenses 48,301 Non-interested trustees' 1,147 compensation Custodian fees and expenses 16,216 Registration fees 99,734 Audit 35,364 Legal 2,630 Reports to shareholders 6,238 Miscellaneous 1,070 TOTAL EXPENSES 1,803,908 NET INTEREST INCOME 17,300,986 NET REALIZED GAIN (LOSS) 19,958 ON INVESTMENTS NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 17,320,944 OTHER INFORMATION Sales charges paid to FDC $2,047,913 Deferred sales charges withheld $33,872 by FDC
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET ASSETS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1995 1995 (UNAUDITED)
Operations $ 17,300,986 $ 28,489,953 Net interest income Net realized gain (loss) 19,958 34,131 NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS 17,320,944 28,524,084 Distributions to shareholders from net interest income (17,300,986) (28,489,953) Share transactions at net asset value of $1.00 per share 2,778,227,747 4,782,122,991 Proceeds from sales of shares Reinvestment of distributions from net interest income 16,137,360 26,192,515 Cost of shares redeemed (2,722,927,575) (4,753,862,525) NET INCREASE (DECREASE) IN NET ASSETS AND SHARES RESULTING FROM SHARE TRANSACTIONS 71,437,532 54,452,981 TOTAL INCREASE (DECREASE) IN NET ASSETS 71,457,490 54,487,112 NET ASSETS Beginning of period 573,143,980 518,656,868 End of period $ 644,601,470 $ 573,143,980
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEARS ENDED TEN MONTHS ENDED YEARS ENDED AUGUST 31, 1995 FEBRUARY 28, FEBRUARY 28, APRIL 30, SELECTED PER-SHARE DATA (UNAUDITED) 1995 1994 1993 1992 1991 Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 Income from Investment Operations .028 .042 .026 .026 .048 .073 Net interest income Less Distributions (.028) (.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 $ 1.000 TOTAL RETURN B 2.85% 4.28 2.62 2.63% 4.93 7.50 % % % % Ratios and Supplemental Data Net assets, end of period (000 omitted) $ 644,601 $ 573,144 $ 518,657 $ 431,133 $ 542,620 $ 608,394 Ratio of expenses to average net assets .58% A .65 .72 .56% A .64 .73 % % % % Ratio of net interest income to average net assets 5.54% A 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 August 31, 1995 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Select Portfolios (the trust) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The trust has thirty-five equity funds (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. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of forward currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, each fund is not subject to income taxes to the extent that it distributes substantially all of its taxable income for the fiscal year. The schedules of investments include information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME: EQUITY FUNDS. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the funds are informed of the ex-dividend date. Interest income, which includes accretion of original issue discount, is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. MONEY MARKET FUND. Interest income, which includes amortization of premium and accretion of discount, is accrued as earned. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned between the funds in the trust. PREPAID EXPENSES. For each equity fund, Fidelity Management and Research Company (FMR) bears all organizational expenses except for registering and qualifying the fund and shares of the fund for distribution under federal and state securities law, which are borne by each fund and amortized over one year. DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid monthly from net interest income for the money market fund. Distributions are recorded on the ex-dividend date for all other funds. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for non-taxable dividends, foreign currency transactions, 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 (including exchanges) from an equity fund are subject to redemption fees. Shares held less than 30 days are subject to a short-term redemption fee equal to .75% of the net asset value of shares redeemed. Shares held 30 days or more are subject to a long-term redemption fee 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED REDEMPTION FEES - CONTINUED 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 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. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC), the funds, along with other affiliated entities of FMR, may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements that mature in 60 days or less from the date of purchase, and are collateralized by U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The funds, through their custodian, receive delivery of the underlying U.S. Treasury or Federal Agency Securities, the market value of which is required to be at least equal to the repurchase price. For term repurchase agreement transactions, the underlying securities are marked-to-market daily and maintained at a value at least equal to the repurchase price. FMR, the funds' investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by the SEC, the funds, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from, or lend money to, other participating funds. 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 securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. At the end of the period, restricted securities (excluding 144A issues) amounted to $1,050,000 and $19,998,707 or 0.2% and 3.1% of the net assets of Biotechnology 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 maturity values of the joint trading account investments were $22,783,683 for Leisure Portfolio, $35,276,702 for Industrial Materials Portfolio, $39,247,344 for Regional Banks Portfolio, and $208,456,695 for Biotechnology Portfolio, all at 5.82%. The investments in repurchase agreements through the joint trading account are summarized as follows: SUMMARY OF JOINT TRADING Dated August 31, 1995, due September 1, 1995 Number of dealers or banks 26 Maximum amount with one dealer or bank 17.85% Aggregate principal amount of agreements $16,889,053,000 Aggregate maturity amount of agreements $16,891,781,769 Aggregate market value of collateral $17,254,482,483 Coupon rates of collateral 0% to 15 3/4% Maturity dates of collateral 9/7/95 to 8/15/25 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 rates ranged from .2700% to .5200% for the period. 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 annualized 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 .1200% to .3700% for the period. 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 annualized rate of .25% 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 FEES. Fidelity Service Co. (FSC), an affiliate of FMR, is the funds' transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. ACCOUNTING AND SECURITY LENDING FEES. FSC maintains the funds' accounting records and administers 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" at the end of each applicable fund's schedule of investments. 6. BANK BORROWINGS. Each fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. 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. 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 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. EXPENSE REDUCTIONS. 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 $389,526. 9. BENEFICIAL INTEREST. At the end of the period, certain shareholders were record owners of more than 25% of the total outstanding shares of the following funds: BENEFICIAL INTEREST NUMBER OF % FUND SHAREHOLDERS OWNERSHIP Construction and Housing 1 49.3 Insurance 1 36.4 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 August 31, 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. 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 A fund's RELATIVE VOLATILITY measures the fund's volatility to the volatility of a benchmark index, in this case, the S&P 500. By definition, the S&P 500 has a relative volatility of 1.0. Relative volatility is calculated by comparing a fund's standard deviation of monthly returns over a three year period to the comparable standard deviation of the S&P 500. (Standard deviation measures the range within which a fund's returns have fallen over a specified period of time). Relative volatility measures are not calculated for funds which are less than three years old. Relative volatility measures are given to investors to assist in determining the historical volatility relationship between the fund and a benchmark index. THE CALCULATIONS ARE NOT MEANT TO PREDICT PERFORMANCE OR FUTURE VOLATILITY and may change quickly as fund composition, company fundamentals, and market conditions change. 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. 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. STATISTICAL ROUNDUP(DAGGER) (UNAUDITED) CUMULATIVE TOTAL RETURNS AVERAGE ANNUAL RETURNS OPENING CLOSING FOR PERIODS ENDED 8/31/95 FOR PERIODS ENDED 8/31/95 NAV NAV YTD(double dagger) 1 YEAR LIFE OF FUND 1 YEAR 5 YEARS LIFE OF FUND 3/1/95 8/31/95 Air Transportation (12/16/85) 46.66% 20.65% 151.07% 17.03% 15.99% 9.59% $13.93 $18.23 American Gold (12/16/85) 13.36 3.77 129.03 0.66 6.10 8.56 18.44 22.57 Automotive (6/30/86) 12.91 7.33 210.25 4.11 19.63 12.75 19.84 21.86 Biotechnology (12/16/85) 28.66 19.38 309.34 15.80 15.89 15.25 25.30 30.12 Brokerage and Investment Mgmt. (7/29/85) 23.53 14.39 154.35 10.96 22.46 9.96* 15.51 18.13 Chemicals (7/29/85) 17.18 9.91 462.38 6.61 18.90 18.15* 33.91 37.97 Computers (7/29/85) 62.87 69.69 455.64 64.60 35.51 18.83* 30.67 47.16 Construction and Housing (9/29/86) 18.93 6.63 187.42 3.43 17.67 12.17 16.79 18.97 Consumer Products (6/29/90) 12.80 10.62 94.40 7.30 15.38 13.03 13.91 15.39 Defense and Aerospace (5/8/84) 36.95 32.96 186.62 28.97 18.40 7.34* 19.64 25.09 Developing Communications (6/29/90) 32.86 47.41 244.32 42.98 32.72 26.23 20.40 24.88 Electronics (7/29/85) 87.45 88.06 310.14 82.42 36.07 14.31* 19.80 34.66 Energy (7/14/81) 11.61 7.08 151.11 3.86 2.41 7.61* 16.10 17.65 Energy Service (12/16/85) 30.16 27.15 52.89 23.33 0.42 4.14 11.97 14.50 Environmental Services (6/29/89) 26.65 17.38 38.17 13.86 3.66 4.85 10.27 12.83 Financial Services (12/10/81) 33.67 15.86 864.30 12.38 26.72 13.95* 48.23 57.64 Food and Agriculture (7/29/85) 18.91 18.84 469.45 15.28 15.20 18.70* 32.53 35.79 Health Care (7/14/81) 26.66 32.53 1436.57 28.56 21.13 19.45 76.13 89.21 Home Finance (12/16/85) 43.27 23.75 534.66 20.03 37.08 20.57 23.92 30.56 Industrial Equipment (9/29/86) 31.89 29.77 177.62 25.88 19.18 11.73 20.04 25.80 Industrial Materials (9/29/86) 21.29 12.51 184.38 9.13 18.88 12.03 23.13 26.59 Insurance (12/16/85) 22.32 19.97 210.46 16.37 17.20 12.02 21.31 24.37 Leisure (5/8/84) 28.71 24.23 622.97 20.51 20.38 15.99* 40.71 48.92 Medical Delivery (6/30/86) 18.54 22.28 254.44 18.61 20.66 14.40 23.18 25.85 Multimedia (6/30/86) 30.66 31.27 357.10 27.33 25.86 17.62 22.35 27.74 Natural Gas (4/21/93) 15.98 7.14 2.59 3.92 N/A (0.21) 8.98 10.08 Paper and Forest Products (6/30/86) 26.49 19.98 204.63 16.38 21.01 12.53 21.14 24.25 Precious Metals and Minerals (7/14/81) 1.19 (2.97) 118.22 (5.89) 7.64 8.08* 15.27 17.89 Regional Banks (6/30/86) 32.92 16.01 281.33 12.53 29.76 15.32 18.01 21.64 Retailing (12/16/85) 10.26 2.77 329.78 (0.31) 19.07 15.83 23.91 26.33 Software and Computer Services (7/29/85) 38.62 54.91 522.92 50.27 31.06 19.94* 29.07 37.83 Technology (7/14/81) 49.46 54.32 769.32 49.69 32.68 15.11* 42.05 59.96 Telecommunications (7/29/85) 25.92 24.95 529.23 21.20 21.69 19.90* 38.34 46.22 Transportation (9/29/86) 13.95 9.30 247.90 6.02 21.24 14.59 20.53 21.98 Utilities Growth (12/10/81) 18.30 13.26 601.38 9.86 11.90 12.70 34.88 39.08 S&P 500 24.51 21.45 - 21.45 15.12 - 487.39 561.88 (dagger) See "Legend" on page for explanation of information on this table. * 10-year Average Annual Total Return. (dagger)(dagger) Total net assets are based on 4:00 p.m. prices. ** High/Low NAVs are based on 4:00 p.m. prices for the period 2/28/95 - 8/31/95. (double dagger) January 1, 1995 to August 31, 1995. HIGH LOW TOTAL NET ASSETS(dagger)(dagger) DISTRIBUTIONS MEDIAN MEDIAN NAV** NAV** $MM 1/1/95 - 8/31/95 PRICE/SALES PRICE/BOOK FOR 6 MONTHS ENDED 8/31/95 2/28/95 8/31/95 CAP GAINS DIVS RELATIVE VOLATILITY AS OF 8/31/95 $19.37 $13.83 $18.6 $40.8 $- $- 2.25 0.50 2.94 23.60 17.95 278.2 347.0 - - 3.15 4.14 3.05 22.14 19.06 60.1 67.9 - - 1.52 0.56 2.36 30.48 25.10 448.2 597.2 - - 2.23 7.91 5.26 18.31 15.17 27.3 31.6 .49 - 2.02 0.87 1.70 38.12 32.99 97.5 75.9 .46 .08 1.35 1.16 2.97 48.34 30.81 215.0 598.0 .42 - 2.18 1.91 3.49 19.41 16.42 16.9 39.1 - - 1.47 0.63 1.95 15.55 13.79 20.5 7.6 .06 - 1.41 2.02 5.23 25.20 19.57 5.0 22.4 - - 1.34 0.82 2.39 25.10 18.89 254.4 477.4 1.53 - 2.15 2.81 4.41 35.74 20.04 216.4 1,236.1 - - 2.23 3.43 5.26 17.96 16.13 96.0 96.3 .06 - 1.83 1.13 2.15 14.50 11.94 63.8 103.3 - - 2.02 1.67 2.20 12.86 10.18 31.3 32.7 - - 1.67 1.45 2.43 57.67 47.12 153.1 171.5 - - 1.70 1.42 1.92 36.33 32.41 197.1 116.7 .52 .03 1.04 0.89 3.11 89.43 76.16 943.1 1,036.8 .36 .05 1.91 1.75 3.25 30.56 23.71 229.9 353.0 - - 1.82 1.27 1.20 26.36 19.72 110.0 116.3 - .01 1.55 0.79 2.52 27.44 22.15 183.5 157.7 - .04 1.49 0.61 1.89 24.37 20.90 21.8 15.3 - .04 1.37 1.46 1.43 48.92 40.51 69.6 112.8 .29 - 1.44 2.38 4.16 26.10 22.50 299.6 183.4 .07 - 2.43 1.15 2.93 27.95 22.30 38.2 93.6 - - 1.54 2.29 4.67 10.09 8.95 79.9 62.9 - .01 - 1.14 1.83 25.02 20.17 94.2 66.0 .21 - 2.06 0.89 1.91 18.47 14.98 364.2 372.8 - - 3.45 3.89 4.83 21.67 17.60 164.6 209.0 - - 1.67 1.57 1.70 26.76 23.00 31.1 40.5 - - 1.62 0.49 2.47 39.18 29.03 236.4 333.1 - - 2.32 3.28 4.67 60.81 42.11 229.8 468.6 1.38 - 1.93 1.66 3.50 46.22 37.99 369.5 448.6 .82 - 1.41 1.86 2.91 22.26 19.69 12.7 10.3 - - 1.38 0.79 1.95 39.08 34.10 237.6 224.7 - .05 1.08 1.27 1.43 - - - - - 1.11 3.66 TO CALL FIDELITY FOR PORTFOLIO INFORMATION AND QUOTES The Fidelity Telephone Connection offers you special automated telephone services for quotes and balances. The services are easy to use, confidential and quick. All you need is a Touch Tone telephone. YOUR PERSONAL IDENTIFICATION NUMBER (PIN) The first time you call one of our automated telephone services, we'll ask you to set up your Personal Identification Number (PIN). The PIN assures that only you have automated telephone access to your account information. Please have your Customer Number (T-account #) handy when you call - you'll need it to establish your PIN. If you would ever like to change your PIN, just choose the "Change your Personal Identification Number" option when you call. If you forget your PIN, please call a Fidelity representative at 1-800-544-6666 for assistance. (PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND QUOTES* 1-800-544-8544 Just make a selection from this recorded menu: PRESS For quotes on funds you own. 1 For an individual fund quote. 2 For the ten most frequently requested Fidelity fund quotes. 3 For quotes on Fidelity Select Portfolios(registered trademark). 4 To change your Personal Identification Number (PIN). 5 To speak with a Fidelity representative. 6 (PHONE_GRAPHIC)(PHONE_GRAPHIC)MUTUAL FUND ACCOUNT BALANCES 1-800-544-7544 Just make a selection from this record- ed menu: PRESS For balances on funds you own. 1 For your most recent fund activity (purchases, redemptions, and dividends). 2 To change your Personal Identification Number (PIN). 3 To speak with a Fidelity representative. 4 * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. 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 Kenneth A. Rathgeber, TREASURER Robert H. Morrison, MANAGER, SECURITY TRANSACTIONS Thomas D. Maher, ASSISTANT VICE PRESIDENT, MONEY MARKET FUND John H. Costello, ASSISTANT TREASURER Leonard M. Rush, ASSISTANT TREASURER 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-----