-----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, Kh6m7HVnKyoPmAdFAwclP/+eGncCoWhwIefWeBlpFu12EcqhjnxCBSqjYpxer3SX 7WjHRgLXFvqF7wlhLDAsXQ== 0000320351-98-000041.txt : 19981103 0000320351-98-000041.hdr.sgml : 19981103 ACCESSION NUMBER: 0000320351-98-000041 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980831 FILED AS OF DATE: 19981102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIDELITY SELECT PORTFOLIOS CENTRAL INDEX KEY: 0000320351 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 042732797 STATE OF INCORPORATION: MA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-03114 FILM NUMBER: 98735867 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 FIDELITY SELECT PORTFOLIOS(REGISTERED TRADEMARK) AIR TRANSPORTATION AUTOMOTIVE BIOTECHNOLOGY BROKERAGE AND INVESTMENT MANAGEMENT BUSINESS SERVICES AND OUTSOURCING CHEMICALS COMPUTERS CONSTRUCTION AND HOUSING CONSUMER INDUSTRIES CYCLICAL INDUSTRIES DEFENSE AND AEROSPACE DEVELOPING COMMUNICATIONS ELECTRONICS ENERGY ENERGY SERVICE ENVIRONMENTAL SERVICES FINANCIAL SERVICES FOOD AND AGRICULTURE GOLD (FORMERLY AMERICAN GOLD) HEALTH CARE HOME FINANCE INDUSTRIAL EQUIPMENT INDUSTRIAL MATERIALS INSURANCE LEISURE MEDICAL DELIVERY MEDICAL EQUIPMENT AND SYSTEMS MONEY MARKET MULTIMEDIA NATURAL GAS NATURAL RESOURCES PAPER AND FOREST PRODUCTS PRECIOUS METALS AND MINERALS REGIONAL BANKS RETAILING SOFTWARE AND COMPUTER SERVICES TECHNOLOGY TELECOMMUNICATIONS TRANSPORTATION UTILITIES GROWTH SEMIANNUAL REPORT AUGUST 31, 1998 (2_FIDELITY_LOGOS)(registered trademark) CONTENTS PERFORMANCE 4 OVERVIEW FUND UPDATES* CONSUMER 6 CONSUMER INDUSTRIES SECTOR 14 FOOD AND AGRICULTURE 20 LEISURE 27 MULTIMEDIA 33 RETAILING CYCLICALS SECTOR 39 AIR TRANSPORTATION 44 AUTOMOTIVE 50 CHEMICALS 55 CONSTRUCTION AND 61 HOUSING 68 CYCLICAL INDUSTRIES 73 DEFENSE AND AEROSPACE 78 ENVIRONMENTAL SERVICES 84 INDUSTRIAL EQUIPMENT 90 INDUSTRIAL MATERIALS 95 PAPER AND FOREST PRODUCTS TRANSPORTATION FINANCIAL 100 BROKERAGE AND SERVICES SECTOR 106 INVESTMENT MANAGEMENT 112 FINANCIAL SERVICES 119 HOME FINANCE 124 INSURANCE REGIONAL BANKS HEALTH CARE 129 BIOTECHNOLOGY SECTOR 135 HEALTH CARE 141 MEDICAL DELIVERY 147 MEDICAL EQUIPMENT AND SYSTEMS NATURAL 152 ENERGY RESOURCES 158 ENERGY SERVICE SECTOR 164 GOLD 170 NATURAL RESOURCES 176 PRECIOUS METALS AND MINERALS * FUND UPDATES FOR EACH SELECT PORTFOLIO INCLUDE: PERFORMANCE AND INVESTMENT SUMMARY, MANAGER'S OVERVIEW, INVESTMENTS, AND FINANCIAL STATEMENTS. TECHNOLOGY 182 BUSINESS SERVICES AND SECTOR 188 OUTSOURCING 194 COMPUTERS 200 DEVELOPING 206 COMMUNICATIONS 212 ELECTRONICS SOFTWARE AND COMPUTER SERVICES TECHNOLOGY UTILITIES SECTOR 218 NATURAL GAS 223 TELECOMMUNICATIONS 229 UTILITIES GROWTH 234 MONEY MARKET NOTES TO 241 FOOTNOTES TO THE FINANCIAL FINANCIAL STATEMENTS STATEMENTS PROXY VOTING 245 RESULTS To reduce expenses and demonstrate respect for our environment, we have initiated a project through which we will begin eliminating duplicate copies of most financial reports and prospectuses to most households, even if they have more than one account in the fund. If additional copies of financial reports, prospectuses or historical account information are needed, please call 1-800-544-6666. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. DEAR SHAREHOLDER: After holding up well through the first half of 1998, U.S. markets generally peaked in late July. They sold off sharply in August on concerns regarding the strength of U.S. political leadership in the face of worsening economic crises abroad. Investors also began to question whether global corporate earnings growth was sustainable in light of deteriorating fundamentals in Asia, Russia and Latin America. Largely as a result of these market declines in the final month of the six-month period ending August 31, 1998, the Standard & Poor's 500 Index - a market-capitalization weighted index of 500 widely held U.S. stocks - declined 8.1% for the period, while the Dow Jones Industrial Average was down -11.08%. Of the 39 Select equity portfolios, 10 topped the S&P 500's return for the past six months. Beginning this period, the Select funds' performance also is compared to seven Goldman Sachs Indexes, which are designed to measure the performance of companies within broad sectors. Overall, 14 Select portfolios outperformed their Goldman Sachs benchmarks. I'll address these indexes in greater detail later in this letter. Throughout the six-month period, there were two constants: a growing U.S. economy, supported by low interest rates, tame inflation and near-record low unemployment; and ever-worsening Asian economies that investors eyed warily. Early in the period, Asia's economic woes seemed to have little impact on the U.S. stock market. That lasted until about mid-June, when investor uncertainty over corporate earnings reports and worldwide stock market volatility began to have a tangible effect on the domestic equity market. The month of August, however, proved most challenging. Weakened economies and currency devaluations in emerging markets - particularly in Russia and Latin America - contributed to a grim global outlook. During the month, the Dow lost over 1,000 points, completing a nearly 20% freefall since its record high of 9337.97 on July 17, 1998. On August 31, 1998, the Dow plunged 512.61 points - erasing all previous gains for the year. Against this backdrop, the CONSUMER sector produced the strongest returns overall, with every Select portfolio in the sector beating its Goldman Sachs benchmark. Retailing and Multimedia were the top performers. Consumer Industries benefited from its large-cap stock selections, while Leisure was strengthened by the strong cable and Internet industries. Food and Agriculture had the toughest time, due to falling prices in the packaged food industry. The performance of CYCLICAL stocks - which tend to rise and fall in tandem with the U.S. economy - reflected the market downturn. Construction and Housing, Industrial Equipment and Cyclical Industries were the top performers in the sector. Heavy exposure to Asian demand and a series of satellite failures hurt Defense and Aerospace. Air Transportation, Transportation and Environmental Services also suffered due to worldwide economic tumult. Reduced demand for virtually all global commodities hampered Paper and Forest Products and Industrial Materials. Chemicals was hurt by a combination of pessimistic earnings reports and Asian companies selling their products at greatly reduced prices. Despite a mostly domestic focus, Automotive was hurt by General Motors' Latin America exposure and 54-day labor strike. The market's plunge in August hit most FINANCIAL SERVICES stocks. Insurance was the best performer in the group, thanks to relatively less exposure to Asia. However, the performance of Brokerage and Investment Management reflected the unfavorable sales, trading and investment banking environment. Signs that the global economy was decelerating took its toll on Financial Services. A slowdown in merger and acquisition activity hurt Regional Banks. Home Finance's overweighting in mortgage-related shares proved detrimental to its performance. The HEALTH CARE sector registered mixed results. The Health Care portfolio beat its benchmarks, as did Medical Equipment and Systems - a new fund which commenced operations on April 28, 1998. However, Biotechnology lagged due to disappointing corporate earnings in the sector. Meanwhile, poor fundamental business conditions for the HMO and hospital industries caused a negative return for Medical Delivery. The Select funds in the NATURAL RESOURCES area struggled throughout the period, as low prices and weak demand for oil detracted from the performance of Energy Service, Natural Resources and Energy. Gold and Precious Metals and Minerals continued to be plagued by weak gold prices. Despite a high degree of exposure in Asia, the Select funds in the TECHNOLOGY sector fared relatively well. Strong economies in the U.S. and Europe helped Computers and Business Services and Outsourcing. However, investor concerns about Asian economies hurt performance for Technology, Electronics and Developing Communications, as well as Software and Computer Services. The UTILITIES group as a whole lagged its benchmarks. Both the Telecommunications and Utilities Growth portfolios were weighted more toward the growth stocks that tend to suffer more in periods of extreme downside volatility. A warmer-than-normal global climate and an oversupply of natural gas detracted from the performance of Natural Gas. In an effort to provide Select Portfolio shareholders with a more meaningful way to measure the performance of their sector-fund investments, we have begun with this report to include Goldman Sachs' new sector indexes as additional benchmarks for the funds. These indexes supplement the existing benchmark for the funds, which is the Standard & Poor's 500 Index. While a comparison to the S&P 500 can illustrate how a sector fund is performing relative to the broad stock market, these new sector indexes will enable shareholders to compare the performance of their funds with a more narrow basket of stocks within the industry in which they're invested. Although the Goldman benchmarks are in most cases much broader than the more narrowly focused Select Portfolios, we believe these indexes will be of more value to shareholders when evaluating sector-fund investments. The indexes - and the number of stocks chosen to be representative of their specific sector - are as follows: Goldman Sachs Consumer Industries Index (300 stocks) Goldman Sachs Cyclical Industries Index (277 stocks) Goldman Sachs Financial Services Index (271 stocks) Goldman Sachs Health Care Index (93 stocks) Goldman Sachs Natural Resources Index (96 stocks) Goldman Sachs Technology Index (190 stocks) Goldman Sachs Utilities Index (136 stocks) In the pages that follow, you'll find detailed summaries for each of the Select portfolios. We hope that you find them informative and useful for evaluating your investments. Sincerely, William R. Ebsworth Group Leader, FMR Research Select Group Leader CUMULATIVE TOTAL RETURNS FOR THE SIX MONTHS ENDED AUGUST 31, 1998 Row: 1, Col: 1, Value: -0.12 Row: 1, Col: 2, Value: nil Row: 2, Col: 1, Value: -0.9 Row: 2, Col: 2, Value: 0.0 Row: 3, Col: 1, Value: -3.14 Row: 3, Col: 2, Value: 0.0 Row: 4, Col: 1, Value: -3.22 Row: 4, Col: 2, Value: 0.0 Row: 5, Col: 1, Value: -4.359999999999999 Row: 5, Col: 2, Value: 0.0 Row: 6, Col: 1, Value: -5.3 Row: 6, Col: 2, Value: 0.0 Row: 7, Col: 1, Value: -6.85 Row: 7, Col: 2, Value: 0.0 Row: 8, Col: 1, Value: -7.35 Row: 8, Col: 2, Value: 0.0 Row: 9, Col: 1, Value: -7.63 Row: 9, Col: 2, Value: 0.0 Row: 10, Col: 1, Value: -8.029999999999999 Row: 10, Col: 2, Value: 0.0 Row: 11, Col: 1, Value: 0.0 Row: 11, Col: 2, Value: -8.1 Row: 12, Col: 1, Value: -9.48 Row: 12, Col: 2, Value: 0.0 Row: 13, Col: 1, Value: -11.77 Row: 13, Col: 2, Value: 0.0 Row: 14, Col: 1, Value: -13.42 Row: 14, Col: 2, Value: 0.0 Row: 15, Col: 1, Value: -14.14 Row: 15, Col: 2, Value: 0.0 Row: 16, Col: 1, Value: -14.75 Row: 16, Col: 2, Value: 0.0 Row: 17, Col: 1, Value: -14.83 Row: 17, Col: 2, Value: 0.0 Row: 18, Col: 1, Value: -15.01 Row: 18, Col: 2, Value: 0.0 Row: 19, Col: 1, Value: -15.63 Row: 19, Col: 2, Value: 0.0 Row: 20, Col: 1, Value: -16.14 Row: 20, Col: 2, Value: 0.0 Row: 21, Col: 1, Value: -16.96 Row: 21, Col: 2, Value: 0.0 Row: 22, Col: 1, Value: -17.64 Row: 22, Col: 2, Value: 0.0 Row: 23, Col: 1, Value: -17.64 Row: 23, Col: 2, Value: 0.0 Row: 24, Col: 1, Value: -18.09 Row: 24, Col: 2, Value: 0.0 Row: 25, Col: 1, Value: -19.68 Row: 25, Col: 2, Value: 0.0 Row: 26, Col: 1, Value: -23.54 Row: 26, Col: 2, Value: 0.0 Row: 27, Col: 1, Value: -24.21 Row: 27, Col: 2, Value: 0.0 Row: 28, Col: 1, Value: -24.33 Row: 28, Col: 2, Value: 0.0 Row: 29, Col: 1, Value: -24.95 Row: 29, Col: 2, Value: 0.0 Row: 30, Col: 1, Value: -25.04 Row: 30, Col: 2, Value: 0.0 Row: 31, Col: 1, Value: -25.51 Row: 31, Col: 2, Value: 0.0 Row: 32, Col: 1, Value: -25.8 Row: 32, Col: 2, Value: 0.0 Row: 33, Col: 1, Value: -26.1 Row: 33, Col: 2, Value: 0.0 Row: 34, Col: 1, Value: -26.55 Row: 34, Col: 2, Value: 0.0 Row: 35, Col: 1, Value: -26.84 Row: 35, Col: 2, Value: 0.0 Row: 36, Col: 1, Value: -26.97 Row: 36, Col: 2, Value: 0.0 Row: 37, Col: 1, Value: -27.25 Row: 37, Col: 2, Value: 0.0 Row: 38, Col: 1, Value: -38.81 Row: 38, Col: 2, Value: 0.0 Row: 39, Col: 1, Value: -41.79000000000001 Row: 39, Col: 2, Value: 0.0 Row: 40, Col: 1, Value: -49.55 Row: 40, Col: 2, Value: 0.0 Row: 41, Col: 1, Value: nil Row: 41, Col: 2, Value: nil Health Care -0.12%Computers -0.90%Retailing -3.14%Utilities Growth - -3.22%Multimedia -4.36%Medical Equipment and Systems 1 - -5.30%Consumer Industries -6.85%Leisure -7.35%Business Services & Outsourcing -7.63%Food & Agriculture -8.03%S&P 500 -8.10%Insurance - -9.48%Developing Communications -11.77%Technology - -13.42%Telecommunications -14.14%Financial Services - -14.75%Construction & Housing -14.83%Software & Computer Services - -15.01%Industrial Equipment -15.63%Cyclical Industries - -16.14%Biotechnology -16.96%Brokerage & Investment Management - -17.64%Regional Banks -17.64%Air Transportation -18.09%Automotive - -19.68%Energy -23.54%Natural Gas -24.21%Defense & Aerospace - -24.33%Transportation -24.95%Electronics -25.04%Paper & Forest - -25.51%Industrial Materials -25.80%Chemicals -26.10%Medical Delivery - -26.55%Home Finance -26.84%Environmental Services -26.97%Natural Resources -27.25%Precious Metals & Minerals -38.81%Gold - -41.79%Energy Service -49.55% 1. RETURNS ARE FROM INCEPTION DATE APRIL 28, 1998. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. TOTAL RETURNS INCLUDE CHANGES IN A FUND'S SHARE PRICE, PLUS REINVESTMENT OF ANY DIVIDENDS AND CAPITAL GAINS BUT DO NOT INCLUDE SELECT'S 3% SALES CHARGE, AND CERTAIN FEES PAID BY SHAREHOLDERS UPON EXCHANGE OR REDEMPTION. FIGURES FOR THE STANDARD & POOR'S 500 INDEX (S&P 500 (registered trademark)), AN UNMANAGED INDEX OF COMMON STOCK PRICES, INCLUDE REINVESTMENT OF DIVIDENDS. S&P 500 IS A REGISTERED TRADEMARK OF STANDARD & POOR'S. ALL PERFORMANCE NUMBERS ARE HISTORICAL; EACH EQUITY FUND'S SHARE PRICE AND RETURN WILL VARY AND SHAREHOLDERS MAY HAVE A GAIN OR LOSS WHEN THEY SELL THEIR SHARES. IF FMR HAD NOT REIMBURSED CERTAIN FUND EXPENSES FOR SOME OF THE FUNDS, THOSE RETURNS WOULD HAVE BEEN LOWER. CONSUMER INDUSTRIES PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past five year and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1998 MONTHS YEAR YEARS FUND SELECT CONSUMER INDUSTRIES -6.85% 15.49% 97.50% 244.43% SELECT CONSUMER INDUSTRIES -9.71% 11.95% 91.51% 234.03% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 230.88% GS CONSUMER INDUSTRIES -8.66% 10.68% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or since the fund started on June 29, 1990. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Consumer Industries Index - a market capitalization-weighted index of 300 stocks designed to measure the performance of companies in the consumer industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF AUGUST 31, 1998 YEAR YEARS FUND SELECT CONSUMER INDUSTRIES 15.49% 14.58% 16.35% SELECT CONSUMER INDUSTRIES 11.95% 13.88% 15.91% (LOAD ADJ.) S&P 500 8.10% 18.25% 15.78% GS CONSUMER INDUSTRIES 10.68% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (CHECKMARK) UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER LIFE OF FUND Consumer Industries S&P 500 00517 SP001 1990/06/29 9700.00 10000.00 1990/07/31 9670.90 9968.00 1990/08/31 8943.40 9066.89 1990/09/30 8439.00 8625.34 1990/10/31 8749.40 8588.25 1990/11/30 9234.40 9143.05 1990/12/31 9593.72 9398.14 1991/01/31 9808.43 9807.90 1991/02/28 10569.68 10509.16 1991/03/31 11077.18 10763.48 1991/04/30 10950.31 10789.32 1991/05/31 11477.33 11255.41 1991/06/30 10911.27 10739.92 1991/07/31 11623.72 11240.40 1991/08/31 12101.94 11506.79 1991/09/30 11994.59 11314.63 1991/10/31 12375.21 11466.25 1991/11/30 11857.95 11004.16 1991/12/31 13290.07 12263.03 1992/01/31 13379.46 12034.94 1992/02/29 13836.37 12191.39 1992/03/31 13677.45 11953.66 1992/04/30 13717.18 12305.10 1992/05/31 13627.78 12365.39 1992/06/30 13015.69 12181.15 1992/07/31 13388.15 12679.36 1992/08/31 13253.65 12419.43 1992/09/30 13377.81 12565.98 1992/10/31 13595.08 12609.96 1992/11/30 14246.90 13039.96 1992/12/31 14427.78 13200.35 1993/01/31 14331.67 13311.24 1993/02/28 13851.10 13492.27 1993/03/31 14662.73 13776.96 1993/04/30 14566.61 13443.55 1993/05/31 15719.98 13803.84 1993/06/30 15730.66 13843.87 1993/07/31 15880.17 13788.50 1993/08/31 16916.07 14311.08 1993/09/30 17289.85 14200.89 1993/10/31 17823.81 14494.84 1993/11/30 17428.68 14357.14 1993/12/31 17987.73 14530.86 1994/01/31 17835.98 15024.91 1994/02/28 17789.29 14617.74 1994/03/31 16645.36 13980.40 1994/04/30 16823.06 14159.35 1994/05/31 16600.01 14391.57 1994/06/30 15684.31 14038.97 1994/07/31 16106.94 14499.45 1994/08/31 17046.12 15093.93 1994/09/30 16729.15 14724.13 1994/10/31 17057.86 15055.42 1994/11/30 16224.34 14507.10 1994/12/31 16716.09 14722.24 1995/01/31 16569.67 15103.99 1995/02/28 16972.32 15692.59 1995/03/31 17435.98 16155.68 1995/04/30 17815.10 16631.47 1995/05/31 18145.91 17296.23 1995/06/30 18133.66 17698.02 1995/07/31 18893.31 18284.88 1995/08/31 18856.56 18330.78 1995/09/30 19861.26 19104.34 1995/10/31 20755.69 19036.14 1995/11/30 21980.94 19871.82 1995/12/31 21446.67 20254.55 1996/01/31 21446.67 20944.02 1996/02/29 22065.08 21138.17 1996/03/31 22844.29 21341.73 1996/04/30 23611.12 21656.31 1996/05/31 24835.58 22214.82 1996/06/30 24711.90 22299.46 1996/07/31 22015.61 21314.27 1996/08/31 22361.92 21763.79 1996/09/30 23809.01 22988.66 1996/10/31 23994.54 23622.68 1996/11/30 24674.80 25408.32 1996/12/31 24266.64 24904.98 1997/01/31 25355.05 26461.05 1997/02/28 25552.95 26668.50 1997/03/31 24798.48 25572.69 1997/04/30 24984.00 27099.38 1997/05/31 26715.57 28749.19 1997/06/30 28026.61 30037.16 1997/07/31 29646.86 32427.21 1997/08/31 28929.50 30610.64 1997/09/30 31836.05 32287.18 1997/10/31 31205.27 31208.79 1997/11/30 32541.05 32653.45 1997/12/31 33501.90 33214.11 1998/01/31 33331.18 33581.45 1998/02/28 35865.82 36003.35 1998/03/31 37888.28 37847.08 1998/04/30 37655.37 38227.82 1998/05/31 37857.53 37570.69 1998/06/30 39717.39 39096.81 1998/07/31 38976.14 38680.43 1998/08/31 33403.00 33088.01 IMATRL PRASUN SHR__CHT 19980831 19980917 164617 R00000000000101 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Consumer Industries Portfolio on June 29, 1990, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $33,403 - a 234.03% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $33,088 - a 230.88% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS PHILIP MORRIS COMPANIES, INC. 6.6 WAL-MART STORES, INC. 6.5 PROCTER & GAMBLE CO. 4.9 GILLETTE CO. 3.9 COCA-COLA CO. (THE) 3.3 HOME DEPOT, INC. 2.8 PEPSICO, INC. 2.5 MCDONALD'S CORP. 2.3 TIME WARNER, INC. 1.9 AVON PRODUCTS, INC. 1.7 TOP INDUSTRIES AS OF AUGUST 31, 1998 SOAPS & DETERGENTS 7.9% GENERAL MERCHANDISE STORES 7.4% COSMETICS 6.6% TOBACCO MANUFACTURERS 6.6% SOFT DRINKS 6.3% ALL OTHERS 65.2% ROW: 1, COL: 1, VALUE: 65.2 ROW: 1, COL: 2, VALUE: 6.3 ROW: 1, COL: 3, VALUE: 6.6 ROW: 1, COL: 4, VALUE: 6.6 ROW: 1, COL: 5, VALUE: 7.4 ROW: 1, COL: 6, VALUE: 7.9 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS CONSUMER INDUSTRIES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (Photograph of Doug Chase) Doug Chase, Portfolio Manager of Fidelity Select Consumer Industries Portfolio Q. HOW DID THE FUND PERFORM, DOUG? A. Relatively well. During the six- and 12-month periods that ended August 31, 1998, the fund returned -6.85% and 15.49%, respectively. This performance compares favorably with the Standard & Poor's 500 Index's returns of -8.10% and 8.10% during the same periods. Beginning this period, the fund also compares itself to the Goldman Sachs Consumer Industries Index - an index of 300 stocks designed to measure the performance of companies in the consumer industries sector - which returned -8.66% and 10.68% over the same six- and 12-month periods, respectively. Q. WHAT WAS YOUR STRATEGY DURING THE SIX-MONTH PERIOD? A. I focused on increasing the number of large-cap stocks in the fund because I believed that, in an environment of market uncertainty, there could be a flight to quality among investors. Large-cap consumer companies delivered more predictable earnings growth and were undervalued at the prevailing interest rates. During the six-month period, the best performers generally have been the large-cap companies, so my strategy paid off. I also built up the fund's retail industry holdings. Retailers have been more insulated from the turmoil in Asia, since their core business is in the U.S. Their good performance reflected the relative strength of the U.S. economy. Q. WHICH STOCKS PERFORMED WELL? A. Wal-Mart Stores, the fund's number-two holding, has been a terrific stock because the company has been one of the best success stories in retailing. Wal-Mart has invested in technology to track its inventories closely and has focused on re-supplying its fastest-selling items. The company's earnings estimates have increased and its same-store sales -which compare sales growth for those stores that have been in operation for at least 12 months -have been very strong. Media companies Time Warner and Viacom performed well, with focused management at the helm. Cable company MediaOne Group also had strong performance. Cable operators have gained an advantage in the battle for high-speed Internet access to the home, because cable already allows high-speed two-way access that phone lines or satellites do not. Q. WERE THERE ANY DISAPPOINTMENTS? A. There were. Three of the fund's top holdings - Disney, Pepsi and Gillette - all delivered lower-than-expected earnings reports during the period. Disney-owned television network ABC has disappointed with lower advertising revenues, and its creative content has come in below expectations. Pepsi, which has been restructuring, is taking much longer than expected to complete the process. Gillette was hurt by its exposure to emerging markets. Many food companies, including Sara Lee and Campbell Soup, also were disappointments. These companies were hurt by limited pricing flexibility and minimal volume growth. Q. THE FUND'S TOP 10 HOLDINGS ARE ALL LARGE-CAP STOCKS . . . A. Yes, I've been building a more diversified portfolio since taking over the fund last summer, adding more large-capitalization stocks to the fund. In the current economic environment, I believe that large-cap companies have an expanded competitive advantage due to their size, so changing the mix to include large-caps has really paid off. Q. WHAT'S YOUR OUTLOOK AND STRATEGY FOR THE COMING MONTHS, DOUG? A. I'm always cautious. Although the U.S. economy is strong and unemployment is low, personal indebtedness is still high. The good news is that interest rates continue to decline. When interest rates go down, U.S. consumers tend to refinance their homes, their other debt costs decline, they have more disposable income and they spend more. That's good for consumer industries and for the fund. In the coming months, I'll maintain the fund's diversified approach. The challenge is in finding companies whose performance is relatively good, and then buying their stock at attractive prices. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: June 29, 1990 FUND NUMBER: 517 TRADING SYMBOL: FSCPX SIZE: as of August 31, 1998, more than $66 million MANAGER: Doug Chase, since 1997; manager, Fidelity Select Automotive Portfolio, 1994-1997; Fidelity Select Industrial Materials Portfolio, 1994-1997; joined Fidelity in 1993 CONSUMER INDUSTRIES PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 97.2% SHARES VALUE (NOTE 1) ADVERTISING - 1.9% ADVERTISING - 0.2% Outdoor Systems, Inc. (a) 6,175 $ 143,569 ADVERTISING AGENCIES - 1.7% Interpublic Group of Companies, Inc. 8,400 478,800 Omnicom Group, Inc. 11,800 561,975 1,040,775 TOTAL ADVERTISING 1,184,344 AIR TRANSPORTATION - 0.4% TRANSPORTATION SERVICES - 0.4% Viad Corp. 11,500 238,625 APPAREL STORES - 3.4% FAMILY CLOTHING STORES - 0.3% Abercrombie & Fitch Co. Class A (a) 1,600 68,800 Stage Stores, Inc. (a) 14,900 155,519 224,319 GENERAL APPAREL STORES - 2.7% Gap, Inc. 10,950 559,134 Limited, Inc. (The) 16,200 338,175 Saks Holdings, Inc. (a) 14,900 311,969 TJX Companies, Inc. 21,700 484,181 1,693,459 WOMEN'S CLOTHING STORES - 0.4% AnnTaylor Stores Corp. (a) 6,000 145,875 Wet Seal, Inc. Class A (a) 4,500 103,500 249,375 TOTAL APPAREL STORES 2,167,153 AUTOS, TIRES, & ACCESSORIES - 0.2% AUTO PARTS - RETAIL - 0.2% Pep Boys-Manny, Moe & Jack 10,000 146,875 BEVERAGES - 8.8% DISTILLED & BLENDED LIQUOR - 0.5% Seagram Co. Ltd. 10,500 328,020 MALT BEVERAGE - 1.9% Anheuser-Busch Companies, Inc. 16,200 747,225 Coors (Adolph) Co. Class B 10,700 441,375 1,188,600 SOFT DRINKS - 6.3% Celestial Seasonings, Inc. 6,500 229,125 Coca-Cola Co. (The) 31,700 2,064,463 PepsiCo, Inc. 56,000 1,550,500 Whitman Corp. 7,300 113,150 3,957,238 WINE, BRANDY & BRANDY SPIRITS - 0.1% Canadaigua Wine Co. Class A (a) 2,300 96,025 TOTAL BEVERAGES 5,569,883 BROADCASTING - 7.8% CABLE TV OPERATORS - 4.3% Comcast Corp. Class A 8,100 303,750 Comcast Corp. Class A special 9,400 351,325 Cox Communications, Inc. Class A (a) 10,700 449,400 MediaOne Group, Inc. (a) 9,400 385,400 Time Warner, Inc. 15,271 1,227,407 2,717,282 SHARES VALUE (NOTE 1) RADIO BROADCASTING - 1.8% Chancellor Media Corp. (a) 7,300 $ 260,519 Clear Channel Communications, Inc. (a) 11,300 508,500 Jacor Communications, Inc. Class A (a) 6,300 371,700 Radiomutuel, Inc. Class A (a) 1,900 14,536 1,155,255 TELEVISION BROADCASTING - 1.7% CBS Corp. 35,100 912,600 Scripps (E.W.) Co. Class A 3,400 160,438 1,073,038 TOTAL BROADCASTING 4,945,575 BUILDING MATERIALS - 0.2% HARDWARE - WHOLESALE - 0.2% Richelieu Hardware Ltd. (a) 11,500 102,646 COMPUTER SERVICES & SOFTWARE - 0.2% COMPUTER & SOFTWARE STORES - 0.1% CompUSA, Inc. (a) 5,700 67,688 COMPUTER SERVICES - 0.1% Computer Learning Centers, Inc. (a) 7,100 33,725 TOTAL COMPUTER SERVICES & SOFTWARE 101,413 CONSUMER ELECTRONICS - 0.5% RADIOS, TELEVISIONS, STEREOS - 0.5% Gemstar International Group Ltd. (a) 8,400 291,375 DRUG STORES - 2.9% CVS Corp. 22,054 802,214 Rite Aid Corp. 9,700 351,019 Walgreen Co. 17,900 689,150 1,842,383 DRUGS & PHARMACEUTICALS - 0.3% PHARMACEUTICAL PREPARATIONS - 0.3% Rexall Sundown, Inc. (a) 9,300 169,725 EDUCATIONAL SERVICES - 0.3% COLLEGES, UNIVERSITIES & PROFESSIONAL SCHOOLS - 0.3% Apollo Group, Inc. Class A (a) 5,900 179,213 ENTERTAINMENT - 5.1% CRUISES - 0.7% Carnival Corp. 12,300 355,163 Royal Carribean Cruises Ltd. 2,900 70,325 425,488 MOTION PICTURE DISTRIBUTION - 0.8% Viacom, Inc. Class B (non-vtg.) (a) 10,500 521,063 MOTION PICTURE PRODUCTION - 3.5% Tele-Communications, Inc. (Liberty Media Group), Series A (a) 14,250 465,797 Disney (Walt) Co. 39,300 1,078,294 King World Productions, Inc. (a) 30,100 632,100 2,176,191 RECREATIONAL SERVICES - 0.1% Premier Parks, Inc. (a) 5,100 82,875 TOTAL ENTERTAINMENT 3,205,617 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) FOODS - 6.6% BAKERY PRODUCTS - 0.2% Flowers Industries, Inc. 2,900 $ 51,656 Interstate Bakeries Corp. 2,300 59,944 111,600 CANDY - 0.3% Hershey Foods Corp. 2,400 168,000 CANNED SPECIALTIES - 0.6% Campbell Soup Co. 7,300 367,738 COOKIES & CRACKERS - 0.1% Nabisco Holdings Corp. Class A 1,700 56,206 DAIRY - 0.3% Dean Foods Co. 2,900 127,600 Groupe Danone 300 76,396 203,996 FOOD - 2.8% Dole Food, Inc. 4,900 211,925 Heinz (H.J.) Co. 13,800 735,713 Kellogg Co. 3,700 112,850 Nestle SA ADR (Reg.) 800 74,600 Sara Lee Corp. 13,400 606,350 1,741,438 GRAIN MILL PRODUCTS - 1.4% Archer-Daniels-Midland Co. 5,670 85,050 Corn Products International, Inc. (a) 3,850 91,197 Quaker Oats Co. 3,100 164,688 Ralston Purina Co. 21,700 570,981 911,916 MEAT & FISH - 0.2% Tyson Foods, Inc. 9,700 158,838 PACKAGED & FROZEN FOODS - 0.7% Bestfoods 9,300 466,744 TOTAL FOODS 4,186,476 GENERAL MERCHANDISE STORES - 12.3% DEPARTMENT STORES - 3.8% Federated Department Stores, Inc. (a) 20,200 879,963 Nordstrom, Inc. 4,000 119,750 Penny (J.C.) Co., Inc. 11,100 550,144 Proffitts, Inc. (a) 6,425 163,838 Sears, Roebuck & Co. 12,000 545,250 Stein Mart, Inc. (a) 12,000 106,500 2,365,445 GENERAL MERCHANDISE STORES - 7.4% Dayton Hudson Corp. 17,000 612,000 Wal-Mart Stores, Inc. 69,500 4,083,125 4,695,125 VARIETY STORES - 1.1% Consolidated Stores Corp. (a) 3,228 101,682 Costco Companies, Inc. (a) 6,500 305,906 Dollar Tree Stores (a) 9,300 269,700 677,288 TOTAL GENERAL MERCHANDISE STORES 7,737,858 GROCERY STORES - 3.7% FOOD STORES - 0.3% Whole Foods Market, Inc. (a) 4,200 173,775 SHARES VALUE (NOTE 1) GROCERY - RETAIL - 3.4% Albertson's, Inc. 7,300 $ 369,106 Hannaford Brothers Co. 2,900 120,531 Kroger Co. (The) (a) 8,600 387,000 Meyer (Fred), Inc. (a) 13,100 514,994 Safeway, Inc. (a) 19,500 767,813 2,159,444 TOTAL GROCERY STORES 2,333,219 HOLDING COMPANIES - 0.2% HOLDING COMPANY OFFICES, NEC - 0.2% Triarc Companies, Inc. Class A (a) 7,400 110,538 HOME FURNISHINGS - 0.1% FURNITURE - 0.1% Dorel Industries, Inc. Class B (sub-vtg.) (a)(c) 4,000 55,850 HOUSEHOLD PRODUCTS - 14.9% COSMETICS - 6.6% Alberto-Culver Co. Class A 4,000 72,250 Avon Products, Inc. 17,200 1,081,450 Estee Lauder Companies, Inc. 3,100 182,513 Gillette Co. 60,000 2,467,500 International Flavors & Fragrances, Inc. 4,700 182,125 Revlon, Inc. Class A (a) 4,900 176,706 4,162,544 FABRICATED RUBBER PRODUCTS - 0.2% Rubbermaid, Inc. 4,600 117,013 MANUFACTURED PRODUCTS - 0.2% First Brands Corp. 8,000 159,500 SOAPS & DETERGENTS - 7.9% Church & Dwight Co., Inc. 4,600 124,488 Clorox Co. 8,100 781,144 Dial Corp. 4,900 95,550 Procter & Gamble Co. 40,600 3,105,900 Unilever NV (NY Shares) 13,400 849,225 4,956,307 TOTAL HOUSEHOLD PRODUCTS 9,395,364 LEASING & RENTAL - 0.1% TRUCK RENT & LEASE, NO DRIVER - 0.1% Hertz Corp. Class A 1,300 49,075 LEISURE DURABLES & TOYS - 1.2% MOTORCYCLES - 0.2% Harley-Davidson, Inc. 5,100 157,144 TOYS & GAMES - 0.9% Galoob (Lewis) Toys, Inc. (a) 10,900 80,388 Mattel, Inc. 14,400 466,200 546,588 TRAVEL TRAILERS AND CAMPERS - 0.1% Brunswick Corp. 3,000 44,813 TOTAL LEISURE DURABLES & TOYS 748,545 LODGING & GAMING - 0.9% HOTELS, MOTELS, & TOURIST COURTS - 0.6% Promus Hotel Corp. (a) 8,600 264,450 Sun International Hotels Ltd. Ord. (a) 3,400 128,138 392,588 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) LODGING & GAMING - CONTINUED RACING & GAMING - 0.3% International Speedway Corp. Class A 5,400 $ 148,500 TOTAL LODGING & GAMING 541,088 MEDICAL FACILITIES MANAGEMENT - 0.0% HOME HEALTH CARE AGENCIES - 0.0% Coram Healthcare Corp. warrants 7/11/99 (a) 216 0 PHOTOGRAPHIC EQUIPMENT - 1.0% Eastman Kodak Co. 7,900 617,188 Polaroid Corp. 1,000 28,125 645,313 PRINTING - 0.3% COMMERCIAL PRINTING, NEC - 0.2% Donnelley (R.R.) & Sons Co. 3,700 134,125 Valassis Communications, Inc. (a) 1,100 32,794 166,919 MANIFOLD BUSINESS FORMS - 0.1% Reynolds & Reynolds Co. Class A 3,900 49,238 TOTAL PRINTING 216,157 PUBLISHING - 3.4% BOOK PUBLISHING & PRINTING - 0.9% Harcourt General, Inc. 6,200 301,088 McGraw-Hill Companies, Inc. 2,900 221,125 Reader's Digest Association, Inc. (The) Class A (non-vtg.) 2,700 52,988 575,201 GENERAL PUBLISHING - 0.1% Applied Graphics Technologies, Inc. (a) 3,100 63,356 GREETING CARDS - 0.2% American Greetings Corp. Class A 2,900 106,213 NEWSPAPERS - 1.6% Gannett Co., Inc. 8,600 507,400 Harte Hanks Communications, Inc. 12,600 276,413 Tribune Co. 3,100 199,756 983,569 PERIODICALS - 0.6% Meredith Corp. 4,900 164,456 Playboy Enterprises, Inc. Class B (a) 19,100 233,975 398,431 TOTAL PUBLISHING 2,126,770 REAL ESTATE - 0.2% CEMETERY SUBDIVIDERS & DEVELOP - 0.2% Stewart Enterprises, Inc. Class A 4,900 96,163 REAL ESTATE INVESTMENT TRUSTS - 0.2% Starwood Hotels & Resorts 3,400 124,100 RESTAURANTS - 2.9% Cracker Barrel Old Country Store, Inc. 2,100 51,319 Foodmaker, Inc. (a) 4,500 62,156 Logan's Roadhouse, Inc. (a) 100 1,663 McDonald's Corp. 26,200 1,468,838 Outback Steakhouse, Inc. (a) 3,900 117,244 Papa John's International, Inc. (a) 2,500 66,250 Starbucks Corp. (a) 2,600 82,063 1,849,533 SHARES VALUE (NOTE 1) RETAIL & WHOLESALE, MISCELLANEOUS - 6.7% BOOK STORES - RETAIL - 0.2% Barnes & Noble, Inc. (a) 4,300 $ 116,369 BUILDING MATERIALS - RETAIL - 2.9% Home Depot, Inc. 46,600 1,794,100 LUMBER & BUILDING MATERIALS - RETAIL - 1.1% Lowe's Companies, Inc. 20,400 715,275 MAIL ORDER - 0.1% Williams-Sonoma, Inc. (a) 2,100 53,550 MISCELLANEOUS DURABLE GOODS - WHOLESALE - 0.2% Action Performance Companies, Inc. (a) 6,300 145,688 MUSIC, TV, & ELECTRONIC STORES - 1.3% Best Buy Co., Inc. (a) 14,400 567,000 Circuit City Stores, Inc. - Circuit City Group 4,300 132,763 Tandy Corp. 2,500 136,406 836,169 RETAIL, GENERAL - 0.9% Bed Bath & Beyond, Inc. (a) 3,700 66,831 Office Depot, Inc. (a) 7,900 201,450 Pier 1 Imports, Inc. 12,700 126,206 Staples, Inc. (a) 7,350 199,369 593,856 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 4,255,007 SERVICES - 1.6% BUSINESS SERVICES - 0.4% Robert Half International, Inc. (a) 3,100 148,800 Snyder Communications, Inc. (a) 3,400 102,425 251,225 CREDIT REPORTING AGENCIES - 0.2% Dunn & Bradstreet Corp. 4,300 101,050 GENERAL SERVICES - 0.7% Service Corp. International 13,600 460,700 MANAGEMENT SERVICES - 0.3% ServiceMaster Co. 9,850 206,234 TOTAL SERVICES 1,019,209 TEXTILES & APPAREL - 2.3% APPAREL - 0.8% Fruit of the Loom, Inc. Class A (a) 3,100 69,556 Kellwood Co. 6,000 160,125 Liz Claiborne, Inc. 10,000 285,000 514,681 CARPETS & RUGS - 0.4% Mohawk Industries, Inc. (a) 1,700 45,156 Shaw Industries, Inc. 15,700 237,463 282,619 FOOTWEAR - 0.3% NIKE, Inc. Class B 4,600 159,563 MEN'S & BOYS' CLOTHING - 0.4% Nautica Enterprises, Inc. (a) 7,700 148,706 Pacific Sunwear of California,Inc. (a) 5,550 101,288 249,994 TEXTILE MILL PRODUCTS - 0.4% Unifi, Inc. 7,400 164,650 Westpoint Stevens, Inc. Class A (a) 3,400 100,725 265,375 TOTAL TEXTILES & APPAREL 1,472,232 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TOBACCO - 6.6% TOBACCO MANUFACTURERS - 6.6% Philip Morris Companies, Inc. 100,200 $ 4,164,546 TOTAL COMMON STOCKS (Cost $63,182,544) 61,271,870 CASH EQUIVALENTS - 2.8% Taxable Central Cash Fund (b) (Cost $1,751,102) 1,751,102 1,751,102 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $64,933,646) $ 63,022,972 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $55,850 or 0.1% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $72,005,846 and $73,634,057, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $10,408 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $64,951,099 Net unrealized depreciation aggregated $1,928,127, of which $4,711,859 related to appreciated investment securities and $6,639,986 related to depreciated investment securities. CONSUMER INDUSTRIES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 63,022,972 SECURITIES, AT VALUE (COST $64,933,646 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 5,147,792 INVESTMENTS SOLD RECEIVABLE FOR 266,494 FUND SHARES SOLD DIVIDENDS 58,218 RECEIVABLE INTEREST 16,866 RECEIVABLE REDEMPTION FEES 1,321 RECEIVABLE OTHER 10,390 RECEIVABLES TOTAL ASSETS 68,524,053 LIABILITIES PAYABLE FOR $ 65,325 INVESTMENTS PURCHASED PAYABLE FOR 1,520,785 FUND SHARES REDEEMED ACCRUED 39,390 MANAGEMENT FEE OTHER PAYABLES 66,850 AND ACCRUED EXPENSES TOTAL LIABILITIES 1,692,350 NET ASSETS $ 66,831,703 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 66,278,879 ACCUMULATED (68,245) NET INVESTMENT LOSS ACCUMULATED 2,531,743 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (1,910,674) APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 66,831,703 2,695,604 SHARES OUTSTANDING NET ASSET $24.79 VALUE AND REDEMPTION PRICE PER SHARE ($66,831,70 3 (DIVIDED BY) 2,695,604 SHARES) MAXIMUM $25.56 OFFERING PRICE PER SHARE (100/97.00 OF $24.79) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 338,872 INCOME DIVIDENDS INTEREST 133,950 TOTAL INCOME 472,822 EXPENSES MANAGEMENT $ 235,504 FEE TRANSFER AGENT 221,685 FEES ACCOUNTING FEES 40,456 AND EXPENSES NON-INTERESTED 135 TRUSTEES' COMPENSATION CUSTODIAN FEES 11,983 AND EXPENSES REGISTRATION FEES 19,735 AUDIT 10,269 LEGAL 230 REPORTS TO 8,685 SHAREHOLDERS TOTAL EXPENSES 548,682 BEFORE REDUCTIONS EXPENSE (7,615) 541,067 REDUCTIONS NET INVESTMENT (68,245) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 2,667,043 SECURITIES FOREIGN (935) 2,666,108 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (8,126,514) SECURITIES ASSETS AND (39) (8,126,553) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (5,460,445) NET INCREASE $ (5,528,690) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 173,776 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 172,846 - - RETAINED BY FDC DEFERRED SALES $ 113 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 12,533 WITHHELD BY FSC EXPENSE $ 7,019 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 596 CREDITS $ 7,615 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (68,245) $ (238,907) NET INVESTMENT INCOME (LOSS) NET REALIZED 2,666,108 5,217,352 GAIN (LOSS) CHANGE IN NET (8,126,553) 4,912,453 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (5,528,690) 9,890,898 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (1,973,480) (1,876,813) SHAREHOLDERS FROM NET REALIZED GAIN SHARE 48,407,721 75,182,201 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 1,947,423 1,832,262 OF DISTRIBUTIONS COST OF SHARES (48,227,152) (31,326,802) REDEEMED NET INCREASE 2,127,992 45,687,661 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 53,805 58,220 FEES TOTAL (5,320,373) 53,759,966 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 72,152,076 18,392,110 PERIOD END OF PERIOD $ 66,831,703 $ 72,152,076 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $68,245 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 1,675,414 3,007,674 ISSUED IN 69,009 74,511 REINVESTMENT OF DISTRIBUTIONS REDEEMED (1,690,697) (1,330,685) NET INCREASE 53,726 1,751,500 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET VALUE, $ 27.31 $ 20.66 $ 17.84 $ 13.91 $ 15.24 $ 12.97 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.02) (.22) (.22) .08 (.15) (.20) INVESTMENT INCOME (LOSS) D NET REALIZED (1.78) 8.34 2.93 3.97 (.60) 3.84 AND UNREALIZED GAIN (LOSS) TOTAL FROM (1.80) 8.12 2.71 4.05 (.75) 3.64 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET - - - (.02) - - INVESTMENT INCOME FROM NET (.74) (1.52) - (.01) (.60) (1.40) REALIZED GAIN IN EXCESS OF - - - (.20) - - NET REALIZED GAIN TOTAL (.74) (1.52) - (.23) (.60) (1.40) DISTRIBUTIONS REDEMPTION FEES .02 .05 .11 .11 .02 .03 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 24.79 $ 27.31 $ 20.66 $ 17.84 $ 13.91 $ 15.24 END OF PERIOD TOTAL RETURN B, C (6.85)% 40.36% 15.81% 30.01% (4.59)% 28.43% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 66,832 $ 72,152 $ 18,392 $ 22,362 $ 20,501 $ 8,374 OF PERIOD (000 OMITTED) RATIO OF 1.34% A 2.01% 2.49% 1.53% E 2.49% E 2.48% E EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.32% A, F 1.97% F 2.44% F 1.48% F 2.49% 2.48% EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.17)% A (.90)% (1.13)% .46% (1.08)% (1.34)% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 191% A 199% 340% 601% 190% 169% TURNOVER RATE AVERAGE $ .0260 $ .0273 $ .0355 COMMISSION RATE G A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
FOOD AND AGRICULTURE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT FOOD AND AGRICULTURE -8.03% 6.80% 109.93% 414.37% SELECT FOOD AND AGRICULTURE (LOAD ADJ.) -10.86% 3.52% 103.56% 398.86% S&P 500 -8.10% 8.10% 131.21% 382.74% GS CONSUMER INDUSTRIES -8.66% 10.68% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Consumer Industries Index - a market capitalization-weighted index of 300 stocks designed to measure the performance of companies in the consumer industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT FOOD AND AGRICULTURE 6.80% 15.99% 17.80% SELECT FOOD AND AGRICULTURE 3.52% 15.28% 17.44% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS CONSUMER INDUSTRIES 10.68% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Food & Agriculture S&P 500 00009 SP001 1988/08/31 9700.00 10000.00 1988/09/30 10089.37 10426.00 1988/10/31 10558.91 10715.84 1988/11/30 10312.69 10562.61 1988/12/31 10576.68 10747.45 1989/01/31 11122.16 11534.17 1989/02/28 10921.20 11246.96 1989/03/31 11334.62 11509.02 1989/04/30 11920.30 12106.34 1989/05/31 12655.27 12596.64 1989/06/30 12903.93 12524.84 1989/07/31 14134.84 13655.84 1989/08/31 13916.92 13923.49 1989/09/30 13975.82 13866.40 1989/10/31 13834.47 13544.70 1989/11/30 14358.64 13821.02 1989/12/31 14687.56 14152.72 1990/01/31 13665.93 13203.07 1990/02/28 13861.43 13373.39 1990/03/31 14460.53 13727.79 1990/04/30 14403.78 13384.59 1990/05/31 15658.75 14689.59 1990/06/30 16166.69 14589.70 1990/07/31 16160.32 14543.01 1990/08/31 14981.43 13228.33 1990/09/30 14503.50 12584.11 1990/10/31 14847.61 12529.99 1990/11/30 15459.36 13339.43 1990/12/31 16057.48 13711.60 1991/01/31 16518.33 14309.43 1991/02/28 17762.64 15332.55 1991/03/31 18631.68 15703.60 1991/04/30 18348.58 15741.29 1991/05/31 19020.11 16421.31 1991/06/30 18236.47 15669.22 1991/07/31 18999.67 16399.40 1991/08/31 19756.17 16788.07 1991/09/30 19408.05 16507.71 1991/10/31 19414.74 16728.91 1991/11/30 19280.85 16054.73 1991/12/31 21531.42 17891.40 1992/01/31 21210.47 17558.62 1992/02/29 21091.86 17786.88 1992/03/31 20624.40 17440.03 1992/04/30 20387.17 17952.77 1992/05/31 20568.58 18040.74 1992/06/30 20343.69 17771.93 1992/07/31 21129.46 18498.80 1992/08/31 21035.75 18119.58 1992/09/30 21388.99 18333.39 1992/10/31 21619.67 18397.56 1992/11/30 22448.70 19024.91 1992/12/31 22828.90 19258.92 1993/01/31 22836.28 19420.70 1993/02/28 22777.23 19684.82 1993/03/31 23397.22 20100.17 1993/04/30 22488.75 19613.74 1993/05/31 23196.81 20139.39 1993/06/30 22965.92 20197.79 1993/07/31 22681.16 20117.00 1993/08/31 23766.34 20879.44 1993/09/30 23689.38 20718.67 1993/10/31 24582.16 21147.54 1993/11/30 24297.39 20946.64 1993/12/31 24841.82 21200.10 1994/01/31 25593.13 21920.90 1994/02/28 25439.64 21326.84 1994/03/31 24252.08 20396.99 1994/04/30 23981.10 20658.07 1994/05/31 23806.84 20996.87 1994/06/30 23989.40 20482.44 1994/07/31 24794.30 21154.27 1994/08/31 26370.91 22021.59 1994/09/30 26420.70 21482.06 1994/10/31 26918.58 21965.41 1994/11/30 26263.04 21165.43 1994/12/31 26355.67 21479.31 1995/01/31 27466.75 22036.27 1995/02/28 28017.98 22895.02 1995/03/31 28655.34 23570.66 1995/04/30 29281.64 24264.81 1995/05/31 30332.42 25234.68 1995/06/30 31050.45 25820.88 1995/07/31 31391.95 26677.10 1995/08/31 31339.41 26744.06 1995/09/30 33799.98 27872.66 1995/10/31 33852.52 27773.15 1995/11/30 35183.50 28992.39 1995/12/31 36012.07 29550.79 1996/01/31 37497.30 30556.70 1996/02/29 38643.30 30839.96 1996/03/31 37992.37 31136.95 1996/04/30 37299.82 31595.90 1996/05/31 38675.71 32410.76 1996/06/30 38713.41 32534.25 1996/07/31 38185.67 31096.88 1996/08/31 36969.98 31752.72 1996/09/30 38223.36 33539.76 1996/10/31 38930.16 34464.79 1996/11/30 40890.33 37069.98 1996/12/31 40819.50 36335.62 1997/01/31 42583.97 38605.87 1997/02/28 43895.01 38908.54 1997/03/31 42751.55 37309.79 1997/04/30 44447.69 39537.19 1997/05/31 45756.53 41944.21 1997/06/30 47276.47 43823.31 1997/07/31 48975.84 47310.33 1997/08/31 46717.04 44660.01 1997/09/30 49524.71 47106.04 1997/10/31 48638.08 45532.69 1997/11/30 51962.95 47640.40 1997/12/31 53202.56 48458.39 1998/01/31 51413.21 48994.34 1998/02/28 54247.27 52527.81 1998/03/31 56325.58 55217.76 1998/04/30 54899.47 55773.25 1998/05/31 56147.99 54814.51 1998/06/30 57325.84 57041.07 1998/07/31 55264.61 56433.58 1998/08/31 49886.00 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980923 111432 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Food and Agriculture Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $49,886 - a 398.86% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison - look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS PHILIP MORRIS COMPANIES, INC. 8.2 MCDONALD'S CORP. 5.4 SARA LEE CORP. 4.7 ANHEUSER-BUSCH COMPANIES, INC. 4.6 SAFEWAY, INC. 4.5 CAMPBELL SOUP CO. 4.0 HEINZ (H.J.) CO. 3.9 COCA-COLA CO. (THE) 3.9 PEPSICO, INC. 3.9 UNILEVER NV (NY SHARES) 3.1 TOP INDUSTRIES AS OF AUGUST 31, 1998 FOOD 13.1% GROCERY - RETAIL 12.5% SOFT DRINKS 9.0% TOBACCO MANUFACTURERS 8.2% GRAIN MILL PRODUCTS 6.6% ALL OTHERS 50.6% ROW: 1, COL: 1, VALUE: 50.6 ROW: 1, COL: 2, VALUE: 6.6 ROW: 1, COL: 3, VALUE: 8.199999999999999 ROW: 1, COL: 4, VALUE: 9.0 ROW: 1, COL: 5, VALUE: 12.5 ROW: 1, COL: 6, VALUE: 13.1 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS FOOD AND AGRICULTURE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (Photograph of Scott Offen) Scott Offen, Portfolio Manager of Fidelity Select Food and Agriculture Portfolio Q. SCOTT, HOW DID THE FUND PERFORM? A. For the six and 12 months that ended August 31, 1998, the fund had total returns of -8.03% and 6.80%, respectively. During the same six- and 12-month periods, the Standard & Poor's 500 Index returned -8.10% and 8.10%, respectively. Beginning with this period, the fund also compares itself to the Goldman Sachs Consumer Industries Index - an index of 300 stocks designed to measure the performance of companies in the consumer industries sector - which returned -8.66% and 10.68% over the same six- and 12-month periods, respectively. Q. WHAT FACTORS AFFECTED THE PERFORMANCE OF THE FOOD AND AGRICULTURE SECTOR DURING THE PAST SIX MONTHS? A. In periods of market volatility like we've seen during the past six months, stocks in this sector generally perform better than other sectors, because consumer nondurable companies such as food and agriculture stocks tend to post steady earnings growth. Since stock prices usually follow earnings, that stability is seen as a relatively safe haven in unstable markets. Yet, as you can see, the performance of the sector proved to be surprisingly disappointing, given the volatility in the market. The main problem was competition and deflation - falling prices - in the packaged food industry that cut into company earnings. Food companies have been unable to raise prices to bolster their earnings. Instead of buying the name brands produced by these food companies, consumers have shifted toward buying lower-priced, private-label or store-brand products, the quality of which has improved dramatically. In addition, food companies, in an attempt to meet ambitious earnings targets, recently cut back on their marketing, advertising and product-development expenditures. Unfortunately, as a result of these cut-backs, the food companies' market position weakened. Q. WHAT STRATEGY DID YOU PURSUE IN THIS INVESTING CLIMATE? A. As it became more apparent that food companies would have a hard time meeting earnings estimates, I increased the fund's holdings in supermarket stocks. Retail supermarket chains are strengthening as the industry consolidates. They have pushed their private-label products because they offer a high profit margin, even though they're lower priced. The fund's supermarket investments at the end of the period included Safeway - one of the fund's largest holdings and one of the top contributors to performance because it beat earnings estimates - Albertson's, American Stores and Dominick's. Q. HOW DID TOBACCO STOCKS FARE DURING THE SIX MONTHS? A. In general, it was a good period for the stocks. Nearly every court decision on the issue of tobacco company liability during the period favored the industry. In addition, during the period judges dismissed some of the suits brought by states' attorneys general, and Congress and the president appeared to lack the political will to attack such a divisive issue. Philip Morris - the fund's largest holding - proved to be one of the fund's top contributors to performance over the period. Q. WHICH INDIVIDUAL STOCKS WERE DISAPPOINTMENTS DURING THE PERIOD? A. The stock price of Sara Lee - one of the fund's largest holdings - fell and was the biggest disappointment. This was one of those instances where it was hard to explain why there was a shift in investor sentiment and a stock-price drop, because Sara Lee's management appeared to do everything right and met earnings expectations. PepsiCo, on the other hand, missed its earnings estimates, leading to a price decline for that stock. Finally, Dole Food was hurt when banana prices didn't rise as much as expected, because banana producers moved more of the fruit into the U.S. market after Russia devalued its currency, thereby depressing prices. Q. WHAT'S YOUR OUTLOOK? A. I'm more optimistic about the next six months. I believe the companies have finally realized what to do to start improving their earnings. I also think the earnings outlook for the market in general is quite uncertain and unstable. Given that and the fact that we should see some stability from companies in the sector, I hope the performance will be better going forward. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark) FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 009 TRADING SYMBOL: FDFAX SIZE: as of August 31, 1998, more than $191 million MANAGER: Scott Offen, since 1996; manager, Fidelity Select Paper and Forest Products Portfolio, 1993-1996; Fidelity Select Brokerage and Investment Management Portfolio, 1990-1993; Fidelity Select Life Insurance Portfolio, 1988- 1990; joined Fidelity in 1985 FOOD AND AGRICULTURE PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 90.6% SHARES VALUE (NOTE 1) AGRICULTURE - 2.7% CROPS - 2.6% DEKALB Genetics Corp. Class B 26,200 $ 2,269,575 Delta & Pine Land Co. 14,100 605,419 Pioneer Hi-Bred International, Inc. 61,900 2,089,125 4,964,119 LIVESTOCK - 0.1% Michael Foods, Inc. 8,200 202,950 TOTAL AGRICULTURE 5,167,069 BEVERAGES - 14.3% MALT BEVERAGE - 5.3% Anheuser-Busch Companies, Inc. 193,800 8,939,025 Coors (Adolph) Co. Class B 29,600 1,221,000 10,160,025 SOFT DRINKS - 9.0% Celestial Seasonings, Inc. (a) 12,200 430,050 Coca-Cola Bottling Co. Consolidated 30,700 1,895,725 Coca-Cola Co. (The) 115,800 7,541,475 PepsiCo, Inc. 271,200 7,508,850 17,376,100 TOTAL BEVERAGES 27,536,125 CHEMICALS & PLASTICS - 0.5% AGRICULTURAL CHEMICALS - 0.5% IMC Global, Inc. 48,000 882,000 FOODS - 40.2% BAKERY PRODUCTS - 1.9% Earthgrains Co. 24,400 671,000 Flowers Industries, Inc. 106,100 1,889,906 Interstate Bakeries Corp. 35,900 935,644 Lance, Inc. 11,600 214,600 3,711,150 CANDY - 1.2% Hershey Foods Corp. 33,800 2,366,000 CANNED SPECIALTIES - 4.0% Campbell Soup Co. 154,300 7,772,863 COOKIES & CRACKERS - 1.1% Keebler Foods Co. (a) 53,600 1,383,550 Nabisco Holdings Corp. Class A 15,100 499,244 United Biscuits Holdings PLC (a) 54,555 167,142 2,049,936 DAIRY - 2.5% Dean Foods Co. 51,100 2,248,400 Groupe Danone 8,100 2,062,697 Suiza Foods Corp. (a) 11,700 565,988 4,877,085 FOOD - 13.1% Chiquita Brands International, Inc. 19,900 222,631 Dole Food, Inc. 68,200 2,949,650 Heinz (H.J.) Co. 141,700 7,554,381 Nestle SA ADR (Reg.) 35,700 3,329,025 Nestle SA (Reg.) 956 1,714,089 Sara Lee Corp. 200,500 9,072,625 Universal Foods Corp. 19,200 405,600 25,248,001 SHARES VALUE (NOTE 1) GENERAL FOOD PREPARATIONS - 1.9% McCormick & Co., Inc. (non-vtg.) 29,200 $ 848,625 Sysco Corp. 139,400 2,814,138 3,662,763 GRAIN MILL PRODUCTS - 6.6% Agribrands International, Inc. 8,400 244,650 Archer-Daniels-Midland Co. 186,359 2,795,385 Corn Products International, Inc. (a) 178,975 4,239,470 Quaker Oats Co. 66,600 3,538,125 Ralston Purina Co. 70,300 1,849,769 12,667,399 MEAT & FISH - 3.2% ConAgra, Inc. 124,500 3,081,375 Hormel (George A) & Co. 25,900 713,869 IBP, Inc. 36,300 601,219 Smithfield Foods, Inc. (a) 11,300 206,225 Tyson Foods, Inc. 99,425 1,628,084 6,230,772 MISCELLANEOUS FOOD PREPS, KINDRED PRODUCTS - 0.5% American Italian Pasta Co. Series A 34,400 862,150 PACKAGED & FROZEN FOODS - 2.7% Bestfoods 101,300 5,083,994 POULTRY SLAUGHTER & PROCESSING - 1.0% Pilgrims Pride Corp. 97,700 1,911,256 SUGAR & CANDIES - 0.5% Sherwood Brands, Inc. warrants 5/6/03 50,000 15,625 Tootsie Roll Industries, Inc. 2,562 86,468 Wrigley (Wm.) Jr. Co. 10,000 775,000 877,093 TOTAL FOODS 77,320,462 GROCERY STORES - 12.8% FOOD STORES - 0.3% Whole Foods Market, Inc. (a) 13,800 570,975 GROCERY - RETAIL - 12.5% Albertson's, Inc. 83,600 4,227,025 American Stores Co. 48,000 1,392,000 Dominick's Supermarkets, Inc. (a) 68,300 3,077,769 Hannaford Brothers Co. 18,700 777,219 Kroger Co. (The) (a) 86,300 3,883,500 Meyer (Fred), Inc. (a) 50,900 2,001,006 Safeway, Inc. (a) 221,600 8,725,500 24,084,019 TOTAL GROCERY STORES 24,654,994 HOLDING COMPANIES - 0.1% HOLDING COMPANY OFFICES - 0.1% Triarc Companies, Inc. Class A (a) 19,600 292,775 HOUSEHOLD PRODUCTS - 5.3% SOAPS & DETERGENTS - 5.3% Unilever NV (NY Shares) 93,400 5,919,225 Unilever PLC Ord. 500,100 4,377,995 10,297,220 RESTAURANTS - 5.4% McDonald's Corp. 186,100 10,433,231 RETAIL & WHOLESALE, MISCELLANEOUS - 0.2% MISCELLANEOUS NONDURABLE GOODS - WHOLESALE - 0.2% AgriBioTech, Inc. (a) 48,400 417,448 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TOBACCO - 9.1% CIGARETTES - 0.9% RJR Nabisco Holdings Corp. 79,100 $ 1,715,482 TOBACCO MANUFACTURERS - 8.2% Philip Morris Companies, Inc. 377,900 15,706,469 TOTAL TOBACCO 17,421,951 TOTAL COMMON STOCKS (Cost $166,022,251) 174,423,275 CASH EQUIVALENTS - 9.4% Taxable Central Cash Fund (b) (Cost $18,013,592) 18,013,592 18,013,592 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $184,035,843) $ 192,436,867 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $83,228,678 and $128,012,049, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $31,235 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At period end, there were no loans outstanding (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $184,374,272. Net unrealized appreciation aggregated $8,062,595, of which $18,265,548 related to appreciated investment securities and $10,202,953 related to depreciated investment securities. FOOD AND AGRICULTURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 192,436,867 SECURITIES, AT VALUE (COST $184,035,84 3) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 2,062,784 INVESTMENTS SOLD RECEIVABLE FOR 499,110 FUND SHARES SOLD DIVIDENDS 194,170 RECEIVABLE INTEREST 79,060 RECEIVABLE REDEMPTION FEES 905 RECEIVABLE TOTAL ASSETS 195,272,896 LIABILITIES PAYABLE FOR $ 887,472 INVESTMENTS PURCHASED PAYABLE FOR 2,261,809 FUND SHARES REDEEMED ACCRUED 104,052 MANAGEMENT FEE OTHER PAYABLES 152,899 AND ACCRUED EXPENSES TOTAL LIABILITIES 3,406,232 NET ASSETS $ 191,866,664 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 170,285,030 UNDISTRIBUTED 579,986 NET INVESTMENT INCOME ACCUMULATED 12,601,277 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 8,400,371 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 191,866,664 4,529,595 SHARES OUTSTANDING NET ASSET $42.36 VALUE AND REDEMPTION PRICE PER SHARE ($191,866,6 64 (DIVIDED BY) 4,529,595 SHARES) MAXIMUM $43.67 OFFERING PRICE PER SHARE (100/97.00 OF $42.36) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 1,599,927 INCOME DIVIDENDS INTEREST 531,220 (INCLUDING INCOME ON SECURITIES LOANED OF $33,247) TOTAL INCOME 2,131,147 EXPENSES MANAGEMENT $ 693,550 FEE TRANSFER AGENT 692,661 FEES ACCOUNTING AND 121,479 SECURITY LENDING FEES NON-INTERESTED 493 TRUSTEES' COMPENSATION CUSTODIAN FEES 9,424 AND EXPENSES REGISTRATION FEES 20,543 AUDIT 14,599 LEGAL 759 REPORTS TO 34,063 SHAREHOLDERS TOTAL EXPENSES 1,587,571 BEFORE REDUCTIONS EXPENSE (36,510) 1,551,061 REDUCTIONS NET INVESTMENT 580,086 INCOME REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 13,237,936 SECURITIES FOREIGN (39,017) 13,198,919 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (29,995,206) SECURITIES ASSETS AND (633) (29,995,839) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (16,796,920) NET INCREASE $ (16,216,834) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 222,708 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 220,928 - - RETAINED BY FDC DEFERRED SALES $ 3,734 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 26,618 WITHHELD BY FSC EXPENSE $ 36,212 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 298 CREDITS $ 36,510 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ 580,086 $ 1,795,355 NET INVESTMENT INCOME NET REALIZED 13,198,919 33,786,692 GAIN (LOSS) CHANGE IN NET (29,995,839) 14,339,862 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (16,216,834) 49,921,909 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (240,018) (2,133,491) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (13,774,848) (27,598,622) REALIZED GAIN TOTAL (14,014,866) (29,732,113) DISTRIBUTIONS SHARE 49,263,257 212,263,562 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 13,747,568 29,301,818 OF DISTRIBUTIONS COST OF SHARES (91,568,948) (234,907,260) REDEEMED NET INCREASE (28,558,123) 6,658,120 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 89,804 296,205 FEES TOTAL (58,700,019) 27,144,121 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 250,566,683 223,422,562 PERIOD END OF PERIOD $ 191,866,664 $ 250,566,683 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $579,986 AND $367,788, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 1,021,168 4,609,772 ISSUED IN 282,466 675,395 REINVESTMENT OF DISTRIBUTIONS REDEEMED (1,907,388) (5,169,172) NET INCREASE (603,754) 115,995 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET VALUE, $ 48.81 $ 44.53 $ 42.15 $ 32.53 $ 31.49 $ 30.86 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET .12 .33 .42 .37 .15 .09 INVESTMENT INCOME D NET REALIZED (3.68) 9.22 4.91 11.61 2.80 3.29 AND UNREALIZED GAIN (LOSS) TOTAL FROM (3.56) 9.55 5.33 11.98 2.95 3.38 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.05) (.37) (.24) (.20) (.08) (.06) INVESTMENT INCOME FROM NET (2.86) (4.95) (2.77) (2.20) (1.85) (2.70) REALIZED GAIN TOTAL (2.91) (5.32) (3.01) (2.40) (1.93) (2.76) DISTRIBUTIONS REDEMPTION FEES .02 .05 .06 .04 .02 .01 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 42.36 $ 48.81 $ 44.53 $ 42.15 $ 32.53 $ 31.49 END OF PERIOD TOTAL RETURN B, C (8.03)% 23.58% 13.59% 37.92% 10.14% 11.69% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 191,867 $ 250,567 $ 223,423 $ 301,102 $ 197,130 $ 95,010 OF PERIOD (000 OMITTED) RATIO OF 1.32% A 1.49% 1.52% 1.43% 1.70% 1.65% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.29% A, E 1.48% E 1.50% E 1.42% E 1.68% E 1.64% E EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET .48% A .73% 1.01% .99% .49% .29% INVESTMENT INCOME TO AVERAGE NET ASSETS PORTFOLIO 76% A 74% 91% 124% 126% 96% TURNOVER RATE AVERAGE $ .0444 $ .0333 $ .0326 COMMISSION RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
LEISURE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT LEISURE -7.35% 19.40% 109.51% 355.50% SELECT LEISURE -10.20% 15.75% 103.15% 341.76% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS CONSUMER INDUSTRIES -8.66% 10.68% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index- a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Consumer Industries Index - a market capitalization-weighted index of 300 stocks designed to measure the performance of companies in the consumer industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT LEISURE 19.40% 15.94% 16.37% SELECT LEISURE 15.75% 15.23% 16.02% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS CONSUMER INDUSTRIES 10.68% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark) UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Leisure S&P 500 00062 SP001 1988/08/31 9700.00 10000.00 1988/09/30 10374.71 10426.00 1988/10/31 10374.71 10715.84 1988/11/30 9976.02 10562.61 1988/12/31 10571.86 10747.45 1989/01/31 11474.39 11534.17 1989/02/28 11290.38 11246.96 1989/03/31 11820.51 11509.02 1989/04/30 12490.83 12106.34 1989/05/31 13112.96 12596.64 1989/06/30 13237.30 12524.84 1989/07/31 14348.16 13655.84 1989/08/31 14463.23 13923.49 1989/09/30 14556.17 13866.40 1989/10/31 13507.27 13544.70 1989/11/30 13666.60 13821.02 1989/12/31 13871.11 14152.72 1990/01/31 12188.91 13203.07 1990/02/28 12080.83 13373.39 1990/03/31 12174.81 13727.79 1990/04/30 11700.22 13384.59 1990/05/31 12668.19 14689.59 1990/06/30 12522.53 14589.70 1990/07/31 12090.23 14543.01 1990/08/31 10694.66 13228.33 1990/09/30 9679.70 12584.11 1990/10/31 9566.93 12529.99 1990/11/30 10328.15 13339.43 1990/12/31 10779.86 13711.60 1991/01/31 11382.70 14309.43 1991/02/28 12256.10 15332.55 1991/03/31 12460.21 15703.60 1991/04/30 12493.44 15741.29 1991/05/31 12925.39 16421.31 1991/06/30 12199.14 15669.22 1991/07/31 12782.99 16399.40 1991/08/31 12915.90 16788.07 1991/09/30 13248.17 16507.71 1991/10/31 13646.90 16728.91 1991/11/30 12991.85 16054.73 1991/12/31 14330.43 17891.40 1992/01/31 14653.21 17558.62 1992/02/29 15165.86 17786.88 1992/03/31 14857.32 17440.03 1992/04/30 15023.46 17952.77 1992/05/31 15113.64 18040.74 1992/06/30 14881.05 17771.93 1992/07/31 14952.26 18498.80 1992/08/31 14738.65 18119.58 1992/09/30 15028.20 18333.39 1992/10/31 15142.13 18397.56 1992/11/30 16172.17 19024.91 1992/12/31 16656.34 19258.92 1993/01/31 17069.30 19420.70 1993/02/28 16979.12 19684.82 1993/03/31 17862.01 20100.17 1993/04/30 17459.47 19613.74 1993/05/31 18713.63 20139.39 1993/06/30 19217.26 20197.79 1993/07/31 19730.78 20117.00 1993/08/31 21088.63 20879.44 1993/09/30 22140.34 20718.67 1993/10/31 23364.88 21147.54 1993/11/30 22495.85 20946.64 1993/12/31 23244.53 21200.10 1994/01/31 23486.13 21920.90 1994/02/28 23285.65 21326.84 1994/03/31 21877.21 20396.99 1994/04/30 21921.31 20658.07 1994/05/31 21689.31 20996.87 1994/06/30 20772.62 20482.44 1994/07/31 21576.14 21154.27 1994/08/31 22436.24 22021.59 1994/09/30 22430.58 21482.06 1994/10/31 22351.36 21965.41 1994/11/30 21395.06 21165.43 1994/12/31 21655.36 21479.31 1995/01/31 22051.46 22036.27 1995/02/28 23036.05 22895.02 1995/03/31 23641.52 23570.66 1995/04/30 23850.96 24264.81 1995/05/31 24312.48 25234.68 1995/06/30 25252.62 25820.88 1995/07/31 27007.54 26677.10 1995/08/31 27873.61 26744.06 1995/09/30 27919.19 27872.66 1995/10/31 26574.51 27773.15 1995/11/30 27440.57 28992.39 1995/12/31 27493.16 29550.79 1996/01/31 27900.65 30556.70 1996/02/29 29396.92 30839.96 1996/03/31 29543.36 31136.95 1996/04/30 30756.38 31595.90 1996/05/31 32018.38 32410.76 1996/06/30 31894.78 32534.25 1996/07/31 29604.97 31096.88 1996/08/31 30340.05 31752.72 1996/09/30 31816.72 33539.76 1996/10/31 30945.03 34464.79 1996/11/30 31823.22 37069.98 1996/12/31 31178.70 36335.62 1997/01/31 32566.38 38605.87 1997/02/28 32376.84 38908.54 1997/03/31 31178.70 37309.79 1997/04/30 31472.53 39537.19 1997/05/31 34422.86 41944.21 1997/06/30 35780.72 43823.31 1997/07/31 37607.79 47310.33 1997/08/31 37003.51 44660.01 1997/09/30 41084.20 47106.04 1997/10/31 40451.48 45532.69 1997/11/30 42079.49 47640.40 1997/12/31 44052.26 48458.39 1998/01/31 44289.55 48994.34 1998/02/28 47688.19 52527.81 1998/03/31 51017.95 55217.76 1998/04/30 51848.62 55773.25 1998/05/31 50556.71 54814.51 1998/06/30 54252.36 57041.07 1998/07/31 53485.04 56433.58 1998/08/31 44176.00 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980923 100939 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Leisure Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $44,176 - a 341.76% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS MICROSOFT CORP. 5.6 TIME WARNER, INC. 5.3 CBS CORP. 4.9 MCDONALD'S CORP. 3.4 INTERPUBLIC GROUP OF COMPANIES, INC. 2.9 MEDIAONE GROUP, INC. 2.8 TELE-COMMUNICATIONS, INC. 2.6 (LIBERTY MEDIA GROUP), SERIES A AMERICA ONLINE, INC. 2.3 DISNEY (WALT) CO. 2.2 GANNETT CO., INC. 2.1 TOP INDUSTRIES AS OF AUGUST 31, 1998 CABLE TV OPERATORS 14.4% MOTION PICTURE PRODUCTION 8.8% TELEVISION BROADCASTING 6.3% PREPACKAGED COMPUTER SOFTWARE 5.6% ADVERTISING AGENCIES 5.4% ALL OTHERS 59.5% ROW: 1, COL: 1, VALUE: 59.5 ROW: 1, COL: 2, VALUE: 5.4 ROW: 1, COL: 3, VALUE: 5.6 ROW: 1, COL: 4, VALUE: 6.3 ROW: 1, COL: 5, VALUE: 8.800000000000001 ROW: 1, COL: 6, VALUE: 14.4 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS LEISURE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Jeffrey Dorsey) Jeffrey Dorsey, Portfolio Manager of Fidelity Select Leisure Portfolio Q. HOW DID THE FUND PERFORM, JEFF? A. For the six- and 12 -month periods ending August 31, 1998, the fund had total returns of -7.35% and 19.40%, respectively. This compared favorably with the Standard & Poor's 500 Index's returns of -8.10% and 8.10% for the same periods. Beginning this period, the fund also compares itself to the Goldman Sachs Consumer Industries Index - an index of 300 stocks designed to measure the performance of companies in the consumer industries sector - which returned -8.66% and 10.68% over the same six- and 12- month periods, respectively. Q. WHAT WAS YOUR STRATEGY DURING THE PERIOD? A. I focused on buying those stocks that would be less affected by the continuing Asian crisis. That led me to increase the fund's weighting in media, entertainment and cable companies, while reducing gaming. I also reduced the fund's holdings in newspapers, restaurant and lodging stocks, due to their weakening fundamentals, with the latter area reacting very negatively to a potential economic downturn. Additionally, I beefed up the fund's weighting in large-cap stocks, which worked out well, given the marked underperformance of small-cap stocks during the period. Q. YOU'VE GOT SOME NEW TOP 10 HOLDINGS IN THE FUND: CBS, MCDONALD'S AND INTERPUBLIC GROUP . . . A. CBS is a company with great radio and outdoor advertising businesses, and it's in the process of turning around its television station operation, showing strong growth there. Investors have focused myopically on the CBS television network operations, which contribute negligible profit to the overall operations, while overlooking the tremendous value in the company's other areas. McDonald's, another new top 10 holding, went through a change in management earlier this year, and has re-focused on cutting overhead, restructuring its operations and developing new products. Interpublic, an ad agency, has shown tremendous growth, which is complemented by its very vigorous acquisition activity. Though this company has some exposure to Asian and Latin American markets, it has managed that exposure quite well. Q. WHICH STOCKS PERFORMED WELL? A. The strongest performers included Time Warner, Viacom and America Online. Time Warner and Viacom have been reducing debt, increasing their cash flows and generally benefiting from economies of scale, while focusing on returns of capital. As Americans spend more of their leisure time on-line, America Online has reaped the benefits. It also has one of the best brand names and business models in its industry. Cable providers such as MediaOne also performed well, putting significant resources into upgrading systems. Outdoor Systems, a billboard advertising company, has benefited from strong advertising activity and demonstrated some of the best growth characteristics in the ad industry. Q. WHICH STOCKS WERE DISAPPOINTMENTS? A. As I mentioned earlier, although CBS had shown strong growth in its broadcasting stations, investors continued their focus on its network business, which performed poorly. Radio now accounts for over 65% of CBS's cash flow. Disney did not meet Wall Street's earnings estimates in June, as its exposure to Asian economies and the poor showing of its ABC network continued to hurt performance. As the high-yield bond market weakened, a number of highly leveraged companies were hurt in the stock market. Chancellor Media's high debt levels were, therefore, a deterrent to investors, given a potential economic downturn. In recessions, investors would tend to shun companies with high debt loads. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS? A. We're seeing the latter stages of lengthy economic growth, and I believe that there will be a downturn at some point. At this point, the outlook for leisure stocks appears fairly positive from my bottom-up, company-by-company perspective. Clearly, the international scene is a concern, and if problems in that arena cause domestic economic growth to falter, that could cause problems for leisure companies. If the economy weakens, I will find ways to position the fund more defensively. However, through varying conditions, my goal is to find companies with strong growth, and then purchase their stocks at a reasonable price. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: MAY 8, 1984 FUND NUMBER: 062 TRADING SYMBOL: FDLSX SIZE: AS OF AUGUST 31, 1998, MORE THAN $239 MILLION MANAGER: JEFFREY DORSEY, SINCE JANUARY 1998; MANAGER, FIDELITY SELECT MULTIMEDIA PORTFOLIO, SINCE 1997; ANALYST, FIXED-INCOME SECURITIES, 1991-1997; JOINED FIDELITY IN 1991 LEISURE PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 93.5% SHARES VALUE (NOTE 1) ADVERTISING - 7.5% ADVERTISING - 1.7% Outdoor Systems, Inc. (a) 169,700 $ 3,945,525 ADVERTISING AGENCIES - 5.4% Interpublic Group of Companies, Inc. 120,400 6,862,800 Omnicom Group, Inc. 77,300 3,681,400 WPP Group PLC 232,100 1,198,597 WPP Group PLC ADR 22,800 1,239,750 Young & Rubicam, Inc. (a) 300 9,169 12,991,716 OUTDOOR ADVERTISING SERVICES - 0.4% Lamar Advertising Co. Class A (a) 28,500 926,250 TOTAL ADVERTISING 17,863,491 APPAREL STORES - 4.4% FAMILY CLOTHING STORES - 1.0% Abercrombie & Fitch Co. Class A (a) 55,115 2,369,945 GENERAL APPAREL STORES - 3.1% Gap, Inc. 78,200 3,993,088 Limited, Inc. (The) 74,100 1,546,838 TJX Companies, Inc. 84,200 1,878,713 7,418,639 SHOE STORES - 0.3% Payless ShoeSource, Inc. (a) 19,000 781,375 TOTAL APPAREL STORES 10,569,959 BEVERAGES - 4.2% DISTILLED & BLENDED LIQUOR - 1.4% Seagram Co. Ltd. 104,800 3,273,956 MALT BEVERAGE - 2.8% Anheuser-Busch Companies, Inc. 106,900 4,930,763 Coors (Adolph) Co. Class B 41,700 1,720,125 6,650,888 TOTAL BEVERAGES 9,924,844 BROADCASTING - 26.2% CABLE TV OPERATORS - 14.4% Cablevision Systems Corp. Class A (a) 10,200 345,525 Comcast Corp. Class A special 87,600 3,274,050 Cox Communications, Inc. Class A (a) 105,300 4,422,600 MediaOne Group, Inc. (a) 163,100 6,687,100 TCA Cable TV, Inc. 71,300 1,639,900 Tele-Communications, Inc. (TCI Group), Series A (a) 129,800 4,283,400 Time Warner, Inc. 155,825 12,524,434 USA Networks, Inc. (a) 60,100 1,179,463 34,356,472 COMMUNICATIONS SERVICES, NEC - 0.4% PanAmSat Corp. (a) 21,500 911,063 RADIO BROADCASTING - 5.1% Chancellor Media Corp. (a) 124,100 4,428,819 Clear Channel Communications, Inc. (a) 103,324 4,649,580 Jacor Communications, Inc. Class A (a) 52,000 3,068,000 12,146,399 TELEVISION BROADCASTING - 6.3% CBS Corp. 449,217 11,679,642 Scripps (EW) Co. Class A 16,400 773,875 SHARES VALUE (NOTE 1) Sinclair Broadcast Group, Inc. Class A (a) 116,300 $ 1,868,069 Young Broadcasting, Inc. Class A (a) 13,800 713,288 15,034,874 TOTAL BROADCASTING 62,448,808 COMPUTER SERVICES & SOFTWARE - 8.4% COMPUTER RELATED SERVICES, NEC - 0.2% CNET, Inc. (a) 10,400 405,600 COMPUTER SERVICES - 2.6% America Online, Inc. 67,100 5,498,006 At Home Corp., Series A (a) 15,000 427,500 SportsLine USA, Inc. 19,600 389,550 6,315,056 PREPACKAGED COMPUTER SOFTWARE - 5.6% Microsoft Corp. (a) 139,200 13,354,500 TOTAL COMPUTER SERVICES & SOFTWARE 20,075,156 ENTERTAINMENT - 14.8% AMUSEMENT - 1.2% SFX Entertainment, Inc. Class A (a) 88,200 2,767,275 AMUSEMENT & RECREATIONAL SERVICES - 0.7% IMAX Corp. (a) 89,400 1,553,172 CRUISES - 1.8% Carnival Corp. 81,900 2,364,863 Royal Carribean Cruises Ltd. 80,500 1,952,125 4,316,988 MOTION PICTURE DISTRIBUTION - 1.8% Viacom, Inc. Class B (non-vtg.) (a) 88,300 4,381,888 MOTION PICTURE PRODUCTION - 8.8% Disney (Walt) Co. 187,256 5,137,837 King World Productions, Inc. (a) 191,900 4,029,900 News Corp. Ltd.: ADR 46,200 1,111,688 sponsored ADR (ltd. vtg.) 145,400 3,053,400 Tele-Communications, Inc. (a): (Liberty Media Group), Series A 189,900 6,207,356 (TCI Ventures Group), Series A 85,600 1,423,100 20,963,281 RECREATIONAL SERVICES - 0.5% Premier Parks, Inc. (a) 75,300 1,223,625 TOTAL ENTERTAINMENT 35,206,229 GENERAL MERCHANDISE STORES - 1.0% DEPARTMENT STORES - 0.2% Stein Mart, Inc. (a) 58,600 520,075 VARIETY STORES - 0.8% Consolidated Stores Corp. (a) 28,500 897,750 Dollar Tree Stores (a) 26,500 768,500 Michaels Stores, Inc. (a) 13,400 314,900 1,981,150 TOTAL GENERAL MERCHANDISE STORES 2,501,225 HOME FURNISHINGS - 0.3% FURNITURE - 0.3% Stanley Furniture Co, Inc. (a) 33,500 670,000 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) HOUSEHOLD PRODUCTS - 1.5% COSMETICS - 1.5% Avon Products, Inc. 42,100 $ 2,647,038 Revlon, Inc. Class A (a) 28,100 1,013,356 3,660,394 LEASING & RENTAL - 0.6% VIDEO TAPE RENTAL - 0.6% Hollywood Entertainment Corp. 129,900 1,339,594 LEISURE DURABLES & TOYS - 1.7% MOTORCYCLES - 0.7% Harley-Davidson, Inc. 55,100 1,697,769 TOYS & GAMES - 1.0% Mattel, Inc. 72,500 2,347,188 TOTAL LEISURE DURABLES & TOYS 4,044,957 LODGING & GAMING - 1.3% HOTELS, MOTELS, & TOURIST COURTS - 1.3% Harrah's Entertainment, Inc. (a) 74,300 1,072,706 Promus Hotel Corp. (a) 33,800 1,039,350 Sun International Hotels Ltd. Ord. (a) 27,100 1,021,331 3,133,387 PHOTOGRAPHIC EQUIPMENT - 1.7% Eastman Kodak Co. 50,800 3,968,750 PRINTING - 1.1% COMMERCIAL PRINTING, NEC - 1.1% Donnelley (R.R.) & Sons Co. 37,700 1,366,625 Valassis Communications, Inc. (a) 41,200 1,228,275 2,594,900 PUBLISHING - 9.2% BOOK PUBLISHING & PRINTING - 2.5% Harcourt General, Inc. 48,200 2,340,713 McGraw-Hill Companies, Inc. 35,400 2,699,250 Reader's Digest Association, Inc. (The) Class A (non-vtg.) 44,700 877,238 5,917,201 GENERAL PUBLISHING - 0.1% R.H. Donnelley Corp. 10,980 144,799 GREETING CARDS - 0.2% American Greetings Corp. Class A 16,400 600,650 NEWSPAPERS - 5.2% Belo (A.H.) Corp. Class A 33,000 610,500 Gannett Co., Inc. 83,900 4,950,100 Harte Hanks Communications, Inc. 35,200 772,200 Times Mirror Co. Class A 68,200 3,900,188 Tribune Co. 33,300 2,145,769 12,378,757 PERIODICALS - 1.2% Meredith Corp. 14,200 476,588 Playboy Enterprises, Inc. Class B (a) 187,600 2,298,100 2,774,688 TOTAL PUBLISHING 21,816,095 REAL ESTATE - 0.0% REAL ESTATE AGENTS - 0.0% ResortQuest International, Inc. (a) 2,900 33,350 SHARES VALUE (NOTE 1) REAL ESTATE INVESTMENT TRUSTS - 0.6% Starwood Hotels & Resorts 40,300 $ 1,470,950 RESTAURANTS - 5.4% Cracker Barrel Old Country Store, Inc. 15,900 388,556 McDonald's Corp. 144,600 8,106,638 Papa John's International, Inc. (a) 10,000 265,000 PJ America, Inc. (a) 47,500 676,875 Starbucks Corp. (a) 110,200 3,478,188 12,915,257 RETAIL & WHOLESALE, MISCELLANEOUS - 1.1% MISCELLANEOUS DURABLE GOODS - WHOLESALE - 0.6% Action Performance Companies, Inc. (a) 55,900 1,292,688 MUSIC, TV, & ELECTRICAL STORES - 0.4% Musicland Stores Corp. (a) 100,700 944,063 PAINT, VARNISH & SUPPLIES - WHOLESALE - 0.1% Finish Line, Inc. Class A (a) 32,700 282,038 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 2,518,789 SERVICES - 0.7% BUSINESS SERVICES - 0.2% Snyder Communications, Inc. (a) 15,000 451,875 CREDIT REPORTING AGENCIES - 0.5% Dunn & Bradstreet Corp. 50,800 1,193,800 TOTAL SERVICES 1,645,675 TEXTILES & APPAREL - 1.8% APPAREL - 0.9% Kellwood Co. 44,100 1,176,919 Warnaco Group, Inc. Class A 35,000 953,750 2,130,669 FOOTWEAR - 0.9% NIKE, Inc. Class B 65,600 2,275,500 TOTAL TEXTILES & APPAREL 4,406,169 TOTAL COMMON STOCKS (Cost $228,966,409) 222,807,979 CASH EQUIVALENTS - 6.5% Taxable Central Cash Fund (b) (Cost $15,478,861) 15,478,861 15,478,861 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $244,445,270) $ 238,286,840 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $190,003,687 and $171,582,098, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $48,644 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $244,619,230. Net unrealized depreciation aggregated $6,332,390, of which $23,451,875 related to appreciated investment securities and $29,784,265 related to depreciated investment securities. LEISURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 238,286,840 SECURITIES, AT VALUE (COST $244,445,27 0) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 6,591,119 INVESTMENTS SOLD RECEIVABLE FOR 535,283 FUND SHARES SOLD DIVIDENDS 229,233 RECEIVABLE INTEREST 62,448 RECEIVABLE REDEMPTION FEES 6,563 RECEIVABLE OTHER 49,491 RECEIVABLES TOTAL ASSETS 245,760,977 LIABILITIES PAYABLE TO $ 33,489 CUSTODIAN BANK PAYABLE FOR 5,847,190 FUND SHARES REDEEMED ACCRUED 145,449 MANAGEMENT FEE OTHER PAYABLES 182,491 AND ACCRUED EXPENSES TOTAL LIABILITIES 6,208,619 NET ASSETS $ 239,552,358 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 226,383,509 ACCUMULATED (496,785) NET INVESTMENT LOSS ACCUMULATED 19,825,129 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (6,159,495) APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 239,552,358 4,245,144 SHARES OUTSTANDING NET ASSET $56.43 VALUE AND REDEMPTION PRICE PER SHARE ($239,552,3 58 (DIVIDED BY) 4,245,144 SHARES) MAXIMUM $58.18 OFFERING PRICE PER SHARE (100/97.00 OF $56.43) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 762,786 INCOME DIVIDENDS INTEREST 649,719 TOTAL INCOME 1,412,505 EXPENSES MANAGEMENT $ 897,802 FEE TRANSFER AGENT 792,750 FEES ACCOUNTING FEES 153,221 AND EXPENSES NON-INTERESTED 634 TRUSTEES' COMPENSATION CUSTODIAN FEES 7,236 AND EXPENSES REGISTRATION FEES 52,553 AUDIT 13,296 LEGAL 868 REPORTS TO 29,889 SHAREHOLDERS TOTAL EXPENSES 1,948,249 BEFORE REDUCTIONS EXPENSE (38,959) 1,909,290 REDUCTIONS NET INVESTMENT (496,785) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 20,123,970 SECURITIES FOREIGN 6,098 20,130,068 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (41,968,047) SECURITIES ASSETS AND (937) (41,968,984) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (21,838,916) NET INCREASE $ (22,335,701) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 671,150 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 662,403 - - RETAINED BY FDC DEFERRED SALES $ 4,945 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 39,975 WITHHELD BY FSC EXPENSE $ 37,661 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 1,298 CREDITS $ 38,959 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (496,785) $ (652,887) NET INVESTMENT INCOME (LOSS) NET REALIZED 20,130,068 27,572,262 GAIN (LOSS) CHANGE IN NET (41,968,984) 29,426,716 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (22,335,701) 56,346,091 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (6,719,596) (19,896,472) SHAREHOLDERS FROM NET REALIZED GAIN SHARE 191,781,949 221,739,781 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 6,637,059 19,641,349 OF DISTRIBUTIONS COST OF SHARES (187,217,388) (118,975,901) REDEEMED NET INCREASE 11,201,620 122,405,229 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 207,518 210,283 FEES TOTAL (17,646,159) 159,065,131 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 257,198,517 98,133,386 PERIOD END OF PERIOD $ 239,552,358 $ 257,198,517 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $496,785 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 2,835,432 3,893,810 ISSUED IN 99,912 374,739 REINVESTMENT OF DISTRIBUTIONS REDEEMED (2,818,421) (2,192,054) NET INCREASE 116,923 2,076,495 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET VALUE, $ 62.30 $ 47.83 $ 46.17 $ 40.71 $ 45.30 $ 35.77 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.11) (.25) (.06) G (.21) (.21) (.29) INVESTMENT INCOME (LOSS) D NET REALIZED (4.29) 21.10 4.47 10.97 (.48) 12.98 AND UNREALIZED GAIN (LOSS) TOTAL FROM (4.40) 20.85 4.41 10.76 (.69) 12.69 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (1.52) (6.46) (2.83) (5.32) (3.93) (3.26) REALIZED GAIN REDEMPTION FEES .05 .08 .08 .02 .03 .10 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 56.43 $ 62.30 $ 47.83 $ 46.17 $ 40.71 $ 45.30 END OF PERIOD TOTAL RETURN B, C (7.35)% 47.29% 10.14% 27.61% (1.07)% 37.14% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 239,552 $ 257,199 $ 98,133 $ 85,013 $ 69,569 $ 105,833 OF PERIOD (000 OMITTED) RATIO OF 1.25% A 1.44% 1.56% 1.64% 1.64% 1.55% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.23% A, E 1.39% E 1.54% E 1.63% E 1.62% E 1.53% E EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.32)% A (.46)% (.12)% (.46)% (.52)% (.69)% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 123% A 209% 127% 141% 103% 170% TURNOVER RATE AVERAGE $ .0396 $ .0396 $ .0370 COMMISSION RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. G INVESTMENT INCOME (LOSS) PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.23 PER SHARE.
MULTIMEDIA PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT MULTIMEDIA -4.36% 16.15% 101.57% 381.51% SELECT MULTIMEDIA -7.30% 12.59% 95.45% 366.99% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS CONSUMER INDUSTRIES -8.66% 10.68% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Consumer Industries Index - a market capitalization-weighted index of 300 stocks designed to measure the performance of companies in the consumer industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT MULTIMEDIA 16.15% 15.05% 17.02% SELECT MULTIMEDIA 12.59% 14.34% 16.66% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS CONSUMER INDUSTRIES 10.68% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark) UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Multimedia S&P 500 00503 SP001 1988/08/31 9700.00 10000.00 1988/09/30 10310.37 10426.00 1988/10/31 10425.85 10715.84 1988/11/30 10343.37 10562.61 1988/12/31 10993.30 10747.45 1989/01/31 12306.06 11534.17 1989/02/28 12280.65 11246.96 1989/03/31 12856.57 11509.02 1989/04/30 13720.45 12106.34 1989/05/31 14381.07 12596.64 1989/06/30 14675.54 12524.84 1989/07/31 15791.97 13655.84 1989/08/31 15774.92 13923.49 1989/09/30 15527.78 13866.40 1989/10/31 14479.52 13544.70 1989/11/30 14564.75 13821.02 1989/12/31 14570.92 14152.72 1990/01/31 12636.11 13203.07 1990/02/28 12316.96 13373.39 1990/03/31 12197.28 13727.79 1990/04/30 11618.83 13384.59 1990/05/31 12725.86 14689.59 1990/06/30 12616.16 14589.70 1990/07/31 11918.03 14543.01 1990/08/31 10372.18 13228.33 1990/09/30 9484.56 12584.11 1990/10/31 9075.66 12529.99 1990/11/30 10013.14 13339.43 1990/12/31 10751.16 13711.60 1991/01/31 11329.61 14309.43 1991/02/28 12167.36 15332.55 1991/03/31 12496.48 15703.60 1991/04/30 12925.33 15741.29 1991/05/31 12995.14 16421.31 1991/06/30 11967.90 15669.22 1991/07/31 12416.69 16399.40 1991/08/31 12805.65 16788.07 1991/09/30 13583.56 16507.71 1991/10/31 14271.72 16728.91 1991/11/30 13294.34 16054.73 1991/12/31 14820.25 17891.40 1992/01/31 15209.20 17558.62 1992/02/29 16056.93 17786.88 1992/03/31 15648.03 17440.03 1992/04/30 15887.38 17952.77 1992/05/31 16126.74 18040.74 1992/06/30 16186.58 17771.93 1992/07/31 16226.47 18498.80 1992/08/31 16007.06 18119.58 1992/09/30 15907.33 18333.39 1992/10/31 16166.64 18397.56 1992/11/30 17343.48 19024.91 1992/12/31 18006.31 19258.92 1993/01/31 18370.07 19420.70 1993/02/28 18450.91 19684.82 1993/03/31 19178.44 20100.17 1993/04/30 18682.48 19613.74 1993/05/31 19956.05 20139.39 1993/06/30 20582.57 20197.79 1993/07/31 21352.88 20117.00 1993/08/31 23170.80 20879.44 1993/09/30 23725.42 20718.67 1993/10/31 25502.26 21147.54 1993/11/30 23837.96 20946.64 1993/12/31 24852.40 21200.10 1994/01/31 25206.83 21920.90 1994/02/28 24883.67 21326.84 1994/03/31 23361.67 20396.99 1994/04/30 23373.00 20658.07 1994/05/31 24232.56 20996.87 1994/06/30 23690.92 20482.44 1994/07/31 24267.89 21154.27 1994/08/31 25727.96 22021.59 1994/09/30 25551.34 21482.06 1994/10/31 26128.31 21965.41 1994/11/30 25304.07 21165.43 1994/12/31 25847.37 21479.31 1995/01/31 26139.57 22036.27 1995/02/28 27210.96 22895.02 1995/03/31 28939.80 23570.66 1995/04/30 29609.42 24264.81 1995/05/31 29767.70 25234.68 1995/06/30 30912.14 25820.88 1995/07/31 32738.38 26677.10 1995/08/31 33773.25 26744.06 1995/09/30 34735.07 27872.66 1995/10/31 33712.37 27773.15 1995/11/30 35015.09 28992.39 1995/12/31 34550.92 29550.79 1996/01/31 34762.32 30556.70 1996/02/29 35911.82 30839.96 1996/03/31 35436.17 31136.95 1996/04/30 37085.82 31595.90 1996/05/31 38317.50 32410.76 1996/06/30 36544.42 32534.25 1996/07/31 33065.93 31096.88 1996/08/31 34297.62 31752.72 1996/09/30 36476.75 33539.76 1996/10/31 35448.09 34464.79 1996/11/30 36097.77 37069.98 1996/12/31 34921.84 36335.62 1997/01/31 34742.89 38605.87 1997/02/28 34288.64 38908.54 1997/03/31 32623.08 37309.79 1997/04/30 33351.54 39537.19 1997/05/31 36535.93 41944.21 1997/06/30 38931.27 43823.31 1997/07/31 41016.62 47310.33 1997/08/31 40213.48 44660.01 1997/09/30 43468.32 47106.04 1997/10/31 42073.39 45532.69 1997/11/30 43468.32 47640.40 1997/12/31 45722.51 48458.39 1998/01/31 46056.99 48994.34 1998/02/28 48834.66 52527.81 1998/03/31 52266.76 55217.76 1998/04/30 53500.33 55773.25 1998/05/31 52030.11 54814.51 1998/06/30 55558.63 57041.07 1998/07/31 56224.09 56433.58 1998/08/31 46698.89 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980903 151603 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Multimedia Portfolio on August 31, 1988 and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $46,699 - a 366.99% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS CBS CORP. 6.6 TIME WARNER, INC. 5.3 MEDIAONE GROUP, INC. 5.3 TELE-COMMUNICATIONS, INC. (TCI GROUP), SERIES A 4.1 INTERPUBLIC GROUP OF COMPANIES, INC. 3.8 VIACOM, INC. CLASS B (NON-VTG.) 3.8 CLEAR CHANNEL COMMUNICATIONS, INC. 3.1 TIMES MIRROR CO. CLASS A 3.0 TELE-COMMUNICATIONS, INC. 3.0 (LIBERTY MEDIA GROUP), SERIES A COX COMMUNICATIONS, INC. CLASS A 2.9 TOP INDUSTRIES AS OF AUGUST 31, 1998 7.7 CABLE TV OPERATORS 23.8% MOTION PICTURE PRODUCTION 9.9% NEWSPAPERS 9.0% TELEVISION BROADCASTING 8.7% ADVERTISING AGENCIES 7.7% ALL OTHERS 40.9% ROW: 1, COL: 1, VALUE: 40.9 ROW: 1, COL: 2, VALUE: 7.7 ROW: 1, COL: 3, VALUE: 8.699999999999999 ROW: 1, COL: 4, VALUE: 9.0 ROW: 1, COL: 5, VALUE: 9.9 ROW: 1, COL: 6, VALUE: 23.8 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS MULTIMEDIA PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Jeffrey Dorsey) Jeffrey Dorsey, Portfolio Manager of Fidelity Select Multimedia Portfolio Q. JEFF, HOW DID THE FUND PERFORM? A. Relatively well. For the six months that ended on August 31, 1998, the fund had a total return of -4.36%, outperforming the Standard & Poor's 500 Index's return of -8.10%. For the 12 months that ended on August 31, 1998, the fund returned 16.15%, also outperforming the S&P 500 index's return of 8.10%. Beginning this period, the fund also compares itself to the Goldman Sachs Consumer Industries Index - an index of 300 stocks designed to measure the performance of companies in the consumer industries sector - which returned -8.66% and 10.68% over the same six- and 12-month periods, respectively. Q. WHAT WAS YOUR STRATEGY DURING THE SIX-MONTH PERIOD, AND HOW DID IT AFFECT PERFORMANCE? A. First, I continued to increase the fund's investments in cable stocks. The spike upward in cable valuations during the period, boosted by merger and acquisition activity, helped the fund's performance. While I built up the fund's positions in cable, I trimmed them in publishing and newspaper stocks, which delivered rather sluggish performance during the most recent six-month period. I decided to cut back on newspaper companies, believing their strong performance in recent years was unsustainable, based on increasing newsprint costs and declining help-wanted ad trends. Finally, the addition of more large-capitalization stocks helped the fund. Q. WHAT WAS BEHIND THE SUCCESS OF THE CABLE PROVIDERS? A. Cable operators have been upgrading their systems to provide more viewing choices and variety in programming for their customers. This industry has done well since 1996, when deregulation was enacted, and is now in a very strong position. I increased the fund's position in cable stocks, including MediaOne and TCI Group earlier in the period, and they've done well. When cable systems are fully upgraded, these companies will be able to provide customers with Internet access through cable at greater speeds, along with telephony. On the programming side, cable networks have become very effective niche players, giving them an advantage in attracting advertising, thereby enabling them to raise advertising prices and increase revenues. Q. WHICH STOCKS PERFORMED WELL? A. The strongest performers included Time Warner and Viacom. These entertainment companies have been reducing debt, growing their cash flows at double-digit rates, benefiting from economies of scale and focusing on returns of capital. Cable providers such as Cox Communications and radio company advertiser Clear Channel Communications also performed well. Q. WHICH STOCKS PERFORMED POORLY? A. My biggest disappointment was publisher Harcourt General. This company has a very strong earnings record and is building up its core business, yet the market has not recognized these achievements. Harcourt has been growing rapidly in the "distance learning" business, one of the big growth areas in education. CBS also disappointed because the market has been focused solely on the network programming end of its businesses, while its other businesses have performed well. Q. WHAT'S YOUR OUTLOOK? A. I'm still optimistic about media stocks, at least for the next six months. We're seeing the latter stages of a long period of economic growth and I believe there will be a downturn at some point. At this point, the outlook for multimedia stocks appears strong, from my bottom-up outlook. I anticipate continued strong advertising growth, a positive factor for most companies held by the fund. Clearly, the international scene is a concern and, if problems in that arena cause domestic economic growth to falter significantly, that could cause problems for the fund. Most of these companies are economically sensitive and have one element in common: they're affected by advertising activity. If the economy weakens, I will work to position the fund more defensively. However, through varying economic conditions, my goal is to find companies with strong growth and to purchase their stocks at a reasonable price. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 503 TRADING SYMBOL: FBMPX SIZE: as of August 31, 1998, more than $105 million MANAGER: Jeffrey Dorsey, since 1997; manager, Fidelity Select Leisure Portfolio, since January 1998; analyst, fixed-income securities, 1991-1997; joined Fidelity in 1991 MULTIMEDIA PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.1% SHARES VALUE (NOTE 1) ADVERTISING - 9.6% ADVERTISING - 1.5% Outdoor Systems, Inc. (a) 68,300 $ 1,587,975 ADVERTISING AGENCIES - 7.7% ADVO, Inc. (a) 13,300 330,838 Interpublic Group of Companies, Inc. 71,000 4,047,000 Omnicom Group, Inc. 60,400 2,876,550 WPP Group PLC 171,100 883,577 Young & Rubicam, Inc. (a) 300 9,169 8,147,134 OUTDOOR ADVERTISING SERVICES - 0.4% Lamar Advertising Co. Class A (a) 14,500 471,250 TOTAL ADVERTISING 10,206,359 BEVERAGES - 0.7% DISTILLED & BLENDED LIQUOR - 0.7% Seagram Co. Ltd. 24,000 749,761 BROADCASTING - 41.0% CABLE TV OPERATORS - 23.8% Adelphia Communications Class A (a) 6,000 207,000 Cablevision Systems Corp. Class A (a) 18,600 630,075 Comcast Corp. Class A special 72,300 2,702,213 Cox Communications, Inc. Class A (a) 73,300 3,078,600 MediaOne Group, Inc. (a) 136,300 5,588,300 TCA Cable TV, Inc. 100,500 2,311,500 Tele-Communications International, Inc., Series A (a) 11,900 246,925 Tele-Communications, Inc. (TCI Group), Series A (a) 130,405 4,303,365 Time Warner, Inc. 69,537 5,589,036 USA Networks, Inc. (a) 29,900 586,788 25,243,802 COMMUNICATIONS SERVICES, NEC - 1.8% CD Radio, Inc. (a) 6,000 90,750 MovieFone, Inc. Class A (a) 11,800 72,275 PanAmSat Corp. (a) 41,500 1,758,563 1,921,588 RADIO BROADCASTING - 6.7% Chancellor Media Corp. (a) 45,300 1,616,644 Clear Channel Communications, Inc. (a) 72,800 3,276,000 Jacor Communications, Inc. Class A (a) 37,600 2,218,400 7,111,044 TELEVISION BROADCASTING - 8.7% CBS Corp. 268,950 6,992,700 Nielsen Media Research 27,700 249,300 Scripps (EW) Co. Class A 27,900 1,316,531 Sinclair Broadcast Group, Inc. Class A (a) 21,200 340,525 Westwood One, Inc. (a) 9,900 191,194 Young Broadcasting, Inc. Class A (a) 3,600 186,075 9,276,325 TOTAL BROADCASTING 43,552,759 COMPUTER SERVICES & SOFTWARE - 0.1% COMPUTER SERVICES - 0.1% FactSet Research Systems, Inc. (a) 3,600 116,100 ELECTRICAL EQUIPMENT - 0.6% TV & RADIO COMMUNICATION EQUIPMENT - 0.6% Loral Space & Communications Ltd. (a) 42,700 677,863 SHARES VALUE (NOTE 1) ENTERTAINMENT - 14.7% AMUSEMENT - 0.4% SFX Entertainment, Inc. Class A (a) 13,700 $ 429,838 MOTION PICTURE DISTRIBUTION - 3.8% Viacom, Inc. Class B (non-vtg.) (a) 81,100 4,024,588 MOTION PICTURE PRODUCTION - 9.9% Disney (Walt) Co. 84,700 2,323,956 King World Productions, Inc. (a) 69,700 1,463,700 News Corp. Ltd. ADR 32,000 770,000 Tele-Communications, Inc. (Liberty Media Group), Series A (a) 97,100 3,173,956 Tele-Communications, Inc. (TCI Ventures Group), Series A (a) 168,200 2,796,325 10,527,937 MOVIE THEATERS - 0.3% Loews Cineplex Entertainment Corp. (a) 28,400 246,248 RECREATIONAL SERVICES - 0.3% Premier Parks, Inc. (a) 19,900 323,375 TOTAL ENTERTAINMENT 15,551,986 PRINTING - 2.5% COMMERCIAL PRINTING, LITHOGRAPHIC - 0.3% Consolidated Graphics, Inc. (a) 7,000 350,438 COMMERCIAL PRINTING - 0.2% Big Flower Holdings, Inc. (a) 7,500 158,438 COMMERCIAL PRINTING, NEC - 2.0% Donnelley (R.R.) & Sons Co. 40,000 1,450,000 Valassis Communications, Inc. (a) 24,200 721,463 2,171,463 TOTAL PRINTING 2,680,339 PUBLISHING - 15.5% BOOK PUBLISHING & PRINTING - 3.9% Harcourt General, Inc. 27,600 1,340,325 McGraw-Hill Companies, Inc. 29,900 2,279,875 Reader's Digest Association, Inc. (The) Class A (non-vtg.) 28,300 555,388 4,175,588 GENERAL PUBLISHING - 0.1% R H Donnelley Corp 11,860 156,404 NEWSPAPERS - 9.0% Belo (A.H.) Corp. Class A 35,700 660,450 Central Newspapers, Inc. Class A 11,000 682,000 Dow Jones & Co., Inc. 6,800 338,725 Gannett Co., Inc. 26,200 1,545,800 Harte Hanks Communicatons, Inc. 44,500 976,219 Times Mirror Co. Class A 56,500 3,231,094 Tribune Co. 32,300 2,081,331 9,515,619 PERIODICALS - 2.5% Meredith Corp. 21,400 718,238 Playboy Enterprises, Inc. Class B (a) 154,400 1,891,400 2,609,638 TOTAL PUBLISHING 16,457,249 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SERVICES - 2.5% BUSINESS SERVICES - 0.5% Catalina Marketing Corp. (a) 5,200 $ 218,725 Snyder Communications, Inc. (a) 8,800 265,100 483,825 COMMERCIAL, ECONOMIC, SOCIOLOGICAL & EDUCATIONAL RESEARCH - 0.5% ACNielsen Corp. (a) 28,300 567,769 CREDIT REPORTING AGENCIES - 1.5% Dunn & Bradstreet Corp. 69,300 1,628,550 TOTAL SERVICES 2,680,144 TELEPHONE SERVICES - 5.9% AT&T Corp. 51,900 2,601,488 Qwest Communications International, Inc. (a) 16,224 405,600 Tel-Save Holdings, Inc. (a) 18,700 280,500 WorldCom, Inc. (a) 71,300 2,918,844 6,206,432 TOTAL COMMON STOCKS (Cost $97,366,225) 98,878,992 CASH EQUIVALENTS - 6.9% Taxable Central Cash Fund (b) (Cost $7,354,396) 7,354,396 7,354,396 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $104,720,621) $ 106,233,388 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $83,314,614 and $83,605,819, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $22,980 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $104,745,284. Net unrealized appreciation aggregated $1,488,104, of which $10,696,194 related to appreciated investment securities and $9,208,090 related to depreciated investment securities. MULTIMEDIA PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 106,233,388 SECURITIES, AT VALUE (COST $104,720,62 1) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 2,875,905 INVESTMENTS SOLD RECEIVABLE FOR 469,602 FUND SHARES SOLD DIVIDENDS 86,832 RECEIVABLE INTEREST 25,183 RECEIVABLE REDEMPTION FEES 6,722 RECEIVABLE OTHER 10,560 RECEIVABLES TOTAL ASSETS 109,708,192 LIABILITIES PAYABLE TO $ 313,206 CUSTODIAN BANK PAYABLE FOR 3,324,251 FUND SHARES REDEEMED ACCRUED 68,720 MANAGEMENT FEE OTHER PAYABLES 101,959 AND ACCRUED EXPENSES TOTAL LIABILITIES 3,808,136 NET ASSETS $ 105,900,056 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 102,823,992 ACCUMULATED (333,354) NET INVESTMENT LOSS ACCUMULATED 1,896,681 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 1,512,737 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 105,900,056 3,508,477 SHARES OUTSTANDING NET ASSET $30.18 VALUE AND REDEMPTION PRICE PER SHARE ($105,900,0 56 (DIVIDED BY) 3,508,477 SHARES) MAXIMUM $31.11 OFFERING PRICE PER SHARE (100/97.00 OF $30.18) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 311,311 INCOME DIVIDENDS INTEREST 273,486 TOTAL INCOME 584,797 EXPENSES MANAGEMENT $ 401,890 FEE TRANSFER AGENT 414,970 FEES ACCOUNTING FEES 68,758 AND EXPENSES NON-INTERESTED 231 TRUSTEES' COMPENSATION CUSTODIAN FEES 7,196 AND EXPENSES REGISTRATION FEES 15,595 AUDIT 10,754 LEGAL 299 REPORTS TO 17,804 SHAREHOLDERS TOTAL EXPENSES 937,497 BEFORE REDUCTIONS EXPENSE (20,882) 916,615 REDUCTIONS NET INVESTMENT (331,818) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 1,944,300 SECURITIES FOREIGN 6,032 1,950,332 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (9,426,996) SECURITIES ASSETS AND (30) (9,427,026) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (7,476,694) NET INCREASE $ (7,808,512) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 412,758 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 410,817 - - RETAINED BY FDC DEFERRED SALES $ 758 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 26,453 WITHHELD BY FSC EXPENSE $ 19,987 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 895 CREDITS $ 20,882 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (331,818) $ (345,513) NET INVESTMENT INCOME (LOSS) NET REALIZED 1,950,332 11,157,423 GAIN (LOSS) CHANGE IN NET (9,427,026) 11,000,546 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (7,808,512) 21,812,456 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (7,953,921) (2,764,701) SHAREHOLDERS FROM NET REALIZED GAINS SHARE 106,099,418 123,445,992 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 7,877,661 2,725,416 OF DISTRIBUTIONS COST OF SHARES (108,038,587) (84,022,531) REDEEMED NET INCREASE 5,938,492 42,148,877 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 239,151 117,385 FEES TOTAL (9,584,790) 61,314,017 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 115,484,846 54,170,829 PERIOD END OF PERIOD $ 105,900,056 $ 115,484,846 (INCLUDING ACCUMULATE D NET INVESTMENT LOSS OF $333,354 AND $1,536, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 2,957,985 4,033,610 ISSUED IN 230,813 101,335 REINVESTMENT OF DISTRIBUTIONS REDEEMED (3,119,815) (2,869,891) NET INCREASE 68,983 1,265,054 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET VALUE, $ 33.58 $ 24.91 $ 27.18 $ 22.35 $ 23.87 $ 18.26 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.08) (.17) .35 E .02 (.01) (.10) INVESTMENT INCOME (LOSS) D NET REALIZED (1.19) 10.30 (1.58) 7.00 1.67 6.28 AND UNREALIZED GAIN (LOSS) TOTAL FROM (1.27) 10.13 (1.23) 7.02 1.66 6.18 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET - - - (.02) - - INVESTMENT INCOME FROM NET (2.19) (1.52) (1.07) (2.19) (3.21) (.65) REALIZED GAIN TOTAL (2.19) (1.52) (1.07) (2.21) (3.21) (.65) DISTRIBUTIONS REDEMPTION FEES .06 .06 .03 .02 .03 .08 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 30.18 $ 33.58 $ 24.91 $ 27.18 $ 22.35 $ 23.87 END OF PERIOD TOTAL RETURN B, C (4.36)% 42.42% (4.52)% 31.98% 9.35% 34.86% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 105,900 $ 115,485 $ 54,171 $ 94,970 $ 38,157 $ 49,177 OF PERIOD (000 OMITTED) RATIO OF 1.34% A 1.75% 1.60% 1.56% 2.05% 1.66% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.31% A, F 1.71% F 1.56% F 1.54% F 2.03% F 1.63% F EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.48)% A (.59)% 1.33% .08% (.07)% (.42)% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 133% A 219% 99% 223% 107% 340% TURNOVER RATE AVERAGE $ .0326 $ .0363 $ .0400 COMMISSION RATE G A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.49 PER SHARE. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
RETAILING PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT RETAILING -3.14% 20.62% 108.06% 499.29% SELECT RETAILING -6.12% 16.93% 101.74% 481.24% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS CONSUMER INDUSTRIES -8.66% 10.68% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Consumer Industries Index - a market capitalization-weighted index of 300 stocks designed to measure the performance of companies in the consumer industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT RETAILING 20.62% 15.78% 19.61% SELECT RETAILING 16.93% 15.07% 19.24% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS CONSUMER INDUSTRIES 10.68% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Retailing S&P 500 00046 SP001 1988/08/31 9700.00 10000.00 1988/09/30 10269.64 10426.00 1988/10/31 10486.27 10715.84 1988/11/30 10341.85 10562.61 1988/12/31 10394.05 10747.45 1989/01/31 10908.05 11534.17 1989/02/28 10761.19 11246.96 1989/03/31 11275.18 11509.02 1989/04/30 11911.55 12106.34 1989/05/31 12735.57 12596.64 1989/06/30 12508.85 12524.84 1989/07/31 13517.62 13655.84 1989/08/31 14173.33 13923.49 1989/09/30 14139.70 13866.40 1989/10/31 13458.78 13544.70 1989/11/30 13542.84 13821.02 1989/12/31 13463.52 14152.72 1990/01/31 12411.99 13203.07 1990/02/28 12844.39 13373.39 1990/03/31 13895.92 13727.79 1990/04/30 13699.37 13384.59 1990/05/31 15527.27 14689.59 1990/06/30 15330.72 14589.70 1990/07/31 14701.77 14543.01 1990/08/31 12588.88 13228.33 1990/09/30 11183.56 12584.11 1990/10/31 10662.71 12529.99 1990/11/30 12117.16 13339.43 1990/12/31 12786.20 13711.60 1991/01/31 14027.38 14309.43 1991/02/28 15327.67 15332.55 1991/03/31 16923.49 15703.60 1991/04/30 17159.90 15741.29 1991/05/31 18588.25 16421.31 1991/06/30 17997.21 15669.22 1991/07/31 19149.74 16399.40 1991/08/31 20164.36 16788.07 1991/09/30 19947.65 16507.71 1991/10/31 19573.32 16728.91 1991/11/30 19199.00 16054.73 1991/12/31 21497.84 17891.40 1992/01/31 22689.92 17558.62 1992/02/29 23780.98 17786.88 1992/03/31 23306.16 17440.03 1992/04/30 22356.54 17952.77 1992/05/31 22821.25 18040.74 1992/06/30 21755.98 17771.93 1992/07/31 22723.84 18498.80 1992/08/31 22208.35 18119.58 1992/09/30 22871.13 18333.39 1992/10/31 24438.65 18397.56 1992/11/30 26290.23 19024.91 1992/12/31 26243.76 19258.92 1993/01/31 26424.83 19420.70 1993/02/28 25423.64 19684.82 1993/03/31 27383.41 20100.17 1993/04/30 25811.66 19613.74 1993/05/31 27241.40 20139.39 1993/06/30 26586.56 20197.79 1993/07/31 26717.52 20117.00 1993/08/31 27939.90 20879.44 1993/09/30 28791.19 20718.67 1993/10/31 29238.66 21147.54 1993/11/30 29522.43 20946.64 1993/12/31 29663.73 21200.10 1994/01/31 28342.20 21920.90 1994/02/28 29392.35 21326.84 1994/03/31 28778.78 20396.99 1994/04/30 29651.93 20658.07 1994/05/31 28188.81 20996.87 1994/06/30 27952.82 20482.44 1994/07/31 28424.79 21154.27 1994/08/31 30230.10 22021.59 1994/09/30 29640.13 21482.06 1994/10/31 29769.93 21965.41 1994/11/30 28731.58 21165.43 1994/12/31 28177.01 21479.31 1995/01/31 27952.82 22036.27 1995/02/28 28212.40 22895.02 1995/03/31 28530.99 23570.66 1995/04/30 27421.84 24264.81 1995/05/31 27905.62 25234.68 1995/06/30 29687.33 25820.88 1995/07/31 31504.44 26677.10 1995/08/31 31067.86 26744.06 1995/09/30 32000.02 27872.66 1995/10/31 30572.29 27773.15 1995/11/30 32106.21 28992.39 1995/12/31 31551.64 29550.79 1996/01/31 30631.28 30556.70 1996/02/29 32884.97 30839.96 1996/03/31 35327.45 31136.95 1996/04/30 37392.35 31595.90 1996/05/31 39185.86 32410.76 1996/06/30 38489.70 32534.25 1996/07/31 34808.28 31096.88 1996/08/31 38100.31 31752.72 1996/09/30 39469.05 33539.76 1996/10/31 38690.29 34464.79 1996/11/30 40177.01 37069.98 1996/12/31 38133.48 36335.62 1997/01/31 37956.06 38605.87 1997/02/28 39328.11 38908.54 1997/03/31 39824.89 37309.79 1997/04/30 40436.48 39537.19 1997/05/31 42313.08 41944.21 1997/06/30 45002.47 43823.31 1997/07/31 49867.28 47310.33 1997/08/31 48193.88 44660.01 1997/09/30 51313.57 47106.04 1997/10/31 51026.70 45532.69 1997/11/30 54744.04 47640.40 1997/12/31 54044.73 48458.39 1998/01/31 54980.26 48994.34 1998/02/28 60017.72 52527.81 1998/03/31 64143.64 55217.76 1998/04/30 63890.82 55773.25 1998/05/31 64996.57 54814.51 1998/06/30 68581.17 57041.07 1998/07/31 66673.44 56433.58 1998/08/31 58124.00 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980923 113232 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Retailing Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $58,124 - a 481.24% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS FEDERATED DEPARTMENT STORES, INC. 8.6 WAL-MART STORES, INC. 6.7 CVS CORP. 6.5 HOME DEPOT, INC. 6.1 SAFEWAY, INC. 4.9 PROFFITTS, INC. 4.8 MCDONALD'S CORP. 4.7 GAP, INC. 4.2 DAYTON HUDSON CORP. 3.9 SEARS, ROEBUCK & CO. 3.6 TOP INDUSTRIES AS OF AUGUST 31, 1998 DEPARTMENT STORES 21.1% DRUG STORES 12.2% GROCERY-RETAIL 11.5% GENERAL MERCHANDISE STORES 11.4% GENERAL APPAREL STORES 9.0% ALL OTHERS 34.8% ROW: 1, COL: 1, VALUE: 34.8 ROW: 1, COL: 2, VALUE: 9.0 ROW: 1, COL: 3, VALUE: 11.4 ROW: 1, COL: 4, VALUE: 11.5 ROW: 1, COL: 5, VALUE: 12.2 ROW: 1, COL: 6, VALUE: 21.1 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS RETAILING PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Ramin Arani) Ramin Arani, Portfolio Manager of Fidelity Select Retailing Portfolio Q. HOW DID THE FUND PERFORM, RAMIN? A. During the six-month period ending August 31, 1998, the fund posted a total return of -3.14% outperforming the Standard & Poor's 500 Index, which returned -8.10% for the same period. For the 12-month period that ended August 31, 1998, the fund returned 20.62%, while the S&P 500 returned 8.10%. Beginning this period, the fund also compares itself to the Goldman Sachs Consumer Industries Index - an index of 300 stocks designed to measure the performance of companies in the consumer industries sector - which returned -8.66% and 10.68% over the same six- and 12-month periods, respectively. Q. WHY DID THE FUND OUTPERFORM THE INDEXES? A. Retail stocks performed relatively well even during the recent market volatility for a number of reasons. First, the economy was strong over the past year and solid consumer spending and product demand were positives for the sector. More importantly, management at many retail companies increasingly focused on improving return on investment capital through enhanced inventory management and increased scrutiny of capital expenditures. Earnings and stock prices benefited as a result. Finally, the fund was overweighted in home-improvement and discount stores such as Home Depot and Wal-Mart relative to the indexes. Wal-Mart is probably the epitome of a retail company that has increasingly focused on its returns, and its earnings growth has accelerated. Home Depot's stock price also benefited from several successful initiatives aimed at improving sales, earnings and returns on investment capital. Q. WERE THERE ANY OTHER FACTORS THAT CONTRIBUTED TO THE FUND'S PERFORMANCE? A. I have increased the fund's holdings in supermarket and drug store chains. In the case of the supermarkets, we have started to see increased consolidation activity. For example, Albertson's bought American Stores, Safeway made a small acquisition, Dominick's Supermarkets announced that it hired investment bankers to seek strategic alliances and Fred Meyer made several acquisitions over the past several months. Typically, those acquisitions end up helping earnings because large cost savings can be realized through consolidation. As far as the drug-store chains, their fundamental business outlook appears positive and as a rule, they tend to be less sensitive to economic cycles. These two factors have supported these stocks during periods of concern about domestic economic growth. Q. WHAT STOCKS OR SECTORS DETRACTED FROM PERFORMANCE? A. Consolidated Stores made an acquisition, but it has taken longer than expected to achieve benefits from that acquisition. J.C. Penney is another holding that has struggled because of its inability to execute on business initiatives and its overall market strategy. Q. IN AUGUST, THE FUND WAS DOWN APPROXIMATELY 13%. IS THIS DECLINE A FACTOR OF THE GENERAL MARKET DECLINE, WEAK INVESTOR CONFIDENCE OR POOR FUNDAMENTALS FOR THE RETAIL SECTOR? A. Toward the end of the period, there were many concerns and fears in the market about both the sustainability of economic growth in the U.S. and the impact of global economic difficulties on corporate earnings. Clearly, this investor uncertainty has had a negative impact on the overall market and the retail sector. The problem, however, is that while there are many economic indicators I can analyze to get a better idea of what consumer demand will look like in the months ahead, these indicators will not tell us which companies will outperform others in the sector. While the outlook for the economy and consumer demand do have an impact on my investment decisions, I continue to focus on bottom-up research before I purchase any holding for the fund. Based on our research, I believe the fundamental business outlook for many retail companies is strong, and I will position the fund to benefit from those companies with solid growth prospects. Q. HOW DOES THE ENVIRONMENT LOOK FOR RETAIL STOCKS OVER THE NEXT SIX MONTHS? A. I would not be surprised if we continue to see volatility and weak investor sentiment in the broader markets and the retail sector over the short term. However, when macroeconomic concerns start to calm down and investors return their focus to companies with strong growth prospects, I believe retail companies can perform well and outperform the broader markets. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: DECEMBER 16, 1985 FUND NUMBER: 046 TRADING SYMBOL: FSRPX SIZE: AS OF AUGUST 31, 1998, MORE THAN $206 MILLION MANAGER: RAMIN ARANI, SINCE 1997; EQUITY RESEARCH ASSOCIATE, DEFENSE ELECTRONICS INDUSTRY AND REAL ESTATE INVESTMENT TRUSTS, 1992-1996; JOINED FIDELITY IN 1992 RETAILING PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 93.9% SHARES VALUE (NOTE 1) APPAREL STORES - 10.6% FAMILY CLOTHING STORES - 1.1% Abercrombie & Fitch Co. Class A (a) 44,201 $ 1,900,643 Stage Stores, Inc. (a) 33,800 352,788 2,253,431 GENERAL APPAREL STORES - 9.0% Gap, Inc. 172,050 8,785,303 Limited, Inc. (The) 160,300 3,346,263 Saks Holdings, Inc. (a) 46,800 979,875 TJX Companies, Inc. 265,300 5,919,506 19,030,947 WOMEN'S CLOTHING STORES - 0.5% AnnTaylor Stores Corp. (a) 42,900 1,043,006 TOTAL APPAREL STORES 22,327,384 COMPUTER SERVICES & SOFTWARE - 0.2% COMPUTER & SOFTWARE STORES - 0.2% CompUSA, Inc. (a) 38,700 459,563 DRUG STORES - 12.2% CVS Corp. 378,674 13,774,267 Duane Reade, Inc. (a) 100 3,738 Rite Aid Corp. 124,500 4,505,344 Walgreen Co. 194,900 7,503,650 25,786,999 GENERAL MERCHANDISE STORES - 37.0% DEPARTMENT STORES - 21.1% Federated Department Stores, Inc. (a) 415,900 18,117,644 Nordstrom, Inc. 72,400 2,167,475 Penney (J.C.) Co., Inc. 129,200 6,403,475 Proffitts, Inc. (a) 398,229 10,154,840 Sears, Roebuck & Co. 169,200 7,688,025 44,531,459 GENERAL MERCHANDISE STORES - 11.4% Dayton Hudson Corp. 227,200 8,179,200 Kmart Corp. (a) 138,800 1,769,700 Wal-Mart Stores, Inc. 241,500 14,188,125 24,137,025 VARIETY STORES - 4.5% Consolidated Stores Corp. (a) 108,558 3,419,577 Costco Companies, Inc. (a) 107,800 5,073,338 Dollar Tree Stores, Inc. (a) 32,900 954,100 9,447,015 TOTAL GENERAL MERCHANDISE STORES 78,115,499 GROCERY STORES - 11.5% GROCERY - RETAIL - 11.5% Albertson's, Inc. 101,600 5,137,150 Dominick's Supermarkets, Inc. (a) 11,900 536,244 Kroger Co. (The) (a) 81,200 3,654,000 Meyer (Fred), Inc. (a) 116,380 4,575,189 Safeway, Inc. (a) 263,274 10,366,414 24,268,997 MEDICAL EQUIPMENT & SUPPLIES - 1.5% DRUG DISTRIBUTORS - WHOLESALE - 1.5% McKesson Corp. 42,800 3,210,000 RESTAURANTS - 5.1% McDonald's Corp. 178,500 10,007,156 Starbucks Corp. (a) 22,600 713,313 10,720,469 SHARES VALUE (NOTE 1) RETAIL & WHOLESALE, MISCELLANEOUS - 15.7% BUILDING MATERIALS - RETAIL - 6.1% Home Depot, Inc. 336,100 $ 12,939,845 LUMBER & BUILDING MATERIALS - RETAIL - 3.0% Lowe's Companies, Inc. 183,700 6,440,981 MUSIC, TV, & ELECTRONIC STORES - 3.1% Best Buy Co., Inc. (a) 64,000 2,520,000 Circuit City Stores, Inc. - Circuit City Group 51,100 1,577,713 Tandy Corp. 43,600 2,378,925 6,476,638 RETAIL, GENERAL - 3.5% Bed Bath & Beyond, Inc. (a) 79,800 1,441,388 Office Depot, Inc. (a) 115,400 2,942,700 Staples, Inc. (a) 107,300 2,910,513 7,294,601 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 33,152,065 TEXTILES & APPAREL - 0.1% APPAREL - 0.1% Liz Claiborne, Inc. 1,700 48,450 Polo Ralph Lauren Corp. Class A (a) 300 6,581 55,031 TOTAL COMMON STOCKS (Cost $193,848,499) 198,096,007 CASH EQUIVALENTS - 6.1% Taxable Central Cash Fund (b) (Cost $12,946,124) 12,946,124 12,946,124 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $206,794,623) $ 211,042,131 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $326,275,431 and $294,048,314, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $122,665 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the interfund lending program as a borrower. The maximum loan and average daily loan balances during the period for which the loans were outstanding amounted to $24,920,000 and $21,329,714, respectively. The weighted average interest rate was 5.79%. Interest expense includes $24,017 paid under the interfund lending program (see Note 5 of Notes to Financial Statements). The fund participated in the security lending program. At period end, there were no loans outstanding (see Note 6 of Notes to Financial Statements). The fund participated in the bank borrowing program. The maximum loan and average daily loan balances during the period for which loans were outstanding amounted to $13,350,000 and $6,603,083, respectively. The weighted average interest rate was 5.85%. Interest expense includes $12,876 paid under the bank borrowing program (see Note 7 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $207,859,965. Net unrealized appreciation aggregated $3,182,166, of which $22,784,707 related to appreciated investment securities and $19,602,541 related to depreciated investment securities. RETAILING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 211,042,131 SECURITIES, AT VALUE (COST $206,794,62 3) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 7,614,899 INVESTMENTS SOLD RECEIVABLE FOR 4,029,039 FUND SHARES SOLD DIVIDENDS 111,338 RECEIVABLE INTEREST 19,803 RECEIVABLE REDEMPTION FEES 25,765 RECEIVABLE OTHER 41,306 RECEIVABLES TOTAL ASSETS 222,884,281 LIABILITIES PAYABLE FOR $ 15,674,651 FUND SHARES REDEEMED ACCRUED 125,791 MANAGEMENT FEE OTHER PAYABLES 164,130 AND ACCRUED EXPENSES TOTAL LIABILITIES 15,964,572 NET ASSETS $ 206,919,709 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 199,886,208 ACCUMULATED (657,278) NET INVESTMENT LOSS ACCUMULATED 3,443,271 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS NET UNREALIZED 4,247,508 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 206,919,709 4,325,221 SHARES OUTSTANDING NET ASSET $47.84 VALUE AND REDEMPTION PRICE PER SHARE ($206,919,7 09 (DIVIDED BY) 4,325,221 SHARES) MAXIMUM $49.32 OFFERING PRICE PER SHARE (100/97.00 OF $47.84) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 651,135 INCOME DIVIDENDS INTEREST 492,316 (INCLUDING INCOME ON SECURITIES LOANED OF $719) TOTAL INCOME 1,143,451 EXPENSES MANAGEMENT $ 855,791 FEE TRANSFER AGENT 673,346 FEES ACCOUNTING AND 146,134 SECURITY LENDING FEES NON-INTERESTED 597 TRUSTEES' COMPENSATION CUSTODIAN FEES 10,418 AND EXPENSES REGISTRATION FEES 96,876 AUDIT 12,779 LEGAL 772 INTEREST 36,893 REPORTS TO 26,454 SHAREHOLDERS TOTAL EXPENSES 1,860,060 BEFORE REDUCTIONS EXPENSE (59,331) 1,800,729 REDUCTIONS NET INVESTMENT (657,278) INCOME (LOSS) REALIZED AND 5,320,923 UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES CHANGE IN NET (17,101,491) UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) (11,780,568) NET INCREASE $ (12,437,846) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 787,511 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 784,938 - - RETAINED BY FDC DEFERRED SALES $ 1,203 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 103,410 WITHHELD BY FSC EXPENSE $ 59,325 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 6 CREDITS $ 59,331 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (657,278) $ (1,019,153) NET INVESTMENT INCOME (LOSS) NET REALIZED 5,320,923 6,177,469 GAIN (LOSS) CHANGE IN NET (17,101,491) 16,637,718 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (12,437,846) 21,796,034 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (3,473,241) (3,631,382) SHAREHOLDERS FROM NET REALIZED GAIN SHARE 515,209,190 722,604,794 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 3,407,781 3,609,234 OF DISTRIBUTIONS COST OF SHARES (489,222,759) (612,476,826) REDEEMED NET INCREASE 29,394,212 113,737,202 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 575,908 1,610,457 FEES TOTAL 14,059,033 133,512,311 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 192,860,676 59,348,365 PERIOD END OF PERIOD $ 206,919,709 $ 192,860,676 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $657,278 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 9,324,376 17,451,277 ISSUED IN 64,737 95,408 REINVESTMENT OF DISTRIBUTIONS REDEEMED (8,918,389) (15,477,247) NET INCREASE 470,724 2,069,438 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET VALUE, $ 50.04 $ 33.25 $ 27.87 $ 23.91 $ 24.91 $ 23.87 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.12) (.27) (.13) (.14) (.18) (.22) INVESTMENT INCOME (LOSS) D NET REALIZED (1.50) 17.14 5.49 4.07 (.96) 3.85 AND UNREALIZED GAIN (LOSS) TOTAL FROM (1.62) 16.87 5.36 3.93 (1.14) 3.63 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.69) (.51) (.08) - - (2.63) REALIZED GAIN REDEMPTION FEES .11 .43 .10 .03 .14 .04 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 47.84 $ 50.04 $ 33.25 $ 27.87 $ 23.91 $ 24.91 END OF PERIOD TOTAL RETURN B, C (3.14)% 52.61% 19.59% 16.56% (4.01)% 15.61% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 206,920 $ 192,861 $ 59,348 $ 44,051 $ 31,090 $ 52,790 OF PERIOD (000 OMITTED) RATIO OF 1.24% A 1.63% 1.45% 1.94% 2.07% 1.86% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.20% A, E 1.55% E 1.39% E 1.92% E 1.96% E 1.83% E EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.44)% A (.67)% (.39)% (.53)% (.74)% (.87)% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 235% A 308% 278% 235% 481% 154% TURNOVER RATE AVERAGE $ .0394 $ .0405 $ .0403 COMMISSION RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
AIR TRANSPORTATION PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT AIR TRANSPORTATION -18.09% 6.82% 61.54% 232.14% SELECT AIR TRANSPORTATION -20.62% 3.55% 56.62% 222.10% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS CYCLICAL INDUSTRIES -18.01% -10.45% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 277 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT AIR TRANSPORTATION 6.82% 10.07% 12.75% SELECT AIR TRANSPORTATION 3.55% 9.39% 12.41% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS CYCLICAL INDUSTRIES -10.45% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Air Transportation S&P 500 00034 SP001 1988/08/31 9700.00 10000.00 1988/09/30 10341.51 10426.00 1988/10/31 10540.59 10715.84 1988/11/30 10297.26 10562.61 1988/12/31 10706.50 10747.45 1989/01/31 11701.94 11534.17 1989/02/28 11923.15 11246.96 1989/03/31 12520.41 11509.02 1989/04/30 13018.13 12106.34 1989/05/31 13349.94 12596.64 1989/06/30 13283.21 12524.84 1989/07/31 14218.49 13655.84 1989/08/31 15298.52 13923.49 1989/09/30 14697.27 13866.40 1989/10/31 13539.30 13544.70 1989/11/30 13405.69 13821.02 1989/12/31 13525.84 14152.72 1990/01/31 12133.81 13203.07 1990/02/28 12644.22 13373.39 1990/03/31 13305.43 13727.79 1990/04/30 12818.22 13384.59 1990/05/31 13711.44 14689.59 1990/06/30 13746.24 14589.70 1990/07/31 13328.63 14543.01 1990/08/31 11217.40 13228.33 1990/09/30 10092.18 12584.11 1990/10/31 10625.79 12529.99 1990/11/30 10463.38 13339.43 1990/12/31 11066.59 13711.60 1991/01/31 12377.42 14309.43 1991/02/28 13769.44 15332.55 1991/03/31 13711.44 15703.60 1991/04/30 13375.03 15741.29 1991/05/31 14163.85 16421.31 1991/06/30 13865.19 15669.22 1991/07/31 14291.45 16399.40 1991/08/31 14113.84 16788.07 1991/09/30 13640.22 16507.71 1991/10/31 14303.29 16728.91 1991/11/30 13663.90 16054.73 1991/12/31 15167.64 17891.40 1992/01/31 16043.84 17558.62 1992/02/29 16766.11 17786.88 1992/03/31 15783.35 17440.03 1992/04/30 14966.36 17952.77 1992/05/31 15167.64 18040.74 1992/06/30 14675.11 17771.93 1992/07/31 14590.77 18498.80 1992/08/31 13976.30 18119.58 1992/09/30 14434.14 18333.39 1992/10/31 14952.23 18397.56 1992/11/30 15313.68 19024.91 1992/12/31 16163.82 19258.92 1993/01/31 16309.99 19420.70 1993/02/28 16565.79 19684.82 1993/03/31 18392.89 20100.17 1993/04/30 18600.81 19613.74 1993/05/31 19663.37 20139.39 1993/06/30 18197.78 20197.79 1993/07/31 18820.65 20117.00 1993/08/31 19944.27 20879.44 1993/09/30 19541.24 20718.67 1993/10/31 20664.86 21147.54 1993/11/30 20713.71 20946.64 1993/12/31 21156.38 21200.10 1994/01/31 21973.42 21920.90 1994/02/28 21193.52 21326.84 1994/03/31 19967.96 20396.99 1994/04/30 19836.64 20658.07 1994/05/31 19007.37 20996.87 1994/06/30 18428.20 20482.44 1994/07/31 19389.10 21154.27 1994/08/31 20126.23 22021.59 1994/09/30 17875.36 21482.06 1994/10/31 18020.15 21965.41 1994/11/30 16822.32 21165.43 1994/12/31 16556.24 21479.31 1995/01/31 17089.02 22036.27 1995/02/28 18554.17 22895.02 1995/03/31 19752.94 23570.66 1995/04/30 21337.97 24264.81 1995/05/31 21684.27 25234.68 1995/06/30 24428.11 25820.88 1995/07/31 25253.92 26677.10 1995/08/31 24281.59 26744.06 1995/09/30 25174.00 27872.66 1995/10/31 24880.97 27773.15 1995/11/30 28090.99 28992.39 1995/12/31 26413.65 29550.79 1996/01/31 25814.58 30556.70 1996/02/29 28741.86 30839.96 1996/03/31 30212.32 31136.95 1996/04/30 28947.01 31595.90 1996/05/31 29222.56 32410.76 1996/06/30 29084.79 32534.25 1996/07/31 24317.69 31096.88 1996/08/31 23876.80 31752.72 1996/09/30 23587.47 33539.76 1996/10/31 23367.03 34464.79 1996/11/30 26219.02 37069.98 1996/12/31 26742.57 36335.62 1997/01/31 25695.46 38605.87 1997/02/28 24414.14 38908.54 1997/03/31 25915.91 37309.79 1997/04/30 27335.01 39537.19 1997/05/31 29236.34 41944.21 1997/06/30 29580.78 43823.31 1997/07/31 31358.11 47310.33 1997/08/31 30159.45 44660.01 1997/09/30 32625.66 47106.04 1997/10/31 32336.33 45532.69 1997/11/30 33162.99 47640.40 1997/12/31 35070.89 48458.39 1998/01/31 36403.44 48994.34 1998/02/28 39332.11 52527.81 1998/03/31 41103.96 55217.76 1998/04/30 42469.91 55773.25 1998/05/31 40699.71 54814.51 1998/06/30 43281.25 57041.07 1998/07/31 40979.99 56433.58 1998/08/31 32210.00 48274.42 IMATRL PRASUN SHR__CHT 19980831 19981009 101002 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Air Transportation Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $32,210 - a 222.10% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS US AIRWAYS GROUP, INC. 7.4 ASA HOLDINGS, INC. 7.4 SOUTHWEST AIRLINES CO. 6.9 GULFSTREAM AEROSPACE CORP. 6.7 COMAIR HOLDINGS, INC. 6.7 ALASKA AIR GROUP. INC. 5.7 SUNDSTRAND CORP. 5.5 AMR CORP. 5.2 AMERICA WEST AIRLINES, INC. CLASS B WARRANTS 8/25/99 4.5 SKYWEST, INC. 4.4 TOP INDUSTRIES AS OF AUGUST 31, 1998 AIR TRANSPORTATION, MAJOR NATIONAL 53.7% AIR TRANSPORTATION, REGIONAL 13.7% AIRCRAFT 9.1% AIRCRAFT & PARTS 5.5% AIR COURIER SERVICES 4.0% ALL OTHERS 14.0% ROW: 1, COL: 1, VALUE: 14.0 ROW: 1, COL: 2, VALUE: 4.0 ROW: 1, COL: 3, VALUE: 5.5 ROW: 1, COL: 4, VALUE: 9.1 ROW: 1, COL: 5, VALUE: 13.7 ROW: 1, COL: 6, VALUE: 53.7 . * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS AIR TRANSPORTATION PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Peter Saperstone) Peter Saperstone, Portfolio Manager of Fidelity Select Air Transportation Portfolio Q. HOW DID THE FUND PERFORM, PETER? A. For the six-month period that ended August 31, 1998, the fund returned -18.09%. For the same six-month period, the Standard & Poor's 500 Index returned -8.10%. For the one-year period that ended August 31, 1998, the fund returned 6.82% and the Standard & Poor's 500 Index returned 8.10%. Beginning this period, the fund also compares itself to the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - which returned -18.01% and -10.45% over the same six- and 12-month periods, respectively. Q. AS A GROUP, THE AIRLINES ARE EXPECTED TO POST A FOURTH CONSECUTIVE YEAR OF RECORD PROFITS IN 1998. GIVEN THAT RECORD PROFITABILITY, WHY WAS THERE SO MUCH TURBULENCE FOR THE AIRLINE INDUSTRY DURING THE PAST SIX MONTHS? A. After outpacing the market as a whole from the beginning of the period through July 1998, airline stocks significantly lagged the S&P 500 index in August due to fears of a slowing U.S. economy. Airlines are quite cyclical - meaning they are very sensitive to the economy's ups and downs. As a result, a slowdown in economic growth can quickly hurt the earnings for the group. In addition, the international operations of U.S. carriers continued to be hurt by weak airline traffic in Asia and Latin America. Finally, as I had anticipated earlier in the year, the market recently began to discount next year's acceleration in industry capacity - which is measured in available seat miles. After seven years of capacity growth in the 1% to 2% range, capacity will grow 5% to 6% in 1999 and will likely exceed annual demand growth of 3% to 4%. Q. DID YOU MAKE ANY STRATEGY SHIFTS IN RESPONSE TO THE MORE DIFFICULT INVESTING ENVIRONMENT? A. Given my concerns about industry fundamentals, I continued to position the fund in areas I believed would be least impacted by the acceleration in supply and slowing international demand. The fund's largest positions continued to be airlines with 100% of their operations in the United States - including Southwest, US Airways, ASA Holdings, Comair, Atlantic Coast and Skywest. In my view, the U.S. will experience the least amount of capacity increases and demand should remain strong. On the other hand, I generally avoided air carriers with a high percentage of international exposure - including United and Northwest - and those that derive a large part of their profits from markets where capacity is growing too fast - such as Delta in the transatlantic market. Q. GULFSTREAM AEROSPACE - WHICH WAS ONE OF THE FUND'S BIG WINNERS IN 1997 AND ONE OF ITS LARGEST HOLDINGS AT THE END OF THE MOST RECENT SIX-MONTH PERIOD - ALSO EXPERIENCED TROUBLE DURING RECENT MONTHS . . . A. That's true. The stock price of Gulfstream - which designs and manufactures business jets for corporations, governments and individuals - fell on growing investor fears that demand for the company's products would decline in a slowing world economy. I continued to hold onto Gulfstream because I believed the stock had already discounted a 25% drop in order rates. The growth of the business jet market - which is driven by share programs, and safety and convenience issues - as well as the strong cash flow of the company were other reasons why I continued to maintain the fund's holdings in Gulfstream. Q. WHAT'S YOUR OUTLOOK? A. I remain cautious about airline stocks. While the industry is financially stronger than during the prior business cycle, the group typically underperforms the market when capacity grows faster than demand. I believe that's exactly what will occur during the next 12 to 18 months. In addition, labor problems are beginning to arise - evidenced by a recent Northwest pilots' strike and the America West mechanics' work slowdown. In my opinion, continued labor problems could put pressure on the airlines' costs. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 034 TRADING SYMBOL: FSAIX SIZE: as of August 31,1998, more than $57 million MANGER: Peter Saperstone, since 1997; manager, Fidelity Select Defense and Aerospace Portfolio, since 1997; Fidelity Select Construction and Housing Portfolio, 1996-1997; equity analyst, various industries, 1995-1996; joined Fidelity in 1995 AIR TRANSPORTATION PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 99.8% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 19.7% AIRCRAFT - 9.1% Gulfstream Aerospace Corp. (a) 105,600 $ 3,709,200 Lockheed Martin Corp. 14,800 1,294,075 5,003,275 AIRCRAFT & PARTS - 5.5% Sundstrand Corp. 67,200 3,061,800 AIRCRAFT ENGINES & PARTS - 1.3% Kellstrom Industries, Inc. (a) 31,900 735,694 MISSILES & SPACE VEHICLES - 3.8% Cordant Technologies, Inc. 59,500 2,119,688 TOTAL AEROSPACE & DEFENSE 10,920,457 AIR TRANSPORTATION - 68.0% AIR TRANSPORTATION, MAJOR NATIONAL - 53.7% AMR Corp. (a) 52,400 2,855,800 Air Canada, Inc. (a) 141,500 599,920 Alaska Air Group, Inc. (a) 81,200 3,161,725 America West Airlines, Inc. Class B warrants 8/25/99 (a) 321,900 2,514,844 America West Holdings Corp. Class B (a) 55,600 1,080,725 ASA Holdings, Inc. 119,500 4,092,875 Atlantic Coast Airlines, Inc. (a) 63,700 1,441,213 Atlas Air, Inc. (a) 68,900 1,636,375 Continental Airlines, Inc. Class B (a) 33,100 1,365,375 Delta Air Lines, Inc. 16,300 1,662,600 Midway Airlines Corp. (a) 24,100 338,906 Ryanair Holdings PLC sponsored ADR (a) 35,100 1,035,450 Southwest Airlines Co. 214,200 3,815,438 US Airways Group, Inc. (a) 70,400 4,100,800 29,702,046 AIR TRANSPORTATION, REGIONAL - 13.7% Comair Holdings, Inc. 144,750 3,682,078 Midwest Express Holdings, Inc. (a) 47,400 1,267,950 SkyWest, Inc. 116,900 2,454,900 Virgin Express Holdings PLC sponsored ADR 21,900 143,719 7,548,647 TRANSPORTATION SERVICES - 0.6% Travel Services International, Inc. (a) 16,200 352,350 TOTAL AIR TRANSPORTATION 37,603,043 COMPUTER SERVICES & SOFTWARE - 1.8% COMPUTER SERVICES - 1.5% Galileo International, Inc. 25,200 823,722 DATA PROCESSING - 0.3% Sabre Group Holdings, Inc. Class A (a) 5,500 176,000 TOTAL COMPUTER SERVICES & SOFTWARE 999,722 ELECTRICAL EQUIPMENT - 2.6% TV & RADIO COMMUNICATION EQUIPMENT - 2.6% Loral Space & Communications Ltd. (a) 90,300 1,433,513 INDUSTRIAL MACHINERY & EQUIPMENT - 1.7% MACHINERY - WHOLESALE - 1.7% AVTEAM, Inc. Class A 140,400 912,600 SHARES VALUE (NOTE 1) TRUCKING & FREIGHT - 6.0% AIR COURIER SERVICES - 4.0% Airborne Freight Corp. 23,500 $ 458,250 FDX Corp. (a) 34,800 1,742,175 2,200,425 FREIGHT FORWARDING - 2.0% Air Express International Corp. 21,900 375,038 Expeditors International of Washington, Inc. 27,400 762,063 1,137,101 TOTAL TRUCKING & FREIGHT 3,337,526 TOTAL COMMON STOCKS (Cost $63,756,838) 55,206,861 CASH EQUIVALENTS - 0.2% Taxable Central Cash Fund (b) (Cost $105,853) 105,853 105,853 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $63,862,691) $ 55,312,714 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $151,634,119 and $250,927,964, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $245 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $63,865,056. Net unrealized depreciation aggregated $8,552,342, of which $1,301,731 related to appreciated investment securities and $9,854,073 related to depreciated investment securities. AIR TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 55,312,714 SECURITIES, AT VALUE (COST $63,862,691 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 5,544,699 INVESTMENTS SOLD RECEIVABLE FOR 2,309,737 FUND SHARES SOLD DIVIDENDS 46,902 RECEIVABLE INTEREST 13,391 RECEIVABLE REDEMPTION FEES 2,470 RECEIVABLE OTHER 570 RECEIVABLES TOTAL ASSETS 63,230,483 LIABILITIES PAYABLE FOR $ 5,452,015 FUND SHARES REDEEMED ACCRUED 39,254 MANAGEMENT FEE OTHER PAYABLES 64,029 AND ACCRUED EXPENSES TOTAL LIABILITIES 5,555,298 NET ASSETS $ 57,675,185 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 55,034,143 ACCUMULATED (290,775) NET INVESTMENT LOSS ACCUMULATED 11,481,892 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (8,550,075) APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 57,675,185 2,641,008 SHARES OUTSTANDING NET ASSET $21.84 VALUE AND REDEMPTION PRICE PER SHARE ($57,675,18 5 (DIVIDED BY) 2,641,008 SHARES) MAXIMUM $22.52 OFFERING PRICE PER SHARE (100/97.00 OF $21.84) STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT INCOME $ 265,990 DIVIDENDS INTEREST 252,028 TOTAL INCOME 518,018 EXPENSES MANAGEMENT FEE $ 392,919 TRANSFER AGENT FEES 341,725 ACCOUNTING FEES AND EXPENSES 67,215 NON-INTERESTED TRUSTEES' COMPENSATION 255 CUSTODIAN FEES AND EXPENSES 11,862 REGISTRATION FEES 15,369 AUDIT 10,601 LEGAL 421 REPORTS TO SHAREHOLDERS 17,839 TOTAL EXPENSES BEFORE REDUCTIONS 858,206 EXPENSE REDUCTIONS (49,413) 808,793 NET INVESTMENT INCOME (LOSS) (290,775) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES 11,762,333 FOREIGN CURRENCY TRANSACTIONS 149 11,762,482 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT SECURITIES (23,637,385) ASSETS AND LIABILITIES IN (98) (23,637,483) FOREIGN CURRENCIES NET GAIN (LOSS) (11,875,001) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (12,165,776) OTHER INFORMATION $ 330,548 SALES CHARGES PAID TO FDC SALES CHARGES - RETAINED BY FDC $ 321,881 DEFERRED SALES CHARGES WITHHELD $ 1,413 BY FDC EXCHANGE FEES WITHHELD BY FSC $ 63,503 EXPENSE REDUCTIONS $ 44,877 DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN CREDITS 4,536 $ 49,413
STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (290,775) $ (529,067) NET INVESTMENT INCOME (LOSS) NET REALIZED 11,762,482 13,099,045 GAIN (LOSS) CHANGE IN NET (23,637,483) 17,664,167 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (12,165,776) 30,234,145 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (1,287,140) (3,545,132) SHAREHOLDERS FROM NET REALIZED GAIN SHARE 164,669,704 317,061,095 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 1,276,229 3,512,172 OF DISTRIBUTIONS COST OF SHARES (276,506,400) (202,499,252) REDEEMED NET INCREASE (110,560,467) 118,074,015 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 503,475 464,487 FEES TOTAL (123,509,908) 145,227,515 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 181,185,093 35,957,578 PERIOD END OF PERIOD $ 57,675,185 $ 181,185,093 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $290,775 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 5,755,883 13,782,585 ISSUED IN 44,922 154,313 REINVESTMENT OF DISTRIBUTIONS REDEEMED (9,904,659) (9,221,113) NET INCREASE (4,103,854) 4,715,785 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET VALUE, $ 26.86 $ 17.72 $ 21.11 $ 13.93 $ 17.12 $ 13.60 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.06) (.19) (.22) (.01) (.18) (.18) INVESTMENT INCOME (LOSS) D NET REALIZED (4.86) 10.59 (3.12) 7.47 (2.01) 3.78 AND UNREALIZED GAIN (LOSS) TOTAL FROM (4.92) 10.40 (3.34) 7.46 (2.19) 3.60 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.21) (1.43) (.07) (.46) (.92) (.22) REALIZED GAIN IN EXCESS OF - - (.20) - (.17) (.05) NET REALIZED GAIN TOTAL (.21) (1.43) (.27) (.46) (1.09) (.27) DISTRIBUTIONS REDEMPTION FEES .11 .17 .22 .18 .09 .19 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 21.84 $ 26.86 $ 17.72 $ 21.11 $ 13.93 $ 17.12 END OF PERIOD TOTAL RETURN B, C (18.09)% 61.10% (15.06)% 54.91% (12.45)% 27.94% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 57,675 $ 181,185 $ 35,958 $ 75,359 $ 18,633 $ 11,035 OF PERIOD (000 OMITTED) RATIO OF 1.26% A 1.93% 1.89% 1.47% 2.50% E 2.33% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.19% A, F 1.87% F 1.80% F 1.41% F 2.50% 2.31% F EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.43)% A (.84)% (1.10)% (.07)% (1.31)% (1.11)% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 248% A 294% 469% 504% 200% 171% TURNOVER RATE AVERAGE $ .0399 $ .0270 $ .0409 COMMISSION RATE G A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
AUTOMOTIVE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT AUTOMOTIVE -19.68% -12.79% 26.18% 198.12% SELECT AUTOMOTIVE -22.16% -15.48% 22.32% 189.10% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS CYCLICAL INDUSTRIES -18.01% -10.45% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 277 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT AUTOMOTIVE -12.79% 4.76% 11.54% SELECT AUTOMOTIVE -15.48% 4.11% 11.20% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS CYCLICAL INDUSTRIES -10.45% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Automotive S&P 500 00502 SP001 1988/08/31 9700.00 10000.00 1988/09/30 9741.38 10426.00 1988/10/31 9666.89 10715.84 1988/11/30 9459.98 10562.61 1988/12/31 9658.62 10747.45 1989/01/31 10105.55 11534.17 1989/02/28 9997.95 11246.96 1989/03/31 10188.31 11509.02 1989/04/30 10643.52 12106.34 1989/05/31 10800.77 12596.64 1989/06/30 10610.41 12524.84 1989/07/31 10982.85 13655.84 1989/08/31 11090.44 13923.49 1989/09/30 10833.87 13866.40 1989/10/31 9931.74 13544.70 1989/11/30 10022.78 13821.02 1989/12/31 10054.74 14152.72 1990/01/31 9789.24 13203.07 1990/02/28 10080.43 13373.39 1990/03/31 10457.27 13727.79 1990/04/30 10423.01 13384.59 1990/05/31 11013.96 14689.59 1990/06/30 11211.18 14589.70 1990/07/31 11245.92 14543.01 1990/08/31 9630.68 13228.33 1990/09/30 8710.16 12584.11 1990/10/31 8536.48 12529.99 1990/11/30 9040.16 13339.43 1990/12/31 9378.84 13711.60 1991/01/31 9908.57 14309.43 1991/02/28 10716.19 15332.55 1991/03/31 10803.03 15703.60 1991/04/30 10924.61 15741.29 1991/05/31 11801.70 16421.31 1991/06/30 11775.65 15669.22 1991/07/31 12261.96 16399.40 1991/08/31 12661.43 16788.07 1991/09/30 12288.01 16507.71 1991/10/31 12609.32 16728.91 1991/11/30 11984.07 16054.73 1991/12/31 12879.51 17891.40 1992/01/31 14270.90 17558.62 1992/02/29 15708.06 17786.88 1992/03/31 16046.75 17440.03 1992/04/30 17071.99 17952.77 1992/05/31 17062.84 18040.74 1992/06/30 16961.32 17771.93 1992/07/31 17117.18 18498.80 1992/08/31 16053.66 18119.58 1992/09/30 15787.78 18333.39 1992/10/31 16447.90 18397.56 1992/11/30 17245.54 19024.91 1992/12/31 18239.27 19258.92 1993/01/31 19081.52 19420.70 1993/02/28 19362.27 19684.82 1993/03/31 20401.04 20100.17 1993/04/30 20283.16 19613.74 1993/05/31 21518.29 20139.39 1993/06/30 21894.62 20197.79 1993/07/31 22145.51 20117.00 1993/08/31 22917.47 20879.44 1993/09/30 23158.70 20718.67 1993/10/31 23650.82 21147.54 1993/11/30 23650.82 20946.64 1993/12/31 24693.17 21200.10 1994/01/31 26100.81 21920.90 1994/02/28 25258.20 21326.84 1994/03/31 23483.79 20396.99 1994/04/30 23006.27 20658.07 1994/05/31 22665.44 20996.87 1994/06/30 22374.73 20482.44 1994/07/31 23046.37 21154.27 1994/08/31 22665.44 22021.59 1994/09/30 21703.09 21482.06 1994/10/31 22114.09 21965.41 1994/11/30 20780.83 21165.43 1994/12/31 21544.07 21479.31 1995/01/31 21032.18 22036.27 1995/02/28 22078.22 22895.02 1995/03/31 21966.94 23570.66 1995/04/30 21900.17 24264.81 1995/05/31 22345.30 25234.68 1995/06/30 22901.71 25820.88 1995/07/31 24548.67 26677.10 1995/08/31 24326.11 26744.06 1995/09/30 24448.52 27872.66 1995/10/31 23313.45 27773.15 1995/11/30 23892.11 28992.39 1995/12/31 24437.39 29550.79 1996/01/31 24148.06 30556.70 1996/02/29 24314.98 30839.96 1996/03/31 25795.02 31136.95 1996/04/30 27098.27 31595.90 1996/05/31 27722.24 32410.76 1996/06/30 27399.11 32534.25 1996/07/31 25805.75 31096.88 1996/08/31 26463.15 31752.72 1996/09/30 26686.00 33539.76 1996/10/31 26808.57 34464.79 1996/11/30 28167.94 37069.98 1996/12/31 28364.73 36335.62 1997/01/31 28861.55 38605.87 1997/02/28 29323.70 38908.54 1997/03/31 28746.01 37309.79 1997/04/30 29388.32 39537.19 1997/05/31 31069.02 41944.21 1997/06/30 32005.41 43823.31 1997/07/31 33410.00 47310.33 1997/08/31 33157.90 44660.01 1997/09/30 34970.66 47106.04 1997/10/31 33361.98 45532.69 1997/11/30 33133.89 47640.40 1997/12/31 33123.88 48458.39 1998/01/31 33110.79 48994.34 1998/02/28 36004.22 52527.81 1998/03/31 38190.66 55217.76 1998/04/30 38014.56 55773.25 1998/05/31 37802.34 54814.51 1998/06/30 37222.29 57041.07 1998/07/31 35835.83 56433.58 1998/08/31 28910.16 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980909 085804 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Automotive Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $28,910 - a 189.10% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS FEDERAL-MOGUL CORP. 10.0 FORD MOTOR CO. 8.6 TRW, INC. 5.5 GOODYEAR TIRE & RUBBER CO. 5.5 CHRYSLER CORP. 4.5 HONDA MOTOR CO. LTD. 4.5 LEAR CORP. 4.4 SPX CORP. 3.8 AUTOZONE, INC. 3.8 DANA CORP. 3.7 TOP INDUSTRIES AS OF AUGUST 31, 1998 AUTO & TRUCK PARTS 48.9% MOTOR VEHICLES & CAR BODIES 26.7% TIRES & INNER TUBES 5.7% AUTO & HOME SUPPLY STORES 3.8% AUTO PARTS - RETAIL 2.9% ALL OTHERS 12.0% ROW: 1, COL: 1, VALUE: 12.0 ROW: 1, COL: 2, VALUE: 2.9 ROW: 1, COL: 3, VALUE: 3.8 ROW: 1, COL: 4, VALUE: 5.7 ROW: 1, COL: 5, VALUE: 26.7 ROW: 1, COL: 6, VALUE: 48.9 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS AUTOMOTIVE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Albert Grosman) Albert Grosman, Portfolio Manager of Fidelity Select Automotive Portfolio Q. HOW DID THE FUND PERFORM, ALBERT? A. For the six- and 12-month periods that ended August 31, 1998, the fund returned -19.68% and -12.79%, respectively. By comparison, the Standard & Poor's 500 Index returned -8.10% and 8.10% for the same periods. Beginning this period, the fund also compares itself to the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - which returned -18.01% and -10.45% over the same six- and 12-month periods, respectively. Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE DURING THE SIX-MONTH PERIOD? A. It was a very difficult one. With concerns that the economy could be showing signs of an economic downturn, investors shied away from cyclical stocks, including auto stocks. Investors also gave serious consideration to the concern that the U.S. economy was being negatively affected by economic problems in Asia, Russia and Latin America. The auto industry is primarily a domestic one, but it most definitely has a global element, with most suppliers and manufacturers selling to global markets. Within the auto industry, there were companies such as General Motors that had direct exposure to Latin American markets. Finally, many auto-part suppliers with exposure to General Motors were hurt because of the 54-day GM strike. Q. WHAT STRATEGY DID YOU PURSUE WITHIN THIS DIFFICULT ENVIRONMENT? A. I invested in companies that had effective management and good longer-term planning and earnings prospects. As an example, I invested in companies such as Federal-Mogul, a parts company that's been growing through acquisitions and has a large exposure to the after-market by selling parts for older vehicles that require more service. I also added more auto dealers that sell used cars including Sonic Automotive and Group 1. I believed that adding these auto dealers could be a good defensive move for the fund, because if consumer confidence is indeed eroding, the historical pattern has been that buyers substitute used cars for new cars when making their purchasing decisions. Q. WHICH STOCKS PERFORMED WELL? A. Ford was a strong contributor during the six-month period. Ford has shown great foresight in planning its product line and mix for the U.S. market, and its management has pursued aggressive cost-cutting measures very effectively. Federal-Mogul, which I mentioned earlier, makes engine parts for the Big Three auto makers, and its strong management team has positioned the company well by making acquisitions and expanding its market. Chrysler also performed well, due primarily to its acquisition by Daimler Benz. Q. WHICH STOCKS PERFORMED POORLY? A. The worst disappointment was Breed Technologies, which makes seat belts, air bags and other safety equipment. Breed is in the process of integrating several companies it acquired earlier, and that process has taken longer than expected. Borg-Warner also performed poorly. This company manufactures four engine component product lines for the Big Three auto makers and has relatively high fixed costs, so reduced demand from Asia, combined with the GM strike, hit pretty hard. The Asian crisis also had a very detrimental effect on the global tire business, and Goodyear Tire's performance was hurt as a result. Asian manufacturers' low-end tire prices declined because of currency devaluation, and customers substituted Asian-made products for Goodyear's generic product line. Q. WHAT'S YOUR OUTLOOK, ALBERT? A. Given the growing trends of outsourcing by auto manufacturers, new safety component development and new environmentally friendly engine technology, I will try to build the fund's exposure to companies that could benefit from these long-term trends. In this cyclical industry, I prefer to select companies whose management teams are focused on returns throughout the economic cycle and are taking a long-term outlook. I'll also try to build exposure to those companies that are making active plans for the future and coming up with the next technology, not just reacting to current demand and market conditions. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 502 TRADING SYMBOL: FSAVX SIZE: as of August 31, 1998, more than $63 million MANAGER: Albert Grosman, since 1997; analyst, Latin American steel, oil, and cable industries, 1996-1997; automotive manufacturing, automotive parts, tire and rental car industries, 1997- present; joined Fidelity in 1996 AUTOMOTIVE PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 97.6% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 0.1% AIRCRAFT EQUIPMENT - 0.1% Simula, Inc. (a) 6,900 $ 62,963 AUTOS, TIRES, & ACCESSORIES - 90.8% AUTO & HOME SUPPLY STORES - 3.8% AutoZone, Inc. (a) 90,000 2,334,375 AUTO & TRUCK PARTS - 48.9% Arvin Industries, Inc. 14,400 543,600 Borg-Warner Automotive, Inc. 53,400 2,162,700 Breed Technologies, Inc. 234,400 1,714,050 Dana Corp. 57,600 2,257,200 Danaher Corp. 28,000 1,015,000 Dura Automotive Systems, Inc. Class A (a) 11,500 253,000 Eaton Corp. 27,500 1,610,469 Federal-Mogul Corp. 115,300 6,154,138 Gentex Corp. (a) 55,200 638,250 Hayes Lemmerz International, Inc. (a) 23,100 687,225 ITT Industries, Inc. 17,100 515,138 Intermet Corp. 5,500 82,500 Johnson Controls, Inc. 46,500 1,990,781 Magna International, Inc. Class A 36,000 2,152,885 Mascotech, Inc. 27,400 479,500 SPX Corp. (a) 47,600 2,368,100 Safety Components International, Inc. (a) 21,100 205,725 Simpson Industries, Inc. 10,600 111,300 Standard Motor Products, Inc. 17,700 427,013 Standard Products Co. 3,600 91,800 TRW, Inc. 78,900 3,382,838 Tower Automotive, Inc. (a) 57,200 1,051,050 Wabash National Corp. 15,000 238,125 Wynn's International, Inc. 3,600 60,975 30,193,362 AUTO DEALERS, GAS STATIONS - RETAIL - 2.8% Group 1 Automotive, Inc. (a) 37,600 446,500 Republic Industries, Inc. (a) 29,800 527,088 Sonic Automotive, Inc. (a) 40,000 737,500 1,711,088 AUTO PARTS - RETAIL - 2.9% Discount Auto Parts, Inc. (a) 28,500 610,969 Monro Muffler Brake, Inc. 5,095 50,950 Pep Boys-Manny, Moe & Jack 78,600 1,154,438 1,816,357 MOTOR VEHICLES & CAR BODIES - 26.7% Chrysler Corp. 62,300 2,780,138 Ford Motor Co. 120,500 5,302,000 Honda Motor Co. Ltd. 83,000 2,777,038 Lear Corp. (a) 66,500 2,697,406 Oshkosh Truck Corp. Class B 3,900 87,750 Renault SA Ord. 30,000 1,288,575 Volkswagen AG 22,200 1,516,466 16,449,373 TIRES & INNER TUBES - 5.7% Goodyear Tire & Rubber Co. 68,800 3,371,200 Michelin SA (Compagnie Generale des Etablissements) Class B 4,229 172,832 3,544,032 TOTAL AUTOS, TIRES, & ACCESSORIES 56,048,587 SHARES VALUE (NOTE 1) BUILDING MATERIALS - 0.6% GASKETS, HOSES, BELTS - 0.6% Mark IV Industries, Inc. 27,200 $ 385,900 CHEMICALS & PLASTICS - 0.3% PLASTICS, NEC - 0.3% Myers Industries, Inc. 9,200 189,750 ELECTRICAL EQUIPMENT - 0.3% MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT, SUPPLIES - 0.3% Delco Remy International, Inc. Class A (a) 20,000 210,000 ELECTRONICS - 0.6% ELECTRONICS & ELECTRONIC COMPONENTS - 0.6% Stoneridge, Inc. 19,300 349,813 INDUSTRIAL MACHINERY & EQUIPMENT - 0.4% PRIMARY BATTERIES, DRY & WET - 0.4% Ballard Power Systems, Inc. (a) 15,000 251,036 IRON & STEEL - 1.3% FABRICATED METAL PRODUCTS - 0.4% SPS Technologies, Inc. (a) 6,600 275,550 METAL FORGINGS & STAMPINGS - 0.9% Linamar Corp. 41,800 536,991 TOTAL IRON & STEEL 812,541 LEASING & RENTAL - 2.8% AUTO RENTAL & LEASING - 1.2% Avis Rent A Car, Inc. (a) 25,200 395,320 Budget Group, Inc. Class A (a) 18,000 306,000 701,320 TRUCK RENT & LEASE, NO DRIVER - 1.6% Hertz Corp. Class A 26,700 1,007,925 TOTAL LEASING & RENTAL 1,709,245 LEISURE DURABLES & TOYS - 0.4% MOTOR HOMES - 0.4% Coachmen Industries, Inc. 12,200 227,988 TOTAL COMMON STOCKS (Cost $75,400,363) 60,247,823 CASH EQUIVALENTS - 2.4% Taxable Central Cash Fund (b) (Cost $1,479,982) 1,479,982 1,479,982 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $76,880,345) $ 61,727,805 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $76,307,370 and $29,401,100, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $15,803 for the period (see Note 4 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 85.9% Canada 4.8 Japan 4.5 Germany 2.4 France 2.4 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $76,944,000. Net unrealized depreciation aggregated $15,216,195, of which $804,954 related to appreciated investment securities and $16,021,149 related to depreciated investment securities. AUTOMOTIVE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 61,727,805 SECURITIES, AT VALUE (COST $76,880,345 ) - SEE ACCOMPANYIN G SCHEDULE FOREIGN 215 CURRENCY HELD AT VALUE (COST $222) RECEIVABLE FOR 3,344,003 INVESTMENTS SOLD RECEIVABLE FOR 326,491 FUND SHARES SOLD DIVIDENDS 131,349 RECEIVABLE INTEREST 19,827 RECEIVABLE REDEMPTION FEES 678 RECEIVABLE OTHER 2,470 RECEIVABLES TOTAL ASSETS 65,552,838 LIABILITIES PAYABLE FOR $ 1,011,150 INVESTMENTS PURCHASED PAYABLE FOR 1,201,832 FUND SHARES REDEEMED ACCRUED 37,731 MANAGEMENT FEE OTHER PAYABLES 62,179 AND ACCRUED EXPENSES TOTAL LIABILITIES 2,312,892 NET ASSETS $ 63,239,946 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 78,410,440 UNDISTRIBUTED 43,604 NET INVESTMENT INCOME ACCUMULATED (62,077) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (15,152,021) APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 63,239,946 3,094,598 SHARES OUTSTANDING NET ASSET $20.44 VALUE AND REDEMPTION PRICE PER SHARE ($63,239,94 6 (DIVIDED BY) 3,094,598 SHARES) MAXIMUM $21.07 OFFERING PRICE PER SHARE (100/97.00 OF $20.44) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 321,345 INCOME DIVIDENDS INTEREST 116,191 TOTAL INCOME 437,536 EXPENSES MANAGEMENT $ 146,411 FEE TRANSFER AGENT 179,351 FEES ACCOUNTING FEES 33,936 AND EXPENSES NON-INTERESTED 160 TRUSTEES' COMPENSATION CUSTODIAN FEES 8,340 AND EXPENSES REGISTRATION FEES 13,954 AUDIT 10,575 LEGAL 131 REPORTS TO 6,419 SHAREHOLDERS TOTAL EXPENSES 399,277 BEFORE REDUCTIONS EXPENSE (10,790) 388,487 REDUCTIONS NET INVESTMENT 49,049 INCOME REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 115,664 SECURITIES FOREIGN (2,288) 113,376 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (17,812,978) SECURITIES ASSETS AND 577 (17,812,401) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (17,699,025) NET INCREASE $ (17,649,976) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 86,407 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 86,407 - - RETAINED BY FDC DEFERRED SALES $ 770 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 7,463 WITHHELD BY FSC EXPENSE $ 10,362 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 428 CREDITS $ 10,790 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ 49,049 $ 108,611 NET INVESTMENT INCOME NET REALIZED 113,376 12,457,463 GAIN (LOSS) CHANGE IN NET (17,812,401) (2,220,824) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (17,649,976) 10,345,250 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (24,886) (202,512) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (2,687,961) (7,054,725) REALIZED GAIN TOTAL (2,712,847) (7,257,237) DISTRIBUTIONS SHARE 74,494,862 38,285,022 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 2,639,778 7,198,159 OF DISTRIBUTIONS COST OF SHARES (26,047,987) (102,498,033) REDEEMED NET INCREASE 51,086,653 (57,014,852) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 27,174 69,215 FEES TOTAL INCREASE 30,751,004 (53,857,624) (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 32,488,942 86,346,566 PERIOD END OF PERIOD $ 63,239,946 $ 32,488,942 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $43,604 AND $52,621, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 2,829,266 1,443,301 ISSUED IN 97,604 295,056 REINVESTMENT OF DISTRIBUTIONS REDEEMED (1,013,581) (3,958,616) NET INCREASE 1,913,289 (2,220,259) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET VALUE, $ 27.50 $ 25.38 $ 21.85 $ 19.84 $ 25.48 $ 20.69 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET .03 .05 .13 .03 .08 .05 INVESTMENT INCOME D NET REALIZED (4.92) 5.21 4.28 1.95 (3.46) 6.00 AND UNREALIZED GAIN (LOSS) TOTAL FROM (4.89) 5.26 4.41 1.98 (3.38) 6.05 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.02) (.08) (.17) - (.05) (.05) INVESTMENT INCOME FROM NET (2.16) (3.09) (.75) - (2.26) (1.26) REALIZED GAIN TOTAL (2.18) (3.17) (.92) - (2.31) (1.31) DISTRIBUTIONS REDEMPTION FEES .01 .03 .04 .03 .05 .05 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 20.44 $ 27.50 $ 25.38 $ 21.85 $ 19.84 $ 25.48 END OF PERIOD TOTAL RETURN B, C (19.68)% 22.78% 20.60% 10.13% (12.59)% 30.45% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 63,240 $ 32,489 $ 86,347 $ 55,753 $ 60,075 $ 228,698 OF PERIOD (000 OMITTED) RATIO OF 1.57% A 1.60% 1.56% 1.81% 1.82% 1.69% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.52% A, E 1.56% E 1.52% E 1.80% E 1.80% E 1.68% E EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET .19% A .17% .54% .13% .34% .22% INVESTMENT INCOME TO AVERAGE NET ASSETS PORTFOLIO 121% A 153% 175% 61% 63% 64% TURNOVER RATE AVERAGE $ .0523 $ .0424 $ .0495 COMMISSION RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
CHEMICALS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT CHEMICALS -26.10% -24.68% 60.08% 204.64% SELECT CHEMICALS -28.39% -27.01% 55.20% 195.43% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS CYCLICAL INDUSTRIES -18.01% -10.45% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 277 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT CHEMICALS -24.68% 9.87% 11.78% SELECT CHEMICALS -27.01% 9.19% 11.44% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS CYCLICAL INDUSTRIES -10.45% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Chemicals S&P 500 00069 SP001 1988/08/31 9700.00 10000.00 1988/09/30 9820.73 10426.00 1988/10/31 9973.96 10715.84 1988/11/30 9639.64 10562.61 1988/12/31 10076.11 10747.45 1989/01/31 10749.40 11534.17 1989/02/28 10614.74 11246.96 1989/03/31 10730.83 11509.02 1989/04/30 11037.29 12106.34 1989/05/31 11292.68 12596.64 1989/06/30 11157.84 12524.84 1989/07/31 11868.86 13655.84 1989/08/31 12412.58 13923.49 1989/09/30 11971.10 13866.40 1989/10/31 11125.31 13544.70 1989/11/30 11362.32 13821.02 1989/12/31 11820.42 14152.72 1990/01/31 10978.20 13203.07 1990/02/28 11051.65 13373.39 1990/03/31 11379.73 13727.79 1990/04/30 11115.31 13384.59 1990/05/31 12084.84 14689.59 1990/06/30 12183.48 14589.70 1990/07/31 12223.79 14543.01 1990/08/31 10591.26 13228.33 1990/09/30 10067.24 12584.11 1990/10/31 10183.13 12529.99 1990/11/30 10863.35 13339.43 1990/12/31 11331.95 13711.60 1991/01/31 12092.78 14309.43 1991/02/28 13019.90 15332.55 1991/03/31 13332.29 15703.60 1991/04/30 13226.48 15741.29 1991/05/31 14143.52 16421.31 1991/06/30 13759.14 15669.22 1991/07/31 14422.29 16399.40 1991/08/31 14705.78 16788.07 1991/09/30 14594.41 16507.71 1991/10/31 14827.27 16728.91 1991/11/30 14088.19 16054.73 1991/12/31 15713.07 17891.40 1992/01/31 16014.84 17558.62 1992/02/29 16592.37 17786.88 1992/03/31 16472.71 17440.03 1992/04/30 17071.05 17952.77 1992/05/31 16972.19 18040.74 1992/06/30 16469.12 17771.93 1992/07/31 16988.79 18498.80 1992/08/31 16408.30 18119.58 1992/09/30 16424.89 18333.39 1992/10/31 16259.04 18397.56 1992/11/30 16751.06 19024.91 1992/12/31 17112.27 19258.92 1993/01/31 17094.67 19420.70 1993/02/28 16795.38 19684.82 1993/03/31 17194.43 20100.17 1993/04/30 17513.35 19613.74 1993/05/31 17778.52 20139.39 1993/06/30 17332.55 20197.79 1993/07/31 17597.73 20117.00 1993/08/31 18459.53 20879.44 1993/09/30 17874.95 20718.67 1993/10/31 18549.93 21147.54 1993/11/30 18688.54 20946.64 1993/12/31 19295.30 21200.10 1994/01/31 20797.21 21920.90 1994/02/28 20764.42 21326.84 1994/03/31 20141.35 20396.99 1994/04/30 21115.37 20658.07 1994/05/31 21623.78 20996.87 1994/06/30 21353.07 20482.44 1994/07/31 22317.06 21154.27 1994/08/31 23611.19 22021.59 1994/09/30 23439.52 21482.06 1994/10/31 23399.90 21965.41 1994/11/30 21564.36 21165.43 1994/12/31 22146.25 21479.31 1995/01/31 21567.52 22036.27 1995/02/28 22819.18 22895.02 1995/03/31 23519.03 23570.66 1995/04/30 24023.20 24264.81 1995/05/31 24262.41 25234.68 1995/06/30 24672.48 25820.88 1995/07/31 25841.18 26677.10 1995/08/31 25950.53 26744.06 1995/09/30 26360.60 27872.66 1995/10/31 25048.38 27773.15 1995/11/30 26141.89 28992.39 1995/12/31 26896.23 29550.79 1996/01/31 28132.50 30556.70 1996/02/29 29089.14 30839.96 1996/03/31 30494.66 31136.95 1996/04/30 30812.43 31595.90 1996/05/31 30745.78 32410.76 1996/06/30 30353.32 32534.25 1996/07/31 29124.08 31096.88 1996/08/31 30412.56 31752.72 1996/09/30 31760.28 33539.76 1996/10/31 31975.02 34464.79 1996/11/30 33152.43 37069.98 1996/12/31 32684.08 36335.62 1997/01/31 33195.63 38605.87 1997/02/28 33471.08 38908.54 1997/03/31 32392.89 37309.79 1997/04/30 33590.67 39537.19 1997/05/31 35245.00 41944.21 1997/06/30 36213.96 43823.31 1997/07/31 39112.97 47310.33 1997/08/31 39231.13 44660.01 1997/09/30 39475.34 47106.04 1997/10/31 37505.91 45532.69 1997/11/30 37718.61 47640.40 1997/12/31 38069.93 48458.39 1998/01/31 37521.10 48994.34 1998/02/28 39986.50 52527.81 1998/03/31 41458.77 55217.76 1998/04/30 41585.12 55773.25 1998/05/31 39957.30 54814.51 1998/06/30 36737.23 57041.07 1998/07/31 33615.01 56433.58 1998/08/31 29543.00 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980923 115156 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Chemicals Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $29,543 - a 195.43% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS DU PONT (E.I.) DE NEMOURS & CO. 13.7 SEALED AIR CORP. 9.9 ICI (IMPERIAL CHEMICAL INDUSTRIES) PLC ADR CLASS L 6.6 WITCO CORP. 5.9 CYTEC INDUSTRIES, INC. 5.8 LYONDELL PETROCHEMICAL CO. 4.8 GREAT LAKES CHEMICAL CORP. 4.4 DOW CHEMICAL CO. 4.2 SPARTECH CORP. 4.1 CABOT CORP. 3.8 TOP INDUSTRIES AS OF AUGUST 31, 1998 CHEMICALS 48.4% UNSUPPORTED PLASTICS FILM & SHEET 13.0% CHEMICALS, GENERAL 4.4% PLASTICS & SYNTHETIC RESINS 4.1% INORGANIC CHEMICALS 3.8% ALL OTHERS 26.3% ROW: 1, COL: 1, VALUE: 26.3 ROW: 1, COL: 2, VALUE: 3.8 ROW: 1, COL: 3, VALUE: 4.1 ROW: 1, COL: 4, VALUE: 4.4 ROW: 1, COL: 5, VALUE: 13.0 ROW: 1, COL: 6, VALUE: 48.4 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS CHEMICALS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Audra J. Barranco) Audra J. Barranco, Portfolio Manager of Fidelity Select Chemicals Portfolio Q. HOW DID THE FUND PERFORM, AUDRA? A. For the six months that ended August 31, 1998, the fund had a total return of -26.10%. For the 12-month period, it returned -24.68%. For the same six- and 12-month periods, the Standard & Poor's 500 Index returned -8.10% and 8.10%, respectively. Beginning this period, the fund also compares itself to the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - which returned -18.01% and -10.45% over the same six- and 12-month periods, respectively. Q. WHAT WERE THE KEY FACTORS BEHIND THE FUND'S PERFORMANCE? A. The period started out in March with the fund continuing to perform quite positively, but performance started to level off in April and early May. Then, beginning in late May and early June, more than half of the chemical companies started issuing pre-release warnings about their earnings, saying that their profitability would be less than the consensus estimates of analysts. It was then that the stock prices of the chemical group plummeted, including companies that did not have disappointing earnings. This correction late in the period affected the entire group - specialty companies, diversified companies and commodity chemical companies. Q. WAS THE FINANCIAL CRISIS IN ASIA A SIGNIFICANT INFLUENCE? A. The turmoil in Asia was a key factor for two reasons. Some companies were directly affected because they sold their products in Asia. Other companies were more indirectly affected because they competed with Asian companies, which started selling their products at substantially lower prices. This was partly because of the devaluations of many Asian currencies and partly because of the willingness of Asian companies to sell their products at any price. With the profitability of many U.S. chemical companies severely hurt, their stock prices fell sharply - much more sharply than the overall market. Before the correction, chemical industry stocks were selling, on a price-to-earnings basis, at a 10% to 25% discount to the overall market. By August 31, they were selling at a 50% to 60% discount. Q. WHAT TYPE OF STRATEGY DID YOU FOLLOW IN LIGHT OF THIS ENVIRONMENT? A. My strategy has always been a stock-picking one, choosing companies on a case-by-case basis, based upon their growth prospects, products and managements. I don't focus on any particular sectors, although I have tended to de-emphasize commodity companies. They have had very little ability to control prices because of an excess of manufacturing capacity. My strategy has remained the same but everything has slowed. Before the correction, a company might have sales growth of about 15% and earnings growth of 15% to 20%. Now, the same company might have sales growth of 3% and earnings growth of 10%. My favorite companies haven't really changed much, but the future is not as promising as it was formerly. Q. DID ANY COMPANIES DO WELL IN SPITE OF THIS OVERALL TREND? A. Monsanto did extremely well, based on strong performance in both its pharmaceutical division and its agricultural division, and it outperformed the overall market. The stock was not in the portfolio at the end of the period as I took profits twice, selling it, buying it back, and then again selling the holding. Each time, the fund made about a 20% profit. Another investment that had positive performance during the six months was Uniroyal Technology. Q. WHAT WERE THE DISAPPOINTMENTS? A. As I indicated, the entire chemical group tended to get caught in a general downdraft. As a result, the companies I liked that were major holdings in the fund tended to hurt performance the most by virtue of their relative weightings in the portfolio. These included Sealed Air Corp., Cytec Industries, Witco Corp. and Imperial Chemical Industries. Q. WHAT IS YOUR OUTLOOK? A. Some chemical company stocks have become very cheap relative to the overall market, and some still have decent growth prospects. At the end of the period, the chemical group was trading at an historically low price-to-earnings multiple compared with the overall market. I don't know when, but I believe the gap between stock prices in the chemical industry and in the broader market will narrow. Some chemical companies now have faster earnings growth than the overall market. However, the stock prices of virtually the entire industry came down as a group, and I suspect they will recover as a group. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 069 TRADING SYMBOL: FSCHX SIZE: as of August 31, 1998, more than $36 million MANAGER: Audra J. Barranco, since 1997; equity analyst, specialty and diversified chemicals since 1996; joined Fidelity in 1996 CHEMICALS PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 87.1% SHARES VALUE (NOTE 1) ADVERTISING - 0.0% GEOCITIES (a) 100 $ 1,806 CHEMICALS & PLASTICS - 78.8% ADHESIVES & SEALANTS - 2.2% Ferro Corp. 40,500 817,594 AGRICULTURAL CHEMICALS - 1.0% Potash Corp. of Saskatchewan 7,400 377,431 CHEMICALS - 48.4% Cabot Corp. 63,700 1,385,475 Crompton & Knowles Corp. 40,000 585,000 Cytec Industries, Inc. (a) 93,713 2,143,685 Dow Chemical Co. 20,000 1,560,000 du Pont (E.I.) de Nemours & Co. 87,200 5,030,350 ICI (Imperial Chemical Industries) PLC ADR Class L 57,000 2,429,625 Lyondell Petrochemical Co. 81,600 1,759,500 NL Industries, Inc. 18,400 365,700 Olin Corp. 13,000 365,625 Witco Corp. 103,600 2,175,600 17,800,560 CHEMICALS, GENERAL - 4.4% Great Lakes Chemical Corp. 41,300 1,615,863 INORGANIC CHEMICALS - 3.8% Minerals Technologies, Inc. 7,200 261,450 Valspar Corp. 34,100 1,133,825 1,395,275 MISCELLANEOUS PLASTICS PRODUCTS - 3.1% Uniroyal Technology Corp. (a) 115,000 1,121,250 ORGANIC CHEMICALS - 1.9% International Specialty Products, Inc. (a) 45,400 695,188 PLASTICS & SYNTHETIC RESINS - 4.1% Spartech Corp. 91,300 1,506,450 UNSUPPORTED PLASTICS FILM & SHEET - 9.9% Sealed Air Corp. (a) 100,820 3,629,520 TOTAL CHEMICALS & PLASTICS 28,959,131 CONSUMER DURABLES - 0.8% MANUFACTURING INDUSTRIES, NEC - 0.8% Minnesota Mining & Manufacturing Co. 4,400 301,400 DRUGS & PHARMACEUTICALS - 1.6% BIOTECHNOLOGY - 1.6% Sigma Aldrich Corp. 21,200 588,300 ELECTRONIC INSTRUMENTS - 0.0% SEMI-CONDUCTOR CAPITAL EQUIPMENT - 0.0% Lam Research Corp. (a) 673 7,361 PACKAGING & CONTAINERS - 3.4% GLASS CONTAINERS - 1.2% Owens-Illinois, Inc. (a) 14,300 445,981 METAL CANS & CONTAINERS - 2.2% Silgan Holdings, Inc. (a) 35,000 813,750 TOTAL PACKAGING & CONTAINERS 1,259,731 PRECIOUS METALS - 0.7% GOLD ORES - 0.7% Stillwater Mining Co. (a)(c) 15,300 268,748 PRINTING - 0.9% PLATEMAKING, RELATED SERVICES - 0.9% Schawk, Inc. Class A 21,000 311,063 SHARES VALUE (NOTE 1) SERVICES - 0.9% BUILDING MAINTENANCE - 0.9% Ecolab, Inc. 12,200 $ 339,311 TOTAL COMMON STOCKS (Cost $37,933,441) 32,036,851 CONVERTIBLE PREFERRED STOCKS - 3.1% CHEMICALS & PLASTICS - 3.1% UNSUPPORTED PLASTICS FILM & SHEET - 3.1% Sealed Air Corp., Series A, $2.00 (Cost $1,093,615) 27,312 1,123,206 CASH EQUIVALENTS - 9.8% Taxable Central Cash Fund (b) (Cost $3,604,346) 3,604,346 3,604,346 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $42,631,402) $ 36,764,403 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $268,748 or 0.7% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $21,757,169 and $38,568,056, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $6,907 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At period end, there were no loans outstanding (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $42,631,402. Net unrealized depreciation aggregated $5,866,999, of which $2,214,011 related to appreciated investment securities and $8,081,010 related to depreciated investment securities. CHEMICALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 36,764,403 SECURITIES, AT VALUE (COST $42,631,402 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 14,672 FUND SHARES SOLD DIVIDENDS 118,534 RECEIVABLE INTEREST 16,316 RECEIVABLE REDEMPTION FEES 209 RECEIVABLE OTHER 2,035 RECEIVABLES TOTAL ASSETS 36,916,169 LIABILITIES PAYABLE FOR $ 210,622 FUND SHARES REDEEMED ACCRUED 20,184 MANAGEMENT FEE OTHER PAYABLES 51,027 AND ACCRUED EXPENSES TOTAL LIABILITIES 281,833 NET ASSETS $ 36,634,336 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 36,720,014 UNDISTRIBUTED 103,046 NET INVESTMENT INCOME ACCUMULATED 5,678,238 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (5,866,962) APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 36,634,336 1,102,698 SHARES OUTSTANDING NET ASSET $33.22 VALUE AND REDEMPTION PRICE PER SHARE ($36,634,33 6 (DIVIDED BY) 1,102,698 SHARES) MAXIMUM $34.25 OFFERING PRICE PER SHARE (100/97.00 OF $33.22) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 450,967 INCOME DIVIDENDS INTEREST 80,391 (INCLUDING INCOME ON SECURITIES LOANED OF $8,336) TOTAL INCOME 531,358 EXPENSES MANAGEMENT $ 167,801 FEE TRANSFER AGENT 195,823 FEES ACCOUNTING AND 32,610 SECURITY LENDING FEES NON-INTERESTED 154 TRUSTEES' COMPENSATION CUSTODIAN FEES 4,424 AND EXPENSES REGISTRATION FEES 14,734 AUDIT 10,716 LEGAL 198 REPORTS TO 11,043 SHAREHOLDERS TOTAL EXPENSES 437,503 BEFORE REDUCTIONS EXPENSE (9,191) 428,312 REDUCTIONS NET INVESTMENT 103,046 INCOME REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 5,682,883 SECURITIES FOREIGN 3,462 5,686,345 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (19,260,608) SECURITIES ASSETS AND 210 (19,260,398) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (13,574,053) NET INCREASE $ (13,471,007) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 18,089 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 18,071 - - RETAINED BY FDC DEFERRED SALES $ 4,028 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 8,715 WITHHELD BY FSC EXPENSE $ 8,573 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 618 CREDITS $ 9,191 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ 103,046 $ (39,750) NET INVESTMENT INCOME (LOSS) NET REALIZED 5,686,345 11,437,021 GAIN (LOSS) CHANGE IN NET (19,260,398) 2,762,987 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (13,471,007) 14,160,258 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (1,419,765) (6,539,426) SHAREHOLDERS FROM NET REALIZED GAIN SHARE 3,192,013 31,893,479 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 1,387,504 6,395,130 OF DISTRIBUTIONS COST OF SHARES (22,422,925) (88,066,094) REDEEMED NET INCREASE (17,843,408) (49,777,485) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 19,095 96,792 FEES TOTAL INCREASE (32,715,085) (42,059,861) (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 69,349,421 111,409,282 PERIOD END OF PERIOD $ 36,634,336 $ 69,349,421 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $103,046 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 72,901 706,740 ISSUED IN 29,235 150,551 REINVESTMENT OF DISTRIBUTIONS REDEEMED (510,341) (1,965,911) NET INCREASE (408,205) (1,108,620) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET VALUE, $ 45.90 $ 42.53 $ 39.53 $ 33.91 $ 31.66 $ 28.62 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET .08 (.02) .28 .01 .36 .29 INVESTMENT INCOME (LOSS) D NET REALIZED (11.77) 7.88 5.49 8.89 2.65 5.97 AND UNREALIZED GAIN (LOSS) TOTAL FROM (11.69) 7.86 5.77 8.90 3.01 6.26 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET - - (.12) (.08) (.22) (.23) INVESTMENT INCOME FROM NET (1.00) (4.54) E (2.74) (3.22) (.60) (3.05) REALIZED GAIN TOTAL (1.00) (4.54) (2.86) (3.30) (.82) (3.28) DISTRIBUTIONS REDEMPTION FEES .01 .05 .09 .02 .06 .06 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 33.22 $ 45.90 $ 42.53 $ 39.53 $ 33.91 $ 31.66 END OF PERIOD TOTAL RETURN B, C (26.10)% 19.47% 15.06% 27.48% 9.90% 23.63% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 36,634 $ 69,349 $ 111,409 $ 89,230 $ 97,511 $ 62,217 OF PERIOD (000 OMITTED) RATIO OF 1.51% A 1.68% 1.83% 1.99% 1.52% 1.93% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.47% A, F 1.67% F 1.81% F 1.97% F 1.51% F 1.93% EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET .35% A (.05)% .67% .04% 1.07% .97% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 81% A 31% 207% 87% 106% 81% TURNOVER RATE AVERAGE $ .0471 $ .0399 $ .0458 COMMISSION RATE G A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
CONSTRUCTION AND HOUSING PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past one year, past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT CONSTRUCTION -14.83% -2.07% 74.43% 288.16% AND HOUSING SELECT CONSTRUCTION -17.46% -5.08% 69.12% 276.44% AND HOUSING (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS CYCLICAL INDUSTRIES -18.01% -10.45% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 277 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT CONSTRUCTION -2.07% 11.77% 14.53% AND HOUSING SELECT CONSTRUCTION -5.08% 11.08% 14.17% AND HOUSING (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS CYCLICAL INDUSTRIES -10.45% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Construction & Housing S&P 500 00511 SP001 1988/08/31 9700.00 10000.00 1988/09/30 9996.58 10426.00 1988/10/31 10066.37 10715.84 1988/11/30 9944.24 10562.61 1988/12/31 10457.79 10747.45 1989/01/31 11095.13 11534.17 1989/02/28 10960.48 11246.96 1989/03/31 11238.76 11509.02 1989/04/30 11678.61 12106.34 1989/05/31 12091.54 12596.64 1989/06/30 12083.90 12524.84 1989/07/31 12574.18 13655.84 1989/08/31 12785.67 13923.49 1989/09/30 13016.39 13866.40 1989/10/31 12285.78 13544.70 1989/11/30 12468.43 13821.02 1989/12/31 12193.48 14152.72 1990/01/31 11424.34 13203.07 1990/02/28 11660.21 13373.39 1990/03/31 12316.54 13727.79 1990/04/30 11957.61 13384.59 1990/05/31 13065.17 14689.59 1990/06/30 12829.30 14589.70 1990/07/31 12160.15 14543.01 1990/08/31 10614.17 13228.33 1990/09/30 9518.14 12584.11 1990/10/31 9183.57 12529.99 1990/11/30 10071.93 13339.43 1990/12/31 11017.97 13711.60 1991/01/31 11987.09 14309.43 1991/02/28 13036.97 15332.55 1991/03/31 13360.01 15703.60 1991/04/30 13567.68 15741.29 1991/05/31 14917.53 16421.31 1991/06/30 14156.08 15669.22 1991/07/31 14525.26 16399.40 1991/08/31 15125.20 16788.07 1991/09/30 14790.62 16507.71 1991/10/31 14536.80 16728.91 1991/11/30 13809.96 16054.73 1991/12/31 15570.03 17891.40 1992/01/31 16727.52 17558.62 1992/02/29 17001.33 17786.88 1992/03/31 16988.88 17440.03 1992/04/30 17225.36 17952.77 1992/05/31 17772.99 18040.74 1992/06/30 16503.03 17771.93 1992/07/31 16801.96 18498.80 1992/08/31 16229.02 18119.58 1992/09/30 16440.76 18333.39 1992/10/31 17013.69 18397.56 1992/11/30 17997.65 19024.91 1992/12/31 18483.40 19258.92 1993/01/31 19255.62 19420.70 1993/02/28 19604.36 19684.82 1993/03/31 20065.20 20100.17 1993/04/30 19591.73 19613.74 1993/05/31 19803.60 20139.39 1993/06/30 20040.40 20197.79 1993/07/31 20725.86 20117.00 1993/08/31 21585.80 20879.44 1993/09/30 22283.73 20718.67 1993/10/31 23093.82 21147.54 1993/11/30 22732.39 20946.64 1993/12/31 24695.83 21200.10 1994/01/31 25502.63 21920.90 1994/02/28 24985.77 21326.84 1994/03/31 23523.44 20396.99 1994/04/30 23470.22 20658.07 1994/05/31 22228.27 20996.87 1994/06/30 21683.34 20482.44 1994/07/31 22304.31 21154.27 1994/08/31 23153.39 22021.59 1994/09/30 21860.76 21482.06 1994/10/31 21214.44 21965.41 1994/11/30 20352.68 21165.43 1994/12/31 20758.18 21479.31 1995/01/31 20849.28 22036.27 1995/02/28 21851.40 22895.02 1995/03/31 22241.84 23570.66 1995/04/30 22267.87 24264.81 1995/05/31 23361.09 25234.68 1995/06/30 23582.34 25820.88 1995/07/31 24675.56 26677.10 1995/08/31 24688.57 26744.06 1995/09/30 24545.41 27872.66 1995/10/31 24532.40 27773.15 1995/11/30 26042.08 28992.39 1995/12/31 26731.81 29550.79 1996/01/31 26677.39 30556.70 1996/02/29 26609.37 30839.96 1996/03/31 27520.84 31136.95 1996/04/30 27555.77 31595.90 1996/05/31 28462.49 32410.76 1996/06/30 28632.50 32534.25 1996/07/31 27428.27 31096.88 1996/08/31 28717.51 31752.72 1996/09/30 30275.93 33539.76 1996/10/31 29822.57 34464.79 1996/11/30 31182.65 37069.98 1996/12/31 30263.77 36335.62 1997/01/31 30565.12 38605.87 1997/02/28 31569.61 38908.54 1997/03/31 30665.57 37309.79 1997/04/30 31288.58 39537.19 1997/05/31 34282.93 41944.21 1997/06/30 34891.41 43823.31 1997/07/31 38558.29 47310.33 1997/08/31 38446.20 44660.01 1997/09/30 39663.15 47106.04 1997/10/31 38125.95 45532.69 1997/11/30 38974.61 47640.40 1997/12/31 39292.74 48458.39 1998/01/31 40707.14 48994.34 1998/02/28 44208.65 52527.81 1998/03/31 46485.49 55217.76 1998/04/30 46467.97 55773.25 1998/05/31 45655.47 54814.51 1998/06/30 46156.80 57041.07 1998/07/31 44497.23 56433.58 1998/08/31 37644.00 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980918 161821 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Construction and Housing Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $37,644 - a 276.44% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS OWENS CORNING 10.0 HOME DEPOT, INC. 7.4 LOWE'S COMPANIES, INC. 7.3 BLACK & DECKER CORP. 6.9 MASCO CORP. 6.2 LEGGETT & PLATT, INC. 3.3 FANNIE MAE 3.0 WHIRLPOOL CORP. 2.9 FREDDIE MAC 2.6 FLUOR CORP. 2.6 TOP INDUSTRIES AS OF AUGUST 31, 1998 APPLIANCES 12.5% PAVING, ROOFING & SIDING 11.7% BUILDING MATERIALS - RETAIL 7.4% LUMBER & BUILDING MATERIALS - RETAIL 7.3% PLUMBING SUPPLIES 6.2% ALL OTHERS 54.9% ROW: 1, COL: 1, VALUE: 54.9 ROW: 1, COL: 2, VALUE: 6.2 ROW: 1, COL: 3, VALUE: 7.3 ROW: 1, COL: 4, VALUE: 7.4 ROW: 1, COL: 5, VALUE: 11.7 ROW: 1, COL: 6, VALUE: 12.5 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS CONSTRUCTION AND HOUSING PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Yolanda McGettigan) Yolanda McGettigan, Portfolio Manager of Fidelity Select Construction and Housing Portfolio Q. HOW DID THE FUND PERFORM, YOLANDA? A. For the six- and 12-month periods that ended August 31, 1998, the fund returned -14.83% and -2.07%, respectively. By comparison, the Standard & Poor's 500 Index returned -8.10% and 8.10% for the same periods. Beginning this period, the fund also compares itself to the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - which returned -18.01% and -10.45% over the same six- and 12-month periods, respectively. Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE? A. The continuing Asian crisis - affecting one-third of the world's gross domestic product - brought commodity prices to record lows. Many companies in the construction and housing universe were directly affected by commodity pricing, in particular the engineering and construction companies. The dramatic declines in commodity prices have led to capital spending cutbacks in such areas as mining and oil refining. Additionally, the economic slowdown in the Pacific Rim countries first affected many companies in the cyclicals sector, as these companies tend to lead the country into and out of recession. Q. HOW DID YOU MANAGE THE FUND IN THIS DIFFICULT ENVIRONMENT? A. I reduced the fund's exposure to companies with considerable international exposure, reallocating the fund's assets to focus more on companies that derive the majority of their sales domestically. Additionally, I concentrated on high-quality medium- and large-cap companies, as these stocks tend to outperform in periods of uncertainty. Q. YOU'VE GOT SOME NEW TOP 10 HOLDINGS: OWENS CORNING, HOME DEPOT AND LOWE'S, FOR INSTANCE. WHAT MADE THEM ATTRACTIVE? A. Owens Corning is the largest insulation producer and one of the largest roofing producers in the country. Because of industry-wide price increases and a massive restructuring of the company, earnings growth has been very strong. Home Depot has been exhibiting above-average same store sales growth - which compares sales growth for only those stores that have been in operation for at least 12 months - because of its large share of the repair and remodeling market. It also has pursued ambitious expansion plans, opening stores nationwide. Lowe's, another large retailer catering to the repair and remodeling market, has opened new stores, simultaneously benefiting from the trend toward "do-it-yourself" repair and remodeling. Q. WHICH STOCKS PERFORMED WELL DURING THE PERIOD? A. Home Depot performed well, reflecting its strong dual exposure to the retailing and repair/remodeling markets. Greentree Financial, which provides financing for manufactured-housing loans, was attractively priced and, after I purchased the stock, the company was acquired by Conseco, helping the fund's performance. Lone Star Industries, a cement company, was the beneficiary of rising demand. With recent federal legislation budgeting a 40% increase in infrastructure spending, Lone Star was very well positioned. Q. WHICH STOCKS WERE DISAPPOINTMENTS? A. Owens Corning's performance was somewhat disappointing. Earnings at the company have been expanding rapidly; however, concerns regarding a possible recession has held back the stock price. Masco, another poor performer, produces faucets and cabinets and is number one in its market. After outperforming in 1997, Masco retreated somewhat in 1998 as it became associated in investors' minds with other more economically sensitive companies in its sector. Black & Decker has gone through a major restructuring after rising nearly 80% through the first four months of 1998. The company gave back some of these gains after investors took profits. Q. WHAT'S YOUR OUTLOOK? A. I'm cautious. The U.S. economy appears to be reacting to global events, and the market has recently ignored positive signs for the construction industry, including low interest rates and record-setting housing starts. Given the amount of volatility in the marketplace and the potential effects on the U.S. economy, I will probably take a more defensive position and select the companies that are leaders in their markets, have good relative growth, are gaining market share or pricing power, or have some earnings component unrelated to the direction the economy may take over the next six months. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 511 TRADING SYMBOL: FSHOX SIZE: as of August 31, 1998, more than $61 million MANAGER: Yolanda McGettigan, since December 1997; analyst, appliances, building materials, home-building, engineering and construction industries, since 1997; joined Fidelity in 1997 CONSTRUCTION AND HOUSING PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 89.2% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 1.5% AUTO & TRUCK PARTS - 1.5% Danaher Corp. 25,800 $ 935,250 BUILDING MATERIALS - 27.4% ABRASIVES AND ASBESTOS - 1.1% Johns-Manville Corp. 50,000 684,375 CEMENT - 4.4% Lone Star Industries, Inc. 12,000 721,500 Southdown, Inc. 20,540 867,815 Vulcan Materials Co. 10,400 1,159,600 2,748,915 CONCRETE, GYPSUM, PLASTER - 3.0% CalMat Co. 16,300 274,044 USG Corp. 36,400 1,565,200 1,839,244 FLOOR COVERINGS - 1.0% Armstrong World Industries, Inc. 12,900 619,200 PAVING, ROOFING & SIDING - 11.7% Elcor Corp. 46,500 1,081,125 Owens Corning 176,400 6,185,025 7,266,150 PLUMBING SUPPLIES - WHOLESALE - 6.2% Masco Corp. 165,400 3,804,200 TOTAL BUILDING MATERIALS 16,962,084 CONSTRUCTION - 6.1% GENERAL BUILDING - 0.6% D.R. Horton, Inc. 25,000 400,000 MOBILE HOMES - 0.9% Southern Energy Homes, Inc. (a) 62,100 543,375 OPERATIVE BUILDERS - 4.6% Centex Corp. 40,000 1,415,000 Lennar Corp. 31,700 574,563 U.S. Home Corp. (a) 30,300 857,869 2,847,432 TOTAL CONSTRUCTION 3,790,807 CONSUMER ELECTRONICS - 12.5% APPLIANCES - 12.5% Black & Decker Corp. 102,400 4,262,400 Electrolux AB 51,500 794,895 Maytag Co. 19,700 849,563 Whirlpool Corp. 36,400 1,806,350 7,713,208 CREDIT & OTHER FINANCE - 1.2% MORTGAGE BANKERS - 1.2% Countrywide Credit Industries, Inc. 19,400 726,288 ENGINEERING - 2.6% ARCHITECTS & ENGINEERS - 2.6% Fluor Corp. 39,800 1,574,588 FEDERAL SPONSORED CREDIT - 5.5% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 5.5% Freddie Mac 40,000 1,580,000 Fannie Mae 32,400 1,840,725 3,420,725 SHARES VALUE (NOTE 1) HOME FURNISHINGS - 8.3% FURNITURE - 4.5% Furniture Brands International, Inc. (a) 31,100 $ 695,863 Leggett & Platt, Inc. 103,000 2,066,438 2,762,301 FURNITURE STORES - 0.7% Heilig-Meyers Co. 35,000 398,125 METAL HOUSEHOLD FURNITURE - 0.2% Winsloew Furniture, Inc. (a) 9,500 147,250 MISCELLANEOUS HOME FURNISHINGS - 0.0% Restoration Hardware, Inc. 100 2,575 NON-WOOD OFFICE FURNITURE - 2.9% Knoll, Inc. (a) 50,000 1,296,875 Miller (Herman), Inc. 25,400 520,700 1,817,575 TOTAL HOME FURNISHINGS 5,127,826 INDUSTRIAL MACHINERY & EQUIPMENT - 2.6% ACCESSORIES & MEASURING CUTTING TOOLS - 1.7% Stanley Works 26,900 1,059,188 CONSTRUCTION EQUIPMENT - 0.9% Caterpillar, Inc. 13,400 565,313 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,624,501 LEISURE DURABLES & TOYS - 0.8% MOTOR HOMES - 0.8% Coachmen Industries, Inc. 27,900 521,381 METALS & MINING - 1.4% NON-METALLIC MINERAL MINING - 1.4% Martin Marietta Materials, Inc. 20,000 852,500 RETAIL & WHOLESALE, MISCELLANEOUS - 14.7% BUILDING MATERIALS - RETAIL - 7.4% Home Depot, Inc. 118,400 4,558,400 LUMBER & BUILDING MATERIALS - RETAIL - 7.3% Lowe's Companies, Inc. 129,800 4,551,113 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 9,109,513 TEXTILES & APPAREL - 4.6% CARPETS & RUGS - 4.6% Interface, Inc. Class A 48,200 590,450 Mohawk Industries, Inc. (a) 29,550 784,916 Shaw Industries, Inc. 98,600 1,491,325 2,866,691 TOTAL COMMON STOCKS (Cost $62,644,480) 55,225,362 CASH EQUIVALENTS - 10.8% Taxable Central Cash Fund (b) (Cost $6,694,091) 6,694,091 6,694,091 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $69,338,571) $ 61,919,453 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $89,263,632 and $72,053,736, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $28,862 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At period end, there were no loans outstanding (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $69,376,436. Net unrealized depreciation aggregated $7,456,983, of which $1,934,413 related to appreciated investment securities and $9,391,396 related to depreciated investment securities. The fund intends to elect to defer to its fiscal year ending February 28, 1999 approximately $480,000 of losses recognized during the period November 1, 1997 to February 28, 1998. CONSTRUCTION AND HOUSING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 61,919,453 SECURITIES, AT VALUE (COST $69,338,571 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 473,164 INVESTMENTS SOLD RECEIVABLE FOR 241,459 FUND SHARES SOLD DIVIDENDS 40,486 RECEIVABLE INTEREST 10,804 RECEIVABLE REDEMPTION FEES 1,591 RECEIVABLE OTHER 1,253 RECEIVABLES TOTAL ASSETS 62,688,210 LIABILITIES PAYABLE FOR $ 1,565,437 FUND SHARES REDEEMED ACCRUED 36,226 MANAGEMENT FEE OTHER PAYABLES 56,717 AND ACCRUED EXPENSES TOTAL LIABILITIES 1,658,380 NET ASSETS $ 61,029,830 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 69,235,498 ACCUMULATED (95,406) NET INVESTMENT LOSS ACCUMULATED (691,144) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (7,419,118) APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 61,029,830 2,802,307 SHARES OUTSTANDING NET ASSET $21.78 VALUE AND REDEMPTION PRICE PER SHARE ($61,029,83 0 (DIVIDED BY) 2,802,307 SHARES) MAXIMUM $22.45 OFFERING PRICE PER SHARE (100/97.00 OF $21.78) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 287,574 INCOME DIVIDENDS INTEREST 155,494 (INCLUDING INCOME ON SECURITIES LOANED OF $7,398) TOTAL INCOME 443,068 EXPENSES MANAGEMENT $ 227,036 FEE TRANSFER AGENT 242,748 FEES ACCOUNTING AND 39,421 SECURITY LENDING FEES NON-INTERESTED 124 TRUSTEES' COMPENSATION CUSTODIAN FEES 8,727 AND EXPENSES REGISTRATION FEES 26,465 AUDIT 10,295 LEGAL 129 REPORTS TO 7,138 SHAREHOLDERS TOTAL EXPENSES 562,083 BEFORE REDUCTIONS EXPENSE (23,609) 538,474 REDUCTIONS NET INVESTMENT (95,406) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT (116,470) SECURITIES FOREIGN (2,361) (118,831) CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (13,057,393) SECURITIES ASSETS AND 1 (13,057,392) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (13,176,223) NET INCREASE $ (13,271,629) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 244,729 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 244,729 - - RETAINED BY FDC DEFERRED SALES $ 248 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 21,345 WITHHELD BY FSC EXPENSE $ 22,238 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAL 1,371 CREDITS $ 23,609 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (95,406) $ (285,511) NET INVESTMENT INCOME (LOSS) NET REALIZED (118,831) 3,768,064 GAIN (LOSS) CHANGE IN NET (13,057,392) 4,728,366 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (13,271,629) 8,210,919 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO - (23,292) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET - (4,419,906) REALIZED GAIN IN EXCESS OF (144,845) - NET REALIZED GAIN TOTAL (144,845) (4,443,198) DISTRIBUTIONS SHARE 80,086,142 96,959,375 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 142,901 4,390,230 OF DISTRIBUTIONS COST OF SHARES (63,329,607) (78,323,951) REDEEMED NET INCREASE 16,899,436 23,025,654 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 62,801 110,066 FEES TOTAL 3,545,763 26,903,441 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 57,484,067 30,580,626 PERIOD END OF PERIOD $ 61,029,830 $ 57,484,067 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $95,406 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 2,976,421 4,140,467 ISSUED IN 5,303 222,821 REINVESTMENT OF DISTRIBUTIONS REDEEMED (2,422,118) (3,510,718) NET INCREASE 559,606 852,570 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET VALUE, $ 25.63 $ 22.00 $ 19.56 $ 16.79 $ 19.82 $ 15.74 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.03) (.25) .06 .07 (.02) .01 INVESTMENT INCOME (LOSS) D NET REALIZED (3.78) 7.67 3.38 3.55 (2.50) 4.26 AND UNREALIZED GAIN (LOSS) TOTAL FROM (3.81) 7.42 3.44 3.62 (2.52) 4.27 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET - (.02) (.02) (.07) - - INVESTMENT INCOME FROM NET - (3.87) (1.03) (.81) (.52) (.22) REALIZED GAIN IN EXCESS OF (.06) - - - - - NET REALIZED GAIN TOTAL (.06) (3.89) (1.05) (.88) (.52) (.22) DISTRIBUTIONS REDEMPTION FEES .02 .10 .05 .03 .01 .03 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 21.78 $ 25.63 $ 22.00 $ 19.56 $ 16.79 $ 19.82 END OF PERIOD TOTAL RETURN B, C (14.83)% 40.04% 18.64% 21.77% (12.54)% 27.45% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 61,030 $ 57,484 $ 30,581 $ 42,668 $ 16,863 $ 80,999 OF PERIOD (000 OMITTED) RATIO OF 1.43% A 2.50% E 1.41% 1.43% 1.76% 1.67% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.37% A, F 2.43% F 1.35% F 1.40% F 1.74% F 1.66% F EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.24)% A (1.10)% .27% .39% (.11)% .03% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 212% A 404% 270% 139% 45% 35% TURNOVER RATE AVERAGE $ .0419 $ .0342 $ .0410 COMMISSION RATE G A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
CYCLICAL INDUSTRIES PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 LIFE OF AUGUST 31, 1998 MONTHS YEAR FUND SELECT CYCLICAL INDUSTRIES -16.14% -11.07% 5.47% SELECT CYCLICAL INDUSTRIES -18.73% -13.82% 2.23% (LOAD ADJ.) S&P 500 -8.10% 8.10% 23.35% GS CYCLICAL INDUSTRIES -18.01% -10.45% 4.22% 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 March 3, 1997. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 277 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF AUGUST 31, 1998 YEAR FUND SELECT CYCLICAL INDUSTRIES -11.07% 3.62% SELECT CYCLICAL INDUSTRIES -13.82% 1.48% (LOAD ADJ.) S&P 500 8.10% 15.06% GS CYCLICAL INDUSTRIES -10.45% 2.80% AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER LIFE OF FUND Cyclical Industries S&P 500 00515 SP001 1997/03/03 9700.00 10000.00 1997/03/31 9418.70 9533.50 1997/04/30 9738.80 10102.65 1997/05/31 10476.00 10717.70 1997/06/30 10999.80 11197.85 1997/07/31 11688.50 12088.86 1997/08/31 11504.20 11411.64 1997/09/30 11766.10 12036.66 1997/10/31 10893.10 11634.64 1997/11/30 11096.80 12173.20 1997/12/31 11118.24 12382.22 1998/01/31 11401.25 12519.16 1998/02/28 12199.74 13422.05 1998/03/31 12846.62 14109.39 1998/04/30 12998.88 14251.33 1998/05/31 12795.29 14006.35 1998/06/30 12856.37 14575.29 1998/07/31 12133.64 14420.06 1998/08/31 10223.00 12335.21 IMATRL PRASUN SHR__CHT 19980831 19980921 161816 R00000000000021 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Cyclical Industries Portfolio on March 3, 1997, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $10,223 - a 2.23% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $12,335 - a 23.35% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS GENERAL ELECTRIC CO. 8.9 DEKALB GENETICS CORP. CLASS B 8.5 TYCO INTERNATIONAL LTD. 6.7 FORD MOTOR CO. 5.5 AMERICAN STANDARD COMPANIES, INC. 3.2 WASTE MANAGEMENT, INC. 2.6 ALLIEDSIGNAL, INC. 2.5 COLTEC INDUSTRIES, INC. 2.4 XEROX CORP. 2.3 U.S. INDUSTRIES, INC. 2.3 TOP INDUSTRIES AS OF AUGUST 31, 1998 ELECTRICAL MACHINERY 12.8% GENERAL INDUSTRIAL MACHINERY 9.7% CROPS 8.5% MOTOR VEHICLES & CAR BODIES 5.8% PAPER 5.7% ALL OTHERS 57.5% ROW: 1, COL: 1, VALUE: 57.4 ROW: 1, COL: 2, VALUE: 5.7 ROW: 1, COL: 3, VALUE: 5.8 ROW: 1, COL: 4, VALUE: 8.5 ROW: 1, COL: 5, VALUE: 9.699999999999999 ROW: 1, COL: 6, VALUE: 12.9 % OF FUND'S INVESTMENTS CYCLICAL INDUSTRIES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (Photograph of Albert Ruback) Albert Ruback, Portfolio Manager of Fidelity Select Cyclical Industries Portfolio Q. HOW DID THE FUND PERFORM, ALBERT? A. During the six-month period ending August 31, 1998, the fund returned -16.14%, underperforming the Standard & Poor's 500 Index, which returned -8.10%. For the 12-month period, the fund posted a total return of -11.07%. During the same 12-month period, the S&P 500 returned 8.10%. Beginning this period, the fund also compares itself to the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - which returned -18.01% and -10.45% over the same six- and 12-month periods, respectively. Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE DURING THE PERIOD? A. There were a couple of key factors that affected the fund's performance. First, given its focus on cyclical industries, the fund could not invest in the pharmaceutical, utility and technology stocks that experienced strong rallies and investor support during the period. Second, many of the cyclical industries in which the fund invests, especially those with international exposure, such as electrical components, industrial equipment, autos and basic materials, turned in mixed results due to weakened product demand, an inability to raise prices and declining commodity prices caused by the ongoing Asian crisis. Q. WHAT CHANGES DID YOU MAKE DURING THE PERIOD TO MINIMIZE RISKS AND IMPROVE THE PERFORMANCE OF THE FUND? A. I lowered the fund's investment in Lockheed Martin due to concerns about the completion of its merger with Northrop Grumman, which has since been canceled. I added to the fund's holdings of DEKALB Genetics and it has done very well because it put itself up for sale, and I felt there would be a competitive takeover bid that would cause the stock price to rise. Waste Management was taken over by USA Waste Management, which helped the stock's performance, and the company seemed committed to improving operations. American Standard, the fund's fifth-largest holding, is an example of a conglomerate with little exposure to Asia. I increased the fund's holdings in this stock because I believed the company was significantly undervalued, and its air conditioning business unit stands to benefit from the warm summer we've experienced. I don't see the Asian situation changing anytime soon. As a result, I have focused on companies that cater more to the domestic economy or that can benefit from declining commodity prices. I avoided companies with a lot of exposure in Asia - those that compete with Asia or that rely on Asia for demand growth. Diversified companies, such as General Electric, for example, have little exposure to Asia. Its focus on penetrating markets by adding services has been very successful. Tyco International, another conglomerate, has done well because of its aggressive acquisition program. Q. WHAT STOCKS DETRACTED FROM FUND PERFORMANCE? A. Paper stocks were a big disappointment for the fund. Fort James and Stone Container are examples of companies I held after the announcement of the Stone Container - Jefferson Smurfit Corp. merger. However, expected price increases for paper have not occurred, and it really hurt the sector's performance. While the fund did not have significant exposure to railroad stocks, these companies did not perform well for the fund. Even though the fundamental business outlook for companies like Norfolk Southern and CSX are solid, their stock prices were hurt because of acquisition costs and increased spending to keep operations running smoothly pending their merger with Conrail. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SIX MONTHS, ALBERT? A. I continue to be cautious about the U.S. economy. I believe we are in a slow growth period, and I'm concerned that Asia will not hit bottom for a while. This environment can cause continued pricing pressures - the inability to increase prices - and reduced export growth for U.S. corporations. Gross domestic product growth slowed from 5.4% to 1.4% in the second quarter, and I think corporate earnings will continue to come under some pressure in the last quarter of this year and possibly into next year. Given these concerns, I will focus on companies that have diversity of earnings sources and can grow during difficult times. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: March 3, 1997 FUND NUMBER: 515 TRADING SYMBOL: FCYCF SIZE: as of August 31, 1998, more than $3 million MANAGER: Albert Ruback, since inception; manager, Fidelity Select Energy Portfolio, 1994-1996; Fidelity Select Industrial Equipment Portfolio, 1991-1994; Sector leader, cyclical industries, since 1996; joined Fidelity in 1991 CYCLICAL INDUSTRIES PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 99.7% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 6.9% AIRCRAFT - 2.0% Gulfstream Aerospace Corp. (a) 500 $ 17,561 Lockheed Martin Corp. 500 43,719 61,280 AIRCRAFT & PARTS - 1.4% Sundstrand Corp. 100 4,556 Textron, Inc. 600 37,650 42,206 AIRCRAFT ENGINES & PARTS - 2.5% AlliedSignal, Inc. 2,200 75,488 MISSILES & SPACE VEHICLES - 1.0% Alliant Techsystems, Inc. (a) 300 19,688 GenCorp, Inc. 500 10,500 30,188 TOTAL AEROSPACE & DEFENSE 209,162 AGRICULTURE - 8.5% CROPS - 8.5% DEKALB Genetics Corp. Class B 3,000 259,875 AIR TRANSPORTATION - 4.3% AIR TRANSPORT, MAJOR NATIONAL - 4.3% Alaska Air Group, Inc. (a) 1,000 38,938 America West Holdings Corp. Class B (a) 600 11,663 Continental Airlines, Inc. Class B (a) 700 28,875 Southwest Airlines Co. 1,000 17,813 US Airways Group, Inc. (a) 600 34,950 132,239 AUTOS, TIRES, & ACCESSORIES - 7.8% AUTO & TRUCK PARTS - 1.4% Breed Technologies, Inc. 500 3,656 Federal-Mogul Corp. 200 10,675 SPX Corp. (a) 250 12,438 TRW, Inc. 350 15,006 41,775 MOTOR VEHICLES & CAR BODIES - 5.8% Ford Motor Co. 3,800 167,200 Lear Corp. (a) 200 8,113 175,313 TIRES & INNER TUBES - 0.6% Goodyear Tire & Rubber Co. 400 19,600 TOTAL AUTOS, TIRES, & ACCESSORIES 236,688 BROADCASTING - 1.0% COMMUNICATIONS SERVICES, NEC - 1.0% PanAmSat Corp. (a) 700 29,663 BUILDING MATERIALS - 8.5% AIRCONDITIONING EQUIPMENT - 3.2% American Standard Companies, Inc. (a) 2,500 97,813 FLOOR COVERINGS - 0.5% Armstrong World Industries, Inc. 300 14,400 GASKETS, HOSES, BELTS - 2.4% Coltec Industries, Inc. (a) 5,000 71,875 LUMBER, PLYWOOD, MILLWORK - WHOLESALE - 0.5% Crane Co. 400 16,100 PAVING, ROOFING & SIDING - 1.2% Carlisle Companies, Inc. 300 11,363 Owens Corning 700 24,544 35,907 SHARES VALUE (NOTE 1) PLUMBING SUPPLIES - WHOLESALE - 0.7% Masco Corp. 1,000 $ 23,000 TOTAL BUILDING MATERIALS 259,095 CHEMICALS & PLASTICS - 4.6% ADHESIVES & SEALANTS - 0.6% Ferro Corp. 550 11,103 Nalco Chemical Co. 300 8,681 19,784 AGRICULTURAL CHEMICALS - 0.6% IMC Global, Inc. 500 9,188 Potash Corp. of Saskatchewan 200 10,201 19,389 CHEMICALS - 1.3% Cytec Industries, Inc. (a) 700 16,013 Lyondell Petrochemical Co. 300 6,469 Witco Corp. 800 16,800 39,282 PLASTICS & SYNTHETIC RESINS - 0.3% Spartech Corp. 500 8,250 PLASTICS, NEC - 1.1% Hanna (M.A.) Co. 800 9,950 Ivex Packaging Corp. 1,500 24,656 34,606 PLASTICS, RESINS & ELASTOMERS - 0.2% Solutia, Inc. 240 5,385 UNSUPPORTED PLASTICS FILM & SHEET - 0.5% Sealed Air Corp. (a) 414 14,904 TOTAL CHEMICALS & PLASTICS 141,600 COMPUTERS & OFFICE EQUIPMENT - 2.9% OFFICE AUTOMATION - 2.9% Pitney Bowes, Inc. 400 19,850 Xerox Corp. 800 70,250 90,100 CONSTRUCTION - 1.4% MOBILE HOMES - 0.2% Oakwood Homes Corp. 500 7,125 OPERATIVE BUILDERS - 1.2% Centex Corp. 300 10,613 Kaufman & Broad Home Corp. 300 6,413 Lennar Corp. 300 5,438 U.S. Home Corp. (a) 500 14,156 36,620 TOTAL CONSTRUCTION 43,745 CONSUMER ELECTRONICS - 1.7% APPLIANCES - 1.7% Black & Decker Corp. 400 16,650 Whirlpool Corp. 700 34,738 51,388 DEFENSE ELECTRONICS - 1.1% Litton Industries, Inc. (a) 300 14,400 Raytheon Co. Class B 400 18,250 32,650 ELECTRICAL EQUIPMENT - 12.8% ELECTRICAL MACHINERY - 12.8% Emerson Electric Co. 1,000 57,000 General Electric Co. 3,400 272,000 Honeywell, Inc. 1,000 62,500 391,500 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRONIC INSTRUMENTS - 0.5% MEASURING INSTRUMENTS - 0.5% Thermo Electron Corp. (a) 900 $ 14,625 ENGINEERING - 2.0% ARCHITECTS & ENGINEERS - 2.0% EG & G, Inc. 900 21,094 Fluor Corp. 1,000 39,563 60,657 HOLDING COMPANIES - 2.3% HOLDING COMPANY OFFICES, NEC - 2.3% U.S. Industries, Inc. 5,000 69,375 HOME FURNISHINGS - 0.4% FURNITURE - 0.4% Leggett & Platt, Inc. 600 12,038 INDUSTRIAL MACHINERY & EQUIPMENT - 10.7% CONSTRUCTION EQUIPMENT - 1.0% Caterpillar, Inc. 700 29,531 GENERAL INDUSTRIAL MACHINERY - 9.7% Cooper Industries, Inc. 700 29,794 Illinois Tool Works, Inc. 700 33,906 Ingersoll-Rand Co. 650 25,838 Tyco International Ltd. 3,700 205,350 294,888 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 324,419 IRON & STEEL - 0.3% IRON & STEEL BLAST FURNACES, MILLS - 0.1% Inland Steel Industries, Inc. 185 3,503 IRON & STEEL FOUNDRIES - 0.2% Dofasco, Inc. 500 4,941 TOTAL IRON & STEEL 8,444 METALS & MINING - 1.9% METAL MINING - 0.3% Phelps Dodge Corp. 200 8,950 NON-METALLIC MINERAL MINING - 0.3% Martin Marietta Materials, Inc. 200 8,525 PRIMARY PRODUCTION OF ALUMINUM - 0.5% Reynolds Metals Co. 300 14,381 PRIME NONFERROUS SMELTING - 0.8% Aluminum Co. of America 424 25,387 TOTAL METALS & MINING 57,243 PACKAGING & CONTAINERS - 1.3% GLASS CONTAINERS - 0.7% Owens-Illinois, Inc. (a) 700 21,831 METAL CANS & CONTAINERS - 0.6% Silgan Holdings, Inc. (a) 800 18,600 TOTAL PACKAGING & CONTAINERS 40,431 PAPER & FOREST PRODUCTS - 7.2% PAPER - 5.7% Champion International Corp. 500 16,500 Georgia-Pacific Corp. 500 21,438 International Paper Co. 800 29,600 Pentair, Inc. 300 8,363 Stone Container Corp. (a) 6,400 66,800 Temple-Inland, Inc. 300 13,444 Union Camp Corp. 300 11,119 Willamette Industries, Inc. 300 7,388 174,652 SHARES VALUE (NOTE 1) PAPER MILLS - 1.5% Bowater, Inc. 700 $ 26,469 Fort James Corp. 687 20,009 46,478 TOTAL PAPER & FOREST PRODUCTS 221,130 POLLUTION CONTROL - 3.6% POLLUTION EQUIPMENT & DESIGN - 0.4% Ogden Corp. 500 11,531 REFUSE SYSTEMS - 3.2% Eastern Environmental Services, Inc. (a) 700 18,025 Waste Management, Inc. 1,797 79,293 97,318 TOTAL POLLUTION CONTROL 108,849 RAILROADS - 3.2% RAILROAD EQUIPMENT - 0.2% Bombardier, Inc. Class B 600 6,388 RAILROADS - 3.0% CSX Corp. 800 30,200 Canadian National Railway Co. 700 31,597 Norfolk Southern Corp. 1,000 28,188 89,985 TOTAL RAILROADS 96,373 RETAIL & WHOLESALE, MISCELLANEOUS - 0.3% MISCELLANEOUS NONDURABLE GOODS - WHOLESALE - 0.3% AgriBioTech, Inc. (a) 1,000 8,625 SERVICES - 1.1% BUILDING MAINTENANCE - 1.1% Ecolab, Inc. 1,200 33,375 SHIP BUILDING & REPAIR - 1.8% SHIP BUILDERS - 1.8% Avondale Industries, Inc. 700 17,938 General Dynamics Corp. 500 23,781 Newport News Shipbuilding, Inc. 500 11,750 53,469 TEXTILES & APPAREL - 0.3% COTTON MILLS - 0.1% Galey & Lord, Inc. (a) 300 2,794 TEXTILE MILL PRODUCTS - 0.2% Unifi, Inc. 300 6,675 TOTAL TEXTILES & APPAREL 9,469 TRUCKING & FREIGHT - 1.3% AIR COURIER SERVICES - 0.2% CNF Transportation, Inc. 200 6,250 FREIGHT FORWARDING - 0.3% Air Express International Corp. 200 3,425 Expeditors International of Washington, Inc. 200 5,563 8,988 TRUCKING, LOCAL & LONG DISTANCE - 0.4% Werner Enterprises, Inc. 725 10,684 TRUCKING, LONG DISTANCE - 0.4% USFreightways Corp. 300 6,731 Yellow Corp. (a) 500 5,969 12,700 TOTAL TRUCKING & FREIGHT 38,622 TOTAL COMMON STOCKS (Cost $3,268,481) 3,034,849 CONVERTIBLE PREFERRED STOCKS - 0.3% SHARES VALUE (NOTE 1) CHEMICALS & PLASTICS - 0.3% UNSUPPORTED PLASTICS FILM & SHEET - 0.3% Sealed Air Corp., Series A, $2.00 (Cost $8,093) 190 $ 7,814 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $3,276,574) $ 3,042,663 LEGEND (a) Non-income producing OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $1,983,673 and $2,114,233, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $224 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $3,277,196. Net unrealized depreciation aggregated $234,533, of which $286,144 related to appreciated investment securities and $520,677 related to depreciated investment securities. CYCLICAL INDUSTRIES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 3,042,663 SECURITIES, AT VALUE (COST $3,276,574) - - SEE ACCOMPANYIN G SCHEDULE CASH 9,741 RECEIVABLE FOR 160,092 INVESTMENTS SOLD RECEIVABLE FOR 5,962 FUND SHARES SOLD DIVIDENDS 4,996 RECEIVABLE INTEREST 33 RECEIVABLE REDEMPTION FEES 19 RECEIVABLE RECEIVABLE FROM 4,397 INVESTMENT ADVISER FOR EXPENSE REDUCTIONS TOTAL ASSETS 3,227,903 LIABILITIES PAYABLE FOR $ 43,161 FUND SHARES REDEEMED OTHER PAYABLES 19,496 AND ACCRUED EXPENSES TOTAL LIABILITIES 62,657 NET ASSETS $ 3,165,246 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 3,338,081 ACCUMULATED (26,271) NET INVESTMENT LOSS ACCUMULATED 87,347 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (233,911) APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 3,165,246 314,950 SHARES OUTSTANDING NET ASSET $10.05 VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ($3,165,246 (DIVIDED BY) 314,950 SHARES) MAXIMUM $10.36 OFFERING PRICE PER SHARE (100/97.00 OF $10.05) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 21,942 INCOME DIVIDENDS INTEREST 6,648 TOTAL INCOME 28,590 EXPENSES MANAGEMENT $ 12,683 FEE TRANSFER AGENT 15,655 FEES ACCOUNTING FEES 30,046 AND EXPENSES NON-INTERESTED 8 TRUSTEES' COMPENSATION CUSTODIAN FEES 5,351 AND EXPENSES REGISTRATION FEES 6,103 AUDIT 9,681 LEGAL 11 REPORTS TO 647 SHAREHOLDERS TOTAL EXPENSES 80,185 BEFORE REDUCTIONS EXPENSE (25,324) 54,861 REDUCTIONS NET INVESTMENT (26,271) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 90,696 SECURITIES FOREIGN 170 90,866 CURRENCY TRANSACTIONS CHANGE IN NET (703,383) UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) (612,517) NET INCREASE $ (638,788) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 13,604 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 13,604 - - RETAINED BY FDC EXCHANGE FEES $ 1,253 WITHHELD BY FSC EXPENSE $ 51 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 3 CREDITS FMR 25,270 REIMBURSEMEN T $ 25,324 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED MARCH 3, 1997 (DECREASE) IN AUGUST 31, 1998 (COMMENCEMENT NET ASSETS (UNAUDITED) OF OPERATIONS) TO FEBRUARY 28, 1998 OPERATIONS $ (26,271) $ (33,119) NET INVESTMENT INCOME (LOSS) NET REALIZED 90,866 328,506 GAIN (LOSS) CHANGE IN NET (703,383) 469,472 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (638,788) 764,859 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (29,887) (144,767) SHAREHOLDERS FROM NET REALIZED GAIN SHARE 2,429,754 10,028,973 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 29,223 143,304 OF DISTRIBUTIONS COST OF SHARES (2,595,642) (6,843,907) REDEEMED NET INCREASE (136,665) 3,328,370 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 5,346 16,778 FEES TOTAL (799,994) 3,965,240 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 3,965,240 - PERIOD END OF PERIOD $ 3,165,246 $ 3,965,240 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $26,271 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 191,683 908,349 ISSUED IN 2,305 13,087 REINVESTMENT OF DISTRIBUTIONS REDEEMED (207,688) (592,786) NET INCREASE (13,700) 328,650 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS SIX MONTHS YEAR ENDED ENDED FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 E PER-SHARE DATA NET ASSET VALUE, $ 12.07 $ 10.00 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.08) (.11) INVESTMENT INCOME (LOSS) D NET REALIZED (1.87) 2.59 AND UNREALIZED GAIN (LOSS) TOTAL FROM (1.95) 2.48 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET (.09) (.46) REALIZED GAIN REDEMPTION FEES .02 .05 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 10.05 $ 12.07 END OF PERIOD TOTAL RETURN B, C (16.14)% 25.77% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 3,165 $ 3,965 OF PERIOD (000 OMITTED) RATIO OF 2.50% A, F 2.50% A, F EXPENSES TO AVERAGE NET ASSETS RATIO OF NET (1.20)% A (.93)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 98% A 140% A TURNOVER RATE AVERAGE $ .0240 $ .0220 COMMISSION RATE G
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1998. F FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). G A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
DEFENSE AND AEROSPACE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT DEFENSE AND -24.33% -16.97% 115.04% 232.80% AEROSPACE SELECT DEFENSE AND -26.67% -19.53% 108.52% 222.74% AEROSPACE (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS CYCLICAL INDUSTRIES -18.01% -10.45% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 277 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT DEFENSE AND -16.97% 16.55% 12.78% AEROSPACE SELECT DEFENSE AND -19.53% 15.83% 12.43% AEROSPACE (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS CYCLICAL INDUSTRIES -10.45% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Defense & Aerospace S&P 500 00067 SP001 1988/08/31 9700.00 10000.00 1988/09/30 9991.42 10426.00 1988/10/31 9974.76 10715.84 1988/11/30 9533.48 10562.61 1988/12/31 9450.21 10747.45 1989/01/31 9824.89 11534.17 1989/02/28 9783.26 11246.96 1989/03/31 9983.09 11509.02 1989/04/30 10341.12 12106.34 1989/05/31 10524.29 12596.64 1989/06/30 10399.40 12524.84 1989/07/31 11073.82 13655.84 1989/08/31 11356.91 13923.49 1989/09/30 11148.76 13866.40 1989/10/31 10515.97 13544.70 1989/11/30 10116.31 13821.02 1989/12/31 10282.83 14152.72 1990/01/31 9700.00 13203.07 1990/02/28 9733.30 13373.39 1990/03/31 10332.79 13727.79 1990/04/30 9908.15 13384.59 1990/05/31 10640.86 14689.59 1990/06/30 10648.51 14589.70 1990/07/31 10221.23 14543.01 1990/08/31 9324.78 13228.33 1990/09/30 9023.17 12584.11 1990/10/31 8905.87 12529.99 1990/11/30 9383.42 13339.43 1990/12/31 9811.47 13711.60 1991/01/31 10677.43 14309.43 1991/02/28 10887.62 15332.55 1991/03/31 11728.36 15703.60 1991/04/30 11534.99 15741.29 1991/05/31 12073.07 16421.31 1991/06/30 11465.63 15669.22 1991/07/31 11963.77 16399.40 1991/08/31 11837.12 16788.07 1991/09/30 11558.50 16507.71 1991/10/31 12115.74 16728.91 1991/11/30 11566.95 16054.73 1991/12/31 12453.47 17891.40 1992/01/31 12411.25 17558.62 1992/02/29 12605.44 17786.88 1992/03/31 12352.15 17440.03 1992/04/30 12132.63 17952.77 1992/05/31 11524.73 18040.74 1992/06/30 10984.38 17771.93 1992/07/31 11406.53 18498.80 1992/08/31 11187.01 18119.58 1992/09/30 11347.43 18333.39 1992/10/31 11440.30 18397.56 1992/11/30 11837.12 19024.91 1992/12/31 12453.47 19258.92 1993/01/31 12824.96 19420.70 1993/02/28 12732.09 19684.82 1993/03/31 13407.53 20100.17 1993/04/30 13449.74 19613.74 1993/05/31 13863.45 20139.39 1993/06/30 14446.02 20197.79 1993/07/31 15037.03 20117.00 1993/08/31 15011.70 20879.44 1993/09/30 15400.08 20718.67 1993/10/31 16016.42 21147.54 1993/11/30 15543.61 20946.64 1993/12/31 16047.26 21200.10 1994/01/31 16811.42 21920.90 1994/02/28 16811.42 21326.84 1994/03/31 16135.10 20396.99 1994/04/30 16222.67 20658.07 1994/05/31 16276.15 20996.87 1994/06/30 15866.13 20482.44 1994/07/31 16097.88 21154.27 1994/08/31 16819.88 22021.59 1994/09/30 15973.09 21482.06 1994/10/31 16365.29 21965.41 1994/11/30 15723.51 21165.43 1994/12/31 16329.63 21479.31 1995/01/31 16320.72 22036.27 1995/02/28 17506.22 22895.02 1995/03/31 18254.96 23570.66 1995/04/30 19262.19 24264.81 1995/05/31 20447.70 25234.68 1995/06/30 21205.35 25820.88 1995/07/31 22373.02 26677.10 1995/08/31 22364.11 26744.06 1995/09/30 22988.06 27872.66 1995/10/31 22150.19 27773.15 1995/11/30 23745.71 28992.39 1995/12/31 24062.75 29550.79 1996/01/31 24493.30 30556.70 1996/02/29 25804.08 30839.96 1996/03/31 26397.27 31136.95 1996/04/30 27669.10 31595.90 1996/05/31 28703.73 32410.76 1996/06/30 28023.83 32534.25 1996/07/31 26131.93 31096.88 1996/08/31 27511.44 31752.72 1996/09/30 28861.39 33539.76 1996/10/31 28358.85 34464.79 1996/11/30 29905.88 37069.98 1996/12/31 30085.10 36335.62 1997/01/31 29434.22 38605.87 1997/02/28 29899.13 38908.54 1997/03/31 29702.84 37309.79 1997/04/30 30496.38 39537.19 1997/05/31 32937.34 41944.21 1997/06/30 33723.06 43823.31 1997/07/31 36844.99 47310.33 1997/08/31 38877.38 44660.01 1997/09/30 41506.92 47106.04 1997/10/31 38384.99 45532.69 1997/11/30 38458.33 47640.40 1997/12/31 37175.62 48458.39 1998/01/31 38958.32 48994.34 1998/02/28 42659.99 52527.81 1998/03/31 43840.89 55217.76 1998/04/30 45010.43 55773.25 1998/05/31 42092.25 54814.51 1998/06/30 42114.96 57041.07 1998/07/31 40264.12 56433.58 1998/08/31 32274.20 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980916 100328 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Defense and Aerospace Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $32,274 - a 222.74% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS GENERAL DYNAMICS CORP. 7.4 PANAMSAT CORP. 6.7 LORAL SPACE & COMMUNICATIONS LTD. 6.0 GULFSTREAM AEROSPACE CORP. 5.6 GENERAL MOTORS CORP. CLASS H 5.5 CORDANT TECHNOLOGIES, INC. 5.0 SUNDSTRAND CORP. 5.0 UNITED TECHNOLOGIES CORP. 4.9 RAYTHEON CO. CLASS A 4.8 PRIMEX TECHNOLOGIES, INC. 4.8 TOP INDUSTRIES AS OF AUGUST 31, 1998 SHIP BUILDERS 12.1% MISSILES & SPACE VEHICLES 11.9% DEFENSE ELECTRONICS 9.3% TV & RADIO COMMUNICATION EQUIPMENT 9.0% COMMUNICATIONS SERVICES, NEC 8.4% ALL OTHERS 49.3% ROW: 1, COL: 1, VALUE: 49.2 ROW: 1, COL: 2, VALUE: 8.5 ROW: 1, COL: 3, VALUE: 9.0 ROW: 1, COL: 4, VALUE: 9.300000000000001 ROW: 1, COL: 5, VALUE: 11.9 ROW: 1, COL: 6, VALUE: 12.1 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS DEFENSE AND AEROSPACE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Peter Saperstone) Peter Saperstone, Portfolio Manager of Fidelity Select Defense and Aerospace Portfolio Q. HOW DID THE FUND PERFORM, PETER? A. It was a tough period for defense and aerospace stocks, and the fund's performance reflects that. For the six-month period that ended August 31, 1998, the fund returned -24.33%. For the same six-month period, the Standard & Poor's 500 Index returned -8.10%. For the one-year period that ended August 31, 1998, the fund returned -16.97% and the Standard & Poor's 500 Index returned 8.10%. Beginning this period, the fund also compares itself to the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - which returned -18.01% and -10.45% over the same six- and 12-month periods, respectively. Q. WHY DID DEFENSE AND AEROSPACE STOCKS STRUGGLE DURING THE PAST SIX MONTHS? A. Each sector had individual reasons for performing poorly. Defense stocks entered the period on a positive note that was due in large part to optimism about increased defense spending. The U.S. for example, is increasing defense spending in 1999 for the first time in nearly 10 years. On the negative side, however, international defense spending has slowed. In addition, the commercial segments of many defense companies - which include engineering, construction and other business lines - have been hurt by slowing global economic growth. As a result of these developments, the fund's holdings in Lockheed Martin and Raytheon suffered. Q. TURNING TO AEROSPACE STOCKS, WHAT WAS BEHIND THEIR PROBLEMS? A. With Asia accounting for about one-third of the world's aircraft demand, the region's economic turmoil took its toll on the aerospace industry as well. Investors stayed away from aerospace stocks because of growing fears that the demand for commercial aircraft would peak in 1999. Since I had anticipated this peak going into the period, the fund had a relatively light weighting in aerospace stocks. Q. WHAT WERE THE BIGGEST DISAPPOINTMENTS FOR THE FUND DURING THE PERIOD? A. Satellite companies - including PanAmSat, Loral Space & Communications, General Motors Corp. Class H (GM Hughes) and Orbital Sciences - were the biggest drag on the fund's performance. The group's underperformance was driven by a series of satellite launch failures and in-orbit failures over recent months. Interestingly, the industry has an historical 90% to 95% success rate in launches, and similar in-orbit success. Although satellite companies continued to experience strong demand for their services, it wasn't enough to calm the uncertainty created by the string of launch and in-orbit failures. Q. WERE THERE ANY BRIGHT SPOTS FOR THE FUND? A. There were a couple. I sold Continental Airlines and US Airways during a period when their prices were relatively strong and locked in gains for the fund. Q. WHAT'S YOUR OUTLOOK? A. It's mixed. First off, I remain cautious about aerospace stocks. I think they will begin to post disappointing earnings due to slowing aircraft demand in 1999. As for defense stocks, I believe the cost savings derived from consolidation is behind them. From here, I think it will be tough for them to grow earnings more than revenue. I'm more upbeat about long-term growth opportunities for satellite companies. Demand for their services is expected to grow about 15% to 20% over the next few years. Finally, I think that investors will set aside the industry's recent string of failures, focusing instead on satellite companies' longer-term success rate. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: May 8, 1984 FUND NUMBER: 067 TRADING SYMBOL: FSDAX SIZE: as of August 31, 1998, more than $35 million MANAGER: Peter Saperstone, since 1997; manager, Fidelity Select Air Transportation Portfolio, since 1997; Fidelity Select Construction and Housing Portfolio, 1996-1997; equity analyst, defense/ aerospace and airlines, since 1997; building materials and appliances, since 1996; textile, apparel and footwear industries, since 1995; joined Fidelity in 1995 DEFENSE AND AEROSPACE PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.9% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 36.4% AIRCRAFT - 8.4% Gulfstream Aerospace Corp. (a) 53,300 $ 1,872,163 Lockheed Martin Corp. 11,000 961,813 2,833,976 AIRCRAFT & PARTS - 5.0% Sundstrand Corp. 36,700 1,672,144 AIRCRAFT ENGINES & PARTS - 5.4% Kellstrom Industries, Inc. (a) 7,300 168,356 United Technologies Corp. 22,800 1,654,425 1,822,781 AIRCRAFT EQUIPMENT - 0.9% BE Aerospace, Inc. (a) 14,200 295,538 MISSILES & SPACE VEHICLES - 11.9% Alliant Techsystems, Inc. (a) 21,000 1,378,125 Cordant Technologies, Inc. 47,000 1,674,375 Orbital Sciences Corp. (a) 51,000 956,250 4,008,750 ORDNANCE - 4.8% Primex Technologies, Inc. 43,900 1,613,325 TOTAL AEROSPACE & DEFENSE 12,246,514 AIR TRANSPORTATION - 2.4% AIR TRANSPORT, MAJOR NATIONAL - 2.4% Alaska Air Group, Inc. (a) 20,900 813,794 BROADCASTING - 8.4% COMMUNICATIONS SERVICES, NEC - 8.4% CD Radio, Inc. (a) 39,800 601,975 PanAmSat Corp. (a) 52,800 2,237,400 2,839,375 COMMUNICATIONS EQUIPMENT - 1.5% TELEPHONE EQUIPMENT - 1.5% Globalstar Telecommunications Ltd. (a) 37,100 493,894 COMPUTER SERVICES & SOFTWARE - 1.0% COMPUTER SERVICES - 1.0% Titan Corp. (a) 75,500 344,469 CONSUMER ELECTRONICS - 5.5% RADIOS, TELEVISIONS, STEREOS - 5.5% General Motors Corp. Class H 51,400 1,856,825 DEFENSE ELECTRONICS - 9.3% Litton Industries, Inc. (a) 26,300 1,262,400 Raytheon Co. Class A 36,252 1,624,543 REMEC, Inc. (a) 29,600 240,500 3,127,443 ELECTRICAL EQUIPMENT - 9.0% TV & RADIO COMMUNICATION EQUIPMENT - 9.0% Loral Space & Communications Ltd. (a) 127,500 2,024,063 ViaSat, Inc. (a) 94,400 991,200 3,015,263 ELECTRONICS - 3.2% ELECTRONIC CAPACITORS - 1.2% Maxwell Technologies, Inc. (a) 21,300 410,025 ELECTRONIC PARTS - WHOLESALE - 2.0% Airport Systems International, Inc. (a)(c) 180,200 653,225 TOTAL ELECTRONICS 1,063,250 SHARES VALUE (NOTE 1) RAILROADS - 2.9% RAILROAD EQUIPMENT - 2.9% Bombardier, Inc. Class B 90,200 $ 960,370 SHIP BUILDING & REPAIR - 12.1% SHIP BUILDERS - 12.1% Avondale Industries, Inc. 46,300 1,186,438 General Dynamics Corp. 52,100 2,478,006 Newport News Shipbuilding, Inc. 16,400 385,400 4,049,844 TELEPHONE SERVICES - 4.2% COMSAT Corp. Series 1 64,600 1,409,084 TOTAL COMMON STOCKS (Cost $38,078,795) 32,220,125 CASH EQUIVALENTS - 4.1% Taxable Central Cash Fund (b) (Cost $1,375,241) 1,375,241 1,375,241 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $39,454,036) $ 33,595,366 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Affiliated company (see Note 10 of Notes to Financial Statements) OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $84,084,392 and $134,263,359, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $22,396 for the period (see Note 4 of Notes to Financial Statements). Transactions during the period with companies which are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Airport Systems International, Inc. $ - $ 317,725 $ - $ 653,225 Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 89.6% Bermuda 7.5 Canada 2.9 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $39,483,792. Net unrealized depreciation aggregated $5,888,426, of which $943,881 related to appreciated investment securities and $6,832,307 related to depreciated investment securities. DEFENSE AND AEROSPACE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 33,595,366 SECURITIES, AT VALUE (COST $39,454,036 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 1,866,661 INVESTMENTS SOLD RECEIVABLE FOR 87,469 FUND SHARES SOLD DIVIDENDS 34,995 RECEIVABLE INTEREST 12,870 RECEIVABLE REDEMPTION FEES 442 RECEIVABLE OTHER 7,999 RECEIVABLES TOTAL ASSETS 35,605,802 LIABILITIES PAYABLE FOR $ 535,713 FUND SHARES REDEEMED ACCRUED 21,195 MANAGEMENT FEE OTHER PAYABLES 46,682 AND ACCRUED EXPENSES TOTAL LIABILITIES 603,590 NET ASSETS $ 35,002,212 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 36,135,157 ACCUMULATED (192,854) NET INVESTMENT LOSS ACCUMULATED 4,918,736 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (5,858,827) APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 35,002,212 1,231,110 SHARES OUTSTANDING NET ASSET $28.43 VALUE AND REDEMPTION PRICE PER SHARE ($35,002,21 2 (DIVIDED BY) 1,231,110 SHARES) MAXIMUM $29.31 OFFERING PRICE PER SHARE (100/97.00 OF $28.43) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 167,923 INCOME DIVIDENDS INTEREST 117,179 TOTAL INCOME 285,102 EXPENSES MANAGEMENT $ 210,632 FEE TRANSFER AGENT 203,769 FEES ACCOUNTING FEES 38,114 AND EXPENSES NON-INTERESTED 142 TRUSTEES' COMPENSATION CUSTODIAN FEES 7,576 AND EXPENSES REGISTRATION FEES 19,162 AUDIT 10,423 LEGAL 238 REPORTS TO 11,710 SHAREHOLDERS MISCELLANEOUS 75 TOTAL EXPENSES 501,841 BEFORE REDUCTIONS EXPENSE (23,885) 477,956 REDUCTIONS NET INVESTMENT (192,854) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 5,477,806 SECURITIES (INCLUDING REALIZED LOSS OF $99,257 ON SALES OF INVESTMENTS IN AFFILIATED ISSUERS) FOREIGN (1,470) 5,476,336 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (16,615,622) SECURITIES ASSETS AND (157) (16,615,779) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (11,139,443) NET INCREASE $ (11,332,297) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 106,402 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 104,253 - - RETAINED BY FDC DEFERRED SALES $ 522 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 22,958 WITHHELD BY FSC EXPENSE $ 23,662 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 223 CREDITS $ 23,885 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (192,854) $ (542,358) NET INVESTMENT INCOME (LOSS) NET REALIZED 5,476,336 10,620,706 GAIN (LOSS) CHANGE IN NET (16,615,779) 9,171,056 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (11,332,297) 19,249,404 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTION TO - (4,691,578) SHAREHOLDERS FROM NET REALIZED GAIN SHARE 37,257,590 173,648,929 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT - 4,606,502 OF DISTRIBUTIONS COST OF SHARES (92,816,176) (160,032,419) REDEEMED NET INCREASE (55,558,586) 18,223,012 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 88,474 221,243 FEES TOTAL (66,802,409) 33,002,081 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 101,804,621 68,802,540 PERIOD END OF PERIOD $ 35,002,212 $ 101,804,621 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $192,854 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 971,770 4,923,503 ISSUED IN - 149,545 REINVESTMENT OF DISTRIBUTIONS REDEEMED (2,450,274) (4,740,835) NET INCREASE (1,478,504) 332,213 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED FEBRUARY 28, YEAR ENDED YEARS ENDED FEBRUARY 28, ENDED FEBRUARY 29, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET VALUE, $ 37.57 $ 28.94 $ 26.97 $ 19.64 $ 19.14 $ 15.08 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.10) (.29) (.11) (.05) (.06) .07 INVESTMENT INCOME (LOSS) D NET REALIZED (9.09) 11.84 4.18 9.09 .70 4.57 AND UNREALIZED GAIN (LOSS) TOTAL FROM (9.19) 11.55 4.07 9.04 .64 4.64 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET - - - - - (.10) INVESTMENT INCOME FROM NET - (3.04) (2.17) (1.82) (.27) (.62) REALIZED GAIN TOTAL - (3.04) (2.17) (1.82) (.27) (.72) DISTRIBUTIONS REDEMPTION FEES .05 .12 .07 .11 .13 .14 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 28.43 $ 37.57 $ 28.94 $ 26.97 $ 19.64 $ 19.14 END OF PERIOD TOTAL RETURN B, C (24.33)% 42.68% 15.87% 47.40% 4.13% 32.04% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 35,002 $ 101,805 $ 68,803 $ 26,648 $ 4,985 $ 11,136 OF PERIOD (000 OMITTED) RATIO OF 1.37% A 1.77% 1.84% 1.77% G 2.49% G 2.53% G EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.31% A, E 1.71% E 1.81% E 1.75% E 2.49% 2.53% EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.53)% A (.85)% (.39)% (.20)% (.32)% .40% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 254% A 311% 219% 267% 146% 324% TURNOVER RATE AVERAGE $ .0372 $ .0320 $ .0335 COMMISSION RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. G DURING THE PERIOD, FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER.
ENVIRONMENTAL SERVICES PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1998 MONTHS YEAR YEARS FUND SELECT ENVIRONMENTAL -26.97% -24.59% 14.85% 36.67% SERVICES SELECT ENVIRONMENTAL -29.24% -26.93% 11.33% 32.50% SERVICES (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 283.41% GS CYCLICAL INDUSTRIES -18.01% -10.45% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or since the fund started on June 29, 1989. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 277 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF AUGUST 31, 1998 YEAR YEARS FUND SELECT ENVIRONMENTAL -24.59% 2.81% 3.46% SERVICES SELECT ENVIRONMENTAL -26.93% 2.17% 3.11% SERVICES (LOAD ADJ.) S&P 500 8.10% 18.25% 15.77% GS CYCLICAL INDUSTRIES -10.45% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER LIFE OF FUND Environmental Services S&P 500 00516 SP001 1989/06/29 9700.00 10000.00 1989/06/30 9573.90 9947.57 1989/07/31 10485.70 10845.83 1989/08/31 10621.50 11058.41 1989/09/30 11193.80 11013.07 1989/10/31 10941.60 10757.57 1989/11/30 11009.50 10977.02 1989/12/31 11368.64 11240.47 1990/01/31 10358.96 10486.23 1990/02/28 10562.83 10621.51 1990/03/31 11019.13 10902.98 1990/04/30 11077.38 10630.40 1990/05/31 12106.48 11666.87 1990/06/30 12485.11 11587.53 1990/07/31 12407.45 11550.45 1990/08/31 10863.80 10506.29 1990/09/30 10281.29 9994.63 1990/10/31 10135.66 9951.66 1990/11/30 10485.17 10594.53 1990/12/31 11087.09 10890.12 1991/01/31 12057.94 11364.93 1991/02/28 12611.32 12177.52 1991/03/31 12611.32 12472.22 1991/04/30 12572.49 12502.15 1991/05/31 12601.62 13042.25 1991/06/30 11650.18 12444.91 1991/07/31 12019.11 13024.84 1991/08/31 12232.69 13333.53 1991/09/30 11941.44 13110.86 1991/10/31 11494.85 13286.55 1991/11/30 10863.80 12751.10 1991/12/31 11936.55 14209.83 1992/01/31 13005.20 13945.52 1992/02/29 13146.34 14126.81 1992/03/31 11835.74 13851.34 1992/04/30 11482.88 14258.57 1992/05/31 11190.52 14328.44 1992/06/30 10592.18 14114.94 1992/07/31 10665.31 14692.25 1992/08/31 10445.94 14391.05 1992/09/30 10571.29 14560.87 1992/10/31 11072.70 14611.83 1992/11/30 11762.13 15110.10 1992/12/31 11772.58 15295.95 1993/01/31 12002.39 15424.44 1993/02/28 11866.59 15634.21 1993/03/31 11574.10 15964.09 1993/04/30 11333.85 15577.76 1993/05/31 11584.55 15995.24 1993/06/30 11438.31 16041.63 1993/07/31 10957.79 15977.46 1993/08/31 11542.77 16583.01 1993/09/30 11553.21 16455.32 1993/10/31 11877.04 16795.94 1993/11/30 11354.74 16636.38 1993/12/31 11699.45 16837.68 1994/01/31 12691.82 17410.16 1994/02/28 12462.01 16938.35 1994/03/31 11333.85 16199.84 1994/04/30 11521.87 16407.19 1994/05/31 11490.54 16676.27 1994/06/30 10801.10 16267.70 1994/07/31 11030.91 16801.28 1994/08/31 11417.41 17490.14 1994/09/30 11344.29 17061.63 1994/10/31 10957.79 17445.52 1994/11/30 10341.48 16810.15 1994/12/31 10581.74 17059.44 1995/01/31 10592.18 17501.80 1995/02/28 10727.98 18183.84 1995/03/31 11239.83 18720.45 1995/04/30 12044.17 19271.76 1995/05/31 12232.20 20042.06 1995/06/30 12733.60 20507.63 1995/07/31 13214.12 21187.67 1995/08/31 13402.14 21240.85 1995/09/30 13872.21 22137.21 1995/10/31 12890.29 22058.18 1995/11/30 13339.47 23026.53 1995/12/31 13346.83 23470.03 1996/01/31 13809.34 24268.95 1996/02/29 13677.20 24493.92 1996/03/31 14282.87 24729.80 1996/04/30 14757.09 25094.31 1996/05/31 15893.10 25741.49 1996/06/30 15606.34 25839.57 1996/07/31 13808.58 24697.98 1996/08/31 14679.89 25218.86 1996/09/30 15209.29 26638.18 1996/10/31 15054.88 27372.86 1996/11/30 15462.96 29441.97 1996/12/31 15429.87 28858.72 1997/01/31 16389.42 30661.82 1997/02/28 15992.36 30902.21 1997/03/31 15087.97 29632.44 1997/04/30 14999.73 31401.49 1997/05/31 16025.45 33313.21 1997/06/30 16918.82 34805.65 1997/07/31 17348.96 37575.13 1997/08/31 17580.57 35470.17 1997/09/30 18804.81 37412.87 1997/10/31 17437.19 36163.28 1997/11/30 17393.07 37837.28 1997/12/31 18187.18 38486.95 1998/01/31 16973.96 38912.61 1998/02/28 18154.09 41718.99 1998/03/31 19091.57 43855.42 1998/04/30 19400.39 44296.61 1998/05/31 18308.50 43535.15 1998/06/30 17922.48 45303.55 1998/07/31 16477.65 44821.06 1998/08/31 13249.62 38340.83 IMATRL PRASUN SHR__CHT 19980831 19980909 154656 R00000000000114 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Environmental Services Portfolio on June 29, 1989, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $13,250 - a 32.50% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $38,341 - a 283.41% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS BROWNING-FERRIS INDUSTRIES, INC. 6.4 OGDEN CORP. 6.0 FLUOR CORP. 5.9 WASTE MANAGEMENT, INC. 5.2 THERMO INSTRUMENT SYSTEMS, INC. 5.1 ALLIED WASTE INDUSTRIES, INC. 5.0 THERMO ELECTRON CORP. 4.9 SAFETY-KLEEN CORP. 4.5 EASTERN ENVIRONMENTAL SERVICES, INC. 4.4 UNITED STATES FILTER CORP. 4.2 TOP INDUSTRIES AS OF AUGUST 31, 1998 REFUSE SYSTEMS 31.5% POLLUTION EQUIPMENT & DESIGN 14.1% LABORATORY ANALYTICAL INSTRUMENTS 7.1% ARCHITECTS & ENGINEERS 5.9% HAZARDOUS WASTE MANAGEMENT 5.6% ALL OTHERS 35.8% ROW: 1, COL: 1, VALUE: 35.8 ROW: 1, COL: 2, VALUE: 5.6 ROW: 1, COL: 3, VALUE: 5.9 ROW: 1, COL: 4, VALUE: 7.1 ROW: 1, COL: 5, VALUE: 14.1 ROW: 1, COL: 6, VALUE: 31.5 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS ENVIRONMENTAL SERVICES PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Steven Buller) (photograph of Subrata Ghose) NOTE TO SHAREHOLDERS: The following is an interview with Steven Buller (left), who managed Fidelity Select Environmental Services Portfolio during the period covered by this report, with additional comments from Subrata Ghose, who will become manager of the fund on October 1, 1998. Q. HOW DID THE FUND PERFORM, STEVE? S.B. It was a difficult period for environmental services stocks. For the six months that ended August 31, 1998, the fund returned -26.97%. This trailed the Standard & Poor's 500 Index, which returned -8.10% during the same period. Also, beginning this period, the fund is comparing its performance to that of the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - which returned -18.01% for the six months that ended August 31, 1998. For the 12 months that ended August 31, 1998, the fund returned -24.59%, while the S&P 500 and Goldman Sachs index returned 8.10% and -10.45%, respectively. Q. WHAT FACTORS CAUSED THE FUND TO PERFORM AS IT DID? S.B. Two of the largest sub-sectors of the environmental services group - the solid waste and environmental instrumentation industries - registered disappointing performances. While solid waste companies typically have minimal international exposure, fears of a worldwide recession toward the end of the period caused some of these stocks - such as Waste Management and Allied Waste - to pull back some. Environmental instrumentation companies - those that manufacture instruments designed to aid environmental research, such as devices for detecting hazardous material and measuring toxicity - performed poorly due in large part to their exposure to Southeast Asia and a strong U.S. dollar. Many of these companies derive close to 12% to 15% of their yearly revenues from that part of the world, and continued economic tumult in Asia hurt the fund's two largest instrumentation holdings, Thermo Instrument and Thermo Electron. Together, these two stocks accounted for approximately 10% of the fund's assets at the end of the period. The fund's water filtration and purification-related positions - including United States Filter Corp. - also were hurt by the troubles in Asia. Q. YOU BUMPED UP THE FUND'S EXPOSURE TO CONSTRUCTION-RELATED STOCKS. WAS THERE A SPECIFIC REASON? S.B. The fund's stake in Fluor - an environmental construction company - - accounted for much of this increase. When someone wants to build a water treatment facility, a company such as Fluor comes in and provides construction and engineering services for the project. While Fluor does have a high degree of business exposure to Asia, and thus didn't perform well during the period, my research indicated that the company's turnaround story with new management was on track. Q. WHICH INDIVIDUAL POSITIONS PERFORMED WELL? S.B. They were few and far between during the period, but good performers included Allied Waste - which benefited from good earnings growth and strong profit margins - and Eastern Environmental, which was acquired by Waste Management during the period. I sold some of the fund's stake in Allied Waste to lock in gains. In addition, KTI, Inc., a waste-to-energy plant, also produced positive results. Q. TURNING TO YOU, SUBRATA, WHAT SORTS OF CHANGES WILL YOU MAKE TO THE PORTFOLIO? S.G. My approach will be similar to Steve's, but I may make some minor adjustments. The solid waste group - I feel - consists of many good growth companies with strong earnings power. However, with fears of a global recession creeping up on investors, some of the solid waste companies may be hurt. In a recession-free economy, I may look to some of the smaller companies within this group, mostly because many offer faster growth and may be merger candidates. If we do see signs of a recession though, I may look to larger companies with strong cash flows and those for which acquisitions account for a small portion of this growth. In terms of the instrumentation and the water purification and filtration companies, short-term business prospects appear shaky due to business exposure to Asia. Some of these companies, though, are restructuring and this could have positive long-term effects. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: June 29, 1989 FUND NUMBER: 516 TRADING SYMBOL: FSLEX SIZE: as of August 31, 1998, more than $16 million MANAGER: Subrata Ghose, effective October 1, 1998; analyst, environmental services industry, 1997-present; gas, electric and water industries,1997-1998; joined Fidelity in 1995 ENVIRONMENTAL SERVICES PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.9% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 0.2% AIR-CONDITIONING EQUIPMENT - 0.2% Thermo Power Corp. (a) 4,700 $ 39,950 CHEMICALS & PLASTICS - 1.7% CHEMICALS - 1.7% Catalytica, Inc. 27,000 278,438 CONSTRUCTION - 3.8% Jacobs Engineering Group, Inc. (a) 24,300 619,650 DRUGS & PHARMACEUTICALS - 1.4% COMMERCIAL LABORATORY RESEARCH - 1.4% Thermotrex Corp. (a) 15,000 223,125 ELECTRONIC INSTRUMENTS - 13.0% INDUSTRIAL MEASUREMENT INSTRUMENTS - 1.0% TSI, Inc. 10,000 80,000 Thermedics Detection, Inc. (a) 9,000 72,563 152,563 LABORATORY ANALYTICAL INSTRUMENTS - 7.1% Thermo Instrument Systems, Inc. (a) 54,200 826,550 Thermoquest Corp. (a) 48,200 337,400 1,163,950 MEASURING INSTRUMENTS - 4.9% Thermo Electron Corp. (a) 49,050 797,063 TOTAL ELECTRONIC INSTRUMENTS 2,113,576 ENERGY SERVICES - 2.0% OIL & GAS SERVICES - 2.0% Newpark Resources, Inc. (a) 58,700 333,856 ENGINEERING - 8.8% ARCHITECTS & ENGINEERS - 5.9% Fluor Corp. 24,300 961,369 SPECIAL CONTRACTORS - 2.9% Foster Wheeler Corp. 37,800 465,413 TOTAL ENGINEERING 1,426,782 INDUSTRIAL MACHINERY & EQUIPMENT - 7.4% GENERAL INDUSTRIAL MACHINERY - 4.9% Osmonics, Inc. (a) 10,700 117,700 United States Filter Corp. (a) 37,800 680,400 798,100 SERVICE INDUSTRY MACHINERY, NEC - 2.1% Ionics, Inc. (a) 14,200 348,788 VENDING & SERVICE MACHINERY - 0.4% Waterlink, Inc. (a) 11,600 58,725 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 1,205,613 MEDICAL EQUIPMENT & SUPPLIES - 1.7% MEDICAL TECHNOLOGY - 1.7% Thermedics, Inc. (a) 30,500 282,125 METALS & MINING - 1.1% SECONDARY NONFERROUS SMELTING - 1.1% IMCO Recycling, Inc. 15,000 181,875 POLLUTION CONTROL - 51.2% HAZARDOUS WASTE MANAGEMENT - 5.6% International Technology Corp. (a) 8,000 46,000 Safety-Kleen Corp. (a) 250,600 736,138 Stericycle, Inc. (a) 9,000 138,375 920,513 SHARES VALUE (NOTE 1) POLLUTION EQUIPMENT & DESIGN - 14.1% Calgon Carbon Corp. 32,100 $ 198,619 Dames & Moore, Inc. 15,000 178,125 Flanders Corp. (a) 23,500 92,531 Instituform Technologies, Inc. (a) 25,200 311,850 Ogden Corp. 42,100 970,926 TETRA Technologies, Inc. (a) 12,000 152,250 Tetra Tech, Inc. 19,000 396,625 2,300,926 REFUSE SYSTEMS - 31.5% Allied Waste Industries, Inc. (a) 43,300 822,700 American Disposal Services, Inc. (a) 21,400 627,288 Browning-Ferris Industries, Inc. 31,900 1,036,750 Casella Waste Systems, Inc. Class A 9,300 233,663 Eastern Environmental Services, Inc. (a) 27,900 718,425 Superior Services, Inc. (a) 25,900 644,263 Waste Industries, Inc. (a) 9,700 208,550 Waste Management, Inc. 19,112 843,317 5,134,956 TOTAL POLLUTION CONTROL 8,356,395 SERVICES - 0.6% REPAIR SERVICES - 0.6% American ECO Corp. (a) 33,800 90,507 TOTAL COMMON STOCKS (Cost $21,613,142) 15,151,892 CASH EQUIVALENTS - 7.1% Taxable Central Cash Fund (b) (Cost $1,151,426) 1,151,426 1,151,426 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $22,764,568) $ 16,303,318 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $12,643,001 and $15,419,306, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $6,734 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $22,908,439. Net unrealized depreciation aggregated $6,605,121, of which $179,051 related to appreciated investment securities and $6,784,172 related to depreciated investment securities. At February 28, 1998, the fund had a capital loss carryforward of approximately $185,000, which will expire on February 28, 2005. ENVIRONMENTAL SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 16,303,318 SECURITIES, AT VALUE (COST $22,764,568 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 4,148 FUND SHARES SOLD DIVIDENDS 7,938 RECEIVABLE INTEREST 4,393 RECEIVABLE REDEMPTION FEES 75 RECEIVABLE TOTAL ASSETS 16,319,872 LIABILITIES PAYABLE TO $ 32,805 CUSTODIAN BANK PAYABLE FOR 130,142 FUND SHARES REDEEMED ACCRUED 9,493 MANAGEMENT FEE OTHER PAYABLES 40,066 AND ACCRUED EXPENSES TOTAL LIABILITIES 212,506 NET ASSETS $ 16,107,366 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 20,853,269 ACCUMULATED (136,897) NET INVESTMENT LOSS ACCUMULATED 1,852,244 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (6,461,250) APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 16,107,366 1,340,231 SHARES OUTSTANDING NET ASSET $12.02 VALUE AND REDEMPTION PRICE PER SHARE ($16,107,36 6 (DIVIDED BY) 1,340,231 SHARES) MAXIMUM $12.39 OFFERING PRICE PER SHARE (100/97.00 OF $12.02) STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT INCOME $ 74,371 DIVIDENDS INTEREST 46,349 TOTAL INCOME 120,720 EXPENSES MANAGEMENT FEE $ 70,840 TRANSFER AGENT FEES 125,119 ACCOUNTING FEES AND EXPENSES 30,329 NON-INTERESTED TRUSTEES' COMPENSATION 92 CUSTODIAN FEES AND EXPENSES 4,888 REGISTRATION FEES 10,163 AUDIT 10,048 LEGAL 77 REPORTS TO SHAREHOLDERS 8,356 TOTAL EXPENSES BEFORE REDUCTIONS 259,912 EXPENSE REDUCTIONS (2,295) 257,617 NET INVESTMENT INCOME (LOSS) (136,897) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT SECURITIES 2,205,670 FOREIGN CURRENCY TRANSACTIONS 1,283 2,206,953 CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) (8,126,680) ON INVESTMENT SECURITIES NET GAIN (LOSS) (5,919,727) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (6,056,624) OTHER INFORMATION $ 13,208 SALES CHARGES PAID TO FDC SALES CHARGES - RETAINED BY FDC $ 13,208 DEFERRED SALES CHARGES WITHHELD $ 3,656 BY FDC EXCHANGE FEES WITHHELD BY FSC $ 4,178 EXPENSE REDUCTIONS $ 2,149 DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN CREDITS 146 $ 2,295
STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (136,897) $ (233,737) NET INVESTMENT INCOME (LOSS) NET REALIZED 2,206,953 491,329 GAIN (LOSS) CHANGE IN NET (8,126,680) 2,816,729 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (6,056,624) 3,074,321 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS SHARE 4,398,511 19,043,654 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES COST OF SHARES (7,433,286) (29,500,558) REDEEMED NET INCREASE (3,034,775) (10,456,904) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 15,541 40,370 FEES TOTAL (9,075,858) (7,342,213) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 25,183,224 32,525,437 PERIOD END OF PERIOD $ 16,107,366 $ 25,183,224 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $136,897 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 257,486 1,183,759 REDEEMED (447,278) (1,896,214) NET INCREASE (189,792) (712,455) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED FEBRUARY 28, YEAR ENDED YEARS ENDED FEBRUARY 28, ENDED FEBRUARY 29, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET VALUE, $ 16.46 $ 14.50 $ 12.42 $ 10.27 $ 11.93 $ 11.36 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.09) (.13) (.08) (.17) (.14) (.11) INVESTMENT INCOME (LOSS) D NET REALIZED (4.36) 2.07 2.04 2.95 (1.53) .67 AND UNREALIZED GAIN (LOSS) TOTAL FROM (4.45) 1.94 1.96 2.78 (1.67) .56 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET - - - (.65) - - REALIZED GAIN IN EXCESS OF - - (.02) - - - NET REALIZED GAIN TOTAL - - (.02) (.65) - - DISTRIBUTIONS REDEMPTION FEES .01 .02 .14 .02 .01 .01 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 12.02 $ 16.46 $ 14.50 $ 12.42 $ 10.27 $ 11.93 END OF PERIOD TOTAL RETURN B, C (26.97)% 13.52% 16.93% 27.49% (13.91)% 5.02% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 16,107 $ 25,183 $ 32,525 $ 27,587 $ 31,270 $ 65,956 OF PERIOD (000 OMITTED) RATIO OF 2.12% A 2.23% 2.18% 2.36% 2.04% 2.07% EXPENSES TO AVERAGE NET ASSETS RATIO OF 2.10% A, E 2.22% E 2.11% E 2.32% E 2.01% E 2.03% E EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (1.12)% A (.84)% (.59)% (1.43)% (1.32)% (1.02)% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 114% A 59% 252% 138% 82% 191% TURNOVER RATE AVERAGE $ .0356 $ .0313 $ .0348 COMMISSION RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
INDUSTRIAL EQUIPMENT PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT INDUSTRIAL EQUIPMENT -15.63% -13.43% 92.26% 273.70% SELECT INDUSTRIAL EQUIPMENT -18.23% -16.10% 86.42% 262.42% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS CYCLICAL INDUSTRIES -18.01% -10.45% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 277 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT INDUSTRIAL EQUIPMENT -13.43% 13.97% 14.09% SELECT INDUSTRIAL EQUIPMENT -16.10% 13.27% 13.74% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS CYCLICAL INDUSTRIES -10.45% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark) UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Industrial Equipment S&P 500 00510 SP001 1988/08/31 9700.00 10000.00 1988/09/30 9880.93 10426.00 1988/10/31 9720.10 10715.84 1988/11/30 9408.50 10562.61 1988/12/31 9911.09 10747.45 1989/01/31 10634.82 11534.17 1989/02/28 10212.64 11246.96 1989/03/31 10363.42 11509.02 1989/04/30 11107.25 12106.34 1989/05/31 11710.36 12596.64 1989/06/30 11207.77 12524.84 1989/07/31 11921.45 13655.84 1989/08/31 12142.59 13923.49 1989/09/30 11971.71 13866.40 1989/10/31 11177.62 13544.70 1989/11/30 11489.22 13821.02 1989/12/31 11690.26 14152.72 1990/01/31 11298.24 13203.07 1990/02/28 11871.19 13373.39 1990/03/31 12574.82 13727.79 1990/04/30 12474.30 13384.59 1990/05/31 13630.26 14689.59 1990/06/30 13388.00 14589.70 1990/07/31 13135.02 14543.01 1990/08/31 10969.46 13228.33 1990/09/30 9481.90 12584.11 1990/10/31 9228.92 12529.99 1990/11/30 9532.50 13339.43 1990/12/31 9876.56 13711.60 1991/01/31 10928.98 14309.43 1991/02/28 11961.16 15332.55 1991/03/31 11859.97 15703.60 1991/04/30 11738.53 15741.29 1991/05/31 12234.39 16421.31 1991/06/30 11839.42 15669.22 1991/07/31 11940.70 16399.40 1991/08/31 12123.00 16788.07 1991/09/30 12406.58 16507.71 1991/10/31 12335.68 16728.91 1991/11/30 11748.27 16054.73 1991/12/31 12527.47 17891.40 1992/01/31 13651.47 17558.62 1992/02/29 14622.19 17786.88 1992/03/31 14193.03 17440.03 1992/04/30 14193.03 17952.77 1992/05/31 14305.43 18040.74 1992/06/30 13426.67 17771.93 1992/07/31 13549.29 18498.80 1992/08/31 12844.23 18119.58 1992/09/30 13109.90 18333.39 1992/10/31 13058.81 18397.56 1992/11/30 13682.12 19024.91 1992/12/31 13947.79 19258.92 1993/01/31 14601.76 19420.70 1993/02/28 15368.12 19684.82 1993/03/31 15644.01 20100.17 1993/04/30 16359.75 19613.74 1993/05/31 17177.74 20139.39 1993/06/30 17402.69 20197.79 1993/07/31 17648.09 20117.00 1993/08/31 18854.62 20879.44 1993/09/30 18639.90 20718.67 1993/10/31 19263.61 21147.54 1993/11/30 19243.16 20946.64 1993/12/31 19991.22 21200.10 1994/01/31 20931.25 21920.90 1994/02/28 21526.60 21326.84 1994/03/31 20283.68 20396.99 1994/04/30 20100.09 20658.07 1994/05/31 19689.24 20996.87 1994/06/30 18677.92 20482.44 1994/07/31 19562.83 21154.27 1994/08/31 20953.40 22021.59 1994/09/30 21016.61 21482.06 1994/10/31 21279.97 21965.41 1994/11/30 20247.58 21165.43 1994/12/31 20616.29 21479.31 1995/01/31 20500.41 22036.27 1995/02/28 21111.42 22895.02 1995/03/31 22860.17 23570.66 1995/04/30 23934.97 24264.81 1995/05/31 24419.79 25234.68 1995/06/30 25347.25 25820.88 1995/07/31 27729.16 26677.10 1995/08/31 27191.65 26744.06 1995/09/30 25948.00 27872.66 1995/10/31 25895.30 27773.15 1995/11/30 26780.61 28992.39 1995/12/31 26350.53 29550.79 1996/01/31 27409.16 30556.70 1996/02/29 28893.53 30839.96 1996/03/31 29100.65 31136.95 1996/04/30 29635.31 31595.90 1996/05/31 29850.67 32410.76 1996/06/30 29719.06 32534.25 1996/07/31 28235.50 31096.88 1996/08/31 29455.85 31752.72 1996/09/30 30855.66 33539.76 1996/10/31 30664.23 34464.79 1996/11/30 33152.78 37069.98 1996/12/31 33388.87 36335.62 1997/01/31 34580.85 38605.87 1997/02/28 34165.66 38908.54 1997/03/31 32786.18 37309.79 1997/04/30 33981.55 39537.19 1997/05/31 36999.56 41944.21 1997/06/30 39306.59 43823.31 1997/07/31 42135.97 47310.33 1997/08/31 41874.79 44660.01 1997/09/30 42977.52 47106.04 1997/10/31 39625.80 45532.69 1997/11/30 39553.25 47640.40 1997/12/31 39582.27 48458.39 1998/01/31 38869.23 48994.34 1998/02/28 42965.09 52527.81 1998/03/31 45916.76 55217.76 1998/04/30 47077.53 55773.25 1998/05/31 45419.29 54814.51 1998/06/30 45236.88 57041.07 1998/07/31 43595.22 56433.58 1998/08/31 36242.00 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980918 161518 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Industrial Equipment Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $36,242 - a 262.42% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS TYCO INTERNATIONAL LTD. 7.4 GENERAL ELECTRIC CO. 7.1 PITNEY BOWES, INC. 6.6 EMERSON ELECTRIC CO. 6.1 DEKALB GENETICS CORP. CLASS B 5.6 XEROX CORP. 3.9 HONEYWELL, INC. 3.8 INGERSOLL-RAND CO. 3.2 ILLINOIS TOOL WORKS, INC. 2.9 CATERPILLAR, INC. 2.5 TOP INDUSTRIES AS OF AUGUST 31, 1998 ROW: 1, COL: 1, VALUE: 42.8 ROW: 1, COL: 2, VALUE: 4.5 ROW: 1, COL: 3, VALUE: 6.6 ROW: 1, COL: 4, VALUE: 10.5 ROW: 1, COL: 5, VALUE: 16.7 ROW: 1, COL: 6, VALUE: 18.9 ELECTRICAL MACHINERY 18.9% GENERAL INDUSTRIAL MACHINERY 16.7% OFFICE AUTOMATION 10.5% CROPS 6.6% TELEPHONE SERVICES 4.5% ALL OTHERS 42.8% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS INDUSTRIAL EQUIPMENT PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Simon Wolf) Simon Wolf, Portfolio Manager of Fidelity Select Industrial Equipment Portfolio Q. HOW DID THE FUND PERFORM, SIMON? A. For the six months that ended on August 31, 1998, the fund had a total return of -15.63%. For the 12-month period, it returned -13.43%. For the same periods, the Standard & Poor's 500 Index returned -8.10% and 8.10%, respectively. Beginning this period, the fund also compares itself to the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - which returned -18.01% and -10.45% over the same six- and 12-month periods, respectively. Q. WHAT WERE THE KEY FACTORS BEHIND THE FUND'S PERFORMANCE DURING THE PAST SIX MONTHS? A. Performance reflected the general uncertainty surrounding world economic conditions that grew as the six-month period progressed. This uncertainty caused cyclical stocks, especially machinery and industrial equipment companies, to fall earlier and faster than the overall market. The six-month period began on an optimistic note, as companies reported good earnings for the first quarter of 1998. These earnings reports led people to believe that the U.S. economy would be shielded from the effects of the Asian economic crisis. In the ensuing months, evidence mounted that the first quarter earnings were an aberration, and that the second and third quarters would experience more moderate growth. July and August saw a further deterioration as investors speculated that the slow earnings growth in the second quarter might be signaling an oncoming global economic depression. Q. WHAT TYPES OF INDUSTRIAL EQUIPMENT COMPANIES WERE MOST AFFECTED BY THE EVIDENCE OF A SLOWDOWN? A. Companies involved in industrial production - the manufacturers of valves, welding equipment, fasteners, pumps and so forth - were most affected. Illinois Tool Works is an example of a fund investment that was among the harder hit companies. Agricultural equipment stocks did poorly as a fall-off in demand for agricultural products in Russia and Asia coincided with bumper crops throughout the world. This drove commodity prices to 10-year lows and lowered farm income, which reduced agricultural equipment purchases. The fund did not own significant positions in any of these stocks. Q. WHAT COMPANIES HELPED OR HURT PERFORMANCE? A. I tried to emphasize steady growth companies less affected by the business cycle, and that helped somewhat. Among the relatively better performers were growth companies such as Tyco International, Pitney Bowes, and General Electric. I also focused on companies that I believed had a more valuable franchise than reflected in the stock prices. A good example is DEKALB Genetics Corp., an agricultural seed company that is being purchased by Monsanto. United Rentals, an equipment rental company that was acquiring smaller firms, also performed well for the fund. Unfortunately, there were also disappointments which included two satellite companies, Loral and COMSAT. Satellite companies fell into disfavor after three unsuccessful launch attempts highlighted the deployment risks associated with these companies. I believe COMSAT was unduly discounted given that all of its satellites have already been launched successfully. Another disappointment was Honeywell, whose stock suffered as slowing orders materialized in its process controls businesses. Q. WHAT IS YOUR OUTLOOK? A. I believe it will be a very tough investment environment, highlighted by continued volatility as investors sort out incremental evidence about whether we are heading into a world recession or whether we are just passing through a temporary slowdown. In this environment, I intend to continue to focus on more defensive stocks, which tend to be the steady growth companies. I will not ignore, however, companies that I believe have very strong franchises or asset values when compared to their current stock prices. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 510 TRADING SYMBOL: FSCGX SIZE: as of August 31, 1998, more than $33 million MANAGER: Simon Wolf, since 1997; research analyst, industrial and electrical equipment industries, since 1997; joined Fidelity in 1996 INDUSTRIAL EQUIPMENT PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.3% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 1.9% AIRCRAFT & PARTS - 0.9% Textron, Inc. 5,000 $ 313,750 AIRCRAFT ENGINES & PARTS - 1.0% AlliedSignal, Inc. 10,000 343,125 TOTAL AEROSPACE & DEFENSE 656,875 AGRICULTURE - 6.6% CROPS - 6.6% DEKALB Genetics Corp. Class B 22,000 1,905,750 Delta & Pine Land Co. 7,500 322,031 2,227,781 BROADCASTING - 2.2% TELEVISION BROADCASTING - 2.2% CBS Corp. 28,600 743,600 BUILDING MATERIALS - 2.6% AIR-CONDITIONING EQUIPMENT - 1.8% American Standard Companies, Inc. (a) 10,000 391,250 York International Corp. 6,000 207,750 599,000 PAVING, ROOFING & SIDING - 0.8% Owens Corning 7,500 262,969 TOTAL BUILDING MATERIALS 861,969 CHEMICALS & PLASTICS - 3.6% CHEMICALS - 1.6% MacDermid, Inc. 13,000 360,750 Tredegar Industries, Inc. 12,000 193,500 554,250 PLASTICS, NEC - 2.0% Ivex Packaging Corp. 40,100 659,144 TOTAL CHEMICALS & PLASTICS 1,213,394 COMPUTER SERVICES & SOFTWARE - 1.0% PREPACKAGED COMPUTER SOFTWARE - 1.0% ModaCAD, Inc. (a) 25,000 331,250 COMPUTERS & OFFICE EQUIPMENT - 10.5% OFFICE AUTOMATION - 10.5% Pitney Bowes, Inc. 45,000 2,233,125 Xerox Corp. 15,000 1,317,188 3,550,313 CONSUMER ELECTRONICS - 1.3% APPLIANCES - 0.8% Maytag Co. 6,000 258,750 WATCHES & CLOCKS - 0.5% Movado Group, Inc. 10,000 178,125 TOTAL CONSUMER ELECTRONICS 436,875 ELECTRICAL EQUIPMENT - 26.7% ELECTRICAL MACHINERY - 18.9% Alcatel Alsthom Compagnie Generale d'Electricite SA sponsored ADR 22,300 673,181 Emerson Electric Co. 36,000 2,052,000 General Electric Co. 30,000 2,400,000 Honeywell, Inc. 20,500 1,281,250 6,406,431 SHARES VALUE (NOTE 1) ELECTRICAL TRANSMISSION EQUIPMENT - 0.4% MagneTek, Inc. (a) 10,000 $ 130,000 ELECTRICAL, INDUSTRIAL APPARATUS - 1.7% Baldor Electric Co. 11,866 243,995 Hubbell, Inc. Class B 9,000 321,750 565,745 MOTORS & GENERATORS - 2.3% AMETEK, Inc. 40,000 780,000 TV & RADIO COMMUNICATION EQUIPMENT - 1.6% Loral Space & Communications Ltd. (a) 35,000 555,625 WIRING & LIGHTING - 1.8% Genlyte Group, Inc. (a) 15,000 255,000 SLI, Inc. (a) 25,000 343,750 598,750 TOTAL ELECTRICAL EQUIPMENT 9,036,551 ELECTRONIC INSTRUMENTS - 2.8% INDUSTRIAL MEASUREMENT INSTRUMENTS - 0.7% Elsag Bailey Process Automation NV (a) 10,000 213,125 SEMI-CONDUCTOR CAPITAL EQUIPMENT - 2.1% Applied Materials, Inc. (a) 20,000 491,250 KLA-Tencor Corp. (a) 8,500 180,625 Novellus Systems, Inc. (a) 1,800 47,925 719,800 TOTAL ELECTRONIC INSTRUMENTS 932,925 ELECTRONICS - 0.5% CONNECTORS - 0.5% AMP, Inc. 5,000 178,438 ENERGY SERVICES - 0.8% OIL & GAS SERVICES - 0.8% Dresser Industries, Inc. 10,000 255,625 ENTERTAINMENT - 0.7% MOTION PICTURE PRODUCTION - 0.7% Tele-Communications, Inc. (TCI Ventures Group), Series A (a) 15,000 249,375 INDUSTRIAL MACHINERY & EQUIPMENT - 23.2% ACCESS & MEASURING CUTTING TOOLS - 0.8% MSC Industrial Direct, Inc. (a) 13,000 273,813 BALL & ROLLER BEARINGS - 0.7% Kaydon Corp. 9,000 243,563 CONSTRUCTION EQUIPMENT - 2.5% Caterpillar, Inc. 20,000 843,750 FARM MACHINERY & EQUIPMENT - 1.9% Deere & Co. 10,000 329,375 Lindsay Manufacturing Co. 15,000 301,875 631,250 GENERAL INDUSTRIAL MACHINERY - 16.7% Cooper Industries, Inc. 13,600 578,850 Dover Corp. 9,900 269,775 Harnischfeger Industries, Inc. 7,500 120,469 Illinois Tool Works, Inc. 20,000 968,750 Ingersoll-Rand Co. 27,000 1,073,250 Manitowoc Co., Inc. 5,250 138,141 Tyco International Ltd. 45,000 2,497,500 5,646,735 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) INDUSTRIAL MACHINERY & EQUIPMENT - CONTINUED PUMPING EQUIPMENT - 0.6% IDEX Corp. 10,000 $ 210,000 TOTAL INDUSTRIAL MACHINERY & EQUIPMENT 7,849,111 LEASING & RENTAL - 0.3% MISCELLANEOUS EQUIPMENT RENTAL & LEASING - 0.3% United Rentals, Inc. 6,000 117,000 MEDICAL EQUIPMENT & SUPPLIES - 0.9% MEDICAL TECHNOLOGY - 0.9% Pall Corp. 15,000 307,500 METALS & MINING - 1.9% NONFERROUS ROLLING & DRAWING - 1.4% Superior Telecom, Inc. 13,000 495,625 NONFERROUS WIRE - 0.5% AFC Cable Systems, Inc. (a) 7,000 162,094 TOTAL METALS & MINING 657,719 PACKAGING & CONTAINERS - 0.9% GLASS CONTAINERS - 0.9% Owens-Illinois, Inc. (a) 10,000 311,875 PRINTING - 1.1% PLATEMAKING, RELATED SERVICES - 1.1% Schawk, Inc. Class A 25,300 374,756 RETAIL & WHOLESALE, MISCELLANEOUS - 0.3% MISCELLANEOUS NONDURABLE GOODS - WHOLESALE - 0.3% AgriBioTech, Inc. (a) 10,000 86,250 SERVICES - 0.0% BUSINESS SERVICES - 0.0% Ritchie Brothers Auctioneers, Inc. (a) 100 2,363 TELEPHONE SERVICES - 4.5% COMSAT Corp., Series 1 33,000 719,813 Qwest Communications International, Inc. (a) 11,661 291,520 WorldCom, Inc. (a) 12,500 511,719 1,523,052 TOTAL COMMON STOCKS (Cost $31,464,864) 31,904,597 CASH EQUIVALENTS - 5.7% Taxable Central Cash Fund (b) (Cost $1,932,613) 1,932,613 1,932,613 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $33,397,477) $ 33,837,210 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $21,935,020 and $24,941,347, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $4,202 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $33,436,053. Net unrealized appreciation aggregated $401,157, of which $4,158,533 related to appreciated investment securities and $3,757,376 related to depreciated investment securities. INDUSTRIAL EQUIPMENT PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 33,837,210 SECURITIES, AT VALUE (COST $33,397,477 ) - SEE ACCOMPANYIN G SCHEDULE CASH 20,372 RECEIVABLE FOR 2,869 FUND SHARES SOLD DIVIDENDS 46,995 RECEIVABLE INTEREST 9,463 RECEIVABLE REDEMPTION FEES 242 RECEIVABLE OTHER 13,550 RECEIVABLES TOTAL ASSETS 33,930,701 LIABILITIES PAYABLE FOR $ 531,289 FUND SHARES REDEEMED ACCRUED 19,509 MANAGEMENT FEE OTHER PAYABLES 41,326 AND ACCRUED EXPENSES TOTAL LIABILITIES 592,124 NET ASSETS $ 33,338,577 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 30,113,197 ACCUMULATED (59,462) NET INVESTMENT LOSS ACCUMULATED 2,845,082 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 439,760 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 33,338,577 1,525,141 SHARES OUTSTANDING NET ASSET $21.86 VALUE AND REDEMPTION PRICE PER SHARE ($33,338,57 7 (DIVIDED BY) 1,525,141 SHARES) MAXIMUM $22.54 OFFERING PRICE PER SHARE (100/97.00 OF $21.86) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 188,695 INCOME DIVIDENDS INTEREST 104,015 TOTAL INCOME 292,710 EXPENSES MANAGEMENT $ 147,109 FEE TRANSFER AGENT 139,441 FEES ACCOUNTING FEES 30,359 AND EXPENSES NON-INTERESTED 91 TRUSTEES' COMPENSATION CUSTODIAN FEES 5,310 AND EXPENSES REGISTRATION FEES 15,464 AUDIT 10,386 LEGAL 184 REPORTS TO 6,450 SHAREHOLDERS TOTAL EXPENSES 354,794 BEFORE REDUCTIONS EXPENSE (2,622) 352,172 REDUCTIONS NET INVESTMENT (59,462) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 2,938,267 SECURITIES FOREIGN 486 2,938,753 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (9,014,435) SECURITIES ASSETS AND 27 (9,014,408) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (6,075,655) NET INCREASE $ (6,135,117) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 17,879 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 17,162 - - RETAINED BY FDC DEFERRED SALES $ 521 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 8,670 WITHHELD BY FSC EXPENSE $ 2,416 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 206 CREDITS $ 2,622 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (59,462) $ (190,412) NET INVESTMENT INCOME (LOSS) NET REALIZED 2,938,753 9,532,487 GAIN (LOSS) CHANGE IN NET (9,014,408) 4,204,137 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (6,135,117) 13,546,212 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO - (59,949) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET - (11,693,964) REALIZED GAIN TOTAL - (11,753,913) DISTRIBUTIONS SHARE 15,279,048 24,781,618 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT - 11,543,701 OF DISTRIBUTIONS COST OF SHARES (26,256,445) (90,632,790) REDEEMED NET INCREASE (10,977,397) (54,307,471) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 23,376 60,604 FEES TOTAL (17,089,138) (52,454,568) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 50,427,715 102,882,283 PERIOD END OF PERIOD $ 33,338,577 $ 50,427,715 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $59,462 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 544,961 934,187 ISSUED IN - 497,967 REINVESTMENT OF DISTRIBUTIONS REDEEMED (965,727) (3,519,270) NET INCREASE (420,766) (2,087,116) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET VALUE, $ 25.91 $ 25.51 $ 25.11 $ 20.04 $ 20.61 $ 15.04 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.03) (.08) .06 .04 .01 - INVESTMENT INCOME (LOSS) D NET REALIZED (4.03) 5.73 4.15 7.10 (.44) 5.92 AND UNREALIZED GAIN (LOSS) TOTAL FROM (4.06) 5.65 4.21 7.14 (.43) 5.92 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET - (.02) (.04) (.05) (.01) (.01) INVESTMENT INCOME FROM NET - (5.26) (3.84) (2.05) (.16) (.40) REALIZED GAIN TOTAL - (5.28) (3.88) (2.10) (.17) (.41) DISTRIBUTIONS REDEMPTION FEES .01 .03 .07 .03 .03 .06 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 21.86 $ 25.91 $ 25.51 $ 25.11 $ 20.04 $ 20.61 END OF PERIOD TOTAL RETURN B, C (15.63)% 25.76% 18.25% 36.86% (1.93)% 40.07% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 33,339 $ 50,428 $ 102,882 $ 137,520 $ 109,968 $ 206,012 OF PERIOD (000 OMITTED) RATIO OF 1.39% A 1.67% 1.51% 1.54% 1.80% 1.69% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.38% A, E 1.60% E 1.44% E 1.53% E 1.78% E 1.68% E EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.23)% A (.32)% .25% .19% .06% .01% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 98% A 115% 261% 115% 131% 95% TURNOVER RATE AVERAGE $ .0420 $ .0386 $ .0401 COMMISSION RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
INDUSTRIAL MATERIALS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT INDUSTRIAL MATERIALS -25.80% -26.99% 24.66% 92.08% SELECT INDUSTRIAL MATERIALS -28.10% -29.25% 20.85% 86.25% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS CYCLICAL INDUSTRIES -18.01% -10.45% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 277 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT INDUSTRIAL MATERIALS -26.99% 4.51% 6.75% SELECT INDUSTRIAL MATERIALS -29.25% 3.86% 6.42% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS CYCLICAL INDUSTRIES -10.45% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Industrial Materials S&P 500 00509 SP001 1988/08/31 9700.00 10000.00 1988/09/30 9782.33 10426.00 1988/10/31 9602.70 10715.84 1988/11/30 9512.89 10562.61 1988/12/31 10095.74 10747.45 1989/01/31 10704.37 11534.17 1989/02/28 10240.29 11246.96 1989/03/31 10133.78 11509.02 1989/04/30 10445.70 12106.34 1989/05/31 10582.64 12596.64 1989/06/30 9966.40 12524.84 1989/07/31 10864.14 13655.84 1989/08/31 11731.44 13923.49 1989/09/30 11016.30 13866.40 1989/10/31 10110.95 13544.70 1989/11/30 10255.50 13821.02 1989/12/31 10544.60 14152.72 1990/01/31 9738.16 13203.07 1990/02/28 9905.54 13373.39 1990/03/31 10194.64 13727.79 1990/04/30 9456.67 13384.59 1990/05/31 10027.26 14689.59 1990/06/30 9920.85 14589.70 1990/07/31 9803.77 14543.01 1990/08/31 8671.96 13228.33 1990/09/30 8055.33 12584.11 1990/10/31 7961.66 12529.99 1990/11/30 8383.16 13339.43 1990/12/31 8734.41 13711.60 1991/01/31 9046.63 14309.43 1991/02/28 9710.10 15332.55 1991/03/31 9842.80 15703.60 1991/04/30 9858.41 15741.29 1991/05/31 10701.41 16421.31 1991/06/30 10584.29 15669.22 1991/07/31 11007.66 16399.40 1991/08/31 11266.39 16788.07 1991/09/30 11117.42 16507.71 1991/10/31 11595.68 16728.91 1991/11/30 10670.53 16054.73 1991/12/31 11862.24 17891.40 1992/01/31 12379.70 17558.62 1992/02/29 12983.40 17786.88 1992/03/31 12756.03 17440.03 1992/04/30 13422.45 17952.77 1992/05/31 13579.25 18040.74 1992/06/30 13249.65 17771.93 1992/07/31 13547.74 18498.80 1992/08/31 12692.67 18119.58 1992/09/30 12520.09 18333.39 1992/10/31 12661.30 18397.56 1992/11/30 13131.98 19024.91 1992/12/31 13329.45 19258.92 1993/01/31 13613.06 19420.70 1993/02/28 13739.10 19684.82 1993/03/31 13967.56 20100.17 1993/04/30 13762.74 19613.74 1993/05/31 14329.95 20139.39 1993/06/30 14369.08 20197.79 1993/07/31 14566.67 20117.00 1993/08/31 14946.06 20879.44 1993/09/30 14479.73 20718.67 1993/10/31 15333.34 21147.54 1993/11/30 15538.84 20946.64 1993/12/31 16179.05 21200.10 1994/01/31 17491.07 21920.90 1994/02/28 17127.50 21326.84 1994/03/31 16645.37 20396.99 1994/04/30 17270.13 20658.07 1994/05/31 17444.42 20996.87 1994/06/30 17262.21 20482.44 1994/07/31 17903.90 21154.27 1994/08/31 18870.39 22021.59 1994/09/30 18632.73 21482.06 1994/10/31 18387.15 21965.41 1994/11/30 17087.93 21165.43 1994/12/31 17504.74 21479.31 1995/01/31 17010.52 22036.27 1995/02/28 18437.37 22895.02 1995/03/31 18859.84 23570.66 1995/04/30 18947.18 24264.81 1995/05/31 18755.55 25234.68 1995/06/30 19593.92 25820.88 1995/07/31 21286.63 26677.10 1995/08/31 21230.74 26744.06 1995/09/30 20631.90 27872.66 1995/10/31 19434.23 27773.15 1995/11/30 21222.75 28992.39 1995/12/31 20198.70 29550.79 1996/01/31 20511.42 30556.70 1996/02/29 20904.33 30839.96 1996/03/31 21962.78 31136.95 1996/04/30 22477.43 31595.90 1996/05/31 22339.03 32410.76 1996/06/30 21598.20 32534.25 1996/07/31 20702.68 31096.88 1996/08/31 21826.15 31752.72 1996/09/30 22306.47 33539.76 1996/10/31 22257.62 34464.79 1996/11/30 22933.33 37069.98 1996/12/31 23029.27 36335.62 1997/01/31 23131.47 38605.87 1997/02/28 23557.30 38908.54 1997/03/31 21990.22 37309.79 1997/04/30 22050.06 39537.19 1997/05/31 23447.28 41944.21 1997/06/30 23373.25 43823.31 1997/07/31 25418.18 47310.33 1997/08/31 25519.96 44660.01 1997/09/30 26186.18 47106.04 1997/10/31 24159.76 45532.69 1997/11/30 23872.92 47640.40 1997/12/31 23433.28 48458.39 1998/01/31 23875.22 48994.34 1998/02/28 25110.67 52527.81 1998/03/31 26336.07 55217.76 1998/04/30 26577.13 55773.25 1998/05/31 25271.38 54814.51 1998/06/30 24005.80 57041.07 1998/07/31 22308.32 56433.58 1998/08/31 18625.00 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980925 112925 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Industrial Materials Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $18,625 - a 86.25% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS MONSANTO CO. 8.4 DU PONT (E.I.) DE NEMOURS & CO. 6.3 KIMBERLY-CLARK CORP. 5.6 OWENS-ILLINOIS, INC. 5.2 RYERSON TULL, INC. CLASS A 4.8 ALUMINUM CO. OF AMERICA 4.3 CYTEC INDUSTRIES, INC. 4.2 BURLINGTON NORTHERN SANTA FE CORP. 3.9 MASCO CORP. 3.2 AIR PRODUCTS & CHEMICALS, INC. 2.8 TOP INDUSTRIES AS OF AUGUST 31, 1998 CHEMICALS 21.4% RAILROADS 13.2% PAPER 8.8% GLASS CONTAINERS 5.2% METALS SERVICE CENTERS - WHOLESALE 4.8% ALL OTHERS 46.6% ROW: 1, COL: 1, VALUE: 46.6 ROW: 1, COL: 2, VALUE: 4.8 ROW: 1, COL: 3, VALUE: 5.2 ROW: 1, COL: 4, VALUE: 8.800000000000001 ROW: 1, COL: 5, VALUE: 13.2 ROW: 1, COL: 6, VALUE: 21.4 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS INDUSTRIAL MATERIALS PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Peter Hirsch) (photograph of James Catudal) NOTE TO SHAREHOLDERS: On September 1, 1998, after the end of the period covered by this report, Peter Hirsch (right) became Portfolio Manager of Fidelity Select Industrial Materials Portfolio. The following is an interview with James Catudal, who managed the fund during the period, and Peter Hirsch, who adds his outlook. Q. HOW DID THE FUND PERFORM, JIM? J.C. For the six- and 12-month periods that ended August 31, 1998, the fund had total returns of -25.80% and -26.99%, respectively. In comparison, the Standard & Poor's 500 Index returned -8.10% and 8.10%, respectively. Beginning this period, the fund also compares itself to the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - which returned -18.01% and -10.45% over the same periods, respectively. Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S WEAK PERFORMANCE RELATIVE TO THE INDEXES? J.C. As a result of the slowdown in most Asian economies, there was less demand for virtually all global commodities. Whether you're talking about steel, paper, chemicals, plastics, copper, nickel or precious metals, prices were weak. Consequently, the fund fared worse than the broader market as reflected in the S&P 500. The Goldman Sachs Cyclical Industries Index contains a mix of industrial materials stocks and stocks from industries with a more domestic orientation, such as automotive and industrial equipment manufacturing. Domestically oriented stocks were more insulated from the deflationary impact of the Asian crisis, enabling the Goldman Sachs Cyclical Industries Index to outperform the fund. Q. HOW DID YOU MANAGE THE FUND AGAINST THAT DIFFICULT BACKDROP? J.C. I focused on companies with strong management and solid long-term growth prospects that are poised to benefit when commodity prices turn up again. In many cases, these were companies that make specialty products whose price is not determined solely by commodity prices. In addition, where possible, I tried to invest in companies with limited Asian exposure. Q. WHAT STOCKS PERFORMED WELL FOR THE FUND? J.C. Monsanto - the fund's largest holding at the end of the period - was one of the better performers. Investors responded positively to the anticipated merger with American Home Products and Monsanto's ongoing transformation from a chemical company to a life sciences company that produces food ingredients, pharmaceuticals and agricultural products. Alumax was bought by Aluminum Co. of America, and the former's stock responded with some strength that helped performance. Another relatively helpful stock was Inland Steel Industries, which strengthened when the company sold its steel business and used the proceeds to repurchase about half of its outstanding shares. Q. WHAT HOLDINGS HURT THE FUND'S PERFORMANCE? J.C. Cytec Industries declined due to concerns about a slowdown in the demand for the company's specialty chemicals from the aerospace industry. Kimberly-Clark suffered because the company failed to meet the sales and earnings targets it set for itself both in the U.S. and Europe. Owens-Illinois was weak because of investors' concerns about the company's exposure to Asia and other emerging markets, as well as reduced demand for the glass and plastic packaging the company manufactures. Q. TURNING TO YOU, PETER, WHAT'S YOUR OUTLOOK? P.H. A lot depends on the global economy. Asia, of course, is the biggest concern because the region's economies are so weak and they jointly consume up to one-third of the total supply of global commodities that are produced by some of the companies in which the fund invests. Russia and Latin America are other current problem areas. On the other hand, most of the stocks that the fund holds have been beaten down severely in the past year or so and have very discounted valuations. Although it's difficult to say when we'll see these stocks rebound, the fund is well positioned to benefit from any meaningful upturn in demand for industrial commodities. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 509 TRADING SYMBOL: FSDPX SIZE: as of August 31, 1998, more than $11 million MANAGER: Peter Hirsch, since September 1998; analyst, growth and income funds and steel industries, 1995-1998; joined Fidelity in 1995 INDUSTRIAL MATERIALS PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.6% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 6.6% CEMENT - 1.0% Lafarge Corp. 4,000 $ 114,250 PAINT & VARNISH - 1.9% Sherwin-Williams Co. 9,700 231,584 PAVING, ROOFING & SIDING - 0.5% Owens Corning 1,700 59,606 PLUMBING SUPPLIES - WHOLESALE - 3.2% Masco Corp. 16,500 379,500 TOTAL BUILDING MATERIALS 784,940 CHEMICALS & PLASTICS - 28.0% CHEMICALS - 21.4% Cytec Industries, Inc. (a) 22,000 503,250 du Pont (E.I.) de Nemours & Co. 13,000 749,938 MacDermid, Inc. 3,000 83,250 Monsanto Co. 18,400 1,006,250 Raychem Corp. 2,420 70,180 Witco Corp. 6,300 132,300 2,545,168 CHEMICALS, GENERAL - 0.5% W.R. Grace & Co. 5,000 64,375 INDUSTRIAL GASES - 4.2% Air Products & Chemicals, Inc. 11,000 336,188 Praxair, Inc. 4,500 161,438 497,626 PLASTICS - 1.1% Hanna (M.A.) Co. 4,700 58,456 Ivex Packaging Corp. 4,300 70,681 129,137 UNSUPPORTED PLASTICS FILM & SHEET - 0.8% Sealed Air Corp. (a) 2,840 102,240 TOTAL CHEMICALS & PLASTICS 3,338,546 DRUGS & PHARMACEUTICALS - 0.8% BIOTECHNOLOGY - 0.8% Sigma Aldrich Corp. 3,500 97,125 INDUSTRIAL MACHINERY & EQUIPMENT - 0.2% CARBON & GRAPHITE PRODUCTS - 0.2% UCAR International, Inc. (a) 1,500 27,188 IRON & STEEL - 3.8% BLAST FURNACES - 1.9% Allegheny Teledyne, Inc. 7,500 112,969 Steel Dynamics, Inc. (a) 9,500 105,688 218,657 IRON & STEEL BLAST FURNACES, MILLS - 1.9% Inland Steel Industries, Inc. 2,220 42,041 Nucor Corp. 5,200 186,875 228,916 TOTAL IRON & STEEL 447,573 METALS & MINING - 12.4% METAL MINING - 0.9% Breakwater Resources Ltd. (a) 30,000 15,301 Phelps Dodge Corp. 2,000 89,500 104,801 METAL ORES - 0.5% Falconbridge Ltd. 8,200 62,735 SHARES VALUE (NOTE 1) METALS SERVICE CENTERS - WHOLESALE - 4.8% Ryerson Tull, Inc. Class A (a) 34,300 $ 572,381 PRIMARY PRODUCTION OF ALUMINUM - 1.4% Reynolds Metals Co. 3,500 167,781 PRIME NONFERROUS SMELTING - 4.8% Aluminum Co. of America 8,541 511,392 Brush Wellman, Inc. 4,000 58,500 569,892 TOTAL METALS & MINING 1,477,590 PACKAGING & CONTAINERS - 8.0% GLASS CONTAINERS - 5.2% Owens-Illinois, Inc. (a) 20,000 623,750 METAL CANS & CONTAINERS - 2.8% Silgan Holdings, Inc. (a) 14,100 327,825 TOTAL PACKAGING & CONTAINERS 951,575 PAPER & FOREST PRODUCTS - 16.7% CONVERTED PAPER & PAPERBOARD - 1.2% Boise Cascade Corp. 5,887 143,864 PAPER - 8.8% Champion International Corp. 7,200 237,600 Georgia-Pacific Corp. 2,400 102,900 Kimberly-Clark Corp. 17,500 667,188 Stone Container Corp. (a) 3,500 36,531 1,044,219 PAPER MILLS - 3.4% Bowater, Inc. 4,000 151,250 Fort James Corp. 8,700 253,388 404,638 PAPERBOARD MILLS - 3.3% Jefferson Smurfit Corp. (a) 6,000 67,500 Mead Corp. 12,000 328,500 396,000 TOTAL PAPER & FOREST PRODUCTS 1,988,721 PRECIOUS METALS - 1.8% GOLD & SILVER ORES - 0.8% Getchell Gold Corp. (a) 10,500 94,500 GOLD ORES - 1.0% Golden Knight Resources, Inc. (a) 20,300 5,824 Kinross Gold Corp. (a) 17,000 29,264 Newmont Gold Co. 2,000 29,750 Newmont Mining Corp. 4,000 54,750 119,588 TOTAL PRECIOUS METALS 214,088 RAILROADS - 13.2% Burlington Northern Santa Fe Corp. 5,000 465,313 CSX Corp. 6,500 245,375 Canadian National Railway Co. 4,000 180,555 Kansas City Southern Industries, Inc. 10,000 328,750 Norfolk Southern Corp. 9,000 253,688 Wisconsin Central Transportation Corp. (a) 8,000 100,500 1,574,181 TEXTILES & APPAREL - 0.5% TEXTILE MILL PRODUCTS - 0.5% Unifi, Inc. 2,700 60,075 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TRUCKING & FREIGHT - 1.6% TRUCKING, LOCAL & LONG DISTANCE - 0.7% Heartland Express, Inc. (a) 5,300 $ 84,800 TRUCKING, LONG DISTANCE - 0.9% USFreightways Corp. 4,500 100,969 TOTAL TRUCKING & FREIGHT 185,769 TOTAL COMMON STOCKS (Cost $13,450,166) 11,147,371 CASH EQUIVALENTS - 6.4% Taxable Central Cash Fund (b) (Cost $765,283) 765,283 765,283 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $14,215,449) $ 11,912,654 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $5,567,648 and $11,467,307, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $1,981 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $14,353,534. Net unrealized depreciation aggregated $2,440,880, of which $596,053 related to appreciated investment securities and $3,036,933 related to depreciated investment securities. The fund intends to elect to defer to its fiscal year ending February 28, 1999 approximately $513,000 of losses recognized during the period November 1, 1997 to February 28,1998. INDUSTRIAL MATERIALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 11,912,654 SECURITIES, AT VALUE (COST $14,215,449 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 5,977 FUND SHARES SOLD DIVIDENDS 15,054 RECEIVABLE INTEREST 1,941 RECEIVABLE REDEMPTION FEES 94 RECEIVABLE OTHER 2,508 RECEIVABLES TOTAL ASSETS 11,938,228 LIABILITIES PAYABLE TO $ 11,899 CUSTODIAN BANK PAYABLE FOR 173,252 FUND SHARES REDEEMED ACCRUED 6,836 MANAGEMENT FEE OTHER PAYABLES 32,459 AND ACCRUED EXPENSES TOTAL LIABILITIES 224,446 NET ASSETS $ 11,713,782 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 14,792,469 ACCUMULATED (60,691) NET INVESTMENT LOSS ACCUMULATED (715,201) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (2,302,795) APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 11,713,782 631,394 SHARES OUTSTANDING NET ASSET $18.55 VALUE AND REDEMPTION PRICE PER SHARE ($11,713,78 2 (DIVIDED BY) 631,394 SHARES) MAXIMUM $19.12 OFFERING PRICE PER SHARE (100/97.00 OF $18.55) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 114,354 INCOME DIVIDENDS INTEREST 22,272 TOTAL INCOME 136,626 EXPENSES MANAGEMENT $ 58,178 FEE TRANSFER AGENT 73,463 FEES ACCOUNTING FEES 30,336 AND EXPENSES NON-INTERESTED 39 TRUSTEES' COMPENSATION CUSTODIAN FEES 6,252 AND EXPENSES REGISTRATION FEES 15,506 AUDIT 9,981 LEGAL 66 REPORTS TO 6,218 SHAREHOLDERS TOTAL EXPENSES 200,039 BEFORE REDUCTIONS EXPENSE (2,722) 197,317 REDUCTIONS NET INVESTMENT (60,691) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 127,374 SECURITIES FOREIGN 248 127,622 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (4,495,015) SECURITIES ASSETS AND 33 (4,494,982) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (4,367,360) NET INCREASE $ (4,428,051) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 8,844 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 8,471 - - RETAINED BY FDC DEFERRED SALES $ 391 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 3,683 WITHHELD BY FSC EXPENSE $ 2,722 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (60,691) $ (124,764) NET INVESTMENT INCOME (LOSS) NET REALIZED 127,622 3,017,681 GAIN (LOSS) CHANGE IN NET (4,494,982) (1,210,871) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (4,428,051) 1,682,046 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO - (37,279) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET - (4,304,754) REALIZED GAIN TOTAL - (4,342,033) DISTRIBUTIONS SHARE 4,594,367 15,807,574 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT - 4,249,488 OF DISTRIBUTIONS COST OF SHARES (11,049,317) (61,328,959) REDEEMED NET INCREASE (6,454,950) (41,271,897) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 14,963 51,834 FEES TOTAL (10,868,038) (43,880,050) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 22,581,820 66,461,870 PERIOD END OF PERIOD $ 11,713,782 $ 22,581,820 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $60,691 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 177,192 605,194 ISSUED IN - 181,274 REINVESTMENT OF DISTRIBUTIONS REDEEMED (449,204) (2,285,848) NET INCREASE (272,012) (1,499,380) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED FEBRUARY 28, YEAR ENDED YEARS ENDED FEBRUARY 28, ENDED FEBRUARY 29, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET VALUE, $ 25.00 $ 27.66 $ 26.07 $ 23.13 $ 21.67 $ 17.44 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.08) (.11) .06 .12 .17 .15 INVESTMENT INCOME (LOSS) D NET REALIZED (6.39) 1.43 3.12 2.92 1.43 4.07 AND UNREALIZED GAIN (LOSS) TOTAL FROM (6.47) 1.32 3.18 3.04 1.60 4.22 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET - (.03) (.06) (.15) (.18) (.06) INVESTMENT INCOME FROM NET - (4.00) (1.57) - - - REALIZED GAIN TOTAL - (4.03) (1.63) (.15) (.18) (.06) DISTRIBUTIONS REDEMPTION .02 .05 .04 .05 .04 .07 FEES ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 18.55 $ 25.00 $ 27.66 $ 26.07 $ 23.13 $ 21.67 END OF PERIOD TOTAL RETURN B, C (25.80)% 6.59% 12.69% 13.38% 7.65% 24.66% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 11,714 $ 22,582 $ 66,462 $ 86,338 $ 183,454 $ 155,721 OF PERIOD (000 OMITTED) RATIO OF 1.98% A 1.98% 1.54% 1.64% 1.56% 2.10% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.96% A, E 1.94% E 1.51% E 1.61% E 1.53% E 2.08% E EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.60)% A (.42)% .23% .49% .77% .75% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 60% A 118% 105% 138% 139% 185% TURNOVER RATE AVERAGE $ .0283 $ .0214 $ .0242 COMMISSION RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
PAPER AND FOREST PRODUCTS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT PAPER AND -25.51% -27.36% 40.23% 115.13% FOREST PRODUCTS SELECT PAPER AND -27.82% -29.61% 35.95% 108.60% FOREST PRODUCTS (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS CYCLICAL INDUSTRIES -18.01% -10.45% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 277 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT PAPER AND -27.36% 7.00% 7.96% FOREST PRODUCTS SELECT PAPER AND -29.61% 6.33% 7.63% FOREST PRODUCTS (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS CYCLICAL INDUSTRIES -10.45% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Paper & Forest S&P 500 00506 SP001 1988/08/31 9700.00 10000.00 1988/09/30 9892.16 10426.00 1988/10/31 9674.94 10715.84 1988/11/30 9466.06 10562.61 1988/12/31 10160.51 10747.45 1989/01/31 10261.02 11534.17 1989/02/28 9959.47 11246.96 1989/03/31 9967.85 11509.02 1989/04/30 10328.03 12106.34 1989/05/31 10512.31 12596.64 1989/06/30 9842.20 12524.84 1989/07/31 10788.73 13655.84 1989/08/31 11559.36 13923.49 1989/09/30 10922.75 13866.40 1989/10/31 10428.55 13544.70 1989/11/30 10353.16 13821.02 1989/12/31 10574.90 14152.72 1990/01/31 9608.14 13203.07 1990/02/28 9701.43 13373.39 1990/03/31 9972.80 13727.79 1990/04/30 9328.30 13384.59 1990/05/31 9947.36 14689.59 1990/06/30 9709.91 14589.70 1990/07/31 9854.07 14543.01 1990/08/31 8675.32 13228.33 1990/09/30 7835.77 12584.11 1990/10/31 7589.84 12529.99 1990/11/30 8353.07 13339.43 1990/12/31 8977.29 13711.60 1991/01/31 9718.93 14309.43 1991/02/28 10184.61 15332.55 1991/03/31 10391.58 15703.60 1991/04/30 10900.38 15741.29 1991/05/31 12150.82 16421.31 1991/06/30 11840.36 15669.22 1991/07/31 11848.99 16399.40 1991/08/31 11909.35 16788.07 1991/09/30 11452.30 16507.71 1991/10/31 11883.48 16728.91 1991/11/30 10977.99 16054.73 1991/12/31 12098.27 17891.40 1992/01/31 13210.95 17558.62 1992/02/29 13272.77 17786.88 1992/03/31 13361.08 17440.03 1992/04/30 13573.02 17952.77 1992/05/31 13193.29 18040.74 1992/06/30 13105.64 17771.93 1992/07/31 13008.30 18498.80 1992/08/31 12486.20 18119.58 1992/09/30 12353.46 18333.39 1992/10/31 12955.21 18397.56 1992/11/30 13433.06 19024.91 1992/12/31 13556.71 19258.92 1993/01/31 13974.25 19420.70 1993/02/28 14285.18 19684.82 1993/03/31 14267.42 20100.17 1993/04/30 14916.44 19613.74 1993/05/31 14960.88 20139.39 1993/06/30 14640.87 20197.79 1993/07/31 14489.75 20117.00 1993/08/31 14880.88 20879.44 1993/09/30 14169.73 20718.67 1993/10/31 14720.87 21147.54 1993/11/30 15636.48 20946.64 1993/12/31 16072.06 21200.10 1994/01/31 17938.84 21920.90 1994/02/28 17432.14 21326.84 1994/03/31 15583.14 20396.99 1994/04/30 15565.73 20658.07 1994/05/31 16200.69 20996.87 1994/06/30 16037.42 20482.44 1994/07/31 17398.06 21154.27 1994/08/31 19339.24 22021.59 1994/09/30 19683.93 21482.06 1994/10/31 18459.36 21965.41 1994/11/30 17652.04 21165.43 1994/12/31 18344.38 21479.31 1995/01/31 18221.20 22036.27 1995/02/28 20031.01 22895.02 1995/03/31 20173.14 23570.66 1995/04/30 20256.55 24264.81 1995/05/31 20591.45 25234.68 1995/06/30 22457.31 25820.88 1995/07/31 23222.79 26677.10 1995/08/31 23203.66 26744.06 1995/09/30 22820.92 27872.66 1995/10/31 22486.02 27773.15 1995/11/30 22820.92 28992.39 1995/12/31 22364.51 29550.79 1996/01/31 22922.31 30556.70 1996/02/29 21869.86 30839.96 1996/03/31 22985.46 31136.95 1996/04/30 23990.46 31595.90 1996/05/31 23506.91 32410.76 1996/06/30 22188.15 32534.25 1996/07/31 21605.70 31096.88 1996/08/31 22814.56 31752.72 1996/09/30 23638.79 33539.76 1996/10/31 23594.83 34464.79 1996/11/30 23869.57 37069.98 1996/12/31 23944.77 36335.62 1997/01/31 24191.39 38605.87 1997/02/28 24247.44 38908.54 1997/03/31 22935.86 37309.79 1997/04/30 23622.29 39537.19 1997/05/31 26537.63 41944.21 1997/06/30 26745.05 43823.31 1997/07/31 28830.72 47310.33 1997/08/31 28727.01 44660.01 1997/09/30 29568.20 47106.04 1997/10/31 26687.43 45532.69 1997/11/30 26860.28 47640.40 1997/12/31 26184.15 48458.39 1998/01/31 27185.53 48994.34 1998/02/28 28013.83 52527.81 1998/03/31 28446.52 55217.76 1998/04/30 29977.89 55773.25 1998/05/31 28226.34 54814.51 1998/06/30 26953.64 57041.07 1998/07/31 24357.82 56433.58 1998/08/31 20859.83 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980909 100803 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Paper and Forest Products Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $20,860 - a 108.60% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS LOUISIANA-PACIFIC CORP. 11.8 UPM-KYMMENE CORP. 9.0 BOWATER, INC. 8.5 FORT JAMES CORP. 6.3 ENSO OY CLASS R 6.1 CHESAPEAKE CORP. 5.9 METSA-SERLA LTD. CLASS B 5.2 ASSI DOMAN AB FREE SHARES 4.3 DONOHUE, INC. (VTG.) 4.2 GEORGIA PACIFIC CORP. (TIMBER GROUP) 3.6 TOP INDUSTRIES AS OF AUGUST 31, 1998 PAPER MILLS 32.9% PAPER 30.0% LUMBER & WOOD 13.4% FORESTRY 4.3% OFFICE AUTOMATION 4.3% ALL OTHERS 15.1% ROW: 1, COL: 1, VALUE: 15.1 ROW: 1, COL: 2, VALUE: 4.3 ROW: 1, COL: 3, VALUE: 4.3 ROW: 1, COL: 4, VALUE: 13.4 ROW: 1, COL: 5, VALUE: 30.0 ROW: 1, COL: 6, VALUE: 32.9 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS PAPER AND FOREST PRODUCTS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Doug Lober) Doug Lober, Portfolio Manager of Fidelity Select Paper & Forest Products Portfolio Q. HOW DID THE FUND PERFORM, DOUG? A. For the six months that ended August 31, 1998, the fund returned - -25.51%. This lagged the Standard & Poor's 500 Index, which returned - -8.10% over the same time span. Beginning this period, the fund also compares itself to the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - which returned -18.01% for the six months that ended August 31. For the 12 months that ended August 31, 1998, the fund returned -27.36%, while the S&P 500 and Goldman Sachs index returned 8.10% and -10.45%, respectively. Q. WHAT FACTORS HURT THE FUND AND PAPER STOCKS IN GENERAL? A. The escalating economic problems in Asia continued to be the primary negative influence on the performance of paper stocks. Paper is a global commodity. Asia accounts for over 30% of world demand, and this demand has been growing at 7% a year versus only 2% for the rest of the world. Economic turbulence throughout Asia has resulted in slowing Asian demand for paper, and this slack in demand has put pressure on paper prices throughout the world. In 1998, prices for pulp - which is the building block for paper - have fallen as have prices for printing and writing paper and cardboard boxes. This across-the-board price decline resulted in weak share price performance for all paper stocks. Q. WAS THERE ONE SEGMENT OF THE MARKET THAT CAUGHT YOUR EYE? A. Oriented strand board (OSB) - a building product that competes with plywood - had the most favorable outlook. For several years, there was significant capacity growth within the OSB market. This growth finally began to slow during the period, creating a better OSB supply/demand balance. In addition, housing starts in the United States have been strong, and companies that specialize in OSB and other building products have been the beneficiaries. Also, OSB is not exported to Asia and has no import competition. The result was that OSB prices rose sharply during the period. The fund benefited from this trend by investing considerably in Louisiana-Pacific - the world's largest producer of OSB. At the end of the period, Louisiana-Pacific was the fund's largest single holding. Q. EUROPEAN PAPER STOCKS ACCOUNT FOR A FEW OF THE FUND'S TOP HOLDINGS. WHAT WAS YOUR ATTRACTION? A. The fund has always held some European paper stocks, since Europe accounts for one-third of the global paper sector and many excellent paper companies are based there - particularly in Finland and Sweden. The fund, in fact, held up to 25% of its assets in Europe during the period for several reasons. First, the rate of consolidation is occurring more quickly in Europe than in the U.S., and industry consolidation typically gives companies a higher level of flexibility in raising prices. Second, stock valuations are much cheaper in Europe than in the U.S. And lastly, a strong U.S. dollar generally results in European companies getting higher prices for their paper in their own currencies, since most paper sales are indexed to U.S. dollars. Of course, international investments typically carry more risks than domestic investments. Q. FORT JAMES, BOWATER AND JEFFERSON SMURFIT WERE THREE OF THE FUND'S DISAPPOINTMENTS. WHAT HAPPENED WITH THESE STOCKS? A. The weak performance of these three names typifies the stock market's lack of differentiation among paper companies during the period. Each of these companies operates in a completely different paper segment from the other (tissue, newsprint and cardboard boxes, respectively) and in my opinion, have better managements and higher asset values than most other paper companies. Despite this, however, all three stocks declined equally with each other and with most other paper companies. Q. DO YOU SEE A LIGHT AT THE END OF THE TUNNEL? A. I see light as well as challenges. The valuations of paper stocks are falling to historically low levels, which usually results in good buying opportunities. Furthermore, the paper industry plans to add only about 1.5% of new capacity per year over the next several years. Reduced capacity growth should raise industry operating rates and lead to better overall pricing for paper products. Asia and its impact on demand remains the chief negative influence going forward. One final factor that could change is that the stock market has not been friendly to stock pickers in the paper sector over the past year. I expect the market to start differentiating among companies again, and this should play into Fidelity's stock-picking strengths. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 506 TRADING SYMBOL: FSPFX SIZE: as of August 31, 1998, more than $11 million MANAGER: Doug Lober, since 1997; manager, Fidelity Select Broadcast and Media Portfolio and Fidelity Select Housing Portfolio, 1989; analyst, various industries, 1986-1989; joined Fidelity in 1986 PAPER AND FOREST PRODUCTS PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.4% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 0.9% STRUCTURAL METAL & WOOD PROD - 0.9% T.J. International, Inc. 4,500 $ 94,219 COMPUTER SERVICES & SOFTWARE - 2.0% PREPACKAGED COMPUTER SOFTWARE - 2.0% Documentum, Inc. (a) 6,400 228,800 COMPUTERS & OFFICE EQUIPMENT - 4.3% OFFICE AUTOMATION - 4.3% Xerox Corp. 3,300 289,779 FileNET Corp. (a) 11,600 189,950 479,729 PAPER & FOREST PRODUCTS - 85.2% CONVERTED PAPER & PAPERBOARD - 1.9% Boise Cascade Corp. 8,600 210,163 FORESTRY - 4.3% Assi Doman AB Free shares 21,800 487,765 LUMBER & WOOD - 13.4% Louisiana-Pacific Corp. 70,000 1,321,250 Weyerhaeuser Co. 5,000 187,813 1,509,063 PAPER - 30.0% Champion International Corp. 10,000 330,000 Chesapeake Corp. 20,100 658,275 Consolidated Papers, Inc. 5,000 125,313 Donohue, Inc. (vtg.) 28,000 477,526 Georgia Pacific Corp. (Timber Group) 20,000 402,500 International Paper Co. 100 3,700 Mercer International, Inc. (SBI) 6,100 40,794 Metsa-Serla Ltd. Class B 75,500 579,541 Smurfit (Jefferson) Group PLC 115,700 219,711 Stone Container Corp. (a) 25,400 265,113 Union Camp Corp. 500 18,531 Willamette Industries, Inc. 10,200 251,175 3,372,179 PAPER MILLS - 32.9% Abitibi-Consolidated, Inc. 29,400 229,614 Alliance Forest Products, Inc. (a) 9,000 88,365 Bowater, Inc. 25,400 960,438 Enso OY Class R 81,300 689,512 Fort James Corp. 24,400 710,650 UPM-Kymmene Corp. 49,700 1,014,229 3,692,808 PAPERBOARD MILLS - 2.3% Jefferson Smurfit Corp. (a) 18,700 210,375 St Laurent Paperboard, Inc. (a) 7,500 47,816 258,191 PULP MILLS - 0.4% Tembec, Inc. Class A 11,500 49,123 TOTAL PAPER & FOREST PRODUCTS 9,579,292 TOTAL COMMON STOCKS (Cost $13,381,689) 10,382,040 CASH EQUIVALENTS - 7.6% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $857,079) 857,079 $ 857,079 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $14,238,768) $ 11,239,119 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $36,331,873 and $50,087,163, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $11,018 for the period (see Note 4 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 65.1% Finland 20.3 Canada 8.3 Sweden 4.3 Ireland 2.0 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $14,292,144. Net unrealized depreciation aggregated $3,053,025, of which $17,010 related to appreciated investment securities and $3,070,035 related to depreciated investment securities. PAPER AND FOREST PRODUCTS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 11,239,119 SECURITIES, AT VALUE (COST $14,238,768 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 7,112 INVESTMENTS SOLD RECEIVABLE FOR 1,472 FUND SHARES SOLD DIVIDENDS 15,848 RECEIVABLE INTEREST 4,432 RECEIVABLE REDEMPTION FEES 197 RECEIVABLE TOTAL ASSETS 11,268,180 LIABILITIES PAYABLE TO $ 20,211 CUSTODIAN BANK PAYABLE FOR 164,434 FUND SHARES REDEEMED ACCRUED 6,205 MANAGEMENT FEE OTHER PAYABLES 30,628 AND ACCRUED EXPENSES TOTAL LIABILITIES 221,478 NET ASSETS $ 11,046,702 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 15,735,096 UNDISTRIBUTED 25,390 NET INVESTMENT INCOME ACCUMULATED (1,714,102) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (2,999,682) APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 11,046,702 667,224 SHARES OUTSTANDING NET ASSET $16.56 VALUE AND REDEMPTION PRICE PER SHARE ($11,046,70 2 (DIVIDED BY) 667,224 SHARES) MAXIMUM $17.07 OFFERING PRICE PER SHARE (100/97.00 OF $16.56) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 151,938 INCOME DIVIDENDS INTEREST 38,265 TOTAL INCOME 190,203 EXPENSES MANAGEMENT $ 54,866 FEE TRANSFER AGENT 76,366 FEES ACCOUNTING FEES 30,326 AND EXPENSES NON-INTERESTED 43 TRUSTEES' COMPENSATION CUSTODIAN FEES 10,359 AND EXPENSES REGISTRATION FEES 15,772 AUDIT 9,896 LEGAL 55 REPORTS TO 5,966 SHAREHOLDERS TOTAL EXPENSES 203,649 BEFORE REDUCTIONS EXPENSE (7,755) 195,894 REDUCTIONS NET INVESTMENT (5,691) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT (938,970) SECURITIES FOREIGN (3,217) (942,187) CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (4,268,606) SECURITIES ASSETS AND 17 (4,268,589) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (5,210,776) NET INCREASE $ (5,216,467) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 34,554 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 34,554 - - RETAINED BY FDC DEFERRED SALES $ 205 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 8,738 WITHHELD BY FSC EXPENSE $ 7,747 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 8 CREDITS $ 7,755 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (5,691) $ (121,775) NET INVESTMENT INCOME (LOSS) NET REALIZED (942,187) 2,537,439 GAIN (LOSS) CHANGE IN NET (4,268,589) 1,291,272 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (5,216,467) 3,706,936 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO - (31,544) SHAREHOLDERS IN EXCESS OF NET INVESTMENT INCOME FROM NET - (1,592,672) REALIZED GAIN IN EXCESS OF (317,946) - NET REALIZED GAIN TOTAL (317,946) (1,624,216) DISTRIBUTIONS SHARE 18,822,999 71,567,372 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 312,733 1,584,087 OF DISTRIBUTIONS COST OF SHARES (34,010,460) (63,467,979) REDEEMED NET INCREASE (14,874,728) 9,683,480 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 71,736 134,393 FEES TOTAL (20,337,405) 11,900,593 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 31,384,107 19,483,514 PERIOD END OF PERIOD $ 11,046,702 $ 31,384,107 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $25,390 AND $31,081, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 783,658 3,117,317 ISSUED IN 13,704 75,670 REINVESTMENT OF DISTRIBUTIONS REDEEMED (1,514,940) (2,708,921) NET INCREASE (717,578) 484,066 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET VALUE, $ 22.66 $ 21.63 $ 20.78 $ 21.14 $ 19.61 $ 16.08 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.01) (.12) .01 .08 .01 (.01) INVESTMENT INCOME (LOSS) D NET REALIZED (5.74) 3.13 2.08 1.83 2.53 3.38 AND UNREALIZED GAIN (LOSS) TOTAL FROM (5.75) 3.01 2.09 1.91 2.54 3.37 INVESTMENT OPERATIONS LESS DISTRIBUTIONS FROM NET - - (.03) (.08) - (.01) INVESTMENT INCOME IN EXCESS OF - (.04) (.07) - - - NET INVESTMENT INCOME FROM NET - (2.07) (1.25) (2.27) (1.17) - REALIZED GAIN IN EXCESS OF (.44) - - - - - NET REALIZED GAIN TOTAL (.44) (2.11) (1.35) (2.35) (1.17) (.01) DISTRIBUTIONS REDEMPTION FEES .09 .13 .11 .08 .16 .17 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 16.56 $ 22.66 $ 21.63 $ 20.78 $ 21.14 $ 19.61 END OF PERIOD TOTAL RETURN B, C (25.51)% 15.53% 10.87% 9.18% 14.91% 22.03% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 11,047 $ 31,384 $ 19,484 $ 27,270 $ 94,219 $ 66,908 OF PERIOD (000 OMITTED) RATIO OF 2.15% A 2.18% 2.19% 1.91% 1.88% 2.08% EXPENSES TO AVERAGE NET ASSETS RATIO OF 2.07% A, E 2.15% E 2.16% E 1.90% E 1.87% E 2.07% E EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.06)% A (.50)% .04% .34% .05% (.08)% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 398% A 235% 180% 78% 209% 176% TURNOVER RATE AVERAGE $ .0321 $ .0320 $ .0306 COMMISSION RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
TRANSPORTATION PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past five years and past 10 years total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT TRANSPORTATION -24.95% -15.26% 49.93% 293.57% SELECT TRANSPORTATION -27.27% -17.87% 45.36% 281.69% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS CYCLICAL INDUSTRIES -18.01% -10.45% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 277 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT TRANSPORTATION -15.26% 8.44% 14.68% SELECT TRANSPORTATION -17.87% 7.77% 14.33% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS CYCLICAL INDUSTRIES -10.45% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Transportation S&P 500 00512 SP001 1988/08/31 9700.00 10000.00 1988/09/30 10339.04 10426.00 1988/10/31 10672.86 10715.84 1988/11/30 10768.24 10562.61 1988/12/31 11092.53 10747.45 1989/01/31 12046.31 11534.17 1989/02/28 12170.30 11246.96 1989/03/31 12542.28 11509.02 1989/04/30 12961.95 12106.34 1989/05/31 13515.14 12596.64 1989/06/30 13431.82 12524.84 1989/07/31 14245.87 13655.84 1989/08/31 15171.86 13923.49 1989/09/30 14876.76 13866.40 1989/10/31 13930.43 13544.70 1989/11/30 14052.54 13821.02 1989/12/31 14252.59 14152.72 1990/01/31 13357.55 13203.07 1990/02/28 13980.68 13373.39 1990/03/31 14399.87 13727.79 1990/04/30 13856.05 13384.59 1990/05/31 14365.88 14689.59 1990/06/30 14207.74 14589.70 1990/07/31 14160.54 14543.01 1990/08/31 12083.66 13228.33 1990/09/30 10526.00 12584.11 1990/10/31 10360.79 12529.99 1990/11/30 10785.61 13339.43 1990/12/31 11175.03 13711.60 1991/01/31 12130.86 14309.43 1991/02/28 13310.91 15332.55 1991/03/31 13322.71 15703.60 1991/04/30 13287.31 15741.29 1991/05/31 14337.55 16421.31 1991/06/30 14218.50 15669.22 1991/07/31 15082.74 16399.40 1991/08/31 15355.04 16788.07 1991/09/30 15070.90 16507.71 1991/10/31 16183.76 16728.91 1991/11/30 15177.45 16054.73 1991/12/31 17225.58 17891.40 1992/01/31 17379.49 17558.62 1992/02/29 18314.76 17786.88 1992/03/31 17876.72 17440.03 1992/04/30 18338.44 17952.77 1992/05/31 18717.28 18040.74 1992/06/30 17912.24 17771.93 1992/07/31 18172.69 18498.80 1992/08/31 17628.10 18119.58 1992/09/30 18326.60 18333.39 1992/10/31 19107.96 18397.56 1992/11/30 20493.11 19024.91 1992/12/31 21323.97 19258.92 1993/01/31 22278.96 19420.70 1993/02/28 22581.17 19684.82 1993/03/31 24092.22 20100.17 1993/04/30 24032.16 19613.74 1993/05/31 24929.88 20139.39 1993/06/30 25002.67 20197.79 1993/07/31 25002.67 20117.00 1993/08/31 25463.66 20879.44 1993/09/30 25524.32 20718.67 1993/10/31 26058.09 21147.54 1993/11/30 26203.67 20946.64 1993/12/31 27575.35 21200.10 1994/01/31 28784.09 21920.90 1994/02/28 28784.09 21326.84 1994/03/31 28013.68 20396.99 1994/04/30 28537.17 20658.07 1994/05/31 28078.42 20996.87 1994/06/30 28051.43 20482.44 1994/07/31 28995.92 21154.27 1994/08/31 29859.46 22021.59 1994/09/30 29063.39 21482.06 1994/10/31 29495.16 21965.41 1994/11/30 27727.61 21165.43 1994/12/31 28641.51 21479.31 1995/01/31 28448.49 22036.27 1995/02/28 30482.65 22895.02 1995/03/31 30883.54 23570.66 1995/04/30 31343.82 24264.81 1995/05/31 30408.41 25234.68 1995/06/30 30081.76 25820.88 1995/07/31 32665.28 26677.10 1995/08/31 32635.59 26744.06 1995/09/30 32338.63 27872.66 1995/10/31 31937.74 27773.15 1995/11/30 33036.48 28992.39 1995/12/31 32985.92 29550.79 1996/01/31 33488.56 30556.70 1996/02/29 34431.02 30839.96 1996/03/31 35263.52 31136.95 1996/04/30 36418.71 31595.90 1996/05/31 36466.09 32410.76 1996/06/30 36639.82 32534.25 1996/07/31 33986.59 31096.88 1996/08/31 34018.17 31752.72 1996/09/30 34176.11 33539.76 1996/10/31 33907.62 34464.79 1996/11/30 36308.16 37069.98 1996/12/31 36120.74 36335.62 1997/01/31 36380.14 38605.87 1997/02/28 36039.68 38908.54 1997/03/31 37142.11 37309.79 1997/04/30 39063.33 39537.19 1997/05/31 41718.12 41944.21 1997/06/30 42971.31 43823.31 1997/07/31 45972.38 47310.33 1997/08/31 45048.97 44660.01 1997/09/30 49501.10 47106.04 1997/10/31 47835.68 45532.69 1997/11/30 47621.31 47640.40 1997/12/31 47727.21 48458.39 1998/01/31 47816.96 48994.34 1998/02/28 50868.34 52527.81 1998/03/31 52699.17 55217.76 1998/04/30 51933.63 55773.25 1998/05/31 49465.86 54814.51 1998/06/30 50626.08 57041.07 1998/07/31 46353.52 56433.58 1998/08/31 38169.00 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980917 164558 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Transportation Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $38,169 - a 281.69% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS UNION PACIFIC CORP. 5.8 BURLINGTON NORTHERN SANTA FE CORP. 5.8 FDX CORP. 5.8 AMR CORP. 5.3 SOUTHWEST AIRLINES CO. 5.1 US AIRWAYS GROUP, INC. 5.1 CSX CORP. 4.6 DELTA AIR LINES, INC. 4.5 NORFOLK SOUTHERN CORP. 3.5 EATON CORP. 3.5 TOP INDUSTRIES AS OF AUGUST 31, 1998 ROW: 1, COL: 1, VALUE: 20.3 ROW: 1, COL: 2, VALUE: 2.6 ROW: 1, COL: 3, VALUE: 4.3 ROW: 1, COL: 4, VALUE: 9.699999999999999 ROW: 1, COL: 5, VALUE: 31.1 ROW: 1, COL: 6, VALUE: 32.0 AIR TRANSPORTATION, MAJOR NATIONAL 32.0% RAILROADS 31.1% AIR COURIER SERVICES 9.7% AUTO & TRUCK PARTS 4.3% FREIGHT FORWARDING 2.6% ALL OTHERS 20.3% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS TRANSPORTATION PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Christopher Zepf) NOTE TO SHAREHOLDERS: On September 1, 1998, after the end of the period covered by this report, Christopher Zepf became Portfolio Manager of Fidelity Select Transportation Portfolio. Q. HOW DID THE FUND PERFORM, CHRIS? A. For the six-month period that ended August 31, 1998, the fund returned -24.95%. For the same six-month period, the Standard & Poor's 500 Index returned -8.10%. For the one-year period that ended August 31, 1998, the fund returned -15.26% and the S&P 500 returned 8.10%. Beginning this period, the fund also compares itself to the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - - which returned -18.01% and -10.45% over the same six- and 12-month periods, respectively. Q. WHY WAS THE PAST SIX-MONTH PERIOD SUCH A TOUGH TIME FOR TRANSPORTATION STOCKS? A. Much of the transportation sector's problems can be traced to the economic weakness in Asia. These companies tend to do best when the global economy is growing. That's when they are able to improve earnings by raising prices and eliminating excess capacity. During the early months of the period, that's exactly what happened and, as a group, transportation stocks generally performed well. However, transportation stocks suffered a sell-off in July and August when problems in Asia worsened. Diminished Asian demand for transportation services curtailed the group's ability to pass on price hikes and fill excess capacity, to a much greater extent than most observers predicted at the outbreak of the Asian crisis. Q. WHICH OF THE FUND'S HOLDINGS PROVED MOST DISAPPOINTING? A. Freight-forwarding companies were some of the fund's worst performers during the past six months. These companies, including Airborne Freight, Expeditors International and Air Express, don't own the planes, trains and trucks used for transporting freight. Rather, they are contracted to transport goods using existing carriers. As a result, they don't have the high costs associated with the fixed assets of other transportation companies. Thanks to continued strong economies in the U.S. and Europe, freight-forwarding companies actually held up pretty well from March through early July. However, as the Asian demand for goods weakened precipitously, freight-forwarding stocks suffered in late July and August. Q. AT ROUGHLY 32% OF THE PORTFOLIO AT THE END OF THE PERIOD, AIR TRANSPORTATION STOCKS ALSO HAD A ROUGH TIME . . . A. Yes, they did, for a combination of reasons. First, major international carriers suffered from slowing overseas demand caused by the deepening recessions in Japan and other Asian countries. The fund's investment in AMR - the holding company of American Airlines - suffered as a result. But eventually the pain spread beyond international carriers. Even regional airlines that limit their operations to the United States - such as Alaska Air - posted pretty good performance in the early months of the period, only to fall back in the summer. That's when investors began to worry that increased capacity over the next two years would potentially outstrip demand. Capacity is expected to grow by 5% to 6% annually in 1999 and 2000, a rate that is about twice as high as the historical annual rate. Q. HOW DID RAILROADS AND TRUCKING COMPANIES FARE? A. Many of the fund's railroad holdings - including Burlington Northern Santa Fe, CSX and Union Pacific - suffered losses as they experienced greater-than-expected difficulties in integrating operations after a series of recent mergers. On the other hand, some trucking companies - such as Swift Transportation - made modest contributions to the fund's performance. Swift, a national truckload carrier, saw rising revenues thanks to the expansion of the company's fleet and rate increases. Q. WHAT'S YOUR OUTLOOK? A. If the U.S. economy continues to weaken in response to problems overseas, the next six to 12 months could be a difficult period for the transportation sector. I'll seek to position the fund in fundamentally strong companies that have the financial resources to build market share at the expense of weaker competitors. When choosing stocks for the fund, one of the qualities I'll be looking for is superior management across functions, from finance to operations to marketing. Another quality I'll focus on finding is free cash flow, which enables companies to acquire weaker competitors, repurchase shares at depressed prices or invest in infrastructure, which should help them capture more customers by offering superior service. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 512 TRADING SYMBOL: FSRFX SIZE: as of August 31,1998, more than $12 million MANGER: Chris Zepf, beginning September 1998; joined Fidelity in 1998 TRANSPORTATION PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.2% SHARES VALUE (NOTE 1) AIR TRANSPORTATION - 33.9% AIR TRANSPORTATION, MAJOR NATIONAL - 32.0% AMR Corp. (a) 11,600 $ 632,200 Alaska Air Group, Inc. (a) 8,000 311,500 America West Holdings Corp. Class B (a) 6,400 124,400 ASA Holdings, Inc. 3,400 116,450 Atlantic Coast Airlines, Inc. (a) 2,500 56,563 Atlas Air, Inc. (a) 2,100 49,875 British Airways PLC ADR 1,600 117,600 Continental Airlines, Inc. Class B (a) 4,500 185,625 Delta Air Lines, Inc. 5,300 540,600 KLM Royal Dutch Airlines NV (NY Reg.) 6,400 196,800 Northwest Airlines Corp. Class A (a) 9,000 250,313 Southwest Airlines Co. 34,150 608,297 UAL Corp. (a) 700 42,219 US Airways Group, Inc. (a) 10,400 605,800 3,838,242 AIR TRANSPORTATION, REGIONAL - 1.9% Comair Holdings, Inc. 6,900 175,519 SkyWest, Inc. 2,500 52,500 228,019 TOTAL AIR TRANSPORTATION 4,066,261 AUTOS, TIRES, & ACCESSORIES - 7.7% AUTO & TRUCK PARTS - 4.3% Cummins Engine Co., Inc. 1,600 65,100 Eaton Corp. 7,100 415,794 Wabash National Corp. 2,100 33,338 514,232 AUTO DEALERS, GAS STATIONS-RET - 0.9% Republic Industries, Inc. (a) 6,000 106,125 MOTOR VEHICLES & CAR BODIES - 2.5% Navistar International Corp. (a) 6,700 140,700 PACCAR, Inc. 3,900 159,900 300,600 TOTAL AUTOS, TIRES, & ACCESSORIES 920,957 LEASING & RENTAL - 3.2% AUTO RENTAL & LEASING - 0.7% Budget Group, Inc. Class A (a) 5,000 85,000 EQUIPMENT RENTAL & LEASING, NEC - 2.5% GATX Corp. 4,400 145,200 Ryder Systems, Inc. 6,700 157,869 303,069 TOTAL LEASING & RENTAL 388,069 RAILROADS - 31.1% Burlington Northern Santa Fe Corp. 7,500 697,969 CSX Corp. 14,500 547,375 Canadian Pacific Ltd. 15,300 290,198 Canadian National Railway Co. 9,200 415,276 Kansas City Southern Industries, Inc. 10,100 332,038 Norfolk Southern Corp. 15,000 422,813 Providence & Worcester Railroad Co. 18,600 241,800 Union Pacific Corp. 17,600 700,694 Wisconsin Central Transportation Corp. (a) 6,700 84,169 3,732,332 SERVICES - 0.6% BUS CHARTER SERVICE, NEC - 0.6% Coach USA, Inc. (a) 2,600 68,413 SHARES VALUE (NOTE 1) SHIPPING - 0.4% Peninsular & Oriental Steam Navigation Co. 4,400 $ 47,876 TRUCKING & FREIGHT - 15.3% AIR COURIER SERVICES - 9.7% Airborne Freight Corp. 4,500 87,750 CNF Transportation, Inc. 12,200 381,250 FDX Corp. (a) 13,900 695,869 1,164,869 FREIGHT FORWARDING - 2.6% Air Express International Corp. 3,200 54,800 Circle International Group, Inc. 7,700 155,925 Expeditors International of Washington, Inc. 3,800 105,688 316,413 TRUCKING, LOCAL & LONG DISTANCE - 1.0% Swift Transportation Co., Inc. (a) 3,600 58,950 Werner Enterprises, Inc. 4,100 60,475 119,425 TRUCKING, LONG DISTANCE - 2.0% Consolidated Freightways Corp. (a) 7,500 65,625 Covenant Transport, Inc. Class A (a) 4,000 50,500 Hunt (J.B.) Transport Services, Inc. 4,000 67,750 USFreightways Corp. 2,300 51,606 235,481 TOTAL TRUCKING & FREIGHT 1,836,188 TOTAL COMMON STOCKS (Cost $11,603,915) 11,060,096 CASH EQUIVALENTS - 7.8% Taxable Central Cash Fund (b) (Cost $930,853) 930,853 930,853 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $12,534,768) $ 11,990,949 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $13,989,292 and $59,835,315, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $3,734 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At period end, there were no loans outstanding (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $12,572,388. Net unrealized depreciation aggregated $581,439 of which $216,946 related to appreciated investment securities and $798,385 related to depreciated investment securities. TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 11,990,949 SECURITIES, AT VALUE (COST $12,534,768 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 7,136,831 INVESTMENTS SOLD RECEIVABLE FOR 48,538 FUND SHARES SOLD DIVIDENDS 15,605 RECEIVABLE INTEREST 2,895 RECEIVABLE REDEMPTION FEES 390 RECEIVABLE OTHER 800 RECEIVABLES TOTAL ASSETS 19,196,008 LIABILITIES PAYABLE FOR $ 6,219,575 INVESTMENTS PURCHASED PAYABLE FOR 481,495 FUND SHARES REDEEMED ACCRUED 7,330 MANAGEMENT FEE OTHER PAYABLES 28,219 AND ACCRUED EXPENSES TOTAL LIABILITIES 6,736,619 NET ASSETS $ 12,459,389 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 8,887,052 ACCUMULATED (92,898) NET INVESTMENT LOSS ACCUMULATED 4,204,193 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (538,958) APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 12,459,389 601,123 SHARES OUTSTANDING NET ASSET $20.73 VALUE AND REDEMPTION PRICE PER SHARE ($12,459,38 9 (DIVIDED BY) 601,123 SHARES) MAXIMUM $21.37 OFFERING PRICE PER SHARE (100/97.00 OF $20.73) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 149,611 INCOME DIVIDENDS INTEREST 58,102 (INCLUDING INCOME ON SECURITIES LOANED OF $12,548) TOTAL INCOME 207,713 EXPENSES MANAGEMENT $ 100,528 FEE TRANSFER AGENT 125,740 FEES ACCOUNTING AND 32,213 SECURITY LENDING FEES NON-INTERESTED 79 TRUSTEES' COMPENSATION CUSTODIAN FEES 7,026 AND EXPENSES REGISTRATION FEES 22,824 AUDIT 10,626 LEGAL 177 REPORTS TO 9,257 SHAREHOLDERS TOTAL EXPENSES 308,470 BEFORE REDUCTIONS EXPENSE (7,859) 300,611 REDUCTIONS NET INVESTMENT (92,898) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 4,409,455 SECURITIES FOREIGN (172) 4,409,283 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (7,852,156) SECURITIES ASSETS AND 5,018 (7,847,138) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (3,437,855) NET INCREASE $ (3,530,753) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 54,530 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 54,411 - - RETAINED BY FDC DEFERRED SALES $ 428 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 28,845 WITHHELD BY FSC EXPENSE $ 7,641 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 218 CREDITS $ 7,859 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (92,898) $ (36,059) NET INVESTMENT INCOME (LOSS) NET REALIZED 4,409,283 10,298,362 GAIN (LOSS) CHANGE IN NET (7,847,138) 7,061,282 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (3,530,753) 17,323,585 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (1,492,528) (4,986,487) SHAREHOLDERS FROM NET REALIZED GAIN SHARE 10,719,560 152,644,299 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 1,481,609 4,933,755 OF DISTRIBUTIONS COST OF SHARES (59,055,770) (114,694,116) REDEEMED NET INCREASE (46,854,601) 42,883,938 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 55,525 170,335 FEES TOTAL (51,822,357) 55,391,371 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 64,281,746 8,890,375 PERIOD END OF PERIOD $ 12,459,389 $ 64,281,746 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $92,898 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 381,292 6,004,453 ISSUED IN 52,079 182,560 REINVESTMENT OF DISTRIBUTIONS REDEEMED (2,100,819) (4,318,403) NET INCREASE (1,667,448) 1,868,610 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED FEBRUARY 28, YEAR ENDED YEARS ENDED FEBRUARY 28, ENDED FEBRUARY 29, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET VALUE, $ 28.34 $ 22.23 $ 21.92 $ 20.53 $ 21.67 $ 18.68 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.08) (.02) (.13) (.09) E (.17) (.20) INVESTMENT INCOME (LOSS) D NET REALIZED (6.84) 8.85 1.06 2.60 1.17 5.07 AND UNREALIZED GAIN (LOSS) TOTAL FROM (6.92) 8.83 .93 2.51 1.00 4.87 INVESTMENT OPERATIONS LESS (.74) (2.80) (.71) (1.22) (2.19) (1.96) DISTRIBUTIONS FROM NET REALIZED GAIN REDEMPTION FEES .05 .08 .09 .10 .05 .08 ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 20.73 $ 28.34 $ 22.23 $ 21.92 $ 20.53 $ 21.67 END OF PERIOD TOTAL RETURN B, C (24.95)% 41.15% 4.67% 12.95% 5.90% 27.47% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 12,459 $ 64,282 $ 8,890 $ 11,445 $ 12,704 $ 13,077 OF PERIOD (000 OMITTED) RATIO OF 1.77% A 1.58% 2.50% F 2.47% F 2.37% 2.40% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.72% A, G 1.54% G 2.48% G 2.44% G 2.36% G 2.39% G EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.53)% A (.06)% (.58)% (.43)% (.83)% (.96)% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 83% A 210% 148% 175% 178% 115% TURNOVER RATE AVERAGE $ .0342 $ .0337 $ .0313 COMMISSION RATE H A ANNUALIZED B T HE 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 $.05 PER SHARE. F FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). H FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT BROKERAGE AND -17.64% 6.51% 122.31% 472.66% INVESTMENT MANAGEMENT SELECT BROKERAGE AND -20.18% 3.24% 115.57% 455.41% INVESTMENT MANAGEMENT (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS Financial Services -15.98% 3.35% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Financial Services Index - a market capitalization-weighted index of 271 stocks designed to measure the performance of companies in the financial services sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT BROKERAGE AND 6.51% 17.33% 19.07% INVESTMENT MANAGEMENT SELECT BROKERAGE AND 3.24% 16.60% 18.70% INVESTMENT MANAGEMENT (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS Financial Services 3.35% n/a n/a AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Brokerage/Invt. Mgt S&P 500 00068 SP001 1988/08/31 9700.00 10000.00 1988/09/30 9946.39 10426.00 1988/10/31 9985.29 10715.84 1988/11/30 9764.84 10562.61 1988/12/31 9856.59 10747.45 1989/01/31 11141.09 11534.17 1989/02/28 10878.95 11246.96 1989/03/31 10892.06 11509.02 1989/04/30 10996.91 12106.34 1989/05/31 11717.81 12596.64 1989/06/30 11388.36 12524.84 1989/07/31 12759.18 13655.84 1989/08/31 13075.52 13923.49 1989/09/30 12666.91 13866.40 1989/10/31 11638.80 13544.70 1989/11/30 11520.17 13821.02 1989/12/31 11242.34 14152.72 1990/01/31 10748.32 13203.07 1990/02/28 11108.82 13373.39 1990/03/31 11415.92 13727.79 1990/04/30 10641.50 13384.59 1990/05/31 11656.25 14689.59 1990/06/30 11642.57 14589.70 1990/07/31 11228.20 14543.01 1990/08/31 9704.37 13228.33 1990/09/30 8875.62 12584.11 1990/10/31 8327.58 12529.99 1990/11/30 8875.62 13339.43 1990/12/31 9423.66 13711.60 1991/01/31 10207.84 14309.43 1991/02/28 11221.87 15332.55 1991/03/31 12371.09 15703.60 1991/04/30 12546.86 15741.29 1991/05/31 13209.35 16421.31 1991/06/30 12329.80 15669.22 1991/07/31 13277.21 16399.40 1991/08/31 13574.97 16788.07 1991/09/30 14278.75 16507.71 1991/10/31 15226.16 16728.91 1991/11/30 14387.03 16054.73 1991/12/31 17175.11 17891.40 1992/01/31 17418.72 17558.62 1992/02/29 17310.45 17786.88 1992/03/31 16850.28 17440.03 1992/04/30 15537.45 17952.77 1992/05/31 15496.84 18040.74 1992/06/30 15131.42 17771.93 1992/07/31 15984.08 18498.80 1992/08/31 15523.91 18119.58 1992/09/30 15415.64 18333.39 1992/10/31 16105.89 18397.56 1992/11/30 17554.07 19024.91 1992/12/31 18054.84 19258.92 1993/01/31 19124.05 19420.70 1993/02/28 19245.86 19684.82 1993/03/31 20788.78 20100.17 1993/04/30 20721.08 19613.74 1993/05/31 21398.24 20139.39 1993/06/30 22413.98 20197.79 1993/07/31 23158.86 20117.00 1993/08/31 24987.19 20879.44 1993/09/30 25447.66 20718.67 1993/10/31 24621.52 21147.54 1993/11/30 23944.36 20946.64 1993/12/31 26960.42 21200.10 1994/01/31 27534.98 21920.90 1994/02/28 26150.13 21326.84 1994/03/31 23218.37 20396.99 1994/04/30 23026.85 20658.07 1994/05/31 23586.68 20996.87 1994/06/30 24485.36 20482.44 1994/07/31 23910.79 21154.27 1994/08/31 24087.58 22021.59 1994/09/30 23174.17 21482.06 1994/10/31 23159.44 21965.41 1994/11/30 21553.60 21165.43 1994/12/31 22304.96 21479.31 1995/01/31 22025.04 22036.27 1995/02/28 22850.06 22895.02 1995/03/31 23085.78 23570.66 1995/04/30 23785.19 24264.81 1995/05/31 25122.63 25234.68 1995/06/30 26536.06 25820.88 1995/07/31 27812.71 26677.10 1995/08/31 27554.34 26744.06 1995/09/30 29226.15 27872.66 1995/10/31 27599.94 27773.15 1995/11/30 28268.66 28992.39 1995/12/31 27567.64 29550.79 1996/01/31 29364.83 30556.70 1996/02/29 29669.71 30839.96 1996/03/31 31001.56 31136.95 1996/04/30 31190.24 31595.90 1996/05/31 32223.36 32410.76 1996/06/30 32124.96 32534.25 1996/07/31 30157.12 31096.88 1996/08/31 31305.03 31752.72 1996/09/30 32912.10 33539.76 1996/10/31 34076.40 34464.79 1996/11/30 37421.73 37069.98 1996/12/31 38500.20 36335.62 1997/01/31 41308.37 38605.87 1997/02/28 42803.85 38908.54 1997/03/31 38466.97 37309.79 1997/04/30 42628.42 39537.19 1997/05/31 45808.90 41944.21 1997/06/30 48473.17 43823.31 1997/07/31 53801.73 47310.33 1997/08/31 52153.21 44660.01 1997/09/30 59763.04 47106.04 1997/10/31 56682.47 45532.69 1997/11/30 59263.49 47640.40 1997/12/31 62491.74 48458.39 1998/01/31 59779.13 48994.34 1998/02/28 67442.25 52527.81 1998/03/31 71206.00 55217.76 1998/04/30 74310.45 55773.25 1998/05/31 72576.71 54814.51 1998/06/30 76456.17 57041.07 1998/07/31 77108.46 56433.58 1998/08/31 55541.00 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980925 112150 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Brokerage and Investment Management Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $55,541 - a 455.41% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS PaineWebber Group, Inc. 6.2 Citicorp 5.6 Bear Stearns Companies, Inc. 5.5 Merrill Lynch & Co., Inc. 5.0 Morgan Stanley, Dean Witter, Discover and Co. 4.4 Lehman Brothers Holdings, Inc. 4.3 Edwards (A.G.), Inc. 3.6 Equitable Companies, Inc. 3.5 Kansas City Southern Industries, Inc. 2.9 Julius Baer Holding AG 2.9 TOP INDUSTRIES AS OF AUGUST 31, 1998 SECURITY & COMMODITY BROKERS 26.3% SECURITY BROKERS & DEALERS 19.3% INVESTMENT MANAGERS 9.5% NATIONAL COMMERCIAL BANKS 6.8% LIFE INSURANCE 5.8% ALL OTHER 32.3% ROW: 1, COL: 1, VALUE: 32.3 ROW: 1, COL: 2, VALUE: 5.8 ROW: 1, COL: 3, VALUE: 6.8 ROW: 1, COL: 4, VALUE: 9.5 ROW: 1, COL: 5, VALUE: 19.3 ROW: 1, COL: 6, VALUE: 26.3 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Peter Fruzzetti) Peter Fruzzetti, Portfolio Manager of Fidelity Select Brokerage and Investment Management Portfolio Q. HOW DID THE FUND PERFORM, PETER? A. For the six-month period that ended on August 31, 1998, the fund had a total return of -17.64%. For the 12 months, it returned 6.51%. For the same periods, the Standard & Poor's 500 Index returned -8.10% and 8.10%, respectively. Beginning this period, the fund also compares itself to the Goldman Sachs Financial Services Index - an index of 271 stocks designed to measure the performance of companies in the financial services sector - which returned -15.98% and 3.35% over the same six- and 12-month periods, respectively. Q. WHY DID THE FUND TRAIL THE OVERALL STOCK MARKET DURING THE PAST SIX MONTHS? A. During most of the first half of 1998, fundamentals for the brokerage firms and investment managers had been superb. Declining interest rates helped to create a superior environment for the stock market. With the stock market up, we saw trading volumes increase, heavy underwriting volume and lots of merger and acquisition activity, all of which helped to increase earnings and thus stock valuations. During the summer of 1998, overall market sentiment changed. First, stock markets throughout the world began to slide, much of which was due to expectations of slowing growth. In some cases, concerns became exacerbated because of deteriorating economic conditions in emerging markets. With these concerns, both stock and bond prices declined as investors became more risk-averse. Because most brokerage firms have exposure in these areas, sales and trading results tend to be poor in this environment. Q. WHY WERE BROKERAGE FIRMS SO HARD HIT? A. When stock and bond prices decline, brokerage firms often take losses on trading positions. In addition, when the markets are more uncertain, fewer deals are done, reducing the volumes of initial public and secondary stock offerings and, consequently, limiting underwriting profits. Q. DID THE STOCK PRICES OF INVESTMENT MANAGERS DECLINE IN THE SAME WAY? A. Both sectors have seen depreciating stock prices, but prices of investment management companies performed a little better than those of brokerage firms. Although investment management earnings are often tied to the stock and bond markets, their income is more fee-based, and less transaction-oriented. This means their earnings tend to be more stable than brokerage earnings, so it makes sense that their stocks performed a little better. Q. WHICH HOLDINGS HELPED PERFORMANCE? A. Most financial stocks have been weak, although some life insurance stocks performed better than most brokerage stocks. SunAmerica, ING, AFLAC, Hartford Life and Nationwide are examples of life stocks that helped fund performance. Also, Midland Walwyn, a Canadian brokerage firm, was acquired by Merrill Lynch, and the fund benefited from a healthy ownership position in the Canadian company. Q. WHICH COMPANIES HURT PERFORMANCE? A. During periods of uncertainty and market volatility, securities brokers and investment managers tend to lag the market. As a result, this group of stocks has not performed well. Most brokerage holdings detracted from performance, and the list would include Merrill Lynch, Morgan Stanley, Lehman Brothers and Travelers. Q. WHAT IS YOUR OUTLOOK? A. I am cautious. As I mentioned, the brokerage stocks tend to be volatile when the markets are volatile. World financial markets probably have more uncertainty than they did six months ago. While cautious, I intend to take advantage of opportunities if valuations become excessively discounted. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 068 TRADING SYMBOL: FSLBX SIZE: as of August 31, 1998, more than $605 million MANAGER: Peter Fruzzetti, since 1997; equity analyst, insurance and health care industries, 1993-1996; equity analyst, insurance industry, since 1996; joined Fidelity in 1993 BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.8% SHARES VALUE (NOTE 1) BANKS - 14.0% COMMERCIAL BANKS, NEC - 0.2% Bank Sarasin & Compagnie Class B (Reg.) 1,110 $ 1,502,675 INTERNATIONAL BANKS - 2.9% Julius Baer Holding AG 6,600 17,649,025 Toronto Dominion Bank 14,443 368,787 18,017,812 NATIONAL COMMERCIAL BANKS - 6.8% BankAmerica Corp. 40,000 2,562,500 Citicorp 320,000 34,600,000 Providian Financial Corp. 73,400 4,711,363 41,873,863 STATE BANKS FEDERAL RESERVE - 4.1% Bankers Trust New York Corp. 220,000 16,348,750 Credit Suisse Group (Reg.) 52,400 8,880,267 25,229,017 TOTAL BANKS 86,623,367 COMPUTER SERVICES & SOFTWARE - 2.0% DATA PROCESSING - 0.6% DST Systems, Inc. (a) 64,100 3,621,650 ELECTRONIC INFORMATION RETRIEVAL - 1.4% E Trade Group, Inc. (a) 535,400 8,901,025 TOTAL COMPUTER SERVICES & SOFTWARE 12,522,675 CREDIT & OTHER FINANCE - 6.2% FINANCIAL SERVICES - 5.5% American Express Co. 90,000 7,020,000 Equitable Companies, Inc. 380,600 21,765,563 Investors Financial Services Corp. 7,507 389,426 Perpetual PLC 20,000 1,165,955 Power Corporation of Canada 200,000 3,570,290 33,911,234 MANAGEMENT & INVESTMENT OFFICES - 0.1% Regent Pacific Group Ltd. 5,000,000 619,451 PERSONAL CREDIT INSTITUTIONS - 0.6% Household International, Inc. 104,329 3,853,652 TOTAL CREDIT & OTHER FINANCE 38,384,337 FEDERAL SPONSORED CREDIT - 0.6% FEDERAL & FEDERAL SPONSORED CREDIT AGENCIES - 0.6% SLM Holding Corp. 100,000 3,587,500 INSURANCE - 9.6% ACCIDENT & HEALTH INSURANCE - 0.0% UICI (a) 15,000 227,813 INSURANCE BROKERS & SERVICES - 2.6% Marsh & McLennan Companies, Inc. 333,000 16,150,500 INSURANCE CARRIERS - 1.0% AFLAC, Inc. 240,000 6,030,000 LIFE INSURANCE - 5.8% ARM Financial Group, Inc. Class A 100,400 1,455,800 Amerus Life Holdings, Inc. 15,500 412,688 Delphi Financial Group, Inc. Class A 20,808 868,734 Hartford Life, Inc. Class A 169,500 8,686,875 Liberty Financial Companies, Inc. 215,100 6,345,450 Life RE Corp. 14,300 1,283,425 SHARES VALUE (NOTE 1) Nationwide Financial Services, Inc. Class A 144,000 $ 6,435,000 Protective Life Corp. 38,000 1,173,250 Torchmark Corp. 250,000 8,937,500 35,598,722 PROPERTY-CASUALTY & REINSURANCE - 0.2% Reinsurance Group of America, Inc. 30,000 1,500,000 TOTAL INSURANCE 59,507,035 RAILROADS - 2.9% Kansas City Southern Industries, Inc. 548,900 18,045,088 REAL ESTATE INVESTMENT TRUSTS - 0.1% AMRESCO Capital Trust, Inc. 50,000 537,500 SAVINGS & LOANS - 0.1% SAVINGS BANKS, FEDERAL CHARTER - 0.1% Dime Bancorp., Inc. 20,000 380,000 SECURITIES INDUSTRY - 57.3% INVESTMENT ADVICE - 2.2% Conning Corp. 500 6,938 NVEST L.P. 189,100 4,928,419 Phoenix Investment Partners Ltd. 245,600 1,627,100 Pilgrim America Capital Corp. (a) 69,000 1,224,750 United Asset Management Corp. 270,000 5,872,500 13,659,707 INVESTMENT MANAGERS - 9.5% Eaton Vance Corp. 90,000 1,788,750 Franklin Resources, Inc. 427,900 13,799,775 Investors Group Inc. 979,600 10,929,551 John Nuveen Co. Class A 250,000 8,531,250 Mackenzie Financial Corp. 333,100 2,983,777 Pioneer Group, Inc. 340,000 6,098,750 Price (T. Rowe) Associates, Inc. 477,200 14,524,775 58,656,628 SECURITY & COMMODITY BROKERS - 26.3% Advest Group, Inc. (The) 305,800 5,848,425 Bear Stearns Companies, Inc. 914,072 33,763,535 Daiwa Securities Co. Ltd. 2,430,000 7,726,881 Edwards (A.G.), Inc. 814,200 22,085,175 Fahnestock Viner Holdings, Inc. Class A 77,600 1,088,428 First Marathon Inc. Class A (non-vtg.) 44,700 534,348 Jefferies Group, Inc. 163,600 4,672,825 Legg Mason, Inc. 179,166 8,510,385 Merrill Lynch & Co., Inc. 465,100 30,696,600 Morgan Keegan, Inc. 157,925 2,803,169 Morgan Stanley, Dean Witter, Discover and Co. 469,865 27,281,537 Nomura Securities Co. Ltd. 1,000,000 9,328,282 Raymond James Financial, Inc. 357,225 6,139,805 Southwest Securities Group, Inc. 82,467 1,334,935 Stifel Financial Corp. 110,250 1,054,266 162,868,596 SECURITY BROKERS & DEALERS - 19.3% Dain Rauscher Corp. 188,350 7,004,266 Donaldson Lufkin & Jenrette, Inc. 479,000 16,765,000 Everen Capital Corp. 200,800 3,652,050 Hambrecht & Quist Group (a) 262,600 5,317,650 Lehman Brothers Holdings, Inc. 673,000 26,499,369 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SECURITIES INDUSTRY - CONTINUED SECURITY BROKERS & DEALERS - CONTINUED PaineWebber Group, Inc. 1,096,300 $ 38,096,425 Travelers Group, Inc. (The) 291,502 12,935,401 Waddell & Reed Financial, Inc. Class A 540,000 8,977,500 119,247,661 TOTAL SECURITIES INDUSTRY 354,432,592 TOTAL COMMON STOCKS (Cost $608,509,864) 574,020,094 CASH EQUIVALENTS - 7.2% Taxable Central Cash Fund (b) (Cost $44,243,515) 44,243,515 44,243,515 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $652,753,379) $ 618,263,609 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $331,603,936 and $221,737,301, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $18,544 for the period (see Note 4 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 89.4% Switzerland 4.5 Canada 3.1 Japan 2.7 Others (individually less than 1%) 0.3 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $653,596,283. Net unrealized depreciation aggregated $35,332,674, of which $63,541,539 related to appreciated investment securities and $98,874,213 related to depreciated investment securities. BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS Investment in $ 618,263,609 securities, at value (cost $652,753,37 9) - See accompanyin g schedule Receivable for 13,409,103 investments sold Receivable for 1,413,672 fund shares sold Dividends 384,144 receivable Interest 169,560 receivable Redemption fees 21,417 receivable TOTAL ASSETS 633,661,505 LIABILITIES Payable for $ 27,362,501 fund shares redeemed Accrued 419,200 management fee Other payables 507,252 and accrued expenses TOTAL LIABILITIES 28,288,953 NET ASSETS $ 605,372,552 Net Assets consist of: Paid in capital $ 609,597,902 Undistributed 1,675,781 net investment income Accumulated 28,585,526 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized (34,486,657) appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 605,372,552 18,709,652 shares outstanding NET ASSET $32.36 VALUE and redemption price per share ($605,372,5 52 (divided by) 18,709,652 shares) Maximum $33.36 offering price per share (100/97.00 of $32.36) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 5,098,319 INCOME Dividends Interest 1,625,724 TOTAL INCOME 6,724,043 EXPENSES Management $ 2,664,159 fee Transfer agent 2,237,908 fees Accounting fees 352,542 and expenses Non-interested 1,492 trustees' compensation Custodian fees 36,188 and expenses Registration fees 135,407 Audit 20,069 Legal 2,005 Reports to 73,981 shareholders Total expenses 5,523,751 before reductions Expense (61,509) 5,462,242 reductions NET INVESTMENT 1,261,801 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 29,891,882 securities Foreign (36,777) 29,855,105 currency transactions Change in net unrealized appreciation (depreciation) on: Investment (182,844,318) securities Assets and (400) (182,844,718) liabilities in foreign currencies NET GAIN (LOSS) (152,989,613) NET INCREASE $ (151,727,812) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 4,169,362 INFORMATION Sales charges paid to FDC Sales charges $ 4,163,450 - - Retained by FDC Deferred sales $ 2,849 charges withheld by FDC Exchange fees $ 141,518 withheld by FSC Expense $ 58,777 reductions Directed brokerage arrangements Custodian 1,169 credits Transfer 1,563 agent credits $ 61,509 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 Operations $ 1,261,801 $ 2,052,773 Net investment income Net realized 29,855,105 24,237,839 gain (loss) Change in net (182,844,718) 128,112,104 unrealized appreciation (depreciation) NET INCREASE (151,727,812) 154,402,716 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (201,766) (1,439,025) shareholders From net investment income From net (10,471,069) (10,009,644) realized gain TOTAL (10,672,835) (11,448,669) DISTRIBUTIONS Share 667,884,104 894,533,503 transactions Net proceeds from sales of shares Reinvestment 10,559,914 11,336,755 of distributions Cost of shares (587,560,018) (832,884,965) redeemed NET INCREASE 90,884,000 72,985,293 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption 821,811 1,340,868 fees TOTAL (70,694,836) 217,280,208 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 676,067,388 458,787,180 period End of period $ 605,372,552 $ 676,067,388 (including undistribute d net investment income of $1,675,781 and $675,811, respectively) OTHER INFORMATION Shares Sold 15,298,302 26,764,779 Issued in 249,065 321,841 reinvestment of distributions Redeemed (13,834,175) (27,900,822) Net increase 1,713,192 (814,202) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA Net asset $ 39.78 $ 25.76 $ 18.49 $ 15.51 $ 17.75 $ 14.22 value, beginning of period Income from Investment Operation s Net .06 .16 .08 .09 (.03) (.02) investment income (loss) D Net (6.99) 14.46 7.80 4.29 (2.25) 4.95 realized and unrealized gain (loss) Total from (6.93) 14.62 7.88 4.38 (2.28) 4.93 investment operations Less Distributio ns From net (.01) (.09) (.06) (.04) - (.01) investment income From net (.52) (.61) (.65) (1.09) - (1.47) realized gain In excess - - - (.35) - - of net realized gain Total (.53) (.70) (.71) (1.48) - (1.48) distributio ns Redemption .04 .10 .10 .08 .04 .08 fees added to paid in capital Net asset $ 32.36 $ 39.78 $ 25.76 $ 18.49 $ 15.51 $ 17.75 value, end of period TOTAL (17.64)% 57.56% 44.27% 29.85% (12.62)% 35.87% RETURN B, C RATIOS AND SUPPLEME NTAL DATA Net assets, $ 605,373 $ 676,067 $ 458,787 $ 38,382 $ 27,346 $ 59,810 end of period (000 omitted) Ratio of 1.20% A 1.33% 1.94% 1.64% E 2.54% E 1.79% expenses to average net assets Ratio of 1.18% A, F 1.29% F 1.93% F 1.61% F 2.54% 1.77% F expenses to average net assets after expense reductions Ratio of net .27% A .49% .37% .50% (.20)% (.14)% investment income (loss) to average net assets Portfolio 55% A 100% 16% 166% 139% 295% turnover rate Average $ .0259 $ .0460 $ .0392 commissio n rate G A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER . F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). G FO R FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
FINANCIAL SERVICES PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT FINANCIAL SERVICES -14.75% 5.13% 139.03% 488.67% SELECT FINANCIAL SERVICES -17.38% 1.91% 131.78% 470.93% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS Financial Services -15.98% 3.35% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Financial Services Index - a market capitalization-weighted index of 271 stocks designed to measure the performance of companies in the financial services sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT FINANCIAL SERVICES 5.13% 19.04% 19.40% SELECT FINANCIAL SERVICES 1.91% 18.31% 19.03% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS Financial Services 3.35% n/a n/a AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Financial Services S&P 500 00066 SP001 1988/08/31 9700.00 10000.00 1988/09/30 10102.00 10426.00 1988/10/31 10129.72 10715.84 1988/11/30 9710.40 10562.61 1988/12/31 9537.79 10747.45 1989/01/31 10026.63 11534.17 1989/02/28 10005.22 11246.96 1989/03/31 10736.70 11509.02 1989/04/30 10932.95 12106.34 1989/05/31 11618.05 12596.64 1989/06/30 11537.09 12524.84 1989/07/31 12460.49 13655.84 1989/08/31 12812.60 13923.49 1989/09/30 13078.48 13866.40 1989/10/31 11831.72 13544.70 1989/11/30 11670.03 13821.02 1989/12/31 11382.63 14152.72 1990/01/31 10421.68 13203.07 1990/02/28 10798.81 13373.39 1990/03/31 10632.00 13727.79 1990/04/30 10254.88 13384.59 1990/05/31 11157.80 14689.59 1990/06/30 10845.95 14589.70 1990/07/31 10149.72 14543.01 1990/08/31 8934.94 13228.33 1990/09/30 7604.13 12584.11 1990/10/31 6940.54 12529.99 1990/11/30 7919.61 13339.43 1990/12/31 8613.25 13711.60 1991/01/31 9395.93 14309.43 1991/02/28 10475.37 15332.55 1991/03/31 10976.14 15703.60 1991/04/30 11332.24 15741.29 1991/05/31 12200.25 16421.31 1991/06/30 11209.83 15669.22 1991/07/31 12096.38 16399.40 1991/08/31 12897.61 16788.07 1991/09/30 12819.72 16507.71 1991/10/31 13101.63 16728.91 1991/11/30 12129.77 16054.73 1991/12/31 13921.46 17891.40 1992/01/31 14614.91 17558.62 1992/02/29 15664.45 17786.88 1992/03/31 15312.10 17440.03 1992/04/30 15900.60 17952.77 1992/05/31 16582.80 18040.74 1992/06/30 16964.37 17771.93 1992/07/31 17449.50 18498.80 1992/08/31 16448.68 18119.58 1992/09/30 16960.55 18333.39 1992/10/31 17632.86 18397.56 1992/11/30 18958.38 19024.91 1992/12/31 19882.64 19258.92 1993/01/31 21136.75 19420.70 1993/02/28 21698.66 19684.82 1993/03/31 22834.70 20100.17 1993/04/30 21741.53 19613.74 1993/05/31 21749.78 20139.39 1993/06/30 22561.74 20197.79 1993/07/31 23167.61 20117.00 1993/08/31 23888.90 20879.44 1993/09/30 24441.19 20718.67 1993/10/31 23785.86 21147.54 1993/11/30 22726.60 20946.64 1993/12/31 23372.91 21200.10 1994/01/31 24959.58 21920.90 1994/02/28 24053.58 21326.84 1994/03/31 22955.11 20396.99 1994/04/30 23826.81 20658.07 1994/05/31 24843.84 20996.87 1994/06/30 24257.27 20482.44 1994/07/31 25104.01 21154.27 1994/08/31 25983.85 22021.59 1994/09/30 24025.48 21482.06 1994/10/31 23897.76 21965.41 1994/11/30 22384.05 21165.43 1994/12/31 22520.38 21479.31 1995/01/31 23685.05 22036.27 1995/02/28 25189.20 22895.02 1995/03/31 25633.13 23570.66 1995/04/30 26437.43 24264.81 1995/05/31 27905.01 25234.68 1995/06/30 28035.58 25820.88 1995/07/31 28975.67 26677.10 1995/08/31 30103.78 26744.06 1995/09/30 31822.06 27872.66 1995/10/31 31007.31 27773.15 1995/11/30 33096.40 28992.39 1995/12/31 33181.58 29550.79 1996/01/31 34732.97 30556.70 1996/02/29 35026.18 30839.96 1996/03/31 35442.02 31136.95 1996/04/30 35048.67 31595.90 1996/05/31 35863.12 32410.76 1996/06/30 36387.87 32534.25 1996/07/31 35595.28 31096.88 1996/08/31 36655.71 31752.72 1996/09/30 39088.12 33539.76 1996/10/31 41564.27 34464.79 1996/11/30 45133.64 37069.98 1996/12/31 43838.71 36335.62 1997/01/31 46448.77 38605.87 1997/02/28 47473.34 38908.54 1997/03/31 43907.40 37309.79 1997/04/30 47605.18 39537.19 1997/05/31 49167.97 41944.21 1997/06/30 51782.65 43823.31 1997/07/31 57583.03 47310.33 1997/08/31 54313.18 44660.01 1997/09/30 57793.41 47106.04 1997/10/31 57024.03 45532.69 1997/11/30 58953.48 47640.40 1997/12/31 62243.40 48458.39 1998/01/31 61575.44 48994.34 1998/02/28 66977.48 52527.81 1998/03/31 70609.10 55217.76 1998/04/30 71779.32 55773.25 1998/05/31 70436.45 54814.51 1998/06/30 73650.77 57041.07 1998/07/31 73886.48 56433.58 1998/08/31 57093.09 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980916 100316 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Financial Services Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $57,093 - a 470.93% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS NationsBank Corp. 4.5 American Express Co. 4.4 American International Group, Inc. 4.4 U.S. Bancorp 4.2 Household International, Inc. 4.1 BankAmerica Corp. 3.8 Wells Fargo & Co. 3.5 Citicorp 3.3 Banc One Corp. 2.6 Fannie Mae 2.6 TOP INDUSTRIES AS OF AUGUST 31, 1998 NATIONAL COMMERCIAL BANKS 34.6% PROPERTY-CASUALTY & REINSURANCE 13.9% PERSONAL CREDIT INSTITUTIONS 8.2% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES 6.4% FINANCIAL SERVICES 6.0% ALL OTHERS 30.9% ROW: 1, COL: 1, VALUE: 30.9 ROW: 1, COL: 2, VALUE: 6.0 ROW: 1, COL: 3, VALUE: 6.4 ROW: 1, COL: 4, VALUE: 8.199999999999999 ROW: 1, COL: 5, VALUE: 13.9 ROW: 1, COL: 6, VALUE: 34.6 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS FINANCIAL SERVICES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Robert Ewing) Robert Ewing, Portfolio Manager of Fidelity Select Financial Services Portfolio Q. HOW DID THE FUND PERFORM, BOB? A. For the six months that ended August 31, 1998, the fund returned - -14.75%. For the 12 months, it returned 5.13%. For the same periods, the Standard & Poor's 500 Index returned -8.10% and 8.10%, respectively. Beginning this period, the fund also compares itself to the Goldman Sachs Financial Services Index - an index of 271 stocks designed to measure the performance of companies in the financial services sector - which returned -15.98% and 3.35% over the same six- and 12-month periods, respectively. Q. AFTER A PROLONGED PERIOD IN WHICH FINANCIAL SERVICES STOCKS DID BETTER THAN THE OVERALL MARKET, THEY UNDERPERFORMED DURING THE PAST SIX MONTHS. WHY? A. There were two basic reasons. Financial services companies traditionally are highly leveraged - they operate using a great deal of borrowed money. Typically, owners' equity represents only a relatively small portion of the value of operations. As a result, financial services companies are more sensitive to market changes than the overall market. The second factor is that financial services companies have become much more a part of the global economy and much more influenced by international events over the past 10 or 20 years. Over the six months, we witnessed major problems in Russia, a continuation of the problems in Asia and emerging problems in Latin America. These global economic problems had a greater impact on the U.S. financial services industry than on U.S. industry in general. Q. IN LIGHT OF THESE CHALLENGES, WHAT STRATEGIES DID YOU EMPHASIZE? A. Throughout the period, I emphasized companies that lent to U.S. consumers, because consumer credit quality here has improved. I also emphasized domestically oriented regional banks, like U.S. Bancorp and Wells Fargo, with relatively little foreign exposure. At the same time, I tried to de-emphasize money center banks with large foreign involvement - companies such as Bankers Trust and J.P. Morgan. I also tried to invest in financial companies that don't necessarily lend, such as life insurance and annuity companies. An example would be Torchmark. The final strategy was to look for companies trading at very attractive stock valuations relative to their underlying value. Lehman Brothers is a good example of a brokerage company that was trading at book value. Q. WHAT HOLDINGS HELPED PERFORMANCE? A. Two of the top performers, Beneficial Corp. and Greentree Financial, are consumer lenders. Beneficial and Greentree also were acquired, which lifted their performance. SunAmerica was another strong contributor, helped by its strong business in retirement savings. AIG has recently announced that it would acquire SunAmerica. Q. WHAT HOLDINGS HURT PERFORMANCE? A. The performance of several large financial companies was hampered due to their exposure to international problems. These included American Express, Chase Manhattan, Travelers Group and BankAmerica. Associates First Capital, a consumer-oriented company that also is involved in commercial lending, did not perform well because of investors' worries about its commercial loans. Q. WHAT IS YOUR OUTLOOK? A. This is a pivotal time. If investors think the world economy will stabilize, they are likely to come to the conclusion that financial services stocks have been over-discounted and will turn out to be terrific stocks. On the other hand, if investors think the world economy will continue to slip and that the U.S. economy will begin to slow, then financial services will continue to be a volatile sector. I plan to continue to emphasize consumer lenders and domestically oriented regional banks, as well as companies that don't have a lot of credit risk, such as life insurers. I also will try to find relatively cheaper stocks, with lower price-to-earnings ratios, to reduce risk in the fund. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: December 10, 1981 FUND NUMBER: 066 TRADING SYMBOL: FIDSX SIZE: as of August 31, 1998, more than $515 million MANAGER: Robert Ewing, since January 1998; manager, Fidelity Advisor Financial Services Fund since January 1998; Fidelity Select Environmental Services Portfolio, 1996-1997; Fidelity Select Energy Service Portfolio, 1996-January 1998; joined Fidelity in 1990 FINANCIAL SERVICES PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.6% SHARES VALUE (NOTE 1) BANKS - 36.5% INTERNATIONAL BANKS - 0.5% Royal Bank of Canada 65,000 $ 2,451,227 NATIONAL COMMERCIAL BANKS - 34.6% Banc One Corp. 352,719 13,403,322 Bank of New York Co., Inc. 470,936 11,390,765 BankAmerica Corp. 302,000 19,346,875 Chase Manhattan Corp. 250,000 13,250,000 Citicorp 157,000 16,975,625 Comerica, Inc. 175,167 9,152,476 First Union Corp. 90,690 4,398,465 Marshall & Ilsley Corp. 30,000 1,320,000 Mellon Bank Corp. 40,000 2,080,000 National City Corp. 85,500 5,023,125 NationsBank Corp. 400,400 22,822,800 Norwest Corp. 110,000 3,272,500 Providian Financial Corp. 101,800 6,534,288 U.S. Bancorp 620,489 21,174,187 Wachovia Corp. 89,500 6,561,469 Wells Fargo & Co. 63,000 17,758,125 Zions Bancorp 50,000 1,918,750 176,382,772 STATE BANKS FEDERAL RESERVE - 1.4% Crestar Financial Corp. 20,000 1,010,000 Firstar Corp. 39,000 1,511,250 Northern Trust Corp. 90,000 5,017,500 7,538,750 TOTAL BANKS 186,372,749 CREDIT & OTHER FINANCE - 16.9% BANK HOLDING COMPANY OFFICES - 1.9% Fleet Financial Group, Inc. 149,767 9,819,099 FINANCIAL SERVICES - 6.0% American Express Co. 287,300 22,409,400 Equitable Companies, Inc. 54,200 3,099,563 First Chicago NBD Corp. 75,000 4,753,125 30,262,088 MORTGAGE BANKERS - 0.8% Aames Financial Corp. 100,000 650,000 Headlands Mortgage Co. (a) 75,000 1,040,625 Resource Bancshares Mortgage Group, Inc. 155,000 2,441,250 4,131,875 PERSONAL CREDIT INSTITUTIONS - 8.2% Associates First Capital Corp. Class A 210,100 12,422,163 Household International, Inc. 559,746 20,675,618 MBNA Corp. 315,000 7,402,500 Takefuji Corp. (c) 34,000 1,465,425 41,965,706 TOTAL CREDIT & OTHER FINANCE 86,178,768 FEDERAL SPONSORED CREDIT - 6.4% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 6.4% Freddie Mac 314,600 12,426,700 Fannie Mae 235,000 13,350,938 SLM Holding Corp. 186,000 6,672,750 32,450,388 SHARES VALUE (NOTE 1) INSURANCE - 24.4% INSURANCE BROKERS & SERVICES - 1.2% Marsh & McLennan Companies, Inc. 122,500 $ 5,941,250 INSURANCE CARRIERS - 4.3% AFLAC, Inc. 382,000 9,597,750 AMBAC, Inc. 65,000 3,067,188 Blanch E.W. Holdings, Inc. 35,000 1,249,063 MBIA, Inc. 67,400 3,782,825 MGIC Investment Corp. 104,200 4,324,300 22,021,126 LIFE INSURANCE - 4.5% Aon Corp. 97,500 6,099,844 Hartford Life, Inc. Class A 25,000 1,281,250 Nationwide Financial Services, Inc. Class A 35,000 1,564,063 Reliastar Financial Corp. 25,000 981,250 SunAmerica, Inc. 110,000 6,813,125 Torchmark Corp. 180,000 6,435,000 23,174,532 PROPERTY-CASUALTY & REINSURANCE - 13.9% ACE Ltd. 80,000 2,320,000 Aegon NV (Reg.) 36,940 3,158,370 Allstate Corp. 227,800 8,542,500 American International Group, Inc. 287,500 22,227,344 Capital Re Corp. 60,000 1,590,000 Chubb Corp. (The) 30,000 1,875,000 General Re Corp. 10,500 2,178,750 HCC Insurance Holdings, Inc. 150,000 2,803,125 Hartford Financial Services Group, Inc. 190,000 8,502,500 Old Republic International Corp. 60,000 1,338,750 PMI Group, Inc. 58,400 3,233,900 Progressive Corp. 55,000 5,359,063 RenaissanceRe Holdings Ltd. 125,000 5,234,375 Travelers Property Casualty Corp. Class A 75,000 2,470,313 70,833,990 SURETY INSURANCE - 0.5% Amerin Corp. (a) 120,000 2,737,500 TOTAL INSURANCE 124,708,398 REAL ESTATE INVESTMENT TRUSTS - 1.6% Crescent Real Estate Equities, Inc. 70,000 1,610,000 Duke Realty Investors, Inc. 50,000 1,037,500 Equity Office Properties Trust 50,000 1,134,375 Imperial Credit Commercial Mortgage Investment Corp. 85,100 765,900 Ocwen Asset Investment Corp. 200,000 1,950,000 Public Storage, Inc. 40,000 935,000 Starwood Hotels & Resorts Trust 20,000 730,000 8,162,775 SAVINGS & LOANS - 2.6% SAVINGS BANKS & SAVINGS & LOANS - 0.4% Astoria Financial Corp. 25,000 900,000 Charter One Financial Corp. 50,000 1,150,000 2,050,000 SAVINGS BANKS, FEDERAL CHARTER - 2.2% Ahmanson (H.F.) & Co. 41,000 2,185,813 Dime Bancorp., Inc. 135,000 2,565,000 Golden State Bancorp 125,000 1,984,375 Golden State Bancorp Litigation Track warrants 1/1/01 (a) 50,000 225,000 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SAVINGS & LOANS - CONTINUED SAVINGS BANKS, FEDERAL CHARTER - CONTINUED Telebanc Financial Corp. (a) 1,800 $ 22,275 Washington Mutual, Inc. 130,000 4,160,000 11,142,463 TOTAL SAVINGS & LOANS 13,192,463 SECURITIES INDUSTRY - 7.2% INVESTMENT MANAGERS - 0.7% Investors Group Inc. 200,000 2,231,431 Pioneer Group, Inc. 75,000 1,345,313 3,576,744 SECURITY & COMMODITY BROKERS - 2.6% Bear Stearns Companies, Inc. 185,000 6,833,438 Merrill Lynch & Co., Inc. 76,000 5,016,000 Nomura Securities Co. Ltd. 150,000 1,399,242 13,248,680 SECURITY BROKERS & DEALERS - 3.9% Lehman Brothers Holdings, Inc. 110,600 4,354,869 Travelers Group, Inc. (The) 282,000 12,513,750 Waddell & Reed Financial, Inc. Class A 170,000 2,826,250 19,694,869 TOTAL SECURITIES INDUSTRY 36,520,293 TOTAL COMMON STOCKS (Cost $494,100,377) 487,585,834 CASH EQUIVALENTS - 4.4% Taxable Central Cash Fund (b) (Cost $22,353,205) 22,353,205 22,353,205 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $516,453,582) $ 509,939,039 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $1,465,425 or 0.3% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $240,604,803 and $214,158,353, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $31,875 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At period end, there were no loans outstanding (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $516,496,405. Net unrealized depreciation aggregated $6,557,366, of which $56,926,487 related to appreciated investment securities and $63,483,853 related to depreciated investment securities. FINANCIAL SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS Investment in $ 509,939,039 securities, at value (cost $516,453,58 2) - See accompanyin g schedule Receivable for 20,581,799 investments sold Receivable for 2,293,085 fund shares sold Dividends 535,614 receivable Interest 183,355 receivable Redemption fees 9,559 receivable TOTAL ASSETS 533,542,451 LIABILITIES Payable for $ 2,952,000 investments purchased Payable for 14,020,676 fund shares redeemed Accrued 316,972 management fee Other payables 363,574 and accrued expenses TOTAL LIABILITIES 17,653,222 NET ASSETS $ 515,889,229 Net Assets consist of: Paid in capital $ 483,083,768 Undistributed 1,843,380 net investment income Accumulated 37,456,197 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized (6,494,116) appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 515,889,229 6,453,062 shares outstanding NET ASSET $79.94 VALUE and redemption price per share ($515,889,2 29 (divided by) 6,453,062 shares) Maximum $82.41 offering price per share (100/97.00 of $79.94) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 4,532,605 INCOME Dividends Interest 1,331,358 (including income on securities loaned of $1,796) TOTAL INCOME 5,863,963 EXPENSES Management $ 2,010,972 fee Transfer agent 1,612,555 fees Accounting and 297,132 security lending fees Non-interested 1,329 trustees' compensation Custodian fees 10,355 and expenses Registration fees 74,708 Audit 18,423 Legal 1,736 Reports to 62,024 shareholders Total expenses 4,089,234 before reductions Expense (69,413) 4,019,821 reductions NET INVESTMENT 1,844,142 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 37,527,194 securities Foreign 19,235 37,546,429 currency transactions Change in net unrealized appreciation (depreciation) on: Investment (135,356,614) securities Assets and 20,427 (135,336,187) liabilities in foreign currencies NET GAIN (LOSS) (97,789,758) NET INCREASE $ (95,945,616) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 1,576,268 INFORMATION Sales charges paid to FDC Sales charges $ 1,575,034 - - Retained by FDC Deferred sales $ 6,835 charges withheld by FDC Exchange fees $ 58,680 withheld by FSC Expense $ 67,246 reductions Directed brokerage arrangements Custodian 2,104 credits Transfer 63 agent credits $ 69,413 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 Operations $ 1,844,142 $ 3,633,948 Net investment income Net realized 37,546,429 108,047,031 gain (loss) Change in net (135,336,187) 47,345,052 unrealized appreciation (depreciation) NET INCREASE (95,945,616) 159,026,031 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (1,162,931) (3,089,281) shareholders From net investment income From net (61,384,939) (50,526,464) realized gain TOTAL (62,547,870) (53,615,745) DISTRIBUTIONS Share 243,927,672 474,752,061 transactions Net proceeds from sales of shares Reinvestment 61,457,951 52,640,022 of distributions Cost of shares (236,208,147) (455,053,591) redeemed NET INCREASE 69,177,476 72,338,492 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption 297,623 734,651 fees TOTAL (89,018,387) 178,483,429 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 604,907,616 426,424,187 period End of period $ 515,889,229 $ 604,907,616 (including undistribute d net investment income of $1,843,38 0 and $1,378,88 2, respectively) OTHER INFORMATION Shares Sold 2,355,109 5,332,883 Issued in 609,460 604,501 reinvestment of distributions Redeemed (2,368,715) (5,221,709) Net increase 595,854 715,675 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA Net asset $ 103.28 $ 82.94 $ 65.70 $ 48.23 $ 51.24 $ 53.29 value, beginning of period Income from Investment Operation s Net .28 .70 .74 1.03 .76 .29 investment income D Net (13.43) 30.65 21.55 17.56 .87 5.02 realized and unrealized gain (loss) Total from (13.15) 31.35 22.29 18.59 1.63 5.31 investment operations Less Distributio ns From net (.19) (.64) (.63) (.37) (.79) (.20) investment income From net (10.04) (10.51) (4.56) (.91) (3.93) (7.32) realized gain Total (10.23) (11.15) (5.19) (1.28) (4.72) (7.52) distributio ns Redemption .04 .14 .14 .16 .08 .16 fees added to paid in capital Net asset $ 79.94 $ 103.28 $ 82.94 $ 65.70 $ 48.23 $ 51.24 value, end of period TOTAL (14.75)% 41.08% 35.54% 39.05% 4.72% 10.85% RETURN B, C RATIOS AND SUPPLEME NTAL DATA Net assets, $ 515,889 $ 604,908 $ 426,424 $ 270,466 $ 153,089 $ 116,195 end of period (000 omitted) Ratio of 1.17% A 1.31% 1.45% 1.42% 1.56% 1.64% expenses to average net assets Ratio of 1.15% A, E 1.29% E 1.43% E 1.41% E 1.54% E 1.63% E expenses to average net assets after expense reductions Ratio of net .53% A .78% 1.03% 1.78% 1.52% .53% investment income to average net assets Portfolio 69% A 84% 80% 125% 107% 93% turnover rate Average $ .0434 $ .0452 $ .0433 commissio n rate F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FO R FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
HOME FINANCE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT HOME FINANCE -26.84% -14.69% 148.93% 655.74% SELECT HOME FINANCE -29.11% -17.32% 141.39% 633.00% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS Financial Services -15.98% 3.35% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Financial Services Index - a market capitalization-weighted index of 271 stocks designed to measure the performance of companies in the financial services sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT HOME FINANCE -14.69% 20.01% 22.42% SELECT HOME FINANCE -17.32% 19.27% 22.04% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS Financial Services 3.35% n/a n/a AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Home Finance S&P 500 00098 SP001 1988/08/31 9700.00 10000.00 1988/09/30 10194.13 10426.00 1988/10/31 10484.16 10715.84 1988/11/30 9957.81 10562.61 1988/12/31 10132.12 10747.45 1989/01/31 10981.91 11534.17 1989/02/28 11221.60 11246.96 1989/03/31 11276.07 11509.02 1989/04/30 11853.49 12106.34 1989/05/31 12365.55 12596.64 1989/06/30 12614.45 12524.84 1989/07/31 13053.97 13655.84 1989/08/31 13856.11 13923.49 1989/09/30 14372.56 13866.40 1989/10/31 12581.48 13544.70 1989/11/30 12174.92 13821.02 1989/12/31 11077.08 14152.72 1990/01/31 10158.77 13203.07 1990/02/28 10537.57 13373.39 1990/03/31 10560.53 13727.79 1990/04/30 10308.00 13384.59 1990/05/31 11283.70 14689.59 1990/06/30 11168.91 14589.70 1990/07/31 10204.69 14543.01 1990/08/31 9171.59 13228.33 1990/09/30 8379.55 12584.11 1990/10/31 7748.22 12529.99 1990/11/30 8586.17 13339.43 1990/12/31 9406.32 13711.60 1991/01/31 10306.06 14309.43 1991/02/28 11708.24 15332.55 1991/03/31 12245.74 15703.60 1991/04/30 12666.40 15741.29 1991/05/31 13192.22 16421.31 1991/06/30 12456.07 15669.22 1991/07/31 13788.15 16399.40 1991/08/31 14313.97 16788.07 1991/09/30 14197.12 16507.71 1991/10/31 13951.73 16728.91 1991/11/30 13309.07 16054.73 1991/12/31 15483.33 17891.40 1992/01/31 17009.19 17558.62 1992/02/29 18121.06 17786.88 1992/03/31 17813.52 17440.03 1992/04/30 18192.03 17952.77 1992/05/31 19989.94 18040.74 1992/06/30 20014.98 17771.93 1992/07/31 20999.13 18498.80 1992/08/31 19860.84 18119.58 1992/09/30 20180.99 18333.39 1992/10/31 20560.42 18397.56 1992/11/30 22671.00 19024.91 1992/12/31 24440.87 19258.92 1993/01/31 26194.36 19420.70 1993/02/28 26638.74 19684.82 1993/03/31 27587.55 20100.17 1993/04/30 26093.28 19613.74 1993/05/31 25646.73 20139.39 1993/06/30 26286.39 20197.79 1993/07/31 27976.06 20117.00 1993/08/31 29448.48 20879.44 1993/09/30 31331.25 20718.67 1993/10/31 31572.63 21147.54 1993/11/30 30160.55 20946.64 1993/12/31 31112.00 21200.10 1994/01/31 32474.10 21920.90 1994/02/28 31863.06 21326.84 1994/03/31 31264.75 20396.99 1994/04/30 32473.55 20658.07 1994/05/31 34476.44 20996.87 1994/06/30 35050.60 20482.44 1994/07/31 35825.05 21154.27 1994/08/31 36986.73 22021.59 1994/09/30 35718.23 21482.06 1994/10/31 33581.81 21965.41 1994/11/30 31845.97 21165.43 1994/12/31 31946.14 21479.31 1995/01/31 33353.98 22036.27 1995/02/28 35825.20 22895.02 1995/03/31 35765.30 23570.66 1995/04/30 37637.43 24264.81 1995/05/31 39869.02 25234.68 1995/06/30 40288.38 25820.88 1995/07/31 41905.90 26677.10 1995/08/31 45769.99 26744.06 1995/09/30 46728.53 27872.66 1995/10/31 45874.83 27773.15 1995/11/30 48405.96 28992.39 1995/12/31 49034.57 29550.79 1996/01/31 50375.24 30556.70 1996/02/29 51315.24 30839.96 1996/03/31 52486.40 31136.95 1996/04/30 51816.30 31595.90 1996/05/31 52971.29 32410.76 1996/06/30 53208.61 32534.25 1996/07/31 54157.92 31096.88 1996/08/31 56388.79 31752.72 1996/09/30 59236.71 33539.76 1996/10/31 63397.83 34464.79 1996/11/30 68144.36 37069.98 1996/12/31 67116.52 36335.62 1997/01/31 71476.87 38605.87 1997/02/28 75689.14 38908.54 1997/03/31 68679.67 37309.79 1997/04/30 70738.19 39537.19 1997/05/31 75478.65 41944.21 1997/06/30 81922.16 43823.31 1997/07/31 89629.79 47310.33 1997/08/31 85925.21 44660.01 1997/09/30 93632.85 47106.04 1997/10/31 92895.44 45532.69 1997/11/30 93422.16 47640.40 1997/12/31 97822.00 48458.39 1998/01/31 92263.29 48994.34 1998/02/28 100206.99 52527.81 1998/03/31 106967.58 55217.76 1998/04/30 109488.51 55773.25 1998/05/31 105675.86 54814.51 1998/06/30 103846.56 57041.07 1998/07/31 99802.84 56433.58 1998/08/31 73306.85 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980914 085516 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Home Finance Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $73,300 - a 633.00% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS Washington Mutual, Inc. 5.9 Ahmanson (H.F.) & Co. 5.5 Charter One Financial Corp. 4.7 Dime Bancorp., Inc. 4.7 Greenpoint Financial Corp. 3.9 Freddie Mac 3.0 Astoria Financial Corp. 2.8 TCF Financial Corp. 2.8 Peoples Heritage Financial Group, Inc. 2.4 BankAmerica Corp. 2.3 TOP INDUSTRIES AS OF AUGUST 31, 1998 SAVINGS BANKS, FEDERAL CHARTER 32.1% SAVINGS BANKS & SAVINGS & LOANS 17.2% NATIONAL COMMERCIAL BANKS 13.5% MORTGAGE BANKERS 7.0% BANK HOLDING COMPANY OFFICES 5.1% ALL OTHERS 25.1% ROW: 1, COL: 1, VALUE: 25.1 ROW: 1, COL: 2, VALUE: 5.1 ROW: 1, COL: 3, VALUE: 7.0 ROW: 1, COL: 4, VALUE: 13.5 ROW: 1, COL: 5, VALUE: 17.2 ROW: 1, COL: 6, VALUE: 32.1 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS HOME FINANCE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Bill Rubin) Bill Rubin, Portfolio Manager of Fidelity Select Home Finance Portfolio Q. HOW DID THE FUND PERFORM, BILL? A. For the six- and 12-month periods that ended August 31, 1998, the fund had total returns of -26.84% and -14.69%, respectively. In comparison, the Standard & Poor's 500 Index returned -8.10% and 8.10%, respectively, over the same time periods. Beginning this period, the fund also compares itself to the Goldman Sachs Financial Services Index - an index of 271 stocks designed to measure the performance of companies in the financial services sector - which returned -15.98% and 3.35% over the same six- and 12-month periods, respectively. Q. PRIOR TO THIS PERIOD, MORTGAGE FINANCE STOCKS ENJOYED A NICE RUN OF STRONG PERFORMANCE. WHY THE SUDDEN TURNAROUND? A. The market's plunge in August devastated virtually all sectors of stocks, but financial services stocks were hit particularly hard, causing the fund to underperform diversified indexes like the S&P 500. The financial services sector was the victim of concern about exposure to emerging markets - especially Russia - and the desire to take profits on stocks that, as a group, have outperformed the overall market over the past few years. Within the financial services sector, mortgage-related shares - which comprise the majority of the fund's investments - were generally under considerable pressure during the period. Investors anticipated lower revenues than earlier expected for mortgage institutions because of the higher rate of refinancings and prepayments, as well as the narrower spread between short-term interest rates, which represent mortgage lenders' cost of borrowing, and the long-term interest rates on which their revenues depend. Consequently, the fund's performance lagged even that of the sector-specific Goldman Sachs index. Q. WHAT STOCKS PERFORMED WELL DURING THE PERIOD? A. Greentree Financial and Money Store shares rose in response to acquisition bids by Conseco and First Union, respectively, which were both looking to diversify further into the consumer finance area. Both acquisitions subsequently transpired, resulting in the elimination of Greentree and Money Store from the fund's holdings. Societe Generale, a French-based bank that rode the wave of a strong European finance sector, also helped performance, and I took profits on this position. Q. WHAT STOCKS WERE DISAPPOINTING? A. Dime Bancorp, formerly one of the fund's best performers and its fourth-largest holding at the end of the period, hurt performance most. Although the company continued to far exceed earnings estimates during the period, it was caught in the wave of indiscriminate selling that engulfed the market recently. Washington Mutual, the fund's largest holding, also detracted from performance. The company's earnings estimates slipped, primarily due to the temporarily higher costs involved in assimilating Great Western - an acquisition that virtually doubled the size of the company. Greenpoint Financial's story parallels that of Dime Bancorp - the stock was hammered in spite of a positive outlook and strong earnings growth that exceeded analysts' estimates. Q. WHAT'S YOUR OUTLOOK, BILL? A. Going forward, a lot will depend on the strength of the U.S. economy, the direction of interest rates and the level of refinancings and prepayments. A moderately slower economy might relieve investors' fears about inflation and allow short-term interest rates to drift lower without disturbing long-term rates, enabling many mortgage finance companies to reaccelerate their revenue growth. However, anything worse than a moderate slowdown would be detrimental to mortgage finance stocks. On the positive side, earnings-per-share growth in the sector should average between 10% and 15% over the next year. Meanwhile, the sector's average price-to-earnings (P/E) ratio - an important measure of value - has fallen to about half of the S&P 500's P/E ratio. Residential mortgage credit quality remains excellent. Moreover, year-to-date figures on the rate of mergers and acquisitions in the industry - a potent positive influence on stock prices over the past few years - have exceeded those covering the same period of time in 1997. Therefore, despite the uncertain prospects for the economy, I am relatively optimistic about prospects for the mortgage finance sector over the next 12 to 18 months. My strategy will remain one of owning stocks projected to have better-than-average earnings growth and selling at a significant valuation discount to the financial services sector and to the S&P 500. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 098 TRADING SYMBOL: FSVLX SIZE: as of August 31, 1998, more than $1.0 billion MANAGER: Bill Rubin, since 1996; manager, Fidelity Select Defense and Aerospace Portfolio, 1994-1997; equity analyst, various industry sectors, since 1994; joined Fidelity in 1994 HOME FINANCE PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 98.5% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 0.6% AUTO DEALERS, GAS STATIONS - RETAIL - 0.6% Ugly Duckling Corp. (a)(c) 1,367,500 $ 6,324,688 BANKS - 17.5% NATIONAL COMMERCIAL BANKS - 13.5% Advanta Corp. 132,900 1,503,431 BB&T Corp. 98,400 2,773,650 Banc One Corp. 98,620 3,747,560 Bank of New York Co., Inc. 577,200 13,961,025 BankAmerica Corp. 353,600 22,652,500 Chase Manhattan Corp. 363,900 19,286,700 Comerica, Inc. 44,300 2,314,675 First Tennessee National Corp. 88,600 2,109,788 HUBCO, Inc. 130,753 3,464,955 Norwest Corp. 157,500 4,685,625 Peoples Heritage Financial Group, Inc. 1,542,700 24,201,106 Providian Financial Corp. 100,900 6,476,519 SouthTrust Corp. 59,100 1,913,363 U.S. Bancorp 334,000 11,397,750 Union Planters Corp. 1,887 75,952 UnionBanCal Corp. 90,500 6,776,188 Vermont Financial Services Corp. 19,700 398,925 Wells Fargo & Co. 24,600 6,934,125 134,673,837 STATE BANKS FEDERAL RESERVE - 4.0% Acadiana Bancshares, Inc. (c) 150,900 2,791,650 Crestar Financial Corp. 102,199 5,161,050 North Fork Bancorp., Inc. 1,066,424 20,262,056 R&G Financial Corp. Class B 286,500 4,404,938 T R Financial Corp. 201,100 4,160,256 UST Corp. 101,640 1,677,060 US Trust Corp. 22,200 1,332,000 39,789,010 TOTAL BANKS 174,462,847 CREDIT & OTHER FINANCE - 16.0% BANK HOLDING COMPANY OFFICES - 5.1% Fleet Financial Group, Inc. 189,100 12,397,869 Greenpoint Financial Corp. 1,536,500 38,700,594 51,098,463 BUSINESS CREDIT - 0.8% Allied Capital Corp. 49,200 787,200 Coast Federal Litigation Contingent Payment Rights Trust 12/31/00 (a) 269,400 2,710,838 Federal Agricultural Mortgage Corp. Class C (non-vtg.) (a) 108,300 4,007,100 7,505,138 FINANCIAL SERVICES - 0.7% ContiFinancial Corp. (a) 545,000 6,880,625 MORTGAGE BANKERS - 7.0% Aames Financial Corp. 1,483,150 9,640,475 BNC Mortgage, Inc. (a) 214,600 1,314,425 Cityscape Financial Corp. (a) 2,010,900 110,600 Countrywide Credit Industries, Inc. 117,890 4,413,507 Delta Financial Corp. (a) 563,800 4,439,925 Doral Financial Corp. 196,900 2,953,500 First Alliance Mortgage Co. (a)(c) 729,250 5,469,375 Home Gold Financial, Inc. (a) 457,700 1,029,825 IMC Mortgage Co. (a) 1,010,500 6,820,875 Imperial Credit Industries (a) 366,200 4,989,475 SHARES VALUE (NOTE 1) Life Financial Corp. (a)(c) 336,400 $ 2,060,450 Long Beach Financial Corp. (a)(c) 1,198,100 9,584,800 New Century Financial Corp. (a) 424,200 3,923,850 Resource Bancshares Mortgage Group, Inc. 287,375 4,526,156 Southern Pacific Funding Corp. (a) 570,500 4,635,313 United Companies Financial Corp. 265,300 3,714,200 69,626,751 PERSONAL CREDIT INSTITUTIONS - 2.4% Associates First Capital Corp. Class A 49,200 2,908,950 FIRSTPLUS Financial Group, Inc. (a) 937,600 21,330,400 24,239,350 TOTAL CREDIT & OTHER FINANCE 159,350,327 FEDERAL SPONSORED CREDIT - 3.8% FEDERAL & FEDERALLY SPONSORED CREDIT AGENCIES - 3.8% Freddie Mac 762,800 30,130,600 SLM Holding Corp. 196,900 7,063,788 37,194,388 INDUSTRIAL MACHINERY & EQUIPMENT - 0.1% INDUSTRIAL MACHINERY - WHOLESALE - 0.1% Linc Capital, Inc. (a) 98,400 1,266,900 INSURANCE - 4.9% INSURANCE CARRIERS - 0.7% MGIC Investment Corp. 177,000 7,345,500 LIFE INSURANCE - 1.4% Conseco, Inc. 509,123 14,064,523 PROPERTY-CASUALTY & REINSURANCE - 2.0% PMI Group, Inc. 361,640 20,025,815 SURETY INSURANCE - 0.8% CMAC Investments 190,800 7,345,800 TOTAL INSURANCE 48,781,638 REAL ESTATE INVESTMENT TRUSTS - 3.7% Criimi Mae, Inc. 265,318 3,333,057 Imperial Credit Mortgage Holdings, Inc. 262,600 3,364,563 Imperial Credit Commercial Mortgage Investment Corp. 147,700 1,329,300 Indymac Mortgage Holdings, Inc. 308,100 6,046,463 Novastar Financial, Inc. 126,200 1,885,113 Ocwen Asset Investment Corp. 863,000 8,414,250 Redwood Trust, Inc. (c) 704,519 10,039,396 Thornburg Mortgage Asset Corp. 300,300 2,402,400 36,814,542 SAVINGS & LOANS - 50.4% SAVINGS BANKS & SAVINGS & LOANS - 17.2% Andover Bancorp., Inc. 153,850 4,307,800 Astoria Financial Corp. 785,300 28,270,800 Bay View Capital, Inc. 305,103 5,186,751 Charter One Financial Corp. 2,044,844 47,031,412 Commercial Federal Corp. 984,525 21,659,550 First Federal Savings & Loan Association 67,300 1,749,800 First Essex Bancorp, Inc. 59,100 893,888 FirstFed Financial Corp. (a) 442,400 6,525,400 MAF Bancorp., Inc. 88,600 1,816,300 Sovereign Bancorp., Inc. 1,584,477 19,310,813 TCF Financial Corp. 1,258,100 27,756,831 Webster Financial Corp. 316,000 6,517,500 Westcorp, Inc. 54,100 500,425 171,527,270 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SAVINGS & LOANS - CONTINUED SAVINGS BANKS, NO FEDERAL CHARTER - 1.1% Downey Financial Corp. 49,662 $ 1,145,330 First Washington Bancorp, Inc. 94,200 1,825,125 ITLA Capital Corp. (a) 106,300 1,860,250 Richmond County Financial Corp. 102,500 1,217,188 SIS Bancorp., Inc. 137,000 4,589,500 10,637,393 SAVINGS BANKS, FEDERAL CHARTER - 32.1% Ahmanson (H.F.) & Co. 1,034,529 55,153,327 Albank Financial Corp. 223,800 11,106,075 Bank Plus Corp. (a) 278,600 2,124,325 Bank United Corp. Class A 648,400 21,559,300 Carver Bancorp, Inc. (c) 139,800 1,450,425 Catskill Financial Corp. 78,800 1,063,800 Citizens First Financial Corp. (a)(c) 172,000 2,709,000 Coastal Bancorp, Inc. 14,800 222,000 D & N Financial Corp. 67,900 1,111,863 Dime Community Bancorp, Inc. 312,900 4,791,281 Dime Bancorp., Inc. 2,460,384 46,747,296 First Bergen Bancorp 86,100 1,399,125 First Defiance Financial Corp. 224,400 2,664,750 First Federal Bancshares of Arkansas, Inc. 12,300 233,700 First Palm Beach Bancorp, Inc. 19,700 591,000 Flagstar Bancorp, Inc. 383,900 8,589,763 GA Financial, Inc. 238,900 3,255,013 Golden State Bancorp 1,188,492 18,867,311 Golden State Bancorp Litigation Track warrants 1/1/01 (a) 898,761 4,044,425 HF Bancorp, Inc. (a) 113,200 1,386,700 Haven Bancorp., Inc. 331,400 5,302,400 Long Island Bancorp., Inc. 418,000 15,675,000 Ocean Financial Corp. 289,100 4,011,263 Ocwen Financial Corp. (a) 265,400 4,047,350 PFF Bancorp, Inc. (a) 448,700 6,253,756 Peoples Bancorp., Inc. 492,200 3,430,019 Provident Financial Holdings, Inc. (a) 177,200 2,525,100 Quaker City Bancorp (a) 113,825 1,821,200 SGV Bancorp., Inc. (a)(c) 137,800 1,963,650 Washington Federal, Inc. 958,528 21,686,696 Washington Mutual, Inc. 1,832,072 58,626,304 Wilshire Financial Services Group, Inc. (a) 424,600 4,299,075 Yonkers Financial Corp. 83,700 1,255,500 319,967,792 TOTAL SAVINGS & LOANS 502,132,455 SECURITIES INDUSTRY - 1.4% SECURITY & COMMODITY BROKERS - 1.1% Advest Group, Inc. (The) 99,300 1,899,101 Edwards (A.G.), Inc. 78,800 2,137,450 McDonald & Co. Investments, Inc. 161,100 4,480,594 Morgan Keegan, Inc. 123,100 2,185,025 10,702,170 SECURITY BROKERS & DEALERS - 0.3% Travelers Group, Inc. (The) 78,800 3,496,750 TOTAL SECURITIES INDUSTRY 14,198,920 SHARES VALUE (NOTE 1) SERVICES - 0.1% MANAGEMENT CONSULTING SERVICES - 0.1% AMRESCO, Inc. 69,900 $ 865,013 Firstmark Corp. (a) 101,800 82,713 947,726 TOTAL COMMON STOCKS (Cost $1,036,064,264) 981,474,431 CONVERTIBLE PREFERRED STOCKS - 0.6% REAL ESTATE INVESTMENT TRUSTS - 0.6% Criimi Mae, Inc. $2.72 119,800 3,474,200 Walden Residential Properties, Inc., Series B, $2.29 80,000 2,200,000 TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $5,920,750) 5,674,200 CASH EQUIVALENTS - 0.9% Taxable Central Cash Fund (b) (Cost $9,377,084) 9,377,084 9,377,084 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $1,051,362,098) $ 996,525,715 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Affiliated company (see Note 10 of Notes to Financial Statements). OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $197,848,430 and $392,220,326, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $44,957 for the period (see Note 4 of Notes to Financial Statements). Transactions during the period with companies which are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Acadiana Bancshares, Inc. $ - $ 32,206 $ 33,726 $ 2,791,650 Carver Bancorp, Inc. - 21,769 6,990 1,450,425 Citizens First Financial Corp. - 29,498 - 2,709,000 Dime Financial Corp. - - - - First Alliance Mortgage Co. 2,556,250 237,188 - 5,469,375 First Bergen Bancorp - 536,250 8,775 - Life Financial Corp. 123,750 130,163 - 2,060,450 Long Beach Financial Corp. 795,513 769,725 - 9,584,800 R&G Financial Corp. Class B - 391,667 - - RedFed Bancorp, Inc. - 1,771,875 - - Redwood Trust, Inc. 888,284 1,898,825 207,599 10,039,396 SGV Bancorp., Inc. - 20,900 - 1,963,650 Ugly Duckling Corp. 778,735 2,320,750 - 6,324,688 TOTALS $ 5,142,532 $ 8,160,816 $ 257,090 $ 42,393,434 INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $1,052,398,711. Net unrealized depreciation aggregated $55,872,996, of which $146,714,442 related to appreciated investment securities and $202,587,438 related to depreciated investment securities. HOME FINANCE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS Investment in $ 996,525,715 securities, at value (cost $1,051,362, 098) - See accompanyin g schedule Receivable for 35,866,927 investments sold Receivable for 962,131 fund shares sold Dividends 1,574,832 receivable Interest 36,156 receivable Redemption fees 9,979 receivable Other 5,461 receivables TOTAL ASSETS 1,034,981,201 LIABILITIES Payable for $ 20,935,976 fund shares redeemed Accrued 657,373 management fee Other payables 743,981 and accrued expenses TOTAL LIABILITIES 22,337,330 NET ASSETS $ 1,012,643,871 Net Assets consist of: Paid in capital $ 992,455,348 Undistributed 4,120,501 net investment income Accumulated 70,902,584 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized (54,834,562) appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 1,012,643,871 26,597,427 shares outstanding NET ASSET $38.07 VALUE and redemption price per share ($1,012,643, 871 (divided by) 26,597,427 shares) Maximum $39.25 offering price per share (100/97.00 of $38.07) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 12,596,194 INCOME Dividends (including $257,090 received from affiliated issuers) Interest 1,405,988 TOTAL INCOME 14,002,182 EXPENSES Management $ 5,026,610 fee Transfer agent 4,002,213 fees Accounting fees 402,021 and expenses Non-interested 3,264 trustees' compensation Custodian fees 47,200 and expenses Registration fees 40,234 Audit 36,312 Legal 4,791 Reports to 174,016 shareholders Total expenses 9,736,661 before reductions Expense (65,366) 9,671,295 reductions NET INVESTMENT 4,330,887 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 72,989,098 securities (including realized loss of $864,169 on sales of investments on affiliated issuers) Foreign (10,778) 72,978,320 currency transactions Change in net unrealized appreciation (depreciation) on: Investment (463,680,732) securities Assets and 828 (463,679,904) liabilities in foreign currencies NET GAIN (LOSS) (390,701,584) NET INCREASE $ (386,370,697) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 3,601,600 INFORMATION Sales charges paid to FDC Sales charges $ 3,588,148 - - Retained by FDC Deferred sales $ 6,418 charges withheld by FDC Exchange fees $ 157,995 withheld by FSC Expense $ 49,009 reductions Directed brokerage arrangements Custodian 12,535 credits Transfer 3,822 agent credits $ 65,366 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 Operations $ 4,330,887 $ 8,926,749 Net investment income Net realized 72,978,320 177,748,259 gain (loss) Change in net (463,679,904) 165,002,991 unrealized appreciation (depreciation) NET INCREASE (386,370,697) 351,677,999 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (2,223,462) (7,530,670) shareholders From net investment income From net (43,929,075) (153,895,241) realized gain TOTAL (46,152,537) (161,425,911) DISTRIBUTIONS Share 406,064,933 1,194,996,073 transactions Net proceeds from sales of shares Reinvestment 45,330,000 158,982,280 of distributions Cost of shares (675,743,144) (1,054,168,696) redeemed NET INCREASE (224,348,211) 299,809,657 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption 905,068 1,720,473 fees TOTAL (655,966,377) 491,782,218 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 1,668,610,248 1,176,828,030 period End of period $ 1,012,643,871 $ 1,668,610,248 (including undistribute d net investment income of $4,120,50 1 and $4,200,14 7, respectively) OTHER INFORMATION Shares Sold 7,216,523 24,323,664 Issued in 793,035 3,484,445 reinvestment of distributions Redeemed (12,681,478) (22,121,347) Net increase (4,671,920) 5,686,762 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA Net asset $ 53.36 $ 46.00 $ 33.30 $ 23.92 $ 25.03 $ 22.18 value, beginning of period Income from Investment Operation s Net .14 .33 .53 .53 .20 .03 investment income D Net (14.01) 13.10 14.60 9.72 2.34 4.15 realized and unrealized gain (loss) Total from (13.87) 13.43 15.13 10.25 2.54 4.18 investment operations Less Distributio ns From net (.07) (.29) (.32) (.19) (.12) (.01) investment income From net (1.38) (5.84) (2.16) (.73) (3.60) (1.40) realized gain Total (1.45) (6.13) (2.48) (.92) (3.72) (1.41) distributio ns Redemption .03 .06 .05 .05 .07 .08 fees added to paid in capital Net asset $ 38.07 $ 53.36 $ 46.00 $ 33.30 $ 23.92 $ 25.03 value, end of period TOTAL (26.84)% 32.39% 47.50% 43.24% 12.43% 19.61% RETURN B, C RATIOS AND SUPPLEME NTAL DATA Net assets, $ 1,012,644 $ 1,668,610 $ 1,176,828 $ 617,035 $ 229,924 $ 155,563 end of period (000 omitted) Ratio of 1.12% A 1.21% 1.38% 1.35% 1.47% 1.58% expenses to average net assets Ratio of 1.11% A, E 1.19% E 1.34% E 1.32% E 1.45% E 1.58% expenses to average net assets after expense reductions Ratio of net .50% A .67% 1.41% 1.80% .80% .11% investment income to average net assets Portfolio 25% A 54% 78% 81% 124% 95% turnover rate Average $ .0382 $ .0382 $ .0417 commissio n rate F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FO R FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
INSURANCE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT INSURANCE -9.48% 8.90% 111.55% 431.17% SELECT INSURANCE -12.27% 5.56% 105.13% 415.17% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS Financial Services -15.98% 3.35% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Financial Services Index - a market capitalization-weighted index of 271 stocks designed to measure the performance of companies in the financial services sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT INSURANCE 8.90% 16.17% 18.17% SELECT INSURANCE 5.56% 15.45% 17.81% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS Financial Services 3.35% n/a n/a AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Insurance S&P 500 00045 SP001 1988/08/31 9700.00 10000.00 1988/09/30 10032.62 10426.00 1988/10/31 9987.67 10715.84 1988/11/30 9771.92 10562.61 1988/12/31 10015.91 10747.45 1989/01/31 10777.30 11534.17 1989/02/28 10849.81 11246.96 1989/03/31 11103.61 11509.02 1989/04/30 11466.17 12106.34 1989/05/31 11529.62 12596.64 1989/06/30 11783.31 12524.84 1989/07/31 12772.82 13655.84 1989/08/31 13163.17 13923.49 1989/09/30 13344.73 13866.40 1989/10/31 13780.48 13544.70 1989/11/30 14152.68 13821.02 1989/12/31 13805.04 14152.72 1990/01/31 12633.26 13203.07 1990/02/28 12990.28 13373.39 1990/03/31 12926.20 13727.79 1990/04/30 12477.63 13384.59 1990/05/31 13621.95 14689.59 1990/06/30 13658.57 14589.70 1990/07/31 13457.17 14543.01 1990/08/31 12056.52 13228.33 1990/09/30 11012.90 12584.11 1990/10/31 10573.49 12529.99 1990/11/30 11974.13 13339.43 1990/12/31 12450.17 13711.60 1991/01/31 13118.45 14309.43 1991/02/28 14445.86 15332.55 1991/03/31 15397.93 15703.60 1991/04/30 15315.54 15741.29 1991/05/31 15700.03 16421.31 1991/06/30 14724.06 15669.22 1991/07/31 15270.77 16399.40 1991/08/31 15178.11 16788.07 1991/09/30 15326.37 16507.71 1991/10/31 15789.68 16728.91 1991/11/30 15650.68 16054.73 1991/12/31 17016.93 17891.40 1992/01/31 16998.34 17558.62 1992/02/29 17453.98 17786.88 1992/03/31 17202.91 17440.03 1992/04/30 16765.86 17952.77 1992/05/31 16989.04 18040.74 1992/06/30 17344.46 17771.93 1992/07/31 18327.18 18498.80 1992/08/31 17790.23 18119.58 1992/09/30 18732.42 18333.39 1992/10/31 19532.78 18397.56 1992/11/30 20201.43 19024.91 1992/12/31 20845.95 19258.92 1993/01/31 21717.52 19420.70 1993/02/28 22127.67 19684.82 1993/03/31 23296.60 20100.17 1993/04/30 22742.26 19613.74 1993/05/31 22156.49 20139.39 1993/06/30 22392.85 20197.79 1993/07/31 23173.88 20117.00 1993/08/31 24355.69 20879.44 1993/09/30 24437.91 20718.67 1993/10/31 23728.82 21147.54 1993/11/30 22279.81 20946.64 1993/12/31 22550.41 21200.10 1994/01/31 22854.38 21920.90 1994/02/28 21852.39 21326.84 1994/03/31 20827.88 20396.99 1994/04/30 21053.05 20658.07 1994/05/31 22021.26 20996.87 1994/06/30 21897.42 20482.44 1994/07/31 22302.72 21154.27 1994/08/31 22910.67 22021.59 1994/09/30 22753.05 21482.06 1994/10/31 22471.60 21965.41 1994/11/30 21334.51 21165.43 1994/12/31 22471.60 21479.31 1995/01/31 23282.20 22036.27 1995/02/28 23991.47 22895.02 1995/03/31 24374.25 23570.66 1995/04/30 24599.44 24264.81 1995/05/31 25140.83 25234.68 1995/06/30 25930.36 25820.88 1995/07/31 26708.61 26677.10 1995/08/31 27486.86 26744.06 1995/09/30 28851.61 27872.66 1995/10/31 27983.13 27773.15 1995/11/30 29652.42 28992.39 1995/12/31 30293.88 29550.79 1996/01/31 31176.00 30556.70 1996/02/29 31071.54 30839.96 1996/03/31 30723.33 31136.95 1996/04/30 30342.25 31595.90 1996/05/31 30955.47 32410.76 1996/06/30 31509.72 32534.25 1996/07/31 30813.96 31096.88 1996/08/31 32111.14 31752.72 1996/09/30 33679.55 33539.76 1996/10/31 35448.43 34464.79 1996/11/30 37630.06 37069.98 1996/12/31 37475.49 36335.62 1997/01/31 39015.07 38605.87 1997/02/28 39858.18 38908.54 1997/03/31 37707.65 37309.79 1997/04/30 39933.05 39537.19 1997/05/31 42866.85 41944.21 1997/06/30 46005.64 43823.31 1997/07/31 49887.48 47310.33 1997/08/31 47312.40 44660.01 1997/09/30 50335.88 47106.04 1997/10/31 49003.50 45532.69 1997/11/30 49977.16 47640.40 1997/12/31 53391.67 48458.39 1998/01/31 52661.58 48994.34 1998/02/28 56920.47 52527.81 1998/03/31 60084.22 55217.76 1998/04/30 60447.29 55773.25 1998/05/31 59750.82 54814.51 1998/06/30 62391.58 57041.07 1998/07/31 61201.79 56433.58 1998/08/31 51517.00 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980918 161826 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Insurance Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $51,517 - a 415.17% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS UNUM Corp. 6.1 Providian Financial Corp. 5.2 Progressive Corp. 4.8 American International Group, Inc. 4.4 AFLAC, Inc. 4.4 Marsh & McLennan Companies, Inc. 4.2 Aon Corp. 3.7 Allstate Corp. 3.6 Torchmark Corp. 3.4 Enhance Financial Services Group Corp. 3.1 TOP INDUSTRIES AS OF AUGUST 31, 1998 PROPERTY-CASUALTY & REINSURANCE 43.6% LIFE INSURANCE 18.9% INSURANCE CARRIERS 11.8% INSURANCE BROKERS & SERVICES 7.2% NATIONAL COMMERCIAL BANKS 5.2% ALL OTHERS 13.3% ROW: 1, COL: 1, VALUE: 13.3 ROW: 1, COL: 2, VALUE: 5.2 ROW: 1, COL: 3, VALUE: 7.2 ROW: 1, COL: 4, VALUE: 11.8 ROW: 1, COL: 5, VALUE: 18.9 ROW: 1, COL: 6, VALUE: 43.6 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS INSURANCE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Thomas Allen) Thomas Allen, Portfolio Manager of Fidelity Select Insurance Portfolio Q. HOW DID THE FUND PERFORM, TOM? A. For the six-month period that ended on August 31, 1998, the fund had a total return of -9.48%. For the 12-month period, it returned 8.90%. For the same periods, the Standard & Poor's 500 Index returned - -8.10% and 8.10%, respectively. Beginning this period, the fund also compares itself to the Goldman Sachs Financial Services Index - an index of 271 stocks designed to measure the performance of companies in the financial services sector - which returned -15.98% and 3.35% over the same six- and 12-month periods, respectively. Q. WHAT FACTORS AFFECTED PERFORMANCE DURING THE PAST SIX MONTHS? A. I believe global economic problems negatively affected virtually all financial stocks after a long stretch in which they outperformed the market. Insurance company stocks, even those of companies with good underlying fundamentals and healthy revenue and earnings growth, were not impervious to this slump. Q. WHAT WERE YOUR PRINCIPAL STRATEGIES? A. In general, I emphasized those companies with relatively strong outlooks for organic - or internally generated - revenue and earnings growth as well as respectable balance sheets. I also looked for good companies that may be acquisition candidates as the industry continues to consolidate. Valuation always has been a consideration. This strategy led me to emphasize the insurance brokerage and bond insurance sectors. Q. HOW HAVE YOU APPROACHED THE TWO LARGEST SECTORS OF THE INDUSTRY - LIFE AND PROPERTY-CASUALTY? A. I have been selective in the property-casualty and life insurance sectors, although they are well represented in the fund. Life insurance companies have been very interesting. I tried to find companies with distinctive advantages, such as good distribution, growing product lines and an ability to accumulate assets. This is a segment that continues to experience solid earnings growth, although not spectacular growth. Most life insurance companies tend to have little or no exposure to the Asian crisis, and the group continues to consolidate. Vigorous price competition has hurt the property-casualty companies, particularly those selling commercial insurance. Price competition has had less of an effect on the personal line property-casualty companies, such as homeowners' and automobile insurance companies. Q. WHICH INVESTMENTS HELPED THE PERFORMANCE OF THE FUND? A. Life insurance companies contributed the most, with some insurance brokers helping. Life insurance companies that did well include SunAmerica, which is subject to a pending acquisition by AIG, and Hartford Life. The insurance brokerage sector has been under consolidation and Sedgwick Group, which is subject to a pending purchase by Marsh & McLennan Companies, helped performance. Brokers don't take the underwriting risks of property-casualty companies on their own balance sheets. As a result, they are partially insulated from the swings in the property-casualty insurance cycle. They also have good near-term prospects as a result of both organic - or internally generated growth - and recent acquisition-driven earnings growth. The fund sold its positions in SunAmerica and Sedgwick before the end of the period, taking profits. Another company that helped performance was Providian Financial, a credit card company that is a spin-off of Providian Insurance Company. Providian Financial had good revenue and earnings growth and a strong competitive position. Q. WHICH HOLDINGS HURT PERFORMANCE? A. Among the disappointments was MGIC Investment Corp., a high-quality company in home finance, which came under pressure as the outlook for growth in private mortgage insurance slowed. Another disappointment was Progressive, an auto insurer. A slowdown in growth in some types of automobile insurance premiums hurt Progressive's earnings growth. The investment in PAULA Financial also was disappointing. Shortly after an initial public offering, this company took a charge against earnings because it had insufficient reserves against losses. At the end of the period, PAULA still had an attractive franchise, but its earnings outlook had slowed near-term. Q. WHAT IS YOUR OUTLOOK? A. I am cautious with respect to commercial property-casualty because of the intense pricing pressure. The outlook is more favorable for the rest of the insurance group, including life insurance companies and insurance brokers. If we were to go into a recession, I believe the steady growth of certain sectors in the insurance sector could drive good relative performance. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 045 TRADING SYMBOL: FSPCX SIZE: as of August 31, 1998, more than $91 million MANAGER: Thomas Allen, since 1997; analyst, property, casualty and multi-line insurance, since 1995; joined Fidelity in 1995 INSURANCE PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 96.2% SHARES VALUE (NOTE 1) BANKS - 5.2% NATIONAL COMMERCIAL BANKS - 5.2% Providian Financial Corp. 72,700 $ 4,666,431 INSURANCE - 86.7% ACCIDENT & HEALTH INSURANCE - 3.2% Provident Companies, Inc. 26,000 936,000 UICI (a) 130,400 1,980,450 2,916,450 INSURANCE BROKERS & SERVICES - 7.2% Marsh & McLennan Companies, Inc. 77,700 3,768,450 Mutual Risk Management Ltd. 71,700 2,151,000 Poe & Associates, Inc. 14,900 560,613 6,480,063 INSURANCE CARRIERS - 11.8% AFLAC, Inc. 156,000 3,919,500 AMBAC, Inc. 47,000 2,217,813 Blanch E.W. Holdings, Inc. 27,600 984,975 MBIA, Inc. 19,900 1,116,888 MGIC Investment Corp. 56,400 2,340,600 10,579,776 LIFE INSURANCE - 18.9% Aon Corp. 52,700 3,297,044 Hartford Life, Inc. Class A 29,600 1,517,000 Nationwide Financial Services, Inc. Class A 30,200 1,349,563 Protective Life Corp. 43,200 1,333,800 Reliastar Financial Corp. 25,909 1,016,928 Torchmark Corp. 85,800 3,067,350 UNUM Corp. 123,900 5,451,600 17,033,285 MULTI-LINE INSURANCE - 1.8% CIGNA Corp. 27,000 1,571,063 FAI Insurance Ltd. Ord. 141,700 36,298 1,607,361 PROPERTY-CASUALTY & REINSURANCE - 43.6% ACE Ltd. 66,400 1,925,600 Allmerica Financial Corp. 6,373 379,990 Allstate Corp. 85,400 3,202,500 American International Group, Inc. 51,750 4,000,922 Capital Re Corp. 95,000 2,517,500 Cincinnati Financial Corp. 18,500 622,063 Enhance Financial Services Group Corp. 112,000 2,814,000 Executive Risk, Inc. 27,600 993,600 Fremont General Corp. 26,000 1,111,500 HCC Insurance Holdings, Inc. 129,600 2,421,900 HSB Group, Inc. 45,000 1,951,875 Hartford Financial Services Group, Inc. 34,200 1,530,450 Mercury General Corp. 18,600 680,063 NAC Re Corp. 5,000 235,938 Old Republic International Corp. 43,400 968,363 PAULA Financial 117,700 794,470 PMI Group, Inc. 21,000 1,162,875 Philadelphia Consolidated Holding Corp. (a) 57,500 1,106,875 Progressive Corp. 44,100 4,296,994 Reinsurance Group of America, Inc. 40,300 2,015,000 RenaissanceRe Holdings Ltd. 38,200 1,599,625 Travelers Property Casualty Corp. Class A 32,500 1,070,469 Terra Nova (Bermuda) Holdings Ltd. 64,198 1,765,445 39,168,017 SHARES VALUE (NOTE 1) SURETY INSURANCE - 0.2% FPIC Insurance Group, Inc. (a) 7,500 $ 198,750 TOTAL INSURANCE 77,983,702 MEDICAL FACILITIES MANAGEMENT - 3.5% HMOS & OUTPATIENT CARE - 3.5% PacifiCare Health Systems, Inc. Class A (a) 20,000 1,210,000 Wellpoint Health Networks, Inc. (a) 36,700 1,958,863 3,168,863 SECURITIES INDUSTRY - 0.8% SECURITY BROKERS & DEALERS - 0.8% Travelers Group, Inc. (The) 16,299 723,268 TOTAL COMMON STOCKS (Cost $86,273,235) 86,542,264 CASH EQUIVALENTS - 3.8% Taxable Central Cash Fund (b) (Cost $3,418,556) 3,418,556 3,418,556 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $89,691,791) $ 89,960,820 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $47,811,745 and $70,701,291, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $8,618 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $89,986,337. Net unrealized depreciation aggregated $25,517, of which $8,472,158 related to appreciated investment securities and $8,497,675 related to depreciated investment securities. INSURANCE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS Investment in $ 89,960,820 securities, at value (cost $89,691,791 ) - See accompanyin g schedule Receivable for 6,330,610 investments sold Receivable for 504,291 fund shares sold Dividends 116,577 receivable Interest 13,153 receivable Redemption fees 2,169 receivable Other 83 receivables TOTAL ASSETS 96,927,703 LIABILITIES Payable for $ 3,466,023 investments purchased Payable for 2,060,424 fund shares redeemed Accrued 54,116 management fee Other payables 82,478 and accrued expenses TOTAL LIABILITIES 5,663,041 NET ASSETS $ 91,264,662 Net Assets consist of: Paid in capital $ 81,108,646 Accumulated (5,064) net investment loss Accumulated 9,875,582 undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized 285,498 appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 91,264,662 2,570,444 shares outstanding NET ASSET $35.51 VALUE and redemption price per share ($91,264,66 2 (divided by) 2,570,444 shares) Maximum $36.61 offering price per share (100/97.00 of $35.51) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 679,059 INCOME Dividends Interest 144,549 TOTAL INCOME 823,608 EXPENSES Management $ 372,391 fee Transfer agent 353,639 fees Accounting fees 63,734 and expenses Non-interested 230 trustees' compensation Custodian fees 7,981 and expenses Registration fees 22,420 Audit 11,413 Legal 353 Reports to 7,715 shareholders Total expenses 839,876 before reductions Expense (11,204) 828,672 reductions NET INVESTMENT (5,064) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 10,276,705 securities Foreign 5,548 10,282,253 currency transactions Change in net unrealized appreciation (depreciation) on: Investment (19,600,652) securities Assets and 16,416 (19,584,236) liabilities in foreign currencies NET GAIN (LOSS) (9,301,983) NET INCREASE $ (9,307,047) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 273,758 INFORMATION Sales charges paid to FDC Sales charges $ 273,624 - - Retained by FDC Deferred sales $ 748 charges withheld by FDC Exchange fees $ 20,183 withheld by FSC Expense $ 10,799 reductions Directed brokerage arrangements Custodian 405 credits $ 11,204 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 Operations $ (5,064) $ 25,471 Net investment income (loss) Net realized 10,282,253 23,084,468 gain (loss) Change in net (19,584,236) 14,487,273 unrealized appreciation (depreciation) NET INCREASE (9,307,047) 37,597,212 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (9,543,630) (6,676,096) shareholders from net realized gain Share 47,027,917 244,332,955 transactions Net proceeds from sales of shares Reinvestment 9,450,009 6,593,993 of distributions Cost of shares (71,584,738) (199,288,742) redeemed NET INCREASE (15,106,812) 51,638,206 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption 71,551 224,405 fees TOTAL (33,885,938) 82,783,727 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 125,150,600 42,366,873 period End of period $ 91,264,662 $ 125,150,600 (including undistribute d net investment income (loss) of $(5,064) and $27,193, respectively) OTHER INFORMATION Shares Sold 1,089,793 6,761,043 Issued in 224,519 185,836 reinvestment of distributions Redeemed (1,716,771) (5,272,969) Net increase (402,459) 1,673,910 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA Net asset $ 42.10 $ 32.62 $ 26.77 $ 21.31 $ 19.41 $ 21.58 value, beginning of period Income from Investment Operation s Net - .01 .01 .06 .05 - investment income (loss) D Net (3.53) 12.93 7.21 6.15 1.78 (.24) realized and unrealized gain (loss) Total from (3.53) 12.94 7.22 6.21 1.83 (.24) investment operations Less Distributio ns From net - - (.03) (.07) - (.01) investment income From net (3.08) (3.54) (1.45) (.72) - (1.96) realized gain Total (3.08) (3.54) (1.48) (.79) - (1.97) distributio ns Redemption .02 .08 .11 .04 .07 .04 fees added to paid in capital Net asset $ 35.51 $ 42.10 $ 32.62 $ 26.77 $ 21.31 $ 19.41 value, end of period TOTAL (9.48)% 42.81% 28.28% 29.51% 9.79% (1.24)% RETURN B, C RATIOS AND SUPPLEME NTAL DATA Net assets, $ 91,265 $ 125,151 $ 42,367 $ 38,994 $ 21,838 $ 18,419 end of period (000 omitted) Ratio of 1.30% A 1.45% 1.82% 1.77% 2.36% 1.93% expenses to average net assets Ratio of 1.28% A, E 1.43% E 1.77% E 1.74% E 2.34% E 1.93% expenses to average net assets after expense reductions Ratio of net (.01)% A .02% .05% .26% .25% (.02)% investment income (loss) to average net assets Portfolio 80% A 157% 142% 164% 265% 101% turnover rate Average $ .0159 $ .0325 $ .0261 commissio n rate F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FO R FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
REGIONAL BANKS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT REGIONAL BANKS -17.64% 0.54% 148.14% 626.13% SELECT REGIONAL BANKS -20.19% -2.55% 140.62% 604.28% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS Financial Services -15.98% 3.35% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Financial Services Index - a market capitalization-weighted index of 271 stocks designed to measure the performance of companies in the financial services sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT REGIONAL BANKS 0.54% 19.93% 21.93% SELECT REGIONAL BANKS -2.55% 19.20% 21.56% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS Financial Services 3.35% n/a n/a AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Regional Banks S&P 500 00507 SP001 1988/08/31 9700.00 10000.00 1988/09/30 10071.53 10426.00 1988/10/31 10192.03 10715.84 1988/11/30 9940.99 10562.61 1988/12/31 10161.19 10747.45 1989/01/31 10806.35 11534.17 1989/02/28 10967.64 11246.96 1989/03/31 11870.85 11509.02 1989/04/30 12182.68 12106.34 1989/05/31 13118.15 12596.64 1989/06/30 12899.96 12524.84 1989/07/31 14048.07 13655.84 1989/08/31 14394.66 13923.49 1989/09/30 14513.81 13866.40 1989/10/31 13170.74 13544.70 1989/11/30 13149.08 13821.02 1989/12/31 12868.76 14152.72 1990/01/31 11709.31 13203.07 1990/02/28 12191.46 13373.39 1990/03/31 11892.99 13727.79 1990/04/30 11215.68 13384.59 1990/05/31 11996.30 14689.59 1990/06/30 11525.64 14589.70 1990/07/31 10825.37 14543.01 1990/08/31 9815.16 13228.33 1990/09/30 8621.27 12584.11 1990/10/31 8368.71 12529.99 1990/11/30 9482.25 13339.43 1990/12/31 10208.88 13711.60 1991/01/31 10886.36 14309.43 1991/02/28 11809.13 15332.55 1991/03/31 12474.93 15703.60 1991/04/30 13315.93 15741.29 1991/05/31 14180.30 16421.31 1991/06/30 13339.30 15669.22 1991/07/31 14448.96 16399.40 1991/08/31 15488.53 16788.07 1991/09/30 15184.84 16507.71 1991/10/31 15815.59 16728.91 1991/11/30 15091.39 16054.73 1991/12/31 16925.61 17891.40 1992/01/31 17984.23 17558.62 1992/02/29 19436.75 17786.88 1992/03/31 19165.94 17440.03 1992/04/30 20286.11 17952.77 1992/05/31 21147.77 18040.74 1992/06/30 21358.79 17771.93 1992/07/31 21383.57 18498.80 1992/08/31 20243.77 18119.58 1992/09/30 21185.34 18333.39 1992/10/31 22089.74 18397.56 1992/11/30 23898.55 19024.91 1992/12/31 25138.32 19258.92 1993/01/31 26185.75 19420.70 1993/02/28 27000.42 19684.82 1993/03/31 28151.30 20100.17 1993/04/30 26702.06 19613.74 1993/05/31 26441.04 20139.39 1993/06/30 27915.79 20197.79 1993/07/31 27994.09 20117.00 1993/08/31 28385.62 20879.44 1993/09/30 29364.43 20718.67 1993/10/31 27785.28 21147.54 1993/11/30 26910.87 20946.64 1993/12/31 27946.90 21200.10 1994/01/31 29576.74 21920.90 1994/02/28 28745.84 21326.84 1994/03/31 28266.48 20396.99 1994/04/30 29764.34 20658.07 1994/05/31 31251.74 20996.87 1994/06/30 30475.70 20482.44 1994/07/31 31284.08 21154.27 1994/08/31 32092.45 22021.59 1994/09/30 30184.69 21482.06 1994/10/31 30055.35 21965.41 1994/11/30 28115.25 21165.43 1994/12/31 28007.88 21479.31 1995/01/31 29418.60 22036.27 1995/02/28 30984.15 22895.02 1995/03/31 31242.21 23570.66 1995/04/30 32016.38 24264.81 1995/05/31 34115.25 25234.68 1995/06/30 34545.35 25820.88 1995/07/31 35887.25 26677.10 1995/08/31 37229.15 26744.06 1995/09/30 38915.13 27872.66 1995/10/31 38725.89 27773.15 1995/11/30 40945.19 28992.39 1995/12/31 41106.53 29550.79 1996/01/31 42450.47 30556.70 1996/02/29 43668.97 30839.96 1996/03/31 44959.15 31136.95 1996/04/30 44575.21 31595.90 1996/05/31 45328.86 32410.76 1996/06/30 44979.61 32534.25 1996/07/31 45053.13 31096.88 1996/08/31 47332.44 31752.72 1996/09/30 49666.90 33539.76 1996/10/31 52846.90 34464.79 1996/11/30 57313.62 37069.98 1996/12/31 55858.25 36335.62 1997/01/31 59977.53 38605.87 1997/02/28 62590.23 38908.54 1997/03/31 58375.59 37309.79 1997/04/30 61541.42 39537.19 1997/05/31 63708.50 41944.21 1997/06/30 67333.10 43823.31 1997/07/31 74582.29 47310.33 1997/08/31 70056.34 44660.01 1997/09/30 75368.58 47106.04 1997/10/31 74256.27 45532.69 1997/11/30 77669.91 47640.40 1997/12/31 81305.82 48458.39 1998/01/31 78750.78 48994.34 1998/02/28 85524.62 52527.81 1998/03/31 90258.38 55217.76 1998/04/30 91778.31 55773.25 1998/05/31 89268.52 54814.51 1998/06/30 91597.61 57041.07 1998/07/31 91738.16 56433.58 1998/08/31 70427.49 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980914 085643 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Regional Banks Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $70,428 - a 604.28% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS U.S. Bancorp 7.4 BankAmerica Corp. 7.3 Bank of New York Co., Inc. 6.1 Fleet Financial Group, Inc. 5.9 Wells Fargo & Co. 5.7 National City Corp. 5.6 American Express Co. 4.9 Banc One Corp. 4.8 First Chicago NBD Corp. 4.7 Comerica, Inc. 4.3 TOP REGIONS AS OF AUGUST 31, 1998 MIDWEST 24.2% WEST 23.9% NORTHEAST 10.5% SOUTHEAST 7.6% INTERNATIONAL 3.3% ALL OTHERS 30.5% ROW: 1, COL: 1, VALUE: 30.5 ROW: 1, COL: 2, VALUE: 3.3 ROW: 1, COL: 3, VALUE: 7.6 ROW: 1, COL: 4, VALUE: 10.5 ROW: 1, COL: 5, VALUE: 23.9 ROW: 1, COL: 6, VALUE: 24.2 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS REGIONAL BANKS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Christine Schaulat) Christine Schaulat, Portfolio Manager of Fidelity Select Regional Banks Portfolio Q. HOW DID THE FUND PERFORM, CHRIS? A. For the six-month period that ended on August 31, 1998, the fund had a total return of -17.64%. For the year, it returned 0.54%. For the same periods, the Standard & Poor's 500 Index returned -8.10% and 8.10%, respectively. Beginning this period, the fund also compares itself to the Goldman Sachs Financial Services Index - an index of 271 stocks designed to measure the performance of companies in the financial services sector - which returned -15.98% and 3.35% over the same six- and 12-month periods, respectively. Q. PRIOR TO THIS PERIOD, BANK STOCKS HAD ENJOYED A NICE RUN OF SOLID PERFORMANCE. WHY THE SUDDEN TURNAROUND? A. To your first point, bank stocks indeed performed well - for the past three years in fact. Over the last six months, however, stocks in general did poorly, particularly in August. The continued weakness of emerging markets and fears of slowing global economic growth contributed to a major correction in the stock market. Bank stocks in particular were hit hard, due to fears of an economic slowdown, which would curtail loan growth and put pressure on credit quality. There were also concerns that consolidation - the merger-and-acquisition activity - in the banking sector might be slowing. Q. LET'S TALK ABOUT CONSOLIDATION FOR A BIT. WHAT DO YOU THINK LED TO THE CONCERNS OF A SLOWDOWN IN MERGER ACTIVITY? A. Consolidation had been a key contributor to the sector's strong performance over the past few years. Some of the primary forces driving bank mergers are the branch closing and technology cost savings generated by consolidation. But I think the increasing focus on the Year 2000 computer problem - the potential difficulty of computer systems in adapting to calendar dates beginning on January 1, 2000 - prompted the market to anticipate a slowdown in merger activity. Once the fears of technical glitches are overcome and banks are more comfortable with their preparedness, I think you'll see an increase in consolidation activity once again. Q. WHAT SPECIFIC HOLDINGS HELPED THE FUND DURING THE PERIOD? WHICH DIDN'T PERFORM AS YOU'D HOPED? A. My emphasis on the larger regional banks, as opposed to the small- and mid-sized banks, did help somewhat on a relative basis. When I looked at such factors as price-to-earnings (P/E) ratios, I emphasized the larger banks because they tended to be trading at a discount compared to their smaller brethren. Some larger banks that helped performance were Mellon Bank and BankBoston, the latter of which I have since liquidated from the fund given its exposure to emerging-market risk. On the other hand, I did own some small- and mid-cap bank stocks, and they were very hard hit during the correction in August. Also, BankAmerica, the fund's second-largest holding, suffered given its exposure to emerging markets and trading activities. Banc One took a hit in the period as well after posting disappointing earnings in the second quarter. Q. WHAT IS YOUR OUTLOOK FOR THE FUND, CHRIS? A. Toward the end of the period, it appeared the Federal Reserve Board was considering a reduction in interest rates. A decline in interest rates would be positive for bank stocks, as the sector tends to perform well in a declining-rate environment. However, the weakness in the stock market of late has translated into less robust market-sensitive revenues for banks. Market-sensitive revenues include trading, asset management, brokerage, and investment banking revenues, as well as venture capital and securities gains. These revenues and gains are negatively impacted by less favorable markets. Should the current lackluster equity market continue, those banks with a high proportion of market-sensitive revenues will post slower earnings growth. I remain cautious on this front; therefore, to minimize risk to the fund, I have reduced its exposure to those banks with a high degree of market-sensitive revenue. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 507 TRADING SYMBOL: FSRBX SIZE: as of August 31, 1998, more than $979 million MANAGER: Christine Schaulat, since January 1998; analyst, regional banks securities, since 1997; joined Fidelity in 1997 REGIONAL BANKS PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 97.0% SHARES VALUE (NOTE 1) BANKS - 73.6% INTERNATIONAL - 3.3% Allied Irish Banks PLC sponsored ADR 88,900 $ 6,889,750 Bank of Nova Scotia 366,000 6,020,274 Canadian Imperial Bank of Commerce 399,700 7,504,727 National Bank of Canada 300,000 3,882,690 Royal Bank of Canada 188,600 7,112,330 31,409,771 MID-ATLANTIC - 0.7% Crestar Finanical Corp. 130,466 6,588,533 MIDWEST - 24.2% Banc One Corp. 1,224,160 46,518,080 Comerica, Inc. 803,850 42,001,163 Marshall & Ilsley Corp. 373,000 16,412,000 National City Corp. 927,809 54,508,779 Northern Trust Corp. 193,500 10,787,625 Norwest Corp. 1,381,400 41,096,650 Star Banc Corp. 423,300 23,228,588 234,552,885 MONEY CENTER - 2.2% Citicorp 198,700 21,484,438 MULTI-REGIONAL - 1.2% M&T Bank Corp. 27,000 11,070,000 NORTHEAST - 10.5% Bank of New York Co., Inc. 2,429,696 58,768,272 Mellon Bank Corp. 251,000 13,052,000 North Fork Bancorp, Inc. 742,800 14,113,200 State Street Corp. 297,800 15,504,213 101,437,685 SOUTHEAST - 7.6% AmSouth Bancorp. 345,000 11,859,375 Compass Bancshares, Inc. 150,000 4,950,000 First Tennessee National Corp. 379,400 9,034,463 NationsBank Corp. 309,936 17,666,352 SunTrust Banks, Inc. 215,900 12,090,400 Synovus Finanical Corp. 197,175 3,586,120 Union Planters Corp. 66,200 2,664,550 Wachovia Corp. 165,000 12,096,563 73,947,823 WEST - 23.9% BankAmerica Corp. 1,109,200 71,058,125 First Security Corp. 230,375 3,570,813 U.S. Bancorp 2,097,696 71,583,872 UnionBanCal Corp. 16,900 1,265,388 Wells Fargo & Co. 197,166 55,576,166 SHARES VALUE (NOTE 1) Westamerica Bancorp. 495,000 $ 12,003,750 Zions Bancorp 427,300 16,397,638 231,455,752 TOTAL BANKS 711,946,887 CREDIT & OTHER FINANCE - 21.4% FINANCIAL SERVICES - 9.6% American Express Co. 611,400 47,689,200 First Chicago NBD Corp. 719,300 45,585,638 93,274,838 OFFICES OF BANK HOLDING COMPANIES - 5.9% Fleet Financial Group, Inc. 865,467 56,742,180 PERSONAL CREDIT INSTITUTIONS - 5.9% Associates First Capital Corp. 313,700 18,547,513 Household International, Inc. 529,800 19,569,488 MBNA Corp. 826,000 19,411,000 57,528,001 TOTAL CREDIT & OTHER FINANCE 207,545,019 SAVINGS & LOANS - 2.0% SAVINGS INSTITUTIONS, FEDERALLY CHARTERED - 2.0% Washington Mutual, Inc. 600,900 19,228,800 TOTAL COMMON STOCKS 938,720,706 (Cost $827,384,633)
CASH EQUIVALENTS - 3.0% Taxable Central Cash Fund (a) 29,322,531 29,322,531 (Cost 29,322,531) TOTAL INVESTMENT IN SECURITIES - 100% $ 968,043,237 (Cost $856,707,164)
LEGEND (a) At the period end, the seven-day yield on the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $150,682,253 and $238,538,340, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $9,622 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At period end, there were no loans outstanding (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $857,048,306. Net unrealized appreciation aggregated $110,994,931, of which $185,875,011 related to appreciated investment securities and $74,880,080 related to depreciated investment securities. REGIONAL BANKS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 968,043,237 SECURITIES, AT VALUE (COST $856,707,16 4) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 34,239,994 INVESTMENTS SOLD RECEIVABLE FOR 1,664,879 FUND SHARES SOLD DIVIDENDS 1,371,752 RECEIVABLE INTEREST 265,589 RECEIVABLE REDEMPTION FEES 26,865 RECEIVABLE TOTAL ASSETS 1,005,612,316 LIABILITIES PAYABLE FOR $ 24,994,859 FUND SHARES REDEEMED ACCRUED 606,902 MANAGEMENT FEE OTHER PAYABLES 637,247 AND ACCRUED EXPENSES TOTAL LIABILITIES 26,239,008 NET ASSETS $ 979,373,308 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 777,996,759 UNDISTRIBUTED 5,840,481 NET INVESTMENT INCOME ACCUMULATED 84,199,995 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 111,336,073 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 979,373,308 27,919,175 SHARES OUTSTANDING NET ASSET $35.08 VALUE AND REDEMPTION PRICE PER SHARE ($979,373,3 08 (DIVIDED BY) 27,919,175 SHARES) MAXIMUM $36.16 OFFERING PRICE PER SHARE (100/97.00 OF $35.08) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 11,320,881 INCOME DIVIDENDS INTEREST 2,624,126 (INCLUDING INCOME ON SECURITIES LOANED OF $8,290) TOTAL INCOME 13,945,007 EXPENSES MANAGEMENT $ 4,110,439 FEE TRANSFER AGENT 3,319,661 FEES ACCOUNTING AND 401,811 SECURITY LENDING FEES NON-INTERESTED 2,643 TRUSTEES' COMPENSATION CUSTODIAN FEES 16,494 AND EXPENSES REGISTRATION FEES 42,323 AUDIT 31,304 LEGAL 3,837 REPORTS TO 143,476 SHAREHOLDERS TOTAL EXPENSES 8,071,988 BEFORE REDUCTIONS EXPENSE (49,366) 8,022,622 REDUCTIONS NET INVESTMENT 5,922,385 INCOME REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 84,715,327 SECURITIES FOREIGN (6,275) 84,709,052 CURRENCY TRANSACTIONS CHANGE IN NET (305,498,172) UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) (220,789,120) NET INCREASE $ (214,866,735) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 2,648,500 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 2,638,833 - - RETAINED BY FDC DEFERRED SALES $ 3,941 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 98,588 WITHHELD BY FSC EXPENSE $ 46,072 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 356 CREDITS TRANSFER 2,938 AGENT CREDITS $ 49,366 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ 5,922,385 $ 11,124,320 NET INVESTMENT INCOME NET REALIZED 84,709,052 58,722,862 GAIN (LOSS) CHANGE IN NET (305,498,172) 242,816,882 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (214,866,735) 312,664,064 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (2,514,227) (7,980,022) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (17,285,215) (35,012,104) REALIZED GAIN TOTAL (19,799,442) (42,992,126) DISTRIBUTIONS SHARE 273,875,455 1,093,335,837 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 19,449,078 42,239,518 OF DISTRIBUTIONS COST OF SHARES (418,569,597) (905,908,084) REDEEMED NET INCREASE (125,245,064) 229,667,271 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 388,914 1,604,750 FEES TOTAL (359,522,327) 500,943,959 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 1,338,895,635 837,951,676 PERIOD END OF PERIOD $ 979,373,308 $ 1,338,895,635 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $5,840,48 1 AND $3,805,98 2, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 6,010,126 29,339,423 ISSUED IN 423,729 1,067,874 REINVESTMENT OF DISTRIBUTIONS REDEEMED (9,523,135) (24,927,202) NET INCREASE (3,089,280) 5,480,095 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET $ 43.18 $ 32.82 $ 24.37 $ 18.01 $ 17.99 $ 20.88 VALUE, BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATION S NET .19 .40 .37 .52 .37 .19 INVESTMENT INCOME D NET (7.67) 11.41 9.70 6.78 .87 .93 REALIZED AND UNREALIZED GAIN (LOSS) TOTAL FROM (7.48) 11.81 10.07 7.30 1.24 1.12 INVESTMENT OPERATIONS LESS DISTRIBUTIO NS FROM NET (.08) (.28) (.27) (.25) (.29) (.15) INVESTMENT INCOME FROM NET (.55) (1.23) (1.40) (.72) (.98) (3.92) REALIZED GAIN TOTAL (.63) (1.51) (1.67) (.97) (1.27) (4.07) DISTRIBUTIO NS REDEMPTION .01 .06 .05 .03 .05 .06 FEES ADDED TO PAID IN CAPITAL NET ASSET $ 35.08 $ 43.18 $ 32.82 $ 24.37 $ 18.01 $ 17.99 VALUE, END OF PERIOD TOTAL (17.64)% 36.64% 43.33% 40.94% 7.79% 6.46% RETURN B, C RATIOS AND SUPPLEME NTAL DATA NET ASSETS, $ 979,373 $ 1,338,896 $ 837,952 $ 315,178 $ 164,603 $ 97,429 END OF PERIOD (000 OMITTED) RATIO OF 1.13% A 1.25% 1.46% 1.41% 1.58% 1.62% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.13% A 1.24% E 1.45% E 1.40% E 1.56% E 1.60% E EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET .83% A 1.07% 1.36% 2.42% 1.99% .88% INVESTMENT INCOME TO AVERAGE NET ASSETS PORTFOLIO 24% A 25% 43% 103% 106% 74% TURNOVER RATE AVERAGE $ .0493 $ .0400 $ .0384 COMMISSIO N RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
BIOTECHNOLOGY PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT BIOTECHNOLOGY -16.96% -4.03% 48.02% 386.14% SELECT BIOTECHNOLOGY -19.52% -6.98% 43.51% 371.48% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS HEALTH CARE -3.02% 20.24% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Health Care Index - a market capitalization-weighted index of 93 stocks designed to measure the performance of companies in the health care sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT BIOTECHNOLOGY -4.03% 8.16% 17.13% SELECT BIOTECHNOLOGY -6.98% 7.49% 16.77% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS HEALTH CARE 20.24% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Biotechnology S&P 500 00042 SP001 1988/08/31 9700.00 10000.00 1988/09/30 9900.69 10426.00 1988/10/31 9795.57 10715.84 1988/11/30 9336.85 10562.61 1988/12/31 9652.22 10747.45 1989/01/31 10321.18 11534.17 1989/02/28 10244.73 11246.96 1989/03/31 10999.70 11509.02 1989/04/30 11372.41 12106.34 1989/05/31 11888.47 12596.64 1989/06/30 11582.66 12524.84 1989/07/31 12653.00 13655.84 1989/08/31 13130.84 13923.49 1989/09/30 13685.12 13866.40 1989/10/31 13732.91 13544.70 1989/11/30 14162.96 13821.02 1989/12/31 13892.67 14152.72 1990/01/31 12853.15 13203.07 1990/02/28 14067.55 13373.39 1990/03/31 14660.17 13727.79 1990/04/30 14844.76 13384.59 1990/05/31 16933.52 14689.59 1990/06/30 18116.04 14589.70 1990/07/31 18165.16 14543.01 1990/08/31 17605.17 13228.33 1990/09/30 17212.20 12584.11 1990/10/31 17359.57 12529.99 1990/11/30 19461.97 13339.43 1990/12/31 20053.76 13711.60 1991/01/31 22356.82 14309.43 1991/02/28 25524.79 15332.55 1991/03/31 28159.74 15703.60 1991/04/30 26932.78 15741.29 1991/05/31 28642.48 16421.31 1991/06/30 27121.74 15669.22 1991/07/31 29563.33 16399.40 1991/08/31 31634.98 16788.07 1991/09/30 33273.28 16507.71 1991/10/31 36549.87 16728.91 1991/11/30 34108.28 16054.73 1991/12/31 39916.03 17891.40 1992/01/31 39115.96 17558.62 1992/02/29 36112.94 17786.88 1992/03/31 33372.96 17440.03 1992/04/30 30260.34 17952.77 1992/05/31 32430.41 18040.74 1992/06/30 31861.19 17771.93 1992/07/31 33526.75 18498.80 1992/08/31 31429.83 18119.58 1992/09/30 31321.98 18333.39 1992/10/31 32855.73 18397.56 1992/11/30 36090.98 19024.91 1992/12/31 35787.43 19258.92 1993/01/31 33948.30 19420.70 1993/02/28 28468.70 19684.82 1993/03/31 28896.99 20100.17 1993/04/30 29640.20 19613.74 1993/05/31 31554.91 20139.39 1993/06/30 31743.86 20197.79 1993/07/31 30698.33 20117.00 1993/08/31 31857.23 20879.44 1993/09/30 33167.30 20718.67 1993/10/31 35636.27 21147.54 1993/11/30 35359.14 20946.64 1993/12/31 36039.36 21200.10 1994/01/31 37273.85 21920.90 1994/02/28 34779.69 21326.84 1994/03/31 31265.19 20396.99 1994/04/30 30698.33 20658.07 1994/05/31 30181.86 20996.87 1994/06/30 28985.17 20482.44 1994/07/31 29060.75 21154.27 1994/08/31 31781.65 22021.59 1994/09/30 31680.88 21482.06 1994/10/31 30597.56 21965.41 1994/11/30 30030.70 21165.43 1994/12/31 29489.04 21479.31 1995/01/31 30811.70 22036.27 1995/02/28 31869.83 22895.02 1995/03/31 32386.30 23570.66 1995/04/30 33394.04 24264.81 1995/05/31 33696.36 25234.68 1995/06/30 34918.25 25820.88 1995/07/31 36480.25 26677.10 1995/08/31 37941.47 26744.06 1995/09/30 39642.04 27872.66 1995/10/31 39327.12 27773.15 1995/11/30 40637.18 28992.39 1995/12/31 43968.22 29550.79 1996/01/31 46568.69 30556.70 1996/02/29 46202.61 30839.96 1996/03/31 45470.43 31136.95 1996/04/30 46452.18 31595.90 1996/05/31 46994.27 32410.76 1996/06/30 44154.74 32534.25 1996/07/31 40915.09 31096.88 1996/08/31 42799.51 31752.72 1996/09/30 45303.46 33539.76 1996/10/31 43728.81 34464.79 1996/11/30 43986.95 37069.98 1996/12/31 46434.19 36335.62 1997/01/31 48562.37 38605.87 1997/02/28 48905.16 38908.54 1997/03/31 43863.24 37309.79 1997/04/30 41939.43 39537.19 1997/05/31 47271.08 41944.21 1997/06/30 48509.31 43823.31 1997/07/31 48800.66 47310.33 1997/08/31 49135.71 44660.01 1997/09/30 55603.61 47106.04 1997/10/31 53578.75 45532.69 1997/11/30 52631.87 47640.40 1997/12/31 53526.27 48458.39 1998/01/31 53970.41 48994.34 1998/02/28 56783.25 52527.81 1998/03/31 59102.61 55217.76 1998/04/30 56757.43 55773.25 1998/05/31 54819.54 54814.51 1998/06/30 54871.92 57041.07 1998/07/31 55762.30 56433.58 1998/08/31 47147.78 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980903 134702 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Biotechnology Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $47,148 - a 371.48% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS GENENTECH, INC. SPECIAL 14.7 AMGEN, INC. 8.4 MERCK & CO., INC. 7.1 FOREST LABORATORIES, INC. 5.3 SCHERING-PLOUGH CORP. 5.2 BIOGEN, INC. 4.9 GENZYME CORP. 4.6 CHIRON CORP. 3.8 LILLY (ELI) & CO. 3.5 SEPRACOR, INC. 3.2 TOP INDUSTRIES AS OF AUGUST 31, 1998 BIOTECHNOLOGY 50.5% DRUGS 26.2% PHARMACEUTICAL PREPARATIONS 5.9% MEDICAL TECHNOLOGY 2.1% LAB ANALYTICAL INSTRUMENTS 1.7% ALL OTHERS 13.6% ROW: 1, COL: 1, VALUE: 13.6 ROW: 1, COL: 2, VALUE: 1.7 ROW: 1, COL: 3, VALUE: 2.1 ROW: 1, COL: 4, VALUE: 5.9 ROW: 1, COL: 5, VALUE: 26.2 ROW: 1, COL: 6, VALUE: 50.05 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS BIOTECHNOLOGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Rajiv Kaul) NOTE TO SHAREHOLDERS: Rajiv Kaul became Portfolio Manager of Fidelity Select Biotechnology Portfolio on June 1, 1998. Q. HOW DID THE FUND PERFORM, RAJIV? A. For the six-month period that ended August 31, 1998, the fund returned -16.96%, underperforming the Standard & Poor's 500 Index, which returned -8.10%. For the 12-month period that ended August 31, 1998, the fund returned -4.03%. During the same period, the S&P 500 returned 8.10%. Beginning this period, the fund also compares itself to the Goldman Sachs Health Care Index - an index of 93 stocks designed to measure the performance of companies in the health care sector - which returned -3.02% and 20.24% over the same six- and 12-month periods, respectively. Q. WHY DID THE FUND UNDERPERFORM THE INDEXES OVER THE PAST SIX-MONTH PERIOD? A. The environment for investing in biotechnology stocks over the past six months has been difficult, with stock prices for this industry declining about 20% during the period. Many new product launches were big disappointments. With the long delays and enormous costs associated with product development, earnings estimates have been cut for many companies and stock prices have not performed well for the entire sector. In addition, it is important to point out that given the fund's focus on biotechnology companies, it cannot invest in the pharmaceutical stocks to the same extent that the Goldman Sachs Health Care index does; these stocks experienced strong rallies and investor support during the period. Q. IN SUCH A DIFFICULT ENVIRONMENT, WERE THERE ANY FACTORS OR STRATEGIES THAT HELPED MINIMIZE RISKS TO THE FUND? A. Given the industry's downturn, I think the fund's return over the period was respectable and can be attributed primarily to stock selection. To minimize risks and help performance, I reduced the fund's exposure to smaller biotechnology companies and moved fund assets to larger companies with stable revenues and earnings. The larger companies have a better pipeline of new and existing products and they look undervalued. I also focused on companies with minimal or zero exposure to Asia. A third strategy I employed is to spend much of my time visiting companies and talking with management, doctors and competitors about products. By visiting as many companies as I can, I get a better understanding of a company's competitive outlook, and it helps me find those companies that may launch successful new products. Q. WHAT STOCKS PERFORMED WELL FOR THE FUND? A. Two of the fund's top-10 holdings, Amgen and Biogen, did well. Sales and revenues for both of these companies improved, which increased their stock prices. Amgen's lead product, Epogen - a drug used to promote red blood cell growth - has started to produce better-than-expected sales results because of positive changes for reimbursement of Epogen by the Health Care Financing Administration. Q. WERE THERE ANY INVESTMENT DECISIONS THAT HURT FUND PERFORMANCE OVER THE PERIOD? A. Aviron, one of the fund's larger holdings, has been a disappointment. Investor concerns about whether Aviron's lead product - - FluMist - a vaccine for influenza - will be accepted by the Food and Drug Administration hurt the stock price. The fund also had some exposure to long-term care nursing homes such as Beverly Enterprises; its stock price suffered and detracted from fund performance due to delays with Medicare payments. Q. SINCE TAKING OVER THE FUND IN JUNE, YOU'VE MADE SOME SIGNIFICANT CHANGES TO THE TOP HOLDINGS. WHY? A. In this market environment of heightened investor uncertainty, I increased the fund's holdings in large-cap biotechnology companies with stronger earnings and inexpensive valuations, and reduced the fund's holdings in smaller biotechnology companies with no earnings that are in the early stages of product development. In addition, I focused on pharmaceutical companies that have solid earnings outlooks and strong product demand. Q. WHAT'S YOUR OUTLOOK FOR THE INDUSTRY OVER THE NEXT SIX MONTHS, RAJIV? A. I think the sector may start to perform better for a number of reasons. First, biotech companies are starting to introduce more new products than ever before. Second, the stocks have been underperforming for a while, so they look very cheap. Third, many biotech companies have limited exposure to Asia and Eastern European financial market problems. Finally, the demographics are favorable, with baby boomers aging and starting to provide more demand for biotechnology and health care products. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: DECEMBER 16, 1985 FUND NUMBER: 042 TRADING SYMBOL: FBIOX SIZE: AS OF AUGUST 31, 1998, MORE THAN $420 MILLION MANAGER: RAJIV KAUL, SINCE JUNE 1998; EQUITY RESEARCH ASSOCIATE, HEALTH CARE INDUSTRY, 1996-1998; JOINED FIDELITY IN 1996 BIOTECHNOLOGY PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 89.4% SHARES VALUE (NOTE 1) DRUGS & PHARMACEUTICALS - 82.9% BIOTECHNOLOGY - 50.5% Alkermes, Inc. (a)(c) 1,083,200 $ 11,847,500 Amgen, Inc. (a) 587,600 35,770,150 Ariad Pharmaceuticals, Inc. (a) 130,300 301,319 Aviron (a) 550,000 11,928,125 Biogen, Inc. (a) 445,800 20,618,250 CV Therapeutics, Inc. (a)(c) 804,500 5,329,813 Cell Genesys, Inc. (a) 108,700 455,181 Chiron Corp. (a) 1,120,900 16,112,938 Creative Biomolecules, Inc. (a) 325,500 895,125 Cytyc Corp. (a) 129,000 1,032,000 Genentech, Inc. special (a) 946,600 62,475,600 Genzyme Corp. (a) 727,100 19,631,700 Hyseq, Inc. 112,400 590,100 LeukoSite, Inc. (a) 455,000 3,355,625 Magainin Pharmaceuticals, Inc. (a) 522,400 1,208,050 Medimmune, Inc. (a) 173,700 8,381,025 Molecular Biosystems, Inc. (a) 196,200 858,375 Sepracor, Inc. (a) 288,900 13,758,863 214,549,739 COMMERCIAL LABORATORY RESEARCH - 0.3% Scios, Inc. (a) 225,000 1,068,750 DRUGS - 26.2% Agouron Pharmaceuticals, Inc. (a) 97,500 1,876,875 Allergan, Inc. 20,000 945,000 Alliance Pharmaceutical Corp. (a) 737,500 2,535,156 Alteon, Inc. (a) 320,000 800,000 Anesta Corp. (a) 403,700 4,945,325 Barr Laboratories, Inc. (a) 2,100 53,813 Elan Corp. PLC ADR (a) 105,000 6,168,750 Forest Laboratories, Inc. (a) 684,800 22,427,200 Lilly (Eli) & Co. 225,000 14,737,500 Merck & Co., Inc. 260,800 30,236,500 Roberts Pharmaceutical Corp. (a) 16,700 285,988 Schering-Plough Corp. 252,800 22,151,600 Sequus Pharmaceuticals, Inc. (a) 64,000 392,000 Warner-Lambert Co. 60,000 3,915,000 111,470,707 PHARMACEUTICAL PREPARATIONS - 5.9% Allergan Specialty Therapeutics, Inc. Class A 151,500 1,467,654 Avant Immunotherapeutics, Inc. (a) 359,300 651,231 AXYS Pharmaceuticals, Inc. (a) 783,900 3,111,103 Cellegy Pharmaceuticals, Inc. (a)(c) 603,600 1,886,250 Inhale Therapeutic Systems (a) 119,700 2,603,475 Jones Pharma, Inc. 10,000 208,750 NPS Pharmaceuticals, Inc. (a) 395,000 2,567,500 NeXstar Pharmaceuticals, Inc. (a) 246,100 1,638,103 Theratech, Inc. (a) 72,000 432,000 ViroPharma, Inc. (a)(c) 599,100 10,334,475 24,900,541 TOTAL DRUGS & PHARMACEUTICALS 351,989,737 ELECTRICAL EQUIPMENT - 0.0% TV & RADIO COMMUNICATION EQUIPMENT - 0.0% American Satellite Network (ASN) warrants 6/30/99 (a) 5,000 0 ELECTRONIC INSTRUMENTS - 1.7% LAB ANALYTICAL INSTRUMENTS - 1.7% Waters Corp. (a) 137,900 7,429,363 SHARES VALUE (NOTE 1) MEDICAL EQUIPMENT & SUPPLIES - 4.1% DRUG DISTRIBUTORS - WHOLESALE - 0.8% Allegiance Corp. 123,400 $ 3,486,050 MEDICAL SUPPLIES & APPLIANCES - 0.8% Cygnus, Inc. (a) 114,800 373,100 Resmed, Inc. (a) 14,800 547,600 Sofamor/Danek Group, Inc. (a) 30,000 2,503,125 3,423,825 MEDICAL TECHNOLOGY - 2.1% Ballard Medical Products 334,300 6,205,444 Biomet, Inc. 45,000 1,209,375 Stryker Corp. 50,000 1,606,250 9,021,069 OPHTHALMIC GOODS - 0.4% Wesley Jessen Visioncare, Inc. (a) 100,000 1,700,000 TOTAL MEDICAL EQUIPMENT & SUPPLIES 17,630,944 MEDICAL FACILITIES MANAGEMENT - 0.7% MEDICAL SERVICES - 0.7% Carematrix Corp. (a) 170,500 2,941,125 TOTAL COMMON STOCKS (Cost $408,137,806) 379,991,169 CASH EQUIVALENTS - 10.6% Taxable Central Cash Fund (b) (Cost $44,849,457) 44,849,457 44,849,457 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $452,987,263) $ 424,840,626 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Affiliated company (see Note 10 of Notes to Financial Statements). OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $146,694,749 and $205,376,755, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $6,774 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At period end, the value of securities loaned and the value of the collateral amounted to $4,857,675 and $5,796,000, respectively (see Note 6 of Notes to Financial Statements). Transactions during the period with companies which are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Alkermes, Inc. $ - $ - $ - $11,847,500 CV Therapeutics, Inc. 791,700 - - 5,329,813 Cellegy Pharmaceuticals , Inc. 315,038 - - 1,886,250 Magainin Pharmaceuticals, Inc. 249,257 2,714,380 - - ViroPharma, Inc. - - - 10,334,475 TOTALS $ 1,355,995 $ 2,714,380 $ - $29,398,038 INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $453,051,506 Net unrealized depreciation aggregated $28,210,880, of which $44,187,605 related to appreciated investment securities and $72,398,485 related to depreciated investment securities. BIOTECHNOLOGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 424,840,626 SECURITIES, AT VALUE (COST $452,987,26 3) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 3,453,759 INVESTMENTS SOLD RECEIVABLE FOR 515,352 FUND SHARES SOLD DIVIDENDS 47,600 RECEIVABLE INTEREST 178,086 RECEIVABLE REDEMPTION FEES 1,947 RECEIVABLE OTHER 53,396 RECEIVABLES TOTAL ASSETS 429,090,766 LIABILITIES PAYABLE FOR $ 2,285,644 FUND SHARES REDEEMED ACCRUED 236,564 MANAGEMENT FEE OTHER PAYABLES 380,594 AND ACCRUED EXPENSES COLLATERAL ON 5,796,000 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 8,698,802 NET ASSETS $ 420,391,964 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 475,264,733 ACCUMULATED (2,287,048) NET INVESTMENT INCOME LOSS ACCUMULATED (24,439,084) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (28,146,637) APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 420,391,964 15,565,787 SHARES OUTSTANDING NET ASSET $27.01 VALUE AND REDEMPTION PRICE PER SHARE ($420,391,9 64 (DIVIDED BY) 15,565,787 SHARES) MAXIMUM $27.85 OFFERING PRICE PER SHARE (100/97.00 OF $27.01) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 456,412 INCOME DIVIDENDS INTEREST 828,568 (INCLUDING INCOME ON SECURITIES LOANED OF $151,644) TOTAL INCOME 1,284,980 EXPENSES MANAGEMENT $ 1,568,934 FEE TRANSFER AGENT 1,701,161 FEES ACCOUNTING AND 268,676 SECURITY LENDING FEES NON-INTERESTED 1,533 TRUSTEES' COMPENSATION CUSTODIAN FEES 10,382 AND EXPENSES REGISTRATION FEES 25,199 AUDIT 18,459 LEGAL 1,761 REPORTS TO 90,815 SHAREHOLDERS TOTAL EXPENSES 3,686,920 BEFORE REDUCTIONS EXPENSE (114,892) 3,572,028 REDUCTIONS NET INVESTMENT (2,287,048) INCOME (LOSS) REALIZED AND (24,268,560) UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES (INCLUDING REALIZED LOSS OF $1,550,669 ON SALES OF INVESTMENTS IN AFFILIATED ISSUERS) CHANGE IN NET (60,731,370) UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) (84,999,930) NET INCREASE $ (87,286,978) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 439,192 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 438,007 - - RETAINED BY FDC DEFERRED SALES $ 14,237 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 47,288 WITHHELD BY FSC EXPENSE $ 111,245 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 2,658 CREDITS TRANSFER 989 AGENT CREDITS $ 114,892 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (2,287,048) $ (4,649,288) NET INVESTMENT INCOME (LOSS) NET REALIZED (24,268,560) 136,618,693 GAIN (LOSS) CHANGE IN NET (60,731,370) (59,882,024) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (87,286,978) 72,087,381 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO SHAREHOLDERS FROM NET (33,971,052) (74,816,933) REALIZED GAIN SHARE 63,968,226 370,670,921 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 33,062,343 72,734,215 OF DISTRIBUTIONS COST OF SHARES (135,076,554) (536,988,307) REDEEMED NET INCREASE (38,045,985) (93,583,171) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 154,078 952,260 FEES TOTAL (159,149,937) (95,360,463) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 579,541,901 674,902,364 PERIOD END OF PERIOD $ 420,391,964 $ 579,541,901 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $2,287,048 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 1,957,911 10,542,169 ISSUED IN 970,422 2,304,448 REINVESTMENT OF DISTRIBUTIONS REDEEMED (4,148,771) (15,772,857) NET INCREASE (1,220,438) (2,926,240) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET $ 34.52 $ 34.24 $ 36.60 $ 25.30 $ 27.61 $ 22.60 VALUE, BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATION S NET (.14) (.27) (.20) .11 (.06) (.18) INVESTMENT INCOME (LOSS) E NET (5.29) 5.20 1.89 11.21 (2.26) 5.15 REALIZED AND UNREALIZED GAIN (LOSS) TOTAL FROM (5.43) 4.93 1.69 11.32 (2.32) 4.97 INVESTMENT OPERATIONS LESS DISTRIBUTIO NS FROM NET - - (.03) (.07) - - INVESTMENT INCOME FROM NET (2.09) (4.71) (4.06) - - - REALIZED GAIN TOTAL (2.09) (4.71) (4.09) (.07) - - DISTRIBUTIO NS REDEMPTION .01 .06 .04 .05 .01 .04 FEES ADDED TO PAID IN CAPITAL NET ASSET $ 27.01 $ 34.52 $ 34.24 $ 36.60 $ 25.30 $ 27.61 VALUE, END OF PERIOD TOTAL (16.96)% 16.11% 5.85% 44.97% (8.37)% 22.17% RETURN B, C, D RATIOS AND SUPPLEME NTAL DATA NET ASSETS, $ 420,392 $ 579,542 $ 674,902 $ 1,096,864 $ 448,197 $ 481,146 END OF PERIOD (000 OMITTED) RATIO OF 1.36% A 1.49% 1.57% 1.44% F 1.59% 1.62% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.31% A, G 1.47% G 1.56% G 1.43% G 1.59% 1.61% G EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.84)% A (.81)% (.59)% .35% (.27)% (.69)% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 57% A 162% 41% 67% 77% 51% TURNOVER RATE AVERAGE $ .0452 $ .0454 $ .0376 COMMISSIO N RATE H A ANNUALIZED B TOT AL RETURNS FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. C 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). D TO TAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. E NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. F FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. G FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). H FO R FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
HEALTH CARE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT HEALTH CARE -0.12% 23.10% 240.14% 748.85% SELECT HEALTH CARE -3.19% 19.34% 229.87% 723.31% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS HEALTH CARE -3.02% 20.24% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Health Care Index - a market capitalization-weighted index of 93 stocks designed to measure the performance of companies in the health care sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT HEALTH CARE 23.10% 27.74% 23.85% SELECT HEALTH CARE 19.34% 26.96% 23.47% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS HEALTH CARE 20.24% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Health Care S&P 500 00063 SP001 1988/08/31 9700.00 10000.00 1988/09/30 10025.27 10426.00 1988/10/31 10150.15 10715.84 1988/11/30 9853.92 10562.61 1988/12/31 9993.80 10747.45 1989/01/31 10699.49 11534.17 1989/02/28 10494.52 11246.96 1989/03/31 11047.94 11509.02 1989/04/30 11651.14 12106.34 1989/05/31 12014.23 12596.64 1989/06/30 11743.42 12524.84 1989/07/31 13198.04 13655.84 1989/08/31 13517.35 13923.49 1989/09/30 13614.92 13866.40 1989/10/31 13514.40 13544.70 1989/11/30 14096.84 13821.02 1989/12/31 14240.02 14152.72 1990/01/31 13422.97 13203.07 1990/02/28 13282.31 13373.39 1990/03/31 13812.04 13727.79 1990/04/30 13812.04 13384.59 1990/05/31 15712.51 14689.59 1990/06/30 16247.87 14589.70 1990/07/31 16472.20 14543.01 1990/08/31 15733.80 13228.33 1990/09/30 15260.23 12584.11 1990/10/31 15609.17 12529.99 1990/11/30 17269.79 13339.43 1990/12/31 17702.68 13711.60 1991/01/31 19450.23 14309.43 1991/02/28 21852.68 15332.55 1991/03/31 23800.71 15703.60 1991/04/30 23386.38 15741.29 1991/05/31 24656.11 16421.31 1991/06/30 23544.31 15669.22 1991/07/31 25627.62 16399.40 1991/08/31 26908.29 16788.07 1991/09/30 27450.52 16507.71 1991/10/31 29259.15 16728.91 1991/11/30 27660.99 16054.73 1991/12/31 32518.50 17891.40 1992/01/31 31451.58 17558.62 1992/02/29 30078.19 17786.88 1992/03/31 28243.23 17440.03 1992/04/30 26642.85 17952.77 1992/05/31 27191.44 18040.74 1992/06/30 26143.38 17771.93 1992/07/31 27716.06 18498.80 1992/08/31 26968.53 18119.58 1992/09/30 25101.73 18333.39 1992/10/31 25873.77 18397.56 1992/11/30 27291.23 19024.91 1992/12/31 26849.15 19258.92 1993/01/31 25407.18 19420.70 1993/02/28 22695.93 19684.82 1993/03/31 23321.93 20100.17 1993/04/30 23313.30 19613.74 1993/05/31 24245.83 20139.39 1993/06/30 24159.48 20197.79 1993/07/31 23373.74 20117.00 1993/08/31 24206.97 20879.44 1993/09/30 24962.50 20718.67 1993/10/31 26818.93 21147.54 1993/11/30 26728.26 20946.64 1993/12/31 27498.00 21200.10 1994/01/31 28042.60 21920.90 1994/02/28 27364.01 21326.84 1994/03/31 25578.93 20396.99 1994/04/30 26605.09 20658.07 1994/05/31 28107.69 20996.87 1994/06/30 27661.68 20482.44 1994/07/31 28215.95 21154.27 1994/08/31 31918.32 22021.59 1994/09/30 32147.82 21482.06 1994/10/31 32593.84 21965.41 1994/11/30 33299.67 21165.43 1994/12/31 33398.69 21479.31 1995/01/31 35167.69 22036.27 1995/02/28 35913.02 22895.02 1995/03/31 36889.51 23570.66 1995/04/30 37403.70 24264.81 1995/05/31 37764.08 25234.68 1995/06/30 39675.04 25820.88 1995/07/31 41946.39 26677.10 1995/08/31 42302.03 26744.06 1995/09/30 44672.95 27872.66 1995/10/31 44782.01 27773.15 1995/11/30 46669.27 28992.39 1995/12/31 48716.96 29550.79 1996/01/31 50459.52 30556.70 1996/02/29 50164.94 30839.96 1996/03/31 50339.69 31136.95 1996/04/30 50128.95 31595.90 1996/05/31 51038.32 32410.76 1996/06/30 51074.49 32534.25 1996/07/31 49080.08 31096.88 1996/08/31 50743.81 31752.72 1996/09/30 54236.61 33539.76 1996/10/31 53172.24 34464.79 1996/11/30 56029.51 37069.98 1996/12/31 56248.23 36335.62 1997/01/31 59644.34 38605.87 1997/02/28 60404.93 38908.54 1997/03/31 57091.36 37309.79 1997/04/30 59940.61 39537.19 1997/05/31 64505.76 41944.21 1997/06/30 69304.55 43823.31 1997/07/31 71893.37 47310.33 1997/08/31 66886.21 44660.01 1997/09/30 71034.64 47106.04 1997/10/31 71009.38 45532.69 1997/11/30 72998.35 47640.40 1997/12/31 73767.60 48458.39 1998/01/31 79075.50 48994.34 1998/02/28 82435.49 52527.81 1998/03/31 85368.23 55217.76 1998/04/30 86986.13 55773.25 1998/05/31 86464.72 54814.51 1998/06/30 91604.34 57041.07 1998/07/31 91879.94 56433.58 1998/08/31 82330.63 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980914 085356 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Health Care Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $82,331 - a 723.31% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS WARNER-LAMBERT CO. 10.7 LILLY (ELI) & CO. 10.0 AMERICAN HOME PRODUCTS CORP. 9.3 MERCK & CO., INC. 7.5 SCHERING-PLOUGH CORP. 5.8 JOHNSON & JOHNSON 4.8 ABBOTT LABORATORIES 4.6 BRISTOL-MYERS SQUIBB CO. 3.9 MEDTRONIC, INC. 2.7 AMGEN, INC. 2.3 TOP INDUSTRIES AS OF AUGUST 31, 1998 DRUGS 51.2% MEDICAL SUPPLIES & APPLIANCES 14.8% HOSPITALS 4.7% BIOTECHNOLOGY 4.4% DRUG DISTRIBUTORS - WHOLESALE 3.7% ALL OTHERS 21.2% ROW: 1, COL: 1, VALUE: 21.2 ROW: 1, COL: 2, VALUE: 3.7 ROW: 1, COL: 3, VALUE: 4.4 ROW: 1, COL: 4, VALUE: 4.7 ROW: 1, COL: 5, VALUE: 14.8 ROW: 1, COL: 6, VALUE: 51.2 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS HEALTH CARE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Beso Sikharulidze) Beso Sikharulidze, Portfolio Manager of Fidelity Select Health Care Portfolio Q. HOW DID THE FUND PERFORM, BESO? A. For the six-month period ending August 31, 1998, the fund returned - -0.12%, outperforming the Standard & Poor's 500 Index, which returned - -8.10%. For the 12-month period that ended August 31, 1998, the fund posted a total return of 23.10%. During the same 12-month period, the S&P 500 returned 8.10%. Beginning this period, the fund also compares itself to the Goldman Sachs Health Care Index - an index of 93 stocks designed to measure the performance of companies in the health care sector - which returned -3.02% and 20.24% over the same six- and 12-month periods, respectively. Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS? A. I committed a significant percentage of fund assets to the major pharmaceutical companies and to other companies that benefited from the growing demand for pharmaceuticals, such as drug distributors and drug-store chains. These companies performed very well for the fund. In addition, many health care and drugs stocks have benefited from investors' perception that these companies, especially those with limited dependency on overseas markets for product demand, will provide stable earnings and revenue growth during this period of global market volatility. Q. WHY DO PHARMACEUTICAL COMPANIES CONTINUE TO PERFORM THE BEST WITHIN THE HEALTH CARE SECTOR? A. Most importantly, all the key drivers for continued strong earnings and sales growth have remained in place: an aging population with increasing demand for pharmaceuticals, an increasing supply of innovative new drugs with superior efficacy and safety, and corporate earnings that have produced double-digit returns, which compare favorably to other health care companies. Q. MOST OF THE FUND'S TOP HOLDINGS HAVE NOT CHANGED SINCE THE LAST REPORT. WHAT IS YOUR RATIONALE BEHIND THIS STRATEGY? A. I didn't foresee any major changes in the market's outlook toward drug companies, and my outlook remained positive. As a result, I continued to take a long-term view on the pharmaceutical sector. Maintaining the fund's top holdings is not an unusual strategy for me. Whether I am looking at a drug company, medical device maker or biotechnology company, I focus on the long-term profitability outlook and the ability of the company to produce consistent results. In addition, some of these companies have very short product life cycles, and this can cause short-term volatility for these stocks. In this environment, it becomes even more important to closely research and determine which companies have the best technology and fundamental business outlook over the next two to three years. Q. WHAT INDIVIDUAL HOLDINGS CONTRIBUTED TO FUND PERFORMANCE? A. Warner-Lambert and Schering-Plough did very well and contributed significantly to the fund's strong performance. Warner-Lambert benefited from having the strongest earnings growth within the pharmaceutical sector. Strong sales of newly launched products, such as its cholesterol-lowering drug Lipitor and its diabetes drug Rezulin, resulted in upward revisions of Warner's earnings and ultimately pushed the stock price higher. Schering-Plough's stock also benefited from strong sales of its diverse product line and from its upward earnings revisions. Q. WERE THERE ANY DISAPPOINTMENTS DURING THE PERIOD? A. Chiron did not perform well. While the company's fundamental business outlook is strong and it has reported stable earnings and revenue growth, the stock price has declined along with the general market and the entire biotechnology sector. HMOs continued to detract from fund performance. Unfortunately, many HMOs struggled to find product and service strategies that will boost their growth and earnings. I continued to hold HMOs such as Foundation Health Systems, United HealthCare and Humana, which all seemed to be undervalued considering their fundamental business outlooks and improving commercial businesses. At the same time, these companies were hard-pressed to improve profitability in their core Medicare patient business, hurting stock performance for most of the sector. Q. WHAT IS YOUR OUTLOOK FOR THE HEALTH CARE SECTOR, BESO? A. Overall, I think the health care sector should continue to be strong. Favorable demographics, combined with strong demand for drugs, medical supplies and medical technology, should drive further innovation. Strong management teams and a favorable regulatory environment also should help to create an excellent opportunity for health care stocks to outperform the broader market. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: JULY 14, 1981 FUND NUMBER: 063 TRADING SYMBOL: FSPHX SIZE: AS OF AUGUST 31, 1998, MORE THAN $2.1 BILLION MANAGER: BESO SIKHARULIDZE, SINCE 1997; MANAGER, FIDELITY ADVISOR HEALTH CARE FUND, SINCE 1997; FIDELITY SELECT TRANSPORTATION PORTFOLIO, 1993-1994; SECURITY ANALYST, APPLIANCE, TRUCKING AND SHIPPING INDUSTRIES, 1992-1993; JOINED FIDELITY IN 1992 HEALTH CARE PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 92.2% SHARES VALUE (NOTE 1) AGRICULTURE - 0.4% CROPS - 0.4% Delta & Pine Land Co. 178,700 $ 7,672,931 Pioneer Hi-Bred International, Inc. 72,400 2,443,500 10,116,431 CHEMICALS & PLASTICS - 1.7% CHEMICALS - 1.7% Monsanto Co. 675,900 36,963,281 COMPUTER SERVICES & SOFTWARE - 0.4% CAD/CAM/CAE - 0.4% Shared Medical Systems Corp. 175,000 9,340,625 DRUG STORES - 3.3% CVS Corp. 540,000 19,642,500 Rite Aid Corp. 400,000 14,475,000 Walgreen Co. 1,000,000 38,500,000 72,617,500 DRUGS & PHARMACEUTICALS - 56.3% BIOTECHNOLOGY - 4.4% Amgen, Inc. (a) 835,400 50,854,975 Biogen, Inc. (a) 237,500 10,984,375 Chiron Corp. (a) 321,800 4,625,875 Genentech, Inc. special (a) 397,400 26,228,400 Genzyme Corp. (a) 140,000 3,780,000 Medimmune, Inc. (a) 36,400 1,756,300 Xoma, Inc. (a)(c) 1,476 2,435 98,232,360 COMMERCIAL LABORATORY RESEARCH - 0.4% Quintiles Transnational Corp. (a) 264,700 9,463,025 DRUGS - 51.2% Allergan, Inc. 200,000 9,450,000 ALZA Corp. Class A 268,700 9,673,200 American Home Products Corp. 4,128,800 206,956,100 Barr Laboratories, Inc. (a) 11,090 284,181 Bristol-Myers Squibb Co. 884,400 86,560,650 Elan Corp. PLC ADR (a) 297,020 17,449,925 Forest Laboratories, Inc. (a) 680,000 22,270,000 Lilly (Eli) & Co. 3,406,812 223,146,186 Merck & Co., Inc. 1,432,400 166,068,875 Schering-Plough Corp. 1,477,100 129,430,888 SmithKline Beecham PLC ADR 112,300 6,387,063 Takeda Chemical Industries Ltd. 448,000 11,256,034 Warner-Lambert Co. 3,664,200 239,089,050 Watson Pharmaceuticals, Inc. (a) 252,800 11,391,800 1,139,413,952 PHARMACEUTICAL PREPARATIONS - 0.3% Medicis Pharmaceutical Corp. Class A (a) 200,000 6,550,000 TOTAL DRUGS & PHARMACEUTICALS 1,253,659,337 ELECTRONIC INSTRUMENTS - 0.5% LAB ANALYTICAL INSTRUMENTS - 0.5% Waters Corp. (a) 213,200 11,486,150 MEDICAL EQUIPMENT & SUPPLIES - 22.8% DENTAL EQUIPMENT - 0.5% Sybron International Corp. (a) 564,600 10,268,663 SHARES VALUE (NOTE 1) DRUG DISTRIBUTORS - WHOLESALE - 3.7% AmeriSource Health Corp. Class A (a) 133,500 $ 6,282,844 Cardinal Health, Inc. 395,270 34,586,125 McKesson Corp. 516,200 38,715,000 Zonagen, Inc. (a) 259,100 3,805,531 83,389,500 MEDICAL SUPPLIES & APPLIANCES - 14.8% Abbott Laboratories 2,679,800 103,172,300 Becton, Dickinson & Co. 1,181,200 39,348,725 Boston Scientific Corp. (a) 577,968 40,024,284 Johnson & Johnson 1,534,600 105,887,400 Sofamor/Danek Group, Inc. (a) 400,500 33,416,719 Steris Corp. (a) 280,400 6,694,550 328,543,978 MEDICAL TECHNOLOGY - 3.2% Medtronic, Inc. 1,182,400 60,745,800 St. Jude Medical, Inc. (a) 439,400 9,694,263 Stryker Corp. 36,400 1,169,350 71,609,413 X-RAY ELECTRO-MEDICAL APPARATUS - 0.6% Guidant Corp. 230,460 14,230,905 TOTAL MEDICAL EQUIPMENT & SUPPLIES 508,042,459 MEDICAL FACILITIES MANAGEMENT - 6.8% HOSPITALS - 4.7% Columbia/HCA Healthcare Corp. 937,800 21,159,113 HEALTHSOUTH Corp. (a) 1,046,300 19,814,306 Health Management Associates, Inc. Class A (a) 1,017,250 18,374,078 Tenet Healthcare Corp. (a) 1,292,200 33,354,913 Universal Health Services, Inc. Class B (a) 300,000 11,625,000 104,327,410 HMO'S & OUTPATIENT CARE - 1.9% Foundation Health Systems, Inc. Class A (a) 750,000 8,390,625 Humana, Inc. (a) 511,500 6,649,500 Trigon Healthcare, Inc. (a) 100,000 2,762,500 United HealthCare Corp. 500,000 18,062,500 Wellpoint Health Networks, Inc. (a) 114,500 6,111,438 41,976,563 MEDICAL SERVICES - 0.1% Lincare Holdings, Inc. (a) 90,300 3,064,556 SKILLED NURSING CARE FACILITIES - 0.1% Beverly Enterprises, Inc. 376,100 2,961,788 TOTAL MEDICAL FACILITIES MANAGEMENT 152,330,317 TOTAL COMMON STOCKS (Cost $1,643,186,860) 2,054,556,100 CASH EQUIVALENTS - 7.8% Taxable Central Cash Fund (b) (Cost $172,973,917) 172,973,917 172,973,917 TOTAL INVESTMENT IN SECURITIES - 100.0% (Cost $1,816,160,777) $2,227,530,017 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $2,435 or 0.0% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $658,987,549 and $511,496,032, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $135,943 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At period end, the value of securities loaned and the value of the collateral amounted to $3,085,739 and $3,571,700, respectively (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $1,816,883,083. Net unrealized appreciation aggregated $410,646,934, of which $504,450,405 related to appreciated investment securities and $93,803,471 related to depreciated investment securities. HEALTH CARE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 2,227,530,017 SECURITIES, AT VALUE (COST $1,816,160, 777) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 951,031 INVESTMENTS SOLD RECEIVABLE FOR 33,031,455 FUND SHARES SOLD DIVIDENDS 2,787,083 RECEIVABLE INTEREST 469,980 RECEIVABLE REDEMPTION FEES 354,014 RECEIVABLE OTHER 185,106 RECEIVABLES TOTAL ASSETS 2,265,308,686 LIABILITIES PAYABLE FOR $ 30,513,682 INVESTMENTS PURCHASED PAYABLE FOR 64,996,920 FUND SHARES REDEEMED ACCRUED 1,158,370 MANAGEMENT FEE OTHER PAYABLES 1,008,312 AND ACCRUED EXPENSES COLLATERAL ON 3,571,700 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 101,248,984 NET ASSETS $ 2,164,059,702 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 1,702,626,574 UNDISTRIBUTED 2,047,054 NET INVESTMENT INCOME ACCUMULATED 48,015,002 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 411,371,072 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 2,164,059,702 19,577,132 SHARES OUTSTANDING NET ASSET $110.54 VALUE AND REDEMPTION PRICE PER SHARE ($2,164,059, 702 (DIVIDED BY) 19,577,132 SHARES) MAXIMUM $113.96 OFFERING PRICE PER SHARE (100/97.00 OF $110.54) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 9,892,405 INCOME DIVIDENDS INTEREST 4,246,560 (INCLUDING INCOME ON SECURITIES LOANED OF $166,770) TOTAL INCOME 14,138,965 EXPENSES MANAGEMENT $ 6,736,046 FEE TRANSFER AGENT 4,798,909 FEES ACCOUNTING AND 412,122 SECURITY LENDING FEES NON-INTERESTED 5,442 TRUSTEES' COMPENSATION CUSTODIAN FEES 44,066 AND EXPENSES REGISTRATION FEES 14,307 AUDIT 35,790 LEGAL 6,344 REPORTS TO 192,719 SHAREHOLDERS TOTAL EXPENSES 12,245,745 BEFORE REDUCTIONS EXPENSE (153,880) 12,091,865 REDUCTIONS NET INVESTMENT 2,047,100 INCOME REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 50,346,687 SECURITIES FOREIGN (306,305) 50,040,382 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (63,178,400) SECURITIES ASSETS AND 3,234 (63,175,166) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (13,134,784) NET INCREASE $ (11,087,684) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 4,244,083 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 4,234,326 - - RETAINED BY FDC DEFERRED SALES $ 25,585 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 146,693 WITHHELD BY FSC EXPENSE $ 144,790 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 3,141 CREDITS TRANSFER 5,949 AGENT CREDITS $ 153,880 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ 2,047,100 $ 4,973,301 NET INVESTMENT INCOME NET REALIZED 50,040,382 304,829,057 GAIN (LOSS) CHANGE IN NET (63,175,166) 201,089,915 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (11,087,684) 510,892,273 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (1,644,584) (3,399,542) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (59,794,768) (285,151,308) REALIZED GAIN TOTAL (61,439,352) (288,550,850) DISTRIBUTIONS SHARE 783,487,521 1,156,162,920 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 60,165,171 281,663,060 OF DISTRIBUTIONS COST OF SHARES (832,066,595) (810,127,873) REDEEMED NET INCREASE 11,586,097 627,698,107 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 981,458 1,425,211 FEES TOTAL (59,959,481) 851,464,741 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 2,224,019,183 1,372,554,442 PERIOD END OF PERIOD $ 2,164,059,702 $ 2,224,019,183 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $2,047,05 4 AND $2,734,33 0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 6,500,723 10,761,631 ISSUED IN 512,787 2,916,990 REINVESTMENT OF DISTRIBUTIONS REDEEMED (6,972,307) (7,540,216) NET INCREASE 41,203 6,138,405 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET $ 113.84 $ 102.45 $ 100.47 $ 76.13 $ 63.31 $ 52.57 VALUE, BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATION S NET .11 .33 .52 .95 .75 .15 INVESTMENT INCOME D NET (.10) 31.94 18.01 28.85 18.38 10.61 REALIZED AND UNREALIZED GAIN (LOSS) TOTAL FROM .01 32.27 18.53 29.80 19.13 10.76 INVESTMENT OPERATIONS LESS DISTRIBUTIO NS FROM NET (.09) (.25) (.65) (.59) (.62) (.07) INVESTMENT INCOME FROM NET (3.27) (20.73) (15.95) (4.92) (5.74) - REALIZED GAIN TOTAL (3.36) (20.98) (16.60) (5.51) (6.36) (.07) DISTRIBUTIO NS REDEMPTION .05 .10 .05 .05 .05 .05 FEES ADDED TO PAID IN CAPITAL NET ASSET $ 110.54 $ 113.84 $ 102.45 $ 100.47 $ 76.13 $ 63.31 VALUE, END OF PERIOD TOTAL (0.12)% 36.47% 20.41% 39.68% 31.24% 20.57% RETURN B, C RATIOS AND SUPPLEME NTAL DATA NET ASSETS, $ 2,164,060 $ 2,224,019 $ 1,372,554 $ 1,525,910 $ 943,141 $ 522,890 END OF PERIOD (000 OMITTED) RATIO OF 1.05% A 1.20% 1.33% 1.31% 1.39% 1.59% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.03% A, E 1.18% E 1.32% E 1.30% E 1.36% E 1.55% E EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET .18% A .31% .52% 1.06% 1.08% .26% INVESTMENT INCOME TO AVERAGE NET ASSETS PORTFOLIO 48% A 79% 59% 54% 151% 213% TURNOVER RATE AVERAGE $ .0431 $ .0490 $ .0466 COMMISSIO N RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FO R FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
MEDICAL DELIVERY PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT MEDICAL DELIVERY -26.55% -17.30% 107.47% 447.41% SELECT MEDICAL DELIVERY -28.82% -19.85% 101.17% 430.92% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS HEALTH CARE -3.02% 20.24% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of 93 common stocks - and the Goldman Sachs Health Care Index - a market capitalization-weighted index of stocks designed to measure the performance of companies in the health care sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT MEDICAL DELIVERY -17.30% 15.72% 18.53% SELECT MEDICAL DELIVERY -19.85% 15.00% 18.17% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS HEALTH CARE 20.24% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Medical Delivery S&P 500 00505 SP001 1988/08/31 9700.00 10000.00 1988/09/30 10249.31 10426.00 1988/10/31 10517.27 10715.84 1988/11/30 10182.32 10562.61 1988/12/31 10517.27 10747.45 1989/01/31 11294.34 11534.17 1989/02/28 11709.67 11246.96 1989/03/31 12352.76 11509.02 1989/04/30 13196.82 12106.34 1989/05/31 13880.11 12596.64 1989/06/30 13718.75 12524.84 1989/07/31 15275.87 13655.84 1989/08/31 15987.31 13923.49 1989/09/30 16430.28 13866.40 1989/10/31 15879.92 13544.70 1989/11/30 16618.21 13821.02 1989/12/31 16619.18 14152.72 1990/01/31 14172.35 13203.07 1990/02/28 14529.75 13373.39 1990/03/31 15203.32 13727.79 1990/04/30 15354.52 13384.59 1990/05/31 17526.43 14689.59 1990/06/30 18364.95 14589.70 1990/07/31 18433.68 14543.01 1990/08/31 16962.83 13228.33 1990/09/30 15835.64 12584.11 1990/10/31 15643.20 12529.99 1990/11/30 17815.10 13339.43 1990/12/31 19321.77 13711.60 1991/01/31 22435.90 14309.43 1991/02/28 23823.11 15332.55 1991/03/31 27361.89 15703.60 1991/04/30 26540.89 15741.29 1991/05/31 28734.94 16421.31 1991/06/30 26314.17 15669.22 1991/07/31 28954.43 16399.40 1991/08/31 29293.68 16788.07 1991/09/30 29559.19 16507.71 1991/10/31 30208.19 16728.91 1991/11/30 29367.43 16054.73 1991/12/31 34358.95 17891.40 1992/01/31 34389.14 17558.62 1992/02/29 33060.68 17786.88 1992/03/31 30871.73 17440.03 1992/04/30 29648.94 17952.77 1992/05/31 29347.01 18040.74 1992/06/30 27801.67 17771.93 1992/07/31 29383.74 18498.80 1992/08/31 29350.78 18119.58 1992/09/30 25906.47 18333.39 1992/10/31 27191.91 18397.56 1992/11/30 29861.66 19024.91 1992/12/31 29828.70 19258.92 1993/01/31 28312.54 19420.70 1993/02/28 23830.00 19684.82 1993/03/31 24357.36 20100.17 1993/04/30 24060.72 19613.74 1993/05/31 24802.32 20139.39 1993/06/30 25049.52 20197.79 1993/07/31 25675.75 20117.00 1993/08/31 25593.35 20879.44 1993/09/30 27702.79 20718.67 1993/10/31 29004.70 21147.54 1993/11/30 29482.62 20946.64 1993/12/31 31476.69 21200.10 1994/01/31 33240.05 21920.90 1994/02/28 33421.33 21326.84 1994/03/31 31756.85 20396.99 1994/04/30 32778.61 20658.07 1994/05/31 33882.77 20996.87 1994/06/30 31789.81 20482.44 1994/07/31 33207.09 21154.27 1994/08/31 36569.00 22021.59 1994/09/30 37870.91 21482.06 1994/10/31 39106.91 21965.41 1994/11/30 37425.95 21165.43 1994/12/31 37721.70 21479.31 1995/01/31 39377.52 22036.27 1995/02/28 39981.20 22895.02 1995/03/31 42516.68 23570.66 1995/04/30 41134.88 24264.81 1995/05/31 39785.63 25234.68 1995/06/30 40425.66 25820.88 1995/07/31 44508.01 26677.10 1995/08/31 44715.59 26744.06 1995/09/30 45649.68 27872.66 1995/10/31 44871.27 27773.15 1995/11/30 48624.96 28992.39 1995/12/31 49861.60 29550.79 1996/01/31 52543.33 30556.70 1996/02/29 53634.51 30839.96 1996/03/31 54152.36 31136.95 1996/04/30 54768.95 31595.90 1996/05/31 54653.29 32410.76 1996/06/30 53361.66 32534.25 1996/07/31 47578.24 31096.88 1996/08/31 51973.64 31752.72 1996/09/30 55694.30 33539.76 1996/10/31 51491.68 34464.79 1996/11/30 54402.67 37069.98 1996/12/31 55348.74 36335.62 1997/01/31 57967.44 38605.87 1997/02/28 59266.31 38908.54 1997/03/31 55516.34 37309.79 1997/04/30 56782.00 39537.19 1997/05/31 62047.15 41944.21 1997/06/30 62478.35 43823.31 1997/07/31 66495.30 47310.33 1997/08/31 64203.15 44660.01 1997/09/30 66109.50 47106.04 1997/10/31 63930.81 45532.69 1997/11/30 65451.35 47640.40 1997/12/31 66495.08 48458.39 1998/01/31 64555.11 48994.34 1998/02/28 72289.47 52527.81 1998/03/31 75199.43 55217.76 1998/04/30 77069.62 55773.25 1998/05/31 73435.27 54814.51 1998/06/30 74397.31 57041.07 1998/07/31 68651.82 56433.58 1998/08/31 53092.00 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980909 100253 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Medical Delivery Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $53,092 - a 430.92% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS HEALTH MANAGEMENT ASSOCIATES, INC. CLASS A 9.6 LINCARE HOLDINGS, INC. 8.3 HEALTHSOUTH CORP. 7.7 TENET HEALTHCARE CORP. 7.5 UNITED HEALTHCARE CORP. 5.1 COLUMBIA/HCA HEALTHCARE CORP. 5.0 WELLPOINT HEALTH NETWORKS, INC. 4.8 UNIVERSAL HEALTH SERVICES, INC. CLASS B 3.9 QUORUM HEALTH GROUP, INC. 3.8 PACIFICARE HEALTH SYSTEMS, INC. CLASS B 3.4 TOP INDUSTRIES AS OF AUGUST 31, 1998 HOSPITALS 38.0% HMOS & OUTPATIENT CARE 21.6% MEDICAL SERVICES 9.4% DRUGS 4.8% NURSING CARE & NURSING HOMES 4.0% ALL OTHERS 22.2% ROW: 1, COL: 1, VALUE: 22.2 ROW: 1, COL: 2, VALUE: 4.0 ROW: 1, COL: 3, VALUE: 4.8 ROW: 1, COL: 4, VALUE: 9.4 ROW: 1, COL: 5, VALUE: 21.6 ROW: 1, COL: 6, VALUE: 38.0 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS MEDICAL DELIVERY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of John Porter) John Porter, Portfolio Manager of Fidelity Select Medical Delivery Portfolio Q. HOW DID THE FUND PERFORM, JOHN? A. For the six-month period ending August 31, 1998, the fund returned - -26.55%, while the Standard & Poor's 500 Index returned -8.10%. For the 12-month period that ended August 31, 1998, the fund returned - -17.30%. During the same period, the S&P 500 returned 8.10%. Beginning this period, the fund also compares itself to the Goldman Sachs Health Care Index - an index of 93 stocks designed to measure the performance of companies in the health care sector - which returned -3.02% and 20.24% over the same six- and 12-month periods, respectively. Q. WHY DID THE FUND UNDERPERFORM THE GOLDMAN SACHS INDEX? A. The fund underperformed the index during the past year because the fund's primary investment focus is on hospitals and managed-care companies or HMOs. The HMO and hospital sectors were characterized by a poor fundamental business outlook and the stocks performed very poorly as a result. On the other hand, the Goldman Sachs Health Care Index is dominated by the large-cap pharmaceutical stocks that experienced solid investor support due to strong product demand and growth prospects. Q. WHY HAS THE MEDICAL DELIVERY SECTOR PERFORMED WORSE THAN OTHER SECTORS WITHIN THE HEALTH CARE INDUSTRY? A. Hospitals and HMOs both produced weak results. On the hospital side, there were two bellwether stocks and fund holdings that detracted from performance, Columbia/HCA Healthcare and Tenet Healthcare. Columbia/HCA stock suffered due to concerns over an on-going government investigation into its billing practices and other aspects of its business dealings. More importantly, the business trends for Columbia were disappointing; volume trends were below expectations and expenses ran higher than projected. Tenet Healthcare's earnings came in slightly below expectations causing its stock, and hospital stocks in general, to decline even further. Q. AND ON THE HMO SIDE? A. On the HMO side, performance was even more disappointing. Stocks for the entire industry declined approximately 35% to 40% during the past year. Bellwether HMO stock and fund holding United HealthCare reported earnings that were significantly below expectations, casting a black cloud over the entire group. Q. WHICH STOCKS PERFORMED WELL DURING THE PERIOD? A. Lincare and Health Management Associates (HMA) were solid performers. I felt HMA was one of the best-run hospital companies in the business, with a lot of its growth coming from acquisitions of rural and non-urban hospitals. Typically, these hospitals don't have all the specialized services that people may need in these areas. Once HMA acquires these hospitals, they add new and specialized services, stopping the migration of patients to larger urban hospitals. Lincare is a respiratory care company with a strong management team that delivered a consistent growth strategy, expanded its market share through acquisitions and managed its internal cost structure. Q. WHAT CHANGES DID YOU MAKE TO THE PORTFOLIO TO MINIMIZE RISKS OR IMPROVE THE PERFORMANCE OF THE FUND? A. Since taking over the fund in January, 1998, I've tried to upgrade the quality of the portfolio wherever possible. I've also tried to take advantage of weakness in many parts of the sector. I've done so by increasing the fund's holdings in companies where I felt stock prices were beaten down to the point where they did not accurately reflect a company's business and growth prospects. Q. WHAT IS YOUR OUTLOOK, JOHN? A. In terms of the HMOs, there are still two negative trends. First, pharmaceutical costs have been much higher than expected and HMOs have been unable to pass along these costs to patients. The second factor is Medicare. The government has set very modest pricing growth at approximately 2% per year, but cost trends are running closer to 5% to 6% for Medicare HMOs. I believe the outlook for hospital stocks is brighter. We should start to see investor sentiment improve as Columbia/HCA's government investigation problems are resolved and as investors begin to take notice of many hospitals' improved earnings outlooks. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: JUNE 30, 1986 FUND NUMBER: 505 TRADING SYMBOL: FSHCX SIZE: AS OF AUGUST 31, 1998, MORE THAN $134 MILLION MANAGER: JOHN PORTER, SINCE JANUARY 1998; MANAGER, FIDELITY SELECT SOFTWARE AND COMPUTER SERVICES PORTFOLIO, SINCE 1997; FIDELITY SELECT MULTIMEDIA PORTFOLIO, 1996-1997; JOINED FIDELITY IN 1995 MEDICAL DELIVERY PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 93.0% SHARES VALUE (NOTE 1) COMPUTER SERVICES & SOFTWARE - 3.6% COMPUTER SERVICES - 2.0% HBO & Co. 131,200 $ 2,788,000 CAD/CAM/CAE - 1.6% Shared Medical Systems Corp. 39,700 2,118,988 TOTAL COMPUTER SERVICES & SOFTWARE 4,906,988 DRUGS & PHARMACEUTICALS - 4.8% DRUGS - 4.8% Bristol-Myers Squibb Co. 6,800 665,550 Lilly (Eli) & Co. 35,000 2,292,500 Merck & Co., Inc. 7,300 846,344 Schering-Plough Corp. 5,000 438,125 Warner-Lambert Co. 35,000 2,283,750 6,526,269 INSURANCE - 1.8% ACCIDENT & HEALTH INSURANCE - 0.3% Aetna, Inc. 6,400 385,200 INSURANCE BROKERS & SERVICES - 0.8% First Health Group Corp. (a) 56,600 1,142,613 LIFE INSURANCE - 0.2% United Wisconsin Services, Inc. 13,100 196,500 MULTI-LINE INSURANCE - 0.5% CIGNA Corp. 11,700 680,794 TOTAL INSURANCE 2,405,107 MEDICAL EQUIPMENT & SUPPLIES - 4.0% DRUG DISTRIBUTORS - WHOLESALE - 0.9% Cardinal Health, Inc. 14,100 1,233,750 MEDICAL SUPPLIES & APPLIANCES - 2.0% Abbott Laboratories 20,800 800,800 Baxter International, Inc. 9,400 500,550 Boston Scientific Corp. (a) 10,000 692,500 Johnson & Johnson 10,000 690,000 2,683,850 MEDICAL TECHNOLOGY - 0.7% Medtronic, Inc. 13,500 693,563 St. Jude Medical, Inc. (a) 12,350 272,472 966,035 OPHTHALMIC GOODS - 0.2% Cooper Companies, Inc. (a) 14,200 284,888 X-RAY ELECTRO-MEDICAL APPARATUS - 0.2% Guidant Corp. 5,500 339,625 TOTAL MEDICAL EQUIPMENT & SUPPLIES 5,508,148 MEDICAL FACILITIES MANAGEMENT - 78.4% HOME HEALTH CARE AGENCIES - 0.4% Alternative Living Services, Inc. (a) 30,000 532,500 Coram Healthcare Corp. warrants 7/11/99 9,740 0 532,500 HOSPITALS - 38.0% Columbia/HCA Healthcare Corp. 299,223 6,751,219 Health Management Associates, Inc. Class A (a) 726,717 13,126,318 HEALTHSOUTH Corp. (a) 552,800 10,468,650 Magellan Health Services, Inc. (a) 44,800 467,600 SHARES VALUE (NOTE 1) Quorum Health Group, Inc. (a) 275,100 $ 5,226,900 Tenet Healthcare Corp. (a) 398,200 10,278,538 Universal Health Services, Inc. Class B (a) 138,500 5,366,875 51,686,100 HMOS & OUTPATIENT CARE - 21.6% Foundation Health Systems, Inc. Class A (a) 409,870 4,585,421 Humana, Inc. (a) 268,400 3,489,200 Maxicare Health Plans, Inc. (a) 14,800 51,338 Mid-Atlantic Medical Services,Inc. (a) 42,900 238,631 Oxford Health Plans, Inc. (a) 28,100 172,113 PacifiCare Health Systems, Inc. Class A (a) 5,900 356,950 PacifiCare Health Systems, Inc. Class B (a) 73,100 4,605,300 Sierra Health Services, Inc. (a) 85,700 1,371,200 Trigon Healthcare, Inc. (a) 38,400 1,060,800 United HealthCare Corp. (a) 193,900 7,004,638 Wellpoint Health Networks, Inc. (a) 122,300 6,527,763 29,463,354 MEDICAL SERVICES - 9.4% Carematrix Corp. (a) 49,300 850,425 Lincare Holdings, Inc. (a) 335,000 11,369,063 Physician Reliance Network, Inc. (a) 64,400 511,175 12,730,663 MISCELLANEOUS HEALTH & ALLIED SERVICES, NEC - 2.8% Renal Care Group, Inc. (a) 81,150 1,638,216 Total Renal Care Holdings, Inc. (a) 117,966 2,241,354 3,879,570 NURSING CARE & NURSING HOMES - 4.0% Genesis Health Ventures, Inc. (a) 38,100 452,438 Health Care & Retirement Corp. (a) 85,000 2,167,500 Integrated Health Services, Inc. 85,100 1,648,813 Manor Care, Inc. 50,000 1,200,000 5,468,751 NURSING, PERSONAL CARE FACILITIES - 0.6% NovaCare, Inc. (a) 106,700 780,244 OFFICES OF MEDICAL DOCTORS - 0.1% Coventry Health Care, Inc. (a) 20,600 92,700 SKILLED NURSING CARE FACILITIES - 0.2% Mariner Post-Acute Network, Inc. (a) 43,800 312,075 SPECIALTY HOSPITAL EXCEPT PSYCHIATRIC - 0.5% Pediatrix Medical Group (a) 17,800 693,088 SPECIALTY OUTPATIENT CLINICS - 0.8% Phycor, Inc. (a) 87,900 609,806 Sun Healthcare Group (a) 55,200 483,000 1,092,806 TOTAL MEDICAL FACILITIES MANAGEMENT 106,731,851 SERVICES - 0.4% MANAGEMENT SERVICES - 0.1% Medpartners, Inc. (a) 76,100 190,250 SOCIAL SERVICES - 0.3% Balanced Care Corp. 75,000 398,438 TOTAL SERVICES 588,688 TOTAL COMMON STOCKS (Cost $154,477,077) 126,667,051 CASH EQUIVALENTS - 7.0% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $9,514,776) 9,514,776 $ 9,514,776 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $163,991,853) $ 136,181,827 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $76,053,544 and $38,292,398, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $17,906 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At period end, the value of securities loaned and the value of the collateral amounted to $323,050 and $364,000, respectively (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1988, the aggregate cost of investment securities for income tax purposes was $164,290,423. Net unrealized depreciation aggregated $28,108,596, of which $10,562,465 related to appreciated investment securities and $38,671,061 related to depreciated investment securities. MEDICAL DELIVERY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 136,181,827 SECURITIES, AT VALUE (COST $163,991,85 3) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 302,239 FUND SHARES SOLD DIVIDENDS 21,153 RECEIVABLE INTEREST 80,381 RECEIVABLE REDEMPTION FEES 916 RECEIVABLE OTHER 130,330 RECEIVABLES TOTAL ASSETS 136,716,846 LIABILITIES PAYABLE FOR $ 1,917,156 FUND SHARES REDEEMED ACCRUED 80,559 MANAGEMENT FEE OTHER PAYABLES 140,932 AND ACCRUED EXPENSES COLLATERAL ON 364,000 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 2,502,647 NET ASSETS $ 134,214,199 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 162,936,029 UNDISTRIBUTED 122,243 NET INVESTMENT INCOME ACCUMULATED (1,034,047) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (27,810,026) APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 134,214,199 6,753,625 SHARES OUTSTANDING NET ASSET $19.87 VALUE AND REDEMPTION PRICE PER SHARE ($134,214,1 99 (DIVIDED BY) 6,753,625 SHARES) MAXIMUM $20.48 OFFERING PRICE PER SHARE (100/97.00 OF $19.87) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 91,357 INCOME DIVIDENDS SPECIAL 748,113 DIVIDEND FROM VENTAS, INC. INTEREST 498,585 (INCLUDING INCOME ON SECURITIES LOANED OF $25,031) TOTAL INCOME 1,338,055 EXPENSES MANAGEMENT $ 517,151 FEE TRANSFER AGENT 534,064 FEES ACCOUNTING AND 90,606 SECURITY LENDING FEES NON-INTERESTED 485 TRUSTEES' COMPENSATION CUSTODIAN FEES 5,882 AND EXPENSES REGISTRATION FEES 45,607 AUDIT 11,895 LEGAL 818 REPORTS TO 24,113 SHAREHOLDERS TOTAL EXPENSES 1,230,621 BEFORE REDUCTIONS EXPENSE (14,809) 1,215,812 REDUCTIONS NET INVESTMENT 122,243 INCOME REALIZED AND (209,696) UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES CHANGE IN NET (51,757,242) UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) (51,966,938) NET INCREASE $ (51,844,695) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 213,942 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 213,879 - - RETAINED BY FDC DEFERRED SALES $ 2,287 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 23,558 WITHHELD BY FSC EXPENSE $ 12,760 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 529 CREDITS TRANSFER 1,520 AGENT CREDITS $ 14,809 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ 122,243 $ (1,403,143) NET INVESTMENT INCOME (LOSS) NET REALIZED (209,696) 30,147,880 GAIN (LOSS) CHANGE IN NET (51,757,242) (1,649,494) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (51,844,695) 27,095,243 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (7,388,637) (27,697,433) SHAREHOLDERS FROM NET REALIZED GAIN IN EXCESS OF (824,351) - NET REALIZED GAIN TOTAL (8,212,988) (27,697,433) DISTRIBUTIONS SHARE 126,829,619 114,716,005 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 8,097,680 27,235,291 OF DISTRIBUTIONS COST OF SHARES (96,315,410) (178,502,092) REDEEMED NET INCREASE 38,611,889 (36,550,796) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 117,550 310,663 FEES TOTAL (21,328,244) (36,842,323) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 155,542,443 192,384,766 PERIOD END OF PERIOD $ 134,214,199 $ 155,542,443 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $122,243 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 4,495,058 4,089,783 ISSUED IN 283,433 1,085,517 REINVESTMENT OF DISTRIBUTIONS REDEEMED (3,517,500) (6,483,186) NET INCREASE 1,260,991 (1,307,886) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET $ 28.32 $ 28.29 $ 29.00 $ 23.18 $ 20.28 $ 14.46 VALUE, BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATION S NET .02 E (.24) (.23) (.03) .06 (.10) INVESTMENT INCOME (LOSS) D NET (7.15) 5.45 2.92 7.72 3.74 5.84 REALIZED AND UNREALIZED GAIN (LOSS) TOTAL FROM (7.13) 5.21 2.69 7.69 3.80 5.74 INVESTMENT OPERATIONS LESS DISTRIBUTIO NS FROM NET - - - - (.06) - INVESTMENT INCOME FROM NET (1.21) (5.23) (3.45) (1.91) (.89) - REALIZED GAIN IN EXCESS (.13) - - - - - OF NET REALIZED GAIN TOTAL (1.34) (5.23) (3.45) (1.91) (.95) - DISTRIBUTIO NS REDEMPTION .02 .05 .05 .04 .05 .08 FEES ADDED TO PAID IN CAPITAL NET ASSET $ 19.87 $ 28.32 $ 28.29 $ 29.00 $ 23.18 $ 20.28 VALUE, END OF PERIOD TOTAL (26.55)% 21.97% 10.50% 34.15% 19.63% 40.25% RETURN B, C RATIOS AND SUPPLEME NTAL DATA NET ASSETS, $ 134,214 $ 155,542 $ 192,385 $ 295,489 $ 299,570 $ 188,553 END OF PERIOD (000 OMITTED) RATIO OF 1.37% A 1.57% 1.57% 1.65% 1.48% 1.82% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.35% A, F 1.53% F 1.53% F 1.62% F 1.45% F 1.79% F EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET .14% A (.88)% (.84)% (.13)% .29% (.57)% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 48% A 109% 78% 132% 123% 164% TURNOVER RATE AVERAGE $ .0452 $ .0422 $ .0434 COMMISSIO N RATE G A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL 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 INVESTME NT INCOME (LOSS) PER SHARE REFLECTS A SPECIAL DIVIDEND FROM VENTAS, INC., WHICH AMOUNTED TO $.02 PER SHARE. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). G FO R FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
MEDICAL EQUIPMENT AND SYSTEMS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the life of fund returns would have been lower. CUMULATIVE TOTAL RETURNS PERIOD ENDED LIFE OF AUGUST 31, 1998 FUND SELECT MEDICAL EQUIPMENT AND SYSTEMS -5.30% SELECT MEDICAL EQUIPMENT AND SYSTEMS -8.21% (LOAD ADJ.) S&P 500 -11.31% GS HEALTH CARE -6.60% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case the period since the fund started on April 28, 1998. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Health Care Index - a market capitalization-weighted index of 93 stocks designed to measure the performance of companies in the health care sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. These numbers will be reported once the fund is a year old. In addition, the growth of the hypothetical $10,000 investment in the fund will appear in the fund's next report six months from now. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS BOSTON SCIENTIFIC CORP. 7.6 GUIDANT CORP. 6.8 MEDTRONIC, INC. 6.7 JOHNSON & JOHNSON 6.5 ABBOTT LABORATORIES 6.1 BECTON, DICKINSON & CO. 5.9 SOFAMOR/DANEK GROUP, INC. 5.2 BIOMET, INC. 4.0 STRYKER CORP. 3.9 ARTERIAL VASCULAR ENGINEERING, INC. 3.5 TOP INDUSTRIES AS OF AUGUST 31, 1998 MEDICAL SUPPLIES & APPLIANCES 42.2% MEDICAL TECHNOLOGY 25.7% X-RAY ELECTRO-MEDICAL APPARATUS 6.8% DRUGS 4.4% OPHTHALMIC GOODS 3.5% ALL OTHERS 17.4% ROW: 1, COL: 1, VALUE: 17.5 ROW: 1, COL: 2, VALUE: 3.5 ROW: 1, COL: 3, VALUE: 4.3 ROW: 1, COL: 4, VALUE: 6.8 ROW: 1, COL: 5, VALUE: 25.7 ROW: 1, COL: 6, VALUE: 42.2 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS MEDICAL EQUIPMENT AND SYSTEMS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Kerry Nelson) Kerry Nelson, Portfolio Manager of Fidelity Select Medical Equipment and Systems Portfolio Q. HOW DID THE FUND PERFORM, KERRY? A. Since its inception on April 28, 1998, the fund returned -5.30%, compared with a return of -11.31% for the Standard & Poor's 500 Index. Beginning with this report, the fund also compares itself to the Goldman Sachs Health Care Index - an index of 93 stocks designed to measure the performance of companies in the health care sector - which returned -6.60% from April 28, 1998, to August 31, 1998. Q. WHY WAS THE FUND ABLE TO OUTPERFORM THOSE INDEXES DURING THIS DIFFICULT PERIOD FOR THE STOCK MARKET? A. There were a couple of reasons. Medical device stocks, like health care stocks in general, tend to be more defensive in nature - that is, they are less sensitive to economic cycles than many other industries. People get sick whether the economy is up or down. Also, these stocks have relatively low exposure to Asia and emerging markets, two areas which experienced severe economic downturns in the period and were significant factors in the U.S. market drop. However, in general, medical device stocks do have significant exposure to Europe. For example, the medical stocks I invest in, on average, derive 40% of their sales from outside the United States, principally Europe. Europe is indirectly affected by the economic slowdown in some of the emerging markets. So while these stocks were protected from the primary pressures on the market, they were not protected from the secondary pressures, which is why many of them did decline, even if not as much as the broader market. Q. WHAT WAS YOUR STRATEGY GIVEN THESE UNFAVORABLE MARKET CONDITIONS? A. I focused on companies with high earnings visibility and pared back on companies that are heavily dependent upon developing new technologies. I also increased my exposure to large-cap stocks within the sector. I thought many were fairly valued before, but as the market declined, they got cheaper and I bought more of them. I also took advantage of indiscriminate selling in companies such as Guidant and Sofamor Danek. Q. WHAT COMPANIES HELPED PERFORMANCE? A. Arterial Vascular Engineering was one of the better performers. The stock rebounded dramatically after it announced excellent second quarter results as well as the acquisition of Bard's cardiovascular division, which helped broaden its product offering. Becton Dickinson also performed well, reflecting the company's faster growth prospects following acquisitions and a tighter focus on expense control. Q. WHAT DISAPPOINTMENTS DID YOU HAVE? A. The disappointments were in small positions in small-cap stocks, which underperformed the market in general. However, for many of them, the fundamental outlook for earnings growth did not change. The market perceived them to have less visible growth prospects than their larger brethren. Among the larger companies, Stryker Corp. was a disappointment. It acquired a company called Howmedica, which will dilute Stryker's earnings next year. The stock fell as a result. Q. WHAT DO YOU LOOK FOR IN A STOCK? A. I look for companies that have strong growth opportunities, either because the markets they operate in are growing quickly or because they have competitive advantages which will enable them to grow faster than their competitors. These could be superior products, patent positions or better distribution capabilities. I like to see high market share in fast-growing industries. I try to sell a stock when the market has already discounted most of the positive future events that I can think of, or when there is a greater risk of an earnings slowdown that does not appear to be reflected in the stock price already. I will also sell when I see a deterioration in the quality of earnings - for example, if a company is making money by selling off its assets, extending its payment terms or cutting its research and development budget - thereby stifling future growth prospects. Q. WHAT IS YOUR OUTLOOK FOR THE NEXT SIX MONTHS, KERRY? A. The medical device industry should remain an attractive area to invest in. The regulatory environment in the U.S. continues to improve. Government reimbursement rates are benign domestically, although they pose a greater risk internationally. Currency comparisons become easier based on today's exchange rates. This will help companies with heavy European exposure because their foreign sales will be translated into dollars at more favorable rates. New product cycles should be an important growth driver for some of the larger companies, but they are also likely to result in greater volatility. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: APRIL 28, 1998 FUND NUMBER: 354 TRADING SYMBOL: FSMEX SIZE: AS OF AUGUST 31, 1998, MORE THAN $14 MILLION MANAGER: KERRY NELSON, SINCE INCEPTION; ANALYST, MEDICAL DEVICES AND AUTOMOTIVE INDUSTRIES; JOINED FIDELITY IN 1995 MEDICAL EQUIPMENT AND SYSTEMS PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 87.9% SHARES VALUE (NOTE 1) DRUGS & PHARMACEUTICALS - 4.4% DRUGS - 4.4% Allergan, Inc. 5,850 276,413 Lilly (Eli) & Co. 2,800 183,400 Merck & Co., Inc. 600 $ 69,558 Warner-Lambert Co. 1,600 104,400 633,771 ELECTRONIC INSTRUMENTS - 2.3% LAB ANALYTICAL INSTRUMENTS - 1.5% Thermo Optek Corp. 2,680 21,440 Waters Corp. (a) 3,560 191,795 213,235 MEASURING INSTRUMENTS - 0.8% Perkin-Elmer Corp. 2,140 123,853 TOTAL ELECTRONIC INSTRUMENTS 337,088 HOUSEHOLD PRODUCTS - 1.2% FABRICATED RUBBER PRODUCTS - 1.2% Safeskin Corp. (a) 5,290 178,538 INDUSTRIAL MACHINERY & EQUIPMENT - 0.7% MISCELLANEOUS INDUSTRIAL, COMMERCIAL, MACHINERY & EQUIPMENT - 0.7% Mettler-Toledo International, Inc. 5,610 94,669 MEDICAL EQUIPMENT & SUPPLIES - 79.2% DENTAL EQUIPMENT - 0.1% Sybron International Corp. 1,060 19,279 MEDICAL, DENTAL, HOSPITAL EQUIPMENT - WHOLESALE - 0.9% ESC Medical Systems Ltd. (a) 6,690 125,019 MEDICAL SUPPLIES & APPLIANCES - 42.2% Abbott Laboratories 23,120 890,120 Bard (C.R.), Inc. 8,730 285,908 Baxter International, Inc. 8,860 471,795 Becton, Dickinson & Co. 25,760 858,130 Boston Scientific Corp. (a) 16,110 1,115,618 Depuy, Inc. 7,760 266,750 Hillenbrand Industries, Inc. 3,070 164,437 Johnson & Johnson 13,850 955,650 Orthofix International NV (a) 4,670 56,040 Sofamor/Danek Group, Inc. (a) 9,170 765,122 Steris Corp. (a) 13,120 313,240 Thermo Cardiosystems, Inc. (a) 1,110 16,650 6,159,460 MEDICAL TECHNOLOGY - 25.7% Arterial Vascular Engineering, Inc. (a) 14,540 508,900 Ballard Medical Products 7,100 131,794 Biomet, Inc. 21,610 580,769 InControl, Inc. (a) 57,000 327,750 Medtronic, Inc. 18,920 972,015 Mentor Corp. 3,120 45,630 Pall Corp. 2,900 59,450 St. Jude Medical, Inc. (a) 10,700 236,069 Stryker Corp. 17,540 563,473 Thoratec Laboratories Corp. (a) 2,150 15,856 U.S. Surgical Corp. 7,870 314,308 3,756,014 OPHTHALMIC GOODS - 3.5% Bausch & Lomb, Inc. 8,880 375,735 Cooper Companies, Inc. (a) 1,310 26,282 Wesley Jessen Visioncare, Inc. (a) 6,600 112,200 514,217 SHARES VALUE (NOTE 1) X-RAY ELECTRO-MEDICAL APPARATUS - 6.8% Guidant Corp. 15,960 $ 985,530 TOTAL MEDICAL EQUIPMENT & SUPPLIES 11,559,519 MEDICAL FACILITIES MANAGEMENT - 0.1% MEDICAL LABORATORIES - 0.1% Cambridge Heart, Inc. (a) 2,800 15,750 TOTAL COMMON STOCKS (Cost $14,046,339) 12,819,335 CASH EQUIVALENTS - 12.1% Taxable Central Cash Fund (b) (Cost $1,771,399) 1,771,399 $ 1,771,399 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $15,817,738) $ 14,590,734 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $16,732,720 and $2,551,652, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $498 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $15,817,738. Net unrealized depreciation aggregated $1,227,004, of which $275,601 related to appreciated investment securities and $1,502,605 related to depreciated investment securities. MEDICAL EQUIPMENT AND SYSTEMS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 14,590,734 SECURITIES, AT VALUE (COST $15,817,738 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 458,863 FUND SHARES SOLD DIVIDENDS 7,988 RECEIVABLE INTEREST 3,460 RECEIVABLE REDEMPTION FEES 382 RECEIVABLE PREPAID 19,219 EXPENSES TOTAL ASSETS 15,080,646 LIABILITIES PAYABLE FOR $ 604,610 INVESTMENTS PURCHASED PAYABLE FOR 359,700 FUND SHARES REDEEMED ACCRUED 9,058 MANAGEMENT FEE OTHER PAYABLES 39,496 AND ACCRUED EXPENSES TOTAL LIABILITIES 1,012,864 NET ASSETS $ 14,067,782 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 15,482,896 ACCUMULATED (53,381) NET INVESTMENT LOSS ACCUMULATED (134,729) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (1,227,004) APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 14,067,782 1,486,048 SHARES OUTSTANDING NET ASSET $9.47 VALUE AND REDEMPTION PRICE PER SHARE ($14,067,78 2 (DIVIDED BY) 1,486,048 SHARES) MAXIMUM $9.76 OFFERING PRICE PER SHARE (100/97.00 OF $9.47) STATEMENT OF OPERATIONS APRIL 28, 1998 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 24,083 INCOME DIVIDENDS INTEREST 25,980 TOTAL INCOME 50,063 EXPENSES MANAGEMENT $ 23,823 FEE TRANSFER AGENT 29,666 FEES ACCOUNTING FEES 20,588 AND EXPENSES NON-INTERESTED 9 TRUSTEES' COMPENSATION CUSTODIAN FEES 21,730 AND EXPENSES REGISTRATION FEES 19,471 AUDIT 8,272 MISCELLANEOUS 250 TOTAL EXPENSES 123,809 BEFORE REDUCTIONS EXPENSE (20,365) 103,444 REDUCTIONS NET INVESTMENT (53,381) INCOME (LOSS) REALIZED AND (134,729) UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES CHANGE IN NET (1,227,004) UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) (1,361,733) NET INCREASE $ (1,415,114) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 130,180 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 130,180 - - RETAINED BY FDC DEFERRED SALES $ 0 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 2,078 WITHHELD BY FSC EXPENSE $ 65 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 13 CREDITS FMR 20,287 REIMBURSEMEN T $ 20,365 STATEMENT OF CHANGES IN NET ASSETS INCREASE APRIL 28, 1998 (DECREASE) IN (COMMENCEMENT NET ASSETS OF OPERATIONS) TO AUGUST 31, 1998 (UNAUDITED) OPERATIONS $ (53,381) NET INVESTMENT INCOME (LOSS) NET REALIZED (134,729) GAIN (LOSS) CHANGE IN NET (1,227,004) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (1,415,114) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS SHARE 21,922,251 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES COST OF SHARES (6,457,768) REDEEMED NET INCREASE 15,464,483 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 18,413 FEES TOTAL 14,067,782 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF - PERIOD END OF PERIOD $ 14,067,782 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $53,381) OTHER INFORMATION SHARES SOLD 2,094,024 REDEEMED (607,976) NET INCREASE 1,486,048 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS APRIL 28, 1998 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31, 1998 SELECTED (UNAUDITED) PER-SHARE DATA NET ASSET VALUE, $ 10.00 BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATIONS NET (.05) INVESTMENT INCOME (LOSS) D NET REALIZED (.50) AND UNREALIZED GAIN (LOSS) TOTAL FROM (.55) INVESTMENT OPERATIONS REDEMPTION .02 FEES ADDED TO PAID IN CAPITAL NET ASSET VALUE, $ 9.47 END OF PERIOD TOTAL RETURN B, C (5.30)% RATIOS AND SUPPLEMENTAL DATA NET ASSETS, END $ 14,068 OF PERIOD (000 OMITTED) RATIO OF 2.50% A, E EXPENSES TO AVERAGE NET ASSETS RATIO OF NET (1.29)% A INVESTMENT INCOME TO AVERAGE NET ASSETS PORTFOLIO 72% A TURNOVER RATE AVERAGE $ .0165 COMMISSION RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. ENERGY PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT ENERGY -23.54% -24.16% 22.74% 122.98% SELECT ENERGY -25.91% -26.51% 18.99% 116.21% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS Natural Resources -24.09% -26.69% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Natural Resources Index - a market capitalization-weighted index of 96 stocks designed to measure the performance of companies in the natural resource sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT ENERGY -24.16% 4.18% 8.35% SELECT ENERGY -26.51% 3.54% 8.02% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS Natural Resources -26.69% n/a n/a AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Energy S&P 500 00060 SP001 1988/08/31 9700.00 10000.00 1988/09/30 9590.48 10426.00 1988/10/31 9676.53 10715.84 1988/11/30 9700.00 10562.61 1988/12/31 9985.70 10747.45 1989/01/31 10740.25 11534.17 1989/02/28 10571.68 11246.96 1989/03/31 11181.74 11509.02 1989/04/30 11559.01 12106.34 1989/05/31 11695.47 12596.64 1989/06/30 11936.29 12524.84 1989/07/31 12433.97 13655.84 1989/08/31 12706.89 13923.49 1989/09/30 12907.56 13866.40 1989/10/31 12819.27 13544.70 1989/11/30 13300.89 13821.02 1989/12/31 14262.13 14152.72 1990/01/31 13625.36 13203.07 1990/02/28 14049.87 13373.39 1990/03/31 14058.04 13727.79 1990/04/30 13584.54 13384.59 1990/05/31 14409.08 14689.59 1990/06/30 14069.49 14589.70 1990/07/31 15027.78 14543.01 1990/08/31 15297.85 13228.33 1990/09/30 15254.29 12584.11 1990/10/31 14470.23 12529.99 1990/11/30 14313.42 13339.43 1990/12/31 13621.43 13711.60 1991/01/31 12739.14 14309.43 1991/02/28 13927.53 15332.55 1991/03/31 13738.46 15703.60 1991/04/30 13891.51 15741.29 1991/05/31 13972.54 16421.31 1991/06/30 13350.05 15669.22 1991/07/31 14035.60 16399.40 1991/08/31 14306.20 16788.07 1991/09/30 14161.88 16507.71 1991/10/31 14585.83 16728.91 1991/11/30 13503.40 16054.73 1991/12/31 13626.22 17891.40 1992/01/31 12897.06 17558.62 1992/02/29 12915.29 17786.88 1992/03/31 12541.59 17440.03 1992/04/30 13398.36 17952.77 1992/05/31 14036.37 18040.74 1992/06/30 13341.80 17771.93 1992/07/31 13698.19 18498.80 1992/08/31 13944.92 18119.58 1992/09/30 14027.17 18333.39 1992/10/31 13424.04 18397.56 1992/11/30 13113.34 19024.91 1992/12/31 13300.76 19258.92 1993/01/31 13802.32 19420.70 1993/02/28 14712.57 19684.82 1993/03/31 15464.92 20100.17 1993/04/30 15762.40 19613.74 1993/05/31 16236.39 20139.39 1993/06/30 16450.15 20197.79 1993/07/31 16329.33 20117.00 1993/08/31 17621.17 20879.44 1993/09/30 17518.94 20718.67 1993/10/31 17268.01 21147.54 1993/11/30 15176.89 20946.64 1993/12/31 15848.45 21200.10 1994/01/31 16697.30 21920.90 1994/02/28 16137.83 21326.84 1994/03/31 15356.50 20396.99 1994/04/30 16529.54 20658.07 1994/05/31 16704.45 20996.87 1994/06/30 16616.99 20482.44 1994/07/31 16869.65 21154.27 1994/08/31 16587.84 22021.59 1994/09/30 16461.51 21482.06 1994/10/31 17394.40 21965.41 1994/11/30 16325.47 21165.43 1994/12/31 15913.82 21479.31 1995/01/31 15532.77 22036.27 1995/02/28 16144.45 22895.02 1995/03/31 17026.88 23570.66 1995/04/30 17550.17 24264.81 1995/05/31 18003.01 25234.68 1995/06/30 17479.72 25820.88 1995/07/31 17892.31 26677.10 1995/08/31 17761.49 26744.06 1995/09/30 17771.55 27872.66 1995/10/31 17006.75 27773.15 1995/11/30 17982.88 28992.39 1995/12/31 19316.67 29550.79 1996/01/31 19615.11 30556.70 1996/02/29 19522.49 30839.96 1996/03/31 20829.48 31136.95 1996/04/30 21838.15 31595.90 1996/05/31 22063.84 32410.76 1996/06/30 22472.23 32534.25 1996/07/31 21462.00 31096.88 1996/08/31 22300.27 31752.72 1996/09/30 23482.46 33539.76 1996/10/31 24438.95 34464.79 1996/11/30 25793.09 37069.98 1996/12/31 25589.46 36335.62 1997/01/31 26173.80 38605.87 1997/02/28 23494.68 38908.54 1997/03/31 24145.16 37309.79 1997/04/30 23929.63 39537.19 1997/05/31 26108.21 41944.21 1997/06/30 26490.62 43823.31 1997/07/31 28228.85 47310.33 1997/08/31 28518.56 44660.01 1997/09/30 30616.02 47106.04 1997/10/31 29770.08 45532.69 1997/11/30 28055.03 47640.40 1997/12/31 28220.75 48458.39 1998/01/31 26712.97 48994.34 1998/02/28 28287.46 52527.81 1998/03/31 29635.12 55217.76 1998/04/30 30206.62 55773.25 1998/05/31 29472.52 54814.51 1998/06/30 28697.64 57041.07 1998/07/31 26332.23 56433.58 1998/08/31 21621.00 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980918 161527 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Energy Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $21,621 - a 116.21% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS USX-Marathon Group 8.2 Total SA sponsored ADR 7.7 Amoco Corp. 6.2 du Pont (E.I.) de Nemours & Co. 5.8 Elf Aquitaine SA sponsored ADR 4.7 Texaco, Inc. 4.6 Chevron Corp. 4.4 Amerada Hess Corp. 3.2 Tosco Corp. 3.2 Mobil Corp. 2.4 TOP INDUSTRIES AS OF AUGUST 31, 1998 OIL & GAS EXPLORATION 34.1% CRUDE PETROLEUM & GAS 25.0% PETROLEUM REFINERS 11.5% CHEMICALS 8.0% OIL & GAS SERVICES 6.0% ALL OTHERS 15.4% ROW: 1, COL: 1, VALUE: 15.4 ROW: 1, COL: 2, VALUE: 6.0 ROW: 1, COL: 3, VALUE: 8.0 ROW: 1, COL: 4, VALUE: 11.5 ROW: 1, COL: 5, VALUE: 25.0 ROW: 1, COL: 6, VALUE: 34.1 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS ENERGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Lawrence Rakers) Lawrence Rakers, Portfolio Manager of Fidelity Select Energy Portfolio Q. HOW DID THE FUND PERFORM, LARRY? A. For the six-month period ending August 31, 1998, the fund returned - -23.54%, while the Standard & Poor's 500 Index returned -8.10%. For the 12-month period that ended August 31, 1998, the fund returned - -24.16%. During the same period, the S&P 500 returned 8.10%. Beginning this period, the fund also compares itself to the Goldman Sachs Natural Resources Index - an index of 96 stocks designed to measure the performance of companies in the natural resources sector - which returned -24.09% and -26.69% over the same six- and 12-month periods, respectively. Q. WHY DID THE FUND OUTPERFORM THE GOLDMAN SACHS INDEX DURING THE PERIOD? A. The fund outperformed the Goldman Sachs index for a couple of reasons. First, unlike the Goldman Sachs index, the fund did not have any exposure to gold and precious metals stocks. Gold stocks fell even further than energy stocks during this period of drastically declining commodity prices. Second, the fund was overweighted in the integrated oil companies. These stocks benefited from well-diversified operations and stable earnings growth relative to other sectors within the energy industry. Q. WHAT FACTORS CAUSED THE STEEP DECLINE IN ENERGY PRICES? A. The primary factor was weak demand for oil and gas. We had one of the warmest weather patterns in recent history in the U.S., Europe and Asia. Also, financial instability in Asian and many other emerging markets resulted in significantly reduced demand for energy in these regions. Finally, OPEC raised oil production quotas at the start of last winter, further multiplying the supply and demand imbalance. Reduced demand, combined with a buildup of reserves and global financial uncertainty, resulted in the price of a barrel of oil losing about 40% of its value during the period. Q. WHAT STOCKS HURT THE FUND'S PERFORMANCE? A. Energy stocks were either flat or down across the entire industry. However, energy service companies such as Schlumberger and exploration companies such as Oryx Energy were among the hardest hit energy stocks and detracted from fund performance. In general, the drilling, exploration and service companies are more sensitive to declining oil prices than the integrated oil companies that have more diversified revenue streams. While these stocks did detract from fund performance, the fund was fortunately underweighted in these sectors. The price of one of the fund's larger holdings, Petrobras PN, a Brazilian oil company, declined along with the majority of oil stocks; however, its stock price came under additional pressure because of concerns about the possible devaluation of the Brazilian currency and the steep decline in Latin American stock markets. USX-Marathon detracted from fund performance in part because it recently acquired Tarragon, a Canadian oil and gas company, and the market did not like this purchase. However, I believed the fundamental business outlook for USX remained solid, and I took advantage of the lower price to increase the fund's holdings. Q. DESPITE THIS NEGATIVE ENVIRONMENT, WERE THERE ANY STRATEGIES OR STOCK PICKS THAT WORKED OUT WELL FOR THE FUND? A. As I mentioned earlier, the fund was overweighted in integrated oil companies, which held up fairly well during the period. I held companies such as Texaco, Exxon, British Petroleum and Chevron because their balance sheets look good, and they are diversified organizations that produce oil and gas, and also have refining and chemical operations. As a result, the integrated oil companies tend to have more stable earnings growth and offer higher dividend yields than most stocks in the sector. In addition, valuations for these companies were beaten down to the point where I didn't believe they accurately reflected the sector's business and growth prospects. Q. WHAT'S YOUR OUTLOOK FOR THE ENERGY SECTOR, LARRY? A. I am modestly optimistic about the sector over the next six months. OPEC recently announced cuts to oil production and we started to see early signs of oil inventories falling, which should begin to help oil prices. In addition, during the winter, demand picks up by about 3%, and under normal circumstances, we consume more oil than we produce. OPEC cuts, combined with the usual seasonal increase in demand, should benefit energy stocks. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 060 TRADING SYMBOL: FSENX SIZE: as of August 31, 1998, more than $109 million MANAGER: Lawrence Rakers, since 1997; manager, Fidelity Select Natural Resources Portfolio, since 1997; Fidelity Select Paper and Forest Products Portfolio, Fidelity Select Precious Metals and Minerals Portfolio, 1996-1997; Fidelity Select Gold Portfolio (formerly known as Fidelity Select American Gold Portfolio), 1995-1997; joined Fidelity in 1993 ENERGY PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.4% SHARES VALUE (NOTE 1) CHEMICALS & PLASTICS - 8.0% CHEMICALS - 8.0% Crompton & Knowles Corp. 30,000 $ 438,750 du Pont (E.I.) de Nemours & Co. 109,600 6,322,550 MacDermid, Inc. 45,000 1,248,750 Quaker State Corp. 25,000 314,063 Sasol, Ltd. 119,500 495,242 8,819,355 ELECTRIC UTILITY - 1.2% ELECTRIC POWER - 1.2% AES Corp. (a) 35,000 953,750 Calenergy, Inc. (a) 16,000 407,000 1,360,750 ENERGY SERVICES - 6.5% DRILLING - 0.5% Helmerich & Payne, Inc. 15,000 243,750 Ryan Energy Technologies, Inc. (a) 32,900 75,512 Transocean Offshore, Inc. 10,632 261,149 580,411 OIL & GAS SERVICES - 6.0% BJ Services Co. (a) 60,000 757,500 Baker Hughes, Inc. 91,650 1,672,613 Coflexip sponsored ADR 37,000 1,160,875 Dresser Industries, Inc. 33,000 843,563 McDermott International, Inc. 21,000 421,313 Schlumberger Ltd. 30,000 1,314,375 Smith International, Inc. (a) 15,500 273,188 Varco International, Inc. (a) 15,000 106,875 6,550,302 TOTAL ENERGY SERVICES 7,130,713 ENGINEERING - 0.1% ARCHITECTS & ENGINEERS - 0.1% Stolt Comex Seaway SA Class A sponsored ADR (a) 11,400 65,550 GAS - 1.5% GAS TRANSMISSION - 1.5% Enron Corp. 25,000 1,057,813 Williams Companies, Inc. 25,000 575,000 1,632,813 INDUSTRIAL MACHINERY & EQUIPMENT - 0.1% INDUSTRIAL MACHINERY - WHOLESALE - 0.1% CE Franklin Ltd. (a) 19,600 59,356 OIL & GAS - 72.3% CRUDE PETROLEUM & GAS - 25.0% Anadarko Petroleum Corp. 25,100 721,625 Barrett Resources Corp. (a) 5,000 101,563 Burlington Resources, Inc. 2,825 83,514 Canadian Occidental Petroleum Ltd. 10,000 119,541 EEX Corp. (a) 10,000 44,375 ENI SPA sponsored ADR 16,700 845,438 Elf Aquitaine SA sponsored ADR 105,400 5,151,425 Enron Oil & Gas Co. 20,000 260,000 Louis Dreyfus Natural Gas Corp. (a) 21,800 246,613 Magnum Hunter Resources, Inc. (a) 38,300 119,688 Occidental Petroleum Corp. 130,900 2,421,650 Oryx Energy Co. (a) 35,000 435,313 Paramount Resources Ltd. (c) 45,200 315,269 Penn West Petroleum Ltd. (a) 25,000 219,158 SHARES VALUE (NOTE 1) Petrobras PN (Pfd. Reg.) 17,500,000 $ 1,786,094 Plains Resources, Inc. (a) 99,400 1,528,275 Rio Alto Exploration Ltd. (a) 99,600 800,102 Stellarton Energy Corp. Class A (a) 50,000 51,004 Suncor Energy, Inc. 35,000 978,483 Total SA sponsored ADR 175,000 8,410,938 Ulster Petroleums Ltd. (a) 45,000 261,077 Upton Resources, Inc. (a) 59,700 60,899 Vastar Resources, Inc. 35,000 1,330,000 YPF Sociedad Anonima sponsored ADR representing Class D shares 53,400 1,181,475 27,473,519 ENERGY COMPOSITE - 0.1% Post Energy Corp. (a) 50,000 111,572 OIL & GAS EXPLORATION - 34.1% Amerada Hess Corp. 72,200 3,546,825 Amoco Corp. 150,000 6,796,875 Berkley Petroleum Corp. (a) 20,000 105,196 Companie Generale de Geophsique SA (a) 35,000 503,117 Chevron Corp. 65,600 4,858,500 Exxon Corp. 22,500 1,472,344 Kerr-McGee Corp. 10,000 386,250 Mobil Corp. 38,000 2,626,750 Petro-Canada 80,000 765,062 Phillips Petroleum Co. 60,000 2,448,750 Texaco, Inc. 90,600 5,033,963 USX-Marathon Group 345,400 8,980,400 37,524,032 OIL FIELD EQUIPMENT - 1.6% Camco International, Inc. 16,000 804,000 Cooper Cameron Corp. (a) 14,400 306,000 EVI Weatherford, Inc. (a) 41,825 637,831 1,747,831 PETROLEUM REFINERS - 11.5% British Petroleum Co. PLC ADR 19,234 1,406,486 Coastal Corp. (The) 47,200 1,227,200 Frontier Oil Corp. (a) 263,000 1,413,625 Imperial Oil Ltd. 100,500 1,409,627 Royal Dutch Petroleum Co. (NY Registry Gilder 1.25) 16,700 663,825 Shell Canada Ltd. Class A 15,000 222,346 Shell Transport & Trading Co. PLC ADR 42,700 1,331,706 Tesoro Petroleum Corp. (a) 31,700 408,138 Tosco Corp. 160,100 3,522,200 Ultramar Diamond Shamrock Corp. 25,200 582,750 Valero Energy Corp. 24,100 430,788 12,618,691 TOTAL OIL & GAS 79,475,645 RAILROADS - 1.0% Canadian National Railway Co. 25,000 1,128,467 SERVICES - 0.3% DETECTIVE, GUARD & ARMORED CAR - 0.3% Pittston Co. (Brinks Group) 9,100 285,513 SHIP BUILDING & REPAIR - 0.4% SHIP BUILDERS - 0.4% Halter Marine Group, Inc. (a) 55,000 495,000 TOTAL COMMON STOCKS (Cost $126,352,196) 100,453,162 CASH EQUIVALENTS - 8.6% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $9,445,109) 9,445,109 $ 9,445,109 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $135,797,305) $ 109,898,271 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $315,269 or 0.3% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $91,661,746 and $92,685,755, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $19,601 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At period end, the value of securities loaned and the value of collateral amounted to $1,087,015 and $1,162,500, respectively (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 71.7% France 13.9 Canada 6.1 United Kingdom 2.5 Brazil 1.6 Netherlands Antilles 1.2 Argentina 1.1 Others (individually less than 1%) 1.9 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $135,928,969. Net unrealized depreciation aggregated $26,030,698, of which $2,325,429 related to appreciated investment securities and $28,356,127 related to depreciated investment securities. ENERGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS Investment in $ 109,898,271 securities, at value (cost $135,797,30 5) - See accompanyin g schedule Receivable for 3,011,364 investments sold Receivable for 787,428 fund shares sold Dividends 660,817 receivable Interest 41,742 receivable Redemption fees 1,285 receivable TOTAL ASSETS 114,400,907 LIABILITIES Payable for $ 2,430,099 investments purchased Payable for 786,767 fund shares redeemed Accrued 60,969 management fee Other payables 117,215 and accrued expenses Collateral on 1,162,500 securities loaned, at value TOTAL LIABILITIES 4,557,550 NET ASSETS $ 109,843,357 Net Assets consist of: Paid in capital $ 136,680,528 Undistributed 717,523 net investment income Accumulated (1,657,373) undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized (25,897,321) appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 109,843,357 6,902,034 shares outstanding NET ASSET $15.91 VALUE and redemption price per share ($109,843,3 57 (divided by) 6,902,034 shares) Maximum $16.40 offering price per share (100/97.00 of $15.91) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 1,613,747 INCOME Dividends Interest 277,342 (including income on securities loaned of $5,480) 1,891,089 Less foreign (92,779) taxes withheld TOTAL INCOME 1,798,310 EXPENSES Management $ 440,781 fee Transfer agent 502,330 fees Accounting and 75,724 security lending fees Non-interested 332 trustees' compensation Custodian fees 20,660 and expenses Registration fees 23,190 Audit 12,159 Legal 429 Reports to 24,623 shareholders Miscellaneous 178 Total expenses 1,100,406 before reductions Expense (19,620) 1,080,786 reductions NET INVESTMENT 717,524 INCOME REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment (1,325,175) securities Foreign (6,334) (1,331,509) currency transactions Change in net unrealized appreciation (depreciation) on: Investment (33,950,685) securities Assets and 1,741 (33,948,944) liabilities in foreign currencies NET GAIN (LOSS) (35,280,453) NET INCREASE $ (34,562,929) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 283,189 INFORMATION Sales charges paid to FDC Sales charges $ 282,643 - - Retained by FDC Deferred sales $ 6,547 charges withheld by FDC Exchange fees $ 19,905 withheld by FSC Expense $ 19,285 reductions Directed brokerage arrangements Custodian 283 credits Transfer 52 agent credits $ 19,620 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 Operations $ 717,524 $ 899,143 Net investment income Net realized (1,331,509) 35,228,064 gain (loss) Change in net (33,948,944) 1,070,352 unrealized appreciation (depreciation) NET INCREASE (34,562,929) 37,197,559 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (72,194) (711,215) shareholders From net investment income From net (2,641,142) (31,012,994) realized gain In excess of (325,864) - net realized gain TOTAL (3,039,200) (31,724,209) DISTRIBUTIONS Share 52,011,188 138,864,076 transactions Net proceeds from sales of shares Reinvestment 2,970,065 31,069,131 of distributions Cost of shares (54,661,835) (231,915,098) redeemed NET INCREASE 319,418 (61,981,891) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption 102,578 267,473 fees TOTAL (37,180,133) (56,241,068) INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 147,023,490 203,264,558 period End of period $ 109,843,357 $ 147,023,490 (including undistribute d net investment income of $717,523 and $431,333, respectively) OTHER INFORMATION Shares Sold 2,432,406 5,967,396 Issued in 133,126 1,509,439 reinvestment of distributions Redeemed (2,599,376) (10,078,784) Net increase (33,844) (2,601,949) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA Net asset $ 21.20 $ 21.31 $ 18.97 $ 16.10 $ 16.73 $ 15.84 value, beginning of period Income from Investment Operation s Net .10 .11 .13 .18 .07 .06 investment income D Net (4.98) 3.93 3.59 3.13 (.11) 1.35 realized and unrealized gain (loss) Total from (4.88) 4.04 3.72 3.31 (.04) 1.41 investment operations Less Distributio ns From net (.01) (.09) (.13) (.11) (.08) (.03) investment income From net (.36) (4.09) (1.31) (.36) (.54) (.57) realized gain In excess (.05) - - - - - of net realized gain Total (.42) (4.18) (1.44) (.47) (.62) (.60) distributio ns Redemption .01 .03 .06 .03 .03 .08 fees added to paid in capital Net asset $ 15.91 $ 21.20 $ 21.31 $ 18.97 $ 16.10 $ 16.73 value, end of period TOTAL (23.54)% 20.40% 20.35% 20.92% .04% 9.69% RETURN B, C RATIOS AND SUPPLEME NTAL DATA Net assets, $ 109,843 $ 147,023 $ 203,265 $ 119,676 $ 96,023 $ 145,490 end of period (000 omitted) Ratio of 1.44% A 1.58% 1.57% 1.63% 1.85% 1.67% expenses to average net assets Ratio of 1.42% A, E 1.53% E 1.55% E 1.63% 1.85% 1.66% E expenses to average net assets after expense reductions Ratio of net .94% A .47% .62% 1.04% .42% .37% investment income to average net assets Portfolio 132% A 115% 87% 97% 106% 157% turnover rate Average $ .0388 $ .0142 $ .0399 commissio n rate F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUNDS EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FO R FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
ENERGY SERVICE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT ENERGY SERVICE -49.55% -52.93% 27.01% 114.20% SELECT ENERGY SERVICE -51.14% -54.42% 23.13% 107.71% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS Natural Resources -24.09% -26.69% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Natural Resources Index - a market capitalization-weighted index of 96 stocks designed to measure the performance of companies in the natural resource sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT ENERGY SERVICE -52.93% 4.90% 7.92% SELECT ENERGY SERVICE -54.42% 4.25% 7.58% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS Natural Resources -26.69% n/a n/a AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Energy Service S&P 500 00043 SP001 1988/08/31 9700.00 10000.00 1988/09/30 9281.90 10426.00 1988/10/31 8971.31 10715.84 1988/11/30 8589.04 10562.61 1988/12/31 8983.25 10747.45 1989/01/31 9532.76 11534.17 1989/02/28 9640.27 11246.96 1989/03/31 10249.51 11509.02 1989/04/30 10739.29 12106.34 1989/05/31 10930.42 12596.64 1989/06/30 11288.79 12524.84 1989/07/31 11921.92 13655.84 1989/08/31 12483.37 13923.49 1989/09/30 12304.19 13866.40 1989/10/31 11694.95 13544.70 1989/11/30 12698.40 13821.02 1989/12/31 14323.03 14152.72 1990/01/31 13403.20 13203.07 1990/02/28 14669.46 13373.39 1990/03/31 15374.26 13727.79 1990/04/30 14561.95 13384.59 1990/05/31 17010.84 14689.59 1990/06/30 16138.79 14589.70 1990/07/31 17655.91 14543.01 1990/08/31 17345.32 13228.33 1990/09/30 17010.84 12584.11 1990/10/31 14872.54 12529.99 1990/11/30 15099.51 13339.43 1990/12/31 14574.39 13711.60 1991/01/31 13916.27 14309.43 1991/02/28 16153.88 15332.55 1991/03/31 14897.47 15703.60 1991/04/30 14969.26 15741.29 1991/05/31 15364.14 16421.31 1991/06/30 13353.88 15669.22 1991/07/31 14359.01 16399.40 1991/08/31 14203.45 16788.07 1991/09/30 12899.17 16507.71 1991/10/31 13090.63 16728.91 1991/11/30 11523.10 16054.73 1991/12/31 11152.16 17891.40 1992/01/31 10996.61 17558.62 1992/02/29 11223.96 17786.88 1992/03/31 10422.25 17440.03 1992/04/30 11283.79 17952.77 1992/05/31 12181.22 18040.74 1992/06/30 11475.24 17771.93 1992/07/31 11953.87 18498.80 1992/08/31 12564.13 18119.58 1992/09/30 12947.04 18333.39 1992/10/31 12276.95 18397.56 1992/11/30 12025.67 19024.91 1992/12/31 11535.07 19258.92 1993/01/31 11989.77 19420.70 1993/02/28 13174.39 19684.82 1993/03/31 14215.42 20100.17 1993/04/30 14981.71 19613.74 1993/05/31 15676.30 20139.39 1993/06/30 15592.47 20197.79 1993/07/31 15808.04 20117.00 1993/08/31 16358.92 20879.44 1993/09/30 15879.89 20718.67 1993/10/31 15652.35 21147.54 1993/11/30 13999.69 20946.64 1993/12/31 13952.42 21200.10 1994/01/31 14084.61 21920.90 1994/02/28 14012.51 21326.84 1994/03/31 12966.98 20396.99 1994/04/30 13644.94 20658.07 1994/05/31 14252.76 20996.87 1994/06/30 14686.92 20482.44 1994/07/31 14959.82 21154.27 1994/08/31 14364.40 22021.59 1994/09/30 14910.20 21482.06 1994/10/31 15505.62 21965.41 1994/11/30 14699.33 21165.43 1994/12/31 14031.59 21479.31 1995/01/31 14119.76 22036.27 1995/02/28 15077.03 22895.02 1995/03/31 15908.34 23570.66 1995/04/30 16878.21 24264.81 1995/05/31 17319.06 25234.68 1995/06/30 16727.06 25820.88 1995/07/31 17558.38 26677.10 1995/08/31 18263.73 26744.06 1995/09/30 18314.12 27872.66 1995/10/31 16727.06 27773.15 1995/11/30 17671.74 28992.39 1995/12/31 19766.86 29550.79 1996/01/31 20197.14 30556.70 1996/02/29 20979.47 30839.96 1996/03/31 22635.41 31136.95 1996/04/30 24337.64 31595.90 1996/05/31 23983.59 32410.76 1996/06/30 24036.05 32534.25 1996/07/31 22711.64 31096.88 1996/08/31 24154.06 31752.72 1996/09/30 25058.86 33539.76 1996/10/31 27851.92 34464.79 1996/11/30 28979.63 37069.98 1996/12/31 29469.22 36335.62 1997/01/31 31110.17 38605.87 1997/02/28 27746.91 38908.54 1997/03/31 29699.77 37309.79 1997/04/30 29356.45 39537.19 1997/05/31 33430.94 41944.21 1997/06/30 35619.36 43823.31 1997/07/31 41219.97 47310.33 1997/08/31 44142.66 44660.01 1997/09/30 48749.85 47106.04 1997/10/31 50607.13 45532.69 1997/11/30 44416.21 47640.40 1997/12/31 44756.04 48458.39 1998/01/31 38421.11 48994.34 1998/02/28 41184.38 52527.81 1998/03/31 44271.00 55217.76 1998/04/30 47916.42 55773.25 1998/05/31 44837.08 54814.51 1998/06/30 38989.44 57041.07 1998/07/31 30404.61 56433.58 1998/08/31 20771.00 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980909 095143 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Energy Service Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $20,771 - a 107.71% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS Baker Hughes, Inc. 11.5 Halliburton Co. 5.4 Schlumberger Ltd. 5.2 Cooper Cameron Corp. 5.1 Transocean Offshore, Inc. 4.9 Coflexip sponsored ADR 4.6 EVI Weatherford, Inc. 4.3 Diamond Offshore Drilling, Inc. 4.2 Camco International, Inc. 4.2 McDermott (J. Ray) SA 3.9 TOP INDUSTRIES AS OF AUGUST 31, 1998 OIL & GAS SERVICES 44.7% DRILLING 25.0% OIL FIELD EQUIPMENT 13.6% HEAVY CONSTRUCTION, NEC 3.9% ARCHITECTS & ENGINEERS 2.3% ALL OTHERS 10.5% ROW: 1, COL: 1, VALUE: 10.6 ROW: 1, COL: 2, VALUE: 2.3 ROW: 1, COL: 3, VALUE: 3.9 ROW: 1, COL: 4, VALUE: 13.6 ROW: 1, COL: 5, VALUE: 25.0 ROW: 1, COL: 6, VALUE: 44.7 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS ENERGY SERVICE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of James Catudal) James Catudal, Portfolio Manager of Fidelity Select Energy Service Portfolio Q. HOW DID THE FUND PERFORM, JIM? A. The fund's performance for the period was very weak. For the six- and 12-month periods that ended August 31, 1998, the fund had total returns of -49.55% and -52.93%, respectively. In comparison, the Standard & Poor's 500 Index returned -8.10% and 8.10%, respectively, over the same time periods. Beginning this period, the fund also compares itself to the Goldman Sachs Natural Resources Index - an index of 96 stocks designed to measure the performance of companies in the natural resource sector - which returned -24.09% and -26.69% over the same six- and 12-month periods, respectively. Q. WHAT ACCOUNTED FOR THE FUND'S POOR PERFORMANCE RELATIVE TO ITS BENCHMARKS? A. The performance of energy service stocks depends primarily on the exploration and production spending of oil companies. That spending is driven, in turn, by the price of oil, which was extremely weak over the period. In addition, the profits of energy service firms tend to be more sensitive to changes in the price of oil than those of exploration and production companies. Finally, the overall stock market was extremely weak in August. All of these factors combined to drive down sharply the prices of virtually all energy service stocks, regardless of quality. The S&P 500, on the other hand, is a diversified index that reflects the performance of stocks from a wide variety of sectors. Overall, stocks were relatively strong for most of the period, and the S&P 500's returns reflect that more favorable environment. The Goldman Sachs index contains primarily stocks of integrated oil companies, making its returns generally less volatile than those of the fund. Q. WHAT WAS YOUR STRATEGY DURING THE PERIOD? A. I continued my strategy of positioning the fund in stocks that are less sensitive to fluctuations in oil and gas prices. The categories that were highlighted in the previous report - deep water drilling, sub-sea construction and large integrated oil service companies - continued to be the most promising in that regard. Q. AT THE END OF THE PERIOD, BAKER HUGHES COMPRISED 11.5% OF THE FUND'S INVESTMENTS. CAN YOU COMMENT ON WHY THE FUND HAD SUCH A LARGE POSITION IN THAT STOCK? A. During the period, Baker Hughes merged with Western Atlas. The 11.5% figure represents the fund's holdings in both companies. Q. WHAT STOCKS PERFORMED WELL FOR THE FUND? A. Royal Dutch Petroleum helped the fund's performance somewhat. The company was a good example of how integrated oil companies did better overall than pure energy service firms. In addition, I sold the stock before it was hit with the steep declines affecting most other stocks in the sector. Bouygues Offshore also bucked the downward trend. The stock's performance reflected the relatively favorable business prospects for offshore construction. Q. WHAT STOCKS DETRACTED FROM THE FUND'S PERFORMANCE? A. EVI Weatherford - the fund's seventh-largest holding at the end of the period - was the biggest detractor. Unlike most of its competitors, the company pre-announced disappointing financial results for the third quarter. Although the results were in line with those of other companies in this sector, investors reacted negatively to the announcement. Cooper Cameron - another core holding - was swamped by the wave of selling that engulfed the entire sector. Another poor performer, BJ Services, saw prices weaken in its main line of business - - pressure pumping. Q. WHAT'S YOUR OUTLOOK, JIM? A. There are some signs that oil prices may recover in the not-too-distant future. Historically, oil prices have not remained depressed for more than about six months, on average, and we are at the upper limits of that range now. Furthermore, the Organization of Petroleum Exporting Countries (OPEC) has recently been cutting back on production in an attempt to boost the price of oil. The big unknown at this point is demand. No one knows how long financial problems in Asia, Russia and Latin America will slow demand in those markets. Of course, weather is an important factor, too. A return to seasonably cold winter temperatures would raise demand and support higher energy prices. Although the short-term outlook is mixed due to low oil prices and lower exploration and production spending by the oil companies, I remain optimistic about the long-term prospects for the group. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 043 TRADING SYMBOL: FSESX SIZE: as of August 31, 1998, more than $370 million MANAGER: James Catudal, since January 1998; manager, Select Industrial Materials Portfolio, 1997-1998; analyst, North American non-ferrous metals companies; joined Fidelity in 1997 ENERGY SERVICE PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.2% SHARES VALUE (NOTE 1) CONSTRUCTION - 4.2% HEAVY CONSTRUCTION, NEC - 3.9% McDermott (J. Ray) SA (a) 519,100 $ 14,502,356 HIGHWAY & STREET CONSTRUCTION - 0.3% Bouygues Offshore SA sponsored ADR 77,000 1,049,125 TOTAL CONSTRUCTION 15,551,481 ELECTRICAL EQUIPMENT - 0.5% MOTORS & GENERATORS - 0.5% NQL Drilling Tools, Inc. Class A (a) 613,300 1,915,952 ENERGY SERVICES - 69.7% DRILLING - 25.0% Atwood Oceanics, Inc. (a) 151,500 2,518,688 Diamond Offshore Drilling, Inc. 743,800 15,526,825 ENSCO International, Inc. 562,200 5,903,100 Global Marine, Inc. (a) 201,200 1,886,250 Helmerich & Payne, Inc. 510,600 8,297,250 Marine Drilling Companies, Inc. (a) 588,600 5,297,400 Nabors Industries, Inc. (a) 516,700 6,103,519 Noble Drilling Corp. 1,152,150 12,673,650 Parker Drilling Co. (a) 248,700 994,800 R&B Falcon Corp. (a) 1,052,518 9,472,662 Rowan Companies, Inc. (a) 471,400 4,360,450 Ryan Energy Technologies, Inc. (a) 417,200 957,552 Transocean Offshore, Inc. 738,754 18,145,645 92,137,791 OIL & GAS SERVICES - 44.7% Baker Hughes, Inc. 2,323,636 42,406,354 BJ Services Co. (a) 918,776 11,599,547 Cal Dive International, Inc. (a) 50,300 647,613 Carbo Ceramics, Inc. 15,000 258,750 Coflexip sponsored ADR 540,400 16,955,050 Daniel Industries, Inc. 291,200 3,239,600 Dawson Geophysical Co. (a) 80,200 982,450 Dresser Industries, Inc. 348,300 8,903,419 Global Industries Ltd. (a) 735,400 6,894,375 Halliburton Co. 753,967 20,027,248 Input/Output, Inc. (a) 94,700 923,325 McDermott International, Inc. 701,600 14,075,850 Oceaneering International, Inc. (a) 463,300 4,314,481 Offshore Logistics, Inc. (a) 117,300 1,055,700 Pool Energy Services Co. (a) 280,700 1,999,988 Schlumberger Ltd. 439,600 19,259,975 Seacor Smit, Inc. (a) 88,200 3,042,900 Smith International, Inc. (a) 83,800 1,476,975 Superior Energy Services, Inc. (a) 205,500 712,828 Tidewater, Inc. 68,465 1,437,765 Varco International, Inc. (a) 712,700 5,077,988 165,292,181 TOTAL ENERGY SERVICES 257,429,972 ENGINEERING - 2.3% ARCHITECTS & ENGINEERS - 2.3% Stolt Comex Seaway SA Class A sponsored ADR (a) 388,600 2,234,450 Stolt Comex Seaway SA 777,100 6,411,075 8,645,525 OIL & GAS - 15.6% OIL & GAS EXPLORATION - 2.0% Companie Generale de Geophsique SA (a) 181,300 2,606,188 SHARES VALUE (NOTE 1) Petroleum Geo-Services AS sponsored ADR (a) 154,900 $ 2,013,700 Veritas DGC, Inc. (a) 186,100 2,791,500 7,411,388 OIL FIELD EQUIPMENT - 13.6% Camco International, Inc. 306,310 15,392,078 Cooper Cameron Corp. (a) 894,276 19,003,365 EVI Weatherford, Inc. (a) 1,037,640 15,824,010 50,219,453 TOTAL OIL & GAS 57,630,841 SERVICES - 0.8% BUSINESS SERVICES - 0.8% Tuboscope, Inc. (a) 335,700 3,084,244 SHIP BUILDING & REPAIR - 1.1% SHIP BUILDERS - 1.1% Dril-Quip, Inc. 86,300 1,062,569 Halter Marine Group, Inc. (a) 329,550 2,965,950 4,028,519 TOTAL COMMON STOCKS (Cost $663,516,128) 348,286,534 CASH EQUIVALENTS - 5.8% Taxable Central Cash Fund (b) (Cost $21,460,792) 21,460,792 21,460,792 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $684,976,920) $ 369,747,326 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $265,756,090 and $395,779,299, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $54,675 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At period end, there were no loans outstanding (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 81.7% France 5.6 Netherlands 5.2 Panama 3.9 Luxembourg 2.3 Others (individually less then 1%) 1.3 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $685,331,086. Net unrealized depreciation aggregated $315,583,760, of which $5,124,088 related to appreciated investment securities and $320,707,848 related to depreciated investment securities. ENERGY SERVICE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS Investment in $ 369,747,326 securities, at value (cost $684,976,92 0) - See accompanyin g schedule Receivable for 3,938,691 investments sold Receivable for 3,178,137 fund shares sold Dividends 509,547 receivable Interest 94,730 receivable Redemption fees 9,292 receivable TOTAL ASSETS 377,477,723 LIABILITIES Payable for $ 5,910,219 fund shares redeemed Accrued 235,761 management fee Other payables 400,359 and accrued expenses TOTAL LIABILITIES 6,546,339 NET ASSETS $ 370,931,384 Net Assets consist of: Paid in capital $ 761,412,057 Accumulated (1,867,848) net investment loss Accumulated (73,383,231) undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized (315,229,594) appreciation (depreciation) on investments NET ASSETS, for $ 370,931,384 27,765,532 shares outstanding NET ASSET $13.36 VALUE and redemption price per share ($370,931,3 84 (divided by) 27,765,532 shares) Maximum $13.77 offering price per share (100/97.00 of $13.36) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 2,332,081 INCOME Dividends Interest 1,175,564 (including income on securities loaned of $213,732) TOTAL INCOME 3,507,645 EXPENSES Management $ 2,491,841 fee Transfer agent 2,414,407 fees Accounting and 336,676 security lending fees Non-interested 1,690 trustees' compensation Custodian fees 19,355 and expenses Registration fees 94,168 Audit 27,801 Legal 2,782 Reports to 123,155 shareholders Total expenses 5,511,875 before reductions Expense (136,382) 5,375,493 reductions NET INVESTMENT (1,867,848) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment (71,566,195) securities Foreign (30) (71,566,225) currency transactions Change in net unrealized appreciation (depreciation) on: Investment (338,232,932) securities Assets and 168 (338,232,764) liabilities in foreign currencies NET GAIN (LOSS) (409,798,989) NET INCREASE $ (411,666,837) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 1,965,395 INFORMATION Sales charges paid to FDC Sales charges $ 1,960,115 - - Retained by FDC Deferred sales $ 5,942 charges withheld by FDC Exchange fees $ 240,435 withheld by FSC Expense $ 134,939 reductions Directed brokerage arrangements Custodian 578 credits Transfer 865 agent credits $ 136,382 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 Operations $ (1,867,848) $ (3,364,496) Net investment income (loss) Net realized (71,566,225) 157,396,467 gain (loss) Change in net (338,232,764) 12,574,205 unrealized appreciation (depreciation) NET INCREASE (411,666,837) 166,606,176 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions to (54,767,341) (52,135,101) shareholders from net realized gain Share 747,012,972 2,385,855,385 transactions Net proceeds from sales of shares Reinvestment 53,845,578 51,297,776 of distributions Cost of shares (885,298,400) (2,077,124,405) redeemed NET INCREASE (84,439,850) 360,028,756 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption 2,803,636 4,998,236 fees TOTAL (548,070,392) 479,498,067 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 919,001,776 439,503,709 period End of period $ 370,931,384 $ 919,001,776 (including accumulated net investment loss of $1,867,848 and $0, respectively) OTHER INFORMATION Shares Sold 26,386,210 81,787,357 Issued in 1,829,615 2,167,528 reinvestment of distributions Redeemed (33,245,361) (72,645,359) Net increase (5,029,536) 11,309,526 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA Net asset $ 28.02 $ 20.46 $ 16.09 $ 11.97 $ 11.66 $ 11.01 value, beginning of period Income from Investment Operation s Net (.06) (.10) (.01) .08 E .02 .03 investment income (loss) D Net (12.98) 9.36 5.05 4.49 .67 .51 realized and unrealized gain (loss) Total from (13.04) 9.26 5.04 4.57 .69 .54 investment operations Less Distributio ns From net - - - (.04) (.01) (.05) investment income In excess - - - - (.01) - of net investment income From net (1.71) (1.85) (.79) (.48) (.35) - realized gain In excess - - - - (.13) - of net realized gain Total (1.71) (1.85) (.79) (.52) (.50) (.05) distributio ns Redemption .09 .15 .12 .07 .12 .16 fees added to paid in capital Net asset $ 13.36 $ 28.02 $ 20.46 $ 16.09 $ 11.97 $ 11.66 value, end of period TOTAL (49.55)% 48.43% 32.26% 39.15% 7.60% 6.36% RETURN B, C RATIOS AND SUPPLEME NTAL DATA Net assets, $ 370,931 $ 919,002 $ 439,504 $ 273,805 $ 63,794 $ 40,857 end of period (000 omitted) Ratio of 1.28% A 1.25% 1.47% 1.59% 1.81% 1.66% expenses to average net assets Ratio of 1.25% A, F 1.22% F 1.45% F 1.58% F 1.79% F 1.65% F expenses to average net assets after expense reductions Ratio of net (.43)% A (.35)% (.07)% .60% .19% .23% investment income (loss) to average net assets Portfolio 68% A 78% 167% 223% 209% 137% turnover rate Average $ .0455 $ .0395 $ .0374 commissio n rate G A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL 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 INVESTMEN T INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.02 PER SHARE. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). G FO R FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
GOLD PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT GOLD -41.79% -56.42% -55.38% -36.76% SELECT GOLD -43.61% -57.80% -56.79% -38.73% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS Natural Resources -24.09% -26.69% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Natural Resources Index - a market capitalization-weighted index of 96 stocks designed to measure the performance of companies in the natural resource sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT GOLD -56.42% -14.90% -4.48% SELECT GOLD -57.80% -15.45% -4.78% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS Natural Resources -26.69% n/a n/a AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Natural Resources S&P 500 00514 SP001 1997/03/03 9700.00 10000.00 1997/03/31 9438.10 9533.50 1997/04/30 9428.40 10102.65 1997/05/31 10262.60 10717.70 1997/06/30 10320.80 11197.85 1997/07/31 10931.90 12088.86 1997/08/31 10980.40 11411.64 1997/09/30 11785.50 12036.66 1997/10/31 11145.30 11634.64 1997/11/30 10233.50 12173.20 1997/12/31 10328.82 12382.22 1998/01/31 10010.40 12519.16 1998/02/28 10408.43 13422.05 1998/03/31 10826.36 14109.39 1998/04/30 11224.38 14251.33 1998/05/31 10627.34 14006.35 1998/06/30 10179.56 14575.29 1998/07/31 9363.60 14420.06 1998/08/31 7565.00 12335.21 IMATRL PRASUN SHR__CHT 19980831 19980916 155914 R00000000000021 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Gold Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have been $6,127 - a 38.73% decrease on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS Euro-Nevada Mining Corp. Ltd. 9.9 Meridian Gold, Inc. 8.7 Getchell Gold Corp. 8.4 Franco Nevada Mining Corp. Ltd. 6.3 Prime Resources Group, Inc. 5.8 Normandy Mining Ltd. 5.4 Stillwater Mining Co. 4.8 Placer Dome, Inc. 4.4 Homestake Mining Co. 4.3 Newmont Gold Co. 4.0 TOP INDUSTRIES AS OF AUGUST 31, 1998 GOLD ORES 70.1% GOLD & SILVER ORES 15.6% SILVER ORES 4.6% MISCELLANEOUS NONMETALLIC MINERALS 3.2% INVESTMENT MANAGERS 3.1% ALL OTHERS 3.4% ROW: 1, COL: 1, VALUE: 3.3 ROW: 1, COL: 2, VALUE: 3.1 ROW: 1, COL: 3, VALUE: 3.3 ROW: 1, COL: 4, VALUE: 4.6 ROW: 1, COL: 5, VALUE: 15.6 ROW: 1, COL: 6, VALUE: 70.09999999999999 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS GOLD PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of George Domolky) George Domolky, Portfolio Manager of Fidelity Select Gold Portfolio Q. HOW DID THE FUND PERFORM, GEORGE? A. Not well at all. For the six- and 12-month periods that ended August 31, 1998, the fund had total returns of -41.79% and -56.42%, respectively. In comparison, the Standard & Poor's 500 Index returned - -8.10% and 8.10%, respectively, over the same time periods. Beginning this period, the fund also compares itself to the Goldman Sachs Natural Resources Index - an index of 96 stocks designed to measure the performance of companies in the natural resource sector - which returned -24.09% and -26.69% over the same six- and 12-month periods, respectively. Q. WHAT ACCOUNTED FOR THE FUND'S POOR PERFORMANCE? A. The primary factor influencing the performance of the fund is typically the price of gold. Unfortunately, gold continued to weaken, getting as low as $271 per ounce in August. Gold was weak for several reasons. For one thing, the European Economic Community central bank decided to hold 15% of its currency reserves in gold, which was somewhat below expectations. Another contributing factor was the ongoing currency crisis in Asia, where the region's weaker currencies made gold more expensive, thereby reducing demand for gold jewelry. Finally, the recent turmoil in Russia added to the gold market's negative psychology, raising fears that Russia would sell gold to help support its weakening currency, the ruble. The Goldman Sachs index, though more similar to the fund in composition than the S&P 500, includes the stocks of companies involved with not only gold and other precious metals, but also copper, nickel, oil, gas, lumber and other natural resources. This greater diversification enabled the Goldman Sachs index to post a better return than the fund did. Q. WHAT STRATEGY DID YOU EMPLOY IN SUCH A CHALLENGING ENVIRONMENT? A. I continued to invest in selected United States and Canadian mining companies with good cash flows and cost structures that allow them to be profitable despite low commodity prices. In addition, the fund held a few stocks of companies in South America, Australia and elsewhere. Although foreign investments carry greater risk than U.S. investments, their profit potential made these stocks attractive investments. Finally, I continued to look for opportunities to diversify the fund's holdings by investing in companies involved in the exploration and production of diamonds, platinum, palladium and silver. Q. WHAT HOLDINGS HELPED THE FUND'S PERFORMANCE? A. Stillwater Mining, a major producer of platinum and palladium, held its ground relatively well based on the company's established production record and the surging price of palladium. Aluminum Company of America, which had a slightly positive impact on performance, is another example of a diversification effort that paid off well on a relative basis. I subsequently sold this stock. Q. WHAT HOLDINGS DISAPPOINTED YOU? A. The stock of Getchell Gold, the fund's third-largest holding at the end of the period, continued to weaken. Weaker gold prices resulted in investors favoring established producers over exploration companies like Getchell Gold. Newmont Gold also detracted from performance, as the falling price of the yellow metal once again hurt this stock badly because of the company's policy of not hedging its gold production. Hedging - selling gold in the futures or forward markets for future delivery - is used by many gold mining companies to help protect them from falling prices. Greenstone Resources - another poorly performing stock - ran into problems when the company reported production numbers below the market's expectations. Q. WHAT'S YOUR OUTLOOK, GEORGE? A. You would have to go back to the late 1970s to find gold prices lower than we have seen recently. However, in most parts of the world, gold still acts as a currency of last resort. When the Far East recovers from its present malaise, demand from that part of the world should increase. Furthermore, central bank gold sales will likely decrease in 1999, when we have passed the year-end cutoff point for participating countries of the European Economic Community to adjust their currency reserves prior to phasing in the region's new currency, the euro. Another positive factor is the recent change in the fund's charter - reflected in the deletion of "American" from the fund's name on June 1, 1998 - that allows me to invest in high-quality precious metals mining companies worldwide. Regardless of the supply and demand considerations for gold, the fund should be well served by its worldwide focus and its emphasis on strong companies with healthy balance sheets and the capability to add meaningfully to production. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 041 TRADING SYMBOL: FSAGX SIZE: as of August 31, 1998, more than $123 million MANAGER: George Domolky, since 1997; manager, Fidelity Select Precious Metals and Minerals Portfolio, since 1997; Fidelity Canada Fund, 1987-1996; Fidelity Select Food and Agriculture Portfolio, 1985-1987; joined Fidelity in 1981 (checkmark) GOLD PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 98.0% SHARES VALUE (NOTE 1) AUSTRALIA - 6.3% METALS & MINING - 0.1% METAL MINING SERVICES - 0.1% Acacia Resources Ltd. 100,000 $ 89,372 PRECIOUS METALS - 6.2% GOLD & SILVER ORES - 5.4% Normandy Mining Ltd. 11,544,508 6,637,428 GOLD ORES - 0.8% Delta Gold NL 200,000 183,299 Lihir Gold Ltd. (a) 400,000 357,489 Resolute Ltd. (a) 800,000 450,846 991,634 TOTAL PRECIOUS METALS 7,629,062 TOTAL AUSTRALIA 7,718,434 CANADA - 57.5% METALS & MINING - 3.5% METAL MINING - 0.1% Morgain Minerals, Inc. (a) 295,000 58,304 Romarco Minerals, Inc. (a) 5,000 4,782 63,086 METAL MINING SERVICES - 0.2% Minefinders Corp. Ltd. (a) 297,600 159,378 Minefinders Corp. Ltd. (a)(c) 200,000 107,109 266,487 MISCELLANEOUS NONMETALLIC MINERALS - 3.2% Aber Resources Ltd. (a) 291,700 1,543,583 Archangel Diamond Corp. (a) 19,600 6,248 Camphor Ventures, Inc. (a) 14,100 5,843 DIA Metropolitan Minerals Ltd. (a): Class A (sub-vtg.) 50,650 557,037 Class B (multi-vtg.) 172,400 1,857,545 3,970,256 TOTAL METALS & MINING 4,299,829 OIL & GAS - 0.4% OIL & GAS FIELD EXPLORATION SERVICES - 0.4% Southwestern Gold Corp. (a) 207,500 420,689 PRECIOUS METALS - 53.6% GOLD & SILVER ORES - 0.9% Goldcorp, Inc. Class A (a) 129,500 330,252 Mentor Exploration & Development 188,000 299,649 Co. Ltd. (d) Richmont Mines, Inc. (a) 187,300 423,918 1,053,819 GOLD ORES - 52.7% Agnico-Eagle Mines Ltd. 40,000 110,934 Argosy Mining Corp. (a) 55,000 6,312 SHARES VALUE (NOTE 1) Argosy Mining Corp. (a)(c) 375,000 $ 43,035 Barrick Gold Corp. 4,100 53,194 Brazilian Resources, Inc. (a) 580,000 85,049 Cambior, Inc. 829,700 3,491,246 Canarc Resource Corp. (a) 530,000 40,548 Cathedral Gold Corp. (a) 79,000 7,555 Crown Resources Corp. (a) 307,700 846,175 Euro-Nevada Mining Corp. Ltd. 1,221,400 12,069,939 Francisco Gold Corp. (a) 182,200 929,295 Francisco Gold Corp. (a)(c) 144,500 737,010 Franco Nevada Mining Corp. Ltd. 565,500 7,679,407 Franco Nevada Mining Corp. Ltd. (c) 106,900 1,451,686 Franco Nevada Mining Corp. Ltd. 33,334 255,026 Class B warrants 9/15/98 (a)(c) Geomaque Explorations Ltd. (a) 678,100 466,910 Golden Knight Resources, Inc. (a) 853,200 244,782 Golden Queen Mining Co. Ltd. (a) 120,800 46,210 Greenstone Resources Ltd. (a) 2,229,800 2,430,958 Greenstone Resources Ltd. (a)(c) 120,000 130,826 High River Gold Mines Ltd. (a) 60,000 14,919 Indochina Goldfields Ltd. (a) 20,000 12,113 Indochina Goldfields Ltd. (a)(c) 100,000 60,567 IAMGOLD International African Mining Gold Corp. (a) 175,200 277,014 IAMGOLD International African Mining Gold Corp. (a)(c) 60,000 94,868 Kinross Gold Corp. (a) 1,723,100 2,966,127 Kinross Gold Corp. (a)(c) 320,000 550,845 Meridian Gold, Inc. (a) 3,539,700 10,606,688 Metallica Resources, Inc. (a)(d) 1,042,100 478,363 Metallica Resources, Inc. (a)(c)(d) 100,000 45,904 Mountain Province Mining, Inc. (a) 874,900 1,115,588 Nevsun Resources Ltd. (a) 612,000 163,876 Oliver Gold Corp. (a) 273,800 19,202 Orvana Minerals Corp. (a) 3,600 2,295 Placer Dome, Inc. 675,400 5,361,001 Prime Resources Group, Inc. 1,161,900 7,074,367 Queenston Mining, Inc. (a) 254,000 71,253 Repadre Capital Corp. (a) 156,200 248,964 Repadre Capital Corp. (a)(c) 155,000 247,051 Rio Narcea Gold Mines Ltd. (a) 193,000 295,314 Samax Gold, Inc. (a) 75,000 248,645 Samax Gold, Inc. (a)(c) 240,000 795,665 Silver Standard Resources, Inc. (a) 170,000 109,468 Sudbury Contact Mines Ltd. (a) 114,800 36,595 Sutton Resources Ltd. (a) 81,700 190,121 Teck Corp. Class B (sub-vtg.) 86,000 507,172 TVI Pacific, Inc. (a) 1,917,000 61,109 TVI Pacific, Inc. (c) 96,000 3,060 TVX Gold, Inc. (a) 1,207,900 1,347,673 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) CANADA - CONTINUED PRECIOUS METALS - CONTINUED GOLD ORES - CONTINUED Vengold, Inc. (a) 215,000 $ 130,220 Viceroy Resources Corp. (a) 130,000 165,763 64,427,907 TOTAL PRECIOUS METALS 65,481,726 TOTAL CANADA 70,202,244 FRANCE - 0.4% PRECIOUS METALS - 0.4% GOLD ORES - 0.4% Guyanor Resources SA Class B (a) 493,440 475,036 GHANA - 1.6% PRECIOUS METALS - 1.6% GOLD ORES - 1.6% Ashanti Goldfields Co. Ltd. GDR 316,422 1,977,638 MEXICO - 0.9% PRECIOUS METALS - 0.9% GOLD & SILVER ORES - 0.9% Industrias Penoles SA 470,000 1,117,711 PERU - 4.6% PRECIOUS METALS - 4.6% SILVER ORES - 4.6% Compania de Minas Buenaventura SA: Series A sponsored ADR 274,445 1,116,448 Series T sponsored ADR 1,146,549 4,219,617 sponsored ADR Class B 41,700 317,963 5,654,028 UNITED STATES OF AMERICA - 26.7% PRECIOUS METALS - 23.0% GOLD & SILVER ORES - 8.4% Getchell Gold Corp. (a) 1,139,648 10,256,832 GOLD ORES - 14.6% Battle Mountain Gold Co. 36,000 110,250 Homestake Mining Co. 598,800 5,314,350 Newmont Gold Co. 328,000 4,879,000 Newmont Mining Corp. 70,440 964,148 Stillwater Mining Co. (a) 335,600 5,893,975 Stillwater Mining Co. (a)(c) 39,600 695,582 17,857,305 TOTAL PRECIOUS METALS 28,114,137 SECURITIES INDUSTRY - 3.1% INVESTMENT MANAGERS - 3.1% Pioneer Group, Inc. 207,500 3,722,031 SHARES VALUE (NOTE 1) SERVICES - 0.6% JEWELRY, PRECIOUS METAL - 0.6% Lazare Kaplan International, Inc. (a) 85,300 $ 709,056 TOTAL UNITED STATES OF AMERICA 32,545,224 TOTAL COMMON STOCKS 119,690,315 (Cost $250,924,998)
CASH EQUIVALENTS - 2.0% Taxable Central Cash Fund (b) 2,484,808 2,484,808 (Cost 2,484,808) TOTAL INVESTMENT IN SECURITIES - 100% $ 122,175,123 (Cost $253,409,806) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $5,218,234 or 4.2% of net assets. (d) Affiliated company (see Note 10 of Notes to Financial Statements). OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $29,745,387 and $28,133,128, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $2,880 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, there were no loans outstanding (see Note 6 of Notes to Financial Statements). Transactions during the period with companies which are or were affiliated are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Mentor Exploration & Development Co. Ltd. $ - $ - $ - $ 299,649 Metallica Resources, Inc. - - - 524,267 TOTALS $ - $ - $ - $ 823,916 INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $254,648,282. Net unrealized depreciation aggregated $132,473,159, of which $5,944,069 related to appreciated investment securities and $138,417,228 related to depreciated investment securities. At February 28, 1998, the fund had a capital loss carryforward of approximately $35,849,000 all of which will expire on February 28, 2006. The fund intends to elect to defer to its fiscal year ending February 28, 1999 approximately $7,830,000 of losses recognized during the period November 1, 1997 to February 28, 1998 GOLD PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS Investment in $ 122,175,123 securities, at value (cost $253,409,80 6) - See accompanyin g schedule Receivable for 2,772,605 investments sold Receivable for 662,371 fund shares sold Dividends 267,616 receivable Interest 15,513 receivable Redemption fees 2,867 receivable Other 3,500 receivables TOTAL ASSETS 125,899,595 LIABILITIES Payable for $ 2,086,659 fund shares redeemed Accrued 76,565 management fee Other payables 178,852 and accrued expenses TOTAL LIABILITIES 2,342,076 NET ASSETS $ 123,557,519 Net Assets consist of: Paid in capital $ 300,943,298 Accumulated (3,368,524) net investment loss Accumulated (42,779,829) undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized (131,237,426) appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 123,557,519 13,998,026 shares outstanding NET ASSET $8.83 VALUE and redemption price per share ($123,557,5 19 (divided by) 13,998,026 shares) Maximum $9.10 offering price per share (100/97.00 of $8.83) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 792,460 INCOME Dividends Interest 142,907 (including income on securities loaned of $10,629) TOTAL INCOME 935,367 EXPENSES Management $ 604,110 fee Transfer agent 801,919 fees Accounting and 103,603 security lending fees Non-interested 517 trustees' compensation Custodian fees 56,858 and expenses Registration fees 32,693 Audit 13,065 Legal 613 Reports to 42,061 shareholders Miscellaneous 200 Total expenses 1,655,639 before reductions Expense (22,875) 1,632,764 reductions NET INVESTMENT (697,397) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment 2,473,250 securities Foreign (19,129) 2,454,121 currency transactions Change in net unrealized appreciation (depreciation) on: Investment (93,843,711) securities Assets and (6,260) (93,849,971) liabilities in foreign currencies NET GAIN (LOSS) (91,395,850) NET INCREASE $ (92,093,247) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 314,117 INFORMATION Sales charges paid to FDC Sales charges $ 310,413 - - Retained by FDC Deferred sales $ 10,596 charges withheld by FDC Exchange fees $ 44,850 withheld by FSC Expense $ 22,821 reductions Directed brokerage arrangements Transfer 54 agent credits $ 22,875 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 Operations $ (697,397) $ (1,879,396) Net investment income (loss) Net realized 2,454,121 (42,330,692) gain (loss) Change in net (93,849,971) (126,678,432) unrealized appreciation (depreciation) NET INCREASE (92,093,247) (170,888,520) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distributions - (17,386,044) to shareholders from net realized gain Share 157,080,280 510,192,668 transactions Net proceeds from sales of shares Reinvestment - 17,026,797 of distributions Cost of shares (161,861,963) (549,713,586) redeemed NET INCREASE (4,781,683) (22,494,121) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption 764,187 2,333,972 fees TOTAL (96,110,743) (208,434,713) INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 219,668,262 428,102,975 period End of period $ 123,557,519 $ 219,668,262 (including accumulate d net investment loss of $3,368,52 4 and $2,671,12 7, respectively) OTHER INFORMATION Shares Sold 10,503,999 26,655,922 Issued in - 755,071 reinvestment of distributions Redeemed (10,982,776) (28,111,853) Net increase (478,777) (700,860) (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA Net asset $ 15.17 $ 28.21 $ 27.11 $ 18.44 $ 22.66 $ 14.15 value, beginning of period Income from Investment Operation s Net (.05) (.13) (.16) (.06) (.05) (.11) investment income (loss) D Net (6.34) (11.78) 1.60 8.62 (4.25) 8.44 realized and unrealized gain (loss) Total from (6.39) (11.91) 1.44 8.56 (4.30) 8.33 investment operations Less Distributio ns From net - (1.29) (.50) - - - realized gain Redemption .05 .16 .16 .11 .08 .18 fees added to paid in capital Net asset $ 8.83 $ 15.17 $ 28.21 $ 27.11 $ 18.44 $ 22.66 value, end of period TOTAL (41.79)% (43.15)% 6.10% 47.02% (18.62)% 60.14% RETURN B, C RATIOS AND SUPPLEME NTAL DATA Net assets, $ 123,558 $ 219,668 $ 428,103 $ 451,493 $ 278,197 $ 347,406 end of period (000 omitted) Ratio of 1.58% A 1.55% 1.44% 1.39% 1.41% 1.50% expenses to average net assets Ratio of 1.56% A, E 1.48% E 1.42% E 1.39% 1.41% 1.49% E expenses to average net assets after expense reductions Ratio of net (.67)% A (.67)% (.59)% (.27)% (.22)% (.51)% investment income (loss) to average net assets Portfolio 29% A 89% 63% 56% 34% 39% turnover rate Average $ .0193 $ .0193 $ .0270 commissio n rate F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FO R FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
NATURAL RESOURCES PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 LIFE OF AUGUST 31, 1998 MONTHS YEAR FUND SELECT NATURAL RESOURCES -27.25% -31.04% -21.93% SELECT NATURAL RESOURCES -29.50% -33.18% -24.35% (LOAD ADJ.) S&P 500 -8.10% 8.10% 23.35% GS Natural Resources -24.09% -26.69% -11.03% 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 March 3, 1997. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Natural Resources Index - a market capitalization-weighted index of 96 stocks designed to measure the performance of companies in the natural resource sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 LIFE OF AUGUST 31, 1998 YEAR FUND SELECT NATURAL RESOURCES -31.04% -15.25% SELECT NATURAL RESOURCES -33.18% -17.02% (LOAD ADJ.) S&P 500 8.10% 15.06% GS Natural Resources -26.69% -7.51% AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER LIFE OF FUND Select Natural Resources S&P 500 $12,335 $7,565 $ $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Natural Resources Portfolio on March 3, 1997 when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have been $7,565 - a 24.35% decrease on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $12,335 - a 23.35% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS Total SA sponsored ADR 6.9 USX-Marathon Group 6.3 Elf Aquitaine SA sponsored ADR 5.5 Amoco Corp. 5.4 Chevron Corp. 4.5 Texaco, Inc. 4.2 Exxon Corp. 4.2 Tosco Corp. 3.6 Phillips Petroleum Co. 3.2 Amerada Hess Corp. 3.0 TOP INDUSTRIES AS OF AUGUST 31, 1998 ROW: 1, COL: 1, VALUE: 19.4 ROW: 1, COL: 2, VALUE: 2.0 ROW: 1, COL: 3, VALUE: 7.9 ROW: 1, COL: 4, VALUE: 12.1 ROW: 1, COL: 5, VALUE: 23.3 ROW: 1, COL: 6, VALUE: 35.3 OIL & GAS EXPLORATION 35.3% CRUDE PETROLEUM & GAS 23.4% PETROLEUM REFINERS 12.1% OIL & GAS SERVICES 7.9% OIL FIELD EQUIPMENT 2.0% ALL OTHERS 19.3% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS NATURAL RESOURCES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Lawrence Rakers) Lawrence Rakers, Portfolio Manager of Fidelity Select Natural Resources Portfolio Q. HOW DID THE FUND PERFORM, LARRY? A. For the six months that ended August 31, 1998, the fund returned - -27.25%, underperforming the Standard & Poor's 500 index, which returned -8.10%. For the 12 months that ended August 31, 1998, the fund returned -31.04%. During the same 12-month period, the S&P 500 returned 8.10%. Beginning this period, the fund also compares itself to the Goldman Sachs Natural Resources index - an index of 96 stocks designed to measure the performance of companies in the natural resource sector - which returned -24.09% and -26.69% over the same six- and 12-month periods, respectively. Q. WHAT FACTORS HURT THE FUND'S PERFORMANCE DURING THE PERIOD? A. The financial crisis in Asia and most recently in Russia have been the primary causes for declining commodity prices. Most natural resources commodities - with the exception of palladium, platinum and silver - are down about 25% to 35% over the past year. Natural resources stock prices move in close tandem with commodity prices, so it has been a difficult environment for the fund. Historically, Asia has represented about 40% of the annual increase in demand for most commodities. Since demand for a typical commodity grows between 2% to 2 % each year, difficulties in Asia have resulted in a decline in annual demand growth, causing a severe decline in commodity prices. In addition, investor sentiment has been negative toward this sector, causing further downward pressure on stock prices. Q. WHAT FACTORS CAUSED THE STEEP DECLINE IN OIL PRICES? A. With regard to oil, we had one of the warmest weather patterns in recent history in the U.S., Europe and Asia, causing lower demand for the commodity. Reduced demand, combined with financial instability in Asian and emerging markets, resulted in the price of a barrel of oil losing about 40% of its value during the period. Q. IN LIGHT OF THE NEGATIVE ENVIRONMENT, WERE THERE ANY SPECIFIC STRATEGIES YOU UTILIZED TO MINIMIZE RISKS TO THE FUND? A. I increased the fund's holdings in energy stocks because there is a possibility that OPEC will cut production, causing a rise in oil prices and an appreciation in the price of energy stocks. I also focused on integrated oil companies such as Texaco, Exxon, USX-Marathon and Total SA. These companies' balance sheets looked good, and they are diversified organizations that produce oil and gas, and have refining and chemical operations. As a result, they tend to have more stable earnings growth and offer higher dividend yields than some of the non-integrated energy companies. More recently, I put about 9% of the portfolio into energy service companies and drillers such as Schlumberger. I believed these stocks could outperform other natural resources stocks if oil prices rebound. Q. WHAT STOCKS OR STRATEGIES HELPED THE FUND'S PERFORMANCE? WHAT WERE THE DISAPPOINTMENTS? A. There were a couple of factors that helped the fund's performance. First, the fund was overweighted in integrated oil companies such as Texaco, Exxon and British Petroleum relative to the rest of the natural resources sector. The valuations and earnings of these companies were more stable than most stocks in the sector. On the negative side, while the fund had limited exposure to gold, just about every gold stock in the fund performed poorly. The supply and demand picture for gold indicates that we consume more than we mine, which should be good for gold prices. However, it is difficult to predict the direction of gold prices. The central banks of governments around the world hold huge reserves of gold and many have been selling recently, putting downward pressure on prices. Q. WHAT'S YOUR OUTLOOK FOR THE NATURAL RESOURCES SECTOR? A. The continued decline in commodity prices seems to be telling us that Asia isn't getting better any time soon. Of course, no one really knows how long it will take for Asia to rebound, so I will continue to focus on individual stock selection and picking companies that I think have the best business prospects and earnings outlooks. I believe the natural resources sector is setting itself up for a great rally; the only problem is that it is impossible to say exactly when it is going to happen. Commodity prices have been beaten down for an extended period and producers have responded by not adding to supply. We can have a strong rally when demand picks up because commodity prices would spike upward quickly during the lag time before supply increases. In addition, when we start to see some global financial stability - and assuming the U.S. and Europe continue to do well - we may see signs of inflation. This sector traditionally has been a great tool for hedging against a period of inflation. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: March 3, 1997 FUND NUMBER: 514 TRADING SYMBOL: FNATF SIZE: as of August 31, 1998, more than $4 million MANAGER: Lawrence Rakers, since inception; manager, Fidelity Select Energy Portfolio, since 1997; Fidelity Select Paper and Forest Products Portfolio, 1996-1997; Fidelity Select American Gold Portfolio, 1995-1997; Fidelity Select Precious Metals and Minerals Portfolio, 1996-1997; joined Fidelity in 1993. NATURAL RESOURCES PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.8% SHARES VALUE (NOTE 1) CHEMICALS & PLASTICS - 1.6% CHEMICALS - 1.6% du Pont (E.I.) de Nemours & Co. 800 $ 46,150 MacDermid, Inc. 400 11,100 Sasol, Ltd. 5,300 21,965 79,215 ENERGY SERVICES - 8.7% DRILLING - 0.8% Helmerich & Payne, Inc. 1,000 16,250 Nabors Industries, Inc. (a) 600 7,088 Transocean Offshore, Inc. 600 14,738 38,076 OIL & GAS SERVICES - 7.9% BJ Services Co. (a) 2,300 29,038 Baker Hughes, Inc. 4,390 80,118 Coflexip sponsored ADR 1,400 43,925 Dresser Industries, Inc. 3,700 94,581 McDermott International, Inc. 1,100 22,069 Schlumberger Ltd. 2,100 92,006 Smith International, Inc. (a) 800 14,100 Varco International, Inc. (a) 2,600 18,525 394,362 TOTAL ENERGY SERVICES 432,438 ENGINEERING - 0.1% ARCHITECTS & ENGINEERS - 0.1% Stolt Comex Seaway SA Class A sponsored ADR (a) 700 4,025 Stolt Comex Seaway SA 400 3,300 7,325 GAS - 0.1% GAS DISTRIBUTION - 0.1% MCN Energy Group, Inc. 400 7,025 METALS & MINING - 2.1% METAL MINING - 0.2% Breakwater Resources Ltd. (a) 13,700 6,988 Columbia Metals Ltd. (a) 20,100 897 7,885 MISCELLANEOUS NONMETAL MINERALS - 0.1% Camphor Ventures, Inc. (a) 16,400 6,796 PRIME NONFERROUS SMELTING - 1.8% Aluminum Co. of America 1,500 89,804 TOTAL METALS & MINING 104,485 OIL & GAS - 72.8% CRUDE PETROLEUM & GAS - 23.4% Anadarko Petroleum Corp. 1,600 46,000 Burlington Resources, Inc. 457 13,510 Canadian Occidental Petroleum Ltd. 400 4,782 EEX Corp. (a) 1,000 4,438 ENI Spa sponsored ADR 1,000 50,625 Elf Aquitaine SA sponsored ADR 5,600 273,700 Enron Oil & Gas Co. 400 5,200 Louis Dreyfus Natural Gas Corp. (a) 800 9,050 Magnum Hunter Resources, Inc. (a) 2,600 8,125 Occidental Petroleum Corp. 4,200 77,700 Oryx Energy Co. (a) 2,300 28,606 SHARES VALUE (NOTE 1) Paramount Resources Ltd. (c) 2,600 $ 19,063 Penn West Petroleum Ltd. (a) 500 4,383 Petrobras PN (Pfd. Reg.) 727,800 74,281 Plains Resources, Inc. (a) 3,300 50,738 Rio Alto Exploration Ltd. (a) 2,300 18,476 Suncor Energy, Inc. 1,600 44,731 Total SA sponsored ADR 7,200 346,050 Ulster Petroleums Ltd. (a) 1,400 8,122 Vastar Resources, Inc. 800 30,400 Vintage Petroleum, Inc. 200 1,563 YPF Sociedad Anonima: sponsored ADR Class D 1,500 33,188 Class D 500 11,202 1,163,933 OIL & GAS EXPLORATION - 35.3% Amerada Hess Corp. 3,000 147,375 Amoco Corp. 5,900 267,344 Berkley Petroleum Corp. (a) 700 3,682 Chevron Corp. 3,000 222,188 Companie Generale de Geophysique SA (a) 1,000 14,375 Exxon Corp. 3,200 209,400 Kerr-McGee Corp. 400 15,450 Mobil Corp. 2,100 145,163 Petro-Canada 5,200 49,729 Phillips Petroleum Co. 3,900 159,169 Texaco, Inc. 3,800 211,138 USX-Marathon Group 12,000 312,000 1,757,013 OIL FIELD EQUIPMENT - 2.0% Camco International, Inc. 700 35,175 Cooper Cameron Corp. (a) 1,400 29,750 EVI Weatherford, Inc. (a) 2,395 36,524 101,449 PETROLEUM REFINERS - 12.1% British Petroleum Co. PLC ADR 1,474 107,786 Coastal Corp. (The) 1,600 41,600 Frontier Oil Corp. (a) 16,300 87,613 Imperial Oil Ltd. 3,000 42,078 Royal Dutch Petroleum Co. (NY Registry Gilder 1.25) 1,300 51,675 Shell Canada Ltd. Class A 800 11,858 Shell Transport & Trading Co. PLC ADR 900 28,069 Tesoro Petroleum Corp. (a) 1,700 21,888 Tosco Corp. 8,200 180,400 Ultramar Diamond Shamrock Corp. 700 16,188 Valero Energy Corp. 700 12,513 601,668 TOTAL OIL & GAS 3,624,063 PACKAGING & CONTAINERS - 0.9% GLASS CONTAINERS - 0.9% Owens-Illinois, Inc. (a) 1,400 43,663 PRECIOUS METALS - 3.6% GOLD & SILVER ORES - 1.7% Getchell Gold Corp. (a) 7,500 67,500 Industrias Penoles SA 6,500 15,458 82,958 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PRECIOUS METALS - CONTINUED GOLD ORES - 1.9% Greenstone Resources Ltd. (a) 23,000 $ 25,075 Greenstone Resources Ltd. (a)(c) 1,500 1,635 Meridian Gold, Inc. (a) 8,400 25,171 Mountain Province Mining, Inc. (a) 1,500 1,913 Stillwater Mining Co. (a) 2,000 35,125 William Resources, Inc. warrants 12/31/02 (a)(c) 15,750 - William Resources, Inc. (a) 105,000 5,355 94,274 TOTAL PRECIOUS METALS 177,232 SHIP BUILDING & REPAIR - 0.3% SHIP BUILDERS - 0.3% Halter Marine Group, Inc. (a) 1,500 13,500 TRUCKING & FREIGHT - 1.6% AIR COURIER SERVICES - 1.3% CNF Transportation, Inc. 2,100 65,625 FREIGHT FORWARDING - 0.3% Expeditors International of Washington, Inc. 600 16,688 TOTAL TRUCKING & FREIGHT 82,313 TOTAL COMMON STOCKS (Cost $6,214,884) 4,571,259 CASH EQUIVALENTS - 8.2% Taxable Central Cash Fund (b) (Cost $410,114) 410,114 410,114 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $6,624,998) $ 4,981,373 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $20,698 or 0.4% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $4,966,085 and $5,543,246, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $1,392 for the period (see Note 4 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 71.0% France 13.6 Canada 5.6 United Kingdom 2.7 Netherlands Antilles 1.8 Brazil 1.5 Netherlands 1.0 Italy 1.0 Others (individually less than 1%) 1.8 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $6,631,435. Net unrealized depreciation aggregated $1,650,062, of which $30,239 related to appreciated investment securities and $1,680,301 related to depreciated investment securities. NATURAL RESOURCES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS Investment in $ 4,981,373 securities, at value (cost $6,624,998) - - See accompanyin g schedule Receivable for 146,334 investments sold Receivable for 7,532 fund shares sold Dividends 23,466 receivable Interest 2,003 receivable Redemption fees 45 receivable Receivable from 3,633 investment adviser for expense reductions TOTAL ASSETS 5,164,386 LIABILITIES Payable to $ 19,728 custodian bank Payable for 145,348 investments purchased Payable for 36,686 fund shares redeemed Other payables 25,283 and accrued expenses TOTAL LIABILITIES 227,045 NET ASSETS $ 4,937,341 Net Assets consist of: Paid in capital $ 7,117,613 Accumulated (14,913) net investment loss Accumulated (522,523) undistributed net realized gain (loss) on investments and foreign currency transactions Net unrealized (1,642,836) appreciation (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for $ 4,937,341 648,653 shares outstanding NET ASSET $7.61 VALUE and redemption price per share ($4,937,341 (divided by) 648,653 shares) Maximum $7.85 offering price per share (100/97.00 of $7.61) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 63,840 INCOME Dividends Interest 13,616 TOTAL INCOME 77,456 EXPENSES Management $ 21,287 fee Transfer agent 33,693 fees Accounting fees 30,048 and expenses Non-interested 14 trustees' compensation Custodian fees 12,476 and expenses Registration fees 6,175 Audit 9,758 Legal 22 Reports to 1,412 shareholders Miscellaneous 134 Total expenses 115,019 before reductions Expense (23,558) 91,461 reductions NET INVESTMENT (14,005) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment (486,160) securities Foreign (334) (486,494) currency transactions Change in net unrealized appreciation (depreciation) on: Investment (1,409,315) securities Assets and 818 (1,408,497) liabilities in foreign currencies NET GAIN (LOSS) (1,894,991) NET INCREASE $ (1,908,996) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 11,601 INFORMATION Sales charges paid to FDC Sales charges $ 11,601 - - Retained by FDC Deferred sales $ 8 charges withheld by FDC Exchange fees $ 1,725 withheld by FSC Expense $ 759 reductions Directed brokerage arrangements Custodian 53 credits FMR 22,746 reimbursemen t $ 23,558 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED MARCH 3, 1997 (DECREASE) IN AUGUST 31, 1998 (COMMENCEMENT NET ASSETS (UNAUDITED) OF OPERATIONS) TO FEBRUARY 28, 1998 Operations $ (14,005) $ (55,268) Net investment income (loss) Net realized (486,494) 327,737 gain (loss) Change in net (1,408,497) (234,339) unrealized appreciation (depreciation) NET INCREASE (1,908,996) 38,130 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Distribution to - (189,236) shareholders from net realized gain Share 2,675,683 19,111,951 transactions Net proceeds from sales of shares Reinvestment - 187,981 of distributions Cost of shares (3,356,284) (11,661,561) redeemed NET INCREASE (680,601) 7,638,371 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption 7,079 32,594 fees TOTAL (2,582,518) 7,519,859 INCREASE (DECREASE) IN NET ASSETS NET ASSETS Beginning of 7,519,859 - period End of period $ 4,937,341 $ 7,519,859 (including accumulate d net investment loss of $14,913 and $908, respectively) OTHER INFORMATION Shares Sold 252,814 1,783,337 Issued in - 18,686 reinvestment of distributions Redeemed (323,199) (1,082,985) Net increase (70,385) 719,038 (decrease)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS SIX MONTHS MARCH 3, ENDED 1997 AUGUST 31, (COMMENCEM 1998 ENT OF OPERATIONS) TO FEBRUARY 28, SELECTED (UNAUDITED) 1998 PER-SHARE DATA Net asset $ 10.46 $ 10.00 value, beginning of period Income from Investment Operation s Net (.02) (.09) investment income (loss) D Net (2.84) .76 realized and unrealized gain (loss) Total from (2.86) .67 investment operations Less Distributio ns From net - (.26) realized gain Redemption .01 .05 fees added to paid in capital Net asset $ 7.61 $ 10.46 value, end of period TOTAL (27.25)% 7.30% RETURN B, C RATIOS AND SUPPLEME NTAL DATA Net assets, $ 4,937 $ 7,520 end of period (000 omitted) Ratio of 2.50% A, E 2.50% A, E expenses to average net assets Ratio of 2.48% A, F 2.48% A, F expenses to average net assets after expense reductions Ratio of net (.38)% A (.86)% A investment income (loss) to average net assets Portfolio 148% A 165% A turnover rate Average $ .0213 $ .0111 commissio n rate G
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). G A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
PRECIOUS METALS AND MINERALS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT PRECIOUS METALS -38.81% -54.12% -57.35% -40.48% AND MINERALS SELECT PRECIOUS METALS -40.72% -55.57% -58.70% -42.34% AND MINERALS (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS Natural Resources -24.09% -26.69% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Natural Resources Index - a market capitalization-weighted index of 96 stocks designed to measure the performance of companies in the natural resource sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT PRECIOUS METALS AND MINERALS -54.12% -15.67% -5.06% SELECT PRECIOUS METALS AND MINERALS -55.57% -16.21% -5.36% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS Natural Resources -26.69% n/a n/a AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Precious Metals&Minerals S&P 500 00061 SP001 1988/08/31 9700.00 10000.00 1988/09/30 9045.25 10426.00 1988/10/31 9376.67 10715.84 1988/11/30 9724.25 10562.61 1988/12/31 9318.15 10747.45 1989/01/31 9705.71 11534.17 1989/02/28 10017.43 11246.96 1989/03/31 10017.43 11509.02 1989/04/30 9562.48 12106.34 1989/05/31 9107.52 12596.64 1989/06/30 9823.66 12524.84 1989/07/31 10093.26 13655.84 1989/08/31 10295.46 13923.49 1989/09/30 10657.74 13866.40 1989/10/31 10649.32 13544.70 1989/11/30 12005.76 13821.02 1989/12/31 12315.11 14152.72 1990/01/31 13295.88 13203.07 1990/02/28 12153.07 13373.39 1990/03/31 11624.30 13727.79 1990/04/30 10430.32 13384.59 1990/05/31 11027.31 14689.59 1990/06/30 10225.63 14589.70 1990/07/31 10848.21 14543.01 1990/08/31 10959.08 13228.33 1990/09/30 10711.75 12584.11 1990/10/31 9509.24 12529.99 1990/11/30 9338.67 13339.43 1990/12/31 9719.88 13711.60 1991/01/31 8664.88 14309.43 1991/02/28 9443.16 15332.55 1991/03/31 9261.56 15703.60 1991/04/30 9235.62 15741.29 1991/05/31 9754.47 16421.31 1991/06/30 10394.39 15669.22 1991/07/31 10394.39 16399.40 1991/08/31 9304.80 16788.07 1991/09/30 9495.04 16507.71 1991/10/31 10134.96 16728.91 1991/11/30 10454.92 16054.73 1991/12/31 9869.33 17891.40 1992/01/31 10078.75 17558.62 1992/02/29 9555.18 17786.88 1992/03/31 9179.96 17440.03 1992/04/30 8638.93 17952.77 1992/05/31 9206.13 18040.74 1992/06/30 9258.07 17771.93 1992/07/31 9380.47 18498.80 1992/08/31 8960.84 18119.58 1992/09/30 8593.66 18333.39 1992/10/31 8042.90 18397.56 1992/11/30 7570.81 19024.91 1992/12/31 7711.30 19258.92 1993/01/31 7898.08 19420.70 1993/02/28 8769.71 19684.82 1993/03/31 9961.54 20100.17 1993/04/30 11571.39 19613.74 1993/05/31 13101.20 20139.39 1993/06/30 13314.66 20197.79 1993/07/31 15049.04 20117.00 1993/08/31 13537.02 20879.44 1993/09/30 12469.71 20718.67 1993/10/31 14239.66 21147.54 1993/11/30 14212.98 20946.64 1993/12/31 16318.97 21200.10 1994/01/31 15643.88 21920.90 1994/02/28 14959.80 21326.84 1994/03/31 14806.78 20396.99 1994/04/30 14807.38 20658.07 1994/05/31 14834.40 20996.87 1994/06/30 15131.63 20482.44 1994/07/31 15708.07 21154.27 1994/08/31 16824.93 22021.59 1994/09/30 18112.92 21482.06 1994/10/31 17410.38 21965.41 1994/11/30 15545.95 21165.43 1994/12/31 16132.77 21479.31 1995/01/31 13322.31 22036.27 1995/02/28 13933.67 22895.02 1995/03/31 15348.03 23570.66 1995/04/30 15475.78 24264.81 1995/05/31 15284.16 25234.68 1995/06/30 15466.65 25820.88 1995/07/31 16105.39 26677.10 1995/08/31 16324.39 26744.06 1995/09/30 16370.01 27872.66 1995/10/31 14326.04 27773.15 1995/11/30 15329.78 28992.39 1995/12/31 15594.05 29550.79 1996/01/31 18863.03 30556.70 1996/02/29 19192.68 30839.96 1996/03/31 19082.79 31136.95 1996/04/30 19514.84 31595.90 1996/05/31 20643.87 32410.76 1996/06/30 17770.80 32534.25 1996/07/31 17550.50 31096.88 1996/08/31 18505.13 31752.72 1996/09/30 17734.09 33539.76 1996/10/31 17587.22 34464.79 1996/11/30 16706.02 37069.98 1996/12/31 16439.83 36335.62 1997/01/31 15733.04 38605.87 1997/02/28 17991.10 38908.54 1997/03/31 15319.97 37309.79 1997/04/30 14301.09 39537.19 1997/05/31 14539.75 41944.21 1997/06/30 13034.37 43823.31 1997/07/31 12520.34 47310.33 1997/08/31 12584.59 44660.01 1997/09/30 13172.06 47106.04 1997/10/31 10959.89 45532.69 1997/11/30 8463.16 47640.40 1997/12/31 9059.81 48458.39 1998/01/31 9977.72 48994.34 1998/02/28 9436.15 52527.81 1998/03/31 10069.51 55217.76 1998/04/30 11042.50 55773.25 1998/05/31 9353.54 54814.51 1998/06/30 7967.49 57041.07 1998/07/31 7774.73 56433.58 1998/08/31 5766.18 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980903 155559 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Precious Metals and Minerals Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have been $5,766 - a 42.34% decrease on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS Meridian Gold, Inc. 10.4 Normandy Mining Ltd. 10.2 Euro-Nevada Mining Corp. Ltd. 8.7 Getchell Gold Corp. 8.0 Franco Nevada Mining Corp. Ltd. 6.8 Anglogold Ltd. sponsored ADR 4.0 Anglogold Ltd. 3.7 Homestake Mining Co. 3.6 Prime Resources Group, Inc. 3.4 Lihir Gold Ltd. 3.3 TOP INDUSTRIES AS OF AUGUST 31, 1998 GOLD ORES 64.4% GOLD & SILVER ORES 27.3% METAL MINING SERVICES 2.7% INVESTMENT MANAGERS 2.4% SILVER ORES 1.4% ALL OTHERS 1.8% ROW: 1, COL: 1, VALUE: 1.8 ROW: 1, COL: 2, VALUE: 1.4 ROW: 1, COL: 3, VALUE: 2.4 ROW: 1, COL: 4, VALUE: 2.7 ROW: 1, COL: 5, VALUE: 27.3 ROW: 1, COL: 6, VALUE: 64.40000000000001 % OF FUND'S INVESTMENTS PRECIOUS METALS AND MINERALS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of George Domolky) George Domolky, Portfolio Manager of Fidelity Select Precious Metals and Minerals Portfolio Q. HOW DID THE FUND PERFORM, GEORGE? A. The fund's performance was extremely weak. For the six- and 12-month periods that ended August 31, 1998, the fund had total returns of -38.81% and -54.12%, respectively. In comparison, the Standard & Poor's 500 Index returned -8.10% and 8.10%, respectively, over the same time periods. Beginning this period, the fund also compares itself to the Goldman Sachs Natural Resources Index - an index of 96 stocks designed to measure the performance of companies in the natural resource sector - which returned -24.09% and -26.69% over the same six- and 12-month periods, respectively. Q. WHAT ACCOUNTED FOR THE FUND'S POOR PERFORMANCE? A. The price of gold continued to weaken, touching the level of $271 per ounce in August. The current price level is a crucial one, because many gold mines cannot produce gold profitably for less than approximately $300 per ounce. The weakness was attributable to several factors. For one thing, the European Economic Community central bank decided to hold 15% of its currency reserves in gold, which was somewhat below expectations. Adding to the downward pressure was the ongoing currency crisis in Asia, where the region's weaker currencies made gold more expensive, thereby reducing demand for gold jewelry. In addition, the lack of inflation in North America led investors to favor stocks, bonds and other assets. Finally, the recent turmoil in Russia added to the negative psychology in the gold market, raising fears that Russia would sell gold to help support its weakening currency, the ruble. The Goldman Sachs index, though more similar to the fund in composition than the S&P 500, includes the stocks of companies involved with not only gold and other precious metals but also copper, nickel, oil, gas, lumber and other natural resources. This greater diversification enabled the Goldman Sachs index to post a better return than the fund did. Q. WHAT STRATEGY DID YOU EMPLOY IN SUCH A CHALLENGING ENVIRONMENT? A. The fund continued its strategy of favoring Australian equities over those of South Africa, based on my judgment that Australian stocks offered good potential returns with a lower risk profile than South African mining shares, which tend to be more volatile because of their higher operating costs. In South Africa, the fund concentrated on only the highest-quality companies. Of course, any foreign investment should be viewed as carrying greater risk than U.S. investments, but many of the best gold mining investment opportunities lie outside United States borders. Q. WHAT HOLDINGS HELPED THE FUND'S PERFORMANCE? A. Plutonic Resources was the most positive contributor, strengthening on news that the company would be acquired by Homestake Mining. Homestake also rose in response to the takeover announcement, as well as to the company's healthy production and cash flow. Stillwater Mining, a major producer of platinum and palladium, had a slightly positive influence on the fund's performance based on the company's established production record and the surging price of palladium. Q. WHAT HOLDINGS DISAPPOINTED YOU? A. The stock of Getchell Gold, the fund's fourth-largest holding at the end of the period, continued to weaken. Falling gold prices generally result in investors favoring established producers over exploration companies like Getchell Gold. Normandy Mining, an Australian gold mining company, also suffered as Australian investors fled the gold market. Greenstone Resources - another poorly performing stock - ran into problems when the company reported production numbers below the market's expectations. Q. WHAT'S YOUR OUTLOOK, GEORGE? A. Gold prices are close to their historic lows. It should not be forgotten that in most parts of the world, gold still acts as a currency of last resort. When the Far East recovers from its present malaise, demand from that part of the world should increase. Furthermore, central bank gold sales will likely decrease in 1999, when we have passed the year-end cutoff point for participating countries of the European Economic Community to adjust their currency reserves prior to phasing in the region's new currency, the euro. Nonetheless, it is impossible to predict where gold's price will go from here. Regardless of the supply and demand considerations for gold, the fund should be well served by its emphasis on strong companies with healthy balance sheets and the capability to add meaningfully to production. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 061 TRADING SYMBOL: FDPMX SIZE: as of August 31, 1998, more than $92 million MANAGER: George Domolky, since 1997; manager, Fidelity Select Gold Portfolio, since 1997; Fidelity Canada Fund, 1987-1996; Fidelity Select Food and Agriculture Portfolio, 1985-1987; joined Fidelity in 1981 PRECIOUS METALS AND MINERALS PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 100.0% SHARES VALUE (NOTE 1) AUSTRALIA - 22.7% METALS & MINING - 2.6% METAL MINING SERVICES - 2.6% Acacia Resources Ltd. 2,600,000 $ 2,323,679 MISCELLANEOUS METAL ORES, NEC - 0.0% Helix Resources NL (a) 150,000 17,931 TOTAL METALS & MINING 2,341,610 PRECIOUS METALS - 20.1% GOLD & SILVER ORES - 10.4% Normandy Mining Ltd. 16,119,375 9,267,714 Sons of Gwalia NL 77,264 171,400 9,439,114 GOLD ORES - 9.7% Centaur Mining & Exploration Ltd. (a) 7,277,770 1,615,720 Delta Gold NL 2,325,190 2,131,019 Great Central Mines Ltd. 2,384,206 1,316,493 Great Central Mines Ltd. ADR 90,000 151,875 Leo Shield Exploration NL (a) 412,000 14,072 Lihir Gold Ltd. (a) 3,360,000 3,002,908 Resolute Ltd. (a) 950,000 535,380 Ross Mining NL 100,000 40,531 8,807,998 TOTAL PRECIOUS METALS 18,247,112 TOTAL AUSTRALIA 20,588,722 CANADA - 43.6% METALS & MINING - 1.2% METAL MINING - 0.0% Lexacal Investment Corp. (a) 14,875 3,130 METAL MINING SERVICES - 0.1% Minefinders Corp. Ltd. (a) 200,200 107,216 MISCELLANEOUS NONMETALLIC MINERALS - 1.1% Aber Resources Ltd. (a) 148,500 785,814 Archangel Diamond Corp (a) 30,000 9,563 DIA Metropolitan Minerals Ltd. Class B (multi-vtg.) (a) 19,500 210,105 1,005,482 TOTAL METALS & MINING 1,115,828 OIL & GAS - 0.3% CRUDE PETROLEUM & NATURAL GAS - 0.0% Solomon Resources Ltd. (a) 200,000 14,026 OIL & GAS FIELD EXPLORATION SERVICES - 0.3% Southwestern Gold Corp. (a) 135,000 273,701 TOTAL OIL & GAS 287,727 PRECIOUS METALS - 42.1% GOLD & SILVER ORES - 0.7% Goldcorp, Inc. Class A (a) 253,900 647,498 SHARES VALUE (NOTE 1) GOLD ORES - 41.4% Agnico-Eagle Mines Ltd. 152,000 $ 421,549 Argosy Mining Corp. (a) 169,200 19,417 Cambior, Inc. 213,000 896,270 Crown Resources Corp. (a) 81,900 225,225 Euro-Nevada Mining Corp. Ltd. 800,300 7,908,607 Francisco Gold Corp. (a) 43,500 221,868 Francisco Gold Corp. (a)(b) 54,500 277,973 Franco Nevada Mining Corp. Ltd. 454,000 6,165,253 Franco Nevada Mining Corp. Ltd. (b) 80,200 1,089,104 Franco Nevada Mining Corp. Ltd. 25,000 191,266 Class B warrants 9/15/98 (a)(b) Geomaque Explorations Ltd. (a) 457,100 314,739 Golden Knight Resources, Inc. (a) 419,300 120,296 Greenstone Resources Ltd. (a) 651,300 710,056 Greenstone Resources Ltd. (a)(b) 80,000 87,217 High River Gold Mines Ltd. (a) 60,000 14,919 Indochina Goldfields Ltd. (a) 20,000 12,113 Indochina Goldfields Ltd. (a)(b) 70,000 42,397 IAMGOLD International African 69,800 110,363 Mining Gold Corp. (a) Kinross Gold Corp. (a) 800,000 1,377,112 Meridian Gold, Inc. (a) 3,159,400 9,467,116 Metallica Resources, Inc. (a) 448,700 205,970 Metallica Resources, Inc. (a)(b) 100,000 45,904 Mountain Province Mining, Inc. (a) 336,700 429,327 Nevsun Resources Ltd. (a) 158,600 42,469 Orvana Minerals Corp. (a) 4,000 2,550 Prime Resources Group, Inc. 506,900 3,086,321 Repadre Capital Corp. (a) 181,200 288,811 Rio Narcea Gold Mines Ltd. (a) 1,118,000 1,710,679 Samax Gold, Inc. (a) 15,000 49,729 Sudbury Contact Mines Ltd. (a) 50,000 15,939 Sutton Resources Ltd. (a) 112,500 261,795 TVI Pacific, Inc. (a) 1,146,800 36,557 TVX Gold, Inc. (a) 1,069,500 1,193,258 Vengold, Inc. (a) 410,600 248,690 Viceroy Resources Corp. (a) 194,700 248,263 37,539,122 TOTAL PRECIOUS METALS 38,186,620 TOTAL CANADA 39,590,175 GHANA - 1.6% PRECIOUS METALS - 1.6% GOLD ORES - 1.6% Ashanti Goldfields Co. Ltd. (Reg.) unit 225,773 1,411,081 MEXICO - 0.5% PRECIOUS METALS - 0.5% GOLD & SILVER ORES - 0.5% Industrias Penoles SA 180,000 428,060 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PERU - 1.4% PRECIOUS METALS - 1.4% SILVER ORES - 1.4% Compania de Minas Buenaventura SA sponsored ADR Class B 166,900 $ 1,272,613 SOUTH AFRICA - 12.4% HOLDING COMPANIES - 0.3% OFFICES OF HOLDING COMPANIES, NEC - 0.3% Gencor Ltd. (Reg.) 165,000 236,800 PRECIOUS METALS - 12.1% GOLD & SILVER ORES - 7.7% Anglogold Ltd. 100,436 3,391,546 Anglogold Ltd. sponsored ADR 224,690 3,651,213 7,042,759 GOLD ORES - 4.4% Anglo American Corp. of South 61,400 1,526,754 Africa Ltd. De Beers Consolidated Mines ADR 37,500 431,250 Gold Fields of South Africa Ltd. 85,600 696,362 Gold Fields of South Africa Ltd. ADR 73,700 626,450 Randfontein Estates Gold Mining Co. warrants 7/1/02 (a) 52,463 20,051 Western Areas Gold Mining Ltd. (a) 345,564 678,929 3,979,796 TOTAL PRECIOUS METALS 11,022,555 TOTAL SOUTH AFRICA 11,259,355 UNITED KINGDOM - 0.0% PRECIOUS METALS - 0.0% GOLD ORES - 0.0% Bakyrchik Gold PLC (a) 70,900 4,765 UNITED STATES OF AMERICA - 17.8% PRECIOUS METALS - 15.3% GOLD & SILVER ORES - 8.0% Getchell Gold Corp. (a) 805,200 7,246,800 GOLD ORES - 7.3% Battle Mountain Gold Co. 60,000 183,750 Homestake Mining Co. 372,900 3,290,237 Newmont Mining Corp. 110 1,506 Stillwater Mining Co. (a) 156,100 2,741,506 Stillwater Mining Co. (a)(b) 23,000 404,000 6,620,999 TOTAL PRECIOUS METALS 13,867,799 SECURITIES INDUSTRY - 2.4% INVESTMENT MANAGERS - 2.4% Pioneer Group, Inc. 122,100 2,190,169 SHARES VALUE (NOTE 1) SERVICES - 0.1% JEWELRY, PRECIOUS METAL - 0.1% Lazare Kaplan International, Inc. (a) 10,000 $ 83,125 TOTAL UNITED STATES OF AMERICA 16,141,093 TOTAL INVESTMENT IN SECURITIES - 100% $ 90,695,864 (Cost $181,511,299)
LEGEND (a) Non-income producing (b) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $2,137,861 or 2.3% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $30,891,962 and $35,377,986, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $3,914 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the securities lending program. At the period end, there were no loans outstanding (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $182,498,932. Net unrealized depreciation aggregated $91,803,068, of which $5,246,993 related to appreciated investment securities and $97,050,061 related to depreciated investment securities. At February 28, 1998, the fund had a capital loss carryforward of approximately $57,071,000 of which 1,376,000 and $55,695,000 will expire on February 28, 2000, and 2006, respectively. The fund intends to elect to defer to its fiscal year ending February 28, 1999 approximately $10,491,000 of losses recognized during the period November 1, 1997 to February 28, 1998. PRECIOUS METALS AND MINERALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 90,695,864 SECURITIES, AT VALUE (COST $181,511,29 9) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 2,338,604 INVESTMENTS SOLD RECEIVABLE FOR 430,704 FUND SHARES SOLD DIVIDENDS 556,556 RECEIVABLE INTEREST 12,638 RECEIVABLE REDEMPTION FEES 1,658 RECEIVABLE TOTAL ASSETS 94,036,024 LIABILITIES PAYABLE TO $ 467,150 CUSTODIAN BANK PAYABLE FOR 1,260,092 FUND SHARES REDEEMED ACCRUED 57,892 MANAGEMENT FEE OTHER PAYABLES 172,238 AND ACCRUED EXPENSES TOTAL LIABILITIES 1,957,372 NET ASSETS $ 92,078,652 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 254,134,874 ACCUMULATED (1,478,570) NET INVESTMENT LOSS ACCUMULATED (69,756,250) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (90,821,402) APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 92,078,652 14,649,210 SHARES OUTSTANDING NET ASSET $6.29 VALUE AND REDEMPTION PRICE PER SHARE ($92,078,65 2 (DIVIDED BY) 14,649,210 SHARES) MAXIMUM $6.48 OFFERING PRICE PER SHARE (100/97.00 OF $6.29) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 1,140,320 INCOME DIVIDENDS INTEREST 110,391 (INCLUDING INCOME ON SECURITIES LOANED OF $3,486) TOTAL INCOME 1,250,711 EXPENSES MANAGEMENT $ 455,579 FEE TRANSFER AGENT 737,553 FEES ACCOUNTING AND 78,283 SECURITY LENDING FEES NON-INTERESTED 441 TRUSTEES' COMPENSATION CUSTODIAN FEES 46,525 AND EXPENSES REGISTRATION FEES 50,974 AUDIT 11,901 LEGAL 435 REPORTS TO 40,632 SHAREHOLDERS TOTAL EXPENSES 1,422,323 BEFORE REDUCTIONS EXPENSE (32,685) 1,389,638 REDUCTIONS NET INVESTMENT (138,927) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 481,494 SECURITIES FOREIGN (18,936) 462,558 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (62,880,726) SECURITIES ASSETS AND (6,320) (62,887,046) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (62,424,488) NET INCREASE $ (62,563,415) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 251,117 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 249,714 - - RETAINED BY FDC DEFERRED SALES $ 7,162 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 40,073 WITHHELD BY FSC EXPENSE $ 31,930 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 331 CREDITS TRANSFER 424 AGENT CREDITS $ 32,685 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (138,927) $ (511,682) NET INVESTMENT INCOME (LOSS) NET REALIZED 462,558 (66,607,356) GAIN (LOSS) CHANGE IN NET (62,887,046) (65,517,001) UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (62,563,415) (132,636,039) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS SHARE 221,207,326 372,321,003 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES COST OF SHARES (233,839,649) (401,322,827) REDEEMED NET INCREASE (12,632,323) (29,001,824) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 1,314,182 2,011,726 FEES TOTAL (73,881,556) (159,626,137) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 165,960,208 325,586,345 PERIOD END OF PERIOD $ 92,078,652 $ 165,960,208 (INCLUDING ACCUMULATE D NET INVESTMENT LOSS OF $1,478,57 0 AND $1,339,64 3, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 21,158,504 30,945,409 REDEEMED (22,658,561) (31,406,772) NET INCREASE (1,500,057) (461,363) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET $ 10.28 $ 19.60 $ 20.96 $ 15.27 $ 16.62 $ 9.86 VALUE, BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATION S NET (.01) (.04) (.01) .07 .17 .21 INVESTMENT INCOME (LOSS) D NET (4.06) (9.42) (1.42) 5.54 (1.42) 6.48 REALIZED AND UNREALIZED GAIN (LOSS) TOTAL FROM (4.07) (9.46) (1.43) 5.61 (1.25) 6.69 INVESTMENT OPERATIONS LESS DISTRIBUTIO NS FROM NET - - (.04) (.06) (.18) (.19) INVESTMENT INCOME IN EXCESS - - (.01) - (.05) (.02) OF NET INVESTMENT INCOME TOTAL - - (.05) (.06) (.23) (.21) DISTRIBUTIO NS REDEMPTION .08 .14 .12 .14 .13 .28 FEES ADDED TO PAID IN CAPITAL NET ASSET $ 6.29 $ 10.28 $ 19.60 $ 20.96 $ 15.27 $ 16.62 VALUE, END OF PERIOD TOTAL (38.81)% (47.55)% (6.26)% 37.74% (6.86)% 70.58% RETURN B, C RATIOS AND SUPPLEME NTAL DATA NET ASSETS, $ 92,079 $ 165,960 $ 325,586 $ 467,196 $ 364,204 $ 409,212 END OF PERIOD (000 OMITTED) RATIO OF 1.81% A 1.82% 1.62% 1.52% 1.46% 1.55% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.76% A, E 1.76% E 1.61% E 1.52% 1.46% 1.55% EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.18)% A (.26)% (.05)% .39% .99% 1.38% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 41% A 84% 54% 53% 43% 73% TURNOVER RATE AVERAGE $ .0182 $ .0096 $ .0141 COMMISSIO N RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FO R FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
BUSINESS SERVICES AND OUTSOURCING PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 LIFE OF AUGUST 31, 1998 MONTHS FUND SELECT BUSINESS SERVICES AND OUTSOURCING -7.63% 0.59% SELECT BUSINESS SERVICES AND OUTSOURCING -10.48% -2.50% (LOAD ADJ.) S&P 500 -8.10% -4.10% GS TECHNOLOGY -8.97% -4.03% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months or since the fund started on February 4, 1998. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Technology Index - a market capitalization-weighted index of 190 stocks designed to measure the performance of companies in the technology sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. These numbers will be reported once the fund is a year old. (checkmark)UNDERSTANDING PERFORMANCE How a fund did yesterday is no guarantee of how it will do tomorrow. The stock market, for example, has a history of long-term growth and short-term volatility. Unlike the broader market, however, some sectors may not have a history of growth in the long run. And, as with all stock funds, the share price and return of a fund that invests in a sector will vary. $10,000 OVER LIFE OF FUND Business Svcs/Outsourcing S&P 500 00353 SP001 1998/02/04 9700.00 10000.00 1998/02/28 10563.30 10435.43 1998/03/31 11339.30 10969.83 1998/04/30 11329.55 11080.19 1998/05/31 10950.93 10889.72 1998/06/30 11824.67 11332.06 1998/07/31 11620.80 11211.37 1998/08/31 9749.31 9590.43 IMATRL PRASUN SHR__CHT 19980831 19980914 084853 R00000000000010 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Business Services and Outsourcing Portfolio on February 4, 1998, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have been to $9,750 - a 2.50% decrease on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have been $9,590 - - a 4.10% decrease. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS IMS HEALTH, INC. 8.1 FIRST DATA CORP. 7.3 DST SYSTEMS, INC. 6.0 EQUIFAX, INC. 4.7 AFFILIATED COMPUTER SERVICES, INC. CLASS A 4.5 CERIDIAN CORP. 4.4 AUTOMATIC DATA PROCESSING, INC. 3.8 USCS INTERNATIONAL, INC. 3.7 NIELSEN MEDIA RESEARCH 3.3 SABRE GROUP HOLDINGS, INC. CLASS A 3.2 TOP INDUSTRIES AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS DATA PROCESSING 30.6% COMPUTER SERVICES 28.9% MANAGEMENT CONSULTING SERVICES 10.8% ADVERTISING AGENCIES 4.7% FREIGHT FORWARDING 4.0% ALL OTHERS 21.0% ROW: 1, COL: 1, VALUE: 21.0 ROW: 1, COL: 2, VALUE: 4.0 ROW: 1, COL: 3, VALUE: 4.7 ROW: 1, COL: 4, VALUE: 10.8 ROW: 1, COL: 5, VALUE: 28.9 ROW: 1, COL: 6, VALUE: 30.6 * * INCLUDES SHORT-TERM INVESTMENTS BUSINESS SERVICES AND OUTSOURCING PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Michael Tarlowe) Michael Tarlowe, Portfolio Manager of Select Business Services and Outsourcing Portfolio Q. MICHAEL, HOW DID THE FUND PERFORM? A. For the six months that ended August 31, 1998, the fund had a total return of -7.63%, while the Standard & Poor's 500 Index returned - -8.10% during the same period. Beginning this period, the fund also compares itself to the Goldman Sachs Technology Index - an index of 190 stocks designed to measure the performance of companies in the technology sector - which returned -8.97% over the same six-month period. Since its inception on February 4, 1998, the fund had a total return of 0.59%, while the S&P 500 and the Goldman Sachs Technology Index returned -4.10% and -4.03%, respectively. Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS? A. Like the broader market, the business services and outsourcing sector saw a broad-based decline, especially toward the latter part of the period. The cause of this downdraft was clear evidence of weakening economies overseas, and the growing fear that companies with business there were at risk of reporting disappointing earnings. In addition, stock valuations in some sectors had been at very high levels. The fund and the sector performed slightly better than the market and the Goldman Sachs index because the companies in the sector tend to have stable, recurring revenues and limited or no business in Asia or other emerging markets. Nevertheless, there were isolated instances of earnings disappointments for some companies, including fund holdings First Data and Electronic Data Systems (EDS). These companies suffered from individual internal issues as opposed to any fundamental changes in the outlook for business services or outsourcing companies. Q. WHAT STRATEGY DID YOU PURSUE IN THIS ENVIRONMENT? A. I looked to invest in companies with prospects for strong earnings growth or improving business that were selling at appealing or reasonable valuations. Among these investments were turnaround situations or securities that I felt were underfollowed by the market and thus selling at attractive valuations. Common characteristics for my company selections included recurring revenues, a clear indication of a strong near-term earnings outlook and solid cash flow. Q. WHICH STOCKS PERFORMED WELL FOR THE FUND? A. The best contributor by far was Cognizant, a market research firm that split into two separate companies, Nielsen Media Research and IMS Health. Cognizant exceeded earnings expectations and took aggressive steps to enhance shareholder value as it announced its split into two separate entities. DST Systems, a company that provides information processing and software to the mutual fund industry, also worked out well. It benefited from explosive growth in the mutual fund industry and witnessed a turnaround in its international operation. Finally, USCS International, which offers customer management software and services to the global communications industry, was an underfollowed stock whose valuation was extremely attractive because the market punished the company after it announced it had lost its largest customer. The fund took a position in the company believing it could nevertheless continue to increase earnings, which in fact it was able to do. As a result of this improvement, the company's share price rose. Q. WHAT WERE THE STORIES BEHIND THE DISAPPOINTING PERFORMANCES OF FIRST DATA AND ELECTRONIC DATA SYSTEMS? A. EDS - which offers a full range of information technology services - - encountered some difficulties in its relationship with its largest customer, General Motors. First Data, a provider of processing services to credit card companies - experienced slower-than-expected revenue growth and suffered from concerns that continued merger activity among banks would hurt its business. In spite of these problems, the fund still owned both stocks at the end of the period based on their strong positions within their markets, appealing valuations and what I thought were improving prospects at the end of the period. Q. WHAT'S YOUR OUTLOOK? A. I'm optimistic. Stocks in the sector tend to outperform the overall market during times of economic uncertainty because the companies enjoy recurring revenues. In addition, their business tends to be focused domestically. As such, if concerns about overseas economies persist, one would expect these companies to be able to sustain or increase their earnings. Even though many of the stocks in the sector have held up better than the overall market over the past six months, many of their stock prices are down from the highs they posted earlier in the year, despite the fact that their fundamentals are unchanged or in some instances even better than before. There are many interesting opportunities given the market's decline and the continued demand for outsourcing. As more and more companies look to outsource additional functions, these companies should be the main beneficiaries. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: FEBRUARY 4, 1998 FUND NUMBER: 353 TRADING SYMBOL: FBSOX SIZE: AS OF AUGUST 31, 1998, MORE THAN $51 MILLION MANAGER: MICHAEL TARLOWE, SINCE INCEPTION; ANALYST, TRANSPORTATION, TELECOMMUNICATIONS EQUIPMENT, COMPUTER SERVICES AND INTERNET SECURITIES, 1994-PRESENT; JOINED FIDELITY IN 1994 BUSINESS SERVICES AND OUTSOURCING PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 94.2% SHARES VALUE (NOTE 1) ADVERTISING - 6.2% ADVERTISING - 0.5% Outdoor Systems, Inc. (a) 12,000 $ 279,000 ADVERTISING AGENCIES - 4.7% Interpublic Group of Companies, Inc. 19,300 1,100,100 Omnicom Group, Inc. 27,539 1,311,545 2,411,645 COMMERCIAL ART SERVICES - 0.2% Getty Images, Inc. (a) 9,000 127,125 OUTDOOR ADVERTISING SERVICES - 0.8% Lamar Advertising Co. Class A (a) 12,250 398,125 TOTAL ADVERTISING 3,215,895 AIR TRANSPORTATION - 0.5% TRANSPORTATION SERVICES - 0.5% Viad Corp. 12,600 261,450 BROADCASTING - 3.7% COMMUNICATIONS SERVICES, NEC - 0.4% MovieFone, Inc. Class A (a) 36,000 220,500 TELEVISION BROADCASTING - 3.3% Nielsen Media Research 190,100 1,710,900 TOTAL BROADCASTING 1,931,400 COMPUTER SERVICES & SOFTWARE - 60.4% COMPUTER FACILITIES MANAGEMENT - 0.3% International Telecommunications Data Systems, Inc. 6,500 127,563 COMPUTER SERVICES - 28.9% Cambridge Technology Partners, Inc. (a) 41,000 1,332,500 Computer Management Sciences, Inc. (a) 23,500 399,500 Computer Sciences Corp. 25,200 1,425,375 Electronic Data Systems Corp. 24,500 820,750 Equifax, Inc. 68,500 2,440,313 Galileo International, Inc. 11,200 366,100 HBO & Co. 34,100 724,625 IntelliQuest Information Group, Inc. (a) 48,700 389,600 International Integration, Inc. (a) 16,700 258,850 Lycos, Inc. (a) 7,000 151,813 Paychex, Inc. 38,150 1,449,700 Pegasus Systems, Inc. 10,000 155,000 QRS Corp. (a) 17,700 480,113 SunGard Data Systems, Inc. (a) 20,600 652,763 Technology Solutions, Inc. (a) 83,100 950,456 USCS International, Inc. (a) 84,300 1,912,556 Wang Laboratories, Inc. (a) 52,200 1,017,900 14,927,914 CUSTOM COMPUTER PROGRAMMING SERVICES - 0.6% Cotelligent Group, Inc. (a) 28,000 318,500 DATA PROCESSING - 30.6% Affiliated Computer Services, Inc. Class A (a) 71,800 2,346,963 Automatic Data Processing, Inc. 30,800 1,963,500 Ceridian Corp. (a) 47,000 2,279,500 DST Systems, Inc. (a) 54,500 3,079,250 First Data Corp. 181,000 3,744,438 Fiserv, Inc. (a) 18,550 723,450 Sabre Group Holdings, Inc. Class A (a) 51,000 1,632,000 15,769,101 SHARES VALUE (NOTE 1) TOTAL COMPUTER SERVICES & SOFTWARE $ 31,143,078 ENGINEERING - 1.0% ENGINEERING, ARCHITECTURE & RELATED SERVICES - 1.0% Compass International Services Corp. 48,700 493,088 PRINTING - 0.6% MANIFOLD BUSINESS FORMS - 0.6% Reynolds & Reynolds Co. Class A 26,000 328,250 RETAIL & WHOLESALE, MISCELLANEOUS - 0.3% MAIL ORDER - 0.3% N2K, Inc. 17,000 148,750 SERVICES - 17.2% BUSINESS SERVICES - 3.1% ABR Information Services, Inc. (a) 38,900 564,050 Cintas Corp. 12,800 521,600 Robert Half International, Inc. (a) 11,400 547,200 1,632,850 COMMERCIAL, ECONOMIC, SOCIOLOGICAL & EDUCATIONAL RESEARCH - 0.5% ACNielsen Corp. (a) 12,900 258,806 CREDIT REPORTING AGENCIES - 1.6% Dunn & Bradstreet Corp. 34,400 808,400 EMPLOYMENT AGENCIES - 0.7% Lamalie Associates, Inc. (a) 59,500 353,276 MANAGEMENT CONSULTING SERVICES - 10.8% Data Processing Resources Corp. (a) 6,000 150,000 Diamond Technology Partners, Inc. Class A (a) 7,000 162,750 Forrester Research, Inc. (a) 4,700 145,700 IMS Health, Inc. 75,800 4,169,000 Market Facts, Inc. (a) 50,100 933,113 5,560,563 PERSONNEL SUPPLY SERVICES - 0.5% Manpower, Inc. 13,300 270,988 TOTAL SERVICES 8,884,883 TEXTILES & APPAREL - 0.3% COTTON MILLS - 0.3% Galey & Lord, Inc. (a) 13,500 125,719 TRUCKING & FREIGHT - 4.0% FREIGHT FORWARDING - 4.0% Air Express International Corp. 51,200 876,800 Expeditors International of Washington, Inc. 37,400 1,040,188 Pittston Co. (Burlington Group) 17,600 139,700 2,056,688 TOTAL COMMON STOCKS (Cost $56,001,367) 48,589,201 CASH EQUIVALENTS - 5.8% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $2,996,495) 2,996,495 $ 2,996,495 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $58,997,862) $ 51,585,696 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $75,226,500 and $33,907,890, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $9,358 for the period (see Note 4 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $58,997,862. Net unrealized depreciation aggregated $7,412,166, of which $1,600,054 related to appreciated investment securities and $9,012,220 related to depreciated investment securities. BUSINESS SERVICES AND OUTSOURCING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 51,585,696 SECURITIES, AT VALUE (COST $58,997,862 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 2,301,180 INVESTMENTS SOLD RECEIVABLE FOR 124,189 FUND SHARES SOLD DIVIDENDS 29,390 RECEIVABLE INTEREST 14,669 RECEIVABLE REDEMPTION FEES 2,115 RECEIVABLE PREPAID 9,284 EXPENSES TOTAL ASSETS 54,066,523 LIABILITIES PAYABLE FOR $ 373,889 INVESTMENTS PURCHASED PAYABLE FOR 1,979,050 FUND SHARES REDEEMED ACCRUED 31,495 MANAGEMENT FEE OTHER PAYABLES 69,829 AND ACCRUED EXPENSES TOTAL LIABILITIES 2,454,263 NET ASSETS $ 51,612,260 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 58,631,740 ACCUMULATED (238,121) NET INVESTMENT LOSS ACCUMULATED 630,807 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (7,412,166) APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 51,612,260 5,134,811 SHARES OUTSTANDING NET ASSET $10.05 VALUE AND REDEMPTION PRICE PER SHARE ($51,612,26 0 (DIVIDED BY) 5,134,811 SHARES) MAXIMUM $10.36 OFFERING PRICE PER SHARE (100/97.00 OF $10.05) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 90,264 INCOME DIVIDENDS INTEREST 122,124 TOTAL INCOME 212,388 EXPENSES MANAGEMENT $ 158,470 FEE TRANSFER AGENT 196,358 FEES ACCOUNTING FEES 30,746 AND EXPENSES NON-INTERESTED 72 TRUSTEES' COMPENSATION CUSTODIAN FEES 10,808 AND EXPENSES REGISTRATION FEES 39,833 AUDIT 19,077 LEGAL 595 REPORTS TO 1,555 SHAREHOLDERS MISCELLANEOUS 250 TOTAL EXPENSES 457,764 BEFORE REDUCTIONS EXPENSE (7,255) 450,509 REDUCTIONS NET INVESTMENT (238,121) INCOME (LOSS) REALIZED AND 659,114 UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES CHANGE IN NET (8,038,196) UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) (7,379,082) NET INCREASE $ (7,617,203) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 520,027 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 520,027 - - RETAINED BY FDC DEFERRED SALES $ 63 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 10,680 WITHHELD BY FSC EXPENSE $ 7,011 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 244 CREDITS $ 7,255 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED FEBRUARY 4, 1998 (DECREASE) IN AUGUST 31, 1998 (COMMENCEMENT NET ASSETS (UNAUDITED) OF OPERATIONS) TO FEBRUARY 28, 1998 OPERATIONS $ (238,121) $ (2,203) NET INVESTMENT INCOME (LOSS) NET REALIZED 659,114 16,708 GAIN (LOSS) CHANGE IN NET (8,038,196) 626,030 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (7,617,203) 640,535 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (42,651) - SHAREHOLDERS FROM NET REALIZED GAIN SHARE 88,764,264 15,378,163 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 42,504 - OF DISTRIBUTIONS COST OF SHARES (45,533,319) (103,682) REDEEMED NET INCREASE 43,273,449 15,274,481 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 83,509 140 FEES TOTAL 35,697,104 15,915,156 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 15,915,156 - PERIOD ENDING $ 51,612,260 $ 15,915,156 BALANCE (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $238,121 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 7,592,920 1,470,842 ISSUED IN 3,624 - REINVESTMENT OF DISTRIBUTIONS REDEEMED (3,922,753) (9,822) NET INCREASE 3,673,791 1,461,020 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS SIX MONTHS FEBRUARY 4, ENDED 1998 AUGUST 31, (COMMENCEMEN 1998 T OF OPERATIONS) TO FEBRUARY 28, SELECTED (UNAUDITED) 1998 PER-SHARE DATA NET ASSET $ 10.89 $ 10.00 VALUE, BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATION S NET (.05) - INVESTMENT INCOME (LOSS) D NET (.80) .89 REALIZED AND UNREALIZED GAIN (LOSS) TOTAL FROM (.85) .89 INVESTMENT OPERATIONS LESS DISTRIBUTIO NS FROM NET (.01) - REALIZED GAIN REDEMPTION .02 - FEES ADDED TO PAID IN CAPITAL NET ASSET $ 10.05 $ 10.89 VALUE, END OF PERIOD TOTAL (7.63)% 8.90% RETURN B, C RATIOS AND SUPPLEME NTAL DATA NET ASSETS, $ 51,612 $ 15,915 END OF PERIOD (000 OMITTED) RATIO OF 1.67% A 2.50% A, E EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.64% A, F 2.50% A EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.87)% A (.49)% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 145% A 36% A TURNOVER RATE AVERAGE $ .0351 $ .0153 COMMISSIO N RATE G A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F F MR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). G FO R FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. COMPUTERS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT COMPUTERS -0.90% -8.22% 217.13% 638.82% SELECT COMPUTERS -3.95% -11.05% 207.55% 616.58% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS TECHNOLOGY -8.97% -3.28% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Technology Index - a market capitalization-weighted index of 190 stocks designed to measure the performance of companies in the technology sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT COMPUTERS -8.22% 25.96% 22.14% SELECT COMPUTERS -11.05% 25.19% 21.77% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS TECHNOLOGY -3.28% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Computers S&P 500 00007 SP001 1988/08/31 9700.00 10000.00 1988/09/30 9957.69 10426.00 1988/10/31 9157.02 10715.84 1988/11/30 9101.80 10562.61 1988/12/31 9690.80 10747.45 1989/01/31 10261.39 11534.17 1989/02/28 10077.32 11246.96 1989/03/31 9598.77 11509.02 1989/04/30 10675.52 12106.34 1989/05/31 11623.43 12596.64 1989/06/30 10242.98 12524.84 1989/07/31 10427.04 13655.84 1989/08/31 10583.49 13923.49 1989/09/30 10831.97 13866.40 1989/10/31 10473.06 13544.70 1989/11/30 10242.98 13821.02 1989/12/31 10353.42 14152.72 1990/01/31 10261.39 13203.07 1990/02/28 11190.89 13373.39 1990/03/31 11991.56 13727.79 1990/04/30 11669.45 13384.59 1990/05/31 13187.95 14689.59 1990/06/30 13427.23 14589.70 1990/07/31 12470.11 14543.01 1990/08/31 10491.46 13228.33 1990/09/30 9801.23 12584.11 1990/10/31 10169.35 12529.99 1990/11/30 11844.31 13339.43 1990/12/31 12259.14 13711.60 1991/01/31 14348.77 14309.43 1991/02/28 15277.49 15332.55 1991/03/31 16484.83 15703.60 1991/04/30 15416.80 15741.29 1991/05/31 16196.93 16421.31 1991/06/30 13991.45 15669.22 1991/07/31 15397.29 16399.40 1991/08/31 16353.64 16788.07 1991/09/30 15492.92 16507.71 1991/10/31 15186.89 16728.91 1991/11/30 14144.47 16054.73 1991/12/31 16028.48 17891.40 1992/01/31 17702.10 17558.62 1992/02/29 18916.67 17786.88 1992/03/31 17424.76 17440.03 1992/04/30 16860.51 17952.77 1992/05/31 17070.91 18040.74 1992/06/30 15425.98 17771.93 1992/07/31 16181.50 18498.80 1992/08/31 15253.84 18119.58 1992/09/30 16009.35 18333.39 1992/10/31 17271.74 18397.56 1992/11/30 18342.86 19024.91 1992/12/31 19547.86 19258.92 1993/01/31 20685.92 19420.70 1993/02/28 19270.52 19684.82 1993/03/31 19653.06 20100.17 1993/04/30 19094.89 19613.74 1993/05/31 21332.11 20139.39 1993/06/30 20478.44 20197.79 1993/07/31 21332.11 20117.00 1993/08/31 22597.91 20879.44 1993/09/30 23235.72 20718.67 1993/10/31 23235.72 21147.54 1993/11/30 24226.77 20946.64 1993/12/31 25190.92 21200.10 1994/01/31 26815.14 21920.90 1994/02/28 27953.13 21326.84 1994/03/31 27663.46 20396.99 1994/04/30 27487.59 20658.07 1994/05/31 27466.90 20996.87 1994/06/30 25211.61 20482.44 1994/07/31 26008.20 21154.27 1994/08/31 29122.15 22021.59 1994/09/30 28915.25 21482.06 1994/10/31 30001.51 21965.41 1994/11/30 30177.38 21165.43 1994/12/31 30342.90 21479.31 1995/01/31 29411.82 22036.27 1995/02/28 31729.18 22895.02 1995/03/31 34170.68 23570.66 1995/04/30 36885.65 24264.81 1995/05/31 38708.97 25234.68 1995/06/30 42942.44 25820.88 1995/07/31 48339.06 26677.10 1995/08/31 49418.38 26744.06 1995/09/30 52247.68 27872.66 1995/10/31 50351.00 27773.15 1995/11/30 49135.45 28992.39 1995/12/31 46069.74 29550.79 1996/01/31 45774.35 30556.70 1996/02/29 48480.16 30839.96 1996/03/31 44380.08 31136.95 1996/04/30 49258.23 31595.90 1996/05/31 50960.51 32410.76 1996/06/30 47256.26 32534.25 1996/07/31 44091.45 31096.88 1996/08/31 45997.53 31752.72 1996/09/30 51643.82 33539.76 1996/10/31 54365.08 34464.79 1996/11/30 61761.60 37069.98 1996/12/31 60636.24 36335.62 1997/01/31 68408.84 38605.87 1997/02/28 60100.63 38908.54 1997/03/31 55367.32 37309.79 1997/04/30 58387.39 39537.19 1997/05/31 62595.74 41944.21 1997/06/30 62188.48 43823.31 1997/07/31 76537.58 47310.33 1997/08/31 78085.16 44660.01 1997/09/30 80990.28 47106.04 1997/10/31 69614.17 45532.69 1997/11/30 68324.52 47640.40 1997/12/31 60698.03 48458.39 1998/01/31 65539.08 48994.34 1998/02/28 72316.56 52527.81 1998/03/31 70679.40 55217.76 1998/04/30 77439.28 55773.25 1998/05/31 72158.13 54814.51 1998/06/30 78583.53 57041.07 1998/07/31 82773.24 56433.58 1998/08/31 71657.72 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980914 085115 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Computers Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $71,658 - a 616.58% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS DELL COMPUTER CORP. 15.4 EMC CORP. 9.7 INTERNATIONAL BUSINESS MACHINES CORP. 5.4 CISCO SYSTEMS, INC. 5.2 MICROSOFT CORP. 4.9 COMPAQ COMPUTER CORP. 4.3 APPLE COMPUTER, INC. 3.0 LUCENT TECHNOLOGIES, INC. 2.7 QUANTUM CORP. 2.7 GATEWAY 2000, INC. 2.4 TOP INDUSTRIES AS OF AUGUST 31, 1998 ROW: 1, COL: 1, VALUE: 45.9 ROW: 1, COL: 2, VALUE: 5.8 ROW: 1, COL: 3, VALUE: 6.0 ROW: 1, COL: 4, VALUE: 8.199999999999999 ROW: 1, COL: 5, VALUE: 11.4 ROW: 1, COL: 6, VALUE: 22.7 MINI & MICRO COMPUTERS 22.7% COMPUTER PERIPHERALS 11.4% PREPACKAGED COMPUTER SOFTWARE 8.2% DATACOMMUNICATIONS EQUIPMENT 6.0% COMPUTERS & OFFICE EQUIPMENT 5.8% ALL OTHERS 45.9% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS COMPUTERS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Michael Tempero) Michael Tempero, Portfolio Manager of Fidelity Select Computers Portfolio Q. HOW DID THE FUND PERFORM, MIKE? A. For the six-month period that ended August 31, 1998, the fund returned -0.90%. For the same six-month period, the Standard & Poor's 500 Index returned -8.10%. For the one-year period that ended August 31, 1998, the fund returned -8.22% and the Standard & Poor's 500 Index returned 8.10%. Beginning this period, the fund also compares itself to the Goldman Sachs Technology Index - an index of 190 stocks designed to measure the performance of companies in the technology sector - which returned -8.97% and -3.28% over the same six- and 12-month periods, respectively. Q. HOW WOULD YOU DESCRIBE THE INVESTING BACKDROP FOR COMPUTERS DURING THE PAST SIX MONTHS? A. Given the economic turmoil and uncertainty that went on around the world - particularly in Asia - many computer stocks performed well relative to their technology counterparts. That's largely because the demand for computers remained relatively firm in the U.S. and Europe, which helped to offset declining sales in Asia. Although a relatively favorable backdrop helped boost computer hardware stocks through the spring, the stock market's summer sell-off acted as a drag on them. But not all segments of the computer industry held up as well. Semiconductor chip companies, for instance, were hard hit when they suffered from a surplus of supply and falling chip prices. Q. WHICH OF THE FUND'S HOLDINGS WERE STANDOUTS DURING THE PAST SIX MONTHS? A. Dell continued to post strong returns and was one of the fund's best performers during the period. The company operates a very efficient model for selling personal computers. What I mean by that is that Dell often is able to under-price its competitors - including Compaq, Hewlett- Packard and IBM - because it doesn't have to worry about stockpiling a lot of inventory. One of the most pressing issues that faces computer makers is predicting demand. By building computers when orders come in, rather than producing them in advance and keeping them in inventory, Dell more or less eliminates the costs associated with forecasting demand incorrectly. Q. ASIDE FROM PERSONAL COMPUTER STOCKS, WHERE DID OTHER WINNERS COME FROM? A. Telecommunications equipment giant Lucent Technologies was one of the fund's - as well as the stock market's - best performers during the past six months. Lucent, spun off from AT&T Corp. in 1996, continued to grab business away from competitors. EMC Corp., which develops and services computer storage and retrieval products, also performed quite well. There was continued strong demand for its products that help companies centralize computer storage. Finally, Cisco Systems also performed quite well. The company, which provides networking solutions through computing devices and computer networks, benefited from the consolidation among networking companies. Q. WERE THERE ANY DISAPPOINTMENTS DURING THE PERIOD? A. Yes, there were, and Quantum was the biggest of them. The company reported worse-than-expected financial results in the spring after suffering from an oversupply of storage devices and industry price cutting. Other disappointments included chip makers -such as Intel - which were hurt by slowing demand and falling chip prices. Q. WHAT'S YOUR OUTLOOK? A. It's important to remember that computer companies are cyclical and their performance usually mirrors the strength or weakness of the economy as a whole. Computer stocks have performed relatively well over the past several years primarily because businesses have continually accelerated their capital spending. If Asia's problems persist and continue to act as a drag on the global economy, I would expect capital equipment spending to slow. That said, I believe that over time there will be continued strong demand for computer products designed to improve productivity and save money. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 007 TRADING SYMBOL: FDCPX SIZE: as of August 31, 1998, more than $720 million MANGER: Michael Tempero, since 1997; manager, Fidelity Select Insurance Portfolio, 1995-1997; Fidelity Select Natural Gas Portfolio, 1994-1995; joined Fidelity in 1993 COMPUTERS PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 79.8% SHARES VALUE (NOTE 1) COMMUNICATIONS EQUIPMENT - 9.2% DATACOMMUNICATIONS EQUIPMENT - 6.0% Cisco Systems, Inc. (a) 493,000 $ 40,364,375 3Com Corp. (a) 275,000 6,514,063 46,878,438 TELEPHONE EQUIPMENT - 3.2% Ascend Communications, Inc. (a) 100,000 3,518,750 Lucent Technologies, Inc. 300,000 21,262,500 24,781,250 TOTAL COMMUNICATIONS EQUIPMENT 71,659,688 COMPUTER SERVICES & SOFTWARE - 11.0% COMPUTER & SOFTWARE STORES - 0.5% Inacom Corp. (a) 200,000 3,850,000 COMPUTER RELATED SERVICES, NEC - 0.4% CNET, Inc. 50,000 1,950,000 Security Dynamics Technologies, Inc. (a) 100,000 937,500 2,887,500 COMPUTER SERVICES - 1.9% America Online, Inc. 100,000 8,193,750 Computer Learning Centers, Inc. (a) 276,600 1,313,850 SportsLine USA, Inc. 50,000 993,750 Yahoo, Inc. (a) 70,000 4,830,000 15,331,350 CUSTOM COMPUTER PROGRAMMING SERVICES - 0.0% Entrust Technologies, Inc. (a) 800 10,600 PREPACKAGED COMPUTER SOFTWARE - 8.2% Citrix Systems, Inc. (a) 188,000 10,833,500 Electronics for Imaging, Inc. (a) 415,400 6,075,225 Microsoft Corp. (a) 400,000 38,375,000 Siebel Systems, Inc. (a) 454,000 8,512,500 63,796,225 TOTAL COMPUTER SERVICES & SOFTWARE 85,875,675 COMPUTERS & OFFICE EQUIPMENT - 51.7% COMPUTER EQUIPMENT - WHOLESALE - 2.1% CDW Computer Centers, Inc. (a) 100,000 3,850,000 CHS Electronics, Inc. (a) 100,000 1,262,500 Ingram Micro, Inc. Class A (a) 50,000 2,250,000 Insight Enterprises, Inc. (a) 127,500 5,418,750 Tech Data Corp. (a) 100,000 3,781,250 16,562,500 COMPUTER PERIPHERALS - 11.4% EMC Corp. (a) 1,679,000 75,869,813 Fore Systems, Inc. (a) 31,700 546,825 Lexmark International Group, Inc. (a) 200,000 12,112,500 88,529,138 COMPUTER STORAGE DEVICES - 3.4% Advanced Digital Information Corp. (a) 170,700 1,162,894 Network Appliance, Inc. 100,000 4,168,750 Quantum Corp. (a) 1,847,000 21,125,063 26,456,707 COMPUTERS & OFFICE EQUIPMENT - 5.8% Diebold, Inc. 150,000 3,281,250 International Business Machines Corp. 375,000 42,234,375 45,515,625 SHARES VALUE (NOTE 1) ELECTRONIC COMPUTERS - 2.7% Gateway 2000, Inc. (a) 400,000 $ 18,925,000 Micron Electronics, Inc. (a) 200,000 2,350,000 21,275,000 GRAPHICS WORKSTATIONS - 2.3% Sun Microsystems, Inc. (a) 450,000 17,831,250 MAINFRAME COMPUTERS - 0.5% Unisys Corp. (a) 200,000 3,587,500 MINI & MICRO COMPUTERS - 22.7% Apple Computer, Inc. (a) 750,000 23,390,625 Compaq Computer Corp. 1,206,350 33,702,403 Dell Computer Corp. (a) 1,200,000 120,000,000 177,093,028 OFFICE AUTOMATION - 0.8% Xerox Corp. 69,300 6,085,405 TOTAL COMPUTERS & OFFICE EQUIPMENT 402,936,153 ELECTRONIC INSTRUMENTS - 0.6% ELECTRONIC EQUIPMENT - 0.5% Smart Modular Technologies, Inc. (a) 250,000 3,812,500 SEMI-CONDUCTOR CAPITAL EQUIPMENT - 0.1% Lam Research Corp. (a) 62,400 682,500 TOTAL ELECTRONIC INSTRUMENTS 4,495,000 ELECTRONICS - 5.2% SEMICONDUCTORS - 5.2% Intel Corp. 200,000 14,237,500 Micron Technology, Inc. (a) 320,000 7,280,000 Semtech Corp. (a) 174,000 2,784,000 Texas Instruments, Inc. 340,000 16,213,750 40,515,250 RETAIL & WHOLESALE, MISCELLANEOUS - 2.1% MAIL ORDER - 0.6% Amazon Com, Inc. (a) 56,400 4,723,500 MUSIC, TV, & ELECTRONIC STORES - 1.5% Best Buy Co., Inc. (a) 300,000 11,812,500 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 16,536,000 TOTAL COMMON STOCKS (Cost $559,565,197) 622,017,766 CASH EQUIVALENTS - 20.2% Taxable Central Cash Fund (b) (Cost $157,017,199) 157,017,199 157,017,199 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $716,582,396) $ 779,034,965 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $411,058,398 and $416,139,348, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $70,905 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At period end, the value of securities loaned and the value of the collateral amounted to $17,922,150 and $23,182,400, respectively (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $719,517,300. Net unrealized appreciation aggregated $59,517,665, of which $150,031,886 related to appreciated investment securities and $90,514,221 related to depreciated investment securities. The fund intends to elect to defer its fiscal year ending February 28, 1999 approximately $78,590,000 of losses recognized during the period November 1, 1997 to February 28, 1998. COMPUTERS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 779,034,965 SECURITIES, AT VALUE (COST $716,582,39 6) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 13,844,107 INVESTMENTS SOLD RECEIVABLE FOR 9,435,072 FUND SHARES SOLD DIVIDENDS 99,500 RECEIVABLE INTEREST 600,119 RECEIVABLE REDEMPTION FEES 108,652 RECEIVABLE OTHER 122,361 RECEIVABLES TOTAL ASSETS 803,244,776 LIABILITIES PAYABLE FOR $ 20,393,052 INVESTMENTS PURCHASED PAYABLE FOR 37,956,869 FUND SHARES REDEEMED ACCRUED 419,859 MANAGEMENT FEE OTHER PAYABLES 482,291 AND ACCRUED EXPENSES COLLATERAL ON 23,182,400 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 82,434,471 NET ASSETS $ 720,810,305 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 753,195,616 ACCUMULATED (2,295,937) NET INVESTMENT LOSS ACCUMULATED (92,541,943) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS NET UNREALIZED 62,452,569 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 720,810,305 17,705,204 SHARES OUTSTANDING NET ASSET $40.71 VALUE AND REDEMPTION PRICE PER SHARE ($720,810,3 05 (DIVIDED BY) 17,705,204 SHARES) MAXIMUM $41.97 OFFERING PRICE PER SHARE (100/97.00 OF $40.71) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 535,917 INCOME DIVIDENDS INTEREST 1,858,699 (INCLUDING INCOME ON SECURITIES LOANED OF $279,915) TOTAL INCOME 2,394,616 EXPENSES MANAGEMENT $ 2,175,029 FEE TRANSFER AGENT 2,086,023 FEES ACCOUNTING AND 320,663 SECURITY LENDING FEES NON-INTERESTED 1,409 TRUSTEES' COMPENSATION CUSTODIAN FEES 19,296 AND EXPENSES REGISTRATION FEES 37,134 AUDIT 18,755 LEGAL 1,977 REPORTS TO 103,140 SHAREHOLDERS TOTAL EXPENSES 4,763,426 BEFORE REDUCTIONS EXPENSE (72,873) 4,690,553 REDUCTIONS NET INVESTMENT (2,295,937) INCOME (LOSS) REALIZED AND (1,615,369) UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON INVESTMENT SECURITIES CHANGE IN NET (34,124,206) UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) (35,739,575) NET INCREASE $ (38,035,512) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 976,628 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 973,541 - - RETAINED BY FDC DEFERRED SALES $ 1,393 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 129,345 WITHHELD BY FSC EXPENSE $ 70,131 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 2,742 CREDITS $ 72,873 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (2,295,937) $ (4,376,259) NET INVESTMENT INCOME (LOSS) NET REALIZED (1,615,369) 89,255,411 GAIN (LOSS) CHANGE IN NET (34,124,206) 22,245,884 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (38,035,512) 107,125,036 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO - (132,918,806) SHAREHOLDERS FROM NET REALIZED GAIN IN EXCESS OF - (34,413,012) NET REALIZED GAIN TOTAL - (167,331,818) DISTRIBUTIONS SHARE 533,395,613 808,411,253 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT - 165,233,207 OF DISTRIBUTIONS COST OF SHARES (561,604,675) (733,889,159) REDEEMED NET INCREASE (28,209,062) 239,755,301 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 1,590,189 1,629,692 FEES TOTAL (64,654,385) 181,178,211 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 785,464,690 604,286,479 PERIOD END OF PERIOD $ 720,810,305 $ 785,464,690 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $2,295,937 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 11,768,229 17,046,061 ISSUED IN - 4,788,686 REINVESTMENT OF DISTRIBUTIONS REDEEMED (13,181,751) (15,239,529) NET INCREASE (1,413,522) 6,595,218 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET $ 41.08 $ 48.25 $ 41.03 $ 30.67 $ 27.02 $ 20.15 VALUE, BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATION S NET (.14) (.32) (.36) (.23) (.31) (.21) E INVESTMENT INCOME (LOSS) D NET (.32) 6.42 9.94 16.10 3.68 8.66 REALIZED AND UNREALIZED GAIN (LOSS) TOTAL FROM (.46) 6.10 9.58 15.87 3.37 8.45 INVESTMENT OPERATIONS LESS DISTRIBUTIO NS FROM NET - (10.64) (2.47) (5.61) - (1.80) REALIZED GAIN IN EXCESS - (2.75) - - - - OF NET REALIZED GAIN TOTAL - (13.39) (2.47) (5.61) - (1.80) DISTRIBUTION S REDEMPTION .09 .12 .11 .10 .28 .22 FEES ADDED TO PAID IN CAPITAL NET ASSET $ 40.71 $ 41.08 $ 48.25 $ 41.03 $ 30.67 $ 27.02 VALUE, END OF PERIOD TOTAL (0.90)% 20.33% 23.97% 52.79% 13.51% 45.06% RETURN B, C RATIOS AND SUPPLEME NTAL DATA NET ASSETS, $ 720,810 $ 785,465 $ 604,286 $ 527,337 $ 215,014 $ 120,435 END OF PERIOD (000 OMITTED) RATIO OF 1.26% A 1.40% 1.48% 1.40% 1.71% 1.90% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.24% A, F 1.34% F 1.44% F 1.38% F 1.69% F 1.89% F EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.61)% A (.67)% (.83)% (.56)% (1.12)% (.91)% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 120% A 333% 255% 129% 189% 145% TURNOVER RATE AVERAGE $ .0431 $ .0444 $ .0432 COMMISSIO N RATE G A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL 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 NET INVESTMENT INCOME (LOSS) PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.07 PER SHARE. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
DEVELOPING COMMUNICATIONS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1998 MONTHS YEAR YEARS FUND SELECT DEVELOPING -11.77% -10.22% 65.92% 264.74% COMMUNICATIONS SELECT DEVELOPING -14.49% -12.99% 60.87% 253.72% COMMUNICATIONS (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 230.88% GS TECHNOLOGY -8.97% -3.28% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or since the fund started on June 29, 1990. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Technology Index - a market capitalization-weighted index of 190 stocks designed to measure the performance of companies in the technology sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF AUGUST 31, 1998 YEAR YEARS FUND SELECT DEVELOPING -10.22% 10.66% 17.17% COMMUNICATIONS SELECT DEVELOPING -12.99% 9.97% 16.73% COMMUNICATIONS (LOAD ADJ.) S&P 500 8.10% 18.25% 15.78% GS TECHNOLOGY -3.28% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER LIFE OF FUND Developing Communications S&P 500 00518 SP001 1990/06/29 9700.00 10000.00 1990/07/31 8953.10 9968.00 1990/08/31 7866.70 9066.89 1990/09/30 6751.20 8625.34 1990/10/31 7081.00 8588.25 1990/11/30 8235.30 9143.05 1990/12/31 8759.10 9398.14 1991/01/31 10146.20 9807.90 1991/02/28 10776.70 10509.16 1991/03/31 11494.50 10763.48 1991/04/30 11591.50 10789.32 1991/05/31 11766.10 11255.41 1991/06/30 10841.06 10739.92 1991/07/31 11963.62 11240.40 1991/08/31 12670.42 11506.79 1991/09/30 12815.94 11314.63 1991/10/31 13564.32 11466.25 1991/11/30 12888.70 11004.16 1991/12/31 14135.99 12263.03 1992/01/31 14510.18 12034.94 1992/02/29 14998.70 12191.39 1992/03/31 14260.72 11953.66 1992/04/30 14073.63 12305.10 1992/05/31 14011.26 12365.39 1992/06/30 13512.35 12181.15 1992/07/31 14104.81 12679.36 1992/08/31 13574.71 12419.43 1992/09/30 14032.05 12565.98 1992/10/31 14655.70 12609.96 1992/11/30 15986.14 13039.96 1992/12/31 16569.33 13200.35 1993/01/31 17017.15 13311.24 1993/02/28 17121.30 13492.27 1993/03/31 17735.75 13776.96 1993/04/30 17206.93 13443.55 1993/05/31 18365.83 13803.84 1993/06/30 19160.51 13843.87 1993/07/31 19535.77 13788.50 1993/08/31 21323.79 14311.08 1993/09/30 21621.79 14200.89 1993/10/31 22372.32 14494.84 1993/11/30 20672.60 14357.14 1993/12/31 21833.52 14530.86 1994/01/31 22673.27 15024.91 1994/02/28 22298.78 14617.74 1994/03/31 20744.11 13980.40 1994/04/30 21598.03 14159.35 1994/05/31 20440.78 14391.57 1994/06/30 18918.07 14038.97 1994/07/31 20879.32 14499.45 1994/08/31 22657.83 15093.93 1994/09/30 22962.38 14724.13 1994/10/31 25021.07 15055.42 1994/11/30 24314.54 14507.10 1994/12/31 25138.57 14722.24 1995/01/31 24467.87 15103.99 1995/02/28 25337.29 15692.59 1995/03/31 25473.91 16155.68 1995/04/30 26593.13 16631.47 1995/05/31 27505.97 17296.23 1995/06/30 30405.58 17698.02 1995/07/31 33318.60 18284.88 1995/08/31 33399.15 18330.78 1995/09/30 34285.14 19104.34 1995/10/31 30875.42 19036.14 1995/11/30 31023.08 19871.82 1995/12/31 29504.05 20254.55 1996/01/31 28582.05 20944.02 1996/02/29 30871.16 21138.17 1996/03/31 30569.12 21341.73 1996/04/30 32572.09 21656.31 1996/05/31 34416.10 22214.82 1996/06/30 32921.82 22299.46 1996/07/31 30060.43 21314.27 1996/08/31 31570.61 21763.79 1996/09/30 34416.10 22988.66 1996/10/31 32969.51 23622.68 1996/11/30 34527.37 25408.32 1996/12/31 33796.13 24904.98 1997/01/31 35226.82 26461.05 1997/02/28 31284.47 26668.50 1997/03/31 28566.15 25572.69 1997/04/30 29742.50 27099.38 1997/05/31 33907.41 28749.19 1997/06/30 35099.65 30037.16 1997/07/31 39566.59 32427.21 1997/08/31 39407.62 30610.64 1997/09/30 42110.04 32287.18 1997/10/31 37198.00 31208.79 1997/11/30 37500.03 32653.45 1997/12/31 35837.88 33214.11 1998/01/31 35758.25 33581.45 1998/02/28 40098.61 36003.35 1998/03/31 41452.49 37847.08 1998/04/30 42391.48 38227.82 1998/05/31 40333.83 37570.69 1998/06/30 43290.45 39096.81 1998/07/31 44369.22 38680.43 1998/08/31 35372.01 33088.01 IMATRL PRASUN SHR__CHT 19980831 19980916 100517 R00000000000101 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Developing Communications Portfolio on June 29, 1990, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $35,372 - a 253.72% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $33,088 - a 230.88% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS INTEL CORP. 9.7 ASCEND COMMUNICATIONS, INC. 7.7 CISCO SYSTEMS, INC. 6.5 OY NOKIA AB SPONSORED ADR CLASS A 6.1 ALCATEL ALSTHOM COMPAGNIE GENERALE D'ELECTRICITE SA 5.3 MEDIAONE GROUP, INC. 4.9 NORTHERN TELECOM LTD. 4.7 WORLDCOM, INC. 4.1 GENERAL INSTRUMENT CORP. 3.6 LUCENT TECHNOLOGIES, INC. 3.4 TOP INDUSTRIES AS OF AUGUST 31, 1998 TELEPHONE EQUIPMENT 25.7% SEMICONDUCTORS 12.9% TELEPHONE SERVICES 9.8% CABLE TV OPERATORS 9.7% DATACOMMUNICATIONS EQUIPMENT 7.9% ALL OTHERS 34.0% ROW: 1, COL: 1, VALUE: 34.0 ROW: 1, COL: 2, VALUE: 7.9 ROW: 1, COL: 3, VALUE: 9.699999999999999 ROW: 1, COL: 4, VALUE: 9.800000000000001 ROW: 1, COL: 5, VALUE: 12.9 ROW: 1, COL: 6, VALUE: 25.7 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS DEVELOPING COMMUNICATIONS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Andrew Kaplan) Andrew Kaplan, Portfolio Manager of Select Developing Communications Portfolio Q. HOW DID THE FUND PERFORM, ANDREW? A. For the six and 12 months that ended August 31, 1998, the fund returned -11.77% and -10.22%, respectively. During those same six- and 12-month periods, the Standard & Poor's 500 Index returned -8.10% and 8.10%, respectively. Beginning this period, the fund also compares itself to the Goldman Sachs Technology Index - an index of 190 stocks designed to measure the performance of companies in the technology sector - which returned -8.97% and -3.28% over the same six- and 12-month periods, respectively. Q. WHAT FACTORS AFFECTED PERFORMANCE? A. There were a couple of important developments. First, investors recognized that crises in Asia would likely have a broader impact than expected on emerging economies worldwide. This reaction hurt the whole U.S. stock market, but the developing communications sector suffered in particular. Telecommunications equipment firms, cable equipment suppliers and service providers that operate internationally concentrate disproportionately on those emerging countries that do not already have existing communications infrastructure. In addition, some emerging communications companies that had attracted more speculative investors - because they promised future, but not current, earnings growth - were especially hard hit in the market downdraft. Q. WHAT STRATEGIES DID YOU PURSUE IN THIS ENVIRONMENT? A. I focused on market segments that I felt were least likely to be hurt by these phenomena. For example, I was attracted to companies involved with data networking, because the vast majority of their sales is in developed economies. I also focused on companies that enjoyed solid or growing market share, with Nokia, the Finnish telecommunications giant, as a good example. Although concerns about a possible spending slowdown hurt the company's wireless operations, it benefited from the introduction of a new line of cellular handsets. In addition, since Nokia was a dominant player in wireless communications infrastructure in Europe - where growth was good - it was somewhat insulated from emerging market issues. Q. WHICH STOCKS DID WELL FOR THE FUND? A. In addition to Nokia, I'd mention French-based Alcatel. This formerly diversified company had been a poor performer, but was in the midst of a turnaround brought on by new and improved management that focused its operations on the company's core telecommunications assets. Lucent, the former equipment division of AT&T, and Cisco Systems, a networking company, also performed well, helped greatly by their dominant positions in North America, where they profited from the continued explosive growth of traffic on the Internet. Q. WHICH STOCKS WERE DISAPPOINTMENTS? A. I'd mention three. First, Northern Telecom, a telecommunications equipment manufacturer, was hurt by its acquisition of Bay Networks. The company thought the purchase would help sustain its growth, but investors felt that it would instead increase the company's risk profile. Brightpoint and Cellstar, two distributors of wireless telecommunications equipment, were hurt because a large concentration of their business was in emerging markets. I sold the fund's holdings in these companies before the end of the period. Q. WHAT'S YOUR OUTLOOK? A. I'm more optimistic about developing communications than about the technology sector as a whole. Companies in the developing communications sector have a great opportunity to take advantage of the emerging importance of the Internet and the transmission of data over public networks; they are unfolding stories that are still in their early chapters. These companies should be beneficiaries of the fact that we will talk, work and play more and more over the Internet. I'm looking for opportunities offered by the companies that are best-positioned to take advantage of this trend, which should last for many years to come. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: June 29, 1990 FUND NUMBER: 518 TRADING SYMBOL: FSDCX SIZE: as of August 31, 1998, more than $205 million MANAGER: Andrew Kaplan, since March 1998; manager, Fidelity Select Technology Portfolio, since July 1998; Fidelity Select Electronics Portfolio, 1996-June 1998; joined Fidelity in 1995 DEVELOPING COMMUNICATIONS PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.1% SHARES VALUE (NOTE 1) BROADCASTING - 11.2% CABLE TV OPERATORS - 9.7% Comcast Corp. Class A special 150,000 $ 5,606,250 Cox Communications, Inc. Class A (a) 100,000 4,200,000 MediaOne Group, Inc. (a) 250,000 10,250,000 20,056,250 COMMUNICATIONS SERVICES, NEC - 1.5% Metromedia Fiber Network, Inc. Class A 150,000 3,150,000 TOTAL BROADCASTING 23,206,250 CELLULAR - 5.3% CELLULAR & COMMUNICATION SERVICES - 5.3% AirTouch Communications, Inc. (a) 100,000 5,625,000 Nextel Communications, Inc. Class A (a) 200,000 3,612,500 SkyTel Communications, Inc. (a) 136,000 1,785,000 11,022,500 COMMUNICATIONS EQUIPMENT - 35.0% DATACOMMUNICATIONS EQUIPMENT - 7.9% Cisco Systems, Inc. (a) 165,000 13,509,375 3Com Corp. (a) 125,000 2,960,938 16,470,313 TELEPHONE EQUIPMENT - 25.7% ADC Telecommunications, Inc. (a) 100,000 2,218,750 Ascend Communications, Inc. (a) 453,600 15,961,050 DSC Communications Corp. (a) 28,000 675,500 Filtronic PLC 73,800 557,945 Filtronic PLC rights 9/30/98 7,380 - InterVoice, Inc. (a) 100,000 1,487,500 Lucent Technologies, Inc. 100,000 7,087,500 Newbridge Networks Corp. (a) 10,000 185,625 Northern Telecom Ltd. 205,480 9,858,062 Oy Nokia AB sponsored ADR Class A 190,000 12,694,375 Terayon Communication Systems (a) 276,500 2,661,313 53,387,620 TELEPHONE INTERCONNECT SYSTEMS - 1.4% Intermedia Communications, Inc. (a) 116,600 2,900,425 TOTAL COMMUNICATIONS EQUIPMENT 72,758,358 COMPUTER SERVICES & SOFTWARE - 5.3% COMPUTER SERVICES - 4.1% America Online, Inc. 70,000 5,735,625 Yahoo, Inc. (a) 40,000 2,760,000 8,495,625 PREPACKAGED COMPUTER SOFTWARE - 1.2% Avant! Corp. (a) 66,300 853,613 Siebel Systems, Inc. (a) 32,900 616,875 Verilink Corp. (a) 205,000 973,750 2,444,238 TOTAL COMPUTER SERVICES & SOFTWARE 10,939,863 COMPUTERS & OFFICE EQUIPMENT - 1.2% MINI & MICRO COMPUTERS - 1.2% Dell Computer Corp. (a) 25,000 2,500,000 ELECTRICAL EQUIPMENT - 9.4% ELECTRICAL EQUIPMENT - WHOLESALE - 0.5% Antec Corp. (a) 50,000 803,125 SHARES VALUE (NOTE 1) ELECTRICAL MACHINERY - 5.3% Alcatel Alsthom Compagnie Generale d'Electricite SA 73,500 $ 11,093,906 TV & RADIO COMMUNICATION EQUIPMENT - 3.6% General Instrument Corp. (a) 378,600 7,524,675 TOTAL ELECTRICAL EQUIPMENT 19,421,706 ELECTRONIC INSTRUMENTS - 1.0% INDUSTRIAL MEASUREMENT INSTRUMENTS - 1.0% JDS Fitel, Inc. (a) 157,400 2,157,539 ELECTRONICS - 12.9% SEMICONDUCTORS - 12.9% Altera Corp. (a) 50,000 1,456,250 Intel Corp. 281,700 20,053,519 Micrel, Inc. (a) 35,000 1,017,186 PMC-Sierra, Inc. (a) 55,500 1,696,219 Vitesse Semiconductor Corp. (a) 97,400 2,641,975 26,865,149 RETAIL & WHOLESALE, MISCELLANEOUS - 1.0% MAIL ORDER - 1.0% Amazon.com, Inc. (a) 25,000 2,093,750 TELEPHONE SERVICES - 9.8% MCI Communications Corp. 140,000 7,000,000 McLeod USA, Inc. Class A (a) 50,000 1,450,000 Qwest Communications International, Inc. (a) 131,689 3,292,225 WorldCom, Inc. (a) 210,000 8,596,875 20,339,100 TOTAL COMMON STOCKS (Cost $207,987,200) 191,304,215 CASH EQUIVALENTS - 7.9% Taxable Central Cash Fund (b) (Cost $16,327,787) 16,327,787 16,327,787 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $224,314,987) $ 207,632,002 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $590,765,144 and $570,642,187, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $54,701 for the period (see Note 4 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 82.4% Finland 6.1 Canada 5.9 France 5.3 Others (individually less than 1%) 0.3 TOTAL 100.0% Transactions during the period with companies which are or were affiliates are as follows (see Note 10 of Notes to Financial Statements): PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Anicom, Inc. $ - $ 1,787,500 $ - $ - INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $225,299,161. Net unrealized depreciation aggregated $17,667,159, of which $12,626,297 related to appreciated investment securities and $30,293,456 related to depreciated investment securities. The fund intends to elect to defer to its fiscal year ending February 28, 1999 approximately $15,529,000 of losses recognized during the period November 1, 1997 to February 28, 1998. DEVELOPING COMMUNICATIONS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 207,632,002 SECURITIES, AT VALUE (COST $224,314,98 7) - SEE ACCOMPANYIN G SCHEDULE CASH 1,668,133 RECEIVABLE FOR 15,196,281 INVESTMENTS SOLD RECEIVABLE FOR 550,421 FUND SHARES SOLD DIVIDENDS 121,724 RECEIVABLE INTEREST 115,550 RECEIVABLE REDEMPTION FEES 9,041 RECEIVABLE OTHER 271,590 RECEIVABLES TOTAL ASSETS 225,564,742 LIABILITIES PAYABLE FOR $ 11,873,210 INVESTMENTS PURCHASED PAYABLE FOR 8,293,311 FUND SHARES REDEEMED ACCRUED 131,296 MANAGEMENT FEE OTHER PAYABLES 188,132 AND ACCRUED EXPENSES TOTAL LIABILITIES 20,485,949 NET ASSETS $ 205,078,793 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 228,175,817 ACCUMULATED (639,901) NET INVESTMENT LOSS ACCUMULATED (5,776,444) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (16,680,679) APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 205,078,793 11,581,376 SHARES OUTSTANDING NET ASSET $17.71 VALUE AND REDEMPTION PRICE PER SHARE ($205,078,7 93 (DIVIDED BY) 11,581,376 SHARES) MAXIMUM $18.26 OFFERING PRICE PER SHARE (100/97.00 OF $17.71) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 365,561 INCOME DIVIDENDS INTEREST 747,418 TOTAL INCOME 1,112,979 EXPENSES MANAGEMENT $ 732,979 FEE TRANSFER AGENT 843,971 FEES ACCOUNTING FEES 125,134 AND EXPENSES NON-INTERESTED 569 TRUSTEES' COMPENSATION CUSTODIAN FEES 30,481 AND EXPENSES REGISTRATION FEES 35,517 AUDIT 12,889 LEGAL 704 REPORTS TO 43,037 SHAREHOLDERS TOTAL EXPENSES 1,825,281 BEFORE REDUCTIONS EXPENSE (72,401) 1,752,880 REDUCTIONS NET INVESTMENT (639,901) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 13,149,600 SECURITIES (INCLUDING REALIZED GAIN OF $159,311 ON SALE OF INVESTMENTS IN AFFILIATED ISUERS) FOREIGN (6,943) 13,142,657 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (43,254,438) SECURITIES ASSETS AND 5,967 (43,248,471) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (30,105,814) NET INCREASE $ (30,745,715) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 260,834 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 259,806 - - RETAINED BY FDC DEFERRED SALES $ 1,690 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 31,920 WITHHELD BY FSC EXPENSE $ 72,119 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 282 CREDITS $ 72,401 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (639,901) $ (1,952,549) NET INVESTMENT INCOME (LOSS) NET REALIZED 13,142,657 43,720,650 GAIN (LOSS) CHANGE IN NET (43,248,471) 15,846,999 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (30,745,715) 57,615,100 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (820,145) (39,986,959) SHAREHOLDERS FROM NET REALIZED GAIN SHARE 105,289,188 191,485,848 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 808,700 39,302,908 OF DISTRIBUTIONS COST OF SHARES (108,048,371) (230,874,543) REDEEMED NET INCREASE (1,950,483) (85,787) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 239,351 453,709 FEES TOTAL (33,276,992) 17,996,063 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 238,355,785 220,359,722 PERIOD END OF PERIOD $ 205,078,793 $ 238,355,785 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $639,901 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 4,822,742 8,748,662 ISSUED IN 39,003 2,281,074 REINVESTMENT OF DISTRIBUTIONS REDEEMED (5,117,493) (10,392,215) NET INCREASE (255,748) 637,521 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET $ 20.14 $ 19.68 $ 19.42 $ 20.40 $ 19.65 $ 16.44 VALUE, BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATION S NET (.05) (.18) (.18) (.17) (.16) (.16) INVESTMENT INCOME (LOSS) D NET (2.33) 4.95 .42 4.17 2.55 4.82 REALIZED AND UNREALIZED GAIN (LOSS) TOTAL FROM (2.38) 4.77 .24 4.00 2.39 4.66 INVESTMENT OPERATIONS LESS DISTRIBUTIO NS FROM NET (.07) (4.35) - (5.00) (1.67) (1.47) REALIZED GAIN REDEMPTION .02 .04 .02 .02 .03 .02 FEES ADDED TO PAID IN CAPITAL NET ASSET $ 17.71 $ 20.14 $ 19.68 $ 19.42 $ 20.40 $ 19.65 VALUE, END OF PERIOD TOTAL (11.77)% 28.17% 1.34% 21.84% 13.63% 30.24% RETURN B, C RATIOS AND SUPPLEME NTAL DATA NET ASSETS, $ 205,079 $ 238,356 $ 220,360 $ 333,185 $ 254,426 $ 222,109 END OF PERIOD (000 OMITTED) RATIO OF 1.44% A 1.61% 1.64% 1.53% 1.58% 1.56% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.38% A, E 1.55% E 1.62% E 1.51% E 1.56% E 1.56% EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.50)% A (.82)% (.86)% (.78)% (.83)% (.88)% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 529% A 383% 202% 249% 266% 280% TURNOVER RATE AVERAGE $ .0431 $ .0437 $ .0346 COMMISSIO N RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FO R FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
ELECTRONICS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT ELECTRONICS -25.04% -31.90% 178.88% 620.54% SELECT ELECTRONICS -27.36% -34.02% 170.44% 598.85% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS TECHNOLOGY -8.97% -3.28% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Technology Index - a market capitalization-weighted index of 190 stocks designed to measure the performance of companies in the technology sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT ELECTRONICS -31.90% 22.77% 21.83% SELECT ELECTRONICS -34.02% 22.02% 21.46% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS TECHNOLOGY -3.28% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Electronics S&P 500 00008 SP001 1988/08/31 9700.00 10000.00 1988/09/30 9851.56 10426.00 1988/10/31 9135.09 10715.84 1988/11/30 8680.40 10562.61 1988/12/31 9231.53 10747.45 1989/01/31 9562.22 11534.17 1989/02/28 9424.43 11246.96 1989/03/31 9355.54 11509.02 1989/04/30 10085.80 12106.34 1989/05/31 11050.28 12596.64 1989/06/30 9961.79 12524.84 1989/07/31 10072.02 13655.84 1989/08/31 10416.48 13923.49 1989/09/30 10705.82 13866.40 1989/10/31 10223.58 13544.70 1989/11/30 10251.14 13821.02 1989/12/31 10678.27 14152.72 1990/01/31 11036.51 13203.07 1990/02/28 11918.32 13373.39 1990/03/31 12497.02 13727.79 1990/04/30 12552.13 13384.59 1990/05/31 14398.44 14689.59 1990/06/30 14618.89 14589.70 1990/07/31 13929.97 14543.01 1990/08/31 11752.98 13228.33 1990/09/30 9975.57 12584.11 1990/10/31 9617.33 12529.99 1990/11/30 10609.38 13339.43 1990/12/31 11298.43 13711.60 1991/01/31 12871.11 14309.43 1991/02/28 14002.33 15332.55 1991/03/31 14747.28 15703.60 1991/04/30 14830.05 15741.29 1991/05/31 15312.89 16421.31 1991/06/30 13450.51 15669.22 1991/07/31 14374.81 16399.40 1991/08/31 14968.01 16788.07 1991/09/30 13822.99 16507.71 1991/10/31 14498.96 16728.91 1991/11/30 13616.06 16054.73 1991/12/31 15285.30 17891.40 1992/01/31 17092.50 17558.62 1992/02/29 18030.59 17786.88 1992/03/31 16609.66 17440.03 1992/04/30 16292.37 17952.77 1992/05/31 16319.96 18040.74 1992/06/30 15133.55 17771.93 1992/07/31 15933.69 18498.80 1992/08/31 16099.23 18119.58 1992/09/30 16678.64 18333.39 1992/10/31 17934.02 18397.56 1992/11/30 19106.63 19024.91 1992/12/31 19479.10 19258.92 1993/01/31 20141.28 19420.70 1993/02/28 19699.83 19684.82 1993/03/31 20389.60 20100.17 1993/04/30 20030.19 19613.74 1993/05/31 22040.14 20139.39 1993/06/30 22442.13 20197.79 1993/07/31 23079.77 20117.00 1993/08/31 25061.99 20879.44 1993/09/30 25477.85 20718.67 1993/10/31 24992.69 21147.54 1993/11/30 24798.62 20946.64 1993/12/31 25727.96 21200.10 1994/01/31 27505.11 21920.90 1994/02/28 28809.44 21326.84 1994/03/31 28499.67 20396.99 1994/04/30 28418.14 20658.07 1994/05/31 28336.62 20996.87 1994/06/30 26820.34 20482.44 1994/07/31 27374.68 21154.27 1994/08/31 30048.56 22021.59 1994/09/30 29184.44 21482.06 1994/10/31 30374.64 21965.41 1994/11/30 29983.34 21165.43 1994/12/31 30146.38 21479.31 1995/01/31 29282.26 22036.27 1995/02/28 32282.23 22895.02 1995/03/31 35608.28 23570.66 1995/04/30 39586.49 24264.81 1995/05/31 42472.33 25234.68 1995/06/30 48521.17 25820.88 1995/07/31 55776.52 26677.10 1995/08/31 56510.21 26744.06 1995/09/30 57521.06 27872.66 1995/10/31 55939.56 27773.15 1995/11/30 54537.40 28992.39 1995/12/31 50937.84 29550.79 1996/01/31 52659.51 30556.70 1996/02/29 55766.44 30839.96 1996/03/31 52501.20 31136.95 1996/04/30 58497.37 31595.90 1996/05/31 60040.94 32410.76 1996/06/30 54994.66 32534.25 1996/07/31 52342.88 31096.88 1996/08/31 54875.92 31752.72 1996/09/30 62277.14 33539.76 1996/10/31 62771.88 34464.79 1996/11/30 72191.62 37069.98 1996/12/31 72191.62 36335.62 1997/01/31 83471.56 38605.87 1997/02/28 75100.65 38908.54 1997/03/31 69876.26 37309.79 1997/04/30 76387.53 39537.19 1997/05/31 84780.81 41944.21 1997/06/30 84258.95 43823.31 1997/07/31 98892.83 47310.33 1997/08/31 102632.84 44660.01 1997/09/30 106438.08 47106.04 1997/10/31 90651.76 45532.69 1997/11/30 89999.43 47640.40 1997/12/31 82096.47 48458.39 1998/01/31 83428.77 48994.34 1998/02/28 93234.52 52527.81 1998/03/31 90569.91 55217.76 1998/04/30 94833.28 55773.25 1998/05/31 82149.76 54814.51 1998/06/30 83775.17 57041.07 1998/07/31 87292.45 56433.58 1998/08/31 69885.00 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980921 161827 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Electronics Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $69,885 - a 598.85% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS INTEL CORP. 11.2 TEXAS INSTRUMENTS, INC. 7.6 MICROSOFT CORP. 6.5 MICRON TECHNOLOGY, INC. 5.6 SOLECTRON CORP. 5.2 EMC CORP. 4.1 MOTOROLA, INC. 4.0 COMPAQ COMPUTER CORP. 3.6 SCI SYSTEMS, INC. 3.0 LINEAR TECHNOLOGY CORP. 2.2 TOP INDUSTRIES AS OF AUGUST 31, 1998 ROW: 1, COL: 1, VALUE: 26.8 ROW: 1, COL: 2, VALUE: 5.2 ROW: 1, COL: 3, VALUE: 6.4 ROW: 1, COL: 4, VALUE: 7.6 ROW: 1, COL: 5, VALUE: 9.6 ROW: 1, COL: 6, VALUE: 44.4 SEMICONDUCTORS 44.4% PREPACKAGED COMPUTER SOFTWARE 9.6% COMPUTER PERIPHERALS 7.6% ELECTRONICS & ELECTRONIC COMPONENTS 6.4% SEMI-CONDUCTOR CAPITAL EQUIPMENT 5.2% ALL OTHERS 26.8% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS ELECTRONICS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Matthew Grech) NOTE TO SHAREHOLDERS: Matthew Grech became Portfolio Manager of Fidelity Select Electronics Portfolio on June 1, 1998. Q. HOW DID THE FUND PERFORM, MATT? A. For the six- and 12-month periods that ended August 31, 1998, the fund returned -25.04% and -31.90%, respectively. By comparison, the Standard & Poor's 500 Index returned -8.10% and 8.10% for the same periods. Beginning this period, the fund also compares itself to the Goldman Sachs Technology Index - an index of 190 stocks designed to measure the performance of companies in the technology sector - which returned -8.97% and -3.28% over the same six- and 12-month periods, respectively. Q. WHY DID THE FUND UNDERPERFORM THE MARKET AND THE GOLDMAN SACHS INDEX BY SUCH A WIDE MARGIN? A. When comparing the fund to the broader technology benchmark, it's important to understand that electronics stocks are just a small subset of the technology industry. It's also important for investors to understand that electronics stocks are generally more volatile than the broader technology index during industry downturns and upswings. Since these companies are generally niche suppliers to the larger and often more diversified computer, instrument and telecommunications equipment makers, their businesses tend to get hit first and hardest in an industry downturn. On the other hand, they also tend to recover rapidly when business conditions improve for the broader industry. It's also important to note that the Goldman Sachs index was helped considerably by strong price gains from industry giants Dell, Microsoft and Cisco, while being hurt by electronics companies, such as Micron Technology, which are more typical to the fund's investing universe. Q. WHAT WAS YOUR STRATEGY WITHIN THIS DIFFICULT ENVIRONMENT? A. I continued to identify and buy the companies best positioned to survive industry downturns. First, I increased the fund's investments in large-capitalization stocks, such as Cisco and Lucent, but still not to the degree represented by the Goldman Sachs index. I added Solectron and SCI Systems, contract manufacturers for electronics companies, whose customers include Cisco and Hewlett Packard. I was enthusiastic about the prospects for these contract manufacturing companies, because semiconductor companies increasingly have been outsourcing the manufacturing of semiconductor components. I also added Micron Technology, which makes DRAM computer memory, to the top 10 holdings. As more memory is being put into new PCs, the prospects for increasing demand could strengthen. Q. WHICH STOCKS PERFORMED WELL? A. Microsoft , Dell, Nokia and Citrix Systems all performed well, benefiting from the relative insulation that larger companies enjoyed during the period. Software companies, such as Microsoft, also fared better than semiconductor and PC-related stocks during the period. Dell's good performance reflected its success in adding market share. Nokia, with its terrific product line, was able to gain a larger share of the cellular phone market during the period, and performed well. Q. WHICH STOCKS WERE DISAPPOINTMENTS? A. Micron Technology and Intel were the fund's biggest detractors from performance. As component sales lagged, both companies were hurt by the decline of personal computer inventories during the period. Micron also suffered through a significant decline in the price of DRAM. SCI Systems' performance was hurt by a substantial decline in the pricing of components, reducing its revenues and overall performance. Q. WHAT'S YOUR OUTLOOK? A. I'm relatively optimistic. Expectations for this industry have come down to a much more reasonable level, creating an environment in which companies may be surpassing expectations, rather than falling short, as in the recent past. I will continue to look for the companies that produce technology necessary for semiconductor production. These are companies that you can't do without if you want to make a good PC or a good telephone handset. Above all, I will look for companies with financial strength, innovative research and development, low-cost manufacturing, competitive product lines and strong management teams. These are the companies that will be in a position to gain market share throughout the downturn and consolidate their lead when the industry recovers. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 008 TRADING SYMBOL: FSELX SIZE: as of August 31, 1998, more than $1.4 billion MANAGER: Matthew Grech, since June, 1998; analyst covering semiconductor equipment, electronic distribution, components, electronic design automation and electronic contract manufacturing industries, since 1996; joined Fidelity in 1996 ELECTRONICS PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.2% SHARES VALUE (NOTE 1) COMMUNICATIONS EQUIPMENT - 7.2% DATACOMMUNICATIONS EQUIPMENT - 4.0% Cisco Systems, Inc. (a) 365,000 $ 29,884,375 Jabil Circuit, Inc. (a) 1,110,000 26,085,000 Level One Communications, Inc. (a) 300,875 5,246,508 61,215,883 TELEPHONE EQUIPMENT - 3.2% Ascend Communications, Inc. (a) 504,000 17,734,500 Lucent Technologies, Inc. 51,000 3,614,625 Oy Nokia AB sponsored ADR Class A 400,000 26,725,000 48,074,125 TOTAL COMMUNICATIONS EQUIPMENT 109,290,008 COMPUTER SERVICES & SOFTWARE - 10.1% CUSTOM COMPUTER PROGRAMMING SERVICES - 0.5% ARM Holdings PLC sponsored ADR (a) 100,000 5,100,000 Saville Systems PLC sponsored ADR (a) 155,900 2,552,863 7,652,863 PREPACKAGED COMPUTER SOFTWARE - 9.6% Citrix Systems, Inc. (a) 493,600 28,443,700 Microsoft Corp. (a) 1,030,000 98,815,620 Sapient Corp. 220,000 8,593,750 Siebel Systems, Inc. (a) 330,600 6,198,750 Wind River Systems, Inc. (a) 100,000 3,750,000 145,801,820 TOTAL COMPUTER SERVICES & SOFTWARE 153,454,683 COMPUTERS & OFFICE EQUIPMENT - 12.5% COMPUTER PERIPHERALS - 7.6% EMC Corp. (a) 1,400,400 63,280,575 Fore Systems, Inc. (a) 379,100 6,539,475 SCI Systems, Inc. (a) 2,005,500 46,001,156 115,821,206 MINI & MICRO COMPUTERS - 4.9% Compaq Computer Corp. 1,949,700 54,469,744 Dell Computer Corp. (a) 200,000 20,000,000 74,469,744 TOTAL COMPUTERS & OFFICE EQUIPMENT 190,290,950 DEFENSE ELECTRONICS - 0.7% Litton Industries, Inc. (a) 220,500 10,584,000 DRUGS & PHARMACEUTICALS - 0.2% COMMERCIAL LABORATORY RESEARCH - 0.2% Integrated Process Equipment Corp. (a) 718,300 3,950,650 ELECTRICAL EQUIPMENT - 0.7% ELECTRICAL MACHINERY - 0.4% Alcatel Alsthom Compagnie Generale d'Electricite SA sponsored ADR 200,000 6,037,500 TV & RADIO COMMUNICATION EQUIPMENT - 0.3% Loral Space & Communications Ltd. (a) 330,700 5,249,863 TOTAL ELECTRICAL EQUIPMENT 11,287,363 ELECTRONIC INSTRUMENTS - 6.1% ELECTRONIC EQUIPMENT - 0.8% Berg Electronics Corp. (a) 200,000 6,500,000 LTX Corp. (a) 513,500 1,155,375 Teradyne, Inc. (a) 200,000 3,475,000 Varian Associates, Inc. 17,600 599,500 11,729,875 SHARES VALUE (NOTE 1) INDUSTRIAL MEASUREMENT INSTRUMENTS - 0.1% JDS Fitel, Inc. (a) 126,100 $ 1,728,499 SEMI-CONDUCTOR CAPITAL EQUIPMENT - 5.2% Applied Materials, Inc. (a) 628,000 15,425,250 KLA-Tencor Corp. (a) 1,302,500 27,678,125 Kulicke & Soffa Industries, Inc. (a) 150,000 1,940,625 Lam Research Corp. (a) 1,069,227 11,694,670 Novellus Systems, Inc. (a) 849,400 22,615,275 79,353,945 TOTAL ELECTRONIC INSTRUMENTS 92,812,319 ELECTRONICS - 53.3% CONNECTORS - 2.2% AMP, Inc. 650,000 23,196,875 Methode Electronics, Inc. Class A 584,000 7,008,000 PCD, Inc. (a) 200,000 3,050,000 33,254,875 ELECTRONICS & ELECTRONIC COMPONENTS - 6.4% Advanced Energy Industries, Inc. (a) 139,000 868,750 Molex, Inc. 400,000 9,300,000 Sanmina Corp. (a) 261,600 8,076,900 Solectron Corp. (a) 1,929,800 79,724,863 97,970,513 PRINTED CIRCUIT BOARDS - 0.3% DII Group, Inc. (a) 400,000 5,150,000 SEMICONDUCTORS - 44.4% Altera Corp. (a) 552,800 16,100,300 Analog Devices, Inc. (a) 1,030,500 14,491,406 Applied Micro Circuits Corp. 955,000 18,145,000 Celestica, Inc. (sub-vtg.) (a) 26,300 356,312 Etec Systems, Inc. (a) 637,300 15,374,863 Intel Corp. 2,409,000 171,490,688 Lattice Semiconductor Corp. (a) 130,800 3,147,375 Linear Technology Corp. 727,610 34,197,670 Maxim Integrated Products, Inc. (a) 1,195,200 32,868,000 Microchip Technology, Inc. (a) 897,550 16,436,384 Micron Technology, Inc. (a) 3,755,300 85,433,075 Motorola, Inc. 1,419,100 61,109,994 PMC-Sierra, Inc. (a) 963,900 29,459,194 Texas Instruments, Inc. 2,423,800 115,584,963 Triquint Semiconductor, Inc. (a) 100,000 1,525,000 Vitesse Semiconductor Corp. (a) 1,238,100 33,583,463 Xilinx, Inc. (a) 904,400 27,584,200 676,887,887 TOTAL ELECTRONICS 813,263,275 INDUSTRIAL MACHINERY & EQUIPMENT - 1.0% SPECIAL INDUSTRIAL MACHINERY, NEC - 1.0% ASM Lithography Holding NV (a) 436,600 7,695,075 Gasonics International Corp. (a) 225,000 1,125,000 PRI Automation, Inc. 486,600 6,082,500 14,902,575 METALS & MINING - 0.4% NONFERROUS WIRE - 0.4% Cable Design Technology Corp. (a) 475,000 6,679,688 TOTAL COMMON STOCKS (Cost $1,607,779,349) 1,406,515,511 CASH EQUIVALENTS - 7.8% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) (Cost $118,750,757) 118,750,757 $ 118,750,757 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $1,726,530,106) $1,525,266,268 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $2,103,962,185 and $2,516,669,832, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $228,387 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At period end, the value of securities loaned and the value of the collateral amounted to $22,091,743 and $26,619,800, respectively (see Note 6 of Notes to Financial Statements). Transactions during the period with companies which are or were affiliates are as follows (see Note 10 of Notes to Financial Statements): PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Benchmarq Microelectronics, Inc. $ - $ 1,281,788 $ - $ - Galileo Technology Ltd. 6,278,291 11,105,381 - - 3D Labs, Inc. Ltd. 1,556,810 4,035,636 - - TOTALS $ 7,835,101 $ 16,422,805 $ - $ - INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $1,735,359,059. Net unrealized depreciation aggregated $210,092,791, of which $97,532,247 related to appreciated investment securities and $307,625,038 related to depreciated investment securities. The fund intends to elect to defer to its fiscal year ending February 28, 1999 approximately $309,105,000 of losses recognized during the period November 1, 1997 to February 28, 1998. ELECTRONICS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 1,525,266,268 SECURITIES, AT VALUE (COST $1,726,530, 106) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 6,046,262 INVESTMENTS SOLD RECEIVABLE FOR 3,460,234 FUND SHARES SOLD DIVIDENDS 87,237 RECEIVABLE INTEREST 564,447 RECEIVABLE REDEMPTION FEES 46,121 RECEIVABLE OTHER 54,183 RECEIVABLES TOTAL ASSETS 1,535,524,752 LIABILITIES PAYABLE FOR $ 3,744,566 INVESTMENTS PURCHASED PAYABLE FOR 30,118,581 FUND SHARES REDEEMED ACCRUED 913,890 MANAGEMENT FEE OTHER PAYABLES 1,022,934 AND ACCRUED EXPENSES COLLATERAL ON 26,619,800 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 62,419,771 NET ASSETS $ 1,473,104,981 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 2,104,463,986 ACCUMULATED (6,465,136) NET INVESTMENT LOSS ACCUMULATED (423,636,782) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (201,257,087) APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 1,473,104,981 56,160,729 SHARES OUTSTANDING NET ASSET $26.23 VALUE AND REDEMPTION PRICE PER SHARE ($1,473,104, 981 (DIVIDED BY) 56,160,729 SHARES) MAXIMUM $27.04 OFFERING PRICE PER SHARE (100/97.00 OF $26.23) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 1,327,567 INCOME DIVIDENDS INTEREST 4,600,235 (INCLUDING INCOME ON SECURITIES LOANED OF $304,739) TOTAL INCOME 5,927,802 EXPENSES MANAGEMENT $ 6,281,940 FEE TRANSFER AGENT 5,753,591 FEES ACCOUNTING AND 414,569 SECURITY LENDING FEES NON-INTERESTED 4,227 TRUSTEES' COMPENSATION CUSTODIAN FEES 66,769 AND EXPENSES REGISTRATION FEES 51,795 AUDIT 46,544 LEGAL 6,988 REPORTS TO 310,724 SHAREHOLDERS TOTAL EXPENSES 12,937,147 BEFORE REDUCTIONS EXPENSE (544,209) 12,392,938 REDUCTIONS NET INVESTMENT (6,465,136) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT (73,761,516) SECURITIES (INCLUDING REALIZED GAIN (LOSS) OF $(3,124,77 3) ON SALES OF INVESTMENTS IN AFFILIATED ISSUERS) FOREIGN (14,901) (73,776,417) CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (460,397,466) SECURITIES ASSETS AND 9,687 (460,387,779) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (534,164,196) NET INCREASE $ (540,629,332) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 2,265,143 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 2,261,758 - - RETAINED BY FDC DEFERRED SALES $ 6,305 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 302,775 WITHHELD BY FSC EXPENSE $ 530,916 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 4,640 CREDITS TRANSFER 8,653 AGENT CREDITS $ 544,209 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (6,465,136) $ (10,090,302) NET INVESTMENT INCOME (LOSS) NET REALIZED (73,776,417) 286,758,046 GAIN (LOSS) CHANGE IN NET (460,387,779) 113,929,512 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (540,629,332) 390,597,256 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS FROM NET - (424,271,823) REALIZED GAIN IN EXCESS OF - (145,162,086) NET REALIZED GAIN TOTAL - (569,433,909) DISTRIBUTIONS SHARE 356,875,239 3,020,162,765 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT - 559,329,509 OF DISTRIBUTIONS COST OF SHARES (1,013,169,897) (2,481,381,434) REDEEMED NET INCREASE (656,294,658) 1,098,110,840 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 1,279,236 5,459,035 FEES TOTAL (1,195,644,754) 924,733,222 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 2,668,749,735 1,744,016,513 PERIOD END OF PERIOD $ 1,473,104,981 $ 2,668,749,735 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $6,465,136 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 10,803,700 75,772,884 ISSUED IN - 17,854,821 REINVESTMENT OF DISTRIBUTIONS REDEEMED (30,912,697) (63,315,407) NET INCREASE (20,108,997) 30,312,298 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET $ 34.99 $ 37.95 $ 28.18 $ 19.80 $ 17.67 $ 14.28 VALUE, BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATION S NET (.10) (.17) (.17) (.08) (.18) (.09) INVESTMENT INCOME (LOSS) D NET (8.68) 7.32 9.80 13.51 2.11 6.09 REALIZED AND UNREALIZED GAIN (LOSS) TOTAL FROM (8.78) 7.15 9.63 13.43 1.93 6.00 INVESTMENT OPERATIONS LESS DISTRIBUTIO NS FROM NET - (7.60) - (5.25) - (2.75) REALIZED GAIN IN EXCESS - (2.60) - - - - OF NET REALIZED GAIN TOTAL - (10.20) - (5.25) - (2.75) DISTRIBUTIO NS REDEMPTION .02 .09 .14 .20 .20 .14 FEES ADDED TO PAID IN CAPITAL NET ASSET $ 26.23 $ 34.99 $ 37.95 $ 28.18 $ 19.80 $ 17.67 VALUE, END OF PERIOD TOTAL (25.04)% 24.15% 34.67% 72.75% 12.05% 46.24% RETURN B, C RATIOS AND SUPPLEME NTAL DATA NET ASSETS, $ 1,473,105 $ 2,668,750 $ 1,744,017 $ 1,133,362 $ 216,433 $ 110,993 END OF PERIOD (000 OMITTED) RATIO OF 1.19% A 1.18% 1.33% 1.25% 1.72% 1.67% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.14% A, E 1.12% E 1.29%E 1.22%E 1.71%E 1.67% EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.59)% A (.42)% (.54)% (.28)% (.98)% (.52)% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 210% A 435% 341% 366% 205% 163% TURNOVER RATE AVERAGE $ .0439 $ .0442 $ .0421 COMMISSIO N RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FO R FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
SOFTWARE AND COMPUTER SERVICES PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT SOFTWARE AND -15.01% -5.27% 109.36% 539.56% COMPUTER SERVICES SELECT SOFTWARE AND -17.63% -8.19% 103.01% 520.30% COMPUTER SERVICES (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS TECHNOLOGY -8.97% -3.28% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Technology Index - a market capitalization-weighted index of 190 stocks designed to measure the performance of companies in the technology sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT SOFTWARE AND -5.27% 15.93% 20.39% COMPUTER SERVICES SELECT SOFTWARE AND -8.19% 15.21% 20.02% COMPUTER SERVICES (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS TECHNOLOGY -3.28% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Software/Computer Svcs S&P 500 00028 SP001 1988/08/31 9700.00 10000.00 1988/09/30 10325.81 10426.00 1988/10/31 9780.05 10715.84 1988/11/30 9634.51 10562.61 1988/12/31 10434.96 10747.45 1989/01/31 11213.58 11534.17 1989/02/28 10711.48 11246.96 1989/03/31 10449.51 11509.02 1989/04/30 11460.99 12106.34 1989/05/31 11875.77 12596.64 1989/06/30 10699.63 12524.84 1989/07/31 10383.83 13655.84 1989/08/31 10857.53 13923.49 1989/09/30 11075.58 13866.40 1989/10/31 11308.67 13544.70 1989/11/30 11639.51 13821.02 1989/12/31 11692.29 14152.72 1990/01/31 11276.63 13203.07 1990/02/28 11569.13 13373.39 1990/03/31 12030.97 13727.79 1990/04/30 11992.49 13384.59 1990/05/31 13501.17 14689.59 1990/06/30 13816.76 14589.70 1990/07/31 12554.40 14543.01 1990/08/31 10799.40 13228.33 1990/09/30 9560.12 12584.11 1990/10/31 9752.56 12529.99 1990/11/30 11007.23 13339.43 1990/12/31 11792.36 13711.60 1991/01/31 13524.26 14309.43 1991/02/28 14509.53 15332.55 1991/03/31 15333.14 15703.60 1991/04/30 15217.68 15741.29 1991/05/31 15494.79 16421.31 1991/06/30 14359.13 15669.22 1991/07/31 15241.21 16399.40 1991/08/31 16479.50 16788.07 1991/09/30 15936.69 16507.71 1991/10/31 16733.94 16728.91 1991/11/30 14901.95 16054.73 1991/12/31 17198.54 17891.40 1992/01/31 19959.13 17558.62 1992/02/29 20558.87 17786.88 1992/03/31 19571.06 17440.03 1992/04/30 19077.15 17952.77 1992/05/31 19377.02 18040.74 1992/06/30 18327.47 17771.93 1992/07/31 19623.98 18498.80 1992/08/31 18159.90 18119.58 1992/09/30 19474.04 18333.39 1992/10/31 21043.96 18397.56 1992/11/30 22878.47 19024.91 1992/12/31 23310.64 19258.92 1993/01/31 24510.13 19420.70 1993/02/28 24360.19 19684.82 1993/03/31 24880.56 20100.17 1993/04/30 24461.84 19613.74 1993/05/31 27220.77 20139.39 1993/06/30 28625.13 20197.79 1993/07/31 27758.61 20117.00 1993/08/31 29631.09 20879.44 1993/09/30 30228.70 20718.67 1993/10/31 30158.98 21147.54 1993/11/30 29411.97 20946.64 1993/12/31 30940.41 21200.10 1994/01/31 32018.55 21920.90 1994/02/28 32445.31 21326.84 1994/03/31 28963.81 20396.99 1994/04/30 29113.66 20658.07 1994/05/31 26200.02 20996.87 1994/06/30 23900.97 20482.44 1994/07/31 25073.26 21154.27 1994/08/31 27793.41 22021.59 1994/09/30 29056.75 21482.06 1994/10/31 30843.63 21965.41 1994/11/30 30137.99 21165.43 1994/12/31 31059.88 21479.31 1995/01/31 30547.72 22036.27 1995/02/28 33085.77 22895.02 1995/03/31 34975.09 23570.66 1995/04/30 36067.70 24264.81 1995/05/31 37046.50 25234.68 1995/06/30 40324.35 25820.88 1995/07/31 42759.97 26677.10 1995/08/31 43055.89 26744.06 1995/09/30 44831.39 27872.66 1995/10/31 45366.32 27773.15 1995/11/30 46652.42 28992.39 1995/12/31 45429.49 29550.79 1996/01/31 43687.13 30556.70 1996/02/29 46377.54 30839.96 1996/03/31 45198.88 31136.95 1996/04/30 49749.21 31595.90 1996/05/31 51483.88 32410.76 1996/06/30 48914.98 32534.25 1996/07/31 45154.33 31096.88 1996/08/31 46094.49 31752.72 1996/09/30 52119.48 33539.76 1996/10/31 52304.87 34464.79 1996/11/30 56449.53 37069.98 1996/12/31 55317.22 36335.62 1997/01/31 59757.12 38605.87 1997/02/28 53865.18 38908.54 1997/03/31 51100.72 37309.79 1997/04/30 54097.51 39537.19 1997/05/31 58677.99 41944.21 1997/06/30 58707.93 43823.31 1997/07/31 65803.17 47310.33 1997/08/31 65488.83 44660.01 1997/09/30 67539.56 47106.04 1997/10/31 64455.97 45532.69 1997/11/30 65878.02 47640.40 1997/12/31 63622.55 48458.39 1998/01/31 65370.61 48994.34 1998/02/28 72989.48 52527.81 1998/03/31 79074.69 55217.76 1998/04/30 77980.91 55773.25 1998/05/31 71888.14 54814.51 1998/06/30 80646.50 57041.07 1998/07/31 75911.36 56433.58 1998/08/31 62030.00 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980924 145619 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Software and Computer Services Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $62,030 - a 520.30% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS MICROSOFT CORP. 14.9 BMC SOFTWARE, INC. 8.8 ORACLE CORP. 7.5 PEOPLESOFT, INC. 6.5 SIEBEL SYSTEMS, INC. 5.2 COMPUWARE CORP. 5.0 AUTOMATIC DATA PROCESSING, INC. 4.0 COMPUTER ASSOCIATES INTERNATIONAL, INC. 4.0 DELL COMPUTER CORP. 3.4 AMERICA ONLINE, INC. 2.5 TOP INDUSTRIES AS OF AUGUST 31, 1998 ROW: 1, COL: 1, VALUE: 12.7 ROW: 1, COL: 2, VALUE: 2.5 ROW: 1, COL: 3, VALUE: 3.6 ROW: 1, COL: 4, VALUE: 7.3 ROW: 1, COL: 5, VALUE: 10.4 ROW: 1, COL: 6, VALUE: 63.5 PREPACKAGED COMPUTER SOFTWARE 63.5% COMPUTER SERVICES 10.4% DATA PROCESSING 7.7% MINI & MICRO COMPUTERS 3.6% COMPUTERS & OFFICE EQUIPMENT 2.5% ALL OTHERS 12.3% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS SOFTWARE AND COMPUTER SERVICES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of John Porter) John Porter, Portfolio Manager of Fidelity Select Software and Computer Services Portfolio Q. HOW DID THE FUND PERFORM, JOHN? A. For the six- and 12-month periods that ended August 31, 1998, the fund returned -15.01% and -5.27%, respectively. By comparison, the Standard & Poor's 500 Index returned -8.10% and 8.10% for the same time periods. Beginning this period, the fund also compares itself to the Goldman Sachs Technology Index - an index of 190 stocks designed to measure the performance of companies in the technology sector - which returned -8.97% and -3.28% over the same six- and 12-month periods, respectively. Q. WHY DID THE FUND UNDERPERFORM THE MARKET AND THE TECHNOLOGY INDEX? A. It's important to understand that software and computer services stocks are a small subset of the technology industry. As with any comparison between a narrow group of stocks and a broader group, there will usually be greater volatility in the narrow group. Software and computer services stocks are generally more volatile than the broader technology index during industry downturns and upswings. Q. WHAT WERE THE PRIMARY CONCERNS DRIVING THE INDUSTRY'S PERFORMANCE DURING THE PERIOD? A. The main issue that caused investors concern was the much-discussed "Year 2000" (Y2K) problem. Many computer systems have 2-digit date fields, so there could be severe problems with older computer systems, which unless corrected might misunderstand the year 2000 as 1900, for instance. The concern is that as we move closer to this date, companies will shift an increasing percentage of their technology budgets to fix the Y2K problem, rather than spending for new applications. Two of the larger software companies, Oracle and Computer Associates, have blamed a slowdown in software sales on the shifting of resources to Y2K fixes. The concern, which could manifest itself in lower earnings, is that other large-enterprise software companies, such as PeopleSoft, SAP and others, could see a substantial slowdown in revenue growth because of this shift. Q. WHAT WAS YOUR STRATEGY WITHIN THIS ENVIRONMENT? A. The Year 2000 issue was a difficult one to respond to. I bought more computer service companies that could benefit from the very strong demand for services to help fix and update computer systems. In addition, I bought stock in software companies that sell tools that help fix Y2K problems, such as Compuware. Q. WHICH STOCKS PERFORMED WELL? A. Microsoft, BMC Software and Compuware all performed well. These companies demonstrated accelerating revenue growth, and the stock market rewarded them with higher valuations. Microsoft had very attractive revenue growth, due in part to its recent release of Windows 98, its newest major desktop operating system. BMC Software benefited from sales of its software that helps organizations manage the vast amount of data stored in databases and improve the performance of new enterprise applications. Compuware, a leader in application development and maintenance software, with a very successful services organization, performed well. Dell Computer successfully added market share during the period, helping its performance. Q. WHICH STOCKS WERE DISAPPOINTMENTS? A. Computer Associates, Oracle and Siebel Systems performed poorly. Siebel's stock declined approximately 30% in the six months ending August 31, because investors were cautious about Siebel's recent acquisition of Scopus. Computer Associates, whose revenue and profit growth have been good, suffered after it made cautionary statements about a slowdown in revenues over the next few quarters. The company anticipated a slowdown, due primarily to customer reluctance to commit to large software purchases at a point in time when Y2K costs were high and economic uncertainty prevails. Oracle's stock declined over growing concern about a slowdown in core database sales, as well as modest customer demand for its applications. Q. WHAT'S YOUR OUTLOOK? A. Although short-term performance is hard to predict, I believe that both software and computer services will be extremely attractive segments of the market over the longer term. I will continue to follow my basic investing philosophy of looking for the best opportunities for the fund. Technology should continue to be an ever-growing part of the economy and, as a consequence, there will continue to be very attractive investment opportunities in both the software and computer service industries. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 028 TRADING SYMBOL: FSCSX SIZE: as of August 31, 1998, more than $437 million MANAGER: John Porter, since 1997; manager Fidelity Select Medical Delivery Portfolio, since January 1998; Fidelity Select Multimedia Portfolio, 1996-1997; joined Fidelity in 1995 SOFTWARE AND COMPUTER SERVICES PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.2% SHARES VALUE (NOTE 1) COMMUNICATIONS EQUIPMENT - 0.9% DATACOMMUNICATIONS EQUIPMENT - 0.6% Cisco Systems, Inc. (a) 30,000 $ 2,456,250 TELEPHONE EQUIPMENT - 0.3% Oy Nokia AB sponsored ADR Class A 20,800 1,389,700 TOTAL COMMUNICATIONS EQUIPMENT 3,845,950 COMPUTER SERVICES & SOFTWARE - 80.7% COMPUTER RELATED SERVICES, NEC - 0.5% Security Dynamics Technologies, Inc. (a) 230,000 2,156,250 COMPUTER SERVICES - 10.4% America Online, Inc. 135,000 11,061,563 Cambridge Technology Partners, Inc. (a) 130,000 4,225,000 Computer Sciences Corp. 60,000 3,393,750 Electronic Data Systems Corp. 124,100 4,157,350 Equifax, Inc. 140,000 4,987,500 Galileo International, Inc. 30,000 980,625 HBO & Co. 360,000 7,650,000 Paychex, Inc. 53,437 2,030,606 SunGard Data Systems, Inc. (a) 105,200 3,333,525 Technology Solutions, Inc. (a) 150,000 1,715,625 Yahoo, Inc. (a) 26,000 1,794,000 45,329,544 CUSTOM COMPUTER PROGRAMMING SERVICES - 0.6% Keane, Inc. (a) 60,000 2,520,000 CAD/CAM/CAE - 0.2% BroadVision, Inc. (a) 61,000 1,139,938 DATA PROCESSING - 7.7% Affiliated Computer Services, Inc. Class A (a) 100,000 3,268,750 Automatic Data Processing, Inc. 275,000 17,531,250 First Data Corp. 440,000 9,102,500 Fiserv, Inc. (a) 55,000 2,145,000 Sabre Group Holdings, Inc. Class A (a) 50,000 1,600,000 33,647,500 PREPACKAGED COMPUTER SOFTWARE - 61.3% Aspect Development, Inc. (a) 200,000 5,825,000 BMC Software, Inc. 909,600 38,487,450 BEA Systems, Inc. (a) 340,000 5,185,000 Business Objects SA sponsored ADR (a) 69,000 612,375 Check Point Software Technologies Ltd. (a) 100,000 1,812,500 Citrix Systems, Inc. (a) 85,000 4,898,125 Computer Associates International, Inc. 639,250 17,259,750 Compuware Corp. (a) 476,200 21,637,338 Deltek Systems, Inc. (a) 50,000 825,000 HNC Software, Inc. (a) 50,000 1,815,625 Industrial-Matematik International Corp. (a) 378,400 2,270,400 i2 Technologies, Inc. (a) 100,800 1,423,800 J.D. Edwards & Co. 100,000 4,050,000 Manugistics Group, Inc. (a) 258,800 3,671,725 Mercury Interactive Group Corp. (a) 50,000 1,681,250 Microsoft Corp. (a) 677,000 64,949,688 Networks Associates, Inc. (a) 60,000 1,935,000 New Era of Networks, Inc. (a) 34,000 973,250 Oracle Corp. (a) 1,650,600 32,908,838 PeopleSoft, Inc. (a) 1,002,000 28,181,250 SHARES VALUE (NOTE 1) Policy Management Systems Corp. (a) 78,400 $ 3,273,200 Siebel Systems, Inc. (a) 1,219,625 22,867,969 Systems Software Associates, Inc. (a) 200,000 900,000 267,444,533 TOTAL COMPUTER SERVICES & SOFTWARE 352,237,765 COMPUTERS & OFFICE EQUIPMENT - 8.2% COMPUTER EQUIPMENT - WHOLESALE - 0.4% Tech Data Corp. (a) 44,600 1,686,438 COMPUTERS & OFFICE EQUIPMENT - 2.5% International Business Machines Corp. 95,000 10,699,375 ELECTRONIC COMPUTERS - 1.1% Gateway 2000, Inc. (a) 97,800 4,627,163 GRAPHICS WORKSTATIONS - 0.6% Sun Microsystems, Inc. (a) 70,000 2,773,750 MINI & MICRO COMPUTERS - 3.6% Compaq Computer Corp. 27,500 768,281 Dell Computer Corp. (a) 150,000 15,000,000 15,768,281 TOTAL COMPUTERS & OFFICE EQUIPMENT 35,555,007 ELECTRICAL EQUIPMENT - 0.1% ELECTRICAL MACHINERY - 0.1% Philips Electronics NV 9,400 563,413 ELECTRONICS - 1.5% SEMICONDUCTORS - 1.5% Intel Corp. 92,000 6,549,250 RETAIL & WHOLESALE, MISCELLANEOUS - 0.1% MAIL ORDER - 0.1% Amazon.com, Inc. (a) 5,600 469,000 SERVICES - 0.7% MANAGEMENT CONSULTING SERVICES - 0.4% IMS Health, Inc. 30,000 1,650,000 PERSONNEL SUPPLY SERVICES - 0.3% Computer Horizons Corp. (a) 61,300 1,432,888 TOTAL SERVICES 3,082,888 TOTAL COMMON STOCKS (Cost $391,753,534) 402,303,273 NONCONVERTIBLE PREFERRED STOCKS - 2.2% COMPUTER SERVICES & SOFTWARE - 2.2% PREPACKAGED COMPUTER SOFTWARE - 2.2% SAP AG Systeme Anwendungen Produkte in der Datenverarbeitung (Cost $4,584,921) 18,000 9,761,594 CASH EQUIVALENTS - 5.6% Taxable Central Cash Fund (b) (Cost $24,197,912) 24,197,912 24,197,912 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $420,536,367) $ 436,262,779 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $207,962,154 and $180,181,527, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $30,859 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At period end, the value of securities loaned and the value of the collateral amounted to $6,273,500 and $7,228,000, respectively (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $423,234,536. Net unrealized appreciation aggregated $13,028,243, of which $91,706,444 related to appreciated investment securities and $78,678,201 related to depreciated investment securities. SOFTWARE AND COMPUTER SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 436,262,779 SECURITIES, AT VALUE (COST $420,536,36 7) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 13,720,501 INVESTMENTS SOLD RECEIVABLE FOR 1,517,611 FUND SHARES SOLD DIVIDENDS 66,150 RECEIVABLE INTEREST 105,146 RECEIVABLE REDEMPTION FEES 10,457 RECEIVABLE OTHER 9,999 RECEIVABLES TOTAL ASSETS 451,692,643 LIABILITIES PAYABLE FOR $ 6,748,553 FUND SHARES REDEEMED ACCRUED 263,671 MANAGEMENT FEE OTHER PAYABLES 369,607 AND ACCRUED EXPENSES COLLATERAL ON 7,228,000 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 14,609,831 NET ASSETS $ 437,082,812 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 415,531,483 ACCUMULATED (2,360,131) NET INVESTMENT LOSS ACCUMULATED 8,185,048 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 15,726,412 APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 437,082,812 11,665,833 SHARES OUTSTANDING NET ASSET $37.47 VALUE AND REDEMPTION PRICE PER SHARE ($437,082,8 12 (DIVIDED BY) 11,665,833 SHARES) MAXIMUM $38.63 OFFERING PRICE PER SHARE (100/97.00 OF $37.47) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 345,621 INCOME DIVIDENDS INTEREST 950,628 (INCLUDING INCOME ON SECURITIES LOANED OF $75,031) TOTAL INCOME 1,296,249 EXPENSES MANAGEMENT $ 1,664,019 FEE TRANSFER AGENT 1,566,634 FEES ACCOUNTING AND 271,672 SECURITY LENDING FEES NON-INTERESTED 1,262 TRUSTEES' COMPENSATION CUSTODIAN FEES 11,599 AND EXPENSES REGISTRATION FEES 67,697 AUDIT 16,458 LEGAL 1,576 REPORTS TO 68,893 SHAREHOLDERS TOTAL EXPENSES 3,669,810 BEFORE REDUCTIONS EXPENSE (13,430) 3,656,380 REDUCTIONS NET INVESTMENT (2,360,131) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 11,356,457 SECURITIES FOREIGN (143) 11,356,314 CURRENCY TRANSACTIONS CHANGE IN NET (96,403,316) UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENT SECURITIES NET GAIN (LOSS) (85,047,002) NET INCREASE $ (87,407,133) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 981,446 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 971,479 - - RETAINED BY FDC DEFERRED SALES $ 2,678 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 70,313 WITHHELD BY FSC EXPENSE $ 12,196 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 213 CREDITS TRANSFER 1,021 AGENT CREDITS $ 13,430 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (2,360,131) $ (3,518,045) NET INVESTMENT INCOME (LOSS) NET REALIZED 11,356,314 56,333,154 GAIN (LOSS) CHANGE IN NET (96,403,316) 76,776,311 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (87,407,133) 129,591,420 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (2,298,100) (67,010,560) SHAREHOLDERS FROM NET REALIZED GAIN SHARE 328,697,929 284,940,442 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 2,271,098 66,130,192 OF DISTRIBUTIONS COST OF SHARES (308,114,855) (300,538,798) REDEEMED NET INCREASE 22,854,172 50,531,836 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 566,976 555,345 FEES TOTAL (66,284,085) 113,668,041 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 503,366,897 389,698,856 PERIOD END OF PERIOD $ 437,082,812 $ 503,366,897 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $2,360,131 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 6,967,590 6,972,295 ISSUED IN 47,395 1,737,307 REINVESTMENT OF DISTRIBUTIONS REDEEMED (6,722,079) (7,436,837) NET INCREASE 292,906 1,272,765 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET $ 44.26 $ 38.58 $ 36.20 $ 29.07 $ 28.89 $ 27.62 VALUE, BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATION S NET (.19) (.33) (.25) (.19) (.26) (.34) INVESTMENT INCOME (LOSS) D NET (6.46) 12.57 5.87 11.85 .67 7.92 REALIZED AND UNREALIZED GAIN (LOSS) TOTAL FROM (6.65) 12.24 5.62 11.66 .41 7.58 INVESTMENT OPERATIONS LESS DISTRIBUTIO NS FROM NET (.19) (6.61) (3.31) (4.60) (.33) (6.48) REALIZED GAIN REDEMPTION .05 .05 .07 .07 .10 .17 FEES ADDED TO PAID IN CAPITAL NET ASSET $ 37.47 $ 44.26 $ 38.58 $ 36.20 $ 29.07 $ 28.89 VALUE, END OF PERIOD TOTAL (15.01)% 35.50% 16.14% 40.17% 1.97% 33.19% RETURN B, C RATIOS AND SUPPLEME NTAL DATA NET ASSETS, $ 437,083 $ 503,367 $ 389,699 $ 337,633 $ 236,445 $ 178,034 END OF PERIOD (000 OMITTED) RATIO OF 1.27% A 1.44% 1.54% 1.48% 1.52% 1.57% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.27% A 1.42% E 1.51% E 1.47% E 1.50% E 1.57% EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.82)% A (.81)% (.66)% (.54)% (1.01)% (1.19)% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 69% A 145% 279% 183% 164% 376% TURNOVER RATE AVERAGE $ .0395 $ .0366 $ .0427 COMMISSIO N RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
TECHNOLOGY PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT TECHNOLOGY -13.42% -15.21% 117.80% 508.81% SELECT TECHNOLOGY -16.09% -17.83% 111.19% 490.47% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS TECHNOLOGY -8.97% -3.28% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Technology Index - a market capitalization-weighted index of 190 stocks designed to measure the performance of companies in the technology sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT TECHNOLOGY -15.21% 16.85% 19.80% SELECT TECHNOLOGY -17.83% 16.13% 19.43% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS TECHNOLOGY -3.28% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Technology S&P 500 00064 SP001 1988/08/31 9700.00 10000.00 1988/09/30 9962.48 10426.00 1988/10/31 9550.86 10715.84 1988/11/30 9264.51 10562.61 1988/12/31 9902.83 10747.45 1989/01/31 10702.21 11534.17 1989/02/28 10409.90 11246.96 1989/03/31 10219.00 11509.02 1989/04/30 10958.73 12106.34 1989/05/31 11853.57 12596.64 1989/06/30 10803.63 12524.84 1989/07/31 10994.53 13655.84 1989/08/31 11233.15 13923.49 1989/09/30 11501.60 13866.40 1989/10/31 11418.08 13544.70 1989/11/30 11447.91 13821.02 1989/12/31 11585.12 14152.72 1990/01/31 11346.49 13203.07 1990/02/28 11984.81 13373.39 1990/03/31 12545.57 13727.79 1990/04/30 11978.84 13384.59 1990/05/31 13523.92 14689.59 1990/06/30 13643.23 14589.70 1990/07/31 12915.44 14543.01 1990/08/31 11155.60 13228.33 1990/09/30 10207.07 12584.11 1990/10/31 10499.38 12529.99 1990/11/30 12074.29 13339.43 1990/12/31 12802.09 13711.60 1991/01/31 14961.62 14309.43 1991/02/28 15719.25 15332.55 1991/03/31 16977.98 15703.60 1991/04/30 16142.80 15741.29 1991/05/31 17037.64 16421.31 1991/06/30 15384.79 15669.22 1991/07/31 17088.21 16399.40 1991/08/31 17927.93 16788.07 1991/09/30 18017.90 16507.71 1991/10/31 18503.74 16728.91 1991/11/30 17897.94 16054.73 1991/12/31 20351.66 17891.40 1992/01/31 21125.65 17558.62 1992/02/29 21455.64 17786.88 1992/03/31 19751.67 17440.03 1992/04/30 19463.68 17952.77 1992/05/31 19655.67 18040.74 1992/06/30 18250.47 17771.93 1992/07/31 19180.35 18498.80 1992/08/31 18198.08 18119.58 1992/09/30 19088.67 18333.39 1992/10/31 20215.00 18397.56 1992/11/30 21852.10 19024.91 1992/12/31 22127.14 19258.92 1993/01/31 22801.63 19420.70 1993/02/28 22670.66 19684.82 1993/03/31 22965.34 20100.17 1993/04/30 22899.49 19613.74 1993/05/31 25209.72 20139.39 1993/06/30 26440.87 20197.79 1993/07/31 25738.39 20117.00 1993/08/31 27114.39 20879.44 1993/09/30 27534.43 20718.67 1993/10/31 26991.27 21147.54 1993/11/30 26730.56 20946.64 1993/12/31 28466.58 21200.10 1994/01/31 29899.84 21920.90 1994/02/28 30745.09 21326.84 1994/03/31 29708.74 20396.99 1994/04/30 29110.37 20658.07 1994/05/31 29156.26 20996.87 1994/06/30 26685.78 20482.44 1994/07/31 27718.33 21154.27 1994/08/31 30640.08 22021.59 1994/09/30 30487.11 21482.06 1994/10/31 31626.74 21965.41 1994/11/30 31190.77 21165.43 1994/12/31 31634.39 21479.31 1995/01/31 30402.97 22036.27 1995/02/28 32162.14 22895.02 1995/03/31 34120.17 23570.66 1995/04/30 36691.84 24264.81 1995/05/31 38111.26 25234.68 1995/06/30 41651.90 25820.88 1995/07/31 45862.83 26677.10 1995/08/31 47282.24 26744.06 1995/09/30 49458.68 27872.66 1995/10/31 48717.43 27773.15 1995/11/30 48465.09 28992.39 1995/12/31 45492.42 29550.79 1996/01/31 45953.46 30556.70 1996/02/29 48471.46 30839.96 1996/03/31 44721.06 31136.95 1996/04/30 48572.31 31595.90 1996/05/31 49889.67 32410.76 1996/06/30 46340.85 32534.25 1996/07/31 41394.00 31096.88 1996/08/31 42998.14 31752.72 1996/09/30 48509.57 33539.76 1996/10/31 48160.07 34464.79 1996/11/30 54101.66 37069.98 1996/12/31 52688.49 36335.62 1997/01/31 58924.44 38605.87 1997/02/28 54599.97 38908.54 1997/03/31 50985.20 37309.79 1997/04/30 53957.10 39537.19 1997/05/31 59692.36 41944.21 1997/06/30 60791.53 43823.31 1997/07/31 67756.54 47310.33 1997/08/31 69650.15 44660.01 1997/09/30 72457.93 47106.04 1997/10/31 62173.65 45532.69 1997/11/30 61085.36 47640.40 1997/12/31 58130.41 48458.39 1998/01/31 61288.56 48994.34 1998/02/28 68208.23 52527.81 1998/03/31 68452.15 55217.76 1998/04/30 71250.83 55773.25 1998/05/31 65897.39 54814.51 1998/06/30 71379.21 57041.07 1998/07/31 71571.78 56433.58 1998/08/31 59047.25 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980910 162239 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Technology Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $59,047 - a 490.47% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS INTEL CORP. 11.6 MICROSOFT CORP. 10.3 OY NOKIA AB SPONSORED ADR CLASS A 5.8 ASCEND COMMUNICATIONS, INC. 5.0 CISCO SYSTEMS, INC. 5.0 EMC CORP. 4.5 LUCENT TECHNOLOGIES, INC. 3.2 SEAGATE TECHNOLOGY 3.0 INTERNATIONAL BUSINESS MACHINES CORP. 3.0 DELL COMPUTER CORP. 2.6 TOP INDUSTRIES AS OF AUGUST 31, 1998 ROW: 1, COL: 1, VALUE: 39.1 ROW: 1, COL: 2, VALUE: 5.3 ROW: 1, COL: 3, VALUE: 6.3 ROW: 1, COL: 4, VALUE: 15.2 ROW: 1, COL: 5, VALUE: 16.8 ROW: 1, COL: 6, VALUE: 17.3 TELEPHONE EQUIPMENT 17.3% SEMICONDUCTORS 16.8% PREPACKAGED COMPUTER SOFTWARE 15.2% DATACOMMUNICATIONS EQUIPMENT 6.3% COMPUTER PERIPHERALS 5.3% ALL OTHER 39.1% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS TECHNOLOGY PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Andrew Kaplan) (photograph of Adam Hetnarski) NOTE TO SHAREHOLDERS: Andrew Kaplan (right) became Portfolio Manager of Fidelity Select Technology Portfolio on July 15, 1998. The following is an interview with Adam Hetnarski, who managed the fund during most of the period covered by this report, and Andrew Kaplan, who discusses changes to the fund and his outlook. Q. ADAM, HOW DID THE FUND PERFORM? A.H. For the six-month and 12-month periods that ended August 31, 1998, the fund had total returns of -13.42% and -15.21%, respectively. During those same periods, the Standard & Poor's 500 Index posted returns of -8.10% and 8.10%, respectively. Beginning this period, the fund also compares itself to the Goldman Sachs Technology Index - an index of 190 stocks designed to measure the performance of companies in the technology sector - which returned -8.97% and -3.28% over the same six- and 12-month periods, respectively. Q. WHY DID THE FUND TRAIL ITS TWO BENCHMARK INDEXES OVER THE PAST SIX MONTHS? A.H. The fund and the technology sector trailed the broad market - as measured by the S&P 500 - due to concerns that the crisis in Asia would stifle demand from that region. In addition, many companies suffered from an inventory reduction by personal computer (PC) manufacturers. Further, stocks in the sector had been selling at very high multiples - a measure of how much an investor pays for a company's earnings. When signs of weakness appeared in this sector, stock prices fell. The fund trailed the Goldman Sachs index because earlier in the period it didn't invest in larger-capitalization companies such as IBM and Hewlett-Packard. These companies make up a significant percentage of the Goldman Sachs index and fared well, even when their earnings were not appealing. Finally, the index's Internet stocks, an area where the fund was underweighted earlier in the period, generally performed well. Q. WHICH STOCKS PROVIDED STRONG PERFORMANCE FOR THE FUND? A.H. Microsoft did extremely well and proved to be one of the best-positioned large-capitalization stocks in the entire stock market. The company benefited from product upgrades, among many other factors. Dell Computer boasted an operational strategy that enabled it to bring new products to market faster than competitors. HBO & Co. saw its share price rise as the market came to appreciate its dominant position in both the consulting and software sides of its health care information services business. Q. WHICH STOCKS WERE DISAPPOINTING? A.H. I'd mention three. Intel and Seagate Technology suffered from slower demand for PCs that caused them to revise their earnings downward. Seagate, in particular, was hurt by an oversupply of disc drives. The share price of Micron Technology also fell due to similar production overcapacity problems in the memory semiconductors industry. Q. TURNING TO YOU, ANDY, WHAT CHANGES HAVE YOU MADE TO THE FUND SINCE TAKING OVER? A.K. First, I've tended to focus on higher-quality names that I felt carried lower risk for earnings disappointments. The market increasingly is paying a premium for these kinds of companies given the uncertainty in Asia and other emerging markets, as well as due to fears about a slowing domestic economy. Second, in the short term I'm focusing on the PC industry, one of the poorer performers over the past 12 to 18 months. I believe that we're moving into a period where sales and profit margins will improve for both PC component suppliers and the computer companies themselves. Q. WHAT'S YOUR OUTLOOK, ANDY? A.K. I am cautiously optimistic. On the one hand, we no longer have Asia and some of the other emerging markets supporting the high rates of growth we saw in technology for most of the past decade. Therefore, the sector will be relying more on the continued health of established economies in North America and Europe. As long as global economic growth rates don't fall precipitously, technology shares should do fine, because continued innovation, new products and other factors drive healthy demand for the products. I would caution that technology has proven to be extremely cyclical: The rate of growth in technology has moved in conjunction with the rate of growth in the worldwide economy, albeit at a more pronounced level. As a result, any further slowdown in global economic growth caused by currency dislocations or other factors should have a negative impact on the technology sector. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: JULY 14, 1981 FUND NUMBER: 064 TRADING SYMBOL: FSPTX SIZE: AS OF AUGUST 31, 1998, MORE THAN $496 MILLION MANAGER: ANDREW KAPLAN, SINCE JULY 1998; MANAGER, FIDELITY SELECT DEVELOPING COMMUNICATIONS PORTFOLIO, SINCE MARCH 1998; FIDELITY SELECT ELECTRONICS PORTFOLIO, 1996-JUNE 1998; JOINED FIDELITY IN 1995 TECHNOLOGY PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 88.1% SHARES VALUE (NOTE 1) ADVERTISING - 0.0% GeoCities (a) 400 $ 7,225 24/7 Media, Inc. (a) 500 3,375 10,600 APPLIANCE STORES - 0.2% ELECTRIC APPLIANCES - WHOLESALE - 0.2% Cellstar Corp. (a) 158,500 1,050,063 COMMUNICATIONS EQUIPMENT - 23.6% DATACOMMUNICATIONS EQUIPMENT - 6.3% Cisco Systems, Inc. (a) 305,150 24,984,156 3Com Corp. (a) 105,000 2,487,188 Xircom, Inc. (a) 246,700 3,854,688 31,326,032 TELEPHONE EQUIPMENT - 17.3% Ascend Communications, Inc. (a) 711,700 25,042,944 Com21, Inc. (a) 25,000 265,625 DSC Communications Corp. (a) 120,900 2,916,713 InterVoice, Inc. (a) 100,000 1,487,500 Lucent Technologies, Inc. 226,100 16,024,838 Oy Nokia AB sponsored ADR Class A 427,200 28,542,300 Northern Telecom Ltd. 240,820 11,553,526 85,833,446 TOTAL COMMUNICATIONS EQUIPMENT 117,159,478 COMPUTER SERVICES & SOFTWARE - 19.7% COMPUTER & SOFTWARE STORES - 0.2% Inacom Corp. (a) 60,300 1,160,775 COMPUTER FACILITIES MANAGEMENT - 0.4% International Telecommunications Data Systems, Inc. 86,400 1,695,600 COMPUTER SERVICES - 2.3% America Online, Inc. 75,000 6,145,313 Broadcast.com, Inc. (a) 100 3,788 Cambridge Technology Partners, Inc. (a) 93,500 3,038,750 Technology Solutions, Inc. (a) 35,550 406,603 Yahoo, Inc. (a) 25,000 1,725,000 11,319,454 CUSTOM COMPUTER PROGRAMMING SERVICES - 0.4% Entrust Technologies, Inc. (a) 1,200 15,900 Saville Systems PLC sponsored ADR (a) 109,500 1,793,063 1,808,963 DATA PROCESSING - 1.2% Affiliated Computer Services, Inc. Class A (a) 66,500 2,173,719 First Data Corp. 187,400 3,876,838 6,050,557 PREPACKAGED COMPUTER SOFTWARE - 15.2% Autodesk, Inc. 150,000 3,506,250 BMC Software, Inc. 46,100 1,950,606 BindView Development Corp. (a) 4,000 39,000 Citrix Systems, Inc. (a) 36,800 2,120,600 Computer Associates International, Inc. 73,300 1,979,100 Compuware Corp. (a) 122,500 5,566,094 i2 Technologies, Inc. (a) 3,600 50,850 Microsoft Corp. (a) 533,540 51,186,494 MicroProse, Inc. (a) 286,180 1,627,649 SHARES VALUE (NOTE 1) Siebel Systems, Inc. (a) 102,580 $ 1,923,375 Wind River Systems, Inc. (a) 150,000 5,625,000 75,575,018 TOTAL COMPUTER SERVICES & SOFTWARE 97,610,367 COMPUTERS & OFFICE EQUIPMENT - 18.1% COMPUTER EQUIPMENT - WHOLESALE - 0.9% Ingram Micro, Inc. Class A (a) 94,300 4,243,500 COMPUTER PERIPHERALS - 5.3% EMC Corp. (a) 492,800 22,268,400 Fore Systems, Inc. (a) 139,000 2,397,750 SCI Systems, Inc. (a) 60,700 1,392,306 Western Digital Corp. (a) 50,000 412,500 26,470,956 COMPUTER STORAGE DEVICES - 4.5% Maxtor Corp. (a) 745,500 5,078,719 Quantum Corp. (a) 200,000 2,287,500 Seagate Technology (a) 850,000 14,875,000 22,241,219 COMPUTERS & OFFICE EQUIPMENT - 3.0% International Business Machines Corp. 131,700 14,832,713 MINI & MICRO COMPUTERS - 4.4% Apple Computer, Inc. (a) 106,900 3,333,944 Compaq Computer Corp. 215,700 6,026,119 Dell Computer Corp. (a) 126,500 12,650,000 22,010,063 TOTAL COMPUTERS & OFFICE EQUIPMENT 89,798,451 DRUGS & PHARMACEUTICALS - 0.0% DRUGS - 0.0% Barr Laboratories, Inc. (a) 2,000 51,250 ELECTRICAL EQUIPMENT - 4.0% ELECTRICAL MACHINERY - 1.4% Alcatel Alsthom Compagnie Generale d'Electricite SA sponsored ADR 231,000 6,973,313 TV & RADIO COMMUNICATION EQUIPMENT - 2.6% General Instrument Corp. (a) 597,400 11,873,325 Loral Space & Communications Ltd. (a) 67,900 1,077,913 12,951,238 TOTAL ELECTRICAL EQUIPMENT 19,924,551 ELECTRONIC INSTRUMENTS - 2.4% ELECTRONIC EQUIPMENT - 1.8% Smart Modular Technologies, Inc. (a) 250,000 3,812,500 Teradyne, Inc. (a) 300,000 5,212,500 9,025,000 SEMI-CONDUCTOR CAPITAL EQUIPMENT - 0.6% KLA-Tencor Corp. (a) 130,300 2,768,875 Novellus Systems, Inc. (a) 6,200 165,075 2,933,950 TOTAL ELECTRONIC INSTRUMENTS 11,958,950 ELECTRONICS - 17.2% ELECTRONICS & ELECTRONIC COMPONENTS - 0.4% Solectron Corp. (a) 41,000 1,693,813 SEMICONDUCTORS - 16.8% Altera Corp. (a) 350,000 10,193,750 Broadcom Corp. Class A 30,700 1,573,375 Intel Corp. 804,800 57,291,691 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRONICS - CONTINUED SEMICONDUCTORS - CONTINUED Lattice Semiconductor Corp. (a) 119,400 $ 2,873,063 Micron Technology, Inc. (a) 187,100 4,256,525 Semtech Corp. (a) 164,200 2,627,200 Vitesse Semiconductor Corp. (a) 115,000 3,119,375 Xilinx, Inc. (a) 50,000 1,525,000 83,459,979 TOTAL ELECTRONICS 85,153,792 METALS & MINING - 0.5% NONFERROUS WIRE - 0.5% AFC Cable Systems, Inc. (a) 107,500 2,489,297 RETAIL & WHOLESALE, MISCELLANEOUS - 2.0% MAIL ORDER - 0.4% Amazon.com, Inc. (a) 25,000 2,093,750 MUSIC, TV, & ELECTRIC STORES - 1.6% Best Buy Co., Inc. (a) 194,000 7,638,750 TOTAL RETAIL & WHOLESALE, MISCELLANEOUS 9,732,500 SERVICES - 0.4% BUSINESS SERVICES - 0.4% Robert Half International, Inc. (a) 37,400 1,795,200 TOTAL COMMON STOCKS (Cost $480,586,893) 436,734,499 CASH EQUIVALENTS - 11.9% Taxable Central Cash Fund (b) 56,502,182 56,502,182 MATURITY AMOUNT Investments in repurchase agreements (U.S. Treasury obligations), in a joint trading account at 5.89%, dated 8/31/98 due 9/01/98 $ 2,696,441 2,696,000 TOTAL CASH EQUIVALENTS (Cost $59,198,182) 59,198,182 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $539,785,075) $ 495,932,681 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $910,498,269 and $982,612,890, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $141,629 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At period end, the value of securities loaned and the value of the collateral amounted to $15,697,747 and $18,385,500, respectively (see Note 6 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 89.9% Finland 5.8 Canada 2.3 France 1.4 Others (individually less than 1%) 0.6 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $540,113,923. Net unrealized depreciation aggregated $44,181,242, of which $36,452,620 related to appreciated investment securities and $80,633,862 related to depreciated investment securities. The fund intends to elect to defer to its fiscal year ending February 28, 1999 approximately $49,633,000 of losses recognized during the period November 1, 1997 to February 28, 1998. TECHNOLOGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 495,932,681 SECURITIES, AT VALUE (INCLUDING REPURCHASE AGREEMENTS OF $2,696,000) (COST $539,785,07 5) - SEE ACCOMPANYIN G SCHEDULE CASH 618 RECEIVABLE FOR 65,448,535 INVESTMENTS SOLD RECEIVABLE FOR 4,769,105 FUND SHARES SOLD DIVIDENDS 38,362 RECEIVABLE INTEREST 296,888 RECEIVABLE REDEMPTION FEES 39,737 RECEIVABLE OTHER 121,992 RECEIVABLES TOTAL ASSETS 566,647,918 LIABILITIES PAYABLE FOR $ 39,185,648 INVESTMENTS PURCHASED PAYABLE FOR 11,459,691 FUND SHARES REDEEMED ACCRUED 299,183 MANAGEMENT FEE OTHER PAYABLES 395,764 AND ACCRUED EXPENSES COLLATERAL ON 18,385,500 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 69,725,786 NET ASSETS $ 496,922,132 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 552,035,882 ACCUMULATED (1,653,003) NET INVESTMENT LOSS ACCUMULATED (9,608,353) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (43,852,394) APPRECIATION (DEPRECIATION) ON INVESTMENTS NET ASSETS, FOR $ 496,922,132 10,802,695 SHARES OUTSTANDING NET ASSET $46.00 VALUE AND REDEMPTION PRICE PER SHARE ($496,922,1 32 (DIVIDED BY) 10,802,695 SHARES) MAXIMUM $47.42 OFFERING PRICE PER SHARE (100/97.00 OF $46.00) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 613,479 INCOME DIVIDENDS INTEREST 1,598,873 (INCLUDING INCOME ON SECURITIES LOANED OF $152,197) TOTAL INCOME 2,212,352 EXPENSES MANAGEMENT $ 1,829,872 FEE TRANSFER AGENT 1,695,973 FEES ACCOUNTING AND 287,115 SECURITY LENDING FEES NON-INTERESTED 1,392 TRUSTEES' COMPENSATION CUSTODIAN FEES 28,870 AND EXPENSES REGISTRATION FEES 21,589 AUDIT 18,161 LEGAL 1,880 REPORTS TO 81,270 SHAREHOLDERS TOTAL EXPENSES 3,966,122 BEFORE REDUCTIONS EXPENSE (100,767) 3,865,355 REDUCTIONS NET INVESTMENT (1,653,003) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 44,616,297 SECURITIES FOREIGN 1,659 44,617,956 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (124,454,603) SECURITIES ASSETS AND 289 (124,454,314) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (79,836,358) NET INCREASE $ (81,489,361) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 787,481 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 780,399 - - RETAINED BY FDC DEFERRED SALES $ 15,620 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 87,915 WITHHELD BY FSC EXPENSE $ 97,221 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 2,869 CREDITS TRANSFER 677 AGENT CREDITS $ 100,767 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (1,653,003) $ (2,470,345) NET INVESTMENT INCOME (LOSS) NET REALIZED 44,617,956 56,871,240 GAIN (LOSS) CHANGE IN NET (124,454,314) 69,437,348 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (81,489,361) 123,838,243 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO - (112,130,367) SHAREHOLDERS FROM NET REALIZED GAIN IN EXCESS OF - (29,870,994) NET REALIZED GAIN TOTAL - (142,001,361) DISTRIBUTIONS SHARE 195,682,037 519,887,482 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT - 139,074,837 OF DISTRIBUTIONS COST OF SHARES (309,762,843) (428,139,579) REDEEMED NET INCREASE (114,080,806) 230,822,740 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 567,873 820,601 FEES TOTAL (195,002,294) 213,480,223 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 691,924,426 478,444,203 PERIOD END OF PERIOD $ 496,922,132 $ 691,924,426 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $1,653,003 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 3,572,325 9,533,953 ISSUED IN - 2,923,252 REINVESTMENT OF DISTRIBUTIONS REDEEMED (5,792,411) (7,726,118) NET INCREASE (2,220,086) 4,731,087 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET $ 53.13 $ 57.70 $ 54.67 $ 42.05 $ 41.83 $ 34.62 VALUE, BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATION S NET (.14) (.25) (.39) (.28) (.39) (.24) E INVESTMENT INCOME (LOSS) D NET (7.04) 11.29 6.95 20.83 1.95 11.04 REALIZED AND UNREALIZED GAIN (LOSS) TOTAL FROM (7.18) 11.04 6.56 20.55 1.56 10.80 INVESTMENT OPERATIONS LESS DISTRIBUTIO NS FROM NET - - - - - (.13) INVESTMENT INCOME FROM NET - (12.39) (3.68) (8.05) (1.50) (3.70) REALIZED GAIN IN EXCESS - (3.30) - - - - OF NET REALIZED GAIN TOTAL - (15.69) (3.68) (8.05) (1.50) (3.83) DISTRIBUTION S REDEMPTION .05 .08 .15 .12 .16 .24 FEES ADDED TO PAID IN CAPITAL NET ASSET $ 46.00 $ 53.13 $ 57.70 $ 54.67 $ 42.05 $ 41.83 VALUE, END OF PERIOD TOTAL (13.42)% 24.92% 12.64% 50.71% 4.61% 35.62% RETURN B, C RATIOS AND SUPPLEME NTAL DATA NET ASSETS, $ 496,922 $ 691,924 $ 478,444 $ 483,026 $ 229,761 $ 202,475 END OF PERIOD (000 OMITTED) RATIO OF 1.25% A 1.38% 1.49% 1.40% 1.57% 1.55% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.22% A, F 1.30% F 1.44% F 1.39% F 1.56% F 1.54% F EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.52)% A (.45)% (.72)% (.52)% (.98)% (.65)% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 321% A 556% 549% 112% 102% 213% TURNOVER RATE AVERAGE $ .0421 $ .0436 $ .0191 COMMISSIO N RATE G A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL 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 INVESTME NT INCOME (LOSS) PER SHARE REFLECTS DIVIDENDS RECEIVED IN ARREARS WHICH AMOUNTED TO $.03 PER SHARE. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). G FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
NATURAL GAS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 LIFE OF AUGUST 31, 1998 MONTHS YEAR YEARS FUND SELECT NATURAL GAS -24.21% -29.14% -3.11% 7.55% SELECT NATURAL GAS -26.55% -31.34% -6.09% 4.25% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 144.31% GS UTILITIES -0.48% 29.59% N/A N/A 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 April 21, 1993. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Utilities Index - a market capitalization-weighted index of 136 stocks designed to measure the performance of companies in the utilities sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 LIFE OF AUGUST 31, 1998 YEAR YEARS FUND SELECT NATURAL GAS -29.14% -0.63% 1.37% SELECT NATURAL GAS -31.34% -1.25% 0.78% (LOAD ADJ.) S&P 500 8.10% 18.25% 18.12% GS UTILITIES 29.59% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER LIFE OF FUND Natural Gas S&P 500 00513 SP001 1993/04/21 9700.00 10000.00 1993/04/30 9515.70 9926.17 1993/05/31 9670.90 10192.20 1993/06/30 9952.20 10221.75 1993/07/31 9913.40 10180.87 1993/08/31 10767.00 10566.72 1993/09/30 10582.70 10485.36 1993/10/31 10010.40 10702.40 1993/11/30 9156.80 10600.73 1993/12/31 9209.91 10729.00 1994/01/31 9672.37 11093.79 1994/02/28 9327.98 10793.14 1994/03/31 8993.44 10322.56 1994/04/30 9692.05 10454.69 1994/05/31 9613.33 10626.15 1994/06/30 9662.53 10365.81 1994/07/31 9603.49 10705.81 1994/08/31 9288.63 11144.75 1994/09/30 9229.59 10871.70 1994/10/31 9554.30 11116.31 1994/11/30 8717.93 10711.46 1994/12/31 8580.06 10870.31 1995/01/31 8313.78 11152.17 1995/02/28 8856.20 11586.77 1995/03/31 9378.89 11928.70 1995/04/30 9536.79 12280.00 1995/05/31 9902.07 12770.83 1995/06/30 9665.13 13067.50 1995/07/31 9665.13 13500.82 1995/08/31 9951.43 13534.70 1995/09/30 10237.73 14105.87 1995/10/31 9793.47 14055.51 1995/11/30 10632.63 14672.55 1995/12/31 11187.09 14955.14 1996/01/31 11236.63 15464.21 1996/02/29 11256.45 15607.57 1996/03/31 11761.80 15757.87 1996/04/30 12587.74 15990.14 1996/05/31 12687.64 16402.52 1996/06/30 13356.99 16465.02 1996/07/31 12397.92 15737.59 1996/08/31 12867.47 16069.50 1996/09/30 13406.94 16973.89 1996/10/31 14376.00 17442.03 1996/11/30 15195.20 18760.47 1996/12/31 15026.99 18388.83 1997/01/31 14794.09 19537.76 1997/02/28 12657.51 19690.94 1997/03/31 12617.00 18881.84 1997/04/30 12431.17 20009.08 1997/05/31 13607.66 21227.24 1997/06/30 13097.50 22178.22 1997/07/31 13670.13 23942.94 1997/08/31 14721.67 22601.65 1997/09/30 15252.65 23839.55 1997/10/31 14825.79 23043.31 1997/11/30 13826.30 24109.98 1997/12/31 13815.88 24523.95 1998/01/31 13107.91 24795.18 1998/02/28 13763.83 26583.41 1998/03/31 14430.16 27944.75 1998/04/30 14825.79 28225.87 1998/05/31 14003.29 27740.67 1998/06/30 13930.41 28867.50 1998/07/31 12743.51 28560.06 1998/08/31 10424.69 24430.84 IMATRL PRASUN SHR__CHT 19980831 19980910 164229 R00000000000068 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Natural Gas Portfolio on April 21, 1993, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $10,425 - a 4.25% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $24,431 - a 144.31% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS ENRON CORP. 7.4 COASTAL CORP. (THE) 7.2 VASTAR RESOURCES, INC. 6.7 WILLIAMS COMPANIES, INC. 5.8 ANADARKO PETROLEUM CORP. 5.4 BURLINGTON RESOURCES, INC. 4.3 SUNCOR ENERGY, INC. 3.3 PLAINS RESOURCES, INC. 3.1 PG&E CORP. 3.0 SEMPRA ENERGY 2.7 TOP INDUSTRIES AS OF AUGUST 31, 1998 CRUDE PETROLEUM & GAS 44.7% GAS TRANSMISSION 18.6% PETROLEUM REFINERS 8.4% GAS DISTRIBUTION 6.2% GAS TRANSMISSION & DISTRIBUTION 3.7% ALL OTHERS 18.4% ROW: 1, COL: 1, VALUE: 18.4 ROW: 1, COL: 2, VALUE: 3.7 ROW: 1, COL: 3, VALUE: 6.2 ROW: 1, COL: 4, VALUE: 8.4 ROW: 1, COL: 5, VALUE: 18.6 ROW: 1, COL: 6, VALUE: 44.7 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS NATURAL GAS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Victor Thay) Victor Thay, Portfolio Manager of Fidelity Select Natural Gas Portfolio Q. HOW DID THE FUND PERFORM, VICTOR? A. It was a difficult period for the fund. For the six- and 12-month periods that ended August 31, 1998, the fund had total returns of - -24.21% and -29.14%, respectively. In comparison, the Standard & Poor's 500 Index returned -8.10% and 8.10%, respectively, over the same time periods. Beginning this period, the fund also compares itself to the Goldman Sachs Utilities Index - an index of 136 stocks designed to measure the performance of companies in the utilities sector - which returned -0.48% and 29.59% over the same six- and 12-month periods, respectively. Q. WHAT ACCOUNTED FOR THE FUND'S POOR PERFORMANCE RELATIVE TO ITS BENCHMARKS? A. The fund's performance depends primarily on the prices of natural gas and oil, which were weak during the period. Unseasonably warm weather last winter led to excess supplies of natural gas in the summer months and depressed prices during the period. Furthermore, industrial demand was low, and this was exacerbated by the General Motors strike. In addition, demand for natural gas fell because of the increased use of residual fuels - that is, some users substituted oil for gas because of the lower cost of oil. Consequently, the fund fared worse than the broader market as reflected in the S&P 500. While the Goldman Sachs index does include gas utility stocks, it also contains telecommunications and electric utility stocks, which did relatively well during the period, enabling the index to outperform the fund by a wide margin. Q. WHAT WAS YOUR STRATEGY DURING THE PERIOD? A. I cut back on the fund's holdings of exploration and production companies because I felt that they would be hurt more by the ongoing glut of natural gas supplies. Conversely, I built larger positions in gas pipeline and distribution companies because those stocks tend to benefit directly from low interest rates. In addition, I eliminated the fund's holdings of drilling companies, because they are typically more susceptible to initial cutbacks in exploration spending. Finally, I diversified by building positions in certain electric utilities in anticipation of the opportunities I see in the retail energy service markets. Q. WHAT STOCKS HELPED THE FUND'S PERFORMANCE? A. Varco International, which builds and repairs drilling rigs, was one of the fund's stronger performers. The stock benefited from one of the cyclical surges in demand for the company's services. Another helpful stock - Noble Drilling - resisted selling pressures better than most of the fund's holdings. The economics of deep water drilling make it profitable to use the services of companies like Noble even at the recent low level of oil and gas prices. I subsequently sold both Varco and Noble because I felt they had become fully valued. Duke Energy and PG&E also were positive contributors to the fund's performance. They are examples of companies that stand to benefit from the deregulation of the electric utility industry. Q. WHAT HOLDINGS WERE DETRIMENTAL TO THE FUND'S PERFORMANCE? A. Williams Companies was the biggest detractor from performance. The company had lower profit margins due to the relative difference, or spread, between oil and gas prices. Vintage and Ocean Energy are oil exploration and production companies that suffered because of the cutbacks in exploration spending brought on by lower commodity prices. Finally, Burlington Resources - a natural gas exploration and production company - saw its stock price erode on fears that limits on storage capacity for natural gas would be reached this fall, causing further weakness in gas prices. Q. WHAT'S YOUR OUTLOOK, VICTOR? A. There are several developments that might lead to higher oil and gas prices in the coming months. For one thing, the Organization of Petroleum Exporting Countries (OPEC) seems to have reached a consensus on reducing production, which should help support oil prices. Historically, oil prices have not remained at the depressed levels we've seen recently for more than six months or so. A return to seasonably cold winter temperatures would also help spur demand in both the gas and oil markets. However, demand from Asia is still weak, and the currency problems in that region seem to be spreading to Latin America and other emerging markets. For now, the fund's reduced emphasis on exploration and production companies and increased focus on the distribution and pipeline areas seems prudent. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: April 21, 1993 FUND NUMBER: 513 TRADING SYMBOL: FSNGX SIZE: as of August 31, 1998, more than $38 million MANAGER: Victor Thay, since 1997; analyst, U.S. and Canadian exploration and production industry, 1996-present; Canadian equities, 1995-1996; joined Fidelity in 1995 NATURAL GAS PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.7% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 0.6% PETROLEUM - WHOLESALE - 0.6% Dynegy, Inc. 25,000 $ 239,063 ELECTRIC UTILITY - 4.3% ELECTRIC & OTHER SERVICES - 3.0% PG&E Corp. 35,700 1,146,863 ELECTRIC POWER - 1.3% Duke Energy Corp. 8,200 511,475 TOTAL ELECTRIC UTILITY 1,658,338 ENERGY SERVICES - 1.2% OIL & GAS SERVICES - 1.2% Baker Hughes, Inc. 9,180 167,535 McDermott International, Inc. 15,000 300,938 468,473 GAS - 28.5% GAS DISTRIBUTION - 6.2% Atmos Energy Corp. 20,000 567,500 Cascade Natural Gas Corp. 6,900 109,106 Indiana Energy, Inc. 3,900 111,881 MCN Energy Group, Inc. 16,100 282,756 National Fuel Gas Co. 2,500 102,813 New Jersey Resources Corp. 3,100 104,431 Northwest Natural Gas Co. 4,100 99,938 Sempra Energy (a) 40,301 1,025,157 2,403,582 GAS TRANSMISSION - 18.6% Enron Corp. 67,100 2,839,160 El Paso Energy Corp. 40,800 1,012,350 Leviathan Gas Pipeline Partners L.P. 30,100 656,556 TransCanada PipeLines Ltd. 29,896 405,983 Williams Companies, Inc. 97,300 2,237,900 7,151,949 GAS TRANSMISSION & DISTRIBUTION - 3.7% Columbia Energy Group 9,700 482,575 Consolidated Natural Gas Co. 9,200 403,075 Equitable Resources, Inc. 9,900 216,563 Midcoast Energy Resources, Inc. 17,930 327,223 1,429,436 TOTAL GAS 10,984,967 OIL & GAS - 59.1% CRUDE PETROLEUM & GAS - 44.7% Anadarko Petroleum Corp. 72,750 2,091,563 Apache Corp. 33,025 755,447 Barrett Resources Corp. (a) 12,500 253,906 Burlington Resources, Inc. 56,072 1,657,629 Elf Aquitaine SA sponsored ADR 20,300 992,163 Enron Oil & Gas Co. 22,200 288,600 Newfield Exploration Co. (a) 17,600 276,100 Noble Affiliates, Inc. 20,600 476,375 Ocean Energy, Inc. (a) 5,540 49,168 Oryx Energy Co. (a) 39,000 485,063 Paramount Resources Ltd. 59,400 435,512 Penn West Petroleum Ltd. (a) 36,700 321,725 Petrobras PN (Pfd. Reg.) 1,500,000 153,094 Plains Resources, Inc. (a) 78,900 1,213,088 Renaissance Energy Ltd. (a) 32,600 355,410 Rio Alto Exploration Ltd. (a) 82,000 658,719 Santa Fe Energy Resources, Inc. 43,300 324,750 SHARES VALUE (NOTE 1) Suncor Energy, Inc. 46,000 $ 1,286,006 Swift Energy Co. (a) 25,000 220,313 Total SA sponsored ADR 11,000 528,688 Ulster Petroleums Ltd. (a) 119,400 692,726 Union Pacific Resources Group, Inc. 79,800 683,288 Vastar Resources, Inc. 68,400 2,599,200 Vintage Petroleum, Inc. 55,700 435,156 17,233,689 OIL & GAS EXPLORATION - 3.7% Anderson Exploration Ltd. (a) 37,000 324,354 Berkley Petroleum Corp. (a) 30,000 157,794 Seagull Energy Corp. (a) 23,100 205,013 USX-Marathon Group 28,400 738,400 1,425,561 PETROLEUM REFINERS - 8.4% British Petroleum Co. PLC ADR 6,500 475,313 Coastal Corp. (The) 106,400 2,766,400 3,241,713 PIPELINES, EXCEPT GAS - 2.3% IPL Energy, Inc. 24,500 905,961 TOTAL OIL & GAS 22,806,924 TOTAL COMMON STOCKS (Cost $43,635,371) 36,157,765 CASH EQUIVALENTS - 6.3% Taxable Central Cash Fund (b) (Cost $2,433,256) 2,433,256 2,433,256 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $46,068,627) $ 38,591,021 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $26,207,641 and $33,877,785, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $6,712 for the period (see Note 4 of Notes to Financial Statements). Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 80.1% Canada 14.4 France 3.9 United Kingdom 1.2 Others (individually less than 1%) 0.4 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $46,199,959. Net unrealized depreciation aggregated $7,608,938, of which $998,029 related to appreciated investment securities and $8,606,967 related to depreciated investment securities. NATURAL GAS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 38,591,021 SECURITIES, AT VALUE (COST $46,068,627 ) - SEE ACCOMPANYIN G SCHEDULE CASH 1,576 RECEIVABLE FOR 104,276 FUND SHARES SOLD DIVIDENDS 76,890 RECEIVABLE INTEREST 11,660 RECEIVABLE REDEMPTION FEES 901 RECEIVABLE OTHER 26 RECEIVABLES TOTAL ASSETS 38,786,350 LIABILITIES PAYABLE FOR $ 504,441 FUND SHARES REDEEMED ACCRUED 21,806 MANAGEMENT FEE OTHER PAYABLES 54,781 AND ACCRUED EXPENSES TOTAL LIABILITIES 581,028 NET ASSETS $ 38,205,322 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 47,914,586 UNDISTRIBUTED 717,055 NET INVESTMENT INCOME ACCUMULATED (2,948,482) UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (7,477,837) APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 38,205,322 3,811,619 SHARES OUTSTANDING NET ASSET $10.02 VALUE AND REDEMPTION PRICE PER SHARE ($38,205,32 2 (DIVIDED BY) 3,811,619 SHARES) MAXIMUM $10.33 OFFERING PRICE PER SHARE (100/97.00 OF $10.02) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 757,260 INCOME DIVIDENDS INTEREST 83,502 TOTAL INCOME 840,762 EXPENSES MANAGEMENT $ 161,252 FEE TRANSFER AGENT 199,852 FEES ACCOUNTING FEES 30,588 AND EXPENSES NON-INTERESTED 105 TRUSTEES' COMPENSATION CUSTODIAN FEES 9,536 AND EXPENSES REGISTRATION FEES 12,461 AUDIT 10,733 LEGAL 175 REPORTS TO 10,904 SHAREHOLDERS MISCELLANEOUS 14 TOTAL EXPENSES 435,620 BEFORE REDUCTIONS EXPENSE (14,265) 421,355 REDUCTIONS NET INVESTMENT 419,407 INCOME REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT (2,721,736) SECURITIES FOREIGN (12,855) (2,734,591) CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (10,038,801) SECURITIES ASSETS AND (231) (10,039,032) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (12,773,623) NET INCREASE $ (12,354,216) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 65,763 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 65,763 - - RETAINED BY FDC DEFERRED SALES $ 417 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 10,568 WITHHELD BY FSC EXPENSE $ 14,121 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 144 CREDITS $ 14,265 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ 419,407 $ (306,523) NET INVESTMENT INCOME (LOSS) NET REALIZED (2,734,591) 1,119,826 GAIN (LOSS) CHANGE IN NET (10,039,032) 5,428,784 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (12,354,216) 6,242,087 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO - (1,875,328) SHAREHOLDERS FROM NET REALIZED GAIN IN EXCESS OF - (210,862) NET REALIZED GAIN TOTAL - (2,086,190) DISTRIBUTIONS SHARE 15,830,686 108,990,438 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT - 2,046,549 OF DISTRIBUTIONS COST OF SHARES (25,182,201) (137,149,165) REDEEMED NET INCREASE (9,351,515) (26,112,178) (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 45,188 255,983 FEES TOTAL (21,660,543) (21,700,298) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 59,865,865 81,566,163 PERIOD END OF PERIOD $ 38,205,322 $ 59,865,865 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $717,055 AND $297,648, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 1,172,601 8,021,019 ISSUED IN - 174,767 REINVESTMENT OF DISTRIBUTIONS REDEEMED (1,890,079) (10,189,472) NET INCREASE (717,478) (1,993,686) (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEAR ENDED APRIL 21, 1993 ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, (COMMENCEMEN AUGUST 31, T OF OPERATIONS) 1998 TO FEBRUARY 28, SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET $ 13.22 $ 12.50 $ 11.36 $ 8.98 $ 9.48 $ 10.00 VALUE, BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATION S NET .10 (.05) (.06) .05 .03 .02 INVESTMENT INCOME (LOSS) D NET (3.31) 1.06 1.30 2.36 (.53) (.46) REALIZED AND UNREALIZED GAIN (LOSS) TOTAL FROM (3.21) 1.01 1.24 2.41 (.50) (.44) INVESTMENT OPERATIONS LESS DISTRIBUTIO NS FROM NET - - (.01) (.05) (.02) - INVESTMENT INCOME FROM NET - (.30) (.29) - - (.07) REALIZED GAIN IN EXCESS - (.03) - - - (.06) OF NET REALIZED GAIN TOTAL - (.33) (.30) (.05) (.02) (.13) DISTRIBUTIO NS REDEMPTION .01 .04 .20 .02 .02 .05 FEES ADDED TO PAID IN CAPITAL NET ASSET $ 10.02 $ 13.22 $ 12.50 $ 11.36 $ 8.98 $ 9.48 VALUE, END OF PERIOD TOTAL (24.21)% 8.74% 12.45% 27.10% (5.06)% (3.84)% RETURN B, C RATIOS AND SUPPLEME NTAL DATA NET ASSETS, $ 38,205 $ 59,866 $ 81,566 $ 60,228 $ 79,894 $ 63,073 END OF PERIOD (000 OMITTED) RATIO OF 1.56% A 1.82% 1.70% 1.68% 1.70% 1.94% A EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.51% A, E 1.78% E 1.66% E 1.67% E 1.66% E 1.93% A, E EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET 1.50% A (.37)% (.46)% .46% .30% .17% A INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 101% A 118% 283% 79% 177% 44% A TURNOVER RATE AVERAGE $ .0379 $ .0285 $ .0361 COMMISSIO N RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FO R FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
TELECOMMUNICATIONS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT TELECOMMUNICATIONS -14.14% 13.88% 79.32% 408.18% SELECT TELECOMMUNICATIONS -16.79% 10.39% 73.86% 392.86% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS UTILITIES -0.48% 29.59% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Utilities Index - a market capitalization-weighted index of 136 stocks designed to measure the performance of companies in the utilities sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT TELECOMMUNICATIONS 13.88% 12.39% 17.65% SELECT TELECOMMUNICATIONS 10.39% 11.70% 17.29% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS UTILITIES 29.59% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Telecommunications S&P 500 00096 SP001 1988/08/31 9700.00 10000.00 1988/09/30 10297.91 10426.00 1988/10/31 10506.88 10715.84 1988/11/30 10599.76 10562.61 1988/12/31 10961.57 10747.45 1989/01/31 11851.13 11534.17 1989/02/28 11897.95 11246.96 1989/03/31 12383.70 11509.02 1989/04/30 13320.09 12106.34 1989/05/31 14303.29 12596.64 1989/06/30 13953.86 12524.84 1989/07/31 15013.21 13655.84 1989/08/31 15372.20 13923.49 1989/09/30 15937.19 13866.40 1989/10/31 15372.20 13544.70 1989/11/30 15760.63 13821.02 1989/12/31 16539.00 14152.72 1990/01/31 14745.39 13203.07 1990/02/28 14690.49 13373.39 1990/03/31 15032.13 13727.79 1990/04/30 14147.53 13384.59 1990/05/31 15636.10 14689.59 1990/06/30 15324.96 14589.70 1990/07/31 14623.38 14543.01 1990/08/31 12921.28 13228.33 1990/09/30 12085.49 12584.11 1990/10/31 12506.44 12529.99 1990/11/30 13220.22 13339.43 1990/12/31 13827.17 13711.60 1991/01/31 14318.56 14309.43 1991/02/28 14797.50 15332.55 1991/03/31 15214.24 15703.60 1991/04/30 15537.69 15741.29 1991/05/31 15699.41 16421.31 1991/06/30 15046.30 15669.22 1991/07/31 15898.45 16399.40 1991/08/31 16371.17 16788.07 1991/09/30 16582.65 16507.71 1991/10/31 17235.76 16728.91 1991/11/30 16576.43 16054.73 1991/12/31 18093.09 17891.40 1992/01/31 18118.23 17558.62 1992/02/29 18344.48 17786.88 1992/03/31 17697.17 17440.03 1992/04/30 18363.33 17952.77 1992/05/31 18149.66 18040.74 1992/06/30 17728.14 17771.93 1992/07/31 18679.44 18498.80 1992/08/31 18458.94 18119.58 1992/09/30 18818.04 18333.39 1992/10/31 19007.04 18397.56 1992/11/30 19996.14 19024.91 1992/12/31 20864.61 19258.92 1993/01/31 20800.43 19420.70 1993/02/28 21942.82 19684.82 1993/03/31 22841.32 20100.17 1993/04/30 22889.52 19613.74 1993/05/31 23810.89 20139.39 1993/06/30 24837.56 20197.79 1993/07/31 25561.50 20117.00 1993/08/31 27489.80 20879.44 1993/09/30 27884.67 20718.67 1993/10/31 28687.58 21147.54 1993/11/30 26338.08 20946.64 1993/12/31 27064.66 21200.10 1994/01/31 27612.58 21920.90 1994/02/28 26747.44 21326.84 1994/03/31 25911.13 20396.99 1994/04/30 26373.61 20658.07 1994/05/31 26218.73 20996.87 1994/06/30 26196.61 20482.44 1994/07/31 27649.52 21154.27 1994/08/31 28453.41 22021.59 1994/09/30 28121.53 21482.06 1994/10/31 29463.81 21965.41 1994/11/30 27900.27 21165.43 1994/12/31 28233.62 21479.31 1995/01/31 28625.33 22036.27 1995/02/28 28881.45 22895.02 1995/03/31 29243.04 23570.66 1995/04/30 30151.92 24264.81 1995/05/31 30974.94 25234.68 1995/06/30 32467.16 25820.88 1995/07/31 34528.56 26677.10 1995/08/31 35551.57 26744.06 1995/09/30 36720.73 27872.66 1995/10/31 35182.37 27773.15 1995/11/30 35959.24 28992.39 1995/12/31 36606.61 29550.79 1996/01/31 36865.71 30556.70 1996/02/29 36331.31 30839.96 1996/03/31 36161.27 31136.95 1996/04/30 37849.58 31595.90 1996/05/31 38689.52 32410.76 1996/06/30 39083.24 32534.25 1996/07/31 36125.97 31096.88 1996/08/31 36878.41 31752.72 1996/09/30 37963.32 33539.76 1996/10/31 37210.88 34464.79 1996/11/30 38339.55 37069.98 1996/12/31 38583.25 36335.62 1997/01/31 38845.72 38605.87 1997/02/28 39183.18 38908.54 1997/03/31 35883.54 37309.79 1997/04/30 37006.20 39537.19 1997/05/31 42273.54 41944.21 1997/06/30 44603.88 43823.31 1997/07/31 45509.06 47310.33 1997/08/31 43284.64 44660.01 1997/09/30 48898.64 47106.04 1997/10/31 47714.22 45532.69 1997/11/30 49688.26 47640.40 1997/12/31 48548.49 48458.39 1998/01/31 52636.34 48994.34 1998/02/28 57412.66 52527.81 1998/03/31 62522.46 55217.76 1998/04/30 62276.09 55773.25 1998/05/31 59617.56 54814.51 1998/06/30 61899.46 57041.07 1998/07/31 63893.36 56433.58 1998/08/31 49293.59 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980917 100654 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Telecommunications Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $49,286 - a 392.86% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS MCI COMMUNICATIONS CORP. 9.9 WORLDCOM, INC. 8.5 AT&T CORP. 7.7 TEL-SAVE HOLDINGS, INC. 7.0 OY NOKIA AB SPONSORED ADR CLASS A 4.2 QWEST COMMUNICATIONS INTERNATIONAL, INC. 3.7 ALCATEL ALSTHOM COMPAGNIE GENERALE 3.6 D'ELECTRICITE SA LUCENT TECHNOLOGIES, INC. 3.4 GLOBAL TELESYSTEMS GROUP, INC. 3.1 CISCO SYSTEMS, INC. 2.5 TOP INDUSTRIES AS OF AUGUST 31, 1998 ROW: 1, COL: 1, VALUE: 26.6 ROW: 1, COL: 2, VALUE: 3.6 ROW: 1, COL: 3, VALUE: 4.9 ROW: 1, COL: 4, VALUE: 5.8 ROW: 1, COL: 5, VALUE: 7.6 ROW: 1, COL: 6, VALUE: 51.5 ROW: 1, COL: 1, VALUE: 16.5 ROW: 1, COL: 2, VALUE: 3.4 ROW: 1, COL: 3, VALUE: 3.8 ROW: 1, COL: 4, VALUE: 6.2 ROW: 1, COL: 5, VALUE: 9.300000000000001 ROW: 1, COL: 6, VALUE: 60.8 TELEPHONE SERVICES 51.5% TELEPHONE EQUIPMENT 7.6% CABLE TV OPERATORS 5.8% CELLULAR & COMMUNICATION SERVICES 4.9% ELECTRICAL MACHINERY 3.6% ALL OTHERS 26.6% * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS TELECOMMUNICATIONS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Nick Thakore) Nick Thakore, Portfolio Manager of Fidelity Select Telecommunications Portfolio Q. HOW DID THE FUND PERFORM, NICK? A. For the six- and 12-month periods that ended August 31, 1998, the fund had total returns of -14.14% and 13.88%, respectively. In comparison, the Standard & Poor's 500 Index returned -8.10% and 8.10%, respectively, over the same time periods. Beginning this period, the fund also compares itself to the Goldman Sachs Utilities Index - an index of 136 stocks designed to measure the performance of companies in the utilities sector - which returned -0.48% and 29.59% over the same six- and 12-month periods, respectively. Q. WHY DID THE FUND UNDERPERFORM BOTH THE S&P 500 AND THE GOLDMAN SACHS INDEX DURING THE PERIOD? A. The fund is comprised primarily of growth stocks in the telecommunications sector. While stocks of that type generally perform well in rising markets, they tend to be hurt badly by market downdrafts of the sort we witnessed in August of this year. This was evident in the fund's inability to keep pace with the S&P 500 over the past six months. Likewise, the Goldman Sachs index contains mostly conservative utility stocks that tend to lag growth stocks in a rising market but hold their ground better when the market falls. The recent market environment, with its extreme downside volatility, therefore favored conservative issues over growth stocks, which explains the superior performance of the Goldman Sachs index. Q. WHAT STRATEGY DID YOU USE IN THIS VOLATILE ENVIRONMENT? A. I continued to monitor the basic business prospects for the companies I follow. Selling waves such as we witnessed recently tend to capsize both good and bad stocks, so I looked for opportunities to upgrade the portfolio with stocks that had better-than-expected growth prospects and had sold down to attractive price levels. Q. THE FUND'S TOP THREE HOLDINGS AT THE END OF THE PERIOD COMPRISED OVER 25% OF THE PORTFOLIO. WAS THAT A CONSCIOUS DECISION? A. Most of it was due to appreciation in the price of those stocks. In AT&T's case, the acquisition of Teleport Communications made it appear as though the fund increased its position when, in fact, the fund's AT&T holdings at the end of the period reflect the value of its positions in both AT&T and Teleport Communications. Q. WHAT STOCKS DID WELL FOR THE FUND? A. Viatel was the biggest contributor to the fund's return. Investors were attracted to the stock based on the anticipated value of the networks the company has been building in Europe. I took profits on a large part of this position before the market weakened in August. WorldCom has been one of the fund's core holdings for some time, and the stock performed well again during the period. Earnings grew as anticipated, and the company's merger with MCI was moving ahead relatively smoothly. Alcatel, a French telecommunications equipment company, benefited from strong earnings and the stock's comparatively modest valuation. Q. WHAT STOCKS FAILED TO PERFORM UP TO YOUR EXPECTATIONS? A. Tel-Save was far and away the biggest detractor from the fund's performance. The stock suffered when it appeared that the company would be acquired but the deal subsequently fell through. Investors also punished AT&T's stock in response to skepticism about the viability of the company's planned acquisition of cable company TCI Group. Nextel did poorly because of concerns about the U.S. wireless industry, and also due to the difficulty of valuing a company that had healthy revenues and cash flow but negligible earnings. Q. WHAT'S YOUR OUTLOOK, NICK? A. Although the market has inflicted a lot of pain on investors recently, my overall outlook is more positive than it's been in quite a while. Broad-based selling hysteria has created tremendous opportunities to buy the stocks of many high-quality companies at very attractive price-to-earnings multiples. It's important to realize that although they are vulnerable to slowdowns in the U.S. economy, most telecommunications stocks in the fund's portfolio have virtually no exposure to emerging markets. There is therefore less risk of earnings disruptions due to the financial turmoil in Asia, Russia and other emerging markets. A greater inclination by the Federal Reserve Board to lower short-term interest rates would help to hold off recessionary forces. As long as the economy avoids outright recession, slower economic growth with lower interest rates should be beneficial for the stocks held by the fund and for the market overall. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: JULY 29, 1985 FUND NUMBER: 096 TRADING SYMBOL: FSTCX SIZE: AS OF AUGUST 31, 1998, MORE THAN $636 MILLION MANAGER: NICK THAKORE, SINCE 1996; MANAGER, FIDELITY UTILITIES FUND, FIDELITY ADVISOR UTILITIES GROWTH FUND AND FIDELITY SELECT UTILITIES GROWTH PORTFOLIO, SINCE 1997; ANALYST, VARIOUS INDUSTRIES, 1993-1996; JOINED FIDELITY IN 1993 TELECOMMUNICATIONS PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) SHOWING PERCENTAGE OF TOTAL VALUE OF INVESTMENT IN SECURITIES COMMON STOCKS - 86.8% SHARES VALUE (NOTE 1) BROADCASTING - 6.1% CABLE TV OPERATORS - 3.7% AlphaNet Telecom, Inc. (a) 394,100 $ 3,756,325 AlphaNet Telecom, Inc. warrants 9/30/98 (a) 824,000 7,618,257 Cable Michigan, Inc. (a) 24,275 904,244 Cox Communications, Inc. Class A (a) 150,800 6,333,600 RCN Corp. 221,200 3,076,063 Tele-Communications, Inc. (TCI Group), Series A (a) 146,634 4,838,922 26,527,411 COMMUNICATIONS SERVICES, NEC - 1.9% SmarTalk TeleServices, Inc. (a)(c) 2,165,000 13,666,563 TELEVISION BROADCASTING - 0.5% NTL, Inc. (a) 96,000 3,834,000 TOTAL BROADCASTING 44,027,974 CELLULAR - 4.9% CELLULAR & COMMUNICATION SERVICES - 4.9% AirTouch Communications, Inc. (a) 98,400 5,535,000 Cellular Communications International, Inc. (a) 260,600 13,811,800 Lightbridge, Inc. (a) 62,800 314,000 Nextel Communications, Inc. Class A (a) 790,700 14,282,019 SkyTel Communications, Inc. (a) 91,700 1,203,563 35,146,382 COMMUNICATIONS EQUIPMENT - 10.1% DATACOMMUNICATIONS EQUIPMENT - 2.5% Cisco Systems, Inc. (a) 218,600 17,897,875 TELEPHONE EQUIPMENT - 7.6% Inter-Tel, Inc. 400 5,350 Lucent Technologies, Inc. 339,500 24,062,063 Oy Nokia AB sponsored ADR Class A 450,000 30,065,625 54,133,038 TELEPHONE INTERCONNECT SYSTEMS - 0.0% Intermedia Communications, Inc. (a) 2,400 59,700 TOTAL COMMUNICATIONS EQUIPMENT 72,090,613 COMPUTER SERVICES & SOFTWARE - 3.2% COMPUTER SERVICES - 2.0% America Online, Inc. 71,900 5,891,306 Concentric Network Corp. 143,700 2,299,200 Electric Lightwave, Inc. Class A (a) 45,300 390,713 Titan Corp. (a) 1,318,200 6,014,288 14,595,507 CUSTOM COMPUTER PROGRAMMING SERVICES - 1.2% Saville Systems PLC sponsored ADR (a) 500,000 8,187,500 TOTAL COMPUTER SERVICES & SOFTWARE 22,783,007 ELECTRICAL EQUIPMENT - 5.0% ELECTRICAL MACHINERY - 3.6% Alcatel Alsthom Compagnie Generale d'Electricite SA 170,280 25,701,632 TV & RADIO COMMUNICATION EQUIPMENT - 1.4% California Amplifier, Inc. (a)(c) 591,300 776,081 Loral Space & Communications Ltd. (a) 607,800 9,648,825 10,424,906 TOTAL ELECTRICAL EQUIPMENT 36,126,538 SHARES VALUE (NOTE 1) ENTERTAINMENT - 1.1% MOTION PICTURE PRODUCTION - 1.1% Tele-Communications, Inc. (TCI Ventures Group), Series A (a) 480,400 $ 7,986,650 ELECTRONICS - 3.2% ELECTRONIC COMPONENTS & ACCESSORIES - 2.5% World Access, Inc. (a) 927,800 17,744,175 ELECTRONICS & ELECTRONIC COMPONENTS - 0.7% Alpine Group, Inc. (a) 378,000 5,386,500 TOTAL ELECTRONICS 23,130,675 ENGINEERING - 0.6% Able Telcom Holdings Corp. (a)(c) 985,100 4,063,538 METALS & MINING - 1.1% NONFERROUS ROLLING & DRAWING - 1.1% Superior Telecom, Inc. 207,100 7,895,688 SERVICES - 0.0% MANAGEMENT CONSULTING SERVICES - 0.0% Hagler Bailly, Inc. (a) 300 5,813 TELEPHONE SERVICES - 51.5% AT&T Corp. 1,101,047 55,189,981 Advanced Communications Group, Inc. 131,600 789,600 AMNEX, Inc. (a) 1,789,100 1,230,006 BCE, Inc. 375,000 12,097,545 Cincinnati Bell, Inc. 155,100 3,644,850 Commonwealth Telephone Enterprises, Inc. 101,800 2,201,425 COMSAT Corp., Series 1 288,700 6,297,269 Equant NV (a) 3,700 150,008 France Telecom SA 3,200 225,867 GTE Corp. 336,400 16,820,000 Global Telesystems Group, Inc. (a) 703,000 22,496,000 ITC DeltaCom, Inc. 700 22,225 IXC Communications, Inc. 7,000 171,500 MCI Communications Corp. 1,414,100 70,705,000 Maritime Telegraph & Telephone Co. Ltd. 17,100 362,496 McLeodUSA, Inc. Class A (a) 194,100 5,628,900 NewTel Enterprises Ltd. 30,800 711,827 NEXTLINK Communications, Inc. Class A (a) 400 8,300 Qwest Communications International, Inc. (a) 1,049,390 26,234,750 Southern New England Telecommunications Corp. 170,000 11,018,125 STAR Telecommunications, Inc. (a) 321,825 3,379,163 Startec Global Communications Corp. 1,800 10,350 Tel-Save Holdings, Inc. (a)(c) 3,353,900 50,308,500 Telebras sponsored ADR (a) 148,500 10,664,156 Telegroup, Inc. (a) 308,300 1,387,350 U.S. LEC Corp. Class A 1,200 17,400 Viatel, Inc. (a) 805,700 6,546,313 WorldCom, Inc. (a) 1,496,805 61,275,455 369,594,361 TOTAL COMMON STOCKS (Cost $665,237,031) 622,851,239 CONVERTIBLE PREFERRED STOCKS - 2.1% SHARES VALUE (NOTE 1) BROADCASTING - 2.1% CABLE TV OPERATORS - 2.1% MediaOne Group, Inc. $3.63 PIES (a) (Cost $16,042,500) 276,000 $ 15,318,000 CASH EQUIVALENTS - 11.1% Taxable Central Cash Fund (b) (Cost $79,516,394) 79,516,394 79,516,394 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $760,795,925) $ 717,685,633 SECURITY TYPE ABBREVIATIONS PIES - Premium Income Equity Securities LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. (c) Affiliated company (see Note 10 of Notes to Financial Statements). OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $524,256,253 and $382,713,313, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $51,271 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At period end, the value of securities loaned and the value of the collateral amounted to $63,253,165 and $77,324,200, respectively (see Note 6 of Notes to Financial Statements). Transactions during the period with companies which are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Able Telcom Holdings Corp. $ 3,157,131 $ - $ - $ 4,063,538 California Amplifier, Inc. 185,966 1,451,235 - 776,081 SmarTalk TeleServices, Inc. 2,434,493 - - 13,666,563 Tel-Save Holdings, Inc. - - - 50,308,500 Titan Corp. 263,832 734,200 - - Viatel, Inc. - 6,303,500 - - TOTALS $ 6,041,422 $ 8,488,935 $ - $ 68,814,682 Distribution of investments by country of issue, as a percentage of total value of investment in securities, is as follows: United States 84.8% Finland 4.2 France 3.6 Canada 3.4 Brazil 1.5 Bermuda 1.4 Ireland 1.1 TOTAL 100.0% INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $761,196,181. Net unrealized depreciation aggregated $43,510,548, of which $80,897,191 related to appreciated investment securities and $124,407,739 related to depreciated investment securities. TELECOMMUNICATIONS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 717,685,633 SECURITIES, AT VALUE (COST $760,795,92 5) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 6,809,686 INVESTMENTS SOLD RECEIVABLE FOR 2,946,186 FUND SHARES SOLD DIVIDENDS 333,486 RECEIVABLE INTEREST 562,711 RECEIVABLE REDEMPTION FEES 17,806 RECEIVABLE OTHER 64,421 RECEIVABLES TOTAL ASSETS 728,419,929 LIABILITIES PAYABLE FOR $ 13,204,422 FUND SHARES REDEEMED ACCRUED 391,615 MANAGEMENT FEE OTHER PAYABLES 697,490 AND ACCRUED EXPENSES COLLATERAL ON 77,324,200 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 91,617,727 NET ASSETS $ 636,802,202 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 657,313,595 ACCUMULATED (616,267) NET INVESTMENT LOSS ACCUMULATED 23,210,950 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED (43,106,076) APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 636,802,202 14,309,858 SHARES OUTSTANDING NET ASSET $44.50 VALUE AND REDEMPTION PRICE PER SHARE ($636,802,2 02 (DIVIDED BY) 14,309,858 SHARES) MAXIMUM $45.88 OFFERING PRICE PER SHARE (100/97.00 OF $44.50) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 1,829,964 INCOME DIVIDENDS INTEREST 2,691,036 (INCLUDING INCOME ON SECURITIES LOANED OF $1,243,594) TOTAL INCOME 4,521,000 EXPENSES MANAGEMENT $ 2,434,477 FEE TRANSFER AGENT 2,168,371 FEES ACCOUNTING AND 352,944 SECURITY LENDING FEES NON-INTERESTED 1,972 TRUSTEES' COMPENSATION CUSTODIAN FEES 47,030 AND EXPENSES REGISTRATION FEES 124,045 AUDIT 16,695 LEGAL 2,036 REPORTS TO 78,838 SHAREHOLDERS TOTAL EXPENSES 5,226,408 BEFORE REDUCTIONS EXPENSE (89,141) 5,137,267 REDUCTIONS NET INVESTMENT (616,267) INCOME (LOSS) REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 27,195,374 SECURITIES (INCLUDING REALIZED GAIN OF $1,397,225 ON SALES OF INVESTMENTS IN AFFILIATED ISSUERS) FOREIGN 22,033 27,217,407 CURRENCY TRANSACTIONS CHANGE IN NET UNREALIZED APPRECIATION (DEPRECIATION) ON: INVESTMENT (144,063,459) SECURITIES ASSETS AND 11,388 (144,052,071) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (LOSS) (116,834,664) NET INCREASE $ (117,450,931) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 2,661,647 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 2,649,809 - - RETAINED BY FDC DEFERRED SALES $ 5,783 CHARGES WITHHELD BY FDC EXCHANGE FEES $ 120,338 WITHHELD BY FSC EXPENSE $ 83,760 REDUCTIONS DIRECTED BROKERAGE ARRANGEMENTS CUSTODIAN 5,381 CREDITS $ 89,141 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ (616,267) $ (2,208,196) NET INVESTMENT INCOME (LOSS) NET REALIZED 27,217,407 89,769,920 GAIN (LOSS) CHANGE IN NET (144,052,071) 75,630,156 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (117,450,931) 163,191,880 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (29,167,122) (57,660,802) SHAREHOLDERS FROM NET REALIZED GAIN SHARE 671,346,028 394,333,392 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 28,756,284 56,532,142 OF DISTRIBUTIONS COST OF SHARES (560,769,610) (302,046,680) REDEEMED NET INCREASE 139,332,702 148,818,854 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 638,254 564,136 FEES TOTAL (6,647,097) 254,914,068 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 643,449,299 388,535,231 PERIOD END OF PERIOD $ 636,802,202 $ 643,449,299 (INCLUDING ACCUMULATED NET INVESTMENT LOSS OF $616,267 AND $0, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 11,862,814 8,067,245 ISSUED IN 505,739 1,266,807 REINVESTMENT OF DISTRIBUTIONS REDEEMED (10,115,955) (6,572,964) NET INCREASE 2,252,598 2,761,088 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET $ 53.37 $ 41.80 $ 44.87 $ 38.34 $ 37.10 $ 34.19 VALUE, BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATION S NET (.04) (.25) .12 G .51 .29 .25 INVESTMENT INCOME (LOSS) D NET (7.18) 18.20 2.92 9.15 2.54 7.00 REALIZED AND UNREALIZED GAIN (LOSS) TOTAL FROM (7.22) 17.95 3.04 9.66 2.83 7.25 INVESTMENT OPERATIONS LESS DISTRIBUTIO NS FROM NET - - (.16) (.39) (.33) (.20) INVESTMENT INCOME FROM NET (1.69) (6.44) (5.98) (2.75) (1.27) (4.18) REALIZED GAIN TOTAL (1.69) (6.44) (6.14) (3.14) (1.60) (4.38) DISTRIBUTIO NS REDEMPTION .04 .06 .03 .01 .01 .04 FEES ADDED TO PAID IN CAPITAL NET ASSET $ 44.50 $ 53.37 $ 41.80 $ 44.87 $ 38.34 $ 37.10 VALUE, END OF PERIOD TOTAL (14.14)% 46.52% 7.85% 25.79% 7.98% 21.90% RETURN B, C RATIOS AND SUPPLEME NTAL DATA NET ASSETS, $ 636,802 $ 643,449 $ 388,535 $ 468,300 $ 369,476 $ 371,025 END OF PERIOD (000 OMITTED) RATIO OF 1.24% A 1.51% 1.51% 1.52% 1.56% 1.54% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.22% A, E 1.48% E 1.47% E 1.52% 1.55% E 1.53% E EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET (.15)% A (.53)% .27% 1.17% .77% .64% INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS PORTFOLIO 100% A 157% 175% 89% 107% 241% TURNOVER RATE AVERAGE $ .0397 $ .0065 $ .0321 COMMISSIO N RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FOR FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER. G INVESTMEN T INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.07 PER SHARE.
UTILITIES GROWTH PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT UTILITIES GROWTH -3.22% 25.14% 79.47% 324.00% SELECT UTILITIES GROWTH -6.20% 21.31% 74.01% 311.21% (LOAD ADJ.) S&P 500 -8.10% 8.10% 131.21% 382.74% GS UTILITIES -0.48% 29.59% N/A N/A CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a widely recognized, unmanaged index of common stocks - and the Goldman Sachs Utilities Index - a market capitalization-weighted index of 136 stocks designed to measure the performance of companies in the utilities sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT UTILITIES GROWTH 25.14% 12.41% 15.54% SELECT UTILITIES GROWTH 21.31% 11.72% 15.19% (LOAD ADJ.) S&P 500 8.10% 18.25% 17.05% GS UTILITIES 29.59% N/A N/A AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (checkmark)UNDERSTANDING PERFORMANCE HOW A FUND DID YESTERDAY IS NO GUARANTEE OF HOW IT WILL DO TOMORROW. THE STOCK MARKET, FOR EXAMPLE, HAS A HISTORY OF LONG-TERM GROWTH AND SHORT-TERM VOLATILITY. UNLIKE THE BROADER MARKET, HOWEVER, SOME SECTORS MAY NOT HAVE A HISTORY OF GROWTH IN THE LONG RUN. AND, AS WITH ALL STOCK FUNDS, THE SHARE PRICE AND RETURN OF A FUND THAT INVESTS IN A SECTOR WILL VARY. $10,000 OVER 10 YEARS Utilities Growth S&P 500 00065 SP001 1988/08/31 9700.00 10000.00 1988/09/30 10037.93 10426.00 1988/10/31 10249.13 10715.84 1988/11/30 10229.93 10562.61 1988/12/31 10211.24 10747.45 1989/01/31 10692.23 11534.17 1989/02/28 10625.21 11246.96 1989/03/31 10806.57 11509.02 1989/04/30 11362.47 12106.34 1989/05/31 11902.60 12596.64 1989/06/30 12203.24 12524.84 1989/07/31 12871.53 13655.84 1989/08/31 12928.23 13923.49 1989/09/30 13114.54 13866.40 1989/10/31 13053.79 13544.70 1989/11/30 13483.11 13821.02 1989/12/31 14195.94 14152.72 1990/01/31 13495.26 13203.07 1990/02/28 13470.96 13373.39 1990/03/31 13398.05 13727.79 1990/04/30 12839.13 13384.59 1990/05/31 13507.41 14689.59 1990/06/30 13667.47 14589.70 1990/07/31 13779.67 14543.01 1990/08/31 13023.37 13228.33 1990/09/30 13056.61 12584.11 1990/10/31 13725.65 12529.99 1990/11/30 14087.18 13339.43 1990/12/31 14274.66 13711.60 1991/01/31 14211.72 14309.43 1991/02/28 14824.33 15332.55 1991/03/31 14992.17 15703.60 1991/04/30 14925.04 15741.29 1991/05/31 14929.23 16421.31 1991/06/30 14748.14 15669.22 1991/07/31 15228.10 16399.40 1991/08/31 15577.17 16788.07 1991/09/30 16057.14 16507.71 1991/10/31 16279.67 16728.91 1991/11/30 16467.30 16054.73 1991/12/31 17276.34 17891.40 1992/01/31 16744.55 17558.62 1992/02/29 16621.83 17786.88 1992/03/31 16449.11 17440.03 1992/04/30 16899.09 17952.77 1992/05/31 17226.34 18040.74 1992/06/30 17425.62 17771.93 1992/07/31 18352.17 18498.80 1992/08/31 18342.76 18119.58 1992/09/30 18441.53 18333.39 1992/10/31 18436.82 18397.56 1992/11/30 18563.81 19024.91 1992/12/31 19106.31 19258.92 1993/01/31 19431.31 19420.70 1993/02/28 20430.95 19684.82 1993/03/31 20982.47 20100.17 1993/04/30 20867.79 19613.74 1993/05/31 20912.55 20139.39 1993/06/30 21713.24 20197.79 1993/07/31 21961.91 20117.00 1993/08/31 22916.77 20879.44 1993/09/30 22916.77 20718.67 1993/10/31 22683.03 21147.54 1993/11/30 21573.99 20946.64 1993/12/31 21503.14 21200.10 1994/01/31 21943.73 21920.90 1994/02/28 20948.11 21326.84 1994/03/31 20192.81 20396.99 1994/04/30 20773.67 20658.07 1994/05/31 20358.90 20996.87 1994/06/30 20294.64 20482.44 1994/07/31 20878.82 21154.27 1994/08/31 20797.04 22021.59 1994/09/30 20265.43 21482.06 1994/10/31 20522.47 21965.41 1994/11/30 19780.55 21165.43 1994/12/31 19909.61 21479.31 1995/01/31 20722.12 22036.27 1995/02/28 20992.96 22895.02 1995/03/31 21077.22 23570.66 1995/04/30 21811.92 24264.81 1995/05/31 22149.44 25234.68 1995/06/30 22366.41 25820.88 1995/07/31 22969.12 26677.10 1995/08/31 23553.74 26744.06 1995/09/30 24674.77 27872.66 1995/10/31 24915.86 27773.15 1995/11/30 25464.32 28992.39 1995/12/31 26756.42 29550.79 1996/01/31 27038.77 30556.70 1996/02/29 26412.68 30839.96 1996/03/31 26179.43 31136.95 1996/04/30 27236.45 31595.90 1996/05/31 27256.16 32410.76 1996/06/30 27676.70 32534.25 1996/07/31 26467.65 31096.88 1996/08/31 26474.22 31752.72 1996/09/30 26953.90 33539.76 1996/10/31 28084.09 34464.79 1996/11/30 29404.85 37069.98 1996/12/31 29797.52 36335.62 1997/01/31 30693.49 38605.87 1997/02/28 31202.56 38908.54 1997/03/31 29546.38 37309.79 1997/04/30 30603.88 39537.19 1997/05/31 32615.83 41944.21 1997/06/30 33611.36 43823.31 1997/07/31 34411.96 47310.33 1997/08/31 32866.45 44660.01 1997/09/30 35762.54 47106.04 1997/10/31 35860.00 45532.69 1997/11/30 38032.07 47640.40 1997/12/31 38827.85 48458.39 1998/01/31 40329.17 48994.34 1998/02/28 42497.75 52527.81 1998/03/31 45381.24 55217.76 1998/04/30 44473.56 55773.25 1998/05/31 43938.90 54814.51 1998/06/30 43971.30 57041.07 1998/07/31 44951.51 56433.58 1998/08/31 41121.00 48274.42 IMATRL PRASUN SHR__CHT 19980831 19980918 161525 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Utilities Growth Portfolio on August 31, 1988, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1998, the value of the investment would have grown to $41,121 - a 311.21% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,274 - a 382.74% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1998 % OF FUND'S INVESTMENTS MCI COMMUNICATIONS CORP. 9.3 AT&T CORP. 9.1 BELL ATLANTIC CORP. 8.6 BELLSOUTH CORP. 6.6 DUKE ENERGY CORP. 5.3 AMERITECH CORP. 5.3 GTE CORP. 3.6 SOUTHERN NEW ENGLAND TELECOMMUNICATIONS CORP. 3.1 PG&E CORP. 3.0 COASTAL CORP. (THE) 2.3 TOP INDUSTRIES AS OF AUGUST 31, 1998 TELEPHONE SERVICES 54.8% ELECTRIC POWER 13.9% ELECTRIC & OTHER SERVICES 11.7% CELLULAR & COMMUNICATION SERVICES 3.4% GAS TRANSMISSION 2.6% ALL OTHERS 13.6% ROW: 1, COL: 1, VALUE: 13.6 ROW: 1, COL: 2, VALUE: 2.6 ROW: 1, COL: 3, VALUE: 3.4 ROW: 1, COL: 4, VALUE: 11.7 ROW: 1, COL: 5, VALUE: 13.9 ROW: 1, COL: 6, VALUE: 54.8 * * INCLUDES SHORT-TERM INVESTMENTS % OF FUND'S INVESTMENTS UTILITIES GROWTH PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Jonahan Zang) NOTE TO SHAREHOLDERS: Jonathan Zang became Portfolio Manager of Fidelity Select Utilities Growth Portfolio on July 1, 1998. Q. HOW DID THE FUND PERFORM, JONATHAN? A. For the six- and 12-month periods that ended August 31, 1998, the fund had total returns of -3.22% and 25.14%, respectively. In comparison, the Standard & Poor's 500 Index returned -8.10% and 8.10%, respectively, over the same time periods. Beginning this period, the fund also compares itself to the Goldman Sachs Utilities Index - an index of 136 stocks designed to measure the performance of companies in the utilities sector - which returned -0.48% and 29.59% over the same six- and 12-month periods, respectively. Q. WHY DID THE FUND UNDERPERFORM THE GOLDMAN SACHS INDEX BUT BEAT THE S&P 500 DURING THE PERIOD? A. The investment environment near the end of the period was similar in many respects to what investors experienced in the fourth quarter of 1997. There was a weak stock market, and investors favored defensive holdings like utilities and U.S. Treasury bonds. This broad interest in utilities helped to cushion the fund's losses as the stock market fell, enabling the fund to outperform the S&P 500. The Goldman Sachs index has an even more defensive orientation than the fund does, with fewer growth-oriented stocks and more electric utilities and regional Bell operating companies. Since the market favored a defensive stance, the Goldman Sachs index was able to beat the fund's performance during the period. Q. WHAT STRATEGY DID YOU USE IN THIS ENVIRONMENT? A. My strategy did not change much. I increased the fund's holdings of electric utilities and slightly decreased its emphasis on growth stocks. However, these were minor shifts of emphasis, not wholesale changes. The fund is still invested primarily in growth-oriented utility and telecommunications stocks. Q. WHAT STOCKS PERFORMED WELL DURING THE PERIOD? A. WorldCom was once again one of the fund's better performers. Earnings grew as expected, and the company's merger with MCI was moving ahead smoothly. In mid-September, WorldCom and MCI were scheduled to begin trading as one stock, and I sold the fund's WorldCom holdings near the end of the period to maintain adequate diversification. Duke Energy was another stock that helped the fund's performance. As a low-cost producer of electricity and one of the leading providers of energy services to businesses and other large consumers in the United States, Duke was positioned to do well as markets for electric power open up. Investors also responded positively to the company's strong earnings and the growth prospects resulting from the successful integration of PanEnergy Corp., a gas company. PECO Energy also made a positive contribution to the fund's performance. The stock benefited from an unexpectedly favorable settlement with the Public Utilities Commission in Pennsylvania. Q. WHAT HOLDINGS DETRACTED FROM THE FUND'S PERFORMANCE? A. Tel-Save led the list of stocks that hurt performance. The stock declined when it appeared that the company would be acquired but the deal subsequently fell through. AT&T was weak because of investors' concern about the company's planned acquisition of cable company TCI Group. Winstar Communications fell as the increased market volatility caused investors to prefer the stocks of companies with more proven and visible earnings. Finally, AES performed poorly on concerns about the company's exposure to Latin America and Pakistan. Q. WHAT'S YOUR OUTLOOK, JONATHAN? A. In the short term, investors seem to be faced with two general possibilities. On the one hand, the stock market could continue to be dominated by concerns about Asia, Latin America and other emerging markets. This would probably entail some further weakness in U.S. stocks, including the kind of utility growth shares in which the fund generally invests. On the other hand, there's the possibility that we have seen the worst, and the markets will recover shortly. I frankly don't know which of these scenarios will materialize. My approach to managing the fund is intermediate to long term in nature. The deflationary pressures from Asia and Latin America have not changed the fact that the utilities sector is an exciting place to invest, with many domestic markets either in the process of opening up or about to open up. While I have made the slight adjustments I mentioned earlier to guard against further weakness in the market, the fund is still positioned to benefit strongly from the dynamic growth I foresee in utility-related markets over the long term. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: December 10, 1981 FUND NUMBER: 065 TRADING SYMBOL: FSUTX SIZE: as of August 31, 1998, more than $311 million MANAGER: Jonathan Zang, since July 1998; analyst, utilities industry, 1997-present; joined Fidelity in 1997 UTILITIES GROWTH PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.7% SHARES VALUE (NOTE 1) CELLULAR - 3.4% CELLULAR & COMMUNICATION SERVICES - 3.4% AirTouch Communications, Inc. (a) 118,100 $ 6,643,125 Teleglobe, Inc. 100,000 2,429,072 Vodafone Group PLC sponsored ADR 14,400 1,809,000 10,881,197 COMMUNICATIONS EQUIPMENT - 1.0% TELEPHONE INTERCONNECT SYSTEMS - 1.0% Intermedia Communications, Inc. (a) 127,600 3,174,050 ELECTRIC UTILITY - 25.6% ELECTRIC POWER - 13.9% AES Corp. (a) 155,800 4,245,550 American Electric Power Co., Inc. 35,000 1,583,750 Duke Energy Corp. 274,108 17,097,487 Edison International 61,300 1,743,219 Entergy Corp. 253,300 7,298,206 FPL Group, Inc. 25,000 1,664,063 GPU, Inc. 47,300 1,776,706 IPALCO Enterprises, Inc. 99,600 4,382,400 Pinnacle West Capital Corp. 27,600 1,191,975 Unicom Corp. 97,600 3,477,000 44,460,356 ELECTRIC & OTHER SERVICES - 11.7% CMS Energy Corp. 147,100 6,224,169 Houston Industries, Inc. 44,636 1,286,075 Illinova Corp. 283,400 7,315,263 LG&E Energy Corp. 8,300 212,688 Montana Power Co. 85,800 3,346,200 PECO Energy Co. 110,500 3,784,625 PG&E Corp. 294,200 9,451,175 PacifiCorp. 92,500 2,087,031 Utilicorp United, Inc. 4,053 139,575 Washington Water Power Co. 200,000 3,387,500 37,234,301 TOTAL ELECTRIC UTILITY 81,694,657 ENGINEERING - 0.4% ARCHITECTS & ENGINEERS - 0.4% Stone & Webster, Inc. 40,000 1,362,500 GAS - 4.5% GAS DISTRIBUTION - 0.7% MCN Energy Group, Inc. 32,400 569,025 Sempra Energy (a) 68,590 1,744,758 2,313,783 GAS TRANSMISSION - 2.6% Enron Corp. 127,696 5,403,137 Williams Companies, Inc. 129,865 2,986,895 8,390,032 GAS TRANSMISSION & DISTRIBUTION - 0.6% Columbia Energy Group 38,000 1,890,500 GAS & OTHER SERVICES - 0.6% MDU Resources Group, Inc. 73,950 1,890,347 TOTAL GAS 14,484,662 HOLDING COMPANIES - 0.7% HOLDING COMPANY OFFICES, NEC - 0.7% CINergy Corp. 60,000 2,085,000 OIL & GAS - 2.3% PETROLEUM REFINERS - 2.3% Coastal Corp. (The) 286,600 7,451,600 SHARES VALUE (NOTE 1) TELEPHONE SERVICES - 54.8% AT&T Corp. 578,483 $ 28,996,460 Advanced Communications Group, Inc. 1,900 11,400 ALLTEL Corp. 49,000 2,211,125 Ameritech Corp. 361,600 17,040,400 AMNEX, Inc. (a) 470,700 323,606 Bell Atlantic Corp. 626,700 27,653,138 BellSouth Corp. 307,600 21,089,825 Cincinnati Bell, Inc. 88,300 2,075,050 E Spire Communications, Inc. (a) 177,100 2,789,325 GTE Corp. 233,000 11,650,000 MCI Communications Corp. 592,800 29,639,998 Maritime Telegraph & Telephone Co., Ltd. 19,000 402,773 McLeodUSA, Inc. Class A (a) 66,500 1,928,500 New Tel Enterprises Ltd. 6,400 147,912 Qwest Communications International, Inc. (a) 257,233 6,430,825 Southern New England Telecommunications Corp. 152,200 9,864,463 Sprint Corp. 58,700 3,936,569 Tel-Save Holdings, Inc. (a) 478,100 7,171,500 Telecomunicacoes Brasileiras SA sponsored ADR 7,000 494,813 Winstar Communications, Inc. (a) 66,700 1,217,275 175,074,957 TOTAL COMMON STOCKS (Cost $288,362,019) 296,208,623 CASH EQUIVALENTS - 7.3% Taxable Central Cash Fund (b) (Cost $23,487,953) 23,487,953 23,487,953 TOTAL INVESTMENT IN SECURITIES - 100% (Cost $311,849,972) $ 319,696,576 LEGEND (a) Non-income producing (b) At period end, the seven-day yield of the Taxable Central Cash Fund was 5.58%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $223,391,774 and $299,851,777, respectively (see Note 3 of Notes to Financial Statements). The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $12,549 for the period (see Note 4 of Notes to Financial Statements). The fund participated in the security lending program. At period end, the value of securities loaned and the value of the collateral amounted to $7,518,050 and $8,044,400, respectively (see Note 6 of Notes to Financial Statements). INCOME TAX INFORMATION At August 31, 1998, the aggregate cost of investment securities for income tax purposes was $311,862,709 Net unrealized appreciation aggregated $7,833,867, of which $26,548,147 related to appreciated investment securities and $18,714,280 related to depreciated investment securities. UTILITIES GROWTH PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 319,696,576 SECURITIES, AT VALUE (COST $311,849,97 2) - SEE ACCOMPANYIN G SCHEDULE CASH 255,200 RECEIVABLE FOR 13,253,509 INVESTMENTS SOLD RECEIVABLE FOR 3,263,445 FUND SHARES SOLD DIVIDENDS 564,995 RECEIVABLE INTEREST 100,644 RECEIVABLE REDEMPTION FEES 2,888 RECEIVABLE OTHER 473 RECEIVABLES TOTAL ASSETS 337,137,730 LIABILITIES PAYABLE FOR $ 14,498,152 INVESTMENTS PURCHASED PAYABLE FOR 3,055,551 FUND SHARES REDEEMED ACCRUED 161,637 MANAGEMENT FEE OTHER PAYABLES 203,297 AND ACCRUED EXPENSES COLLATERAL ON 8,044,400 SECURITIES LOANED, AT VALUE TOTAL LIABILITIES 25,963,037 NET ASSETS $ 311,174,693 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 236,557,135 UNDISTRIBUTED 1,304,207 NET INVESTMENT INCOME ACCUMULATED 65,464,520 UNDISTRIBUTED NET REALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS NET UNREALIZED 7,848,831 APPRECIATION (DEPRECIATION) ON INVESTMENTS AND ASSETS AND LIABILITIES IN FOREIGN CURRENCIES NET ASSETS, FOR $ 311,174,693 6,129,455 SHARES OUTSTANDING NET ASSET $50.77 VALUE AND REDEMPTION PRICE PER SHARE ($311,174,6 93 (DIVIDED BY) 6,129,455 SHARES) MAXIMUM $52.34 OFFERING PRICE PER SHARE (100/97.00 OF $50.77) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INVESTMENT $ 3,024,336 INCOME DIVIDENDS INTEREST 448,329 (INCLUDING INCOME ON SECURITIES LOANED OF $50,103) TOTAL 3,472,665 INCOME EXPENSES MANAGEMEN $ 1,095,748 T FEE TRANSFER 874,270 AGENT FEES ACCOUNTING 190,253 AND SECURITY LENDING FEES NON-INTEREST 1,103 ED TRUSTEES' COMPENSAT ION CUSTODIAN 15,941 FEES AND EXPENSES REGISTRATION 18,485 FEES AUDIT 15,378 LEGAL 1,135 REPORTS TO 41,177 SHAREHOLD ERS MISCELLANEO 1,999 US TOTAL 2,255,489 EXPENSES BEFORE REDUCTIONS EXPENSE (61,499) 2,193,990 REDUCTIONS NET 1,278,675 INVESTMEN T INCOME REALIZED AND UNREALIZED GAIN (LOSS) NET REALIZED GAIN (LOSS) ON: INVESTMENT 65,497,615 SECURITIES FOREIGN 552 65,498,167 CURRENCY TRANSACTIO NS CHANGE IN NET UNREALIZED APPRECIATI ON (DEPRECIATI ON) ON: INVESTMENT (75,030,512) SECURITIES ASSETS AND 2,227 (75,028,285) LIABILITIES IN FOREIGN CURRENCIES NET GAIN (9,530,118) (LOSS) NET INCREASE $ (8,251,443) (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER $ 396,810 INFORMATIO N SALES CHARGES PAID TO FDC SALES $ 394,484 CHARGES - RETAINED BY FDC DEFERRED $ 14,329 SALES CHARGES WITHHELD BY FDC EXCHANGE $ 41,985 FEES WITHHELD BY FSC EXPENSE $ 56,517 REDUCTIONS DIRECTED BROKERAGE ARRANGEM ENTS CUSTODIA 4,982 N CREDITS $ 61,499 STATEMENT OF CHANGES IN NET ASSETS INCREASE SIX MONTHS ENDED YEAR ENDED (DECREASE) IN AUGUST 31, 1998 FEBRUARY 28, NET ASSETS (UNAUDITED) 1998 OPERATIONS $ 1,278,675 $ 3,040,458 NET INVESTMENT INCOME NET REALIZED 65,498,167 52,835,863 GAIN (LOSS) CHANGE IN NET (75,028,285) 34,220,552 UNREALIZED APPRECIATION (DEPRECIATION) NET INCREASE (8,251,443) 90,096,873 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (389,192) (3,324,884) SHAREHOLDERS FROM NET INVESTMENT INCOME FROM NET (8,356,675) (43,053,193) REALIZED GAIN TOTAL (8,745,867) (46,378,077) DISTRIBUTIONS SHARE 102,244,378 235,594,493 TRANSACTIONS NET PROCEEDS FROM SALES OF SHARES REINVESTMENT 8,538,089 45,039,264 OF DISTRIBUTIONS COST OF SHARES (184,664,057) (179,495,059) REDEEMED NET INCREASE (73,881,590) 101,138,698 (DECREASE) IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS REDEMPTION 126,366 225,357 FEES TOTAL (90,752,534) 145,082,851 INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 401,927,227 256,844,376 PERIOD END OF PERIOD $ 311,174,693 $ 401,927,227 (INCLUDING UNDISTRIBUTE D NET INVESTMENT INCOME OF $1,304,20 7 AND $677,487, RESPECTIVELY) OTHER INFORMATION SHARES SOLD 1,828,848 4,622,639 ISSUED IN 150,983 950,425 REINVESTMENT OF DISTRIBUTIONS REDEEMED (3,363,655) (3,646,680) NET INCREASE (1,383,824) 1,926,384 (DECREASE)
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET $ 53.50 $ 45.97 $ 43.03 $ 34.88 $ 36.61 $ 41.49 VALUE, BEGINNING OF PERIOD INCOME FROM INVESTMENT OPERATION S NET .19 .54 .73 1.10 1.13 1.33 INVESTMENT INCOME D NET (1.82) 14.83 6.41 7.86 (1.17) (.16) REALIZED AND UNREALIZED GAIN (LOSS) TOTAL FROM (1.63) 15.37 7.14 8.96 (.04) 1.17 INVESTMENT OPERATIONS LESS DISTRIBUTIO NS FROM NET (.05) (.58) (.70) (.84) (1.05) (1.13) INVESTMENT INCOME FROM NET (1.07) (7.30) (3.54) - (.67) (4.94) REALIZED GAIN TOTAL (1.12) (7.88) (4.24) (.84) (1.72) (6.07) DISTRIBUTIO NS REDEMPTION .02 .04 .04 .03 .03 .02 FEES ADDED TO PAID IN CAPITAL NET ASSET $ 50.77 $ 53.50 $ 45.97 $ 43.03 $ 34.88 $ 36.61 VALUE, END OF PERIOD TOTAL (3.22)% 36.20% 18.13% 25.82% .21% 2.53% RETURN B, C RATIOS AND SUPPLEME NTAL DATA NET ASSETS, $ 311,175 $ 401,927 $ 256,844 $ 266,768 $ 237,635 $ 250,522 END OF PERIOD (000 OMITTED) RATIO OF 1.19% A 1.33% 1.47% 1.39% 1.43% 1.36% EXPENSES TO AVERAGE NET ASSETS RATIO OF 1.15% A, E 1.30% E 1.46% E 1.38% E 1.42% E 1.35% E EXPENSES TO AVERAGE NET ASSETS AFTER EXPENSE REDUCTIONS RATIO OF NET .67% A 1.11% 1.73% 2.76% 3.24% 3.11% INVESTMENT INCOME TO AVERAGE NET ASSETS PORTFOLIO 124% A 78% 31% 65% 24% 61% TURNOVER RATE AVERAGE $ .0129 $ .0106 $ .0287 COMMISSIO N RATE F A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). C TOT AL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES (SEE NOTE 8 OF NOTES TO FINANCIAL STATEMENTS). F FO R FISCAL YEARS BEGINNING ON OR AFTER SEPTEMBER 1, 1995, A FUND IS REQUIRED TO DISCLOSE ITS AVERAGE COMMISSION RATE PER SHARE FOR SECURITY TRADES ON WHICH COMMISSIONS ARE CHARGED. THIS AMOUNT MAY VARY FROM PERIOD TO PERIOD AND FUND TO FUND DEPENDING ON THE MIX OF TRADES EXECUTED IN VARIOUS MARKETS WHERE TRADING PRACTICES AND COMMISSION RATE STRUCTURES MAY DIFFER.
MONEY MARKET PORTFOLIO PERFORMANCE PERFORMANCE To evaluate a money market fund's historical performance, you can look at either total return or yield. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income. Yield measures the income paid by a fund. Since a money market fund tries to maintain a $1 share price, yield is an important measure of performance. Load adjusted returns include a 3.00% sales charge. CUMULATIVE TOTAL RETURNS PERIODS ENDED PAST 6 PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 MONTHS YEAR YEARS YEARS SELECT MONEY MARKET 2.57% 5.23% 26.36% 70.03% SELECT MONEY MARKET -0.50% 2.07% 22.57% 64.93% (LOAD ADJ.) ALL TAXABLE 2.55% 5.15% 25.94% 67.64% MONEY MARKET FUNDS AVERAGE CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050 without including the effect of the 3% sales charge. To measure how the fund's performance stacked up against its peers, you can compare it to the all taxable money market funds average, which reflects the performance of 885 all taxable money market funds with similar objectives tracked by IBC Financial Data, Inc. over the six months. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED PAST 1 PAST 5 PAST 10 AUGUST 31, 1998 YEAR YEARS YEARS SELECT MONEY MARKET 5.23% 4.79% 5.45% SELECT MONEY MARKET 2.07% 4.15% 5.13% (LOAD ADJ.) ALL TAXABLE 5.15% 4.72% 5.32% MONEY MARKET FUNDS AVERAGE AVERAGE ANNUAL TOTAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had achieved that return by performing at a constant rate each year. YIELD ROW: 1, COL: 1, VALUE: 5.1 ROW: 1, COL: 2, VALUE: 5.03 ROW: 1, COL: 3, VALUE: 2.55 ROW: 2, COL: 1, VALUE: 5.0 ROW: 2, COL: 2, VALUE: 5.02 ROW: 2, COL: 3, VALUE: 2.51 ROW: 3, COL: 1, VALUE: 5.270000000000001 ROW: 3, COL: 2, VALUE: 5.07 ROW: 3, COL: 3, VALUE: 2.58 ROW: 4, COL: 1, VALUE: 5.45 ROW: 4, COL: 2, VALUE: 5.09 ROW: 4, COL: 3, VALUE: 2.62 ROW: 5, COL: 1, VALUE: 5.09 ROW: 5, COL: 2, VALUE: 5.05 ROW: 5, COL: 3, VALUE: 2.67 6% - 4% - 2% - 0% MONEY MARKET ALL TAXABLE MONEY MARKET FUNDS AVERAGE MMDA 9/1/98 6/2/98 3/3/98 12/2/97 9/2/97 SELECT MONEY MARKET 5.10% 5.00% 5.27% 5.45% 5.09% All Taxable Money Market Funds Average 5.03% 5.02% 5.07% 5.09% 5.04% 9/2/98 6/3/98 2/25/98 12/3/97 9/3/97 MMDA 2.55% 2.51% 2.58% 2.62% 2.67% YIELD refers to the income paid by the fund over a given period. Yields for money market funds are usually for seven-day periods, expressed as annual percentage rates. A yield that assumes income earned is reinvested or compounded is called an effective yield. The chart above shows the fund's current seven-day yield at quarterly intervals over the past year. You can compare these yields to the all taxable money market funds average and the bank money market deposit account average (MMDA). Figures for the all taxable money market funds average are from IBC Financial Data, Inc. The MMDA average is supplied by BANK RATE MONITOR.(Trademark) (checkmark)COMPARING PERFORMANCE There are some important differences between a bank money market deposit account (MMDA) and a money market fund. First, the U.S. government neither insures nor guarantees a money market fund. In fact, there is no assurance that a money market fund will maintain a $1 share price. Second, a money market fund returns to its shareholders income earned by the fund's investments after expenses. This is in contrast to banks, which set their MMDA rates periodically based on current interest rates, competitors' rates, and internal criteria. MONEY MARKET PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of John Todd) John Todd, Portfolio Manager of Fidelity Select Money Market Portfolio Q. JOHN, WHAT WAS THE INVESTMENT ENVIRONMENT LIKE OVER THE PAST SIX MONTHS? A. The overriding theme during the period was the money markets' attempt to gauge what impact, if any, the continuing crisis in Southeast Asia would have on the U.S. economy. The domestic economy was exceptionally strong during the first quarter of the year, with real GDP - gross domestic product adjusted for inflation - growing at a 5.5% annual rate. In the second quarter, however, there was some payback as inventories and trade reduced real GDP to 1.6%, even though domestic consumption remained strong. Many felt that what we were seeing was the impact, delayed as it may have been, from the Southeast Asian crisis that started in the summer of 1997. Toward the end of the period, corporate profit forecasts were being revised downward. Most stock market indexes, such as the Standard & Poor's 500 Index and the Dow Jones Industrial Average, were off sharply after hitting record highs early in the third quarter. Russia's move to devalue its currency and in essence default on its domestic debt was one factor that sparked these declines. In addition, falling commodity prices hurt Canada - one of the main trading partners of the U.S. - forcing that country's central bank to raise interest rates to keep its currency from continuing to drop in value. We saw similar currency drops and interest rate hikes in Latin America, where the U.S. also trades a great deal. Fears arose that this "Asian contagion" would start to erode U.S. economic growth and lead to further problems in both the economy and the capital markets. Q. HOW DID THIS BACKDROP AFFECT MONETARY POLICY? A. Up until mid-July, it was commonly believed that the Federal Reserve Board might raise the rate banks charge each other for overnight loans - the fed funds rate - to slow economic growth and head off inflation. However, toward the end of the period, market sentiment shifted as many felt struggling financial markets could help slow the economy and make a rate increase unnecessary. In spite of this backdrop, the Fed maintained a stated bias toward raising rates during the entire period, because it was concerned that robust consumption, low savings rates, a strong economy and an historically low unemployment rate would combine to build inflationary pressures in the economy. Q. WHAT STRATEGY DID YOU PURSUE WITH THE FUND? A. I maintained a neutral position until mid-July. At that point, sentiment started to swing, with market observers shifting from expecting a Fed rate increase to believing that such a move would be unnecessary. Some market participants even started to predict that a Fed rate decrease would be the next move. When sentiment shifted, I became more aggressive with the positioning of the fund. I tried to extend its average maturity by buying higher-yielding, longer-term money market securities to lock in their attractive rates in anticipation of interest-rate declines. If investors look at the average maturity of the fund six months ago - 70 days - and compare it to the end of the period - when it stood at 56 days - they might think the opposite was happening. However, it should be noted that assets came into the fund rapidly toward the end of the period as investors sought the safe haven offered by a money market fund, making it somewhat difficult to extend the average maturity quickly. Suffice it to say that from mid-July on, I tried to be as aggressive with the positioning of the fund as was prudent given the shareholder inflows that were taking place at the time. Q. HOW DID THE FUND PERFORM? A. The fund's seven-day yield on August 31, 1998, was 5.16%, compared to 5.26% six months ago. For the six months that ended August 31, 1998, the fund had a total return of 2.57%, compared to 2.55% for the all taxable money markets average, according to IBC Financial Data, Inc. Q. WHAT'S YOUR OUTLOOK? A. I believe that the Fed could very well lower interest rates in the fall. Because of the turmoil in financial markets, it's also possible that the Fed may lower the fed funds rate by a more dramatic .50% instead of .25%. Some sort of bold move by the Fed may be needed to calm global markets. The Fed is the largest and, by reputation, the most important central bank in the world. In order to have some impact, allay fears and address the global financial situation, the Fed may decide it needs to do something dramatic. Much depends on how global financial markets perform in the weeks ahead and how the U.S. consumer responds to this developing financial turmoil, as well as domestic political developments. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER CONDITIONS. (checkmark)FUND FACTS START DATE: August 30, 1985 FUND NUMBER: 085 TRADING SYMBOL: FSLXX SIZE: as of August 31, 1998, more than $1.4 billion MANAGER: John Todd, since 1991; manager, various Fidelity and Spartan taxable money market funds; joined Fidelity in 1981 MONEY MARKET PORTFOLIO INVESTMENTS AUGUST 31, 1998 (UNAUDITED) Showing Percentage of Total Value of Investment in Securities
CERTIFICATES OF DEPOSIT - 28.4% DUE DATE ANNUALIZED YIELD PRINCIPAL VALUE AT TIME OF AMOUNT (NOTE 1) PURCHASE DOMESTIC CERTIFICATES OF DEPOSIT - 0.3% WACHOVIA BANK, NA 9/17/98 5.50% (B) $ 5,000,000 $ 4,999,836 LONDON BRANCH, EURODOLLAR, DOMESTIC BANKS - 1.8% NATIONSBANK, NA 9/14/98 5.55 5,000,000 5,000,000 2/16/99 5.60 10,000,000 10,000,000 3/2/99 5.50 10,000,000 10,000,000 25,000,000 LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 6.1% BANK OF SCOTLAND TREASURY SERVICES 12/29/98 5.65 15,000,000 14,999,475 BARCLAYS BANK, PLC 10/30/98 5.62 7,000,000 6,999,698 BAYERISCHE VEREINSBANK AG 9/30/98 5.60 25,000,000 25,000,000 COMMERZBANK AG 9/28/98 5.55 5,000,000 5,000,000 DEUTSCHE BANK AG 9/28/98 5.55 20,000,000 20,000,000 HALIFAX, PLC 2/16/99 5.60 5,000,000 5,000,641 NORDDEUTSCHE LANDESBANK GIROZENTRALE 12/10/98 5.62 7,000,000 7,000,623 84,000,437 NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 20.2% ABN-AMRO BANK NV 6/7/99 5.76 5,000,000 4,997,804 BANK OF NOVA SCOTIA 10/2/98 5.62 4,000,000 4,000,085 BAYERISCHE LANDESBANK GIROZENTRALE 12/1/98 5.56 50,000,000 50,000,000 BAYERISCHE VEREINSBANK AG 12/18/98 5.60 15,000,000 15,009,112 CANADIAN IMPERIAL BANK OF COMMERCE 9/28/98 5.55 15,000,000 15,000,000 10/6/98 5.52 20,000,000 20,003,273 11/4/98 5.55 10,000,000 10,000,000 12/1/98 5.54 10,000,000 10,000,000 CREDIT AGRICOLE INDOSUEZ 10/19/98 5.97 5,000,000 4,999,560 4/30/99 5.87 5,000,000 4,998,104 CREDIT COMMUNALE DE BELGIQUE 12/21/98 5.62 25,000,000 25,000,000 DEUTSCHE BANK AG 10/26/98 6.00 15,000,000 14,998,704 DRESDNER BANK AG 9/16/98 5.55 10,000,000 10,000,000 DUE DATE ANNUALIZED YIELD PRINCIPAL VALUE AT TIME OF AMOUNT (NOTE 1) PURCHASE NATIONAL WESTMINSTER BANK, PLC 6/7/99 5.75% $ 5,000,000 $ 4,997,529 RABOBANK NEDERLAND, COOP. CENTRAL 6/4/99 5.75% 10,000,000 9,994,929 ROYAL BANK OF CANADA 9/17/98 5.53 5,000,000 5,000,508 SOCIETE GENERALE, FRANCE 10/9/98 5.70 10,000,000 9,998,762 10/28/98 5.57 15,000,000 15,000,000 11/18/98 5.63 5,000,000 5,000,532 SWISS BANK CORP. 4/30/99 5.87 5,000,000 4,998,104 6/3/99 5.75 10,000,000 9,994,947 TORONTO-DOMINION BANK 6/4/99 5.75 10,000,000 9,994,929 WESTDEUTSCHE LANDESBANK GIROZENTRALE 9/28/98 5.55 5,000,000 5,000,000 2/8/99 5.63 10,000,000 10,000,000 278,986,882 TOTAL CERTIFICATES OF DEPOSIT 392,987,155
COMMERCIAL PAPER - 49.1% ASPEN FUNDING CORP. 11/18/98 5.60 10,000,000 9,880,400 11/23/98 5.60 5,000,000 4,936,424 ASSET SECURITIZATION COOP. CORP. 12/8/98 5.59 10,000,000 9,850,278 ASSOCIATES CORP. OF NORTH AMERICA 9/3/98 5.60 5,000,000 4,998,464 9/22/98 5.60 5,000,000 4,983,958 ATLANTIC RICHFIELD CO. 9/14/98 5.62 5,000,000 4,989,997 BMW US CAPITAL CORP. 11/9/98 5.58 25,000,000 24,736,458 CIESCO L.P. 9/16/98 5.58 45,000,000 44,896,125 CITIBANK CREDIT CARD MASTER TRUST I (DAKOTA CERTIFICATE PROGRAM) 10/5/98 5.58 5,000,000 4,973,792 10/28/98 5.58 5,000,000 4,956,300 COMMERZBANK US FINANCE, INC. 9/14/98 5.56 15,000,000 14,970,046 CREGEM NORTH AMERICA, INC. 12/3/98 5.51 10,000,000 9,859,725 DELAWARE FUNDING CORP. 9/11/98 5.58 45,000,000 44,930,625 9/17/98 5.57 10,000,000 9,975,378 DEUTSCHE BANK FINANCIAL, INC. 11/12/98 5.59 22,000,000 21,757,560 COMMERCIAL PAPER - CONTINUED DUE DATE ANNUALIZED YIELD PRINCIPAL VALUE AT TIME OF AMOUNT (NOTE 1) PURCHASE DIAGEO CAPITAL, PLC 9/30/98 5.60% $ 5,000,000 $ 4,977,847 ENTERPRISE FUNDING CORP. 9/21/98 5.58 14,351,000 14,306,751 FINA OIL & CHEMICAL CO. 9/14/98 5.60 10,000,000 9,979,922 9/22/98 5.59 18,000,000 17,941,515 FLEET FUNDING CORP. 10/15/98 5.57 5,000,000 4,966,206 FORD MOTOR CREDIT CO. 9/16/98 5.56 25,000,000 24,942,500 GENERAL ELECTRIC CAPITAL CORP. 9/10/98 5.61 5,000,000 4,993,113 9/22/98 5.57 10,200,000 10,167,097 10/21/98 5.64 12,000,000 11,908,167 2/1/99 5.62 25,000,000 24,418,813 2/22/99 5.58 15,000,000 14,606,325 GENERAL ELECTRIC CAPITAL SERVICES, INC. 11/23/98 5.58 45,000,000 44,429,375 GENERAL MOTORS ACCEPTANCE CORP. 10/29/98 5.61 5,000,000 4,955,533 GENERALE DE BANQUE SA 2/17/99 5.61 10,000,000 9,744,153 GTE CORP. 9/8/98 5.60 12,000,000 11,986,980 HALIFAX, PLC 9/18/98 5.59 5,000,000 4,986,990 KITTY HAWK FUNDING CORP. 9/14/98 5.61 5,000,000 4,990,015 LEHMAN BROTHERS HOLDINGS, INC. 9/8/98 5.59 5,000,000 4,994,585 MERRILL LYNCH & CO., INC. 11/18/98 5.60 30,000,000 29,642,175 MONSANTO CO. 9/29/98 5.61 10,000,000 9,957,222 MORGAN (JP) & CO., INC. 9/28/98 5.60 10,000,000 9,958,750 NEW CENTER ASSET TRUST 9/21/98 5.56 5,000,000 4,984,639 NORFOLK SOUTHERN CORP. 9/14/98 5.72 2,000,000 1,995,883 PREFERRED RECEIVABLES FUNDING CORP. 10/20/98 5.58 5,000,000 4,962,365 SEARS ROEBUCK ACCEPTANCE CORP. 9/15/98 5.59 45,000,000 44,902,875 SOCIETE GENERALE NORTH AMERICA, INC. 9/15/98 5.58 10,000,000 9,978,494 DUE DATE ANNUALIZED YIELD PRINCIPAL VALUE AT TIME OF AMOUNT (NOTE 1) PURCHASE TEXTRON, INC. 10/14/98 5.75% $ 3,600,000 $ 3,575,490 THREE RIVERS FUNDING CORP. 9/16/98 5.56 5,000,000 4,988,458 UBS FINANCE, INC. 9/14/98 5.55 25,000,000 24,950,167 UNIFUNDING, INC. 11/6/98 5.57 50,000,000 49,495,833 VEREINSBANK FINANCE, INC. 9/2/98 5.60 25,000,000 24,996,118 WESTPAC CAPITAL CORP. 9/21/98 5.59 5,000,000 4,984,750 TOTAL COMMERCIAL PAPER 679,364,636
FEDERAL AGENCIES - 7.4% FANNIE MAE - 6.3% DISCOUNT NOTES - 6.3% 9/18/98 5.51 87,000,000 86,775,276 FREDDIE MAC - 1.1% DISCOUNT NOTES - 1.1% 9/24/98 5.50 15,000,000 14,947,675 TOTAL FEDERAL AGENCIES 101,722,951
BANK NOTES - 2.9% FIRST UNION NAT'L. BANK OF NORTH CAROLINA 9/1/98 5.66 (B) 10,000,000 10,000,000 3/1/99 5.50 15,000,000 15,000,000 NATIONSBANK, NA 10/19/98 5.54 5,000,000 5,000,000 12/22/98 5.54 5,000,000 5,003,892 PNC BANK, NA, PITTSBURGH 10/16/98 5.58 (B) 5,000,000 4,998,896 TOTAL BANK NOTES 40,002,788
MASTER NOTES - 1.7% GOLDMAN SACHS GROUP LP (THE) 9/13/98 5.69 (B)(C) 10,000,000 10,000,000 J.P. MORGAN SECURITIES, INC. 9/8/98 5.63 (B) 13,000,000 13,000,000 TOTAL MASTER NOTES 23,000,000
MEDIUM-TERM NOTES - 1.2% MERRILL LYNCH & CO. 9/1/98 5.63 (B) 3,000,000 2,999,973 9/4/98 5.62 (B) 5,000,000 4,999,258 MEDIUM-TERM NOTES - CONTINUED DUE DATE ANNUALIZED YIELD PRINCIPAL VALUE AT TIME OF AMOUNT (NOTE 1) PURCHASE MORGAN STANLEY, DEAN WITTER, DISCOVER, INC. 9/1/98 5.75% (B) $ 5,000,000 $ 5,000,000 NORWEST CORP. 10/22/98 5.71 (B) 4,000,000 4,000,000 TOTAL MEDIUM-TERM NOTES 16,999,231
SHORT-TERM NOTES - 3.0% CAPITAL ONE FUNDING CORP. (1998-B) 9/8/98 5.61 (B) 4,000,000 4,000,000 LIQUID ASSET BACKED SECURITIES TRUST (1997-5) 9/17/98 5.63 (A)(B) 6,000,000 6,000,000 SMM TRUST (1997-P) 9/16/98 5.64 (A)(B) 2,000,000 2,000,000 SMM TRUST (1997-X) 9/14/98 5.65 (A)(B) 6,000,000 6,000,000 SMM TRUST (1998-I) 9/28/98 5.65 (A)(B) 2,000,000 2,000,000 STRATEGIC MONEY MARKET TRUST (1997-A) 9/23/98 5.69 (A)(B) 17,000,000 17,000,000 STRATEGIC MONEY MARKET TRUST (1998-B) 9/7/98 5.66 (A)(B) 4,000,000 4,000,000 TOTAL SHORT-TERM NOTES 41,000,000
TIME DEPOSITS - 3.2% RABOBANK NEDERLAND, COOP. CENTRAL 9/1/98 5.88 45,000,000 45,000,000
REPURCHASE AGREEMENTS - 3.1% MATURITY AMOUNT IN A JOINT TRADING ACCOUNT $ 43,173,022 43,166,000 (U.S. GOVERNMENT OBLIGATIONS) DATED 8/31/98 DUE 9/1/98 AT 5.86%
TOTAL INVESTMENTS $ 1,383,242,761 TOTAL COST FOR INCOME TAX PURPOSES - $1,383,242,761 LEGEND (a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $37,000,000 or 2.5% of net assets. (b) 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. (c) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (see Note 2 of Notes to Financial Statements). SECURITY ACQUISTION ACQUISITION DATE COST Goldman Sachs Group LP (The) 3/10/98 $ 10,000,000 5.69% 9/13/98 OTHER INFORMATION The fund invested in securities that are not registered under the Securities Act of 1933. These securities are subject to legal or contractual restrictions on resale. At the end of the period, restricted securities (excluding 144A issues) amounted to $10,000,000 and 0.7% of net assets (see Note 2 of Notes to Financial Statements). INCOME TAX INFORMATION At February 28, 1998, the fund had a capital loss carryforward of approximately $5,400, all of which will expire on February 28, 2006. MONEY MARKET PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998 (UNAUDITED) ASSETS INVESTMENT IN $ 1,383,242,761 SECURITIES, AT VALUE (INCLUDING REPURCHASE AGREEMENTS OF $43,166,000 ) - SEE ACCOMPANYIN G SCHEDULE RECEIVABLE FOR 187,815,592 FUND SHARES SOLD INTEREST 7,229,238 RECEIVABLE TOTAL ASSETS 1,578,287,591 LIABILITIES PAYABLE TO $ 961 CUSTODIAN BANK PAYABLE FOR 59,825,931 INVESTMENTS PURCHASED PAYABLE FOR 25,002,336 FUND SHARES REDEEMED DISTRIBUTIONS 149,546 PAYABLE ACCRUED 212,729 MANAGEMENT FEE OTHER PAYABLES 306,442 AND ACCRUED EXPENSES TOTAL LIABILITIES 85,497,945 NET ASSETS $ 1,492,789,646 NET ASSETS CONSIST OF: PAID IN CAPITAL $ 1,492,797,587 ACCUMULATED (7,941) NET REALIZED GAIN (LOSS) ON INVESTMENTS NET ASSETS, FOR $ 1,492,789,646 1,492,779,4 60 SHARES OUTSTANDING NET ASSET $1.00 VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ($1,492,789, 646 (DIVIDED BY) 1,492,779,4 60 SHARES) MAXIMUM $1.03 OFFERING PRICE PER SHARE (100/97.00 OF $1.00) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1998 (UNAUDITED) INTEREST INCOME $ 24,661,761 EXPENSES MANAGEMENT $ 884,131 FEE TRANSFER AGENT 961,750 FEES ACCOUNTING FEES 58,051 AND EXPENSES CUSTODIAN FEES 4,704 AND EXPENSES REGISTRATION FEES 288,244 AUDIT 21,100 REPORTS TO 53,339 SHAREHOLDERS MISCELLANEOUS 17 TOTAL EXPENSES 2,271,336 BEFORE REDUCTIONS EXPENSE (2,008) 2,269,328 REDUCTIONS NET INTEREST 22,392,433 INCOME NET REALIZED (1,709) GAIN (LOSS) ON INVESTMENTS NET INCREASE IN $ 22,390,724 NET ASSETS RESULTING FROM OPERATIONS OTHER $ 841,905 INFORMATION SALES CHARGES PAID TO FDC SALES CHARGES $ 816,983 - - RETAINED BY FDC DEFERRED SALES $ 32,650 CHARGES WITHHELD BY FDC EXPENSE $ 28 REDUCTIONS CUSTODIAN CREDITS TRANSFER 1,980 AGENT CREDITS $ 2,008 STATEMENT OF CHANGES IN NET ASSETS SIX MONTHS ENDED YEAR ENDED AUGUST 31, 1998 FEBRUARY 28, (UNAUDITED) 1998 INCREASE (DECREASE) IN NET ASSETS OPERATIONS $ 22,392,433 $ 41,842,077 NET INTEREST INCOME NET REALIZED (1,709) (6,232) GAIN (LOSS) NET INCREASE 22,390,724 41,835,845 (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS DISTRIBUTIONS TO (22,392,433) (41,842,077) SHAREHOLDERS FROM NET INTEREST INCOME SHARE 3,803,752,978 7,445,369,611 TRANSACTIONS AT NET ASSET VALUE OF $1.00 PER SHARE PROCEEDS FROM SALES OF SHARES REINVESTMENT 20,754,509 38,682,466 OF DISTRIBUTIONS FROM NET INTEREST INCOME COST OF SHARES (2,916,634,674) (7,747,295,187) REDEEMED NET INCREASE 907,872,813 (263,243,110) (DECREASE) IN NET ASSETS AND SHARES RESULTING FROM SHARE TRANSACTIONS TOTAL 907,871,104 (263,249,342) INCREASE (DECREASE) IN NET ASSETS NET ASSETS BEGINNING OF 584,918,542 848,167,884 PERIOD END OF PERIOD $ 1,492,789,646 $ 584,918,542
SEE ACCOMPANYING NOTES WHICH ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
FINANCIAL HIGHLIGHTS
SIX MONTHS YEARS ENDED YEAR ENDED YEARS ENDED ENDED FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, AUGUST 31, 1998 SELECTED (UNAUDITED) 1998 1997 1996 1995 1994 PER-SHARE DATA NET ASSET $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 VALUE, BEGINNING OF PERIOD INCOME FROM .025 .051 .049 .054 .042 .026 INVESTMENT OPERATION S NET INTEREST INCOME LESS DISTRIBUTIO NS FROM NET (.025) (.051) (.049) (.054) (.042) (.026) INTEREST INCOME NET ASSET $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 VALUE, END OF PERIOD TOTAL 2.57% 5.26% 5.02% 5.56% 4.28% 2.62% RETURN B RATIOS AND SUPPLEME NTAL DATA NET ASSETS, $ 1,492,790 $ 584,919 $ 848,168 $ 610,821 $ 573,144 $ 518,657 END OF PERIOD (000 OMITTED) RATIO OF .52% A .56% .56% .59% .65% .72% EXPENSES TO AVERAGE NET ASSETS RATIO OF NET 5.10% A 5.13% 4.92% 5.39% 4.19% 2.59% INTEREST INCOME TO AVERAGE NET ASSETS
ANNUALIZED 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, 1998 (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-nine 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 Gold Portfolio (formerly American Gold Portfolio), Precious Metals and Minerals Portfolio and Natural Resources Portfolio may also invest in certain precious metals. The financial statements have been prepared in conformity with generally accepted accounting principles which require management to make certain estimates and assumptions at the date of the financial statements. The following summarizes the significant accounting policies of the funds: SECURITY VALUATION: EQUITY FUNDS. Securities for which exchange quotations are readily available are valued at the last sale price, or if no sale price, at the closing bid price. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. If trading or events occurring in other markets after the close of the principal market in which foreign securities are traded, and before the close of business of the fund, are expected to materially affect the value of those securities, then they are valued at their fair value taking this trading or these events into account. Fair value is determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. 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. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. Direct investments in precious metals in the form of bullion are valued at the most recent bid price quoted by a major bank on the New York Commodities Exchange. MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and certain conditions therein, securities are valued initially at cost and thereafter assume a constant amortization to maturity of any discount or premium. FOREIGN CURRENCY TRANSLATION. The accounting records of the funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. 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 foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income accrued and the U.S. dollar amount actually received, and gains and losses between trade date and settlement on purchases and sales of securities. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. INCOME TAXES. As a qualified regulated investment company under Subchapter M of the Internal Revenue Code, each fund (except for Medical Equipment and Systems Portfolio) is not subject to income taxes to the extent that it distributes substantially all of its taxable income for the fiscal year. Each fund may be subject to foreign taxes on income and gains on investments which are accrued based upon each fund's understanding of the tax rules and regulations that exist in the markets in which they invest. Each fund accrues such taxes as applicable. Medical Equipment and Systems Portfolio intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code. By so qualifying, the fund will not be subject to income taxes to the extent that it distributes substantially all of its taxable income for the fiscal year. The schedules of investments include information regarding income taxes under the caption "Income Tax Information." INVESTMENT INCOME: EQUITY FUNDS. Dividend income is recorded on the ex-dividend date, except certain dividends from foreign securities where the ex-dividend date may have passed, are recorded as soon as the funds are informed of the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is accrued as earned. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain. MONEY MARKET FUND. Interest income, which includes amortization of premium and accretion of discount, is accrued as earned. EXPENSES. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among the funds in the trust. DEFERRED TRUSTEE COMPENSATION. Under a Deferred Compensation Plan (the Plan) non-interested Trustees must defer receipt of a portion of, and may elect to defer receipt of an additional portion of, their annual compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the fund or are invested in a cross-section of other Fidelity funds. Deferred amounts remain in the fund until distributed in accordance with the Plan. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED PREPAID EXPENSES. Fidelity Management & Research Company (FMR) bears all organizational expenses except for registering and qualifying Business Services and Outsourcing Portfolio and Medical Equipment and Systems Portfolio and shares of Business Services and Outsourcing Portfolio and Medical Equipment and Systems Portfolio for distribution under federal and state securities law. These expenses are borne by Business Services and Outsourcing Portfolio and Medical Equipment and Systems Portfolio and amortized over one year. DISTRIBUTIONS TO SHAREHOLDERS. Dividends are declared daily and paid monthly from net interest income for the money market fund. Distributions are recorded on the ex-dividend date for all other funds. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences, which may result in distribution reclassifications, are primarily due to differing treatments for litigation proceeds, foreign currency transactions, passive foreign investment companies (PFIC), partnerships, non-taxable dividends, net operating losses, capital loss carryforwards, expiring capital loss carryforwards, and losses deferred due to wash sales and excise tax regulations. Certain funds also utilized earnings and profits distributed to shareholders on redemption of shares as a part of the dividends paid deduction for income tax purposes. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications to paid in capital. Undistributed net investment income, distributions in excess of net investment income, accumulated net investment loss and accumulated undistributed net realized gain (loss) on investments and foreign currency transactions may include temporary book and tax basis differences that will reverse in a subsequent period. Any taxable income or gain remaining at fiscal year end is distributed in the following year. TRADING (REDEMPTION) FEES. Shares redeemed (including exchanges) from an equity fund are subject to trading fees. Shares held less than 30 days are subject to a trading fee equal to .75% of the net asset value of shares redeemed. Shares held 30 days or more are subject to a trading fee equal to the lesser of $7.50 or .75% of the net asset value of shares redeemed. The fees, which are retained by the fund, are accounted for as an addition to paid in capital. Shareholders are also subject to an additional $7.50 fee for shares exchanged into another Fidelity fund (see Note 4). SECURITY TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 2. OPERATING POLICIES. FOREIGN CURRENCY CONTRACTS. Certain funds use foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms. The U.S. dollar value of foreign currency contracts is determined using contractual currency exchange rates established at the time of each trade. JOINT TRADING ACCOUNT. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (the SEC), the funds, along with other affiliated entities of FMR, may transfer uninvested cash balances into one or more joint trading accounts. These balances are invested in one or more repurchase agreements for U.S. Treasury or Federal Agency obligations. REPURCHASE AGREEMENTS. The underlying U.S. Treasury or Federal Agency securities are transferred to an account of the funds, or to the Joint Trading Account, at a bank custodian. The securities are marked-to-market daily and maintained at a value at least equal to the principal amount of the repurchase agreement (including accrued interest). FMR, the funds' investment adviser, is responsible for determining that the value of the underlying securities remains in accordance with the market value requirements stated above. TAXABLE CENTRAL CASH FUND. Pursuant to an Exemptive Order issued by the SEC, the funds may invest in the Taxable Central Cash Fund (the Cash Fund) managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Cash Fund is an open-end money market fund available only to investment companies and other accounts managed by FMR and its affiliates. The Cash Fund seeks preservation of capital, liquidity, and current income by investing in U.S. Treasury securities and repurchase agreements for these securities. Income distributions from the Cash Fund are declared daily and paid monthly from net interest income. Income distributions earned by the funds are recorded as interest income in the accompanying financial statements. INTERFUND LENDING PROGRAM. Pursuant to an Exemptive Order issued by the SEC, the funds, along with other registered investment companies having management contracts with FMR, may participate in an interfund lending program. This program provides an alternative credit facility allowing the funds to borrow from, or lend money to, other participating funds. RESTRICTED SECURITIES. Certain funds are permitted to invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. 3. PURCHASES AND SALES OF INVESTMENTS. Information regarding purchases and sales of securities (other than short-term securities) is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As each fund's investment adviser, FMR receives a monthly fee. For each equity fund, the monthly fee is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of each fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2500% to .5200% for the period. The annual individual fund fee rate is .30%. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. For the period, the management fees were equivalent to an annualized rate that ranged from .57% to .58% of average net assets for the equity funds. For the Money Market fund, FMR receives a monthly fee that is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of the fund and an income-based fee. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .1100% to .3700% for the period. The annual individual fund fee rate is .03%. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. The income-based fee is added only when the fund's gross yield exceeds 5%. At that time, the fee would equal 6% of that portion of the fund's gross income that represents a gross yield of more than 5% per year. The maximum income-based component is .24% of average net assets. For the period, the management fee was equivalent to an annualized rate of .20% of the fund's average net assets. SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FIMM, a wholly owned subsidiary of FMR, receives a fee from FMR of 50% of the management fee payable to FMR. The fee is paid prior to any voluntary expense reimbursements which may be in effect. SALES LOAD. Fidelity Distributors Corporation (FDC), an affiliate of FMR, is the general distributor of the fund. FDC receives a sales charge of up to 3% for selling shares of each fund. A portion of these sales charges are reallowed to financial intermediaries. Prior to October 12, 1990, FDC received a sales charge of up to 2% and a 1% deferred sales charge. Shares purchased prior to October 12, 1990, are subject to a 1% deferred sales charge upon redemption or exchange to any other Fidelity Fund (other than Select funds). All deferred sales charges are retained by FDC. The amounts received and retained 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 Company, Inc. (FSC), an affiliate of FMR, is the fund's transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. ACCOUNTING AND SECURITY LENDING FEES. FSC maintains each fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses. EXCHANGE FEES. FSC receives the proceeds of $7.50 to cover administrative costs associated with exchanges out of an equity fund to any other Fidelity Select fund or to any other Fidelity fund. The exchange fees retained by FSC are shown under the caption "Other Information" on each fund's Statement of Operations. BROKERAGE COMMISSIONS. Certain funds placed a portion of their portfolio transactions with brokerage firms which are affiliates of FMR. The commissions paid to these affiliated firms are shown under the caption "Other Information" at the end of each applicable fund's schedule of investments. 5. INTERFUND LENDING PROGRAM. Each fund is permitted to participate in the interfund lending program. Information regarding each fund's participation in the program is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. 6. SECURITY LENDING. Certain equity funds loaned securities to brokers who paid the funds negotiated lenders' fees. These fees are included in interest income. Each applicable fund receives U.S. Treasury obligations and/or cash as collateral against the loaned securities, in an amount at least equal to 102% of the market value of the loaned securities at the inception of each loan. This collateral must be maintained at not less than 100% of the market value of the loaned securities during the period of the loan. Information regarding the value of securities loaned and the value of collateral at period end is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. 7. BANK BORROWINGS. Each fund is permitted to have bank borrowings for temporary or emergency purposes to fund shareholder redemptions. Each fund has established borrowing arrangements with certain banks. Under the most restrictive arrangement, each fund must pledge to the bank securities having a market value in excess of 220% of the total bank borrowings. The interest rate on the borrowings is 7. BANK BORROWINGS - CONTINUED the bank's base rate, as revised from time to time. Information regarding a fund's participation in the program is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. 8. EXPENSE REDUCTIONS. FMR voluntarily agreed to reimburse the funds' operating expenses (excluding interest, taxes, brokerage commissions and extraordinary expenses) above an annual rate of 2.50% of average net assets. FMR retains the ability to be repaid by the funds for these expense reductions in the amount that expenses fall below the limit prior to the end of the fiscal year. For the period, the reimbursement reduced the expenses by $25,270 for Cyclical Industries Portfolio, $20,287 for Medical Equipment and Systems Portfolio and $22,746 for Natural Resources Portfolio. FMR has directed certain portfolio trades to brokers who paid a portion of certain equity fund's expenses. In addition, certain funds have entered into arrangements with their custodian and transfer agent whereby credits realized as a result of uninvested cash balances were used to reduce a portion of each applicable fund's expenses. For the period, the reductions under these arrangements are shown under the caption "Other Information" on each applicable fund's Statement of Operations. 9. BENEFICIAL INTEREST. At the end of the period, FMR Capital, an affiliate of FMR was record owner of more than 5% of the outstanding shares of the following funds: BENEFICIAL INTEREST % FUND OWNERSHIP Cyclical Industries 33.3 Natural Resources 15.8 Medical Equipment & Systems 6.8 10. TRANSACTIONS WITH AFFILIATED COMPANIES. An affiliated company is a company which the fund has ownership of at least 5% of the voting securities. Information regarding transactions with affiliated companies is included in "Other Information" at the end of each applicable fund's schedule of investments. PROXY VOTING RESULTS A special meeting of the funds' shareholders was held on May 13, 1998. The results of votes taken among shareholders on the proposals before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting. PROPOSAL 1 To elect as Trustees the following twelve nominees. # OF % OF VOTES CAST VOTES CAST RALPH F. COX AFFIRMATIVE 7,753,366,141.55 89.603 WITHHELD 899,674,808.29 10.397 TOTAL 8,653,040,949.84 100.000 PHYLLIS BURKE DAVIS AFFIRMATIVE 7,746,305,162.73 89.521 WITHHELD 906,735,787.11 10.479 TOTAL 8,653,040,949.84 100.000 ROBERT M. GATES AFFIRMATIVE 7,742,038,054.66 89.472 WITHHELD 911,002,895.18 10.528 TOTAL 8,653,040,949.84 100.000 EDWARD C. JOHNSON 3D AFFIRMATIVE 7,748,393,016.65 89.545 WITHHELD 904,647,933.19 10.455 TOTAL 8,653,040,949.84 100.000 E. BRADLEY JONES AFFIRMATIVE 7,739,328,874.43 89.441 WITHHELD 913,712,075.41 10.559 TOTAL 8,653,040,949.84 100.000 DONALD J. KIRK AFFIRMATIVE 7,753,756,203.57 89.607 WITHHELD 899,284,746.27 10.393 TOTAL 8,653,040,949.84 100.000 # OF % OF VOTES CAST VOTES CAST PETER S. LYNCH AFFIRMATIVE 7,756,709,375.68 89.641 WITHHELD 896,331,574.16 10.359 TOTAL 8,653,040,949.84 100.000 WILLIAM O. MCCOY AFFIRMATIVE 7,755,387,388.40 89.626 WITHHELD 897,653,561.44 10.374 TOTAL 8,653,040,949.84 100.000 GERALD C. MCDONOUGH AFFIRMATIVE 7,748,303,990.87 89.544 WITHHELD 904,736,958.97 10.456 TOTAL 8,653,040,949.84 100.000 MARVIN L. MANN AFFIRMATIVE 7,753,481,007.38 89.604 WITHHELD 899,559,942.46 10.396 TOTAL 8,653,040,949.84 100.000 ROBERT C. POZEN AFFIRMATIVE 7,754,099,035.87 89.611 WITHHELD 898,941,913.97 10.389 TOTAL 8,653,040,949.84 100.000 THOMAS R. WILLIAMS AFFIRMATIVE 7,748,460,240.63 89.546 WITHHELD 904,580,709.21 10.454 TOTAL 8,653,040,949.84 100.000 PROPOSAL 2 To ratify the selection of Price Waterhouse LLP as independent accountants of the funds. AIR TRANSPORTATION # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 92,216,747.46 79.246 AGAINST 1,098,105.50 .944 ABSTAIN 23,052,814.11 19.810 TOTAL 116,367,667.07 100.000 GOLD # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 100,658,258.82 93.608 AGAINST 3,207,332.75 2.982 ABSTAIN 3,666,307.38 3.410 TOTAL 107,531,898.95 100.000 AUTOMOTIVE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 15,764,394.96 85.995 AGAINST 106,293.53 .579 ABSTAIN 2,461,160.17 13.426 TOTAL 18,331,848.66 100.000 BIOTECHNOLOGY # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 255,501,527.41 85.455 AGAINST 3,334,273.83 1.115 ABSTAIN 40,155,471.48 13.430 TOTAL 298,991,272.72 100.000 BROKERAGE AND # OF % OF INVESTMENT MANAGEMENT VOTES CAST VOTES CAST AFFIRMATIVE 332,897,441.61 86.994 AGAINST 2,415,501.83 .632 ABSTAIN 47,352,768.76 12.374 TOTAL 382,665,712.20 100.000 BUSINESS SERVICES # OF % OF AND OUTSOURCING VOTES CAST VOTES CAST AFFIRMATIVE 13,471,564.34 91.755 AGAINST 145,286.28 .990 ABSTAIN 1,065,255.47 7.255 TOTAL 14,682,106.09 100.000 CHEMICALS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 30,335,526.46 87.669 AGAINST 374,411.51 1.082 ABSTAIN 3,892,560.68 11.249 TOTAL 34,602,498.65 100.000 COMPUTERS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 280,957,525.89 83.394 AGAINST 5,060,937.96 1.502 ABSTAIN 50,885,565.57 15.104 TOTAL 336,904,029.42 100.000 CONSTRUCTION AND HOUSING # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 27,955,641.16 88.748 AGAINST 224,504.31 .712 ABSTAIN 3,319,953.96 10.540 TOTAL 31,500,099.43 100.000 CONSUMER INDUSTRIES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 34,576,419.47 91.761 AGAINST 254,221.23 .674 ABSTAIN 2,850,473.76 7.565 TOTAL 37,681,114.46 100.000 CYCLICAL INDUSTRIES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 2,623,936.97 98.371 AGAINST 23,800.27 .892 ABSTAIN 19,653.99 .737 TOTAL 2,667,391.23 100.000 DEFENSE AND AEROSPACE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 51,303,510.55 85.627 AGAINST 248,060.18 .415 ABSTAIN 8,363,197.93 13.958 TOTAL 59,914,768.66 100.000 DEVELOPING COMMUNICATIONS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 103,338,655.88 82.664 AGAINST 1,873,004.54 1.499 ABSTAIN 19,798,270.19 15.837 TOTAL 125,009,930.61 100.000 ELECTRONICS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 1,073,301,414.73 86.375 AGAINST 11,610,518.03 .935 ABSTAIN 157,688,873.06 12.690 TOTAL 1,242,600,805.82 100.000 ENERGY # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 65,318,190.73 89.829 AGAINST 722,166.98 .993 ABSTAIN 6,673,456.29 9.178 TOTAL 72,713,814.00 100.000 ENERGY SERVICE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 389,301,747.22 89.646 AGAINST 5,049,219.11 1.162 ABSTAIN 39,916,621.54 9.192 TOTAL 434,267,587.87 100.000 ENVIRONMENTAL SERVICES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 11,516,154.03 84.961 AGAINST 83,510.25 .616 ABSTAIN 1,954,983.81 14.423 TOTAL 13,554,648.09 100.000 PROPOSAL 2 - CONTINUED FINANCIAL SERVICES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 286,397,061.70 87.676 AGAINST 3,202,933.29 .980 ABSTAIN 37,055,266.64 11.344 TOTAL 326,655,261.63 100.000 FOOD AND AGRICULTURE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 114,630,036.79 93.589 AGAINST 1,473,148.26 1.202 ABSTAIN 6,379,834.83 5.209 TOTAL 122,483,019.88 100.000 HEALTH CARE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 1,018,287,018.17 88.863 AGAINST 10,830,531.31 .945 ABSTAIN 116,791,591.73 10.192 TOTAL 1,145,909,141.21 100.000 HOME FINANCE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 794,452,253.80 91.016 AGAINST 8,425,081.16 .965 ABSTAIN 69,996,650.50 8.019 TOTAL 872,873,985.46 100.000 INDUSTRIAL EQUIPMENT # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 22,789,320.78 88.145 AGAINST 458,530.92 1.773 ABSTAIN 2,606,544.19 10.082 TOTAL 25,854,395.89 100.000 INDUSTRIAL MATERIALS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 9,797,428.07 86.536 AGAINST 65,313.96 .577 ABSTAIN 1,459,033.90 12.887 TOTAL 11,321,775.93 100.000 INSURANCE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 54,993.648.10 83.153 AGAINST 772,601.22 1.168 ABSTAIN 10,369,328.39 15.679 TOTAL 66,135,577.71 100.000 LEISURE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 121,725,009.54 88.601 AGAINST 869,325.86 .633 ABSTAIN 14,791,538.63 10.766 TOTAL 137,385,874.03 100.000 MEDICAL DELIVERY # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 86,648,605.64 86.518 AGAINST 775,574.17 .774 ABSTAIN 12,726,696.97 12.708 TOTAL 100,150,876.78 100.000 MULTIMEDIA # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 50,016,990.75 83.776 AGAINST 474,795.12 .795 ABSTAIN 9,211,354.32 15.429 TOTAL 59,703,140.19 100.000 NATURAL GAS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 27,697,874.05 95.278 AGAINST 509,131.26 1.751 ABSTAIN 863,631.27 2.971 TOTAL 29,070,636.58 100.000 NATURAL RESOURCES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 3,942,516.43 96.508 AGAINST 12,864.00 .315 ABSTAIN 129,774.79 3.177 TOTAL 4,085,155.22 100.000 PAPER AND FOREST PRODUCTS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 8,284,781.48 86.533 AGAINST 168,888.35 1.764 ABSTAIN 1,120,492.68 11.703 TOTAL 9,574,162.51 100.000 PRECIOUS METALS AND MINERALS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 71,772,062.04 89.963 AGAINST 1,852,041.14 2.322 ABSTAIN 6,155,007.12 7.715 TOTAL 79,779,110.30 100.000 REGIONAL BANKS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 625,203,572.47 89.389 AGAINST 6,870,168.47 .982 ABSTAIN 67,344,161.02 9.629 TOTAL 699,417,901.96 100.000 RETAILING # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 117,074,984.53 84.222 AGAINST 1,250,795.58 .899 ABSTAIN 20,682,596.04 14.879 TOTAL 139,008,376.15 100.000 SOFTWARE AND COMPUTER SERVICES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 227,719,853.71 85.956 AGAINST 2,326,904.77 .878 ABSTAIN 34,879,127.77 13.166 TOTAL 264,925,886.25 100.000 TECHNOLOGY # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 279,451,674.57 86.672 AGAINST 3,383,068.55 1.050 ABSTAIN 39,588,275.36 12.278 TOTAL 322,423,018.48 100.000 PROPOSAL 2 - CONTINUED TELECOM MUNICATIONS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 321,155,321.56 86.856 AGAINST 3,388,906.87 .916 ABSTAIN 45,212,539.59 12.228 TOTAL 369,756,768.02 100.000 TRANSPORTATION # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 30,254,239.54 90.810 AGAINST 216,625.66 .650 ABSTAIN 2,845,126.52 8.540 TOTAL 33,315,991.72 100.000 UTILITIES GROWTH # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 204,256,268.94 96.811 AGAINST 1,834,078.41 .869 ABSTAIN 4,894,199.40 2.320 TOTAL 210,984,546.75 100.000 MONEY MARKET # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 261,535,880.47 89.494 AGAINST 4,035,752.50 1.381 ABSTAIN 26,667,520.28 9.125 TOTAL 292,239,153.25 100.000 PROPOSAL 3 To authorize the Trustees to adopt an amended and restated Declaration of Trust. # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 6,786,374,695.13 78.453 AGAINST 294,199,608.21 3.401 ABSTAIN 1,569,643,684.54 18.146 TOTAL 8,650,217,987.88 100.000 BROKER NON-VOTES 2,822,961.96 PROPOSAL 4 To approve an amended management contract for the fund that would reduce the management fee payable to FMR by the fund as FMR's assets under management increase. AIR TRANSPORTATION # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 88,331,761.87 75.907 AGAINST 3,638,300.83 3.127 ABSTAIN 24,397,604.37 20.966 TOTAL 116,367,667.07 100.000 GOLD # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 94,562,031.56 87.939 AGAINST 7,001,270.47 6.510 ABSTAIN 5,968,596.92 5.551 TOTAL 107,531,898.95 100.000 AUTOMOTIVE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 15,187,888.15 82.850 AGAINST 417,351.75 2.276 ABSTAIN 2,726,608.76 14.874 TOTAL 18,331,848.66 100.000 BIOTECHNOLOGY # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 243,165,399.55 81.329 AGAINST 10,653,205.65 3.563 ABSTAIN 45,172,667.52 15.108 TOTAL 298,991,272.72 100.000 BROKERAGE AND # OF % OF INVESTMENT MANAGEMENT VOTES CAST VOTES CAST AFFIRMATIVE 320,917,182.22 83.864 AGAINST 9,219,271.09 2.409 ABSTAIN 52,529,258.89 13.727 TOTAL 382,665,712.20 100.000 CHEMICALS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 28,702,652.80 82.950 AGAINST 1,300,869.72 3.759 ABSTAIN 4,598,976.13 13.291 TOTAL 34,602,498.65 100.000 COMPUTERS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 270,046,670.96 80.155 AGAINST 9,945,847.58 2.953 ABSTAIN 56,911,510.88 16.892 TOTAL 336,904,029.42 100.000 CONSTRUCTION AND HOUSING # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 27,231,528.43 86.449 AGAINST 631,247.12 2.004 ABSTAIN 3,637,323.88 11.547 TOTAL 31,500,099.43 100.000 CONSUMER INDUSTRIES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 33,525,166.77 88.971 AGAINST 775,331.73 2.057 ABSTAIN 3,380,615.96 8.972 TOTAL 37,681,114.46 100.000 DEFENSE AND AEROSPACE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 48,375,726.48 80.741 AGAINST 775,125.89 1.294 ABSTAIN 10,763,916.29 17.965 TOTAL 59,914,768.66 100.000 DEVELOPING COMMUNICATIONS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 98,263,849.25 78.605 AGAINST 4,603,812.97 3.683 ABSTAIN 22,142,268.39 17.712 TOTAL 125,009,930.61 100.000 PROPOSAL 4 - CONTINUED ELECTRONICS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 1,027,191,955.49 82.665 AGAINST 159,261,934.39 12.817 ABSTAIN 56,146,915.94 4.518 TOTAL 1,242,600,805.82 100.000 ENERGY # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 61,972,377.11 85.228 AGAINST 2,732,124.18 3.757 ABSTAIN 8,009,312.71 11.015 TOTAL 72,713,814.00 100.000 ENERGY SERVICES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 373,930,842.39 86.106 AGAINST 13,257,672.22 3.053 ABSTAIN 47,079,073.26 10.841 TOTAL 434,267,587.87 100.000 ENVIRONMENTAL SERVICES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 10,650,119.56 78.572 AGAINST 620,288.79 4.576 ABSTAIN 2,284,239.74 16.852 TOTAL 13,554,648.09 100.000 FINANCIAL SERVICES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 274,470,999.76 84.025 AGAINST 9,136,135.17 2.797 ABSTAIN 43,048,126.70 13.178 TOTAL 326,655,261.63 100.000 FOOD AND AGRICULTURE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 108,827,660.19 88.851 AGAINST 4,889,731.49 3.992 ABSTAIN 8,765,628.20 7.157 TOTAL 122,483,019.88 100.000 HEALTH CARE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 965,997,795.25 84.300 AGAINST 38,385,460.85 3.349 ABSTAIN 141,525,885.11 12.351 TOTAL 1,145,909,141.21 100.000 HOME FINANCE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 764,517,493.78 87.586 AGAINST 24,755,647.12 2.836 ABSTAIN 83,600,844.56 9.578 TOTAL 872,873,985.46 100.000 INDUSTRIAL EQUIPMENT # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 21,894,772.32 84.685 AGAINST 1,028,514.47 3.978 ABSTAIN 2,931,109.10 11.337 TOTAL 25,854,395.89 100.000 INDUSTRIAL MATERIALS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 9,137,601.28 80.708 AGAINST 330,541.69 2.920 ABSTAIN 1,853,632.96 16.372 TOTAL 11,321,775.93 100.000 INSURANCE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 52,244,487.18 78.996 AGAINST 2,561,649.44 3.873 ABSTAIN 11,329,441.09 17.131 TOTAL 66,135,577.71 100.000 LEISURE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 116,428,593.72 84.746 AGAINST 3,577,395.73 2.604 ABSTAIN 17,379,884.58 12.650 TOTAL 137,385,874.03 100.000 MEDICAL DELIVERY # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 81,962,329.21 81.839 AGAINST 2,623,293.47 2.619 ABSTAIN 15,565,254.10 15.542 TOTAL 100,150,876.78 100.000 MULTIMEDIA # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 48,725,744.24 81.613 AGAINST 1,121,199.57 1.878 ABSTAIN 9,856,196.38 16.509 TOTAL 59,703,140.19 100.000 NATURAL GAS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 26,276,232.63 90.388 AGAINST 1,388,331.25 4.775 ABSTAIN 1,406,072.70 4.837 TOTAL 29,070,636.58 100.000 PAPER AND FOREST PRODUCTS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 7,678,987.09 80.205 AGAINST 590,477.99 6.168 ABSTAIN 1,304,697.43 13.627 TOTAL 9,574,162.51 100.000 PRECIOUS METALS AND MINERALS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 68,061,941.03 85.313 AGAINST 3,879,330.91 4.863 ABSTAIN 7,837,838.36 9.824 TOTAL 79,779,110.30 100.000 REGIONAL BANKS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 595,015,797.25 85.073 AGAINST 25,116,085.51 3.591 ABSTAIN 79,286,019.20 11.336 TOTAL 699,417,901.96 100.000 PROPOSAL 4 - CONTINUED RETAILING # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 113,355,144.06 81.546 AGAINST 3,772,282.91 2.713 ABSTAIN 21,880,949.18 15.741 TOTAL 139,008,376.15 100.000 SOFTWARE AND COMPUTER SERVICES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 217,257,453.29 82.007 AGAINST 7,288,094.85 2.751 ABSTAIN 40,380,338.11 15.242 TOTAL 264,925,886.25 100.000 TECHNOLOGY # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 265,238,914.82 82.264 AGAINST 11,319,267.99 3.511 ABSTAIN 45,864,835.67 14.225 TOTAL 322,423,018.48 100.000 TELECOM MUNICATIONS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 305,617,632.54 82.654 AGAINST 11,539,266.63 3.120 ABSTAIN 52,599,868.85 14.226 TOTAL 369,756,768.02 100.000 TRANSPORTATION # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 29,561,553.68 88.731 AGAINST 531,812.44 1.596 ABSTAIN 3,222,625.60 9.673 TOTAL 33,315,991.72 100.000 UTILITIES GROWTH # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 193,578,103.90 91.750 AGAINST 7,910,897.28 3.749 ABSTAIN 9,495,545.57 4.501 TOTAL 210,984,546.75 100.000 PROPOSAL 5 To approve an amended management contract for Money Market Portfolio that would reduce the management fee payable to FMR by the fund as FMR's assets under management increases. # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 245,969,256.05 84.167 AGAINST 14,855,502.09 5.083 ABSTAIN 31,414,395.11 10.750 TOTAL 292,239,153.25 100.000 PROPOSAL 6 To approve a sub-advisory agreement with FMR U.K. to provide investment advice and research services or investment management services to Gold Portfolio. # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 94,533,376.31 87.912 AGAINST 6,907,643.32 6.424 ABSTAIN 6,090,879.32 5.664 TOTAL 107,531,898.95 100.000 PROPOSAL 7 To approve a sub-advisory agreement with FMR Far East to provide investment advice and research services or investment management services to Gold Portfolio. # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 93,962,009.35 87.381 AGAINST 7,425,017.12 6.905 ABSTAIN 6,144,872.48 5.714 TOTAL 107,531,898.95 100.000 PROPOSAL 8(A) To make the current fundamental 80% investment policy non-fundamental. AIR TRANSPORTATION # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 81,784,924.28 70.281 AGAINST 5,319,581.91 4.572 ABSTAIN 29,263,160.88 25.147 TOTAL 116,367,667.07 100.000 AUTOMOTIVE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 13,466,159.09 73.458 AGAINST 717,074.83 3.911 ABSTAIN 4,148,614.74 22.631 TOTAL 18,331,848.66 100.000 BIOTECHNOLOGY # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 206,872,261.15 69.190 AGAINST 20,801,262.41 6.957 ABSTAIN 71,317,749.16 23.853 TOTAL 298,991,272.72 100.000 BROKERAGE AND # OF % OF INVESTMENT MANAGEMENT VOTES CAST VOTES CAST AFFIRMATIVE 287,126,658.10 75.033 AGAINST 16,642,056.34 4.349 ABSTAIN 78,896,997.76 20.618 TOTAL 382,665,712.20 100.000 PROPOSAL 8(A) - CONTINUED CHEMICALS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 25,811,855.73 74.595 AGAINST 2,075,298.62 5.998 ABSTAIN 6,715,344.30 19.407 TOTAL 34,602,498.65 100.000 COMPUTERS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 233,020,603.48 69.165 AGAINST 18,070,433.52 5.364 ABSTAIN 85,812,992.42 25.471 TOTAL 336,904,029.42 100.000 CONSTRUCTION AND HOUSING # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 24,597,948.32 78.088 AGAINST 1,358,442.62 4.313 ABSTAIN 5,543,708.49 17.599 TOTAL 31,500,099.43 100.000 CONSUMER INDUSTRIES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 31,815,790.92 84.434 AGAINST 1,784,168.80 4.735 ABSTAIN 4,081,154.74 10.831 TOTAL 37,681,114.46 100.000 DEFENSE AND AEROSPACE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 43,592,670.30 72.758 AGAINST 2,756,881.95 4.601 ABSTAIN 13,565,216.41 22.641 TOTAL 59,914,768.66 100.000 DEVELOPING COMMUNICATIONS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 89,369,179.95 71.490 AGAINST 9,066,570.82 7.252 ABSTAIN 26,574,179.84 21.258 TOTAL 125,009,930.61 100.000 ELECTRONICS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 849,887,743.47 68.396 AGAINST 66,702,678.25 5.368 ABSTAIN 326,010,384.10 26.236 TOTAL 1,242,600,805.82 100.000 ENERGY # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 53,836,856.67 74.039 AGAINST 4,587,161.58 6.309 ABSTAIN 14,289,795.75 19.652 TOTAL 72,713,814.00 100.000 ENERGY SERVICE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 319,031,333.55 73.464 AGAINST 24,563,860.42 5.657 ABSTAIN 90,672,393.90 20.879 TOTAL 434,267,587.87 100.000 ENVIRONMENTAL SERVICES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 9,540,393.55 70.385 AGAINST 970,739.08 7.161 ABSTAIN 3,043,515.46 22.454 TOTAL 13,554,648.09 100.000 FINANCIAL SERVICES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 237,974,716.59 72.852 AGAINST 16,993,069.53 5.202 ABSTAIN 71,687,475.51 21.946 TOTAL 326,655,261.63 100.000 FOOD AND AGRICULTURE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 90,763,679.36 74.103 AGAINST 10,466,684.76 8.545 ABSTAIN 21,252,655.76 17.352 TOTAL 122,483,019.88 100.000 HEALTH CARE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 846,476,378.49 73.869 AGAINST 77,469,177.22 6.761 ABSTAIN 221,963,585.50 19.370 TOTAL 1,145,909,141.21 100.000 HOME FINANCE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 774,515,006.98 88.732 AGAINST 51,010,191.82 5.844 ABSTAIN 47,348,786.66 5.424 TOTAL 872,873,985.46 100.000 INDUSTRIAL EQUIPMENT # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 19,372,627.93 74.930 AGAINST 1,899,086.52 7.345 ABSTAIN 4,582,681.44 17.725 TOTAL 25,854,395.89 100.000 INDUSTRIAL MATERIALS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 8,317,429.03 73.464 AGAINST 667,224.29 5.893 ABSTAIN 2,337,122.61 20.643 TOTAL 11,321,775.93 100.000 INSURANCE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 47,264,401.23 71.466 AGAINST 4,256,851.68 6.436 ABSTAIN 14,614,324.80 22.098 TOTAL 66,135,577.71 100.000 LEISURE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 107,419,653.59 78.188 AGAINST 6,810,070.15 4.957 ABSTAIN 23,156,150.29 16.855 TOTAL 137,385,874.03 100.000 PROPOSAL 8(A) - CONTINUED MEDICAL DELIVERY # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 72,030,422.87 71.922 AGAINST 5,871,796.69 5.863 ABSTAIN 22,248,657.22 22.215 TOTAL 100,150,876.78 100.000 MULTIMEDIA # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 44,070,481.42 73.816 AGAINST 2,457,209.73 4.116 ABSTAIN 13,175,449.04 22.068 TOTAL 59,703,140.19 100.000 NATURAL GAS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 23,238,133.30 81.686 AGAINST 2,713,844.54 9.540 ABSTAIN 2,496,114.89 8.774 TOTAL 28,448,092.73 100.000 PAPER AND FOREST PRODUCTS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 6,807,529.77 71.103 AGAINST 755,087.96 7.887 ABSTAIN 2,011,544.78 21.010 TOTAL 9,574,162.51 100.000 PRECIOUS METALS AND MINERALS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 61,915,378.85 77.609 AGAINST 7,035,911.50 8.819 ABSTAIN 10,827,819.95 13.572 TOTAL 79,779,110.30 100.000 REGIONAL BANKS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 509,531,999.72 72.851 AGAINST 43,415,159.12 6.207 ABSTAIN 146,470,743.12 20.942 TOTAL 699,417,901.96 100.000 RETAILING # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 101,736,813.64 73.188 AGAINST 8,688,703.97 6.250 ABSTAIN 28,582,858.54 20.562 TOTAL 139,008,376.15 100.000 SOFTWARE AND COMPUTER SERVICES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 183,474,192.17 69.255 AGAINST 17,133,042.08 6.467 ABSTAIN 64,318,652.00 24.278 TOTAL 264,925,886.25 100.000 TECHNOLOGY # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 234,384,763.25 72.695 AGAINST 18,668,800.59 5.790 ABSTAIN 69,369,454.64 21.515 TOTAL 322,423,018.48 100.000 TELECOM MUNICATIONS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 263,026,500.28 71.135 AGAINST 22,933,470.98 6.202 ABSTAIN 83,796,796.76 22.663 TOTAL 369,756,768.02 100.000 TRANSPORTATION # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 27,344,653.49 82.077 AGAINST 1,851,919.24 5.558 ABSTAIN 4,119,418.99 12.365 TOTAL 33,315,991.72 100.000 UTILITIES GROWTH # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 165,163,998.30 79.046 AGAINST 15,012,167.39 7.184 ABSTAIN 28,771,245.55 13.770 TOTAL 208,947,411.24 100.000 BROKER NON-VOTES 2,037,135.51 MONEY MARKET # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 248,381,078.83 84.992 AGAINST 24,273,146.63 8.306 ABSTAIN 19,584,927.79 6.702 TOTAL 292,239,153.25 100.000 PROPOSAL 8(B) To make the current fundamental 50% "principally engaged in" policy non-fundamental and to approve changes to the policy. AIR TRANSPORTATION # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 81,530,381.50 70.063 AGAINST 5,138,916.34 4.416 ABSTAIN 29,698,369.23 25.521 TOTAL 116,367,667.07 100.000 AUTOMOTIVE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 13,412,008.37 73.162 AGAINST 699,160.85 3.814 ABSTAIN 4,220,679.44 23.024 TOTAL 18,331,848.66 100.000 BIOTECHNOLOGY # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 206,654,832.40 69.117 AGAINST 20,268,828.77 6.779 ABSTAIN 72,067,611.55 24.104 TOTAL 298,991,272.72 100.000 BROKERAGE AND INVESTMENT # OF % OF MANAGEMENT VOTES CAST VOTES CAST AFFIRMATIVE 286,613,628.30 74.899 AGAINST 16,460,169.61 4.302 ABSTAIN 79,591,914.29 20.799 TOTAL 382,665,712.20 100.000 PROPOSAL 8(B) - CONTINUED CHEMICALS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 25,670,060.83 74.186 AGAINST 2,181,796.21 6.305 ABSTAIN 6,750,641.61 19.509 TOTAL 34,602,498.65 100.000 COMPUTERS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 232,733,200.95 69.080 AGAINST 18,081,604.16 5.367 ABSTAIN 86,089,224.31 25.553 TOTAL 336,904,029.42 100.000 CONSTRUCTION AND HOUSING # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 24,627,901.30 78.184 AGAINST 1,335,940.23 4.241 ABSTAIN 5,536,257.90 17.575 TOTAL 31,500,099.43 100.000 CONSUMER INDUSTRIES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 31,777,298.19 84.332 AGAINST 1,766,548.59 4.688 ABSTAIN 4,137,267.68 10.980 TOTAL 37,681,114.46 100.000 DEFENSE AND AEROSPACE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 43,950,283.68 73.355 AGAINST 2,267,409.21 3.784 ABSTAIN 13,697,075.77 22.861 TOTAL 59,914,768.66 100.000 DEVELOPING COMMUNICATIONS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 89,126,083.71 71.295 AGAINST 8,969,664.48 7.175 ABSTAIN 26,914,182.42 21.530 TOTAL 125,009,930.61 100.000 ELECTRONICS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 848,278,334.86 68.266 AGAINST 66,417,837.65 5.345 ABSTAIN 327,904,633.31 26.389 TOTAL 1,242,600,805.82 100.000 ENERGY # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 53,541,696.52 73.633 AGAINST 4,615,976.82 6.349 ABSTAIN 14,556,140.66 20.018 TOTAL 72,713,814.00 100.000 ENERGY SERVICE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 318,683,225.00 73.384 AGAINST 24,710,561.01 5.690 ABSTAIN 90,873,801.86 20.926 TOTAL 434,267,587.87 100.000 ENVIRONMENTAL SERVICES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 9,487,363.06 69.993 AGAINST 928,144.36 6.848 ABSTAIN 3,139,140.67 23.159 TOTAL 13,554,648.09 100.000 FINANCIAL SERVICES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 237,544,867.93 72.720 AGAINST 16,881,253.75 5.168 ABSTAIN 72,229,139.95 22.112 TOTAL 326,655,261.63 100.000 FOOD AND AGRICULTURE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 90,580,759.83 73.954 AGAINST 10,273,520.03 8.387 ABSTAIN 21,628,740.02 17.659 TOTAL 122,483,019.88 100.000 HEALTH CARE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 844,885,797.70 73.731 AGAINST 76,493,018.14 6.675 ABSTAIN 224,530,325.37 19.594 TOTAL 1,145,909,141.21 100.000 HOME FINANCE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 770,542,942.77 88.277 AGAINST 52,646,972.97 6.031 ABSTAIN 49,684,069.72 5.692 TOTAL 872,873,985.46 100.000 INDUSTRIAL EQUIPMENT # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 19,251,877.80 74.463 AGAINST 1,933,197.89 7.477 ABSTAIN 4,669,320.20 18.060 TOTAL 25,854,395.89 100.000 INDUSTRIAL MATERIALS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 8,232,007.18 72.710 AGAINST 702,894.09 6.208 ABSTAIN 2,386,874.66 21.082 TOTAL 11,321,775.93 100.000 INSURANCE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 47,047,682.49 71.138 AGAINST 4,362,994.52 6.597 ABSTAIN 14,724,900.70 22.265 TOTAL 66,135,577.71 100.000 LEISURE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 107,136,143.37 77.982 AGAINST 6,886,559.76 5.012 ABSTAIN 23,363,170.90 17.006 TOTAL 137,385,874.03 100.000 PROPOSAL 8(B) - CONTINUED MEDICAL DELIVERY # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 71,998,606.53 71.890 AGAINST 5,786,226.67 5.778 ABSTAIN 22,366,043.58 22.332 TOTAL 100,150,876.78 100.000 MULTIMEDIA # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 44,090,990.33 73.850 AGAINST 2,338,567.24 3.917 ABSTAIN 13,273,582.62 22.233 TOTAL 59,703,140.19 100.000 NATURAL GAS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 22,561,634.74 79.308 AGAINST 3,244,466.65 11.405 ABSTAIN 2,641,991.34 9.287 TOTAL 28,448,092.73 100.000 BROKER NON-VOTES 622,543.85 PAPER AND FOREST PRODUCTS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 6,785,747.46 70.876 AGAINST 787,911.92 8.229 ABSTAIN 2,000,503.13 20.895 TOTAL 9,574,162.51 100.000 PRECIOUS METALS AND MINERALS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 61,755,990.79 77.409 AGAINST 6,875,636.08 8.618 ABSTAIN 11,147,483.43 13.973 TOTAL 79,779,110.30 100.000 REGIONAL BANKS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 506,790,124.22 72.459 AGAINST 43,115,121.02 6.164 ABSTAIN 149,512,656.72 21.377 TOTAL 699,417,901.96 100.000 RETAILING # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 101,878,730.92 73.290 AGAINST 8,400,746.67 6.043 ABSTAIN 28,728,898.56 20.667 TOTAL 139,008,376.15 100.000 SOFTWARE AND COMPUTER SERVICES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 183,018,168.69 69.083 AGAINST 16,797,493.24 6.340 ABSTAIN 65,110,224.32 24.577 TOTAL 264,925,886.25 100.000 TECHNOLOGY # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 234,250,871.23 72.653 AGAINST 18,749,417.22 5.815 ABSTAIN 69,422,730.03 21.532 TOTAL 322,423,018.48 100.000 TELECOM MUNICATIONS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 262,506,222.42 70.994 AGAINST 22,939,814.78 6.204 ABSTAIN 84,310,730.82 22.802 TOTAL 369,756,768.02 100.000 TRANSPORTATION # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 27,341,630.62 82.068 AGAINST 1,842,657.52 5.530 ABSTAIN 4,131,703.58 12.402 TOTAL 33,315,991.72 100.000 UTILITIES GROWTH # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 164,013,231.16 78.495 AGAINST 15,355,539.10 7.349 ABSTAIN 29,578,640.98 14.156 TOTAL 208,947,411.24 100.000 BROKER NON-VOTES 2,037,135.51 PROPOSAL 9(A) To make Gold Portfolio's current fundamental 80% investment policy non-fundamental and to approve changes to the policy. # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 86,229,451.32 80.280 AGAINST 10,723,590.03 9.984 ABSTAIN 10,457,997.95 9.736 TOTAL 107,411,039.30 100.000 BROKER NON-VOTES 120,859.65 PROPOSAL 9(B) To make Gold Portfolio's current fundamental 50% "principally engaged in" policy non-fundamental and to approve changes to the policy. # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 86,023,158.35 80.088 AGAINST 10,562,068.28 9.833 ABSTAIN 10,825,812.67 10.079 TOTAL 107,411,039.30 100.000 BROKER NON-VOTES 120,859.65 PROPOSAL 10 To make the current fundamental 15% "principally engaged in" policy non-fundamental. BROKERAGE AND # OF % OF INVESTMENT MANAGEMENT VOTES CAST VOTES CAST AFFIRMATIVE 286,979,193.01 74.995 AGAINST 15,543,614.23 4.062 ABSTAIN 80,142,904.96 20.943 TOTAL 382,665,712.20 100.000 PROPOSAL 10 - CONTINUED FINANCIAL SERVICES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 238,353,584.93 72.968 AGAINST 16,479,829.93 5.045 ABSTAIN 71,821,846.77 21.987 TOTAL 326,655,261.63 100.000 PROPOSAL 11 To amend the fundamental investment limitations concerning diversification. FINANCIAL SERVICES # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 241,126,964.55 73.817 AGAINST 15,889,907.00 4.864 ABSTAIN 69,638,390.08 21.319 TOTAL 326,655,261.63 100.000 HOME FINANCE # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 785,293,340.30 89.966 AGAINST 43,966,364.46 5.037 ABSTAIN 43,614,280.70 4.997 TOTAL 872,873,985.46 100.000 REGIONAL BANKS # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 514,983,172.04 73.630 AGAINST 41,205,954.33 5.892 ABSTAIN 143,228,775.59 20.478 TOTAL 699,417,901.96 100.000 MONEY MARKET # OF % OF VOTES CAST VOTES CAST AFFIRMATIVE 250,939,184.95 85.868 AGAINST 23,838,890.03 8.157 ABSTAIN 17,461,078.27 5.975 TOTAL 292,239,153.25 100.000 MANAGING YOUR INVESTMENTS Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day. BY PHONE Fidelity TouchTone Xpress(registered trademark) provides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security. (PHONE_GRAPHIC)TOUCHTONE XPRESS 1-800-544-5555 PRESS 1 For mutual fund and brokerage trading. 2 For quotes.* 3 For account balances and holdings. 4 To review orders and mutual fund activity. 5 To change your PIN. *0 To speak to a Fidelity representative. BY PC Fidelity's Web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services. (PHONE_GRAPHIC)FIDELITY'S WEB SITE WWW.FIDELITY.COM If you are not currently on the Internet, call Fidelity at 1-800-544-7272 and we'll send you an America Online CD or disk with up to 50 free hours of Web access. (PHONE_GRAPHIC) FIDELITY ON-LINE XPRESS+TM Fidelity On-line Xpress+ software for Windows combines comprehensive portfolio management capabilities, securities trading and access to research and analysis tools . . . all on your desktop. Call Fidelity at 1-800-544-7272 or visit our Web site for more information on how to manage your investments via your PC. * 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. 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Bellevue, WA 511 Pine Street Seattle, WA WASHINGTON, DC 1900 K Street, N.W. Washington, DC WISCONSIN 595 North Barker Road Brookfield, WI INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Investments Money Management, Inc., Merrimack, NH, MONEY MARKET FUND Fidelity Management & Research (U.K.) Inc., London, England Fidelity Management & Research (Far East) Inc., Tokyo, Japan OFFICERS Edward C. Johnson 3d, PRESIDENT Robert C. Pozen, SENIOR VICE PRESIDENT Eric D. Roiter, SECRETARY Richard A. Silver, TREASURER Fred L. Henning Jr., VICE PRESIDENT, MONEY MARKET FUND Boyce I. Greer, VICE PRESIDENT, MONEY MARKET FUND John Todd, VICE PRESIDENT, MONEY MARKET FUND Stanley N. Griffith, VICE PRESIDENT, MONEY MARKET FUND John H. Costello, ASSISTANT TREASURER Leonard M. Rush, ASSISTANT TREASURER Thomas J. Simpson, ASSISTANT TREASURER, MONEY MARKET FUND BOARD OF TRUSTEES Ralph F. Cox * Phyllis Burke Davis * Robert M. Gates * Edward C. Johnson 3d E. Bradley Jones * Donald J. Kirk * Peter S. Lynch Marvin L. Mann * William O. McCoy * Gerald C. McDonough * Robert C. Pozen Thomas R. Williams * ADVISORY BOARD J. Gary Burkhead GENERAL DISTRIBUTOR Fidelity Distributors Corporation Boston, MA TRANSFER AND SHAREHOLDER SERVICING AGENT Fidelity Service Company, Inc. Boston, MA CUSTODIANS Brown Brothers Harriman & Co. Boston, MA and The Bank of New York New York, NY CORPORATE HEADQUARTERS 82 Devonshire Street Boston, MA 02109 1-800-544-8888 * INDEPENDENT TRUSTEES FIDELITY SELECT PORTFOLIOS CONSUMER SECTOR Consumer Industries Food and Agriculture Leisure Multimedia Retailing CYCLICALS SECTOR Air Transportation Automotive Chemicals Cyclical Industries Construction and Housing Defense and Aerospace Environmental Services Industrial Equipment Industrial Materials Paper and Forest Products Transportation FINANCIAL SERVICES SECTOR Brokerage and Investment Management Financial Services Home Finance Insurance Regional Banks HEALTH CARE SECTOR Biotechnology Health Care Medical Delivery Medical Equipment and Systems NATURAL RESOURCES SECTOR Energy Energy Service Gold Natural Resources Precious Metals and Minerals TECHNOLOGY SECTOR Business Services and Outsourcing Computers Developing Communications Electronics Software and Computer Services Technology UTILITIES SECTOR Natural Gas Telecommunications Utilities Growth Money Market THE FIDELITY TELEPHONE CONNECTION MUTUAL FUND 24-HOUR SERVICE Exchanges/Redemptions 1-800-544-7777 Account Assistance 1-800-544-6666 Product Information 1-800-544-8888 Retirement Accounts 1-800-544-4774 (8 a.m. - 9 p.m.) TDD Service 1-800-544-0111 for the deaf and hearing impaired (9 a.m. - 9 p.m. Eastern time) TouchTone Xpress(registered trademark)(automated graphic) 1-800-544-5555 (automated graphic) AUTOMATED LINE FOR QUICKEST SERVICE (Fidelity Logo Graphic) Fidelity Investments (registered trademark) P.O. Box 193 Boston, MA 02101 (Recycle graphic) Printed on Recycled Paper SEL-SANN-1098 62995 1.536823.101 -----END PRIVACY-ENHANCED MESSAGE-----