-----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, Qc6Tn9tDGEZNB5Z+kSbvRwKtuHGDNT02FnIGjD2Y690JrwNgv8vNZ5/L2J5rfoGg 77N5K4/XL9/gxdh9HbGVFA== 0000320351-99-000004.txt : 19990422 0000320351-99-000004.hdr.sgml : 19990422 ACCESSION NUMBER: 0000320351-99-000004 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990228 FILED AS OF DATE: 19990421 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: 99598001 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 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 ANNUAL REPORT FOR THE YEAR ENDING FEBRUARY 28, 1999 AND PROSPECTUS DATED APRIL 29,1999 (2_FIDELITY_LOGOS)(REGISTERED TRADEMARK) CONTENTS
PERFORMANCE OVERVIEW A-4 FUND UPDATES* CONSUMER SECTOR A-6 CONSUMER INDUSTRIES A-13 FOOD AND AGRICULTURE A-19 LEISURE A-25 MULTIMEDIA A-30 RETAILING CYCLICALS SECTOR A-35 AIR TRANSPORTATION A-40 AUTOMOTIVE A-45 CHEMICALS A-50 CONSTRUCTION AND HOUSING A-56 CYCLICAL INDUSTRIES A-62 DEFENSE AND AEROSPACE A-67 ENVIRONMENTAL SERVICES A-72 INDUSTRIAL EQUIPMENT A-78 INDUSTRIAL MATERIALS A-84 PAPER AND FOREST PRODUCTS A-89 TRANSPORTATION FINANCIAL SERVICES SECTOR A-94 BROKERAGE AND INVESTMENT MANAGEMENT A-100 FINANCIAL SERVICES A-106 HOME FINANCE A-112 INSURANCE A-117 REGIONAL BANKS HEALTH CARE SECTOR A-122 BIOTECHNOLOGY A-128 HEALTH CARE A-134 MEDICAL DELIVERY A-139 MEDICAL EQUIPMENT AND SYSTEMS NATURAL RESOURCES SECTOR A-144 ENERGY A-150 ENERGY SERVICE A-156 GOLD A-162 NATURAL RESOURCES A-168 PRECIOUS METALS AND MINERALS
* FUND UPDATES FOR EACH SELECT PORTFOLIO INCLUDE: PERFORMANCE AND INVESTMENT SUMMARY, MANAGER'S OVERVIEW, INVESTMENTS, AND FINANCIAL STATEMENTS.
TECHNOLOGY SECTOR A-174 BUSINESS SERVICES AND OUTSOURCING A-180 COMPUTERS A-186 DEVELOPING COMMUNICATIONS A-192 ELECTRONICS A-198 SOFTWARE AND COMPUTER SERVICES A-204 TECHNOLOGY UTILITIES SECTOR A-210 NATURAL GAS A-215 TELECOMMUNICATIONS A-221 UTILITIES GROWTH A-226 MONEY MARKET NOTES TO FINANCIAL STATEMENTS A-233 FOOTNOTES TO THE FINANCIAL STATEMENTS REPORT OF INDEPENDENT A-237 THE AUDITORS' OPINION. ACCOUNTANTS DISTRIBUTIONS A-238 FIDELITY SELECT PORTFOLIO P-1 PROSPECTUS
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation. Other third party marks appearing herein are the property of their respective owners. All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company. This report is printed on recycled paper using soy-based inks. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF EACH FUND'S PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON BEHALF OF ANY FIDELITY FUND. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. PERFORMANCE OVERVIEW DEAR SHAREHOLDER: Predictable only for their volatility, U.S. equity markets overcame a major correction to post impressive double-digit returns for the 12-month period ending February 28, 1999. For the period, the Standard & Poor's 500 Index - a large-capitalization-oriented index based on the performance of 500 widely held stocks - returned 19.74%, nearly double its historical annual average return. The Dow Jones Industrial Average - an index of 30 blue-chip stocks - had a 10.75% increase for the 12-month period. Of the 39 Select equity portfolios, 15 topped the S&P 500's return for the past 12 months. Meanwhile, 20 beat their Goldman Sachs indexes - which are designed to measure the performance of companies within the Select portfolios' sector concentrations. In comparison, 10 Select portfolios bested their S&P benchmark in the last reporting period six months ago, while 14 topped their Goldman Sachs index. The best-performing Select portfolio for the 12-month period was Computers, with a gain of 66.43%. Energy Service - whose performance tends to be closely linked to the price of oil - had the lowest return, declining 50.57%. The period began with the U.S. economy continuing to demonstrate its strength. Low unemployment, tame inflation, strong consumer buying patterns and low interest rates all sparked hopes of continued growth. But while the equity market soared, concerns grew about the impact of Asia's economic woes. Those fears soon became reality when Russia's escalating economic and political difficulties culminated in a series of loan defaults and a devaluation of the ruble. Investor reaction was swift and extreme: Money began to pour out of stocks and the Dow plunged 512.61 points on August 31 - erasing all previous gains for the year. Seeking a safe haven, investors found refuge in U.S. Treasuries. While Treasury yields dropped to their lowest levels in three decades, new fears loomed on the horizon. The specter of presidential impeachment hearings recalled the 1970s bear market during the Watergate scandal. Rumors of troubled hedge funds and their potential impact on the nation's economy added to investor worries. Faced with the possibility of a global economic crisis, the U.S. Federal Reserve Board stepped in. To address the lack of confidence in domestic and global equity markets, the Fed instituted a series of three separate quarter-point interest-rate cuts. The first came on September 29. Then, in a surprise move, the Fed slashed rates another quarter-point on October 15, and the Dow responded with its third-greatest single-day point gain ever. The third reduction - a so-called "insurance" cut on November 17 - helped solidify the confidence the stock market needed to support a fourth-quarter rally. Technology stocks, particularly the high-flying Internet issues, helped drive stock market performance to new heights. Strong holiday sales also lifted confidence heading into the new year. The stock market maintained its momentum in January. The S&P 500, Dow and NASDAQ all reached record highs during the first month of 1999 - this, despite concerns about the impact of Brazil's currency devaluation. The markets slowed somewhat in February, principally in anticipation that the Fed was considering a rate hike, and fears of a slowdown in the technology sector. The strength of the domestic economy during the 12-month period helped the CONSUMER sector notch solid returns. Holdings in cable TV and Internet stocks bolstered Multimedia and Leisure. Retailing and Consumer Industries benefited from their domestic focus. Food & Agriculture trailed its indexes due to the poor earnings of many packaged-food companies. CYCLICAL stocks - whose performance tends to mirror the ups and downs of the economy - were hampered by weak international economies. Despite the global exposure of many airlines, Air Transportation notched a positive return. Transportation fell slightly, but beat its Goldman Sachs index. Construction and Housing suffered due to poor-performing new-home builder stocks. Automotive lagged due to the poor performance of auto parts stocks. An unfavorable supply/demand balance, created by weakness in Asia, detracted from Chemicals. Satellite launch and orbit failures, along with failed mergers in the sector, hurt Defense and Aerospace. The oversupply and slack demand for global commodities impaired Industrial Materials, Paper and Forest Products, and Industrial Equipment. The economically sensitive Cyclical Industries and Environmental Services portfolios also were dragged down by the international fiscal crisis. Currency devaluations in Russia and Brazil, and Russia's loan defaults, were particularly detrimental to the FINANCIAL SERVICES sector. The resulting liquidity crunch prevented any of the Select portfolios from topping the broad-based S&P 500. However, thanks to strong stock picking, Insurance and Financial Services beat their Goldman Sachs benchmark. Regional Banks, as well as Brokerage and Investment Management, posted positive - albeit more modest - returns. A sharp increase in loan prepayments and refinancings hurt Home Finance. Continuing their trend of recent vigorous performance, HEALTH CARE stocks helped contribute to the broad market's overall success. The strong pharmaceutical industry buoyed Health Care and Biotechnology. An emphasis on large-cap cardiology stocks helped Medical Equipment and Systems generate index-beating performance. The uncertain profitability outlook for HMOs and concern over Medicare budget cuts dragged down Medical Delivery. The period's hardest-hit sector was NATURAL RESOURCES. Overproduction, lack of demand and weak global economic growth contributed to poor results nearly across the board. While the price of gold finally stopped its slide, it was still too low for holdings in both the Gold and the Precious Metals and Minerals portfolios to operate profitably. The low price and oversupply of oil was the major detractor for Natural Resources, Energy and Energy Service. The TECHNOLOGY sector accounted for nine of the top-10 best-performing stocks in the S&P 500 by the end of 1998. Computers, Developing Communications and Technology each returned over 55%. Both the Electronics and the Software and Computer Services portfolios returned over 30%, yet they still trailed the Goldman Sachs index. A lack of exposure to large hardware and software companies caused Business Services and Outsourcing to lag the Goldman Sachs benchmark. Telecommunication companies were among the few outperformers in the UTILITIES sector. Overweighted positions in that industry helped Utilities Growth and Telecommunications produce solid returns. Natural Gas, on the other hand, struggled greatly because of plunging oil prices and weak demand. In the pages that follow, you'll find detailed summaries for each of the Select funds. We hope that you find them informative and useful for evaluating your investments. Thank you very much for your continued interest in the Fidelity Select Portfolios. Sincerely, William R. Ebsworth Group Leader, FMRCo Equity Research Select Group Leader CUMULATIVE TOTAL RETURNS FOR THE YEAR ENDED FEBRUARY 28, 1999 Computers 66.43% Row: 1, Col: 1, Value: 66.43000000000001 Row: 1, Col: 2, Value: nil Developing Communications 63.01% Row: 2, Col: 1, Value: 63.01 Row: 2, Col: 2, Value: 0.0 Technology 55.66% Row: 3, Col: 1, Value: 55.66 Row: 3, Col: 2, Value: 0.0 Leisure 37.54% Row: 4, Col: 1, Value: 37.54 Row: 4, Col: 2, Value: 0.0 Multimedia 36.68% Row: 5, Col: 1, Value: 36.68 Row: 5, Col: 2, Value: 0.0 Retailing 36.66% Row: 6, Col: 1, Value: 36.66 Row: 6, Col: 2, Value: 0.0 Electronics 35.30% Row: 7, Col: 1, Value: 35.3 Row: 7, Col: 2, Value: 0.0 Software & Computer Services 32.57% Row: 8, Col: 1, Value: 32.57 Row: 8, Col: 2, Value: 0.0 Utilities Growth 32.17% Row: 9, Col: 1, Value: 32.17 Row: 9, Col: 2, Value: 0.0 Health Care 27.20% Row: 10, Col: 1, Value: 27.2 Row: 10, Col: 2, Value: 0.0 Biotechnology 27.13% Row: 11, Col: 1, Value: 27.13 Row: 11, Col: 2, Value: 0.0 Business Services & Outsourcing 26.23% Row: 12, Col: 1, Value: 26.23 Row: 12, Col: 2, Value: 0.0 Telecommunications 22.21% Row: 13, Col: 1, Value: 22.21 Row: 13, Col: 2, Value: 0.0 Medical Equipment & Systems1 21.00% Row: 14, Col: 1, Value: 21.0 Row: 14, Col: 2, Value: 0.0 Consumer Industries 20.18% Row: 15, Col: 1, Value: 20.18 Row: 15, Col: 2, Value: 0.0 Row: 16, Col: 1, Value: 0.0 S&P 500 19.74% Row: 16, Col: 2, Value: 19.74 Insurance 9.84% Row: 17, Col: 1, Value: 9.84 Row: 17, Col: 2, Value: 0.0 Financial Services 8.42% Row: 18, Col: 1, Value: 8.42 Row: 18, Col: 2, Value: 0.0 Food & Agriculture 7.83% Row: 19, Col: 1, Value: 7.83 Row: 19, Col: 2, Value: 0.0 Brokerage & Investment Management 4.76% Row: 20, Col: 1, Value: 4.76 Row: 20, Col: 2, Value: 0.0 Air Transportation 4.11% Row: 21, Col: 1, Value: 4.11 Row: 21, Col: 2, Value: 0.0 Regional Banks 3.10% Row: 22, Col: 1, Value: 3.1 Row: 22, Col: 2, Value: 0.0 Industrial Equipment 1.00% Row: 23, Col: 1, Value: 1.0 Row: 23, Col: 2, Value: 0.0 Transportation -1.73% Row: 24, Col: 1, Value: -1.73 Row: 24, Col: 2, Value: 0.0 Construction & Housing -2.16% Row: 25, Col: 1, Value: -2.16 Row: 25, Col: 2, Value: 0.0 Cyclical Industries -4.96% Row: 26, Col: 1, Value: -4.96 Row: 26, Col: 2, Value: 0.0 Automotive -8.52% Row: 27, Col: 1, Value: -8.52 Row: 27, Col: 2, Value: 0.0 Defense & Aerospace -9.90% Row: 28, Col: 1, Value: -9.9 Row: 28, Col: 2, Value: 0.0 Precious Metals & Minerals -10.89% Row: 29, Col: 1, Value: -10.89 Row: 29, Col: 2, Value: 0.0 Gold -15.69% Row: 30, Col: 1, Value: -15.69 Row: 30, Col: 2, Value: 0.0 Paper & Forest -17.01% Row: 31, Col: 1, Value: -17.01 Row: 31, Col: 2, Value: 0.0 Industrial Materials -18.72% Row: 32, Col: 1, Value: -18.72 Row: 32, Col: 2, Value: 0.0 Home Finance -19.12% Row: 33, Col: 1, Value: -19.12 Row: 33, Col: 2, Value: 0.0 Natural Gas -19.17% Row: 34, Col: 1, Value: -19.17 Row: 34, Col: 2, Value: 0.0 Energy -22.00% Row: 35, Col: 1, Value: -22.0 Row: 35, Col: 2, Value: 0.0 Environmental Services -22.23% Row: 36, Col: 1, Value: -22.23 Row: 36, Col: 2, Value: 0.0 Chemicals -23.66% Row: 37, Col: 1, Value: -23.66 Row: 37, Col: 2, Value: 0.0 Natural Resources -24.57% Row: 38, Col: 1, Value: -24.57 Row: 38, Col: 2, Value: 0.0 Medical Delivery -29.47% Row: 39, Col: 1, Value: -29.47 Row: 39, Col: 2, Value: 0.0 Energy Service -50.57% Row: 40, Col: 1, Value: -50.57 Row: 40, Col: 2, Value: 0.0 Row: 41, Col: 1, Value: nil Row: 41, Col: 2, Value: nil 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)), A MARKET CAPITALIZATION-WEIGHTED INDEX OF COMMON STOCKS, 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 FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND 1996 SELECT CONSUMER INDUSTRIES 20.18% 142.30% 344.37% SELECT CONSUMER INDUSTRIES 16.50% 134.96% 330.97% (LOAD ADJ.) S&P 500 19.74% 194.91% 331.09% GS Consumer Industries 16.26% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or since the fund started on June 29, 1990. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND 1996 SELECT CONSUMER INDUSTRIES 20.18% 19.36% 18.78% SELECT CONSUMER INDUSTRIES 16.50% 18.63% 18.36% (LOAD ADJ.) S&P 500 19.74% 24.15% 18.36% GS Consumer Industries 16.26% 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 33410.05 33088.01 1998/09/30 33612.21 35207.63 1998/10/31 37709.28 38071.42 1998/11/30 39825.21 40378.93 1998/12/31 42711.33 42705.56 1999/01/31 43537.91 44491.51 1999/02/26 43097.00 43108.71 IMATRL PRASUN SHR__CHT 19990228 19990309 143604 R00000000000107 $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 February 28, 1999, the value of the investment would have grown to $43,097 - a 330.97% 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 $43,109 - a 331.09% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Wal-Mart Stores, Inc. 6.7 Procter & Gamble Co. 4.6 Philip Morris Companies, Inc. 3.9 Home Depot, Inc. 3.1 McDonald's Corp. 2.7 CBS Corp. 2.3 Gillette Co. 2.2 Disney (Walt) Co. 2.2 Time Warner, Inc. 2.2 PepsiCo, Inc. 2.0 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS General Merchandise Stores 12.5% Household Products 11.2% Broadcasting 10.5% Foods 7.5% Retail & Wholesale, Miscellaneous 6.4% All Others 51.9%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 51.9 Row: 1, Col: 2, Value: 6.4 Row: 1, Col: 3, Value: 7.5 Row: 1, Col: 4, Value: 10.5 Row: 1, Col: 5, Value: 11.2 Row: 1, Col: 6, Value: 12.5 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. For the 12-month period that ended February 28, 1999, the fund returned 20.18%. This compared favorably to the 19.74% return of the Standard & Poor's 500 Index. The fund also outperformed 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 16.26% over the same period. Q. WHAT WAS YOUR STRATEGY DURING THIS VOLATILE PERIOD? A. I looked for opportunities to buy undervalued companies, as well as companies that appeared to have the best business trends at the time. In the beginning of August, I began to shift from retailing stocks to multinational companies, because multinationals were cheap and retailers were getting expensive. When the market plummeted in late August, retailing took it on the chin, so as retail stocks got cheaper, I added more to the portfolio. With the approach of the end of the calendar year - the usual time for retail stock sell-offs - I decided that conditions still looked positive after talking to the management of many retailers. I pared back the fund's multinational holdings and added even more retail stocks. This strategy worked well. Within the consumer products area, I stayed focused on household products and personal care during the year rather than on food, beverage and tobacco. The first two groups tend to have higher sales growth and better earnings growth over time, because it's much easier to innovate in these areas. Q. HOW MUCH OF AN IMPACT DID GLOBAL ECONOMIC PROBLEMS HAVE ON THE FUND? A. Among consumer stocks, I observed that generally if the majority of a company's sales came from the U.S., and if it made its earnings targets, its stock performed well. If the majority of sales came from outside the U.S., then its stock did poorly, whether or not the company made its earnings targets. So, multinational companies like Coca-Cola, Gillette and Avon were punished, regardless of the impact on their earnings from international economic problems. Q. WHICH STOCKS PERFORMED WELL? A. By their nature, retailers operate primarily in the U.S., so they generally performed well during the period. Dayton Hudson - which owns discounter Target Stores - Lowe's hardware stores and Saks all performed strongly. Wal-Mart, the fund's top holding at the end of the period, was a stellar performer, benefiting from its steadily increasing market share and its growing earnings. Clorox acquired First Brands, the maker of Glad Bag products, and its stock price increased as a result. Clorox also performed well based on its earnings and volume growth. Drug chains Walgreen and CVS did very well, benefiting from steady earnings growth. Q. WHICH STOCKS DISAPPOINTED? A. As I mentioned earlier, Gillette, one of the fund's top holdings, did poorly overall, recovering slightly toward the end of the period. Gillette did have lower earnings, but it also had a great story - its launch of the new Mach 3 razor. Although the launch was a huge success, it could not offset the impact of the global economic crisis. Coca-Cola was another disappointment. With the majority of its sales outside the U.S., Coca-Cola had significant international exposure, and its stock performed poorly. Avon was an even bigger disappointment, because in spite of meeting earnings targets and maintaining earnings estimates, its stock was extremely volatile, simply because the majority of its business is outside the U.S. Q. WHAT'S YOUR OUTLOOK, DOUG? A. I'm always cautious. Consumer activity is very strong right now, but the U.S. may not have absorbed the total impact of the world's economic problems. It is possible that the U.S. economy simply cannot strengthen much further without triggering wage inflation. Stocks have become much more expensive without a corresponding decline in interest rates to justify their higher price-to-earnings ratios. I'm continuing to take a bottom-up approach, picking high-quality stocks rather than betting on the direction of the economy. I'm also taking a long-term view, waiting for opportunities to present themselves rather than trying to predict the future or reacting emotionally to events in the market. So far, that's proved to be a successful strategy for 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: June 29, 1990 FUND NUMBER: 517 TRADING SYMBOL: FSCPX SIZE: as of February 28, 1999, more than $82 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 FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.5% SHARES VALUE (NOTE 1) ADVERTISING - 1.8% Interpublic Group of 4,000 $ 299,250 Companies, Inc. Omnicom Group, Inc. 9,200 609,500 Outdoor Systems, Inc. (a) 9,875 275,883 Young & Rubicam, Inc. 6,600 249,150 1,433,783 AIR TRANSPORTATION - 0.3% Viad Corp. 10,400 274,950 APPAREL STORES - 4.6% Abercrombie & Fitch Co. Class 7,100 539,600 A (a) AnnTaylor Stores Corp. (a) 10,700 404,594 Chicos Fas, Inc. (a) 5,500 135,438 Gap, Inc. 17,225 1,114,242 Limited, Inc. (The) 22,200 788,100 Ross Stores, Inc. 3,500 160,125 TJX Companies, Inc. 16,300 465,569 Wet Seal, Inc. Class A (a) 4,500 174,656 3,782,324 AUTOS, TIRES, & ACCESSORIES - 0.4% Canadian Tire Corp. Ltd. 4,900 124,791 Series A Pep Boys-Manny, Moe & Jack 8,700 158,775 283,566 BEVERAGES - 5.8% Anheuser-Busch Companies, 17,200 1,319,025 Inc. Celestial Seasonings, Inc. (a) 5,300 153,038 Coca-Cola Co. (The) 7,600 485,925 Coors (Adolph) Co. Class B 5,100 303,769 Golden State Vinters, Inc. 21,300 258,263 Class B (a) PepsiCo, Inc. 42,600 1,602,825 Seagram Co. Ltd. 12,800 593,394 4,716,239 BROADCASTING - 10.5% Cablevision Systems Corp. 5,000 325,000 Class A (a) CBS Corp. 49,800 1,836,375 Chancellor Media Corp. (a) 4,100 179,375 Clear Channel Communications, 5,200 312,000 Inc. (a) Comcast Corp.: Class A 5,000 339,375 Class A (special) 5,900 418,531 Cox Communications, Inc. 8,700 615,525 Class A (a) Jacor Communications, Inc. 8,300 578,925 Class A (a) MediaOne Group, Inc. 17,900 975,550 Tele-Communications, Inc. 14,600 917,063 (TCI Group) Series A (a) Time Warner, Inc. 27,502 1,773,879 USA Networks, Inc. (a) 7,100 282,225 8,553,823 SHARES VALUE (NOTE 1) CONSUMER ELECTRONICS - 1.0% Gemstar International Group 3,600 $ 230,400 Ltd. (a) Newell Co. 14,400 612,000 842,400 DRUG STORES - 2.4% CVS Corp. 16,854 893,262 Walgreen Co. 33,800 1,081,600 1,974,862 EDUCATIONAL SERVICES - 0.1% Apollo Group, Inc. Class A (a) 2,400 72,150 ENTERTAINMENT - 5.8% Carnival Corp. 7,300 324,850 Disney (Walt) Co. 51,300 1,805,119 King World Productions, Inc. 11,800 311,963 (a) Royal Carribean Cruises Ltd. 2,400 79,200 Tele-Communications, Inc. 13,550 730,006 (Liberty Media Group) Series A (a) Viacom, Inc.: Class A (a) 1,900 165,894 Class B (non-vtg.) (a) 14,900 1,316,788 4,733,820 FOODS - 7.5% American Italian Pasta Co. 11,200 285,600 Class A (a) Archer-Daniels-Midland Co. 5,670 85,759 Bestfoods 10,200 478,763 ConAgra, Inc. 12,000 361,500 Corn Products International, 4,050 95,175 Inc. Dean Foods Co. 2,900 105,669 Earthgrains Co. 6,700 164,569 Flowers Industries, Inc. 2,900 70,688 Groupe Danone 900 225,142 Heinz (H.J.) Co. 15,800 860,113 Hershey Foods Corp. 3,100 192,975 Interstate Bakeries Corp. 6,500 156,000 Keebler Foods Co. (a) 9,700 378,300 Kellogg Co. 11,800 436,600 Nabisco Holdings Corp. Class A 8,500 377,188 Quaker Oats Co. 7,800 426,075 Ralston Purina Co. 6,100 164,319 Sanderson Farms, Inc. 7,800 115,050 Sara Lee Corp. 26,700 725,906 Tootsie Roll Industries, Inc. 3,600 165,600 Vlasic Foods International, 7,100 86,531 Inc. (a) Wrigley (Wm.) Jr. Co. 1,700 158,100 6,115,622 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) GENERAL MERCHANDISE STORES - 12.5% Consolidated Stores Corp. (a) 11,428 $ 287,843 Costco Companies, Inc. (a) 8,500 682,656 Dayton Hudson Corp. 24,800 1,551,550 Dollar Tree Stores, Inc. (a) 6,000 240,000 Federated Department Stores, 23,600 898,275 Inc. (a) Nordstrom, Inc. 4,900 197,225 Saks, Inc. (a) 25,543 917,952 Wal-Mart Stores, Inc. 62,900 5,432,975 10,208,476 GROCERY STORES - 4.2% Albertson's, Inc. 11,100 632,700 Kroger Co. (a) 7,800 504,563 Loblaw Companies Ltd. 6,600 170,712 Meyer (Fred), Inc. (a) 16,800 1,079,400 Safeway, Inc. (a) 17,400 1,004,850 3,392,225 HOME FURNISHINGS - 0.1% Maxim Group, Inc. (a) 5,900 106,938 HOUSEHOLD PRODUCTS - 11.2% Alberto-Culver Co. Class A 6,600 143,550 Avon Products, Inc. 18,800 782,550 Church & Dwight Co., Inc. 4,700 196,225 Clorox Co. 9,178 1,085,872 Gillette Co. 33,800 1,812,525 Procter & Gamble Co. 41,700 3,732,150 Unilever NV (NY shares) 18,900 1,369,069 9,121,941 LEISURE DURABLES & TOYS - 1.0% Brunswick Corp. 2,200 46,888 Harley-Davidson, Inc. 4,700 271,719 Hasbro, Inc. 5,500 203,500 Mattel, Inc. 11,800 311,225 833,332 LODGING & GAMING - 1.0% Circus Circus Enterprises, 11,400 195,225 Inc. (a) Prime Hospitality Corp. (a) 23,900 244,975 Promus Hotel Corp. (a) 7,200 253,350 Sun International Hotels Ltd. 3,400 120,913 (a) 814,463 MEDICAL FACILITIES MANAGEMENT - - 0.0% Coram Healthcare Corp. 216 0 warrants 7/11/99 (a) SHARES VALUE (NOTE 1) PACKAGING & CONTAINERS - 0.7% Corning, Inc. 6,700 $ 358,450 Tupperware Corp. 9,900 173,250 531,700 PAPER & FOREST PRODUCTS - 1.0% Kimberly-Clark Corp. 17,900 845,775 PRINTING - 0.2% Reynolds & Reynolds Co. Class 5,400 101,925 A Valassis Communications, Inc. 1,100 52,800 (a) 154,725 PUBLISHING - 3.1% American Greetings Corp. 2,500 59,219 Class A Gannet, Inc. 7,800 495,300 Harcourt General, Inc. 6,100 279,456 Harte Hanks Communications, 4,700 121,613 Inc. Knight-Ridder, Inc. 2,200 110,413 McGraw-Hill Companies, Inc. 4,700 514,356 Playboy Enterprises, Inc. 11,900 318,325 Class B (a) Reader's Digest Association, 11,600 394,400 Inc. Class A (non-vtg.) Tribune Co. 3,100 205,569 2,498,651 REAL ESTATE INVESTMENT TRUSTS - - 0.3% Starwood Hotels & Resorts 7,300 226,300 Worldwide, Inc. RESTAURANTS - 4.5% Brinker International, Inc. 2,800 81,025 (a) CEC Entertainment, Inc. (a) 2,600 78,000 CKE Restaurants, Inc. 5,700 151,406 Marriott International, Inc. 7,500 270,000 Class A McDonald's Corp. 25,700 2,184,500 Outback Steakhouse, Inc. (a) 5,600 245,700 Papa John's International, 2,000 86,500 Inc. (a) Sizzler International, Inc. 29,900 63,538 (a) Starbucks Corp. (a) 2,200 116,325 Tricon Global Restaurants, 6,700 415,400 Inc. (a) 3,692,394 RETAIL & WHOLESALE, MISCELLANEOUS - 6.4% Action Performance Companies, 5,700 204,488 Inc. (a) Finish Line, Inc. Class A (a) 12,900 155,606 Home Depot, Inc. 41,800 2,494,938 Lowe's Companies, Inc. 18,700 1,109,144 Office Depot, Inc. (a) 21,200 756,575 Staples, Inc. (a) 10,275 302,149 Tandy Corp. 2,100 116,813 Williams-Sonoma, Inc. (a) 2,100 71,794 5,211,507 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SERVICES - 1.1% ACNielsen Corp. (a) 10,900 $ 283,400 Cintas Corp. 2,800 198,100 Day Runner, Inc. (a) 2,500 34,063 Modis Professional Services, 7,800 106,763 Inc. (a) Service Corp. International 6,000 92,250 ServiceMaster Co. 9,350 174,728 889,304 TEXTILES & APPAREL - 1.1% Fruit of the Loom, Inc. Class 3,100 39,331 A (a) Liz Claiborne, Inc. 4,700 158,331 Mohawk Industries, Inc. (a) 1,200 39,000 Pacific Sunwear of 4,850 138,225 California, Inc. (a) Tommy Hilfiger (a) 3,900 269,344 VF Corp. 2,600 125,125 WestPoint Stevens, Inc. Class 3,400 86,700 A (a) 856,056 TOBACCO - 3.9% Philip Morris Companies, Inc. 81,700 3,196,513 TOTAL COMMON STOCKS 75,363,839 (Cost $58,708,527) CASH EQUIVALENTS - 7.5% Taxable Central Cash Fund (b) 6,128,201 6,128,201 (Cost $6,128,201) TOTAL INVESTMENT IN $ 81,492,040 SECURITIES - 100% (Cost $64,836,728) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $109,279,094 and $115,562,379, respectively. 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 $17,657 for the period. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $65,576,721. Net unrealized appreciation aggregated $15,915,319, of which $17,581,133 related to appreciated investment securities and $1,665,814 related to depreciated investment securities. The fund hereby designates approximately $697,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 29% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for use in preparing 1999 income tax returns. CONSUMER INDUSTRIES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 81,492,040 value (cost $64,836,728) - See accompanying schedule Receivable for investments 814,718 sold Receivable for fund shares 719,696 sold Dividends receivable 43,182 Interest receivable 16,458 Redemption fees receivable 67 Other receivables 35,533 TOTAL ASSETS 83,121,694 LIABILITIES Payable for investments $ 639,912 purchased Payable for fund shares 143,891 redeemed Accrued management fee 39,145 Other payables and accrued 54,646 expenses TOTAL LIABILITIES 877,594 NET ASSETS $ 82,244,100 Net Assets consist of: Paid in capital $ 63,406,467 Accumulated undistributed net 2,182,319 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 16,655,314 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 2,585,485 $ 82,244,100 shares outstanding NET ASSET VALUE and $31.81 redemption price per share ($82,244,100 (divided by) 2,585,485 shares) Maximum offering price per $32.79 share (100/97.00 of $31.81) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 658,885 Dividends Interest 250,336 TOTAL INCOME 909,221 EXPENSES Management fee $ 457,965 Transfer agent fees 441,855 Accounting fees and expenses 75,037 Non-interested trustees' 274 compensation Custodian fees and expenses 17,783 Registration fees 21,053 Audit 17,180 Legal 531 Reports to shareholders 8,724 Total expenses before 1,040,402 reductions Expense reductions (13,370) 1,027,032 NET INVESTMENT INCOME (LOSS) (117,811) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 2,848,102 Foreign currency transactions 981 2,849,083 Change in net unrealized appreciation (depreciation) on: Investment securities 10,439,472 Assets and liabilities in (37) 10,439,435 foreign currencies NET GAIN (LOSS) 13,288,518 NET INCREASE (DECREASE) IN $ 13,170,707 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 342,823 charges paid to FDC Sales charges - Retained by $ 339,350 FDC Deferred sales charges $ 208 withheld by FDC Exchange fees withheld by FSC $ 4,553 Expense reductions Directed $ 12,166 brokerage arrangements Custodian credits 1,204 $ 13,370
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (117,811) $ (238,907) income (loss) Net realized gain (loss) 2,849,083 5,217,352 Change in net unrealized 10,439,435 4,912,453 appreciation (depreciation) NET INCREASE (DECREASE) IN 13,170,707 9,890,898 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (2,388,067) (1,876,813) from net realized gains Share transactions Net 69,216,485 75,182,201 proceeds from sales of shares Reinvestment of distributions 2,350,548 1,832,262 Cost of shares redeemed (72,339,516) (31,326,802) NET INCREASE (DECREASE) IN (772,483) 45,687,661 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 81,867 58,220 TOTAL INCREASE (DECREASE) 10,092,024 53,759,966 IN NET ASSETS NET ASSETS Beginning of period 72,152,076 18,392,110 End of period $ 82,244,100 $ 72,152,076 OTHER INFORMATION Shares Sold 2,390,153 3,007,674 Issued in reinvestment of 82,715 74,511 distributions Redeemed (2,529,261) (1,330,685) Net increase (decrease) (56,393) 1,751,500
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 F 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 27.31 $ 20.66 $ 17.84 $ 13.91 $ 15.24 period Income from Investment Operations Net investment income (loss) C (.04) (.22) (.22) .08 (.15) Net realized and unrealized 5.41 8.34 2.93 3.97 (.60) gain (loss) Total from investment 5.37 8.12 2.71 4.05 (.75) operations Less Distributions From net investment income - - - (.02) - From net realized gain (.90) (1.52) - (.01) (.60) In excess of net realized gain - - - (.20) - Total distributions (.90) (1.52) - (.23) (.60) Redemption fees added to paid .03 .05 .11 .11 .02 in capital Net asset value, end of period $ 31.81 $ 27.31 $ 20.66 $ 17.84 $ 13.91 TOTAL RETURN A, B 20.18% 40.36% 15.81% 30.01% (4.59)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 82,244 $ 72,152 $ 18,392 $ 22,362 $ 20,501 (000 omitted) Ratio of expenses to average 1.34% 2.01% 2.49% 1.53% D 2.49% D net assets Ratio of expenses to average 1.32% E 1.97% E 2.44% E 1.48% E 2.49% net assets after expense reductions Ratio of net investment (.15)% (.90)% (1.13)% .46% (1.08)% income (loss) to average net assets Portfolio turnover rate 150% 199% 340% 601% 190%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D 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. 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 THE YEAR ENDED FEBRUARY 29. 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 FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1996 SELECT FOOD AND AGRICULTURE 7.83% 129.93% 435.61% SELECT FOOD AND AGRICULTURE 4.52% 122.96% 419.46% (LOAD ADJ.) S&P 500 19.74% 194.91% 459.21% GS Consumer Industries 16.26% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1996 SELECT FOOD AND AGRICULTURE 7.83% 18.12% 18.27% SELECT FOOD AND AGRICULTURE 4.52% 17.39% 17.91% (LOAD ADJ.) S&P 500 19.74% 24.15% 18.78% GS Consumer Industries 16.26% 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 1989/02/28 9700.00 10000.00 1989/03/31 10067.19 10233.00 1989/04/30 10587.38 10764.09 1989/05/31 11240.17 11200.04 1989/06/30 11461.02 11136.20 1989/07/31 12554.29 12141.80 1989/08/31 12360.75 12379.78 1989/09/30 12413.06 12329.02 1989/10/31 12287.52 12042.99 1989/11/30 12753.07 12288.66 1989/12/31 13045.22 12583.59 1990/01/31 12137.82 11739.23 1990/02/28 12311.46 11890.67 1990/03/31 12843.57 12205.77 1990/04/30 12793.16 11900.63 1990/05/31 13907.80 13060.94 1990/06/30 14358.95 12972.12 1990/07/31 14353.29 12930.61 1990/08/31 13306.22 11761.68 1990/09/30 12881.74 11188.89 1990/10/31 13187.37 11140.78 1990/11/30 13730.71 11860.47 1990/12/31 14261.95 12191.38 1991/01/31 14671.27 12722.92 1991/02/28 15776.44 13632.61 1991/03/31 16548.31 13962.52 1991/04/30 16296.86 13996.03 1991/05/31 16893.31 14600.66 1991/06/30 16197.29 13931.95 1991/07/31 16875.15 14581.18 1991/08/31 17547.06 14926.75 1991/09/30 17237.86 14677.48 1991/10/31 17243.81 14874.16 1991/11/30 17124.88 14274.73 1991/12/31 19123.80 15907.76 1992/01/31 18838.74 15611.87 1992/02/29 18733.39 15814.83 1992/03/31 18318.20 15506.44 1992/04/30 18107.50 15962.33 1992/05/31 18268.62 16040.54 1992/06/30 18068.88 15801.54 1992/07/31 18766.79 16447.82 1992/08/31 18683.55 16110.64 1992/09/30 18997.29 16300.75 1992/10/31 19202.19 16357.80 1992/11/30 19938.51 16915.60 1992/12/31 20276.20 17123.66 1993/01/31 20282.75 17267.50 1993/02/28 20230.31 17502.34 1993/03/31 20780.97 17871.64 1993/04/30 19974.08 17439.14 1993/05/31 20602.97 17906.51 1993/06/30 20397.90 17958.44 1993/07/31 20144.98 17886.61 1993/08/31 21108.82 18564.51 1993/09/30 21040.46 18421.56 1993/10/31 21833.41 18802.89 1993/11/30 21580.48 18624.26 1993/12/31 22064.04 18849.62 1994/01/31 22731.34 19490.50 1994/02/28 22595.01 18962.31 1994/03/31 21540.24 18135.55 1994/04/30 21299.56 18367.69 1994/05/31 21144.79 18668.92 1994/06/30 21306.93 18211.53 1994/07/31 22021.83 18808.87 1994/08/31 23422.14 19580.03 1994/09/30 23466.36 19100.32 1994/10/31 23908.57 19530.08 1994/11/30 23326.33 18818.79 1994/12/31 23408.61 19097.87 1995/01/31 24395.44 19593.08 1995/02/28 24885.04 20356.63 1995/03/31 25451.13 20957.35 1995/04/30 26007.40 21574.54 1995/05/31 26940.68 22436.88 1995/06/30 27578.42 22958.09 1995/07/31 27881.74 23719.38 1995/08/31 27835.07 23778.91 1995/09/30 30020.50 24782.38 1995/10/31 30067.17 24693.91 1995/11/30 31249.32 25777.97 1995/12/31 31985.24 26274.46 1996/01/31 33304.39 27168.84 1996/02/29 34322.25 27420.69 1996/03/31 33744.11 27684.75 1996/04/30 33128.99 28092.83 1996/05/31 34351.03 28817.34 1996/06/30 34384.52 28927.14 1996/07/31 33915.79 27649.13 1996/08/31 32836.04 28232.26 1996/09/30 33949.27 29821.17 1996/10/31 34577.03 30643.63 1996/11/30 36318.02 32959.99 1996/12/31 36255.11 32307.05 1997/01/31 37822.28 34325.59 1997/02/28 38986.72 34594.71 1997/03/31 37971.12 33173.21 1997/04/30 39477.60 35153.65 1997/05/31 40640.08 37293.80 1997/06/30 41990.06 38964.57 1997/07/31 43499.42 42064.98 1997/08/31 41493.20 39708.50 1997/09/30 43986.91 41883.33 1997/10/31 43199.42 40484.43 1997/11/30 46152.51 42358.45 1997/12/31 47253.51 43085.75 1998/01/31 45664.24 43562.28 1998/02/28 48181.40 46703.99 1998/03/31 50027.32 49095.70 1998/04/30 48760.67 49589.60 1998/05/31 49869.58 48737.16 1998/06/30 50915.73 50716.86 1998/07/31 49084.98 50176.72 1998/08/31 44314.57 42922.17 1998/09/30 46773.00 45671.77 1998/10/31 50936.65 49386.71 1998/11/30 52997.55 52380.04 1998/12/31 54666.56 55398.18 1999/01/31 52452.00 57714.93 1999/02/26 51946.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990309 144216 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Food and Agriculture Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $51,946 - a 419.46% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Anheuser-Busch Companies, Inc. 7.4 McDonald's Corp. 6.9 PepsiCo, Inc. 5.8 Safeway, Inc. 5.7 Sara Lee Corp. 4.7 Philip Morris Companies, Inc. 4.3 Unilever NV (NY shares) 3.7 Heinz (H.J.) Co. 3.6 Kroger Co. 3.4 Coca-Cola Co. (The) 3.2 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Foods 35.1% Beverages 19.3% Grocery Stores 18.8% Restaurants 8.9% Household Products 5.3% All Others 12.6%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 12.6 Row: 1, Col: 2, Value: 5.3 Row: 1, Col: 3, Value: 8.9 Row: 1, Col: 4, Value: 18.8 Row: 1, Col: 5, Value: 19.3 Row: 1, Col: 6, Value: 35.1 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 12 months that ended February 28, 1999, the fund posted a total return of 7.83%, while the Standard & Poor's 500 Index returned 19.74% and the Goldman Sachs Consumer Industries Index - an index of 300 stocks designed to measure the performance of companies in the consumer industries sector - returned 16.26% during the same 12-month period. Q. WHAT FACTORS AFFECTED THE FOOD AND AGRICULTURE SECTOR OVER THE PAST YEAR? A. It was a difficult period for most of the sector. The most significant detractor to performance was the earnings shortfall suffered by many packaged-foods companies. These earnings disappointments were tied to the increased bargaining power grocery store chains have developed through active consolidation. By creating economies of scale - where growing to a certain size can lower costs - the grocers have increased their leverage and helped force packaged-food companies to sell their products to them at lower prices. That deflation cut into food company earnings. In addition, buying and eating trends among Americans have changed. Consumers are buying more lower-priced, private-label or store-brand products and are purchasing more prepared meals. These trends hurt food companies' earnings at a time when, amid the volatile backdrop of the past year, investors generally gravitate toward them; they generally post steady earnings growth that arises from fairly constant demand for their products. But earnings shortfalls dominated to the point where they even hurt the share prices of some companies that met or exceeded their earnings expectations. Q. HOW DID THE OTHER GROUPS WITHIN THE SECTOR FARE? A. They generally struggled as well. Beverage company stocks were basically flat, including Coca-Cola, which was hurt by slowing overseas sales. Tobacco companies, including Philip Morris, rebounded when an agreement was reached with the states' attorneys general, but started lagging again when a new round of civil litigation started. Agricultural stocks were hurt by a deflationary environment. On the positive side, beer stocks did well because of improved unit growth and pricing power - the ability to sustain or raise prices without sacrificing sales or market share. Q. WHICH STOCKS WERE THE TOP CONTRIBUTORS TO THE FUND'S PERFORMANCE? WHICH STOCKS DETRACTED? A. Anheuser-Busch was a top performer, as this beer company enjoyed the strong unit growth and pricing power I just talked about. Safeway and Kroger also did well, as they bought up smaller supermarkets. As I mentioned, large supermarket chains are strengthening through consolidation, so I maintained a healthy weighting in that arena. McDonald's improved its earnings by reducing costs in its U.S. operations. In addition, the company's international business started to generate free cash flow so that the company's overall cash flow generation improved. Philip Morris, which I already mentioned, was a net winner due to the tobacco settlement. On the negative side, Dole Foods was hurt because Hurricane Mitch interrupted the banana market. And Corn Products International proved to be one of the fund's worst detractors. This is the kind of story that can confound stock market investors from time to time. Stock prices generally follow a company's earnings: When earnings improve or surprise on the upside, a stock generally goes up, and vice versa. Corn Products International posted one of the strongest growth rates in earnings among the stocks in the fund. The company increased its earnings per share during the period, yet the stock price fell over the past year. It's hard to pinpoint why the stock didn't attract more investor interest. Perhaps it lagged because it's a smaller-capitalization stock and investors focused more on large-caps during the period, or maybe the company's story wasn't as "sexy" as alternatives in the marketplace, such as Internet stocks. The stock market doesn't always react logically. Q. WHAT'S YOUR OUTLOOK? A. Looking specifically at the packaged-food industry, these are companies that could benefit from a round of consolidation. The resulting larger companies would benefit from reduced costs and economies of scale that would help them bargain for better pricing. As it stands, there's too much competition and most of these firms have been reluctant to consolidate. Looking at the overall sector, most companies have improved their business plans. In addition, I think investors have reset their expectations for the companies in the sector, looking to see if they can match earnings projections that are perhaps a bit more achievable. I believe the future looks better than the recent past, but we'll have to see how it plays out. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 009 TRADING SYMBOL: FDFAX SIZE: as of February 28, 1999, more than $206 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 FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.7% SHARES VALUE (NOTE 1) AGRICULTURE - 0.4% Delta & Pine Land Co. 10,100 $ 326,988 Pioneer Hi-Bred 21,300 499,219 International, Inc. 826,207 BEVERAGES - 19.3% Anheuser-Busch Companies, 198,500 15,222,465 Inc. Celestial Seasonings, Inc. (a) 24,400 704,550 Coca-Cola Bottling Co. 20,100 1,125,600 Consolidated Coca-Cola Co. (The) 104,600 6,687,863 Coca-Cola Enterprises, Inc. 29,800 923,800 Coors (Adolph) Co. Class B 41,300 2,459,931 PepsiCo, Inc. 317,800 11,957,225 Whitman Corp. 38,000 722,000 39,803,434 CHEMICALS & PLASTICS - 0.5% IMC Global, Inc. 46,700 931,081 FOODS - 35.1% American Italian Pasta Co. 36,000 918,000 Class A (a) Archer-Daniels-Midland Co. 181,259 2,741,542 Aurora Foods, Inc. (a) 28,400 459,725 Bestfoods 101,200 4,750,075 ConAgra, Inc. 191,400 5,765,925 Corn Products International, 147,375 3,463,313 Inc. Dean Foods Co. 19,600 714,175 Dole Food, Inc. 24,100 759,150 Earthgrains Co. 29,300 719,681 Flowers Industries, Inc. 74,600 1,818,375 General Mills, Inc. 24,100 1,944,569 Groupe Danone 5,300 1,325,833 Heinz (H.J.) Co. 136,500 7,430,719 Hershey Foods Corp. 35,700 2,222,325 Hormel Foods Corp. 25,200 907,200 IBP, Inc. 35,300 794,250 International Home Foods, 26,600 415,625 Inc. (a) Interstate Bakeries Corp. 34,900 837,600 Keebler Foods Co. (a) 61,300 2,390,700 McCormick & Co., Inc. 22,100 632,613 (non-vtg.) Nabisco Holdings Corp. Class A 55,300 2,453,938 Nestle SA: ADR (Reg.) 34,700 3,313,850 (Reg.) 956 1,806,952 Quaker Oats Co. 46,900 2,561,913 Ralston Purina Co. 111,800 3,011,613 Sanderson Farms, Inc. 46,900 691,775 Sara Lee Corp. 356,600 9,695,063 Smithfield Foods, Inc. (a) 22,500 591,328 Suiza Foods Corp. (a) 11,700 432,900 Sysco Corp. 135,600 3,830,700 Tootsie Roll Industries, Inc. 19,562 899,852 SHARES VALUE (NOTE 1) Tyson Foods, Inc. 50,925 $ 1,043,963 United Biscuits Holdings PLC 54,555 158,725 Universal Foods Corp. 19,200 435,600 Vlasic Foods International, 20,000 243,750 Inc. (a) Wrigley (Wm.) Jr. Co. 4,200 390,600 72,573,917 GROCERY STORES - 18.8% Albertson's, Inc. 111,600 6,361,200 American Stores Co. 162,800 5,494,500 Hannaford Brothers Co. 40,500 1,903,500 Kroger Co. (a) 108,800 7,038,000 Meyer (Fred), Inc. (a) 83,500 5,364,875 Safeway, Inc. (a) 204,200 11,792,550 Supervalu, Inc. 39,800 957,688 38,912,313 HOLDING COMPANIES - 0.1% Triarc Companies, Inc. Class 19,600 311,150 A (a) HOUSEHOLD PRODUCTS - 5.3% Unilever NV (NY shares) 105,800 7,663,888 Unilever PLC 326,900 3,187,251 10,851,139 RESTAURANTS - 8.9% McDonald's Corp. 166,400 14,144,000 Outback Steakhouse, Inc. (a) 29,200 1,281,150 Tricon Global Restaurants, 46,100 2,858,200 Inc. (a) 18,283,350 TOBACCO - 4.3% Philip Morris Companies, Inc. 227,600 8,904,850 TOTAL COMMON STOCKS 191,397,441 (Cost $157,237,335) CASH EQUIVALENTS - 7.3% Taxable Central Cash Fund (b) 15,157,520 15,157,520 (Cost $15,157,520) TOTAL INVESTMENT IN $ 206,554,961 SECURITIES - 100% (Cost $172,394,855) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $141,491,375 and $202,525,536, respectively. 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 $54,460 for the period. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $172,928,466. Net unrealized appreciation aggregated $33,626,495, of which $38,352,761 related to appreciated investment securities and $4,726,266 related to depreciated investment securities. The fund hereby designates approximately $27,714,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for use in preparing 1999 income tax returns. FOOD AND AGRICULTURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 206,554,961 value (cost $172,394,855) - See accompanying schedule Receivable for fund shares 208,427 sold Dividends receivable 214,122 Interest receivable 60,759 Redemption fees receivable 280 TOTAL ASSETS 207,038,549 LIABILITIES Payable for fund shares $ 801,602 redeemed Accrued management fee 101,113 Other payables and accrued 128,848 expenses TOTAL LIABILITIES 1,031,563 NET ASSETS $ 206,006,986 Net Assets consist of: Paid in capital $ 163,091,993 Undistributed net investment 490,066 income Accumulated undistributed net 8,264,883 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 34,160,044 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 4,390,575 $ 206,006,986 shares outstanding NET ASSET VALUE and $46.92 redemption price per share ($206,006,986 (divided by) 4,390,575 shares) Maximum offering price per $48.37 share (100/97.00 of $46.92) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 3,016,334 Dividends Interest (including income on 929,718 securities loaned of $39,045) TOTAL INCOME 3,946,052 EXPENSES Management fee $ 1,335,082 Transfer agent fees 1,340,677 Accounting and security 222,264 lending fees Non-interested trustees' 796 compensation Custodian fees and expenses 15,000 Registration fees 23,434 Audit 15,760 Legal 1,372 Reports to shareholders 34,266 Total expenses before 2,988,651 reductions Expense reductions (62,961) 2,925,690 NET INVESTMENT INCOME 1,020,362 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 20,703,810 Foreign currency transactions (31,096) 20,672,714 Change in net unrealized appreciation (depreciation) on: Investment securities (4,236,124) Assets and liabilities in (42) (4,236,166) foreign currencies NET GAIN (LOSS) 16,436,548 NET INCREASE (DECREASE) IN $ 17,456,910 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 373,556 charges paid to FDC Sales charges - Retained by $ 371,478 FDC Deferred sales charges $ 5,955 withheld by FDC Exchange fees withheld by FSC $ 16,665 Expense reductions Directed $ 62,550 brokerage arrangements Custodian credits 411 $ 62,961
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ 1,020,362 $ 1,795,355 income Net realized gain (loss) 20,672,714 33,786,692 Change in net unrealized (4,236,166) 14,339,862 appreciation (depreciation) NET INCREASE (DECREASE) IN 17,456,910 49,921,909 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (739,119) (2,133,491) From net investment income From net realized gain (25,615,738) (27,598,622) TOTAL DISTRIBUTIONS (26,354,857) (29,732,113) Share transactions Net 80,793,360 212,263,562 proceeds from sales of shares Reinvestment of distributions 25,579,323 29,301,818 Cost of shares redeemed (142,182,438) (234,907,260) NET INCREASE (DECREASE) IN (35,809,755) 6,658,120 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 148,005 296,205 TOTAL INCREASE (DECREASE) (44,559,697) 27,144,121 IN NET ASSETS NET ASSETS Beginning of period 250,566,683 223,422,562 End of period (including $ 206,006,986 $ 250,566,683 undistributed net investment income of $490,066 and $367,788, respectively) OTHER INFORMATION Shares Sold 1,684,840 4,609,772 Issued in reinvestment of 536,693 675,395 distributions Redeemed (2,964,307) (5,169,172) Net increase (decrease) (742,774) 115,995
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 48.81 $ 44.53 $ 42.15 $ 32.53 $ 31.49 period Income from Investment Operations Net investment income C .21 .33 .42 .37 .15 Net realized and unrealized 3.50 9.22 4.91 11.61 2.80 gain (loss) Total from investment 3.71 9.55 5.33 11.98 2.95 operations Less Distributions From net investment income (.16) (.37) (.24) (.20) (.08) From net realized gain (5.47) (4.95) (2.77) (2.20) (1.85) Total distributions (5.63) (5.32) (3.01) (2.40) (1.93) Redemption fees added to paid .03 .05 .06 .04 .02 in capital Net asset value, end of period $ 46.92 $ 48.81 $ 44.53 $ 42.15 $ 32.53 TOTAL RETURN A, B 7.83% 23.58% 13.59% 37.92% 10.14% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 206,007 $ 250,567 $ 223,423 $ 301,102 $ 197,130 (000 omitted) Ratio of expenses to average 1.31% 1.49% 1.52% 1.43% 1.70% net assets Ratio of expenses to average 1.29% D 1.48% D 1.50% D 1.42% D 1.68% D net assets after expense reductions Ratio of net investment .45% .73% 1.01% .99% .49% income to average net assets Portfolio turnover rate 68% 74% 91% 124% 126% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1996 SELECT LEISURE 37.54% 181.67% 480.93% SELECT LEISURE (LOAD ADJ.) 33.34% 173.15% 463.43% S&P 500 19.74% 194.91% 459.21% GS Consumer Industries 16.26% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index- a market capitalization-weighted 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 FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1996 SELECT LEISURE 37.54% 23.01% 19.24% SELECT LEISURE (LOAD ADJ.) 33.34% 22.26% 18.87% S&P 500 19.74% 24.15% 18.78% GS Consumer Industries 16.26% 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 1989/02/28 9700.00 10000.00 1989/03/31 10155.45 10233.00 1989/04/30 10731.35 10764.09 1989/05/31 11265.85 11200.04 1989/06/30 11372.68 11136.20 1989/07/31 12327.05 12141.80 1989/08/31 12425.91 12379.78 1989/09/30 12505.76 12329.02 1989/10/31 11604.62 12042.99 1989/11/30 11741.50 12288.66 1989/12/31 11917.20 12583.59 1990/01/31 10471.96 11739.23 1990/02/28 10379.11 11890.67 1990/03/31 10459.85 12205.77 1990/04/30 10052.11 11900.63 1990/05/31 10883.73 13060.94 1990/06/30 10758.59 12972.12 1990/07/31 10387.18 12930.61 1990/08/31 9188.20 11761.68 1990/09/30 8316.21 11188.89 1990/10/31 8219.32 11140.78 1990/11/30 8873.31 11860.47 1990/12/31 9261.40 12191.38 1991/01/31 9779.32 12722.92 1991/02/28 10529.69 13632.61 1991/03/31 10705.05 13962.52 1991/04/30 10733.60 13996.03 1991/05/31 11104.70 14600.66 1991/06/30 10480.75 13931.95 1991/07/31 10982.36 14581.18 1991/08/31 11096.55 14926.75 1991/09/30 11382.02 14677.48 1991/10/31 11724.58 14874.16 1991/11/30 11161.80 14274.73 1991/12/31 12311.83 15907.76 1992/01/31 12589.14 15611.87 1992/02/29 13029.57 15814.83 1992/03/31 12764.50 15506.44 1992/04/30 12907.23 15962.33 1992/05/31 12984.71 16040.54 1992/06/30 12784.89 15801.54 1992/07/31 12846.06 16447.82 1992/08/31 12662.54 16110.64 1992/09/30 12911.31 16300.75 1992/10/31 13009.18 16357.80 1992/11/30 13894.13 16915.60 1992/12/31 14310.10 17123.66 1993/01/31 14664.90 17267.50 1993/02/28 14587.41 17502.34 1993/03/31 15345.94 17871.64 1993/04/30 15000.10 17439.14 1993/05/31 16077.60 17906.51 1993/06/30 16510.29 17958.44 1993/07/31 16951.47 17886.61 1993/08/31 18118.05 18564.51 1993/09/30 19021.62 18421.56 1993/10/31 20073.66 18802.89 1993/11/30 19327.05 18624.26 1993/12/31 19970.27 18849.62 1994/01/31 20177.84 19490.50 1994/02/28 20005.60 18962.31 1994/03/31 18795.55 18135.55 1994/04/30 18833.44 18367.69 1994/05/31 18634.12 18668.92 1994/06/30 17846.56 18211.53 1994/07/31 18536.89 18808.87 1994/08/31 19275.84 19580.03 1994/09/30 19270.98 19100.32 1994/10/31 19202.92 19530.08 1994/11/30 18381.32 18818.79 1994/12/31 18604.95 19097.87 1995/01/31 18945.26 19593.08 1995/02/28 19791.16 20356.63 1995/03/31 20311.34 20957.35 1995/04/30 20491.28 21574.54 1995/05/31 20887.79 22436.88 1995/06/30 21695.50 22958.09 1995/07/31 23203.22 23719.38 1995/08/31 23947.29 23778.91 1995/09/30 23986.45 24782.38 1995/10/31 22831.18 24693.91 1995/11/30 23575.25 25777.97 1995/12/31 23620.43 26274.46 1996/01/31 23970.53 27168.84 1996/02/29 25256.03 27420.69 1996/03/31 25381.84 27684.75 1996/04/30 26423.99 28092.83 1996/05/31 27508.22 28817.34 1996/06/30 27402.03 28927.14 1996/07/31 25434.77 27649.13 1996/08/31 26066.30 28232.26 1996/09/30 27334.97 29821.17 1996/10/31 26586.07 30643.63 1996/11/30 27340.56 32959.99 1996/12/31 26786.83 32307.05 1997/01/31 27979.03 34325.59 1997/02/28 27816.19 34594.71 1997/03/31 26786.83 33173.21 1997/04/30 27039.26 35153.65 1997/05/31 29574.00 37293.80 1997/06/30 30740.60 38964.57 1997/07/31 32310.30 42064.98 1997/08/31 31791.14 39708.50 1997/09/30 35297.02 41883.33 1997/10/31 34753.43 40484.43 1997/11/30 36152.11 42358.45 1997/12/31 37846.99 43085.75 1998/01/31 38050.86 43562.28 1998/02/28 40970.77 46703.99 1998/03/31 43831.49 49095.70 1998/04/30 44545.15 49589.60 1998/05/31 43435.22 48737.16 1998/06/30 46610.29 50716.86 1998/07/31 45951.06 50176.72 1998/08/31 37959.57 42922.17 1998/09/30 39486.56 45671.77 1998/10/31 42197.48 49386.71 1998/11/30 46038.51 52380.04 1998/12/31 52198.73 55398.18 1999/01/31 56647.80 57714.93 1999/02/26 56353.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990309 160436 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Leisure Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $56,343 - a 463.43% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS America Online, Inc. 5.8 Time Warner, Inc. 5.8 Disney (Walt) Co. 5.4 McDonald's Corp. 5.3 Microsoft Corp. 4.8 CBS Corp. 4.5 Anheuser-Busch Companies, Inc. 3.3 Tele-Communications, Inc. 3.1 (Liberty Media Group) Series A Gap, Inc. 2.7 Comcast Corp. Class A (special) 2.5 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Broadcasting 25.9% Entertainment 15.3% Computer Services & Software 12.8% Restaurants 8.6% Apparel Stores 6.4% All Others 31.0%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 31.0 Row: 1, Col: 2, Value: 6.4 Row: 1, Col: 3, Value: 8.6 Row: 1, Col: 4, Value: 12.8 Row: 1, Col: 5, Value: 15.3 Row: 1, Col: 6, Value: 25.9 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. Very well. For the 12 months that ended February 28, 1999, the fund returned 37.54%, outperforming the Standard & Poor's 500 Index's return of 19.74%. 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 16.26% over the same 12-month period. Q. WHAT ACCOUNTED FOR THE FUND'S EXCEPTIONALLY STRONG PERFORMANCE? A. The fund's focus on entertainment companies, cable providers and advertising companies - as well as its underweighting in gaming and lodging companies - all contributed to strong performance during the year. A healthy U.S. economy helped entertainment companies to thrive. Many entertainment companies have reduced debt, grown their cash flows and benefited from economies of scale. After the stock market dip in the late summer and early fall, many of these companies got cheaper and, with their fundamentals still strong, I bought more shares. Furthermore, the fund's heavy concentration in cable companies helped performance; cable providers continued to develop new revenue sources during the year, posting strong returns. In general, they had an outstanding year. Though future price increases may be muted on the basic cable side, the advent of digital cable, telephony and online services has boosted the growth rate for this industry. Advertising companies benefited from increased ad budgets and consolidation within the industry. Q. WHICH STOCKS STOOD OUT IN THIS POSITIVE ENVIRONMENT? A. Entertainment companies Time Warner - the fund's number-two holding at the end of the period - and Viacom were both standouts during the year, benefiting from the strength of their cable television networks and their very solid film entertainment divisions. Cable providers Comcast, TCI Group and Cox Communications all performed well, reflecting the success cable systems achieved in offering a much greater range of services to consumers. McDonald's had a great year. The company did a terrific job in restructuring its operations and developed a winning growth strategy that was reflected in its strong stock performance. Reader's Digest was another success story . With a new CEO in place for nearly a year, the leadership at Reader's Digest identified a significant amount of cost cutting and articulated a growth strategy for the future. The reinvigoration of this company was made possible by using its considerable strengths, including its huge customer database, to drive new growth initiatives. Q. WERE THERE ANY DISAPPOINTMENTS? A. Gaming and lodging stocks generally were disappointing, suffering from a decline in demand. However, the fund had very little exposure to these stocks. I did own a few - such as Harrah's - and have sold them from the fund's portfolio. Starwood Hotels, which owns several hotel chains, reflected this industry's sluggish performance as the previously strong trend toward consolidation stalled during 1998. Disney continued to disappoint as lower home-video sales, plus Asia's weakness and its corresponding economic decline, hurt results. However, with the launch of Disney's GO Network and further substantial investment spending this year, the company is making a good effort to position itself for a re-acceleration of growth. Q. WHERE DO YOU SEE NEW OPPORTUNITIES? A. With advertising trends positive, I think we may actually see an acceleration in activity from increased "millennium spending" as the Year 2000 approaches. Add to this an upcoming presidential campaign and the 2000 Olympics, and we should see a very strong second half of 1999, while 2000 should be one of the biggest advertising years in recent memory. Consequently, I'll be looking for companies that could benefit from this phenomenon. Q. WHAT'S YOUR OUTLOOK, JEFF? A. I'm optimistic. At this point, the outlook for leisure stocks is strong, reflecting a healthy U.S. economy and the domestic orientation of most of the companies in this sector. As long as business fundamentals remain attractive, I believe that there are ample opportunities to identify good companies that are well-positioned for the future, and to buy their stock 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: May 8, 1984 FUND NUMBER: 062 TRADING SYMBOL: FDLSX SIZE: as of February 28, 1999, more than $346 million MANAGER: Jeffrey Dorsey, since 1998; manager, Fidelity Select Multimedia Portfolio, since 1997; analyst, fixed-income securities, 1991-1997; joined Fidelity in 1991 LEISURE PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.0% SHARES VALUE (NOTE 1) ADVERTISING - 5.7% Interpublic Group of 62,300 $ 4,660,819 Companies, Inc. Lamar Advertising Co. Class A 30,900 1,193,513 (a) Omnicom Group, Inc. 73,100 4,842,875 Outdoor Systems, Inc. (a) 162,400 4,537,050 WPP Group PLC 235,400 1,864,090 WPP Group PLC sponsored ADR 22,600 1,799,525 Young & Rubicam, Inc. 24,400 921,100 19,818,972 APPAREL STORES - 6.4% Abercrombie & Fitch Co. Class 53,615 4,074,740 A (a) AnnTaylor Stores Corp. (a) 19,900 752,469 Gap, Inc. 145,500 9,412,031 Intimate Brands, Inc. Class A 25,600 1,006,400 Limited, Inc. (The) 70,900 2,516,950 Payless ShoeSource, Inc. (a) 20,600 1,130,425 TJX Companies, Inc. 80,600 2,302,138 Wet Seal, Inc. Class A (a) 24,600 954,788 22,149,941 BEVERAGES - 5.1% Anheuser-Busch Companies, 148,600 11,395,763 Inc. Seagram Co. Ltd. 136,600 6,332,630 17,728,393 BROADCASTING - 25.9% Cablevision Systems Corp. 63,600 4,134,000 Class A (a) CBS Corp. 425,117 15,676,189 Chancellor Media Corp. (a) 122,300 5,350,625 Clear Channel Communications, 101,824 6,109,440 Inc. (a) Comcast Corp. Class A 120,400 8,540,875 (special) Cox Communications, Inc. 117,800 8,334,350 Class A (a) Infinity Broadcasting Corp. 14,500 344,375 Class A (a) Jacor Communications, Inc. 50,700 3,536,325 Class A (a) MediaOne Group, Inc. 96,100 5,237,450 PanAmSat Corp. (a) 49,200 1,765,050 TCA Cable TV, Inc. 7,700 339,763 Tele-Communications, Inc. 128,000 8,040,000 (TCI Group) Series A (a) Time Warner, Inc. 310,061 19,998,935 USA Networks, Inc. (a) 38,700 1,538,325 Westwood One, Inc. (a) 12,400 302,250 89,247,952 COMPUTER SERVICES & SOFTWARE - - 12.8% America Online, Inc. 226,600 20,153,225 At Home Corp. Series A (a) 12,500 1,326,563 SHARES VALUE (NOTE 1) CNET, Inc. (a) 2,900 $ 332,413 Electronic Arts, Inc. (a) 17,800 709,775 Lycos, Inc. (a) 35,200 3,084,400 Microsoft Corp. (a) 111,100 16,678,888 Modem Media . Poppe Tyson, 100 2,688 Inc. (a) Sportsline USA, Inc. (a) 20,200 909,000 Yahoo!, Inc. (a) 6,100 936,350 44,133,302 COMPUTERS & OFFICE EQUIPMENT - - 0.7% Coinstar, Inc. (a) 151,100 2,379,825 CONSUMER ELECTRONICS - 0.1% Fossil, Inc. (a) 5,100 160,650 ENTERTAINMENT - 15.3% Carnival Corp. 24,800 1,103,600 Disney (Walt) Co. 530,256 18,658,383 Fox Entertainment Group, Inc. 12,000 312,000 (a) IMAX Corp. (a) 87,000 1,555,014 King World Productions, Inc. 18,100 478,519 (a) News Corp. Ltd.: ADR 43,700 1,239,988 sponsored ADR (ltd. vtg.) 101,900 2,674,875 Premier Parks, Inc. (a) 103,800 3,023,175 Royal Carribean Cruises Ltd. 48,200 1,590,600 SFX Entertainment, Inc. Class 18,100 1,106,363 A (a) Tele-Communications, Inc.: (Liberty Media Group) Series 200,700 10,812,713 A (a) (TCI Ventures Group) Series A 87,800 2,430,963 (a) Ticketmaster Online 200 7,225 CitySearch, Inc. (a) Viacom, Inc. Class B 87,000 7,688,625 (non-vtg.) (a) 52,682,043 GENERAL MERCHANDISE STORES - 0.2% Michaels Stores, Inc. (a) 13,800 236,325 Saks, Inc. (a) 13,600 488,750 725,075 HOUSEHOLD PRODUCTS - 1.0% Avon Products, Inc. 81,500 3,392,438 LEASING & RENTAL - 0.0% Hollywood Entertainment Corp. 5,000 137,188 (a) LEISURE DURABLES & TOYS - 0.8% Hasbro, Inc. 35,400 1,309,800 Mattel, Inc. 53,300 1,405,788 2,715,588 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) LODGING & GAMING - 0.5% Promus Hotel Corp. (a) 17,600 $ 619,300 Sun International Hotels Ltd. 28,200 1,002,863 (a) 1,622,163 PRINTING - 0.9% Donnelley (R.R.) & Sons Co. 36,000 1,233,000 Valassis Communications, Inc. 39,500 1,896,000 (a) 3,129,000 PUBLISHING - 5.5% American Greetings Corp. 20,900 495,069 Class A Harte Hanks Communications, 38,100 985,838 Inc. McGraw-Hill Companies, Inc. 34,500 3,775,594 Meredith Corp. 70,300 2,372,625 Playboy Enterprises, Inc. 155,200 4,151,600 Class B (a) Reader's Digest Association, 108,400 3,685,600 Inc. Class A (non-vtg.) Tribune Co. 50,500 3,348,781 18,815,107 REAL ESTATE - 0.0% ResortQuest International, 3,000 52,688 Inc. (a) REAL ESTATE INVESTMENT TRUSTS - - 0.6% Starwood Hotels & Resorts 61,400 1,903,400 Worldwide, Inc. RESTAURANTS - 8.6% Brinker International, Inc. 33,800 978,088 (a) CKE Restaurants, Inc. 16,560 439,875 McDonald's Corp. 214,400 18,224,000 Outback Steakhouse, Inc. (a) 19,700 864,338 Papa John's International, 10,000 432,500 Inc. (a) PJ America, Inc. (a) 51,500 1,010,688 Starbucks Corp. (a) 60,400 3,193,650 Tricon Global Restaurants, 73,200 4,538,400 Inc. (a) 29,681,539 RETAIL & WHOLESALE, MISCELLANEOUS - 0.7% Action Performance Companies, 21,500 771,313 Inc. (a) Barnes & Noble, Inc. (a) 21,500 635,594 Bed Bath & Beyond, Inc. (a) 37,200 1,095,075 Piercing Pagoda, Inc. (a) 1,300 13,325 2,515,307 SHARES VALUE (NOTE 1) TEXTILES & APPAREL - 1.2% Liz Claiborne, Inc. 21,300 $ 717,544 NIKE, Inc. Class B 65,300 3,501,713 4,219,257 TOTAL COMMON STOCKS 317,209,828 (Cost $216,394,086) CASH EQUIVALENTS - 8.0% Taxable Central Cash Fund (b) 27,721,242 27,721,242 (Cost $27,721,242) TOTAL INVESTMENT IN $ 344,931,070 SECURITIES - 100% (Cost $244,115,328) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $294,037,393 and $290,681,002, respectively. 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 $84,286 for the period. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $245,469,507. Net unrealized appreciation aggregated $99,461,563, of which $104,699,680 related to appreciated investment securities and $5,238,117 related to depreciated investment securities. The fund hereby designates approximately $10,012,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 12% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for use in preparing 1999 income tax returns. LEISURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 344,931,070 value (cost $244,115,328) - See accompanying schedule Receivable for fund shares 2,232,887 sold Dividends receivable 149,528 Interest receivable 101,730 Redemption fees receivable 282 Other receivables 49,491 TOTAL ASSETS 347,464,988 LIABILITIES Payable for fund shares $ 986,552 redeemed Accrued management fee 164,062 Other payables and accrued 175,006 expenses TOTAL LIABILITIES 1,325,620 NET ASSETS $ 346,139,368 Net Assets consist of: Paid in capital $ 231,932,004 Accumulated undistributed net 13,391,716 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 100,815,648 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 4,250,039 $ 346,139,368 shares outstanding NET ASSET VALUE and $81.44 redemption price per share ($346,139,368 (divided by) 4,250,039 shares) Maximum offering price per $83.96 share (100/97.00 of $81.44) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 1,278,268 Dividends Interest 1,178,921 TOTAL INCOME 2,457,189 EXPENSES Management fee $ 1,721,162 Transfer agent fees 1,556,159 Accounting fees and expenses 279,815 Non-interested trustees' 1,166 compensation Custodian fees and expenses 14,784 Registration fees 56,416 Audit 22,874 Legal 1,948 Reports to shareholders 30,091 Total expenses before 3,684,415 reductions Expense reductions (55,442) 3,628,973 NET INVESTMENT INCOME (LOSS) (1,171,784) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 22,616,844 Foreign currency transactions 7,211 22,624,055 Change in net unrealized appreciation (depreciation) on: Investment securities 65,006,125 Assets and liabilities in 34 65,006,159 foreign currencies NET GAIN (LOSS) 87,630,214 NET INCREASE (DECREASE) IN $ 86,458,430 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 956,242 charges paid to FDC Sales charges - Retained by $ 946,671 FDC Deferred sales charges $ 10,919 withheld by FDC Exchange fees withheld by FSC $ 18,008 Expense Reductions Directed brokerage $ 53,531 arrangements Custodian credits 1,911 $ 55,442
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (1,171,784) $ (652,887) income (loss) Net realized gain (loss) 22,624,055 27,572,262 Change in net unrealized 65,006,159 29,426,716 appreciation (depreciation) NET INCREASE (DECREASE) IN 86,458,430 56,346,091 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (14,475,212) (19,896,472) from net realized gains Share transactions Net 283,063,939 221,739,781 proceeds from sales of shares Reinvestment of distributions 14,128,858 19,641,349 Cost of shares redeemed (280,558,227) (118,975,901) NET INCREASE (DECREASE) IN 16,634,570 122,405,229 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 323,063 210,283 TOTAL INCREASE (DECREASE) 88,940,851 159,065,131 IN NET ASSETS NET ASSETS Beginning of period 257,198,517 98,133,386 End of period $ 346,139,368 $ 257,198,517 OTHER INFORMATION Shares Sold 4,108,533 3,893,810 Issued in reinvestment of 211,513 374,739 distributions Redeemed (4,198,228) (2,192,054) Net increase (decrease) 121,818 2,076,495
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 F 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 62.30 $ 47.83 $ 46.17 $ 40.71 $ 45.30 period Income from Investment Operations Net investment income (loss) C (.27) (.25) (.06) E (.21) (.21) Net realized and unrealized 22.78 21.10 4.47 10.97 (.48) gain (loss) Total from investment 22.51 20.85 4.41 10.76 (.69) operations Less Distributions From net realized gain (3.44) (6.46) (2.83) (5.32) (3.93) Redemption fees added to paid .07 .08 .08 .02 .03 in capital Net asset value, end of period $ 81.44 $ 62.30 $ 47.83 $ 46.17 $ 40.71 TOTAL RETURN A, B 37.54% 47.29% 10.14% 27.61% (1.07)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 346,139 $ 257,199 $ 98,133 $ 85,013 $ 69,569 (000 omitted) Ratio of expenses to average 1.26% 1.44% 1.56% 1.64% 1.64% net assets Ratio of expenses to average 1.24% D 1.39% D 1.54% D 1.63% D 1.62% D net assets after expense reductions Ratio of net investment (.40)% (.46)% (.12)% (.46)% (.52)% income (loss) to average net assets Portfolio turnover rate 107% 209% 127% 141% 103% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. CNET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E INVESTMENT INCOME (LOSS) PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.23 PER SHARE. F FOR THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1996 SELECT MULTIMEDIA 36.68% 168.24% 443.52% SELECT MULTIMEDIA (LOAD ADJ.) 32.51% 160.12% 427.14% S&P 500 19.74% 194.91% 459.21% GS Consumer Industries 16.26% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1996 SELECT MULTIMEDIA 36.68% 21.82% 18.45% SELECT MULTIMEDIA (LOAD ADJ.) 32.51% 21.07% 18.08% S&P 500 19.74% 24.15% 18.78% GS Consumer Industries 16.26% 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 1989/02/28 9700.00 10000.00 1989/03/31 10154.90 10233.00 1989/04/30 10837.24 10764.09 1989/05/31 11359.03 11200.04 1989/06/30 11591.62 11136.20 1989/07/31 12473.45 12141.80 1989/08/31 12459.99 12379.78 1989/09/30 12264.77 12329.02 1989/10/31 11436.80 12042.99 1989/11/30 11504.12 12288.66 1989/12/31 11508.99 12583.59 1990/01/31 9980.76 11739.23 1990/02/28 9728.68 11890.67 1990/03/31 9634.15 12205.77 1990/04/30 9177.26 11900.63 1990/05/31 10051.66 13060.94 1990/06/30 9965.00 12972.12 1990/07/31 9413.58 12930.61 1990/08/31 8192.57 11761.68 1990/09/30 7491.48 11188.89 1990/10/31 7168.50 11140.78 1990/11/30 7908.98 11860.47 1990/12/31 8491.92 12191.38 1991/01/31 8948.81 12722.92 1991/02/28 9610.52 13632.61 1991/03/31 9870.47 13962.52 1991/04/30 10209.20 13996.03 1991/05/31 10264.35 14600.66 1991/06/30 9452.97 13931.95 1991/07/31 9807.45 14581.18 1991/08/31 10114.68 14926.75 1991/09/30 10729.12 14677.48 1991/10/31 11272.66 14874.16 1991/11/30 10500.67 14274.73 1991/12/31 11705.92 15907.76 1992/01/31 12013.15 15611.87 1992/02/29 12682.73 15814.83 1992/03/31 12359.76 15506.44 1992/04/30 12548.81 15962.33 1992/05/31 12737.87 16040.54 1992/06/30 12785.14 15801.54 1992/07/31 12816.65 16447.82 1992/08/31 12643.34 16110.64 1992/09/30 12564.57 16300.75 1992/10/31 12769.38 16357.80 1992/11/30 13698.93 16915.60 1992/12/31 14222.47 17123.66 1993/01/31 14509.79 17267.50 1993/02/28 14573.64 17502.34 1993/03/31 15148.29 17871.64 1993/04/30 14756.55 17439.14 1993/05/31 15762.50 17906.51 1993/06/30 16257.36 17958.44 1993/07/31 16865.79 17886.61 1993/08/31 18301.69 18564.51 1993/09/30 18739.77 18421.56 1993/10/31 20143.22 18802.89 1993/11/30 18828.66 18624.26 1993/12/31 19629.92 18849.62 1994/01/31 19909.88 19490.50 1994/02/28 19654.62 18962.31 1994/03/31 18452.45 18135.55 1994/04/30 18461.41 18367.69 1994/05/31 19140.34 18668.92 1994/06/30 18712.52 18211.53 1994/07/31 19168.24 18808.87 1994/08/31 20321.50 19580.03 1994/09/30 20181.99 19100.32 1994/10/31 20637.71 19530.08 1994/11/30 19986.68 18818.79 1994/12/31 20415.81 19097.87 1995/01/31 20646.61 19593.08 1995/02/28 21492.86 20356.63 1995/03/31 22858.40 20957.35 1995/04/30 23387.31 21574.54 1995/05/31 23512.32 22436.88 1995/06/30 24416.27 22958.09 1995/07/31 25858.75 23719.38 1995/08/31 26676.15 23778.91 1995/09/30 27435.85 24782.38 1995/10/31 26628.07 24693.91 1995/11/30 27657.03 25777.97 1995/12/31 27290.40 26274.46 1996/01/31 27457.38 27168.84 1996/02/29 28365.32 27420.69 1996/03/31 27989.62 27684.75 1996/04/30 29292.62 28092.83 1996/05/31 30265.47 28817.34 1996/06/30 28864.99 28927.14 1996/07/31 26117.47 27649.13 1996/08/31 27090.33 28232.26 1996/09/30 28811.53 29821.17 1996/10/31 27999.04 30643.63 1996/11/30 28512.19 32959.99 1996/12/31 27583.37 32307.05 1997/01/31 27442.03 34325.59 1997/02/28 27083.24 34594.71 1997/03/31 25767.67 33173.21 1997/04/30 26343.06 35153.65 1997/05/31 28858.28 37293.80 1997/06/30 30750.26 38964.57 1997/07/31 32397.40 42064.98 1997/08/31 31763.03 39708.50 1997/09/30 34333.90 41883.33 1997/10/31 33232.10 40484.43 1997/11/30 34333.90 42358.45 1997/12/31 36114.40 43085.75 1998/01/31 36378.59 43562.28 1998/02/28 38572.56 46703.99 1998/03/31 41283.44 49095.70 1998/04/30 42257.79 49589.60 1998/05/31 41096.52 48737.16 1998/06/30 43883.56 50716.86 1998/07/31 44409.18 50176.72 1998/08/31 36891.52 42922.17 1998/09/30 38480.62 45671.77 1998/10/31 40815.37 49386.71 1998/11/30 43247.92 52380.04 1998/12/31 49005.34 55398.18 1999/01/31 53014.76 57714.93 1999/02/26 52714.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990310 115444 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Multimedia Portfolio on February 28, 1989 and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $52,714 - a 427.14% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Comcast Corp. Class A (special) 6.2 CBS Corp. 5.8 Viacom, Inc. Class B (non-vtg.) 5.6 Time Warner, Inc. 5.3 Tele-Communications, Inc. 5.2 (TCI Group) Series A Disney (Walt) Co. 5.0 Cox Communications, Inc. 4.2 Class A MCI WorldCom, Inc. 4.0 Clear Channel Communications, 3.5 Inc. AT&T Corp. 3.4 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Broadcasting 42.9% Entertainment 18.8% Publishing 8.5% Advertising 7.7% Telephone Services 7.4% All Others 14.7%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 14.7 Row: 1, Col: 2, Value: 7.4 Row: 1, Col: 3, Value: 7.7 Row: 1, Col: 4, Value: 8.5 Row: 1, Col: 5, Value: 18.8 Row: 1, Col: 6, Value: 42.9 MULTIMEDIA PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Jeffrey Dorsey) Jeffrey Dorsey, Portfolio Manager of Fidelity Select Multimedia Portfolio Q. HOW DID THE FUND PERFORM, JEFF? A. Very well. For the 12 months that ended February 28, 1999, the fund returned 36.68%, outperforming the Standard & Poor's 500 Index's return of 19.74%. 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 16.26% over the same 12-month period. Q. WHAT ACCOUNTED FOR THE FUND'S EXCEPTIONALLY STRONG PERFORMANCE? A. The fund's focus on entertainment companies, cable providers and advertising companies - as well as its underweighting in newspaper publishers - all contributed to its strong performance during the year. A healthy U.S. economy helped entertainment companies to thrive, with many of these companies reducing debt, growing their cash flows and benefiting from economies of scale. After the stock market dip in the late summer and early fall, entertainment stocks got cheaper and, with their business fundamentals still strong, I bought more shares. Furthermore, the fund's heavy concentration in cable companies helped performance; in general, cable providers had an outstanding year, continuing to develop new revenue sources and posting strong returns. Though future price increases may be muted on the basic cable side, the advent of digital cable, telephony and online services has boosted the overall growth rate for this industry. Advertising companies benefited from increased ad budgets and consolidation within their industry. As for newspapers, help-wanted advertising activity continued to decline, based on an ongoing shift from print to radio and online mediums. Q. WHICH STOCKS STOOD OUT IN THIS POSITIVE ENVIRONMENT? A. Entertainment companies Time Warner and Viacom were both standouts during the year, benefiting from the strength of their cable television networks and their very solid film entertainment divisions. Comcast, a cable provider, performed well, reflecting the success cable systems achieved in offering a much greater range of services to consumers. Reader's Digest is another success story in the making. With a new CEO in place for nearly a year, the leadership at Reader's Digest identified a significant amount of cost cutting and articulated a growth strategy for the future. The reinvigoration of this company was made possible by using its considerable strengths, including its huge customer database, to drive new growth initiatives. Q. WERE THERE ANY DISAPPOINTMENTS? A. Disney continued to disappoint as lower home-video sales, Asia's economic weakness and declining demand hurt results. However, with the launch of its GO Network and further substantial investment spending this year, the company is making a good effort to position itself for a re-acceleration of growth. Seagram is another company that experienced difficulties resulting from disappointments in its entertainment division and Asia's economic problems, but it has formed the most powerful music company in the industry with its purchase of Polygram. Seagram, too, is hoping to structure itself for substantial profit growth through both cost cutting and top-line improvement at its theme-park division. Q. WHERE DO YOU SEE NEW OPPORTUNITIES? A. With advertising trends positive, I think we may actually see an acceleration in activity from increased "millennium spending" as the Year 2000 approaches. Add to this an upcoming presidential campaign and the 2000 Olympics, and we should see a very strong second half of 1999. In fact, 2000 should be one of the biggest advertising years in recent memory. Consequently, I'll be looking for companies that will benefit from this phenomenon. Q. WHAT'S YOUR OUTLOOK, JEFF? A. I'm optimistic. At this point, the outlook for multimedia stocks is strong, reflecting a healthy U.S. economy and the domestic nature of most of the companies in this sector. As long as business fundamentals remain attractive, I believe that there are ample opportunities to identify good companies that are well-positioned for the future. To take advantage of the strong potential I'm seeing now in many companies, I'll continue to build a more concentrated portfolio. Most companies in this sector have one element in common: They're affected by advertising activity. As long as the economy doesn't weaken significantly and advertising activity remains strong, many of these companies should benefit. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 503 TRADING SYMBOL: FBMPX SIZE: as of February 28, 1999, more than $159 million MANAGER: Jeffrey Dorsey, since 1997; manager, Fidelity Select Leisure Portfolio, since 1998; analyst, fixed-income securities, 1991-1997; joined Fidelity in 1991 MULTIMEDIA PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.0% SHARES VALUE (NOTE 1) ADVERTISING - 7.7% Interpublic Group of 55,300 $ 4,137,131 Companies, Inc. Lamar Advertising Co. Class A 15,500 598,688 (a) Omnicom Group, Inc. 67,000 4,438,750 Outdoor Systems, Inc. (a) 62,600 1,748,887 WPP Group PLC 172,700 1,367,580 12,291,036 BEVERAGES - 2.5% Seagram Co. Ltd. 85,200 3,949,781 BROADCASTING - 42.9% Cablevision Systems Corp. 61,500 3,997,500 Class A (a) CBS Corp. 252,550 9,312,781 Chancellor Media Corp. (a) 55,500 2,428,125 Clear Channel Communications, 94,500 5,670,000 Inc. (a) Comcast Corp. Class A 138,900 9,853,214 (special) Cox Communications, Inc. 96,000 6,792,000 Class A (a) E.W. Scripps Co. Class A 12,100 496,100 Infinity Broadcasting Corp. 6,000 142,500 Class A (a) Jacor Communications, Inc. 39,900 2,783,025 Class A (a) MediaOne Group, Inc. 91,100 4,964,950 Moviefone, Inc. Class A (a) 11,800 354,000 Nielsen Media Research, Inc. 29,700 582,863 (a) PanAmSat Corp. (a) 60,900 2,184,788 TCA Cable TV, Inc. 2,100 92,663 Tele-Communications, Inc. 133,605 8,392,064 (TCI Group) Series A (a) Time Warner, Inc. 130,947 8,446,082 USA Networks, Inc. (a) 47,600 1,892,100 Westwood One, Inc. (a) 9,900 241,313 68,626,068 COMPUTER SERVICES & SOFTWARE - - 1.1% America Online, Inc. 11,600 1,031,675 FactSet Research Systems, 5,850 243,872 Inc. Modem Media Poppe Tyson, Inc. 100 2,688 (a) Sportsline USA, Inc. (a) 11,400 513,000 1,791,235 ENTERTAINMENT - 18.8% Disney (Walt) Co. 228,000 8,022,750 Fox Entertainment Group, Inc. 5,000 130,000 (a) King World Productions, Inc. 24,000 634,500 (a) News Corp. Ltd. ADR 34,600 981,775 Premier Parks, Inc. (a) 41,500 1,208,688 SFX Entertainment, Inc. Class 8,200 501,225 A (a) Tele-Communications, Inc.: (Liberty Media Group) Series 99,202 5,344,508 A (a) (TCI Ventures Group) Series A 159,800 4,424,463 (a) Ticketmaster Online 100 3,613 CitySearch, Inc. (a) Viacom, Inc. Class B 100,600 8,890,525 (non-vtg.) (a) 30,142,047 PRINTING - 1.7% Donnelley (R.R.) & Sons Co. 42,500 1,455,625 Valassis Communications, Inc. 26,200 1,257,600 (a) 2,713,225 SHARES VALUE (NOTE 1) PUBLISHING - 8.5% American Greetings Corp. 21,900 $ 518,756 Class A Banta Corp. 11,400 242,963 Harte Hanks Communications, 48,300 1,249,763 Inc. McGraw-Hill Companies, Inc. 32,100 3,512,944 Meredith Corp. 42,500 1,434,375 Playboy Enterprises, Inc. 52,100 1,393,675 Class B (a) Reader's Digest Association, 66,800 2,271,200 Inc. Class A (non-vtg.) Tribune Co. 44,200 2,931,013 13,554,689 SERVICES - 0.4% ACNielsen Corp. (a) 8,800 228,800 Catalina Marketing Corp. (a) 5,600 360,500 589,300 TELEPHONE SERVICES - 7.4% AT&T Corp. 66,800 5,485,950 MCI WorldCom, Inc. (a) 76,600 6,319,500 11,805,450 TOTAL COMMON STOCKS 145,462,831 (Cost $102,209,349) CASH EQUIVALENTS - 9.0% Taxable Central Cash Fund (b) 14,391,006 14,391,006 (Cost $14,391,006) TOTAL INVESTMENT IN $ 159,853,837 SECURITIES - 100% (Cost $116,600,355) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $135,513,128 and $132,504,769, respectively. 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 $41,770 for the period. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $117,064,039. Net unrealized appreciation aggregated $42,789,798, of which $44,808,607 related to appreciated investment securities and $2,018,809 related to depreciated investment securities. The fund hereby designates approximately $5,431,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 19% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for use in preparing 1999 income tax returns. MULTIMEDIA PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 159,853,837 value (cost $116,600,355) - See accompanying schedule Receivable for fund shares 579,849 sold Dividends receivable 67,251 Interest receivable 45,921 Redemption fees receivable 1,385 Other receivables 18,276 TOTAL ASSETS 160,566,519 LIABILITIES Payable for fund shares $ 666,421 redeemed Accrued management fee 77,149 Other payables and accrued 93,421 expenses TOTAL LIABILITIES 836,991 NET ASSETS $ 159,729,528 Net Assets consist of: Paid in capital $ 113,715,452 Accumulated net investment (17,095) loss Accumulated undistributed net 2,777,697 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 43,253,474 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 3,703,786 $ 159,729,528 shares outstanding NET ASSET VALUE and $43.13 redemption price per share ($159,729,528 (divided by) 3,703,786 shares) Maximum offering price per $44.46 share (100/97.00 of $43.13) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 553,150 Dividends Interest 496,822 TOTAL INCOME 1,049,972 EXPENSES Management fee $ 768,461 Transfer agent fees 795,802 Accounting fees and expenses 124,969 Non-interested trustees' 452 compensation Custodian fees and expenses 15,329 Registration fees 22,574 Audit 16,016 Legal 675 Reports to shareholders 17,970 Total expenses before 1,762,248 reductions Expense reductions (31,187) 1,731,061 NET INVESTMENT INCOME (LOSS) (681,089) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 3,487,861 Foreign currency transactions 9,198 3,497,059 Change in net unrealized appreciation (depreciation) on: Investment securities 32,313,719 Assets and liabilities in (8) 32,313,711 foreign currencies NET GAIN (LOSS) 35,810,770 NET INCREASE (DECREASE) IN $ 35,129,681 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 599,274 charges paid to FDC Sales charges - Retained by $ 596,505 FDC Deferred sales charges $ 1,687 withheld by FDC Exchange fees withheld by FSC $ 10,110 Expense reductions Directed $ 30,211 brokerage arrangements Custodian credits 976 $ 31,187
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (681,089) $ (345,513) income (loss) Net realized gain (loss) 3,497,059 11,157,423 Change in net unrealized 32,313,711 11,000,546 appreciation (depreciation) NET INCREASE (DECREASE) IN 35,129,681 21,812,456 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (7,954,098) (2,764,701) from net realized gains Share transactions Net 158,099,619 123,445,992 proceeds from sales of shares Reinvestment of distributions 7,877,838 2,725,416 Cost of shares redeemed (149,217,492) (84,022,531) NET INCREASE (DECREASE) IN 16,759,965 42,148,877 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 309,134 117,385 TOTAL INCREASE (DECREASE) 44,244,682 61,314,017 IN NET ASSETS NET ASSETS Beginning of period 115,484,846 54,170,829 End of period (including $ 159,729,528 $ 115,484,846 accumulated net investment loss of $17,095 and $1,536, respectively) OTHER INFORMATION Shares Sold 4,292,822 4,033,610 Issued in reinvestment of 230,819 101,335 distributions Redeemed (4,259,349) (2,869,891) Net increase (decrease) 264,292 1,265,054
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 F 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 33.58 $ 24.91 $ 27.18 $ 22.35 $ 23.87 period Income from Investment Operations Net investment income (loss) C (.19) (.17) .35 D .02 (.01) Net realized and unrealized 11.85 10.30 (1.58) 7.00 1.67 gain (loss) Total from investment 11.66 10.13 (1.23) 7.02 1.66 operations Less Distributions From net investment income - - - (.02) - From net realized gain (2.19) (1.52) (1.07) (2.19) (3.21) Total distributions (2.19) (1.52) (1.07) (2.21) (3.21) Redemption fees added to paid .08 .06 .03 .02 .03 in capital Net asset value, end of period $ 43.13 $ 33.58 $ 24.91 $ 27.18 $ 22.35 TOTAL RETURN A, B 36.68% 42.42% (4.52)% 31.98% 9.35% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 159,730 $ 115,485 $ 54,171 $ 94,970 $ 38,157 (000 omitted) Ratio of expenses to average 1.35% 1.75% 1.60% 1.56% 2.05% net assets Ratio of expenses to average 1.33% E 1.71% E 1.56% E 1.54% E 2.03% E net assets after expense reductions Ratio of net investment (.52)% (.59)% 1.33% .08% (.07)% income (loss) to average net assets Portfolio turnover rate 109% 219% 99% 223% 107% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE . C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.49 PER SHARE. 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 THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1996 SELECT RETAILING 36.66% 179.05% 662.19% SELECT RETAILING (LOAD ADJ.) 32.49% 170.61% 639.25% S&P 500 19.74% 194.91% 459.21% GS Consumer Industries 16.26% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1996 SELECT RETAILING 36.66% 22.78% 22.52% SELECT RETAILING (LOAD ADJ.) 32.49% 22.03% 22.15% S&P 500 19.74% 24.15% 18.78% GS Consumer Industries 16.26% 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 1989/02/28 9700.00 10000.00 1989/03/31 10163.31 10233.00 1989/04/30 10736.92 10764.09 1989/05/31 11479.68 11200.04 1989/06/30 11275.31 11136.20 1989/07/31 12184.61 12141.80 1989/08/31 12775.66 12379.78 1989/09/30 12745.35 12329.02 1989/10/31 12131.57 12042.99 1989/11/30 12207.34 12288.66 1989/12/31 12135.84 12583.59 1990/01/31 11188.01 11739.23 1990/02/28 11577.77 11890.67 1990/03/31 12525.60 12205.77 1990/04/30 12348.44 11900.63 1990/05/31 13996.08 13060.94 1990/06/30 13818.91 12972.12 1990/07/31 13251.98 12930.61 1990/08/31 11347.45 11761.68 1990/09/30 10080.72 11188.89 1990/10/31 9611.23 11140.78 1990/11/30 10922.26 11860.47 1990/12/31 11525.31 12191.38 1991/01/31 12644.10 12722.92 1991/02/28 13816.17 13632.61 1991/03/31 15254.61 13962.52 1991/04/30 15467.72 13996.03 1991/05/31 16755.21 14600.66 1991/06/30 16222.45 13931.95 1991/07/31 17261.33 14581.18 1991/08/31 18175.90 14926.75 1991/09/30 17980.55 14677.48 1991/10/31 17643.14 14874.16 1991/11/30 17305.73 14274.73 1991/12/31 19377.88 15907.76 1992/01/31 20452.40 15611.87 1992/02/29 21435.87 15814.83 1992/03/31 21007.88 15506.44 1992/04/30 20151.90 15962.33 1992/05/31 20570.78 16040.54 1992/06/30 19610.56 15801.54 1992/07/31 20482.98 16447.82 1992/08/31 20018.32 16110.64 1992/09/30 20615.74 16300.75 1992/10/31 22028.69 16357.80 1992/11/30 23697.67 16915.60 1992/12/31 23655.79 17123.66 1993/01/31 23819.00 17267.50 1993/02/28 22916.55 17502.34 1993/03/31 24683.05 17871.64 1993/04/30 23266.30 17439.14 1993/05/31 24555.05 17906.51 1993/06/30 23964.78 17958.44 1993/07/31 24082.83 17886.61 1993/08/31 25184.66 18564.51 1993/09/30 25952.01 18421.56 1993/10/31 26355.36 18802.89 1993/11/30 26611.14 18624.26 1993/12/31 26738.51 18849.62 1994/01/31 25547.29 19490.50 1994/02/28 26493.88 18962.31 1994/03/31 25940.82 18135.55 1994/04/30 26727.87 18367.69 1994/05/31 25409.03 18668.92 1994/06/30 25196.31 18211.53 1994/07/31 25621.74 18808.87 1994/08/31 27249.03 19580.03 1994/09/30 26717.24 19100.32 1994/10/31 26834.23 19530.08 1994/11/30 25898.28 18818.79 1994/12/31 25398.39 19097.87 1995/01/31 25196.31 19593.08 1995/02/28 25430.30 20356.63 1995/03/31 25717.47 20957.35 1995/04/30 24717.70 21574.54 1995/05/31 25153.77 22436.88 1995/06/30 26759.78 22958.09 1995/07/31 28397.70 23719.38 1995/08/31 28004.17 23778.91 1995/09/30 28844.40 24782.38 1995/10/31 27557.47 24693.91 1995/11/30 28940.13 25777.97 1995/12/31 28440.24 26274.46 1996/01/31 27610.65 27168.84 1996/02/29 29642.09 27420.69 1996/03/31 31843.71 27684.75 1996/04/30 33704.98 28092.83 1996/05/31 35321.63 28817.34 1996/06/30 34694.12 28927.14 1996/07/31 31375.73 27649.13 1996/08/31 34343.13 28232.26 1996/09/30 35576.89 29821.17 1996/10/31 34874.93 30643.63 1996/11/30 36215.04 32959.99 1996/12/31 34373.03 32307.05 1997/01/31 34213.11 34325.59 1997/02/28 35449.85 34594.71 1997/03/31 35897.64 33173.21 1997/04/30 36448.92 35153.65 1997/05/31 38140.46 37293.80 1997/06/30 40564.65 38964.57 1997/07/31 44949.72 42064.98 1997/08/31 43441.34 39708.50 1997/09/30 46253.39 41883.33 1997/10/31 45994.81 40484.43 1997/11/30 49345.57 42358.45 1997/12/31 48715.23 43085.75 1998/01/31 49558.50 43562.28 1998/02/28 54099.20 46703.99 1998/03/31 57818.25 49095.70 1998/04/30 57590.36 49589.60 1998/05/31 58587.08 48737.16 1998/06/30 61818.18 50716.86 1998/07/31 60098.58 50176.72 1998/08/31 52398.69 42922.17 1998/09/30 52683.46 45671.77 1998/10/31 57601.32 49386.71 1998/11/30 63263.97 52380.04 1998/12/31 71007.67 55398.18 1999/01/31 74085.43 57714.93 1999/02/26 73925.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990309 145048 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Retailing Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $73,925 - a 639.25% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Dayton Hudson Corp. 6.9 Safeway, Inc. 6.0 CVS Corp. 5.6 McDonald's Corp. 5.5 Wal-Mart Stores, Inc. 5.1 Home Depot, Inc. 5.1 Walgreen Co. 5.0 Gap, Inc. 5.0 Federated Department Stores, 4.5 Inc. Lowe's Companies, Inc. 4.0 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS General Merchandise Stores 25.7% Retail & Wholesale, Miscellaneous 19.2% Grocery Stores 15.9% Apparel Stores 13.3% Drug Stores 11.2% All Others 14.7%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 14.7 Row: 1, Col: 2, Value: 11.2 Row: 1, Col: 3, Value: 13.3 Row: 1, Col: 4, Value: 15.9 Row: 1, Col: 5, Value: 19.2 Row: 1, Col: 6, Value: 25.7 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. I'm very pleased with the fund's performance. During the 12-month period that ended February 28, 1999, the fund returned 36.66%. This performance compares favorably with the Standard & Poor's 500 Index, which returned 19.74% and 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 16.26% during the same period. Q. WHAT MARKET FACTORS ALLOWED THE FUND AND RETAIL STOCKS TO PERFORM SO WELL DURING THE PERIOD? A. The principle factor was the solid economy, which was characterized by low interest rates, non-existent signs of inflation, low levels of unemployment and rising household incomes leading to robust consumer spending. All of these economic trends are very good for retail stocks. In addition to the strong economy, managements at many retail companies really began to run their businesses better over the last couple of years. Today, instead of focusing on square footage expansion, which led to over-capacity and saturated retail markets, companies now concentrate on improving returns on invested capital through increased scrutiny of capital expenditures and enhanced inventory management. With more effective and efficient ways of removing excess inventories and reducing costs, many retail companies improved their business profitability and, subsequently, produced stellar sales results. This led to increased returns on invested capital and earnings growth. Stock prices rallied in light of these solid business fundamentals and the favorable economic environment. Q. DID ANY OTHER FACTORS CONTRIBUTE TO THE FUND'S SOLID RESULTS? A. Individual stock picking and the fund's holdings across a wide range of retail sectors helped performance. Overweighted positions in home improvement stores, discount stores and specialty retailers, such as Home Depot, Wal-Mart, Dayton Hudson, The Gap and Abercrombie & Fitch, all provided a boost to total return. Each of these companies produced strong performance results driven by a commitment to effective cost reduction and inventory management. In addition, the fund's focus on top-performing supermarket and drug store chains, such as Safeway, CVS and Walgreen, also contributed to fund performance. Q. DID INTERNET COMMERCE PLAY ANY ROLE IN THE PERFORMANCE OF THESE STOCKS? A. For certain companies. More specifically, specialty retailer The Limited and discount wholesaler Costco benefited as valuations increased due to the favorable prospects for growth on the Internet. While the Internet provides an additional and convenient distribution outlet for many companies and their customers, business and marketing strategies are somewhat new in this arena and have yet to prove their ability to produce significant earnings growth. Of course, I'll be keeping a close eye on new developments to determine the Internet's impact on more traditional retail sales. Q. WERE THERE ANY DISAPPOINTMENTS DURING THE PERIOD? A. There were a couple. While the share prices of Federated Department Stores and Consolidated Stores recovered somewhat toward the end of the period, stock performance of Federated suffered in the second half of 1998 in response to lower-than-expected sales results. Shares of Consolidated Stores were hurt as the company struggled to execute certain business plans. Q. WHAT'S YOUR OUTLOOK FOR RETAIL STOCKS OVER THE NEXT SIX MONTHS? A. While the future for many retail stocks and the broader market indexes lies in the hands of the economic environment to a large extent, it is very difficult to predict where the economy and financial markets may be headed over the next six months. A strong argument can be made to say that the U.S. economy and consumer spending will remain strong. On the other hand, many economists remain cautious about the impact of persistent problems overseas. As a result, I remain focused on extensive bottom-up, stock-by-stock research to locate companies that can outperform others in the retail industry, regardless of the economic environment and the general direction of the 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 046 TRADING SYMBOL: FSRPX SIZE: as of February 28, 1999, more than $337 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 FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.9% SHARES VALUE (NOTE 1) APPAREL STORES - 13.3% Abercrombie & Fitch Co. Class 130,401 $ 9,910,476 A (a) AnnTaylor Stores Corp. (a) 49,700 1,879,281 Gap, Inc. 267,125 17,279,648 Limited, Inc. (The) 179,200 6,361,600 Ross Stores, Inc. 41,100 1,880,325 TJX Companies, Inc. 310,400 8,865,800 46,177,130 DRUG STORES - 11.2% CVS Corp. 366,274 19,412,522 Duane Reade, Inc. (a) 100 3,025 Rite Aid Corp. 50,700 2,097,713 Walgreen Co. 548,100 17,539,200 39,052,460 GENERAL MERCHANDISE STORES - 25.7% Consolidated Stores Corp. (a) 90,758 2,285,967 Costco Companies, Inc. (a) 152,300 12,231,594 Dayton Hudson Corp. 387,600 24,249,222 Dollar Tree Stores, Inc. (a) 24,800 992,000 Federated Department Stores, 409,100 15,571,369 Inc. (a) Nordstrom, Inc. 96,900 3,900,225 Saks, Inc. (a) 350,385 12,591,961 Wal-Mart Stores, Inc. 207,200 17,896,900 89,719,238 GROCERY STORES - 15.9% Albertson's, Inc. 93,000 5,301,000 American Stores Co. 116,000 3,915,000 Kroger Co. (a) 157,700 10,201,219 Loblaw Companies Ltd. 145,200 3,755,671 Meyer (Fred), Inc. (a) 179,080 11,505,890 Safeway, Inc. (a) 361,174 20,857,799 55,536,579 RESTAURANTS - 6.6% McDonald's Corp. 224,800 19,108,000 Starbucks Corp. (a) 29,500 1,559,813 Tricon Global Restaurants, 39,000 2,418,000 Inc. (a) 23,085,813 RETAIL & WHOLESALE, MISCELLANEOUS - 19.2% Barnes & Noble, Inc. (a) 38,800 1,147,025 Bed Bath & Beyond, Inc. (a) 95,100 2,799,506 Best Buy Co., Inc. (a) 64,400 5,973,100 Circuit City Stores, Inc. - 58,400 3,168,200 Circuit City Group Home Depot, Inc. 298,500 17,816,719 Lowe's Companies, Inc. 233,100 13,825,744 Noodle Kidoodle, Inc. (a) 58,100 464,800 Office Depot, Inc. (a) 209,300 7,469,394 Staples, Inc. (a) 277,900 8,171,997 SHARES VALUE (NOTE 1) Tandy Corp. 60,100 $ 3,343,063 Williams-Sonoma, Inc. (a) 75,200 2,570,900 66,750,448 TEXTILES & APPAREL - 0.0% Liz Claiborne, Inc. 1,700 57,269 Polo Ralph Lauren Corp. Class 300 5,981 A (a) 63,250 TOTAL COMMON STOCKS 320,384,918 (Cost $219,758,753) CASH EQUIVALENTS - 8.1% Taxable Central Cash Fund (b) 28,256,826 28,256,826 (Cost $28,256,826) TOTAL INVESTMENT IN $ 348,641,744 SECURITIES - 100% (Cost $248,015,579) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $486,355,683 and $423,275,928, respectively. 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 $155,653 for the period. The fund participated in the interfund lending program as a borrower. The maximum loan and average daily balances during the period for which 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. The fund participated in the bank borrowing program. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $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. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $251,616,531. Net unrealized appreciation aggregated $97,025,213, of which $100,236,719 related to appreciated investment securities and $3,211,506 related to depreciated investment securities. The fund hereby designates approximately $3,435,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for use in preparing 1999 income tax returns. RETAILING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 348,641,744 value (cost $248,015,579) - See accompanying schedule Receivable for fund shares 2,120,505 sold Dividends receivable 73,994 Interest receivable 70,783 Redemption fees receivable 8,315 Other receivables 235,410 TOTAL ASSETS 351,150,751 LIABILITIES Payable for investments $ 2,357,631 purchased Payable for fund shares 10,939,389 redeemed Accrued management fee 164,791 Other payables and accrued 175,768 expenses TOTAL LIABILITIES 13,637,579 NET ASSETS $ 337,513,172 Net Assets consist of: Paid in capital $ 239,803,785 Accumulated undistributed net (2,916,778) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 100,626,165 (depreciation) on investments NET ASSETS, for 5,000,251 $ 337,513,172 shares outstanding NET ASSET VALUE and $67.50 redemption price per share ($337,513,172 (divided by) 5,000,251 shares) Maximum offering price per $69.59 share (100/97.00 of $67.50) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 1,053,166 Dividends Interest (including income on 981,331 securities loaned of $1,752) TOTAL INCOME 2,034,497 EXPENSES Management fee $ 1,658,052 Transfer agent fees 1,394,457 Accounting and security 268,988 lending fees Non-interested trustees' 1,114 compensation Custodian fees and expenses 16,538 Registration fees 109,094 Audit 21,635 Legal 2,333 Interest 36,893 Reports to shareholders 26,779 Miscellaneous 107 Total expenses before 3,535,990 reductions Expense reductions (80,480) 3,455,510 NET INVESTMENT INCOME (LOSS) (1,421,013) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 378,538 Foreign currency transactions 3,370 381,908 Change in net unrealized 79,277,166 appreciation (depreciation) on investment securities NET GAIN (LOSS) 79,659,074 NET INCREASE (DECREASE) IN $ 78,238,061 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 1,568,122 charges paid to FDC Sales charges - Retained by $ 1,565,474 FDC Deferred sales charges $ 2,870 withheld by FDC Exchange fees withheld by FSC $ 36,173 Expense reductions Directed $ 80,365 brokerage arrangements Custodian credits 115 $ 80,480
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (1,421,013) $ (1,019,153) income (loss) Net realized gain (loss) 381,908 6,177,469 Change in net unrealized 79,277,166 16,637,718 appreciation (depreciation) NET INCREASE (DECREASE) IN 78,238,061 21,796,034 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (1,977,498) (3,631,382) From net realized gains In excess of net realized (1,495,766) - gain TOTAL DISTRIBUTIONS (3,473,264) (3,631,382) Share transactions Net 767,856,791 722,604,794 proceeds from sales of shares Reinvestment of distributions 3,407,803 3,609,234 Cost of shares redeemed (702,182,873) (612,476,826) NET INCREASE (DECREASE) IN 69,081,721 113,737,202 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 805,978 1,610,457 TOTAL INCREASE (DECREASE) 144,652,496 133,512,311 IN NET ASSETS NET ASSETS Beginning of period 192,860,676 59,348,365 End of period $ 337,513,172 $ 192,860,676 OTHER INFORMATION Shares Sold 13,691,594 17,451,277 Issued in reinvestment of 64,738 95,408 distributions Redeemed (12,610,578) (15,477,247) Net increase (decrease) 1,145,754 2,069,438
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 50.04 $ 33.25 $ 27.87 $ 23.91 $ 24.91 period Income from Investment Operations Net investment income (loss) C (.28) (.27) (.13) (.14) (.18) Net realized and unrealized 18.27 17.14 5.49 4.07 (.96) gain (loss) Total from investment 17.99 16.87 5.36 3.93 (1.14) operations Less Distributions From net realized gain (.39) (.51) (.08) - - In excess of net realized gain (.30) - - - - Total distributions (.69) (.51) (.08) - - Redemption fees added to paid .16 .43 .10 .03 .14 in capital Net asset value, end of period $ 67.50 $ 50.04 $ 33.25 $ 27.87 $ 23.91 TOTAL RETURN A, B 36.66% 52.61% 19.59% 16.56% (4.01)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 337,513 $ 192,861 $ 59,348 $ 44,051 $ 31,090 (000 omitted) Ratio of expenses to average 1.25% 1.63% 1.45% 1.94% 2.07% net assets Ratio of expenses to average 1.22% D 1.55% D 1.39% D 1.92% D 1.96% D net assets after expense reductions Ratio of net investment (.50)% (.67)% (.39)% (.53)% (.74)% income (loss) to average net assets Portfolio turnover rate 165% 308% 278% 235% 481%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. DFMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29. 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT AIR TRANSPORTATION 4.11% 93.22% 243.45% SELECT AIR TRANSPORTATION 0.92% 87.35% 233.08% (LOAD ADJ.) S&P 500 19.74% 194.91% 459.21% GS Cyclical Industries -4.79% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT AIR TRANSPORTATION 4.11% 14.08% 13.13% SELECT AIR TRANSPORTATION 0.92% 13.38% 12.79% (LOAD ADJ.) S&P 500 19.74% 24.15% 18.78% GS Cyclical Industries -4.79% 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 1989/02/28 9700.00 10000.00 1989/03/31 10185.90 10233.00 1989/04/30 10590.82 10764.09 1989/05/31 10860.76 11200.04 1989/06/30 10806.47 11136.20 1989/07/31 11567.36 12141.80 1989/08/31 12446.01 12379.78 1989/09/30 11956.87 12329.02 1989/10/31 11014.81 12042.99 1989/11/30 10906.11 12288.66 1989/12/31 11003.86 12583.59 1990/01/31 9871.38 11739.23 1990/02/28 10286.62 11890.67 1990/03/31 10824.55 12205.77 1990/04/30 10428.18 11900.63 1990/05/31 11154.85 13060.94 1990/06/30 11183.17 12972.12 1990/07/31 10843.42 12930.61 1990/08/31 9125.84 11761.68 1990/09/30 8210.43 11188.89 1990/10/31 8644.54 11140.78 1990/11/30 8512.42 11860.47 1990/12/31 9003.16 12191.38 1991/01/31 10069.57 12722.92 1991/02/28 11202.04 13632.61 1991/03/31 11154.85 13962.52 1991/04/30 10881.17 13996.03 1991/05/31 11522.91 14600.66 1991/06/30 11279.94 13931.95 1991/07/31 11626.72 14581.18 1991/08/31 11482.23 14926.75 1991/09/30 11096.92 14677.48 1991/10/31 11636.35 14874.16 1991/11/30 11116.18 14274.73 1991/12/31 12339.54 15907.76 1992/01/31 13052.36 15611.87 1992/02/29 13639.96 15814.83 1992/03/31 12840.44 15506.44 1992/04/30 12175.78 15962.33 1992/05/31 12339.54 16040.54 1992/06/30 11938.84 15801.54 1992/07/31 11870.23 16447.82 1992/08/31 11370.33 16110.64 1992/09/30 11742.80 16300.75 1992/10/31 12164.29 16357.80 1992/11/30 12458.35 16915.60 1992/12/31 13149.97 17123.66 1993/01/31 13268.89 17267.50 1993/02/28 13476.99 17502.34 1993/03/31 14963.42 17871.64 1993/04/30 15132.57 17439.14 1993/05/31 15997.01 17906.51 1993/06/30 14804.68 17958.44 1993/07/31 15311.42 17886.61 1993/08/31 16225.54 18564.51 1993/09/30 15897.65 18421.56 1993/10/31 16811.76 18802.89 1993/11/30 16851.51 18624.26 1993/12/31 17211.64 18849.62 1994/01/31 17876.33 19490.50 1994/02/28 17241.85 18962.31 1994/03/31 16244.80 18135.55 1994/04/30 16137.97 18367.69 1994/05/31 15463.33 18668.92 1994/06/30 14992.15 18211.53 1994/07/31 15773.88 18808.87 1994/08/31 16373.56 19580.03 1994/09/30 14542.38 19100.32 1994/10/31 14660.18 19530.08 1994/11/30 13685.69 18818.79 1994/12/31 13469.22 19097.87 1995/01/31 13902.66 19593.08 1995/02/28 15094.63 20356.63 1995/03/31 16069.87 20957.35 1995/04/30 17359.37 21574.54 1995/05/31 17641.10 22436.88 1995/06/30 19873.33 22958.09 1995/07/31 20545.17 23719.38 1995/08/31 19754.13 23778.91 1995/09/30 20480.15 24782.38 1995/10/31 20241.76 24693.91 1995/11/30 22853.25 25777.97 1995/12/31 21488.66 26274.46 1996/01/31 21001.29 27168.84 1996/02/29 23382.76 27420.69 1996/03/31 24579.04 27684.75 1996/04/30 23549.65 28092.83 1996/05/31 23773.83 28817.34 1996/06/30 23661.74 28927.14 1996/07/31 19783.50 27649.13 1996/08/31 19424.82 28232.26 1996/09/30 19189.44 29821.17 1996/10/31 19010.10 30643.63 1996/11/30 21330.31 32959.99 1996/12/31 21756.25 32307.05 1997/01/31 20904.38 34325.59 1997/02/28 19861.96 34594.71 1997/03/31 21083.72 33173.21 1997/04/30 22238.23 35153.65 1997/05/31 23785.04 37293.80 1997/06/30 24065.26 38964.57 1997/07/31 25511.19 42064.98 1997/08/31 24536.03 39708.50 1997/09/30 26542.40 41883.33 1997/10/31 26307.01 40484.43 1997/11/30 26979.54 42358.45 1997/12/31 28531.70 43085.75 1998/01/31 29615.78 43562.28 1998/02/28 31998.39 46703.99 1998/03/31 33439.86 49095.70 1998/04/30 34551.12 49589.60 1998/05/31 33110.99 48737.16 1998/06/30 35211.18 50716.86 1998/07/31 33339.01 50176.72 1998/08/31 26210.37 42922.17 1998/09/30 25802.33 45671.77 1998/10/31 28346.56 49386.71 1998/11/30 28958.62 52380.04 1998/12/31 30362.74 55398.18 1999/01/31 32486.93 57714.93 1999/02/26 33308.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990309 142758 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Air Transportation Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $33,308 - a 233.08% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Continental Airlines, Inc. 8.0 Class B Delta Air Lines, Inc. 5.5 Northwest Airlines Corp. 5.3 Class A United Technologies Corp. 4.5 Cordant Technologies, Inc. 4.4 ASA Holdings, Inc. 4.4 AMR Corp. 4.3 Airborne Freight Corp. 4.3 Sabre Group Holdings, Inc. 4.3 Class A Sundstrand Corp. 4.0 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Air Transportation 50.9% Aerospace & Defense 25.1% Trucking & Freight 9.5% Computer Services & Software 4.3% Industrial Machinery & Equipment 1.8% All Others 8.4%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 8.4 Row: 1, Col: 2, Value: 1.8 Row: 1, Col: 3, Value: 4.3 Row: 1, Col: 4, Value: 9.5 Row: 1, Col: 5, Value: 25.1 Row: 1, Col: 6, Value: 50.9 AIR TRANSPORTATION PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Christopher Zepf) NOTE TO SHAREHOLDERS: Christopher Zepf became Portfolio Manager of Fidelity Select Air Transportation Portfolio on October 30, 1998. Q. HOW DID THE FUND PERFORM, CHRIS? A. For the 12-month period that ended February 28, 1999, the fund returned 4.11%. For the same 12-month period, the Standard & Poor's 500 Index returned 19.74%. For another comparison, the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - returned -4.79%. Q. THE PAST 12 MONTHS PROVED TO BE A FAIRLY TURBULENT TIME FOR AIRLINE STOCKS. WHAT FACTORS INFLUENCED THEIR PERFORMANCE? A. Airlines are cyclical - meaning, they are very sensitive to the economy's ebbs and flows - and they performed according to shifting expectations throughout the year. In the early months of the period, airline stocks behaved fairly well based on investors' beliefs that the U.S. economy would be resistant to problems in Southeast Asia and Latin America. In July, airline stocks reversed course and began to perform quite poorly based on fears that the U.S. economy was in danger of slowing after all. Furthermore, weak airline traffic out of the troubled Asia and Latin America regions hurt the international operations of U.S. carriers. Another worry was the future growth in industry capacity - which is expected to expand about 5% in 1999. Investors worried that supply would outstrip demand. Over the past several months of the period, however, airline stocks gained some altitude on news that the U.S. economy was growing at a much quicker-than-expected pace and that many of the troubled areas of the world were doing a bit better than originally expected. The fact that oil prices were low was another positive, since fuel is one of the airlines' major expenditures. Q. WHAT CHANGES HAVE YOU MADE SINCE TAKING OVER THE FUND? A. I focused on finding stocks that I felt already had priced in the possibility of a global recession. My reason for emphasizing those stocks was that I felt they had limited downside if a recession were to occur, and good potential for strong returns if the economy turned out to be stronger than most observers believed. Specifically, I made significant additions to the fund's holdings in America West, which staged a major rebound after resolving its labor dispute with its mechanics. Other airlines with most of their operations in the United States also posted strong returns, including Southwest Airlines and Atlantic Coast Airlines. I also added to the fund's holdings in Continental Airlines, which I liked because it has grown at a faster pace than the industry as a whole. That stock, too, posted decent gains since I added to the fund's stake in it. Q. WERE THERE ANY DISAPPOINTMENTS AMONG THE FUND'S AIRLINE HOLDINGS? A. Yes, there were. Atlantic Southeast Airlines (ASA) lagged the regional airline group, mostly due to operational and company-specific issues. Delta, which already owned roughly 27% of ASA, recently announced its intention to acquire the company. Q. WHAT INVESTMENTS DID YOU CHOOSE OUTSIDE THE AIRLINE GROUP? A. I added to the fund's stake in computer reservations provider Sabre Group, which performed relatively well. The company is getting more and more of the reservations business that airlines are increasingly outsourcing. In addition, Travelocity - the company's Internet booking and travel information service - continued to attract both new customers and higher sales. Airborne Freight, which I bought in the late fall when fears of a global recession were at their peak, and thus had an attractive valuation, has performed well. Q. WHAT'S YOUR OUTLOOK? A. I think that capacity growth - which is measured in available seat miles - will be an issue for airline stocks over the next two years. In an environment where capacity outpaces demand, it will be difficult for airlines to grow their earnings. However, if the U.S. economy remains robust and oil prices remain low, airline stocks could continue their recent strong performance. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 034 TRADING SYMBOL: FSAIX SIZE: as of February 28, 1999, more than $65 million MANAGER: Christopher Zepf, since October 1998; manager, Fidelity Select Transportation Portfolio, since 1998; joined Fidelity in 1998 AIR TRANSPORTATION PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.9% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 25.1% Boeing Co. 46,000 $ 1,635,875 Cordant Technologies, Inc. 75,600 2,943,675 Gulfstream Aerospace Corp. (a) 49,100 2,197,225 Howmet International, Inc. (a) 39,000 628,875 Kellstrom Industries, Inc. (a) 38,000 615,125 Lockheed Martin Corp. 70,000 2,638,125 Precision Castparts Corp. 13,400 497,475 Sundstrand Corp. 39,300 2,660,119 United Technologies Corp. 24,000 2,973,000 16,789,494 AIR TRANSPORTATION - 50.9% Air Canada, Inc. (a) 75,001 303,426 Alaska Air Group, Inc. (a) 37,300 1,890,644 America West Holding Corp. 94,300 1,603,100 Class B (a) AMR Corp. (a) 52,300 2,899,381 ASA Holdings, Inc. 87,600 2,940,075 Atlantic Coast Airlines 21,000 672,000 Holdings (a) Atlas Air, Inc. (a) 21,450 646,181 British Airways PLC ADR 7,000 518,000 Comair Holdings, Inc. 56,850 2,138,981 Continental Airlines, Inc. 155,200 5,373,801 Class B (a) Delta Air Lines, Inc. 60,000 3,648,750 Midwest Express Holdings, 70,400 1,892,000 Inc. (a) Northwest Airlines Corp. 142,000 3,550,000 Class A (a) Ryanair Holdings PLC 24,600 931,725 sponsored ADR (a) SkyWest, Inc. 1,500 47,156 Southwest Airlines Co. 79,400 2,391,925 US Airways Group, Inc. (a) 53,800 2,548,775 33,995,920 AUTOS, TIRES, & ACCESSORIES - 0.5% World Fuel Services Corp. 30,200 313,325 COMPUTER SERVICES & SOFTWARE - - 4.3% Sabre Group Holdings, Inc. 73,000 2,865,250 Class A (a) DEFENSE ELECTRONICS - 0.8% Litton Industries, Inc. (a) 10,000 561,250 INDUSTRIAL MACHINERY & EQUIPMENT - 1.8% AVTEAM, Inc. Class A (a) 252,300 1,198,425 TRUCKING & FREIGHT - 9.5% Airborne Freight Corp. 73,800 2,878,200 Eagle USA Airfreight, Inc. (a) 35,000 1,010,625 Expeditors International of 11,100 516,844 Washington, Inc. FDX Corp. (a) 20,000 1,910,000 6,315,669 TOTAL COMMON STOCKS 62,039,333 (Cost $54,824,623) CASH EQUIVALENTS - 7.1% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) 4,743,535 $ 4,743,535 (Cost $4,743,535) TOTAL INVESTMENT IN $ 66,782,868 SECURITIES - 100% (Cost $59,568,158) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $237,617,388 and $344,369,991, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $73,991 for the period. The fund participated in the bank borrowing program. The maximum loan and average daily balance during the period for which the loan was outstanding amounted to $3,008,000. The weighted average interest rate was 5.94%. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $61,896,349. Net unrealized appreciation aggregated $4,886,519, of which $6,246,428 related to appreciated investment securities and $1,359,909 related to depreciated investment securities. The fund hereby designates approximately $804,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 18% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for use in preparing 1999 income tax returns. AIR TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 66,782,868 value (cost $59,568,158) - See accompanying schedule Foreign currency held at 318,434 value (cost $321,010) Receivable for investments 1,775,553 sold Receivable for fund shares 1,309,792 sold Dividends receivable 42,072 Interest receivable 15,702 Redemption fees receivable 1,321 Other receivables 575 TOTAL ASSETS 70,246,317 LIABILITIES Payable for investments $ 3,003,785 purchased Payable for fund shares 1,221,159 redeemed Accrued management fee 29,597 Other payables and accrued 42,365 expenses TOTAL LIABILITIES 4,296,906 NET ASSETS $ 65,949,411 Net Assets consist of: Paid in capital $ 49,213,691 Accumulated undistributed net 9,519,067 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 7,216,653 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 2,375,389 $ 65,949,411 shares outstanding NET ASSET VALUE and $27.76 redemption price per share ($65,949,411 (divided by) 2,375,389 shares) Maximum offering price per $28.62 share (100/97.00 of $27.76) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 379,217 Dividends Interest 372,979 TOTAL INCOME 752,196 EXPENSES Management fee $ 573,138 Transfer agent fees 575,180 Accounting fees and expenses 98,333 Non-interested trustees' 374 compensation Custodian fees and expenses 18,252 Registration fees 17,710 Audit 20,919 Legal 638 Interest 496 Reports to shareholders 18,150 Total expenses before 1,323,190 reductions Expense reductions (76,482) 1,246,708 NET INVESTMENT INCOME (LOSS) (494,512) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 10,288,875 Foreign currency transactions 5,295 10,294,170 Change in net unrealized appreciation (depreciation) on: Investment securities (7,872,698) Assets and liabilities in 1,943 (7,870,755) foreign currencies NET GAIN (LOSS) 2,423,415 NET INCREASE (DECREASE) IN $ 1,928,903 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 432,957 charges paid to FDC Sales charges - Retained by $ 423,538 FDC Deferred sales charges $ 2,545 withheld by FDC Exchange fees withheld by FSC $ 21,908 Expense reductions Directed $ 71,923 brokerage arrangements Custodian credits 4,559 $ 76,482
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (494,512) $ (529,067) income (loss) Net realized gain (loss) 10,294,170 13,099,045 Change in net unrealized (7,870,755) 17,664,167 appreciation (depreciation) NET INCREASE (DECREASE) IN 1,928,903 30,234,145 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (1,287,140) (3,545,132) from net realized gains Share transactions Net 234,828,394 317,061,095 proceeds from sales of shares Reinvestment of distributions 1,276,230 3,512,172 Cost of shares redeemed (352,683,506) (202,499,252) NET INCREASE (DECREASE) IN (116,578,882) 118,074,015 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 701,437 464,487 TOTAL INCREASE (DECREASE) (115,235,682) 145,227,515 IN NET ASSETS NET ASSETS Beginning of period 181,185,093 35,957,578 End of period 65,949,411 181,185,093 OTHER INFORMATION Shares Sold 8,676,907 13,782,585 Issued in reinvestment of 44,922 154,313 distributions Redeemed (13,091,302) (9,221,113) Net increase (decrease) (4,369,473) 4,715,785
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 F 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 26.86 $ 17.72 $ 21.11 $ 13.93 $ 17.12 period Income from Investment Operations Net investment income (loss) C (.14) (.19) (.22) (.01) (.18) Net realized and unrealized 1.06 10.59 (3.12) 7.47 (2.01) gain (loss) Total from investment .92 10.40 (3.34) 7.46 (2.19) operations Less Distributions From net realized gain (.21) (1.43) (.07) (.46) (.92) In excess of net realized gain - - (.20) - (.17) Total distributions (.21) (1.43) (.27) (.46) (1.09) Redemption fees added to paid .19 .17 .22 .18 .09 in capital Net asset value, end of period $ 27.76 $ 26.86 $ 17.72 $ 21.11 $ 13.93 TOTAL RETURN A, B 4.11% 61.10% (15.06)% 54.91% (12.45)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 65,949 $ 181,185 $ 35,958 $ 75,359 $ 18,633 (000 omitted) Ratio of expenses to average 1.35% 1.93% 1.89% 1.47% 2.50% D net assets Ratio of expenses to average 1.27% E 1.87% E 1.80% E 1.41% E 2.50% net assets after expense reductions Ratio of net investment (.50)% (.84)% (1.10)% (.07)% (1.31)% income (loss) to average net assets Portfolio turnover rate 260% 294% 469% 504% 200%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D 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. 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 THE YEAR ENDED FEBRUARY 29. 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT AUTOMOTIVE -8.52% 30.40% 229.42% SELECT AUTOMOTIVE (LOAD ADJ.) -11.34% 26.41% 219.47% S&P 500 19.74% 194.91% 459.21% GS Cyclical Industries -4.79% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT AUTOMOTIVE -8.52% 5.45% 12.66% SELECT AUTOMOTIVE (LOAD ADJ.) -11.34% 4.80% 12.32% S&P 500 19.74% 24.15% 18.78% GS Cyclical Industries -4.79% 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 1989/02/28 9700.00 10000.00 1989/03/31 9884.69 10233.00 1989/04/30 10326.32 10764.09 1989/05/31 10478.89 11200.04 1989/06/30 10294.21 11136.20 1989/07/31 10655.55 12141.80 1989/08/31 10759.93 12379.78 1989/09/30 10511.01 12329.02 1989/10/31 9635.76 12042.99 1989/11/30 9724.09 12288.66 1989/12/31 9755.09 12583.59 1990/01/31 9497.50 11739.23 1990/02/28 9780.02 11890.67 1990/03/31 10145.63 12205.77 1990/04/30 10112.39 11900.63 1990/05/31 10685.73 13060.94 1990/06/30 10877.08 12972.12 1990/07/31 10910.78 12930.61 1990/08/31 9343.67 11761.68 1990/09/30 8450.59 11188.89 1990/10/31 8282.08 11140.78 1990/11/30 8770.75 11860.47 1990/12/31 9099.33 12191.38 1991/01/31 9613.28 12722.92 1991/02/28 10396.83 13632.61 1991/03/31 10481.09 13962.52 1991/04/30 10599.04 13996.03 1991/05/31 11450.00 14600.66 1991/06/30 11424.72 13931.95 1991/07/31 11896.54 14581.18 1991/08/31 12284.10 14926.75 1991/09/30 11921.81 14677.48 1991/10/31 12233.55 14874.16 1991/11/30 11626.93 14274.73 1991/12/31 12495.69 15907.76 1992/01/31 13845.61 15611.87 1992/02/29 15239.94 15814.83 1992/03/31 15568.54 15506.44 1992/04/30 16563.22 15962.33 1992/05/31 16554.34 16040.54 1992/06/30 16455.85 15801.54 1992/07/31 16607.07 16447.82 1992/08/31 15575.24 16110.64 1992/09/30 15317.29 16300.75 1992/10/31 15957.73 16357.80 1992/11/30 16731.60 16915.60 1992/12/31 17695.72 17123.66 1993/01/31 18512.86 17267.50 1993/02/28 18785.25 17502.34 1993/03/31 19793.06 17871.64 1993/04/30 19678.70 17439.14 1993/05/31 20877.02 17906.51 1993/06/30 21242.13 17958.44 1993/07/31 21485.54 17886.61 1993/08/31 22234.50 18564.51 1993/09/30 22468.54 18421.56 1993/10/31 22946.00 18802.89 1993/11/30 22946.00 18624.26 1993/12/31 23957.28 18849.62 1994/01/31 25322.97 19490.50 1994/02/28 24505.48 18962.31 1994/03/31 22783.94 18135.55 1994/04/30 22320.66 18367.69 1994/05/31 21989.98 18668.92 1994/06/30 21707.93 18211.53 1994/07/31 22359.56 18808.87 1994/08/31 21989.98 19580.03 1994/09/30 21056.31 19100.32 1994/10/31 21455.06 19530.08 1994/11/30 20161.53 18818.79 1994/12/31 20902.03 19097.87 1995/01/31 20405.39 19593.08 1995/02/28 21420.26 20356.63 1995/03/31 21312.30 20957.35 1995/04/30 21247.52 21574.54 1995/05/31 21679.38 22436.88 1995/06/30 22219.21 22958.09 1995/07/31 23817.09 23719.38 1995/08/31 23601.16 23778.91 1995/09/30 23719.92 24782.38 1995/10/31 22618.68 24693.91 1995/11/30 23180.09 25777.97 1995/12/31 23709.12 26274.46 1996/01/31 23428.41 27168.84 1996/02/29 23590.36 27420.69 1996/03/31 25026.30 27684.75 1996/04/30 26290.70 28092.83 1996/05/31 26896.08 28817.34 1996/06/30 26582.58 28927.14 1996/07/31 25036.71 27649.13 1996/08/31 25674.51 28232.26 1996/09/30 25890.72 29821.17 1996/10/31 26009.63 30643.63 1996/11/30 27328.49 32959.99 1996/12/31 27519.42 32307.05 1997/01/31 28001.43 34325.59 1997/02/28 28449.82 34594.71 1997/03/31 27889.34 33173.21 1997/04/30 28512.51 35153.65 1997/05/31 30143.12 37293.80 1997/06/30 31051.61 38964.57 1997/07/31 32414.34 42064.98 1997/08/31 32169.75 39708.50 1997/09/30 33928.48 41883.33 1997/10/31 32367.75 40484.43 1997/11/30 32146.45 42358.45 1997/12/31 32136.75 43085.75 1998/01/31 32124.04 43562.28 1998/02/28 34931.25 46703.99 1998/03/31 37052.53 49095.70 1998/04/30 36881.67 49589.60 1998/05/31 36675.78 48737.16 1998/06/30 36113.02 50716.86 1998/07/31 34767.87 50176.72 1998/08/31 28055.88 42922.17 1998/09/30 28069.60 45671.77 1998/10/31 30608.91 49386.71 1998/11/30 32269.75 52380.04 1998/12/31 33724.70 55398.18 1999/01/31 34163.93 57714.93 1999/02/26 31947.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990309 142800 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Automotive Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $31,947 - a 219.47% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Federal-Mogul Corp. 8.4 Ford Motor Co. 7.3 TRW, Inc. 6.2 Danaher Corp. 6.0 DaimlerChrysler AG (Reg.) 5.5 Eaton Corp. 4.8 Honda Motor Co. Ltd. 4.7 AutoZone, Inc. 4.7 Johnson Controls, Inc. 4.6 General Motors Corp. 4.1 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Autos, Tires, & Accessories 92.9% Iron & Steel 1.5% Industrial Machinery & Equipment 1.2% Electronics 0.5% Leisure Durables & Toys 0.4% All Others 3.5%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 3.5 Row: 1, Col: 2, Value: 1.4 Row: 1, Col: 3, Value: 1.5 Row: 1, Col: 4, Value: 1.2 Row: 1, Col: 5, Value: 1.5 Row: 1, Col: 6, Value: 92.90000000000001 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 12 months that ended February 28, 1999, the fund returned - -8.52%, while the Standard & Poor's 500 Index returned 19.74%. During the same period, the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - generated a return of -4.79%. Q. WHY DID THE FUND UNDERPERFORM ITS TWO BENCHMARKS OVER THE PAST 12 MONTHS? A. Although it was a fairly good year for automakers, many auto-parts makers and retailers hit a rough patch as a result of continued softness in the after-market, or the market for replacement parts. Longer-lasting vehicles caused a drop in the demand for replacement parts - a trend that dragged down the performance of the entire automotive industry during the period. Parts manufacturers also faced pricing pressures as a result of sluggish sales in the after-market. Q. SIX MONTHS AGO, YOU TALKED ABOUT THE DIFFICULT ENVIRONMENT FOR CYCLICAL STOCKS. DID THAT SITUATION IMPROVE RECENTLY? A. Somewhat. Fears of a slowdown in the economy continued to hurt cyclical stocks from August through October. However, many of these stocks rebounded in late October and early November when expectations grew that the Federal Reserve Board would continue to lower the target for interest rates. Generally, cyclical stocks - such as automakers - do well when rates are coming down because consumers tend to have more money. For instance, lower rates can prompt people to refinance their mortgages, leaving them with more disposable income. Automotive sales are heavily tied to the financial health of consumers. That said, even the recent improvement in the economic landscape couldn't erase the negative returns generated earlier in the year - or the pitfalls encountered by the parts makers over the past few months. Q. WHICH INDIVIDUAL HOLDINGS HELPED PERFORMANCE? A. Big contributors on the auto manufacturing side were Ford Motor Company and DaimlerChrysler. Ford was the best-performing stock in this group during the period, because the company was offering the right mix of products - such as its popular line of sport utility vehicles (SUVs), which sold well. In addition, DaimlerChrysler reaped the benefits of its merger, including cost-effectiveness and a well-received product line. Auto dealerships, such as Group 1 Automotive and Sonic Automotive, were also positive contributors for the fund. These companies have become more profitable over the past few years through consolidation in the industry. Q. WHICH STOCKS WERE DISAPPOINTING? A. Breed Technologies, a maker of seat belts, air bags and other safety equipment, was a big detractor from performance. Breed's restructuring efforts hit a roadblock as the company continued to struggle with the integration of several of its acquisitions. The fund sold its position in Breed by the end of the period. In addition, some auto-parts companies, such as Borg-Warner and Lear Corp., were unable to offset high fixed costs and lower demand from automakers. Q. FEDERAL-MOGUL CONTINUED TO BE THE FUND'S NO. 1 HOLDING, REPRESENTING MORE THAN 8% OF THE PORTFOLIO AT THE END OF THE PERIOD. WHAT DID YOU FIND ATTRACTIVE ABOUT THAT STOCK? A. Federal-Mogul is one of the parts manufacturers that was able to achieve success through an aggressive acquisition strategy. The company's management team focused on generating strong returns, rather than just on growing the business. Q. WHAT'S YOUR OUTLOOK FOR THE AUTOMOTIVE INDUSTRY? A. Low interest rates and low unemployment bode well for the financial health of the average U.S. consumer - which is good news for automakers. As a result, I'm not terribly concerned about sales volumes in North America. However, I am concerned about pricing pressures that may arise because some manufacturers aren't offering competitive products in specific segments of the market, such as small passenger cars, compact SUVs and small pick-up trucks. As a result, some manufacturers may need to rely solely on price for its sales. We're witnessing a similar situation in Europe as pricing pressures are mounting in the market for smaller passenger cars. Overall, I think the global economy is stable. Therefore, manufacturers with competitive product lines and good management teams should continue to thrive in this market. On the other hand, auto-parts makers may continue to suffer as a result of increasing fixed costs and pricing pressures from the automakers. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 502 TRADING SYMBOL: FSAVX SIZE: as of February 28, 1999, more than $64 million MANAGER: Albert Grosman, since 1997; analyst, automotive manufacturing, automotive parts, tire and rental car industries, 1997- present; Latin American steel, oil and cable industries, 1996-1997; joined Fidelity in 1996 AUTOMOTIVE PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 96.8% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 92.9% American Axle & Manufacturing 24,000 $ 352,500 Holdings, Inc. (a) Arvin Industries, Inc. 27,200 986,000 AutoZone, Inc. (a) 86,200 3,017,000 Borg-Warner Automotive, Inc. 13,800 601,163 DaimlerChrysler AG (Reg.) 37,927 3,562,768 Dana Corp. 48,500 1,830,875 Danaher Corp. 80,200 3,869,650 Delphi Automotive Systems 4,000 73,750 Corp. (a) Discount Auto Parts, Inc. (a) 27,300 585,244 Eaton Corp. 44,750 3,104,531 Federal-Mogul Corp. 110,500 5,435,217 Ford Motor Co. 79,500 4,715,344 General Motors Corp. 32,600 2,691,538 Gentex Corp. (a) 60,700 1,316,431 Goodyear Tire & Rubber Co. 30,500 1,410,625 Group 1 Automotive, Inc. (a) 27,600 695,175 Honda Motor Co. Ltd. 80,000 3,035,000 Johnson Controls, Inc. 48,150 2,961,225 Lear Corp. (a) 40,900 1,444,281 Magna International, Inc. 28,400 1,695,185 Class A Mascotech, Inc. 26,300 397,788 Monro Muffler Brake, Inc. 5,095 42,671 Navistar International Corp. 43,100 1,853,300 (a) Oshkosh Truck Co. Class B 3,900 131,625 Pep Boys-Manny, Moe & Jack 92,600 1,689,950 Renault SA 19,200 899,640 Republic Industries, Inc. (a) 45,800 561,050 Snap-On, Inc. 33,100 935,075 Sonic Automotive, Inc. (a) 20,000 322,500 SPX Corp. 45,600 2,604,900 Standard Motor Products, Inc. 17,000 364,438 Standard Products Co. 3,600 54,000 Superior Industries 10,000 247,500 International, Inc. TBC Corp. (a) 18,000 102,375 Tower Automotive, Inc. (a) 64,400 1,199,450 TRW, Inc. 85,200 4,025,700 Volkswagen AG 12,200 786,854 Volvo AB ADR Class B 12,000 306,000 Wabash National Corp. 15,000 184,688 Wynn's International, Inc. 3,600 66,600 60,159,606 CHEMICALS & PLASTICS - 0.3% Myers Industries, Inc. 9,200 179,400 ELECTRONICS - 0.5% Stoneridge, Inc. (a) 19,300 326,894 INDUSTRIAL MACHINERY & EQUIPMENT - 1.2% Ballard Power Systems, Inc. 15,000 405,889 (a) Mark IV Industries, Inc. 26,100 393,131 799,020 SHARES VALUE (NOTE 1) IRON & STEEL - 1.5% Linamar Corp. 40,100 $ 712,747 SPS Technologies, Inc. (a) 6,600 272,250 984,997 LEISURE DURABLES & TOYS - 0.4% Coachmen Industries, Inc. 12,200 247,050 TOTAL COMMON STOCKS 62,696,967 (Cost $63,821,267) CASH EQUIVALENTS - 3.2% Taxable Central Cash Fund (b) 2,063,258 2,063,258 (Cost $2,063,258) TOTAL INVESTMENT IN $ 64,760,225 SECURITIES - 100% (Cost $65,884,525) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $95,113,946 and $55,240,463, respectively. 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 $23,803 for the period. Distribution of investments by country of issue, as a percentage of total value of investments in securities, is as follows: United States of America 82.4% Germany 6.7 Japan 4.7 Canada 4.3 France 1.4 Others individually less than 0.5 1% TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $66,277,893. Net unrealized depreciation aggregated $1,517,668, of which $5,404,600 related to appreciated investment securities and $6,922,268 related to depreciated investment securities. The fund hereby designates approximately $978,000 as a capital gain dividend for the purpose of the dividend paid deduction. At February 28, 1999, the fund had a capital loss carryforward of approximately $1,009,000, all of which will expire on February 28, 2007. The fund intends to elect to defer to its fiscal year ending February 29, 2000 approximately $3,193,000 of losses recognized during the period November 1, 1998 to February 28,1999. A total of 33% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for use in preparing 1999 income tax returns. AUTOMOTIVE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 64,760,225 value (cost $65,884,525) - See accompanying schedule Receivable for fund shares 28,118 sold Dividends receivable 119,989 Interest receivable 7,805 Redemption fees receivable 82 Other receivables 2,470 TOTAL ASSETS 64,918,689 LIABILITIES Payable for fund shares $ 293,270 redeemed Accrued management fee 34,070 Other payables and accrued 50,255 expenses TOTAL LIABILITIES 377,595 NET ASSETS $ 64,541,094 Net Assets consist of: Paid in capital $ 70,210,580 Undistributed net investment 47,401 income Accumulated undistributed net (4,592,634) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (1,124,253) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 2,772,595 $ 64,541,094 shares outstanding NET ASSET VALUE and $23.28 redemption price per share ($64,541,094 (divided by) 2,772,595 shares) Maximum offering price per $24.00 share (100/97.00 of $23.28) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 700,748 Dividends Interest 225,135 TOTAL INCOME 925,883 EXPENSES Management fee $ 357,296 Transfer agent fees 397,375 Accounting fees and expenses 67,412 Non-interested trustees' 160 compensation Custodian fees and expenses 13,317 Registration fees 19,077 Audit 15,140 Legal 300 Reports to shareholders 6,518 Total expenses before 876,595 reductions Expense reductions (19,721) 856,874 NET INVESTMENT INCOME 69,009 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (4,430,645) Foreign currency transactions 307 (4,430,338) Change in net unrealized appreciation (depreciation) on: Investment securities (3,784,738) Assets and liabilities in 105 (3,784,633) foreign currencies NET GAIN (LOSS) (8,214,971) NET INCREASE (DECREASE) IN $ (8,145,962) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 151,425 charges paid to FDC Sales charges - Retained by $ 151,425 FDC Deferred sales charges $ 1,131 withheld by FDC Exchange fees withheld by FSC $ 4,493 Expense reductions Directed $ 18,421 brokerage arrangements Custodian credits 1,300 $ 19,721
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ 69,009 $ 108,611 income Net realized gain (loss) (4,430,338) 12,457,463 Change in net unrealized (3,784,633) (2,220,824) appreciation (depreciation) NET INCREASE (DECREASE) IN (8,145,962) 10,345,250 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (41,356) (202,512) From net investment income From net realized gain (2,674,498) (7,054,725) TOTAL DISTRIBUTIONS (2,715,854) (7,257,237) Share transactions Net 93,308,374 38,285,022 proceeds from sales of shares Reinvestment of distributions 2,635,878 7,198,159 Cost of shares redeemed (53,084,232) (102,498,033) NET INCREASE (DECREASE) IN 42,860,020 (57,014,852) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 53,948 69,215 TOTAL INCREASE (DECREASE) 32,052,152 (53,857,624) IN NET ASSETS NET ASSETS Beginning of period 32,488,942 86,346,566 End of period (including $ 64,541,094 $ 32,488,942 undistributed net investment income of $47,401 and $52,621, respectively) OTHER INFORMATION Shares Sold 3,661,058 1,443,301 Issued in reinvestment of 97,455 295,056 distributions Redeemed (2,167,227) (3,958,616) Net increase (decrease) 1,591,286 (2,220,259)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 27.50 $ 25.38 $ 21.85 $ 19.84 $ 25.48 period Income from Investment Operations Net investment income C .03 .05 .13 .03 .08 Net realized and unrealized (2.09) 5.21 4.28 1.95 (3.46) gain (loss) Total from investment (2.06) 5.26 4.41 1.98 (3.38) operations Less Distributions From net investment income (.01) (.08) (.17) - (.05) From net realized gain (2.17) (3.09) (.75) - (2.26) Total distributions (2.18) (3.17) (.92) - (2.31) Redemption fees added to paid .02 .03 .04 .03 .05 in capital Net asset value, end of period $ 23.28 $ 27.50 $ 25.38 $ 21.85 $ 19.84 TOTAL RETURN A, B (8.52)% 22.78% 20.60% 10.13% (12.59)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 64,541 $ 32,489 $ 86,347 $ 55,753 $ 60,075 (000 omitted) Ratio of expenses to average 1.45% 1.60% 1.56% 1.81% 1.82% net assets Ratio of expenses to average 1.41% D 1.56% D 1.52% D 1.80% D 1.80% D net assets after expense reductions Ratio of net investment .11% .17% .54% .13% .34% income to average net assets Portfolio turnover rate 96% 153% 175% 61% 63% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT CHEMICALS -23.66% 47.01% 187.59% SELECT CHEMICALS (LOAD ADJ.) -26.02% 42.53% 178.89% S&P 500 19.74% 194.91% 459.21% GS Cyclical Industries -4.79% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT CHEMICALS -23.66% 8.01% 11.14% SELECT CHEMICALS (LOAD ADJ.) -26.02% 7.34% 10.80% S&P 500 19.74% 24.15% 18.78% GS Cyclical Industries -4.79% 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 1989/02/28 9700.00 10000.00 1989/03/31 9806.08 10233.00 1989/04/30 10086.13 10764.09 1989/05/31 10319.51 11200.04 1989/06/30 10196.30 11136.20 1989/07/31 10846.04 12141.80 1989/08/31 11342.90 12379.78 1989/09/30 10939.47 12329.02 1989/10/31 10166.57 12042.99 1989/11/30 10383.15 12288.66 1989/12/31 10801.78 12583.59 1990/01/31 10032.14 11739.23 1990/02/28 10099.26 11890.67 1990/03/31 10399.06 12205.77 1990/04/30 10157.43 11900.63 1990/05/31 11043.41 13060.94 1990/06/30 11133.55 12972.12 1990/07/31 11170.38 12930.61 1990/08/31 9678.54 11761.68 1990/09/30 9199.68 11188.89 1990/10/31 9305.58 11140.78 1990/11/30 9927.18 11860.47 1990/12/31 10355.40 12191.38 1991/01/31 11050.67 12722.92 1991/02/28 11897.89 13632.61 1991/03/31 12183.36 13962.52 1991/04/30 12086.67 13996.03 1991/05/31 12924.68 14600.66 1991/06/30 12573.42 13931.95 1991/07/31 13179.43 14581.18 1991/08/31 13438.48 14926.75 1991/09/30 13336.71 14677.48 1991/10/31 13549.51 14874.16 1991/11/30 12874.11 14274.73 1991/12/31 14358.97 15907.76 1992/01/31 14634.73 15611.87 1992/02/29 15162.50 15814.83 1992/03/31 15053.14 15506.44 1992/04/30 15599.92 15962.33 1992/05/31 15509.59 16040.54 1992/06/30 15049.86 15801.54 1992/07/31 15524.75 16447.82 1992/08/31 14994.29 16110.64 1992/09/30 15009.45 16300.75 1992/10/31 14857.89 16357.80 1992/11/30 15307.51 16915.60 1992/12/31 15637.59 17123.66 1993/01/31 15621.51 17267.50 1993/02/28 15348.01 17502.34 1993/03/31 15712.67 17871.64 1993/04/30 16004.11 17439.14 1993/05/31 16246.43 17906.51 1993/06/30 15838.89 17958.44 1993/07/31 16081.21 17886.61 1993/08/31 16868.75 18564.51 1993/09/30 16334.55 18421.56 1993/10/31 16951.36 18802.89 1993/11/30 17078.03 18624.26 1993/12/31 17632.49 18849.62 1994/01/31 19004.97 19490.50 1994/02/28 18975.01 18962.31 1994/03/31 18405.64 18135.55 1994/04/30 19295.72 18367.69 1994/05/31 19760.31 18668.92 1994/06/30 19512.93 18211.53 1994/07/31 20393.85 18808.87 1994/08/31 21576.45 19580.03 1994/09/30 21419.58 19100.32 1994/10/31 21383.37 19530.08 1994/11/30 19706.01 18818.79 1994/12/31 20237.75 19097.87 1995/01/31 19708.90 19593.08 1995/02/28 20852.70 20356.63 1995/03/31 21492.24 20957.35 1995/04/30 21952.96 21574.54 1995/05/31 22171.56 22436.88 1995/06/30 22546.29 22958.09 1995/07/31 23614.27 23719.38 1995/08/31 23714.20 23778.91 1995/09/30 24088.93 24782.38 1995/10/31 22889.79 24693.91 1995/11/30 23889.07 25777.97 1995/12/31 24578.40 26274.46 1996/01/31 25708.14 27168.84 1996/02/29 26582.33 27420.69 1996/03/31 27866.73 27684.75 1996/04/30 28157.12 28092.83 1996/05/31 28096.21 28817.34 1996/06/30 27737.57 28927.14 1996/07/31 26614.26 27649.13 1996/08/31 27791.70 28232.26 1996/09/30 29023.28 29821.17 1996/10/31 29219.52 30643.63 1996/11/30 30295.46 32959.99 1996/12/31 29867.48 32307.05 1997/01/31 30334.94 34325.59 1997/02/28 30586.65 34594.71 1997/03/31 29601.38 33173.21 1997/04/30 30695.94 35153.65 1997/05/31 32207.70 37293.80 1997/06/30 33093.16 38964.57 1997/07/31 35742.34 42064.98 1997/08/31 35850.32 39708.50 1997/09/30 36073.49 41883.33 1997/10/31 34273.77 40484.43 1997/11/30 34468.14 42358.45 1997/12/31 34789.19 43085.75 1998/01/31 34287.65 43562.28 1998/02/28 36540.59 46703.99 1998/03/31 37885.99 49095.70 1998/04/30 38001.45 49589.60 1998/05/31 36513.91 48737.16 1998/06/30 33571.33 50716.86 1998/07/31 30718.18 50176.72 1998/08/31 27003.38 42922.17 1998/09/30 26873.32 45671.77 1998/10/31 27613.03 49386.71 1998/11/30 29604.55 52380.04 1998/12/31 29259.25 55398.18 1999/01/31 27635.73 57714.93 1999/02/26 27889.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990309 143208 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Chemicals Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $27,889 - a 178.89% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS du Pont (E.I.) de Nemours & Co. 9.2 Dow Chemical Co. 8.8 Minnesota Mining & 7.4 Manufacturing Co. Praxair, Inc. 6.3 PPG Industries, Inc. 5.6 Avery Dennison Corp. 3.8 Monsanto Co. 3.4 Morton International, Inc. 3.3 Rohm & Haas Co. 3.2 Air Products & Chemicals, Inc. 3.2 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Chemicals & Plastics 66.8% Consumer Durables 7.4% Drugs & Pharmaceuticals 5.3% Agriculture 5.2% Building Materials 4.3% All Others 11.0%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 11.0 Row: 1, Col: 2, Value: 4.3 Row: 1, Col: 3, Value: 5.2 Row: 1, Col: 4, Value: 5.3 Row: 1, Col: 5, Value: 7.4 Row: 1, Col: 6, Value: 66.8 CHEMICALS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Dylan J. Yolles) NOTE TO SHAREHOLDERS: Dylan J. Yolles became Portfolio Manager of Fidelity Select Chemicals Portfolio on January 4, 1999. Q. HOW DID THE FUND PERFORM, DYLAN? A. For the 12 months that ended February 28, 1999, the fund had a total return of -23.66%. During the same period, the Standard & Poor's 500 Index had a return of 19.74%, while the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - had a return of -4.79%. Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE? A. The chemical industry faced an unfavorable supply/demand balance that lowered chemical prices, reduced profitability and caused a sharp drop in its stock prices. A great deal of new production capacity in the industry became operational in 1997 and 1998, increasing supply at the very time that a worsening global economy caused a weakness in demand, resulting in lower prices. Asia's economic problems put pressure on U.S. companies in two ways: They had to compete domestically against cheap imports from Asia, and they faced declining export markets in that region of the world. Although the U.S. economy grew, the most significant growth occurred in technology, rather than basic industries. When the unfavorable supply/demand balance caused earnings disappointments, the stock prices of chemical companies corrected sharply. Q. WERE THERE ANY BRIGHT SPOTS IN PERFORMANCE, AND WHERE WERE THE BIGGEST DISAPPOINTMENTS? A. Monsanto's basic agricultural business continued to do well, and its Searle pharmaceutical division successfully introduced a new anti-arthritis drug - Celebrex. The stock performance also was helped by reports that Monsanto might be acquired by a larger company. In general, we had disappointments among the small- and mid-cap specialty companies, including Witco, Sealed Air and Cytec. Each of these companies had its own problems, but the group as a whole was penalized when analysts lowered growth expectations in light of disappointing earnings. DuPont, the biggest company in the industry, was a major disappointment as it failed to meet earnings expectations. Q. WHAT CHANGES HAVE YOU MADE IN THE PORTFOLIO SINCE TAKING OVER THE FUND IN JANUARY? A. In general, I have given the fund a larger-cap bias. I believe that in a relatively tough economic environment, the downside risk of large-cap companies is more limited. These companies are much better able to weather the storm, but still have the potential to do well in a recovery. I increased the exposure to commodity companies, including Dow Chemical and Union Carbide. Profit margins in commodities have reached historical lows. In the past, this has been a good time to begin buying the stocks, since stock performance should do better when profit margins recover. I also added some higher-quality specialty companies in the mid- to large-cap areas. Two examples are Morton International, which was recently acquired by Rohm & Haas, and Avery Dennison Corp., manufacturer of labels and adhesives. In addition, I added industrial gas companies such as Praxair. These larger-cap stocks were relatively inexpensive. Historically, they have shown good earnings growth, and have had fairly stable earnings during economic downturns. Q. HOW WOULD YOU DESCRIBE YOUR INVESTMENT STYLE, DYLAN? A. I look for companies with demonstrated records of financial success, which usually are a combination of a high return on capital and good earnings growth. I also like companies with good records of adding new products and strong market positions. Finally, I balance valuations relative to the company's fundamental outlook. I want to make sure I am paying a reasonable price for the stock. Q. WHAT IS YOUR OUTLOOK? A. A lot depends on what happens in the global economy over the next 12 months. The chemical company stocks are cheap relative to the overall market. If there is improvement in Asia and a bottom to the recession in Latin America, I think that chemical stocks have the potential to go up significantly and quickly. While few analysts are optimistic about the near-term economic outlook, keep in mind that this is a cyclical industry: The best time to buy cyclical companies is when things have not gone well. Eventually, things will get better, but you have to be patient. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 069 TRADING SYMBOL: FSCHX SIZE: as of February 28, 1999, more than $31 million MANAGER: Dylan J. Yolles, since January 1999; equity analyst, commodity and diversified chemicals, since 1998; equity analyst, gaming and lodging, 1997-1998; joined Fidelity in 1997 CHEMICALS PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.2% SHARES VALUE (NOTE 1) AGRICULTURE - 5.2% Delta & Pine Land Co. 22,000 $ 712,250 Pioneer Hi-Bred 40,900 958,594 International, Inc. 1,670,844 BUILDING MATERIALS - 4.3% Owens-Corning 11,700 372,206 Sherwin-Williams Co. 41,500 998,594 1,370,800 CHEMICALS & PLASTICS - 66.8% Agrium, Inc. 25,300 201,353 Air Products & Chemicals, 32,000 1,028,000 Inc. Arch Chemicals, Inc. (a) 11,550 219,450 Avery Dennison Corp. 22,600 1,213,338 Borden Chemicals&Plastics 6,900 34,500 Ltd. Cabot Corp. 14,500 365,219 Cytec Industries, Inc. (a) 18,800 504,075 Dow Chemical Co. 28,600 2,813,525 du Pont (E.I.) de Nemours & 57,400 2,945,335 Co. Eastman Chemical Co. 16,100 759,719 Ferro Corp. 14,600 312,075 Geon Co. 8,300 189,344 Great Lakes Chemical Corp. 400 15,575 IMC Global, Inc. 30,200 602,113 Methanex Corp. (a) 38,100 162,982 Millennium Chemicals, Inc. 19,300 348,606 Minerals Technologies, Inc. 10,100 433,669 Monsanto Co. 24,000 1,093,500 Morton International, Inc. 29,100 1,051,238 Olin Corp. 23,100 293,081 Potash Corp. of Saskatchewan 7,400 420,354 PPG Industries, Inc. 34,400 1,790,950 Praxair, Inc. 57,600 2,012,400 Raychem Corp. 19,700 449,406 Rohm & Haas Co. 33,000 1,031,250 Union Carbide Corp. 19,000 836,000 Valspar Corp. 8,300 269,750 21,396,807 CONSUMER DURABLES - 7.4% Minnesota Mining & 31,900 2,362,594 Manufacturing Co. DRUGS & PHARMACEUTICALS - 5.3% Cambrex Corp. 8,700 208,256 Chirex, Inc. (a) 10,300 215,013 Rhone-Poulenc SA sponsored 11,500 529,000 ADR Class A Sigma-Aldrich Corp. 27,700 730,588 1,682,857 SHARES VALUE (NOTE 1) ELECTRONIC INSTRUMENTS - 0.8% Optical Coating Laboratories, 8,000 $ 256,000 Inc. SERVICES - 2.8% Ecolab, Inc. 22,500 897,188 TEXTILES & APPAREL - 0.6% Polymer Group, Inc. (a) 19,500 196,219 TOTAL COMMON STOCKS 29,833,309 (Cost $31,457,897) CASH EQUIVALENTS - 6.8% Taxable Central Cash Fund (b) 2,189,378 2,189,378 (Cost $2,189,378) TOTAL INVESTMENT IN $ 32,022,687 SECURITIES - 100% (Cost $33,647,275) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $61,535,452 and $82,787,097, respectively. 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 $21,237 for the period. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $34,170,646. Net unrealized depreciation aggregated $2,147,959, of which $1,268,936 related to appreciated investment securities and $3,416,895 related to depreciated investment securities. The fund hereby designates approximately $3,906,000 as a capital gain dividend for the purpose of the dividend paid deduction. The fund intends to elect to defer its fiscal year ending February 29, 2000 approximately $1,740,000 of losses recognized during the period November 1, 1998 to February 28, 1999. A total of 34% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentages for use in preparing 1999 income tax returns. CHEMICALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 32,022,687 value (cost $33,647,275) - See accompanying schedule Receivable for investments 7,140 sold Receivable for fund shares 19,812 sold Dividends receivable 89,345 Interest receivable 11,964 Redemption fees receivable 128 Other receivables 2,035 TOTAL ASSETS 32,153,111 LIABILITIES Payable to custodian bank $ 5,061 Payable for investments 3,700 purchased Payable for fund shares 232,787 redeemed Accrued management fee 16,196 Other payables and accrued 33,628 expenses TOTAL LIABILITIES 291,372 NET ASSETS $ 31,861,739 Net Assets consist of: Paid in capital $ 34,103,460 Undistributed net investment 159,886 income Accumulated undistributed net (777,032) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (1,624,575) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 1,024,331 $ 31,861,739 shares outstanding NET ASSET VALUE and $31.10 redemption price per share ($31,861,739 (divided by) 1,024,331 shares) Maximum offering price per $32.06 share (100/97.00 of $31.10) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 774,503 Dividends Interest (including income on 149,011 securities loaned of $8,336) TOTAL INCOME 923,514 EXPENSES Management fee $ 276,652 Transfer agent fees 359,063 Accounting and security 62,653 lending fees Non-interested trustees' 154 compensation Custodian fees and expenses 7,794 Registration fees 17,086 Audit 13,240 Legal 319 Reports to shareholders 11,132 Total expenses before 748,093 reductions Expense reductions (32,787) 715,306 NET INVESTMENT INCOME 208,208 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 2,554,482 Foreign currency transactions 3,597 2,558,079 Change in net unrealized appreciation (depreciation) on: Investment securities (15,018,197) Assets and liabilities in 186 (15,018,011) foreign currencies NET GAIN (LOSS) (12,459,932) NET INCREASE (DECREASE) IN $ (12,251,724) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 45,096 charges paid to FDC Sales charges - Retained by $ 44,178 FDC Deferred sales charges $ 7,081 withheld by FDC Exchange fees withheld by FSC $ 7,718 Expense reductions Directed $ 32,355 brokerage arrangements Custodian credits 432 $ 32,787
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ 208,208 $ (39,750) income (loss) Net realized gain (loss) 2,558,079 11,437,021 Change in net unrealized (15,018,011) 2,762,987 appreciation (depreciation) NET INCREASE (DECREASE) IN (12,251,724) 14,160,258 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (51,919) - From net investment income From net realized gain (3,969,737) (6,539,426) In excess of net realized (773,436) - gain TOTAL DISTRIBUTIONS (4,795,092) (6,539,426) Share transactions Net 17,546,799 31,893,479 proceeds from sales of shares Reinvestment of distributions 4,627,284 6,395,130 Cost of shares redeemed (42,678,413) (88,066,094) NET INCREASE (DECREASE) IN (20,504,330) (49,777,485) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 63,464 96,792 TOTAL INCREASE (DECREASE) (37,487,682) (42,059,861) IN NET ASSETS NET ASSETS Beginning of period 69,349,421 111,409,282 End of period (including $ 31,861,739 $ 69,349,421 undistributed net investment income of $159,886 and $0, respectively) OTHER INFORMATION Shares Sold 503,657 706,740 Issued in reinvestment of 132,380 150,551 distributions Redeemed (1,122,609) (1,965,911) Net increase (decrease) (486,572) (1,108,620)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 45.90 $ 42.53 $ 39.53 $ 33.91 $ 31.66 period Income from Investment Operations Net investment income (loss) .17 (.02) .28 .01 .36 C Net realized and unrealized (10.77) 7.88 5.49 8.89 2.65 gain (loss) Total from investment (10.60) 7.86 5.77 8.90 3.01 operations Less Distributions From net investment income (.05) - (.12) (.08) (.22) From net realized gain (3.52) (4.54) (2.74) (3.22) (.60) In excess of net realized gain (.68) - - - - Total distributions (4.25) (4.54) (2.86) (3.30) (.82) Redemption fees added to paid .05 .05 .09 .02 .06 in capital Net asset value, end of period $ 31.10 $ 45.90 $ 42.53 $ 39.53 $ 33.91 TOTAL RETURN A, B (23.66)% 19.47% 15.06% 27.48% 9.90% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 31,862 $ 69,349 $ 111,409 $ 89,230 $ 97,511 (000 omitted) Ratio of expenses to average 1.58% 1.68% 1.83% 1.99% 1.52% net assets Ratio of expenses to average 1.51% D 1.67% D 1.81% D 1.97% D 1.51% D net assets after expense reductions Ratio of net investment .44% (.05)% .67% .04% 1.07% income (loss) to average net assets Portfolio turnover rate 141% 31% 207% 87% 106% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29.
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 five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT CONSTRUCTION AND -2.16% 73.11% 294.62% HOUSING SELECT CONSTRUCTION AND -5.17% 67.84% 282.71% HOUSING (LOAD ADJ.) S&P 500 19.74% 194.91% 459.21% GS Cyclical Industries -4.79% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT CONSTRUCTION AND -2.16% 11.60% 14.71% HOUSING SELECT CONSTRUCTION AND -5.17% 10.91% 14.36% HOUSING (LOAD ADJ.) S&P 500 19.74% 24.15% 18.78% GS Cyclical Industries -4.79% 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 1989/02/28 9700.00 10000.00 1989/03/31 9946.27 10233.00 1989/04/30 10335.54 10764.09 1989/05/31 10700.98 11200.04 1989/06/30 10694.22 11136.20 1989/07/31 11128.12 12141.80 1989/08/31 11315.29 12379.78 1989/09/30 11519.47 12329.02 1989/10/31 10872.88 12042.99 1989/11/30 11034.53 12288.66 1989/12/31 10791.20 12583.59 1990/01/31 10110.51 11739.23 1990/02/28 10319.26 11890.67 1990/03/31 10900.11 12205.77 1990/04/30 10582.46 11900.63 1990/05/31 11562.65 13060.94 1990/06/30 11353.90 12972.12 1990/07/31 10761.70 12930.61 1990/08/31 9393.52 11761.68 1990/09/30 8423.54 11188.89 1990/10/31 8127.44 11140.78 1990/11/30 8913.63 11860.47 1990/12/31 9750.88 12191.38 1991/01/31 10608.55 12722.92 1991/02/28 11537.69 13632.61 1991/03/31 11823.58 13962.52 1991/04/30 12007.37 13996.03 1991/05/31 13201.98 14600.66 1991/06/30 12528.09 13931.95 1991/07/31 12854.83 14581.18 1991/08/31 13385.76 14926.75 1991/09/30 13089.66 14677.48 1991/10/31 12865.04 14874.16 1991/11/30 12221.78 14274.73 1991/12/31 13779.44 15907.76 1992/01/31 14803.81 15611.87 1992/02/29 15046.14 15814.83 1992/03/31 15035.12 15506.44 1992/04/30 15244.40 15962.33 1992/05/31 15729.05 16040.54 1992/06/30 14605.15 15801.54 1992/07/31 14869.69 16447.82 1992/08/31 14362.65 16110.64 1992/09/30 14550.03 16300.75 1992/10/31 15057.08 16357.80 1992/11/30 15927.88 16915.60 1992/12/31 16357.77 17123.66 1993/01/31 17041.18 17267.50 1993/02/28 17349.81 17502.34 1993/03/31 17757.65 17871.64 1993/04/30 17338.64 17439.14 1993/05/31 17526.14 17906.51 1993/06/30 17735.71 17958.44 1993/07/31 18342.34 17886.61 1993/08/31 19103.39 18564.51 1993/09/30 19721.05 18421.56 1993/10/31 20437.97 18802.89 1993/11/30 20118.11 18624.26 1993/12/31 21855.75 18849.62 1994/01/31 22569.77 19490.50 1994/02/28 22112.35 18962.31 1994/03/31 20818.19 18135.55 1994/04/30 20771.09 18367.69 1994/05/31 19671.97 18668.92 1994/06/30 19189.70 18211.53 1994/07/31 19739.26 18808.87 1994/08/31 20490.70 19580.03 1994/09/30 19346.72 19100.32 1994/10/31 18774.73 19530.08 1994/11/30 18012.08 18818.79 1994/12/31 18370.94 19097.87 1995/01/31 18451.57 19593.08 1995/02/28 19338.44 20356.63 1995/03/31 19683.98 20957.35 1995/04/30 19707.01 21574.54 1995/05/31 20674.51 22436.88 1995/06/30 20870.31 22958.09 1995/07/31 21837.81 23719.38 1995/08/31 21849.33 23778.91 1995/09/30 21722.63 24782.38 1995/10/31 21711.11 24693.91 1995/11/30 23047.18 25777.97 1995/12/31 23657.59 26274.46 1996/01/31 23609.43 27168.84 1996/02/29 23549.23 27420.69 1996/03/31 24355.88 27684.75 1996/04/30 24386.80 28092.83 1996/05/31 25189.24 28817.34 1996/06/30 25339.70 28927.14 1996/07/31 24273.95 27649.13 1996/08/31 25414.93 28232.26 1996/09/30 26794.13 29821.17 1996/10/31 26392.91 30643.63 1996/11/30 27596.58 32959.99 1996/12/31 26783.37 32307.05 1997/01/31 27050.06 34325.59 1997/02/28 27939.03 34594.71 1997/03/31 27138.96 33173.21 1997/04/30 27690.32 35153.65 1997/05/31 30340.31 37293.80 1997/06/30 30878.81 38964.57 1997/07/31 34124.00 42064.98 1997/08/31 34024.80 39708.50 1997/09/30 35101.80 41883.33 1997/10/31 33741.38 40484.43 1997/11/30 34492.44 42358.45 1997/12/31 34773.99 43085.75 1998/01/31 36025.73 43562.28 1998/02/28 39124.55 46703.99 1998/03/31 41139.55 49095.70 1998/04/30 41124.05 49589.60 1998/05/31 40404.99 48737.16 1998/06/30 40848.66 50716.86 1998/07/31 39379.95 50176.72 1998/08/31 33321.49 42922.17 1998/09/30 32939.01 45671.77 1998/10/31 36534.31 49386.71 1998/11/30 39364.65 52380.04 1998/12/31 42715.16 55398.18 1999/01/31 41980.80 57714.93 1999/02/26 38271.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990309 143221 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Construction and Housing Portfolio on February, 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $38,271 - a 282.71% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Lowe's Companies, Inc. 9.0 Danaher Corp. 8.6 Masco Corp. 6.7 Home Depot, Inc. 6.3 Fannie Mae 6.1 Black & Decker Corp. 5.4 Shaw Industries, Inc. 4.3 Leggett & Platt, Inc. 4.2 Lennar Corp. 4.1 Mohawk Industries, Inc. 4.0 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Building Materials 15.9% Retail & Wholesale, Miscellaneous 15.3% Home Furnishings 9.7% Construction 9.7% Autos, Tires, & Accessories 8.6% All Others 40.8%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 40.8 Row: 1, Col: 2, Value: 8.6 Row: 1, Col: 3, Value: 9.699999999999999 Row: 1, Col: 4, Value: 9.699999999999999 Row: 1, Col: 5, Value: 15.3 Row: 1, Col: 6, Value: 15.9 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 12 months that ended February 28, 1999, the fund returned - -2.16%. For the same 12-month period, the Standard and Poor's 500 Index returned 19.74%, while the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - returned -4.79%. The fund outperformed the Goldman Sachs index because the index contains many cyclical industries, some of which had weaker performance than housing and construction. In addition, the fund was underweighted in construction and engineering stocks that suffered from weak overseas economies and falling commodity prices. Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE DURING THE PAST YEAR? A. The biggest factor was the strong housing market, which expanded for the eighth year in a row. Both housing starts and housing turnover - - which measure new construction activity and sales of new and existing homes, respectively - hit record levels in 1998. This trend increased demand for construction materials, home furnishings and appliances. However, many stock prices didn't reflect these positive conditions because investors had been anticipating the housing market's peak for several years and were reluctant to bid up prices. Stocks in the construction and engineering sector performed poorly because of declining economies in Asia and Latin America and collapsing commodity prices. Reduced demand and weak pricing forced a number of industries to cut back capital spending for large-scale construction projects. Q. DID YOU CHANGE THE FUND'S INVESTMENT STRATEGY DURING THE YEAR? A. Yes, I made several strategic changes. First, I shifted assets away from companies with significant ties to international economies and into domestic companies that could benefit from the strong housing market. Second, within the housing sector I emphasized companies with growth characteristics independent of the housing market's strength. Third, I increased the fund's exposure to high-quality mid- and large-cap stocks that tend to perform better in unpredictable markets. Q. WHAT HOLDINGS PERFORMED WELL DURING THE YEAR? A. Maytag performed well. Maytag is a leading appliance producer that successfully implemented a premium brand and product innovation strategy. For example, Maytag introduced the "Neptune" class of washing machines late in 1997. Despite the machine's $1,100 price tag - - considerably higher than the $350 charge for an average washer - sales exceeded expectations. Danaher Corp. also did well. Danaher manufactures Sears' Craftsman tools as well as controls used in manufacturing automation and environmental testing. By employing an aggressive acquisition strategy, the company has generated a 10-year record of consistent earnings growth, and traded at a price-to-earnings ratio about twice the industry average. Home Depot's stock price benefited from the company's increased market share of a strong repair and remodeling market driven by booming home sales. Q. WHAT ABOUT DISAPPOINTMENTS? A. I had a positive outlook for Owens-Corning, the country's largest fiberglass insulation manufacturer. Successive price increases and a significant restructuring had positioned Owens-Corning for strong earnings growth. However, the stock had disappointing performance because the company settled an asbestos lawsuit for a higher-than-expected sum. Although the settlement removed a great deal of financial uncertainty, it significantly reduced potential upside in the stock price. Another disappointing stock was Black & Decker, the world's leading power-tool manufacturer. Despite a successful restructuring that included divesting underperforming businesses, weaker-than-expected revenue growth held the stock down. Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? A. I have a guarded outlook. The housing and construction industries are cyclical and 1998 marks the eighth consecutive year of economic expansion. The housing market's performance is tied to the strength of the economy and the direction of interest rates, and some leading indicators suggest that housing-related activity may slow down in 1999. Construction and engineering stocks with global exposure and strong ties to capital spending may continue to suffer in the absence of an interest-rate cut or signs of recovery in foreign economies. As a result, I anticipate underweighting this sector in favor of housing-market stocks. Within the housing sector, I am planning to stick with medium- and large-cap companies that offer steady growth and that are taking decisive steps to shield their earnings from a weaker economy. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. NOTE TO SHAREHOLDERS: Effective April 30, 1999, Brian Hogan will become manager of Select Construction & Housing Portfolio. (checkmark)FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 511 TRADING SYMBOL: FSHOX SIZE: as of February 28, 1999, more than $51 million MANAGER: Yolanda McGettigan, since 1997; analyst, appliances, building materials, home-building, engineering and construction industries, since 1997; joined Fidelity in 1997 CONSTRUCTION AND HOUSING PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 98.0% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 8.6% Danaher Corp. 88,600 $ 4,274,950 BUILDING MATERIALS - 15.9% Carlisle Companies, Inc. 12,600 521,325 Elcor Corp. 15,800 497,700 Lafarge Corp. 15,800 503,625 Lone Star Industries, Inc. 3,300 108,900 Masco Corp. 125,800 3,302,250 Owens-Corning 12,400 394,475 Sherwin-Williams Co. 36,500 878,281 Southdown, Inc. 6,040 285,013 USG Corp. 11,900 596,488 Vulcan Materials Co. 5,900 795,025 7,883,082 CONSTRUCTION - 9.7% Centex Corp. 27,500 1,012,344 Clayton Homes, Inc. 35,000 433,125 Jacobs Engineering Group, 7,000 276,938 Inc. (a) Kaufman & Broad Home Corp. 45,000 1,012,500 Lennar Corp. 88,000 2,040,500 4,775,407 CONSUMER ELECTRONICS - 8.5% Black & Decker Corp. 54,800 2,671,500 Maytag Corp. 27,300 1,530,506 4,202,006 CREDIT & OTHER FINANCE - 2.2% Countrywide Credit 28,100 1,064,288 Industries, Inc. FEDERAL SPONSORED CREDIT - 8.2% Fannie Mae 43,600 3,052,000 Freddie Mac 17,400 1,024,425 4,076,425 HOME FURNISHINGS - 9.7% Ethan Allen Interiors, Inc. 6,000 270,000 Furniture Brands 12,100 258,638 International, Inc. (a) Knoll, Inc. (a) 13,600 260,100 Leggett & Platt, Inc. 98,200 2,056,063 Maxim Group, Inc. (a) 107,900 1,955,688 4,800,489 LEASING & RENTAL - 1.0% United Rentals, Inc. (a) 15,900 511,781 LEISURE DURABLES & TOYS - 0.4% Champion Enterprises, Inc. (a) 10,400 204,750 METALS & MINING - 1.1% Martin Marietta Materials, 10,200 523,388 Inc. SHARES VALUE (NOTE 1) REAL ESTATE - 2.2% Catellus Development Corp. (a) 25,600 $ 369,600 Rouse Co. (The) 30,500 712,938 1,082,538 REAL ESTATE INVESTMENT TRUSTS - - 6.9% Apartment Investment & 2,900 113,463 Management Co. Class A Archstone Communities Trust 31,700 620,131 Equity Residential Properties 25,800 1,057,800 Trust (SBI) Mack-Cali Realty Corp. 12,700 367,506 Post Properties, Inc. 8,800 314,050 Simon Property Group, Inc. 37,600 956,450 3,429,400 RETAIL & WHOLESALE, MISCELLANEOUS - 15.3% Home Depot, Inc. 52,200 3,115,688 Lowe's Companies, Inc. 74,700 4,430,639 7,546,327 TEXTILES & APPAREL - 8.3% Mohawk Industries, Inc. (a) 60,550 1,967,875 Shaw Industries, Inc. 97,600 2,141,100 4,108,975 TOTAL COMMON STOCKS 48,483,806 (Cost $42,903,576) CASH EQUIVALENTS - 2.0% Taxable Central Cash Fund (b) 1,005,868 1,005,868 (Cost $1,005,868) TOTAL INVESTMENT IN $ 49,489,674 SECURITIES - 100% (Cost $43,909,444) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $168,374,456 and $172,267,058, respectively. 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 $51,030 for the period. The fund participated in the bank borrowing program. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $5,939,000 and $4,311,750, respectively. The weighted average interest rate was 5.08%. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $43,982,378. Net unrealized appreciation aggregated $5,507,296, of which $7,013,824 related to appreciated investment securities and $1,506,528 related to depreciated investment securities. The fund hereby designates approximately $749,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for use in preparing 1999 income tax returns. CONSTRUCTION AND HOUSING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 49,489,674 value (cost $43,909,444) - See accompanying schedule Receivable for investments 8,428,016 sold Receivable for fund shares 78,061 sold Dividends receivable 36,759 Interest receivable 6,729 Redemption fees receivable 3,944 Other receivables 7,253 TOTAL ASSETS 58,050,436 LIABILITIES Payable for fund shares $ 6,305,383 redeemed Accrued management fee 36,964 Other payables and accrued 56,464 expenses TOTAL LIABILITIES 6,398,811 NET ASSETS $ 51,651,625 Net Assets consist of: Paid in capital $ 45,398,583 Accumulated undistributed net 672,812 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 5,580,230 (depreciation) on investments NET ASSETS, for 2,064,686 $ 51,651,625 shares outstanding NET ASSET VALUE and $25.02 redemption price per share ($51,651,625 (divided by) 2,064,686 shares) Maximum offering price per $25.79 share (100/97.00 of $25.02) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 638,925 Dividends Interest (including income on 307,536 securities loaned of $7,398) TOTAL INCOME 946,461 EXPENSES Management fee $ 490,439 Transfer agent fees 535,294 Accounting and security 80,738 lending fees Non-interested trustees' 287 compensation Custodian fees and expenses 12,077 Registration fees 34,181 Audit 22,982 Legal 371 Interest 4,870 Reports to shareholders 7,258 Total expenses before 1,188,497 reductions Expense reductions (46,765) 1,141,732 NET INVESTMENT INCOME (LOSS) (195,271) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 1,245,125 Foreign currency transactions (1,205) 1,243,920 Change in net unrealized appreciation (depreciation) on: Investment securities (58,045) Assets and liabilities in 1 (58,044) foreign currencies NET GAIN (LOSS) 1,185,876 NET INCREASE (DECREASE) IN $ 990,605 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 451,157 charges paid to FDC Sales charges - Retained by $ 449,854 FDC Deferred sales charges $ 653 withheld by FDC Exchange fees withheld by FSC $ 10,418 Expense reductions Directed $ 45,252 brokerage arrangements Custodian credits 1,513 $ 46,765
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (195,271) $ (285,511) income (loss) Net realized gain (loss) 1,243,920 3,768,064 Change in net unrealized (58,044) 4,728,366 appreciation (depreciation) NET INCREASE (DECREASE) IN 990,605 8,210,919 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders - (23,292) From net investment income From net realized gain (144,845) (4,419,906) TOTAL DISTRIBUTIONS (144,845) (4,443,198) Share transactions Net 137,817,090 96,959,375 proceeds from sales of shares Reinvestment of distributions 142,901 4,390,230 Cost of shares redeemed (144,767,914) (78,323,951) NET INCREASE (DECREASE) IN (6,807,923) 23,025,654 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 129,721 110,066 TOTAL INCREASE (DECREASE) (5,832,442) 26,903,441 IN NET ASSETS NET ASSETS Beginning of period 57,484,067 30,580,626 End of period $ 51,651,625 $ 57,484,067 OTHER INFORMATION Shares Sold 5,395,789 4,140,467 Issued in reinvestment of 5,303 222,821 distributions Redeemed (5,579,107) (3,510,718) Net increase (decrease) (178,015) 852,570
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 G 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 25.63 $ 22.00 $ 19.56 $ 16.79 $ 19.82 period Income from Investment Operations Net investment income (loss) C (.06) (.25) .06 .07 (.02) Net realized and unrealized (.53) F 7.67 3.38 3.55 (2.50) gain (loss) Total from investment (.59) 7.42 3.44 3.62 (2.52) operations Less Distributions From net investment income - (.02) (.02) (.07) - From net realized gain (.06) (3.87) (1.03) (.81) (.52) Total distributions (.06) (3.89) (1.05) (.88) (.52) Redemption fees added to paid .04 .10 .05 .03 .01 in capital Net asset value, end of period $ 25.02 $ 25.63 $ 22.00 $ 19.56 $ 16.79 TOTAL RETURN A, B (2.16)% 40.04% 18.64% 21.77% (12.54)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 51,652 $ 57,484 $ 30,581 $ 42,668 $ 16,863 (000 omitted) Ratio of expenses to average 1.43% 2.50% D 1.41% 1.43% 1.76% net assets Ratio of expenses to average 1.37% E 2.43% E 1.35% E 1.40% E 1.74% E net assets after expense reductions Ratio of net investment (.23)% (1.10)% .27% .39% (.11)% income (loss) to average net assets Portfolio turnover rate 226% 404% 270% 139% 45% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSED DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. 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 THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND. G FOR THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 28, PAST 1 YEAR LIFE OF FUND 1999 SELECT CYCLICAL INDUSTRIES -4.96% 19.53% SELECT CYCLICAL INDUSTRIES -7.89% 15.87% (LOAD ADJ.) S&P 500 19.74% 60.71% GS Cyclical Industries -4.79% 21.02% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year or since the fund started on March 3, 1997. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR LIFE OF FUND 1999 SELECT CYCLICAL INDUSTRIES -4.96% 9.37% SELECT CYCLICAL INDUSTRIES -7.89% 7.67% (LOAD ADJ.) S&P 500 19.74% 26.89% GS Cyclical Industries -4.79% 10.05% 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 10230.13 12335.21 1998/09/30 10301.38 13125.40 1998/10/31 11237.87 14193.02 1998/11/30 11594.14 15053.26 1998/12/31 12092.92 15920.63 1999/01/31 11858.80 16586.43 1999/02/26 11587.00 16070.92 IMATRL PRASUN SHR__CHT 19990228 19990322 094431 R00000000000027 $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 February 28, 1999, the value of the investment would have grown to $11,587 - a 15.87% 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 $16,071 - a 60.71% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS General Electric Co. 7.8 Textron, Inc. 7.1 Tyco International Ltd. 6.3 Ford Motor Co. 5.2 Waste Management, Inc. 3.7 DaimlerChrysler AG (Reg.) 3.5 Coltec Industries, Inc. 3.1 Emerson Electric Co. 2.9 du Pont (E.I.) de Nemours & Co. 2.6 Monsanto Co. 2.5 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Industrial Machinery & Equipment 13.2% Electrical Equipment 13.1% Autos, Tires, & Accessories 12.0% Aerospace & Defense 9.7% Chemicals & Plastics 8.9% All Others 43.1%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 43.1 Row: 1, Col: 2, Value: 8.9 Row: 1, Col: 3, Value: 9.699999999999999 Row: 1, Col: 4, Value: 12.02 Row: 1, Col: 5, Value: 13.1 Row: 1, Col: 6, Value: 13.2 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. For the 12 months that ended February 28, 1999, the fund had a total return of -4.96%. In comparison, the Standard & Poor's 500 Index returned 19.74% and the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - returned -4.79% during the same 12-month period. Q. WHAT MARKET FACTORS INFLUENCED THE FUND'S PERFORMANCE? WHY DID THE FUND LAG THE GOLDMAN SACHS INDEX DURING THE 12-MONTH PERIOD? A. Cyclical industries turned in mixed results during the period. In the third quarter of 1998, the fund produced negative returns as the global economic crisis took hold of the U.S. stock market. In the fourth quarter, the fund staged a turnaround, led by strong performance from conglomerates such as Tyco International and General Electric. Both companies managed to increase profits and earnings during the period. However, the primary reason for the fund's underperformance compared to the Goldman Sachs index was the portfolio's asset underweighting in auto stocks. General Motors, Ford and DaimlerChrysler all surged in response to record sales numbers. In hindsight, I underestimated the potential of the auto stocks, given my doubts about the strength of the U.S. economy. Q. IN LIGHT OF THE DIFFICULT ENVIRONMENT FOR CYCLICAL STOCKS, WHAT STRATEGY DID YOU PURSUE TO STABILIZE FUND PERFORMANCE? A. I continued to concentrate a significant portion of fund assets in conglomerates such as Tyco International and General Electric and added conglomerates, including Textron and Pentair. While the U.S. economy appeared relatively stable, the global economic situation was less bright. Since cyclical stocks are highly dependent on solid economic growth for their performance, I felt these companies offered a diversity of strong revenue sources that could shield the portfolio during difficult and uncertain periods. Q. YOU MADE SOME CHANGES TO THE FUND'S TOP HOLDINGS DURING THE PERIOD . . . A. That's right. I sold off the fund's holdings in DEKALB after it was acquired by Monsanto. The stock performed very well during the period, so I felt it was prudent to lock in profits. Textron was added to the fund's top holdings because I felt that its stock was undervalued, considering its fundamental business outlook and its strong track record of earnings growth. Q. WHAT STOCKS HELPED PERFORMANCE? A. Tyco International and General Electric were the biggest contributors to total return. Tyco International stock rallied during the period as it increased profits by acquiring a number of companies, including an announced $11 billion bid for electric device maker AMP. General Electric performed solidly in response to strong earnings growth and a dividend increase. The stock surged from a 12-month low of $72 on October 8, 1998, to close at $100 by the end of the period. Q. WHAT STOCKS WERE THE MAIN DISAPPOINTMENTS? A. While the fund's assets remained underweighted relative to the Goldman Sachs index in industrial commodities such as chemicals and paper, these sectors continued to lag. Prior to Stone Container's merger with Jefferson Smurfit, the stock detracted significantly from performance as the paper sector continued to languish in a poor business environment with little ability to raise prices and increase profit margins. Lackluster performance from chemical companies duPont and Monsanto also detracted from total return. Q. WHAT'S YOUR OUTLOOK, ALBERT? A. I think the short-term environment remains difficult for cyclical stocks. In the absence of a catalyst such as another interest-rate cut or strong signs of a turnaround in Asia and the global economy, industrial commodities and cyclical stocks could continue to struggle in 1999. This is the primary reason for my defensive strategy of allocating a significant portion of fund assets to conglomerates. These holdings can provide predictable earnings and the ability to quickly cut costs in a weak economic environment. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: March 3, 1997 FUND NUMBER: 515 TRADING SYMBOL: FCYCF SIZE: as of February 28, 1999, 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 FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.6% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 9.7% Alliant Techsystems, Inc. (a) 100 $ 7,919 Gulfstream Aerospace Corp. (a) 500 22,375 Lockheed Martin Corp. 1,000 37,688 Sundstrand Corp. 100 6,769 Textron, Inc. 2,700 210,600 285,351 AIR TRANSPORTATION - 2.3% America West Holding Corp. 600 10,200 Class B (a) Southwest Airlines Co. 1,000 30,125 US Airways Group, Inc. (a) 600 28,425 68,750 AUTOS, TIRES, & ACCESSORIES - 12.0% DaimlerChrysler AG (Reg.) 1,100 103,331 Danaher Corp. 250 12,063 Federal-Mogul Corp. 450 22,134 Ford Motor Co. 2,600 154,213 General Motors Corp. 600 49,538 SPX Corp. 250 14,281 355,560 BROADCASTING - 0.9% PanAmSat Corp. (a) 700 25,113 BUILDING MATERIALS - 2.6% Carlisle Companies, Inc. 300 12,413 Crane Co. 600 16,463 Masco Corp. 1,000 26,250 Owens-Corning 700 22,269 77,395 CHEMICALS & PLASTICS - 8.6% du Pont (E.I.) de Nemours & 1,500 76,969 Co. Ferro Corp. 550 11,756 Ivex Packaging Corp. (a) 1,500 22,688 Monsanto Co. 1,600 72,900 Nalco Chemical Co. 300 8,438 Potash Corp. of Saskatchewan 200 11,361 Sealed Air Corp. (a) 414 21,011 Solutia, Inc. 240 4,275 Spartech Corp. 500 11,813 Witco Corp. 800 13,550 254,761 COMPUTERS & OFFICE EQUIPMENT - - 2.3% Pitney Bowes, Inc. 400 25,275 Xerox Corp. 800 44,150 69,425 SHARES VALUE (NOTE 1) CONSTRUCTION - 1.1% Centex Corp. 300 $ 11,044 Kaufman & Broad Home Corp. 300 6,750 Lennar Corp. 300 6,956 Oakwood Homes Corp. 500 8,063 32,813 CONSUMER ELECTRONICS - 0.7% Black & Decker Corp. 400 19,500 DEFENSE ELECTRONICS - 3.5% Litton Industries, Inc. (a) 300 16,838 Raytheon Co.: Class A 600 31,725 Class B 1,000 53,438 102,001 ELECTRICAL EQUIPMENT - 13.1% Emerson Electric Co. 1,500 86,156 General Electric Co. 2,300 230,706 Honeywell, Inc. 1,000 69,938 386,800 ENGINEERING - 0.8% EG & G, Inc. 900 23,850 HOME FURNISHINGS - 0.4% Leggett & Platt, Inc. 600 12,563 INDUSTRIAL MACHINERY & EQUIPMENT - 13.2% Case Corp. 200 3,900 Caterpillar, Inc. 700 31,894 Coltec Industries, Inc. (a) 5,000 90,000 Illinois Tool Works, Inc. 700 48,125 Ingersoll-Rand Co. 650 30,875 Tyco International Ltd. 2,500 186,094 390,888 METALS & MINING - 1.5% Alcoa, Inc. 848 34,344 Martin Marietta Materials, 200 10,263 Inc. 44,607 PACKAGING & CONTAINERS - 1.2% Owens-Illinois, Inc. (a) 700 16,756 Silgan Holdings, Inc. (a) 800 17,750 34,506 PAPER & FOREST PRODUCTS - 6.2% Bowater, Inc. 700 29,488 Champion International Corp. 500 18,500 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PAPER & FOREST PRODUCTS - CONTINUED Fort James Corp. 687 $ 20,524 Pentair, Inc. 300 11,363 Smurfit-Stone Container Corp. 2,970 53,646 (a) Temple-Inland, Inc. 300 17,981 Union Camp Corp. 300 20,063 Willamette Industries, Inc. 300 10,931 182,496 POLLUTION CONTROL - 4.1% Ogden Corp. 500 12,219 Waste Management, Inc. 2,245 109,724 121,943 RAILROADS - 3.7% Bombardier, Inc. Class B 600 8,814 Burlington Northern Santa Fe 1,500 49,688 Corp. Canadian National Railway Co. 300 14,485 Union Pacific Corp. 500 23,438 Wisconsin Central 1,000 13,750 Transportation Corp. (a) 110,175 SERVICES - 1.6% Ecolab, Inc. 1,200 47,850 SHIP BUILDING & REPAIR - 1.8% Avondale Industries, Inc. 700 21,613 General Dynamics Corp. 500 30,219 51,832 TEXTILES & APPAREL - 1.4% Shaw Industries, Inc. 1,700 37,294 Unifi, Inc. 300 3,619 40,913 TRUCKING & FREIGHT - 0.9% CNF Transportation, Inc. 200 8,450 Expeditors International of 200 9,313 Washington, Inc. USFreightways Corp. 300 9,563 27,326 TOTAL COMMON STOCKS 2,766,418 (Cost $2,506,497) CONVERTIBLE PREFERRED STOCKS - - 0.3% CHEMICALS & PLASTICS - 0.3% Sealed Air Corp. Series A, 190 9,785 $2.00 (Cost $8,093) CASH EQUIVALENTS - 6.1% MATURITY AMOUNT VALUE (NOTE 1) Investments in repurchase $ 29,011 $ 29,000 agreements (U.S. Treasury obligations), in a joint trading account at 4.74%, dated 2/26/99 due 3/1/99 SHARES Taxable Central Cash Fund (b) 149,752 149,752 TOTAL CASH EQUIVALENTS 178,752 (Cost $178,752) TOTAL INVESTMENT IN $ 2,954,955 SECURITIES - 100% (Cost $2,693,342) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $3,633,603 and $4,456,955, respectively. 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 $579 for the period. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $2,693,963. Net unrealized appreciation aggregated $260,992, of which $449,365 related to appreciated investment securities and $188,373 related to depreciated investment securities. The fund hereby designates approximately $22,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for use in preparing 1999 income tax returns. CYCLICAL INDUSTRIES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 2,954,955 value (including repurchase agreements of $29,000) (cost $2,693,342) - See accompanying schedule Cash 117 Receivable for investments 143,540 sold Receivable for fund shares 5,619 sold Dividends receivable 4,515 Interest receivable 328 Receivable from investment 1,565 adviser for expense reductions TOTAL ASSETS 3,110,639 LIABILITIES Payable for investments $ 3,700 purchased Other payables and accrued 19,955 expenses TOTAL LIABILITIES 23,655 NET ASSETS $ 3,086,984 Net Assets consist of: Paid in capital $ 2,807,386 Accumulated undistributed net 17,985 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 261,613 (depreciation) on investments NET ASSETS, for 270,992 $ 3,086,984 shares outstanding NET ASSET VALUE and $11.39 redemption price per share ($3,086,984 (divided by) 270,992 shares) Maximum offering price per $11.74 share (100/97.00 of $11.39) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 41,330 Dividends Interest 11,720 TOTAL INCOME 53,050 EXPENSES Management fee $ 22,236 Transfer agent fees 28,977 Accounting fees and expenses 60,050 Non-interested trustees' 14 compensation Custodian fees and expenses 8,160 Registration fees 12,920 Audit 17,333 Legal 21 Reports to shareholders 647 Miscellaneous 12 Total expenses before 150,370 reductions Expense reductions (56,169) 94,201 NET INVESTMENT INCOME (LOSS) (41,151) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 21,503 Foreign currency transactions 195 21,698 Change in net unrealized (207,859) appreciation (depreciation) on investment securities NET GAIN (LOSS) (186,161) NET INCREASE (DECREASE) IN $ (227,312) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 16,210 charges paid to FDC Sale charges - Retained by $ 16,210 FDC Exchange fees withheld by FSC $ 698 Expense reductions Directed $ 521 brokerage arrangements FMR reimbursement 55,648 $ 56,169
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 MARCH 3, 1997 (COMMENCEMENT ASSETS OF OPERATIONS) TO FEBRUARY 28, 1998 Operations Net investment $ (41,151) $ (33,119) income (loss) Net realized gain (loss) 21,698 328,506 Change in net unrealized (207,859) 469,472 appreciation (depreciation) NET INCREASE (DECREASE) IN (227,312) 764,859 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (29,887) (144,767) from net realized gains Share transactions Net 3,255,351 10,028,973 proceeds from sales of shares Reinvestment of distributions 29,223 143,304 Cost of shares redeemed (3,913,851) (6,843,907) NET INCREASE (DECREASE) IN (629,277) 3,328,370 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 8,220 16,778 TOTAL INCREASE (DECREASE) (878,256) 3,965,240 IN NET ASSETS NET ASSETS Beginning of period 3,965,240 - End of period 3,086,984 3,965,240 OTHER INFORMATION Shares Sold 265,208 908,349 Issued in reinvestment of 2,305 13,087 distributions Redeemed (325,171) (592,786) Net increase (decrease) (57,658) 328,650
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 F SELECTED PER-SHARE DATA Net asset value, beginning of $ 12.07 $ 10.00 period Income from Investment Operations Net investment income (loss) D (.13) (.11) Net realized and unrealized (.49) 2.59 gain (loss) Total from investment (.62) 2.48 operations Less Distributions From net realized gain (.09) (.46) Redemption fees added to paid .03 .05 in capital Net asset value, end of period $ 11.39 $ 12.07 TOTAL RETURN B, C (4.96)% 25.77% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 3,087 $ 3,965 (000 omitted) Ratio of expenses to average 2.50% E 2.50% A, E net assets Ratio of expenses to average 2.49% G 2.50% A net assets after expense reductions Ratio of net investment (1.09)% (.93)% A income (loss) to average net assets Portfolio turnover rate 103% 140% A A ANNUALIZED BTHE 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 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 FOR THE PERIOD MARCH 3, 1997 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1998. 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. 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT DEFENSE AND AEROSPACE -9.90% 128.63% 292.88% SELECT DEFENSE AND AEROSPACE -12.68% 121.70% 281.02% (LOAD ADJ.) S&P 500 19.74% 194.91% 459.21% GS Cyclical Industries -4.79% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT DEFENSE AND AEROSPACE -9.90% 17.98% 14.66% SELECT DEFENSE AND AEROSPACE -12.68% 17.26% 14.31% (LOAD ADJ.) S&P 500 19.74% 24.15% 18.78% GS Cyclical Industries -4.79% 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 1989/02/28 9700.00 10000.00 1989/03/31 9898.13 10233.00 1989/04/30 10253.11 10764.09 1989/05/31 10434.72 11200.04 1989/06/30 10310.89 11136.20 1989/07/31 10979.57 12141.80 1989/08/31 11260.26 12379.78 1989/09/30 11053.87 12329.02 1989/10/31 10426.47 12042.99 1989/11/30 10030.21 12288.66 1989/12/31 10195.32 12583.59 1990/01/31 9617.45 11739.23 1990/02/28 9650.47 11890.67 1990/03/31 10244.85 12205.77 1990/04/30 9823.83 11900.63 1990/05/31 10550.30 13060.94 1990/06/30 10557.88 12972.12 1990/07/31 10134.24 12930.61 1990/08/31 9245.42 11761.68 1990/09/30 8946.37 11188.89 1990/10/31 8830.08 11140.78 1990/11/30 9303.56 11860.47 1990/12/31 9727.97 12191.38 1991/01/31 10586.56 12722.92 1991/02/28 10794.96 13632.61 1991/03/31 11628.55 13962.52 1991/04/30 11436.82 13996.03 1991/05/31 11970.32 14600.66 1991/06/30 11368.05 13931.95 1991/07/31 11861.95 14581.18 1991/08/31 11736.38 14926.75 1991/09/30 11460.13 14677.48 1991/10/31 12012.63 14874.16 1991/11/30 11468.51 14274.73 1991/12/31 12347.48 15907.76 1992/01/31 12305.62 15611.87 1992/02/29 12498.16 15814.83 1992/03/31 12247.02 15506.44 1992/04/30 12029.37 15962.33 1992/05/31 11426.65 16040.54 1992/06/30 10890.89 15801.54 1992/07/31 11309.45 16447.82 1992/08/31 11091.80 16110.64 1992/09/30 11250.85 16300.75 1992/10/31 11342.94 16357.80 1992/11/30 11736.38 16915.60 1992/12/31 12347.48 17123.66 1993/01/31 12715.81 17267.50 1993/02/28 12623.73 17502.34 1993/03/31 13293.42 17871.64 1993/04/30 13335.28 17439.14 1993/05/31 13745.46 17906.51 1993/06/30 14323.07 17958.44 1993/07/31 14909.06 17886.61 1993/08/31 14883.94 18564.51 1993/09/30 15269.02 18421.56 1993/10/31 15880.11 18802.89 1993/11/30 15411.33 18624.26 1993/12/31 15910.69 18849.62 1994/01/31 16668.34 19490.50 1994/02/28 16668.34 18962.31 1994/03/31 15997.78 18135.55 1994/04/30 16084.61 18367.69 1994/05/31 16137.63 18668.92 1994/06/30 15731.10 18211.53 1994/07/31 15960.88 18808.87 1994/08/31 16676.73 19580.03 1994/09/30 15837.15 19100.32 1994/10/31 16226.01 19530.08 1994/11/30 15589.70 18818.79 1994/12/31 16190.66 19097.87 1995/01/31 16181.82 19593.08 1995/02/28 17357.23 20356.63 1995/03/31 18099.60 20957.35 1995/04/30 19098.26 21574.54 1995/05/31 20273.67 22436.88 1995/06/30 21024.88 22958.09 1995/07/31 22182.62 23719.38 1995/08/31 22173.78 23778.91 1995/09/30 22792.42 24782.38 1995/10/31 21961.67 24693.91 1995/11/30 23543.62 25777.97 1995/12/31 23857.97 26274.46 1996/01/31 24284.85 27168.84 1996/02/29 25584.47 27420.69 1996/03/31 26172.61 27684.75 1996/04/30 27433.62 28092.83 1996/05/31 28459.45 28817.34 1996/06/30 27785.33 28927.14 1996/07/31 25909.53 27649.13 1996/08/31 27277.30 28232.26 1996/09/30 28615.76 29821.17 1996/10/31 28117.50 30643.63 1996/11/30 29651.36 32959.99 1996/12/31 29829.05 32307.05 1997/01/31 29183.71 34325.59 1997/02/28 29644.67 34594.71 1997/03/31 29450.05 33173.21 1997/04/30 30236.83 35153.65 1997/05/31 32657.02 37293.80 1997/06/30 33436.06 38964.57 1997/07/31 36531.41 42064.98 1997/08/31 38546.51 39708.50 1997/09/30 41153.67 41883.33 1997/10/31 38058.31 40484.43 1997/11/30 38131.02 42358.45 1997/12/31 36859.23 43085.75 1998/01/31 38626.76 43562.28 1998/02/28 42296.92 46703.99 1998/03/31 43467.77 49095.70 1998/04/30 44627.36 49589.60 1998/05/31 41734.01 48737.16 1998/06/30 41756.53 50716.86 1998/07/31 39921.45 50176.72 1998/08/31 32006.96 42922.17 1998/09/30 34134.75 45671.77 1998/10/31 37500.94 49386.71 1998/11/30 38390.34 52380.04 1998/12/31 38457.89 55398.18 1999/01/31 38390.34 57714.93 1999/02/26 38102.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990309 143614 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Defense and Aerospace Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $38,102 - a 281.02% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS United Technologies Corp. 8.6 General Dynamics Corp. 8.1 Cordant Technologies, Inc. 7.5 Raytheon Co. Class A 6.2 General Motors Corp. Class H 5.3 Sundstrand Corp. 5.1 Gulfstream Aerospace Corp. 5.1 Litton Industries, Inc. 4.4 Boeing Co. 3.7 PanAmSat Corp. 3.2 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Aerospace & Defense 47.5% Defense Electronics 13.6% Ship Building & Repair 10.7% Consumer Electronics 5.3% Electrical Equipment 4.2% All Others 18.7%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 18.7 Row: 1, Col: 2, Value: 4.2 Row: 1, Col: 3, Value: 5.3 Row: 1, Col: 4, Value: 10.7 Row: 1, Col: 5, Value: 13.6 Row: 1, Col: 6, Value: 47.5 DEFENSE AND AEROSPACE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Jeff Feingold) NOTE TO SHAREHOLDERS: Jeff Feingold became Portfolio Manager of Fidelity Select Defense and Aerospace Portfolio on October 30, 1998. Q. HOW DID THE FUND PERFORM, JEFF? A. For the 12 months that ended February 28, 1999, the fund returned - -9.90%. For the same 12 month period, the Standard & Poor's 500 Index returned 19.74%, while the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - returned -4.79%. The fund lagged the Goldman Sachs index because it had a greater concentration in defense and aerospace stocks that underperformed other industry sectors included in the more diversified Cyclical Industries index. Q. WHAT FACTORS INFLUENCED THE FUND'S RETURNS? A. On the positive side, the government's 1999 budget proposal features the first meaningful increase in defense spending since 1985, although funds appropriated this year will take about 18 to 24 months to convert to actual procurement spending. On the negative side, the year's biggest proposed merger - between Lockheed Martin and Northrop Grumman - was called off in response to regulatory concerns. While the failed merger disappointed investors, both companies also delivered earnings below expectations. At Lockheed, launch failures in its commercial satellite division hurt earnings. Northrop had problems in its airborne surveillance segment. Results were further weakened by an industry-wide reduction in demand for commercial aircraft components, particularly at Boeing. Q. WHAT ABOUT AEROSPACE STOCKS? DID THEY FARE ANY BETTER? A. Aerospace stocks suffered fallout from the Asian economic crisis, as Asia's passenger traffic and demand for new aircraft declined. Boeing - the world's largest aircraft manufacturer - saw its orders peak two years ago, and expects production and deliveries to crest this year. Component suppliers, whose earnings depend on aircraft production levels, also had weak performance. For example, an investment in Cordant Technologies, one of Boeing's largest suppliers of fasteners, did poorly despite the healthy performance and good growth prospects of some of the company's other business segments. Q. WHAT STOCKS HELPED THE FUND'S PERFORMANCE? A. Stocks with consistent and predictable earnings growth fared well. For example, General Dynamics, a defense contractor with operations in basic armaments, shipbuilding and electronics, downsized in the early 1990s to cope with defense cutbacks. Since then, it has generated annual earnings growth that outpaced many of its peers. Another solid performer was United Technologies Corp. Its business segments - including Pratt & Whitney aircraft engines, Otis Elevator, and Carrier heat and air conditioning systems - are market leaders offering relatively predictable growth. Q. WHAT ABOUT SATELLITE STOCKS? A. The fund owns a number of satellite stocks, including COMSAT, PanAmSat and Loral Space & Communications. However, I reduced the fund's exposure to these companies for several reasons. First, satellite companies have a relatively high degree of financial risk because they must invest significant capital before they can expect to break even on a cash-flow basis. Second, it is unclear which companies have the most appropriate technology or business models. Both satellite launch and in-orbit failures during the past year demonstrated this risk. Finally, these stocks have significant price volatility because their growth rates are unpredictable. During the past year, the market has severely penalized satellite companies that missed their earnings or revenue projections. Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? A. I am relatively optimistic about the defense industry. Over the longer term, increased defense spending should improve the climate for these stocks, especially as we approach the conversion of appropriation into procurement. My outlook for aerospace stocks is more cautious. It is difficult to see much good news over the next 12 months as production and delivery peak for the world's largest manufacturers. Over the longer term, Asia's recovery will be critical for the industry to regain momentum. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: May 8, 1984 FUND NUMBER: 067 TRADING SYMBOL: FSDAX SIZE: as of February 28, 1999, more than $28 million MANAGER: Jeff Feingold, since 1998; equity analyst, defense and aerospace industries, since 1998; footwear industry, since 1997; textile and apparel industries, 1997-1998; joined Fidelity in 1997 DEFENSE AND AEROSPACE PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.6% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 47.5% AAR Corp. 12,300 $ 186,038 Alliant Techsystems, Inc. (a) 11,200 886,900 BE Aerospace, Inc. (a) 14,500 213,875 Boeing Co. 29,200 1,038,425 Cordant Technologies, Inc. 54,400 2,118,200 Goodrich (B.F.) Co. 14,500 494,813 Gulfstream Aerospace Corp. (a) 31,900 1,427,525 Howmet International, Inc. (a) 47,300 762,713 Lockheed Martin Corp. 22,600 851,738 Orbital Sciences Corp. (a) 25,800 712,725 Primex Technologies, Inc. 2,400 99,750 Rockwell International Corp. 15,100 671,006 Sundstrand Corp. 21,400 1,448,513 United Technologies Corp. 19,600 2,427,947 13,340,168 AUTOS, TIRES, & ACCESSORIES - 1.9% TRW, Inc. 11,400 538,650 BROADCASTING - 3.2% PanAmSat Corp. (a) 25,400 911,225 COMPUTER SERVICES & SOFTWARE - - 1.3% Titan Corp. (a) 67,500 379,688 CONSUMER ELECTRONICS - 5.3% General Motors Corp. Class H 31,500 1,486,406 (a) DEFENSE ELECTRONICS - 13.6% Litton Industries, Inc. (a) 22,100 1,240,363 Northrop Grumman Corp. 13,600 847,450 Raytheon Co. Class A 32,952 1,742,337 3,830,150 ELECTRICAL EQUIPMENT - 4.2% Harris Corp. 6,800 211,650 L-3 Communications Holdings, 5,000 214,375 Inc. (a) Loral Space & Communications 41,800 752,400 Ltd. (a) 1,178,425 ELECTRONICS - 1.8% Airport Systems 90,200 191,675 International, Inc. (a) Conexant Systems, Inc. (a) 13,350 226,950 Maxwell Technologies, Inc. (a) 3,300 84,769 503,394 MEDICAL EQUIPMENT & SUPPLIES - - 1.3% Teleflex, Inc. 10,000 355,625 SHIP BUILDING & REPAIR - 10.7% Avondale Industries, Inc. 7,300 225,388 SHARES VALUE (NOTE 1) General Dynamics Corp. 37,600 $ 2,272,450 Newport News Shipbuilding, 17,500 506,406 Inc. 3,004,244 TELEPHONE SERVICES - 1.8% COMSAT Corp. Series 1 16,900 494,325 TOTAL COMMON STOCKS 26,022,300 (Cost $23,593,542) CASH EQUIVALENTS - 7.4% Taxable Central Cash Fund (b) 2,078,393 2,078,393 (Cost $2,078,393) TOTAL INVESTMENT IN $ 28,100,693 SECURITIES - 100% (Cost $25,671,935) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $109,202,806 and $171,978,745, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $29,426 for the period. 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. $ - $ 715,850 $ - $ -
INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $26,299,141. Net unrealized appreciation aggregated $1,801,552, of which $3,200,190 related to appreciated investment securities and $1,398,638 related to depreciated investment securities. The fund hereby designates approximately $928,000 as a capital gain dividend for the purpose of the dividend paid deduction. DEFENSE AND AEROSPACE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 28,100,693 value (cost $25,671,935) - See accompanying schedule Receivable for investments 943,519 sold Receivable for fund shares 54,391 sold Dividends receivable 39,904 Interest receivable 5,447 Redemption fees receivable 108 Other receivables 7,999 TOTAL ASSETS 29,152,061 LIABILITIES Payable for investments $ 371,965 purchased Payable for fund shares 233,739 redeemed Accrued management fee 14,423 Other payables and accrued 35,102 expenses TOTAL LIABILITIES 655,229 NET ASSETS $ 28,496,832 Net Assets consist of: Paid in capital $ 23,289,679 Accumulated undistributed net 2,778,395 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 2,428,758 (depreciation) on investments NET ASSETS, for 841,804 $ 28,496,832 shares outstanding NET ASSET VALUE and $33.85 redemption price per share ($28,496,832 (divided by) 841,804 shares) Maximum offering price per $34.90 share (100/97.00 of $33.85) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 304,878 Dividends Interest 172,051 TOTAL INCOME 476,929 EXPENSES Management fee $ 312,058 Transfer agent fees 346,580 Accounting fees and expenses 68,157 Non-interested trustees' 210 compensation Custodian fees and expenses 12,152 Registration fees 21,406 Audit 16,243 Legal 413 Reports to shareholders 11,871 Miscellaneous 75 Total expenses before 789,165 reductions Expense reductions (31,428) 757,737 NET INVESTMENT INCOME (LOSS) (280,808) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 3,589,524 (including realized loss of $328,497 on sales of investments in affiliated issuers) Foreign currency transactions (2,584) 3,586,940 Change in net unrealized (8,328,194) appreciation (depreciation) on investment securities NET GAIN (LOSS) (4,741,254) NET INCREASE (DECREASE) IN $ (5,022,062) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 127,643 charges paid to FDC Sales charges - Retained by $ 125,494 FDC Deferred sales charges $ 824 withheld by FDC Exchange fees withheld by FSC $ 8,738 Expense reductions Directed $ 31,108 brokerage arrangements Custodian credits 320 $ 31,428
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (280,808) $ (542,358) income (loss) Net realized gain (loss) 3,586,940 10,620,706 Change in net unrealized (8,328,194) 9,171,056 appreciation (depreciation) NET INCREASE (DECREASE) IN (5,022,062) 19,249,404 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders - (4,691,578) from net realized gain Share transactions Net 47,399,132 173,648,929 proceeds from sales of shares Reinvestment of distributions - 4,606,502 Cost of shares redeemed (115,799,880) (160,032,419) NET INCREASE (DECREASE) IN (68,400,748) 18,223,012 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 115,021 221,243 TOTAL INCREASE (DECREASE) (73,307,789) 33,002,081 IN NET ASSETS NET ASSETS Beginning of period 101,804,621 68,802,540 End of period $ 28,496,832 $ 101,804,621 OTHER INFORMATION Shares Sold 1,280,563 4,923,503 Issued in reinvestment of - 149,545 distributions Redeemed (3,148,373) (4,740,835) Net increase (decrease) (1,867,810) 332,213
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 F 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 37.57 $ 28.94 $ 26.97 $ 19.64 $ 19.14 period Income from Investment Operations Net investment income (loss) D (.19) (.29) (.11) (.05) (.06) Net realized and unrealized (3.61) 11.84 4.18 9.09 .70 gain (loss) Total from investment (3.80) 11.55 4.07 9.04 .64 operations Less Distributions From net realized gain - (3.04) (2.17) (1.82) (.27) Redemption fees added to paid .08 .12 .07 .11 .13 in capital Net asset value, end of period $ 33.85 $ 37.57 $ 28.94 $ 26.97 $ 19.64 TOTAL RETURN A, B (9.90)% 42.68% 15.87% 47.40% 4.13% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 28,497 $ 101,805 $ 68,803 $ 26,648 $ 4,985 (000 omitted) Ratio of expenses to average 1.48% 1.77% 1.84% 1.77% C 2.49% C net assets Ratio of expenses to average 1.42% E 1.71% E 1.81% E 1.75% E 2.49% net assets after expense reductions Ratio of net investment (.53)% (.85)% (.39)% (.20)% (.32)% income (loss) to average net assets Portfolio turnover rate 221% 311% 219% 267% 146% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C 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. 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 THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 28, 1999 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND SELECT ENVIRONMENTAL SERVICES -22.23% 13.29% 45.55% SELECT ENVIRONMENTAL -24.64% 9.82% 41.11% SERVICES (LOAD ADJ.) S&P 500 19.74% 194.91% 399.52% GS Cyclical Industries -4.79% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or since the fund started on June 29, 1989. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND 1999 SELECT ENVIRONMENTAL SERVICES -22.23% 2.53% 3.96% SELECT ENVIRONMENTAL -24.64% 1.89% 3.62% SERVICES (LOAD ADJ.) S&P 500 19.74% 24.15% 18.09% GS Cyclical Industries -4.79% 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 13257.12 38340.83 1998/09/30 14415.19 40796.95 1998/10/31 14724.00 44115.37 1998/11/30 13996.08 46789.20 1998/12/31 15101.98 49485.20 1999/01/31 14925.09 51554.67 1999/02/26 14118.03 49952.35 IMATRL PRASUN SHR__CHT 19990228 19990322 095822 R00000000000120 $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 February 28, 1999, the value of the investment would have grown to $14,111 - a 41.11% 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 $49,952 - a 399.52% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Waste Management, Inc. 13.7 Allied Waste Industries, Inc. 11.2 Browning-Ferris Industries, 6.2 Inc. Superior Services, Inc. 5.5 Republic Services, Inc. Class A 5.1 IT Group, Inc. (The) 4.5 KTI, Inc. 4.0 Casella Waste Systems, Inc. 3.7 Class A Thermo Electron Corp. 3.6 Safety-Kleen Corp. 3.6 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Pollution Control 70.9% Electronic Instruments 9.3% Industrial Machinery & Equipment 6.7% Electric Utility 4.0% Water 2.4% All Others 6.7%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 6.7 Row: 1, Col: 2, Value: 2.4 Row: 1, Col: 3, Value: 4.0 Row: 1, Col: 4, Value: 6.7 Row: 1, Col: 5, Value: 9.300000000000001 Row: 1, Col: 6, Value: 70.90000000000001 ENVIRONMENTAL SERVICES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Subrata Ghose) Subrata Ghose, Portfolio Manager of Fidelity Select Environmental Services Portfolio Q. HOW DID THE FUND PERFORM, SUBRATA? A. Overall, it was a tough period for environmental services stocks. For the 12 months that ended February 28, 1999, the fund returned - -22.23%. The Standard & Poor's 500 Index returned 19.74% during the same period, while the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - fell 4.79%. Q. WHAT FACTORS HURT PERFORMANCE? A. The five major areas of investment for the fund are solid waste, water purification, environmental consulting, hazardous waste and thermal instrumentation. Water purification and thermal instrumentation realize a good portion of their revenues from Asia, and the slowdown in that region hurt badly. As we entered the period, the sector was still smarting from the Asian economic turmoil. As fears of a U.S. economic slowdown spread in the fall, environmental services stocks, which are economically sensitive, hit their low point. Since that time, we've seen a slight rebound in performance, but nothing significant. Some groups have benefited from increased merger and acquisition activity, and many companies seem more willing to restructure their internal operations in an attempt to boost stalling profitability. Q. THE FUND'S TOP-FIVE HOLDINGS AT THE END OF THE PERIOD WERE ALL SOLID WASTE-RELATED STOCKS. HOW DID THEY PERFORM? A. Like the other groups, solid waste stocks struggled. The group experienced dramatic changes over the past year, due mostly to the consolidation of several large companies. For instance, Waste Management and USA Waste merged operations, and there was much talk about Allied Waste making a large acquisition. While consolidation is generally beneficial, there was some uncertainty as to whether companies of that size could integrate themselves smoothly. That being said, solid waste stocks began to turn the corner during the second half of the period. Waste Management - the fund's largest individual stake and a key player in the solid waste field - reported strong earnings in the third and fourth quarters of 1998. Q. THE FUND ALSO HAD SOME EXPOSURE TO HAZARDOUS WASTE AND THERMAL INSTRUMENTATION STOCKS AT THE CLOSE OF THE PERIOD. HOW DID THESE GROUPS FARE? A. A combination of excess capacity and weak pricing was disastrous for hazardous waste stocks. Strict dumping regulations have limited the volume of hazardous waste, but the incinerators that destroy the waste were still populous. While some of the fund's investments in this area - such as IT Group - worked well, I'm not overly optimistic that the hazardous waste group can right its ship soon. Thermal instrumentation companies, were also disappointing. Many of these companies - which manufacture instruments designed to aid environmental research - performed poorly due to their exposure to Asia, weak U.S. capital equipment markets and a complex corporate structure. As a result, the fund's investments in Thermo Electron and Thermo Instruments detracted from overall performance. Fortunately, Thermo Electron is undergoing a major restructuring of business units and management. This could make for an interesting story down the road. Q. WHICH STOCKS PERFORMED WELL DURING THE PERIOD? WHICH DISAPPOINTED? A. Two small-cap, solid waste companies - American Disposal and Eastern Environmental - were acquired by other companies during the period and this gave the fund a bit of a performance boost. U.S. Filter Corp., a leader in the water purification area, also performed well during the second half of the period as its exposure to semiconductor companies helped. Semiconductor firms use highly purified water in processing their chips and, when semiconductor stocks rallied in December, demand picked up. Allied Waste, meanwhile, was one of the fund's bigger disappointments as speculation over the company's acquisition plans caused uncertainty. Q. WHAT'S YOUR OUTLOOK? A. The key phrase going forward is "long term." The sector has undergone quite a bit of volatility recently, and at the close of the period there was no single group that stood out over any other in terms of offering good opportunities. That being said, my emphasis will be on finding good stories that could play out nicely in the long run. Solid waste fundamentals are definitely improving, albeit slowly. The water filtration and thermal instrumentation groups could turn around with pickups in the Asian and U.S. capital equipment markets. When the sector does eventually turn around, my patience will hopefully be rewarded. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: June 29, 1989 FUND NUMBER: 516 TRADING SYMBOL: FSLEX SIZE: as of February 28, 1999, more than $15 million MANAGER: Subrata Ghose, since October 1998; analyst, environmental services industry, 1997- present; gas, electric and water industries, 1997-1998; joined Fidelity in 1995 ENVIRONMENTAL SERVICES PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.7% SHARES VALUE (NOTE 1) CHEMICALS & PLASTICS - 2.0% Catalytica, Inc. (a) 22,000 $ 313,500 ELECTRIC UTILITY - 4.0% KTI, Inc. (a) 35,000 630,000 ELECTRONIC INSTRUMENTS - 9.3% Thermo Electron Corp. (a) 41,050 567,003 Thermo Instrument Systems, 13,200 195,525 Inc. (a) Thermo Optek Corp. (a) 20,000 217,500 Thermoquest Corp. (a) 42,200 464,200 1,444,228 INDUSTRIAL MACHINERY & EQUIPMENT - 6.7% Ionics, Inc. (a) 7,200 200,700 Recovery Engineering, Inc. (a) 14,000 152,250 Thermo Fibertek, Inc. (a) 4,000 31,000 United States Filter Corp. (a) 21,800 535,463 Waterlink, Inc. (a) 29,600 131,350 1,050,763 METALS & MINING - 0.4% IMCO Recycling, Inc. 5,000 62,813 POLLUTION CONTROL - 70.9% Allied Waste Industries, Inc. 89,460 1,744,470 (a) Browning-Ferris Industries, 30,900 973,350 Inc. Calgon Carbon Corp. 9,100 54,031 Casella Waste Systems, Inc. 27,300 573,300 Class A (a) Insituform Technologies, Inc. 20,200 300,475 Class A (a) IT Group, Inc. (The) (a) 54,000 708,750 Ogden Corp. 22,100 540,069 Republic Services, Inc. Class 46,000 802,125 A (a) Safety-Kleen Corp. (a) 40,150 559,591 Stericycle, Inc. (a) 23,000 291,813 Superior Services, Inc. (a) 42,900 862,022 Tetra Tech, Inc. (a) 23,750 452,734 U.S. Liquids, Inc. 6,000 136,125 Waste Connections, Inc. (a) 20,000 400,000 Waste Industries, Inc. (a) 39,700 535,950 Waste Management, Inc. 43,593 2,130,606 11,065,411 WATER - 2.4% American Water Works, Inc. 5,000 151,250 E'Town Corp. 5,000 214,688 365,938 TOTAL COMMON STOCKS 14,932,653 (Cost $17,641,948) CASH EQUIVALENTS - 4.3% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) 677,744 $ 677,744 (Cost $677,744) TOTAL INVESTMENT IN $ 15,610,397 SECURITIES - 100% (Cost $18,319,692) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $23,763,535 and $27,829,701, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $14,545 for the period. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $18,477,058. Net unrealized depreciation aggregated $2,866,661, of which $574,854 related to appreciated investment securities and $3,441,515 related to depreciated investment securities. The fund hereby designates approximately $169,000 as a capital gain dividend for the purpose of the dividend paid deduction. The fund intends to elect to defer to its fiscal year ending February 29, 2000 approximately $845,000 of losses recognized during the period November 1, 1998 to February 28, 1999. ENVIRONMENTAL SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 15,610,397 value (cost $18,319,692) - See accompanying schedule Receivable for fund shares 3,580 sold Interest receivable 3,311 Redemption fees receivable 16 TOTAL ASSETS 15,617,304 LIABILITIES Payable for fund shares $ 41,663 redeemed Accrued management fee 8,529 Other payables and accrued 33,551 expenses TOTAL LIABILITIES 83,743 NET ASSETS $ 15,533,561 Net Assets consist of: Paid in capital $ 19,113,474 Accumulated undistributed net (870,618) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (2,709,295) (depreciation) on investments NET ASSETS, for 1,216,736 $ 15,533,561 shares outstanding NET ASSET VALUE and $12.77 redemption price per share ($15,533,561 (divided by) 1,216,736 shares) Maximum offering price per $13.16 share (100/97.00 of $12.77) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 120,420 Dividends Interest 72,918 TOTAL INCOME 193,338 EXPENSES Management fee $ 122,145 Transfer agent fees 234,438 Accounting fees and expenses 57,141 Custodian fees and expenses 9,513 Registration fees 12,390 Audit 14,562 Legal 130 Reports to shareholders 8,386 Total expenses before 458,705 reductions Expense reductions (8,619) 450,086 NET INVESTMENT INCOME (LOSS) (256,748) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (475,663) Foreign currency transactions 1,449 (474,214) Change in net unrealized (4,374,725) appreciation (depreciation) on investment securities NET GAIN (LOSS) (4,848,939) NET INCREASE (DECREASE) IN $ (5,105,687) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 29,658 charges paid to FDC Sales charges - Retained by $ 28,390 FDC Deferred sales charges $ 7,574 withheld by FDC Exchange fees withheld by FSC $ 3,083 Expense reductions Directed $ 8,015 brokerage arrangements Custodian credits 604 $ 8,619
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (256,748) $ (233,737) income (loss) Net realized gain (loss) (474,214) 491,329 Change in net unrealized (4,374,725) 2,816,729 appreciation (depreciation) NET INCREASE (DECREASE) IN (5,105,687) 3,074,321 NET ASSETS RESULTING FROM OPERATIONS Distributions in excess of (40,246) - net realized gains Share transactions Net 10,454,030 19,043,654 proceeds from sales of shares Reinvestment of distributions 38,642 - Cost of shares redeemed (15,030,447) (29,500,558) NET INCREASE (DECREASE) IN (4,537,775) (10,456,904) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 34,045 40,370 TOTAL INCREASE (DECREASE) (9,649,663) (7,342,213) IN NET ASSETS NET ASSETS Beginning of period 25,183,224 32,525,437 End of period $ 15,533,561 $ 25,183,224 OTHER INFORMATION Shares Sold 712,286 1,183,759 Issued in reinvestment of 3,084 - distributions Redeemed (1,028,657) (1,896,214) Net increase (decrease) (313,287) (712,455)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 16.46 $ 14.50 $ 12.42 $ 10.27 $ 11.93 period Income from Investment Operations Net investment income (loss) c (.18) (.13) (.08) (.17) (.14) Net realized and unrealized (3.50) 2.07 2.04 2.95 (1.53) gain (loss) Total from investment (3.68) 1.94 1.96 2.78 (1.67) operations Less Distributions From net realized gain - - - (.65) - In excess of net realized gain (.03) - (.02) - - Total distributions (.03) - (.02) (.65) - Redemption fees added to paid .02 .02 .14 .02 .01 in capital Net asset value, end of period $ 12.77 $ 16.46 $ 14.50 $ 12.42 $ 10.27 TOTAL RETURN A, b (22.23)% 13.52% 16.93% 27.49% (13.91)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 15,534 $ 25,183 $ 32,525 $ 27,587 $ 31,270 (000 omitted) Ratio of expenses to average 2.20% 2.23% 2.18% 2.36% 2.04% net assets Ratio of expenses to average 2.16% d 2.22% d 2.11% d 2.32% d 2.01% d net assets after expense reductions Ratio of net investment (1.23)% (.84)% (.59)% (1.43)% (1.32)% income (loss) to average net assets Portfolio turnover rate 123% 59% 252% 138% 82% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT INDUSTRIAL EQUIPMENT 1.00% 101.58% 324.90% SELECT INDUSTRIAL EQUIPMENT -2.11% 95.46% 312.08% (LOAD ADJ.) S&P 500 19.74% 194.91% 459.21% GS Cyclical Industries -4.79% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT INDUSTRIAL EQUIPMENT 1.00% 15.05% 15.57% SELECT INDUSTRIAL EQUIPMENT -2.11% 14.34% 15.21% (LOAD ADJ.) S&P 500 19.74% 24.15% 18.78% GS Cyclical Industries -4.79% 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 1989/02/28 9700.00 10000.00 1989/03/31 9843.21 10233.00 1989/04/30 10549.70 10764.09 1989/05/31 11122.54 11200.04 1989/06/30 10645.18 11136.20 1989/07/31 11323.03 12141.80 1989/08/31 11533.07 12379.78 1989/09/30 11370.77 12329.02 1989/10/31 10616.54 12042.99 1989/11/30 10912.50 12288.66 1989/12/31 11103.44 12583.59 1990/01/31 10731.10 11739.23 1990/02/28 11275.30 11890.67 1990/03/31 11943.60 12205.77 1990/04/30 11848.13 11900.63 1990/05/31 12946.06 13060.94 1990/06/30 12715.97 12972.12 1990/07/31 12475.68 12930.61 1990/08/31 10418.83 11761.68 1990/09/30 9005.94 11188.89 1990/10/31 8765.65 11140.78 1990/11/30 9054.00 11860.47 1990/12/31 9380.79 12191.38 1991/01/31 10380.38 12722.92 1991/02/28 11360.75 13632.61 1991/03/31 11264.63 13962.52 1991/04/30 11149.30 13996.03 1991/05/31 11620.26 14600.66 1991/06/30 11245.12 13931.95 1991/07/31 11341.31 14581.18 1991/08/31 11514.46 14926.75 1991/09/30 11783.81 14677.48 1991/10/31 11716.47 14874.16 1991/11/30 11158.54 14274.73 1991/12/31 11898.63 15907.76 1992/01/31 12966.21 15611.87 1992/02/29 13888.20 15814.83 1992/03/31 13480.58 15506.44 1992/04/30 13480.58 15962.33 1992/05/31 13587.34 16040.54 1992/06/30 12752.69 15801.54 1992/07/31 12869.15 16447.82 1992/08/31 12199.49 16110.64 1992/09/30 12451.83 16300.75 1992/10/31 12403.30 16357.80 1992/11/30 12995.32 16915.60 1992/12/31 13247.66 17123.66 1993/01/31 13868.79 17267.50 1993/02/28 14596.69 17502.34 1993/03/31 14858.73 17871.64 1993/04/30 15538.55 17439.14 1993/05/31 16315.47 17906.51 1993/06/30 16529.13 17958.44 1993/07/31 16762.21 17886.61 1993/08/31 17908.17 18564.51 1993/09/30 17704.23 18421.56 1993/10/31 18296.64 18802.89 1993/11/30 18277.22 18624.26 1993/12/31 18987.73 18849.62 1994/01/31 19880.57 19490.50 1994/02/28 20446.03 18962.31 1994/03/31 19265.50 18135.55 1994/04/30 19091.13 18367.69 1994/05/31 18700.90 18668.92 1994/06/30 17740.34 18211.53 1994/07/31 18580.83 18808.87 1994/08/31 19901.60 19580.03 1994/09/30 19961.64 19100.32 1994/10/31 20211.78 19530.08 1994/11/30 19231.21 18818.79 1994/12/31 19581.42 19097.87 1995/01/31 19471.35 19593.08 1995/02/28 20051.69 20356.63 1995/03/31 21712.66 20957.35 1995/04/30 22733.51 21574.54 1995/05/31 23193.99 22436.88 1995/06/30 24074.90 22958.09 1995/07/31 26337.24 23719.38 1995/08/31 25826.71 23778.91 1995/09/30 24645.49 24782.38 1995/10/31 24595.44 24693.91 1995/11/30 25436.31 25777.97 1995/12/31 25027.82 26274.46 1996/01/31 26033.30 27168.84 1996/02/29 27443.17 27420.69 1996/03/31 27639.89 27684.75 1996/04/30 28147.71 28092.83 1996/05/31 28352.26 28817.34 1996/06/30 28227.26 28927.14 1996/07/31 26818.17 27649.13 1996/08/31 27977.26 28232.26 1996/09/30 29306.80 29821.17 1996/10/31 29124.98 30643.63 1996/11/30 31488.62 32959.99 1996/12/31 31712.85 32307.05 1997/01/31 32845.00 34325.59 1997/02/28 32450.66 34594.71 1997/03/31 31140.42 33173.21 1997/04/30 32275.79 35153.65 1997/05/31 35142.29 37293.80 1997/06/30 37333.52 38964.57 1997/07/31 40020.87 42064.98 1997/08/31 39772.81 39708.50 1997/09/30 40820.19 41883.33 1997/10/31 37636.71 40484.43 1997/11/30 37567.80 42358.45 1997/12/31 37595.36 43085.75 1998/01/31 36918.11 43562.28 1998/02/28 40808.37 46703.99 1998/03/31 43611.88 49095.70 1998/04/30 44714.39 49589.60 1998/05/31 43139.38 48737.16 1998/06/30 42966.13 50716.86 1998/07/31 41406.88 50176.72 1998/08/31 34429.61 42922.17 1998/09/30 35469.11 45671.77 1998/10/31 39359.37 49386.71 1998/11/30 40792.62 52380.04 1998/12/31 42358.58 55398.18 1999/01/31 42766.97 57714.93 1999/02/26 41208.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990309 144528 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Industrial Equipment Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $41,208 - a 312.08% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Tyco International Ltd. 10.1 Pitney Bowes, Inc. 8.5 General Electric Co. 8.3 Illinois Tool Works, Inc. 6.7 Emerson Electric Co. 5.7 Xerox Corp. 5.0 Applied Materials, Inc. 4.8 Ingersoll-Rand Co. 4.7 Caterpillar, Inc. 4.1 COMSAT Corp. Series 1 3.1 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Industrial Machinery & Equipment 30.2% Electrical Equipment 19.8% Computers & Office Equipment 13.9% Electronic Instruments 7.3% Telephone Services 3.8% All Others 25.0%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 25.0 Row: 1, Col: 2, Value: 3.8 Row: 1, Col: 3, Value: 7.3 Row: 1, Col: 4, Value: 13.9 Row: 1, Col: 5, Value: 19.8 Row: 1, Col: 6, Value: 30.2 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 12 months that ended February 28, 1999, the fund returned 1.00%. For the same 12-month period, the Standard & Poor's 500 Index returned 19.74%, while the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - returned -4.79%. The fund outperformed the Goldman Sachs index due to the portfolio's smaller exposure to stocks with strong ties to falling commodity prices and its larger exposure to defensive, consumer-oriented stocks. Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE DURING THE PAST YEAR? A. The biggest factor was weak international economies, particularly in Asia, Russia and Latin America. As conditions worsened, demand for commodity-oriented products such as coal, paper and oil fell significantly, resulting in capital spending cutbacks and reduced equipment orders. Declining demand for agricultural products was exacerbated by record crop yields in the U.S., driving commodity prices to historically low levels and reducing demand for agricultural equipment. In addition, because U.S. exports represent an important component of revenue, declining currencies versus the dollar further aggravated conditions. These factors all led to deteriorating earnings growth and weak stock price performance for industrial and agricultural companies. Q. HOW DID YOU MANAGE THE FUND IN THIS DIFFICULT ENVIRONMENT? A. I underweighted companies whose earnings were sensitive to falling commodity prices and weak international economies. For example, the fund had relatively small positions in agricultural and mining equipment manufacturers and industrial component suppliers. In addition, I significantly overweighted large-cap stocks that offered investors good liquidity, expanding revenues and steady, predictable earnings growth. Q. WHICH OF THE FUND'S HOLDINGS REFLECTED YOUR STRATEGY? A. Tyco International and Pitney Bowes - the fund's two largest positions at the end of the period - were large-cap companies that generated strong sales and predictable earnings growth. Both of these stocks performed well throughout the year. Tyco diversified its operations by establishing leadership positions in such businesses as fire and security services - it owns ADT, the top U.S. provider of security monitoring - and electronic components. These relatively non-cyclical businesses offer good growth rates and high margins. Pitney Bowes manufactures office equipment and is the world's largest producer of postage meters. With a domestic market share in excess of 80%, the company recently benefited from U.S. Postal Service regulations that are driving a major product transition. These regulations eliminated older, mechanical postage meters in favor of newer, more efficient electronic and digital meters. Q. WHERE ELSE DID YOU FIND VALUE? A. I increased the fund's holdings in semiconductor equipment stocks. Excess inventories and falling prices hurt this sector earlier in the year when many personal computer manufacturers scaled back production and reduced semiconductor orders. However, after inventories were sold down, pricing improved and these stocks recovered. For example, the fund's performance benefited from an investment in Applied Materials - the dominant producer of wafer-fabrication equipment used by semiconductor manufacturers - when its stock price more than tripled between October and February. Q. WHAT STOCKS DETRACTED FROM PERFORMANCE? A. Investments in Loral and Comsat, two satellite companies, performed poorly. Both launch and in-orbit failures accentuated their lack of earnings predictability. As a result, their stock prices fell sharply despite a favorable deployment history and strong demand for satellite services and capacity. Loral is no longer in the portfolio. Emerson Electric - a large manufacturer of electrical products - weakened significantly during the last part of the period. The stock performed well throughout the fall of 1998 as the market rewarded its relatively steady earnings growth. Ultimately, however, weak global economies and falling commodity prices led to a deteriorating earnings outlook and investors were disappointed. Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? A. I am modestly optimistic that conditions should improve for North American industrial equipment manufacturers. Although I'm mindful of weaknesses in Latin America and potentially slower growth in Europe, I am encouraged by signs of economic recovery and stronger currencies in some Asian countries, including Singapore and Korea. As confidence in Asia's recovery increases, demand for industrial products should improve. Looking ahead, I plan to maintain my focus on companies offering steady growth and predictable earnings. However, I also plan to increase the fund's exposure to companies that should be performance leaders - such as component suppliers to the large equipment manufacturers - when the industrial equipment cycle turns around. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 510 TRADING SYMBOL: FSCGX SIZE: as of February 28, 1999, more than $31 million MANAGER: Simon Wolf, since 1997; research analyst, industrial and electrical equipment industries, since 1997; joined Fidelity in 1996 INDUSTRIAL EQUIPMENT PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 89.6% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 2.8% AlliedSignal, Inc. 10,000 $ 413,750 Cordant Technologies, Inc. 3,100 120,706 Textron, Inc. 5,000 390,000 924,456 BUILDING MATERIALS - 1.2% American Standard Companies, 5,000 167,813 Inc. (a) York International Corp. 6,000 217,500 385,313 CHEMICALS & PLASTICS - 0.9% Tredegar Industries, Inc. 12,000 306,750 COMPUTERS & OFFICE EQUIPMENT - - 13.9% Neopost SA (a) 8,100 129,489 Pitney Bowes, Inc. 45,000 2,843,438 Xerox Corp. 30,000 1,655,625 4,628,552 ELECTRICAL EQUIPMENT - 19.8% Baldor Electric Co. 11,866 226,937 Emerson Electric Co. 33,000 1,895,438 General Electric Co. 27,500 2,758,594 Genlyte Group, Inc. (a) 15,000 271,406 Honeywell, Inc. 13,000 909,188 Hubbell, Inc. Class B 9,000 335,250 SLI, Inc. (a) 9,000 201,375 6,598,188 ELECTRONIC INSTRUMENTS - 7.3% Applied Materials, Inc. (a) 28,500 1,585,313 KLA-Tencor Corp. (a) 8,500 440,406 LAM Research Corp. (a) 3,500 103,469 Novellus Systems, Inc. (a) 1,850 109,266 Teradyne, Inc. (a) 4,000 190,500 2,428,954 ELECTRONICS - 1.2% AMP, Inc. 7,500 398,906 ENERGY SERVICES - 1.1% Halliburton Co. 13,000 367,250 ENTERTAINMENT - 1.3% Tele-Communications, Inc. 15,000 415,313 (TCI Ventures Group) Series A (a) INDUSTRIAL MACHINERY & EQUIPMENT - 30.2% Caterpillar, Inc. 30,000 1,366,875 Cooper Industries, Inc. 6,000 262,500 Dover Corp. 9,900 336,600 SHARES VALUE (NOTE 1) IDEX Corp. 5,000 $ 118,750 Illinois Tool Works, Inc. 32,500 2,234,375 Ingersoll-Rand Co. 33,000 1,567,500 Kaydon Corp. 4,500 137,250 Lindsay Manufacturing Co. 15,000 238,125 Manitowoc Co., Inc. 5,250 193,594 MSC Industrial Direct, Inc. 13,000 232,375 (a) Tyco International Ltd. 45,000 3,349,682 10,037,626 LEASING & RENTAL - 0.6% United Rentals, Inc. (a) 6,000 193,125 MEDICAL EQUIPMENT & SUPPLIES - - 1.5% Millipore Corp. 14,000 390,250 Pall Corp. 5,000 105,938 496,188 METALS & MINING - 1.3% AFC Cable Systems, Inc. (a) 7,000 231,875 Superior Telecom, Inc. 7,500 212,344 444,219 OIL & GAS - 1.0% Cooper Cameron Corp. (a) 100 2,313 Weatherford International, 20,000 340,000 Inc. (a) 342,313 PACKAGING & CONTAINERS - 0.7% Owens-Illinois, Inc. (a) 10,000 239,375 RETAIL & WHOLESALE, MISCELLANEOUS - 0.3% IKON Office Solutions, Inc. 7,500 105,938 SERVICES - 0.7% Ritchie Bros. Auctioneers, 7,500 235,313 Inc. TELEPHONE SERVICES - 3.8% COMSAT Corp. Series 1 35,000 1,023,750 MCI WorldCom, Inc. (a) 3,000 247,500 1,271,250 TOTAL COMMON STOCKS 29,819,029 (Cost $23,685,734) CASH EQUIVALENTS - 10.4% Taxable Central Cash Fund (b) 3,445,357 3,445,357 (Cost $3,445,357) TOTAL INVESTMENT IN $ 33,264,386 SECURITIES - 100% (Cost $27,131,091) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $32,425,269 and $43,857,749, respectively. 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 $8,504 for the period. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $27,171,099. Net unrealized appreciation aggregated $6,093,287 of which $7,322,018 related to appreciated investment securities and $1,228,731 related to depreciated investment securities. The fund hereby designates approximately $1,939,000 as capital gain dividend for the purpose of the dividend paid deduction. INDUSTRIAL EQUIPMENT PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 33,264,386 value (cost $27,131,091) - See accompanying schedule Receivable for fund shares 3,336 sold Dividends receivable 48,163 Interest receivable 6,368 Redemption fees receivable 112 Other receivables 8,150 TOTAL ASSETS 33,330,515 LIABILITIES Payable to custodian bank $ 49,145 Payable for investments 363,454 purchased Payable for fund shares 1,295,808 redeemed Accrued management fee 16,224 Other payables and accrued 32,722 expenses TOTAL LIABILITIES 1,757,353 NET ASSETS $ 31,573,162 Net Assets consist of: Paid in capital $ 23,290,162 Accumulated undistributed net 2,149,705 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 6,133,295 (depreciation) on investments NET ASSETS, for 1,251,395 $ 31,573,162 shares outstanding NET ASSET VALUE and $25.23 redemption price per share ($31,573,162 (divided by) 1,251,395 shares) Maximum offering price per $26.01 share (100/97.00 of $25.23) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 365,472 Dividends Interest 164,210 TOTAL INCOME 529,682 EXPENSES Management fee $ 249,535 Transfer agent fees 248,573 Accounting fees and expenses 60,400 Non-interested trustees' 158 compensation Custodian fees and expenses 9,119 Registration fees 17,222 Audit 14,066 Legal 347 Reports to shareholders 6,504 Total expenses before 605,924 reductions Expense reductions (6,761) 599,163 NET INVESTMENT INCOME (LOSS) (69,481) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 3,585,290 Foreign currency transactions 830 3,586,120 Change in net unrealized (3,320,873) appreciation (depreciation) on investment securities NET GAIN (LOSS) 265,247 NET INCREASE (DECREASE) IN $ 195,766 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 25,189 charges paid to FDC Sales charges - Retained by $ 24,472 FDC Deferred sales charges $ 1,074 withheld by FDC Exchange fees withheld by FSC $ 4,058 Expense reductions Directed $ 6,560 brokerage arrangements Custodian credits 201 $ 6,761
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (69,481) $ (190,412) income (loss) Net realized gain (loss) 3,586,120 9,532,487 Change in net unrealized (3,320,873) 4,204,137 appreciation (depreciation) NET INCREASE (DECREASE) IN 195,766 13,546,212 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders - (59,949) From net investment income From net realized gain (1,273,263) (11,693,964) TOTAL DISTRIBUTIONS (1,273,263) (11,753,913) Share transactions Net 20,888,073 24,781,618 proceeds from sales of shares Reinvestment of distributions 1,219,714 11,543,701 Cost of shares redeemed (39,935,425) (90,632,790) NET INCREASE (DECREASE) IN (17,827,638) (54,307,471) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 50,582 60,604 TOTAL INCREASE (DECREASE) (18,854,553) (52,454,568) IN NET ASSETS NET ASSETS Beginning of period 50,427,715 102,882,283 End of period $ 31,573,162 $ 50,427,715 OTHER INFORMATION Shares Sold 771,299 934,187 Issued in reinvestment of 49,301 497,967 distributions Redeemed (1,515,112) (3,519,270) Net increase (decrease) (694,512) (2,087,116)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 25.91 $ 25.51 $ 25.11 $ 20.04 $ 20.61 period Income from Investment Operations Net investment income (loss) C (.04) (.08) .06 .04 .01 Net realized and unrealized .25 5.73 4.15 7.10 (.44) gain (loss) Total from investment .21 5.65 4.21 7.14 (.43) operations Less Distributions From net investment income - (.02) (.04) (.05) (.01) From net realized gain (.92) (5.26) (3.84) (2.05) (.16) Total distributions (.92) (5.28) (3.88) (2.10) (.17) Redemption fees added to paid .03 .03 .07 .03 .03 in capital Net asset value, end of period $ 25.23 $ 25.91 $ 25.51 $ 25.11 $ 20.04 TOTAL RETURN A, B 1.00% 25.76% 18.25% 36.86% (1.93)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 31,573 $ 50,428 $ 102,882 $ 137,520 $ 109,968 (000 omitted) Ratio of expenses to average 1.43% 1.67% 1.51% 1.54% 1.80% net assets Ratio of expenses to average 1.41% D 1.60% D 1.44% D 1.53% D 1.78% D net assets after expense reductions Ratio of net investment (.16)% (.32)% .25% .19% .06% income (loss) to average net assets Portfolio turnover rate 84% 115% 261% 115% 131%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29. 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT INDUSTRIAL MATERIALS -18.72% 19.16% 99.31% SELECT INDUSTRIAL MATERIALS -21.23% 15.52% 93.26% (LOAD ADJ.) S&P 500 19.74% 194.91% 459.21% GS Cyclical Industries -4.79% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT INDUSTRIAL MATERIALS -18.72% 3.57% 7.14% SELECT INDUSTRIAL MATERIALS -21.23% 2.93% 6.81% (LOAD ADJ.) S&P 500 19.74% 24.15% 18.78% GS Cyclical Industries -4.79% 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 1989/02/28 9700.00 10000.00 1989/03/31 9599.11 10233.00 1989/04/30 9894.58 10764.09 1989/05/31 10024.29 11200.04 1989/06/30 9440.56 11136.20 1989/07/31 10290.94 12141.80 1989/08/31 11112.48 12379.78 1989/09/30 10435.07 12329.02 1989/10/31 9577.49 12042.99 1989/11/30 9714.41 12288.66 1989/12/31 9988.26 12583.59 1990/01/31 9224.37 11739.23 1990/02/28 9382.91 11890.67 1990/03/31 9656.76 12205.77 1990/04/30 8957.73 11900.63 1990/05/31 9498.22 13060.94 1990/06/30 9397.42 12972.12 1990/07/31 9286.51 12930.61 1990/08/31 8214.42 11761.68 1990/09/30 7630.32 11188.89 1990/10/31 7541.60 11140.78 1990/11/30 7940.86 11860.47 1990/12/31 8273.57 12191.38 1991/01/31 8569.32 12722.92 1991/02/28 9197.79 13632.61 1991/03/31 9323.48 13962.52 1991/04/30 9338.27 13996.03 1991/05/31 10136.79 14600.66 1991/06/30 10025.85 13931.95 1991/07/31 10426.89 14581.18 1991/08/31 10671.96 14926.75 1991/09/30 10530.86 14677.48 1991/10/31 10983.88 14874.16 1991/11/30 10107.54 14274.73 1991/12/31 11236.38 15907.76 1992/01/31 11726.53 15611.87 1992/02/29 12298.38 15814.83 1992/03/31 12083.01 15506.44 1992/04/30 12714.27 15962.33 1992/05/31 12862.80 16040.54 1992/06/30 12550.58 15801.54 1992/07/31 12832.95 16447.82 1992/08/31 12023.00 16110.64 1992/09/30 11859.52 16300.75 1992/10/31 11993.27 16357.80 1992/11/30 12439.12 16915.60 1992/12/31 12626.18 17123.66 1993/01/31 12894.82 17267.50 1993/02/28 13014.22 17502.34 1993/03/31 13230.62 17871.64 1993/04/30 13036.60 17439.14 1993/05/31 13573.89 17906.51 1993/06/30 13610.95 17958.44 1993/07/31 13798.12 17886.61 1993/08/31 14157.49 18564.51 1993/09/30 13715.77 18421.56 1993/10/31 14524.34 18802.89 1993/11/30 14719.00 18624.26 1993/12/31 15325.42 18849.62 1994/01/31 16568.23 19490.50 1994/02/28 16223.84 18962.31 1994/03/31 15767.14 18135.55 1994/04/30 16358.95 18367.69 1994/05/31 16524.04 18668.92 1994/06/30 16351.44 18211.53 1994/07/31 16959.27 18808.87 1994/08/31 17874.77 19580.03 1994/09/30 17649.65 19100.32 1994/10/31 17417.02 19530.08 1994/11/30 16186.35 18818.79 1994/12/31 16581.17 19097.87 1995/01/31 16113.03 19593.08 1995/02/28 17464.59 20356.63 1995/03/31 17864.78 20957.35 1995/04/30 17947.51 21574.54 1995/05/31 17765.99 22436.88 1995/06/30 18560.13 22958.09 1995/07/31 20163.53 23719.38 1995/08/31 20110.59 23778.91 1995/09/30 19543.34 24782.38 1995/10/31 18408.86 24693.91 1995/11/30 20103.02 25777.97 1995/12/31 19132.99 26274.46 1996/01/31 19429.22 27168.84 1996/02/29 19801.40 27420.69 1996/03/31 20804.00 27684.75 1996/04/30 21291.50 28092.83 1996/05/31 21160.41 28817.34 1996/06/30 20458.66 28927.14 1996/07/31 19610.39 27649.13 1996/08/31 20674.58 28232.26 1996/09/30 21129.56 29821.17 1996/10/31 21083.29 30643.63 1996/11/30 21723.35 32959.99 1996/12/31 21814.22 32307.05 1997/01/31 21911.03 34325.59 1997/02/28 22314.40 34594.71 1997/03/31 20830.00 33173.21 1997/04/30 20886.68 35153.65 1997/05/31 22210.18 37293.80 1997/06/30 22140.06 38964.57 1997/07/31 24077.09 42064.98 1997/08/31 24173.51 39708.50 1997/09/30 24804.58 41883.33 1997/10/31 22885.07 40484.43 1997/11/30 22613.36 42358.45 1997/12/31 22196.91 43085.75 1998/01/31 22615.54 43562.28 1998/02/28 23785.81 46703.99 1998/03/31 24946.55 49095.70 1998/04/30 25174.90 49589.60 1998/05/31 23938.03 48737.16 1998/06/30 22739.23 50716.86 1998/07/31 21131.31 50176.72 1998/08/31 17649.07 42922.17 1998/09/30 17905.95 45671.77 1998/10/31 19209.42 49386.71 1998/11/30 19884.93 52380.04 1998/12/31 19751.73 55398.18 1999/01/31 19856.39 57714.93 1999/02/26 19326.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990309 144533 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Industrial Materials Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $19,326 - a 93.26% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Kimberly-Clark Corp. 9.2 Minnesota Mining & 7.9 Manufacturing Co. Monsanto Co. 6.8 du Pont (E.I.) de Nemours & Co. 6.7 Burlington Northern Santa Fe 5.6 Corp. Alcoa, Inc. 4.4 Dow Chemical Co. 4.3 Getchell Gold Corp. 3.0 Union Pacific Corp. 2.5 International Paper Co. 2.3 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Chemicals & Plastics 25.2% Paper & Forest Products 23.8% Railroads 9.8% Consumer Durables 7.9% Metals & Mining 7.2% All Others 26.1%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 26.1 Row: 1, Col: 2, Value: 7.2 Row: 1, Col: 3, Value: 7.9 Row: 1, Col: 4, Value: 9.800000000000001 Row: 1, Col: 5, Value: 23.8 Row: 1, Col: 6, Value: 25.2 INDUSTRIAL MATERIALS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Peter Hirsch) Peter Hirsch, Portfolio Manager of Fidelity Select Industrial Materials Portfolio Q. HOW DID THE FUND PERFORM, PETER? A. For the 12 months that ended February 28, 1999, the fund had a total return of -18.72%, compared to 19.74% for the Standard & Poor's 500 Index. The Goldman Sachs Cyclical Industries Index, comprised of 277 stocks in the cyclical industries sector, had a return of -4.79%. Q. WHY DID THE FUND TRAIL THE S&P 500 AND THE GOLDMAN SACHS INDEX? A. The story hasn't changed much from six months ago. The fund's performance depends heavily on the prices of global commodities such as steel, paper, chemicals, plastics and non-ferrous metals. Ongoing weak demand from Asia and Latin America kept commodity prices low, thereby diminishing the profitability of most companies in the sector. The S&P 500, on the other hand, is a broadly based index containing the stocks of companies from a variety of sectors. With the exception of the three-month period from mid-July through mid-October, the general market was strong, enabling the S&P 500 to outperform the fund by a considerable degree. The Goldman Sachs index, although closer in composition than the S&P 500 to the universe of stocks in which the fund can invest, nevertheless also contains stocks from industries that are more insulated from weak overseas demand. Consequently, the Goldman Sachs index performed better than the fund did. Q. DID YOU MAKE ANY SIGNIFICANT CHANGES SINCE TAKING OVER THE FUND IN SEPTEMBER 1998? A. There were no major shifts in strategy. I tried to pick the best stocks in each industry, particularly those with the ability to grow their earnings and generate solid cash flow during difficult periods. Q. WHAT STOCKS DID WELL FOR THE FUND DURING THE PERIOD? A. Alcoa helped the fund's performance. The company was able to grow its earnings through cost reductions and a variety of productivity-enhancing programs. In addition, Alcoa made a number of acquisitions that added to earnings. One of those acquisitions was Alumax, another relatively strong performer during the period. Getchell Gold also performed well. The stock surged higher on news of a takeover bid by another gold mining company, Placer Dome. Q. WHAT STOCKS DETRACTED FROM PERFORMANCE? A. Cytec was one of the biggest detractors. A supplier to Boeing, the company was adversely affected by the aerospace giant's plans to build fewer planes in the year 2000. Owens-Illinois performed poorly in part because of weakness in the economies of Latin America, where the company does a fair amount of business. Ryerson Tull - a metal service center/distributor - was another disappointment. The company's business slowed in response to slackening demand for the products of its customers in the heavy machinery manufacturing industry. Finally, Kimberly-Clark detracted significantly from the fund's performance. Although the stock suffered only a slight decline, Kimberly-Clark was one of the fund's largest holdings during the period, so even a modest decline was enough to put a noticeable dent in the fund's performance. Q. WHAT'S YOUR OUTLOOK, PETER? A. An improving outlook for the industrial materials sector depends to a significant degree on a rebound in global demand for the commodities used to produce those materials. Current prospects in that regard are mixed. On the one hand, Japan's economy remains in a recession, and Latin America may be in the early stages of contracting the "Asian flu" - as the recent devaluation of the Brazilian currency suggests. Furthermore, some European economies are weaker than they were six months ago. China is still a question mark. A devaluation of the Chinese yuan, which some analysts have been anticipating, could put downward pressure on industrial materials prices. On the other hand, some parts of Asia, such as South Korea, appear to be rebounding from their economic doldrums. Another positive factor is the United States economy, which continues to show surprising strength. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 509 TRADING SYMBOL: FSDPX SIZE: as of February 28, 1999, 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 FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.2% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 6.0% Lafarge Corp. 1,820 $ 58,013 Masco Corp. 9,400 246,750 Owens-Corning 800 25,450 Sherwin-Williams Co. 4,300 103,469 Southdown, Inc. 3,900 184,031 USG Corp. 1,100 55,138 672,851 CHEMICALS & PLASTICS - 25.2% Air Products & Chemicals, 900 28,913 Inc. Avery Dennison Corp. 2,800 150,325 Cytec Industries, Inc. (a) 3,500 93,844 Dow Chemical Co. 4,900 482,038 du Pont (E.I.) de Nemours & 14,700 754,294 Co. Ivex Packaging Corp. (a) 5,300 80,163 Monsanto Co. 16,800 765,450 Praxair, Inc. 5,500 192,156 Raychem Corp. 20 456 Sealed Air Corp. (a) 3,440 174,580 Union Carbide Corp. 1,700 74,800 Witco Corp. 1,600 27,100 2,824,119 CONSUMER DURABLES - 7.9% Minnesota Mining & 12,000 888,750 Manufacturing Co. DRUGS & PHARMACEUTICALS - 0.5% Sigma-Aldrich Corp. 2,100 55,388 IRON & STEEL - 3.5% AK Steel Holding Corp. 3,300 71,981 Allegheny Teledyne, Inc. 3,800 78,375 Nucor Corp. 2,500 111,406 Steel Dynamics, Inc. (a) 8,500 133,875 395,637 LEASING & RENTAL - 0.4% Ryder Systems, Inc. 1,600 43,200 METALS & MINING - 7.2% Alcoa, Inc. 12,282 497,421 Brush Wellman, Inc. 400 5,750 Cominco Ltd. 1,800 24,771 Falconbridge Ltd. 4,500 49,990 Kaiser Aluminum Corp. (a) 7,000 35,000 Phelps Dodge Corp. 1,400 67,900 Reynolds Metals Co. 1,500 64,125 Ryerson Tull, Inc. (a) 3,220 58,765 803,722 PACKAGING & CONTAINERS - 1.2% Owens-Illinois, Inc. (a) 5,400 129,263 SHARES VALUE (NOTE 1) PAPER & FOREST PRODUCTS - 23.8% Boise Cascade Corp. 1,587 $ 49,296 Bowater, Inc. 1,600 67,400 Champion International Corp. 2,700 99,900 Consolidated Papers, Inc. 1,800 40,050 Fort James Corp. 5,500 164,313 Georgia-Pacific Corp. 2,900 212,425 International Paper Co. 6,100 256,200 Kimberly-Clark Corp. 21,700 1,025,319 Louisiana-Pacific Corp. 2,000 36,750 Mead Corp. 1,700 51,744 Potlatch Corp. 700 24,281 Smurfit-Stone Container Corp. 4,900 88,506 (a) Temple-Inland, Inc. 1,400 83,913 Union Camp Corp. 1,600 107,000 Westvaco Corp. 2,300 51,463 Weyerhaeuser Co. 4,100 228,575 Willamette Industries, Inc. 2,000 72,875 2,660,010 PRECIOUS METALS - 6.4% Barrick Gold Corp. 12,200 215,632 Euro-Nevada Mining Corp. Ltd. 2,000 28,916 Getchell Gold Corp. (a) 12,900 334,594 Kinross Gold Corp. (a) 6,100 13,593 Newmont Mining Corp. 6,150 106,088 Stillwater Mining Co. (a) 750 17,203 716,026 RAILROADS - 9.8% Burlington Northern Santa Fe 18,900 626,063 Corp. Canadian National Railway Co. 2,100 101,393 Kansas City Southern 1,900 88,825 Industries, Inc. Union Pacific Corp. 6,100 285,938 1,102,219 TRUCKING & FREIGHT - 2.3% CNF Transportation, Inc. 2,000 84,500 USFreightways Corp. 5,500 175,313 259,813 TOTAL COMMON STOCKS 10,550,998 (Cost $10,352,285) CASH EQUIVALENTS - 5.8% Taxable Central Cash Fund (b) 644,087 644,087 (Cost $644,087) TOTAL INVESTMENT IN $ 11,195,085 SECURITIES - 100% (Cost $10,996,372) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $12,528,232 and $20,188,827, respectively. 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 $3,612 for the period. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $11,139,998. Net unrealized appreciation aggregated $55,087, of which $762,001 related to appreciated investment securities and $706,914 related to depreciated investment securities. At February 28, 1999, the fund had a capital loss carryforward of approximately $840,000, all of which will expire on February 28, 2007. The fund intends to elect to defer its fiscal year ending February 29, 2000 approximately $1,067,000 of losses recognized during the period November 1, 1998 to February 28, 1999. INDUSTRIAL MATERIALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 11,195,085 value (cost $10,996,372) - See accompanying schedule Receivable for investments 5,922 sold Receivable for fund shares 560 sold Dividends receivable 22,038 Interest receivable 2,418 Redemption fees receivable 46 Other receivables 340 TOTAL ASSETS 11,226,409 LIABILITIES Payable for fund shares $ 32,072 redeemed Accrued management fee 5,616 Other payables and accrued 26,478 expenses TOTAL LIABILITIES 64,166 NET ASSETS $ 11,162,243 Net Assets consist of: Paid in capital $ 13,014,205 Accumulated undistributed net (2,050,672) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 198,710 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 549,189 $ 11,162,243 shares outstanding NET ASSET VALUE and $20.32 redemption price per share ($11,162,243 (divided by) 549,189 shares) Maximum offering price per $20.95 share (100/97.00 of $20.32) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 204,818 Dividends Interest 39,996 TOTAL INCOME 244,814 EXPENSES Management fee $ 94,263 Transfer agent fees 131,584 Accounting fees and expenses 60,350 Non-interested trustees' 62 compensation Custodian fees and expenses 11,394 Registration fees 16,934 Audit 12,599 Legal 118 Reports to shareholders 6,245 Total expenses before 333,549 reductions Expense reductions (4,865) 328,684 NET INVESTMENT INCOME (LOSS) (83,870) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (1,209,571) Foreign currency transactions 764 (1,208,807) Change in net unrealized appreciation (depreciation) on: Investment securities (1,993,507) Assets and liabilities in 30 (1,993,477) foreign currencies NET GAIN (LOSS) (3,202,284) NET INCREASE (DECREASE) IN $ (3,286,154) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 12,710 charges paid to FDC Sales charges - Retained by $ 12,337 FDC Deferred sales charges $ 1,065 withheld by FDC Exchange fees withheld by FSC $ 2,640 Expense reductions Directed $ 4,865 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (83,870) $ (124,764) income (loss) Net realized gain (loss) (1,208,807) 3,017,681 Change in net unrealized (1,993,477) (1,210,871) appreciation (depreciation) NET INCREASE (DECREASE) IN (3,286,154) 1,682,046 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders - (37,279) From net investment income From net realized gain - (4,304,754) TOTAL DISTRIBUTIONS - (4,342,033) Share transactions Net 9,957,438 15,807,574 proceeds from sales of shares Reinvestment of distributions - 4,249,488 Cost of shares redeemed (18,118,847) (61,328,959) NET INCREASE (DECREASE) IN (8,161,409) (41,271,897) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 27,986 51,834 TOTAL INCREASE (DECREASE) (11,419,577) (43,880,050) IN NET ASSETS NET ASSETS Beginning of period 22,581,820 66,461,870 End of period $ 11,162,243 $ 22,581,820 OTHER INFORMATION Shares Sold 440,126 605,194 Issued in reinvestment of - 181,274 distributions Redeemed (794,343) (2,285,848) Net increase (decrease) (354,217) (1,499,380)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 25.00 $ 27.66 $ 26.07 $ 23.13 $ 21.67 period Income from Investment Operations Net investment income (loss) C (.12) (.11) .06 .12 .17 Net realized and unrealized (4.60) 1.43 3.12 2.92 1.43 gain (loss) Total from investment (4.72) 1.32 3.18 3.04 1.60 operations Less Distributions From net investment income - (.03) (.06) (.15) (.18) From net realized gain - (4.00) (1.57) - - Total distributions - (4.03) (1.63) (.15) (.18) Redemption fees added to paid .04 .05 .04 .05 .04 in capital Net asset value, end of period $ 20.32 $ 25.00 $ 27.66 $ 26.07 $ 23.13 TOTAL RETURN A, B (18.72)% 6.59% 12.69% 13.38% 7.65% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 11,162 $ 22,582 $ 66,462 $ 86,338 $ 183,454 (000 omitted) Ratio of expenses to average 2.07% 1.98% 1.54% 1.64% 1.56% net assets Ratio of expenses to average 2.04% D 1.94% D 1.51% D 1.61% D 1.53% D net assets after expense reductions Ratio of net investment (.52)% (.42)% .23% .49% .77% income (loss) to average net assets Portfolio turnover rate 82% 118% 105% 138% 139%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE . C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29. 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT PAPER AND FOREST -17.01% 33.37% 133.44% PRODUCTS SELECT PAPER AND FOREST -19.57% 29.29% 126.36% PRODUCTS (LOAD ADJ.) S&P 500 19.74% 194.91% 459.21% GS Cyclical Industries -4.79% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT PAPER AND FOREST -17.01% 5.93% 8.85% PRODUCTS SELECT PAPER AND FOREST -19.57% 5.27% 8.51% PRODUCTS (LOAD ADJ.) S&P 500 19.74% 24.15% 18.78% GS Cyclical Industries -4.79% 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 1989/02/28 9700.00 10000.00 1989/03/31 9708.16 10233.00 1989/04/30 10058.96 10764.09 1989/05/31 10238.44 11200.04 1989/06/30 9585.79 11136.20 1989/07/31 10507.65 12141.80 1989/08/31 11258.20 12379.78 1989/09/30 10638.18 12329.02 1989/10/31 10156.85 12042.99 1989/11/30 10083.43 12288.66 1989/12/31 10299.39 12583.59 1990/01/31 9357.82 11739.23 1990/02/28 9448.68 11890.67 1990/03/31 9712.98 12205.77 1990/04/30 9085.27 11900.63 1990/05/31 9688.20 13060.94 1990/06/30 9456.94 12972.12 1990/07/31 9597.35 12930.61 1990/08/31 8449.30 11761.68 1990/09/30 7631.62 11188.89 1990/10/31 7392.10 11140.78 1990/11/30 8135.44 11860.47 1990/12/31 8743.40 12191.38 1991/01/31 9465.72 12722.92 1991/02/28 9919.27 13632.61 1991/03/31 10120.85 13962.52 1991/04/30 10616.39 13996.03 1991/05/31 11834.25 14600.66 1991/06/30 11531.89 13931.95 1991/07/31 11540.29 14581.18 1991/08/31 11599.08 14926.75 1991/09/30 11153.93 14677.48 1991/10/31 11573.88 14874.16 1991/11/30 10691.98 14274.73 1991/12/31 11783.07 15907.76 1992/01/31 12866.77 15611.87 1992/02/29 12926.98 15814.83 1992/03/31 13012.98 15506.44 1992/04/30 13219.40 15962.33 1992/05/31 12849.57 16040.54 1992/06/30 12764.20 15801.54 1992/07/31 12669.40 16447.82 1992/08/31 12160.90 16110.64 1992/09/30 12031.62 16300.75 1992/10/31 12617.69 16357.80 1992/11/30 13083.09 16915.60 1992/12/31 13203.52 17123.66 1993/01/31 13610.18 17267.50 1993/02/28 13913.01 17502.34 1993/03/31 13895.71 17871.64 1993/04/30 14527.82 17439.14 1993/05/31 14571.11 17906.51 1993/06/30 14259.43 17958.44 1993/07/31 14112.25 17886.61 1993/08/31 14493.19 18564.51 1993/09/30 13800.56 18421.56 1993/10/31 14337.35 18802.89 1993/11/30 15229.10 18624.26 1993/12/31 15653.34 18849.62 1994/01/31 17471.48 19490.50 1994/02/28 16977.98 18962.31 1994/03/31 15177.16 18135.55 1994/04/30 15160.20 18367.69 1994/05/31 15778.62 18668.92 1994/06/30 15619.59 18211.53 1994/07/31 16944.79 18808.87 1994/08/31 18835.39 19580.03 1994/09/30 19171.11 19100.32 1994/10/31 17978.44 19530.08 1994/11/30 17192.16 18818.79 1994/12/31 17866.46 19097.87 1995/01/31 17746.49 19593.08 1995/02/28 19509.14 20356.63 1995/03/31 19647.57 20957.35 1995/04/30 19728.81 21574.54 1995/05/31 20054.98 22436.88 1995/06/30 21872.23 22958.09 1995/07/31 22617.77 23719.38 1995/08/31 22599.13 23778.91 1995/09/30 22226.37 24782.38 1995/10/31 21900.19 24693.91 1995/11/30 22226.37 25777.97 1995/12/31 21781.85 26274.46 1996/01/31 22325.12 27168.84 1996/02/29 21300.09 27420.69 1996/03/31 22386.62 27684.75 1996/04/30 23365.44 28092.83 1996/05/31 22894.49 28817.34 1996/06/30 21610.09 28927.14 1996/07/31 21042.81 27649.13 1996/08/31 22220.18 28232.26 1996/09/30 23022.93 29821.17 1996/10/31 22980.12 30643.63 1996/11/30 23247.70 32959.99 1996/12/31 23320.94 32307.05 1997/01/31 23561.14 34325.59 1997/02/28 23615.73 34594.71 1997/03/31 22338.31 33173.21 1997/04/30 23006.86 35153.65 1997/05/31 25846.25 37293.80 1997/06/30 26048.26 38964.57 1997/07/31 28079.60 42064.98 1997/08/31 27978.59 39708.50 1997/09/30 28797.86 41883.33 1997/10/31 25992.15 40484.43 1997/11/30 26160.49 42358.45 1997/12/31 25501.98 43085.75 1998/01/31 26477.27 43562.28 1998/02/28 27283.99 46703.99 1998/03/31 27705.41 49095.70 1998/04/30 29196.88 49589.60 1998/05/31 27490.97 48737.16 1998/06/30 26251.42 50716.86 1998/07/31 23723.23 50176.72 1998/08/31 20323.68 42922.17 1998/09/30 20728.68 45671.77 1998/10/31 22054.14 49386.71 1998/11/30 23097.32 52380.04 1998/12/31 23490.05 55398.18 1999/01/31 22459.14 57714.93 1999/02/26 22636.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990310 115448 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Paper and Forest Products Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $22,636 - a 126.36% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Westvaco Corp. 10.5 Champion International Corp. 7.7 Consolidated Papers, Inc. 6.9 Union Camp Corp. 6.1 Smurfit-Stone Container Corp. 5.2 Georgia-Pacific Corp. (Timber 5.1 Group) Kimberly-Clark Corp. 5.0 Mead Corp. 3.8 International Paper Co. 3.5 Bowater, Inc. 3.4 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Paper & Forest Products 85.9% Packaging & Containers 3.3% Chemicals & Plastics 1.8% Building Materials 1.0% All Others 8.0%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 8.0 Row: 1, Col: 2, Value: 1.0 Row: 1, Col: 3, Value: 1.8 Row: 1, Col: 4, Value: 3.3 Row: 1, Col: 5, Value: 85.90000000000001 PAPER AND FOREST PRODUCTS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Noah Eccles) NOTE TO SHAREHOLDERS: Noah Eccles became Portfolio Manager of Fidelity Select Paper and Forest Products Portfolio on January 4, 1999. Q. HOW DID THE FUND PERFORM, NOAH? A. It was a challenging year for paper stocks. For the 12 months that ended February 28, 1999, the fund returned -17.01%. During that same period, the Standard & Poor's 500 Index returned 19.74%, while the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - fell 4.79%. Q. WHAT FACTORS CONSPIRED TO MAKE IT A CHALLENGING ENVIRONMENT FOR THE SECTOR? A. Through the first half of the period, the paper industry was still trying to recover from the ongoing economic problems in Asia. Paper-company stocks generally rise and fall in step with paper prices, and since Asia accounts for a significant portion of the world's paper demand, the lack of demand from that region sent paper prices spiraling downward. A poor pricing environment, combined with overcapacity within the sector, caused many paper stocks to decline. The second half of the period, however, brought better results as capacity was reduced and the sector reacted favorably to International Paper's acquisition of Union Camp. Q. WHAT STOCKS HURT THE FUND THE MOST? WHICH HELPED? A. Through the first half of the period, most stocks in the five major paper grades - pulp, containerboard, uncoated free sheet, newsprint and tissue - detracted from performance. Newsprint stocks such as Bowater were particular laggards, as were tissue-related stocks such as Fort James. In the second half of the period, companies with exposure to building products - such as Georgia-Pacific and Louisiana-Pacific - performed well due to warm weather trends, a low interest-rate environment and strong housing starts. But the real excitement involved containerboard companies. A merger between Jefferson Smurfit and Stone Container, two of the larger containerboard-related companies, reduced overall capacity and was met with optimism. As a result, containerboard companies bounced back quicker than those in the other grades, and the fund's holdings in stocks such as Georgia-Pacific, Weyerhaeuser and the newly merged company, Smurfit-Stone, benefited. Q. DID THE GAP BETWEEN THE PERFORMANCE OF CONTAINERBOARD AND THE OTHER GRADES CONCERN YOU? A. It did, simply because past history tells us that when one paper grade improves, the rest typically follow suit. The possibility exists that the other grades will catch up to containerboard and building products, but my feeling is that an across-the-board recovery will happen later rather than sooner. As a result, I positioned the fund a bit more defensively in the latter stages of the period. I chose to de-emphasize some of the containerboard stocks that had risen dramatically - which is why I sold Weyerhaeuser - and emphasize stocks in the pulp, coated free sheet, uncoated free sheet and newsprint categories that were within 10% of their downside valuations. My thinking here was that the stocks in these areas had more room to grow if the paper cycle works, and less downside if it doesn't. Q. THE FUND'S LARGEST POSITION AT THE END OF THE PERIOD WAS ITS INVESTMENT IN WESTVACO. WHAT'S YOUR SCOUTING REPORT ON THIS COMPANY? A. Westvaco has strong exposure to both coated free sheet - which is the glossy type of paper used in catalogs - and bleachboard, which is used for folded paper products such as food takeout cartons and cigarette boxes. I felt the company fit nicely into my defensive strategy and I was attracted to its valuation. While Westvaco turned in a fairly flat performance during the month since we increased our holdings, I'm optimistic about its future. Q. WHAT'S YOUR OUTLOOK? A. Since I feel we may not see a broad recovery until at least 2000 or later, I'll continue to take a defensive approach to the portfolio for now. I'll also keep a close eye on Brazil and the evolving economic problems there. Brazil is one of the world's larger paper exporters, and the worry is that Brazil will start flooding the U.S. market with excess product. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 506 TRADING SYMBOL: FSPFX SIZE: as of February 28, 1999, more than $10 million MANAGER: Noah Eccles, since January 1999; analyst, agricultural chemicals industry, 1997- present; specialty chemicals and packing industries, 1997-1998; joined Fidelity in 1997 PAPER AND FOREST PRODUCTS PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.0% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 1.0% T.J. International, Inc. 4,400 $ 95,150 CHEMICALS & PLASTICS - 1.8% Ivex Packaging Corp. (a) 11,800 178,475 PACKAGING & CONTAINERS - 3.3% Sonoco Products Co. 13,100 320,950 PAPER & FOREST PRODUCTS - 85.9% Abitibi-Consolidated, Inc. 25,300 202,192 Alliance Forest Products, 5,700 62,943 Inc. (a) Boise Cascade Corp. 8,600 267,138 Bowater, Inc. 8,000 337,000 Champion International Corp. 20,400 754,800 Consolidated Papers, Inc. 30,400 676,400 Domtar, Inc. 23,300 139,077 Donohue, Inc. Class A (sub. 10,400 211,062 vtg.) Fletcher Challenge Canada 2,500 23,213 Ltd. Fort James Corp. 7,600 227,050 Georgia-Pacific Corp. (Timber 24,300 495,113 Group) International Paper Co. 8,200 344,400 Kimberly-Clark Corp. 10,300 486,675 Louisiana-Pacific Corp. 11,800 216,825 Macmillan Bloedel Ltd. 16,700 167,244 Mead Corp. 12,300 374,381 Mercer International, Inc. 1,600 12,000 (SBI) Plum Creek Timber Co. unit 6,400 170,000 Potlatch Corp. 3,800 131,813 Rayonier, Inc. 4,000 163,750 Smurfit (Jefferson) Group PLC 23,600 50,737 Smurfit-Stone Container Corp. 28,300 511,169 (a) St. Laurent Paperboard, Inc. 7,500 58,446 (a) Stora Enso Oyj 28,300 251,166 Svenska Cellulosa AB (SCA) 2,700 54,108 Class B Tembec, Inc. Class A (a) 11,500 61,016 Temple-Inland, Inc. 3,600 215,775 Union Camp Corp. 9,000 601,875 UPM-Kymmene Corp. 5,400 140,800 Westvaco Corp. 46,000 1,029,249 8,437,417 TOTAL COMMON STOCKS 9,031,992 (Cost $9,031,301) CASH EQUIVALENTS - 8.0% Taxable Central Cash Fund (b) 786,687 786,687 (Cost $786,687) TOTAL INVESTMENT IN $ 9,818,679 SECURITIES - 100% (Cost $9,817,988) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $48,680,043 and $64,950,440, respectively. 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 $15,977 for the period. Distribution of investments by country of issue, as a percentage of total value of investments in securities, is as follows: United States of America 85.4% Canada 9.5 Finland 4.0 Others (individually less 1.1 than 1%) TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $9,964,481. Net unrealized depreciation aggregated $145,802, of which $437,901 related to appreciated investment securities and $583,703 related to depreciated investment securities. The fund hereby designates approximately $181,000 as capital gain dividend for the purpose of the dividend paid deduction. At February 28, 1999, the fund had a capital loss carryforward of approximately $2,903,000, all of which will expire on February 28, 2007. The fund intends to elect to defer to its fiscal year ending February 29, 2000 approximately $463,000 of losses recognized during the period November 1, 1998 to February 28, 1999. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividend-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of this percentage for use in preparing 1999 income tax returns. PAPER AND FOREST PRODUCTS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 9,818,679 value (cost $9,817,988) - See accompanying schedule Receivable for investments 1,008,764 sold Receivable for fund shares 29,470 sold Dividends receivable 21,049 Interest receivable 3,024 Redemption fees receivable 62 TOTAL ASSETS 10,881,048 LIABILITIES Payable for investments $ 562,680 purchased Payable for fund shares 41,342 redeemed Accrued management fee 5,053 Other payables and accrued 25,425 expenses TOTAL LIABILITIES 634,500 NET ASSETS $ 10,246,548 Net Assets consist of: Paid in capital $ 13,754,844 Undistributed net investment 4,129 income Accumulated undistributed net (3,513,096) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 671 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 555,457 $ 10,246,548 shares outstanding NET ASSET VALUE and $18.45 redemption price per share ($10,246,548 (divided by) 555,457 shares) Maximum offering price per $19.02 share (100/97.00 of $18.45) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 249,426 Dividends Interest 62,508 TOTAL INCOME 311,934 EXPENSES Management fee $ 87,942 Transfer agent fees 139,644 Accounting fees and expenses 60,339 Non-interested trustees' 64 compensation Custodian fees and expenses 14,884 Registration fees 18,940 Audit 17,079 Legal 94 Reports to shareholders 5,985 Total expenses before 344,971 reductions Expense reductions (13,517) 331,454 NET INVESTMENT INCOME (LOSS) (19,520) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (2,774,252) Foreign currency transactions (2,221) (2,776,473) Change in net unrealized appreciation (depreciation) on: Investment securities (1,268,266) Assets and liabilities in 30 (1,268,236) foreign currencies NET GAIN (LOSS) (4,044,709) NET INCREASE (DECREASE) IN $ (4,064,229) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 45,535 charges paid to FDC Sales charges - Retained by $ 45,535 FDC Deferred sales charges $ 737 withheld by FDC Exchange fees withheld by FSC $ 3,038 Expense reductions Direct $ 13,487 brokerage arrangements Custodian credits 30 $ 13,517
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (19,520) $ (121,775) income (loss) Net realized gain (loss) (2,776,473) 2,537,439 Change in net unrealized (1,268,236) 1,291,272 appreciation (depreciation) NET INCREASE (DECREASE) IN (4,064,229) 3,706,936 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders In excess of net investment - (31,544) income From net realized gain - (1,592,672) In excess of net realized (317,946) - gain TOTAL DISTRIBUTIONS (317,946) (1,624,216) Share transactions Net 24,142,684 71,567,372 proceeds from sales of shares Reinvestment of distributions 312,733 1,584,087 Cost of shares redeemed (41,303,607) (63,467,979) NET INCREASE (DECREASE) IN (16,848,190) 9,683,480 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 92,806 134,393 TOTAL INCREASE (DECREASE) (21,137,559) 11,900,593 IN NET ASSETS NET ASSETS Beginning of period 31,384,107 19,483,514 End of period (including $ 10,246,548 $ 31,384,107 undistributed net investment income of $4,129 and $31,081, respectively) OTHER INFORMATION Shares Sold 1,074,182 3,117,317 Issued in reinvestment of 13,704 75,670 distributions Redeemed (1,917,231) (2,708,921) Net increase (decrease) (829,345) 484,066
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 22.66 $ 21.63 $ 20.78 $ 21.14 $ 19.61 period Income from Investment Operations Net investment income (loss) C (.03) (.12) .01 .08 .01 Net realized and unrealized (3.87) 3.13 2.08 1.83 2.53 gain (loss) Total from investment (3.90) 3.01 2.09 1.91 2.54 operations Less Distributions From net investment income - - (.03) (.08) - In excess of net investment - (.04) (.07) - - income From net realized gain - (2.07) (1.25) (2.27) (1.17) In excess of net realized gain (.44) - - - - Total distributions (.44) (2.11) (1.35) (2.35) (1.17) Redemption fees added to paid .13 .13 .11 .08 .16 in capital Net asset value, end of period $ 18.45 $ 22.66 $ 21.63 $ 20.78 $ 21.14 TOTAL RETURN A, B (17.01)% 15.53% 10.87% 9.18% 14.91% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 10,247 $ 31,384 $ 19,484 $ 27,270 $ 94,219 (000 omitted) Ratio of expenses to average 2.30% 2.18% 2.19% 1.91% 1.88% net assets Ratio of expenses to average 2.21% D 2.15% D 2.16% D 1.90% D 1.87% D net assets after expense reductions Ratio of net investment (.13)% (.50)% .04% .34% .05% income (loss) to average net assets Portfolio turnover rate 338% 235% 180% 78% 209%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29. 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT TRANSPORTATION -1.73% 73.66% 310.73% SELECT TRANSPORTATION (LOAD -4.75% 68.38% 298.34% ADJ.) S&P 500 19.74% 194.91% 459.21% GS Cyclical Industries -4.79% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT TRANSPORTATION -1.73% 11.67% 15.17% SELECT TRANSPORTATION (LOAD -4.75% 10.98% 14.82% ADJ.) S&P 500 19.74% 24.15% 18.78% GS Cyclical Industries -4.79% 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 1989/02/28 9700.00 10000.00 1989/03/31 9996.47 10233.00 1989/04/30 10330.96 10764.09 1989/05/31 10771.87 11200.04 1989/06/30 10705.46 11136.20 1989/07/31 11354.27 12141.80 1989/08/31 12092.30 12379.78 1989/09/30 11857.11 12329.02 1989/10/31 11102.86 12042.99 1989/11/30 11200.18 12288.66 1989/12/31 11359.63 12583.59 1990/01/31 10646.26 11739.23 1990/02/28 11142.91 11890.67 1990/03/31 11477.01 12205.77 1990/04/30 11043.58 11900.63 1990/05/31 11449.92 13060.94 1990/06/30 11323.88 12972.12 1990/07/31 11286.26 12930.61 1990/08/31 9630.94 11761.68 1990/09/30 8389.45 11188.89 1990/10/31 8257.78 11140.78 1990/11/30 8596.37 11860.47 1990/12/31 8906.74 12191.38 1991/01/31 9668.56 12722.92 1991/02/28 10609.08 13632.61 1991/03/31 10618.49 13962.52 1991/04/30 10590.27 13996.03 1991/05/31 11427.34 14600.66 1991/06/30 11332.46 13931.95 1991/07/31 12021.28 14581.18 1991/08/31 12238.30 14926.75 1991/09/30 12011.84 14677.48 1991/10/31 12898.81 14874.16 1991/11/30 12096.76 14274.73 1991/12/31 13729.17 15907.76 1992/01/31 13851.83 15611.87 1992/02/29 14597.26 15814.83 1992/03/31 14248.14 15506.44 1992/04/30 14616.14 15962.33 1992/05/31 14918.08 16040.54 1992/06/30 14276.45 15801.54 1992/07/31 14484.03 16447.82 1992/08/31 14049.98 16110.64 1992/09/30 14606.70 16300.75 1992/10/31 15229.47 16357.80 1992/11/30 16333.46 16915.60 1992/12/31 16995.67 17123.66 1993/01/31 17756.82 17267.50 1993/02/28 17997.68 17502.34 1993/03/31 19202.03 17871.64 1993/04/30 19154.16 17439.14 1993/05/31 19869.66 17906.51 1993/06/30 19927.68 17958.44 1993/07/31 19927.68 17886.61 1993/08/31 20295.10 18564.51 1993/09/30 20343.44 18421.56 1993/10/31 20768.87 18802.89 1993/11/30 20884.90 18624.26 1993/12/31 21978.16 18849.62 1994/01/31 22941.55 19490.50 1994/02/28 22941.55 18962.31 1994/03/31 22327.52 18135.55 1994/04/30 22744.75 18367.69 1994/05/31 22379.11 18668.92 1994/06/30 22357.61 18211.53 1994/07/31 23110.39 18808.87 1994/08/31 23798.65 19580.03 1994/09/30 23164.16 19100.32 1994/10/31 23508.29 19530.08 1994/11/30 22099.51 18818.79 1994/12/31 22827.92 19097.87 1995/01/31 22674.07 19593.08 1995/02/28 24295.34 20356.63 1995/03/31 24614.86 20957.35 1995/04/30 24981.72 21574.54 1995/05/31 24236.17 22436.88 1995/06/30 23975.82 22958.09 1995/07/31 26034.95 23719.38 1995/08/31 26011.28 23778.91 1995/09/30 25774.60 24782.38 1995/10/31 25455.08 24693.91 1995/11/30 26330.80 25777.97 1995/12/31 26290.50 26274.46 1996/01/31 26691.12 27168.84 1996/02/29 27442.27 27420.69 1996/03/31 28105.80 27684.75 1996/04/30 29026.51 28092.83 1996/05/31 29064.28 28817.34 1996/06/30 29202.74 28927.14 1996/07/31 27088.06 27649.13 1996/08/31 27113.23 28232.26 1996/09/30 27239.11 29821.17 1996/10/31 27025.12 30643.63 1996/11/30 28938.40 32959.99 1996/12/31 28789.02 32307.05 1997/01/31 28995.77 34325.59 1997/02/28 28724.42 34594.71 1997/03/31 29603.08 33173.21 1997/04/30 31134.33 35153.65 1997/05/31 33250.26 37293.80 1997/06/30 34249.08 38964.57 1997/07/31 36640.99 42064.98 1997/08/31 35905.02 39708.50 1997/09/30 39453.47 41883.33 1997/10/31 38126.08 40484.43 1997/11/30 37955.23 42358.45 1997/12/31 38039.63 43085.75 1998/01/31 38111.16 43562.28 1998/02/28 40543.18 46703.99 1998/03/31 42002.39 49095.70 1998/04/30 41392.24 49589.60 1998/05/31 39425.37 48737.16 1998/06/30 40350.09 50716.86 1998/07/31 36944.78 50176.72 1998/08/31 30427.70 42922.17 1998/09/30 30383.67 45671.77 1998/10/31 33612.85 49386.71 1998/11/30 35271.47 52380.04 1998/12/31 36388.47 55398.18 1999/01/31 39634.32 57714.93 1999/02/26 39834.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990309 145347 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Transportation Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $39,834 - a 298.34% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Union Pacific Corp. 9.9 Burlington Northern Santa Fe 8.9 Corp. Continental Airlines, Inc. 6.5 Class B CSX Corp. 5.2 Delta Air Lines, Inc. 4.6 Southwest Airlines Co. 4.1 Eaton Corp. 3.5 Northwest Airlines Corp. 3.5 Class A Navistar International Corp. 3.1 Kansas City Southern 3.1 Industries, Inc. TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Air Transportation 33.2% Railroads 31.2% Trucking & Freighting 14.3% Autos, Tires & Accesories 10.0% Leasing & Rental 2.4% All Others 8.9%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 8.9 Row: 1, Col: 2, Value: 2.4 Row: 1, Col: 3, Value: 10.0 Row: 1, Col: 4, Value: 14.3 Row: 1, Col: 5, Value: 31.2 Row: 1, Col: 6, Value: 33.2 TRANSPORTATION PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Christopher Zepf) Christopher Zepf, Portfolio Manager of Fidelity Select Transportation Portfolio Q. HOW DID THE FUND PERFORM, CHRIS? A. For the 12-month period that ended February 28, 1999, the fund returned -1.73%, while the Standard & Poor's 500 Index returned 19.74%. For another comparison, the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - returned -4.79% for the same 12-month period. Q. FOR TRANSPORTATION STOCKS, THE PAST YEAR WAS A TALE OF TWO HALVES - ONE BAD, AND THE MORE RECENT ONE, GOOD. WHAT ACCOUNTED FOR THAT TURNAROUND? A. After getting off to a fairly strong start in the spring of 1998, transportation stocks suffered a sharp sell-off beginning this past summer. That's when investors were most worried that protracted and expanding economic problems in Japan, Latin America, Russia and Southeast Asia would further curtail worldwide economic growth and potentially throw the U.S. into a recession. Of course, transportation companies tend to do best during periods of economic growth because they can grow earnings by raising prices and eliminating excess capacity. More recently, however, the transportation industry has staged a significant rebound as investors became less worried about a global recession in light of the U.S. economy's faster-than-expected growth. In addition, the price of oil - which is a major expense for most transportation companies - fell to levels not seen in over a decade. Q. HOW DID YOU RESPOND TO THOSE CHANGING CONDITIONS? A. Since taking over the fund this past September, I've made a number of changes. I looked for stocks that I felt had a global recession already factored into their prices. In my view, these stocks had good upside potential if the economy strengthened, but only limited downside if a recession occurred. One outgrowth of that strategy was that I added to the fund's stake in airline stocks, many of which performed quite well since I initiated positions in them or expanded existing holdings. America West, for example, posted strong gains after it settled its dispute with mechanics. Other domestically oriented airlines, including Southwest Airlines and Atlantic Coast Airlines, also performed well. The biggest addition was Continental Airlines, which became the fund's third-largest holding by the end of the period. I liked that airline because it was growing at a rate much faster than the industry as a whole, mainly by expanding the use of its under-utilized hubs at Newark and Houston airports. Q. WHICH OF THE FUND'S HOLDINGS PROVED MOST DISAPPOINTING? A. Union Pacific, the largest domestic railroad, with routes primarily in the western United States, detracted from performance for the year due to significant operational difficulties stemming from its acquisition of Southern Pacific. I chose to add to the fund's stake in Union Pacific in the fall because I felt that the market had too severely punished the stock based on those problems. Since then, the stock has recouped some of its losses when it became evident that the company was enjoying a turnaround. I took a similar approach to Burlington Northern, buying the stock in the fall when it was relatively cheap. I liked it because it is the only major railroad that isn't expected to face merger-related issues in 1999. It also has a strong presence in the low-sulfur coal shipping business. That market position is important because the Clean Air Act - which goes into effect next year - should spur demand. Although it was up only slightly for the one-year period, Burlington Northern has posted good recent gains. Q. WHAT'S YOUR OUTLOOK? A. Transportation companies are cyclical, meaning their performance is tied closely to the economy's ups and downs. As a result, transportation stocks should perform in line with expectations about the economy's potential strength or weakness. However, I'll try to identify the strongest companies in the group, because I believe they are better able to take advantage of robust economic periods and manage their operations well during difficult economic 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 512 TRADING SYMBOL: FSRFX SIZE: as of February 28,1999, more than $19 million MANGER: Christopher Zepf, since September 1998; manager, Fidelity Select Air Transportation Portfolio, since 1998; equity analyst, trucking and rails industries, since 1998; joined Fidelity in 1998 TRANSPORTATION PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.1% SHARES VALUE (NOTE 1) AIR TRANSPORTATION - 33.2% Air Canada, Inc. (a) 25,000 $ 101,141 Alaska Air Group, Inc. (a) 4,300 217,956 America West Holding Corp. 12,800 217,600 Class B (a) AMR Corp. (a) 10,000 554,375 ASA Holdings, Inc. 5,700 191,306 Atlantic Coast Airlines 2,800 89,600 Holdings (a) Atlas Air, Inc. (a) 5,000 150,625 Comair Holdings, Inc. 4,000 150,500 Continental Airlines, Inc. 37,500 1,298,438 Class B (a) Delta Air Lines, Inc. 15,000 912,188 Midwest Express Holdings, 15,000 403,125 Inc. (a) Northwest Airlines Corp. 27,500 687,500 Class A (a) SkyWest, Inc. 12,400 389,825 Southwest Airlines Co. 27,150 817,894 US Airways Group, Inc. (a) 8,700 412,163 6,594,236 AUTOS, TIRES, & ACCESSORIES - 10.0% Eaton Corp. 10,100 700,688 Meritor Automotive, Inc. 6,000 95,250 Navistar International Corp. 14,500 623,500 (a) PACCAR, Inc. 7,000 293,125 Republic Industries, Inc. (a) 14,100 172,725 World Fuel Services Corp. 10,000 103,750 1,989,038 COMPUTER SERVICES & SOFTWARE - - 0.9% Sabre Group Holdings, Inc. 4,300 168,775 Class A (a) LEASING & RENTAL - 2.4% GATX Corp. 2,400 82,950 Ryder Systems, Inc. 14,700 396,900 479,850 RAILROADS - 31.2% Burlington Northern Santa Fe 53,700 1,778,813 Corp. Canadian National Railway Co. 12,600 608,357 CSX Corp. 26,500 1,040,125 Florida East Coast Industries 3,000 81,375 Kansas City Southern 13,100 612,425 Industries, Inc. Railtex, Inc. (a) 11,500 125,063 Union Pacific Corp. 41,800 1,959,371 6,205,529 SHIPPING - 1.1% Peninsular & Oriental Steam 4,400 51,735 Navigation Co. Sea Containers Ltd. Class A 8,000 175,000 226,735 SHARES VALUE (NOTE 1) TRUCKING & FREIGHT - 14.3% Airborne Freight Corp. 4,000 $ 156,000 Circle International Group, 5,000 85,625 Inc. CNF Transportation, Inc. 9,000 380,250 Consolidated Freightways 3,000 43,500 Corp. (a) Eagle USA Airfreight, Inc. (a) 7,500 216,563 Expeditors International of 8,000 372,500 Washington, Inc. FDX Corp. (a) 5,000 477,500 Hub Group, Inc. Class A (a) 5,000 97,500 Hunt (J.B.) Transport 16,000 376,000 Services, Inc. M.S. Carriers, Inc. (a) 3,000 81,000 USFreightways Corp. 11,000 350,625 Werner Enterprises, Inc. 6,000 107,250 Yellow Corp. (a) 5,000 89,375 2,833,688 TOTAL COMMON STOCKS 18,497,851 (Cost $17,238,313) CASH EQUIVALENTS - 6.9% Taxable Central Cash Fund (b) 1,362,746 1,362,746 (Cost $1,362,746) TOTAL INVESTMENT IN $ 19,860,597 SECURITIES - 100% (Cost $18,601,059) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $44,073,749 and $86,107,016, respectively. 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 $12,152 for the period. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $18,856,313. Net unrealized appreciation aggregated $1,004,284, of which $1,322,101 related to appreciated investment securities and $317,817 related to depreciated investment securities. The fund hereby designates approximately $1,324,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 8% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for use in preparing 1999 income tax returns. TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 19,860,597 value (cost $18,601,059) - See accompanying schedule Foreign currency held at 106,146 value (cost $106,458) Receivable for investments 853,396 sold Receivable for fund shares 160,369 sold Dividends receivable 19,881 Interest receivable 4,626 Redemption fees receivable 324 Other receivables 2,032 TOTAL ASSETS 21,007,371 LIABILITIES Payable for investments $ 1,051,206 purchased Payable for fund shares 66,782 redeemed Accrued management fee 9,122 Other payables and accrued 25,469 expenses TOTAL LIABILITIES 1,152,579 NET ASSETS $ 19,854,792 Net Assets consist of: Paid in capital $ 13,838,885 Accumulated undistributed net 4,755,211 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 1,260,696 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 793,001 $ 19,854,792 shares outstanding NET ASSET VALUE and $25.04 redemption price per share ($19,854,792 (divided by) 793,001 shares) Maximum offering price per $25.81 share (100/97.00 of $25.04) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 215,371 Dividends Interest (including income on 83,138 securities loaned of $12,548) TOTAL INCOME 298,509 EXPENSES Management fee $ 142,306 Transfer agent fees 205,276 Accounting and security 62,228 lending fees Non-interested trustees' 104 compensation Custodian fees and expenses 13,182 Registration fees 24,256 Audit 20,404 Legal 228 Reports to shareholders 9,326 Total expenses before 477,310 reductions Expense reductions (14,141) 463,169 NET INVESTMENT INCOME (LOSS) (164,660) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 6,231,096 Foreign currency transactions 4,268 6,235,364 Change in net unrealized appreciation (depreciation) on: Investment securities (6,048,799) Assets and liabilities in 1,315 (6,047,484) foreign currencies NET GAIN (LOSS) 187,880 NET INCREASE (DECREASE) IN $ 23,220 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 94,851 charges paid to FDC Sales charges - Retained by $ 93,190 FDC Deferred sales charges $ 657 withheld by FDC Exchange fees withheld by FSC $ 5,753 Expense reductions Directed $ 13,997 brokerage arrangements Custodian credits 144 $ 14,141
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (164,660) $ (36,059) income (loss) Net realized gain (loss) 6,235,364 10,298,362 Change in net unrealized (6,047,484) 7,061,282 appreciation (depreciation) NET INCREASE (DECREASE) IN 23,220 17,323,585 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (2,602,131) (4,986,487) from net realized gains Share transactions Net 28,194,142 152,644,299 proceeds from sales of shares Reinvestment of distributions 2,518,945 4,933,755 Cost of shares redeemed (72,656,072) (114,694,116) NET INCREASE (DECREASE) IN (41,942,985) 42,883,938 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 94,942 170,335 TOTAL INCREASE (DECREASE) (44,426,954) 55,391,371 IN NET ASSETS NET ASSETS Beginning of period 64,281,746 8,890,375 End of period $ 19,854,792 $ 64,281,746 OTHER INFORMATION Shares Sold 1,116,624 6,004,453 Issued in reinvestment of 97,938 182,560 distributions Redeemed (2,690,132) (4,318,403) Net increase (decrease) (1,475,570) 1,868,610
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 G 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 28.34 $ 22.23 $ 21.92 $ 20.53 $ 21.67 period Income from Investment Operations Net investment income (loss) C (.18) (.02) (.13) (.09) D (.17) Net realized and unrealized (.58) H 8.85 1.06 2.60 1.17 gain (loss) Total from investment (.76) 8.83 .93 2.51 1.00 operations Less Distributions From net realized gain (2.64) (2.80) (.71) (1.22) (2.19) Redemption fees added to paid .10 .08 .09 .10 .05 in capital Net asset value, end of period $ 25.04 $ 28.34 $ 22.23 $ 21.92 $ 20.53 TOTAL RETURN A, B (1.73)% 41.15% 4.67% 12.95% 5.90% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 19,855 $ 64,282 $ 8,890 $ 11,445 $ 12,704 (000 omitted) Ratio of expenses to average 1.96% 1.58% 2.50% E 2.47% E 2.37% net assets Ratio of expenses to average 1.90% F 1.54% F 2.48% F 2.44% F 2.36% F net assets after expense reductions Ratio of net investment (.68)% (.06)% (.58)% (.43)% (.83)% income (loss) to average net assets Portfolio turnover rate 182% 210% 148% 175% 178% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.05 PER SHARE. 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 CLD 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. G FOR THE YEAR ENDED FEBRUARY 29. H THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET GAIN ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT BROKERAGE AND 4.76% 170.19% 549.46% INVESTMENT MANAGEMENT SELECT BROKERAGE AND 1.55% 162.01% 529.90% INVESTMENT MANAGEMENT (LOAD ADJ.) S&P 500 19.74% 194.91% 459.21% GS Financial Services 4.74% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT BROKERAGE AND 4.76% 21.99% 20.57% INVESTMENT MANAGEMENT SELECT BROKERAGE AND 1.55% 21.24% 20.21% INVESTMENT MANAGEMENT (LOAD ADJ.) S&P 500 19.74% 24.15% 18.78% GS Financial Services 4.74% 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 1989/02/28 9700.00 10000.00 1989/03/31 9711.69 10233.00 1989/04/30 9805.18 10764.09 1989/05/31 10447.95 11200.04 1989/06/30 10154.20 11136.20 1989/07/31 11376.47 12141.80 1989/08/31 11658.53 12379.78 1989/09/30 11294.20 12329.02 1989/10/31 10377.50 12042.99 1989/11/30 10271.73 12288.66 1989/12/31 10024.01 12583.59 1990/01/31 9583.53 11739.23 1990/02/28 9904.96 11890.67 1990/03/31 10178.78 12205.77 1990/04/30 9488.29 11900.63 1990/05/31 10393.07 13060.94 1990/06/30 10380.87 12972.12 1990/07/31 10011.40 12930.61 1990/08/31 8652.71 11761.68 1990/09/30 7913.77 11188.89 1990/10/31 7425.12 11140.78 1990/11/30 7913.77 11860.47 1990/12/31 8402.42 12191.38 1991/01/31 9101.62 12722.92 1991/02/28 10005.76 13632.61 1991/03/31 11030.44 13962.52 1991/04/30 11187.16 13996.03 1991/05/31 11777.86 14600.66 1991/06/30 10993.63 13931.95 1991/07/31 11838.36 14581.18 1991/08/31 12103.85 14926.75 1991/09/30 12731.37 14677.48 1991/10/31 13576.10 14874.16 1991/11/30 12827.91 14274.73 1991/12/31 15313.84 15907.76 1992/01/31 15531.06 15611.87 1992/02/29 15434.52 15814.83 1992/03/31 15024.22 15506.44 1992/04/30 13853.66 15962.33 1992/05/31 13817.46 16040.54 1992/06/30 13491.63 15801.54 1992/07/31 14251.89 16447.82 1992/08/31 13841.59 16110.64 1992/09/30 13745.05 16300.75 1992/10/31 14360.50 16357.80 1992/11/30 15651.74 16915.60 1992/12/31 16098.24 17123.66 1993/01/31 17051.58 17267.50 1993/02/28 17160.19 17502.34 1993/03/31 18535.91 17871.64 1993/04/30 18475.54 17439.14 1993/05/31 19079.32 17906.51 1993/06/30 19984.98 17958.44 1993/07/31 20649.14 17886.61 1993/08/31 22279.33 18564.51 1993/09/30 22689.90 18421.56 1993/10/31 21953.29 18802.89 1993/11/30 21349.52 18624.26 1993/12/31 24038.72 18849.62 1994/01/31 24551.02 19490.50 1994/02/28 23316.25 18962.31 1994/03/31 20702.20 18135.55 1994/04/30 20531.43 18367.69 1994/05/31 21030.60 18668.92 1994/06/30 21831.89 18211.53 1994/07/31 21319.59 18808.87 1994/08/31 21477.22 19580.03 1994/09/30 20662.79 19100.32 1994/10/31 20649.66 19530.08 1994/11/30 19217.84 18818.79 1994/12/31 19887.77 19097.87 1995/01/31 19638.19 19593.08 1995/02/28 20373.80 20356.63 1995/03/31 20583.98 20957.35 1995/04/30 21207.59 21574.54 1995/05/31 22400.10 22436.88 1995/06/30 23660.36 22958.09 1995/07/31 24798.66 23719.38 1995/08/31 24568.29 23778.91 1995/09/30 26058.92 24782.38 1995/10/31 24608.94 24693.91 1995/11/30 25205.19 25777.97 1995/12/31 24580.14 26274.46 1996/01/31 26182.57 27168.84 1996/02/29 26454.41 27420.69 1996/03/31 27641.93 27684.75 1996/04/30 27810.16 28092.83 1996/05/31 28731.32 28817.34 1996/06/30 28643.59 28927.14 1996/07/31 26889.01 27649.13 1996/08/31 27912.51 28232.26 1996/09/30 29345.42 29821.17 1996/10/31 30383.55 30643.63 1996/11/30 33366.35 32959.99 1996/12/31 34327.95 32307.05 1997/01/31 36831.80 34325.59 1997/02/28 38165.21 34594.71 1997/03/31 34298.31 33173.21 1997/04/30 38008.79 35153.65 1997/05/31 40844.60 37293.80 1997/06/30 43220.15 38964.57 1997/07/31 47971.25 42064.98 1997/08/31 46501.38 39708.50 1997/09/30 53286.54 41883.33 1997/10/31 50539.81 40484.43 1997/11/30 52841.12 42358.45 1997/12/31 55719.53 43085.75 1998/01/31 53300.88 43562.28 1998/02/28 60133.55 46703.99 1998/03/31 63489.42 49095.70 1998/04/30 66257.45 49589.60 1998/05/31 64711.59 48737.16 1998/06/30 68170.63 50716.86 1998/07/31 68752.24 50176.72 1998/08/31 49528.55 42922.17 1998/09/30 45595.04 45671.77 1998/10/31 52130.48 49386.71 1998/11/30 58650.62 52380.04 1998/12/31 58880.20 55398.18 1999/01/31 64696.29 57714.93 1999/02/26 62990.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990309 142809 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Brokerage and Investment Management Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $62,990 - a 529.90% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Bear Stearns Companies, Inc. 6.7 Lehman Brothers Holdings, Inc. 6.7 Merrill Lynch & Co., Inc. 6.2 Equitable Companies (The), Inc. 5.7 Morgan Stanley, Dean Witter & 4.7 Co. PaineWebber Group, Inc. 4.5 Donaldson Lufkin & Jenrette, 4.1 Inc. Citigroup, Inc. 4.0 Kansas City Southern 4.0 Industries, Inc. Marsh & McLennan Companies, 3.8 Inc. TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Securities Industry 59.0% Credit & Other Finance 14.1% Insurance 10.8% Banks 5.4% Railroads 4.0% All Others 6.7%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 6.7 Row: 1, Col: 2, Value: 4.0 Row: 1, Col: 3, Value: 5.4 Row: 1, Col: 4, Value: 10.8 Row: 1, Col: 5, Value: 14.1 Row: 1, Col: 6, Value: 59.0 BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Peter Fruzzetti) (photograph of Ted Grenstein) NOTE TO SHAREHOLDERS: The following is an interview with Peter Fruzzetti (left), who managed the Fidelity Select Brokerage and Investment Management Portfolio for most of the period covered by this report, and with Ted Orenstein (right), who became manager of the fund on January 4, 1999. Q. HOW DID THE FUND PERFORM, PETER? P.F. For the 12-month period that ended on February 28, 1999, the fund had a total return of 4.76%. This trailed the broad market as measured by the Standard & Poor's 500 Index, which had a total return of 19.74% for the same period, but is right in line with the total return of 4.74% for the Goldman Sachs Financial Services Index - an index of 271 stocks designed to measure the relative performance of companies in the financial services sector. Q. WHAT WERE THE MAJOR FACTORS AFFECTING THIS SOMEWHAT SLUGGISH PERFORMANCE? P.F. Probably the biggest factor affecting the entire financial services sector has been the uncertainty in overseas financial markets, beginning with Russia's default on its debt in mid-summer of 1998 and continuing through various currency crises, first in Asia, then in Latin America. The brokerage and investment management businesses are global in scope and, on the brokerage side especially - where the business is highly leveraged - stock prices tend to be extremely volatile during times of market uncertainty. So when widespread global problems began last summer and world financial markets began to slide, these deteriorating conditions had serious repercussions for brokerage stocks. Furthermore, as U.S. investors became more risk averse, fewer new securities were issued, which limited brokers' underwriting profits. Interest-rate spreads also widened significantly, resulting in lower earnings from sales and trading. In the past few months, overall market conditions have improved considerably, which has helped boost fund performance, but the sector has not regained all of the ground it lost over the past year. Q. DID YOU MAKE ANY SIGNIFICANT CHANGES IN STRATEGY WITHIN THIS DIFFICULT ENVIRONMENT? P.F. Initially, as a play on uncertainty, my strategy was to position the fund toward companies that have more stable earnings. Typically, this means the investment management firms. Although their earnings are often tied to the stock and bond markets, they tend to be more stable because they are fee-based and less transaction-oriented. As it happened, investment management stocks were hurt as badly as brokerage stocks during this market turbulence. So in the early fall, the fund was repositioned toward brokerage stocks that I felt would show more explosive earnings growth in a period of volatility. This opportunistic approach worked out pretty well. Q. WHICH HOLDINGS HELPED PERFORMANCE? P.F. As the market rebounded, I felt that large institutional brokerage firms would likely be the first to recover. Indeed, such firms as Merrill Lynch and Morgan Stanley came back quite a bit, as did Lehman Brothers and Bear Stearns. PaineWebber performed well, as did Equitable, whose activities are diversified among the brokerage, asset management, life insurance and annuity businesses. The fund also benefited from its investment in E Trade Group, the online retail broker, which experienced tremendous growth, particularly in the latter months of the period. Q. WHICH WERE DISAPPOINTMENTS? P.F. Some of the investment managers were underperformers. Franklin Resources saw its growth slow, due mainly to the global nature of its business. T. Rowe Price and Waddell & Reed also disappointed. Q. TURNING TO YOU TED, WHAT'S YOUR OUTLOOK FOR THE INDUSTRY OVER THE NEXT SIX MONTHS? T.O. I'm fairly optimistic. I think there's room for further recovery in many of the holdings. Given an environment of low interest rates and narrowing spreads, combined with the significant deferral of activity from last fall, the institutional brokerage stocks should continue to perform well over the next six months. As investor confidence and the pace of retail brokerage business increase, I believe that trend also will have a positive impact on the regional brokerage firms we hold. The investment management companies should start to show better net sales and recovering earnings, which should provide added benefit to the fund. In addition, there is a global consolidation theme that continues to be played out in the life insurance industry, and I believe the fund is positioned properly to take advantage of that trend. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 068 TRADING SYMBOL: FSLBX SIZE: as of February 28, 1999, more than $482 million MANAGER: Ted Orenstein, since January 1999; equity analyst for securities brokerage industry, 1998-1999; joined Fidelity in 1998 BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.4% SHARES VALUE (NOTE 1) BANKS - 5.4% Bank of Montreal 50,600 $ 2,089,037 Bank Sarasin & Compagnie 910 1,647,685 Class B (Reg.) BankAmerica Corp. 25,464 1,663,118 Chase Manhattan Corp. 72,500 5,772,813 Credit Suisse Group (Reg.) 23,900 3,716,310 Julius Baer Holding AG 2,500 7,603,663 Morgan (JP) & Co., Inc. 10,000 1,114,375 Royal Bank of Canada 52,200 2,527,258 26,134,259 COMPUTER SERVICES & SOFTWARE - - 0.6% DST Systems, Inc. (a) 53,100 2,880,675 CREDIT & OTHER FINANCE - 14.1% American Express Co. 84,300 9,146,550 Citigroup, Inc. 330,150 19,396,313 Equitable Companies (The), 406,500 27,464,156 Inc. Investors Financial Services 6,207 360,006 Corp. Perpetual PLC 16,500 998,469 Providian Financial Corp. 103,200 10,539,300 67,904,794 INSURANCE - 10.8% AFLAC, Inc. 63,900 2,819,588 American Bankers Insurance 165,400 7,939,200 Group, Inc. ARM Financial Group, Inc. 83,100 1,293,244 Class A Hartford Life, Inc. Class A 133,500 7,743,000 Liberty Financial Companies, 140,200 3,145,738 Inc. Marsh & McLennan Companies, 257,600 18,241,300 Inc. Nationwide Financial 119,100 5,411,606 Services, Inc. Class A Protective Life Corp. 31,400 1,083,300 Reinsurance Group of America, 24,800 1,598,050 Inc. Torchmark Corp. 84,800 2,819,600 UICI (a) 12,400 285,200 52,379,826 RAILROADS - 4.0% Kansas City Southern 411,400 19,232,950 Industries, Inc. REAL ESTATE INVESTMENT TRUSTS - - 0.1% AMRESCO Capital Trust, Inc. 41,400 362,250 SAVINGS & LOANS - 0.4% Dime Bancorp, Inc. 51,300 1,269,675 Washington Mutual, Inc. 18,900 756,000 2,025,675 SECURITIES INDUSTRY - 59.0% Advest Group, Inc. (The) 208,900 4,151,888 Affiliated Managers Group, 91,400 2,376,400 Inc. (a) SHARES VALUE (NOTE 1) Bear Stearns Companies, Inc. 759,330 $ 32,508,809 Conning Corp. 500 8,000 Dain Rauscher Corp. 115,950 3,666,919 Donaldson Lufkin & Jenrette, 346,700 19,761,900 Inc. E Trade Group, Inc. (a) 254,800 11,720,800 Eaton Vance Corp. 74,400 1,464,750 Edwards (A.G.), Inc. 493,700 16,076,106 Everen Capital Corp. 223,400 4,803,100 Federated Investors, Inc. 115,100 2,208,481 Class B First Marathon, Inc. Class A 37,000 445,384 (non-vtg.) Franklin Resources, Inc. 273,400 8,697,538 Hambrecht & Quist Group (a) 217,300 5,785,613 Investors Group, Inc. 804,600 11,686,391 Jefferies Group, Inc. 135,300 5,335,894 John Nuveen Co. Class A 162,500 6,418,750 Legg Mason, Inc. 241,032 6,824,219 Lehman Brothers Holdings, 612,400 32,457,200 Inc. Mackenzie Financial Corp. 275,600 3,271,813 Merrill Lynch & Co., Inc. 390,400 29,963,200 Morgan Keegan, Inc. 139,425 2,300,513 Morgan Stanley, Dean Witter & 253,765 22,965,733 Co. PaineWebber Group, Inc. 577,500 21,584,063 Phoenix Investment Partners 203,200 1,511,300 Ltd. Pilgrim America Capital Corp. 57,100 1,284,750 (a) Pioneer Group, Inc. 131,500 2,145,094 Price (T. Rowe) Associates, 325,300 10,023,306 Inc. Raymond James Financial, Inc. 177,625 3,241,656 Southwest Securities Group, 50,567 1,456,962 Inc. Stifel Financial Corp. 95,817 940,204 United Asset Management Corp. 45,000 1,020,938 Waddell & Reed Financial, Inc.: Class A 328,636 6,203,004 Class B 48,161 893,989 285,204,667 TOTAL COMMON STOCKS 456,125,096 (Cost $349,978,241) CASH EQUIVALENTS - 5.6% Taxable Central Cash Fund (b) 27,012,968 27,012,968 (Cost $27,012,968) TOTAL INVESTMENT IN $ 483,138,064 SECURITIES - 100% (Cost $376,991,209) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $391,812,067 and $521,601,050, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $47,015 for the period. The fund participated in the bank borrowing program. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $2,851,000 and $2,311,600, respectively. The weighted average interest rate was 5.0%. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $377,770,273. Net unrealized appreciation aggregated $105,367,791, of which $119,928,083 related to appreciated investment securities and $14,560,292 related to depreciated investment securities. The fund hereby designates approximately $11,036,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 99% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of these percentages for use in preparing 1999 income tax returns. BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 483,138,064 value (cost $376,991,209) - See accompanying schedule Receivable for investments 5,672,438 sold Receivable for fund shares 634,807 sold Dividends receivable 315,066 Interest receivable 23,840 Redemption fees receivable 6,692 TOTAL ASSETS 489,790,907 LIABILITIES Payable for investments $ 2,450,967 purchased Payable for fund shares 4,277,062 redeemed Accrued management fee 241,603 Other payables and accrued 296,268 expenses TOTAL LIABILITIES 7,265,900 NET ASSETS $ 482,525,007 Net Assets consist of: Paid in capital $ 364,482,172 Undistributed net investment 1,842,357 income Accumulated undistributed net 10,051,293 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 106,149,185 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 11,723,842 $ 482,525,007 shares outstanding NET ASSET VALUE and $41.16 redemption price per share ($482,525,007 (divided by) 11,723,842 shares) Maximum offering price per $42.43 share (100/97.00 of $41.16) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 8,442,201 Dividends Interest 2,455,320 TOTAL INCOME 10,897,521 EXPENSES Management fee $ 4,267,725 Transfer agent fees 4,027,741 Accounting fees and expenses 593,407 Non-interested trustees' 2,610 compensation Custodian fees and expenses 49,280 Registration fees 103,404 Audit 34,276 Legal 3,931 Interest 1,608 Reports to shareholders 74,397 Miscellaneous 670 Total expenses before 9,159,049 reductions Expense reductions (141,329) 9,017,720 NET INVESTMENT INCOME 1,879,801 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 11,015,878 Foreign currency transactions (146,465) 10,869,413 Change in net unrealized appreciation (depreciation) on: Investment securities (42,207,693) Assets and liabilities in (1,183) (42,208,876) foreign currencies NET GAIN (LOSS) (31,339,463) NET INCREASE (DECREASE) IN $ (29,459,662) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 4,817,568 charges paid to FDC Sales charges - Retained by $ 4,806,902 FDC Deferred sales charges $ 5,812 withheld by FDC Exchange fees withheld by FSC $ 92,633 Expense reductions Directed $ 136,233 brokerage arrangements Custodian credits 1,168 Transfer agent credits 3,928 $ 141,329
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ 1,879,801 $ 2,052,773 income Net realized gain (loss) 10,869,413 24,237,839 Change in net unrealized (42,208,876) 128,112,104 appreciation (depreciation) NET INCREASE (DECREASE) IN (29,459,662) 154,402,716 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (201,762) (1,439,025) From net investment income From net realized gain (10,471,038) (10,009,644) TOTAL DISTRIBUTIONS (10,672,800) (11,448,669) Share transactions Net 881,017,420 894,533,503 proceeds from sales of shares Reinvestment of distributions 10,559,880 11,336,755 Cost of shares redeemed (1,046,567,449) (832,884,965) NET INCREASE (DECREASE) IN (154,990,149) 72,985,293 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 1,580,230 1,340,868 TOTAL INCREASE (DECREASE) (193,542,381) 217,280,208 IN NET ASSETS NET ASSETS Beginning of period 676,067,388 458,787,180 End of period (including $ 482,525,007 $ 676,067,388 undistributed net investment income of $1,842,357 and $675,811, respectively) OTHER INFORMATION Shares Sold 21,245,778 26,764,779 Issued in reinvestment of 249,064 321,841 distributions Redeemed (26,767,460) (27,900,822) Net increase (decrease) (5,272,618) (814,202)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 F 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 39.78 $ 25.76 $ 18.49 $ 15.51 $ 17.75 period Income from Investment Operations Net investment income (loss) C .10 .16 .08 .09 (.03) Net realized and unrealized 1.72 G 14.46 7.80 4.29 (2.25) gain (loss) Total from investment 1.82 14.62 7.88 4.38 (2.28) operations Less Distributions From net investment income (.01) (.09) (.06) (.04) - From net realized gain (.52) (.61) (.65) (1.09) - In excess of net realized gain - - - (.35) - Total distributions (.53) (.70) (.71) (1.48) - Redemption fees added to paid .09 .10 .10 .08 .04 in capital Net asset value, end of period $ 41.16 $ 39.78 $ 25.76 $ 18.49 $ 15.51 TOTAL RETURN A, B 4.76% 57.56% 44.27% 29.85% (12.62)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 482,525 $ 676,067 $ 458,787 $ 38,382 $ 27,346 (000 omitted) Ratio of expenses to average 1.26% 1.33% 1.94% 1.64% D 2.54% D net assets Ratio of expenses to average 1.24% E 1.29% E 1.93% E 1.61% E 2.54% net assets after expense reductions Ratio of net investment .26% .49% .37% .50% (.20)% income (loss) to average net assets Portfolio turnover rate 59% 100% 16% 166% 139% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. BTOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. CNET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. DFMR 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. EFMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. FFOR THE YEAR ENDED FEBRUARY 29. GTHE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND.
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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT FINANCIAL SERVICES 8.42% 201.90% 625.81% SELECT FINANCIAL SERVICES 5.10% 192.77% 603.96% (LOAD ADJ.) S&P 500 19.74% 194.91% 459.21% GS Financial Services 4.74% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT FINANCIAL SERVICES 8.42% 24.73% 21.92% SELECT FINANCIAL SERVICES 5.10% 23.97% 21.55% (LOAD ADJ.) S&P 500 19.74% 24.15% 18.78% GS Financial Services 4.74% 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 1989/02/28 9700.00 10000.00 1989/03/31 10409.17 10233.00 1989/04/30 10599.43 10764.09 1989/05/31 11263.62 11200.04 1989/06/30 11185.14 11136.20 1989/07/31 12080.37 12141.80 1989/08/31 12421.74 12379.78 1989/09/30 12679.51 12329.02 1989/10/31 11470.78 12042.99 1989/11/30 11314.02 12288.66 1989/12/31 11035.38 12583.59 1990/01/31 10103.76 11739.23 1990/02/28 10469.38 11890.67 1990/03/31 10307.66 12205.77 1990/04/30 9942.04 11900.63 1990/05/31 10817.42 13060.94 1990/06/30 10515.08 12972.12 1990/07/31 9840.09 12930.61 1990/08/31 8662.37 11761.68 1990/09/30 7372.16 11188.89 1990/10/31 6728.81 11140.78 1990/11/30 7678.01 11860.47 1990/12/31 8350.49 12191.38 1991/01/31 9109.30 12722.92 1991/02/28 10155.81 13632.61 1991/03/31 10641.30 13962.52 1991/04/30 10986.54 13996.03 1991/05/31 11828.06 14600.66 1991/06/30 10867.86 13931.95 1991/07/31 11727.37 14581.18 1991/08/31 12504.16 14926.75 1991/09/30 12428.63 14677.48 1991/10/31 12701.95 14874.16 1991/11/30 11759.73 14274.73 1991/12/31 13496.77 15907.76 1992/01/31 14169.06 15611.87 1992/02/29 15186.59 15814.83 1992/03/31 14844.99 15506.44 1992/04/30 15415.53 15962.33 1992/05/31 16076.92 16040.54 1992/06/30 16446.85 15801.54 1992/07/31 16917.18 16447.82 1992/08/31 15946.89 16110.64 1992/09/30 16443.14 16300.75 1992/10/31 17094.94 16357.80 1992/11/30 18380.03 16915.60 1992/12/31 19276.09 17123.66 1993/01/31 20491.95 17267.50 1993/02/28 21036.72 17502.34 1993/03/31 22138.10 17871.64 1993/04/30 21078.28 17439.14 1993/05/31 21086.27 17906.51 1993/06/30 21873.46 17958.44 1993/07/31 22460.86 17886.61 1993/08/31 23160.14 18564.51 1993/09/30 23695.58 18421.56 1993/10/31 23060.24 18802.89 1993/11/30 22033.30 18624.26 1993/12/31 22659.88 18849.62 1994/01/31 24198.15 19490.50 1994/02/28 23319.79 18962.31 1994/03/31 22254.84 18135.55 1994/04/30 23099.94 18367.69 1994/05/31 24085.94 18668.92 1994/06/30 23517.27 18211.53 1994/07/31 24338.18 18808.87 1994/08/31 25191.18 19580.03 1994/09/30 23292.56 19100.32 1994/10/31 23168.73 19530.08 1994/11/30 21701.20 18818.79 1994/12/31 21833.37 19097.87 1995/01/31 22962.51 19593.08 1995/02/28 24420.77 20356.63 1995/03/31 24851.16 20957.35 1995/04/30 25630.92 21574.54 1995/05/31 27053.73 22436.88 1995/06/30 27180.32 22958.09 1995/07/31 28091.73 23719.38 1995/08/31 29185.43 23778.91 1995/09/30 30851.28 24782.38 1995/10/31 30061.39 24693.91 1995/11/30 32086.75 25777.97 1995/12/31 32169.33 26274.46 1996/01/31 33673.39 27168.84 1996/02/29 33957.66 27420.69 1996/03/31 34360.81 27684.75 1996/04/30 33979.47 28092.83 1996/05/31 34769.07 28817.34 1996/06/30 35277.81 28927.14 1996/07/31 34509.40 27649.13 1996/08/31 35537.48 28232.26 1996/09/30 37895.69 29821.17 1996/10/31 40296.30 30643.63 1996/11/30 43756.78 32959.99 1996/12/31 42501.36 32307.05 1997/01/31 45031.80 34325.59 1997/02/28 46025.10 34594.71 1997/03/31 42567.95 33173.21 1997/04/30 46152.92 35153.65 1997/05/31 47668.04 37293.80 1997/06/30 50202.96 38964.57 1997/07/31 55826.39 42064.98 1997/08/31 52656.29 39708.50 1997/09/30 56030.34 41883.33 1997/10/31 55284.44 40484.43 1997/11/30 57155.03 42358.45 1997/12/31 60344.58 43085.75 1998/01/31 59697.00 43562.28 1998/02/28 64934.24 46703.99 1998/03/31 68455.08 49095.70 1998/04/30 69589.60 49589.60 1998/05/31 68287.69 48737.16 1998/06/30 71403.95 50716.86 1998/07/31 71632.48 50176.72 1998/08/31 55358.67 42922.17 1998/09/30 57304.60 45671.77 1998/10/31 63052.37 49386.71 1998/11/30 66667.24 52380.04 1998/12/31 68873.88 55398.18 1999/01/31 70165.75 57714.93 1999/02/26 70396.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990309 144213 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Financial Services Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $70,396 - a 603.96% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Citigroup, Inc. 6.3 American International Group, 5.4 Inc. Chase Manhattan Corp. 4.7 American Express Co. 4.7 Providian Financial Corp. 4.4 Wells Fargo & Co. 4.4 BankAmerica Corp. 4.4 Household International, Inc. 3.9 Bank One Corp. 3.8 Freddie Mac 3.5 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Banks 29.7% Credit & Other Finance 27.2% Insurance 19.8% Federal Sponsored Credit 8.1% Securities Industry 4.4% All Others 10.8%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 10.8 Row: 1, Col: 2, Value: 4.4 Row: 1, Col: 3, Value: 8.1 Row: 1, Col: 4, Value: 19.8 Row: 1, Col: 5, Value: 27.2 Row: 1, Col: 6, Value: 29.7 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. The fund had a respectable year within the context of what happened to financial services company stocks, although it trailed the overall stock market. For the 12-month period that ended February 28, 1999, the fund had a total return of 8.42%. The Goldman Sachs Financial Services Index - an index of 271 stocks designed to measure the performance of companies in the financial services sector - returned 4.74% during the same 12-month period, while the Standard & Poor's 500 Index had a return of 19.74%. Q. WHAT FACTORS AFFECTED THE MARKET FOR FINANCIAL SERVICES STOCKS DURING THE PAST 12 MONTHS? A. Financial services stocks did not fare as well as stocks in general. The 12-month period began with an escalation of global economic turmoil, starting with Asia and moving into other markets, including Eastern European countries and South America. The global problems affected the quality of loans and the earnings growth of financial companies. Market volatility and uncertainty were at their highest in the late summer and early fall, following the Russian bond default and currency devaluation in August. However, when the U.S. Federal Reserve Board cut short-term interest rates three successive times in the fall, the capital markets rebounded. Financial services stocks, which had fallen more sharply than the market as a whole, at first recovered more quickly, but have since lagged the market slightly. At the end of the period, we saw more stability. The year also witnessed an unusually large number of big-company mergers, including Citicorp and Travelers, BankAmerica and NationsBank, First Chicago and Bank One, and Norwest and Wells Fargo. Q. WHAT WERE YOUR PRINCIPAL STRATEGIES DURING THE YEAR? A. At the beginning of the 12-month period, the fund's portfolio was diversified across large-cap, mid-cap and small-cap companies. Small-cap and mid-cap companies performed well then, but became more expensive on a price-to-earnings ratio basis. Late in the spring, I moved more heavily into big-cap stocks. This worked well as large-cap banks slowed their acquisitions of smaller banks and started merging with each other. Throughout the year, I also focused on consumer-oriented firms, including banks and companies emphasizing consumer finance and credit card operations. The international volatility also had an influence on strategy, as we shifted our emphasis depending on relative valuations. In the spring, as Asia was deteriorating, I de-emphasized companies with an international focus, such as the large money-center banks. Then, as international events unfolded, stocks with a foreign focus were penalized and became unusually cheap. In November, I began increasing our exposure to these companies, adding to positions in stocks such as Chase Manhattan and Citigroup. For most of the period, I also concentrated on companies with more predictable and sustainable earnings growth, such as life insurance companies, including SunAmerica and AFLAC. At the end of the fiscal year, the fund continued to have a big-cap bias, although we did increase our emphasis on mid-cap banks as their relative valuations became more attractive. Q. WHAT STOCKS HELPED PERFORMANCE, AND WHAT WERE THE DISAPPOINTMENTS? A. The biggest single contributor to performance was Providian Financial Group, which increased both its credit card business and its fee income. Another healthy performer was American Express, a holding which illustrates the fund's consumer-oriented strategy. American International Group (AIG), which successfully weathered the international problems, helped, as did SunAmerica, which has done a wonderful job selling variable and fixed-rate annuities. AIG acquired SunAmerica in November. BankAmerica was a disappointment as it was affected by the international turmoil even more than most people expected. U.S. Bancorp failed to meet expectations, with disappointing earnings growth the past two fiscal quarters. Also disappointing was a smaller company, Ocwen Asset Investment, a commercial mortgage real estate investment trust. Q. WHAT IS YOUR OUTLOOK? A. I still think the backdrop is positive for financial service companies. I think the industry's average earnings growth during the coming year may exceed overall market earnings growth. If that happens, financial services stocks should outperform the market as a whole. While I am somewhat optimistic, I am vigilant in tracking international developments. If we continue to get erosion in international markets, the U.S. economy will be affected, hurting credit quality and the performance of financial services 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: December 10, 1981 FUND NUMBER: 066 TRADING SYMBOL: FIDSX SIZE: as of February 28, 1999, more than $546 million MANAGER: Robert Ewing, since 1998; manager, Fidelity Advisor Financial Services Fund, since 1998; Fidelity Select Environmental Services Portfolio, 1996-1997; Fidelity Select Energy Service Portfolio, 1996-1998; joined Fidelity in 1990 FINANCIAL SERVICES PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.1% SHARES VALUE (NOTE 1) BANKS - 29.7% AmSouth Bancorp. 40,000 $ 1,880,000 Bank of New York Co., Inc. 425,936 14,881,139 Bank One Corp. 389,219 20,920,521 BankAmerica Corp. 366,879 23,961,785 Chase Manhattan Corp. 325,000 25,878,125 Comerica, Inc. 120,167 7,961,064 First Union Corp. 90,690 4,834,911 M&T Bank Corp. 6,000 2,854,500 Marshall & Ilsley Corp. 30,000 1,680,000 Mellon Bank Corp. 40,000 2,705,000 U.S. Bancorp 568,089 18,356,376 Wachovia Corp. 89,500 7,613,094 Wells Fargo & Co. 665,000 24,438,750 Zions Bancorp 90,000 5,760,000 163,725,265 CREDIT & OTHER FINANCE - 27.2% American Express Co. 237,800 25,801,300 Associates First Capital 440,200 17,883,125 Corp. Class A Citigroup, Inc. 587,000 34,486,246 Equitable Companies (The), 89,200 6,026,575 Inc. Firstcity Financial Corp. (a) 100,300 1,209,869 Fleet Financial Group, Inc. 234,534 10,070,304 Household International, Inc. 529,746 21,520,931 MBNA Corp. 287,500 6,971,875 Metris Companies, Inc. 25,000 1,075,000 Providian Financial Corp. 239,700 24,479,363 149,524,588 FEDERAL SPONSORED CREDIT - 8.1% Fannie Mae 230,000 16,100,000 Freddie Mac 329,600 19,405,200 SLM Holding Corp. 216,000 9,261,000 44,766,200 INSURANCE - 19.8% ACE Ltd. 80,000 2,180,000 Aegon NV (Reg.) 36,940 3,864,848 AFLAC, Inc. 142,000 6,265,750 Allmerica Financial Corp. 31,200 1,665,300 Allstate Corp. 127,800 4,792,500 Ambac Financial Group, Inc. 65,000 3,640,000 American Bankers Insurance 75,000 3,600,000 Group, Inc. American International Group, 259,050 29,515,509 Inc. Berkshire Hathaway, Inc.: Class A (a) 154 10,949,400 Class B (a) 7 16,653 Blanch E.W. Holdings, Inc. 35,000 1,942,500 CMAC Investments Corp. 75,000 3,098,438 Hartford Financial Services 170,000 9,190,625 Group, Inc. SHARES VALUE (NOTE 1) Hartford Life, Inc. Class A 25,000 $ 1,450,000 Marsh & McLennan Companies, 107,500 7,612,344 Inc. MBIA, Inc. 52,400 3,225,875 Nationwide Financial 35,000 1,590,313 Services, Inc. Class A PMI Group, Inc. 46,400 2,001,000 Progressive Corp. 17,500 2,248,750 Reliastar Financial Corp. 65,000 2,949,375 Torchmark Corp. 150,000 4,987,500 UICI (a) 100,000 2,300,000 109,086,680 REAL ESTATE INVESTMENT TRUSTS - - 1.5% Crescent Real Estate Equities 140,000 2,922,500 Co. Duke Realty Investments, Inc. 50,000 1,090,625 Equity Office Properties Trust 50,000 1,287,500 Ocwen Asset Investment Corp. 369,000 1,914,188 Public Storage, Inc. 40,000 1,020,000 8,234,813 SAVINGS & LOANS - 2.4% Charter One Financial, Inc. 75,000 2,160,938 Dime Bancorp, Inc. 60,000 1,485,000 Golden State Bancorp, Inc. 100,000 1,781,250 Golden State Bancorp, Inc. 50,000 253,125 litigation warrants 12/31/99 (a) Washington Mutual, Inc. 188,880 7,555,200 13,235,513 SECURITIES INDUSTRY - 4.4% Bear Stearns Companies, Inc. 57,750 2,472,422 E Trade Group, Inc. (a) 30,000 1,380,000 Investors Group, Inc. 200,000 2,904,895 Lehman Brothers Holdings, 125,600 6,656,800 Inc. Morgan Stanley, Dean Witter & 70,000 6,335,000 Co. Waddell & Reed Financial, Inc.: Class A 178,535 3,369,848 Class B 36,735 681,893 23,800,858 TOTAL COMMON STOCKS 512,373,917 (Cost $374,372,608) CASH EQUIVALENTS - 6.9% Taxable Central Cash Fund (b) 37,949,707 37,949,707 (Cost $37,949,707) TOTAL INVESTMENT IN $ 550,323,624 SECURITIES - 100% (Cost $412,322,315) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $343,643,233 and $421,107,652, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $45,514 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $1,820,475. The fund received cash collateral of $1,861,800. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $414,728,198. Net unrealized appreciation aggregated $135,595,426, of which $147,529,914 related to appreciated investment securities and $11,934,488 related to depreciated investment securities. The fund hereby designates approximately $62,832,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 51% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of this percentage for use in preparing 1999 income tax returns. FINANCIAL SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 550,323,624 value (cost $412,322,315) - See accompanying schedule Receivable for fund shares 1,408,735 sold Dividends receivable 503,053 Interest receivable 120,798 Redemption fees receivable 5,946 TOTAL ASSETS 552,362,156 LIABILITIES Payable for fund shares $ 2,951,093 redeemed Accrued management fee 262,558 Other payables and accrued 287,194 expenses Collateral on securities 1,861,800 loaned, at value TOTAL LIABILITIES 5,362,645 NET ASSETS $ 546,999,511 Net Assets consist of: Paid in capital $ 388,431,484 Undistributed net investment 3,679,892 income Accumulated undistributed net 16,886,826 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 138,001,309 (depreciation) on investments NET ASSETS, for 5,425,361 $ 546,999,511 shares outstanding NET ASSET VALUE and $100.82 redemption price per share ($546,999,511 (divided by) 5,425,361 shares) Maximum offering price per $103.94 share (100/97.00 of $100.82) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 8,663,505 Dividends Interest (including income on 2,337,085 securities loaned of $5,426) TOTAL INCOME 11,000,590 EXPENSES Management fee $ 3,668,034 Transfer agent fees 3,122,127 Accounting and security 543,416 lending fees Non-interested trustees' 2,407 compensation Custodian fees and expenses 17,213 Registration fees 53,760 Audit 28,584 Legal 3,384 Reports to shareholders 62,257 Total expenses before 7,501,182 reductions Expense reductions (106,101) 7,395,081 NET INVESTMENT INCOME 3,605,509 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 21,710,294 Foreign currency transactions 75,133 21,785,427 Change in net unrealized 9,159,238 appreciation (depreciation) on investment securities NET GAIN (LOSS) 30,944,665 NET INCREASE (DECREASE) IN $ 34,550,174 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 2,154,649 charges paid to FDC Sales charges - Retained by $ 2,152,071 FDC Deferred sales charges $ 13,596 withheld by FDC Exchange fees withheld by FSC $ 52,705 Expense reductions Directed $ 104,171 brokerage arrangements Custodian credits 1,684 Transfer agent credits 246 $ 106,101
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ 3,605,509 $ 3,633,948 income Net realized gain (loss) 21,785,427 108,047,031 Change in net unrealized 9,159,238 47,345,052 appreciation (depreciation) NET INCREASE (DECREASE) IN 34,550,174 159,026,031 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (1,162,919) (3,089,281) From net investment income From net realized gain (66,118,174) (50,526,464) TOTAL DISTRIBUTIONS (67,281,093) (53,615,745) Share transactions Net 389,871,130 474,752,061 proceeds from sales of shares Reinvestment of distributions 66,001,479 52,640,022 Cost of shares redeemed (481,672,418) (455,053,591) NET INCREASE (DECREASE) IN (25,799,809) 72,338,492 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 622,623 734,651 TOTAL INCREASE (DECREASE) (57,908,105) 178,483,429 IN NET ASSETS NET ASSETS Beginning of period 604,907,616 426,424,187 End of period (including $ 546,999,511 $ 604,907,616 undistributed net investment income of $3,679,892 and $1,378,882, respectively) OTHER INFORMATION Shares Sold 3,952,203 5,332,883 Issued in reinvestment of 658,905 604,501 distributions Redeemed (5,042,955) (5,221,709) Net increase (decrease) (431,847) 715,675
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 103.28 $ 82.94 $ 65.70 $ 48.23 $ 51.24 period Income from Investment Operations Net investment income C .56 .70 .74 1.03 .76 Net realized and unrealized 7.88 30.65 21.55 17.56 .87 gain (loss) Total from investment 8.44 31.35 22.29 18.59 1.63 operations Less Distributions From net investment income (.19) (.64) (.63) (.37) (.79) From net realized gain (10.81) (10.51) (4.56) (.91) (3.93) Total distributions (11.00) (11.15) (5.19) (1.28) (4.72) Redemption fees added to paid .10 .14 .14 .16 .08 in capital Net asset value, end of period $ 100.82 $ 103.28 $ 82.94 $ 65.70 $ 48.23 TOTAL RETURN A, B 8.42% 41.08% 35.54% 39.05% 4.72% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 547,000 $ 604,908 $ 426,424 $ 270,466 $ 153,089 (000 omitted) Ratio of expenses to average 1.20% 1.31% 1.45% 1.42% 1.56% net assets Ratio of expenses to average 1.18% D 1.29% D 1.43% D 1.41% D 1.54% D net assets after expense reductions Ratio of net investment .58% .78% 1.03% 1.78% 1.52% income to average net assets Portfolio turnover rate 60% 84% 80% 125% 107%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29. 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT HOME FINANCE -19.12% 154.36% 622.25% SELECT HOME FINANCE (LOAD -21.62% 146.66% 600.51% ADJ.) S&P 500 19.74% 194.91% 459.21% GS Financial Services 4.74% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT HOME FINANCE -19.12% 20.53% 21.86% SELECT HOME FINANCE (LOAD -21.62% 19.79% 21.49% ADJ.) S&P 500 19.74% 24.15% 18.78% GS Financial Services 4.74% 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 1989/02/28 9700.00 10000.00 1989/03/31 9747.09 10233.00 1989/04/30 10246.21 10764.09 1989/05/31 10688.83 11200.04 1989/06/30 10903.98 11136.20 1989/07/31 11283.91 12141.80 1989/08/31 11977.28 12379.78 1989/09/30 12423.70 12329.02 1989/10/31 10875.49 12042.99 1989/11/30 10524.05 12288.66 1989/12/31 9575.08 12583.59 1990/01/31 8781.29 11739.23 1990/02/28 9108.73 11890.67 1990/03/31 9128.57 12205.77 1990/04/30 8910.28 11900.63 1990/05/31 9753.68 13060.94 1990/06/30 9654.46 12972.12 1990/07/31 8820.98 12930.61 1990/08/31 7927.97 11761.68 1990/09/30 7243.32 11188.89 1990/10/31 6697.59 11140.78 1990/11/30 7421.93 11860.47 1990/12/31 8130.87 12191.38 1991/01/31 8908.60 12722.92 1991/02/28 10120.65 13632.61 1991/03/31 10585.28 13962.52 1991/04/30 10948.89 13996.03 1991/05/31 11403.41 14600.66 1991/06/30 10767.08 13931.95 1991/07/31 11918.54 14581.18 1991/08/31 12373.06 14926.75 1991/09/30 12272.05 14677.48 1991/10/31 12059.94 14874.16 1991/11/30 11504.42 14274.73 1991/12/31 13383.86 15907.76 1992/01/31 14702.82 15611.87 1992/02/29 15663.93 15814.83 1992/03/31 15398.09 15506.44 1992/04/30 15725.27 15962.33 1992/05/31 17279.40 16040.54 1992/06/30 17301.04 15801.54 1992/07/31 18151.74 16447.82 1992/08/31 17167.80 16110.64 1992/09/30 17444.53 16300.75 1992/10/31 17772.52 16357.80 1992/11/30 19596.91 16915.60 1992/12/31 21126.79 17123.66 1993/01/31 22642.52 17267.50 1993/02/28 23026.65 17502.34 1993/03/31 23846.80 17871.64 1993/04/30 22555.15 17439.14 1993/05/31 22169.15 17906.51 1993/06/30 22722.07 17958.44 1993/07/31 24182.63 17886.61 1993/08/31 25455.40 18564.51 1993/09/30 27082.87 18421.56 1993/10/31 27291.52 18802.89 1993/11/30 26070.92 18624.26 1993/12/31 26893.35 18849.62 1994/01/31 28070.76 19490.50 1994/02/28 27542.57 18962.31 1994/03/31 27025.39 18135.55 1994/04/30 28070.28 18367.69 1994/05/31 29801.59 18668.92 1994/06/30 30297.89 18211.53 1994/07/31 30967.33 18808.87 1994/08/31 31971.49 19580.03 1994/09/30 30875.00 19100.32 1994/10/31 29028.27 19530.08 1994/11/30 27527.80 18818.79 1994/12/31 27614.38 19097.87 1995/01/31 28831.33 19593.08 1995/02/28 30967.47 20356.63 1995/03/31 30915.68 20957.35 1995/04/30 32533.96 21574.54 1995/05/31 34462.96 22436.88 1995/06/30 34825.45 22958.09 1995/07/31 36223.65 23719.38 1995/08/31 39563.79 23778.91 1995/09/30 40392.35 24782.38 1995/10/31 39654.41 24693.91 1995/11/30 41842.33 25777.97 1995/12/31 42385.70 26274.46 1996/01/31 43544.58 27168.84 1996/02/29 44357.13 27420.69 1996/03/31 45369.48 27684.75 1996/04/30 44790.24 28092.83 1996/05/31 45788.62 28817.34 1996/06/30 45993.76 28927.14 1996/07/31 46814.35 27649.13 1996/08/31 48742.72 28232.26 1996/09/30 51204.47 29821.17 1996/10/31 54801.37 30643.63 1996/11/30 58904.29 32959.99 1996/12/31 58015.82 32307.05 1997/01/31 61784.93 34325.59 1997/02/28 65426.03 34594.71 1997/03/31 59367.01 33173.21 1997/04/30 61146.40 35153.65 1997/05/31 65244.08 37293.80 1997/06/30 70813.88 38964.57 1997/07/31 77476.39 42064.98 1997/08/31 74274.14 39708.50 1997/09/30 80936.65 41883.33 1997/10/31 80299.23 40484.43 1997/11/30 80754.53 42358.45 1997/12/31 84557.77 43085.75 1998/01/31 79752.80 43562.28 1998/02/28 86619.36 46703.99 1998/03/31 92463.25 49095.70 1998/04/30 94642.35 49589.60 1998/05/31 91346.68 48737.16 1998/06/30 89765.43 50716.86 1998/07/31 86270.02 50176.72 1998/08/31 63366.77 42922.17 1998/09/30 66645.79 45671.77 1998/10/31 68443.43 49386.71 1998/11/30 72288.38 52380.04 1998/12/31 72038.71 55398.18 1999/01/31 71755.75 57714.93 1999/02/26 70051.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990307 162722 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Home Finance Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $70,051 - a 600.51% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Washington Mutual, Inc. 13.1 Charter One Financial, Inc. 7.6 Dime Bancorp, Inc. 6.1 Astoria Financial Corp. 5.8 Freddie Mac 5.6 Greenpoint Financial Corp. 4.8 Peoples Heritage Financial 3.1 Group, Inc. PMI Group, Inc. 3.0 Bank United Corp. Class A 2.6 Washington Federal, Inc. 2.4 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Savings & Loans 57.2% Credit & Finance 12.6% Banks 11.0% Federal Sponsored Credit 7.6% Insurance 5.6% All Others 6.0%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 6.0 Row: 1, Col: 2, Value: 5.6 Row: 1, Col: 3, Value: 7.6 Row: 1, Col: 4, Value: 11.0 Row: 1, Col: 5, Value: 12.6 Row: 1, Col: 6, Value: 57.2 HOME FINANCE PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Robert Ewing) (photograph of Victor Thay) NOTE TO SHAREHOLDERS: The following is an interview with Robert Ewing (left), Fidelity Financial Services Sector Leader, who addresses the fund's 12-month performance under its previous portfolio manager; and with Victor Thay (right), who became manager of the Fidelity Select Home Finance Portfolio on March 30, 1999, after the end of the period covered by this report. Q. HOW DID THE FUND PERFORM, BOB? B.E. It was a disappointing year. For the 12 months that ended February 28, 1999, the fund had a total return of -19.12%, compared to a gain of 19.74% for the broadly based Standard & Poor's 500 Index. Moreover, the Goldman Sachs Financial Services Index - an index of 271 stocks designed to measure the performance of companies in the financial services sector - had a return of 4.74% over the same period. Q. WHY WAS THE FUND'S PERFORMANCE SO WEAK COMPARED TO ITS BENCHMARKS? B.E. Russia's currency devaluation and debt default, together with the near-failure of a prominent hedge fund, created a severe credit crunch that prompted a sharp selloff in virtually all sectors of the market - particularly mortgage finance shares - in the late summer and early fall of 1998. Subsequently, other segments of the Goldman Sachs index and the S&P 500 enjoyed greater participation in the rally that took place in the second half of the period. Another negative factor was the fund's overweighting in small-capitalization stocks, which underperformed large-cap shares during the selloff and ensuing recovery. Q. WHY DID MORTGAGE FINANCE SHARES LANGUISH WHILE OTHER STOCKS RALLIED? B.E. Investors were concerned about slower asset growth due to an increase in refinancings and prepayments triggered by the overall downward trend in interest rates. There was also concern that the narrowing spread between short-term and long-term interest rates would decrease profit margins for mortgage lenders. Furthermore, industry consolidation, which had helped to fuel the outperformance of mortgage finance stocks in the past, slowed in response to last fall's credit crunch. Q. WHAT ADJUSTMENTS DID THE FUND MAKE IN RESPONSE TO THESE EVENTS? B.E. The fund shifted some assets out of small-capitalization stocks and into higher-quality, large-capitalization shares. Q. WHAT STOCKS PERFORMED WELL FOR THE FUND? B.E. Freddie Mac benefited from the refinancing wave and the shift toward fixed-rate mortgages, where the company has a profitable niche. The resulting stronger-than-expected portfolio and earnings growth allowed Freddie Mac to buck the downward trend of most mortgage finance stocks. Providian Financial, a credit card and consumer finance company, was another strong holding. The company reported faster-than-expected earnings growth and pursued an innovative strategy of focusing on an underserved market segment. Q. WHAT STOCKS DETRACTED FROM PERFORMANCE? B.E. Sub-prime home equity lenders - firms that lend money to people with less than prime credit histories - performed poorly. In that category, FIRSTPLUS Financial, Aames Financial and ContiFinancial were all hurt by last fall's liquidity crunch and by a higher-than-expected increase in prepayments resulting from falling interest rates. Small-capitalization savings and loan stocks also were weak, as fears abounded of slower asset and earnings growth. Roslyn Bancorp was one example. Q. TURNING TO YOU, VICTOR, WHAT'S YOUR OUTLOOK FOR THE FUND? V.T. There are several potential positives either already occurring or on the near-term horizon. The first two months of 1999 saw mortgage rates rise about one-half of a percent, resulting in a meaningful slowdown in refinancings. In addition, the spread - or difference in yield - between short-term and long-term interest rates widened moderately, enabling lenders such as banks and savings and loans to operate more profitably. Moreover, several high-profile thrifts that have recently completed mergers will be eligible to buy back their stock in the next few months, which should tend to support their stock prices. Another positive is that industry consolidation is likely to accelerate again as companies begin to look past the uncertainty of January 1, 2000. Finally, a widely followed lawsuit against the federal government is due to be settled in April. A settlement in favor of the plaintiff - a large California savings and loan - would set an important precedent for other thrifts. These factors, together with an apparently strong economy and housing market, good credit quality and other favorable economic fundamentals, should enable mortgage finance companies to continue to grow their earnings at an average rate above that of most S&P 500 firms. Given price-to-earnings ratios for mortgage finance shares that have been averaging about half of those of the typical S&P 500 stock, I believe mortgage finance stocks represent excellent values with good growth potential. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 098 TRADING SYMBOL: FSVLX SIZE: as of February 28, 1999, more than $740 million MANAGER: Victor Thay, since March 1999; manager, Fidelity Select Natural Gas Portfolio, since 1997; analyst, U.S. and Canadian exploration and production industry, 1996-present; analyst, Canadian equities, 1995-1996; joined Fidelity in 1995 HOME FINANCE PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 96.2% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 0.5% Ugly Duckling Corp. 767,800 $ 3,982,962 BANKS - 11.0% Acadiana Bancshares, Inc. (c) 121,100 2,179,800 Advanta Corp. 132,900 1,553,269 BankAmerica Corp. 189,217 12,358,235 Chase Manhattan Corp. 201,000 16,004,625 North Fork Bancorp, Inc. 617,024 13,574,528 Peoples Heritage Financial 1,346,175 22,884,975 Group, Inc. R&G Financial Corp. Class B 72,700 1,354,038 SouthTrust Corp. 9,100 364,569 U.S. Bancorp 163,800 5,292,788 UnionBanCal Corp. 139,800 4,394,963 UST Corp. 81,640 1,709,338 81,671,128 CREDIT & OTHER FINANCE - 12.6% Aames Financial Corp. 536,750 1,107,047 Allied Capital Corp. 29,200 514,650 Associates First Capital 105,100 4,269,688 Corp. Class A BNC Mortgage, Inc. (a) 204,600 1,176,450 Citigroup, Inc. 23,700 1,392,375 Coast Federal Litigation 269,400 1,835,288 Contingent Payment Rights Trust rights 12/31/00 (a) ContiFinancial Corp. (a) 125,000 437,500 Countrywide Credit 96,603 3,658,839 Industries, Inc. Delta Financial Corp. (a) 527,300 3,064,931 Doral Financial Corp. 86,100 1,630,519 Federal Agricultural Mortgage 119,400 5,074,500 Corp. Class C (a) First Alliance Corp. (a) 595,250 2,157,781 FIRSTPLUS Financial Group, 987,600 1,357,950 Inc. (a) Greenpoint Financial Corp. 1,162,700 35,680,356 Household International, Inc. 50,000 2,031,250 Imperial Credit Industries (a) 342,500 2,954,063 Life Financial Corp. (a) 326,400 1,264,800 Long Beach Financial Corp. (a) 916,200 8,703,900 New Century Financial Corp. 376,600 4,425,050 (a) Providian Financial Corp. 76,900 7,853,413 Resource Bancshares Mortgage 248,775 3,482,850 Group, Inc. United Companies Financial 115,300 50,444 Corp. 94,123,644 FEDERAL SPONSORED CREDIT - 7.6% Fannie Mae 120,000 8,400,000 Freddie Mac 705,900 41,559,863 SLM Holding Corp. 152,000 6,517,000 56,476,863 SHARES VALUE (NOTE 1) INDUSTRIAL MACHINERY & EQUIPMENT - 0.1% Linc Capital, Inc. (a) 68,400 $ 547,200 INSURANCE - 5.6% CMAC Investments Corp. 216,600 8,948,288 Conseco, Inc. 47,823 1,431,701 MGIC Investment Corp. 272,800 9,292,250 PMI Group, Inc. 518,040 22,340,475 42,012,714 REAL ESTATE INVESTMENT TRUSTS - - 1.6% Impac Mortgage Holdings, Inc. 222,600 1,279,950 Imperial Credit Commercial 107,700 976,031 Mortgage Investment Corp. Indymac Mortgage Holdings, 258,200 2,743,375 Inc. Novastar Financial, Inc. 86,200 554,913 Ocwen Asset Investment Corp. 791,300 4,104,869 Thornburg Mortgage Asset 250,900 2,367,869 Corp. 12,027,007 SAVINGS & LOANS - 57.2% Andover Bancorp, Inc. 87,150 2,614,500 Astoria Financial Corp. 958,800 43,445,625 Bank Plus Corp. (a) 278,600 1,218,875 Bank United Corp. Class A 494,200 19,520,900 Bay View Capital Corp. 261,003 5,203,747 Carver Bancorp, Inc. 99,800 698,600 Charter One Financial, Inc. 1,971,964 56,817,213 Citizens First Financial 172,000 2,644,500 Corp. (a)(c) Commercial Federal Corp. 765,425 16,695,833 Dime Bancorp, Inc. 1,848,184 45,742,554 Dime Community Bancorp, Inc. 169,000 3,728,563 Downey Financial Corp. 24,662 500,947 First Bergen Bancorp 56,100 1,311,338 First Essex Bancorp, Inc. 49,100 804,013 First Federal Savings & Loan 52,300 1,287,888 Association (East Hartford, Conn.) First Washington Bancorp, 59,200 1,261,700 Inc. FirstFed Financial Corp. (a) 357,100 6,048,381 Flagstar Bancorp, Inc. 246,200 6,893,600 GA Financial, Inc. 203,400 3,101,850 Golden State Bancorp, Inc. 1,010,092 17,992,264 Golden State Bancorp, Inc. 898,761 4,549,978 litigation warrants 12/31/99 (a) Haven Bancorp, Inc. 263,400 3,720,525 HF Bancorp, Inc. (a) 113,200 1,952,700 ITLA Capital Corp. (a) 76,300 1,182,650 Ocwen Financial Corp. (a) 205,400 1,643,200 Peoples Bancorp, Inc. 366,800 3,576,300 PFF Bancorp, Inc. (a) 345,200 6,041,000 Provident Financial Holdings, 95,700 1,531,200 Inc. (a) Quaker City Bancorp, Inc. (a) 83,825 1,252,136 Richmond County Financial 102,500 1,582,344 Corp. COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SAVINGS & LOANS - CONTINUED Roslyn Bancorp, Inc. 316,315 $ 5,159,888 SGV Bancorp., Inc. (a)(c) 137,800 1,670,825 Sovereign Bancorp, Inc. 1,271,877 15,580,493 TCF Financial Corp. 708,700 17,053,094 Washington Federal, Inc. 803,470 18,078,075 Washington Mutual, Inc. 2,451,180 98,047,191 Webster Financial Corp. 188,400 5,757,975 Wilshire Financial Services 374,600 140,475 Group, Inc. (a) Yonkers Financial Corp. 61,200 910,350 426,963,290 TOTAL COMMON STOCKS 717,804,808 (Cost $625,347,348) CONVERTIBLE PREFERRED STOCKS - - 0.2% REAL ESTATE INVESTMENT TRUSTS - - 0.2% Walden Residential 80,000 1,730,000 Properties, Inc. Series B, $2.29 (Cost $2,000,000) CASH EQUIVALENTS - 3.6% Taxable Central Cash Fund (b) 26,596,475 26,596,475 (Cost $26,596,475) TOTAL INVESTMENT IN $ 746,131,283 SECURITIES - 100% (Cost $653,943,823) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $236,128,665 and $794,743,099, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $118,062 for the period. The fund participated in the bank borrowing program. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $9,580,000 and $4,095,824, respectively. The weighted average interest rate was 5.18%. 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. $ - $ 431,330 $ 66,924 $ 2,179,800 Carver Bancorp, Inc. - 311,715 6,990 - Citizens First Financial Corp. - 29,498 - 2,644,500 First Alliance Corp. 2,556,250 237,188 - - First Bergen Bancorp - 536,250 8,775 - Life Financial Corp. 123,750 343,913 - - Long Beach Financial Corp. 795,513 1,808,425 - - R&G Financial Corp. Class B - 391,667 - - RedFed Bancorp, Inc. - 1,771,875 - - Redwood Trust, Inc. 888,284 3,012,247 207,599 - SGV Bancorp., Inc. - 20,900 - 1,670,825 Ugly Duckling Corp. 778,735 10,748,373 128,203 - TOTALS $ 5,142,532 $ 19,643,381 $ 418,491 $ 6,495,125
INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $656,861,339. Net unrealized appreciation aggregated $89,269,944, of which $213,371,565 related to appreciated investment securities and $124,101,621 related to depreciated investment securities. The fund hereby designates approximately $45,625,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for use in preparing 1999 income tax returns. HOME FINANCE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 746,131,283 value (cost $653,943,823) - See accompanying schedule Receivable for investments 1,122,003 sold Receivable for fund shares 312,111 sold Dividends receivable 1,020,966 Interest receivable 77,051 Redemption fees receivable 4,211 Other receivables 7,329 TOTAL ASSETS 748,674,954 LIABILITIES Payable for investments $ 1,355,000 purchased Payable for fund shares 6,038,322 redeemed Accrued management fee 378,339 Other payables and accrued 463,076 expenses TOTAL LIABILITIES 8,234,737 NET ASSETS $ 740,440,217 Net Assets consist of: Paid in capital $ 620,230,274 Undistributed net investment 7,800,879 income Accumulated undistributed net 20,220,842 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 92,188,222 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 17,590,183 $ 740,440,217 shares outstanding NET ASSET VALUE and $42.09 redemption price per share ($740,440,217 (divided by) 17,590,183 shares) Maximum offering price per $43.39 share (100/97.00 of $42.09) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 21,826,996 Dividends (including $418,491 received from affiliated issuers) Interest 1,839,067 TOTAL INCOME 23,666,063 EXPENSES Management fee $ 7,895,622 Transfer agent fees 7,065,489 Accounting fees and expenses 753,655 Non-interested trustees' 4,508 compensation Custodian fees and expenses 63,138 Registration fees 64,138 Audit 41,149 Legal 8,350 Interest 10,024 Reports to shareholders 175,156 Total expenses before 16,081,229 reductions Expense reductions (140,681) 15,940,548 NET INVESTMENT INCOME 7,725,515 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 22,593,970 (including realized gain (loss) of $7,792,207 on sales of investments in affiliated issuers) Foreign currency transactions (10,336) 22,583,634 Change in net unrealized appreciation (depreciation) on: Investment securities (316,656,889) Assets and liabilities in (231) (316,657,120) foreign currencies NET GAIN (LOSS) (294,073,486) NET INCREASE (DECREASE) IN $ (286,347,971) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 4,255,219 charges paid to FDC Sales charges - Retained by $ 4,241,642 FDC Deferred sales charges $ 13,199 withheld by FDC Exchange fees withheld by FSC $ 159,788 EXPENSE REDUCTIONS Directed 119,026 brokerage arrangements Custodian credits 12,536 Transfer agent credits 9,119 $ 140,681
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ 7,725,515 $ 8,926,749 income Net realized gain (loss) 22,583,634 177,748,259 Change in net unrealized (316,657,120) 165,002,991 appreciation (depreciation) NET INCREASE (DECREASE) IN (286,347,971) 351,677,999 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (2,223,405) (7,530,670) From net investment income From net realized gain (43,930,438) (153,895,241) TOTAL DISTRIBUTIONS (46,153,843) (161,425,911) Share transactions Net 655,146,906 1,194,996,073 proceeds from sales of shares Reinvestment of distributions 45,331,306 158,982,280 Cost of shares redeemed (1,297,847,011) (1,054,168,696) NET INCREASE (DECREASE) IN (597,368,799) 299,809,657 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 1,700,582 1,720,473 TOTAL INCREASE (DECREASE) (928,170,031) 491,782,218 IN NET ASSETS NET ASSETS Beginning of period 1,668,610,248 1,176,828,030 End of period (including $ 740,440,217 $ 1,668,610,248 undistributed net investment income of $7,800,879 and $4,200,147, respectively) OTHER INFORMATION Shares Sold 13,208,817 24,323,664 Issued in reinvestment of 793,059 3,484,445 distributions Redeemed (27,681,040) (22,121,347) Net increase (decrease) (13,679,164) 5,686,762
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 53.36 $ 46.00 $ 33.30 $ 23.92 $ 25.03 period Income from Investment Operations Net investment income c .28 .33 .53 .53 .20 Net realized and unrealized (10.16) 13.10 14.60 9.72 2.34 gain (loss) Total from investment (9.88) 13.43 15.13 10.25 2.54 operations Less Distributions From net investment income (.07) (.29) (.32) (.19) (.12) From net realized gain (1.38) (5.84) (2.16) (.73) (3.60) Total distributions (1.45) (6.13) (2.48) (.92) (3.72) Redemption fees added to paid .06 .06 .05 .05 .07 in capital Net asset value, end of period $ 42.09 $ 53.36 $ 46.00 $ 33.30 $ 23.92 TOTAL RETURN a,b (19.12)% 32.39% 47.50% 43.24% 12.43% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 740,440 $ 1,668,610 $ 1,176,828 $ 617,035 $ 229,924 (000 omitted) Ratio of expenses to average 1.19% 1.21% 1.38% 1.35% 1.47% net assets Ratio of expenses to average 1.18% d 1.19% d 1.34% d 1.32% d 1.45% d net assets after expense reductions Ratio of net investment .57% .67% 1.41% 1.80% .80% income to average net assets Portfolio turnover rate 18% 54% 78% 81% 124% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT INSURANCE 9.84% 186.10% 476.22% SELECT INSURANCE (LOAD ADJ.) 6.47% 177.44% 458.86% S&P 500 19.74% 194.91% 459.21% GS Financial Services 4.74% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT INSURANCE 9.84% 23.40% 19.14% SELECT INSURANCE (LOAD ADJ.) 6.47% 22.64% 18.78% S&P 500 19.74% 24.15% 18.78% GS Financial Services 4.74% 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 1989/02/28 9700.00 10000.00 1989/03/31 9926.90 10233.00 1989/04/30 10251.04 10764.09 1989/05/31 10307.77 11200.04 1989/06/30 10534.57 11136.20 1989/07/31 11419.21 12141.80 1989/08/31 11768.20 12379.78 1989/09/30 11930.52 12329.02 1989/10/31 12320.09 12042.99 1989/11/30 12652.85 12288.66 1989/12/31 12342.05 12583.59 1990/01/31 11294.45 11739.23 1990/02/28 11613.64 11890.67 1990/03/31 11556.35 12205.77 1990/04/30 11155.31 11900.63 1990/05/31 12178.36 13060.94 1990/06/30 12211.10 12972.12 1990/07/31 12031.04 12930.61 1990/08/31 10778.83 11761.68 1990/09/30 9845.81 11188.89 1990/10/31 9452.96 11140.78 1990/11/30 10705.17 11860.47 1990/12/31 11130.76 12191.38 1991/01/31 11728.22 12722.92 1991/02/28 12914.95 13632.61 1991/03/31 13766.13 13962.52 1991/04/30 13692.47 13996.03 1991/05/31 14036.21 14600.66 1991/06/30 13163.67 13931.95 1991/07/31 13652.45 14581.18 1991/08/31 13569.60 14926.75 1991/09/30 13702.15 14677.48 1991/10/31 14116.36 14874.16 1991/11/30 13992.10 14274.73 1991/12/31 15213.56 15907.76 1992/01/31 15196.93 15611.87 1992/02/29 15604.29 15814.83 1992/03/31 15379.83 15506.44 1992/04/30 14989.10 15962.33 1992/05/31 15188.62 16040.54 1992/06/30 15506.38 15801.54 1992/07/31 16384.95 16447.82 1992/08/31 15904.90 16110.64 1992/09/30 16747.25 16300.75 1992/10/31 17462.79 16357.80 1992/11/30 18060.58 16915.60 1992/12/31 18636.79 17123.66 1993/01/31 19416.00 17267.50 1993/02/28 19782.69 17502.34 1993/03/31 20827.74 17871.64 1993/04/30 20332.14 17439.14 1993/05/31 19808.45 17906.51 1993/06/30 20019.76 17958.44 1993/07/31 20718.02 17886.61 1993/08/31 21774.59 18564.51 1993/09/30 21848.09 18421.56 1993/10/31 21214.15 18802.89 1993/11/30 19918.70 18624.26 1993/12/31 20160.62 18849.62 1994/01/31 20432.38 19490.50 1994/02/28 19536.58 18962.31 1994/03/31 18620.64 18135.55 1994/04/30 18821.95 18367.69 1994/05/31 19687.56 18668.92 1994/06/30 19576.84 18211.53 1994/07/31 19939.19 18808.87 1994/08/31 20482.71 19580.03 1994/09/30 20341.80 19100.32 1994/10/31 20090.16 19530.08 1994/11/30 19073.58 18818.79 1994/12/31 20090.16 19097.87 1995/01/31 20814.86 19593.08 1995/02/28 21448.97 20356.63 1995/03/31 21791.19 20957.35 1995/04/30 21992.51 21574.54 1995/05/31 22476.53 22436.88 1995/06/30 23182.38 22958.09 1995/07/31 23878.16 23719.38 1995/08/31 24573.93 23778.91 1995/09/30 25794.06 24782.38 1995/10/31 25017.61 24693.91 1995/11/30 26510.00 25777.97 1995/12/31 27083.48 26274.46 1996/01/31 27872.12 27168.84 1996/02/29 27778.72 27420.69 1996/03/31 27467.42 27684.75 1996/04/30 27126.73 28092.83 1996/05/31 27674.96 28817.34 1996/06/30 28170.47 28927.14 1996/07/31 27548.44 27649.13 1996/08/31 28708.15 28232.26 1996/09/30 30110.35 29821.17 1996/10/31 31691.78 30643.63 1996/11/30 33642.20 32959.99 1996/12/31 33504.01 32307.05 1997/01/31 34880.44 34325.59 1997/02/28 35634.20 34594.71 1997/03/31 33711.57 33173.21 1997/04/30 35701.13 35153.65 1997/05/31 38324.03 37293.80 1997/06/30 41130.18 38964.57 1997/07/31 44600.65 42064.98 1997/08/31 42298.46 39708.50 1997/09/30 45001.53 41883.33 1997/10/31 43810.34 40484.43 1997/11/30 44680.82 42358.45 1997/12/31 47733.48 43085.75 1998/01/31 47080.76 43562.28 1998/02/28 50888.31 46703.99 1998/03/31 53716.78 49095.70 1998/04/30 54041.37 49589.60 1998/05/31 53418.72 48737.16 1998/06/30 55779.62 50716.86 1998/07/31 54715.92 50176.72 1998/08/31 46063.59 42922.17 1998/09/30 49034.18 45671.77 1998/10/31 51096.73 49386.71 1998/11/30 54391.62 52380.04 1998/12/31 57431.95 55398.18 1999/01/31 56052.52 57714.93 1999/02/26 55886.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990312 110614 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Insurance Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $55,886 - a 458.86% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS American International Group, 6.5 Inc. Marsh & McLennan Companies, 6.0 Inc. AFLAC, Inc. 6.0 Citigroup, Inc. 4.9 Providian Financial Corp. 4.7 Allmerica Financial Corp. 4.7 Mutual Risk Management Ltd. 4.4 Ambac Financial Group, Inc. 4.3 Wellpoint Health Networks, Inc. 3.9 Enhance Financial Services 3.8 Group, Inc. TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Insurance 79.8% Credit & Other Finance 9.6% Medical Facilities Management 3.9% Services 1.8% All Others 4.9%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 4.9 Row: 1, Col: 2, Value: 1.8 Row: 1, Col: 3, Value: 3.9 Row: 1, Col: 4, Value: 9.6 Row: 1, Col: 5, Value: 79.8 INSURANCE PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Thomas Allen) (photograph of Timothy Cohen) NOTE TO SHAREHOLDERS: The following is an interview with Thomas Allen (left), who managed Fidelity Select Insurance Portfolio for most of the period covered by this report, and with Timothy Cohen (right), who became manager of the fund on February 1, 1999. Q. HOW DID THE FUND PERFORM, TOM? T.A. It did pretty well relative to the financial services industry as a whole, particularly in the second half of the period. But the entire sector has been struggling just to keep pace with the broader market. For the 12 months that ended February 28, 1999, the fund returned 9.84%. This compares favorably with the total return of 4.74% for the Goldman Sachs Financial Services Index - an index of 271 stocks designed to measure the relative performance of companies in the financial services sector - but it is well below the 19.74% return of the Standard and Poor's 500 Index over the same 12-month period. Q. WHAT MAJOR FACTORS AFFECTED FUND PERFORMANCE? T.A. Worries about financial collapse in emerging markets, combined with fears of a deep worldwide recession, had a dampening effect on the financial services industry as a whole, and insurance stocks were by no means immune from these concerns. In addition, competitive pricing pressures continued to hurt the insurance sector. However, the fund rebounded from a disappointing first half, benefiting mainly from continued consolidation activity in the industry and some quality-bias shifts in the fund's holdings. Q. YOU MADE CHANGES TO YOUR STRATEGY THEN? T.A. There was no fundamental change in strategy. I continued to focus on quality companies with good prospects for long-term revenue growth and solid records of managing losses. But during the early fall of 1998, as I became more concerned about pricing pressures in the property-casualty business, I began trimming the number of holdings in the fund, narrowing the portfolio in favor of fewer, higher-quality names. Q. WAS IT THIS SUBTLE SHIFT THAT HELPED YOU BEAT THE FINANCIAL SERVICES SECTOR AS A WHOLE? T.A. To some degree, yes, I believe it was. As I mentioned earlier, it was not a great year for financial services stocks. The quality bias I emphasized during the year resulted in the fund owning a group of stocks that either suffered less than the industry as a whole, or benefited from better revenue growth and fewer losses. Q. WHICH OF THE FUND'S HOLDINGS DID WELL? T.A. Providian Financial, a credit card company spin-off of Providian Insurance Company, did especially well, based on solid revenue growth, excellent underwriting and loss management, and outstanding earnings growth. The fund also benefited from the consummation of two large acquisitions: the take-over of SunAmerica by American International Group (AIG) in the life insurance sector and, in the insurance brokerage sector, the acquisition of Sedgwick Group by Marsh & McLennan Companies. Q. WHICH STOCKS HURT PERFORMANCE? T.A. MBIA, a municipal bond insurer, suffered a material loss during the summer, which had a negative impact on fund performance. Similarly, Capital Re, a bond re-insurer, was affected by MBIA's difficulties and suffered its own unexpected loss during the period. The investment in PAULA Financial also was disappointing. Not long after this workers' compensation insurer launched an initial public offering, the company announced it would take a charge against earnings because of insufficient loss reserves. This event hurt the stock price and the performance of the fund. I sold the fund's positions in both PAULA Financial and Capital Re. Q. TURNING TO YOU, TIM, HAVE YOU MADE ANY SIGNIFICANT CHANGES IN STRATEGY SINCE TAKING OVER THE FUND IN EARLY FEBRUARY? T.C. Tom and I have worked very closely to transition the fund. We've tended to look at things in the same way, so I haven't really made any major changes in how I intend to manage the fund going forward. Q. WHAT IS YOUR OUTLOOK? T.C. Like Tom, I'm somewhat cautious in my outlook, especially with the property-casualty sector, which continues to suffer from excess capital and a very tough pricing environment. I tend to look for companies with a strong franchise or a sustainable competitive advantage, which can be tough to find in the industry these days. Still, the fund now holds some specialty insurance brokers that dominate niche segments of the industry, as well as some life and bond insurance companies that have built and sustained valuable brand names in the marketplace. I believe these holdings should help the fund achieve good relative performance in the near term. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 045 TRADING SYMBOL: FSPCX SIZE: as of February 28, 1999, more than $82 million MANAGER: Timothy Cohen, since February 1999; equity analyst, business and consumer services, 1996-1999; joined Fidelity in 1996 INSURANCE PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.1% SHARES VALUE (NOTE 1) CREDIT & OTHER FINANCE - 9.6% Citigroup, Inc. 69,799 $ 4,100,691 Providian Financial Corp. 38,250 3,906,281 8,006,972 INSURANCE - 79.8% ACE Ltd. 74,100 2,019,225 AFLAC, Inc. 112,400 4,959,650 Allmerica Financial Corp. 72,673 3,878,921 Ambac Financial Group, Inc. 64,600 3,617,600 American Bankers Insurance 63,800 3,062,400 Group, Inc. American International Group, 47,150 5,372,151 Inc. Blanch E.W. Holdings, Inc. 48,200 2,675,100 CIGNA Corp. 10,900 855,650 CMAC Investments Corp. 57,400 2,371,338 Enhance Financial Services 134,200 3,178,863 Group, Inc. Hartford Financial Services 41,100 2,221,969 Group, Inc. Hartford Life, Inc. Class A 26,900 1,560,200 HIH Insurance Ltd. 23,616 31,922 Marsh & McLennan Companies, 70,700 5,006,444 Inc. MBIA, Inc. 33,100 2,037,719 Mercury General Corp. 17,000 592,875 MGIC Investment Corp. 3,400 115,813 Mutual Risk Management Ltd. 99,800 3,648,938 Nationwide Financial 27,500 1,249,531 Services, Inc. Class A Philadelphia Consolidated 52,300 1,124,450 Holding Corp. (a) PMI Group, Inc. 19,200 828,000 Poe & Brown, Inc. 22,900 742,819 Progressive Corp. 12,200 1,567,700 Protective Life Corp. 67,000 2,311,500 Provident Companies, Inc. 11,000 360,250 Reinsurance Group of America, 36,700 2,364,856 Inc. Reliastar Financial Corp. 23,738 1,077,112 RenaissanceRe Holdings Ltd. 34,800 1,183,200 Terra Nova (Bermuda) Holdings 67,000 1,599,625 Ltd. Class A Torchmark Corp. 41,700 1,386,525 UICI (a) 27,800 639,400 UNUM Corp. 60,900 2,725,275 66,367,021 MEDICAL FACILITIES MANAGEMENT - - 3.9% Wellpoint Health Networks, 41,000 3,233,875 Inc. (a) SERVICES - 1.8% Service Corp. International 100,000 1,537,500 TOTAL COMMON STOCKS 79,145,368 (Cost $63,839,318) CASH EQUIVALENTS - 4.9% SHARES VALUE (NOTE 1) Taxable Central Cash Fund (b) 4,076,031 $ 4,076,031 (Cost $4,076,031) TOTAL INVESTMENT IN $ 83,221,399 SECURITIES - 100% (Cost $67,915,349) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $74,970,161 and $123,193,029, respectively. 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 $17,412 for the period. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $68,110,427. Net unrealized appreciation aggregated $15,110,972, of which $17,419,133 related to appreciated investment securities and $2,308,161 related to depreciated investment securities. The fund hereby designates approximately $7,184,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 12% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for use in preparing 1999 income tax returns. INSURANCE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 83,221,399 value (cost $67,915,349) - See accompanying schedule Receivable for fund shares 178,524 sold Dividends receivable 63,039 Interest receivable 14,116 Redemption fees receivable 105 Other receivables 143 TOTAL ASSETS 83,477,326 LIABILITIES Payable for fund shares $ 495,321 redeemed Accrued management fee 41,014 Other payables and accrued 61,511 expenses TOTAL LIABILITIES 597,846 NET ASSETS $ 82,879,480 Net Assets consist of: Paid in capital $ 56,985,255 Accumulated undistributed net 10,588,175 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 15,306,050 (depreciation) on investments NET ASSETS, for 1,966,938 $ 82,879,480 shares outstanding NET ASSET VALUE and $42.14 redemption price per share ($82,879,480 (divided by) 1,966,938 shares) Maximum offering price per $43.44 share (100/97.00 of $42.14) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 1,096,543 Dividends Interest 235,419 TOTAL INCOME 1,331,962 EXPENSES Management fee $ 645,431 Transfer agent fees 650,121 Accounting fees and expenses 106,572 Non-interested trustees' 410 compensation Custodian fees and expenses 11,411 Registration fees 25,206 Audit 17,939 Legal 640 Reports to shareholders 7,812 Total expenses before 1,465,542 reductions Expense reductions (27,236) 1,438,306 NET INVESTMENT INCOME (LOSS) (106,344) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 13,176,110 Foreign currency transactions 22,622 13,198,732 Change in net unrealized appreciation (depreciation) on: Investment securities (4,563,631) Assets and liabilities in (53) (4,563,684) foreign currencies NET GAIN (LOSS) 8,635,048 NET INCREASE (DECREASE) IN $ 8,528,704 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 351,928 charges paid to FDC Sales charges - Retained by $ 351,772 FDC Deferred sales charges $ 1,491 withheld by FDC Exchange fees withheld by FSC $ 11,648 Expense reductions Directed $ 26,812 brokerage arrangements Custodian credits 424 $ 27,236
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (106,344) $ 25,471 income (loss) Net realized gain (loss) 13,198,732 23,084,468 Change in net unrealized (4,563,684) 14,487,273 appreciation (depreciation) NET INCREASE (DECREASE) IN 8,528,704 37,597,212 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (11,641,173) (6,676,096) from net realized gains Share transactions Net 64,911,861 244,332,955 proceeds from sales of shares Reinvestment of distributions 11,462,296 6,593,993 Cost of shares redeemed (115,658,850) (199,288,742) NET INCREASE (DECREASE) IN (39,284,693) 51,638,206 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 126,042 224,405 TOTAL INCREASE (DECREASE) (42,271,120) 82,783,727 IN NET ASSETS NET ASSETS Beginning of period 125,150,600 42,366,873 End of period (including $ 82,879,480 $ 125,150,600 undistributed net investment income of $0 and $27,193, respectively) OTHER INFORMATION Shares Sold 1,540,455 6,761,043 Issued in reinvestment of 274,802 185,836 distributions Redeemed (2,821,222) (5,272,969) Net increase (decrease) (1,005,965) 1,673,910
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 42.10 $ 32.62 $ 26.77 $ 21.31 $ 19.41 period Income from Investment Operations Net investment income (loss) C (.04) .01 .01 .06 .05 Net realized and unrealized 4.01 12.93 7.21 6.15 1.78 gain (loss) Total from investment 3.97 12.94 7.22 6.21 1.83 operations Less Distributions From net investment income - - (.03) (.07) - From net realized gain (3.98) (3.54) (1.45) (.72) - Total distributions (3.98) (3.54) (1.48) (.79) - Redemption fees added to paid .05 .08 .11 .04 .07 in capital Net asset value, end of period $ 42.14 $ 42.10 $ 32.62 $ 26.77 $ 21.31 TOTAL RETURN A, B 9.84% 42.81% 28.28% 29.51% 9.79% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 82,879 $ 125,151 $ 42,367 $ 38,994 $ 21,838 (000 omitted) Ratio of expenses to average 1.33% 1.45% 1.82% 1.77% 2.36% net assets Ratio of expenses to average 1.31% D 1.43% D 1.77% D 1.74% D 2.34% D net assets after expense reductions Ratio of net investment (.10)% .02% .05% .26% .25% income (loss) to average net assets Portfolio turnover rate 72% 157% 142% 164% 265% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT REGIONAL BANKS 3.10% 206.76% 704.00% SELECT REGIONAL BANKS (LOAD -0.06% 197.48% 679.81% ADJ.) S&P 500 19.74% 194.91% 459.21% GS Financial Services 4.74% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT REGIONAL BANKS 3.10% 25.13% 23.18% SELECT REGIONAL BANKS (LOAD -0.06% 24.36% 22.80% ADJ.) S&P 500 19.74% 24.15% 18.78% GS Financial Services 4.74% 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 1989/02/28 9700.00 10000.00 1989/03/31 10498.82 10233.00 1989/04/30 10774.61 10764.09 1989/05/31 11601.96 11200.04 1989/06/30 11408.98 11136.20 1989/07/31 12424.39 12141.80 1989/08/31 12730.93 12379.78 1989/09/30 12836.30 12329.02 1989/10/31 11648.47 12042.99 1989/11/30 11629.31 12288.66 1989/12/31 11381.39 12583.59 1990/01/31 10355.95 11739.23 1990/02/28 10782.37 11890.67 1990/03/31 10518.40 12205.77 1990/04/30 9919.38 11900.63 1990/05/31 10609.77 13060.94 1990/06/30 10193.50 12972.12 1990/07/31 9574.18 12930.61 1990/08/31 8680.72 11761.68 1990/09/30 7624.82 11188.89 1990/10/31 7401.46 11140.78 1990/11/30 8386.29 11860.47 1990/12/31 9028.94 12191.38 1991/01/31 9628.12 12722.92 1991/02/28 10444.23 13632.61 1991/03/31 11033.08 13962.52 1991/04/30 11776.88 13996.03 1991/05/31 12541.35 14600.66 1991/06/30 11797.54 13931.95 1991/07/31 12778.95 14581.18 1991/08/31 13698.37 14926.75 1991/09/30 13429.78 14677.48 1991/10/31 13987.63 14874.16 1991/11/30 13347.13 14274.73 1991/12/31 14969.35 15907.76 1992/01/31 15905.61 15611.87 1992/02/29 17190.25 15814.83 1992/03/31 16950.74 15506.44 1992/04/30 17941.44 15962.33 1992/05/31 18703.52 16040.54 1992/06/30 18890.14 15801.54 1992/07/31 18912.06 16447.82 1992/08/31 17904.00 16110.64 1992/09/30 18736.74 16300.75 1992/10/31 19536.61 16357.80 1992/11/30 21136.36 16915.60 1992/12/31 22232.84 17123.66 1993/01/31 23159.21 17267.50 1993/02/28 23879.72 17502.34 1993/03/31 24897.58 17871.64 1993/04/30 23615.84 17439.14 1993/05/31 23384.99 17906.51 1993/06/30 24689.29 17958.44 1993/07/31 24758.54 17886.61 1993/08/31 25104.81 18564.51 1993/09/30 25970.50 18421.56 1993/10/31 24573.86 18802.89 1993/11/30 23800.52 18624.26 1993/12/31 24716.81 18849.62 1994/01/31 26158.27 19490.50 1994/02/28 25423.40 18962.31 1994/03/31 24999.45 18135.55 1994/04/30 26324.18 18367.69 1994/05/31 27639.67 18668.92 1994/06/30 26953.33 18211.53 1994/07/31 27668.27 18808.87 1994/08/31 28383.21 19580.03 1994/09/30 26695.95 19100.32 1994/10/31 26581.56 19530.08 1994/11/30 24865.70 18818.79 1994/12/31 24770.74 19097.87 1995/01/31 26018.40 19593.08 1995/02/28 27403.01 20356.63 1995/03/31 27631.24 20957.35 1995/04/30 28315.94 21574.54 1995/05/31 30172.22 22436.88 1995/06/30 30552.60 22958.09 1995/07/31 31739.41 23719.38 1995/08/31 32926.21 23778.91 1995/09/30 34417.33 24782.38 1995/10/31 34249.96 24693.91 1995/11/30 36212.75 25777.97 1995/12/31 36355.45 26274.46 1996/01/31 37544.05 27168.84 1996/02/29 38621.72 27420.69 1996/03/31 39762.78 27684.75 1996/04/30 39423.22 28092.83 1996/05/31 40089.76 28817.34 1996/06/30 39780.87 28927.14 1996/07/31 39845.90 27649.13 1996/08/31 41861.77 28232.26 1996/09/30 43926.41 29821.17 1996/10/31 46738.87 30643.63 1996/11/30 50689.32 32959.99 1996/12/31 49402.16 32307.05 1997/01/31 53045.34 34325.59 1997/02/28 55356.06 34594.71 1997/03/31 51628.55 33173.21 1997/04/30 54428.47 35153.65 1997/05/31 56345.09 37293.80 1997/06/30 59550.75 38964.57 1997/07/31 65962.08 42064.98 1997/08/31 61959.24 39708.50 1997/09/30 66657.49 41883.33 1997/10/31 65673.74 40484.43 1997/11/30 68692.84 42358.45 1997/12/31 71908.51 43085.75 1998/01/31 69648.78 43562.28 1998/02/28 75639.70 46703.99 1998/03/31 79826.33 49095.70 1998/04/30 81170.59 49589.60 1998/05/31 78950.88 48737.16 1998/06/30 81010.77 50716.86 1998/07/31 81135.08 50176.72 1998/08/31 62294.12 42922.17 1998/09/30 67692.48 45671.77 1998/10/31 73854.41 49386.71 1998/11/30 76251.70 52380.04 1998/12/31 80427.01 55398.18 1999/01/31 78363.34 57714.93 1999/02/26 77981.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990307 170117 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Regional Banks Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $77,981 - a 679.81% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Bank One Corp. 10.6 Bank of New York Co., Inc. 9.3 Fleet Financial Group, Inc. 8.2 Wells Fargo & Co. 7.9 U.S. Bancorp 7.5 Comerica, Inc. 5.9 BankAmerica Corp. 3.7 MBNA Corp. 3.3 Zions Bancorp 3.0 BB&T Corp. 2.9 TOP REGIONS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Midwest 28.4% Northeast 14.4% Southeast 14.1% West 12.8% Multi-regional 6.2% All Others 24.1%* * INCLUDES SHORT-TERM INVESTMENTS Row: 1, Col: 1, Value: 24.1 Row: 1, Col: 2, Value: 6.2 Row: 1, Col: 3, Value: 12.8 Row: 1, Col: 4, Value: 14.1 Row: 1, Col: 5, Value: 14.4 Row: 1, Col: 6, Value: 28.4 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. Bank stocks were hard-pressed to realize positive returns over the past year. Still, the fund managed to gain 3.10% during the 12-month period ending February 28, 1999. For the same period, the Standard & Poor's 500 Index returned 19.74%, while the Goldman Sachs Financial Services Index - an index of 271 stocks designed to measure the performance of companies in the financial services sector - returned 4.74%. Q. CAN YOU RECAP FOR US THE MARKET CONDITIONS THAT INFLUENCED THE FUND'S PERFORMANCE? A. Sure. In the first half of 1998, market confidence was strong as the U.S. economy continued its steady growth. In the third quarter, however, Russia's loan defaults and currency devaluation caught investors off guard, and they feared a chain reaction in emerging markets. On the heels of Russia's bad news came the near-collapse of Long-Term Capital Management, a highly leveraged hedge fund. The subsequent liquidity crunch and aversion to risk resulted in depressed valuations for bank stocks in light of this uncertain environment. To address the lack of confidence and restore liquidity to the markets, the Federal Reserve Board implemented three separate 0.25% interest-rate cuts. Stocks rallied furiously in response during the fourth quarter. To illustrate, the fund returned 25.19% for the six-month period ending February 28, 1999. Q. WHAT STRATEGY DID YOU EMPLOY TO TEMPER THE IMPACT OF THE MARKET'S UNCERTAINTY ON THE FUND? A. Throughout the period, the fund maintained a large-cap bias for several reasons. First, at the beginning of the period, I felt many of the smaller issues were priced at a premium in anticipation of takeover bids. I anticipated a slowdown in consolidation, and large-cap valuations were quite compelling comparatively. I also felt larger issues would be better equipped to weather the market's turbulence, and, in hindsight, this decision helped the performance of the fund. Q. BUT THERE WERE THREE SIGNIFICANT MERGERS DURING THE PERIOD, CORRECT? A. That's right, but those were cases where large banks merged with other large banks, and they were announced very early in the period. Banc One merged with First Chicago to form Bank One. Wells Fargo and Norwest merged, creating Wells Fargo & Co., the nation's seventh-largest bank. And BankAmerica joined forces with NationsBank, resulting in BankAmerica Corp., one of the country's largest banks. Q. WERE THESE MERGERS A POSITIVE FOR THE FUND? A. The jury's still out. Typically, bank mergers result in significant cost savings as they integrate their computer systems and reduce headcount. However, banks are reluctant to do so right now given their focus on testing for Y2K compliance, so the cost savings for some of these large bank mergers have been delayed. I believe these cost savings will come through and these mergers will prove to be winning combinations. One immediate impact of the banks' consolidation was that six positions in the fund became three very large positions. Combined, those three holdings represented 22% of the fund at the end of the period. Q. WHAT SPECIFIC HOLDINGS HELPED THE FUND DURING THE PERIOD? WHICH DIDN'T PERFORM AS YOU'D HOPED? A. Bank of New York was a big contributor to performance. This bank outperformed due to its strong securities-processing business, which has higher returns and a higher growth rate than basic banking. Zions Bancorp also performed very well, in large part due to a savvy acquisition in California. Fleet Financial had a strong year thanks to its high quality of earnings and its domestic focus. On the other hand, U.S. Bancorp was a big detractor due to a significant slowdown in revenue growth in the second half of 1998. Washington Mutual, a thrift that experienced increased mortgage prepayments as interest rates declined to very low levels, also hurt performance. Q. WHAT IS YOUR OUTLOOK FOR THE FUND, CHRIS? A. As is always the case with this sector, the key risk is deterioration in credit quality. Banks are currently very well reserved - meaning their reserve-to-loan ratios are stronger than they were in the early 1990s - and credit quality remains stable. I will continue to evaluate the fund's large-cap bias in light of relative valuations and the potential for merger activity to resume after the Year 2000 issue is resolved. Going forward, I think there is a good possibility that bank stocks can perform well, given the current favorable interest-rate and economic environment. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. NOTE TO SHAREHOLDERS: Effective April 30, 1999, Yolanda McGettigan will become manager of Select Regional Banks Portfolio. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 507 TRADING SYMBOL: FSRBX SIZE: as of February 28, 1999, more than $925 million MANAGER: Christine Schaulat, since 1998; equity analyst, regional banks securities; since 1997; joined Fidelity in 1997 REGIONAL BANKS PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 96.9% SHARES VALUE (NOTE 1) BANKS - 76.7% INTERNATIONAL - 0.8% Bank of Nova Scotia 366,000 $ 7,561,281 MIDWEST - 28.4% Bank One Corp. 1,802,426 96,880,396 Comerica, Inc. 803,850 53,255,063 Marshall & Ilsley Corp. 373,000 20,888,000 National City Corp. 223,909 15,645,641 Wells Fargo & Co. 1,956,760 71,910,930 258,580,030 MULTI-REGIONAL - 6.2% BankAmerica Corp. 511,306 33,394,673 M&T Bank Corp. 47,000 22,360,250 55,754,923 NORTHEAST - 14.4% Bank of New York Co., Inc. 2,429,696 84,887,504 Mellon Bank Corp. 251,000 16,973,875 North Fork Bancorp, Inc. 292,000 6,424,000 State Street Corp. 297,800 22,837,538 131,122,917 SOUTHEAST - 14.1% AmSouth Bancorp. 345,000 16,215,000 BB&T Corp. 691,300 26,182,988 CCB Financial Corp. 102,300 5,313,206 Centura Banks, Inc. 79,500 5,088,000 Compass Bancshares, Inc. 150,000 5,493,750 First Tennessee National 379,400 14,440,913 Corp. SouthTrust Corp. 318,400 12,755,900 SunTrust Banks, Inc. 341,147 23,176,674 Synovus Finanical Corp. 197,175 4,695,230 Wachovia Corp. 167,300 14,230,956 127,592,617 WEST - 12.8% First Security Corp. 230,375 4,276,336 U.S. Bancorp 2,097,696 67,781,802 Westamerica Bancorp. 495,000 16,582,500 Zions Bancorp 427,300 27,347,200 115,987,838 TOTAL BANKS 696,599,606 CREDIT & OTHER FINANCE - 18.9% FINANCIAL SERVICES - 3.6% American Express Co. 183,100 19,866,350 Citigroup, Inc. 218,300 12,825,125 32,691,475 SHARES VALUE (NOTE 1) OFFICES OF BANK HOLDING COMPANIES - 8.2% Fleet Financial Group, Inc. 1,730,934 $ 74,321,979 PERSONAL CREDIT INSTITUTIONS - - 7.1% Associates First Capital 327,400 13,300,625 Corp. Class A Household International, Inc. 529,800 21,523,125 MBNA Corp. 1,239,000 30,045,750 64,869,500 TOTAL CREDIT & OTHER FINANCE 171,882,954 SAVINGS & LOANS - 1.3% SAVINGS INSTITUTIONS, FEDERALLY CHARTERED - 1.3% Washington Mutual, Inc. 300,900 12,036,000 TOTAL COMMON STOCKS 880,518,560 (Cost $587,387,203) CASH EQUIVALENTS - 3.1% Taxable Central Cash Fund (a) 28,415,353 28,415,353 (Cost $28,415,353) TOTAL INVESTMENT IN $ 908,933,913 SECURITIES - 100% (Cost $615,802,556) LEGEND (a) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $251,064,881 and $629,554,774, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $16,496 for the period. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $616,143,699. Net unrealized appreciation aggregated $292,790,214, of which $298,995,475 related to appreciated investment securities and $6,205,261 related to depreciated investment securities. The fund hereby designates approximately $104,480,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for use in preparing 1999 income tax returns. REGIONAL BANKS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 908,933,913 value (cost $615,802,556) - See accompanying schedule Receivable for investments 21,125,000 sold Receivable for fund shares 504,425 sold Dividends receivable 1,491,484 Interest receivable 83,183 Redemption fees receivable 2,551 Other receivables 2,230 TOTAL ASSETS 932,142,786 LIABILITIES Payable for fund shares $ 5,362,194 redeemed Accrued management fee 457,021 Other payables and accrued 495,033 expenses TOTAL LIABILITIES 6,314,248 NET ASSETS $ 925,828,538 Net Assets consist of: Paid in capital $ 549,096,464 Undistributed net investment 5,985,670 income Accumulated undistributed net 77,615,047 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 293,131,357 (depreciation) on investments NET ASSETS, for 22,271,826 $ 925,828,538 shares outstanding NET ASSET VALUE and $41.57 redemption price per share ($925,828,538 (divided by) 22,271,826 shares) Maximum offering price per $42.86 share (100/97.00 of $41.57) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 21,686,854 Dividends Interest (including income on 4,138,978 securities loaned of $8,290) TOTAL INCOME 25,825,832 EXPENSES Management fee $ 7,314,180 Transfer agent fees 6,235,230 Accounting and security 777,255 lending fees Non-interested trustees' 4,992 compensation Custodian fees and expenses 27,299 Registration fees 57,637 Audit 47,084 Legal 7,133 Reports to shareholders 144,554 Total expenses before 14,615,364 reductions Expense reductions (140,726) 14,474,638 NET INVESTMENT INCOME 11,351,194 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 135,351,703 Foreign currency transactions 140,683 135,492,386 Change in net unrealized (123,702,888) appreciation (depreciation) on investment securities NET GAIN (LOSS) 11,789,498 NET INCREASE (DECREASE) IN $ 23,140,692 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 3,590,683 charges paid to FDC Sales charges - Retained by $ 3,579,211 FDC Deferred sales charges $ 8,288 withheld by FDC Exchange fees withheld by FSC $ 110,257 Expense reductions Directed $ 133,907 brokerage arrangements Custodian credits 365 Transfer agent credits 6,454 $ 140,726
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ 11,351,194 $ 11,124,320 income Net realized gain (loss) 135,492,386 58,722,862 Change in net unrealized (123,702,888) 242,816,882 appreciation (depreciation) NET INCREASE (DECREASE) IN 23,140,692 312,664,064 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (7,938,530) (7,980,022) From net investment income From net realized gain (74,512,814) (35,012,104) TOTAL DISTRIBUTIONS (82,451,344) (42,992,126) Share transactions Net 506,783,832 1,093,335,837 proceeds from sales of shares Reinvestment of distributions 79,475,689 42,239,518 Cost of shares redeemed (940,968,587) (905,908,084) NET INCREASE (DECREASE) IN (354,709,066) 229,667,271 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 952,621 1,604,750 TOTAL INCREASE (DECREASE) (413,067,097) 500,943,959 IN NET ASSETS NET ASSETS Beginning of period 1,338,895,635 837,951,676 End of period (including $ 925,828,538 $ 1,338,895,635 undistributed net investment income of $5,985,670 and $3,805,982, respectively) OTHER INFORMATION Shares Sold 11,696,257 29,339,423 Issued in reinvestment of 1,891,390 1,067,874 distributions Redeemed (22,324,276) (24,927,202) Net increase (decrease) (8,736,629) 5,480,095
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 43.18 $ 32.82 $ 24.37 $ 18.01 $ 17.99 period Income from Investment Operations Net investment income C .39 .40 .37 .52 .37 Net realized and unrealized .91 11.41 9.70 6.78 .87 gain (loss) Total from investment 1.30 11.81 10.07 7.30 1.24 operations Less Distributions From net investment income (.28) (.28) (.27) (.25) (.29) From net realized gain (2.66) (1.23) (1.40) (.72) (.98) Total distributions (2.94) (1.51) (1.67) (.97) (1.27) Redemption fees added to paid .03 .06 .05 .03 .05 in capital Net asset value, end of period $ 41.57 $ 43.18 $ 32.82 $ 24.37 $ 18.01 TOTAL RETURN A, B 3.10% 36.64% 43.33% 40.94% 7.79% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 925,829 $ 1,338,896 $ 837,952 $ 315,178 $ 164,603 (000 omitted) Ratio of expenses to average 1.17% 1.25% 1.46% 1.41% 1.58% net assets Ratio of expenses to average 1.16% D 1.24% D 1.45% D 1.40% D 1.56% D net assets after expense reductions Ratio of net investment .91% 1.07% 1.36% 2.42% 1.99% income to average net assets Portfolio turnover rate 22% 25% 43% 103% 106% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT BIOTECHNOLOGY 27.13% 107.57% 604.66% SELECT BIOTECHNOLOGY (LOAD 23.25% 101.27% 583.45% ADJ.) S&P 500 19.74% 194.91% 459.21% GS Health Care 23.88% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT BIOTECHNOLOGY 27.13% 15.73% 21.56% SELECT BIOTECHNOLOGY (LOAD 23.25% 15.01% 21.19% ADJ.) S&P 500 19.74% 24.15% 18.78% GS Health Care 23.88% 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 1989/02/28 9700.00 10000.00 1989/03/31 10414.83 10233.00 1989/04/30 10767.72 10764.09 1989/05/31 11256.34 11200.04 1989/06/30 10966.79 11136.20 1989/07/31 11980.22 12141.80 1989/08/31 12432.65 12379.78 1989/09/30 12957.46 12329.02 1989/10/31 13002.71 12042.99 1989/11/30 13409.89 12288.66 1989/12/31 13153.98 12583.59 1990/01/31 12169.73 11739.23 1990/02/28 13319.55 11890.67 1990/03/31 13880.67 12205.77 1990/04/30 14055.44 11900.63 1990/05/31 16033.14 13060.94 1990/06/30 17152.78 12972.12 1990/07/31 17199.29 12930.61 1990/08/31 16669.08 11761.68 1990/09/30 16297.00 11188.89 1990/10/31 16436.53 11140.78 1990/11/30 18427.15 11860.47 1990/12/31 18987.47 12191.38 1991/01/31 21168.07 12722.92 1991/02/28 24167.60 13632.61 1991/03/31 26662.44 13962.52 1991/04/30 25500.72 13996.03 1991/05/31 27119.51 14600.66 1991/06/30 25679.63 13931.95 1991/07/31 27991.40 14581.18 1991/08/31 29952.90 14926.75 1991/09/30 31504.09 14677.48 1991/10/31 34606.46 14874.16 1991/11/30 32294.69 14274.73 1991/12/31 37793.63 15907.76 1992/01/31 37036.10 15611.87 1992/02/29 34192.76 15814.83 1992/03/31 31598.46 15506.44 1992/04/30 28651.35 15962.33 1992/05/31 30706.03 16040.54 1992/06/30 30167.08 15801.54 1992/07/31 31744.07 16447.82 1992/08/31 29758.65 16110.64 1992/09/30 29656.54 16300.75 1992/10/31 31108.74 16357.80 1992/11/30 34171.96 16915.60 1992/12/31 33884.55 17123.66 1993/01/31 32143.21 17267.50 1993/02/28 26954.98 17502.34 1993/03/31 27360.49 17871.64 1993/04/30 28064.18 17439.14 1993/05/31 29877.09 17906.51 1993/06/30 30055.99 17958.44 1993/07/31 29066.05 17886.61 1993/08/31 30163.33 18564.51 1993/09/30 31403.74 18421.56 1993/10/31 33741.43 18802.89 1993/11/30 33479.03 18624.26 1993/12/31 34123.09 18849.62 1994/01/31 35291.93 19490.50 1994/02/28 32930.39 18962.31 1994/03/31 29602.76 18135.55 1994/04/30 29066.05 18367.69 1994/05/31 28577.04 18668.92 1994/06/30 27443.98 18211.53 1994/07/31 27515.54 18808.87 1994/08/31 30091.77 19580.03 1994/09/30 29996.36 19100.32 1994/10/31 28970.63 19530.08 1994/11/30 28433.92 18818.79 1994/12/31 27921.06 19097.87 1995/01/31 29173.39 19593.08 1995/02/28 30175.26 20356.63 1995/03/31 30664.27 20957.35 1995/04/30 31618.42 21574.54 1995/05/31 31904.67 22436.88 1995/06/30 33061.59 22958.09 1995/07/31 34540.53 23719.38 1995/08/31 35924.06 23778.91 1995/09/30 37534.21 24782.38 1995/10/31 37236.03 24693.91 1995/11/30 38476.44 25777.97 1995/12/31 41630.35 26274.46 1996/01/31 44092.56 27168.84 1996/02/29 43745.94 27420.69 1996/03/31 43052.70 27684.75 1996/04/30 43982.24 28092.83 1996/05/31 44495.51 28817.34 1996/06/30 41806.96 28927.14 1996/07/31 38739.57 27649.13 1996/08/31 40523.79 28232.26 1996/09/30 42894.60 29821.17 1996/10/31 41403.68 30643.63 1996/11/30 41648.09 32959.99 1996/12/31 43965.21 32307.05 1997/01/31 45980.22 34325.59 1997/02/28 46304.79 34594.71 1997/03/31 41530.96 33173.21 1997/04/30 39709.44 35153.65 1997/05/31 44757.60 37293.80 1997/06/30 45929.99 38964.57 1997/07/31 46205.85 42064.98 1997/08/31 46523.08 39708.50 1997/09/30 52647.08 41883.33 1997/10/31 50729.88 40484.43 1997/11/30 49833.35 42358.45 1997/12/31 50680.19 43085.75 1998/01/31 51100.71 43562.28 1998/02/28 53763.99 46703.99 1998/03/31 55960.03 49095.70 1998/04/30 53739.54 49589.60 1998/05/31 51904.70 48737.16 1998/06/30 51954.29 50716.86 1998/07/31 52797.33 50176.72 1998/08/31 44647.96 42922.17 1998/09/30 52119.59 45671.77 1998/10/31 55623.98 49386.71 1998/11/30 57855.55 52380.04 1998/12/31 65740.44 55398.18 1999/01/31 69575.44 57714.93 1999/02/26 68345.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990307 154002 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Biotechnology Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $68,345 - a 583.45% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Amgen, Inc. 7.7 Biogen, Inc. 7.7 Genentech, Inc. (special) 6.2 Sepracor, Inc. 6.0 Merck & Co., Inc. 5.9 Medimmune, Inc. 5.6 Genzyme Corp. (General 5.0 Division) Schering-Plough Corp. 4.6 Forest Laboratories, Inc. 4.3 Chiron Corp. 4.2 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Drugs & Pharmaceuticals 86.4% Medical Equipment & Supplies 1.7% Electronic Instruments 1.4% Computer Services & Software 0.2% All Others 10.3%* Row: 1, Col: 1, Value: 10.3 Row: 1, Col: 2, Value: 1.2 Row: 1, Col: 3, Value: 2.4 Row: 1, Col: 4, Value: 2.7 Row: 1, Col: 5, Value: 83.40000000000001 * INCLUDES SHORT-TERM INVESTMENTS BIOTECHNOLOGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Rajiv Kaul) Rajiv Kaul, Portfolio Manager of Fidelity Select Biotechnology Portfolio Q. HOW DID THE FUND PERFORM, RAJIV? A. For the 12 months that ended February 28, 1999, the fund posted a total return of 27.13%. During the same period, the Standard & Poor's 500 Index returned 19.74%. The fund also compares its performance 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 23.88% during the same period. Q. WHAT PRIMARY FACTORS CONTRIBUTED TO THE STRONG PERFORMANCE OF BIOTECHNOLOGY STOCKS? A. Following a difficult period of global market instability and disappointing results during the summer and early fall of 1998, the biotechnology sector and the broader market staged an enthusiastic comeback during the last half of the period. During this six-month stock market rally, the fund posted an impressive return of 53.09%. Beyond the strong performance of the market, the fund's overweighted positions in the biotechnology and pharmaceutical sectors, along with significant holdings in companies such as Amgen, Biogen, Genentech, Sepracor and Medimmune, contributed considerably to performance. Profitable product pipelines, strong fundamental business outlooks and robust sales during the period buoyed the stock prices of these companies. Q. YOU MENTIONED AMGEN, BIOGEN, MEDIMMUNE AND A FEW OTHER NAMES AS MAJOR CONTRIBUTORS TO FUND PERFORMANCE. WHY DID THESE STOCKS PERFORM SO WELL? A. Amgen, maker of Epogen, one of the world's best-selling anemia drugs, was one of the fund's best performers; its stock soared nearly 100% during the 12-month period. The share price responded favorably after the company was awarded all rights to a new version of Epogen following an arbitration battle with Johnson & Johnson. Biogen also boosted total return as investors reacted positively to the company's solid business outlook and the absence of any serious competitive threats. Medimmune shares appreciated considerably as its new product launches were successful and its lead products turned in solid sales results. Q. DID ANY OTHER MARKET FACTORS ADD TO THIS NOTABLE PERFORMANCE? A. One of the primary reasons for the bullish performance is an aging population with accelerating demand for biotechnology and health care products. Along with increasing demand, many companies are developing a wide range of innovative, effective and safe biotechnological products, services and processes. This favorable business environment translated into strong stock performance. Q. YOU SIGNIFICANTLY INCREASED THE FUND'S EXPOSURE TO LARGE-CAP BIOTECHNOLOGY STOCKS DURING THE PERIOD. WHAT WAS YOUR RATIONALE FOR THIS DECISION, AND HOW DID THIS STRATEGY WORK OUT? A. I liked the earnings growth potential I saw in new product launches offered by the larger-cap biotechnology companies. In addition, the lead products for many of these companies had encouraging outlooks and, subsequently, produced record sales results. This strategy worked out very well for the fund. As I mentioned, these stocks were the key contributors to the fund's outperformance of the indexes. Q. WERE THERE ANY DETRACTORS FROM FUND PERFORMANCE? A. While the fund was underweighted in HMOs and health care service providers, such as MedPartners and Beverly Enterprises, these stocks still detracted from the fund's total return. The market continued to push stock prices lower in this sector amid uncertainty about the group's profitability and concerns about rising medical costs. Medical device maker Cytyc also hurt performance. Its shares stumbled late in the period due to concerns about future earnings growth. Q. WHAT'S YOUR OUTLOOK, RAJIV? A. I'm comfortable with the portfolio's asset allocation and feel that the fund's holdings have strong long-term business fundamentals and healthy outlooks. The companies in the fund have historically reliable earnings growth, profitable product pipelines and their competitors have high barriers to entry. As a result, I think these companies should hold up well relative to the rest of the biotechnology sector, regardless of which direction the market heads in the short term. Similar to what I mentioned in the report six months ago, I will continue to focus on larger-cap biotechnology companies with established market dominance and predictable earnings strength. I believe these types of holdings offer reduced downside risk in this environment of high market valuations. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 042 TRADING SYMBOL: FBIOX SIZE: as of February 28, 1999, more than $741 million MANAGER: Rajiv Kaul, since 1998; equity research associate, health care industry, 1996-1998; joined Fidelity in 1996 BIOTECHNOLOGY PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 89.7% SHARES VALUE (NOTE 1) COMPUTER SERVICES & SOFTWARE - - 0.2% Affymetrix, Inc. (a) 40,000 $ 1,550,000 DRUGS & PHARMACEUTICALS - 86.4% Alkermes, Inc. (a) 563,200 15,804,800 Allergan, Inc. 125,000 10,187,500 Alliance Pharmaceutical Corp. 737,500 1,843,750 (a) Alpharma, Inc. Class A 190,000 7,196,250 ALZA Corp. Class A (a) 20,000 1,048,750 Amgen, Inc. (a) 487,600 60,889,045 Andrx Corp. (a) 156,700 10,636,013 Anesta Corp. (a) 113,700 2,252,681 Aviron (a) 200,000 4,287,500 AXYS Pharmaceuticals, Inc. (a) 703,900 3,255,538 Biochem Pharma, Inc. 1,031,300 25,307,136 Biogen, Inc. (a) 633,200 60,866,350 Cellegy Pharmaceuticals, Inc. 578,600 2,025,100 (a)(c) Centocor, Inc. (a) 324,200 13,474,563 Chiron Corp. (a) 1,565,900 32,981,769 Creative Biomolecules, Inc. 325,500 874,781 (a) CV Therapeutics, Inc. (a)(c) 787,000 4,820,375 Cytyc Corp. (a) 99,000 1,794,375 Elan Corp. PLC sponsored ADR 30,000 2,300,625 (a) Forest Laboratories, Inc. (a) 684,800 33,854,800 GelTex Pharmaceuticals, Inc. 50,000 859,375 (a) Genentech, Inc. (special) (a) 606,600 48,414,263 Genzyme Corp. (General 872,000 39,240,000 Division) Gilead Sciences, Inc. (a) 418,700 17,271,375 ICN Pharmaceuticals, Inc. 1,500 32,813 IDEC Pharmaceuticals Corp. (a) 408,500 17,693,156 Immunex Corp. (a) 186,950 26,453,425 Inhale Therapeutic Systems, 69,700 1,916,750 Inc. (a) Invitrogen Corp. (a) 30,000 450,000 LeukoSite, Inc. (a) 440,000 5,060,000 Ligand Pharmaceuticals, Inc. 400,000 3,925,000 Class B (a) Lilly (Eli) & Co. 165,000 15,623,438 Magainin Pharmaceuticals, 230,000 934,375 Inc. (a) Medimmune, Inc. (a) 798,300 43,906,500 Merck & Co., Inc. 566,600 46,319,550 Mylan Laboratories, Inc. 30,000 819,375 NeXstar Pharmeceuticals, Inc. 246,100 3,399,256 (a) NPS Pharmaceuticals, Inc. (a) 345,000 2,544,375 Pfizer, Inc. 30,000 3,958,125 QLT PhotoTherapeutics, Inc. 161,900 6,302,912 (a) Roberts Pharmaceutical Corp. 16,700 377,838 (a) Schering-Plough Corp. 640,600 35,833,563 Scios, Inc. (a) 290,000 2,682,500 Sepracor, Inc. (a) 378,900 47,267,775 Sequus Pharmaceuticals, Inc. 64,000 1,308,000 (a) Serologicals Corp. (a) 50,000 893,750 ViroPharma, Inc. (a) 357,700 2,973,381 SHARES VALUE (NOTE 1) Warner-Lambert Co. 35,000 $ 2,417,188 Zonagen, Inc. (a) 175,000 4,834,375 679,414,134 ELECTRICAL EQUIPMENT - 0.0% American Satellite Network 5,000 - (ASN) warrants 6/30/99 (a) ELECTRONIC INSTRUMENTS - 1.4% Perkin-Elmer Corp. 112,270 10,637,583 MEDICAL EQUIPMENT & SUPPLIES - - 1.7% Cardinal Health, Inc. 68,804 4,966,789 Cygnus, Inc. (a) 64,800 372,600 Medtronic, Inc. 65,000 4,590,625 Osteotech, Inc. (a) 70,500 3,815,813 13,745,827 TOTAL COMMON STOCKS 705,347,544 (Cost $519,908,322) CASH EQUIVALENTS - 10.3% Taxable Central Cash Fund (b) 80,825,501 80,825,501 (Cost $80,825,501) TOTAL INVESTMENT IN $ 786,173,045 SECURITIES - 100% (Cost $600,733,823) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $499,721,864 and $473,490,492, respectively. 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 $31,302 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $36,161,622. The fund received cash collateral of $36,293,300. Transactions during the period with companies which are or were affiliates are as follows:
PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Alkermes, Inc. $ - $ - $ - $ - CV Therapeutics, Inc. 791,700 170,625 - 4,820,375 Cellegy Pharmaceuticals, Inc. 315,038 225,000 - 2,025,100 Magainin Pharmaceuticals, Inc. 249,257 2,714,380 - - ViroPharma, Inc. - 771,075 - - TOTALS $ 1,355,995 $ 3,881,080 $ - $ 6,845,475
INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $601,690,691. Net unrealized appreciation aggregated $184,482,354, of which $216,700,973 related to appreciated investment securities and $32,218,619 related to depreciated investment securities. The fund hereby designates approximately $24,934,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 11% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for use in preparing 1999 income tax returns. BIOTECHNOLOGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 786,173,045 value (cost $600,733,823) - See accompanying schedule Cash 126,800 Receivable for investments 2,284,720 sold Receivable for fund shares 1,345,985 sold Dividends receivable 70,886 Interest receivable 263,683 Redemption fees receivable 1,210 Other receivables 36,520 TOTAL ASSETS 790,302,849 LIABILITIES Payable for investments $ 10,416,729 purchased Payable for fund shares 1,255,129 redeemed Accrued management fee 364,555 Other payables and accrued 443,613 expenses Collateral on securities 36,293,300 loaned, at value TOTAL LIABILITIES 48,773,326 NET ASSETS $ 741,529,523 Net Assets consist of: Paid in capital $ 553,672,039 Accumulated undistributed net 2,417,617 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 185,439,867 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 17,933,954 $ 741,529,523 shares outstanding NET ASSET VALUE and $41.35 redemption price per share ($741,529,523 (divided by) 17,933,954 shares) Maximum offering price per $42.63 share (100/97.00 of $41.35) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 1,104,719 Dividends Interest (including income on 2,056,527 securities loaned of $309,832) TOTAL INCOME 3,161,246 EXPENSES Management fee $ 3,390,377 Transfer agent fees 3,550,214 Accounting and security 536,521 lending fees Non-interested trustees' 3,422 compensation Custodian fees and expenses 22,172 Registration fees 62,626 Audit 18,459 Legal 3,487 Reports to shareholders 91,367 Total expenses before 7,678,645 reductions Expense reductions (189,856) 7,488,789 NET INVESTMENT INCOME (LOSS) (4,327,543) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 2,588,579 (including realized loss of $1,989,327 on sales of investments in affiliated issuers) Foreign currency transactions (3,194) 2,585,385 Change in net unrealized appreciation (depreciation) on: Investment securities 152,854,489 Assets and liabilities in 645 152,855,134 foreign currencies NET GAIN (LOSS) 155,440,519 NET INCREASE (DECREASE) IN $ 151,112,976 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 1,182,620 charges paid to FDC Sales charges - Retained by $ 1,176,547 FDC Deferred sales charges $ 23,624 withheld by FDC Exchange fees withheld by FSC $ 33,195 Expense reductions Directed $ 178,555 brokerage arrangements Custodian credits 4,105 Transfer agent credits 7,196 $ 189,856 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (4,327,543) $ (4,649,288) income (loss) Net realized gain (loss) 2,585,385 136,618,693 Change in net unrealized 152,855,134 (59,882,024) appreciation (depreciation) NET INCREASE (DECREASE) IN 151,112,976 72,087,381 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (33,971,527) (74,816,933) from net realized gain Share transactions Net 320,529,357 370,670,921 proceeds from sales of shares Reinvestment of distributions 33,062,818 72,734,215 Cost of shares redeemed (309,253,094) (536,988,307) NET INCREASE (DECREASE) IN 44,339,081 (93,583,171) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 507,092 952,260 TOTAL INCREASE (DECREASE) 161,987,622 (95,360,463) IN NET ASSETS NET ASSETS Beginning of period 579,541,901 674,902,364 End of period 741,529,523 579,541,901 OTHER INFORMATION Shares Sold 9,105,791 10,542,169 Issued in reinvestment of 970,436 2,304,448 distributions Redeemed (8,928,498) (15,772,857) Net increase (decrease) 1,147,729 (2,926,240)
FINANCIAL HIGHLIGHTS
YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 F 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 34.52 $ 34.24 $ 36.60 $ 25.30 $ 27.61 period Income from Investment Operations Net investment income (loss) C (.26) (.27) (.20) .11 (.06) Net realized and unrealized 9.15 5.20 1.89 11.21 (2.26) gain (loss) Total from investment 8.89 4.93 1.69 11.32 (2.32) operations Less Distributions From net investment income - - (.03) (.07) - From net realized gain (2.09) (4.71) (4.06) - - Total distributions (2.09) (4.71) (4.09) (.07) - Redemption fees added to paid .03 .06 .04 .05 .01 in capital Net asset value, end of period $ 41.35 $ 34.52 $ 34.24 $ 36.60 $ 25.30 TOTAL RETURN A, B 27.13% 16.11% 5.85% 44.97% (8.37)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 741,530 $ 579,542 $ 674,902 $ 1,096,864 $ 448,197 (000 omitted) Ratio of expenses to average 1.34% 1.49% 1.57% 1.44% D 1.59% net assets Ratio of expenses to average 1.30% E 1.47% E 1.56% E 1.43% E 1.59% net assets after expense reductions Ratio of net investment (.75)% (.81)% (.59)% .35% (.27)% income (loss) to average net assets Portfolio turnover rate 86% 162% 41% 67% 77% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D 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. 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 THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT HEALTH CARE 27.20% 283.18% 899.13% SELECT HEALTH CARE (LOAD ADJ.) 23.31% 271.61% 869.08% S&P 500 19.74% 194.91% 459.21% GS Health Care 23.88% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT HEALTH CARE 27.20% 30.82% 25.88% SELECT HEALTH CARE (LOAD ADJ.) 23.31% 30.02% 25.50% S&P 500 19.74% 24.15% 18.78% GS Health Care 23.88% 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 1989/02/28 9700.00 10000.00 1989/03/31 10211.52 10233.00 1989/04/30 10769.06 10764.09 1989/05/31 11104.66 11200.04 1989/06/30 10854.35 11136.20 1989/07/31 12198.85 12141.80 1989/08/31 12493.98 12379.78 1989/09/30 12584.16 12329.02 1989/10/31 12491.25 12042.99 1989/11/30 13029.59 12288.66 1989/12/31 13161.94 12583.59 1990/01/31 12406.75 11739.23 1990/02/28 12276.73 11890.67 1990/03/31 12766.36 12205.77 1990/04/30 12766.36 11900.63 1990/05/31 14522.95 13060.94 1990/06/30 15017.78 12972.12 1990/07/31 15225.12 12930.61 1990/08/31 14542.62 11761.68 1990/09/30 14104.91 11188.89 1990/10/31 14427.44 11140.78 1990/11/30 15962.33 11860.47 1990/12/31 16362.45 12191.38 1991/01/31 17977.69 12722.92 1991/02/28 20198.26 13632.61 1991/03/31 21998.81 13962.52 1991/04/30 21615.85 13996.03 1991/05/31 22789.45 14600.66 1991/06/30 21761.82 13931.95 1991/07/31 23687.41 14581.18 1991/08/31 24871.12 14926.75 1991/09/30 25372.30 14677.48 1991/10/31 27044.00 14874.16 1991/11/30 25566.84 14274.73 1991/12/31 30056.59 15907.76 1992/01/31 29070.44 15611.87 1992/02/29 27801.04 15814.83 1992/03/31 26105.00 15506.44 1992/04/30 24625.77 15962.33 1992/05/31 25132.84 16040.54 1992/06/30 24164.12 15801.54 1992/07/31 25617.74 16447.82 1992/08/31 24926.80 16110.64 1992/09/30 23201.33 16300.75 1992/10/31 23914.92 16357.80 1992/11/30 25225.07 16915.60 1992/12/31 24816.46 17123.66 1993/01/31 23483.65 17267.50 1993/02/28 20977.67 17502.34 1993/03/31 21556.28 17871.64 1993/04/30 21548.30 17439.14 1993/05/31 22410.23 17906.51 1993/06/30 22330.42 17958.44 1993/07/31 21604.16 17886.61 1993/08/31 22374.32 18564.51 1993/09/30 23072.64 18421.56 1993/10/31 24788.52 18802.89 1993/11/30 24704.72 18624.26 1993/12/31 25416.18 18849.62 1994/01/31 25919.55 19490.50 1994/02/28 25292.34 18962.31 1994/03/31 23642.40 18135.55 1994/04/30 24590.88 18367.69 1994/05/31 25979.72 18668.92 1994/06/30 25567.47 18211.53 1994/07/31 26079.78 18808.87 1994/08/31 29501.85 19580.03 1994/09/30 29713.98 19100.32 1994/10/31 30126.23 19530.08 1994/11/30 30778.62 18818.79 1994/12/31 30870.14 19097.87 1995/01/31 32505.21 19593.08 1995/02/28 33194.12 20356.63 1995/03/31 34096.68 20957.35 1995/04/30 34571.94 21574.54 1995/05/31 34905.04 22436.88 1995/06/30 36671.33 22958.09 1995/07/31 38770.72 23719.38 1995/08/31 39099.43 23778.91 1995/09/30 41290.86 24782.38 1995/10/31 41391.66 24693.91 1995/11/30 43136.04 25777.97 1995/12/31 45028.70 26274.46 1996/01/31 46639.34 27168.84 1996/02/29 46367.05 27420.69 1996/03/31 46528.58 27684.75 1996/04/30 46333.79 28092.83 1996/05/31 47174.32 28817.34 1996/06/30 47207.75 28927.14 1996/07/31 45364.33 27649.13 1996/08/31 46902.10 28232.26 1996/09/30 50130.47 29821.17 1996/10/31 49146.68 30643.63 1996/11/30 51787.64 32959.99 1996/12/31 51989.79 32307.05 1997/01/31 55128.80 34325.59 1997/02/28 55831.80 34594.71 1997/03/31 52769.09 33173.21 1997/04/30 55402.63 35153.65 1997/05/31 59622.17 37293.80 1997/06/30 64057.65 38964.57 1997/07/31 66450.47 42064.98 1997/08/31 61822.40 39708.50 1997/09/30 65656.76 41883.33 1997/10/31 65633.41 40484.43 1997/11/30 67471.80 42358.45 1997/12/31 68182.81 43085.75 1998/01/31 73088.87 43562.28 1998/02/28 76194.47 46703.99 1998/03/31 78905.19 49095.70 1998/04/30 80400.60 49589.60 1998/05/31 79918.66 48737.16 1998/06/30 84669.17 50716.86 1998/07/31 84923.90 50176.72 1998/08/31 76104.49 42922.17 1998/09/30 84930.79 45671.77 1998/10/31 87450.62 49386.71 1998/11/30 91182.18 52380.04 1998/12/31 96331.12 55398.18 1999/01/31 97415.79 57714.93 1999/02/26 96908.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990307 162407 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Health Care Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $96,908 - an 869.08% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Lilly (Eli) & Co. 10.2 Merck & Co., Inc. 10.0 Warner-Lambert Co. 8.0 Schering-Plough Corp. 7.0 Johnson & Johnson 5.4 Medtronic, Inc. 4.7 Bristol-Myers Squibb Co. 4.5 Pfizer, Inc. 4.2 Abbott Laboratories 4.1 Amgen, Inc. 3.6 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Drugs & Pharmaceuticals 62.0% Medical Equipment & Supplies 24.0% Medical Facilities Management 3.7% Drug Stores 2.1% Computer Services & Software 1.2% All Others 7.0%* Row: 1, Col: 1, Value: 7.0 Row: 1, Col: 2, Value: 1.2 Row: 1, Col: 3, Value: 2.1 Row: 1, Col: 4, Value: 3.7 Row: 1, Col: 5, Value: 24.0 Row: 1, Col: 6, Value: 62.0 * INCLUDES SHORT-TERM 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 12 months that ended February 28, 1999, the fund returned 27.20%. During the same time period, the Standard & Poor's 500 Index returned 19.74%. Fund performance also compared favorably 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 23.88% over the same 12-month period. Q. WHAT WERE THE MAIN FACTORS CONTRIBUTING TO THE FUND'S STRONG PERFORMANCE? A. Drug stocks posted solid gains during most of the period due to strong product pipelines, increased merger activity and robust domestic sales. During periods of market weakness, I took the opportunity to increase the fund's asset weightings in pharmaceuticals and medical equipment. My strategy of overweighting these sectors relative to the Goldman Sachs index worked out well. While the fund was overweighted in pharmaceutical stocks relative to the benchmark indexes, total return received the biggest boost from a number of top holdings, such as Eli Lilly, Warner-Lambert and Schering-Plough. Performance also was helped by the fund's underweighted position relative to the Goldman Sachs benchmark in HMOs and hospitals, which continued to struggle during the period. Q. YOU MENTIONED ELI LILLY, WARNER-LAMBERT AND SCHERING-PLOUGH AS MAJOR CONTRIBUTORS TO THE FUND'S PERFORMANCE. WHAT WERE THE STORIES THERE? A. These stocks performed very well. But first, I would like to talk about a stock you didn't ask about - Amgen. While it was not as large of a holding as the others you asked about, it provided a significant boost to total return. I liked Amgen because it had some very successful products and, at one point, traded at a significant discount to other health care companies. The stock soared after an arbitration panel gave the company all rights to a new version of Epogen, a popular anemia drug. Concerning the other stocks you mentioned, Eli Lilly rallied as the company kept generic drug companies at bay by developing a new version of its blockbuster anti-depressant drug, Prozac. Warner-Lambert shares appreciated as the company reported increased earnings driven by the continued success of its cholesterol treatment, Lipitor. Schering-Plough's stock continued to benefit from upward earnings estimates and strong sales of its major product, Claritin. Q. WHAT WAS YOUR RATIONALE BEHIND THE DECISION TO SIGNIFICANTLY INCREASE THE FUND'S HOLDINGS IN PHARMACEUTICAL AND MEDICAL EQUIPMENT COMPANIES? A. Similar to what I mentioned in the semiannual report six months ago, I did not foresee any major changes in the market's favorable growth outlook for these companies. As a result, I continued to take a positive long-term view about their prospects. The major factors for this bullish outlook were an aging population with increasing demand for health care products and an increasing supply of innovative, effective and safe new drugs. Most importantly, these companies produced strong corporate earnings combined with a favorable business outlook. Q. WHAT STOCKS HURT TOTAL RETURN? A. Monsanto, a diversified chemicals company, hurt fund performance when its proposed merger with American Home Products fell apart. While the fund was underweighted in HMOs and health care service providers, such as Medpartners and Foundation Health Systems, this sector continued to detract from the fund's total return as investors remained uncertain about the groups' profitability outlook and rising medical costs. Q. WHAT'S YOUR OUTLOOK, BESO? A. I still see a strong business cycle ahead for pharmaceutical companies, especially those drug companies with dominant market presence and a strong pipeline of profitable products. I will continue to focus on the pharmaceutical companies because I believe they have the best prospects for long-term, sustainable market growth. I also like some of the companies that stand to benefit from the strong pharmaceutical sector. For example, medical research and development (R&D) companies could benefit from the robust R&D cycle and the growing popularity of outsourcing drug research and development. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 063 TRADING SYMBOL: FSPHX SIZE: as of February 28, 1999, more than $3.1 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 FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 95.0% SHARES VALUE (NOTE 1) AGRICULTURE - 0.4% Pioneer Hi-Bred 500,000 $ 11,718,750 International, Inc. COMPUTER SERVICES & SOFTWARE - - 1.2% IMS Health, Inc. 800,000 28,400,000 Medical Manager Corp. (a) 54,900 1,537,200 Shared Medical Systems Corp. 175,400 8,945,400 38,882,600 DRUG STORES - 2.1% CVS Corp. 107,154 5,679,162 Walgreen Co. 1,920,500 61,456,000 67,135,162 DRUGS & PHARMACEUTICALS - 62.0% Allergan, Inc. 126,180 10,283,670 American Home Products Corp. 1,324,600 78,813,700 Amgen, Inc. (a) 909,800 113,611,275 Biogen, Inc. (a) 256,300 24,636,838 Bristol-Myers Squibb Co. 1,114,300 140,332,156 Centocor, Inc. (a) 8,500 353,281 Chiron Corp. (a) 321,800 6,777,913 Elan Corp. PLC sponsored ADR 297,020 22,777,721 (a) Forest Laboratories, Inc. (a) 680,000 33,617,500 Genentech, Inc. (special) (a) 397,400 31,717,488 Genzyme Corp.: (General Division) 477,600 21,492,000 (Molecular Oncology) (a) 27,315 104,138 Glaxo Wellcome PLC sponsored 572,500 36,675,781 ADR Immunex Corp. (a) 72,500 10,258,750 Lilly (Eli) & Co. 3,406,812 322,582,508 Medimmune, Inc. (a) 172,800 9,504,000 Merck & Co., Inc. 3,864,800 315,947,400 Novartis AG (Reg.) 14,501 25,474,459 PAREXEL International Corp. 195,300 4,064,681 (a) Pfizer, Inc. 991,400 130,802,838 Pharmacia & Upjohn, Inc. 232,000 12,644,000 QLT PhotoTherapeutics, Inc. 66,400 2,585,011 (a) Quintiles Transnational Corp. 294,700 12,708,938 (a) Rhone-Poulenc SA sponsored 152,300 7,005,800 ADR Class A Roche Holding AG 2,350 29,801,313 participation certificates Schering-Plough Corp. 3,939,800 220,382,563 Sepracor, Inc. (a) 70,100 8,744,975 SmithKline Beecham PLC 500,900 35,626,513 sponsored ADR Takeda Chemical Industries 448,000 15,353,549 Ltd. Warner-Lambert Co. 3,664,200 253,058,813 Watson Pharmaceuticals, Inc. 252,800 12,213,400 (a) SHARES VALUE (NOTE 1) XOMA Ltd. (a) 1,476 $ 4,133 Zonagen, Inc. (a) 259,100 7,157,638 1,957,114,743 ELECTRONIC INSTRUMENTS - 1.0% Perkin-Elmer Corp. 119,900 11,360,525 Waters Corp. (a) 213,200 19,840,925 31,201,450 INSURANCE - 0.5% Aetna, Inc. 900 66,656 CIGNA Corp. 211,800 16,626,300 16,692,956 MEDICAL EQUIPMENT & SUPPLIES - - 24.0% Abbott Laboratories 2,779,800 129,086,963 AmeriSource Health Corp. 383,000 28,581,375 Class A (a) Bausch & Lomb, Inc. 124,300 7,496,844 Baxter International, Inc. 1,307,800 92,036,425 Becton, Dickinson & Co. 1,481,200 49,620,200 Biomet, Inc. 50,700 1,860,056 Boston Scientific Corp. (a) 742,536 19,677,204 Cardinal Health, Inc. 863,805 62,355,923 Guidant Corp. 728,720 41,537,040 Johnson & Johnson 2,003,900 171,082,963 Mallinckrodt, Inc. 7,200 222,750 Medtronic, Inc. 2,101,886 148,445,699 Omnicare, Inc. 9,200 220,225 Sybron International, Inc. (a) 239,700 5,887,631 758,111,298 MEDICAL FACILITIES MANAGEMENT - - 3.7% Concentra Managed Care, Inc. 277,200 2,945,250 (a) Foundation Health Systems, 232,100 1,856,800 Inc. Class A (a) Health Management Associates, 955,500 12,361,781 Inc. Class A (a) HEALTHSOUTH Corp. (a) 713,200 8,290,950 Humana, Inc. (a) 260,600 4,560,500 Lincare Holdings, Inc. (a) 764,400 27,231,750 PacifiCare Health Systems, 8,800 635,800 Inc. Class B (a) Tenet Healthcare Corp. (a) 52,800 1,039,500 Total Renal Care Holdings, 622,300 5,522,913 Inc. (a) Trigon Healthcare, Inc. (a) 100,000 3,506,250 United HealthCare Corp. 347,300 17,126,231 Universal Health Services, 300,000 12,187,500 Inc. Class B (a) Wellpoint Health Networks, 229,800 18,125,475 Inc. (a) 115,390,700 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SERVICES - 0.1% Medpartners, Inc. (a) 326,000 $ 1,935,625 TOTAL COMMON STOCKS 2,998,183,284 (Cost $2,066,944,764) CASH EQUIVALENTS - 5.0% Taxable Central Cash Fund (b) 157,479,759 157,479,759 (Cost $157,479,759) TOTAL INVESTMENT IN $ 3,155,663,043 SECURITIES - 100% (Cost $2,224,424,523)
LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $2,023,455,625 and $1,543,188,343, respectively. 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 $244,159 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $13,395,137. The fund received cash collateral of $13,304,800. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $2,224,754,689. Net unrealized appreciation aggregated $930,908,354, of which $973,074,201 related to appreciated investment securities and $42,165,847 related to depreciated investment securities. The fund hereby designates approximately $103,283,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 65% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for use in preparing 1999 income tax returns. HEALTH CARE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 3,155,663,043 value (cost $2,224,424,523) - - See accompanying schedule Receivable for investments 2,545,052 sold Receivable for fund shares 6,544,577 sold Dividends receivable 2,805,069 Interest receivable 807,435 Redemption fees receivable 5,071 Other receivables 181,348 TOTAL ASSETS 3,168,551,595 LIABILITIES Payable for fund shares $ 6,553,547 redeemed Accrued management fee 1,513,897 Other payables and accrued 1,354,795 expenses Collateral on securities 13,304,800 loaned, at value TOTAL LIABILITIES 22,727,039 NET ASSETS $ 3,145,824,556 Net Assets consist of: Paid in capital $ 2,136,274,229 Undistributed net investment 1,027,364 income Accumulated undistributed net 77,281,651 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 931,241,312 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 22,861,395 $ 3,145,824,556 shares outstanding NET ASSET VALUE and $137.60 redemption price per share ($3,145,824,556 (divided by) 22,861,395 shares) Maximum offering price per $141.86 share (100/97.00 of $137.60) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 19,172,514 Dividends Interest (including income on 10,666,331 securities loaned of $356,115) TOTAL INCOME 29,838,845 EXPENSES Management fee $ 14,851,440 Transfer agent fees 10,618,207 Accounting and security 978,835 lending fees Non-interested trustees' 13,557 compensation Custodian fees and expenses 77,520 Registration fees 149,900 Audit 69,969 Legal 14,375 Reports to shareholders 193,559 Total expenses before 26,967,362 reductions Expense reductions (606,172) 26,361,190 NET INVESTMENT INCOME 3,477,655 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 141,328,826 Foreign currency transactions (312,020) 141,016,806 Change in net unrealized appreciation (depreciation) on: Investment securities 456,692,226 Assets and liabilities in 2,848 456,695,074 foreign currencies NET GAIN (LOSS) 597,711,880 NET INCREASE (DECREASE) IN $ 601,189,535 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 10,991,959 charges paid to FDC Sales charges - Retained by $ 10,970,853 FDC Deferred sales charges $ 58,978 withheld by FDC Exchange fees withheld by FSC $ 79,358 Expense reductions Directed $ 590,859 brokerage arrangements Custodian credits 5,771 Transfer agent credits 9,542 $ 606,172 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ 3,477,655 $ 4,973,301 income Net realized gain (loss) 141,016,806 304,829,057 Change in net unrealized 456,695,074 201,089,915 appreciation (depreciation) NET INCREASE (DECREASE) IN 601,189,535 510,892,273 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (3,782,810) (3,399,542) From net investment income From net realized gain (121,803,514) (285,151,308) TOTAL DISTRIBUTIONS (125,586,324) (288,550,850) Share transactions Net 1,715,677,379 1,156,162,920 proceeds from sales of shares Reinvestment of distributions 121,790,160 281,663,060 Cost of shares redeemed (1,393,295,000) (810,127,873) NET INCREASE (DECREASE) IN 444,172,539 627,698,107 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 2,029,623 1,425,211 TOTAL INCREASE (DECREASE) 921,805,373 851,464,741 IN NET ASSETS NET ASSETS Beginning of period 2,224,019,183 1,372,554,442 End of period (including $ 3,145,824,556 $ 2,224,019,183 undistributed net investment income of $1,027,364 and $2,734,330, respectively) OTHER INFORMATION Shares Sold 13,702,070 10,761,631 Issued in reinvestment of 985,706 2,916,990 distributions Redeemed (11,362,310) (7,540,216) Net increase (decrease) 3,325,466 6,138,405
FINANCIAL HIGHLIGHTS
YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 113.84 $ 102.45 $ 100.47 $ 76.13 $ 63.31 period Income from Investment Operations Net investment income C .17 .33 .52 .95 .75 Net realized and unrealized 29.85 31.94 18.01 28.85 18.38 gain (loss) Total from investment 30.02 32.27 18.53 29.80 19.13 operations Less Distributions From net investment income (.19) (.25) (.65) (.59) (.62) From net realized gain (6.17) (20.73) (15.95) (4.92) (5.74) Total distributions (6.36) (20.98) (16.60) (5.51) (6.36) Redemption fees added to paid .10 .10 .05 .05 .05 in capital Net asset value, end of period $ 137.60 $ 113.84 $ 102.45 $ 100.47 $ 76.13 TOTAL RETURN A, B 27.20% 36.47% 20.41% 39.68% 31.24% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 3,145,825 $ 2,224,019 $ 1,372,554 $ 1,525,910 $ 943,141 (000 omitted) Ratio of expenses to average 1.07% 1.20% 1.33% 1.31% 1.39% net assets Ratio of expenses to average 1.05% D 1.18% D 1.32% D 1.30% D 1.36% D net assets after expense reductions Ratio of net investment .14% .31% .52% 1.06% 1.08% income to average net assets Portfolio turnover rate 66% 79% 59% 54% 151%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29. 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. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT MEDICAL DELIVERY -29.47% 52.56% 335.43% SELECT MEDICAL DELIVERY (LOAD -31.66% 47.91% 322.30% ADJ.) S&P 500 19.74% 194.91% 459.21% GS Health Care 23.88% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT MEDICAL DELIVERY -29.47% 8.81% 15.85% SELECT MEDICAL DELIVERY -31.66% 8.14% 15.49% (LOAD ADJ.) S&P 500 19.74% 24.15% 18.78% GS Health Care 23.88% 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 1989/02/28 9700.00 10000.00 1989/03/31 10232.72 10233.00 1989/04/30 10931.92 10764.09 1989/05/31 11497.94 11200.04 1989/06/30 11364.27 11136.20 1989/07/31 12654.15 12141.80 1989/08/31 13243.49 12379.78 1989/09/30 13610.44 12329.02 1989/10/31 13154.53 12042.99 1989/11/30 13766.11 12288.66 1989/12/31 13766.92 12583.59 1990/01/31 11740.02 11739.23 1990/02/28 12036.09 11890.67 1990/03/31 12594.05 12205.77 1990/04/30 12719.31 11900.63 1990/05/31 14518.46 13060.94 1990/06/30 15213.07 12972.12 1990/07/31 15270.00 12930.61 1990/08/31 14051.59 11761.68 1990/09/30 13117.85 11188.89 1990/10/31 12958.44 11140.78 1990/11/30 14757.59 11860.47 1990/12/31 16005.68 12191.38 1991/01/31 18585.35 12722.92 1991/02/28 19734.47 13632.61 1991/03/31 22665.92 13962.52 1991/04/30 21985.82 13996.03 1991/05/31 23803.32 14600.66 1991/06/30 21798.00 13931.95 1991/07/31 23985.14 14581.18 1991/08/31 24266.16 14926.75 1991/09/30 24486.10 14677.48 1991/10/31 25023.72 14874.16 1991/11/30 24327.26 14274.73 1991/12/31 28462.11 15907.76 1992/01/31 28487.12 15611.87 1992/02/29 27386.65 15814.83 1992/03/31 25573.38 15506.44 1992/04/30 24560.45 15962.33 1992/05/31 24310.34 16040.54 1992/06/30 23030.21 15801.54 1992/07/31 24340.76 16447.82 1992/08/31 24313.46 16110.64 1992/09/30 21460.28 16300.75 1992/10/31 22525.10 16357.80 1992/11/30 24736.66 16915.60 1992/12/31 24709.36 17123.66 1993/01/31 23453.41 17267.50 1993/02/28 19740.18 17502.34 1993/03/31 20177.03 17871.64 1993/04/30 19931.31 17439.14 1993/05/31 20545.63 17906.51 1993/06/30 20750.40 17958.44 1993/07/31 21269.16 17886.61 1993/08/31 21200.90 18564.51 1993/09/30 22948.30 18421.56 1993/10/31 24026.78 18802.89 1993/11/30 24422.67 18624.26 1993/12/31 26074.52 18849.62 1994/01/31 27535.23 19490.50 1994/02/28 27685.40 18962.31 1994/03/31 26306.59 18135.55 1994/04/30 27152.99 18367.69 1994/05/31 28067.65 18668.92 1994/06/30 26333.90 18211.53 1994/07/31 27507.93 18808.87 1994/08/31 30292.85 19580.03 1994/09/30 31371.33 19100.32 1994/10/31 32395.20 19530.08 1994/11/30 31002.74 18818.79 1994/12/31 31247.72 19097.87 1995/01/31 32619.36 19593.08 1995/02/28 33119.44 20356.63 1995/03/31 35219.77 20957.35 1995/04/30 34075.12 21574.54 1995/05/31 32957.43 22436.88 1995/06/30 33487.62 22958.09 1995/07/31 36869.34 23719.38 1995/08/31 37041.29 23778.91 1995/09/30 37815.07 24782.38 1995/10/31 37170.25 24693.91 1995/11/30 40279.71 25777.97 1995/12/31 41304.12 26274.46 1996/01/31 43525.59 27168.84 1996/02/29 44429.50 27420.69 1996/03/31 44858.48 27684.75 1996/04/30 45369.25 28092.83 1996/05/31 45273.43 28817.34 1996/06/30 44203.48 28927.14 1996/07/31 39412.64 27649.13 1996/08/31 43053.68 28232.26 1996/09/30 46135.78 29821.17 1996/10/31 42654.44 30643.63 1996/11/30 45065.83 32959.99 1996/12/31 45849.53 32307.05 1997/01/31 48018.79 34325.59 1997/02/28 49094.75 34594.71 1997/03/31 45988.36 33173.21 1997/04/30 47036.80 35153.65 1997/05/31 51398.33 37293.80 1997/06/30 51755.52 38964.57 1997/07/31 55083.07 42064.98 1997/08/31 53184.30 39708.50 1997/09/30 54763.47 41883.33 1997/10/31 52958.70 40484.43 1997/11/30 54218.28 42358.45 1997/12/31 55082.88 43085.75 1998/01/31 53475.86 43562.28 1998/02/28 59882.81 46703.99 1998/03/31 62293.35 49095.70 1998/04/30 63842.57 49589.60 1998/05/31 60831.96 48737.16 1998/06/30 61628.89 50716.86 1998/07/31 56869.47 50176.72 1998/08/31 43985.85 42922.17 1998/09/30 45446.88 45671.77 1998/10/31 48546.03 49386.71 1998/11/30 50405.53 52380.04 1998/12/31 51689.46 55398.18 1999/01/31 44317.90 57714.93 1999/02/26 42230.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990307 163817 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Medical Delivery Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $42,230 - a 322.30% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Lincare Holdings, Inc. 14.6 Health Management Associates, 10.5 Inc. Class A Wellpoint Health Networks, Inc. 9.1 Universal Health Services, 5.5 Inc. Class B PacifiCare Health Systems, 5.5 Inc. Class B Tenet Healthcare Corp. 4.8 HEALTHSOUTH Corp. 4.8 Humana, Inc. 3.9 Columbia/HCA Healthcare Corp. 3.0 Quorum Health Group, Inc. 2.9 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Medical Facilities Management 77.1% Drugs & Pharmaceuticals 8.8% Medical Equipment & Supplies 6.6% Insurance 2.9% Computer Services & Software 0.6% All Others 4.0%* Row: 1, Col: 1, Value: 4.0 Row: 1, Col: 2, Value: 1.6 Row: 1, Col: 3, Value: 2.9 Row: 1, Col: 4, Value: 6.6 Row: 1, Col: 5, Value: 8.800000000000001 Row: 1, Col: 6, Value: 76.09999999999999 * INCLUDES SHORT-TERM 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 12 months that ended February 28, 1999, the fund returned - -29.47%. By comparison, the Standard & Poor's 500 Index and the Goldman Sachs Health Care Index - an index of 93 stocks designed to measure the performance of companies in the health care sector - returned 19.74% and 23.88%, respectively. Q. WHY DID THE FUND LAG THE GOLDMAN SACHS INDEX BY SUCH A WIDE MARGIN? A. The fund's return obviously was disappointing as conditions across all health care services continued to be very challenging. HMOs were not able to find a solution to spiraling costs - particularly in the pharmaceuticals area - or to pass those costs on to patients, making their stocks unattractive to investors. The government's overhaul of Medicare was probably the biggest negative factor affecting hospitals and long-term care providers. Changes in the federal budget for 1998, which reduced Medicare reimbursement, severely affected the revenues of hospitals, long-term care facilities and the home health care sector. Physician practice managers also struggled to create an attractive long-term business model. Meanwhile, investors continued to gravitate to pharmaceutical stocks - a significant part of the Goldman Sachs index - where growth has been healthy and demand strong. Q. WHAT DID YOU DO TO TRY TO ALLEVIATE THE SITUATION? A. While the fund could not avoid being affected by the changes in Medicare, I looked for opportunities to offset the negative trends within the industry. For example, while the rising cost of prescription drugs has hurt managed-care companies, pharmaceutical stocks have performed well, so I increased the fund's investments in that area, holding Eli Lilly, Merck, Pfizer and Bristol-Myers Squibb. I've since sold Pfizer from the fund's portfolio to take profits for the fund. I also bought stocks of companies that don't depend as much on Medicare, and therefore shouldn't be as severely affected by the changes. Examples include small hospitals that focus more on basic medical services that are in less danger of being cut by Medicare. In addition, I shifted the fund's HMO holdings to those companies with little Medicare exposure. Q. WHICH STOCKS PERFORMED WELL DURING THE PERIOD? A. Wellpoint Health Networks did well, reflecting its success in controlling costs and in increasing its membership. Drug makers Eli Lilly, Merck, Pfizer and Bristol-Myers Squibb benefited from the pharmaceutical industry's strong growth and rising prices. An aging population demanding a wider range of more effective drugs helped boost the industry. Lincare, a respiratory care company, performed well as it continued to expand its market share through acquisitions and did a good job managing its internal cost structure. Cardinal Health, the country's second-largest hospital and pharmacy drug distributor, performed well, reflecting increased demand and its acquisition activities. Cardinal successfully employed its own extensive sales and distribution system for efficient, cost-effective product delivery. Q. WHICH STOCKS WERE DISAPPOINTMENTS? A. HEALTHSOUTH, United HealthCare and Columbia/HCA were all disappointing stocks for the fund. Each experienced earnings shortfalls at various times during the year. Foundation Health Systems, a managed-care company, was hurt by rising costs and slow membership growth, particularly on the Medicare side of its business. Quorum Health Group, another managed-care company, was subject to a government probe. Quorum also had disappointing performance in some of its newly acquired hospitals, and its stock suffered as a result. Q. WHAT'S YOUR OUTLOOK, JOHN? A. Although I'm still cautious, the outlook for HMOs appears to be improving, as recent data on pricing trends in 1999 look more positive. It also appears that there is some movement by the federal government to make the Medicare HMO formula more attractive. Though hospital business trends became bleaker in late 1998 and early 1999 as patient volumes slowed when this winter's cases of flu and other upper respiratory diseases declined, the overall picture looks better for hospitals. First, the changes in 1999 Medicare reimbursement have not been nearly as onerous as they were in 1998. Second, the recent slowdown in business trends was a cyclical event that should return to normal. The silver lining is that there may now exist some good buying opportunities. I'll try to find the companies with attractive relative valuations that are likely to do well, should business trends improve. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 505 TRADING SYMBOL: FSHCX SIZE: as of February 28, 1999, more than $76 million MANAGER: John Porter, since 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 FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 96.4% SHARES VALUE (NOTE 1) COMPUTER SERVICES & SOFTWARE - - 0.6% Shared Medical Systems Corp. 8,900 $ 453,900 DRUGS & PHARMACEUTICALS - 8.8% Bristol-Myers Squibb Co. 5,100 642,281 Lilly (Eli) & Co. 22,500 2,130,469 Merck & Co., Inc. 19,000 1,553,250 Schering-Plough Corp. 7,500 419,531 Warner-Lambert Co. 26,200 1,809,438 6,554,969 INSURANCE - 2.9% CIGNA Corp. 27,700 2,174,450 MEDICAL EQUIPMENT & SUPPLIES - - 6.6% Abbott Laboratories 10,600 492,238 Baxter International, Inc. 7,000 492,625 Boston Scientific Corp. (a) 9,500 251,750 Cardinal Health, Inc. 15,850 1,144,172 Guidant Corp. 8,200 467,400 Johnson & Johnson 6,000 512,250 McKesson HBOC, Inc. 1,744 118,592 Medtronic, Inc. 10,200 720,375 Omnicare, Inc. 20,000 478,750 St. Jude Medical, Inc. (a) 9,250 232,406 4,910,558 MEDICAL FACILITIES MANAGEMENT - - 77.1% Carematrix Corp. (a) 8,000 177,000 Columbia/HCA Healthcare Corp. 124,723 2,229,424 Coram Healthcare Corp. 9,740 0 warrants 7/11/99 (a) Foundation Health Systems, 128,870 1,030,960 Inc. Class A (a) HCR Manor Care, Inc. (a) 58,800 1,315,650 Health Management Associates, 607,717 7,862,339 Inc. Class A (a) HEALTHSOUTH Corp. (a) 307,700 3,577,013 Humana, Inc. (a) 167,800 2,936,500 Lincare Holdings, Inc. (a) 306,100 10,904,809 NovaCare, Inc. (a) 40,000 85,000 Oxford Health Plans, Inc. (a) 21,100 399,581 PacifiCare Health Systems, Inc.: Class A (a) 4,500 296,438 Class B (a) 56,800 4,103,800 Pediatrix Medical Group (a) 13,400 413,725 Phycor, Inc. (a) 7,900 42,956 Physician Reliance Network, 48,300 437,719 Inc. (a) Quorum Health Group, Inc. (a) 236,400 2,186,700 Renal Care Group, Inc. (a) 60,850 1,205,591 Sierra Health Services, Inc. 20,600 296,125 (a) Tenet Healthcare Corp. (a) 183,100 3,604,781 Total Renal Care Holdings, 96,066 852,586 Inc. (a) Trigon Healthcare, Inc. (a) 19,300 676,706 SHARES VALUE (NOTE 1) United HealthCare Corp. 41,700 $ 2,056,331 Universal Health Services, 101,900 4,139,688 Inc. Class B (a) Wellpoint Health Networks, 86,300 6,806,913 Inc. (a) 57,638,335 SERVICES - 0.4% Magellan Health Services, 23,600 160,775 Inc. (a) Medpartners, Inc. (a) 24,800 147,250 308,025 TOTAL COMMON STOCKS 72,040,237 (Cost $72,651,789) CASH EQUIVALENTS - 3.6% Taxable Central Cash Fund (b) 2,705,792 2,705,792 (Cost $2,705,792) TOTAL INVESTMENT IN $ 74,746,029 SECURITIES - 100% (Cost $75,357,581) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $91,251,954 and $106,080,592, respectively. 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 $23,772 for the period. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $76,541,184. Net unrealized depreciation aggregated $1,795,155, of which $11,240,396 related to appreciated investment securities and $13,035,551 related to depreciated investment securities. The fund hereby designates approximately $6,804,000 as a capital gain dividend for the purpose of the dividend paid deduction. At February 28, 1999, the fund had a capital loss carryforward of approximately $10,988,000, all of which will expire on February 28, 2007. The fund intends to elect to defer to its fiscal year ending February 29, 2000 approximately $18,134,000 of losses recognized during the period November 1, 1998 to February 28,1999. A total of 66% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of this percentage for use in preparing 1999 income tax returns. MEDICAL DELIVERY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 74,746,029 value (cost $75,357,581) - See accompanying schedule Receivable for investments 2,890,910 sold Receivable for fund shares 45,593 sold Dividends receivable 16,250 Interest receivable 16,589 Redemption fees receivable 277 Other receivables 37,310 TOTAL ASSETS 77,752,958 LIABILITIES Payable for fund shares $ 791,042 redeemed Accrued management fee 42,231 Other payables and accrued 77,405 expenses TOTAL LIABILITIES 910,678 NET ASSETS $ 76,842,280 Net Assets consist of: Paid in capital $ 107,722,467 Accumulated undistributed net (30,268,635) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (611,552) (depreciation) on investments NET ASSETS, for 4,028,359 $ 76,842,280 shares outstanding NET ASSET VALUE and $19.08 redemption price per share ($76,842,280 (divided by) 4,028,359 shares) Maximum offering price per $19.67 share (100/97.00 of $19.08) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 184,483 Dividends Special dividend from 748,113 Vencor, Inc. Interest (including income on 814,106 securities loaned of $27,838) TOTAL INCOME 1,746,702 EXPENSES Management fee $ 909,497 Transfer agent fees 1,031,055 Accounting and security 153,468 lending fees Non-interested trustees' 197 compensation Custodian fees and expenses 10,198 Registration fees 38,310 Audit 13,275 Legal 1,627 Reports to shareholders 24,315 Total expenses before 2,181,942 reductions Expense reductions (45,006) 2,136,936 NET INVESTMENT INCOME (LOSS) (390,234) REALIZED AND UNREALIZED GAIN (29,445,200) (LOSS) Net realized gain (loss) on investment securities Change in net unrealized (24,558,768) appreciation (depreciation) on investment securities NET GAIN (LOSS) (54,003,968) NET INCREASE (DECREASE) IN $ (54,394,202) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 324,894 charges paid to FDC Sales charges - Retained by $ 324,831 FDC Deferred sales charges $ 6,973 withheld by FDC Exchange fees withheld by FSC $ 19,297 Expense reductions Directed $ 41,000 brokerage arrangements Custodian credits 649 Transfer agent credits 3,357 $ 45,006 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (390,234) $ (1,403,143) income (loss) Net realized gain (loss) (29,445,200) 30,147,880 Change in net unrealized (24,558,768) (1,649,494) appreciation (depreciation) NET INCREASE (DECREASE) IN (54,394,202) 27,095,243 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (7,388,637) (27,697,433) From net realized gain In excess of net realized (824,351) - gain TOTAL DISTRIBUTIONS (8,212,988) (27,697,433) Share transactions Net 162,156,332 114,716,005 proceeds from sales of shares Reinvestment of distributions 8,097,680 27,235,291 Cost of shares redeemed (186,595,554) (178,502,092) NET INCREASE (DECREASE) IN (16,341,542) (36,550,796) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 248,569 310,663 TOTAL INCREASE (DECREASE) (78,700,163) (36,842,323) IN NET ASSETS NET ASSETS Beginning of period 155,542,443 192,384,766 End of period $ 76,842,280 $ 155,542,443 OTHER INFORMATION Shares Sold 6,115,538 4,089,783 Issued in reinvestment of 283,433 1,085,517 distributions Redeemed (7,863,246) (6,483,186) Net increase (decrease) (1,464,275) (1,307,886)
FINANCIAL HIGHLIGHTS
YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 28.32 $ 28.29 $ 29.00 $ 23.18 $ 20.28 period Income from Investment Operations Net investment income (loss) C (.06) F (.24) (.23) (.03) .06 Net realized and unrealized (7.88) 5.45 2.92 7.72 3.74 gain (loss) Total from investment (7.94) 5.21 2.69 7.69 3.80 operations Less Distributions From net investment income - - - - (.06) From net realized gain (1.21) (5.23) (3.45) (1.91) (.89) In excess of net realized gain (.13) - - - - Total distributions (1.34) (5.23) (3.45) (1.91) (.95) Redemption fees added to paid .04 .05 .05 .04 .05 in capital Net asset value, end of period $ 19.08 $ 28.32 $ 28.29 $ 29.00 $ 23.18 TOTAL RETURN A, B (29.47)% 21.97% 10.50% 34.15% 19.63% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 76,842 $ 155,542 $ 192,385 $ 295,489 $ 299,570 (000 omitted) Ratio of expenses to average 1.40% 1.57% 1.57% 1.65% 1.48% net assets Ratio of expenses to average 1.37% d 1.53% d 1.53% d 1.62% d 1.45% d net assets after expense reductions Ratio of net investment (.25)% (.88)% (.84)% (.13)% .29% income (loss) to average net assets Portfolio turnover rate 67% 109% 78% 132% 123% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29. F NET INVESTMENT INCOME (LOSS) PER SHARE REFLECTS A SPECIAL DIVIDEND FROM VENCOR, INC., WHICH AMOUNTED TO $.12 PER SHARE.
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. CUMULATIVE TOTAL RETURNS PERIOD ENDED FEBRUARY 28, 1999 LIFE OF FUND SELECT MEDICAL EQUIPMENT AND 21.00% SYSTEMS SELECT MEDICAL EQUIPMENT AND 17.30% SYSTEMS (LOAD ADJ.) S&P 500 15.54% GS Health Care 19.32% 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 market capitalization-weighted 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. (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 Medical Equipment/Systems S&P 500 00354 SP001 1998/04/28 9700.00 10000.00 1998/04/30 9961.90 10246.17 1998/05/31 9816.40 10070.04 1998/06/30 10340.20 10479.08 1998/07/31 10543.90 10367.48 1998/08/31 9185.90 8868.55 1998/09/30 9874.60 9436.67 1998/10/31 10349.90 10204.25 1998/11/30 11067.70 10822.73 1998/12/31 11882.50 11446.33 1999/01/31 11872.80 11925.02 1999/02/26 11730.00 11554.39 IMATRL PRASUN SHR__CHT 19990228 19990315 135209 R00000000000014 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Medical Equipment and Systems Portfolio on April 28, 1998, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $11,730 - a 17.30% 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 been $11,554 - a 15.54% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Baxter International, Inc. 7.2 Becton, Dickinson & Co. 6.7 Medtronic, Inc. 6.6 Guidant Corp. 6.1 Abbott Laboratories 5.9 Johnson & Johnson 5.7 Biomet, Inc. 5.0 Boston Scientific Corp. 4.5 Bausch & Lomb, Inc. 4.1 Allergan, Inc. 3.8 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Medical Equipment & Supplies 70.4% Drugs & Pharmaceuticals 10.3% Electronic Instruments 5.7% Industrial Machinery & Equipment 1.0% Household Products 0.4% All Others 12.2%* Row: 1, Col: 1, Value: 12.2 Row: 1, Col: 2, Value: 1.4 Row: 1, Col: 3, Value: 2.0 Row: 1, Col: 4, Value: 5.7 Row: 1, Col: 5, Value: 10.3 Row: 1, Col: 6, Value: 68.40000000000001 * INCLUDES SHORT-TERM 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. The fund did well on both an absolute and a relative basis. From its inception on April 28, 1998, through February 28, 1999, the fund returned 21.00%, compared to 15.54% for the Standard and Poor's 500 Index and 19.32% for the Goldman Sachs Health Care Index, an index of 93 stocks designed to measure the performance of companies in the health care sector. Q. WHAT ENABLED THE FUND TO BEAT BOTH OF ITS BENCHMARKS? A. Medical device stocks performed well during the period due to major, profitable product launches at many of the larger companies, leading to faster earnings growth than that experienced by the typical S&P 500 company. Superior earnings growth, combined with increased industry consolidation and generally favorable business prospects, contributed to the fund's strong performance. In addition, the fund's overweighted position in large-cap cardiology stocks, which tend to offer higher quality, faster growth and greater product diversification than many of the smaller companies within the sector, helped the fund outperform its benchmarks. Q. WHAT SHIFTS IN STRATEGY DID YOU MAKE DURING THE PERIOD? A. I increased the fund's exposure to the large-cap, diversified cardiology companies I mentioned earlier, and sold more of the small-cap, single-product companies. Because earnings for S&P 500 companies were slowing, I focused on medical device companies that seemed capable of generating consistent revenue and earnings growth. Medical device companies with diversified product portfolios tend to have more consistent results than many of the smaller companies, which tend to be more dependent on their ability to gain regulatory approval for and successfully market a single product. As the year progressed, investors became increasingly willing to pay higher premiums for companies with solid growth prospects. In addition, I raised the fund's weighting in orthopedic stocks. That decision was driven by an improvement in the industry's basic business prospects following a wave of consolidation that I believed would lead to more stable pricing. Consolidation and the improved fundamental outlook boded well for the prices of orthopedic shares. Q. WHAT STOCKS CONTRIBUTED POSITIVELY TO THE FUND'S PERFORMANCE DURING THE PERIOD? A. Guidant, one of the fund's core holdings, was also one of the top performers. The company has a leadership position in three key segments of the cardiology market and reported strong earnings during the period. Arterial Vascular Engineering was another star performer. The company was acquired by Medtronic at a significant premium to the stock's price. Sofamor/Danek Group, an orthopedic company specializing in products for the spine, also performed well when it, too, was acquired by Medtronic at a substantial premium. Q. WHAT STOCKS WERE DISAPPOINTING? A. The fund was hurt by its large position in Boston Scientific, which suffered the double whammy of a Food and Drug Administration (FDA)-mandated recall on a major new product and an apparently related investigation by the Department of Justice. Another disappointment was ESC Medical Systems, an Israel-based firm that manufactures lasers for medical purposes. The company suffered a sharp decline in sales concurrent with difficulties in integrating a recent acquisition. Q. WHAT'S YOUR OUTLOOK, KERRY? A. My outlook for the medical device industry remains positive. The overall economic, demographic and regulatory environment appears supportive of stable pricing and further healthy growth in the demand for medical devices. I continue to favor larger, diversified companies and remain cautious of single-product companies, particularly those without proven success in the marketplace. One area that I am keeping an eye on in 1999 is the discussion in Washington about Medicare reform. Some topics being discussed - for example, the reimbursement of pharmaceuticals - could lead to measures that negatively affect some medical device stocks with pharmaceutical exposure. On the positive side, accounting changes have been proposed by the Financial Accounting Standards Board that could stimulate more short-term consolidation in the industry, as participants attempt to complete mergers and acquisitions before these new standards take effect. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: April 28, 1998 FUND NUMBER: 354 TRADING SYMBOL: FSMEX SIZE: as of February 28, 1999, more than $28 million MANAGER: Kerry Nelson, since inception; analyst, medical devices and automotive industries; joined Fidelity in 1995 MEDICAL EQUIPMENT AND SYSTEMS PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 88.0% SHARES VALUE (NOTE 1) DRUGS & PHARMACEUTICALS - 10.3% Allergan, Inc. 14,050 $ 1,145,075 Biomatrix, Inc. (a) 2,000 139,000 Chiron Corp. (a) 33,000 695,063 Cytyc Corp. (a) 9,000 163,125 Lilly (Eli) & Co. 2,800 265,125 Merck & Co., Inc. 1,200 98,100 Pfizer, Inc. 500 65,969 Sepracor, Inc. (a) 1,000 124,750 Ventana Medical Systems, Inc. 15,300 265,838 (a) Warner-Lambert Co. 1,500 103,594 3,065,639 ELECTRONIC INSTRUMENTS - 5.7% Perkin-Elmer Corp. 8,740 828,115 Thermo Optek Corp. (a) 2,680 29,145 Waters Corp. (a) 9,160 852,453 1,709,713 HOUSEHOLD PRODUCTS - 0.4% Safeskin Corp. (a) 5,290 122,993 INDUSTRIAL MACHINERY & EQUIPMENT - 1.0% Mettler-Toledo International, 11,310 289,112 Inc. (a) MEDICAL EQUIPMENT & SUPPLIES - - 70.4% Abbott Laboratories 38,120 1,770,198 ADAC Laboratories (a) 5,000 89,375 Ballard Medical Products 4,700 112,506 Bard (C.R.), Inc. 14,630 824,766 Bausch & Lomb, Inc. 20,380 1,229,169 Baxter International, Inc. 30,460 2,143,619 Becton, Dickinson & Co. 59,960 2,008,660 Biomet, Inc. 41,110 1,508,223 Boston Scientific Corp. (a) 50,220 1,330,830 CONMED Corp. (a) 3,000 92,625 Cooper Companies, Inc. (a) 4,310 63,034 Dionex Corp. (a) 3,500 129,063 ESC Medical Systems Ltd. (a) 6,690 33,659 Guidant Corp. 31,820 1,813,740 Haemonetics Corp. (a) 5,600 93,450 Heartport, Inc. (a) 4,000 26,500 Hillenbrand Industries, Inc. 20,670 865,556 Johnson & Johnson 19,850 1,694,694 Mallinckrodt, Inc. 6,000 185,625 Medtronic, Inc. 27,808 1,963,940 Mentor Corp. 3,120 47,970 Ocular Sciences, Inc. (a) 11,900 291,550 Orthofix International NV (a) 8,170 114,380 Pall Corp. 2,900 61,444 Resmed, Inc. (a) 3,500 108,500 St. Jude Medical, Inc. (a) 18,000 452,250 Steris Corp. (a) 18,620 612,133 Stryker Corp. 12,540 592,515 Sybron International, Inc. (a) 27,060 664,661 Thoratec Laboratories Corp. 2,150 16,259 (a) VISX, Inc. (a) 1,000 61,750 21,002,644 SHARES VALUE (NOTE 1) MEDICAL FACILITIES MANAGEMENT - - 0.2% Cambridge Heart, Inc. (a) 7,800 $ 63,375 TOTAL COMMON STOCKS 26,253,476 (Cost $24,659,886) CASH EQUIVALENTS - 12.0% Taxable Central Cash Fund (b) 3,591,929 3,591,929 (Cost $3,591,929) TOTAL INVESTMENT IN $ 29,845,405 SECURITIES - 100% (Cost $28,251,815) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $33,765,122 and $10,391,732, respectively. 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 $3,290 for the period. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $28,271,997. Net unrealized appreciation aggregated $1,573,408, of which $2,853,110 related to appreciated investment securities and $1,279,702 related to depreciated investment securities. MEDICAL EQUIPMENT AND SYSTEMS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 29,845,405 value (cost $28,251,815) - See accompanying schedule Receivable for investments 139,961 sold Receivable for fund shares 155,198 sold Dividends receivable 9,725 Interest receivable 12,234 Redemption fees receivable 30 TOTAL ASSETS 30,162,553 LIABILITIES Payable for investments $ 1,492,114 purchased Payable for fund shares 20,669 redeemed Accrued management fee 12,967 Other payables and accrued 42,385 expenses TOTAL LIABILITIES 1,568,135 NET ASSETS $ 28,594,418 Net Assets consist of: Paid in capital $ 25,878,452 Accumulated undistributed net 1,122,376 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 1,593,590 (depreciation) on investments NET ASSETS, for 2,364,036 $ 28,594,418 shares outstanding NET ASSET VALUE and $12.10 redemption price per share ($28,594,418 (divided by) 2,364,036 shares) Maximum offering price per $12.47 share (100/97.00 of $12.10) STATEMENT OF OPERATIONS APRIL 28, 1998 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1999 INVESTMENT INCOME $ 77,548 Dividends Interest 80,397 TOTAL INCOME 157,945 EXPENSES Management fee $ 80,475 Transfer agent fees 107,471 Accounting fees and expenses 50,606 Non-interested trustees' 41 compensation Custodian fees and expenses 9,620 Registration fees 54,577 Audit 20,376 Legal 41 Miscellaneous 278 Total expenses before 323,485 reductions Expense reductions (1,420) 322,065 NET INVESTMENT INCOME (LOSS) (164,120) REALIZED AND UNREALIZED GAIN 1,286,496 (LOSS) Net realized gain (loss) on investment securities Change in net unrealized 1,593,590 appreciation (depreciation) on investment securities NET GAIN (LOSS) 2,880,086 NET INCREASE (DECREASE) IN $ 2,715,966 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 283,524 charges paid to FDC Sales charges retained by FDC $ 283,524 Deferred sales charges $ 2,642 withheld by FDC Exchange fees withheld by FSC $ 1,635 Expense Reductions Direct brokerage $ 1,351 arrangements Custodian credits 69 $ 1,420 STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET APRIL 28, 1998 (COMMENCEMENT ASSETS OF OPERATIONS) TO FEBRUARY 28, 1999 Operations Net investment $ (164,120) income (loss) Net realized gain (loss) 1,286,496 Change in net unrealized 1,593,590 appreciation (depreciation) NET INCREASE (DECREASE) IN 2,715,966 NET ASSETS RESULTING FROM OPERATIONS Share transactions Net 45,365,490 proceeds from sales of shares Cost of shares redeemed (19,529,306) NET INCREASE (DECREASE) IN 25,836,184 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 42,268 TOTAL INCREASE (DECREASE) 28,594,418 IN NET ASSETS NET ASSETS Beginning of period - End of period $ 28,594,418 OTHER INFORMATION Shares Sold 4,138,562 Redeemed (1,774,526) Net increase (decrease) 2,364,036 FINANCIAL HIGHLIGHTS YEAR ENDED FEBRUARY 28, 1999 F SELECTED PER-SHARE DATA Net asset value, beginning of $ 10.00 period Income from Investment Operations Net investment income (loss) D (.11) Net realized and unrealized 2.18 gain (loss) Total from investment 2.07 operations Redemption fees added to paid .03 in capital Net asset value, end of period $ 12.10 TOTAL RETURN B, C 21.00% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 28,594 (000 omitted) Ratio of expenses to average 2.39% A net assets Ratio of expenses to average 2.38% A, E net assets after expense reductions Ratio of net investment (1.21)% A income (loss) to average net assets Portfolio turnover rate 85% A A ANNUALIZED B THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD 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 THE PERIOD APRIL 28, 1998 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1999. 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT ENERGY -22.00% 36.72% 108.70% SELECT ENERGY (LOAD ADJ.) -24.41% 32.55% 102.37% S&P 500 19.74% 194.91% 459.21% GS Natural Resources -20.88% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT ENERGY -22.00% 6.46% 7.63% SELECT ENERGY (LOAD ADJ.) -24.41% 5.80% 7.30% S&P 500 19.74% 24.15% 18.78% GS Natural Resources -20.88% 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 1989/02/28 9700.00 10000.00 1989/03/31 10259.76 10233.00 1989/04/30 10605.92 10764.09 1989/05/31 10731.13 11200.04 1989/06/30 10952.09 11136.20 1989/07/31 11408.73 12141.80 1989/08/31 11659.15 12379.78 1989/09/30 11843.28 12329.02 1989/10/31 11762.26 12042.99 1989/11/30 12204.18 12288.66 1989/12/31 13086.16 12583.59 1990/01/31 12501.89 11739.23 1990/02/28 12891.40 11890.67 1990/03/31 12898.89 12205.77 1990/04/30 12464.43 11900.63 1990/05/31 13220.99 13060.94 1990/06/30 12909.40 12972.12 1990/07/31 13788.68 12930.61 1990/08/31 14036.47 11761.68 1990/09/30 13996.50 11188.89 1990/10/31 13277.10 11140.78 1990/11/30 13133.21 11860.47 1990/12/31 12498.28 12191.38 1991/01/31 11688.74 12722.92 1991/02/28 12779.14 13632.61 1991/03/31 12605.67 13962.52 1991/04/30 12746.10 13996.03 1991/05/31 12820.44 14600.66 1991/06/30 12249.28 13931.95 1991/07/31 12878.30 14581.18 1991/08/31 13126.60 14926.75 1991/09/30 12994.17 14677.48 1991/10/31 13383.17 14874.16 1991/11/30 12389.98 14274.73 1991/12/31 12502.68 15907.76 1992/01/31 11833.64 15611.87 1992/02/29 11850.37 15814.83 1992/03/31 11507.48 15506.44 1992/04/30 12293.60 15962.33 1992/05/31 12879.01 16040.54 1992/06/30 12241.71 15801.54 1992/07/31 12568.71 16447.82 1992/08/31 12795.10 16110.64 1992/09/30 12870.56 16300.75 1992/10/31 12317.17 16357.80 1992/11/30 12032.09 16915.60 1992/12/31 12204.05 17123.66 1993/01/31 12664.26 17267.50 1993/02/28 13499.46 17502.34 1993/03/31 14189.77 17871.64 1993/04/30 14462.72 17439.14 1993/05/31 14897.63 17906.51 1993/06/30 15093.76 17958.44 1993/07/31 14982.90 17886.61 1993/08/31 16168.23 18564.51 1993/09/30 16074.43 18421.56 1993/10/31 15844.19 18802.89 1993/11/30 13925.49 18624.26 1993/12/31 14541.68 18849.62 1994/01/31 15320.54 19490.50 1994/02/28 14807.20 18962.31 1994/03/31 14090.29 18135.55 1994/04/30 15166.60 18367.69 1994/05/31 15327.10 18668.92 1994/06/30 15246.85 18211.53 1994/07/31 15478.68 18808.87 1994/08/31 15220.10 19580.03 1994/09/30 15104.19 19100.32 1994/10/31 15960.15 19530.08 1994/11/30 14979.36 18818.79 1994/12/31 14601.65 19097.87 1995/01/31 14252.02 19593.08 1995/02/28 14813.27 20356.63 1995/03/31 15622.94 20957.35 1995/04/30 16103.08 21574.54 1995/05/31 16518.58 22436.88 1995/06/30 16038.44 22958.09 1995/07/31 16417.01 23719.38 1995/08/31 16296.98 23778.91 1995/09/30 16306.21 24782.38 1995/10/31 15604.47 24693.91 1995/11/30 16500.11 25777.97 1995/12/31 17723.92 26274.46 1996/01/31 17997.76 27168.84 1996/02/29 17912.78 27420.69 1996/03/31 19112.00 27684.75 1996/04/30 20037.50 28092.83 1996/05/31 20244.58 28817.34 1996/06/30 20619.29 28927.14 1996/07/31 19692.36 27649.13 1996/08/31 20461.52 28232.26 1996/09/30 21546.23 29821.17 1996/10/31 22423.85 30643.63 1996/11/30 23666.33 32959.99 1996/12/31 23479.50 32307.05 1997/01/31 24015.65 34325.59 1997/02/28 21557.44 34594.71 1997/03/31 22154.29 33173.21 1997/04/30 21956.53 35153.65 1997/05/31 23955.48 37293.80 1997/06/30 24306.36 38964.57 1997/07/31 25901.26 42064.98 1997/08/31 26167.08 39708.50 1997/09/30 28091.60 41883.33 1997/10/31 27315.41 40484.43 1997/11/30 25741.77 42358.45 1997/12/31 25893.83 43085.75 1998/01/31 24510.37 43562.28 1998/02/28 25955.04 46703.99 1998/03/31 27191.58 49095.70 1998/04/30 27715.95 49589.60 1998/05/31 27042.38 48737.16 1998/06/30 26331.40 50716.86 1998/07/31 24161.02 50176.72 1998/08/31 19845.22 42922.17 1998/09/30 23237.99 45671.77 1998/10/31 23512.41 49386.71 1998/11/30 22689.16 52380.04 1998/12/31 22077.96 55398.18 1999/01/31 20568.68 57714.93 1999/02/26 20237.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990322 111032 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Energy Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $20,237 - a 102.37% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS BP Amoco PLC sponsored ADR 7.0 Mobil Corp. 6.2 USX-Marathon Group 5.6 Schlumberger Ltd. 5.3 Exxon Corp. 5.3 Enron Corp. 5.2 Chevron Corp. 3.5 Total SA sponsored ADR 3.5 Amerada Hess Corp. 3.3 Halliburton Co. 3.2 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Oil & Gas 63.0% Energy Services 18.6% Gas 5.6% Chemicals & Plastics 3.9% Electric Utility 2.3% All Others 6.6%* Row: 1, Col: 1, Value: 6.6 Row: 1, Col: 2, Value: 2.3 Row: 1, Col: 3, Value: 3.9 Row: 1, Col: 4, Value: 5.6 Row: 1, Col: 5, Value: 18.6 Row: 1, Col: 6, Value: 63.0 * INCLUDES SHORT-TERM INVESTMENTS ENERGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Larry Rakers) Larry Rakers, Portfolio Manager of Fidelity Select Energy Portfolio Q. HOW DID THE FUND PERFORM, LARRY? A. For the 12 months that ended February 28, 1999, the fund returned - -22.00%, while the Standard & Poor's 500 Index returned 19.74% during the same period. The fund also compares its performance 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 -20.88% during the same 12-month period. Q. WHAT MARKET FACTORS HURT PERFORMANCE AND WHAT CAUSED THE FUND TO UNDERPERFORM THE GOLDMAN SACHS INDEX FOR THE PERIOD? A. The major cause of poor performance was weak global economic growth. Many international economies continued to languish in a mire of political, financial and currency troubles. Over the past couple of years, the global demand for oil has declined from approximately a 2% annual growth rate to 0%. In this environment, even a slight increase in the supply of oil is too much and, as a result, commodity prices have tanked across the board. Regarding the fund's performance relative to the Goldman Sachs index, the fund underperformed because I allocated a larger percentage of assets to small and mid-cap integrated oil companies and energy service companies compared to the index. These are more sensitive to oil prices and underperformed the larger integrated oil companies, such as Mobil and Exxon, in this bearish environment. Q. WHAT ABOUT THE ELECTRIC AND GAS UTILITIES SECTORS? IN COMPARISON TO THE GOLDMAN SACHS INDEX, WHY WAS THE FUND UNDERWEIGHTED IN THESE AREAS AND OVERWEIGHTED IN MORE AGGRESSIVE OIL COMPANIES? A. Gas and electric stocks are defensive investments that I tend to focus on when I am concerned about oil prices declining. However, I believed there wasn't much room for oil prices to go lower and there was a strong argument to say that prices were ready to go higher. In hindsight, I was early in my prediction that oil prices were poised to rebound. However, I am comfortable with the fund's asset allocation. I believe for a number of reasons - which I will discuss in more detail in my market outlook - that we are starting to see signs of impending strength in oil prices. As a result, if we do see an increase in oil prices, the smaller-cap integrated oil companies and energy service companies - which are more sensitive to oil prices - should perform better than electric and gas utilities, as well as the larger-cap integrated oil companies. Q. WERE THERE ANY BRIGHT SPOTS IN THIS DIFFICULT ENVIRONMENT? A. The major oil stocks, such as BP Amoco, Mobil and Exxon, managed to gain approximately 13% combined over the past year. All of these stocks provided a boost to the fund's total return and rallied in response to merger announcements. In comparison, the secondary energy stocks - drillers, oil service and oil equipment - all posted significant losses for the year. Q. WHAT OTHER STOCKS DETRACTED FROM PERFORMANCE? A. With the exception of the large integrated oil stocks, the energy and energy service sectors experienced negative returns across the board. With energy prices hitting 12-year lows, significant detractors were USX-Marathon, Tosco, Weatherford International and Schlumberger. As I mentioned earlier, the stock prices of these companies are even more dependent on energy prices than the larger integrated oil companies. When the prices of oil and natural gas drop below a certain level, it no longer makes economic sense to explore for these fuels or drill new wells. In this environment, business deteriorates for energy service companies like Weatherford and Schlumberger. On the other hand, if energy prices pick up, earnings can rise exponentially for these companies. Q. WHAT'S YOUR OUTLOOK, LARRY? A. I'm starting to get excited about the outlook for oil stocks for the first time in a while. The Organization of Petroleum Exporting Countries (OPEC) is scheduled to meet on March 23, 1999. We started to see a strong rebound in oil prices toward the end of the period as investors anticipated that OPEC will reduce oil production. If this trend continues, combined with a slight increase in demand, the fund could perform well. In addition, for the first time in a while, we are starting to see a response on the supply side to price movement. For example, the typical oil company cut capital expenditures by 30%, cut back on exploration, and the number of rigs drilling for oil and gas fell to a 49-year low. As a result, oil and gas production may fall in 1999. If we get even a slight rebound in demand from Asia or Latin America, I don't think it will take much for a squeeze on supply. This scenario could be very good for 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 060 TRADING SYMBOL: FSENX SIZE: as of February 28, 1999, more than $120 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, 1995-1997; joined Fidelity in 1993 ENERGY PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.7% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 0.1% Forest Oil Corp. (a) 10,000 $ 63,750 CHEMICALS & PLASTICS - 3.9% Crompton & Knowles Corp. 61,600 1,139,600 du Pont (E.I.) de Nemours & 69,600 3,571,350 Co. 4,710,950 ELECTRIC UTILITY - 2.3% AES Corp. (a) 62,000 2,305,625 Calenergy, Inc. (a) 16,700 468,644 2,774,269 ENERGY SERVICES - 18.6% Baker Hughes, Inc. 135,650 2,441,700 BJ Services Co. (a) 151,100 2,124,844 Coflexip SA sponsored ADR 29,300 842,375 ENSCO International, Inc. 145,400 1,290,425 Global Industries Ltd. (a) 10,000 50,625 Global Marine, Inc. (a) 38,000 294,500 Halliburton Co. 135,400 3,825,050 Helmerich & Payne, Inc. 44,400 724,275 Marine Drilling Companies, 20,000 127,500 Inc. (a) Nabors Industries, Inc. (a) 25,000 287,500 Noble Drilling Corp. (a) 105,800 1,309,275 Pool Energy Services Co. (a) 87,000 883,594 Rowan Companies, Inc. (a) 20,000 172,500 Ryan Energy Technologies, 32,900 50,186 Inc. (a) Santa Fe International Corp. 17,300 231,388 Schlumberger Ltd. 131,880 6,404,423 Smith International, Inc. 47,600 1,157,275 UTI Energy Corp. (a) 27,000 156,938 22,374,373 ENGINEERING - 0.2% Stolt Comex Seaway SA 13,800 91,425 Stolt Comex Seaway SA 20,000 117,500 sponsored ADR Class A 208,925 GAS - 5.6% Dynegy, Inc. 11,000 132,000 Enron Corp. 96,800 6,292,000 Williams Companies, Inc. 10,000 370,000 6,794,000 OIL & GAS - 62.9% Alberta Energy Co. Ltd. 23,000 493,467 Amerada Hess Corp. 87,200 3,956,700 SHARES VALUE (NOTE 1) Anadarko Petroleum Corp. 25,900 $ 712,250 Apache Corp. 10,000 199,375 Berkley Petroleum Corp. (a) 38,800 211,009 BP Amoco PLC sponsored ADR 99,390 8,448,140 Burlington Resources, Inc. 2,825 91,459 Cabot Oil & Gas Corp. Class A 26,500 289,844 Canadian Natural Resources 72,600 1,003,920 Ltd. (a) Chesapeake Energy Corp. 50,000 34,375 Chevron Corp. 54,600 4,197,375 Compagnie Generale de 25,800 212,850 Geophysique SA sponsored ADR (a) Conoco, Inc. Class A 15,000 304,688 Cooper Cameron Corp. (a) 14,800 342,250 Crestar Energy, Inc. (a) 49,500 334,859 Elf Aquitaine SA sponsored ADR 71,300 3,680,863 Eni Spa sponsored ADR 5,000 295,000 Enron Oil & Gas Co. 55,200 910,800 Exxon Corp. 95,500 6,356,719 Frontier Oil Corp. (a) 249,600 1,310,400 Gulf Canada Resources Ltd. (a) 93,000 221,429 Imperial Oil Ltd. 147,000 2,271,588 Louis Dreyfus Natural Gas 54,700 652,981 Corp. (a) Magnum Hunter Resources, Inc. 60,200 154,263 (a) Mallon Resources Corp. (a) 5,000 31,563 Mobil Corp. 88,900 7,395,369 Newfield Exploration Co. (a) 5,000 81,250 Noble Affiliates, Inc. 12,800 289,600 Ocean Energy, Inc. (a) 31,800 135,150 Oryx Energy Co. (a) 90,600 939,975 Paramount Resources Ltd. (c) 38,200 325,554 Penn West Petroleum Ltd. (a) 25,800 255,810 Petro-Canada 85,100 914,326 Plains Resources, Inc. (a) 96,400 891,700 Post Energy Corp. (a) 47,500 105,535 Ranger Oil Ltd. 40,000 111,686 Renaissance Energy Ltd. (a) 43,300 381,941 Rio Alto Exploration Ltd. (a) 101,700 900,448 Seagull Energy Corp. (a) 77,100 366,225 Shell Transport & Trading Co. PLC: ADR 83,100 2,789,044 (Reg.) 510,000 2,852,853 Snyder Oil Corp. 59,900 625,206 Stellarton Energy Corp. Class 100,000 79,586 A (a) Suncor Energy, Inc. 44,800 1,311,792 Texaco, Inc. 80,600 3,752,938 Tosco Corp. 52,100 1,077,819 Total SA sponsored ADR 81,200 4,191,950 Ulster Petroleums Ltd. (a) 34,600 192,758 Ultramar Diamond Shamrock 29,100 574,725 Corp. Union Pacific Resources 76,100 680,144 Group, Inc. Upton Resources, Inc. (a) 59,700 55,432 USX-Marathon Group 325,400 6,731,713 Vastar Resources, Inc. 5,200 200,200 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) OIL & GAS - CONTINUED Vintage Petroleum, Inc. 14,900 $ 66,119 Weatherford International, 28,425 483,225 Inc. (a) 75,478,240 SHIP BUILDING & REPAIR - 0.1% Halter Marine Group, Inc. (a) 20,000 80,000 TOTAL COMMON STOCKS 112,484,507 (Cost $126,539,724) CONVERTIBLE PREFERRED STOCKS - - 0.1% OIL & GAS - 0.1% Chesapeake Energy Corp. $3.50 9,400 89,300 (Cost $91,438) CASH EQUIVALENTS - 6.2% Taxable Central Cash Fund (b) 7,421,818 7,421,818 (Cost $7,421,818) TOTAL INVESTMENT IN $ 119,995,625 SECURITIES - 100% (Cost $134,052,980) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $325,554 or 0.3% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $188,611,682 and $178,672,234, respectively. 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 $48,921 for the period. Distribution of investments by country of issue, as a percentage of total value of investments in securities, is as follows: United States of America 67.4% United Kingdom 11.7 Canada 7.7 France 7.5 Netherlands Antilles 5.3 Others (individually less 0.4 than 1%) TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $137,186,700. Net unrealized depreciation aggregated $17,191,075, of which $3,832,545 related to appreciated investment securities and $21,023,620 related to depreciated investment securities. The fund hereby designates approximately $2,129,000 as a capital gain dividend for the purpose of the dividend paid deduction. At February 28, 1999, the fund had a capital loss carryforward of approximately $3,040,000 all of which will expire on February 28, 2007. The fund intends to elect to defer to its fiscal year ending February 29, 2000 approximately $6,117,000 of losses recognized during the period November 1, 1998 to February 28, 1999 A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of this percentage for use in preparing 1999 income tax returns. ENERGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 119,995,625 value (cost $134,052,980) - See accompanying schedule Receivable for investments 7,140 sold Receivable for fund shares 565,649 sold Dividends receivable 452,490 Interest receivable 36,831 Redemption fees receivable 411 Other receivables 1,364 TOTAL ASSETS 121,059,510 LIABILITIES Payable for investments $ 122,508 purchased Payable for fund shares 779,716 redeemed Accrued management fee 59,148 Other payables and accrued 93,662 expenses TOTAL LIABILITIES 1,055,034 NET ASSETS $ 120,004,476 Net Assets consist of: Paid in capital $ 145,525,094 Undistributed net investment 825,869 income Accumulated undistributed net (12,289,132) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (14,057,355) (depreciation) on investments NET ASSETS, for 7,395,868 $ 120,004,476 shares outstanding NET ASSET VALUE and $16.23 redemption price per share ($120,004,476 (divided by) 7,395,868 shares) Maximum offering price per $16.73 share (100/97.00 of $16.23) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 2,450,558 Dividends Interest (including income on 500,765 securities loaned of $5,546) TOTAL INCOME 2,951,323 EXPENSES Management fee $ 825,294 Transfer agent fees 989,327 Accounting and security 136,226 lending fees Non-interested trustees' 332 compensation Custodian fees and expenses 30,016 Registration fees 25,954 Audit 12,517 Legal 796 Reports to shareholders 24,787 Miscellaneous 1,374 Total expenses before 2,046,623 reductions Expense reductions (56,099) 1,990,524 NET INVESTMENT INCOME 960,799 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (12,009,667) Foreign currency transactions (88,526) (12,098,193) Change in net unrealized appreciation (depreciation) on: Investment securities (22,109,006) Assets and liabilities in 28 (22,108,978) foreign currencies NET GAIN (LOSS) (34,207,171) NET INCREASE (DECREASE) IN $ (33,246,372) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 570,198 charges paid to FDC Sales charges - Retained by $ 567,585 FDC Deferred sales charges $ 12,418 withheld by FDC Exchange fees withheld by FSC $ 15,098 Expense reductions Directed $ 55,993 brokerage arrangements Custodian credits 106 $ 56,099 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ 960,799 $ 899,143 income Net realized gain (loss) (12,098,193) 35,228,064 Change in net unrealized (22,108,978) 1,070,352 appreciation (depreciation) NET INCREASE (DECREASE) IN (33,246,372) 37,197,559 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (118,598) (711,215) From net investment income From net realized gain (2,920,602) (31,012,994) TOTAL DISTRIBUTIONS (3,039,200) (31,724,209) Share transactions Net 115,988,469 138,864,076 proceeds from sales of shares Reinvestment of distributions 2,970,065 31,069,131 Cost of shares redeemed (109,891,379) (231,915,098) NET INCREASE (DECREASE) IN 9,067,155 (61,981,891) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 199,403 267,473 TOTAL INCREASE (DECREASE) (27,019,014) (56,241,068) IN NET ASSETS NET ASSETS Beginning of period 147,023,490 203,264,558 End of period (including $ 120,004,476 $ 147,023,490 undistributed net investment income of $825,869 and $431,333, respectively) OTHER INFORMATION Shares Sold 5,995,866 5,967,396 Issued in reinvestment of 133,126 1,509,439 distributions Redeemed (5,669,002) (10,078,784) Net increase (decrease) 459,990 (2,601,949)
FINANCIAL HIGHLIGHTS
YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 F 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 21.20 $ 21.31 $ 18.97 $ 16.10 $ 16.73 period Income from Investment Operations Net investment income C .13 .11 .13 .18 .07 Net realized and unrealized (4.71) 3.93 3.59 3.13 (.11) gain (loss) Total from investment (4.58) 4.04 3.72 3.31 (.04) operations Less Distributions From net investment income (.02) E (.09) (.13) (.11) (.08) From net realized gain (.40) E (4.09) (1.31) (.36) (.54) Total distributions (.42) (4.18) (1.44) (.47) (.62) Redemption fees added to paid .03 .03 .06 .03 .03 in capital Net asset value, end of period $ 16.23 $ 21.20 $ 21.31 $ 18.97 $ 16.10 TOTAL RETURN A, B (22.00)% 20.40% 20.35% 20.92% .04% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 120,004 $ 147,023 $ 203,265 $ 119,676 $ 96,023 (000 omitted) Ratio of expenses to average 1.46% 1.58% 1.57% 1.63% 1.85% net assets Ratio of expenses to average 1.42% D 1.53% D 1.55% D 1.63% 1.85% net assets after expense reductions Ratio of net investment .68% .47% .62% 1.04% .42% income to average net assets Portfolio turnover rate 138% 115% 87% 97% 106% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E THE AMOUNTS SHOWN REFLECT CERTAIN RECLASSIFICATIONS RELATED TO BOOK TO TAX DIFFERENCES. F FOR THE YEAR ENDED FEBRUARY 29.
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. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT ENERGY SERVICE -50.57% 45.28% 111.18% SELECT ENERGY SERVICE (LOAD -52.12% 40.85% 104.77% ADJ.) S&P 500 19.74% 194.91% 459.21% GS Natural Resources -20.88% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT ENERGY SERVICE -50.57% 7.76% 7.76% SELECT ENERGY SERVICE (LOAD -52.12% 7.09% 7.43% ADJ.) S&P 500 19.74% 24.15% 18.78% GS Natural Resources -20.88% 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 1989/02/28 9700.00 10000.00 1989/03/31 10313.01 10233.00 1989/04/30 10805.82 10764.09 1989/05/31 10998.14 11200.04 1989/06/30 11358.74 11136.20 1989/07/31 11995.79 12141.80 1989/08/31 12560.72 12379.78 1989/09/30 12380.42 12329.02 1989/10/31 11767.41 12042.99 1989/11/30 12777.08 12288.66 1989/12/31 14411.77 12583.59 1990/01/31 13486.25 11739.23 1990/02/28 14760.35 11890.67 1990/03/31 15469.52 12205.77 1990/04/30 14652.17 11900.63 1990/05/31 17116.23 13060.94 1990/06/30 16238.79 12972.12 1990/07/31 17765.30 12930.61 1990/08/31 17452.79 11761.68 1990/09/30 17116.23 11188.89 1990/10/31 14964.68 11140.78 1990/11/30 15193.06 11860.47 1990/12/31 14664.69 12191.38 1991/01/31 14002.49 12722.92 1991/02/28 16253.97 13632.61 1991/03/31 14989.77 13962.52 1991/04/30 15062.01 13996.03 1991/05/31 15459.33 14600.66 1991/06/30 13436.61 13931.95 1991/07/31 14447.97 14581.18 1991/08/31 14291.45 14926.75 1991/09/30 12979.10 14677.48 1991/10/31 13171.73 14874.16 1991/11/30 11594.50 14274.73 1991/12/31 11221.26 15907.76 1992/01/31 11064.74 15611.87 1992/02/29 11293.50 15814.83 1992/03/31 10486.82 15506.44 1992/04/30 11353.70 15962.33 1992/05/31 12256.70 16040.54 1992/06/30 11546.34 15801.54 1992/07/31 12027.94 16447.82 1992/08/31 12641.98 16110.64 1992/09/30 13027.26 16300.75 1992/10/31 12353.02 16357.80 1992/11/30 12100.18 16915.60 1992/12/31 11606.54 17123.66 1993/01/31 12064.06 17267.50 1993/02/28 13256.01 17502.34 1993/03/31 14303.49 17871.64 1993/04/30 15074.53 17439.14 1993/05/31 15773.43 17906.51 1993/06/30 15689.08 17958.44 1993/07/31 15905.98 17886.61 1993/08/31 16460.28 18564.51 1993/09/30 15978.28 18421.56 1993/10/31 15749.33 18802.89 1993/11/30 14086.43 18624.26 1993/12/31 14038.86 18849.62 1994/01/31 14171.88 19490.50 1994/02/28 14099.32 18962.31 1994/03/31 13047.32 18135.55 1994/04/30 13729.48 18367.69 1994/05/31 14341.07 18668.92 1994/06/30 14777.92 18211.53 1994/07/31 15052.51 18808.87 1994/08/31 14453.40 19580.03 1994/09/30 15002.58 19100.32 1994/10/31 15601.69 19530.08 1994/11/30 14790.40 18818.79 1994/12/31 14118.52 19097.87 1995/01/31 14207.24 19593.08 1995/02/28 15170.44 20356.63 1995/03/31 16006.91 20957.35 1995/04/30 16982.78 21574.54 1995/05/31 17426.36 22436.88 1995/06/30 16830.70 22958.09 1995/07/31 17667.16 23719.38 1995/08/31 18376.89 23778.91 1995/09/30 18427.59 24782.38 1995/10/31 16830.70 24693.91 1995/11/30 17781.23 25777.97 1995/12/31 19889.33 26274.46 1996/01/31 20322.28 27168.84 1996/02/29 21109.46 27420.69 1996/03/31 22775.65 27684.75 1996/04/30 24488.43 28092.83 1996/05/31 24132.19 28817.34 1996/06/30 24184.97 28927.14 1996/07/31 22852.35 27649.13 1996/08/31 24303.72 28232.26 1996/09/30 25214.12 29821.17 1996/10/31 28024.48 30643.63 1996/11/30 29159.18 32959.99 1996/12/31 29651.81 32307.05 1997/01/31 31302.92 34325.59 1997/02/28 27918.82 34594.71 1997/03/31 29883.78 33173.21 1997/04/30 29538.34 35153.65 1997/05/31 33638.07 37293.80 1997/06/30 35840.05 38964.57 1997/07/31 41475.36 42064.98 1997/08/31 44416.16 39708.50 1997/09/30 49051.90 41883.33 1997/10/31 50920.68 40484.43 1997/11/30 44691.41 42358.45 1997/12/31 45033.34 43085.75 1998/01/31 38659.16 43562.28 1998/02/28 41439.55 46703.99 1998/03/31 44545.29 49095.70 1998/04/30 48213.30 49589.60 1998/05/31 45114.88 48737.16 1998/06/30 39231.01 50716.86 1998/07/31 30592.99 50176.72 1998/08/31 20906.52 42922.17 1998/09/30 25585.44 45671.77 1998/10/31 29309.81 49386.71 1998/11/30 22330.54 52380.04 1998/12/31 22643.51 55398.18 1999/01/31 21595.05 57714.93 1999/02/26 20477.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990309 144156 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Energy Service Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $20,477 - a 104.77% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Halliburton Co. 8.7 Schlumberger Ltd. 7.0 Baker Hughes, Inc. 6.7 Cooper Cameron Corp. 6.0 Noble Drilling Corp. 5.7 Weatherford International, Inc. 5.0 Smith International, Inc. 5.0 BJ Services Co. 4.4 McDermott International, Inc. 4.0 Helmerich & Payne, Inc. 3.6 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Energy Services 76.2% Oil & Gas 12.2% Construction 2.7% Engineering 1.7% Services 0.4% All Others 6.8%* Row: 1, Col: 1, Value: 6.8 Row: 1, Col: 2, Value: 1.0 Row: 1, Col: 3, Value: 1.7 Row: 1, Col: 4, Value: 2.7 Row: 1, Col: 5, Value: 12.2 Row: 1, Col: 6, Value: 75.2 * INCLUDES SHORT-TERM 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. It was a very difficult period. For the 12 months that ended February 28, 1999, the fund had a total return of -50.57%, compared to 19.74% for the Standard & Poor's 500 Index. The Goldman Sachs Natural Resources Index - an index of 96 stocks designed to measure the performance of companies in the natural resources sector - returned - -20.88% during the same period. Q. WHAT ACCOUNTED FOR THE FUND'S EXTREMELY WEAK PERFORMANCE VERSUS ITS BENCHMARKS? A. The basic business prospects - and, in turn, the stock prices - of energy service companies depend to a considerable extent on the price of oil, which continued to decline for most of the period, dipping below $11 a barrel in December 1998. On the other hand, aside from a rough stretch from mid-July through mid-October, the broader stock market turned in another strong showing, enabling the S&P 500 to far surpass the fund's performance. The Goldman Sachs index contains the stocks of companies involved in the production of a wide variety of natural resources, most of which performed better than oil did during the period. In addition, energy service stocks are typically very volatile and highly sensitive to the price of oil, whereas the Goldman Sachs index also contains some less volatile components - for example, the stocks of large integrated oil companies. These factors helped the Goldman Sachs index to outperform the fund. Q. HOW DID YOU MANAGE THE FUND DURING THIS DIFFICULT PERIOD? A. I tried to focus on the stocks of companies that could weather the downturn better than others. That meant seeking out the shares of larger companies with strong balance sheets - many with leadership positions in the sector - and avoiding the stocks of companies with high financial leverage and low value-added products and services. Secondarily, I emphasized the shares of companies with exposure to the U.S. natural gas market, which was somewhat healthier than the oil market. As the price of oil continued to grind lower, however, there was virtually no segment of the energy service sector that was immune to plunging stock prices. In the words of a song that was popular some years ago, there was "nowhere to run, nowhere to hide." Q. WHAT STOCKS HELPED THE FUND'S PERFORMANCE DURING THE PERIOD? A. Unfortunately, there is nothing worth mentioning on the positive side, as almost all energy service stocks underperformed during the period. Q. WHAT STOCKS WERE DISAPPOINTING? A. Cooper Cameron, the fund's largest holding for most of the period, was one of the biggest detractors from performance. A well-managed oil field equipment company, Cooper Cameron was hurt by falling order backlogs. Drilling companies were extremely poor performers, as day rates for drill rigs fell sharply along with utilization. R&B Falcon, Noble Drilling and Diamond Offshore Drilling were examples of drilling stocks that detracted from performance. Even Halliburton, widely considered to be a "blue chip" energy service holding, saw its stock perform poorly during the period. Q. WHAT'S YOUR OUTLOOK, JIM? A. Despite sailing on rough seas recently, there may be some rays of light on the horizon for energy service stocks. The Organization of Petroleum Exporting Countries (OPEC) has a meeting scheduled for March 23, 1999, at which it will decide whether or not to reduce oil production further. If additional cuts are made, oil prices could firm up in short order. However, even if OPEC cannot agree on any production cuts, low oil prices will eventually result in decreased supplies, which should be supportive of higher prices. On the demand side, Asia appears to be consuming more oil again, but that influence is being offset to some extent by lower demand from Brazil and the rest of Latin America. To sum up, the short-term outlook is uncertain, and all eyes are on OPEC, but over the longer term, the oil market - and energy service stocks in general - should see improvement regardless of what OPEC does on March 23. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 043 TRADING SYMBOL: FSESX SIZE: as of February 28, 1999, more than $366 million MANAGER: James Catudal, since 1998; manager, Fidelity Select Industrial Materials Portfolio, 1997-1998; research analyst, North American non-ferrous metals companies, since 1997; joined Fidelity in 1997 ENERGY SERVICE PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.1% SHARES VALUE (NOTE 1) COMPUTER SERVICES & SOFTWARE - - 0.1% GeoScience Corp. (a) 20,000 $ 270,000 CONSTRUCTION - 2.7% Bouygues Offshore SA 59,000 781,750 sponsored ADR McDermott (J. Ray) SA (a) 449,900 9,307,306 10,089,056 ELECTRICAL EQUIPMENT - 0.3% NQL Drilling Tools, Inc. 495,300 1,215,420 Class A (a) ENERGY SERVICES - 76.2% Atwood Oceanics, Inc. (a) 225,700 3,794,581 Baker Hughes, Inc. 1,370,936 24,676,848 BJ Services Co. (a) 1,153,176 16,216,538 CAL Dive International, Inc. 49,300 708,688 (a) Carbo Ceramics, Inc. 61,000 976,000 Coflexip SA sponsored ADR 343,600 9,878,500 Daniel Industries, Inc. 341,800 3,631,625 Diamond Offshore Drilling, 596,500 12,340,094 Inc. ENSCO International, Inc. 1,367,800 12,139,225 Global Industries Ltd. (a) 942,300 4,770,394 Global Marine, Inc. (a) 546,000 4,231,500 Halliburton Co. 1,137,167 32,124,962 Helmerich & Payne, Inc. 801,300 13,071,206 Input/Output, Inc. (a) 716,800 4,032,000 Marine Drilling Companies, 832,100 5,304,638 Inc. (a) McDermott International, Inc. 737,500 14,703,906 Nabors Industries, Inc. (a) 937,700 10,783,550 Noble Drilling Corp. (a) 1,705,650 21,107,419 Oceaneering International, 517,600 5,176,000 Inc. (a) Offshore Logistics, Inc. (a) 159,300 1,388,897 Parker Drilling Co. (a) 25,000 62,500 Pool Energy Services Co. (a) 325,600 3,306,875 R&B Falcon Corp. (a) 75,118 413,149 Rowan Companies, Inc. (a) 923,600 7,966,050 Ryan Energy Technologies, 397,200 605,889 Inc. (a) Santa Fe International Corp. 338,300 4,524,763 Schlumberger Ltd. 532,245 25,847,148 SEACOR SMIT, Inc. (a) 128,900 5,075,438 Smith International, Inc. 754,600 18,346,213 Superior Energy Services, 50,000 137,500 Inc. (a) Tidewater, Inc. 146,465 2,755,373 Transocean Offshore, Inc. 338,154 6,974,426 UTI Energy Corp. (a) 115,000 668,438 Varco International, Inc. (a) 292,500 2,266,875 280,007,208 ENGINEERING - 1.7% Stolt Comex Seaway SA 669,500 4,435,438 Stolt Comex Seaway SA 302,900 1,779,538 sponsored ADR Class A 6,214,976 SHARES VALUE (NOTE 1) INDUSTRIAL MACHINERY & EQUIPMENT - 0.1% Gardner Denver Machinery, 35,000 $ 446,250 Inc. (a) METALS & MINING - 0.1% Cameco Corp. 20,000 426,449 OIL & GAS - 12.2% Compagnie Generale de 140,300 1,157,475 Geophysique SA sponsored ADR (a) Cooper Cameron Corp. (a) 946,276 21,882,633 Petroleum Geo-Services ASA 116,600 1,333,613 sponsored ADR (a) Veritas DGC, Inc. (a) 190,500 1,797,844 Weatherford International, 1,090,940 18,545,980 Inc. (a) 44,717,545 SERVICES - 0.4% Tuboscope, Inc. (a) 290,900 1,563,588 SHIP BUILDING & REPAIR - 0.3% Dril-Quip, Inc. (a) 67,400 859,350 Halter Marine Group, Inc. (a) 70,000 280,000 1,139,350 TOTAL COMMON STOCKS 346,089,842 (Cost $567,053,337) CASH EQUIVALENTS - 5.9% Taxable Central Cash Fund (b) 21,633,087 21,633,087 (Cost $21,633,087) TOTAL INVESTMENT IN $ 367,722,929 SECURITIES - 100% (Cost $588,686,424) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $457,434,835 and $570,297,633, respectively. 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 $132,958 for the period. Distribution of investments by country of issue, as a percentage of total value of investments in securities, is as follows: United States of America 84.6% Netherlands Antilles 7.0 France 3.2 Panama 2.5 Luxembourg 1.7 Others (individually less 1.0 than 1%) total 100.0% INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $633,527,520. Net unrealized depreciation aggregated $265,804,591, of which $2,654,891 related to appreciated investment securities and $268,459,482 related to depreciated investment securities. The fund hereby designates approximately $34,268,000 as capital gain dividend for the purpose of the dividend paid deduction. At February 28, 1999, the fund had a capital loss carryforward of approximately $85,150,000, all of which will expire on February 28, 2007. The fund intends to elect to defer to its fiscal year ending February 29, 2000 approximately $56,642,000 of losses recognized during the period November 1, 1998 to February 28, 1999. A total of 11% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of this percentage for use in preparing 1999 income tax returns. ENERGY SERVICE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 367,722,929 value (cost $588,686,424) - See accompanying schedule Receivable for investments 1,215,887 sold Receivable for fund shares 2,332,234 sold Dividends receivable 395,147 Interest receivable 84,285 Redemption fees receivable 3,369 TOTAL ASSETS 371,753,851 LIABILITIES Payable for investments $ 2,378,387 purchased Payable for fund shares 2,012,857 redeemed Accrued management fee 187,002 Other payables and accrued 279,233 expenses TOTAL LIABILITIES 4,857,479 NET ASSETS $ 366,896,372 Net Assets consist of: Paid in capital $ 774,492,783 Accumulated undistributed net (186,632,916) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (220,963,495) (depreciation) on investments NET ASSETS, for 28,022,490 $ 366,896,372 shares outstanding NET ASSET VALUE and $13.09 redemption price per share ($366,896,372 (divided by) 28,022,490 shares) Maximum offering price per $13.49 share (100/97.00 of $13.09) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 3,891,533 Dividends Interest (including income on 1,782,191 securities loaned of $218,074) TOTAL INCOME 5,673,724 EXPENSES Management fee $ 3,826,822 Transfer agent fees 4,328,274 Accounting and security 545,412 lending fees Non-interested trustees' 2,014 compensation Custodian fees and expenses 24,274 Registration fees 175,479 Audit 27,810 Legal 4,387 Reports to shareholders 124,072 Total expenses before 9,058,544 reductions Expense reductions (217,151) 8,841,393 NET INVESTMENT INCOME (LOSS) (3,167,669) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (185,189,396) Foreign currency transactions (1,446) (185,190,842) Change in net unrealized appreciation (depreciation) on: Investment securities (243,966,833) Assets and liabilities in 168 (243,966,665) foreign currencies NET GAIN (LOSS) (429,157,507) NET INCREASE (DECREASE) IN $ (432,325,176) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 3,272,526 charges paid to FDC Sales charges - Retained by $ 3,265,721 FDC Deferred sales charges $ 9,358 withheld by FDC Exchange fees withheld by FSC $ 136,703 Expense reductions Directed $ 214,503 brokerage arrangements Custodian credits 773 Transfer agent credits 1,875 $ 217,151 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (3,167,669) $ (3,364,496) income (loss) Net realized gain (loss) (185,190,842) 157,396,467 Change in net unrealized (243,966,665) 12,574,205 appreciation (depreciation) NET INCREASE (DECREASE) IN (432,325,176) 166,606,176 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (54,767,354) (52,135,101) from net realized gains Share transactions Net 1,182,599,212 2,385,855,385 proceeds from sales of shares Reinvestment of distributions 53,845,591 51,297,776 Cost of shares redeemed (1,305,871,677) (2,077,124,405) NET INCREASE (DECREASE) IN (69,426,874) 360,028,756 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 4,414,000 4,998,236 TOTAL INCREASE (DECREASE) (552,105,404) 479,498,067 IN NET ASSETS NET ASSETS Beginning of period 919,001,776 439,503,709 End of period $ 366,896,372 $ 919,001,776 OTHER INFORMATION Shares Sold 53,434,483 81,787,357 Issued in reinvestment of 1,829,614 2,167,528 distributions Redeemed (60,036,675) (72,645,359) Net increase (decrease) (4,772,578) 11,309,526
FINANCIAL HIGHLIGHTS
YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 F 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 28.02 $ 20.46 $ 16.09 $ 11.97 $ 11.66 period Income from Investment Operations Net investment income (loss) C (.10) (.10) (.01) .08 D .02 Net realized and unrealized (13.26) 9.36 5.05 4.49 .67 gain (loss) Total from investment (13.36) 9.26 5.04 4.57 .69 operations Less Distributions From net investment income - - - (.04) (.01) In excess of net investment - - - - (.01) income From net realized gain (1.71) (1.85) (.79) (.48) (.35) In excess of net realized gain - - - - (.13) Total distributions (1.71) (1.85) (.79) (.52) (.50) Redemption fees added to paid .14 .15 .12 .07 .12 in capital Net asset value, end of period $ 13.09 $ 28.02 $ 20.46 $ 16.09 $ 11.97 TOTAL RETURN A, B (50.57)% 48.43% 32.26% 39.15% 7.60% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 366,896 $ 919,002 $ 439,504 $ 273,805 $ 63,794 (000 omitted) Ratio of expenses to average 1.39% 1.25% 1.47% 1.59% 1.81% net assets Ratio of expenses to average 1.35% E 1.22% E 1.45% E 1.58% E 1.79% E net assets after expense reductions Ratio of net investment (.49)% (.35)% (.07)% .60% .19% income (loss) to average net assets Portfolio turnover rate 75% 78% 167% 223% 209%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.02 PER SHARE. 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 THE YEAR ENDED FEBRUARY 29. 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT GOLD -15.69% -39.16% -11.85% SELECT GOLD (LOAD ADJ.) -18.29% -41.06% -14.57% S&P 500 19.74% 194.91% 459.21% GS Natural Resources -20.88% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT GOLD -15.69% -9.46% -1.25% SELECT GOLD (LOAD ADJ.) -18.29% -10.03% -1.56% S&P 500 19.74% 24.15% 18.78% GS Natural Resources -20.88% 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 Gold S&P 500 00041 SP001 1989/02/28 9700.00 10000.00 1989/03/31 9358.89 10233.00 1989/04/30 8906.14 10764.09 1989/05/31 8583.63 11200.04 1989/06/30 9067.39 11136.20 1989/07/31 9160.42 12141.80 1989/08/31 9625.58 12379.78 1989/09/30 9681.39 12329.02 1989/10/31 9780.63 12042.99 1989/11/30 11027.24 12288.66 1989/12/31 10853.58 12583.59 1990/01/31 11331.14 11739.23 1990/02/28 11014.83 11890.67 1990/03/31 10586.89 12205.77 1990/04/30 9439.51 11900.63 1990/05/31 10270.59 13060.94 1990/06/30 9613.17 12972.12 1990/07/31 10282.99 12930.61 1990/08/31 10096.93 11761.68 1990/09/30 10090.73 11188.89 1990/10/31 8434.78 11140.78 1990/11/30 8329.35 11860.47 1990/12/31 8986.76 12191.38 1991/01/31 7740.15 12722.92 1991/02/28 8440.98 13632.61 1991/03/31 8409.97 13962.52 1991/04/30 8112.28 13996.03 1991/05/31 8391.37 14600.66 1991/06/30 8955.75 13931.95 1991/07/31 8856.52 14581.18 1991/08/31 8137.08 14926.75 1991/09/30 8000.64 14677.48 1991/10/31 8614.64 14874.16 1991/11/30 8596.04 14274.73 1991/12/31 8434.78 15907.76 1992/01/31 8639.45 15611.87 1992/02/29 8372.76 15814.83 1992/03/31 7802.17 15506.44 1992/04/30 7405.24 15962.33 1992/05/31 7932.42 16040.54 1992/06/30 8447.19 15801.54 1992/07/31 8980.56 16447.82 1992/08/31 8813.11 16110.64 1992/09/30 8763.49 16300.75 1992/10/31 8503.01 16357.80 1992/11/30 7783.57 16915.60 1992/12/31 8174.30 17123.66 1993/01/31 8019.25 17267.50 1993/02/28 8775.90 17502.34 1993/03/31 9762.02 17871.64 1993/04/30 10996.23 17439.14 1993/05/31 12218.03 17906.51 1993/06/30 12931.27 17958.44 1993/07/31 13960.81 17886.61 1993/08/31 13228.96 18564.51 1993/09/30 11827.30 18421.56 1993/10/31 13594.88 18802.89 1993/11/30 13607.29 18624.26 1993/12/31 14605.82 18849.62 1994/01/31 14612.02 19490.50 1994/02/28 14053.84 18962.31 1994/03/31 14394.95 18135.55 1994/04/30 13179.35 18367.69 1994/05/31 13749.94 18668.92 1994/06/30 13073.91 18211.53 1994/07/31 12881.65 18808.87 1994/08/31 13489.45 19580.03 1994/09/30 14667.84 19100.32 1994/10/31 13607.29 19530.08 1994/11/30 11994.76 18818.79 1994/12/31 12348.27 19097.87 1995/01/31 11058.25 19593.08 1995/02/28 11436.57 20356.63 1995/03/31 13191.75 20957.35 1995/04/30 13142.14 21574.54 1995/05/31 13415.03 22436.88 1995/06/30 13601.09 22958.09 1995/07/31 13967.01 23719.38 1995/08/31 13998.02 23778.91 1995/09/30 13991.82 24782.38 1995/10/31 12304.86 24693.91 1995/11/30 13446.04 25777.97 1995/12/31 13731.33 26274.46 1996/01/31 16168.73 27168.84 1996/02/29 16813.75 27420.69 1996/03/31 17216.88 27684.75 1996/04/30 17626.21 28092.83 1996/05/31 19548.85 28817.34 1996/06/30 16788.94 28927.14 1996/07/31 16478.84 27649.13 1996/08/31 18159.59 28232.26 1996/09/30 17824.68 29821.17 1996/10/31 17334.72 30643.63 1996/11/30 16590.47 32959.99 1996/12/31 16466.67 32307.05 1997/01/31 15764.75 34325.59 1997/02/28 17838.90 34594.71 1997/03/31 15005.92 33173.21 1997/04/30 14099.42 35153.65 1997/05/31 14908.35 37293.80 1997/06/30 13631.44 38964.57 1997/07/31 13417.51 42064.98 1997/08/31 13544.53 39708.50 1997/09/30 14701.10 41883.33 1997/10/31 12448.13 40484.43 1997/11/30 9513.26 42358.45 1997/12/31 9981.24 43085.75 1998/01/31 10536.12 43562.28 1998/02/28 10141.69 46703.99 1998/03/31 10803.54 49095.70 1998/04/30 11431.96 49589.60 1998/05/31 9820.79 48737.16 1998/06/30 8624.11 50716.86 1998/07/31 7989.00 50176.72 1998/08/31 5903.17 42922.17 1998/09/30 9145.57 45671.77 1998/10/31 8871.47 49386.71 1998/11/30 8684.28 52380.04 1998/12/31 9118.83 55398.18 1999/01/31 8864.78 57714.93 1999/02/26 8543.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990307 162024 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Gold Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have been $8,543 - - a 14.57% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Getchell Gold Corp. 11.9 Meridian Gold, Inc. 10.8 Euro-Nevada Mining Corp. Ltd. 8.6 Barrick Gold Corp. 7.0 Normandy Mining Ltd. 6.7 Newmont Mining Corp. 4.8 Anglogold Ltd. 4.3 Stillwater Mining Co. 4.0 Compania de Minas 3.9 Buenaventura SA Class B Franco Nevada Mining Corp. Ltd. 3.6 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Gold Ores 60.1% Gold & Silver Ores 24.4% Silver Ores 4.8% Miscellaneous Nonmetallic Minerals 2.5% Metal Mining Services 1.3% All Others 6.9%* Row: 1, Col: 1, Value: 6.9 Row: 1, Col: 2, Value: 1.3 Row: 1, Col: 3, Value: 2.5 Row: 1, Col: 4, Value: 4.8 Row: 1, Col: 5, Value: 24.4 Row: 1, Col: 6, Value: 60.1 * INCLUDES SHORT-TERM 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. The fund once again had a negative return but performed well relative to the more meaningful of its two benchmarks. For the 12 months that ended February 28, 1999, the fund had a total return of - -15.69%, while the Goldman Sachs Natural Resources Index - an index of 96 stocks designed to measure the performance of companies in the natural resources sector - returned -20.88%. The Standard & Poor's 500 Index posted a return of 19.74% during the same period. Q. WHY DID THE FUND OUTPERFORM THE GOLDMAN SACHS INDEX BUT LAG THE S&P 500? A. As always, the price of gold played a major role in determining how the fund performed. Following a difficult period of steadily falling prices in 1997, gold stabilized in 1998 and ended the period essentially where it began, around $290 per ounce. On the other hand, the prices of some other commodities, such as copper and nickel, continued to fall during the period. The Goldman Sachs index contains the stocks of companies involved in the production of a wide variety of natural resources, including copper and nickel. The weakness of those commodities, together with the fund's favorable stock selection process, helped the fund's performance relative to the Goldman Sachs index. Although gold stabilized, it remained low by historical standards, and many mining companies found it difficult to do business profitably. Consequently, investors tended to favor stocks from other sectors over precious metals shares, as evidenced by the fund's poor showing against the S&P 500. Q. WHAT WAS YOUR STRATEGY DURING THE PERIOD? A. Reflecting the June 1, 1998, change in the fund's investment policies allowing it to invest in precious metals mining companies anywhere in the world, I pursued a strategy of broadening the fund's exposure to companies in Australia and, to a lesser extent, South Africa. Although foreign investments are commonly viewed as having greater risk than domestic ones, this strategy enabled the fund to purchase stocks that, in general, were more modestly valued and performed better than their peers in the United States and Canada. In addition, the fund maintained its overall emphasis on finding strong companies with healthy balance sheets and the ability to add meaningfully to production. Q. WHAT STOCKS HELPED THE FUND'S PERFORMANCE? A. Getchell Gold, the fund's largest holding for much of the period, was also the holding that made the most positive contribution to performance. The company received a takeover bid from competitor Placer Dome at a price considerably above Getchell's market price, which buoyed the stock. Stillwater Mining was another positive contributor. The company, which produces platinum and palladium, was helped by higher prices resulting from cutbacks in Russian exports of those metals. A third helpful holding was Buenaventura. The company is a major gold producer in Chile and co-owner, with Newmont Mining, of one of the lowest-cost mines in the world. Q. WHAT STOCKS WERE DETRIMENTAL TO PERFORMANCE? A. Greenstone Resources was the holding that hurt performance most. The stock performed poorly after the company reported disappointing production numbers. TVX Gold reacted poorly when the company encountered delays in starting production at some new mines in Greece. Pioneer Group suffered from poor gold mining results in Ghana. The fund did not hold these positions at the end of the period. Q. WHAT'S YOUR OUTLOOK, GEORGE? A. The Far East is traditionally a strong source of demand for gold jewelry, so a recovery in that region, particularly in Japan, would be favorable for the yellow metal. In addition, gold is traditionally viewed as a hedge against inflation, so any upturn in the inflation outlook - a real possibility with the U.S. economy growing faster than expected and economic forces in Asia beginning to recover - would help the outlook for gold. Another factor to consider is central bank sales, which helped to drive gold prices lower for the past several years. Now that the European Economic Community has officially launched its currency, the euro, it seems likely that, while central bank sales in Europe may continue on a smaller scale, they will no longer occur at levels that will depress the price of gold. Although these developments seem promising, the fund does not make bets on the price of gold, but rather attempts to invest in companies that can benefit regardless of the level of gold 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 041 TRADING SYMBOL: FSAGX SIZE: as of February 28, 1999, more than $179 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 GOLD PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.7% SHARES VALUE (NOTE 1) AUSTRALIA - 10.3% METALS & MINING - 1.0% METAL MINING SERVICES - 1.0% Acacia Resources Ltd. 1,360,755 $ 1,809,059 PRECIOUS METALS - 9.3% GOLD & SILVER ORES - 7.2% Normandy Mining Ltd. 14,388,954 12,278,425 Sons of Gwalia NL 307,210 896,627 13,175,052 GOLD ORES - 2.1% Delta Gold NL 895,509 1,317,896 Lihir Gold Ltd. (a) 1,433,500 1,170,054 Resolute Ltd. 1,900,000 1,327,597 3,815,547 TOTAL PRECIOUS METALS 16,990,599 TOTAL AUSTRALIA 18,799,658 CANADA - 48.1% METALS & MINING - 2.8% METAL MINING SERVICES - 0.3% Minefinders Corp. Ltd. (a) 297,600 325,667 Minefinders Corp. Ltd. (a)(c) 200,000 218,862 544,529 MISCELLANEOUS NONMETALLIC MINERALS - 2.5% Aber Resources Ltd. (a) 291,700 2,011,991 Camphor Ventures, Inc. (a) 14,100 6,827 DIA Metropolitan Minerals Ltd.: Class A (sub-vtg.) (a) 50,650 520,676 Class B (multi-vtg.) (a) 172,400 2,000,929 4,540,423 TOTAL METALS & MINING 5,084,952 OIL & GAS - 0.4% OIL & GAS FIELD EXPLORATION SERVICES - 0.4% Southwestern Gold Corp. (a) 227,500 829,851 PRECIOUS METALS - 44.9% GOLD & SILVER ORES - 1.0% Goldcorp, Inc. Class A (a) 221,100 1,319,737 Richmont Mines, Inc. (a) 187,300 434,773 1,754,510 GOLD ORES - 43.9% Agnico-Eagle Mines Ltd. 447,800 2,465,009 Argentina Gold Corp. (a) 164,900 479,017 Barrick Gold Corp. 724,100 12,798,292 Cambior, Inc. 1,142,400 4,508,078 SHARES VALUE (NOTE 1) Crown Resources Corp. (a) 307,700 $ 788,481 Euro-Nevada Mining Corp. Ltd. 1,096,400 15,851,917 Francisco Gold Corp. (a) 182,200 1,147,964 Francisco Gold Corp. (a)(c) 144,500 910,432 Franco Nevada Mining Corp. 424,600 6,561,334 Ltd. Franco Nevada Mining Corp. 106,900 1,651,923 Ltd. (c) Franco Nevada Mining Corp. 33,334 276,346 Ltd. Class B warrants 9/15/98 (a)(c) Geomaque Explorations Ltd. (a) 678,100 535,176 Glamis Gold Ltd. (a) 125,300 216,063 High River Gold Mines Ltd. (a) 60,000 19,101 IAMGOLD, International 195,200 608,463 African Mining Gold Corp. (a) IAMGOLD, International 60,000 187,027 African Mining Gold Corp. (a)(c) Kinross Gold Corp. (a) 573,100 1,277,103 Kinross Gold Corp. (a)(c) 320,000 713,092 Meridian Gold, Inc. (a) 3,519,700 19,841,789 Metallica Resources, Inc. 1,042,100 414,684 (a)(d) Metallica Resources, Inc. 100,000 39,793 (a)(c)(d) Mountain Province Mining, 874,900 1,740,748 Inc. (a) Placer Dome, Inc. 455,400 4,983,486 Repadre Capital Corp. (a) 156,200 269,346 Repadre Capital Corp. (a)(c) 155,000 267,277 Rio Narcea Gold Mines Ltd. (a) 221,800 189,761 Teck Corp. Class B (sub-vtg.) 220,300 1,556,039 Vengold, Inc. (a) 315,000 96,100 Viceroy Resources Corp. (a) 130,000 146,571 80,540,412 TOTAL PRECIOUS METALS 82,294,922 TOTAL CANADA 88,209,725 GHANA - 1.5% PRECIOUS METALS - 1.5% GOLD ORES - 1.5% Ashanti Goldfields Co. Ltd. 316,422 2,808,245 GDR PERU - 4.8% PRECIOUS METALS - 4.8% SILVER ORES - 4.8% Compania de Minas Buenaventura SA: Class B 1,041,419 7,121,962 Series A sponsored ADR 224,445 1,546,762 sponsored ADR Class B 11,700 157,219 8,825,943 SOUTH AFRICA - 5.0% PRECIOUS METALS - 5.0% GOLD & SILVER ORES - 4.3% Anglogold Ltd. 219,200 8,002,779 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SOUTH AFRICA - CONTINUED PRECIOUS METALS - CONTINUED GOLD ORES - 0.7% Gold Fields Ltd. 231,700 $ 1,242,670 TOTAL PRECIOUS METALS 9,245,449 UNITED STATES OF AMERICA - 25.0% METALS & MINING - 0.8% COPPER ORES - 0.8% Freeport-McMoRan Copper & 152,500 1,439,219 Gold, Inc. Class B PRECIOUS METALS - 23.8% GOLD & SILVER ORES - 11.9% Getchell Gold Corp. (a) 844,648 21,908,057 GOLD ORES - 11.9% Battle Mountain Gold Co. 109,700 370,238 Homestake Mining Co. 425,006 3,904,743 Newmont Mining Corp. 510,565 8,807,246 Stillwater Mining Co. (a) 320,900 7,360,644 Stillwater Mining Co. (a)(c) 59,400 1,362,488 21,805,359 TOTAL PRECIOUS METALS 43,713,416 SERVICES - 0.4% JEWELRY, PRECIOUS METAL - 0.4% Lazare Kaplan International, 85,300 629,088 Inc. (a) TOTAL UNITED STATES OF AMERICA 45,781,723 TOTAL COMMON STOCKS 173,670,743 (Cost $214,333,271) CASH EQUIVALENTS - 5.3% Taxable Central Cash Fund (b) 9,775,494 9,775,494 (Cost $9,775,494) TOTAL INVESTMENT IN $ 183,446,237 SECURITIES - 100% (Cost $224,108,765) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $5,627,240 or 3.1% of net assets. (d) Affilliated Company OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $114,881,881 and $115,404,549, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $16,916 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $4,983,442. The fund received cash collateral of $5,464,800. The fund participated in the bank borrowing program. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $5,749,000 and $3,319,000, respectively. The weighted average interest rate was 5.21%. Transactions during the period with companies which are or were affiliates are as follows: PURCHASE SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Mentor Exploration & Development Co. Ltd. $ - $ 182,383 $ - $ - Metallica Resources, Inc.- - - 454,477 TOTALS $ - $ 182,383 $ - $ 454,477 INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $225,745,288. Net unrealized depreciation aggregated $42,299,051, of which $21,822,102 related to appreciated investment securities and $64,121,153 related to depreciated investment securities. At February 28, 1999 the fund had a capital loss carryforward of approximately $52,460,000 of which $35,849,000 and $16,611,000 will expire on February 28, 2006 and 2007, respectively. The fund intends to defer to its fiscal year ending February 29, 2000 approximately $24,084,000 of losses recognized during the period November 1, 1998 to February 28, 1999. GOLD PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 183,446,237 value (cost $224,108,765) - See accompanying schedule Receivable for investments 5,195,313 sold Receivable for fund shares 329,962 sold Dividends receivable 507,752 Interest receivable 17,484 Redemption fees receivable 3,723 Other receivables 3,500 TOTAL ASSETS 189,503,971 LIABILITIES Payable for investments $ 3,131,072 purchased Payable for fund shares 1,024,503 redeemed Accrued management fee 92,759 Other payables and accrued 171,510 expenses Collateral on securities 5,464,800 loaned, at value TOTAL LIABILITIES 9,884,644 NET ASSETS $ 179,619,327 Net Assets consist of: Paid in capital $ 298,496,829 Accumulated net investment (35,591) loss Accumulated undistributed net (78,176,418) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (40,665,493) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 14,044,991 $ 179,619,327 shares outstanding NET ASSET VALUE and $12.79 redemption price per share ($179,619,327 (divided by) 14,044,991 shares) Maximum offering price per $13.19 share (100/97.00 of $12.79) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 1,663,035 Dividends Interest (including income on 288,508 securities loaned of $11,259) TOTAL INCOME 1,951,543 EXPENSES Management fee $ 1,216,228 Transfer agent fees 1,592,230 Accounting and security 199,767 lending fees Non-interested trustees' 654 compensation Custodian fees and expenses 96,242 Registration fees 70,643 Audit 15,879 Legal 1,155 Interest 6,342 Reports to shareholders 42,148 Total expenses before 3,241,288 reductions Expense reductions (66,010) 3,175,278 NET INVESTMENT INCOME (LOSS) (1,223,735) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (31,983,550) (including realized loss $171,879 on sales of investments in affiliated issuers) Foreign currency transactions (25,270) (32,008,820) Change in net unrealized appreciation (depreciation) on: Investment securities (3,271,556) Assets and liabilities in (6,482) (3,278,038) foreign currencies NET GAIN (LOSS) (35,286,858) NET INCREASE (DECREASE) IN $ (36,510,593) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 691,742 charges paid to FDC Sales charges - Retained by $ 685,928 FDC Deferred sales charges $ 19,578 withheld by FDC Exchange fees withheld by FSC $ 32,157 Expense Reductions Direct brokerage arrangements $ 65,602 Transfer agent credits 408 $ 66,010 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (1,223,735) $ (1,879,396) income (loss) Net realized gain (loss) (32,008,820) (42,330,692) Change in net unrealized (3,278,038) (126,678,432) appreciation (depreciation) NET INCREASE (DECREASE) IN (36,510,593) (170,888,520) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders - (17,386,044) from net realized gains Share transactions Net 403,467,113 510,192,668 proceeds from sales of shares Reinvestment of distributions - 17,026,797 Cost of shares redeemed (408,945,830) (549,713,586) NET INCREASE (DECREASE) IN (5,478,717) (22,494,121) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 1,940,375 2,333,972 TOTAL INCREASE (DECREASE) (40,048,935) (208,434,713) IN NET ASSETS NET ASSETS Beginning of period 219,668,262 428,102,975 End of period (including $ 179,619,327 $ 219,668,262 accumulated net investment loss of $35,591 and $2,671,127, respectively) OTHER INFORMATION Shares Sold 29,231,688 26,655,922 Issued in reinvestment of - 755,071 distributions Redeemed (29,663,500) (28,111,853) Net increase (decrease) (431,812) (700,860)
FINANCIAL HIGHLIGHTS
YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 15.17 $ 28.21 $ 27.11 $ 18.44 $ 22.66 period Income from Investment Operations Net investment income (loss) C (.08) (.13) (.16) (.06) (.05) Net realized and unrealized (2.43) (11.78) 1.60 8.62 (4.25) gain (loss) Total from investment (2.51) (11.91) 1.44 8.56 (4.30) operations Less Distributions From net realized gain - (1.29) (.50) - - Redemption fees added to paid .13 .16 .16 .11 .08 in capital Net asset value, end of period $ 12.79 $ 15.17 $ 28.21 $ 27.11 $ 18.44 TOTAL RETURN A, B (15.69)% (43.15)% 6.10% 47.02% (18.62)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 179,619 $ 219,668 $ 428,103 $ 451,493 $ 278,197 (000 omitted) Ratio of expenses to average 1.57% 1.55% 1.44% 1.39% 1.41% net assets Ratio of expenses to average 1.54% D 1.48% D 1.42% D 1.39% 1.41% net assets after expense reductions Ratio of net investment (.59)% (.67)% (.59)% (.27)% (.22)% income (loss) to average net assets Portfolio turnover rate 59% 89% 63% 56% 34%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29. 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 FEBRUARY 28, PAST 1 YEAR LIFE OF FUND 1999 SELECT NATURAL RESOURCES -24.57% -19.06% SELECT NATURAL RESOURCES -26.91% -21.56% (LOAD ADJ.) S&P 500 19.74% 60.71% GS Natural Resources -20.88% -7.26% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year or since the fund started on March 3, 1997. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR LIFE OF FUND 1999 SELECT NATURAL RESOURCES -24.57% -10.07% SELECT NATURAL RESOURCES -26.91% -11.48% (LOAD ADJ.) S&P 500 19.74% 26.89% GS Natural Resources -20.88% -3.72% 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 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 7572.48 12335.21 1998/09/30 9025.28 13125.40 1998/10/31 9065.08 14193.02 1998/11/30 8726.76 15053.26 1998/12/31 8617.30 15920.63 1999/01/31 8030.21 16586.43 1999/02/26 7844.00 16070.92 IMATRL PRASUN SHR__CHT 19990228 19990307 165520 R00000000000027 $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 February 28, 1999, the value of the investment would have been $7,844 - a 21.56% 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 $16,071 - a 60.71% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Mobil Corp. 8.2 USX-Marathon Group 6.0 BP Amoco PLC sponsored ADR 5.9 Elf Aquitaine SA sponsored ADR 5.2 Total SA sponsored ADR 5.1 Exxon Corp. 4.9 Schlumberger Ltd. 4.3 Halliburton Co. 3.8 Chevron Corp. 3.7 Amerada Hess Corp. 3.1 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Oil & Gas 63.5% Energy Services 18.8% Precious Metals 6.1% Metals & Mining 4.4% Gas 0.8% All Others 6.4%* Row: 1, Col: 1, Value: 6.4 Row: 1, Col: 2, Value: 1.8 Row: 1, Col: 3, Value: 4.4 Row: 1, Col: 4, Value: 6.1 Row: 1, Col: 5, Value: 18.8 Row: 1, Col: 6, Value: 62.5 * INCLUDES SHORT-TERM INVESTMENTS NATURAL RESOURCES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Larry Rakers) Larry Rakers, Portfolio Manager Fidelity Select Natural Resources Portfolio Q. HOW DID THE FUND PERFORM, LARRY? A. The natural resources sector continued to suffer during the period. For the 12 months that ended February 28, 1999, the fund returned - -24.57%. The Standard & Poor's 500 Index returned 19.74% during the same period. The fund also compares its performance 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 -20.88% during the 12-month period. Q. WHAT MARKET FACTORS HURT PERFORMANCE AND WHAT CAUSED THE FUND TO UNDERPERFORM THE GOLDMAN SACHS INDEX FOR THE PERIOD? A. The major cause of poor performance was weak global economic growth. Many international economies continue to languish in a mire of political, financial and currency troubles. Over the past couple of years, the global demand for natural resources has declined from approximately a 2% annual growth rate to 0%. In this environment, even a slight increase in the supply of natural resources is too much, and, as a result, commodity prices tanked across the board. Regarding the fund's performance relative to the Goldman Sachs index, the fund underperformed because I allocated a larger percentage of fund assets to small and mid-cap integrated oil companies, energy service companies and drillers compared to the index. These companies are more sensitive to oil prices and underperformed the larger integrated oil companies, such as Mobil and Exxon, in this bearish environment. Q. WHY DID YOU OVERWEIGHT THE FUND IN MORE AGGRESSIVE OIL COMPANIES, RELATIVE TO THE INDEX? A. In hindsight, I was early in my prediction that oil prices were poised to rebound. However, I am comfortable with the fund's asset allocation. I believe for a number of reasons - which I will discuss in more detail in my market outlook - that we are starting to see signs of impending strength in oil prices. As a result, if we do see an increase in oil prices, the smaller-cap integrated oil companies and energy service companies - which are more sensitive to oil prices - - should perform better than the larger-cap integrated oil companies, such as Mobil, BP Amoco and Exxon. Q. WERE THERE ANY BRIGHT SPOTS IN THIS DIFFICULT ENVIRONMENT? A. The major oil stocks, such as BP Amoco, Mobil and Exxon, managed to produce solid gains over the past year. All of these stocks provided a boost to the fund's total return and rallied in response to merger announcements. In comparison, the majority of secondary energy stocks - - drillers, oil service and oil equipment - posted significant losses for the year. Gold was the star of the metals group. The price of gold was essentially flat during the past 12-month period, while prices for most other commodities were down approximately 20% to 30% for the same period. Q. WHAT STOCKS DETRACTED FROM PERFORMANCE? A. With the exception of the large integrated oil stocks and a select group of precious-metals companies, the natural resources sector experienced negative returns across the board. With energy prices hitting 12-year lows, significant detractors were USX-Marathon, Tosco, Weatherford International and Schlumberger. As I mentioned earlier, the stock prices of these energy service companies are even more dependent on energy prices than the larger integrated oil companies. When the prices of oil and natural gas drop below a certain level, it no longer makes economic sense to explore for these fuels or drill new wells. In this environment, business deteriorates for energy service companies such as Weatherford and Schlumberger, and their stock prices suffer. On the other hand, if energy prices pick up, earnings can rise exponentially for these companies. Q. WHAT'S YOUR OUTLOOK, LARRY? A. I'm starting to get excited about the outlook for natural resources for the first time in a while. Look at oil, for instance, where we are starting to see a response on the supply side to price movement. For example, as oil prices declined, the typical oil company cut capital expenditures by 30%, cut back on exploration, and the number of rigs drilling for oil and gas fell to a 49-year low. As a result, oil and gas production will most likely fall in 1999. In addition, some base-metals mines have been closing worldwide. If we get even a slight rebound in demand from Asia or Latin America, it will not take much for a squeeze on supply. This situation could set the stage for an increase in commodity prices, which ultimately could be good for 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: March 3, 1997 FUND NUMBER: 514 TRADING SYMBOL: FNATF SIZE: as of February 28, 1999, more than $5 million MANAGER: Lawrence Rakers, since inception; manager, Fidelity Select Energy Portfolio, since 1997; Fidelity Select Paper and Forest Products Portfolio, Fidelity Select Precious Metals and Minerals Portfolio,1996-1997; Fidelity Select American Gold Portfolio 1995-1997; joined Fidelity in 1993 NATURAL RESOURCES PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.7% SHARES VALUE (NOTE 1) ENERGY SERVICES - 18.8% Baker Hughes, Inc. 5,290 $ 95,220 BJ Services Co. (a) 5,000 70,313 Carbo Ceramics, Inc. 200 3,200 Coflexip SA sponsored ADR 1,500 43,125 ENSCO International, Inc. 6,200 55,025 Global Marine, Inc. (a) 1,500 11,625 Halliburton Co. 7,000 197,750 Helmerich & Payne, Inc. 2,200 35,888 Marine Drilling Companies, 1,300 8,288 Inc. (a) Nabors Industries, Inc. (a) 3,800 43,700 Noble Drilling Corp. (a) 5,300 65,588 Pool Energy Services Co. (a) 2,500 25,391 Santa Fe International Corp. 2,300 30,763 Schlumberger Ltd. 4,626 224,650 Smith International, Inc. 2,200 53,488 Transocean Offshore, Inc. 200 4,125 UTI Energy Corp. (a) 1,400 8,138 976,277 ENGINEERING - 0.2% Stolt Comex Seaway SA 1,800 10,575 sponsored ADR Class A GAS - 0.8% Dynegy, Inc. 2,000 24,000 Williams Companies, Inc. 500 18,500 42,500 METALS & MINING - 4.4% Alcoa, Inc. 3,800 153,900 Breakwater Resources Ltd. (a) 13,700 9,086 Cameco Corp. 800 17,058 Camphor Ventures, Inc. (a) 16,400 7,940 Cominco Ltd. 600 8,257 Cyprus Amax Minerals Co. 700 7,875 Freeport-McMoRan Copper & 400 3,700 Gold, Inc. Inco Ltd. 1,100 13,788 Rio Algom Ltd. 700 7,289 228,893 OIL & GAS - 63.4% Alberta Energy Co. Ltd. 1,000 21,455 Amerada Hess Corp. 3,600 163,350 Anadarko Petroleum Corp. 1,600 44,000 Apache Corp. 400 7,975 Berkley Petroleum Corp. (a) 1,000 5,438 BP Amoco PLC sponsored ADR 3,577 304,045 Burlington Resources, Inc. 557 18,033 Canadian Natural Resources 1,000 13,828 Ltd. (a) SHARES VALUE (NOTE 1) Chevron Corp. 2,500 $ 192,188 Compagnie Generale de 1,300 10,725 Geophysique SA sponsored ADR (a) Conoco, Inc. Class A 600 12,188 Cooper Cameron Corp. (a) 200 4,625 Crestar Energy, Inc. (a) 900 6,088 Elf Aquitaine SA sponsored ADR 5,200 268,450 Eni Spa sponsored ADR 100 5,900 Enron Oil & Gas Co. 2,100 34,650 Exxon Corp. 3,800 252,938 Frontier Oil Corp. (a) 18,700 98,175 Gulf Canada Resources Ltd. (a) 6,000 14,286 Imperial Oil Ltd. 5,700 88,082 Louis Dreyfus Natural Gas 1,600 19,100 Corp. (a) Magnum Hunter Resources, Inc. 3,600 9,225 (a) Mobil Corp. 5,100 424,248 Noble Affiliates, Inc. 700 15,838 Occidental Petroleum Corp. 200 3,013 Ocean Energy, Inc. (a) 1,000 4,250 Oryx Energy Co. (a) 5,300 54,988 Paramount Resources Ltd. (c) 1,400 11,931 Penn West Petroleum Ltd. (a) 500 4,958 Petro-Canada 3,400 36,530 Petrobras PN (Pfd. Reg.) 1 0 Phillips Petroleum Co. 200 7,738 Plains Resources, Inc. (a) 4,100 37,925 Renaissance Energy Ltd. (a) 600 5,292 Rio Alto Exploration Ltd. (a) 2,200 19,479 Seagull Energy Corp. (a) 3,100 14,725 Shell Transport & Trading Co. PLC: ADR 2,000 67,125 (Reg.) 10,000 55,938 Snyder Oil Corp. 500 5,219 Suncor Energy, Inc. 1,800 52,706 Tesoro Petroleum Corp. (a) 1,200 9,600 Texaco, Inc. 3,400 158,313 Tosco Corp. 2,000 41,375 Total SA sponsored ADR 5,100 263,288 Ulster Petroleums Ltd. (a) 1,700 9,471 Ultramar Diamond Shamrock 1,100 21,725 Corp. Union Pacific Resources 3,300 29,494 Group, Inc. USX-Marathon Group 15,000 310,313 Veritas DGC, Inc. (a) 300 2,831 Vintage Petroleum, Inc. 800 3,550 Weatherford International, 1,195 20,315 Inc. (a) 3,286,922 PRECIOUS METALS - 6.1% Argentina Gold Corp. (a) 10,000 29,049 Getchell Gold Corp. (a) 4,200 108,938 Greenstone Resources Ltd. (a) 71,232 26,928 Greenstone Resources Ltd. 500 189 (a)(c) Meridian Gold, Inc. (a) 10,600 59,756 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PRECIOUS METALS - CONTINUED Mountain Province Mining, 1,500 $ 2,984 Inc. (a) Pan American Silver Corp. (a) 1,700 9,527 Stillwater Mining Co. (a) 3,350 76,841 William Resources, Inc. 15,750 0 warrants 12/31/02 (a)(c) 314,212 TOTAL COMMON STOCKS 4,859,379 (Cost $5,603,913) CONVERTIBLE PREFERRED STOCKS - - 0.1% OIL & GAS - 0.1% Chesapeake Energy Corp. $3.50 600 5,700 (Cost $5,825) CASH EQUIVALENTS - 6.2% Taxable Central Cash Fund (b) 323,594 323,594 (Cost $323,594) TOTAL INVESTMENT IN $ 5,188,673 SECURITIES - 100% (Cost $5,933,332) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $12,120 or 0.2% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $9,348,795 and $9,820,624, respectively. 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 $2,189 for the period. Distribution of investments by country of issue, as a percentage of total value of investments in securities, is as follows: United States of America 66.5% France 11.3 Canada 9.3 United Kingdom 8.3 Netherlands Antilles 4.3 Others (individually less 0.3 than 1%) TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $6,257,950. Net unrealized depreciation aggregated $1,069,277, of which $148,481 related to appreciated investment securities and $1,217,758 related to depreciated investment securities. At February 28, 1999, the fund had a capital loss carryforward of approximately $563,000, all of which will expire on February 28, 2007. The fund intends to elect to defer to its fiscal year ending February 29, 2000 approximately $345,000 of losses recognized during the period November 1, 1998 to February 28, 1999. NATURAL RESOURCES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 5,188,673 value (cost $5,933,332) - See accompanying schedule Receivable for investments 7,140 sold Receivable for fund shares 5,460 sold Dividends receivable 17,363 Interest receivable 1,399 Redemption fees receivable 191 Receivable from investment 479 adviser for expense reductions TOTAL ASSETS 5,220,705 LIABILITIES Payable to custodian bank $ 23,647 Payable for investments 9,145 purchased Payable for fund shares 30,673 redeemed Other payables and accrued 23,094 expenses TOTAL LIABILITIES 86,559 NET ASSETS $ 5,134,146 Net Assets consist of: Paid in capital $ 7,111,468 Accumulated undistributed net (1,232,663) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (744,659) (depreciation) on investments NET ASSETS, for 650,739 $ 5,134,146 shares outstanding NET ASSET VALUE and $7.89 redemption price per share ($5,134,146 (divided by) 650,739 shares) Maximum offering price per $8.13 share (100/97.00 of $7.89) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 102,921 Dividends Interest 23,193 TOTAL INCOME 126,114 EXPENSES Management fee $ 38,307 Transfer agent fees 59,138 Accounting fees and expenses 60,054 Non-interested trustees' 24 compensation Custodian fees and expenses 18,146 Registration fees 12,995 Audit 18,493 Legal 39 Reports to shareholders 1,416 Miscellaneous 239 Total expenses before 208,851 reductions Expense reductions (47,499) 161,352 NET INVESTMENT INCOME (LOSS) (35,238) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (1,196,635) Foreign currency transactions (9,554) (1,206,189) Change in net unrealized appreciation (depreciation) on: Investment securities (510,349) Assets and liabilities in 29 (510,320) foreign currencies NET GAIN (LOSS) (1,716,509) NET INCREASE (DECREASE) IN $ (1,751,747) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 24,488 charges paid to FDC Sales charges - Retained by $ 24,488 FDC Deferred sales charges $ 8 withheld by FDC Exchange fees withheld by FSC $ 1,035 Expense reductions Directed $ 2,114 brokerage arrangements Custodian credits 35 FMR reimbursement 45,350 $ 47,499 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 MARCH 3,1997 (COMMENCEMENT OF ASSETS OPERATIONS) TO FEBRUARY 28, 1998 Operations Net investment $ (35,238) $ (55,268) income (loss) Net realized gain (loss) (1,206,189) 327,737 Change in net unrealized (510,320) (234,339) appreciation (depreciation) NET INCREASE (DECREASE) IN (1,751,747) 38,130 NET ASSETS RESULTING FROM OPERATIONS Distributions to - (189,236) shareholders from net realized gains Share transactions Net 6,170,322 19,111,951 proceeds from sales of shares Reinvestment of distributions - 187,981 Cost of shares redeemed (6,819,368) (11,661,561) NET INCREASE (DECREASE) IN (649,046) 7,638,371 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 15,080 32,594 TOTAL INCREASE (DECREASE) (2,385,713) 7,519,859 IN NET ASSETS NET ASSETS Beginning of period 7,519,859 - End of period (including $ 5,134,146 $ 7,519,859 accumulated net investment loss of $0 and $908, respectively) OTHER INFORMATION Shares Sold 655,279 1,783,337 Issued in reinvestment of - 18,686 distributions Redeemed (723,578) (1,082,985) Net increase (decrease) (68,299) 719,038
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 10.46 $ 10.00 period Income from Investment Operations Net investment income (loss) d (.05) (.09) Net realized and unrealized (2.54) .76 gain (loss) Total from investment (2.59) .67 operations Less Distributions From net realized gain - (.26) Redemption fees added to paid .02 .05 in capital Net asset value, end of period $ 7.89 $ 10.46 TOTAL RETURN B, C (24.57)% 7.30% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 5,134 $ 7,520 (000 omitted) Ratio of expenses to average 2.50% F 2.50% A, F net assets Ratio of expenses to average 2.47% G 2.48% A, G net assets after expense reductions Ratio of net investment (.54)% (.86)% A income (loss) to average net assets Portfolio turnover rate 155% 165% A 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 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. 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. 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT PRECIOUS METALS AND -10.89% -43.80% -16.07% MINERALS SELECT PRECIOUS METALS AND -13.64% -45.55% -18.66% MINERALS (LOAD ADJ.) S&P 500 19.74% 194.91% 459.21% GS Natural Resources -20.88% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT PRECIOUS METALS AND -10.89% -10.88% -1.74% MINERALS SELECT PRECIOUS METALS AND -13.64% -11.45% -2.04% MINERALS (LOAD ADJ.) S&P 500 19.74% 24.15% 18.78% GS Natural Resources -20.88% 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 1989/02/28 9700.00 10000.00 1989/03/31 9700.00 10233.00 1989/04/30 9259.46 10764.09 1989/05/31 8818.92 11200.04 1989/06/30 9512.36 11136.20 1989/07/31 9773.42 12141.80 1989/08/31 9969.22 12379.78 1989/09/30 10320.02 12329.02 1989/10/31 10311.86 12042.99 1989/11/30 11625.32 12288.66 1989/12/31 11924.86 12583.59 1990/01/31 12874.56 11739.23 1990/02/28 11767.96 11890.67 1990/03/31 11255.95 12205.77 1990/04/30 10099.80 11900.63 1990/05/31 10677.87 13060.94 1990/06/30 9901.60 12972.12 1990/07/31 10504.45 12930.61 1990/08/31 10611.81 11761.68 1990/09/30 10372.32 11188.89 1990/10/31 9207.91 11140.78 1990/11/30 9042.75 11860.47 1990/12/31 9411.87 12191.38 1991/01/31 8390.30 12722.92 1991/02/28 9143.92 13632.61 1991/03/31 8968.08 13962.52 1991/04/30 8942.96 13996.03 1991/05/31 9445.37 14600.66 1991/06/30 10065.01 13931.95 1991/07/31 10065.01 14581.18 1991/08/31 9009.94 14926.75 1991/09/30 9194.16 14677.48 1991/10/31 9813.81 14874.16 1991/11/30 10123.63 14274.73 1991/12/31 9556.58 15907.76 1992/01/31 9759.38 15611.87 1992/02/29 9252.40 15814.83 1992/03/31 8889.06 15506.44 1992/04/30 8365.18 15962.33 1992/05/31 8914.41 16040.54 1992/06/30 8964.70 15801.54 1992/07/31 9083.22 16447.82 1992/08/31 8676.88 16110.64 1992/09/30 8321.34 16300.75 1992/10/31 7788.03 16357.80 1992/11/30 7330.91 16915.60 1992/12/31 7466.94 17123.66 1993/01/31 7647.80 17267.50 1993/02/28 8491.82 17502.34 1993/03/31 9645.88 17871.64 1993/04/30 11204.72 17439.14 1993/05/31 12686.05 17906.51 1993/06/30 12892.75 17958.44 1993/07/31 14572.16 17886.61 1993/08/31 13108.06 18564.51 1993/09/30 12074.57 18421.56 1993/10/31 13788.43 18802.89 1993/11/30 13762.60 18624.26 1993/12/31 15801.85 18849.62 1994/01/31 15148.16 19490.50 1994/02/28 14485.75 18962.31 1994/03/31 14337.58 18135.55 1994/04/30 14338.16 18367.69 1994/05/31 14364.32 18668.92 1994/06/30 14652.13 18211.53 1994/07/31 15210.31 18808.87 1994/08/31 16291.78 19580.03 1994/09/30 17538.95 19100.32 1994/10/31 16858.68 19530.08 1994/11/30 15053.32 18818.79 1994/12/31 15621.55 19097.87 1995/01/31 12900.15 19593.08 1995/02/28 13492.14 20356.63 1995/03/31 14861.68 20957.35 1995/04/30 14985.38 21574.54 1995/05/31 14799.83 22436.88 1995/06/30 14976.54 22958.09 1995/07/31 15595.04 23719.38 1995/08/31 15807.10 23778.91 1995/09/30 15851.28 24782.38 1995/10/31 13872.08 24693.91 1995/11/30 14844.01 25777.97 1995/12/31 15099.90 26274.46 1996/01/31 18265.30 27168.84 1996/02/29 18584.50 27420.69 1996/03/31 18478.10 27684.75 1996/04/30 18896.45 28092.83 1996/05/31 19989.71 28817.34 1996/06/30 17207.68 28927.14 1996/07/31 16994.36 27649.13 1996/08/31 17918.74 28232.26 1996/09/30 17172.13 29821.17 1996/10/31 17029.91 30643.63 1996/11/30 16176.64 32959.99 1996/12/31 15918.88 32307.05 1997/01/31 15234.48 34325.59 1997/02/28 17421.00 34594.71 1997/03/31 14834.51 33173.21 1997/04/30 13847.92 35153.65 1997/05/31 14079.01 37293.80 1997/06/30 12621.33 38964.57 1997/07/31 12123.59 42064.98 1997/08/31 12185.81 39708.50 1997/09/30 12754.66 41883.33 1997/10/31 10612.59 40484.43 1997/11/30 8194.98 42358.45 1997/12/31 8772.72 43085.75 1998/01/31 9661.54 43562.28 1998/02/28 9137.14 46703.99 1998/03/31 9750.43 49095.70 1998/04/30 10692.58 49589.60 1998/05/31 9057.14 48737.16 1998/06/30 7715.01 50716.86 1998/07/31 7528.36 50176.72 1998/08/31 5590.72 42922.17 1998/09/30 8497.18 45671.77 1998/10/31 8497.18 49386.71 1998/11/30 8301.64 52380.04 1998/12/31 8781.60 55398.18 1999/01/31 8514.96 57714.93 1999/02/26 8134.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990307 165850 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Precious Metals and Minerals Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have been $8,134 - an 18.66% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Meridian Gold, Inc. 12.9 Normandy Mining Ltd. 12.6 Euro-Nevada Mining Corp. Ltd. 8.1 Getchell Gold Corp. 8.0 Delta Gold NL 4.9 Franco Nevada Mining Corp. Ltd. 4.7 Acacia Resources Ltd. 4.6 Stillwater Mining Co. 4.2 Anglogold Ltd. sponsored ADR 3.2 Lihir Gold Ltd. 2.8 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Gold Ores (Canada) 33.5% Gold & Silver Ores (Australia) 13.8% Gold Ores (Australia) 9.0% Gold & Silver Ores (United States of America) 8.0% Gold Ores (South Africa) 7.3% All Others 28.4% * Row: 1, Col: 1, Value: 28.4 Row: 1, Col: 2, Value: 7.3 Row: 1, Col: 3, Value: 8.0 Row: 1, Col: 4, Value: 9.0 Row: 1, Col: 5, Value: 13.8 Row: 1, Col: 6, Value: 33.5 * INCLUDES SHORT-TERM INVESTMENTS PRECIOUS METALS AND MINERALS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW George Domolky, Portfolio Manager of Fidelity Select Precious Metals and Minerals Portfolio Q. HOW DID THE FUND PERFORM, GEORGE? A. While the fund lost more ground on an absolute basis, its losses were relatively small compared to those of some recent periods. Moreover, the fund's performance compared favorably to that of its most meaningful benchmark: the Goldman Sachs Natural Resources Index, an index of 96 stocks designed to measure the performance of companies in the natural resources sector. For the 12 months that ended February 28, 1999, the fund had a total return of -10.89%, while the Goldman Sachs index returned -20.88%. The Standard & Poor's 500 Index posted a return of 19.74% during the same period. Q. WHY DID THE FUND BEAT THE GOLDMAN SACHS INDEX BUT TRAIL THE S&P 500? A. The price of gold - the primary determinant of the fund's fortunes - - was essentially the same at the end of the period as at the beginning, a welcome relief from the relentlessly sinking gold prices seen during most of 1997. In contrast, certain other components of the Goldman Sachs index, such as companies in the copper and nickel industries, had to cope with commodity prices that continued to fall during the period. This downward pressure on the non-gold elements of the Goldman Sachs index, together with the fund's favorable stock selection process, helped the fund to outperform the index. However, the level at which the price of gold stabilized - around $290 per ounce - was too low for many mines to operate profitably. As a result, investors tended to favor stocks from other sectors over precious metals shares, as evidenced by the fund's poor showing against the S&P 500. Q. WHAT OTHER FACTORS INFLUENCED THE FUND'S PERFORMANCE? A. The decision to expand the fund's holdings of Australian gold mining companies paid off. Although foreign investments are commonly viewed as being riskier than domestic ones, Australian shares were generally undervalued relative to their peers in Canada and the United States, and outperformed them during the period. Moreover, I continued to consolidate the fund's South African holdings in two of the strongest candidates, Anglogold and Gold Fields. South African mining companies tend to have higher cost structures than firms in other countries, making them more sensitive to low gold prices. Q. WHAT STOCKS PERFORMED WELL DURING THE PERIOD? A. One of the fund's major holdings - Getchell Gold - received a takeover bid at a substantial premium over its market price, causing the stock to rise. Meridian Gold was another beneficial holding that firmed on news of promising discoveries in Chile. Australian company Delta Gold also helped the fund's performance and reflected my decision to increase holdings Down Under. Another positive contributor, Stillwater Mining, is a producer of platinum and palladium that benefited from firmer prices in response to decreased exports of those metals from Russia. Q. WHAT HOLDINGS DISAPPOINTED YOU? A. Greenstone Resources - no longer one of the fund's holdings - reported disappointing production numbers, and the market responded in predictable fashion by trimming the stock price. Franco Nevada suffered from the perception that it's primarily a holding company at a time when investors preferred to hold producers. TVX Gold was hurt by a slow start of production at some new mines in Greece. Q. WHAT'S YOUR OUTLOOK, GEORGE? A. There are several important factors to watch for during the remainder of 1999. One key to improving precious metals prices would be a strengthening of the Far East economies, especially Japan. The Far East is a traditionally strong source of demand for gold jewelry, so a recovery in that region would be favorable for the yellow metal. In view of gold's traditional role as a hedge against inflation, the inflation outlook here in the United States is also important. Although it has been dormant for quite some time, inflation could become a concern if strengthening economic forces here and abroad trigger a recovery in the price of oil and other commodities. Another factor to consider is central bank sales, which helped to drive gold prices lower for the past several years. Now that the European Economic Community has officially launched its currency, the euro, it seems likely that, while central bank sales in Europe may continue on a smaller scale, they will no longer occur at levels that will depress the price of gold. The investment case for gold also would be helped if the U.S. stock market or the U.S. dollar were to falter to any substantial degree. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 061 TRADING SYMBOL: FDPMX SIZE: as of February 28, 1999, more than $123 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 FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 96.4% SHARES VALUE (NOTE 1) AUSTRALIA - 27.5% METALS & MINING - 4.7% METAL MINING SERVICES - 4.6% Acacia Resources Ltd. 4,339,253 $ 5,768,831 MISCELLANEOUS METAL ORES, NEC - - 0.1% Zimbabwe Platinum Mines Ltd. 738,508 162,113 (a) TOTAL METALS & MINING 5,930,944 PRECIOUS METALS - 22.8% GOLD & SILVER ORES - 13.8% Normandy Mining Ltd. 18,595,066 15,867,598 Sons of Gwalia NL 526,902 1,537,823 17,405,421 GOLD ORES - 9.0% Delta Gold NL 4,195,819 6,174,874 Lihir Gold Ltd. (a) 4,391,375 3,584,337 Resolute Ltd. 1,950,000 1,362,534 Ross Mining NL 452,197 229,285 11,351,030 TOTAL PRECIOUS METALS 28,756,451 TOTAL AUSTRALIA 34,687,395 CANADA - 36.3% METALS & MINING - 1.1% METAL MINING SERVICES - 0.1% Minefinders Corp. Ltd. (a) 200,200 219,081 MISCELLANEOUS NONMETALLIC MINERALS - 1.0% Aber Resources Ltd. (a) 148,500 1,024,274 DIA Metropolitan Minerals 19,500 226,323 Ltd. Class B (multi-vtg.) (a) 1,250,597 TOTAL METALS & MINING 1,469,678 OIL & GAS - 0.4% OIL & GAS FIELD EXPLORATION SERVICES - 0.4% Southwestern Gold Corp. (a) 135,000 492,439 PRECIOUS METALS - 34.8% GOLD & SILVER ORES - 1.3% Goldcorp, Inc. Class A (a) 266,400 1,590,131 GOLD ORES - 33.5% Agnico-Eagle Mines Ltd. 152,000 836,716 Barrick Gold Corp. 5,000 88,374 Cambior, Inc. 213,000 840,529 Crown Resources Corp. (a) 81,900 209,869 Euro-Nevada Mining Corp. Ltd. 705,300 10,197,334 Francisco Gold Corp. (a) 43,500 274,075 Francisco Gold Corp. (a)(c) 54,500 343,381 Franco Nevada Mining Corp. 386,400 5,971,031 Ltd. Franco Nevada Mining Corp. 80,200 1,239,329 Ltd. (c) SHARES VALUE (NOTE 1) Franco Nevada Mining Corp. 25,000 $ 207,256 Ltd. Class B warrants 9/15/98 (a)(c) Geomaque Explorations Ltd. (a) 457,100 360,757 High River Gold Mines Ltd. (a) 60,000 19,101 IAMGOLD, International 69,800 217,575 African Mining Gold Corp. (a) Kinross Gold Corp. (a) 300,000 668,524 Meridian Gold, Inc. (a) 2,889,400 16,288,564 Metallica Resources, Inc. (a) 448,700 178,552 Metallica Resources, Inc. 100,000 39,793 (a)(c) Mountain Province Mining, 336,700 669,916 Inc. (a) Placer Dome, Inc. 148,000 1,619,578 Repadre Capital Corp. (a) 181,200 312,455 Rio Narcea Gold Mines Ltd. (a) 1,168,000 999,284 Sutton Resources Ltd. (a) 51,000 402,507 Vengold, Inc. (a) 410,600 125,266 Viceroy Resources Corp. (a) 194,700 219,518 42,329,284 TOTAL PRECIOUS METALS 43,919,415 TOTAL CANADA 45,881,532 GHANA - 1.5% PRECIOUS METALS - 1.5% GOLD ORES - 1.5% Ashanti Goldfields Co. Ltd. 215,773 1,914,985 GDR PERU - 1.7% PRECIOUS METALS - 1.7% SILVER ORES - 1.7% Compania de Minas 156,900 2,108,344 Buenaventura SA sponsored ADR Class B SOUTH AFRICA - 13.8% HOLDING COMPANIES - 0.6% OFFICES OF HOLDING COMPANIES, NEC - 0.6% Gencor Ltd. (Reg.) 342,000 784,524 METALS & MINING - 1.1% MISCELLANEOUS METAL ORES, NEC - - 0.8% Anglo American Platinum Corp. 63,100 1,037,693 Ltd. MISCELLANEOUS NONMETALLIC MINERALS - 0.3% De Beers Consolidated Mines 19,700 339,883 Ltd./ De Beers Centenary AG unit TOTAL METALS & MINING 1,377,576 PRECIOUS METALS - 12.1% GOLD & SILVER ORES - 4.8% Anglogold Ltd. 53,186 1,941,769 Anglogold Ltd. sponsored ADR 224,690 4,072,506 6,014,275 GOLD ORES - 7.3% Anglo American Corp. of South 61,400 1,916,317 Africa Ltd. COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SOUTH AFRICA - CONTINUED PRECIOUS METALS - CONTINUED GOLD ORES - CONTINUED Avgold Ltd. (a) 45,000 $ 21,082 De Beers Consolidated Mines 137,500 2,354,688 Ltd. ADR Gold Fields Ltd. 631,336 3,386,027 Gold Fields of South Africa 85,600 135,516 Ltd. Gold Fields of South Africa 73,700 110,550 Ltd. ADR Harmony Gold Mining Co. Ltd. 165,700 738,794 Randfontein Estates Gold 52,463 25,425 Mining Co. warrants 7/1/02 (a) Western Areas Gold Mining 215,000 574,815 Ltd. (a) 9,263,214 TOTAL PRECIOUS METALS 15,277,489 TOTAL SOUTH AFRICA 17,439,589 UNITED STATES OF AMERICA - 15.6% METALS & MINING - 0.8% COPPER ORES - 0.8% Freeport-McMoRan Copper & 100,000 943,750 Gold, Inc. Class B PRECIOUS METALS - 14.7% GOLD & SILVER ORES - 8.0% Getchell Gold Corp. (a) 391,700 10,159,719 GOLD ORES - 6.7% Homestake Mining Co. 240,106 2,205,973 Homestake Mining Co. (ASTL) 22,900 201,217 Stillwater Mining Co. (a) 229,150 5,256,128 Stillwater Mining Co. (a)(c) 34,500 791,344 8,454,662 TOTAL PRECIOUS METALS 18,614,381 SERVICES - 0.1% JEWELRY, PRECIOUS METAL - 0.1% Lazare Kaplan International, 10,000 73,750 Inc. (a) TOTAL UNITED STATES OF AMERICA 19,631,881 TOTAL COMMON STOCKS 121,663,726 (Cost $145,864,546) CASH EQUIVALENTS - 3.6% Taxable Central Cash Fund (b) 4,600,787 4,600,787 (Cost $4,600,787) TOTAL INVESTMENT IN $ 126,264,513 SECURITIES - 100% (Cost $150,465,333) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $2,621,103 or 2.1% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $75,666,319 and $94,287,029, respectively. 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 $11,498 for the period. The fund participated in the bank borrowing program. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $3,755,000 and $2,353,182, respectively. The weighted average interest rate was 5.05%. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $151,305,065. Net unrealized depreciation aggregated $25,040,552, of which $17,051,472 related to appreciated investment securities and $42,092,024 related to depreciated investment securities. At February 28, 1999, the fund had a capital loss carryforward of approximately $77,793,000 of which $1,376,000, $55,694,000, and $20,723,000 will expire on February 28, 2001, 2006, and 2007, respectively. The fund intends to defer to its fiscal year ending February 29, 2000 approximately $12,682,000 of losses recognized during the period November 1, 1998 to February 28, 1999. PRECIOUS METALS AND MINERALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 126,264,513 value (cost $150,465,333) - See accompanying schedule Receivable for investments 403,856 sold Receivable for fund shares 240,966 sold Dividends receivable 649,189 Interest receivable 9,582 Redemption fees receivable 894 TOTAL ASSETS 127,569,000 LIABILITIES Payable for investments $ 3,397,461 purchased Payable for fund shares 528,773 redeemed Accrued management fee 64,619 Other payables and accrued 139,019 expenses TOTAL LIABILITIES 4,129,872 NET ASSETS $ 123,439,128 Net Assets consist of: Paid in capital $ 238,968,188 Accumulated net investment (37,156) loss Accumulated undistributed net (91,281,851) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (24,210,053) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 13,474,676 $ 123,439,128 shares outstanding NET ASSET VALUE and $9.16 redemption price per share ($123,439,128 (divided by) 13,474,676 shares) Maximum offering price per $9.44 share (100/97.00 of $9.16) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 2,262,380 Dividends Interest (including income on 204,614 securities loaned of $3,486) TOTAL INCOME 2,466,994 EXPENSES Management fee $ 882,668 Transfer agent fees 1,431,323 Accounting and security 145,339 lending fees Non-interested trustees' 441 compensation Custodian fees and expenses 72,947 Registration fees 74,184 Audit 11,901 Legal 809 Interest 3,630 Reports to shareholders 40,820 Total expenses before 2,664,062 reductions Expense reductions (54,750) 2,609,312 NET INVESTMENT INCOME (LOSS) (142,318) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (21,030,575) Foreign currency transactions 23,252 (21,007,323) Change in net unrealized appreciation (depreciation) on: Investment securities 3,733,889 Assets and liabilities in (9,586) 3,724,303 foreign currencies NET GAIN (LOSS) (17,283,020) NET INCREASE (DECREASE) IN $ (17,425,338) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 418,114 charges paid to FDC Sales charges - Retained by $ 414,477 FDC Deferred sales charges $ 18,943 withheld by FDC Exchange fees withheld by FSC $ 30,587 Expense reductions Directed $ 53,824 brokerage arrangements Custodian credits 237 Transfer agent credits 689 $ 54,750 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (142,318) $ (511,682) income (loss) Net realized gain (loss) (21,007,323) (66,607,356) Change in net unrealized 3,724,303 (65,517,001) appreciation (depreciation) NET INCREASE (DECREASE) IN (17,425,338) (132,636,039) NET ASSETS RESULTING FROM OPERATIONS Share transactions Net 415,102,396 372,321,003 proceeds from sales of shares Cost of shares redeemed (442,648,944) (401,322,827) NET INCREASE (DECREASE) IN (27,546,548) (29,001,824) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 2,450,806 2,011,726 TOTAL INCREASE (DECREASE) (42,521,080) (159,626,137) IN NET ASSETS NET ASSETS Beginning of period 165,960,208 325,586,345 End of period (including $ 123,439,128 $ 165,960,208 accumulated net investment loss of $37,156 and $1,339,643, respectively) OTHER INFORMATION Shares Sold 42,223,635 30,945,409 Redeemed (44,898,226) (31,406,772) Net increase (decrease) (2,674,591) (461,363)
FINANCIAL HIGHLIGHTS
YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 10.28 $ 19.60 $ 20.96 $ 15.27 $ 16.62 period Income from Investment Operations Net investment income (loss) C (.01) (.04) (.01) .07 .17 Net realized and unrealized (1.27) (9.42) (1.42) 5.54 (1.42) gain (loss) Total from investment (1.28) (9.46) (1.43) 5.61 (1.25) operations Less Distributions From net investment income - - (.04) (.06) (.18) In excess of net investment - - (.01) - (.05) income Total distributions - - (.05) (.06) (.23) Redemption fees added to paid .16 .14 .12 .14 .13 in capital Net asset value, end of period $ 9.16 $ 10.28 $ 19.60 $ 20.96 $ 15.27 TOTAL RETURN A, B (10.89)% (47.55)% (6.26)% 37.74% (6.86)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 123,439 $ 165,960 $ 325,586 $ 467,196 $ 364,204 (000 omitted) Ratio of expenses to average 1.78% 1.82% 1.62% 1.52% 1.46% net assets Ratio of expenses to average 1.74% D 1.76% D 1.61% D 1.52% 1.46% net assets after expense reductions Ratio of net investment (.09)% (.26)% (.05)% .39% .99% income (loss) to average net assets Portfolio turnover rate 53% 84% 54% 53% 43% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 28, 1999 PAST 1 YEAR LIFE OF FUND SELECT BUSINESS SERVICES AND 26.23% 37.47% OUTSOURCING SELECT BUSINESS SERVICES AND 22.37% 33.27% OUTSOURCING (LOAD ADJ.) S&P 500 19.74% 24.95% GS Technology 48.15% 56.20% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year or since the fund started on February 4, 1998. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, 1999 PAST 1 YEAR LIFE OF FUND SELECT BUSINESS SERVICES AND 26.23% 34.79% OUTSOURCING SELECT BUSINESS SERVICES AND 22.37% 30.92% OUTSOURCING (LOAD ADJ.) S&P 500 19.74% 23.24% GS Technology 48.15% 51.95% 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 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 9756.81 9590.43 1998/09/30 10465.51 10204.80 1998/10/31 11387.80 11034.86 1998/11/30 11999.42 11703.68 1998/12/31 13275.56 12378.04 1999/01/31 13806.19 12895.69 1999/02/26 13327.00 12494.90 IMATRL PRASUN SHR__CHT 19990228 19990307 154325 R00000000000016 $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 February 28, 1999, the value of the investment would have been $13,327 - a 33.27% 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 been $12,495 - a 24.95% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS First Data Corp. 7.5 Automatic Data Processing, Inc. 5.9 IMS Health, Inc. 5.7 DST Systems, Inc. 5.1 Ceridian Corp. 4.6 Nielsen Media Research, Inc. 4.6 Affiliated Computer Services, 4.3 Inc. Class A Sabre Group Holdings, Inc. 4.0 Class A Computer Sciences Corp. 3.8 Equifax, Inc. 3.4 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Computer Services & Software 61.6% Services 11.2% Advertising 8.1% Broadcasting 4.6% Trucking & Freight 3.0% All Others 11.5%* Row: 1, Col: 1, Value: 11.5 Row: 1, Col: 2, Value: 3.0 Row: 1, Col: 3, Value: 4.6 Row: 1, Col: 4, Value: 8.1 Row: 1, Col: 5, Value: 11.2 Row: 1, Col: 6, Value: 61.6 * 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. HOW DID THE FUND PERFORM, MICHAEL? A. For the 12 months that ended February 28, 1999, the fund posted a total return of 26.23%. To compare, the Standard & Poor's 500 Index returned 19.74% during the same 12-month period, and the Goldman Sachs Technology Index - an index of 190 stocks designed to measure the performance of companies in the technology sector - returned 48.15%. Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE OVER THE PAST 12 MONTHS? A. The fund - and the business services and outsourcing sector - performed well relative to the S&P 500 because of the defensive nature of many of the stocks; they tend to have stable revenue streams. During the year, many investors were concerned that a weakened domestic economy could result from continued financial problems in Asia and currency devaluations in Latin America. Many stocks in the fund did well because they had little or no business in these countries, and enjoyed predictable revenues. Relative to the Goldman Sachs Technology Index, the fund didn't own the large technology hardware and software companies that dominate the index and drove the technology sector over the past 12 months. Companies like Microsoft and Intel posted very strong performance, but the fund generally wouldn't own these product companies; it's focused on companies that provide business-related services. Q. DID YOUR STRATEGY CHANGE AS WE WORKED OUR WAY THROUGH THE TURMOIL IN THE MARKETS IN THE LATTER HALF OF 1998? A. No, it didn't. I continued to search for companies with strong earnings-growth prospects or improving fundamentals, selling at reasonable or attractive valuations. I looked for turnaround situations or under-followed securities. Recurring revenues, strong near-term earnings outlooks and strong cash flows were among the common characteristics shared by many of the fund's holdings. Q. WHICH STOCKS WERE STRONG CONTRIBUTORS TO THE FUND'S PERFORMANCE? A. On the plus side, there was Nielsen Media Research, a company that enjoys a virtual monopoly in the business of measuring television audiences. The company split from Cognizant in July 1998. Because Nielsen was so small when the split occurred, it received very little coverage on Wall Street at that time. Recognizing the company's strong market position and appreciating its stock's low valuation, I took a large position in the stock for the fund. In time, the company saw its share price rise as investors came to appreciate the company's consistent earnings-growth potential. Ceridian, a data management firm, sold off some of its businesses, better positioning itself to produce superior earnings growth and strong cash flow. First Data was a turnaround story, as this data management company's stock rebounded from record lows. Finally, Affiliated Computer Services continued to generate strong earnings growth and made some positive acquisitions to its business-process outsourcing operations. Q. WHICH STOCKS PROVED TO BE DISAPPOINTING? A. On the downside, Technology Solutions and Cambridge Technology Partners - two computer system integration companies - suffered from disappointing near-term earnings growth because demand for their services declined. However, the fund continued to own both securities at the end of the period because their valuations were reasonable and their prospects appeared favorable. Q. WHAT'S YOUR OUTLOOK? A. I'm very positive about the outlook for this sector over the next six months. Companies in the sector appear poised to post earnings growth in excess of the overall market, as measured by the S&P 500. In addition, there should be continued possibilities for consolidation as well as a pipeline of new stock offerings that could create new investment opportunities for the fund. As I've said in the past, as more and more companies look to outsource some of their functions, the companies in the sector 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: February 4, 1998 FUND NUMBER: 353 TRADING SYMBOL: FBSOX SIZE: as of February 28, 1999, more than $64 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 FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 91.0% SHARES VALUE (NOTE 1) ADVERTISING - 8.1% Interpublic Group of 20,800 $ 1,556,100 Companies, Inc. Lamar Advertising Co. Class A 17,250 666,281 (a) Omnicom Group, Inc. 29,039 1,923,834 Outdoor Systems, Inc. (a) 24,000 670,500 Pharmaceutical Marketing 30,000 435,000 Services, Inc. (a) 5,251,715 AIR TRANSPORTATION - 0.6% Viad Corp. 13,600 359,550 BROADCASTING - 4.6% Nielsen Media Research, Inc. 150,600 2,955,525 (a) COMPUTER SERVICES & SOFTWARE - - 61.6% Affiliated Computer Services, 60,200 2,784,250 Inc. Class A (a) Automatic Data Processing, 96,100 3,819,975 Inc. CACI International, Inc. 10,000 165,000 Class A (a) Cambridge Technology 21,500 540,188 Partners, Inc. (a) Ceridian Corp. (a) 41,500 2,972,438 Computer Sciences Corp. 37,200 2,478,450 Convergys Corp. (a) 16,500 285,656 Cotelligent, Inc. (a) 12,000 159,000 DST Systems, Inc. (a) 60,500 3,282,125 Electronic Data Systems Corp. 41,000 1,906,500 Equifax, Inc. 57,500 2,170,625 First Data Corp. 127,000 4,857,745 Fiserv, Inc. (a) 30,050 1,412,350 Fundtech Ltd. 8,500 177,438 Galileo International, Inc. 17,200 868,600 HNC Software, Inc. (a) 7,000 188,125 IMS Health, Inc. 103,600 3,677,800 IntelliQuest Information 38,700 420,863 Group, Inc. (a) International Integration, 15,000 298,125 Inc. (a) Paychex, Inc. 46,150 1,955,606 QRS Corp. (a) 6,700 333,744 Sabre Group Holdings, Inc. 65,500 2,570,875 Class A (a) SunGard Data Systems, Inc. (a) 20,600 816,275 Technology Solutions, Inc. (a) 68,100 557,569 Wang Laboratories, Inc. (a) 47,200 1,126,900 39,826,222 INSURANCE - 0.2% Scottish Annuity & Life Hold 15,800 156,025 (a) LEASING & RENTAL - 0.5% Caribiner International, Inc. 43,500 339,844 (a) PRINTING - 0.6% Reynolds & Reynolds Co. Class 21,000 396,375 A SHARES VALUE (NOTE 1) PUBLISHING - 0.3% Harte Hanks Communications, 6,500 $ 168,188 Inc. RESTAURANTS - 0.3% Sodexho Marriott Services, 8,500 198,688 Inc. (a) SERVICES - 11.2% ABR Information Services, 7,900 139,238 Inc. (a) ACNielsen Corp. (a) 15,900 413,400 Cintas Corp. 10,800 764,100 Compass International 47,000 384,813 Services Corp. Data Processing Resources 15,000 285,000 Corp. (a) Diamond Technology Partners, 16,000 397,000 Inc. Class A (a) Dun & Bradstreet Corp. 36,400 1,246,700 Gartner Group, Inc. Class A 20,500 459,969 (a) International Telecom Data 35,000 481,250 Systems, Inc. Korn/Ferry International (a) 19,000 216,125 Lai Worldwide, Inc. (a) 59,500 438,813 Manpower, Inc. 13,300 318,369 Market Facts, Inc. (a) 34,100 801,350 Paymentech, Inc. (a) 11,000 210,375 Robert Half International, 18,900 680,400 Inc. (a) 7,236,902 TRUCKING & FREIGHT - 3.0% Air Express International 38,200 670,888 Corp. Expeditors International of 26,900 1,252,531 Washington, Inc. 1,923,419 TOTAL COMMON STOCKS 58,812,453 (Cost $51,042,144) CASH EQUIVALENTS - 9.0% Taxable Central Cash Fund (b) 5,813,720 5,813,720 (Cost $5,813,720) TOTAL INVESTMENT IN $ 64,626,173 SECURITIES - 100% (Cost $56,855,864) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $92,045,698 and $57,419,897, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $16,127 for the period. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $57,599,238. Net unrealized appreciation aggregated $7,026,935, of which $9,954,218 related to appreciated investment securities and $2,927,283 related to depreciated investment securities. A total of 20% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of this percentage for use in preparing 1999 income tax returns. BUSINESS SERVICES AND OUTSOURCING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 64,626,173 value (cost $56,855,864) - See accompanying schedule Receivable for fund shares 318,349 sold Dividends receivable 25,757 Interest receivable 21,611 Redemption fees receivable 213 TOTAL ASSETS 64,992,103 LIABILITIES Payable for investments $ 310,463 purchased Payable for fund shares 459,005 redeemed Accrued management fee 31,472 Other payables and accrued 68,552 expenses TOTAL LIABILITIES 869,492 NET ASSETS $ 64,122,611 Net Assets consist of: Paid in capital $ 55,174,965 Accumulated undistributed net 1,177,337 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 7,770,309 (depreciation) on investments NET ASSETS, for 4,726,469 $ 64,122,611 shares outstanding NET ASSET VALUE and $13.57 redemption price per share ($64,122,611 (divided by) 4,726,469 shares) Maximum offering price per $13.99 share (100/97.00 of $13.57) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 181,268 Dividends Interest 221,409 TOTAL INCOME 402,677 EXPENSES Management fee $ 326,653 Transfer agent fees 421,635 Accounting fees and expenses 60,809 Non-interested trustees' 177 compensation Custodian fees and expenses 13,013 Registration fees 64,318 Audit 30,659 Legal 745 Reports to shareholders 1,557 Miscellaneous 403 Total expenses before 919,969 reductions Expense reductions (12,168) 907,801 NET INVESTMENT INCOME (LOSS) (505,124) REALIZED AND UNREALIZED GAIN 2,392,697 (LOSS) Net realized gain (loss) on investment securities Change in net unrealized 7,144,279 appreciation (depreciation) on investment securities NET GAIN (LOSS) 9,536,976 NET INCREASE (DECREASE) IN $ 9,031,852 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 661,865 charges paid to FDC Sales charges - Retained by $ 661,865 FDC Deferred sales charges $ 106 withheld by FDC Exchange fees withheld by FSC $ 7,478 Expense reductions Directed $ 11,380 brokerage arrangements Custodian credits 788 $ 12,168 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 FEBRUARY 4, 1998 ASSETS (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1998 Operations Net investment $ (505,124) $ (2,203) income (loss) Net realized gain (loss) 2,392,697 16,708 Change in net unrealized 7,144,279 626,030 appreciation (depreciation) NET INCREASE (DECREASE) IN 9,031,852 640,535 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (724,580) - from net realized gains Share transactions Net 115,593,201 15,378,163 proceeds from sales of shares Reinvestment of distributions 706,597 - Cost of shares redeemed (76,520,490) (103,682) NET INCREASE (DECREASE) IN 39,779,308 15,274,481 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 120,875 140 TOTAL INCREASE (DECREASE) 48,207,455 15,915,156 IN NET ASSETS NET ASSETS Beginning of period 15,915,156 - End of period $ 64,122,611 $ 15,915,156 OTHER INFORMATION Shares Sold 9,724,396 1,470,842 Issued in reinvestment of 57,528 - distributions Redeemed (6,516,475) (9,822) Net increase (decrease) 3,265,449 1,461,020
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 1999 1998E SELECTED PER-SHARE DATA Net asset value, beginning of $ 10.89 $ 10.00 period Income from Investment Operations Net investment income (loss) D (.11) - Net realized and unrealized 2.92 .89 gain (loss) Total from investment 2.81 .89 operations Less Distributions From net realized gain (.16) - Redemption fees added to paid .03 - in capital Net asset value, end of period $ 13.57 $ 10.89 TOTAL RETURN B, C 26.23% 8.90% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 64,123 $ 15,915 (000 omitted) Ratio of expenses to average 1.66% 2.50% A, F net assets Ratio of expenses to average 1.64% G 2.50% A net assets after expense reductions Ratio of net investment (.91)% (.49)% A income (loss) to average net assets Portfolio turnover rate 115% 36% A 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 FOR THE PERIOD FEBRUARY 4, 1998 (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. 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. 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT COMPUTERS 66.43% 330.57% 1,094.34% SELECT COMPUTERS (LOAD ADJ.) 61.37% 317.58% 1,058.44% S&P 500 19.74% 194.91% 459.21% GS Technology 48.15% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT COMPUTERS 66.43% 33.91% 28.15% SELECT COMPUTERS (LOAD ADJ.) 61.37% 33.09% 27.76% S&P 500 19.74% 24.15% 18.78% GS Technology 48.15% 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 1989/02/28 9700.00 10000.00 1989/03/31 9239.36 10233.00 1989/04/30 10275.80 10764.09 1989/05/31 11188.22 11200.04 1989/06/30 9859.45 11136.20 1989/07/31 10036.62 12141.80 1989/08/31 10187.21 12379.78 1989/09/30 10426.39 12329.02 1989/10/31 10080.91 12042.99 1989/11/30 9859.45 12288.66 1989/12/31 9965.75 12583.59 1990/01/31 9877.17 11739.23 1990/02/28 10771.87 11890.67 1990/03/31 11542.56 12205.77 1990/04/30 11232.51 11900.63 1990/05/31 12694.16 13060.94 1990/06/30 12924.47 12972.12 1990/07/31 12003.20 12930.61 1990/08/31 10098.63 11761.68 1990/09/30 9434.25 11188.89 1990/10/31 9788.58 11140.78 1990/11/30 11400.82 11860.47 1990/12/31 11800.12 12191.38 1991/01/31 13811.51 12722.92 1991/02/28 14705.46 13632.61 1991/03/31 15867.59 13962.52 1991/04/30 14839.55 13996.03 1991/05/31 15590.47 14600.66 1991/06/30 13467.57 13931.95 1991/07/31 14820.77 14581.18 1991/08/31 15741.31 14926.75 1991/09/30 14912.82 14677.48 1991/10/31 14618.25 14874.16 1991/11/30 13614.86 14274.73 1991/12/31 15428.33 15907.76 1992/01/31 17039.28 15611.87 1992/02/29 18208.37 15814.83 1992/03/31 16772.32 15506.44 1992/04/30 16229.20 15962.33 1992/05/31 16431.72 16040.54 1992/06/30 14848.39 15801.54 1992/07/31 15575.62 16447.82 1992/08/31 14682.69 16110.64 1992/09/30 15409.92 16300.75 1992/10/31 16625.04 16357.80 1992/11/30 17656.05 16915.60 1992/12/31 18815.93 17123.66 1993/01/31 19911.38 17267.50 1993/02/28 18548.98 17502.34 1993/03/31 18917.19 17871.64 1993/04/30 18379.92 17439.14 1993/05/31 20533.38 17906.51 1993/06/30 19711.67 17958.44 1993/07/31 20533.38 17886.61 1993/08/31 21751.78 18564.51 1993/09/30 22365.70 18421.56 1993/10/31 22365.70 18802.89 1993/11/30 23319.65 18624.26 1993/12/31 24247.70 18849.62 1994/01/31 25811.10 19490.50 1994/02/28 26906.48 18962.31 1994/03/31 26627.66 18135.55 1994/04/30 26458.37 18367.69 1994/05/31 26438.46 18668.92 1994/06/30 24267.62 18211.53 1994/07/31 25034.38 18808.87 1994/08/31 28031.73 19580.03 1994/09/30 27832.58 19100.32 1994/10/31 28878.16 19530.08 1994/11/30 29047.45 18818.79 1994/12/31 29206.78 19097.87 1995/01/31 28310.56 19593.08 1995/02/28 30541.15 20356.63 1995/03/31 32891.23 20957.35 1995/04/30 35504.54 21574.54 1995/05/31 37259.59 22436.88 1995/06/30 41334.55 22958.09 1995/07/31 46529.10 23719.38 1995/08/31 47568.02 23778.91 1995/09/30 50291.37 24782.38 1995/10/31 48465.72 24693.91 1995/11/30 47295.68 25777.97 1995/12/31 44344.76 26274.46 1996/01/31 44060.42 27168.84 1996/02/29 46664.92 27420.69 1996/03/31 42718.36 27684.75 1996/04/30 47413.86 28092.83 1996/05/31 49052.40 28817.34 1996/06/30 45486.85 28927.14 1996/07/31 42440.54 27649.13 1996/08/31 44275.25 28232.26 1996/09/30 49710.13 29821.17 1996/10/31 52329.49 30643.63 1996/11/30 59449.07 32959.99 1996/12/31 58365.85 32307.05 1997/01/31 65847.42 34325.59 1997/02/28 57850.29 34594.71 1997/03/31 53294.20 33173.21 1997/04/30 56201.20 35153.65 1997/05/31 60251.97 37293.80 1997/06/30 59859.96 38964.57 1997/07/31 73671.79 42064.98 1997/08/31 75161.43 39708.50 1997/09/30 77957.77 41883.33 1997/10/31 67007.61 40484.43 1997/11/30 65766.25 42358.45 1997/12/31 58425.32 43085.75 1998/01/31 63085.11 43562.28 1998/02/28 69608.82 46703.99 1998/03/31 68032.96 49095.70 1998/04/30 74539.72 49589.60 1998/05/31 69456.31 48737.16 1998/06/30 75641.13 50716.86 1998/07/31 79673.97 50176.72 1998/08/31 68981.86 42922.17 1998/09/30 82283.45 45671.77 1998/10/31 88095.48 49386.71 1998/11/30 97635.35 52380.04 1998/12/31 114732.55 55398.18 1999/01/31 132253.36 57714.93 1999/02/26 115844.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990309 143213 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Computers Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $115,844 - a 1,058.44% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS EMC Corp. 9.0 Texas Instruments, Inc. 6.8 Microsoft Corp. 5.3 Cisco Systems, Inc. 5.1 Micron Technology, Inc. 4.8 Applied Materials, Inc. 4.8 America Online, Inc. 4.5 Dell Computer Corp. 4.1 Compaq Computer Corp. 2.7 Intel Corp. 2.4 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Electronics 25.0% Computers & Office Equipment 24.1% Computer Services & Software 19.3% Communications Equipment 7.1% Electronic Instruments 7.0% All Others 17.5%* Row: 1, Col: 1, Value: 17.5 Row: 1, Col: 2, Value: 7.0 Row: 1, Col: 3, Value: 7.1 Row: 1, Col: 4, Value: 19.3 Row: 1, Col: 5, Value: 24.1 Row: 1, Col: 6, Value: 25.0 * INCLUDES SHORT-TERM INVESTMENTS COMPUTERS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Mike Tempero) Mike Tempero, Portfolio Manager of Fidelity Select Computers Portfolio Q. HOW DID THE FUND PERFORM, MIKE? A. For the 12 months that ended February 28, 1999, the fund returned 66.43%. For the same 12-month period, the Standard & Poor's 500 Index returned 19.74%, while the Goldman Sachs Technology Index - an index of 190 stocks designed to measure the performance of companies in the technology sector - returned 48.15%. The fund outperformed the Goldman Sachs index due to the fund's smaller exposure to poorly performing semiconductor stocks during the first half of the period. Q. HOW WOULD YOU CHARACTERIZE THE INVESTMENT ENVIRONMENT OVER THE PAST YEAR? A. Firm computer demand helped the sector perform very well for most of the year, although there were weak periods. During the late summer and early fall, economic crises in emerging markets caused a broadly based stock market decline. However, when the market rebounded in October, computer and technology stocks led the rally, with some prices doubling. Within the computer sector, semiconductor and semiconductor equipment stock prices were soft for a large part of the year. Excess inventories and falling prices hurt this segment when many personal computer manufacturers scaled back production and reduced semiconductor orders early in 1998. However, after inventories sold down, continued demand helped improve semiconductor pricing and these stocks recovered. In February 1999, several computer manufacturers, including Compaq and Dell, announced that unit sales were running below expectations. Computer stocks ended the period on a weaker note amid concerns of slower revenue and earnings growth. Q. YOU NOW HAVE SEMICONDUCTOR STOCKS IN YOUR TOP-10 HOLDINGS. WHAT LED YOU TO SELECT THEM? A. Although semiconductor stocks underperformed for much of the year, these stocks appeared to bottom out in the fall as investors anticipated improving business conditions. For example, Applied Materials, Inc. did very well - its stock more than doubled between October and February. Applied Materials dominates the market for wafer-fabrication equipment used by semiconductor manufacturers and counts Intel, the world's leading chip maker, as its largest customer. I also added to positions in Texas Instruments and Micron Technology. Texas Instruments is the leading producer of the digital signal processors used in more than 85 million cellular phones; Micron is a low-cost provider of semiconductor memory components. Q. WHAT HOLDINGS INFLUENCED THE FUND'S STRONG PERFORMANCE? A. EMC Corp., the fund's largest holding, performed extremely well. EMC manufactures large-scale data storage units and is a prime beneficiary of increased electronic data generation - every e-mail, online transaction or file transfer needs safe warehousing. EMC dominates the storage market largely because its units are compatible with many types of mainframes, network servers and operating systems. Dell Computer also did well. As the industry's low-cost leader in personal computer manufacturing, Dell has prospered because it sells PCs directly to consumers and assembles units only as orders are received. Not only does this strategy keep inventories lean, it gives Dell a competitive advantage. When component costs - such as semiconductors - are falling, Dell can benefit from lower costs immediately while other manufacturers are burdened with inventories of more expensive components. Q. WHAT STOCKS WERE DISAPPOINTING DURING THE PERIOD? A. One stock that fell short of my expectations was Seagate Technology. Seagate is the largest independent producer of computer disk drives and specializes in high-end networking applications. I believed Seagate's earnings growth would improve after reducing built-up inventories during the fall. However, severe price competition and expectations of lower demand in Seagate's high-end market caused the stock to sell off sharply early in 1999. Most disappointments, however, fell into the category of omission. For example, after the market corrected, I was slow to buy more Cisco Systems, the market leader in data networking routers. Cisco's shares more than doubled from their low in October. Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? A. Computer stock performance in 1999 will rest on two critical issues: consumer spending and corporate profitability. As long as consumer confidence remains strong and corporate profits are relatively stable, spending for computers and related products should continue. I will be watching for new trends in the industry that could shift spending patterns. For example, increased bandwidth that helps speed up connections and reduces data log-jams between computers is crucial for system upgrades. Consequently, companies that can provide the means for greater bandwidth capacity may lead the next big wave in the computing industry. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 007 TRADING SYMBOL: FDCPX SIZE: as of February 28, 1999, more than $1.8 billion MANAGER: 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 FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 86.4% SHARES VALUE (NOTE 1) ADVERTISING - 0.2% DoubleClick, Inc. (a) 50,000 $ 4,493,750 VerticalNet, Inc. (a) 300 12,375 4,506,125 BROADCASTING - 0.1% Infinity Broadcasting Corp. 33,000 783,750 Class A (a) COMMUNICATIONS EQUIPMENT - 7.1% ADC Telecommunications, Inc. 550,000 22,275,000 (a) Cisco Systems, Inc. (a) 1,039,500 101,676,094 OY Nokia AB sponsored ADR 125,000 16,953,125 140,904,219 COMPUTER SERVICES & SOFTWARE - - 19.3% AboveNet Communications, Inc. 500 15,625 (a) Allaire Corp. (a) 400 19,500 America Online, Inc. 990,800 88,119,275 At Home Corp. Series A (a) 100,000 10,612,500 Aware, Inc. (a) 336,300 11,644,388 BMC Software, Inc. 200,000 8,175,000 Cambridge Technology 150,000 3,768,750 Partners, Inc. (a) Computer Learning Centers, 22,800 98,325 Inc. (a) Documentum, Inc. (a) 100,000 2,137,500 eBay, Inc. (a) 100,500 33,567,000 Electronics for Imaging, Inc. 615,400 21,500,538 (a) Equifax, Inc. 300,000 11,325,000 IMS Health, Inc. 300,000 10,650,000 Inacom Corp. (a) 200,000 3,100,000 Inktomi Corp. (a) 50,000 3,106,250 Internet America, Inc. (a) 300 8,719 Intraware, Inc. 700 13,213 Microsoft Corp. (a) 700,000 105,087,500 Oracle Corp. (a) 200,000 11,175,000 Pacific Internet Ltd. (a) 200 5,975 pcOrder.com, Inc. (a) 400 18,850 Perot Systems Corp. (a) 400 17,375 Siebel Systems, Inc. (a) 704,000 30,976,000 VeriSign, Inc. (a) 50,000 4,900,000 Vignette Corp. (a) 100,700 5,462,975 Wang Laboratories, Inc. (a) 50,000 1,193,750 WebTrends Corp. (a) 1,000 25,125 Yahoo!, Inc. (a) 100,000 15,350,000 382,074,133 COMPUTERS & OFFICE EQUIPMENT - - 24.1% Advanced Digital Information 170,700 2,901,900 Corp. (a) CDW Computer Centers, Inc. (a) 100,000 6,962,500 Compaq Computer Corp. 1,506,350 53,098,838 Dell Computer Corp. (a) 1,000,000 80,125,000 EMC Corp. (a) 1,729,000 177,006,371 SHARES VALUE (NOTE 1) Ingram Micro, Inc. Class A (a) 50,000 $ 1,100,000 Insight Enterprises, Inc. (a) 286,875 6,669,844 International Business 204,000 34,680,000 Machines Corp. Iomega Corp. (a) 200,000 1,212,500 Komag, Inc. (a) 100,000 700,000 Lexmark International Group, 250,000 25,796,875 Inc. Class A (a) Micron Electronics, Inc. (a) 200,000 2,875,000 Network Appliance, Inc. (a) 150,000 6,300,000 Quantum Corp. (a) 247,000 4,060,063 Seagate Technology, Inc. (a) 500,000 14,468,750 Sun Microsystems, Inc. (a) 450,000 43,790,625 Symbol Technologies, Inc. 100,000 5,300,000 Tech Data Corp. (a) 200,000 3,400,000 Unisys Corp. (a) 200,000 5,962,500 476,410,766 CONSUMER ELECTRONICS - 1.0% Sharp Corp. 1,968,000 19,142,747 DEFENSE ELECTRONICS - 0.1% Alpha Industries, Inc. (a) 60,000 1,222,500 ELECTRONIC INSTRUMENTS - 7.0% Advantest Corp. 105,100 7,954,229 Applied Materials, Inc. (a) 1,700,000 94,562,500 KLA-Tencor Corp. (a) 100,000 5,181,250 LAM Research Corp. (a) 62,400 1,844,700 Smart Modular Technologies, 650,000 10,440,625 Inc. (a) Teradyne, Inc. (a) 400,000 19,050,000 139,033,304 ELECTRONICS - 25.0% Altera Corp. (a) 300,000 14,587,500 Analog Devices, Inc. (a) 450,000 11,278,125 C-Cube Microsystems, Inc. (a) 72,300 1,355,625 Intel Corp. 400,000 47,975,000 Linear Technology Corp. 1,046,600 45,854,163 LSI Logic Corp. (a) 500,000 12,968,750 Microchip Technology, Inc. (a) 100,000 2,725,000 Micron Technology, Inc. (a) 1,655,000 95,369,375 Motorola, Inc. 630,000 44,257,500 PMC-Sierra, Inc. (a) 50,000 3,543,750 Rambus, Inc. (a) 75,300 5,473,369 Semtech Corp. (a) 470,000 14,276,250 Solectron Corp. (a) 173,200 7,739,875 Texas Instruments, Inc. 1,499,200 133,709,900 Tokyo Electron Ltd. 172,000 7,801,764 Xilinx, Inc. (a) 650,000 45,337,500 494,253,446 INDUSTRIAL MACHINERY & EQUIPMENT - 0.6% ASM Lithography Holding N V 300,000 11,887,500 (a) COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SERVICES - 0.0% Corporate Executive Board Co. 1,200 $ 29,400 (a) TELEPHONE SERVICES - 1.9% MCI WorldCom, Inc. (a) 461,000 38,032,500 TOTAL COMMON STOCKS 1,708,280,390 (Cost $1,339,272,825) CASH EQUIVALENTS - 13.6% MATURITY AMOUNT Investments in repurchase $ 4,474,771 4,473,000 agreements (U.S. Treasury obligations), in a joint trading account at 4.75%, dated 2/26/99 due 3/1/99 SHARES Taxable Central Cash Fund (b) 264,220,070 264,220,070 TOTAL CASH EQUIVALENTS 268,693,070 (Cost $268,693,070) TOTAL INVESTMENT IN $ 1,976,973,460 SECURITIES - 100% (Cost $1,607,965,895)
LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $1,827,516,954 and $1,247,515,427, respectively. 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 $217,026 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $18,833,331. The fund received cash collateral of $18,038,100. The fund participated in the interfund lending program as a lender. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $37,166,000. The weighted average interest rate was 5.87%. Interest earned from the interfund lending program amounted to $6,055 and is included in interest income on the Statement of Operations. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $1,612,250,580. Net unrealized appreciation aggregated $364,722,880, of which $447,991,267 related to appreciated investment securities and $83,268,387 related to depreciated investment securities. The fund hereby designates approximately $1,825,000 as a capital gain dividend for the purpose of the dividend paid deduction. COMPUTERS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 1,976,973,460 value (including repurchase agreements of $4,473,000) (cost $1,607,965,895) - See accompanying schedule Cash 540 Receivable for investments 74,550,698 sold Receivable for fund shares 12,196,853 sold Dividends receivable 111,480 Interest receivable 847,493 Redemption fees receivable 6,719 Other receivables 82,279 TOTAL ASSETS 2,064,769,522 LIABILITIES Payable for investments $ 205,491,186 purchased Payable for fund shares 7,938,408 redeemed Accrued management fee 946,369 Other payables and accrued 920,650 expenses Collateral on securities 18,038,100 loaned, at value TOTAL LIABILITIES 233,334,713 NET ASSETS $ 1,831,434,809 Net Assets consist of: Paid in capital $ 1,363,112,573 Accumulated undistributed net 99,314,671 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 369,007,565 (depreciation) on investments NET ASSETS, for 26,786,080 $ 1,831,434,809 shares outstanding NET ASSET VALUE and $68.37 redemption price per share ($1,831,434,809 (divided by) 26,786,080 shares) Maximum offering price per $70.48 share (100/97.00 of $68.37) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 1,207,978 Dividends Interest (including income on 5,691,380 securities loaned of $578,753) TOTAL INCOME 6,899,358 EXPENSES Management fee $ 6,013,190 Transfer agent fees 5,234,820 Accounting and security 764,075 lending fees Non-interested trustees' 3,899 compensation Custodian fees and expenses 37,728 Registration fees 380,098 Audit 42,206 Legal 5,276 Reports to shareholders 103,662 Total expenses before 12,584,954 reductions Expense reductions (214,475) 12,370,479 NET INVESTMENT INCOME (LOSS) (5,471,121) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 193,009,783 Foreign currency transactions 24,748 193,034,531 Change in net unrealized 272,430,790 appreciation (depreciation) on investment securities NET GAIN (LOSS) 465,465,321 NET INCREASE (DECREASE) IN $ 459,994,200 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 9,062,985 charges paid to FDC Sales charges - Retained by $ 9,053,383 FDC Deferred sales charges $ 5,657 withheld by FDC Exchange fees withheld by FSC $ 73,148 EXPENSE REDUCTIONS Directed $ 207,334 brokerage arrangements Custodian credits 5,645 Transfer agent credits 1,496 $ 214,475 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (5,471,121) $ (4,376,259) income (loss) Net realized gain (loss) 193,034,531 89,255,411 Change in net unrealized 272,430,790 22,245,884 appreciation (depreciation) NET INCREASE (DECREASE) IN 459,994,200 107,125,036 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders - (132,918,806) From net realized gain In excess of net realized - (34,413,012) gain TOTAL DISTRIBUTIONS - (167,331,818) Share transactions Net 1,830,119,568 808,411,253 proceeds from sales of shares Reinvestment of distributions - 165,233,207 Cost of shares redeemed (1,247,821,903) (733,889,159) NET INCREASE (DECREASE) IN 582,297,665 239,755,301 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 3,678,254 1,629,692 TOTAL INCREASE (DECREASE) 1,045,970,119 181,178,211 IN NET ASSETS NET ASSETS Beginning of period 785,464,690 604,286,479 End of period $ 1,831,434,809 $ 785,464,690 OTHER INFORMATION Shares Sold 33,082,983 17,046,061 Issued in reinvestment of - 4,788,686 distributions Redeemed (25,415,629) (15,239,529) Net increase (decrease) 7,667,354 6,595,218
FINANCIAL HIGHLIGHTS
YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 41.08 $ 48.25 $ 41.03 $ 30.67 $ 27.02 period Income from Investment Operations Net investment income (loss) C (.29) (.32) (.36) (.23) (.31) Net realized and unrealized 27.39 6.42 9.94 16.10 3.68 gain (loss) Total from investment 27.10 6.10 9.58 15.87 3.37 operations Less Distributions From net realized gain - (10.64) (2.47) (5.61) - In excess of net realized gain - (2.75) - - - Total distributions - (13.39) (2.47) (5.61) - Redemption fees added to paid .19 .12 .11 .10 .28 in capital Net asset value, end of period $ 68.37 $ 41.08 $ 48.25 $ 41.03 $ 30.67 TOTAL RETURN A, B 66.43% 20.33% 23.97% 52.79% 13.51% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 1,831,435 $ 785,465 $ 604,286 $ 527,337 $ 215,014 (000 omitted) Ratio of expenses to average 1.25% 1.40% 1.48% 1.40% 1.71% net assets Ratio of expenses to average 1.23% D 1.34% D 1.44% D 1.38% D 1.69% D net assets after expense reductions Ratio of net investment (.54)% (.67)% (.83)% (.56)% (1.12)% income (loss) to average net assets Portfolio turnover rate 133% 333% 255% 129% 189% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND 1999 SELECT DEVELOPING 63.01% 193.13% 573.87% COMMUNICATIONS SELECT DEVELOPING 58.05% 184.27% 553.58% COMMUNICATIONS (LOAD ADJ.) S&P 500 19.74% 194.91% 331.09% GS Technology 48.15% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or since the fund started on June 29, 1990. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND 1999 SELECT DEVELOPING 63.01% 24.00% 24.62% COMMUNICATIONS SELECT DEVELOPING 58.05% 23.24% 24.19% COMMUNICATIONS (LOAD ADJ.) S&P 500 19.74% 24.15% 18.36% GS Technology 48.15% 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 35379.51 33088.01 1998/09/30 40353.81 35207.63 1998/10/31 43789.88 38071.42 1998/11/30 50202.54 40378.93 1998/12/31 60091.22 42705.56 1999/01/31 70259.58 44491.51 1999/02/26 65358.00 43108.71 IMATRL PRASUN SHR__CHT 19990228 19990309 143851 R00000000000107 $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 February 28, 1999, the value of the investment would have grown to $65,358 - a 553.58% 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 $43,109 - a 331.09% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS OY Nokia AB sponsored ADR 10.0 MCI WorldCom, Inc. 7.3 Motorola, Inc. 7.3 ADC Telecommunications, Inc. 5.0 Cisco Systems, Inc. 5.0 Cox Communications, Inc. 3.5 Class A Aware, Inc. 3.1 Texas Instruments, Inc. 3.1 America Online, Inc. 3.0 Comcast Corp. Class A (special) 2.9 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Communications Equipment 28.6% Telephone Services 14.8% Broadcasting 12.0% Computer Services & Software 11.3% Electronics 10.5% All Others 22.8%* 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 DEVELOPING COMMUNICATIONS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Andrew Kaplan) Andrew Kaplan, Portfolio Manager of Fidelity Select Developing Communications Portfolio Q. HOW DID THE FUND PERFORM, ANDY? A. Very well. For the 12 months that ended February 28, 1999, the fund returned 63.01%, while the Standard & Poor's 500 Index returned 19.74%. During the same period, the Goldman Sachs Technology Index - an index of 190 stocks designed to measure the performance of companies in the technology sector - returned 48.15%. Q. HOW WAS THE FUND ABLE TO OUTPACE THE RETURNS OF BOTH BENCHMARKS OVER THE PAST 12 MONTHS? A. The incredible rebound of technology stocks over the last four months of the period helped the fund generate robust returns. Technology stocks hit a low point in early October when fears about an economic slowdown peaked following financial turmoil in Asian and Russian markets. However, when it became evident that the international situation was not getting worse and, more importantly, that U.S. economic growth was accelerating, investors returned to technology stocks with a vengeance. Specifically, the fund outperformed the Goldman Sachs Technology Index because of my focus on large-capitalization stocks. I continued to believe that investors would pay a premium for stocks that weren't at risk of reporting disappointing earnings numbers - and these were mostly larger-cap stocks. On top of that, I focused on Internet stocks - the industry that enjoyed the most dramatic growth. Q. WHICH INDIVIDUAL HOLDINGS PERFORMED PARTICULARLY WELL? A. Some examples of the Internet stocks that did particularly well were Yahoo!, America Online and Amazon.com. Another Internet play that was successful was Aware, Inc., a company that provides high-speed Internet access. Cisco Systems, a maker of networking equipment for the Internet, also generated healthy returns. Looking to other areas, wireless communications was one of the fastest growing areas of technology. The promise of wireless is its increasing reach into developing economies that have no access to wire-line phones. In addition, as advances in technology cause service prices to fall, wireless phones are becoming mass-market items rather than luxury items. Nokia was one of my favorite wireless names. It rapidly increased market share by commercializing and mass-producing devices with the latest technologies. Q. ARE YOU CONCERNED ABOUT THE INCREDIBLE RUN-UP IN INTERNET STOCKS? A. Sure. After all, we've seen several years of appreciation all in a few months. For instance, from early October through early January, many Internet stocks appreciated as much as 400% to 500%. I'm always concerned that there may be a correction after that kind of run-up. As a result, I reduced the weighting of some of the Internet stocks that enjoyed the most dramatic gains during the period, such as Yahoo! and Amazon. However, I continued to make investments directly in Internet companies, or indirectly through the service providers, because I believe in the long-term growth of the sector. Q. WERE THERE ANY DISAPPOINTMENTS? A. It was an extraordinary period because almost all of the fund's large positions did well. In hindsight, I would have owned more cable stocks. I was a little late in recognizing the potential of cable as a means of accessing the Internet. Cable companies have been aggressive in their introduction of cable modems and in providing high-speed Internet service to the home. This strategy was a great catalyst for growth and provided cable companies with a tremendous source of ancillary revenue. By the end of the period, both Cox Communications and Comcast were among the fund's top-10 holdings, but I believe I could have done more sooner. Q. WHAT'S YOUR OUTLOOK? A. I continue to be bullish about technology and developing communications, especially because - with the Internet - we're only in the second inning. People are starting to realize that these business models can make money and that the industry is far from mature. For instance, we have barely captured 10% of the potential subscriber base and we've only scratched the surface as far as ways to make money through this medium. I will continue to look for the most aggressive ways to capitalize on the future growth in that area. However, I am more concerned about valuations than I was six months ago - and I'd be foolish not to be - given the incredible run-up in the stocks. As a result, I will continue to focus on stocks that I believe can deliver strong earnings. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: June 29, 1990 FUND NUMBER: 518 TRADING SYMBOL: FSDCX SIZE: as of February 28, 1999, more than $612 million MANAGER: Andrew Kaplan, since 1998; manager, Fidelity Select Technology Portfolio, since 1998; Fidelity Select Electronics Portfolio, 1996-1998; joined Fidelity in 1995 DEVELOPING COMMUNICATIONS PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 92.2% SHARES VALUE (NOTE 1) BROADCASTING - 12.0% Cablevision Systems Corp. 1,000 $ 65,000 Class A (a) CBS Corp. 74,600 2,750,875 Comcast Corp. Class A 250,000 17,734,375 (special) Cox Communications, Inc. 300,000 21,225,000 Class A (a) MediaOne Group, Inc. 300,000 16,350,000 Tele-Communications, Inc. 225,000 14,132,813 (TCI Group) Series A (a) 72,258,063 CELLULAR - 2.6% AirTouch Communications, Inc. 88,500 8,059,031 (a) Nextel Communications, Inc. 255,000 7,665,938 Class A (a) 15,724,969 COMMUNICATIONS EQUIPMENT - 28.6% 3Com Corp. (a) 25,000 785,938 ADC Telecommunications, Inc. 750,000 30,375,000 (a) Ascend Communications, Inc. 153,600 11,817,600 (a) Carrier Access Corp. (a) 200,000 7,900,000 Cisco Systems, Inc. (a) 307,500 30,077,344 Filtronic PLC 81,180 1,034,546 InterVoice, Inc. (a) 149,400 1,624,725 Level One Communications, 231,100 7,741,850 Inc. (a) Newbridge Networks Corp. (a) 196,400 4,773,882 OY Nokia AB sponsored ADR 445,000 60,353,123 P-Com, Inc. (a) 800,000 5,075,000 Plantronics, Inc. (a) 20,400 1,234,200 Premisys Communications, Inc. 128,800 1,062,600 (a) Tekelec (a) 700,000 8,487,500 172,343,308 COMPUTER SERVICES & SOFTWARE - - 11.3% Amazon.com, Inc. (a) 45,000 5,765,625 America Online, Inc. 200,000 17,787,500 Aware, Inc. (a) 545,000 18,870,625 eBay, Inc. (a) 20,000 6,680,000 Franklin Electronic 182,800 1,051,100 Publishers (a) InterVU, Inc. (a) 65,000 1,332,500 Lycos, Inc. (a) 25,000 2,190,625 Siebel Systems, Inc. (a) 32,900 1,447,600 Yahoo!, Inc. (a) 83,400 12,801,900 67,927,475 COMPUTERS & OFFICE EQUIPMENT - - 1.2% Comverse Technology, Inc. (a) 103,100 7,397,425 DEFENSE ELECTRONICS - 1.6% Alpha Industries, Inc. (a) 101,150 2,060,931 REMEC, Inc. (a) 450,000 7,734,375 9,795,306 SHARES VALUE (NOTE 1) ELECTRICAL EQUIPMENT - 3.3% Adtran, Inc. (a) 600,000 $ 12,300,000 ANTEC Corp. (a) 50,000 1,393,750 General Instrument Corp. (a) 178,600 5,224,050 Research in Motion Ltd. (a) 150,000 1,333,068 20,250,868 ELECTRONIC INSTRUMENTS - 3.1% Aeroflex, Inc. (a) 300,000 4,031,250 Intest Corp. (a) 188,000 1,269,000 JDS Fitel, Inc. (a) 307,400 13,149,821 18,450,071 ELECTRONICS - 10.5% Motorola, Inc. 625,000 43,906,250 Texas Instruments, Inc. 210,000 18,729,375 Vitesse Semiconductor Corp. 17,400 799,313 (a) 63,434,938 ENTERTAINMENT - 0.9% Tele-Communications, Inc. 100,000 5,387,500 (Liberty Media Group) Series A (a) PACKAGING & CONTAINERS - 2.3% Corning, Inc. 257,000 13,749,500 TELEPHONE SERVICES - 14.8% Covad Communications Group, 300,700 12,178,350 Inc. (a) MCI WorldCom, Inc. (a) 534,146 44,067,045 McLeodUSA, Inc. Class A (a) 50,000 1,925,000 Metromedia Fiber Network, 375,000 16,312,500 Inc. Class A (a) Qwest Communications 131,689 8,090,643 International, Inc. (a) WinStar Communications, Inc. 224,000 7,056,000 (a) 89,629,538 TOTAL COMMON STOCKS 556,348,961 (Cost $432,392,044) CASH EQUIVALENTS - 7.8% Taxable Central Cash Fund (b) 46,881,297 46,881,297 (Cost $46,881,297) TOTAL INVESTMENT IN $ 603,230,258 SECURITIES - 100% (Cost $479,273,341) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $1,067,740,674 and $863,840,247, respectively. 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 $91,601 for the period. Distribution of investments by country of issue, as a percentage of total value of investments in securities, is as follows: United States 86.6% Finland 10.0 Canada 3.2 Others (individually less 0.2 than 1%) TOTAL 100.0% Transactions during the period with companies which are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Anicom, Inc. $ - $ 1,787,500 $ - $ - INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $482,807,908. Net unrealized appreciation aggregated $120,422,350, of which $146,132,317 related to appreciated investment securities and $25,709,967 related to depreciated investment securities. The fund hereby designates approximately $734,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 19% of the dividends distributed the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for the use in preparing 1999 income tax returns. DEVELOPING COMMUNICATIONS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 603,230,258 value (cost $479,273,341) - See accompanying schedule Receivable for investments 7,097,155 sold Receivable for fund shares 11,595,475 sold Dividends receivable 157,150 Interest receivable 150,223 Redemption fees receivable 3,362 Other receivables 453,068 TOTAL ASSETS 622,686,691 LIABILITIES Payable for investments $ 7,781,817 purchased Payable for fund shares 2,246,529 redeemed Accrued management fee 311,449 Other payables and accrued 285,678 expenses TOTAL LIABILITIES 10,625,473 NET ASSETS $ 612,061,218 Net Assets consist of: Paid in capital $ 455,289,751 Accumulated undistributed net 32,812,995 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 123,958,472 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 18,703,523 $ 612,061,218 shares outstanding NET ASSET VALUE and $32.72 redemption price per share ($612,061,218 (divided by) 18,703,523 shares) Maximum offering price per $33.73 share (100/97.00 of $32.72) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 518,090 Dividends Interest 1,648,201 TOTAL INCOME 2,166,291 EXPENSES Management fee $ 1,854,817 Transfer agent fees 1,936,382 Accounting fees and expenses 287,287 Non-interested trustees' 1,386 compensation Custodian fees and expenses 35,597 Registration fees 108,938 Audit 23,069 Legal 3,389 Reports to shareholders 43,296 Total expenses before 4,294,161 reductions Expense reductions (130,962) 4,163,199 NET INVESTMENT INCOME (LOSS) (1,996,908) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 53,776,976 (including realized gain of $159,311 on sale of investments in affiliated issuers) Foreign currency transactions (45,749) 53,731,227 Change in net unrealized appreciation (depreciation) on: Investment securities 97,385,464 Assets and liabilities in 5,216 97,390,680 foreign currencies NET GAIN (LOSS) 151,121,907 NET INCREASE (DECREASE) IN $ 149,124,999 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 1,740,638 charges paid to FDC Sales charges - Retained by $ 1,737,968 FDC Deferred sales charges $ 3,177 withheld by FDC Exchange fees withheld by FSC $ 23,850 Expense reductions Directed $ 128,666 brokerage arrangements Custodian credits 2,296 $ 130,962 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (1,996,908) $ (1,952,549) income (loss) Net realized gain (loss) 53,731,227 43,720,650 Change in net unrealized 97,390,680 15,846,999 appreciation (depreciation) NET INCREASE (DECREASE) IN 149,124,999 57,615,100 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (820,226) (39,986,959) from net realized gains Share transactions Net 606,604,197 191,485,848 proceeds from sales of shares Reinvestment of distributions 808,781 39,302,908 Cost of shares redeemed (383,100,933) (230,874,543) NET INCREASE (DECREASE) IN 224,312,045 (85,787) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 1,088,615 453,709 TOTAL INCREASE (DECREASE) 373,705,433 17,996,063 IN NET ASSETS NET ASSETS Beginning of period 238,355,785 220,359,722 End of period $ 612,061,218 $ 238,355,785 OTHER INFORMATION Shares Sold 21,247,025 8,748,662 Issued in reinvestment of 39,007 2,281,074 distributions Redeemed (14,419,633) (10,392,215) Net increase (decrease) 6,866,399 637,521
FINANCIAL HIGHLIGHTS
YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 20.14 $ 19.68 $ 19.42 $ 20.40 $ 19.65 period Income from Investment Operations Net investment income (loss) C (.16) (.18) (.18) (.17) (.16) Net realized and unrealized 12.72 4.95 .42 4.17 2.55 gain (loss) Total from investment 12.56 4.77 .24 4.00 2.39 operations Less Distributions From net realized gain (.07) (4.35) - (5.00) (1.67) Redemption fees added to paid .09 .04 .02 .02 .03 in capital Net asset value, end of period $ 32.72 $ 20.14 $ 19.68 $ 19.42 $ 20.40 TOTAL RETURN A, B 63.01% 28.17% 1.34% 21.84% 13.63% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 612,061 $ 238,356 $ 220,360 $ 333,185 $ 254,426 (000 omitted) Ratio of expenses to average 1.38% 1.61% 1.64% 1.53% 1.58% net assets Ratio of expenses to average 1.34% D 1.55% D 1.62% D 1.51% D 1.56% D net assets after expense reductions Ratio of net investment (.64)% (.82)% (.86)% (.78)% (.83)% income (loss) to average net assets Portfolio turnover rate 299% 383% 202% 249% 266% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. CNET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT ELECTRONICS 35.30% 337.85% 1,238.46% SELECT ELECTRONICS (LOAD ADJ.) 31.16% 324.64% 1,198.23% S&P 500 19.74% 194.91% 459.21% GS Technology 48.15% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT ELECTRONICS 35.30% 34.36% 29.62% SELECT ELECTRONICS (LOAD ADJ.) 31.16% 33.54% 29.22% S&P 500 19.74% 24.15% 18.78% GS Technology 48.15% 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 1989/02/28 9700.00 10000.00 1989/03/31 9629.09 10233.00 1989/04/30 10380.70 10764.09 1989/05/31 11373.39 11200.04 1989/06/30 10253.07 11136.20 1989/07/31 10366.52 12141.80 1989/08/31 10721.05 12379.78 1989/09/30 11018.86 12329.02 1989/10/31 10522.51 12042.99 1989/11/30 10550.88 12288.66 1989/12/31 10990.50 12583.59 1990/01/31 11359.21 11739.23 1990/02/28 12266.81 11890.67 1990/03/31 12862.43 12205.77 1990/04/30 12919.15 11900.63 1990/05/31 14819.44 13060.94 1990/06/30 15046.35 12972.12 1990/07/31 14337.28 12930.61 1990/08/31 12096.64 11761.68 1990/09/30 10267.25 11188.89 1990/10/31 9898.54 11140.78 1990/11/30 10919.59 11860.47 1990/12/31 11628.79 12191.38 1991/01/31 13247.45 12722.92 1991/02/28 14411.75 13632.61 1991/03/31 15178.49 13962.52 1991/04/30 15263.68 13996.03 1991/05/31 15760.64 14600.66 1991/06/30 13843.80 13931.95 1991/07/31 14795.12 14581.18 1991/08/31 15405.67 14926.75 1991/09/30 14227.17 14677.48 1991/10/31 14922.91 14874.16 1991/11/30 14014.19 14274.73 1991/12/31 15732.24 15907.76 1992/01/31 17592.28 15611.87 1992/02/29 18557.80 15814.83 1992/03/31 17095.32 15506.44 1992/04/30 16768.75 15962.33 1992/05/31 16797.15 16040.54 1992/06/30 15576.05 15801.54 1992/07/31 16399.58 16447.82 1992/08/31 16569.97 16110.64 1992/09/30 17166.32 16300.75 1992/10/31 18458.40 16357.80 1992/11/30 19665.30 16915.60 1992/12/31 20048.67 17123.66 1993/01/31 20730.21 17267.50 1993/02/28 20275.85 17502.34 1993/03/31 20985.79 17871.64 1993/04/30 20615.87 17439.14 1993/05/31 22684.59 17906.51 1993/06/30 23098.33 17958.44 1993/07/31 23754.62 17886.61 1993/08/31 25794.80 18564.51 1993/09/30 26222.81 18421.56 1993/10/31 25723.47 18802.89 1993/11/30 25523.73 18624.26 1993/12/31 26480.24 18849.62 1994/01/31 28309.35 19490.50 1994/02/28 29651.83 18962.31 1994/03/31 29332.99 18135.55 1994/04/30 29249.08 18367.69 1994/05/31 29165.18 18668.92 1994/06/30 27604.56 18211.53 1994/07/31 28175.11 18808.87 1994/08/31 30927.17 19580.03 1994/09/30 30037.79 19100.32 1994/10/31 31262.79 19530.08 1994/11/30 30860.05 18818.79 1994/12/31 31027.86 19097.87 1995/01/31 30138.47 19593.08 1995/02/28 33226.15 20356.63 1995/03/31 36649.45 20957.35 1995/04/30 40743.99 21574.54 1995/05/31 43714.21 22436.88 1995/06/30 49939.92 22958.09 1995/07/31 57407.41 23719.38 1995/08/31 58162.55 23778.91 1995/09/30 59202.97 24782.38 1995/10/31 57575.22 24693.91 1995/11/30 56132.06 25777.97 1995/12/31 52427.25 26274.46 1996/01/31 54199.26 27168.84 1996/02/29 57397.04 27420.69 1996/03/31 54036.32 27684.75 1996/04/30 60207.82 28092.83 1996/05/31 61796.53 28817.34 1996/06/30 56602.69 28927.14 1996/07/31 53873.37 27649.13 1996/08/31 56480.48 28232.26 1996/09/30 64098.11 29821.17 1996/10/31 64607.31 30643.63 1996/11/30 74302.48 32959.99 1996/12/31 74302.48 32307.05 1997/01/31 85912.25 34325.59 1997/02/28 77296.58 34594.71 1997/03/31 71919.43 33173.21 1997/04/30 78621.09 35153.65 1997/05/31 87259.78 37293.80 1997/06/30 86722.66 38964.57 1997/07/31 101784.43 42064.98 1997/08/31 105633.80 39708.50 1997/09/30 109550.31 41883.33 1997/10/31 93302.40 40484.43 1997/11/30 92630.99 42358.45 1997/12/31 84496.95 43085.75 1998/01/31 85868.21 43562.28 1998/02/28 95960.67 46703.99 1998/03/31 93218.15 49095.70 1998/04/30 97606.18 49589.60 1998/05/31 84551.80 48737.16 1998/06/30 86224.74 50716.86 1998/07/31 89844.86 50176.72 1998/08/31 71936.22 42922.17 1998/09/30 81452.76 45671.77 1998/10/31 97469.05 49386.71 1998/11/30 110797.69 52380.04 1998/12/31 127691.59 55398.18 1999/01/31 154074.61 57714.93 1999/02/26 129823.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990322 112556 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Electronics Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $129,823 - an 1,198.23% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Texas Instruments, Inc. 9.9 Micron Technology, Inc. 9.3 Intel Corp. 6.7 Applied Materials, Inc. 5.6 Motorola, Inc. 4.9 KLA-Tencor Corp. 3.5 Xilinx, Inc. 3.2 Teradyne, Inc. 3.1 LAM Research Corp. 2.7 Cadence Design Systems, Inc. 2.6 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Electronics 55.6% Electronic Instruments 17.8% Computer Services & Software 5.2% Computers & Office Equipment 4.0% Industrial Machinery & Equipment 2.8% All Others 14.6%* Row: 1, Col: 1, Value: 14.6 Row: 1, Col: 2, Value: 2.8 Row: 1, Col: 3, Value: 4.0 Row: 1, Col: 4, Value: 5.2 Row: 1, Col: 5, Value: 17.8 Row: 1, Col: 6, Value: 55.6 * INCLUDES SHORT-TERM INVESTMENTS ELECTRONICS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Matthew Grech) Matthew Grech, Portfolio Manager of Fidelity Select Electronics Portfolio Q. HOW DID THE FUND PERFORM, MATT? A. For the 12 months that ended February 28, 1999, the fund returned 35.30%, outperforming the 19.74% return of the Standard & Poor's 500 Index. 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 48.15% over the same 12-month time period. Q. WHAT WAS THE INVESTING ENVIRONMENT LIKE FOR ELECTRONICS STOCKS? A. It was mixed. The first part of the year was a struggle because personal computer (PC) inventories were high and slow to come down in the aftermath of the Asian economic crisis and subsequent rapidly declining demand. In October, the market improved overall, following good news about the prospects for recovery in Korea and Taiwan, and, to a lesser extent, Japan. Investors saw strong PC sales through the holiday season and into January. In February, concerns re-emerged when disappointing earnings announcements, which resulted in a correction, dampened the market's euphoria. Throughout the year, investors gravitated to large-cap companies across industries, while small-cap stocks never really got off the ground. In this environment, the fund performed very strongly during the October-January recovery, as electronics stocks tended to do better relative to the rest of the technology sector, but could not keep pace with the Goldman Sachs index for the entire period, given the benchmark's exposure to Internet stocks and other strong-performing, large-cap technology issues. Q. WHAT STRATEGY DID YOU USE TO MANAGE THE FUND IN THIS VOLATILE ENVIRONMENT? A. It generally was a stock picker's market, where the difference in performance was made by individual stock selection - although some industries did better than others. I beefed up on large-cap companies, which continued to maintain their edge over smaller companies during the period. Anticipating growing interest in manufacturing outsourcing, I also bought electronics contract manufacturers, more specifically telecommunications equipment manufacturers such as Solectron, Jabil and Sanmina. Q. WHICH STOCKS PERFORMED WELL DURING THE PAST 12 MONTHS? A. PC makers Intel, Micron Technology, Teradyne and Texas Instruments all did well as personal computer inventory wound down and demand picked up. PMC-Sierra and Vitesse sell semiconductors to communication companies, which use them in their equipment. They both performed well, enjoying strong demand for their products. Sanmina, Solectron and Jabil, all electronic contract manufacturers, benefited from the growing outsourcing trend. Q. WHICH STOCKS DISAPPOINTED? A. Cadence Design, a leader in its industry and whose automated electronic design product is used in the design of semiconductors, did not do as well as I hoped. Cadence should have followed the performance of semiconductor companies. Unfortunately, its recovery, along with other design automation companies, was much slower than I expected. Integrated Device Technology, a maker of standard random access memory, tried to branch out, getting into the low-end microprocessor game, and didn't reach expectations. Along with other PC makers, Hewlett-Packard suffered from high inventories during the first part of the period. Its problems in the corporate desktop market prevented the company's full participation in the industry's recovery in October, and its performance suffered. I sold both Hewlett-Packard and Integrated Device Technology from the fund's portfolio. Q. WHAT'S YOUR OUTLOOK, MATT? A. Although some of the valuations for larger companies have risen so high that it's hard for me to fathom a huge buying surge, I think the demand for electronic goods and Internet-related technology will enable continued growth. I'm also bullish on the business fundamentals for the networking semiconductor market. Companies such as Lucent and Nortel are just now starting to adopt outsourcing policies, which could fuel future growth in this area. Hopefully, there will be continued improvement in Asia, which could also drive demand significantly. I'll continue to search for those companies that have good business fundamentals and are selling at reasonable valuations. Certain industries are growing faster than others, but then again, there are a lot of places to invest in this sector, with plenty of opportunities to discover new and growing businesses. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 008 TRADING SYMBOL: FSELX SIZE: as of February 28, 1999, more than $2.8 billion MANAGER: Matthew Grech, since 1998; analyst, semiconductor equipment, electronic distribution, components, electronic design automation and electronic contract manufacturing industries, since 1996; joined Fidelity in 1996 ELECTRONICS PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 89.3% SHARES VALUE (NOTE 1) CHEMICALS & PLASTICS - 0.0% Atmi, Inc. (a) 20,000 $ 455,000 COMMUNICATIONS EQUIPMENT - 2.7% ADC Telecommunications, Inc. 300,000 12,150,000 (a) Cisco Systems, Inc. (a) 75,000 7,335,938 Jabil Circuit, Inc. (a) 1,070,000 34,908,750 OY Nokia AB sponsored ADR 190,000 25,768,750 80,163,438 COMPUTER SERVICES & SOFTWARE - - 5.2% America Online, Inc. 15,000 1,334,063 Aware, Inc. (a) 240,200 8,316,925 BMC Software, Inc. 200,000 8,175,000 Cadence Design Systems, Inc. 3,187,200 76,692,000 (a) Cambridge Technology 325,000 8,165,625 Partners, Inc. (a) Citrix Systems, Inc. (a) 18,300 1,411,388 i2 Technologies, Inc. (a) 31,800 793,013 J.D. Edwards & Co. (a) 150,000 2,371,875 Microsoft Corp. (a) 85,000 12,760,625 PeopleSoft, Inc. 300,000 5,662,500 Siebel Systems, Inc. (a) 630,600 27,746,400 153,429,414 COMPUTERS & OFFICE EQUIPMENT - - 4.0% Adaptec, Inc. (a) 700,000 13,956,250 Dell Computer Corp. (a) 200,000 16,025,000 EMC Corp. (a) 150,450 15,402,319 Quantum Corp. (a) 310,000 5,095,625 SCI Systems, Inc. (a) 2,150,500 66,531,094 Seagate Technology, Inc. (a) 50,000 1,446,875 118,457,163 DRUGS & PHARMACEUTICALS - 0.5% Integrated Process Equipment 1,356,000 15,255,000 Corp. (a) (c) ELECTRICAL EQUIPMENT - 0.3% Research in Motion Ltd. (a) 1,000,800 8,894,230 ELECTRONIC INSTRUMENTS - 17.8% Applied Materials, Inc. (a) 2,948,000 163,982,500 Credence Systems Corp. (a) 350,000 7,393,750 Helix Technology, Inc. 200,000 3,937,500 Keithley Instruments, Inc. 43,800 328,500 KLA-Tencor Corp. (a) 1,990,600 103,137,963 Kulicke & Soffa Industries, 150,000 3,806,250 Inc. (a) LAM Research Corp. (a) (c) 2,703,227 79,914,148 Novellus Systems, Inc. (a) 1,202,900 71,046,281 Teradyne, Inc. (a) 1,922,600 91,563,825 525,110,717 SHARES VALUE (NOTE 1) ELECTRONICS - 55.6% Advanced Energy Industries, 439,000 $ 8,450,750 Inc. (a) Altera Corp. (a) 1,179,600 57,358,050 Analog Devices, Inc. (a) 1,880,500 47,130,031 Arm Holdings PLC sponsored 100,000 11,550,000 ADR (a) Conexant Systems, Inc. (a) 555,000 9,435,000 Dallas Semiconductor Corp. 184,400 6,523,150 DII Group, Inc. (a) 220,000 5,142,500 Etec Systems, Inc. (a) 765,300 33,912,356 Flextronics International (a) 50,000 1,884,375 Hadco Corp. (a) 200,000 6,375,000 Intel Corp. 1,654,000 198,376,625 Linear Technology Corp. 1,386,020 60,725,001 LSI Logic Corp. (a) 300,000 7,781,250 Maxim Integrated Products, 1,124,700 46,885,931 Inc. (a) Methode Electronics, Inc. 684,000 7,182,000 Class A Microchip Technology, Inc. (a) 1,226,050 33,409,863 Micron Technology, Inc. (a) 4,766,900 274,692,613 Molex, Inc. Class A 400,000 9,400,000 Motorola, Inc. 2,056,300 144,455,075 PCD, Inc. (a) 200,000 2,800,000 PMC-Sierra, Inc. (a) 769,600 54,545,400 Rambus, Inc. (a) 582,800 42,362,275 Sanmina Corp. (a) 1,420,700 74,231,575 Solectron Corp. (a) 999,600 44,669,625 Speedfam International, Inc. 887,000 14,469,188 (a) (c) Texas Instruments, Inc. 3,267,000 291,375,559 Vitesse Semiconductor Corp. 1,149,700 52,814,344 (a) Xilinx, Inc. (a) 1,339,400 93,423,150 1,641,360,686 INDUSTRIAL MACHINERY & EQUIPMENT - 2.8% ASM Lithography Holding NV (a) 1,136,600 45,037,775 Asyst Technologies, Inc. (a) 430,500 9,255,750 PRI Automation, Inc. 911,600 27,348,000 81,641,525 METALS & MINING - 0.3% Cable Design Technology Corp. 575,000 7,439,063 (a) TELEPHONE SERVICES - 0.1% MCI WorldCom, Inc. (a) 15,000 1,237,500 TOTAL COMMON STOCKS 2,633,443,736 (Cost $1,943,153,648) CASH EQUIVALENTS - 10.7% Taxable Central Cash Fund (b) 316,780,214 316,780,214 (Cost $316,780,214) TOTAL INVESTMENT IN $ 2,950,223,950 SECURITIES - 100% (Cost $2,259,933,862) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $3,418,222,442 and $3,789,829,078, respectively. 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 $363,022 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $29,074,800. The fund received cash collateral of $30,800,000. Transactions during the period with companies which are or were affiliates are as follows:
PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Benchmarq Microelectronics, Inc. $ - $ 1,281,788 $ - $ - Galileo Technology Ltd. 6,278,291 11,105,381 - - Integrated Process Equipment Corp. 3,794,538 - - 15,255,000 LAM Research Corp. 1,350,343 - - 79,914,148 Speedfam International, Inc. 1,029,375 - - 14,469,188 3D Labs, Inc. Ltd. 1,556,811 4,035,636 - - TOTALS $ 14,009,358 $ 16,422,805 $ - $ 109,638,336
INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $2,287,309,686. Net unrealized appreciation aggregated $662,914,264, of which $741,259,879 related to appreciated investment securities and $78,345,615 related to depreciated investment securities. At February 28, 1999, the fund had a capital loss carryforward of approximately $102,009,000 all of which will expire on February 28, 2007. ELECTRONICS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 2,950,223,950 value (cost $2,259,933,862) - - See accompanying schedule Receivable for investments 32,937,353 sold Receivable for fund shares 16,645,802 sold Dividends receivable 109,288 Interest receivable 937,990 Redemption fees receivable 20,215 Other receivables 39,058 TOTAL ASSETS 3,000,913,656 LIABILITIES Payable for investments $ 69,895,831 purchased Payable for fund shares 11,892,574 redeemed Accrued management fee 1,568,022 Other payables and accrued 1,209,296 expenses Collateral on securities 30,800,000 loaned, at value TOTAL LIABILITIES 115,365,723 NET ASSETS $ 2,885,547,933 Net Assets consist of: Paid in capital $ 2,324,616,439 Accumulated undistributed (129,350,532) net realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 690,282,026 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 60,950,394 $ 2,885,547,933 shares outstanding NET ASSET VALUE and $47.34 redemption price per share ($2,885,547,933 (divided by) 60,950,394 shares) Maximum offering price per $48.80 share (100/97.00 of $47.34) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 2,816,769 Dividends Interest (including income on 9,020,936 securities loaned of $537,775) TOTAL INCOME 11,837,705 EXPENSES Management fee $ 13,375,808 Transfer agent fees 11,621,314 Accounting and security 981,827 lending fees Non-interested trustees' 8,487 compensation Custodian fees and expenses 93,428 Registration fees 143,459 Audit 75,536 Legal 12,666 Reports to shareholders 312,570 Total expenses before 26,625,095 reductions Expense reductions (697,236) 25,927,859 NET INVESTMENT INCOME (LOSS) (14,090,154) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 220,511,771 (including realized loss of $3,124,773 on sales of investments in affiliated issuers) Foreign currency transactions (15,013) 220,496,758 Change in net unrealized appreciation (depreciation) on: Investment securities 431,156,460 Assets and liabilities in (5,126) 431,151,334 foreign currencies NET GAIN (LOSS) 651,648,092 NET INCREASE (DECREASE) IN $ 637,557,938 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 7,287,169 charges paid to FDC Sales charges - Retained by $ 7,252,407 FDC Deferred sales charges $ 10,633 withheld by FDC Exchange fees withheld by FSC $ 176,614 Expense reductions Directed $ 671,026 brokerage arrangements Custodian credits 8,449 Transfer agent credits 17,761 $ 697,236 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (14,090,154) $ (10,090,302) income (loss) Net realized gain (loss) 220,496,758 286,758,046 Change in net unrealized 431,151,334 113,929,512 appreciation (depreciation) NET INCREASE (DECREASE) IN 637,557,938 390,597,256 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders From net realized gain - (424,271,823) In excess of net realized - (145,162,086) gain TOTAL DISTRIBUTIONS - (569,433,909) Share transactions Net 1,488,308,447 3,020,162,765 proceeds from sales of shares Reinvestment of distributions - 559,329,509 Cost of shares redeemed (1,912,074,698) (2,481,381,434) NET INCREASE (DECREASE) IN (423,766,251) 1,098,110,840 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 3,006,511 5,459,035 TOTAL INCREASE (DECREASE) 216,798,198 924,733,222 IN NET ASSETS NET ASSETS Beginning of period 2,668,749,735 1,744,016,513 End of period $ 2,885,547,933 $ 2,668,749,735 OTHER INFORMATION Shares Sold 36,527,830 75,772,884 Issued in reinvestment of - 17,854,821 distributions Redeemed (51,847,162) (63,315,407) Net increase (decrease) (15,319,332) 30,312,298
FINANCIAL HIGHLIGHTS
YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 34.99 $ 37.95 $ 28.18 $ 19.80 $ 17.67 period Income from Investment Operations Net investment income (loss) C (.23) (.17) (.17) (.08) (.18) Net realized and unrealized 12.53 7.32 9.80 13.51 2.11 gain (loss) Total from investment 12.30 7.15 9.63 13.43 1.93 operations Less Distributions From net realized gain - (7.60) - (5.25) - In excess of net realized gain - (2.60) - - - Total distributions - (10.20) - (5.25) - Redemption fees added to paid .05 .09 .14 .20 .20 in capital Net asset value, end of period $ 47.34 $ 34.99 $ 37.95 $ 28.18 $ 19.80 TOTAL RETURN A, B 35.30% 24.15% 34.67% 72.75% 12.05% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 2,885,548 $ 2,668,750 $ 1,744,017 $ 1,133,362 $ 216,433 (000 omitted) Ratio of expenses to average 1.18% 1.18% 1.33% 1.25% 1.72% net assets Ratio of expenses to average 1.15% D 1.12% D 1.29% D 1.22% D 1.71% D net assets after expense reductions Ratio of net investment (.62)% (.42)% (.54)% (.28)% (.98)% income (loss) to average net assets Portfolio turnover rate 160% 435% 341% 366% 205%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. CNET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29. 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT SOFTWARE AND COMPUTER 32.57% 198.22% 803.33% SERVICES SELECT SOFTWARE AND COMPUTER 28.52% 189.20% 776.15% SERVICES (LOAD ADJ.) S&P 500 19.74% 194.91% 459.21% GS Technology 48.15% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT SOFTWARE AND COMPUTER 32.57% 24.43% 24.62% SERVICES SELECT SOFTWARE AND COMPUTER 28.52% 23.66% 24.24% SERVICES (LOAD ADJ.) S&P 500 19.74% 24.15% 18.78% GS Technology 48.15% 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 1989/02/28 9700.00 10000.00 1989/03/31 9462.77 10233.00 1989/04/30 10378.74 10764.09 1989/05/31 10754.35 11200.04 1989/06/30 9689.27 11136.20 1989/07/31 9403.29 12141.80 1989/08/31 9832.26 12379.78 1989/09/30 10029.72 12329.02 1989/10/31 10240.80 12042.99 1989/11/30 10540.40 12288.66 1989/12/31 10588.20 12583.59 1990/01/31 10211.79 11739.23 1990/02/28 10476.67 11890.67 1990/03/31 10894.90 12205.77 1990/04/30 10860.05 11900.63 1990/05/31 12226.26 13060.94 1990/06/30 12512.05 12972.12 1990/07/31 11368.89 12930.61 1990/08/31 9779.62 11761.68 1990/09/30 8657.37 11188.89 1990/10/31 8831.63 11140.78 1990/11/30 9967.82 11860.47 1990/12/31 10678.81 12191.38 1991/01/31 12247.18 12722.92 1991/02/28 13139.40 13632.61 1991/03/31 13885.24 13962.52 1991/04/30 13780.69 13996.03 1991/05/31 14031.62 14600.66 1991/06/30 13003.21 13931.95 1991/07/31 13801.99 14581.18 1991/08/31 14923.35 14926.75 1991/09/30 14431.80 14677.48 1991/10/31 15153.77 14874.16 1991/11/30 13494.77 14274.73 1991/12/31 15574.49 15907.76 1992/01/31 18074.40 15611.87 1992/02/29 18617.51 15814.83 1992/03/31 17722.98 15506.44 1992/04/30 17275.71 15962.33 1992/05/31 17547.26 16040.54 1992/06/30 16596.82 15801.54 1992/07/31 17770.90 16447.82 1992/08/31 16445.07 16110.64 1992/09/30 17635.12 16300.75 1992/10/31 19056.79 16357.80 1992/11/30 20718.07 16915.60 1992/12/31 21109.43 17123.66 1993/01/31 22195.65 17267.50 1993/02/28 22059.87 17502.34 1993/03/31 22531.10 17871.64 1993/04/30 22151.92 17439.14 1993/05/31 24650.33 17906.51 1993/06/30 25922.08 17958.44 1993/07/31 25137.38 17886.61 1993/08/31 26833.05 18564.51 1993/09/30 27374.22 18421.56 1993/10/31 27311.08 18802.89 1993/11/30 26634.62 18624.26 1993/12/31 28018.72 18849.62 1994/01/31 28995.06 19490.50 1994/02/28 29381.52 18962.31 1994/03/31 26228.78 18135.55 1994/04/30 26364.47 18367.69 1994/05/31 23725.97 18668.92 1994/06/30 21644.02 18211.53 1994/07/31 22705.61 18808.87 1994/08/31 25168.90 19580.03 1994/09/30 26312.94 19100.32 1994/10/31 27931.09 19530.08 1994/11/30 27292.08 18818.79 1994/12/31 28126.92 19097.87 1995/01/31 27663.12 19593.08 1995/02/28 29961.50 20356.63 1995/03/31 31672.41 20957.35 1995/04/30 32661.85 21574.54 1995/05/31 33548.23 22436.88 1995/06/30 36516.55 22958.09 1995/07/31 38722.18 23719.38 1995/08/31 38990.15 23778.91 1995/09/30 40597.99 24782.38 1995/10/31 41082.41 24693.91 1995/11/30 42247.06 25777.97 1995/12/31 41139.61 26274.46 1996/01/31 39561.78 27168.84 1996/02/29 41998.14 27420.69 1996/03/31 40930.78 27684.75 1996/04/30 45051.43 28092.83 1996/05/31 46622.29 28817.34 1996/06/30 44295.97 28927.14 1996/07/31 40890.44 27649.13 1996/08/31 41741.82 28232.26 1996/09/30 47197.87 29821.17 1996/10/31 47365.75 30643.63 1996/11/30 51119.04 32959.99 1996/12/31 50093.66 32307.05 1997/01/31 54114.30 34325.59 1997/02/28 48778.73 34594.71 1997/03/31 46275.31 33173.21 1997/04/30 48989.12 35153.65 1997/05/31 53137.06 37293.80 1997/06/30 53164.18 38964.57 1997/07/31 59589.42 42064.98 1997/08/31 59304.76 39708.50 1997/09/30 61161.85 41883.33 1997/10/31 58369.44 40484.43 1997/11/30 59657.20 42358.45 1997/12/31 57614.72 43085.75 1998/01/31 59197.70 43562.28 1998/02/28 66097.13 46703.99 1998/03/31 71607.71 49095.70 1998/04/30 70617.23 49589.60 1998/05/31 65099.79 48737.16 1998/06/30 73031.11 50716.86 1998/07/31 68743.10 50176.72 1998/08/31 56178.93 42922.17 1998/09/30 68548.19 45671.77 1998/10/31 66224.26 49386.71 1998/11/30 72431.38 52380.04 1998/12/31 83985.07 55398.18 1999/01/31 94191.59 57714.93 1999/02/26 87615.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990309 145051 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Software and Computer Services Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $87,615 - a 776.15% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Microsoft Corp. 14.5 Oracle Corp. 13.2 Siebel Systems, Inc. 8.9 BMC Software, Inc. 6.2 Compuware Corp. 5.9 America Online, Inc. 4.7 Yahoo!, Inc. 3.9 Aspect Development, Inc. 2.7 Networks Associates, Inc. 2.6 Automatic Data Processing, Inc. 2.4 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Computer Services & Software 88.8% Computers & Office Equipment 2.7% Communications Equipment 0.8% Securities Industry 0.5% Electronics 0.2% All Others 7.0%* Row: 1, Col: 1, Value: 7.0 Row: 1, Col: 2, Value: 1.2 Row: 1, Col: 3, Value: 1.5 Row: 1, Col: 4, Value: 1.8 Row: 1, Col: 5, Value: 2.7 Row: 1, Col: 6, Value: 85.8 * INCLUDES SHORT-TERM INVESTMENTS SOFTWARE AND COMPUTER SERVICES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of John Porter) John Porter, Portfolio Manager of Fidelity Software and Computer Services Portfolio Q. HOW DID THE FUND PERFORM, JOHN? A. For the 12 months that ended February 28, 1999, the fund returned 32.57%. This topped the 19.74% return of the Standard & Poor's 500 Index over the same 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 48.15% over the same 12-month period. Q. WHY DID THE FUND TRAIL THE GOLDMAN SACHS INDEX? A. It's important to understand that the fund invests primarily in software and computer services, two sub-sectors of technology that are not as cyclical as many other areas, while the broadly based Goldman Sachs Technology Index covers the entire range of technology stocks. Therefore, when there are prolonged periods of extraordinarily high returns - positive or negative - the fund will typically produce a more modest return. Q. WHAT WAS YOUR INVESTMENT STRATEGY DURING THE YEAR? A. In software, there has been a tendency for one clear leader to emerge in each sub-sector over time. I tried to identify those eventual "winners" as key investments for the fund, concentrating investments in industry leaders. I also reduced the fund's exposure to areas of technology that I believed were most susceptible to Year 2000 (Y2K) problems, such as the enterprise resource planning (ERP) sector. The concern is that as we move closer to the Year 2000, companies are increasing their technology budgets to fix the Y2K problem, rather than spending on new applications that are designed to integrate and manage internal operations more efficiently. ERP companies, such as PeopleSoft and SAP, were vulnerable to this shift. Finally, I increased the fund's exposure to Internet stocks. Although selected Internet companies represented a significant percentage of the fund's portfolio as of the end of the year, I wish I had invested in them earlier. Q. WHICH STOCKS PERFORMED WELL? A. Microsoft, Siebel and Oracle were all standouts. Microsoft continued to demonstrate good performance, reflecting terrific demand for its Office suite of products. Microsoft's server products also continued to improve following new product releases, helping the company's revenue growth. Siebel, another strong performer, completed a very successful merger with another company and enjoyed an 80% revenue growth rate during 1998. Oracle enjoyed a strong improvement in business trends from a disappointing 1997, as demand rebounded for its database technology during 1998. Q. WHICH STOCKS DISAPPOINTED? A. Despite a cautious view of the ERP sector, I was not as aggressive as I could have been in reducing the fund's exposure to these companies. Examples include PeopleSoft, which had disappointing earnings in the face of declining demand for its products. I sold this stock from the fund's portfolio. J.D. Edwards, another ERP company and a leader in offerings for small and medium-sized businesses, had weaker business trends than expected, which was reflected in its poor performance. I expected ERP demand to remain stronger for small and medium-sized businesses than it actually was. Computer Associates was another disappointment. The company experienced a slowdown in revenue growth because customers, under budgetary pressures from Y2K, scaled back purchases of its products. Q. WHAT'S YOUR OUTLOOK, JOHN? A. The only certainty in technology is volatility. Although some areas of this sector have better potential for growth than others, there are plenty of opportunities in this sector. Over the long term, I'm confident about the prospects for both software and computer services companies. Looking forward, technology should continue to grow as a percentage of capital spending, and therefore should be an attractive area for investment. In the short term, I think the greatest uncertainty will be the potential impact of Y2K, and to what degree and when any rebound from that event will occur. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 028 TRADING SYMBOL: FSCSX SIZE: as of February 28, 1999, more than $690 million MANAGER: John Porter, since 1997; manager Fidelity Select Medical Delivery Portfolio, since 1998; Fidelity Select Multimedia Portfolio, 1996-1997; joined Fidelity in 1995 SOFTWARE AND COMPUTER SERVICES PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.1% SHARES VALUE (NOTE 1) COMMUNICATIONS EQUIPMENT - 0.8% Cisco Systems, Inc. (a) 15,000 $ 1,467,188 OY Nokia AB sponsored ADR 30,000 4,068,750 5,535,938 COMPUTER SERVICES & SOFTWARE - - 88.8% Affiliated Computer Services, 130,000 6,012,500 Inc. Class A (a) Amazon.com, Inc. (a) 52,000 6,662,500 America Online, Inc. 370,000 32,906,875 Aspect Development, Inc. (a) 630,000 19,215,000 At Home Corp. Series A (a) 55,000 5,836,875 Automatic Data Processing, 430,000 17,092,500 Inc. BMC Software, Inc. 1,059,600 43,311,150 BroadVision, Inc. (a) 75,000 3,365,625 Cambridge Technology 30,000 753,750 Partners, Inc. (a) Ceridian Corp. (a) 50,000 3,581,250 Check Point Software 75,000 2,878,125 Technologies Ltd. (a) Citrix Systems, Inc. (a) 85,000 6,555,625 Clarify, Inc. (a) 190,000 5,153,750 CMGI, Inc. (a) 55,000 6,744,375 CNET, Inc. (a) 25,000 2,865,625 Computer Associates 239,250 10,048,500 International, Inc. Computer Sciences Corp. 35,000 2,331,875 Computron Software, Inc. (a) 111 139 Compuware Corp. (a) 736,200 41,181,188 Documentum, Inc. (a) 140,000 2,992,500 eBay, Inc. (a) 15,000 5,010,000 Electronic Data Systems Corp. 24,100 1,120,650 Equifax, Inc. 130,000 4,907,500 Excite, Inc. (a) 20,000 2,050,000 First Data Corp. 340,000 13,005,000 Fiserv, Inc. (a) 45,000 2,115,000 Galileo International, Inc. 30,000 1,515,000 i2 Technologies, Inc. (a) 275,800 6,877,763 Industri-Matematik 378,400 1,324,400 International Corp. (a) Informix Corp. (a) 200,000 1,750,000 Infoseek Corp. (a) 10,000 715,625 Inktomi Corp. (a) 31,000 1,925,875 J.D. Edwards & Co. (a) 475,000 7,510,938 Keane, Inc. (a) 60,000 1,856,250 Mercury Interactive Corp. (a) 50,000 3,240,625 Microsoft Corp. (a) 677,000 101,634,621 MindSpring Enterprises, Inc. 15,000 1,282,500 (a) Netscape Communications Corp. 65,000 5,033,438 (a) Network Solutions, Inc. Class 10,000 1,815,000 A (a) Networks Associates, Inc. (a) 390,000 18,330,000 New Era of Networks, Inc. (a) 90,000 5,613,750 Oracle Corp. (a) 1,650,600 92,227,275 Platinum Technology, Inc. (a) 325,000 4,306,250 SHARES VALUE (NOTE 1) Policy Management Systems 78,400 $ 2,866,500 Corp. (a) RealNetworks, Inc. (a) 25,000 1,753,125 Sabre Group Holdings, Inc. 50,000 1,962,500 Class A (a) Security Dynamics 30,000 555,000 Technologies, Inc. (a) Siebel Systems, Inc. (a) 1,416,125 62,309,500 SunGard Data Systems, Inc. (a) 105,200 4,168,550 Technology Solutions, Inc. (a) 100,000 818,750 TSI International Software 50,000 2,509,375 Ltd. (a) VeriSign, Inc. (a) 100,100 9,809,800 Vignette Corp. (a) 22,200 1,204,350 Whittman-Hart, Inc. (a) 40,000 1,252,500 Yahoo!, Inc. (a) 178,000 27,323,000 621,190,137 COMPUTERS & OFFICE EQUIPMENT - - 2.7% Compaq Computer Corp. 10,000 352,500 Gateway 2000, Inc. (a) 27,800 2,020,713 International Business 15,000 2,550,000 Machines Corp. Sun Microsystems, Inc. (a) 140,000 13,623,750 Tech Data Corp. (a) 34,600 588,200 19,135,163 ELECTRONICS - 0.2% Intel Corp. 12,000 1,439,250 SECURITIES INDUSTRY - 0.5% E Trade Group, Inc. (a) 70,000 3,220,000 SERVICES - 0.1% Computer Horizons Corp. (a) 61,300 915,669 TOTAL COMMON STOCKS 651,436,157 (Cost $428,862,544) CASH EQUIVALENTS - 6.9% Taxable Central Cash Fund (b) 48,513,650 48,513,650 (Cost $48,513,650) TOTAL INVESTMENT IN $ 699,949,807 SECURITIES - 100% (Cost $477,376,194) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $415,381,363 and $390,592,306, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $38,702 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $13,712,500. The fund received cash collateral of $13,320,000. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $480,173,539. Net unrealized appreciation aggregated $219,776,268, of which $245,569,259 related to appreciated investment securities and $25,792,991 related to depreciated investment securities. The fund hereby designates approximately $18,816,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 37% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for use in preparing 1999 income tax returns. SOFTWARE AND COMPUTER SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 699,949,807 value (cost $477,376,194) - See accompanying schedule Receivable for investments 4,435,292 sold Receivable for fund shares 1,927,987 sold Dividends receivable 19,095 Interest receivable 271,166 Redemption fees receivable 1,084 Other receivables 155,673 TOTAL ASSETS 706,760,104 LIABILITIES Payable for fund shares $ 1,873,587 redeemed Accrued management fee 342,417 Other payables and accrued 372,100 expenses Collateral on securities 13,320,000 loaned, at value TOTAL LIABILITIES 15,908,104 NET ASSETS $ 690,852,000 Net Assets consist of: Paid in capital $ 439,147,038 Accumulated undistributed net 29,131,349 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 222,573,613 (depreciation) on investments NET ASSETS, for 12,100,635 $ 690,852,000 shares outstanding NET ASSET VALUE and $57.09 redemption price per share ($690,852,000 (divided by) 12,100,635 shares) Maximum offering price per $58.86 share (100/97.00 of $57.09) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 533,478 Dividends Interest (including income on 2,024,987 securities loaned of $274,250) TOTAL INCOME 2,558,465 EXPENSES Management fee $ 3,378,317 Transfer agent fees 3,206,917 Accounting and security 525,575 lending fees Non-interested trustees' 2,274 compensation Custodian fees and expenses 20,319 Registration fees 77,590 Audit 25,754 Legal 3,206 Reports to shareholders 69,247 Total expenses before 7,309,199 reductions Expense reductions (41,513) 7,267,686 NET INVESTMENT INCOME (LOSS) (4,709,221) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 46,872,115 Foreign currency transactions (2,002) 46,870,113 Change in net unrealized 110,443,885 appreciation (depreciation) on investment securities NET GAIN (LOSS) 157,313,998 NET INCREASE (DECREASE) IN $ 152,604,777 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 1,939,605 charges paid to FDC Sales charges - Retained by $ 1,925,580 FDC Deferred sales charges $ 4,793 withheld by FDC Exchange fees withheld by FSC $ 31,838 Expense reductions Directed $ 39,450 brokerage arrangements Custodian credits 836 Transfer agent credits 1,227 $ 41,513 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (4,709,221) $ (3,518,045) income (loss) Net realized gain (loss) 46,870,113 56,333,154 Change in net unrealized 110,443,885 76,776,311 appreciation (depreciation) NET INCREASE (DECREASE) IN 152,604,777 129,591,420 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (15,509,477) (67,010,560) from net realized gains Share transactions Net 512,689,909 284,940,442 proceeds from sales of shares Reinvestment of distributions 15,022,690 66,130,192 Cost of shares redeemed (478,286,707) (300,538,798) NET INCREASE (DECREASE) IN 49,425,892 50,531,836 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 963,911 555,345 TOTAL INCREASE (DECREASE) 187,485,103 113,668,041 IN NET ASSETS NET ASSETS Beginning of period 503,366,897 389,698,856 End of period 690,852,000 503,366,897 OTHER INFORMATION Shares Sold 10,599,999 6,972,295 Issued in reinvestment of 314,660 1,737,307 distributions Redeemed (10,186,951) (7,436,837) Net increase (decrease) 727,708 1,272,765
FINANCIAL HIGHLIGHTS
YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 44.26 $ 38.58 $ 36.20 $ 29.07 $ 28.89 period Income from Investment Operations Net investment income (loss) C (.39) (.33) (.25) (.19) (.26) Net realized and unrealized 14.46 12.57 5.87 11.85 .67 gain (loss) Total from investment 14.07 12.24 5.62 11.66 .41 operations Less Distributions From net realized gain (1.32) (6.61) (3.31) (4.60) (.33) Redemption fees added to paid .08 .05 .07 .07 .10 in capital Net asset value, end of period $ 57.09 $ 44.26 $ 38.58 $ 36.20 $ 29.07 TOTAL RETURN A, B 32.57% 35.50% 16.14% 40.17% 1.97% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 690,852 $ 503,367 $ 389,699 $ 337,633 $ 236,445 (000 omitted) Ratio of expenses to average 1.28% 1.44% 1.54% 1.48% 1.52% net assets Ratio of expenses to average 1.27% D 1.42% D 1.51% D 1.47% D 1.50% D net assets after expense reductions Ratio of net investment (.82)% (.81)% (.66)% (.54)% (1.01)% income (loss) to average net assets Portfolio turnover rate 72% 145% 279% 183% 164% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT TECHNOLOGY 55.66% 245.32% 919.90% SELECT TECHNOLOGY (LOAD ADJ.) 50.91% 234.89% 889.23% S&P 500 19.74% 194.91% 459.21% GS Technology 48.15% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT TECHNOLOGY 55.66% 28.13% 26.14% SELECT TECHNOLOGY (LOAD ADJ.) 50.91% 27.34% 25.76% S&P 500 19.74% 24.15% 18.78% GS Technology 48.15% 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 1989/02/28 9700.00 10000.00 1989/03/31 9522.12 10233.00 1989/04/30 10211.40 10764.09 1989/05/31 11045.21 11200.04 1989/06/30 10066.88 11136.20 1989/07/31 10244.76 12141.80 1989/08/31 10467.11 12379.78 1989/09/30 10717.25 12329.02 1989/10/31 10639.43 12042.99 1989/11/30 10667.22 12288.66 1989/12/31 10795.07 12583.59 1990/01/31 10572.72 11739.23 1990/02/28 11167.51 11890.67 1990/03/31 11690.03 12205.77 1990/04/30 11161.95 11900.63 1990/05/31 12601.66 13060.94 1990/06/30 12712.84 12972.12 1990/07/31 12034.67 12930.61 1990/08/31 10394.84 11761.68 1990/09/30 9511.00 11188.89 1990/10/31 9783.38 11140.78 1990/11/30 11250.89 11860.47 1990/12/31 11929.05 12191.38 1991/01/31 13941.32 12722.92 1991/02/28 14647.28 13632.61 1991/03/31 15820.17 13962.52 1991/04/30 15041.95 13996.03 1991/05/31 15875.76 14600.66 1991/06/30 14335.63 13931.95 1991/07/31 15922.89 14581.18 1991/08/31 16705.34 14926.75 1991/09/30 16789.17 14677.48 1991/10/31 17241.88 14874.16 1991/11/30 16677.39 14274.73 1991/12/31 18963.78 15907.76 1992/01/31 19684.99 15611.87 1992/02/29 19992.48 15814.83 1992/03/31 18404.71 15506.44 1992/04/30 18136.35 15962.33 1992/05/31 18315.26 16040.54 1992/06/30 17005.88 15801.54 1992/07/31 17872.34 16447.82 1992/08/31 16957.07 16110.64 1992/09/30 17786.92 16300.75 1992/10/31 18836.44 16357.80 1992/11/30 20361.90 16915.60 1992/12/31 20618.18 17123.66 1993/01/31 21246.67 17267.50 1993/02/28 21124.64 17502.34 1993/03/31 21399.22 17871.64 1993/04/30 21337.86 17439.14 1993/05/31 23490.54 17906.51 1993/06/30 24637.74 17958.44 1993/07/31 23983.16 17886.61 1993/08/31 25265.33 18564.51 1993/09/30 25656.72 18421.56 1993/10/31 25150.61 18802.89 1993/11/30 24907.67 18624.26 1993/12/31 26525.31 18849.62 1994/01/31 27860.82 19490.50 1994/02/28 28648.43 18962.31 1994/03/31 27682.75 18135.55 1994/04/30 27125.19 18367.69 1994/05/31 27167.95 18668.92 1994/06/30 24865.95 18211.53 1994/07/31 25828.09 18808.87 1994/08/31 28550.58 19580.03 1994/09/30 28408.04 19100.32 1994/10/31 29469.96 19530.08 1994/11/30 29063.72 18818.79 1994/12/31 29477.09 19097.87 1995/01/31 28329.65 19593.08 1995/02/28 29968.85 20356.63 1995/03/31 31793.35 20957.35 1995/04/30 34189.65 21574.54 1995/05/31 35512.26 22436.88 1995/06/30 38811.46 22958.09 1995/07/31 42735.22 23719.38 1995/08/31 44057.84 23778.91 1995/09/30 46085.85 24782.38 1995/10/31 45395.15 24693.91 1995/11/30 45160.02 25777.97 1995/12/31 42390.07 26274.46 1996/01/31 42819.67 27168.84 1996/02/29 45165.96 27420.69 1996/03/31 41671.32 27684.75 1996/04/30 45259.93 28092.83 1996/05/31 46487.45 28817.34 1996/06/30 43180.64 28927.14 1996/07/31 38571.14 27649.13 1996/08/31 40065.89 28232.26 1996/09/30 45201.47 29821.17 1996/10/31 44875.80 30643.63 1996/11/30 50412.21 32959.99 1996/12/31 49095.41 32307.05 1997/01/31 54906.09 34325.59 1997/02/28 50876.53 34594.71 1997/03/31 47508.27 33173.21 1997/04/30 50277.51 35153.65 1997/05/31 55621.65 37293.80 1997/06/30 56645.86 38964.57 1997/07/31 63135.89 42064.98 1997/08/31 64900.37 39708.50 1997/09/30 67516.67 41883.33 1997/10/31 57933.72 40484.43 1997/11/30 56919.66 42358.45 1997/12/31 54166.22 43085.75 1998/01/31 57108.99 43562.28 1998/02/28 63556.78 46703.99 1998/03/31 63784.07 49095.70 1998/04/30 66391.89 49589.60 1998/05/31 61403.53 48737.16 1998/06/30 66511.52 50716.86 1998/07/31 66690.96 50176.72 1998/08/31 55027.52 42922.17 1998/09/30 64633.41 45671.77 1998/10/31 69801.21 49386.71 1998/11/30 80806.71 52380.04 1998/12/31 94336.30 55398.18 1999/01/31 110677.08 57714.93 1999/02/26 98923.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990310 115456 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Technology Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $98,923 - an 889.23% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS OY Nokia AB sponsored ADR 8.5 Motorola, Inc. 6.3 Cisco Systems, Inc. 5.0 Microsoft Corp. 4.1 Texas Instruments, Inc. 3.9 ADC Telecommunications, Inc. 3.9 eBay, Inc. 3.7 Flextronics International 2.9 Xilinx, Inc. 2.8 America Online, Inc. 2.6 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Electronics 22.7% Communications Equipment 22.7% Computer Services & Software 18.5% Computers & Office Equipment 9.4% Electronic Instruments 4.7% All Others 22.0% * Row: 1, Col: 1, Value: 22.0 Row: 1, Col: 2, Value: 4.7 Row: 1, Col: 3, Value: 9.4 Row: 1, Col: 4, Value: 18.5 Row: 1, Col: 5, Value: 22.7 Row: 1, Col: 6, Value: 22.7 * INCLUDES SHORT-TERM INVESTMENTS TECHNOLOGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Andrew Kaplan) Andrew Kaplan, Portfolio Manager of Fidelity Select Technology Portfolio Q. HOW DID THE FUND PERFORM, ANDY? A. Very well. For the 12 months that ended February 28, 1999, the fund returned 55.66%, while the Standard & Poor's 500 Index returned 19.74%. During the same period, the Goldman Sachs Technology Index - an index of 190 stocks designed to measure the performance of companies in the technology sector - returned 48.15%. Q. WHAT FACTORS HELPED THE FUND OUTPACE THE RETURNS OF BOTH BENCHMARKS OVER THE PAST 12 MONTHS? A. The incredible rebound of technology stocks over the last four months of the period helped the fund generate robust returns. Technology stocks hit a low point in early October when fears about an economic slowdown peaked following financial turmoil in both Russia and Asia. However, when it became evident that the situation in Asia was not getting worse and, more importantly, that U.S. economic growth was accelerating, investors returned to technology stocks with a vengeance. Specifically, the fund outperformed the Goldman Sachs Technology Index because of my focus on large-capitalization stocks. I continued to believe that investors would pay a premium for stocks that weren't at risk of reporting disappointing earnings numbers - and these were mostly larger-cap stocks. On top of that, I focused on Internet stocks - the sector that has enjoyed the most dramatic growth. Q. WHICH INDIVIDUAL HOLDINGS PERFORMED PARTICULARLY WELL? A. eBay, an online interactive auction site that debuted on Wall Street with its successful initial public offering in September, generated one of the biggest returns during the period. Another strong performer was Cisco Systems, a maker of networking equipment for the Internet. Looking to other areas, I anticipated a recovery of the semiconductor market after a long period of excess supply. As a result, I bought several semiconductor capital equipment stocks, such as Applied Materials, ASM Lithography and Texas Instruments - all of which did very well. I also tried to capitalize on the rapid growth of the wireless communications sector by investing in Motorola. Wireless phones, which are quickly becoming mass-market items as service prices fall, have huge growth potential in developing economies that have no access to wire-line phones. In addition, Motorola's management team has implemented a restructuring plan that is focused on cutting costs and improving returns. Q. WHAT OTHER FACTORS HELPED PERFORMANCE? A. I reduced the fund's weighting in personal computer (PC) manufacturers in late 1998. This helped the fund because several PC makers reported disappointing earnings in the latest quarter as a result of slowing demand growth, and their stocks were punished. Q. ARE YOU CONCERNED ABOUT THE INCREDIBLE RUN-UP IN INTERNET STOCKS? A. Sure. After all, we've seen several years of appreciation all in a few months. For instance, from early October through early January, many Internet stocks appreciated as much as 400% to 500%. I'm always concerned that there may be a correction after that kind of run-up. As a result, I reduced the weighting of some of the Internet stocks that enjoyed the most dramatic gains during the period, such as Yahoo! and America Online. However, I continued to make investments directly in Internet companies or indirectly through the service providers because I believe in the long-term growth prospects of the sector. Q. WERE THERE ANY DISAPPOINTMENTS? A. One big void was that the fund did not own any Sun Microsystems. This stock generated huge returns during the period. I did not realize the company's Internet tie-in quickly enough. Sun Microsystems makes high-end servers that are now being used by Internet sites to store data. Q. WHAT'S YOUR OUTLOOK? A. I continue to be bullish about technology, especially because - with the Internet - we're only in the second inning. We have barely captured 10% of the potential subscriber base and we've only scratched the surface as far as ways to make money through this medium. I will continue to look for the most aggressive ways to capitalize on the future growth of the Internet. However, I am more concerned about valuations than I was six months ago, so I plan to concentrate on stocks that I believe can deliver strong earnings. In addition, I'm somewhat more cautious about the semiconductor sector because of the recent slowdown in PC demand growth, as well as the huge run-ups we've seen in those stocks over the past few 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 064 TRADING SYMBOL: FSPTX SIZE: as of February 28, 1999, more than $1.3 billion MANAGER: Andrew Kaplan, since 1998; manager, Fidelity Select Developing Communications Portfolio, since 1998; Fidelity Select Electronics Portfolio, 1996-1998; joined Fidelity in 1995 TECHNOLOGY PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities
COMMON STOCKS - 85.6% SHARES VALUE (NOTE 1) ADVERTISING - 0.0% VerticalNet, Inc. (a) 400 $ 16,500 BROADCASTING - 1.0% Comcast Corp. Class A 100,000 7,093,750 (special) Cox Communications, Inc. 100,000 7,075,000 Class A (a) 14,168,750 COMMUNICATIONS EQUIPMENT - 22.7% ADC Telecommunications, Inc. 1,300,000 52,650,000 (a) Ascend Communications, Inc. 236,700 18,211,106 (a) Cisco Systems, Inc. (a) 705,225 68,979,820 Jabil Circuit, Inc. (a) 400,000 13,050,000 Level One Communications, 259,400 8,689,900 Inc. (a) Lucent Technologies, Inc. 141,100 14,330,469 OY Nokia AB sponsored ADR 861,000 116,773,121 P-Com, Inc. (a) 1,000,000 6,343,750 Premisys Communications, Inc. 374,700 3,091,275 (a) Tekelec (a) 722,200 8,756,675 310,876,116 COMPUTER SERVICES & SOFTWARE - - 18.5% Amazon.com, Inc. (a) 65,000 8,328,125 America Online, Inc. 396,800 35,290,400 Aware, Inc. (a) 300,000 10,387,500 BMC Software, Inc. 250,000 10,218,750 Bottomline Technologies, Inc. 600 12,600 (a) broadcast.com, Inc. (a) 200 16,763 Cadence Design Systems, Inc. 450,700 10,844,969 (a) Cambridge Technology 200,000 5,025,000 Partners, Inc. (a) Catapult Communications Corp. 300 3,019 (a) Citrix Systems, Inc. (a) 111,800 8,622,575 Concur Technologies, Inc. (a) 700 21,700 eBay, Inc. (a) 150,000 50,100,000 Electronic Data Systems Corp. 100,000 4,650,000 GeoCities (a) 400 39,100 Healtheon Corp. (a) 2,900 78,300 i2 Technologies, Inc. (a) 3,600 89,775 Intraware, Inc. 1,000 18,875 Lycos, Inc. (a) 75,000 6,571,875 Microsoft Corp. (a) 378,540 56,828,318 Modem Media . Poppe Tyson, 200 5,375 Inc. (a) Momentum Business 4,000 34,500 Applications Inc (a) ONYX Software Corp. (a) 500 9,281 Oracle Corp. (a) 250,000 13,968,750 pcOrder.com, Inc. (a) 500 23,563 Perot Systems Corp. (a) 300 13,031 Prodigy Communications Corp. 1,500 58,313 (a) SERENA Software, Inc. (a) 600 7,875 Siebel Systems, Inc. (a) 150,000 6,600,000 Symantec Corp. (a) 194,300 3,509,544 Vignette Corp. (a) 300 16,275 SHARES VALUE (NOTE 1) WebTrends Corp. (a) 400 $ 10,050 Yahoo!, Inc. (a) 143,000 21,950,500 253,354,701 COMPUTERS & OFFICE EQUIPMENT - - 9.4% Adaptec, Inc. (a) 300,000 5,981,250 Dell Computer Corp. (a) 72,500 5,809,063 EMC Corp. (a) 304,000 31,122,000 Hewlett-Packard Co. 350,000 23,253,125 International Business 36,700 6,239,000 Machines Corp. Lexmark International Group, 200,000 20,637,500 Inc. Class A (a) Maxtor Corp. (a) 204,200 1,684,650 Network Appliance, Inc. (a) 300,000 12,600,000 SanDisk Corp. (a) 446,100 12,490,800 SCI Systems, Inc. (a) 281,700 8,715,094 128,532,482 DEFENSE ELECTRONICS - 0.6% Alpha Industries, Inc. (a) 162,050 3,301,769 REMEC, Inc. (a) 300,000 5,156,250 8,458,019 DRUGS & PHARMACEUTICALS - 0.0% Albany Molecular Research, 400 8,000 Inc. (a) EDUCATIONAL SERVICES - 0.0% Corinthian Colleges, Inc. (a) 6,800 152,150 ELECTRICAL EQUIPMENT - 2.3% Adtran, Inc. (a) 410,000 8,405,000 General Instrument Corp. (a) 197,400 5,773,950 Philips Electronics NV (NY 250,000 17,406,250 shares) 31,585,200 ELECTRONIC INSTRUMENTS - 4.7% Aeroflex, Inc. (a) 300,000 4,031,250 Applied Materials, Inc. (a) 450,000 25,031,250 JDS Fitel, Inc. (a) 200,000 8,555,511 KLA-Tencor Corp. (a) 130,300 6,751,169 Kulicke & Soffa Industries, 265,000 6,724,375 Inc. (a) Novellus Systems, Inc. (a) 6,200 366,188 Smart Modular Technologies, 350,000 5,621,875 Inc. (a) Teradyne, Inc. (a) 139,000 6,619,875 63,701,493 ELECTRONICS - 22.7% Altera Corp. (a) 126,800 6,165,650 DII Group, Inc. (a) 400,000 9,350,000 Flextronics International (a) 1,042,800 39,300,525 Galileo Technology Ltd. (a) 200,000 4,100,000 Intel Corp. 154,800 18,566,325 Micron Technology, Inc. (a) 587,700 33,866,213 Motorola, Inc. 1,225,000 86,056,250 PMC-Sierra, Inc. (a) 5,000 354,375 Rambus, Inc. (a) 245,600 17,852,050 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRONICS - CONTINUED Solectron Corp. (a) 82,000 $ 3,664,375 Texas Instruments, Inc. 600,000 53,512,500 Xilinx, Inc. (a) 550,000 38,362,500 311,150,763 ENTERTAINMENT - 0.2% Ticketmaster Online 71,200 2,572,100 CitySearch, Inc. (a) INDUSTRIAL MACHINERY & EQUIPMENT - 3.0% ASM Lithography Holding N V 800,000 31,700,000 (a) PRI Automation, Inc. 300,000 9,000,000 40,700,000 SECURITIES INDUSTRY - 0.5% E Trade Group, Inc. (a) 150,000 6,900,000 SERVICES - 0.0% Corporate Executive Board Co. 900 22,050 (a) TELEPHONE SERVICES - 0.0% Covad Communications Group, 700 28,350 Inc. (a) TOTAL COMMON STOCKS 1,172,226,674 (Cost $968,831,151) CASH EQUIVALENTS - 14.4% Taxable Central Cash Fund (b) 197,935,034 197,935,034 (Cost $197,935,034) TOTAL INVESTMENT IN $ 1,370,161,708 SECURITIES - 100% (Cost $1,166,766,185)
LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $2,662,982,813 and $2,417,743,979, respectively. 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 $323,190 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $54,358,127. The fund received cash collateral of $52,357,000. The fund participated in the interfund lending program as a lender. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $35,121,000 and $26,026,833, respectively. The weighted average interest rate was 5.28%. Interest earned from the interfund lending program amounted to $22,897 and is included in interest income on the Statement of Operations. Distribution of investments by country of issue, as a percentage of total value of investments in securities, is as follows: United States of America 84.1% Finland 8.5 Netherlands 3.6 Singapore 2.9 Others (individually less 0.9 than 1%) TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $1,178,964,874. Net unrealized appreciation aggregated $191,196,834, of which $239,560,713 related to appreciated investment securities and $48,363,879 related to depreciated investment securities. The fund hereby designates approximately $2,157,000 as a capital gain dividend for the purpose of the dividend paid deduction. TECHNOLOGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 1,370,161,708 value (cost $1,166,766,185) - - See accompanying schedule Cash 155,383 Receivable for investments 138,535,148 sold Receivable for fund shares 10,739,703 sold Dividends receivable 40,910 Interest receivable 672,196 Redemption fees receivable 9,311 Other receivables 290,210 TOTAL ASSETS 1,520,604,569 LIABILITIES Payable for investments $ 94,033,397 purchased Payable for fund shares 5,789,219 redeemed Accrued management fee 686,134 Other payables and accrued 591,308 expenses Collateral on securities 52,357,000 loaned, at value TOTAL LIABILITIES 153,457,058 NET ASSETS $ 1,367,147,511 Net Assets consist of: Paid in capital $ 1,006,589,737 Accumulated undistributed 157,162,251 net realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 203,395,523 (depreciation) on investments NET ASSETS, for 16,531,732 $ 1,367,147,511 shares outstanding NET ASSET VALUE and $82.70 redemption price per share ($1,367,147,511 (divided by) 16,531,732 shares) Maximum offering price per $85.26 share (100/97.00 of $82.70) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 1,000,332 Dividends Interest (including income on 3,971,800 securities loaned of $474,304) TOTAL INCOME 4,972,132 EXPENSES Management fee $ 4,515,599 Transfer agent fees 3,907,220 Accounting and security 633,939 lending fees Non-interested trustees' 3,322 compensation Custodian fees and expenses 46,862 Registration fees 179,099 Audit 35,290 Legal 4,915 Reports to shareholders 81,822 Total expenses before 9,408,068 reductions Expense reductions (338,456) 9,069,612 NET INVESTMENT INCOME (LOSS) (4,097,480) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 215,507,098 Foreign currency transactions (21,197) 215,485,901 Change in net unrealized appreciation (depreciation) on: Investment securities 122,793,314 Assets and liabilities in 289 122,793,603 foreign currencies NET GAIN (LOSS) 338,279,504 NET INCREASE (DECREASE) IN $ 334,182,024 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 5,573,254 charges paid to FDC Sales charges - Retained by $ 5,562,533 FDC Deferred sales charges $ 32,321 withheld by FDC Exchange fees withheld by FSC $ 46,395 Expense reductions Directed $ 331,286 brokerage arrangements Custodian credits 5,356 Transfer agent credits 1,814 $ 338,456 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (4,097,480) $ (2,470,345) income (loss) Net realized gain (loss) 215,485,901 56,871,240 Change in net unrealized 122,793,603 69,437,348 appreciation (depreciation) NET INCREASE (DECREASE) IN 334,182,024 123,838,243 NET ASSETS RESULTING FROM OPERATIONS Distribution to shareholders - (112,130,367) From net realized gain In excess of net realized - (29,870,994) gain TOTAL DISTRIBUTIONS - (142,001,361) Share transactions Net 1,006,339,152 519,887,482 proceeds from sales of shares Reinvestment of distributions - 139,074,837 Cost of shares redeemed (666,801,634) (428,139,579) NET INCREASE (DECREASE) IN 339,537,518 230,822,740 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 1,503,543 820,601 TOTAL INCREASE (DECREASE) 675,223,085 213,480,223 IN NET ASSETS NET ASSETS Beginning of period 691,924,426 478,444,203 End of period $ 1,367,147,511 $ 691,924,426 OTHER INFORMATION Shares Sold 14,223,107 9,533,953 Issued in reinvestment of - 2,923,252 distributions Redeemed (10,714,156) (7,726,118) Net increase (decrease) 3,508,951 4,731,087
FINANCIAL HIGHLIGHTS
YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 53.13 $ 57.70 $ 54.67 $ 42.05 $ 41.83 period Income from Investment Operations Net investment income (loss) C (.34) (.25) (.39) (.28) (.39) Net realized and unrealized 29.79 11.29 6.95 20.83 1.95 gain (loss) Total from investment 29.45 11.04 6.56 20.55 1.56 operations Less Distributions From net realized gain - (12.39) (3.68) (8.05) (1.50) In excess of net realized gain - (3.30) - - - Total distributions - (15.69) (3.68) (8.05) (1.50) Redemption fees added to paid .12 .08 .15 .12 .16 in capital Net asset value, end of period $ 82.70 $ 53.13 $ 57.70 $ 54.67 $ 42.05 TOTAL RETURN A, B 55.66% 24.92% 12.64% 50.71% 4.61% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 1,367,148 $ 691,924 $ 478,444 $ 483,026 $ 229,761 (000 omitted) Ratio of expenses to average 1.24% 1.38% 1.49% 1.40% 1.57% net assets Ratio of expenses to average 1.20% D 1.30% D 1.44% D 1.39% D 1.56% D net assets after expense reductions Ratio of net investment (.54)% (.45)% (.72)% (.52)% (.98)% income (loss) to average net assets Portfolio turnover rate 339% 556% 549% 112% 102% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE . C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND 1999 SELECT NATURAL GAS -19.17% 19.27% 14.70% SELECT NATURAL GAS (LOAD ADJ.) -21.66% 15.62% 11.19% S&P 500 19.74% 194.91% 218.30% GS Utilities 30.02% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or since the fund started on April 21, 1993. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND 1999 SELECT NATURAL GAS -19.17% 3.59% 2.37% SELECT NATURAL GAS (LOAD ADJ.) -21.66% 2.95% 1.83% S&P 500 19.74% 24.15% 21.84% GS Utilities 30.02% 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 10432.19 24430.84 1998/09/30 12691.46 25995.88 1998/10/31 12951.74 28110.39 1998/11/30 12066.77 29814.16 1998/12/31 12102.93 31532.05 1999/01/31 11251.94 32850.72 1999/02/26 11119.00 31829.72 IMATRL PRASUN SHR__CHT 19990228 19990309 145029 R00000000000074 $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 February 28, 1999, the value of the investment would have grown to $11,119 - an 11.19% 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 $31,830 - a 218.30% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Enron Corp. 8.8 Coastal Corp. (The) 6.0 Vastar Resources, Inc. 5.3 Williams Companies, Inc. 5.3 BP Amoco PLC sponsored ADR 5.1 Anadarko Petroleum Corp. 4.5 Consolidated Natural Gas Co. 3.3 Columbia Gas System, Inc. 2.8 Enbridge, Inc. 2.7 El Paso Energy Corp. 2.5 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Oil & Gas 52.9% Gas 31.5% Energy Services 6.0% Electric Utility 4.7% All Others 4.9% Row: 1, Col: 1, Value: 4.9 Row: 1, Col: 2, Value: 4.7 Row: 1, Col: 3, Value: 6.0 Row: 1, Col: 4, Value: 31.5 Row: 1, Col: 5, Value: 52.9 * INCLUDES SHORT-TERM 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 disappointing period. For the 12 months that ended February 28, 1999, the fund had a total return of -19.17%, compared to a gain of 19.74% for the Standard & Poor's 500 Index. The Goldman Sachs Utilities Index - an index of 136 stocks designed to measure the performance of companies in the utilities sector - turned in a stellar return of 30.02%. Q. WHY WAS THE FUND'S RETURN SO FAR BEHIND THOSE OF ITS BENCHMARKS? A. Natural gas prices, on which the fund's performance depends to a great extent, trended mainly downward during the period. Oil prices, which also influence many of the fund's holdings, were even weaker than gas prices. On the other hand, a number of other stock sectors performed well except for a few months in the late summer and early fall of 1998, accounting for the strong showing of the broadly based S&P 500. The Goldman Sachs index contains a number of holdings that are incompatible with the fund's primary focus on natural gas, including significant positions in telecommunications, electric utilities - even the Internet. In particular, the Goldman Sachs index benefited from a large position in America Online, one of the strongest stocks in a surging Internet group. Consequently, the fund came up short against both of its benchmarks. Q. WHY WERE OIL AND NATURAL GAS PRICES SO WEAK? A. Poor global demand, especially from Southeast Asia, was one problem affecting oil prices, as was the inability of the Organization of Petroleum Exporting Countries (OPEC) to sufficiently restrict the production of its member countries. On the natural gas side, the main problem was uncooperative weather. The winter of 1997-98 was the second-warmest winter on record, and so far the winter of 1998-99 has been even warmer. Furthermore, low oil prices caused some users to substitute oil for natural gas, thereby reducing demand for gas. Q. WHAT WAS YOUR STRATEGY DURING THE PERIOD? A. The fund's primary emphasis was on the stocks of exploration and production (E&P) companies with solid balance sheets and the capability to add meaningfully to reserves at a relatively low cost. In the fall, I reduced the fund's E&P holdings slightly and increased exposure to gas utilities and integrated pipeline companies to take advantage of falling interest rates. In the fourth quarter of 1998, I built up positions in drilling and energy service companies. My rationale was that we had probably seen the worst of the oil and gas price declines for this cycle, and these companies were well positioned to benefit from a recovery in commodity prices. Q. WHAT STOCKS CONTRIBUTED POSITIVELY TO THE FUND'S PERFORMANCE? A. Enron, the fund's largest holding at the end of the period, was one stock that helped performance. This diversified energy company benefited from strong growth in its wholesale trading operations and increased visibility in its retail energy services division. Consolidated Natural Gas saw its stock price firm amid takeover speculation. Q. WHAT ABOUT DISAPPOINTING HOLDINGS? A. Plains Resources, an oil-oriented E&P company, experienced weakness in its stock price mainly because of declining oil prices. Ocean Energy - no longer one of the fund's holdings - is another oil-based E&P company whose balance sheet deteriorated over the period when the company spent considerable sums on exploration but came up with no significant finds. Burlington Resources, primarily a gas E&P company, weakened when it failed to meet production expectations, and the cost savings from a recent merger took longer than expected to materialize. Q. WHAT'S YOUR OUTLOOK, VICTOR? A. After considerable declines, both oil and gas prices are low enough to force cutbacks in production, which should be supportive of higher prices in the long run. Moreover, OPEC has scheduled a meeting for March 23 to debate further cuts in oil production. There will probably be adequate natural gas supplies for the first half of 1999, but supplies may shrink later in the year, lending support to that market. Furthermore, two recent high-profile unions - Dominion Resources bought Consolidated Natural Gas and Sempra Energy purchased K N Energy - - may stimulate further consolidation in the natural gas industry, which could be a positive influence on stock prices. Therefore, while I am cautious about the near-term prospects for natural gas stocks, I am optimistic about the longer-term outlook. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: April 21, 1993 FUND NUMBER: 513 TRADING SYMBOL: FSNGX SIZE: as of February 28, 1999, more than $36 million MANAGER: Victor Thay, since 1997; manager, Fidelity Select Home Finance Portfolio, since March 1999; analyst, U.S. and Canadian exploration and production industry, 1996-present; Canadian equities, 1995-1996; joined Fidelity in 1995 NATURAL GAS PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 95.1% SHARES VALUE (NOTE 1) ELECTRIC UTILITY - 4.7% AES Corp. (a) 15,300 $ 568,969 CMS Energy Corp. 9,200 380,650 PG&E Corp. 24,800 781,200 1,730,819 ENERGY SERVICES - 6.0% BJ Services Co. (a) 14,600 205,313 ENSCO International, Inc. 45,700 405,588 Halliburton Co. 10,700 302,275 Noble Drilling Corp. (a) 24,400 301,950 Pool Energy Services Co. (a) 34,100 346,328 Santa Fe International Corp. 21,800 291,575 Schlumberger Ltd. 7,600 369,075 2,222,104 GAS - 31.5% Atmos Energy Corp. 19,700 472,800 Cascade Natural Gas Corp. 25,400 401,638 Columbia Gas System, Inc. 20,800 1,050,400 Consolidated Natural Gas Co. 22,250 1,222,359 Dynegy, Inc. 36,600 439,200 El Paso Energy Corp. 24,950 909,116 Enron Corp. 49,800 3,236,997 Equitable Resources, Inc. 8,600 222,525 K N Energy, Inc. 15,600 326,625 Midcoast Energy Resources, 3,710 82,548 Inc. National Fuel Gas Co. 6,300 253,969 New Jersey Resources Corp. 5,700 199,144 Northwest Natural Gas Co. 14,400 352,350 ONEOK, Inc. 9,800 263,988 SEMCO Energy, Inc. 12,400 195,300 Transcanada Pipelines Ltd. 3,296 45,250 Williams Companies, Inc. 52,460 1,941,020 11,615,229 OIL & GAS - 52.9% Anadarko Petroleum Corp. 59,950 1,648,625 Apache Corp. 33,225 662,423 BP Amoco PLC sponsored ADR 22,319 1,897,115 Burlington Resources, Inc. 24,672 798,756 Canadian Natural Resources 47,100 651,303 Ltd. (a) Coastal Corp. (The) 69,170 2,213,440 Enbridge, Inc. 21,500 1,012,402 Enron Oil & Gas Co. 28,200 465,300 Newfield Exploration Co. (a) 29,800 484,250 Noble Affiliates, Inc. 29,000 656,125 Nuevo Energy Co. (a) 12,500 87,500 Oryx Energy Co. (a) 12,500 129,688 Paramount Resources Ltd. 54,700 466,173 Penn West Petroleum Ltd. (a) 75,600 749,582 Plains Resources, Inc. (a) 84,400 780,700 Renaissance Energy Ltd. (a) 60,500 533,658 Rio Alto Exploration Ltd. (a) 85,800 759,670 SHARES VALUE (NOTE 1) Santa Fe Energy Resources, 89,300 $ 468,825 Inc. (a) Seagull Energy Corp. (a) 92,700 440,325 Stone Energy Corp. (a) 21,500 520,031 Suncor Energy, Inc. 19,500 570,981 Ulster Petroleums Ltd. (a) 113,900 634,540 Union Pacific Resources 86,000 768,625 Group, Inc. Vastar Resources, Inc. 50,700 1,951,950 Vintage Petroleum, Inc. 33,500 148,656 19,500,643 TOTAL COMMON STOCKS 35,068,795 (Cost $37,084,484) CASH EQUIVALENTS - 4.9% Taxable Central Cash Fund (b) 1,803,368 1,803,368 (Cost $1,803,368) TOTAL INVESTMENT IN $ 36,872,163 SECURITIES - 100% (Cost $38,887,852) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. The yield refers to the income earned by investing in the fund over the seven-day period, expressed as an annual percentage. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $51,708,839 and $63,353,313, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $13,630 for the period. The fund participated in the bank borrowing program. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $2,590,000 and $1,717,000, respectively. The weighted average interest rate was 5.7%. Distribution of investments by country of issue, as a percentage of total value of investments in securities, is as follows: United States of America 79.3% Canada 14.6 United Kingdom 5.1 Netherlands Antilles 1.0 TOTAL 100.0% INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $39,375,928. Net unrealized depreciation aggregated $2,503,765, of which $3,185,025 related to appreciated investment securities and $5,688,790 related to depreciated investment securities. At February 28, 1999, the fund had a capital loss carryforward of approximately $3,229,000, all of which will expire on February 28, 2007. The fund intends to elect to defer to its fiscal year ending February 29, 2000 approximately $1,719,000 of losses recognized during the period November 1, 1998 to February 28, 1999. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of this percentage for use in preparing 1999 income tax returns. NATURAL GAS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 36,872,163 value (cost $38,887,852) - See accompanying schedule Receivable for fund shares 46,471 sold Dividends receivable 43,421 Interest receivable 6,414 Redemption fees receivable 105 Other receivables 26 TOTAL ASSETS 36,968,600 LIABILITIES Payable for fund shares $ 78,219 redeemed Accrued management fee 18,520 Other payables and accrued 43,435 expenses TOTAL LIABILITIES 140,174 NET ASSETS $ 36,828,426 Net Assets consist of: Paid in capital $ 43,960,023 Undistributed net investment 319,683 income Accumulated undistributed net (5,435,532) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (2,015,748) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 3,478,063 $ 36,828,426 shares outstanding NET ASSET VALUE and $10.59 redemption price per share ($36,828,426 (divided by) 3,478,063 shares) Maximum offering price per $10.92 share (100/97.00 of $10.59) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 715,257 Dividends Special dividend from 399,656 Transcanada Pipelines Ltd. Interest 147,033 TOTAL INCOME 1,261,946 EXPENSES Management fee $ 301,788 Transfer agent fees 393,852 Accounting fees and expenses 60,991 Non-interested trustees' 195 compensation Custodian fees and expenses 14,741 Registration fees 14,687 Audit 10,733 Legal 306 Interest 548 Reports to shareholders 10,973 Miscellaneous 14 Total expenses before 808,828 reductions Expense reductions (26,170) 782,658 NET INVESTMENT INCOME 479,288 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (5,298,288) Foreign currency transactions (5,038) (5,303,326) Change in net unrealized appreciation (depreciation) on: Investment securities (4,576,884) Assets and liabilities in (59) (4,576,943) foreign currencies NET GAIN (LOSS) (9,880,269) NET INCREASE (DECREASE) IN $ (9,400,981) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 123,203 charges paid to FDC Sales charges - Retained by $ 121,320 FDC Deferred sales charges $ 982 withheld by FDC Exchange fees withheld by FSC $ 7,478 Expense reductions Directed $ 25,878 brokerage arrangements Custodian credits 176 Transfer agent credits 116 $ 26,170 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ 479,288 $ (306,523) income (loss) Net realized gain (loss) (5,303,326) 1,119,826 Change in net unrealized (4,576,943) 5,428,784 appreciation (depreciation) NET INCREASE (DECREASE) IN (9,400,981) 6,242,087 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (375,571) - From net investment income From net realized gain - (1,875,328) In excess of net realized - (210,862) gain TOTAL DISTRIBUTIONS (375,571) (2,086,190) Share transactions Net 47,858,222 108,990,438 proceeds from sales of shares Reinvestment of distributions 356,687 2,046,549 Cost of shares redeemed (61,599,489) (137,149,165) NET INCREASE (DECREASE) IN (13,384,580) (26,112,178) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 123,693 255,983 TOTAL INCREASE (DECREASE) (23,037,439) (21,700,298) IN NET ASSETS NET ASSETS Beginning of period 59,865,865 81,566,163 End of period (including $ 36,828,426 $ 59,865,865 undistributed net investment income of $319,683 and $297,648, respectively) OTHER INFORMATION Shares Sold 3,845,626 8,021,019 Issued in reinvestment of 32,426 174,767 distributions Redeemed (4,929,086) (10,189,472) Net increase (decrease) (1,051,034) (1,993,686)
FINANCIAL HIGHLIGHTS
YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 F 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 13.22 $ 12.50 $ 11.36 $ 8.98 $ 9.48 period Income from Investment Operations Net investment income (loss) C .12 E (.05) (.06) .05 .03 Net realized and unrealized (2.68) 1.06 1.30 2.36 (.53) gain (loss) Total from investment (2.56) 1.01 1.24 2.41 (.50) operations Less Distributions From net investment income (.10) - (.01) (.05) (.02) From net realized gain - (.30) (.29) - - In excess of net realized gain - (.03) - - - Total distributions (.10) (.33) (.30) (.05) (.02) Redemption fees added to paid .03 .04 .20 .02 .02 in capital Net asset value, end of period $ 10.59 $ 13.22 $ 12.50 $ 11.36 $ 8.98 TOTAL RETURN A, B (19.17)% 8.74% 12.45% 27.10% (5.06)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 36,828 $ 59,866 $ 81,566 $ 60,228 $ 79,894 (000 omitted) Ratio of expenses to average 1.57% 1.82% 1.70% 1.68% 1.70% net assets Ratio of expenses to average 1.52% D 1.78% D 1.66% D 1.67% D 1.66% D net assets after expense reductions Ratio of net investment .93% (.37)% (.46)% .46% .30% income (loss) to average net assets Portfolio turnover rate 107% 118% 283% 79% 177% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM TRANSCANADA PIPELINES LTD. WHICH AMOUNTED TO $.10 PER SHARE. F FOR THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT TELECOMMUNICATIONS 22.21% 162.32% 489.71% SELECT TELECOMMUNICATIONS 18.47% 154.38% 471.95% (LOAD ADJ.) S&P 500 19.74% 194.91% 459.21% GS Utilities 30.02% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT TELECOMMUNICATIONS 22.21% 21.27% 19.42% SELECT TELECOMMUNICATIONS 18.47% 20.53% 19.05% (LOAD ADJ.) S&P 500 19.74% 24.15% 18.78% GS Utilities 30.02% 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 1989/02/28 9700.00 10000.00 1989/03/31 10096.02 10233.00 1989/04/30 10859.42 10764.09 1989/05/31 11660.99 11200.04 1989/06/30 11376.12 11136.20 1989/07/31 12239.76 12141.80 1989/08/31 12532.44 12379.78 1989/09/30 12993.05 12329.02 1989/10/31 12532.44 12042.99 1989/11/30 12849.11 12288.66 1989/12/31 13483.69 12583.59 1990/01/31 12021.42 11739.23 1990/02/28 11976.66 11890.67 1990/03/31 12255.19 12205.77 1990/04/30 11534.00 11900.63 1990/05/31 12747.58 13060.94 1990/06/30 12493.93 12972.12 1990/07/31 11921.95 12930.61 1990/08/31 10534.29 11761.68 1990/09/30 9852.89 11188.89 1990/10/31 10196.08 11140.78 1990/11/30 10778.00 11860.47 1990/12/31 11272.83 12191.38 1991/01/31 11673.44 12722.92 1991/02/28 12063.90 13632.61 1991/03/31 12403.66 13962.52 1991/04/30 12667.35 13996.03 1991/05/31 12799.20 14600.66 1991/06/30 12266.74 13931.95 1991/07/31 12961.47 14581.18 1991/08/31 13346.87 14926.75 1991/09/30 13519.28 14677.48 1991/10/31 14051.74 14874.16 1991/11/30 13514.21 14274.73 1991/12/31 14750.69 15907.76 1992/01/31 14771.19 15611.87 1992/02/29 14955.63 15814.83 1992/03/31 14427.91 15506.44 1992/04/30 14971.01 15962.33 1992/05/31 14796.81 16040.54 1992/06/30 14453.16 15801.54 1992/07/31 15228.72 16447.82 1992/08/31 15048.96 16110.64 1992/09/30 15341.72 16300.75 1992/10/31 15495.80 16357.80 1992/11/30 16302.18 16915.60 1992/12/31 17010.22 17123.66 1993/01/31 16957.89 17267.50 1993/02/28 17889.24 17502.34 1993/03/31 18621.77 17871.64 1993/04/30 18661.05 17439.14 1993/05/31 19412.22 17906.51 1993/06/30 20249.23 17958.44 1993/07/31 20839.43 17886.61 1993/08/31 22411.51 18564.51 1993/09/30 22733.44 18421.56 1993/10/31 23388.02 18802.89 1993/11/30 21472.55 18624.26 1993/12/31 22064.91 18849.62 1994/01/31 22511.61 19490.50 1994/02/28 21806.29 18962.31 1994/03/31 21124.47 18135.55 1994/04/30 21501.52 18367.69 1994/05/31 21375.25 18668.92 1994/06/30 21357.22 18211.53 1994/07/31 22541.72 18808.87 1994/08/31 23197.11 19580.03 1994/09/30 22926.54 19100.32 1994/10/31 24020.86 19530.08 1994/11/30 22746.16 18818.79 1994/12/31 23017.92 19097.87 1995/01/31 23337.27 19593.08 1995/02/28 23546.08 20356.63 1995/03/31 23840.87 20957.35 1995/04/30 24581.85 21574.54 1995/05/31 25252.83 22436.88 1995/06/30 26469.38 22958.09 1995/07/31 28149.98 23719.38 1995/08/31 28984.01 23778.91 1995/09/30 29937.18 24782.38 1995/10/31 28683.00 24693.91 1995/11/30 29316.36 25777.97 1995/12/31 29844.14 26274.46 1996/01/31 30055.38 27168.84 1996/02/29 29619.70 27420.69 1996/03/31 29481.07 27684.75 1996/04/30 30857.50 28092.83 1996/05/31 31542.27 28817.34 1996/06/30 31863.25 28927.14 1996/07/31 29452.29 27649.13 1996/08/31 30065.73 28232.26 1996/09/30 30950.22 29821.17 1996/10/31 30336.78 30643.63 1996/11/30 31256.95 32959.99 1996/12/31 31455.63 32307.05 1997/01/31 31669.61 34325.59 1997/02/28 31944.73 34594.71 1997/03/31 29254.65 33173.21 1997/04/30 30169.91 35153.65 1997/05/31 34464.20 37293.80 1997/06/30 36364.05 38964.57 1997/07/31 37102.01 42064.98 1997/08/31 35288.52 39708.50 1997/09/30 39865.42 41883.33 1997/10/31 38899.80 40484.43 1997/11/30 40509.17 42358.45 1997/12/31 39579.96 43085.75 1998/01/31 42912.64 43562.28 1998/02/28 46806.61 46703.99 1998/03/31 50972.46 49095.70 1998/04/30 50771.60 49589.60 1998/05/31 48604.19 48737.16 1998/06/30 50464.55 50716.86 1998/07/31 52090.11 50176.72 1998/08/31 40187.41 42922.17 1998/09/30 42716.06 45671.77 1998/10/31 45777.53 49386.71 1998/11/30 48387.45 52380.04 1998/12/31 55823.77 55398.18 1999/01/31 60448.00 57714.93 1999/02/26 57195.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990307 170836 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Telecommunications Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $57,195 - a 471.95% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS MCI WorldCom, Inc. 14.0 Tele-Communications, Inc. 5.3 (TCI Group) Series A Cisco Systems, Inc. 5.0 SBC Communications, Inc. 5.0 AirTouch Communications, Inc. 4.5 Bell Atlantic Corp. 4.2 Motorola, Inc. 3.8 OY Nokia AB sponsored ADR 3.4 Sprint Corp. (FON Group) 3.3 AT&T Corp. 3.1 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Telephone Services 56.1% Communications Equipment 14.4% Broadcasting 7.3% Cellular 5.6% Computer Services & Software 5.4% All Others 11.2% Row: 1, Col: 1, Value: 11.2 Row: 1, Col: 2, Value: 5.4 Row: 1, Col: 3, Value: 5.6 Row: 1, Col: 4, Value: 7.3 Row: 1, Col: 5, Value: 14.4 Row: 1, Col: 6, Value: 56.1 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 * INCLUDES SHORT-TERM INVESTMENTS TELECOMMUNICATIONS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Peter Saperstone) NOTE TO SHAREHOLDERS: Peter Saperstone became Portfolio Manager of Fidelity Select Telecommunications Portfolio on October 30, 1998. Q. HOW DID THE FUND PERFORM, PETER? A. It was a good year. For the 12 months that ended February 28, 1999, the fund had a total return of 22.21%, besting the 19.74% return of the Standard & Poor's 500 Index over the same period. Although the fund outperformed the S&P 500, it trailed the 30.02% return of the Goldman Sachs Utilities Index, an index of 136 stocks designed to measure the performance of companies in the utilities sector. Q. WHY DID THE FUND BEAT THE S&P 500 BUT TRAIL THE GOLDMAN SACHS INDEX? A. Telecommunications stocks in general fared well during the period, reflecting dynamic growth in that sector recently. For the past several years, the telecommunications market has grown at more than twice the rate of the overall economy, which helps to explain why the fund outperformed the broadly based S&P 500. Poor stock selection in a few cases and a comparative underweighting of Internet stocks caused the fund to trail the Goldman Sachs index. The stellar performance of that index was attributable in part to a roughly 5% weighting in one of the period's star performers, America Online. Q. PETER, YOU TOOK OVER THE FUND ON OCTOBER 30, 1998. CAN YOU COMMENT ON SOME OF THE CHANGES YOU'VE MADE? A. Sure. I believe in restricting the fund's investments to those stocks in which I have the most confidence. While fewer holdings tend to increase short-term volatility in the fund's performance, my aim is to enhance long-term returns by minimizing the diluting effects of marginal holdings. Consequently, I reduced the number of holdings in the fund from about 70 when I took over to approximately 50 as of the end of the period. I also tended to favor large-capitalization stocks over small-cap shares. Finally, I marginally increased the allocation of Internet stocks, but the position is still less than the 7% or so allocated to Internet shares in the Goldman Sachs index. Q. WHAT STOCKS PERFORMED WELL FOR THE FUND DURING THE PERIOD? A. MCI WorldCom helped performance because the stock did well and it was the fund's largest holding for most of the period. The company continued to attract investor interest because it was well positioned to benefit from the fastest-growing segment of the industry - data communications. Qwest Communications, in many ways a smaller version of MCI WorldCom, also contributed positively to performance. The company is building a national network designed to accommodate state-of-the-art data communication. Another beneficial holding, Cisco Systems, is a leading supplier of hardware for data and voice networks. Q. WHAT STOCKS TURNED IN DISAPPOINTING PERFORMANCES? A. Tel-Save.com heads the list of disappointments. As the company made the conversion to distributing long-distance calling services over the Internet, it experienced lower earnings than investors expected. Smartalk also hurt the fund's performance. The company suffered from disappointing earnings attributable to more competition in its prepaid calling card business. Another weak performer was World Access, which found it harder to compete against larger rivals in the cellular telecommunications industry. I sold the fund's holdings in both Smartalk and World Access. Q. WHAT'S YOUR OUTLOOK, PETER? A. My outlook for the telecommunications sector remains positive. In the short term, we should see overall revenues continue to grow at a healthy rate, with the majority of that growth coming from the data services segment of the industry. In the next year or two, the regional Bell operating companies (RBOCs) are expected to enter the long-distance market, and the lines between long-distance carriers and local phone companies will blur further. As the market makes this transition, there will be some confusion as investors attempt to sort out the winners and losers. My own view is that the RBOCs may see their earnings erode as they are forced to open up their local markets as a prerequisite to participate in the long-distance market. Time will tell, but I am confident that the fund remains well positioned to benefit from the segments of the telecommunications sector currently offering the highest growth potential. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 096 TRADING SYMBOL: FSTCX SIZE: as of February 28, 1999, more than $824 million MANAGER: Peter Saperstone, since October 1998; manager, Fidelity Utilities Fund and Fidelity Advisor Utilities Growth Fund, since 1998; Fidelity Select Air Transportation Portfolio and Fidelity Select Defense and Aerospace Portfolio, 1997-1998; Fidelity Select Construction and Housing Portfolio, 1996-1997; joined Fidelity in 1995 TELECOMMUNICATIONS PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 94.3% SHARES VALUE (NOTE 1) BROADCASTING - 7.3% AlphaNet Telecom, Inc. (a)(c) 1,196,200 $ 8 American Tower Corp. Class A 43,700 1,171,706 (a) Cablevision Systems Corp. 57,100 3,711,500 Class A (a) MediaOne Group, Inc. 100,000 5,450,000 NTL, Inc. (a) 76,400 5,935,325 Tele-Communications, Inc. 689,934 43,336,479 (TCI Group) Series A (a) 59,605,018 CELLULAR - 5.6% AirTouch Communications, Inc. 406,100 36,980,481 (a) Nextel Communications, Inc. 117,200 3,523,325 Class A (a) SkyTel Communications, Inc. 31,700 570,600 (a) Telephone & Data Systems, 87,300 4,386,825 Inc. 45,461,231 COMMUNICATIONS EQUIPMENT - 14.4% ADC Telecommunications, Inc. 261,900 10,606,950 (a) Ascend Communications, Inc. 131,000 10,078,813 (a) Cisco Systems, Inc. (a) 423,500 41,423,594 Intermedia Communications, 579,000 10,494,375 Inc. (a) Lucent Technologies, Inc. 142,800 14,503,125 Newbridge Networks Corp. (a) 126,700 3,079,689 OY Nokia AB sponsored ADR 206,700 28,033,688 118,220,234 COMPUTER SERVICES & SOFTWARE - - 5.4% America Online, Inc. 229,000 20,366,688 Novell, Inc. (a) 159,100 3,082,563 Saville Systems PLC sponsored 163,100 3,251,806 ADR (a) Yahoo!, Inc. (a) 113,500 17,422,250 44,123,307 COMPUTERS & OFFICE EQUIPMENT - - 0.6% Fore Systems, Inc. (a) 340,700 4,940,150 ELECTRICAL EQUIPMENT - 1.1% ANTEC Corp. (a) 329,300 9,179,238 ELECTRONICS - 3.8% Motorola, Inc. 445,000 31,261,250 TELEPHONE SERVICES - 56.1% ALLTEL Corp. 335,300 20,076,088 Ameritech Corp. 259,100 16,938,663 AT&T Corp. 306,547 25,175,172 BCE, Inc. 298,300 12,087,896 Bell Atlantic Corp. 597,300 34,307,419 BellSouth Corp. 50,000 2,312,500 Cable & Wireless PLC ADR 87,300 3,541,106 Cincinnati Bell, Inc. 255,400 5,044,150 Commonwealth Telephone 289,100 9,359,613 Enterprises, Inc. (a) COMSAT Corp. Series 1 229,600 6,715,800 SHARES VALUE (NOTE 1) Covad Communications Group, 178,100 $ 7,213,050 Inc. (a) Frontier Corp. 594,100 21,350,469 Global TeleSystems Group, 26,500 1,470,750 Inc. (a) GTE Corp. 288,500 18,716,438 MCI WorldCom, Inc. (a) 1,383,003 114,097,743 McLeodUSA, Inc. Class A (a) 463,500 17,844,750 Metromedia Fiber Network, 320,500 13,941,750 Inc. Class A (a) Nippon Telegraph & Telephone 464 3,811,777 Corp. Qwest Communications 259,290 15,930,129 International, Inc. (a) SBC Communications, Inc. 767,000 40,555,125 Sprint Corp. (FON Group) 313,000 26,859,313 Tel-Save.com, Inc. (a) 1,771,550 17,604,778 Telebras sponsored ADR 38,600 2,492,113 PFD-Holdr (a) U.S. WEST, Inc. 286,500 15,274,031 WinStar Communications, Inc. 180,000 5,670,000 (a) 458,390,623 TOTAL COMMON STOCKS 771,181,051 (Cost $584,642,053) CASH EQUIVALENTS - 5.7% Taxable Central Cash Fund (b) 46,400,881 46,400,881 (Cost $46,400,881) TOTAL INVESTMENT IN $ 817,581,932 SECURITIES - 100% (Cost $631,042,934) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $1,124,377,604 and $1,098,129,165, respectively. 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 $123,641 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $5,316,534. The fund received cash collateral of $6,740,600. The fund participated in the interfund lending program as a lender. The maximum loan and average daily balances during the period for which loans were outstanding amounted to $32,000,000 and $31,250,000 respectively. The weighted average interest rate was 5.47%. Interest earned from the interfund lending program amounted to $18,984 and is included in interest income on the Statement of Operations. Transactions during the period with companies which are or were affiliates are as follows: PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Able Teccom Holdings Corp. $ 3,157,131 $ 6,930,054 $ - $ - AlphaNet Telecom, Inc. 54,339 1,434,852 - 8 California Amplifier, Inc. 185,967 1,664,342 - - SmarTalk TeleServices, Inc. 2,434,493 15,877,925 - - Tel-Save.com, Inc. 2,648,830 30,187,740 - - Titan Corp. 263,832 734,200 - - Viatel, Inc. - 6,303,500 - - TOTALS $ 8,744,592 $ 63,132,613 $ - $ 8 INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $637,023,529. Net unrealized appreciation aggregated $180,558,403, of which $216,260,764 related to appreciated investment securities and $35,702,361 related to depreciated investment securities. The fund hereby designates approximately $32,933,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 9% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of the applicable percentage for the use in preparing 1999 income tax returns. TELECOMMUNICATIONS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 817,581,932 value (cost $631,042,934) - See accompanying schedule Cash 1,243,094 Receivable for investments 55,727,870 sold Receivable for fund shares 956,110 sold Dividends receivable 596,315 Interest receivable 225,363 Redemption fees receivable 2,631 Other receivables 138,196 TOTAL ASSETS 876,471,511 LIABILITIES Payable for investments $ 42,383,267 purchased Payable for fund shares 2,314,454 redeemed Accrued management fee 416,632 Other payables and accrued 441,245 expenses Collateral on securities 6,740,600 loaned, at value TOTAL LIABILITIES 52,296,198 NET ASSETS $ 824,175,313 Net Assets consist of: Paid in capital $ 613,532,997 Accumulated undistributed net 24,099,612 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 186,542,704 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 13,326,238 $ 824,175,313 shares outstanding NET ASSET VALUE and $61.85 redemption price per share ($824,175,313 (divided by) 13,326,238 shares) Maximum offering price per $63.76 share (100/97.00 of $61.85) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 4,051,599 Dividends Interest (including income on 4,826,969 securities loaned of $2,420,214) TOTAL INCOME 8,878,568 EXPENSES Management fee $ 4,615,660 Transfer agent fees 4,327,726 Accounting and security 682,512 lending fees Non-interested trustees' 3,153 compensation Custodian fees and expenses 70,818 Registration fees 129,839 Audit 29,402 Legal 4,452 Reports to shareholders 79,448 Total expenses before 9,943,010 reductions Expense reductions (189,988) 9,753,022 NET INVESTMENT INCOME (LOSS) (874,454) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 45,892,397 (including realized loss of $27,541,180 on sales of investments in affiliated issuers) Foreign currency transactions (56,189) 45,836,208 Change in net unrealized appreciation (depreciation) on: Investment securities 85,585,831 Assets and liabilities in 10,878 85,596,709 foreign currencies NET GAIN (LOSS) 131,432,917 NET INCREASE (DECREASE) IN $ 130,558,463 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 3,594,841 charges paid to FDC Sales charges - Retained by $ 3,578,078 FDC Deferred sales charges $ 12,323 withheld by FDC Exchange fees withheld by FSC $ 57,437 Expense reductions Directed $ 177,481 brokerage arrangements Custodian credits 10,290 Transfer agent credits 2,217 $ 189,988 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ (874,454) $ (2,208,196) income (loss) Net realized gain (loss) 45,836,208 89,769,920 Change in net unrealized 85,596,709 75,630,156 appreciation (depreciation) NET INCREASE (DECREASE) IN 130,558,463 163,191,880 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (46,022,800) (57,660,802) from net realized gains Share transactions Net 863,829,740 394,333,392 proceeds from sales of shares Reinvestment of distributions 44,998,804 56,532,142 Cost of shares redeemed (813,636,128) (302,046,680) NET INCREASE (DECREASE) IN 95,192,416 148,818,854 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 997,935 564,136 TOTAL INCREASE (DECREASE) 180,726,014 254,914,068 IN NET ASSETS NET ASSETS Beginning of period 643,449,299 388,535,231 End of period $ 824,175,313 $ 643,449,299 OTHER INFORMATION Shares Sold 15,272,906 8,067,245 Issued in reinvestment of 813,871 1,266,807 distributions Redeemed (14,817,799) (6,572,964) Net increase (decrease) 1,268,978 2,761,088
FINANCIAL HIGHLIGHTS
YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 F 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 53.37 $ 41.80 $ 44.87 $ 38.34 $ 37.10 period Income from Investment Operations Net investment income (loss) C (.06) (.25) .12 D .51 .29 Net realized and unrealized 11.43 18.20 2.92 9.15 2.54 gain (loss) Total from investment 11.37 17.95 3.04 9.66 2.83 operations Less Distributions From net investment income - - (.16) (.39) (.33) From net realized gain (2.96) (6.44) (5.98) (2.75) (1.27) Total distributions (2.96) (6.44) (6.14) (3.14) (1.60) Redemption fees added to paid .07 .06 .03 .01 .01 in capital Net asset value, end of period $ 61.85 $ 53.37 $ 41.80 $ 44.87 $ 38.34 TOTAL RETURN A, B 22.21% 46.52% 7.85% 25.79% 7.98% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 824,175 $ 643,449 $ 388,535 $ 468,300 $ 369,476 (000 omitted) Ratio of expenses to average 1.27% 1.51% 1.51% 1.52% 1.56% net assets Ratio of expenses to average 1.25% E 1.48% E 1.47% E 1.52% 1.55% E net assets after expense reductions Ratio of net investment (.11)% (.53)% .27% 1.17% .77% income (loss) to average net assets Portfolio turnover rate 150% 157% 175% 89% 107% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.07 PER SHARE. 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 THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT UTILITIES GROWTH 32.17% 168.13% 428.63% SELECT UTILITIES GROWTH (LOAD 28.13% 160.01% 412.70% ADJ.) S&P 500 19.74% 194.91% 459.21% GS Utilities 30.02% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted 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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT UTILITIES GROWTH 32.17% 21.81% 18.12% SELECT UTILITIES GROWTH (LOAD 28.13% 21.06% 17.76% ADJ.) S&P 500 19.74% 24.15% 18.78% GS Utilities 30.02% 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 1989/02/28 9700.00 10000.00 1989/03/31 9865.57 10233.00 1989/04/30 10373.06 10764.09 1989/05/31 10866.16 11200.04 1989/06/30 11140.62 11136.20 1989/07/31 11750.71 12141.80 1989/08/31 11802.48 12379.78 1989/09/30 11972.57 12329.02 1989/10/31 11917.10 12042.99 1989/11/30 12309.04 12288.66 1989/12/31 12959.80 12583.59 1990/01/31 12320.13 11739.23 1990/02/28 12297.95 11890.67 1990/03/31 12231.39 12205.77 1990/04/30 11721.13 11900.63 1990/05/31 12331.22 13060.94 1990/06/30 12477.35 12972.12 1990/07/31 12579.78 12930.61 1990/08/31 11889.33 11761.68 1990/09/30 11919.68 11188.89 1990/10/31 12530.46 11140.78 1990/11/30 12860.51 11860.47 1990/12/31 13031.67 12191.38 1991/01/31 12974.21 12722.92 1991/02/28 13533.48 13632.61 1991/03/31 13686.70 13962.52 1991/04/30 13625.41 13996.03 1991/05/31 13629.24 14600.66 1991/06/30 13463.91 13931.95 1991/07/31 13902.09 14581.18 1991/08/31 14220.76 14926.75 1991/09/30 14658.94 14677.48 1991/10/31 14862.09 14874.16 1991/11/30 15033.38 14274.73 1991/12/31 15771.97 15907.76 1992/01/31 15286.49 15611.87 1992/02/29 15174.45 15814.83 1992/03/31 15016.78 15506.44 1992/04/30 15427.57 15962.33 1992/05/31 15726.33 16040.54 1992/06/30 15908.25 15801.54 1992/07/31 16754.12 16447.82 1992/08/31 16745.53 16110.64 1992/09/30 16835.70 16300.75 1992/10/31 16831.40 16357.80 1992/11/30 16947.33 16915.60 1992/12/31 17442.59 17123.66 1993/01/31 17739.29 17267.50 1993/02/28 18651.88 17502.34 1993/03/31 19155.38 17871.64 1993/04/30 19050.69 17439.14 1993/05/31 19091.55 17906.51 1993/06/30 19822.52 17958.44 1993/07/31 20049.53 17886.61 1993/08/31 20921.25 18564.51 1993/09/30 20921.25 18421.56 1993/10/31 20707.86 18802.89 1993/11/30 19695.40 18624.26 1993/12/31 19630.71 18849.62 1994/01/31 20032.94 19490.50 1994/02/28 19124.01 18962.31 1994/03/31 18434.48 18135.55 1994/04/30 18964.76 18367.69 1994/05/31 18586.11 18668.92 1994/06/30 18527.44 18211.53 1994/07/31 19060.76 18808.87 1994/08/31 18986.10 19580.03 1994/09/30 18500.78 19100.32 1994/10/31 18735.44 19530.08 1994/11/30 18058.13 18818.79 1994/12/31 18175.94 19097.87 1995/01/31 18917.70 19593.08 1995/02/28 19164.96 20356.63 1995/03/31 19241.88 20957.35 1995/04/30 19912.61 21574.54 1995/05/31 20220.73 22436.88 1995/06/30 20418.81 22958.09 1995/07/31 20969.04 23719.38 1995/08/31 21502.75 23778.91 1995/09/30 22526.17 24782.38 1995/10/31 22746.26 24693.91 1995/11/30 23246.96 25777.97 1995/12/31 24426.55 26274.46 1996/01/31 24684.32 27168.84 1996/02/29 24112.74 27420.69 1996/03/31 23899.80 27684.75 1996/04/30 24864.78 28092.83 1996/05/31 24882.78 28817.34 1996/06/30 25266.70 28927.14 1996/07/31 24162.93 27649.13 1996/08/31 24168.93 28232.26 1996/09/30 24606.84 29821.17 1996/10/31 25638.62 30643.63 1996/11/30 26844.37 32959.99 1996/12/31 27202.85 32307.05 1997/01/31 28020.79 34325.59 1997/02/28 28485.53 34594.71 1997/03/31 26973.58 33173.21 1997/04/30 27938.99 35153.65 1997/05/31 29775.74 37293.80 1997/06/30 30684.59 38964.57 1997/07/31 31415.47 42064.98 1997/08/31 30004.54 39708.50 1997/09/30 32648.45 41883.33 1997/10/31 32737.43 40484.43 1997/11/30 34720.36 42358.45 1997/12/31 35446.84 43085.75 1998/01/31 36817.44 43562.28 1998/02/28 38797.18 46703.99 1998/03/31 41429.59 49095.70 1998/04/30 40600.94 49589.60 1998/05/31 40112.84 48737.16 1998/06/30 40142.42 50716.86 1998/07/31 41037.27 50176.72 1998/08/31 37546.62 42922.17 1998/09/30 41251.74 45671.77 1998/10/31 43854.93 49386.71 1998/11/30 45548.48 52380.04 1998/12/31 50744.47 55398.18 1999/01/31 52259.98 57714.93 1999/02/26 51270.00 55921.15 IMATRL PRASUN SHR__CHT 19990228 19990309 145353 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Utilities Growth Portfolio on February 28, 1989, and the current 3.00% sales charge was paid. As the chart shows, by February 28, 1999, the value of the investment would have grown to $51,270 - a 412.70% 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 $55,921 - a 459.21% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS MCI WorldCom, Inc. 11.3 AT&T Corp. 8.1 Bell Atlantic Corp. 6.0 SBC Communications, Inc. 5.9 AES Corp. 5.2 PG&E Corp. 4.9 AirTouch Communications, Inc. 4.0 Ameritech Corp. 3.6 GTE Corp. 3.5 BellSouth Corp. 3.3 TOP INDUSTRIES AS OF FEBRUARY 28, 1999 % OF FUND'S INVESTMENTS Telephone Services 55.0% Electric Utility 26.2% Cellular 4.5% Gas 4.2% Broadcasting 1.7% All Others 8.4%* Row: 1, Col: 1, Value: 8.4 Row: 1, Col: 2, Value: 1.7 Row: 1, Col: 3, Value: 4.2 Row: 1, Col: 4, Value: 4.5 Row: 1, Col: 5, Value: 26.2 Row: 1, Col: 6, Value: 55.0 * INCLUDES SHORT-TERM INVESTMENTS UTILITIES GROWTH PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Jonathan Zang) Jonathan Zang, Portfolio Manager of Fidelity Select Utilities Growth Portfolio Q. HOW DID THE FUND PERFORM, JONATHAN? A. The fund had a good year. For the 12 months that ended February 28, 1999, the fund's total return was 32.17%, compared to 19.74% for the Standard & Poor's 500 Index. The Goldman Sachs Utilities Index - an index of 136 stocks designed to measure the performance of companies in the utilities sector - had a total return of 30.02%. Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S STRONG PERFORMANCE AGAINST ITS BENCHMARKS? A. The fund's stock selection, especially in the area of long-distance carriers, helped it outperform the S&P 500. Secondarily, the fund significantly underweighted the regional Bell operating companies (RBOCs) during the first half of 1998, when they underperformed the S&P 500. Shortly after I took over the fund on July 1, 1998, I substantially increased its holdings of RBOCs. That shift coincided with renewed strength in the group, as the RBOCs outperformed the S&P 500 for most of the remainder of the period. With respect to the Goldman Sachs index, the fund was helped by its heavier weighting of telecommunications stocks and lighter emphasis on electric utilities. Within the telecommunications sector, overweighting long distance carriers and competitive local exchange carriers (CLECs) at the expense of RBOCs was beneficial. Q. CAN YOU REVIEW YOUR STRATEGY FOR ALLOCATING FUNDS AMONG THE TELECOMMUNICATIONS, ELECTRIC AND GAS UTILITIES SEGMENTS OF THE FUND? A. Sure. Telecommunications stocks typically make up the bulk of the fund's holdings - 62.2% as of the end of the period. This is based on my assessment of the superior growth potential of telecommunications companies compared to electric and gas utilities. Electric utilities and independent power producers accounted for 26.2% of the fund's holdings at the end of the period. I use electric utilities, in part, to adjust the risk profile of the fund as market conditions warrant. For example, when the broader market dropped sharply last fall and investors flocked to electric utilities for their "safe haven" status, I took profits on some of the fund's holdings in the sector and reinvested them in out-of-favor telecom stocks. Gas utilities and integrated energy companies, on the other hand, are normally a very small component of the fund - about 5%. They generally don't compare favorably with opportunities I see in telecommunications and electric utilities. Q. WHAT STOCKS DID WELL FOR THE FUND? A. MCI WorldCom, the fund's largest holding for much of the period, was a key contributor. The company experienced strong growth in its data communications business, as well as cost savings from the merger of WorldCom and MCI. AT&T also performed well. I bought more AT&T shares around the middle of 1998, after the stock had been driven down on investor skepticism about the acquisition of cable company TCI Group. AT&T rebounded strongly in December and January, as investors reconsidered their initial misgivings. Q. WHAT ABOUT HOLDINGS THAT FAILED TO MEET YOUR EXPECTATIONS? A. Tel-Save.com was a disappointment. The former CEO tried to find a buyer for the company, but no deal transpired. In addition, the company's exclusive agreement to market long-distance telephone services through America Online resulted in marketing costs that were higher than anticipated. Intermedia Communications and e.spire Communications are both CLECs that failed to execute their growth strategies according to investors' expectations. Q. WHAT'S YOUR OUTLOOK, JONATHAN? A. I continue to see lots of opportunity in the utilities sector. Deregulation in the United States and privatization abroad are two powerful forces that are opening up markets worldwide, allowing well-managed companies to reap the benefits. There are plenty of opportunities in the stocks of domestic companies. I generally favor participating in overseas markets indirectly, through U.S. firms with foreign subsidiaries, rather than investing directly in foreign companies, which generally entails higher risk. With the telecommunications industry at a more advanced stage of deregulation, I think that growth opportunities will continue to be better there than in other utilities 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: December 10, 1981 FUND NUMBER: 065 TRADING SYMBOL: FSUTX SIZE: as of February 28, 1999, more than $507 million MANAGER: Jonathan Zang, since 1998; analyst, utilities industry, 1997- present; joined Fidelity in 1997 UTILITIES GROWTH PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities COMMON STOCKS - 93.4% SHARES VALUE (NOTE 1) BROADCASTING - 1.7% Tele-Communications, Inc. 139,500 $ 8,762,344 (TCI Group) Series A (a) CELLULAR - 4.5% AirTouch Communications, Inc. 225,200 20,507,275 (a) Vodafone Group PLC sponsored 14,300 2,605,281 ADR 23,112,556 COMMUNICATIONS EQUIPMENT - 1.0% Intermedia Communications, 279,700 5,069,563 Inc. (a) ELECTRIC UTILITY - 26.2% AES Corp. (a) 718,800 26,730,375 CMS Energy Corp. 350,200 14,489,525 Duke Energy Corp. 282,708 16,079,018 Entergy Corp. 403,200 11,390,400 Illinova Corp. 345,800 8,212,750 IPALCO Enterprises, Inc. 234,300 11,231,756 Montana Power Co. 84,900 5,168,288 NIPSCO Industries, Inc. 130,000 3,371,875 PECO Energy Co. 158,800 5,627,475 PG&E Corp. 793,500 24,995,250 Unicom Corp. 184,700 6,568,394 133,865,106 ENGINEERING - 0.2% Stone & Webster, Inc. 40,000 1,070,000 GAS - 4.2% Columbia Gas System, Inc. 39,700 2,004,850 Dynegy, Inc. 197,900 2,374,800 Enron Corp. 167,796 10,906,740 MDU Resources Group, Inc. 61,250 1,439,375 Williams Companies, Inc. 120,000 4,440,000 21,165,765 OIL & GAS - 0.6% Coastal Corp. (The) 100,400 3,212,800 TELEPHONE SERVICES - 55.0% ALLTEL Corp. 121,700 7,286,788 Ameritech Corp. 283,600 18,540,350 AT&T Corp. 503,483 41,348,541 Bell Atlantic Corp. 533,200 30,625,675 BellSouth Corp. 359,600 16,631,500 Cincinnati Bell, Inc. 214,900 4,244,275 e.spire Communications, Inc. 1,629,400 8,961,700 (a) Frontier Corp. 100,000 3,593,750 Global TeleSystems Group, 10,600 588,300 Inc. (a) GTE Corp. 275,100 17,847,113 MCI WorldCom, Inc. (a) 702,583 57,963,095 SHARES VALUE (NOTE 1) McLeodUSA, Inc. Class A (a) 105,800 $ 4,073,300 Metromedia Fiber Network, 61,200 2,662,200 Inc. Class A (a) Qwest Communications 210,133 12,910,046 International, Inc. (a) SBC Communications, Inc. 567,644 30,014,177 Sprint Corp. (FON Group) 144,900 12,434,231 Tel-Save.com, Inc. (a) 799,600 7,946,025 Telebras sponsored ADR 14,800 955,525 PFD-Holdr (a) WinStar Communications, Inc. 72,600 2,286,900 (a) 280,913,491 TOTAL COMMON STOCKS 477,171,625 (Cost $374,716,602) CASH EQUIVALENTS - 6.6% Taxable Central Cash Fund (b) 33,712,144 33,712,144 (Cost $33,712,144) TOTAL INVESTMENT IN $ 510,883,769 SECURITIES - 100% (Cost $408,428,746) LEGEND (a) Non-income producing (b) At period end, the seven-day yield on the Taxable Central Cash Fund was 4.80%. 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 $442,537,597 and $465,480,084, respectively. 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 $23,956 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $3,443,324. The fund received cash collateral of $3,563,400. INCOME TAX INFORMATION At February 28, 1999, the aggregate cost of investment securities for income tax purposes was $409,446,753. Net unrealized appreciation aggregated $101,437,016, of which $118,578,668 related to appreciated investment securities and $17,141,652 related to depreciated investment securities. The fund hereby designates approximately $46,415,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 24% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2000 of these percentages for use in preparing 1999 income tax returns. UTILITIES GROWTH PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 510,883,769 value (cost $408,428,746) - See accompanying schedule Receivable for investments 2,118,097 sold Receivable for fund shares 1,070,924 sold Dividends receivable 604,398 Interest receivable 128,172 Redemption fees receivable 2,152 Other receivables 123 TOTAL ASSETS 514,807,635 LIABILITIES Payable for investments $ 1,572,415 purchased Payable for fund shares 1,341,906 redeemed Accrued management fee 249,727 Other payables and accrued 239,080 expenses Collateral on securities 3,563,400 loaned, at value TOTAL LIABILITIES 6,966,528 NET ASSETS $ 507,841,107 Net Assets consist of: Paid in capital $ 355,427,419 Undistributed net investment 1,646,086 income Accumulated undistributed net 48,312,566 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 102,455,036 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 8,247,065 $ 507,841,107 shares outstanding NET ASSET VALUE and $61.58 redemption price per share ($507,841,107 (divided by) 8,247,065 shares) Maximum offering price per $63.48 share (100/97.00 of $61.58) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INVESTMENT INCOME $ 6,569,955 Dividends Interest (including income on 1,295,447 securities loaned of $275,553) TOTAL INCOME 7,865,402 EXPENSES Management fee $ 2,410,584 Transfer agent fees 1,894,258 Accounting and security 396,783 lending fees Non-interested trustees' 2,041 compensation Custodian fees and expenses 24,893 Registration fees 37,651 Audit 24,062 Legal 2,162 Reports to shareholders 41,649 Miscellaneous 1,999 Total expenses before 4,836,082 reductions Expense reductions (104,758) 4,731,324 NET INVESTMENT INCOME 3,134,078 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 98,334,683 Foreign currency transactions (6,507) 98,328,176 Change in net unrealized appreciation (depreciation) on: Investment securities 19,577,907 Assets and liabilities in 13 19,577,920 foreign currencies NET GAIN (LOSS) 117,906,096 NET INCREASE (DECREASE) IN $ 121,040,174 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 1,250,178 charges paid to FDC Sales charges - Retained by $ 1,246,320 FDC Deferred sales charges $ 21,580 withheld by FDC Exchange fees withheld by FSC $ 20,948 Expense reductions Directed $ 94,853 brokerage arrangements Custodian credits 8,956 Transfer agent credits 949 $ 104,758 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net investment $ 3,134,078 $ 3,040,458 income Net realized gain (loss) 98,328,176 52,835,863 Change in net unrealized 19,577,920 34,220,552 appreciation (depreciation) NET INCREASE (DECREASE) IN 121,040,174 90,096,873 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (1,845,471) (3,324,884) From net investment income From net realized gain (58,304,043) (43,053,193) TOTAL DISTRIBUTIONS (60,149,514) (46,378,077) Share transactions Net 311,901,481 235,594,493 proceeds from sales of shares Reinvestment of distributions 57,497,817 45,039,264 Cost of shares redeemed (324,713,707) (179,495,059) NET INCREASE (DECREASE) IN 44,685,591 101,138,698 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 337,629 225,357 TOTAL INCREASE (DECREASE) 105,913,880 145,082,851 IN NET ASSETS NET ASSETS Beginning of period 401,927,227 256,844,376 End of period (including $ 507,841,107 $ 401,927,227 undistributed net investment income of $1,646,086 and $677,487, respectively) OTHER INFORMATION Shares Sold 5,410,133 4,622,639 Issued in reinvestment of 1,024,484 950,425 distributions Redeemed (5,700,831) (3,646,680) Net increase (decrease) 733,786 1,926,384
FINANCIAL HIGHLIGHTS
YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996 E 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 53.50 $ 45.97 $ 43.03 $ 34.88 $ 36.61 period Income from Investment Operations Net investment income C .44 .54 .73 1.10 1.13 Net realized and unrealized 15.77 14.83 6.41 7.86 (1.17) gain (loss) Total from investment 16.21 15.37 7.14 8.96 (.04) operations Less Distributions From net investment income (.25) (.58) (.70) (.84) (1.05) From net realized gain (7.93) (7.30) (3.54) - (.67) Total distributions (8.18) (7.88) (4.24) (.84) (1.72) Redemption fees added to paid .05 .04 .04 .03 .03 in capital Net asset value, end of period $ 61.58 $ 53.50 $ 45.97 $ 43.03 $ 34.88 TOTAL RETURN A, B 32.17% 36.20% 18.13% 25.82% .21% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 507,841 $ 401,927 $ 256,844 $ 266,768 $ 237,635 (000 omitted) Ratio of expenses to average 1.18% 1.33% 1.47% 1.39% 1.43% net assets Ratio of expenses to average 1.16% D 1.30% D 1.46% D 1.38% D 1.42% D net assets after expense reductions Ratio of net investment .77% 1.11% 1.73% 2.76% 3.24% income to average net assets Portfolio turnover rate 113% 78% 31% 65% 24% A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29.
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 FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT MONEY MARKET 5.08% 27.87% 67.31% SELECT MONEY MARKET (LOAD ADJ.) 1.93% 24.03% 62.29% All Taxable Money Market 4.93% 27.22% 66.07% Funds Average CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. For example, if you 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 916 taxable money market funds with similar objectives tracked by IBC Financial Data, Inc. over the past one year. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 28, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 1999 SELECT MONEY MARKET 5.08% 5.04% 5.28% SELECT MONEY MARKET (LOAD ADJ.) 1.93% 4.40% 4.96% All Taxable Money Market 4.93% 4.93% 5.24% Funds Average AVERAGE ANNUAL TOTAL 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. YIELDS 3/2/99 12/1/98 9/1/98 6/2/98 3/3/98 SELECT MONEY MARKET 4.71% 4.71% 5.10% 5.00% 5.27% All Taxable Money Market Funds Average 4.37% 4.57% 5.03% 5.02% 5.07% 3/3/99 12/2/98 9/2/98 6/3/98 2/25/98 MMDA 2.16% 2.32% 2.55% 2.51% 2.58% Row: 1, Col: 1, Value: 4.71 Row: 1, Col: 2, Value: 4.37 Row: 1, Col: 3, Value: 2.16 Row: 2, Col: 1, Value: 4.71 Row: 2, Col: 2, Value: 4.57 Row: 2, Col: 3, Value: 2.32 Row: 3, Col: 1, Value: 5.1 Row: 3, Col: 2, Value: 5.03 Row: 3, Col: 3, Value: 2.55 Row: 4, Col: 1, Value: 5.0 Row: 4, Col: 2, Value: 5.02 Row: 4, Col: 3, Value: 2.51 Row: 5, Col: 1, Value: 5.270000000000001 Row: 5, Col: 2, Value: 5.07 Row: 5, Col: 3, Value: 2.58 6% - 4% - 2% - 0% Money Market All Taxable Money Market Funds Average MMDA 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 Select Money Market Portfolio Q. WHAT WAS THE INVESTMENT ENVIRONMENT LIKE OVER THE PAST YEAR, JOHN? A. At the beginning of the 12-month period ending February 28, 1999, economic growth was strong in the U.S. but inflation remained benign. Weakness abroad - especially in Asia - translated into cheaper imports into the U.S. that helped stabilize inflation. However, when that slowdown in growth overseas started to negatively affect U.S. economic growth in the second quarter of 1998, market sentiment shifted. Market observers revised downward their expectations for economic growth and corporate profits. Then, problems in Russia in August 1998 sparked declines in stock market indexes that had reached record highs earlier in the third quarter, and caused the yield differential between U.S. Treasuries and all other debt obligations to widen considerably. Falling commodity prices and other issues caused several countries' currencies to decline and their interest rates to climb. Fears arose that these problems would start to erode U.S. economic growth and lead to further problems in the capital markets, which were rocked in the fall by the well-publicized problems encountered by several highly leveraged hedge funds. Q. WHAT WAS THE FEDERAL RESERVE BOARD'S ROLE AS THESE EVENTS DEVELOPED? A. Up until mid-July, it was commonly believed that the Fed might raise the rate banks charge each other for overnight loans - the fed funds rate - to slow growth and control inflation. The Fed maintained a bias toward raising rates until its September meeting, when it cut the fed funds rate from 5.50% to 5.25%. The Fed acted in an effort to head off slower growth, at a time when we saw further deterioration in the financial markets and growing liquidity problems in the fixed-income markets. Acting out of character by making an announcement between meetings of its Open Market Committee, the Fed cut the fed funds rate to 5.00% on October 15. The Fed further reduced that rate to 4.75% on November 17, marking the third reduction in that rate in just seven weeks. These moves came in response to continued deterioration in the fixed-income markets, and were an attempt on the Fed's part to avoid a "credit crunch" - where lenders hold back from lending to even the most creditworthy borrowers. The financial markets have since rebounded and found stability, as witnessed by the muted reaction to the recent currency crisis in Brazil. Q. WHAT STRATEGY DID YOU PURSUE WITH THE FUND? A. At the beginning of the period, the best opportunities were found on either end of the maturity spectrum, so I pursued a "barbell strategy" - focusing on investments with very short maturities on the one hand, and one-year securities on the other. When the economic outlook deteriorated and called for declining interest rates, I looked for opportunities to maintain the fund's average maturity, shifting investments from very short-term and one-year securities to those in the three- to six-month range. Those maturities offered the most attractive rates and were also appealing from a credit standpoint, given the uncertainty in the market about different issuers' exposure to hedge fund problems. The fund also took advantage of seasonally high yields for short-term securities at the end of 1998, and has since emphasized instruments in the two- to four-month range. Q. HOW DID THE FUND PERFORM? A. The fund's seven-day yield on February 28, 1999, was 4.76%, compared to 5.26% one year ago. For the 12 months that ended February 28, 1999, the fund had a total return of 5.08%, compared to 4.93% for the all taxable money market funds average, according to IBC Financial Data, Inc. Q. WHAT'S YOUR OUTLOOK? A. Inflation continues to be relatively dormant. While domestic consumption in the U.S. has been strong, it has not generated increased prices in services and products where intense competition has held pricing power in check. Assuming inflation remains benign, the Fed is likely to keep its monetary policy unchanged over the near term. The Fed continues to expect that economic growth will moderate, a forecast it has had in place for the past year and a half. If incoming data does not confirm this view, the Fed may move to increase short-term rates in order to reduce inflationary pressures by negating some of the economic stimulus it provided the economy last fall. 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 OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark) FUND FACTS START DATE: August 30, 1985 FUND NUMBER: 085 TRADING SYMBOL: FSLXX SIZE: as of February 28, 1999, more than $1.1 billion MANAGER: John Todd, since 1991; manager, various Fidelity and Spartan taxable money market funds; joined Fidelity in 1981 MONEY MARKET PORTFOLIO INVESTMENTS FEBRUARY 28, 1999 Showing Percentage of Total Value of Investment in Securities
CERTIFICATES OF DEPOSIT - 22.9% DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1) PURCHASE DOMESTIC CERTIFICATES OF DEPOSIT - 1.8% First Union National Bank of North Carolina 3/9/99 5.42% $ 10,000,000 $ 10,000,000 4/12/99 5.44 10,000,000 10,000,000 20,000,000 LONDON BRANCH, EURODOLLAR, DOMESTIC BANKS - 0.9% NationsBank NA 3/2/99 5.50 10,000,000 10,000,000 LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 4.2% Abbey National Treasury Services PLC 3/15/99 5.15 10,000,000 10,000,000 Bank of Scotland Treasury Services 2/16/00 5.14 5,000,000 4,998,141 Barclays Bank PLC 3/25/99 5.50 11,000,000 11,000,274 Bayerische Hypo-und Vereinsbank AG 5/12/99 4.89 5,000,000 5,000,000 Halifax PLC 8/31/99 4.98 5,000,000 5,000,000 Westdeutsche Landesbank Girozentrale 5/17/99 4.90 10,000,000 10,000,000 45,998,415 NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 16.0% ABN-AMRO Bank NV 6/7/99 5.76 5,000,000 4,999,229 Bank of Scotland Treasury Services 4/2/99 4.88 (b) 5,000,000 4,997,500 Banque Nationale de Paris 3/17/99 5.32 10,000,000 10,000,000 Barclays Bank PLC 3/23/99 5.45 10,000,000 10,000,208 Bayerische Hypo-und Vereinsbank AG 3/8/99 4.85 15,000,000 15,000,000 3/10/99 5.40 5,000,000 5,000,000 Credit Agricole Indosuez 4/30/99 5.87 5,000,000 4,999,528 Deutsche Bank AG 2/16/00 5.12 10,000,000 9,995,352 Landesbank Hessen-Thuringen 4/12/99 5.07 5,000,000 5,000,057 Lloyds Bank PLC 5/17/99 4.88 40,000,000 40,000,000 National Westminster Bank PLC 6/7/99 5.75 5,000,000 4,999,132 RaboBank Nederland Coop. Central 6/4/99 5.75 10,000,000 9,998,255 9/2/99 5.00 5,000,000 5,000,000 Societe Generale, France 3/22/99 5.15 5,000,000 5,000,909 3/22/99 5.20 5,000,000 5,000,880 DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1) PURCHASE Swiss Bank Corp. 4/30/99 5.87% $ 5,000,000 $ 4,999,528 6/3/99 5.75 10,000,000 9,998,273 Toronto Dominion Bank 6/4/99 5.75 10,000,000 9,998,255 Westdeutsche Landesbank Girozentrale 3/17/99 5.14 10,000,000 10,000,000 174,987,106 TOTAL CERTIFICATES OF DEPOSIT 250,985,521 COMMERCIAL PAPER - 51.0% AVCO Financial Services, Inc. 3/15/99 5.15 9,000,000 8,982,220 Asset Securitization Coop. Corp. 3/15/99 5.28 3,000,000 2,993,933 3/19/99 5.17 3,000,000 2,992,350 4/15/99 5.14 5,000,000 4,968,438 4/15/99 5.17 5,000,000 4,968,250 Associates Corp. of North America 4/6/99 4.86 5,000,000 4,975,900 Associates First Capital Corp. 3/24/99 5.15 7,000,000 6,977,281 CIESCO L.P. 4/16/99 4.88 40,000,000 39,753,644 Centric Capital Corp. 3/22/99 4.89 5,000,000 4,985,796 5/14/99 4.90 5,000,000 4,950,153 Citibank Credit Card Master Trust I (Dakota Certificate Program) 5/13/99 4.89 25,000,000 24,755,146 5/14/99 4.90 5,000,000 4,950,256 Commonwealth Bank of Australia 3/4/99 4.86 10,000,000 9,995,975 8/10/99 4.92 4,000,000 3,913,600 8/16/99 4.95 5,000,000 4,887,300 Daimler-Chrysler North America Corp. 4/20/99 5.14 8,260,000 8,202,065 4/26/99 5.07 5,000,000 4,961,267 5/20/99 4.91 12,000,000 11,870,667 5/26/99 4.90 14,000,000 13,838,129 Delaware Funding Corp. 3/9/99 5.21 30,396,000 30,361,213 3/16/99 4.91 2,325,000 2,320,253 Deutsche Bank Financial, Inc. 5/10/99 4.90 40,000,000 39,623,556 Dresdner US Finance, Inc. 3/10/99 5.16 5,000,000 4,993,625 Enterprise Funding Corp. 5/19/99 4.91 9,856,000 9,751,102 COMMERCIAL PAPER - CONTINUED DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1) PURCHASE Falcon Asset Securitization 3/9/99 5.18% $ 25,355,000 $ 25,326,152 3/11/99 4.89 6,880,000 6,870,712 3/22/99 5.22 4,310,000 4,297,052 Ford Motor Credit Co. 3/5/99 5.18 30,000,000 29,982,967 4/29/99 4.87 10,000,000 9,921,333 General Electric Capital Corp. 7/26/99 4.93 30,000,000 29,409,550 General Motors Acceptance Corp. 5/19/99 4.90 5,000,000 4,946,894 Kitty Hawk Funding Corp. 3/12/99 4.88 1,399,000 1,396,927 4/15/99 4.90 25,000,000 24,848,125 Lehman Brothers Holdings, Inc. 3/9/99 5.15 3,000,000 2,996,587 3/17/99 5.16 3,000,000 2,993,173 MCI WorldCom, Inc. 3/26/99 5.54 2,000,000 1,992,431 3/30/99 5.02 3,000,000 2,987,917 5/5/99 5.02 2,000,000 1,982,125 National Australia Funding, Inc. 3/10/99 5.41 10,000,000 9,986,825 Nationwide Building Society 5/11/99 4.91 41,500,000 41,103,041 New Center Asset Trust 3/8/99 5.17 5,000,000 4,995,042 4/22/99 4.87 25,000,000 24,826,125 Newport Funding Corp. 5/19/99 4.92 5,000,000 4,946,675 Nordbanken, North America, Inc. 3/1/99 5.26 5,000,000 5,000,000 3/10/99 5.15 2,000,000 1,997,460 Norddeutsche Landesbank Girozentrale 8/5/99 4.91 10,000,000 9,791,103 Norfolk Southern Corp. 3/4/99 5.02 3,000,000 2,998,750 Preferred Receivables Funding Corp. 3/3/99 5.21 5,000,000 4,998,569 3/5/99 5.23 6,800,000 6,796,094 3/16/99 4.91 5,000,000 4,989,854 4/15/99 4.86 1,670,000 1,659,959 Tyco International Group SA 3/25/99 5.04 5,000,000 4,983,333 UBS Finance (Delaware), Inc. 4/5/99 5.12 20,000,000 19,902,194 TOTAL COMMERCIAL PAPER 559,899,088 FEDERAL AGENCIES - 10.7% DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1) PURCHASE FANNIE MAE - 3.2% Discount Notes - 3.2% 5/13/99 4.81% $ 35,000,000 $ 34,662,527 FEDERAL HOME LOAN BANK - 4.3% Discount Notes - 4.3% 5/12/99 4.81 48,000,000 47,543,998 FREDDIE MAC - 3.2% Discount Notes - 3.2% 5/20/99 4.81 35,000,000 34,630,556 TOTAL FEDERAL AGENCIES 116,837,081 BANK NOTES - 7.3% First Union National Bank of North Carolina 3/1/99 4.99 (b) 10,000,000 10,000,000 3/1/99 5.50 15,000,000 15,000,000 NationsBank NA 3/17/99 5.30 10,000,000 10,000,000 4/13/99 5.05 20,000,000 20,000,000 9/8/99 5.01 25,000,000 25,000,000 TOTAL BANK NOTES 80,000,000 MASTER NOTES - 1.8% Goldman Sachs Group L.P. 3/8/99 5.30 (b) 5,000,000 5,000,000 J.P. Morgan Securities, Inc. 3/5/99 4.91 (b) 15,000,000 15,000,000 TOTAL MASTER NOTES 20,000,000 MEDIUM-TERM NOTES - 5.0% Bishops Gate Resources Mortgage Trust 3/1/99 5.14 (b) 2,000,000 2,000,000 General Motors Acceptance Corp. 3/16/99 5.22 28,000,000 27,989,618 Goldman Sachs Group L.P. 4/7/99 5.26 (b)(c) 4,000,000 4,000,000 Merrill Lynch & Co., Inc. 3/4/99 5.21 (b) 5,000,000 4,999,745 Morgan Guaranty Trust Co., NY 3/29/99 4.89 (b) 10,000,000 9,997,208 Norwest Corp. 4/22/99 4.99 (b) 4,000,000 4,000,000 Premier Auto Trust 6/8/99 5.41 1,787,018 1,786,912 TOTAL MEDIUM-TERM NOTES 54,773,483 SHORT-TERM NOTES - 0.9% DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1) PURCHASE Capital One Funding Corp. (1998-B) 3/5/99 4.97% (b) $ 3,863,000 $ 3,863,000 SMM Trust (1998-I) 3/29/99 4.94 (a)(b) 2,000,000 2,000,000 Strategic Money Market Trust (1998-B) 3/5/99 4.94 (a)(b) 4,000,000 4,000,000 TOTAL SHORT-TERM NOTES 9,863,000
REPURCHASE AGREEMENTS - 0.4% MATURITY AMOUNT In a joint trading account $ 4,349,761 4,348,000 (U.S. Government Obligations) dated 2/26/99 due 3/1/99 At 4.86% TOTAL INVESTMENT IN $ 1,096,706,173 SECURITIES - 100% Total Cost for Income Tax Purposes $ 1,096,706,173 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 $6,000,000 or 0.5% 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. SECURITY ACQUISITION DATE COST Goldman Sachs Group L.P. 12/7/98 $ 4,000,000 5.26%, 4/7/99 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 $4,000,000 and 0.4% of net assets. MONEY MARKET PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1999 ASSETS Investment in securities, at $ 1,096,706,173 value (including repurchase agreements of $4,348,000) - See accompanying schedule Receivable for fund shares 56,892,192 sold Interest receivable 7,249,940 Prepaid expenses 46,521 TOTAL ASSETS 1,160,894,826 LIABILITIES Payable to custodian bank $ 7,589 Payable for investments 9,997,500 purchased Payable for fund shares 24,110,193 redeemed Distributions payable 300,137 Accrued management fee 126,721 Other payables and accrued 179,124 expenses TOTAL LIABILITIES 34,721,264 NET ASSETS $ 1,126,173,562 Net Assets consist of: Paid in capital $ 1,126,173,562 NET ASSETS, for 1,126,106,672 $ 1,126,173,562 shares outstanding NET ASSET VALUE, offering $1.00 price and redemption price per share ($1,126,173,562 (divided by) 1,126,106,672 shares) Maximum offering price per $1.03 share (100/97.00 of $1.00) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1999 INTEREST INCOME $ 52,463,460 EXPENSES Management fee $ 1,853,858 Transfer agent fees 2,010,926 Accounting fees and expenses 120,261 Non-interested trustees' 3,711 compensation Custodian fees and expenses 19,989 Registration fees 599,928 Audit 35,570 Legal 5,015 Reports to shareholders 53,674 Miscellaneous 1,085 Total expenses before 4,704,017 reductions Expense reductions (9,932) 4,694,085 NET INTEREST INCOME 47,769,375 NET REALIZED GAIN (LOSS) ON 54,995 INVESTMENTS NET INCREASE IN NET ASSETS $ 47,824,370 RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 1,708,692 charges paid to FDC Sales charges - Retained by $ 1,671,903 FDC Deferred sales charges $ 67,970 withheld by FDC Expense reductions $ 4,200 Custodian credits Transfer agent credits 5,732 $ 9,932 STATEMENT OF CHANGES IN NET ASSETS
INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 28, 1999 YEAR ENDED FEBRUARY 28, 1998 ASSETS Operations Net interest income $ 47,769,375 $ 41,842,077 Net realized gain (loss) 54,995 (6,232) NET INCREASE (DECREASE) IN 47,824,370 41,835,845 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (47,769,375) (41,842,077) from net interest income Share transactions at net 6,779,151,867 7,445,369,611 asset value of $1.00 per share Proceeds from sales of shares Reinvestment of 42,982,213 38,682,466 distributions from net interest income Cost of shares redeemed (6,280,934,055) (7,747,295,187) NET INCREASE (DECREASE) IN 541,200,025 (263,243,110) NET ASSETS AND SHARES RESULTING FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) 541,255,020 (263,249,342) IN NET ASSETS NET ASSETS Beginning of period 584,918,542 848,167,884 End of period $ 1,126,173,562 $ 584,918,542
FINANCIAL HIGHLIGHTS
YEARS ENDED FEBRUARY 28, 1999 1998 1997 1996C 1995 SELECTED PER-SHARE DATA Net asset value, beginning of $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 period Income from Investment .050 .051 .049 .054 .042 Operations Net interest income Less Distributions From net interest income (.050) (.051) (.049) (.054) (.042) Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 TOTAL RETURN A 5.08% 5.26% 5.02% 5.56% 4.28% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 1,126,174 $ 584,919 $ 848,168 $ 610,821 $ 573,144 (000 omitted) Ratio of expenses to average .50% .56% .56% .59% .65% net assets Ratio of expenses to average .49% B .56% .56% .59% .65% net assets after expense reductions Ratio of net interest income 5.03% 5.13% 4.92% 5.39% 4.19% to average net assets
A TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. B FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. C FOR THE YEAR ENDED FEBRUARY 29. NOTES TO FINANCIAL STATEMENTS For the period ended February 28, 1999 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. Purchase 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 and settlement date 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 U.S. federal income taxes to the extent that it distributes substantially all of its taxable income for its 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. 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. 1. SIGNIFICANT ACCOUNTING POLICIES - CONTINUED DISTRIBUTIONS TO SHAREHOLDERS - CONTINUED 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), market discount, partnerships, non-taxable dividends, net operating losses, 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. 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. 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 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES - CONTINUED MANAGEMENT FEE - CONTINUED 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 annual rate that ranged from .58% to .60% 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 annual rate of .20% of the fund's average net assets. The income-based portion of this fee was equal to $298,684 or an annual rate of .03% 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 funds' transfer, dividend disbursing and shareholder servicing agent. FSC receives account fees and asset-based fees that vary according to account size and type of account. FSC pays for typesetting, printing and mailing of all shareholder reports, except proxy statements. ACCOUNTING AND SECURITY LENDING FEES. FSC maintains each fund's accounting records and administers the security lending program. The security lending fee is based on the number and duration of lending transactions. The accounting fee is based on the level of average net assets for the month plus out-of-pocket expenses. MONEY MARKET INSURANCE. Pursuant to an Exemptive Order issued by the SEC, the money market fund, along with other money market funds advised by FMR or its affiliates, has entered into insurance agreements with FIDFUNDS Mutual Limited (FIDFUNDS), an affiliated mutual insurance company, effective January 1, 1999. FIDFUNDS provides limited coverage for certain loss events including issuer default as to payment of principal or interest and bankruptcy or insolvency of a credit enhancement provider. The insurance does not cover losses resulting from changes in interest rates, ratings downgrades or other market conditions. The fund may be subject to a special assessment of up to approximately 2.5 times the fund's annual gross premium if covered losses exceed certain levels. During the period, the fund paid premiums of $55,825 to FIDFUNDS which are being amortized over one year. 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. SECURITY LENDING. Certain 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. The market value of the loaned securities is determined at the close of business of the fund and any additional required collateral is delivered to the fund on the next business day. 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. 6. 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. The interest rate on the borrowings is 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. 7. 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 7. EXPENSE REDUCTIONS - CONTINUED 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 $55,648 for Cyclical Industries Portfolio, and $45,350 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. 8. 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 38.7 Natural Resources 15.7 9. 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. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees and the Shareholders of Fidelity Select Portfolios: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of each of the forty funds constituting Fidelity Select Portfolios at February 28, 1999, and the results of their operations, the changes in their net assets and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Select Portfolios' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 28, 1999 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. /s/PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Boston, Massachusetts April 19, 1999 DISTRIBUTIONS The Board of Trustees of Fidelity Select Portfolios voted to pay to shareholders of record at the opening of business on record date, the following distributions derived from capital gains realized from sales of portfolio securities, and dividends derived from net investment income for each of the following funds: AMOUNTS PER SHARE RECORD & CAPITAL FUND EX-DATE PAY DATE DIVIDENDS GAINS Air Transportation 4/1/99 4/5/99 $ - $ 0.62 Biotechnology 4/1/99 4/5/99 $ - $ 0.12 Brokerage and Investment Management 4/1/99 4/5/99 $ 0.05 $ 0.33 Business Services and Outsourcing 4/9/99 4/12/99 $ - $ 0.37 Computers 4/1/99 4/5/99 $ - $ 3.92 Construction and Housing 4/9/99 4/12/99 $ - $ 0.01 Consumer Industries 4/9/99 4/12/99 $ - $ 0.71 Defense and Aerospace 4/1/99 4/5/99 $ - $ 0.17 Developing Communications 4/9/99 4/12/99 $ - $ 1.14 Energy 4/1/99 4/5/99 $ 0.04 $ - Environmental Services 4/9/99 4/12/99 $ - $ 0.01 Financial Services 4/1/99 4/5/99 $ 0.29 $ 1.48 Food and Agriculture 4/1/99 4/5/99 $ 0.06 $ 1.00 Health Care 4/1/99 4/5/99 $ 0.03 $ 2.61 Home Finance 4/9/99 4/12/99 $ 0.12 $ 0.36 Industrial Equipment 4/9/99 4/12/99 $ - $ 0.74 Insurance 4/9/99 4/12/99 $ - $ 3.65 Leisure 4/1/99 4/5/99 $ - $ 1.36 Medical Equipment and Systems 4/1/99 4/5/99 $ - $ 0.36 Multimedia 4/9/99 4/12/99 $ - $ 0.54 Natural Gas 4/9/99 4/12/99 $ 0.09 $ - Regional Banks 4/9/99 4/12/99 $ 0.16 $ 2.09 Software and Computer Services 4/1/99 4/5/99 $ - $ 2.30 Technology 4/1/99 4/5/99 $ - $ 8.98 Telecommunications 4/1/99 4/5/99 $ - $ 1.38 Transportation 4/9/99 4/12/99 $ - $ 2.40 Utilities Growth 4/1/99 4/5/99 $ 0.12 $ 3.52 Each fund hereby designates 100% of the long-term capital gain dividends distributed during the fiscal year as 20%-rate capital gain dividends. 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 Matthew N. Karstetter, DEPUTY 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 Abigail P. Johnson 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)(registered trademark) BULK RATE P.O. Box 193 U.S. Postage Boston, MA 02101 PAID (recycle logo) Printed on Recycled Paper SEL-ANN0499 74113 1.701407.101 -----END PRIVACY-ENHANCED MESSAGE-----