-----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, ImIQJhxENhvN1TfzFRcsiPttQDQmNQb+rYh0FF1YINkQHkR1mT1Wqrd9y9k4THtS gi8MUruZqakob7mtizF+lw== 0000320351-99-000015.txt : 19991101 0000320351-99-000015.hdr.sgml : 19991101 ACCESSION NUMBER: 0000320351-99-000015 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990831 FILED AS OF DATE: 19991029 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: 99736734 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(REGISTERED TRADEMARK) SELECT PORTFOLIOS(REGISTERED TRADEMARK) AIR TRANSPORTATION AUTOMOTIVE BANKING (FORMERLY REGIONAL BANKS) 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 RETAILING SOFTWARE AND COMPUTER SERVICES TECHNOLOGY TELECOMMUNICATIONS TRANSPORTATION UTILITIES GROWTH SEMIANNUAL REPORT AUGUST 31, 1999 (2_FIDELITY_LOGOS)(registered trademark) CONTENTS
PERFORMANCE OVERVIEW 4 FUND UPDATES* CONSUMER SECTOR 6 CONSUMER INDUSTRIES 13 FOOD AND AGRICULTURE 19 LEISURE 25 MULTIMEDIA 31 RETAILING CYCLICALS SECTOR 36 AIR TRANSPORTATION 41 AUTOMOTIVE 47 CHEMICALS 52 CONSTRUCTION AND HOUSING 58 CYCLICAL INDUSTRIES 64 DEFENSE AND AEROSPACE 69 ENVIRONMENTAL SERVICES 74 INDUSTRIAL EQUIPMENT 80 INDUSTRIAL MATERIALS 86 PAPER AND FOREST PRODUCTS 91 TRANSPORTATION FINANCIAL SERVICES SECTOR 96 BANKING 101 BROKERAGE AND INVESTMENT MANAGEMENT 107 FINANCIAL SERVICES 113 HOME FINANCE 119 INSURANCE HEALTH CARE SECTOR 124 BIOTECHNOLOGY 130 HEALTH CARE 136 MEDICAL DELIVERY 141 MEDICAL EQUIPMENT AND SYSTEMS NATURAL RESOURCES SECTOR 146 ENERGY 152 ENERGY SERVICE 158 GOLD 164 NATURAL RESOURCES 170 PRECIOUS METALS AND MINERALS
* FUND UPDATES FOR EACH SELECT PORTFOLIO INCLUDE: PERFORMANCE AND INVESTMENT SUMMARY, MANAGER'S OVERVIEW, INVESTMENTS, AND FINANCIAL STATEMENTS.
TECHNOLOGY SECTOR 176 BUSINESS SERVICES AND OUTSOURCING 182 COMPUTERS 189 DEVELOPING COMMUNICATIONS 195 ELECTRONICS 201 SOFTWARE AND COMPUTER SERVICES 207 TECHNOLOGY UTILITIES SECTOR 214 NATURAL GAS 220 TELECOMMUNICATIONS 226 UTILITIES GROWTH 231 MONEY MARKET NOTES TO FINANCIAL STATEMENTS 238 FOOTNOTES TO THE FINANCIAL STATEMENTS
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: A rotation from large-cap growth stocks to value and cyclical shares, two interest-rate hikes by the Federal Reserve Board and a significant rebound in oil prices were three of the stories dominating financial headlines during the six-month period ending August 31, 1999. In that time, the Standard & Poor's 500 Index (S&P 500 (registered trademark)) - - a large-capitalization index based on the performance of 500 widely held stocks - returned 7.32%. Reflecting the capitalization shift, the Russell 2000 - a popular measure of small-cap stocks - outperformed the S&P 500, returning 9.91%. For the same period, the Dow Jones Industrial Average - an index of 30 blue-chip stocks - increased 17.24%. Meanwhile, the NASDAQ Composite Index, which measures the performance of over-the-counter - predominantly technology - stocks, returned 19.91%. Of the 39 Select equity portfolios, 22 topped the S&P 500's six-month return, while 24 of the 39 beat their respective Goldman Sachs index - a market proxy that measures the performance of companies within the Select portfolios' sector concentrations. The best-performing Select portfolio for the period was Energy Service, which gained 83.80%. Environmental Services posted the lowest return, falling 10.97%. Also, effective August 2, 1999, Select Regional Banks Portfolio changed its name to Select Banking Portfolio. At the period's outset in March, a handful of large-cap growth stocks - - particularly in the technology sector - continued to set the pace for bullish equity market performance. By the beginning of the second quarter, however, market conditions began to change. The global economy began to improve, due in large part to the willingness of central banks worldwide to adopt generally easier monetary policies. This environment proved favorable for small- and mid-cap value stocks and the economically sensitive cyclical stocks. Their relatively low valuations proved quite compelling compared to their expensive, large-cap growth counterparts. Consequently, a sharp rotation into value and cyclical names dominated the second quarter of 1999. At the same time, the price of oil began to surge. With OPEC's production cuts and growing global demand, the price of oil jumped from approximately $11 per barrel at the beginning of the six-month period to around $22 per barrel at the end of August. Late in the second quarter, fears of an overheating domestic economy - and thus, inflation - caused the Federal Reserve Board to switch from a neutral bias to one favoring a hike in the federal funds target rate. That inclination became reality on June 30, as the Fed announced a 0.25 percentage point increase. The Board hiked rates again by the same amount on August 24. Although it immediately switched to a neutral bias following each increase, the majority of market watchers anticipated another jump in key short-term interest rates later in 1999. Turning to individual sector performance for the six-month period ending August 31, 1999, the CONSUMER sector was hampered by inflation fears and rising interest rates. Despite still robust consumer demand, stocks in the Retailing fund were particularly hard-hit as investors anticipated an economic slowdown. Strong picks in broadcasting stocks helped the Multimedia and Leisure portfolios outpace their Goldman Sachs index. Earnings shortfalls and an inability to increase prices hurt companies held by Food and Agriculture. Inflation and interest-rate fears caused Consumer Industries to stumble slightly. The healthy returns of CYCLICAL stocks mirrored the growth of an improving global economy. Eight of the 11 Select cyclical portfolios beat their Goldman Sachs benchmark, led by Paper and Forest Products, which surged due to increased global consumption. Transportation doubled the benchmark's return on the strength of said stock picking. Higher base metal prices spurred the strong returns of Industrial Materials. Chemicals and Cyclical Industries did very well, primarily due to improved Asian demand. Larger military budgets worldwide benefited many stocks in Defense and Aerospace. The improved overseas economy and higher commodity prices led to index-beating performance by Industrial Equipment. The strong showing of regional airline stocks propelled Air Transportation to a solid return. But rising auto loan and lease rates subdued Automotive's return, while Construction and Housing suffered from the effects of interest-rate jitters on the housing market. Difficulty in assimilating acquisitions in the solid waste industry caused companies held in Environmental Services to fare the worst in the group. Rising interest rates took their toll on the FINANCIAL SERVICES sector, despite the generally sound fundamentals of the group. The newly named Banking Portfolio and Home Finance suffered subpar performance in light of the Fed's more hostile monetary policy. However, thanks to strong stock selection, Insurance, Financial Services, and Brokerage and Investment Management all beat their Goldman Sachs benchmark. The HEALTH CARE sector encountered a host of challenges during the period. Reduced Medicare reimbursements plagued Medical Delivery. Pharmaceuticals fell out of favor during the market's shift from growth to value, causing Health Care's return to fall. Biotechnology, however, enjoyed exceptional returns on the heels of biotech R&D breakthroughs. Medical Equipment and Systems also beat its benchmark, helped by its lack of pharmaceuticals exposure. The period's big sector winner was NATURAL RESOURCES. OPEC production limitations, rebounding oil prices and increased demand were the main factors that drove the performance of Natural Resources, Energy and Energy Service, each returning in excess of 50%. However, the low prices of gold left Gold and Precious Metals and Minerals with only marginally positive returns. The TECHNOLOGY sector continued its run of exceptional performance. A boon in the semiconductor industry helped Electronics and Technology record impressive returns. The strong performance of Internet stocks boosted Computers. Developing Communications and Software and Computer Services both had double-digit returns, but underperformed the Goldman Sachs benchmark given the index's greater exposure to semiconductor stocks. Business Services and Outsourcing also did well, but its focus on services companies precluded it from owning the hardware and software stocks which helped fuel the Goldman Sachs benchmark. Within the UTILITIES sector, robust demand for data and wireless communications helped Telecommunications, while Utilities Growth was helped by investments in independent power producers. Both outperformed their Goldman Sachs benchmark. Natural Gas also outperformed the index as both the price of and demand for the commodity greatly increased during the period. In the pages that follow, you'll find detailed summaries for each of the Select portfolios. We hope that you find them informative and useful for evaluating your investments. Thank you very much for your continued interest in the Fidelity Select Portfolios. Sincerely, William R. Ebsworth Group Leader, FMR Research Select Group Leader
CUMULATIVE TOTAL RETURNS FOR THE SIX MONTHS ENDED AUGUST 31, 1999 Energy Service Row: 1, Col: 1, Value: 83.8 83.80% Energy Row: 2, Col: 1, Value: 54.54 54.54% Natural Resources Row: 3, Col: 1, Value: 52.98 52.98% Natural Gas Row: 4, Col: 1, Value: 49.45 49.45% Electronics Row: 5, Col: 1, Value: 44.66 44.66% Technology Row: 6, Col: 1, Value: 36.44 36.44% Biotechnology Row: 7, Col: 1, Value: 32.19000000000001 32.19% Computers Row: 8, Col: 1, Value: 30.14 30.14% Paper & Forest Products Row: 9, Col: 1, Value: 24.23 24.23% Developing Communications Row: 10, Col: 1, Value: 22.58 22.58% Industrial Equipment Row: 11, Col: 1, Value: 17.75 17.75% Chemicals Row: 12, Col: 1, Value: 17.07 17.07% Transportation Row: 13, Col: 1, Value: 16.99 16.99% Telecommunications Row: 14, Col: 1, Value: 16.42 16.42% Air Transportation Row: 15, Col: 1, Value: 14.86 14.86% Defense & Aerospace Row: 16, Col: 1, Value: 13.92 13.92% Industrial Materials Row: 17, Col: 1, Value: 12.84 12.84% Cyclical Industries Row: 18, Col: 1, Value: 12.47 12.47% Utilities Growth Row: 19, Col: 1, Value: 11.67 11.67% Software & Computer Services Row: 20, Col: 1, Value: 11.04 11.04% Medical Equipment & Systems Row: 21, Col: 1, Value: 9.51 9.51% Business Services & Outsourcing Row: 22, Col: 1, Value: 8.529999999999999 8.53% S&P 500 Row: 23, Col: 2, Value: 7.319999999999999 7.32% Multimedia Row: 24, Col: 1, Value: 5.67 5.67% Automotive Row: 25, Col: 1, Value: 3.31 3.31% Leisure Row: 26, Col: 1, Value: 3.14 3.14% Brokerage & Investment Management Row: 27, Col: 1, Value: 2.36 2.36% Precious Metals & Minerals Row: 28, Col: 1, Value: 1.09 1.09% Gold Row: 29, Col: 1, Value: 0.78 0.78% Insurance -1.49% Row: 30, Col: 1, Value: -1.49 Health Care -2.02% Row: 31, Col: 1, Value: -2.02 Consumer Industries -2.06% Row: 32, Col: 1, Value: -2.06 Financial Services -2.84% Row: 33, Col: 1, Value: -2.84 Home Finance -4.84% Row: 34, Col: 1, Value: -4.84 Banking -4.87% Row: 35, Col: 1, Value: -4.87 Construction & Housing -5.68% Row: 36, Col: 1, Value: -5.68 Food & Agriculture -6.53% Row: 37, Col: 1, Value: -6.53 Medical Delivery -9.96% Row: 38, Col: 1, Value: -9.960000000000001 Retailing -10.67% Row: 39, Col: 1, Value: -10.67 Environmental Services -10.97% Row: 40, Col: 1, Value: -10.97
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, 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS LIFE OF FUND SELECT CONSUMER INDUSTRIES -2.06% 26.36% 147.66% 335.22% SELECT CONSUMER INDUSTRIES -5.07% 22.49% 140.16% 322.09% (LOAD ADJ.) S&P 500 7.32% 39.82% 206.52% 362.65% GS Consumer Industries -2.00% 24.74% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or since the fund started on June 29, 1990. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND SELECT CONSUMER INDUSTRIES 26.36% 19.89% 17.40% SELECT CONSUMER INDUSTRIES 22.49% 19.15% 17.01% (LOAD ADJ.) S&P 500 39.82% 25.11% 18.19% GS Consumer Industries 24.74% 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 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 1999/02/28 43104.29 43108.71 1999/03/31 43781.82 44833.49 1999/04/30 44389.79 46569.89 1999/05/31 43600.58 45470.38 1999/06/30 45386.69 47993.98 1999/07/31 43946.72 46495.61 1999/08/31 42209.00 46265.46 IMATRL PRASUN SHR__CHT 19990831 19990915 140414 R00000000000113 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Consumer Industries Portfolio on June 29, 1990, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $42,209 - a 322.09% 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 $46,265 - - a 362.65% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Procter & Gamble Co. 7.2 Wal-Mart Stores, Inc. 5.7 Philip Morris Companies, Inc. 5.3 Home Depot, Inc. 3.0 Time Warner, Inc. 2.4 McDonald's Corp. 2.2 Gillette Co. 2.0 Disney (Walt) Co. 1.9 AT&T Corp. (Liberty Media 1.8 Group) Class A Clorox Co. 1.5 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Household Products 14.6% Broadcasting 12.0% General Merchandise Stores 9.7% Foods 7.5% Retail & Wholesale, Miscellaneous 6.0% All Others 50.2%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 50.2 Row: 1, Col: 2, Value: 6.0 Row: 1, Col: 3, Value: 7.5 Row: 1, Col: 4, Value: 9.699999999999999 Row: 1, Col: 5, Value: 12.0 Row: 1, Col: 6, Value: 14.6 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. CONSUMER INDUSTRIES PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Doug Chase) (photograph of John Porter) NOTE TO SHAREHOLDERS: On September 1, 1999, after the period covered by this report, John Porter (right) became Portfolio Manager of Fidelity Select Consumer Industries Portfolio. The following is an interview with Doug Chase, who managed the fund during the period covered by this report, with comments from John Porter on his outlook. Q. HOW DID THE FUND PERFORM, DOUG? D.C. During the six- and 12-month periods that ended August 31, 1999, the fund returned -2.06% and 26.36%, respectively. This performance was in line with 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 -2.00% and 24.74% over the same six- and 12-month periods, respectively. The Standard and Poor's 500 Index produced returns of 7.32% and 39.82%, respectively, during those same periods. Q. WHAT FACTORS SHAPED THE FUND'S PERFORMANCE DURING THE PERIOD? D.C. Our deep bench of research analysts did a good job of identifying the winners and losers within the consumer industries over the past six months. Together, we were generally successful in picking the right companies and moving money between consumer industry sectors on a timely basis. Having a healthy underweighting in Coca-Cola proved especially beneficial, as the company suffered from poor earnings growth and a massive recall in Europe. Still, many consumer stocks traded down during the period despite strong company fundamentals and above-average domestic consumer spending levels. Much of their falloff can be attributed to an increasingly uncertain economic environment, marked by concerns about inflation and rising interest rates. This backdrop, together with the fund's underweighting in several strong office and computer product retailing names, weighed heavily on performance for much of the period. Conversely, the fund benefited from strong stock picking in household products and broadcasting stocks. Q. WHICH STOCKS PERFORMED WELL FOR THE FUND? D.C. Wal-Mart soared due to strong sales growth fueled by robust consumer demand and superior inventory and pricing. The Limited, also benefiting from the sharp rise in consumer confidence, rallied around improving sales, which resulted from a rotation in its product line to a younger target audience. As majority owner of Intimate Brands, operator of Victoria's Secret and Bath & Body Works, this stock also was rewarded for strong performance within these businesses. CBS was a particularly good performer, enjoying healthy returns in both its radio and television divisions. Q. WHICH STOCKS DETRACTED FROM PERFORMANCE? D.C. Disney suffered from a host of problems, including a loss of creative talent, higher costs associated with making animated films and increased competition from other studios. Weak company-store sales and declining revenues from home-video releases also pressured its stock. The market continued to punish shares of Philip Morris for its litigation troubles. Saks' earnings suffered after its buyout by national retailer Proffitt's last September, as the joint concern faced the challenges associated with combining the two operations. Q. TURNING TO YOU, JOHN, WHAT'S YOUR OUTLOOK? J.P. Facing the prospect of rising interest rates, the market is saying that it thinks the U.S. economy is going to slow, which could change consumer expenditure patterns dramatically. I'm comfortable with the fund's current defensive positioning - underweighting the more economically sensitive retailing stocks and overweighting supermarkets and drug chains, which tend to be defensive. It's important to keep in mind that if consumer spending continues to be driven primarily by market gains, investors could be in for a bumpy ride. The situation last fall proved how fast consumers could flee a falling market. I'm not looking to change the fund's defensive positioning until we see some semblance of order in the marketplace. Until then, I will keep a close eye on relative valuations and rely on Fidelity's research strength in picking the right stocks. 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 3. (checkmark)FUND FACTS START DATE: June 29, 1990 FUND NUMBER: 517 TRADING SYMBOL: FSCPX SIZE: as of August 31, 1999, more than $68 million MANAGER: John Porter, since September 1999; manager, Fidelity Advisor Consumer Industries Fund, since September 1999; Fidelity Select Software and Computer Services Portfolio, 1997-1999; Fidelity Select Medical Delivery Portfolio, 1998-1999; Fidelity Select Multimedia Portfolio, 1996-1997; joined Fidelity in 1995 CONSUMER INDUSTRIES PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 93.5% SHARES VALUE (NOTE 1) ADVERTISING - 1.3% Interpublic Group of 7,600 $ 301,150 Companies, Inc. Omnicom Group, Inc. 7,400 557,775 858,925 APPAREL STORES - 3.0% Abercrombie & Fitch Co. Class 5,900 205,763 A (a) American Eagle Outfitters, 2,500 98,125 Inc. (a) AnnTaylor Stores Corp. (a) 4,700 155,688 Claire's Stores, Inc. 5,200 97,825 Gap, Inc. 13,337 521,810 Limited, Inc. (The) 10,501 397,725 Payless ShoeSource, Inc. (a) 2,700 134,663 TJX Companies, Inc. 11,100 320,513 Too, Inc. (a) 1,285 22,568 Venator Group, Inc. (a) 16,000 114,000 2,068,680 AUTOS, TIRES, & ACCESSORIES - 0.4% AutoNation, Inc. (a) 23,300 301,444 BEVERAGES - 4.9% Anheuser-Busch Companies, 7,200 554,400 Inc. Canandaigua Wine, Inc. Class 5,300 306,738 A (a) Celestial Seasonings, Inc. (a) 18,800 373,650 Coca-Cola Co. (The) 1,100 65,794 Coors (Adolph) Co. Class B 7,800 445,088 Golden State Vinters, Inc. 26,700 160,200 Class B (a) PepsiCo, Inc. 19,000 648,375 Seagram Co. Ltd. 11,100 589,397 Whitman Corp. 11,100 185,231 3,328,873 BROADCASTING - 12.0% AMFM, Inc. (a) 3,600 177,300 AT&T Corp. (Liberty Media 39,500 1,264,000 Group) Class A (a) Cablevision Systems Corp. 3,500 245,000 Class A (a) CBS Corp. (a) 21,500 1,010,500 Clear Channel Communications, 6,038 423,037 Inc. (a) Comcast Corp.: Class A 3,500 103,031 Class A (special) 15,900 518,738 Cox Communications, Inc. 16,400 609,875 Class A (a) E.W. Scripps Co. Class A 2,100 100,800 EchoStar Communications Corp. 1,300 108,713 Class A (a) Infinity Broadcasting Corp. 4,300 116,369 Class A MediaOne Group, Inc. 14,800 973,100 Nielsen Media Research, Inc. 4,100 150,419 (a) SHARES VALUE (NOTE 1) Sinclair Broadcast Group, 7,800 $ 126,750 Inc. Class A (a) Time Warner, Inc. 27,745 1,645,625 UnitedGlobalCom, Inc. (a) 2,200 161,150 USA Networks, Inc. (a) 10,900 489,138 8,223,545 BUILDING MATERIALS - 0.4% Fortune Brands, Inc. 8,200 307,500 CELLULAR - 0.2% Rogers Communications, Inc. 6,600 116,080 Class B (non-vtg.) (a) COMPUTER SERVICES & SOFTWARE - - 0.6% At Home Corp. Series A (a) 4,800 192,600 Galileo International, Inc. 2,700 130,950 Sykes Enterprises, Inc. (a) 3,500 84,000 407,550 CONSUMER ELECTRONICS - 0.4% Gemstar International Group 3,700 255,300 Ltd. (a) DRUG STORES - 2.0% CVS Corp. 19,054 794,314 Walgreen Co. 24,300 563,456 1,357,770 ENTERTAINMENT - 5.6% Carnival Corp. 14,300 639,031 Disney (Walt) Co. 46,300 1,284,825 King World Productions, Inc. 8,200 312,625 (a) Royal Carribean Cruises Ltd. 6,900 323,006 SFX Entertainment, Inc. Class 4,650 191,522 A (a) Viacom, Inc.: Class A (a) 2,800 118,475 Class B (non-vtg.) (a) 22,200 933,788 3,803,272 FOODS - 7.5% American Italian Pasta Co. 11,700 327,600 Class A (a) Archer-Daniels-Midland Co. 3,538 45,994 Aurora Foods, Inc. (a) 5,900 99,563 Bestfoods 7,000 343,875 Corn Products International, 14,550 473,784 Inc. Dean Foods Co. 5,700 229,425 Earthgrains Co. 7,800 188,175 Flowers Industries, Inc. 10,700 169,194 General Mills, Inc. 3,900 326,625 Groupe Danone 700 173,375 Hormel Foods Corp. 3,500 140,875 IBP, Inc. 7,400 169,738 Interstate Bakeries Corp. 4,000 95,750 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) FOODS - CONTINUED Keebler Foods Co. (a) 25,100 $ 748,294 Kellogg Co. 6,600 234,713 Nabisco Holdings Corp. Class A 10,500 412,781 Quaker Oats Co. 6,400 427,600 Sara Lee Corp. 21,700 481,469 5,088,830 GENERAL MERCHANDISE STORES - 9.7% Ames Department Stores, Inc. 3,800 111,625 (a) Consolidated Stores Corp. (a) 10,728 172,989 Dayton Hudson Corp. 16,900 980,200 Dollar General Corp. 6,075 157,950 Dollar Tree Stores, Inc. (a) 1,500 49,500 Federated Department Stores, 10,700 492,200 Inc. (a) Nordstrom, Inc. 5,500 155,719 Saks, Inc. (a) 28,543 479,879 Stein Mart, Inc. (a) 12,700 88,106 Wal-Mart Stores, Inc. 88,300 3,912,794 6,600,962 GROCERY STORES - 4.5% Albertson's, Inc. 14,323 686,609 Fleming Companies, Inc. 15,800 190,588 Kroger Co. (a) 38,900 899,563 Safeway, Inc. (a) 20,500 954,531 U.S. Foodservice (a) 18,000 374,625 3,105,916 HOUSEHOLD PRODUCTS - 14.6% Alberto-Culver Co. Class A 5,100 109,969 Avon Products, Inc. 18,900 829,238 Clorox Co. 23,156 1,047,809 Colgate-Palmolive Co. 14,800 791,800 Gillette Co. 29,400 1,370,775 Procter & Gamble Co. 49,500 4,912,862 Unilever NV 3,100 16,785 Unilever NV NY Shares 12,196 840,000 Yankee Candle Co., Inc. (a) 3,200 57,000 9,976,238 LEISURE DURABLES & TOYS - 0.8% Harley-Davidson, Inc. 3,800 207,100 Hasbro, Inc. 11,050 270,034 Mattel, Inc. 3,300 70,331 547,465 LODGING & GAMING - 1.5% Gtech Holdings Corp. (a) 6,800 171,700 Marriott International, Inc. 5,100 174,675 Class A SHARES VALUE (NOTE 1) Prime Hospitality Corp. (a) 16,300 $ 151,794 Promus Hotel Corp. (a) 8,200 238,313 Starwood Hotels & Resorts 5,200 123,825 Worldwide, Inc. Sun International Hotels Ltd. 2,100 61,163 (a) WMS Industries, Inc. (a) 11,200 121,800 1,043,270 PACKAGING & CONTAINERS - 1.3% Corning, Inc. 6,300 418,950 Tupperware Corp. 19,800 446,738 865,688 PAPER & FOREST PRODUCTS - 0.6% Kimberly-Clark Corp. 7,100 404,256 PRINTING - 0.2% Donnelley (R.R.) & Sons Co. 4,000 125,500 PUBLISHING - 3.6% Gannet, Inc. 7,500 509,531 Harcourt General, Inc. 1,900 83,244 Harte Hanks Communications, 3,300 74,044 Inc. Knight-Ridder, Inc. 2,100 113,269 McGraw-Hill Companies, Inc. 7,700 397,994 Meredith Corp. 6,900 239,344 New York Times Co. (The) 5,400 210,938 Class A Playboy Enterprises, Inc. 4,400 92,675 Class B (a) Reader's Digest Association, 11,900 371,875 Inc. Class A (non-vtg.) Tribune Co. 4,000 373,250 2,466,164 RESTAURANTS - 3.5% CEC Entertainment, Inc. (a) 5,100 142,163 Foodmaker, Inc. (a) 4,300 99,169 McDonald's Corp. 35,900 1,485,363 Outback Steakhouse, Inc. (a) 8,400 248,850 Papa John's International, 2,000 79,500 Inc. (a) Sizzler International, Inc. 20,700 51,750 (a) Tricon Global Restaurants, 7,400 300,625 Inc. (a) 2,407,420 RETAIL & WHOLESALE, MISCELLANEOUS - 6.0% Action Performance Companies, 4,000 98,750 Inc. (a) Bed Bath & Beyond, Inc. (a) 3,800 104,500 Circuit City Stores, Inc. - 15,600 670,800 Circuit City Group Home Depot, Inc. 33,600 2,053,800 Lowe's Companies, Inc. 12,700 574,675 Office Depot, Inc. (a) 9,750 101,766 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) RETAIL & WHOLESALE, MISCELLANEOUS - CONTINUED PETsMART, Inc. (a) 34,600 $ 166,513 Staples, Inc. (a) 15,775 343,106 4,113,910 SERVICES - 2.9% ACNielsen Corp. (a) 9,600 240,000 Block (H&R), Inc. 2,800 155,750 Cendant Corp. (a) 20,900 374,894 Modis Professional Services, 4,800 75,900 Inc. (a) NCO Group, Inc. (a) 5,400 245,700 Profit Recovery Group 3,000 114,188 International, Inc. (a) ServiceMaster Co. 6,350 104,775 Snyder Communications, Inc. 4,000 81,500 (a) True North Communications 5,800 191,038 Viad Corp. 12,400 371,225 1,954,970 TEXTILES & APPAREL - 0.7% Jones Apparel Group, Inc. (a) 5,100 132,281 Liz Claiborne, Inc. 3,600 132,300 NIKE, Inc. Class B 4,300 198,875 463,456 TOBACCO - 5.3% Philip Morris Companies, Inc. 97,600 3,653,900 TOTAL COMMON STOCKS 63,846,884 (Cost $53,406,084) CASH EQUIVALENTS - 7.6% Central Cash Collateral Fund, 924,600 924,600 5.26% (b) Taxable Central Cash Fund, 4,254,722 4,254,722 5.20% (b) TOTAL CASH EQUIVALENTS 5,179,322 (Cost $5,179,322) TOTAL INVESTMENT PORTFOLIO - 69,026,206 101.1% (Cost $58,585,406) NET OTHER ASSETS - (1.1%) (723,253) NET ASSETS - 100% $ 68,302,953 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $37,979,816 and $48,384,596, 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 $7,924 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $882,731. The fund received cash collateral of $924,600 which was invested in the Central Cash Collateral Fund. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $59,147,036. Net unrealized appreciation aggregated $9,879,170, of which $12,948,063 related to appreciated investment securities and $3,068,893 related to depreciated investment securities. CONSUMER INDUSTRIES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 69,026,206 value (cost $58,585,406) - See accompanying schedule Receivable for fund shares 601,646 sold Dividends receivable 40,023 Interest receivable 19,477 Redemption fees receivable 263 Other receivables 30,665 TOTAL ASSETS 69,718,280 LIABILITIES Payable for investments $ 44,384 purchased Payable for fund shares 366,453 redeemed Accrued management fee 33,471 Other payables and accrued 46,419 expenses Collateral on securities 924,600 loaned, at value TOTAL LIABILITIES 1,415,327 NET ASSETS $ 68,302,953 Net Assets consist of: Paid in capital $ 53,436,960 Undistributed net investment 40,813 income Accumulated undistributed net 4,384,384 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 10,440,796 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 2,240,302 $ 68,302,953 shares outstanding NET ASSET VALUE and $30.49 redemption price per share ($68,302,953 (divided by) 2,240,302 shares) Maximum offering price per $31.43 share (100/97.00 of $30.49) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 319,095 Dividends Special dividend from 91,055 Unilever NV NY Shares Interest 123,254 Security lending 7,201 TOTAL INCOME 540,605 EXPENSES Management fee $ 231,071 Transfer agent fees 209,684 Accounting and security 31,058 lending fees Non-interested trustees' 117 compensation Custodian fees and expenses 11,752 Registration fees 20,711 Audit 4,398 Legal 181 Total expenses before 508,972 reductions Expense reductions (9,180) 499,792 NET INVESTMENT INCOME 40,813 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 5,102,337 Foreign currency transactions 755 5,103,092 Change in net unrealized appreciation (depreciation) on: Investment securities (6,214,512) Assets and liabilities in (6) (6,214,518) foreign currencies NET GAIN (LOSS) (1,111,426) NET INCREASE (DECREASE) IN $ (1,070,613) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 138,746 charges paid to FDC Sales charges - Retained by $ 135,347 FDC Deferred sales charges $ 109 withheld by FDC Exchange fees withheld by FSC $ 1,988 Expense reductions Directed $ 9,135 brokerage arrangements Custodian credits 45 $ 9,180
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ 40,813 $ (117,811) income (loss) Net realized gain (loss) 5,103,092 2,849,083 Change in net unrealized (6,214,518) 10,439,435 appreciation (depreciation) NET INCREASE (DECREASE) IN (1,070,613) 13,170,707 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (1,807,115) (2,388,067) from net realized gains Share transactions Net 15,739,418 69,216,485 proceeds from sales of shares Reinvestment of distributions 1,752,932 2,350,548 Cost of shares redeemed (28,583,044) (72,339,516) NET INCREASE (DECREASE) IN (11,090,694) (772,483) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 27,275 81,867 TOTAL INCREASE (DECREASE) (13,941,147) 10,092,024 IN NET ASSETS NET ASSETS Beginning of period 82,244,100 72,152,076 End of period (including $ 68,302,953 $ 82,244,100 undistributed net investment income of $40,813 and $0, respectively) OTHER INFORMATION Shares Sold 490,423 2,390,153 Issued in reinvestment of 53,804 82,715 distributions Redeemed (889,410) (2,529,261) Net increase (decrease) (345,183) (56,393)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 G 1995 Net asset value, beginning of $ 31.81 $ 27.31 $ 20.66 $ 17.84 $ 13.91 $ 15.24 period Income from Investment Operations Net investment income (loss) D .02 H (.04) (.22) (.22) .08 (.15) Net realized and unrealized (.64) 5.41 8.34 2.93 3.97 (.60) gain (loss) Total from investment (.62) 5.37 8.12 2.71 4.05 (.75) operations Less Distributions From net investment income - - - - (.02) - From net realized gain (.71) (.90) (1.52) - (.01) (.60) In excess of net realized gain - - - - (.20) - Total distributions (.71) (.90) (1.52) - (.23) (.60) Redemption fees added to paid .01 .03 .05 .11 .11 .02 in capital Net asset value, end of period $ 30.49 $ 31.81 $ 27.31 $ 20.66 $ 17.84 $ 13.91 TOTAL RETURN B, C (2.06)% 20.18% 40.36% 15.81% 30.01% (4.59)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 68,303 $ 82,244 $ 72,152 $ 18,392 $ 22,362 $ 20,501 (000 omitted) Ratio of expenses to average 1.26% A 1.34% 2.01% 2.49% 1.53% E 2.49% E net assets Ratio of expenses to average 1.24% A, F 1.32% F 1.97% F 2.44% F 1.48% F 2.49% net assets after expense reductions Ratio of net investment .10% A (.15)% (.90)% (1.13)% .46% (1.08)% income (loss) to average net assets Portfolio turnover rate 102% A 150% 199% 340% 601% 190% 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 DURING THE PERIOD, FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. G FOR THE YEAR ENDED FEBRUARY 29 H NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM UNILEVER NV NY SHARES WHICH AMOUNTED TO $.04 PER SHARE. 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT FOOD AND AGRICULTURE -6.53% 9.58% 107.33% 292.86% SELECT FOOD AND AGRICULTURE -9.41% 6.22% 101.03% 281.00% (LOAD ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Consumer Industries -2.00% 24.74% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT FOOD AND AGRICULTURE 9.58% 15.70% 14.66% SELECT FOOD AND AGRICULTURE 6.22% 14.99% 14.31% (LOAD ADJ.) S&P 500 39.82% 25.11% 17.10% GS Consumer Industries 24.74% 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 Food & Agriculture S&P 500 00009 SP001 1989/08/31 9700.00 10000.00 1989/09/30 9741.05 9959.00 1989/10/31 9642.53 9727.95 1989/11/30 10007.87 9926.40 1989/12/31 10237.13 10164.64 1990/01/31 9525.06 9482.59 1990/02/28 9661.32 9604.91 1990/03/31 10078.89 9859.44 1990/04/30 10039.33 9612.96 1990/05/31 10914.04 10550.22 1990/06/30 11268.07 10478.48 1990/07/31 11263.63 10444.95 1990/08/31 10441.95 9500.72 1990/09/30 10108.84 9038.04 1990/10/31 10348.68 8999.18 1990/11/30 10775.06 9580.52 1990/12/31 11191.95 9847.82 1991/01/31 11513.16 10277.18 1991/02/28 12380.44 11012.00 1991/03/31 12986.15 11278.49 1991/04/30 12788.84 11305.56 1991/05/31 13256.89 11793.96 1991/06/30 12710.69 11253.80 1991/07/31 13242.64 11778.23 1991/08/31 13769.92 12057.37 1991/09/30 13527.27 11856.01 1991/10/31 13531.94 12014.88 1991/11/30 13438.62 11530.68 1991/12/31 15007.25 12849.79 1992/01/31 14783.55 12610.79 1992/02/29 14700.88 12774.73 1992/03/31 14375.06 12525.62 1992/04/30 14209.72 12893.87 1992/05/31 14336.16 12957.05 1992/06/30 14179.41 12763.99 1992/07/31 14727.09 13286.04 1992/08/31 14661.77 13013.68 1992/09/30 14907.98 13167.24 1992/10/31 15068.76 13213.32 1992/11/30 15646.59 13663.90 1992/12/31 15911.58 13831.96 1993/01/31 15916.73 13948.15 1993/02/28 15875.57 14137.85 1993/03/31 16307.70 14436.15 1993/04/30 15674.50 14086.80 1993/05/31 16168.02 14464.33 1993/06/30 16007.09 14506.27 1993/07/31 15808.61 14448.25 1993/08/31 16564.98 14995.84 1993/09/30 16511.33 14880.37 1993/10/31 17133.59 15188.39 1993/11/30 16935.11 15044.10 1993/12/31 17314.58 15226.14 1994/01/31 17838.24 15743.82 1994/02/28 17731.25 15317.17 1994/03/31 16903.53 14649.34 1994/04/30 16714.66 14836.85 1994/05/31 16593.20 15080.17 1994/06/30 16720.44 14710.71 1994/07/31 17281.45 15193.22 1994/08/31 18380.34 15816.14 1994/09/30 18415.04 15428.65 1994/10/31 18762.06 15775.79 1994/11/30 18305.15 15201.24 1994/12/31 18369.72 15426.67 1995/01/31 19144.13 15826.69 1995/02/28 19528.33 16443.45 1995/03/31 19972.57 16928.70 1995/04/30 20409.10 17427.25 1995/05/31 21141.48 18123.82 1995/06/30 21641.95 18544.83 1995/07/31 21879.97 19159.78 1995/08/31 21843.35 19207.87 1995/09/30 23558.35 20018.44 1995/10/31 23594.97 19946.98 1995/11/30 24522.66 20822.65 1995/12/31 25100.17 21223.69 1996/01/31 26135.36 21946.15 1996/02/29 26934.11 22149.59 1996/03/31 26480.42 22362.89 1996/04/30 25997.72 22692.52 1996/05/31 26956.70 23277.76 1996/06/30 26982.98 23366.44 1996/07/31 26615.15 22334.12 1996/08/31 25767.82 22805.14 1996/09/30 26641.42 24088.62 1996/10/31 27134.05 24752.98 1996/11/30 28500.28 26624.06 1996/12/31 28450.91 26096.63 1997/01/31 29680.73 27727.15 1997/02/28 30594.52 27944.53 1997/03/31 29797.53 26796.29 1997/04/30 30979.73 28396.03 1997/05/31 31891.98 30124.78 1997/06/30 32951.37 31474.37 1997/07/31 34135.82 33978.79 1997/08/31 32561.46 32075.30 1997/09/30 34518.38 33832.06 1997/10/31 33900.40 32702.07 1997/11/30 36217.81 34215.85 1997/12/31 37081.81 34803.33 1998/01/31 35834.65 35188.26 1998/02/28 37809.97 37726.04 1998/03/31 39258.54 39657.99 1998/04/30 38264.55 40056.94 1998/05/31 39134.76 39368.37 1998/06/30 39955.71 40967.51 1998/07/31 38519.05 40531.21 1998/08/31 34775.51 34671.20 1998/09/30 36704.74 36892.24 1998/10/31 39972.13 39893.06 1998/11/30 41589.41 42310.97 1998/12/31 42899.15 44748.93 1999/01/31 41161.29 46620.33 1999/02/28 40770.27 45171.37 1999/03/31 39414.73 46978.68 1999/04/30 38908.00 48798.16 1999/05/31 38952.49 47646.04 1999/06/30 39424.05 50290.39 1999/07/31 39237.20 48720.33 1999/08/31 38100.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 140555 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Food and Agriculture Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $38,100 - a 281.00% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison - look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS McDonald's Corp. 8.0 Anheuser-Busch Companies, Inc. 6.6 Safeway, Inc. 5.5 Unilever NV NY Shares 5.3 Philip Morris Companies, Inc. 5.1 Kroger Co. 4.4 PepsiCo, Inc. 4.3 Albertson's, Inc. 3.8 Keebler Foods Co. 3.5 Corn Products International, 3.3 Inc. TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Foods 40.0% Beverages 17.7% Grocery Stores 14.5% Restaurants 10.0% Tobacco 5.5% All Others 12.3%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 12.3 Row: 1, Col: 2, Value: 5.5 Row: 1, Col: 3, Value: 10.0 Row: 1, Col: 4, Value: 14.5 Row: 1, Col: 5, Value: 17.7 Row: 1, Col: 6, Value: 40.0 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. FOOD AND AGRICULTURE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Scott Offen) Scott Offen, Portfolio Manager of Fidelity Select Food and Agriculture Portfolio Q. HOW DID THE FUND PERFORM, SCOTT? A. It was a difficult period for the fund. For the six and 12 months ending August 31, 1999, the fund returned -6.53% and 9.58%, respectively. During that same time, the Goldman Sachs Consumer Industries Index - an index of 300 stocks designed to measure the performance of companies in the consumer industries sector - returned - -2.00% and 24.74%, respectively. The Standard & Poor's 500 Index returned 7.32% and 39.82% during the same six- and 12-month periods. Q. WHAT MARKET FACTORS DROVE THE WEAK PERFORMANCE OF THE FOOD AND AGRICULTURE SECTOR? A. The primary factors were slow or negative unit sales growth, little or no pricing power - meaning the inability to sustain or raise prices without sacrificing sales or market share - and widespread earnings shortfalls, which resulted in generally pessimistic investor sentiment across the sector. Adding to the negative environment, strength in other sectors of the market resulted in further outflows of dollars from the underperforming food and agriculture stocks. Q. FOOD, BEVERAGE AND GROCERY STORE HOLDINGS REPRESENTED APPROXIMATELY 72% OF THE FUND'S NET ASSETS. CAN YOU TELL US HOW THESE INDUSTRIES FARED? A. Food companies had a difficult time because they had little to no pricing power, which was especially damaging in this slow-growth industry. Any price increases that companies did institute were usually rolled-back into marketing initiatives to stimulate consumer demand. Unit sales growth was also very low for companies in the food sector, which resulted in lower earnings. In the beverage category, this situation was clearly evident as the deflationary price environment hurt sales results at Coca-Cola and PepsiCo. Despite favorable business fundamentals in the grocery store chains, these stocks also declined as consolidation in this sector was a double-edged sword. Supermarket consolidation increased the chains' leverage with packaged-food companies, forcing them to sell their products to supermarkets at lower prices. On the other hand, though, the pressure to lower prices created a deflationary environment, which hurt earnings at many packaged-food companies. In turn, this trend hurt stock prices for the entire food and agriculture sector. Q. YOU MADE SOME CHANGES TO THE FUND'S TOP-10 HOLDINGS AND REDUCED THE FUND'S HOLDINGS IN GROCERY STORES. WHAT WAS YOUR RATIONALE FOR THESE CHANGES? A. As certain grocery store and food stocks sold off quickly, it presented some value opportunities for the fund. While I reduced the fund's total exposure to supermarket chains, I increased the fund's holdings in certain grocers, namely Kroger and Albertson's, and food stocks, such as Keebler and Quaker Oats, because I believed they had positive long-term growth prospects. Unfortunately, there weren't many places to protect the fund from downside risk, as the majority of stocks in the food and agriculture sector declined, including Kroger, Albertson's and Safeway. Q. WHICH STOCKS HELPED THE FUND'S RETURN? A. I increased the fund's holdings in Corn Products International during the period, which helped performance. This company refines corn for a variety of food and industrial uses, including the production of high-fructose corn syrup. As the price of corn declined during the period, its stock price rallied as overhead costs decreased and profits grew. Another top contributor to fund performance was Quaker Oats. Sales in its hot cereal and sports drink franchises, which include Gatorade, continued to produce strong results. Q. WHAT'S YOUR OUTLOOK? A. Consolidation in the grocery store sector has put pressure on the packaged-foods industry to consolidate. Unfortunately, food companies have not taken the logical steps to consolidate and cut costs out of their businesses. While this scenario has been frustrating and it is difficult to ascertain whether this trend will change, there are top-quality companies in this industry that are at historically low values. If the industry begins to take the necessary steps to cut costs and increase its return on assets, we could start to see some improvement in stock 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 3. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 009 TRADING SYMBOL: FDFAX SIZE: as of August 31, 1999, more than $154 million MANAGER: Scott Offen, since 1996; manager, several Fidelity Select Portfolios, 1988-1996; joined Fidelity in 1985 FOOD AND AGRICULTURE PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 93.5% SHARES VALUE (NOTE 1) BEVERAGES - 17.7% Anheuser-Busch Companies, 132,800 $ 10,225,600 Inc. Brown-Forman Corp. Class B 6,800 399,500 Canandaigua Wine, Inc. Class 8,200 474,575 A (a) Celestial Seasonings, Inc. (a) 18,600 369,675 Coca-Cola Bottling Co. 19,100 1,100,638 Consolidated Coca-Cola Co. (The) 75,700 4,527,806 Coca-Cola Enterprises, Inc. 29,800 847,438 Coors (Adolph) Co. Class B 37,100 2,117,019 PepsiCo, Inc. 193,200 6,592,950 Whitman Corp. 38,000 634,125 27,289,326 CHEMICALS & PLASTICS - 0.5% IMC Global, Inc. 46,700 744,281 FOODS - 40.0% American Italian Pasta Co. 65,100 1,822,800 Class A (a) Archer-Daniels-Midland Co. 84,755 1,101,815 Aurora Foods, Inc. (a) 41,000 691,875 Bestfoods 78,200 3,841,575 ConAgra, Inc. 116,700 2,859,150 Corn Products International, 157,775 5,137,548 Inc. Dean Foods Co. 39,300 1,581,825 Earthgrains Co. 48,800 1,177,300 Flowers Industries, Inc. 66,900 1,057,856 General Mills, Inc. 41,700 3,492,375 Groupe Danone 5,200 1,287,927 Heinz (H.J.) Co. 94,400 4,407,300 Hershey Foods Corp. 9,400 503,488 Hormel Foods Corp. 25,200 1,014,300 IBP, Inc. 35,300 809,694 International Home Foods, 26,600 532,000 Inc. (a) Interstate Bakeries Corp. 35,900 859,356 Keebler Foods Co. (a) 179,100 5,339,419 Kellogg Co. 51,500 1,831,469 McCormick & Co., Inc. 22,100 707,200 (non-vtg.) Nabisco Group Holdings Corp. 80,500 1,428,875 Nabisco Holdings Corp. Class A 52,800 2,075,700 Nestle SA: ADR (Reg.) 31,100 3,067,238 (Reg.) 956 1,888,629 Quaker Oats Co. 61,400 4,102,288 Ralston Purina Co. 30,000 825,000 Sara Lee Corp. 142,700 3,166,156 Suiza Foods Corp. (a) 11,000 350,625 Sysco Corp. 121,700 3,970,463 Tootsie Roll Industries, Inc. 8,848 302,491 Universal Foods Corp. 19,200 405,600 61,639,337 SHARES VALUE (NOTE 1) GROCERY STORES - 14.5% Albertson's, Inc. 123,286 $ 5,910,023 Kroger Co. (a) 293,200 6,780,250 Safeway, Inc. (a) 180,300 8,395,219 SUPERVALU, Inc. 39,800 895,500 Whole Foods Market, Inc. (a) 8,800 316,250 22,297,242 HOUSEHOLD PRODUCTS - 5.3% Unilever NV NY Shares 119,978 8,263,485 RESTAURANTS - 10.0% McDonald's Corp. 298,500 12,350,434 Outback Steakhouse, Inc. (a) 40,400 1,196,850 Tricon Global Restaurants, 45,500 1,848,438 Inc. (a) 15,395,722 TOBACCO - 5.5% Philip Morris Companies, Inc. 211,200 7,906,800 RJ Reynolds Tobacco Holdings, 19,066 523,123 Inc. 8,429,923 TOTAL COMMON STOCKS 144,059,316 (Cost $126,361,664) CASH EQUIVALENTS - 9.0% Central Cash Collateral Fund, 3,292,800 3,292,800 5.26% (b) Taxable Central Cash Fund, 10,612,396 10,612,396 5.20% (b) TOTAL CASH EQUIVALENTS 13,905,196 (Cost $13,905,196) TOTAL INVESTMENT PORTFOLIO - 157,964,512 102.5% (Cost $140,266,860) NET OTHER ASSETS - (2.5%) (3,796,223) NET ASSETS - 100% $ 154,168,289 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $28,576,457 and $62,625,300, 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 $4,491 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $3,105,694. The fund received cash collateral of $3,292,800 which was invested in the Central Cash Collateral Fund. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $140,702,793. Net unrealized appreciation aggregated $17,261,719, of which $21,536,820 related to appreciated investment securities and $4,275,101 related to depreciated investment securities. FOOD AND AGRICULTURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 157,964,512 value (cost $140,266,860) - See accompanying schedule Receivable for fund shares 65,931 sold Dividends receivable 154,081 Interest receivable 35,293 Redemption fees receivable 232 Other receivables 825 TOTAL ASSETS 158,220,874 LIABILITIES Payable for fund shares $ 583,197 redeemed Accrued management fee 76,919 Other payables and accrued 99,669 expenses Collateral on securities 3,292,800 loaned, at value TOTAL LIABILITIES 4,052,585 NET ASSETS $ 154,168,289 Net Assets consist of: Paid in capital $ 132,656,043 Undistributed net investment 1,207,183 income Accumulated undistributed net 2,607,461 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 17,697,602 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 3,599,923 $ 154,168,289 shares outstanding NET ASSET VALUE and $42.83 redemption price per share ($154,168,289 (divided by) 3,599,923 shares) Maximum offering price per $44.15 share (100/97.00 of $42.83) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 1,048,572 Dividends Special dividend from 993,960 Unilever NV NY Shares Interest 257,851 Security lending 42,306 TOTAL INCOME 2,342,689 EXPENSES Management fee $ 519,948 Transfer agent fees 529,914 Accounting and security 67,605 lending fees Non-interested trustees' 173 compensation Custodian fees and expenses 5,514 Registration fees 24,358 Audit 7,493 Legal 105 Total expenses before 1,155,110 reductions Expense reductions (23,533) 1,131,577 NET INVESTMENT INCOME 1,211,112 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 3,173,172 Foreign currency transactions (5,027) 3,168,145 Change in net unrealized appreciation (depreciation) on: Investment securities (16,462,454) Assets and liabilities in 12 (16,462,442) foreign currencies NET GAIN (LOSS) (13,294,297) NET INCREASE (DECREASE) IN $ (12,083,185) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 87,476 charges paid to FDC Sales charges - Retained by $ 87,470 FDC Deferred sales charges $ 4,617 withheld by FDC Exchange fees withheld by FSC $ 11,198 Expense reductions Directed $ 22,896 brokerage arrangements Custodian credits 637 $ 23,533
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ 1,211,112 $ 1,020,362 income Net realized gain (loss) 3,168,145 20,672,714 Change in net unrealized (16,462,442) (4,236,166) appreciation (depreciation) NET INCREASE (DECREASE) IN (12,083,185) 17,456,910 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (252,465) (739,119) From net investment income From net realized gain (4,208,811) (25,615,738) TOTAL DISTRIBUTIONS (4,461,276) (26,354,857) Share transactions Net 15,063,474 80,793,360 proceeds from sales of shares Reinvestment of distributions 4,282,978 25,579,323 Cost of shares redeemed (54,698,431) (142,182,438) NET INCREASE (DECREASE) IN (35,351,979) (35,809,755) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 57,743 148,005 TOTAL INCREASE (DECREASE) (51,838,697) (44,559,697) IN NET ASSETS NET ASSETS Beginning of period 206,006,986 250,566,683 End of period (including $ 154,168,289 $ 206,006,986 undistributed net investment income of $1,207,183 and $490,066, respectively) OTHER INFORMATION Shares Sold 337,854 1,684,840 Issued in reinvestment of 96,727 536,693 distributions Redeemed (1,225,233) (2,964,307) Net increase (decrease) (790,652) (742,774)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 G Net asset value, beginning of $ 46.92 $ 48.81 $ 44.53 $ 42.15 $ 32.53 period Income from Investment Operations Net investment income D .30 E .21 .33 .42 .37 Net realized and unrealized (3.34) 3.50 9.22 4.91 11.61 gain (loss) Total from investment (3.04) 3.71 9.55 5.33 11.98 operations Less Distributions From net investment income (.06) (.16) (.37) (.24) (.20) From net realized gain (1.00) (5.47) (4.95) (2.77) (2.20) Total distributions (1.06) (5.63) (5.32) (3.01) (2.40) Redemption fees added to paid .01 .03 .05 .06 .04 in capital Net asset value, end of period $ 42.83 $ 46.92 $ 48.81 $ 44.53 $ 42.15 TOTAL RETURN B, C (6.53)% 7.83% 23.58% 13.59% 37.92% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 154,168 $ 206,007 $ 250,567 $ 223,423 $ 301,102 (000 omitted) Ratio of expenses to average 1.27% A 1.31% 1.49% 1.52% 1.43% net assets Ratio of expenses to average 1.25% A, F 1.29% F 1.48% F 1.50% F 1.42% F net assets after expense reductions Ratio of net investment 1.33% A .45% .73% 1.01% .99% income to average net assets Portfolio turnover rate 34% A 68% 74% 91% 124%
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 31.49 period Income from Investment Operations Net investment income D .15 Net realized and unrealized 2.80 gain (loss) Total from investment 2.95 operations Less Distributions From net investment income (.08) From net realized gain (1.85) Total distributions (1.93) Redemption fees added to paid .02 in capital Net asset value, end of period $ 32.53 TOTAL RETURN B, C 10.14% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 197,130 (000 omitted) Ratio of expenses to average 1.70% net assets Ratio of expenses to average 1.68% F net assets after expense reductions Ratio of net investment .49% income to average net assets Portfolio turnover rate 126%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM UNILEVER NV NY SHARES WHICH AMOUNTED TO $.25 PER SHARE. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. G 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT LEISURE 3.14% 53.10% 201.50% 367.71% SELECT LEISURE (LOAD ADJ.) -0.03% 48.44% 192.39% 353.61% S&P 500 7.32% 39.82% 206.52% 384.79% GS Consumer Industries -2.00% 24.74% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index- a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT LEISURE 53.10% 24.70% 16.68% SELECT LEISURE (LOAD ADJ.) 48.44% 23.93% 16.32% S&P 500 39.82% 25.11% 17.10% GS Consumer Industries 24.74% 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 Leisure S&P 500 00062 SP001 1989/08/31 9700.00 10000.00 1989/09/30 9762.33 9959.00 1989/10/31 9058.87 9727.95 1989/11/30 9165.73 9926.40 1989/12/31 9302.89 10164.64 1990/01/31 8174.69 9482.59 1990/02/28 8102.21 9604.91 1990/03/31 8165.24 9859.44 1990/04/30 7846.95 9612.96 1990/05/31 8496.13 10550.22 1990/06/30 8398.44 10478.48 1990/07/31 8108.51 10444.95 1990/08/31 7172.55 9500.72 1990/09/30 6491.85 9038.04 1990/10/31 6416.22 8999.18 1990/11/30 6926.74 9580.52 1990/12/31 7229.69 9847.82 1991/01/31 7634.00 10277.18 1991/02/28 8219.76 11012.00 1991/03/31 8356.65 11278.49 1991/04/30 8378.93 11305.56 1991/05/31 8668.63 11793.96 1991/06/30 8181.55 11253.80 1991/07/31 8573.12 11778.23 1991/08/31 8662.26 12057.37 1991/09/30 8885.10 11856.01 1991/10/31 9152.52 12014.88 1991/11/30 8713.20 11530.68 1991/12/31 9610.94 12849.79 1992/01/31 9827.42 12610.79 1992/02/29 10171.23 12774.73 1992/03/31 9964.31 12525.62 1992/04/30 10075.73 12893.87 1992/05/31 10136.21 12957.05 1992/06/30 9980.22 12763.99 1992/07/31 10027.98 13286.04 1992/08/31 9884.72 13013.68 1992/09/30 10078.91 13167.24 1992/10/31 10155.32 13213.32 1992/11/30 10846.13 13663.90 1992/12/31 11170.85 13831.96 1993/01/31 11447.81 13948.15 1993/02/28 11387.32 14137.85 1993/03/31 11979.45 14436.15 1993/04/30 11709.48 14086.80 1993/05/31 12550.60 14464.33 1993/06/30 12888.37 14506.27 1993/07/31 13232.77 14448.25 1993/08/31 14143.43 14995.84 1993/09/30 14848.78 14880.37 1993/10/31 15670.04 15188.39 1993/11/30 15087.21 15044.10 1993/12/31 15589.33 15226.14 1994/01/31 15751.36 15743.82 1994/02/28 15616.91 15317.17 1994/03/31 14672.31 14649.34 1994/04/30 14701.89 14836.85 1994/05/31 14546.29 15080.17 1994/06/30 13931.50 14710.71 1994/07/31 14470.39 15193.22 1994/08/31 15047.23 15816.14 1994/09/30 15043.44 15428.65 1994/10/31 14990.31 15775.79 1994/11/30 14348.95 15201.24 1994/12/31 14523.52 15426.67 1995/01/31 14789.17 15826.69 1995/02/28 15449.51 16443.45 1995/03/31 15855.57 16928.70 1995/04/30 15996.04 17427.25 1995/05/31 16305.57 18123.82 1995/06/30 16936.08 18544.83 1995/07/31 18113.05 19159.78 1995/08/31 18693.89 19207.87 1995/09/30 18724.46 20018.44 1995/10/31 17822.63 19946.98 1995/11/30 18403.47 20822.65 1995/12/31 18438.74 21223.69 1996/01/31 18712.03 21946.15 1996/02/29 19715.53 22149.59 1996/03/31 19813.74 22362.89 1996/04/30 20627.27 22692.52 1996/05/31 21473.65 23277.76 1996/06/30 21390.76 23366.44 1996/07/31 19855.06 22334.12 1996/08/31 20348.05 22805.14 1996/09/30 21338.41 24088.62 1996/10/31 20753.79 24752.98 1996/11/30 21342.77 26624.06 1996/12/31 20910.51 26096.63 1997/01/31 21841.18 27727.15 1997/02/28 21714.06 27944.53 1997/03/31 20910.51 26796.29 1997/04/30 21107.57 28396.03 1997/05/31 23086.26 30124.78 1997/06/30 23996.93 31474.37 1997/07/31 25222.28 33978.79 1997/08/31 24817.01 32075.30 1997/09/30 27553.79 33832.06 1997/10/31 27129.45 32702.07 1997/11/30 28221.30 34215.85 1997/12/31 29544.37 34803.33 1998/01/31 29703.51 35188.26 1998/02/28 31982.87 37726.04 1998/03/31 34216.03 39657.99 1998/04/30 34773.13 40056.94 1998/05/31 33906.69 39368.37 1998/06/30 36385.23 40967.51 1998/07/31 35870.62 40531.21 1998/08/31 29632.25 34671.20 1998/09/30 30824.26 36892.24 1998/10/31 32940.48 39893.06 1998/11/30 35938.89 42310.97 1998/12/31 40747.72 44748.93 1999/01/31 44220.78 46620.33 1999/02/28 43988.53 45171.37 1999/03/31 47429.18 46978.68 1999/04/30 49246.60 48798.16 1999/05/31 47447.24 47646.04 1999/06/30 49520.89 50290.39 1999/07/31 47737.99 48720.33 1999/08/31 45361.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 120211 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Leisure Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $45,361 - a 353.61% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Microsoft Corp. 6.0 CBS Corp. 5.6 Disney (Walt) Co. 5.2 Time Warner, Inc. 5.1 McDonald's Corp. 5.0 AT&T Corp. (Liberty Media 4.6 Group) Class A AT&T Corp. 4.5 Anheuser-Busch Companies, Inc. 3.6 MediaOne Group, Inc. 3.5 Seagram Co. Ltd. 2.8 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Broadcasting 30.3% Entertainment 10.7% Computer Services & Software 8.0% Restaurants 7.5% Beverages 6.8% All Others 36.7%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 30.3 Row: 1, Col: 2, Value: 10.7 Row: 1, Col: 3, Value: 8.0 Row: 1, Col: 4, Value: 7.5 Row: 1, Col: 5, Value: 6.8 Row: 1, Col: 6, Value: 36.7 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. LEISURE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Jeffrey Dorsey) Jeffrey Dorsey, Portfolio Manager of Fidelity Select Leisure Portfolio Q. HOW DID THE FUND PERFORM, JEFF? A. For the six- and 12-month periods ending August 31, 1999, the fund returned 3.14% and 53.10%, respectively. By comparison, the Standard & Poor's 500 Index returned 7.32% and 39.82% for the same time periods. 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 -2.00% and 24.74% for the same six- and 12-month periods, respectively. Q. WHAT CONTRIBUTED TO THE FUND'S OUTPERFORMANCE OF THE GOLDMAN SACHS INDEX DURING THE SIX-MONTH PERIOD? A. The fund's focus on broadcasting helped boost its performance relative to the Goldman Sachs index. In general, though, leisure stocks' performance stalled somewhat in the past few months after a very strong showing during the first part of 1999. Typically, leisure stocks such as retailing, lodging, gaming and other industries are fueled by consumers' disposable-income spending and tend to be affected disproportionately whenever there's concern about the possibility of renewed inflation and Federal Reserve Board interest-rate tightening. Q. BROADCASTING STOCKS ACCOUNTED FOR NEARLY 30% OF THE FUND'S HOLDINGS . . . A. And, generally, they performed well. CBS, which was hurt earlier in the year when investors focused only on its network programming and ignored the more successful aspects of its business, came back strongly later in the period. CBS cash flows improved, its network business did well and the company executed its business strategy flawlessly. Tribune Co., a Chicago-based publisher/television station operator, benefited from its stake in WB Network, which airs programming that successfully targets 14-22 year-old viewers. Tribune's earnings growth was very strong as a result of its WB Network affiliation. Newspaper operations also picked up as newsprint prices came down, but represented a declining percentage of Tribune's profits as its television operations increased. Other broadcasters, such as Clear Channel Communications, a radio and outdoor advertising company, also benefited from robust advertising activity. Q. WHICH OTHER STOCKS PERFORMED WELL? A. The strongest performers included America Online, which posted terrific growth, adding to its expanding subscriber base during the period. I later sold the stock from the fund's portfolio because I thought it was an opportune time to lock in profits. Microsoft continued to be a stellar performer, executing all aspects of its business strategy successfully. Liberty Media Group is a conglomeration of media investments that has demonstrated phenomenal success since going public several years ago. Liberty used the tremendous amount of cash on its balance sheets to make attractive acquisitions and tax-efficient investments. Gemstar, which owns proprietary technology for an electronic television program guide and has several valuable patents, emerged as a leader in digital television. Q. WHAT ABOUT DISAPPOINTMENTS? A. Walt Disney continued to disappoint investors with its deteriorating licensing and merchandising business. Disney's home video business was also disappointing after the company decided to slow down its library title releases. AT&T's performance reflected investors' dimming view of the long-distance telephone business, and while management tried to move the company further away from long distance - instead focusing on local telephony and cable - AT&T was hit by the shift in investor sentiment. Time Warner's performance was hurt along with most cable stocks as municipalities fought the right of cable companies to keep Internet access through their lines proprietary. Q. WHAT'S YOUR OUTLOOK, JEFF? A. Overall, my outlook is positive. Most companies are seeing healthy growth and costs haven't been much of a problem, so we should continue to see double-digit cash flow growth through the rest of this year. The issue that could change all of that is the future performance of the bond market and further Fed actions, because if interest rates go up it could slow the performance of many of these companies. In the near term, though, they should do quite well operationally. 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 3. (checkmark)FUND FACTS START DATE: May 8, 1984 FUND NUMBER: 062 TRADING SYMBOL: FDLSX SIZE: as of August 31, 1999, more than $391 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 AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 94.9% SHARES VALUE (NOTE 1) ADVERTISING - 4.9% Interpublic Group of 125,400 $ 4,968,975 Companies, Inc. Lamar Advertising Co. Class A 37,300 1,557,275 (a) Omnicom Group, Inc. 90,500 6,821,438 Outdoor Systems, Inc. (a) 121,400 3,922,738 WPP Group PLC 300 2,808 Young & Rubicam, Inc. 41,000 1,829,625 19,102,859 APPAREL STORES - 6.1% Abercrombie & Fitch Co. Class 105,430 3,676,871 A (a) American Eagle Outfitters, 20,200 792,850 Inc. (a) AnnTaylor Stores Corp. (a) 26,000 861,250 Gap, Inc. 270,550 10,585,269 Limited, Inc. (The) 87,600 3,317,850 Payless ShoeSource, Inc. (a) 22,100 1,102,238 TJX Companies, Inc. 99,700 2,878,838 Too, Inc. (a) 10,871 190,922 Wet Seal, Inc. Class A (a) 30,600 466,650 23,872,738 BEVERAGES - 6.8% Anheuser-Busch Companies, 184,000 14,168,000 Inc. Coors (Adolph) Co. Class B 29,400 1,677,638 Seagram Co. Ltd. 203,300 10,794,992 26,640,630 BROADCASTING - 30.3% AMFM, Inc. (a) 48,800 2,403,400 AT&T Corp. (Liberty Media 559,144 17,892,608 Group) Class A (a) Cablevision Systems Corp. 78,700 5,509,000 Class A (a) CBS Corp. (a) 463,417 21,780,599 Clear Channel Communications, 133,059 9,322,446 Inc. (a) Comcast Corp. Class A 298,100 9,725,513 (special) Cox Communications, Inc. 257,987 9,593,892 Class A (a) E.W. Scripps Co. Class A 13,100 628,800 EchoStar Communications Corp. 12,500 1,045,313 Class A (a) Hearst-Argyle Television, 3,400 86,063 Inc. (a) Infinity Broadcasting Corp. 20,500 554,781 Class A MediaOne Group, Inc. 206,400 13,570,800 PanAmSat Corp. (a) 300 11,081 SBS Broadcasting SA (a) 800 28,400 Sinclair Broadcast Group, 11,800 191,750 Inc. Class A (a) Time Warner, Inc. 339,557 20,139,975 Univision Communications, 20,800 1,534,000 Inc. Class A (a) SHARES VALUE (NOTE 1) USA Networks, Inc. (a) 86,100 $ 3,863,738 Westwood One, Inc. (a) 17,200 660,050 118,542,209 COMPUTER SERVICES & SOFTWARE - - 8.0% At Home Corp. Series A (a) 96,900 3,888,113 Electronic Arts, Inc. (a) 24,600 1,688,175 Lycos, Inc. (a) 26,600 1,080,625 Microsoft Corp. (a) 252,700 23,390,532 MindSpring Enterprises, Inc. 20,200 589,588 (a) Razorfish, Inc. (a) 100 2,800 Xoom.com, Inc. (a) 16,500 641,438 31,281,271 COMPUTERS & OFFICE EQUIPMENT - - 1.1% Coinstar, Inc. (a) 187,000 4,324,375 CONSUMER ELECTRONICS - 1.2% Fossil, Inc. (a) 8,550 266,653 Gemstar International Group 65,400 4,512,600 Ltd. (a) 4,779,253 ENTERTAINMENT - 10.7% Carmike Cinemas, Inc. Class A 700 9,450 (a) Carnival Corp. 42,200 1,885,813 Disney (Walt) Co. 733,556 20,356,179 Fox Entertainment Group, Inc. 16,200 373,613 Hollywood Entertainment Corp. 6,500 88,156 (a) King World Productions, Inc. 25,500 972,188 (a) News Corp. Ltd. sponsored: ADR 19,800 580,388 ADR (preferred ltd. vtg.) 16,200 428,288 Peace Arch Entertainment 10,000 46,901 Group, Inc. Class B (a) Premier Parks, Inc. (a) 93,300 3,055,575 Royal Carribean Cruises Ltd. 73,700 3,450,081 SFX Entertainment, Inc. Class 32,850 1,353,009 A (a) Viacom, Inc. Class B 219,400 9,228,513 (non-vtg.) (a) 41,828,154 GENERAL MERCHANDISE STORES - 0.4% Consolidated Stores Corp. (a) 40,400 651,450 Michaels Stores, Inc. (a) 19,500 598,406 Saks, Inc. (a) 22,900 385,006 1,634,862 HOUSEHOLD PRODUCTS - 0.7% Avon Products, Inc. 64,200 2,816,775 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) LEISURE DURABLES & TOYS - 0.8% Hasbro, Inc. 64,550 $ 1,577,441 Mattel, Inc. 64,900 1,383,181 2,960,622 LODGING & GAMING - 1.7% Marriott International, Inc. 90,100 3,085,925 Class A Prime Hospitality Corp. (a) 52,500 488,906 Promus Hotel Corp. (a) 38,600 1,121,813 Starwood Hotels & Resorts 78,900 1,878,806 Worldwide, Inc. Sun International Hotels Ltd. 100 2,913 (a) 6,578,363 PRINTING - 0.7% Donnelley (R.R.) & Sons Co. 76,100 2,387,638 Valassis Communications, Inc. 6,800 297,500 (a) 2,685,138 PUBLISHING - 6.3% Gannet, Inc. 64,800 4,402,350 Harcourt General, Inc. 18,300 801,769 Harte Hanks Communications, 53,700 1,204,894 Inc. Knight-Ridder, Inc. 34,600 1,866,238 McGraw-Hill Companies, Inc. 65,300 3,375,194 Meredith Corp. 98,300 3,409,781 Playboy Enterprises, Inc. 99,400 2,093,613 Class B (a) Reader's Digest Association, 109,200 3,412,500 Inc. Class A (non-vtg.) Tribune Co. 45,700 4,264,381 24,830,720 RESTAURANTS - 7.5% Brinker International, Inc. 41,100 986,400 (a) CEC Entertainment, Inc. (a) 24,650 687,119 McDonald's Corp. 475,000 19,653,125 Outback Steakhouse, Inc. (a) 51,750 1,533,094 Papa John's International, 10,000 397,500 Inc. (a) PJ America, Inc. (a) 56,900 1,088,213 Starbucks Corp. (a) 66,300 1,516,613 Tricon Global Restaurants, 89,000 3,615,625 Inc. (a) 29,477,689 RETAIL & WHOLESALE, MISCELLANEOUS - 1.4% Action Performance Companies, 30,300 748,031 Inc. (a) Bed Bath & Beyond, Inc. (a) 45,300 1,245,750 Intimate Brands, Inc. Class A 32,835 1,266,200 Piercing Pagoda, Inc. (a) 1,300 18,363 Shop At Home, Inc. (a) 255,400 2,218,788 5,497,132 SHARES VALUE (NOTE 1) SERVICES - 0.2% True North Communications 30,400 $ 1,001,300 TELEPHONE SERVICES - 4.5% AT&T Corp. 388,938 17,502,210 TEXTILES & APPAREL - 1.6% Liz Claiborne, Inc. 23,200 852,600 NIKE, Inc. Class B 81,000 3,746,250 Pacific Sunwear of 22,900 532,425 California, Inc. (a) Polo Ralph Lauren Corp. Class 29,600 573,500 A (a) Stride Rite Corp. 1,500 13,031 Warnaco Group, Inc. Class A 22,400 492,800 6,210,606 TOTAL COMMON STOCKS 371,566,906 (Cost $296,328,638) CASH EQUIVALENTS - 9.7% Central Cash Collateral Fund, 5,275,400 5,275,400 5.26% (b) Taxable Central Cash Fund, 32,712,514 32,712,514 5.20% (b) TOTAL CASH EQUIVALENTS 37,987,914 (Cost $37,987,914) TOTAL INVESTMENT PORTFOLIO - 409,554,820 104.6% (Cost $334,316,552) NET OTHER ASSETS - (4.6%) (18,066,862) NET ASSETS - 100% $ 391,487,958 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $270,081,878 and $231,593,455, 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 $32,303 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $5,051,844. The fund received cash collateral of $5,275,400 which was invested in the Central Cash Collateral Fund. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $336,548,023. Net unrealized appreciation aggregated $73,006,797, of which $88,639,721 related to appreciated investment securities and $15,632,924 related to depreciated investment securities. LEISURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 409,554,820 value (cost $334,316,552) - See accompanying schedule Receivable for investments 51,451,638 sold Receivable for fund shares 24,797,027 sold Dividends receivable 195,394 Interest receivable 95,534 Redemption fees receivable 1,339 Other receivables 709,157 TOTAL ASSETS 486,804,909 LIABILITIES Payable for investments $ 87,498,630 purchased Payable for fund shares 2,167,147 redeemed Accrued management fee 177,765 Other payables and accrued 198,009 expenses Collateral on securities 5,275,400 loaned, at value TOTAL LIABILITIES 95,316,951 NET ASSETS $ 391,487,958 Net Assets consist of: Paid in capital $ 277,081,333 Accumulated net investment (939,974) loss Accumulated undistributed net 40,109,433 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 75,237,166 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 4,733,844 $ 391,487,958 shares outstanding NET ASSET VALUE and $82.70 redemption price per share ($391,487,958 (divided by) 4,733,844 shares) Maximum offering price per $85.26 share (100/97.00 of $82.70) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 771,329 Dividends Interest 778,212 Security lending 2,593 TOTAL INCOME 1,552,134 EXPENSES Management fee $ 1,269,224 Transfer agent fees 984,941 Accounting and security 163,802 lending fees Non-interested trustees' 839 compensation Custodian fees and expenses 12,395 Registration fees 89,891 Audit 7,605 Legal 470 Total expenses before 2,529,167 reductions Expense reductions (37,059) 2,492,108 NET INVESTMENT INCOME (LOSS) (939,974) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 41,446,129 Foreign currency transactions 5,132 41,451,261 Change in net unrealized appreciation (depreciation) on: Investment securities (25,577,474) Assets and liabilities in (1,008) (25,578,482) foreign currencies NET GAIN (LOSS) 15,872,779 NET INCREASE (DECREASE) IN $ 14,932,805 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 843,041 charges paid to FDC Sales charges - Retained by $ 840,591 FDC Deferred sales charges $ 6,685 withheld by FDC Exchange fees withheld by FSC $ 14,400 Expense reductions Directed $ 29,694 brokerage arrangements Custodian credits 7,365 $ 37,059
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (939,974) $ (1,171,784) income (loss) Net realized gain (loss) 41,451,261 22,624,055 Change in net unrealized (25,578,482) 65,006,159 appreciation (depreciation) NET INCREASE (DECREASE) IN 14,932,805 86,458,430 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (7,672,554) (14,475,212) from net realized gains Share transactions Net 281,076,667 283,063,939 proceeds from sales of shares Reinvestment of distributions 7,427,293 14,128,858 Cost of shares redeemed (250,696,401) (280,558,227) NET INCREASE (DECREASE) IN 37,807,559 16,634,570 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 280,780 323,063 TOTAL INCREASE (DECREASE) 45,348,590 88,940,851 IN NET ASSETS NET ASSETS Beginning of period 346,139,368 257,198,517 End of period (including $ 391,487,958 $ 346,139,368 accumulated net investment loss of $939,974 and $0, respectively) OTHER INFORMATION Shares Sold 3,258,841 4,108,533 Issued in reinvestment of 85,459 211,513 distributions Redeemed (2,860,495) (4,198,228) Net increase (decrease) 483,805 121,818
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 G 1995 Net asset value, beginning of $ 81.44 $ 62.30 $ 47.83 $ 46.17 $ 40.71 $ 45.30 period Income from Investment Operations Net investment income (loss) (.19) (.27) (.25) (.06) F (.21) (.21) D Net realized and unrealized 2.75 22.78 21.10 4.47 10.97 (.48) gain (loss) Total from investment 2.56 22.51 20.85 4.41 10.76 (.69) operations Less Distributions From net realized gain (1.36) (3.44) (6.46) (2.83) (5.32) (3.93) Redemption fees added to paid .06 .07 .08 .08 .02 .03 in capital Net asset value, end of period $ 82.70 $ 81.44 $ 62.30 $ 47.83 $ 46.17 $ 40.71 TOTAL RETURN B, C 3.14% 37.54% 47.29% 10.14% 27.61% (1.07)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 391,488 $ 346,139 $ 257,199 $ 98,133 $ 85,013 $ 69,569 (000 omitted) Ratio of expenses to average 1.14% A 1.26% 1.44% 1.56% 1.64% 1.64% net assets Ratio of expenses to average 1.13% A, E 1.24% E 1.39% E 1.54% E 1.63% E 1.62% E net assets after expense reductions Ratio of net investment (.43)% A (.40)% (.46)% (.12)% (.46)% (.52)% income (loss) to average net assets Portfolio turnover rate 116% A 107% 209% 127% 141% 103%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F NET INVESTMENT INCOME (LOSS) PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.23 PER SHARE. G 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT MULTIMEDIA 5.67% 51.02% 174.16% 347.13% SELECT MULTIMEDIA (LOAD ADJ.) 2.43% 46.41% 165.86% 333.65% S&P 500 7.32% 39.82% 206.52% 384.79% GS Consumer Industries -2.00% 24.74% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT MULTIMEDIA 51.02% 22.35% 16.16% SELECT MULTIMEDIA (LOAD ADJ.) 46.41% 21.60% 15.80% S&P 500 39.82% 25.11% 17.10% GS Consumer Industries 24.74% 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 Multimedia S&P 500 00503 SP001 1989/08/31 9700.00 10000.00 1989/09/30 9548.03 9959.00 1989/10/31 8903.46 9727.95 1989/11/30 8955.86 9926.40 1989/12/31 8959.66 10164.64 1990/01/31 7769.94 9482.59 1990/02/28 7573.70 9604.91 1990/03/31 7500.11 9859.44 1990/04/30 7144.42 9612.96 1990/05/31 7825.13 10550.22 1990/06/30 7757.68 10478.48 1990/07/31 7328.40 10444.95 1990/08/31 6377.85 9500.72 1990/09/30 5832.05 9038.04 1990/10/31 5580.62 8999.18 1990/11/30 6157.08 9580.52 1990/12/31 6610.89 9847.82 1991/01/31 6966.58 10277.18 1991/02/28 7481.71 11012.00 1991/03/31 7684.08 11278.49 1991/04/30 7947.78 11305.56 1991/05/31 7990.71 11793.96 1991/06/30 7359.06 11253.80 1991/07/31 7635.02 11778.23 1991/08/31 7874.19 12057.37 1991/09/30 8352.53 11856.01 1991/10/31 8775.68 12014.88 1991/11/30 8174.69 11530.68 1991/12/31 9112.97 12849.79 1992/01/31 9352.14 12610.79 1992/02/29 9873.41 12774.73 1992/03/31 9621.97 12525.62 1992/04/30 9769.15 12893.87 1992/05/31 9916.33 12957.05 1992/06/30 9953.13 12763.99 1992/07/31 9977.66 13286.04 1992/08/31 9842.74 13013.68 1992/09/30 9781.42 13167.24 1992/10/31 9940.86 13213.32 1992/11/30 10664.50 13663.90 1992/12/31 11072.08 13831.96 1993/01/31 11295.76 13948.15 1993/02/28 11345.46 14137.85 1993/03/31 11792.82 14436.15 1993/04/30 11487.86 14086.80 1993/05/31 12270.98 14464.33 1993/06/30 12656.22 14506.27 1993/07/31 13129.88 14448.25 1993/08/31 14247.72 14995.84 1993/09/30 14588.76 14880.37 1993/10/31 15681.34 15188.39 1993/11/30 14657.96 15044.10 1993/12/31 15281.74 15226.14 1994/01/31 15499.68 15743.82 1994/02/28 15300.97 15317.17 1994/03/31 14365.09 14649.34 1994/04/30 14372.06 14836.85 1994/05/31 14900.60 15080.17 1994/06/30 14567.55 14710.71 1994/07/31 14922.32 15193.22 1994/08/31 15820.12 15816.14 1994/09/30 15711.52 15428.65 1994/10/31 16066.30 15775.79 1994/11/30 15559.47 15201.24 1994/12/31 15893.55 15426.67 1995/01/31 16073.22 15826.69 1995/02/28 16732.02 16443.45 1995/03/31 17795.08 16928.70 1995/04/30 18206.83 17427.25 1995/05/31 18304.16 18123.82 1995/06/30 19007.87 18544.83 1995/07/31 20130.83 19159.78 1995/08/31 20767.17 19207.87 1995/09/30 21358.59 20018.44 1995/10/31 20729.74 19946.98 1995/11/30 21530.78 20822.65 1995/12/31 21245.36 21223.69 1996/01/31 21375.35 21946.15 1996/02/29 22082.18 22149.59 1996/03/31 21789.70 22362.89 1996/04/30 22804.07 22692.52 1996/05/31 23561.43 23277.76 1996/06/30 22471.16 23366.44 1996/07/31 20332.24 22334.12 1996/08/31 21089.60 22805.14 1996/09/30 22429.55 24088.62 1996/10/31 21797.03 24752.98 1996/11/30 22196.52 26624.06 1996/12/31 21473.43 26096.63 1997/01/31 21363.40 27727.15 1997/02/28 21084.09 27944.53 1997/03/31 20059.93 26796.29 1997/04/30 20507.86 28396.03 1997/05/31 22465.94 30124.78 1997/06/30 23938.83 31474.37 1997/07/31 25221.12 33978.79 1997/08/31 24727.26 32075.30 1997/09/30 26728.67 33832.06 1997/10/31 25870.92 32702.07 1997/11/30 26728.67 34215.85 1997/12/31 28114.77 34803.33 1998/01/31 28320.44 35188.26 1998/02/28 30028.43 37726.04 1998/03/31 32138.83 39657.99 1998/04/30 32897.35 40056.94 1998/05/31 31993.31 39368.37 1998/06/30 34163.00 40967.51 1998/07/31 34572.19 40531.21 1998/08/31 28719.76 34671.20 1998/09/30 29956.86 36892.24 1998/10/31 31774.44 39893.06 1998/11/30 33668.16 42310.97 1998/12/31 38150.27 44748.93 1999/01/31 41271.57 46620.33 1999/02/28 41043.18 45171.37 1999/03/31 42489.63 46978.68 1999/04/30 44815.63 48798.16 1999/05/31 44112.98 47646.04 1999/06/30 46086.18 50290.39 1999/07/31 45287.27 48720.33 1999/08/31 43365.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990909 154651 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Multimedia Portfolio on August 31, 1989 and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $43,365 - a 333.65% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS CBS Corp. 7.2 AT&T Corp. (Liberty Media 7.0 Group) Class A Viacom, Inc. Class B (non-vtg.) 5.7 MediaOne Group, Inc. 5.5 Disney (Walt) Co. 5.4 Time Warner, Inc. 5.3 Seagram Co. Ltd. 5.2 Cox Communications, Inc. 4.8 Class A Clear Channel Communications, 4.7 Inc. Comcast Corp. Class A (special) 4.7 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS 7.7 Broadcasting 46.5% Entertainment 13.2% Publishing 10.8% Advertising 8.1% Beverages 5.2% All Others 16.2%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 16.2 Row: 1, Col: 2, Value: 5.2 Row: 1, Col: 3, Value: 8.1 Row: 1, Col: 4, Value: 10.8 Row: 1, Col: 5, Value: 13.2 Row: 1, Col: 6, Value: 46.5 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. MULTIMEDIA PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Jeffrey Dorsey) Jeffrey Dorsey, Portfolio Manager of Fidelity Select Multimedia Portfolio Q. HOW DID THE FUND PERFORM, JEFF? A. For the six- and 12-month periods ending August 31, 1999, the fund returned 5.67% and 51.02%, respectively. By comparison, the Standard & Poor's 500 Index returned 7.32% and 39.82%, respectively, for the same time periods. 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 -2.00% and 24.74%, respectively, for the six- and 12-month periods. Q. WHAT HELPED THE FUND OUTPERFORM THE GOLDMAN SACHS INDEX DURING THE PERIOD? A. Although multimedia stocks' performance did slow somewhat in the past few months after a very strong showing during the first part of 1999, the fund's focus on broadcasting helped boost its performance relative to the Goldman Sachs index. Multimedia stocks were affected disproportionately - as they tend to be whenever there is concern about the possibility of renewed inflation and Fed interest-rate tightening - during the six-month period. However, the market calmed somewhat toward the end of the period. Q. BROADCASTING WAS BY FAR THE FUND'S BIGGEST EMPHASIS DURING THE PERIOD. WHICH HOLDINGS STOOD OUT? A. CBS, the fund's number-one holding at the end of the period, was hurt earlier in the year when investors focused only on its network programming and ignored the more successful aspects of its TV and radio business. CBS came back strongly later in the period as its cash flows improved, its TV network business made a nice recovery and the company executed its business strategy flawlessly. Clear Channel Communications, a radio and outdoor advertising company, posted outstanding cash flow growth, benefiting from robust advertising activity. Tribune Co., a Chicago-based publisher/television station operator, benefited from its stake in WB Network, which airs programming that successfully targets young viewers. Q. WHICH OTHER STOCKS PERFORMED WELL? A. The strongest performers included Liberty Media Group, a conglomeration of media assets that has demonstrated phenomenal success since going public several years ago. It has used innovative methods to take stakes in media companies, and has made attractive acquisitions and tax-efficient investments with the tremendous amount of cash on its balance sheets. Seagram also did well. Seagram now owns Polygram, making it the world's largest purveyor of recorded music through its Universal Music subsidiary. Management merged the two entities and cut costs significantly; meanwhile, Seagram's spirits business bounced back nicely as demand from Asian countries increased. Q. WHAT ABOUT DISAPPOINTMENTS? A. Walt Disney's deteriorating licensing and merchandising business, and its decision to slow down its library title releases, continued to disappoint investors. I'm still holding some of the stock because it appears cheap, and because management is finally starting to pay attention to what is important to shareholders: return on invested capital and generation of free cash flow. While AT&T's management tried to move the company further away from long distance - instead focusing on local telephony and cable - AT&T was hit by a shift in sentiment among investors, whose dimming view of the long-distance telephone business hurt the stock's performance. Fund holdings Time Warner and Comcast also suffered, along with most cable stocks, as municipalities challenged the right of cable companies to keep Internet access through their lines proprietary. However, operational performance continued to be better than expected among cable companies during the period. Q. WHAT'S YOUR OUTLOOK, JEFF? A. I'm optimistic. Overall, advertising activity is robust and growth should be strong through next year, though there continues to be some uncertainty about whether growth can continue at this pace in 2001. However, there are plenty of positive signs, including the success of the "dot.com" companies, which are spending a growing percentage of advertising dollars. The issue that could change all of this is the future performance of the bond market and further Fed actions, because if interest rates go up, it could slow the performance of many of these companies. In the near term, however, they should do quite well operationally. 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 3. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 503 TRADING SYMBOL: FBMPX SIZE: as of August 31, 1999, more than $183 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 AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 93.0% SHARES VALUE (NOTE 1) ADVERTISING - 8.1% Interpublic Group of 115,700 $ 4,584,613 Companies, Inc. Lamar Advertising Co. Class A 24,700 1,031,225 (a) Omnicom Group, Inc. 82,700 6,233,513 Outdoor Systems, Inc. (a) 68,000 2,197,250 Young & Rubicam, Inc. 17,600 785,400 14,832,001 BEVERAGES - 5.2% Seagram Co. Ltd. 181,200 9,621,508 BROADCASTING - 46.5% AMFM, Inc. (a) 51,900 2,556,075 AT&T Corp. (Liberty Media 403,196 12,902,272 Group) Class A (a) Cablevision Systems Corp. 60,000 4,200,000 Class A (a) CBS Corp. (a) 283,550 13,326,806 Clear Channel Communications, 124,120 8,696,157 Inc. (a) Comcast Corp. Class A 265,000 8,645,625 (special) Cox Communications, Inc. 235,860 8,771,044 Class A (a) E.W. Scripps Co. Class A 14,200 681,600 EchoStar Communications Corp. 14,400 1,204,200 Class A (a) Hearst-Argyle Television, 4,900 124,031 Inc. (a) Infinity Broadcasting Corp. 21,800 589,963 Class A MediaOne Group, Inc. 153,700 10,105,775 Sinclair Broadcast Group, 19,000 308,750 Inc. Class A (a) Time Warner, Inc. 164,944 9,783,241 Univision Communications, 3,500 258,125 Inc. Class A (a) USA Networks, Inc. (a) 54,800 2,459,150 ValueVision International, 22,000 525,250 Inc. (a) Westwood One, Inc. (a) 11,600 445,150 85,583,214 COMPUTER SERVICES & SOFTWARE - - 0.4% At Home Corp. Series A (a) 9,800 393,225 FactSet Research Systems, 6,850 317,241 Inc. Razorfish, Inc. (a) 100 2,800 713,266 CONSUMER ELECTRONICS - 0.4% Gemstar International Group 11,200 772,800 Ltd. (a) ENTERTAINMENT - 13.2% Disney (Walt) Co. 357,500 9,920,625 Fox Entertainment Group, Inc. 5,000 115,313 King World Productions, Inc. 25,000 953,125 (a) News Corp. Ltd. sponsored ADR 39,200 1,149,050 Peace Arch Entertainment 10,000 46,901 Group, Inc. Class B (a) Premier Parks, Inc. (a) 39,200 1,283,800 SHARES VALUE (NOTE 1) SFX Entertainment, Inc. Class 9,100 $ 374,806 A (a) Viacom, Inc. Class B 246,300 10,359,994 (non-vtg.) (a) 24,203,614 PRINTING - 1.3% Donnelley (R.R.) & Sons Co. 58,200 1,826,025 Valassis Communications, Inc. 14,950 654,063 (a) 2,480,088 PUBLISHING - 10.8% Gannet, Inc. 53,500 3,634,656 Harcourt General, Inc. 20,300 889,394 Harte Hanks Communications, 54,600 1,225,088 Inc. Knight-Ridder, Inc. 27,200 1,467,100 McGraw-Hill Companies, Inc. 69,600 3,597,450 Meredith Corp. 49,800 1,727,438 Playboy Enterprises, Inc. 32,900 692,956 Class B (a) Reader's Digest Association, 76,900 2,403,125 Inc. Class A (non-vtg.) Tribune Co. 44,700 4,171,069 19,808,276 RETAIL & WHOLESALE, MISCELLANEOUS - 0.6% Shop At Home, Inc. (a) 128,700 1,118,081 SERVICES - 1.4% True North Communications 77,000 2,536,188 TELEPHONE SERVICES - 5.1% AT&T Corp. 182,005 8,190,225 MCI WorldCom, Inc. (a) 15,800 1,196,850 9,387,075 TOTAL COMMON STOCKS 171,056,111 (Cost $124,836,162) CASH EQUIVALENTS - 8.5% Central Cash Collateral Fund, 6,443,300 6,443,300 5.26% (b) Taxable Central Cash Fund, 9,104,511 9,104,511 5.20% (b) TOTAL CASH EQUIVALENTS 15,547,811 (Cost $15,547,811) TOTAL INVESTMENT PORTFOLIO - 186,603,922 101.5% (Cost $140,383,973) NET OTHER ASSETS - (1.5%) (2,695,908) NET ASSETS - 100% $ 183,908,014 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $58,651,545 and $42,344,447, 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 $10,911 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $6,243,511. The fund received cash collateral of $6,443,300 which was invested in the Central Cash Collateral Fund. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $140,790,841. Net unrealized appreciation aggregated $45,813,081, of which $49,250,116 related to appreciated investment securities and $3,437,035 related to depreciated investment securities. MULTIMEDIA PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 186,603,922 value (cost $140,383,973) - See accompanying schedule Receivable for investments 4,028,852 sold Receivable for fund shares 443,331 sold Dividends receivable 88,999 Interest receivable 57,460 Redemption fees receivable 234 Other receivables 9,010 TOTAL ASSETS 191,231,808 LIABILITIES Payable for fund shares $ 681,112 redeemed Accrued management fee 93,049 Other payables and accrued 106,333 expenses Collateral on securities 6,443,300 loaned, at value TOTAL LIABILITIES 7,323,794 NET ASSETS $ 183,908,014 Net Assets consist of: Paid in capital $ 132,265,393 Accumulated net investment (462,726) loss Accumulated undistributed net 5,885,398 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 46,219,949 (depreciation) on investments NET ASSETS, for 4,081,604 $ 183,908,014 shares outstanding NET ASSET VALUE and $45.06 redemption price per share ($183,908,014 (divided by) 4,081,604 shares) Maximum offering price per $46.45 share (100/97.00 of $45.06) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 338,336 Dividends Interest 370,104 Security lending 2,939 TOTAL INCOME 711,379 EXPENSES Management fee $ 573,025 Transfer agent fees 475,652 Accounting and security 74,250 lending fees Non-interested trustees' 273 compensation Custodian fees and expenses 6,165 Registration fees 40,549 Audit 7,462 Legal 152 Total expenses before 1,177,528 reductions Expense reductions (20,518) 1,157,010 NET INVESTMENT INCOME (LOSS) (445,631) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 6,319,716 Foreign currency transactions 9,201 6,328,917 Change in net unrealized appreciation (depreciation) on: Investment securities 2,966,467 Assets and liabilities in 8 2,966,475 foreign currencies NET GAIN (LOSS) 9,295,392 NET INCREASE (DECREASE) IN $ 8,849,761 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 280,344 charges paid to FDC Sales charges - Retained by $ 278,805 FDC Deferred sales charges $ 501 withheld by FDC Exchange fees withheld by FSC $ 3,855 Expense reductions Directed $ 13,192 brokerage arrangements Custodian credits 1,697 Transfer agent credits 5,629 $ 20,518
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (445,631) $ (681,089) income (loss) Net realized gain (loss) 6,328,917 3,497,059 Change in net unrealized 2,966,475 32,313,711 appreciation (depreciation) NET INCREASE (DECREASE) IN 8,849,761 35,129,681 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (2,312,059) (7,954,098) from net realized gains Share transactions Net 85,325,901 158,099,619 proceeds from sales of shares Reinvestment of distributions 2,249,878 7,877,838 Cost of shares redeemed (70,023,339) (149,217,492) NET INCREASE (DECREASE) IN 17,552,440 16,759,965 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 88,344 309,134 TOTAL INCREASE (DECREASE) 24,178,486 44,244,682 IN NET ASSETS NET ASSETS Beginning of period 159,729,528 115,484,846 End of period (including $ 183,908,014 $ 159,729,528 accumulated net investment loss of $462,726 and $17,095, respectively) OTHER INFORMATION Shares Sold 1,852,882 4,292,822 Issued in reinvestment of 47,809 230,819 distributions Redeemed (1,522,873) (4,259,349) Net increase (decrease) 377,818 264,292
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 G 1995 Net asset value, beginning of $ 43.13 $ 33.58 $ 24.91 $ 27.18 $ 22.35 $ 23.87 period Income from Investment Operations Net investment income (loss) D (.11) (.19) (.17) .35 e .02 (.01) Net realized and unrealized 2.56 11.85 10.30 (1.58) 7.00 1.67 gain (loss) Total from investment 2.45 11.66 10.13 (1.23) 7.02 1.66 operations Less Distributions From net investment income - - - - (.02) - From net realized gain (.54) (2.19) (1.52) (1.07) (2.19) (3.21) Total distributions (.54) (2.19) (1.52) (1.07) (2.21) (3.21) Redemption fees added to paid .02 .08 .06 .03 .02 .03 in capital Net asset value, end of period $ 45.06 $ 43.13 $ 33.58 $ 24.91 $ 27.18 $ 22.35 TOTAL RETURN B, C 5.67% 36.68% 42.42% (4.52)% 31.98% 9.35% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 183,908 $ 159,730 $ 115,485 $ 54,171 $ 94,970 $ 38,157 (000 omitted) Ratio of expenses to average 1.18% A 1.35% 1.75% 1.60% 1.56% 2.05% net assets Ratio of expenses to average 1.16% A, F 1.33% F 1.71% F 1.56% F 1.54% F 2.03% F net assets after expense reductions Ratio of net investment (.45)% A (.52)% (.59)% 1.33% .08% (.07)% income (loss) to average net assets Portfolio turnover rate 47% a 109% 219% 99% 223% 107%
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 NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.49 PER SHARE. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. G 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT RETAILING -10.67% 26.05% 142.38% 416.97% SELECT RETAILING (LOAD ADJ.) -13.42% 22.19% 135.04% 401.39% S&P 500 7.32% 39.82% 206.52% 384.79% GS Consumer Industries -2.00% 24.74% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT RETAILING 26.05% 19.37% 17.85% SELECT RETAILING (LOAD ADJ.) 22.19% 18.64% 17.49% S&P 500 39.82% 25.11% 17.10% GS Consumer Industries 24.74% 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 Retailing S&P 500 00046 SP001 1989/08/31 9700.00 10000.00 1989/09/30 9676.99 9959.00 1989/10/31 9210.97 9727.95 1989/11/30 9268.51 9926.40 1989/12/31 9214.22 10164.64 1990/01/31 8494.57 9482.59 1990/02/28 8790.50 9604.91 1990/03/31 9510.15 9859.44 1990/04/30 9375.63 9612.96 1990/05/31 10626.61 10550.22 1990/06/30 10492.10 10478.48 1990/07/31 10061.65 10444.95 1990/08/31 8615.63 9500.72 1990/09/30 7653.85 9038.04 1990/10/31 7297.39 8999.18 1990/11/30 8292.79 9580.52 1990/12/31 8750.67 9847.82 1991/01/31 9600.12 10277.18 1991/02/28 10490.02 11012.00 1991/03/31 11582.16 11278.49 1991/04/30 11743.96 11305.56 1991/05/31 12721.50 11793.96 1991/06/30 12317.00 11253.80 1991/07/31 13105.78 11778.23 1991/08/31 13800.17 12057.37 1991/09/30 13651.85 11856.01 1991/10/31 13395.67 12014.88 1991/11/30 13139.49 11530.68 1991/12/31 14712.78 12849.79 1992/01/31 15528.62 12610.79 1992/02/29 16275.32 12774.73 1992/03/31 15950.37 12525.62 1992/04/30 15300.46 12893.87 1992/05/31 15618.50 12957.05 1992/06/30 14889.44 12763.99 1992/07/31 15551.84 13286.04 1992/08/31 15199.04 13013.68 1992/09/30 15652.64 13167.24 1992/10/31 16725.42 13213.32 1992/11/30 17992.61 13663.90 1992/12/31 17960.81 13831.96 1993/01/31 18084.73 13948.15 1993/02/28 17399.54 14137.85 1993/03/31 18740.77 14436.15 1993/04/30 17665.09 14086.80 1993/05/31 18643.58 14464.33 1993/06/30 18195.41 14506.27 1993/07/31 18285.05 14448.25 1993/08/31 19121.62 14995.84 1993/09/30 19704.23 14880.37 1993/10/31 20010.47 15188.39 1993/11/30 20204.68 15044.10 1993/12/31 20301.38 15226.14 1994/01/31 19396.95 15743.82 1994/02/28 20115.65 15317.17 1994/03/31 19695.73 14649.34 1994/04/30 20293.31 14836.85 1994/05/31 19291.97 15080.17 1994/06/30 19130.46 14710.71 1994/07/31 19453.47 15193.22 1994/08/31 20689.00 15816.14 1994/09/30 20285.23 15428.65 1994/10/31 20374.06 15775.79 1994/11/30 19663.43 15201.24 1994/12/31 19283.89 15426.67 1995/01/31 19130.46 15826.69 1995/02/28 19308.12 16443.45 1995/03/31 19526.15 16928.70 1995/04/30 18767.07 17427.25 1995/05/31 19098.16 18123.82 1995/06/30 20317.53 18544.83 1995/07/31 21561.14 19159.78 1995/08/31 21262.35 19207.87 1995/09/30 21900.30 20018.44 1995/10/31 20923.18 19946.98 1995/11/30 21972.98 20822.65 1995/12/31 21593.44 21223.69 1996/01/31 20963.56 21946.15 1996/02/29 22505.95 22149.59 1996/03/31 24177.54 22362.89 1996/04/30 25590.73 22692.52 1996/05/31 26818.18 23277.76 1996/06/30 26341.73 23366.44 1996/07/31 23822.23 22334.12 1996/08/31 26075.25 22805.14 1996/09/30 27011.99 24088.62 1996/10/31 26479.01 24752.98 1996/11/30 27496.51 26624.06 1996/12/31 26097.95 26096.63 1997/01/31 25976.52 27727.15 1997/02/28 26915.53 27944.53 1997/03/31 27255.52 26796.29 1997/04/30 27674.08 28396.03 1997/05/31 28958.39 30124.78 1997/06/30 30798.97 31474.37 1997/07/31 34128.37 33978.79 1997/08/31 32983.12 32075.30 1997/09/30 35118.19 33832.06 1997/10/31 34921.86 32702.07 1997/11/30 37465.94 34215.85 1997/12/31 36987.35 34803.33 1998/01/31 37627.61 35188.26 1998/02/28 41075.17 37726.04 1998/03/31 43898.88 39657.99 1998/04/30 43725.86 40056.94 1998/05/31 44482.62 39368.37 1998/06/30 46935.86 40967.51 1998/07/31 45630.23 40531.21 1998/08/31 39784.04 34671.20 1998/09/30 40000.26 36892.24 1998/10/31 43734.17 39893.06 1998/11/30 48033.58 42310.97 1998/12/31 53913.03 44748.93 1999/01/31 56249.85 46620.33 1999/02/28 56133.42 45171.37 1999/03/31 57081.45 46978.68 1999/04/30 56175.00 48798.16 1999/05/31 54470.21 47646.04 1999/06/30 58387.07 50290.39 1999/07/31 55700.99 48720.33 1999/08/31 50139.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 120334 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Retailing Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $50,139 - a 401.39% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Safeway, Inc. 7.3 Home Depot, Inc. 7.2 Dayton Hudson Corp. 7.0 Wal-Mart Stores, Inc. 6.7 McDonald's Corp. 6.3 Kroger Co. 5.9 Walgreen Co. 5.7 Gap, Inc. 5.0 CVS Corp. 4.5 Federated Department Stores, 4.4 Inc. TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Retail & Wholesale, Miscellaneous 27.0% General Merchandise Stores 24.9% Grocery Stores 14.6% Drug Stores 10.2% Apparel Stores 8.8% All Others 14.5%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 14.5 Row: 1, Col: 2, Value: 8.800000000000001 Row: 1, Col: 3, Value: 10.2 Row: 1, Col: 4, Value: 14.6 Row: 1, Col: 5, Value: 24.9 Row: 1, Col: 6, Value: 27.0 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. RETAILING PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Ramin Arani) (photograph of Steve Calhoun) NOTE TO SHAREHOLDERS: On August 2, 1999, Steve Calhoun (right) became Portfolio Manager of Fidelity Select Retailing Portfolio. The following is an interview with Ramin Arani, who managed the fund during most of the period covered by this report, with additional comments from Steve Calhoun on his strategy and outlook. Q. HOW DID THE FUND PERFORM, RAMIN? R.A. It was a difficult environment for retailing stocks. During the six-month period that ended August 31, 1999, the fund lost 10.67%. This performance lagged the Goldman Sachs Consumer Industries Index - an index of 300 stocks designed to measure the performance of companies in the consumer industries sector - which lost 2.00% during the same period. During the 12-month period that ended August 31, 1999, the fund's 26.05% return compares favorably to the 24.74% return for the Goldman Sachs index. The Standard & Poor's 500 Index returned 7.32% and 39.82% during the same six- and 12-month periods. Q. WHAT MARKET FACTORS INFLUENCED THE FUND'S PERFORMANCE AND WHAT CAUSED THE FUND TO UNDERPERFORM THE GOLDMAN SACHS INDEX? R.A. Despite positive business fundamentals and strong consumer spending at many of the retailers the fund invests in, investors opted to sell off retail stocks during the period. The sell-off was sparked primarily by the changing economic landscape, characterized by increasing interest rates, rising oil prices, concerns about potential inflation and further interest-rate hikes by the Federal Reserve Board. These economic trends, which were evident during the period, are generally detrimental to consumer purchasing power and retail stocks. In terms of the fund's performance relative to the Goldman Sachs index, a much larger percentage of fund assets are concentrated in general merchandise, apparel, retail and grocery stores compared to the index. In light of the difficult environment for retailing stocks, the fund's greater exposure to these industry groups caused the fund to underperform the benchmark. Q. WERE THERE ANY BRIGHT SPOTS FOR THE FUND? R.A. Federated Department Stores, operator of Macy's and Bloomingdale's, performed well as it lowered prices and reacted quickly to fashion changes. Consumer electronics and computer retailers, such as Best Buy, Tandy and Circuit City, also provided a significant contribution to fund performance. This group performed well as consumers continued to snap up electronics products, such as DVD players and digital phones, to replace older technology. Q. WHICH STOCKS WERE THE MAIN DETRACTORS? R.A. Despite solid business fundamentals driven by consolidation and cost-cutting initiatives, supermarket stocks, such as Safeway and Kroger, detracted from performance. Generally, the fund's supermarket holdings suffered amid sluggish sales, due to a deflationary price environment and looming competition from big discount stores such as Wal-Mart. In the department store sector, weak earnings results and a deteriorating growth outlook hurt the group. Specifically, the fund's holdings in Saks produced poor results after the company reported lower earnings. Q. TURNING TO YOU, STEVE, DID YOU MAKE ANY SIGNIFICANT CHANGES TO THE FUND SINCE TAKING OVER? S.C. I started to make some selective changes to the fund's holdings and industry allocations given the changing market environment. For example, I thought the department store sector had lost some of its competitive edge relative to specialty retailers and apparel stores, such as the Gap and the Limited. Nevertheless, certain department stores, such as Federated, have carved out a niche by expanding their Internet strategy and by upgrading their assortment of product lines. This scenario shows us that regardless of the difficulties a certain industry may experience, there are usually specific situations that create opportunities for the fund. Q. WHAT'S YOUR OUTLOOK, STEVE? S.C. I'm somewhat cautious given the changing economic environment that Ramin discussed. However, we've never run this fund by trying to determine what the Fed's next move will be. Over the short and long term, in spite of inflationary concerns and potentially higher interest rates, there are compelling investment opportunities in most of the industries where the fund invests. My focus is to search out stocks that have the best potential to outperform the companies in their industry. 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 3. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 046 TRADING SYMBOL: FSRPX SIZE: as of August 31, 1999, more than $141 million MANAGER: Steve Calhoun, since August, 1999; director of associate research, 1997-1999; equity research associate, 1994-1997; joined Fidelity in 1994 RETAILING PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 93.3% SHARES VALUE (NOTE 1) APPAREL STORES - 8.8% Abercrombie & Fitch Co. Class 49,002 $ 1,708,945 A (a) Gap, Inc. 182,087 7,124,154 Limited, Inc. (The) 90,100 3,412,538 Too, Inc. (a) 12,871 226,047 12,471,684 DRUG STORES - 10.2% CVS Corp. 150,974 6,293,729 Duane Reade, Inc. (a) 100 3,150 Walgreen Co. 348,800 8,087,800 14,384,679 GENERAL MERCHANDISE STORES - 24.9% BJ's Wholesale Club, Inc. (a) 101,800 2,875,850 Consolidated Stores Corp. (a) 97,358 1,569,898 Dayton Hudson Corp. 169,500 9,831,000 Dollar Tree Stores, Inc. (a) 10,000 330,000 Federated Department Stores, 135,900 6,251,400 Inc. (a) Kohls Corp. (a) 20,000 1,425,000 Nordstrom, Inc. 94,500 2,675,531 Saks, Inc. (a) 43,385 729,410 Wal-Mart Stores, Inc. 211,500 9,372,094 35,060,183 GROCERY STORES - 14.6% Kroger Co. (a) 358,960 8,300,950 Loblaw Companies Ltd. 82,600 2,047,705 Safeway, Inc. (a) 220,874 10,284,442 20,633,097 RESTAURANTS - 7.8% CEC Entertainment, Inc. (a) 21,500 599,313 McDonald's Corp. 215,500 8,916,313 Outback Steakhouse, Inc. (a) 51,500 1,525,688 11,041,314 RETAIL & WHOLESALE, MISCELLANEOUS - 27.0% Bed Bath & Beyond, Inc. (a) 59,000 1,622,500 Best Buy Co., Inc. (a) 65,100 4,573,275 Circuit City Stores, Inc. - 52,200 2,244,600 Circuit City Group Costco Wholesale Corp. 78,200 5,845,450 Home Depot, Inc. 166,300 10,165,088 Lowe's Companies, Inc. 134,700 6,095,175 Staples, Inc. (a) 183,900 3,999,825 Tandy Corp. 54,600 2,579,850 Williams-Sonoma, Inc. (a) 24,000 936,000 38,061,763 TOTAL COMMON STOCKS 131,652,720 (Cost $94,020,676) CASH EQUIVALENTS - 8.2% SHARES VALUE (NOTE 1) Central Cash Collateral Fund, 824,315 $ 824,315 5.26% (b) Taxable Central Cash Fund, 10,823,084 10,823,084 5.20% (b) TOTAL CASH EQUIVALENTS 11,647,399 (Cost $11,647,399) TOTAL INVESTMENT PORTFOLIO - 143,300,119 101.5% (Cost $105,668,075) NET OTHER ASSETS - (1.5%) (2,153,970) NET ASSETS - 100% $ 141,146,149 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $68,198,024 and $237,437,228, 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 $19,262 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $729,410. The fund received cash collateral of $824,315 which was invested in the Central Cash Collateral Fund. The fund participated in the interfund lending program as a borrower. The average daily loan balance during the period for which loans were outstanding amounted to $25,416,000. The weighted average interest rate was 4.73%. Interest expense includes $3,337 paid under the interfund lending program. The fund participated in the bank borrowing program. The average daily loan balance during the period for which loans were outstanding amounted to $11,488,000. The weighted average interest rate was 4.91%. Interest expense includes $1,567 paid under the bank borrowing program. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $106,340,673. Net unrealized appreciation aggregated $36,959,446, of which $39,957,952 related to appreciated investment securities and $2,998,506 related to depreciated investment securities. RETAILING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 143,300,119 value (cost $105,668,075) - See accompanying schedule Receivable for investments 6,212,480 sold Receivable for fund shares 207,099 sold Dividends receivable 55,568 Interest receivable 43,345 Redemption fees receivable 1,719 Other receivables 215,323 TOTAL ASSETS 150,035,653 LIABILITIES Payable for investments $ 5,308,454 purchased Payable for fund shares 2,568,747 redeemed Accrued management fee 77,921 Other payables and accrued 110,067 expenses Collateral on securities 824,315 loaned at value TOTAL LIABILITIES 8,889,504 NET ASSETS $ 141,146,149 Net Assets consist of: Paid in capital $ 64,077,868 Accumulated net investment (696,676) loss Accumulated undistributed net 40,132,913 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 37,632,044 (depreciation) on investments NET ASSETS, for 2,340,844 $ 141,146,149 shares outstanding NET ASSET VALUE and $60.30 redemption price per share ($141,146,149 (divided by) 2,340,844 shares) Maximum offering price per $62.16 share (100/97.00 of $60.30) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 349,977 Dividends Interest 362,116 Security lending 122 TOTAL INCOME 712,215 EXPENSES Management fee $ 695,234 Transfer agent fees 603,436 Accounting and security 90,048 lending fees Non-interested trustees' 463 compensation Custodian fees and expenses 6,895 Registration fees 29,226 Audit 9,217 Legal 1,125 Interest 4,904 Total expenses before 1,440,548 reductions Expense reductions (31,657) 1,408,891 NET INVESTMENT INCOME (LOSS) (696,676) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 43,501,126 Foreign currency transactions (2,671) 43,498,455 Change in net unrealized (62,994,121) appreciation (depreciation) on investment securities NET GAIN (LOSS) (19,495,666) NET INCREASE (DECREASE) IN $ (20,192,342) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 394,393 charges paid to FDC Sales charges - Retained by $ 394,258 FDC Deferred sales charges $ 1,966 withheld by FDC Exchange fees withheld by FSC $ 16,103 Expense reductions Directed $ 30,171 brokerage arrangements Custodian credits 1,486 $ 31,657
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (696,676) $ (1,421,013) income (loss) Net realized gain (loss) 43,498,455 381,908 Change in net unrealized (62,994,121) 79,277,166 appreciation (depreciation) NET INCREASE (DECREASE) IN (20,192,342) 78,238,061 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders - (1,977,498) From net realized gain In excess of net realized - (1,495,766) gain TOTAL DISTRIBUTIONS - (3,473,264) Share transactions Net 117,221,796 767,856,791 proceeds from sales of shares Reinvestment of distributions - 3,407,803 Cost of shares redeemed (293,687,372) (702,182,873) NET INCREASE (DECREASE) IN (176,465,576) 69,081,721 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 290,895 805,978 TOTAL INCREASE (DECREASE) (196,367,023) 144,652,496 IN NET ASSETS NET ASSETS Beginning of period 337,513,172 192,860,676 End of period (including $ 141,146,149 $ 337,513,172 accumulated net investment loss of $696,676 and $0, respectively) OTHER INFORMATION Shares Sold 1,695,821 13,691,594 Issued in reinvestment of - 64,738 distributions Redeemed (4,355,228) (12,610,578) Net increase (decrease) (2,659,407) 1,145,754
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F 1995 Net asset value, beginning of $ 67.50 $ 50.04 $ 33.25 $ 27.87 $ 23.91 $ 24.91 period Income from Investment Operations Net investment income (loss) D (.20) (.28) (.27) (.13) (.14) (.18) Net realized and unrealized (7.08) 18.27 17.14 5.49 4.07 (.96) gain (loss) Total from investment (7.28) 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 .08 .16 .43 .10 .03 .14 in capital Net asset value, end of period $ 60.30 $ 67.50 $ 50.04 $ 33.25 $ 27.87 $ 23.91 TOTAL RETURN B, C (10.67)% 36.66% 52.61% 19.59% 16.56% (4.01)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 141,146 $ 337,513 $ 192,861 $ 59,348 $ 44,051 $ 31,090 (000 omitted) Ratio of expenses to average 1.18% A 1.25% 1.63% 1.45% 1.94% 2.07% net assets Ratio of expenses to average 1.15% A, E 1.22% E 1.55% E 1.39% E 1.92% E 1.96% E net assets after expense reductions Ratio of net investment (.57)% A (.50)% (.67)% (.39)% (.53)% (.74)% income (loss) to average net assets Portfolio turnover rate 61% A 165% 308% 278% 235% 481%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT AIR TRANSPORTATION 14.86% 45.99% 133.70% 207.45% SELECT AIR TRANSPORTATION 11.34% 41.54% 126.62% 198.16% (LOAD ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Cyclical Industries 8.29% 25.75% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT AIR TRANSPORTATION 45.99% 18.50% 11.89% SELECT AIR TRANSPORTATION 41.54% 17.78% 11.54% (LOAD ADJ.) S&P 500 39.82% 25.11% 17.10% GS Cyclical Industries 25.75% 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 1989/08/31 9700.00 10000.00 1989/09/30 9318.78 9959.00 1989/10/31 8584.57 9727.95 1989/11/30 8499.85 9926.40 1989/12/31 8576.03 10164.64 1990/01/31 7693.42 9482.59 1990/02/28 8017.05 9604.91 1990/03/31 8436.29 9859.44 1990/04/30 8127.37 9612.96 1990/05/31 8693.72 10550.22 1990/06/30 8715.78 10478.48 1990/07/31 8451.00 10444.95 1990/08/31 7112.37 9500.72 1990/09/30 6398.93 9038.04 1990/10/31 6737.26 8999.18 1990/11/30 6634.29 9580.52 1990/12/31 7016.75 9847.82 1991/01/31 7847.88 10277.18 1991/02/28 8730.49 11012.00 1991/03/31 8693.72 11278.49 1991/04/30 8480.42 11305.56 1991/05/31 8980.56 11793.96 1991/06/30 8791.20 11253.80 1991/07/31 9061.47 11778.23 1991/08/31 8948.86 12057.37 1991/09/30 8648.56 11856.01 1991/10/31 9068.98 12014.88 1991/11/30 8663.58 11530.68 1991/12/31 9617.02 12849.79 1992/01/31 10172.57 12610.79 1992/02/29 10630.52 12774.73 1992/03/31 10007.41 12525.62 1992/04/30 9489.39 12893.87 1992/05/31 9617.02 12957.05 1992/06/30 9304.73 12763.99 1992/07/31 9251.25 13286.04 1992/08/31 8861.65 13013.68 1992/09/30 9151.94 13167.24 1992/10/31 9480.43 13213.32 1992/11/30 9709.62 13663.90 1992/12/31 10248.64 13831.96 1993/01/31 10341.32 13948.15 1993/02/28 10503.51 14137.85 1993/03/31 11661.98 14436.15 1993/04/30 11793.81 14086.80 1993/05/31 12467.53 14464.33 1993/06/30 11538.27 14506.27 1993/07/31 11933.20 14448.25 1993/08/31 12645.63 14995.84 1993/09/30 12390.09 14880.37 1993/10/31 13102.52 15188.39 1993/11/30 13133.49 15044.10 1993/12/31 13414.17 15226.14 1994/01/31 13932.21 15743.82 1994/02/28 13437.71 15317.17 1994/03/31 12660.65 14649.34 1994/04/30 12577.39 14836.85 1994/05/31 12051.59 15080.17 1994/06/30 11684.37 14710.71 1994/07/31 12293.63 15193.22 1994/08/31 12761.00 15816.14 1994/09/30 11333.84 15428.65 1994/10/31 11425.65 15775.79 1994/11/30 10666.16 15201.24 1994/12/31 10497.45 15426.67 1995/01/31 10835.26 15826.69 1995/02/28 11764.24 16443.45 1995/03/31 12524.32 16928.70 1995/04/30 13529.30 17427.25 1995/05/31 13748.88 18123.82 1995/06/30 15488.60 18544.83 1995/07/31 16012.21 19159.78 1995/08/31 15395.70 19207.87 1995/09/30 15961.54 20018.44 1995/10/31 15775.74 19946.98 1995/11/30 17811.05 20822.65 1995/12/31 16747.53 21223.69 1996/01/31 16367.69 21946.15 1996/02/29 18223.73 22149.59 1996/03/31 19156.07 22362.89 1996/04/30 18353.80 22692.52 1996/05/31 18528.52 23277.76 1996/06/30 18441.16 23366.44 1996/07/31 15418.59 22334.12 1996/08/31 15139.05 22805.14 1996/09/30 14955.60 24088.62 1996/10/31 14815.83 24752.98 1996/11/30 16624.13 26624.06 1996/12/31 16956.08 26096.63 1997/01/31 16292.17 27727.15 1997/02/28 15479.74 27944.53 1997/03/31 16431.94 26796.29 1997/04/30 17331.72 28396.03 1997/05/31 18537.25 30124.78 1997/06/30 18755.65 31474.37 1997/07/31 19882.56 33978.79 1997/08/31 19122.55 32075.30 1997/09/30 20686.25 33832.06 1997/10/31 20502.80 32702.07 1997/11/30 21026.94 34215.85 1997/12/31 22236.64 34803.33 1998/01/31 23081.54 35188.26 1998/02/28 24938.46 37726.04 1998/03/31 26061.90 39657.99 1998/04/30 26927.97 40056.94 1998/05/31 25805.59 39368.37 1998/06/30 27442.40 40967.51 1998/07/31 25983.30 40531.21 1998/08/31 20427.47 34671.20 1998/09/30 20109.46 36892.24 1998/10/31 22092.35 39893.06 1998/11/30 22569.36 42310.97 1998/12/31 23663.69 44748.93 1999/01/31 25319.22 46620.33 1999/02/28 25964.59 45171.37 1999/03/31 27171.16 46978.68 1999/04/30 30042.73 48798.16 1999/05/31 29880.29 47646.04 1999/06/30 31189.40 50290.39 1999/07/31 31370.96 48720.33 1999/08/31 29816.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 141048 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Air Transportation Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $29,816 - a 198.16% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Atlantic Coast Airlines 10.6 Holdings AMR Corp. 9.7 Sabre Group Holdings, Inc. 5.3 Class A Northwest Airlines Corp. 5.3 Class A SkyWest, Inc. 5.2 Lockheed Martin Corp. 5.1 Delta Air Lines, Inc. 5.1 United Technologies Corp. 4.5 Boeing Co. 4.4 America West Holding Corp. 4.1 Class B TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Air Transportation 55.0% Aerospace & Defense 17.9% Trucking & Freight 9.1% Computer Services & Software 5.3% Ship Building & Repair 3.6% All Other 9.1%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 9.1 Row: 1, Col: 2, Value: 3.6 Row: 1, Col: 3, Value: 5.3 Row: 1, Col: 4, Value: 9.1 Row: 1, Col: 5, Value: 17.9 Row: 1, Col: 6, Value: 55.0 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. AIR TRANSPORTATION PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Christopher Zepf) Christopher Zepf, Portfolio Manager of Fidelity Select Air Transportation Portfolio Q. HOW DID THE FUND PERFORM, CHRIS? A. For the six-month period that ended August 31, 1999, the fund returned 14.86%. For the same six-month period, the Standard & Poor's 500 Index returned 7.32%. 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 8.29%. For the 12-month period that ended August 31, 1999, the fund returned 45.99%. That compared to the 39.82% return for the Standard & Poor's index and the 25.75% return for Goldman Sachs index during the same 12-month period. Q. WHAT FACTORS HELPED THE FUND OUTPACE BOTH THE STANDARD & POOR'S AND GOLDMAN SACHS INDEXES DURING THE PAST SIX MONTHS? A. Good security selection - which led to a smaller weighting in major airline carriers and a larger weighting in regional airlines - was the main factor. Throughout the past six months, the major airline carriers came under growing pressure because the industry's increased capacity growth - that is, the number of available airline seats - outstripped demand growth, meaning the number of tickets sold. In addition, the price of oil - which is a major cost component for the airlines - jumped substantially during the period. My strategy was to pare back the fund's holdings in major carriers in order to focus more heavily on regional airlines. Q. HOW DID THAT STRATEGY PAN OUT? A. That strategy proved beneficial because the regional airline group held up much better than their major airline counterparts over the past six months. In contrast to the majors, the regionals typically enjoy monopolistic-type holds on the smaller, niche-like markets they fly rather than the head-to-head competition that characterizes the major carriers. In addition, I emphasized major carriers who had used various financial instruments to hedge their exposure to rising oil prices, such as AMR, the parent company of American Airlines. Q. WHICH HOLDINGS MADE THE BIGGEST CONTRIBUTION TO THE FUND'S PERFORMANCE? A. Regional airline holdings, including Atlantic Coast Airlines and niche player America West, were some of the fund's top performers. In addition, Northwest Airlines was a standout, benefiting from the perception that signs of an economic rebound in Asia - which makes up about one-quarter of Northwest's traffic - would help to improve the company's business prospects. The fund also benefited from its holdings in Gulfstream Aerospace, which was acquired by General Dynamics on July 30, 1999, at a significant profit to the fund. Computer reservations provider Sabre Holdings also was a winner, in part boosted by a contract with USAir to handle that airline's reservations. In addition, investors began to place a higher value on Sabre's Travelocity.com business - which provides travel information and airline tickets via the Internet. Q. WHICH HOLDINGS DETRACTED FROM THE FUND'S PERFORMANCE DURING THE PAST SIX MONTHS? A. As I mentioned earlier, major airline carriers such as AMR and Delta Airlines were the most significant detractors during the past six months. Despite their recent lackluster performance, however, I continued to maintain holdings in selected major carriers. For example, AMR holds 82% of fast-growing Sabre and I believed that the airline portion of the company was selling at a significant discount to what I thought was its fair value. Other positives, in my view, included the fact that the company is led by a strong management team and has implemented an ongoing effort to buy back some of its shares. Q. WHAT'S YOUR OUTLOOK? A. A lot depends on the global economy. For air transport stocks to do well, we'll likely need continued economic strength in the United States and for Asia to continue on a path toward recovery. Although capacity growth will continue to be an issue into next year, I believe that many of the stocks that make up the sector are more attractively valued than they were earlier in the year. To the extent that investors recognize that value, the sector could be poised to do well. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 034 TRADING SYMBOL: FSAIX SIZE: as of August 31, 1999, more than $50 million MANAGER: Christopher Zepf, since 1998; manager, Fidelity Select Transportation Portfolio, since 1998; joined Fidelity in 1998 AIR TRANSPORTATION PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 90.9% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 17.9% Boeing Co. 49,400 $ 2,238,438 Cordant Technologies, Inc. 30,000 1,241,250 Howmet International, Inc. (a) 40,200 718,575 Lockheed Martin Corp. 69,500 2,571,500 United Technologies Corp. 34,000 2,248,250 9,018,013 AIR TRANSPORTATION - 55.0% AirTran Holdings, Inc. (a) 47,900 264,947 Alaska Air Group, Inc. (a) 28,100 1,215,325 America West Holding Corp. 107,100 2,088,450 Class B (a) AMR Corp. (a) 83,500 4,895,188 Atlantic Coast Airlines 267,900 5,324,510 Holdings (a) Comair Holdings, Inc. 92,575 1,955,647 Continental Airlines, Inc. 35,700 1,457,006 Class B (a) Delta Air Lines, Inc. 50,500 2,566,031 Mesaba Holdings, Inc. (a) 60,700 751,163 Northwest Airlines Corp. 89,900 2,652,050 Class A (a) SkyWest, Inc. 131,400 2,644,425 Southwest Airlines Co. 114,350 1,908,216 27,722,958 COMPUTER SERVICES & SOFTWARE - - 5.3% Sabre Group Holdings, Inc. 47,600 2,665,600 Class A (a) SHIP BUILDING & REPAIR - 3.6% General Dynamics Corp. 28,400 1,789,200 TRUCKING & FREIGHT - 9.1% Air Express International 37,300 911,519 Corp. Airborne Freight Corp. 58,100 1,463,394 Eagle USA Airfreight, Inc. (a) 25,150 704,200 Expeditors International of 47,200 1,525,150 Washington, Inc. 4,604,263 TOTAL COMMON STOCKS 45,800,034 (Cost $40,207,437) CONVERTIBLE PREFERRED STOCKS - - 2.1% OIL & GAS - 2.1% Tesoro Petroleum Corp. 60,000 1,027,500 $1.1552 PIES (Cost $776,281) CASH EQUIVALENTS - 3.3% SHARES VALUE (NOTE 1) Taxable Central Cash Fund, 1,658,624 $ 1,658,624 5.20% (b) (Cost $1,658,624) TOTAL INVESTMENT PORTFOLIO - 48,486,158 96.3% (Cost $42,642,342) NET OTHER ASSETS - 3.7% 1,888,480 NET ASSETS - 100% $ 50,374,638 SECURITY TYPE ABBREVIATIONS PIES - Premium Income Equity Securities LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $92,415,367 and $117,058,277, 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 $18,231 for the period. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $43,406,820. Net unrealized appreciation aggregated $5,079,338, of which $7,117,275 related to appreciated investment securities and $2,037,937 related to depreciated investment securities. AIR TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 48,486,158 value (cost $42,642,342) - See accompanying schedule Receivable for investments 2,269,818 sold Receivable for fund shares 27,290 sold Dividends receivable 38,975 Interest receivable 17,134 Redemption fees receivable 232 Other receivables 575 TOTAL ASSETS 50,840,182 LIABILITIES Payable for fund shares $ 395,694 redeemed Accrued management fee 27,832 Other payables and accrued 42,018 expenses TOTAL LIABILITIES 465,544 NET ASSETS $ 50,374,638 Net Assets consist of: Paid in capital $ 36,234,292 Accumulated net investment (166,056) loss Accumulated undistributed net 8,462,523 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 5,843,879 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 1,614,104 $ 50,374,638 shares outstanding NET ASSET VALUE and $31.21 redemption price per share ($50,374,638 (divided by) 1,614,104 shares) Maximum offering price per $32.18 share (100/97.00 of $31.21) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 168,249 Dividends Interest 123,014 TOTAL INCOME 291,263 EXPENSES Management fee $ 208,372 Transfer agent fees 204,883 Accounting fees and expenses 30,838 Non-interested trustees' 104 compensation Custodian fees and expenses 6,729 Registration fees 25,382 Audit 4,336 Legal 44 Total expenses before 480,688 reductions Expense reductions (23,369) 457,319 NET INVESTMENT INCOME (LOSS) (166,056) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 10,802,006 Foreign currency transactions 1,122 10,803,128 Change in net unrealized appreciation (depreciation) on: Investment securities (1,370,894) Assets and liabilities in (1,880) (1,372,774) foreign currencies NET GAIN (LOSS) 9,430,354 NET INCREASE (DECREASE) IN $ 9,264,298 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 93,135 charges paid to FDC Sales charges - Retained by $ 90,549 FDC Deferred sales charges $ 433 withheld by FDC Exchange fees withheld by FSC $ 4,463 Expense reductions Directed $ 23,100 brokerage arrangements Custodian credits 269 $ 23,369
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (166,056) $ (494,512) income (loss) Net realized gain (loss) 10,803,128 10,294,170 Change in net unrealized (1,372,774) (7,870,755) appreciation (depreciation) NET INCREASE (DECREASE) IN 9,264,298 1,928,903 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (1,461,646) (1,287,140) from net realized gains Share transactions Net 64,949,277 234,828,394 proceeds from sales of shares Reinvestment of distributions 1,415,821 1,276,230 Cost of shares redeemed (89,901,207) (352,683,506) NET INCREASE (DECREASE) IN (23,536,109) (116,578,882) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 158,684 701,437 TOTAL INCREASE (DECREASE) (15,574,773) (115,235,682) IN NET ASSETS NET ASSETS Beginning of period 65,949,411 181,185,093 End of period (including $ 50,374,638 $ 65,949,411 accumulated net investment loss of $166,056 and $0, respectively) OTHER INFORMATION Shares Sold 2,121,060 8,676,907 Issued in reinvestment of 49,400 44,922 distributions Redeemed (2,931,745) (13,091,302) Net increase (decrease) (761,285) (4,369,473)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 G 1995 Net asset value, beginning of $ 27.76 $ 26.86 $ 17.72 $ 21.11 $ 13.93 $ 17.12 period Income from Investment Operations Net investment income (loss) D (.07) (.14) (.19) (.22) (.01) (.18) Net realized and unrealized 4.07 1.06 10.59 (3.12) 7.47 (2.01) gain (loss) Total from investment 4.00 .92 10.40 (3.34) 7.46 (2.19) operations Less Distributions From net realized gain (.62) (.21) (1.43) (.07) (.46) (.92) In excess of net realized gain - - - (.20) - (.17) Total distributions (.62) (.21) (1.43) (.27) (.46) (1.09) Redemption fees added to paid .07 .19 .17 .22 .18 .09 in capital Net asset value, end of period $ 31.21 $ 27.76 $ 26.86 $ 17.72 $ 21.11 $ 13.93 TOTAL RETURN B, C 14.86% 4.11% 61.10% (15.06)% 54.91% (12.45)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 50,375 $ 65,949 $ 181,185 $ 35,958 $ 75,359 $ 18,633 (000 omitted) Ratio of expenses to average 1.33% A 1.35% 1.93% 1.89% 1.47% 2.50% E net assets Ratio of expenses to average 1.26% A, F 1.27% F 1.87% F 1.80% F 1.41% F 2.50% net assets after expense reductions Ratio of net investment (.46)% A (.50)% (.84)% (1.10)% (.07)% (1.31)% income (loss) to average net assets Portfolio turnover rate 288% A 260% 294% 469% 504% 200%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. G 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT AUTOMOTIVE 3.31% 17.66% 50.12% 206.80% SELECT AUTOMOTIVE (LOAD ADJ.) 0.14% 14.06% 45.54% 197.52% S&P 500 7.32% 39.82% 206.52% 384.79% GS Cyclical Industries 8.29% 25.75% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT AUTOMOTIVE 17.66% 8.46% 11.86% SELECT AUTOMOTIVE (LOAD ADJ.) 14.06% 7.79% 11.52% S&P 500 39.82% 25.11% 17.10% GS Cyclical Industries 25.75% 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 1989/08/31 9700.00 10000.00 1989/09/30 9475.60 9959.00 1989/10/31 8686.57 9727.95 1989/11/30 8766.19 9926.40 1989/12/31 8794.14 10164.64 1990/01/31 8561.93 9482.59 1990/02/28 8816.61 9604.91 1990/03/31 9146.21 9859.44 1990/04/30 9116.24 9612.96 1990/05/31 9633.11 10550.22 1990/06/30 9805.60 10478.48 1990/07/31 9835.98 10444.95 1990/08/31 8423.25 9500.72 1990/09/30 7618.14 9038.04 1990/10/31 7466.23 8999.18 1990/11/30 7906.76 9580.52 1990/12/31 8202.98 9847.82 1991/01/31 8666.30 10277.18 1991/02/28 9372.67 11012.00 1991/03/31 9448.62 11278.49 1991/04/30 9554.96 11305.56 1991/05/31 10322.09 11793.96 1991/06/30 10299.30 11253.80 1991/07/31 10724.64 11778.23 1991/08/31 11074.03 12057.37 1991/09/30 10747.43 11856.01 1991/10/31 11028.45 12014.88 1991/11/30 10481.59 11530.68 1991/12/31 11264.77 12849.79 1992/01/31 12481.71 12610.79 1992/02/29 13738.69 12774.73 1992/03/31 14034.92 12525.62 1992/04/30 14931.62 12893.87 1992/05/31 14923.61 12957.05 1992/06/30 14834.83 12763.99 1992/07/31 14971.15 13286.04 1992/08/31 14040.96 13013.68 1992/09/30 13808.42 13167.24 1992/10/31 14385.77 13213.32 1992/11/30 15083.41 13663.90 1992/12/31 15952.56 13831.96 1993/01/31 16689.21 13948.15 1993/02/28 16934.76 14137.85 1993/03/31 17843.29 14436.15 1993/04/30 17740.20 14086.80 1993/05/31 18820.48 14464.33 1993/06/30 19149.63 14506.27 1993/07/31 19369.06 14448.25 1993/08/31 20044.23 14995.84 1993/09/30 20255.22 14880.37 1993/10/31 20685.65 15188.39 1993/11/30 20685.65 15044.10 1993/12/31 21597.31 15226.14 1994/01/31 22828.47 15743.82 1994/02/28 22091.50 15317.17 1994/03/31 20539.55 14649.34 1994/04/30 20121.91 14836.85 1994/05/31 19823.80 15080.17 1994/06/30 19569.54 14710.71 1994/07/31 20156.98 15193.22 1994/08/31 19823.80 15816.14 1994/09/30 18982.10 15428.65 1994/10/31 19341.58 15775.79 1994/11/30 18175.47 15201.24 1994/12/31 18843.03 15426.67 1995/01/31 18395.31 15826.69 1995/02/28 19310.21 16443.45 1995/03/31 19212.88 16928.70 1995/04/30 19154.48 17427.25 1995/05/31 19543.80 18123.82 1995/06/30 20030.45 18544.83 1995/07/31 21470.93 19159.78 1995/08/31 21276.27 19207.87 1995/09/30 21383.33 20018.44 1995/10/31 20390.57 19946.98 1995/11/30 20896.68 20822.65 1995/12/31 21373.60 21223.69 1996/01/31 21120.54 21946.15 1996/02/29 21266.53 22149.59 1996/03/31 22561.02 22362.89 1996/04/30 23700.87 22692.52 1996/05/31 24246.62 23277.76 1996/06/30 23964.00 23366.44 1996/07/31 22570.40 22334.12 1996/08/31 23145.38 22805.14 1996/09/30 23340.29 24088.62 1996/10/31 23447.49 24752.98 1996/11/30 24636.43 26624.06 1996/12/31 24808.56 26096.63 1997/01/31 25243.08 27727.15 1997/02/28 25647.30 27944.53 1997/03/31 25142.03 26796.29 1997/04/30 25703.81 28396.03 1997/05/31 27173.80 30124.78 1997/06/30 27992.79 31474.37 1997/07/31 29221.29 33978.79 1997/08/31 29000.79 32075.30 1997/09/30 30586.28 33832.06 1997/10/31 29179.29 32702.07 1997/11/30 28979.79 34215.85 1997/12/31 28971.04 34803.33 1998/01/31 28959.59 35188.26 1998/02/28 31490.26 37726.04 1998/03/31 33402.58 39657.99 1998/04/30 33248.55 40056.94 1998/05/31 33062.94 39368.37 1998/06/30 32555.62 40967.51 1998/07/31 31342.98 40531.21 1998/08/31 25292.16 34671.20 1998/09/30 25304.54 36892.24 1998/10/31 27593.70 39893.06 1998/11/30 29090.94 42310.97 1998/12/31 30402.56 44748.93 1999/01/31 30798.53 46620.33 1999/02/28 28806.34 45171.37 1999/03/31 28187.64 46978.68 1999/04/30 31330.60 48798.16 1999/05/31 31206.87 47646.04 1999/06/30 32184.40 50290.39 1999/07/31 30464.43 48720.33 1999/08/31 29752.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 144425 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Automotive Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $29,752 - a 197.52% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Federal-Mogul Corp. 8.3 SPX Corp. 6.6 TRW, Inc. 5.9 Eaton Corp. 5.7 Ford Motor Co. 5.6 Danaher Corp. 5.6 Honda Motor Co. Ltd. 5.4 Johnson Controls, Inc. 5.1 Navistar International Corp. 4.1 AutoZone, Inc. 3.7 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Autos, Tires, & Accessories 88.6% Consumer Durables 2.5% Iron & Steel 1.9% Industrial Machinery & Equipment 1.2% Electronics 0.5% All Others 5.3%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 5.3 Row: 1, Col: 2, Value: 0.5 Row: 1, Col: 3, Value: 1.2 Row: 1, Col: 4, Value: 1.9 Row: 1, Col: 5, Value: 2.5 Row: 1, Col: 6, Value: 88.59999999999999 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. AUTOMOTIVE PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Albert Grosman) (photograph of Douglas Nigen) NOTE TO SHAREHOLDERS: On September 1, 1999, after the period covered by this report, Douglas Nigen (right) became Portfolio Manager of Fidelity Select Automotive Portfolio. The following is an interview with Albert Grosman, who managed the fund during the period covered by this report, with comments from Douglas Nigen on his outlook. Q. HOW DID THE FUND PERFORM, ALBERT? A.G. For the six months that ended August 31, 1999, the fund returned 3.31%. For the same period, the Standard & Poor's 500 Index returned 7.32%, 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 8.29%. For the year that ended August 31, 1999, the fund returned 17.66%, while the S&P 500 and the Goldman Sachs index returned 39.82% and 25.75%, respectively. The fund underperformed the Goldman Sachs index because the index had a larger exposure to commodity-oriented stocks that rallied strongly during part of the period while automotive stocks remained relatively flat. Q. WHAT FACTORS AFFECTED AUTOMOTIVE STOCKS DURING THE SIX-MONTH PERIOD? A.G. The biggest factor by far was the changing interest-rate environment. Long-term interest rates rose throughout the period, as investors feared that the strong domestic economy in concert with improving overseas economies could rekindle inflation. Cyclical stocks such as automobile manufacturers generally do not perform well when interest rates are rising - auto loan and lease rates increase in sympathy, automobile purchases become relatively more expensive and many consumers postpone new purchases. As a result, auto manufacturers offered consumers substantial incentives to keep sales volume up, and this had a negative effect on earnings growth. Another factor was continued weakness in the auto-replacement parts market. Domestic vehicle quality has improved significantly over the past decade, which has reduced demand for replacement parts. Q. WHAT STRATEGY DID YOU PURSUE IN SUCH A CHALLENGING ENVIRONMENT? A.G. I reduced the portfolio's exposure to auto manufacturers and added holdings in companies with automobile-related businesses. For example, I increased the fund's weighting in Danaher and Snap-On Tools - - two companies that manufacture tools, equipment and controls used in manufacturing automation. These stocks represent companies with more diversified operations and less cyclical characteristics than those that rely more heavily on automobile and parts manufacturing. I also reduced the fund's investment in auto-parts stocks because - in addition to reduced demand for replacement parts - vehicle manufacturers are outsourcing more and more component manufacturing in an effort to increase their own manufacturing efficiency. This increases parts manufacturers' fixed costs, which in turn reduces their margins and hurts their earnings. Q. WHAT STOCKS PERFORMED WELL? A.G. Several of the portfolio's top-10 holdings contributed to the fund's total return. SPX Corp. - a diversified producer of industrial products, vehicle components and auto aftermarket diagnostic tools - performed very well. SPX profited from a successful acquisition strategy that increased efficiency and significantly enhanced its growth potential. Eaton and Navistar International also generated strong returns. Both companies have large North American trucking operations that benefited from increased demand for overnight shipping. Q. WERE THERE ANY DISAPPOINTMENTS? A.G. The stocks that did poorly fell into two categories: domestic automobile manufacturers and aftermarket parts manufacturers. Ford, General Motors and DaimlerChrysler all had negative returns resulting from the impact of higher interest rates that led to increased incentives and deteriorating margins. Pep Boys and Autozone suffered from the weak market for replacement parts that I discussed earlier. Q. TURNING TO YOU DOUG, WHAT'S YOUR OUTLOOK FOR THE MONTHS AHEAD? D.N. I am cautiously optimistic about the automotive group over the next three to six months for several reasons. First, although I expect vehicle volume to remain stable, I am concerned about pricing and incentives. Second, I anticipate continuing consolidation by auto-parts businesses. What remains to be seen is how quickly they can cut costs and increase efficiency - both critical factors for their stock prices. Lastly, the United Auto Workers' three-year national contract with the major domestic auto producers expired in September. At the time of this report, negotiations appeared to be starting favorably, but their outcome and the final contract's impact on the auto companies is still uncertain. 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 3. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 502 TRADING SYMBOL: FSAVX SIZE: as of August 31, 1999, more than $19 million MANAGER: Douglas Nigen, since September 1999; analyst, automotive manufacturing, automotive parts, tire and rental car industries, 1999- present; specialty apparel industry, 1997-1999; joined Fidelity in 1997 AUTOMOTIVE PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 95.2% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 88.6% American Axle & Manufacturing 6,400 $ 100,000 Holdings, Inc. (a) Arvin Industries, Inc. 7,600 271,700 AutoNation, Inc. (a) 13,300 172,069 AutoZone, Inc. (a) 30,200 719,138 Borg-Warner Automotive, Inc. 2,700 127,913 DaimlerChrysler AG (Reg.) 8,427 633,605 Dana Corp. 14,600 636,013 Danaher Corp. 18,500 1,086,875 Delphi Automotive Systems 6,924 129,825 Corp. Discount Auto Parts, Inc. (a) 4,400 84,150 Dura Automotive Systems, Inc. 3,400 87,975 Class A (a) Eaton Corp. 11,250 1,102,500 Federal-Mogul Corp. 35,100 1,601,433 Ford Motor Co. 20,900 1,089,413 General Motors Corp. 8,500 562,063 Gentex Corp. (a) 9,000 172,125 Goodyear Tire & Rubber Co. 7,400 415,325 Hayes Lemmerz International, 7,000 197,313 Inc. (a) Honda Motor Co. Ltd. 26,000 1,044,320 Johnson Controls, Inc. 14,550 994,856 Lear Corp. (a) 9,100 365,706 Lithia Motors, Inc. (a) 9,600 194,400 Magna International, Inc. 8,800 436,905 Class A Mascotech, Inc. 6,100 105,225 Monro Muffler Brake, Inc. (a) 3,395 23,128 Navistar International Corp. 16,300 792,588 (a) Oshkosh Truck Co. Class B 3,600 121,050 Pep Boys-Manny, Moe & Jack 31,100 452,894 Sonic Automotive, Inc. (a) 12,200 147,163 SPX Corp. (a) 15,100 1,279,725 Standard Motor Products, Inc. 7,400 166,500 Tower Automotive, Inc. (a) 23,200 464,000 TRW, Inc. 20,800 1,133,600 Volkswagen AG 2,900 173,280 Wynn's International, Inc. 2,400 43,200 17,127,975 CONSUMER DURABLES - 2.5% Snap-On, Inc. 14,400 486,900 ELECTRONICS - 0.5% Stoneridge, Inc. (a) 5,900 106,200 INDUSTRIAL MACHINERY & EQUIPMENT - 1.2% Mark IV Industries, Inc. 11,300 223,881 SHARES VALUE (NOTE 1) IRON & STEEL - 1.9% Linamar Corp. 17,400 $ 254,151 SPS Technologies, Inc. (a) 3,000 117,563 371,714 LEISURE DURABLES & TOYS - 0.5% Coachmen Industries, Inc. 5,600 88,550 TOTAL COMMON STOCKS 18,405,220 (Cost $16,571,784) CASH EQUIVALENTS - 7.1% Central Cash Collateral Fund, 401,500 401,500 5.26% (b) Taxable Central Cash Fund, 970,461 970,461 5.20% (b) TOTAL CASH EQUIVALENTS 1,371,961 (Cost $1,371,961) TOTAL INVESTMENT PORTFOLIO - 19,777,181 102.3% (Cost $17,943,745) NET OTHER ASSETS - (2.3%) $ (449,286) NET ASSETS - 100% $ 19,327,895 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $1,794,438 and $46,339,377, 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 $4,817 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $409,713. The fund received cash collateral of $401,500 which was invested in the Central Cash Collateral Fund. The fund participated in the bank borrowing program. The average daily loan balance during the period for which loans were outstanding amounted to $941,800. The weighted average interest rate was 5.58%. Distribution of investments by country of issue, as a percentage of net assets is as follows: United States of America 86.8% Japan 5.4 Germany 4.2 Canada 3.6 100.0% INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $18,046,033. Net unrealized appreciation aggregated $1,731,148, of which $2,794,004 related to appreciated investment securities and $1,062,856 related to depreciated investment securities. 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 has elected 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. AUTOMOTIVE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 19,777,181 value (cost $17,943,745) - See accompanying schedule Receivable for fund shares 167 sold Dividends receivable 39,351 Interest receivable 4,434 Redemption fees receivable 59 Other receivables 139 TOTAL ASSETS 19,821,331 LIABILITIES Payable for fund shares $ 49,795 redeemed Accrued management fee 9,798 Other payables and accrued 32,343 expenses Collateral on securities 401,500 loaned, at value TOTAL LIABILITIES 493,436 NET ASSETS $ 19,327,895 Net Assets consist of: Paid in capital $ 24,839,163 Accumulated net investment (55,827) loss Accumulated undistributed net (7,288,869) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 1,833,428 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 803,745 $ 19,327,895 shares outstanding NET ASSET VALUE and $24.05 redemption price per share ($19,327,895 (divided by) 803,745 shares) Maximum offering price per $24.79 share (100/97.00 of $24.05) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 174,736 Dividends Interest 37,825 Security lending 139 TOTAL INCOME 212,700 EXPENSES Management fee $ 91,437 Transfer agent fees 121,515 Accounting and security 30,325 lending fees Non-interested trustees' 89 compensation Custodian fees and expenses 6,655 Registration fees 19,140 Audit 4,167 Legal 23 Interest 730 Total expenses before 274,081 reductions Expense reductions (5,554) 268,527 NET INVESTMENT INCOME (LOSS) (55,827) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (2,704,543) Foreign currency transactions 8,308 (2,696,235) Change in net unrealized appreciation (depreciation) on: Investment securities 2,957,736 Assets and liabilities in (55) 2,957,681 foreign currencies NET GAIN (LOSS) 261,446 NET INCREASE (DECREASE) IN $ 205,619 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 13,408 charges paid to FDC Sales charges - Retained by $ 13,408 FDC Deferred sales charges $ 215 withheld by FDC Exchange fees withheld by FSC $ 6,510 Expense reductions Directed $ 5,554 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (55,827) $ 69,009 income (loss) Net realized gain (loss) (2,696,235) (4,430,338) Change in net unrealized 2,957,681 (3,784,633) appreciation (depreciation) NET INCREASE (DECREASE) IN 205,619 (8,145,962) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders - (41,356) From net investment income From net realized gain - (2,674,498) TOTAL DISTRIBUTIONS - (2,715,854) Share transactions Net 12,219,159 93,308,374 proceeds from sales of shares Reinvestment of distributions - 2,635,878 Cost of shares redeemed (57,698,902) (53,084,232) NET INCREASE (DECREASE) IN (45,479,743) 42,860,020 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 60,925 53,948 TOTAL INCREASE (DECREASE) (45,213,199) 32,052,152 IN NET ASSETS NET ASSETS Beginning of period 64,541,094 32,488,942 End of period (including $ 19,327,895 $ 64,541,094 undistributed net investment income (loss) of $(55,827) and $47,401, respectively) OTHER INFORMATION Shares Sold 485,431 3,661,058 Issued in reinvestment of - 97,455 distributions Redeemed (2,454,281) (2,167,227) Net increase (decrease) (1,968,850) 1,591,286
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F 1995 Net asset value, beginning of $ 23.28 $ 27.50 $ 25.38 $ 21.85 $ 19.84 $ 25.48 period Income from Investment Operations Net investment income (loss) D (.04) .03 .05 .13 .03 .08 Net realized and unrealized .76 (2.09) 5.21 4.28 1.95 (3.46) gain (loss) Total from investment .72 (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 .05 .02 .03 .04 .03 .05 in capital Net asset value, end of period $ 24.05 $ 23.28 $ 27.50 $ 25.38 $ 21.85 $ 19.84 TOTAL RETURN B, C 3.31% (8.52)% 22.78% 20.60% 10.13% (12.59)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 19,328 $ 64,541 $ 32,489 $ 86,347 $ 55,753 $ 60,075 (000 omitted) Ratio of expenses to average 1.70% A 1.45% 1.60% 1.56% 1.81% 1.82% net assets Ratio of expenses to average 1.66% A, E 1.41% E 1.56% E 1.52% E 1.80% E 1.80% E net assets after expense reductions Ratio of net investment (.35)% A .11% .17% .54% .13% .34% income (loss) to average net assets Portfolio turnover rate 12% A 96% 153% 175% 61% 63%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT CHEMICALS 17.07% 20.94% 51.36% 187.92% SELECT CHEMICALS (LOAD ADJ.) 13.49% 17.24% 46.75% 179.21% S&P 500 7.32% 39.82% 206.52% 384.79% GS Cyclical Industries 8.29% 25.75% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT CHEMICALS 20.94% 8.64% 11.15% SELECT CHEMICALS (LOAD ADJ.) 17.24% 7.97% 10.81% S&P 500 39.82% 25.11% 17.10% GS Cyclical Industries 25.75% 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 1989/08/31 9700.00 10000.00 1989/09/30 9355.00 9959.00 1989/10/31 8694.05 9727.95 1989/11/30 8879.26 9926.40 1989/12/31 9237.25 10164.64 1990/01/31 8579.09 9482.59 1990/02/28 8636.48 9604.91 1990/03/31 8892.86 9859.44 1990/04/30 8686.23 9612.96 1990/05/31 9443.88 10550.22 1990/06/30 9520.97 10478.48 1990/07/31 9552.47 10444.95 1990/08/31 8276.71 9500.72 1990/09/30 7867.20 9038.04 1990/10/31 7957.76 8999.18 1990/11/30 8489.33 9580.52 1990/12/31 8855.52 9847.82 1991/01/31 9450.09 10277.18 1991/02/28 10174.60 11012.00 1991/03/31 10418.73 11278.49 1991/04/30 10336.04 11305.56 1991/05/31 11052.67 11793.96 1991/06/30 10752.29 11253.80 1991/07/31 11270.52 11778.23 1991/08/31 11492.06 12057.37 1991/09/30 11405.03 11856.01 1991/10/31 11587.00 12014.88 1991/11/30 11009.43 11530.68 1991/12/31 12279.22 12849.79 1992/01/31 12515.04 12610.79 1992/02/29 12966.37 12774.73 1992/03/31 12872.85 12525.62 1992/04/30 13340.43 12893.87 1992/05/31 13263.18 12957.05 1992/06/30 12870.04 12763.99 1992/07/31 13276.15 13286.04 1992/08/31 12822.52 13013.68 1992/09/30 12835.48 13167.24 1992/10/31 12705.87 13213.32 1992/11/30 13090.38 13663.90 1992/12/31 13372.65 13831.96 1993/01/31 13358.89 13948.15 1993/02/28 13125.01 14137.85 1993/03/31 13436.85 14436.15 1993/04/30 13686.08 14086.80 1993/05/31 13893.30 14464.33 1993/06/30 13544.79 14506.27 1993/07/31 13752.01 14448.25 1993/08/31 14425.49 14995.84 1993/09/30 13968.65 14880.37 1993/10/31 14496.13 15188.39 1993/11/30 14604.45 15044.10 1993/12/31 15078.61 15226.14 1994/01/31 16252.30 15743.82 1994/02/28 16226.67 15317.17 1994/03/31 15739.77 14649.34 1994/04/30 16500.93 14836.85 1994/05/31 16898.24 15080.17 1994/06/30 16686.69 14710.71 1994/07/31 17440.01 15193.22 1994/08/31 18451.33 15816.14 1994/09/30 18317.17 15428.65 1994/10/31 18286.21 15775.79 1994/11/30 16851.80 15201.24 1994/12/31 17306.52 15426.67 1995/01/31 16854.27 15826.69 1995/02/28 17832.40 16443.45 1995/03/31 18379.31 16928.70 1995/04/30 18773.30 17427.25 1995/05/31 18960.23 18123.82 1995/06/30 19280.69 18544.83 1995/07/31 20193.98 19159.78 1995/08/31 20279.44 19207.87 1995/09/30 20599.89 20018.44 1995/10/31 19574.44 19946.98 1995/11/30 20428.98 20822.65 1995/12/31 21018.47 21223.69 1996/01/31 21984.58 21946.15 1996/02/29 22732.16 22149.59 1996/03/31 23830.52 22362.89 1996/04/30 24078.85 22692.52 1996/05/31 24026.77 23277.76 1996/06/30 23720.07 23366.44 1996/07/31 22759.46 22334.12 1996/08/31 23766.36 22805.14 1996/09/30 24819.56 24088.62 1996/10/31 24987.37 24752.98 1996/11/30 25907.47 26624.06 1996/12/31 25541.48 26096.63 1997/01/31 25941.24 27727.15 1997/02/28 26156.49 27944.53 1997/03/31 25313.92 26796.29 1997/04/30 26249.95 28396.03 1997/05/31 27542.75 30124.78 1997/06/30 28299.96 31474.37 1997/07/31 30565.43 33978.79 1997/08/31 30657.77 32075.30 1997/09/30 30848.61 33832.06 1997/10/31 29309.57 32702.07 1997/11/30 29475.79 34215.85 1997/12/31 29750.33 34803.33 1998/01/31 29321.44 35188.26 1998/02/28 31248.06 37726.04 1998/03/31 32398.59 39657.99 1998/04/30 32497.33 40056.94 1998/05/31 31225.24 39368.37 1998/06/30 28708.87 40967.51 1998/07/31 26268.97 40531.21 1998/08/31 23092.22 34671.20 1998/09/30 22981.00 36892.24 1998/10/31 23613.57 39893.06 1998/11/30 25316.64 42310.97 1998/12/31 25021.35 44748.93 1999/01/31 23632.98 46620.33 1999/02/28 23855.42 45171.37 1999/03/31 24676.17 46978.68 1999/04/30 29539.30 48798.16 1999/05/31 28242.98 47646.04 1999/06/30 28657.19 50290.39 1999/07/31 28219.97 48720.33 1999/08/31 27921.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 121251 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Chemicals Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $27,921 - a 179.21% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Praxair, Inc. 6.3 PPG Industries, Inc. 4.9 Rhone-Poulenc SA sponsored 4.9 ADR Class A Monsanto Co. 4.8 Rohm & Haas Co. 4.1 Union Carbide Corp. 3.6 Minnesota Mining & 3.6 Manufacturing Co. Avery Dennison Corp. 3.6 Air Products & Chemicals, Inc. 3.5 Dow Chemical Co. 3.4 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Chemicals & Plastics 58.7% Drugs & Pharmaceuticals 8.4% Building Materials 5.2% Consumer Durables 3.6% Services 3.2% All Others 20.9%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 20.9 Row: 1, Col: 2, Value: 3.2 Row: 1, Col: 3, Value: 3.6 Row: 1, Col: 4, Value: 5.2 Row: 1, Col: 5, Value: 8.4 Row: 1, Col: 6, Value: 58.7 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. CHEMICALS PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Dylan Yolles)(photograph of Jonathan Zang) NOTE TO SHAREHOLDERS: On September 1, 1999, after the period covered by this report, Jonathan Zang (right) became Portfolio Manager of Fidelity Select Chemicals Portfolio. The following is an interview with Dylan Yolles, who managed the fund during the period covered by this report, with comments from Jonathan Zang on his investment style and outlook. Q. HOW DID THE FUND PERFORM, DYLAN? D.Y. For the six months that ended August 31, 1999, the fund had a total return of 17.07%. For the 12-month period ending August 31, 1999, it returned 20.94%. For the same six-and 12-month periods, the Standard & Poor's 500 Index returned 7.32% and 39.82%, respectively, 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 returns of 8.29% and 25.75%, respectively. Q. WHAT FACTORS HELPED THE FUND OUTPERFORM THE GOLDMAN SACHS INDEX DURING THE SIX-MONTH PERIOD? D.Y. During the past six months, chemical company stocks tended to do better than cyclical stocks in general, and some of the fund's larger holdings were particularly good performers. The primary external factor that helped the chemical industry was the perception that the Asian economic crisis was over, and that world economies would improve. Chemical companies met earnings expectations and investors sensed that the industry was recovering. At the same time, companies producing commodity chemicals enjoyed better prices for their products, a result of low inventories and strong demand. The fund was well-represented among commodity companies. Q. WHAT WERE SOME OF THE PARTICULAR STOCKS THAT HELPED PERFORMANCE? D.Y. DuPont was the biggest contributor to performance. I invested in the company when the global economic outlook was not so bright because I felt it had an attractive stock price that was not likely to go much lower even if conditions worsened. However, when the world economy began to improve, investors first started looking at the large-cap companies such as DuPont. Praxair and Minnesota Mining & Manufacturing (3M), two leaders in their industry segments, also benefited from the improved environment. Dow Chemical, a leader in commodity chemicals, was a strong performer as well. As conditions improved, merger-and-acquisition activity also picked up. Four fund holdings were takeover targets and supported performance. Pioneer Hi-Bred was acquired by DuPont, Union Carbide was acquired by Dow, Raychem was acquired by Tyco International, and Nalco, a water purification company, received a takeover offer from a French firm, Suez Lyonnaise des Eaux. Q. WERE THERE ANY DISAPPOINTMENTS? D.Y. Monsanto disappointed, even though the company's earnings were good. The company was affected by doubts about the future of genetically modified grains, where Monsanto is a leader. Moreover, agricultural-related companies in general did poorly because of excessive grain supplies and resulting low prices. IMC Global, a manufacturer of fertilizers, was another disappointing agriculture-related stock because of an industry-wide oversupply of fertilizer. Q. TURNING TO YOU, JONATHAN, HOW WOULD YOU DESCRIBE YOUR INVESTMENT STYLE? J.Z. I search for companies with the potential for earnings growth exceeding market estimates or companies whose stock prices have been unduly hurt by an issue I am confident is not going to be significant. I want to make sure I invest in companies whose valuations make sense. I prefer to own relatively few stocks. I would rather identify companies in which I have a great deal of conviction, and own more of them, than own a little of a lot of companies. Q. WHAT'S YOUR OUTLOOK FOR THE NEXT FEW MONTHS? J.Z. At least for now, it looks like economies in Europe, Latin America and most of Asia are improving, while North America remains strong. My outlook would change materially if interest rates were to rise significantly, but I don't believe the Federal Reserve Board will raise rates so much as to wipe out economic growth. In the absence of a major setback in the North American economy, such as the fallout from a significant correction in the market, I'm generally more bullish than bearish. 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 3. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 069 TRADING SYMBOL: FSCHX SIZE: as of August 31, 1999, more than $38 million MANAGER: Jonathan Zang, since September 1999; equity analyst, electric and gas utilities and independent power producers, 1997-1999; joined Fidelity in 1997 CHEMICALS PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 84.8% SHARES VALUE (NOTE 1) AGRICULTURE - 1.7% Delta & Pine Land Co. 23,400 $ 662,513 BUILDING MATERIALS - 5.2% Ferro Corp. 20,500 492,000 Owens-Corning 16,400 461,250 Sherwin-Williams Co. 42,600 1,038,375 1,991,625 CHEMICALS & PLASTICS - 58.7% Agrium, Inc. 35,500 359,162 Air Products & Chemicals, 39,300 1,336,200 Inc. Albemarle Corp. 5,100 88,294 Arch Chemicals, Inc. 15,150 298,266 Avery Dennison Corp. 25,100 1,377,363 Borden Chemicals & Plastics 8,500 42,500 Ltd. (common unit) (a) Cabot Corp. 20,200 465,863 Crompton & Knowles Corp. 33,200 581,000 Cytec Industries, Inc. (a) 26,400 615,450 Dexter Corp. 3,000 109,313 Dow Chemical Co. 11,300 1,283,963 E.I. du Pont de Nemours and 7,237 458,645 Co. Eastman Chemical Co. 22,600 1,049,488 Fuller (H.B.) Co. 3,922 236,301 Georgia Gulf Corp. 7,300 132,769 Great Lakes Chemical Corp. 5,300 218,294 IMC Global, Inc. 42,400 675,750 Lyondell Chemical Co. 6,300 91,744 Millennium Chemicals, Inc. 27,000 621,000 Minerals Technologies, Inc. 14,100 697,950 Monsanto Co. 44,600 1,831,388 Potash Corp. of Saskatchewan 16,900 943,229 PPG Industries, Inc. 31,000 1,861,938 Praxair, Inc. 50,800 2,387,595 Rohm & Haas Co. 42,243 1,578,832 Solutia, Inc. 5,600 112,000 Tredegar Industries, Inc. 37,700 819,975 Union Carbide Corp. 24,400 1,387,750 Valspar Corp. 11,700 424,856 Wellman, Inc. 8,000 134,500 Witco Corp. 9,900 160,256 22,381,634 COMPUTER SERVICES & SOFTWARE - - 0.2% Chemdex Corp. 3,200 86,400 CONSUMER DURABLES - 3.6% Minnesota Mining & 14,600 1,379,700 Manufacturing Co. DRUGS & PHARMACEUTICALS - 8.4% Cambrex Corp. 12,200 327,875 Chirex, Inc. (a) 7,100 214,775 SHARES VALUE (NOTE 1) Rhone-Poulenc SA sponsored 38,300 $ 1,859,944 ADR Class A Sigma-Aldrich Corp. 25,300 815,925 3,218,519 METALS & MINING - 1.1% Olin Corp. 28,400 402,925 OIL & GAS - 1.1% Conoco, Inc. Class B 15,230 409,306 SERVICES - 3.2% Ecolab, Inc. 32,400 1,217,025 TEXTILES & APPAREL - 1.6% Polymer Group, Inc. (a) 43,100 603,400 TOTAL COMMON STOCKS 32,353,047 (Cost $31,725,929) CASH EQUIVALENTS - 15.9% Taxable Central Cash Fund, 6,071,180 6,071,180 5.20% (b) (Cost $6,071,180) TOTAL INVESTMENT PORTFOLIO - 38,424,227 100.7% (Cost $37,797,109) NET OTHER ASSETS - (0.7%) (264,434) NET ASSETS - 100% $ 38,159,793 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $24,151,104 and $26,875,736, 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 $4,853 for the period. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $38,185,268. Net unrealized appreciation aggregated $238,959, of which $2,755,039 related to appreciated investment securities and $2,516,080 related to depreciated investment securities. The fund has elected to defer to its fiscal year ending February 29, 2000 approximately $1,740,000 of losses recognized during the period November 1, 1998 to February 28, 1999. CHEMICALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 38,424,227 value (cost $37,797,109) - See accompanying schedule Receivable for investments 6,132 sold Receivable for fund shares 7,032 sold Dividends receivable 85,041 Interest receivable 15,182 Redemption fees receivable 118 Other receivables 249 TOTAL ASSETS 38,537,981 LIABILITIES Payable for fund shares $ 320,842 redeemed Accrued management fee 18,274 Other payables and accrued 39,072 expenses TOTAL LIABILITIES 378,188 NET ASSETS $ 38,159,793 Net Assets consist of: Paid in capital $ 36,705,309 Undistributed net investment 98,000 income Accumulated undistributed net 729,366 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 627,118 (depreciation) on investments NET ASSETS, for 1,047,934 $ 38,159,793 shares outstanding NET ASSET VALUE and $36.41 redemption price per share ($38,159,793 (divided by) 1,047,934 shares) Maximum offering price per $37.54 share (100/97.00 of $36.41) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 377,332 Dividends Interest 79,530 Security lending 24 TOTAL INCOME 456,886 EXPENSES Management fee $ 129,348 Transfer agent fees 165,360 Accounting and security 30,318 lending fees Non-interested trustees' 121 compensation Custodian fees and expenses 6,169 Registration fees 24,160 Audit 4,098 Legal 25 Total expenses before 359,599 reductions Expense reductions (713) 358,886 NET INVESTMENT INCOME 98,000 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 2,992,666 Foreign currency transactions (322) 2,992,344 Change in net unrealized appreciation (depreciation) on: Investment securities 2,251,706 Assets and liabilities in (13) 2,251,693 foreign currencies NET GAIN (LOSS) 5,244,037 NET INCREASE (DECREASE) IN $ 5,342,037 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 66,869 charges paid to FDC Sales charges - Retained by $ 66,869 FDC Deferred sales charges $ 2,301 withheld by FDC Exchange fees withheld by FSC $ 3,375 Expense reductions Directed $ 713 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ 98,000 $ 208,208 income Net realized gain (loss) 2,992,344 2,558,079 Change in net unrealized 2,251,693 (15,018,011) appreciation (depreciation) NET INCREASE (DECREASE) IN 5,342,037 (12,251,724) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders - (51,919) From net investment income From net realized gain - (3,969,737) In excess of net realized - (773,436) gain TOTAL DISTRIBUTIONS - (4,795,092) Share transactions Net 45,876,917 17,546,799 proceeds from sales of shares Reinvestment of distributions - 4,627,284 Cost of shares redeemed (45,013,972) (42,678,413) NET INCREASE (DECREASE) IN 862,945 (20,504,330) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 93,072 63,464 TOTAL INCREASE (DECREASE) 6,298,054 (37,487,682) IN NET ASSETS NET ASSETS Beginning of period 31,861,739 69,349,421 End of period (including $ 38,159,793 $ 31,861,739 undistributed net investment income of $98,000 and $159,886, respectively) OTHER INFORMATION Shares Sold 1,237,723 503,657 Issued in reinvestment of - 132,380 distributions Redeemed (1,214,120) (1,122,609) Net increase (decrease) 23,603 (486,572)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F 1995 Net asset value, beginning of $ 31.10 $ 45.90 $ 42.53 $ 39.53 $ 33.91 $ 31.66 period Income from Investment Operations Net investment income (loss) D .08 .17 (.02) .28 .01 .36 Net realized and unrealized 5.15 (10.77) 7.88 5.49 8.89 2.65 gain (loss) Total from investment 5.23 (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 .08 .05 .05 .09 .02 .06 in capital Net asset value, end of period $ 36.41 $ 31.10 $ 45.90 $ 42.53 $ 39.53 $ 33.91 TOTAL RETURN B, C 17.07% (23.66)% 19.47% 15.06% 27.48% 9.90% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 38,160 $ 31,862 $ 69,349 $ 111,409 $ 89,230 $ 97,511 (000 omitted) Ratio of expenses to average 1.60% A 1.58% 1.68% 1.83% 1.99% 1.52% net assets Ratio of expenses to average 1.60% A 1.51% E 1.67% E 1.81% E 1.97% E 1.51% E net assets after expense reductions Ratio of net investment .44% A .44% (.05)% .67% .04% 1.07% income (loss) to average net assets Portfolio turnover rate 122% A 141% 31% 207% 87% 106%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT CONSTRUCTION AND -5.68% 8.35% 76.20% 219.08% HOUSING SELECT CONSTRUCTION AND -8.58% 5.03% 70.84% 209.44% HOUSING (LOAD ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Cyclical Industries 8.29% 25.75% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT CONSTRUCTION AND 8.35% 12.00% 12.30% HOUSING SELECT CONSTRUCTION AND 5.03% 11.31% 11.96% HOUSING (LOAD ADJ.) S&P 500 39.82% 25.11% 17.10% GS Cyclical Industries 25.75% 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 1989/08/31 9700.00 10000.00 1989/09/30 9875.04 9959.00 1989/10/31 9320.75 9727.95 1989/11/30 9459.32 9926.40 1989/12/31 9250.73 10164.64 1990/01/31 8667.21 9482.59 1990/02/28 8846.16 9604.91 1990/03/31 9344.09 9859.44 1990/04/30 9071.78 9612.96 1990/05/31 9912.05 10550.22 1990/06/30 9733.11 10478.48 1990/07/31 9225.44 10444.95 1990/08/31 8052.57 9500.72 1990/09/30 7221.05 9038.04 1990/10/31 6967.22 8999.18 1990/11/30 7641.19 9580.52 1990/12/31 8358.92 9847.82 1991/01/31 9094.15 10277.18 1991/02/28 9890.66 11012.00 1991/03/31 10135.73 11278.49 1991/04/30 10293.28 11305.56 1991/05/31 11317.36 11793.96 1991/06/30 10739.68 11253.80 1991/07/31 11019.77 11778.23 1991/08/31 11474.91 12057.37 1991/09/30 11221.08 11856.01 1991/10/31 11028.52 12014.88 1991/11/30 10477.09 11530.68 1991/12/31 11812.39 12849.79 1992/01/31 12690.53 12610.79 1992/02/29 12898.26 12774.73 1992/03/31 12888.82 12525.62 1992/04/30 13068.23 12893.87 1992/05/31 13483.69 12957.05 1992/06/30 12520.23 12763.99 1992/07/31 12747.01 13286.04 1992/08/31 12312.34 13013.68 1992/09/30 12472.98 13167.24 1992/10/31 12907.64 13213.32 1992/11/30 13654.13 13663.90 1992/12/31 14022.65 13831.96 1993/01/31 14608.50 13948.15 1993/02/28 14873.08 14137.85 1993/03/31 15222.70 14436.15 1993/04/30 14863.50 14086.80 1993/05/31 15024.24 14464.33 1993/06/30 15203.89 14506.27 1993/07/31 15723.92 14448.25 1993/08/31 16376.33 14995.84 1993/09/30 16905.82 14880.37 1993/10/31 17520.40 15188.39 1993/11/30 17246.20 15044.10 1993/12/31 18735.79 15226.14 1994/01/31 19347.88 15743.82 1994/02/28 18955.76 15317.17 1994/03/31 17846.34 14649.34 1994/04/30 17805.96 14836.85 1994/05/31 16863.74 15080.17 1994/06/30 16450.32 14710.71 1994/07/31 16921.43 15193.22 1994/08/31 17565.60 15816.14 1994/09/30 16584.93 15428.65 1994/10/31 16094.59 15775.79 1994/11/30 15440.81 15201.24 1994/12/31 15748.44 15426.67 1995/01/31 15817.56 15826.69 1995/02/28 16577.83 16443.45 1995/03/31 16874.04 16928.70 1995/04/30 16893.79 17427.25 1995/05/31 17723.17 18123.82 1995/06/30 17891.02 18544.83 1995/07/31 18720.41 19159.78 1995/08/31 18730.28 19207.87 1995/09/30 18621.67 20018.44 1995/10/31 18611.80 19946.98 1995/11/30 19757.14 20822.65 1995/12/31 20280.41 21223.69 1996/01/31 20239.12 21946.15 1996/02/29 20187.52 22149.59 1996/03/31 20879.01 22362.89 1996/04/30 20905.52 22692.52 1996/05/31 21593.41 23277.76 1996/06/30 21722.39 23366.44 1996/07/31 20808.78 22334.12 1996/08/31 21786.88 22805.14 1996/09/30 22969.20 24088.62 1996/10/31 22625.25 24752.98 1996/11/30 23657.09 26624.06 1996/12/31 22959.97 26096.63 1997/01/31 23188.59 27727.15 1997/02/28 23950.66 27944.53 1997/03/31 23264.80 26796.29 1997/04/30 23737.45 28396.03 1997/05/31 26009.16 30124.78 1997/06/30 26470.78 31474.37 1997/07/31 29252.71 33978.79 1997/08/31 29167.67 32075.30 1997/09/30 30090.93 33832.06 1997/10/31 28924.71 32702.07 1997/11/30 29568.56 34215.85 1997/12/31 29809.91 34803.33 1998/01/31 30882.96 35188.26 1998/02/28 33539.42 37726.04 1998/03/31 35266.77 39657.99 1998/04/30 35253.48 40056.94 1998/05/31 34637.07 39368.37 1998/06/30 35017.41 40967.51 1998/07/31 33758.36 40531.21 1998/08/31 28564.76 34671.20 1998/09/30 28236.89 36892.24 1998/10/31 31318.94 39893.06 1998/11/30 33745.24 42310.97 1998/12/31 36617.46 44748.93 1999/01/31 35987.93 46620.33 1999/02/28 32814.07 45171.37 1999/03/31 32446.84 46978.68 1999/04/30 34506.64 48798.16 1999/05/31 33693.17 47646.04 1999/06/30 34414.79 50290.39 1999/07/31 33233.96 48720.33 1999/08/31 30944.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 141327 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Construction and Housing Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $30,944 - a 209.44% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Masco Corp. 8.9 Home Depot, Inc. 6.6 Fannie Mae 6.1 Lowe's Companies, Inc. 5.8 Caterpillar, Inc. 5.7 Deere & Co. 4.5 Equity Residential Properties 3.1 Trust (SBI) Maytag Corp. 3.1 Leggett & Platt, Inc. 3.1 Simon Property Group, Inc. 2.5 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Building Materials 19.6% Retail & Wholesale, Miscellaneous 12.4% Industrial Machinery & Equipment 12.0% Real Estate Investment Trusts 11.8% Federal Sponsored Credit 7.3% All Others 36.9%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 36.9 Row: 1, Col: 2, Value: 7.3 Row: 1, Col: 3, Value: 11.8 Row: 1, Col: 4, Value: 12.0 Row: 1, Col: 5, Value: 12.4 Row: 1, Col: 6, Value: 19.6 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. CONSTRUCTION AND HOUSING PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Brian Hogan) NOTE TO SHAREHOLDERS: Brian Hogan became Portfolio Manager of Fidelity Select Construction and Housing Portfolio on April 30, 1999. Q. HOW DID THE FUND PERFORM, BRIAN? A. For the six months that ended August 31, 1999, the fund fell 5.68%. For the same six-month period, the Standard & Poor's 500 Index returned 7.32%, 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 8.29%. For the year that ended August 31, 1999, the fund returned 8.35%, while the S&P 500 and the Goldman Sachs Cyclical Industries Index returned 39.82% and 25.75%, respectively. The fund underperformed the Goldman Sachs index because the index had a larger exposure to cyclical and commodity-oriented stocks that rallied strongly during the first half of the period. Q. WHAT FACTORS INFLUENCED YOUR STRATEGY DURING THE PAST SIX MONTHS? A. First, the Federal Reserve Board raised interest rates in both June and August, following a six-month trend of rising mortgage rates. The average rate for a 30-year conventional mortgage increased from 6.79% in January to 8.02% in August. Since higher mortgage rates tend to have a negative impact on the level of new and existing home sales, higher rates are also negative for many industries involved in construction and housing. Second, although the sector's fundamental investment characteristics remained strong - existing home sales and housing starts posted robust gains despite rising interest rates - stock prices were weak as investors anticipated that higher rates could end the housing market's eight-year expansion. These factors, combined with the surprising strength in cyclical and commodity-oriented stocks during the first half of the period, led me to adopt a more diversified strategy. I reduced some positions in areas that were closely tied to the housing market's strength - such as building materials, home builders and carpet manufacturers - and added holdings in cyclical industries that had been underrepresented in the fund. For example, I added Fluor, a global engineering and construction company, and Caterpillar and Deere, two top manufacturers of construction and farming equipment. Q. WHICH HOLDINGS BENEFITED PERFORMANCE? A. One of the largest contributors to the fund's performance was Danaher Corp., which manufactures the Sears' Craftsman line of tools. It benefited from a strong repair and remodeling market. Home Depot, the country's largest and fastest-growing home center, performed well on the basis of well-executed expansion strategies and continued market share gains. Masco - a diversified building materials company - also posted solid performance. The stock benefited from Masco's close alliance with Home Depot, a long track record of earnings gains and a value-added product line that commanded a price premium. Q. WERE THERE ANY DISAPPOINTMENTS? A. Unfortunately, yes. Maxim Group, a commercial and retail carpet distributor, performed poorly when it had difficulty integrating a large retail floor-covering acquisition. The fund sold its Maxim position before the period ended. Two other disappointments were Shaw Industries and Owens-Corning, both relatively large holdings. Shaw - a low-cost flooring producer with strong business fundamentals - fell victim to the market's fear that higher interest rates could halt the eight-year housing expansion. Owens-Corning, the country's leading manufacturer of fiberglass insulation, suffered from larger-than-expected settlement costs for asbestos litigation as well as from interest-rate jitters. Although I expected both stocks to perform well, they didn't live up to their potential over the period. Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? A. I have a cautious outlook. Typically, stocks in the construction and housing industries - especially building materials stocks - have not performed well in periods that follow interest-rate increases by the Fed. Although higher interest rates have the potential to derail the housing market's recent strong performance, I am optimistic that a number of stocks may benefit from higher commodity prices, strengthening economies overseas and increased levels of industrial production domestically. As a result, I have increased the fund's diversification by adding holdings in cyclical, commodity-oriented sectors such as engineering and construction, and equipment and machinery, and by reducing holdings in some building material and carpet manufacturing 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 3. (checkmark)FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 511 TRADING SYMBOL: FSHOX SIZE: as of August 31, 1999, more than $13 million MANAGER: Brian Hogan, since 1999; equity analyst, various industries, since 1998; high-yield analyst and portfolio manager, 1995-1998; fixed-income analyst, 1994; joined Fidelity in 1994 CONSTRUCTION AND HOUSING PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 95.6% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 1.0% Danaher Corp. 2,450 $ 143,938 BUILDING MATERIALS - 19.6% Armstrong World Industries, 1,500 72,844 Inc. Elcor Corp. 3,750 72,188 Johns Manville Corp. 3,900 56,063 Lafarge Corp. 7,234 198,935 Lone Star Industries, Inc. 1,300 44,688 Masco Corp. 43,300 1,225,926 Owens-Corning 10,800 303,750 Sherwin-Williams Co. 5,400 131,625 Southdown, Inc. 3,840 193,920 USG Corp. 2,000 98,000 Vulcan Materials Co. 7,300 311,163 2,709,102 CONSTRUCTION - 6.0% Centex Corp. 6,600 185,625 Clayton Homes, Inc. 14,500 137,750 D.R. Horton, Inc. 2,900 42,231 Granite Construction, Inc. 2,200 55,000 Jacobs Engineering Group, 2,500 82,500 Inc. (a) Kaufman & Broad Home Corp. 5,100 104,231 Lennar Corp. 8,300 157,700 M/I Schottenstein Homes, Inc. 3,000 57,375 822,412 CONSUMER ELECTRONICS - 5.6% Black & Decker Corp. 2,000 105,250 Maytag Corp. 6,800 425,850 Whirlpool Corp. 3,500 247,406 778,506 CREDIT & OTHER FINANCE - 1.6% Countrywide Credit 6,755 217,004 Industries, Inc. ENGINEERING - 1.8% Fluor Corp. 6,000 248,250 FEDERAL SPONSORED CREDIT - 7.3% Fannie Mae 13,600 844,900 Freddie Mac 3,100 159,650 1,004,550 HOME FURNISHINGS - 5.8% Ethan Allen Interiors, Inc. 3,800 110,913 Furniture Brands 4,900 98,306 International, Inc. (a) Knoll, Inc. (a) 4,200 112,350 SHARES VALUE (NOTE 1) Leggett & Platt, Inc. 19,200 $ 424,800 Miller (Herman), Inc. 2,500 58,906 805,275 INDUSTRIAL MACHINERY & EQUIPMENT - 12.0% Case Corp. 5,000 246,875 Caterpillar, Inc. 14,000 792,750 Deere & Co. 16,000 622,000 1,661,625 LEASING & RENTAL - 1.2% United Rentals, Inc. (a) 6,500 158,844 LEISURE DURABLES & TOYS - 0.3% Champion Enterprises, Inc. (a) 4,400 37,400 METALS & MINING - 1.2% Martin Marietta Materials, 3,500 159,688 Inc. PACKAGING & CONTAINERS - 0.9% Gaylord Container Corp. Class 15,800 129,363 A (a) PAPER & FOREST PRODUCTS - 1.4% Georgia-Pacific Corp. 2,500 103,438 Trex Co., Inc. (a) 4,400 91,575 195,013 POLLUTION CONTROL - 0.7% IT Group, Inc. (The) (a) 8,200 97,888 REAL ESTATE - 1.5% Catellus Development Corp. (a) 8,800 120,450 LNR Property Corp. 5,000 93,125 213,575 REAL ESTATE INVESTMENT TRUSTS - - 11.8% Apartment Investment & 4,400 180,400 Management Co. Class A Archstone Communities Trust 9,000 192,375 Crescent Real Estate Equities 3,900 80,925 Co. Equity Residential Properties 9,700 426,800 Trust (SBI) Mack-Cali Realty Corp. 4,900 139,038 Post Properties, Inc. 2,300 94,013 Rouse Co. (The) 7,300 166,075 Simon Property Group, Inc. 13,900 354,450 1,634,076 RETAIL & WHOLESALE, MISCELLANEOUS - 12.4% Home Depot, Inc. 14,900 910,763 Lowe's Companies, Inc. 17,900 809,975 1,720,738 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TEXTILES & APPAREL - 3.5% Mohawk Industries, Inc. (a) 8,850 $ 200,231 Shaw Industries, Inc. 13,900 278,000 478,231 TOTAL COMMON STOCKS 13,215,478 (Cost $12,372,252) CASH EQUIVALENTS - 5.9% Taxable Central Cash Fund, 815,698 815,698 5.20% (b) (Cost $815,698) TOTAL INVESTMENT PORTFOLIO - 14,031,176 101.5% (Cost $13,187,950) NET OTHER ASSETS - (1.5%) (202,600) NET ASSETS - 100% $ 13,828,576 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $3,904,570 and $38,482,964, 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 $5,251 for the period. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $13,226,972. Net unrealized appreciation aggregated $804,204, of which $1,594,860 related to appreciated investment securities and $790,656 related to depreciated investment securities. CONSTRUCTION AND HOUSING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 14,031,176 value (cost $13,187,950) - See accompanying schedule Receivable for fund shares 16,302 sold Dividends receivable 9,876 Interest receivable 1,845 Redemption fees receivable 105 Other receivables 8,704 TOTAL ASSETS 14,068,008 LIABILITIES Payable to custodian bank $ 276 Payable for fund shares 199,813 redeemed Accrued management fee 7,262 Other payables and accrued 32,081 expenses TOTAL LIABILITIES 239,432 NET ASSETS $ 13,828,576 Net Assets consist of: Paid in capital $ 9,068,202 Accumulated net investment (59,793) loss Accumulated undistributed net 3,976,941 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 843,226 (depreciation) on investments NET ASSETS, for 586,183 $ 13,828,576 shares outstanding NET ASSET VALUE and $23.59 redemption price per share ($13,828,576 (divided by) 586,183 shares) Maximum offering price per $24.32 share (100/97.00 of $23.59) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 140,461 Dividends Interest 23,243 TOTAL INCOME 163,704 EXPENSES Management fee $ 60,319 Transfer agent fees 110,750 Accounting fees and expenses 30,315 Non-interested trustees' 46 compensation Custodian fees and expenses 6,379 Registration fees 23,242 Audit 4,799 Legal 54 Total expenses before 235,904 reductions Expense reductions (12,407) 223,497 NET INVESTMENT INCOME (LOSS) (59,793) REALIZED AND UNREALIZED GAIN 4,047,070 (LOSS) Net realized gain (loss) on investment securities Change in net unrealized (4,737,004) appreciation (depreciation) on investment securities NET GAIN (LOSS) (689,934) NET INCREASE (DECREASE) IN $ (749,727) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 13,312 charges paid to FDC Sales charges - Retained by $ 13,312 FDC Deferred sales charges $ 582 withheld by FDC Exchange fees withheld by FSC $ 4,703 Expense reductions Directed $ 12,407 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (59,793) $ (195,271) income (loss) Net realized gain (loss) 4,047,070 1,243,920 Change in net unrealized (4,737,004) (58,044) appreciation (depreciation) NET INCREASE (DECREASE) IN (749,727) 990,605 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (8,525) (144,845) from net realized gains Share transactions Net 4,691,647 137,817,090 proceeds from sales of shares Reinvestment of distributions 8,092 142,901 Cost of shares redeemed (41,807,579) (144,767,914) NET INCREASE (DECREASE) IN (37,107,840) (6,807,923) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 43,043 129,721 TOTAL INCREASE (DECREASE) (37,823,049) (5,832,442) IN NET ASSETS NET ASSETS Beginning of period 51,651,625 57,484,067 End of period (including $ 13,828,576 $ 51,651,625 accumulated net investment loss of $59,793 and $0, respectively) OTHER INFORMATION Shares Sold 177,997 5,395,789 Issued in reinvestment of 324 5,303 distributions Redeemed (1,656,824) (5,579,107) Net increase (decrease) (1,478,503) (178,015)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 G 1995 Net asset value, beginning of $ 25.02 $ 25.63 $ 22.00 $ 19.56 $ 16.79 $ 19.82 period Income from Investment Operations Net investment income (loss) D (.08) (.06) (.25) .06 .07 (.02) Net realized and unrealized (1.39) (.53) 7.67 3.38 3.55 (2.50) gain (loss) Total from investment (1.47) (.59) 7.42 3.44 3.62 (2.52) operations Less Distributions From net investment income - - (.02) (.02) (.07) - From net realized gain (.01) (.06) (3.87) (1.03) (.81) (.52) Total distributions (.01) (.06) (3.89) (1.05) (.88) (.52) Redemption fees added to paid .05 .04 .10 .05 .03 .01 in capital Net asset value, end of period $ 23.59 $ 25.02 $ 25.63 $ 22.00 $ 19.56 $ 16.79 TOTAL RETURN B, C (5.68)% (2.16)% 40.04% 18.64% 21.77% (12.54)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 13,829 $ 51,652 $ 57,484 $ 30,581 $ 42,668 $ 16,863 (000 omitted) Ratio of expenses to average 2.23% A 1.43% 2.50% E 1.41% 1.43% 1.76% net assets Ratio of expenses to average 2.12% A, F 1.37% F 2.43% F 1.35% F 1.40% F 1.74% F net assets after expense reductions Ratio of net investment (.57)% A (.23)% (1.10)% .27% .39% (.11)% income (loss) to average net assets Portfolio turnover rate 35% A 226% 404% 270% 139% 45%
A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR LIFE OF FUND SELECT CYCLICAL INDUSTRIES 12.47% 27.46% 34.43% SELECT CYCLICAL INDUSTRIES 9.02% 23.57% 30.32% (LOAD ADJ.) S&P 500 7.32% 39.82% 72.48% GS Cyclical Industries 8.29% 25.75% 31.05% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year or since the fund started on March 3, 1997. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR LIFE OF FUND SELECT CYCLICAL INDUSTRIES 27.46% 12.58% SELECT CYCLICAL INDUSTRIES 23.57% 11.19% (LOAD ADJ.) S&P 500 39.82% 24.41% GS Cyclical Industries 25.75% 11.44% AVERAGE ANNUAL RETURNS take the fund's cumulative return and show you what would have happened if the fund had performed at a constant rate each year. (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 1999/02/28 11594.14 16070.92 1999/03/31 11706.11 16713.92 1999/04/30 13355.15 17361.25 1999/05/31 13121.03 16951.35 1999/06/30 13640.17 17892.15 1999/07/31 13334.79 17333.56 1999/08/31 13032.00 17247.76 IMATRL PRASUN SHR__CHT 19990831 19990914 141605 R00000000000033 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Cyclical Industries Portfolio on March 3, 1997, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $13,032 - a 30.32% 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 $17,248 - a 72.48% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS General Electric Co. 9.7 SPX Corp. 5.1 Textron, Inc. 4.9 General Dynamics Corp. 4.1 Fortune Brands, Inc. 3.6 Honeywell, Inc. 3.3 AlliedSignal, Inc. 3.2 Litton Industries, Inc. 3.0 EG & G, Inc. 2.8 Union Carbide Corp. 2.7 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Electrical Equipment 15.7% Aerospace & Defense 10.9% Chemicals & Plastics 8.6% Autos, Tires, & Accessories 8.0% Building Materials 8.0% All Others 48.8%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 48.8 Row: 1, Col: 2, Value: 8.0 Row: 1, Col: 3, Value: 8.0 Row: 1, Col: 4, Value: 8.6 Row: 1, Col: 5, Value: 10.9 Row: 1, Col: 6, Value: 15.7 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. CYCLICAL INDUSTRIES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Albert Ruback) Albert Ruback, Portfolio Manager of Fidelity Select Cyclical Industries Portfolio Q. HOW DID THE FUND PERFORM, ALBERT? A. The fund experienced a rebound in the second quarter of 1999, which significantly improved performance during the six-month period. For the six and 12 months ending August 31, 1999, the fund returned 12.47% and 27.46%, respectively. In 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 8.29% and 25.75%, respectively. The Standard & Poor's 500 Index returned 7.32% and 39.82% during the same six- and 12-month periods. Q. WHAT DROVE THE RALLY IN THE SECOND QUARTER? WHAT FACTORS HELPED THE FUND OUTPERFORM THE GOLDMAN SACHS INDEX DURING THE PERIOD? A. The cyclical sector, which is predominantly made up of economically sensitive stocks such as chemicals and plastics, suffered at the beginning of the period as weak international markets led to a slowdown in domestic manufacturing. This trend reversed itself in April, as improving global economic conditions spurred investor confidence in cyclical and value-oriented companies, leading to a rally in chemicals, paper and aluminum stocks. While the fund benefited from the rotation into cyclical stocks given its investment objectives, much of the fund's outperformance of the Goldman Sachs index came from strong stock selection and timely sector allocation shifts into chemicals, non-ferrous metals and aerospace stocks. Q. IN THE PREVIOUS REPORT, YOU TALKED ABOUT HAVING A MORE DEFENSIVE STRATEGY GIVEN THE DOMESTIC INTEREST-RATE ENVIRONMENT AND WEAKNESS OVERSEAS. WHAT CAUSED YOU TO CHANGE THIS STANCE? A. I began to see signs that the global economic picture was improving. Asia was recovering, certain European countries were lowering interest rates last spring and other countries were coming out of recessions. This environment generally leads to a cyclical recovery and I started to position the fund to take advantage of this cyclical up-trend. The stocks that generally react most favorably at the beginning of an economic expansion are the commodities-based companies, such as chemicals and metals. Q. WERE THERE ANY OTHER FACTORS THAT HELPED THE FUND'S PERFORMANCE? A. The fund's underweighted position in auto manufacturers relative to the Goldman Sachs index was a significant contributor over the past six months. Despite the record sales results auto companies racked up over the past year, price incentives - due to fierce competition - ate away at profit margins. Q. WHICH STOCKS PRODUCED STRONG RESULTS? A. Honeywell was a solid contributor to fund performance as the company experienced accelerated growth and sales across many of its divisions. In addition, investors generally viewed its merger with AlliedSignal as a beneficial alliance. Shares of Fortune Brands benefited from a change in management that became more focused on cost-cutting initiatives and improving returns. SPX Corp., a global automobile parts manufacturer, also was a strong corporate management story, with encouraging cost-savings initiatives underway. Textron, the biggest maker of commercial helicopters and mid-size business jets, helped the fund after its shares rose on stronger profits. Q. WHICH HOLDINGS HURT THE FUND'S PERFORMANCE? A. Shares of US Airways fell in the second quarter because of costly new labor contracts and lower ticket sales. In general, the major airlines suffered and detracted from fund performance. As capacity began to outstrip demand for seats, it forced price cuts, which lowered profit margins. Waste Management hurt the fund's total return after the company posted its biggest one-day loss ever when it warned investors that second-quarter and full-year profits would fall below estimates. The announcement was particularly damaging because the company didn't provide any advanced warning of the earnings shortfall. I have since sold both of these holdings. Q. WHAT'S YOUR OUTLOOK, ALBERT? A. I continue to think the global economy is improving. We see evidence of Asia recovering - with South Korea rebounding dramatically and strengthening in the Japanese stock market - as well as signs of improvement in Europe. In addition, even if we see a slowdown in the U.S., I don't think it's likely to short-circuit the global upturn with overseas economies strengthening. As a result, if an environment of sustained global economic growth continues, I'm optimistic that the rally in cyclical stocks can continue. 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 3. (checkmark)FUND FACTS START DATE: March 3, 1997 FUND NUMBER: 515 TRADING SYMBOL: FCYIX SIZE: as of August 31, 1999, more than $7 million MANAGER: Albert Ruback, since inception; manager, Fidelity Select Energy Portfolio, 1994-1996; Fidelity Select Industrial Equipment Portfolio, 1991-1994; sector leader, cyclical industries, since 1996; joined Fidelity in 1991 CYCLICAL INDUSTRIES PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 99.4% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 10.9% AlliedSignal, Inc. 3,700 $ 226,625 Boeing Co. 1,000 45,313 Howmet International, Inc. (a) 2,700 48,263 Lockheed Martin Corp. 1,800 66,600 Textron, Inc. 4,300 347,225 United Technologies Corp. 711 47,015 781,041 AIR TRANSPORTATION - 5.1% AMR Corp. (a) 2,700 158,288 Atlantic Coast Airlines 3,000 59,625 Holdings (a) Northwest Airlines Corp. 3,900 115,050 Class A (a) Southwest Airlines Co. 1,800 30,037 363,000 AUTOS, TIRES, & ACCESSORIES - 8.0% Danaher Corp. 750 44,063 Federal-Mogul Corp. 450 20,531 Ford Motor Co. 1,100 57,338 Navistar International Corp. 1,800 87,525 (a) SPX Corp. (a) 4,250 360,188 569,645 BUILDING MATERIALS - 8.0% American Standard Companies, 4,100 168,100 Inc. (a) Carlisle Companies, Inc. 500 20,000 Ferro Corp. 950 22,800 Fortune Brands, Inc. 6,800 255,000 Masco Corp. 2,200 62,288 Owens-Corning 1,400 39,375 567,563 CHEMICALS & PLASTICS - 8.6% Air Products & Chemicals, 1,200 40,800 Inc. Dow Chemical Co. 1,200 136,350 E.I. du Pont de Nemours and 1,664 105,456 Co. Ivex Packaging Corp. (a) 2,500 38,750 Potash Corp. of Saskatchewan 400 22,325 Sealed Air Corp. (a) 514 30,198 Spartech Corp. 900 25,031 Union Carbide Corp. 3,400 193,375 Witco Corp. 1,500 24,281 616,566 COMPUTERS & OFFICE EQUIPMENT - - 0.3% Pitney Bowes, Inc. 400 23,600 CONSTRUCTION - 0.2% Centex Corp. 500 14,063 SHARES VALUE (NOTE 1) CONSUMER DURABLES - 2.0% Minnesota Mining & 1,500 $ 141,750 Manufacturing Co. CONSUMER ELECTRONICS - 0.9% Black & Decker Corp. 800 42,100 General Motors Corp. Class H 400 20,600 (a) 62,700 DEFENSE ELECTRONICS - 5.5% Litton Industries, Inc. (a) 3,400 217,600 Raytheon Co.: Class A 600 40,275 Class B 2,000 136,250 394,125 ELECTRICAL EQUIPMENT - 15.7% Emerson Electric Co. 2,700 169,088 General Electric Co. 6,200 696,331 Honeywell, Inc. 2,100 238,350 Hubbell, Inc. Class B 500 19,406 1,123,175 ENGINEERING - 2.8% EG & G, Inc. 6,200 197,238 HOME FURNISHINGS - 0.4% Leggett & Platt, Inc. 1,400 30,975 INDUSTRIAL MACHINERY & EQUIPMENT - 6.1% Caterpillar, Inc. 2,100 118,913 Illinois Tool Works, Inc. 1,600 124,700 Ingersoll-Rand Co. 2,350 149,519 Parker-Hannifin Corp. 900 39,375 432,507 IRON & STEEL - 0.8% Bethlehem Steel Corp. (a) 7,000 53,813 METALS & MINING - 3.7% Alcoa, Inc. 1,648 106,399 Inco Ltd. 7,500 154,020 260,419 OIL & GAS - 1.3% Conoco, Inc. Class B 3,498 94,009 PACKAGING & CONTAINERS - 1.6% Ball Corp. 800 35,950 Owens-Illinois, Inc. (a) 2,200 54,450 Silgan Holdings, Inc. (a) 1,500 27,000 117,400 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PAPER & FOREST PRODUCTS - 5.1% Bowater, Inc. 1,400 $ 75,075 Champion International Corp. 1,000 55,000 Fort James Corp. 887 28,606 International Paper Co. 1,442 67,864 Smurfit-Stone Container Corp. 4,470 94,708 (a) Temple-Inland, Inc. 400 24,800 Willamette Industries, Inc. 400 15,850 361,903 POLLUTION CONTROL - 0.3% Ogden Corp. 1,000 22,750 RAILROADS - 5.2% Bombardier, Inc. Class B 2,200 34,271 Burlington Northern Santa Fe 6,300 182,700 Corp. Canadian National Railway Co. 100 6,355 CSX Corp. 1,000 43,688 Union Pacific Corp. 2,100 102,244 369,258 SERVICES - 1.2% Ecolab, Inc. 2,300 86,394 SHIP BUILDING & REPAIR - 4.1% General Dynamics Corp. 4,700 296,100 TEXTILES & APPAREL - 0.9% Shaw Industries, Inc. 3,300 66,000 TRUCKING & FREIGHT - 0.7% Expeditors International of 800 25,850 Washington, Inc. USFreightways Corp. 500 24,250 50,100 TOTAL COMMON STOCKS 7,096,094 (Cost $6,699,346) CASH EQUIVALENTS - 8.2% Central Cash Collateral Fund, 468,000 468,000 5.26% (b) Taxable Central Cash Fund, 120,219 120,219 5.20% (b) TOTAL CASH EQUIVALENTS 588,219 (Cost $588,219) TOTAL INVESTMENT PORTFOLIO - 7,684,313 107.6% (Cost $7,287,565) NET OTHER ASSETS - (7.6%) (540,813) NET ASSETS - 100% $ 7,143,500 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $9,201,225 and $5,225,303, 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 $983 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $449,250. The fund received cash collateral of $468,000 which was invested in the Central Cash Collateral Fund. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $7,288,167. Net unrealized appreciation aggregated $396,146, of which $760,778 related to appreciated investment securities and $364,632 related to depreciated investment securities. CYCLICAL INDUSTRIES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 7,684,313 value (cost $7,287,565) - See accompanying schedule Receivable for fund shares 5,003 sold Dividends receivable 9,826 Interest receivable 467 Redemption fees receivable 30 Other receivables 145 TOTAL ASSETS 7,699,784 LIABILITIES Payable to custodian bank $ 4,066 Payable for fund shares 63,661 redeemed Accrued management fee 2,462 Other payables and accrued 18,095 expenses Collateral on securities 468,000 loaned, at value TOTAL LIABILITIES 556,284 NET ASSETS $ 7,143,500 Net Assets consist of: Paid in capital $ 6,578,849 Accumulated net investment (40,153) loss Accumulated undistributed net 208,056 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 396,748 (depreciation) on investments NET ASSETS, for 557,760 $ 7,143,500 shares outstanding NET ASSET VALUE and $12.81 redemption price per share ($7,143,500 (divided by) 557,760 shares) Maximum offering price per $13.21 share (100/97.00 of $12.81) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 46,354 Dividends Interest 8,300 Security lending 145 TOTAL INCOME 54,799 EXPENSES Management fee $ 22,129 Transfer agent fees 27,815 Accounting and security 30,004 lending fees Non-interested trustees' 10 compensation Custodian fees and expenses 7,041 Registration fees 11,837 Audit 2,871 Legal 3 Miscellaneous 250 Total expenses before 101,960 reductions Expense reductions (7,008) 94,952 NET INVESTMENT INCOME (LOSS) (40,153) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 208,834 Foreign currency transactions (156) 208,678 Change in net unrealized 135,135 appreciation (depreciation) on investment securities NET GAIN (LOSS) 343,813 NET INCREASE (DECREASE) IN $ 303,660 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 33,655 charges paid to FDC Sales charges - Retained by $ 33,655 FDC Exchange fees withheld by FSC $ 998 Expense reductions Directed $ 747 brokerage arrangements FMR reimbursement 6,261 $ 7,008
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (40,153) $ (41,151) income (loss) Net realized gain (loss) 208,678 21,698 Change in net unrealized 135,135 (207,859) appreciation (depreciation) NET INCREASE (DECREASE) IN 303,660 (227,312) NET ASSETS RESULTING FROM OPERATIONS From net realized gain - (29,887) Share transactions Net 12,847,626 3,255,351 proceeds from sales of shares Reinvestment of distributions - 29,223 Cost of shares redeemed (9,115,899) (3,913,851) NET INCREASE (DECREASE) IN 3,731,727 (629,277) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 21,129 8,220 TOTAL INCREASE (DECREASE) 4,056,516 (878,256) IN NET ASSETS NET ASSETS Beginning of period 3,086,984 3,965,240 End of period (including 7,143,500 3,086,984 accumulated net investment loss of $40,153 and $0, respectively) OTHER INFORMATION Shares Sold 980,461 265,208 Issued in reinvestment of - 2,305 distributions Redeemed (693,693) (325,171) Net increase (decrease) 286,768 (57,658)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 E Net asset value, beginning of $ 11.39 $ 12.07 $ 10.00 period Income from Investment Operations Net investment income (loss) D (.07) (.13) (.11) Net realized and unrealized 1.45 (.49) 2.59 gain (loss) Total from investment 1.38 (.62) 2.48 operations Less Distributions From net realized gain - (.09) (.46) Redemption fees added to paid .04 .03 .05 in capital Net asset value, end of period $ 12.81 $ 11.39 $ 12.07 TOTAL RETURN B, C 12.47% (4.96)% 25.77% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 7,144 $ 3,087 $ 3,965 (000 omitted) Ratio of expenses to average 2.50% A, F 2.50% F 2.50% A, F net assets Ratio of expenses to average 2.48% A, G 2.49% G 2.50% A net assets after expense reductions Ratio of net investment (1.05)% A (1.09)% (.93)% A income (loss) to average net assets Portfolio turnover rate 148% A 103% 140% 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. 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT DEFENSE AND AEROSPACE 13.92% 35.64% 160.33% 285.55% SELECT DEFENSE AND AEROSPACE 10.43% 31.50% 152.44% 273.91% (LOAD ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Cyclical Industries 8.29% 25.75% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT DEFENSE AND AEROSPACE 35.64% 21.09% 14.45% SELECT DEFENSE AND AEROSPACE 31.50% 20.35% 14.10% (LOAD ADJ.) S&P 500 39.82% 25.11% 17.10% GS Cyclical Industries 25.75% 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 1989/08/31 9700.00 10000.00 1989/09/30 9522.21 9959.00 1989/10/31 8981.74 9727.95 1989/11/30 8640.40 9926.40 1989/12/31 8782.62 10164.64 1990/01/31 8284.82 9482.59 1990/02/28 8313.27 9604.91 1990/03/31 8825.29 9859.44 1990/04/30 8462.61 9612.96 1990/05/31 9088.42 10550.22 1990/06/30 9094.95 10478.48 1990/07/31 8730.01 10444.95 1990/08/31 7964.34 9500.72 1990/09/30 7706.74 9038.04 1990/10/31 7606.56 8999.18 1990/11/30 8014.43 9580.52 1990/12/31 8380.03 9847.82 1991/01/31 9119.66 10277.18 1991/02/28 9299.18 11012.00 1991/03/31 10017.26 11278.49 1991/04/30 9852.10 11305.56 1991/05/31 10311.67 11793.96 1991/06/30 9792.86 11253.80 1991/07/31 10218.32 11778.23 1991/08/31 10110.15 12057.37 1991/09/30 9872.18 11856.01 1991/10/31 10348.12 12014.88 1991/11/30 9879.39 11530.68 1991/12/31 10636.57 12849.79 1992/01/31 10600.52 12610.79 1992/02/29 10766.38 12774.73 1992/03/31 10550.04 12525.62 1992/04/30 10362.55 12893.87 1992/05/31 9843.34 12957.05 1992/06/30 9381.82 12763.99 1992/07/31 9742.38 13286.04 1992/08/31 9554.89 13013.68 1992/09/30 9691.90 13167.24 1992/10/31 9771.23 13213.32 1992/11/30 10110.15 13663.90 1992/12/31 10636.57 13831.96 1993/01/31 10953.87 13948.15 1993/02/28 10874.54 14137.85 1993/03/31 11451.44 14436.15 1993/04/30 11487.50 14086.80 1993/05/31 11840.85 14464.33 1993/06/30 12338.43 14506.27 1993/07/31 12843.21 14448.25 1993/08/31 12821.58 14995.84 1993/09/30 13153.30 14880.37 1993/10/31 13679.72 15188.39 1993/11/30 13275.89 15044.10 1993/12/31 13706.06 15226.14 1994/01/31 14358.73 15743.82 1994/02/28 14358.73 15317.17 1994/03/31 13781.08 14649.34 1994/04/30 13855.87 14836.85 1994/05/31 13901.55 15080.17 1994/06/30 13551.35 14710.71 1994/07/31 13749.29 15193.22 1994/08/31 14365.95 15816.14 1994/09/30 13642.71 15428.65 1994/10/31 13977.68 15775.79 1994/11/30 13429.54 15201.24 1994/12/31 13947.23 15426.67 1995/01/31 13939.62 15826.69 1995/02/28 14952.16 16443.45 1995/03/31 15591.66 16928.70 1995/04/30 16451.95 17427.25 1995/05/31 17464.49 18123.82 1995/06/30 18111.61 18544.83 1995/07/31 19108.93 19159.78 1995/08/31 19101.31 19207.87 1995/09/30 19634.23 20018.44 1995/10/31 18918.60 19946.98 1995/11/30 20281.35 20822.65 1995/12/31 20552.13 21223.69 1996/01/31 20919.86 21946.15 1996/02/29 22039.40 22149.59 1996/03/31 22546.06 22362.89 1996/04/30 23632.33 22692.52 1996/05/31 24516.02 23277.76 1996/06/30 23935.31 23366.44 1996/07/31 22319.42 22334.12 1996/08/31 23497.67 22805.14 1996/09/30 24650.68 24088.62 1996/10/31 24221.46 24752.98 1996/11/30 25542.78 26624.06 1996/12/31 25695.85 26096.63 1997/01/31 25139.93 27727.15 1997/02/28 25537.02 27944.53 1997/03/31 25369.36 26796.29 1997/04/30 26047.12 28396.03 1997/05/31 28131.97 30124.78 1997/06/30 28803.05 31474.37 1997/07/31 31469.51 33978.79 1997/08/31 33205.39 32075.30 1997/09/30 35451.29 33832.06 1997/10/31 32784.84 32702.07 1997/11/30 32847.47 34215.85 1997/12/31 31751.90 34803.33 1998/01/31 33274.52 35188.26 1998/02/28 36436.13 37726.04 1998/03/31 37444.74 39657.99 1998/04/30 38443.66 40056.94 1998/05/31 35951.22 39368.37 1998/06/30 35970.62 40967.51 1998/07/31 34389.81 40531.21 1998/08/31 27571.98 34671.20 1998/09/30 29404.94 36892.24 1998/10/31 32304.70 39893.06 1998/11/30 33070.86 42310.97 1998/12/31 33129.05 44748.93 1999/01/31 33070.86 46620.33 1999/02/28 32828.40 45171.37 1999/03/31 33070.86 46978.68 1999/04/30 36745.29 48798.16 1999/05/31 37057.18 47646.04 1999/06/30 38811.60 50290.39 1999/07/31 38714.13 48720.33 1999/08/31 37391.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 140615 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Defense and Aerospace Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $37,391 - a 273.91% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS General Dynamics Corp. 9.9 United Technologies Corp. 7.2 General Electric Co. 7.2 Raytheon Co. Class A 6.8 Boeing Co. 6.3 Howmet International, Inc. 5.3 Newport News Shipbuilding, Inc. 5.1 Textron, Inc. 5.0 Litton Industries, Inc. 4.8 Alliant Techsystems, Inc. 3.8 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Aerospace & Defense 46.0% Ship Building & Repair 15.0% Defense Electronics 11.6% Electrical Equipment 10.8% Air Transportation 8.8% All Others 7.8%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 7.8 Row: 1, Col: 2, Value: 8.800000000000001 Row: 1, Col: 3, Value: 10.8 Row: 1, Col: 4, Value: 11.6 Row: 1, Col: 5, Value: 15.0 Row: 1, Col: 6, Value: 46.0 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. DEFENSE AND AEROSPACE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Jeff Feingold) Jeff Feingold, Portfolio Manager of Fidelity Select Defense and Aerospace Portfolio Q. HOW DID THE FUND PERFORM, JEFF? A. For the six months that ended August 31, 1999, the fund returned 13.92%. For the same six-month period, the Standard & Poor's 500 Index returned 7.32%, 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 8.29%. For the 12-month period that ended August 31, 1999, the fund returned 35.64%, while the S&P 500 and the Goldman Sachs index returned 39.82% and 25.75%, respectively. During the past six-month period, the fund outperformed the Goldman Sachs index and the S&P 500 because the portfolio had a higher concentration in defense-related stocks that performed well and a smaller concentration in weaker aerospace stocks. Q. WHAT FACTORS PLAYED IMPORTANT ROLES IN THE FUND'S PERFORMANCE? A. Defense stocks continued to benefit from larger federal budget appropriations in fiscal 1999, which represented the first significant increase in over a decade. In addition, military action in Kosovo boosted a number of defense stocks involved in armament and missile production, such as Raytheon. Merger and acquisition activity played a positive role when several of the fund's holdings were acquired at premium prices, including Gulfstream Aerospace and Wyman Gordon. Many aerospace stocks were negatively affected by peaking commercial aircraft production and by continued performance problems for satellite manufacturers. Q. WHAT INVESTMENT STRATEGY DID YOU PURSUE DURING THE PAST SIX MONTHS? A. Broadly speaking, I overweighted defense stocks that I expected to benefit from increased appropriations and positive revenue trends, and underweighted aerospace stocks that were pressured by a declining business cycle. More specifically, I emphasized holdings in companies where management demonstrated an ability to produce consistent, predictable earnings growth. The portfolio's largest holdings illustrate this strategy - they primarily are exceptionally well-managed defense companies that have the potential to grow earnings between 10% and 15% over the next several years. Q. HOW DID THE FUND'S TOP HOLDINGS FARE? A. Very well. Three of the portfolio's largest 10 positions - Raytheon, Boeing and United Technologies - were among the top performers. Raytheon profited from heightened expectations of strong earnings resulting from successful deployment of its laser-guided munitions in Kosovo and from earnings that met or exceeded analysts' expectations. Boeing, best known for its commercial aircraft division, performed well when its internal restructuring began to produce results. A combination of layoffs and improved manufacturing efficiency resulted in expanded margins and increased free cash flow. In addition, Boeing derives about one-third of its revenue from military aircraft and thus benefited somewhat from positive defense industry conditions. United Technologies' stock benefited from restructuring in all divisions, which should result in continued margin expansion. Q. WHAT STOCKS WERE DISAPPOINTING? A. AMR Corp. (American Airlines) and SkyWest detracted from performance. AMR struggled with the industry-wide problems of declining passengers per plane and declining revenue per passenger. SkyWest's financial performance was stable, but its association with the weakening commercial airline market hurt the stock. Orbital Sciences declined as a result of production problems with its satellite equipment and lower-than-anticipated product demand. I sold the stock during the period. Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? A. I am more optimistic about the defense industry than about the aerospace industry. Defense stocks should continue to benefit from increased budget appropriations, although they may be volatile over the short term when Congress begins debating the fiscal year 2000 budget in October. Within the defense sector, I am particularly bullish on shipbuilders, such as Newport News and General Dynamics, because of the relatively long lead time from order to delivery - a condition that leads to greater earnings predictability and fewer negative earnings surprises. I expect that aerospace stocks will remain under pressure as the delivery cycle winds down, creating a difficult earnings environment for commercial aircraft manufacturers and component suppliers. 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 3. (checkmark)FUND FACTS START DATE: May 8, 1984 FUND NUMBER: 067 TRADING SYMBOL: FSDAX SIZE: as of August 31, 1999, more than $36 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 AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 99.6% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 46.0% AAR Corp. 13,500 $ 288,563 Alliant Techsystems, Inc. (a) 19,100 1,394,300 BE Aerospace, Inc. (a) 15,900 275,269 Boeing Co. 50,600 2,292,813 Cordant Technologies, Inc. 30,900 1,278,488 Goodrich (B.F.) Co. 28,200 1,041,638 Howmet International, Inc. (a) 108,200 1,934,075 Lockheed Martin Corp. 36,000 1,332,000 Northrop Grumman Corp. 17,300 1,254,250 Precision Castparts Corp. 8,100 287,550 Primex Technologies, Inc. 5,200 108,550 Rockwell International Corp. 12,900 762,713 Textron, Inc. 22,600 1,824,950 United Technologies Corp. 39,500 2,611,938 16,687,097 AIR TRANSPORTATION - 8.8% AMR Corp. (a) 20,500 1,201,813 Atlantic Coast Airlines 56,800 1,128,900 Holdings (a) SkyWest, Inc. 43,500 875,438 3,206,151 BROADCASTING - 2.5% PanAmSat Corp. (a) 24,200 893,888 COMPUTER SERVICES & SOFTWARE - - 0.3% Titan Corp. (a) 12,200 124,288 CONSUMER ELECTRONICS - 3.4% General Motors Corp. Class H 24,100 1,241,150 (a) DEFENSE ELECTRONICS - 11.6% Litton Industries, Inc. (a) 27,400 1,753,600 Raytheon Co. Class A 36,452 2,446,841 4,200,441 ELECTRICAL EQUIPMENT - 10.8% General Electric Co. 23,200 2,605,650 Harris Corp. 4,200 110,250 Loral Space & Communications 38,300 703,763 Ltd. (a) Teleflex, Inc. 10,900 506,850 3,926,513 ELECTRONICS - 1.2% Airport Systems 89,600 352,800 International, Inc. (a) Maxwell Technologies, Inc. (a) 3,600 79,650 432,450 SHARES VALUE (NOTE 1) SHIP BUILDING & REPAIR - 15.0% General Dynamics Corp. 56,800 $ 3,578,394 Newport News Shipbuilding, 59,100 1,857,956 Inc. 5,436,350 TOTAL COMMON STOCKS 36,148,328 (Cost $32,507,994) CASH EQUIVALENTS - 7.5% Central Cash Collateral Fund, 2,714,400 2,714,400 5.26% (b) (Cost $2,714,400) TOTAL INVESTMENT PORTFOLIO - 38,862,728 107.1% (Cost $35,222,394) NET OTHER ASSETS - (7.1%) (2,572,145) NET ASSETS - 100% $ 36,290,583 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $31,980,672 and $25,923,042, 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 $3,468 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $2,605,650. The fund received cash collateral of $2,714,400 which was invested in the Central Cash Collateral Fund. The fund participated in the bank borrowing program. The average daily loan balance during the period for which loans were outstanding amounted to $1,333,000. The weighted average interest rate was 5.21%. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $35,538,080. Net unrealized appreciation aggregated $3,324,648, of which $4,870,613 related to appreciated investment securities and $1,545,965 related to depreciated investment securities. DEFENSE AND AEROSPACE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 38,862,728 value (cost $35,222,394) - See accompanying schedule Receivable for investments 1,196,344 sold Receivable for fund shares 46,223 sold Dividends receivable 46,670 Interest receivable 2,304 Redemption fees receivable 75 Other receivables 11,465 TOTAL ASSETS 40,165,809 LIABILITIES Payable to custodian bank $ 67,483 Payable for fund shares 1,038,101 redeemed Accrued management fee 19,755 Other payables and accrued 35,487 expenses Collateral on securities 2,714,400 loaned, at value TOTAL LIABILITIES 3,875,226 NET ASSETS $ 36,290,583 Net Assets consist of: Paid in capital $ 30,506,144 Accumulated net investment (81,500) loss Accumulated undistributed net 2,225,605 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 3,640,334 (depreciation) on investments NET ASSETS, for 945,792 $ 36,290,583 shares outstanding NET ASSET VALUE and $38.37 redemption price per share ($36,290,583 (divided by) 945,792 shares) Maximum offering price per $39.56 share (100/97.00 of $38.37) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 191,831 Dividends Interest 46,832 Security lending 957 TOTAL INCOME 239,620 EXPENSES Management fee $ 123,532 Transfer agent fees 138,627 Accounting and security 30,314 lending fees Non-interested trustees' 58 compensation Custodian fees and expenses 5,991 Registration fees 22,782 Audit 3,974 Legal 61 Interest 386 Total expenses before 325,725 reductions Expense reductions (4,605) 321,120 NET INVESTMENT INCOME (LOSS) (81,500) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 2,856,822 Foreign currency transactions 189 2,857,011 Change in net unrealized 1,211,576 appreciation (depreciation) on investment securities NET GAIN (LOSS) 4,068,587 NET INCREASE (DECREASE) IN $ 3,987,087 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 137,495 charges paid to FDC Sales charges - Retained by $ 136,948 FDC Deferred sales charges $ 234 withheld by FDC Exchange fees withheld by FSC $ 2,700 Expense reductions Directed $ 4,605 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (81,500) $ (280,808) income (loss) Net realized gain (loss) 2,857,011 3,586,940 Change in net unrealized 1,211,576 (8,328,194) appreciation (depreciation) NET INCREASE (DECREASE) IN 3,987,087 (5,022,062) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (131,190) - from net realized gains Share transactions Net 46,939,291 47,399,132 proceeds from sales of shares Reinvestment of distributions 124,783 - Cost of shares redeemed (43,197,673) (115,799,880) NET INCREASE (DECREASE) IN 3,866,401 (68,400,748) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 71,453 115,021 TOTAL INCREASE (DECREASE) 7,793,751 (73,307,789) IN NET ASSETS NET ASSETS Beginning of period 28,496,832 101,804,621 End of period (including $ 36,290,583 $ 28,496,832 accumulated net investment loss of $81,500 and $0, respectively) OTHER INFORMATION Shares Sold 1,231,262 1,280,563 Issued in reinvestment of 3,676 - distributions Redeemed (1,130,950) (3,148,373) Net increase (decrease) 103,988 (1,867,810)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 G 1995 Net asset value, beginning of $ 33.85 $ 37.57 $ 28.94 $ 26.97 $ 19.64 $ 19.14 period Income from Investment Operations Net investment income (loss) D (.07) (.19) (.29) (.11) (.05) (.06) Net realized and unrealized 4.70 (3.61) 11.84 4.18 9.09 .70 gain (loss) Total from investment 4.63 (3.80) 11.55 4.07 9.04 .64 operations Less Distributions From net realized gain (.17) - (3.04) (2.17) (1.82) (.27) Redemption fees added to paid .06 .08 .12 .07 .11 .13 in capital Net asset value, end of period $ 38.37 $ 33.85 $ 37.57 $ 28.94 $ 26.97 $ 19.64 TOTAL RETURN B, C 13.92% (9.90)% 42.68% 15.87% 47.40% 4.13% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 36,291 $ 28,497 $ 101,805 $ 68,803 $ 26,648 $ 4,985 (000 omitted) Ratio of expenses to average 1.52% A 1.48% 1.77% 1.84% 1.77% E 2.49% E net assets Ratio of expenses to average 1.50% A, F 1.42% F 1.71% F 1.81% F 1.75% F 2.49% net assets after expense reductions Ratio of net investment (.38)% A (.53)% (.85)% (.39)% (.20)% (.32)% income (loss) to average net assets Portfolio turnover rate 132% A 221% 311% 219% 267% 146% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. G 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT ENVIRONMENTAL SERVICES -10.97% -5.19% 10.09% 18.34% SELECT ENVIRONMENTAL -13.71% -8.10% 6.72% 14.72% SERVICES (LOAD ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Cyclical Industries 8.29% 25.75% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT ENVIRONMENTAL SERVICES -5.19% 1.94% 1.70% SELECT ENVIRONMENTAL -8.10% 1.31% 1.38% SERVICES (LOAD ADJ.) S&P 500 39.82% 25.11% 17.10% GS Cyclical Industries 25.75% 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 Environmental Services S&P 500 00516 SP001 1989/08/31 9700.00 10000.00 1989/09/30 10222.65 9959.00 1989/10/31 9992.33 9727.95 1989/11/30 10054.34 9926.40 1989/12/31 10382.32 10164.64 1990/01/31 9460.23 9482.59 1990/02/28 9646.42 9604.91 1990/03/31 10063.13 9859.44 1990/04/30 10116.33 9612.96 1990/05/31 11056.15 10550.22 1990/06/30 11401.93 10478.48 1990/07/31 11331.00 10444.95 1990/08/31 9921.28 9500.72 1990/09/30 9389.30 9038.04 1990/10/31 9256.31 8999.18 1990/11/30 9575.49 9580.52 1990/12/31 10125.20 9847.82 1991/01/31 11011.82 10277.18 1991/02/28 11517.19 11012.00 1991/03/31 11517.19 11278.49 1991/04/30 11481.73 11305.56 1991/05/31 11508.32 11793.96 1991/06/30 10639.44 11253.80 1991/07/31 10976.35 11778.23 1991/08/31 11171.41 12057.37 1991/09/30 10905.42 11856.01 1991/10/31 10497.58 12014.88 1991/11/30 9921.28 11530.68 1991/12/31 10900.96 12849.79 1992/01/31 11876.89 12610.79 1992/02/29 12005.79 12774.73 1992/03/31 10808.89 12525.62 1992/04/30 10486.65 12893.87 1992/05/31 10219.65 12957.05 1992/06/30 9673.23 12763.99 1992/07/31 9740.01 13286.04 1992/08/31 9539.67 13013.68 1992/09/30 9654.15 13167.24 1992/10/31 10112.05 13213.32 1992/11/30 10741.67 13663.90 1992/12/31 10751.21 13831.96 1993/01/31 10961.08 13948.15 1993/02/28 10837.07 14137.85 1993/03/31 10569.96 14436.15 1993/04/30 10350.54 14086.80 1993/05/31 10579.50 14464.33 1993/06/30 10445.94 14506.27 1993/07/31 10007.12 14448.25 1993/08/31 10541.34 14995.84 1993/09/30 10550.88 14880.37 1993/10/31 10846.61 15188.39 1993/11/30 10369.62 15044.10 1993/12/31 10684.43 15226.14 1994/01/31 11590.70 15743.82 1994/02/28 11380.83 15317.17 1994/03/31 10350.54 14649.34 1994/04/30 10522.26 14836.85 1994/05/31 10493.64 15080.17 1994/06/30 9864.02 14710.71 1994/07/31 10073.89 15193.22 1994/08/31 10426.86 15816.14 1994/09/30 10360.08 15428.65 1994/10/31 10007.12 15775.79 1994/11/30 9444.28 15201.24 1994/12/31 9663.69 15426.67 1995/01/31 9673.23 15826.69 1995/02/28 9797.24 16443.45 1995/03/31 10264.69 16928.70 1995/04/30 10999.24 17427.25 1995/05/31 11170.96 18123.82 1995/06/30 11628.86 18544.83 1995/07/31 12067.69 19159.78 1995/08/31 12239.40 19207.87 1995/09/30 12668.69 20018.44 1995/10/31 11771.96 19946.98 1995/11/30 12182.16 20822.65 1995/12/31 12188.88 21223.69 1996/01/31 12611.27 21946.15 1996/02/29 12490.59 22149.59 1996/03/31 13043.72 22362.89 1996/04/30 13476.80 22692.52 1996/05/31 14514.25 23277.76 1996/06/30 14252.37 23366.44 1996/07/31 12610.57 22334.12 1996/08/31 13406.29 22805.14 1996/09/30 13889.76 24088.62 1996/10/31 13748.75 24752.98 1996/11/30 14121.43 26624.06 1996/12/31 14091.21 26096.63 1997/01/31 14967.50 27727.15 1997/02/28 14604.90 27944.53 1997/03/31 13778.97 26796.29 1997/04/30 13698.39 28396.03 1997/05/31 14635.12 30124.78 1997/06/30 15450.98 31474.37 1997/07/31 15843.80 33978.79 1997/08/31 16055.32 32075.30 1997/09/30 17173.35 33832.06 1997/10/31 15924.38 32702.07 1997/11/30 15884.09 34215.85 1997/12/31 16609.29 34803.33 1998/01/31 15501.34 35188.26 1998/02/28 16579.08 37726.04 1998/03/31 17435.23 39657.99 1998/04/30 17717.25 40056.94 1998/05/31 16720.09 39368.37 1998/06/30 16367.56 40967.51 1998/07/31 15048.08 40531.21 1998/08/31 12106.96 34671.20 1998/09/30 13164.55 36892.24 1998/10/31 13446.58 39893.06 1998/11/30 12781.80 42310.97 1998/12/31 13791.76 44748.93 1999/01/31 13630.22 46620.33 1999/02/28 12893.18 45171.37 1999/03/31 12580.19 46978.68 1999/04/30 14267.91 48798.16 1999/05/31 14409.37 47646.04 1999/06/30 15288.48 50290.39 1999/07/31 13510.05 48720.33 1999/08/31 11472.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990917 113843 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Environmental Services Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $11,472 - a 14.72% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Allied Waste Industries, Inc. 6.4 Tetra Tech, Inc. 6.3 Ogden Corp. 6.2 Thermo Electron Corp. 6.2 Safety-Kleen Corp. 6.0 Thermo Instrument Systems, Inc. 5.5 Republic Services, Inc. Class A 5.5 Waste Connections, Inc. 4.7 Waste Management, Inc. 4.6 Azurix Corp. 4.5 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Pollution Control 56.2% Electronic Instruments 12.4% Industrial Machinery & Equipment 5.2% Water 4.9% Retail & Wholesale, Miscellaneous 3.8% All Others 17.5%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 17.5 Row: 1, Col: 2, Value: 3.8 Row: 1, Col: 3, Value: 4.9 Row: 1, Col: 4, Value: 5.2 Row: 1, Col: 5, Value: 12.4 Row: 1, Col: 6, Value: 56.2 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. 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. Unfortunately, the tough times continued for the environmental sector. For the six-month period that ended August 31, 1999, the fund returned -10.97%. The Standard & Poor's 500 Index returned 7.32% in that time, 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 8.29%. For the 12 months that ended August 31, 1999, the fund returned -5.19%, while the S&P 500 and Goldman Sachs indexes returned 39.82% and 25.75%, respectively. Q. CAN YOU HIGHLIGHT THE PROBLEMS THAT CONTINUED TO PLAGUE THE SECTOR? A. Solid waste stocks - which make up a sizable portion of the portfolio - were a disaster as industry leaders such as Waste Management and Republic Services encountered difficulty. Waste Management was the victim of overly optimistic earnings forecasts that were drawn up when the company merged with USA Waste a year ago. Waste Management failed to meet those projections and, coupled with concerns over its accounting process, the stock fell hard. Republic Services, meanwhile, had problems integrating several smaller acquisitions it had made and its stock also took a tumble. When problems hit two of the bigger companies in any sector, it usually affects the whole group. Over the past few months, it seems like bad news was followed by more bad news. Q. WATER FILTRATION AND PURIFICATION COMPANIES HAVE BEEN IN THE NEWS OVER THE PAST SIX MONTHS, WITH MANY BEING ACQUIRED BY FOREIGN COMPANIES . . . A. Yes, that has been the big story in the water area. U.S. Filter, which was the sector's largest company, was acquired by French conglomerate Vivendi. Another French conglomerate, Suez Lyonnaise, also made a splash in the U.S. market with its acquisitions of Nalco and United Water Resources. These acquisitions were generally received positively, primarily because the foreign buyers cited strong growth potential as the reason behind their purchases. U.S. Filter, which was performing quite poorly before being bought, is now a subsidiary of Vivendi and is no longer a publicly traded stock. At the end of the period, the fund did not own positions in Vivendi or Suez Lyonnaise. Q. HOW DID HAZARDOUS WASTE AND THERMAL INSTRUMENTATION STOCKS PERFORM DURING THE PERIOD? A. Hazardous waste stocks were negatively affected by supply and demand conditions. A situation of excess capacity- in the form of too many incinerators - and not enough demand continued throughout the period. What may help this sector, however, is the increased consolidation activity we've seen over the past two years. Safety-Kleen, one of the larger companies in the hazardous waste arena, was acquired by Laidlaw and favorable synergies may result in time. Thermal instrumentation stocks, on the other hand, began to show a pulse after being down for so long due to lack of demand from Asia. The fund's two largest positions in this area - Thermo Electron and Thermo Instrument - displayed relatively positive bookings and backlogs prospects and may be on the upswing. Q. WHICH STOCKS PERFORMED WELL FOR THE FUND? WHICH OTHERS WERE DISAPPOINTING? A. Several companies that were acquired through mergers received favorable stock boosts, mainly because the acquiring company paid a premium. One such example was Superior Services, which was acquired by Vivendi. Browning-Ferris also performed well after being bought by Allied Waste. An additional disappointment was Casella Waste, which fell on concerns that it wouldn't be able to integrate its acquisition of KTI Inc. smoothly. Q. WHAT'S YOUR OUTLOOK? A. Overall, I can't see the news getting any more difficult for environmental services stocks. If some of the big solid waste companies implement stock buyback programs, look to reduce debt and start hitting their earnings targets, investors may show renewed interest. For the foreseeable future, though, I think most investors will stay on the sidelines. Thermal instrumentation stocks may be the group closest to bouncing back - with several restructuring efforts a key part of their revival - and I may look for additional opportunities there. 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 3. (checkmark)FUND FACTS START DATE: June 29, 1989 FUND NUMBER: 516 TRADING SYMBOL: FSLEX SIZE: as of August 31, 1999, more than $12 million MANAGER: Subrata Ghose, since 1998; analyst, environmental services industry, 1997-present; gas, electric and water industries, 1997-1998; joined Fidelity in 1995 ENVIRONMENTAL SERVICES PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 92.2% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 0.7% American Standard Companies, 1,200 $ 49,200 Inc. (a) York International Corp. 900 37,013 86,213 CONSTRUCTION - 0.4% Jacobs Engineering Group, 1,600 52,800 Inc. (a) DRUGS & PHARMACEUTICALS - 3.1% Catalytica, Inc. (a) 24,800 389,050 ELECTRIC UTILITY - 2.0% KTI, Inc. (a) 31,100 252,688 ELECTRICAL EQUIPMENT - 0.6% General Electric Co. 700 78,619 ELECTRONIC INSTRUMENTS - 12.4% Thermo Electron Corp. (a) 48,750 773,906 Thermo Instrument Systems, 62,200 691,975 Inc. (a) Thermoquest Corp. (a) 5,600 58,100 Waters Corp. (a) 300 19,781 1,543,762 ENGINEERING - 0.4% Fluor Corp. 1,200 49,650 INDUSTRIAL MACHINERY & EQUIPMENT - 5.2% Ionics, Inc. (a) 16,000 468,000 Thermo Fibertek, Inc. (a) 25,700 173,475 641,475 METALS & MINING - 2.1% IMCO Recycling, Inc. 16,600 261,450 POLLUTION CONTROL - 56.2% Allied Waste Industries, Inc. 62,160 792,537 (a) Calgon Carbon Corp. 4,000 26,750 Casella Waste Systems, Inc. 23,200 394,400 Class A (a) Insituform Technologies, Inc. 23,800 493,850 Class A (a) IT Group, Inc. (The) (a) 41,100 490,631 Ogden Corp. 34,200 778,050 Republic Services, Inc. Class 63,100 686,213 A (a) Safety-Kleen Corp. (a) 58,150 741,413 Stericycle, Inc. (a) 3,700 58,969 Tetra Tech, Inc. (a) 48,737 782,838 TETRA Technologies, Inc. (a) 9,400 97,525 U.S. Liquids, Inc. (a) 12,200 91,500 U.S. Plastic Lumber Co. (a) 6,000 63,750 Waste Connections, Inc. (a) 27,100 584,344 Waste Industries, Inc. (a) 22,800 342,000 Waste Management, Inc. 26,093 569,154 6,993,924 SHARES VALUE (NOTE 1) RESTAURANTS - 0.4% McDonald's Corp. 1,000 $ 41,375 RETAIL & WHOLESALE, MISCELLANEOUS - 3.8% Newpark Resources, Inc. (a) 52,900 476,100 WATER - 4.9% American Water Works, Inc. 1,700 49,513 Azurix Corp. 29,800 553,163 602,676 TOTAL COMMON STOCKS 11,469,782 (Cost $16,114,732) CASH EQUIVALENTS - 6.4% Taxable Central Cash Fund, 800,855 800,855 5.20% (b) (Cost $800,855) TOTAL INVESTMENT PORTFOLIO - 12,270,637 98.6% (Cost $16,915,587) NET OTHER ASSETS - 1.4% 178,463 NET ASSETS - 100% $ 12,449,100 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $24,461,428 and $26,007,376, 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 $9,653 for the period. The fund participated in the bank borrowing program. The average daily loan balance during the period for which loans were outstanding amounted to $4,116,333. The weighted average interest rate was 5.34%. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $17,496,947. Net unrealized depreciation aggregated $5,226,310, of which $60,942 related to appreciated investment securities and $5,287,252 related to depreciated investment securities. The fund has elected 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 AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 12,270,637 value (cost $16,915,587) - See accompanying schedule Receivable for investments 1,022,422 sold Receivable for fund shares 84,047 sold Dividends receivable 49 Interest receivable 3,464 Redemption fees receivable 118 Other receivables 11 TOTAL ASSETS 13,380,748 LIABILITIES Payable to custodian bank $ 10,576 Payable for investments 798,203 purchased Payable for fund shares 91,585 redeemed Accrued management fee 6,936 Other payables and accrued 24,348 expenses TOTAL LIABILITIES 931,648 NET ASSETS $ 12,449,100 Net Assets consist of: Paid in capital $ 18,224,105 Accumulated net investment (138,230) loss Accumulated undistributed net (991,825) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (4,644,950) (depreciation) on investments NET ASSETS, for 1,096,061 $ 12,449,100 shares outstanding NET ASSET VALUE and $11.36 redemption price per share ($12,449,100 (divided by) 1,096,061 shares) Maximum offering price per $11.71 share (100/97.00 of $11.36) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 35,390 Dividends Interest 28,618 Security lending 11 TOTAL INCOME 64,019 EXPENSES Management fee $ 54,321 Transfer agent fees 104,370 Accounting and security 30,301 lending fees Non-interested trustees' 95 compensation Custodian fees and expenses 5,681 Registration fees 17,064 Audit 3,598 Legal 10 Interest 1,833 Total expenses before 217,273 reductions Expense reductions (15,024) 202,249 NET INVESTMENT INCOME (LOSS) (138,230) REALIZED AND UNREALIZED GAIN 18,733 (LOSS) Net realized gain (loss) on investment securities Change in net unrealized (1,935,655) appreciation (depreciation) on investment securities NET GAIN (LOSS) (1,916,922) NET INCREASE (DECREASE) IN $ (2,055,152) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 17,454 charges paid to FDC Sales charges - Retained by $ 14,894 FDC Deferred sales charges $ 3,510 withheld by FDC Exchange fees withheld by FSC $ 3,503 Expense reductions Directed $ 15,024 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (138,230) $ (256,748) income (loss) Net realized gain (loss) 18,733 (474,214) Change in net unrealized (1,935,655) (4,374,725) appreciation (depreciation) NET INCREASE (DECREASE) IN (2,055,152) (5,105,687) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (11,276) - From net realized gain In excess of net realized - (40,246) gain TOTAL DISTRIBUTIONS (11,276) (40,246) Share transactions Net 20,304,471 10,454,030 proceeds from sales of shares Reinvestment of distributions 10,779 38,642 Cost of shares redeemed (21,370,859) (15,030,447) NET INCREASE (DECREASE) IN (1,055,609) (4,537,775) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 37,576 34,045 TOTAL INCREASE (DECREASE) (3,084,461) (9,649,663) IN NET ASSETS NET ASSETS Beginning of period 15,533,561 25,183,224 End of period (including net $ 12,449,100 $ 15,533,561 investment loss of $138,230 and $0, respectively) OTHER INFORMATION Shares Sold 1,403,226 712,286 Issued in reinvestment of 885 3,084 distributions Redeemed (1,524,786) (1,028,657) Net increase (decrease) (120,675) (313,287)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F 1995 Net asset value, beginning of $ 12.77 $ 16.46 $ 14.50 $ 12.42 $ 10.27 $ 11.93 period Income from Investment Operations Net investment income (loss) (.10) (.18) (.13) (.08) (.17) (.14) D Net realized and unrealized (1.33) (3.50) 2.07 2.04 2.95 (1.53) gain (loss) Total from investment (1.43) (3.68) 1.94 1.96 2.78 (1.67) operations Less Distributions From net realized gain (.01) - - - (.65) - In excess of net realized - (.03) - (.02) - - gain Total distributions (.01) (.03) - (.02) (.65) - Redemption fees added to paid .03 .02 .02 .14 .02 .01 in capital Net asset value, end of period $ 11.36 $ 12.77 $ 16.46 $ 14.50 $ 12.42 $ 10.27 TOTAL RETURN B, C (10.97)% (22.23)% 13.52% 16.93% 27.49% (13.91)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 12,449 $ 15,534 $ 25,183 $ 32,525 $ 27,587 $ 31,270 (000 omitted) Ratio of expenses to average 2.30% A 2.20% 2.23% 2.18% 2.36% 2.04% net assets Ratio of expenses to average 2.14% A, E 2.16% E 2.22% E 2.11% E 2.32% E 2.01% E net assets after expense reductions Ratio of net investment (1.46)% A (1.23)% (.84)% (.59)% (1.43)% (1.32)% income (loss) to average net assets Portfolio turnover rate 278% A 123% 59% 252% 138% 82% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT INDUSTRIAL EQUIPMENT 17.75% 40.95% 143.84% 320.78% SELECT INDUSTRIAL EQUIPMENT 14.14% 36.65% 136.46% 308.08% (LOAD ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Cyclical Industries 8.29% 25.75% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT INDUSTRIAL EQUIPMENT 40.95% 19.51% 15.45% SELECT INDUSTRIAL EQUIPMENT 36.65% 18.78% 15.10% (LOAD ADJ.) S&P 500 39.82% 25.11% 17.10% GS Cyclical Industries 25.75% 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 1989/08/31 9700.00 10000.00 1989/09/30 9563.49 9959.00 1989/10/31 8929.14 9727.95 1989/11/30 9178.06 9926.40 1989/12/31 9338.66 10164.64 1990/01/31 9025.50 9482.59 1990/02/28 9483.20 9604.91 1990/03/31 10045.28 9859.44 1990/04/30 9964.98 9612.96 1990/05/31 10888.41 10550.22 1990/06/30 10694.89 10478.48 1990/07/31 10492.79 10444.95 1990/08/31 8762.85 9500.72 1990/09/30 7574.53 9038.04 1990/10/31 7372.44 8999.18 1990/11/30 7614.95 9580.52 1990/12/31 7889.80 9847.82 1991/01/31 8730.52 10277.18 1991/02/28 9555.07 11012.00 1991/03/31 9474.23 11278.49 1991/04/30 9377.22 11305.56 1991/05/31 9773.33 11793.96 1991/06/30 9457.81 11253.80 1991/07/31 9538.72 11778.23 1991/08/31 9684.35 12057.37 1991/09/30 9910.88 11856.01 1991/10/31 9854.25 12014.88 1991/11/30 9385.00 11530.68 1991/12/31 10007.46 12849.79 1992/01/31 10905.35 12610.79 1992/02/29 11680.81 12774.73 1992/03/31 11337.97 12525.62 1992/04/30 11337.97 12893.87 1992/05/31 11427.76 12957.05 1992/06/30 10725.77 12763.99 1992/07/31 10823.73 13286.04 1992/08/31 10260.50 13013.68 1992/09/30 10472.73 13167.24 1992/10/31 10431.92 13213.32 1992/11/30 10929.84 13663.90 1992/12/31 11142.07 13831.96 1993/01/31 11664.48 13948.15 1993/02/28 12276.68 14137.85 1993/03/31 12497.08 14436.15 1993/04/30 13068.84 14086.80 1993/05/31 13722.29 14464.33 1993/06/30 13901.98 14506.27 1993/07/31 14098.02 14448.25 1993/08/31 15061.84 14995.84 1993/09/30 14890.31 14880.37 1993/10/31 15388.56 15188.39 1993/11/30 15372.23 15044.10 1993/12/31 15969.81 15226.14 1994/01/31 16720.74 15743.82 1994/02/28 17196.33 15317.17 1994/03/31 16203.43 14649.34 1994/04/30 16056.78 14836.85 1994/05/31 15728.57 15080.17 1994/06/30 14920.69 14710.71 1994/07/31 15627.59 15193.22 1994/08/31 16738.44 15816.14 1994/09/30 16788.93 15428.65 1994/10/31 16999.32 15775.79 1994/11/30 16174.60 15201.24 1994/12/31 16469.14 15426.67 1995/01/31 16376.57 15826.69 1995/02/28 16864.67 16443.45 1995/03/31 18261.64 16928.70 1995/04/30 19120.24 17427.25 1995/05/31 19507.53 18123.82 1995/06/30 20248.43 18544.83 1995/07/31 22151.19 19159.78 1995/08/31 21721.80 19207.87 1995/09/30 20728.33 20018.44 1995/10/31 20686.23 19946.98 1995/11/30 21393.45 20822.65 1995/12/31 21049.89 21223.69 1996/01/31 21895.56 21946.15 1996/02/29 23081.34 22149.59 1996/03/31 23246.80 22362.89 1996/04/30 23673.90 22692.52 1996/05/31 23845.94 23277.76 1996/06/30 23740.81 23366.44 1996/07/31 22555.68 22334.12 1996/08/31 23530.54 22805.14 1996/09/30 24648.77 24088.62 1996/10/31 24495.85 24752.98 1996/11/30 26483.81 26624.06 1996/12/31 26672.40 26096.63 1997/01/31 27624.60 27727.15 1997/02/28 27292.94 27944.53 1997/03/31 26190.95 26796.29 1997/04/30 27145.86 28396.03 1997/05/31 29556.76 30124.78 1997/06/30 31399.72 31474.37 1997/07/31 33659.94 33978.79 1997/08/31 33451.30 32075.30 1997/09/30 34332.21 33832.06 1997/10/31 31654.72 32702.07 1997/11/30 31596.76 34215.85 1997/12/31 31619.94 34803.33 1998/01/31 31050.33 35188.26 1998/02/28 34322.28 37726.04 1998/03/31 36680.19 39657.99 1998/04/30 37607.46 40056.94 1998/05/31 36282.79 39368.37 1998/06/30 36137.08 40967.51 1998/07/31 34825.65 40531.21 1998/08/31 28957.35 34671.20 1998/09/30 29831.63 36892.24 1998/10/31 33103.58 39893.06 1998/11/30 34309.03 42310.97 1998/12/31 35626.09 44748.93 1999/01/31 35969.57 46620.33 1999/02/28 34664.33 45171.37 1999/03/31 35103.99 46978.68 1999/04/30 40250.12 48798.16 1999/05/31 39783.57 47646.04 1999/06/30 42088.02 50290.39 1999/07/31 41480.10 48720.33 1999/08/31 40808.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 141103 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Industrial Equipment Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $40,808 - a 308.08% 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 $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Tyco International Ltd. 6.6 Pitney Bowes, Inc. 5.9 Emerson Electric Co. 5.3 General Electric Co. 5.1 AlliedSignal, Inc. 4.8 Caterpillar, Inc. 4.8 Illinois Tool Works, Inc. 4.7 Applied Materials, Inc. 4.5 Xerox Corp. 4.3 Ingersoll-Rand Co. 3.7 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Industrial Machinery & Equipment 30.1% Electrical Equipment 17.3% Computers & Office Equipment 10.2% Aerospace & Defense 10.0% Electronic Instruments 7.7% All Others 24.7%* * INCLUDES SHORT-TERM INVESTMENTS AND OTHER NET ASSETS. Row: 1, Col: 1, Value: 24.7 Row: 1, Col: 2, Value: 7.7 Row: 1, Col: 3, Value: 10.0 Row: 1, Col: 4, Value: 10.2 Row: 1, Col: 5, Value: 17.3 Row: 1, Col: 6, Value: 30.1 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. INDUSTRIAL EQUIPMENT PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Simon Wolf) Simon Wolf, Portfolio Manager of Fidelity Select Industrial Equipment Portfolio Q. HOW DID THE FUND PERFORM, SIMON? A. For the six months that ended August 31, 1999, the fund returned 17.75%. For the same six-month period, the Standard & Poor's 500 Index returned 7.32%, 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 8.29%. For the 12 months that ended August 31, 1999, the fund returned 40.95%, while the S&P 500 and the Goldman Sachs Cyclical Industries Index returned 39.82% and 25.75%, respectively. The fund outperformed both the Goldman Sachs index and the S&P 500 because the portfolio had a higher concentration in cyclical, commodity-related stocks that benefited from improving global economies and recovering natural resources prices. Q. WHAT FACTORS LED TO THE FUND'S STRONG PERFORMANCE DURING THE PERIOD? A. The biggest factor was the turnaround in international economies, particularly in Asia. As conditions improved overseas, demand and prices for commodities - such as oil, copper and paper - increased. Higher commodity prices generally lead oil service, mining and construction companies to increase their orders for industrial equipment and machinery. In addition, many equipment companies have significant international sales, so "global healing" provided industrial equipment stocks with an added boost. A pick-up in industrial production domestically, particularly in the technology sector, also contributed to rising stock prices. Q. DID YOU ALTER YOUR STRATEGY TO REFLECT THE CHANGING INVESTMENT ENVIRONMENT? A. Yes, I did. When the period began, I underweighted stocks that were sensitive to commodity prices and international economies. However, once the Asian markets showed signs of stabilizing and oil prices began to recover, I shifted assets into more cyclical companies - such as oil services and heavy equipment manufacturers - that stood to benefit from recovering commodity prices and higher levels of capital spending. For the most part, however, I maintained my bias toward large-cap, highly liquid stocks because a disproportionately small number of larger stocks led the market's advance. Q. WHAT STOCKS WERE THE BIGGEST CONTRIBUTORS TO PERFORMANCE? A. Three of the portfolio's largest positions - Caterpillar, Tyco International and Ingersoll-Rand - generated large gains. Caterpillar - - a manufacturer of earth-moving and construction machinery - was one of the portfolio's largest beneficiaries of increased capital spending overseas. Tyco is a diversified company that has been a core holding based on good growth prospects and consistent earnings gains in both strong and weak markets. Ingersoll-Rand has a multinational portfolio of industrial businesses, including compact construction equipment, architectural hardware and automotive parts. The stock benefited from robust housing activity and strong truck sales throughout the period. Q. WERE THERE ANY DISAPPOINTMENTS? A. There were several stocks that failed to live up to my expectations. Pitney Bowes performed poorly when investors became worried that Internet competition would erode the postage-meter market. However, the company's business prospects remained attractive, with accelerating revenues and expanding margins, and I believe the stock was unduly discounted. Xerox underperformed due to disappointing revenue growth. Although digital sales were strong, they were offset by a faster-than-expected decline in analog sales. Xerox also suffered from weakness in Latin American markets, unfavorable currency exchange rates, and increased price and product competition. Grainger detracted from performance due to a slower-than-anticipated recovery in its core electrical products distribution business, problems implementing a new business-enterprise software system and a disappointing contribution from its Internet sales start-up. Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? A. I am cautiously optimistic that the manufacturing recovery will continue. Industrial equipment stocks have staged a rally on expectations of stronger earnings growth. Now we need to wait and see if earnings can be sustained. In the meantime, I plan to maintain the fund's exposure to large-cap, liquid stocks that I believe are well-positioned to benefit from improving industrial and manufacturing activity overseas as well as from increasing industrial production domestically. 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 3. (checkmark)FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 510 TRADING SYMBOL: FSCGX SIZE: as of August 31, 1999, more than $35 million MANAGER: Simon Wolf, since 1997; research analyst, industrial and electrical equipment industries, since 1997; joined Fidelity in 1996 INDUSTRIAL EQUIPMENT PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 94.6% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 10.0% AlliedSignal, Inc. 28,400 $ 1,739,500 Rockwell International Corp. 14,400 851,400 Textron, Inc. 12,300 993,225 3,584,125 AUTOS, TIRES, & ACCESSORIES - 0.5% Eaton Corp. 2,000 196,000 BUILDING MATERIALS - 1.6% American Standard Companies, 6,200 254,200 Inc. (a) Tecumseh Products Co. 500 26,500 Tecumseh Products Co. Class A 1,300 74,100 York International Corp. 5,000 205,625 560,425 CELLULAR - 1.1% Mannesmann AG Sponsored ADR 2,700 410,400 COMMUNICATIONS EQUIPMENT - 0.9% NEC Corp. ADR 3,800 305,900 COMPUTERS & OFFICE EQUIPMENT - - 10.2% Pitney Bowes, Inc. 35,800 2,112,200 Xerox Corp. 32,000 1,528,000 3,640,200 CONSTRUCTION - 0.3% Granite Construction, Inc. 4,600 115,000 CONSUMER ELECTRONICS - 0.9% Matsushita Electric 1,600 321,700 Industrial Co. Ltd. ADR ELECTRICAL EQUIPMENT - 17.3% Emerson Electric Co. 30,400 1,903,800 General Electric Co. 16,200 1,819,463 Grainger (W.W.), Inc. 6,300 274,444 Honeywell, Inc. 10,100 1,146,350 Hubbell, Inc. Class B 7,500 291,094 Roper Industries, Inc. 9,000 322,313 Siemens AG Sponsored ADR 5,000 426,875 6,184,339 ELECTRONIC INSTRUMENTS - 7.7% Applied Materials, Inc. (a) 22,500 1,598,906 KLA-Tencor Corp. (a) 5,400 339,188 LAM Research Corp. (a) 3,495 197,249 Novellus Systems, Inc. (a) 3,050 164,509 Teradyne, Inc. (a) 6,900 469,631 2,769,483 SHARES VALUE (NOTE 1) ENERGY SERVICES - 2.9% Halliburton Co. 18,700 $ 867,213 Smith International, Inc. (a) 3,400 158,738 1,025,951 GAS - 0.8% Williams Companies, Inc. 6,900 284,625 INDUSTRIAL MACHINERY & EQUIPMENT - 30.1% AGCO Corp. 3,600 37,125 Briggs & Stratton Corp. 1,800 109,575 Case Corp. 7,000 345,625 Caterpillar, Inc. 30,000 1,698,750 Cooper Industries, Inc. 7,000 363,125 Deere & Co. 16,800 653,100 Dover Corp. 8,300 321,106 Hardinge, Inc. 3,500 53,375 IDEX Corp. 4,100 121,206 Illinois Tool Works, Inc. 21,700 1,691,244 Ingersoll-Rand Co. 20,900 1,329,763 Kaydon Corp. 7,000 214,813 Kennametal, Inc. 5,132 135,998 Manitowoc Co., Inc. 2,800 103,775 Milacron, Inc. 7,300 131,400 MSC Industrial Direct, Inc. 23,700 226,631 (a) New Holland NV 14,800 229,400 Parker-Hannifin Corp. 10,500 459,375 Terex Corp. (a) 5,900 158,563 Tyco International Ltd. 23,400 2,370,710 10,754,659 LEASING & RENTAL - 0.8% United Rentals, Inc. (a) 11,200 273,700 MEDICAL EQUIPMENT & SUPPLIES - - 1.5% Millipore Corp. 11,700 441,675 Pall Corp. 4,100 81,488 523,163 METALS & MINING - 0.5% AFC Cable Systems, Inc. (a) 4,000 172,000 OIL & GAS - 2.4% Cooper Cameron Corp. (a) 400 16,650 Weatherford International, 24,000 855,000 Inc. (a) 871,650 PAPER & FOREST PRODUCTS - 0.6% Trex Co., Inc. (a) 9,700 201,881 PHOTOGRAPHIC EQUIPMENT - 0.7% Imation Corp. (a) 8,300 233,956 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) RETAIL & WHOLESALE, MISCELLANEOUS - 0.2% IKON Office Solutions, Inc. 6,200 $ 68,975 SERVICES - 1.3% Ritchie Bros. Auctioneers, 12,500 456,250 Inc. (a) TELEPHONE SERVICES - 2.3% COMSAT Corp. Series 1 24,000 834,000 TOTAL COMMON STOCKS 33,788,382 (Cost $25,984,998) CASH EQUIVALENTS - 10.7% Central Cash Collateral Fund, 1,883,700 1,883,700 5.26% (b) Taxable Central Cash Fund, 1,932,938 1,932,938 5.20% (b) TOTAL CASH EQUIVALENTS 3,816,638 (Cost $3,816,638) TOTAL INVESTMENT PORTFOLIO - 37,605,020 105.3% (Cost $29,801,636) NET OTHER ASSETS - (5.3%) (1,877,669) NET ASSETS - 100% $ 35,727,351 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $33,978,139 and $35,622,342, 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 $2,936 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $1,808,231. The fund received cash collateral of $1,883,700 which was invested in the Central Cash Collateral Fund. The fund participated in the bank borrowing program. The average daily loan balance during the period for which the loan was outstanding amounted to $5,970,000. The weighted average interest rate was 5.29%. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $29,870,881. Net unrealized appreciation aggregated $7,734,139, of which $8,473,934 related to appreciated investment securities and $739,795 related to depreciated investment securities. INDUSTRIAL EQUIPMENT PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 37,605,020 value (cost $29,801,636) - See accompanying schedule Cash 2,804 Receivable for investments 240,417 sold Receivable for fund shares 39,695 sold Dividends receivable 48,981 Interest receivable 7,856 Redemption fees receivable 147 Other receivables 906 TOTAL ASSETS 37,945,826 LIABILITIES Payable for investments $ 172,444 purchased Payable for fund shares 114,542 redeemed Accrued management fee 17,850 Other payables and accrued 29,939 expenses Collateral on securities 1,883,700 loaned, at value TOTAL LIABILITIES 2,218,475 NET ASSETS $ 35,727,351 Net Assets consist of: Paid in capital $ 23,984,556 Undistributed net investment 29,005 income Accumulated undistributed net 3,910,406 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 7,803,384 (depreciation) on investments NET ASSETS, for 1,237,354 $ 35,727,351 shares outstanding NET ASSET VALUE and $28.87 redemption price per share ($35,727,351 (divided by) 1,237,354 shares) Maximum offering price per $29.76 share (100/97.00 of $28.87) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 204,625 Dividends Interest 106,059 Security lending 608 TOTAL INCOME 311,292 EXPENSES Management fee $ 116,132 Transfer agent fees 105,479 Accounting and security 30,314 lending fees Non-interested trustees' 56 compensation Custodian fees and expenses 6,887 Registration fees 20,046 Audit 3,995 Legal 28 Interest 3,507 Total expenses before 286,444 reductions Expense reductions (4,157) 282,287 NET INVESTMENT INCOME 29,005 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 3,943,464 Foreign currency transactions 568 3,944,032 Change in net unrealized 1,670,089 appreciation (depreciation) on investment securities NET GAIN (LOSS) 5,614,121 NET INCREASE (DECREASE) IN $ 5,643,126 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 36,499 charges paid to FDC Sales charges - Retained by $ 36,499 FDC Deferred sales charges $ 355 withheld by FDC Exchange fees withheld by FSC $ 1,628 Expense reductions Directed $ 3,848 brokerage arrangements Custodian credits 309 $ 4,157
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ 29,005 $ (69,481) income (loss) Net realized gain (loss) 3,944,032 3,586,120 Change in net unrealized 1,670,089 (3,320,873) appreciation (depreciation) NET INCREASE (DECREASE) IN 5,643,126 195,766 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (855,037) (1,273,263) from net realized gains Share transactions Net 24,060,945 20,888,073 proceeds from sales of shares Reinvestment of distributions 816,722 1,219,714 Cost of shares redeemed (25,551,553) (39,935,425) NET INCREASE (DECREASE) IN (673,886) (17,827,638) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 39,986 50,582 TOTAL INCREASE (DECREASE) 4,154,189 (18,854,553) IN NET ASSETS NET ASSETS Beginning of period 31,573,162 50,427,715 End of period (including $ 35,727,351 $ 31,573,162 undistributed net investment income of $29,005 and $0, respectively) OTHER INFORMATION Shares Sold 835,619 771,299 Issued in reinvestment of 32,003 49,301 distributions Redeemed (881,663) (1,515,112) Net increase (decrease) (14,041) (694,512)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F 1995 Net asset value, beginning of $ 25.23 $ 25.91 $ 25.51 $ 25.11 $ 20.04 $ 20.61 period Income from Investment Operations Net investment income (loss) D .02 (.04) (.08) .06 .04 .01 Net realized and unrealized 4.33 .25 5.73 4.15 7.10 (.44) gain (loss) Total from investment 4.35 .21 5.65 4.21 7.14 (.43) operations Less Distributions From net investment income - - (.02) (.04) (.05) (.01) From net realized gain (.74) (.92) (5.26) (3.84) (2.05) (.16) Total distributions (.74) (.92) (5.28) (3.88) (2.10) (.17) Redemption fees added to paid .03 .03 .03 .07 .03 .03 in capital Net asset value, end of period $ 28.87 $ 25.23 $ 25.91 $ 25.51 $ 25.11 $ 20.04 TOTAL RETURN B, C 17.75% 1.00% 25.76% 18.25% 36.86% (1.93)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 35,727 $ 31,573 $ 50,428 $ 102,882 $ 137,520 $ 109,968 (000 omitted) Ratio of expenses to average 1.42% A 1.43% 1.67% 1.51% 1.54% 1.80% net assets Ratio of expenses to average 1.40% A, E 1.41% E 1.60% E 1.44% E 1.53% E 1.78% E net assets after expense reductions Ratio of net investment .14% A (.16)% (.32)% .25% .19% .06% income (loss) to average net assets Portfolio turnover rate 188% A 84% 115% 261% 115% 131% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT INDUSTRIAL MATERIALS 12.84% 23.61% 22.05% 96.32% SELECT INDUSTRIAL MATERIALS 9.39% 19.83% 18.32% 90.36% (LOAD ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Cyclical Industries 8.29% 25.75% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT INDUSTRIAL MATERIALS 23.61% 4.07% 6.98% SELECT INDUSTRIAL MATERIALS 19.83% 3.42% 6.65% (LOAD ADJ.) S&P 500 39.82% 25.11% 17.10% GS Cyclical Industries 25.75% 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 1989/08/31 9700.00 10000.00 1989/09/30 9108.69 9959.00 1989/10/31 8360.12 9727.95 1989/11/30 8479.64 9926.40 1989/12/31 8718.68 10164.64 1990/01/31 8051.88 9482.59 1990/02/28 8190.27 9604.91 1990/03/31 8429.31 9859.44 1990/04/30 7819.13 9612.96 1990/05/31 8290.92 10550.22 1990/06/30 8202.94 10478.48 1990/07/31 8106.13 10444.95 1990/08/31 7170.31 9500.72 1990/09/30 6660.45 9038.04 1990/10/31 6583.00 8999.18 1990/11/30 6931.51 9580.52 1990/12/31 7221.94 9847.82 1991/01/31 7480.10 10277.18 1991/02/28 8028.68 11012.00 1991/03/31 8138.40 11278.49 1991/04/30 8151.30 11305.56 1991/05/31 8848.33 11793.96 1991/06/30 8751.49 11253.80 1991/07/31 9101.55 11778.23 1991/08/31 9315.47 12057.37 1991/09/30 9192.31 11856.01 1991/10/31 9587.74 12014.88 1991/11/30 8822.80 11530.68 1991/12/31 9808.15 12849.79 1992/01/31 10236.00 12610.79 1992/02/29 10735.16 12774.73 1992/03/31 10547.17 12525.62 1992/04/30 11098.19 12893.87 1992/05/31 11227.84 12957.05 1992/06/30 10955.31 12763.99 1992/07/31 11201.79 13286.04 1992/08/31 10494.78 13013.68 1992/09/30 10352.08 13167.24 1992/10/31 10468.84 13213.32 1992/11/30 10858.01 13663.90 1992/12/31 11021.29 13831.96 1993/01/31 11255.79 13948.15 1993/02/28 11360.01 14137.85 1993/03/31 11548.91 14436.15 1993/04/30 11379.55 14086.80 1993/05/31 11848.54 14464.33 1993/06/30 11880.90 14506.27 1993/07/31 12044.28 14448.25 1993/08/31 12357.96 14995.84 1993/09/30 11972.39 14880.37 1993/10/31 12678.19 15188.39 1993/11/30 12848.10 15044.10 1993/12/31 13377.45 15226.14 1994/01/31 14462.28 15743.82 1994/02/28 14161.66 15317.17 1994/03/31 13763.02 14649.34 1994/04/30 14279.60 14836.85 1994/05/31 14423.70 15080.17 1994/06/30 14273.05 14710.71 1994/07/31 14803.62 15193.22 1994/08/31 15602.75 15816.14 1994/09/30 15406.25 15428.65 1994/10/31 15203.19 15775.79 1994/11/30 14128.94 15201.24 1994/12/31 14473.58 15426.67 1995/01/31 14064.94 15826.69 1995/02/28 15244.71 16443.45 1995/03/31 15594.03 16928.70 1995/04/30 15666.24 17427.25 1995/05/31 15507.80 18123.82 1995/06/30 16200.99 18544.83 1995/07/31 17600.59 19159.78 1995/08/31 17554.38 19207.87 1995/09/30 17059.24 20018.44 1995/10/31 16068.95 19946.98 1995/11/30 17547.77 20822.65 1995/12/31 16701.04 21223.69 1996/01/31 16959.62 21946.15 1996/02/29 17284.49 22149.59 1996/03/31 18159.65 22362.89 1996/04/30 18585.19 22692.52 1996/05/31 18470.76 23277.76 1996/06/30 17858.21 23366.44 1996/07/31 17117.76 22334.12 1996/08/31 18046.68 22805.14 1996/09/30 18443.83 24088.62 1996/10/31 18403.44 24752.98 1996/11/30 18962.14 26624.06 1996/12/31 19041.47 26096.63 1997/01/31 19125.97 27727.15 1997/02/28 19478.07 27944.53 1997/03/31 18182.35 26796.29 1997/04/30 18231.82 28396.03 1997/05/31 19387.09 30124.78 1997/06/30 19325.89 31474.37 1997/07/31 21016.71 33978.79 1997/08/31 21100.87 32075.30 1997/09/30 21651.72 33832.06 1997/10/31 19976.20 32702.07 1997/11/30 19739.03 34215.85 1997/12/31 19375.52 34803.33 1998/01/31 19740.94 35188.26 1998/02/28 20762.45 37726.04 1998/03/31 21775.65 39657.99 1998/04/30 21974.97 40056.94 1998/05/31 20895.33 39368.37 1998/06/30 19848.90 40967.51 1998/07/31 18445.36 40531.21 1998/08/31 15405.74 34671.20 1998/09/30 15629.97 36892.24 1998/10/31 16767.75 39893.06 1998/11/30 17357.41 42310.97 1998/12/31 17241.14 44748.93 1999/01/31 17332.49 46620.33 1999/02/28 16875.72 45171.37 1999/03/31 17257.75 46978.68 1999/04/30 20837.19 48798.16 1999/05/31 19491.79 47646.04 1999/06/30 20131.27 50290.39 1999/07/31 19724.33 48720.33 1999/08/31 19036.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 121309 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Industrial Materials Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $19,036 - a 90.36% 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 $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Minnesota Mining & 6.8 Manufacturing Co. Alcoa, Inc. 5.8 Kimberly-Clark Corp. 5.5 E.I. du Pont de Nemours and Co. 5.3 Dow Chemical Co. 4.7 Monsanto Co. 4.1 International Paper Co. 3.6 Burlington Northern Santa Fe 3.4 Corp. CSX Corp. 2.6 Union Pacific Corp. 2.4 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Chemicals & Plastics 27.1% Paper & Forest Products 21.3% Railroads 11.0% Metals & Mining 10.2% Consumer Durables 6.8% All Others 23.6%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 23.6 Row: 1, Col: 2, Value: 6.8 Row: 1, Col: 3, Value: 10.2 Row: 1, Col: 4, Value: 11.0 Row: 1, Col: 5, Value: 21.3 Row: 1, Col: 6, Value: 27.1 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. 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. It was a good period for the fund. For the six months that ended August 31, 1999, the fund returned 12.84%. That bettered both the 7.32% return of the Standard & Poor's 500 Index and the 8.29% return of the Goldman Sachs Cyclical Industries Index, an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector. For the 12 months that ended August 31, 1999, the fund returned 23.61%, versus 39.82% and 25.75%, respectively, for the S&P 500 and the Goldman Sachs index. Q. WHAT ACCOUNTED FOR THE FUND'S STRONG PERFORMANCE DURING THE SIX-MONTH PERIOD? A. The biggest influence was the powerful rally in cyclical stocks that took place during April and the first half of May. This rally was sparked by several factors, including a stronger-than-expected U.S. economy and apparent turnarounds in a number of Asian economies. Cyclical stocks generally do well in an environment of vigorous economic growth, and these factors contributed to investors' perception that we had that kind of environment. Although the cyclical rally faded somewhat during the summer, many stocks held on to a significant portion of their gains. In addition, base metals such as copper, aluminum, zinc and nickel rallied strongly during the period, boosting that portion of the fund's holdings. Although the broadly based S&P 500 also advanced during the period, rising interest rates hurt some sectors. Q. HAVE THERE BEEN ANY NOTABLE SHIFTS IN THE SUBSECTORS IN WHICH THE FUND INVESTS? A. Not really. I try to keep subsector weightings pretty consistent. At the end of the period, the fund's four biggest subsectors - as a percentage of net assets - were chemicals and plastics, at 27.1%; paper and forest products, 21.3%; railroads, 11.0%; and metals and mining, 10.2%. Within each sub sector, I try to identify the most attractive companies based on basic business prospects and valuations. Q. WHAT STOCKS DID WELL FOR THE FUND? A. Alcoa, the fund's second-largest holding at the end of the period, was one of the strongest performers. The company continued to benefit from an aggressive cost reduction program and recent acquisitions, as well as from an increase in the aluminum price. Kimberly-Clark, also a core holding, was helped by the general upturn in cyclical stocks. Minnesota Mining & Manufacturing (3M), the fund's largest holding as of the end of the period, responded to rebounding Asian demand for the company's products as a result of the improved economic conditions there. Another positive contributor was Reynolds Metals, which was bought by Alcoa at a premium. Q. WHAT STOCKS DETRACTED FROM PERFORMANCE? A. One disappointment was Owens-Illinois, which was hurt by weak demand in Latin America for its beverage containers. Monsanto also underperformed. Although its earnings were on target, investors were concerned that European demand for the company's genetically modified seed products might be affected by negative perceptions. Q. WHAT'S YOUR OUTLOOK, PETER? A. Industrial materials stocks should do well if the current uptrend in worldwide economic growth continues. At present, the U.S. economy seems to be in relatively good shape. The main concern going forward is whether the Federal Reserve Board's worries about inflation will lead to further increases in interest rates, which could cause a slowdown. Some countries in Asia - for example, South Korea - genuinely seem to have improved. However, Japan, the economic linchpin of Asia, is still a question mark. Although the Japanese economy appears to be stabilizing, it's unclear how much of that has resulted from government spending intended to jump-start the economy. Turning to Europe, Germany, a concern earlier in the year, seems to be improving. Overall, then, my outlook is cautiously optimistic. 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 3. (checkmark)FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 509 TRADING SYMBOL: FSDPX SIZE: as of August 31, 1999, more than $14 million MANAGER: Peter Hirsch, since 1998; analyst, growth and income funds and steel industries, 1995-1998; joined Fidelity in 1995 INDUSTRIAL MATERIALS PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 95.1% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 5.1% Ferro Corp. 1,000 $ 24,000 Lafarge Corp. 2,356 64,790 Masco Corp. 10,600 300,113 Owens-Corning 2,900 81,563 Sherwin-Williams Co. 600 14,625 Southdown, Inc. 1,900 95,950 USG Corp. 600 29,400 Vulcan Materials Co. 2,800 119,350 729,791 CHEMICALS & PLASTICS - 27.1% Air Products & Chemicals, 2,000 68,000 Inc. Avery Dennison Corp. 3,700 203,038 Crompton & Knowles Corp. 2,000 35,000 Cytec Industries, Inc. (a) 1,500 34,969 Dow Chemical Co. 5,900 670,388 E.I. du Pont de Nemours and 11,900 754,163 Co. Eastman Chemical Co. 2,200 102,163 Engelhard Corp. 6,100 121,619 Fuller (H.B.) Co. 400 24,100 Great Lakes Chemical Corp. 1,100 45,306 Hanna (M.A.) Co. 1,400 19,163 Hercules, Inc. 3,200 104,200 Ivex Packaging Corp. (a) 2,800 43,400 Lyondell Chemical Co. 3,200 46,600 Minerals Technologies, Inc. 600 29,700 Monsanto Co. 14,200 583,088 PPG Industries, Inc. 4,400 264,275 Praxair, Inc. 5,500 258,500 Sealed Air Corp. (a) 3,440 202,100 Union Carbide Corp. 2,400 136,500 Valspar Corp. 2,100 76,256 Witco Corp. 2,700 43,706 3,866,234 CONSUMER DURABLES - 6.8% Minnesota Mining & 10,200 963,893 Manufacturing Co. INDUSTRIAL MACHINERY & EQUIPMENT - 0.2% UCAR International, Inc. (a) 1,300 31,688 IRON & STEEL - 4.7% AK Steel Holding Corp. 4,600 96,600 Allegheny Teledyne, Inc. 10,300 192,481 Bethlehem Steel Corp. (a) 11,100 85,331 Nucor Corp. 2,000 93,125 Steel Dynamics, Inc. (a) 5,600 100,800 USX-U.S. Steel Group 2,400 64,800 Worthington Industries, Inc. 2,200 33,000 666,137 SHARES VALUE (NOTE 1) LEASING & RENTAL - 0.7% Ryder Systems, Inc. 4,600 $ 101,488 METALS & MINING - 10.2% Alcoa, Inc. 12,782 825,238 Brush Wellman, Inc. 600 10,200 Cominco Ltd. 2,500 43,132 Falconbridge Ltd. 7,100 110,841 Inco Ltd. 7,700 158,127 Kaiser Aluminum Corp. (a) 600 5,363 Olin Corp. 2,600 36,888 Phelps Dodge Corp. 2,300 128,656 Reynolds Metals Co. 1,400 88,638 Ryerson Tull, Inc. 2,420 45,829 1,452,912 PACKAGING & CONTAINERS - 2.2% Ball Corp. 700 31,456 Bemis Co., Inc. 1,900 72,081 Crown Cork & Seal Co., Inc. 2,700 71,719 Owens-Illinois, Inc. (a) 5,800 143,550 318,806 PAPER & FOREST PRODUCTS - 21.3% Boise Cascade Corp. 1,687 61,365 Bowater, Inc. 1,600 85,800 Champion International Corp. 2,700 148,500 Chesapeake Corp. 500 16,906 Consolidated Papers, Inc. 2,900 77,213 Domtar, Inc. 4,800 52,422 Fort James Corp. 5,900 190,275 Georgia-Pacific Corp. 4,400 182,050 International Paper Co. 10,886 512,322 Kimberly-Clark Corp. 13,700 780,044 Louisiana-Pacific Corp. 100 1,850 Mead Corp. 3,200 119,400 Potlatch Corp. 800 30,900 Smurfit-Stone Container Corp. 7,200 152,550 (a) Temple-Inland, Inc. 1,400 86,800 Westvaco Corp. 3,400 89,038 Weyerhaeuser Co. 5,900 331,875 Willamette Industries, Inc. 2,800 110,950 3,030,260 PRECIOUS METALS - 4.0% Barrick Gold Corp. 12,500 241,206 Euro-Nevada Mining Corp. Ltd. 4,900 58,931 Kinross Gold Corp. (a) 13,500 28,945 Newmont Mining Corp. 5,750 117,516 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PRECIOUS METALS - CONTINUED Placer Dome, Inc. 7,445 $ 77,318 Stillwater Mining Co. (a) 1,950 43,022 566,938 RAILROADS - 11.0% Burlington Northern Santa Fe 16,900 490,100 Corp. Canadian National Railway Co. 3,400 216,074 Canadian Pacific Ltd. 6,600 155,216 CSX Corp. 8,300 362,606 Union Pacific Corp. 7,100 345,681 1,569,677 SECURITIES INDUSTRY - 0.5% Kansas City Southern 1,400 64,838 Industries, Inc. TRUCKING & FREIGHT - 1.3% CNF Transportation, Inc. 2,200 85,663 USFreightways Corp. 2,200 106,700 192,363 TOTAL COMMON STOCKS 13,555,025 (Cost $12,289,620) CASH EQUIVALENTS - 9.5% Taxable Central Cash Fund, 1,355,461 1,355,461 5.20% (b) (Cost $1,355,461) TOTAL INVESTMENT PORTFOLIO - 14,910,486 104.6% (Cost $13,645,081) NET OTHER ASSETS - (4.6%) (660,851) NET ASSETS - 100% $ 14,249,635 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $45,087,091 and $42,526,881, 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 $8,111 for the period. The fund participated in the bank borrowing program. The average daily loan balance during the period for which loans were outstanding amounted to $1,962,714. The weighted average interest rate was 5.32%. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $13,722,778. Net unrealized appreciation aggregated $1,187,708, of which $1,711,882 related to appreciated investment securities and $524,174 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 29, 2007. The fund has elected to defer to 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 AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 14,910,486 value (cost $13,645,081) - See accompanying schedule Receivable for fund shares 45,526 sold Dividends receivable 28,694 Interest receivable 7,550 Redemption fees receivable 259 Other receivables 1,380 TOTAL ASSETS 14,993,895 LIABILITIES Payable to custodian bank $ 285 Payable for fund shares 708,666 redeemed Accrued management fee 7,929 Other payables and accrued 27,380 expenses TOTAL LIABILITIES 744,260 NET ASSETS $ 14,249,635 Net Assets consist of: Paid in capital $ 15,627,508 Undistributed net investment 30,305 income Accumulated undistributed net (2,673,579) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 1,265,401 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 621,348 $ 14,249,635 shares outstanding NET ASSET VALUE and $22.93 redemption price per share ($14,249,635 (divided by) 621,348 shares) Maximum offering price per $23.64 share (100/97.00 of $22.93) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 215,705 Dividends Interest 40,155 Security lending 1,380 TOTAL INCOME 257,240 EXPENSES Management fee $ 73,484 Transfer agent fees 85,120 Accounting and security 30,303 lending fees Non-interested trustees' 35 compensation Custodian fees and expenses 15,927 Registration fees 21,656 Audit 3,534 Legal 13 Interest 2,031 Total expenses before 232,103 reductions Expense reductions (5,168) 226,935 NET INVESTMENT INCOME 30,305 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (622,876) Foreign currency transactions (31) (622,907) Change in net unrealized appreciation (depreciation) on: Investment securities 1,066,692 Assets and liabilities in (1) 1,066,691 foreign currencies NET GAIN (LOSS) 443,784 NET INCREASE (DECREASE) IN $ 474,089 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 41,607 charges paid to FDC Sales charges - Retained by $ 41,607 FDC Deferred sales charges $ 289 withheld by FDC Exchange fees withheld by FSC $ 2,790 Expense reductions Directed $ 5,168 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ 30,305 $ (83,870) income (loss) Net realized gain (loss) (622,907) (1,208,807) Change in net unrealized 1,066,691 (1,993,477) appreciation (depreciation) NET INCREASE (DECREASE) IN 474,089 (3,286,154) NET ASSETS RESULTING FROM OPERATIONS Share transactions Net 57,571,279 9,957,438 proceeds from sales of shares Cost of shares redeemed (55,092,521) (18,118,847) NET INCREASE (DECREASE) IN 2,478,758 (8,161,409) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 134,545 27,986 TOTAL INCREASE (DECREASE) 3,087,392 (11,419,577) IN NET ASSETS NET ASSETS Beginning of period 11,162,243 22,581,820 End of period (including $ 14,249,635 $ 11,162,243 undistributed net investment income of $30,305 and $0, respectively) OTHER INFORMATION Shares Sold 2,353,254 440,126 Redeemed (2,281,095) (794,343) Net increase (decrease) 72,159 (354,217)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F 1995 Net asset value, beginning of $ 20.32 $ 25.00 $ 27.66 $ 26.07 $ 23.13 $ 21.67 period Income from Investment Operations Net investment income (loss) D .03 (.12) (.11) .06 .12 .17 Net realized and unrealized 2.45 (4.60) 1.43 3.12 2.92 1.43 gain (loss) Total from investment 2.48 (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 .13 .04 .05 .04 .05 .04 in capital Net asset value, end of period $ 22.93 $ 20.32 $ 25.00 $ 27.66 $ 26.07 $ 23.13 TOTAL RETURN B, C 12.84% (18.72)% 6.59% 12.69% 13.38% 7.65% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 14,250 $ 11,162 $ 22,582 $ 66,462 $ 86,338 $ 183,454 (000 omitted) Ratio of expenses to average 1.84% A 2.07% 1.98% 1.54% 1.64% 1.56% net assets Ratio of expenses to average 1.80% A, E 2.04% E 1.94% E 1.51% E 1.61% E 1.53% E net assets after expense reductions Ratio of net investment .24% A (.52)% (.42)% .23% .49% .77% income (loss) to average net assets Portfolio turnover rate 389% A 82% 118% 105% 138% 139% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT PAPER AND FOREST 24.23% 38.41% 49.34% 149.85% PRODUCTS SELECT PAPER AND FOREST 20.43% 34.18% 44.79% 142.29% PRODUCTS (LOAD ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Cyclical Industries 8.29% 25.75% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT PAPER AND FOREST 38.41% 8.35% 9.59% PRODUCTS SELECT PAPER AND FOREST 34.18% 7.68% 9.25% PRODUCTS (LOAD ADJ.) S&P 500 39.82% 25.11% 17.10% GS Cyclical Industries 25.75% 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 Products S&P 500 00506 SP001 1989/08/31 9700.00 10000.00 1989/09/30 9165.80 9959.00 1989/10/31 8751.09 9727.95 1989/11/30 8687.83 9926.40 1989/12/31 8873.89 10164.64 1990/01/31 8062.65 9482.59 1990/02/28 8140.93 9604.91 1990/03/31 8368.64 9859.44 1990/04/30 7827.81 9612.96 1990/05/31 8347.30 10550.22 1990/06/30 8148.04 10478.48 1990/07/31 8269.02 10444.95 1990/08/31 7279.87 9500.72 1990/09/30 6575.36 9038.04 1990/10/31 6368.99 8999.18 1990/11/30 7009.45 9580.52 1990/12/31 7533.27 9847.82 1991/01/31 8155.61 10277.18 1991/02/28 8546.39 11012.00 1991/03/31 8720.06 11278.49 1991/04/30 9147.02 11305.56 1991/05/31 10196.32 11793.96 1991/06/30 9935.81 11253.80 1991/07/31 9943.04 11778.23 1991/08/31 9993.70 12057.37 1991/09/30 9610.16 11856.01 1991/10/31 9971.99 12014.88 1991/11/30 9212.15 11530.68 1991/12/31 10152.23 12849.79 1992/01/31 11085.93 12610.79 1992/02/29 11137.81 12774.73 1992/03/31 11211.91 12525.62 1992/04/30 11389.76 12893.87 1992/05/31 11071.11 12957.05 1992/06/30 10997.56 12763.99 1992/07/31 10915.88 13286.04 1992/08/31 10477.76 13013.68 1992/09/30 10366.37 13167.24 1992/10/31 10871.33 13213.32 1992/11/30 11272.32 13663.90 1992/12/31 11376.07 13831.96 1993/01/31 11726.45 13948.15 1993/02/28 11987.37 14137.85 1993/03/31 11972.46 14436.15 1993/04/30 12517.09 14086.80 1993/05/31 12554.38 14464.33 1993/06/30 12285.84 14506.27 1993/07/31 12159.03 14448.25 1993/08/31 12487.25 14995.84 1993/09/30 11890.49 14880.37 1993/10/31 12352.98 15188.39 1993/11/30 13121.31 15044.10 1993/12/31 13486.82 15226.14 1994/01/31 15053.33 15743.82 1994/02/28 14628.13 15317.17 1994/03/31 13076.55 14649.34 1994/04/30 13061.94 14836.85 1994/05/31 13594.77 15080.17 1994/06/30 13457.75 14710.71 1994/07/31 14599.53 15193.22 1994/08/31 16228.47 15816.14 1994/09/30 16517.72 15428.65 1994/10/31 15490.12 15775.79 1994/11/30 14812.66 15201.24 1994/12/31 15393.64 15426.67 1995/01/31 15290.27 15826.69 1995/02/28 16808.96 16443.45 1995/03/31 16928.23 16928.70 1995/04/30 16998.23 17427.25 1995/05/31 17279.26 18123.82 1995/06/30 18844.99 18544.83 1995/07/31 19487.34 19159.78 1995/08/31 19471.28 19207.87 1995/09/30 19150.11 20018.44 1995/10/31 18869.08 19946.98 1995/11/30 19150.11 20822.65 1995/12/31 18767.12 21223.69 1996/01/31 19235.19 21946.15 1996/02/29 18352.03 22149.59 1996/03/31 19288.18 22362.89 1996/04/30 20131.53 22692.52 1996/05/31 19725.76 23277.76 1996/06/30 18619.13 23366.44 1996/07/31 18130.36 22334.12 1996/08/31 19144.78 22805.14 1996/09/30 19836.42 24088.62 1996/10/31 19799.54 24752.98 1996/11/30 20030.08 26624.06 1996/12/31 20093.19 26096.63 1997/01/31 20300.14 27727.15 1997/02/28 20347.17 27944.53 1997/03/31 19246.56 26796.29 1997/04/30 19822.58 28396.03 1997/05/31 22268.98 30124.78 1997/06/30 22443.03 31474.37 1997/07/31 24193.22 33978.79 1997/08/31 24106.19 32075.30 1997/09/30 24812.07 33832.06 1997/10/31 22394.68 32702.07 1997/11/30 22539.73 34215.85 1997/12/31 21972.36 34803.33 1998/01/31 22812.66 35188.26 1998/02/28 23507.72 37726.04 1998/03/31 23870.82 39657.99 1998/04/30 25155.86 40056.94 1998/05/31 23686.06 39368.37 1998/06/30 22618.07 40967.51 1998/07/31 20439.80 40531.21 1998/08/31 17510.76 34671.20 1998/09/30 17859.71 36892.24 1998/10/31 19001.72 39893.06 1998/11/30 19900.52 42310.97 1998/12/31 20238.89 44748.93 1999/01/31 19350.66 46620.33 1999/02/28 19509.27 45171.37 1999/03/31 20524.39 46978.68 1999/04/30 24669.45 48798.16 1999/05/31 24267.63 47646.04 1999/06/30 24595.43 50290.39 1999/07/31 24415.67 48720.33 1999/08/31 24229.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 140634 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Paper and Forest Products Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $24,229 - a 142.29% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Smurfit-Stone Container Corp. 9.2 Gaylord Container Corp. Class A 8.5 Abitibi-Consolidated, Inc. 8.3 Champion International Corp. 7.9 Domtar, Inc. 7.9 Bowater, Inc. 6.5 Tembec, Inc. Class A 5.8 Pope & Talbot, Inc. 5.3 Boise Cascade Corp. 5.2 Plum Creek Timber Co., Inc. 5.1 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Paper & Forest Products 87.9% Packaging & Containers 8.5% Real Estate Investment Trusts 5.1% Tobacco 0.9% Building Materials 0.3% All Others (2.7%)* * SHORT-TERM INVESTMENTS AND NET OTHER ASSETS ARE NOT INCLUDED IN THE PIE CHART. Row: 1, Col: 1, Value: 85.5 Row: 1, Col: 2, Value: 8.300000000000001 Row: 1, Col: 3, Value: 5.0 Row: 1, Col: 4, Value: 0.9 Row: 1, Col: 5, Value: 0.3 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. PAPER AND FOREST PRODUCTS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Noah Eccles) Noah Eccles, Portfolio Manager of Fidelity Select Paper and Forest Products Portfolio Q. HOW DID THE FUND PERFORM, NOAH? A. Very well. For the six months that ended August 31, 1999, the fund returned 24.23%. This topped the Standard & Poor's 500 Index, which returned 7.32% in that time. The fund also outpaced the Goldman Sachs Cyclical Industries Index - an index of 277 stocks designed to measure the performance of companies in the cyclical industries sector - which returned 8.29% during the period. For the 12 months that ended August 31, 1999, the fund returned 38.41%, while the S&P 500 and Goldman Sachs indexes returned 39.82% and 25.75%, respectively. Q. WHAT FACTORS PLAYED A KEY ROLE IN HELPING THE SECTOR AND THE FUND PERFORM WELL DURING THE SIX-MONTH PERIOD? A. Two of the most important drivers for this sector - operating rates and pulp prices - were very favorable. I define operating rates as the global consumption for paper products divided by available capacity. Capacity expansion for 1999 and 2000 will be the lowest it has been in 30 years. In conjunction, shipments accelerated during the period as customers began to re-stock inventories after significant de-stocking last year. Specifically, we've seen a significant pickup in exports to Asia as that region gradually recovers. This formula translated into positive operating rates throughout the sector as well as higher pulp prices. Pulp is the major paper grade and serves as the building block for paper itself. Since paper prices tend to follow pulp prices pretty closely, rising pulp prices helped many stocks. Q. DID ANY OF THE OTHER PAPER GRADES YOU TRACK BENEFIT FROM INCREASED PULP PRICES? A. The coated and uncoated free sheet grades have more direct exposure to pulp because pulp is a larger component of the cost involved in making those types of paper. Coated and uncoated inventories decreased minimally during the period, yet both experienced a 10% price increase. Pulp prices are the biggest driver for these grades. The other grades, meanwhile, were helped along by capacity reduction and tighter inventories. The containerboard sector pushed through two considerable price increases for linerboard, the material used in assembling corrugated boxes, and the newsprint industry recently announced a price jump effective October 1. Finally, operating margins within the tissue area have been very competitive, and tissue is typically the last grade to be helped by rising pulp prices. Tissue margins shouldn't begin to turn until 2000. Q. SIX MONTHS AGO, YOU WERE LOOKING TO ADD STOCKS THAT HAD BOTTOMED OUT IN VALUATION YET COULD GROW IF THE PAPER CYCLE BLOSSOMED. HOW DID THIS MOVE WORK OUT? A. Even though the paper pricing cycle kicked in sooner than I anticipated, this strategy paid off. For a three-week period in March and early April, we experienced a significant cyclical rally. As a result, fund assets rose quickly and it took some time to put the money to use. In a rallying market, having a high cash level can be frustrating. But this is where my defensive strategy came into play. Relative to the rest of the paper group, the strong performance of stocks such as Abitibi, Bowater, Champion International, Pope & Talbot, Westvaco and Consolidated Papers more than offset the fact that the fund had a higher cash position than I preferred. Q. WE'VE TALKED ABOUT SOME STOCKS THAT PERFORMED WELL. WHAT ABOUT SOME THAT DIDN'T? A. The fund's timber-related positions were disappointing, as timber prices stayed fairly flat. This hurt several names, including Crown Pacific and Georgia-Pacific, neither of which were owned by the fund at the end of the period. Gaylord Container - the fund's biggest small-cap stock position - also performed poorly as small-cap stocks in general trailed larger stocks during the period. Q. WHAT'S YOUR OUTLOOK? A. The future looks bright for the sector. Operating rates should be increasing for another 12-24 months, as should commodity prices, both good signs for stocks. The one worry I have concerns Y2K and inventories. Companies may be loading up on supply before the end of 1999 and any drop-off in shipments due to Y2K could be a fly in the ointment. 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 3. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 506 TRADING SYMBOL: FSPFX SIZE: as of August 31, 1999, more than $16 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 AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 102.7% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 0.3% T.J. International, Inc. 1,600 $ 46,600 INDUSTRIAL MACHINERY & EQUIPMENT - 0.0% Tenneco, Inc. 50 1,006 PACKAGING & CONTAINERS - 8.5% Gaylord Container Corp. Class 168,100 1,376,319 A (a) PAPER & FOREST PRODUCTS - 87.9% Abitibi-Consolidated, Inc. 112,400 1,340,516 Alliance Forest Products, 5,700 70,080 Inc. (a) Boise Cascade Corp. 23,000 836,625 Bowater, Inc. 19,600 1,051,050 Caraustar Industries, Inc. 1,800 40,838 Champion International Corp. 23,200 1,276,000 Consolidated Papers, Inc. 29,900 796,088 Domtar, Inc. 116,400 1,271,236 Donohue, Inc. Class A (sub. 33,300 538,824 vtg.) Fletcher Challenge Canada 2,500 27,303 Ltd. Glatfelter (P.H.) Co. 8,800 116,050 International Paper Co. 61 2,871 Jefferson Smurfit Group PLC 23,600 68,635 Jefferson Smurfit Group PLC 27,000 806,625 Sponsored ADR Kimberly-Clark Corp. 500 28,469 Longview Fibre Co. 4,500 58,219 Mead Corp. 21,000 783,563 Pope & Talbot, Inc. 70,400 858,000 Potlatch Corp. 900 34,763 Rayonier, Inc. 900 37,350 Rock-Tenn Co. Class A 3,800 53,675 Smurfit-Stone Container Corp. 69,900 1,481,003 (a) St. Laurent Paperboard, Inc. 5,000 64,657 (a) Stora Enso Oyj 28,300 377,101 Svenska Cellulosa AB (SCA) 2,700 78,600 Class B Tembec, Inc. Class A (a) 103,600 940,556 Temple-Inland, Inc. 100 6,200 UPM-Kymmene Corp. 5,400 187,028 Wausau-Mosinee Paper Corp. 9,500 130,625 Westvaco Corp. 31,100 814,431 14,176,981 REAL ESTATE INVESTMENT TRUSTS - - 5.1% Plum Creek Timber Co., Inc. 30,550 819,122 TOBACCO - 0.9% Schweitzer-Mauduit 11,000 149,188 International, Inc. TOTAL COMMON STOCKS 16,569,216 (Cost $15,842,685) CASH EQUIVALENTS - 2.6% SHARES VALUE (NOTE 1) Taxable Central Cash Fund, 411,852 $ 411,852 5.20% (b) (Cost $411,852) TOTAL INVESTMENT PORTFOLIO - 16,981,068 105.3% (Cost $16,254,537) NET OTHER ASSETS - (5.3%) (855,040) NET ASSETS - 100% $ 16,126,028 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $47,621,378 and $42,675,768, 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 $12,261 for the period. Distribution of investments by country of issue, as a percentage of net assets, is as follows: United States of America 64.2% Canada 26.4 Ireland 5.4 Finland 3.5 Others (individually less 0.5 than 1%) 100.0% INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $16,340,278. Net unrealized appreciation aggregated $640,790, of which $1,114,655 related to appreciated investment securities and $473,865 related to depreciated investment securities. 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 has elected 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. PAPER AND FOREST PRODUCTS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 16,981,068 value (cost $16,254,537) - See accompanying schedule Receivable for investments 175,500 sold Receivable for fund shares 37,827 sold Dividends receivable 10,196 Interest receivable 3,674 Redemption fees receivable 780 TOTAL ASSETS 17,209,045 LIABILITIES Payable for fund shares $ 1,052,414 redeemed Accrued management fee 8,778 Other payables and accrued 21,825 expenses TOTAL LIABILITIES 1,083,017 NET ASSETS $ 16,126,028 Net Assets consist of: Paid in capital $ 16,828,939 Undistributed net investment 216,755 income Accumulated undistributed net (1,646,182) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 726,516 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 703,636 $ 16,126,028 shares outstanding NET ASSET VALUE and $22.92 redemption price per share ($16,126,028 (divided by) 703,636 shares) Maximum offering price per $23.63 share (100/97.00 of $22.92) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 320,889 Dividends Interest 82,806 TOTAL INCOME 403,695 EXPENSES Management fee $ 72,970 Transfer agent fees 84,868 Accounting fees and expenses 30,303 Non-interested trustees' 34 compensation Custodian fees and expenses 5,697 Registration fees 18,429 Audit 4,900 Legal 12 Total expenses before 217,213 reductions Expense reductions (26,144) 191,069 NET INVESTMENT INCOME 212,626 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 1,865,775 Foreign currency transactions 1,139 1,866,914 Change in net unrealized appreciation (depreciation) on: Investment securities 725,840 Assets and liabilities in 5 725,845 foreign currencies NET GAIN (LOSS) 2,592,759 NET INCREASE (DECREASE) IN $ 2,805,385 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 57,943 charges paid to FDC Sales charges - Retained by $ 57,943 FDC Deferred sales charges $ 901 withheld by FDC Exchange fees withheld by FSC $ 4,455 Expense reductions Directed $ 26,144 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ 212,626 $ (19,520) income (loss) Net realized gain (loss) 1,866,914 (2,776,473) Change in net unrealized 725,845 (1,268,236) appreciation (depreciation) NET INCREASE (DECREASE) IN 2,805,385 (4,064,229) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders - (317,946) in excess of net realized gain Share transactions Net 56,799,449 24,142,684 proceeds from sales of shares Reinvestment of distributions - 312,733 Cost of shares redeemed (53,838,106) (41,303,607) NET INCREASE (DECREASE) IN 2,961,343 (16,848,190) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 112,752 92,806 TOTAL INCREASE (DECREASE) 5,879,480 (21,137,559) IN NET ASSETS NET ASSETS Beginning of period 10,246,548 31,384,107 End of period (including $ 16,126,028 $ 10,246,548 undistributed net investment income of $216,755 and $4,129, respectively) OTHER INFORMATION Shares Sold 2,457,856 1,074,182 Issued in reinvestment of - 13,704 distributions Redeemed (2,309,677) (1,917,231) Net increase (decrease) 148,179 (829,345)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F Net asset value, beginning of $ 18.45 $ 22.66 $ 21.63 $ 20.78 $ 21.14 period Income from Investment Operations Net investment income (loss) D .20 (.03) (.12) .01 .08 Net realized and unrealized 4.17 (3.87) 3.13 2.08 1.83 gain (loss) Total from investment 4.37 (3.90) 3.01 2.09 1.91 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) In excess of net realized gain - (.44) - - - Total distributions - (.44) (2.11) (1.35) (2.35) Redemption fees added to paid .10 .13 .13 .11 .08 in capital Net asset value, end of period $ 22.92 $ 18.45 $ 22.66 $ 21.63 $ 20.78 TOTAL RETURN B, C 24.23% (17.01)% 15.53% 10.87% 9.18% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 16,126 $ 10,247 $ 31,384 $ 19,484 $ 27,270 (000 omitted) Ratio of expenses to average 1.73% A 2.30% 2.18% 2.19% 1.91% net assets Ratio of expenses to average 1.52% A, E 2.21% E 2.15% E 2.16% E 1.90% E net assets after expense reductions Ratio of net investment 1.69% A (.13)% (.50)% .04% .34% income (loss) to average net assets Portfolio turnover rate 406% A 338% 235% 180% 78%
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 19.61 period Income from Investment Operations Net investment income (loss) D .01 Net realized and unrealized 2.53 gain (loss) Total from investment 2.54 operations Less Distributions From net investment income - In excess of net investment - income From net realized gain (1.17) In excess of net realized gain - Total distributions (1.17) Redemption fees added to paid .16 in capital Net asset value, end of period $ 21.14 TOTAL RETURN B, C 14.91% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 94,219 (000 omitted) Ratio of expenses to average 1.88% net assets Ratio of expenses to average 1.87% E net assets after expense reductions Ratio of net investment .05% income (loss) to average net assets Portfolio turnover rate 209% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR 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 year and past 10 year total returns would have been lower.
CUMULATIVE TOTAL RETURNS PERIODS ENDED AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT TRANSPORTATION 16.99% 53.19% 95.86% 285.47% SELECT TRANSPORTATION (LOAD 13.41% 48.52% 89.91% 273.83% ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Cyclical Industries 8.29% 25.75% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT TRANSPORTATION 53.19% 14.39% 14.45% SELECT TRANSPORTATION (LOAD 48.52% 13.69% 14.10% ADJ.) S&P 500 39.82% 25.11% 17.10% GS Cyclical Industries 25.75% 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 1989/08/31 9700.00 10000.00 1989/09/30 9511.33 9959.00 1989/10/31 8906.30 9727.95 1989/11/30 8984.37 9926.40 1989/12/31 9112.27 10164.64 1990/01/31 8540.04 9482.59 1990/02/28 8938.43 9604.91 1990/03/31 9206.44 9859.44 1990/04/30 8858.75 9612.96 1990/05/31 9184.71 10550.22 1990/06/30 9083.60 10478.48 1990/07/31 9053.42 10444.95 1990/08/31 7725.59 9500.72 1990/09/30 6729.71 9038.04 1990/10/31 6624.09 8999.18 1990/11/30 6895.69 9580.52 1990/12/31 7144.66 9847.82 1991/01/31 7755.77 10277.18 1991/02/28 8510.22 11012.00 1991/03/31 8517.76 11278.49 1991/04/30 8495.13 11305.56 1991/05/31 9166.59 11793.96 1991/06/30 9090.48 11253.80 1991/07/31 9643.03 11778.23 1991/08/31 9817.11 12057.37 1991/09/30 9635.46 11856.01 1991/10/31 10346.95 12014.88 1991/11/30 9703.58 11530.68 1991/12/31 11013.03 12849.79 1992/01/31 11111.43 12610.79 1992/02/29 11709.39 12774.73 1992/03/31 11429.33 12525.62 1992/04/30 11724.53 12893.87 1992/05/31 11966.74 12957.05 1992/06/30 11452.04 12763.99 1992/07/31 11618.56 13286.04 1992/08/31 11270.38 13013.68 1992/09/30 11716.96 13167.24 1992/10/31 12216.52 13213.32 1992/11/30 13102.10 13663.90 1992/12/31 13633.30 13831.96 1993/01/31 14243.86 13948.15 1993/02/28 14437.08 14137.85 1993/03/31 15403.16 14436.15 1993/04/30 15364.76 14086.80 1993/05/31 15938.71 14464.33 1993/06/30 15985.25 14506.27 1993/07/31 15985.25 14448.25 1993/08/31 16279.98 14995.84 1993/09/30 16318.76 14880.37 1993/10/31 16660.03 15188.39 1993/11/30 16753.10 15044.10 1993/12/31 17630.07 15226.14 1994/01/31 18402.87 15743.82 1994/02/28 18402.87 15317.17 1994/03/31 17910.31 14649.34 1994/04/30 18245.00 14836.85 1994/05/31 17951.70 15080.17 1994/06/30 17934.45 14710.71 1994/07/31 18538.30 15193.22 1994/08/31 19090.40 15816.14 1994/09/30 18581.44 15428.65 1994/10/31 18857.48 15775.79 1994/11/30 17727.41 15201.24 1994/12/31 18311.71 15426.67 1995/01/31 18188.31 15826.69 1995/02/28 19488.83 16443.45 1995/03/31 19745.13 16928.70 1995/04/30 20039.41 17427.25 1995/05/31 19441.36 18123.82 1995/06/30 19232.52 18544.83 1995/07/31 20884.28 19159.78 1995/08/31 20865.29 19207.87 1995/09/30 20675.43 20018.44 1995/10/31 20419.13 19946.98 1995/11/30 21121.60 20822.65 1995/12/31 21089.27 21223.69 1996/01/31 21410.63 21946.15 1996/02/29 22013.18 22149.59 1996/03/31 22545.44 22362.89 1996/04/30 23284.00 22692.52 1996/05/31 23314.29 23277.76 1996/06/30 23425.36 23366.44 1996/07/31 21729.04 22334.12 1996/08/31 21749.24 22805.14 1996/09/30 21850.21 24088.62 1996/10/31 21678.56 24752.98 1996/11/30 23213.32 26624.06 1996/12/31 23093.50 26096.63 1997/01/31 23259.34 27727.15 1997/02/28 23041.67 27944.53 1997/03/31 23746.50 26796.29 1997/04/30 24974.81 28396.03 1997/05/31 26672.13 30124.78 1997/06/30 27473.35 31474.37 1997/07/31 29392.06 33978.79 1997/08/31 28801.69 32075.30 1997/09/30 31648.12 33832.06 1997/10/31 30583.34 32702.07 1997/11/30 30446.29 34215.85 1997/12/31 30514.00 34803.33 1998/01/31 30571.37 35188.26 1998/02/28 32522.25 37726.04 1998/03/31 33692.78 39657.99 1998/04/30 33203.33 40056.94 1998/05/31 31625.59 39368.37 1998/06/30 32367.36 40967.51 1998/07/31 29635.74 40531.21 1998/08/31 24407.98 34671.20 1998/09/30 24372.66 36892.24 1998/10/31 26962.99 39893.06 1998/11/30 28293.48 42310.97 1998/12/31 29189.50 44748.93 1999/01/31 31793.19 46620.33 1999/02/28 31959.12 45171.37 1999/03/31 33733.20 46978.68 1999/04/30 38511.99 48798.16 1999/05/31 38021.30 47646.04 1999/06/30 39857.88 50290.39 1999/07/31 39871.90 48720.33 1999/08/31 37383.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990928 112910 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Transportation Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $37,383 - a 273.83% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS AMR Corp. 10.8 Burlington Northern Santa Fe 8.4 Corp. Navistar International Corp. 8.1 Union Pacific Corp. 6.5 CSX Corp. 5.5 Canadian National Railway Co. 5.4 Eaton Corp. 5.3 Atlantic Coast Airlines 5.0 Holdings Northwest Airlines Corp. 4.0 Class A Kansas City Southern 3.9 Industries, Inc. TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Railroads 33.1% Air Transportation 32.2% Autos, Tires & Accessories 15.7% Trucking & Freight 7.6% Securities Industry 3.9% All Others 7.5%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 7.5 Row: 1, Col: 2, Value: 3.9 Row: 1, Col: 3, Value: 7.6 Row: 1, Col: 4, Value: 15.7 Row: 1, Col: 5, Value: 32.2 Row: 1, Col: 6, Value: 33.1 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. 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 six-month period that ended August 31, 1999, the fund returned 16.99%. For the same six-month period, the Standard & Poor's 500 Index returned 7.32%. 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 8.29%. For the 12-month period that ended August 31, 1999, the fund returned 53.19%. That compared to the 39.82% return for the Standard & Poor's index and the 25.75% return for Goldman Sachs index during the same 12-month period. Q. WHY DID THE FUND OUTPERFORM THE INDEXES? A. Against a relatively weak environment for the transportation industry, it really came down to owning the right stocks. Transportation stocks are cyclical, meaning their performance is closely linked to expectations about the economy's potential strength or weakness. While the news on that front was encouraging - with the United States experiencing continued strong economic growth and Asia showing signs of a rebound - other factors weighed on transportation stocks. In particular, the price of oil - which is a major expense for most transportation companies - rose substantially during the period. Q. WHICH STOCKS PERFORMED WELL FOR THE FUND? A. Truck, bus and diesel engine manufacturer Navistar International performed well, thanks to continued strong demand in key markets. PACCAR, the second-largest truck manufacturer in the U.S., also benefited from rising demand for heavy- and medium-duty trucks from North America and Europe. Another helpful stock was railroad company Union Pacific, which had come under pressure due to operational problems before the period began. Later, however, it was clear that the company had made the necessary adjustments and its earnings surprised investors on the upside. That said, I pared back the fund's stake in Union Pacific in the spring in response to its very quick rise amid a cyclical stock rally. Q. WHICH HOLDINGS DETRACTED FROM THE FUND'S PERFORMANCE DURING THE PAST SIX MONTHS? A. Railroad company Burlington Northern performed poorly when its earnings came under pressure because of weak levels of coal, grain and other freight shipments. But I continued to maintain the fund's holdings in the company, in part because I believed it was poised to benefit from increased demand for grain from Asia. The fund's holdings in major airline carriers also were disappointing because capacity began to overwhelm demand. Here, too, I held on to selected major carriers so that I could maintain a level of diversification for the portfolio and because many were more attractively valued than they were at the beginning of the period. In particular, AMR, the parent company of American Airlines, became the fund's largest holding by the end of the period. It owns 82% of the fast-growing reservations system, Sabre, and I believed that the airline portion of the company was selling at a significant discount to what I felt was its fair value. Q. CAN YOU TELL US ABOUT SOME OF THE CHANGES YOU MADE DURING THE PERIOD? A. Sure. As I mentioned earlier, the spring rally in cyclical stocks pushed some of the fund's holdings to highs that I felt were unsustainable over the short term. So I sold some of the better performers to lock in gains and find more attractively priced alternatives. I added to the fund's stake in diversified manufacturer Eaton Corporation, which performed well. I also added to Atlantic Coast Airlines, which I was able to buy in early summer at roughly half its spring price. Q. WHAT FACTORS WILL SHAPE THE PERFORMANCE OF TRANSPORTATION STOCKS OVER THE NEXT SIX MONTHS OR SO? A. Across the sector, the price of fuel likely will be a major issue. Throughout much of 1998, transportation companies got a boost from low oil costs and then came under pressure when oil prices marched higher. Another key will be the global economy. If the U.S. economy remains strong and Asia continues on its current recovery path, transportation stocks stand poised to 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 3. (checkmark)FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 512 TRADING SYMBOL: FSRFX SIZE: as of August 31, 1999, more than $20 million MANAGER: Christopher Zepf, since 1998; manager, Fidelity Select Air Transportation Portfolio, since 1998; joined Fidelity in 1998 TRANSPORTATION PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 95.8% SHARES VALUE (NOTE 1) AIR TRANSPORTATION - 32.2% America West Holding Corp. 18,800 $ 366,600 Class B (a) AMR Corp. (a) 38,000 2,227,747 Atlantic Coast Airlines 51,400 1,021,575 Holdings (a) Comair Holdings, Inc. 8,500 179,563 Delta Air Lines, Inc. 14,000 711,375 Mesaba Holdings, Inc. (a) 2,500 30,938 Northwest Airlines Corp. 28,000 826,000 Class A (a) SkyWest, Inc. 21,000 422,625 Southwest Airlines Co. 38,725 646,223 UAL Corp. (a) 3,000 194,438 6,627,084 AUTOS, TIRES, & ACCESSORIES - 15.7% Eaton Corp. 11,100 1,087,800 Navistar International Corp. 34,400 1,672,700 (a) PACCAR, Inc. 8,400 463,050 3,223,550 COMPUTER SERVICES & SOFTWARE - - 1.7% Sabre Group Holdings, Inc. 6,400 358,400 Class A (a) LEASING & RENTAL - 1.1% Ryder Systems, Inc. 10,700 236,069 RAILROADS - 33.1% Burlington Northern Santa Fe 59,700 1,731,300 Corp. Canadian National Railway Co. 17,600 1,118,499 Canadian Pacific Ltd. 32,000 752,563 CSX Corp. 26,000 1,135,875 MotivePower Industries, Inc. 60,000 742,500 (a) Union Pacific Corp. 27,200 1,324,300 6,805,037 SECURITIES INDUSTRY - 3.9% Kansas City Southern 17,100 791,944 Industries, Inc. SHIPPING - 0.5% Kirby Corp. (a) 5,000 100,000 TRUCKING & FREIGHT - 7.6% Air Express International 5,000 122,188 Corp. Airborne Freight Corp. 6,000 151,125 Circle International Group, 7,900 195,525 Inc. CNF Transportation, Inc. 7,000 272,563 Consolidated Freightways 8,000 86,500 Corp. (a) Eagle USA Airfreight, Inc. (a) 3,600 100,800 Expeditors International of 7,000 226,188 Washington, Inc. Hunt (J.B.) Transport 5,000 74,063 Services, Inc. SHARES VALUE (NOTE 1) USFreightways Corp. 4,800 $ 232,800 Werner Enterprises, Inc. 5,000 105,781 1,567,533 TOTAL COMMON STOCKS 19,709,617 (Cost $18,979,027) CASH EQUIVALENTS - 6.8% Taxable Central Cash Fund, 1,399,483 1,399,483 5.20% (b) (Cost $1,399,483) TOTAL INVESTMENT PORTFOLIO - 21,109,100 102.6% (Cost $20,378,510) NET OTHER ASSETS - (2.6%) (530,993) NET ASSETS - 100% $ 20,578,107 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $48,861,220 and $50,725,200, 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 $6,961 for the period. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $20,495,745. Net unrealized appreciation aggregated $613,355, of which $1,880,893 related to appreciated investment securities and $1,267,538 related to depreciated investment securities. TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 21,109,100 value (cost $20,378,510) - See accompanying schedule Receivable for investments 1,056,369 sold Receivable for fund shares 131,807 sold Dividends receivable 16,732 Interest receivable 5,651 Redemption fees receivable 582 TOTAL ASSETS 22,320,241 LIABILITIES Payable for investments $ 356,804 purchased Payable for fund shares 1,348,213 redeemed Accrued management fee 12,250 Other payables and accrued 24,867 expenses TOTAL LIABILITIES 1,742,134 NET ASSETS $ 20,578,107 Net Assets consist of: Paid in capital $ 16,551,222 Accumulated net investment (49,855) loss Accumulated undistributed net 3,346,133 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 730,607 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 771,512 $ 20,578,107 shares outstanding NET ASSET VALUE and $26.67 redemption price per share ($20,578,107 (divided by) 771,512 shares) Maximum offering price per $27.49 share (100/97.00 of $26.67) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 118,646 Dividends Interest 44,691 TOTAL INCOME 163,337 EXPENSES Management fee $ 80,029 Transfer agent fees 82,624 Accounting fees and expenses 30,305 Non-interested trustees' 37 compensation Custodian fees and expenses 8,872 Registration fees 19,717 Audit 3,701 Legal 17 Total expenses before 225,302 reductions Expense reductions (12,110) 213,192 NET INVESTMENT INCOME (LOSS) (49,855) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 3,604,694 Foreign currency transactions 1,629 3,606,323 Change in net unrealized appreciation (depreciation) on: Investment securities (528,948) Assets and liabilities in (1,141) (530,089) foreign currencies NET GAIN (LOSS) 3,076,234 NET INCREASE (DECREASE) IN $ 3,026,379 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 78,955 charges paid to FDC Sales charges - Retained by $ 78,755 FDC Deferred sales charges $ 154 withheld by FDC Exchange fees withheld by FSC $ 1,935 Expense reductions Directed $ 12,053 brokerage arrangements Custodian credits 57 $ 12,110
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (49,855) $ (164,660) income (loss) Net realized gain (loss) 3,606,323 6,235,364 Change in net unrealized (530,089) (6,047,484) appreciation (depreciation) NET INCREASE (DECREASE) IN 3,026,379 23,220 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (1,575,601) (2,602,131) from net realized gains Share transactions Net 34,574,749 28,194,142 proceeds from sales of shares Reinvestment of distributions 1,519,459 2,518,945 Cost of shares redeemed (36,881,407) (72,656,072) NET INCREASE (DECREASE) IN (787,199) (41,942,985) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 59,736 94,942 TOTAL INCREASE (DECREASE) 723,315 (44,426,954) IN NET ASSETS NET ASSETS Beginning of period 19,854,792 64,281,746 End of period (including $ 20,578,107 $ 19,854,792 accumulated net investment loss of $49,855 and $0, respectively) OTHER INFORMATION Shares Sold 1,264,381 1,116,624 Issued in reinvestment of 62,324 97,938 distributions Redeemed (1,348,194) (2,690,132) Net increase (decrease) (21,489) (1,475,570)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 I 1995 Net asset value, beginning of $ 25.04 $ 28.34 $ 22.23 $ 21.92 $ 20.53 $ 21.67 period Income from Investment Operations Net investment income (loss) D (.05) (.18) (.02) (.13) (.09) E (.17) Net realized and unrealized 4.02 (.58) F 8.85 1.06 2.60 1.17 gain (loss) Total from investment 3.97 (.76) 8.83 .93 2.51 1.00 operations Less Distributions From net realized gain (2.40) (2.64) (2.80) (.71) (1.22) (2.19) Redemption fees added to paid .06 .10 .08 .09 .10 .05 in capital Net asset value, end of period $ 26.67 $ 25.04 $ 28.34 $ 22.23 $ 21.92 $ 20.53 TOTAL RETURN B, C 16.99% (1.73)% 41.15% 4.67% 12.95% 5.90% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 20,578 $ 19,855 $ 64,282 $ 8,890 $ 11,445 $ 12,704 (000 omitted) Ratio of expenses to average 1.62% A 1.96% 1.58% 2.50% G 2.47% G 2.37% net assets Ratio of expenses to average 1.54% A, H 1.90% H 1.54% H 2.48% H 2.44% H 2.36% H net assets after expense reductions Ratio of net investment (.36)% A (.68)% (.06)% (.58)% (.43)% (.83)% income (loss) to average net assets Portfolio turnover rate 393% A 182% 210% 148% 175% 178% 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 NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.05 PER SHARE. 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 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. H FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. I FOR THE YEAR ENDED FEBRUARY 29
BANKING 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT BANKING -4.87% 19.09% 161.38% 482.73% SELECT BANKING (LOAD ADJ.) -7.80% 15.45% 153.46% 465.18% S&P 500 7.32% 39.82% 206.52% 384.79% GS Financial Services -3.19% 20.67% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT BANKING 19.09% 21.19% 19.27% SELECT BANKING (LOAD ADJ.) 15.45% 20.44% 18.91% S&P 500 39.82% 25.11% 17.10% GS Financial Services 20.67% 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 BANKING S&P 500 00507 SP001 1989/08/31 9700.00 10000.00 1989/09/30 9780.29 9959.00 1989/10/31 8875.24 9727.95 1989/11/30 8860.65 9926.40 1989/12/31 8671.75 10164.64 1990/01/31 7890.45 9482.59 1990/02/28 8215.35 9604.91 1990/03/31 8014.22 9859.44 1990/04/30 7557.81 9612.96 1990/05/31 8083.84 10550.22 1990/06/30 7766.67 10478.48 1990/07/31 7294.79 10444.95 1990/08/31 6614.05 9500.72 1990/09/30 5809.53 9038.04 1990/10/31 5639.35 8999.18 1990/11/30 6389.71 9580.52 1990/12/31 6879.37 9847.82 1991/01/31 7335.89 10277.18 1991/02/28 7957.71 11012.00 1991/03/31 8406.37 11278.49 1991/04/30 8973.09 11305.56 1991/05/31 9555.55 11793.96 1991/06/30 8988.83 11253.80 1991/07/31 9736.59 11778.23 1991/08/31 10437.12 12057.37 1991/09/30 10232.47 11856.01 1991/10/31 10657.51 12014.88 1991/11/30 10169.50 11530.68 1991/12/31 11405.50 12849.79 1992/01/31 12118.86 12610.79 1992/02/29 13097.66 12774.73 1992/03/31 12915.18 12525.62 1992/04/30 13670.01 12893.87 1992/05/31 14250.66 12957.05 1992/06/30 14392.85 12763.99 1992/07/31 14409.55 13286.04 1992/08/31 13641.48 13013.68 1992/09/30 14275.97 13167.24 1992/10/31 14885.41 13213.32 1992/11/30 16104.30 13663.90 1992/12/31 16939.73 13831.96 1993/01/31 17645.55 13948.15 1993/02/28 18194.53 14137.85 1993/03/31 18970.06 14436.15 1993/04/30 17993.47 14086.80 1993/05/31 17817.58 14464.33 1993/06/30 18811.35 14506.27 1993/07/31 18864.12 14448.25 1993/08/31 19127.96 14995.84 1993/09/30 19787.54 14880.37 1993/10/31 18723.41 15188.39 1993/11/30 18134.18 15044.10 1993/12/31 18832.32 15226.14 1994/01/31 19930.61 15743.82 1994/02/28 19370.70 15317.17 1994/03/31 19047.67 14649.34 1994/04/30 20057.02 14836.85 1994/05/31 21059.33 15080.17 1994/06/30 20536.38 14710.71 1994/07/31 21081.11 15193.22 1994/08/31 21625.85 15816.14 1994/09/30 20340.28 15428.65 1994/10/31 20253.12 15775.79 1994/11/30 18945.77 15201.24 1994/12/31 18873.42 15426.67 1995/01/31 19824.04 15826.69 1995/02/28 20879.01 16443.45 1995/03/31 21052.90 16928.70 1995/04/30 21574.59 17427.25 1995/05/31 22988.93 18123.82 1995/06/30 23278.76 18544.83 1995/07/31 24183.01 19159.78 1995/08/31 25087.27 19207.87 1995/09/30 26223.38 20018.44 1995/10/31 26095.86 19946.98 1995/11/30 27591.36 20822.65 1995/12/31 27700.08 21223.69 1996/01/31 28605.71 21946.15 1996/02/29 29426.81 22149.59 1996/03/31 30296.21 22362.89 1996/04/30 30037.49 22692.52 1996/05/31 30545.34 23277.76 1996/06/30 30310.00 23366.44 1996/07/31 30359.54 22334.12 1996/08/31 31895.48 22805.14 1996/09/30 33468.58 24088.62 1996/10/31 35611.46 24752.98 1996/11/30 38621.40 26624.06 1996/12/31 37640.69 26096.63 1997/01/31 40416.51 27727.15 1997/02/28 42177.10 27944.53 1997/03/31 39337.02 26796.29 1997/04/30 41470.35 28396.03 1997/05/31 42930.66 30124.78 1997/06/30 45373.14 31474.37 1997/07/31 50258.08 33978.79 1997/08/31 47208.22 32075.30 1997/09/30 50787.93 33832.06 1997/10/31 50038.39 32702.07 1997/11/30 52338.71 34215.85 1997/12/31 54788.81 34803.33 1998/01/31 53067.07 35188.26 1998/02/28 57631.69 37726.04 1998/03/31 60821.58 39657.99 1998/04/30 61845.81 40056.94 1998/05/31 60154.56 39368.37 1998/06/30 61724.04 40967.51 1998/07/31 61818.75 40531.21 1998/08/31 47463.38 34671.20 1998/09/30 51576.51 36892.24 1998/10/31 56271.43 39893.06 1998/11/30 58097.99 42310.97 1998/12/31 61279.26 44748.93 1999/01/31 59706.90 46620.33 1999/02/28 59421.01 45171.37 1999/03/31 59363.84 46978.68 1999/04/30 65525.97 48798.16 1999/05/31 61198.79 47646.04 1999/06/30 63324.69 50290.39 1999/07/31 59510.13 48720.33 1999/08/31 56518.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990924 102525 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Banking Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $56,518 - a 465.18% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Bank of New York Co., Inc. 9.7 Wells Fargo & Co. 6.2 Chase Manhattan Corp. 5.8 Mellon Bank Corp. 5.6 Fleet Financial Group, Inc. 5.0 Bank of America Corp. 4.3 Comerica, Inc. 4.0 Fifth Third Bancorp 3.9 SunTrust Banks, Inc. 3.4 Marshall & Ilsley Corp. 3.3 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Banks 78.9% Credit & Other Finance 12.3% Computer Services & Software 0.8% All Others 8.0%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 8.0 Row: 1, Col: 2, Value: 0.8 Row: 1, Col: 3, Value: 12.3 Row: 1, Col: 4, Value: 78.90000000000001 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. BANKING PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Yolanda McGettigan) Yolanda McGettigan, Portfolio Manager of Fidelity Select Banking Portfolio Q. HOW DID THE FUND PERFORM, YOLANDA? A. It was a tough time for bank stocks. For the six months that ended August 31, 1999, the fund returned -4.87%. Over the same period, the Standard & Poor's 500 Index returned 7.32%, 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 -3.19%. For the 12 months that ended August 31, 1999, the fund returned 19.09%, compared to 39.82% for the S&P 500 and 20.67% for the Goldman Sachs index. Q. WHAT FACTORS CONTRIBUTED TO THE SUBPAR PERFORMANCE OF BANK STOCKS DURING THE PERIOD? A. Federal Reserve Board monetary policy was the key culprit. The Fed raised interest rates twice during the period - in June and again in August - and bank stocks suffered. Typically, when interest rates rise, so do concerns over credit and loan volumes, two of the bigger drivers behind banks' earnings growth. Beyond that, the perception that we were nearing the end of an extended economic growth cycle seemed to persist among investors. In terms of the fund's relative performance, the Goldman Sachs index may have included more companies with capital markets exposure. Due to the stock market's steady overall performance, companies with stock-market-related revenues - such as Chase Manhattan and Citigroup - fared a bit better during the period than those without stock market exposure. Q. WHICH STOCKS PERFORMED WELL DURING THE PERIOD? WHICH DID NOT? A. Bank of New York, the fund's largest holding at the end of the period, performed well, as did positions in both American Express and MBNA. Bank of New York benefited from solid revenue streams and its exposure to the securities processing industry, while American Express and MBNA - two of the leaders in the credit card arena - performed nicely due to positive consumer credit trends. Disappointments, on the other hand, included U.S. Bancorp and State Street. U.S. Bancorp experienced slower-than-expected earnings growth during the period, while State Street - also a victim of slower earnings growth - began to show signs of an unfavorable revenue/expense balance. Q. THE FUND'S NAME RECENTLY WAS CHANGED FROM REGIONAL BANKS PORTFOLIO TO BANKING PORTFOLIO. WHAT PROMPTED THIS CHANGE? A. The evolution of the industry, mainly. As the banking sector has changed over time, fewer banks concentrate their activities within a specific geographic region. With the consolidation of the industry, banks are spreading their operations across multiple states and regions within the U.S., blurring the distinction between regional and non-regional banks. Q. WHAT ARE YOUR MAIN CONCERNS SURROUNDING Y2K? A. My concerns revolve more around potential investor behavior rather than the banks' overall readiness for the event. For instance, investors may opt for safer types of investments as the millennium approaches. From a systems standpoint, everything I read and hear - including encouraging remarks from the chairman of the Federal Reserve Board - indicates that most banks are very well-prepared. Q. WHAT'S YOUR OUTLOOK? A. Overall, I'm cautious. I think there are still some fears out there that the Fed may raise rates again in early October. Also, concerns regarding the economic cycle won't vanish until we actually see hard evidence that the cycle is ending. From a fundamental standpoint, banks did well during this past period. But if interest-rate and economic fears continue to outweigh fundamental performance, the stocks may continue to struggle. Lastly, as we enter 2000, an anticipated jump in merger and acquisition activity could give the sector a boost. 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 3. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 507 TRADING SYMBOL: FSRBX SIZE: as of August 31, 1999, more than $652 million MANAGER: Yolanda McGettigan, since April 1999; manager, Fidelity Select Construction & Housing Portfolio, 1997-1999; analyst, appliances, building materials, homebuilding, engineering and construction industries, 1997-1999; banking industry, April 1999-present; joined Fidelity in 1997 BANKING PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 92.0% SHARES VALUE (NOTE 1) BANKS - 78.9% AmSouth Bancorp. 17,500 $ 382,813 Bank of America Corp. 461,306 27,909,013 Bank of New York Co., Inc. 1,764,896 63,095,029 Bank One Corp. 263,726 10,582,006 BankBoston Corp. 300,000 13,931,250 BB&T Corp. 301,300 10,093,550 CCB Financial Corp. 102,300 4,833,675 Centura Banks, Inc. 161,500 7,479,469 Chase Manhattan Corp. 450,000 37,659,375 Comerica, Inc. 503,850 26,231,691 Compass Bancshares, Inc. 193,000 5,126,563 Fifth Third Bancorp 380,000 25,175,000 First Security Corp. 230,375 4,996,258 First Tennessee National 229,400 7,340,800 Corp. First Union Corp. 350,000 14,525,000 Firstmerit Corp. 280,000 7,358,750 KeyCorp 150,000 4,350,000 M&T Bank Corp. 28,700 13,316,800 Marshall & Ilsley Corp. 373,000 21,843,813 Mellon Bank Corp. 1,102,000 36,779,250 North Fork Bancorp, Inc. 242,000 4,386,250 Northern Trust Corp. 250,000 21,203,125 PNC Financial Corp. 200,000 10,462,500 SouthTrust Corp. 218,400 7,712,250 State Street Corp. 197,800 11,843,275 Summit Bancorp 190,000 6,341,250 SunTrust Banks, Inc. 341,147 21,940,016 Synovus Finanical Corp. 197,175 3,721,678 U.S. Bancorp 372,696 11,506,989 US Trust Corp. 150,000 12,468,750 Wachovia Corp. 87,300 6,842,138 Wells Fargo & Co. 1,016,760 40,479,758 Zions Bancorp 255,500 12,711,125 514,629,209 COMPUTER SERVICES & SOFTWARE - - 0.8% Online Resources & Comms 175,000 3,128,125 Corp. (a) Sanchez Computer Associates, 50,000 2,237,500 Inc. (a) 5,365,625 CREDIT & OTHER FINANCE - 12.3% American Express Co. 83,100 11,426,250 Associates First Capital 327,400 11,233,913 Corp. Class A Citigroup, Inc. 327,450 14,551,059 Fleet Financial Group, Inc. 818,734 32,595,847 Household International, Inc. 279,800 10,562,450 80,369,519 TOTAL COMMON STOCKS 600,364,353 (Cost $465,917,706) CASH EQUIVALENTS - 5.4% SHARES VALUE (NOTE 1) Central Cash Collateral Fund, 3,326,800 $ 3,326,800 5.26% (b) Taxable Central Cash Fund, 32,180,808 32,180,808 5.20% (b) TOTAL CASH EQUIVALENTS 35,507,608 (Cost $35,507,608) TOTAL INVESTMENT PORTFOLIO - 635,871,961 97.4% (Cost $501,425,314) NET OTHER ASSETS - 2.6% 16,905,505 NET ASSETS - 100% $ 652,777,466 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $280,566,208 and $530,969,599, 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 $6,412 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $3,316,150. The fund received cash collateral of $3,326,800 which was invested in the Central Cash Collateral Fund. The fund participated in the bank borrowing program. The average daily loan balance during the period for which loans were outstanding amounted to $2,914,250. The weighted average interest rate was 5.46%. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $503,078,320. Net unrealized appreciation aggregated $132,793,641, of which $152,717,433 related to appreciated investment securities and $19,923,792 related to depreciated investment securities. BANKING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 635,871,961 value (cost $501,425,314) - See accompanying schedule Receivable for investments 26,491,196 sold Receivable for fund shares 188,249 sold Dividends receivable 987,598 Interest receivable 89,166 Redemption fees receivable 1,806 Other receivables 3,584 TOTAL ASSETS 663,633,560 LIABILITIES Payable for investments $ 3,229,844 purchased Payable for fund shares 3,517,840 redeemed Accrued management fee 337,050 Other payables and accrued 444,560 expenses Collateral on securities 3,326,800 loaned, at value TOTAL LIABILITIES 10,856,094 NET ASSETS $ 652,777,466 Net Assets consist of: Paid in capital $ 386,556,197 Undistributed net investment 3,365,942 income Accumulated undistributed net 128,408,680 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 134,446,647 (depreciation) on investments NET ASSETS, for 17,412,330 $ 652,777,466 shares outstanding NET ASSET VALUE and $37.49 redemption price per share ($652,777,466 (divided by) 17,412,330 shares) Maximum offering price per $38.65 share (100/97.00 of $37.49) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 7,823,370 Dividends Interest 543,519 Security lending 1,354 TOTAL INCOME 8,368,243 EXPENSES Management fee $ 2,432,382 Transfer agent fees 2,280,654 Accounting and security 280,758 lending fees Non-interested trustees' 809 compensation Custodian fees and expenses 10,962 Registration fees 74,830 Audit 26,415 Legal 516 Interest 1,766 Total expenses before 5,109,092 reductions Expense reductions (110,291) 4,998,801 NET INVESTMENT INCOME 3,369,442 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 128,933,894 Foreign currency transactions (10,972) 128,922,922 Change in net unrealized (158,684,710) appreciation (depreciation) on investment securities NET GAIN (LOSS) (29,761,788) NET INCREASE (DECREASE) IN $ (26,392,346) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 297,059 charges paid to FDC Sales charges - Retained by $ 295,900 FDC Deferred sales charges $ 5,736 withheld by FDC Exchange fees withheld by FSC $ 50,003 Expense reductions Directed $ 109,897 brokerage arrangements Transfer agent credits 394 $ 110,291
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ 3,369,442 $ 11,351,194 income Net realized gain (loss) 128,922,922 135,492,386 Change in net unrealized (158,684,710) (123,702,888) appreciation (depreciation) NET INCREASE (DECREASE) IN (26,392,346) 23,140,692 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (3,327,347) (7,938,530) From net investment income From net realized gain (43,463,275) (74,512,814) TOTAL DISTRIBUTIONS (46,790,622) (82,451,344) Share transactions Net 91,771,001 506,783,832 proceeds from sales of shares Reinvestment of distributions 44,722,583 79,475,689 Cost of shares redeemed (336,743,016) (940,968,587) NET INCREASE (DECREASE) IN (200,249,432) (354,709,066) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 381,328 952,621 TOTAL INCREASE (DECREASE) (273,051,072) (413,067,097) IN NET ASSETS NET ASSETS Beginning of period 925,828,538 1,338,895,635 End of period (including $ 652,777,466 $ 925,828,538 undistributed net investment income of $3,365,942 and $5,985,670, respectively) OTHER INFORMATION Shares Sold 2,159,905 11,696,257 Issued in reinvestment of 1,088,934 1,891,390 distributions Redeemed (8,108,335) (22,324,276) Net increase (decrease) (4,859,496) (8,736,629)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F Net asset value, beginning of $ 41.57 $ 43.18 $ 32.82 $ 24.37 $ 18.01 period Income from Investment Operations Net investment income D .17 .39 .40 .37 .52 Net realized and unrealized (2.02) .91 11.41 9.70 6.78 gain (loss) Total from investment (1.85) 1.30 11.81 10.07 7.30 operations Less Distributions From net investment income (.16) (.28) (.28) (.27) (.25) From net realized gain (2.09) (2.66) (1.23) (1.40) (.72) Total distributions (2.25) (2.94) (1.51) (1.67) (.97) Redemption fees added to paid .02 .03 .06 .05 .03 in capital Net asset value, end of period $ 37.49 $ 41.57 $ 43.18 $ 32.82 $ 24.37 TOTAL RETURN B, C (4.87)% 3.10% 36.64% 43.33% 40.94% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 652,777 $ 925,829 $ 1,338,896 $ 837,952 $ 315,178 (000 omitted) Ratio of expenses to average 1.20% A 1.17% 1.25% 1.46% 1.41% net assets Ratio of expenses to average 1.18% A, E 1.16% E 1.24% E 1.45% E 1.40% E net assets after expense reductions Ratio of net investment .79% A .91% 1.07% 1.36% 2.42% income to average net assets Portfolio turnover rate 70% A 22% 25% 43% 103%
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 17.99 period Income from Investment Operations Net investment income D .37 Net realized and unrealized .87 gain (loss) Total from investment 1.24 operations Less Distributions From net investment income (.29) From net realized gain (.98) Total distributions (1.27) Redemption fees added to paid .05 in capital Net asset value, end of period $ 18.01 TOTAL RETURN B, C 7.79% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 164,603 (000 omitted) Ratio of expenses to average 1.58% net assets Ratio of expenses to average 1.56% E net assets after expense reductions Ratio of net investment 1.99% income to average net assets Portfolio turnover rate 106% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR THE YEAR ENDED FEBRUARY 29
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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT BROKERAGE AND 2.36% 30.19% 200.24% 453.09% INVESTMENT MANAGEMENT SELECT BROKERAGE AND -0.79% 26.21% 191.16% 436.43% INVESTMENT MANAGEMENT (LOAD ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Financial Services -3.19% 20.67% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT BROKERAGE AND 30.19% 24.59% 18.65% INVESTMENT MANAGEMENT SELECT BROKERAGE AND 26.21% 23.83% 18.29% INVESTMENT MANAGEMENT (LOAD ADJ.) S&P 500 39.82% 25.11% 17.10% GS Financial Services 20.67% 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 1989/08/31 9700.00 10000.00 1989/09/30 9396.88 9959.00 1989/10/31 8634.17 9727.95 1989/11/30 8546.17 9926.40 1989/12/31 8340.07 10164.64 1990/01/31 7973.58 9482.59 1990/02/28 8241.01 9604.91 1990/03/31 8468.83 9859.44 1990/04/30 7894.34 9612.96 1990/05/31 8647.12 10550.22 1990/06/30 8636.97 10478.48 1990/07/31 8329.57 10444.95 1990/08/31 7199.13 9500.72 1990/09/30 6584.33 9038.04 1990/10/31 6177.77 8999.18 1990/11/30 6584.33 9580.52 1990/12/31 6990.89 9847.82 1991/01/31 7572.63 10277.18 1991/02/28 8324.88 11012.00 1991/03/31 9177.43 11278.49 1991/04/30 9307.82 11305.56 1991/05/31 9799.28 11793.96 1991/06/30 9146.79 11253.80 1991/07/31 9849.62 11778.23 1991/08/31 10070.51 12057.37 1991/09/30 10592.61 11856.01 1991/10/31 11295.44 12014.88 1991/11/30 10672.93 11530.68 1991/12/31 12741.25 12849.79 1992/01/31 12921.98 12610.79 1992/02/29 12841.66 12774.73 1992/03/31 12500.28 12525.62 1992/04/30 11526.37 12893.87 1992/05/31 11496.24 12957.05 1992/06/30 11225.15 12763.99 1992/07/31 11857.70 13286.04 1992/08/31 11516.33 13013.68 1992/09/30 11436.00 13167.24 1992/10/31 11948.06 13213.32 1992/11/30 13022.38 13663.90 1992/12/31 13393.88 13831.96 1993/01/31 14187.07 13948.15 1993/02/28 14277.43 14137.85 1993/03/31 15422.04 14436.15 1993/04/30 15371.82 14086.80 1993/05/31 15874.16 14464.33 1993/06/30 16627.68 14506.27 1993/07/31 17180.26 14448.25 1993/08/31 18536.60 14995.84 1993/09/30 18878.20 14880.37 1993/10/31 18265.33 15188.39 1993/11/30 17762.99 15044.10 1993/12/31 20000.43 15226.14 1994/01/31 20426.67 15743.82 1994/02/28 19399.32 15317.17 1994/03/31 17224.41 14649.34 1994/04/30 17082.33 14836.85 1994/05/31 17497.64 15080.17 1994/06/30 18164.32 14710.71 1994/07/31 17738.09 15193.22 1994/08/31 17869.24 15816.14 1994/09/30 17191.63 15428.65 1994/10/31 17180.70 15775.79 1994/11/30 15989.41 15201.24 1994/12/31 16546.80 15426.67 1995/01/31 16339.15 15826.69 1995/02/28 16951.18 16443.45 1995/03/31 17126.05 16928.70 1995/04/30 17644.90 17427.25 1995/05/31 18637.08 18123.82 1995/06/30 19685.63 18544.83 1995/07/31 20632.70 19159.78 1995/08/31 20441.03 19207.87 1995/09/30 21681.25 20018.44 1995/10/31 20474.85 19946.98 1995/11/30 20970.94 20822.65 1995/12/31 20450.89 21223.69 1996/01/31 21784.13 21946.15 1996/02/29 22010.30 22149.59 1996/03/31 22998.33 22362.89 1996/04/30 23138.30 22692.52 1996/05/31 23904.71 23277.76 1996/06/30 23831.72 23366.44 1996/07/31 22371.89 22334.12 1996/08/31 23223.46 22805.14 1996/09/30 24415.65 24088.62 1996/10/31 25279.38 24752.98 1996/11/30 27761.09 26624.06 1996/12/31 28561.15 26096.63 1997/01/31 30644.38 27727.15 1997/02/28 31753.79 27944.53 1997/03/31 28536.50 26796.29 1997/04/30 31623.65 28396.03 1997/05/31 33983.07 30124.78 1997/06/30 35959.54 31474.37 1997/07/31 39912.50 33978.79 1997/08/31 38689.55 32075.30 1997/09/30 44334.87 33832.06 1997/10/31 42049.57 32702.07 1997/11/30 43964.28 34215.85 1997/12/31 46359.14 34803.33 1998/01/31 44346.80 35188.26 1998/02/28 50031.64 37726.04 1998/03/31 52823.76 39657.99 1998/04/30 55126.78 40056.94 1998/05/31 53840.62 39368.37 1998/06/30 56718.57 40967.51 1998/07/31 57202.47 40531.21 1998/08/31 41208.19 34671.20 1998/09/30 37935.48 36892.24 1998/10/31 43373.02 39893.06 1998/11/30 48797.83 42310.97 1998/12/31 48988.85 44748.93 1999/01/31 53827.88 46620.33 1999/02/28 52414.37 45171.37 1999/03/31 56565.75 46978.68 1999/04/30 60906.97 48798.16 1999/05/31 58993.19 47646.04 1999/06/30 60495.96 50290.39 1999/07/31 55756.46 48720.33 1999/08/31 53643.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 140623 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Brokerage and Investment Management Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $53,643 - a 436.43% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Lehman Brothers Holdings, Inc. 7.3 Bear Stearns Companies, Inc. 7.0 Morgan Stanley Dean Witter & 5.8 Co. Merrill Lynch & Co., Inc. 5.4 Schwab (Charles) Corp. 4.0 Citigroup, Inc. 4.0 Kansas City Southern 3.9 Industries, Inc. Franklin Resources, Inc. 3.2 PaineWebber Group, Inc. 3.1 American Express Co. 2.9 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Securities Industry 62.8% Credit & Other Finance 11.7% Banks 7.3% Insurance 6.5% Computer Services & Software 2.3% All Others 9.4%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 9.4 Row: 1, Col: 2, Value: 2.3 Row: 1, Col: 3, Value: 6.5 Row: 1, Col: 4, Value: 7.3 Row: 1, Col: 5, Value: 11.7 Row: 1, Col: 6, Value: 62.8 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Ted Orenstein) Ted Orenstein, Portfolio Manager of Fidelity Select Brokerage and Investment Management Portfolio Q. HOW DID THE FUND PERFORM, TED? A. It did well on a relative basis against financial services stocks. For the period that ended on August 31, 1999, the fund had a total six-month return of 2.36% and a 12-month return of 30.19%. For the same periods, the Goldman Sachs Financial Services Index - an index of 271 stocks designed to measure the performance of companies in the financial services sector - showed returns of -3.19% and 20.67%, respectively. The Standard & Poor's 500 Index returned 7.32% and 39.82% for the same six- and 12-month periods. Q. WHAT FACTORS AFFECTED THE INVESTMENT ENVIRONMENT FOR FINANCIAL SERVICES STOCKS DURING THE SIX-MONTH PERIOD? A. Financial services stocks tend to react in anticipation of any possibility of bad news, and concerns about the Federal Reserve Board's interest-rate policy and Y2K had a dampening effect on the market for these stocks during the period. In my opinion, these concerns were overblown within a strong fundamental environment for companies in the sector. The overall investment picture improved significantly since the summer of 1998 when there was great uncertainty in the overseas financial markets and spreads widened largely because of hedge-fund problems at Long-Term Capital Management. Many of the companies that I cover - particularly on the brokerage side - had spectacular first and second quarters in 1999: Their earnings exceeded estimates, they had strong deal flow going forward and they had a healthy balance between U.S. and overseas business operations. This enabled them to capitalize on the extraordinary advisory and financing activity that took place in Europe during the first half of this year. Q. WHICH OF THE FUND'S HOLDINGS HELPED PERFORMANCE? A. The fund was helped by many of the large-cap institutional brokerage stocks - Morgan Stanley and Lehman Brothers, to name two. Such firms operate high-margin businesses and tend to take part in a great deal of the activity in the marketplace. On the back of improved economic conditions in parts of Asia, such names as Daiwa Securities and Nomura Securities also did quite well. Jefferies Group and Dain Rauscher, two smaller-cap regional brokerages, rebounded from industry difficulties in 1998 and were among the top performers in the group during the period. Money center banks - especially Citigroup - also helped returns. Q. WHICH STOCKS WERE DISAPPOINTMENTS? A. Investment managers as a group took in lower levels of assets during the period and, while they generally performed adequately, many did not do as well as I'd hoped. The life insurance segment also did not do that well, mainly because there wasn't as much takeover speculation as there had been in the past. Bear Stearns' performance lagged expectations, due in large measure to the residual effects of its recent litigation issues, which are now substantially behind them. PaineWebber, which struggled with its Internet strategy, also did not perform as well as I'd hoped. Q. WHAT'S YOUR OUTLOOK FOR THE INDUSTRY, TED? A. I'm cautiously optimistic. I think the industry's fundamentals are quite good. My only real concern would be with accelerating inflation, which could force interest rates higher and drive liquidity out of the market. I believe Y2K concerns have already been priced into the financial services stocks in many cases. So if inflation remains in check, I would expect to see fairly strong performance from the large-cap brokers in the third quarter, with perhaps a slight fall-off in activity at year-end, followed by a good first quarter of 2000 as activity resumes. I think investment management companies should see stronger asset inflows - particularly if activity in the stock markets becomes less robust - which should drive better performance and return their stock prices to more typical valuations. I believe the consolidation theme should continue in the life insurance sector, and I think the fund is properly positioned to benefit from that trend. I'm also keeping a close eye on international opportunities, especially in Japan and Europe, where cross-border consolidation is likely to have broad-ranging impact on the capital 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 3. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 068 TRADING SYMBOL: FSLBX SIZE: as of August 31, 1999, more than $452 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 AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 90.7% SHARES VALUE (NOTE 1) BANKS - 7.3% Bank Sarasin & Compagnie 610 $ 1,086,191 Class B (Reg.) Chase Manhattan Corp. 153,000 12,804,188 Credit Suisse Group (Reg.) 14,900 2,815,593 Deutsche Bank AG 1 68 J.P. Morgan & Co., Inc. 16,100 2,079,919 Julius Baer Holding AG 2,500 7,713,908 Toronto Dominion Bank 145,200 2,845,628 US Trust Corp. 45,900 3,815,438 33,160,933 COMPUTER SERVICES & SOFTWARE - - 2.3% DST Systems, Inc. (a) 155,400 10,334,100 CREDIT & OTHER FINANCE - 11.7% American Express Co. 95,800 13,172,500 Citigroup, Inc. 399,025 17,731,673 Equitable Companies (The), 184,400 11,386,700 Inc. Providian Financial Corp. 133,600 10,370,700 52,661,573 INSURANCE - 6.5% AFLAC, Inc. 63,900 2,871,506 Ambac Financial Group, Inc. 10,700 565,094 American International Group, 31,125 2,884,898 Inc. Hartford Life, Inc. Class A 81,200 3,527,125 Liberty Financial Companies, 94,500 2,433,375 Inc. Marsh & McLennan Companies, 93,800 6,829,813 Inc. Mutual Risk Management Ltd. 35,200 968,000 Nationwide Financial 119,100 4,347,150 Services, Inc. Class A Protective Life Corp. 31,400 934,150 Reinsurance Group of America, 50 1,600 Inc. Reliastar Financial Corp. 80,288 3,617,978 Torchmark Corp. 1 29 UICI (a) 19,000 499,938 29,480,656 REAL ESTATE INVESTMENT TRUSTS - - 0.1% AMRESCO Capital Trust, Inc. 41,400 388,125 SECURITIES INDUSTRY - 62.8% Affiliated Managers Group, 150,400 4,013,800 Inc. (a) Ameritrade Holding Corp. 41,700 849,638 Class A (a) Bear Stearns Companies, Inc. 759,330 31,607,111 Dain Rauscher Corp. 134,450 6,672,081 Daiwa Securities Co. Ltd. 914,000 8,268,511 DLJdirect, Inc. 242,700 11,604,094 E*Trade Group, Inc. (a) 454,800 11,370,000 Eaton Vance Corp. 59,500 1,814,750 SHARES VALUE (NOTE 1) Edwards (A.G.), Inc. 33,000 $ 829,125 Federated Investors, Inc. 284,000 5,218,500 Class B Franklin Resources, Inc. 403,400 14,497,188 Goldman Sachs Group, Inc. 87,700 5,245,556 Hambrecht & Quist Group (a) 18,700 714,106 Investment Technology Group, 43,300 1,179,925 Inc. Investors Group, Inc. 453,500 5,697,236 Jefferies Group, Inc. 290,400 7,187,400 John Nuveen Co. Class A 96,600 3,773,438 Kansas City Southern 377,900 17,501,494 Industries, Inc. Knight/Trimark Group, Inc. 18,000 589,500 Class A (a) Legg Mason, Inc. 118,432 4,522,622 Lehman Brothers Holdings, 612,400 32,916,495 Inc. Mackenzie Financial Corp. 275,600 2,695,987 Merrill Lynch & Co., Inc. 325,800 24,312,825 Morgan Keegan, Inc. 73,625 1,247,023 Morgan Stanley Dean Witter & 303,665 26,058,253 Co. Nomura Securities Co. Ltd. 241,000 3,531,015 PaineWebber Group, Inc. 358,800 14,082,900 Phoenix Investment Partners 203,200 1,752,600 Ltd. Pilgrim Capital Corp. (a) 57,100 1,848,613 Pioneer Group, Inc. (a) 65,900 992,619 Price (T. Rowe) Associates, 54,400 1,683,000 Inc. Raymond James Financial, Inc. 89,825 1,757,202 Schwab (Charles) Corp. 459,800 18,162,100 Southwest Securities Group, 9,313 314,314 Inc. TD Waterhouse Group, Inc. (a) 7,000 105,438 United Asset Management Corp. 15,000 293,438 Waddell & Reed Financial, Inc.: Class A 358,036 8,122,942 Class B 48,161 1,098,673 284,131,512 TOTAL COMMON STOCKS 410,156,899 (Cost $337,157,656) CASH EQUIVALENTS - 10.4% Central Cash Collateral Fund, 18,121,700 18,121,700 5.26% (b) Taxable Central Cash Fund, 28,905,625 28,905,625 5.20% (b) TOTAL CASH EQUIVALENTS 47,027,325 (Cost $47,027,325) TOTAL INVESTMENT PORTFOLIO - 457,184,224 101.1% (Cost $384,184,981) NET OTHER ASSETS - (1.1%) (4,869,432) NET ASSETS - 100% $452,314,792 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $122,651,355 and $180,014,354, 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 $8,651 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $17,795,981. The fund received cash collateral of $18,121,700 which was invested in the Central Cash Collateral Fund. The fund participated in the interfund lending program as a lender. The average daily loan balance during the period for which loans were outstanding amounted to $25,416,000. The weighted average interest rate was 4.73%. Interest earned from the interfund lending program amounted to $3,337 and is included in interest income on the Statement of Operations. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $385,069,538. Net unrealized appreciation aggregated $72,114,686, of which $93,567,205 related to appreciated investment securities and $21,452,519 related to depreciated investment securities. BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 457,184,224 value (cost $384,184,981) - See accompanying schedule Receivable for investments 3,147,382 sold Receivable for fund shares 24,323,511 sold Dividends receivable 293,730 Interest receivable 29,727 Redemption fees receivable 3,220 Other receivables 7,401 TOTAL ASSETS 484,989,195 LIABILITIES Payable for investments $ 10,388,975 purchased Payable for fund shares 3,672,071 redeemed Accrued management fee 210,871 Other payables and accrued 280,786 expenses Collateral on securities 18,121,700 loaned, at value TOTAL LIABILITIES 32,674,403 NET ASSETS $ 452,314,792 Net Assets consist of: Paid in capital $ 335,661,644 Distributions in excess of (59,691) net investment income Accumulated undistributed net 43,715,632 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 72,997,207 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 10,829,649 $ 452,314,792 shares outstanding NET ASSET VALUE and $41.77 redemption price per share ($452,314,792 (divided by) 10,829,649 shares) Maximum offering price per $43.06 share (100/97.00 of $41.77) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 2,535,690 Dividends Interest 663,334 Security lending 7,401 TOTAL INCOME 3,206,425 EXPENSES Management fee $ 1,511,625 Transfer agent fees 1,524,077 Accounting and security 192,413 lending fees Non-interested trustees' 761 compensation Custodian fees and expenses 16,095 Registration fees 55,240 Audit 13,633 Legal 310 Total expenses before 3,314,154 reductions Expense reductions (20,933) 3,293,221 NET INVESTMENT INCOME (LOSS) (86,796) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 44,542,415 Foreign currency transactions 4,559 44,546,974 Change in net unrealized appreciation (depreciation) on: Investment securities (33,147,612) Assets and liabilities in (4,366) (33,151,978) foreign currencies NET GAIN (LOSS) 11,394,996 NET INCREASE (DECREASE) IN $ 11,308,200 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 619,699 charges paid to FDC Sales charges - Retained by $ 618,180 FDC Deferred sales charges $ 1,400 withheld by FDC Exchange fees withheld by FSC $ 26,948 Expense reductions Directed $ 20,807 brokerage arrangements Custodian credits 126 $ 20,933
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (86,796) $ 1,879,801 income (loss) Net realized gain (loss) 44,546,974 10,869,413 Change in net unrealized (33,151,978) (42,208,876) appreciation (depreciation) NET INCREASE (DECREASE) IN 11,308,200 (29,459,662) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (594,460) (201,762) From net investment income From net realized gain (3,923,511) (10,471,038) TOTAL DISTRIBUTIONS (4,517,971) (10,672,800) Share transactions Net 229,707,365 881,017,420 proceeds from sales of shares Reinvestment of distributions 4,369,616 10,559,880 Cost of shares redeemed (271,548,576) (1,046,567,449) NET INCREASE (DECREASE) IN (37,471,595) (154,990,149) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 471,151 1,580,230 TOTAL INCREASE (DECREASE) (30,210,215) (193,542,381) IN NET ASSETS NET ASSETS Beginning of period 482,525,007 676,067,388 End of period (including $ 452,314,792 $ 482,525,007 under (over) distribution of net investment income of $(59,691) and $1,842,357, respectively) OTHER INFORMATION Shares Sold 5,055,388 21,245,778 Issued in reinvestment of 99,196 249,064 distributions Redeemed (6,048,777) (26,767,460) Net increase (decrease) (894,193) (5,272,618)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 G 1995 Net asset value, beginning of $ 41.16 $ 39.78 $ 25.76 $ 18.49 $ 15.51 $ 17.75 period Income from Investment Operations Net investment income (loss) D (.01) .10 .16 .08 .09 (.03) Net realized and unrealized .96 1.72 14.46 7.80 4.29 (2.25) gain (loss) Total from investment .95 1.82 14.62 7.88 4.38 (2.28) operations Less Distributions From net investment income (.05) (.01) (.09) (.06) (.04) - From net realized gain (.33) (.52) (.61) (.65) (1.09) - In excess of net realized gain - - - - (.35) - Total distributions (.38) (.53) (.70) (.71) (1.48) - Redemption fees added to paid .04 .09 .10 .10 .08 .04 in capital Net asset value, end of period $ 41.77 $ 41.16 $ 39.78 $ 25.76 $ 18.49 $ 15.51 TOTAL RETURN B, C 2.36% 4.76% 57.56% 44.27% 29.85% (12.62)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 452,315 $ 482,525 $ 676,067 $ 458,787 $ 38,382 $ 27,346 (000 omitted) Ratio of expenses to average 1.26% A 1.26% 1.33% 1.94% 1.64% E 2.54% E net assets Ratio of expenses to average 1.25% A, F 1.24% F 1.29% F 1.93% F 1.61% F 2.54% net assets after expense reductions Ratio of net investment (.03)% A .26% .49% .37% .50% (.20)% income (loss) to average net assets Portfolio turnover rate 50% A 59% 100% 16% 166% 139% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. G FOR THE YEAR ENDED FEBRUARY 29
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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT FINANCIAL SERVICES -2.84% 23.56% 171.53% 450.66% SELECT FINANCIAL SERVICES -5.83% 19.78% 163.31% 434.07% (LOAD ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Financial Services -3.19% 20.67% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT FINANCIAL SERVICES 23.56% 22.11% 18.60% SELECT FINANCIAL SERVICES 19.78% 21.37% 18.24% (LOAD ADJ.) S&P 500 39.82% 25.11% 17.10% GS Financial Services 20.67% 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 1989/08/31 9700.00 10000.00 1989/09/30 9901.29 9959.00 1989/10/31 8957.40 9727.95 1989/11/30 8835.00 9926.40 1989/12/31 8617.41 10164.64 1990/01/31 7889.91 9482.59 1990/02/28 8175.42 9604.91 1990/03/31 8049.14 9859.44 1990/04/30 7763.63 9612.96 1990/05/31 8447.20 10550.22 1990/06/30 8211.11 10478.48 1990/07/31 7684.02 10444.95 1990/08/31 6764.35 9500.72 1990/09/30 5756.84 9038.04 1990/10/31 5254.45 8999.18 1990/11/30 5995.68 9580.52 1990/12/31 6520.81 9847.82 1991/01/31 7113.35 10277.18 1991/02/28 7930.56 11012.00 1991/03/31 8309.67 11278.49 1991/04/30 8579.27 11305.56 1991/05/31 9236.40 11793.96 1991/06/30 8486.60 11253.80 1991/07/31 9157.77 11778.23 1991/08/31 9764.36 12057.37 1991/09/30 9705.39 11856.01 1991/10/31 9918.81 12014.88 1991/11/30 9183.05 11530.68 1991/12/31 10539.48 12849.79 1992/01/31 11064.46 12610.79 1992/02/29 11859.04 12774.73 1992/03/31 11592.29 12525.62 1992/04/30 12037.82 12893.87 1992/05/31 12554.29 12957.05 1992/06/30 12843.16 12763.99 1992/07/31 13210.44 13286.04 1992/08/31 12452.75 13013.68 1992/09/30 12840.27 13167.24 1992/10/31 13349.26 13213.32 1992/11/30 14352.76 13663.90 1992/12/31 15052.49 13831.96 1993/01/31 16001.94 13948.15 1993/02/28 16427.34 14137.85 1993/03/31 17287.40 14436.15 1993/04/30 16459.80 14086.80 1993/05/31 16466.04 14464.33 1993/06/30 17080.75 14506.27 1993/07/31 17539.44 14448.25 1993/08/31 18085.50 14995.84 1993/09/30 18503.62 14880.37 1993/10/31 18007.49 15188.39 1993/11/30 17205.56 15044.10 1993/12/31 17694.86 15226.14 1994/01/31 18896.07 15743.82 1994/02/28 18210.17 15317.17 1994/03/31 17378.56 14649.34 1994/04/30 18038.49 14836.85 1994/05/31 18808.45 15080.17 1994/06/30 18364.38 14710.71 1994/07/31 19005.42 15193.22 1994/08/31 19671.52 15816.14 1994/09/30 18188.90 15428.65 1994/10/31 18092.21 15775.79 1994/11/30 16946.23 15201.24 1994/12/31 17049.44 15426.67 1995/01/31 17931.17 15826.69 1995/02/28 19069.91 16443.45 1995/03/31 19406.00 16928.70 1995/04/30 20014.91 17427.25 1995/05/31 21125.97 18123.82 1995/06/30 21224.82 18544.83 1995/07/31 21936.53 19159.78 1995/08/31 22790.58 19207.87 1995/09/30 24091.43 20018.44 1995/10/31 23474.61 19946.98 1995/11/30 25056.19 20822.65 1995/12/31 25120.68 21223.69 1996/01/31 26295.18 21946.15 1996/02/29 26517.17 22149.59 1996/03/31 26831.99 22362.89 1996/04/30 26534.20 22692.52 1996/05/31 27150.79 23277.76 1996/06/30 27548.06 23366.44 1996/07/31 26948.02 22334.12 1996/08/31 27750.83 22805.14 1996/09/30 29592.33 24088.62 1996/10/31 31466.94 24752.98 1996/11/30 34169.19 26624.06 1996/12/31 33188.85 26096.63 1997/01/31 35164.84 27727.15 1997/02/28 35940.50 27944.53 1997/03/31 33240.85 26796.29 1997/04/30 36040.31 28396.03 1997/05/31 37223.45 30124.78 1997/06/30 39202.94 31474.37 1997/07/31 43594.22 33978.79 1997/08/31 41118.72 32075.30 1997/09/30 43753.48 33832.06 1997/10/31 43171.01 32702.07 1997/11/30 44631.74 34215.85 1997/12/31 47122.43 34803.33 1998/01/31 46616.74 35188.26 1998/02/28 50706.44 37726.04 1998/03/31 53455.82 39657.99 1998/04/30 54341.76 40056.94 1998/05/31 53325.11 39368.37 1998/06/30 55758.57 40967.51 1998/07/31 55937.02 40531.21 1998/08/31 43228.98 34671.20 1998/09/30 44748.54 36892.24 1998/10/31 49236.91 39893.06 1998/11/30 52059.72 42310.97 1998/12/31 53782.86 44748.93 1999/01/31 54791.67 46620.33 1999/02/28 54977.07 45171.37 1999/03/31 56869.26 46978.68 1999/04/30 61224.98 48798.16 1999/05/31 57253.15 47646.04 1999/06/30 59533.07 50290.39 1999/07/31 56398.87 48720.33 1999/08/31 53407.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 140804 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Financial Services Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $53,407 - a 434.07% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Citigroup, Inc. 6.1 American International Group, 5.6 Inc. Chase Manhattan Corp. 5.1 American Express Co. 4.6 Bank of America Corp. 4.5 Freddie Mac 3.9 Fannie Mae 3.9 Wells Fargo & Co. 3.9 Associates First Capital 3.4 Corp. Class A Household International, Inc. 3.1 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Banks 29.2% Credit & Other Finance 24.1% Insurance 20.8% Federal Sponsored Credit 8.9% Securities Industry 7.6% All Others 9.4%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 9.4 Row: 1, Col: 2, Value: 7.6 Row: 1, Col: 3, Value: 8.9 Row: 1, Col: 4, Value: 20.8 Row: 1, Col: 5, Value: 24.1 Row: 1, Col: 6, Value: 29.2 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. FINANCIAL SERVICES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Robert Ewing) Robert Ewing, Portfolio Manager of Fidelity Select Financial Services Portfolio Q. HOW DID THE FUND PERFORM, BOB? A. For the six months that ended August 31, 1999, the fund returned - -2.84%. For the 12 months ending August 31, 1999, it returned 23.56%. For the same six-and 12-month periods, the Standard & Poor's 500 Index returned 7.32% and 39.82%, respectively, while the Goldman Sachs Financial Services Index - an index of 271 stocks designed to measure the performance of companies in the financial services sector - had returns of -3.19% and 20.67%, respectively. Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE? A. As the period progressed, interest rates rose and investors became increasingly nervous about the potential impact of higher interest rates on financial services stocks. There is a long-standing, historical relationship indicating that rising interest rates tend to hurt financial services companies. Investor fears appeared to be justified when the Federal Reserve Board raised short-term rates twice near the end of the period. While the valuations of stocks fell as investors anticipated more challenges for the industry, the fundamental business characteristics of financial services companies continued to be strong for the most part. In this challenging environment, I think Fidelity's financial services analysts did a good job in stock selection, enabling the fund to outperform the Goldman Sachs benchmark. Q. WHAT STRATEGIES DID YOU PURSUE? A. Three primary themes stood out. First, we emphasized consumer-oriented companies such as American Express, Associates First Capital and Household International. Although we did trim our consumer-related holdings somewhat, we maintained a major emphasis on these companies because we believed consumer spending would continue to be healthy and companies in businesses such as credit cards and mortgages would do well. The second theme was to de-emphasize property and casualty insurance companies. There simply is too much competition in this industry, and companies have very little control or flexibility in pricing. The third theme was to de-emphasize regional "bricks-and-mortar" banks. We believed they would find it harder to increase their revenues as the Internet became a larger factor in financial services. We also maintained the fund's exposure to large money-center banks such as Citigroup and Chase Manhattan that we had built up before the period began, although we reduced the Chase Manhattan holdings slightly. Q. WHAT WERE SOME OF THE MAJOR CONTRIBUTORS TO PERFORMANCE? A. American Express was a major contributor. It continued to demonstrate its ability to accelerate revenue growth and finally grow the number of its card-customer accounts, which had been flat. In my opinion, of all the major companies in this group, American Express has the best potential to use the Internet to help it grow faster. The Internet creates opportunities for the company both because transactions will be paid using cards, rather than cash or checks, and because American Express can add new, Internet-based services. During the six-month period, Citigroup and Chase Manhattan also performed well. Q. WHAT INVESTMENTS DISAPPOINTED YOU? A. The rising interest-rate environment hurt the stock valuation of Freddie Mac, even though its fundamentals remained strong and even improved. Bank One was a somewhat different story. We were underweight in Bank One relative to the Goldman Sachs benchmark, but the holding nevertheless hurt performance in absolute terms. The company had a very serious setback in its marketing and customer retention efforts for credit cards, resulting in disappointing earnings. Q. WHAT IS YOUR OUTLOOK? A. Our general outlook is positive. The fundamentals of financial services companies continue to be strong, and we believe this industry should have better earnings growth than the overall market for the remainder of 1999. These stocks tend to do well when they have superior earnings growth. In addition, the poor performance of the industry's stocks during July and August made the stocks even more attractive on a valuation basis. While the potential impact of the Year 2000 on computer systems is still a concern, I am beginning to think that we have worried about it enough. As we approach the end of the year, investor confidence may actually increase. 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 3. (checkmark)FUND FACTS START DATE: December 10, 1981 FUND NUMBER: 066 TRADING SYMBOL: FIDSX SIZE: as of August 31,1999, more than $476 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 AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 96.2% SHARES VALUE (NOTE 1) BANKS - 29.2% Bank of America Corp. 354,079 $ 21,421,780 Bank of New York Co., Inc. 375,936 13,439,712 Bank One Corp. 215,519 8,647,700 Capital One Financial Corp. 20,000 755,000 Chase Manhattan Corp. 290,000 24,269,375 Comerica, Inc. 120,167 6,256,194 First Union Corp. 117,803 4,888,825 M&T Bank Corp. 6,000 2,784,000 Marshall & Ilsley Corp. 105,000 6,149,063 Mellon Bank Corp. 160,000 5,340,000 State Street Corp. 50,000 2,993,750 Synovus Finanical Corp. 30,000 566,250 Toronto Dominion Bank 80,000 1,567,839 U.S. Bancorp 433,089 13,371,623 Wachovia Corp. 74,500 5,838,938 Wells Fargo & Co. 460,000 18,313,750 Zions Bancorp 50,000 2,487,500 139,091,299 COMPUTER SERVICES & SOFTWARE - - 0.1% Security First Technologies 12,000 444,000 Corp. (a) CREDIT & OTHER FINANCE - 24.1% American Express Co. 160,300 22,041,250 Associates First Capital 475,200 16,305,300 Corp. Class A Citigroup, Inc. 655,500 29,128,773 Equitable Companies (The), 67,600 4,174,300 Inc. Fleet Financial Group, Inc. 234,534 9,337,385 Household International, Inc. 384,746 14,524,162 MBNA Corp. 172,500 4,258,594 Metris Companies, Inc. 50,000 1,378,125 Providian Financial Corp. 174,700 13,561,088 114,708,977 FEDERAL SPONSORED CREDIT - 8.9% Fannie Mae 297,000 18,451,125 Freddie Mac 365,300 18,812,950 SLM Holding Corp. 116,000 5,125,750 42,389,825 INSURANCE - 20.8% AFLAC, Inc. 142,000 6,381,125 Allmerica Financial Corp. 31,200 1,762,800 Allstate Corp. 27,800 912,188 Ambac Financial Group, Inc. 164,900 8,708,781 American International Group, 290,062 26,885,122 Inc. Berkshire Hathaway, Inc.: Class A (a) 204 13,096,800 Class B (a) 7 14,021 SHARES VALUE (NOTE 1) Blanch E.W. Holdings, Inc. 35,000 $ 2,318,750 CIGNA Corp. 20,000 1,796,250 Hartford Financial Services 177,000 8,042,438 Group, Inc. Hartford Life, Inc. Class A 25,000 1,085,938 Marsh & McLennan Companies, 87,500 6,371,094 Inc. MBIA, Inc. 52,400 2,718,250 Mutual Risk Management Ltd. 15,000 412,500 Nationwide Financial 105,000 3,832,500 Services, Inc. Class A PMI Group, Inc. 69,600 2,958,000 Progressive Corp. 10,000 1,020,000 Reliastar Financial Corp. 102,030 4,597,727 Travelers Property Casualty 50,000 1,775,000 Corp. Class A UICI (a) 175,000 4,604,688 99,293,972 LODGING & GAMING - 0.5% Starwood Hotels & Resorts 100,000 2,381,250 Worldwide, Inc. REAL ESTATE INVESTMENT TRUSTS - - 2.4% Crescent Real Estate Equities 140,000 2,905,000 Co. Duke Realty Investments, Inc. 50,000 1,121,875 Equity Office Properties Trust 50,000 1,278,125 Indymac Mortgage Holdings, 325,000 4,367,188 Inc. Ocwen Asset Investment Corp. 140,100 604,181 Public Storage, Inc. 40,000 1,040,000 11,316,369 SAVINGS & LOANS - 2.3% Charter One Financial, Inc. 55,000 1,287,344 Commercial Federal Corp. 150,000 3,487,500 Golden State Bancorp, Inc. (a) 75,000 1,504,688 Golden State Bancorp, Inc. 50,000 76,563 litigation warrants 12/31/99 (a) Golden West Financial Corp. 15,000 1,362,188 Washington Mutual, Inc. 108,880 3,456,940 11,175,223 SECURITIES INDUSTRY - 7.6% Bear Stearns Companies, Inc. 202,750 8,439,469 E*Trade Group, Inc. (a) 10,000 250,000 Investors Group, Inc. 200,000 2,512,563 Lehman Brothers Holdings, 115,600 6,213,500 Inc. Morgan Stanley Dean Witter & 114,000 9,782,625 Co. PaineWebber Group, Inc. 50,000 1,962,500 Schwab (Charles) Corp. 50,000 1,975,000 Waddell & Reed Financial, Inc.: Class A 178,535 4,050,513 Class B 36,735 838,017 36,024,187 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SERVICES - 0.3% CheckFree Holdings Corp. (a) 55,000 $ 1,608,750 InsWeb Corp. 300 9,600 1,618,350 TOTAL COMMON STOCKS 458,443,452 (Cost $364,895,555) CASH EQUIVALENTS - 4.2% Taxable Central Cash Fund, 20,092,016 20,092,016 5.20% (b) (Cost $20,092,016) TOTAL INVESTMENT PORTFOLIO - 478,535,468 100.4% (Cost $384,987,571) NET OTHER ASSETS - (0.4%) (1,901,501) NET ASSETS - 100% $ 476,633,967 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $111,310,973 and $150,694,355, 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 $6,959 for the period. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $386,655,013. Net unrealized appreciation aggregated $91,880,455, of which $110,063,540 related to appreciated investment securities and $18,183,085 related to depreciated investment securities. FINANCIAL SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 478,535,468 value (cost $384,987,571) - See accompanying schedule Receivable for fund shares 1,159,057 sold Dividends receivable 653,105 Interest receivable 114,723 Redemption fees receivable 2,699 TOTAL ASSETS 480,465,052 LIABILITIES Payable for investments $ 809,280 purchased Payable for fund shares 2,505,303 redeemed Accrued management fee 245,428 Other payables and accrued 271,074 expenses TOTAL LIABILITIES 3,831,085 NET ASSETS $ 476,633,967 Net Assets consist of: Paid in capital $ 353,854,772 Undistributed net investment 1,733,381 income Accumulated undistributed net 27,497,917 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 93,547,897 (depreciation) on investments NET ASSETS, for 4,949,943 $ 476,633,967 shares outstanding NET ASSET VALUE and $96.29 redemption price per share ($476,633,967 (divided by) 4,949,943 shares) Maximum offering price per $99.27 share (100/97.00 of $96.29) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 4,221,569 Dividends Interest 906,364 Security lending 5,125 TOTAL INCOME 5,133,058 EXPENSES Management fee $ 1,687,702 Transfer agent fees 1,440,000 Accounting and security 210,562 lending fees Non-interested trustees' 774 compensation Custodian fees and expenses 8,164 Registration fees 52,354 Audit 13,016 Legal 338 Total expenses before 3,412,910 reductions Expense reductions (39,623) 3,373,287 NET INVESTMENT INCOME 1,759,771 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 29,906,330 Foreign currency transactions (294) 29,906,036 Change in net unrealized (44,453,412) appreciation (depreciation) on investment securities NET GAIN (LOSS) (14,547,376) NET INCREASE (DECREASE) IN $ (12,787,605) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 546,108 charges paid to FDC Sales charges - Retained by $ 533,301 FDC Deferred sales charges $ 7,081 withheld by FDC Exchange fees withheld by FSC $ 22,373 Expense reductions Directed $ 39,435 brokerage arrangements Transfer agent credits 188 $ 39,623
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ 1,759,771 $ 3,605,509 income Net realized gain (loss) 29,906,036 21,785,427 Change in net unrealized (44,453,412) 9,159,238 appreciation (depreciation) NET INCREASE (DECREASE) IN (12,787,605) 34,550,174 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (1,683,714) (1,162,919) From net investment income From net realized gain (8,593,336) (66,118,174) TOTAL DISTRIBUTIONS (10,277,050) (67,281,093) Share transactions Net 183,865,962 389,871,130 proceeds from sales of shares Reinvestment of distributions 9,858,240 66,001,479 Cost of shares redeemed (241,419,525) (481,672,418) NET INCREASE (DECREASE) IN (47,695,323) (25,799,809) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 394,434 622,623 TOTAL INCREASE (DECREASE) (70,365,544) (57,908,105) IN NET ASSETS NET ASSETS Beginning of period 546,999,511 604,907,616 End of period (including $ 476,633,967 $ 546,999,511 undistributed net investment income of $1,733,381 and $3,679,892, respectively) OTHER INFORMATION Shares Sold 1,732,222 3,952,203 Issued in reinvestment of 96,272 658,905 distributions Redeemed (2,303,912) (5,042,955) Net increase (decrease) (475,418) (431,847)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F Net asset value, beginning of $ 100.82 $ 103.28 $ 82.94 $ 65.70 $ 48.23 period Income from Investment Operations Net investment income D .32 .56 .70 .74 1.03 Net realized and unrealized (3.15) 7.88 30.65 21.55 17.56 gain (loss) Total from investment (2.83) 8.44 31.35 22.29 18.59 operations Less Distributions From net investment income (.29) (.19) (.64) (.63) (.37) From net realized gain (1.48) (10.81) (10.51) (4.56) (.91) Total distributions (1.77) (11.00) (11.15) (5.19) (1.28) Redemption fees added to paid .07 .10 .14 .14 .16 in capital Net asset value, end of period $ 96.29 $ 100.82 $ 103.28 $ 82.94 $ 65.70 TOTAL RETURN B, C (2.84)% 8.42% 41.08% 35.54% 39.05% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 476,634 $ 547,000 $ 604,908 $ 426,424 $ 270,466 (000 omitted) Ratio of expenses to average 1.16% A 1.20% 1.31% 1.45% 1.42% net assets Ratio of expenses to average 1.15% A, E 1.18% E 1.29% E 1.43% E 1.41% E net assets after expense reductions Ratio of net investment .60% A .58% .78% 1.03% 1.78% income to average net assets Portfolio turnover rate 41% A 60% 84% 80% 125%
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 51.24 period Income from Investment Operations Net investment income D .76 Net realized and unrealized .87 gain (loss) Total from investment 1.63 operations Less Distributions From net investment income (.79) From net realized gain (3.93) Total distributions (4.72) Redemption fees added to paid .08 in capital Net asset value, end of period $ 48.23 TOTAL RETURN B, C 4.72% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 153,089 (000 omitted) Ratio of expenses to average 1.56% net assets Ratio of expenses to average 1.54% E net assets after expense reductions Ratio of net investment 1.52% income to average net assets Portfolio turnover rate 107% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT HOME FINANCE -4.84% 5.21% 108.52% 456.61% SELECT HOME FINANCE (LOAD -7.77% 1.98% 102.19% 439.84% ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Financial Services -3.19% 20.67% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT HOME FINANCE 5.21% 15.83% 18.73% SELECT HOME FINANCE (LOAD 1.98% 15.12% 18.37% ADJ.) S&P 500 39.82% 25.11% 17.10% GS Financial Services 20.67% 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 1989/08/31 9700.00 10000.00 1989/09/30 10061.54 9959.00 1989/10/31 8807.69 9727.95 1989/11/30 8523.08 9926.40 1989/12/31 7754.53 10164.64 1990/01/31 7111.67 9482.59 1990/02/28 7376.85 9604.91 1990/03/31 7392.92 9859.44 1990/04/30 7216.14 9612.96 1990/05/31 7899.18 10550.22 1990/06/30 7818.82 10478.48 1990/07/31 7143.81 10444.95 1990/08/31 6420.59 9500.72 1990/09/30 5866.12 9038.04 1990/10/31 5424.16 8999.18 1990/11/30 6010.77 9580.52 1990/12/31 6584.91 9847.82 1991/01/31 7214.78 10277.18 1991/02/28 8196.38 11012.00 1991/03/31 8572.66 11278.49 1991/04/30 8867.14 11305.56 1991/05/31 9235.24 11793.96 1991/06/30 8719.90 11253.80 1991/07/31 9652.42 11778.23 1991/08/31 10020.52 12057.37 1991/09/30 9938.72 11856.01 1991/10/31 9766.94 12014.88 1991/11/30 9317.04 11530.68 1991/12/31 10839.14 12849.79 1992/01/31 11907.32 12610.79 1992/02/29 12685.69 12774.73 1992/03/31 12470.39 12525.62 1992/04/30 12735.37 12893.87 1992/05/31 13994.00 12957.05 1992/06/30 14011.53 12763.99 1992/07/31 14700.49 13286.04 1992/08/31 13903.62 13013.68 1992/09/30 14127.74 13167.24 1992/10/31 14393.36 13213.32 1992/11/30 15870.88 13663.90 1992/12/31 17109.88 13831.96 1993/01/31 18337.42 13948.15 1993/02/28 18648.51 14137.85 1993/03/31 19312.72 14436.15 1993/04/30 18266.66 14086.80 1993/05/31 17954.05 14464.33 1993/06/30 18401.84 14506.27 1993/07/31 19584.70 14448.25 1993/08/31 20615.47 14995.84 1993/09/30 21933.51 14880.37 1993/10/31 22102.49 15188.39 1993/11/30 21113.96 15044.10 1993/12/31 21780.02 15226.14 1994/01/31 22733.56 15743.82 1994/02/28 22305.80 15317.17 1994/03/31 21886.96 14649.34 1994/04/30 22733.17 14836.85 1994/05/31 24135.30 15080.17 1994/06/30 24537.25 14710.71 1994/07/31 25079.40 15193.22 1994/08/31 25892.64 15816.14 1994/09/30 25004.62 15428.65 1994/10/31 23509.02 15775.79 1994/11/30 22293.84 15201.24 1994/12/31 22363.96 15426.67 1995/01/31 23349.53 15826.69 1995/02/28 25079.51 16443.45 1995/03/31 25037.57 16928.70 1995/04/30 26348.16 17427.25 1995/05/31 27910.39 18123.82 1995/06/30 28203.96 18544.83 1995/07/31 29336.32 19159.78 1995/08/31 32041.38 19207.87 1995/09/30 32712.40 20018.44 1995/10/31 32114.77 19946.98 1995/11/30 33886.69 20822.65 1995/12/31 34326.75 21223.69 1996/01/31 35265.29 21946.15 1996/02/29 35923.34 22149.59 1996/03/31 36743.22 22362.89 1996/04/30 36274.11 22692.52 1996/05/31 37082.66 23277.76 1996/06/30 37248.80 23366.44 1996/07/31 37913.36 22334.12 1996/08/31 39475.09 22805.14 1996/09/30 41468.78 24088.62 1996/10/31 44381.79 24752.98 1996/11/30 47704.60 26624.06 1996/12/31 46985.06 26096.63 1997/01/31 50037.54 27727.15 1997/02/28 52986.34 27944.53 1997/03/31 48079.34 26796.29 1997/04/30 49520.41 28396.03 1997/05/31 52838.98 30124.78 1997/06/30 57349.78 31474.37 1997/07/31 62745.52 33978.79 1997/08/31 60152.12 32075.30 1997/09/30 65547.87 33832.06 1997/10/31 65031.65 32702.07 1997/11/30 65400.38 34215.85 1997/12/31 68480.50 34803.33 1998/01/31 64589.11 35188.26 1998/02/28 70150.11 37726.04 1998/03/31 74882.88 39657.99 1998/04/30 76647.66 40056.94 1998/05/31 73978.61 39368.37 1998/06/30 72698.00 40967.51 1998/07/31 69867.19 40531.21 1998/08/31 51318.61 34671.20 1998/09/30 53974.19 36892.24 1998/10/31 55430.03 39893.06 1998/11/30 58543.93 42310.97 1998/12/31 58341.73 44748.93 1999/01/31 58112.57 46620.33 1999/02/28 56737.60 45171.37 1999/03/31 57977.77 46978.68 1999/04/30 61326.13 48798.16 1999/05/31 59090.14 47646.04 1999/06/30 59049.23 50290.39 1999/07/31 57931.24 48720.33 1999/08/31 53984.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990909 154440 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Home Finance Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $53,984 - a 439.84% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Fannie Mae 6.3 Freddie Mac 5.5 Golden West Financial Corp. 4.9 Wachovia Corp. 4.2 Peoples Heritage Financial 4.1 Group, Inc. Charter One Financial, Inc. 4.1 Countrywide Credit 4.0 Industries, Inc. Golden State Bancorp, Inc. 4.0 MGIC Investment Corp. 4.0 Washington Federal, Inc. 3.8 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Savings & Loans 42.9% Banks 15.0% Federal Sponsored Credit 11.8% Insurance 11.2% Credit & Other Finance 9.8% All Others 9.3%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 9.300000000000001 Row: 1, Col: 2, Value: 9.800000000000001 Row: 1, Col: 3, Value: 11.2 Row: 1, Col: 4, Value: 11.8 Row: 1, Col: 5, Value: 15.0 Row: 1, Col: 6, Value: 42.9 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. HOME FINANCE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Victor Thay) Victor Thay, Portfolio Manager of Fidelity Select Home Finance Portfolio Q. HOW DID THE FUND PERFORM, VICTOR? A. It was a disappointing period for home finance stocks. For the six-month period that ended August 31, 1999, the fund returned -4.84%, compared to 7.32% for the Standard & Poor's 500 Index and -3.19% for the Goldman Sachs Financial Services Index, an index of 271 stocks designed to measure the performance of companies in the financial services sector. For the 12 months that ended August 31, 1999, the fund returned 5.21%, while the S&P 500 gained 39.82% and the Goldman Sachs index returned 20.67%. Q. WHY DID THE FUND UNDERPERFORM THE S&P 500 DURING THE PERIOD? A. The fund includes mostly home finance stocks, whose performance tends to depend on the relationship between long-term and short-term interest rates. During the period, there was a relatively small difference between the long-term rates that home finance companies could charge for mortgages and the short-term rates that they had to pay on certificates of deposit, savings accounts and the like. Another factor holding back performance was homeowners' preference for fixed-rate mortgages, which - because their rates do not rise with the general level of interest rates - are more risky for home finance companies than variable-rate mortgages. In contrast, most stocks in the broadly based S&P 500 responded positively to the favorable economic conditions during the period, which included solid economic growth, low inflation and low - albeit rising - interest rates. Q. WHY DID THE FUND ALSO UNDERPERFORM THE GOLDMAN SACHS INDEX? A. The Goldman Sachs index includes stocks from a variety of financial services subsectors - such as money center banks and brokerage firms - that performed better than home finance stocks did during the period. Q. HOW DO YOU CLASSIFY HOME FINANCE, OR SAVINGS AND LOAN, STOCKS? A. I think of the current savings and loan (S&L) universe as being divided into three categories. First, there are the traditional S&Ls that are sticking to the business they know best: residential mortgages. Then there are the savings and loans that made the decision some years ago to become more like commercial banks and have made considerable progress toward that goal. And finally, there are S&Ls that are just starting to make that move. I'm interested in well-managed companies in the first two categories. At this point in the economic cycle, after so many years of good growth, I am skeptical of the prospects for companies beginning to enter the commercial loan business. Q. WHAT STOCKS DID WELL FOR THE FUND? A. MGIC Investment Corp., a mortgage insurance company, was one of the best performers. After suffering from negative investor sentiment connected with anticipated lower demand for mortgage insurance, the stock recovered nicely. Golden State Bancorp, a savings and loan, also helped performance. Its stock was beaten down excessively during the liquidity crunch of last fall but rebounded in the spring, when prospects for the economy improved and rumors circulated that the company might be an acquisition target. Q. WHAT STOCKS WERE DISAPPOINTING? A. Dime Bancorp was a disappointment. Negative sentiment surrounded one of the company's divisions, North American Mortgage Company, due to the slowdown in refinancings over the past six months. Freddie Mac also detracted from performance after entering into a price war with another government-sponsored entity, Fannie Mae. Finally, two savings and loans, Charter One and Peoples Heritage, were both in the middle of acquisitions that caused investors to avoid the stocks. Q. WHAT'S YOUR OUTLOOK, VICTOR? A. The operating environment for home finance stocks is marginally better than it was six months ago because of a slightly wider spread, or difference, between short-term and long-term interest rates. In the very short term, however, upside appreciation in most stocks might be limited by rising interest rates. I will continue to focus on companies with strong management and low cost structures, especially those that have a sensible business plan for this stage of the economic cycle. Late in an economic expansion, it's important to stick with the stocks of companies that maintain high standards with respect to the credit risks they are willing to take on. That's what I plan to do. 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 3. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 098 TRADING SYMBOL: FSVLX SIZE: as of August 31, 1999, more than $467 million MANAGER: Victor Thay, since March 1999; manager, Fidelity Select Natural Gas Portfolio, 1997-1999; analyst, U.S. and Canadian exploration and production industry, 1996-1999; analyst, Canadian equities, 1995-1996; joined Fidelity in 1995 HOME FINANCE PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 93.1% SHARES VALUE (NOTE 1) BANKS - 15.0% BankAtlantic Bancorp, Inc. 71,000 $ 514,750 BankAtlantic Bancorp, Inc. 10,650 67,228 (non-vtg.) Class A Colonial Bancgroup, Inc. 442,500 5,475,938 Fifth Third Bancorp 100,000 6,625,000 North Fork Bancorp, Inc. 542,024 9,824,185 Peoples Heritage Financial 1,146,175 19,270,067 Group, Inc. Seacoast Financial Services 210,700 2,344,038 Corp. Wachovia Corp. 247,200 19,374,300 Wells Fargo & Co. 158,600 6,314,263 69,809,769 CREDIT & OTHER FINANCE - 9.8% Coast Federal Litigation 269,400 353,588 Contingent Payment Rights Trust rights 12/31/00 (a) Countrywide Credit 583,367 18,740,665 Industries, Inc. First Alliance Corp. (a) 300,500 901,500 Greenpoint Financial Corp. 256,500 6,636,938 Household International, Inc. 429,500 16,213,625 Triad Guaranty, Inc. (a) 89,800 1,751,100 WSFS Financial Corp. 94,000 1,374,750 45,972,166 FEDERAL SPONSORED CREDIT - 11.8% Fannie Mae 471,600 29,298,146 Freddie Mac 502,100 25,858,151 55,156,297 INSURANCE - 11.2% LandAmerica Financial Group, 127,900 2,957,688 Inc. MGIC Investment Corp. 424,400 18,434,875 Old Republic International 364,000 5,642,000 Corp. PMI Group, Inc. 301,110 12,797,175 Radian Group, Inc. 117,200 5,427,825 Stewart Information Services 88,100 1,833,581 Corp. White Mountains Insurance 39,700 5,170,925 Group, Inc. 52,264,069 REAL ESTATE INVESTMENT TRUSTS - - 2.4% Imperial Credit Commercial 107,700 1,177,969 Mortgage Investment Corp. Indymac Mortgage Holdings, 473,000 6,355,938 Inc. Novastar Financial, Inc. 80,200 360,900 Ocwen Asset Investment Corp. 758,300 3,270,169 11,164,976 SAVINGS & LOANS - 42.9% Astoria Financial Corp. 423,400 13,919,275 SHARES VALUE (NOTE 1) Bank Plus Corp. (a) 278,600 $ 1,271,113 Bank United Corp. Class A 500 17,156 BankUnited Financial Corp. 50,000 478,125 Class A (a) Bay View Capital Corp. 139,103 2,269,118 Charter One Financial, Inc. 810,764 18,976,945 Commercial Federal Corp. 349,225 8,119,481 Dime Bancorp, Inc. 751,684 13,812,194 Downey Financial Corp. 127,500 2,709,375 First Bell Bancorp, Inc. 71,000 1,184,813 First Federal Capital Corp. 141,900 2,226,056 First Federal Savings & Loan 52,300 1,464,400 Association East Hartford First Washington Bancorp, 113,400 2,126,250 Inc. FirstFed Financial Corp. (a) 201,600 3,074,400 Golden State Bancorp, Inc. (a) 929,092 18,639,908 Golden State Bancorp, Inc. 898,761 1,376,228 litigation warrants 12/31/99 (a) Golden West Financial Corp. 251,300 22,821,181 Haven Bancorp, Inc. 86,200 1,422,300 ITLA Capital Corp. (a) 76,300 1,201,725 JSB Financial, Inc. 71,000 3,771,875 MAF Bancorp., Inc. 212,900 4,524,125 Quaker City Bancorp, Inc. (a) 83,825 1,445,981 Richmond County Financial 416,300 8,247,944 Corp. Roslyn Bancorp, Inc. 246,015 4,182,255 SGV Bancorp., Inc. (a)(c) 114,300 2,514,600 Sovereign Bancorp, Inc. 151,400 1,518,731 St. Paul Bancorp, Inc. 120,200 2,614,350 TCF Financial Corp. 587,800 16,605,350 Washington Federal, Inc. 743,470 17,750,346 Washington Mutual, Inc. 429,980 13,651,865 Webster Financial Corp. 243,800 6,567,363 200,504,828 TOTAL COMMON STOCKS 434,872,105 (Cost $396,873,663) CASH EQUIVALENTS - 7.4% Taxable Central Cash Fund, 34,744,123 34,744,123 5.20% (b) (Cost $34,744,123) TOTAL INVESTMENT PORTFOLIO - 469,616,228 100.5% (Cost $431,617,786) NET OTHER ASSETS - (0.5%) (2,197,848) NET ASSETS - 100% $ 467,418,380 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. (c) Affiliated company OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $339,738,433 and $604,432,370, 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 $59,247 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 Acadiana Bancshares, Inc. $ - $ 570,826 $ 15,743 $ - Citizens First Financial Corp. - 768,875 - - SGV Bancorp., Inc. - 223,250 - 2,514,600 TOTALS $ - $ 1,562,951 $ 15,743 $ 2,514,600
INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $432,934,361. Net unrealized appreciation aggregated $36,681,867, of which $78,779,062 related to appreciated investment securities and $42,097,195 related to depreciated investment securities. HOME FINANCE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 469,616,228 value (cost $431,617,786) - See accompanying schedule Receivable for investments 6,341,705 sold Receivable for fund shares 56,516 sold Dividends receivable 1,338,990 Interest receivable 156,055 Redemption fees receivable 9,148 Other receivables 7,822 TOTAL ASSETS 477,526,464 LIABILITIES Payable for investments $ 3,423,494 purchased Payable for fund shares 6,071,708 redeemed Accrued management fee 246,572 Other payables and accrued 366,310 expenses TOTAL LIABILITIES 10,108,084 NET ASSETS $ 467,418,380 Net Assets consist of: Paid in capital $ 396,055,981 Undistributed net investment 2,142,754 income Accumulated undistributed net 31,221,552 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 37,998,093 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 11,803,496 $ 467,418,380 shares outstanding NET ASSET VALUE and $39.60 redemption price per share ($467,418,380 (divided by) 11,803,496 shares) Maximum offering price per $40.82 share (100/97.00 of $39.60) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 4,923,603 Dividends (including $15,743 received from affiliated issuers) Special dividend from Ocwen 648,866 Asset Investment Corp. Interest 805,601 TOTAL INCOME 6,378,070 EXPENSES Management fee $ 1,821,337 Transfer agent fees 2,124,267 Accounting fees and expenses 222,864 Non-interested trustees' 952 compensation Custodian fees and expenses 13,102 Registration fees 52,003 Audit 23,156 Legal 417 Total expenses before 4,258,098 reductions Expense reductions (26,583) 4,231,515 NET INVESTMENT INCOME 2,146,555 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 34,220,251 (including realized gain of $541,491 on sales of investments in affiliated issuers) Foreign currency transactions (3,137) 34,217,114 Change in net unrealized appreciation (depreciation) on: Investment securities (54,189,018) Assets and liabilities in (1,111) (54,190,129) foreign currencies NET GAIN (LOSS) (19,973,015) NET INCREASE (DECREASE) IN $ (17,826,460) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 268,364 charges paid to FDC Sales charges - Retained by $ 268,077 FDC Deferred sales charges $ 6,308 withheld by FDC Exchange fees withheld by FSC $ 58,416 Expense Reductions Directed $ 25,403 brokerage arrangements Custodian credits 112 Transfer agent credits 1,068 $ 26,583
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ 2,146,555 $ 7,725,515 income Net realized gain (loss) 34,217,114 22,583,634 Change in net unrealized (54,190,129) (316,657,120) appreciation (depreciation) NET INCREASE (DECREASE) IN (17,826,460) (286,347,971) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (1,867,268) (2,223,405) From net investment income From net realized gain (5,600,916) (43,930,438) TOTAL DISTRIBUTIONS (7,468,184) (46,153,843) Share transactions Net 79,457,646 655,146,906 proceeds from sales of shares Reinvestment of distributions 7,089,429 45,331,306 Cost of shares redeemed (334,650,890) (1,297,847,011) NET INCREASE (DECREASE) IN (248,103,815) (597,368,799) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 376,622 1,700,582 TOTAL INCREASE (DECREASE) (273,021,837) (928,170,031) IN NET ASSETS NET ASSETS Beginning of period 740,440,217 1,668,610,248 End of period (including $ 467,418,380 $ 740,440,217 undistributed net investment income of $2,142,754 and $7,800,879, respectively) OTHER INFORMATION Shares Sold 1,806,856 13,208,817 Issued in reinvestment of 168,756 793,059 distributions Redeemed (7,762,299) (27,681,040) Net increase (decrease) (5,786,687) (13,679,164)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F Net asset value, beginning of $ 42.09 $ 53.36 $ 46.00 $ 33.30 $ 23.92 period Income from Investment Operations Net investment income D .15 G .28 .33 .53 .53 Net realized and unrealized (2.19) (10.16) 13.10 14.60 9.72 gain (loss) Total from investment (2.04) (9.88) 13.43 15.13 10.25 operations Less Distributions From net investment income (.12) (.07) (.29) (.32) (.19) From net realized gain (.36) (1.38) (5.84) (2.16) (.73) Total distributions (.48) (1.45) (6.13) (2.48) (.92) Redemption fees added to paid .03 .06 .06 .05 .05 in capital Net asset value, end of period $ 39.60 $ 42.09 $ 53.36 $ 46.00 $ 33.30 TOTAL RETURN B, C (4.84)% (19.12)% 32.39% 47.50% 43.24% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 467,418 $ 740,440 $ 1,668,610 $ 1,176,828 $ 617,035 (000 omitted) Ratio of expenses to average 1.34% A 1.19% 1.21% 1.38% 1.35% net assets Ratio of expenses to average 1.33% A, E 1.18% E 1.19% E 1.34% E 1.32% E net assets after expense reductions Ratio of net investment .68% A .57% .67% 1.41% 1.80% income to average net assets Portfolio turnover rate 114% A 18% 54% 78% 81%
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 25.03 period Income from Investment Operations Net investment income D .20 Net realized and unrealized 2.34 gain (loss) Total from investment 2.54 operations Less Distributions From net investment income (.12) From net realized gain (3.60) Total distributions (3.72) Redemption fees added to paid .07 in capital Net asset value, end of period $ 23.92 TOTAL RETURN B, C 12.43% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 229,924 (000 omitted) Ratio of expenses to average 1.47% net assets Ratio of expenses to average 1.45% E net assets after expense reductions Ratio of net investment .80% income to average net assets Portfolio turnover rate 124% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR THE YEAR ENDED FEBRUARY 29 G NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM OCWEN ASSET INVESTMENT CORP., WHICH AMOUNTED TO $.05 PER SHARE.
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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT INSURANCE -1.49% 19.53% 168.81% 367.86% SELECT INSURANCE (LOAD ADJ.) -4.52% 15.87% 160.67% 353.76% S&P 500 7.32% 39.82% 206.52% 384.79% GS Financial Services -3.19% 20.67% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT INSURANCE 19.53% 21.87% 16.68% SELECT INSURANCE (LOAD ADJ.) 15.87% 21.12% 16.33% S&P 500 39.82% 25.11% 17.10% GS Financial Services 20.67% 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 1989/08/31 9700.00 10000.00 1989/09/30 9833.79 9959.00 1989/10/31 10154.90 9727.95 1989/11/30 10429.17 9926.40 1989/12/31 10172.99 10164.64 1990/01/31 9309.50 9482.59 1990/02/28 9572.60 9604.91 1990/03/31 9525.38 9859.44 1990/04/30 9194.82 9612.96 1990/05/31 10038.07 10550.22 1990/06/30 10065.06 10478.48 1990/07/31 9916.64 10444.95 1990/08/31 8884.50 9500.72 1990/09/30 8115.46 9038.04 1990/10/31 7791.65 8999.18 1990/11/30 8823.79 9580.52 1990/12/31 9174.58 9847.82 1991/01/31 9667.04 10277.18 1991/02/28 10645.21 11012.00 1991/03/31 11346.80 11278.49 1991/04/30 11286.09 11305.56 1991/05/31 11569.42 11793.96 1991/06/30 10850.22 11253.80 1991/07/31 11253.10 11778.23 1991/08/31 11184.81 12057.37 1991/09/30 11294.07 11856.01 1991/10/31 11635.48 12014.88 1991/11/30 11533.06 11530.68 1991/12/31 12539.85 12849.79 1992/01/31 12526.15 12610.79 1992/02/29 12861.91 12774.73 1992/03/31 12676.90 12525.62 1992/04/30 12354.84 12893.87 1992/05/31 12519.30 12957.05 1992/06/30 12781.21 12763.99 1992/07/31 13505.38 13286.04 1992/08/31 13109.70 13013.68 1992/09/30 13804.00 13167.24 1992/10/31 14393.79 13213.32 1992/11/30 14886.52 13663.90 1992/12/31 15361.47 13831.96 1993/01/31 16003.73 13948.15 1993/02/28 16305.98 14137.85 1993/03/31 17167.37 14436.15 1993/04/30 16758.87 14086.80 1993/05/31 16327.21 14464.33 1993/06/30 16501.39 14506.27 1993/07/31 17076.93 14448.25 1993/08/31 17947.82 14995.84 1993/09/30 18008.40 14880.37 1993/10/31 17485.87 15188.39 1993/11/30 16418.09 15044.10 1993/12/31 16617.49 15226.14 1994/01/31 16841.49 15743.82 1994/02/28 16103.12 15317.17 1994/03/31 15348.16 14649.34 1994/04/30 15514.08 14836.85 1994/05/31 16227.57 15080.17 1994/06/30 16136.31 14710.71 1994/07/31 16434.97 15193.22 1994/08/31 16882.97 15816.14 1994/09/30 16766.83 15428.65 1994/10/31 16559.42 15775.79 1994/11/30 15721.49 15201.24 1994/12/31 16559.42 15426.67 1995/01/31 17156.75 15826.69 1995/02/28 17679.42 16443.45 1995/03/31 17961.49 16928.70 1995/04/30 18127.43 17427.25 1995/05/31 18526.39 18123.82 1995/06/30 19108.19 18544.83 1995/07/31 19681.69 19159.78 1995/08/31 20255.18 19207.87 1995/09/30 21260.88 20018.44 1995/10/31 20620.89 19946.98 1995/11/30 21851.00 20822.65 1995/12/31 22323.69 21223.69 1996/01/31 22973.73 21946.15 1996/02/29 22896.75 22149.59 1996/03/31 22640.16 22362.89 1996/04/30 22359.34 22692.52 1996/05/31 22811.22 23277.76 1996/06/30 23219.65 23366.44 1996/07/31 22706.94 22334.12 1996/08/31 23662.84 22805.14 1996/09/30 24818.61 24088.62 1996/10/31 26122.11 24752.98 1996/11/30 27729.75 26624.06 1996/12/31 27615.85 26096.63 1997/01/31 28750.38 27727.15 1997/02/28 29371.67 27944.53 1997/03/31 27786.93 26796.29 1997/04/30 29426.84 28396.03 1997/05/31 31588.77 30124.78 1997/06/30 33901.76 31474.37 1997/07/31 36762.31 33978.79 1997/08/31 34864.71 32075.30 1997/09/30 37092.73 33832.06 1997/10/31 36110.89 32702.07 1997/11/30 36828.39 34215.85 1997/12/31 39344.56 34803.33 1998/01/31 38806.55 35188.26 1998/02/28 41944.95 37726.04 1998/03/31 44276.33 39657.99 1998/04/30 44543.87 40056.94 1998/05/31 44030.64 39368.37 1998/06/30 45976.63 40967.51 1998/07/31 45099.87 40531.21 1998/08/31 37968.14 34671.20 1998/09/30 40416.67 36892.24 1998/10/31 42116.73 39893.06 1998/11/30 44832.56 42310.97 1998/12/31 47338.57 44748.93 1999/01/31 46201.57 46620.33 1999/02/28 46070.38 45171.37 1999/03/31 47797.74 46978.68 1999/04/30 50288.80 48798.16 1999/05/31 49787.47 47646.04 1999/06/30 49966.52 50290.39 1999/07/31 48283.46 48720.33 1999/08/31 45376.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 141053 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Insurance Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $45,376 - a 353.76% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS American International Group, 6.6 Inc. CIGNA Corp. 5.9 Berkshire Hathaway, Inc. 5.8 Class A Equitable Companies (The), Inc. 5.5 American General Corp. 4.9 AFLAC, Inc. 4.6 MBIA, Inc. 4.6 Allmerica Financial Corp. 4.6 Hartford Financial Services 4.1 Group, Inc. Marsh & McLennan Companies, 3.2 Inc. TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Insurance 82.5% Credit & Other Finance 8.1% Medical Facilities Management 1.9% Services 1.2% All Others 6.3%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 6.3 Row: 1, Col: 2, Value: 1.2 Row: 1, Col: 3, Value: 1.9 Row: 1, Col: 4, Value: 8.1 Row: 1, Col: 5, Value: 82.5 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. INSURANCE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Timothy Cohen) Timothy Cohen, Portfolio Manager of Fidelity Select Insurance Portfolio Q. HOW DID THE FUND PERFORM, TIM? A. It was in line with the industry as a whole. For the period that ended August 31, 1999, the fund had total returns of -1.49% for the preceding six months and 19.53% for the preceding 12 months. This compares with returns of -3.19% and 20.67% for the six-month and 12-month periods, respectively, 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. The fund underperformed the broader market as measured by the Standard and Poor's 500 Index, which had returns of 7.32% and 39.82% over the same six- and 12-month periods, respectively. Q. WHAT WERE THE MAJOR FACTORS AFFECTING THIS PERFORMANCE? A. The overall investment backdrop for financial services was one of rising interest rates, inflation worries and signs of a broad cyclical recovery. These factors are not the best environment for the financial sector as a whole, which helps to explain its relatively lackluster performance versus the broader market. Specifically within the insurance segment, the environment was one of continued price competition and generally disappointing earnings from the property-casualty companies. Q. DID YOUR INVESTMENT STRATEGY CHANGE DURING THE PERIOD BASED ON THIS ENVIRONMENT? A. The way I positioned the fund didn't really change. I continued to favor the health, life and specialty insurers over the less-specialized, commodity-like players in the property-casualty business. I moved the fund further away from the auto insurance segment, where increased competition and inflation were leading to declining margins. I continued to find opportunities in certain niche segments of the property-casualty business, with particular emphasis on such areas as bond insurance and specialty brokerage. I also found strong growth in life and health insurance companies, based largely on the growing demand for retirement and health care-related products from an aging population. Q. WHICH OF THE FUND'S HOLDINGS DID WELL? A. Looking first at the life and health segment, where the fund was overweighted, there were a number of quality names that helped performance. CIGNA and AFLAC were top performers in this segment. So too was American International Group (AIG), which expanded its presence in life insurance with its recent acquisition of Sun America and benefited from strong worldwide growth in life insurance. In the brokerage area, E.W. Blanch, a broker specializing in re-insurance, was a strong contributor to fund performance. Q. WHICH STOCKS WERE DISAPPOINTMENTS? A. Despite what I think is a fundamentally sound story based on their business prospects, some of the bond insurers didn't do as well as I would have liked. Municipal bond issuance is highly cyclical with interest rates, so as rates rose in the period, bond issuance in the U.S. declined, and this hurt the performance of such companies as MBIA and Ambac Financial. Another disappointment came in the wake of the merger of UNUM Corp. and Provident Companies, when a reserve deficiency was discovered in the group disability business. Unfortunately, a common risk among insurers is that loss reserves for certain business lines sometimes prove insufficient due to poor estimates or rising inflation. Fortunately, the fund avoided exposure to various property-casualty stocks that were also affected by reserve deficiency problems. Q. WHAT IS YOUR OUTLOOK, TIM? A. I continue to be somewhat cautious in my outlook for the insurance sector. Uncertainty around the interest-rate environment is a big factor in that view. If rates continue to rise, that trend will likely continue to have a negative effect on the performance of the financial services industry as a whole. Looking ahead, I'll continue to position the fund in the best-quality companies in each of the insurance segments. That means I'll likely continue to favor the life, health and bond insurers over companies in the property-casualty business, where I see a persistent environment of overcapacity and price competition, as well as some potential exposure to Y2K liabilities. 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 3. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 045 TRADING SYMBOL: FSPCX SIZE: as of August 31, 1999, more than $60 million MANAGER: Timothy Cohen, since February 1999; equity analyst, business and consumer services, 1996-1998; joined Fidelity in 1996. INSURANCE PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 93.7% SHARES VALUE (NOTE 1) CREDIT & OTHER FINANCE - 8.1% Citigroup, Inc. 35,748 $ 1,588,552 Equitable Companies (The), 53,400 3,297,450 Inc. 4,886,002 INSURANCE - 82.5% Aetna, Inc. 10,000 777,500 AFLAC, Inc. 62,300 2,799,606 Allmerica Financial Corp. 48,573 2,744,375 Ambac Financial Group, Inc. 30,800 1,626,625 American General Corp. 41,500 2,946,500 American International Group, 42,637 3,951,913 Inc. Berkshire Hathaway, Inc. 54 3,466,800 Class A (a) Blanch E.W. Holdings, Inc. 27,800 1,841,750 CIGNA Corp. 39,400 3,538,613 Financial Security Assurance 4,300 215,269 Holdings Ltd. Hartford Financial Services 54,500 2,476,344 Group, Inc. Hartford Life, Inc. Class A 37,700 1,637,594 Horace Mann Educators Corp. 35,400 1,066,425 Jefferson-Pilot Corp. 18,900 1,261,575 Lincoln National Corp. 16,500 773,438 Marsh & McLennan Companies, 26,200 1,907,688 Inc. MBIA, Inc. 53,200 2,759,750 MGIC Investment Corp. 26,800 1,164,125 Mutual Risk Management Ltd. 62,000 1,705,000 Nationwide Financial 41,700 1,522,050 Services, Inc. Class A Philadelphia Consolidated 46,800 865,800 Holding Corp. (a) PMI Group, Inc. 18,950 805,375 Protective Life Corp. 39,000 1,160,250 Reliastar Financial Corp. 21,876 985,787 RenaissanceRe Holdings Ltd. 21,600 780,300 Terra Nova (Bermuda) Holdings 15,100 483,200 Ltd. Class A Torchmark Corp. 39,200 1,117,200 UICI (a) 34,200 899,888 UnumProvident Corp. 39,435 1,422,125 Xl Capital Ltd. 18,900 950,906 49,653,771 MEDICAL FACILITIES MANAGEMENT - - 1.9% Wellpoint Health Networks, 15,300 1,114,988 Inc. (a) SERVICES - 1.2% InsWeb Corp. 22,800 729,600 TOTAL COMMON STOCKS 56,384,361 (Cost $51,670,109) CASH EQUIVALENTS - 8.6% SHARES VALUE (NOTE 1) Central Cash Collateral Fund, 1,351,400 $ 1,351,400 5.26% (b) Taxable Central Cash Fund, 3,836,409 3,836,409 5.20% (b) TOTAL CASH EQUIVALENTS 5,187,809 (Cost $5,187,809) TOTAL INVESTMENT PORTFOLIO - 61,572,170 102.3% (Cost $56,857,918) NET OTHER ASSETS - (2.3%) (1,388,490) NET ASSETS - 100% $ 60,183,680 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $41,944,624 and $65,118,640, 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 $4,468 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $1,281,500. The fund received cash collateral of $1,351,400 which was invested in the Central Cash Collateral Fund. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $56,899,312. Net unrealized appreciation aggregated $4,672,858, of which $7,509,282 related to appreciated investment securities and $2,836,424 related to depreciated investment securities. INSURANCE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 61,572,170 value (cost $56,857,918) - See accompanying schedule Receivable for fund shares 348,418 sold Dividends receivable 72,283 Interest receivable 5,914 Redemption fees receivable 121 Other receivables 118 TOTAL ASSETS 61,999,024 LIABILITIES Payable for fund shares $ 387,035 redeemed Accrued management fee 30,954 Other payables and accrued 45,955 expenses Collateral on securities 1,351,400 loaned, at value TOTAL LIABILITIES 1,815,344 NET ASSETS $ 60,183,680 Net Assets consist of: Paid in capital $ 44,729,674 Accumulated net investment (65,497) loss Accumulated undistributed net 10,805,251 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 4,714,252 (depreciation) on investments NET ASSETS, for 1,582,974 $ 60,183,680 shares outstanding NET ASSET VALUE and $38.02 redemption price per share ($60,183,680 (divided by) 1,582,974 shares) Maximum offering price per $39.20 share (100/97.00 of $38.02) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 359,309 Dividends Interest 76,346 Security lending 35 TOTAL INCOME 435,690 EXPENSES Management fee $ 224,536 Transfer agent fees 231,492 Accounting and security 30,999 lending fees Non-interested trustees' 116 compensation Custodian fees and expenses 5,978 Registration fees 20,984 Audit 4,917 Legal 46 Total expenses before 519,068 reductions Expense reductions (17,881) 501,187 NET INVESTMENT INCOME (LOSS) (65,497) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 11,004,806 Foreign currency transactions 25 11,004,831 Change in net unrealized (10,591,798) appreciation (depreciation) on investment securities NET GAIN (LOSS) 413,033 NET INCREASE (DECREASE) IN $ 347,536 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 55,391 charges paid to FDC Sales charges - Retained by $ 54,277 FDC Deferred sales charges $ 194 withheld by FDC Exchange fees withheld by FSC $ 5,018 Expense reductions Directed $ 17,881 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (65,497) $ (106,344) income (loss) Net realized gain (loss) 11,004,831 13,198,732 Change in net unrealized (10,591,798) (4,563,684) appreciation (depreciation) NET INCREASE (DECREASE) IN 347,536 8,528,704 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (6,906,129) (11,641,173) from net realized gains Share transactions Net 14,215,742 64,911,861 proceeds from sales of shares Reinvestment of distributions 6,603,662 11,462,296 Cost of shares redeemed (36,991,670) (115,658,850) NET INCREASE (DECREASE) IN (16,172,266) (39,284,693) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 35,059 126,042 TOTAL INCREASE (DECREASE) (22,695,800) (42,271,120) IN NET ASSETS NET ASSETS Beginning of period 82,879,480 125,150,600 End of period (including $ 60,183,680 $ 82,879,480 accumulated net investment loss of $65,497 and $0, respectively) OTHER INFORMATION Shares Sold 335,895 1,540,455 Issued in reinvestment of 166,129 274,802 distributions Redeemed (885,988) (2,821,222) Net increase (decrease) (383,964) (1,005,965)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F 1995 Net asset value, beginning of $ 42.14 $ 42.10 $ 32.62 $ 26.77 $ 21.31 $ 19.41 period Income from Investment Operations Net investment income (loss) D (.04) (.04) .01 .01 .06 .05 Net realized and unrealized (.45) G 4.01 12.93 7.21 6.15 1.78 gain (loss) Total from investment (.49) 3.97 12.94 7.22 6.21 1.83 operations Less Distributions From net investment income - - - (.03) (.07) - From net realized gain (3.65) (3.98) (3.54) (1.45) (.72) - Total distributions (3.65) (3.98) (3.54) (1.48) (.79) - Redemption fees added to paid .02 .05 .08 .11 .04 .07 in capital Net asset value, end of period $ 38.02 $ 42.14 $ 42.10 $ 32.62 $ 26.77 $ 21.31 TOTAL RETURN B, C (1.49)% 9.84% 42.81% 28.28% 29.51% 9.79% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 60,184 $ 82,879 $ 125,151 $ 42,367 $ 38,994 $ 21,838 (000 omitted) Ratio of expenses to average 1.32% A 1.33% 1.45% 1.82% 1.77% 2.36% net assets Ratio of expenses to average 1.28% A, E 1.31% E 1.43% E 1.77% E 1.74% E 2.34% E net assets after expense reductions Ratio of net investment (.17)% A (.10)% .02% .05% .26% .25% income (loss) to average net assets Portfolio turnover rate 115% A 72% 157% 142% 164% 265% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR THE YEAR ENDED FEBRUARY 29 G 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.
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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT BIOTECHNOLOGY 32.19% 102.37% 200.27% 626.76% SELECT BIOTECHNOLOGY (LOAD 28.15% 96.23% 191.18% 604.88% ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Health Care -0.56% 27.04% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT BIOTECHNOLOGY 102.37% 24.60% 21.94% SELECT BIOTECHNOLOGY (LOAD 96.23% 23.83% 21.57% ADJ.) S&P 500 39.82% 25.11% 17.10% GS Health Care 27.04% 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 1989/08/31 9700.00 10000.00 1989/09/30 10109.46 9959.00 1989/10/31 10144.76 9727.95 1989/11/30 10462.45 9926.40 1989/12/31 10262.78 10164.64 1990/01/31 9494.87 9482.59 1990/02/28 10391.97 9604.91 1990/03/31 10829.75 9859.44 1990/04/30 10966.11 9612.96 1990/05/31 12509.11 10550.22 1990/06/30 13382.66 10478.48 1990/07/31 13418.95 10444.95 1990/08/31 13005.28 9500.72 1990/09/30 12714.98 9038.04 1990/10/31 12823.84 8999.18 1990/11/30 14376.93 9580.52 1990/12/31 14814.09 9847.82 1991/01/31 16515.41 10277.18 1991/02/28 18855.65 11012.00 1991/03/31 20802.14 11278.49 1991/04/30 19895.76 11305.56 1991/05/31 21158.74 11793.96 1991/06/30 20035.35 11253.80 1991/07/31 21839.00 11778.23 1991/08/31 23369.37 12057.37 1991/09/30 24579.61 11856.01 1991/10/31 27000.09 12014.88 1991/11/30 25196.44 11530.68 1991/12/31 29486.73 12849.79 1992/01/31 28895.70 12610.79 1992/02/29 26677.32 12774.73 1992/03/31 24653.24 12525.62 1992/04/30 22353.89 12893.87 1992/05/31 23956.96 12957.05 1992/06/30 23536.47 12763.99 1992/07/31 24766.85 13286.04 1992/08/31 23217.81 13013.68 1992/09/30 23138.15 13167.24 1992/10/31 24271.16 13213.32 1992/11/30 26661.09 13663.90 1992/12/31 26436.85 13831.96 1993/01/31 25078.26 13948.15 1993/02/28 21030.37 14137.85 1993/03/31 21346.76 14436.15 1993/04/30 21895.78 14086.80 1993/05/31 23310.22 14464.33 1993/06/30 23449.80 14506.27 1993/07/31 22677.44 14448.25 1993/08/31 23533.55 14995.84 1993/09/30 24501.32 14880.37 1993/10/31 26325.19 15188.39 1993/11/30 26120.47 15044.10 1993/12/31 26622.96 15226.14 1994/01/31 27534.90 15743.82 1994/02/28 25692.42 15317.17 1994/03/31 23096.19 14649.34 1994/04/30 22677.44 14836.85 1994/05/31 22295.92 15080.17 1994/06/30 21411.90 14710.71 1994/07/31 21467.73 15193.22 1994/08/31 23477.71 15816.14 1994/09/30 23403.27 15428.65 1994/10/31 22603.00 15775.79 1994/11/30 22184.25 15201.24 1994/12/31 21784.12 15426.67 1995/01/31 22761.19 15826.69 1995/02/28 23542.85 16443.45 1995/03/31 23924.38 16928.70 1995/04/30 24668.81 17427.25 1995/05/31 24892.15 18123.82 1995/06/30 25794.78 18544.83 1995/07/31 26948.66 19159.78 1995/08/31 28028.09 19207.87 1995/09/30 29284.33 20018.44 1995/10/31 29051.69 19946.98 1995/11/30 30019.46 20822.65 1995/12/31 32480.16 21223.69 1996/01/31 34401.18 21946.15 1996/02/29 34130.75 22149.59 1996/03/31 33589.88 22362.89 1996/04/30 34315.11 22692.52 1996/05/31 34715.57 23277.76 1996/06/30 32617.95 23366.44 1996/07/31 30224.76 22334.12 1996/08/31 31616.81 22805.14 1996/09/30 33466.53 24088.62 1996/10/31 32303.31 24752.98 1996/11/30 32494.00 26624.06 1996/12/31 34301.82 26096.63 1997/01/31 35873.95 27727.15 1997/02/28 36127.17 27944.53 1997/03/31 32402.61 26796.29 1997/04/30 30981.46 28396.03 1997/05/31 34920.05 30124.78 1997/06/30 35834.75 31474.37 1997/07/31 36049.98 33978.79 1997/08/31 36297.48 32075.30 1997/09/30 41075.45 33832.06 1997/10/31 39579.65 32702.07 1997/11/30 38880.17 34215.85 1997/12/31 39540.88 34803.33 1998/01/31 39868.97 35188.26 1998/02/28 41946.87 37726.04 1998/03/31 43660.23 39657.99 1998/04/30 41927.80 40056.94 1998/05/31 40496.24 39368.37 1998/06/30 40534.93 40967.51 1998/07/31 41192.67 40531.21 1998/08/31 34834.51 34671.20 1998/09/30 40663.90 36892.24 1998/10/31 43398.04 39893.06 1998/11/30 45139.12 42310.97 1998/12/31 51290.94 44748.93 1999/01/31 54283.02 46620.33 1999/02/28 53328.65 45171.37 1999/03/31 55946.72 46978.68 1999/04/30 51471.69 48798.16 1999/05/31 53489.17 47646.04 1999/06/30 57860.38 50290.39 1999/07/31 63266.20 48720.33 1999/08/31 70488.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990909 153942 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Biotechnology Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $70,488 - a 604.88% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Amgen, Inc. 7.8 Medimmune, Inc. 7.1 Chiron Corp. 5.7 Biogen, Inc. 5.3 Immunex Corp. 5.1 IDEC Pharmaceuticals Corp. 5.0 Schering-Plough Corp. 4.8 Merck & Co., Inc. 4.8 Genzyme Corp. (General 4.7 Division) Gilead Sciences, Inc. 3.8 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Drugs & Pharmaceuticals 89.2% Computer Services & Software 2.6% Electronic Instruments 1.3% Medical Facilities Management 0.1% Medical Equipment & Supplies 0.1% All Others 6.7%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 6.7 Row: 1, Col: 2, Value: 0.1 Row: 1, Col: 3, Value: 0.1 Row: 1, Col: 4, Value: 1.3 Row: 1, Col: 5, Value: 2.6 Row: 1, Col: 6, Value: 89.2 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S 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 six- and 12-month periods that ended August 31, 1999, the fund posted a total return of 32.19% and 102.37%, respectively. During the same periods, the Goldman Sachs Health Care Index - an index of 93 stocks designed to measure the performance of companies in the health care sector - returned -0.56% and 27.04%, respectively. The fund also compares its performance to the Standard & Poor's 500 Index, which returned 7.32% and 39.82% during the same periods. Q. WHAT WERE THE PRIMARY FACTORS CONTRIBUTING TO THE FUND'S STRONG PERFORMANCE? A. Biotechnology companies have begun to reap the rewards of their drug research and development. Five years ago, investors bought biotechnology stocks on the hopes and expectations of breakthrough drugs; now, many of these companies are rolling out new drugs, or they are much closer to releasing new products to the market. Beyond the overall strength of the sector, the fund benefited from its focus on companies with strong business fundamentals, including promising new product launches, strong existing product pipelines and accelerating earnings outlooks. Q. GENOMICS IS CONSIDERED CENTRAL TO THE SUCCESS OF BIOTECHNOLOGY COMPANIES. CAN YOU TELL US MORE ABOUT THIS NEW FIELD OF RESEARCH? A. Essentially, genomics is the decoding of the human genome, or genetic code, so that researchers can pinpoint the genetic differences of specific diseases and develop targeted treatments. While it's still too early to tell how great an impact genomics will have on the industry, biotechnology and pharmaceutical companies do not want to be caught behind in this new process of drug development. Genomics can be crucial to a company's success because it has the potential to help produce new drugs that can be very effective and profitable. Also, by targeting specific diseases and treatments more quickly, it may reduce the time spent in development, which saves money. Q. IT SEEMS TRADITIONAL PHARMACEUTICAL COMPANIES AND BIOTECHNOLOGY COMPANIES ARE BECOMING MORE AND MORE ALIKE. DOES THIS TREND HAVE ANY EFFECT ON THE FUND'S STRATEGY? A. After launching multiple product lines, mature biotechnology companies, such as Amgen, are beginning to look more like large pharmaceutical companies. At the same time, many large pharmaceutical companies have made significant investments in biotechnology. While the distinction between certain biotechnology and pharmaceutical companies is blurring, I've recently reduced the fund's exposure to traditional pharmaceutical stocks, but not because they look more like biotechnology stocks. On the contrary, I see more growth potential in certain biotechnology companies. Q. WHICH STOCKS TURNED IN STRONG PERFORMANCE FOR THE FUND? A. Medimmune was one of the fund's top performers after its shares rallied in response to strong sales of its blockbuster drug, Synagis, which is used in the prevention of respiratory disease. Immunex moved into the fund's top-10 holdings during the period, and provided strong performance due to the promising outlook for its lead drug, Enbrel, a treatment for rheumatoid arthritis. IDEC Pharmaceuticals, a leader in the development of targeted immunotherapies for cancer, also provided a boost to the fund's total return. It has a new drug called Rituxan, which exhibited robust sales results. Q. WHICH HOLDINGS WERE DISAPPOINTMENTS DURING THE PERIOD? A. Sepracor, Merck and Eli Lilly hurt fund performance. In general, each of these companies have solid business fundamentals. However, shares of Sepracor were hurt after the company's new product launch of Xopenex, an asthma drug, was a disappointment. Merck and Eli Lilly declined along with most of the pharmaceutical sector during the period, as investors became increasingly concerned about pending health care legislation and the potential loss of patent protection. Q. WHAT'S YOUR OUTLOOK, RAJIV? A. I'm optimistic about the short- and long-term growth prospects for biotechnology stocks. The sector is generally characterized by strong new product cycles, the benefits of consolidation and positive earnings and revenue growth estimates. In addition, health care legislation is not as much of a factor for biotechnology firms as for pharmaceutical companies. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 042 TRADING SYMBOL: FBIOX SIZE: as of August 31, 1999, more than $1.1 billion MANAGER: Rajiv Kaul, since 1998; equity research associate, health care industry, 1996-1998; joined Fidelity in 1996 BIOTECHNOLOGY PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 93.3% SHARES VALUE (NOTE 1) COMPUTER SERVICES & SOFTWARE - - 2.6% Affymetrix, Inc. (a) 356,350 $ 30,512,469 DRUGS & PHARMACEUTICALS - 89.2% Alkermes, Inc. (a) 323,200 11,998,800 Allergan, Inc. 164,900 16,469,388 Alliance Pharmaceutical Corp. 737,500 2,304,688 (a) Alpharma, Inc. Class A 90,000 3,048,750 ALZA Corp. Class A. (a) 475,600 23,958,350 Amgen, Inc. (a) 1,086,700 90,399,850 Anesta Corp. (a) 125,000 1,437,500 Aviron (a) 317,600 8,912,650 AXYS Pharmaceuticals, Inc. (a) 335,600 1,405,325 Biochem Pharma, Inc. (a) 971,300 25,120,389 BioCryst Pharmaceuticals, 120,000 3,300,000 Inc. (a) Biogen, Inc. (a) 800,200 61,415,350 BioMarin Pharmaceutical, Inc. 90,600 1,404,300 (a) Cell Genesys, Inc. (a) 100,000 887,500 Cellegy Pharmaceuticals, Inc. 353,600 2,850,900 (a) Centocor, Inc. (a) 651,900 39,032,513 Cephalon, Inc. (a) 594,400 11,256,450 Chiron Corp. (a) 2,055,200 66,023,300 COR Therapeutics, Inc. (a) 375,000 8,179,688 CV Therapeutics, Inc. (a)(c) 733,400 11,642,725 Elan Corp. PLC sponsored ADR 125,000 4,007,813 (a) Enzo Biochem, Inc. (a) 160,000 3,690,000 Forest Laboratories, Inc. (a) 362,600 17,586,100 GelTex Pharmaceuticals, Inc. 195,000 2,632,500 (a) Genentech, Inc. 167,300 27,479,025 Genzyme Corp. (General 976,100 55,088,644 Division) Gilead Sciences, Inc. (a) 565,645 44,084,957 Guilford Pharmaceuticals, 35,000 472,500 Inc. (a) Human Genome Sciences, Inc. 277,500 18,887,344 (a) ICOS Corp. (a) 615,000 19,564,688 IDEC Pharmaceuticals Corp. (a) 454,240 57,716,870 Ilex Oncology, Inc. (a) 135,000 2,362,500 Imclone Systems, Inc. (a) 300,000 8,700,000 Immunex Corp. (a) 881,600 59,342,700 Inhale Therapeutic Systems, 181,000 5,961,688 Inc. (a) LeukoSite, Inc. (a) 305,000 7,891,875 Ligand Pharmaceuticals, Inc. 335,000 2,261,250 Class B (a) Lilly (Eli) & Co. 60,000 4,477,500 Liposome, Inc. (a) 200,000 3,943,750 Medco Research, Inc. (a) 61,920 1,416,420 Medimmune, Inc. (a) 798,300 82,374,581 Merck & Co., Inc. 837,600 56,276,250 Millennium Pharmaceuticals, 532,400 31,378,325 Inc. (a) NPS Pharmaceuticals, Inc. (a) 345,000 2,328,750 QLT PhotoTherapeutics, Inc. 128,900 10,536,549 (a) Sangstat Medical Corp. (a) 214,500 4,424,063 Schein Pharmaceutical, Inc. 213,000 2,955,375 (a) Schering-Plough Corp. 1,075,600 56,536,225 Sepracor, Inc. (a) 448,800 33,603,900 Serologicals Corp. (a) 135,000 860,625 SHARES VALUE (NOTE 1) Transkaryotic Therapies, Inc. 30,000 $ 1,181,250 (a) U.S. Bioscience, Inc. (a) 319,600 3,695,375 Vertex Pharmaceuticals, Inc. 285,000 7,908,750 (a) ViroPharma, Inc. (a) 218,100 3,789,488 Watson Pharmaceuticals, Inc. 80,000 2,870,000 (a) XOMA Ltd. (a) 120,000 547,500 1,039,883,546 ELECTRONIC INSTRUMENTS - 1.3% PE Corp. (Biosystems Group) 224,540 15,451,159 MEDICAL EQUIPMENT & SUPPLIES - - 0.1% Allscripts, Inc. 1,300 16,819 Cygnus, Inc. (a) 64,800 757,350 774,169 MEDICAL FACILITIES MANAGEMENT - - 0.1% Cryolife, Inc. (a) 110,000 1,560,625 TOTAL COMMON STOCKS 1,088,181,968 (Cost $703,685,318) CASH EQUIVALENTS - 8.2% Central Cash Collateral Fund, 26,280,800 26,280,800 5.26% (b) Taxable Central Cash Fund, 68,967,353 68,967,353 5.20% (b) TOTAL CASH EQUIVALENTS 95,248,153 (Cost $95,248,153) TOTAL INVESTMENT PORTFOLIO - 1,183,430,121 101.5% (Cost $798,933,471) NET OTHER ASSETS - (1.5%) (17,403,753) NET ASSETS - 100% $ 1,166,026,368 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. (c) Affiliated company OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $483,399,071 and $348,157,007, 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 $3,063 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $25,556,806. The fund received cash collateral of $26,280,800 which was invested in the Central Cash Collateral Fund. Transactions during the period with companies which are or were affiliates are as follows:
PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME CV Therapeutics, Inc. $ 1,112,287 $ 2,193,750 $ - $ 11,642,725 Cellegy Pharmaceuticals, Inc. - 608,231 - - TOTALS $ 1,112,287 $ 2,801,981 $ - $ 11,642,725
INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $801,027,948. Net unrealized appreciation aggregated $382,402,173, of which $403,662,410 related to appreciated investment securities and $21,260,237 related to depreciated investment securities. BIOTECHNOLOGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 1,183,430,121 value (cost $798,933,471) - See accompanying schedule Receivable for investments 6,699,597 sold Receivable for fund shares 12,781,739 sold Dividends receivable 79,058 Interest receivable 275,033 Redemption fees receivable 12,655 Other receivables 41,255 TOTAL ASSETS 1,203,319,458 LIABILITIES Payable for investments $ 6,505,317 purchased Payable for fund shares 3,518,545 redeemed Accrued management fee 503,481 Other payables and accrued 484,947 expenses Collateral on securities 26,280,800 loaned, at value TOTAL LIABILITIES 37,293,090 NET ASSETS $ 1,166,026,368 Net Assets consist of: Paid in capital $ 736,720,460 Accumulated net investment (2,708,813) loss Accumulated undistributed net 47,517,178 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 384,497,543 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 21,390,167 $ 1,166,026,368 shares outstanding NET ASSET VALUE and $54.51 redemption price per share ($1,166,026,368 (divided by) 21,390,167 shares) Maximum offering price per $56.20 share (100/97.00 of $54.51) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 693,795 Dividends Interest 1,390,509 Security lending 109,092 TOTAL INCOME 2,193,396 EXPENSES Management fee $ 2,410,374 Transfer agent fees 2,158,288 Accounting and security 284,663 lending fees Non-interested trustees' 679 compensation Custodian fees and expenses 20,590 Registration fees 47,902 Audit 13,224 Legal 572 Total expenses before 4,936,292 reductions Expense reductions (34,083) 4,902,209 NET INVESTMENT INCOME (LOSS) (2,708,813) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 48,534,932 (including realized loss of $1,532,357 on sales of investments in affiliated issuers) Foreign currency transactions 29,528 48,564,460 Change in net unrealized appreciation (depreciation) on: Investment securities 199,057,428 Assets and liabilities in 248 199,057,676 foreign currencies NET GAIN (LOSS) 247,622,136 NET INCREASE (DECREASE) IN $ 244,913,323 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 1,648,580 charges paid to FDC Sales charges - Retained by $ 1,646,497 FDC Deferred sales charges $ 7,587 withheld by FDC Exchange fees withheld by FSC $ 12,675 Expense reductions Directed $ 31,299 brokerage arrangements Custodian credits 1,815 Transfer agent credits 969 $ 34,083
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (2,708,813) $ (4,327,543) income (loss) Net realized gain (loss) 48,564,460 2,585,385 Change in net unrealized 199,057,676 152,855,134 appreciation (depreciation) NET INCREASE (DECREASE) IN 244,913,323 151,112,976 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (2,262,626) (33,971,527) from net realized gains Share transactions Net 399,730,582 320,529,357 proceeds from sales of shares Reinvestment of distributions 2,159,395 33,062,818 Cost of shares redeemed (220,487,785) (309,253,094) NET INCREASE (DECREASE) IN 181,402,192 44,339,081 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 443,956 507,092 TOTAL INCREASE (DECREASE) 424,496,845 161,987,622 IN NET ASSETS NET ASSETS Beginning of period 741,529,523 579,541,901 End of period (including $ 1,166,026,368 $ 741,529,523 accumulated net investment loss of $2,708,813 and $0, respectively) OTHER INFORMATION Shares Sold 8,440,275 9,105,791 Issued in reinvestment of 49,802 970,436 distributions Redeemed (5,033,864) (8,928,498) Net increase (decrease) 3,456,213 1,147,729
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 G Net asset value, beginning of $ 41.35 $ 34.52 $ 34.24 $ 36.60 $ 25.30 period Income from Investment Operations Net investment income (loss) D (.15) (.26) (.27) (.20) .11 Net realized and unrealized 13.41 9.15 5.20 1.89 11.21 gain (loss) Total from investment 13.26 8.89 4.93 1.69 11.32 operations Less Distributions From net investment income - - - (.03) (.07) From net realized gain (.12) (2.09) (4.71) (4.06) - Total distributions (.12) (2.09) (4.71) (4.09) (.07) Redemption fees added to paid .02 .03 .06 .04 .05 in capital Net asset value, end of period $ 54.51 $ 41.35 $ 34.52 $ 34.24 $ 36.60 TOTAL RETURN B, C 32.19% 27.13% 16.11% 5.85% 44.97% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 1,166,026 $ 741,530 $ 579,542 $ 674,902 $ 1,096,864 (000 omitted) Ratio of expenses to average 1.17% A 1.34% 1.49% 1.57% 1.44% E net assets Ratio of expenses to average 1.16% A, F 1.30% F 1.47% F 1.56% F 1.43% F net assets after expense reductions Ratio of net investment (.64)% A (.75)% (.81)% (.59)% .35% income (loss) to average net assets Portfolio turnover rate 88% A 86% 162% 41% 67%
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 27.61 period Income from Investment Operations Net investment income (loss) D (.06) Net realized and unrealized (2.26) gain (loss) Total from investment (2.32) operations Less Distributions From net investment income - From net realized gain - Total distributions - Redemption fees added to paid .01 in capital Net asset value, end of period $ 25.30 TOTAL RETURN B, C (8.37)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 448,197 (000 omitted) Ratio of expenses to average 1.59% net assets Ratio of expenses to average 1.59% net assets after expense reductions Ratio of net investment (.27)% income (loss) to average net assets Portfolio turnover rate 77% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. G 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT HEALTH CARE -2.02% 24.77% 221.87% 660.03% SELECT HEALTH CARE (LOAD ADJ.) -5.03% 20.96% 212.14% 637.16% S&P 500 7.32% 39.82% 206.52% 384.79% GS Health Care -0.56% 27.04% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT HEALTH CARE 24.77% 26.34% 22.49% SELECT HEALTH CARE (LOAD ADJ.) 20.96% 25.57% 22.11% S&P 500 39.82% 25.11% 17.10% GS Health Care 27.04% 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 1989/08/31 9700.00 10000.00 1989/09/30 9770.01 9959.00 1989/10/31 9697.88 9727.95 1989/11/30 10115.84 9926.40 1989/12/31 10218.58 10164.64 1990/01/31 9632.27 9482.59 1990/02/28 9531.33 9604.91 1990/03/31 9911.47 9859.44 1990/04/30 9911.47 9612.96 1990/05/31 11275.24 10550.22 1990/06/30 11659.41 10478.48 1990/07/31 11820.38 10444.95 1990/08/31 11290.51 9500.72 1990/09/30 10950.68 9038.04 1990/10/31 11201.08 8999.18 1990/11/30 12392.73 9580.52 1990/12/31 12703.37 9847.82 1991/01/31 13957.41 10277.18 1991/02/28 15681.40 11012.00 1991/03/31 17079.30 11278.49 1991/04/30 16781.98 11305.56 1991/05/31 17693.13 11793.96 1991/06/30 16895.30 11253.80 1991/07/31 18390.28 11778.23 1991/08/31 19309.29 12057.37 1991/09/30 19698.39 11856.01 1991/10/31 20996.26 12014.88 1991/11/30 19849.42 11530.68 1991/12/31 23335.15 12849.79 1992/01/31 22569.53 12610.79 1992/02/29 21584.00 12774.73 1992/03/31 20267.24 12525.62 1992/04/30 19118.81 12893.87 1992/05/31 19512.48 12957.05 1992/06/30 18760.39 12763.99 1992/07/31 19888.94 13286.04 1992/08/31 19352.51 13013.68 1992/09/30 18012.90 13167.24 1992/10/31 18566.92 13213.32 1992/11/30 19584.09 13663.90 1992/12/31 19266.85 13831.96 1993/01/31 18232.09 13948.15 1993/02/28 16286.51 14137.85 1993/03/31 16735.73 14436.15 1993/04/30 16729.53 14086.80 1993/05/31 17398.71 14464.33 1993/06/30 17336.75 14506.27 1993/07/31 16772.91 14448.25 1993/08/31 17370.83 14995.84 1993/09/30 17912.99 14880.37 1993/10/31 19245.16 15188.39 1993/11/30 19180.10 15044.10 1993/12/31 19732.46 15226.14 1994/01/31 20123.26 15743.82 1994/02/28 19636.31 15317.17 1994/03/31 18355.34 14649.34 1994/04/30 19091.71 14836.85 1994/05/31 20169.97 15080.17 1994/06/30 19849.91 14710.71 1994/07/31 20247.66 15193.22 1994/08/31 22904.46 15816.14 1994/09/30 23069.15 15428.65 1994/10/31 23389.21 15775.79 1994/11/30 23895.72 15201.24 1994/12/31 23966.77 15426.67 1995/01/31 25236.20 15826.69 1995/02/28 25771.05 16443.45 1995/03/31 26471.77 16928.70 1995/04/30 26840.75 17427.25 1995/05/31 27099.36 18123.82 1995/06/30 28470.66 18544.83 1995/07/31 30100.57 19159.78 1995/08/31 30355.77 19207.87 1995/09/30 32057.14 20018.44 1995/10/31 32135.40 19946.98 1995/11/30 33489.69 20822.65 1995/12/31 34959.10 21223.69 1996/01/31 36209.56 21946.15 1996/02/29 35998.17 22149.59 1996/03/31 36123.57 22362.89 1996/04/30 35972.34 22692.52 1996/05/31 36624.90 23277.76 1996/06/30 36650.86 23366.44 1996/07/31 35219.67 22334.12 1996/08/31 36413.56 22805.14 1996/09/30 38919.98 24088.62 1996/10/31 38156.19 24752.98 1996/11/30 40206.56 26624.06 1996/12/31 40363.51 26096.63 1997/01/31 42800.55 27727.15 1997/02/28 43346.35 27944.53 1997/03/31 40968.54 26796.29 1997/04/30 43013.15 28396.03 1997/05/31 46289.09 30124.78 1997/06/30 49732.68 31474.37 1997/07/31 51590.40 33978.79 1997/08/31 47997.29 32075.30 1997/09/30 50974.18 33832.06 1997/10/31 50956.06 32702.07 1997/11/30 52383.34 34215.85 1997/12/31 52935.34 34803.33 1998/01/31 56744.28 35188.26 1998/02/28 59155.39 37726.04 1998/03/31 61259.92 39657.99 1998/04/30 62420.91 40056.94 1998/05/31 62046.75 39368.37 1998/06/30 65734.92 40967.51 1998/07/31 65932.69 40531.21 1998/08/31 59085.53 34671.20 1998/09/30 65938.04 36892.24 1998/10/31 67894.37 39893.06 1998/11/30 70791.45 42310.97 1998/12/31 74788.96 44748.93 1999/01/31 75631.07 46620.33 1999/02/28 75242.82 45171.37 1999/03/31 76276.32 46978.68 1999/04/30 71794.79 48798.16 1999/05/31 70602.11 47646.04 1999/06/30 73856.90 50290.39 1999/07/31 71906.25 48720.33 1999/08/31 73716.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990909 154435 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Health Care Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $73,716 - a 637.16% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Lilly (Eli) & Co. 8.4 Bristol-Myers Squibb Co. 7.8 Johnson & Johnson 6.3 Merck & Co., Inc. 5.9 Schering-Plough Corp. 5.8 Warner-Lambert Co. 5.7 Amgen, Inc. 4.8 Abbott Laboratories 4.7 Pfizer, Inc. 3.0 Medtronic, Inc. 3.0 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Drugs & Pharmaceuticals 55.4% Medical Equipment & Supplies 28.2% Medical Facilities Management 5.5% Computer Services & Software 1.6% Drug Stores 1.1% All Others 8.2%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 8.199999999999999 Row: 1, Col: 2, Value: 1.1 Row: 1, Col: 3, Value: 1.6 Row: 1, Col: 4, Value: 5.5 Row: 1, Col: 5, Value: 28.2 Row: 1, Col: 6, Value: 55.4 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. HEALTH CARE PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Beso Sikharulidze) (photograph of Ramin Arani) NOTE TO SHAREHOLDERS: On August 2, 1999, Ramin Arani (right) became Portfolio Manager of Fidelity Select Health Care Portfolio. The following is an interview with Beso Sikharulidze, who managed the fund during most of the period covered by this report, with comments from Ramin Arani on his investment strategy and outlook. Q. HOW DID THE FUND PERFORM, BESO? B.S. The past six-month period was a difficult time for health care stocks. For the six months that ended August 31, 1999, the fund posted a loss of 2.02%. This performance lagged 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 -0.56%. During the same period, the Standard & Poor's 500 Index returned 7.32%. For the 12-month period that ended August 31, 1999, the fund returned 24.77%, while the Goldman Sachs Health Care Index and S&P 500 index returned 27.04% and 39.82%, respectively. Q. WHAT FACTORS CAUSED THE FUND TO UNDERPERFORM THE GOLDMAN SACHS INDEX? B.S. The fund's performance relative to the Goldman Sachs index was hurt primarily because of an overweighted position in pharmaceutical companies and an underweighted position in medical equipment manufacturers. In hindsight, I underestimated the extent of investor uncertainty with respect to large-cap drug companies, as they seemed to ignore the strong pipelines of profitable drugs and favorable long-term growth prospects. Q. WHY DID INVESTORS SELL OFF HEALTH CARE STOCKS DURING THE PAST SIX MONTHS? B.S. Despite positive business fundamentals in the form of strong corporate earnings driven by innovative new drugs and an aging population with increasing demand for health care products, the market favored cyclical, value and smaller-cap stocks during much of 1999. Investors' concerns about the loss of patent protection and increased competition for many popular drugs at the large pharmaceutical companies were also major factors for the sell-off. Q. WHICH STOCKS PERFORMED WELL FOR THE FUND? B.S. Amgen, the largest biotechnology company in the U.S., performed well on continued strong sales of its two main drugs, Epogen, the company's blockbuster anemia drug, and Neupogen, its new cancer drug. Shares of VISX, the leading manufacturer of lasers used in corrective eye surgery, performed well on strong consumer demand. The fund's holdings in Johnson & Johnson also contributed to total return as the company's well-diversified line of medical products and surgical supplies held up nicely during the market sell-off of health care stocks in the second quarter. Q. WHICH STOCKS TURNED OUT TO BE DISAPPOINTMENTS? B.S. The large-cap drug companies, such as Eli Lilly, Merck and Schering-Plough, hurt fund performance. Shares of these companies faltered in the second quarter due to investor nervousness over high valuations, a weakening product pipeline outlook and the possibility that Medicare reform could lead to government-sanctioned price controls. Another detractor was McKesson HBOC. While the fund's position in this stock was not significant, it detracted from total return before I could sell the remaining shares following the discovery of accounting irregularities at its recently acquired HBO & Co. division. Q. TURNING TO YOU, RAMIN, DO YOU ANTICIPATE ANY MAJOR CHANGES TO THE FUND'S INVESTMENT STRATEGY? R.A. Not really. Similar to Beso's approach, I believe new product innovation is the lifeblood of the industry and drives corporate returns on investment because it leads directly to earnings. As a result, my team of analysts and I will continue to closely examine each company's product pipeline and business fundamentals. Of course, we'll keep a close eye on external factors, such as Medicare reform and patent protection, which can affect both the industry and individual holdings. Q. WHAT'S YOUR OUTLOOK? R.A. While the short-term outlook for the sector could be choppy given an uncertain U.S. interest-rate environment and the global economic recovery, I'm optimistic that health care stocks won't remain in the doldrums for very long. In light of favorable long-term prospects for market growth, pharmaceutical and biotechnology companies in particular should benefit from reasonable valuations, steady earnings growth and promising multi-product pipelines. 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 3. (checkmark)FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 063 TRADING SYMBOL: FSPHX SIZE: as of August 31, 1999, more than $2.8 billion MANAGER: Ramin Arani, since August 1999; manager, Fidelity Select Retailing Portfolio 1997-1999; equity research associate, 1992-1996; joined Fidelity in 1992 HEALTH CARE PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 94.7% SHARES VALUE (NOTE 1) AGRICULTURE - 0.3% Pioneer Hi-Bred 224,100 $ 8,767,913 International, Inc. COMPUTER SERVICES & SOFTWARE - - 1.6% Affymetrix, Inc. (a) 95,600 8,185,750 Healtheon Corp. (a) 63,700 2,153,856 IMS Health, Inc. 928,300 25,644,288 Shared Medical Systems Corp. 183,100 10,287,931 46,271,825 DRUG STORES - 1.1% CVS Corp. 717,154 29,896,357 DRUGS & PHARMACEUTICALS - 55.4% Allergan, Inc. 248,280 24,796,965 American Home Products Corp. 1,330,200 55,203,300 Amgen, Inc. (a) 1,648,100 137,101,319 Banyu Pharmaceutical Co. Ltd. 137,000 2,626,318 Biogen, Inc. (a) 540,600 41,491,050 Bristol-Myers Squibb Co. 3,138,800 220,893,050 Centocor, Inc. (a) 85,000 5,089,375 Cephalon, Inc. (a) 163,700 3,100,069 Chiron Corp. (a) 643,700 20,678,863 Forest Laboratories, Inc. (a) 554,400 26,888,400 Genentech, Inc. 59,500 9,772,875 Genzyme Corp. 250 1,625 Genzyme Corp. (General 438,700 24,759,131 Division) Gilead Sciences, Inc. (a) 164,600 12,828,513 IDEC Pharmaceuticals Corp. (a) 11,300 1,435,806 Immunex Corp. (a) 464,400 31,259,925 Lilly (Eli) & Co. 3,221,152 240,378,462 Medicis Pharmaceutical Corp. 358,700 9,774,575 Class A (a) Medimmune, Inc. (a) 194,100 20,028,694 Merck & Co., Inc. 2,497,900 167,827,656 Pfizer, Inc. 2,286,800 86,326,700 Pharmacia & Upjohn, Inc. 597,700 31,229,825 Quintiles Transnational Corp. 990,100 35,457,956 (a) Schering-Plough Corp. 3,134,200 164,741,388 Sepracor, Inc. (a) 118,800 8,895,150 Shire Pharmaceuticals Group 97,900 2,447,500 PLC ADR (a) Takeda Chemical Industries 212,000 10,644,028 Ltd. Warner-Lambert Co. 2,471,600 163,743,500 Watson Pharmaceuticals, Inc. 217,800 7,813,575 (a) Yamanouchi Pharmaceutical Co. 254,000 11,315,168 Ltd. 1,578,550,761 ELECTRONIC INSTRUMENTS - 0.7% Beckman Coulter, Inc. 63,700 3,017,788 SHARES VALUE (NOTE 1) PE Corp. (Biosystems Group) 104,100 $ 7,163,381 Waters Corp. (a) 140,600 9,270,813 19,451,982 INDUSTRIAL MACHINERY & EQUIPMENT - 0.4% Mettler-Toledo International, 465,800 12,401,925 Inc. (a) INSURANCE - 1.0% CIGNA Corp. 325,300 29,216,006 MEDICAL EQUIPMENT & SUPPLIES - - 28.2% Abbott Laboratories 3,056,000 132,554,000 Allscripts, Inc. 4,200 54,338 AmeriSource Health Corp. 667,300 17,224,681 Class A (a) Bard (C.R.), Inc. 400 18,650 Baxter International, Inc. 1,025,900 68,799,419 Becton, Dickinson & Co. 914,400 25,717,500 Biomet, Inc. 735,600 26,297,700 Boston Scientific Corp. (a) 1,792,536 60,834,191 Cardinal Health, Inc. 1,120,505 71,432,194 Guidant Corp. 1,139,220 66,857,974 Johnson & Johnson 1,765,200 180,491,700 Mallinckrodt, Inc. 2,900 92,981 Medtronic, Inc. 1,102,386 86,261,705 Resmed, Inc. (a) 139,500 3,871,125 St. Jude Medical, Inc. (a) 302,000 10,947,500 Stryker Corp. 159,500 9,191,188 Sybron International, Inc. (a) 215,800 5,556,850 VISX, Inc. (a) 318,600 28,833,300 Xomed Surgical Products, Inc. 144,500 8,498,406 (a) 803,535,402 MEDICAL FACILITIES MANAGEMENT - - 5.5% Columbia/HCA Healthcare Corp. 2,415,400 59,479,225 Express Scripts, Inc. Class A 100,000 6,737,500 (a) Health Management Associates, 727,700 5,821,600 Inc. Class A (a) HEALTHSOUTH Corp. (a) 510,100 4,176,444 Lincare Holdings, Inc. 238,300 6,285,163 Trigon Healthcare, Inc. (a) 244,800 8,889,300 United HealthCare Corp. 761,800 46,326,963 Wellpoint Health Networks, 245,100 17,861,663 Inc. (a) 155,577,858 SERVICES - 0.5% Gartner Group, Inc. Class B 137,664 2,822,112 (a) Medpartners, Inc. (a) 1,533,300 10,733,100 13,555,212 TOTAL COMMON STOCKS 2,697,225,241 (Cost $1,972,555,574) CASH EQUIVALENTS - 5.9% SHARES VALUE (NOTE 1) Central Cash Collateral Fund, 1,798,300 $ 1,798,300 5.26% (b) Taxable Central Cash Fund, 166,539,508 166,539,508 5.20% (b) TOTAL CASH EQUIVALENTS 168,337,808 (Cost $168,337,808) TOTAL INVESTMENT PORTFOLIO - 2,865,563,049 100.6% (Cost $2,140,893,382) NET OTHER ASSETS - (0.6%) (15,833,860) NET ASSETS - 100% $ 2,849,729,189 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $1,205,759,030 and $1,438,049,395, 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 $90,995 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $1,767,794. The fund received cash collateral of $1,798,300 which was invested in the Central Cash Collateral Fund. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $2,143,981,279. Net unrealized appreciation aggregated $721,581,770, of which $766,638,249 related to appreciated investment securities and $45,056,479 related to depreciated investment securities. HEALTH CARE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 2,865,563,049 value (cost $2,140,893,382) - - See accompanying schedule Receivable for investments 2,141,833 sold Receivable for fund shares 3,952,622 sold Dividends receivable 2,830,518 Interest receivable 753,633 Redemption fees receivable 4,784 Other receivables 195,340 TOTAL ASSETS 2,875,441,779 LIABILITIES Payable for investments $ 13,019,990 purchased Payable for fund shares 8,404,206 redeemed Accrued management fee 1,356,697 Other payables and accrued 1,133,397 expenses Collateral on securities 1,798,300 loaned, at value TOTAL LIABILITIES 25,712,590 NET ASSETS $ 2,849,729,189 Net Assets consist of: Paid in capital $ 1,985,456,593 Undistributed net investment 1,978,856 income Accumulated undistributed net 137,623,158 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 724,670,582 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 21,542,664 $ 2,849,729,189 shares outstanding NET ASSET VALUE and $132.28 redemption price per share ($2,849,729,189 (divided by) 21,542,664 shares) Maximum offering price per $136.37 share (100/97.00 of $132.28) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 13,578,244 Dividends Interest 4,030,686 Security lending 115,846 TOTAL INCOME 17,724,776 EXPENSES Management fee $ 8,702,356 Transfer agent fees 6,375,159 Accounting and security 861,719 lending fees Non-interested trustees' 4,510 compensation Custodian fees and expenses 58,794 Registration fees 95,466 Audit 46,239 Legal 2,473 Total expenses before 16,146,716 reductions Expense reductions (400,808) 15,745,908 NET INVESTMENT INCOME 1,978,868 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 137,901,176 Foreign currency transactions (84,368) 137,816,808 Change in net unrealized appreciation (depreciation) on: Investment securities (206,568,217) Assets and liabilities in (2,513) (206,570,730) foreign currencies NET GAIN (LOSS) (68,753,922) NET INCREASE (DECREASE) IN $ (66,775,054) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 4,564,759 charges paid to FDC Sales charges - Retained by $ 4,541,754 FDC Deferred sales charges $ 28,106 withheld by FDC Exchange fees withheld by FSC $ 74,175 Expense reductions Directed $ 394,843 brokerage arrangements Custodian credits 1,571 Transfer agent credits 4,394 $ 400,808
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ 1,978,868 $ 3,477,655 income Net realized gain (loss) 137,816,808 141,016,806 Change in net unrealized (206,570,730) 456,695,074 appreciation (depreciation) NET INCREASE (DECREASE) IN (66,775,054) 601,189,535 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (687,260) (3,782,810) From net investment income From net realized gain (59,789,028) (121,803,514) TOTAL DISTRIBUTIONS (60,476,288) (125,586,324) Share transactions Net 427,142,594 1,715,677,379 proceeds from sales of shares Reinvestment of distributions 58,065,061 121,790,160 Cost of shares redeemed (654,664,106) (1,393,295,000) NET INCREASE (DECREASE) IN (169,456,451) 444,172,539 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 612,426 2,029,623 TOTAL INCREASE (DECREASE) (296,095,367) 921,805,373 IN NET ASSETS NET ASSETS Beginning of period 3,145,824,556 2,224,019,183 End of period (including $ 2,849,729,189 $ 3,145,824,556 undistributed net investment income of $1,978,856 and $1,027,364, respectively) OTHER INFORMATION Shares Sold 3,185,441 13,702,070 Issued in reinvestment of 422,477 985,706 distributions Redeemed (4,926,649) (11,362,310) Net increase (decrease) (1,318,731) 3,325,466
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F Net asset value, beginning of $ 137.60 $ 113.84 $ 102.45 $ 100.47 $ 76.13 period Income from Investment Operations Net investment income D .09 .17 .33 .52 .95 Net realized and unrealized (2.80) 29.85 31.94 18.01 28.85 gain (loss) Total from investment (2.71) 30.02 32.27 18.53 29.80 operations Less Distributions From net investment income (.03) (.19) (.25) (.65) (.59) From net realized gain (2.61) (6.17) (20.73) (15.95) (4.92) Total distributions (2.64) (6.36) (20.98) (16.60) (5.51) Redemption fees added to paid .03 .10 .10 .05 .05 in capital Net asset value, end of period $ 132.28 $ 137.60 $ 113.84 $ 102.45 $ 100.47 TOTAL RETURN B, C (2.02)% 27.20% 36.47% 20.41% 39.68% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 2,849,729 $ 3,145,825 $ 2,224,019 $ 1,372,554 $ 1,525,910 (000 omitted) Ratio of expenses to average 1.06% A 1.07% 1.20% 1.33% 1.31% net assets Ratio of expenses to average 1.04% A, E 1.05% E 1.18% E 1.32% E 1.30% E net assets after expense reductions Ratio of net investment .13% A .14% .31% .52% 1.06% income to average net assets Portfolio turnover rate 84% A 66% 79% 59% 54%
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 63.31 period Income from Investment Operations Net investment income D .75 Net realized and unrealized 18.38 gain (loss) Total from investment 19.13 operations Less Distributions From net investment income (.62) From net realized gain (5.74) Total distributions (6.36) Redemption fees added to paid .05 in capital Net asset value, end of period $ 76.13 TOTAL RETURN B, C 31.24% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 943,141 (000 omitted) Ratio of expenses to average 1.39% net assets Ratio of expenses to average 1.36% E net assets after expense reductions Ratio of net investment 1.08% income to average net assets Portfolio turnover rate 151% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT MEDICAL DELIVERY -9.96% -13.54% 25.54% 187.17% SELECT MEDICAL DELIVERY (LOAD -12.73% -16.20% 21.71% 178.48% ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Health Care -0.56% 27.04% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT MEDICAL DELIVERY -13.54% 4.65% 11.13% SELECT MEDICAL DELIVERY -16.20% 4.01% 10.78% (LOAD ADJ.) S&P 500 39.82% 25.11% 17.10% GS Health Care 27.04% 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 1989/08/31 9700.00 10000.00 1989/09/30 9968.77 9959.00 1989/10/31 9634.84 9727.95 1989/11/30 10082.79 9926.40 1989/12/31 10083.38 10164.64 1990/01/31 8598.81 9482.59 1990/02/28 8815.66 9604.91 1990/03/31 9224.33 9859.44 1990/04/30 9316.07 9612.96 1990/05/31 10633.83 10550.22 1990/06/30 11142.59 10478.48 1990/07/31 11184.29 10444.95 1990/08/31 10291.88 9500.72 1990/09/30 9607.98 9038.04 1990/10/31 9491.22 8999.18 1990/11/30 10808.98 9580.52 1990/12/31 11723.12 9847.82 1991/01/31 13612.56 10277.18 1991/02/28 14454.23 11012.00 1991/03/31 16601.32 11278.49 1991/04/30 16103.19 11305.56 1991/05/31 17434.39 11793.96 1991/06/30 15965.63 11253.80 1991/07/31 17567.56 11778.23 1991/08/31 17773.40 12057.37 1991/09/30 17934.48 11856.01 1991/10/31 18328.25 12014.88 1991/11/30 17818.14 11530.68 1991/12/31 20846.65 12849.79 1992/01/31 20864.97 12610.79 1992/02/29 20058.95 12774.73 1992/03/31 18730.85 12525.62 1992/04/30 17988.94 12893.87 1992/05/31 17805.75 12957.05 1992/06/30 16868.14 12763.99 1992/07/31 17828.04 13286.04 1992/08/31 17808.04 13013.68 1992/09/30 15718.27 13167.24 1992/10/31 16498.18 13213.32 1992/11/30 18118.00 13663.90 1992/12/31 18098.01 13831.96 1993/01/31 17178.11 13948.15 1993/02/28 14458.41 14137.85 1993/03/31 14778.37 14436.15 1993/04/30 14598.39 14086.80 1993/05/31 15048.34 14464.33 1993/06/30 15198.33 14506.27 1993/07/31 15578.28 14448.25 1993/08/31 15528.29 14995.84 1993/09/30 16808.15 14880.37 1993/10/31 17598.06 15188.39 1993/11/30 17888.03 15044.10 1993/12/31 19097.90 15226.14 1994/01/31 20167.78 15743.82 1994/02/28 20277.77 15317.17 1994/03/31 19267.88 14649.34 1994/04/30 19887.81 14836.85 1994/05/31 20557.74 15080.17 1994/06/30 19287.88 14710.71 1994/07/31 20147.78 15193.22 1994/08/31 22187.56 15816.14 1994/09/30 22977.47 15428.65 1994/10/31 23727.39 15775.79 1994/11/30 22707.50 15201.24 1994/12/31 22886.93 15426.67 1995/01/31 23891.57 15826.69 1995/02/28 24257.85 16443.45 1995/03/31 25796.20 16928.70 1995/04/30 24957.82 17427.25 1995/05/31 24139.19 18123.82 1995/06/30 24527.51 18544.83 1995/07/31 27004.40 19159.78 1995/08/31 27130.35 19207.87 1995/09/30 27697.09 20018.44 1995/10/31 27224.80 19946.98 1995/11/30 29502.28 20822.65 1995/12/31 30252.60 21223.69 1996/01/31 31879.68 21946.15 1996/02/29 32541.74 22149.59 1996/03/31 32855.93 22362.89 1996/04/30 33230.04 22692.52 1996/05/31 33159.86 23277.76 1996/06/30 32376.19 23366.44 1996/07/31 28867.21 22334.12 1996/08/31 31534.03 22805.14 1996/09/30 33791.48 24088.62 1996/10/31 31241.62 24752.98 1996/11/30 33007.80 26624.06 1996/12/31 33581.82 26096.63 1997/01/31 35170.66 27727.15 1997/02/28 35958.73 27944.53 1997/03/31 33683.50 26796.29 1997/04/30 34451.42 28396.03 1997/05/31 37645.95 30124.78 1997/06/30 37907.57 31474.37 1997/07/31 40344.78 33978.79 1997/08/31 38954.06 32075.30 1997/09/30 40110.70 33832.06 1997/10/31 38788.82 32702.07 1997/11/30 39711.38 34215.85 1997/12/31 40344.65 34803.33 1998/01/31 39167.61 35188.26 1998/02/28 43860.29 37726.04 1998/03/31 45625.85 39657.99 1998/04/30 46760.55 40056.94 1998/05/31 44555.48 39368.37 1998/06/30 45139.18 40967.51 1998/07/31 41653.21 40531.21 1998/08/31 32216.79 34671.20 1998/09/30 33286.90 36892.24 1998/10/31 35556.83 39893.06 1998/11/30 36918.79 42310.97 1998/12/31 37859.19 44748.93 1999/01/31 32460.00 46620.33 1999/02/28 30935.90 45171.37 1999/03/31 29719.87 46978.68 1999/04/30 32476.21 48798.16 1999/05/31 32070.87 47646.04 1999/06/30 31243.96 50290.39 1999/07/31 29476.66 48720.33 1999/08/31 27848.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 120609 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Medical Delivery Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $27,848 - a 178.48% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Lincare Holdings, Inc. 9.8 CIGNA Corp. 7.8 Columbia/HCA Healthcare Corp. 7.7 United HealthCare Corp. 7.3 Health Management Associates, 6.6 Inc. Class A Wellpoint Health Networks, Inc. 6.6 Tenet Healthcare Corp. 5.1 Apria Healthcare Group, Inc. 3.8 Universal Health Services, 3.7 Inc. Class B HEALTHSOUTH Corp. 3.4 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Medical Facilities Management 64.8% Insurance 10.7% Drugs & Pharmaceuticals 7.7% Medical Equipment & Supplies 6.8% Services 2.1% All Others 7.9%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 7.9 Row: 1, Col: 2, Value: 2.1 Row: 1, Col: 3, Value: 6.8 Row: 1, Col: 4, Value: 7.7 Row: 1, Col: 5, Value: 10.7 Row: 1, Col: 6, Value: 64.8 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. MEDICAL DELIVERY PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of John Porter) (photograph of Shep Perkins) NOTE TO SHAREHOLDERS: On August 2, 1999, Shep Perkins (right) became Portfolio Manager of Fidelity Select Medical Delivery Portfolio. The following is an interview with John Porter, who managed the fund for most of the period covered by this report, with comments from Shep Perkins on his investment style and outlook. Q. HOW DID THE FUND PERFORM, JOHN? J.P. For the six- and 12-month periods ending August 31, 1999, the fund returned -9.96% and -13.54%, respectively. By comparison, the Standard & Poor's 500 Index returned 7.32% and 39.82%, respectively, for the same periods. The fund also compares itself to the Goldman Sachs Health Care Index - an index of 93 stocks designed to measure the performance of companies in the health care sector - which returned -0.56% and 27.04%, respectively, during the same six- and 12-month periods. Q. WHY DID THE FUND UNDERPERFORM THE GOLDMAN SACHS INDEX? J.P. The fund invests in a much narrower range of stocks than the Goldman Sachs index, and medical delivery stocks continued to suffer from changes in the federal budget, which reduced Medicare reimbursements and severely affected the revenues of hospitals, long-term care facilities and the home health care sector. Investors continued to gravitate to other areas of the health care sector, including biotechnology stocks - a significant part of the Goldman Sachs index - where growth was healthy and demand strong. Q. WHICH STOCKS PERFORMED WELL? J.P. Strong performers included Columbia/HCA, which recovered nicely as business fundamentals firmed up for the company. It also successfully spun off two small hospital groups, leaving Columbia with a stronger mix of hospitals. Meanwhile, concerns about an ongoing federal investigation into aspects of its business dealings waned, and the company continued to aggressively repurchase its stock. Foundation Health Systems also did well after selling off some of its weakest operations. A general strengthening of business fundamentals in the HMO sector also boosted Foundation's performance. United HealthCare posted strong earnings and also benefited from a strengthening of sentiment regarding the HMO sector. CIGNA's performance surged as investors recognized the lack of Medicare membership in its HMO operations as a strong positive. Q. WHICH STOCKS DISAPPOINTED? J.P. Disappointments included Health Management Associates, Lincare Holdings and HEALTHSOUTH. Health Management's performance was hurt by missed earnings targets, reimbursement pressure from the government and a lack of significant acquisitions over the past year. Lincare's business remained strong, but its stock was weak due to investor concern about California's and the Food and Drug Administration's examination of certain areas of Lincare's operations. HEALTHSOUTH's stock was very volatile, even though the company hit its earnings targets. Investors were disappointed that the quality of earnings was not as high as they hoped. Q. SHEP, HOW WILL YOU MANAGE THE FUND GOING FORWARD? S.P. The health care industry has compelling growth characteristics, driven by an aging population and new technologies. I'll search out those companies that can take advantage of these important trends. I believe that there are plenty of opportunities to invest in companies that have limited Medicare exposure and good business fundamentals, and that are attractively valued. I'll also look for companies with strong internal growth prospects and low cost structures in industries with high barriers to entry, such as pharmacy benefit-management companies, which help employers manage employees' pharmaceutical costs, as well as health insurance companies. Q. WHAT'S YOUR OUTLOOK, SHEP? S.P. The largest customer for many companies in the medical delivery industry is the U.S. government. Medicare reimbursement cuts have plagued this industry during the past two years, and will continue to create a difficult business environment over the next 12 to 24 months, although to a lesser degree. I think some companies have been unfairly hurt by the whole Medicare cloud, and I believe that they offer good opportunities for improved future performance as the market recognizes their real value. For now, I'm cautiously optimistic. 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 3. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 505 TRADING SYMBOL: FSHCX SIZE: as of August 31, 1999, more than $54 million MANAGER: Shep Perkins, since August, 1999; research analyst, health care services, 1997- present; joined Fidelity in 1997 MEDICAL DELIVERY PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 93.2% SHARES VALUE (NOTE 1) COMPUTER SERVICES & SOFTWARE - - 1.1% Healtheon Corp. (a) 1,800 $ 60,863 Shared Medical Systems Corp. 9,600 539,400 600,263 DRUGS & PHARMACEUTICALS - 7.7% Amgen, Inc. (a) 6,500 540,719 Bristol-Myers Squibb Co. 12,800 900,800 Lilly (Eli) & Co. 9,000 671,625 Merck & Co., Inc. 4,500 302,344 Pfizer, Inc. 8,300 313,325 Schering-Plough Corp. 17,100 898,819 Warner-Lambert Co. 8,900 589,625 4,217,257 INSURANCE - 10.7% CIGNA Corp. 47,600 4,275,075 First Health Group Corp. (a) 75,000 1,617,188 5,892,263 MEDICAL EQUIPMENT & SUPPLIES - - 6.8% Abbott Laboratories 13,200 572,550 Becton, Dickinson & Co. 20,600 579,375 Boston Scientific Corp. (a) 16,700 566,756 Cardinal Health, Inc. 18,150 1,157,063 Guidant Corp. 9,600 563,400 Johnson & Johnson 3,000 306,750 3,745,894 MEDICAL FACILITIES MANAGEMENT - - 64.8% Apria Healthcare Group, Inc. 124,500 2,100,938 (a) Beverly Enterprises, Inc. (a) 105,700 528,500 Columbia/HCA Healthcare Corp. 171,923 4,233,604 Foundation Health Systems, 35,070 447,143 Inc. Class A (a) HCR Manor Care, Inc. (a) 39,300 768,806 Health Management Associates, 455,617 3,644,936 Inc. Class A (a) HEALTHSOUTH Corp. (a) 229,200 1,876,575 Lifepoint Hospitals, Inc. (a) 7,695 52,903 Lincare Holdings, Inc. 203,100 5,356,758 Oxford Health Plans, Inc. (a) 35,200 545,600 Pediatrix Medical Group (a) 4,900 73,194 Province Healthcare Co. (a) 24,100 379,575 Quorum Health Group, Inc. (a) 128,800 1,135,050 Renal Care Group, Inc. (a) 31,050 593,831 Tenet Healthcare Corp. (a) 159,200 2,776,050 Total Renal Care Holdings, 23,166 186,776 Inc. (a) Triad Hospitals, Inc. (a) 7,695 86,088 Trigon Healthcare, Inc. (a) 25,000 907,813 United HealthCare Corp. 66,300 4,031,869 SHARES VALUE (NOTE 1) Universal Health Services, 60,400 $ 2,015,850 Inc. Class B (a) US Oncology, Inc. (a) 20,104 206,066 Wellpoint Health Networks, 49,400 3,600,025 Inc. (a) 35,547,950 SERVICES - 2.1% Magellan Health Services, 10,300 93,988 Inc. (a) Medpartners, Inc. (a) 146,700 1,026,900 1,120,888 TOTAL COMMON STOCKS 51,124,515 (Cost $51,772,465) CASH EQUIVALENTS - 6.1% Central Cash Collateral Fund, 57,600 57,600 5.26% (b) Taxable Central Cash Fund, 3,282,679 3,282,679 5.20% (b) TOTAL CASH EQUIVALENTS 3,340,279 (Cost $3,340,279) TOTAL INVESTMENT PORTFOLIO - 54,464,794 99.3% (Cost $55,112,744) NET OTHER ASSETS - 0.7% 410,406 NET ASSETS - 100% $ 54,875,200 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $25,343,662 and $39,150,568, 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 $4,148 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $53,775. The fund received cash collateral of $57,600 which was invested in the Central Cash Collateral Fund. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $55,964,379. Net unrealized depreciation aggregated $1,499,585, of which $5,097,221 related to appreciated investment securities and $6,596,806 related to depreciated investment securities. 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 has elected 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. MEDICAL DELIVERY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 54,464,794 value (cost $55,112,744) - See accompanying schedule Receivable for investments 833,925 sold Receivable for fund shares 242,170 sold Dividends receivable 11,162 Interest receivable 15,906 Redemption fees receivable 267 Other receivables 603 TOTAL ASSETS 55,568,827 LIABILITIES Payable to custodian bank $ 12,028 Payable for investments 260,440 purchased Payable for fund shares 271,512 redeemed Accrued management fee 27,124 Other payables and accrued 64,923 expenses Collateral on securities 57,600 loaned, at value TOTAL LIABILITIES 693,627 NET ASSETS $ 54,875,200 Net Assets consist of: Paid in capital $ 93,255,525 Accumulated net investment (391,322) loss Accumulated undistributed net (37,341,053) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (647,950) (depreciation) on investments NET ASSETS, for 3,194,665 $ 54,875,200 shares outstanding NET ASSET VALUE and $17.18 redemption price per share ($54,875,200 (divided by) 3,194,665 shares) Maximum offering price per $17.71 share (100/97.00 of $17.18) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 77,911 Dividends Interest 124,219 Security lending 163 TOTAL INCOME 202,293 EXPENSES Management fee $ 208,666 Transfer agent fees 327,382 Accounting and security 30,688 lending fees Custodian fees and expenses 5,941 Registration fees 26,399 Audit 7,331 Legal 134 Total expenses before 606,541 reductions Expense reductions (12,926) 593,615 NET INVESTMENT INCOME (LOSS) (391,322) REALIZED AND UNREALIZED GAIN (7,072,418) (LOSS) Net realized gain (loss) on investment securities Change in net unrealized (36,398) appreciation (depreciation) on investment securities NET GAIN (LOSS) (7,108,816) NET INCREASE (DECREASE) IN $ (7,500,138) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 62,518 charges paid to FDC Sales charges - Retained by $ 60,989 FDC Deferred sales charges $ 2,862 withheld by FDC Exchange fees withheld by FSC $ 10,583 Expense reductions Directed $ 11,679 brokerage arrangements Transfer agent credits 1,247 $ 12,926
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (391,322) $ (390,234) income (loss) Net realized gain (loss) (7,072,418) (29,445,200) Change in net unrealized (36,398) (24,558,768) appreciation (depreciation) NET INCREASE (DECREASE) IN (7,500,138) (54,394,202) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders - (7,388,637) From net realized gain In excess of net realized - (824,351) gain TOTAL DISTRIBUTIONS - (8,212,988) Share transactions Net 38,797,264 162,156,332 proceeds from sales of shares Reinvestment of distributions - 8,097,680 Cost of shares redeemed (53,357,796) (186,595,554) NET INCREASE (DECREASE) IN (14,560,532) (16,341,542) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 93,590 248,569 TOTAL INCREASE (DECREASE) (21,967,080) (78,700,163) IN NET ASSETS NET ASSETS Beginning of period 76,842,280 155,542,443 End of period (including $ 54,875,200 $ 76,842,280 accumulated net investment loss of $391,322 and $0, respectively) OTHER INFORMATION Shares Sold 1,972,458 6,115,538 Issued in reinvestment of - 283,433 distributions Redeemed (2,806,152) (7,863,246) Net increase (decrease) (833,694) (1,464,275)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 G Net asset value, beginning of $ 19.08 $ 28.32 $ 28.29 $ 29.00 $ 23.18 period Income from Investment Operations Net investment income (loss) D (.10) (.06) F (.24) (.23) (.03) Net realized and unrealized (1.82) (7.88) 5.45 2.92 7.72 gain (loss) Total from investment (1.92) (7.94) 5.21 2.69 7.69 operations Less Distributions From net investment income - - - - - From net realized gain - (1.21) (5.23) (3.45) (1.91) In excess of net realized gain - (.13) - - - Total distributions - (1.34) (5.23) (3.45) (1.91) Redemption fees added to paid .02 .04 .05 .05 .04 in capital Net asset value, end of period $ 17.18 $ 19.08 $ 28.32 $ 28.29 $ 29.00 TOTAL RETURN B, C (9.96)% (29.47)% 21.97% 10.50% 34.15% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 54,875 $ 76,842 $ 155,542 $ 192,385 $ 295,489 (000 omitted) Ratio of expenses to average 1.67% A 1.40% 1.57% 1.57% 1.65% net assets Ratio of expenses to average 1.63% A, E 1.37% E 1.53% E 1.53% E 1.62% E net assets after expense reductions Ratio of net investment (1.08)% A (.25)% (.88)% (.84)% (.13)% income (loss) to average net assets Portfolio turnover rate 77% A 67% 109% 78% 132%
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 20.28 period Income from Investment Operations Net investment income (loss) D .06 Net realized and unrealized 3.74 gain (loss) Total from investment 3.80 operations Less Distributions From net investment income (.06) From net realized gain (.89) In excess of net realized gain - Total distributions (.95) Redemption fees added to paid .05 in capital Net asset value, end of period $ 23.18 TOTAL RETURN B, C 19.63% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 299,570 (000 omitted) Ratio of expenses to average 1.48% net assets Ratio of expenses to average 1.45% E net assets after expense reductions Ratio of net investment .29% income (loss) to average net assets Portfolio turnover rate 123% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F NET INVESTMENT INCOME (LOSS) PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.12 PER SHARE. G FOR THE YEAR ENDED FEBRUARY 29
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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR LIFE OF FUND SELECT MEDICAL EQUIPMENT AND 9.51% 39.93% 32.51% SYSTEMS SELECT MEDICAL EQUIPMENT AND 6.16% 35.66% 28.46% SYSTEMS (LOAD ADJ.) S&P 500 7.32% 39.82% 24.00% GS Health Care -0.56% 27.04% 18.66% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year or 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 PERIOD ENDED AUGUST 31, 1999 PAST 1 YEAR LIFE OF FUND SELECT MEDICAL EQUIPMENT AND 39.93% 23.34% SYSTEMS SELECT MEDICAL EQUIPMENT AND 35.66% 20.52% SYSTEMS (LOAD ADJ.) S&P 500 39.82% 17.39% GS Health Care 27.04% 13.60% 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 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 1999/02/28 11737.00 11554.39 1999/03/31 12445.10 12016.68 1999/04/30 12564.30 12482.09 1999/05/31 12464.50 12187.39 1999/06/30 12664.09 12863.79 1999/07/31 12733.95 12462.18 1999/08/31 12846.00 12400.49 IMATRL PRASUN SHR__CHT 19990831 19990909 154638 R00000000000020 $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 August 31, 1999, the value of the investment would have grown to $12,846 - a 28.46% 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 been $12,400 - a 24.00% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Boston Scientific Corp. 7.7 Abbott Laboratories 7.0 Guidant Corp. 6.6 Johnson & Johnson 6.5 PE Corp. (Biosystems Group) 6.1 Baxter International, Inc. 5.9 Allergan, Inc. 5.5 Becton, Dickinson & Co. 4.9 Medtronic, Inc. 4.7 Biomet, Inc. 4.6 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Medical Equipment & Supplies 68.1% Drugs & Pharmaceuticals 14.0% Electronic Instruments 9.4% Industrial Machinery & Equipment 0.8% Computer Services and Software 0.5% All Others 7.2%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 7.2 Row: 1, Col: 2, Value: 0.5 Row: 1, Col: 3, Value: 0.8 Row: 1, Col: 4, Value: 9.4 Row: 1, Col: 5, Value: 14.0 Row: 1, Col: 6, Value: 68.09999999999999 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. MEDICAL EQUIPMENT AND SYSTEMS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Kerry Nelson) Kerry Nelson, Portfolio Manager of Fidelity Select Medical Equipment and Systems Portfolio Q. HOW DID THE FUND PERFORM, KERRY? A. It did well. For the six-month period that ended on August 31, 1999, the fund had a total return of 9.51%; for the 12 months ending August 31, 1999, it returned 39.93%. This compares favorably with the Standard & Poor's 500 Index, which returned 7.32% and 39.82% for the same periods, respectively. The fund also outpaced 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 - -0.56% and 27.04% for the same six- and 12-month periods, respectively. Q. WHY DID THE FUND OUTPERFORM THE INDUSTRY INDEX? A. The primary reason was that the Goldman Sachs index includes a lot of large pharmaceutical companies, which had sluggish performance during the period, while the fund owned relatively few of these stocks. Large pharmaceuticals generally were down for a couple of reasons: first, fears that the Federal government might play a larger role in the Medicare payments system, which could eventually lead to greater government control of pricing; and second, a slowdown in the number of new product approvals by the Food and Drug Administration (FDA), which would imply decelerating sales and earnings growth in the future. The fund was more heavily weighted to medical device stocks, which as a group were affected less by these factors than were the pharmaceuticals. The fund also owned some biotechnology stocks, which as a group demonstrated superior earnings growth. Q. DID YOU ALTER YOUR INVESTMENT STRATEGY DURING THE PERIOD? A. I increased the fund's exposure to companies in the field of genomics, which is attracting a lot of new investment. Genomics is a segment of the biotechnology industry that involves research into the human genome, or genetic material. This research is often applied to the development of new pharmaceutical products. Q. WHICH COMPANIES HELPED PERFORMANCE? A. Johnson & Johnson demonstrated accelerating sales and earnings growth, particularly in its U.S. pharmaceutical business, after a very difficult 1998. Boston Scientific, did well during most of the period. A new management team inspired investor confidence, the company hit earnings targets for two successive quarters, and a new medical device received FDA approval, signaling an improved relationship with this important regulatory agency. PE Corp. (BioSystems), an analytic instrumentation company that benefited from the recent boom in genomics, exceeded earnings estimates and made a nice contribution to fund performance. Waters Corporation, a fast-growing analytical instrumentation company, was another top performer. Q. WHICH STOCKS DIDN'T DO AS WELL AS YOU HAD HOPED? A. Abbott Laboratories, which derives nearly half of its profits from pharmaceuticals, had less-than-expected sales growth as a result of the unfavorable industry environment discussed earlier. The company experienced some manufacturing problems with two of its major drugs, and its new management team also made two acquisitions, that were dilutive to earnings and drove some investors out of the stock. Another disappointment was Becton, Dickinson & Co., a diversified hospital supplier that is trying to grow its business more rapidly. The company's overly optimistic earnings projections were not met, largely because investment spending came ahead of sales growth. Sales also suffered as a result of health care budgetary constraints in Europe, where the company earns a substantial portion of its profits. Q. LOOKING OUT OVER THE NEXT FEW MONTHS, KERRY, WHAT ARE YOUR EXPECTATIONS? A. I am more guarded in my outlook than in the past. While the fundamentals for the sector seem relatively stable, I believe medical technology stocks may underperform the broader market in the short term. I think many companies in the sector will continue to do well, but probably with not as much upside as we've seen in the recent past. In the cardiology segment, for example, interventional devices have been big growth drivers, but as market penetration continues to increase, there may be more limited growth potential. I also believe that the Medicare reform dialogue in Washington may continue to have a psychologically chilling effect on the investment environment for the health care group. Longer term, I believe medical equipment should still be an area of promising investment opportunity. 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 3 . (checkmark)FUND FACTS START DATE: April 28, 1998 FUND NUMBER: 354 TRADING SYMBOL: FSMEX SIZE: as of August 31, 1999, more than $40 million MANAGER: Kerry Nelson, since inception; analyst, medical devices and automotive industries; joined Fidelity in 1995 MEDICAL EQUIPMENT AND SYSTEMS PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 93.3% SHARES VALUE (NOTE 1) COMPUTER SERVICES & SOFTWARE - - 0.5% Affymetrix, Inc. (a) 2,500 $ 214,063 DRUGS & PHARMACEUTICALS - 14.0% Allergan, Inc. 22,050 2,202,244 Bausch & Lomb, Inc. 19,180 1,267,079 Chiron Corp. (a) 42,000 1,349,250 IDEXX Laboratories, Inc. (a) 8,000 136,000 Merck & Co., Inc. 1,200 80,625 PE Corp. (Celera Genomics 5,170 148,638 Group) (a) Quintiles Transnational Corp. 11,500 411,844 (a) Sepracor, Inc. (a) 1,000 74,875 5,670,555 ELECTRONIC INSTRUMENTS - 9.4% PE Corp. (Biosystems Group) 35,680 2,455,230 Thermo Optek Corp. (a) 2,680 21,775 Waters Corp. (a) 20,120 1,326,663 3,803,668 HOUSEHOLD PRODUCTS - 0.1% Safeskin Corp. (a) 5,290 41,989 INDUSTRIAL MACHINERY & EQUIPMENT - 0.8% Mettler-Toledo International, 11,310 301,129 Inc. (a) INSURANCE - 0.4% Aetna, Inc. 2,000 155,500 MEDICAL EQUIPMENT & SUPPLIES - - 68.1% Abbott Laboratories 65,120 2,824,580 Ballard Medical Products 4,700 115,150 Bard (C.R.), Inc. 14,630 682,124 Baxter International, Inc. 35,460 2,378,036 Becton, Dickinson & Co. 69,960 1,967,625 Biomet, Inc. 51,610 1,845,058 Boston Scientific Corp. (a) 91,720 3,112,744 Cardinal Health, Inc. 5,200 331,500 CardioThoracic Systems, Inc. 20,000 363,750 (a) CONMED Corp. (a) 6,000 168,000 Cooper Companies, Inc. 4,310 103,171 Cyberonics, Inc. (a) 20,000 371,250 DENTSPLY International, Inc. 10,000 248,125 Dionex Corp. (a) 4,000 159,250 ESC Medical Systems Ltd. (a) 6,690 26,342 Guidant Corp. 45,820 2,689,061 Hillenbrand Industries, Inc. 20,670 589,095 Johnson & Johnson 25,850 2,643,163 Mallinckrodt, Inc. 6,000 192,375 Medtronic, Inc. 24,508 1,917,751 Mentor Corp. 3,120 72,930 Novoste Corp. (a) 16,900 370,744 Ocular Sciences, Inc. (a) 23,900 392,856 Orthofix International NV (a) 8,170 117,444 SHARES VALUE (NOTE 1) Resmed, Inc. (a) 6,000 $ 166,500 St. Jude Medical, Inc. (a) 26,500 960,625 Stryker Corp. 21,040 1,212,430 Sybron International, Inc. (a) 42,060 1,083,045 VISX, Inc. (a) 4,500 407,250 27,511,974 TOTAL COMMON STOCKS 37,698,878 (Cost $34,570,835) CASH EQUIVALENTS - 7.9% Taxable Central Cash Fund, 3,186,008 3,186,008 5.20% (b) (Cost $3,186,008) TOTAL INVESTMENT PORTFOLIO - 40,884,886 101.2% (Cost $37,756,843) NET OTHER ASSETS - (1.2%) (477,630) NET ASSETS - 100% $ 40,407,256 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $17,057,658 and $8,581,536, 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 $1,513 for the period. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $37,767,173. Net unrealized appreciation aggregated $3,117,713, of which $5,361,071 related to appreciated investment securities and $2,243,358 related to depreciated investment securities. MEDICAL EQUIPMENT AND SYSTEMS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 40,884,886 value (cost $37,756,843) - See accompanying schedule Receivable for fund shares 105,674 sold Dividends receivable 22,352 Interest receivable 11,556 Redemption fees receivable 191 TOTAL ASSETS 41,024,659 LIABILITIES Payable for fund shares $ 556,594 redeemed Accrued management fee 19,388 Other payables and accrued 41,421 expenses TOTAL LIABILITIES 617,403 NET ASSETS $ 40,407,256 Net Assets consist of: Paid in capital $ 35,995,649 Accumulated net investment (105,093) loss Accumulated undistributed net 1,388,657 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 3,128,043 (depreciation) on investments NET ASSETS, for 3,137,111 $ 40,407,256 shares outstanding NET ASSET VALUE and $12.88 redemption price per share ($40,407,256 (divided by) 3,137,111 shares) Maximum offering price per $13.28 share (100/97.00 of $12.88) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 127,104 Dividends Interest 73,705 TOTAL INCOME 200,809 EXPENSES Management fee $ 109,423 Transfer agent fees 146,504 Accounting fees and expenses 30,302 Non-interested trustees' 50 compensation Custodian fees and expenses 4,488 Registration fees 13,168 Audit 3,303 Legal 19 Total expenses before 307,257 reductions Expense reductions (1,355) 305,902 NET INVESTMENT INCOME (LOSS) (105,093) REALIZED AND UNREALIZED GAIN 1,434,827 (LOSS) Net realized gain (loss) on investment securities Change in net unrealized 1,534,453 appreciation (depreciation) on investment securities NET GAIN (LOSS) 2,969,280 NET INCREASE (DECREASE) IN $ 2,864,187 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 214,138 charges paid to FDC Sales charges - Retained by $ 212,593 FDC Deferred sales charges $ 65 withheld by FDC Exchange fees withheld by FSC $ 1,905 Expense Reductions Directed $ 1,170 brokerage arrangements Custodian credits 185 $ 1,355
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, APRIL 28, 1998 (COMMENCEMENT ASSETS 1999 (UNAUDITED) OF OPERATIONS) TO FEBRUARY 28, 1999 Operations Net investment $ (105,093) $ (164,120) income (loss) Net realized gain (loss) 1,434,827 1,286,496 Change in net unrealized 1,534,453 1,593,590 appreciation (depreciation) NET INCREASE (DECREASE) IN 2,864,187 2,715,966 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (981,691) - from net realized gains Share transactions Net 24,674,154 45,365,490 proceeds from sales of shares Reinvestment of distributions 956,509 - Cost of shares redeemed (15,724,859) (19,529,306) NET INCREASE (DECREASE) IN 9,905,804 25,836,184 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 24,538 42,268 TOTAL INCREASE (DECREASE) 11,812,838 28,594,418 IN NET ASSETS NET ASSETS Beginning of period 28,594,418 - End of period (including $ 40,407,256 $ 28,594,418 accumulated net investment loss of $105,093 and $0, respectively) OTHER INFORMATION Shares Sold 1,935,196 4,138,562 Issued in reinvestment of 76,582 - distributions Redeemed (1,238,703) (1,774,526) Net increase (decrease) 773,075 2,364,036
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 F Net asset value, beginning of $ 12.10 $ 10.00 period Income from Investment Operations Net investment income (loss) D (.04) (.11) Net realized and unrealized 1.17 2.18 gain (loss) Total from investment 1.13 2.07 operations Less Distributions From net realized gain (.36) - Redemption fees added to paid .01 .03 in capital Net asset value, end of period $ 12.88 $ 12.10 TOTAL RETURN B, C 9.51% 21.00% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 40,407 $ 28,594 (000 omitted) Ratio of expenses to average 1.61% A 2.39% A net assets Ratio of expenses to average 1.60% A, E 2.38% A, E net assets after expense reductions Ratio of net investment (.55)% A (1.21)% A income (loss) to average net assets Portfolio turnover rate 50% A 85% 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 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT ENERGY 54.54% 57.65% 105.55% 168.33% SELECT ENERGY (LOAD ADJ.) 49.83% 52.84% 99.31% 160.21% S&P 500 7.32% 39.82% 206.52% 384.79% GS Natural Resources 43.20% 49.26% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 resources 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT ENERGY 57.65% 15.50% 10.37% SELECT ENERGY (LOAD ADJ.) 52.84% 14.79% 10.04% S&P 500 39.82% 25.11% 17.10% GS Natural Resources 49.26% 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 Energy S&P 500 00060 SP001 1989/08/31 9700.00 10000.00 1989/09/30 9853.19 9959.00 1989/10/31 9785.79 9727.95 1989/11/30 10153.44 9926.40 1989/12/31 10887.22 10164.64 1990/01/31 10401.13 9482.59 1990/02/28 10725.19 9604.91 1990/03/31 10731.42 9859.44 1990/04/30 10369.97 9612.96 1990/05/31 10999.39 10550.22 1990/06/30 10740.16 10478.48 1990/07/31 11471.69 10444.95 1990/08/31 11677.85 9500.72 1990/09/30 11644.60 9038.04 1990/10/31 11046.07 8999.18 1990/11/30 10926.37 9580.52 1990/12/31 10398.13 9847.82 1991/01/31 9724.62 10277.18 1991/02/28 10631.79 11012.00 1991/03/31 10487.47 11278.49 1991/04/30 10604.30 11305.56 1991/05/31 10666.16 11793.96 1991/06/30 10190.97 11253.80 1991/07/31 10714.29 11778.23 1991/08/31 10920.86 12057.37 1991/09/30 10810.69 11856.01 1991/10/31 11134.32 12014.88 1991/11/30 10308.03 11530.68 1991/12/31 10401.79 12849.79 1992/01/31 9845.17 12610.79 1992/02/29 9859.09 12774.73 1992/03/31 9573.82 12525.62 1992/04/30 10227.84 12893.87 1992/05/31 10714.88 12957.05 1992/06/30 10184.67 12763.99 1992/07/31 10456.73 13286.04 1992/08/31 10645.07 13013.68 1992/09/30 10707.85 13167.24 1992/10/31 10247.45 13213.32 1992/11/30 10010.27 13663.90 1992/12/31 10153.34 13831.96 1993/01/31 10536.22 13948.15 1993/02/28 11231.07 14137.85 1993/03/31 11805.39 14436.15 1993/04/30 12032.47 14086.80 1993/05/31 12394.30 14464.33 1993/06/30 12557.48 14506.27 1993/07/31 12465.25 14448.25 1993/08/31 13451.40 14995.84 1993/09/30 13373.36 14880.37 1993/10/31 13181.80 15188.39 1993/11/30 11585.51 15044.10 1993/12/31 12098.16 15226.14 1994/01/31 12746.15 15743.82 1994/02/28 12319.07 15317.17 1994/03/31 11722.63 14649.34 1994/04/30 12618.08 14836.85 1994/05/31 12751.60 15080.17 1994/06/30 12684.84 14710.71 1994/07/31 12877.71 15193.22 1994/08/31 12662.59 15816.14 1994/09/30 12566.15 15428.65 1994/10/31 13278.28 15775.79 1994/11/30 12462.30 15201.24 1994/12/31 12148.06 15426.67 1995/01/31 11857.18 15826.69 1995/02/28 12324.12 16443.45 1995/03/31 12997.73 16928.70 1995/04/30 13397.19 17427.25 1995/05/31 13742.88 18123.82 1995/06/30 13343.42 18544.83 1995/07/31 13658.37 19159.78 1995/08/31 13558.51 19207.87 1995/09/30 13566.19 20018.44 1995/10/31 12982.37 19946.98 1995/11/30 13727.51 20822.65 1995/12/31 14745.68 21223.69 1996/01/31 14973.50 21946.15 1996/02/29 14902.80 22149.59 1996/03/31 15900.51 22362.89 1996/04/30 16670.49 22692.52 1996/05/31 16842.77 23277.76 1996/06/30 17154.52 23366.44 1996/07/31 16383.35 22334.12 1996/08/31 17023.26 22805.14 1996/09/30 17925.70 24088.62 1996/10/31 18655.85 24752.98 1996/11/30 19689.55 26624.06 1996/12/31 19534.11 26096.63 1997/01/31 19980.17 27727.15 1997/02/28 17935.03 27944.53 1997/03/31 18431.58 26796.29 1997/04/30 18267.06 28396.03 1997/05/31 19930.11 30124.78 1997/06/30 20222.03 31474.37 1997/07/31 21548.93 33978.79 1997/08/31 21770.09 32075.30 1997/09/30 23371.22 33832.06 1997/10/31 22725.46 32702.07 1997/11/30 21416.24 34215.85 1997/12/31 21542.75 34803.33 1998/01/31 20391.76 35188.26 1998/02/28 21593.67 37726.04 1998/03/31 22622.43 39657.99 1998/04/30 23058.69 40056.94 1998/05/31 22498.31 39368.37 1998/06/30 21906.79 40967.51 1998/07/31 20101.12 40531.21 1998/08/31 16510.52 34671.20 1998/09/30 19333.19 36892.24 1998/10/31 19561.49 39893.06 1998/11/30 18876.58 42310.97 1998/12/31 18368.08 44748.93 1999/01/31 17112.41 46620.33 1999/02/28 16842.60 45171.37 1999/03/31 20402.06 46978.68 1999/04/30 23896.60 48798.16 1999/05/31 23376.65 47646.04 1999/06/30 24614.12 50290.39 1999/07/31 25269.25 48720.33 1999/08/31 26021.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 121304 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Energy Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $26,021 - a 160.21% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Mobil Corp. 5.3 Schlumberger Ltd. 4.5 Atlantic Richfield Co. 4.3 USX-Marathon Group 3.8 Texaco, Inc. 3.6 Halliburton Co. 3.0 Chevron Corp. 3.0 Amerada Hess Corp. 2.7 BJ Services Co. 2.2 Conoco, Inc. Class B 2.1 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Oil & Gas 61.0% Energy Services 22.6% Gas 4.8% Chemicals & Plastics 3.0% Electric Utility 2.6% All Others 6.0%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 6.0 Row: 1, Col: 2, Value: 2.6 Row: 1, Col: 3, Value: 3.0 Row: 1, Col: 4, Value: 4.8 Row: 1, Col: 5, Value: 22.6 Row: 1, Col: 6, Value: 61.0 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. ENERGY PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Larry Rakers) (photograph of Scott Offen) NOTE TO SHAREHOLDERS: On September 1, 1999, after the end of the period covered by this report, Scott Offen (right) became Portfolio Manager of Fidelity Select Energy Portfolio. The following is an interview with Larry Rakers, who managed the fund during the period covered by this report, with additional comments from Scott Offen on his outlook. Q. HOW DID THE FUND PERFORM, LARRY? L.R. For the six- and 12-month periods that ended August 31, 1999, the fund returned 54.54% and 57.65%, respectively. During the same periods, the fund outpaced 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 43.20% and 49.26%, respectively. The Standard & Poor's 500 Index returned 7.32% and 39.82% during the same six- and 12-month periods. Q. WHAT FACTORS CAUSED THE FUND TO OUTPERFORM THE GOLDMAN SACHS INDEX? L.R. My early prediction that oil prices were poised to rebound turned out to be beneficial to the fund's relative performance. The fund's more aggressive strategy worked well over the past six months as oil prices rebounded. Specifically, I allocated a larger percentage of assets to smaller integrated oil companies, such as USX-Marathon; energy services companies, such as Halliburton; and drillers, such as ENSCO International, which are more sensitive to price swings of oil. In an environment of increasing oil prices, these companies normally perform better than large integrated oil companies, such as Mobil and Texaco. Q. WHAT SPARKED THE DRAMATIC RALLY IN ENERGY STOCKS IN 1999? L.R. First and foremost, we saw the price of oil rebound dramatically during the period. Much of this increase was due to a favorable supply and demand equation. On the supply side, OPEC announced a significant production cutback in March. In addition, the private sector of the oil industry significantly cut back on exploration and production efforts as the price of oil continued to slide. On the demand side, we experienced a rebound in Asia and stable global demand growth. This was just enough to create a squeeze on supply, resulting in a recovery in oil prices. Q. THE FUND WAS UNDERWEIGHTED IN ELECTRIC AND GAS UTILITY STOCKS. DID YOU PURSUE ANY OTHER STRATEGIES TO TAKE ADVANTAGE OF THE RECOVERY IN OIL PRICES? L.R. I saw better growth potential in energy service and in exploration and production companies compared to electric and gas utilities given my belief that oil prices were poised to rebound. As a result, I aggressively positioned the fund to take advantage of increasing oil prices toward the beginning of the year. Since then, I made some adjustments to the portfolio; however, I didn't make a significant shift in strategy because I believed many of the stocks in the sector did not fully price in the increase in oil prices. As a result, the fund's allocation of energy services and integrated oil companies remained steady. Q. WHICH STOCKS PERFORMED WELL FOR THE FUND? L.R. USX-Marathon Group, Baker Hughes, BJ Services and Halliburton, all significant holdings for the fund, were big contributors to total return. USX-Marathon, an integrated oil company, and these leading energy services companies benefited tremendously from the recovery in oil prices. Q. WHICH STOCKS HURT FUND PERFORMANCE? L.R. Lyondell Chemical, a petrochemical producer, and EEX Corp., an oil exploration and production company, detracted from the fund's total return. Shares of Lyondell Chemical suffered after profit margins declined for ethylene - one of Lyondell's primary petrochemical products. EEX Corp. detracted from fund performance after the company's drilling sites in the Gulf of Mexico came up short of expectations. Q. SCOTT, WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? S.O. While it is difficult to predict the strength of the global economy, my feeling is that worldwide economic activity will remain steady. There are a number of overseas economies recovering from recessions, Asia seems to be turning the corner to recovery and Europe looks stable. While U.S. economic growth is in question due to potentially higher domestic interest rates, I don't think it will lead to a global slowdown. Since energy prices are heavily dependent upon global demand, I'm fairly optimistic about the outlook for energy stocks. 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 3. (checkmark)FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 060 TRADING SYMBOL: FSENX SIZE: as of August 31, 1999, more than $243 million MANAGER: Scott Offen, since September, 1999; manager, Fidelity Select Food and Agriculture Portfolio, since 1996; manager, several Fidelity Select portfolios, 1988-1996; joined Fidelity in 1985 ENERGY PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 94.5% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 0.3% Barrett Resources Corp. (a) 16,000 $ 577,000 CHEMICALS & PLASTICS - 3.0% E.I. du Pont de Nemours and 67,357 4,268,750 Co. Georgia Gulf Corp. 40,000 727,500 Lyondell Chemical Co. 108,500 1,580,031 NOVA Chemicals Corp. 35,000 763,317 7,339,598 ELECTRIC UTILITY - 2.6% AES Corp. (a) 85,500 5,188,781 Calpine Corp. (a) 10,200 924,375 Illinova Corp. 5,700 181,688 6,294,844 ENERGY SERVICES - 22.6% Atwood Oceanics, Inc. (a) 24,500 771,750 Baker Hughes, Inc. 127,550 4,336,700 BJ Services Co. (a) 154,100 5,277,925 Bonus Resource Services Corp. 35,000 77,387 (a) ENSCO International, Inc. 184,400 3,930,025 Global Marine, Inc. (a) 79,000 1,402,250 Halliburton Co. 158,300 7,341,163 Helmerich & Payne, Inc. 57,600 1,587,600 Marine Drilling Companies, 126,500 2,008,188 Inc. (a) McDermott International, Inc. 43,400 979,213 Nabors Industries, Inc. (a) 45,400 1,225,800 Noble Drilling Corp. (a) 153,500 3,779,938 Oceaneering International, 10,000 200,625 Inc. (a) Peak Energy Services Ltd. (a) 225,000 407,035 Pool Energy Services Co. (a) 53,000 1,397,875 Precision Drilling Corp. 41,800 949,427 Class A (a) Rowan Companies, Inc. (a) 29,000 540,125 Ryan Energy Technologies, 32,900 96,992 Inc. (a) Schlumberger Ltd. 163,180 10,892,265 Smith International, Inc. (a) 66,200 3,090,713 Tesco Corp. (a) 15,000 103,518 Tidewater, Inc. 20,000 650,000 Tuboscope, Inc. (a) 177,600 2,586,300 Unit Corp. (a) 105,000 807,188 UTI Energy Corp. (a) 37,000 740,000 55,180,002 GAS - 4.8% Dynegy, Inc. 7,500 176,250 Enron Corp. 120,000 5,025,000 K N Energy, Inc. 175,000 3,565,625 Ocean Energy, Inc. (a) 296,200 2,999,025 11,765,900 SHARES VALUE (NOTE 1) LEASING & RENTAL - 0.1% Superior Energy Services, 35,000 $ 218,750 Inc. (a) METALS & MINING - 0.3% Olin Corp. 47,500 673,906 OIL & GAS - 60.8% Alberta Energy Co. Ltd. 51,000 1,571,859 Amerada Hess Corp. 105,200 6,528,975 Anadarko Petroleum Corp. 49,900 1,696,600 Anderson Exploration Ltd. (a) 15,800 227,605 Apache Corp. 88,400 4,022,200 Atlantic Richfield Co. 119,400 10,499,738 Basin Exploration, Inc. (a) 30,000 682,500 Bellator Exploration, Inc. (a) 120,000 132,663 Bellwether Exploration Co. (a) 20,000 87,500 Benton Oil & Gas Co. (a) 100,000 256,250 Bonavista Petroleum Ltd. (a) 25,000 305,695 British-Borneo Oil & Gas PLC 321,900 1,131,956 Cabot Oil & Gas Corp. Class A 73,400 1,399,188 Canada Occidental Petroleum 75,000 1,381,910 Ltd. Canadian Hunter Exploration 52,000 844,891 Ltd. Canadian Natural Resources 109,800 2,722,010 Ltd. (a) Chesapeake Energy Corp. (a) 140,000 455,000 Chevron Corp. 78,200 7,213,950 Compton Petroleum Corp. (a) 125,000 234,506 Comstock Resources, Inc. (a) 94,700 437,988 Conoco, Inc. Class B 194,911 5,238,233 Cooper Cameron Corp. (a) 35,760 1,488,510 Crestar Energy, Inc. (a) 138,900 1,972,985 Denbury Resources, Inc. (a) 27,500 116,080 EEX Corp. (a) 120,000 570,000 Elf Aquitaine SA sponsored ADR 19,100 1,681,994 Enron Oil & Gas Co. 72,200 1,723,775 Ensign Resource Service 13,000 287,437 Group, Inc. Exxon Corp. 58,200 4,590,525 Forest Oil Corp. (a) 52,000 776,750 Frontier Oil Corp. (a) 227,900 1,823,200 Imperial Oil Ltd. 12,000 252,462 Ionic Energy, Inc. (a) 35,000 87,940 Kerr-McGee Corp. 46,531 2,605,736 Louis Dreyfus Natural Gas 111,000 2,428,125 Corp. (a) Magnum Hunter Resources, Inc. 65,200 248,575 Mallon Resources Corp. (a) 35,000 282,188 Meridian Resource Corp. (a) 10,000 47,500 Merit Energy Ltd. (a) 30,000 127,638 Mobil Corp. 127,300 13,032,335 Murphy Oil Corp. 17,000 862,750 Newfield Exploration Co. (a) 17,000 516,375 Noble Affiliates, Inc. 10,800 334,800 Novus Petroleum Ltd. (a) 160,152 161,882 Nuevo Energy Co. (a) 129,700 2,269,750 Occidental Petroleum Corp. 40,000 867,500 Penn West Petroleum Ltd. (a) 49,900 1,061,524 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) OIL & GAS - CONTINUED Pennaco Energy, Inc. (a) 32,000 $ 372,000 Petro-Canada 186,000 2,797,789 Pioneer Natural Resources Co. 151,000 1,717,625 Plains Resources, Inc. (a) 108,000 2,065,500 Poco Petroleums Ltd. (a) 135,000 1,338,693 Pogo Producing Co. 16,000 334,000 Post Energy Corp. (a) 127,500 696,231 Premier Oil PLC (a) 1,750,000 639,269 Prima Energy Corp. (a) 7,500 162,656 Range Resources Corp. 120,000 660,000 Ranger Oil Ltd. (a) 187,500 854,271 Remington Oil & Gas Corp. 55,500 287,906 Renaissance Energy Ltd. (a) 8,300 127,906 Rio Alto Exploration Ltd. (a) 98,400 1,608,683 Santa Fe Snyder Corp. (a) 441,585 4,305,454 Shell Canada Ltd. Class A 17,000 361,072 Shell Transport & Trading Co. 333,900 2,681,633 PLC (Reg.) St. Mary Land & Exploration 17,700 469,050 Co. Stellarton Energy Corp. Class 200,000 335,008 A (a) Storm Energy, Inc. 75,000 125,628 Suncor Energy, Inc. 50,000 2,061,977 Sunoco, Inc. 101,700 3,311,606 Swift Energy Co. (a) 105,000 1,325,625 Talisman Energy, Inc. (a) 30,000 880,402 Texaco, Inc. 139,100 8,832,850 Titan Exploration, Inc. (a) 121,200 666,600 Tosco Corp. 70,700 1,802,850 Ulster Petroleums Ltd. (a) 44,600 493,065 Ultramar Diamond Shamrock 68,000 1,776,500 Corp. Union Pacific Resources 60,400 1,083,425 Group, Inc. Upton Resources, Inc. (a) 269,700 487,900 USX-Marathon Group 298,000 9,275,250 Valero Energy Corp. 45,000 956,250 Vastar Resources, Inc. 7,800 519,675 Vintage Petroleum, Inc. 212,200 3,037,113 Weatherford International, 65,225 2,323,641 Inc. (a) Wiser Oil Co. 70,000 205,625 148,270,281 TOTAL COMMON STOCKS 230,320,281 (Cost $182,001,919) CONVERTIBLE PREFERRED STOCKS - - 0.2% OIL & GAS - 0.2% Chesapeake Energy Corp. $3.50 15,000 431,250 (Cost $146,211) CASH EQUIVALENTS - 4.4% SHARES VALUE (NOTE 1) Central Cash Collateral Fund, 82,800 $ 82,800 5.26% (b) Taxable Central Cash Fund, 10,804,245 10,804,245 5.20% (b) TOTAL CASH EQUIVALENTS 10,887,045 (Cost $10,887,045) TOTAL INVESTMENT PORTFOLIO - 241,638,576 99.1% (Cost $193,035,175) NET OTHER ASSETS - 0.9% 2,129,865 TOTAL NET ASSETS - 100% $ 243,768,441 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $154,726,808 and $112,403,927, 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 $36,299 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $67,275. The fund received cash collateral of $82,800 which was invested in the Central Cash Collateral Fund. Distribution of investments by country of issue, as a percentage of total net assets, is as follows: United States of America 82.3% Canada 10.5 Netherlands Antilles 4.5 United Kingdom 1.9 Others individually less than 0.8 1% 100.0% INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $195,496,079. Net unrealized appreciation aggregated $46,142,497, of which $49,748,048 related to appreciated investment securities and $3,605,551 related to depreciated investment securities. 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 has elected to defer to its fiscal year ending February 29, 2000 approxiamtely $6,117,000 of losses recognized during the period November 1, 1998 to February 28, 1999. ENERGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 241,638,576 value (cost $193,035,175) - See accompanying schedule Receivable for investments 3,031,236 sold Receivable for fund shares 1,085,446 sold Dividends receivable 667,951 Interest receivable 63,163 Redemption fees receivable 5,515 Other receivables 1,522 TOTAL ASSETS 246,493,409 LIABILITIES Payable for fund shares $ 2,394,202 redeemed Accrued management fee 116,359 Other payables and accrued 131,607 expenses Collateral on securities 82,800 loaned, at value TOTAL LIABILITIES 2,724,968 NET ASSETS $ 243,768,441 Net Assets consist of: Paid in capital $ 193,834,016 Undistributed net investment 429,677 income Accumulated undistributed net 901,510 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 48,603,238 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 9,738,436 $ 243,768,441 shares outstanding NET ASSET VALUE and $25.03 redemption price per share ($243,768,441 (divided by) 9,738,436 shares) Maximum offering price per $25.80 share (100/97.00 of $25.03) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 1,511,678 Dividends Interest 298,082 Security lending 1,486 TOTAL INCOME 1,811,246 EXPENSES Management fee $ 611,492 Transfer agent fees 621,950 Accounting and security 79,323 lending fees Non-interested trustees' 539 compensation Custodian fees and expenses 29,681 Registration fees 38,824 Audit 5,557 Legal 111 Total expenses before 1,387,477 reductions Expense reductions (63,267) 1,324,210 NET INVESTMENT INCOME 487,036 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 13,194,087 Foreign currency transactions (3,445) 13,190,642 Change in net unrealized appreciation (depreciation) on: Investment securities 62,660,756 Assets and liabilities in (163) 62,660,593 foreign currencies NET GAIN (LOSS) 75,851,235 NET INCREASE (DECREASE) IN $ 76,338,271 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 610,759 charges paid to FDC Sales charges - Retained by $ 608,772 FDC Deferred sales charges $ 4,037 withheld by FDC Exchange fees withheld by FSC $ 8,205 Expense reductions Directed $ 63,114 brokerage arrangements Custodian credits 153 $ 63,267
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ 487,036 $ 960,799 income Net realized gain (loss) 13,190,642 (12,098,193) Change in net unrealized 62,660,593 (22,108,978) appreciation (depreciation) NET INCREASE (DECREASE) IN 76,338,271 (33,246,372) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (365,381) (118,598) From net investment income From net realized gain - (2,920,602) TOTAL DISTRIBUTIONS (365,381) (3,039,200) Share transactions Net 159,216,384 115,988,469 proceeds from sales of shares Reinvestment of distributions 348,543 2,970,065 Cost of shares redeemed (112,021,889) (109,891,379) NET INCREASE (DECREASE) IN 47,543,038 9,067,155 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 248,037 199,403 TOTAL INCREASE (DECREASE) 123,763,965 (27,019,014) IN NET ASSETS NET ASSETS Beginning of period 120,004,476 147,023,490 End of period (including $ 243,768,441 $ 120,004,476 undistributed net investment income of $429,677 and $825,869, respectively) OTHER INFORMATION Shares Sold 7,317,421 5,995,866 Issued in reinvestment of 17,985 133,126 distributions Redeemed (4,992,838) (5,669,002) Net increase (decrease) 2,342,568 459,990
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F 1995 Net asset value, beginning of $ 16.23 $ 21.20 $ 21.31 $ 18.97 $ 16.10 $ 16.73 period Income from Investment Operations Net investment income D .05 .13 .11 .13 .18 .07 Net realized and unrealized 8.76 (4.71) 3.93 3.59 3.13 (.11) gain (loss) Total from investment 8.81 (4.58) 4.04 3.72 3.31 (.04) operations Less Distributions From net investment income (.04) (.02) (.09) (.13) (.11) (.08) From net realized gain - (.40) (4.09) (1.31) (.36) (.54) Total distributions (.04) (.42) (4.18) (1.44) (.47) (.62) Redemption fees added to paid .03 .03 .03 .06 .03 .03 in capital Net asset value, end of period $ 25.03 $ 16.23 $ 21.20 $ 21.31 $ 18.97 $ 16.10 TOTAL RETURN B, C 54.54% (22.00)% 20.40% 20.35% 20.92% .04% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 243,768 $ 120,004 $ 147,023 $ 203,265 $ 119,676 $ 96,023 (000 omitted) Ratio of expenses to average 1.30% A 1.46% 1.58% 1.57% 1.63% 1.85% net assets Ratio of expenses to average 1.25% A, E 1.42% E 1.53% E 1.55% E 1.63% 1.85% net assets after expense reductions Ratio of net investment .46% A .68% .47% .62% 1.04% .42% income to average net assets Portfolio turnover rate 114% A 138% 115% 87% 97% 106% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT ENERGY SERVICE 83.80% 80.09% 160.50% 199.75% SELECT ENERGY SERVICE (LOAD 78.22% 74.61% 152.61% 190.68% ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Natural Resources 43.20% 49.26% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of the Standard & Poor's 500 Index - a 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 resources 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT ENERGY SERVICE 80.09% 21.10% 11.60% SELECT ENERGY SERVICE (LOAD 74.61% 20.36% 11.26% ADJ.) S&P 500 39.82% 25.11% 17.10% GS Natural Resources 49.26% 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 Energy Service S&P 500 00043 SP001 1989/08/31 9700.00 10000.00 1989/09/30 9560.77 9959.00 1989/10/31 9087.37 9727.95 1989/11/30 9867.08 9926.40 1989/12/31 11129.47 10164.64 1990/01/31 10414.74 9482.59 1990/02/28 11398.66 9604.91 1990/03/31 11946.32 9859.44 1990/04/30 11315.12 9612.96 1990/05/31 13217.99 10550.22 1990/06/30 12540.38 10478.48 1990/07/31 13719.23 10444.95 1990/08/31 13477.89 9500.72 1990/09/30 13217.99 9038.04 1990/10/31 11556.46 8999.18 1990/11/30 11732.82 9580.52 1990/12/31 11324.79 9847.82 1991/01/31 10813.41 10277.18 1991/02/28 12552.11 11012.00 1991/03/31 11575.83 11278.49 1991/04/30 11631.62 11305.56 1991/05/31 11938.45 11793.96 1991/06/30 10376.41 11253.80 1991/07/31 11157.43 11778.23 1991/08/31 11036.56 12057.37 1991/09/30 10023.09 11856.01 1991/10/31 10171.86 12014.88 1991/11/30 8953.84 11530.68 1991/12/31 8665.60 12849.79 1992/01/31 8544.73 12610.79 1992/02/29 8721.39 12774.73 1992/03/31 8098.43 12525.62 1992/04/30 8767.88 12893.87 1992/05/31 9465.22 12957.05 1992/06/30 8916.65 12763.99 1992/07/31 9288.56 13286.04 1992/08/31 9762.75 13013.68 1992/09/30 10060.28 13167.24 1992/10/31 9539.60 13213.32 1992/11/30 9344.35 13663.90 1992/12/31 8963.14 13831.96 1993/01/31 9316.45 13948.15 1993/02/28 10236.94 14137.85 1993/03/31 11045.86 14436.15 1993/04/30 11641.29 14086.80 1993/05/31 12181.01 14464.33 1993/06/30 12115.87 14506.27 1993/07/31 12283.37 14448.25 1993/08/31 12711.43 14995.84 1993/09/30 12339.21 14880.37 1993/10/31 12162.40 15188.39 1993/11/30 10878.23 15044.10 1993/12/31 10841.50 15226.14 1994/01/31 10944.21 15743.82 1994/02/28 10888.19 15317.17 1994/03/31 10075.77 14649.34 1994/04/30 10602.58 14836.85 1994/05/31 11074.87 15080.17 1994/06/30 11412.23 14710.71 1994/07/31 11624.28 15193.22 1994/08/31 11161.62 15816.14 1994/09/30 11585.73 15428.65 1994/10/31 12048.38 15775.79 1994/11/30 11421.87 15201.24 1994/12/31 10903.01 15426.67 1995/01/31 10971.52 15826.69 1995/02/28 11715.35 16443.45 1995/03/31 12361.31 16928.70 1995/04/30 13114.93 17427.25 1995/05/31 13457.49 18123.82 1995/06/30 12997.49 18544.83 1995/07/31 13643.45 19159.78 1995/08/31 14191.53 19207.87 1995/09/30 14230.68 20018.44 1995/10/31 12997.49 19946.98 1995/11/30 13731.53 20822.65 1995/12/31 15359.51 21223.69 1996/01/31 15693.86 21946.15 1996/02/29 16301.75 22149.59 1996/03/31 17588.47 22362.89 1996/04/30 18911.16 22692.52 1996/05/31 18636.06 23277.76 1996/06/30 18676.81 23366.44 1996/07/31 17647.70 22334.12 1996/08/31 18768.52 22805.14 1996/09/30 19471.57 24088.62 1996/10/31 21641.87 24752.98 1996/11/30 22518.14 26624.06 1996/12/31 22898.57 26096.63 1997/01/31 24173.64 27727.15 1997/02/28 21560.28 27944.53 1997/03/31 23077.72 26796.29 1997/04/30 22810.95 28396.03 1997/05/31 25976.96 30124.78 1997/06/30 27677.43 31474.37 1997/07/31 32029.30 33978.79 1997/08/31 34300.33 32075.30 1997/09/30 37880.27 33832.06 1997/10/31 39323.43 32702.07 1997/11/30 34512.89 34215.85 1997/12/31 34776.94 34803.33 1998/01/31 29854.49 35188.26 1998/02/28 32001.64 37726.04 1998/03/31 34400.05 39657.99 1998/04/30 37232.67 40056.94 1998/05/31 34839.91 39368.37 1998/06/30 30296.10 40967.51 1998/07/31 23625.40 40531.21 1998/08/31 16145.03 34671.20 1998/09/30 19758.33 36892.24 1998/10/31 22634.46 39893.06 1998/11/30 17244.73 42310.97 1998/12/31 17486.42 44748.93 1999/01/31 16676.75 46620.33 1999/02/28 15818.75 45171.37 1999/03/31 22211.50 46978.68 1999/04/30 25897.31 48798.16 1999/05/31 25039.30 47646.04 1999/06/30 26888.24 50290.39 1999/07/31 27734.17 48720.33 1999/08/31 29068.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 120610 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Energy Service Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $29,068 - a 190.68% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Noble Drilling Corp. 7.0 BJ Services Co. 6.5 Smith International, Inc. 6.5 ENSCO International, Inc. 6.5 Schlumberger Ltd. 6.5 Weatherford International, Inc. 6.2 Halliburton Co. 5.9 Baker Hughes, Inc. 5.4 Nabors Industries, Inc. 5.0 Cooper Cameron Corp. 5.0 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Energy Services 80.2% Oil & Gas 11.7% Engineering 0.2% Iron & Steel 0.2% Ship Building & Repair 0.2% All Others 7.5%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 7.5 Row: 1, Col: 2, Value: 0.2 Row: 1, Col: 3, Value: 0.2 Row: 1, Col: 4, Value: 0.2 Row: 1, Col: 5, Value: 11.7 Row: 1, Col: 6, Value: 80.2 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. ENERGY SERVICE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of James Catudal) James Catudal, Portfolio Manager of Fidelity Select Energy Service Portfolio Q. HOW DID THE FUND PERFORM, JIM? A. It was an exceptional period. For the six months that ended August 31, 1999, the fund returned 83.80%, compared to 7.32% for the Standard & Poor's 500 Index and 43.20% for 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 August 31, 1999, the fund returned 80.09%, compared to 39.82% and 49.26% for the S&P 500 and the Goldman Sachs index, respectively. Q. WHAT ACCOUNTED FOR THE FUND'S EXTRAORDINARILY STRONG PERFORMANCE? A. A significant improvement in both crude oil and natural gas prices was the primary factor aiding the fund's performance. Crude oil, for example, roughly doubled in price during the period as a result of increased demand from Asia and the decision by the Organization of Petroleum Exporting Countries (OPEC) to restrict production. Natural gas also strengthened because lower prices in 1998 had caused reduced drilling activity, which resulted in lower production. Higher energy prices typically lead to more spending for exploration and production (E&P), which directly benefits energy service companies. Although the broadly based S&P 500 also showed a gain for the period, higher interest rates limited returns in many sectors of the market. The Goldman Sachs index benefited from higher energy prices but also reflected subsectors of the natural resources area that were not as strong as the energy component. Q. WERE THERE ANY SIGNIFICANT SHIFTS IN THE FUND'S HOLDINGS? A. During the first half of the period, I was more confident of the prospects for natural gas than for oil. Consequently, I increased the fund's holdings of companies with exposure to North American natural gas drilling activity. However, as the period progressed and the rally in oil prices continued, both oil- and gas-related stocks saw significant gains. Q. WHAT STOCKS DID WELL FOR THE FUND? A. BJ Services, a pressure pumping company, was a key contributor. The company has high exposure to the North American natural gas drilling market, which has led the energy recovery. Investors also were attracted to the stock because of efforts the company made to strengthen itself through cost reductions and acquisitions made during the recent downturn. Another strong performer was Baker Hughes, a diversified energy service company. In that case, the stock price had been driven down sharply when energy prices were weak, and it responded with a comparable move up when oil and gas recovered. Noble Drilling also helped performance. This well-managed company began to see the benefits of converting six drilling rigs to the semi-submersible type used in deep water drilling. In addition, investors liked the fact that a sizable part of the company's prospective earnings was secured by long-term contracts. Q. WHAT STOCKS WERE DISAPPOINTING? A. There is nothing worth mentioning on the negative side. Virtually all of the fund's holdings made positive contributions to performance. Q. WHAT'S YOUR OUTLOOK, JIM? A. The outlook for energy service companies appears very favorable at this juncture. Strong worldwide economic growth should continue to support oil and gas prices and, in turn, healthy budgets for exploration and production activities. Sharply higher interest rates in the United States or another shock from one of the emerging economies - for example, a currency devaluation - could reduce demand for energy products and services. Right now, though, neither of those possibilities seems likely to materialize in the near term. OPEC will probably relax its restrictions on production at some point which could increase oil price volatility. Given an environment of strong and growing demand for crude oil and low supply growth due to reduced E&P budgets, however, the market should be able to absorb the increased OPEC supply. 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 3. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 043 TRADING SYMBOL: FSESX SIZE: as of August 31, 1999, more than $796 million MANAGER: James Catudal, since 1998; manager, Fidelity Select Industrial Materials Portfolio, 1997- 1998; analyst, North American non-ferrous metals companies, since 1997; joined Fidelity in 1997 ENERGY SERVICE PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 92.9% SHARES VALUE (NOTE 1) COMPUTER SERVICES & SOFTWARE - - 0.1% GeoScience Corp. (a) 79,000 $ 533,250 CONSTRUCTION - 0.0% Bouygues Offshore SA 1,000 18,813 sponsored ADR ELECTRICAL EQUIPMENT - 0.0% NQL Drilling Tools, Inc. 90,300 468,894 Class A (a) ENERGY SERVICES - 80.2% Atwood Oceanics, Inc. (a) 195,700 6,164,550 Baker Hughes, Inc. 1,265,936 43,041,824 BJ Services Co. (a) 1,521,676 52,117,403 CAL Dive International, Inc. 100 3,763 (a) Carbo Ceramics, Inc. 46,500 1,243,875 Coflexip SA sponsored ADR 198,600 8,986,650 Diamond Offshore Drilling, 416,500 15,931,125 Inc. ENSCO International, Inc. 2,435,200 51,900,200 Global Industries Ltd. (a) 712,300 7,968,856 Global Marine, Inc. (a) 816,000 14,484,000 Halliburton Co. 1,013,167 46,985,620 Helmerich & Payne, Inc. 1,071,300 29,527,706 Input/Output, Inc. (a) 336,800 2,483,900 Lone Star Technologies, Inc. 355,000 7,100,000 (a) Marine Drilling Companies, 1,257,100 19,956,463 Inc. (a) McDermott International, Inc. 1,242,500 28,033,906 Nabors Industries, Inc. (a) 1,462,700 39,492,900 Noble Drilling Corp. (a) 2,277,450 56,082,199 Oceaneering International, 583,600 11,708,475 Inc. (a) Offshore Logistics, Inc. (a) 172,300 2,013,756 Parker Drilling Co. (a) 180,000 900,000 Pool Energy Services Co. (a) 455,100 12,003,263 Precision Drilling Corp. 125,000 2,839,196 Class A (a) Pride International, Inc. (a) 80,000 1,190,000 R&B Falcon Corp. (a) 100 1,288 Rowan Companies, Inc. (a) 1,088,600 20,275,175 Ryan Energy Technologies, 298,200 879,116 Inc. (a) Santa Fe International Corp. 118,300 3,120,163 Schlumberger Ltd. 769,245 51,347,104 SEACOR SMIT, Inc. (a) 108,900 5,655,994 Smith International, Inc. (a) 1,113,800 52,000,538 Tidewater, Inc. 646,465 21,010,113 Transocean Offshore, Inc. 228,154 7,757,236 Tuboscope, Inc. (a) 610,900 8,896,231 UTI Energy Corp. (a) 170,000 3,400,000 Varco International, Inc. (a) 172,500 2,134,688 638,637,276 ENGINEERING - 0.2% Stolt Comex Seaway SA (a) 139,500 1,778,625 INDUSTRIAL MACHINERY & EQUIPMENT - 0.2% Gardner Denver Machinery, 75,000 1,439,063 Inc. (a) SHARES VALUE (NOTE 1) IRON & STEEL - 0.2% NS Group, Inc. (a) 120,000 $ 1,425,000 Prudential Steel Ltd. 35,000 298,995 1,723,995 LEASING & RENTAL - 0.1% Hanover Compressor Co. (a) 900 32,344 Superior Energy Services, 125,000 781,250 Inc. (a) 813,594 OIL & GAS - 11.7% Compagnie Generale de 42,300 507,600 Geophysique SA sponsored ADR (a) Cooper Cameron Corp. (a) 946,276 39,388,739 Dailey International, Inc. 285,000 279,300 (a)(c) National-Oilwell, Inc. (a) 12,000 204,000 Petroleum Geo-Services ASA 126,600 2,587,388 sponsored ADR (a) Veritas DGC, Inc. (a) 20,500 366,438 Weatherford International, 1,395,940 49,730,363 Inc. (a) 93,063,828 SHIP BUILDING & REPAIR - 0.2% Dril-Quip, Inc. (a) 57,400 1,603,613 TOTAL COMMON STOCKS 740,080,951 (Cost $621,999,294) CASH EQUIVALENTS - 7.2% Taxable Central Cash Fund, 57,266,536 57,266,536 5.20% (b) (Cost $57,266,536) TOTAL INVESTMENT PORTFOLIO - 797,347,487 100.1% (Cost $679,265,830) NET OTHER ASSETS - (0.1%) (1,034,336) NET ASSETS - 100% $ 796,313,151 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. (c) Affiliated company OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $331,932,802 and $278,869,443, 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 $69,674 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 Dailey International, Inc. $ - $ - $ - $ 279,300
INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $701,754,098. Net unrealized appreciation aggregated $95,593,389, of which $151,367,435 related to appreciated investment securities and $55,774,046 related to depreciated investment securities. 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 has elected 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. ENERGY SERVICE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 797,347,487 value (cost $679,265,830) - See accompanying schedule Receivable for investments 8,357,556 sold Receivable for fund shares 3,796,330 sold Dividends receivable 582,608 Interest receivable 237,428 Redemption fees receivable 25,975 TOTAL ASSETS 810,347,384 LIABILITIES Payable for investments $ 3,156,183 purchased Payable for fund shares 10,067,431 redeemed Accrued management fee 393,381 Other payables and accrued 417,238 expenses TOTAL LIABILITIES 14,034,233 NET ASSETS $ 796,313,151 Net Assets consist of: Paid in capital $ 864,226,989 Accumulated net investment (1,239,921) loss Accumulated undistributed net (184,755,810) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 118,081,893 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 33,097,001 $ 796,313,151 shares outstanding NET ASSET VALUE and $24.06 redemption price per share ($796,313,151 (divided by) 33,097,001 shares) Maximum offering price per $24.80 share (100/97.00 of $24.06) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 1,956,753 Dividends Interest 1,221,854 Security lending 2,836 TOTAL INCOME 3,181,443 EXPENSES Management fee $ 2,104,259 Transfer agent fees 2,056,569 Accounting and security 249,839 lending fees Non-interested trustees' 1,044 compensation Custodian fees and expenses 17,025 Registration fees 99,746 Audit 13,174 Legal 367 Total expenses before 4,542,023 reductions Expense reductions (120,659) 4,421,364 NET INVESTMENT INCOME (LOSS) (1,239,921) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 1,882,599 Foreign currency transactions (5,493) 1,877,106 Change in net unrealized appreciation (depreciation) on: Investment securities 339,045,152 Assets and liabilities in 236 339,045,388 foreign currencies NET GAIN (LOSS) 340,922,494 NET INCREASE (DECREASE) IN $ 339,682,573 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 1,784,256 charges paid to FDC Sales charges - Retained by $ 1,777,258 FDC Deferred sales charges $ 3,134 withheld by FDC Exchange fees withheld by FSC $ 35,782 Expense reductions Directed $ 118,747 brokerage arrangements Custodian credits 1,153 Transfer agent credits 759 $ 120,659
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (1,239,921) $ (3,167,669) income (loss) Net realized gain (loss) 1,877,106 (185,190,842) Change in net unrealized 339,045,388 (243,966,665) appreciation (depreciation) NET INCREASE (DECREASE) IN 339,682,573 (432,325,176) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders - (54,767,354) from net realized gain Share transactions Net 754,638,708 1,182,599,212 proceeds from sales of shares Reinvestment of distributions - 53,845,591 Cost of shares redeemed (666,913,334) (1,305,871,677) NET INCREASE (DECREASE) IN 87,725,374 (69,426,874) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 2,008,832 4,414,000 TOTAL INCREASE (DECREASE) 429,416,779 (552,105,404) IN NET ASSETS NET ASSETS Beginning of period 366,896,372 919,001,776 End of period (including $ 796,313,151 $ 366,896,372 accumulated net investment loss of $1,239,921 and $0, respectively) OTHER INFORMATION Shares Sold 38,335,822 53,434,483 Issued in reinvestment of - 1,829,614 distributions Redeemed (33,261,311) (60,036,675) Net increase (decrease) 5,074,511 (4,772,578)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 G 1995 Net asset value, beginning of $ 13.09 $ 28.02 $ 20.46 $ 16.09 $ 11.97 $ 11.66 period Income from Investment Operations Net investment income (loss) (.04) (.10) (.10) (.01) .08 E .02 D Net realized and unrealized 10.95 (13.26) 9.36 5.05 4.49 .67 gain (loss) Total from investment 10.91 (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 - - - - - (.13) gain Total distributions - (1.71) (1.85) (.79) (.52) (.50) Redemption fees added to paid .06 .14 .15 .12 .07 .12 in capital Net asset value, end of period $ 24.06 $ 13.09 $ 28.02 $ 20.46 $ 16.09 $ 11.97 TOTAL RETURN B, C 83.80% (50.57)% 48.43% 32.26% 39.15% 7.60% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 796,313 $ 366,896 $ 919,002 $ 439,504 $ 273,805 $ 63,794 (000 omitted) Ratio of expenses to average 1.24% A 1.39% 1.25% 1.47% 1.59% 1.81% net assets Ratio of expenses to average 1.21% A, F 1.35% F 1.22% F 1.45% F 1.58% F 1.79% F net assets after expense reductions Ratio of net investment (.34)% A (.49)% (.35)% (.07)% .60% .19% income (loss) to average net assets Portfolio turnover rate 83% A 75% 78% 167% 223% 209% 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 NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.02 PER SHARE. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. G 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT GOLD 0.78% 45.98% -36.12% -10.47% SELECT GOLD (LOAD ADJ.) -2.31% 41.53% -38.11% -13.23% S&P 500 7.32% 39.82% 206.52% 384.79% GS Natural Resources 43.20% 49.26% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 index - a 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 resources 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT GOLD 45.98% -8.57% -1.10% SELECT GOLD (LOAD ADJ.) 41.53% -9.15% -1.41% S&P 500 39.82% 25.11% 17.10% GS Natural Resources 49.26% 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 GOLD S&P 500 00041 SP001 1989/08/31 9700.00 10000.00 1989/09/30 9756.25 9959.00 1989/10/31 9856.25 9727.95 1989/11/30 11112.50 9926.40 1989/12/31 10937.50 10164.64 1990/01/31 11418.75 9482.59 1990/02/28 11100.00 9604.91 1990/03/31 10668.75 9859.44 1990/04/30 9512.50 9612.96 1990/05/31 10350.00 10550.22 1990/06/30 9687.50 10478.48 1990/07/31 10362.50 10444.95 1990/08/31 10175.00 9500.72 1990/09/30 10168.75 9038.04 1990/10/31 8500.00 8999.18 1990/11/30 8393.75 9580.52 1990/12/31 9056.25 9847.82 1991/01/31 7800.00 10277.18 1991/02/28 8506.25 11012.00 1991/03/31 8475.00 11278.49 1991/04/30 8175.00 11305.56 1991/05/31 8456.25 11793.96 1991/06/30 9025.00 11253.80 1991/07/31 8925.00 11778.23 1991/08/31 8200.00 12057.37 1991/09/30 8062.50 11856.01 1991/10/31 8681.25 12014.88 1991/11/30 8662.50 11530.68 1991/12/31 8500.00 12849.79 1992/01/31 8706.25 12610.79 1992/02/29 8437.50 12774.73 1992/03/31 7862.50 12525.62 1992/04/30 7462.50 12893.87 1992/05/31 7993.75 12957.05 1992/06/30 8512.50 12763.99 1992/07/31 9050.00 13286.04 1992/08/31 8881.25 13013.68 1992/09/30 8831.25 13167.24 1992/10/31 8568.75 13213.32 1992/11/30 7843.75 13663.90 1992/12/31 8237.50 13831.96 1993/01/31 8081.25 13948.15 1993/02/28 8843.75 14137.85 1993/03/31 9837.50 14436.15 1993/04/30 11081.25 14086.80 1993/05/31 12312.50 14464.33 1993/06/30 13031.25 14506.27 1993/07/31 14068.75 14448.25 1993/08/31 13331.25 14995.84 1993/09/30 11918.75 14880.37 1993/10/31 13700.00 15188.39 1993/11/30 13712.50 15044.10 1993/12/31 14718.75 15226.14 1994/01/31 14725.00 15743.82 1994/02/28 14162.50 15317.17 1994/03/31 14506.25 14649.34 1994/04/30 13281.25 14836.85 1994/05/31 13856.25 15080.17 1994/06/30 13175.00 14710.71 1994/07/31 12981.25 15193.22 1994/08/31 13593.75 15816.14 1994/09/30 14781.25 15428.65 1994/10/31 13712.50 15775.79 1994/11/30 12087.50 15201.24 1994/12/31 12443.75 15426.67 1995/01/31 11143.75 15826.69 1995/02/28 11525.00 16443.45 1995/03/31 13293.75 16928.70 1995/04/30 13243.75 17427.25 1995/05/31 13518.75 18123.82 1995/06/30 13706.25 18544.83 1995/07/31 14075.00 19159.78 1995/08/31 14106.25 19207.87 1995/09/30 14100.00 20018.44 1995/10/31 12400.00 19946.98 1995/11/30 13550.00 20822.65 1995/12/31 13837.50 21223.69 1996/01/31 16293.75 21946.15 1996/02/29 16943.75 22149.59 1996/03/31 17350.00 22362.89 1996/04/30 17762.50 22692.52 1996/05/31 19700.00 23277.76 1996/06/30 16918.75 23366.44 1996/07/31 16606.25 22334.12 1996/08/31 18300.00 22805.14 1996/09/30 17962.50 24088.62 1996/10/31 17468.75 24752.98 1996/11/30 16718.75 26624.06 1996/12/31 16593.99 26096.63 1997/01/31 15886.64 27727.15 1997/02/28 17976.83 27944.53 1997/03/31 15121.94 26796.29 1997/04/30 14208.43 28396.03 1997/05/31 15023.62 30124.78 1997/06/30 13736.84 31474.37 1997/07/31 13521.25 33978.79 1997/08/31 13649.26 32075.30 1997/09/30 14814.77 33832.06 1997/10/31 12544.38 32702.07 1997/11/30 9586.82 34215.85 1997/12/31 10058.41 34803.33 1998/01/31 10617.59 35188.26 1998/02/28 10220.10 37726.04 1998/03/31 10887.07 39657.99 1998/04/30 11520.35 40056.94 1998/05/31 9896.72 39368.37 1998/06/30 8690.79 40967.51 1998/07/31 8050.77 40531.21 1998/08/31 5948.81 34671.20 1998/09/30 9216.28 36892.24 1998/10/31 8940.06 39893.06 1998/11/30 8751.42 42310.97 1998/12/31 9189.33 44748.93 1999/01/31 8933.33 46620.33 1999/02/28 8616.68 45171.37 1999/03/31 8630.16 46978.68 1999/04/30 9977.57 48798.16 1999/05/31 8441.52 47646.04 1999/06/30 8845.74 50290.39 1999/07/31 8320.25 48720.33 1999/08/31 8677.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990909 154434 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Gold Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have been $8,677 - a 13.23% decrease on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Meridian Gold, Inc. 10.6 Placer Dome, Inc. 9.3 Anglogold Ltd. 6.7 Freeport-McMoRan Copper & 5.9 Gold, Inc. Class B Normandy Mining Ltd. 5.8 Barrick Gold Corp. 5.3 Euro-Nevada Mining Corp. Ltd. 4.9 Agnico-Eagle Mines Ltd. 4.9 Newmont Mining Corp. 4.9 Newcrest Mining Ltd. 4.5 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Gold Ores (Canada) 44.2% Gold Ores (United States of America) 8.9% Gold Ores (Australia) 8.7% Gold & Silver Ores (South Africa) 8.5% Gold & Silver Ores (Australia) 6.7% All Others 23.0%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 23.0 Row: 1, Col: 2, Value: 6.7 Row: 1, Col: 3, Value: 8.5 Row: 1, Col: 4, Value: 8.699999999999999 Row: 1, Col: 5, Value: 8.9 Row: 1, Col: 6, Value: 44.2 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. GOLD PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of George Domolky) George Domolky, Portfolio Manager of Fidelity Select Gold Portfolio Q. HOW DID THE FUND PERFORM, GEORGE? A. The fund's performance was disappointing relative to its benchmarks, although it posted a small gain in spite of further weakness in the price of gold. For the six months that ended August 31, 1999, the fund returned 0.78%, trailing the 7.32% gain in the Standard & Poor's 500 Index and the 43.20% gain in 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 August 31, 1999, the fund returned 45.98%, beating the 39.82% gain in the S&P 500 but coming up slightly short of the 49.26% gain in the Goldman Sachs index. Q. WHY DID THE FUND UNDERPERFORM THE INDEXES BY SO MUCH DURING THE SIX-MONTH PERIOD? A. Selling pressure once again engulfed the gold market, this time in response to the Bank of England's announcement in May of its intention to sell off about 400 tons of gold over the next 18 months. That announcement drove down the price of the yellow metal to around the level of $250 per ounce in late August. While the Goldman Sachs index contains precious metals stocks, it also contains the stocks of companies that produce base metals such as copper, aluminum, zinc and nickel. The prices of base metals advanced sharply during the period as did energy prices, enabling the Goldman Sachs index to outpace the fund's performance by a wide margin. The S&P 500 also performed well because the environment for stocks in most sectors continued to be favorable, with moderate growth in the U.S. economy and negligible inflation. Q. HOW DID DEMAND FOR GOLD FROM ASIA AFFECT THE MARKET? A. The formerly depressed economies of Asia appeared to be recovering much faster than most investors expected. Since the Asian jewelry market uses a significant percentage of annual worldwide gold production, this development undoubtedly prevented gold's price from sliding even further than it did. Q. WHAT STOCKS HELPED THE FUND'S PERFORMANCE? A. Anglogold Ltd., the largest gold mining company in South Africa, made a positive contribution to performance. The stock price was supported by investors' confidence in the company's management and its strategic approach to cost-cutting. Although foreign investments are typically riskier than U.S.-based ones, I've tried to offset some of that risk by seeking out companies with the best management, healthiest cash flows and strongest balance sheets, as well as the capability to add meaningfully to production. Anglogold is a good example of that strategy. Newmont Mining also bucked the downtrend, as investor interest in the stock remained high because of the company's large reserve position. Finally, the price of Getchell Gold benefited from the company's acquisition by Placer Dome. Q. WHAT STOCKS DETRACTED FROM PERFORMANCE? A. Euro-Nevada Mining Corp., which derives the bulk of its revenue from gold royalties, was a disappointment. In the recent difficult environment, investors became skeptical of the company's future earnings stream. Normandy Mining, an Australian holding, was another negative contributor to performance. Its decision to acquire TVX Gold was not well received by investors. Also disappointing was Placer Dome, which ran into trouble when investors judged that the company paid too much for some recent acquisitions. Q. WHAT'S YOUR OUTLOOK, GEORGE? A. At the end of the period, the price of gold was close to a 20-year low. With prices so low, many mines must cut back their budgets for exploring and developing new properties. Over the long term, this should have the effect of curtailing supply and supporting gold prices. Other factors that could help gold would be a resurgence of inflation in the Western world, a decline in the value of the U.S. dollar and a reduction in central bank sales of gold. Regardless of what gold does, however, my goal is to keep the fund invested in the stocks of the highest-quality companies. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 041 TRADING SYMBOL: FSAGX SIZE: as of August 31, 1999, more than $177 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 AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 98.1% SHARES VALUE (NOTE 1) AUSTRALIA - 17.5% METALS & MINING - 2.1% METAL MINING SERVICES - 2.1% Acacia Resources Ltd. 3,060,755 $ 3,642,100 PRECIOUS METALS - 15.4% GOLD & SILVER ORES - 6.7% Normandy Mining Ltd. 14,355,416 10,285,943 Sons of Gwalia NL 635,235 1,584,927 11,870,870 GOLD ORES - 8.7% Delta Gold NL 5,320,509 7,515,581 Newcrest Mining Ltd. (a) 3,335,062 7,894,342 15,409,923 TOTAL PRECIOUS METALS 27,280,793 TOTAL AUSTRALIA 30,922,893 CANADA - 49.8% METALS & MINING - 2.1% METAL MINING SERVICES - 0.1% Minefinders Corp. Ltd. (a) 297,600 129,608 Minefinders Corp. Ltd. (a)(d) 200,000 87,102 216,710 MISCELLANEOUS NONMETALLIC MINERALS - 2.0% Camphor Ventures, Inc. (a) 14,100 6,235 DIA Metropolitan Minerals Ltd.: Class A (sub-vtg.) (a) 50,650 755,084 Class B (multi-vtg.) (a) 177,900 2,801,106 3,562,425 TOTAL METALS & MINING 3,779,135 OIL & GAS - 0.4% OIL & GAS FIELD EXPLORATION SERVICES - 0.4% Southwestern Gold Corp. (a) 227,500 670,687 PRECIOUS METALS - 47.3% GOLD & SILVER ORES - 3.1% Goldcorp, Inc. Class A (a) 1,056,200 5,236,771 Richmont Mines, Inc. (a) 198,600 294,074 5,530,845 GOLD ORES - 44.2% Agnico-Eagle Mines Ltd. 1,427,500 8,608,040 Barrick Gold Corp. 485,500 9,368,442 Euro-Nevada Mining Corp. Ltd. 721,400 8,676,134 Francisco Gold Corp. (a) 191,200 980,020 Francisco Gold Corp. (d) 144,500 740,653 Franco Nevada Mining Corp. 369,600 5,819,497 Ltd. Franco Nevada Mining Corp. 106,900 1,683,183 Ltd. (d) SHARES VALUE (NOTE 1) Franco Nevada Mining Corp. 33,334 $ 167,508 Ltd. Class B warrants 9/15/98 (a)(d) Geomaque Explorations Ltd. (a) 678,100 227,169 Glamis Gold Ltd. (a) 897,600 1,683,940 High River Gold Mines Ltd. (a) 60,000 17,688 IAMGOLD, International 195,200 438,137 African Mining Gold Corp. (a) IAMGOLD, International 60,000 134,673 African Mining Gold Corp. (d) Meridian Gold, Inc. (a) 3,569,700 18,775,304 Metallica Resources, Inc. 1,042,100 363,077 (a)(c) Metallica Resources, Inc. 100,000 34,841 (a)(c)(d) Mountain Province Mining, 427,400 773,186 Inc. (a) Placer Dome, Inc. 1,584,787 16,458,424 Repadre Capital Corp. (a) 301,200 435,908 Repadre Capital Corp. (a)(d) 155,000 224,322 Teck Corp. Class B (sub-vtg.) 300,300 2,605,618 Vengold, Inc. (a) 315,000 15,829 78,231,593 TOTAL PRECIOUS METALS 83,762,438 TOTAL CANADA 88,212,260 GHANA - 1.3% PRECIOUS METALS - 1.3% GOLD ORES - 1.3% Ashanti Goldfields Co. Ltd. 319,902 2,319,290 GDR GRAND CAYMAN ISLANDS - 0.1% PRECIOUS METALS - 0.1% SILVER ORES - 0.1% Apex Silver Mines Ltd. (a) 14,800 190,550 PERU - 5.0% PRECIOUS METALS - 5.0% SILVER ORES - 5.0% Compania de Minas Buenaventura SA: Class B 939,419 7,184,690 Series A sponsored ADR 224,445 1,722,523 8,907,213 SOUTH AFRICA - 8.9% METALS & MINING - 0.4% NON-METALLIC MINERALS, EXCEPT FUELS - 0.4% De Beers Consolidated Mines 25,000 679,688 Ltd. ADR PRECIOUS METALS - 8.5% GOLD & SILVER ORES - 8.5% Anglogold Ltd. 236,500 11,851,228 Gold Fields Ltd. 919,135 3,171,254 15,022,482 TOTAL SOUTH AFRICA 15,702,170 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) UNITED KINGDOM - 0.3% METALS & MINING - 0.3% MISCELLANEOUS METAL ORES, NEC - - 0.3% Anglo American PLC (a) 10,000 $ 550,070 UNITED STATES OF AMERICA - 15.2% METALS & MINING - 5.9% COPPER ORES - 5.9% Freeport-McMoRan Copper & 655,000 10,520,938 Gold, Inc. Class B PRECIOUS METALS - 8.9% GOLD ORES - 8.9% Homestake Mining Co. 340,006 2,890,051 Newmont Mining Corp. 420,565 8,595,297 Stillwater Mining Co. (a) 136,000 3,000,500 Stillwater Mining Co. (d) 59,400 1,310,513 15,796,361 SERVICES - 0.4% JEWELRY, PRECIOUS METAL - 0.4% Lazare Kaplan International, 85,300 703,725 Inc. (a) TOTAL UNITED STATES OF AMERICA 27,021,024 TOTAL COMMON STOCKS 173,825,470 (Cost $209,331,292) CASH EQUIVALENTS - 0.4% Taxable Central Cash Fund, 715,535 715,535 5.20% (b) (Cost $715,535) TOTAL INVESTMENT PORTFOLIO - 174,541,005 98.5% NET OTHER ASSETS - 1.5% 2,685,944 NET ASSETS - 100% $ 177,226,949 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. (c) Affiliated company (d) 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 $4,382,795 or 2.5% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $55,375,308 and $55,366,426, 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 $9,904 for the period. Transactions during the period with companies which are or were affiliates are as follows:
AFFILIATE PURCHASE COST SALES COST DIVIDEND INCOME VALUE Metallica Resources, Inc. $ - $ - $ - $ 397,918
INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $211,446,902. Net unrealized depreciation aggregated $36,905,897, of which $14,504,368 related to appreciated investment securities and $51,410,265 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 elect 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 AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 174,541,005 value (cost $210,046,827) - See accompanying schedule Receivable for investments 917,463 sold Receivable for fund shares 2,123,552 sold Dividends receivable 726,592 Interest receivable 13,561 Redemption fees receivable 1,403 Other receivables 6,280 TOTAL ASSETS 178,329,856 LIABILITIES Payable to custodian bank $ 7,124 Payable for investments 276,737 purchased Payable for fund shares 588,581 redeemed Accrued management fee 86,690 Other payables and accrued 143,775 expenses TOTAL LIABILITIES 1,102,907 NET ASSETS $ 177,226,949 Net Assets consist of: Paid in capital $ 295,022,663 Undistributed net investment 909,084 income Accumulated undistributed net (83,209,442) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (35,495,356) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 13,752,983 $ 177,226,949 shares outstanding NET ASSET VALUE and $12.89 redemption price per share ($177,226,949 (divided by) 13,752,983 shares) Maximum offering price per $13.29 share (100/97.00 of $12.89) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 1,289,681 Dividends Special dividend from Gold 875,395 Fields Ltd. Interest 67,090 Security lending 3,630 TOTAL INCOME 2,235,796 EXPENSES Management fee $ 521,931 Transfer agent fees 699,555 Accounting and security 67,761 lending fees Custodian fees and expenses 57,126 Registration fees 26,761 Audit 8,228 Legal 118 Total expenses before 1,381,480 reductions Expense reductions (90,359) 1,291,121 NET INVESTMENT INCOME 944,675 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (5,010,862) Foreign currency transactions (22,162) (5,033,024) Change in net unrealized appreciation (depreciation) on: Investment securities 5,156,706 Assets and liabilities in 13,431 5,170,137 foreign currencies NET GAIN (LOSS) 137,113 NET INCREASE (DECREASE) IN $ 1,081,788 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 233,953 charges paid to FDC Sales charges - Retained by $ 232,460 FDC Deferred sales charges $ 10,047 withheld by FDC Exchange fees withheld by FSC $ 10,988 Expense reductions Directed $ 90,359 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ 944,675 $ (1,223,735) income (loss) Net realized gain (loss) (5,033,024) (32,008,820) Change in net unrealized 5,170,137 (3,278,038) appreciation (depreciation) NET INCREASE (DECREASE) IN 1,081,788 (36,510,593) NET ASSETS RESULTING FROM OPERATIONS Share transactions Net 125,653,500 403,467,113 proceeds from sales of shares Cost of shares redeemed (129,643,951) (408,945,830) NET INCREASE (DECREASE) IN (3,990,451) (5,478,717) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 516,285 1,940,375 TOTAL INCREASE (DECREASE) (2,392,378) (40,048,935) IN NET ASSETS NET ASSETS Beginning of period 179,619,327 219,668,262 End of period (including $ 177,226,949 $ 179,619,327 undistributed net investment income (loss) of $909,084 and $(35,591), respectively) OTHER INFORMATION Shares Sold 9,409,953 29,231,688 Redeemed (9,701,961) (29,663,500) Net increase (decrease) (292,008) (431,812)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F Net asset value, beginning of $ 12.79 $ 15.17 $ 28.21 $ 27.11 $ 18.44 period Income from Investment Operations Net investment income (loss) D .07 H (.08) (.13) (.16) (.06) Net realized and unrealized (.01) G (2.43) (11.78) 1.60 8.62 gain (loss) Total from investment .06 (2.51) (11.91) 1.44 8.56 operations Less Distributions From net realized gain - - (1.29) (.50) - Redemption fees added to paid .04 .13 .16 .16 .11 in capital Net asset value, end of period $ 12.89 $ 12.79 $ 15.17 $ 28.21 $ 27.11 TOTAL RETURN B, C 0.78% (15.69)% (43.15)% 6.10% 47.02% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 177,227 $ 179,619 $ 219,668 $ 428,103 $ 451,493 (000 omitted) Ratio of expenses to average 1.52% A 1.57% 1.55% 1.44% 1.39% net assets Ratio of expenses to average 1.42% A, E 1.54% E 1.48% E 1.42% E 1.39% net assets after expense reductions Ratio of net investment 1.04% A (.59)% (.67)% (.59)% (.27)% income (loss) to average net assets Portfolio turnover rate 62% A 59% 89% 63% 56%
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 22.66 period Income from Investment Operations Net investment income (loss) D (.05) Net realized and unrealized (4.25) gain (loss) Total from investment (4.30) operations Less Distributions From net realized gain - Redemption fees added to paid .08 in capital Net asset value, end of period $ 18.44 TOTAL RETURN B, C (18.62)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 278,197 (000 omitted) Ratio of expenses to average 1.41% net assets Ratio of expenses to average 1.41% net assets after expense reductions Ratio of net investment (.22)% income (loss) to average net assets Portfolio turnover rate 34% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR THE YEAR ENDED FEBRUARY 29 G 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. H NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM GOLD FIELDS LTD. WHICH AMOUNTED TO $.06 PER SHARE.
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 past one year and life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR LIFE OF FUND SELECT NATURAL RESOURCES 52.98% 58.61% 23.82% SELECT NATURAL RESOURCES 48.32% 53.78% 20.03% (LOAD ADJ.) S&P 500 7.32% 39.82% 72.48% GS Natural Resources 43.20% 49.26% 32.80% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year or since the fund started on March 3, 1997. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR LIFE OF FUND SELECT NATURAL RESOURCES 58.61% 8.94% SELECT NATURAL RESOURCES 53.78% 7.59% (LOAD ADJ.) S&P 500 39.82% 24.41% GS Natural Resources 49.26% 12.04% 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 1999/02/28 7851.10 16070.92 1999/03/31 9522.82 16713.92 1999/04/30 11154.73 17361.25 1999/05/31 10796.50 16951.35 1999/06/30 11423.40 17892.15 1999/07/31 11602.51 17333.56 1999/08/31 12003.00 17247.76 IMATRL PRASUN SHR__CHT 19990831 19990909 154654 R00000000000033 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Natural Resources Portfolio on March 3, 1997 when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have been $12,003 - a 20.03% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $17,248 - a 72.48% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Mobil Corp. 7.8 USX-Marathon Group 5.6 Schlumberger Ltd. 4.7 Halliburton Co. 3.9 Alcoa, Inc. 3.8 Texaco, Inc. 3.2 Chevron Corp. 3.2 Amerada Hess Corp. 3.0 Exxon Corp. 2.9 BJ Services Co. 2.2 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Oil & Gas 55.6% Energy Services 23.4% Metals & Mining 7.8% Gas 2.9% Precious Metals 2.3% All Others 8.0%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 8.0 Row: 1, Col: 2, Value: 2.3 Row: 1, Col: 3, Value: 2.9 Row: 1, Col: 4, Value: 7.8 Row: 1, Col: 5, Value: 23.4 Row: 1, Col: 6, Value: 55.6 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. NATURAL RESOURCES PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Larry Rakers) (photograph of Scott Offen) NOTE TO SHAREHOLDERS: On September 1, 1999, after the end of the period covered by this report, Scott Offen (right) became Portfolio Manager of Fidelity Select Natural Resources Portfolio. The following is an interview with Larry Rakers, who managed the fund during the period covered by this report, with comments from Scott Offen on his outlook. Q. HOW DID THE FUND PERFORM, LARRY? L.R. For the six- and 12-month periods that ended August 31, 1999, the fund returned 52.98% and 58.61%, respectively. During the same periods, the fund outpaced 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 43.20% and 49.26%, respectively. The Standard & Poor's 500 Index returned 7.32% and 39.82% during the same six- and 12-month periods. Q. WHAT FACTORS HELPED THE FUND OUTPERFORM THE GOLDMAN SACHS INDEX? L.R. My early prediction that oil prices and commodity prices were poised to rebound turned out to be beneficial to the fund's relative performance. The fund's more aggressive strategy worked well over the past six months as oil prices rebounded. Specifically, I allocated a larger percentage of assets to smaller integrated oil companies, energy service companies and drillers, which are more sensitive to oil prices. In an environment of increasing oil prices, these companies performed better than the large integrated oil companies during the period. Q. WHAT SPARKED THE DRAMATIC RALLY IN NATURAL RESOURCES STOCKS IN 1999? L.R. First we saw the price of oil rebound dramatically. Much of this increase was due to a favorable supply and demand equation. On the supply side, OPEC announced a significant production cutback in March. In addition, the remainder of the oil industry significantly cut back on exploration and production efforts as the price of oil continued to slide. On the demand side, we experienced a rebound in Asia and stable global demand. This created a squeeze on supply, resulting in a recovery in most commodity prices, especially oil. Q. DID YOU MAKE ANY CHANGES TO THE FUND'S STRATEGY TO TAKE ADVANTAGE OF THE RECOVERY IN OIL PRICES? L.R. I did make some minor adjustments to the portfolio. I did not, however, make any significant changes to the fund's strategy because I believed many of the stocks in the sector did not fully price in the increase in oil prices. As a result, even if energy prices remained stable, these stocks could have room to grow. While the fund's allocation of energy services and integrated oil companies remained steady, I started to look more closely at oil refiners and natural gas companies, which appeared to be undervalued given their favorable supply and demand outlook. Q. WHICH STOCKS PERFORMED WELL FOR THE FUND? L.R. USX-Marathon Group and Halliburton, two of the fund's top-10 holdings, were big contributors to fund performance. USX-Marathon, a leading integrated oil company, and Halliburton, a leading oil services company, benefited from the recovery in oil prices and the group's sensitivity to the price swings of oil. In the metals and mining group, Alcoa was a key contributor. Shares of Alcoa rallied dramatically as global demand for commodities improved, and aluminum was one of the hottest commodities. Q. WHICH STOCKS HURT FUND PERFORMANCE? L.R. Greenstone Resources was a disappointment for the fund. This gold mining company ran into some operational problems and a deteriorating business outlook. While the fund was underweighted in gold mining companies, Placer Dome and Homestake Mining also detracted from total return as weakness in gold prices hurt stock performance. Q. SCOTT, WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? S.O. While it is difficult to predict the strength of the global economy, my feeling is that worldwide economic activity will remain steady. There are a number of overseas economies recovering from recessions, Asia seems to be turning the corner to recovery and Europe looks stable. While U.S. economic growth is in question due to potentially higher domestic interest rates, I don't think it will lead to a global slowdown. Since commodity prices are heavily dependent upon global demand, I'm fairly optimistic about the outlook for natural resources stocks. 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 3. (checkmark)FUND FACTS START DATE: March 3, 1997 FUND NUMBER: 514 TRADING SYMBOL: FNATF SIZE: as of August 31, 1999, more than $22 million MANAGER: Scott Offen, since September 1999; manager, Fidelity Select Food and Agriculture Portfolio, since 1996; manager, several Fidelity Select portfolios, 1988-1996; joined Fidelity in 1985 NATURAL RESOURCES PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 92.4% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 0.2% Barrett Resources Corp. (a) 1,400 $ 50,488 ELECTRIC UTILITY - 0.2% Calpine Corp. (a) 400 36,250 Illinova Corp. 400 12,750 49,000 ENERGY SERVICES - 23.4% Baker Hughes, Inc. 11,490 390,660 BJ Services Co. (a) 14,100 482,925 Bonus Resource Services Corp. 8,400 18,573 (a) ENSCO International, Inc. 18,800 400,675 Global Marine, Inc. (a) 9,200 163,300 Halliburton Co. 18,800 871,850 Helmerich & Payne, Inc. 6,300 173,644 Marine Drilling Companies, 10,000 158,750 Inc. (a) McDermott International, Inc. 1,800 40,613 Nabors Industries, Inc. (a) 8,800 237,600 Noble Drilling Corp. (a) 16,500 406,313 Oceaneering International, 600 12,038 Inc. (a) Precision Drilling Corp. 2,500 56,784 Class A (a) Rowan Companies, Inc. (a) 2,000 37,250 Santa Fe International Corp. 4,200 110,775 Schlumberger Ltd. 15,726 1,049,711 Smith International, Inc. (a) 5,300 247,444 Tidewater, Inc. 2,400 78,000 Tuboscope, Inc. (a) 10,300 149,994 Unit Corp. (a) 4,100 31,519 UTI Energy Corp. (a) 4,100 82,000 5,200,418 GAS - 2.9% Dynegy, Inc. 7,200 169,200 K N Energy, Inc. 10,600 215,975 Ocean Energy, Inc. (a) 25,700 260,213 645,388 LEASING & RENTAL - 0.1% Superior Energy Services, 1,800 11,250 Inc. (a) METALS & MINING - 7.8% Alcan Aluminium Ltd. 900 29,608 Alcoa, Inc. 13,100 845,769 ASARCO, Inc. 600 12,525 Breakwater Resources Ltd. (a) 36,900 92,714 Camphor Ventures, Inc. (a) 16,400 7,252 Cominco Ltd. 3,600 62,111 Cyprus Amax Minerals Co. 6,800 115,175 Freeport-McMoRan Copper & 6,200 89,125 Gold, Inc. Freeport-McMoRan Copper & 3,500 56,219 Gold, Inc. Class B Inco Ltd. 7,900 162,234 Phelps Dodge Corp. 700 39,156 SHARES VALUE (NOTE 1) Reynolds Metals Co. 3,300 $ 208,931 Rio Algom Ltd. 1,500 22,864 1,743,683 OIL & GAS - 55.5% Alberta Energy Co. Ltd. 4,900 151,022 Amerada Hess Corp. 10,800 670,275 Anadarko Petroleum Corp. 6,600 224,400 Apache Corp. 6,800 309,400 Atlantic Richfield Co. 3,100 272,606 Basin Exploration, Inc. (a) 3,200 72,800 Bellator Exploration, Inc. (a) 9,800 10,834 Benton Oil & Gas Co. (a) 8,600 22,038 British-Borneo Oil & Gas PLC 23,300 81,934 Cabot Oil & Gas Corp. Class A 2,200 41,938 Canada Occidental Petroleum 6,400 117,923 Ltd. Canadian Hunter Exploration 4,100 66,616 Ltd. Canadian Natural Resources 5,600 138,827 Ltd. (a) Chevron Corp. 7,800 719,550 Comstock Resources, Inc. (a) 3,000 13,875 Conoco, Inc. Class B 6,351 170,683 Cooper Cameron Corp. (a) 1,100 45,788 Crestar Energy, Inc. (a) 7,600 107,953 EEX Corp. (a) 4,300 20,425 Elf Aquitaine SA sponsored ADR 800 70,450 Encal Energy Ltd. (a) 3,500 18,760 Enron Oil & Gas Co. 5,800 138,475 Ensign Resource Service 1,200 26,533 Group, Inc. Exxon Corp. 8,100 638,888 Forest Oil Corp. (a) 2,400 35,850 Frontier Oil Corp. (a) 50,700 405,600 Gulf Canada Resources Ltd. (a) 5,600 22,888 Imperial Oil Ltd. 3,800 79,946 Kerr-McGee Corp. 7,055 395,080 Louis Dreyfus Natural Gas 5,700 124,688 Corp. (a) Magnum Hunter Resources, Inc. 11,900 45,369 Magnum Hunter Resources, Inc. 3,966 1,735 warrants 7/1/02 (a) Mobil Corp. 17,000 1,740,369 Murphy Oil Corp. 1,100 55,825 Noble Affiliates, Inc. 900 27,900 Novus Petroleum Ltd. (a) 19,000 19,205 Nuevo Energy Co. (a) 9,200 161,000 Occidental Petroleum Corp. 1,000 21,688 Penn West Petroleum Ltd. (a) 1,800 38,291 Pennaco Energy, Inc. (a) 1,500 17,438 Petro-Canada 14,700 221,116 Petrobras PN (Pfd. Reg.) 1 0 Pioneer Natural Resources Co. 14,200 161,525 Plains Resources, Inc. (a) 12,100 231,413 Pogo Producing Co. 1,600 33,400 Premier Oil PLC (a) 117,300 42,849 Prima Energy Corp. (a) 1,200 26,025 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) OIL & GAS - CONTINUED Range Resources Corp. 5,800 $ 31,900 Ranger Oil Ltd. (a) 4,400 20,047 Remington Oil & Gas Corp. 4,900 25,419 Rio Alto Exploration Ltd. (a) 6,600 107,899 Santa Fe Snyder Corp. (a) 29,985 292,354 Shell Transport & Trading Co. 8,000 64,250 PLC (Reg.) St. Mary Land & Exploration 1,500 39,750 Co. Suncor Energy, Inc. 5,800 239,189 Sunoco, Inc. 7,900 257,244 Swift Energy Co. (a) 6,000 75,750 Talisman Energy, Inc. (a) 5,100 149,668 Texaco, Inc. 11,400 723,900 Titan Exploration, Inc. (a) 5,800 31,900 Tosco Corp. 7,600 193,800 Ulster Petroleums Ltd. (a) 5,600 61,910 Ultramar Diamond Shamrock 3,400 88,825 Corp. Union Pacific Resources 8,600 154,263 Group, Inc. Upton Resources, Inc. (a) 7,600 13,749 USX-Marathon Group 40,000 1,245,000 Valero Energy Corp. 3,800 80,750 Vintage Petroleum, Inc. 14,900 213,256 Weatherford International, 4,495 160,134 Inc. (a) Wiser Oil Co. 4,400 12,925 12,345,075 PRECIOUS METALS - 2.3% Agnico-Eagle Mines Ltd. 1,900 11,457 Meridian Gold, Inc. (a) 10,600 55,752 Mountain Province Mining, 9,100 16,462 Inc. (a) Newmont Mining Corp. 2,100 42,919 Pan American Silver Corp. (a) 2,400 12,704 Placer Dome, Inc. 18,400 191,089 Repadre Capital Corp. (a) 1,500 2,171 Stillwater Mining Co. (a) 8,150 179,809 William Resources, Inc. 15,750 0 warrants 2/15/03 (a)(c) 512,363 TOTAL COMMON STOCKS 20,557,665 (Cost $17,567,167) CONVERTIBLE PREFERRED STOCKS - - 0.1% OIL & GAS - 0.1% Chesapeake Energy Corp. $3.50 1,000 28,750 (Cost $9,692) CASH EQUIVALENTS - 3.4% SHARES VALUE (NOTE 1) Taxable Central Cash Fund, 753,725 $ 753,725 5.20% (b) (Cost $753,725) TOTAL INVESTMENT PORTFOLIO - 21,340,140 95.9% (Cost $18,330,584) NET OTHER ASSETS - 4.1% 921,802 NET ASSETS - 100% $ 22,261,942 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. (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 $0 or 0.0% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $21,696,176 and $10,196,082, 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 $3,638 for the period. Distribution of investments by country of issue, as a percentage of net assets, is as follows: United States of America 83.4% Canada 10.6 Netherlands Antilles 4.7 Others (individually less 1.3 than 1%) 100.0% INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $18,564,138. Net unrealized appreciation aggregated $2,776,002, of which $3,174,270 related to appreciated investment securities and $398,268 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 has elected 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 AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 21,340,140 value (cost $18,330,584) - See accompanying schedule Receivable for investments 1,059,466 sold Receivable for fund shares 129,694 sold Dividends receivable 41,665 Interest receivable 6,180 Redemption fees receivable 553 Other receivables 37 TOTAL ASSETS 22,577,735 LIABILITIES Payable for investments $ 152,511 purchased Payable for fund shares 125,349 redeemed Accrued management fee 9,444 Other payables and accrued 28,489 expenses TOTAL LIABILITIES 315,793 NET ASSETS $ 22,261,942 Net Assets consist of: Paid in capital $ 20,038,853 Accumulated net investment (17,837) loss Accumulated undistributed net (768,723) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 3,009,649 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 1,844,064 $ 22,261,942 shares outstanding NET ASSET VALUE and $12.07 redemption price per share ($22,261,942 (divided by) 1,844,064 shares) Maximum offering price per $12.44 share (100/97.00 of $12.07) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 109,339 Dividends Interest 25,978 Security lending 37 TOTAL INCOME 135,354 EXPENSES Management fee $ 44,272 Transfer agent fees 45,676 Accounting and security 30,141 lending fees Non-interested trustees' 18 compensation Custodian fees and expenses 17,990 Registration fees 14,080 Audit 3,382 Miscellaneous 264 Total expenses before 155,823 reductions Expense reductions (2,632) 153,191 NET INVESTMENT INCOME (LOSS) (17,837) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 467,027 Foreign currency transactions (3,087) 463,940 Change in net unrealized appreciation (depreciation) on: Investment securities 3,754,215 Assets and liabilities in 93 3,754,308 foreign currencies NET GAIN (LOSS) 4,218,248 NET INCREASE (DECREASE) IN $ 4,200,411 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 46,993 charges paid to FDC Sales charges - Retained by $ 46,993 FDC Exchange fees withheld by FSC $ 855 Expense reductions Directed $ 2,632 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (17,837) $ (35,238) income (loss) Net realized gain (loss) 463,940 (1,206,189) Change in net unrealized 3,754,308 (510,320) appreciation (depreciation) NET INCREASE (DECREASE) IN 4,200,411 (1,751,747) NET ASSETS RESULTING FROM OPERATIONS Share transactions Net 24,404,288 6,170,322 proceeds from sales of shares Cost of shares redeemed (11,507,335) (6,819,368) NET INCREASE (DECREASE) IN 12,896,953 (649,046) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 30,432 15,080 TOTAL INCREASE (DECREASE) 17,127,796 (2,385,713) IN NET ASSETS NET ASSETS Beginning of period 5,134,146 7,519,859 End of period (including $ 22,261,942 $ 5,134,146 accumulated net investment loss of $17,837 and $0, respectively) OTHER INFORMATION Shares Sold 2,241,433 655,279 Redeemed (1,048,108) (723,578) Net increase (decrease) 1,193,325 (68,299)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 E Net asset value, beginning of $ 7.89 $ 10.46 $ 10.00 period Income from Investment Operations Net investment income (loss) D (.01) (.05) (.09) Net realized and unrealized 4.17 (2.54) .76 gain (loss) Total from investment 4.16 (2.59) .67 operations Less Distributions From net realized gain - - (.26) Redemption fees added to paid .02 .02 .05 in capital Net asset value, end of period $ 12.07 $ 7.89 $ 10.46 TOTAL RETURN B, C 52.98% (24.57)% 7.30% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 22,262 $ 5,134 $ 7,520 (000 omitted) Ratio of expenses to average 2.03% A 2.50% F 2.50% A, F net assets Ratio of expenses to average 2.00% A, G 2.47% G 2.48% A, G net assets after expense reductions Ratio of net investment (.23)% A (.54)% (.86)% A income (loss) to average net assets Portfolio turnover rate 143% A 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT PRECIOUS METALS AND 1.09% 47.22% -49.48% -17.44% MINERALS SELECT PRECIOUS METALS AND -2.01% 42.73% -51.07% -19.99% MINERALS (LOAD ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Natural Resources 43.20% 49.26% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years, or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 resources 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT PRECIOUS METALS AND 47.22% -12.76% -1.90% MINERALS SELECT PRECIOUS METALS AND 42.73% -13.32% -2.21% MINERALS (LOAD ADJ.) S&P 500 39.82% 25.11% 17.10% GS Natural Resources 49.26% 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 PRECIOUS METALS&MINERALS S&P 500 00061 SP001 1989/08/31 9700.00 10000.00 1989/09/30 10041.33 9959.00 1989/10/31 10033.39 9727.95 1989/11/30 11311.37 9926.40 1989/12/31 11602.83 10164.64 1990/01/31 12526.88 9482.59 1990/02/28 11450.16 9604.91 1990/03/31 10951.98 9859.44 1990/04/30 9827.05 9612.96 1990/05/31 10389.52 10550.22 1990/06/30 9634.21 10478.48 1990/07/31 10220.78 10444.95 1990/08/31 10325.24 9500.72 1990/09/30 10092.22 9038.04 1990/10/31 8959.25 8999.18 1990/11/30 8798.55 9580.52 1990/12/31 9157.71 9847.82 1991/01/31 8163.72 10277.18 1991/02/28 8896.99 11012.00 1991/03/31 8725.89 11278.49 1991/04/30 8701.45 11305.56 1991/05/31 9190.30 11793.96 1991/06/30 9793.21 11253.80 1991/07/31 9793.21 11778.23 1991/08/31 8766.63 12057.37 1991/09/30 8945.87 11856.01 1991/10/31 9548.78 12014.88 1991/11/30 9850.24 11530.68 1991/12/31 9298.51 12849.79 1992/01/31 9495.83 12610.79 1992/02/29 9002.54 12774.73 1992/03/31 8649.01 12525.62 1992/04/30 8139.28 12893.87 1992/05/31 8673.68 12957.05 1992/06/30 8722.61 12763.99 1992/07/31 8837.92 13286.04 1992/08/31 8442.57 13013.68 1992/09/30 8096.63 13167.24 1992/10/31 7577.72 13213.32 1992/11/30 7132.94 13663.90 1992/12/31 7265.30 13831.96 1993/01/31 7441.27 13948.15 1993/02/28 8262.49 14137.85 1993/03/31 9385.39 14436.15 1993/04/30 10902.14 14086.80 1993/05/31 12343.46 14464.33 1993/06/30 12544.58 14506.27 1993/07/31 14178.64 14448.25 1993/08/31 12754.07 14995.84 1993/09/30 11748.50 14880.37 1993/10/31 13416.08 15188.39 1993/11/30 13390.94 15044.10 1993/12/31 15375.12 15226.14 1994/01/31 14739.08 15743.82 1994/02/28 14094.57 15317.17 1994/03/31 13950.40 14649.34 1994/04/30 13950.96 14836.85 1994/05/31 13976.42 15080.17 1994/06/30 14256.45 14710.71 1994/07/31 14799.56 15193.22 1994/08/31 15851.82 15816.14 1994/09/30 17065.32 15428.65 1994/10/31 16403.41 15775.79 1994/11/30 14646.81 15201.24 1994/12/31 15199.69 15426.67 1995/01/31 12551.78 15826.69 1995/02/28 13127.79 16443.45 1995/03/31 14460.34 16928.70 1995/04/30 14580.70 17427.25 1995/05/31 14400.16 18123.82 1995/06/30 14572.10 18544.83 1995/07/31 15173.90 19159.78 1995/08/31 15380.23 19207.87 1995/09/30 15423.22 20018.44 1995/10/31 13497.46 19946.98 1995/11/30 14443.15 20822.65 1995/12/31 14692.13 21223.69 1996/01/31 17772.04 21946.15 1996/02/29 18082.62 22149.59 1996/03/31 17979.10 22362.89 1996/04/30 18386.15 22692.52 1996/05/31 19449.89 23277.76 1996/06/30 16742.99 23366.44 1996/07/31 16535.43 22334.12 1996/08/31 17434.85 22805.14 1996/09/30 16708.39 24088.62 1996/10/31 16570.02 24752.98 1996/11/30 15739.79 26624.06 1996/12/31 15488.99 26096.63 1997/01/31 14823.08 27727.15 1997/02/28 16950.55 27944.53 1997/03/31 14433.91 26796.29 1997/04/30 13473.95 28396.03 1997/05/31 13698.81 30124.78 1997/06/30 12280.50 31474.37 1997/07/31 11796.20 33978.79 1997/08/31 11856.73 32075.30 1997/09/30 12410.22 33832.06 1997/10/31 10326.00 32702.07 1997/11/30 7973.67 34215.85 1997/12/31 8535.81 34803.33 1998/01/31 9400.63 35188.26 1998/02/28 8890.39 37726.04 1998/03/31 9487.12 39657.99 1998/04/30 10403.83 40056.94 1998/05/31 8812.55 39368.37 1998/06/30 7506.67 40967.51 1998/07/31 7325.06 40531.21 1998/08/31 5439.74 34671.20 1998/09/30 8267.71 36892.24 1998/10/31 8267.71 39893.06 1998/11/30 8077.45 42310.97 1998/12/31 8544.46 44748.93 1999/01/31 8285.01 46620.33 1999/02/28 7921.79 45171.37 1999/03/31 7939.08 46978.68 1999/04/30 9072.00 48798.16 1999/05/31 7619.10 47646.04 1999/06/30 7895.84 50290.39 1999/07/31 7670.99 48720.33 1999/08/31 8001.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990909 154852 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Precious Metals and Minerals Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have been $8,001 - a 19.99% decrease on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Meridian Gold, Inc. 11.5 Normandy Mining Ltd. 7.3 Placer Dome, Inc. 6.1 Euro-Nevada Mining Corp. Ltd. 5.0 Delta Gold NL 5.0 Newmont Mining Corp. 4.9 Newcrest Mining Ltd. 4.8 Acacia Resources Ltd. 4.7 De Beers Consolidated Mines 4.6 Ltd. ADR Freeport-McMoRan Copper & 4.5 Gold, Inc. Class B TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Gold Ores (Canada) 34.0% Gold Ores (Australia) 9.9% Gold & Silver Ores (South Africa) 9.8% Gold & Silver Ores (Australia) 8.6% Gold Ores (United States of America) 6.7% All Others 31.0%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 31.0 Row: 1, Col: 2, Value: 6.7 Row: 1, Col: 3, Value: 8.6 Row: 1, Col: 4, Value: 9.800000000000001 Row: 1, Col: 5, Value: 9.9 Row: 1, Col: 6, Value: 34.0 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. PRECIOUS METALS AND MINERALS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of George Domolky) George Domolky, Portfolio Manager of Fidelity Select Precious Metals and Minerals Portfolio Q. HOW DID THE FUND PERFORM, GEORGE? A. The fund turned in a poor performance relative to its benchmarks, although it managed a positive return despite ongoing weakness in the price of gold. For the six months that ended August 31, 1999, the fund returned 1.09%, trailing the 7.32% gain in the Standard & Poor's 500 Index and the 43.20% gain in 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 August 31, 1999, the fund returned 47.22%, beating the 39.82% gain in the S&P 500 but coming up slightly short of the 49.26% gain in the Goldman Sachs index. Q. WHY DID THE FUND UNDERPERFORM THE GOLDMAN SACHS INDEX BY SO MUCH DURING THE SIX-MONTH PERIOD? A. During the past six months, the price of gold was again subject to selling pressure, this time in response to the Bank of England's announcement in May of its intention to sell off about 400 tons of gold over the next 18 months. This event drove down the price of gold by about $30, to around $250 per ounce in late August. The Goldman Sachs index, on the other hand, comprises a broad selection of natural resources stocks, including those of companies that produce base metals such as copper, aluminum, zinc and nickel. The prices of base metals advanced sharply during the period, as did energy prices, which explains the stellar performance of the Goldman Sachs index. Q. WERE THERE ANY POSITIVE DEVELOPMENTS IN GOLD'S SUPPLY/DEMAND PICTURE? A. Things began to look brighter on the demand side. As 1999 progressed, it became clearer that the formerly depressed economies of Asia were recovering much faster than most investors expected. Since a significant percentage of annual worldwide gold production is used by the Asian jewelry market, this development undoubtedly prevented gold's price from sliding even further than it did. Q. WHAT STOCKS HELPED THE FUND'S PERFORMANCE? A. De Beers Consolidated Mines Ltd. was one of the fund's strongest stocks. The world's premier producer of diamonds, De Beers was helped by the recovery of the Asian markets and continued strong demand for diamonds in the U.S. Anglogold Ltd., the largest gold mining company in South Africa, also made a positive contribution to performance. The stock price was supported by investors' confidence in the company's management and its strategic approach to cost-cutting. Although foreign investments are typically riskier than U.S.-based ones, I've tried to offset some of that risk by seeking out companies with the best managements, healthiest cash flows and strongest balance sheets, as well as the capability to add meaningfully to production. De Beers and Anglogold are two good examples of that strategy. Q. WHAT STOCKS DETRACTED FROM PERFORMANCE? A. Normandy Mining, an Australian holding representing the fund's second-largest position at the end of the period, was by far the most negative contributor to performance. Its decision to acquire TVX Gold was not well received by investors. The fund was also hurt by its largest holding, Meridian Gold. Although there was no particularly negative news about the company, investors grew less confident in the earnings prospects for the company's new mine in Chile, which was in its final pre-production phase. Q. WHAT'S YOUR OUTLOOK, GEORGE? A. In order for sentiment in the gold market to improve, we need to see a decline in central bank selling. Other positive factors would be a resurgence of inflation in the Western world and a decline in the value of the U.S. dollar. With gold prices near a 20-year low and production being curtailed because of low prices, any of those developments could precipitate a strong recovery in the price of gold. Regardless of what gold does, however, my goal is to keep the fund invested in the stocks of the highest-quality companies. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3. NOTE TO SHAREHOLDERS: On July 15, 1999, the fund's Board of Trustees voted to present to shareholders a proposal to merge Select Precious Metals and Minerals Portfolio into Select Gold Portfolio. In anticipation of the merger, Select Precious Metals and Minerals Portfolio will be closed to new investments at the close of business on December 20, 1999. A special meeting of shareholders of Select Precious Metals and Minerals Portfolio is scheduled to be held on February 16, 2000. On or about December 20, 1999, shareholders will be sent proxy materials asking them to vote on the proposal. (checkmark)FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 061 TRADING SYMBOL: FDPMX SIZE: as of August 31, 1999, more than $131 million MANAGER: George Domolky, since 1997; manager, Fidelity Select Gold Portfolio, since 1997; Fidelity Canada Fund, 1987-1996; Fidelity Select Food and Agriculture Portfolio, 1985-1987; joined Fidelity in 1981 PRECIOUS METALS AND MINERALS PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 98.5% SHARES VALUE (NOTE 1) AUSTRALIA - 23.2% METALS & MINING - 4.7% METAL MINING SERVICES - 4.7% Acacia Resources Ltd. 5,139,253 $ 6,115,377 PRECIOUS METALS - 18.5% GOLD & SILVER ORES - 8.6% Normandy Mining Ltd. 13,289,419 9,522,135 Sons of Gwalia NL 675,211 1,684,668 11,206,803 GOLD ORES - 9.9% Delta Gold NL 4,645,819 6,562,535 Newcrest Mining Ltd. (a) 2,668,000 6,315,356 Ross Mining NL 452,197 138,861 13,016,752 TOTAL PRECIOUS METALS 24,223,555 TOTAL AUSTRALIA 30,338,932 CANADA - 36.7% METALS & MINING - 0.4% METAL MINING - 0.1% Ivanhoe Mines Ltd. (a) 100,000 105,193 METAL MINING SERVICES - 0.0% Minefinders Corp. Ltd. (a) 200,200 87,189 MISCELLANEOUS NONMETALLIC MINERALS - 0.3% DIA Metropolitan Minerals 22,500 354,271 Ltd. Class B (multi-vtg.) (a) TOTAL METALS & MINING 546,653 OIL & GAS - 0.3% OIL & GAS FIELD EXPLORATION SERVICES - 0.3% Southwestern Gold Corp. (a) 135,000 397,990 PRECIOUS METALS - 36.0% GOLD & SILVER ORES - 2.0% Goldcorp, Inc. Class A (a) 515,900 2,557,896 Richmont Mines, Inc. (a) 7,700 11,402 2,569,298 GOLD ORES - 34.0% Agnico-Eagle Mines Ltd. 348,800 2,103,317 Barrick Gold Corp. 205,000 3,955,779 Claude Resources, Inc. (a) 500,500 486,248 Euro-Nevada Mining Corp. Ltd. 545,800 6,564,228 Francisco Gold Corp. (a) 53,500 274,221 Francisco Gold Corp. (c) 54,500 279,347 Franco Nevada Mining Corp. 281,400 4,430,754 Ltd. Franco Nevada Mining Corp. 80,200 1,262,781 Ltd. (c) Franco Nevada Mining Corp. 25,000 125,628 Ltd. Class B warrants 9/15/98 (a)(c) SHARES VALUE (NOTE 1) Geomaque Explorations Ltd. (a) 537,100 $ 179,933 Glamis Gold Ltd. (a) 240,000 450,251 High River Gold Mines Ltd. (a) 60,000 17,688 IAMGOLD, International 139,800 313,789 African Mining Gold Corp. (a) Meridian Gold, Inc. (a) 2,853,100 15,006,251 Metallica Resources, Inc. (a) 448,700 156,331 Metallica Resources, Inc. 100,000 34,841 (a)(c) Mountain Province Mining, 291,500 527,337 Inc. (a) Placer Dome, Inc. 762,665 7,920,474 Repadre Capital Corp. (a) 274,800 397,701 Vengold, Inc. (a) 410,600 20,633 44,507,532 TOTAL PRECIOUS METALS 47,076,830 TOTAL CANADA 48,021,473 GHANA - 1.2% PRECIOUS METALS - 1.2% GOLD ORES - 1.2% Ashanti Goldfields Co. Ltd. 218,146 1,581,559 GDR PERU - 4.4% PRECIOUS METALS - 4.4% SILVER ORES - 4.4% Compania de Minas Buenaventura SA: Class B 102,000 780,097 sponsored ADR Class B 327,600 5,036,850 5,816,947 SOUTH AFRICA - 17.9% HOLDING COMPANIES - 0.9% OFFICES OF HOLDING COMPANIES, NEC - 0.9% Gencor Ltd. (Reg.) 352,000 1,139,308 METALS & MINING - 6.1% MISCELLANEOUS METAL ORES, NEC - - 1.5% Anglo American Platinum Corp. 80,800 1,837,299 Ltd. Impala Platinum Holdings Ltd. 4,000 128,152 1,965,451 NON-METALLIC MINERALS, EXCEPT FUELS - 4.6% De Beers Consolidated Mines 222,500 6,049,219 Ltd. ADR TOTAL METALS & MINING 8,014,670 PRECIOUS METALS - 10.9% GOLD & SILVER ORES - 9.8% Anglogold Ltd. 64,586 3,236,463 Anglogold Ltd. sponsored ADR 224,690 5,813,854 Gold Fields Ltd. 1,101,270 3,799,667 12,849,984 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SOUTH AFRICA - CONTINUED PRECIOUS METALS - CONTINUED GOLD ORES - 1.1% Avgold Ltd. (a) 45,000 $ 23,659 Gold Fields of South Africa 85,600 164,548 Ltd. Gold Fields of South Africa 73,700 138,188 Ltd. ADR Harmony Gold Mining Co. Ltd. 165,700 680,605 Western Areas Gold Mining 169,500 473,425 Ltd. (a) 1,480,425 TOTAL PRECIOUS METALS 14,330,409 TOTAL SOUTH AFRICA 23,484,387 UNITED KINGDOM - 3.8% METALS & MINING - 3.8% MISCELLANEOUS METAL ORES, NEC - - 3.8% Anglo American PLC (a) 89,400 4,917,624 UNITED STATES OF AMERICA - 11.3% METALS & MINING - 4.5% COPPER ORES - 4.5% Freeport-McMoRan Copper & 364,000 5,846,750 Gold, Inc. Class B PRECIOUS METALS - 6.7% GOLD ORES - 6.7% Homestake Mining Co. 70,000 595,000 Newmont Mining Corp. 315,000 6,437,813 Stillwater Mining Co. (a) 44,150 974,059 Stillwater Mining Co. (c) 34,500 761,156 8,768,028 SERVICES - 0.1% JEWELRY, PRECIOUS METAL - 0.1% Lazare Kaplan International, 25,000 206,250 Inc. (a) TOTAL UNITED STATES OF AMERICA 14,821,028 TOTAL COMMON STOCKS 128,981,950 (Cost $147,040,395) CASH EQUIVALENTS - 1.4% Central Cash Collateral Fund, 1,188,200 1,188,200 5.26% (b) Taxable Central Cash Fund, 653,418 653,418 5.20% (b) TOTAL CASH EQUIVALENTS 1,841,618 (Cost $1,841,618) TOTAL INVESTMENT PORTFOLIO - 130,823,568 99.9% (Cost $148,882,013) NET OTHER ASSETS - 0.1% 189,297 NET ASSETS - 100% $ 131,012,865 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. (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 $2,463,753 or 1.9% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $57,921,853 and $50,945,524, 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 $7,347 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $1,182,488. The fund received cash collateral of $1,188,200 which was invested in the Central Cash Collateral Fund. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $149,784,576. Net unrealized depreciation aggregated $18,961,008, of which $14,119,723 related to appreciated investment securities and $33,080,731 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 has elected 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 AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 130,823,568 value (cost $148,882,013) - See accompanying schedule Foreign currency held at 534,742 value (cost $534,742) Receivable for investments 8,299 sold Receivable for fund shares 1,074,223 sold Dividends receivable 564,449 Interest receivable 12,101 Redemption fees receivable 1,743 Other receivables 2,148 TOTAL ASSETS 133,021,273 LIABILITIES Payable for investments $ 106,750 purchased Payable for fund shares 520,530 redeemed Accrued management fee 64,178 Other payables and accrued 128,750 expenses Collateral on securities 1,188,200 loaned, at value TOTAL LIABILITIES 2,008,408 NET ASSETS $ 131,012,865 Net Assets consist of: Paid in capital $ 244,657,417 Undistributed net investment 1,550,567 income Accumulated undistributed net (97,130,941) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (18,064,178) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 14,141,664 $ 131,012,865 shares outstanding NET ASSET VALUE and $9.26 redemption price per share ($131,012,865 (divided by) 14,141,664 shares) Maximum offering price per $9.55 share (100/97.00 of $9.26) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 1,326,905 Dividends Special dividend from Gold 1,280,213 Fields Ltd. Interest 48,770 Security lending 2,148 TOTAL INCOME 2,658,036 EXPENSES Management fee $ 367,488 Transfer agent fees 618,861 Accounting and security 47,731 lending fees Non-interested trustees' 87 compensation Custodian fees and expenses 36,673 Registration fees 43,958 Audit 7,444 Legal 72 Total expenses before 1,122,314 reductions Expense reductions (52,001) 1,070,313 NET INVESTMENT INCOME 1,587,723 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (5,800,478) Foreign currency transactions (48,612) (5,849,090) Change in net unrealized appreciation (depreciation) on: Investment securities 6,142,375 Assets and liabilities in 3,500 6,145,875 foreign currencies NET GAIN (LOSS) 296,785 NET INCREASE (DECREASE) IN $ 1,884,508 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 137,591 charges paid to FDC Sales charges - Retained by $ 137,591 FDC Deferred sales charges $ 6,986 withheld by FDC Exchange fees withheld by FSC $ 10,673 Expense reductions Directed $ 52,001 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ 1,587,723 $ (142,318) income (loss) Net realized gain (loss) (5,849,090) (21,007,323) Change in net unrealized 6,145,875 3,724,303 appreciation (depreciation) NET INCREASE (DECREASE) IN 1,884,508 (17,425,338) NET ASSETS RESULTING FROM OPERATIONS Share transactions Net 112,796,705 415,102,396 proceeds from sales of shares Cost of shares redeemed (107,637,901) (442,648,944) NET INCREASE (DECREASE) IN 5,158,804 (27,546,548) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 530,425 2,450,806 TOTAL INCREASE (DECREASE) 7,573,737 (42,521,080) IN NET ASSETS NET ASSETS Beginning of period 123,439,128 165,960,208 End of period (including $ 131,012,865 $ 123,439,128 undistributed net investment income (loss) of $1,550,567 and $(37,156), respectively) OTHER INFORMATION Shares Sold 11,838,732 42,223,635 Redeemed (11,171,744) (44,898,226) Net increase (decrease) 666,988 (2,674,591)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F Net asset value, beginning of $ 9.16 $ 10.28 $ 19.60 $ 20.96 $ 15.27 period Income from Investment Operations Net investment income (loss) D .12 H (.01) (.04) (.01) .07 Net realized and unrealized (.06) G (1.27) (9.42) (1.42) 5.54 gain (loss) Total from investment .06 (1.28) (9.46) (1.43) 5.61 operations Less Distributions From net investment income - - - (.04) (.06) In excess of net investment - - - (.01) - income Total distributions - - - (.05) (.06) Redemption fees added to paid .04 .16 .14 .12 .14 in capital Net asset value, end of period $ 9.26 $ 9.16 $ 10.28 $ 19.60 $ 20.96 TOTAL RETURN B, C 1.09% (10.89)% (47.55)% (6.26)% 37.74% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 131,013 $ 123,439 $ 165,960 $ 325,586 $ 467,196 (000 omitted) Ratio of expenses to average 1.75% A 1.78% 1.82% 1.62% 1.52% net assets Ratio of expenses to average 1.67% A, E 1.74% E 1.76% E 1.61% E 1.52% net assets after expense reductions Ratio of net investment 2.48% A (.09)% (.26)% (.05)% .39% income (loss) to average net assets Portfolio turnover rate 81% A 53% 84% 54% 53%
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 16.62 period Income from Investment Operations Net investment income (loss) D .17 Net realized and unrealized (1.42) gain (loss) Total from investment (1.25) operations Less Distributions From net investment income (.18) In excess of net investment (.05) income Total distributions (.23) Redemption fees added to paid .13 in capital Net asset value, end of period $ 15.27 TOTAL RETURN B, C (6.86)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 364,204 (000 omitted) Ratio of expenses to average 1.46% net assets Ratio of expenses to average 1.46% net assets after expense reductions Ratio of net investment .99% income (loss) to average net assets Portfolio turnover rate 43% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR THE YEAR ENDED FEBRUARY 29 G 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. H NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM GOLD FIELDS LTD. WHICH AMOUNTED TO $.09 PER SHARE.
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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR LIFE OF FUND SELECT BUSINESS SERVICES AND 8.53% 48.33% 49.20% OUTSOURCING SELECT BUSINESS SERVICES AND 5.20% 43.80% 44.65% OUTSOURCING (LOAD ADJ.) S&P 500 7.32% 39.82% 34.10% GS Technology 28.97% 109.92% 101.46% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year or since the fund started on 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 AUGUST 31, 1999 PAST 1 YEAR LIFE OF FUND SELECT BUSINESS SERVICES AND 48.33% 29.02% OUTSOURCING SELECT BUSINESS SERVICES AND 43.80% 26.51% OUTSOURCING (LOAD ADJ.) S&P 500 39.82% 20.55% GS Technology 109.92% 56.23% 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 1999/02/28 13334.52 12494.90 1999/03/31 13737.41 12994.82 1999/04/30 14027.95 13498.11 1999/05/31 14068.32 13179.42 1999/06/30 15309.64 13910.87 1999/07/31 14815.13 13476.58 1999/08/31 14465.00 13409.87 IMATRL PRASUN SHR__CHT 19990831 19990909 153945 R00000000000022 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Business Services and Outsourcing Portfolio on February 4, 1998, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have been $14,465 - a 44.65% 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 $13,410 - a 34.10% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS DST Systems, Inc. 7.0 Computer Sciences Corp. 6.9 Automatic Data Processing, Inc. 6.8 First Data Corp. 5.4 Sabre Group Holdings, Inc. 5.3 Class A IMS Health, Inc. 4.8 Galileo International, Inc. 4.1 Electronic Data Systems Corp. 4.1 Omnicom Group, Inc. 4.0 Affiliated Computer Services, 3.9 Inc. Class A TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Computer Services & Software 67.1% Services 13.0% Advertising 9.7% Broadcasting 2.2% Trucking & Freight 1.1% All Others 6.9%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 6.9 Row: 1, Col: 2, Value: 1.1 Row: 1, Col: 3, Value: 2.2 Row: 1, Col: 4, Value: 9.699999999999999 Row: 1, Col: 5, Value: 13.0 Row: 1, Col: 6, Value: 67.09999999999999 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. BUSINESS SERVICES AND OUTSOURCING PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (Michael Tarlowe) Michael Tarlowe, Portfolio Manager of Fidelity Select Business Services and Outsourcing Portfolio Q. HOW DID THE FUND PERFORM, MICHAEL? A. For the six-month period that ended August 31, 1999, the fund posted a total return of 8.53%. In comparison, the Standard and Poor's 500 Index returned 7.32% during the same six-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 28.97%. For the 12-month period that ended August 31, 1999, the fund returned 48.33%, while the S&P 500 and Goldman Sachs indexes returned 39.82% and 109.92%, respectively. Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE OVER THE SIX-MONTH PERIOD? A. The fund enjoyed positive relative performance versus the S&P 500, mainly driven by strong stock selection and a healthy overweighting in the computer services industry. Many companies in this area shined during the period as investors grew increasingly enamored of their favorable investment characteristics, namely robust earnings and cash flow growth, as well as solid long-term outlooks. Also attractive was the fact that these firms have long-term relationships with their customers, which typically yield predictable recurring revenue streams. The fund further benefited from successfully anticipating increased consolidation activity among companies within the industry. Relative to the Goldman Sachs Technology Index, the fund suffered by not owning some of the large-cap hardware and software companies, such as Cisco and Microsoft, that soared during the period, but which aren't business-service providers. Q. DID YOU MAKE ANY OTHER INDUSTRY BETS DURING THE PERIOD? A. I did focus on other companies providing outsourcing services outside of the technology industry, yet I maintained the fund's strong technology bias throughout the period. We were successful in taking advantage of opportunities within other industries where movement toward outsourcing became even more pervasive. Q. WHICH OF THE FUND'S HOLDINGS DID WELL? A. Nielsen Media Research is an example of how the fund pursues good businesses that are overlooked by the market and are selling at attractive valuations. A leading provider of television audience measurement and related services in the U.S. and Canada, Nielsen powered fund performance as the market began to appreciate its business along with its new Internet venture. In August, the firm agreed to be acquired by VNU N.V. - a Netherlands-based international publishing company - at a nice premium, which further benefited the stock. The fund's position in First Data is reflective of how we look for turnaround situations. The owner of Western Union, First Data is the nation's largest credit card processor and rallied strongly on improved earnings growth. DST Systems, which provides information processing and computer software services and products primarily to financial services organizations, soared as reported earnings exceeded expectations. The stock was helped further by the cost efficiencies gained by its acquisition of USCS International last December. Q. WHICH STOCKS DISAPPOINTED? A. Equifax, an information services provider helping businesses grant credit as well as authorize and process credit card and check transactions, suffered from disappointing earnings related to its international operations. Ceridian, a firm that delivers products and services to customers in the human resources, trucking and electronic media markets, skidded as a result of its announcement to acquire ABR Benefits Services, a move that weighed on earnings. IMS Health - a provider of information solutions to the pharmaceutical and health care industries - faltered as a result of the rotation away from pharmaceutical stocks earlier in the period. IMS fell further amid the uncertainty surrounding its spin-off of GartnerGroup during the period. Q. WHAT'S YOUR OUTLOOK, MICHAEL? A. My outlook remains quite positive as the services sector and the outsourcing trend continue to spread throughout the economy. I expect the fund to continue to benefit from consolidation activity in the months to come. I don't anticipate making any significant changes to the portfolio in the near term. Although, as more and more businesses realize their need to establish a Web presence, the fund may look to take advantage of those companies best-positioned to provide such services. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3. (checkmark)FUND FACTS START DATE: February 4, 1998 FUND NUMBER: 353 TRADING SYMBOL: FBSOX SIZE: as of August 31, 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 AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 94.6% SHARES VALUE (NOTE 1) ADVERTISING - 9.7% Interpublic Group of 57,000 $ 2,258,625 Companies, Inc. Lamar Advertising Co. Class A 13,450 561,538 (a) Omnicom Group, Inc. 34,039 2,565,690 Outdoor Systems, Inc. (a) 20,600 665,637 TMP Worldwide, Inc. (a) 3,938 218,067 6,269,557 BANKS - 0.2% State Street Corp. 2,500 149,688 BROADCASTING - 2.2% Nielsen Media Research, Inc. 38,300 1,405,131 (a) COMPUTER SERVICES & SOFTWARE - - 67.1% Affiliated Computer Services, 58,700 2,509,425 Inc. Class A (a) At Plan, Inc. 21,700 222,425 Automatic Data Processing, 112,300 4,414,794 Inc. Bisys Group, Inc. (The) (a) 13,200 627,000 Cambridge Technology 18,900 258,694 Partners, Inc. (a) Ceridian Corp. (a) 75,300 2,108,400 Computer Sciences Corp. (a) 64,500 4,462,594 DST Systems, Inc. (a) 67,500 4,488,744 Electronic Data Systems Corp. 46,800 2,626,650 Equifax, Inc. 58,000 1,769,000 First Data Corp. 79,300 3,489,200 Fiserv, Inc. (a) 56,375 1,737,055 Galileo International, Inc. 55,000 2,667,500 IMS Health, Inc. 111,000 3,066,375 International Integration, 18,800 432,400 Inc. (a) International Network 5,000 265,938 Services (a) National Data Corp. 18,300 699,975 Paychex, Inc. 84,425 2,485,261 Sabre Group Holdings, Inc. 60,900 3,410,400 Class A (a) SunGard Data Systems, Inc. (a) 17,500 437,500 Technology Solutions, Inc. (a) 63,700 764,400 Viant Corp. (a) 6,100 231,800 43,175,530 PRINTING - 0.5% Reynolds & Reynolds Co. Class 13,500 295,313 A PUBLISHING - 0.5% Harte Hanks Communications, 14,900 334,319 Inc. RESTAURANTS - 0.3% Sodexho Marriott Services, 14,100 199,163 Inc. (a) SERVICES - 13.0% ACNielsen Corp. (a) 27,900 697,500 Cintas Corp. 20,800 1,068,600 Convergys Corp. (a) 17,200 354,750 Diamond Technology Partners, 18,500 612,813 Inc. Class A (a) SHARES VALUE (NOTE 1) Dun & Bradstreet Corp. 40,100 $ 1,050,119 Forrester Research, Inc. (a) 16,000 536,000 Gartner Group, Inc.: Class A 9,700 203,094 Class B (a) 62,483 1,280,902 International Telecom Data 38,700 304,763 Systems, Inc. (a) Korn/Ferry International (a) 21,200 355,100 Manpower, Inc. 16,800 453,600 NFO Worldwide, Inc. (a) 16,500 216,563 NOVA Corp. (a) 11,500 299,000 Robert Half International, 17,100 448,875 Inc. (a) True North Communications 6,000 197,625 Viad Corp. 10,800 323,325 8,402,629 TRUCKING & FREIGHT - 1.1% Air Express International 12,500 305,469 Corp. Circle International Group, 8,200 202,950 Inc. Expeditors International of 5,300 171,256 Washington, Inc. 679,675 TOTAL COMMON STOCKS 60,911,005 (Cost $52,089,593) CASH EQUIVALENTS - 9.0% Central Cash Collateral Fund, 1,794,900 1,794,900 5.26% (b) Taxable Central Cash Fund, 4,009,005 4,009,005 5.20%, (b) TOTAL CASH EQUIVALENTS 5,803,905 (Cost $5,803,905) TOTAL INVESTMENT PORTFOLIO - 66,714,910 103.6% (Cost $57,893,498) NET OTHER ASSETS - (3.6%) (2,339,960) NET ASSETS - 100% $ 64,374,950 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $20,052,136 and $22,984,571, 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 $3,297 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $1,765,950. The fund received cash collateral of $1,794,900 which was invested in the Central Cash Collateral Fund. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $58,400,283. Net unrealized appreciation aggregated $8,314,627, of which $11,205,845 related to appreciated investment securities and $2,891,218 related to depreciated investment securities. BUSINESS SERVICES AND OUTSOURCING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 66,714,910 value (cost $57,893,498) - See accompanying schedule Receivable for investments 144,745 sold Receivable for fund shares 77,938 sold Dividends receivable 30,560 Interest receivable 21,959 Redemption fees receivable 404 Other receivables 230 TOTAL ASSETS 66,990,746 LIABILITIES Payable for fund shares $ 733,274 redeemed Accrued management fee 32,319 Other payables and accrued 55,303 expenses Collateral on securities 1,794,900 loaned, at value TOTAL LIABILITIES 2,615,796 NET ASSETS $ 64,374,950 Net Assets consist of: Paid in capital $ 52,591,091 Accumulated net investment (229,008) loss Accumulated undistributed net 3,191,455 realized gain (loss) on investments Net unrealized appreciation 8,821,412 (depreciation) on investments NET ASSETS, for 4,488,470 $ 64,374,950 shares outstanding NET ASSET VALUE and $14.34 redemption price per share ($64,374,950 (divided by) 4,488,470 shares) Maximum offering price per $14.78 share (100/97.00 of $14.34) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 123,233 Dividends Interest 127,930 Security lending 230 TOTAL INCOME 251,393 EXPENSES Management fee $ 188,792 Transfer agent fees 245,734 Accounting and security 30,332 lending fees Non-interested trustees' 92 compensation Custodian fees and expenses 5,757 Registration fees 11,861 Audit 3,865 Legal 35 Total expenses before 486,468 reductions Expense reductions (6,067) 480,401 NET INVESTMENT INCOME (LOSS) (229,008) REALIZED AND UNREALIZED GAIN 3,979,884 (LOSS) Net realized gain (loss) on investment securities Change in net unrealized 1,051,103 appreciation (depreciation) on investment securities NET GAIN (LOSS) 5,030,987 NET INCREASE (DECREASE) IN $ 4,801,979 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 183,907 charges paid to FDC Sales charges - Retained by $ 183,907 FDC Deferred sales charges $ 197 withheld by FDC Exchange fees withheld by FSC $ 3,578 Expense reductions Directed $ 2,955 brokerage arrangements Custodian credits 86 Transfer agent credits 3,026 $ 6,067
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (229,008) $ (505,124) income (loss) Net realized gain (loss) 3,979,884 2,392,697 Change in net unrealized 1,051,103 7,144,279 appreciation (depreciation) NET INCREASE (DECREASE) IN 4,801,979 9,031,852 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (1,673,661) (724,580) from net realized gains Share transactions Net 25,177,687 115,593,201 proceeds from sales of shares Reinvestment of distributions 1,623,074 706,597 Cost of shares redeemed (29,709,592) (76,520,490) NET INCREASE (DECREASE) IN (2,908,831) 39,779,308 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 32,852 120,875 TOTAL INCREASE (DECREASE) 252,339 48,207,455 IN NET ASSETS NET ASSETS Beginning of period 64,122,611 15,915,156 End of period (including $ 64,374,950 $ 64,122,611 accumulated net investment loss of $229,008 and $0, respectively) OTHER INFORMATION Shares Sold 1,751,263 9,724,396 Issued in reinvestment of 118,559 57,528 distributions Redeemed (2,107,821) (6,516,475) Net increase (decrease) (237,999) 3,265,449
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 E Net asset value, beginning of $ 13.57 $ 10.89 $ 10.00 period Income from Investment Operations Net investment income (loss) D (.05) (.11) - Net realized and unrealized 1.18 2.92 .89 gain (loss) Total from investment 1.13 2.81 .89 operations Less Distributions From net realized gain (.37) (.16) - Redemption fees added to paid .01 .03 - in capital Net asset value, end of period $ 14.34 $ 13.57 $ 10.89 TOTAL RETURN B, C 8.53% 26.23% 8.90% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 64,375 $ 64,123 $ 15,915 (000 omitted) Ratio of expenses to average 1.48% A 1.66% 2.50% A, F net assets Ratio of expenses to average 1.46% A, G 1.64% G 2.50% A net assets after expense reductions Ratio of net investment (.70)% A (.91)% (.49)% A income (loss) to average net assets Portfolio turnover rate 66% A 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT COMPUTERS 30.14% 118.56% 437.85% 1,379.99% SELECT COMPUTERS (LOAD ADJ.) 26.16% 111.93% 421.64% 1,335.52% S&P 500 7.32% 39.82% 206.52% 384.79% GS Technology 28.97% 109.92% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT COMPUTERS 118.56% 40.00% 30.93% SELECT COMPUTERS (LOAD ADJ.) 111.93% 39.15% 30.53% S&P 500 39.82% 25.11% 17.10% GS Technology 109.92% 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 1989/08/31 9700.00 10000.00 1989/09/30 9927.74 9959.00 1989/10/31 9598.78 9727.95 1989/11/30 9387.91 9926.40 1989/12/31 9489.13 10164.64 1990/01/31 9404.78 9482.59 1990/02/28 10256.70 9604.91 1990/03/31 10990.52 9859.44 1990/04/30 10695.30 9612.96 1990/05/31 12087.04 10550.22 1990/06/30 12306.35 10478.48 1990/07/31 11429.13 10444.95 1990/08/31 9615.65 9500.72 1990/09/30 8983.04 9038.04 1990/10/31 9320.43 8999.18 1990/11/30 10855.57 9580.52 1990/12/31 11235.77 9847.82 1991/01/31 13150.96 10277.18 1991/02/28 14002.15 11012.00 1991/03/31 15108.71 11278.49 1991/04/30 14129.83 11305.56 1991/05/31 14844.84 11793.96 1991/06/30 12823.47 11253.80 1991/07/31 14111.95 11778.23 1991/08/31 14988.47 12057.37 1991/09/30 14199.60 11856.01 1991/10/31 13919.12 12014.88 1991/11/30 12963.71 11530.68 1991/12/31 14690.45 12849.79 1992/01/31 16224.36 12610.79 1992/02/29 17337.54 12774.73 1992/03/31 15970.17 12525.62 1992/04/30 15453.02 12893.87 1992/05/31 15645.86 12957.05 1992/06/30 14138.25 12763.99 1992/07/31 14830.70 13286.04 1992/08/31 13980.47 13013.68 1992/09/30 14672.92 13167.24 1992/10/31 15829.93 13213.32 1992/11/30 16811.63 13663.90 1992/12/31 17916.04 13831.96 1993/01/31 18959.10 13948.15 1993/02/28 17661.85 14137.85 1993/03/31 18012.46 14436.15 1993/04/30 17500.88 14086.80 1993/05/31 19551.35 14464.33 1993/06/30 18768.93 14506.27 1993/07/31 19551.35 14448.25 1993/08/31 20711.48 14995.84 1993/09/30 21296.04 14880.37 1993/10/31 21296.04 15188.39 1993/11/30 22204.36 15044.10 1993/12/31 23088.03 15226.14 1994/01/31 24576.66 15743.82 1994/02/28 25619.65 15317.17 1994/03/31 25354.16 14649.34 1994/04/30 25192.97 14836.85 1994/05/31 25174.01 15080.17 1994/06/30 23106.99 14710.71 1994/07/31 23837.08 15193.22 1994/08/31 26691.09 15816.14 1994/09/30 26501.45 15428.65 1994/10/31 27497.03 15775.79 1994/11/30 27658.22 15201.24 1994/12/31 27809.93 15426.67 1995/01/31 26956.58 15826.69 1995/02/28 29080.48 16443.45 1995/03/31 31318.17 16928.70 1995/04/30 33806.50 17427.25 1995/05/31 35477.61 18123.82 1995/06/30 39357.68 18544.83 1995/07/31 44303.80 19159.78 1995/08/31 45293.02 19207.87 1995/09/30 47886.14 20018.44 1995/10/31 46147.79 19946.98 1995/11/30 45033.71 20822.65 1995/12/31 42223.92 21223.69 1996/01/31 41953.18 21946.15 1996/02/29 44433.12 22149.59 1996/03/31 40675.31 22362.89 1996/04/30 45146.24 22692.52 1996/05/31 46706.42 23277.76 1996/06/30 43311.39 23366.44 1996/07/31 40410.78 22334.12 1996/08/31 42157.74 22805.14 1996/09/30 47332.69 24088.62 1996/10/31 49826.77 24752.98 1996/11/30 56605.85 26624.06 1996/12/31 55574.44 26096.63 1997/01/31 62698.19 27727.15 1997/02/28 55083.54 27944.53 1997/03/31 50745.35 26796.29 1997/04/30 53513.32 28396.03 1997/05/31 57370.36 30124.78 1997/06/30 56997.09 31474.37 1997/07/31 70148.35 33978.79 1997/08/31 71566.75 32075.30 1997/09/30 74229.35 33832.06 1997/10/31 63802.90 32702.07 1997/11/30 62620.91 34215.85 1997/12/31 55631.06 34803.33 1998/01/31 60067.99 35188.26 1998/02/28 66279.70 37726.04 1998/03/31 64779.21 39657.99 1998/04/30 70974.78 40056.94 1998/05/31 66134.49 39368.37 1998/06/30 72023.51 40967.51 1998/07/31 75863.47 40531.21 1998/08/31 65682.73 34671.20 1998/09/30 78348.16 36892.24 1998/10/31 83882.22 39893.06 1998/11/30 92965.83 42310.97 1998/12/31 109245.34 44748.93 1999/01/31 125928.20 46620.33 1999/02/28 110310.20 45171.37 1999/03/31 123992.09 46978.68 1999/04/30 121880.60 48798.16 1999/05/31 118890.50 47646.04 1999/06/30 131717.36 50290.39 1999/07/31 133841.01 48720.33 1999/08/31 143552.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 120349 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Computers Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $143,552 - a 1,335.52% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Microsoft Corp. 9.4 Cisco Systems, Inc. 5.5 Texas Instruments, Inc. 5.1 Intel Corp. 5.0 EMC Corp. 4.8 Gateway, Inc. 4.7 Hewlett-Packard Co. 4.6 Motorola, Inc. 2.8 Xerox Corp. 2.4 Best Buy Co., Inc. 2.3 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Computers & Office Equipment 30.4% Electronics 27.7% Computer Services & Software 16.9% Communications Equipment 5.8% Retail & Wholesale, Miscellaneous 5.5% All Others 13.7% * * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 13.7 Row: 1, Col: 2, Value: 5.5 Row: 1, Col: 3, Value: 5.8 Row: 1, Col: 4, Value: 16.9 Row: 1, Col: 5, Value: 27.7 Row: 1, Col: 6, Value: 30.4 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. COMPUTERS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Michael Tempero) Michael Tempero, Portfolio Manager of Fidelity Select Computers Portfolio Q. HOW DID THE FUND PERFORM, MIKE? A. It did well. For the six- and 12-month periods that ended August 31, 1999, the fund had total returns of 30.14% and 118.56%, respectively. During those same periods, the Standard & Poor's 500 Index posted returns of 7.32% and 39.82%, respectively. The fund also outpaced the Goldman Sachs Technology Index - an index of 190 stocks designed to measure the performance of companies in the technology sector - which returned 28.97% and 109.92% during those same periods. Q. HOW DID THE FUND OUTPERFORM ITS TWO BENCHMARK INDEXES? A. The fund garnered most of its gains from good stock picks and an overweighted position in Internet holdings, such as America Online, early in the period. Internet firms rallied as consumers grew more accustomed to shopping, banking and communicating over the Web. Our positions in networking equipment also made a significant contribution to the fund, fueled by a sharp rise in demand for equipment used to connect businesses to the Internet. The fund's underweighting in computer hardware stocks also provided it with a significant advantage over its benchmarks. Q. WHAT WERE SOME OF YOUR KEY INVESTMENT STRATEGIES DURING THE PERIOD? A. Throughout the period, I maintained my firm belief in the importance of communications and the development of the Internet to consumers and corporations alike. I increased the fund's overweighting in those companies best suited to benefit from advances in bandwidth, or data transmission capacity. I also broadened the fund's exposure to semiconductor stocks early in the period as many of these companies enjoyed an acceleration in business momentum. The prevalence of low-priced personal computers and the explosion in mobile communications contributed to a period of strong unit demand for chips. Overall, the fund remained concentrated in some of the biggest industry names, as the truly dominant companies continued to fuel the growth of the technology sector. Q. WHAT WERE SOME OF THE OTHER CHANGES YOU MADE TO THE PORTFOLIO? A. Late in the period, I trimmed the fund's exposure to semiconductor stocks to take some profits. The fear I had with many of these stocks was that they might have run ahead of their business fundamentals. I also cut back on some of the fund's Internet holdings as they hit their valuation targets in the spring. Q. WHICH STOCKS PERFORMED WELL FOR THE FUND? A. Texas Instruments and Motorola each benefited from soaring demand for cell phones and networking equipment. Cisco Systems, the market leader in data networking routers, contributed heavily to returns as investors rallied around the value of infrastructure to the Internet's future development. Microsoft benefited from the release of its Office 2000 product, which provided its traditional software business with a healthy lift. The stock also profited from the firm's strong product pipeline. Gateway, a leader in the consumer PC market, also added meaningfully to returns. Q. WHICH STOCKS DISAPPOINTED? A. Personal computer giant Compaq fell significantly as it struggled to perform under intense competitive pressures in the PC market. At Home, a provider of Internet services over cable lines, lost 50% of its value amid the Internet stock correction of the late spring and early summer. Xerox was tripped up by unfavorable foreign exchange rates, which sent annual earnings estimates spiraling downward. Newbridge Networks also stumbled during the period amid an earnings shortfall, which detracted from fund performance. Q. WHAT'S YOUR OUTLOOK? A. I'm optimistic about the next six months. I will, however, keep an eye out for any issues that may arise due to the Year 2000 changeover. I intend to remain focused on the development of the Internet and, more specifically, on suppliers to the Internet - companies that specialize in software, networking and servers. I'll continue to search for the fastest-growing stocks and industries within the technology sector, all the while remaining watchful of valuations. As long as corporate profitability remains good and consumers stay confident, spending for technology should continue to be healthy. 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 3. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 007 TRADING SYMBOL: FDCPX SIZE: as of August 31, 1999, more than $2.2 billion MANAGER: Michael Tempero, since 1997; manager, Fidelity Advisor Technology Fund, since 1998; Fidelity Select Insurance Portfolio, 1995-1997; Fidelity Select Natural Gas Portfolio, 1994-1995; joined Fidelity in 1993 COMPUTERS PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 88.8% SHARES VALUE (NOTE 1) ADVERTISING - 0.0% Newgen Results Corp. (a) 4,300 $ 42,463 BROADCASTING - 0.0% CAIS Internet, Inc. 900 10,913 Insight Communications, Inc. 3,400 92,650 NorthPoint Communication 1,600 42,300 Holdings, Inc. Radio One, Inc. (a) 1,100 45,856 Salem Communications Corp. 2,300 63,250 Class A (a) 254,969 COMMUNICATIONS EQUIPMENT - 5.8% Cisco Systems, Inc. (a) 1,849,400 125,412,438 Efficient Networks, Inc. 1,000 46,938 Paradyne Networks, Inc. 800 35,250 Tekelec (a) 200,000 3,225,000 Xircom, Inc. (a) 90,000 3,583,125 132,302,751 COMPUTER SERVICES & SOFTWARE - - 16.9% Accrue Software, Inc. 500 7,313 Active Software, Inc. (a) 600 10,425 Agile Software Corp. (a) 400 19,900 Ariba, Inc. 1,100 152,900 Art Technology Group, Inc. 600 12,000 Ask Jeeves, Inc. 1,200 37,350 At Home Corp. Series A (a) 274,694 11,022,097 At Plan, Inc. 200 2,050 Aware, Inc. (a) 271,300 9,088,550 BackWeb Technologies Ltd. (a) 1,000 22,563 barnesandnoble.com, Inc. 4,000 68,250 Class A Bell & Howell Co. (a) 110,000 3,685,000 Careerbuilder, Inc. 900 6,638 CareInsite, Inc. 900 42,975 Chemdex Corp. 1,400 37,800 China.com Corp. 200 8,775 Clarent Corp. 2,700 89,775 Commerce One, Inc. 600 26,925 Convergent Communications, 2,000 24,375 Inc. (a) CyberSource Corp. 800 25,650 Digex, Inc. Class A 1,400 46,550 drkoop.com, Inc. 1,200 20,400 Electronics for Imaging, Inc. 860,400 50,440,950 (a) Engage Technologies, Inc. 800 23,200 Exodus Communications, Inc. 360,000 28,935,000 (a) Fashionmall.com, Inc. 100 594 Flycast Communications Corp. 600 13,875 GoTo.com, Inc. (a) 900 32,625 High Speed Access Corp. 1,100 28,875 Homestore.com, Inc. (a) 1,400 73,675 Hoover's, Inc. 500 5,406 Inet Technologies, Inc. 900 27,956 SHARES VALUE (NOTE 1) Interactive Pictures Corp. (a) 500 $ 10,000 Internet Capital Group, Inc. 800 60,000 (a) Internet.com Corp. 600 9,263 Juno Online Services, Inc. (a) 1,500 28,406 Latitude Communications, Inc. 800 11,150 (a) Liberate Technologies 1,300 34,288 Liquid Audio, Inc. (a) 300 8,016 Micromuse, Inc. (a) 80,000 4,570,000 Microsoft Corp. (a) 2,320,000 214,744,984 Mission Critical Software, 400 16,250 Inc. (a) MP3.com, Inc. (a) 1,400 47,775 N2H2, Inc. 600 5,925 National Information 1,000 16,500 Consortium, Inc. (a) National Instrument Corp. (a) 180,000 5,388,750 NCR Corp. (a) 200,000 8,750,000 NetIQ Corp. 800 24,000 NetObjects, Inc. (a) 700 3,763 Packeteer, Inc. 300 11,063 Persistence Software, Inc. 700 12,425 Phone.com, Inc. 86,000 10,158,750 Portal Software, Inc. (a) 600 28,238 Quest Software, Inc. (a) 600 25,125 RAVISENT Technologies, Inc. 2,300 36,800 (a) Red Hat, Inc. (a) 1,000 81,875 Redback Networks, Inc. 112,400 12,083,000 Scient Corp. 300 18,938 Silknet Software, Inc. (a) 500 16,938 SilverStream Software, Inc. 500 15,063 (a) Software.com, Inc. 1,200 54,525 StarMedia Network, Inc. (a) 900 34,819 Talk City, Inc. (a) 500 4,969 Tanning Technology Corp. (a) 2,000 35,000 TenFold Corp. (a) 500 13,656 TheStreet.Com, Inc. (a) 600 10,575 TIBCO Software, Inc. (a) 1,000 27,125 Tumbleweed Communications 1,300 25,025 Corp. (a) Unisys Corp. (a) 200,000 8,600,000 Veritas Software Corp. (a) 225,000 13,331,250 Viant Corp. (a) 500 19,000 Visual Networks, Inc. (a) 130,000 5,395,000 Voyager.net, Inc. (a) 1,800 18,000 WatchGuard Technologies, Inc. 600 8,100 Wink Communications, Inc. (a) 600 24,600 ZipLink, Inc. (a) 4,300 39,506 387,898,852 COMPUTERS & OFFICE EQUIPMENT - - 30.4% Adaptec, Inc. (a) 410,000 15,990,000 Advanced Digital Information 341,400 11,010,150 Corp. (a) Aironet Wireless 12,200 152,500 Communication, Inc. CDW Computer Centers, Inc. (a) 200,000 8,875,000 Comdisco, Inc. 446,000 9,393,875 Compaq Computer Corp. 1,106,350 25,653,491 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) COMPUTERS & OFFICE EQUIPMENT - - CONTINUED Comverse Technology, Inc. (a) 282,700 $ 22,050,600 Creo Products, Inc. (a) 2,700 59,246 Dell Computer Corp. (a) 900,000 43,931,250 EMC Corp. (a) 1,838,000 110,280,000 Emulex Corp. (a) 220,600 15,207,613 Gadzoox Networks, Inc. 800 72,300 Gateway, Inc. (a) 1,125,000 109,054,688 Hewlett-Packard Co. 1,000,000 105,375,000 Inacom Corp. (a) 200,000 1,950,000 Ingram Micro, Inc. Class A (a) 419,700 10,597,425 Insight Enterprises, Inc. (a) 286,875 8,677,969 Juniper Networks, Inc. 56,300 11,541,500 Lexmark International Group, 360,000 28,350,000 Inc. Class A (a) Network Appliance, Inc. (a) 290,000 19,049,375 Quantum Corp.: DLT & Storage Systems (a) 580,000 10,621,250 Hard Disk Drive (a) 290,000 2,066,250 Seagate Technology, Inc. (a) 600,000 19,912,500 Sequent Computer Systems, 190,000 3,348,750 Inc. (a) Sun Microsystems, Inc. (a) 400,000 31,800,000 Symbol Technologies, Inc. 258,700 9,005,994 Tech Data Corp. (a) 200,000 7,412,500 Xerox Corp. 1,160,300 55,404,325 696,843,551 CONSUMER ELECTRONICS - 1.2% Gemstar International Group 400,000 27,600,000 Ltd. (a) CREDIT & OTHER FINANCE - 0.0% E-Loan, Inc. 500 14,250 NextCard, Inc. (a) 800 19,600 33,850 DRUGS & PHARMACEUTICALS - 0.0% Genentech, Inc. 2,000 328,500 EDUCATIONAL SERVICES - 0.0% Scientific Learning Corp. (a) 200 3,575 ELECTRICAL EQUIPMENT - 0.8% American Power Conversion 400,000 7,025,000 Corp. (a) ANTEC Corp. (a) 100,000 4,556,250 Ericsson (L.M.) Telefon AB 200,000 6,512,500 ADR Class B 18,093,750 ELECTRONIC INSTRUMENTS - 0.2% LAM Research Corp. (a) 62,400 3,521,700 ELECTRONICS - 27.7% Altera Corp. (a) 1,135,400 47,828,725 Analog Devices, Inc. (a) 800,000 41,200,000 Atmel Corp. (a) 290,000 11,400,625 SHARES VALUE (NOTE 1) Broadcom Corp. Class A (a) 36,000 $ 4,635,000 Brocade Communications 36,400 6,847,750 Systems, Inc. Cypress Semiconductor Corp. 200,000 4,625,000 (a) GlobeSpan, Inc. (a) 300 18,150 Intel Corp. 1,383,600 113,714,625 JDS Uniphase Corp. (a) 152,600 16,185,138 Linear Technology Corp. 496,600 31,254,763 LSI Logic Corp. (a) 550,000 31,212,500 Maker Communications, Inc. 300 7,088 Maxim Integrated Products, 437,000 29,415,563 Inc. (a) Microchip Technology, Inc. (a) 230,000 12,592,500 Micron Technology, Inc. (a) 511,200 38,116,350 Motorola, Inc. 700,000 64,575,000 National Semiconductor Corp. 610,000 17,194,375 (a) PMC-Sierra, Inc. (a) 40,000 3,720,000 QLogic Corp. (a) 85,000 7,400,313 Semtech Corp. (a) 235,000 16,464,688 Texas Instruments, Inc. 1,418,400 116,397,450 Xilinx, Inc. (a) 295,000 20,631,563 635,437,166 ENGINEERING - 0.1% AdForce, Inc. 500 8,094 DSP Group, Inc. (a) 60,000 2,310,000 2,318,094 ENTERTAINMENT - 0.0% Musicmaker.com, Inc. (a) 1,200 14,213 Quokka Sports, Inc. 1,000 8,875 23,088 INSURANCE - 0.0% MIIX Group, Inc. 300 5,250 Quotesmith.com, Inc. (a) 800 8,900 14,150 MEDICAL EQUIPMENT & SUPPLIES - - 0.0% Allscripts, Inc. 1,500 19,406 PHOTOGRAPHIC EQUIPMENT - 0.1% Imation Corp. (a) 100,000 2,818,750 RESTAURANTS - 0.0% Rubio's Restaurants, Inc. (a) 1,300 14,300 RETAIL & WHOLESALE, MISCELLANEOUS - 5.5% 1-800-FLOWERS.COM, Inc. Class 1,600 28,800 A (a) Alloy Online, Inc. 500 6,594 Best Buy Co., Inc. (a) 763,000 53,600,750 Circuit City Stores, Inc. - 750,000 32,250,000 Circuit City Group Drugstore.com, Inc. 1,300 77,838 eToys, Inc. 800 34,800 Tandy Corp. 850,000 40,162,500 126,161,282 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SECURITIES INDUSTRY - 0.0% DLJdirect, Inc. 1,100 $ 18,769 Goldman Sachs Group, Inc. 7,000 418,688 TD Waterhouse Group, Inc. (a) 13,000 195,813 Wit Capital Group, Inc. (a) 4,000 77,500 710,770 SERVICES - 0.1% Gartner Group, Inc. Class B 39,060 800,730 (a) InsWeb Corp. 600 19,200 iXL Enterprises, Inc. (a) 1,700 41,863 MapQuest.com, Inc. (a) 300 3,619 Media Metrix, Inc. (a) 200 9,594 875,006 TELEPHONE SERVICES - 0.0% Digital Island, Inc. Delaware 7,000 132,125 Focal Communications Corp. 2,500 60,781 JFAX.COM, Inc. 4,400 30,250 Net2Phone, Inc. (a) 500 42,500 Network Plus Corp. 6,900 110,400 Time Warner Telecom, Inc. 1,400 37,800 413,856 TOTAL COMMON STOCKS 2,035,729,829 (Cost $1,472,515,124) CASH EQUIVALENTS - 14.2% Central Cash Collateral Fund, 68,940,100 68,940,100 5.26% (b) Taxable Central Cash Fund, 255,954,911 255,954,911 5.20% (b) TOTAL CASH EQUIVALENTS 324,895,011 (Cost $324,895,011) TOTAL INVESTMENT PORTFOLIO - 2,360,624,840 103.0% (Cost $1,797,410,135) NET OTHER ASSETS - (3.0%) (69,468,636) NET ASSETS - 100% $ 2,291,156,204 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $1,703,711,497 and $1,905,742,969, 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 $72,823 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $68,432,944. The fund received cash collateral of $68,940,100 which was invested in the Central Cash Collateral Fund. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $1,803,415,973. Net unrealized appreciation aggregated $557,208,867, of which $600,375,468 related to appreciated investment securities and $43,166,601 related to depreciated investment securities. COMPUTERS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 2,360,624,840 value (cost $1,797,410,135) - - See accompanying schedule Receivable for investments 3,265,230 sold Receivable for fund shares 6,212,319 sold Dividends receivable 39,525 Interest receivable 1,141,238 Redemption fees receivable 6,175 Other receivables 93,295 TOTAL ASSETS 2,371,382,622 LIABILITIES Payable for investments $ 4,656,250 purchased Payable for fund shares 4,660,806 redeemed Accrued management fee 1,050,762 Other payables and accrued 918,500 expenses Collateral on securities 68,940,100 loaned, at value TOTAL LIABILITIES 80,226,418 NET ASSETS $ 2,291,156,204 Net Assets consist of: Paid in capital $ 1,401,157,353 Accumulated net investment (4,014,618) loss Accumulated undistributed net 330,798,764 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 563,214,705 (depreciation) on investments NET ASSETS, for 27,114,144 $ 2,291,156,204 shares outstanding NET ASSET VALUE and $84.50 redemption price per share ($2,291,156,204 (divided by) 27,114,144 shares) Maximum offering price per $87.11 share (100/97.00 of $84.50) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 1,233,785 Dividends Interest 5,399,912 Security lending 533,976 TOTAL INCOME 7,167,673 EXPENSES Management fee $ 5,889,894 Transfer agent fees 4,622,890 Accounting and security 614,630 lending fees Non-interested trustees' 3,179 compensation Custodian fees and expenses 39,768 Registration fees 98,102 Audit 21,584 Legal 1,412 Total expenses before 11,291,459 reductions Expense reductions (109,168) 11,182,291 NET INVESTMENT INCOME (LOSS) (4,014,618) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 335,273,772 Foreign currency transactions (38,934) 335,234,838 Change in net unrealized 194,207,140 appreciation (depreciation) on investment securities NET GAIN (LOSS) 529,441,978 NET INCREASE (DECREASE) IN $ 525,427,360 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 5,964,274 charges paid to FDC Sales charges - Retained by $ 5,962,176 FDC Deferred sales charges $ 3,333 withheld by FDC Exchange fees withheld by FSC $ 46,140 Expense reductions Directed $ 102,972 brokerage arrangements Custodian credits 4,447 Transfer agent credits 1,749 $ 109,168
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (4,014,618) $ (5,471,121) income (loss) Net realized gain (loss) 335,234,838 193,034,531 Change in net unrealized 194,207,140 272,430,790 appreciation (depreciation) NET INCREASE (DECREASE) IN 525,427,360 459,994,200 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (101,521,674) - from net realized gains Share transactions Net 581,128,381 1,830,119,568 proceeds from sales of shares Reinvestment of distributions 98,738,212 - Cost of shares redeemed (644,905,561) (1,247,821,903) NET INCREASE (DECREASE) IN 34,961,032 582,297,665 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 854,677 3,678,254 TOTAL INCREASE (DECREASE) 459,721,395 1,045,970,119 IN NET ASSETS NET ASSETS Beginning of period 1,831,434,809 785,464,690 End of period (including $ 2,291,156,204 $ 1,831,434,809 accumulated net investment loss of $4,014,618 and $0, respectively) OTHER INFORMATION Shares Sold 7,714,532 33,082,983 Issued in reinvestment of 1,334,660 - distributions Redeemed (8,721,128) (25,415,629) Net increase (decrease) 328,064 7,667,354
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F Net asset value, beginning of $ 68.37 $ 41.08 $ 48.25 $ 41.03 $ 30.67 period Income from Investment Operations Net investment income (loss) D (.15) (.29) (.32) (.36) (.23) Net realized and unrealized 20.17 27.39 6.42 9.94 16.10 gain (loss) Total from investment 20.02 27.10 6.10 9.58 15.87 operations Less Distributions From net realized gain (3.92) - (10.64) (2.47) (5.61) In excess of net realized gain - - (2.75) - - Total distributions (3.92) - (13.39) (2.47) (5.61) Redemption fees added to paid .03 .19 .12 .11 .10 in capital Net asset value, end of period $ 84.50 $ 68.37 $ 41.08 $ 48.25 $ 41.03 TOTAL RETURN B, C 30.14% 66.43% 20.33% 23.97% 52.79% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 2,291,156 $ 1,831,435 $ 785,465 $ 604,286 $ 527,337 (000 omitted) Ratio of expenses to average 1.10% A 1.25% 1.40% 1.48% 1.40% net assets Ratio of expenses to average 1.09% A, E 1.23% E 1.34% E 1.44% E 1.38% E net assets after expense reductions Ratio of net investment (.39)% A (.54)% (.67)% (.83)% (.56)% income (loss) to average net assets Portfolio turnover rate 185% A 133% 333% 255% 129%
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 27.02 period Income from Investment Operations Net investment income (loss) D (.31) Net realized and unrealized 3.68 gain (loss) Total from investment 3.37 operations Less Distributions From net realized gain - In excess of net realized gain - Total distributions - Redemption fees added to paid .28 in capital Net asset value, end of period $ 30.67 TOTAL RETURN B, C 13.51% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 215,014 (000 omitted) Ratio of expenses to average 1.71% net assets Ratio of expenses to average 1.69% E net assets after expense reductions Ratio of net investment (1.12)% income (loss) to average net assets Portfolio turnover rate 189% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS LIFE OF FUND SELECT DEVELOPING 22.58% 126.48% 253.64% 726.05% COMMUNICATIONS SELECT DEVELOPING 18.83% 119.61% 242.96% 701.20% COMMUNICATIONS (LOAD ADJ.) S&P 500 7.32% 39.82% 206.52% 362.65% GS Technology 28.97% 109.92% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or since the fund started on June 29, 1990. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND SELECT DEVELOPING 126.48% 28.74% 25.90% COMMUNICATIONS SELECT DEVELOPING 119.61% 27.95% 25.48% COMMUNICATIONS (LOAD ADJ.) S&P 500 39.82% 25.11% 18.19% GS Technology 109.92% 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 1999/02/28 65365.18 43108.71 1999/03/31 75453.64 44833.49 1999/04/30 80250.25 46569.89 1999/05/31 77188.21 45470.38 1999/06/30 83230.10 47993.98 1999/07/31 81586.04 46495.61 1999/08/31 80120.00 46265.46 IMATRL PRASUN SHR__CHT 19990831 19990914 120203 R00000000000113 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Developing Communications Portfolio on June 29, 1990, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $80,120 - a 701.20% 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 $46,265 - a 362.65% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Cisco Systems, Inc. 10.0 Motorola, Inc. 8.3 MCI WorldCom, Inc. 5.4 Lucent Technologies, Inc. 5.2 AT&T Corp. 4.1 JDS Uniphase Corp. 3.8 MediaOne Group, Inc. 3.4 Cox Communications, Inc. 3.1 Class A Nokia AB sponsored ADR 3.0 Comcast Corp. Class A (special) 3.0 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Communications Equipment 23.6% Electronics 18.3% Telephone Services 13.1% Broadcasting 11.5% Computer Services & Software 10.2% All Others 23.3%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 23.3 Row: 1, Col: 2, Value: 10.2 Row: 1, Col: 3, Value: 11.5 Row: 1, Col: 4, Value: 13.1 Row: 1, Col: 5, Value: 18.3 Row: 1, Col: 6, Value: 23.6 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S 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. For the six-month period that ended August 31, 1999, the fund posted a total return of 22.58%. In comparison, the Standard and Poor's 500 Index returned 7.32% during the same six-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 28.97%. For the 12-month period that ended August 31, 1999, the fund returned 126.48%, while the S&P 500 and Goldman Sachs indexes returned 39.82% and 109.92%, respectively. Q. WHAT FACTORS INFLUENCED PERFORMANCE? A. Relative to the Goldman Sachs index, returns were curbed by the fund's overweighted position in cable stocks, which suffered during the period, and its underweighted position in semiconductor and software firms, which enjoyed a strong six months. The fund benefited, however, from some good stock picks and favorable industry weightings. Most notably, the fund's overweighting in telecommunications equipment companies relative to the Goldman Sachs index bolstered performance. Also helping returns was the fund's healthy exposure to networking firms, providers of infrastructure to the Internet, such as Cisco Systems. Timely trading of Internet stocks such as America Online and Yahoo! during the period also proved beneficial, although I did cut back on these positions as they hit their price targets in the early spring. Q. WHAT WERE SOME OF YOUR STRATEGIES DURING THE SIX-MONTH PERIOD? A. I directed some assets toward a number of emerging companies in the world of computer networks and communications equipment. For example, there were several attractive IPOs, namely Brocade Communications and Juniper Networks, over the past six months that boosted relative performance. In technology, you tend to want to own the leaders, but you must keep a watchful eye on the sector as new industries are developing all the time. It is critical to find the leaders in emerging technologies whenever you can. Q. WHICH STOCKS PERFORMED WELL FOR THE FUND? A. Cisco Systems was a strong performer for the fund during the period. Investors rallied around the stock, cognizant of the value of infrastructure to the Internet's development. Motorola doubly benefited from the semiconductor rally and from a sharp recovery in its mobile handset business. While the fund no longer owns America Online, its performance early in the period also boosted fund returns. Nokia, a leader in wireless handsets, also performed well for the fund. Q. WHICH STOCKS DISAPPOINTED? A. AT&T wilted amid a negative pricing environment in telecommunications services. Its stock also weakened as a result of the earnings dilution created by its cable acquisitions. Critical Path, a provider of business-to-business Internet messaging solutions, fell sharply amid the Internet stock correction of the late spring and early summer. Other Internet-related service firms, such as Concentric Network and Northpoint Communications, also faltered during the period, hurting fund performance. Q. WHAT'S YOUR OUTLOOK, ANDY? A. In terms of the economy, the domestic outlook looks favorable and the conditions in Asia have improved significantly over the past six months. While still a small percentage of overall technology spending, Asia remains a meaningful part of the growth equation. A sustained recovery there spells good things for the sector over the next several years. Down the road, I will consider further concentrating the fund's telecommunications positions in data networking firms. Many of the best companies from the traditional telecom world are moving into data networking, especially into the Internet. To the extent that they're successful at doing this, they may become important parts of the portfolio. 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 3. (checkmark)FUND FACTS START DATE: June 29, 1990 FUND NUMBER: 518 TRADING SYMBOL: FSDCX SIZE: as of August 31, 1999, more than $1.0 billion 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 AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 92.2% SHARES VALUE (NOTE 1) ADVERTISING - 0.7% DoubleClick, Inc. (a) 80,000 $ 7,990,000 BROADCASTING - 11.5% AT&T Corp. (Liberty Media 350,000 11,200,000 Group) Class A (a) Cablevision Systems Corp. 1,000 70,000 Class A (a) CBS Corp. (a) 74,600 3,506,200 Comcast Corp. Class A 1,000,000 32,625,000 (special) Cox Communications, Inc. 900,000 33,468,750 Class A (a) MediaOne Group, Inc. 575,000 37,806,250 Time Warner, Inc. 125,000 7,414,063 126,090,263 CELLULAR - 4.6% QUALCOMM, Inc. 50,000 9,609,375 Sprint Corp. Series 1 (PCS 250,000 14,937,500 Group) Vodafone AirTouch PLC 129,250 25,922,703 sponsored ADR 50,469,578 COMMUNICATIONS EQUIPMENT - 23.6% ADC Telecommunications, Inc. 208,000 7,709,000 (a) Advanced Fibre 500,000 8,156,250 Communications, Inc. (a) Ciena Corp. (a) 225,000 7,903,125 Cisco Systems, Inc. (a) 1,615,000 109,517,184 Lucent Technologies, Inc. 888,440 56,915,688 Newbridge Networks Corp. (a) 846,400 23,251,189 Nokia AB sponsored ADR 400,000 33,350,000 Tekelec (a) 300,000 4,837,500 Tellabs, Inc. (a) 100,000 5,956,250 Terayon Communication 50,000 1,800,000 Systems, Inc. (a) 259,396,186 COMPUTER SERVICES & SOFTWARE - - 10.2% Amdocs Ltd. (a) 250,000 6,562,500 At Home Corp. Series A (a) 381,688 15,315,231 Aware, Inc. (a) 443,500 14,857,250 BroadVision, Inc. (a) 150,000 14,934,375 Concentric Network Corp. (a) 300,000 6,581,250 Internet Capital Group, Inc. 5,210 390,750 (a) Micromuse, Inc. (a) 100,000 5,712,500 Networks Associates, Inc. (a) 300,000 5,062,500 Polycom, Inc. (a) 2,200 80,438 PSINet, Inc. (a) 168,000 8,043,000 Redback Networks, Inc. 72,000 7,740,000 Siebel Systems, Inc. (a) 32,900 2,259,819 US Interactive, Inc. (a) 2,605 54,054 Verio, Inc. (a) 250,000 9,296,875 Yahoo!, Inc. (a) 100,000 14,750,000 111,640,542 SHARES VALUE (NOTE 1) COMPUTERS & OFFICE EQUIPMENT - - 5.8% Computer Network Technology 779,000 $ 12,317,938 Corp. (a) Comverse Technology, Inc. (a) 339,650 26,492,700 Juniper Networks, Inc. 60,800 12,464,000 MMC Networks, Inc. (a) 200,000 6,175,000 Netopia, Inc. (a) 80,000 2,210,000 Safeguard Scientifics, Inc. 52,100 3,503,725 (a) 63,163,363 CONSUMER ELECTRONICS - 0.5% Gemstar International Group 75,000 5,175,000 Ltd. (a) ELECTRICAL EQUIPMENT - 2.1% Ericsson (L.M.) Telefon AB 410,500 13,366,906 ADR Class B Scientific-Atlanta, Inc. 200,000 10,250,000 23,616,906 ELECTRONIC INSTRUMENTS - 0.0% Photon Dynamics, Inc. (a) 10,000 165,000 ELECTRONICS - 18.3% Altera Corp. (a) 200,000 8,425,000 Analog Devices, Inc. (a) 200,000 10,300,000 Broadcom Corp. Class A (a) 81,600 10,506,000 Brocade Communications 130,800 24,606,750 Systems, Inc. JDS Uniphase Corp. (a) 389,368 41,297,344 Motorola, Inc. 983,100 90,690,975 QLogic Corp. (a) 79,400 6,912,763 Texas Instruments, Inc. 20,000 1,641,250 Vitesse Semiconductor Corp. 17,400 1,183,200 (a) Xilinx, Inc. (a) 75,000 5,245,313 200,808,595 GAS - 0.7% Williams Companies, Inc. 200,000 8,250,000 PACKAGING & CONTAINERS - 1.1% Corning, Inc. 182,000 12,103,000 TELEPHONE SERVICES - 13.1% AT&T Corp. 1,000,000 45,000,000 MCI WorldCom, Inc. (a) 784,146 59,399,060 McLeodUSA, Inc. Class A (a) 100,000 3,337,500 Metromedia Fiber Network, 510,000 15,013,125 Inc. Class A (a) NEXTLINK Communications, Inc. 250,000 12,593,750 Class A (a) Rhythms NetConnections, Inc. 68,800 2,631,600 (a) WinStar Communications, Inc. 124,000 6,300,750 (a) 144,275,785 TOTAL COMMON STOCKS 1,013,144,218 (Cost $821,903,673) CASH EQUIVALENTS - 13.2% SHARES VALUE (NOTE 1) Central Cash Collateral Fund, 49,238,500 $ 49,238,500 5.26% (b) Taxable Central Cash Fund, 95,283,138 95,283,138 5.20% (b) TOTAL CASH EQUIVALENTS 144,521,638 (Cost $144,521,638) TOTAL INVESTMENT PORTFOLIO - 1,157,665,856 105.4% (Cost $966,425,311) NET OTHER ASSETS - (5.4%) (59,505,636) NET ASSETS - 100% $ 1,098,160,220 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $1,172,176,911 and $858,877,162, 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 $23,729 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $49,297,269 The fund received cash collateral of $49,238,500 which was invested in the Central Cash Collateral Fund. The fund participated in the interfund lending program as a lender. The average daily loan balance during the period for which loans were outstanding amounted to $36,346,857. The weighted average interest rate was 5.29%. Interest earned from the interfund lending program amounted to $37,362 and is included in interest income on the Statement of Operations. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $971,491,986. Net unrealized appreciation aggregated $186,173,870, of which $228,013,584 related to appreciated investment securities and $41,839,714 related to depreciated investment securities. DEVELOPING COMMUNICATIONS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 1,157,665,856 value (cost $966,425,311) - See accompanying schedule Receivable for investments 21,196,477 sold Receivable for fund shares 6,626,410 sold Dividends receivable 56,394 Interest receivable 400,519 Redemption fees receivable 30,351 Other receivables 660,621 TOTAL ASSETS 1,186,636,628 LIABILITIES Payable for investments $ 25,984,826 purchased Payable for fund shares 12,140,890 redeemed Accrued management fee 531,011 Other payables and accrued 581,181 expenses Collateral on securities 49,238,500 loaned, at value TOTAL LIABILITIES 88,476,408 NET ASSETS $ 1,098,160,220 Net Assets consist of: Paid in capital $ 836,572,623 Accumulated net investment (2,516,742) loss Accumulated undistributed net 72,863,794 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 191,240,545 (depreciation) on investments NET ASSETS, for 28,162,325 $ 1,098,160,220 shares outstanding NET ASSET VALUE and $38.99 redemption price per share ($1,098,160,220 (divided by) 28,162,325 shares) Maximum offering price per $40.20 share (100/97.00 of $38.99) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 930,143 Dividends Interest 2,420,328 Security lending 45,400 TOTAL INCOME 3,395,871 EXPENSES Management fee $ 3,007,867 Transfer agent fees 2,372,311 Accounting and security 335,139 lending fees Non-interested trustees' 1,930 compensation Custodian fees and expenses 20,203 Registration fees 204,774 Audit 8,142 Legal 2,714 Total expenses before 5,953,080 reductions Expense reductions (40,467) 5,912,613 NET INVESTMENT INCOME (LOSS) (2,516,742) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 76,211,880 Foreign currency transactions 1,432 76,213,312 Change in net unrealized appreciation (depreciation) on: Investment securities 67,283,628 Assets and liabilities in (1,555) 67,282,073 foreign currencies NET GAIN (LOSS) 143,495,385 NET INCREASE (DECREASE) IN $ 140,978,643 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 4,102,715 charges paid to FDC Sales charges - Retained by $ 4,093,971 FDC Deferred sales charges $ 1,380 withheld by FDC Exchange fees withheld by FSC $ 27,015 Expense reductions Directed $ 38,371 brokerage arrangements Custodian credits 1,190 Transfer agent credits 906 $ 40,467
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (2,516,742) $ (1,996,908) income (loss) Net realized gain (loss) 76,213,312 53,731,227 Change in net unrealized 67,282,073 97,390,680 appreciation (depreciation) NET INCREASE (DECREASE) IN 140,978,643 149,124,999 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (28,177,745) (820,226) from net realized gains Share transactions Net 897,031,286 606,604,197 proceeds from sales of shares Reinvestment of distributions 27,382,252 808,781 Cost of shares redeemed (552,314,094) (383,100,933) NET INCREASE (DECREASE) IN 372,099,444 224,312,045 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 1,198,660 1,088,615 TOTAL INCREASE (DECREASE) 486,099,002 373,705,433 IN NET ASSETS NET ASSETS Beginning of period 612,061,218 238,355,785 End of period (including $ 1,098,160,220 $ 612,061,218 accumulated net investment loss of $2,516,742 and $0, respectively) OTHER INFORMATION Shares Sold 23,263,892 21,247,025 Issued in reinvestment of 689,559 39,007 distributions Redeemed (14,494,649) (14,419,633) Net increase (decrease) 9,458,802 6,866,399
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 f Net asset value, beginning of $ 32.72 $ 20.14 $ 19.68 $ 19.42 $ 20.40 period Income from Investment Operations Net investment income (loss) (.09) (.16) (.18) (.18) (.17) D Net realized and unrealized 7.46 12.72 4.95 .42 4.17 gain (loss) Total from investment 7.37 12.56 4.77 .24 4.00 operations Less Distributions From net realized gain (1.14) (.07) (4.35) - (5.00) Redemption fees added to paid .04 .09 .04 .02 .02 in capital Net asset value, end of period $ 38.99 $ 32.72 $ 20.14 $ 19.68 $ 19.42 TOTAL RETURN B, C 22.58% 63.01% 28.17% 1.34% 21.84% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 1,098,160 $ 612,061 $ 238,356 $ 220,360 $ 333,185 (000 omitted) Ratio of expenses to average 1.14% A 1.38% 1.61% 1.64% 1.53% net assets Ratio of expenses to average 1.13% A, E 1.34% E 1.55% E 1.62% E 1.51% E net assets after expense reductions Ratio of net investment (.48)% A (.64)% (.82)% (.86)% (.78)% income (loss) to average net assets Portfolio turnover rate 185% A 299% 383% 202% 249%
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 19.65 period Income from Investment Operations Net investment income (loss) (.16) D Net realized and unrealized 2.55 gain (loss) Total from investment 2.39 operations Less Distributions From net realized gain (1.67) Redemption fees added to paid .03 in capital Net asset value, end of period $ 20.40 TOTAL RETURN B, C 13.63% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 254,426 (000 omitted) Ratio of expenses to average 1.58% net assets Ratio of expenses to average 1.56% E net assets after expense reductions Ratio of net investment (.83)% income (loss) to average net assets Portfolio turnover rate 266% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT ELECTRONICS 44.66% 161.08% 507.26% 1,651.76% SELECT ELECTRONICS (LOAD ADJ.) 40.24% 153.17% 488.97% 1,599.14% S&P 500 7.32% 39.82% 206.52% 384.79% GS Technology 28.97% 109.92% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT ELECTRONICS 161.08% 43.44% 33.15% SELECT ELECTRONICS (LOAD ADJ.) 153.17% 42.57% 32.75% S&P 500 39.82% 25.11% 17.10% GS Technology 109.92% 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 1989/08/31 9700.00 10000.00 1989/09/30 9969.44 9959.00 1989/10/31 9520.37 9727.95 1989/11/30 9546.03 9926.40 1989/12/31 9943.78 10164.64 1990/01/31 10277.38 9482.59 1990/02/28 11098.54 9604.91 1990/03/31 11637.43 9859.44 1990/04/30 11688.76 9612.96 1990/05/31 13408.07 10550.22 1990/06/30 13613.36 10478.48 1990/07/31 12971.83 10444.95 1990/08/31 10944.58 9500.72 1990/09/30 9289.42 9038.04 1990/10/31 8955.82 8999.18 1990/11/30 9879.63 9580.52 1990/12/31 10521.29 9847.82 1991/01/31 11985.79 10277.18 1991/02/28 13039.21 11012.00 1991/03/31 13732.92 11278.49 1991/04/30 13810.00 11305.56 1991/05/31 14259.62 11793.96 1991/06/30 12525.35 11253.80 1991/07/31 13386.06 11778.23 1991/08/31 13938.46 12057.37 1991/09/30 12872.20 11856.01 1991/10/31 13501.68 12014.88 1991/11/30 12679.50 11530.68 1991/12/31 14233.93 12849.79 1992/01/31 15916.82 12610.79 1992/02/29 16790.39 12774.73 1992/03/31 15467.20 12525.62 1992/04/30 15171.73 12893.87 1992/05/31 15197.42 12957.05 1992/06/30 14092.62 12763.99 1992/07/31 14837.72 13286.04 1992/08/31 14991.88 13013.68 1992/09/30 15531.43 13167.24 1992/10/31 16700.46 13213.32 1992/11/30 17792.41 13663.90 1992/12/31 18139.27 13831.96 1993/01/31 18755.90 13948.15 1993/02/28 18344.81 14137.85 1993/03/31 18987.14 14436.15 1993/04/30 18652.45 14086.80 1993/05/31 20524.15 14464.33 1993/06/30 20898.49 14506.27 1993/07/31 21492.27 14448.25 1993/08/31 23338.15 14995.84 1993/09/30 23725.40 14880.37 1993/10/31 23273.61 15188.39 1993/11/30 23092.90 15044.10 1993/12/31 23958.31 15226.14 1994/01/31 25613.23 15743.82 1994/02/28 26827.84 15317.17 1994/03/31 26539.37 14649.34 1994/04/30 26463.46 14836.85 1994/05/31 26387.54 15080.17 1994/06/30 24975.55 14710.71 1994/07/31 25491.76 15193.22 1994/08/31 27981.73 15816.14 1994/09/30 27177.04 15428.65 1994/10/31 28285.38 15775.79 1994/11/30 27921.00 15201.24 1994/12/31 28072.82 15426.67 1995/01/31 27268.14 15826.69 1995/02/28 30061.76 16443.45 1995/03/31 33159.03 16928.70 1995/04/30 36863.61 17427.25 1995/05/31 39550.95 18123.82 1995/06/30 45183.73 18544.83 1995/07/31 51940.04 19159.78 1995/08/31 52623.26 19207.87 1995/09/30 53564.59 20018.44 1995/10/31 52091.87 19946.98 1995/11/30 50786.15 20822.65 1995/12/31 47434.17 21223.69 1996/01/31 49037.43 21946.15 1996/02/29 51930.65 22149.59 1996/03/31 48890.00 22362.89 1996/04/30 54473.75 22692.52 1996/05/31 55911.14 23277.76 1996/06/30 51211.95 23366.44 1996/07/31 48742.58 22334.12 1996/08/31 51101.39 22805.14 1996/09/30 57993.53 24088.62 1996/10/31 58454.24 24752.98 1996/11/30 67226.06 26624.06 1996/12/31 67226.06 26096.63 1997/01/31 77730.13 27727.15 1997/02/28 69935.00 27944.53 1997/03/31 65069.96 26796.29 1997/04/30 71133.37 28396.03 1997/05/31 78949.33 30124.78 1997/06/30 78463.36 31474.37 1997/07/31 92090.68 33978.79 1997/08/31 95573.44 32075.30 1997/09/30 99116.94 33832.06 1997/10/31 84416.45 32702.07 1997/11/30 83809.00 34215.85 1997/12/31 76449.62 34803.33 1998/01/31 77690.28 35188.26 1998/02/28 86821.56 37726.04 1998/03/31 84340.23 39657.99 1998/04/30 88310.35 40056.94 1998/05/31 76499.25 39368.37 1998/06/30 78012.86 40967.51 1998/07/31 81288.20 40531.21 1998/08/31 65085.15 34671.20 1998/09/30 73695.35 36892.24 1998/10/31 88186.29 39893.06 1998/11/30 100245.53 42310.97 1998/12/31 115530.49 44748.93 1999/01/31 139400.83 46620.33 1999/02/28 117465.92 45171.37 1999/03/31 122230.07 46978.68 1999/04/30 124761.02 48798.16 1999/05/31 129152.96 47646.04 1999/06/30 153991.02 50290.39 1999/07/31 158705.54 48720.33 1999/08/31 169914.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 123226 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Electronics Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $169,914 - a 1,599.14% 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 $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Micron Technology, Inc. 7.0 Microsoft Corp. 5.1 Texas Instruments, Inc. 4.8 Analog Devices, Inc. 4.8 Altera Corp. 4.7 LSI Logic Corp. 4.2 Motorola, Inc. 4.2 LAM Research Corp. 3.7 Rambus, Inc. 3.5 Linear Technology Corp. 3.1 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Electronics 56.9% Computers & Office Equipment 9.2% Computer Services & Software 8.8% Electronic Instruments 8.5% Communications Equipment 3.1% All Others 13.5%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 13.5 Row: 1, Col: 2, Value: 3.1 Row: 1, Col: 3, Value: 8.5 Row: 1, Col: 4, Value: 8.800000000000001 Row: 1, Col: 5, Value: 9.199999999999999 Row: 1, Col: 6, Value: 56.9 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S 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. It did very well. For the six-month period that ended on August 31, 1999, the fund had a total return of 44.66%. For the 12-month period ending August 31, 1999, it returned 161.08%. For the comparable periods, the Standard & Poor's 500 Index returned 7.32% and 39.82%, respectively. The fund did quite well against the Goldman Sachs Technology Index - an index of 190 stocks designed to measure the performance of companies in the technology sector - which returned 28.97% and 109.92% for the same six-month and 12-month periods. Q. THE FUND OUTPERFORMED THE INDUSTRY INDEX BY A FAIRLY WIDE MARGIN. WHY? A. The main reason was that the fund was weighted fairly heavily toward semiconductor stocks, which have done quite well since last October. The Goldman Sachs Technology Index is a bit more broadly based across the sector, so the fund had the benefit of a particularly strong semiconductor environment within a technology environment that itself was strengthening. A number of factors contributed to the overall strength of the industry. The personal computer environment improved greatly, with aggressive pricing driving stronger PC demand on the consumer side and lower levels of concern about the Y2K millennium bug spurring PC spending on the corporate side. The cellular phone, or "wireless", business also was terrific. The recovery in semiconductors came largely on the back of these improvements in the PC and wireless segments. Emerging signs of economic reawakening in South Korea and Japan also helped the investment environment for technology stocks. Q. WHAT WAS YOUR INVESTMENT STRATEGY DURING THIS PERIOD? A. Last fall, as the broad market showed signs of improvement, I began to concentrate the fund more in the semiconductor segment, including semiconductor equipment manufacturers. I also tended to focus more on companies that I believed were well-positioned for turnaround and those whose business applications were closely aligned with the wireless industry, which I believed would do well. Q. WHICH STOCKS PERFORMED WELL DURING THE PERIOD? A. Texas Instruments (TI) continued to be a very successful turnaround story. With the sale of its memory business to Micron Technology, TI demonstrated increased earnings by continuing to grow its market share as a leading provider of digital signal processing (DSP), which is closely aligned with the cellular telephone market. Analog Devices, which derives about one-quarter of its revenues from DSPs, also did well on the resurgence of the wireless market. LAM Research, a maker of semiconductor equipment, is another great turnaround story that helped fund performance. Xilinx and Altera, two programmable logic companies, both performed well on the strength in the networking and telecommunications businesses. Micron Technology benefited from a firming of prices in the recovering digital random access memory (DRAM) market and made a strong contribution to fund performance. Q. WERE THERE ANY DISAPPOINTMENTS? A. No major disappointments spring to mind. However, Cadence Design, a leading electronic design company whose product is used in the design of semiconductors, did not recover in step with the semiconductor industry as a whole and continued to show some earnings weakness. SpeedFam-IPEC, a semiconductor equipment company that lost market share, also hurt fund performance during the period. Q. WHAT'S YOUR NEAR-TERM OUTLOOK FOR THE FUND, MATT? A. I'm actually quite cautious at the moment. I've become increasingly concerned about the high valuations of some of the companies in the semiconductor and semiconductor equipment segments. I'm also concerned about the technology sector as a whole. So much good news has been priced into many of these names that I'm now feeling more and more cautious about their ability to meet expectations. I believe there is a good likelihood that corporate America will tone down its capital spending on information technology during the fourth quarter of the year based on concerns about Y2K. I don't think that viewpoint is currently reflected in the stocks, and as a result, there may be some disappointments in the short term. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 008 TRADING SYMBOL: FSELX SIZE: as of August 31, 1999, more than $4.2 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 AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets
COMMON STOCKS - 91.3% SHARES VALUE (NOTE 1) COMMUNICATIONS EQUIPMENT - 3.1% ADC Telecommunications, Inc. 150,000 $ 5,559,375 (a) Ciena Corp. (a) 350,000 12,293,750 Cisco Systems, Inc. (a) 100,000 6,781,250 Jabil Circuit, Inc. (a) 2,330,000 104,413,125 129,047,500 COMPUTER SERVICES & SOFTWARE - - 8.8% America Online, Inc. (a) 25,000 2,282,813 Cadence Design Systems, Inc. 6,855,700 93,408,913 (a) IMS Health, Inc. 574,200 15,862,275 Legato Systems, Inc. (a) 338,200 14,563,738 Microsoft Corp. (a) 2,340,000 216,596,250 Scient Corp. 1,200 75,750 Synopsys, Inc. (a) 525,000 29,367,188 372,156,927 COMPUTERS & OFFICE EQUIPMENT - - 9.2% Adaptec, Inc. (a) 2,575,000 100,425,000 Compaq Computer Corp. 2,400,000 55,650,000 Creative Technology Ltd. 100,000 981,250 (NASDAQ) Gateway, Inc. (a) 781,270 75,734,361 Lexmark International Group, 200,000 15,750,000 Inc. Class A (a) Quantum Corp. - DLT & Storage 1,299,100 23,789,769 Systems (a) SCI Systems, Inc. (a) 2,317,500 115,440,469 387,770,849 CONSUMER ELECTRONICS - 0.3% Gemstar International Group 200,000 13,800,000 Ltd. (a) ELECTRICAL EQUIPMENT - 0.2% Ericsson (L.M.) Telefon AB 300,000 9,768,750 ADR Class B ELECTRONIC INSTRUMENTS - 8.5% Applied Materials, Inc. (a) 28,400 2,018,175 KLA-Tencor Corp. (a) 1,215,600 76,354,875 LAM Research Corp. (a)(c) 2,758,227 155,667,436 Novellus Systems, Inc. (a) 1,199,100 64,676,456 Teradyne, Inc. (a) 856,600 58,302,338 357,019,280 ELECTRONICS - 56.9% Altera Corp. (a) 4,743,300 199,811,513 Analog Devices, Inc. (a) 3,913,400 201,540,100 Arm Holdings PLC sponsored 243,900 10,274,288 ADR (a) Avnet, Inc. 200,000 8,850,000 SHARES VALUE (NOTE 1) AVX Corp. 765,700 $ 22,923,144 Broadcom Corp. Class A (a) 20,000 2,575,000 Dallas Semiconductor Corp. 1,098,500 55,474,250 DII Group, Inc. (a) 220,000 7,796,250 Etec Systems, Inc. (a) 730,300 32,133,200 Flextronics International 75,000 4,401,563 Ltd. (a) Intel Corp. 1,200,000 98,625,000 KEMET Corp. (a) 237,500 6,130,469 Lattice Semiconductor Corp. 411,600 25,364,850 (a) Linear Technology Corp. 2,111,020 132,862,321 LSI Logic Corp. (a) 3,154,800 179,034,900 Maxim Integrated Products, 1,728,900 116,376,581 Inc. (a) Methode Electronics, Inc. 684,000 12,312,000 Class A Microchip Technology, Inc. (a) 1,351,050 73,969,988 Micron Technology, Inc. (a) 3,970,000 296,013,120 Molex, Inc. Class A 300,000 8,437,500 Motorola, Inc. 1,923,300 177,424,425 National Semiconductor Corp. 2,515,100 70,894,381 (a) PCD, Inc. (a) 200,000 1,687,500 PMC-Sierra, Inc. (a) 389,200 36,195,600 Rambus, Inc. (a)(c) 1,523,800 147,808,600 RF Micro Devices, Inc. (a) 50,000 2,196,875 Sanmina Corp. (a) 1,309,900 98,242,500 Solectron Corp. (a) 484,200 37,888,650 Texas Instruments, Inc. 2,487,400 204,122,263 Vitesse Semiconductor Corp. 779,700 53,019,600 (a) Xilinx, Inc. (a) 1,140,700 79,777,706 2,404,164,137 INDUSTRIAL MACHINERY & EQUIPMENT - 2.1% ASM Lithography Holding NV (a) 636,600 40,185,375 PRI Automation, Inc. (a) 811,600 23,232,050 SpeedFam-IPEC, Inc. (a)(c) 1,849,760 18,266,380 Varian Semiconductor 356,900 8,119,475 Equipment Associates, Inc. (a) 89,803,280 METALS & MINING - 0.4% Cable Design Technology Corp. 796,000 16,765,750 (a) SERVICES - 0.0% Gartner Group, Inc. Class B 74,760 1,532,580 (a) TELEPHONE SERVICES - 1.8% Level 3 Communications, Inc. 360,000 21,510,000 (a) MCI WorldCom, Inc. (a) 605,000 45,828,750 Metromedia Fiber Network, 321,700 9,470,044 Inc. Class A (a) 76,808,794 TOTAL COMMON STOCKS 3,858,637,847 (Cost $2,501,956,202) CASH EQUIVALENTS - 11.5% SHARES VALUE (NOTE 1) Central Cash Collateral Fund, 88,402,500 $ 88,402,500 5.26% (b) Taxable Central Cash Fund, 398,114,200 398,114,200 5.20% (b) TOTAL CASH EQUIVALENTS 486,516,700 (Cost $486,516,700) TOTAL INVESTMENT PORTFOLIO - $ 4,345,154,547 102.8% (Cost $2,988,472,902) NET OTHER ASSETS - (2.8%) (119,116,983) NET ASSETS - 100% $ 4,226,037,564
LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. (c) Affiliated company OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $2,144,688,693 and $2,150,384,982, 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 $170,536 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $81,767,313. The fund received cash collateral of $88,402,500 which was invested in the Central Cash Collateral Fund. Transactions during the period with companies which are or were affiliates are as follows:
PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME LAM Research Corp. $ 1,712,810 $ - $ - $ 155,667,436 Rambus, Inc. 32,148,678 - - 147,808,600 SpeedFam-IPEC, Inc. 6,675,764 - - 18,266,380 Totals $ 40,537,252 $ - $ - $ 321,742,416
INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $3,006,294,216. Net unrealized appreciation aggregated $1,338,860,331, of which $1,398,962,872 related to appreciated investment securities and $60,102,541 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 AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 4,345,154,547 value (cost $2,988,472,902) - - See accompanying schedule Receivable for investments 8,280,748 sold Receivable for fund shares 17,954,148 sold Dividends receivable 139,159 Interest receivable 1,403,973 Redemption fees receivable 12,827 Other receivables 112,156 TOTAL ASSETS 4,373,057,558 LIABILITIES Payable for investments $ 43,904,582 purchased Payable for fund shares 11,428,020 redeemed Accrued management fee 1,935,331 Other payables and accrued 1,349,561 expenses Collateral on securities 88,402,500 loaned, at value TOTAL LIABILITIES 147,019,994 NET ASSETS $ 4,226,037,564 Net Assets consist of: Paid in capital $ 2,442,119,178 Accumulated net investment (7,904,439) (loss) Accumulated undistributed net 435,141,180 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 1,356,681,645 (depreciation) on investments NET ASSETS, for 61,710,653 $ 4,226,037,564 shares outstanding NET ASSET VALUE and $68.48 redemption price per share ($4,226,037,564 (divided by) 61,710,653 shares) Maximum offering price per $70.60 share (100/97.00 of $68.48) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 1,454,509 Dividends Interest 7,642,758 Security lending 232,279 TOTAL INCOME 9,329,546 EXPENSES Management fee $ 9,687,228 Transfer agent fees 6,688,737 Accounting and security 872,510 lending fees Non-interested trustees' 5,355 compensation Custodian fees and expenses 39,636 Registration fees 149,063 Audit 47,104 Legal 1,894 Total expenses before 17,491,527 reductions Expense reductions (257,542) 17,233,985 NET INVESTMENT INCOME (LOSS) (7,904,439) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 564,498,843 Foreign currency transactions (7,131) 564,491,712 Change in net unrealized appreciation (depreciation) on: Investment securities 666,391,557 Assets and liabilities in 8,062 666,399,619 foreign currencies NET GAIN (LOSS) 1,230,891,331 NET INCREASE (DECREASE) IN $ 1,222,986,892 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 6,414,167 charges paid to FDC Sales charges - Retained by $ 6,393,671 FDC Deferred sales charges $ 3,889 withheld by FDC Exchange fees withheld by FSC $ 54,203 Expense reductions Directed $ 248,612 brokerage arrangements Custodian credits 2,418 Transfer agent credits 6,512 $ 257,542
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (7,904,439) $ (14,090,154) income (loss) Net realized gain (loss) 564,491,712 220,496,758 Change in net unrealized 666,399,619 431,151,334 appreciation (depreciation) NET INCREASE (DECREASE) IN 1,222,986,892 637,557,938 NET ASSETS RESULTING FROM OPERATIONS Share transactions Net 1,152,707,040 1,488,308,447 proceeds from sales of shares Cost of shares redeemed (1,036,744,965) (1,912,074,698) NET INCREASE (DECREASE) IN 115,962,075 (423,766,251) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 1,540,664 3,006,511 TOTAL INCREASE (DECREASE) 1,340,489,631 216,798,198 IN NET ASSETS NET ASSETS Beginning of period 2,885,547,933 2,668,749,735 End of period (including $ 4,226,037,564 $ 2,885,547,933 accumulated net investment loss of $7,904,439 and $0, respectively) OTHER INFORMATION Shares Sold 19,637,292 36,527,830 Redeemed (18,877,033) (51,847,162) Net increase (decrease) 760,259 (15,319,332)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F Net asset value, beginning of $ 47.34 $ 34.99 $ 37.95 $ 28.18 $ 19.80 period Income from Investment Operations Net investment income (loss) D (.14) (.23) (.17) (.17) (.08) Net realized and unrealized 21.25 12.53 7.32 9.80 13.51 gain (loss) Total from investment 21.11 12.30 7.15 9.63 13.43 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 .03 .05 .09 .14 .20 in capital Net asset value, end of period $ 68.48 $ 47.34 $ 34.99 $ 37.95 $ 28.18 TOTAL RETURN B, C 44.66% 35.30% 24.15% 34.67% 72.75% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 4,226,038 $ 2,885,548 $ 2,668,750 $ 1,744,017 $ 1,133,362 (000 omitted) Ratio of expenses to average 1.03% A 1.18% 1.18% 1.33% 1.25% net assets Ratio of expenses to average 1.02% A, E 1.15% E 1.12% E 1.29% E 1.22% E net assets after expense reductions Ratio of net investment (.47)% A (.62)% (.42)% (.54)% (.28)% income (loss) to average net assets Portfolio turnover rate 140% A 160% 435% 341% 366%
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 17.67 period Income from Investment Operations Net investment income (loss) D (.18) Net realized and unrealized 2.11 gain (loss) Total from investment 1.93 operations Less Distributions From net realized gain - In excess of net realized gain - Total distributions - Redemption fees added to paid .20 in capital Net asset value, end of period $ 19.80 TOTAL RETURN B, C 12.05% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 216,433 (000 omitted) Ratio of expenses to average 1.72% net assets Ratio of expenses to average 1.71% E net assets after expense reductions Ratio of net investment (.98)% income (loss) to average net assets Portfolio turnover rate 205% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT SOFTWARE AND COMPUTER 11.04% 73.18% 286.56% 889.52% SERVICES SELECT SOFTWARE AND COMPUTER 7.63% 67.91% 274.89% 859.76% SERVICES (LOAD ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Technology 28.97% 109.92% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT SOFTWARE AND COMPUTER 73.18% 31.05% 25.76% SERVICES SELECT SOFTWARE AND COMPUTER 67.91% 30.25% 25.38% SERVICES (LOAD ADJ.) S&P 500 39.82% 25.11% 17.10% GS Technology 109.92% 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 1989/08/31 9700.00 10000.00 1989/09/30 9894.81 9959.00 1989/10/31 10103.05 9727.95 1989/11/30 10398.61 9926.40 1989/12/31 10445.77 10164.64 1990/01/31 10074.43 9482.59 1990/02/28 10335.74 9604.91 1990/03/31 10748.35 9859.44 1990/04/30 10713.96 9612.96 1990/05/31 12061.80 10550.22 1990/06/30 12343.75 10478.48 1990/07/31 11215.96 10444.95 1990/08/31 9648.07 9500.72 1990/09/30 8540.91 9038.04 1990/10/31 8712.83 8999.18 1990/11/30 9833.74 9580.52 1990/12/31 10535.17 9847.82 1991/01/31 12082.43 10277.18 1991/02/28 12962.66 11012.00 1991/03/31 13698.47 11278.49 1991/04/30 13595.32 11305.56 1991/05/31 13842.88 11793.96 1991/06/30 12828.30 11253.80 1991/07/31 13616.33 11778.23 1991/08/31 14722.61 12057.37 1991/09/30 14237.67 11856.01 1991/10/31 14949.93 12014.88 1991/11/30 13313.24 11530.68 1991/12/31 15364.99 12849.79 1992/01/31 17831.27 12610.79 1992/02/29 18367.08 12774.73 1992/03/31 17484.58 12525.62 1992/04/30 17043.32 12893.87 1992/05/31 17311.23 12957.05 1992/06/30 16373.57 12763.99 1992/07/31 17531.85 13286.04 1992/08/31 16223.86 13013.68 1992/09/30 17397.90 13167.24 1992/10/31 18800.45 13213.32 1992/11/30 20439.38 13663.90 1992/12/31 20825.48 13831.96 1993/01/31 21897.09 13948.15 1993/02/28 21763.14 14137.85 1993/03/31 22228.03 14436.15 1993/04/30 21853.95 14086.80 1993/05/31 24318.74 14464.33 1993/06/30 25573.39 14506.27 1993/07/31 24799.25 14448.25 1993/08/31 26472.11 14995.84 1993/09/30 27006.00 14880.37 1993/10/31 26943.71 15188.39 1993/11/30 26276.35 15044.10 1993/12/31 27641.83 15226.14 1994/01/31 28605.03 15743.82 1994/02/28 28986.30 15317.17 1994/03/31 25875.96 14649.34 1994/04/30 26009.83 14836.85 1994/05/31 23406.82 15080.17 1994/06/30 21352.87 14710.71 1994/07/31 22400.18 15193.22 1994/08/31 24830.34 15816.14 1994/09/30 25958.99 15428.65 1994/10/31 27555.38 15775.79 1994/11/30 26924.96 15201.24 1994/12/31 27748.57 15426.67 1995/01/31 27291.01 15826.69 1995/02/28 29558.48 16443.45 1995/03/31 31246.37 16928.70 1995/04/30 32222.50 17427.25 1995/05/31 33096.96 18123.82 1995/06/30 36025.35 18544.83 1995/07/31 38201.31 19159.78 1995/08/31 38465.68 19207.87 1995/09/30 40051.89 20018.44 1995/10/31 40529.79 19946.98 1995/11/30 41678.78 20822.65 1995/12/31 40586.23 21223.69 1996/01/31 39029.62 21946.15 1996/02/29 41433.20 22149.59 1996/03/31 40380.20 22362.89 1996/04/30 44445.42 22692.52 1996/05/31 45995.15 23277.76 1996/06/30 43700.13 23366.44 1996/07/31 40340.40 22334.12 1996/08/31 41180.33 22805.14 1996/09/30 46563.00 24088.62 1996/10/31 46728.62 24752.98 1996/11/30 50431.42 26624.06 1996/12/31 49419.82 26096.63 1997/01/31 53386.38 27727.15 1997/02/28 48122.58 27944.53 1997/03/31 45652.84 26796.29 1997/04/30 48330.15 28396.03 1997/05/31 52422.29 30124.78 1997/06/30 52449.04 31474.37 1997/07/31 58787.86 33978.79 1997/08/31 58507.03 32075.30 1997/09/30 60339.13 33832.06 1997/10/31 57584.29 32702.07 1997/11/30 58854.72 34215.85 1997/12/31 56839.71 34803.33 1998/01/31 58401.41 35188.26 1998/02/28 65208.03 37726.04 1998/03/31 70644.49 39657.99 1998/04/30 69667.32 40056.94 1998/05/31 64224.10 39368.37 1998/06/30 72048.73 40967.51 1998/07/31 67818.40 40531.21 1998/08/31 55423.24 34671.20 1998/09/30 67626.11 36892.24 1998/10/31 65333.45 39893.06 1998/11/30 71457.08 42310.97 1998/12/31 82855.35 44748.93 1999/01/31 92924.57 46620.33 1999/02/28 86443.93 45171.37 1999/03/31 90411.05 46978.68 1999/04/30 86980.23 48798.16 1999/05/31 86933.01 47646.04 1999/06/30 98045.58 50290.39 1999/07/31 91938.39 48720.33 1999/08/31 95976.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990921 142935 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Software and Computer Services Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $95,976 - an 859.76% increase on the initial investment - - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Microsoft Corp. 17.2 Siebel Systems, Inc. 7.6 BMC Software, Inc. 6.3 Compuware Corp. 5.5 Oracle Corp. 4.8 Automatic Data Processing, Inc. 3.9 First Data Corp. 3.3 Yahoo!, Inc. 3.2 Computer Associates 2.8 International, Inc. America Online, Inc. 2.6 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Computer Services & Software 87.1% Computers & Office Equipment 2.3% Broadcasting 0.9% Communications Equipment 0.8% Services 0.4% All Others 8.5%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 8.5 Row: 1, Col: 2, Value: 0.4 Row: 1, Col: 3, Value: 0.8 Row: 1, Col: 4, Value: 0.9 Row: 1, Col: 5, Value: 2.3 Row: 1, Col: 6, Value: 87.09999999999999 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. SOFTWARE AND COMPUTER SERVICES PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of John Porter) (photograph of Dylan Yolles) NOTE TO SHAREHOLDERS: On September 1, 1999, after the period covered by this report, Dylan Yolles (right) became Portfolio Manager of Fidelity Select Software and Computer Services Portfolio. The following is an interview with John Porter, who managed the fund during the period covered by this report, with additional comments from Dylan Yolles. Q. HOW DID THE FUND PERFORM, JOHN? J.P. For the six- and 12-month periods ending August 31, 1999, the fund returned 11.04% and 73.18%, respectively. By comparison, the Standard & Poor's 500 Index returned 7.32% and 39.82% for the same time periods. 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 28.97% and 109.92% over the same six- and 12-month periods. Q. WHY DID THE FUND'S PERFORMANCE LAG THAT OF THE GOLDMAN SACHS INDEX? J.P. The fund invests primarily in a much narrower range of generally less cyclical computer services and software stocks than those in the broadly based Goldman Sachs Technology Index. During prolonged periods of extraordinary returns - positive or negative - such as we've seen during the past several years, the fund generally produces a more modest return. Q. WHICH STOCKS STOOD OUT IN THIS ENVIRONMENT? J.P. Microsoft, the fund's number-one holding, continued to post stellar earnings, and its stock performed well. Siebel Systems, another good performer, was one of the fastest-growing software companies around, posting earnings above expectations. Investor concerns about the company's possible slowdown because of Y2K issues abated during the period, helping Siebel's valuation. BMC Software enjoyed good earnings growth and investors grew more comfortable about the company's recent acquisitions. VeriSign also had strong earnings and developed new pricing for its key products, offering the prospect of even better growth for this company. Investors also recognized that VeriSign could be a key beneficiary of growing e-commerce activity over the Internet. America Online continued to enjoy terrific growth, adding to its expanding membership base. Q. WHAT ABOUT DISAPPOINTMENTS? J.P. Oracle, which started out well in early 1999, had a very disappointing six months. Its stock was volatile and business appeared to slow toward the end of the period. Network Associates missed its earnings targets, due in part to how Y2K budget demands shifted spending from some of its products. In addition, the company's new security product that launched this year didn't do as well as expected. Aspect Development, which develops and markets enterprise software designed to help manufacturers improve product development, had a problem earlier this year when it lost a few of its most important contracts. The company also suffered from slower-than-planned sales-force growth and experienced some transition issues in key management positions. Q. DYLAN, WHERE DO YOU SEE GOOD OPPORTUNITIES? D.Y. I think that the Internet is creating tremendous growth opportunities for many software companies. In general, most enterprises will need to rebuild much of their software infrastructure over the next few years to prepare for the amount of business which will be conducted on the Internet, and many areas of software - including infrastructure, database and enterprise applications - could benefit from this trend. There are a number of areas that have experienced extremely fast growth. For example, within the enterprise software area, customer relationship-management software is finding a growing number of companies interested in developing more effective ways to engage their customers. This software is designed to help those companies come up with better ways of reaching their customers via the Internet, while enabling their customers to use the Internet to reach them. Q. WHAT'S YOUR OUTLOOK, DYLAN? D.Y. Overall, I believe that the software industry will continue to grow and that there will be good investment opportunities within the industry. My goal is to identify software companies that are market leaders, forging new growth opportunities that may not yet be fully recognized by the market. In addition, I think it's important to look for early-warning signs that could indicate when a software company's growth is slowing. In general, it's much more challenging than other more conservative areas of the equity markets, but the potential reward is commensurate with the risk. 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 3. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 028 TRADING SYMBOL: FSCSX SIZE: as of August 31, 1999, more than $729 million MANAGER: Dylan Yolles, since September, 1999; manager, Fidelity Select Chemicals Portfolio, January-August, 1999; research analyst, commodities, diversified chemicals, gaming and lodging, 1997-present; joined Fidelity in 1997 SOFTWARE AND COMPUTER SERVICES PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 91.9% SHARES VALUE (NOTE 1) BROADCASTING - 0.9% MediaOne Group, Inc. 100,000 $ 6,575,000 COMMUNICATIONS EQUIPMENT - 0.8% Cisco Systems, Inc. (a) 60,000 4,068,750 Nokia AB sponsored ADR 25,000 2,084,375 6,153,125 COMPUTER SERVICES & SOFTWARE - - 87.1% Affiliated Computer Services, 150,000 6,412,500 Inc. Class A (a) Amazon.com, Inc. (a) 44,000 5,472,500 America Online, Inc. (a) 205,000 18,719,063 Ariba, Inc. 15,400 2,140,600 Aspect Development, Inc. (a) 355,000 5,569,063 At Home Corp. Series A (a) 256,676 10,299,125 Automatic Data Processing, 728,900 28,654,881 Inc. Axent Technolgies, Inc. (a) 200,000 2,525,000 BMC Software, Inc. (a) 855,225 46,021,795 BroadVision, Inc. (a) 15,000 1,493,438 Cambridge Technology 30,000 410,625 Partners, Inc. (a) Ceridian Corp. (a) 179,400 5,023,200 Check Point Software 40,000 3,085,000 Technologies Ltd. (a) Citrix Systems, Inc. (a) 95,000 5,415,000 Clarify, Inc. (a) 110,000 4,840,000 CMGI, Inc. (a) 79,000 6,631,063 CNET, Inc. (a) 93,000 3,493,313 Computer Associates 364,250 20,580,125 International, Inc. Computer Sciences Corp. (a) 165,000 11,415,938 Computron Software, Inc. (a) 111 76 Compuware Corp. (a) 1,327,300 40,067,869 DST Systems, Inc. (a) 100,000 6,650,000 eBay, Inc. 30,000 3,766,875 Electronic Data Systems Corp. 329,100 18,470,738 Equifax, Inc. 175,000 5,337,500 Exodus Communications, Inc. 90,000 7,233,750 (a) First Data Corp. 555,000 24,420,000 Fiserv, Inc. (a) 67,500 2,079,844 Galileo International, Inc. 120,000 5,820,000 i2 Technologies, Inc. (a) 175,800 5,581,650 IMS Health, Inc. 250,000 6,906,250 Industri-Matematik 378,400 626,725 International Corp. (a) Informatica Corp. (a) 20,000 1,122,500 Informix Corp. (a) 150,000 1,092,188 Infoseek Corp. (a) 25,000 760,938 Inktomi Corp. (a) 31,000 3,514,625 International Business 100,000 12,456,250 Machines Corp. International Integration, 50,000 1,150,000 Inc. (a) SHARES VALUE (NOTE 1) Intuit, Inc. (a) 71,100 $ 6,367,894 ISS Group, Inc. (a) 70,000 1,728,125 J.D. Edwards & Co. (a) 100,000 1,837,500 Keane, Inc. (a) 30,000 650,625 Lycos, Inc. (a) 40,000 1,625,000 Microsoft Corp. (a) 1,354,000 125,329,618 MindSpring Enterprises, Inc. 30,000 875,625 (a) Network Solutions, Inc. Class 14,000 806,750 A (a) Networks Associates, Inc. (a) 120,000 2,025,000 New Era of Networks, Inc. (a) 80,000 1,340,000 Oracle Corp. (a) 950,900 34,707,850 Pervasive Software, Inc. (a) 100,000 2,125,000 Policy Management Systems 78,400 2,396,100 Corp. (a) RealNetworks, Inc. (a) 60,000 4,905,000 Sabre Group Holdings, Inc. 90,000 5,040,000 Class A (a) SalesLogix Corp. (a) 20,000 360,000 Security Dynamics 10,000 236,250 Technologies, Inc. (a) Siebel Systems, Inc. (a) 806,125 55,370,711 SunGard Data Systems, Inc. (a) 90,200 2,255,000 Technology Solutions, Inc. (a) 100,000 1,200,000 TSI International Software 40,000 760,000 Ltd. (a) Tumbleweed Communications 113,000 2,175,250 Corp. (a) VeriSign, Inc. (a) 100,200 10,852,913 Veritas Software Corp. (a) 100,000 5,925,000 Vignette Corp. (a) 22,200 1,505,438 WatchGuard Technologies, Inc. 200,400 2,705,400 Whittman-Hart, Inc. (a) 40,000 1,052,500 Yahoo!, Inc. (a) 158,000 23,305,000 634,723,556 COMPUTERS & OFFICE EQUIPMENT - - 2.3% Compaq Computer Corp. 10,000 231,875 Gateway, Inc. (a) 27,800 2,694,863 Sun Microsystems, Inc. (a) 160,000 12,720,000 Tech Data Corp. (a) 34,600 1,282,363 16,929,101 ELECTRONICS - 0.0% Intel Corp. 2,000 164,375 SECURITIES INDUSTRY - 0.4% E*Trade Group, Inc. (a) 110,000 2,750,000 SERVICES - 0.4% Computer Horizons Corp. (a) 61,300 796,900 Diamond Technology Partners, 40,000 1,325,000 Inc. Class A (a) Gartner Group, Inc. Class B 32,550 667,275 (a) 2,789,175 TOTAL COMMON STOCKS 670,084,332 (Cost $420,389,264) CASH EQUIVALENTS - 13.0% SHARES VALUE (NOTE 1) Central Cash Collateral Fund, 31,657,094 $ 31,657,094 5.26% (b) Taxable Central Cash Fund, 63,221,819 63,221,819 5.20% (b) TOTAL CASH EQUIVALENTS 94,878,913 (Cost $94,878,913) TOTAL INVESTMENT PORTFOLIO - 764,963,245 104.9% (Cost $515,268,177) NET OTHER ASSETS - (4.9%) (35,845,370) TOTAL NET ASSETS - 100% $ 729,117,875 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $183,602,374 and $234,876,420, 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 $6,738 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $31,487,001. The fund received cash collateral of $31,657,094 which was invested in the Central Cash Collateral Fund. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $517,604,257. Net unrealized appreciation aggregated $247,358,988, of which $278,163,245 related to appreciated investment securities and $30,804,257 related to depreciated investment securities. SOFTWARE AND COMPUTER SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 764,963,245 value (cost $515,268,177) - See accompanying schedule Cash 456,675 Receivable for investments 6,076,392 sold Receivable for fund shares 1,196,401 sold Dividends receivable 82,775 Interest receivable 243,946 Redemption fees receivable 5,199 Other receivables 586,478 TOTAL ASSETS 773,611,111 LIABILITIES Payable for investments $ 8,879,987 purchased Payable for fund shares 3,256,180 redeemed Accrued management fee 340,997 Other payables and accrued 358,978 expenses Collateral on securities 31,657,094 loaned, at value TOTAL LIABILITIES 44,493,236 NET ASSETS $ 729,117,875 Net Assets consist of: Paid in capital $ 441,422,718 Accumulated net investment (2,102,110) loss Accumulated undistributed net 40,102,460 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 249,694,807 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 11,956,856 $ 729,117,875 shares outstanding NET ASSET VALUE and $60.98 redemption price per share ($729,117,875 (divided by) 11,956,856 shares) Maximum offering price per $62.87 share (100/97.00 of $60.98) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 290,103 Dividends Interest 1,382,312 Security lending 336,566 TOTAL INCOME 2,008,981 EXPENSES Management fee $ 2,025,113 Transfer agent fees 1,758,174 Accounting and security 248,081 lending fees Non-interested trustees' 1,150 compensation Custodian fees and expenses 14,888 Registration fees 53,598 Audit 11,991 Legal 2,281 Total expenses before 4,115,276 reductions Expense reductions (4,185) 4,111,091 NET INVESTMENT INCOME (LOSS) (2,102,110) REALIZED AND UNREALIZED GAIN 42,800,766 (LOSS) Net realized gain (loss) on investment securities Change in net unrealized appreciation (depreciation) on: Investment securities 27,121,455 Assets and liabilities in (261) 27,121,194 foreign currencies NET GAIN (LOSS) 69,921,960 NET INCREASE (DECREASE) IN $ 67,819,850 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 933,948 charges paid to FDC Sales charges - Retained by $ 931,501 FDC Deferred sales charges $ 3,248 withheld by FDC Exchange fees withheld by FSC $ 16,950 Expense reductions Directed $ 2,454 brokerage arrangements Custodian credits 1,345 Transfer agent credits 386 $ 4,185
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (2,102,110) $ (4,709,221) income (loss) Net realized gain (loss) 42,800,766 46,870,113 Change in net unrealized 27,121,194 110,443,885 appreciation (depreciation) NET INCREASE (DECREASE) IN 67,819,850 152,604,777 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (27,222,764) (15,509,477) from net realized gains Share transactions Net 181,085,673 512,689,909 proceeds from sales of shares Reinvestment of distributions 26,224,199 15,022,690 Cost of shares redeemed (210,103,290) (478,286,707) NET INCREASE (DECREASE) IN (2,793,418) 49,425,892 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 462,207 963,911 TOTAL INCREASE (DECREASE) 38,265,875 187,485,103 IN NET ASSETS NET ASSETS Beginning of period 690,852,000 503,366,897 End of period (including $ 729,117,875 $ 690,852,000 accumulated net investment loss of $2,102,110 and $0, respectively) OTHER INFORMATION Shares Sold 3,075,720 10,599,999 Issued in reinvestment of 450,668 314,660 distributions Redeemed (3,670,167) (10,186,951) Net increase (decrease) (143,779) 727,708
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F Net asset value, beginning of $ 57.09 $ 44.26 $ 38.58 $ 36.20 $ 29.07 period Income from Investment Operations Net investment income (loss) D (.18) (.39) (.33) (.25) (.19) Net realized and unrealized 6.33 14.46 12.57 5.87 11.85 gain (loss) Total from investment 6.15 14.07 12.24 5.62 11.66 operations Less Distributions From net realized gain (2.30) (1.32) (6.61) (3.31) (4.60) Redemption fees added to paid .04 .08 .05 .07 .07 in capital Net asset value, end of period $ 60.98 $ 57.09 $ 44.26 $ 38.58 $ 36.20 TOTAL RETURN B, C 11.04% 32.57% 35.50% 16.14% 40.17% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 729,118 $ 690,852 $ 503,367 $ 389,699 $ 337,633 (000 omitted) Ratio of expenses to average 1.16% A 1.28% 1.44% 1.54% 1.48% net assets Ratio of expenses to average 1.16% A 1.27% E 1.42% E 1.51% E 1.47% E net assets after expense reductions Ratio of net investment (.59)% A (.82)% (.81)% (.66)% (.54)% income (loss) to average net assets Portfolio turnover rate 56% A 72% 145% 279% 183%
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 28.89 period Income from Investment Operations Net investment income (loss) D (.26) Net realized and unrealized .67 gain (loss) Total from investment .41 operations Less Distributions From net realized gain (.33) Redemption fees added to paid .10 in capital Net asset value, end of period $ 29.07 TOTAL RETURN B, C 1.97% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 236,445 (000 omitted) Ratio of expenses to average 1.52% net assets Ratio of expenses to average 1.50% E net assets after expense reductions Ratio of net investment (1.01)% income (loss) to average net assets Portfolio turnover rate 164% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT TECHNOLOGY 36.44% 145.29% 372.76% 1,189.53% SELECT TECHNOLOGY (LOAD ADJ.) 32.27% 137.86% 358.51% 1,150.77% S&P 500 7.32% 39.82% 206.52% 384.79% GS Technology 28.97% 109.92% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT TECHNOLOGY 145.29% 36.44% 29.13% SELECT TECHNOLOGY (LOAD ADJ.) 137.86% 35.60% 28.74% S&P 500 39.82% 25.11% 17.10% GS Technology 109.92% 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 1989/08/31 9700.00 10000.00 1989/09/30 9931.81 9959.00 1989/10/31 9859.69 9727.95 1989/11/30 9885.45 9926.40 1989/12/31 10003.93 10164.64 1990/01/31 9797.88 9482.59 1990/02/28 10349.07 9604.91 1990/03/31 10833.30 9859.44 1990/04/30 10343.92 9612.96 1990/05/31 11678.12 10550.22 1990/06/30 11781.15 10478.48 1990/07/31 11152.68 10444.95 1990/08/31 9633.03 9500.72 1990/09/30 8813.97 9038.04 1990/10/31 9066.38 8999.18 1990/11/30 10426.34 9580.52 1990/12/31 11054.81 9847.82 1991/01/31 12919.60 10277.18 1991/02/28 13573.82 11012.00 1991/03/31 14660.75 11278.49 1991/04/30 13939.56 11305.56 1991/05/31 14712.27 11793.96 1991/06/30 13285.01 11253.80 1991/07/31 14755.94 11778.23 1991/08/31 15481.05 12057.37 1991/09/30 15558.74 11856.01 1991/10/31 15978.27 12014.88 1991/11/30 15455.15 11530.68 1991/12/31 17573.98 12849.79 1992/01/31 18242.33 12610.79 1992/02/29 18527.28 12774.73 1992/03/31 17055.88 12525.62 1992/04/30 16807.19 12893.87 1992/05/31 16972.98 12957.05 1992/06/30 15759.57 12763.99 1992/07/31 16562.53 13286.04 1992/08/31 15714.33 13013.68 1992/09/30 16483.36 13167.24 1992/10/31 17455.97 13213.32 1992/11/30 18869.63 13663.90 1992/12/31 19107.13 13831.96 1993/01/31 19689.56 13948.15 1993/02/28 19576.47 14137.85 1993/03/31 19830.93 14436.15 1993/04/30 19774.07 14086.80 1993/05/31 21768.99 14464.33 1993/06/30 22832.11 14506.27 1993/07/31 22225.50 14448.25 1993/08/31 23413.70 14995.84 1993/09/30 23776.41 14880.37 1993/10/31 23307.39 15188.39 1993/11/30 23082.25 15044.10 1993/12/31 24581.34 15226.14 1994/01/31 25818.98 15743.82 1994/02/28 26548.86 15317.17 1994/03/31 25653.96 14649.34 1994/04/30 25137.26 14836.85 1994/05/31 25176.89 15080.17 1994/06/30 23043.59 14710.71 1994/07/31 23935.22 15193.22 1994/08/31 26458.19 15816.14 1994/09/30 26326.10 15428.65 1994/10/31 27310.19 15775.79 1994/11/30 26933.72 15201.24 1994/12/31 27316.79 15426.67 1995/01/31 26253.44 15826.69 1995/02/28 27772.51 16443.45 1995/03/31 29463.30 16928.70 1995/04/30 31683.98 17427.25 1995/05/31 32909.67 18123.82 1995/06/30 35967.07 18544.83 1995/07/31 39603.27 19159.78 1995/08/31 40828.96 19207.87 1995/09/30 42708.34 20018.44 1995/10/31 42068.26 19946.98 1995/11/30 41850.36 20822.65 1995/12/31 39283.42 21223.69 1996/01/31 39681.53 21946.15 1996/02/29 41855.86 22149.59 1996/03/31 38617.34 22362.89 1996/04/30 41942.95 22692.52 1996/05/31 43080.51 23277.76 1996/06/30 40016.05 23366.44 1996/07/31 35744.37 22334.12 1996/08/31 37129.57 22805.14 1996/09/30 41888.78 24088.62 1996/10/31 41586.97 24752.98 1996/11/30 46717.63 26624.06 1996/12/31 45497.34 26096.63 1997/01/31 50882.17 27727.15 1997/02/28 47147.93 27944.53 1997/03/31 44026.52 26796.29 1997/04/30 46592.80 28396.03 1997/05/31 51545.29 30124.78 1997/06/30 52494.43 31474.37 1997/07/31 58508.83 33978.79 1997/08/31 60144.00 32075.30 1997/09/30 62568.55 33832.06 1997/10/31 53687.92 32702.07 1997/11/30 52748.17 34215.85 1997/12/31 50196.52 34803.33 1998/01/31 52923.63 35188.26 1998/02/28 58898.88 37726.04 1998/03/31 59109.51 39657.99 1998/04/30 61526.21 40056.94 1998/05/31 56903.43 39368.37 1998/06/30 61637.07 40967.51 1998/07/31 61803.36 40531.21 1998/08/31 50994.70 34671.20 1998/09/30 59896.60 36892.24 1998/10/31 64685.67 39893.06 1998/11/30 74884.61 42310.97 1998/12/31 87422.65 44748.93 1999/01/31 102565.86 46620.33 1999/02/28 91679.60 45171.37 1999/03/31 103707.70 46978.68 1999/04/30 106357.77 48798.16 1999/05/31 103847.03 47646.04 1999/06/30 119119.73 50290.39 1999/07/31 116976.41 48720.33 1999/08/31 125077.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990924 115652 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Technology Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $125,077 - a 1,150.77% 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 $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Microsoft Corp. 10.2 Cisco Systems, Inc. 7.7 Intel Corp. 5.4 Motorola, Inc. 4.8 Lucent Technologies, Inc. 4.3 Micron Technology, Inc. 4.0 Analog Devices, Inc. 3.0 Altera Corp. 2.8 Dell Computer Corp. 2.3 QLogic Corp. 2.3 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Electronics 37.0% Computer Services & Software 20.9% Communications Equipment 15.2% Computers & Office Equipment 12.0% Electrical Equipment 2.4% All Others 12.5%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. 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 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S 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. Quite well. For the six- and 12-month periods that ended August 31, 1999, the fund had total returns of 36.44% and 145.29%, respectively. During those same periods, the Standard & Poor's 500 Index posted returns of 7.32% and 39.82%, respectively. The fund also outpaced the Goldman Sachs Technology Index - an index of 190 stocks designed to measure the performance of companies in the technology sector - which returned 28.97% and 109.92% for those same periods. Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S SOUND PERFORMANCE VERSUS THE GOLDMAN SACHS INDEX? A. Strong stock selection and favorable industry weightings - specifically, the fund's underweighting in computer hardware firms and overweighting in semiconductor stocks - gave it an advantage over the Goldman Sachs index. The fund's healthy exposure to networking firms that provide infrastructure to the Internet, such as Cisco Systems, also helped returns. A modest overweighting in Internet stocks such as America Online and eBay during the first half of the period proved beneficial, although I did cut back on these positions as they hit their valuation targets in the early spring. The fund no longer held eBay at the end of the period. Q. WHAT'S BEHIND THE FALL OFF IN THE COMPUTER HARDWARE SECTOR? A. Computer hardware stocks have been hurt by the emergence of the low-price, or free, personal computer phenomenon. Demand for personal computers rebounded strongly, fueled by falling prices, which set the stage for fierce competitive battles among suppliers. It became increasingly difficult for even the best companies to show growth and margin improvement. Of course, firms like Microsoft and Intel undoubtedly benefited from this phenomenon, as a lack of pricing pressure enabled these firms to simply tag along for the ride. Basic arithmetic reveals that as the number of PC shipments rise, the number of operating systems and chips found in every box rise in unison. Every additional box that goes out the door directly helps the bottom lines of these industry leaders. Q. WHAT WERE SOME OF YOUR STRATEGIES DURING THE SIX-MONTH PERIOD? A. I broadened the fund's investment portfolio to include a number of emerging companies, the likes of Brocade Communications and Juniper Networks, each of which added meaningfully to relative performance. As we move toward an Internet-based economy, new emerging technology providers create niches that could enable them to become, perhaps, the new giants. Q. WHICH HOLDINGS CONTRIBUTED TO PERFORMANCE? A. Intel, a dominant supplier of chips for personal computers, rallied late in the period as the low-priced PC took center stage in the marketplace, effectively ending a long period of excess supply. Motorola benefited doubly from the semiconductor rally and from a sharp recovery in its mobile handset business. Cisco Systems remained one of the brightest stars in the technology sector and helped sustain the fund's upward climb during the period. Bullish investors continued to bid up the stock, as it became increasingly clear to them the inherent value of infrastructure to the development of the Internet. Q. WHICH HOLDINGS DETRACTED? A. At Home, a provider of Internet services over cable lines, and Critical Path, which specializes in business-to-business Internet messaging solutions, fell sharply amid the Internet stock correction of the late spring and early summer. Cadence Design Systems, a leading electronic design firm, and Newbridge Networks, a provider of networking solutions, also faltered during the period, negatively influencing fund performance. The fund no longer held At Home and Critical Path at the end of the period. Q. WHAT'S YOUR OUTLOOK? A. In terms of the economy, the domestic outlook looks favorable and the conditions in Asia have improved significantly over past six months. While still a small percentage of overall technology spending, Asia remains a meaningful part of the growth equation. A sustained recovery there spells good things for the sector over the next several years. As time goes on, I will consider further concentrating the fund's Internet positions in advertising, and away from connectivity and electronic commerce. In telecommunications, I may shift the fund's investments to data networking firms. Many of the best companies from the traditional telecom world are moving into data networking, especially into the Internet. To the extent that they're successful at doing this, they may become important parts of the portfolio. 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 3. (checkmark)FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 064 TRADING SYMBOL: FSPTX SIZE: as of August 31, 1999, more than $2.3 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 AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 92.7% SHARES VALUE (NOTE 1) ADVERTISING - 2.1% DoubleClick, Inc. (a) 480,000 $ 47,940,000 BROADCASTING - 0.3% Cox Communications, Inc. 200,000 7,437,500 Class A (a) Insight Communications, Inc. 3,300 89,925 7,527,425 COMMUNICATIONS EQUIPMENT - 15.2% ADC Telecommunications, Inc. 202,700 7,512,569 (a) Cabletron Systems, Inc. (a) 500,000 8,406,250 Cisco Systems, Inc. (a) 2,610,450 177,021,141 Efficient Networks, Inc. 1,000 46,938 Jabil Circuit, Inc. (a) 460,000 20,613,750 Lucent Technologies, Inc. 1,527,205 97,836,570 Newbridge Networks Corp. (a) 272,900 7,496,750 Nokia AB sponsored ADR 357,000 29,764,875 Paradyne Networks, Inc. 800 35,250 348,734,093 COMPUTER SERVICES & SOFTWARE - - 20.9% Accrue Software, Inc. 900 13,163 Active Software, Inc. (a) 1,100 19,113 Agile Software Corp. (a) 400 19,900 America Online, Inc. (a) 1,800 164,363 Ariba, Inc. 1,100 152,900 Art Technology Group, Inc. 1,200 24,000 At Plan, Inc. 200 2,050 Audible, Inc. 2,700 30,038 Automatic Data Processing, 100,400 3,946,975 Inc. Autoweb.Com, Inc. 1,000 9,219 Aware, Inc. (a) 214,300 7,179,050 barnesandnoble.com, Inc. 3,000 51,188 Class A BMC Software, Inc. (a) 100,000 5,381,250 BroadVision, Inc. (a) 125,000 12,445,313 Cadence Design Systems, Inc. 800,000 10,900,000 (a) CareInsite, Inc. 1,700 81,175 Chemdex Corp. 2,700 72,900 China.com Corp. 200 8,775 Citrix Systems, Inc. (a) 198,600 11,320,200 Clarent Corp. 2,600 86,450 Commerce One, Inc. 1,100 49,363 Compuware Corp. (a) 300,000 9,056,250 Concentric Network Corp. (a) 325,000 7,129,688 Convergent Communications, 2,000 24,375 Inc. (a) CyberSource Corp. 700 22,444 Digex, Inc. Class A 2,700 89,775 DST Systems, Inc. (a) 200,000 13,300,000 Engage Technologies, Inc. 300,800 8,723,200 Exodus Communications, Inc. 231,800 18,630,925 (a) Fashionmall.com, Inc. 100 594 High Speed Access Corp. 1,000 26,250 Inet Technologies, Inc. 800 24,850 SHARES VALUE (NOTE 1) Interactive Pictures Corp. (a) 1,000 $ 20,000 International Business 75,000 9,342,188 Machines Corp. International Integration, 400,000 9,200,000 Inc. (a) Internet Capital Group, Inc. 6,920 519,000 (a) Internet.com Corp. 1,100 16,981 Juno Online Services, Inc. (a) 1,300 24,619 Legato Systems, Inc. (a) 302,200 13,013,488 Liberate Technologies 2,500 65,938 Liquid Audio, Inc. (a) 300 8,016 Micromuse, Inc. (a) 100,000 5,712,500 Microsoft Corp. (a) 2,532,080 234,375,639 Mission Critical Software, 800 32,500 Inc. (a) MP3.com, Inc. (a) 2,800 95,550 N2H2, Inc. 600 5,925 National Information 2,000 33,000 Consortium, Inc. (a) NetIQ Corp. 1,600 48,000 New Era of Networks, Inc. (a) 100,000 1,675,000 Oracle Corp. (a) 100,000 3,650,000 Orbotech Ltd. 150,000 8,015,625 Packeteer, Inc. 700 25,813 pcOrder.com, Inc. (a) 102,600 3,289,613 Persistence Software, Inc. 600 10,650 Phone.com, Inc. 700 82,688 QRS Corp. (a) 5,850 281,531 Quest Software, Inc. (a) 1,100 46,063 RAVISENT Technologies, Inc. 4,600 73,600 (a) Red Hat, Inc. (a) 1,900 155,563 Redback Networks, Inc. 301,400 32,400,500 SilverStream Software, Inc. 1,000 30,125 (a) Software.com, Inc. 2,100 95,419 StarMedia Network, Inc. (a) 800 30,950 Symantec Corp. (a) 194,300 5,829,000 Synopsys, Inc. (a) 8,100 453,094 Talk City, Inc. (a) 400 3,975 Tanning Technology Corp. (a) 1,900 33,250 TenFold Corp. (a) 500 13,656 TIBCO Software, Inc. (a) 2,000 54,250 Tumbleweed Communications 2,500 48,125 Corp. (a) US Interactive, Inc. (a) 2,660 55,195 Verio, Inc. (a) 229,400 8,530,813 Veritas Software Corp. (a) 200,000 11,850,000 VerticalNet, Inc. (a) 800 27,600 Viant Corp. (a) 400 15,200 Voyager.net, Inc. (a) 3,500 35,000 WatchGuard Technologies, Inc. 1,200 16,200 Wink Communications, Inc. (a) 600 24,600 Yahoo!, Inc. (a) 150,000 22,125,000 ZipLink, Inc. (a) 3,800 34,913 480,512,091 COMPUTERS & OFFICE EQUIPMENT - - 12.0% Advanced Digital Information 80,000 2,580,000 Corp. (a) Aironet Wireless 11,900 148,750 Communication, Inc. COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) COMPUTERS & OFFICE EQUIPMENT - - CONTINUED Ancor Communications, Inc. (a) 389,000 $ 10,308,500 Comverse Technology, Inc. (a) 657,300 51,269,400 Creo Products, Inc. (a) 2,600 57,052 Dell Computer Corp. (a) 1,100,000 53,693,750 EMC Corp. (a) 298,000 17,880,000 Emulex Corp. (a) 600,000 41,362,500 Gadzoox Networks, Inc. 800 72,300 Hewlett-Packard Co. 150,000 15,806,250 Ingram Micro, Inc. Class A (a) 200,000 5,050,000 Juniper Networks, Inc. 112,900 23,144,500 MMC Networks, Inc. (a) 35,000 1,080,625 Network Appliance, Inc. (a) 285,800 18,773,488 Safeguard Scientifics, Inc. 53,200 3,577,700 (a) SCI Systems, Inc. (a) 402,400 20,044,550 Sun Microsystems, Inc. (a) 150,000 11,925,000 276,774,365 CONSUMER ELECTRONICS - 0.1% Gemstar International Group 25,000 1,725,000 Ltd. (a) DRUGS & PHARMACEUTICALS - 0.0% Genentech, Inc. 2,000 328,500 EDUCATIONAL SERVICES - 0.0% Scientific Learning Corp. (a) 200 3,575 ELECTRICAL EQUIPMENT - 2.4% Ericsson (L.M.) Telefon AB 819,500 26,684,969 ADR Class B Koninklijke Philips 87,800 9,026,938 Electronics NV NY Shares Powerwave Technologies, Inc. 200,000 8,487,500 (a) Scientific-Atlanta, Inc. 200,000 10,250,000 54,449,407 ELECTRONIC INSTRUMENTS - 1.9% KLA-Tencor Corp. (a) 100,000 6,281,250 Novellus Systems, Inc. (a) 198,100 10,685,019 Photon Dynamics, Inc. (a)(c) 500,000 8,250,000 Sawtek, Inc. (a) 205,000 6,777,813 Teradyne, Inc. (a) 184,300 12,543,919 44,538,001 ELECTRONICS - 37.0% 3Dfx Interactive, Inc. (a) 200,000 2,225,000 Advanced Micro Devices, Inc. 500,000 10,343,750 (a) Altera Corp. (a) 1,528,600 64,392,275 Analog Devices, Inc. (a) 1,346,700 69,355,050 Atmel Corp. (a) 1,050,000 41,278,125 Audiovox Corp. Class A (a) 252,700 3,585,181 Avnet, Inc. 123,700 5,473,725 Broadcom Corp. Class A (a) 166,800 21,475,500 SHARES VALUE (NOTE 1) Brocade Communications 121,300 $ 22,819,563 Systems, Inc. Burr-Brown Corp. (a) 230,500 8,787,813 Cypress Semiconductor Corp. 600,000 13,875,000 (a) DII Group, Inc. (a) 200,000 7,087,500 GlobeSpan, Inc. (a) 600 36,300 Hadco Corp. (a) 200,000 8,312,500 Intel Corp. 1,500,000 123,281,250 JDS Uniphase Corp. (a) 156,848 16,635,691 KEMET Corp. (a) 725,000 18,714,063 Linear Technology Corp. 181,000 11,391,688 LSI Logic Corp. (a) 850,000 48,237,500 Maxim Integrated Products, 120,000 8,077,500 Inc. (a) Micron Technology, Inc. (a) 1,250,000 93,203,125 MIPS Technologies, Inc. (a) 48,600 1,664,550 Motorola, Inc. 1,200,000 110,700,000 National Semiconductor Corp. 396,400 11,173,525 (a) PMC-Sierra, Inc. (a) 60,000 5,580,000 QLogic Corp. (a) 605,400 52,707,638 Rambus, Inc. (a) 20,600 1,998,200 RF Micro Devices, Inc. (a) 100,000 4,393,750 Semtech Corp. (a) 313,600 21,971,600 Silicon Storage Technology, 801,400 12,521,875 Inc. (a) Solectron Corp. (a) 82,000 6,416,500 STMicroelectronics NV 50,000 3,337,500 Unitrode Corp. (a) 300,000 12,262,500 Xilinx, Inc. (a) 123,400 8,630,288 851,946,025 ENTERTAINMENT - 0.0% Musicmaker.com, Inc. (a) 2,300 27,241 Quokka Sports, Inc. 2,000 17,750 44,991 INDUSTRIAL MACHINERY & EQUIPMENT - 0.3% PRI Automation, Inc. (a) 250,000 7,156,250 INSURANCE - 0.0% MIIX Group, Inc. 300 5,250 Quotesmith.com, Inc. (a) 800 8,900 14,150 MEDICAL EQUIPMENT & SUPPLIES - - 0.0% Allscripts, Inc. 1,500 19,406 PACKAGING & CONTAINERS - 0.2% Corning, Inc. 50,000 3,325,000 RETAIL & WHOLESALE, MISCELLANEOUS - 0.0% 1-800-FLOWERS.COM, Inc. Class 1,600 28,800 A (a) CDnow, Inc. (a) 41,800 590,425 Drugstore.com, Inc. 1,800 107,775 Valley Media, Inc. (a) 600 7,350 734,350 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SECURITIES INDUSTRY - 0.0% TD Waterhouse Group, Inc. (a) 12,000 $ 180,750 SERVICES - 0.3% Diamond Technology Partners, 200,000 6,625,000 Inc. Class A (a) InsWeb Corp. 1,300 41,600 iXL Enterprises, Inc. (a) 1,500 36,938 6,703,538 TELEPHONE SERVICES - 0.0% Covad Communications Group, 1,050 48,431 Inc. Digital Island, Inc. Delaware 13,000 245,375 Focal Communications Corp. 2,500 60,781 JFAX.COM, Inc. 8,700 59,813 Net2Phone, Inc. (a) 500 42,500 Network Plus Corp. 6,500 104,000 Rhythms NetConnections, Inc. 600 22,950 (a) Time Warner Telecom, Inc. 1,200 32,400 616,250 TOTAL COMMON STOCKS 2,133,273,167 (Cost $1,700,278,376) CASH EQUIVALENTS - 16.9% Central Cash Collateral Fund, 111,385,800 111,385,800 5.26% (b) Taxable Central Cash Fund, 277,462,647 277,462,647 5.20% (b) TOTAL CASH EQUIVALENTS 388,848,447 (Cost $388,848,447) TOTAL INVESTMENT PORTFOLIO - 2,522,121,614 109.6% (Cost $2,089,126,823) NET OTHER ASSETS - (9.6%) (220,480,941) NET ASSETS - 100% $ 2,301,640,673 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. (c) Affiliated company OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $3,182,222,591 and $2,751,693,680, 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 $158,571 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $109,099,544. The fund received cash collateral of $111,385,800 which was invested in the Central Cash Collateral Fund. The fund participated in the bank borrowing program. The average daily loan balance during the period for which loans were outstanding amounted to $5,390,000. The weighted average interest rate was 5.41%. Transactions during the period with companies that are or were affiliates are as follows:
PURCHASES SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Photon Dynamics, Inc. $ 734,377 $ - $ - $ 8,250,000
INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $2,112,307,675. Net unrealized appreciation aggregated $409,813,939, of which $450,951,470 related to appreciated investment securities and $41,137,531 related to depreciated investment securities. TECHNOLOGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 2,522,121,614 value (cost $2,089,126,823) - - See accompanying schedule Receivable for investments 60,090,388 sold Receivable for fund shares 13,736,913 sold Dividends receivable 136,500 Interest receivable 880,322 Redemption fees receivable 16,198 Other receivables 517,299 TOTAL ASSETS 2,597,499,234 LIABILITIES Payable for investments $ 175,170,735 purchased Payable for fund shares 7,273,982 redeemed Accrued management fee 1,034,026 Other payables and accrued 994,018 expenses Collateral on securities 111,385,800 loaned, at value TOTAL LIABILITIES 295,858,561 NET ASSETS $ 2,301,640,673 Net Assets consist of: Paid in capital $ 1,580,891,356 Accumulated net investment (1,077,051) loss Accumulated undistributed net 288,831,577 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 432,994,791 (depreciation) on investments NET ASSETS, for 22,536,336 $ 2,301,640,673 shares outstanding NET ASSET VALUE and $102.13 redemption price per share ($2,301,640,673 (divided by) 22,536,336 shares) Maximum offering price per $105.29 share (100/97.00 of $102.13) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 1,812,729 Dividends Special dividend from 1,823,201 Koninklijke Philips Electronics NV ADR Interest 4,276,879 Security lending 953,849 TOTAL INCOME 8,866,658 EXPENSES Management fee $ 5,280,212 Transfer agent fees 3,931,098 Accounting and security 560,455 lending fees Non-interested trustees' 3,389 compensation Custodian fees and expenses 42,480 Registration fees 256,614 Audit 18,137 Legal 2,388 Interest 810 Total expenses before 10,095,583 reductions Expense reductions (151,874) 9,943,709 NET INVESTMENT INCOME (LOSS) (1,077,051) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 300,918,314 Foreign currency transactions (14,666) 300,903,648 Change in net unrealized 229,599,268 appreciation (depreciation) on investment securities NET GAIN (LOSS) 530,502,916 NET INCREASE (DECREASE) IN $ 529,425,865 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 7,549,394 charges paid to FDC Sales charges - Retained by $ 7,536,592 FDC Deferred sales charges $ 13,721 withheld by FDC Exchange fees withheld by FSC $ 31,658 Expense reductions Directed $ 140,552 brokerage arrangements Custodian credits 6,677 Transfer agent credits 4,645 $ 151,874
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (1,077,051) $ (4,097,480) income (loss) Net realized gain (loss) 300,903,648 215,485,901 Change in net unrealized 229,599,268 122,793,603 appreciation (depreciation) NET INCREASE (DECREASE) IN 529,425,865 334,182,024 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (152,669,414) - from net realized gains Share transactions Net 966,645,704 1,006,339,152 proceeds from sales of shares Reinvestment of distributions 147,207,437 - Cost of shares redeemed (557,181,062) (666,801,634) NET INCREASE (DECREASE) IN 556,672,079 339,537,518 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 1,064,632 1,503,543 TOTAL INCREASE (DECREASE) 934,493,162 675,223,085 IN NET ASSETS NET ASSETS Beginning of period 1,367,147,511 691,924,426 End of period (including $ 2,301,640,673 $ 1,367,147,511 accumulated net investment loss of $1,077,051 and $0, respectively) OTHER INFORMATION Shares Sold 10,454,091 14,223,107 Issued in reinvestment of 1,717,899 - distributions Redeemed (6,167,386) (10,714,156) Net increase (decrease) 6,004,604 3,508,951
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 G Net asset value, beginning of $ 82.70 $ 53.13 $ 57.70 $ 54.67 $ 42.05 period Income from Investment Operations Net investment income (loss) D (.05) E (.34) (.25) (.39) (.28) Net realized and unrealized 28.41 29.79 11.29 6.95 20.83 gain (loss) Total from investment 28.36 29.45 11.04 6.56 20.55 operations Less Distributions From net realized gain (8.98) - (12.39) (3.68) (8.05) In excess of net realized gain - - (3.30) - - Total distributions (8.98) - (15.69) (3.68) (8.05) Redemption fees added to paid .05 .12 .08 .15 .12 in capital Net asset value, end of period $ 102.13 $ 82.70 $ 53.13 $ 57.70 $ 54.67 TOTAL RETURN B, C 36.44% 55.66% 24.92% 12.64% 50.71% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 2,301,641 $ 1,367,148 $ 691,924 $ 478,444 $ 483,026 (000 omitted) Ratio of expenses to average 1.10% A 1.24% 1.38% 1.49% 1.40% net assets Ratio of expenses to average 1.08% A, F 1.20% F 1.30% F 1.44% F 1.39% F net assets after expense reductions Ratio of net investment (.12)% A (.54)% (.45)% (.72)% (.52)% income (loss) to average net assets Portfolio turnover rate 331% A 339% 556% 549% 112%
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 41.83 period Income from Investment Operations Net investment income (loss) D (.39) Net realized and unrealized 1.95 gain (loss) Total from investment 1.56 operations Less Distributions From net realized gain (1.50) In excess of net realized gain - Total distributions (1.50) Redemption fees added to paid .16 in capital Net asset value, end of period $ 42.05 TOTAL RETURN B, C 4.61% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 229,761 (000 omitted) Ratio of expenses to average 1.57% net assets Ratio of expenses to average 1.56% F net assets after expense reductions Ratio of net investment (.98)% income (loss) to average net assets Portfolio turnover rate 102% 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 NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM KONINKLIJKE PHILIPS ELECTRONICS NV ADR WHICH AMOUNTED TO $.09 PER SHARE F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. G 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS LIFE OF FUND SELECT NATURAL GAS 49.45% 59.39% 79.01% 71.42% SELECT NATURAL GAS (LOAD ADJ.) 44.90% 54.54% 73.57% 66.21% S&P 500 7.32% 39.82% 206.52% 241.61% GS Utilities 4.02% 35.90% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or since the fund started on April 21, 1993. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS LIFE OF FUND SELECT NATURAL GAS 59.39% 12.35% 8.84% SELECT NATURAL GAS (LOAD ADJ.) 54.54% 11.66% 8.31% S&P 500 39.82% 25.11% 21.29% GS Utilities 35.90% 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 1999/02/28 11125.87 31829.72 1999/03/31 12974.93 33103.23 1999/04/30 15050.95 34385.32 1999/05/31 15019.20 33573.48 1999/06/30 15548.42 35436.81 1999/07/31 16278.74 34330.47 1999/08/31 16621.00 34160.54 IMATRL PRASUN SHR__CHT 19990831 19990914 141606 R00000000000080 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Natural Gas Portfolio on April 21, 1993, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $16,621 - a 66.21% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $34,161 - a 241.61% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Coastal Corp. (The) 5.1 Williams Companies, Inc. 4.8 Enron Corp. 4.8 Burlington Resources, Inc. 4.3 Vastar Resources, Inc. 4.0 BP Amoco PLC sponsored ADR 3.3 Anadarko Petroleum Corp. 2.7 Apache Corp. 2.5 Santa Fe Snyder Corp. 2.3 AES Corp. 2.3 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Oil & Gas 56.9% Gas 25.9% Energy Services 6.5% Electric Utility 5.8% Autos, Tires, & Accessories 1.6% All Others 3.3%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 3.3 Row: 1, Col: 2, Value: 1.6 Row: 1, Col: 3, Value: 5.8 Row: 1, Col: 4, Value: 6.5 Row: 1, Col: 5, Value: 25.9 Row: 1, Col: 6, Value: 56.9 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. NATURAL GAS PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Victor Thay) (photograph of Christian Zann) NOTE TO SHAREHOLDERS: On August 2, 1999, Christian Zann (right) became Portfolio Manager of Fidelity Select Natural Gas Portfolio. The following is an interview with Victor Thay, who managed the fund during most of the period covered by this report, with additional comments from Christian Zann on his outlook. Q. HOW DID THE FUND PERFORM, VICTOR? V.T. The fund did very well. For the six months that ended August 31, 1999, the fund had a total return of 49.45%, far exceeding the 7.32% gain of the Standard & Poor's 500 Index and the 4.02% return of the Goldman Sachs Utilities Index, an index of 136 stocks designed to measure the performance of companies in the utilities sector. For the 12 months that ended August 31, 1999, the fund had a total return of 59.39%, again outperforming the S&P 500 and the Goldman Sachs index, which gained 39.82% and 35.90%, respectively. Q. WHAT WAS RESPONSIBLE FOR THE FUND'S STRONG PERFORMANCE? V.T. The main factor was a dramatic improvement in the supply and demand picture for natural gas and crude oil. Natural gas production had been slowing, which cut back on supply. However, an extremely warm summer resulted in liberal use of air conditioning systems, which spurred demand. On the crude oil side, OPEC (Organization of Petroleum Exporting Countries) was apparently successful, at least over the short term, in reining in the production of its members. In addition, the oil market benefited from more rapid recoveries in many Asian economies than most people expected, which added to demand for energy products. So it was an ideal environment for the fund. The broadly based S&P 500 also did well but lagged the fund's performance because of the index's much greater diversification. The Goldman Sachs Utilities Index, on the other hand, suffered somewhat from its focus on utilities, which tend to underperform when interest rates are rising, as they did during the period. Q. WHAT STRATEGIC MOVES DID YOU MAKE DURING THE PERIOD? V.T. Drilling stocks had a phenomenal run, so I took some profits there. I also moved out a bit more on the risk spectrum toward exploration and production (E&P) companies with higher cost structures and greater financial leverage. My rationale was that in an environment of rising energy prices, such companies would reap the greatest benefits. Q. WHICH STOCKS HELPED THE FUND? V.T. Enron was one of the fund's best performers. The company was a big winner in the move toward energy deregulation around the world. In addition, it gained a foothold in the telecommunications market - more specifically, in the potentially lucrative business of buying and selling bandwidth, or telecommunications network capacity. Another strong performer, Vastar Resources, is a gas E&P company that enjoyed some exploration successes recently. Another factor helping in this case was speculation that BP Amoco, which already owns 80% of Vastar's stock, would buy the other 20%. Finally, Apache Corporation - another E&P company - purchased some property in the Gulf of Mexico from Royal Dutch Petroleum that was widely anticipated to help Apache's earnings. In addition, the company had an extremely healthy balance sheet that appealed to investors. Q. WHICH STOCKS DETRACTED FROM PERFORMANCE? V.T. With the extremely favorable environment for natural gas stocks, most of the fund's holdings helped its performance. However, Atmos Energy, a gas utility, was hurt marginally by interest-rate fears. Q. TURNING TO YOU, CHRISTIAN, WHAT'S YOUR OUTLOOK? C.Z. The supply and demand situation for both natural gas and crude oil appears favorable at this juncture. Natural gas supplies are tight enough to support prices at roughly their current levels if we have a relatively normal winter, and gas-related stocks should do well in that case. It takes a while to increase production after a period of weak prices such as we had recently, and the supply of natural gas is still in the process of catching up with demand. Supply and demand for oil also appear to be in good shape, but, as always, OPEC is an unpredictable wild card. OPEC meetings scheduled for September 1999 and March 2000 should provide more clues about the direction of oil prices. 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 3. (checkmark)FUND FACTS START DATE: April 21, 1993 FUND NUMBER: 513 TRADING SYMBOL: FSNGX SIZE: as of August 31, 1999, more than $72 million MANAGER: Christian Zann, since August 1999; analyst, oil and natural gas companies, since 1999; analyst, retail and consumer products companies, 1996-1999; joined Fidelity in 1996 NATURAL GAS PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 96.7% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 1.6% Barrett Resources Corp. (a) 31,100 $ 1,121,544 ELECTRIC UTILITY - 5.8% AES Corp. (a) 27,200 1,650,700 Calpine Corp. (a) 12,500 1,132,813 CMS Energy Corp. 12,400 490,576 Entergy Corp. 31,800 948,038 4,222,127 ENERGY SERVICES - 6.5% BJ Services Co. (a) 16,100 551,425 ENSCO International, Inc. 33,200 707,575 Halliburton Co. 10,700 496,213 Marine Drilling Companies, 13,900 220,663 Inc. (a) Nabors Industries, Inc. (a) 17,200 464,400 Noble Drilling Corp. (a) 24,000 591,000 Oceaneering International, 14,700 294,919 Inc. (a) Pool Energy Services Co. (a) 15,100 398,263 Precision Drilling Corp. 45,600 1,035,739 Class A (a) 4,760,197 GAS - 25.9% Atmos Energy Corp. 19,700 493,731 Cascade Natural Gas Corp. 37,200 681,225 Columbia Energy Group 15,100 891,844 Dynegy, Inc. 68,900 1,619,150 Energen Corp. 42,000 792,750 Enron Corp. 84,100 3,521,688 Equitable Resources, Inc. 30,100 1,106,175 K N Energy, Inc. 65,000 1,324,375 National Fuel Gas Co. 14,000 658,875 New Jersey Resources Corp. 9,300 360,375 Northwest Natural Gas Co. 13,700 342,500 Ocean Energy, Inc. (a) 121,100 1,226,138 ONEOK, Inc. 6,500 201,906 SEMCO Energy, Inc. 13,600 197,200 Sonat, Inc. 40,100 1,448,613 Westcoast Energy, Inc. 26,100 509,759 Williams Companies, Inc. 85,660 3,533,475 18,909,779 OIL & GAS - 56.9% Alberta Energy Co. Ltd. 37,167 1,145,516 Anadarko Petroleum Corp. 58,450 1,987,300 Anderson Exploration Ltd. (a) 38,500 554,606 Apache Corp. 39,625 1,802,938 Atlantic Richfield Co. 4,600 404,513 Baytex Energy Ltd. (a) 7,700 51,849 Bonavista Petroleum Ltd. (a) 3,300 40,352 BP Amoco PLC sponsored ADR 21,619 2,424,030 Burlington Resources, Inc. 75,672 3,164,036 SHARES VALUE (NOTE 1) Cabot Oil & Gas Corp. Class A 10,300 $ 196,344 Canada Occidental Petroleum 61,300 1,129,481 Ltd. Canadian Hunter Exploration 51,800 841,642 Ltd. Canadian Natural Resources 56,500 1,400,670 Ltd. (a) Coastal Corp. (The) 85,670 3,710,571 Comstock Resources, Inc. (a) 60,700 280,738 Enbridge, Inc. 52,700 1,126,385 Encal Energy Ltd. (a) 24,100 129,179 Enron Oil & Gas Co. 51,400 1,227,175 Ensign Resource Service 23,200 512,965 Group, Inc. Forest Oil Corp. (a) 46,100 688,619 Kerr-McGee Corp. 17,912 1,003,072 Louis Dreyfus Natural Gas 4,700 102,813 Corp. (a) Murphy Oil Corp. 3,800 192,850 Newfield Exploration Co. (a) 28,300 859,613 Nuevo Energy Co. (a) 60,100 1,051,750 Paramount Resources Ltd. 35,700 550,151 Penn West Petroleum Ltd. (a) 70,200 1,493,367 Pennaco Energy, Inc. (a) 50,000 581,250 Pioneer Natural Resources Co. 50,000 568,750 Plains Resources, Inc. (a) 84,500 1,616,063 Remington Oil & Gas Corp. 45,300 234,994 Rio Alto Exploration Ltd. (a) 82,400 1,347,109 Santa Fe Snyder Corp. (a) 172,015 1,677,146 St. Mary Land & Exploration 4,000 106,000 Co. Stone Energy Corp. (a) 13,500 718,875 Swift Energy Co. (a) 37,500 473,438 Ulster Petroleums Ltd. (a) 76,500 845,729 Union Pacific Resources 17,500 313,906 Group, Inc. Vastar Resources, Inc. 43,700 2,911,513 Vintage Petroleum, Inc. 103,800 1,485,638 Western Gas Resources, Inc. 32,700 557,944 Wiser Oil Co. 3,900 11,456 41,522,336 TOTAL COMMON STOCKS 70,535,983 (Cost $55,935,271) CASH EQUIVALENTS - 6.6% Central Cash Collateral Fund, 1,578,100 1,578,100 5.26% (b) Taxable Central Cash Fund, 3,216,022 3,216,022 5.20% (b) TOTAL CASH EQUIVALENTS 4,794,122 (Cost $4,794,122) TOTAL INVESTMENT PORTFOLIO - 75,330,105 103.3% (Cost $60,729,393) NET OTHER ASSETS - (3.3%) (2,388,169) NET ASSETS - 100% $ 72,941,936 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $41,439,130 and $25,511,580, 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 $5,079 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $1,550,575. The fund received cash collateral of $1,578,100 which was invested in the Central Cash Collateral Fund. Distribution of investments by country of issue, as a percentage of net assets, is as follows: United States of America 79.2% Canada 17.5 United Kingdom 3.3 100.0% INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $60,975,957. Net unrealized appreciation aggregated $14,354,148, of which $15,441,205 related to appreciated investment securities and $1,087,057 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 has elected 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. NATURAL GAS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 75,330,105 value (cost $60,729,393) - See accompanying schedule Receivable for fund shares 463,380 sold Dividends receivable 87,223 Interest receivable 20,686 Redemption fees receivable 3,197 Other receivables 26 TOTAL ASSETS 75,904,617 LIABILITIES Payable for investments $ 381,715 purchased Payable for fund shares 926,726 redeemed Accrued management fee 32,683 Other payables and accrued 43,457 expenses Collateral on securities 1,578,100 loaned, at value TOTAL LIABILITIES 2,962,681 NET ASSETS $ 72,941,936 Net Assets consist of: Paid in capital $ 60,843,242 Undistributed net investment 11,754 income Accumulated undistributed net (2,514,483) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 14,601,423 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 4,642,207 $ 72,941,936 shares outstanding NET ASSET VALUE and $15.71 redemption price per share ($72,941,936 (divided by) 4,642,207 shares) Maximum offering price per $16.20 share (100/97.00 of $15.71) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 336,141 Dividends Interest 82,286 Security lending 111 TOTAL INCOME 418,538 EXPENSES Management fee $ 164,615 Transfer agent fees 182,047 Accounting and security 30,324 lending fees Non-interested trustees' 73 compensation Custodian fees and expenses 11,071 Registration fees 20,479 Audit 4,124 Legal 28 Total expenses before 412,761 reductions Expense reductions (16,834) 395,927 NET INVESTMENT INCOME 22,611 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 2,923,237 Foreign currency transactions (2,188) 2,921,049 Change in net unrealized appreciation (depreciation) on: Investment securities 16,616,401 Assets and liabilities in 770 16,617,171 foreign currencies NET GAIN (LOSS) 19,538,220 NET INCREASE (DECREASE) IN $ 19,560,831 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 90,429 charges paid to FDC Sales charges - Retained by $ 90,429 FDC Deferred sales charges $ 650 withheld by FDC Exchange fees withheld by FSC $ 3,083 Expense reductions Directed $ 16,780 brokerage arrangements Custody credits 54 $ 16,834
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ 22,611 $ 479,288 income Net realized gain (loss) 2,921,049 (5,303,326) Change in net unrealized 16,617,171 (4,576,943) appreciation (depreciation) NET INCREASE (DECREASE) IN 19,560,831 (9,400,981) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (330,540) (375,571) from net investment income Share transactions Net 54,516,665 47,858,222 proceeds from sales of shares Reinvestment of distributions 314,409 356,687 Cost of shares redeemed (38,028,300) (61,599,489) NET INCREASE (DECREASE) IN 16,802,774 (13,384,580) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 80,445 123,693 TOTAL INCREASE (DECREASE) 36,113,510 (23,037,439) IN NET ASSETS NET ASSETS Beginning of period 36,828,426 59,865,865 End of period (including $ 72,941,936 $ 36,828,426 undistributed net investment income of $11,754 and $319,683, respectively) OTHER INFORMATION Shares Sold 3,778,624 3,845,626 Issued in reinvestment of 26,049 32,426 distributions Redeemed (2,640,529) (4,929,086) Net increase (decrease) 1,164,144 (1,051,034)
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 G 1995 Net asset value, beginning of $ 10.59 $ 13.22 $ 12.50 $ 11.36 $ 8.98 $ 9.48 period Income from Investment Operations Net investment income (loss) D .01 .12 E (.05) (.06) .05 .03 Net realized and unrealized 5.18 (2.68) 1.06 1.30 2.36 (.53) gain (loss) Total from investment 5.19 (2.56) 1.01 1.24 2.41 (.50) operations Less Distributions From net investment income (.09) (.10) - (.01) (.05) (.02) From net realized gain - - (.30) (.29) - - In excess of net realized gain - - (.03) - - - Total distributions (.09) (.10) (.33) (.30) (.05) (.02) Redemption fees added to paid .02 .03 .04 .20 .02 .02 in capital Net asset value, end of period $ 15.71 $ 10.59 $ 13.22 $ 12.50 $ 11.36 $ 8.98 TOTAL RETURN B, C 49.45% (19.17)% 8.74% 12.45% 27.10% (5.06)% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 72,942 $ 36,828 $ 59,866 $ 81,566 $ 60,228 $ 79,894 (000 omitted) Ratio of expenses to average 1.42% A 1.57% 1.82% 1.70% 1.68% 1.70% net assets Ratio of expenses to average 1.36% A, F 1.52% F 1.78% F 1.66% F 1.67% F 1.66% F net assets after expense reductions Ratio of net investment .08% A .93% (.37)% (.46)% .46% .30% income (loss) to average net assets Portfolio turnover rate 94% A 107% 118% 283% 79% 177% 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 NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.10 PER SHARE. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. G 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT TELECOMMUNICATIONS 16.42% 65.71% 187.09% 431.39% SELECT TELECOMMUNICATIONS 12.86% 60.67% 178.40% 415.38% (LOAD ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Utilities 4.02% 35.90% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT TELECOMMUNICATIONS 65.71% 23.48% 18.18% SELECT TELECOMMUNICATIONS 60.67% 22.73% 17.82% (LOAD ADJ.) S&P 500 39.82% 25.11% 17.10% GS Utilities 35.90% 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 1989/08/31 9700.00 10000.00 1989/09/30 10056.51 9959.00 1989/10/31 9700.00 9727.95 1989/11/30 9945.10 9926.40 1989/12/31 10436.26 10164.64 1990/01/31 9304.48 9482.59 1990/02/28 9269.83 9604.91 1990/03/31 9485.41 9859.44 1990/04/30 8927.22 9612.96 1990/05/31 9866.52 10550.22 1990/06/30 9670.19 10478.48 1990/07/31 9227.49 10444.95 1990/08/31 8153.45 9500.72 1990/09/30 7626.05 9038.04 1990/10/31 7891.67 8999.18 1990/11/30 8342.08 9580.52 1990/12/31 8725.07 9847.82 1991/01/31 9035.14 10277.18 1991/02/28 9337.36 11012.00 1991/03/31 9600.33 11278.49 1991/04/30 9804.42 11305.56 1991/05/31 9906.47 11793.96 1991/06/30 9494.35 11253.80 1991/07/31 10032.07 11778.23 1991/08/31 10330.36 12057.37 1991/09/30 10463.81 11856.01 1991/10/31 10875.92 12014.88 1991/11/30 10459.88 11530.68 1991/12/31 11416.91 12849.79 1992/01/31 11432.77 12610.79 1992/02/29 11575.53 12774.73 1992/03/31 11167.08 12525.62 1992/04/30 11587.43 12893.87 1992/05/31 11452.60 12957.05 1992/06/30 11186.62 12763.99 1992/07/31 11786.90 13286.04 1992/08/31 11647.76 13013.68 1992/09/30 11874.35 13167.24 1992/10/31 11993.62 13213.32 1992/11/30 12617.74 13663.90 1992/12/31 13165.76 13831.96 1993/01/31 13125.26 13948.15 1993/02/28 13846.12 14137.85 1993/03/31 14413.08 14436.15 1993/04/30 14443.49 14086.80 1993/05/31 15024.89 14464.33 1993/06/30 15672.73 14506.27 1993/07/31 16129.54 14448.25 1993/08/31 17346.31 14995.84 1993/09/30 17595.48 14880.37 1993/10/31 18102.12 15188.39 1993/11/30 16619.57 15044.10 1993/12/31 17078.04 15226.14 1994/01/31 17423.79 15743.82 1994/02/28 16877.88 15317.17 1994/03/31 16350.16 14649.34 1994/04/30 16641.99 14836.85 1994/05/31 16544.26 15080.17 1994/06/30 16530.30 14710.71 1994/07/31 17447.10 15193.22 1994/08/31 17954.36 15816.14 1994/09/30 17744.94 15428.65 1994/10/31 18591.93 15775.79 1994/11/30 17605.33 15201.24 1994/12/31 17815.67 15426.67 1995/01/31 18062.84 15826.69 1995/02/28 18224.46 16443.45 1995/03/31 18452.62 16928.70 1995/04/30 19026.13 17427.25 1995/05/31 19545.47 18123.82 1995/06/30 20487.07 18544.83 1995/07/31 21787.84 19159.78 1995/08/31 22433.37 19207.87 1995/09/30 23171.11 20018.44 1995/10/31 22200.39 19946.98 1995/11/30 22690.61 20822.65 1995/12/31 23099.10 21223.69 1996/01/31 23262.60 21946.15 1996/02/29 22925.39 22149.59 1996/03/31 22818.09 22362.89 1996/04/30 23883.43 22692.52 1996/05/31 24413.44 23277.76 1996/06/30 24661.88 23366.44 1996/07/31 22795.81 22334.12 1996/08/31 23270.61 22805.14 1996/09/30 23955.20 24088.62 1996/10/31 23480.40 24752.98 1996/11/30 24192.60 26624.06 1996/12/31 24346.38 26096.63 1997/01/31 24512.00 27727.15 1997/02/28 24724.94 27944.53 1997/03/31 22642.84 26796.29 1997/04/30 23351.25 28396.03 1997/05/31 26674.99 30124.78 1997/06/30 28145.46 31474.37 1997/07/31 28716.63 33978.79 1997/08/31 27313.00 32075.30 1997/09/30 30855.49 33832.06 1997/10/31 30108.10 32702.07 1997/11/30 31353.75 34215.85 1997/12/31 30634.54 34803.33 1998/01/31 33214.01 35188.26 1998/02/28 36227.91 37726.04 1998/03/31 39452.24 39657.99 1998/04/30 39296.78 40056.94 1998/05/31 37619.22 39368.37 1998/06/30 39059.12 40967.51 1998/07/31 40317.29 40531.21 1998/08/31 31104.71 34671.20 1998/09/30 33061.86 36892.24 1998/10/31 35431.40 39893.06 1998/11/30 37451.46 42310.97 1998/12/31 43207.11 44748.93 1999/01/31 46786.22 46620.33 1999/02/28 44273.68 45171.37 1999/03/31 47566.47 46978.68 1999/04/30 51128.34 48798.16 1999/05/31 50945.64 47646.04 1999/06/30 55133.25 50290.39 1999/07/31 54387.81 48720.33 1999/08/31 51538.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990924 121921 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Telecommunications Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $51,538 - a 415.38% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS MCI WorldCom, Inc. 11.2 Ameritech Corp. 7.0 Cisco Systems, Inc. 6.2 Vodafone AirTouch PLC 5.6 sponsored ADR AT&T Corp. 4.3 Motorola, Inc. 3.4 MediaOne Group, Inc. 3.1 Cincinnati Bell, Inc. 2.8 ALLTEL Corp. 2.7 SBC Communications, Inc. 2.7 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Telephone Services 50.2% Cellular 13.5% Communications Equipment 10.3% Computer Services & Software 6.4% Broadcasting 5.2% All Others 14.4%* * INCLUDES SHORT-TERM INVESTMENTS AND OTHER NET ASSETS. Row: 1, Col: 1, Value: 14.4 Row: 1, Col: 2, Value: 5.2 Row: 1, Col: 3, Value: 6.4 Row: 1, Col: 4, Value: 10.3 Row: 1, Col: 5, Value: 13.5 Row: 1, Col: 6, Value: 50.2 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S INVESTMENTS. TELECOMMUNICATIONS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Peter Saperstone) Peter Saperstone, Portfolio Manager of Fidelity Select Telecommunications Portfolio Q. HOW DID THE FUND PERFORM, PETER? A. The fund's performance was very strong. For the six months that ended August 31, 1999, the fund returned 16.42%, far ahead of the 7.32% return of the Standard & Poor's 500 Index and the 4.02% gain of the Goldman Sachs Utilities Index, an index of 136 stocks designed to measure the performance of companies in the utilities sector. For the 12 months that ended August 31, 1999, the fund returned 65.71%, which also compared favorably to the 39.82% return of the S&P 500 and the 35.90% return of the Goldman Sachs index. Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S STRONG PERFORMANCE? A. The fund benefited from its emphasis on the stocks of companies involved in two of the fastest-growing segments of the telecommunications market - data communications and wireless communications. In addition, I underweighted the regional Bell operating companies (RBOCs), which tend to underperform when interest rates are rising, as they did during the period. In general, I favored the stocks of competitive local exchange carriers (CLECs) over the RBOCs because the former are better positioned to benefit from the deregulation of the local telephone service market. The general market, as represented by the S&P 500, also performed well, but gains in many sectors of the market were limited by the Federal Reserve Board's two increases of short-term interest rates over the summer. Higher interest rates also played a role in the fund's ability to outperform the Goldman Sachs index. Electric utility stocks, which typically move with bond prices and counter to the direction of interest rates, make up approximately 20% of that index and held back its performance during the period. Q. WHY DID DATA AND WIRELESS COMMUNICATIONS STOCKS PERFORM SO WELL? A. More and more business is being transacted over the Internet, and much of it involves data communications of some kind. That's good for the companies building the equipment that makes data networks possible. At the moment, data traffic is growing much faster than voice traffic, and investors were attracted by that growth. In the wireless market, prices for cellular equipment and service have come down to the point where most people can realistically consider purchasing them. One result of that was healthy sales and earnings growth for companies that make cellular equipment and provide the infrastructure by which it operates. Q. WHAT STOCKS DID WELL FOR THE FUND? A. Cisco Systems, the fund's third-largest holding at the end of the period, made a positive contribution to performance. The company manufactures products that enable companies to operate data networks on the Internet and was one of the beneficiaries of the growth in data traffic I mentioned. Exodus Communications also helped performance. A provider of Web-hosting capabilities for Internet service providers, Exodus presented another way to play the strength in data communications stocks. Another strong performer, McLeodUSA, exemplified the potential that investors saw in the CLEC area. Vodafone Airtouch and Nextel are both wireless companies that benefited from healthy demand and flattening supply for cellular products and services. Q. WHAT STOCKS DISAPPOINTED YOU? A. AT&T and MCI WorldCom, both providers of long-distance telephone service, were hurt by a price war that broke out over the summer. Cincinnati Bell, a local telephone service provider, caught investors off guard with its purchase of a long-distance service wholesaler, implying an abrupt and challenging shift in the company's strategy. PSINet, which provides Web-hosting capabilities for other companies, suffered when investors took profits on their Internet holdings over the summer. Q. WHAT'S YOUR OUTLOOK, PETER? A. I foresee continued strong growth in the two markets I mentioned earlier - data and wireless communications. The main concern going forward will be to keep an eye on valuations. I also think we'll see competition between long-distance carriers and local service companies heating up very soon. My feeling is that the RBOCs have more to lose in that battle because they have operated as monopolies for so long, whereas the long-distance market has been competitive for a number of years now. Overall, the telecommunications sector should continue to offer excellent opportunities for investors. 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 3. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 096 TRADING SYMBOL: FSTCX SIZE: as of August 31, 1999, more than $994 million MANAGER: Peter Saperstone, since 1998; manager, Fidelity Utilities Fund and Fidelity Advisor Utilities Growth Fund, since 1998; manager, Fidelity Select Air Transportation Portfolio and Fidelity Select Defense and Aerospace Portfolio, 1997-1998; manager, Fidelity Select Construction and Housing Portfolio, 1996-1997; joined Fidelity in 1995 TELECOMMUNICATIONS PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 91.5% SHARES VALUE (NOTE 1) BROADCASTING - 5.2% AlphaNet Telecom, Inc. (a)(c) 1,196,200 $ 8 AT&T Corp. (Liberty Media 295,000 9,440,000 Group) Class A (a) EchoStar Communications Corp. 69,700 5,828,663 Class A (a) MediaOne Group, Inc. 474,800 31,218,100 NTL, Inc. (a) 48,900 4,801,369 51,288,140 CELLULAR - 13.5% ALLTEL Corp. 403,800 27,306,975 Mannesmann AG 89,600 13,550,177 Nextel Communications, Inc. 259,300 14,990,781 Class A (a) QUALCOMM, Inc. 80,700 15,509,531 Sprint Corp. Series 1 (PCS 44,800 2,676,800 Group) Telephone & Data Systems, 56,099 3,905,893 Inc. Vodafone AirTouch PLC 278,650 55,886,741 sponsored ADR 133,826,898 COMMUNICATIONS EQUIPMENT - 10.3% ADC Telecommunications, Inc. 97,100 3,598,769 (a) Cisco Systems, Inc. (a) 903,400 61,261,813 Dycom Industries, Inc. (a) 82,600 2,550,275 Lucent Technologies, Inc. 405,675 25,988,555 Newbridge Networks Corp. (a) 69,700 1,914,707 Nokia AB sponsored ADR 87,600 7,303,650 102,617,769 COMPUTER SERVICES & SOFTWARE - - 6.4% America Online, Inc. (a) 10,800 986,175 At Home Corp. Series A (a) 92,800 3,723,600 Digex, Inc. Class A 127,600 4,242,700 Exodus Communications, Inc. 184,600 14,837,225 (a) IXnet, Inc. (a) 379,800 7,121,250 PSINet, Inc. (a) 484,900 23,214,588 Verio, Inc. (a) 151,000 5,615,313 Visual Networks, Inc. (a) 101,500 4,212,250 Yahoo!, Inc. (a) 600 88,500 64,041,601 ELECTRICAL EQUIPMENT - 2.5% ANTEC Corp. (a) 238,200 10,852,988 Ericsson (L.M.) Telefon AB 145,200 4,728,075 ADR Class B Oak Industries, Inc. (a) 284,800 8,935,600 24,516,663 ELECTRONICS - 3.4% Motorola, Inc. 366,900 33,846,525 SHARES VALUE (NOTE 1) TELEPHONE SERVICES - 50.2% Ameritech Corp. 1,106,200 $ 69,828,875 AT&T Corp. 948,792 42,695,640 Bell Atlantic Corp. 382,500 23,428,125 BellSouth Corp. 255,400 11,556,850 CenturyTel, Inc. 379,800 14,930,888 Cincinnati Bell, Inc. 1,522,700 28,169,950 Commonwealth Telephone 197,500 8,418,437 Enterprises, Inc. (a) COMSAT Corp. Series 1 147,000 5,108,250 CTC Communications Corp. (a) 34,800 524,175 Focal Communications Corp. 130,800 3,180,075 Frontier Corp. 446,800 18,737,675 GTE Corp. 332,600 22,824,675 Intermedia Communications, 400,700 10,418,200 Inc. (a) MCI WorldCom, Inc. (a) 1,471,703 111,481,498 McLeodUSA, Inc. Class A (a) 697,000 23,262,375 Metromedia Fiber Network, 258,100 7,597,819 Inc. Class A (a) NEXTLINK Communications, Inc. 121,400 6,115,525 Class A (a) Nippon Telegraph & Telephone 298 3,346,022 Corp. Qwest Communications 221,180 6,358,925 International, Inc. (a) SBC Communications, Inc. 562,600 27,004,800 Sprint Corp. (FON Group) 604,500 26,824,688 TALK.com, Inc. (a) 1,111,950 11,466,984 TALK.com, Inc. rights 2/28/00 62,033 1 (a) Telebras sponsored: ADR 32,100 1,505 ADR (PFD) 24,800 1,839,850 WinStar Communications, Inc. 289,700 14,720,381 (a) 499,842,188 TOTAL COMMON STOCKS 909,979,784 (Cost $726,209,783) CASH EQUIVALENTS - 13.7% Central Cash Collateral Fund, 60,681,400 60,681,400 5.26% (b) Taxable Central Cash Fund, 75,964,054 75,964,054 5.20% (b) TOTAL CASH EQUIVALENTS 136,645,454 (Cost $136,645,454) TOTAL INVESTMENT PORTFOLIO - 1,046,625,238 105.2% (Cost $862,855,237) NET OTHER ASSETS - (5.2%) (51,745,620) NET ASSETS - 100% $ 994,879,618 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. (c) Affiliated company OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $775,103,089 and $765,908,672, 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 $32,690 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $59,449,856. The fund received cash collateral of $60,681,400 which was invested in the Central Cash Collateral Fund. The fund participated in the bank borrowing program. The average daily loan balance during the period for which loans were outstanding amounted to $4,672,000. The weighted average interest rate was 5.01%. Transactions during the period with companies which are or were affiliates are as follows: AFFILIATE PURCHASE COST SALES COST DIVIDEND INCOME VALUE AlphaNet Telecom, Inc. $ - $ - $ - $ 8 INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $867,119,517. Net unrealized appreciation aggregated $179,505,721, of which $227,332,481 related to appreciated investment securities and $47,826,760 related to depreciated investment securities. TELECOMMUNICATIONS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 1,046,625,238 value (cost $862,855,237) - See accompanying schedule Receivable for investments 13,930,500 sold Receivable for fund shares 2,177,890 sold Dividends receivable 194,607 Interest receivable 200,707 Redemption fees receivable 1,914 Other receivables 299,473 TOTAL ASSETS 1,063,430,329 LIABILITIES Payable to custodian bank $ 1,476,027 Payable for investments 3,474,578 purchased Payable for fund shares 1,943,265 redeemed Accrued management fee 492,175 Other payables and accrued 483,266 expenses Collateral on securities 60,681,400 loaned, at value TOTAL LIABILITIES 68,550,711 NET ASSETS $ 994,879,618 Net Assets consist of: Paid in capital $ 685,046,426 Accumulated net investment (636,384) loss Accumulated undistributed net 126,699,821 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 183,769,755 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 14,105,824 $ 994,879,618 shares outstanding NET ASSET VALUE and $70.53 redemption price per share ($994,879,618 (divided by) 14,105,824 shares) Maximum offering price per $72.71 share (100/97.00 of $70.53) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 3,488,005 Dividends Interest 1,304,516 Security lending 137,777 TOTAL INCOME 4,930,298 EXPENSES Management fee $ 2,869,188 Transfer agent fees 2,358,695 Accounting and security 329,871 lending fees Non-interested trustees' 2,186 compensation Custodian fees and expenses 28,364 Registration fees 52,607 Audit 14,217 Legal 1,560 Interest 651 Total expenses before 5,657,339 reductions Expense reductions (90,657) 5,566,682 NET INVESTMENT INCOME (LOSS) (636,384) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 132,373,314 Foreign currency transactions 190,637 132,563,951 Change in net unrealized appreciation (depreciation) on: Investment securities (2,768,997) Assets and liabilities in (3,952) (2,772,949) foreign currencies NET GAIN (LOSS) 129,791,002 NET INCREASE (DECREASE) IN $ 129,154,618 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 1,613,517 charges paid to FDC Sales charges - Retained by $ 1,607,031 FDC Deferred sales charges $ 4,705 withheld by FDC Exchange fees withheld by FSC $ 17,280 Expense reductions Directed $ 76,210 brokerage arrangements Custodian credits 13,398 Transfer agent credits 1,049 $ 90,657
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ (636,384) $ (874,454) income (loss) Net realized gain (loss) 132,563,951 45,836,208 Change in net unrealized (2,772,949) 85,596,709 appreciation (depreciation) NET INCREASE (DECREASE) IN 129,154,618 130,558,463 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (18,192,342) (46,022,800) from net realized gains Share transactions Net 252,880,468 863,829,740 proceeds from sales of shares Reinvestment of distributions 17,540,314 44,998,804 Cost of shares redeemed (210,950,727) (813,636,128) NET INCREASE (DECREASE) IN 59,470,055 95,192,416 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 271,974 997,935 TOTAL INCREASE (DECREASE) 170,704,305 180,726,014 IN NET ASSETS NET ASSETS Beginning of period 824,175,313 643,449,299 End of period (including $ 994,879,618 $ 824,175,313 accumulated net investment loss of $636,384 and $0, respectively) OTHER INFORMATION Shares Sold 3,519,873 15,272,906 Issued in reinvestment of 266,328 813,871 distributions Redeemed (3,006,615) (14,817,799) Net increase (decrease) 779,586 1,268,978
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 G Net asset value, beginning of $ 61.85 $ 53.37 $ 41.80 $ 44.87 $ 38.34 period Income from Investment Operations Net investment income (loss) D (.05) (.06) (.25) .12 E .51 Net realized and unrealized 10.09 11.43 18.20 2.92 9.15 gain (loss) Total from investment 10.04 11.37 17.95 3.04 9.66 operations Less Distributions From net investment income - - - (.16) (.39) From net realized gain (1.38) (2.96) (6.44) (5.98) (2.75) Total distributions (1.38) (2.96) (6.44) (6.14) (3.14) Redemption fees added to paid .02 .07 .06 .03 .01 in capital Net asset value, end of period $ 70.53 $ 61.85 $ 53.37 $ 41.80 $ 44.87 TOTAL RETURN B, C 16.42% 22.21% 46.52% 7.85% 25.79% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 994,880 $ 824,175 $ 643,449 $ 388,535 $ 468,300 (000 omitted) Ratio of expenses to average 1.13% A 1.27% 1.51% 1.51% 1.52% net assets Ratio of expenses to average 1.11% A, F 1.25% F 1.48% F 1.47% F 1.52% net assets after expense reductions Ratio of net investment (.13)% A (.11)% (.53)% .27% 1.17% income (loss) to average net assets Portfolio turnover rate 165% A 150% 157% 175% 89%
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 37.10 period Income from Investment Operations Net investment income (loss) D .29 Net realized and unrealized 2.54 gain (loss) Total from investment 2.83 operations Less Distributions From net investment income (.33) From net realized gain (1.27) Total distributions (1.60) Redemption fees added to paid .01 in capital Net asset value, end of period $ 38.34 TOTAL RETURN B, C 7.98% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 369,476 (000 omitted) Ratio of expenses to average 1.56% net assets Ratio of expenses to average 1.55% F net assets after expense reductions Ratio of net investment .77% income (loss) to average net assets Portfolio turnover rate 107% 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 NET INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.07 PER SHARE. F FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. G 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT UTILITIES GROWTH 11.67% 52.51% 201.61% 385.18% SELECT UTILITIES GROWTH (LOAD 8.25% 47.87% 192.49% 370.56% ADJ.) S&P 500 7.32% 39.82% 206.52% 384.79% GS Utilities 4.02% 35.90% n/a n/a
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a 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 AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT UTILITIES GROWTH 52.51% 24.71% 17.11% SELECT UTILITIES GROWTH (LOAD 47.87% 23.94% 16.75% ADJ.) S&P 500 39.82% 25.11% 17.10% GS Utilities 35.90% 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 1989/08/31 9700.00 10000.00 1989/09/30 9839.79 9959.00 1989/10/31 9794.20 9727.95 1989/11/30 10116.32 9926.40 1989/12/31 10651.16 10164.64 1990/01/31 10125.44 9482.59 1990/02/28 10107.21 9604.91 1990/03/31 10052.51 9859.44 1990/04/30 9633.15 9612.96 1990/05/31 10134.56 10550.22 1990/06/30 10254.65 10478.48 1990/07/31 10338.83 10444.95 1990/08/31 9771.38 9500.72 1990/09/30 9796.32 9038.04 1990/10/31 10298.30 8999.18 1990/11/30 10569.55 9580.52 1990/12/31 10710.22 9847.82 1991/01/31 10663.00 10277.18 1991/02/28 11122.64 11012.00 1991/03/31 11248.57 11278.49 1991/04/30 11198.20 11305.56 1991/05/31 11201.34 11793.96 1991/06/30 11065.47 11253.80 1991/07/31 11425.59 11778.23 1991/08/31 11687.49 12057.37 1991/09/30 12047.61 11856.01 1991/10/31 12214.57 12014.88 1991/11/30 12355.35 11530.68 1991/12/31 12962.37 12849.79 1992/01/31 12563.37 12610.79 1992/02/29 12471.30 12774.73 1992/03/31 12341.71 12525.62 1992/04/30 12679.32 12893.87 1992/05/31 12924.86 12957.05 1992/06/30 13074.37 12763.99 1992/07/31 13769.56 13286.04 1992/08/31 13762.50 13013.68 1992/09/30 13836.61 13167.24 1992/10/31 13833.08 13213.32 1992/11/30 13928.36 13663.90 1992/12/31 14335.39 13831.96 1993/01/31 14579.24 13948.15 1993/02/28 15329.26 14137.85 1993/03/31 15743.06 14436.15 1993/04/30 15657.02 14086.80 1993/05/31 15690.60 14464.33 1993/06/30 16291.36 14506.27 1993/07/31 16477.93 14448.25 1993/08/31 17194.37 14995.84 1993/09/30 17194.37 14880.37 1993/10/31 17018.99 15188.39 1993/11/30 16186.88 15044.10 1993/12/31 16133.72 15226.14 1994/01/31 16464.29 15743.82 1994/02/28 15717.28 15317.17 1994/03/31 15150.59 14649.34 1994/04/30 15586.40 14836.85 1994/05/31 15275.20 15080.17 1994/06/30 15226.99 14710.71 1994/07/31 15665.30 15193.22 1994/08/31 15603.94 15816.14 1994/09/30 15205.07 15428.65 1994/10/31 15397.93 15775.79 1994/11/30 14841.27 15201.24 1994/12/31 14938.10 15426.67 1995/01/31 15547.73 15826.69 1995/02/28 15750.93 16443.45 1995/03/31 15814.15 16928.70 1995/04/30 16365.40 17427.25 1995/05/31 16618.63 18123.82 1995/06/30 16781.43 18544.83 1995/07/31 17233.64 19159.78 1995/08/31 17672.28 19207.87 1995/09/30 18513.39 20018.44 1995/10/31 18694.27 19946.98 1995/11/30 19105.78 20822.65 1995/12/31 20075.23 21223.69 1996/01/31 20287.09 21946.15 1996/02/29 19817.33 22149.59 1996/03/31 19642.32 22362.89 1996/04/30 20435.40 22692.52 1996/05/31 20450.19 23277.76 1996/06/30 20765.72 23366.44 1996/07/31 19858.57 22334.12 1996/08/31 19863.50 22805.14 1996/09/30 20223.40 24088.62 1996/10/31 21071.39 24752.98 1996/11/30 22062.34 26624.06 1996/12/31 22356.97 26096.63 1997/01/31 23029.20 27727.15 1997/02/28 23411.16 27944.53 1997/03/31 22168.54 26796.29 1997/04/30 22961.97 28396.03 1997/05/31 24471.53 30124.78 1997/06/30 25218.47 31474.37 1997/07/31 25819.16 33978.79 1997/08/31 24659.57 32075.30 1997/09/30 26832.49 33832.06 1997/10/31 26905.62 32702.07 1997/11/30 28535.31 34215.85 1997/12/31 29132.39 34803.33 1998/01/31 30258.82 35188.26 1998/02/28 31885.90 37726.04 1998/03/31 34049.37 39657.99 1998/04/30 33368.33 40056.94 1998/05/31 32967.19 39368.37 1998/06/30 32991.50 40967.51 1998/07/31 33726.94 40531.21 1998/08/31 30858.11 34671.20 1998/09/30 33903.20 36892.24 1998/10/31 36042.66 39893.06 1998/11/30 37434.53 42310.97 1998/12/31 41704.91 44748.93 1999/01/31 42950.45 46620.33 1999/02/28 42142.90 45171.37 1999/03/31 43306.31 46978.68 1999/04/30 46794.24 48798.16 1999/05/31 47991.86 47646.04 1999/06/30 49073.35 50290.39 1999/07/31 49465.29 48720.33 1999/08/31 47056.00 48479.16 IMATRL PRASUN SHR__CHT 19990831 19990914 141047 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Utilities Growth Portfolio on August 31, 1989, and the current 3.00% sales charge was paid. As the chart shows, by August 31, 1999, the value of the investment would have grown to $47,056 - a 370.56% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the S&P 500 did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,479 - a 384.79% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS MCI WorldCom, Inc. 9.2 AES Corp. 8.1 AT&T Corp. 7.6 Calpine Corp. 7.5 SBC Communications, Inc. 6.8 Ameritech Corp. 4.6 K N Energy, Inc. 4.4 PG&E Corp. 4.1 Vodafone AirTouch PLC 3.9 sponsored ADR Enron Corp. 3.7 TOP INDUSTRIES AS OF AUGUST 31, 1999 % OF FUND'S NET ASSETS Telephone Services 45.8% Electric Utility 31.0% Gas 11.0% Cellular 5.4% Water 1.1% All Others 5.7%* * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. Row: 1, Col: 1, Value: 5.7 Row: 1, Col: 2, Value: 1.1 Row: 1, Col: 3, Value: 5.4 Row: 1, Col: 4, Value: 11.0 Row: 1, Col: 5, Value: 31.0 Row: 1, Col: 6, Value: 45.8 PRIOR TO THIS REPORT, CERTAIN INFORMATION RELATED TO PORTFOLIO HOLDINGS WAS STATED AS A PERCENTAGE OF THE FUND'S 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 did very well. For the six months that ended August 31, 1999, the fund returned 11.67%, compared to 7.32% for the Standard & Poor's 500 Index and 4.02% for the Goldman Sachs Utilities Index, an index of 136 stocks designed to measure the performance of companies in the utilities sector. For the 12 months that ended August 31, 1999, the fund returned 52.51%, surpassing the 39.82% gain of the S&P 500 and the 35.90% gain of the Goldman Sachs index during the same period. Q. WHAT ACCOUNTED FOR THE FUND'S STRONG PERFORMANCE? A. Independent power producers (IPPs) - included under the category of electric utilities in the fund's holdings - accounted for a lot of its gains. IPPs have been the primary beneficiaries of an industrywide shortage of power-generating capacity, as electric utilities have postponed or abandoned building projects due to uncertainty about deregulation. Extremely hot weather over the summer exacerbated those pre-existing supply shortages. Against the favorable backdrop of moderate economic growth and low inflation, the overall market, as represented by the broadly based S&P 500, also did well, but rising interest rates limited gains in many sectors. In the Goldman Sachs index, the telecommunications and energy subsectors were strong, but electric utilities backed off in response to higher interest rates. Utilities are typically valued in large part for their income stream, and the stocks usually move counter to the direction of interest rates. Q. WHAT IMPORTANT ADJUSTMENTS DID YOU MAKE IN THE FUND'S HOLDINGS DURING THE PERIOD? A. I became more confident in energy-related stocks, as higher energy prices and deregulation continued to create attractive opportunities in that area. My confidence was reflected in an increase in electric utility stocks - mostly independent power producers - from 26.4% of the portfolio's net assets six months ago to 31.0% at the end of the period. In addition, there was an increase in gas-related stocks - from 4.2% six months ago to 11.0% at the end of the period. On the other hand, I reduced the fund's holdings in some of the higher-valued telecommunications stocks, a move that proved to be timely. Q. WHICH STOCKS DID WELL FOR THE FUND? A. Calpine and AES, independent power producers and two of the fund's 10 largest holdings, were its strongest performers. Calpine benefited from both higher earnings and earnings estimates that were driven by promising new projects and better-than-expected results from existing projects. AES was helped when regulators in Brazil honored the company's contracts and granted it significant rate increases to compensate for the devaluation of the Brazilian currency earlier in the year. Another holding that did well, McLeod-USA, exemplified the potential that investors saw in competitive local exchange carriers (CLECs) - those that are competing with the regional Bell operating companies (RBOCs) for local telephone service. Finally, Enron, a diversified energy company, saw further healthy earnings growth from its energy trading operations. The company also announced plans to enter the telecommunications market by creating a market for trading bandwidth - that is, telecommunications network capacity. Q. WHICH STOCKS DETRACTED FROM PERFORMANCE? A. AT&T Corp. and MCI WorldCom were two stocks that hurt performance. During the summer, intense competition among the major long-distance carriers triggered faster-than-expected reductions in rates, causing many of those stocks to experience sharp pullbacks. SBC Communications, part of the RBOC group, declined partly as a reaction to higher interest rates. The stock prices of RBOCs, like those of electric utilities, tend to move down when interest rates are rising. Q. WHAT'S YOUR OUTLOOK, JONATHAN? A. Deregulation should continue to offer attractive opportunities for the fund's investors. For example, the supply constraints working in favor of independent power producers should take a couple of years to dissipate. In the meantime, those companies should be able to profit from selling power to local utilities at attractive prices, especially during peak usage periods. In the telecommunications area, the ongoing deregulation of local telephone service markets will continue to be an important focus of the fund. In that case, the long-distance companies and CLECs have the most to gain, while the RBOCs have the most to lose, in my opinion. Overall, the outlook for growth-oriented utilities stocks appears quite favorable. 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 3. (checkmark)FUND FACTS START DATE: December 10, 1981 FUND NUMBER: 065 TRADING SYMBOL: FSUTX SIZE: as of August 31, 1999, more than $588 million MANAGER: Jonathan Zang, since 1998; analyst, utilities industry, 1997-present; joined Fidelity in 1997 UTILITIES GROWTH PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets COMMON STOCKS - 95.6% SHARES VALUE (NOTE 1) BROADCASTING - 0.6% AT&T Corp. (Liberty Media 110,000 $ 3,520,000 Group) Class A (a) CELLULAR - 5.4% ALLTEL Corp. 130,700 8,838,588 Vodafone AirTouch PLC 113,900 22,844,069 sponsored ADR 31,682,657 COMPUTERS & OFFICE EQUIPMENT - - 0.7% Comverse Technology, Inc. (a) 50,000 3,900,000 ELECTRIC UTILITY - 31.0% AES Corp. (a) 788,800 47,870,300 Bangor Hydro-Electric Co. 59,800 982,963 Calpine Corp. (a) 487,800 44,206,875 CILCORP, Inc. 100,000 6,443,750 CMS Energy Corp. 400,200 15,832,913 Entergy Corp. 659,200 19,652,400 Illinova Corp. 424,100 13,518,188 IPALCO Enterprises, Inc. 468,600 9,811,313 PG&E Corp. 793,500 24,052,969 182,371,671 GAS - 11.0% Dynegy, Inc. 259,100 6,088,850 Enron Corp. 515,592 21,590,415 K N Energy, Inc. 1,270,000 25,876,250 Williams Companies, Inc. 275,000 11,343,750 64,899,265 TELEPHONE SERVICES - 45.8% Ameritech Corp. 433,600 27,371,000 AT&T Corp. 992,539 44,664,255 Bell Atlantic Corp. 63,200 3,871,000 Cincinnati Bell, Inc. 437,700 8,097,450 e.spire Communications, Inc. 395,200 3,161,600 (a) Frontier Corp. 350,000 14,678,125 GTE Corp. 275,100 18,878,738 MCI WorldCom, Inc. (a) 716,583 54,281,158 McLeodUSA, Inc. Class A (a) 291,600 9,732,150 Metromedia Fiber Network, 351,200 10,338,450 Inc. Class A (a) Qwest Communications 386,266 11,105,148 International, Inc. (a) SBC Communications, Inc. 837,644 40,206,912 Sprint Corp. (FON Group) 372,800 16,543,000 TALK.com, Inc. (a) 310,900 3,206,156 TALK.com, Inc. rights 2/28/00 30,225 0 (a) WinStar Communications, Inc. 72,600 3,688,988 (a) 269,824,130 SHARES VALUE (NOTE 1) WATER - 1.1% Azurix Corp. 363,700 $ 6,751,181 TOTAL COMMON STOCKS 562,948,904 (Cost $438,405,328) CASH EQUIVALENTS - 8.1% Central Cash Collateral Fund, 21,518,600 21,518,600 5.26% (b) Taxable Central Cash Fund, 25,967,084 25,967,084 5.20% (b) TOTAL CASH EQUIVALENTS 47,485,684 (Cost $47,485,684) TOTAL INVESTMENT PORTFOLIO - 610,434,588 103.7% (Cost 485,891,012) NET OTHER ASSETS - (3.7%) (21,629,761) NET ASSETS - 100% $ 588,804,827 LEGEND (a) Non-income producing (b) The rate quoted is the annualized seven-day yield of the fund at period end. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $241,703,032 and $211,225,396, 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 $3,662 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $21,205,913. The fund received cash collateral of $21,518,600 which was invested in the Central Cash Collateral Fund. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $485,966,462. Net unrealized appreciation aggregated $124,468,126, of which $143,113,313 related to appreciated investment securities and $18,645,187 related to depreciated investment securities. UTILITIES GROWTH PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 (UNAUDITED) ASSETS Investment in securities, at $ 610,434,588 value (cost $485,891,012) - See accompanying schedule Receivable for fund shares 1,208,193 sold Dividends receivable 494,602 Interest receivable 120,308 Redemption fees receivable 585 Other receivables 13,751 TOTAL ASSETS 612,272,027 LIABILITIES Payable for fund shares $ 1,411,028 redeemed Accrued management fee 293,216 Other payables and accrued 244,356 expenses Collateral on securities 21,518,600 loaned, at value TOTAL LIABILITIES 23,467,200 NET ASSETS $ 588,804,827 Net Assets consist of: Paid in capital $ 430,144,960 Undistributed net investment 1,965,942 income Accumulated undistributed net 32,150,349 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 124,543,576 (depreciation) on investments NET ASSETS, for 9,080,423 $ 588,804,827 shares outstanding NET ASSET VALUE and $64.84 redemption price per share ($588,804,827 (divided by) 9,080,423 shares) Maximum offering price per $66.85 share (100/97.00 of $64.84) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED) INVESTMENT INCOME $ 4,257,171 Dividends Interest 755,240 Security lending 52,228 TOTAL INCOME 5,064,639 EXPENSES Management fee $ 1,699,670 Transfer agent fees 1,174,572 Accounting and security 213,500 lending fees Non-interested trustees' 1,466 compensation Custodian fees and expenses 11,556 Registration fees 52,906 Audit 10,388 Legal 309 Total expenses before 3,164,367 reductions Expense reductions (87,868) 3,076,499 NET INVESTMENT INCOME 1,988,140 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 33,211,090 Foreign currency transactions (122) 33,210,968 Change in net unrealized appreciation (depreciation) on: Investment securities 22,088,553 Assets and liabilities in (13) 22,088,540 foreign currencies NET GAIN (LOSS) 55,299,508 NET INCREASE (DECREASE) IN $ 57,287,648 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 1,006,518 charges paid to FDC Sales charges - Retained by $ 1,005,557 FDC Deferred sales charges $ 4,867 withheld by FDC Exchange fees withheld by FSC $ 9,683 Expense reductions Directed $ 86,538 brokerage arrangements Custodian credits 1,194 Transfer agent credits 136 $ 87,868
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1999 ASSETS 1999 (UNAUDITED) Operations Net investment $ 1,988,140 $ 3,134,078 income Net realized gain (loss) 33,210,968 98,328,176 Change in net unrealized 22,088,540 19,577,920 appreciation (depreciation) NET INCREASE (DECREASE) IN 57,287,648 121,040,174 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (980,203) (1,845,471) From net investment income From net realized gain (28,752,707) (58,304,043) TOTAL DISTRIBUTIONS (29,732,910) (60,149,514) Share transactions Net 147,655,765 311,901,481 proceeds from sales of shares Reinvestment of distributions 28,454,602 57,497,817 Cost of shares redeemed (122,822,310) (324,713,707) NET INCREASE (DECREASE) IN 53,288,057 44,685,591 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 120,925 337,629 TOTAL INCREASE (DECREASE) 80,963,720 105,913,880 IN NET ASSETS NET ASSETS Beginning of period 507,841,107 401,927,227 End of period (including $ 588,804,827 $ 507,841,107 undistributed net investment income of $1,965,942 and $1,646,086, respectively) OTHER INFORMATION Shares Sold 2,228,796 5,410,133 Issued in reinvestment of 473,692 1,024,484 distributions Redeemed (1,869,130) (5,700,831) Net increase (decrease) 833,358 733,786
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 F Net asset value, beginning of $ 61.58 $ 53.50 $ 45.97 $ 43.03 $ 34.88 period Income from Investment Operations Net investment income D .22 .44 .54 .73 1.10 Net realized and unrealized 6.67 15.77 14.83 6.41 7.86 gain (loss) Total from investment 6.89 16.21 15.37 7.14 8.96 operations Less Distributions From net investment income (.12) (.25) (.58) (.70) (.84) From net realized gain (3.52) (7.93) (7.30) (3.54) - Total distributions (3.64) (8.18) (7.88) (4.24) (.84) Redemption fees added to paid .01 .05 .04 .04 .03 in capital Net asset value, end of period $ 64.84 $ 61.58 $ 53.50 $ 45.97 $ 43.03 TOTAL RETURN B, C 11.67% 32.17% 36.20% 18.13% 25.82% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 588,805 $ 507,841 $ 401,927 $ 256,844 $ 266,768 (000 omitted) Ratio of expenses to average 1.07% A 1.18% 1.33% 1.47% 1.39% net assets Ratio of expenses to average 1.04% A, E 1.16% E 1.30% E 1.46% E 1.38% E net assets after expense reductions Ratio of net investment .67% A .77% 1.11% 1.73% 2.76% income to average net assets Portfolio turnover rate 76% A 113% 78% 31% 65%
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 36.61 period Income from Investment Operations Net investment income D 1.13 Net realized and unrealized (1.17) gain (loss) Total from investment (.04) operations Less Distributions From net investment income (1.05) From net realized gain (.67) Total distributions (1.72) Redemption fees added to paid .03 in capital Net asset value, end of period $ 34.88 TOTAL RETURN B, C .21% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 237,635 (000 omitted) Ratio of expenses to average 1.43% net assets Ratio of expenses to average 1.42% E net assets after expense reductions Ratio of net investment 3.24% income to average net assets Portfolio turnover rate 24% A ANNUALIZED B THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. C TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. D NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR THE YEAR ENDED FEBRUARY 29
MONEY MARKET PORTFOLIO 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 AUGUST 31, 1999 PAST 6 MONTHS PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT MONEY MARKET 2.35% 4.85% 28.60% 63.69% SELECT MONEY MARKET (LOAD ADJ.) -0.72% 1.71% 24.74% 58.78% All Taxable Money Market 2.23% 4.60% 27.88% 62.28% Funds Average
CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, six months, one year, five years or 10 years. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050 without including the effect of the 3.00% 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 931 taxable money market funds with similar objectives tracked by IBC Financial Data, Inc. over the past six months. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED AUGUST 31, 1999 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT MONEY MARKET 4.85% 5.16% 5.05% SELECT MONEY MARKET (LOAD ADJ.) 1.71% 4.52% 4.73% All Taxable Money Market 4.60% 5.04% 4.96% 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
,s> 8/31/99 6/1/99 3/2/99 12/1/98 9/1/98 SELECT MONEY MARKET 4.99% 4.37% 4.71% 4.71% 5.10% All Taxable Money Market Funds Average 4.64% 4.33% 4.37% 4.57% 5.03% 9/1/99 6/2/99 3/3/99 12/2/98 9/2/98 MMDA 2.06% 2.06% 2.16% 2.32% 2.55%
Money Market All Taxable Money Market Funds Average MMDA 6% - 4% - 2% - 0% Row: 1, Col: 1, Value: 4.99 Row: 1, Col: 2, Value: 4.64 Row: 1, Col: 3, Value: 2.06 Row: 2, Col: 1, Value: 4.37 Row: 2, Col: 2, Value: 4.33 Row: 2, Col: 3, Value: 2.06 Row: 3, Col: 1, Value: 4.71 Row: 3, Col: 2, Value: 4.37 Row: 3, Col: 3, Value: 2.16 Row: 4, Col: 1, Value: 4.71 Row: 4, Col: 2, Value: 4.57 Row: 4, Col: 3, Value: 2.32 Row: 5, Col: 1, Value: 5.1 Row: 5, Col: 2, Value: 5.03 Row: 5, Col: 3, Value: 2.55 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. JOHN, WHAT WAS THE INVESTMENT ENVIRONMENT LIKE OVER THE SIX MONTHS THAT ENDED AUGUST 31, 1999? A. At the beginning of the period, the markets were recovering from the global financial meltdown that occurred in late 1998. To help alleviate that crisis, the Federal Reserve Board reduced the rate that banks charge each other for overnight loans - known as the fed funds rate - by 0.25 percentage points three times, bringing the fed funds rate down to 4.75%. When the period started, the overall world economy was fairly static, although economies in Asia - with the exception of Japan - seemed to be reviving. That rebirth helped to spark a recovery in oil and other commodity prices. The Asian recovery, coupled with Latin America's ability to head off the threat of an additional financial crisis, helped convince U.S. markets that the international economic situation had stabilized somewhat. As investors turned their eyes back to the domestic scene, they saw an economy that continued to grow at a fairly robust rate. Final demand - meaning retail sales - remained strong, but standard inflation measures such as the consumer price index (CPI) and the producer price index (PPI) stayed fairly benign. In May, however, there was an unexpected outsized gain in the CPI. Q. HOW DID THE FED RESPOND TO THESE CONDITIONS? A. At its May meeting, the Fed shifted from a neutral interest-rate stance to a bias toward hiking rates to head off inflation. The Fed followed through with a 0.25 percentage point increase in the fed funds rate at the end of June, although it went back to a neutral stance at that time. Nevertheless, market observers expected the Fed to take back the three rate cuts it implemented in late 1998 in response to a credit crunch sparked by Russia's default on its debt and the near collapse of a highly leveraged hedge fund. The Fed raised the fed funds rate by 0.25 percentage points once again in August, and it stood at 5.25% at the end of the period. Q. WHAT WAS YOUR STRATEGY WITH THE FUND? A. I let the fund's average maturity slide down from 60 days at the beginning of the period to 50 days at the end of April, because I felt longer-term securities were not offering enough yield for investing farther out on the money market yield curve. With the CPI scare at the beginning of May, yields in the market rose in anticipation of Fed action. As a result, I extended the average maturity to take advantage of yields offered by one-year securities, which I found to be especially attractive because they factored in more significant Fed rate hikes than I thought would occur. Since the end of June, I've let the fund's average maturity slip back to 52 days at the end of the period. By doing so, I positioned the fund to take advantage of the additional Fed rate hike that is widely anticipated by the market, and because there are market pressures that typically lead to higher yields at the end of the year. I also increased the fund's holdings in variable-rate securities - whose yields are reset periodically - to 14% of the fund at the end of the period. These instruments should ratchet up in yield in response to potential Fed rate hikes and as we approach the increases in market rates typically experienced at year-end. Q. HOW DID THE FUND PERFORM? A. The fund's seven-day yield on August 31, 1999, was 4.99%, compared to 4.76% six months ago. For the six months that ended August 31, 1999, the fund had a total return of 2.35%, compared to 2.23% for the all taxable money market funds average, according to IBC Financial Data, Inc. Q. WHAT IS YOUR OUTLOOK? A. The big question is whether or not the Fed will take back the last of the three rate hikes it implemented in late 1998, bringing the fed funds rate back to 5.50%. My sense at this point is that the Fed will do so before the end of the year. The Fed appeared relatively comfortable with its monetary policy before last year's global economic crisis, when it felt compelled to lower rates to benefit the financial markets. At that point, the fed funds rate was at 5.50% and the economy was healthy without exhibiting excesses that might lead to inflation. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE 3. (checkmark)FUND FACTS START DATE: August 30, 1985 FUND NUMBER: 085 TRADING SYMBOL: FSLXX SIZE: as of August 31, 1999, more than $1.1 billion MANAGER: John Todd, since 1991; manager, various Fidelity and Spartan money market funds; joined Fidelity in 1981 MONEY MARKET PORTFOLIO INVESTMENTS AUGUST 31, 1999 (UNAUDITED) Showing Percentage of Net Assets
CERTIFICATES OF DEPOSIT - 13.8% DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1) PURCHASE DOMESTIC CERTIFICATES OF DEPOSIT - 0.7% First Union National Bank, North Carolina 11/20/99 5.55% (b) $ 8,000,000 $ 8,000,000 LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 6.8% Abbey National Treasury Services PLC 9/24/99 5.15 15,000,000 15,000,000 9/27/99 5.20 5,000,000 5,000,000 Bank of Scotland Treasury Services 2/16/00 5.14 5,000,000 4,999,113 Banque Nationale de Paris 11/10/99 5.00 25,000,000 24,998,821 Barclays Bank PLC 9/7/99 4.90 5,000,000 5,000,080 9/7/99 5.03 25,000,000 25,000,000 79,998,014 NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 6.3% Bank of Scotland Treasury Services 9/2/99 5.10 (b) 5,000,000 4,998,750 Deutsche Bank AG 2/16/00 5.12 10,000,000 9,997,782 RaboBank Nederland Coop. Central 9/2/99 5.00 5,000,000 5,000,000 Societe Generale, France 12/6/99 5.21 9,000,000 9,000,000 UBS AG 5/18/00 5.35 25,000,000 24,989,726 Westdeutsche Landesbank Girozentrale 9/7/99 5.18 10,000,000 10,000,000 9/8/99 5.18 10,000,000 10,000,000 73,986,258 TOTAL CERTIFICATES OF DEPOSIT 161,984,272 COMMERCIAL PAPER - 57.8% ABN-AMRO North America, Inc. 12/6/99 5.20 3,000,000 2,959,480 Aspen Funding Corp. 9/1/99 5.58 39,000,000 39,000,000 Asset Securitization Coop. Corp. 9/10/99 5.26 (b) 10,000,000 10,000,000 9/20/99 5.05 (b) 5,000,000 5,000,000 Bear Stearns Companies, Inc. 2/23/00 5.72 5,000,000 4,865,469 Caisse des Depots et Consignations 9/7/99 5.19 10,000,000 9,991,383 Centric Capital Corp. 9/10/99 5.08 8,100,000 8,089,835 9/10/99 5.22 4,000,000 3,994,800 9/13/99 5.18 9,754,000 9,737,288 DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1) PURCHASE Citibank Credit Card Master Trust I (Dakota Certificate Program) 9/2/99 5.19% $ 21,000,000 $ 20,996,984 ConAgra, Inc. 9/3/99 5.40 2,000,000 1,999,401 9/10/99 5.41 1,000,000 998,650 10/4/99 5.49 2,000,000 1,989,990 Conoco, Inc. 9/23/99 5.42 2,000,000 1,993,400 CXC, Inc. 9/7/99 5.20 5,000,000 4,995,683 9/8/99 5.19 5,000,000 4,995,003 10/18/99 5.24 3,000,000 2,979,751 Daimler-Chrysler North America Holding Corp. 9/8/99 5.22 5,000,000 4,994,954 Deutsche Bank Financial, Inc. 9/27/99 5.33 20,000,000 19,923,444 12/8/99 5.21 20,000,000 19,723,967 Edison Asset Securitization LLC 9/1/99 5.20 25,222,000 25,222,000 10/25/99 5.40 5,000,000 4,959,875 10/26/99 5.39 5,000,000 4,959,132 Enterprise Funding Corp. 9/9/99 5.20 10,000,000 9,988,511 9/23/99 5.34 20,000,000 19,934,978 10/19/99 5.41 8,000,000 7,942,827 Falcon Asset Securitization Corp. 9/1/99 5.18 12,000,000 12,000,000 9/21/99 5.32 3,135,000 3,125,769 10/27/99 5.43 6,000,000 5,949,880 10/28/99 5.42 15,000,000 14,872,700 11/1/99 5.46 5,000,000 4,954,250 Finova Capital Corp. 9/7/99 5.21 10,000,000 9,991,417 9/9/99 5.41 (b) 3,000,000 3,000,000 Fleet Funding Corp. 9/10/99 5.22 5,439,000 5,431,929 General Electric Capital Corp. 2/24/00 5.60 10,000,000 9,735,511 General Electric Capital International Funding, Inc. 9/3/99 5.21 10,000,000 9,997,117 10/6/99 5.36 12,000,000 11,937,817 General Motors Acceptance Corp. 2/22/00 5.90 25,000,000 24,308,833 2/23/00 5.60 10,000,000 9,736,528 2/23/00 5.90 20,000,000 19,443,889 3/6/00 5.90 5,000,000 4,851,439 Goldman Sachs Group, Inc. 2/9/00 5.80 10,000,000 9,748,438 Heller Financial, Inc. 9/9/99 5.21 5,000,000 4,994,278 9/9/99 5.32 5,000,000 4,994,111 COMMERCIAL PAPER - CONTINUED DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1) PURCHASE J.P. Morgan & Co., Inc. 2/2/00 5.75% $ 15,000,000 $ 14,641,308 2/9/00 5.62 25,000,000 24,390,660 Kitty Hawk Funding Corp. 9/17/99 5.17 5,175,000 5,163,201 10/20/99 5.41 3,000,000 2,978,113 Lehman Brothers Holdings, Inc. 9/16/99 5.30 3,000,000 2,993,438 MCI WorldCom, Inc. 9/1/99 5.28 1,000,000 1,000,000 11/15/99 5.48 (b) 5,000,000 5,000,000 Newport Funding Corp. 9/15/99 5.32 (b) 5,000,000 5,000,000 Norfolk Southern Corp. 9/8/99 5.36 2,000,000 1,997,927 PHH Corp. 9/13/99 5.42 3,000,000 2,994,600 Preferred Receivables Funding Corp. 10/15/99 5.40 5,000,000 4,967,306 10/18/99 5.40 3,000,000 2,979,046 10/19/99 5.40 8,000,000 7,942,933 11/15/99 5.47 10,000,000 9,887,500 Rohm & Haas Co. 9/22/99 5.41 2,000,000 1,993,712 9/28/99 5.42 3,000,000 2,987,850 Salomon Smith Barney Holdings, Inc. 2/8/00 5.63 15,000,000 14,636,000 Societe Generale, North America, Inc. 9/7/99 5.22 10,000,000 9,991,333 Svenska Handelsbanken, Inc. 12/2/99 5.15 17,000,000 16,781,909 Triple-A One Funding Corp. 9/8/99 5.22 5,000,000 4,994,944 9/13/99 5.18 8,000,000 7,986,293 10/13/99 5.39 8,926,000 8,870,287 Tyco International Group SA 9/16/99 5.37 1,000,000 997,792 9/22/99 5.47 4,000,000 3,987,283 UBS Finance (Delaware), Inc. 9/10/99 5.20 10,000,000 9,987,050 12/7/99 5.27 15,000,000 14,792,663 Westdeutsche Landesbank Girozentrale 9/28/99 5.32 10,000,000 9,960,288 Windmill Funding Corp. 9/2/99 5.20 2,288,000 2,287,671 9/13/99 5.27 16,675,000 16,645,819 9/27/99 5.33 10,000,000 9,961,722 9/27/99 5.34 17,000,000 16,934,682 10/25/99 5.40 10,000,000 9,919,750 TOTAL COMMERCIAL PAPER 676,963,791 FEDERAL AGENCIES - 5.1% DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1) PURCHASE FREDDIE MAC - DISCOUNT NOTES - - 5.1% 9/16/99 5.06% $ 10,000,000 $ 9,979,167 11/18/99 4.88 50,000,000 49,484,331 59,463,498 BANK NOTES - 5.5% First National Bank, Chicago 7/12/00 5.75 10,000,000 9,995,867 Fleet National Bank 9/1/99 5.46 (b) 25,000,000 24,989,639 NationsBank NA 9/1/99 5.41 (b) 5,000,000 4,998,689 9/8/99 5.01 25,000,000 25,000,000 TOTAL BANK NOTES 64,984,195 MASTER NOTES - 1.7% Goldman Sachs Group, Inc. 9/1/99 5.18 (b) 5,000,000 5,000,000 J.P. Morgan Securities, Inc. 9/7/99 5.18 (b) 15,000,000 15,000,000 TOTAL MASTER NOTES 20,000,000 MEDIUM-TERM NOTES - 4.8% American Telephone & Telegraph 9/7/99 5.26 (b) 15,000,000 15,000,000 Bishops Gate Resources Mortgage Trust 9/1/99 5.38 (b) 2,000,000 2,000,000 CIESCO L.P. 9/15/99 5.25 (b) 5,000,000 4,999,138 Ford Motor Credit Co. 9/1/99 5.45 (b) 6,000,000 6,000,000 11/23/99 5.46 (b) 10,000,000 9,993,297 Goldman Sachs Group L.P. 10/7/99 5.51 (b)(c) 4,000,000 4,000,000 Morgan Guaranty Trust Co., NY 9/27/99 5.31 (b) 10,000,000 9,999,654 Norwest Corp. 10/22/99 5.33 (b) 4,000,000 4,000,000 TOTAL MEDIUM-TERM NOTES 55,992,089 SHORT-TERM NOTES - 1.1% DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1) PURCHASE Capital One Funding Corp. Series 1998 B, 9/7/99 5.47% (b) $ 3,752,000 $ 3,752,000 RACERS Series 1999 - 16MM, 9/2/99 5.20 (a)(b) 5,000,000 5,000,000 SMM Trust Series 1999 E, 10/5/99 5.32 (a)(b) 2,000,000 2,000,000 SMM Trust Series 1999 I, 11/26/99 5.49 (a)(b) 2,000,000 2,000,000 TOTAL SHORT-TERM NOTES 12,752,000 TIME DEPOSITS - 3.4% Societe Generale, France 9/1/99 5.56 40,000,000 40,000,000
REPURCHASE AGREEMENTS - 8.4% MATURITY AMOUNT In a joint trading account $ 97,849,972 97,835,000 (U.S. Government Obligations) dated 8/31/99 due 9/1/99 At 5.51% TOTAL INVESTMENT PORTFOLIO - 1,189,974,845 101.6% NET OTHER ASSETS - (1.6%) (18,807,293) NET ASSETS - 100% $ 1,171,167,552 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 $9,000,000 or 0.8% 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. Additional information on each holding is as follows: SECURITY ACQUISITION DATE COST Goldman Sachs Group L.P. 12/7/98 $ 4,000,000 5.51%, 10/7/99 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 0.3% of net assets. INCOME TAX INFORMATION At August 31, 1999, the aggregate cost of investment securities for income tax purposes was $1,189,974,845. MONEY MARKET PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1999 ASSETS Investment in securities, at $ 1,189,974,845 value (including repurchase agreements of $97,835,000) - See accompanying schedule Receivable for fund shares 49,498,509 sold Interest receivable 4,039,468 Prepaid expenses 18,608 TOTAL ASSETS 1,243,531,430 LIABILITIES Payable to custodian bank $ 199 Payable for investments 4,959,132 purchased Payable for fund shares 66,693,267 redemed Distributions payable 201,036 Accrued management fee 179,924 Other payables and accrued 330,320 expenses TOTAL LIABILITIES 72,363,878 NET ASSETS $ 1,171,167,552 Net Assets consist of: Paid in capital $ 1,171,173,477 Accumulated net realized gain (5,925) (loss) on investments NET ASSETS, for 1,171,106,587 $ 1,171,167,552 shares outstanding NET ASSET VALUE, offering $1.00 price and redemption price per share ($1,171,167,552 (divided by) 1,171,106,587 shares) Maximum offering price per $1.03 share (100/97.00 of $1.00) STATEMENT OF OPERATIONS SIX MONTHS ENDED AUGUST 31, 1999 INTEREST INCOME $ 26,662,451 EXPENSES Management fee $ 864,868 Transfer agent fees 1,132,616 Accounting fees and expenses 60,101 Non-interested trustees' 1,580 compensation Custodian fees and expenses 11,130 Registration fees 318,285 Audit 19,706 Legal 602 Miscellaneous 27,527 Total expenses before 2,436,415 reductions Expense reductions (2,139) 2,434,276 NET INTEREST INCOME 24,228,175 NET REALIZED GAIN (LOSS) ON (5,925) INVESTMENTS NET INCREASE IN NET ASSETS $ 24,222,250 RESULTING FROM OPERATIONS OTHER INFORMATION Sales charge paid to FDC $ 951,807 Sales charges - Retained by $ 933,503 FDC Deferred sales charges $ 30,783 withheld by FDC Expense reductions Transfer $ 2,139 agent credits
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET SIX MONTHS ENDED AUGUST 31, YEAR ENDED FEBRUARY 28, 1998 ASSETS 1999 (UNAUDITED) Operations Net interest income $ 24,228,175 $ 47,769,375 Net realized gain (loss) (5,925) 54,995 NET INCREASE (DECREASE) IN 24,222,250 47,824,370 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (24,228,175) (47,769,375) from net interest income Share transactions at net 2,530,501,844 6,779,151,867 asset value of $1.00 per share Proceeds from sales of shares Reinvestment of 22,337,550 42,982,213 distributions from net interest income Cost of shares redeemed (2,507,839,479) (6,280,934,055) NET INCREASE (DECREASE) IN 44,999,915 541,200,025 NET ASSETS AND SHARES RESULTING FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) 44,993,990 541,255,020 IN NET ASSETS NET ASSETS Beginning of period 1,126,173,562 584,918,542 End of period $ 1,171,167,552 $ 1,126,173,562
FINANCIAL HIGHLIGHTS SIX MONTHS ENDED AUGUST 31, YEARS ENDED FEBRUARY 28, 1999 SELECTED PER-SHARE DATA (UNAUDITED) 1999 1998 1997 1996 E Net asset value, beginning of $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 period Income from Investment .023 .050 .051 .049 .054 Operations Net interest income Less Distributions From net interest income (.023) (.050) (.051) (.049) (.054) Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 TOTAL RETURN B, C 2.35% 5.08% 5.26% 5.02% 5.56% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 1,171,168 $ 1,126,174 $ 584,919 $ 848,168 $ 610,821 (000 omitted) Ratio of expenses to average .46% A .50% .56% .56% .59% net assets Ratio of expenses to average .46% A .49% D .56% .56% .59% net assets after expense reductions Ratio of net interest income 4.62% A 5.03% 5.13% 4.92% 5.39% to average net assets
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, SELECTED PER-SHARE DATA 1995 Net asset value, beginning of $ 1.000 period Income from Investment .042 Operations Net interest income Less Distributions From net interest income (.042) Net asset value, end of period $ 1.000 TOTAL RETURN B, C 4.28% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 573,144 (000 omitted) Ratio of expenses to average .65% net assets Ratio of expenses to average .65% net assets after expense reductions Ratio of net interest income 4.19% to average net assets
A ANNUALIZED B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE AND FOR PERIODS OF LESS THAN ONE YEAR ARE NOT ANNUALIZED. C THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD SHOWN. 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 NOTES TO FINANCIAL STATEMENTS For the period ended August 31, 1999 (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES. Fidelity Select Portfolios (the trust) is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company organized as a Massachusetts business trust. The trust has thirty-nine equity funds 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 (the fund or the funds). Each fund is authorized to issue an unlimited number of shares. The 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 as determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. Direct investments in precious metals in the form of bullion are valued at the most recent bid price quoted by a major bank on the New York Commodities Exchange. MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and certain conditions therein, securities are valued initially at cost and thereafter assume a constant amortization to maturity of any discount or premium. FOREIGN CURRENCY TRANSLATION. The accounting records of the funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income accrued and the U.S. dollar amount actually received, and gains and losses between trade 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 is not subject to income taxes to the extent that it distributes substantially all of its taxable income for the fiscal year. Each fund may be subject to foreign taxes on income and gains on investments which are accrued based upon each fund's understanding of the tax rules and regulations that exist in the markets in which they invest. Each fund accrues such taxes as applicable. 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 Fidelity Management & Research Company (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. CENTRAL CASH FUNDS. Pursuant to an Exemptive Order issued by the SEC, the funds may invest in the Taxable Central Cash Fund and the Central Cash Collateral Fund (the Cash Funds) managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR. The Cash Funds are open-end money market funds available only to investment companies and other accounts managed by FMR and its affiliates. The Cash Funds seek preservation of capital, liquidity, and current income. Income distributions from the Cash Funds are declared daily and paid monthly from net interest income. Income distributions earned by the funds are recorded as either interest income or security lending 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 at the end of each applicable fund's schedule of investments. 3. PURCHASES AND SALES OF INVESTMENTS. Information regarding purchases and sales of securities (other than short-term securities), is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As each fund's investment adviser, FMR receives a monthly fee. For each equity fund, the monthly fee is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of each fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2500% to .5200% for the period. The annual individual fund fee rate is .30%. In the event that these rates were lower than the contractual rates in effect during the period, FMR voluntarily implemented the above rates, as they resulted in the same or a lower management fee. For the period, the management fees were equivalent to annualized rates that ranged from .57% to .59%, 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 income-based 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 total management fee was equivalent to an annualized rate of .17%. The income-based portion of this fee was equal to $26,364, or an annualized rate of .01% 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 fees are 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 funds. 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. 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 lend portfolio securities from time to time in order to earn additional income. Each applicable fund receives collateral (in the form of U.S. Treasury obligations, letters of credit and/or cash) against the loaned securities and maintains collateral in an amount 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 funds and any additional required collateral is delivered to the funds on the next business day. If the borrower defaults on its obligation to return the securities loaned because of insolvency or other reasons, a fund could experience delays and costs in recovering the securities loaned or in gaining access to the collateral. Information regarding the value of securities loaned and the value of collateral at period end 5. SECURITY LENDING - CONTINUED 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, certain securities lending fees, brokerage commissions and extraordinary expenses, if any) above an annual rate of 2.50% of average net assets. FMR retains the ability to be repaid by the funds for these expense reductions in the amount that expenses fall below the limit prior to the end of the fiscal year. For the period, the reimbursement reduced the expenses by $6,261 for Cyclical Industries Portfolio. FMR has directed certain portfolio trades to brokers who paid a portion of certain equity funds' expenses. In addition, certain funds have entered into arrangements with their custodian and transfer agent whereby credits realized on uninvested cash balances were used to offset a portion of certain funds' 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 and its affiliates were record owners of more than 5% of the outstanding shares, and certain unaffiliated shareholders were each record owners of 10% or more of the total outstanding shares of the following funds:
BENEFICIAL INTEREST FUND FMR % OF OWNERSHIP NUMBER OF UNAFFILIATED % OF UNAFFILIATED OWNERSHIP SHAREHOLDERS Cyclical Industries 18.8 - - Multimedia - 1 12.9 Natural Resources 28.4 - -
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. 10. PROPOSED REORGANIZATION. The Board of Trustees of has approved an Agreement and Plan of Reorganization ("Agreement") between the Fidelity Select Gold Portfolio ("Acquiring Fund") and Fidelity Select Precious Metals and Minerals Portfolio ("Target Fund") ("Reorganization"). The Agreement provides for the transfer of all of the assets of the Target Fund to the Acquiring Fund in exchange solely for the number of shares of the Acquiring Fund having the same aggregate net asset value as the outstanding shares of the Target Fund as of the close of business of the New York Stock Exchange on the day that the Reorganization is effective. The Agreement also provides for the assumption by the Acquiring Fund of all of the liabilities of the Target Fund. The Reorganization can be consummated only if, among other things, it is approved by the vote of a majority (as defined by the 1940 Act) of outstanding voting securities of the Target Fund. A Special Meeting of Shareholders ("Meeting") of the Target Fund will be held on February 16, 2000 to vote on the Agreement. A detailed description of the proposed transaction and voting information will be sent to shareholders of the Target Fund in December 1999. If the Agreement is approved at the Meeting, the Reorganization is expected to become effective on or about February 29, 2000. Effective at the close of business on December 20, 1999, shares of Fidelity Select Precious Metals and Minerals Portfolio will no longer be available for purchase or exchange to new accounts of the fund pending the proposed Reorganization. MANAGING YOUR INVESTMENTS Fidelity offers several ways to conveniently manage your personal investments via your telephone or PC. You can access your account information, conduct trades and research your investments 24 hours a day. BY PHONE Fidelity Automated Service Telephone provides a single toll-free number to access account balances, positions, quotes and trading. It's easy to navigate the service, and on your first call, the system will help you create a personal identification number (PIN) for security. (PHONE_GRAPHIC)FIDELITY AUTOMATED SERVICE TELEPHONE (FASTSM) 1-800-544-5555 PRESS 1 For mutual fund and brokerage trading. 2 For quotes.* 3 For account balances and holdings. 4 To review orders and mutual fund activity. 5 To change your PIN. *0 To speak to a Fidelity representative. BY PC Fidelity's Web site on the Internet provides a wide range of information, including daily financial news, fund performance, interactive planning tools and news about Fidelity products and services. (COMPUTER_GRAPHIC)FIDELITY'S WEB SITE WWW.FIDELITY.COM If you are not currently on the Internet, call EarthLink Sprint at 1-800-288-2967, and be sure to ask for registration number SMD004 to receive a special Fidelity package that includes 30 days of free Internet access. EarthLink is North America's #1 independent Internet access provider. (COMPUTER_GRAPHIC) FIDELITY ON-LINE XPRESS+X(registered trademark) Fidelity On-line Xpress+ software for Windows combines comprehensive portfolio management capabilities, securities trading and access to research and analysis tools . . . all on your desktop. Call Fidelity at 1-800-544-7272 or visit our Web site for more information on how to manage your investments via your PC. * WHEN YOU CALL THE QUOTES LINE, PLEASE REMEMBER THAT A FUND'S YIELD AND RETURN WILL VARY AND, EXCEPT FOR MONEY MARKET FUNDS, SHARE PRICE WILL ALSO VARY. THIS MEANS THAT YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. THERE IS NO ASSURANCE THAT MONEY MARKET FUNDS WILL BE ABLE TO MAINTAIN A STABLE $1 SHARE PRICE; AN INVESTMENT IN A MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT. TOTAL RETURNS ARE HISTORICAL AND INCLUDE CHANGES IN SHARE PRICE, REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS, AND THE EFFECTS OF ANY SALES CHARGES. INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Investments Money Management, Inc. (FIMM), 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 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 Banking Brokerage and Investment Management Financial Services Home Finance Insurance 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) Fidelity Automated Service Telephone (FASTSM) 1-800-544-5555 AUTOMATED LINE FOR QUICKEST SERVICE
(2_FIDELITY_LOGOS)(REGISTERED TRADEMARK) BULK RATE P.O. Box 193 U.S. Postage Boston, MA 02101 PAID Printed on Recycled Paper SEL-SANN-1099 86080 1.536823.102
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