-----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, Mc6cs6i8UnTegd4sRnpbT+uz38d4q7G/L3owQT0Q0TrvusbdeS3VDYtmdopgYKF5 Tj8AVkvQeKTBBQiErdmhSA== 0000819118-00-000003.txt : 20000426 0000819118-00-000003.hdr.sgml : 20000426 ACCESSION NUMBER: 0000819118-00-000003 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000229 FILED AS OF DATE: 20000425 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: 607854 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 (ANNUAL ONLY) RETAILING SOFTWARE AND COMPUTER SERVICES TECHNOLOGY TELECOMMUNICATIONS TRANSPORTATION UTILITIES GROWTH ANNUAL REPORT FOR THE YEAR ENDING FEBRUARY 29, 2000 AND PROSPECTUS DATED APRIL 29, 2000 (2_FIDELITY_LOGOS)(registered trademark) CONTENTS
PERFORMANCE OVERVIEW A-4 FUND UPDATES* CONSUMER SECTOR A-6 CONSUMER INDUSTRIES A-14 FOOD AND AGRICULTURE A-20 LEISURE A-26 MULTIMEDIA A-32 RETAILING CYCLICALS SECTOR A-37 AIR TRANSPORTATION A-42 AUTOMOTIVE A-47 CHEMICALS A-52 CONSTRUCTION AND HOUSING A-58 CYCLICAL INDUSTRIES A-65 DEFENSE AND AEROSPACE A-71 ENVIRONMENTAL SERVICES A-76 INDUSTRIAL EQUIPMENT A-82 INDUSTRIAL MATERIALS A-88 PAPER AND FOREST PRODUCTS A-93 TRANSPORTATION FINANCIAL SERVICES SECTOR A-98 BANKING A-103 BROKERAGE AND INVESTMENT MANAGEMENT A-109 FINANCIAL SERVICES A-115 HOME FINANCE A-121 INSURANCE HEALTH CARE SECTOR A-126 BIOTECHNOLOGY A-132 HEALTH CARE A-138 MEDICAL DELIVERY A-144 MEDICAL EQUIPMENT AND SYSTEMS NATURAL RESOURCES SECTOR A-149 ENERGY A-155 ENERGY SERVICE A-160 GOLD A-166 NATURAL RESOURCES A-172 PRECIOUS METALS AND MINERALS
* FUND UPDATES FOR EACH SELECT PORTFOLIO INCLUDE: PERFORMANCE AND INVESTMENT SUMMARY, MANAGER'S OVERVIEW, INVESTMENTS, AND FINANCIAL STATEMENTS.
TECHNOLOGY SECTOR A-176 BUSINESS SERVICES AND OUTSOURCING A-181 COMPUTERS A-187 DEVELOPING COMMUNICATIONS A-193 ELECTRONICS A-199 SOFTWARE AND COMPUTER SERVICES A-205 TECHNOLOGY UTILITIES SECTOR A-212 NATURAL GAS A-218 TELECOMMUNICATIONS A-224 UTILITIES GROWTH A-230 MONEY MARKET NOTES TO FINANCIAL STATEMENTS A-236 FOOTNOTES TO THE FINANCIAL STATEMENTS REPORT OF INDEPENDENT A-240 THE AUDITORS' OPINION ACCOUNTANTS DISTRIBUTIONS A-241 PROXY VOTING RESULTS A-242 FIDELITY SELECT PORTFOLIOS P-1 PROSPECTUS
Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation. Other third party marks appearing herein are the property of their respective owners. All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company. This report is printed on recycled paper using soy-based inks. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF EACH FUND'S PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER AND DO NOT NECESSARILY REPRESENT THE VIEWS OF FIDELITY OR ANY OTHER PERSON IN THE FIDELITY ORGANIZATION. ANY SUCH VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED UPON MARKET OR OTHER CONDITIONS AND FIDELITY DISCLAIMS ANY RESPONSIBILITY TO UPDATE SUCH VIEWS. THESE VIEWS MAY NOT BE RELIED ON AS INVESTMENT ADVICE AND, BECAUSE INVESTMENT DECISIONS FOR A FIDELITY FUND ARE BASED ON NUMEROUS FACTORS, MAY NOT BE RELIED ON AS AN INDICATION OF TRADING INTENT ON BEHALF OF ANY FIDELITY FUND. BECAUSE OF THEIR NARROW FOCUS, SECTOR FUNDS TEND TO BE MORE VOLATILE THAN FUNDS THAT DIVERSIFY ACROSS MANY SECTORS AND COMPANIES. THIS REPORT AND THE FINANCIAL STATEMENTS CONTAINED HEREIN ARE SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUNDS. THIS REPORT IS NOT AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS IN THE FUNDS UNLESS PRECEDED OR ACCOMPANIED BY AN EFFECTIVE PROSPECTUS. MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY THE FDIC, FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED. NEITHER THE FUNDS NOR FIDELITY DISTRIBUTORS CORPORATION IS A BANK. DEAR SHAREHOLDER: The threat of inflation that overhung the investment landscape for nearly all of the 12-month period ending February 29, 2000, never fully materialized. Four pre-emptive interest-rate hikes by the Federal Reserve Board helped keep inflation at bay. But what did emerge from this environment was unparalleled momentum in technology that spurred the sector's rise to unprecedented heights. Phrases such as "new economy," "e-commerce" and "dot.com" rolled off of investors' tongues, while their dollars rolled into technology stocks and mutual funds. On the other hand, save for a short-lived cyclical and value rally in the early stages of the period, the stocks of more traditional, stable growers saw their share prices tumble to seemingly unjustified levels given their strong earnings growth rates. U.S. equity market indexes told the tale of this performance divergence. The broad-based Standard & Poor's 500SM Index - a large-capitalization index of 500 widely held stocks - returned 11.73% during the 12-month period. Meanwhile, the narrower, technology-focused NASDAQ Composite Index returned 105.81%. Even the small-cap oriented Russell 2000(registered trademark) Index got in on the tech rally, gaining 49.28%, while blue chips lagged behind with a 10.47% return, as measured by the Dow Jones Industrial Average. Of the 39 Select equity portfolios, 19 topped the S&P 500's(registered trademark) 12-month return, while 25 of the 39 beat their respective Goldman Sachs index - a measure of the performance of companies within the Select Portfolios' sector concentrations. The best performer for the period was Select Technology, which gained 184.11%. Select Food & Agriculture posted the lowest return, falling 27.86%. Select Precious Metals and Minerals merged with Select Gold on the final day of the period, February 29, 2000. In addition to the rush into technology stocks, another significant development during the period was a dramatic improvement in the global economy. This spurred greater demand for commodities, which enhanced the prospects for extractive industries - such as mining and oil and natural gas drilling - where many stocks were selling at steep discounts to the market averages. 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 period to around $30 per barrel by the end of February. Fears of an overheating domestic economy - and thus, inflation - quickly put an end to the value rally, however. In May, the Fed switched from a neutral bias to one favoring a hike in the federal funds target rate, and later followed through with four 0.25 percentage point increases in June, August, November and February. Turning to individual sector performance for the 12-month period, the CONSUMER sector turned in mixed results. Multimedia and Leisure each benefited from the strong performance of advertising-driven companies. Rising interest rates put a damper on Retailing, which underperformed its benchmarks. A lack of volume growth and pricing power detracted from Food and Agriculture, while rising interest rates and compelling technology returns subdued the performance of Consumer Industries. While eight of the 11 Select CYCLICAL Portfolios beat their Goldman Sachs benchmark, this sector also struggled to compete with the more glamorous technology issues. Paper and Forest Products did very well as the global economic recovery spurred demand. Cautious investor sentiment about continued economic growth caused Industrial Materials to drop into negative territory. Chemicals soundly beat its Goldman Sachs index, helped by its exposure to the overseas rally. Cyclical Industries had a slightly positive return, gained mostly from the cyclical rally early in the period. Several large defense contractors missed their earnings targets, detracting from Defense and Aerospace. A sizable weighting in semiconductor stocks benefited Industrial Equipment. Air Transportation and Transportation had a solid first half, then pulled back somewhat due to soaring jet fuel prices. Although auto sales were strong, fears of further Fed rate hikes negatively affected Automotive. Construction and Housing fell from the effects of interest-rate jitters on the housing market. Environmental Services posted a negative return due to poor merger integrations and missed earnings targets among solid waste companies. FINANCIAL SERVICES stocks typically struggle in an environment of rising interest rates, which highlighted the past 12 months. The Fed's actions caused returns of Banking, Home Finance and Insurance to drop by more than 20%. Although Financial Services beat its Goldman Sachs benchmark, it too suffered a double-digit drop. Brokerage and Investment Management, on the other hand, reaped the benefits of record-breaking trading activity and its capital markets exposure. After encountering a host of challenges in 1999, the HEALTH CARE sector demonstrated new signs of life in 2000. However, only Biotechnology delivered technology-like returns thanks to a number of research & development breakthroughs. Exposure to the biotech industry also helped Medical Equipment and Systems, as it returned over 25%. Conversely, Medical Delivery was felled by a variety of macro-economic factors, including federal budget cuts that reduced Medicare reimbursements. Meanwhile, a poor year for pharmaceuticals contributed to the flat return of Health Care. Higher oil prices, increased demand and restricted supply were a boon to most of the NATURAL RESOURCES sector. Natural Resources, Energy and Energy Service were all beneficiaries of this scenario. Once again, however, the relatively low prices of gold and excess supply fears left Gold and Precious Metals and Minerals with only single-digit returns. What more can one say about TECHNOLOGY? Five of the six Fidelity Select Portfolios in this sector - Technology, Electronics, Developing Communications, Computers, and Software and Computer Services - generated one-year returns in excess of 100%. While Business Services and Outsourcing did beat the S&P 500, the Portfolio's focus on companies that provide outsourcing services naturally precluded it from owning the Internet and data-networking stocks that led the period's charge. All of the Select Portfolios within the UTILITIES sector beat their Goldman Sachs and S&P 500 benchmarks. The explosion of data and wireless communications demand spurred a return of nearly 85% for Telecommunications. Utilities Growth jumped almost 30% on the strength of its wireless exposure, and Natural Gas was up nearly 45% as the price of and demand for natural gas surged during the past 12 months. 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 YEAR ENDED FEBRUARY 29, 2000
Technology 184.11% Row: 1, Col: 1, Value: 184.11 Electronics 178.06% Row: 2, Col: 1, Value: 178.06 Biotechnology 173.22% Row: 3, Col: 1, Value: 173.22 Developing Communications 166.12% Row: 4, Col: 1, Value: 166.12 Energy Service 121.24% Row: 5, Col: 1, Value: 121.24 Computers 119.58% Row: 6, Col: 1, Value: 119.58 Software & Computer Services 100.83% Row: 7, Col: 1, Value: 100.83 Telecommunications 84.89% Row: 8, Col: 1, Value: 84.89 Natural Resources 48.42% Row: 9, Col: 1, Value: 48.42 Energy 44.89% Row: 10, Col: 1, Value: 44.89 Natural Gas 44.70% Row: 11, Col: 1, Value: 44.7 Utilities Growth 29.76% Row: 12, Col: 1, Value: 29.76 Multimedia 27.62% Row: 13, Col: 1, Value: 27.62 Medical Equipment & Systems 25.68% Row: 14, Col: 1, Value: 25.68 Paper & Forest Products 20.16% Row: 15, Col: 1, Value: 20.16 Brokerage & Investment Management 19.14% Row: 16, Col: 1, Value: 19.14 Industrial Equipment 18.98% Row: 17, Col: 1, Value: 18.98 Leisure 13.89% Row: 18, Col: 1, Value: 13.89 Business Services & Outsourcing 12.15% Row: 19, Col: 1, Value: 12.15 S&P 500 11.73% Row: 20, Col: 2, Value: 11.73 Chemicals 11.10% Row: 21, Col: 1, Value: 11.1 Air Transportation 8.50% Row: 22, Col: 1, Value: 8.5 Gold 5.16% Row: 23, Col: 1, Value: 5.159999999999999 Precious Metals & Minerals 5.02% Row: 24, Col: 1, Value: 5.02 Defense and Aerospace 3.24% Row: 25, Col: 1, Value: 3.24 Transportation 2.15% Row: 26, Col: 1, Value: 2.15 Cyclical Industries 1.40% Row: 27, Col: 1, Value: 1.4 Health Care 1.15% Row: 28, Col: 1, Value: 1.15 Industrial Materials -3.22% Row: 29, Col: 1, Value: -3.22 Consumer Industries -4.55% Row: 30, Col: 1, Value: -4.55 Retailing -12.15% Row: 31, Col: 1, Value: -12.15 Financial Services -14.53% Row: 32, Col: 1, Value: -14.53 Automotive -17.40% Row: 33, Col: 1, Value: -17.4 Construction & Housing -18.28% Row: 34, Col: 1, Value: -18.28 Medical Delivery -19.60% Row: 35, Col: 1, Value: -19.6 Banking -22.07% Row: 36, Col: 1, Value: -22.07 Insurance -22.12% Row: 37, Col: 1, Value: -22.12 Home Finance -24.88% Row: 38, Col: 1, Value: -24.88 Environmental Services -25.00% Row: 39, Col: 1, Value: -25.0 Food & Agriculture -27.86% Row: 40, Col: 1, Value: -27.86
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 FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND 2000 SELECT CONSUMER INDUSTRIES -4.55% 142.42% 324.17% SELECT CONSUMER INDUSTRIES -7.48% 135.07% 311.37% (LOAD ADJ.) S&P 500 11.73% 206.94% 381.66% GS Consumer Industries -5.41% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or since the fund started on June 29, 1990. You can compare the fund's returns to the performance of both the Standard & Poor's 500SM Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Consumer Industries Index - a market capitalization-weighted index of 301 stocks designed to measure the performance of companies in the consumer industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND 2000 SELECT CONSUMER INDUSTRIES -4.55% 19.37% 16.12% SELECT CONSUMER INDUSTRIES -7.48% 18.64% 15.76% (LOAD ADJ.) S&P 500 11.73% 25.14% 17.66% GS Consumer Industries -5.41% 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 42215.99 46265.46 1999/09/30 41246.78 44997.32 1999/10/31 43392.89 47844.75 1999/11/30 44085.18 48817.43 1999/12/31 47042.51 51692.78 2000/01/31 43717.44 49095.74 2000/02/29 41137.00 48166.35 IMATRL PRASUN SHR__CHT 20000229 20000309 111400 R00000000000119 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Consumer Industries Portfolio on June 29, 1990, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $41,137 - a 311.37% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $48,166 - - a 381.66% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Wal-Mart Stores, Inc. 7.0 Home Depot, Inc. 6.4 Procter & Gamble Co. 6.3 The Coca-Cola Co. 3.6 Walt Disney Co. 3.5 Time Warner, Inc. 3.5 AT&T Corp. - Liberty Media 2.8 Group Class A CBS Corp. 2.1 MediaOne Group, Inc. 2.1 Philip Morris Companies, Inc. 2.0 39.3 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Broadcasting 17.4% Row: 1, Col: 6, Value: 17.4 General Merchandise Stores 11.4% Row: 1, Col: 5, Value: 11.4 Household Products 10.6% Row: 1, Col: 4, Value: 10.6 Retail & Wholesale, Miscellaneous 10.4% Row: 1, Col: 3, Value: 10.4 Beverages 9.3% Row: 1, Col: 2, Value: 9.300000000000001 *All Others 40.9% Row: 1, Col: 1, Value: 40.9
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. (photograph of John Porter) John Porter, Portfolio Manager of Fidelity Select Consumer Industries Portfolio Q. HOW DID THE FUND PERFORM, JOHN? A. For the 12 months that ended February 29, 2000, the fund posted a return of -4.55%, outpacing the Goldman Sachs Consumer Industries Index - an index of 301 stocks designed to measure the performance of companies in the consumer industries sector - which declined 5.41%. The Standard & Poor's 500 Index returned 11.73% during this same time frame. Q. WITH HISTORICALLY HIGH LEVELS OF CONSUMER SPENDING FUELING THE ECONOMY, THE SECTOR STILL SEEMED TO STRUGGLE. WHY? A. It's true that consumer spending was very strong, and many consumer companies benefited from it. But the growth, which was attractive on an absolute basis, was simply not all that exciting on a relative basis. We're living in an environment where investors are expecting the market to continue to deliver growth in the mid-teens or better, and there were really only one or two sectors that could do that - technology and telecommunications. Rising interest rates also proved troubling for consumer stocks, but to a much lesser degree than the relative attractiveness of the tech and telecom sectors. Q. WHAT FACTORS ALLOWED THE FUND TO BEAT THE GOLDMAN SACHS INDEX DURING THE 12-MONTH PERIOD? A. Some good stock picks, coupled with strong industry positioning, gave us the upper hand during the period. We gained an advantage by maintaining an underweighting in soft drinks, most notably Coca-Cola, which continued to grapple with local market challenges and falling sales volumes. The fund benefited from its overexposure to Procter & Gamble, which rallied in response to recovering global economies and a company-wide reorganization. Having a smaller stake than the index in retail department stores and foods, and a larger position in broadcasting stocks, also helped. However, the fund's overweighting in supermarkets and tobacco, both of which performed poorly, tempered its gains. Q. HAVE YOU MADE ANY NOTABLE CHANGES SINCE TAKING OVER THE FUND ON SEPTEMBER 1, 1999? A. As the period progressed, I became increasingly confident in the state of the U.S. economy. So, I was more comfortable building up my exposure on the domestic front, rotating away from defensive areas such as supermarkets, and into more offensive high-growth retail, advertising and media stocks. I did add modestly to the fund's stake in multinationals as a play on the developing recoveries overseas. Q. HOW DID THE FUND'S INVESTMENTS IN THE VARIOUS CONSUMER INDUSTRIES INFLUENCE PERFORMANCE? A. Our exposure to high-growth retailers Wal-Mart, Home Depot and Costco, as well as our avoidance of weak department store benchmark issues Sears, Kmart and J.C. Penney, served us well. I cut back on the fund's exposure to supermarkets, a group in part felled by execution problems related to merger activity, but those we did own - such as Kroger, Albertson's and Safeway - really hurt. In advertising and media, I stepped up our weighting in radio stocks - big beneficiaries of Internet advertising - such as AMFM, which helped. Our out-of-benchmark positioning in consumer- electronics provider Gemstar gave us an additional lift. Finally, in terms of food stocks, not holding Campbell Soup and having less ConAgra - a top food conglomerate supplying well-known brands such as Banquet, Peter Pan and Wesson - than the benchmark also added meaningfully to returns. Q. WHAT OTHER STOCKS WORKED OUT WELL FOR THE FUND? WHICH DISAPPOINTED? A. CBS, Time Warner, MediaOne and Corning all were strong contributors. On the downside, our stake in Saks hurt, as the stock retreated - along with most department stores - in response to declining mall traffic. The fund no longer held Saks at the close of the period. As mentioned above, supermarket stocks also were big negatives, as was Philip Morris, which continued to languish on concerns surrounding tobacco-related litigation. Q. WHAT'S YOUR OUTLOOK? A. I'll continue to position the fund to further benefit from the robustness of the U.S. economy, which I believe still has legs. Globally, I feel it's too early to measure the sustainability of the recoveries we're watching unfold today. If I happen to see signs of deterioration domestically, I would consider adding more of the leading multinationals, which could help performance in the event of a slowdown. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: June 29, 1990 FUND NUMBER: 517 TRADING SYMBOL: FSCPX SIZE: as of February 29, 2000, more than $63 million MANAGER: John Porter, since September 1999; manager, Fidelity Advisor Consumer Industries Fund, since September 1999; several Fidelity Select Portfolios, 1996-1999; joined Fidelity in 1995 CONSUMER INDUSTRIES PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 95.7% SHARES VALUE (NOTE 1) ADVERTISING - 1.9% Interpublic Group of 9,700 $ 389,819 Companies, Inc. Omnicom Group, Inc. 6,500 612,219 TMP Worldwide, Inc. (a) 500 67,969 Young & Rubicam, Inc. 2,000 101,000 1,171,007 APPAREL STORES - 3.1% Abercrombie & Fitch Co. Class 6,500 95,469 A (a) American Eagle Outfitters, 2,100 53,550 Inc. (a) AnnTaylor Stores Corp. (a) 3,100 59,094 Claire's Stores, Inc. 3,300 57,544 Gap, Inc. 24,037 1,161,288 Payless ShoeSource, Inc. (a) 1,200 47,400 Talbots, Inc. 1,800 65,138 The Limited, Inc. 8,601 292,434 TJX Companies, Inc. 4,300 68,531 Too, Inc. (a) 1,285 30,840 Venator Group, Inc. (a) 5,000 28,438 1,959,726 AUTOS, TIRES, & ACCESSORIES - 0.1% AutoNation, Inc. (a) 8,400 63,525 BEVERAGES - 9.3% Adolph Coors Co. Class B 2,700 118,463 Anheuser-Busch Companies, 13,700 878,513 Inc. Canandaigua Brands, Inc. 3,000 147,000 Class A (a) Celestial Seasonings, Inc. (a) 14,100 366,600 Coca-Cola Enterprises, Inc. 14,000 327,250 Panamerican Beverages, Inc. 3,000 51,188 Class A Pepsi Bottling Group, Inc. 4,100 68,675 PepsiCo, Inc. 36,500 1,177,125 Seagram Co. Ltd. 8,100 455,122 The Coca-Cola Co. 47,500 2,300,781 Whitman Corp. 1 13 5,890,730 BROADCASTING - 17.4% Adelphia Communications Corp. 1,500 82,406 Class A (a) American Tower Corp. Class A 1,000 49,250 (a) AMFM, Inc. (a) 10,900 668,988 AT&T Corp. - Liberty Media 34,300 1,792,175 Group Class A (a) Cablevision Systems Corp. 2,900 186,144 Class A (a) CBS Corp. (a) 22,212 1,323,002 Clear Channel Communications, 6,638 442,257 Inc. (a) Comcast Corp.: Class A 2,300 92,000 Class A (special) 19,500 828,750 Cox Communications, Inc. 14,300 649,756 Class A (a) E.W. Scripps Co. Class A 700 30,188 SHARES VALUE (NOTE 1) EchoStar Communications Corp. 1,200 $ 136,800 Class A (a) Entercom Communications Corp. 1,200 50,475 Hearst-Argyle Television, 1,400 29,138 Inc. (a) Hispanic Broadcasting Corp. 1,400 130,813 (a) Infinity Broadcasting Corp. 13,000 415,188 Class A (a) MediaOne Group, Inc. (a) 16,600 1,303,100 Time Warner, Inc. 25,990 2,222,145 UnitedGlobalCom, Inc. (a) 1,700 177,650 Univision Communications, 700 71,313 Inc. Class A (a) USA Networks, Inc. (a) 14,200 318,613 11,000,151 BUILDING MATERIALS - 0.1% Fortune Brands, Inc. 3,500 76,563 CELLULAR - 0.4% Crown Castle International 1,900 61,275 Corp. (a) Rogers Communications, Inc. 6,300 214,259 Class B (non-vtg.) (a) 275,534 COMPUTER SERVICES & SOFTWARE - - 1.0% America Online, Inc. (a) 1,800 106,200 Circle.com (a) 1,000 9,438 Microsoft Corp. (a) 5,300 473,688 Sykes Enterprises, Inc. (a) 3,000 48,938 638,264 COMPUTERS & OFFICE EQUIPMENT - - 0.1% Pitney Bowes, Inc. 1,600 79,200 CONSUMER ELECTRONICS - 0.7% Black & Decker Corp. 1,500 49,406 Gemstar International Group 4,500 341,438 Ltd. (a) Whirlpool Corp. 1,000 54,313 445,157 DRUG STORES - 1.4% CVS Corp. 5,154 180,390 Walgreen Co. 27,800 717,588 897,978 DRUGS & PHARMACEUTICALS - 0.3% American Home Products Corp. 4,200 182,700 ENTERTAINMENT - 6.7% Carnival Corp. 18,000 518,625 Fox Entertainment Group, Inc. 2,600 68,413 Class A Hollywood Entertainment Corp. 2,500 25,469 (a) International Speedway Corp. 600 26,550 Class A Royal Caribbean Cruises Ltd. 5,800 205,175 SFX Entertainment, Inc. Class 4,250 163,625 A (a) COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ENTERTAINMENT - CONTINUED Speedway Motorsports, Inc. (a) 1,200 $ 36,750 Viacom, Inc.: Class A (a) 3,200 177,200 Class B (non-vtg.) (a) 14,100 786,075 Walt Disney Co. 66,600 2,231,100 4,238,982 FOODS - 3.7% American Italian Pasta Co. 4,000 91,250 Class A (a) Bestfoods 7,800 327,113 Corn Products International, 5,350 126,059 Inc. Dean Foods Co. 1,400 37,975 Earthgrains Co. 3,800 57,000 General Mills, Inc. 4,500 148,219 Groupe Danone 170 34,245 Hormel Foods Corp. 3,400 56,738 IBP, Inc. 4,200 52,500 Keebler Foods Co. (a) 6,200 157,325 Kellogg Co. 3,000 75,938 Nabisco Group Holdings Corp. 15,400 132,825 Nabisco Holdings Corp. Class A 6,500 190,125 Quaker Oats Co. 8,400 453,075 Sara Lee Corp. 7,900 118,500 Sysco Corp. 8,300 272,344 2,331,231 GENERAL MERCHANDISE STORES - 11.4% Ames Department Stores, Inc. 6,200 87,575 (a) BJ's Wholesale Club, Inc. (a) 2,100 65,100 Consolidated Stores Corp. (a) 11,628 130,815 Costco Wholesale Corp. (a) 17,100 848,588 Dollar General Corp. 6,875 143,945 Dollar Tree Stores, Inc. (a) 1,500 58,219 Federated Department Stores, 2,400 88,050 Inc. (a) Kohls Corp. (a) 6,200 470,038 Neiman Marcus Group, Inc. 572 12,012 Class B (a) Stein Mart, Inc. (a) 8,900 38,381 Target Corp. 15,300 902,700 Wal-Mart Stores, Inc. 90,300 4,396,457 7,241,880 GROCERY STORES - 2.1% Albertson's, Inc. 4,823 118,164 Fleming Companies, Inc. 10,000 154,375 Kroger Co. (a) 19,500 290,063 Safeway, Inc. (a) 14,900 574,581 U.S. Foodservice (a) 7,900 139,731 Winn-Dixie Stores, Inc. 1,100 17,738 1,294,652 SHARES VALUE (NOTE 1) HOME FURNISHINGS - 0.2% Linens'n Things, Inc. (a) 4,800 $ 94,500 HOUSEHOLD PRODUCTS - 10.6% Avon Products, Inc. 23,600 638,675 Clorox Co. 14,156 572,433 Colgate-Palmolive Co. 5,800 302,688 Dial Corp. 14,500 208,438 Estee Lauder Companies, Inc. 9,600 416,400 Gillette Co. 8,900 313,725 Procter & Gamble Co. 45,100 3,968,800 Unilever NV 12,000 60,432 Unilever NV (NY Shares) 4,996 227,318 Yankee Candle Co., Inc. 1,400 18,200 6,727,109 LEASING & RENTAL - 0.1% Hertz Corp. Class A 800 28,650 LEISURE DURABLES & TOYS - 0.5% Callaway Golf Co. 5,200 62,400 Harley-Davidson, Inc. 4,100 279,313 341,713 LODGING & GAMING - 0.5% Gtech Holdings Corp. (a) 1,800 36,000 Marriott International, Inc. 2,200 60,638 Class A Mirage Resorts, Inc. (a) 5,400 85,725 Prime Hospitality Corp. (a) 8,800 74,800 Sun International Hotels Ltd. 800 17,050 (a) WMS Industries, Inc. (a) 4,200 47,775 321,988 PACKAGING & CONTAINERS - 0.5% Corning, Inc. 1,200 225,600 Tupperware Corp. 5,300 91,094 316,694 PAPER & FOREST PRODUCTS - 1.7% Kimberly-Clark Corp. 20,300 1,049,256 PHOTOGRAPHIC EQUIPMENT - 0.4% Eastman Kodak Co. 4,700 269,369 PRINTING - 0.1% R.R. Donnelley & Sons Co. 4,700 89,888 PUBLISHING - 2.8% Gannet Co., Inc. 5,400 352,013 Harcourt General, Inc. 2,300 79,206 Harte Hanks Communications, 3,300 71,981 Inc. COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PUBLISHING - CONTINUED Knight-Ridder, Inc. 1,300 $ 60,938 McGraw-Hill Companies, Inc. 7,500 381,563 Meredith Corp. 4,000 114,500 Playboy Enterprises, Inc. 5,100 112,519 Class B (a) Reader's Digest Association, 4,300 147,813 Inc. Class A (non-vtg.) The New York Times Co. Class A 6,800 287,300 Tribune Co. 4,700 183,006 1,790,839 REAL ESTATE INVESTMENT TRUSTS - - 0.1% Pinnacle Holdings, Inc. 1,200 70,200 RESTAURANTS - 2.9% Brinker International, Inc. 3,000 65,250 (a) CEC Entertainment, Inc. (a) 2,700 61,425 Darden Restaurants, Inc. 3,300 43,519 Jack in the Box, Inc. (a) 5,100 102,319 McDonald's Corp. 38,700 1,221,469 Outback Steakhouse, Inc. (a) 8,600 224,675 Papa John's International, 3,100 74,400 Inc. (a) Starbucks Corp. (a) 1,400 49,175 1,842,232 RETAIL & WHOLESALE, MISCELLANEOUS - 10.4% Alberto-Culver Co. Class A 5,100 100,725 Bed Bath & Beyond, Inc. (a) 6,800 192,950 Best Buy Co., Inc. (a) 3,300 179,438 Chemdex Corp. 900 202,388 Circuit City Stores, Inc. - 8,100 327,038 Circuit City Group Drugstore.com, Inc. 1,500 28,500 Home Depot, Inc. 70,500 4,075,781 Lowe's Companies, Inc. 17,500 833,438 Office Depot, Inc. (a) 3,950 48,141 Staples, Inc. (a) 17,275 466,425 Tiffany & Co., Inc. 900 57,769 Webvan Group, Inc. 4,600 52,325 Zale Corp. (a) 700 26,338 6,591,256 SECURITIES INDUSTRY - 0.1% Macrovision Corp. (a) 300 29,925 SERVICES - 1.9% ACNielsen Corp. (a) 10,400 176,150 Cendant Corp. (a) 10,700 190,594 H&R Block, Inc. 3,200 140,400 Manpower, Inc. 4,500 147,094 Modis Professional Services, 700 11,025 Inc. (a) SHARES VALUE (NOTE 1) NCO Group, Inc. (a) 3,400 $ 79,475 Profit Recovery Group 3,000 55,500 International, Inc. (a) Snyder Communications, Inc. 1 24 (SNC) True North Communications 6,300 233,100 Viad Corp. 7,800 182,813 1,216,175 TEXTILES & APPAREL - 1.1% Jones Apparel Group, Inc. (a) 6,600 149,325 Liz Claiborne, Inc. 5,200 194,675 Mohawk Industries, Inc. (a) 1,500 33,281 NIKE, Inc. Class B 7,300 207,594 Pacific Sunwear of 1,100 27,981 California, Inc. (a) Shaw Industries, Inc. 2,500 31,719 Tommy Hilfiger (a) 500 5,813 WestPoint Stevens, Inc. Class 2,600 43,225 A 693,613 TOBACCO - 2.1% Philip Morris Companies, Inc. 62,000 1,243,875 RJ Reynolds Tobacco Holdings, 4,900 88,200 Inc. 1,332,075 TOTAL COMMON STOCKS 60,592,762 (Cost $51,229,870) CASH EQUIVALENTS - 9.3% Central Cash Collateral Fund, 2,758,800 2,758,800 5.75% (b) Taxable Central Cash Fund, 3,164,178 3,164,178 5.66% (b) TOTAL CASH EQUIVALENTS 5,922,978 (Cost $5,922,978) TOTAL INVESTMENT PORTFOLIO - 66,515,740 105.0% (Cost $57,152,848) NET OTHER ASSETS - (5.0)% (3,185,090) NET ASSETS - 100% $ 63,330,650 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 $66,003,499 and $77,986,566, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $11,823 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $2,622,525. The fund received cash collateral of $2,758,800 which was invested in cash equivalents. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $57,515,684. Net unrealized appreciation aggregated $9,000,056, of which $14,966,778 related to appreciated investment securities and $5,966,722 related to depreciated investment securities. The fund hereby designates approximately $4,378,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 37% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. CONSUMER INDUSTRIES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 66,515,740 value (cost $57,152,848) - See accompanying schedule Receivable for fund shares 108,015 sold Dividends receivable 32,540 Interest receivable 20,187 Redemption fees receivable 204 Other receivables 8,606 TOTAL ASSETS 66,685,292 LIABILITIES Payable for fund shares $ 522,837 redeemed Accrued management fee 32,513 Other payables and accrued 40,492 expenses Collateral on securities 2,758,800 loaned, at value TOTAL LIABILITIES 3,354,642 NET ASSETS $ 63,330,650 Net Assets consist of: Paid in capital $ 53,227,150 Accumulated undistributed net 740,697 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 9,362,803 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 2,224,934 $ 63,330,650 shares outstanding NET ASSET VALUE and $28.46 redemption price per share ($63,330,650 (divided by) 2,224,934 shares) Maximum offering price per $29.34 share (100/97.00 of $28.46) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 614,401 Dividends Special dividend from 91,055 Unilever NV (NY Shares) Interest 257,645 Security lending 7,407 TOTAL INCOME 970,508 EXPENSES Management fee $ 432,129 Transfer agent fees 393,981 Accounting and security 61,184 lending fees Non-interested trustees' 219 compensation Custodian fees and expenses 18,682 Registration fees 24,425 Audit 12,437 Legal 570 Miscellaneous 127 Total expenses before 943,754 reductions Expense reductions (14,583) 929,171 NET INVESTMENT INCOME 41,337 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 4,504,410 Foreign currency transactions 925 4,505,335 Change in net unrealized appreciation (depreciation) on: Investment securities (7,292,420) Assets and liabilities in (91) (7,292,511) foreign currencies NET GAIN (LOSS) (2,787,176) NET INCREASE (DECREASE) IN $ (2,745,839) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 291,878 charges paid to FDC Sales charges - Retained by $ 288,479 FDC Deferred sales charges $ 326 withheld by FDC Exchange fees withheld by FSC $ 4,172 Expense reductions $ 14,345 Directed brokerage arrangements Custodian credits 238 $ 14,583
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ 41,337 $ (117,811) income (loss) Net realized gain (loss) 4,505,335 2,849,083 Change in net unrealized (7,292,511) 10,439,435 appreciation (depreciation) NET INCREASE (DECREASE) IN (2,745,839) 13,170,707 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (42,261) - From net investment income From net realized gain (4,852,121) (2,388,067) TOTAL DISTRIBUTIONS (4,894,382) (2,388,067) Share transactions Net 32,937,853 69,216,485 proceeds from sales of shares Reinvestment of distributions 4,772,156 2,350,548 Cost of shares redeemed (49,036,030) (72,339,516) NET INCREASE (DECREASE) IN (11,326,021) (772,483) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 52,792 81,867 TOTAL INCREASE (DECREASE) (18,913,450) 10,092,024 IN NET ASSETS NET ASSETS Beginning of period 82,244,100 72,152,076 End of period $ 63,330,650 $ 82,244,100 OTHER INFORMATION Shares Sold 1,041,150 2,390,153 Issued in reinvestment of 149,653 82,715 distributions Redeemed (1,551,354) (2,529,261) Net increase (decrease) (360,551) (56,393)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 G 1999 1998 1997 1996 G SELECTED PER-SHARE DATA Net asset value, beginning of $ 31.81 $ 27.31 $ 20.66 $ 17.84 $ 13.91 period Income from Investment Operations Net investment income (loss) C .02 D (.04) (.22) (.22) .08 Net realized and unrealized (1.29) 5.41 8.34 2.93 3.97 gain (loss) Total from investment (1.27) 5.37 8.12 2.71 4.05 operations Less Distributions From net investment income (.02) - - - (.02) From net realized gain (2.08) (.90) (1.52) - (.01) In excess of net realized gain - - - - (.20) Total distributions (2.10) (.90) (1.52) - (.23) Redemption fees added to paid .02 .03 .05 .11 .11 in capital Net asset value, end of period $ 28.46 $ 31.81 $ 27.31 $ 20.66 $ 17.84 TOTAL RETURN A, B (4.55)% 20.18% 40.36% 15.81% 30.01% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 63,331 $ 82,244 $ 72,152 $ 18,392 $ 22,362 (000 omitted) Ratio of expenses to average 1.27% 1.34% 2.01% 2.49% 1.53% F net assets Ratio of expenses to average 1.25% E 1.32% E 1.97% E 2.44% E 1.48% E net assets after expense reductions Ratio of net investment .06% (.15)% (.90)% (1.13)% .46% income (loss) to average net assets Portfolio turnover rate 96% 150% 199% 340% 601%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM UNILEVER NV (NY SHARES) WHICH AMOUNTED TO $.04 PER SHARE. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F 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. G FOR THE YEAR ENDED FEBRUARY 29 FOOD AND AGRICULTURE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT FOOD AND AGRICULTURE -27.86% 50.62% 204.44% SELECT FOOD AND AGRICULTURE -30.09% 46.03% 195.24% (LOAD ADJ.) S&P 500 11.73% 206.94% 425.47% GS Consumer Industries -5.41% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Consumer Industries Index - a market capitalization-weighted index of 301 stocks designed to measure the performance of companies in the consumer industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT FOOD AND AGRICULTURE -27.86% 8.54% 11.78% SELECT FOOD AND AGRICULTURE -30.09% 7.87% 11.43% (LOAD ADJ.) S&P 500 11.73% 25.14% 18.05% GS Consumer Industries -5.41% 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 1990/02/28 9700.00 10000.00 1990/03/31 10119.24 10265.00 1990/04/30 10079.53 10008.38 1990/05/31 10957.73 10984.19 1990/06/30 11313.18 10909.50 1990/07/31 11308.72 10874.59 1990/08/31 10483.76 9891.53 1990/09/30 10149.31 9409.81 1990/10/31 10390.11 9369.35 1990/11/30 10818.20 9974.61 1990/12/31 11236.76 10252.90 1991/01/31 11559.26 10699.92 1991/02/28 12430.00 11464.97 1991/03/31 13038.14 11742.42 1991/04/30 12840.04 11770.60 1991/05/31 13309.96 12279.09 1991/06/30 12761.58 11716.71 1991/07/31 13295.66 12262.71 1991/08/31 13825.05 12553.34 1991/09/30 13581.43 12343.69 1991/10/31 13586.12 12509.10 1991/11/30 13492.42 12004.98 1991/12/31 15067.34 13378.35 1992/01/31 14842.74 13129.52 1992/02/29 14759.74 13300.20 1992/03/31 14432.61 13040.85 1992/04/30 14266.61 13424.25 1992/05/31 14393.55 13490.03 1992/06/30 14236.18 13289.02 1992/07/31 14786.05 13832.55 1992/08/31 14720.47 13548.98 1992/09/30 14967.66 13708.86 1992/10/31 15129.09 13756.84 1992/11/30 15709.23 14225.94 1992/12/31 15975.29 14400.92 1993/01/31 15980.45 14521.89 1993/02/28 15939.13 14719.39 1993/03/31 16372.99 15029.97 1993/04/30 15737.26 14666.24 1993/05/31 16232.75 15059.30 1993/06/30 16071.18 15102.97 1993/07/31 15871.90 15042.56 1993/08/31 16631.30 15612.67 1993/09/30 16577.44 15492.45 1993/10/31 17202.19 15813.15 1993/11/30 17002.92 15662.92 1993/12/31 17383.90 15852.44 1994/01/31 17909.66 16391.43 1994/02/28 17802.24 15947.22 1994/03/31 16971.21 15251.92 1994/04/30 16781.58 15447.15 1994/05/31 16659.64 15700.48 1994/06/30 16787.39 15315.82 1994/07/31 17350.64 15818.18 1994/08/31 18453.93 16466.72 1994/09/30 18488.77 16063.29 1994/10/31 18837.18 16424.71 1994/11/30 18378.44 15826.52 1994/12/31 18443.27 16061.23 1995/01/31 19220.78 16477.70 1995/02/28 19606.52 17119.83 1995/03/31 20052.53 17625.04 1995/04/30 20490.81 18144.10 1995/05/31 21226.13 18869.32 1995/06/30 21728.59 19307.65 1995/07/31 21967.57 19947.89 1995/08/31 21930.81 19997.96 1995/09/30 23652.67 20841.88 1995/10/31 23689.44 20767.47 1995/11/30 24620.84 21679.16 1995/12/31 25200.66 22096.70 1996/01/31 26239.99 22848.87 1996/02/29 27041.95 23060.68 1996/03/31 26586.44 23282.76 1996/04/30 26101.80 23625.95 1996/05/31 27064.63 24235.26 1996/06/30 27091.01 24327.60 1996/07/31 26721.70 23252.80 1996/08/31 25870.99 23743.20 1996/09/30 26748.08 25079.47 1996/10/31 27242.68 25771.16 1996/11/30 28614.38 27719.21 1996/12/31 28564.81 27170.09 1997/01/31 29799.57 28867.68 1997/02/28 30717.01 29094.00 1997/03/31 29916.83 27898.53 1997/04/30 31103.76 29564.07 1997/05/31 32019.67 31363.93 1997/06/30 33083.30 32769.03 1997/07/31 34272.49 35376.46 1997/08/31 32691.82 33394.67 1997/09/30 34656.58 35223.70 1997/10/31 34036.13 34047.23 1997/11/30 36362.82 35623.28 1997/12/31 37230.28 36234.93 1998/01/31 35978.12 36635.68 1998/02/28 37961.35 39277.85 1998/03/31 39415.72 41289.27 1998/04/30 38417.75 41704.64 1998/05/31 39291.44 40987.74 1998/06/30 40115.68 42652.66 1998/07/31 38673.26 42198.41 1998/08/31 34914.74 36097.36 1998/09/30 36851.70 38409.76 1998/10/31 40132.17 41534.01 1998/11/30 41755.92 44051.38 1998/12/31 43070.90 46589.63 1999/01/31 41326.08 48538.00 1999/02/28 40933.50 47029.44 1999/03/31 39572.54 48911.09 1999/04/30 39063.78 50805.42 1999/05/31 39108.44 49605.90 1999/06/30 39581.89 52359.03 1999/07/31 39394.30 50724.38 1999/08/31 38259.81 50473.29 1999/09/30 36276.70 49089.82 1999/10/31 36687.61 52196.23 1999/11/30 35901.51 53257.37 1999/12/31 34255.19 56394.23 2000/01/31 31624.45 53560.99 2000/02/29 29524.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000316 094919 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Food and Agriculture Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $29,524 - a 195.24% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison - look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Anheuser-Busch Companies, Inc. 7.0 Safeway, Inc. 6.2 Philip Morris Companies, Inc. 6.1 McDonald's Corp. 5.6 Unilever NV (NY Shares) 4.8 The Coca-Cola Co. 4.4 PepsiCo, Inc. 3.9 Kroger Co. 3.7 Quaker Oats Co. 3.1 Bestfoods 2.8 47.6 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Foods 35.9% Row: 1, Col: 6, Value: 35.9 Beverages 22.2% Row: 1, Col: 5, Value: 22.2 Grocery Stores 13.8% Row: 1, Col: 4, Value: 13.8 Restaurants 10.1% Row: 1, Col: 3, Value: 10.1 Tobacco 7.7% Row: 1, Col: 2, Value: 7.7 *All Others 10.3% Row: 1, Col: 1, Value: 10.3 * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. FOOD & AGRICULTURE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Matthew Fruhan) NOTE TO SHAREHOLDERS: Matthew Fruhan became Portfolio Manager of Fidelity Select Food and Agriculture Portfolio on November 1, 1999. Q. HOW DID THE FUND PERFORM, MATTHEW? A. For the 12 months that ended February 29, 2000, the fund returned - -27.86%. By comparison, the Goldman Sachs Consumer Industries Index - an index of 301 stocks designed to measure the performance of companies in the consumer industries sector - fell 5.41%. During the same period, the Standard & Poor's 500 Index returned 11.73%. Q. WHY DID THE FUND UNDERPERFORM THE GOLDMAN SACHS INDEX AND THE S&P 500 DURING THE PERIOD? A. The Goldman Sachs index includes many blue-chip names, such as Procter & Gamble, that performed quite well during the past year. Many of these blue-chip names are not in the fund, which is comprised mostly of food-company stocks. Investors in the stock market seemed to be looking for sales growth, and there wasn't much volume growth in the food industry over the past year. In addition, food companies have very little pricing power - meaning they are unable to raise prices without sacrificing market share. With minimal revenue growth, many of these companies were only able to meet earnings expectations through less sustainable means, such as cost cutting. Supermarket stocks did not fare well, largely because some of the bigger names in that sector were plagued by acquisition integration problems in 1999. All of these reasons caused the fund to underperform both of its indexes during the past year. Q. WERE THERE ANY OTHER MARKET FACTORS THAT WEAKENED THE PERFORMANCE OF FOOD AND AGRICULTURE STOCKS? A. The general trends driving the stock market really hurt these stocks. Investors sought out companies with high growth potential - particularly technology companies - leaving many old economy companies in the dust. Basically, it was a supply and demand issue. The supply of food and agriculture stocks is fixed and there was a decrease in demand for these stocks during the period, so their prices had to go down. Q. WHICH INDIVIDUAL STOCKS WERE THE MOST DISAPPOINTING? A. All of the big supermarket stocks - including Safeway, Albertson's and Kroger - hurt the fund's performance. As a group, supermarket companies maintained solid long-term growth prospects, but investors fled those stocks because of short-term acquisition integration problems, such as Kroger's troubles with its purchase of Fred Meyer. Finally, these stocks were hurt by a "Wal-Mart scare" - meaning Wal-Mart's intentions to grow its overall food sales spooked investors. The market also began to question the top-line growth rates of some consumer products companies such as Coca-Cola. Finally, Philip Morris was a big detractor from performance as the company went into a tailspin because of the threat of continued tobacco litigation. Q. WHICH OF THE FUND'S HOLDINGS PERFORMED WELL DURING THE PAST YEAR? A. During this tough environment for food stocks, Corn Products International was a diamond in the rough. The 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, Corn Products' stock rallied due to lower overhead costs and higher profits. The company's position in Sysco, a food services distributor, also did relatively well. Q. WHAT'S YOUR OUTLOOK? A. Food stocks continue to be hampered by flat volume growth and no pricing power. The market is tired of earnings growth that comes through cost cutting. Investors want to see strong sales growth. On top of that, the continued consolidation among food retailers likely will lead to more onerous terms from the packaged-food companies. Consequently, I expect the large players in the consumer products sector to continue to struggle in the near future. However, I do see opportunities among smaller companies in fast-growing sectors, such as organic food. Many of these small companies are private, but I think we'll see the larger packaged-food companies snatching them up at a premium. As an example of that trend, Kraft recently purchased Balance Bar, a company in the fast-growing healthy snack segment. Finding new avenues for growth at reasonable prices and developing new products that retailers need on their shelves is critical to the long-term success of food 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 A-3. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 009 TRADING SYMBOL: FDFAX SIZE: as of February 29, 2000, more than $78 million MANAGER: Matthew Fruhan, since November 1999; analyst, food industry, since 1999; joined Fidelity in 1995 FOOD AND AGRICULTURE PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 95.5% SHARES VALUE (NOTE 1) BEVERAGES - 22.2% Adolph Coors Co. Class B 29,600 $ 1,298,700 Anheuser-Busch Companies, 85,000 5,450,615 Inc. Brown-Forman Corp. Class B 5,500 261,938 Canandaigua Brands, Inc. 7,100 347,900 Class A (a) Celestial Seasonings, Inc. (a) 35,900 933,400 Coca-Cola Enterprises, Inc. 76,000 1,776,500 Diageo PLC sponsored ADR 21,900 674,794 PepsiCo, Inc. 94,700 3,054,075 The Coca-Cola Co. 71,300 3,453,594 Whitman Corp. 7,200 90,000 17,341,516 CHEMICALS & PLASTICS - 0.4% IMC Global, Inc. 23,800 321,300 COMPUTER SERVICES & SOFTWARE - - 0.0% MatrixOne, Inc. 100 2,500 Onvia.com, Inc. 100 2,100 4,600 FOODS - 35.9% American Italian Pasta Co. 11,200 255,500 Class A (a) Archer-Daniels-Midland Co. 67,355 677,760 Aurora Foods, Inc. (a) 8,700 24,469 Bestfoods 52,700 2,210,106 Campbell Soup Co. 46,800 1,327,950 ConAgra, Inc. 84,800 1,388,600 Corn Products International, 19,075 449,455 Inc. Dean Foods Co. 2,600 70,525 Earthgrains Co. 27,800 417,000 Flowers Industries, Inc. 13,100 169,481 General Mills, Inc. 47,800 1,574,413 Groupe Danone 2,200 443,168 H.J. Heinz Co. 56,500 1,804,469 Hershey Foods Corp. 7,300 320,744 Hormel Foods Corp. 13,000 216,938 IBP, Inc. 4,600 57,500 International Home Foods, 5,600 94,850 Inc. (a) Interstate Bakeries Corp. 15,400 176,138 Keebler Foods Co. (a) 44,100 1,119,038 Kellogg Co. 55,600 1,407,375 McCormick & Co., Inc. 8,300 227,213 (non-vtg.) Nabisco Group Holdings Corp. 128,000 1,104,000 Nabisco Holdings Corp. Class A 18,600 544,050 Nestle SA ADR (Reg.) 23,000 1,940,625 Quaker Oats Co. 45,000 2,427,188 Ralston Purina Co. 55,300 1,565,681 Sara Lee Corp. 145,200 2,178,000 Smithfield Foods, Inc. (a) 8,500 131,750 Suiza Foods Corp. (a) 5,000 195,625 Sysco Corp. 61,400 2,014,688 SHARES VALUE (NOTE 1) Tootsie Roll Industries, Inc. 4,448 $ 132,050 Universal Foods Corp. 10,100 182,431 Wm. Wrigley Jr. Co. 17,900 1,210,488 28,059,268 GENERAL MERCHANDISE STORES - 0.6% Wal-Mart Stores, Inc. 10,200 496,613 GROCERY STORES - 13.8% Albertson's, Inc. 65,886 1,614,207 Kroger Co. (a) 194,800 2,897,650 Safeway, Inc. (a) 127,000 4,897,438 SUPERVALU, Inc. 24,500 421,094 U.S. Foodservice (a) 20,200 357,288 Whole Foods Market, Inc. (a) 10,300 391,078 Wild Oats Markets, Inc. (a) 13,100 245,625 10,824,380 HOUSEHOLD PRODUCTS - 4.8% Unilever NV (NY Shares) 82,978 3,775,499 RESTAURANTS - 10.1% Brinker International, Inc. 17,600 382,800 (a) CEC Entertainment, Inc. (a) 11,800 268,450 Darden Restaurants, Inc. 16,100 212,319 McDonald's Corp. 139,400 4,399,813 Outback Steakhouse, Inc. (a) 38,900 1,016,263 Papa John's International, 15,100 362,400 Inc. (a) Tricon Global Restaurants, 34,100 907,913 Inc. (a) Wendy's International, Inc. 23,300 366,975 7,916,933 TOBACCO - 7.7% British American Tobacco PLC 145,600 1,237,600 sponsored ADR Philip Morris Companies, Inc. 239,100 4,796,944 6,034,544 TOTAL COMMON STOCKS 74,774,653 (Cost $85,880,606) CASH EQUIVALENTS - 12.6% Central Cash Collateral Fund, 6,422,500 6,422,500 5.75% (b) Taxable Central Cash Fund, 3,434,831 3,434,831 5.66% (b) TOTAL CASH EQUIVALENTS 9,857,331 (Cost $9,857,331) TOTAL INVESTMENT PORTFOLIO - 84,631,984 108.1% (Cost $95,737,937) NET OTHER ASSETS - (8.1)% (6,344,192) NET ASSETS - 100% $ 78,287,792 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 $53,400,954 and $127,676,365, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $13,213 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $6,103,338. The fund received cash collateral of $6,422,500 which was invested in cash equivalents. Distribution of investments by country of issue, as a percentage of net assets, is as follows: United States of America 89.6% Netherlands 4.8 Switzerland 2.5 United Kingdom 2.5 Others (individually less 0.6 than 1%) 100.0% INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $96,036,334. Net unrealized depreciation aggregated $11,404,350, of which $6,138,792 related to appreciated investment securities and $17,543,142 related to depreciated investment securities. The fund hereby designates approximately $7,754,000 as a capital gain dividend for the purpose of the dividend paid deduction. The fund intends to elect to defer to its fiscal year ending February 28, 2001 approximately $1,232,000 of losses recognized during the period November 1, 1999 to February 29, 2000. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. FOOD AND AGRICULTURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 84,631,984 value (cost $95,737,937) - See accompanying schedule Receivable for investments 2,023,890 sold Receivable for fund shares 77,869 sold Dividends receivable 108,053 Interest receivable 18,012 Redemption fees receivable 458 Other receivables 2,265 TOTAL ASSETS 86,862,531 LIABILITIES Payable to custodian bank $ 22,331 Payable for investments 796,291 purchased Payable for fund shares 1,230,949 redeemed Accrued management fee 41,054 Other payables and accrued 61,614 expenses Collateral on securities 6,422,500 loaned, at value TOTAL LIABILITIES 8,574,739 NET ASSETS $ 78,287,792 Net Assets consist of: Paid in capital $ 89,751,101 Undistributed net investment 381,112 income Accumulated undistributed net (737,230) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (11,107,191) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 2,455,421 $ 78,287,792 shares outstanding NET ASSET VALUE and $31.88 redemption price per share ($78,287,792 (divided by) 2,455,421 shares) Maximum offering price per $32.87 share (100/97.00 of $31.88) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 1,996,194 Dividends Special dividend from 993,960 Unilever NV (NY Shares) Interest 416,710 Security lending 50,881 TOTAL INCOME 3,457,745 EXPENSES Management fee $ 872,870 Transfer agent fees 934,515 Accounting and security 112,569 lending fees Non-interested trustees' 222 compensation Custodian fees and expenses 11,854 Registration fees 29,717 Audit 14,926 Legal 627 Miscellaneous 16 Total expenses before 1,977,316 reductions Expense reductions (33,723) 1,943,593 NET INVESTMENT INCOME 1,514,152 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 2,918,682 Foreign currency transactions (14,829) 2,903,853 Change in net unrealized appreciation (depreciation) on: Investment securities (45,266,059) Assets and liabilities in (1,176) (45,267,235) foreign currencies NET GAIN (LOSS) (42,363,382) NET INCREASE (DECREASE) IN $ (40,849,230) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 157,165 charges paid to FDC Sales charges - Retained by $ 156,771 FDC Deferred sales charges $ 9,318 withheld by FDC Exchange fees withheld by FSC $ 23,259 Expense reductions Directed $ 33,106 brokerage arrangements Custodian credits 617 $ 33,723
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ 1,514,152 $ 1,020,362 income Net realized gain (loss) 2,903,853 20,672,714 Change in net unrealized (45,267,235) (4,236,166) appreciation (depreciation) NET INCREASE (DECREASE) IN (40,849,230) 17,456,910 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (1,366,746) (739,119) From net investment income From net realized gain (6,551,980) (25,615,738) In excess of net realized (752,061) - gain TOTAL DISTRIBUTIONS (8,670,787) (26,354,857) Share transactions Net 25,160,713 80,793,360 proceeds from sales of shares Reinvestment of distributions 8,301,729 25,579,323 Cost of shares redeemed (111,774,157) (142,182,438) NET INCREASE (DECREASE) IN (78,311,715) (35,809,755) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 112,538 148,005 TOTAL INCREASE (DECREASE) (127,719,194) (44,559,697) IN NET ASSETS NET ASSETS Beginning of period 206,006,986 250,566,683 End of period (including $ 78,287,792 $ 206,006,986 undistributed net investment income of $381,112 and $490,066, respectively) OTHER INFORMATION Shares Sold 602,218 1,684,840 Issued in reinvestment of 205,962 536,693 distributions Redeemed (2,743,334) (2,964,307) Net increase (decrease) (1,935,154) (742,774)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 F 1999 1998 1997 1996 F SELECTED PER-SHARE DATA Net asset value, beginning of $ 46.92 $ 48.81 $ 44.53 $ 42.15 $ 32.53 period Income from Investment Operations Net investment income C .42 D .21 .33 .42 .37 Net realized and unrealized (13.07) 3.50 9.22 4.91 11.61 gain (loss) Total from investment (12.65) 3.71 9.55 5.33 11.98 operations Less Distributions From net investment income (.42) (.16) (.37) (.24) (.20) From net realized gain (1.79) (5.47) (4.95) (2.77) (2.20) In excess of net realized gain (.21) - - - - Total distributions (2.42) (5.63) (5.32) (3.01) (2.40) Redemption fees added to paid .03 .03 .05 .06 .04 in capital Net asset value, end of period $ 31.88 $ 46.92 $ 48.81 $ 44.53 $ 42.15 TOTAL RETURN A, B (27.86)% 7.83% 23.58% 13.59% 37.92% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 78,288 $ 206,007 $ 250,567 $ 223,423 $ 301,102 (000 omitted) Ratio of expenses to average 1.31% 1.31% 1.49% 1.52% 1.43% net assets Ratio of expenses to average 1.29% E 1.29% E 1.48% E 1.50% E 1.42% E net assets after expense reductions Ratio of net investment 1.00% .45% .73% 1.01% .99% income to average net assets Portfolio turnover rate 38% 68% 74% 91% 124%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM UNILEVER NV (NY SHARES) WHICH AMOUNTED TO $.28 PER SHARE. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR THE YEAR ENDED FEBRUARY 29 LEISURE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT LEISURE 13.89% 224.26% 518.31% SELECT LEISURE (LOAD ADJ.) 10.40% 214.46% 499.69% S&P 500 11.73% 206.94% 425.47% GS Consumer Industries -5.41% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index- a market capitalization-weighted index of common stocks - and the Goldman Sachs Consumer Industries Index - a market capitalization-weighted index of 301 stocks designed to measure the performance of companies in the consumer industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT LEISURE 13.89% 26.53% 19.98% SELECT LEISURE (LOAD ADJ.) 10.40% 25.75% 19.62% S&P 500 11.73% 25.14% 18.05% GS Consumer Industries -5.41% 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 1990/02/28 9700.00 10000.00 1990/03/31 9775.46 10265.00 1990/04/30 9394.40 10008.38 1990/05/31 10171.61 10984.19 1990/06/30 10054.65 10909.50 1990/07/31 9707.55 10874.59 1990/08/31 8587.01 9891.53 1990/09/30 7772.07 9409.81 1990/10/31 7681.52 9369.35 1990/11/30 8292.73 9974.61 1990/12/31 8655.42 10252.90 1991/01/31 9139.45 10699.92 1991/02/28 9840.73 11464.97 1991/03/31 10004.61 11742.42 1991/04/30 10031.29 11770.60 1991/05/31 10378.12 12279.09 1991/06/30 9794.99 11716.71 1991/07/31 10263.78 12262.71 1991/08/31 10370.50 12553.34 1991/09/30 10637.29 12343.69 1991/10/31 10957.43 12509.10 1991/11/30 10431.48 12004.98 1991/12/31 11506.26 13378.35 1992/01/31 11765.43 13129.52 1992/02/29 12177.04 13300.20 1992/03/31 11929.31 13040.85 1992/04/30 12062.71 13424.25 1992/05/31 12135.12 13490.03 1992/06/30 11948.37 13289.02 1992/07/31 12005.54 13832.55 1992/08/31 11834.03 13548.98 1992/09/30 12066.52 13708.86 1992/10/31 12157.99 13756.84 1992/11/30 12985.04 14225.94 1992/12/31 13373.79 14400.92 1993/01/31 13705.37 14521.89 1993/02/28 13632.95 14719.39 1993/03/31 14341.85 15029.97 1993/04/30 14018.64 14666.24 1993/05/31 15025.63 15059.30 1993/06/30 15430.02 15102.97 1993/07/31 15842.33 15042.56 1993/08/31 16932.58 15612.67 1993/09/30 17777.03 15492.45 1993/10/31 18760.24 15813.15 1993/11/30 18062.48 15662.92 1993/12/31 18663.61 15852.44 1994/01/31 18857.59 16391.43 1994/02/28 18696.63 15947.22 1994/03/31 17565.75 15251.92 1994/04/30 17601.16 15447.15 1994/05/31 17414.88 15700.48 1994/06/30 16678.85 15315.82 1994/07/31 17324.02 15818.18 1994/08/31 18014.61 16466.72 1994/09/30 18010.07 16063.29 1994/10/31 17946.46 16424.71 1994/11/30 17178.63 15826.52 1994/12/31 17387.62 16061.23 1995/01/31 17705.66 16477.70 1995/02/28 18496.22 17119.83 1995/03/31 18982.36 17625.04 1995/04/30 19150.53 18144.10 1995/05/31 19521.10 18869.32 1995/06/30 20275.95 19307.65 1995/07/31 21685.02 19947.89 1995/08/31 22380.41 19997.96 1995/09/30 22417.01 20841.88 1995/10/31 21337.33 20767.47 1995/11/30 22032.72 21679.16 1995/12/31 22074.94 22096.70 1996/01/31 22402.12 22848.87 1996/02/29 23603.52 23060.68 1996/03/31 23721.10 23282.76 1996/04/30 24695.06 23625.95 1996/05/31 25708.35 24235.26 1996/06/30 25609.11 24327.60 1996/07/31 23770.56 23252.80 1996/08/31 24360.78 23743.20 1996/09/30 25546.43 25079.47 1996/10/31 24846.53 25771.16 1996/11/30 25551.65 27719.21 1996/12/31 25034.15 27170.09 1997/01/31 26148.35 28867.68 1997/02/28 25996.17 29094.00 1997/03/31 25034.15 27898.53 1997/04/30 25270.07 29564.07 1997/05/31 27638.97 31363.93 1997/06/30 28729.23 32769.03 1997/07/31 30196.23 35376.46 1997/08/31 29711.03 33394.67 1997/09/30 32987.52 35223.70 1997/10/31 32479.50 34047.23 1997/11/30 33786.67 35623.28 1997/12/31 35370.65 36234.93 1998/01/31 35561.18 36635.68 1998/02/28 38290.03 39277.85 1998/03/31 40963.57 41289.27 1998/04/30 41630.54 41704.64 1998/05/31 40593.24 40987.74 1998/06/30 43560.56 42652.66 1998/07/31 42944.46 42198.41 1998/08/31 35475.86 36097.36 1998/09/30 36902.94 38409.76 1998/10/31 39436.48 41534.01 1998/11/30 43026.19 44051.38 1998/12/31 48783.35 46589.63 1999/01/31 52941.31 48538.00 1999/02/28 52663.26 47029.44 1999/03/31 56782.42 48911.09 1999/04/30 58958.24 50805.42 1999/05/31 56804.04 49605.90 1999/06/30 59286.63 52359.03 1999/07/31 57152.13 50724.38 1999/08/31 54314.88 50473.29 1999/09/30 54676.10 49089.82 1999/10/31 57290.05 52196.23 1999/11/30 58432.83 53257.37 1999/12/31 64796.78 56394.23 2000/01/31 61908.75 53560.99 2000/02/29 59969.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000320 103140 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Leisure Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $59,969 - a 499.69% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Walt Disney Co. 6.7 Time Warner, Inc. 5.9 AT&T Corp. - Liberty Media 5.7 Group Class A CBS Corp. 4.7 MediaOne Group, Inc. 4.1 AT&T Corp. 3.7 Seagram Co. Ltd. 3.5 Viacom, Inc. Class B (non-vtg.) 3.4 McDonald's Corp. 3.4 Yahoo!, Inc. 2.8 43.9 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Broadcasting 33.5% Row: 1, Col: 6, Value: 33.5 Entertainment 17.3% Row: 1, Col: 5, Value: 17.3 Computer Services & Software 8.0% Row: 1, Col: 4, Value: 8.0 Publishing 7.0% Row: 1, Col: 3, Value: 7.0 Beverages 5.9% Row: 1, Col: 2, Value: 5.9 *All Others 28.3% Row: 1, Col: 1, Value: 28.3
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. LEISURE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Michael Tarlowe) NOTE TO SHAREHOLDERS: Michael Tarlowe became Portfolio Manager of Fidelity Select Leisure Portfolio on January 4, 2000. Q. HOW DID THE FUND PERFORM, MICHAEL? A. For the 12-month period ending February 29, 2000, the fund returned 13.89%. In comparison, the Goldman Sachs Consumer Industries Index - an index of 301 stocks designed to measure the performance of companies in the consumer industries sector - fell 5.41% for the same period. The fund also compares its performance to the Standard & Poor's 500 Index, which returned 11.73% for the 12-month period. Q. WHAT HELPED THE FUND OUTPERFORM THE GOLDMAN SACHS AND THE S&P 500 INDEXES? A. This sector is a mixed bag - there are innovative industries with fast-changing technologies, such as cable, alongside more traditional, consumer-oriented industries, such as retailing, restaurants and lodging, and consumer staples. The fund's focus on advertising-driven companies, as well as broadcasting and entertainment companies and selected Internet issues, helped its performance during the period. Its exposure to some of the more mature consumer-oriented companies was reduced, which also helped. Toward the end of the period, I modestly lowered the fund's exposure to cable as the group's valuations became very high, while increasing its emphasis on satellite television companies, which became much more competitive than they had been in the past. Q. BROADCASTING AND ENTERTAINMENT - THE FUND'S MAIN FOCUS DURING THE YEAR - PERFORMED WELL . . . A. Yes, they generally did very well. CBS, a top holding, benefited from cost cutting and increased advertising revenues. The company enjoyed an improvement in its cash flows, its TV network business made a good recovery and it executed its business strategy flawlessly. Entertainment company Viacom benefited from the strong advertising market, as viewers continued to shift from traditional broadcast networks to cable networks, driving more advertising dollars to such cable networks as Viacom's. The company's announcement of its merger with CBS also caused its stock to rise during the period. Q. WHAT OTHER STOCKS STOOD OUT IN THIS ENVIRONMENT? A. Cable stocks did well, as investors reacted favorably to new digital cable and cable modem services. There also was very active consolidation activity within this sector during the period, and fund holding MediaOne benefited from its acquisition by AT&T. Time Warner's announcement of its merger with America Online helped the company's performance, as did the value of Time Warner's cable assets. Liberty Media Corp., a holding company that owned stakes in cable companies and Time Warner, also performed well. Fund holding America Online benefited from its growing subscriber base in the U.S. and worldwide, generating significant advertising and e-commerce-related revenues. Q. WHAT ABOUT DISAPPOINTMENTS? A. A significant decline in Walt Disney's home video business, following a decision to remove some of its best-selling library titles from the shelves, hurt its stock. Disney's consumer products business also suffered as Disney store sales declined and its licensing business performed poorly. Carnival Corp. was a disappointment. Concerns about cruise line safety and worries about the company's ability to absorb the significant capacity it added hurt Carnival's performance. McDonald's performed well in the U.S., but its international business was weak in Russia, Latin America and Japan. Tricon, the owner of Pizza Hut and Kentucky Fried Chicken, had disappointing sales related to Pizza Hut's Star Wars promotion last summer and KFC's roll-out of its new product line. Q. WHAT'S YOUR OUTLOOK, MICHAEL? A. I'm optimistic. With so many places to invest, I believe that the fund has the potential to pursue some great opportunities. Because consumer-oriented companies could be hurt more than other leisure sectors should there be additional interest-rate hikes, I will focus on areas with better opportunities for growth. Currently, entertainment, media and selected Internet-related companies look attractive. There also are some exciting opportunities in satellite television, with the potential for companies to gain greater share through their ability to offer local programming and perhaps high-speed Internet access. Although this traditionally has been a cyclical sector - with some risk of slowing if the Fed continues to raise interest rates - I'm finding companies with good prospects and valuations, which could provide some protection if the market declines. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: May 8, 1984 FUND NUMBER: 062 TRADING SYMBOL: FDLSX SIZE: as of February 29, 2000, more than $314 million MANAGER: Michael Tarlowe, since January 2000; manager, Fidelity Select Multimedia Portfolio, since January 2000; Fidelity Select Business Services and Outsourcing Portfolio, 1998-2000; research analyst, transportation, telecommunications equipment, computer services and Internet securities, 1994-1998; joined Fidelity in 1994 LEISURE PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 93.3% SHARES VALUE (NOTE 1) ADVERTISING - 3.0% ADVO, Inc. (a) 15,800 $ 438,450 Interpublic Group of 96,000 3,858,000 Companies, Inc. Omnicom Group, Inc. 45,600 4,294,950 Young & Rubicam, Inc. 16,000 808,000 9,399,400 AIR TRANSPORTATION - 1.0% Preview Travel, Inc. (a) 68,900 3,173,706 APPAREL STORES - 0.3% Gap, Inc. 20,150 973,497 BEVERAGES - 5.9% Anheuser-Busch Companies, 116,800 7,489,800 Inc. Seagram Co. Ltd. 196,300 11,029,688 18,519,488 BROADCASTING - 33.5% Adelphia Communications Corp. 14,100 774,619 Class A (a) AMFM, Inc. (a) 16,100 988,138 AT&T Corp. - Liberty Media 344,844 18,018,099 Group Class A (a) Cablevision Systems Corp. 50,300 3,228,631 Class A (a) CBS Corp. (a) 249,372 14,853,220 Chris-Craft Industries, Inc. 7,300 480,431 Clear Channel Communications, 72,459 4,827,581 Inc. (a) Comcast Corp. Class A 186,400 7,922,000 (special) Cox Communications, Inc. 147,687 6,710,528 Class A (a) EchoStar Communications Corp. 42,700 4,867,800 Class A (a) Hispanic Broadcasting Corp. 9,900 925,031 (a) Infinity Broadcasting Corp. 71,050 2,269,159 Class A (a) MediaOne Group, Inc. (a) 162,200 12,732,700 Time Warner, Inc. 216,636 18,522,378 UnitedGlobalCom, Inc. (a) 4,800 501,600 Univision Communications, 19,900 2,027,313 Inc. Class A (a) USA Networks, Inc. (a) 206,600 4,635,588 Westwood One, Inc. (a) 17,200 1,149,175 105,433,991 COMMUNICATIONS EQUIPMENT - 0.2% Globalstar Telecommunications 24,300 692,550 Ltd. (a) COMPUTER SERVICES & SOFTWARE - - 8.0% America Online, Inc. (a) 121,600 7,174,400 At Plan, Inc. 120,000 1,200,000 CMGI, Inc. (a) 26,600 3,446,363 Lycos, Inc. (a) 33,400 1,991,475 MatrixOne, Inc. 100 2,500 Onvia.com, Inc. 200 4,200 SHARES VALUE (NOTE 1) RealNetworks, Inc. (a) 14,600 $ 1,026,563 Sabre Holdings Corp. Class A 38,500 1,544,813 Yahoo!, Inc. (a) 54,000 8,623,125 25,013,439 CONSUMER ELECTRONICS - 1.7% Gemstar International Group 37,400 2,837,725 Ltd. (a) General Motors Corp. Class H 12,800 1,542,400 (a) Sony Corp. sponsored ADR 3,500 1,096,813 5,476,938 ENTERTAINMENT - 17.3% Carnival Corp. 151,100 4,353,569 EMI Group PLC 96,200 1,024,272 Fox Entertainment Group, Inc. 137,600 3,620,600 Class A Metro-Goldwyn-Mayer, Inc. (a) 38,500 919,188 News Corp. Ltd. sponsored ADR 114,800 6,694,275 Premier Parks, Inc. (a) 52,700 1,067,175 Royal Caribbean Cruises Ltd. 55,800 1,973,925 SFX Entertainment, Inc. Class 32,850 1,264,725 A (a) Ticketmaster Online 47,200 1,646,838 CitySearch, Inc. (a) Viacom, Inc. Class B 193,000 10,759,750 (non-vtg.) (a) Walt Disney Co. 626,856 20,999,667 54,323,984 HOUSEHOLD PRODUCTS - 2.4% Avon Products, Inc. 76,600 2,072,988 Estee Lauder Companies, Inc. 18,000 780,750 Gillette Co. 135,600 4,779,900 7,633,638 LEISURE DURABLES & TOYS - 0.6% Harley-Davidson, Inc. 26,000 1,771,250 LODGING & GAMING - 0.6% Mirage Resorts, Inc. (a) 61,300 973,138 Starwood Hotels & Resorts 39,000 875,063 Worldwide, Inc. unit 1,848,201 PRINTING - 0.2% R.R. Donnelley & Sons Co. 38,900 743,963 PUBLISHING - 7.0% Gannet Co., Inc. 48,200 3,142,038 Harcourt General, Inc. 13,000 447,688 Harte Hanks Communications, 68,700 1,498,519 Inc. Knight-Ridder, Inc. 10,200 478,125 McGraw-Hill Companies, Inc. 58,700 2,986,363 Meredith Corp. 81,800 2,341,525 Playboy Enterprises, Inc. 78,700 1,736,319 Class B (a) PRIMEDIA, Inc. (a) 48,000 891,000 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PUBLISHING - CONTINUED Reader's Digest Association, 115,000 $ 3,953,125 Inc. Class A (non-vtg.) The New York Times Co. Class A 56,600 2,391,350 Tribune Co. 51,200 1,993,600 21,859,652 RESTAURANTS - 5.3% Brinker International, Inc. 41,100 893,925 (a) CEC Entertainment, Inc. (a) 24,650 560,788 Cheesecake Factory, Inc. (a) 17,000 505,750 Darden Restaurants, Inc. 38,000 501,125 McDonald's Corp. 334,200 10,548,188 Outback Steakhouse, Inc. (a) 66,750 1,743,844 Tricon Global Restaurants, 65,400 1,741,275 Inc. (a) 16,494,895 RETAIL & WHOLESALE, MISCELLANEOUS - 0.2% Intimate Brands, Inc. Class A 22,935 749,688 SERVICES - 1.4% ACNielsen Corp. (a) 60,000 1,016,250 Dun & Bradstreet Corp. 36,300 950,606 Media Metrix, Inc. 40,000 1,405,000 True North Communications 31,000 1,147,000 4,518,856 TELEPHONE SERVICES - 3.7% AT&T Corp. 236,700 11,701,856 TEXTILES & APPAREL - 1.0% Liz Claiborne, Inc. 23,200 868,550 NIKE, Inc. Class B 57,300 1,629,469 Polo Ralph Lauren Corp. Class 29,600 495,800 A (a) 2,993,819 TOTAL COMMON STOCKS 293,322,811 (Cost $224,652,052) CASH EQUIVALENTS - 13.2% Central Cash Collateral Fund, 25,910,600 $ 25,910,600 5.75% (b) Taxable Central Cash Fund, 15,534,241 15,534,241 5.66% (b) TOTAL CASH EQUIVALENTS 41,444,841 (Cost $41,444,841) TOTAL INVESTMENT PORTFOLIO - 334,767,652 106.5% (Cost $266,096,893) NET OTHER ASSETS - (6.5)% (20,420,007) NET ASSETS - 100% $ 314,347,645 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 $437,198,180 and $513,044,336, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $48,009 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $21,006,331 The fund received cash collateral of $25,910,600 which was invested in cash equivalents. Cash collateral includes $4,165,000 received for unsettled security loans. 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 $30,003,000. The weighted average interest rate was 5.44%. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $267,300,542. Net unrealized appreciation aggregated $67,467,110, of which $86,783,827 related to appreciated investment securities and $19,316,717 related to depreciated investment securities. The fund hereby designates approximately $47,121,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 29% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. LEISURE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 334,767,652 value (cost $266,096,893) - See accompanying schedule Cash 446,200 Receivable for investments 12,750,162 sold Receivable for fund shares 225,374 sold Dividends receivable 206,996 Interest receivable 103,091 Redemption fees receivable 1,408 Other receivables 10,626 TOTAL ASSETS 348,511,509 LIABILITIES Payable for investments $ 2,223,101 purchased Payable for fund shares 5,287,980 redeemed Accrued management fee 165,937 Other payables and accrued 576,246 expenses Collateral on securities 25,910,600 loaned, at value TOTAL LIABILITIES 34,163,864 NET ASSETS $ 314,347,645 Net Assets consist of: Paid in capital $ 191,078,031 Accumulated undistributed net 54,599,234 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 68,670,380 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 3,710,126 $ 314,347,645 shares outstanding NET ASSET VALUE and $84.73 redemption price per share ($314,347,645 (divided by) 3,710,126 shares) Maximum offering price per $87.35 share (100/97.00 of $84.73) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 1,539,464 Dividends Special dividend from Sabre 200,317 Holdings Corp. Class A Interest 1,459,335 Security lending 23,511 TOTAL INCOME 3,222,627 EXPENSES Management fee $ 2,325,785 Transfer agent fees 1,865,284 Accounting and security 295,776 lending fees Non-interested trustees' 1,496 compensation Custodian fees and expenses 19,648 Registration fees 85,830 Audit 17,637 Legal 1,881 Interest 4,531 Miscellaneous 635 Total expenses before 4,618,503 reductions Expense reductions (125,492) 4,493,011 NET INVESTMENT INCOME (LOSS) (1,270,384) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 84,104,122 Foreign currency transactions 911 84,105,033 Change in net unrealized appreciation (depreciation) on: Investment securities (32,144,983) Assets and liabilities in (285) (32,145,268) foreign currencies NET GAIN (LOSS) 51,959,765 NET INCREASE (DECREASE) IN $ 50,689,381 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 1,258,444 charges paid to FDC Sales charges - Retained by $ 1,255,993 FDC Deferred sales charges $ 15,030 withheld by FDC Exchange fees withheld by FSC $ 30,533 Expense reductions Directed $ 118,101 brokerage arrangements Custodian credits 7,391 $ 125,492
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (1,270,384) $ (1,171,784) income (loss) Net realized gain (loss) 84,105,033 22,624,055 Change in net unrealized (32,145,268) 65,006,159 appreciation (depreciation) NET INCREASE (DECREASE) IN 50,689,381 86,458,430 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (34,566,142) (14,475,212) from net realized gains Share transactions Net 342,207,955 283,063,939 proceeds from sales of shares Reinvestment of distributions 33,284,316 14,128,858 Cost of shares redeemed (424,039,556) (280,558,227) NET INCREASE (DECREASE) IN (48,547,285) 16,634,570 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 632,323 323,063 TOTAL INCREASE (DECREASE) (31,791,723) 88,940,851 IN NET ASSETS NET ASSETS Beginning of period 346,139,368 257,198,517 End of period $ 314,347,645 $ 346,139,368 OTHER INFORMATION Shares Sold 3,958,787 4,108,533 Issued in reinvestment of 381,645 211,513 distributions Redeemed (4,880,345) (4,198,228) Net increase (decrease) (539,913) 121,818
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 G 1999 1998 1997 1996 G SELECTED PER-SHARE DATA Net asset value, beginning of $ 81.44 $ 62.30 $ 47.83 $ 46.17 $ 40.71 period Income from Investment Operations Net investment income (loss) C (.28) D (.27) (.25) (.06) E (.21) Net realized and unrealized 11.58 22.78 21.10 4.47 10.97 gain (loss) Total from investment 11.30 22.51 20.85 4.41 10.76 operations Less Distributions From net realized gain (8.15) (3.44) (6.46) (2.83) (5.32) Redemption fees added to paid .14 .07 .08 .08 .02 in capital Net asset value, end of period $ 84.73 $ 81.44 $ 62.30 $ 47.83 $ 46.17 TOTAL RETURN A, B 13.89% 37.54% 47.29% 10.14% 27.61% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 314,348 $ 346,139 $ 257,199 $ 98,133 $ 85,013 (000 omitted) Ratio of expenses to average 1.15% 1.26% 1.44% 1.56% 1.64% net assets Ratio of expenses to average 1.12% F 1.24% F 1.39% F 1.54% F 1.63% F net assets after expense reductions Ratio of net investment (.32)% (.40)% (.46)% (.12)% (.46)% income (loss) to average net assets Portfolio turnover rate 120% 107% 209% 127% 141%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM SABRE HOLDINGS CORP CLASS A WHICH AMOUNTED TO $.04 PER SHARE. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.23 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 MULTIMEDIA PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT MULTIMEDIA 27.62% 213.05% 591.59% SELECT MULTIMEDIA (LOAD ADJ.) 23.72% 203.58% 570.77% S&P 500 11.73% 206.94% 425.47% GS Consumer Industries -5.41% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Consumer Industries Index - a market capitalization-weighted index of 301 stocks designed to measure the performance of companies in the consumer industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT MULTIMEDIA 27.62% 25.64% 21.33% SELECT MULTIMEDIA (LOAD ADJ.) 23.72% 24.87% 20.96% S&P 500 11.73% 25.14% 18.05% GS Consumer Industries -5.41% 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 1990/02/28 9700.00 10000.00 1990/03/31 9605.75 10265.00 1990/04/30 9150.20 10008.38 1990/05/31 10022.02 10984.19 1990/06/30 9935.63 10909.50 1990/07/31 9385.83 10874.59 1990/08/31 8168.42 9891.53 1990/09/30 7469.39 9409.81 1990/10/31 7147.37 9369.35 1990/11/30 7885.67 9974.61 1990/12/31 8466.88 10252.90 1991/01/31 8922.43 10699.92 1991/02/28 9582.19 11464.97 1991/03/31 9841.38 11742.42 1991/04/30 10179.11 11770.60 1991/05/31 10234.09 12279.09 1991/06/30 9425.10 11716.71 1991/07/31 9778.54 12262.71 1991/08/31 10084.86 12553.34 1991/09/30 10697.49 12343.69 1991/10/31 11239.43 12509.10 1991/11/30 10469.72 12004.98 1991/12/31 11671.42 13378.35 1992/01/31 11977.73 13129.52 1992/02/29 12645.34 13300.20 1992/03/31 12323.32 13040.85 1992/04/30 12511.82 13424.25 1992/05/31 12700.32 13490.03 1992/06/30 12747.45 13289.02 1992/07/31 12778.87 13832.55 1992/08/31 12606.07 13548.98 1992/09/30 12527.53 13708.86 1992/10/31 12731.74 13756.84 1992/11/30 13658.54 14225.94 1992/12/31 14180.54 14400.92 1993/01/31 14467.02 14521.89 1993/02/28 14530.68 14719.39 1993/03/31 15103.63 15029.97 1993/04/30 14713.05 14666.24 1993/05/31 15716.03 15059.30 1993/06/30 16209.43 15102.97 1993/07/31 16816.07 15042.56 1993/08/31 18247.74 15612.67 1993/09/30 18684.52 15492.45 1993/10/31 20083.84 15813.15 1993/11/30 18773.16 15662.92 1993/12/31 19572.05 15852.44 1994/01/31 19851.19 16391.43 1994/02/28 19596.68 15947.22 1994/03/31 18398.06 15251.92 1994/04/30 18406.98 15447.15 1994/05/31 19083.92 15700.48 1994/06/30 18657.36 15315.82 1994/07/31 19111.74 15818.18 1994/08/31 20261.59 16466.72 1994/09/30 20122.50 16063.29 1994/10/31 20576.88 16424.71 1994/11/30 19927.76 15826.52 1994/12/31 20355.63 16061.23 1995/01/31 20585.74 16477.70 1995/02/28 21429.50 17119.83 1995/03/31 22791.02 17625.04 1995/04/30 23318.37 18144.10 1995/05/31 23443.01 18869.32 1995/06/30 24344.30 19307.65 1995/07/31 25782.52 19947.89 1995/08/31 26597.51 19997.96 1995/09/30 27354.97 20841.88 1995/10/31 26549.57 20767.47 1995/11/30 27575.50 21679.16 1995/12/31 27209.95 22096.70 1996/01/31 27376.44 22848.87 1996/02/29 28281.70 23060.68 1996/03/31 27907.11 23282.76 1996/04/30 29206.27 23625.95 1996/05/31 30176.26 24235.26 1996/06/30 28779.90 24327.60 1996/07/31 26040.48 23252.80 1996/08/31 27010.47 23743.20 1996/09/30 28726.60 25079.47 1996/10/31 27916.50 25771.16 1996/11/30 28428.14 27719.21 1996/12/31 27502.06 27170.09 1997/01/31 27361.13 28867.68 1997/02/28 27003.40 29094.00 1997/03/31 25691.71 27898.53 1997/04/30 26265.40 29564.07 1997/05/31 28773.21 31363.93 1997/06/30 30659.61 32769.03 1997/07/31 32301.90 35376.46 1997/08/31 31669.40 33394.67 1997/09/30 34232.69 35223.70 1997/10/31 33134.13 34047.23 1997/11/30 34232.69 35623.28 1997/12/31 36007.93 36234.93 1998/01/31 36271.35 36635.68 1998/02/28 38458.86 39277.85 1998/03/31 41161.74 41289.27 1998/04/30 42133.22 41704.64 1998/05/31 40975.37 40987.74 1998/06/30 43754.19 42652.66 1998/07/31 44278.27 42198.41 1998/08/31 36782.77 36097.36 1998/09/30 38367.19 38409.76 1998/10/31 40695.06 41534.01 1998/11/30 43120.43 44051.38 1998/12/31 48860.88 46589.63 1999/01/31 52858.48 48538.00 1999/02/28 52565.97 47029.44 1999/03/31 54418.51 48911.09 1999/04/30 57397.53 50805.42 1999/05/31 56497.61 49605.90 1999/06/30 59024.78 52359.03 1999/07/31 58001.59 50724.38 1999/08/31 55548.39 50473.29 1999/09/30 57446.84 49089.82 1999/10/31 61330.05 52196.23 1999/11/30 62328.59 53257.37 1999/12/31 70426.74 56394.23 2000/01/31 69057.16 53560.99 2000/02/29 67077.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000314 100439 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Multimedia Portfolio on February 28, 1990 and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $67,077 - a 570.77% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Viacom, Inc. Class B (non-vtg.) 6.6 AT&T Corp. - Liberty Media 6.4 Group Class A Walt Disney Co. 6.1 CBS Corp. 5.9 Time Warner, Inc. 5.4 MediaOne Group, Inc. 5.3 Comcast Corp. Class A (special) 4.7 Seagram Co. Ltd. 4.7 Cox Communications, Inc. 4.4 Class A AT&T Corp. 3.8 53.3 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Broadcasting 47.1% Row: 1, Col: 6, Value: 47.1 Entertainment 17.8% Row: 1, Col: 5, Value: 17.8 Publishing 11.6% Row: 1, Col: 4, Value: 11.6 Advertising 5.1% Row: 1, Col: 3, Value: 5.1 Beverages 4.7% Row: 1, Col: 2, Value: 4.7 * All Others 13.7% Row: 1, Col: 1, Value: 13.7
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. MULTIMEDIA PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Michael Tarlowe) NOTE TO SHAREHOLDERS: Michael Tarlowe became Portfolio Manager of Fidelity Select Multimedia Portfolio on January 4, 2000. Q. HOW DID THE FUND PERFORM, MICHAEL? A. For the 12-month period ending February 29, 2000, the fund returned 27.62%. By comparison, the Goldman Sachs Consumer Industries Index - an index of 301 stocks designed to measure the performance of companies in the consumer industries sector - fell 5.41% for the same period. The fund also compares its performance to the Standard & Poor's 500 Index, which returned 11.73% for the 12-month period. Q. WHAT HELPED THE FUND OUTPERFORM THE GOLDMAN SACHS AND THE S&P 500 INDEXES? A. The advertising market was extremely robust during the period, fueled by increased competition and advertising activity in telecommunications, financial services and health care, as well as new Internet companies spending on advertising to create brand awareness. The fund's focus on advertising-driven companies, as well as broadcasting and entertainment companies, helped its performance. Toward the end of the period, I also modestly reduced the fund's exposure to cable while increasing its emphasis on satellite television companies, which had become much more competitive than they had been in the past. Q. BROADCASTING AND ENTERTAINMENT CONTINUED TO BE THE FUND'S MAIN FOCUS DURING THE YEAR. HOW DID THESE STOCKS DO? A. In general, they performed very well. CBS, the fund's number-four holding, benefited from a turnaround at its network due to cost cutting and increased advertising revenues. Its cash flows improved, its TV network business made a good recovery and the company executed its business strategy flawlessly. Entertainment companies also were strong performers. Viacom saw its stock rise following the announcement of its merger with CBS. The company also reaped the benefits of the strong advertising market, as viewers continued to shift from traditional broadcast networks to cable networks, driving more advertising dollars to such cable networks as Viacom's. Q. WHAT OTHER STOCKS STOOD OUT IN THIS ENVIRONMENT? A. Cable stocks continued to shine, rolling out such new services as digital cable and cable modem service, potentially leading to increased revenues. There also was very active consolidation activity within this sector, with fund holding MediaOne benefiting from its acquisition by AT&T. Another top holding, Time Warner, benefited from the announcement of a merger with America Online, and from the strong performance of Time Warner's cable assets. Q. WHAT ABOUT DISAPPOINTMENTS? A. Walt Disney was a disappointment. A significant decline in Disney's home video business followed a decision to remove some of its best-selling library titles from the shelves. Its consumer products business also suffered as Disney store sales declined and its licensing business performed poorly. However, the company brought in new management and is making new titles available, and its ABC and ESPN networks are now benefiting from the robust advertising environment and higher ratings. AT&T spent over $100 billion to acquire two large cable companies, and investors became skeptical about whether it could integrate these acquisitions effectively and cost-efficiently. There also was some concern about whether AT&T paid too much to get into cable, given the shifting competitive environment. Along with most newspaper publishers, Gannett was hurt by competition from the Internet, which took away revenues from classified ads, traditionally a significant revenue source for newspapers. Advertising dollars also shifted to radio during the year, causing further stagnation in Gannett's performance. Q. WHAT'S YOUR OUTLOOK, MICHAEL? A. I'm optimistic. Overall, advertising activity is robust and growth should be strong through the next few months, which is when television networks sell as much as 75% of their inventory for the fall/spring 2001 season. We should see significant ad price increases during this time and continued growth in revenues from advertising activity through this year. I'm positioning the fund to take advantage of the current climate, as well as evolving opportunities in broadband, Internet/new media and new distribution platforms. There are some exciting opportunities in satellite television, with the potential for companies to gain greater share through their ability to offer local programming and perhaps high-speed Internet access. Although multimedia has traditionally been a cyclical sector - and there is some risk of slowing if the Fed continues to raise interest rates - I'm finding companies with attractive prospects and valuations, which could provide some protection if the market declines. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 503 TRADING SYMBOL: FBMPX SIZE: as of February 29, 2000, more than $238 million MANAGER: Michael Tarlowe, since January 2000; manager, Fidelity Select Leisure Portfolio, since January 2000; Fidelity Select Business Services and Outsourcing Portfolio, 1998-2000; research analyst, transportation, telecommunications equipment, computer services and Internet securities, 1994-1998; joined Fidelity in 1994 MULTIMEDIA PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 95.1% SHARES VALUE (NOTE 1) ADVERTISING - 5.1% ADVO, Inc. (a) 11,400 $ 316,350 Interpublic Group of 109,600 4,404,550 Companies, Inc. Lamar Advertising Co. Class A 11,000 479,188 (a) Omnicom Group, Inc. 69,000 6,498,938 Young & Rubicam, Inc. 7,300 368,650 12,067,676 BEVERAGES - 4.7% Seagram Co. Ltd. 200,600 11,271,296 BROADCASTING - 47.1% Adelphia Communications Corp. 11,000 604,313 Class A (a) AMFM, Inc. (a) 95,900 5,885,863 AT&T Corp. - Liberty Media 291,496 15,230,666 Group Class A (a) Cablevision Systems Corp. 53,900 3,459,706 Class A (a) CBS Corp. (a) 234,595 13,973,065 Chris-Craft Industries, Inc. 8,300 546,244 Clear Channel Communications, 126,120 8,402,745 Inc. (a) Comcast Corp. Class A 266,500 11,326,250 (special) Cox Communications, Inc. 229,760 10,439,720 Class A (a) E.W. Scripps Co. Class A 22,500 970,313 EchoStar Communications Corp. 44,400 5,061,600 Class A (a) Hispanic Broadcasting Corp. 9,600 897,000 (a) Infinity Broadcasting Corp. 26,075 832,770 Class A (a) MediaOne Group, Inc. (a) 162,500 12,756,250 PanAmSat Corp. (a) 11,300 551,581 Time Warner, Inc. 151,217 12,929,054 UnitedGlobalCom, Inc. (a) 23,600 2,466,200 Univision Communications, 3,500 356,563 Inc. Class A (a) USA Networks, Inc. (a) 196,000 4,397,750 Westwood One, Inc. (a) 17,800 1,189,263 112,276,916 COMPUTER SERVICES & SOFTWARE - - 1.0% At Plan, Inc. 153,900 1,539,000 RealNetworks, Inc. (a) 4,400 309,375 Sabre Holdings Corp. Class A 14,100 565,763 2,414,138 CONSUMER ELECTRONICS - 1.4% Gemstar International Group 21,000 1,593,375 Ltd. (a) General Motors Corp. Class H 8,400 1,012,200 (a) Sony Corp. sponsored ADR 2,300 720,763 3,326,338 ENGINEERING - 0.2% Jupiter Communications, Inc. 13,400 428,800 SHARES VALUE (NOTE 1) ENTERTAINMENT - 17.8% EMI Group PLC 53,300 $ 567,502 Fox Entertainment Group, Inc. 76,000 1,999,750 Class A News Corp. Ltd. sponsored ADR 151,700 8,846,006 Premier Parks, Inc. (a) 24,500 496,125 Ticketmaster Online 11,500 401,242 CitySearch, Inc. (a) Viacom, Inc. Class B 281,500 15,693,615 (non-vtg.) (a) Walt Disney Co. 431,500 14,455,250 42,459,490 PRINTING - 0.4% R.R. Donnelley & Sons Co. 54,300 1,038,488 PUBLISHING - 11.6% Gannet Co., Inc. 94,200 6,140,663 Harcourt General, Inc. 17,400 599,213 Harte Hanks Communications, 59,600 1,300,025 Inc. Knight-Ridder, Inc. 22,900 1,073,438 McGraw-Hill Companies, Inc. 88,200 4,487,175 Meredith Corp. 66,300 1,897,838 Playboy Enterprises, Inc. 38,700 853,819 Class B (a) PRIMEDIA, Inc. (a) 25,000 464,063 Reader's Digest Association, 106,600 3,664,375 Inc. Class A (non-vtg.) The New York Times Co. Class A 81,100 3,426,475 Tribune Co. 98,100 3,819,769 27,726,853 SERVICES - 2.0% ACNielsen Corp. (a) 78,200 1,324,513 Dun & Bradstreet Corp. 31,700 830,144 Gartner Group, Inc. Class B 119,500 1,411,594 (a) Media Metrix, Inc. 15,000 526,875 True North Communications 21,200 784,400 4,877,526 TELEPHONE SERVICES - 3.8% AT&T Corp. 181,000 8,948,188 TOTAL COMMON STOCKS 226,835,709 (Cost $158,783,139) CASH EQUIVALENTS - 22.7% SHARES VALUE (NOTE 1) Central Cash Collateral Fund, 38,757,300 $ 38,757,300 5.75% (b) Taxable Central Cash Fund, 15,375,275 15,375,275 5.66% (b) TOTAL CASH EQUIVALENTS 54,132,575 (Cost $54,132,575) TOTAL INVESTMENT PORTFOLIO - 280,968,284 117.8% (Cost $212,915,714) NET OTHER ASSETS - (17.8)% (42,356,584) NET ASSETS - 100% $ 238,611,700 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 $182,411,188 and $145,732,178, 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 $24,819 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $30,283,725. The fund received cash collateral of $38,757,300 which was invested in cash equivalents. Cash Collateral includes $6,069,000 received for unsettled security loans. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $213,594,802. Net unrealized appreciation aggregated $67,373,482, of which $74,169,808 related to appreciated investment securities and $6,796,326 related to depreciated investment securities. The fund hereby designates approximately $8,972,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 43% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. MULTIMEDIA PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 280,968,284 value (cost $212,915,714) - See accompanying schedule Receivable for investments 2,182,414 sold Receivable for fund shares 523,033 sold Dividends receivable 117,180 Interest receivable 88,884 Redemption fees receivable 2,712 Other receivables 12,874 TOTAL ASSETS 283,895,381 LIABILITIES Payable for investments $ 2,250,773 purchased Payable for fund shares 4,028,485 redeemed Accrued management fee 130,752 Other payables and accrued 116,371 expenses Collateral on securities 38,757,300 loaned, at value TOTAL LIABILITIES 45,283,681 NET ASSETS $ 238,611,700 Net Assets consist of: Paid in capital $ 156,210,444 Accumulated net investment (17,095) (loss) Accumulated undistributed net 14,365,946 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 68,052,405 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 4,469,624 $ 238,611,700 shares outstanding NET ASSET VALUE and $53.39 redemption price per share ($238,611,700 (divided by) 4,469,624 shares) Maximum offering price per $55.04 share (100/97.00 of $53.39) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 847,534 Dividends Interest 856,739 Security lending 29,929 TOTAL INCOME 1,734,202 EXPENSES Management fee $ 1,229,878 Transfer agent fees 990,042 Accounting and security 155,901 lending fees Non-interested trustees' 587 compensation Custodian fees and expenses 12,187 Registration fees 57,081 Audit 17,221 Legal 776 Miscellaneous 146 Total expenses before 2,463,819 reductions Expense reductions (42,775) 2,421,044 NET INVESTMENT INCOME (LOSS) (686,842) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 19,894,780 Foreign currency transactions 5,731 19,900,511 Change in net unrealized appreciation (depreciation) on: Investment securities 24,799,088 Assets and liabilities in (157) 24,798,931 foreign currencies NET GAIN (LOSS) 44,699,442 NET INCREASE (DECREASE) IN $ 44,012,600 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 879,938 charges paid to FDC Sales charges - Retained by $ 878,682 FDC Deferred sales charges $ 1,738 withheld by FDC Exchange fees withheld by FSC $ 9,579 Expense reductions Directed $ 35,474 brokerage arrangements Custodian credits 1,819 Transfer agent credits 5,482 $ 42,775
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (686,842) $ (681,089) income (loss) Net realized gain (loss) 19,900,511 3,497,059 Change in net unrealized 24,798,931 32,313,711 appreciation (depreciation) NET INCREASE (DECREASE) IN 44,012,600 35,129,681 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (6,716,257) (7,954,098) from net realized gains Share transactions Net 211,032,647 158,099,619 proceeds from sales of shares Reinvestment of distributions 6,530,741 7,877,838 Cost of shares redeemed (176,372,310) (149,217,492) NET INCREASE (DECREASE) IN 41,191,078 16,759,965 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 394,751 309,134 TOTAL INCREASE (DECREASE) 78,882,172 44,244,682 IN NET ASSETS NET ASSETS Beginning of period 159,729,528 115,484,846 End of period (including $ 238,611,700 $ 159,729,528 accumulated net investment loss of $17,095 and $17,095, respectively) OTHER INFORMATION Shares Sold 4,212,974 4,292,822 Issued in reinvestment of 127,825 230,819 distributions Redeemed (3,574,961) (4,259,349) Net increase (decrease) 765,838 264,292
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 F 1999 1998 1997 1996 F SELECTED PER-SHARE DATA Net asset value, beginning of $ 43.13 $ 33.58 $ 24.91 $ 27.18 $ 22.35 period Income from Investment Operations Net investment income (loss) C (.16) (.19) (.17) .35 D .02 Net realized and unrealized 11.90 11.85 10.30 (1.58) 7.00 gain (loss) Total from investment 11.74 11.66 10.13 (1.23) 7.02 operations Less Distributions From net investment income - - - - (.02) From net realized gain (1.57) (2.19) (1.52) (1.07) (2.19) Total distributions (1.57) (2.19) (1.52) (1.07) (2.21) Redemption fees added to paid .09 .08 .06 .03 .02 in capital Net asset value, end of period $ 53.39 $ 43.13 $ 33.58 $ 24.91 $ 27.18 TOTAL RETURN A, B 27.62% 36.68% 42.42% (4.52)% 31.98% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 238,612 $ 159,730 $ 115,485 $ 54,171 $ 94,970 (000 omitted) Ratio of expenses to average 1.17% 1.35% 1.75% 1.60% 1.56% net assets Ratio of expenses to average 1.15% E 1.33% E 1.71% E 1.56% E 1.54% E net assets after expense reductions Ratio of net investment (.32)% (.52)% (.59)% 1.33% .08% income (loss) to average net assets Portfolio turnover rate 76% 109% 219% 99% 223%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.49 PER SHARE. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR THE YEAR ENDED FEBRUARY 29 RETAILING PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT RETAILING -12.15% 155.39% 460.96% SELECT RETAILING (LOAD ADJ.) -14.86% 147.66% 444.06% S&P 500 11.73% 206.94% 425.47% GS Consumer Industries -5.41% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Consumer Industries Index - a market capitalization-weighted index of 301 stocks designed to measure the performance of companies in the consumer industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT RETAILING -12.15% 20.63% 18.82% SELECT RETAILING (LOAD ADJ.) -14.86% 19.89% 18.46% S&P 500 11.73% 25.14% 18.05% GS Consumer Industries -5.41% 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 1990/02/28 9700.00 10000.00 1990/03/31 10494.11 10265.00 1990/04/30 10345.68 10008.38 1990/05/31 11726.09 10984.19 1990/06/30 11577.66 10909.50 1990/07/31 11102.68 10874.59 1990/08/31 9507.04 9891.53 1990/09/30 8445.75 9409.81 1990/10/31 8052.41 9369.35 1990/11/30 9150.80 9974.61 1990/12/31 9656.05 10252.90 1991/01/31 10593.39 10699.92 1991/02/28 11575.36 11464.97 1991/03/31 12780.51 11742.42 1991/04/30 12959.05 11770.60 1991/05/31 14037.73 12279.09 1991/06/30 13591.38 11716.71 1991/07/31 14461.76 12262.71 1991/08/31 15227.99 12553.34 1991/09/30 15064.33 12343.69 1991/10/31 14781.64 12509.10 1991/11/30 14498.96 12004.98 1991/12/31 16235.03 13378.35 1992/01/31 17135.28 13129.52 1992/02/29 17959.24 13300.20 1992/03/31 17600.66 13040.85 1992/04/30 16883.51 13424.25 1992/05/31 17234.46 13490.03 1992/06/30 16429.97 13289.02 1992/07/31 17160.90 13832.55 1992/08/31 16771.60 13548.98 1992/09/30 17272.13 13708.86 1992/10/31 18455.91 13756.84 1992/11/30 19854.21 14225.94 1992/12/31 19819.12 14400.92 1993/01/31 19955.86 14521.89 1993/02/28 19199.77 14719.39 1993/03/31 20679.77 15029.97 1993/04/30 19492.80 14666.24 1993/05/31 20572.52 15059.30 1993/06/30 20077.99 15102.97 1993/07/31 20176.90 15042.56 1993/08/31 21100.03 15612.67 1993/09/30 21742.92 15492.45 1993/10/31 22080.85 15813.15 1993/11/30 22295.14 15662.92 1993/12/31 22401.86 15852.44 1994/01/31 21403.84 16391.43 1994/02/28 22196.91 15947.22 1994/03/31 21733.54 15251.92 1994/04/30 22392.94 15447.15 1994/05/31 21288.00 15700.48 1994/06/30 21109.78 15315.82 1994/07/31 21466.22 15818.18 1994/08/31 22829.58 16466.72 1994/09/30 22384.03 16063.29 1994/10/31 22482.05 16424.71 1994/11/30 21697.90 15826.52 1994/12/31 21279.09 16061.23 1995/01/31 21109.78 16477.70 1995/02/28 21305.82 17119.83 1995/03/31 21546.41 17625.04 1995/04/30 20708.80 18144.10 1995/05/31 21074.14 18869.32 1995/06/30 22419.68 19307.65 1995/07/31 23791.95 19947.89 1995/08/31 23462.25 19997.96 1995/09/30 24166.20 20841.88 1995/10/31 23087.99 20767.47 1995/11/30 24246.40 21679.16 1995/12/31 23827.59 22096.70 1996/01/31 23132.54 22848.87 1996/02/29 24834.52 23060.68 1996/03/31 26679.06 23282.76 1996/04/30 28238.46 23625.95 1996/05/31 29592.90 24235.26 1996/06/30 29067.17 24327.60 1996/07/31 26286.98 23252.80 1996/08/31 28773.11 23743.20 1996/09/30 29806.77 25079.47 1996/10/31 29218.65 25771.16 1996/11/30 30341.42 27719.21 1996/12/31 28798.16 27170.09 1997/01/31 28664.17 28867.68 1997/02/28 29700.33 29094.00 1997/03/31 30075.49 27898.53 1997/04/30 30537.36 29564.07 1997/05/31 31954.56 31363.93 1997/06/30 33985.57 32769.03 1997/07/31 37659.44 35376.46 1997/08/31 36395.70 33394.67 1997/09/30 38751.67 35223.70 1997/10/31 38535.03 34047.23 1997/11/30 41342.34 35623.28 1997/12/31 40814.23 36234.93 1998/01/31 41520.73 36635.68 1998/02/28 45324.99 39277.85 1998/03/31 48440.85 41289.27 1998/04/30 48249.93 41704.64 1998/05/31 49084.99 40987.74 1998/06/30 51792.05 42652.66 1998/07/31 50351.34 42198.41 1998/08/31 43900.28 36097.36 1998/09/30 44138.86 38409.76 1998/10/31 48259.10 41534.01 1998/11/30 53003.34 44051.38 1998/12/31 59491.11 46589.63 1999/01/31 62069.70 48538.00 1999/02/28 61941.23 47029.44 1999/03/31 62987.35 48911.09 1999/04/30 61987.12 50805.42 1999/05/31 60105.94 49605.90 1999/06/30 64428.06 52359.03 1999/07/31 61464.06 50724.38 1999/08/31 55334.17 50473.29 1999/09/30 55609.46 49089.82 1999/10/31 58307.35 52196.23 1999/11/30 60693.23 53257.37 1999/12/31 62582.87 56394.23 2000/01/31 55935.00 53560.99 2000/02/29 54406.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000322 093556 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Retailing Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $54,406 - a 444.06% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Home Depot, Inc. 9.6 Costco Wholesale Corp. 9.3 Wal-Mart Stores, Inc. 8.4 Walgreen Co. 8.1 Target Corp. 7.7 Kohls Corp. 5.0 Lowe's Companies, Inc. 4.6 Gap, Inc. 4.6 BJ's Wholesale Club, Inc. 4.5 Staples, Inc. 4.4 66.2 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
General Merchandise Stores 38.2% Row: 1, Col: 6, Value: 38.2 Retail & Wholesale, Miscellaneous 24.0% Row: 1, Col: 5, Value: 24.0 Drug Stores 9.3% Row: 1, Col: 4, Value: 9.300000000000001 Apparel Stores 7.5% Row: 1, Col: 3, Value: 7.5 Grocery Stores 5.1% Row: 1, Col: 2, Value: 5.1 *All Others 15.9% Row: 1, Col: 1, Value: 15.9
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. (photograph of Steve Calhoun) Steve Calhoun, Portfolio Manager of Fidelity Select Retailing Portfolio Q. HOW DID THE FUND PERFORM, STEVE? A. The retailing stocks experienced a difficult period. For the 12 months that ended February 29, 2000, the fund fell 12.15%. For the same 12-month period, the Goldman Sachs Consumer Industries Index - an index of 301 stocks designed to measure the performance of companies in the consumer industries sector - lost 5.41%, while the Standard & Poor's 500 Index returned 11.73%. Q. WHAT MARKET FACTORS AFFECTED PERFORMANCE OVER THE PAST 12 MONTHS? A. The market environment was characterized by rising interest rates, which hurt the interest-rate sensitive retailing sector. This was especially evident in large capitalization stocks. The fund owned many large capitalization retail companies with increasing market share and superior unit growth. Despite the bright prospects for these companies, the interest-rate environment caused their earnings multiples - that is, the price of the security divided by the earnings of the company - to decrease. The result was lower stock prices for many retailing securities. Q. WHAT INVESTMENT STRATEGY DID YOU PURSUE DURING THE PERIOD? A. I chose to focus on a handful of companies with similar themes. All of these companies were increasing their market share, growing earnings and meeting their financial targets. Many of them were leading or near the top of their categories. For example, Wal-Mart is becoming one of the country's largest grocers, significantly increasing its grocery business while pursuing a strategy of aggressive unit expansion. These two factors have made Wal-Mart a very attractive story. Target Stores is another example of a company that is increasing its market share and earnings while expanding throughout the country. Q. WHAT STOCKS BENEFITED PERFORMANCE? A. Home Depot and Costco were two important contributors. Both companies significantly increased their unit growth while meeting their financial objectives. Costco, like many of the wholesale clubs, capitalized on increased consumer acceptance of buying branded goods and groceries at discounted prices. Home Depot continued to benefit from the trend toward home improvement. On the other hand, the fund was underweighted in grocery stores, a strategy that proved beneficial as grocery stores lagged due to flat unit growth and sales. In addition, they faced increasing competition from both Wal-Mart and the wholesale clubs. Q. WHAT STOCKS WERE DISAPPOINTING? A. Department stores were disappointing for the most part as they struggled to adapt their business models to the new economy, and continued to be faced with difficult decisions as they try to compete with the Internet retailers. Unfortunately for the department stores, the market was very unforgiving of traditional retailers that incurred significant losses while trying to build their Internet presence. This factor negatively affected the established retailers such as Consolidated Stores. One exception to this was Kohls, which demonstrated impressive store growth and rising market share throughout the past 12 months. Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? A. I am cautiously optimistic about the next six months. The retail sector has really suffered due to rising interest rates, but many of the companies that I follow have met their financial targets and are positioned to show impressive growth. Additionally, we are still seeing very vibrant consumer spending. Even if spending moderates in the next few months, the companies that I have focused on are still poised to do extremely well. With that in mind, I am hoping for a significant recovery in the retail sector in 2000. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 046 TRADING SYMBOL: FSRPX SIZE: as of February 29, 2000, more than $75 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 FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 90.3% SHARES VALUE (NOTE 1) APPAREL STORES - 7.5% Gap, Inc. 72,300 $ 3,492,994 The Limited, Inc. 64,400 2,189,600 5,682,594 DRUG STORES - 9.3% CVS Corp. 26,774 937,090 Walgreen Co. 238,100 6,145,956 7,083,046 GENERAL MERCHANDISE STORES - 38.2% BJ's Wholesale Club, Inc. (a) 109,000 3,379,000 Consolidated Stores Corp. (a) 168,558 1,896,278 Costco Wholesale Corp. (a) 142,000 7,046,750 Ito-Yokado Co. Ltd. 10,000 580,710 Kohls Corp. (a) 50,000 3,790,625 Target Corp. 99,500 5,870,500 Wal-Mart Stores, Inc. 131,500 6,402,406 28,966,269 GROCERY STORES - 5.1% Loblaw Companies Ltd. 82,600 1,951,607 Whole Foods Market, Inc. (a) 22,700 861,891 Wild Oats Markets, Inc. (a) 57,500 1,078,125 3,891,623 HOME FURNISHINGS - 1.1% Linens'n Things, Inc. (a) 43,600 858,375 RESTAURANTS - 5.1% McDonald's Corp. 86,600 2,733,313 Outback Steakhouse, Inc. (a) 41,900 1,094,638 3,827,951 RETAIL & WHOLESALE, MISCELLANEOUS - 24.0% Bed Bath & Beyond, Inc. (a) 34,300 973,263 Best Buy Co., Inc. (a) 36,500 1,984,688 Circuit City Stores, Inc. - 28,700 1,158,763 Circuit City Group Home Depot, Inc. 125,550 7,258,356 Lowe's Companies, Inc. 73,700 3,509,963 Staples, Inc. (a) 121,600 3,283,200 18,168,233 TOTAL COMMON STOCKS 68,478,091 (Cost $48,613,487) CASH EQUIVALENTS - 6.5% SHARES VALUE (NOTE 1) Central Cash Collateral Fund, 741,000 $ 741,000 5.75% (b) Taxable Central Cash Fund, 4,205,803 4,205,803 5.66% (b) TOTAL CASH EQUIVALENTS 4,946,803 (Cost $4,946,803) TOTAL INVESTMENT PORTFOLIO - 73,424,894 96.8% (Cost $53,560,290) NET OTHER ASSETS - 3.2% 2,396,801 NET ASSETS - 100% $ 75,821,695 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 $148,899,934 and $383,371,008, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $31,755 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $731,250. The fund received cash collateral of $741,000 which was invested in cash equivalents. 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 February 29, 2000, the aggregate cost of investment securities for income tax purposes was $54,117,860. Net unrealized appreciation aggregated $19,307,034, of which $22,813,867 related to appreciated investment securities and $3,506,833 related to depreciated investment securities. The fund hereby designates approximately $37,953,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 11% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. RETAILING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 73,424,894 value (cost $53,560,290) - See accompanying schedule Receivable for investments 2,590,549 sold Receivable for fund shares 1,810,278 sold Dividends receivable 21,442 Interest receivable 24,875 Redemption fees receivable 730 Other receivables 175,929 TOTAL ASSETS 78,048,697 LIABILITIES Payable for fund shares $ 1,394,881 redeemed Accrued management fee 39,976 Other payables and accrued 51,145 expenses Collateral on securities 741,000 loaned, at value TOTAL LIABILITIES 2,227,002 NET ASSETS $ 75,821,695 Net Assets consist of: Paid in capital $ 18,374,013 Accumulated undistributed net 37,583,065 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 19,864,617 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 1,503,668 $ 75,821,695 shares outstanding NET ASSET VALUE, and $50.42 redemption price per share ($75,821,695 (divided by) 1,503,668 shares) Maximum offering price per $51.98 share (100/97.00 of $50.42) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 506,341 Dividends Interest 588,126 Security lending 5,338 TOTAL INCOME 1,099,805 EXPENSES Management fee $ 1,047,886 Transfer agent fees 1,013,666 Accounting and security 135,084 lending fees Non-interested trustees' 645 compensation Custodian fees and expenses 11,758 Registration fees 38,810 Audit 16,951 Legal 2,828 Interest 4,904 Miscellaneous 296 Total expenses before 2,272,828 reductions Expense reductions (83,030) 2,189,798 NET INVESTMENT INCOME (LOSS) (1,089,993) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 63,325,808 Foreign currency transactions (4,862) 63,320,946 Change in net unrealized appreciation (depreciation) on: Investment securities (80,761,561) Assets and liabilities in 13 (80,761,548) foreign currencies NET GAIN (LOSS) (17,440,602) NET INCREASE (DECREASE) IN $ (18,530,595) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 519,808 charges paid to FDC Sales charges - Retained by $ 519,673 FDC Deferred sales charges $ 4,022 withheld by FDC Exchange fees withheld by FSC $ 30,054 Expense reductions Directed $ 81,471 brokerage arrangements Custodian credits 1,559 $ 83,030
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (1,089,993) $ (1,421,013) income (loss) Net realized gain (loss) 63,320,946 381,908 Change in net unrealized (80,761,548) 79,277,166 appreciation (depreciation) NET INCREASE (DECREASE) IN (18,530,595) 78,238,061 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (21,286,354) (1,977,498) From net realized gain In excess of net realized - (1,495,766) gain TOTAL DISTRIBUTIONS (21,286,354) (3,473,264) Share transactions Net 165,337,107 767,856,791 proceeds from sales of shares Reinvestment of distributions 20,405,937 3,407,803 Cost of shares redeemed (408,057,115) (702,182,873) NET INCREASE (DECREASE) IN (222,314,071) 69,081,721 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 439,543 805,978 TOTAL INCREASE (DECREASE) (261,691,477) 144,652,496 IN NET ASSETS NET ASSETS Beginning of period 337,513,172 192,860,676 End of period $ 75,821,695 $ 337,513,172 OTHER INFORMATION Shares Sold 2,486,363 13,691,594 Issued in reinvestment of 354,639 64,738 distributions Redeemed (6,337,585) (12,610,578) Net increase (decrease) (3,496,583) 1,145,754
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 67.50 $ 50.04 $ 33.25 $ 27.87 $ 23.91 period Income from Investment Operations Net investment income (loss) C (.39) (.28) (.27) (.13) (.14) Net realized and unrealized (6.72) 18.27 17.14 5.49 4.07 gain (loss) Total from investment (7.11) 17.99 16.87 5.36 3.93 operations Less Distributions From net realized gain (10.13) (.39) (.51) (.08) - In excess of net realized gain - (.30) - - - Total distributions (10.13) (.69) (.51) (.08) - Redemption fees added to paid .16 .16 .43 .10 .03 in capital Net asset value, end of period $ 50.42 $ 67.50 $ 50.04 $ 33.25 $ 27.87 TOTAL RETURN A, B (12.15)% 36.66% 52.61% 19.59% 16.56% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 75,822 $ 337,513 $ 192,861 $ 59,348 $ 44,051 (000 omitted) Ratio of expenses to average 1.25% 1.25% 1.63% 1.45% 1.94% net assets Ratio of expenses to average 1.20% D 1.22% D 1.55% D 1.39% D 1.92% D net assets after expense reductions Ratio of net investment (.60)% (.50)% (.67)% (.39)% (.53)% income (loss) to average net assets Portfolio turnover rate 88% 165% 308% 278% 235%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 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 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT AIR TRANSPORTATION 8.50% 139.48% 251.41% SELECT AIR TRANSPORTATION 5.18% 132.22% 240.79% (LOAD ADJ.) S&P 500 11.73% 206.94% 425.47% GS Cyclical Industries -7.75% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 246 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT AIR TRANSPORTATION 8.50% 19.08% 13.39% SELECT AIR TRANSPORTATION 5.18% 18.35% 13.04% (LOAD ADJ.) S&P 500 11.73% 25.14% 18.05% GS Cyclical Industries -7.75% 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 1990/02/28 9700.00 10000.00 1990/03/31 10207.25 10265.00 1990/04/30 9833.49 10008.38 1990/05/31 10518.72 10984.19 1990/06/30 10545.41 10909.50 1990/07/31 10225.05 10874.59 1990/08/31 8605.41 9891.53 1990/09/30 7742.20 9409.81 1990/10/31 8151.56 9369.35 1990/11/30 8026.97 9974.61 1990/12/31 8489.72 10252.90 1991/01/31 9495.32 10699.92 1991/02/28 10563.21 11464.97 1991/03/31 10518.72 11742.42 1991/04/30 10260.64 11770.60 1991/05/31 10865.78 12279.09 1991/06/30 10636.67 11716.71 1991/07/31 10963.67 12262.71 1991/08/31 10827.42 12553.34 1991/09/30 10464.08 12343.69 1991/10/31 10972.75 12509.10 1991/11/30 10482.25 12004.98 1991/12/31 11635.84 13378.35 1992/01/31 12308.01 13129.52 1992/02/29 12862.10 13300.20 1992/03/31 12108.18 13040.85 1992/04/30 11481.42 13424.25 1992/05/31 11635.84 13490.03 1992/06/30 11258.00 13289.02 1992/07/31 11193.29 13832.55 1992/08/31 10721.90 13548.98 1992/09/30 11073.13 13708.86 1992/10/31 11470.58 13756.84 1992/11/30 11747.88 14225.94 1992/12/31 12400.06 14400.92 1993/01/31 12512.19 14521.89 1993/02/28 12708.42 14719.39 1993/03/31 14110.09 15029.97 1993/04/30 14269.59 14666.24 1993/05/31 15084.73 15059.30 1993/06/30 13960.40 15102.97 1993/07/31 14438.24 15042.56 1993/08/31 15300.23 15612.67 1993/09/30 14991.04 15492.45 1993/10/31 15853.02 15813.15 1993/11/30 15890.50 15662.92 1993/12/31 16230.09 15852.44 1994/01/31 16856.88 16391.43 1994/02/28 16258.58 15947.22 1994/03/31 15318.40 15251.92 1994/04/30 15217.66 15447.15 1994/05/31 14581.49 15700.48 1994/06/30 14137.17 15315.82 1994/07/31 14874.33 15818.18 1994/08/31 15439.81 16466.72 1994/09/30 13713.06 16063.29 1994/10/31 13824.14 16424.71 1994/11/30 12905.22 15826.52 1994/12/31 12701.10 16061.23 1995/01/31 13109.82 16477.70 1995/02/28 14233.81 17119.83 1995/03/31 15153.44 17625.04 1995/04/30 16369.40 18144.10 1995/05/31 16635.07 18869.32 1995/06/30 18740.00 19307.65 1995/07/31 19373.52 19947.89 1995/08/31 18627.60 19997.96 1995/09/30 19312.21 20841.88 1995/10/31 19087.41 20767.47 1995/11/30 21549.97 21679.16 1995/12/31 20263.20 22096.70 1996/01/31 19803.63 22848.87 1996/02/29 22049.29 23060.68 1996/03/31 23177.34 23282.76 1996/04/30 22206.67 23625.95 1996/05/31 22418.06 24235.26 1996/06/30 22312.36 24327.60 1996/07/31 18655.29 23252.80 1996/08/31 18317.06 23743.20 1996/09/30 18095.10 25079.47 1996/10/31 17925.99 25771.16 1996/11/30 20113.89 27719.21 1996/12/31 20515.53 27170.09 1997/01/31 19712.25 28867.68 1997/02/28 18729.28 29094.00 1997/03/31 19881.36 27898.53 1997/04/30 20970.03 29564.07 1997/05/31 22428.63 31363.93 1997/06/30 22692.87 32769.03 1997/07/31 24056.34 35376.46 1997/08/31 23136.79 33394.67 1997/09/30 25028.74 35223.70 1997/10/31 24806.78 34047.23 1997/11/30 25440.95 35623.28 1997/12/31 26904.59 36234.93 1998/01/31 27926.86 36635.68 1998/02/28 30173.59 39277.85 1998/03/31 31532.86 41289.27 1998/04/30 32580.74 41704.64 1998/05/31 31222.74 40987.74 1998/06/30 33203.16 42652.66 1998/07/31 31437.76 42198.41 1998/08/31 24715.64 36097.36 1998/09/30 24330.88 38409.76 1998/10/31 26730.02 41534.01 1998/11/30 27307.17 44051.38 1998/12/31 28631.22 46589.63 1999/01/31 30634.27 48538.00 1999/02/28 31415.12 47029.44 1999/03/31 32874.98 48911.09 1999/04/30 36349.36 50805.42 1999/05/31 36152.81 49605.90 1999/06/30 37736.74 52359.03 1999/07/31 37956.41 50724.38 1999/08/31 36083.44 50473.29 1999/09/30 32904.03 49089.82 1999/10/31 36083.44 52196.23 1999/11/30 35794.41 53257.37 1999/12/31 38507.04 56394.23 2000/01/31 35285.24 53560.99 2000/02/29 34079.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000322 162626 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Air Transportation Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $34,079 - a 240.79% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS AMR Corp. 13.2 Southwest Airlines Co. 7.8 United Technologies Corp. 6.2 Delta Air Lines, Inc. 6.1 General Dynamics Corp. 5.5 BFGoodrich Co. 5.3 Northwest Airlines Corp. 5.1 Class A Atlas Air, Inc. 5.1 EGL, Inc. 4.8 Continental Airlines, Inc. 4.8 Class B 63.9 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Air Transportation 54.6% Row: 1, Col: 6, Value: 54.6 Aerospace & Defense 20.6% Row: 1, Col: 5, Value: 20.6 Trucking & Freight 12.1% Row: 1, Col: 4, Value: 12.1 Ship Building & Repair 5.5% Row: 1, Col: 3, Value: 5.5 Oil & Gas 0.2% Row: 1, Col: 2, Value: 0.2 *All Others 7.0% Row: 1, Col: 1, Value: 7.0
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. AIR TRANSPORTATION PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Chris Zepf)(photograph of Jeff Feingold) NOTE TO SHAREHOLDERS: The following is an interview with Chris Zepf (left), who managed Fidelity Select Air Transportation Portfolio for most of the period covered by this report, with additional comments from Jeff Feingold (right), who became manager of the fund on February 25, 2000. Q. HOW DID THE FUND PERFORM, CHRIS? C.Z. For the 12-month period that ended February 29, 2000, the fund returned 8.50%. For the same 12-month period, the Standard & Poor's 500 Index returned 11.73%. For another comparison, the Goldman Sachs Cyclical Industries Index - an index of 246 stocks designed to measure the performance of companies in the cyclical industries sector - fell 7.75%. Q. WHAT FACTORS DROVE AIR TRANSPORTATION STOCKS DURING THE PERIOD? C.Z. Air transport stocks had a pretty decent first half, thanks to the strong U.S. economy and rebounding foreign economies. But the second half proved much more difficult. The price of oil skyrocketed to more than $30 a barrel and the price of jet fuel - the second largest cost to airlines - more than doubled. Ongoing uncertainty about where fuel prices were headed was a constant challenge, despite the fact that some airlines had used various methods to hedge against the rising cost of fuel. What's more, the airlines met with little success in passing on fuel surcharges to their customers. Also, supply and demand conditions remained unfavorable. The number of available airline seats continued to outstrip demand in terms of the number of airline tickets sold. Further, rising interest rates called into question the group's future profitability. Q. WHY DID THE FUND OUTPERFORM THE GOLDMAN SACHS INDEX? C.Z. Despite the many challenges they faced during the year, airline stocks outpaced many of the more interest-rate sensitive industry groups that make up the Goldman Sachs Cyclical Industries Index. In addition, the fund was helped by strong stock picking. Skywest Airlines and Southwest Airlines both held up reasonably well. Skywest Airlines benefited from strong revenue growth and passing on much of its fuel cost increases to its partners. Low-cost carrier Southwest continued to enjoy good financial results, partly due to its exploding sales of tickets via the Internet. In 1999, nearly 20% of the company's revenues came from tickets bought on its web site. That helped to lower Southwest's distribution costs since ticket sales over the Internet cost the airline far less than ticket sales through travel agents. Q. SPEAKING OF INTERNET-BASED TICKET SALES, PREVIEW TRAVEL AND SABRE ALSO PERFORMED QUITE WELL AND CONTRIBUTED TO THE FUND'S OUTPERFORMANCE OF THE GOLDMAN SACHS INDEX DURING THE YEAR . . . C.Z. That's true. Last October, computer reservations provider Sabre Holdings agreed to acquire Preview Travel and combine it with Sabre's Travelocity.com unit. The combination of the No. 1 and No. 3 Web-based sellers of airline, hotel and cruise reservations helped generate investor enthusiasm for both companies. More recently, AMR, the parent company of both American Airlines and Sabre, announced that it would spin off Travelocity in a public offering of stock later this year, which also boosted the stock prices of Sabre and Preview. Q. WHICH HOLDINGS WERE DISAPPOINTING? C.Z. Airlines that hadn't hedged against rising fuel costs using various financial instruments were some of the biggest detractors from the fund's performance for the year. The stock price of Northwest Airlines, for example, dropped substantially because it hadn't hedged its oil exposure. That occurred despite the fact that the company enjoyed more revenue out of the economic rebound in Asia. Like most airlines, American Airlines announced disappointing fourth quarter 1999 earnings, blaming higher fuel costs. Furthermore, in my view, the market failed to realize the value of AMR's holdings in Sabre. Rising fuel prices hurt regional airlines, too, including America West. Q. TURNING TO YOU, JEFF, WHAT'S YOUR OUTLOOK? J.F. Airline stocks are cyclical, meaning they're susceptible to the global economy's ebbs and flow. As long as the global economy remains strong, airlines could do well. If growth slows dramatically, however, airline stocks will likely suffer. Another factor they'll have to contend with is fuel prices, and at present it's not clear whether oil will remain on the rise or if it will fall back to more historical levels. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 034 TRADING SYMBOL: FSAIX SIZE: as of February 29, 2000, more than $24 million MANAGER: Jeff Feingold, since February 2000; manager, Fidelity Select Transportation Portfolio, since February 2000; Fidelity Select Defense and Aerospace Portfolio, since 1998; equity analyst, various industries, 1997-1998; joined Fidelity in 1997 AIR TRANSPORTATION PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 93.0% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 20.6% BFGoodrich Co. 54,200 $ 1,297,413 Boeing Co. 29,700 1,095,188 Cordant Technologies, Inc. 27,000 874,125 Lockheed Martin Corp. 14,000 244,125 United Technologies Corp. 29,800 1,517,938 5,028,789 AIR TRANSPORTATION - 54.6% America West Holding Corp. 58,000 775,750 Class B (a) AMR Corp. (a) 61,200 3,235,947 Atlantic Coast Airlines 63,400 1,133,275 Holdings, Inc. (a) Atlas Air, Inc. (a) 51,400 1,243,238 Continental Airlines, Inc. 37,300 1,179,613 Class B (a) Delta Air Lines, Inc. 32,700 1,491,938 Northwest Airlines Corp. 72,900 1,257,525 Class A (a) Preview Travel, Inc. (a) 8,900 409,956 SkyWest, Inc. 15,500 460,156 Southwest Airlines Co. 103,050 1,899,984 US Airways Group, Inc. (a) 14,900 278,444 13,365,826 COMPUTER SERVICES & SOFTWARE - - 0.0% MatrixOne, Inc. 100 2,500 Onvia.com, Inc. 100 2,100 4,600 OIL & GAS - 0.2% Frontier Oil Corp. (a) 6,100 38,125 SHIP BUILDING & REPAIR - 5.5% General Dynamics Corp. 31,100 1,345,075 TRUCKING & FREIGHT - 12.1% Airborne Freight Corp. 7,400 136,900 Circle International Group, 10,700 261,481 Inc. EGL, Inc. (a) 42,150 1,185,469 Expeditors International of 20,700 781,425 Washington, Inc. Forward Air Corp. (a) 3,550 81,650 Fritz Companies, Inc. (a) 18,700 156,613 United Parcel Service, Inc. 6,700 365,988 Class B 2,969,526 TOTAL COMMON STOCKS 22,751,941 (Cost $22,647,059) CASH EQUIVALENTS - 7.5% SHARES VALUE (NOTE 1) Central Cash Collateral Fund, 404,800 $ 404,800 5.75% (b) Taxable Central Cash Fund, 1,426,701 1,426,701 5.66% (b) TOTAL CASH EQUIVALENTS 1,831,501 (Cost $1,831,501) TOTAL INVESTMENT PORTFOLIO - 24,583,442 100.5% (Cost $24,478,560) NET OTHER ASSETS - (0.5)% (120,693) NET ASSETS - 100% $ 24,462,749 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 $125,831,549 and $172,647,421, 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 $23,162 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $405,350. The fund received cash collateral of $404,800 which was invested in cash equivalents. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $24,971,097. Net unrealized depreciation aggregated $387,655, of which $1,803,915 related to appreciated investment securities and $2,191,570 related to depreciated investment securities. The fund hereby designates approximately $3,395,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 5% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. AIR TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 24,583,442 value (cost $24,478,560) - See accompanying schedule Receivable for investments 2,335,323 sold Receivable for fund shares 17,273 sold Dividends receivable 17,198 Interest receivable 9,030 Redemption fees receivable 1,301 Other receivables 4,368 TOTAL ASSETS 26,967,935 LIABILITIES Payable for investments $ 1,561,286 purchased Payable for fund shares 498,232 redeemed Accrued management fee 13,403 Other payables and accrued 27,465 expenses Collateral on securities 404,800 loaned, at value TOTAL LIABILITIES 2,505,186 NET ASSETS $ 24,462,749 Net Assets consist of: Paid in capital $ 16,382,386 Accumulated undistributed net 7,975,481 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 104,882 (depreciation) on investments NET ASSETS, for 924,983 $ 24,462,749 shares outstanding NET ASSET VALUE and $26.45 redemption price per share ($24,462,749 (divided by) 924,983 shares) Maximum offering price per $27.27 share (100/97.00 of $26.45) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 280,929 Dividends Interest 197,448 Security lending 6,345 TOTAL INCOME 484,722 EXPENSES Management fee $ 322,853 Transfer agent fees 345,244 Accounting and security 60,950 lending fees Non-interested trustees' 169 compensation Custodian fees and expenses 11,583 Registration fees 30,362 Audit 12,171 Legal 243 Total expenses before 783,575 reductions Expense reductions (32,638) 750,937 NET INVESTMENT INCOME (LOSS) (266,215) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 14,638,308 Foreign currency transactions 1,057 14,639,365 Change in net unrealized appreciation (depreciation) on: Investment securities (7,109,828) Assets and liabilities in (1,943) (7,111,771) foreign currencies NET GAIN (LOSS) 7,527,594 NET INCREASE (DECREASE) IN $ 7,261,379 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 116,840 charges paid to FDC Sales charges - Retained by $ 114,253 FDC Deferred sales charges $ 1,637 withheld by FDC Exchange fees withheld by FSC $ 8,575 Expense reductions Directed $ 32,616 brokerage arrangements Custodian credits 22 $ 32,638
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (266,215) $ (494,512) income (loss) Net realized gain (loss) 14,639,365 10,294,170 Change in net unrealized (7,111,771) (7,870,755) appreciation (depreciation) NET INCREASE (DECREASE) IN 7,261,379 1,928,903 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (5,518,710) (1,287,140) from net realized gains Share transactions Net 85,072,471 234,828,394 proceeds from sales of shares Reinvestment of distributions 5,319,847 1,276,230 Cost of shares redeemed (133,856,898) (352,683,506) NET INCREASE (DECREASE) IN (43,464,580) (116,578,882) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 235,249 701,437 TOTAL INCREASE (DECREASE) (41,486,662) (115,235,682) IN NET ASSETS NET ASSETS Beginning of period 65,949,411 181,185,093 End of period $ 24,462,749 $ 65,949,411 OTHER INFORMATION Shares Sold 2,797,655 8,676,907 Issued in reinvestment of 186,721 44,922 distributions Redeemed (4,434,782) (13,091,302) Net increase (decrease) (1,450,406) (4,369,473)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 27.76 $ 26.86 $ 17.72 $ 21.11 $ 13.93 period Income from Investment Operations Net investment income (loss) C (.15) (.14) (.19) (.22) (.01) Net realized and unrealized 2.59 1.06 10.59 (3.12) 7.47 gain (loss) Total from investment 2.44 .92 10.40 (3.34) 7.46 operations Less Distributions From net realized gain (3.88) (.21) (1.43) (.07) (.46) In excess of net realized gain - - - (.20) - Total distributions (3.88) (.21) (1.43) (.27) (.46) Redemption fees added to paid .13 .19 .17 .22 .18 in capital Net asset value, end of period $ 26.45 $ 27.76 $ 26.86 $ 17.72 $ 21.11 TOTAL RETURN A, B 8.50% 4.11% 61.10% (15.06)% 54.91% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 24,463 $ 65,949 $ 181,185 $ 35,958 $ 75,359 (000 omitted) Ratio of expenses to average 1.40% 1.35% 1.93% 1.89% 1.47% net assets Ratio of expenses to average 1.35% D 1.27% D 1.87% D 1.80% D 1.41% D net assets after expense reductions Ratio of net investment (.48)% (.50)% (.84)% (1.10)% (.07)% income (loss) to average net assets Portfolio turnover rate 252% 260% 294% 469% 504%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 AUTOMOTIVE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT AUTOMOTIVE -17.40% 23.22% 169.89% SELECT AUTOMOTIVE (LOAD ADJ.) -19.95% 19.46% 161.72% S&P 500 11.73% 206.94% 425.47% GS Cyclical Industries -7.75% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 246 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT AUTOMOTIVE -17.40% 4.27% 10.44% SELECT AUTOMOTIVE (LOAD ADJ.) -19.95% 3.62% 10.10% S&P 500 11.73% 25.14% 18.05% GS Cyclical Industries -7.75% 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 1990/02/28 9700.00 10000.00 1990/03/31 10062.62 10265.00 1990/04/30 10029.65 10008.38 1990/05/31 10598.30 10984.19 1990/06/30 10788.08 10909.50 1990/07/31 10821.51 10874.59 1990/08/31 9267.22 9891.53 1990/09/30 8381.44 9409.81 1990/10/31 8214.32 9369.35 1990/11/30 8698.99 9974.61 1990/12/31 9024.89 10252.90 1991/01/31 9534.62 10699.92 1991/02/28 10311.77 11464.97 1991/03/31 10395.33 11742.42 1991/04/30 10512.32 11770.60 1991/05/31 11356.31 12279.09 1991/06/30 11331.25 11716.71 1991/07/31 11799.20 12262.71 1991/08/31 12183.60 12553.34 1991/09/30 11824.27 12343.69 1991/10/31 12133.46 12509.10 1991/11/30 11531.80 12004.98 1991/12/31 12393.45 13378.35 1992/01/31 13732.33 13129.52 1992/02/29 15115.25 13300.20 1992/03/31 15441.16 13040.85 1992/04/30 16427.70 13424.25 1992/05/31 16418.90 13490.03 1992/06/30 16321.21 13289.02 1992/07/31 16471.19 13832.55 1992/08/31 15447.81 13548.98 1992/09/30 15191.96 13708.86 1992/10/31 15827.17 13756.84 1992/11/30 16594.70 14225.94 1992/12/31 17550.94 14400.92 1993/01/31 18361.40 14521.89 1993/02/28 18631.55 14719.39 1993/03/31 19631.11 15029.97 1993/04/30 19517.69 14666.24 1993/05/31 20706.21 15059.30 1993/06/30 21068.33 15102.97 1993/07/31 21309.75 15042.56 1993/08/31 22052.58 15612.67 1993/09/30 22284.71 15492.45 1993/10/31 22758.26 15813.15 1993/11/30 22758.26 15662.92 1993/12/31 23761.26 15852.44 1994/01/31 25115.78 16391.43 1994/02/28 24304.98 15947.22 1994/03/31 22597.52 15251.92 1994/04/30 22138.03 15447.15 1994/05/31 21810.06 15700.48 1994/06/30 21530.32 15315.82 1994/07/31 22176.62 15818.18 1994/08/31 21810.06 16466.72 1994/09/30 20884.03 16063.29 1994/10/31 21279.52 16424.71 1994/11/30 19996.58 15826.52 1994/12/31 20731.01 16061.23 1995/01/31 20238.44 16477.70 1995/02/28 21245.01 17119.83 1995/03/31 21137.93 17625.04 1995/04/30 21073.68 18144.10 1995/05/31 21502.00 18869.32 1995/06/30 22037.41 19307.65 1995/07/31 23622.22 19947.89 1995/08/31 23408.06 19997.96 1995/09/30 23525.85 20841.88 1995/10/31 22433.61 20767.47 1995/11/30 22990.44 21679.16 1995/12/31 23515.14 22096.70 1996/01/31 23236.73 22848.87 1996/02/29 23397.35 23060.68 1996/03/31 24821.54 23282.76 1996/04/30 26075.60 23625.95 1996/05/31 26676.02 24235.26 1996/06/30 26365.09 24327.60 1996/07/31 24831.86 23252.80 1996/08/31 25464.45 23743.20 1996/09/30 25678.89 25079.47 1996/10/31 25796.83 25771.16 1996/11/30 27104.90 27719.21 1996/12/31 27294.26 27170.09 1997/01/31 27772.33 28867.68 1997/02/28 28217.04 29094.00 1997/03/31 27661.15 27898.53 1997/04/30 28279.22 29564.07 1997/05/31 29896.50 31363.93 1997/06/30 30797.55 32769.03 1997/07/31 32149.13 35376.46 1997/08/31 31906.54 33394.67 1997/09/30 33650.89 35223.70 1997/10/31 32102.92 34047.23 1997/11/30 31883.44 35623.28 1997/12/31 31873.81 36234.93 1998/01/31 31861.21 36635.68 1998/02/28 34645.44 39277.85 1998/03/31 36749.37 41289.27 1998/04/30 36579.91 41704.64 1998/05/31 36375.71 40987.74 1998/06/30 35817.55 42652.66 1998/07/31 34483.41 42198.41 1998/08/31 27826.33 36097.36 1998/09/30 27839.94 38409.76 1998/10/31 30358.47 41534.01 1998/11/30 32005.72 44051.38 1998/12/31 33448.77 46589.63 1999/01/31 33884.41 48538.00 1999/02/28 31692.61 47029.44 1999/03/31 31011.92 48911.09 1999/04/30 34469.79 50805.42 1999/05/31 34333.66 49605.90 1999/06/30 35409.14 52359.03 1999/07/31 33516.84 50724.38 1999/08/31 32740.86 50473.29 1999/09/30 30753.26 49089.82 1999/10/31 28983.49 52196.23 1999/11/30 27839.94 53257.37 1999/12/31 28942.65 56394.23 2000/01/31 26750.85 53560.99 2000/02/29 26172.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000309 105819 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Automotive Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $26,172 - a 161.72% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS SPX Corp. 10.2 General Motors Corp. 7.9 Honda Motor Co. Ltd. 7.7 TRW, Inc. 7.1 Delphi Automotive Systems Corp. 7.0 Johnson Controls, Inc. 5.9 Navistar International Corp. 5.9 Eaton Corp. 5.0 Danaher Corp. 5.0 Dana Corp. 3.4 65.1 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Autos, Tires, & Accessories 87.0% Row: 1, Col: 5, Value: 87.0 Leasing & Rental 2.9% Row: 1, Col: 4, Value: 2.9 Consumer Durables 1.7% Row: 1, Col: 3, Value: 1.7 Iron & Steel 0.4% Row: 1, Col: 2, Value: 0.4 *All Others 8.0% Row: 1, Col: 1, Value: 8.0
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. (photograph of Douglas Nigen) Douglas Nigen, Portfolio Manager of Fidelity Select Automotive Portfolio Q. HOW DID THE FUND PERFORM, DOUG? A. For the 12 months that ended February 29, 2000, the fund returned - -17.40%. By comparison, the Goldman Sachs Cyclical Industries Index - an index of 246 stocks designed to measure the performance of companies in the cyclical industries sector - fell 7.75%. During the same period, the Standard & Poor's 500 Index returned 11.73%. Q. WHY DID THE FUND UNDERPERFORM BOTH THE GOLDMAN SACHS INDEX AND THE S&P 500 INDEX DURING THE PERIOD? A. Despite booming auto sales in North America, auto stocks were hammered by fears of rising interest rates as they tend to slow auto sales. In addition, the trend of the stock market had a big effect, as investors fled old economy - or industrial - stocks to buy new economy - - or technology - stocks. These two factors caused the fund to underperform both of its indexes. Also, a few of the fund's large positions in the weak aftermarket for auto parts hurt performance relative to the Goldman Sachs index. Q. SPECIFICALLY, WHAT HAPPENED IN THE AUTO AFTERMARKET? A. We witnessed a trend of too much inventory in the retail sector of the auto aftermarket. Companies such as PepBoys and AutoZone were forced to reduce new orders and clear current inventory, which slowed supplier sales during the period. Also, a few big names in the aftermarket suffered from company-specific problems. For example, Federal-Mogul was punished over the past year as the company struggled with acquisition-related difficulties. Q. WHICH OF THE FUND'S LARGE HOLDINGS PERFORMED WELL OVER THE PAST YEAR? A. While it was a rough year for automotive companies, there were a few bright spots. SPX - a diversified producer of industrial products, vehicle components and auto aftermarket diagnostic tools - was the biggest contributor to the fund's returns. Navistar International was another strong performer. The company produces trucks and engines, and it benefited from robust sales trends. Finally, some of the fund's underweighted positions helped performance. For example, Goodyear represented 5% of the Goldman Sachs index, but the fund held much less than that - a position that helped the fund's relative returns when that stock plummeted this year. I utilized the same underweighting strategy with some of the poor-performing European auto manufacturers, such as Volkswagen, Renault and DaimlerChrylser, which helped the fund. Q. WHICH STOCKS WERE DISAPPOINTING? A. As I mentioned, Federal-Mogul - the fund's biggest detractor from returns - suffered from acquisition-related difficulties. Another big position that was disappointing was PepBoys, a company that suffered from weakness in the auto aftermarket and also from a restructuring plan that went awry. In addition, many auto suppliers were hurt by fears about the advent of business-to-business e-commerce. Direct electronic auctions could make an already thin-margin business worse. I sold the fund's position in PepBoys by the end of the period. Q. SIX MONTHS AGO, YOU MENTIONED THAT THE UNITED AUTOWORKERS BEGAN NEGOTIATIONS ON A NEW CONTRACT. HOW DID THOSE NEGOTIATIONS AFFECT AUTO STOCKS? A. The UAW settled the strike, which was a positive for auto stocks in the short term because there was no disruption of production. However, the bad news is that the contract was very expensive and could weigh auto stocks down with the long-term worry of rising costs. Q. WHAT'S YOUR OUTLOOK? A. I expect the automotive industry to continue to be plagued by the same issues that affected the fund over the past year. Interest rates are expected to continue rising in the year 2000, so I don't expect automotive stocks to outperform the broad market in the near future. The difference, however, is that automotive stocks are a lot cheaper now, so I think the downside is limited. During this environment of higher interest rates, the fund needs to explore investments in stocks outside of pure-auto businesses. For example, General Motors did well over the past year because of its Hughes Electronics subsidiary. Johnson Controls, which has a large automation business, also did well. Finally, I believe there are opportunities among Japanese automakers because the Japanese economy looks to be bottoming and that's generally when auto companies begin 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 A- 3. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 502 TRADING SYMBOL: FSAVX SIZE: as of February 29, 2000, more than $10 million MANAGER: Douglas Nigen, since September 1999; analyst, automotive manufacturing, automotive parts, tire and rental car industries, since 1999; specialty apparel industry, 1997-1999; joined Fidelity in 1997 AUTOMOTIVE PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 92.0% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 87.0% American Axle & Manufacturing 1 $ 14 Holdings, Inc. Arvin Industries, Inc. 1,500 27,563 AutoNation, Inc. (a) 12,900 97,556 AutoZone, Inc. (a) 9,000 221,063 DaimlerChrysler AG (Reg.) 1,727 117,004 Dana Corp. 16,900 360,181 Danaher Corp. 12,900 526,481 Delphi Automotive Systems 44,524 742,994 Corp. Eaton Corp. 7,050 528,309 Federal-Mogul Corp. 7,750 105,594 Ford Motor Co. 8,600 357,975 Fuji Heavy Industries Ltd. 18,000 114,491 General Motors Corp. 11,000 836,688 Gentex Corp. (a) 10,900 318,484 Honda Motor Co. Ltd. (a) 24,000 810,000 Johnson Controls, Inc. 11,750 627,156 Lear Corp. (a) 7,550 159,494 Lithia Motors, Inc. (a) 4,900 73,194 Magna International, Inc. 3,800 153,353 Class A Michelin SA (Compagnie 3,000 93,861 Generale des Etablissements) Class B (a) Navistar International Corp. 19,000 622,250 (a) Oshkosh Truck Co. 1,700 45,050 Sonic Automotive, Inc. (a) 8,245 70,598 SPX Corp. (a) 12,400 1,079,572 Superior Industries 1,500 35,813 International, Inc. Tower Automotive, Inc. (a) 4,625 54,922 Toyota Motor Corp. 6,000 238,998 TRW, Inc. 15,600 748,800 Wynn's International, Inc. 1,200 15,975 9,183,433 COMPUTER SERVICES & SOFTWARE - - 0.0% MatrixOne, Inc. 100 2,500 Onvia.com, Inc. 100 2,100 4,600 CONSUMER DURABLES - 1.7% Snap-On, Inc. 8,100 176,681 IRON & STEEL - 0.4% SPS Technologies, Inc. (a) 1,300 42,494 LEASING & RENTAL - 2.9% Avis Rent A Car, Inc. (a) 9,930 144,606 Hertz Corp. Class A 4,390 157,217 301,823 SHARES VALUE (NOTE 1) LODGING & GAMING - 0.0% Magna Entertainment Corp. 760 $ 4,323 Class A (a) TOTAL COMMON STOCKS 9,713,354 (Cost $10,072,806) CASH EQUIVALENTS - 6.5% Taxable Central Cash Fund, 693,156 693,156 5.66% (b) (Cost $693,156) TOTAL INVESTMENT PORTFOLIO - 10,406,510 98.5% (Cost $10,765,962) NET OTHER ASSETS - 1.5% 154,973 NET ASSETS - 100% $ 10,561,483 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 $6,233,837 and $56,104,079, 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 $6,617 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 $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 85.4% Japan 11.1 Canada 1.5 Germany 1.1 Others (individually less 0.9 than 1%) 100.0% INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $10,838,332. Net unrealized depreciation aggregated $431,822, of which $1,048,119 related to appreciated investment securities and $1,479,941 related to depreciated investment securities. At February 29, 2000, the fund had a capital loss carryforward of approximately $7,479,000 of which $1,009,000 and $6,470,000 will expire on February 28, 2007 and February 29, 2008, respectively. The fund intends to elect to defer to its fiscal year ending February 28, 2001 approximately $866,000 of losses recognized during the period November 1, 1999 to February 29, 2000. AUTOMOTIVE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 10,406,510 value (cost $10,765,962) - See accompanying schedule Receivable for investments 349,440 sold Receivable for fund shares 27,034 sold Dividends receivable 27,342 Interest receivable 3,430 Redemption fees receivable 60 Other receivables 4,467 TOTAL ASSETS 10,818,283 LIABILITIES Payable to custodian bank $ 17,730 Payable for investments 116,414 purchased Payable for fund shares 92,944 redeemed Accrued management fee 5,542 Other payables and accrued 24,170 expenses TOTAL LIABILITIES 256,800 NET ASSETS $ 10,561,483 Net Assets consist of: Paid in capital $ 19,391,760 Accumulated undistributed net (8,470,853) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (359,424) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 549,086 $ 10,561,483 shares outstanding NET ASSET VALUE and $19.23 redemption price per share ($10,561,483 (divided by) 549,086 shares) Maximum offering price per $19.82 share (100/97.00 of $19.23) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 263,475 Dividends Interest 66,401 Security lending 327 TOTAL INCOME 330,203 EXPENSES Management fee $ 132,781 Transfer agent fees 209,768 Accounting and security 60,364 lending fees Non-interested trustees' 46 compensation Custodian fees and expenses 12,370 Registration fees 22,335 Audit 11,478 Legal 131 Interest 730 Total expenses before 450,003 reductions Expense reductions (7,118) 442,885 NET INVESTMENT INCOME (LOSS) (112,682) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (3,878,219) Foreign currency transactions 8,229 (3,869,990) Change in net unrealized appreciation (depreciation) on: Investment securities 764,848 Assets and liabilities in (19) 764,829 foreign currencies NET GAIN (LOSS) (3,105,161) NET INCREASE (DECREASE) IN $ (3,217,843) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 27,747 charges paid to FDC Sales charges - Retained by $ 27,747 FDC Deferred sales charges $ 430 withheld by FDC Exchange fees withheld by FSC $ 8,102 Expense reductions Directed $ 7,118 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (112,682) $ 69,009 income (loss) Net realized gain (loss) (3,869,990) (4,430,338) Change in net unrealized 764,829 (3,784,633) appreciation (depreciation) NET INCREASE (DECREASE) IN (3,217,843) (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 17,054,337 93,308,374 proceeds from sales of shares Reinvestment of distributions - 2,635,878 Cost of shares redeemed (67,890,860) (53,084,232) NET INCREASE (DECREASE) IN (50,836,523) 42,860,020 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 74,755 53,948 TOTAL INCREASE (DECREASE) (53,979,611) 32,052,152 IN NET ASSETS NET ASSETS Beginning of period 64,541,094 32,488,942 End of period (including $ 10,561,483 $ 64,541,094 undistributed net investment income of $0 and $47,401, respectively) OTHER INFORMATION Shares Sold 717,103 3,661,058 Issued in reinvestment of - 97,455 distributions Redeemed (2,940,612) (2,167,227) Net increase (decrease) (2,223,509) 1,591,286
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 23.28 $ 27.50 $ 25.38 $ 21.85 $ 19.84 period Income from Investment Operations Net investment income (loss) C (.12) .03 .05 .13 .03 Net realized and unrealized (4.01) (2.09) 5.21 4.28 1.95 gain (loss) Total from investment (4.13) (2.06) 5.26 4.41 1.98 operations Less Distributions From net investment income - (.01) (.08) (.17) - From net realized gain - (2.17) (3.09) (.75) - Total distributions - (2.18) (3.17) (.92) - Redemption fees added to paid .08 .02 .03 .04 .03 in capital Net asset value, end of period $ 19.23 $ 23.28 $ 27.50 $ 25.38 $ 21.85 TOTAL RETURN A, B (17.40)% (8.52)% 22.78% 20.60% 10.13% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 10,561 $ 64,541 $ 32,489 $ 86,347 $ 55,753 (000 omitted) Ratio of expenses to average 1.94% 1.45% 1.60% 1.56% 1.81% net assets Ratio of expenses to average 1.91% D 1.41% D 1.56% D 1.52% D 1.80% D net assets after expense reductions Ratio of net investment (.49)% .11% .17% .54% .13% income (loss) to average net assets Portfolio turnover rate 29% 96% 153% 175% 61%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 CHEMICALS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT CHEMICALS 11.10% 48.63% 206.89% SELECT CHEMICALS (LOAD ADJ.) 7.70% 44.10% 197.61% S&P 500 11.73% 206.94% 425.47% GS Cyclical Industries -7.75% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 246 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT CHEMICALS 11.10% 8.25% 11.87% SELECT CHEMICALS (LOAD ADJ.) 7.70% 7.58% 11.52% S&P 500 11.73% 25.14% 18.05% GS Cyclical Industries -7.75% 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 1990/02/28 9700.00 10000.00 1990/03/31 9987.95 10265.00 1990/04/30 9755.87 10008.38 1990/05/31 10606.82 10984.19 1990/06/30 10693.40 10909.50 1990/07/31 10728.78 10874.59 1990/08/31 9295.92 9891.53 1990/09/30 8835.99 9409.81 1990/10/31 8937.70 9369.35 1990/11/30 9534.73 9974.61 1990/12/31 9946.01 10252.90 1991/01/31 10613.80 10699.92 1991/02/28 11427.52 11464.97 1991/03/31 11701.71 11742.42 1991/04/30 11608.84 11770.60 1991/05/31 12413.72 12279.09 1991/06/30 12076.36 11716.71 1991/07/31 12658.40 12262.71 1991/08/31 12907.22 12553.34 1991/09/30 12809.47 12343.69 1991/10/31 13013.85 12509.10 1991/11/30 12365.16 12004.98 1991/12/31 13791.31 13378.35 1992/01/31 14056.18 13129.52 1992/02/29 14563.07 13300.20 1992/03/31 14458.04 13040.85 1992/04/30 14983.21 13424.25 1992/05/31 14896.44 13490.03 1992/06/30 14454.89 13289.02 1992/07/31 14911.00 13832.55 1992/08/31 14401.52 13548.98 1992/09/30 14416.07 13708.86 1992/10/31 14270.50 13756.84 1992/11/30 14702.36 14225.94 1992/12/31 15019.39 14400.92 1993/01/31 15003.94 14521.89 1993/02/28 14741.25 14719.39 1993/03/31 15091.50 15029.97 1993/04/30 15371.41 14666.24 1993/05/31 15604.15 15059.30 1993/06/30 15212.73 15102.97 1993/07/31 15445.47 15042.56 1993/08/31 16201.87 15612.67 1993/09/30 15688.79 15492.45 1993/10/31 16281.22 15813.15 1993/11/30 16402.88 15662.92 1993/12/31 16935.42 15852.44 1994/01/31 18253.65 16391.43 1994/02/28 18224.86 15947.22 1994/03/31 17678.00 15251.92 1994/04/30 18532.90 15447.15 1994/05/31 18979.12 15700.48 1994/06/30 18741.52 15315.82 1994/07/31 19587.61 15818.18 1994/08/31 20723.46 16466.72 1994/09/30 20572.79 16063.29 1994/10/31 20538.02 16424.71 1994/11/30 18926.97 15826.52 1994/12/31 19437.69 16061.23 1995/01/31 18929.75 16477.70 1995/02/28 20028.32 17119.83 1995/03/31 20642.58 17625.04 1995/04/30 21085.09 18144.10 1995/05/31 21295.04 18869.32 1995/06/30 21654.96 19307.65 1995/07/31 22680.72 19947.89 1995/08/31 22776.70 19997.96 1995/09/30 23136.61 20841.88 1995/10/31 21984.88 20767.47 1995/11/30 22944.66 21679.16 1995/12/31 23606.74 22096.70 1996/01/31 24691.81 22848.87 1996/02/29 25531.45 23060.68 1996/03/31 26765.07 23282.76 1996/04/30 27043.97 23625.95 1996/05/31 26985.48 24235.26 1996/06/30 26641.01 24327.60 1996/07/31 25562.11 23252.80 1996/08/31 26693.01 23743.20 1996/09/30 27875.89 25079.47 1996/10/31 28064.38 25771.16 1996/11/30 29097.78 27719.21 1996/12/31 28686.72 27170.09 1997/01/31 29135.70 28867.68 1997/02/28 29377.46 29094.00 1997/03/31 28431.14 27898.53 1997/04/30 29482.43 29564.07 1997/05/31 30934.42 31363.93 1997/06/30 31784.88 32769.03 1997/07/31 34329.33 35376.46 1997/08/31 34433.04 33394.67 1997/09/30 34647.38 35223.70 1997/10/31 32918.82 34047.23 1997/11/30 33105.50 35623.28 1997/12/31 33413.86 36234.93 1998/01/31 32932.15 36635.68 1998/02/28 35096.02 39277.85 1998/03/31 36388.23 41289.27 1998/04/30 36499.13 41704.64 1998/05/31 35070.39 40987.74 1998/06/30 32244.15 42652.66 1998/07/31 29503.79 42198.41 1998/08/31 25935.85 36097.36 1998/09/30 25810.93 38409.76 1998/10/31 26521.40 41534.01 1998/11/30 28434.19 44051.38 1998/12/31 28102.53 46589.63 1999/01/31 26543.19 48538.00 1999/02/28 26793.03 47029.44 1999/03/31 27714.85 48911.09 1999/04/30 33176.84 50805.42 1999/05/31 31720.88 49605.90 1999/06/30 32186.10 52359.03 1999/07/31 31695.04 50724.38 1999/08/31 31367.66 50473.29 1999/09/30 30058.16 49089.82 1999/10/31 30592.30 52196.23 1999/11/30 31393.51 53257.37 1999/12/31 33494.82 56394.23 2000/01/31 31354.04 53560.99 2000/02/29 29761.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000309 110645 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Chemicals Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $29,761 - a 197.61% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Union Carbide Corp. 11.6 Rohm & Haas Co. 8.4 Minnesota Mining & 7.7 Manufacturing Co. Avery Dennison Corp. 7.2 PPG Industries, Inc. 5.6 E.I. du Pont de Nemours and Co. 5.4 Monsanto Co. 4.7 Air Products & Chemicals, Inc. 3.4 Georgia Gulf Corp. 3.3 Ecolab, Inc. 3.3 60.6 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Chemicals & Plastics 73.5% Row: 1, Col: 6, Value: 73.5 Consumer Durables 7.7% Row: 1, Col: 5, Value: 7.7 Drugs & Pharmaceuticals 3.9% Row: 1, Col: 4, Value: 3.9 Services 3.3% Row: 1, Col: 3, Value: 3.3 Agriculture 1.1% Row: 1, Col: 2, Value: 1.1 *All Others 10.5% Row: 1, Col: 1, Value: 10.5
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. (photograph of Jonathan Zang) Jonathan Zang, Portfolio Manager of Fidelity Select Chemicals Portfolio Q. HOW DID THE FUND PERFORM, JONATHAN? A. For the 12 months that ended on February 29, 2000, the fund had a total return of 11.10% while the Goldman Sachs Cyclical Industries Index - designed to measure the performance of 246 stocks in the cyclical industries sector - returned -7.75%. During the same 12-month period, the Standard & Poor's 500 Index, a measure of the broader market's performance, had a return of 11.73%. Q. WHAT FACTORS INFLUENCED THE FUND'S PERFORMANCE? A. Chemical company stocks did extremely well during the early part of the period, as accelerating worldwide economic growth resulted in increased demand for many industrial products, contributing to strong performance by cyclical stocks in general. During the final six months of the period, many chemical companies reported stronger-than-expected earnings growth. In January and February 2000, however, stocks of companies in the chemical and other cyclical industries lost ground as rising interest rates increased concerns that U.S. economic growth would slow, resulting in diminished demand for many products in this sector. In addition, higher oil prices put near-term pressure on profit margins of chemical companies, many of which use oil-based derivatives. Still, during the full 12-month period, chemical stocks tended to perform better than stocks in other cyclical industries. Q. WHAT WERE YOUR PRINCIPAL STRATEGIES? A. To take advantage of the worldwide economic expansion, I favored companies with significant international sales, such as Rohm & Haas, Avery Dennison and DuPont. At the same time, I tended to avoid companies seeking to acquire other companies to compensate for their own lack of internal growth. In general, I de-emphasized companies closely tied to changes in commodity prices or dependent on sales of one chemical product. They tend to be more volatile, and I invested only when I saw a specific positive factor, such as an overly depressed stock price, that could compensate for the added risk. Q. WHAT COMPANIES HELPED SUPPORT PERFORMANCE? A. The largest single contributor was Optical Coatings, which manufactures specialized chemicals used by technology and telecommunications equipment companies. A beneficiary of the expansion of the Internet's infrastructure, Optical Coatings' stock value also rose when it was taken over by JDS Uniphase, a fast-growing technology company. The industry consolidation theme also was a factor in the strong performance of several other holdings that were acquired, including Pioneer Hi-Bred, Nalco Chemical and Union Carbide. Other contributors were the large industry leaders that I emphasized, including DuPont, Dow and Minnesota Mining & Manufacturing (3M). Q. WHAT INVESTMENTS WERE DISAPPOINTING? A. Air Products, a company specializing in oxygen and other gases, performed poorly after it overpaid for an acquisition. Ecolab, a specialty chemical company that makes sanitation products for the food service and hospitality industries, had strong earnings growth that met all expectations. However, investors became concerned that its growth was slowing, a concern that now appears unfounded. Monsanto was disappointing both because of the controversy over genetically modified grain seeds and because investors were disappointed with the financial terms of Monsanto's proposed merger with Pharmacia & Upjohn. Q. WHAT IS YOUR OUTLOOK? A. I have been surprised at the extent to which the stock market has reacted to the Federal Reserve Board's interest-rate increases and the extent to which the market appears to be discounting a significant economic slowdown. I do not think the Fed will raise interest rates so much as to put the U.S. economy into a recession, and therefore I see more upside potential than downside risk in chemical stocks at their current prices. Many chemical company stocks are trading at extremely low valuations and appear especially attractive within the context of accelerating worldwide economic growth. Eventually, I expect these stocks to trade closer to their intrinsic values as determined by their ability to consistently deliver strong growth in both earnings and cash flow. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 069 TRADING SYMBOL: FSCHX SIZE: as of February 29, 2000, more than $26 million MANAGER: Jonathan Zang, since 1999; manager, Fidelity Select Utilities Growth Portfolio, 1998-1999; analyst, electric and gas utilities and independent power producers, 1997-1999; joined Fidelity in 1997 CHEMICALS PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 91.6% SHARES VALUE (NOTE 1) AGRICULTURE - 1.1% Delta & Pine Land Co. 16,000 $ 287,000 BUILDING MATERIALS - 0.6% Ferro Corp. 8,500 160,438 CHEMICALS & PLASTICS - 73.5% Air Products & Chemicals, 34,600 890,950 Inc. Albemarle Corp. 5,100 76,819 Arch Chemicals, Inc. 35,850 683,391 Avery Dennison Corp. 31,200 1,893,450 CK Witco Corp. 72,149 766,583 Dexter Corp. 13,600 627,300 Dow Chemical Co. 5,900 640,150 E.I. du Pont de Nemours and 28,337 1,431,019 Co. Eastman Chemical Co. 5,500 197,656 Engelhard Corp. 26,900 366,513 Geon Co. 9,900 206,663 Georgia Gulf Corp. 38,100 866,775 Great Lakes Chemical Corp. 15,300 444,656 IMC Global, Inc. 32,500 438,750 Lyondell Chemical Co. 24,000 205,500 Monsanto Co. 32,200 1,249,763 Olin Corp. 24,400 378,200 PPG Industries, Inc. 30,000 1,481,250 Praxair, Inc. 20,800 702,000 Rohm & Haas Co. 54,743 2,210,249 Union Carbide Corp. 56,800 3,049,446 Valspar Corp. 11,700 383,906 Wellman, Inc. 7,900 147,138 19,338,127 COMPUTER SERVICES & SOFTWARE - - 0.0% MatrixOne, Inc. 100 2,500 Onvia.com, Inc. 100 2,100 4,600 CONSUMER DURABLES - 7.7% Minnesota Mining & 22,900 2,018,063 Manufacturing Co. DRUGS & PHARMACEUTICALS - 3.9% Cambrex Corp. 8,100 325,013 Chirex, Inc. (a) 7,000 174,125 Millennium Pharmaceuticals, 1,000 260,125 Inc. (a) Symyx Technologies, Inc. 4,800 264,000 1,023,263 MEDICAL FACILITIES MANAGEMENT - - 0.6% Apria Healthcare Group, Inc. 11,500 163,875 (a) SHARES VALUE (NOTE 1) SERVICES - 3.3% Ecolab, Inc. 30,300 $ 855,975 TEXTILES & APPAREL - 0.9% Polymer Group, Inc. 16,400 244,975 TOTAL COMMON STOCKS 24,096,316 (Cost $24,965,540) CASH EQUIVALENTS - 10.8% Taxable Central Cash Fund, 2,833,046 2,833,046 5.66% (b)(Cost $2,833,046) TOTAL INVESTMENT PORTFOLIO - 26,929,362 102.4% (Cost $27,798,586) NET OTHER ASSETS - (2.4)% (621,909) NET ASSETS - 100% $ 26,307,453 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 $45,523,982 and $54,039,928, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $8,076 for the period. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $28,267,708. Net unrealized depreciation aggregated $1,338,346, of which $2,173,495 related to appreciated investment securities and $3,511,841 related to depreciated investment securities. The fund hereby designates approximately $390,000 as a capital gain dividend for the purpose of the dividend paid deduction. The fund intends to elect to defer to its fiscal year ending February 28, 2001 approximately $613,000 of losses recognized during the period November 1, 1999 to February 29, 2000. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. CHEMICALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 26,929,362 value (cost $27,798,586) - See accompanying schedule Receivable for investments 520,876 sold Receivable for fund shares 33,135 sold Dividends receivable 99,587 Interest receivable 9,224 Redemption fees receivable 113 Other receivables 177 TOTAL ASSETS 27,592,474 LIABILITIES Payable for investments $ 891,931 purchased Payable for fund shares 346,321 redeemed Accrued management fee 14,475 Other payables and accrued 32,294 expenses TOTAL LIABILITIES 1,285,021 NET ASSETS $ 26,307,453 Net Assets consist of: Paid in capital $ 27,952,812 Undistributed net investment 81,847 income Accumulated undistributed net (857,982) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (869,224) (depreciation) on investments NET ASSETS, for 778,469 $ 26,307,453 shares outstanding NET ASSET VALUE and $33.79 redemption price per share ($26,307,453 (divided by) 778,469 shares) Maximum offering price per $34.84 share (100/97.00 of $33.79) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 626,795 Dividends Interest 158,513 Security lending 338 TOTAL INCOME 785,646 EXPENSES Management fee $ 224,179 Transfer agent fees 294,011 Accounting and security 60,376 lending fees Non-interested trustees' 189 compensation Custodian fees and expenses 12,785 Registration fees 27,040 Audit 11,980 Legal 149 Miscellaneous 660 Total expenses before 631,369 reductions Expense reductions (1,452) 629,917 NET INVESTMENT INCOME 155,729 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 2,023,589 Foreign currency transactions (1,627) 2,021,962 Change in net unrealized appreciation (depreciation) on: Investment securities 755,364 Assets and liabilities in (13) 755,351 foreign currencies NET GAIN (LOSS) 2,777,313 NET INCREASE (DECREASE) IN $ 2,933,042 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 91,594 charges paid to FDC Sales charges - Retained by $ 91,594 FDC Deferred sales charges $ 4,185 withheld by FDC Exchange fees withheld by FSC $ 5,476 Expense reductions $ 1,452 Directed brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ 155,729 $ 208,208 income Net realized gain (loss) 2,021,962 2,558,079 Change in net unrealized 755,351 (15,018,011) appreciation (depreciation) NET INCREASE (DECREASE) IN 2,933,042 (12,251,724) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (75,847) (51,919) From net investment income From net realized gain (615,000) (3,969,737) In excess of net realized - (773,436) gain TOTAL DISTRIBUTIONS (690,847) (4,795,092) Share transactions Net 60,660,224 17,546,799 proceeds from sales of shares Reinvestment of distributions 656,447 4,627,284 Cost of shares redeemed (69,265,144) (42,678,413) NET INCREASE (DECREASE) IN (7,948,473) (20,504,330) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 151,992 63,464 TOTAL INCREASE (DECREASE) (5,554,286) (37,487,682) IN NET ASSETS NET ASSETS Beginning of period 31,861,739 69,349,421 End of period (including $ 26,307,453 $ 31,861,739 undistributed net investment income of $81,847 and $159,886, respectively) OTHER INFORMATION Shares Sold 1,623,343 503,657 Issued in reinvestment of 18,089 132,380 distributions Redeemed (1,887,294) (1,122,609) Net increase (decrease) (245,862) (486,572)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 31.10 $ 45.90 $ 42.53 $ 39.53 $ 33.91 period Income from Investment Operations Net investment income (loss) C .15 .17 (.02) .28 .01 Net realized and unrealized 3.22 (10.77) 7.88 5.49 8.89 gain (loss) Total from investment 3.37 (10.60) 7.86 5.77 8.90 operations Less Distributions From net investment income (.09) (.05) - (.12) (.08) From net realized gain (.73) (3.52) (4.54) (2.74) (3.22) In excess of net realized gain - (.68) - - - Total distributions (.82) (4.25) (4.54) (2.86) (3.30) Redemption fees added to paid .14 .05 .05 .09 .02 in capital Net asset value, end of period $ 33.79 $ 31.10 $ 45.90 $ 42.53 $ 39.53 TOTAL RETURN A, B 11.10% (23.66)% 19.47% 15.06% 27.48% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 26,307 $ 31,862 $ 69,349 $ 111,409 $ 89,230 (000 omitted) Ratio of expenses to average 1.64% 1.58% 1.68% 1.83% 1.99% net assets Ratio of expenses to average 1.63% D 1.51% D 1.67% D 1.81% D 1.97% D net assets after expense reductions Ratio of net investment .40% .44% (.05)% .67% .04% income (loss) to average net assets Portfolio turnover rate 132% 141% 31% 207% 87%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 CONSTRUCTION AND HOUSING PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT CONSTRUCTION AND -18.28% 61.76% 203.15% HOUSING SELECT CONSTRUCTION AND -20.80% 56.84% 193.98% HOUSING (LOAD ADJ.) S&P 500 11.73% 206.94% 425.47% GS Cyclical Industries -7.75% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 246 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT CONSTRUCTION AND -18.28% 10.10% 11.73% HOUSING SELECT CONSTRUCTION AND -20.80% 9.42% 11.39% HOUSING (LOAD ADJ.) S&P 500 11.73% 25.14% 18.05% GS Cyclical Industries -7.75% 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 1990/02/28 9700.00 10000.00 1990/03/31 10246.00 10265.00 1990/04/30 9947.41 10008.38 1990/05/31 10868.78 10984.19 1990/06/30 10672.56 10909.50 1990/07/31 10115.90 10874.59 1990/08/31 8829.82 9891.53 1990/09/30 7918.04 9409.81 1990/10/31 7639.71 9369.35 1990/11/30 8378.73 9974.61 1990/12/31 9165.73 10252.90 1991/01/31 9971.93 10699.92 1991/02/28 10845.32 11464.97 1991/03/31 11114.05 11742.42 1991/04/30 11286.81 11770.60 1991/05/31 12409.73 12279.09 1991/06/30 11776.29 11716.71 1991/07/31 12083.41 12262.71 1991/08/31 12582.49 12553.34 1991/09/30 12304.16 12343.69 1991/10/31 12093.01 12509.10 1991/11/30 11488.36 12004.98 1991/12/31 12952.54 13378.35 1992/01/31 13915.44 13129.52 1992/02/29 14143.22 13300.20 1992/03/31 14132.87 13040.85 1992/04/30 14329.59 13424.25 1992/05/31 14785.15 13490.03 1992/06/30 13728.70 13289.02 1992/07/31 13977.37 13832.55 1992/08/31 13500.75 13548.98 1992/09/30 13676.89 13708.86 1992/10/31 14153.51 13756.84 1992/11/30 14972.05 14225.94 1992/12/31 15376.14 14400.92 1993/01/31 16018.54 14521.89 1993/02/28 16308.65 14719.39 1993/03/31 16692.02 15029.97 1993/04/30 16298.15 14666.24 1993/05/31 16474.40 15059.30 1993/06/30 16671.39 15102.97 1993/07/31 17241.62 15042.56 1993/08/31 17956.99 15612.67 1993/09/30 18537.59 15492.45 1993/10/31 19211.50 15813.15 1993/11/30 18910.83 15662.92 1993/12/31 20544.19 15852.44 1994/01/31 21215.36 16391.43 1994/02/28 20785.39 15947.22 1994/03/31 19568.89 15251.92 1994/04/30 19524.62 15447.15 1994/05/31 18491.46 15700.48 1994/06/30 18038.13 15315.82 1994/07/31 18554.71 15818.18 1994/08/31 19261.06 16466.72 1994/09/30 18185.73 16063.29 1994/10/31 17648.06 16424.71 1994/11/30 16931.18 15826.52 1994/12/31 17268.51 16061.23 1995/01/31 17344.29 16477.70 1995/02/28 18177.95 17119.83 1995/03/31 18502.74 17625.04 1995/04/30 18524.40 18144.10 1995/05/31 19433.84 18869.32 1995/06/30 19617.89 19307.65 1995/07/31 20527.33 19947.89 1995/08/31 20538.16 19997.96 1995/09/30 20419.06 20841.88 1995/10/31 20408.24 20767.47 1995/11/30 21664.13 21679.16 1995/12/31 22237.90 22096.70 1996/01/31 22192.63 22848.87 1996/02/29 22136.05 23060.68 1996/03/31 22894.29 23282.76 1996/04/30 22923.35 23625.95 1996/05/31 23677.64 24235.26 1996/06/30 23819.07 24327.60 1996/07/31 22817.28 23252.80 1996/08/31 23889.79 23743.20 1996/09/30 25186.22 25079.47 1996/10/31 24809.08 25771.16 1996/11/30 25940.51 27719.21 1996/12/31 25176.10 27170.09 1997/01/31 25426.79 28867.68 1997/02/28 26262.41 29094.00 1997/03/31 25510.35 27898.53 1997/04/30 26028.63 29564.07 1997/05/31 28519.60 31363.93 1997/06/30 29025.78 32769.03 1997/07/31 32076.22 35376.46 1997/08/31 31982.98 33394.67 1997/09/30 32995.35 35223.70 1997/10/31 31716.56 34047.23 1997/11/30 32422.56 35623.28 1997/12/31 32687.21 36234.93 1998/01/31 33863.83 36635.68 1998/02/28 36776.69 39277.85 1998/03/31 38670.77 41289.27 1998/04/30 38656.20 41704.64 1998/05/31 37980.29 40987.74 1998/06/30 38397.34 42652.66 1998/07/31 37016.76 42198.41 1998/08/31 31321.88 36097.36 1998/09/30 30962.35 38409.76 1998/10/31 34341.89 41534.01 1998/11/30 37002.38 44051.38 1998/12/31 40151.83 46589.63 1999/01/31 39461.54 48538.00 1999/02/28 35981.33 47029.44 1999/03/31 35578.66 48911.09 1999/04/30 37837.27 50805.42 1999/05/31 36945.29 49605.90 1999/06/30 37736.56 52359.03 1999/07/31 36441.75 50724.38 1999/08/31 33938.45 50473.29 1999/09/30 33060.85 49089.82 1999/10/31 33895.29 52196.23 1999/11/30 33075.24 53257.37 1999/12/31 35154.71 56394.23 2000/01/31 31613.94 53560.99 2000/02/29 29398.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000320 115611 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Construction and Housing Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $29,398 - a 193.98% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Lowe's Companies, Inc. 8.0 Home Depot, Inc. 7.7 Fannie Mae 6.1 Caterpillar, Inc. 5.9 Deere & Co. 5.9 Masco Corp. 5.4 Equity Residential Properties 3.5 Trust (SBI) Georgia-Pacific Corp. 3.4 Fluor Corp. 3.4 Vulcan Materials Co. 2.5 51.8 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Retail & Wholesale, Miscellaneous 15.7% Row: 1, Col: 6, Value: 15.7 Building Materials 14.7% Row: 1, Col: 5, Value: 14.7 Industrial Machinery & Equipment 13.2% Row: 1, Col: 4, Value: 13.2 Real Estate Investment Trusts 12.6% Row: 1, Col: 3, Value: 12.6 Federal Sponsored Credit 6.7% Row: 1, Col: 2, Value: 6.7 *All Others 37.1% Row: 1, Col: 1, Value: 37.1
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. (photograph of Brian Hogan) Brian Hogan, Portfolio Manager of Fidelity Select Construction and Housing Portfolio Q. HOW DID THE FUND PERFORM, BRIAN? A. For the 12 months that ended February 29, 2000, the fund returned - -18.28%. For the same 12-month period, the Goldman Sachs Cyclical Industries Index - an index of 246 stocks designed to measure the performance of companies in the cyclical industries sector - fell 7.75%, while the Standard & Poor's 500 Index returned 11.73%. The fund underperformed the Goldman Sachs index because the index is more broadly based than the fund, with greater exposure to sectors that are not represented in the construction and housing universe. Several of those sectors outperformed construction and housing stocks during the past 12 months. Q. WHAT CHARACTERIZED THE INVESTMENT ENVIRONMENT DURING THE PERIOD? A. Two factors created an unfavorable environment. First, steadily rising interest rates had a significant impact on construction and housing stock prices. Since June 1999, the Federal Reserve Board has raised interest rates four times. Higher interest rates are typically followed by higher mortgage rates, which usually reduce new and existing home sales. In turn, slower building activity negatively impacts suppliers to the construction and housing market. Although building activity remained robust throughout the period, increasing rates raised investors' expectations for a peak in the building cycle, and stock prices weakened despite strong operating characteristics for many companies. Second, the stock market became two-tiered during the period. Investors increasingly favored new economy stocks with high revenue growth expectations - such as technology and communications - at the expense of stocks in more mature, old economy industries. Q. WHAT WAS YOUR STRATEGY IN SUCH A CHALLENGING ENVIRONMENT? A. I focused on selecting the best stocks available within a poorly performing sector, primarily stocks that I expected to decline less in a weak market environment and to rebound first when market sentiment shifts, as it inevitably does. In addition, within the construction and housing sector there are two types of companies - those that are more consumer-oriented and those that are more manufacturing-oriented. In the fund, I emphasized stocks of manufacturing and engineering companies that were positioned to benefit from a global economic recovery in Southeast Asia, Latin America and Europe, as well as from strong industrial production domestically. At the same time, I underweighted stocks of companies that were more sensitive to consumer spending and the residential housing market, such as carpet manufacturers and building material suppliers. Q. WHICH HOLDINGS BENEFITED PERFORMANCE? A. Home Depot offered some of the highest revenue growth available within the sector, and it performed well for most of the period. Known as a "category killer," Home Depot continued to gain market share and exert greater control over its suppliers, as well as benefit from positive housing activity during the period. Danaher, which manufactures Sears' Craftsman Tools, also performed well, although I reduced the fund's exposure on concerns that increasing market leadership by chains like Home Depot could erode the Sears distribution channel. Q. WERE THERE ANY DISAPPOINTMENTS? A. Consumer-oriented carpet manufacturers such as Maxim, Mohawk and Shaw performed poorly as investors feared that higher interest rates could derail the housing market expansion that began in 1991. Another disappointment was a missed opportunity during the first two months of the period, when cyclical and commodity-oriented stocks - such as equipment manufacturers - posted a surprising rally. Although I acted quickly to add holdings in those underrepresented sectors when I assumed the fund's management, much of the market's move already had taken place. Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? A. I am cautious. Despite record levels of building activity in 1999, stocks reacted negatively as the market viewed these levels as unsustainable in the face of rising interest rates. However, as higher rates take hold and investors are provided with more concrete evidence that the building cycle may have peaked, stocks in this sector may begin to perform better. In the meantime, it's important to remember that when a sector is out of favor, a company's stock price does not necessarily represent its fundamental business characteristics. Accordingly, I will continue to seek out the best-managed companies with the most attractive long-term prospects. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 511 TRADING SYMBOL: FSHOX SIZE: as of February 29, 2000, more than $7 million MANAGER: Brian Hogan, since 1999; manager, Fidelity Select Cyclical Industries Portfolio, since February 2000; equity analyst, various industries, since 1998; high-yield analyst and portfolio manager, 1995-1998; joined Fidelity in 1994 CONSTRUCTION AND HOUSING PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 95.1% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 14.7% Armstrong World Industries, 700 $ 13,300 Inc. Carlisle Companies, Inc. 1,500 49,688 Elcor Corp. 1,950 65,325 Johns Manville Corp. 3,000 24,375 Lafarge Corp. 4,016 79,065 Masco Corp. 23,900 427,213 Owens Corning 3,900 56,550 Sherwin-Williams Co. 4,000 76,500 Southdown, Inc. 2,040 101,235 USG Corp. 2,100 68,250 Vulcan Materials Co. 5,000 200,000 1,161,501 CHEMICALS & PLASTICS - 1.6% DuPont Canada, Inc. 4,000 124,172 COMPUTER SERVICES & SOFTWARE - - 0.1% MatrixOne, Inc. 100 2,500 Onvia.com, Inc. 100 2,100 4,600 CONSTRUCTION - 4.5% Centex Corp. 4,000 78,750 Clayton Homes, Inc. 7,000 56,875 D.R. Horton, Inc. 2,900 32,625 Jacobs Engineering Group, 1,200 33,675 Inc. (a) Kaufman & Broad Home Corp. 2,300 43,988 Lennar Corp. 5,000 82,500 M/I Schottenstein Homes, Inc. 2,000 28,875 357,288 CONSUMER ELECTRONICS - 6.3% Black & Decker Corp. 6,000 197,625 Maytag Corp. 4,100 108,394 Whirlpool Corp. 3,500 190,094 496,113 CREDIT & OTHER FINANCE - 1.6% Countrywide Credit 4,996 124,588 Industries, Inc. ENGINEERING - 3.4% Fluor Corp. 9,500 270,156 FEDERAL SPONSORED CREDIT - 6.7% Fannie Mae 9,200 487,600 Freddie Mac 1,100 45,925 533,525 SHARES VALUE (NOTE 1) HOME FURNISHINGS - 4.6% Ethan Allen Interiors, Inc. 3,000 $ 69,938 Furniture Brands 2,500 40,156 International, Inc. (a) Herman Miller, Inc. 4,000 82,000 Leggett & Platt, Inc. 10,500 176,531 368,625 INDUSTRIAL MACHINERY & EQUIPMENT - 13.2% Caterpillar, Inc. 13,300 466,331 Deere & Co. 13,000 464,750 The Stanley Works 5,000 115,000 1,046,081 LEASING & RENTAL - 0.7% United Rentals, Inc. (a) 3,500 54,688 LEISURE DURABLES & TOYS - 0.2% Champion Enterprises, Inc. (a) 2,000 12,625 LODGING & GAMING - 0.3% Prime Hospitality Corp. (a) 3,000 25,500 METALS & MINING - 1.6% Martin Marietta Materials, 3,600 127,800 Inc. PACKAGING & CONTAINERS - 0.4% Gaylord Container Corp. Class 5,500 29,563 A (a) PAPER & FOREST PRODUCTS - 3.7% Georgia-Pacific Corp. 7,900 274,031 Trex Co., Inc. (a) 900 22,275 296,306 REAL ESTATE - 1.2% Catellus Development Corp. (a) 6,000 73,875 LNR Property Corp. 1,200 23,400 97,275 REAL ESTATE INVESTMENT TRUSTS - - 12.6% Apartment Investment & 4,000 148,000 Management Co. Class A Archstone Communities Trust 4,000 78,250 Avalonbay Communities, Inc. 2,000 67,500 Crescent Real Estate Equities 2,000 34,125 Co. Equity Residential Properties 7,000 279,563 Trust (SBI) Mack-Cali Realty Corp. 2,900 68,875 Post Properties, Inc. 1,500 56,438 Reckson Associates Realty 1,500 27,750 Corp. Simon Property Group, Inc. 7,000 164,500 The Rouse Co. 3,300 72,188 997,189 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) RETAIL & WHOLESALE, MISCELLANEOUS - 15.7% Home Depot, Inc. 10,550 $ 609,922 Lowe's Companies, Inc. 13,400 638,171 1,248,093 TEXTILES & APPAREL - 2.0% Mohawk Industries, Inc. (a) 3,250 72,109 Shaw Industries, Inc. 7,000 88,813 160,922 TOTAL COMMON STOCKS 7,536,610 (Cost $8,536,855) CASH EQUIVALENTS - 13.0% Central Cash Collateral Fund, 545,400 545,400 5.75% (b) Taxable Central Cash Fund, 486,114 486,114 5.66% (b) TOTAL CASH EQUIVALENTS 1,031,514 (Cost $1,031,514) TOTAL INVESTMENT PORTFOLIO - 8,568,124 108.1% (Cost $9,568,369) NET OTHER ASSETS - (8.1)% (643,219) NET ASSETS - 100% $ 7,924,905 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 $5,714,414 and $44,597,502, 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 $5,722 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $517,925. The fund received cash collateral of $545,400 which was invested in cash equivalents. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $9,588,097. Net unrealized depreciation aggregated $1,019,973, of which $704,225 related to appreciated investment securities and $1,724,198 related to depreciated investment securities. The fund hereby designates approximately $2,813,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 39% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. CONSTRUCTION AND HOUSING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 8,568,124 value (cost $9,568,369) - See accompanying schedule Cash 5,701 Receivable for investments 49,262 sold Receivable for fund shares 23,970 sold Dividends receivable 6,814 Interest receivable 1,801 Redemption fees receivable 113 Other receivables 8,598 TOTAL ASSETS 8,664,383 LIABILITIES Payable for investments $ 26,700 purchased Payable for fund shares 142,659 redeemed Accrued management fee 4,185 Other payables and accrued 20,534 expenses Collateral on securities 545,400 loaned, at value TOTAL LIABILITIES 739,478 NET ASSETS $ 7,924,905 Net Assets consist of: Paid in capital $ 6,241,601 Undistributed net investment 7,898 income Accumulated undistributed net 2,675,651 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (1,000,245) (depreciation) on investments NET ASSETS, for 454,396 $ 7,924,905 shares outstanding NET ASSET VALUE and $17.44 redemption price per share ($7,924,905 (divided by) 454,396 shares) Maximum offering price per $17.98 share (100/97.00 of $17.44) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 256,480 Dividends Interest 40,419 Security lending 167 TOTAL INCOME 297,066 EXPENSES Management fee $ 94,274 Transfer agent fees 193,728 Accounting and security 60,341 lending fees Non-interested trustees' 64 compensation Custodian fees and expenses 11,077 Registration fees 24,681 Audit 11,789 Legal 159 Total expenses before 396,113 reductions Expense reductions (12,939) 383,174 NET INVESTMENT INCOME (LOSS) (86,108) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 4,516,367 Foreign currency transactions 34 4,516,401 Change in net unrealized (6,580,475) appreciation (depreciation) on investment securities NET GAIN (LOSS) (2,064,074) NET INCREASE (DECREASE) IN $ (2,150,182) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 24,695 charges paid to FDC Sales charges - Retained by $ 24,695 FDC Deferred sales charges $ 973 withheld by FDC Exchange fees withheld by FSC $ 6,039 Expense reductions Directed $ 12,939 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (86,108) $ (195,271) income (loss) Net realized gain (loss) 4,516,401 1,243,920 Change in net unrealized (6,580,475) (58,044) appreciation (depreciation) NET INCREASE (DECREASE) IN (2,150,182) 990,605 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (1,685,140) (144,845) from net realized gains Share transactions Net 6,797,348 137,817,090 proceeds from sales of shares Reinvestment of distributions 1,553,985 142,901 Cost of shares redeemed (48,295,592) (144,767,914) NET INCREASE (DECREASE) IN (39,944,259) (6,807,923) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 52,861 129,721 TOTAL INCREASE (DECREASE) (43,726,720) (5,832,442) IN NET ASSETS NET ASSETS Beginning of period 51,651,625 57,484,067 End of period (including $ 7,924,905 $ 51,651,625 undistributed net investment income of $7,898 and $0, respectively) OTHER INFORMATION Shares Sold 272,449 5,395,789 Issued in reinvestment of 78,282 5,303 distributions Redeemed (1,961,021) (5,579,107) Net increase (decrease) (1,610,290) (178,015)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 F 1999 1998 1997 1996 F SELECTED PER-SHARE DATA Net asset value, beginning of $ 25.02 $ 25.63 $ 22.00 $ 19.56 $ 16.79 period Income from Investment Operations Net investment income (loss) C (.13) (.06) (.25) .06 .07 Net realized and unrealized (4.11) (.53) 7.67 3.38 3.55 gain (loss) Total from investment (4.24) (.59) 7.42 3.44 3.62 operations Less Distributions From net investment income - - (.02) (.02) (.07) From net realized gain (3.42) (.06) (3.87) (1.03) (.81) Total distributions (3.42) (.06) (3.89) (1.05) (.88) Redemption fees added to paid .08 .04 .10 .05 .03 in capital Net asset value, end of period $ 17.44 $ 25.02 $ 25.63 $ 22.00 $ 19.56 TOTAL RETURN A, B (18.28)% (2.16)% 40.04% 18.64% 21.77% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 7,925 $ 51,652 $ 57,484 $ 30,581 $ 42,668 (000 omitted) Ratio of expenses to average 2.42% 1.43% 2.50% D 1.41% 1.43% net assets Ratio of expenses to average 2.34% E 1.37% E 2.43% E 1.35% E 1.40% E net assets after expense reductions Ratio of net investment (.53)% (.23)% (1.10)% .27% .39% income (loss) to average net assets Portfolio turnover rate 34% 226% 404% 270% 139%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR THE YEAR ENDED FEBRUARY 29 CYCLICAL INDUSTRIES PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR LIFE OF FUND 2000 SELECT CYCLICAL INDUSTRIES 1.40% 21.21% SELECT CYCLICAL INDUSTRIES -1.71% 17.50% (LOAD ADJ.) S&P 500 11.73% 79.56% GS Cyclical Industries -7.75% 11.65% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year or since the fund started on March 3, 1997. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 246 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR LIFE OF FUND 2000 SELECT CYCLICAL INDUSTRIES 1.40% 6.63% SELECT CYCLICAL INDUSTRIES -1.71% 5.53% (LOAD ADJ.) S&P 500 11.73% 21.59% GS Cyclical Industries -7.75% 3.75% 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 13039.59 17247.76 1999/09/30 12652.78 16775.00 1999/10/31 12886.90 17836.52 1999/11/30 12591.71 18199.14 1999/12/31 13670.71 19271.06 2000/01/31 12245.61 18302.89 2000/02/29 11750.00 17956.41 IMATRL PRASUN SHR__CHT 20000229 20000322 163117 R00000000000039 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Cyclical Industries Portfolio on March 3, 1997, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $11,750 - a 17.50% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $17,956 - a 79.56% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS General Electric Co. 8.8 General Motors Corp. 6.5 Tyco International Ltd. 5.4 E.I. du Pont de Nemours and Co. 4.4 Honeywell International, Inc. 4.1 United Technologies Corp. 3.9 Minnesota Mining & 3.5 Manufacturing Co. Boeing Co. 3.4 Union Carbide Corp. 3.0 General Dynamics Corp. 2.7 45.7 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Chemicals & Plastics 15.8% Row: 1, Col: 6, Value: 15.8 Aerospace & Defense 14.9% Row: 1, Col: 5, Value: 14.9 Autos, Tires, & Accessories 12.4% Row: 1, Col: 4, Value: 12.4 Electrical Equipment 10.7% Row: 1, Col: 3, Value: 10.7 Electronics 5.4% Row: 1, Col: 2, Value: 5.4 *All Others 40.8% Row: 1, Col: 1, Value: 40.8
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. CYCLICAL INDUSTRIES PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Albert Ruback)(photograph of Brian Hogan) NOTE TO SHAREHOLDERS: The following is an interview with Albert Ruback (left), who managed Fidelity Select Cyclical Industries Portfolio for most of the period covered by this report, with additional comments from Brian Hogan (right), who became manager of the fund on February 1, 2000. Q. HOW DID THE FUND PERFORM, ALBERT? A.R. For the 12 months that ended February 29, 2000, the fund returned 1.40%. For the same 12-month period, the Goldman Sachs Cyclical Industries Index - an index of 246 stocks designed to measure the performance of companies in the cyclical industries sector - fell 7.75%, while the Standard & Poor's 500 Index returned 11.73%. Q. WHAT FACTORS DROVE CYCLICAL INDUSTRY STOCKS DURING THE PERIOD? A.R. The first half of the period was characterized by a cyclical stock rally in response to improving economies overseas. These conditions renewed investors' interest in companies whose earnings are closely linked to industrial production, such as metals, chemicals and paper. This trend reversed itself during the past six months. Investors began to favor stocks with high revenue growth expectations - - such as technology and communications - at the expense of stocks providing solid earnings growth with less spectacular revenue gains. These conditions created obstacles for investors in many of the well-managed industrial companies comprising the cyclical industries group. Rising interest rates further complicated the investment environment because cyclical stock price performance is closely linked with investors' expectations about the economy's strength, and rising interest rates typically suggest that economic growth may slow down. Q. HOW DID THE FUND OUTPERFORM THE GOLDMAN SACHS INDEX IN THIS ENVIRONMENT? A.R. The fund outperformed the Goldman Sachs index by virtue of strong stock selection across a variety of cyclical subsectors. I emphasized well-managed companies with dominant market positions that adapted their business models to participate in the evolving e-commerce environment. For example, companies such as General Electric made sizable, early investments in Internet technology and now are well-positioned to increase market share, revenue growth and earnings potential. In addition, the fund benefited from not owning certain stocks for much of the period, including automobile manufacturers. Rising interest rates forced automakers to offer significant incentives to maintain sales volume, which had a negative effect on their earnings growth and stock prices. Q. WHAT STOCKS PERFORMED WELL FOR THE FUND? A.R. I already mentioned General Electric, the fund's largest holding. GE should benefit from its early investment in web site development, as much of the site's content can lead to new marketing opportunities and enhanced revenue growth. For example, within the Power Division, utility managers can access GE's web site and evaluate the relative performance of their GE turbines vis--vis those of their competitors. Furthermore, the site alerts managers to products and services that have the potential to increase operating efficiency, an important feature in the deregulating utility sector. SPX Corp., a global automotive parts manufacturer, also performed well, particularly during the first half of the period when investors rewarded companies whose earnings were expected to benefit from improving economies worldwide. In addition, encouraging results from an ongoing cost reduction program further contributed to the stock's performance. Q. WHAT STOCKS WERE DISAPPOINTING? A.R. Several defense and aerospace-related stocks - General Dynamics, Textron and Litton - fell short of my expectations during the period. All three were affected by an industry-wide reduction in price-to-earnings multiples in response to negative earnings surprises during the period. Furthermore, because these companies operate in mature, slow-growth industrial markets, they suffered from the shift in investor sentiment toward stocks offering higher revenue growth during the second half of the period. Q. TURNING TO YOU, BRIAN, WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? B.H. Industrial activity levels - domestically and abroad - suggest a positive business environment for many cyclical companies. I anticipate focusing on companies where earnings are driven by accelerating revenue growth rather than by cost cutting. More specifically, I intend to highlight companies that have taken advantage of the new economy by expanding their markets and business opportunities. I also expect to de-emphasize interest-rate sensitive consumer-oriented stocks - such as auto manufacturers and building materials companies - that tend to perform poorly in rising interest-rate environments. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: March 3, 1997 FUND NUMBER: 515 TRADING SYMBOL: FCYIX SIZE: as of February 29, 2000, more than $4 million MANAGER: Brian Hogan, since February 2000; manager, Fidelity Select Construction and Housing Portfolio, since 1999; equity analyst, various industries, since 1998; high-yield analyst and portfolio manager, 1995-1998; fixed-income analyst, 1994; joined Fidelity in 1994 CYCLICAL INDUSTRIES PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 93.4% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 14.9% Alliant Techsystems, Inc. (a) 100 $ 5,413 BFGoodrich Co. 370 8,857 Boeing Co. 3,750 138,281 Cordant Technologies, Inc. 740 23,958 Honeywell International, Inc. 3,490 167,956 Howmet International, Inc. (a) 500 9,156 Lockheed Martin Corp. 640 11,160 Rockwell International Corp. 420 19,005 Textron, Inc. 1,110 67,710 United Technologies Corp. 3,191 162,542 614,038 AIR TRANSPORTATION - 4.7% America West Holding Corp. 630 8,426 Class B (a) AMR Corp. (a) 2,050 108,394 Continental Airlines, Inc. 1,600 50,600 Class B (a) Northwest Airlines Corp. 180 3,105 Class A (a) Southwest Airlines Co. 1,160 21,388 191,913 AUTOS, TIRES, & ACCESSORIES - 12.4% Danaher Corp. 340 13,876 Delphi Automotive Systems 1,670 27,868 Corp. Ford Motor Co. 1,930 80,336 General Motors Corp. 3,530 268,501 Gentex Corp. (a) 520 15,194 Johnson Controls, Inc. 370 19,749 Navistar International Corp. 780 25,545 (a) SPX Corp. (a) 680 59,202 510,271 BUILDING MATERIALS - 1.9% American Standard Companies, 370 12,904 Inc. (a) Ferro Corp. 470 8,871 Fortune Brands, Inc. 100 2,188 Lafarge Corp. 580 11,419 Masco Corp. 2,090 37,359 Owens Corning 210 3,045 USG Corp. 100 3,250 79,036 CHEMICALS & PLASTICS - 15.7% Air Products & Chemicals, 210 5,408 Inc. Arch Chemicals, Inc. 1,050 20,016 Avery Dennison Corp. 520 31,558 CK Witco Corp. 676 7,182 Dow Chemical Co. 260 28,210 E.I. du Pont de Nemours and 3,604 182,002 Co. Engelhard Corp. 520 7,085 Lyondell Chemical Co. 530 4,538 SHARES VALUE (NOTE 1) Monsanto Co. 1,050 $ 40,753 Potash Corp. of Saskatchewan 200 9,106 PPG Industries, Inc. 420 20,738 Praxair, Inc. 1,930 65,138 Rohm & Haas Co. 1,250 50,469 Sealed Air Corp. (a) 654 32,496 Solutia, Inc. 500 6,906 Spartech Corp. 420 10,710 Union Carbide Corp. 2,300 123,481 645,796 COMPUTER SERVICES & SOFTWARE - - 0.5% Commerce One, Inc. 40 8,355 Litton Industries, Inc. (a) 200 5,988 MatrixOne, Inc. 100 2,500 Onvia.com, Inc. 100 2,100 18,943 COMPUTERS & OFFICE EQUIPMENT - - 0.4% Pitney Bowes, Inc. 370 18,315 CONSTRUCTION - 0.4% Centex Corp. 300 5,906 Kaufman & Broad Home Corp. 310 5,929 Lennar Corp. 310 5,115 Oakwood Homes Corp. 600 1,538 18,488 CONSUMER DURABLES - 3.5% Minnesota Mining & 1,620 142,763 Manufacturing Co. CONSUMER ELECTRONICS - 0.6% Black & Decker Corp. 500 16,469 General Motors Corp. Class H 80 9,640 (a) 26,109 ELECTRICAL EQUIPMENT - 10.7% Emerson Electric Co. 1,310 59,687 General Electric Co. 2,750 363,507 Hubbell, Inc. Class B 260 6,321 Plug Power, Inc. 100 11,744 441,259 ELECTRONICS - 5.4% Tyco International Ltd. 5,810 220,417 ENGINEERING - 2.6% Fluor Corp. 1,870 53,178 PerkinElmer, Inc. 850 54,931 108,109 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) HOME FURNISHINGS - 0.3% Leggett & Platt, Inc. 680 $ 11,433 INDUSTRIAL MACHINERY & EQUIPMENT - 4.0% Caterpillar, Inc. 1,050 36,816 Deere & Co. 600 21,450 Illinois Tool Works, Inc. 1,150 59,441 Ingersoll-Rand Co. 780 29,884 Parker-Hannifin Corp. 420 15,225 162,816 IRON & STEEL - 0.4% Bethlehem Steel Corp. (a) 2,000 11,375 USX - U.S. Steel Group 260 5,688 17,063 LEASING & RENTAL - 0.1% Ryder System, Inc. 130 2,421 MEDICAL FACILITIES MANAGEMENT - - 0.3% Apria Healthcare Group, Inc. 790 11,258 (a) METALS & MINING - 1.6% Alcoa, Inc. 358 24,523 Inco Ltd. (a) 1,050 18,362 Martin Marietta Materials, 610 21,655 Inc. 64,540 PACKAGING & CONTAINERS - 1.0% Ball Corp. 370 9,967 Bemis Co., Inc. 520 15,470 Owens-Illinois, Inc. (a) 1,100 15,194 40,631 PAPER & FOREST PRODUCTS - 1.1% Bowater, Inc. 210 10,329 International Paper Co. 542 19,952 Smurfit-Stone Container Corp. 970 13,216 (a) 43,497 POLLUTION CONTROL - 0.4% Ogden Corp. 990 11,261 Republic Services, Inc. Class 420 4,568 A (a) 15,829 RAILROADS - 2.5% Burlington Northern Santa Fe 1,930 37,997 Corp. Canadian Pacific Ltd. 1,560 30,025 SHARES VALUE (NOTE 1) CSX Corp. 500 $ 11,094 Union Pacific Corp. 580 22,040 101,156 RETAIL & WHOLESALE, MISCELLANEOUS - 0.2% Chemdex Corp. 40 8,995 SECURITIES INDUSTRY - 1.0% Kansas City Southern 520 40,950 Industries, Inc. SERVICES - 1.1% Ecolab, Inc. 1,160 32,770 FreeMarkets, Inc. 80 13,935 46,705 SHIP BUILDING & REPAIR - 2.7% General Dynamics Corp. 2,590 112,018 TEXTILES & APPAREL - 0.1% Shaw Industries, Inc. 260 3,299 Unifi, Inc. (a) 300 2,869 6,168 TRUCKING & FREIGHT - 2.9% EGL, Inc. (a) 1,710 48,094 Expeditors International of 840 31,710 Washington, Inc. FedEx Corp. (a) 520 18,168 United Parcel Service, Inc. 370 20,211 Class B USFreightways Corp. 100 3,325 121,508 TOTAL COMMON STOCKS 3,842,445 (Cost $4,022,191) CONVERTIBLE PREFERRED STOCKS - - 0.1% CHEMICALS & PLASTICS - 0.1% Sealed Air Corp. Series A, 70 3,408 $2.00 (Cost $3,346) CASH EQUIVALENTS - 5.9% SHARES VALUE (NOTE 1) Central Cash Collateral Fund, 37,000 $ 37,000 5.75% (b) Taxable Central Cash Fund, 205,815 205,815 5.66% (b) TOTAL CASH EQUIVALENTS 242,815 (Cost $242,815) TOTAL INVESTMENT PORTFOLIO - 4,088,668 99.4% (Cost $4,268,352) NET OTHER ASSETS - 0.6% 23,272 NET ASSETS - 100% $ 4,111,940 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 $13,945,889 and $12,604,014, 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 $1,804 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $35,063. The fund received cash collateral of $37,000 which was invested in cash equivalents. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $4,326,677. Net unrealized depreciation aggregated $238,009, of which $325,142 related to appreciated investment securities and $563,151 related to depreciated investment securities. The fund hereby designates approximately $53,000 as a capital gain dividend for the purpose of the dividend paid deduction. The fund intends to elect to defer to its fiscal year ending February 28, 2001 approximately $7,000 of losses recognized during the period November 1, 1999 to February 29, 2000. CYCLICAL INDUSTRIES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 4,088,668 value (cost $4,268,352) - See accompanying schedule Cash 8,543 Receivable for investments 239,651 sold Receivable for fund shares 31,972 sold Dividends receivable 9,745 Interest receivable 1,040 Redemption fees receivable 15 Other receivables 550 Receivable from investment 752 adviser for expense reductions TOTAL ASSETS 4,380,936 LIABILITIES Payable for investments $ 199,631 purchased Payable for fund shares 14,125 redeemed Other payables and accrued 18,240 expenses Collateral on securities 37,000 loaned, at value TOTAL LIABILITIES 268,996 NET ASSETS $ 4,111,940 Net Assets consist of: Paid in capital $ 4,188,474 Accumulated undistributed net 103,152 realized gain loss on investments and foreign currency transactions Net unrealized appreciation (179,686) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 355,926 $ 4,111,940 shares outstanding NET ASSET VALUE and $11.55 redemption price per share ($4,111,940 (divided by) 355,926 shares) Maximum offering price per $11.91 share (100/97.00 of $11.55) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 82,521 Dividends Interest 13,288 Security lending 241 TOTAL INCOME 96,050 EXPENSES Management fee $ 37,738 Transfer agent fees 49,199 Accounting and security 60,017 lending fees Non-interested trustees' 18 compensation Custodian fees and expenses 14,391 Registration fees 17,838 Audit 10,614 Legal 22 Miscellaneous 265 Total expenses before 190,102 reductions Expense reductions (28,879) 161,223 NET INVESTMENT INCOME (LOSS) (65,173) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 169,072 Foreign currency transactions (125) 168,947 Change in net unrealized appreciation (depreciation) on: Investment securities (441,297) Assets and liabilities in (2) (441,299) foreign currencies NET GAIN (LOSS) (272,352) NET INCREASE (DECREASE) IN $ (337,525) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 42,617 charges paid to FDC Sales charges - Retained by $ 42,617 FDC Exchange fees withheld by FSC $ 1,772 Expense reductions $ 966 Directed brokerage arrangements FMR reimbursement 27,913 $ 28,879
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (65,173) $ (41,151) income (loss) Net realized gain (loss) 168,947 21,698 Change in net unrealized (441,299) (207,859) appreciation (depreciation) NET INCREASE (DECREASE) IN (337,525) (227,312) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders From net realized gain - (29,887) Share transactions Net 16,676,868 3,255,351 proceeds from sales of shares Reinvestment of distributions - 29,223 Cost of shares redeemed (15,352,529) (3,913,851) NET INCREASE (DECREASE) IN 1,324,339 (629,277) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 38,142 8,220 TOTAL INCREASE (DECREASE) 1,024,956 (878,256) IN NET ASSETS NET ASSETS Beginning of period 3,086,984 3,965,240 End of period $ 4,111,940 $ 3,086,984 OTHER INFORMATION Shares Sold 1,274,489 265,208 Issued in reinvestment of - 2,305 distributions Redeemed (1,189,555) (325,171) Net increase (decrease) 84,934 (57,658)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 H 1999 1998 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 11.39 $ 12.07 $ 10.00 period Income from Investment Operations Net investment income (loss) D (.13) (.13) (.11) Net realized and unrealized .21 I (.49) 2.59 gain (loss) Total from investment .08 (.62) 2.48 operations Less Distributions From net realized gain - (.09) (.46) Redemption fees added to paid .08 .03 .05 in capital Net asset value, end of period $ 11.55 $ 11.39 $ 12.07 TOTAL RETURN B, C 1.40% (4.96)% 25.77% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 4,112 $ 3,087 $ 3,965 (000 omitted) Ratio of expenses to average 2.50% F 2.50% F 2.50% A, F net assets Ratio of expenses to average 2.49% G 2.49% G 2.50% A net assets after expense reductions Ratio of net investment (1.00)% (1.09)% (.93)% A income (loss) to average net assets Portfolio turnover rate 211% 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. H FOR THE YEAR ENDED FEBRUARY 29 I THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES AND PURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND. DEFENSE AND AEROSPACE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT DEFENSE AND AEROSPACE 3.24% 126.67% 307.68% SELECT DEFENSE AND AEROSPACE 0.07% 119.79% 295.38% (LOAD ADJ.) S&P 500 11.73% 206.94% 425.47% GS Cyclical Industries -7.75% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 246 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT DEFENSE AND AEROSPACE 3.24% 17.78% 15.09% SELECT DEFENSE AND AEROSPACE 0.07% 17.06% 14.74% (LOAD ADJ.) S&P 500 11.73% 25.14% 18.05% GS Cyclical Industries -7.75% 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 1990/02/28 9700.00 10000.00 1990/03/31 10297.43 10265.00 1990/04/30 9874.25 10008.38 1990/05/31 10604.45 10984.19 1990/06/30 10612.07 10909.50 1990/07/31 10186.25 10874.59 1990/08/31 9292.87 9891.53 1990/09/30 8992.29 9409.81 1990/10/31 8875.40 9369.35 1990/11/30 9351.32 9974.61 1990/12/31 9777.90 10252.90 1991/01/31 10640.90 10699.92 1991/02/28 10850.36 11464.97 1991/03/31 11688.23 11742.42 1991/04/30 11495.52 11770.60 1991/05/31 12031.76 12279.09 1991/06/30 11426.40 11716.71 1991/07/31 11922.83 12262.71 1991/08/31 11796.62 12553.34 1991/09/30 11518.95 12343.69 1991/10/31 12074.29 12509.10 1991/11/30 11527.37 12004.98 1991/12/31 12410.85 13378.35 1992/01/31 12368.78 13129.52 1992/02/29 12562.31 13300.20 1992/03/31 12309.88 13040.85 1992/04/30 12091.12 13424.25 1992/05/31 11485.30 13490.03 1992/06/30 10946.79 13289.02 1992/07/31 11367.50 13832.55 1992/08/31 11148.73 13548.98 1992/09/30 11308.60 13708.86 1992/10/31 11401.16 13756.84 1992/11/30 11796.62 14225.94 1992/12/31 12410.85 14400.92 1993/01/31 12781.07 14521.89 1993/02/28 12688.52 14719.39 1993/03/31 13361.65 15029.97 1993/04/30 13403.72 14666.24 1993/05/31 13816.01 15059.30 1993/06/30 14396.59 15102.97 1993/07/31 14985.58 15042.56 1993/08/31 14960.34 15612.67 1993/09/30 15347.39 15492.45 1993/10/31 15961.62 15813.15 1993/11/30 15490.43 15662.92 1993/12/31 15992.35 15852.44 1994/01/31 16753.90 16391.43 1994/02/28 16753.90 15947.22 1994/03/31 16079.89 15251.92 1994/04/30 16167.16 15447.15 1994/05/31 16220.46 15700.48 1994/06/30 15811.84 15315.82 1994/07/31 16042.80 15818.18 1994/08/31 16762.33 16466.72 1994/09/30 15918.44 16063.29 1994/10/31 16309.29 16424.71 1994/11/30 15669.71 15826.52 1994/12/31 16273.76 16061.23 1995/01/31 16264.88 16477.70 1995/02/28 17446.32 17119.83 1995/03/31 18192.50 17625.04 1995/04/30 19196.28 18144.10 1995/05/31 20377.73 18869.32 1995/06/30 21132.79 19307.65 1995/07/31 22296.47 19947.89 1995/08/31 22287.59 19997.96 1995/09/30 22909.40 20841.88 1995/10/31 22074.39 20767.47 1995/11/30 23664.46 21679.16 1995/12/31 23980.42 22096.70 1996/01/31 24409.49 22848.87 1996/02/29 25715.78 23060.68 1996/03/31 26306.95 23282.76 1996/04/30 27574.42 23625.95 1996/05/31 28605.52 24235.26 1996/06/30 27927.94 24327.60 1996/07/31 26042.51 23252.80 1996/08/31 27417.30 23743.20 1996/09/30 28762.64 25079.47 1996/10/31 28261.82 25771.16 1996/11/30 29803.55 27719.21 1996/12/31 29982.15 27170.09 1997/01/31 29333.50 28867.68 1997/02/28 29796.83 29094.00 1997/03/31 29601.20 27898.53 1997/04/30 30392.03 29564.07 1997/05/31 32824.64 31363.93 1997/06/30 33607.67 32769.03 1997/07/31 36718.91 35376.46 1997/08/31 38744.35 33394.67 1997/09/30 41364.89 35223.70 1997/10/31 38253.65 34047.23 1997/11/30 38326.73 35623.28 1997/12/31 37048.41 36234.93 1998/01/31 38825.02 36635.68 1998/02/28 42514.02 39277.85 1998/03/31 43690.87 41289.27 1998/04/30 44856.42 41704.64 1998/05/31 41948.22 40987.74 1998/06/30 41970.85 42652.66 1998/07/31 40126.35 42198.41 1998/08/31 32171.24 36097.36 1998/09/30 34309.95 38409.76 1998/10/31 37693.42 41534.01 1998/11/30 38587.38 44051.38 1998/12/31 38655.28 46589.63 1999/01/31 38587.38 48538.00 1999/02/28 38304.48 47029.44 1999/03/31 38587.38 48911.09 1999/04/30 42874.74 50805.42 1999/05/31 43238.67 49605.90 1999/06/30 45285.74 52359.03 1999/07/31 45172.01 50724.38 1999/08/31 43636.71 50473.29 1999/09/30 39861.00 49089.82 1999/10/31 39781.39 52196.23 1999/11/30 39610.80 53257.37 1999/12/31 43227.67 56394.23 2000/01/31 40005.16 53560.99 2000/02/29 39538.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000316 093924 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Defense and Aerospace Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $39,538 - a 295.38% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS United Technologies Corp. 10.8 General Dynamics Corp. 9.4 Cordant Technologies, Inc. 7.0 General Electric Co. 5.2 Boeing Co. 5.0 General Motors Corp. Class H 4.3 BFGoodrich Co. 3.4 AMR Corp. 3.3 Adaptive Broadband Corp. 3.1 EchoStar Communications Corp. 3.0 Class A 54.5 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Aerospace & Defense 38.1% Row: 1, Col: 6, Value: 38.1 Electrical Equipment 15.6% Row: 1, Col: 5, Value: 15.6 Ship Building & Repair 11.1% Row: 1, Col: 4, Value: 11.1 Broadcasting 5.9% Row: 1, Col: 3, Value: 5.9 Air Transportation 5.5% Row: 1, Col: 2, Value: 5.5 * All Others 23.8% Row: 1, Col: 1, Value: 23.8
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. 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 12 months that ended February 29, 2000, the fund returned 3.24%. For the same 12-month period, the Goldman Sachs Cyclical Industries Index - an index of 246 stocks designed to measure the performance of companies in the cyclical industries sector - fell 7.75%, while the Standard & Poor's 500 Index returned 11.73%. The fund outperformed the Goldman Sachs index because of the fund's relatively lower exposure to large defense contractors and aerospace component suppliers that performed poorly in response to earnings shortfalls. Q. WHAT FACTORS AFFECTED DEFENSE AND AEROSPACE STOCKS OVER THE PAST 12 MONTHS? A. The market environment was difficult for both sectors. Several of the largest defense contractors, such as Lockheed, Northrop, Litton and Raytheon, missed their financial targets as a result of higher internal cost growth, revenue constraints and difficulties integrating acquisitions. Aerospace suppliers suffered from reduced production schedules and aggressive inventory reductions by Boeing. A significant shift in investor preference toward new economy stocks that offered higher expectations for revenue growth further complicated the environment, particularly late in the period. Such stocks, including those in the technology and communication sectors, advanced strongly while cyclical stocks in more mature industries with lower growth expectations fared poorly. Q. WHAT INVESTMENT STRATEGY DID YOU PURSUE IN THIS CHALLENGING PERIOD? A. My strategy comprised several features. My primary focus remained on companies with strong management teams that have consistently produced predictable earnings growth. Despite prevailing investor sentiment, which tended to paint all cyclical stocks with the same brush, many of the fund's core holdings were exceptionally well-managed companies with strong business fundamentals and good long-term prospects. In addition, I diversified the fund by investing in companies that derived some - but not all - of their earnings from defense- and aerospace-related businesses, and therefore offered investors higher growth potential and greater earnings stability. Q. WHAT STOCKS BENEFITED PERFORMANCE? A. Several of the best performing stocks in the portfolio illustrated my diversification strategy. Echostar and General Motors' Hughes Division were the biggest contributors to performance. These companies are the two largest participants in the fast-growing satellite TV transmission market. Satellite TV services - such as GM's DirecTV - provide a viable alternative to cable TV by offering viewers more channels at competitive rates, and their stock prices reflected the market's positive outlook for increasing revenue and subscriber growth. General Electric performed well on the basis of strong internal revenue growth and its long track record of earnings consistency. The market rewarded Howmet Intl. for its commanding market share in the high-growth industrial gas turbine business as well as Cordant Technologies for its announced intention to buy the remaining 15% of Howmet that it doesn't already own. Q. WHAT STOCKS WERE DISAPPOINTING? A. Two of the largest disappointments were investments in United Technologies and General Dynamics. Although both companies consistently met their financial targets - unlike many of their peers over the past 12 months - they suffered from an industry-wide contraction in price-to-earnings multiples. United Technologies stock was further pressured by investors' concern regarding the potential effect of a declining business and commercial aircraft production cycle on its Pratt & Whitney jet engine division. General Dynamics' purchase of Gulfstream Aerospace drew some concerns about new exposure to the cyclical business-jet market. Although both stocks failed to meet my short-term expectations, they remain well-managed companies with strong track records of consistent, predictable earnings growth. Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? A. I am cautiously optimistic that the earnings shortfalls that surprised investors during the past 12 months are behind us. However, I expect continued challenges for defense contractors including their reliance on a small number of large contracts and the difficulties of working with the Department of Defense as their largest customer. I anticipate the declining aircraft production cycle to pose further obstacles for pure-play aerospace manufacturers and component suppliers. As I look ahead, I expect to remain focused on companies with more diversified exposure to the defense and aerospace industries and that offer investors greater growth potential and more earnings stability. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: May 8, 1984 FUND NUMBER: 067 TRADING SYMBOL: FSDAX SIZE: as of February 29, 2000, more than $21 million MANAGER: Jeff Feingold, since 1998; manager, Fidelity Select Transportation and Select Air Transportation Portfolios, since February, 2000; equity analyst, defense and aerospace industries, since 1998; joined Fidelity in 1997 DEFENSE AND AEROSPACE PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 92.9% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 38.1% Alliant Techsystems, Inc. (a) 4,500 $ 243,563 BE Aerospace, Inc. (a) 9,300 82,538 BFGoodrich Co. 30,700 734,881 Boeing Co. 29,200 1,076,750 British Aerospace PLC 47,300 234,076 Cordant Technologies, Inc. 46,400 1,502,200 Howmet International, Inc. (a) 24,900 455,981 Lockheed Martin Corp. 11,500 200,531 Northrop Grumman Corp. 13,800 627,038 Primex Technologies, Inc. 5,200 109,200 Rockwell International Corp. 12,900 583,725 United Technologies Corp. 45,200 2,302,371 8,152,854 AIR TRANSPORTATION - 5.5% AMR Corp. (a) 13,500 713,813 Northwest Airlines Corp. 11,200 193,200 Class A (a) Southwest Airlines Co. 14,400 265,500 1,172,513 BROADCASTING - 5.9% EchoStar Communications Corp. 5,600 638,400 Class A (a) PanAmSat Corp. (a) 12,900 629,681 1,268,081 COMMUNICATIONS EQUIPMENT - 3.4% Globalstar Telecommunications 19,400 552,900 Ltd. (a) P-Com, Inc. (a) 9,200 167,900 720,800 COMPUTER SERVICES & SOFTWARE - - 3.5% Litton Industries, Inc. (a) 7,700 230,519 MatrixOne, Inc. 100 2,500 Onvia.com, Inc. 100 2,100 Titan Corp. (a) 13,800 517,500 752,619 COMPUTERS & OFFICE EQUIPMENT - - 0.3% SBS Technologies, Inc. (a) 1,200 65,325 CONSUMER ELECTRONICS - 4.3% General Motors Corp. Class H 7,600 915,800 (a) DEFENSE ELECTRONICS - 2.1% Anaren Microwave, Inc. (a) 1,200 91,050 Raytheon Co. Class A 12,352 244,724 REMEC, Inc. (a) 3,100 114,313 450,087 SHARES VALUE (NOTE 1) ELECTRICAL EQUIPMENT - 15.6% Adaptive Broadband Corp. (a) 5,700 $ 655,678 General Electric Co. 8,500 1,123,594 Harris Corp. 11,300 360,188 Loral Space & Communications 32,200 485,013 Ltd. (a) Powerwave Technologies, Inc. 3,100 495,613 (a) Teleflex, Inc. 3,500 98,875 ViaSat, Inc. (a) 1,500 117,000 3,335,961 ELECTRONIC INSTRUMENTS - 1.2% Newport Corp. 1,600 256,000 ELECTRONICS - 1.9% Digital Microwave Corp. (a) 12,100 403,838 SHIP BUILDING & REPAIR - 11.1% General Dynamics Corp. 46,700 2,019,775 Newport News Shipbuilding, 12,800 362,400 Inc. 2,382,175 TOTAL COMMON STOCKS 19,876,053 (Cost $18,968,043) CASH EQUIVALENTS - 16.0% Central Cash Collateral Fund, 2,215,400 2,215,400 5.75% (b) Taxable Central Cash Fund, 1,211,910 1,211,910 5.66% (b) TOTAL CASH EQUIVALENTS 3,427,310 (Cost $3,427,310) TOTAL INVESTMENT PORTFOLIO - 23,303,363 108.9% (Cost $22,395,353) NET OTHER ASSETS - (8.9)% (1,897,842) NET ASSETS - 100% $ 21,405,521 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 $47,035,129 and $54,133,386, 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 $6,543 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $2,099,500. The fund received cash collateral of $2,215,400 which was invested in cash equivalents. 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 February 29, 2000, the aggregate cost of investment securities for income tax purposes was $22,710,576. Net unrealized appreciation aggregated $592,787, of which $2,759,483 related to appreciated investment securities and $2,166,696 related to depreciated investment securities. The fund hereby designates approximately $1,187,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 100% of the dividends during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. DEFENSE AND AEROSPACE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 23,303,363 value (cost $22,395,353) - See accompanying schedule Receivable for investments 703,278 sold Receivable for fund shares 41,266 sold Dividends receivable 28,579 Interest receivable 4,511 Redemption fees receivable 138 Other receivables 4,994 TOTAL ASSETS 24,086,129 LIABILITIES Payable for investments $ 79,739 purchased Payable for fund shares 346,677 redeemed Accrued management fee 10,942 Other payables and accrued 27,850 expenses Collateral on securities 2,215,400 loaned, at value TOTAL LIABILITIES 2,680,608 NET ASSETS $ 21,405,521 Net Assets consist of: Paid in capital $ 19,105,544 Accumulated undistributed net 1,391,967 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 908,010 (depreciation) on investments NET ASSETS, for 622,953 $ 21,405,521 shares outstanding NET ASSET VALUE and $34.36 redemption price per share ($21,405,521 (divided by) 622,953 shares) Maximum offering price per $35.42 share (100/97.00 of $34.36) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 323,641 Dividends Interest 82,691 Security lending 2,849 TOTAL INCOME 409,181 EXPENSES Management fee $ 202,860 Transfer agent fees 248,725 Accounting and security 60,402 lending fees Non-interested trustees' 102 compensation Custodian fees and expenses 12,340 Registration fees 25,114 Audit 11,809 Legal 230 Interest 386 Miscellaneous 41 Total expenses before 562,009 reductions Expense reductions (7,249) 554,760 NET INVESTMENT INCOME (LOSS) (145,579) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 2,472,758 Foreign currency transactions 1,800 2,474,558 Change in net unrealized (1,520,748) appreciation (depreciation) on investment securities NET GAIN (LOSS) 953,810 NET INCREASE (DECREASE) IN $ 808,231 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 197,536 charges paid to FDC Sales charges - Retained by $ 196,989 FDC Deferred sales charges $ 650 withheld by FDC Exchange fees withheld by FSC $ 5,649 Expense reductions $ 7,249 Directed brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (145,579) $ (280,808) income (loss) Net realized gain (loss) 2,474,558 3,586,940 Change in net unrealized (1,520,748) (8,328,194) appreciation (depreciation) NET INCREASE (DECREASE) IN 808,231 (5,022,062) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (436,796) - from net realized gains Share transactions Net 56,172,571 47,399,132 proceeds from sales of shares Reinvestment of distributions 420,257 - Cost of shares redeemed (64,155,432) (115,799,880) NET INCREASE (DECREASE) IN (7,562,604) (68,400,748) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 99,858 115,021 TOTAL INCREASE (DECREASE) (7,091,311) (73,307,789) IN NET ASSETS NET ASSETS Beginning of period 28,496,832 101,804,621 End of period $ 21,405,521 $ 28,496,832 OTHER INFORMATION Shares Sold 1,490,942 1,280,563 Issued in reinvestment of 12,111 - distributions Redeemed (1,721,904) (3,148,373) Net increase (decrease) (218,851) (1,867,810)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 F 1999 1998 1997 1996 F SELECTED PER-SHARE DATA Net asset value, beginning of $ 33.85 $ 37.57 $ 28.94 $ 26.97 $ 19.64 period Income from Investment Operations Net investment income (loss) C (.15) (.19) (.29) (.11) (.05) Net realized and unrealized 1.14 (3.61) 11.84 4.18 9.09 gain (loss) Total from investment .99 (3.80) 11.55 4.07 9.04 operations Less Distributions From net realized gain (.59) - (3.04) (2.17) (1.82) Redemption fees added to paid .11 .08 .12 .07 .11 in capital Net asset value, end of period $ 34.36 $ 33.85 $ 37.57 $ 28.94 $ 26.97 TOTAL RETURN A, B 3.24% (9.90)% 42.68% 15.87% 47.40% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 21,406 $ 28,497 $ 101,805 $ 68,803 $ 26,648 (000 omitted) Ratio of expenses to average 1.61% 1.48% 1.77% 1.84% 1.77% D net assets Ratio of expenses to average 1.59% E 1.42% E 1.71% E 1.81% E 1.75% E net assets after expense reductions Ratio of net investment (.42)% (.53)% (.85)% (.39)% (.20)% income (loss) to average net assets Portfolio turnover rate 146% 221% 311% 219% 267%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR THE YEAR ENDED FEBRUARY 29 ENVIRONMENTAL SERVICES PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, 2000 PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS SELECT ENVIRONMENTAL SERVICES -25.00% -1.30% 0.25% SELECT ENVIRONMENTAL SERVICES -27.32% -4.33% -2.83% (LOAD ADJ.) S&P 500 11.73% 206.94% 425.47% GS Cyclical Industries -7.75% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 246 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT ENVIRONMENTAL SERVICES -25.00% -0.26% 0.02% SELECT ENVIRONMENTAL SERVICES -27.32% -0.88% -0.29% (LOAD ADJ.) S&P 500 11.73% 25.14% 18.05% GS Cyclical Industries -7.75% 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 1990/02/28 9700.00 10000.00 1990/03/31 10119.03 10265.00 1990/04/30 10172.52 10008.38 1990/05/31 11117.56 10984.19 1990/06/30 11465.26 10909.50 1990/07/31 11393.93 10874.59 1990/08/31 9976.38 9891.53 1990/09/30 9441.45 9409.81 1990/10/31 9307.72 9369.35 1990/11/30 9628.68 9974.61 1990/12/31 10181.43 10252.90 1991/01/31 11072.98 10699.92 1991/02/28 11581.16 11464.97 1991/03/31 11581.16 11742.42 1991/04/30 11545.50 11770.60 1991/05/31 11572.24 12279.09 1991/06/30 10698.53 11716.71 1991/07/31 11037.32 12262.71 1991/08/31 11233.46 12553.34 1991/09/30 10965.99 12343.69 1991/10/31 10555.88 12509.10 1991/11/30 9976.38 12004.98 1991/12/31 10961.51 13378.35 1992/01/31 11942.86 13129.52 1992/02/29 12072.47 13300.20 1992/03/31 10868.93 13040.85 1992/04/30 10544.90 13424.25 1992/05/31 10276.41 13490.03 1992/06/30 9726.95 13289.02 1992/07/31 9794.10 13832.55 1992/08/31 9592.66 13548.98 1992/09/30 9707.77 13708.86 1992/10/31 10168.22 13756.84 1992/11/30 10801.33 14225.94 1992/12/31 10810.92 14400.92 1993/01/31 11021.96 14521.89 1993/02/28 10897.26 14719.39 1993/03/31 10628.66 15029.97 1993/04/30 10408.03 14666.24 1993/05/31 10638.26 15059.30 1993/06/30 10503.96 15102.97 1993/07/31 10062.70 15042.56 1993/08/31 10599.89 15612.67 1993/09/30 10609.48 15492.45 1993/10/31 10906.85 15813.15 1993/11/30 10427.22 15662.92 1993/12/31 10743.78 15852.44 1994/01/31 11655.08 16391.43 1994/02/28 11444.04 15947.22 1994/03/31 10408.03 15251.92 1994/04/30 10580.70 15447.15 1994/05/31 10551.92 15700.48 1994/06/30 9918.81 15315.82 1994/07/31 10129.85 15818.18 1994/08/31 10484.77 16466.72 1994/09/30 10417.63 16063.29 1994/10/31 10062.70 16424.71 1994/11/30 9496.73 15826.52 1994/12/31 9717.36 16061.23 1995/01/31 9726.95 16477.70 1995/02/28 9851.66 17119.83 1995/03/31 10321.70 17625.04 1995/04/30 11060.33 18144.10 1995/05/31 11233.00 18869.32 1995/06/30 11693.45 19307.65 1995/07/31 12134.71 19947.89 1995/08/31 12307.38 19997.96 1995/09/30 12739.05 20841.88 1995/10/31 11837.34 20767.47 1995/11/30 12249.82 21679.16 1995/12/31 12256.58 22096.70 1996/01/31 12681.32 22848.87 1996/02/29 12559.96 23060.68 1996/03/31 13116.16 23282.76 1996/04/30 13551.65 23625.95 1996/05/31 14594.86 24235.26 1996/06/30 14331.52 24327.60 1996/07/31 12680.61 23252.80 1996/08/31 13480.75 23743.20 1996/09/30 13966.91 25079.47 1996/10/31 13825.11 25771.16 1996/11/30 14199.86 27719.21 1996/12/31 14169.47 27170.09 1997/01/31 15050.63 28867.68 1997/02/28 14686.01 29094.00 1997/03/31 13855.50 27898.53 1997/04/30 13774.47 29564.07 1997/05/31 14716.40 31363.93 1997/06/30 15536.79 32769.03 1997/07/31 15931.79 35376.46 1997/08/31 16144.49 33394.67 1997/09/30 17268.73 35223.70 1997/10/31 16012.82 34047.23 1997/11/30 15972.31 35623.28 1997/12/31 16701.54 36234.93 1998/01/31 15587.43 36635.68 1998/02/28 16671.16 39277.85 1998/03/31 17532.06 41289.27 1998/04/30 17815.66 41704.64 1998/05/31 16812.96 40987.74 1998/06/30 16458.47 42652.66 1998/07/31 15131.66 42198.41 1998/08/31 12174.20 36097.36 1998/09/30 13237.67 38409.76 1998/10/31 13521.26 41534.01 1998/11/30 12852.80 44051.38 1998/12/31 13868.36 46589.63 1999/01/31 13705.92 48538.00 1999/02/28 12964.79 47029.44 1999/03/31 12650.06 48911.09 1999/04/30 14347.15 50805.42 1999/05/31 14489.40 49605.90 1999/06/30 15373.40 52359.03 1999/07/31 13585.08 50724.38 1999/08/31 11542.75 50473.29 1999/09/30 10668.91 49089.82 1999/10/31 9977.98 52196.23 1999/11/30 9723.95 53257.37 1999/12/31 10282.80 56394.23 2000/01/31 10120.23 53560.99 2000/02/29 9717.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000309 111757 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Environmental Services Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have been $9,717 - a 2.83% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Thermo Electron Corp. 9.1 Tetra Tech, Inc. 6.4 Newpark Resources, Inc. 6.0 Thermo Instrument Systems, Inc. 5.7 Republic Services, Inc. Class A 5.5 Waste Management, Inc. 5.0 Thermo Fibertek, Inc. 5.0 Insituform Technologies, Inc. 4.9 Class A Catalytica, Inc. 4.7 Azurix Corp. 4.5 56.8 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Pollution Control 49.5% Row: 1, Col: 6, Value: 49.5 Electronic Instruments 15.7% Row: 1, Col: 5, Value: 15.7 Industrial Machinery & Equipment 9.4% Row: 1, Col: 4, Value: 9.4 Retail & Wholesale, Miscellaneous 6.0% Row: 1, Col: 3, Value: 6.0 Drugs & Pharmaceuticals 4.7% Row: 1, Col: 2, Value: 4.7 *All Others 14.7% Row: 1, Col: 1, Value: 14.7
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. ENVIRONMENTAL SERVICES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Ian Gutterman) NOTE TO SHAREHOLDERS: Ian Gutterman became Portfolio Manager of Fidelity Select Environmental Services Portfolio on November 1, 1999. Q. HOW DID THE FUND PERFORM, IAN? A. It continued to be a challenging environment for the sector. For the 12 months that ended February 29, 2000, the fund declined 25.00%. This trailed both the Standard & Poor's 500 Index, which returned 11.73% during the period, and the Goldman Sachs Cyclical Industries Index, which returned -7.75%. The Goldman Sachs index is an index of 246 stocks designed to measure the performance of companies in the cyclical industries sector. Q. WHAT WERE THE MAIN FACTORS THAT HINDERED PERFORMANCE? A. Solid waste stocks - which make up a significant portion of the sector - continued to spiral downward. This was mostly due to a less-than-smooth adjustment period following a series of mergers and acquisitions throughout the group, and ultimately resulted in missed earnings targets for three of the biggest waste players: Waste Management, Allied Waste and Republic Services. Besides missed earnings, Allied Waste struggled to mesh its various businesses following its merger with Browning-Ferris Industries. Republic Services, meanwhile, experienced similar execution problems with assets that it purchased from Waste Management. This negative cycle simply wasn't conducive to good performance for the fund's solid-waste stocks. Q. HOW DID HAZARDOUS WASTE AND WATER-UTILITY STOCKS PERFORM DURING THE PERIOD? A. I pared back on the fund's hazardous waste stocks, mostly because continued fallout from supply/demand imbalances resulted in flat to low earnings for many companies in this area. Throughout the period, this group was challenged by too much capacity - in the form of incinerators - and not enough demand. It also didn't help that one of the more prominent members of the group, Safety-Kleen, experienced accounting problems. On the whole, water-utility stock performance also was subpar. Similar to the solid waste situation, the problems for water stocks stemmed from slow progress following consolidation activity, particularly deals involving foreign firms such as France's Vivendi and Suez Lyonnaise. Q. THE FUND'S TOP HOLDING AT THE END OF THE PERIOD, THERMO ELECTRON, UNDERWENT A BUSINESS FACELIFT DURING THE PERIOD . . . A. Yes, and for the better. Thermo Electron announced it would streamline its overall structure by either divesting or incorporating several of its subsidiary businesses. The company is a leading manufacturer of measurement instruments that monitor, collect and analyze information for a broad range of industries. Going forward, Thermo Electron's new management has made the decision to integrate, sell or spin out each subsidiary business, two of which include separate stocks Thermo Instruments and Thermo Fibertek. The market has viewed this simplified structure in a positive vein. At the close of the period, Thermo Electron and Thermo Instruments were among the fund's top-five holdings. Q. WERE THERE ANY OTHER STOCKS THAT PERFORMED WELL? ANY ADDITIONAL DISAPPOINTMENTS? A. Water-utility stock Tetra Tech performed well, mostly because the company had additional exposure to the telecommunications market. This sideline business gave the company's stock a good performance boost. Insituform Technologies - a market leader in repairing sewer pipes due to its less-evasive techniques - managed to beat earnings expectations throughout the period and also performed well. On the negative side, the fund's stakes in water-utility owner Azurix and waste-to-energy stock Ogden Corp. were disappointments. Q. WHAT'S THE OUTLOOK FOR THE FUND AND THE SECTOR GOING FORWARD? A. The near-term outlook for solid waste stocks will be key. Waste stocks need to show the market that they're capable of generating positive earnings and free cash flow. In terms of the portfolio itself, I'll continue to look for stocks that have exposure to faster-growing segments of the market. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: June 29, 1989 FUND NUMBER: 516 TRADING SYMBOL: FSLEX SIZE: as of February 29, 2000, more than $17 million MANAGER: Ian Gutterman, since November 1999; analyst, air freight and waste industries, 1999-present; joined Fidelity in 1999 ENVIRONMENTAL SERVICES PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 92.3% SHARES VALUE (NOTE 1) DRUGS & PHARMACEUTICALS - 4.7% Catalytica, Inc. (a) 64,400 $ 829,150 ELECTRONIC INSTRUMENTS - 15.7% Thermo Electron Corp. (a) 101,650 1,588,280 Thermo Instrument Systems, 62,600 1,005,513 Inc. (a) Thermoquest Corp. (a) 9,700 160,050 2,753,843 INDUSTRIAL MACHINERY & EQUIPMENT - 9.4% Ionics, Inc. (a) 27,400 780,900 Thermo Fibertek, Inc. (a) 122,200 870,675 1,651,575 METALS & MINING - 2.5% IMCO Recycling, Inc. 43,800 435,263 POLLUTION CONTROL - 49.5% Allied Waste Industries, Inc. 109,060 613,462 (a) Calgon Carbon Corp. 78,400 563,500 Casella Waste Systems, Inc. 69,505 475,675 Class A (a) Insituform Technologies, Inc. 30,500 861,625 Class A (a) IT Group, Inc. (a) 61,400 468,175 Ogden Corp. 68,400 778,050 Republic Services, Inc. Class 88,300 960,263 A (a) Safety-Kleen Corp. (a) 93,450 455,569 Tetra Tech, Inc. (a) 44,637 1,118,715 TETRA Technologies, Inc. (a) 36,700 330,300 U.S. Liquids, Inc. (a) 21,700 135,625 Waste Connections, Inc. (a) 60,100 638,563 Waste Industries, Inc. (a) 37,900 400,319 Waste Management, Inc. 58,893 883,395 8,683,236 RETAIL & WHOLESALE, MISCELLANEOUS - 6.0% Newpark Resources, Inc. (a) 134,100 1,047,656 WATER - 4.5% Azurix Corp. 106,700 800,250 TOTAL COMMON STOCKS 16,200,973 (Cost $22,641,354) CASH EQUIVALENTS - 6.5% Taxable Central Cash Fund, 1,143,666 1,143,666 5.66% (b) (Cost $1,143,666) TOTAL INVESTMENT PORTFOLIO - 17,344,639 98.8% (Cost $23,785,020) NET OTHER ASSETS - 1.2% 208,500 NET ASSETS - 100% $ 17,553,139 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 $37,005,925 and $31,429,882, respectively. 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%. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $15,874 for the period. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $24,529,145. Net unrealized depreciation aggregated $7,184,506, of which $796,922 related to appreciated investment securities and $7,981,428 related to depreciated investment securities. The fund hereby designates approximately $12,000 as a capital gain dividend for the purpose of the dividend paid deduction. At February 29, 2000, the fund had a capital loss carryforward of approximately $635,000 all of which will expire on February 29, 2008. ENVIRONMENTAL SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 17,344,639 value (cost $23,785,020) - See accompanying schedule Receivable for investments 835,864 sold Receivable for fund shares 153,675 sold Interest receivable 5,420 Redemption fees receivable 848 Other receivables 39,790 TOTAL ASSETS 18,380,236 LIABILITIES Payable for investments $ 259,423 purchased Payable for fund shares 525,468 redeemed Accrued management fee 13,191 Other payables and accrued 29,015 expenses TOTAL LIABILITIES 827,097 NET ASSETS $ 17,553,139 Net Assets consist of: Paid in capital $ 25,572,577 Accumulated undistributed net (1,579,057) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (6,440,381) (depreciation) on investments NET ASSETS, for 1,834,014 $ 17,553,139 shares outstanding NET ASSET VALUE and $9.57 redemption price per share ($17,553,139 (divided by) 1,834,014 shares) Maximum offering price per $9.87 share (100/97.00 of $9.57) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 42,344 Dividends Interest 58,501 Security lending 118 TOTAL INCOME 100,963 EXPENSES Management fee $ 92,828 Transfer agent fees 198,679 Accounting and security 60,321 lending fees Custodian fees and expenses 10,420 Registration fees 19,598 Audit 11,317 Legal 90 Interest 1,833 Total expenses before 395,086 reductions Expense reductions (12,560) 382,526 NET INVESTMENT INCOME (LOSS) (281,563) REALIZED AND UNREALIZED GAIN (576,637) (LOSS) Net realized gain (loss) on investment securities Change in net unrealized (3,731,086) appreciation (depreciation) on investment securities NET GAIN (LOSS) (4,307,723) NET INCREASE (DECREASE) IN $ (4,589,286) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 66,627 charges paid to FDC Sales charges - Retained by $ 64,068 FDC Deferred sales charges $ 9,071 withheld by FDC Exchange fees withheld by FSC $ 5,049 Expense reductions Directed brokerage $ 12,560 arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (281,563) $ (256,748) income (loss) Net realized gain (loss) (576,637) (474,214) Change in net unrealized (3,731,086) (4,374,725) appreciation (depreciation) NET INCREASE (DECREASE) IN (4,589,286) (5,105,687) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (11,275) (40,246) in excess of net realized gain Share transactions Net 36,121,444 10,454,030 proceeds from sales of shares Reinvestment of distributions 10,778 38,642 Cost of shares redeemed (29,576,762) (15,030,447) NET INCREASE (DECREASE) IN 6,555,460 (4,537,775) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 64,679 34,045 TOTAL INCREASE (DECREASE) 2,019,578 (9,649,663) IN NET ASSETS NET ASSETS Beginning of period 15,533,561 25,183,224 End of period $ 17,553,139 $ 15,533,561 OTHER INFORMATION Shares Sold 2,977,437 712,286 Issued in reinvestment of 885 3,084 distributions Redeemed (2,361,044) (1,028,657) Net increase (decrease) 617,278 (313,287)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 12.77 $ 16.46 $ 14.50 $ 12.42 $ 10.27 period Income from Investment Operations Net investment income (loss) C (.21) (.18) (.13) (.08) (.17) Net realized and unrealized (3.03) (3.50) 2.07 2.04 2.95 gain (loss) Total from investment (3.24) (3.68) 1.94 1.96 2.78 operations Less Distributions From net realized gain - - - - (.65) In excess of net realized gain (.01) (.03) - (.02) - Total distributions (.01) (.03) - (.02) (.65) Redemption fees added to paid .05 .02 .02 .14 .02 in capital Net asset value, end of period $ 9.57 $ 12.77 $ 16.46 $ 14.50 $ 12.42 TOTAL RETURN A, B (25.00)% (22.23)% 13.52% 16.93% 27.49% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 17,553 $ 15,534 $ 25,183 $ 32,525 $ 27,587 (000 omitted) Ratio of expenses to average 2.47% 2.20% 2.23% 2.18% 2.36% net assets Ratio of expenses to average 2.39% D 2.16% D 2.22% D 2.11% D 2.32% D net assets after expense reductions Ratio of net investment (1.76)% (1.23)% (.84)% (.59)% (1.43)% income (loss) to average net assets Portfolio turnover rate 206% 123% 59% 252% 138%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 INDUSTRIAL EQUIPMENT PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT INDUSTRIAL EQUIPMENT 18.98% 144.56% 334.92% SELECT INDUSTRIAL EQUIPMENT 15.34% 137.15% 321.80% (LOAD ADJ.) S&P 500 11.73% 206.94% 425.47% GS Cyclical Industries -7.75% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 246 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT INDUSTRIAL EQUIPMENT 18.98% 19.59% 15.84% SELECT INDUSTRIAL EQUIPMENT 15.34% 18.85% 15.48% (LOAD ADJ.) S&P 500 11.73% 25.14% 18.05% GS Cyclical Industries -7.75% 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 1990/02/28 9700.00 10000.00 1990/03/31 10274.94 10265.00 1990/04/30 10192.80 10008.38 1990/05/31 11137.34 10984.19 1990/06/30 10939.39 10909.50 1990/07/31 10732.68 10874.59 1990/08/31 8963.19 9891.53 1990/09/30 7747.70 9409.81 1990/10/31 7540.99 9369.35 1990/11/30 7789.05 9974.61 1990/12/31 8070.18 10252.90 1991/01/31 8930.12 10699.92 1991/02/28 9773.52 11464.97 1991/03/31 9690.83 11742.42 1991/04/30 9591.61 11770.60 1991/05/31 9996.77 12279.09 1991/06/30 9674.04 11716.71 1991/07/31 9756.79 12262.71 1991/08/31 9905.75 12553.34 1991/09/30 10137.47 12343.69 1991/10/31 10079.54 12509.10 1991/11/30 9599.56 12004.98 1991/12/31 10236.25 13378.35 1992/01/31 11154.67 13129.52 1992/02/29 11947.85 13300.20 1992/03/31 11597.18 13040.85 1992/04/30 11597.18 13424.25 1992/05/31 11689.03 13490.03 1992/06/30 10970.99 13289.02 1992/07/31 11071.18 13832.55 1992/08/31 10495.08 13548.98 1992/09/30 10712.16 13708.86 1992/10/31 10670.41 13756.84 1992/11/30 11179.72 14225.94 1992/12/31 11396.80 14400.92 1993/01/31 11931.16 14521.89 1993/02/28 12557.35 14719.39 1993/03/31 12782.78 15029.97 1993/04/30 13367.62 14666.24 1993/05/31 14036.00 15059.30 1993/06/30 14219.81 15102.97 1993/07/31 14420.32 15042.56 1993/08/31 15406.19 15612.67 1993/09/30 15230.74 15492.45 1993/10/31 15740.38 15813.15 1993/11/30 15723.67 15662.92 1993/12/31 16334.91 15852.44 1994/01/31 17103.01 16391.43 1994/02/28 17589.47 15947.22 1994/03/31 16573.88 15251.92 1994/04/30 16423.87 15447.15 1994/05/31 16088.16 15700.48 1994/06/30 15261.80 15315.82 1994/07/31 15984.87 15818.18 1994/08/31 17121.11 16466.72 1994/09/30 17172.76 16063.29 1994/10/31 17387.95 16424.71 1994/11/30 16544.38 15826.52 1994/12/31 16845.66 16061.23 1995/01/31 16750.97 16477.70 1995/02/28 17250.23 17119.83 1995/03/31 18679.14 17625.04 1995/04/30 19557.37 18144.10 1995/05/31 19953.51 18869.32 1995/06/30 20711.35 19307.65 1995/07/31 22657.61 19947.89 1995/08/31 22218.41 19997.96 1995/09/30 21202.22 20841.88 1995/10/31 21159.16 20767.47 1995/11/30 21882.55 21679.16 1995/12/31 21531.13 22096.70 1996/01/31 22396.13 22848.87 1996/02/29 23609.02 23060.68 1996/03/31 23778.26 23282.76 1996/04/30 24215.14 23625.95 1996/05/31 24391.10 24235.26 1996/06/30 24283.57 24327.60 1996/07/31 23071.34 23252.80 1996/08/31 24068.50 23743.20 1996/09/30 25212.29 25079.47 1996/10/31 25055.87 25771.16 1996/11/30 27089.28 27719.21 1996/12/31 27282.18 27170.09 1997/01/31 28256.16 28867.68 1997/02/28 27916.91 29094.00 1997/03/31 26789.72 27898.53 1997/04/30 27766.47 29564.07 1997/05/31 30232.49 31363.93 1997/06/30 32117.58 32769.03 1997/07/31 34429.47 35376.46 1997/08/31 34216.07 33394.67 1997/09/30 35117.11 35223.70 1997/10/31 32378.40 34047.23 1997/11/30 32319.13 35623.28 1997/12/31 32342.84 36234.93 1998/01/31 31760.21 36635.68 1998/02/28 35106.95 39277.85 1998/03/31 37518.78 41289.27 1998/04/30 38467.25 41704.64 1998/05/31 37112.29 40987.74 1998/06/30 36963.24 42652.66 1998/07/31 35621.83 42198.41 1998/08/31 29619.37 36097.36 1998/09/30 30513.64 38409.76 1998/10/31 33860.39 41534.01 1998/11/30 35093.40 44051.38 1998/12/31 36440.57 46589.63 1999/01/31 36791.91 48538.00 1999/02/28 35456.83 47029.44 1999/03/31 35906.54 48911.09 1999/04/30 41170.31 50805.42 1999/05/31 40693.10 49605.90 1999/06/30 43050.24 52359.03 1999/07/31 42428.42 50724.38 1999/08/31 41748.75 50473.29 1999/09/30 41242.62 49089.82 1999/10/31 39087.94 52196.23 1999/11/30 39579.61 53257.37 1999/12/31 42778.88 56394.23 2000/01/31 40715.90 53560.99 2000/02/29 42180.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000323 092329 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Industrial Equipment Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $42,180 - a 321.80% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Applied Materials, Inc. 8.1 Tyco International Ltd. 6.5 Pitney Bowes, Inc. 6.0 General Electric Co. 5.1 Emerson Electric Co. 4.6 Honeywell International, Inc. 4.4 Illinois Tool Works, Inc. 4.0 Caterpillar, Inc. 3.9 Ingersoll-Rand Co. 3.9 Vodafone AirTouch PLC 3.5 50.0 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Industrial Machinery & Equipment 20.5% Row: 1, Col: 6, Value: 20.5 Electronic Instruments 20.0% Row: 1, Col: 5, Value: 20.0 Electrical Equipment 14.4% Row: 1, Col: 4, Value: 14.4 Aerospace & Defense 9.4% Row: 1, Col: 3, Value: 9.4 Computers & Office Equipment 8.1% Row: 1, Col: 2, Value: 8.1 *All Others 27.6% Row: 1, Col: 1, Value: 27.6
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. INDUSTRIAL EQUIPMENT PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Praveen Abichandani) NOTE TO SHAREHOLDERS: Praveen Abichandani became Portfolio Manager of Fidelity Select Industrial Equipment Portfolio on January 4, 2000. Q. HOW DID THE FUND PERFORM, PRAVEEN? A. For the 12 months that ended on February 29, 2000, the fund had a total return of 18.98%, while the Goldman Sachs Cyclical Industries Index - an index of 246 stocks designed to measure the performance of companies in the cyclical industries sector - returned -7.75%. During the same 12-month period, the Standard & Poor's 500 Index, a measure of the broader market's performance, had a return of 11.73%. Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S STRONG PERFORMANCE? A. Several different factors influenced performance. Early in the period, in the spring of 1999, the fund benefited from a snap-back in cyclical industry stocks as emerging markets started to rally, signaling an expansion in global economic growth. This recovery in cyclical industry stocks continued through June. In the fall, fears about potential Y2K computer problems started to recede and a strong rally began in technology stocks, sparked by favorable earnings reports and the long-range growth potential in networking and telecommunications. This technology rally lifted the prices of semiconductor capital equipment stocks in which the fund had a meaningful position and helped the fund's performance even as many other cyclical stocks faltered. Finally, strengthening commodity prices, including higher oil prices, increased demand for companies serving industries such as oil services. However, despite the strong performance in some industry groups, stocks of many high quality companies continued to trade at very low prices because of fears that rising interest rates would slow economic growth significantly. Q. WHAT HAVE BEEN YOUR PRINCIPAL STRATEGIES SINCE BECOMING THE FUND'S MANAGER IN JANUARY? A. I have maintained a focus on high-quality companies with strong fundamentals, irrespective of top-down, macroeconomic trends. I've overweighted companies such as Caterpillar, Parker Hannifin, Pitney-Bowes and Ingersoll Rand that have been trading at recessionary-level valuations. At the same time, I continued to emphasize semiconductor equipment companies such as Applied Materials, KLA Tencor, Kulicke & Soffa and Teradyne, where earnings expectations are rising. I believe that the proliferation of semiconductor chips in cars, home appliances and other everyday products signals an important trend that is more secular than cyclical. Taking advantage of developments in genomics, I also invested in equipment companies such as Millipore, which provides test equipment for the biotechnology industry. In addition, I have increased opportunistically the fund's emphasis on telecommunications equipment companies such as Ilumnet and Emerson Electronics, which is re-positioning itself. In general, I favor companies with strong management teams that can meet or exceed earnings expectations. I prefer companies with value-added products that can't be treated as commodities, even in a deflationary economy. Q. WHAT STOCKS WERE THE BIGGEST CONTRIBUTORS TO PERFORMANCE, AND WHAT STOCKS WERE THE MOST DISAPPOINTING? A. Semiconductor capital equipment companies had the largest positive influence on fund performance, with Applied Materials the single biggest contributor. General Electric also was a significant contributor. The company continued to deliver strong earnings growth as it successfully implemented its multi-line business strategy. General Electric has positioned itself very well to take advantage of opportunities in the new technology-based economy. Another contributor was Honeywell, whose stock rose in value as it merged with Allied-Signal. Xerox was the single biggest detractor from performance. The company had disappointing earnings as it continued to lose market share in office automation. In general, small-cap and mid-cap industrials did not perform well, as the market preferred technology stocks. Q. WHAT IS YOUR OUTLOOK? A. Three themes dominate my current thinking. First, while I am not hung up on the new economy trend, I will invest in networking equipment manufacturing companies that have good earnings growth potential. Second, I see potential opportunity in high-quality companies that have not participated in recent stock rallies and, consequently, have very low stock valuations that already discount the possibility the economy might suffer a hard landing. If the economy were to have a soft landing, these stocks could offer attractive opportunities. Third, I believe valuations of agriculture equipment stocks are at very low levels, reflecting low grain prices. They also may offer an 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 A- 3. (checkmark)FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 510 TRADING SYMBOL: FSCGX SIZE: as of February 29, 2000, more than $26 million MANAGER: Praveen Abichandani, since January 2000; equity analyst, cable services and equipment, 1998-2000; joined Fidelity in 1998 INDUSTRIAL EQUIPMENT PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 100.0% SHARES VALUE (NOTE 1) AEROSPACE & DEFENSE - 9.4% Honeywell International, Inc. 24,025 $ 1,156,203 Rockwell International Corp. 14,400 651,600 Textron, Inc. 10,700 652,700 2,460,503 BUILDING MATERIALS - 1.0% American Standard Companies, 6,200 216,225 Inc. (a) York International Corp. 2,500 45,313 261,538 CELLULAR - 3.5% Vodafone AirTouch PLC 159,204 918,408 COMMUNICATIONS EQUIPMENT - 1.6% NEC Corp. ADR 3,800 428,925 COMPUTER SERVICES & SOFTWARE - - 1.4% Electronics for Imaging, Inc. 6,000 356,250 (a) MatrixOne, Inc. 100 2,500 Onvia.com, Inc. 100 2,100 360,850 COMPUTERS & OFFICE EQUIPMENT - - 8.1% Pitney Bowes, Inc. 31,600 1,564,200 Xerox Corp. 25,000 542,188 2,106,388 CONSUMER ELECTRONICS - 1.8% Matsushita Electric 1,600 470,300 Industrial Co. Ltd. ADR ELECTRICAL EQUIPMENT - 14.4% Emerson Electric Co. 26,100 1,189,181 General Electric Co. 10,050 1,328,484 Hubbell, Inc. Class B 4,000 97,250 Roper Industries, Inc. 9,000 245,250 Siemens AG sponsored ADR 5,000 887,500 W.W. Grainger, Inc. 300 12,844 3,760,509 ELECTRONIC INSTRUMENTS - 20.0% Applied Materials, Inc. (a) 11,500 2,103,776 KLA-Tencor Corp. (a) 9,200 717,025 Kulicke & Soffa Industries, 9,500 755,250 Inc. (a) LAM Research Corp. (a) 2,595 405,144 Novellus Systems, Inc. (a) 6,000 355,875 Teradyne, Inc. (a) 10,100 878,700 5,215,770 ELECTRONICS - 6.5% Tyco International Ltd. 44,600 1,692,013 SHARES VALUE (NOTE 1) ENERGY SERVICES - 6.6% Baker Hughes, Inc. 4,100 $ 106,088 Halliburton Co. 18,800 717,925 Smith International, Inc. (a) 3,400 213,138 Weatherford International, 15,200 684,000 Inc. (a) 1,721,151 INDUSTRIAL MACHINERY & EQUIPMENT - 20.5% AGCO Corp. 3,600 39,600 Caterpillar, Inc. 29,200 1,023,825 CNH Global NV 14,800 163,725 Deere & Co. 14,300 511,225 Dover Corp. 9,800 377,913 Illinois Tool Works, Inc. 20,100 1,038,919 Ingersoll-Rand Co. 26,600 1,019,113 Milacron, Inc. 7,300 101,288 MSC Industrial Direct, Inc. 23,700 370,313 (a) Pall Corp. 10,800 213,300 Parker-Hannifin Corp. 13,700 496,625 5,355,846 LEASING & RENTAL - 0.2% Avis Rent A Car, Inc. (a) 3,600 52,425 MEDICAL EQUIPMENT & SUPPLIES - - 2.4% Millipore Corp. 11,700 625,219 PAPER & FOREST PRODUCTS - 0.0% Trex Co., Inc. 1 25 RETAIL & WHOLESALE, MISCELLANEOUS - 0.2% Stamps.com, Inc. 1,800 50,963 SERVICES - 1.3% Ritchie Bros. Auctioneers, 12,500 350,781 Inc. (a) TELEPHONE SERVICES - 1.1% Illuminet Holdings, Inc. 3,750 277,500 TOTAL COMMON STOCKS 26,109,114 (Cost $19,346,113) CASH EQUIVALENTS - 4.1% Central Cash Collateral Fund, 1,076,700 1,076,700 5.75% (b) (Cost $1,076,700) TOTAL INVESTMENT PORTFOLIO - 27,185,814 104.1% (Cost $20,422,813) NET OTHER ASSETS - (4.1)% (1,068,670) NET ASSETS - 100% $ 26,117,144 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 $38,454,094 and $47,784,091, 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 $4,565 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $1,020,319. The fund received cash collateral of $1,076,700 which was invested in cash equivalents. The fund participated in the bank borrowing program. The average daily loan balance during the period for which loans were outstanding amounted to $5,970,000. The weighted average interest rate was 5.29%. Distribution of investments by country of issue, as a percentage of net assets, is as follows: United States of America 87.8% United Kingdom 3.5 Japan 3.4 Germany 3.4 Canada 1.3 Others (individually less 0.6 than 1%) 100.0% INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $20,512,458. Net unrealized appreciation aggregated $6,673,356, of which $8,834,715 related to appreciated investment securities and $2,161,359 related to depreciated investment securities. The fund hereby designates approximately $3,978,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 31% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. INDUSTRIAL EQUIPMENT PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 27,185,814 value (cost $20,422,813) - See accompanying schedule Receivable for investments 201,263 sold Receivable for fund shares 24,635 sold Dividends receivable 43,438 Interest receivable 194 Redemption fees receivable 83 Other receivables 8,529 TOTAL ASSETS 27,463,956 LIABILITIES Payable to custodian bank $ 27,769 Payable for investments 26,700 purchased Payable for fund shares 177,862 redeemed Accrued management fee 12,762 Other payables and accrued 25,019 expenses Collateral on securities 1,076,700 loaned, at value TOTAL LIABILITIES 1,346,812 NET ASSETS $ 26,117,144 Net Assets consist of: Paid in capital $ 17,223,019 Undistributed net investment 11,392 income Accumulated undistributed net 2,119,732 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 6,763,001 (depreciation) on investments NET ASSETS, for 990,004 $ 26,117,144 shares outstanding NET ASSET VALUE and $26.38 redemption price per share ($26,117,144 (divided by) 990,004 shares) Maximum offering price per $27.20 share (100/97.00 of $26.38) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 380,871 Dividends Interest 138,598 Security lending 2,244 TOTAL INCOME 521,713 EXPENSES Management fee $ 204,936 Transfer agent fees 190,044 Accounting and security 60,399 lending fees Non-interested trustees' 104 compensation Custodian fees and expenses 11,155 Registration fees 21,908 Audit 11,784 Legal 157 Interest 3,507 Total expenses before 503,994 reductions Expense reductions (4,121) 499,873 NET INVESTMENT INCOME 21,840 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 4,990,376 Foreign currency transactions 516 4,990,892 Change in net unrealized 629,706 appreciation (depreciation) on investment securities NET GAIN (LOSS) 5,620,598 NET INCREASE (DECREASE) IN $ 5,642,438 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 48,861 charges paid to FDC Sales charges - Retained by $ 48,861 FDC Deferred sales charges $ 999 withheld by FDC Exchange fees withheld by FSC $ 2,919 Expense reductions Directed $ 4,121 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ 21,840 $ (69,481) income (loss) Net realized gain (loss) 4,990,892 3,586,120 Change in net unrealized 629,706 (3,320,873) appreciation (depreciation) NET INCREASE (DECREASE) IN 5,642,438 195,766 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (10,963) - From net investment income From net realized gain (3,692,055) (1,273,263) TOTAL DISTRIBUTIONS (3,703,018) (1,273,263) Share transactions Net 27,153,867 20,888,073 proceeds from sales of shares Reinvestment of distributions 3,534,052 1,219,714 Cost of shares redeemed (38,134,454) (39,935,425) NET INCREASE (DECREASE) IN (7,446,535) (17,827,638) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 51,097 50,582 TOTAL INCREASE (DECREASE) (5,456,018) (18,854,553) IN NET ASSETS NET ASSETS Beginning of period 31,573,162 50,427,715 End of period (including $ 26,117,144 $ 31,573,162 undistributed net investment income of $11,392 and $0, respectively) OTHER INFORMATION Shares Sold 949,014 771,299 Issued in reinvestment of 142,239 49,301 distributions Redeemed (1,352,644) (1,515,112) Net increase (decrease) (261,391) (694,512)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 25.23 $ 25.91 $ 25.51 $ 25.11 $ 20.04 period Income from Investment Operations Net investment income (loss) C .02 (.04) (.08) .06 .04 Net realized and unrealized 4.44 .25 5.73 4.15 7.10 gain (loss) Total from investment 4.46 .21 5.65 4.21 7.14 operations Less Distributions From net investment income (.01) - (.02) (.04) (.05) From net realized gain (3.34) (.92) (5.26) (3.84) (2.05) Total distributions (3.35) (.92) (5.28) (3.88) (2.10) Redemption fees added to paid .04 .03 .03 .07 .03 in capital Net asset value, end of period $ 26.38 $ 25.23 $ 25.91 $ 25.51 $ 25.11 TOTAL RETURN A, B 18.98% 1.00% 25.76% 18.25% 36.86% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 26,117 $ 31,573 $ 50,428 $ 102,882 $ 137,520 (000 omitted) Ratio of expenses to average 1.43% 1.43% 1.67% 1.51% 1.54% net assets Ratio of expenses to average 1.41% D 1.41% D 1.60% D 1.44% D 1.53% D net assets after expense reductions Ratio of net investment .06% (.16)% (.32)% .25% .19% income (loss) to average net assets Portfolio turnover rate 119% 84% 115% 261% 115%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 INDUSTRIAL MATERIALS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT INDUSTRIAL MATERIALS -3.22% 7.13% 99.41% SELECT INDUSTRIAL MATERIALS -6.20% 3.85% 93.36% (LOAD ADJ.) S&P 500 11.73% 206.94% 425.47% GS Cyclical Industries -7.75% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 246 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT INDUSTRIAL MATERIALS -3.22% 1.39% 7.15% SELECT INDUSTRIAL MATERIALS -6.20% 0.76% 6.82% (LOAD ADJ.) S&P 500 11.73% 25.14% 18.05% GS Cyclical Industries -7.75% 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 1990/02/28 9700.00 10000.00 1990/03/31 9983.10 10265.00 1990/04/30 9260.45 10008.38 1990/05/31 9819.20 10984.19 1990/06/30 9715.00 10909.50 1990/07/31 9600.34 10874.59 1990/08/31 8492.02 9891.53 1990/09/30 7888.18 9409.81 1990/10/31 7796.46 9369.35 1990/11/30 8209.21 9974.61 1990/12/31 8553.17 10252.90 1991/01/31 8858.92 10699.92 1991/02/28 9508.62 11464.97 1991/03/31 9638.56 11742.42 1991/04/30 9653.85 11770.60 1991/05/31 10479.36 12279.09 1991/06/30 10364.67 11716.71 1991/07/31 10779.25 12262.71 1991/08/31 11032.61 12553.34 1991/09/30 10886.74 12343.69 1991/10/31 11355.07 12509.10 1991/11/30 10449.12 12004.98 1991/12/31 11616.11 13378.35 1992/01/31 12122.82 13129.52 1992/02/29 12713.99 13300.20 1992/03/31 12491.34 13040.85 1992/04/30 13143.93 13424.25 1992/05/31 13297.48 13490.03 1992/06/30 12974.72 13289.02 1992/07/31 13266.63 13832.55 1992/08/31 12429.30 13548.98 1992/09/30 12260.30 13708.86 1992/10/31 12398.58 13756.84 1992/11/30 12859.49 14225.94 1992/12/31 13052.87 14400.92 1993/01/31 13330.59 14521.89 1993/02/28 13454.02 14719.39 1993/03/31 13677.74 15029.97 1993/04/30 13477.16 14666.24 1993/05/31 14032.61 15059.30 1993/06/30 14070.92 15102.97 1993/07/31 14264.42 15042.56 1993/08/31 14635.93 15612.67 1993/09/30 14179.28 15492.45 1993/10/31 15015.18 15813.15 1993/11/30 15216.41 15662.92 1993/12/31 15843.33 15852.44 1994/01/31 17128.14 16391.43 1994/02/28 16772.11 15947.22 1994/03/31 16299.98 15251.92 1994/04/30 16911.78 15447.15 1994/05/31 17082.45 15700.48 1994/06/30 16904.03 15315.82 1994/07/31 17532.40 15818.18 1994/08/31 18478.84 16466.72 1994/09/30 18246.11 16063.29 1994/10/31 18005.62 16424.71 1994/11/30 16733.36 15826.52 1994/12/31 17141.52 16061.23 1995/01/31 16657.56 16477.70 1995/02/28 18054.79 17119.83 1995/03/31 18468.50 17625.04 1995/04/30 18554.03 18144.10 1995/05/31 18366.38 18869.32 1995/06/30 19187.35 19307.65 1995/07/31 20844.94 19947.89 1995/08/31 20790.21 19997.96 1995/09/30 20203.80 20841.88 1995/10/31 19030.97 20767.47 1995/11/30 20782.39 21679.16 1995/12/31 19779.58 22096.70 1996/01/31 20085.81 22848.87 1996/02/29 20470.57 23060.68 1996/03/31 21507.05 23282.76 1996/04/30 22011.03 23625.95 1996/05/31 21875.50 24235.26 1996/06/30 21150.04 24327.60 1996/07/31 20273.11 23252.80 1996/08/31 21373.26 23743.20 1996/09/30 21843.62 25079.47 1996/10/31 21795.78 25771.16 1996/11/30 22457.47 27719.21 1996/12/31 22551.41 27170.09 1997/01/31 22651.49 28867.68 1997/02/28 23068.49 29094.00 1997/03/31 21533.93 27898.53 1997/04/30 21592.53 29564.07 1997/05/31 22960.75 31363.93 1997/06/30 22888.26 32769.03 1997/07/31 24890.76 35376.46 1997/08/31 24990.43 33394.67 1997/09/30 25642.83 35223.70 1997/10/31 23658.45 34047.23 1997/11/30 23377.56 35623.28 1997/12/31 22947.04 36234.93 1998/01/31 23379.82 36635.68 1998/02/28 24589.63 39277.85 1998/03/31 25789.60 41289.27 1998/04/30 26025.66 41704.64 1998/05/31 24747.00 40987.74 1998/06/30 23507.68 42652.66 1998/07/31 21845.42 42198.41 1998/08/31 18245.50 36097.36 1998/09/30 18511.07 38409.76 1998/10/31 19858.58 41534.01 1998/11/30 20556.93 44051.38 1998/12/31 20419.23 46589.63 1999/01/31 20527.42 48538.00 1999/02/28 19986.45 47029.44 1999/03/31 20438.90 48911.09 1999/04/30 24678.15 50805.42 1999/05/31 23084.74 49605.90 1999/06/30 23842.10 52359.03 1999/07/31 23360.15 50724.38 1999/08/31 22553.61 50473.29 1999/09/30 21963.45 49089.82 1999/10/31 22435.58 52196.23 1999/11/30 22110.99 53257.37 1999/12/31 23784.72 56394.23 2000/01/31 21224.05 53560.99 2000/02/29 19336.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000322 092524 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Industrial Materials Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $19,336 - a 93.36% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Minnesota Mining & 6.9 Manufacturing Co. Alcoa, Inc. 5.9 E.I. du Pont de Nemours and Co. 5.5 Dow Chemical Co. 5.0 Kimberly-Clark Corp. 4.6 Monsanto Co. 4.3 International Paper Co. 3.2 Weyerhaeuser Co. 2.4 Inco Ltd. 2.2 Union Pacific Corp. 2.1 42.1 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Chemicals & Plastics 27.3% Row: 1, Col: 6, Value: 27.3 Paper & Forest Products 20.6% Row: 1, Col: 5, Value: 20.6 Metals & Mining 11.9% Row: 1, Col: 4, Value: 11.9 Iron & Steel 7.0% Row: 1, Col: 3, Value: 7.0 Railroads 6.9% Row: 1, Col: 2, Value: 6.9 *All Others 26.3% Row: 1, Col: 1, Value: 26.3
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. INDUSTRIAL MATERIALS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Peter Hirsch) Peter Hirsch, Portfolio Manager of Fidelity Select Industrial Materials Portfolio Q. HOW DID THE FUND PERFORM, PETER? A. For the 12 months that ended February 29, 2000, the fund returned - -3.22%. For the same 12-month period, the Goldman Sachs Cyclical Industries Index - an index of 246 stocks designed to measure the performance of companies in the cyclical industries sector - fell 7.75%, while the Standard & Poor's 500 Index returned 11.73%. The fund outperformed the Goldman Sachs index because the index is more broadly based and includes some cyclical industry sectors that performed poorly relative to industrial materials. In addition, specific stock selection within the industrial materials subsector contributed to the fund's performance. Q. HOW WOULD YOU CHARACTERIZE THE INVESTMENT ENVIRONMENT OVER THE PAST 12 MONTHS? A. During the past year, global growth created a generally favorable environment for earnings gains in industrial materials stocks. More specifically, a rebound in Asian economies, a robust domestic economy and signs of improvement in European economies generated improved demand and pricing for commodities such as metals and paper. Early in the period, these conditions created a strong rally in cyclical stocks, and industrial materials stocks fully participated in the sector's advance. However, for much of the rest of the period, cyclical stock prices fell out of favor in response to investors' heightened preference for new economy stocks - such as technology stocks - that are characterized by high revenue growth expectations. Although industrial materials stock fundamentals remained attractive throughout the period, negative investor sentiment resulted in correcting prices, particularly in the early months of 2000. In addition, increasing interest rates, which suggest potentially slower economic growth, played a significant role in cyclical stock price weakness. Q. WHAT STOCKS BENEFITED THE FUND'S PERFORMANCE? A. Several of the fund's top 5 holdings generated strong performance. Alcoa, Kimberly-Clark, Minnesota Mining & Manufacturing (3M) and Dow Chemical all posted robust gains as they profited from rebounding global economies and improving commodity prices. In addition, Alcoa's stock performed well in response to its leadership position in the aluminum industry's consolidation as well as continued benefits from a significant cost-cutting campaign. Kimberly-Clark generated positive investor response by divesting non-core businesses, gaining market share in personal care products and implementing an aggressive share re-purchase program. Q. WERE THERE ANY DISAPPOINTMENTS? A. Two of the largest detractors from the fund's performance were CSX Corp. and Burlington Northern. Both stocks suffered from problems in the ongoing consolidation of the U.S. railroad industry. Although consolidation should have positive long-term benefits, short-term problems pressured earnings and stock prices. For example, some recent mergers performed poorly because of unsuccessful systems and operating integration. In view of recent disappointing merger activity, investors were unreceptive to Burlington Northern's announced acquisition of Canadian National in December 1999. Another weak stock was Monsanto, which lost ground over concerns - primarily in Europe - about genetically modified foods, which represent one of Monsanto's potentially higher-growth businesses. Q. WHAT'S YOUR OUTLOOK FOR THE COMING MONTHS? A. As long as economic growth continues to trend upward both domestically and abroad, I'll have a positive earnings outlook for the remainder of the year. As a caveat, however, further interest-rate hikes by the Federal Reserve Board have the potential to reduce domestic demand for industrial materials, which would have a negative earnings effect that might only partially be offset by strength overseas. Additionally, many industrial materials stock fundamentals remain strong with attractive earnings prospects. Although they appear to be undervalued, current investor preference for new economy stocks may lengthen the time horizon to capture the intrinsic value in industrial materials stocks. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 509 TRADING SYMBOL: FSDPX SIZE: as of February 29, 2000, more than $20 million MANAGER: Peter Hirsch, since 1998; analyst, growth and income funds and steel industries, 1995-1998; joined Fidelity in 1995 NOTE TO SHAREHOLDERS: Effective April 1, 2000, Niel Marotta became Portfolio Manager of Fidelity Select Industrial Materials Portfolio. INDUSTRIAL MATERIALS PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 93.8% SHARES VALUE (NOTE 1) BUILDING MATERIALS - 3.9% Ferro Corp. 1,900 $ 35,863 Lafarge Corp. 3,887 76,525 Masco Corp. 16,700 298,513 Owens Corning 4,900 71,050 Sherwin-Williams Co. 900 17,213 Southdown, Inc. 1,700 84,363 USG Corp. 800 26,000 Vulcan Materials Co. 4,500 180,000 Water Pik Technologies, Inc. 865 5,839 (a) 795,366 CHEMICALS & PLASTICS - 27.3% Air Products & Chemicals, 3,400 87,550 Inc. Avery Dennison Corp. 5,500 333,781 CK Witco Corp. 7,195 76,447 Cytec Industries, Inc. (a) 1,600 38,800 Dow Chemical Co. 9,500 1,030,750 E.I. du Pont de Nemours and 22,600 1,141,300 Co. Eastman Chemical Co. 3,600 129,375 Engelhard Corp. 9,700 132,163 Great Lakes Chemical Corp. 2,000 58,125 H.B. Fuller Co. 600 36,825 Hercules, Inc. 5,100 84,150 Ivex Packaging Corp. (a) 4,600 34,788 Lyondell Chemical Co. 5,400 46,238 M.A. Hanna Co. 2,500 28,594 Minerals Technologies, Inc. 800 32,450 Monsanto Co. 22,600 877,163 Olin Corp. 4,400 68,200 PPG Industries, Inc. 6,800 335,750 Praxair, Inc. 9,600 324,000 Sealed Air Corp. (a) 5,340 265,331 Union Carbide Corp. 6,400 343,600 Valspar Corp. 3,700 121,406 5,626,786 COMPUTER SERVICES & SOFTWARE - - 0.0% MatrixOne, Inc. 100 2,500 Onvia.com, Inc. 100 2,100 4,600 CONSUMER DURABLES - 6.9% Minnesota Mining & 16,100 1,418,804 Manufacturing Co. ELECTRICAL EQUIPMENT - 0.1% Teledyne Technologies, Inc. 2,485 21,588 (a) INDUSTRIAL MACHINERY & EQUIPMENT - 0.2% UCAR International, Inc. (a) 2,000 30,500 SHARES VALUE (NOTE 1) IRON & STEEL - 7.0% AK Steel Holding Corp. 35,700 $ 296,756 Allegheny Technologies, Inc. 8,150 138,041 Bethlehem Steel Corp. (a) 33,000 187,688 Nucor Corp. 8,000 397,500 Steel Dynamics, Inc. (a) 9,100 139,913 USX - U.S. Steel Group 11,100 242,813 Worthington Industries, Inc. 3,700 49,025 1,451,736 LEASING & RENTAL - 0.7% Ryder System, Inc. 7,200 134,100 METALS & MINING - 11.9% Alcoa, Inc. 17,882 1,224,917 Brush Wellman, Inc. 900 15,075 Cominco Ltd. 4,200 60,844 Falconbridge Ltd. 11,200 159,934 Inco Ltd. (a) 26,200 458,175 Kaiser Aluminum Corp. (a) 900 5,119 Martin Marietta Materials, 2,300 81,650 Inc. Noranda, Inc. 7,200 75,000 Phelps Dodge Corp. 3,800 179,075 Reynolds Metals Co. 2,200 139,700 Ryerson Tull, Inc. 4,120 54,590 2,454,079 PACKAGING & CONTAINERS - 2.0% Ball Corp. 1,206 32,487 Bemis Co., Inc. 3,300 98,175 Crown Cork & Seal Co., Inc. 4,500 63,000 Gaylord Container Corp. Class 17,800 95,675 A (a) Owens-Illinois, Inc. (a) 9,500 131,219 420,556 PAPER & FOREST PRODUCTS - 20.6% Boise Cascade Corp. 2,887 86,069 Bowater, Inc. 7,300 359,069 Champion International Corp. 4,500 232,875 Chesapeake Corp. 700 15,531 Consolidated Papers, Inc. 4,800 182,100 Domtar, Inc. 7,600 89,652 Fort James Corp. 9,500 178,719 Georgia-Pacific Corp. 6,800 235,875 International Paper Co. 17,686 651,066 Kimberly-Clark Corp. 18,400 951,050 Louisiana-Pacific Corp. 100 1,181 Mead Corp. 5,100 152,681 Potlatch Corp. 1,500 57,000 Smurfit-Stone Container Corp. 11,300 153,963 (a) Temple-Inland, Inc. 2,200 112,475 Westvaco Corp. 5,400 148,838 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) PAPER & FOREST PRODUCTS - CONTINUED Weyerhaeuser Co. 9,500 $ 487,469 Willamette Industries, Inc. 4,500 152,719 4,248,332 PRECIOUS METALS - 4.2% Barrick Gold Corp. 20,000 326,297 Franco Nevada Mining Corp. 6,142 71,182 Ltd. Kinross Gold Corp. (a) 22,600 35,546 Newmont Mining Corp. 9,550 211,294 Placer Dome, Inc. 12,145 105,565 Stillwater Mining Co. (a) 3,350 124,369 874,253 RAILROADS - 6.9% Burlington Northern Santa Fe 20,000 393,750 Corp. Canadian National Railway Co. 4,600 107,416 Canadian Pacific Ltd. 10,600 204,015 CSX Corp. 13,400 297,313 Union Pacific Corp. 11,300 429,400 1,431,894 SECURITIES INDUSTRY - 0.8% Kansas City Southern 2,200 173,250 Industries, Inc. TRUCKING & FREIGHT - 1.3% CNF Transportation, Inc. 4,200 134,663 USFreightways Corp. 3,700 123,025 257,688 TOTAL COMMON STOCKS 19,343,532 (Cost $21,700,604) CASH EQUIVALENTS - 12.3% Central Cash Collateral Fund, 1,145,100 1,145,100 5.75% (b) Taxable Central Cash Fund, 1,406,368 1,406,368 5.66% (b) TOTAL CASH EQUIVALENTS 2,551,468 (Cost $2,551,468) TOTAL INVESTMENT PORTFOLIO - 21,895,000 106.1% (Cost $24,252,072) NET OTHER ASSETS - (6.1)% (1,268,275) NET ASSETS - 100% $ 20,626,725 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 $64,801,228 and $52,440,711, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $11,147 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $1,076,550. The fund received cash collateral of $1,145,100 which was invested in cash equivalents. 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 February 29, 2000, the aggregate cost of investment securities for income tax purposes was $24,727,383. Net unrealized depreciation aggregated $2,832,383, of which $1,241,125 related to appreciated investment securities and $4,073,508 related to depreciated investment securities. At February 29, 2000, the fund had a capital loss carryforward of approximately $2,206,000 of which $840,000 and $1,366,000 will expire on February 28, 2007 and February 29, 2008, respectively. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. INDUSTRIAL MATERIALS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 21,895,000 value (cost $24,252,072) - See accompanying schedule Receivable for investments 49,262 sold Receivable for fund shares 96,960 sold Dividends receivable 51,640 Interest receivable 6,414 Other receivables 63,785 TOTAL ASSETS 22,163,061 LIABILITIES Payable for investments $ 26,701 purchased Payable for fund shares 320,918 redeemed Accrued management fee 11,139 Other payables and accrued 32,478 expenses Collateral on securities 1,145,100 loaned, at value TOTAL LIABILITIES 1,536,336 NET ASSETS $ 20,626,725 Net Assets consist of: Paid in capital $ 26,027,361 Undistributed net investment 19,303 income Accumulated undistributed net (3,062,871) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (2,357,068) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 1,050,162 $ 20,626,725 shares outstanding NET ASSET VALUE and $19.64 redemption price per share ($20,626,725 (divided by) 1,050,162 shares) Maximum offering price per $20.25 share (100/97.00 of $19.64) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 396,424 Dividends Interest 76,795 Security lending 2,782 TOTAL INCOME 476,001 EXPENSES Management fee $ 132,530 Transfer agent fees 168,755 Accounting and security 60,367 lending fees Non-interested trustees' 64 compensation Custodian fees and expenses 33,056 Registration fees 25,010 Audit 11,449 Legal 243 Interest 2,031 Total expenses before 433,505 reductions Expense reductions (5,778) 427,727 NET INVESTMENT INCOME 48,274 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (1,012,199) Foreign currency transactions (942) (1,013,141) Change in net unrealized appreciation (depreciation) on: Investment securities (2,555,785) Assets and liabilities in 7 (2,555,778) foreign currencies NET GAIN (LOSS) (3,568,919) NET INCREASE (DECREASE) IN $ (3,520,645) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 120,846 charges paid to FDC Sales charges - Retained by $ 120,846 FDC Deferred sales charges $ 478 withheld by FDC Exchange fees withheld by FSC $ 4,359 Expense reductions Directed $ 5,778 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ 48,274 $ (83,870) income (loss) Net realized gain (loss) (1,013,141) (1,208,807) Change in net unrealized (2,555,778) (1,993,477) appreciation (depreciation) NET INCREASE (DECREASE) IN (3,520,645) (3,286,154) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (28,030) - from net investment income Share transactions Net 84,117,245 9,957,438 proceeds from sales of shares Reinvestment of distributions 27,010 - Cost of shares redeemed (71,316,023) (18,118,847) NET INCREASE (DECREASE) IN 12,828,232 (8,161,409) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 184,925 27,986 TOTAL INCREASE (DECREASE) 9,464,482 (11,419,577) IN NET ASSETS NET ASSETS Beginning of period 11,162,243 22,581,820 End of period (including $ 20,626,725 $ 11,162,243 undistributed net investment income of $19,303 and $0, respectively) OTHER INFORMATION Shares Sold 3,507,863 440,126 Issued in reinvestment of 1,180 - distributions Redeemed (3,008,070) (794,343) Net increase (decrease) 500,973 (354,217)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 20.32 $ 25.00 $ 27.66 $ 26.07 $ 23.13 period Income from Investment Operations Net investment income (loss) C .05 (.12) (.11) .06 .12 Net realized and unrealized (.89) (4.60) 1.43 3.12 2.92 gain (loss) Total from investment (.84) (4.72) 1.32 3.18 3.04 operations Less Distributions From net investment income (.03) - (.03) (.06) (.15) From net realized gain - - (4.00) (1.57) - Total distributions (.03) - (4.03) (1.63) (.15) Redemption fees added to paid .19 .04 .05 .04 .05 in capital Net asset value, end of period $ 19.64 $ 20.32 $ 25.00 $ 27.66 $ 26.07 TOTAL RETURN A, B (3.22)% (18.72)% 6.59% 12.69% 13.38% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 20,627 $ 11,162 $ 22,582 $ 66,462 $ 86,338 (000 omitted) Ratio of expenses to average 1.92% 2.07% 1.98% 1.54% 1.64% net assets Ratio of expenses to average 1.89% D 2.04% D 1.94% D 1.51% D 1.61% D net assets after expense reductions Ratio of net investment .21% (.52)% (.42)% .23% .49% income (loss) to average net assets Portfolio turnover rate 257% 82% 118% 105% 138%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 PAPER AND FOREST PRODUCTS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT PAPER AND FOREST 20.16% 39.47% 187.96% PRODUCTS SELECT PAPER AND FOREST 16.48% 35.21% 179.25% PRODUCTS (LOAD ADJ.) S&P 500 11.73% 206.94% 425.47% GS Cyclical Industries -7.75% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 246 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT PAPER AND FOREST 20.16% 6.88% 11.16% PRODUCTS SELECT PAPER AND FOREST 16.48% 6.22% 10.82% PRODUCTS (LOAD ADJ.) S&P 500 11.73% 25.14% 18.05% GS Cyclical Industries -7.75% 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 1990/02/28 9700.00 10000.00 1990/03/31 9971.33 10265.00 1990/04/30 9326.92 10008.38 1990/05/31 9945.89 10984.19 1990/06/30 9708.48 10909.50 1990/07/31 9852.62 10874.59 1990/08/31 8674.04 9891.53 1990/09/30 7834.62 9409.81 1990/10/31 7588.72 9369.35 1990/11/30 8351.84 9974.61 1990/12/31 8975.97 10252.90 1991/01/31 9717.50 10699.92 1991/02/28 10183.11 11464.97 1991/03/31 10390.05 11742.42 1991/04/30 10898.77 11770.60 1991/05/31 12149.03 12279.09 1991/06/30 11838.62 11716.71 1991/07/31 11847.24 12262.71 1991/08/31 11907.60 12553.34 1991/09/30 11450.61 12343.69 1991/10/31 11881.73 12509.10 1991/11/30 10976.38 12004.98 1991/12/31 12096.49 13378.35 1992/01/31 13209.01 13129.52 1992/02/29 13270.82 13300.20 1992/03/31 13359.11 13040.85 1992/04/30 13571.02 13424.25 1992/05/31 13191.35 13490.03 1992/06/30 13103.71 13289.02 1992/07/31 13006.39 13832.55 1992/08/31 12484.36 13548.98 1992/09/30 12351.64 13708.86 1992/10/31 12953.30 13756.84 1992/11/30 13431.09 14225.94 1992/12/31 13554.71 14400.92 1993/01/31 13972.19 14521.89 1993/02/28 14283.08 14719.39 1993/03/31 14265.32 15029.97 1993/04/30 14914.24 14666.24 1993/05/31 14958.68 15059.30 1993/06/30 14638.71 15102.97 1993/07/31 14487.61 15042.56 1993/08/31 14878.69 15612.67 1993/09/30 14167.64 15492.45 1993/10/31 14718.70 15813.15 1993/11/30 15634.18 15662.92 1993/12/31 16069.70 15852.44 1994/01/31 17936.20 16391.43 1994/02/28 17429.58 15947.22 1994/03/31 15580.85 15251.92 1994/04/30 15563.44 15447.15 1994/05/31 16198.31 15700.48 1994/06/30 16035.06 15315.82 1994/07/31 17395.50 15818.18 1994/08/31 19336.39 16466.72 1994/09/30 19681.04 16063.29 1994/10/31 18456.64 16424.71 1994/11/30 17649.45 15826.52 1994/12/31 18341.68 16061.23 1995/01/31 18218.52 16477.70 1995/02/28 20028.06 17119.83 1995/03/31 20170.17 17625.04 1995/04/30 20253.57 18144.10 1995/05/31 20588.42 18869.32 1995/06/30 22454.01 19307.65 1995/07/31 23219.38 19947.89 1995/08/31 23200.24 19997.96 1995/09/30 22817.56 20841.88 1995/10/31 22482.71 20767.47 1995/11/30 22817.56 21679.16 1995/12/31 22361.22 22096.70 1996/01/31 22918.94 22848.87 1996/02/29 21866.64 23060.68 1996/03/31 22982.07 23282.76 1996/04/30 23986.93 23625.95 1996/05/31 23503.45 24235.26 1996/06/30 22184.89 24327.60 1996/07/31 21602.52 23252.80 1996/08/31 22811.21 23743.20 1996/09/30 23635.31 25079.47 1996/10/31 23591.36 25771.16 1996/11/30 23866.06 27719.21 1996/12/31 23941.25 27170.09 1997/01/31 24187.83 28867.68 1997/02/28 24243.87 29094.00 1997/03/31 22932.48 27898.53 1997/04/30 23618.82 29564.07 1997/05/31 26533.73 31363.93 1997/06/30 26741.11 32769.03 1997/07/31 28826.48 35376.46 1997/08/31 28722.79 33394.67 1997/09/30 29563.85 35223.70 1997/10/31 26683.50 34047.23 1997/11/30 26856.32 35623.28 1997/12/31 26180.30 36234.93 1998/01/31 27181.53 36635.68 1998/02/28 28009.70 39277.85 1998/03/31 28442.33 41289.27 1998/04/30 29973.48 41704.64 1998/05/31 28222.19 40987.74 1998/06/30 26949.67 42652.66 1998/07/31 24354.24 42198.41 1998/08/31 20864.26 36097.36 1998/09/30 21280.03 38409.76 1998/10/31 22640.75 41534.01 1998/11/30 23711.68 44051.38 1998/12/31 24114.85 46589.63 1999/01/31 23056.52 48538.00 1999/02/28 23245.51 47029.44 1999/03/31 24455.03 48911.09 1999/04/30 29393.91 50805.42 1999/05/31 28915.15 49605.90 1999/06/30 29305.72 52359.03 1999/07/31 29091.53 50724.38 1999/08/31 28877.35 50473.29 1999/09/30 28285.19 49089.82 1999/10/31 28864.75 52196.23 1999/11/30 27642.63 53257.37 1999/12/31 31472.78 56394.23 2000/01/31 29482.11 53560.99 2000/02/29 27925.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000309 114953 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Paper and Forest Products Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $27,925 - a 179.25% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Pope & Talbot, Inc. 14.8 Bowater, Inc. 10.7 Tembec, Inc. Class A 10.4 Gaylord Container Corp. Class A 9.8 Abitibi-Consolidated, Inc. 8.6 Consolidated Papers, Inc. 6.8 Donohue, Inc. Class A (sub. 6.4 vtg.) Domtar, Inc. 5.1 Champion International Corp. 4.2 Boise Cascade Corp. 4.1 80.9 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Paper & Forest Products 87.4% Row: 1, Col: 6, Value: 87.40000000000001 Packaging & Containers 10.1% Row: 1, Col: 5, Value: 10.1 Real Estate Investment Trusts 0.7% Row: 1, Col: 4, Value: 0.7000000000000001 Tobacco 0.4% Row: 1, Col: 3, Value: 0.4 Chemicals & Plastics 0.2% Row: 1, Col: 2, Value: 0.2 *All Others 1.2% Row: 1, Col: 1, Value: 1.2
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. PAPER AND FOREST PRODUCTS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Adam Segel) NOTE TO SHAREHOLDERS: On March 7, 2000, after the end of the period covered by this report, Adam Segel became Portfolio Manager of Fidelity Select Paper and Forest Products Portfolio. Q. HOW DID THE FUND PERFORM, ADAM? A. For the 12 months that ended February 29, 2000, the fund returned 20.16%. This compared favorably to the Standard & Poor's 500 Index, which returned 11.73% during that time. The Goldman Sachs Cyclical Industries Index - an index of 246 stocks designed to measure the performance of companies in the cyclical industries sector - fell 7.75%. Q. WHAT FACTORS HELPED SHAPE THE FUND'S PERFORMANCE? A. The fund benefited from favorable sector trends throughout the period. Two of the most critical drivers for the paper group - operating rates and pulp prices - continued to be attractive. Operating rates are simply the global consumption of paper products divided by available capacity. While capacity expansion reached near-historic lows during the period, demand - spurred on by improving global economies and a pickup in exporting - was strong. A pickup in Asian exports, for instance, helped paper prices. Rising pulp prices also contributed positively to performance. Pulp serves as the building block for all things paper, and paper-stock prices tend to track the price of pulp. Q. HOW DID EACH OF THE PAPER SUBSECTORS PERFORM DURING THE PERIOD? A. Coated and uncoated free sheet grades have direct exposure to pulp because pulp is a significant component of the cost involved in making those types of paper. Inventories in each of these areas decreased slightly, yet both experienced price increases. Most of the other grades within the group were helped along by capacity reduction and tighter inventories. The containerboard sector pushed through a couple of price increases for linerboard, the material used in assembling corrugated boxes, and newsprint prices also rose. Operating margins within the tissue area have been fairly competitive, and tissue is typically the last grade to be helped by rising pulp prices. Q. THE FUND'S THREE LARGEST INDIVIDUAL POSITIONS AT THE END OF THE PERIOD WERE POPE & TALBOT, BOWATER AND TEMBEC. WHAT CAN YOU TELL US ABOUT THESE STOCKS? A. Pope & Talbot was the fund's single best performer during the period. The company benefited from good revenue growth from both its wood products and pulp businesses. Its wood products business involves the manufacture and sale of standardized and specialty wood and lumber chips, while its pulp business manufactures and sells bleached kraft pulp for newsprint, tissue and high-grade coated and uncoated paper. Bowater is another market leader in this area, with a particular focus on newsprint. Finally, Tembec is a leading Canadian forest products company that markets its products to more than 50 countries across the world. Bowater and Tembec turned in mediocre performances during the period. Q. WHICH OTHER STOCKS PERFORMED WELL? WHICH PROVED DISAPPOINTING? A. The fund's holdings in Consolidated Papers, Westvaco and Champion International all performed well, as each company rode the favorable trends of low capacity and high demand. Gaylord Container, meanwhile, was somewhat of a disappointment. The company specializes in containerboard and, while prices rose within this group, pricing momentum slowed relative to other paper grades. However, Gaylord - the fund's fourth-largest position at the close of the period - appeared to turn the corner in early 2000 as revenue growth took an upturn. Other stocks that didn't perform up to par included Tenneco, Abitibi-Consolidated and Plum Creek Timber. Q. WHAT'S YOUR OUTLOOK, ADAM? A. The fund is currently positioned to benefit from continued improvement in operating rates, pricing and cost structures. Its top holdings are concentrated in names that are leveraged to fine paper prices and wood products, with lesser exposures to companies leveraged to containerboard and newsprint. The outlook for operating rates in most grades - particularly pulp - remains favorable as global demand continues to rebound, and there are limited amounts of new capacity coming on. The current tightness in the worldwide pulp market is positive for paper prices, as producers are forced to pass on the cost of higher pulp prices to consumers in the way of higher paper prices. Slowing worldwide economic growth or major additions to supply are the major risks to this thesis and, if either materializes, it could hurt the paper cycle. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 506 TRADING SYMBOL: FSPFX SIZE: as of February 29, 2000, more than $12 million MANAGER: Adam Segel, since March 2000; analyst, cellular and wireless industries; furniture and appliance industries, since 1997; joined Fidelity in 1997 PAPER AND FOREST PRODUCTS PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 98.8% SHARES VALUE (NOTE 1) CHEMICALS & PLASTICS - 0.2% Ivex Packaging Corp. (a) 2,400 $ 18,150 Pactiv Corp. (a) 250 2,078 20,228 INDUSTRIAL MACHINERY & EQUIPMENT - 0.0% Tenneco Automotive, Inc. 10 74 PACKAGING & CONTAINERS - 10.1% Gaylord Container Corp. Class 225,700 1,213,138 A (a) Longview Fibre Co. 3,000 40,875 1,254,013 PAPER & FOREST PRODUCTS - 87.4% Abitibi-Consolidated, Inc. 120,300 1,062,252 Alliance Forest Products, 16,300 212,521 Inc. (a) Boise Cascade Corp. 17,012 507,170 Bowater, Inc. 27,100 1,332,981 Caraustar Industries, Inc. 600 9,975 Champion International Corp. 10,060 520,605 Consolidated Papers, Inc. 22,284 845,399 Domtar, Inc. 53,700 633,464 Donohue, Inc. Class A (sub. 34,600 792,439 vtg.) Fletcher Challenge Canada 7,700 90,301 Ltd. Fort James Corp. 300 5,644 Georgia-Pacific Corp. 361 12,522 International Paper Co. 261 9,608 Jefferson Smurfit Group PLC 11,600 26,299 Jefferson Smurfit Group PLC 13,750 327,422 sponsored ADR Mead Corp. 16,311 488,311 P.H. Glatfelter Co. 3,400 41,650 Pope & Talbot, Inc. 95,800 1,832,173 Potlatch Corp. 400 15,200 Rayonier, Inc. 300 11,925 Smurfit-Stone Container Corp. 24,500 333,813 (a) Stora Enso Oyj 10,600 107,377 Svenska Cellulosa AB (SCA) 5,200 126,909 Series B Tembec, Inc. Class A (a) 130,000 1,295,875 Temple-Inland, Inc. 377 19,274 Westvaco Corp. 6,700 184,669 10,845,778 REAL ESTATE INVESTMENT TRUSTS - - 0.7% Plum Creek Timber Co., Inc. 3,950 87,888 (REIT) TOBACCO - 0.4% Schweitzer-Mauduit 4,200 57,225 International, Inc. TOTAL COMMON STOCKS 12,265,206 (Cost $12,574,929) CASH EQUIVALENTS - 1.3% SHARES VALUE (NOTE 1) Central Cash Collateral Fund, 154,000 $ 154,000 5.75% (b) (Cost $154,000) TOTAL INVESTMENT PORTFOLIO - 12,419,206 100.1% (Cost $12,728,929) NET OTHER ASSETS - (0.1)% (7,409) NET ASSETS - 100% $ 12,411,797 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 $73,172,046 and $69,738,920, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $15,067 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $142,137. The fund received cash collateral of $154,000 which was invested in cash equivalents. The fund participated in the bank borrowing program. The average daily loan balance during the period for which loans were outstanding amounted to $1,069,000. The weighted average interest rate was 5.97%. Distribution of investments by country of issue, as a percentage of net assets, is as follows: United States of America 62.4% Canada 32.9 Ireland 2.8 Sweden 1.0 Others (individually less 0.9 than 1%) 100.0% INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $12,797,439. Net unrealized depreciation aggregated $378,233, of which $1,451,757 related to appreciated investment securities and $1,829,990 related to depreciated investment securities. At February 29, 2000, the fund had a capital loss carryforward of approximately $1,444,000, all of which will expire on February 28, 2007. The fund intends to elect to defer to its fiscal year ending February 28, 2001 approximately $1,496,000 of losses recognized during the period November 1, 1999 to February 29, 2000. PAPER AND FOREST PRODUCTS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 12,419,206 value (cost $12,728,929) - See accompanying schedule Receivable for investments 4,645,708 sold Receivable for fund shares 78,550 sold Dividends receivable 18,939 Interest receivable 2,308 Redemption fees receivable 2,173 Other receivables 16 TOTAL ASSETS 17,166,900 LIABILITIES Payable to custodian bank $ 1,210,762 Payable for fund shares 3,357,014 redeemed Accrued management fee 9,300 Other payables and accrued 24,027 expenses Collateral on securities 154,000 loaned, at value TOTAL LIABILITIES 4,755,103 NET ASSETS $ 12,411,797 Net Assets consist of: Paid in capital $ 15,951,296 Undistributed net investment 15,056 income Accumulated undistributed net (3,243,567) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (310,988) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 559,895 $ 12,411,797 shares outstanding NET ASSET VALUE and $22.17 redemption price per share ($12,411,797 (divided by) 559,895 shares) Maximum offering price per $22.86 share (100/97.00 of $22.17) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 442,107 Dividends Interest 105,961 Security lending 615 TOTAL INCOME 548,683 EXPENSES Management fee $ 124,175 Transfer agent fees 156,807 Accounting and security 60,330 lending fees Non-interested trustees' 60 compensation Custodian fees and expenses 17,144 Registration fees 27,666 Audit 14,129 Legal 77 Interest 710 Total expenses before 401,098 reductions Expense reductions (32,414) 368,684 NET INVESTMENT INCOME 179,999 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 110,502 Foreign currency transactions 670 111,172 Change in net unrealized appreciation (depreciation) on: Investment securities (310,414) Assets and liabilities in (1,245) (311,659) foreign currencies NET GAIN (LOSS) (200,487) NET INCREASE (DECREASE) IN $ (20,488) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 117,490 charges paid to FDC Sales charges - Retained by $ 117,490 FDC Deferred sales charges $ 1,145 withheld by FDC Exchange fees withheld by FSC $ 6,414 Expense reductions Directed $ 32,414 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ 179,999 $ (19,520) income (loss) Net realized gain (loss) 111,172 (2,776,473) Change in net unrealized (311,659) (1,268,236) appreciation (depreciation) NET INCREASE (DECREASE) IN (20,488) (4,064,229) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders - (317,946) In excess of net realized gain Share transactions Net 88,259,011 24,142,684 proceeds from sales of shares Reinvestment of distributions - 312,733 Cost of shares redeemed (86,313,272) (41,303,607) NET INCREASE (DECREASE) IN 1,945,739 (16,848,190) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 239,998 92,806 TOTAL INCREASE (DECREASE) 2,165,249 (21,137,559) IN NET ASSETS NET ASSETS Beginning of period 10,246,548 31,384,107 End of period (including $ 12,411,797 $ 10,246,548 undistributed net investment income of $15,056 and $4,129, respectively) OTHER INFORMATION Shares Sold 3,705,982 1,074,182 Issued in reinvestment of - 13,704 distributions Redeemed (3,701,544) (1,917,231) Net increase (decrease) 4,438 (829,345)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 F 1999 1998 1997 1996 F SELECTED PER-SHARE DATA Net asset value, beginning of $ 18.45 $ 22.66 $ 21.63 $ 20.78 $ 21.14 period Income from Investment Operations Net investment income (loss) C .20 (.03) (.12) .01 .08 Net realized and unrealized 3.26 d (3.87) 3.13 2.08 1.83 gain (loss) Total from investment 3.46 (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 .26 .13 .13 .11 .08 in capital Net asset value, end of period $ 22.17 $ 18.45 $ 22.66 $ 21.63 $ 20.78 TOTAL RETURN A, B 20.16% (17.01)% 15.53% 10.87% 9.18% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 12,412 $ 10,247 $ 31,384 $ 19,484 $ 27,270 (000 omitted) Ratio of expenses to average 1.89% 2.30% 2.18% 2.19% 1.91% net assets Ratio of expenses to average 1.74% e 2.21% e 2.15% e 2.16% e 1.90% e net assets after expense reductions Ratio of net investment .85% (.13)% (.50)% .04% .34% income (loss) to average net assets Portfolio turnover rate 383% 338% 235% 180% 78%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES AND PURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND. 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 FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT TRANSPORTATION 2.15% 67.51% 265.23% SELECT TRANSPORTATION (LOAD -0.99% 62.41% 254.20% ADJ.) S&P 500 11.73% 206.94% 425.47% GS Cyclical Industries -7.75% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Cyclical Industries Index - a market capitalization-weighted index of 246 stocks designed to measure the performance of companies in the cyclical industries sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT TRANSPORTATION 2.15% 10.87% 13.83% SELECT TRANSPORTATION (LOAD -0.99% 10.19% 13.48% ADJ.) S&P 500 11.73% 25.14% 18.05% GS Cyclical Industries -7.75% 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 1990/02/28 9700.00 10000.00 1990/03/31 9990.84 10265.00 1990/04/30 9613.53 10008.38 1990/05/31 9967.26 10984.19 1990/06/30 9857.54 10909.50 1990/07/31 9824.79 10874.59 1990/08/31 8383.82 9891.53 1990/09/30 7303.09 9409.81 1990/10/31 7188.47 9369.35 1990/11/30 7483.21 9974.61 1990/12/31 7753.40 10252.90 1991/01/31 8416.57 10699.92 1991/02/28 9235.30 11464.97 1991/03/31 9243.49 11742.42 1991/04/30 9218.93 11770.60 1991/05/31 9947.60 12279.09 1991/06/30 9865.01 11716.71 1991/07/31 10464.63 12262.71 1991/08/31 10653.55 12553.34 1991/09/30 10456.41 12343.69 1991/10/31 11228.53 12509.10 1991/11/30 10530.34 12004.98 1991/12/31 11951.36 13378.35 1992/01/31 12058.14 13129.52 1992/02/29 12707.05 13300.20 1992/03/31 12403.13 13040.85 1992/04/30 12723.48 13424.25 1992/05/31 12986.32 13490.03 1992/06/30 12427.77 13289.02 1992/07/31 12608.48 13832.55 1992/08/31 12230.64 13548.98 1992/09/30 12715.26 13708.86 1992/10/31 13257.39 13756.84 1992/11/30 14218.42 14225.94 1992/12/31 14794.88 14400.92 1993/01/31 15457.47 14521.89 1993/02/28 15667.14 14719.39 1993/03/31 16715.53 15029.97 1993/04/30 16673.87 14666.24 1993/05/31 17296.72 15059.30 1993/06/30 17347.22 15102.97 1993/07/31 17347.22 15042.56 1993/08/31 17667.06 15612.67 1993/09/30 17709.14 15492.45 1993/10/31 18079.49 15813.15 1993/11/30 18180.49 15662.92 1993/12/31 19132.18 15852.44 1994/01/31 19970.82 16391.43 1994/02/28 19970.82 15947.22 1994/03/31 19436.30 15251.92 1994/04/30 19799.51 15447.15 1994/05/31 19481.22 15700.48 1994/06/30 19462.50 15315.82 1994/07/31 20117.80 15818.18 1994/08/31 20716.93 16466.72 1994/09/30 20164.61 16063.29 1994/10/31 20464.17 16424.71 1994/11/30 19237.82 15826.52 1994/12/31 19871.90 16061.23 1995/01/31 19737.98 16477.70 1995/02/28 21149.31 17119.83 1995/03/31 21427.45 17625.04 1995/04/30 21746.81 18144.10 1995/05/31 21097.80 18869.32 1995/06/30 20871.16 19307.65 1995/07/31 22663.65 19947.89 1995/08/31 22643.05 19997.96 1995/09/30 22437.02 20841.88 1995/10/31 22158.87 20767.47 1995/11/30 22921.19 21679.16 1995/12/31 22886.11 22096.70 1996/01/31 23234.85 22848.87 1996/02/29 23888.74 23060.68 1996/03/31 24466.35 23282.76 1996/04/30 25267.84 23625.95 1996/05/31 25300.71 24235.26 1996/06/30 25421.24 24327.60 1996/07/31 23580.39 23252.80 1996/08/31 23602.31 23743.20 1996/09/30 23711.88 25079.47 1996/10/31 23525.61 25771.16 1996/11/30 25191.14 27719.21 1996/12/31 25061.10 27170.09 1997/01/31 25241.07 28867.68 1997/02/28 25004.86 29094.00 1997/03/31 25769.74 27898.53 1997/04/30 27102.71 29564.07 1997/05/31 28944.64 31363.93 1997/06/30 29814.13 32769.03 1997/07/31 31896.31 35376.46 1997/08/31 31255.64 33394.67 1997/09/30 34344.59 35223.70 1997/10/31 33189.09 34047.23 1997/11/30 33040.37 35623.28 1997/12/31 33113.84 36234.93 1998/01/31 33176.11 36635.68 1998/02/28 35293.20 39277.85 1998/03/31 36563.46 41289.27 1998/04/30 36032.31 41704.64 1998/05/31 34320.14 40987.74 1998/06/30 35125.12 42652.66 1998/07/31 32160.76 42198.41 1998/08/31 26487.58 36097.36 1998/09/30 26449.25 38409.76 1998/10/31 29260.28 41534.01 1998/11/30 30704.13 44051.38 1998/12/31 31676.49 46589.63 1999/01/31 34502.03 48538.00 1999/02/28 34682.09 47029.44 1999/03/31 36607.33 48911.09 1999/04/30 41793.28 50805.42 1999/05/31 41260.78 49605.90 1999/06/30 43253.84 52359.03 1999/07/31 43269.05 50724.38 1999/08/31 40576.14 50473.29 1999/09/30 38217.95 49089.82 1999/10/31 40469.65 52196.23 1999/11/30 39130.80 53257.37 1999/12/31 40447.50 56394.23 2000/01/31 36458.53 53560.99 2000/02/29 35420.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000309 125452 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Transportation Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $35,420 - a 254.20% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS AMR Corp. 10.4 Navistar International Corp. 7.9 Southwest Airlines Co. 5.8 Union Pacific Corp. 5.6 Delta Air Lines, Inc. 5.6 Canadian Pacific Ltd. 5.3 Burlington Northern Santa Fe 5.1 Corp. Kansas City Southern 5.0 Industries, Inc. CSX Corp. 4.9 Eaton Corp. 4.9 60.5 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Air Transportation 35.2% Row: 1, Col: 6, Value: 35.2 Railroads 24.8% Row: 1, Col: 5, Value: 24.8 Autos, Tires, & Accessories 12.8% Row: 1, Col: 4, Value: 12.8 Trucking & Freight 9.2% Row: 1, Col: 3, Value: 9.199999999999999 Securities Industry 5.0% Row: 1, Col: 2, Value: 5.0 *All Others 13.0% Row: 1, Col: 1, Value: 13.0
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. TRANSPORTATION PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Chris Zepf)(photograph of Jeff Feingold) NOTE TO SHAREHOLDERS: The following is an interview with Chris Zepf (left), who managed Fidelity Select Transportation Portfolio for most of the period covered by this report, with additional comments from Jeff Feingold (right), who became manager of the fund on February 25, 2000. Q. HOW DID THE FUND PERFORM, CHRIS? C.Z. For the 12-month period that ended February 29, 2000, the fund returned 2.15%. For the same 12-month period, the Standard & Poor's 500 Index returned 11.73%. For another comparison, the Goldman Sachs Cyclical Industries Index - an index of 246 stocks designed to measure the performance of companies in the cyclical industries sector - fell 7.75%. Q. WHY DID THE FUND OUTPERFORM THE GOLDMAN SACHS INDEX? C.Z. Although transportation stocks fell during the period, they performed better than many of the other industries that make up the Goldman Sachs Cyclical Industries Index. In addition, the fund benefited from good security selection. Among the fund's best performers were Skywest Airlines and Southwest Airlines. Skywest continued to post good financial results because of strong revenue growth and because it passed on much of its fuel cost increases to its partners. Low-cost carrier Southwest Airlines also enjoyed stronger sales. In addition, its increased sales of tickets via the Internet helped lower Southwest's distribution costs. The fund got a further boost from its holdings in Preview Travel, which was acquired by Sabre Holdings, the No. 1 Web-based seller of airline, hotel and cruise reservations. Q. WHAT FACTORS MADE THE PAST YEAR SO TOUGH FOR TRANSPORTATION STOCKS? C.Z. Soaring fuel prices sent transportation stocks down throughout the year as crude oil prices edged above $30 a barrel for the first time in nearly a decade. Even through air traffic remained solid, most airlines couldn't combat surging jet fuel prices, an airline's second-largest expense after labor. Fuel problems were just as serious for truckers. On average, diesel prices were more than 50 cents a gallon higher at the end of the period than they were at the beginning and roughly 20 cents higher than they were at the start of 2000. Railroad companies, meanwhile, frightened investors with their inability to pull off a merger without service disruptions. Q. GIVEN THE RANGE OF PROBLEMS FACING TRANSPORTATION STOCKS, WHICH OF THE FUND'S HOLDINGS PROVED MOST DISAPPOINTING? C.Z. AMR, the parent company of American Airlines and the fund's largest holding, detracted from performance as airline stocks in general slumped. Big western railroads Union Pacific and Burlington Northern Santa Fe also hurt the fund's performance. Even though Union Pacific enjoyed improving financials through gains in freight traffic and efficiency improvements, it wasn't able to shake off investors' skepticism about railroad stocks. Burlington's plans to merge with Montreal-based Canadian National Railway Company, another of the fund's bigger disappointments, also was unwelcomed by investors. Q. WHAT CHANGES DID YOU MAKE TO THE FUND DURING THE PERIOD? C.Z. One of the more noticeable changes was that I added to the fund's stake in Expeditors International, a Seattle-based freight forwarder and logistical management firm for heavy cargo. In a market that was intensely focused on growth stocks, Expeditors did well because of its strong track record and proven ability to grow earnings. Furthermore, the company, which essentially moves freight across oceans, rebounded in response to improving global economies and expanding world trade. I also liked the fact that Expeditors doesn't own or lease any assets such as planes, ships or delivery vehicles and isn't burdened with costs associated with that. Instead, the company manages all the efforts needed to get a package from one place to another. Q. TURNING TO YOU, JEFF, WHAT'S YOUR OUTLOOK? J.F. Because transportation stocks are cyclical, a great deal of their performance will be determined by the strength or weakness of the global economy. If we continue to enjoy strong worldwide economic growth, I believe transportation stocks can do reasonably well. Just as it has over the past year, the price of fuel also will play a role, although it's unclear where the price of oil is headed. In my view, transportation stocks will be okay if the economy stays strong, even if oil prices rise a bit higher from current levels. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: September 29, 1986 FUND NUMBER: 512 TRADING SYMBOL: FSRFX SIZE: as of February 29, 2000, more than $10 million MANAGER: Jeff Feingold, since February 2000; manager, Fidelity Select Air Transportation Portfolio, since February 2000; Fidelity Select Defense and Aerospace Portfolio, since 1998; equity analyst, various industries, 1997-1998; joined Fidelity in 1997 TRANSPORTATION PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 93.0% SHARES VALUE (NOTE 1) AIR TRANSPORTATION - 35.2% Air Canada (a) 4,900 $ 57,971 America West Holding Corp. 7,800 104,325 Class B (a) AMR Corp. (a) 20,000 1,057,497 Atlantic Coast Airlines 11,800 210,925 Holdings, Inc. (a) Atlas Air, Inc. (a) 9,000 217,688 Continental Airlines, Inc. 8,100 256,163 Class B (a) Delta Air Lines, Inc. 12,500 570,313 Northwest Airlines Corp. 3,000 51,750 Class A (a) Preview Travel, Inc. (a) 4,100 188,856 SkyWest, Inc. 9,600 285,000 Southwest Airlines Co. 31,825 586,773 3,587,261 AUTOS, TIRES, & ACCESSORIES - 12.8% Eaton Corp. 6,600 494,588 Navistar International Corp. 24,700 808,925 (a) 1,303,513 COMPUTER SERVICES & SOFTWARE - - 0.0% MatrixOne, Inc. 100 2,500 Onvia.com, Inc. 100 2,100 4,600 ELECTRICAL EQUIPMENT - 1.3% General Electric Co. 1,000 132,188 LEASING & RENTAL - 1.0% Ryder System, Inc. 5,700 106,163 OIL & GAS - 2.5% Frontier Oil Corp. (a) 40,000 250,000 RAILROADS - 24.8% Burlington Northern Santa Fe 26,400 519,750 Corp. Canadian Pacific Ltd. 28,000 538,907 CSX Corp. 22,600 501,438 Union Pacific Corp. 15,100 573,800 Westinghouse Air Brake Co. 41,996 398,962 2,532,857 SECURITIES INDUSTRY - 5.0% Kansas City Southern 6,501 511,954 Industries, Inc. SHIPPING - 1.2% Kirby Corp. (a) 6,500 125,938 TRUCKING & FREIGHT - 9.2% Circle International Group, 3,900 95,306 Inc. CNF Transportation, Inc. 5,200 166,725 EGL, Inc. (a) 12,900 362,813 SHARES VALUE (NOTE 1) Expeditors International of 4,900 $ 184,975 Washington, Inc. United Parcel Service, Inc. 2,300 125,638 Class B 935,457 TOTAL COMMON STOCKS 9,489,931 (Cost $10,721,573) CASH EQUIVALENTS - 9.5% Central Cash Collateral Fund, 179,400 179,400 5.75% (b) Taxable Central Cash Fund, 782,746 782,746 5.66% (b) TOTAL CASH EQUIVALENTS 962,146 (Cost $962,146) TOTAL INVESTMENT PORTFOLIO - 10,452,077 102.5% (Cost $11,683,719) NET OTHER ASSETS - (2.5)% (250,558) NET ASSETS - 100% $ 10,201,519 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 $60,373,925 and $70,701,211, 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 $9,783 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $179,644. The fund received cash collateral of $179,400 which was invested in cash equivalents. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $11,843,589. Net unrealized depreciation aggregated $1,391,512, of which $475,794 related to appreciated investment securities and $1,867,306 related to depreciated investment securities. The fund hereby designates approximately $848,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 5% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. TRANSPORTATION PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 10,452,077 value (cost $11,683,719) - See accompanying schedule Receivable for investments 859,075 sold Receivable for fund shares 20,981 sold Dividends receivable 7,797 Interest receivable 3,737 Redemption fees receivable 248 Other receivables 41 TOTAL ASSETS 11,343,956 LIABILITIES Payable for investments $ 646,240 purchased Payable for fund shares 290,850 redeemed Accrued management fee 5,129 Other payables and accrued 20,818 expenses Collateral on securities 179,400 loaned, at value TOTAL LIABILITIES 1,142,437 NET ASSETS $ 10,201,519 Net Assets consist of: Paid in capital $ 9,433,878 Accumulated undistributed net 1,999,290 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (1,231,649) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 486,632 $ 10,201,519 shares outstanding NET ASSET VALUE and $20.96 redemption price per share ($10,201,519 (divided by) 486,632 shares) Maximum offering price per $21.61 share (100/97.00 of $20.96) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 174,870 Dividends Interest 68,796 Security lending 458 TOTAL INCOME 244,124 EXPENSES Management fee $ 121,154 Transfer agent fees 141,804 Accounting and security 60,343 lending fees Non-interested trustees' 62 compensation Custodian fees and expenses 14,133 Registration fees 21,170 Audit 11,486 Legal 90 Miscellaneous 27 Total expenses before 370,269 reductions Expense reductions (13,224) 357,045 NET INVESTMENT INCOME (LOSS) (112,921) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 3,810,546 Foreign currency transactions 6,072 3,816,618 Change in net unrealized appreciation (depreciation) on: Investment securities (2,491,180) Assets and liabilities in (1,165) (2,492,345) foreign currencies NET GAIN (LOSS) 1,324,273 NET INCREASE (DECREASE) IN $ 1,211,352 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 106,609 charges paid to FDC Sales charges - Retained by $ 106,409 FDC Deferred sales charges $ 378 withheld by FDC Exchange fees withheld by FSC $ 3,841 Expense reductions Directed $ 13,224 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (112,921) $ (164,660) income (loss) Net realized gain (loss) 3,816,618 6,235,364 Change in net unrealized (2,492,345) (6,047,484) appreciation (depreciation) NET INCREASE (DECREASE) IN 1,211,352 23,220 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (3,020,619) (2,602,131) from net realized gains Share transactions Net 38,904,845 28,194,142 proceeds from sales of shares Reinvestment of distributions 2,884,955 2,518,945 Cost of shares redeemed (49,710,711) (72,656,072) NET INCREASE (DECREASE) IN (7,920,911) (41,942,985) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 76,905 94,942 TOTAL INCREASE (DECREASE) (9,653,273) (44,426,954) IN NET ASSETS NET ASSETS Beginning of period 19,854,792 64,281,746 End of period $ 10,201,519 $ 19,854,792 OTHER INFORMATION Shares Sold 1,445,730 1,116,624 Issued in reinvestment of 121,282 97,938 distributions Redeemed (1,873,381) (2,690,132) Net increase (decrease) (306,369) (1,475,570)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 G 1999 1998 1997 1996 G SELECTED PER-SHARE DATA Net asset value, beginning of $ 25.04 $ 28.34 $ 22.23 $ 21.92 $ 20.53 period Income from Investment Operations Net investment income (loss) C (.14) (.18) (.02) (.13) (.09) D Net realized and unrealized .93 (.58) 8.85 1.06 2.60 gain (loss) Total from investment .79 (.76) 8.83 .93 2.51 operations Less Distributions From net realized gain (4.97) (2.64) (2.80) (.71) (1.22) Redemption fees added to paid .10 .10 .08 .09 .10 in capital Net asset value, end of period $ 20.96 $ 25.04 $ 28.34 $ 22.23 $ 21.92 TOTAL RETURN A, B 2.15% (1.73)% 41.15% 4.67% 12.95% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 10,202 $ 19,855 $ 64,282 $ 8,890 $ 11,445 (000 omitted) Ratio of expenses to average 1.77% 1.96% 1.58% 2.50% E 2.47% E net assets Ratio of expenses to average 1.71% F 1.90% F 1.54% F 2.48% F 2.44% F net assets after expense reductions Ratio of net investment (.54)% (.68)% (.06)% (.58)% (.43)% income (loss) to average net assets Portfolio turnover rate 318% 182% 210% 148% 175%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.05 PER SHARE. E FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES, OR EXPENSES WERE LIMITED IN ACCORDANCE WITH A STATE EXPENSE LIMITATION. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO 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 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 FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT BANKING -22.07% 121.80% 463.69% SELECT BANKING (LOAD ADJ.) -24.48% 115.07% 446.71% S&P 500 11.73% 206.94% 425.47% GS Financial Services -14.90% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Financial Services Index - a market capitalization-weighted index of 252 stocks designed to measure the performance of companies in the financial services sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT BANKING -22.07% 17.27% 18.88% SELECT BANKING (LOAD ADJ.) -24.48% 16.55% 18.52% S&P 500 11.73% 25.14% 18.05% GS Financial Services -14.90% 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 BANKING S&P 500 00507 SP001 1990/02/28 9700.00 10000.00 1990/03/31 9462.52 10265.00 1990/04/30 8923.63 10008.38 1990/05/31 9544.73 10984.19 1990/06/30 9170.24 10909.50 1990/07/31 8613.09 10874.59 1990/08/31 7809.32 9891.53 1990/09/30 6859.42 9409.81 1990/10/31 6658.47 9369.35 1990/11/30 7544.44 9974.61 1990/12/31 8122.59 10252.90 1991/01/31 8661.61 10699.92 1991/02/28 9395.81 11464.97 1991/03/31 9925.54 11742.42 1991/04/30 10594.68 11770.60 1991/05/31 11282.40 12279.09 1991/06/30 10613.26 11716.71 1991/07/31 11496.15 12262.71 1991/08/31 12323.28 12553.34 1991/09/30 12081.65 12343.69 1991/10/31 12583.50 12509.10 1991/11/30 12007.30 12004.98 1991/12/31 13466.67 13378.35 1992/01/31 14308.95 13129.52 1992/02/29 15464.64 13300.20 1992/03/31 15249.17 13040.85 1992/04/30 16140.42 13424.25 1992/05/31 16825.99 13490.03 1992/06/30 16993.88 13289.02 1992/07/31 17013.60 13832.55 1992/08/31 16106.73 13548.98 1992/09/30 16855.88 13708.86 1992/10/31 17575.46 13756.84 1992/11/30 19014.62 14225.94 1992/12/31 20001.03 14400.92 1993/01/31 20834.41 14521.89 1993/02/28 21482.59 14719.39 1993/03/31 22398.27 15029.97 1993/04/30 21245.20 14666.24 1993/05/31 21037.52 15059.30 1993/06/30 22210.89 15102.97 1993/07/31 22273.19 15042.56 1993/08/31 22584.70 15612.67 1993/09/30 23363.49 15492.45 1993/10/31 22107.05 15813.15 1993/11/30 21411.34 15662.92 1993/12/31 22235.65 15852.44 1994/01/31 23532.41 16391.43 1994/02/28 22871.31 15947.22 1994/03/31 22489.91 15251.92 1994/04/30 23681.67 15447.15 1994/05/31 24865.11 15700.48 1994/06/30 24247.66 15315.82 1994/07/31 24890.83 15818.18 1994/08/31 25534.01 16466.72 1994/09/30 24016.12 16063.29 1994/10/31 23913.21 16424.71 1994/11/30 22369.59 15826.52 1994/12/31 22284.16 16061.23 1995/01/31 23406.59 16477.70 1995/02/28 24652.20 17119.83 1995/03/31 24857.52 17625.04 1995/04/30 25473.48 18144.10 1995/05/31 27143.43 18869.32 1995/06/30 27485.63 19307.65 1995/07/31 28553.30 19947.89 1995/08/31 29620.97 19997.96 1995/09/30 30962.40 20841.88 1995/10/31 30811.83 20767.47 1995/11/30 32577.59 21679.16 1995/12/31 32705.96 22096.70 1996/01/31 33775.25 22848.87 1996/02/29 34744.74 23060.68 1996/03/31 35771.25 23282.76 1996/04/30 35465.78 23625.95 1996/05/31 36065.41 24235.26 1996/06/30 35787.53 24327.60 1996/07/31 35846.03 23252.80 1996/08/31 37659.54 23743.20 1996/09/30 39516.92 25079.47 1996/10/31 42047.06 25771.16 1996/11/30 45600.95 27719.21 1996/12/31 44443.00 27170.09 1997/01/31 47720.46 28867.68 1997/02/28 49799.23 29094.00 1997/03/31 46445.90 27898.53 1997/04/30 48964.75 29564.07 1997/05/31 50688.97 31363.93 1997/06/30 53572.84 32769.03 1997/07/31 59340.58 35376.46 1997/08/31 55739.56 33394.67 1997/09/30 59966.18 35223.70 1997/10/31 59081.18 34047.23 1997/11/30 61797.21 35623.28 1997/12/31 64690.08 36234.93 1998/01/31 62657.19 36635.68 1998/02/28 68046.72 39277.85 1998/03/31 71813.09 41289.27 1998/04/30 73022.41 41704.64 1998/05/31 71025.51 40987.74 1998/06/30 72878.63 42652.66 1998/07/31 72990.46 42198.41 1998/08/31 56040.82 36097.36 1998/09/30 60897.27 38409.76 1998/10/31 66440.65 41534.01 1998/11/30 68597.29 44051.38 1998/12/31 72353.47 46589.63 1999/01/31 70496.95 48538.00 1999/02/28 70159.41 47029.44 1999/03/31 70091.90 48911.09 1999/04/30 77367.64 50805.42 1999/05/31 72258.46 49605.90 1999/06/30 74768.54 52359.03 1999/07/31 70264.63 50724.38 1999/08/31 66739.83 50473.29 1999/09/30 64639.19 49089.82 1999/10/31 73362.18 52196.23 1999/11/30 69766.17 53257.37 1999/12/31 65068.72 56394.23 2000/01/31 62858.45 53560.99 2000/02/29 54671.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000313 090516 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Banking Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $54,671 - a 446.71% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Firstar Corp. 6.4 Bank of New York Co., Inc. 6.0 Chase Manhattan Corp. 5.7 Wells Fargo & Co. 5.5 FleetBoston Financial Corp. 4.9 SunTrust Banks, Inc. 4.8 Mellon Financial Corp. 4.7 Bank One Corp. 4.6 U.S. Bancorp 4.3 Bank of America Corp. 4.1 51.0 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Banks 89.4% Row: 1, Col: 4, Value: 89.40000000000001 Credit & Other Finance 0.6% Row: 1, Col: 3, Value: 0.6000000000000001 Computer Services & Software 0.1% Row: 1, Col: 2, Value: 0.1 *All Others 9.9% Row: 1, Col: 1, Value: 9.9
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. BANKING PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Yolanda McGettigan)(photograph of Samuel Peters) NOTE TO SHAREHOLDERS: The following is an interview with Yolanda McGettigan (left), who managed Fidelity Select Banking Portfolio for most of the period covered by this report, with additional comments from Samuel Peters (right), who became manager of the fund on February 1, 2000. Q. HOW DID THE FUND PERFORM, YOLANDA? Y.M. Bank stocks continued to endure a challenging investing climate. For the 12 months that ended February 29, 2000, the fund was down 22.07%. Over the same time, the Standard & Poor's 500 Index returned 11.73%. The Goldman Sachs Financial Services Index - an index of 252 stocks designed to measure the performance of companies in the financial services sector - fell 14.90%. Q. WHAT WERE THE MAIN OBSTACLES FOR BANK STOCKS DURING THE PERIOD? Y.M. While rising interest rates were certainly detrimental, I'd say the biggest negative driver for the group was that banks had difficulty growing deposits. People elected to put more of their assets into mutual funds and stocks, and less into bank checking and savings accounts. When a bank can't grow deposits, it's funding incremental loan volume with higher-cost, wholesale funding. This has negative consequences for banks that derive a significant portion of their revenues from lending and borrowing spreads, or what I call their net interest margin. For the most part, banks reported in-line earnings during the period. The problem was that the quality of those earnings deteriorated as the period wore on. Increased competition from online competitors also hurt the group. Q. WHAT STRATEGIES DID YOU PURSUE TO TRY TO PROTECT THE FUND FROM THIS SCENARIO? Y.M. Since banks' problems were centered primarily around the whole margin and spread issue, I tried to invest more in companies whose businesses were less dependent on spread-related revenue, or income generated mostly through loan yields. One company that fit this bill was Bank of New York, which focuses much of its operations around processing functions. As the capital markets continued to perform well, I also tried to add to companies with equity underwriting and trading exposure, including Citigroup and Chase Manhattan. The fund no longer owned Citigroup at the end of the period. Q. FLEET AND BANKBOSTON OFFICIALLY MERGED DURING THE PERIOD. WHAT WAS THE EFFECT ON THE FUND? Y.M. Overall, I'd say the effect was mostly negative. The market remains cynical about the ability of big banks that merge to integrate their respective businesses smoothly and effectively. While the process seemed to be moving along nicely through the end of the period, the market won't reward the stock - now known as FleetBoston - until it sees the fruits of the merger. That may not happen until later in 2000. Q. WHICH STOCKS PERFORMED WELL DURING THE PERIOD? WHICH PERFORMED POORLY? Y.M. Northern Trust performed nicely. The company - which splits its business between custody and processing operations, and private banking - managed to avoid many of the pitfalls facing typical banks. With so much wealth generated over the past few years, the company's private banking services have been high in demand. In terms of disappointments, U.S. Bancorp and Bank of America suffered from the deposit problems I outlined earlier. Q. TURNING TO YOU, SAM, WHAT'S IN STORE FOR THE SECTOR AND THE FUND AS WE GET DEEPER INTO 2000? S.P. I think we'll see continued weakness for bank stocks, with few individual examples of outperformance. This weak group performance, however, should provide an opportunity to buy higher-quality bank names at attractive long-term valuations during the next few months. This could also put the fund in excellent position to benefit when bank stocks eventually stabilize. As far as the types of stocks I'll be looking at, I'll continue Yolanda's approach of emphasizing processing-oriented banks and the better-performing traditional banks. As for interest rates, we should remain in a rising short-term rate environment well into 2000. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 507 TRADING SYMBOL: FSRBX SIZE: as of February 29, 2000, more than $363 million MANAGER: Samuel Peters, since February 2000; analyst, retail and office furniture industries, since 1999; joined Fidelity in 1999 BANKING PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 90.1% SHARES VALUE (NOTE 1) BANKS - 89.4% AmSouth Bancorp. 454,000 $ 6,583,000 Associated Banc-Corp. 75,600 1,913,625 Bank of America Corp. 325,006 14,970,589 Bank of New York Co., Inc. 649,996 21,652,992 Bank One Corp. 650,226 16,783,959 BB&T Corp. 340,450 8,000,575 Chase Manhattan Corp. 260,000 20,702,500 Comerica, Inc. 191,100 7,058,756 Commerce Bancshares, Inc. 68,450 1,967,938 Compass Bancshares, Inc. 142,600 2,308,338 First Security Corp. 226,875 5,260,664 First Union Corp. 300,000 8,850,000 First Virginia Banks, Inc. 60,400 1,902,600 Firstar Corp. 1,300,000 23,156,247 FleetBoston Financial Corp. 653,754 17,814,797 Huntington Bancshares, Inc. 280,400 5,853,350 KeyCorp 150,000 2,540,625 M&T Bank Corp. 11,000 4,059,000 Marshall & Ilsley Corp. 25,900 1,189,781 Mellon Financial Corp. 560,500 16,885,063 Mercantile Bankshares Corp. 82,000 2,060,250 National City Corp. 100,000 1,925,000 National Commmerce Bancorp 122,000 2,074,000 North Fork Bancorp, Inc. 44,700 731,963 Northern Trust Corp. 234,300 13,237,950 PNC Financial Corp. 350,000 13,540,625 Popular, Inc. 100,000 2,231,250 Regions Financial Corp. 224,000 4,536,000 SouthTrust Corp. 204,500 4,690,719 State Street Corp. 25,000 1,821,875 Summit Bancorp 209,900 5,024,481 SunTrust Banks, Inc. 343,747 17,466,644 Synovus Finanical Corp. 317,875 5,205,203 U.S. Bancorp 849,396 15,554,564 UnionBanCal Corp. 204,000 6,553,500 Wachovia Corp. 216,200 12,363,938 Wells Fargo & Co. 600,000 19,837,500 Zions Bancorp 125,000 6,632,813 324,942,674 COMPUTER SERVICES & SOFTWARE - - 0.1% Digital Insight Corp. 4,100 258,300 CREDIT & OTHER FINANCE - 0.6% Old Kent Financial Corp. 90,000 2,356,875 TOTAL COMMON STOCKS 327,557,849 (Cost $327,848,789) CASH EQUIVALENTS - 10.2% SHARES VALUE (NOTE 1) Taxable Central Cash Fund, 37,087,973 $ 37,087,973 5.66% (a) (Cost $37,087,973) TOTAL INVESTMENT PORTFOLIO - 364,645,822 100.3% (Cost $364,936,762) NET OTHER ASSETS - (0.3)% (1,108,815) NET ASSETS - 100% $ 363,537,007 LEGEND (a) 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 $620,149,938 and $1,049,851,482, 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 $34,682 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 $2,914,250. The weighted average interest rate was 5.46%. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $370,364,764. Net unrealized depreciation aggregated $5,718,942, of which $44,520,866 related to appreciated investment securities and $50,239,808 related to depreciated investment securities. The fund hereby designates approximately $176,257,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. BANKING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 364,645,822 value (cost $364,936,762) - See accompanying schedule Receivable for investments 11,037,469 sold Receivable for fund shares 2,278,033 sold Dividends receivable 846,071 Interest receivable 120,082 Redemption fees receivable 3,505 Other receivables 2,230 TOTAL ASSETS 378,933,212 LIABILITIES Payable for investments $ 10,118,973 purchased Payable for fund shares 4,913,020 redeemed Accrued management fee 195,942 Other payables and accrued 168,270 expenses TOTAL LIABILITIES 15,396,205 NET ASSETS $ 363,537,007 Net Assets consist of: Paid in capital $ 274,462,695 Undistributed net investment 3,725,496 income Accumulated undistributed net 85,639,756 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (290,940) (depreciation) on investments NET ASSETS, for 13,732,024 $ 363,537,007 shares outstanding NET ASSET VALUE and $26.47 redemption price per share ($363,537,007 (divided by) 13,732,024 shares) Maximum offering price per $27.29 share (100/97.00 of $26.47) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 13,949,581 Dividends Interest 1,403,129 Security lending 7,426 TOTAL INCOME 15,360,136 EXPENSES Management fee $ 4,050,752 Transfer agent fees 3,985,426 Accounting and security 476,476 lending fees Non-interested trustees' 1,503 compensation Custodian fees and expenses 18,818 Registration fees 62,355 Audit 32,494 Legal 2,951 Interest 1,766 Miscellaneous 1,188 Total expenses before 8,633,729 reductions Expense reductions (273,296) 8,360,433 NET INVESTMENT INCOME 6,999,703 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 170,163,130 Foreign currency transactions (10,972) 170,152,158 Change in net unrealized (293,422,297) appreciation (depreciation) on investment securities NET GAIN (LOSS) (123,270,139) NET INCREASE (DECREASE) IN $ (116,270,436) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 754,724 charges paid to FDC Sales charges - Retained by $ 753,565 FDC Deferred sales charges $ 12,204 withheld by FDC Exchange fees withheld by FSC $ 105,939 Expense reductions Directed $ 270,014 brokerage arrangements Transfer agent credits 3,282 $ 273,296
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ 6,999,703 $ 11,351,194 income Net realized gain (loss) 170,152,158 135,492,386 Change in net unrealized (293,422,297) (123,702,888) appreciation (depreciation) NET INCREASE (DECREASE) IN (116,270,436) 23,140,692 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (6,587,083) (7,938,530) From net investment income From net realized gain (127,472,407) (74,512,814) TOTAL DISTRIBUTIONS (134,059,490) (82,451,344) Share transactions Net 233,488,860 506,783,832 proceeds from sales of shares Reinvestment of distributions 127,608,941 79,475,689 Cost of shares redeemed (673,927,965) (940,968,587) NET INCREASE (DECREASE) IN (312,830,164) (354,709,066) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 868,559 952,621 TOTAL INCREASE (DECREASE) (562,291,531) (413,067,097) IN NET ASSETS NET ASSETS Beginning of period 925,828,538 1,338,895,635 End of period (including $ 363,537,007 $ 925,828,538 undistributed net investment income of $3,725,496 and $5,985,670, respectively) OTHER INFORMATION Shares Sold 6,263,157 11,696,257 Issued in reinvestment of 3,483,815 1,891,390 distributions Redeemed (18,286,774) (22,324,276) Net increase (decrease) (8,539,802) (8,736,629)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 41.57 $ 43.18 $ 32.82 $ 24.37 $ 18.01 period Income from Investment Operations Net investment income C .39 .39 .40 .37 .52 Net realized and unrealized (7.74) .91 11.41 9.70 6.78 gain (loss) Total from investment (7.35) 1.30 11.81 10.07 7.30 operations Less Distributions From net investment income (.36) (.28) (.28) (.27) (.25) From net realized gain (7.44) (2.66) (1.23) (1.40) (.72) Total distributions (7.80) (2.94) (1.51) (1.67) (.97) Redemption fees added to paid .05 .03 .06 .05 .03 in capital Net asset value, end of period $ 26.47 $ 41.57 $ 43.18 $ 32.82 $ 24.37 TOTAL RETURN A , B (22.07)% 3.10% 36.64% 43.33% 40.94% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 363,537 $ 925,829 $ 1,338,896 $ 837,952 $ 315,178 (000 omitted) Ratio of expenses to average 1.23% 1.17% 1.25% 1.46% 1.41% net assets Ratio of expenses to average 1.19% D 1.16% D 1.24% D 1.45% D 1.40% D net assets after expense reductions Ratio of net investment 1.00% .91% 1.07% 1.36% 2.42% income to average net assets Portfolio turnover rate 94% 22% 25% 43% 103%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT BROKERAGE AND 19.14% 268.38% 657.74% INVESTMENT MANAGEMENT SELECT BROKERAGE AND 15.49% 257.26% 634.93% INVESTMENT MANAGEMENT (LOAD ADJ.) S&P 500 11.73% 206.94% 425.47% GS Financial Services -14.90% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Financial Services Index - a market capitalization-weighted index of 252 stocks designed to measure the performance of companies in the financial services sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT BROKERAGE AND 19.14% 29.80% 22.45% INVESTMENT MANAGEMENT SELECT BROKERAGE AND 15.49% 29.00% 22.07% INVESTMENT MANAGEMENT (LOAD ADJ.) S&P 500 11.73% 25.14% 18.05% GS Financial Services -14.90% 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 BROKERAGE/INVT. MGT S&P 500 00068 SP001 1990/02/28 9700.00 10000.00 1990/03/31 9968.15 10265.00 1990/04/30 9291.95 10008.38 1990/05/31 10178.00 10984.19 1990/06/30 10166.06 10909.50 1990/07/31 9804.24 10874.59 1990/08/31 8473.66 9891.53 1990/09/30 7750.02 9409.81 1990/10/31 7271.47 9369.35 1990/11/30 7750.02 9974.61 1990/12/31 8228.56 10252.90 1991/01/31 8913.28 10699.92 1991/02/28 9798.71 11464.97 1991/03/31 10802.19 11742.42 1991/04/30 10955.67 11770.60 1991/05/31 11534.14 12279.09 1991/06/30 10766.14 11716.71 1991/07/31 11593.39 12262.71 1991/08/31 11853.39 12553.34 1991/09/30 12467.92 12343.69 1991/10/31 13295.18 12509.10 1991/11/30 12562.46 12004.98 1991/12/31 14996.96 13378.35 1992/01/31 15209.68 13129.52 1992/02/29 15115.14 13300.20 1992/03/31 14713.33 13040.85 1992/04/30 13566.99 13424.25 1992/05/31 13531.53 13490.03 1992/06/30 13212.45 13289.02 1992/07/31 13956.98 13832.55 1992/08/31 13555.17 13548.98 1992/09/30 13460.63 13708.86 1992/10/31 14063.34 13756.84 1992/11/30 15327.86 14225.94 1992/12/31 15765.12 14400.92 1993/01/31 16698.74 14521.89 1993/02/28 16805.10 14719.39 1993/03/31 18152.35 15029.97 1993/04/30 18093.23 14666.24 1993/05/31 18684.52 15059.30 1993/06/30 19571.44 15102.97 1993/07/31 20221.85 15042.56 1993/08/31 21818.31 15612.67 1993/09/30 22220.38 15492.45 1993/10/31 21499.02 15813.15 1993/11/30 20907.74 15662.92 1993/12/31 23541.29 15852.44 1994/01/31 24042.99 16391.43 1994/02/28 22833.77 15947.22 1994/03/31 20273.81 15251.92 1994/04/30 20106.58 15447.15 1994/05/31 20595.42 15700.48 1994/06/30 21380.13 15315.82 1994/07/31 20878.43 15818.18 1994/08/31 21032.80 16466.72 1994/09/30 20235.22 16063.29 1994/10/31 20222.36 16424.71 1994/11/30 18820.17 15826.52 1994/12/31 19476.24 16061.23 1995/01/31 19231.82 16477.70 1995/02/28 19952.21 17119.83 1995/03/31 20158.04 17625.04 1995/04/30 20768.75 18144.10 1995/05/31 21936.58 18869.32 1995/06/30 23170.76 19307.65 1995/07/31 24285.50 19947.89 1995/08/31 24059.90 19997.96 1995/09/30 25519.68 20841.88 1995/10/31 24099.71 20767.47 1995/11/30 24683.63 21679.16 1995/12/31 24071.51 22096.70 1996/01/31 25640.78 22848.87 1996/02/29 25907.00 23060.68 1996/03/31 27069.94 23282.76 1996/04/30 27234.69 23625.95 1996/05/31 28136.79 24235.26 1996/06/30 28050.87 24327.60 1996/07/31 26332.60 23252.80 1996/08/31 27334.93 23743.20 1996/09/30 28738.19 25079.47 1996/10/31 29754.83 25771.16 1996/11/30 32675.90 27719.21 1996/12/31 33617.61 27170.09 1997/01/31 36069.65 28867.68 1997/02/28 37375.47 29094.00 1997/03/31 33588.59 27898.53 1997/04/30 37222.28 29564.07 1997/05/31 39999.41 31363.93 1997/06/30 42325.80 32769.03 1997/07/31 46978.59 35376.46 1997/08/31 45539.13 33394.67 1997/09/30 52183.89 35223.70 1997/10/31 49494.00 34047.23 1997/11/30 51747.69 35623.28 1997/12/31 54566.53 36234.93 1998/01/31 52197.94 36635.68 1998/02/28 58889.22 39277.85 1998/03/31 62175.65 41289.27 1998/04/30 64886.40 41704.64 1998/05/31 63372.53 40987.74 1998/06/30 66759.99 42652.66 1998/07/31 67329.57 42198.41 1998/08/31 48503.67 36097.36 1998/09/30 44651.55 38409.76 1998/10/31 51051.76 41534.01 1998/11/30 57436.98 44051.38 1998/12/31 57661.81 46589.63 1999/01/31 63357.54 48538.00 1999/02/28 61693.79 47029.44 1999/03/31 66580.13 48911.09 1999/04/30 71689.91 50805.42 1999/05/31 69437.31 49605.90 1999/06/30 71206.13 52359.03 1999/07/31 65627.56 50724.38 1999/08/31 63148.20 50473.29 1999/09/30 60457.18 49089.82 1999/10/31 68847.71 52196.23 1999/11/30 70389.75 53257.37 1999/12/31 75334.19 56394.23 2000/01/31 72921.18 53560.99 2000/02/29 73493.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000309 110354 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Brokerage and Investment Management Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $73,493 - a 634.93% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Morgan Stanley Dean Witter & 9.3 Co. Lehman Brothers Holdings, Inc. 8.3 Kansas City Southern 6.1 Industries, Inc. Merrill Lynch & Co., Inc. 5.8 Charles Schwab Corp. 5.7 Goldman Sachs Group, Inc. 5.3 Citigroup, Inc. 4.4 Daiwa Securities Co. Ltd. 4.0 The Bear Stearns Companies, 3.7 Inc. Nikko Securities Co. Ltd. 3.0 55.6 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Securities Industry 78.2% Row: 1, Col: 6, Value: 78.2 Credit & Other Finance 7.9% Row: 1, Col: 5, Value: 7.9 Banks 5.9% Row: 1, Col: 4, Value: 5.9 Insurance 5.8% Row: 1, Col: 3, Value: 5.8 Computer Services & Software 2.2% Row: 1, Col: 2, Value: 2.2 *All Others 0.0% Row: 1, Col: 1, Value: 0.0
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Ted Grenstein) Ted Orenstein, Portfolio Manager of Fidelity Select Brokerage and Investment Management Portfolio Q. HOW DID THE FUND PERFORM, TED? A. The fund continued to do very well relative to its benchmarks. For the 12 months ending February 29, 2000, the fund returned 19.14%. The Goldman Sachs Financial Services Index - an index of 252 stocks designed to measure the performance of companies in the financial services sector - fell 14.90% for the same period, while the Standard & Poor's 500 Index returned 11.73%. Q. WHY DID THE FUND OUTPERFORM ITS GOLDMAN SACHS BENCHMARK? A. The fund had significant exposure to capital markets stocks and less concentration on some of the slower growth areas of the financial sector. Capital markets-oriented firms were the fastest growing stocks in the financial sector during the past year. While many other segments had problems contending with the Federal Reserve Board's rate hikes, positioning of the long bond, and wider credit and swap spreads, the overall industry fundamentals proved to be a tremendous environment for brokerage firms. Q. WHAT WERE SOME OF THE FACTORS THAT CONTRIBUTED TO PERFORMANCE? A. Brokerage firms were able to benefit from the record trading and underwriting environment - both in equity and debt - throughout much of the year. Advisory fees were particularly strong, fueled by domestic activity and significant demand in the international markets. Brokerage commission levels grew solidly as well throughout the year as a result of increased trading activity by retail customers, institutional flows and strong exchange volumes. Q. WHAT NOTABLE TRENDS EMERGED OVER THE PAST 12 MONTHS? A. During the past year, many financial services companies improved their risk management cultures and strengthened their balance sheets by reducing exposure to high-risk instruments and lowering their leverage levels, or equity committed to trading inventory. There also was a concerted move toward reducing expenses with the intent of achieving more consistent results. A good example can be found in the asset management area. Those stocks rebounded in the second half of 1999, after suffering from high redemptions and consequently lower net sales in the first half of the year. While the companies had been experiencing growth early on, it was as a result of market activity, not from new business bringing in new money. So, many of the companies spent a good part of the year looking at expense controls and searching for ways to improve their business. As the year came to a close, gross sales re-surged, redemptions declined and net sales were higher, leading to a marked improvement in results. Two companies that added to the fund's performance were Kansas City Southern Industries, which owns mutual fund company Janus and was a dominant player this past year, and Waddell & Reed, which possesses an excellent distribution system and low redemption rates. Q. WHAT OTHER COMPANIES PERFORMED WELL DURING THE PERIOD, AND WHICH WERE DISAPPOINTMENTS? A. In terms of companies that did well, two that come to mind are Morgan Stanley Dean Witter and Lehman Brothers. Morgan Stanley has a diversified business mix that includes well-positioned securities and credit card businesses, improving asset management and a very strong culture of risk management. Lehman improved its business model by focusing more on its equity capital markets rather than fixed-income, and had significant exposure to overseas markets. On the negative side, PaineWebber and Bear Stearns both had disappointing results, some of this reflecting their largely domestic exposure. Q. WHAT IS YOUR OUTLOOK FOR THE FUND? A. I remain optimistic about the fund and the market in general. Fundamentals are excellent, earnings are strong and return on equity is quite high for the brokerage sector. I do have concerns over widening credit and swap spreads and an inverted yield curve, meaning long bonds had a lower yield than shorter-term bonds. While this is not necessarily problematic for the brokerage and investment management firms, it could create problems with the financial sector over the long term by leading to a possible decline in liquidity. However, this has not yet occurred and business fundamentals remain very positive. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 068 TRADING SYMBOL: FSLBX SIZE: as of February 29, 2000, more than $423 million MANAGER: Ted Orenstein, since 1999; equity analyst for the securities brokerage industry, 1998-1999; joined Fidelity in 1998 BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 100.1% SHARES VALUE (NOTE 1) BANKS - 5.9% Bank Sarasin & Compagnie 1 $ 2,043 Series B (Reg.) Chase Manhattan Corp. 143,500 11,426,188 Credit Suisse Group (Reg.) 14,000 2,233,774 J.P. Morgan & Co., Inc. 5,900 654,900 Julius Baer Holding AG 1,900 5,846,154 Toronto Dominion Bank 197,000 4,987,514 25,150,573 COMPUTER SERVICES & SOFTWARE - - 2.2% DST Systems, Inc. (a) 161,400 9,058,575 CREDIT & OTHER FINANCE - 7.9% American Express Co. 64,800 8,695,350 Citigroup, Inc. 363,125 18,769,023 Providian Financial Corp. 94,500 6,124,781 33,589,154 INSURANCE - 5.8% AFLAC, Inc. 83,100 3,038,344 Ambac Financial Group, Inc. 10,000 439,375 American International Group, 21,425 1,894,773 Inc. Hartford Life, Inc. Class A 116,500 4,121,188 Liberty Financial Companies, 73,100 1,411,744 Inc. Marsh & McLennan Companies, 96,500 7,466,688 Inc. Mutual Risk Management Ltd. 33,000 453,750 Nationwide Financial 111,700 2,576,081 Services, Inc. Class A Protective Life Corp. 29,500 649,000 Reinsurance Group of America, 50 853 Inc. Reliastar Financial Corp. 89,066 2,488,281 UICI (a) 17,800 155,750 24,695,827 REAL ESTATE INVESTMENT TRUSTS - - 0.1% AMRESCO Capital Trust, Inc. 36,800 340,400 SECURITIES INDUSTRY - 78.2% A.G. Edwards, Inc. 7,300 231,319 Affiliated Managers Group, 150,200 5,904,738 Inc. (a) AXA Financial, Inc. 250,700 7,505,331 BlackRock, Inc. Class A 169,900 3,684,706 Charles Schwab Corp. 581,500 24,313,969 Dain Rauscher Corp. 146,450 8,256,119 Daiwa Securities Co. Ltd. 1,061,000 16,799,247 DLJ, Inc. 223,000 9,686,563 E*Trade Group, Inc. (a) 123,100 3,031,338 Eaton Vance Corp. 32,500 1,346,719 Federated Investors, Inc. 446,100 10,399,706 Class B Franklin Resources, Inc. 345,400 9,390,563 Goldman Sachs Group, Inc. 243,800 22,551,500 Investment Technology Group, 30,600 1,185,750 Inc. Investors Group, Inc. 238,700 2,511,158 SHARES VALUE (NOTE 1) Jefferies Group, Inc. 57,400 $ 1,341,725 John Nuveen Co. Class A 26,000 897,000 Kansas City Southern 328,700 25,885,125 Industries, Inc. Legg Mason, Inc. 179,232 7,034,856 Lehman Brothers Holdings, 484,100 35,097,250 Inc. Mackenzie Financial Corp. 140,100 2,102,080 Merrill Lynch & Co., Inc. 240,700 24,671,750 Morgan Keegan, Inc. 28,125 400,781 Morgan Stanley Dean Witter & 558,730 39,355,542 Co. Neuberger Berman, Inc. 35,000 901,250 Nikko Securities Co. Ltd. 985,000 12,664,414 Nomura Securities Co. Ltd. 438,000 12,320,116 PaineWebber Group, Inc. 274,400 10,495,800 Phoenix Investment Partners 1 7 Ltd. Pioneer Group, Inc. (a) 38,900 780,431 Raymond James Financial, Inc. 12,525 247,369 T. Rowe Price Associates, 79,000 2,602,063 Inc. The Bear Stearns Companies, 395,686 15,530,676 Inc. Waddell & Reed Financial, Inc.: Class A 375,336 10,861,286 Class B 47,761 1,295,517 331,283,764 TOTAL COMMON STOCKS 424,118,293 (Cost $303,431,989) CASH EQUIVALENTS - 0.7% Central Cash Collateral Fund, 2,952,000 2,952,000 5.75% (b) (Cost $2,952,000) TOTAL INVESTMENT PORTFOLIO - 427,070,293 100.8% (Cost $306,383,989) NET OTHER ASSETS - (0.8)% $ (3,498,403) NET ASSETS - 100% $ 423,571,890 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 $210,699,172 and $314,111,786, 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 $18,793 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $3,028,875. The fund received cash collateral of $2,952,000 which was invested in cash equivalents. The fund participated in the interfund lending program as a lender. The average daily loan balance during the period for which loans were out- standing 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. Distribution of investments by country of issue, as a percentage of net assets, is as follows: United States of America 85.9% Japan 9.9 Canada 2.3 Switzerland 1.9 100.0% INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $308,497,705. Net unrealized appreciation aggregated $118,572,588, of which $137,134,102 related to appreciated investment securities and $18,561,514 related to depreciated investment securities. The fund hereby designates approximately $50,264,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. BROKERAGE AND INVESTMENT MANAGEMENT PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 427,070,293 value (cost $306,383,989) - See accompanying schedule Receivable for investments 3,978,197 sold Receivable for fund shares 1,392,244 sold Dividends receivable 213,634 Interest receivable 89,698 Redemption fees receivable 3,128 Other receivables 2,471 TOTAL ASSETS 432,749,665 LIABILITIES Payable to custodian bank $ 296,874 Payable for fund shares 5,501,104 redeemed Accrued management fee 215,094 Other payables and accrued 212,703 expenses Collateral on securities 2,952,000 loaned, at value TOTAL LIABILITIES 9,177,775 NET ASSETS $ 423,571,890 Net Assets consist of: Paid in capital $ 272,534,131 Accumulated undistributed net 30,367,440 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 120,670,319 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 9,270,491 $ 423,571,890 shares outstanding NET ASSET VALUE and $45.69 redemption price per share ($423,571,890 (divided by) 9,270,491 shares) Maximum offering price per $47.10 share (100/97.00 of $45.69) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 4,275,085 Dividends Interest 1,336,803 Security lending 56,441 TOTAL INCOME 5,668,329 EXPENSES Management fee $ 2,764,553 Transfer agent fees 2,852,017 Accounting and security 348,961 lending fees Non-interested trustees' 1,392 compensation Custodian fees and expenses 30,485 Registration fees 113,134 Audit 23,635 Legal 1,807 Miscellaneous 11,472 Total expenses before 6,147,456 reductions Expense reductions (48,271) 6,099,185 NET INVESTMENT INCOME (LOSS) (430,856) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 56,866,362 Foreign currency transactions 15,606 56,881,968 Change in net unrealized appreciation (depreciation) on: Investment securities 14,539,449 Assets and liabilities in (18,315) 14,521,134 foreign currencies NET GAIN (LOSS) 71,403,102 NET INCREASE (DECREASE) IN $ 70,972,246 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 1,404,092 charges paid to FDC Sales charges - Retained by $ 1,402,572 FDC Deferred sales charges $ 3,484 withheld by FDC Exchange fees withheld by FSC $ 60,190 Expense reductions Directed $ 47,406 brokerage arrangements Custodian credits 98 Transfer agent credits 767 $ 48,271
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (430,856) $ 1,879,801 income (loss) Net realized gain (loss) 56,881,968 10,869,413 Change in net unrealized 14,521,134 (42,208,876) appreciation (depreciation) NET INCREASE (DECREASE) IN 70,972,246 (29,459,662) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (594,460) (201,762) From net investment income From net realized gain (29,239,962) (10,471,038) TOTAL DISTRIBUTIONS (29,834,422) (10,672,800) Share transactions Net 461,837,909 881,017,420 proceeds from sales of shares Reinvestment of distributions 28,620,298 10,559,880 Cost of shares redeemed (591,672,937) (1,046,567,449) NET INCREASE (DECREASE) IN (101,214,730) (154,990,149) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 1,123,789 1,580,230 TOTAL INCREASE (DECREASE) (58,953,117) (193,542,381) IN NET ASSETS NET ASSETS Beginning of period 482,525,007 676,067,388 End of period (including $ 423,571,890 $ 482,525,007 undistributed net investment income of $0 and $1,842,357, respectively) OTHER INFORMATION Shares Sold 10,180,475 21,245,778 Issued in reinvestment of 654,132 249,064 distributions Redeemed (13,287,958) (26,767,460) Net increase (decrease) (2,453,351) (5,272,618)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 F 1999 1998 1997 1996 F SELECTED PER-SHARE DATA Net asset value, beginning of $ 41.16 $ 39.78 $ 25.76 $ 18.49 $ 15.51 period Income from Investment Operations Net investment income (loss) C (.04) .10 .16 .08 .09 Net realized and unrealized 7.64 1.72 14.46 7.80 4.29 gain (loss) Total from investment 7.60 1.82 14.62 7.88 4.38 operations Less Distributions From net investment income (.05) (.01) (.09) (.06) (.04) From net realized gain (3.13) (.52) (.61) (.65) (1.09) In excess of net realized gain - - - - (.35) Total distributions (3.18) (.53) (.70) (.71) (1.48) Redemption fees added to paid .11 .09 .10 .10 .08 in capital Net asset value, end of period $ 45.69 $ 41.16 $ 39.78 $ 25.76 $ 18.49 TOTAL RETURN A, B 19.14% 4.76% 57.56% 44.27% 29.85% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 423,572 $ 482,525 $ 676,067 $ 458,787 $ 38,382 (000 omitted) Ratio of expenses to average 1.29% 1.26% 1.33% 1.94% 1.64% D net assets Ratio of expenses to average 1.28% E 1.24% E 1.29% E 1.93% E 1.61% E net assets after expense reductions Ratio of net investment (.09)% .26% .49% .37% .50% income (loss) to average net assets Portfolio turnover rate 47% 59% 100% 16% 166%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR THE YEAR ENDED FEBRUARY 29 FINANCIAL SERVICES PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT FINANCIAL SERVICES -14.53% 146.39% 474.74% SELECT FINANCIAL SERVICES -17.17% 138.93% 457.42% (LOAD ADJ.) S&P 500 11.73% 206.94% 425.47% GS Financial Services -14.90% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Financial Services Index - a market capitalization-weighted index of 252 stocks designed to measure the performance of companies in the financial services sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT FINANCIAL SERVICES -14.53% 19.76% 19.11% SELECT FINANCIAL SERVICES -17.17% 19.03% 18.75% (LOAD ADJ.) S&P 500 11.73% 25.14% 18.05% GS Financial Services -14.90% 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 Financial Services S&P 500 00066 SP001 1990/02/28 9700.00 10000.00 1990/03/31 9550.17 10265.00 1990/04/30 9211.42 10008.38 1990/05/31 10022.46 10984.19 1990/06/30 9742.34 10909.50 1990/07/31 9116.96 10874.59 1990/08/31 8025.79 9891.53 1990/09/30 6830.39 9409.81 1990/10/31 6234.32 9369.35 1990/11/30 7113.77 9974.61 1990/12/31 7736.83 10252.90 1991/01/31 8439.87 10699.92 1991/02/28 9409.47 11464.97 1991/03/31 9859.29 11742.42 1991/04/30 10179.16 11770.60 1991/05/31 10958.84 12279.09 1991/06/30 10069.20 11716.71 1991/07/31 10865.54 12262.71 1991/08/31 11585.25 12553.34 1991/09/30 11515.27 12343.69 1991/10/31 11768.50 12509.10 1991/11/30 10895.53 12004.98 1991/12/31 12504.91 13378.35 1992/01/31 13127.80 13129.52 1992/02/29 14070.55 13300.20 1992/03/31 13754.05 13040.85 1992/04/30 14282.67 13424.25 1992/05/31 14895.46 13490.03 1992/06/30 15238.20 13289.02 1992/07/31 15673.96 13832.55 1992/08/31 14774.98 13548.98 1992/09/30 15234.76 13708.86 1992/10/31 15838.67 13756.84 1992/11/30 17029.31 14225.94 1992/12/31 17859.52 14400.92 1993/01/31 18986.03 14521.89 1993/02/28 19490.76 14719.39 1993/03/31 20511.20 15029.97 1993/04/30 19529.27 14666.24 1993/05/31 19536.68 15059.30 1993/06/30 20266.02 15102.97 1993/07/31 20810.24 15042.56 1993/08/31 21458.14 15612.67 1993/09/30 21954.23 15492.45 1993/10/31 21365.58 15813.15 1993/11/30 20414.11 15662.92 1993/12/31 20994.65 15852.44 1994/01/31 22419.87 16391.43 1994/02/28 21606.06 15947.22 1994/03/31 20619.37 15251.92 1994/04/30 21402.36 15447.15 1994/05/31 22315.91 15700.48 1994/06/30 21789.03 15315.82 1994/07/31 22549.60 15818.18 1994/08/31 23339.92 16466.72 1994/09/30 21580.82 16063.29 1994/10/31 21466.10 16424.71 1994/11/30 20106.41 15826.52 1994/12/31 20228.87 16061.23 1995/01/31 21275.03 16477.70 1995/02/28 22626.13 17119.83 1995/03/31 23024.89 17625.04 1995/04/30 23747.35 18144.10 1995/05/31 25065.60 18869.32 1995/06/30 25182.88 19307.65 1995/07/31 26027.32 19947.89 1995/08/31 27040.64 19997.96 1995/09/30 28584.07 20841.88 1995/10/31 27852.23 20767.47 1995/11/30 29728.75 21679.16 1995/12/31 29805.26 22096.70 1996/01/31 31198.79 22848.87 1996/02/29 31462.17 23060.68 1996/03/31 31835.69 23282.76 1996/04/30 31482.37 23625.95 1996/05/31 32213.95 24235.26 1996/06/30 32685.30 24327.60 1996/07/31 31973.36 23252.80 1996/08/31 32925.89 23743.20 1996/09/30 35110.80 25079.47 1996/10/31 37334.99 25771.16 1996/11/30 40541.16 27719.21 1996/12/31 39378.00 27170.09 1997/01/31 41722.48 28867.68 1997/02/28 42642.79 29094.00 1997/03/31 39439.70 27898.53 1997/04/30 42761.22 29564.07 1997/05/31 44164.99 31363.93 1997/06/30 46513.62 32769.03 1997/07/31 51723.80 35376.46 1997/08/31 48786.66 33394.67 1997/09/30 51912.77 35223.70 1997/10/31 51221.67 34047.23 1997/11/30 52954.80 35623.28 1997/12/31 55909.96 36234.93 1998/01/31 55309.97 36635.68 1998/02/28 60162.33 39277.85 1998/03/31 63424.42 41289.27 1998/04/30 64475.57 41704.64 1998/05/31 63269.34 40987.74 1998/06/30 66156.59 42652.66 1998/07/31 66368.33 42198.41 1998/08/31 51290.45 36097.36 1998/09/30 53093.38 38409.76 1998/10/31 58418.76 41534.01 1998/11/30 61767.97 44051.38 1998/12/31 63812.45 46589.63 1999/01/31 65009.38 48538.00 1999/02/28 65229.36 47029.44 1999/03/31 67474.41 48911.09 1999/04/30 72642.39 50805.42 1999/05/31 67929.89 49605.90 1999/06/30 70634.97 52359.03 1999/07/31 66916.30 50724.38 1999/08/31 63375.34 50473.29 1999/09/30 61216.54 49089.82 1999/10/31 69792.51 52196.23 1999/11/30 65988.28 53257.37 1999/12/31 64806.84 56394.23 2000/01/31 61604.90 53560.99 2000/02/29 55742.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000316 093816 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Financial Services Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $55,742 - a 457.42% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Citigroup, Inc. 6.2 American International Group, 5.0 Inc. Morgan Stanley Dean Witter & 4.6 Co. Bank of America Corp. 4.6 Fannie Mae 4.5 Chase Manhattan Corp. 4.4 American Express Co. 4.1 Berkshire Hathaway, Inc. 3.4 Class A Wells Fargo & Co. 3.3 Freddie Mac 3.2 43.3 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Banks 27.7% Row: 1, Col: 6, Value: 27.7 Insurance 20.5% Row: 1, Col: 5, Value: 20.5 Securities Industry 16.0% Row: 1, Col: 4, Value: 16.0 Credit & Other Finance 15.2% Row: 1, Col: 3, Value: 15.2 Federal Sponsored Credit 8.4% Row: 1, Col: 2, Value: 8.4 *All Others 12.2% Row: 1, Col: 1, Value: 12.2
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. FINANCIAL SERVICES PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Robert Ewing)(photograph of James Catudal) NOTE TO SHAREHOLDERS: The following is an interview with Robert Ewing (left), who managed Fidelity Select Financial Services Portfolio for most the period covered by this report, with additional comments from James Catudal (right), who became manager of the fund on February 1, 2000. Q. HOW DID THE FUND PERFORM, BOB? R.E. For the 12 months that ended February 29, 2000, the fund returned - -14.53%. During the same time, the Goldman Sachs Financial Services Index - an index of 252 companies designed to measure the performance of companies in the financial services sector - had a return of - -14.90%, while the Standard & Poor's 500 Index, a measure of the broader market's performance, returned 11.73%. Q. WHAT FACTORS AFFECTED PERFORMANCE DURING THE PERIOD? R.E. Rising interest rates made it a challenging period for financial services stocks. Higher rates traditionally have created difficulties for these stocks for two reasons. First, the "spreads" between short-term and long-term rates typically narrow, squeezing the profitability of lending. Second, higher rates often signal the beginning of the end of an economic growth cycle. Throughout the period, we emphasized consumer stocks while de-emphasizing traditional banks and property and casualty companies. The decision to emphasize consumer-related companies was the least successful. While the companies performed reasonably well, investors worried about potentially slower economic growth. The decision to de-emphasize traditional banks was more successful. These stocks were hurt both by the rising interest-rate environment and by new competitive threats, including those from the Internet and from traditional securities firms. Similarly, the decision to underweight property and casualty companies worked out well. Strong price competition hurt the group, especially those in consumer businesses such as homeowners and automobile insurance. Online competitors also were a threat. Q. WHAT WERE SOME OF THE CONTRIBUTORS TO PERFORMANCE? R.E. Citigroup was a healthy contributor. The company did an excellent job combining the former Citicorp and Travelers organizations, and it was the beneficiary of strong activity in the capital markets. While most consumer stocks were disappointing, an exception was American Express, the beneficiary of heavy charge card usage and a rising number of consumer accounts. Investors also saw American Express as well-positioned to take advantage of accelerating consumer spending on the Internet. Q. WHAT INVESTMENTS DISAPPOINTED YOU? R.E. Associates First Capital, a consumer finance company, was very disappointing. Earnings quality deteriorated as it experienced credit problems in home equity loans and manufactured housing loans. Rising interest rates hurt mortgage-related stocks such as Freddie Mac and Fannie Mae, even though their businesses remained fundamentally strong. BankAmerica also performed poorly. It had minor earnings problems and was caught by concerns about the possibility of slowing economic growth. Q. TURNING TO YOU, JIM, HOW WOULD YOU DESCRIBE YOUR INVESTMENT STYLE? J.C. I look for companies with solid strategies and strong managements that are able to execute those strategies. I prefer attractive valuations, but I don't just buy cheap stocks. While I am a bottom-up manager who looks for stocks of good companies, I recognize that it can be difficult to invest in a company where the macroeconomic trends are moving against it. Q. WHAT IS YOUR OUTLOOK, JIM? J.C. The general outlook is mixed, at best. The Federal Reserve Board has maintained its policy of raising short-term interest rates to slow economic growth, making it difficult for financial services stocks. During the past six months, most financial companies did not have earnings difficulties, yet their stock prices fell because of concerns about slower economic growth. For the most part, the only stocks to do well have been brokerage and securities firms, and they may be vulnerable if investors lose their enthusiasm for technology stocks. In this environment, I will focus on companies that have demonstrated their ability to generate strong revenue growth. I also will look for opportunities in special situations, either where a low stock valuation is inconsistent with the company's fundamental strengths or where a company is turning its business around. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: December 10, 1981 FUND NUMBER: 066 TRADING SYMBOL: FIDSX SIZE: as of February 29, 2000, more than $344 million MANAGER: James Catudal, since February 2000; manager, Fidelity Select Energy Service Portfolio, 1998-February 2000; Fidelity Select Industrial Materials Portfolio, 1997-1998; joined Fidelity in 1997 FINANCIAL SERVICES PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 95.0% SHARES VALUE (NOTE 1) BANKS - 27.7% Bank of America Corp. 341,079 $ 15,710,951 Bank of New York Co., Inc. 227,736 7,586,456 Bank One Corp. 175,519 4,530,584 Capital One Financial Corp. 39,000 1,435,688 Chase Manhattan Corp. 191,700 15,264,113 Comerica, Inc. 45,167 1,668,356 First Union Corp. 106,101 3,129,980 Firstar Corp. 200,000 3,562,500 FleetBoston Financial Corp. 191,234 5,211,127 Marshall & Ilsley Corp. 48,000 2,205,000 Mellon Financial Corp. 160,000 4,820,000 PNC Financial Corp. 59,000 2,282,563 State Street Corp. 33,000 2,404,875 SunTrust Banks, Inc. 35,000 1,778,438 Synovus Finanical Corp. 30,000 491,250 Toronto Dominion Bank 80,000 2,025,386 U.S. Bancorp 220,089 4,030,380 U.S. Trust Corp. 5,000 692,500 UnionBanCal Corp. 35,000 1,124,375 Wachovia Corp. 37,000 2,115,938 Wells Fargo & Co. 342,200 11,313,988 Zions Bancorp 40,000 2,122,500 95,506,948 COMPUTER SERVICES & SOFTWARE - - 0.2% Intuit, Inc. (a) 11,800 619,500 MatrixOne, Inc. 100 2,500 Onvia.com, Inc. 200 4,200 626,200 CREDIT & OTHER FINANCE - 15.2% American Express Co. 106,300 14,264,131 Associates First Capital 305,200 6,065,850 Corp. Class A Citigroup, Inc. 412,500 21,321,083 Household International, Inc. 159,046 5,079,532 MBNA Corp. 145,500 3,310,125 Metris Companies, Inc. 12,000 310,500 NextCard, Inc. 9,000 203,625 Providian Financial Corp. 27,500 1,782,344 52,337,190 FEDERAL SPONSORED CREDIT - 8.4% Fannie Mae 291,500 15,449,500 Freddie Mac 262,600 10,963,550 SLM Holding Corp. 76,000 2,379,750 28,792,800 HOLDING COMPANIES - 0.2% PartnerRe Ltd. 20,000 620,000 SHARES VALUE (NOTE 1) INSURANCE - 20.5% ACE Ltd. 102,000 $ 1,823,250 AFLAC, Inc. 127,000 4,643,438 Allmerica Financial Corp. 31,200 1,302,600 Ambac Financial Group, Inc. 50,400 2,214,450 American General Corp. 50,000 2,609,375 American International Group, 196,362 17,365,764 Inc. Arthur J. Gallagher & Co. 22,000 1,124,750 Berkshire Hathaway, Inc. 269 11,836,000 Class A (a) E.W. Blanch Holdings, Inc. 11,000 517,000 Hartford Financial Services 67,000 2,093,750 Group, Inc. Hartford Life, Inc. Class A 85,000 3,006,875 HCC Insurance Holdings, Inc. 20,000 255,000 Jefferson-Pilot Corp. 25,000 1,301,563 Loews Corp. 25,000 1,112,500 Marsh & McLennan Companies, 62,500 4,835,938 Inc. MBIA, Inc. 147,400 5,656,475 Mutual Risk Management Ltd. 63,000 866,250 Nationwide Financial 50,000 1,153,125 Services, Inc. Class A PMI Group, Inc. 19,600 711,725 Reliastar Financial Corp. 43,305 1,209,833 The Chubb Corp. 14,000 688,625 Travelers Property Casualty 50,000 1,581,250 Corp. Class A UICI (a) 25,000 218,750 Xl Capital Ltd. 60,000 2,426,250 70,554,536 LODGING & GAMING - 0.3% Starwood Hotels & Resorts 40,000 897,500 Worldwide, Inc. unit REAL ESTATE INVESTMENT TRUSTS - - 4.3% AMB Property Corp. 50,000 1,009,375 Apartment Investment & 10,000 370,000 Management Co. Class A Cousins Properties, Inc. 20,000 710,000 Crescent Real Estate Equities 90,000 1,535,625 Co. Duke-Weeks Realty Corp. 50,000 918,750 Equity Office Properties Trust 65,000 1,555,938 Equity Residential Properties 35,000 1,397,813 Trust (SBI) First Industrial Realty 13,000 338,000 Trust, Inc. Indymac Mortgage Holdings, 190,000 2,410,625 Inc. Kimco Realty Corp. 25,000 860,938 ProLogis Trust 25,000 451,563 Public Storage, Inc. 35,000 772,188 Simon Property Group, Inc. 50,000 1,175,000 Spieker Properties, Inc. 34,000 1,364,250 14,870,065 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SAVINGS & LOANS - 1.8% Charter One Financial, Inc. 57,750 $ 909,563 Commercial Federal Corp. 50,000 646,875 Golden State Bancorp, Inc. (a) 75,000 965,625 Golden West Financial Corp. 60,000 1,710,000 TCF Financial Corp. 80,000 1,585,000 Washington Mutual, Inc. 13,880 307,095 6,124,158 SECURITIES INDUSTRY - 16.0% AXA Financial, Inc. 55,200 1,652,550 Charles Schwab Corp. 175,000 7,317,188 DLJ, Inc. 32,000 1,390,000 Eaton Vance Corp. 10,000 414,375 Federated Investors, Inc. 28,300 659,744 Class B Franklin Resources, Inc. 25,000 679,688 Goldman Sachs Group, Inc. 105,000 9,712,500 Investors Group, Inc. 200,000 2,104,029 Lehman Brothers Holdings, 22,800 1,653,000 Inc. Merrill Lynch & Co., Inc. 80,000 8,200,000 Morgan Stanley Dean Witter & 226,200 15,932,963 Co. The Bear Stearns Companies, 45,387 1,781,440 Inc. Waddell & Reed Financial, 128,535 3,719,482 Inc. Class A 55,216,959 SERVICES - 0.4% CheckFree Holdings Corp. (a) 15,000 1,319,063 TOTAL COMMON STOCKS 326,865,419 (Cost $295,782,508) CASH EQUIVALENTS - 6.3% Central Cash Collateral Fund, 3,478,000 3,478,000 5.75% (b) Taxable Central Cash Fund, 18,136,843 18,136,843 5.66% (b) TOTAL CASH EQUIVALENTS 21,614,843 (Cost $21,614,843) TOTAL INVESTMENT PORTFOLIO - 348,480,262 101.3% (Cost $317,397,351) NET OTHER ASSETS - (1.3)% (4,328,576) NET ASSETS - 100% $ 344,151,686 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 $269,455,287 and $387,300,288, 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 $19,290 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $3,456,263. The fund received cash collateral of $3,478,000 which was invested in cash equivalents. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $319,052,558. Net unrealized appreciation aggregated $29,427,704, of which $66,414,140 related to appreciated investment securities and $36,986,436 related to depreciated investment securities. The fund hereby designates approximately $39,067,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 100% of the dividends distributed the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for the use in preparing 2000 income tax returns. FINANCIAL SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 348,480,262 value (cost $317,397,351) - See accompanying schedule Receivable for investments 53,663 sold Receivable for fund shares 3,387,966 sold Dividends receivable 364,184 Interest receivable 102,920 Redemption fees receivable 3,197 Other receivables 919 TOTAL ASSETS 352,393,111 LIABILITIES Payable for investments $ 29,800 purchased Payable for fund shares 4,379,443 redeemed Accrued management fee 175,437 Other payables and accrued 178,745 expenses Collateral on securities 3,478,000 loaned, at value TOTAL LIABILITIES 8,241,425 NET ASSETS $ 344,151,686 Net Assets consist of: Paid in capital $ 291,351,964 Undistributed net investment 1,570,371 income Accumulated undistributed net 20,146,440 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 31,082,911 (depreciation) on investments NET ASSETS, for 4,232,554 $ 344,151,686 shares outstanding NET ASSET VALUE and $81.31 redemption price per share ($344,151,686 (divided by) 4,232,554 shares) Maximum offering price per $83.82 share (100/97.00 of $81.31) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 7,740,066 Dividends Interest 1,682,199 Security lending 11,312 TOTAL INCOME 9,433,577 EXPENSES Management fee $ 2,973,467 Transfer agent fees 2,628,737 Accounting and security 371,216 lending fees Non-interested trustees' 1,338 compensation Custodian fees and expenses 14,226 Registration fees 85,267 Audit 21,956 Legal 2,032 Miscellaneous 830 Total expenses before 6,099,069 reductions Expense reductions (70,138) 6,028,931 NET INVESTMENT INCOME 3,404,646 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 39,254,901 Foreign currency transactions (112) 39,254,789 Change in net unrealized (106,918,398) appreciation (depreciation) on investment securities NET GAIN (LOSS) (67,663,609) NET INCREASE (DECREASE) IN $ (64,258,963) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 1,218,365 charges paid to FDC Sales charges - Retained by $ 1,205,409 FDC Deferred sales charges $ 18,493 withheld by FDC Exchange fees withheld by FSC $ 56,432 Expense reductions Directed $ 69,294 brokerage arrangements Custodian credits 4 Transfer agent credits 840 $ 70,138
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ 3,404,646 $ 3,605,509 income Net realized gain (loss) 39,254,789 21,785,427 Change in net unrealized (106,918,398) 9,159,238 appreciation (depreciation) NET INCREASE (DECREASE) IN (64,258,963) 34,550,174 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (3,318,425) (1,162,919) From net investment income From net realized gain (25,466,741) (66,118,174) TOTAL DISTRIBUTIONS (28,785,166) (67,281,093) Share transactions Net 375,427,486 389,871,130 proceeds from sales of shares Reinvestment of distributions 27,476,805 66,001,479 Cost of shares redeemed (513,506,187) (481,672,418) NET INCREASE (DECREASE) IN (110,601,896) (25,799,809) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 798,200 622,623 TOTAL INCREASE (DECREASE) (202,847,825) (57,908,105) IN NET ASSETS NET ASSETS Beginning of period 546,999,511 604,907,616 End of period (including $ 344,151,686 $ 546,999,511 undistributed net investment income of $1,570,371 and $3,679,892, respectively) OTHER INFORMATION Shares Sold 3,739,478 3,952,203 Issued in reinvestment of 281,965 658,905 distributions Redeemed (5,214,250) (5,042,955) Net increase (decrease) (1,192,807) (431,847)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 100.82 $ 103.28 $ 82.94 $ 65.70 $ 48.23 period Income from Investment Operations Net investment income C .67 .56 .70 .74 1.03 Net realized and unrealized (14.61) 7.88 30.65 21.55 17.56 gain (loss) Total from investment (13.94) 8.44 31.35 22.29 18.59 operations Less Distributions From net investment income (.64) (.19) (.64) (.63) (.37) From net realized gain (5.09) (10.81) (10.51) (4.56) (.91) Total distributions (5.73) (11.00) (11.15) (5.19) (1.28) Redemption fees added to paid .16 .10 .14 .14 .16 in capital Net asset value, end of period $ 81.31 $ 100.82 $ 103.28 $ 82.94 $ 65.70 TOTAL RETURN A, B (14.53)% 8.42% 41.08% 35.54% 39.05% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 344,152 $ 547,000 $ 604,908 $ 426,424 $ 270,466 (000 omitted) Ratio of expenses to average 1.19% 1.20% 1.31% 1.45% 1.42% net assets Ratio of expenses to average 1.17% D 1.18% D 1.29% D 1.43% D 1.41% D net assets after expense reductions Ratio of net investment .66% .58% .78% 1.03% 1.78% income to average net assets Portfolio turnover rate 57% 60% 84% 80% 125%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 HOME FINANCE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT HOME FINANCE -24.88% 69.94% 477.77% SELECT HOME FINANCE (LOAD -27.21% 64.77% 460.36% ADJ.) S&P 500 11.73% 206.94% 425.47% GS Financial Services -14.90% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Financial Services Index - a market capitalization-weighted index of 252 stocks designed to measure the performance of companies in the financial services sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT HOME FINANCE -24.88% 11.19% 19.17% SELECT HOME FINANCE (LOAD -27.21% 10.50% 18.81% ADJ.) S&P 500 11.73% 25.14% 18.05% GS Financial Services -14.90% 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 HOME FINANCE S&P 500 00098 SP001 1990/02/28 9700.00 10000.00 1990/03/31 9721.13 10265.00 1990/04/30 9488.67 10008.38 1990/05/31 10386.82 10984.19 1990/06/30 10281.15 10909.50 1990/07/31 9393.57 10874.59 1990/08/31 8442.59 9891.53 1990/09/30 7713.51 9409.81 1990/10/31 7132.35 9369.35 1990/11/30 7903.70 9974.61 1990/12/31 8658.66 10252.90 1991/01/31 9486.88 10699.92 1991/02/28 10777.62 11464.97 1991/03/31 11272.40 11742.42 1991/04/30 11659.62 11770.60 1991/05/31 12143.64 12279.09 1991/06/30 11466.01 11716.71 1991/07/31 12692.20 12262.71 1991/08/31 13176.23 12553.34 1991/09/30 13068.67 12343.69 1991/10/31 12842.79 12509.10 1991/11/30 12251.20 12004.98 1991/12/31 14252.65 13378.35 1992/01/31 15657.23 13129.52 1992/02/29 16680.72 13300.20 1992/03/31 16397.62 13040.85 1992/04/30 16746.04 13424.25 1992/05/31 18401.05 13490.03 1992/06/30 18424.10 13289.02 1992/07/31 19330.03 13832.55 1992/08/31 18282.21 13548.98 1992/09/30 18576.91 13708.86 1992/10/31 18926.18 13756.84 1992/11/30 20869.01 14225.94 1992/12/31 22498.19 14400.92 1993/01/31 24112.32 14521.89 1993/02/28 24521.37 14719.39 1993/03/31 25394.77 15029.97 1993/04/30 24019.27 14666.24 1993/05/31 23608.21 15059.30 1993/06/30 24197.03 15102.97 1993/07/31 25752.39 15042.56 1993/08/31 27107.78 15612.67 1993/09/30 28840.90 15492.45 1993/10/31 29063.10 15813.15 1993/11/30 27763.25 15662.92 1993/12/31 28639.07 15852.44 1994/01/31 29892.91 16391.43 1994/02/28 29330.44 15947.22 1994/03/31 28779.69 15251.92 1994/04/30 29892.40 15447.15 1994/05/31 31736.09 15700.48 1994/06/30 32264.62 15315.82 1994/07/31 32977.51 15818.18 1994/08/31 34046.85 16466.72 1994/09/30 32879.18 16063.29 1994/10/31 30912.58 16424.71 1994/11/30 29314.71 15826.52 1994/12/31 29406.91 16061.23 1995/01/31 30702.86 16477.70 1995/02/28 32977.65 17119.83 1995/03/31 32922.51 17625.04 1995/04/30 34645.84 18144.10 1995/05/31 36700.05 18869.32 1995/06/30 37086.07 19307.65 1995/07/31 38575.03 19947.89 1995/08/31 42131.98 19997.96 1995/09/30 43014.33 20841.88 1995/10/31 42228.49 20767.47 1995/11/30 44558.43 21679.16 1995/12/31 45137.07 22096.70 1996/01/31 46371.18 22848.87 1996/02/29 47236.47 23060.68 1996/03/31 48314.54 23282.76 1996/04/30 47697.70 23625.95 1996/05/31 48760.89 24235.26 1996/06/30 48979.35 24327.60 1996/07/31 49853.20 23252.80 1996/08/31 51906.75 23743.20 1996/09/30 54528.30 25079.47 1996/10/31 58358.68 25771.16 1996/11/30 62727.94 27719.21 1996/12/31 61781.79 27170.09 1997/01/31 65795.56 28867.68 1997/02/28 69673.02 29094.00 1997/03/31 63220.69 27898.53 1997/04/30 65115.59 29564.07 1997/05/31 69479.26 31363.93 1997/06/30 75410.61 32769.03 1997/07/31 82505.61 35376.46 1997/08/31 79095.48 33394.67 1997/09/30 86190.48 35223.70 1997/10/31 85511.69 34047.23 1997/11/30 85996.54 35623.28 1997/12/31 90046.66 36234.93 1998/01/31 84929.78 36635.68 1998/02/28 92242.08 39277.85 1998/03/31 98465.30 41289.27 1998/04/30 100785.86 41704.64 1998/05/31 97276.26 40987.74 1998/06/30 95592.36 42652.66 1998/07/31 91870.05 42198.41 1998/08/31 67480.09 36097.36 1998/09/30 70971.96 38409.76 1998/10/31 72886.29 41534.01 1998/11/30 76980.83 44051.38 1998/12/31 76714.95 46589.63 1999/01/31 76413.62 48538.00 1999/02/28 74605.64 47029.44 1999/03/31 76236.37 48911.09 1999/04/30 80639.21 50805.42 1999/05/31 77699.05 49605.90 1999/06/30 77645.27 52359.03 1999/07/31 76175.19 50724.38 1999/08/31 70994.06 50473.29 1999/09/30 70312.80 49089.82 1999/10/31 77107.43 52196.23 1999/11/30 71101.62 53257.37 1999/12/31 67227.10 56394.23 2000/01/31 63330.14 53560.99 2000/02/29 56036.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000320 163136 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Home Finance Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $56,036 - a 460.36% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Freddie Mac 13.9 Fannie Mae 13.3 Golden West Financial Corp. 8.1 PMI Group, Inc. 5.6 TCF Financial Corp. 4.9 Charter One Financial, Inc. 3.8 Washington Federal, Inc. 3.4 Dime Bancorp, Inc. 2.9 Wells Fargo & Co. 2.8 Chase Manhattan Corp. 2.2 60.9 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Savings & loans 35.5% Row: 1, Col: 6, Value: 35.5 Federal Sponsored Credit 27.2% Row: 1, Col: 5, Value: 27.2 Banks 10.9% Row: 1, Col: 4, Value: 10.9 Insurance 9.6% Row: 1, Col: 3, Value: 9.6 Credit & Other Finance 5.9% Row: 1, Col: 2, Value: 5.9 *All Others 10.9% Row: 1, Col: 1, Value: 10.9
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. 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. Not well. For the 12 months that ended February 29, 2000, the fund returned -24.88%, trailing both the 11.73% return of the Standard & Poor's 500 Index and the -14.90% return of the Goldman Sachs Financial Services Index, an index of 252 stocks designed to measure the performance of companies in the financial services sector. Q. WHY DID THE FUND UNDERPERFORM THE INDEXES DURING THE PERIOD? A. Rising interest rates were the main culprit. Although rising rates tend to have a negative impact on stock prices generally, home finance stocks are one of the most rate-sensitive groups in the financial services sector. That's because higher rates tend to reduce borrowing by homeowners and limit the growth of mortgage finance companies' loan portfolios. Another unfavorable influence was the slightly inverted yield curve - that is, the yields of some short-term debt securities were higher than those of their longer-term counterparts. An inverted yield curve is detrimental to home finance companies because they borrow short-term funds from depositors and lend mortgage money on a long-term basis. Profits are generated when long-term rates are above short-term rates. When the yield curve is inverted, profit margins are squeezed. Q. AREN'T COMPANIES IN THE GOLDMAN SACHS INDEX RATE-SENSITIVE TOO? A. They are to some extent. Remember, though, that the Goldman Sachs index comprises more than just home finance stocks. For example, there also are money center banks, which derive substantial revenue from fees and venture capital activities. Another industry represented in the index, brokerage firms, receives income from commissions on stock transactions as well as from investment banking activities. These various revenue streams were quite strong during the period, aided by robust economic growth and sharply advancing stock prices in a few less rate-sensitive sectors of the stock market. Q. WHAT STOCKS PERFORMED WELL DURING THE PERIOD? A. CMAC Investment Corp., which became a wholly owned subsidiary of Radian Group during the period, and MGIC Investment Corp. were two mortgage insurance holdings that did relatively well. Mortgage insurance stocks rebounded after hitting a low point in 1998, when it appeared that government-sponsored mortgage entities (GSEs) such as Fannie Mae and Freddie Mac might enter the mortgage insurance business and take away market share from existing players. As it turned out, the GSEs decided to stay out of mortgage insurance, which triggered stronger share prices in the group. In addition, investors responded positively to cost-cutting initiatives by MGIC and CMAC. A third holding that performed better than most was Long Beach Financial, an originator of loans to borrowers with less-than-ideal credit histories. The stock strengthened as the company was being acquired by savings and loan company Washington Mutual. Q. WHAT STOCKS DETRACTED FROM PERFORMANCE? A. Freddie Mac and Fannie Mae, the two GSEs mentioned above, did poorly during the period. Although their earnings were largely insulated from rising interest rates, investors sold them along with other home finance stocks. Charter One Financial, a savings and loan making the transition to a commercial bank, was another disappointment. The stock responded negatively to a recent acquisition that raised questions about the viability of the company's business strategy. Another lackluster holding was Washington Mutual. Following a series of acquisitions in the past several years, the stock faltered when the company missed its earnings estimates. Q. WHAT'S YOUR OUTLOOK, VICTOR? A. As long as the economy stays in overdrive and the Federal Reserve Board feels compelled to raise interest rates to keep inflation in check, home finance stocks will probably struggle. On the positive side, the worst of the sector's underperformance due to higher rates is probably behind us. While I expect several more rate hikes this year, subsequent increases will probably have less impact on mortgage finance stocks, financially and psychologically, than the increases we've seen so far. My strategy in this challenging environment will be to stick with the companies whose business models make sense at this advanced stage of the business cycle and those with the lowest cost structures and best balance sheets. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 098 TRADING SYMBOL: FSVLX SIZE: as of February 29, 2000, more than $213 million MANAGER: Victor Thay, since 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 FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 94.7% SHARES VALUE (NOTE 1) BANKS - 10.9% Chase Manhattan Corp. 59,300 $ 4,721,763 North Fork Bancorp, Inc. 130,900 2,143,488 Peoples Heritage Financial 370,775 3,939,484 Group, Inc. PNC Financial Corp. 114,100 4,414,244 Seacoast Financial Services 210,700 2,080,663 Corp. Wells Fargo & Co. 178,600 5,904,963 23,204,605 COMPUTER SERVICES & SOFTWARE - - 5.1% Automatic Data Processing, 30,000 1,306,875 Inc. Digital Insight Corp. 2,400 151,200 First Data Corp. 50,000 2,250,000 Homestore.com, Inc. 20,000 1,366,250 Intuit, Inc. (a) 65,000 3,412,500 The Bisys Group (a) 45,000 2,320,313 10,807,138 CREDIT & OTHER FINANCE - 5.9% Countrywide Credit 183,515 4,576,405 Industries, Inc. Greenpoint Financial Corp. 91,300 1,455,094 Household International, Inc. 145,600 4,650,100 LendingTree, Inc. 100,000 1,175,000 WSFS Financial Corp. 70,000 809,375 12,665,974 FEDERAL SPONSORED CREDIT - 27.2% Fannie Mae 534,800 28,344,400 Freddie Mac 711,300 29,696,770 58,041,170 INSURANCE - 9.6% MGIC Investment Corp. 111,100 4,152,363 PMI Group, Inc. 331,310 12,030,694 Radian Group, Inc. 122,200 4,238,813 20,421,870 REAL ESTATE INVESTMENT TRUSTS - - 0.4% Indymac Mortgage Holdings, 63,000 799,313 Inc. SAVINGS & LOANS - 35.5% Astoria Financial Corp. 119,200 2,838,450 BankUnited Financial Corp. 200,000 1,393,750 Class A (a) Charter One Financial, Inc. 510,470 8,039,903 Commercial Federal Corp. 84,225 1,089,661 Dime Bancorp, Inc. 500,000 6,093,750 Downey Financial Corp. 72,300 1,423,406 SHARES VALUE (NOTE 1) First Federal Savings & Loan 35,300 $ 992,813 Association of East Hartford First Sentinel Bancorp, Inc. 134,900 1,112,925 FirstFed Financial Corp. (a) 92,000 1,173,000 Golden State Bancorp, Inc. (a) 111,292 1,432,885 Golden West Financial Corp. 609,000 17,356,500 Haven Bancorp, Inc. 18,100 217,200 MAF Bancorp., Inc. 126,900 2,157,300 Quaker City Bancorp, Inc. (a) 83,825 1,278,331 Richmond County Financial 66,300 1,106,381 Corp. Roslyn Bancorp, Inc. 106,015 1,629,981 SGV Bancorp., Inc. (a) 104,300 2,320,675 TCF Financial Corp. 532,000 10,540,250 Washington Federal, Inc. 473,470 7,250,009 Washington Mutual, Inc. 134,680 2,979,795 Webster Financial Corp. 153,700 3,246,913 75,673,878 TELEPHONE SERVICES - 0.1% IXnet, Inc. 3,100 165,075 TOTAL COMMON STOCKS 201,779,023 (Cost $204,518,458) CASH EQUIVALENTS - 8.4% Central Cash Collateral Fund, 599,400 599,400 5.75% (b) Taxable Central Cash Fund, 17,235,835 17,235,835 5.66% (b) TOTAL CASH EQUIVALENTS 17,835,235 (Cost $17,835,235) TOTAL INVESTMENT PORTFOLIO - 219,614,258 103.1% (Cost $222,353,693) NET OTHER ASSETS - (3.1)% $ (6,556,289) NET ASSETS - 100% $ 213,057,969 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 $428,968,867 and $857,214,997, 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 $66,175 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $553,331. The fund received cash collateral of $599,400 which was invested in cash equivalents. Transactions during the period with companies which are or were affiliates are as follows:
AFFILIATE PURCHASE COST SALES COST DIVIDEND INCOME VALUE Acadiana Bancshares, Inc. $ - $ 570,826 $ 15,743 $ - Citizens First Financial - 768,875 - - Corp. SGV Bancorp., Inc. - 311,600 - - TOTALS $ - $ 1,651,301 $ 15,743 $ -
INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $222,502,940. Net unrealized depreciation aggregated $2,888,682, of which $19,827,151 related to appreciated investment securities and $22,715,833 related to depreciated investment securities. The fund hereby designates approximately $17,146,000 as a capital gain dividend for the purpose of the dividend paid deduction. The fund intends to elect to defer to its fiscal year ending February 28, 2001 approximately $9,089,000 of losses recognized during the period November 1, 1999 to February 29, 2000. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. HOME FINANCE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 219,614,258 value (cost $222,353,693) - See accompanying schedule Receivable for investments 4,815,610 sold Receivable for fund shares 90,629 sold Dividends receivable 274,042 Interest receivable 64,355 Redemption fees receivable 1,627 Other receivables 9,557 TOTAL ASSETS 224,870,078 LIABILITIES Payable for investments $ 6,564,567 purchased Payable for fund shares 4,359,932 redeemed Accrued management fee 117,607 Other payables and accrued 170,603 expenses Collateral on securities 599,400 loaned, at value TOTAL LIABILITIES 11,812,109 NET ASSETS $ 213,057,969 Net Assets consist of: Paid in capital $ 213,534,335 Undistributed net investment 2,868,182 income Accumulated undistributed net (602,672) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (2,741,876) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 6,890,209 $ 213,057,969 shares outstanding NET ASSET VALUE and $30.92 redemption price per share ($213,057,969 (divided by) 6,890,209 shares) Maximum offering price per $31.88 share (100/97.00 of $30.92) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 9,042,833 Dividends (including $15,743 received from affiliated issuers) Interest 1,454,159 Security lending 2,819 TOTAL INCOME 10,499,811 EXPENSES Management fee $ 2,904,120 Transfer agent fees 3,617,871 Accounting and security 359,560 lending fees Non-interested trustees' 1,425 compensation Custodian fees and expenses 19,485 Registration fees 62,017 Audit 28,393 Legal 2,254 Miscellaneous 461 Total expenses before 6,995,586 reductions Expense reductions (96,274) 6,899,312 NET INVESTMENT INCOME 3,600,499 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 5,417,240 (including realized gain (loss) of $658,315 on sale of investments in affiliated issuers) Foreign currency transactions (3,137) 5,414,103 Change in net unrealized appreciation (depreciation) on: Investment securities (94,926,895) Assets and liabilities in (3,203) (94,930,098) foreign currencies NET GAIN (LOSS) (89,515,995) NET INCREASE (DECREASE) IN $ (85,915,496) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 376,497 charges paid to FDC Sales charges - Retained by $ 376,195 FDC Deferred sales charges $ 11,748 withheld by FDC Exchange fees withheld by FSC $ 111,382 Expense reductions $ 92,112 Directed brokerage arrangements Custodian credits 434 Transfer agent credits 3,728 $ 96,274
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ 3,600,499 $ 7,725,515 income Net realized gain (loss) 5,414,103 22,583,634 Change in net unrealized (94,930,098) (316,657,120) appreciation (depreciation) NET INCREASE (DECREASE) IN (85,915,496) (286,347,971) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (2,523,487) (2,223,405) From net investment income From net realized gain (8,694,427) (43,930,438) TOTAL DISTRIBUTIONS (11,217,914) (46,153,843) Share transactions Net 119,654,192 655,146,906 proceeds from sales of shares Reinvestment of distributions 10,658,735 45,331,306 Cost of shares redeemed (561,225,441) (1,297,847,011) NET INCREASE (DECREASE) IN (430,912,514) (597,368,799) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 663,676 1,700,582 TOTAL INCREASE (DECREASE) (527,382,248) (928,170,031) IN NET ASSETS NET ASSETS Beginning of period 740,440,217 1,668,610,248 End of period (including $ 213,057,969 $ 740,440,217 undistributed net investment income of $2,868,182 and $7,800,879, respectively) OTHER INFORMATION Shares Sold 2,834,768 13,208,817 Issued in reinvestment of 267,110 793,059 distributions Redeemed (13,801,852) (27,681,040) Net increase (decrease) (10,699,974) (13,679,164)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 42.09 $ 53.36 $ 46.00 $ 33.30 $ 23.92 period Income from Investment Operations Net investment income C .30 .28 .33 .53 .53 Net realized and unrealized (10.64) (10.16) 13.10 14.60 9.72 gain (loss) Total from investment (10.34) (9.88) 13.43 15.13 10.25 operations Less Distributions From net investment income (.19) (.07) (.29) (.32) (.19) From net realized gain (.69) (1.38) (5.84) (2.16) (.73) Total distributions (.88) (1.45) (6.13) (2.48) (.92) Redemption fees added to paid .05 .06 .06 .05 .05 in capital Net asset value, end of period $ 30.92 $ 42.09 $ 53.36 $ 46.00 $ 33.30 TOTAL RETURN A, B (24.88)% (19.12)% 32.39% 47.50% 43.24% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 213,058 $ 740,440 $ 1,668,610 $ 1,176,828 $ 617,035 (000 omitted) Ratio of expenses to average 1.39% 1.19% 1.21% 1.38% 1.35% net assets Ratio of expenses to average 1.37% D 1.18% D 1.19% D 1.34% D 1.32% D net assets after expense reductions Ratio of net investment .72% .57% .67% 1.41% 1.80% income to average net assets Portfolio turnover rate 91% 18% 54% 78% 81%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 INSURANCE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT INSURANCE -22.12% 102.94% 274.80% SELECT INSURANCE (LOAD ADJ.) -24.53% 96.78% 263.48% S&P 500 11.73% 206.94% 425.47% GS Financial Services -14.90% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Financial Services Index - a market capitalization-weighted index of 252 stocks designed to measure the performance of companies in the financial services sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT INSURANCE -22.12% 15.21% 14.12% SELECT INSURANCE (LOAD ADJ.) -24.53% 14.50% 13.78% S&P 500 11.73% 25.14% 18.05% GS Financial Services -14.90% 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 INSURANCE S&P 500 00045 SP001 1990/02/28 9700.00 10000.00 1990/03/31 9652.15 10265.00 1990/04/30 9317.20 10008.38 1990/05/31 10171.67 10984.19 1990/06/30 10199.01 10909.50 1990/07/31 10048.63 10874.59 1990/08/31 9002.75 9891.53 1990/09/30 8223.47 9409.81 1990/10/31 7895.35 9369.35 1990/11/30 8941.23 9974.61 1990/12/31 9296.69 10252.90 1991/01/31 9795.70 10699.92 1991/02/28 10786.89 11464.97 1991/03/31 11497.82 11742.42 1991/04/30 11436.29 11770.60 1991/05/31 11723.40 12279.09 1991/06/30 10994.63 11716.71 1991/07/31 11402.86 12262.71 1991/08/31 11333.67 12553.34 1991/09/30 11444.38 12343.69 1991/10/31 11790.34 12509.10 1991/11/30 11686.55 12004.98 1991/12/31 12706.75 13378.35 1992/01/31 12692.86 13129.52 1992/02/29 13033.10 13300.20 1992/03/31 12845.62 13040.85 1992/04/30 12519.27 13424.25 1992/05/31 12685.92 13490.03 1992/06/30 12951.31 13289.02 1992/07/31 13685.12 13832.55 1992/08/31 13284.17 13548.98 1992/09/30 13987.72 13708.86 1992/10/31 14585.36 13756.84 1992/11/30 15084.65 14225.94 1992/12/31 15565.92 14400.92 1993/01/31 16216.73 14521.89 1993/02/28 16522.99 14719.39 1993/03/31 17395.85 15029.97 1993/04/30 16981.91 14666.24 1993/05/31 16544.51 15059.30 1993/06/30 16721.01 15102.97 1993/07/31 17304.21 15042.56 1993/08/31 18186.69 15612.67 1993/09/30 18248.08 15492.45 1993/10/31 17718.59 15813.15 1993/11/30 16636.60 15662.92 1993/12/31 16838.66 15852.44 1994/01/31 17065.64 16391.43 1994/02/28 16317.44 15947.22 1994/03/31 15552.43 15251.92 1994/04/30 15720.56 15447.15 1994/05/31 16443.54 15700.48 1994/06/30 16351.07 15315.82 1994/07/31 16653.71 15818.18 1994/08/31 17107.67 16466.72 1994/09/30 16989.98 16063.29 1994/10/31 16779.81 16424.71 1994/11/30 15930.73 15826.52 1994/12/31 16779.81 16061.23 1995/01/31 17385.09 16477.70 1995/02/28 17914.72 17119.83 1995/03/31 18200.54 17625.04 1995/04/30 18368.69 18144.10 1995/05/31 18772.96 18869.32 1995/06/30 19362.51 19307.65 1995/07/31 19943.64 19947.89 1995/08/31 20524.76 19997.96 1995/09/30 21543.84 20841.88 1995/10/31 20895.34 20767.47 1995/11/30 22141.81 21679.16 1995/12/31 22620.80 22096.70 1996/01/31 23279.49 22848.87 1996/02/29 23201.49 23060.68 1996/03/31 22941.48 23282.76 1996/04/30 22656.92 23625.95 1996/05/31 23114.82 24235.26 1996/06/30 23528.68 24327.60 1996/07/31 23009.15 23252.80 1996/08/31 23977.77 23743.20 1996/09/30 25148.92 25079.47 1996/10/31 26469.77 25771.16 1996/11/30 28098.81 27719.21 1996/12/31 27983.39 27170.09 1997/01/31 29133.02 28867.68 1997/02/28 29762.58 29094.00 1997/03/31 28156.75 27898.53 1997/04/30 29818.48 29564.07 1997/05/31 32009.19 31363.93 1997/06/30 34352.96 32769.03 1997/07/31 37251.58 35376.46 1997/08/31 35328.73 33394.67 1997/09/30 37586.40 35223.70 1997/10/31 36591.50 34047.23 1997/11/30 37318.54 35623.28 1997/12/31 39868.20 36234.93 1998/01/31 39323.03 36635.68 1998/02/28 42503.19 39277.85 1998/03/31 44865.61 41289.27 1998/04/30 45136.71 41704.64 1998/05/31 44616.65 40987.74 1998/06/30 46588.54 42652.66 1998/07/31 45700.11 42198.41 1998/08/31 38473.47 36097.36 1998/09/30 40954.58 38409.76 1998/10/31 42677.27 41534.01 1998/11/30 45429.24 44051.38 1998/12/31 47968.60 46589.63 1999/01/31 46816.47 48538.00 1999/02/28 46683.53 47029.44 1999/03/31 48433.89 48911.09 1999/04/30 50958.10 50805.42 1999/05/31 50450.09 49605.90 1999/06/30 50631.52 52359.03 1999/07/31 48926.07 50724.38 1999/08/31 45986.87 50473.29 1999/09/30 41003.55 49089.82 1999/10/31 47099.66 52196.23 1999/11/30 45345.82 53257.37 1999/12/31 45115.82 56394.23 2000/01/31 41432.90 53560.99 2000/02/29 36348.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000320 164145 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Insurance Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $36,348 - a 263.48% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS American International Group, 7.7 Inc. CIGNA Corp. 6.2 Marsh & McLennan Companies, 5.8 Inc. Ambac Financial Group, Inc. 5.8 AXA Financial, Inc. 5.6 AFLAC, Inc. 5.3 The Chubb Corp. 5.0 Berkshire Hathaway, Inc. 4.8 Class A American General Corp. 4.5 MBIA, Inc. 4.1 54.8 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Insurance 85.7% Row: 1, Col: 6, Value: 85.7 Securities Industry 5.6% Row: 1, Col: 5, Value: 5.6 Medical Facilities Management 1.5% Row: 1, Col: 4, Value: 1.5 Holding Companies 1.4% Row: 1, Col: 3, Value: 1.4 Credit & Other Finance 1.0% Row: 1, Col: 2, Value: 1.0 *All Others 4.8% Row: 1, Col: 1, Value: 4.8
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. 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 a difficult period for insurance company stocks. For the 12 months ending February 29, 2000, the fund's total return was -22.12%. During the same period, the Goldman Sachs Financial Services Index - an index of 252 stocks designed to measure the performance of companies in the financial services sector - had a return of -14.90%, while the Standard & Poor's 500 Index, a measure of the broader market's performance, returned 11.73%. Q. WHAT WERE THE MAJOR FACTORS AFFECTING PERFORMANCE? A. Virtually all insurance company stocks performed poorly as rising interest rates hurt financial services companies in general. In the insurance industry, intense price competition among property and casualty companies kept premiums down, while the industry experienced abnormally high damage claims because of natural disasters such as earthquakes, tornadoes and hurricanes. In addition, the lack of merger-and-acquisition activity among life insurance companies disappointed investors. Q. WHAT WERE YOUR PRINCIPAL STRATEGIES? A. For most of the year, I favored health, life and specialty insurers, while avoiding the commodity property and casualty sectors, especially those companies emphasizing personal lines such as automobile and home insurance. While I continued to avoid personal lines insurers, I increased the investments in commercial property and casualty insurers late in the period. Some of their stock prices dropped well below their intrinsic values and I saw signs that companies were gaining more power to raise the premiums they charged. I invested in companies such as Chubb Insurance, which focuses largely on the commercial insurance market, and Marsh & McLennan, a commercial insurance brokerage company. I continued to favor bond insurance companies because of their strong fundamentals. Later in the period, I decreased the weightings in life and health companies, principally because I saw better value in the commercial area and some of the valuations had become stretched based on expectations of acquisitions. Q. WHAT INVESTMENTS PERFORMED RELATIVELY WELL? A. In an otherwise poor year for insurance companies, the best performance came from my investments in high-quality, diversified growth companies such as American International Group, Citigroup and Marsh & McLennan. These large-cap companies demonstrated consistent earnings growth and were in favor in the overall stock market. Q. WHAT WERE YOUR MAJOR DISAPPOINTMENTS? A. Bond insurance companies such as MBIA and Ambac Financial did not perform well. Both are highly interest-rate sensitive and rising rates throughout the year hurt their stock prices. My conviction in these companies did not diminish, however. Their fundamentals actually strengthened during the year as they realized healthy earnings growth and gained improved pricing power. With their stocks trading at extremely attractive valuations, I continued to hold them. Several other companies also performed poorly. UnumProvident Corp. had difficulty with a deficiency in reserves for claims in its disability business. Mutual Risk Management, a Bermuda-based company that helps commercial businesses establish self-insurance programs, also was disappointing. At a time when commercial insurance premiums were very low, businesses had less incentive to use self-insurance programs. Q. WHAT IS YOUR OUTLOOK? A. I am more encouraged about the prospects for insurance stocks than I have been in over a year. The stocks have been trading at extremely low valuations, and I am beginning to see signs that commercial property and casualty companies are gaining greater pricing power. At the same time, I must point out that this sector typically performs poorly when interest rates rise. In addition, insurance company stocks have suffered as investors sold old economy stocks and moved to new economy opportunities in technology. Before insurance company stocks begin to revive, we probably need to see a change in the external factors of rising interest rates and investor fascination with technology stocks. When these factors do change, the insurance sector is poised to perform very well, especially in light of enactment of new financial services industry legislation that should encourage renewed merger-and-acquisition activity. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 045 TRADING SYMBOL: FSPCX SIZE: as of February 29, 2000, more than $29 million MANAGER: Timothy Cohen, since 1999; equity analyst, business and consumer services, 1996-1998; joined Fidelity in 1996 INSURANCE PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 95.2% SHARES VALUE (NOTE 1) CREDIT & OTHER FINANCE - 1.0% Citigroup, Inc. 5,948 $ 307,437 HOLDING COMPANIES - 1.4% PartnerRe Ltd. 13,300 412,300 INSURANCE - 85.7% ACE Ltd. 21,300 380,738 AFLAC, Inc. 42,900 1,568,531 Allmerica Financial Corp. 22,273 929,898 Ambac Financial Group, Inc. 38,700 1,700,381 American General Corp. 25,400 1,325,563 American International Group, 25,537 2,258,423 Inc. Arthur J. Gallagher & Co. 5,700 291,413 Berkshire Hathaway, Inc. 32 1,408,000 Class A (a) CIGNA Corp. 24,900 1,837,931 Commerce Group, Inc. 13,700 409,288 E.W. Blanch Holdings, Inc. 16,600 780,200 Everest Re Group Ltd. (a) 21,900 537,919 Financial Security Assurance 14,900 670,500 Holdings Ltd. Hartford Financial Services 34,300 1,071,875 Group, Inc. Hartford Life, Inc. Class A 14,200 502,325 Horace Mann Educators Corp. 21,300 330,150 Jefferson-Pilot Corp. 11,400 593,513 Lincoln National Corp. 22,200 617,438 Marsh & McLennan Companies, 22,100 1,709,988 Inc. MBIA, Inc. 31,700 1,216,488 MGIC Investment Corp. 7,000 261,625 Mutual Risk Management Ltd. 25,100 345,125 Nationwide Financial 3,500 80,719 Services, Inc. Class A PMI Group, Inc. 11,450 415,778 Protective Life Corp. 12,600 277,200 Reliastar Financial Corp. 22,711 634,489 RenaissanceRe Holdings Ltd. 12,900 488,588 The Chubb Corp. 30,300 1,490,381 Torchmark Corp. 11,800 233,788 UnumProvident Corp. 34,935 467,256 Xl Capital Ltd. 11,400 460,988 25,296,499 MEDICAL FACILITIES MANAGEMENT - - 1.5% Wellpoint Health Networks, 6,400 432,000 Inc. (a) SECURITIES INDUSTRY - 5.6% AXA Financial, Inc. 55,100 1,649,556 TOTAL COMMON STOCKS 28,097,792 (Cost $31,157,980) CASH EQUIVALENTS - 5.1% SHARES VALUE (NOTE 1) Taxable Central Cash Fund, 1,501,763 $ 1,501,763 5.66% (b) (Cost $1,501,763) TOTAL INVESTMENT PORTFOLIO - 29,599,555 100.3% (Cost $32,659,743) NET OTHER ASSETS - (0.3)% $ (78,962) NET ASSETS - 100% $ 29,520,593 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 $63,350,978 and $105,133,071, 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 $6,528 for the period. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $32,719,661. Net unrealized depreciation aggregated $3,120,106, of which $2,859,608 related to appreciated investment securities and $5,979,714 related to depreciated investment securities. The fund hereby designates approximately $14,894,000 as a capital gain dividend for the purpose of the dividend paid deduction. The fund intends to elect to defer to its fiscal year ending February 28, 2001 approximately $383,000 of losses recognized during the period November 1, 1999 to February 29, 2000. A total of 51% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. INSURANCE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 29,599,555 value (cost $32,659,743) - See accompanying schedule Receivable for investments 635,408 sold Receivable for fund shares 159,505 sold Dividends receivable 53,744 Interest receivable 8,242 Redemption fees receivable 181 TOTAL ASSETS 30,456,635 LIABILITIES Payable for fund shares $ 884,880 redeemed Accrued management fee 16,235 Other payables and accrued 34,927 expenses TOTAL LIABILITIES 936,042 NET ASSETS $ 29,520,593 Net Assets consist of: Paid in capital $ 27,857,980 Accumulated undistributed net 4,722,801 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (3,060,188) (depreciation) on investments NET ASSETS, for 1,067,879 $ 29,520,593 shares outstanding NET ASSET VALUE and $27.64 redemption price per share ($29,520,593 (divided by) 1,067,879 shares) Maximum offering price per $28.49 share (100/97.00 of $27.64) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 642,126 Dividends Interest 144,882 Security lending 658 TOTAL INCOME 787,666 EXPENSES Management fee $ 366,679 Transfer agent fees 404,158 Accounting and security 61,095 lending fees Non-interested trustees' 194 compensation Custodian fees and expenses 13,969 Registration fees 25,903 Audit 12,478 Legal 268 Miscellaneous 62 Total expenses before 884,806 reductions Expense reductions (19,336) 865,470 NET INVESTMENT INCOME (LOSS) (77,804) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 9,100,755 Foreign currency transactions 26 9,100,781 Change in net unrealized (18,366,238) appreciation (depreciation) on investment securities NET GAIN (LOSS) (9,265,457) NET INCREASE (DECREASE) IN $ (9,343,261) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 128,554 charges paid to FDC Sales charges - Retained by $ 127,441 FDC Deferred sales charges $ 1,211 withheld by FDC Exchange fees withheld by FSC $ 11,664 Expense reductions Directed $ 19,336 brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (77,804) $ (106,344) income (loss) Net realized gain (loss) 9,100,781 13,198,732 Change in net unrealized (18,366,238) (4,563,684) appreciation (depreciation) NET INCREASE (DECREASE) IN (9,343,261) 8,528,704 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (11,006,673) (11,641,173) from net realized gains Share transactions Net 39,337,528 64,911,861 proceeds from sales of shares Reinvestment of distributions 10,527,687 11,462,296 Cost of shares redeemed (82,991,526) (115,658,850) NET INCREASE (DECREASE) IN (33,126,311) (39,284,693) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 117,358 126,042 TOTAL INCREASE (DECREASE) (53,358,887) (42,271,120) IN NET ASSETS NET ASSETS Beginning of period 82,879,480 125,150,600 End of period $ 29,520,593 $ 82,879,480 OTHER INFORMATION Shares Sold 1,020,932 1,540,455 Issued in reinvestment of 282,466 274,802 distributions Redeemed (2,202,457) (2,821,222) Net increase (decrease) (899,059) (1,005,965)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 42.14 $ 42.10 $ 32.62 $ 26.77 $ 21.31 period Income from Investment Operations Net investment income (loss) C (.05) (.04) .01 .01 .06 Net realized and unrealized (7.92) 4.01 12.93 7.21 6.15 gain (loss) Total from investment (7.97) 3.97 12.94 7.22 6.21 operations Less Distributions From net investment income - - - (.03) (.07) From net realized gain (6.60) (3.98) (3.54) (1.45) (.72) Total distributions (6.60) (3.98) (3.54) (1.48) (.79) Redemption fees added to paid .07 .05 .08 .11 .04 in capital Net asset value, end of period $ 27.64 $ 42.14 $ 42.10 $ 32.62 $ 26.77 TOTAL RETURN A, B (22.12)% 9.84% 42.81% 28.28% 29.51% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 29,521 $ 82,879 $ 125,151 $ 42,367 $ 38,994 (000 omitted) Ratio of expenses to average 1.39% 1.33% 1.45% 1.82% 1.77% net assets Ratio of expenses to average 1.36% D 1.31% D 1.43% D 1.77% D 1.74% D net assets after expense reductions Ratio of net investment (.12)% (.10)% .02% .05% .26% income (loss) to average net assets Portfolio turnover rate 107% 72% 157% 142% 164%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 BIOTECHNOLOGY PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past five year and past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT BIOTECHNOLOGY 173.22% 518.88% 1,302.07% SELECT BIOTECHNOLOGY (LOAD 164.95% 500.24% 1,259.94% ADJ.) S&P 500 11.73% 206.94% 425.47% GS Health Care 3.51% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Health Care Index - a market capitalization-weighted index of 97 stocks designed to measure the performance of companies in the health care sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT BIOTECHNOLOGY 173.22% 43.99% 30.22% SELECT BIOTECHNOLOGY (LOAD 164.95% 43.11% 29.82% ADJ.) S&P 500 11.73% 25.14% 18.05% GS Health Care 3.51% 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 1990/02/28 9700.00 10000.00 1990/03/31 10108.63 10265.00 1990/04/30 10235.91 10008.38 1990/05/31 11676.17 10984.19 1990/06/30 12491.56 10909.50 1990/07/31 12525.43 10874.59 1990/08/31 12139.30 9891.53 1990/09/30 11868.33 9409.81 1990/10/31 11969.95 9369.35 1990/11/30 13419.62 9974.61 1990/12/31 13827.67 10252.90 1991/01/31 15415.71 10699.92 1991/02/28 17600.12 11464.97 1991/03/31 19416.99 11742.42 1991/04/30 18570.97 11770.60 1991/05/31 19749.86 12279.09 1991/06/30 18701.26 11716.71 1991/07/31 20384.81 12262.71 1991/08/31 21813.28 12553.34 1991/09/30 22942.93 12343.69 1991/10/31 25202.24 12509.10 1991/11/30 23518.69 12004.98 1991/12/31 27523.31 13378.35 1992/01/31 26971.64 13129.52 1992/02/29 24900.97 13300.20 1992/03/31 23011.67 13040.85 1992/04/30 20865.42 13424.25 1992/05/31 22361.75 13490.03 1992/06/30 21969.26 13289.02 1992/07/31 23117.71 13832.55 1992/08/31 21671.82 13548.98 1992/09/30 21597.46 13708.86 1992/10/31 22655.02 13756.84 1992/11/30 24885.82 14225.94 1992/12/31 24676.51 14400.92 1993/01/31 23408.38 14521.89 1993/02/28 19630.03 14719.39 1993/03/31 19925.35 15029.97 1993/04/30 20437.82 14666.24 1993/05/31 21758.07 15059.30 1993/06/30 21888.35 15102.97 1993/07/31 21167.43 15042.56 1993/08/31 21966.53 15612.67 1993/09/30 22869.86 15492.45 1993/10/31 24572.28 15813.15 1993/11/30 24381.20 15662.92 1993/12/31 24850.23 15852.44 1994/01/31 25701.45 16391.43 1994/02/28 23981.65 15947.22 1994/03/31 21558.29 15251.92 1994/04/30 21167.43 15447.15 1994/05/31 20811.31 15700.48 1994/06/30 19986.15 15315.82 1994/07/31 20038.27 15818.18 1994/08/31 21914.41 16466.72 1994/09/30 21844.93 16063.29 1994/10/31 21097.94 16424.71 1994/11/30 20707.08 15826.52 1994/12/31 20333.59 16061.23 1995/01/31 21245.60 16477.70 1995/02/28 21975.21 17119.83 1995/03/31 22331.33 17625.04 1995/04/30 23026.20 18144.10 1995/05/31 23234.66 18869.32 1995/06/30 24077.19 19307.65 1995/07/31 25154.24 19947.89 1995/08/31 26161.80 19997.96 1995/09/30 27334.39 20841.88 1995/10/31 27117.24 20767.47 1995/11/30 28020.57 21679.16 1995/12/31 30317.42 22096.70 1996/01/31 32110.52 22848.87 1996/02/29 31858.10 23060.68 1996/03/31 31353.24 23282.76 1996/04/30 32030.18 23625.95 1996/05/31 32403.97 24235.26 1996/06/30 30446.03 24327.60 1996/07/31 28212.19 23252.80 1996/08/31 29511.56 23743.20 1996/09/30 31238.11 25079.47 1996/10/31 30152.34 25771.16 1996/11/30 30330.33 27719.21 1996/12/31 32017.78 27170.09 1997/01/31 33485.22 28867.68 1997/02/28 33721.59 29094.00 1997/03/31 30245.03 27898.53 1997/04/30 28918.51 29564.07 1997/05/31 32594.84 31363.93 1997/06/30 33448.64 32769.03 1997/07/31 33649.53 35376.46 1997/08/31 33880.56 33394.67 1997/09/30 38340.38 35223.70 1997/10/31 36944.17 34047.23 1997/11/30 36291.27 35623.28 1997/12/31 36907.99 36234.93 1998/01/31 37214.23 36635.68 1998/02/28 39153.77 39277.85 1998/03/31 40753.04 41289.27 1998/04/30 39135.97 41704.64 1998/05/31 37799.73 40987.74 1998/06/30 37835.85 42652.66 1998/07/31 38449.79 42198.41 1998/08/31 32514.99 36097.36 1998/09/30 37956.23 38409.76 1998/10/31 40508.31 41534.01 1998/11/30 42133.46 44051.38 1998/12/31 47875.65 46589.63 1999/01/31 50668.50 48538.00 1999/02/28 49777.67 47029.44 1999/03/31 52221.42 48911.09 1999/04/30 48044.36 50805.42 1999/05/31 49927.51 49605.90 1999/06/30 54007.66 52359.03 1999/07/31 59053.52 50724.38 1999/08/31 65801.46 50473.29 1999/09/30 60490.02 49089.82 1999/10/31 63532.03 52196.23 1999/11/30 68903.82 53257.37 1999/12/31 85110.04 56394.23 2000/01/31 98726.64 53560.99 2000/02/29 135994.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000313 085407 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Biotechnology Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $135,994 - a 1,259.94% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Immunex Corp. 7.8 Millennium Pharmaceuticals, 4.7 Inc. Alkermes, Inc. 4.6 IDEC Pharmaceuticals Corp. 4.6 Human Genome Sciences, Inc. 4.6 Medimmune, Inc. 4.4 Amgen, Inc. 4.0 Biogen, Inc. 3.8 Protein Design Labs, Inc. 3.7 Affymetrix, Inc. 3.6 45.8 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Drugs & Pharmaceuticals 85.1% Row: 1, Col: 6, Value: 85.09999999999999 Computer Services & Software 3.8% Row: 1, Col: 5, Value: 3.8 Medical Facilities Management 0.3% Row: 1, Col: 4, Value: 0.03000000000000001 Medical Equipment & Supplies 0.2% Row: 1, Col: 3, Value: 0.2 Electronic Instruments 0.0% Row: 1, Col: 2, Value: 0.0 *All Others 10.6% Row: 1, Col: 1, Value: 10.6
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. BIOTECHNOLOGY PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Rajiv Kaul)(photograph of Yolanda McGettigan) NOTE TO SHAREHOLDERS: The following is an interview with Rajiv Kaul (left), who managed Fidelity Select Biotechnolgy Portfolio for most of the period covered by this report, with additional comments from Yolanda McGettigan, who became manager of the fund on February 1, 2000. Q. HOW DID THE FUND PERFORM, RAJIV? R.K. For the 12-month period that ended February 29, 2000, the fund returned 173.22%, significantly outperforming the Goldman Sachs Health Care Index - an index of 97 stocks designed to measure the performance of companies in the health care sector - which returned 3.51%. The fund also compares its performance to the Standard & Poor's 500 Index, which returned 11.73% during the same time period. Q. WHAT WERE THE REASONS FOR THE FUND'S STRONG PERFORMANCE? R.K. Biotechnology stocks performed strongly as they began to reap the rewards of their drug research and development. Many companies made breakthroughs in launching new drugs or got much closer to releasing new products to the market. Biotechnology companies also were seen as potential takeover targets by large pharmaceutical companies seeking to fill out their diminishing product pipelines. During the year, the fund continued to focus not so much on the hyped stories, but on those companies with existing products or the prospects of new product cycles. The fund also benefited from its focus on companies with strong business fundamentals. Q. HOW DID GENOMICS COMPANIES DO? R.K. Investor enthusiasm over genomics resulted in stellar performance during the year. Genomics, or the decoding of the human genetic code, has the potential to produce new drugs that are very effective and profitable. By targeting specific diseases and treatments more quickly, it also may reduce the time spent in development, saving money. Genomics companies made significant progress during the year in their efforts to map the human gene, leading to pinpointing genetic differences of specific diseases and developing new, targeted treatments. Q. WHICH STOCKS HELPED THE FUND'S PERFORMANCE? R.K. Immunex, the fund's top holding at the end of the period, launched a blockbuster drug, Enbrel, used in the treatment of rheumatoid arthritis. With no real competition for its lead drug and a second drug in the pipeline, the company's momentum was very strong and its stock did well. Medimmune, another top holding, also had a very good year, launching its new drug, Synagis, a vaccine used in the prevention of respiratory disease in premature infants. Affymetrix, a maker of chips used for DNA analysis and genomics testing, had an excellent year. Its superior technology propelled demand for its product, and it performed well. Q. WHICH STOCKS HURT THE FUND? R.K. Although pharmaceutical companies had solid fundamentals, they continued to face difficulties during the year. Rising interest rates, products coming off of patent protection, few big product launches and pending health care legislation all caused investors to be concerned about the prospects for good performance. Fund holdings Schering-Plough, Merck and Eli Lilly were all hurt by these factors. Q. TURNING TO YOU, YOLANDA, WHERE DO YOU SEE OPPORTUNITIES NOW? Y.M. I'm positioning the fund to capitalize on the strong fundamentals of biotechnology drugs currently on the market, as well as the potential for products in the late stage of development. The fund's focus is on established biotechnology companies and companies facilitating the process of drug development - both within genomics and drug technology platforms. Both types of companies should enable other biotechnology firms to develop drugs in a more focused, expedited fashion, with improved odds of success. That said, the risks inherent within the biotechnology industry are significant. Because of this, the fund tends to avoid companies with products in the early stage of development, where the probability of success can be as low as 20%. Q. WHAT'S YOUR OUTLOOK? Y.M. I'm very optimistic. The environment for biotechnology companies should continue to be favorable. Currently, there are approximately 750 drugs in clinical testing - up from 200 in 1994 - including approximately 180 in late-stage development. This could translate into 70 new biotechnology drugs reaching the market by 2005. Additionally, the fruits of the Human Genome Project, whose goal is to map the human gene sequence, is scheduled to be completed this April. This could potentially lead to more accurate and faster drug development. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 042 TRADING SYMBOL: FBIOX SIZE: as of February 29, 2000, more than $5.2 billion MANAGER: Yolanda McGettigan, since February 2000; manager, Fidelity Select Banking Portfolio, 1999-January 2000; Fidelity Select Construction and Housing Portfolio, 1997-1999; joined Fidelity in 1997 BIOTECHNOLOGY PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets
COMMON STOCKS - 89.4% SHARES VALUE (NOTE 1) COMPUTER SERVICES & SOFTWARE - - 3.8% Affymetrix, Inc. (a) 666,450 $ 193,020,581 Healtheon/Web Maryland Corp. 200,000 11,062,500 MatrixOne, Inc. 1,300 32,500 Onvia.com, Inc. 3,600 75,600 204,191,181 DRUGS & PHARMACEUTICALS - 85.1% Abgenix, Inc. (a) 63,400 20,422,725 Advanced Tissue Sciences, 216,000 1,647,000 Inc. (a) Alkermes, Inc. (a) 1,272,400 244,141,750 Allergan, Inc. 1,106,500 55,670,781 Alliance Pharmaceutical Corp. 754,300 13,577,400 (a) ALZA Corp. Class A. (a) 3,155,900 115,782,081 Amgen, Inc. (a) 3,087,500 210,528,906 Amylin Pharmaceuticals, Inc. 795,900 11,341,575 (a) Anesta Corp. (a) 288,500 6,419,125 Ariad Pharmaceuticals, Inc. 187,500 4,921,875 (a) Aviron (a) 40,100 1,626,556 AXYS Pharmaceuticals, Inc. (a) 377,700 6,043,200 Bio-Technology General Corp. 25,000 480,469 (a) Biochem Pharma, Inc. (a) 1,824,300 47,822,434 BioCryst Pharmaceuticals, 182,300 4,922,100 Inc. (a) Biogen, Inc. (a) 1,870,000 201,843,125 Biora AB sponsored ADR (a) 34,700 425,075 Biotransplant, Inc. (a) 273,100 5,188,900 Celgene Corp. (a) 200,040 33,106,620 Cell Genesys, Inc. (a) 500,000 19,437,500 Cellegy Pharmaceuticals, Inc. 286,100 1,984,819 (a) Cephalon, Inc. (a) 646,600 42,978,694 Cerus Corp. (a) 127,000 6,127,750 Chiron Corp. (a) 3,309,700 165,485,000 COR Therapeutics, Inc. (a)(c) 1,645,290 147,459,116 Creative Biomolecules, Inc. 409,800 7,888,650 (a) CV Therapeutics, Inc. (a) 550,400 35,500,800 CYTOGEN Corp. (a) 654,500 11,453,750 Cytyc Corp. (a) 679,700 31,266,200 Emisphere Technologies, Inc. 199,300 11,173,256 (a) Enzo Biochem, Inc. (a) 523,200 41,463,600 Enzon, Inc. (a) 25,000 1,450,000 Epitope, Inc. (a) 60,000 712,500 GelTex Pharmaceuticals, Inc. 160,000 3,510,000 (a) Genelabs Technologies, Inc. 718,700 7,726,025 (a) Genentech, Inc. 775,200 149,516,700 Genome Therapeutics Corp. (a) 108,900 5,390,550 Genzyme Corp. - General 3,150,300 180,945,356 Division Genzyme Transgenics Corp. (a) 207,700 9,242,650 Gilead Sciences, Inc. (a) 860,745 65,846,993 Guilford Pharmaceuticals, 137,500 4,554,688 Inc. (a) Human Genome Sciences, Inc. 1,106,400 241,471,800 (a) ICOS Corp. (a) 492,800 25,810,400 IDEC Pharmaceuticals Corp. (a) 1,715,980 241,738,683 SHARES VALUE (NOTE 1) IGEN International, Inc. (a) 85,000 $ 2,358,750 Ilex Oncology, Inc. (a) 346,500 16,761,938 Imclone Systems, Inc. (a) 775,800 101,678,288 Immune Response Corp. (a) 200,000 3,100,000 Immunex Corp. (a) 2,077,750 410,225,761 Immunomedics, Inc. (a) 844,900 24,607,713 Incara Pharmaceuticals Corp. 61,600 246,400 (a) Incyte Pharmaceuticals, Inc. 334,900 92,285,881 (a) Inhale Therapeutic Systems, 838,100 84,857,625 Inc. (a) Interneuron Pharmaceuticals, 1,591,600 6,465,875 Inc. (a) Isis Pharmaceuticals Co. (a) 338,080 4,775,380 King Pharmaceuticals, Inc. (a) 125,409 5,980,442 Kos Pharmaceuticals, Inc. (a) 90,000 1,710,000 Ligand Pharmaceuticals, Inc. 797,500 17,345,625 Class B (a) Liposome, Inc. (a) 435,800 5,856,063 Magainin Pharmaceuticals, 112,000 805,000 Inc. (a) Martek Biosciences (a) 157,000 1,766,250 Matritech, Inc. (a) 77,500 823,438 Matrix Pharmaceutical, Inc. 60,000 1,042,500 (a) Medarex, Inc. (a) 612,500 99,531,250 Medimmune, Inc. (a) 1,171,100 232,463,350 Merck & Co., Inc. 1,647,600 101,430,375 Millennium Pharmaceuticals, 962,000 250,240,250 Inc. (a) Miravant Medical Technologies 160,800 4,482,300 (a) Myriad Genetics, Inc. (a) 150,800 23,298,600 Nabi (a) 481,400 5,295,400 Neurogen Corp. (a) 50,800 2,146,300 North American Vaccine, Inc. 473,900 2,636,069 (a) Northfield Laboratories, Inc. 44,500 990,125 (a) Noven Pharmaceuticals, Inc. 294,000 4,244,625 (a) NPS Pharmaceuticals, Inc. (a) 237,900 6,467,906 Organogenesis, Inc. (a) 161,900 2,428,500 OSI Pharmaceuticals, Inc. (a) 349,700 9,813,456 OXiGENE, Inc. (a) 181,300 4,226,556 PE Corp. - Celera Genomics 23,900 5,831,600 Group (a) Protein Design Labs, Inc. (a) 776,200 194,195,538 Regeneron Pharmaceuticals, 73,500 4,152,750 Inc. (a) Sangstat Medical Corp. (a) 392,300 16,966,975 Schering-Plough Corp. 2,721,200 94,901,850 Scios, Inc. (a) 247,500 1,980,000 Sepracor, Inc. (a) 1,107,400 112,262,675 Serologicals Corp. (a) 120,000 1,350,000 SICOR, Inc. (a) 1,375,500 13,669,031 Synaptic Pharmaceutical Corp. 17,500 227,500 (a) Titan Pharmaceuticals, Inc. 286,000 14,371,500 (a) Tularik, Inc. 28,800 2,271,600 Vertex Pharmaceuticals, Inc. 431,300 31,323,163 (a) Vical, Inc. (a) 312,300 18,445,219 ViroPharma, Inc. (a) 50,600 4,737,425 Vivus, Inc. (a) 229,300 1,318,475 XOMA Ltd. (a) 580,000 5,365,000 4,501,805,469 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRONIC INSTRUMENTS - 0.0% PE Corp. - Biosystems Group 80 $ 8,440 MEDICAL EQUIPMENT & SUPPLIES - - 0.2% Cygnus, Inc. (a) 517,900 9,548,781 Lifecore Biomedical, Inc. (a) 145,000 1,585,938 11,134,719 MEDICAL FACILITIES MANAGEMENT - - 0.3% Cryolife, Inc. (a) 147,500 2,931,563 Neurocrine Biosciences, Inc. 320,600 11,862,200 (a) 14,793,763 TOTAL COMMON STOCKS 4,731,933,572 (Cost $2,613,002,015) CASH EQUIVALENTS - 16.0% Central Cash Collateral Fund, 198,730,000 198,730,000 5.75% (b) Taxable Central Cash Fund, 646,134,398 646,134,398 5.66% (b) TOTAL CASH EQUIVALENTS 844,864,398 (Cost $844,864,398) TOTAL INVESTMENT PORTFOLIO - 5,576,797,970 105.4% (Cost $3,457,866,413) NET OTHER ASSETS - (5.4)% (284,448,139) NET ASSETS - 100% $ 5,292,349,831
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 $2,910,540,673 and $980,687,244, 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 $35,822 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $203,820,792. The fund received cash collateral of $198,730,000 which was invested in cash equivalents. Transactions during the period with companies which are or were affiliates are as follows:
PURCHASE SALES DIVIDEND VALUE AFFILIATE COST COST INCOME COR Therapeutics, Inc . $ 28,846,298 $ - $ - $147,459,116 CV Therapeutics, Inc. 1,112,287 4,019,061 - - Cellegy Pharmaceuticals, Inc. - 608,231 - - TOTALS $ 29,958,585 $ 4,627,292 $ - $147,459,116
INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $3,476,188,293. Net unrealized appreciation aggregated $2,100,609,677, of which $2,173,436,275 related to appreciated investment securities and $72,826,598 related to depreciated investment securities. The fund hereby designates approximately $42,369,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 5% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. BIOTECHNOLOGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 5,576,797,970 value (cost $3,457,866,413) - - See accompanying schedule Receivable for investments 711,865 sold Receivable for fund shares 119,261,929 sold Dividends receivable 88,523 Interest receivable 2,072,959 Redemption fees receivable 33,086 Other receivables 323,633 TOTAL ASSETS 5,699,289,965 LIABILITIES Payable for investments $ 189,676,622 purchased Payable for fund shares 15,044,158 redeemed Accrued management fee 1,826,902 Other payables and accrued 1,662,452 expenses Collateral on securities 198,730,000 loaned, at value TOTAL LIABILITIES 406,940,134 NET ASSETS $ 5,292,349,831 Net Assets consist of: Paid in capital $ 3,076,550,646 Accumulated undistributed net 96,867,628 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 2,118,931,557 (depreciation) on investments NET ASSETS, for 49,338,604 $ 5,292,349,831 shares outstanding NET ASSET VALUE and $107.27 redemption price per share ($5,292,349,831 (divided by) 49,338,604 shares) Maximum offering price per $110.59 share (100/97.00 of $107.27) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 1,751,135 Dividends Interest 6,000,755 Security lending 489,956 TOTAL INCOME 8,241,846 EXPENSES Management fee $ 7,618,538 Transfer agent fees 5,822,443 Accounting and security 738,739 lending fees Non-interested trustees' 6,536 compensation Custodian fees and expenses 51,062 Registration fees 796,582 Audit 35,382 Legal 3,522 Miscellaneous 689 Total expenses before 15,073,493 reductions Expense reductions (155,224) 14,918,269 NET INVESTMENT INCOME (LOSS) (6,676,423) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 163,240,264 (including realized loss of $967,563 on sales of investments in affiliated issuers) Foreign currency transactions 11,968 163,252,232 Change in net unrealized appreciation (depreciation) on: Investment securities 1,933,492,335 Assets and liabilities in (645) 1,933,491,690 foreign currencies NET GAIN (LOSS) 2,096,743,922 NET INCREASE (DECREASE) IN $ 2,090,067,499 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 23,234,295 charges paid to FDC Sales charges - Retained by $ 23,232,011 FDC Deferred sales charges $ 19,543 withheld by FDC Exchange fees withheld by FSC $ 40,194 Expense reductions $ 144,324 Directed brokerage arrangements Custodian credits 5,783 Transfer agent credits 5,117 $ 155,224
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (6,676,423) $ (4,327,543) income (loss) Net realized gain (loss) 163,252,232 2,585,385 Change in net unrealized 1,933,491,690 152,855,134 appreciation (depreciation) NET INCREASE (DECREASE) IN 2,090,067,499 151,112,976 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (60,923,524) (33,971,527) from net realized gains Share transactions Net 3,361,002,098 320,529,357 proceeds from sales of shares Reinvestment of distributions 58,575,624 33,062,818 Cost of shares redeemed (900,425,402) (309,253,094) NET INCREASE (DECREASE) IN 2,519,152,320 44,339,081 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 2,524,013 507,092 TOTAL INCREASE (DECREASE) 4,550,820,308 161,987,622 IN NET ASSETS NET ASSETS Beginning of period 741,529,523 579,541,901 End of period $ 5,292,349,831 $ 741,529,523 OTHER INFORMATION Shares Sold 45,451,966 9,105,791 Issued in reinvestment of 1,100,383 970,436 distributions Redeemed (15,147,699) (8,928,498) Net increase (decrease) 31,404,650 1,147,729
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 F 1999 1998 1997 1996 F SELECTED PER-SHARE DATA Net asset value, beginning of $ 41.35 $ 34.52 $ 34.24 $ 36.60 $ 25.30 period Income from Investment Operations Net investment income (loss) C (.30) (.26) (.27) (.20) .11 Net realized and unrealized 68.93 9.15 5.20 1.89 11.21 gain (loss) Total from investment 68.63 8.89 4.93 1.69 11.32 operations Less Distributions From net investment income - - - (.03) (.07) From net realized gain (2.82) (2.09) (4.71) (4.06) - Total distributions (2.82) (2.09) (4.71) (4.09) (.07) Redemption fees added to paid .11 .03 .06 .04 .05 in capital Net asset value, end of period $ 107.27 $ 41.35 $ 34.52 $ 34.24 $ 36.60 TOTAL RETURN A, B 173.22% 27.13% 16.11% 5.85% 44.97% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 5,292,350 $ 741,530 $ 579,542 $ 674,902 $ 1,096,864 (000 omitted) Ratio of expenses to average 1.16% 1.34% 1.49% 1.57% 1.44% D net assets Ratio of expenses to average 1.15% E 1.30% E 1.47% E 1.56% E 1.43% E net assets after expense reductions Ratio of net investment (.51)% (.75)% (.81)% (.59)% .35% income (loss) to average net assets Portfolio turnover rate 72% 86% 162% 41% 67%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR AGREED TO REIMBURSE A PORTION OF THE FUND'S EXPENSES DURING THE PERIOD. WITHOUT THIS REIMBURSEMENT, THE FUND'S EXPENSE RATIO WOULD HAVE BEEN HIGHER. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR THE YEAR ENDED FEBRUARY 29 HEALTH CARE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT HEALTH CARE 1.15% 195.33% 698.52% SELECT HEALTH CARE (LOAD ADJ.) -1.96% 186.40% 674.49% S&P 500 11.73% 206.94% 425.47% GS Health Care 3.51% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Health Care Index - a market capitalization-weighted index of 97 stocks designed to measure the performance of companies in the health care sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT HEALTH CARE 1.15% 24.18% 23.09% SELECT HEALTH CARE (LOAD ADJ.) -1.96% 23.42% 22.72% S&P 500 11.73% 25.14% 18.05% GS Health Care 3.51% 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 1990/02/28 9700.00 10000.00 1990/03/31 10086.86 10265.00 1990/04/30 10086.86 10008.38 1990/05/31 11474.76 10984.19 1990/06/30 11865.74 10909.50 1990/07/31 12029.56 10874.59 1990/08/31 11490.31 9891.53 1990/09/30 11144.46 9409.81 1990/10/31 11399.30 9369.35 1990/11/30 12612.04 9974.61 1990/12/31 12928.18 10252.90 1991/01/31 14204.40 10699.92 1991/02/28 15958.90 11464.97 1991/03/31 17381.54 11742.42 1991/04/30 17078.95 11770.60 1991/05/31 18006.23 12279.09 1991/06/30 17194.29 11716.71 1991/07/31 18715.72 12262.71 1991/08/31 19650.99 12553.34 1991/09/30 20046.97 12343.69 1991/10/31 21367.81 12509.10 1991/11/30 20200.68 12004.98 1991/12/31 23748.09 13378.35 1992/01/31 22968.92 13129.52 1992/02/29 21965.95 13300.20 1992/03/31 20625.89 13040.85 1992/04/30 19457.13 13424.25 1992/05/31 19857.77 13490.03 1992/06/30 19092.37 13289.02 1992/07/31 20240.90 13832.55 1992/08/31 19694.98 13548.98 1992/09/30 18331.66 13708.86 1992/10/31 18895.48 13756.84 1992/11/30 19930.65 14225.94 1992/12/31 19607.79 14400.92 1993/01/31 18554.73 14521.89 1993/02/28 16574.72 14719.39 1993/03/31 17031.89 15029.97 1993/04/30 17025.58 14666.24 1993/05/31 17706.60 15059.30 1993/06/30 17643.55 15102.97 1993/07/31 17069.72 15042.56 1993/08/31 17678.23 15612.67 1993/09/30 18229.98 15492.45 1993/10/31 19585.72 15813.15 1993/11/30 19519.51 15662.92 1993/12/31 20081.64 15852.44 1994/01/31 20479.36 16391.43 1994/02/28 19983.79 15947.22 1994/03/31 18680.16 15251.92 1994/04/30 19429.56 15447.15 1994/05/31 20526.90 15700.48 1994/06/30 20201.18 15315.82 1994/07/31 20605.96 15818.18 1994/08/31 23309.78 16466.72 1994/09/30 23477.39 16063.29 1994/10/31 23803.11 16424.71 1994/11/30 24318.58 15826.52 1994/12/31 24390.89 16061.23 1995/01/31 25682.78 16477.70 1995/02/28 26227.10 17119.83 1995/03/31 26940.22 17625.04 1995/04/30 27315.73 18144.10 1995/05/31 27578.91 18869.32 1995/06/30 28974.48 19307.65 1995/07/31 30633.23 19947.89 1995/08/31 30892.95 19997.96 1995/09/30 32624.43 20841.88 1995/10/31 32704.07 20767.47 1995/11/30 34082.33 21679.16 1995/12/31 35577.74 22096.70 1996/01/31 36850.33 22848.87 1996/02/29 36635.19 23060.68 1996/03/31 36762.82 23282.76 1996/04/30 36608.91 23625.95 1996/05/31 37273.02 24235.26 1996/06/30 37299.43 24327.60 1996/07/31 35842.93 23252.80 1996/08/31 37057.94 23743.20 1996/09/30 39608.72 25079.47 1996/10/31 38831.41 25771.16 1996/11/30 40918.06 27719.21 1996/12/31 41077.79 27170.09 1997/01/31 43557.96 28867.68 1997/02/28 44113.41 29094.00 1997/03/31 41693.52 27898.53 1997/04/30 43774.31 29564.07 1997/05/31 47108.23 31363.93 1997/06/30 50612.75 32769.03 1997/07/31 52503.36 35376.46 1997/08/31 48846.66 33394.67 1997/09/30 51876.23 35223.70 1997/10/31 51857.78 34047.23 1997/11/30 53310.32 35623.28 1997/12/31 53872.10 36234.93 1998/01/31 57748.43 36635.68 1998/02/28 60202.21 39277.85 1998/03/31 62343.98 41289.27 1998/04/30 63525.52 41704.64 1998/05/31 63144.74 40987.74 1998/06/30 66898.17 42652.66 1998/07/31 67099.45 42198.41 1998/08/31 60131.11 36097.36 1998/09/30 67104.89 38409.76 1998/10/31 69095.84 41534.01 1998/11/30 72044.19 44051.38 1998/12/31 76112.43 46589.63 1999/01/31 76969.44 48538.00 1999/02/28 76574.33 47029.44 1999/03/31 77626.11 48911.09 1999/04/30 73065.28 50805.42 1999/05/31 71851.49 49605.90 1999/06/30 75163.88 52359.03 1999/07/31 73178.72 50724.38 1999/08/31 75027.75 50473.29 1999/09/30 68300.89 49089.82 1999/10/31 73195.73 52196.23 1999/11/30 75180.89 53257.37 1999/12/31 73921.11 56394.23 2000/01/31 78493.07 53560.99 2000/02/29 77449.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000313 085011 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Health Care Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $77,449 - a 674.49% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Warner-Lambert Co. 9.9 Bristol-Myers Squibb Co. 7.3 Eli Lilly & Co. 5.8 Amgen, Inc. 5.2 Medtronic, Inc. 5.1 Merck & Co., Inc. 4.8 American Home Products Corp. 4.6 Johnson & Johnson 4.2 Schering-Plough Corp. 4.0 Immunex Corp. 3.7 54.6 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Drugs & Pharmaceuticals 64.9% Row: 1, Col: 6, Value: 64.90000000000001 Medical Equipment & Supplies 20.9% Row: 1, Col: 5, Value: 20.9 Medical Facilities Management 4.0% Row: 1, Col: 4, Value: 4.0 Insurance 1.7% Row: 1, Col: 3, Value: 1.7 Electronic Instruments 1.7% Row: 1, Col: 2, Value: 1.7 *All Others 6.8% Row: 1, Col: 1, Value: 6.8
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. HEALTH CARE PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Ramin Arani) Ramin Arani, Portfolio Manager of Fidelity Select Health Care Portfolio Q. HOW DID THE FUND PERFORM, RAMIN? A. For the 12 months that ended February 29, 2000, the fund returned 1.15%. By comparison, the Goldman Sachs Health Care Index - an index of 97 stocks designed to measure the performance of companies in the health care sector - returned 3.51%. During the same period, the Standard & Poor's 500 Index returned 11.73%. Q. WHY DID THE FUND UNDERPERFORM BOTH THE GOLDMAN SACHS INDEX AND THE S&P 500 INDEX DURING THE PERIOD? A. During the first six months of the period, the fund's overweighted position in pharmaceutical stocks - relative to the Goldman Sachs index - hurt performance as these stocks fell out of favor. Later in the year, the fund reduced its weighting in pharmaceutical stocks and added some high-flying biotechnology names. Unfortunately, this transition was not enough to boost the fund's 12-month returns over that of the Goldman Sachs index or the S&P 500. Q. WHY DID PHARMACEUTICAL STOCKS UNDERPERFORM? A. The earnings growth rate for the pharmaceutical industry had been incredibly robust during the past couple of years, mostly due to U.S. Food and Drug Administration reforms that resulted in a significant amount of new product approvals. During the past year, however, investors began to realize that this pace of product approvals was unsustainable and that the earnings growth rate for pharmaceutical companies was likely peaking in 1999. At that point, drug stocks started losing their luster. On top of that, the stocks suffered from political concerns, including fears about passage of a universal Medicare drug benefit and the possibility that it could lead to price controls. Q. YOU MENTIONED THE STRONG PERFORMANCE OF BIOTECH STOCKS. SPECIFICALLY, WHY DID THEY DO SO WELL? A. In 1999, biotech companies began reporting very good data from their clinical trials for new products and, by and large, these stocks trade relative to the quality of their clinical data. Promising new products caused their earnings growth rates to accelerate - and, many times, to exceed analysts' expectations. In turn, investors flocked to biotech stocks in droves late in the year, especially as the pharmaceutical sector struggled. Q. WHICH INDIVIDUAL STOCKS DETRACTED THE MOST FROM PERFORMANCE? A. Some of the fund's large pharmaceutical holdings, such as Eli Lilly and Schering-Plough, hurt returns. These stocks were dragged down by the aforementioned issues that pressured the pharmaceutical group as a whole, but company-specific concerns also played a part in their underperformance. In addition, the fund held a few large positions in health care service stocks, such as Cardinal Health, that fell under extreme pressures due to concerns about the sustainability of their earnings growth rates. Q. WHICH OF THE FUND'S LARGE HOLDINGS PERFORMED WELL OVER THE PAST YEAR? A. Warner-Lambert, the fund's largest holding at the end of the period, helped performance because the company was the target of a takeover battle between American Home Products and Pfizer. Pfizer ultimately signed a contract to acquire Warner-Lambert, but the ensuing battle drove the stock price to record highs. The biggest winner on the biotech side was Amgen. The company reported strong sales growth in its core products, while also reporting good data from its clinical trials and the promise to launch several new drugs over the next few years. Stocks such as Affymetrix, a developer of genetic technology, and Millennium Pharmaceuticals also did well as those companies generated strong earnings growth during the period. Q. WHAT'S YOUR OUTLOOK? A. Health care stocks are driven by relative earnings growth. Given that the outlook for earnings growth in health care stocks is pretty stable, the growth rate of the S&P 500 must decelerate for health care issues to really outperform. I don't think I can predict the future of the S&P 500, but I believe that a 20% growth rate for that index will become unsustainable at some point. Therefore, I believe health care stocks could generate strong relative returns when growth of the broader market slows. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 063 TRADING SYMBOL: FSPHX SIZE: as of February 29, 2000, more than $2.3 billion MANAGER: Ramin Arani, since 1999; manager, Fidelity Select Retailing Portfolio 1997-1999; equity research associate, 1992-1996; joined Fidelity in 1992 HEALTH CARE PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 94.9% SHARES VALUE (NOTE 1) COMPUTER SERVICES & SOFTWARE - - 1.5% Affymetrix, Inc. (a) 58,900 $ 17,058,913 Healtheon/Web Maryland Corp. 127,700 7,063,406 IMS Health, Inc. 588,100 11,835,513 MatrixOne, Inc. 600 15,000 Onvia.com, Inc. 1,700 35,700 36,008,532 DRUGS & PHARMACEUTICALS - 64.9% Allergan, Inc. 446,060 22,442,394 ALZA Corp. Class A. (a) 147,700 5,418,744 American Home Products Corp. 2,494,300 108,502,050 Amgen, Inc. (a) 1,810,900 123,480,744 Andrx Corp. (a) 97,500 9,366,094 Bausch & Lomb, Inc. 231,400 12,206,350 Biochem Pharma, Inc. (a) 7,200 188,742 Biogen, Inc. (a) 415,200 44,815,650 Biovail Corp. International 142,900 9,271,347 (a) Bristol-Myers Squibb Co. 3,028,800 172,073,700 Celgene Corp. (a) 79,100 13,091,050 Cephalon, Inc. (a) 329,781 21,920,131 Chiron Corp. (a) 488,500 24,425,000 Eli Lilly & Co. 2,304,352 136,964,922 Enzon, Inc. (a) 91,200 5,289,600 Forest Laboratories, Inc. (a) 349,900 23,902,544 Genentech, Inc. 8,400 1,620,150 Genzyme Corp. - General 163,500 9,391,031 Division Gilead Sciences, Inc. (a) 123,500 9,447,750 Human Genome Sciences, Inc. 82,500 18,005,625 (a) IDEC Pharmaceuticals Corp. (a) 175,984 24,791,746 Immunex Corp. (a) 447,500 88,353,281 Medicis Pharmaceutical Corp. 104,900 5,290,894 Class A (a) Medimmune, Inc. (a) 197,400 39,183,900 Merck & Co., Inc. 1,855,300 114,216,906 Millennium Pharmaceuticals, 98,400 25,596,300 Inc. (a) PE Corp. - Celera Genomics 10,800 2,635,200 Group (a) Pfizer, Inc. 1,719,100 55,226,088 Pharmacia & Upjohn, Inc. 463,400 22,069,425 Protein Design Labs, Inc. (a) 69,800 17,463,088 QLT PhotoTherapeutics, Inc. 38,300 2,734,582 (a) Schering-Plough Corp. 2,673,800 93,248,775 Sepracor, Inc. (a) 289,400 29,337,925 SuperGen, Inc. (a) 45,900 2,825,719 Warner-Lambert Co. 2,737,000 234,184,559 Watson Pharmaceuticals, Inc. 156,400 6,256,000 (a) 1,535,238,006 SHARES VALUE (NOTE 1) ELECTRONIC INSTRUMENTS - 1.7% Beckman Coulter, Inc. 45,800 $ 2,204,125 PE Corp. - Biosystems Group 234,400 24,729,200 Waters Corp. (a) 121,700 11,934,206 38,867,531 INSURANCE - 1.7% CIGNA Corp. 544,100 40,161,381 MEDICAL EQUIPMENT & SUPPLIES - - 20.9% Abbott Laboratories 2,594,600 84,973,150 Allscripts, Inc. 1,500 103,500 AmeriSource Health Corp. 53,100 773,269 Class A (a) Baxter International, Inc. 779,100 42,460,950 Becton, Dickinson & Co. 556,000 17,270,750 Biomet, Inc. 458,600 15,133,800 C.R. Bard, Inc. 300 11,850 Cardinal Health, Inc. 687,905 28,376,081 Guidant Corp. (a) 874,420 58,914,048 Johnson & Johnson 1,373,515 98,549,701 Mallinckrodt, Inc. 2,000 49,250 Medtronic, Inc. 2,511,672 121,659,113 Patterson Dental Co. (a) 61,000 2,197,906 Resmed, Inc. (a) 55,000 4,104,375 Stryker Corp. 107,700 6,300,450 Sybron International, Inc. (a) 378,200 10,589,600 VISX, Inc. (a) 70,000 1,185,625 492,653,418 MEDICAL FACILITIES MANAGEMENT - - 4.0% Columbia/HCA Healthcare Corp. 1,402,100 27,078,056 Express Scripts, Inc. Class A 315,100 14,514,294 (a) Lincare Holdings, Inc. (a) 227,500 5,332,031 Oxford Health Plans, Inc. (a) 223,300 3,447,194 Trigon Healthcare, Inc. (a) 181,700 5,803,044 United HealthCare Corp. 482,800 24,683,150 Wellpoint Health Networks, 212,000 14,310,000 Inc. (a) 95,167,769 SERVICES - 0.2% Caremark Rx, Inc. (a) 1,145,700 5,155,650 TOTAL COMMON STOCKS 2,243,252,287 (Cost $1,521,768,351) CASH EQUIVALENTS - 6.1% SHARES VALUE (NOTE 1) Central Cash Collateral Fund, 9,795,500 $ 9,795,500 5.75% (b) Taxable Central Cash Fund, 135,593,584 135,593,584 5.66% (b) TOTAL CASH EQUIVALENTS 145,389,084 (Cost $145,389,084) TOTAL INVESTMENT PORTFOLIO - 2,388,641,371 101.0% (Cost $1,667,157,435) NET OTHER ASSETS - (1.0)% (23,578,333) NET ASSETS - 100% $ 2,365,063,038 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 $1,826,204,663 and $2,576,033,207, 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 $143,093 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $9,794,806. The fund received cash collateral of $9,795,500 which was invested in cash equivalents. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $1,668,874,380. Net unrealized appreciation aggregated $719,766,991, of which $795,851,059 related to appreciated investment securities and $76,084,068 related to depreciated investment securities. The fund hereby designates approximately $153,808,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 50% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. HEALTH CARE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 2,388,641,371 value (cost $1,667,157,435) - - See accompanying schedule Receivable for investments 3,206,814 sold Receivable for fund shares 2,500,046 sold Dividends receivable 2,557,012 Interest receivable 692,171 Redemption fees receivable 8,100 Other receivables 123,405 TOTAL ASSETS 2,397,728,919 LIABILITIES Payable for investments $ 2,640,600 purchased Payable for fund shares 18,163,231 redeemed Accrued management fee 1,187,410 Other payables and accrued 879,140 expenses Collateral on securities 9,795,500 loaned, at value TOTAL LIABILITIES 32,665,881 NET ASSETS $ 2,365,063,038 Net Assets consist of: Paid in capital $ 1,540,724,272 Undistributed net investment 2,230,397 income Accumulated undistributed net 100,634,248 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 721,474,121 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 18,082,391 $ 2,365,063,038 shares outstanding NET ASSET VALUE and $130.79 redemption price per share ($2,365,063,038 (divided by) 18,082,391 shares) Maximum offering price per $134.84 share (100/97.00 of $130.79) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 24,201,967 Dividends Interest 8,199,950 Security lending 162,523 TOTAL INCOME 32,564,440 EXPENSES Management fee $ 16,196,325 Transfer agent fees 11,913,589 Accounting and security 1,571,747 lending fees Non-interested trustees' 9,459 compensation Custodian fees and expenses 89,598 Registration fees 144,588 Audit 61,743 Legal 12,308 Miscellaneous 4,640 Total expenses before 30,003,997 reductions Expense reductions (695,076) 29,308,921 NET INVESTMENT INCOME 3,255,519 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 204,652,131 Foreign currency transactions (34,949) 204,617,182 Change in net unrealized appreciation (depreciation) on: Investment securities (209,752,846) Assets and liabilities in (14,345) (209,767,191) foreign currencies NET GAIN (LOSS) (5,150,009) NET INCREASE (DECREASE) IN $ (1,894,490) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 6,917,352 charges paid to FDC Sales charges - Retained by $ 6,892,954 FDC Deferred sales charges $ 84,087 withheld by FDC Exchange fees withheld by FSC $ 197,379 Expense reductions Directed $ 679,973 brokerage arrangements Custodian credits 1,683 Transfer agent credits 13,420 $ 695,076
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ 3,255,519 $ 3,477,655 income Net realized gain (loss) 204,617,182 141,016,806 Change in net unrealized (209,767,191) 456,695,074 appreciation (depreciation) NET INCREASE (DECREASE) IN (1,894,490) 601,189,535 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (1,677,421) (3,782,810) From net investment income From net realized gain (163,613,261) (121,803,514) TOTAL DISTRIBUTIONS (165,290,682) (125,586,324) Share transactions Net 762,183,703 1,715,677,379 proceeds from sales of shares Reinvestment of distributions 158,184,675 121,790,160 Cost of shares redeemed (1,535,337,928) (1,393,295,000) NET INCREASE (DECREASE) IN (614,969,550) 444,172,539 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 1,393,204 2,029,623 TOTAL INCREASE (DECREASE) (780,761,518) 921,805,373 IN NET ASSETS NET ASSETS Beginning of period 3,145,824,556 2,224,019,183 End of period (including $ 2,365,063,038 $ 3,145,824,556 undistributed net investment income of $2,230,397 and $1,027,364, respectively) OTHER INFORMATION Shares Sold 5,768,494 13,702,070 Issued in reinvestment of 1,257,783 985,706 distributions Redeemed (11,805,281) (11,362,310) Net increase (decrease) (4,779,004) 3,325,466
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 137.60 $ 113.84 $ 102.45 $ 100.47 $ 76.13 period Income from Investment Operations Net investment income C .15 .17 .33 .52 .95 Net realized and unrealized .90 F 29.85 31.94 18.01 28.85 gain (loss) Total from investment 1.05 30.02 32.27 18.53 29.80 operations Less Distributions From net investment income (.08) (.19) (.25) (.65) (.59) From net realized gain (7.85) (6.17) (20.73) (15.95) (4.92) Total distributions (7.93) (6.36) (20.98) (16.60) (5.51) Redemption fees added to paid .07 .10 .10 .05 .05 in capital Net asset value, end of period $ 130.79 $ 137.60 $ 113.84 $ 102.45 $ 100.47 TOTAL RETURN A, B 1.15% 27.20% 36.47% 20.41% 39.68% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 2,365,063 $ 3,145,825 $ 2,224,019 $ 1,372,554 $ 1,525,910 (000 omitted) Ratio of expenses to average 1.07% 1.07% 1.20% 1.33% 1.31% net assets Ratio of expenses to average 1.05% D 1.05% D 1.18% D 1.32% D 1.30% D net assets after expense reductions Ratio of net investment .12% .14% .31% .52% 1.06% income to average net assets Portfolio turnover rate 70% 66% 79% 59% 54%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 F THE AMOUNT SHOWN FOR A SHARE OUTSTANDING DOES NOT CORRESPOND WITH THE AGGREGATE NET LOSS ON INVESTMENTS FOR THE PERIOD DUE TO THE TIMING OF SALES AND REPURCHASES OF FUND SHARES IN RELATION TO FLUCTUATING MARKET VALUES OF THE INVESTMENTS OF THE FUND. MEDICAL DELIVERY PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT MEDICAL DELIVERY -19.60% 2.53% 182.13% SELECT MEDICAL DELIVERY (LOAD -22.09% -0.62% 173.60% ADJ.) S&P 500 11.73% 206.94% 425.47% GS Health Care 3.51% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Health Care Index - a market capitalization-weighted index of 97 stocks designed to measure the performance of companies in the health care sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT MEDICAL DELIVERY -19.60% 0.50% 10.93% SELECT MEDICAL DELIVERY -22.09% -0.12% 10.59% (LOAD ADJ.) S&P 500 11.73% 25.14% 18.05% GS Health Care 3.51% 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 1990/02/28 9700.00 10000.00 1990/03/31 10149.67 10265.00 1990/04/30 10250.61 10008.38 1990/05/31 11700.57 10984.19 1990/06/30 12260.36 10909.50 1990/07/31 12306.24 10874.59 1990/08/31 11324.31 9891.53 1990/09/30 10571.81 9409.81 1990/10/31 10443.33 9369.35 1990/11/30 11893.28 9974.61 1990/12/31 12899.13 10252.90 1991/01/31 14978.11 10699.92 1991/02/28 15904.20 11464.97 1991/03/31 18266.68 11742.42 1991/04/30 17718.59 11770.60 1991/05/31 19183.32 12279.09 1991/06/30 17567.22 11716.71 1991/07/31 19329.85 12262.71 1991/08/31 19556.34 12553.34 1991/09/30 19733.59 12343.69 1991/10/31 20166.86 12509.10 1991/11/30 19605.57 12004.98 1991/12/31 22937.89 13378.35 1992/01/31 22958.05 13129.52 1992/02/29 22071.17 13300.20 1992/03/31 20609.83 13040.85 1992/04/30 19793.50 13424.25 1992/05/31 19591.94 13490.03 1992/06/30 18560.27 13289.02 1992/07/31 19616.46 13832.55 1992/08/31 19594.46 13548.98 1992/09/30 17295.05 13708.86 1992/10/31 18153.20 13756.84 1992/11/30 19935.52 14225.94 1992/12/31 19913.51 14400.92 1993/01/31 18901.33 14521.89 1993/02/28 15908.81 14719.39 1993/03/31 16260.87 15029.97 1993/04/30 16062.83 14666.24 1993/05/31 16557.92 15059.30 1993/06/30 16722.95 15102.97 1993/07/31 17141.02 15042.56 1993/08/31 17086.01 15612.67 1993/09/30 18494.26 15492.45 1993/10/31 19363.41 15813.15 1993/11/30 19682.47 15662.92 1993/12/31 21013.71 15852.44 1994/01/31 22190.91 16391.43 1994/02/28 22311.93 15947.22 1994/03/31 21200.74 15251.92 1994/04/30 21882.86 15447.15 1994/05/31 22619.99 15700.48 1994/06/30 21222.74 15315.82 1994/07/31 22168.91 15818.18 1994/08/31 24413.31 16466.72 1994/09/30 25282.46 16063.29 1994/10/31 26107.60 16424.71 1994/11/30 24985.41 15826.52 1994/12/31 25182.84 16061.23 1995/01/31 26288.26 16477.70 1995/02/28 26691.28 17119.83 1995/03/31 28383.95 17625.04 1995/04/30 27461.47 18144.10 1995/05/31 26560.71 18869.32 1995/06/30 26988.00 19307.65 1995/07/31 29713.36 19947.89 1995/08/31 29851.93 19997.96 1995/09/30 30475.53 20841.88 1995/10/31 29955.87 20767.47 1995/11/30 32461.81 21679.16 1995/12/31 33287.39 22096.70 1996/01/31 35077.70 22848.87 1996/02/29 35806.17 23060.68 1996/03/31 36151.89 23282.76 1996/04/30 36563.52 23625.95 1996/05/31 36486.30 24235.26 1996/06/30 35624.01 24327.60 1996/07/31 31763.03 23252.80 1996/08/31 34697.38 23743.20 1996/09/30 37181.28 25079.47 1996/10/31 34375.63 25771.16 1996/11/30 36318.99 27719.21 1996/12/31 36950.58 27170.09 1997/01/31 38698.81 28867.68 1997/02/28 39565.94 29094.00 1997/03/31 37062.47 27898.53 1997/04/30 37907.42 29564.07 1997/05/31 41422.41 31363.93 1997/06/30 41710.28 32769.03 1997/07/31 44391.98 35376.46 1997/08/31 42861.74 33394.67 1997/09/30 44134.42 35223.70 1997/10/31 42679.93 34047.23 1997/11/30 43695.04 35623.28 1997/12/31 44391.83 36234.93 1998/01/31 43096.72 36635.68 1998/02/28 48260.14 39277.85 1998/03/31 50202.82 41289.27 1998/04/30 51451.35 41704.64 1998/05/31 49025.07 40987.74 1998/06/30 49667.32 42652.66 1998/07/31 45831.66 42198.41 1998/08/31 35448.62 36097.36 1998/09/30 36626.08 38409.76 1998/10/31 39123.72 41534.01 1998/11/30 40622.30 44051.38 1998/12/31 41657.04 46589.63 1999/01/31 35716.23 48538.00 1999/02/28 34039.24 47029.44 1999/03/31 32701.22 48911.09 1999/04/30 35734.07 50805.42 1999/05/31 35288.06 49605.90 1999/06/30 34378.21 52359.03 1999/07/31 32433.62 50724.38 1999/08/31 30649.59 50473.29 1999/09/30 27081.54 49089.82 1999/10/31 26546.33 52196.23 1999/11/30 27884.35 53257.37 1999/12/31 29329.41 56394.23 2000/01/31 29115.33 53560.99 2000/02/29 27360.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000309 114726 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Medical Delivery Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $27,360 - a 173.60% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS CIGNA Corp. 8.4 United HealthCare Corp. 6.4 Columbia/HCA Healthcare Corp. 5.9 Wellpoint Health Networks, Inc. 5.3 Healtheon/Web Maryland Corp. 5.0 Caremark Rx, Inc. 4.5 Cardinal Health, Inc. 4.4 Express Scripts, Inc. Class A 4.3 CareInsite, Inc. 4.2 McKesson HBOC, Inc. 3.7 52.1 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Medical Facilities Management 42.1% Row: 1, Col: 6, Value: 42.1 Computer Services & Software 13.0% Row: 1, Col: 5, Value: 13.0 Insurance 13.0% Row: 1, Col: 4, Value: 13.0 Medical Equipment & Supplies 12.3% Row: 1, Col: 3, Value: 12.3 Services 4.8% Row: 1, Col: 2, Value: 4.8 * All Others 14.8% Row: 1, Col: 1, Value: 14.8
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. (photograph of Shep Perkins)(photograph of Pratima Abichandani) NOTE TO SHAREHOLDERS: The following is an interview with Shep Perkins (left), who managed Fidelity Select Medical Delivery Portfolio for most of the period covered by this report, with additional comments from Pratima Abichandani, who became manager of the fund on February 25, 2000. Q. HOW DID THE FUND PERFORM, SHEP? S.P. For the 12-month period that ended February 29, 2000, the fund returned -19.60%. In comparison, the Goldman Sachs Health Care Index - an index of 97 stocks designed to measure the performance of companies in the health care sector - returned 3.51%. The fund also compares its performance to the Standard & Poor's 500 Index, which returned 11.73% during the same time period. Q. WHY DID THE FUND'S PERFORMANCE LAG THAT OF THE S&P 500 AND THE GOLDMAN SACHS INDEXES? S.P. It was a very difficult year for medical delivery stocks, a much narrower universe of stocks than the Goldman Sachs or the S&P 500 indexes. Earlier in the year, these stocks were hurt by federal budget cuts, which reduced Medicare reimbursements to health care providers. While some companies' earnings improved during the period, overall results were dampened by escalating wage inflation. Finally, despite solid fundamental performance on the part of managed care companies, their stocks were hit by the threat of lawsuits by tobacco plaintiff lawyers for alleged illegal incentive programs for doctors. The Goldman Sachs index benefited from the performance of biotechnology and genomics stocks, while the fund was limited in its ability to invest in this area. Q. WHAT WAS YOUR STRATEGY IN THIS DIFFICULT ENVIRONMENT? S.P. I looked for the best opportunities within the fund's investment universe and, given all the interest in Internet stocks, I added selected Internet health care-related stocks toward the end of the year. These companies are attempting to transform and streamline information flow, removing redundancies and inefficiencies within the health care industry. For example, sending electronic claims over the Internet and maintaining and tracking patient data could make back-office functions more efficient and cost-effective. Although these developments are still in the early stages, investors are excited about their prospects. Q. WHICH STOCKS HELPED THE FUND'S PERFORMANCE? S.P. The fund's Internet-related holdings performed very well. Ventro (formerly Chemdex) formed an online business-to-business marketplace for life sciences and health care companies, so hospitals and other organizations can buy medical equipment and supplies over the Internet using Ventro's exchange. Healtheon/WebMD helped streamline the administrative process by developing the capability of sending electronic claims over the Internet. CareInsite is developing a process that will put best practices on a doctor's desktop computer to provide information that assists with diagnoses and treatment protocols, making patient consultations more efficient. Q. WERE THERE OTHER STOCKS THAT DID WELL? S.P. Biotechnology holdings did exceptionally well. Millennium Pharmaceuticals discovered several promising compounds using new genomics technologies. Amgen, another biotech company, benefited from strong demand for its product Epogen - used to treat anemia in patients on dialysis - and its product pipeline looked more promising than expected. Q. WHICH STOCKS DETRACTED FROM PERFORMANCE? S.P. Health Management Associates missed its earnings targets earlier in the year due to higher-than-expected operating expenses, which continued to weigh on the company's stock. Respiratory care company Lincare had steady operating performance throughout the year, but investors became increasingly concerned about slowing revenue growth and wage pressures. HEALTHSOUTH missed its earnings targets by a wide margin due to pricing pressure, which, coupled with a heavy debt load, led to disappointing stock performance. Q. TURNING TO YOU, PRATIMA, WHAT'S YOUR OUTLOOK FOR THE NEXT FEW MONTHS? P.A. There are some encouraging signs. With many opportunities to overhaul the back-office and the supply chain, companies are looking to use better tools to re-engineer and improve their business processes. Another piece of good news is that many of the largest managed care companies are beating earnings estimates for the first time in four years. Finally, the level of cuts resulting from Medicare reform appears to have slowed, and it looks like the worst may be over in that area. There are still some legislative changes and class action lawsuits pending, but I am cautiously optimistic about general business fundamentals. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: June 30, 1986 FUND NUMBER: 505 TRADING SYMBOL: FSHCX SIZE: as of February 29, 2000, more than $45 million MANAGER: Pratima Abichandani, since February 2000; manager, several Fidelity international funds, 1997-2000; sector leader, Asian telecommunications sector, 1998-2000; analyst, India and Singapore, 1995-1997; joined Fidelity in 1994 MEDICAL DELIVERY PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 94.0% SHARES VALUE (NOTE 1) CHEMICALS & PLASTICS - 1.0% Medical Manager Corp. (a) 5,200 $ 437,775 COMPUTER SERVICES & SOFTWARE - - 13.0% CareInsite, Inc. 28,200 1,917,600 ebenX, Inc. 5,400 303,075 Eclipsys Corp. (a) 7,300 175,200 First Consulting Group, Inc. 7,300 109,044 (a) Healtheon/Web Maryland Corp. 40,700 2,251,219 IDX Systems Corp. (a) 6,900 250,125 MatrixOne, Inc. 100 2,500 National Data Corp. 7,500 232,500 Onvia.com, Inc. 100 2,100 SciQuest.com, Inc. 2,500 187,188 Shared Medical Systems Corp. 11,500 447,781 5,878,332 DRUGS & PHARMACEUTICALS - 4.3% Amgen, Inc. (a) 2,700 184,106 Bristol-Myers Squibb Co. 3,800 215,888 Cephalon, Inc. (a) 3,400 225,994 Immunex Corp. (a) 1,100 217,181 Millennium Pharmaceuticals, 800 208,100 Inc. (a) Quintiles Transnational Corp. 24,500 727,344 (a) Schering-Plough Corp. 5,200 181,350 1,959,963 ELECTRONIC INSTRUMENTS - 1.3% Fisher Scientific 13,800 600,300 International, Inc. INSURANCE - 13.0% Aetna, Inc. 34,800 1,431,150 CIGNA Corp. 51,600 3,808,720 First Health Group Corp. (a) 25,700 620,013 5,859,883 MEDICAL EQUIPMENT & SUPPLIES - - 12.3% AmeriSource Health Corp. 12,200 177,663 Class A (a) Bindley Western Industries, 23,500 403,906 Inc. Cardinal Health, Inc. 48,050 1,982,063 Guidant Corp. (a) 3,200 215,600 Johnson & Johnson 2,500 179,375 McKesson HBOC, Inc. 87,000 1,685,625 Omnicare, Inc. 22,000 202,125 Patterson Dental Co. (a) 14,900 536,866 Sybron International, Inc. (a) 5,100 142,800 5,526,023 MEDICAL FACILITIES MANAGEMENT - - 42.1% Advance Paradigm, Inc. (a) 14,000 331,188 Apria Healthcare Group, Inc. 37,600 535,800 (a) SHARES VALUE (NOTE 1) Columbia/HCA Healthcare Corp. 138,623 $ 2,677,157 Express Scripts, Inc. Class A 41,700 1,920,806 (a) Health Management Associates, 103,417 1,111,733 Inc. Class A (a) HEALTHSOUTH Corp. (a) 116,300 566,963 Lifepoint Hospitals, Inc. (a) 9,200 138,575 Lincare Holdings, Inc. (a) 46,800 1,096,875 Manor Care, Inc. (a) 45,200 392,675 Medquist, Inc. (a) 12,600 324,450 Oxford Health Plans, Inc. (a) 64,300 992,631 Quorum Health Group, Inc. (a) 17,600 156,750 Renal Care Group, Inc. (a) 24,650 432,916 Syncor International Corp. (a) 12,800 313,600 Tenet Healthcare Corp. (a) 49,800 871,500 Triad Hospitals, Inc. (a) 22,000 352,000 Trigon Healthcare, Inc. (a) 29,800 951,738 United HealthCare Corp. 56,400 2,883,450 Universal Health Services, 14,000 544,250 Inc. Class B (a) Wellpoint Health Networks, 35,500 2,396,250 Inc. (a) 18,991,307 RETAIL & WHOLESALE, MISCELLANEOUS - 2.2% Chemdex Corp. 2,800 629,650 Drugstore.com, Inc. 8,400 159,600 PlanetRx.com, Inc. 15,700 182,513 971,763 SERVICES - 4.8% Caremark Rx, Inc. (a) 446,040 2,007,180 Superior Consultant Holdings 8,700 134,850 Corp. (a) 2,142,030 TOTAL COMMON STOCKS 42,367,376 (Cost $44,036,406) CASH EQUIVALENTS - 8.1% Central Cash Collateral Fund, 3,664,500 3,664,500 5.75% (b) (Cost $3,664,500) TOTAL INVESTMENT PORTFOLIO - 46,031,876 102.1% (Cost $47,700,906) NET OTHER ASSETS - (2.1)% (925,973) NET ASSETS - 100% $ 45,105,903 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 $87,901,175 and $103,578,577, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $17,503 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $3,500,919. The fund received cash collateral of $3,664,500 which was invested in cash equivalents. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $48,406,659. Net unrealized depreciation aggregated $2,374,783, of which $4,008,551 related to appreciated investment securities and $6,383,334 related to depreciated investment securities. At February 29, 2000, the fund had a capital loss carryforward of approximately $38,668,000, of which $10,988,000 and $27,680,000 will expire on February 28, 2007 and February 29, 2008, respectively. The fund intends to elect to defer to its fiscal year ending February 28, 2001 approximately $3,786,000 of losses recognized during the period November 1, 1999 to February 29, 2000. MEDICAL DELIVERY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 46,031,876 value (cost $47,700,906) - See accompanying schedule Receivable for investments 9,268,979 sold Receivable for fund shares 93,261 sold Dividends receivable 11,809 Interest receivable 9,321 Redemption fees receivable 2,469 Other receivables 9,306 TOTAL ASSETS 55,427,021 LIABILITIES Payable to custodian bank $ 2,096,398 Payable for investments 495,662 purchased Payable for fund shares 3,989,093 redeemed Accrued management fee 28,762 Other payables and accrued 46,703 expenses Collateral on securities 3,664,500 loaned, at value TOTAL LIABILITIES 10,321,118 NET ASSETS $ 45,105,903 Net Assets consist of: Paid in capital $ 89,981,549 Accumulated undistributed net (43,206,616) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (1,669,030) (depreciation) on investments NET ASSETS, for 2,941,114 $ 45,105,903 shares outstanding NET ASSET VALUE and $15.34 redemption price per share ($45,105,903 (divided by) 2,941,114 shares) Maximum offering price per $15.81 share (100/97.00 of $15.34) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 160,121 Dividends Interest 238,379 Security lending 14,629 TOTAL INCOME 413,129 EXPENSES Management fee $ 366,977 Transfer agent fees 603,980 Accounting and security 60,806 lending fees Custodian fees and expenses 12,550 Registration fees 32,655 Audit 16,047 Legal 344 Total expenses before 1,093,359 reductions Expense reductions (37,246) 1,056,113 NET INVESTMENT INCOME (LOSS) (642,984) REALIZED AND UNREALIZED GAIN (12,937,981) (LOSS) Net realized gain (loss) on investment securities Change in net unrealized (1,057,478) appreciation (depreciation) on investment securities NET GAIN (LOSS) (13,995,459) NET INCREASE (DECREASE) IN $ (14,638,443) NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 148,780 charges paid to FDC Sales charges - Retained by $ 147,252 FDC Deferred sales charges $ 4,305 withheld by FDC Exchange fees withheld by FSC $ 16,705 Expense reductions Directed $ 34,638 brokerage arrangements Transfer agent credits 2,608 $ 37,246
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (642,984) $ (390,234) income (loss) Net realized gain (loss) (12,937,981) (29,445,200) Change in net unrealized (1,057,478) (24,558,768) appreciation (depreciation) NET INCREASE (DECREASE) IN (14,638,443) (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 81,001,356 162,156,332 proceeds from sales of shares Reinvestment of distributions - 8,097,680 Cost of shares redeemed (98,291,380) (186,595,554) NET INCREASE (DECREASE) IN (17,290,024) (16,341,542) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 192,090 248,569 TOTAL INCREASE (DECREASE) (31,736,377) (78,700,163) IN NET ASSETS NET ASSETS Beginning of period 76,842,280 155,542,443 End of period $ 45,105,903 $ 76,842,280 OTHER INFORMATION Shares Sold 4,531,558 6,115,538 Issued in reinvestment of - 283,433 distributions Redeemed (5,618,803) (7,863,246) Net increase (decrease) (1,087,245) (1,464,275)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 F 1999 1998 1997 1996 F SELECTED PER-SHARE DATA Net asset value, beginning of $ 19.08 $ 28.32 $ 28.29 $ 29.00 $ 23.18 period Income from Investment Operations Net investment income (loss) C (.18) (.06) E (.24) (.23) (.03) Net realized and unrealized (3.61) (7.88) 5.45 2.92 7.72 gain (loss) Total from investment (3.79) (7.94) 5.21 2.69 7.69 operations Less Distributions 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 .05 .04 .05 .05 .04 in capital Net asset value, end of period $ 15.34 $ 19.08 $ 28.32 $ 28.29 $ 29.00 TOTAL RETURN A, B (19.60)% (29.47)% 21.97% 10.50% 34.15% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 45,106 $ 76,842 $ 155,542 $ 192,385 $ 295,489 (000 omitted) Ratio of expenses to average 1.73% 1.40% 1.57% 1.57% 1.65% net assets Ratio of expenses to average 1.67% D 1.37% D 1.53% D 1.53% D 1.62% D net assets after expense reductions Ratio of net investment (1.02)% (.25)% (.88)% (.84)% (.13)% income (loss) to average net assets Portfolio turnover rate 154% 67% 109% 78% 132%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.12 PER SHARE. F 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 FEBRUARY 29, 2000 PAST 1 YEAR LIFE OF FUND SELECT MEDICAL EQUIPMENT AND 25.68% 52.07% SYSTEMS SELECT MEDICAL EQUIPMENT AND 21.84% 47.44% SYSTEMS (LOAD ADJ.) S&P 500 11.73% 29.10% GS Health Care 3.51% 23.51% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year or since the fund started on April 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 97 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 FEBRUARY 29, 2000 PAST 1 YEAR LIFE OF FUND SELECT MEDICAL EQUIPMENT AND 25.68% 25.57% SYSTEMS SELECT MEDICAL EQUIPMENT AND 21.84% 23.48% SYSTEMS (LOAD ADJ.) S&P 500 11.73% 14.88% GS Health Care 3.51% 12.16% 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 12853.70 12400.49 1999/09/30 11835.79 12060.59 1999/10/31 11656.15 12823.79 1999/11/30 12095.26 13084.50 1999/12/31 13156.47 13855.17 2000/01/31 13948.66 13159.09 2000/02/29 14744.00 12909.99 IMATRL PRASUN SHR__CHT 20000229 20000320 151202 R00000000000026 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Medical Equipment and Systems Portfolio on April 28, 1998, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $14,744 - a 47.44% 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 been $12,910 - a 29.10% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Abbott Laboratories 6.9 Becton, Dickinson & Co. 6.8 Baxter International, Inc. 6.5 Guidant Corp. 6.4 Biomet, Inc. 6.1 Johnson & Johnson 5.4 Medtronic, Inc. 5.4 PE Corp. - Biosystems Group 5.4 Chiron Corp. 4.9 Bausch & Lomb, Inc. 4.5 58.3 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Medical Equipment & Supplies 60.3% Row: 1, Col: 6, Value: 60.3 Drugs & Pharmaceuticals 17.5% Row: 1, Col: 5, Value: 17.5 Electronic Instruments 8.4% Row: 1, Col: 4, Value: 8.4 Industrial Machinery & Equipment 1.2% Row: 1, Col: 3, Value: 1.2 Home Furnishings 1.1% Row: 1, Col: 2, Value: 1.1 * All Others 11.5% Row: 1, Col: 1, Value: 11.5
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. 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 12 months that ended February 29, 2000, the fund returned 25.68%, compared to 11.73% for the Standard & Poor's 500 Index and 3.51% for the Goldman Sachs Health Care Index, an index of 97 stocks designed to measure the performance of companies in the health care sector. Q. WHY DID THE FUND OUTPERFORM THE GOLDMAN SACHS INDEX? A. The fund carried a heavier weighting in several high-growth industries that helped it outperform the Goldman Sachs index. For example, although the fund maintained its primary emphasis on medical technology companies, significant outperformance came from companies with an exposure to biotechnology, which was extremely strong during the period. The cardiology area also helped, as several of the fund's core holdings in that area did well. Orthopedic stocks were a third category that contributed nicely, buoyed by expanding product demand and industry consolidation that led to better pricing. Finally, underweighting manufacturers of health care capital equipment aided relative performance because those stocks were weak during the period. Q. WHY WERE INVESTORS DRAWN TO BIOTECHNOLOGY STOCKS DURING THE PERIOD? A. Investor enthusiasm for biotechnology stocks focused on more robust product pipelines, several high-profile product launches that exceeded expectations and recent advances in genomics, the study of genes. In particular, the industry appeared close to mapping a complete sequence of the human genome - the genetic material that makes up a human being. Success in this area could speed up the discovery of new, more powerful drugs as well as help better identify which patients are likely to respond to a drug and which are not. Q. WHAT STOCKS DID WELL FOR THE FUND DURING THE PERIOD? A. Four of the top contributors were biotechnology or genomics-related stocks: PE Biosystems, Chiron, Waters and Celera. All four benefited from positive investor sentiment due to the trends I mentioned earlier. Two cardiology stocks - Guidant and Medtronic - also made positive contributions to performance. Guidant was helped by gains in its share of the market for stents, the small pieces of metal used to prop open the artery walls of people with heart disease. Medtronic shares advanced due to positive sentiment surrounding a new cycle of products used to treat tachycardia - rapid, irregular heartbeat. Stryker, an orthopedic stock, also turned in a strong performance. The company successfully integrated an acquisition that was initially unpopular with investors because it had a dilutive effect on earnings. Q. WHAT STOCKS HURT PERFORMANCE? A. Abbott Laboratories was the biggest detractor. This holding, normally one of the fund's most consistent performers, ran into a series of problems. The company was ordered by the Food and Drug Administration to remove two of its top-selling drugs from the market, while a third was subject to increased competitive pressures as the result of a patent expiration. Believing that investors overreacted to this negative news, I added to the fund's position in Abbott. Another disappointing holding was Baxter International, a health care conglomerate. The company had solid business prospects but suffered from investors' preoccupation with stocks perceived to have stronger growth prospects. Finally, Johnson & Johnson was hurt by a dip in sales and earnings growth following the company's announcement of plans to absorb distributor overstocks of its drugs in the fourth quarter of 1999. Q. WHAT'S YOUR OUTLOOK, KERRY? A. In terms of this sector's basic business prospects, my outlook has not changed much from a year ago. The constructive trends in orthopedics and some areas of cardiology - especially cardiac rhythm management - should enable companies in these industries to keep growing at attractive rates. In the hospital supply group, business prospects are solid, but the stocks could continue to be out of favor if the economy continues its robust pace. These stocks are considered defensive holdings and tend to do well in a slower-growing economy than we have presently. I am also keeping my eye on the Internet to identify its potential impact on the medical device industry. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: April 28, 1998 FUND NUMBER: 354 TRADING SYMBOL: FSMEX SIZE: as of February 29, 2000, more than $52 million MANAGER: Kerry Nelson, since inception; analyst, medical devices and automotive industries, since 1997; joined Fidelity in 1995 MEDICAL EQUIPMENT AND SYSTEMS PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 90.0% SHARES VALUE (NOTE 1) COMPUTER SERVICES & SOFTWARE - - 0.5% Healtheon/Web Maryland Corp. 4,900 $ 271,031 MatrixOne, Inc. 100 2,500 Onvia.com, Inc. 100 2,100 275,631 DRUGS & PHARMACEUTICALS - 17.5% Allergan, Inc. 44,500 2,238,906 Bausch & Lomb, Inc. 44,680 2,356,870 Chiron Corp. (a) 50,400 2,520,000 Eli Lilly & Co. 2,300 136,706 Human Genome Sciences, Inc. 1,600 349,200 (a) IDEXX Laboratories, Inc. (a) 14,500 428,656 Millennium Pharmaceuticals, 2,200 572,275 Inc. (a) PE Corp. - Celera Genomics 1,140 278,160 Group (a) Sepracor, Inc. (a) 2,200 223,025 9,103,798 ELECTRONIC INSTRUMENTS - 8.4% PE Corp. - Biosystems Group 26,360 2,780,980 Waters Corp. (a) 16,020 1,570,961 4,351,941 HOME FURNISHINGS - 1.1% Hillenbrand Industries, Inc. 19,800 601,425 INDUSTRIAL MACHINERY & EQUIPMENT - 1.2% Mettler-Toledo International, 16,010 618,386 Inc. (a) MEDICAL EQUIPMENT & SUPPLIES - - 60.3% Abbott Laboratories 109,520 3,586,780 Arrow International, Inc. 7,200 284,400 Baxter International, Inc. 61,560 3,355,020 Becton, Dickinson & Co. 113,660 3,530,564 Biomet, Inc. 95,910 3,165,030 Boston Scientific Corp. (a) 20,600 375,950 C.R. Bard, Inc. 35,430 1,399,485 Cardinal Health, Inc. 10,700 441,375 CONMED Corp. (a) 8,400 231,000 DENTSPLY International, Inc. 20,400 522,750 Dionex Corp. (a) 200 6,313 Guidant Corp. (a) 49,520 3,336,410 Johnson & Johnson 39,250 2,816,188 Mallinckrodt, Inc. 15,400 379,225 Medtronic, Inc. 58,016 2,810,150 Novoste Corp. (a) 12,800 467,200 Orthofix International NV (a) 8,170 135,826 Respironics, Inc. (a) 16,100 226,406 St. Jude Medical, Inc. (a) 22,600 590,425 SHARES VALUE (NOTE 1) Stryker Corp. 37,040 $ 2,166,840 Sybron International, Inc. (a) 54,860 1,536,080 31,363,417 MEDICAL FACILITIES MANAGEMENT - - 1.0% Quest Diagnostics, Inc. (a) 14,700 504,394 TOTAL COMMON STOCKS 46,818,992 (Cost $43,297,525) CASH EQUIVALENTS - 6.5% Taxable Central Cash Fund, 3,388,731 3,388,731 5.66% (b) (Cost $3,388,731) TOTAL INVESTMENT PORTFOLIO - 50,207,723 96.5% (Cost $46,686,256) NET OTHER ASSETS - 3.5% 1,822,572 NET ASSETS - 100% $ 52,030,295 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 $47,805,029 and $36,335,402, 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 $5,647 for the period. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $46,960,421. Net unrealized appreciation aggregated $3,247,302, of which $7,252,502 related to appreciated investment securities and $4,005,200 related to depreciated investment securities. The fund hereby designates approximately $502,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 23% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. MEDICAL EQUIPMENT AND SYSTEMS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 50,207,723 value (cost $46,686,256) - See accompanying schedule Receivable for investments 1,599,009 sold Receivable for fund shares 660,509 sold Dividends receivable 16,908 Interest receivable 21,766 Redemption fees receivable 321 Other receivables 28 TOTAL ASSETS 52,506,264 LIABILITIES Payable for investments $ 26,700 purchased Payable for fund shares 379,431 redeemed Accrued management fee 25,237 Other payables and accrued 44,601 expenses TOTAL LIABILITIES 475,969 NET ASSETS $ 52,030,295 Net Assets consist of: Paid in capital $ 41,819,496 Accumulated undistributed net 6,689,332 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 3,521,467 (depreciation) on investments NET ASSETS, for 3,536,723 $ 52,030,295 shares outstanding NET ASSET VALUE and $14.71 redemption price per share ($52,030,295 (divided by) 3,536,723 shares) Maximum offering price per $15.16 share (100/97.00 of $14.71) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 242,667 Dividends Interest 165,007 Security lending 2,195 TOTAL INCOME 409,869 EXPENSES Management fee $ 228,913 Transfer agent fees 301,303 Accounting and security 60,401 lending fees Non-interested trustees' 108 compensation Custodian fees and expenses 9,825 Registration fees 42,338 Audit 11,865 Legal 123 Miscellaneous 75 Total expenses before 654,951 reductions Expense reductions (4,054) 650,897 NET INVESTMENT INCOME (LOSS) (241,028) REALIZED AND UNREALIZED GAIN 7,168,011 (LOSS) Net realized gain (loss) on investment securities Change in net unrealized 1,927,877 appreciation (depreciation) on investment securities NET GAIN (LOSS) 9,095,888 NET INCREASE (DECREASE) IN $ 8,854,860 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 317,761 charges paid to FDC Sales charges - Retained by $ 316,216 FDC Deferred sales charges $ 470 withheld by FDC Exchange fees withheld by FSC $ 5,401 Expense reductions $ 3,936 Directed brokerage arrangements Custodian credits 118 $ 4,054
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 APRIL 28, 1998 (COMMENCEMENT ASSETS OF OPERATIONS) TO FEBRUARY 28, 1999 Operations Net investment $ (241,028) $ (164,120) income (loss) Net realized gain (loss) 7,168,011 1,286,496 Change in net unrealized 1,927,877 1,593,590 appreciation (depreciation) NET INCREASE (DECREASE) IN 8,854,860 2,715,966 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (1,173,170) - from net realized gains Share transactions Net 58,510,274 45,365,490 proceeds from sales of shares Reinvestment of distributions 1,142,384 - Cost of shares redeemed (43,972,480) (19,529,306) NET INCREASE (DECREASE) IN 15,680,178 25,836,184 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 74,009 42,268 TOTAL INCREASE (DECREASE) 23,435,877 28,594,418 IN NET ASSETS NET ASSETS Beginning of period 28,594,418 - End of period $ 52,030,295 $ 28,594,418 OTHER INFORMATION Shares Sold 4,477,921 4,138,562 Issued in reinvestment of 91,548 - distributions Redeemed (3,396,782) (1,774,526) Net increase (decrease) 1,172,687 2,364,036
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 G 1999 F SELECTED PER-SHARE DATA Net asset value, beginning of $ 12.10 $ 10.00 period Income from Investment Operations Net investment income (loss) D (.08) (.11) Net realized and unrealized 3.09 2.18 gain (loss) Total from investment 3.01 2.07 operations Less Distributions From net realized gain (.42) - Redemption fees added to paid .02 .03 in capital Net asset value, end of period $ 14.71 $ 12.10 TOTAL RETURN B, C 25.68% 21.00% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 52,030 $ 28,594 (000 omitted) Ratio of expenses to average 1.66% 2.39% A net assets Ratio of expenses to average 1.65% E 2.38% A, E net assets after expense reductions Ratio of net investment (.61)% (1.21)% A income (loss) to average net assets Portfolio turnover rate 101% 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. G FOR THE YEAR ENDED FEBRUARY 29 ENERGY PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT ENERGY 44.89% 98.01% 127.53% SELECT ENERGY (LOAD ADJ.) 40.47% 91.99% 120.63% S&P 500 11.73% 206.94% 425.47% GS Natural Resources 27.62% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Natural Resources Index - - a market capitalization-weighted index of 105 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 FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT ENERGY 44.89% 14.64% 8.57% SELECT ENERGY (LOAD ADJ.) 40.47% 13.94% 8.23% S&P 500 11.73% 25.14% 18.05% GS Natural Resources 27.62% 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 1990/02/28 9700.00 10000.00 1990/03/31 9705.64 10265.00 1990/04/30 9378.73 10008.38 1990/05/31 9948.00 10984.19 1990/06/30 9713.54 10909.50 1990/07/31 10375.15 10874.59 1990/08/31 10561.60 9891.53 1990/09/30 10531.52 9409.81 1990/10/31 9990.21 9369.35 1990/11/30 9881.95 9974.61 1990/12/31 9404.20 10252.90 1991/01/31 8795.07 10699.92 1991/02/28 9615.53 11464.97 1991/03/31 9485.00 11742.42 1991/04/30 9590.67 11770.60 1991/05/31 9646.61 12279.09 1991/06/30 9216.85 11716.71 1991/07/31 9690.14 12262.71 1991/08/31 9876.97 12553.34 1991/09/30 9777.33 12343.69 1991/10/31 10070.03 12509.10 1991/11/30 9322.72 12004.98 1991/12/31 9407.51 13378.35 1992/01/31 8904.10 13129.52 1992/02/29 8916.69 13300.20 1992/03/31 8658.69 13040.85 1992/04/30 9250.20 13424.25 1992/05/31 9690.68 13490.03 1992/06/30 9211.15 13289.02 1992/07/31 9457.20 13832.55 1992/08/31 9627.54 13548.98 1992/09/30 9684.32 13708.86 1992/10/31 9267.93 13756.84 1992/11/30 9053.42 14225.94 1992/12/31 9182.81 14400.92 1993/01/31 9529.09 14521.89 1993/02/28 10157.53 14719.39 1993/03/31 10676.94 15029.97 1993/04/30 10882.33 14666.24 1993/05/31 11209.57 15059.30 1993/06/30 11357.14 15102.97 1993/07/31 11273.73 15042.56 1993/08/31 12165.62 15612.67 1993/09/30 12095.04 15492.45 1993/10/31 11921.79 15813.15 1993/11/30 10478.09 15662.92 1993/12/31 10941.73 15852.44 1994/01/31 11527.78 16391.43 1994/02/28 11141.52 15947.22 1994/03/31 10602.09 15251.92 1994/04/30 11411.95 15447.15 1994/05/31 11532.72 15700.48 1994/06/30 11472.34 15315.82 1994/07/31 11646.77 15818.18 1994/08/31 11452.21 16466.72 1994/09/30 11364.99 16063.29 1994/10/31 12009.05 16424.71 1994/11/30 11271.07 15826.52 1994/12/31 10986.86 16061.23 1995/01/31 10723.79 16477.70 1995/02/28 11146.09 17119.83 1995/03/31 11755.32 17625.04 1995/04/30 12116.59 18144.10 1995/05/31 12429.24 18869.32 1995/06/30 12067.96 19307.65 1995/07/31 12352.81 19947.89 1995/08/31 12262.49 19997.96 1995/09/30 12269.44 20841.88 1995/10/31 11741.42 20767.47 1995/11/30 12415.34 21679.16 1995/12/31 13336.18 22096.70 1996/01/31 13542.23 22848.87 1996/02/29 13478.28 23060.68 1996/03/31 14380.62 23282.76 1996/04/30 15077.01 23625.95 1996/05/31 15232.82 24235.26 1996/06/30 15514.77 24327.60 1996/07/31 14817.31 23252.80 1996/08/31 15396.06 23743.20 1996/09/30 16212.23 25079.47 1996/10/31 16872.59 25771.16 1996/11/30 17807.49 27719.21 1996/12/31 17666.91 27170.09 1997/01/31 18070.33 28867.68 1997/02/28 16220.67 29094.00 1997/03/31 16669.76 27898.53 1997/04/30 16520.96 29564.07 1997/05/31 18025.05 31363.93 1997/06/30 18289.07 32769.03 1997/07/31 19489.14 35376.46 1997/08/31 19689.15 33394.67 1997/09/30 21137.23 35223.70 1997/10/31 20553.20 34047.23 1997/11/30 19369.13 35623.28 1997/12/31 19483.54 36234.93 1998/01/31 18442.58 36635.68 1998/02/28 19529.60 39277.85 1998/03/31 20460.02 41289.27 1998/04/30 20854.58 41704.64 1998/05/31 20347.76 40987.74 1998/06/30 19812.79 42652.66 1998/07/31 18179.71 42198.41 1998/08/31 14932.33 36097.36 1998/09/30 17485.18 38409.76 1998/10/31 17691.67 41534.01 1998/11/30 17072.22 44051.38 1998/12/31 16612.33 46589.63 1999/01/31 15476.69 48538.00 1999/02/28 15232.66 47029.44 1999/03/31 18451.89 48911.09 1999/04/30 21612.39 50805.42 1999/05/31 21142.15 49605.90 1999/06/30 22261.33 52359.03 1999/07/31 22853.84 50724.38 1999/08/31 23540.39 50473.29 1999/09/30 22515.26 49089.82 1999/10/31 21753.47 52196.23 1999/11/30 21809.89 53257.37 1999/12/31 22299.14 56394.23 2000/01/31 21984.00 53560.99 2000/02/29 22063.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000316 094712 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Energy Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $22,063 - a 120.63% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Exxon Mobil Corp. 8.3 Royal Dutch Petroleum Co. (NY 7.0 Shares) Schlumberger Ltd. 6.2 Atlantic Richfield Co. 5.8 Chevron Corp. 5.7 Halliburton Co. 4.4 Amerada Hess Corp. 3.4 BP Amoco PLC sponsored ADR 3.3 Noble Drilling Corp. 2.7 Smith International, Inc. 2.7 49.5 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Oil & Gas 64.5% Row: 1, Col: 6, Value: 64.5 Energy Services 29.9% Row: 1, Col: 5, Value: 29.9 Gas 3.1% Row: 1, Col: 4, Value: 3.1 Electric Utility 0.8% Row: 1, Col: 3, Value: 0.8 Autos, Tires, & Accessories 0.2% Row: 1, Col: 2, Value: 0.2 * All Others 1.5% Row: 1, Col: 1, Value: 1.5
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. ENERGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Scott Offen) Scott Offen, Portfolio Manager of Fidelity Select Energy Portfolio Q. HOW DID THE FUND PERFORM DURING ITS FISCAL YEAR, SCOTT? A. For the 12 months that ended February 29, 2000, the fund returned 44.89%, while the Goldman Sachs Natural Resources Index - an index of 105 stocks designed to measure the performance of companies in the natural resources sector - returned 27.62%, and the Standard & Poor's 500 Index returned 11.73%. Q. WHAT FACTORS HELPED THE FUND POST SUCH A STRONG PERFORMANCE? A. Oil prices hit historically high levels, and fundamentals in the energy industry were quite positive. The fund beat the Goldman Sachs index because the index includes stocks outside of the energy industry - - such as paper and forest products, steel and non-ferrous metals companies - all of which did not perform as well as energy stocks. Also, within the energy sector, exploration and production (E&P) and energy service stocks outperformed the rest of the sector, and the fund was overweighted relative to the index in these two areas. Q. HOW HAVE YOU STRUCTURED THE PORTFOLIO SINCE TAKING OVER THE FUND AT THE BEGINNING OF SEPTEMBER? A. I added to the fund's investments in E&P companies, which tend to benefit from high oil prices. While these stocks fell initially - hurting the fund's performance over the short term - they were attractive to me because they were selling at very cheap valuations. As I said, oil prices hit historically high levels - more than $30 per barrel. Nevertheless, valuations for energy stocks, in general, and E&P stocks, in particular, discounted an eventual price of about $16 per barrel for crude oil. I believe we're reaching a peak, but I don't believe that oil will fall to such a low level again. I think the E&P stock prices will move up as oil prices move down, meeting somewhere in the middle to provide a solid return. In addition, two-thirds of the E&P companies' business is in natural gas, where the fundamentals look terrific, characterized by growing consumption and declining supply. As with oil, I believe the price of natural gas should be sustainable at a higher price than current estimates are calling for. Q. WHAT OTHER MOVES HAVE YOU MADE WITH THE FUND? A. I cut back on the number of stocks in the fund, so that I could focus on what I considered to be the best ideas. In addition, I invested in stocks that usually do well when the price of oil is high but moving lower - well-managed refiners and integrated oil companies whose earnings come from refining and marketing. The fund also held a larger weighting than the index in energy service stocks - which helped boost performance - because of my feeling that while oil prices might fall, they should stay high enough to stimulate added supply. Q. WHICH STOCKS PERFORMED WELL? WHICH DISAPPOINTED? A. Most of the fund's top performers came from the energy services industry, including Schlumberger, BJ Services, Noble Drilling, Baker Hughes and Halliburton. These firms do well when investors believe that the capital expenditure budgets of the integrated oil companies are on the rise. When the oil companies are flush with cash, they tend to re-invest in their businesses. That certainly was the case with oil prices at such a high level. As far as disappointments, I'd include Royal Dutch Petroleum, which did not achieve the cost savings it had promised investors, and Chevron, which suffered from expectations of lower oil production. Q. WHAT IS YOUR OUTLOOK? A. Almost all of the run-up in energy stocks occurred in the first half of the year. By the end of the period, energy stocks had cheapened significantly. While fundamentals for the energy sector remain positive, that doesn't mean stock prices will necessarily follow, but we are optimistic that stock performance should follow fundamentals. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 060 TRADING SYMBOL: FSENX SIZE: as of February 29, 2000, more than $175 million MANAGER: Scott Offen, since September 1999; manager, Fidelity Select Natural Resources Portfolio and Fidelity Advisor Natural Resources Portfolio, since September 1999; several Fidelity Select Portfolios, 1988-1999; joined Fidelity in 1985 ENERGY PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 98.2% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 0.2% Barrett Resources Corp. (a) 15,400 $ 448,525 COMPUTER SERVICES & SOFTWARE - - 0.0% MatrixOne, Inc. 100 2,500 Onvia.com, Inc. 100 2,100 4,600 ELECTRIC UTILITY - 0.8% Calpine Corp. (a) 15,400 1,409,100 ENERGY SERVICES - 29.9% Baker Hughes, Inc. 145,850 3,773,869 BJ Services Co. (a) 30,100 1,717,581 Diamond Offshore Drilling, 16,400 520,700 Inc. ENSCO International, Inc. 137,200 4,150,300 Global Marine, Inc. (a) 64,000 1,436,000 Halliburton Co. 204,600 7,813,163 Hanover Compressor Co. (a) 19,300 905,894 Helmerich & Payne, Inc. 25,400 676,275 Marine Drilling Companies, 30,200 688,938 Inc. (a) McDermott International, Inc. 400 3,750 Nabors Industries, Inc. (a) 97,200 3,487,050 Noble Drilling Corp. (a) 134,000 4,824,000 R&B Falcon Corp. (a) 11,000 169,813 Rowan Companies, Inc. (a) 27,800 698,475 Santa Fe International Corp. 11,600 332,775 Schlumberger Ltd. 146,480 10,821,210 Smith International, Inc. (a) 76,200 4,776,788 Superior Energy Services, 69,301 511,095 Inc. (a) Tidewater, Inc. 21,200 600,225 Transocean Sedco Forex, Inc. 46,768 1,844,413 Weatherford International, 62,025 2,791,125 Inc. (a) 52,543,439 GAS - 3.1% Dynegy, Inc. Class A 51,215 2,400,703 Kinder Morgan, Inc. 102,800 2,865,550 5,266,253 METALS & MINING - 0.0% Alcoa, Inc. 1 69 OIL & GAS - 64.2% Alberta Energy Co. Ltd. 54,200 1,473,151 Amerada Hess Corp. 117,600 5,946,150 Anadarko Petroleum Corp. 72,300 2,223,225 Apache Corp. 52,300 1,908,950 Atlantic Richfield Co. 144,500 10,259,500 BP Amoco PLC sponsored ADR 122,200 5,743,400 Burlington Resources, Inc. 17,825 492,416 SHARES VALUE (NOTE 1) Cabot Oil & Gas Corp. Class A 33,100 $ 523,394 Canada Occidental Petroleum 68,700 1,274,855 Ltd. Canadian Hunter Exploration 37,200 587,666 Ltd. (a) Chevron Corp. 133,500 9,970,781 Conoco, Inc.: Class A 56,500 1,084,094 Class B 128,411 2,528,092 Cooper Cameron Corp. (a) 14,360 793,390 Crestar Energy, Inc. (a) 21,300 268,160 EOG Resources, Inc. 69,700 1,062,925 Exxon Mobil Corp. 194,055 14,614,763 Forest Oil Corp. (a) 36,000 294,750 Frontier Oil Corp. (a) 215,100 1,344,375 Imperial Oil Ltd. 38,600 718,957 Kerr-McGee Corp. 31,900 1,427,525 Magnum Hunter Resources, Inc. 1 3 Noble Affiliates, Inc. 14,700 330,750 Nuevo Energy Co. (a) 60,100 1,066,775 Occidental Petroleum Corp. 180,000 2,891,250 Penn West Petroleum Ltd. (a) 14,600 298,124 Petro-Canada 120,500 1,695,778 Phillips Petroleum Co. 25,900 990,675 Pioneer Natural Resources Co. 138,200 1,148,788 Pogo Producing Co. 19,900 460,188 Prima Energy Corp. (a) 34,500 700,781 Rio Alto Exploration Ltd. (a) 52,300 793,736 Royal Dutch Petroleum Co. (NY 232,700 12,216,750 Shares) Santa Fe Snyder Corp. (a) 321,485 2,411,138 Shell Transport & Trading Co. 89,400 619,282 PLC (Reg.) Suncor Energy, Inc. 63,900 2,433,278 Sunoco, Inc. 87,500 2,160,156 Talisman Energy, Inc. (a) 73,000 1,888,452 Texaco, Inc. 93,400 4,430,663 Tosco Corp. 84,300 2,255,025 Total Fina SA sponsored ADR 10,811 725,688 Ultramar Diamond Shamrock 56,100 1,216,669 Corp. Union Pacific Resources 91,500 817,781 Group, Inc. USX - Marathon Group 189,600 4,100,100 Valero Energy Corp. 73,300 1,869,150 Vastar Resources, Inc. 14,000 742,875 112,804,374 TOTAL COMMON STOCKS 172,476,360 (Cost $152,254,076) CONVERTIBLE PREFERRED STOCKS - - 0.3% OIL & GAS - 0.3% Chesapeake Energy Corp. $3.50 15,000 555,000 (a) (Cost $146,211) CASH EQUIVALENTS - 5.1% SHARES VALUE (NOTE 1) Central Cash Collateral 4,505,696 $ 4,505,696 Fund, 5.75% (b) Taxable Central Cash Fund, 4,404,404 4,404,404 5.66% (b) TOTAL CASH EQUIVALENTS 8,910,100 (Cost $8,910,100) TOTAL INVESTMENT PORTFOLIO - 181,941,460 103.6% (Cost $161,310,387) NET OTHER ASSETS - (3.6)% (6,269,653) NET ASSETS - 100% $ 175,671,807 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 $242,251,234 and $239,760,747, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $41,409 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $4,537,328. The fund received cash collateral of $4,505,696 which was invested in cash equivalents. Distribution of investments by country of issue, as a percentage of net assets, is as follows: United States of America 75.3% Netherlands 7.0 Canada 6.4 Netherlands Antilles 6.2 United Kingdom 3.6 Grand Cayman Islands 1.1 Others (individually less 0.4 than 1%) 100.0% INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $163,098,790. Net unrealized appreciation aggregated $18,842,670, of which $28,854,002 related to appreciated investment securities and $10,011,332 related to depreciated investment securities. The fund hereby designates approximately $1,682,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 73% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. ENERGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 181,941,460 value (cost $161,310,387) - See accompanying schedule Receivable for investments 1,121,045 sold Receivable for fund shares 318,951 sold Dividends receivable 584,801 Interest receivable 32,434 Redemption fees receivable 872 Other receivables 3,153 TOTAL ASSETS 184,002,716 LIABILITIES Payable for investments $ 26,700 purchased Payable for fund shares 3,613,434 redeemed Accrued management fee 87,536 Other payables and accrued 97,543 expenses Collateral on securities 4,505,696 loaned, at value TOTAL LIABILITIES 8,330,909 NET ASSETS $ 175,671,807 Net Assets consist of: Paid in capital $ 146,034,692 Undistributed net investment 458,754 income Accumulated undistributed net 8,547,288 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 20,631,073 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 7,602,344 $ 175,671,807 shares outstanding NET ASSET VALUE and $23.11 redemption price per share ($175,671,807 (divided by) 7,602,344 shares) Maximum offering price per $23.82 share (100/97.00 of $23.11) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 2,954,474 Dividends Interest 544,606 Security lending 18,737 TOTAL INCOME 3,517,817 EXPENSES Management fee $ 1,204,091 Transfer agent fees 1,207,603 Accounting and security 153,657 lending fees Non-interested trustees' 842 compensation Custodian fees and expenses 41,388 Registration fees 54,462 Audit 14,824 Legal 731 Miscellaneous 231 Total expenses before 2,677,829 reductions Expense reductions (95,101) 2,582,728 NET INVESTMENT INCOME 935,089 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 23,278,638 Foreign currency transactions 2,099 23,280,737 Change in net unrealized 34,688,428 appreciation (depreciation) on investment securities NET GAIN (LOSS) 57,969,165 NET INCREASE (DECREASE) IN $ 58,904,254 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 930,422 charges paid to FDC Sales charges - Retained by $ 928,434 FDC Deferred sales charges $ 9,981 withheld by FDC Exchange fees withheld by FSC $ 19,869 Expense reductions $ 94,960 Directed brokerage arrangements Custodian credits 141 $ 95,101
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ 935,089 $ 960,799 income Net realized gain (loss) 23,280,737 (12,098,193) Change in net unrealized 34,688,428 (22,108,978) appreciation (depreciation) NET INCREASE (DECREASE) IN 58,904,254 (33,246,372) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (786,455) (118,598) From net investment income From net realized gain (2,442,218) (2,920,602) TOTAL DISTRIBUTIONS (3,228,673) (3,039,200) Share transactions Net 235,865,753 115,988,469 proceeds from sales of shares Reinvestment of distributions 3,080,231 2,970,065 Cost of shares redeemed (239,412,583) (109,891,379) NET INCREASE (DECREASE) IN (466,599) 9,067,155 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 458,349 199,403 TOTAL INCREASE (DECREASE) 55,667,331 (27,019,014) IN NET ASSETS NET ASSETS Beginning of period 120,004,476 147,023,490 End of period (including $ 175,671,807 $ 120,004,476 undistributed net investment income of $458,754 and $825,869, respectively) OTHER INFORMATION Shares Sold 10,521,938 5,995,866 Issued in reinvestment of 141,927 133,126 distributions Redeemed (10,457,389) (5,669,002) Net increase (decrease) 206,476 459,990
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 16.23 $ 21.20 $ 21.31 $ 18.97 $ 16.10 period Income from Investment Operations Net investment income C .10 .13 .11 .13 .18 Net realized and unrealized 7.11 (4.71) 3.93 3.59 3.13 gain (loss) Total from investment 7.21 (4.58) 4.04 3.72 3.31 operations Less Distributions From net investment income (.09) (.02) (.09) (.13) (.11) From net realized gain (.29) (.40) (4.09) (1.31) (.36) Total distributions (.38) (.42) (4.18) (1.44) (.47) Redemption fees added to paid .05 .03 .03 .06 .03 in capital Net asset value, end of period $ 23.11 $ 16.23 $ 21.20 $ 21.31 $ 18.97 TOTAL RETURN A, B 44.89% (22.00)% 20.40% 20.35% 20.92% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 175,672 $ 120,004 $ 147,023 $ 203,265 $ 119,676 (000 omitted) Ratio of expenses to average 1.29% 1.46% 1.58% 1.57% 1.63% net assets Ratio of expenses to average 1.25% D 1.42% D 1.53% D 1.55% D 1.63% net assets after expense reductions Ratio of net investment .45% .68% .47% .62% 1.04% income to average net assets Portfolio turnover rate 124% 138% 115% 87% 97%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 ENERGY SERVICE PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT ENERGY SERVICE 121.24% 198.73% 207.03% SELECT ENERGY SERVICE (LOAD 114.53% 189.69% 197.74% ADJ.) S&P 500 11.73% 206.94% 425.47% GS Natural Resources 27.62% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Natural Resources Index - a market capitalization-weighted index of 105 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 FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT ENERGY SERVICE 121.24% 24.47% 11.87% SELECT ENERGY SERVICE (LOAD 114.53% 23.71% 11.53% ADJ.) S&P 500 11.73% 25.14% 18.05% GS Natural Resources 27.62% 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 1990/02/28 9700.00 10000.00 1990/03/31 10166.04 10265.00 1990/04/30 9628.91 10008.38 1990/05/31 11248.21 10984.19 1990/06/30 10671.58 10909.50 1990/07/31 11674.76 10874.59 1990/08/31 11469.38 9891.53 1990/09/30 11248.21 9409.81 1990/10/31 9834.28 9369.35 1990/11/30 9984.36 9974.61 1990/12/31 9637.14 10252.90 1991/01/31 9201.96 10699.92 1991/02/28 10681.56 11464.97 1991/03/31 9850.77 11742.42 1991/04/30 9898.24 11770.60 1991/05/31 10159.35 12279.09 1991/06/30 8830.09 11716.71 1991/07/31 9494.72 12262.71 1991/08/31 9391.86 12553.34 1991/09/30 8529.42 12343.69 1991/10/31 8656.02 12509.10 1991/11/30 7619.51 12004.98 1991/12/31 7374.23 13378.35 1992/01/31 7271.37 13129.52 1992/02/29 7421.70 13300.20 1992/03/31 6891.58 13040.85 1992/04/30 7461.27 13424.25 1992/05/31 8054.69 13490.03 1992/06/30 7587.86 13289.02 1992/07/31 7904.35 13832.55 1992/08/31 8307.88 13548.98 1992/09/30 8561.07 13708.86 1992/10/31 8117.98 13756.84 1992/11/30 7951.83 14225.94 1992/12/31 7627.42 14400.92 1993/01/31 7928.09 14521.89 1993/02/28 8711.40 14719.39 1993/03/31 9399.77 15029.97 1993/04/30 9906.47 14666.24 1993/05/31 10365.76 15059.30 1993/06/30 10310.33 15102.97 1993/07/31 10452.87 15042.56 1993/08/31 10817.14 15612.67 1993/09/30 10500.38 15492.45 1993/10/31 10349.93 15813.15 1993/11/30 9257.13 15662.92 1993/12/31 9225.87 15852.44 1994/01/31 9313.28 16391.43 1994/02/28 9265.60 15947.22 1994/03/31 8574.25 15251.92 1994/04/30 9022.55 15447.15 1994/05/31 9424.47 15700.48 1994/06/30 9711.55 15315.82 1994/07/31 9892.00 15818.18 1994/08/31 9498.29 16466.72 1994/09/30 9859.19 16063.29 1994/10/31 10252.90 16424.71 1994/11/30 9719.75 15826.52 1994/12/31 9278.21 16061.23 1995/01/31 9336.52 16477.70 1995/02/28 9969.50 17119.83 1995/03/31 10519.20 17625.04 1995/04/30 11160.51 18144.10 1995/05/31 11452.02 18869.32 1995/06/30 11060.56 19307.65 1995/07/31 11610.26 19947.89 1995/08/31 12076.67 19997.96 1995/09/30 12109.99 20841.88 1995/10/31 11060.56 20767.47 1995/11/30 11685.22 21679.16 1995/12/31 13070.60 22096.70 1996/01/31 13355.12 22848.87 1996/02/29 13872.42 23060.68 1996/03/31 14967.39 23282.76 1996/04/30 16092.97 23625.95 1996/05/31 15858.86 24235.26 1996/06/30 15893.54 24327.60 1996/07/31 15017.79 23252.80 1996/08/31 15971.58 23743.20 1996/09/30 16569.86 25079.47 1996/10/31 18416.74 25771.16 1996/11/30 19162.43 27719.21 1996/12/31 19486.16 27170.09 1997/01/31 20571.22 28867.68 1997/02/28 18347.30 29094.00 1997/03/31 19638.61 27898.53 1997/04/30 19411.60 29564.07 1997/05/31 22105.80 31363.93 1997/06/30 23552.86 32769.03 1997/07/31 27256.20 35376.46 1997/08/31 29188.80 33394.67 1997/09/30 32235.25 35223.70 1997/10/31 33463.35 34047.23 1997/11/30 29369.68 35623.28 1997/12/31 29594.38 36234.93 1998/01/31 25405.49 36635.68 1998/02/28 27232.67 39277.85 1998/03/31 29273.66 41289.27 1998/04/30 31684.15 41704.64 1998/05/31 29647.97 40987.74 1998/06/30 25781.29 42652.66 1998/07/31 20104.68 42198.41 1998/08/31 13739.05 36097.36 1998/09/30 16813.89 38409.76 1998/10/31 19261.41 41534.01 1998/11/30 14674.87 44051.38 1998/12/31 14880.55 46589.63 1999/01/31 14191.54 48538.00 1999/02/28 13461.39 47029.44 1999/03/31 18901.48 48911.09 1999/04/30 22038.02 50805.42 1999/05/31 21307.87 49605.90 1999/06/30 22881.28 52359.03 1999/07/31 23601.14 50724.38 1999/08/31 24742.64 50473.29 1999/09/30 22367.10 49089.82 1999/10/31 21852.91 52196.23 1999/11/30 22901.85 53257.37 1999/12/31 25616.75 56394.23 2000/01/31 25390.51 53560.99 2000/02/29 29774.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000316 093643 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Energy Service Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $29,774 - a 197.74% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS ENSCO International, Inc. 8.4 Smith International, Inc. 7.7 Weatherford International, Inc. 7.5 Noble Drilling Corp. 7.0 Cooper Cameron Corp. 6.7 Nabors Industries, Inc. 6.3 BJ Services Co. 5.7 Baker Hughes, Inc. 4.5 Marine Drilling Companies, Inc. 4.2 Halliburton Co. 4.2 62.2 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Energy Services 84.0% Row: 1, Col: 5, Value: 84.0 Oil & Gas 6.8% Row: 1, Col: 4, Value: 6.8 Retail & Wholesale, Miscellaneous 0.1% Row: 1, Col: 3, Value: 0.1 * All Others 9.1% Row: 1, Col: 1, Value: 9.1
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. (photograph of James Catudel)(photograph of Nick Tiller) NOTE TO SHAREHOLDERS: The following is an interview with James Catudal (left), who managed Fidelity Select Energy Service Portfolio for most of the period covered by this report, with additional comments from Nick Tiller (right), who became manager of the fund on February 1, 2000. Q. HOW DID THE FUND PERFORM, JIM? J.C. Extremely well. For the 12 months that ended February 29, 2000, the fund returned 121.24%, far outdistancing the 27.62% return of the Goldman Sachs Natural Resources Index, an index of 105 stocks designed to measure the performance of companies in the natural resources sector. The fund also finished well ahead of the Standard & Poor's 500 Index, which returned 11.73% during the same period. Q. WHAT WAS RESPONSIBLE FOR THE FUND'S OUTSTANDING PERFORMANCE? J.C. Sharply advancing crude oil and natural gas prices were the primary drivers of performance. To put the recent rally in perspective, at the end of the period oil prices were at levels not seen since the Gulf War in 1990, when Iraq invaded Kuwait. Firming prices resulted from both diminished supply and growing demand. On the supply side, the Organization of Petroleum Exporting Countries (OPEC), in concert with Norway and Mexico, was successful in reining in oil production. At the same time, demand for oil expanded due to economic recovery in Asia and Latin America as well as continued prosperity in the U.S. and Europe. In the case of natural gas, prices experienced a smaller but still significant rise. Typically, rallies of this magnitude stimulate more spending for exploration and production, which directly benefits energy service companies. While some stocks in the Goldman Sachs index reacted to surging energy prices, others were dependent on the prices for metals, paper or other commodities that were more stable during the period. The broader market as represented by the S&P 500 also was subject to factors that limited performance in some sectors, notably higher interest rates. Q. HOW DID YOU POSITION THE FUND DURING THE PERIOD? J.C. In the energy service sector, stocks are categorized as either early-cycle, mid-cycle or late-cycle, depending on how quickly the company's business activity responds to changes in energy prices. I focused the fund on early-cycle and North American stocks, which are normally the first to reflect stronger oil and gas prices. As I expected, those two groups led the rally, so the strategy paid off well. Q. WHAT STOCKS DID WELL FOR THE FUND? J.C. Two stocks mentioned in the report six months ago showed up once again on the list of top performers. BJ Services, a provider of pressure pumping services, and Noble Drilling - both early-cycle stocks - turned in stellar performances. Ensco International also made a positive contribution. Ensco is a shallow-water driller with high exposure to the Gulf of Mexico, which was one of the first drilling markets to recover. Another early-cycle stock, Weatherford International, was attractive to investors because of plans to spin off its drill pipe business. Q. WHAT STOCKS WERE DISAPPOINTING? J.C. There was only one stock that detracted significantly from performance - McDermott International. When the company released earnings in November, it revealed that potential asbestos-related liabilities had increased. The stock pulled back sharply on the news. Q. TURNING TO YOU, NICK, WHAT'S YOUR OUTLOOK? N.T. My long-term outlook for the energy service sector is positive. Inventories of oil recently hit 23-year lows, indicating extremely tight supplies. Over the short term, the supply squeeze has been alleviated by an OPEC production increase. Increased production lowered oil prices from the recent high of $34 per barrel. If worldwide economic activity continues to expand, however, it probably would not take long for the production increase to be absorbed by higher demand. Furthermore, it's important to realize that exploration and production activity - and therefore demand in the energy service market - will likely see a healthy increase if oil stays anywhere above $20 per barrel. One challenge as we move forward will be to time the migration from early-cycle holdings to mid- and late-cycle stocks, and I will be looking at that issue carefully in the months to come. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 043 TRADING SYMBOL: FSESX SIZE: as of February 29, 2000, more than $631 million MANAGER: Nicholas Tiller, since February 2000; analyst, various industries, since 1998; joined Fidelity in 1998 ENERGY SERVICE PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 90.9% SHARES VALUE (NOTE 1) COMPUTER SERVICES & SOFTWARE - - 0.0% MatrixOne, Inc. 200 $ 5,000 Onvia.com, Inc. 400 8,400 13,400 ELECTRICAL EQUIPMENT - 0.0% NQL Drilling Tools, Inc. 60,600 232,016 Class A (a) ENERGY SERVICES - 84.0% Atwood Oceanics, Inc. (a) 122,300 6,497,188 Baker Hughes, Inc. 1,096,836 28,380,632 BJ Services Co. (a) 627,076 35,782,524 Carbo Ceramics, Inc. 45,300 985,275 Coflexip SA sponsored ADR 117,600 5,269,950 Diamond Offshore Drilling, 226,500 7,191,375 Inc. ENSCO International, Inc. 1,750,600 52,955,646 Global Industries Ltd. (a) 837,300 8,582,325 Global Marine, Inc. (a) 911,000 20,440,563 Halliburton Co. 697,567 26,638,340 Hanover Compressor Co. (a) 71,900 3,374,806 Helmerich & Payne, Inc. 541,400 14,414,775 Input/Output, Inc. (a) 89,300 541,381 Lone Star Technologies, Inc. 201,400 7,552,500 (a) Marine Drilling Companies, 1,169,800 26,686,063 Inc. (a) McDermott International, Inc. 846,300 7,934,063 Nabors Industries, Inc. (a) 1,114,577 39,985,450 Noble Drilling Corp. (a) 1,225,450 44,116,200 Oceaneering International, 766,500 14,563,500 Inc. (a) Offshore Logistics, Inc. (a) 158,900 1,579,069 Parker Drilling Co. (a) 321,100 1,284,400 Precision Drilling Corp. 58,400 1,671,909 Class A (a) Rowan Companies, Inc. (a) 923,100 23,192,888 Ryan Energy Technologies, 212,300 446,685 Inc. (a) Santa Fe International Corp. 54,700 1,569,206 Schlumberger Ltd. 270,445 19,979,124 SEACOR SMIT, Inc. (a) 67,100 3,254,350 Smith International, Inc. (a) 777,000 48,708,188 Superior Energy Services, 96,300 710,213 Inc. (a) Tidewater, Inc. 653,465 18,501,228 TMBR/Sharp Drilling, Inc. (a) 14,100 133,950 Transocean Sedco Forex, Inc. 75,327 2,970,709 Tuboscope, Inc. (a) 409,600 6,835,200 Varco International, Inc. (a) 75,400 834,113 Weatherford International, 1,049,305 47,218,725 Inc. (a) 530,782,513 ENGINEERING - 0.0% Stolt Comex Seaway SA (a) 100 1,300 IRON & STEEL - 0.0% NS Group, Inc. (a) 14,600 170,638 SHARES VALUE (NOTE 1) OIL & GAS - 6.8% Compagnie Generale de 25,478 $ 292,997 Geophysique SA sponsored ADR (a) Cooper Cameron Corp. (a) 770,176 42,552,224 Petroleum Geo-Services ASA 3,900 63,863 sponsored ADR (a) 42,909,084 RETAIL & WHOLESALE, MISCELLANEOUS - 0.1% Newpark Resources, Inc. (a) 38,900 303,906 TOTAL COMMON STOCKS 574,412,857 (Cost $382,067,236) CASH EQUIVALENTS - 4.5% Central Cash Collateral Fund, 9,473,400 9,473,400 5.75% (b) Taxable Central Cash Fund, 18,714,291 18,714,291 5.66% (b) TOTAL CASH EQUIVALENTS 28,187,691 (Cost $28,187,691) TOTAL INVESTMENT PORTFOLIO - 602,600,548 95.4% (Cost $410,254,927) NET OTHER ASSETS - 4.6% 29,285,438 NET ASSETS - 100% $ 631,885,986 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 $433,935,367 and $636,368,911, 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 $117,730 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $9,998,063. The fund received cash collateral of $9,473,400 which was invested in cash equivalents. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $416,294,903. Net unrealized appreciation aggregated $186,305,645, of which $208,041,840 related to appreciated investment securities and $21,736,195 related to depreciated investment securities. At February 29, 2000, the fund had a capital loss carryforward of approximately $162,650,000 of which $85,150,000 and $77,500,000 will expire on February 28, 2007 and February 29, 2008, respectively. ENERGY SERVICE PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 602,600,548 value (cost $410,254,927) - See accompanying schedule Receivable for investments 42,212,019 sold Receivable for fund shares 5,804,129 sold Dividends receivable 340,011 Interest receivable 102,187 Redemption fees receivable 4,733 Other receivables 2,235 TOTAL ASSETS 651,065,862 LIABILITIES Payable for investments $ 1,477,966 purchased Payable for fund shares 7,672,651 redeemed Accrued management fee 297,771 Other payables and accrued 258,088 expenses Collateral on securities 9,473,400 loaned, at value TOTAL LIABILITIES 19,179,876 NET ASSETS $ 631,885,986 Net Assets consist of: Paid in capital $ 608,725,839 Accumulated undistributed net (169,185,474) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 192,345,621 (depreciation) on investments NET ASSETS, for 21,816,791 $ 631,885,986 shares outstanding NET ASSET VALUE and $28.96 redemption price per share ($631,885,986 (divided by) 21,816,791 shares) Maximum offering price per $29.86 share (100/97.00 of $28.96) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 3,345,033 Dividends Interest 2,162,744 Security lending 14,230 TOTAL INCOME 5,522,007 EXPENSES Management fee $ 3,977,952 Transfer agent fees 3,794,938 Accounting and security 467,998 lending fees Non-interested trustees' 2,140 compensation Custodian fees and expenses 29,465 Registration fees 152,192 Audit 25,754 Legal 2,417 Miscellaneous 1,126 Total expenses before 8,453,982 reductions Expense reductions (218,638) 8,235,344 NET INVESTMENT INCOME (LOSS) (2,713,337) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 17,447,443 Foreign currency transactions (15,438) 17,432,005 Change in net unrealized 413,309,116 appreciation (depreciation) on investment securities NET GAIN (LOSS) 430,741,121 NET INCREASE (DECREASE) IN $ 428,027,784 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 2,622,816 charges paid to FDC Sales charges - Retained by $ 2,615,772 FDC Deferred sales charges $ 8,292 withheld by FDC Exchange fees withheld by FSC $ 80,663 Expense reductions $ 214,185 Directed brokerage arrangements Custodian credits 1,312 Transfer agent credits 3,141 $ 218,638
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (2,713,337) $ (3,167,669) income (loss) Net realized gain (loss) 17,432,005 (185,190,842) Change in net unrealized 413,309,116 (243,966,665) appreciation (depreciation) NET INCREASE (DECREASE) IN 428,027,784 (432,325,176) NET ASSETS RESULTING FROM OPERATIONS From net realized gain - (54,767,354) Share transactions Net 1,103,932,587 1,182,599,212 proceeds from sales of shares Reinvestment of distributions - 53,845,591 Cost of shares redeemed (1,270,153,739) (1,305,871,677) NET INCREASE (DECREASE) IN (166,221,152) (69,426,874) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 3,182,982 4,414,000 TOTAL INCREASE (DECREASE) 264,989,614 (552,105,404) IN NET ASSETS NET ASSETS Beginning of period 366,896,372 919,001,776 End of period $ 631,885,986 $ 366,896,372 OTHER INFORMATION Shares Sold 52,841,715 53,434,483 Issued in reinvestment of - 1,829,614 distributions Redeemed (59,047,414) (60,036,675) Net increase (decrease) (6,205,699) (4,772,578)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 F 1999 1998 1997 1996 f SELECTED PER-SHARE DATA Net asset value, beginning of $ 13.09 $ 28.02 $ 20.46 $ 16.09 $ 11.97 period Income from Investment Operations Net investment income (loss) C (.09) (.10) (.10) (.01) .08 d Net realized and unrealized 15.86 (13.26) 9.36 5.05 4.49 gain (loss) Total from investment 15.77 (13.36) 9.26 5.04 4.57 operations Less Distributions From net investment income - - - - (.04) From net realized gain - (1.71) (1.85) (.79) (.48) Total distributions - (1.71) (1.85) (.79) (.52) Redemption fees added to paid .10 .14 .15 .12 .07 in capital Net asset value, end of period $ 28.96 $ 13.09 $ 28.02 $ 20.46 $ 16.09 TOTAL RETURN A, B 121.24% (50.57)% 48.43% 32.26% 39.15% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 631,886 $ 366,896 $ 919,002 $ 439,504 $ 273,805 (000 omitted) Ratio of expenses to average 1.23% 1.39% 1.25% 1.47% 1.59% net assets Ratio of expenses to average 1.20% e 1.35% e 1.22% e 1.45% e 1.58% e net assets after expense reductions Ratio of net investment (.40)% (.49)% (.35)% (.07)% .60% income (loss) to average net assets Portfolio turnover rate 69% 75% 78% 167% 223%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.02 PER SHARE. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR THE YEAR ENDED FEBRUARY 29 GOLD PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT GOLD 5.16% -21.38% -18.37% SELECT GOLD (LOAD ADJ.) 1.93% -23.81% -20.89% S&P 500 11.73% 206.94% 425.47% GS Natural Resources 27.62% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Natural Resources Index - - a market capitalization-weighted index of 105 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 FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT GOLD 5.16% -4.70% -2.01% SELECT GOLD (LOAD ADJ.) 1.93% -5.29% -2.32% S&P 500 11.73% 25.14% 18.05% GS Natural Resources 27.62% 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 1990/02/28 9700.00 10000.00 1990/03/31 9323.14 10265.00 1990/04/30 8312.73 10008.38 1990/05/31 9044.59 10984.19 1990/06/30 8465.65 10909.50 1990/07/31 9055.52 10874.59 1990/08/31 8891.67 9891.53 1990/09/30 8886.20 9409.81 1990/10/31 7427.93 9369.35 1990/11/30 7335.08 9974.61 1990/12/31 7914.02 10252.90 1991/01/31 6816.22 10699.92 1991/02/28 7433.39 11464.97 1991/03/31 7406.08 11742.42 1991/04/30 7143.92 11770.60 1991/05/31 7389.70 12279.09 1991/06/30 7886.71 11716.71 1991/07/31 7799.32 12262.71 1991/08/31 7165.77 12553.34 1991/09/30 7045.61 12343.69 1991/10/31 7586.32 12509.10 1991/11/30 7569.93 12004.98 1991/12/31 7427.93 13378.35 1992/01/31 7608.16 13129.52 1992/02/29 7373.31 13300.20 1992/03/31 6870.83 13040.85 1992/04/30 6521.28 13424.25 1992/05/31 6985.53 13490.03 1992/06/30 7438.85 13289.02 1992/07/31 7908.56 13832.55 1992/08/31 7761.09 13548.98 1992/09/30 7717.40 13708.86 1992/10/31 7488.01 13756.84 1992/11/30 6854.45 14225.94 1992/12/31 7198.54 14400.92 1993/01/31 7061.99 14521.89 1993/02/28 7728.32 14719.39 1993/03/31 8596.73 15029.97 1993/04/30 9683.61 14666.24 1993/05/31 10759.57 15059.30 1993/06/30 11387.67 15102.97 1993/07/31 12294.31 15042.56 1993/08/31 11649.83 15612.67 1993/09/30 10415.48 15492.45 1993/10/31 11972.07 15813.15 1993/11/30 11983.00 15662.92 1993/12/31 12862.33 15852.44 1994/01/31 12867.79 16391.43 1994/02/28 12376.24 15947.22 1994/03/31 12676.63 15251.92 1994/04/30 11606.14 15447.15 1994/05/31 12108.61 15700.48 1994/06/30 11513.29 15315.82 1994/07/31 11343.98 15818.18 1994/08/31 11879.22 16466.72 1994/09/30 12916.95 16063.29 1994/10/31 11983.00 16424.71 1994/11/30 10562.95 15826.52 1994/12/31 10874.27 16061.23 1995/01/31 9738.23 16477.70 1995/02/28 10071.40 17119.83 1995/03/31 11617.06 17625.04 1995/04/30 11573.37 18144.10 1995/05/31 11813.68 18869.32 1995/06/30 11977.53 19307.65 1995/07/31 12299.77 19947.89 1995/08/31 12327.08 19997.96 1995/09/30 12321.62 20841.88 1995/10/31 10836.04 20767.47 1995/11/30 11840.99 21679.16 1995/12/31 12092.23 22096.70 1996/01/31 14238.68 22848.87 1996/02/29 14806.70 23060.68 1996/03/31 15161.71 23282.76 1996/04/30 15522.18 23625.95 1996/05/31 17215.32 24235.26 1996/06/30 14784.85 24327.60 1996/07/31 14511.77 23252.80 1996/08/31 15991.89 23743.20 1996/09/30 15696.96 25079.47 1996/10/31 15265.48 25771.16 1996/11/30 14610.08 27719.21 1996/12/31 14501.06 27170.09 1997/01/31 13882.92 28867.68 1997/02/28 15709.48 29094.00 1997/03/31 13214.67 27898.53 1997/04/30 12416.38 29564.07 1997/05/31 13128.75 31363.93 1997/06/30 12004.27 32769.03 1997/07/31 11815.87 35376.46 1997/08/31 11927.73 33394.67 1997/09/30 12946.24 35223.70 1997/10/31 10962.21 34047.23 1997/11/30 8377.67 35623.28 1997/12/31 8789.78 36234.93 1998/01/31 9278.43 36635.68 1998/02/28 8931.08 39277.85 1998/03/31 9513.93 41289.27 1998/04/30 10067.33 41704.64 1998/05/31 8648.49 40987.74 1998/06/30 7594.66 42652.66 1998/07/31 7035.36 42198.41 1998/08/31 5198.51 36097.36 1998/09/30 8053.87 38409.76 1998/10/31 7812.49 41534.01 1998/11/30 7647.64 44051.38 1998/12/31 8030.32 46589.63 1999/01/31 7806.60 48538.00 1999/02/28 7529.89 47029.44 1999/03/31 7541.67 48911.09 1999/04/30 8719.14 50805.42 1999/05/31 7376.82 49605.90 1999/06/30 7730.06 52359.03 1999/07/31 7270.85 50724.38 1999/08/31 7588.77 50473.29 1999/09/30 9555.14 49089.82 1999/10/31 8748.57 52196.23 1999/11/30 8401.22 53257.37 1999/12/31 8701.47 56394.23 2000/01/31 7665.30 53560.99 2000/02/29 7911.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000309 111933 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Gold Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have been $7,911 - - a 20.89% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Meridian Gold, Inc. 13.8 Anglogold Ltd. sponsored ADR 7.8 Newcrest Mining Ltd. 6.8 Agnico-Eagle Mines Ltd. 5.0 Newmont Mining Corp. 4.9 Gold Fields Ltd. 4.8 Normandy Mining Ltd. 4.6 Anglogold Ltd. 4.6 Barrick Gold Corp. 4.4 Delta Gold NL 4.4 61.1 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Gold Ores 58.7% Row: 1, Col: 6, Value: 58.7 Gold & Silver Ores 28.1% Row: 1, Col: 5, Value: 28.1 Silver Ores 6.5% Row: 1, Col: 4, Value: 6.5 Registered Investment Companies 1.9% Row: 1, Col: 3, Value: 1.9 Miscellaneous Nonmetallic Minerals 1.2% Row: 1, Col: 2, Value: 1.2 * All Others 3.6% Row: 1, Col: 1, Value: 3.6
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. 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. While encouraging in some respects, the fund's return reflected gold's mediocre performance. For the 12 months that ended February 29, 2000, the fund returned 5.16%, trailing the 11.73% return of the Standard & Poor's 500 Index and the 27.62% return of the Goldman Sachs Natural Resources Index, an index of 105 stocks designed to measure the performance of companies in the natural resources sector. Q. WHY DID THE FUND UNDERPERFORM ITS INDEXES? A. The price of gold, which largely determines the profitability of gold mining companies, failed to make much upside progress. Gold plunged in response to the Bank of England's announcement in May that it planned to sell approximately 400 tons of gold over the next 18 months. After flirting with the $250-per-ounce price level over the summer, prices rallied in September on news of an agreement by European central banks to restrict their collective gold sales to no more than 500 tons per year for the next five years. The rally carried the yellow metal to around $320 per ounce, from where it settled back to approximately $290 per ounce as the period came to an end. While gold merely treaded water, however, the prices of such base metals as copper, nickel, aluminum and zinc rallied sharply during the period, providing a boost to the Goldman Sachs index. Another factor helping the Goldman Sachs index was its weighting of energy stocks, which mirrored significantly higher oil and gas prices during the period. Generally favorable economic conditions, including robust growth, minimal inflation and low - albeit rising - interest rates, enabled the S&P 500 to outperform the fund. Q. WHAT OTHER SIGNIFICANT DEVELOPMENTS OCCURRED DURING THE PERIOD? A. Several major gold producers announced plans to reduce their hedging operations. Less hedging activity should support the price of gold because hedging requires a mining company to sell gold in the forward or futures market, which exerts downward pressure on gold. Q. WHAT STOCKS HELPED THE FUND'S PERFORMANCE? A. Stillwater Mining was a strong performer. The company is the only North American supplier of palladium, a metal used in the catalytic converters of automobile emission control devices. A shortage of palladium, caused in part by lower-than-expected deliveries of the metal from Russia, was responsible for Stillwater's strength. Anglogold Ltd. was another positive contributor. The largest gold company in the world, Anglogold executed an effective restructuring program that succeeded in lowering costs and streamlining production. Newmont Mining also helped the fund's performance. The company benefited from a substantial increase in production and reserves at its Yanacoccha property in Peru. Q. WHAT STOCKS DETRACTED FROM PERFORMANCE? A. Normandy Mining was a disappointment due to difficulties with containing costs and negligible progress toward increasing production. Franco-Nevada, a company that derives most of its revenues from gold royalties, suffered production delays at its Aber diamond and Voise Bay nickel interests due to environmental and economic difficulties. Homestake Mining also underperformed. Investors were cautious about the stock due to uncertainty over the company's restructuring effort. Q. WHAT'S YOUR OUTLOOK, GEORGE? A. The decision by European central banks to curtail their gold sales and the willingness of gold producers to restrict their hedging operations, both of which have depressed the price of gold in the past, bode well for the long-suffering gold market. Furthermore, improving economic conditions in Asia and continued prosperity in the U.S. and Europe should keep demand for gold jewelry at healthy levels. However, the real catalyst for a recovery in gold would be a resurgence of inflation. While we have yet to see evidence of such a resurgence, stronger worldwide economic activity would suggest that it is not an unlikely prospect in the next year or two. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. NOTE TO SHAREHOLDERS: Effective April 1, 2000, Niel Marotta became portfolio manager of Fidelity Select Gold Portfolio. (checkmark)FUND FACTS START DATE: December 16, 1985 FUND NUMBER: 041 TRADING SYMBOL: FSAGX SIZE: as of February 29, 2000, more than $283 million MANAGER: George Domolky, since 1997; manager, Fidelity Select Precious Metals and Minerals Portfolio, since 1997; Fidelity Canada Fund, 1987-1996; Fidelity Select Food and Agriculture Portfolio, 1985-1987; joined Fidelity in 1981 GOLD PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 98.2% SHARES VALUE (NOTE 1) AUSTRALIA - 19.1% PRECIOUS METALS - 19.1% GOLD & SILVER ORES - 6.8% Normandy Mining Ltd. 24,247,212 $ 13,050,468 Sons of Gwalia NL 2,222,517 6,407,314 19,457,782 GOLD ORES - 12.3% Delta Gold NL 9,166,328 12,362,232 Lihir Gold Ltd. (a) 7,030,720 3,218,671 Newcrest Mining Ltd. (a) 7,203,062 19,384,358 34,965,261 TOTAL AUSTRALIA 54,423,043 CANADA - 40.6% METALS & MINING - 1.7% METAL MINING - 0.3% Ivanhoe Mines Ltd. (a) 100,000 63,466 Pangea Goldfields, Inc. (a) 319,200 781,705 845,171 METAL MINING SERVICES - 0.2% Minefinders Corp. Ltd. (a) 497,800 343,405 Minefinders Corp. Ltd. (a)(d) 200,000 137,969 481,374 MISCELLANEOUS NONMETALLIC MINERALS - 1.2% DIA Metropolitan Minerals Ltd.: Class A (sub-vtg.) (a) 50,650 648,150 Class B (multi-vtg.) (a) 204,400 2,897,641 3,545,791 TOTAL METALS & MINING 4,872,336 OIL & GAS - 0.5% OIL & GAS FIELD EXPLORATION SERVICES - 0.5% Southwestern Gold Corp. (a) 362,500 1,475,407 PRECIOUS METALS - 38.4% GOLD & SILVER ORES - 4.1% Goldcorp, Inc. Class A (a) 2,385,300 11,189,321 Richmont Mines, Inc. (a) 206,300 284,630 11,473,951 GOLD ORES - 34.3% Agnico-Eagle Mines Ltd. 2,026,100 14,116,729 Barrick Gold Corp. 765,500 12,489,014 Francisco Gold Corp. (a) 221,400 954,574 Francisco Gold Corp. (d) 199,000 857,995 Franco Nevada Mining Corp. 587,294 6,806,387 Ltd. Franco Nevada Mining Corp. 187,100 2,168,377 Ltd. (d) Franco Nevada Mining Corp. 58,334 291,750 Ltd. Class B warrants 9/15/03 (a)(d) Glamis Gold Ltd. (a) 1,760,800 3,644,040 SHARES VALUE (NOTE 1) High River Gold Mines Ltd. (a) 120,000 $ 49,669 IAMGOLD Corp. (a) 335,000 727,959 IAMGOLD Corp. (d) 60,000 130,381 Meridian Gold, Inc. (a)(c) 6,422,800 39,212,042 Metallica Resources, Inc. 1,490,800 462,790 (a)(c) Metallica Resources, Inc. 200,000 62,086 (a)(c)(d) Placer Dome, Inc. 1,262,452 10,973,300 Repadre Capital Corp. (a) 576,000 715,232 Repadre Capital Corp. (a)(d) 155,000 192,467 Teck Corp. Class B (sub. vtg.) 465,300 3,530,836 97,385,628 TOTAL PRECIOUS METALS 108,859,579 TOTAL CANADA 115,207,322 GRAND CAYMAN ISLANDS - 0.0% PRECIOUS METALS - 0.0% SILVER ORES - 0.0% Apex Silver Mines Ltd. (a) 14,800 153,550 PERU - 6.5% PRECIOUS METALS - 6.5% SILVER ORES - 6.5% Compania de Minas Buenaventura SA: Class B 1,265,864 11,424,100 Class B sponsored ADR 400,600 6,985,463 18,409,563 SOUTH AFRICA - 19.8% METALS & MINING - 0.1% MISCELLANEOUS METAL ORES, NEC - - 0.1% Anglo American Platinum Corp. 800 22,722 Ltd. Impala Platinum Holdings Ltd. 4,000 142,643 165,365 PRECIOUS METALS - 19.7% GOLD & SILVER ORES - 17.2% Anglogold Ltd. 251,086 13,034,681 Anglogold Ltd. sponsored ADR 870,628 22,309,843 Gold Fields Ltd. 2,949,705 13,683,839 49,028,363 GOLD ORES - 2.5% Avgold Ltd. (a) 45,000 30,604 Gold Fields of South Africa 85,600 210,708 Ltd. Gold Fields of South Africa 73,700 179,644 Ltd. sponsored ADR Harmony Gold Mining Co. Ltd. 1,065,700 6,642,233 7,063,189 TOTAL PRECIOUS METALS 56,091,552 TOTAL SOUTH AFRICA 56,256,917 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) UNITED STATES OF AMERICA - 12.2% INVESTMENT COMPANIES - 1.9% REGISTERED INVESTMENT COMPANIES - 1.9% ASA Ltd. 293,000 $ 5,383,875 METALS & MINING - 0.4% COPPER ORES - 0.4% Freeport-McMoRan Copper & 73,700 1,013,375 Gold, Inc. Class B (a) PRECIOUS METALS - 9.6% GOLD ORES - 9.6% Homestake Mining Co. 550,006 3,575,039 Newmont Mining Corp. 630,565 13,951,251 Stillwater Mining Co. (a) 170,950 6,346,519 Stillwater Mining Co. (d) 93,900 3,486,038 27,358,847 SERVICES - 0.3% JEWELRY, PRECIOUS METAL - 0.3% Lazare Kaplan International, 110,300 827,250 Inc. (a) TOTAL UNITED STATES OF AMERICA 34,583,347 TOTAL COMMON STOCKS 279,033,742 (Cost $326,384,804) CASH EQUIVALENTS - 2.6% Central Cash Collateral Fund, 4,418,500 4,418,500 5.75% (b) Taxable Central Cash Fund, 2,870,802 2,870,802 5.66% (b) TOTAL CASH EQUIVALENTS 7,289,302 (Cost $7,289,302) TOTAL INVESTMENT PORTFOLIO - 286,323,044 100.8% (Cost $333,674,106) NET OTHER ASSETS - (0.8)% (2,356,840) NET ASSETS - 100% $ 283,966,204 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 $7,327,063 or 2.6% of net assets. OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $256,841,346 and $139,436,619, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $17,440 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $4,336,094. The fund received cash collateral of $4,418,500 which was invested in cash equivalents. The fund participated in the bank borrowing program. The average daily loan balance during the period for which loans were outstanding amounted to $2,062,625. The weighted average interest rate was 5.75%. Transactions during the period with companies which are or were affiliates are as follows:
PURCHASE SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Meridan Gold, Inc. $ - $ - $ - $ 39,212,042 Metallica Resources, Inc. - - - 524,876 TOTALS $ - $ - $ - $ 39,736,918
INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $336,303,760. Net unrealized depreciation aggregated $49,980,716, of which $30,359,101 related to appreciated investment securities and $80,339,817 related to depreciated investment securities. At February 29, 2000, the fund had a capital loss carryforward of approximately $173,233,000 of which $1,376,000, $91,543,000, $37,334,000 and $42,980,000 will expire on February 28, 2001, 2006, 2007 and February 29, 2008, respectively. Approximately $92,589,000, of which $1,376,000, $55,694,000, $20,723,000 and $14,796,000 will expire on February 28, 2001, 2006, 2007 and February 29, 2008, respectively, was acquired in the merger and is available to offset future capital gains of the fund to the extent provided by regulations. GOLD PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 286,323,044 value (cost $333,674,106) - See accompanying schedule Receivable for investments 4,202,231 sold Receivable for fund shares 1,730,990 sold Dividends receivable 1,748,052 Interest receivable 26,058 Redemption fees receivable 16,853 Other receivables 8,224 TOTAL ASSETS 294,055,452 LIABILITIES Payable to custodian bank $ 790,170 Payable for investments 464,125 purchased Payable for fund shares 4,041,993 redeemed Accrued management fee 145,049 Other payables and accrued 229,411 expenses Collateral on securities 4,418,500 loaned, at value TOTAL LIABILITIES 10,089,248 NET ASSETS $ 283,966,204 Net Assets consist of: Paid in capital $ 413,634,388 Undistributed net investment 1,223,012 income Accumulated undistributed net (83,529,614) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation (47,361,582) (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 21,107,056 $ 283,966,204 shares outstanding NET ASSET VALUE and $13.45 redemption price per share ($283,966,204 (divided by) 21,107,056 shares) Maximum offering price per $13.87 share (100/97.00 of $13.45) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 2,947,486 Dividends Special dividend from Gold 875,395 Fields Ltd. Interest 156,339 Security lending 6,804 TOTAL INCOME 3,986,024 EXPENSES Management fee $ 1,103,778 Transfer agent fees 1,392,489 Accounting and security 140,439 lending fees Non-interested trustees' 82 compensation Custodian fees and expenses 118,812 Registration fees 51,248 Audit 18,416 Legal 710 Interest 2,637 Total expenses before 2,828,611 reductions Expense reductions (141,972) 2,686,639 NET INVESTMENT INCOME 1,299,385 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (5,353,195) Foreign currency transactions (40,781) (5,393,976) Change in net unrealized appreciation (depreciation) on: Investment securities 7,856,842 Assets and liabilities in (7,555) 7,849,287 foreign currencies NET GAIN (LOSS) 2,455,311 NET INCREASE (DECREASE) IN $ 3,754,696 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 639,487 charges paid to FDC Sales charges - Retained by $ 637,994 FDC Deferred sales charges $ 22,792 withheld by FDC Exchange fees withheld by FSC $ 25,861 Expense reductions Directed $ 141,928 brokerage arrangements Custodian credits 44 $ 141,972
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ 1,299,385 $ (1,223,735) income (loss) Net realized gain (loss) (5,393,976) (32,008,820) Change in net unrealized 7,849,287 (3,278,038) appreciation (depreciation) NET INCREASE (DECREASE) IN 3,754,696 (36,510,593) NET ASSETS RESULTING FROM OPERATIONS Share transactions Net 349,062,624 403,467,113 proceeds from sales of shares Net asset value of shares 104,054,922 - issued in exchange for the net assets of Fidelity Select Precious Metals and Minerals Portfolio (Note 10) Cost of shares redeemed (354,065,350) (408,945,830) NET INCREASE (DECREASE) IN 99,052,196 (5,478,717) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 1,539,985 1,940,375 TOTAL INCREASE (DECREASE) 104,346,877 (40,048,935) IN NET ASSETS NET ASSETS Beginning of period 179,619,327 219,668,262 End of period (including $ 283,966,204 $ 179,619,327 undistributed net investment income (loss) of $1,223,012 and $(35,591), respectively) OTHER INFORMATION Shares Sold 24,108,341 29,231,688 Issued in exchange for the 7,736,425 - shares of Fidelity Select Precious Metals and Minerals Portfolio (Note 10) Redeemed (24,782,701) (29,663,500) Net increase (decrease) 7,062,065 (431,812)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 12.79 $ 15.17 $ 28.21 $ 27.11 $ 18.44 period Income from Investment Operations Net investment income (loss) C .09 D (.08) (.13) (.16) (.06) Net realized and unrealized .46 (2.43) (11.78) 1.60 8.62 gain (loss) Total from investment .55 (2.51) (11.91) 1.44 8.56 operations Less Distributions From net realized gain - - (1.29) (.50) - Redemption fees added to paid .11 .13 .16 .16 .11 in capital Net asset value, end of period $ 13.45 $ 12.79 $ 15.17 $ 28.21 $ 27.11 TOTAL RETURN A, B 5.16% (15.69)% (43.15)% 6.10% 47.02% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 283,966 $ 179,619 $ 219,668 $ 428,103 $ 451,493 (000 omitted) Ratio of expenses to average 1.49% 1.57% 1.55% 1.44% 1.39% net assets Ratio of expenses to average 1.41% F 1.54% F 1.48% F 1.42% F 1.39% net assets after expense reductions Ratio of net investment .68% (.59)% (.67)% (.59)% (.27)% income (loss) to average net assets Portfolio turnover rate 71% G 59% 89% 63% 56%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM GOLD FIELDS LTD. WHICH AMOUNTED TO $.06 PER SHARE. E FOR THE YEAR ENDED FEBRUARY 29 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 THE PORTFOLIO TURNOVER RATE DOES NOT INCLUDE THE ASSETS ACQUIRED IN THE MERGER. 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 life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR LIFE OF FUND 2000 SELECT NATURAL RESOURCES 48.42% 20.13% SELECT NATURAL RESOURCES 43.89% 16.45% (LOAD ADJ.) S&P 500 11.73% 79.56% GS Natural Resources 27.62% 18.35% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year or since the fund started on March 3, 1997. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Natural Resources Index - a market capitalization-weighted index of 105 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 FEBRUARY 29, PAST 1 YEAR LIFE OF FUND 2000 SELECT NATURAL RESOURCES 48.42% 6.31% SELECT NATURAL RESOURCES 43.89% 5.22% (LOAD ADJ.) S&P 500 11.73% 21.59% GS Natural Resources 27.62% 5.79% 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 12010.49 17247.76 1999/09/30 11552.76 16775.00 1999/10/31 11164.68 17836.52 1999/11/30 11284.09 18199.14 1999/12/31 11960.74 19271.06 2000/01/31 11572.66 18302.89 2000/02/29 11645.00 17956.41 IMATRL PRASUN SHR__CHT 20000229 20000320 152754 R00000000000039 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Natural Resources Portfolio on March 3, 1997 when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have been $11,645 - a 16.45% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $17,956 - a 79.56% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Exxon Mobil Corp. 7.2 Royal Dutch Petroleum Co. (NY 6.1 Shares) Schlumberger Ltd. 5.4 Chevron Corp. 5.2 Halliburton Co. 3.9 Alcoa, Inc. 3.7 Atlantic Richfield Co. 3.1 Amerada Hess Corp. 3.0 BP Amoco PLC sponsored ADR 2.7 Noble Drilling Corp. 2.4 42.7 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Oil & Gas 55.1% Row: 1, Col: 6, Value: 55.1 Energy Services 26.0% Row: 1, Col: 5, Value: 26.0 Metals & Mining 5.7% Row: 1, Col: 4, Value: 5.7 Precious Metals 3.9% Row: 1, Col: 3, Value: 3.9 Gas 2.6% Row: 1, Col: 2, Value: 2.6 * All Others 6.7% Row: 1, Col: 1, Value: 6.7
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. NATURAL RESOURCES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Scott Offen) Scott Offen, Portfolio Manager of Fidelity Select Natural Resources Portfolio Q. SCOTT, HOW DID THE FUND PERFORM DURING ITS FISCAL YEAR? A. For the 12 months that ended February 29, 2000, the fund returned 48.42%, while the Goldman Sachs Natural Resources Index - an index of 105 stocks designed to measure the performance of companies in the natural resources sector - returned 27.62%, and the Standard & Poor's 500 Index returned 11.73%. Q. WHAT FACTORS HELPED PERFORMANCE? A. Overall, the sector was helped by the strong performance of energy stocks during the first six months of the period. Oil prices hit historically high levels and fundamentals in the energy industry - which makes up a large proportion of the natural resources sector - were quite positive. The fund beat the Goldman Sachs index because I overweighted energy stocks and significantly underweighted paper and forest product stocks. The latter group was added to the index in January 2000, but they were unappealing to me because it appeared their fundamentals had peaked after a rally in 1999. Q. WHAT MOVES HAVE YOU MADE WITH THE FUND SINCE TAKING OVER AT THE BEGINNING OF SEPTEMBER? A. I trimmed the number of stocks in the fund to focus on what I felt were the best ideas. In addition, with oil prices at very high levels, I organized the portfolio to benefit from a downward trend in prices going forward. In particular, I turned my attention to stocks that typically do well when the price of oil is high but trending downward, namely dollar-wise refiners and integrated oil companies. A greater proportion of their earnings comes from refining and marketing. As the price of oil falls, these companies typically see their earnings rise. While the fund was hurt initially by its investments in exploration and production (E&P) stocks, I maintained an overweighted position in that industry relative to the Goldman Sachs index because I felt investors were underestimating the sustainability of the price of oil. The fund also carried a larger weighting in energy services stocks than the index - a positive for performance - because I felt that while oil prices may fall, they should stay high enough to stimulate increased supply. Q. WHAT INVESTMENTS DID YOU PURSUE OUTSIDE THE ENERGY SPHERE? A. I looked to cut back the fund's investments in gold stocks - which had done well for the fund - because it was uncertain whether or not central banks around the world would continue to sell some of their reserves. I also reduced the fund's investments in non-ferrous metals at around their peak, and increased the percentage of the fund dedicated to steel investments. Stocks in that industry moved upward but then fell back. Q. WHICH STOCKS PERFORMED WELL? WHICH DISAPPOINTED? A. Enron Corp. - which the fund held during the period but not at the end of it - and Dynegy, two natural gas and crude oil marketers, performed well due to their diversification into other industries. Both started operations to provide broadband delivery of Internet content and applications. The stock of Calpine, an independent power producer, took off due to deregulation in the U.S. electric industry. On the downside, two E&P companies, Burlington Resources and Santa Fe Snyder, suffered from investors' belief that the price of oil would collapse. Q. WHAT IS YOUR OUTLOOK? A. At the end of the period, energy stocks were cheap. Prices reflected an expectation that oil would fall from where it stood at around $30 per barrel to possibly as low as $16. My feeling is that the long-term price will be higher than $16. Overall, the fundamentals for the natural resources sector remain positive. The big question is whether or not that will help stock prices. Recently, the market has been driven by a preference for rapid-growth stocks, mainly in the technology sector. People once invested in natural resources stocks because they offered potentially high rewards for taking on some additional risk. That role has been assumed by Internet stocks. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: March 3, 1997 FUND NUMBER: 514 TRADING SYMBOL: FNARX SIZE: as of February 29, 2000, more than $14 million MANAGER: Scott Offen, since September 1999; manager, Fidelity Select Energy Portfolio, since September 1999; Fidelity Advisor Natural Resources Portfolio, since September 1999; several Fidelity Select Portfolios, 1988-1999; joined Fidelity in 1985 NATURAL RESOURCES PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 96.0% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 0.2% Barrett Resources Corp. (a) 1,000 $ 29,125 COMPUTER SERVICES & SOFTWARE - - 0.0% MatrixOne, Inc. 100 2,500 Onvia.com, Inc. 100 2,100 4,600 ELECTRIC UTILITY - 0.7% Calpine Corp. (a) 1,100 100,650 ENERGY SERVICES - 26.0% Baker Hughes, Inc. 10,190 263,666 BJ Services Co. (a) 2,100 119,831 Diamond Offshore Drilling, 1,200 38,100 Inc. ENSCO International, Inc. 9,500 287,375 Global Marine, Inc. (a) 4,400 98,725 Halliburton Co. 14,200 542,263 Hanover Compressor Co. (a) 1,300 61,019 Helmerich & Payne, Inc. 1,800 47,925 Marine Drilling Companies, 2,200 50,188 Inc. (a) Nabors Industries, Inc. (a) 6,800 243,950 Noble Drilling Corp. (a) 9,300 334,800 R&B Falcon Corp. (a) 700 10,806 Rowan Companies, Inc. (a) 1,900 47,738 Santa Fe International Corp. 800 22,950 Schlumberger Ltd. 10,226 755,446 Smith International, Inc. (a) 5,300 332,244 Superior Energy Services, 4,800 35,400 Inc. (a) Tidewater, Inc. 1,600 45,300 Transocean Sedco Forex, Inc. 3,231 127,423 Weatherford International, 4,295 193,275 Inc. (a) 3,658,424 GAS - 2.6% Dynegy, Inc. Class A 3,540 165,937 Kinder Morgan, Inc. 7,100 197,913 363,850 IRON & STEEL - 1.0% USX - U.S. Steel Group 6,600 144,375 METALS & MINING - 5.7% Alcan Aluminium Ltd. 900 29,584 Alcoa, Inc. 7,600 520,600 Cominco Ltd. 500 7,243 Freeport-McMoRan Copper & 2,100 26,906 Gold, Inc.: Class A (a) Class B (a) 2,300 31,625 Inco Ltd. (a) 2,900 50,714 Phelps Dodge Corp. 1,200 56,550 Reynolds Metals Co. 1,300 82,550 805,772 SHARES VALUE (NOTE 1) OIL & GAS - 54.8% Alberta Energy Co. Ltd. 3,800 $ 103,284 Amerada Hess Corp. 8,200 414,613 Anadarko Petroleum Corp. 5,000 153,750 Apache Corp. 3,600 131,400 Atlantic Richfield Co. 6,100 433,100 BP Amoco PLC sponsored ADR 8,100 380,700 Burlington Resources, Inc. 1,300 35,913 Cabot Oil & Gas Corp. Class A 2,400 37,950 Canada Occidental Petroleum 4,800 89,073 Ltd. Canadian Hunter Exploration 2,700 42,653 Ltd. (a) Chevron Corp. 9,800 731,938 Conoco, Inc.: Class A 3,900 74,831 Class B 9,251 182,129 Cooper Cameron Corp. (a) 900 49,725 Crestar Energy, Inc. (a) 1,400 17,626 EOG Resources, Inc. 4,900 74,725 Exxon Mobil Corp. 13,498 1,016,563 Forest Oil Corp. (a) 2,400 19,650 Frontier Oil Corp. (a) 29,700 185,625 Gulf Canada Resources Ltd. (a) 200 657 Imperial Oil Ltd. 2,700 50,290 Kerr-McGee Corp. 2,100 93,975 Magnum Hunter Resources, Inc. 3,966 1,735 warrants 7/1/02 Noble Affiliates, Inc. 1,000 22,500 Nuevo Energy Co. (a) 4,200 74,550 Occidental Petroleum Corp. 12,500 200,781 Penn West Petroleum Ltd. (a) 1,000 20,419 Petro-Canada 8,400 118,212 Petrobras PN (Pfd. Reg.) 1 0 Phillips Petroleum Co. 1,800 68,850 Pioneer Natural Resources Co. 10,000 83,125 Pogo Producing Co. 1,400 32,375 Prima Energy Corp. (a) 2,400 48,750 Rio Alto Exploration Ltd. (a) 3,600 54,636 Royal Dutch Petroleum Co. (NY 16,200 850,500 Shares) Santa Fe Snyder Corp. (a) 22,385 167,888 Shell Transport & Trading Co. 6,200 42,948 PLC (Reg.) Suncor Energy, Inc. 4,400 167,550 Sunoco, Inc. 6,100 150,594 Talisman Energy, Inc. (a) 5,100 131,933 Texaco, Inc. 6,500 308,344 Tosco Corp. 5,900 157,825 Total Fina SA sponsored ADR 759 50,948 Ultramar Diamond Shamrock 4,400 95,425 Corp. Union Pacific Resources 6,400 57,200 Group, Inc. USX - Marathon Group 13,200 285,450 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) OIL & GAS - CONTINUED Valero Energy Corp. 5,600 $ 142,800 Vastar Resources, Inc. 900 47,756 7,703,264 PAPER & FOREST PRODUCTS - 1.1% Abitibi-Consolidated, Inc. 3,800 33,554 Consolidated Papers, Inc. 1,900 72,081 Domtar, Inc. 3,700 43,647 149,282 PRECIOUS METALS - 3.9% Barrick Gold Corp. 1,400 22,841 Homestake Mining Co. 1,200 7,800 Meridian Gold, Inc. (a) 13,100 79,977 Newmont Mining Corp. 3,200 70,800 Placer Dome, Inc. 14,400 125,166 Stillwater Mining Co. (a) 6,350 235,744 William Resources, Inc. 15,750 0 warrants 2/15/03 (a)(c) 542,328 TOTAL COMMON STOCKS 13,501,670 (Cost $12,132,055) CONVERTIBLE PREFERRED STOCKS - - 0.3% OIL & GAS - 0.3% Chesapeake Energy Corp. $3.50 1,000 37,000 (a) (Cost $9,692) CASH EQUIVALENTS - 3.8% Taxable Central Cash Fund, 537,314 537,314 5.66% (b) (Cost $537,314) TOTAL INVESTMENT PORTFOLIO - 14,075,984 100.1% (Cost $12,679,061) NET OTHER ASSETS - (0.1)% (18,512) NET ASSETS - 100% $ 14,057,472 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 $30,847,500 and $25,453,649, 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 $4,865 for the period. Distribution of investments by country of issue, as a percentage of net assets, is as follows: United States of America 75.7% Canada 8.5 Netherlands 6.1 Netherlands Antilles 5.4 United Kingdom 3.0 Others (individually less 1.3 than 1%) 100.0% INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $12,783,386. Net unrealized appreciation aggregated $1,292,598, of which $2,325,085 related to appreciated investment securities and $1,032,487 related to depreciated investment securities. NATURAL RESOURCES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 14,075,984 value (cost $12,679,061) - See accompanying schedule Receivable for investments 124,247 sold Receivable for fund shares 25,237 sold Dividends receivable 43,657 Interest receivable 2,999 Redemption fees receivable 86 Other receivables 47 TOTAL ASSETS 14,272,257 LIABILITIES Payable for investments $ 26,700 purchased Payable for fund shares 157,329 redeemed Accrued management fee 7,293 Other payables and accrued 23,463 expenses TOTAL LIABILITIES 214,785 NET ASSETS $ 14,057,472 Net Assets consist of: Paid in capital $ 12,756,699 Accumulated undistributed net (96,150) realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 1,396,923 (depreciation) on investments NET ASSETS, for 1,200,252 $ 14,057,472 shares outstanding NET ASSET VALUE and $11.71 redemption price per share ($14,057,472 (divided by) 1,200,252 shares) Maximum offering price per $12.07 share (100/97.00 of $11.71) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 231,052 Dividends Interest 54,023 Security lending 661 TOTAL INCOME 285,736 EXPENSES Management fee $ 98,795 Transfer agent fees 98,201 Accounting and security 60,180 lending fees Non-interested trustees' 47 compensation Custodian fees and expenses 27,636 Registration fees 23,647 Audit 11,271 Legal 50 Miscellaneous 288 Total expenses before 320,115 reductions Expense reductions (5,477) 314,638 NET INVESTMENT INCOME (LOSS) (28,902) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 1,138,158 Foreign currency transactions (3,202) 1,134,956 Change in net unrealized 2,141,582 appreciation (depreciation) on investment securities NET GAIN (LOSS) 3,276,538 NET INCREASE (DECREASE) IN $ 3,247,636 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 73,194 charges paid to FDC Sales charges - Retained by $ 73,154 FDC Deferred sales charges $ 77 withheld by FDC Exchange fees withheld by FSC $ 2,138 Expense reductions $ 5,477 Directed brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (28,902) $ (35,238) income (loss) Net realized gain (loss) 1,134,956 (1,206,189) Change in net unrealized 2,141,582 (510,320) appreciation (depreciation) NET INCREASE (DECREASE) IN 3,247,636 (1,751,747) NET ASSETS RESULTING FROM OPERATIONS Share transactions Net 32,389,849 6,170,322 proceeds from sales of shares Cost of shares redeemed (26,769,375) (6,819,368) NET INCREASE (DECREASE) IN 5,620,474 (649,046) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 55,216 15,080 TOTAL INCREASE (DECREASE) 8,923,326 (2,385,713) IN NET ASSETS NET ASSETS Beginning of period 5,134,146 7,519,859 End of period $ 14,057,472 $ 5,134,146 OTHER INFORMATION Shares Sold 2,913,758 655,279 Redeemed (2,364,245) (723,578) Net increase (decrease) 549,513 (68,299)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 H 1999 1998 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 7.89 $ 10.46 $ 10.00 period Income from Investment Operations Net investment income (loss) D (.02) (.05) (.09) Net realized and unrealized 3.80 (2.54) .76 gain (loss) Total from investment 3.78 (2.59) .67 operations Less Distributions From net realized gain - - (.26) Redemption fees added to paid .04 .02 .05 in capital Net asset value, end of period $ 11.71 $ 7.89 $ 10.46 TOTAL RETURN B, C 48.42% (24.57)% 7.30% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 14,057 $ 5,134 $ 7,520 (000 omitted) Ratio of expenses to average 1.89% 2.50% F 2.50% A, F net assets Ratio of expenses to average 1.85% G 2.47% G 2.48% A, G net assets after expense reductions Ratio of net investment (.17)% (.54)% (.86)% A income (loss) to average net assets Portfolio turnover rate 164% 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. H FOR THE YEAR ENDED FEBRUARY 29 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. The performance figures were calculated using the net asset value per share calculated in conjunction with the merger at the close of business on February 29, 2000. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT PRECIOUS METALS AND 5.02% -36.62% -27.34% MINERALS SELECT PRECIOUS METALS AND 1.80% -38.60% -29.59% MINERALS (LOAD ADJ.) S&P 500 11.73% 206.94% 425.47% GS Natural Resources 27.62% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years, or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Natural Resources Index - - a market capitalization-weighted index of 105 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 FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT PRECIOUS METALS AND 5.02% -8.72% -3.14% MINERALS SELECT PRECIOUS METALS AND 1.80% -9.29% -3.45% MINERALS (LOAD ADJ.) S&P 500 11.73% 25.14% 18.05% GS Natural Resources 27.62% 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 1990/02/28 9700.00 10000.00 1990/03/31 9277.96 10265.00 1990/04/30 8324.98 10008.38 1990/05/31 8801.47 10984.19 1990/06/30 8161.61 10909.50 1990/07/31 8658.53 10874.59 1990/08/31 8747.02 9891.53 1990/09/30 8549.61 9409.81 1990/10/31 7589.82 9369.35 1990/11/30 7453.68 9974.61 1990/12/31 7757.95 10252.90 1991/01/31 6915.89 10699.92 1991/02/28 7537.08 11464.97 1991/03/31 7392.14 11742.42 1991/04/30 7371.43 11770.60 1991/05/31 7785.55 12279.09 1991/06/30 8296.31 11716.71 1991/07/31 8296.31 12262.71 1991/08/31 7426.65 12553.34 1991/09/30 7578.49 12343.69 1991/10/31 8089.25 12509.10 1991/11/30 8344.62 12004.98 1991/12/31 7877.23 13378.35 1992/01/31 8044.38 13129.52 1992/02/29 7626.49 13300.20 1992/03/31 7327.01 13040.85 1992/04/30 6895.19 13424.25 1992/05/31 7347.90 13490.03 1992/06/30 7389.35 13289.02 1992/07/31 7487.04 13832.55 1992/08/31 7152.11 13548.98 1992/09/30 6859.05 13708.86 1992/10/31 6419.46 13756.84 1992/11/30 6042.66 14225.94 1992/12/31 6154.79 14400.92 1993/01/31 6303.87 14521.89 1993/02/28 6999.57 14719.39 1993/03/31 7950.83 15029.97 1993/04/30 9235.74 14666.24 1993/05/31 10456.76 15059.30 1993/06/30 10627.13 15102.97 1993/07/31 12011.43 15042.56 1993/08/31 10804.61 15612.67 1993/09/30 9952.73 15492.45 1993/10/31 11365.42 15813.15 1993/11/30 11344.13 15662.92 1993/12/31 13025.02 15852.44 1994/01/31 12486.21 16391.43 1994/02/28 11940.20 15947.22 1994/03/31 11818.07 15251.92 1994/04/30 11818.55 15447.15 1994/05/31 11840.11 15700.48 1994/06/30 12077.35 15315.82 1994/07/31 12537.44 15818.18 1994/08/31 13428.86 16466.72 1994/09/30 14456.87 16063.29 1994/10/31 13896.14 16424.71 1994/11/30 12408.04 15826.52 1994/12/31 12876.41 16061.23 1995/01/31 10633.23 16477.70 1995/02/28 11121.20 17119.83 1995/03/31 12250.07 17625.04 1995/04/30 12352.03 18144.10 1995/05/31 12199.09 18869.32 1995/06/30 12344.75 19307.65 1995/07/31 12854.56 19947.89 1995/08/31 13029.35 19997.96 1995/09/30 13065.77 20841.88 1995/10/31 11434.37 20767.47 1995/11/30 12235.50 21679.16 1995/12/31 12446.43 22096.70 1996/01/31 15055.58 22848.87 1996/02/29 15318.68 23060.68 1996/03/31 15230.98 23282.76 1996/04/30 15575.82 23625.95 1996/05/31 16476.96 24235.26 1996/06/30 14183.81 24327.60 1996/07/31 14007.98 23252.80 1996/08/31 14769.92 23743.20 1996/09/30 14154.51 25079.47 1996/10/31 14037.28 25771.16 1996/11/30 13333.96 27719.21 1996/12/31 13121.49 27170.09 1997/01/31 12557.36 28867.68 1997/02/28 14359.64 29094.00 1997/03/31 12227.68 27898.53 1997/04/30 11414.45 29564.07 1997/05/31 11604.94 31363.93 1997/06/30 10403.42 32769.03 1997/07/31 9993.14 35376.46 1997/08/31 10044.42 33394.67 1997/09/30 10513.31 35223.70 1997/10/31 8747.66 34047.23 1997/11/30 6754.89 35623.28 1997/12/31 7231.11 36234.93 1998/01/31 7963.74 36635.68 1998/02/28 7531.49 39277.85 1998/03/31 8037.00 41289.27 1998/04/30 8813.60 41704.64 1998/05/31 7465.55 40987.74 1998/06/30 6359.27 42652.66 1998/07/31 6205.42 42198.41 1998/08/31 4608.27 36097.36 1998/09/30 7003.99 38409.76 1998/10/31 7003.99 41534.01 1998/11/30 6842.81 44051.38 1998/12/31 7238.43 46589.63 1999/01/31 7018.64 48538.00 1999/02/28 6710.94 47029.44 1999/03/31 6725.59 48911.09 1999/04/30 7685.34 50805.42 1999/05/31 6454.51 49605.90 1999/06/30 6688.96 52359.03 1999/07/31 6498.47 50724.38 1999/08/31 6784.20 50473.29 1999/09/30 8439.95 49089.82 1999/10/31 7780.58 52196.23 1999/11/30 7509.51 53257.37 1999/12/31 7758.60 56394.23 2000/01/31 6791.53 53560.99 2000/02/29 7041.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000309 131634 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Precious Metals and Minerals Portfolio on February 28, 1990, and the 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have been $7,041 - a 29.59% 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 $52,547 - a 425.47% increase. 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. For the 12 months that ended February 29, 2000, the fund returned 5.02%, considerably behind the 27.62% return of the Goldman Sachs Natural Resources Index, an index of 105 stocks designed to measure the performance of companies in the natural resources sector. The fund also trailed the Standard & Poor's 500 Index, which returned 11.73% during the same period. Q. WHY DID THE FUND UNDERPERFORM ITS INDEXES DURING THE PERIOD? A. The fund's performance reflected the lackluster performance of gold itself. The yellow metal had a rough time of it early in the period when the Bank of England announced in May that it planned to sell approximately 400 tons of gold over the next 18 months. After flirting with the $250-per-ounce mark over the summer, gold got a boost in September when a number of key European central banks agreed to restrict their collective gold sales to no more than 500 tons per year for the next five years. The ensuing rally carried prices to around $320 per ounce before they settled back to approximately $290 per ounce at the end of the period. In contrast to gold's mediocre performance, the prices of such base metals as copper, nickel, aluminum and zinc rallied sharply during the period, boosting the return of the Goldman Sachs index. Another factor helping the Goldman Sachs index was its weighting of energy stocks, which mirrored significantly higher oil and gas prices during the period. Generally favorable economic conditions, including robust growth, minimal inflation and low - albeit rising - interest rates, enabled the S&P 500 to outperform the fund. Q. WHAT WAS THE RATIONALE FOR THE FUND'S MERGER WITH FIDELITY SELECT GOLD PORTFOLIO AS OF THE END OF BUSINESS ON THE LAST DAY OF THE PERIOD? A. The two funds shared the same manager and similar investment objectives. Merging them allows Fidelity to concentrate its investment expertise on one fund without sacrificing the Select Portfolios' coverage of major industry sectors. The merger also simplifies the Select Portfolios' product offerings by consolidating similar funds. Q. WHAT STOCKS HELPED THE FUND'S PERFORMANCE? A. The fund's most positive contributor was Stillwater Mining. The company is the only North American supplier of palladium, a metal used in the catalytic converters of automobile emission control devices. A shortage of palladium, caused in part by lower-than-expected deliveries of the metal from Russia, contributed to Stillwater's strength. Another helpful holding was De Beers Consolidated Mines Ltd., which benefited from strong demand for diamonds due to healthy economic activity in Europe and the U.S. as well as the ongoing recovery in Asia. De Beers also was helped by worldwide millennium celebrations, which prompted more purchases of diamond gifts. Finally, Freeport McMoran contributed positively to performance. The company, which mines copper as a by-product of its gold mining operations, received a boost from some exploration successes as well as improving copper prices. Q. WHAT STOCKS DETRACTED FROM PERFORMANCE? A. Normandy Mining was a disappointment due to difficulties with cost containment and negligible progress toward increasing production. Lihir Gold struggled under the weight of equipment problems afflicting its operations in Papua, New Guinea. Franco-Nevada, a company that derives most of its revenues from gold royalties, suffered production delays at its Aber diamond and Voise Bay nickel interests due to environmental and economic difficulties. Q. WHAT'S YOUR OUTLOOK, GEORGE? A. Gold investors can take some comfort in the decision by European central banks to curtail their gold sales and the willingness of gold producers to restrict their hedging operations, both of which have depressed the price of gold in the past. In addition, improving economic conditions in Asia and continued prosperity in the U.S. and Europe should keep demand for gold jewelry at healthy levels. However, the real catalyst for gold's recovery would be a resurgence of inflation, which would likely trigger increased demand from investors. While we have yet to see evidence of such a resurgence, stronger worldwide economic activity would suggest that it is not an unlikely prospect in the next year or two. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. NOTE TO SHAREHOLDERS: On February 29, 2000, Fidelity Select Gold Portfolio acquired all of the assets and assumed all of the liabilities of Fidelity Select Precious Metals and Minerals Portfolio. The acquisition, which was approved by the shareholders of Fidelity Select Precious Metals and Minerals Portfolio on February 16, 2000, was accomplished by an exchange of shares of Fidelity Select Precious Metals and Minerals Portfolio for shares of Fidelity Select Gold Portfolio. (checkmark)FUND FACTS START DATE: July 14, 1981 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 FINANCIAL STATEMENTS STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 2,807,057 Dividends Special dividend from Gold 1,280,213 Fields Ltd. Interest 80,955 Security lending 26,696 TOTAL INCOME 4,194,921 EXPENSES Management fee $ 763,104 Transfer agent fees 1,201,698 Accounting and security 97,533 lending fees Non-interested trustees' 478 compensation Custodian fees and expenses 74,544 Registration fees 57,446 Audit 15,278 Legal 11,302 Interest 8,124 Reports to shareholders 15,757 Miscellaneous 91 Total expenses before 2,245,355 reductions Expense reductions (83,455) 2,161,900 NET INVESTMENT INCOME 2,033,021 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities (2,203,476) Foreign currency transactions (43,038) (2,246,514) Change in net unrealized appreciation (depreciation) on: Investment securities 9,655,444 Assets and liabilities in (5,997) 9,649,447 foreign currencies NET GAIN (LOSS) 7,402,933 NET INCREASE (DECREASE) IN $ 9,435,954 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 246,487 charges paid to FDC Sales charges - Retained by $ 246,487 FDC Deferred sales charges $ 17,488 withheld by FDC Exchange fees withheld by FSC $ 22,504 Expense reductions $ 83,455 Directed brokerage arrangements OTHER INFORMATION Purchases and sales of securities, other than short-term securities, aggregated $101,676,834 and $130,662,869, 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 $12,642 for the period. 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 $5,874,333. The weighted average interest rate was 5.28%. Interest expense includes $5,169 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 $2,229,000. The weighted average interest rate was 5.97%. Interest expense includes $2,955 paid under the bank borrowing program.
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ 2,033,021 $ (142,318) income (loss) Net realized gain (loss) (2,246,514) (21,007,323) Change in net unrealized 9,649,447 3,724,303 appreciation (depreciation) NET INCREASE (DECREASE) IN 9,435,954 (17,425,338) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (868,658) - from net investment income Share transactions Net 218,550,731 415,102,396 proceeds from sales of shares Reinvestment of distributions 836,188 - Net asset value of shares (104,054,922) - exchanged for shares of Fidelity Select Gold Portfolio (Note 10) Cost of shares redeemed (248,535,572) (442,648,944) NET INCREASE (DECREASE) IN (133,203,575) (27,546,548) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 1,197,151 2,450,806 TOTAL INCREASE (DECREASE) (123,439,128) (42,521,080) IN NET ASSETS NET ASSETS Beginning of period 123,439,128 165,960,208 End of period (including - $ 123,439,128 accumulated net investment loss of $0 and $37,156, respectively) OTHER INFORMATION Shares Sold 21,569,463 42,223,635 Issued in reinvestment of 87,835 - distributions Redeemed in exchange for the (10,907,225) - shares of Fidelity Select Gold Portfolio (Note 10) Redeemed (24,224,749) (44,898,226) Net increase (decrease) (13,474,676) (2,674,591)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 F 1999 1998 1997 1996 F SELECTED PER-SHARE DATA Net asset value, beginning of $ 9.16 $ 10.28 $ 19.60 $ 20.96 $ 15.27 period Income from Investment Operations Net investment income (loss) C .15 D (.01) (.04) (.01) .07 Net realized and unrealized .22 (1.27) (9.42) (1.42) 5.54 gain (loss) Total from investment .37 (1.28) (9.46) (1.43) 5.61 operations Less Distributions From net investment income (.08) - - (.04) (.06) In excess of net investment - - - (.01) - income Total distributions (.08) - - (.05) (.06) Redemption fees added to paid .09 .16 .14 .12 .14 in capital Net asset value per share (9.54) - - - - exchanged for shares of Fidelity Select Gold Portfolio Net asset value, end of period $ - $ 9.16 $ 10.28 $ 19.60 $ 20.96 TOTAL RETURN A, B 5.02% G (10.89)% (47.55)% (6.26)% 37.74% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ - $ 123,439 $ 165,960 $ 325,586 $ 467,196 (000 omitted) Ratio of expenses to average 1.71% 1.78% 1.82% 1.62% 1.52% net assets Ratio of expenses to average 1.64% E 1.74% E 1.76% E 1.61% E 1.52% net assets after expense reductions Ratio of net investment 1.54% (.09)% (.26)% (.05)% .39% income (loss) to average net assets Portfolio turnover rate 79% 53% 84% 54% 53%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM GOLD FIELDS LTD. WHICH AMOUNTED TO $.09 PER SHARE. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR THE YEAR ENDED FEBRUARY 29 G THE TOTAL RETURN WAS CALCULATED USING THE NET ASSET VALUE PER SHARE CALCULATED IN CONJUNCTION WITH THE MERGER AT THE CLOSE OF BUSINESS ON FEBRUARY 29, 2000. BUSINESS SERVICES AND OUTSOURCING PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, 2000 PAST 1 YEAR LIFE OF FUND SELECT BUSINESS SERVICES AND 12.15% 54.17% OUTSOURCING SELECT BUSINESS SERVICES AND 8.71% 49.48% OUTSOURCING (LOAD ADJ.) S&P 500 11.73% 39.61% GS Technology 104.99% 220.20% CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year or since the fund started on February 4, 1998. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Technology Index - a market capitalization-weighted index of 185 stocks designed to measure the performance of companies in the technology sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, 2000 PAST 1 YEAR LIFE OF FUND SELECT BUSINESS SERVICES AND 12.15% 23.29% OUTSOURCING SELECT BUSINESS SERVICES AND 8.71% 21.46% OUTSOURCING (LOAD ADJ.) S&P 500 11.73% 17.51% GS Technology 104.99% 75.55% 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 14472.00 13409.87 1999/09/30 14239.88 13042.30 1999/10/31 14774.76 13867.62 1999/11/30 15249.09 14149.55 1999/12/31 17176.77 14982.96 2000/01/31 15713.32 14230.21 2000/02/29 14948.00 13960.83 IMATRL PRASUN SHR__CHT 20000229 20000320 153540 R00000000000028 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Business Services and Outsourcing Portfolio on February 4, 1998, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have been $14,948 - a 49.48% 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 been $13,961 - a 39.61% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Automatic Data Processing, Inc. 8.2 First Data Corp. 7.5 Paychex, Inc. 5.7 Computer Sciences Corp. 5.7 Omnicom Group, Inc. 5.4 Electronic Data Systems Corp. 4.9 IMS Health, Inc. 4.4 DST Systems, Inc. 4.2 Interpublic Group of 4.2 Companies, Inc. Ceridian Corp. 4.1 54.3 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Computer Services & Software 66.7% Row: 1, Col: 6, Value: 66.7 Services 13.8% Row: 1, Col: 5, Value: 13.8 Advertising 10.6% Row: 1, Col: 4, Value: 10.6 Printing 0.9% Row: 1, Col: 3, Value: 0.9 Publishing 0.7% Row: 1, Col: 2, Value: 0.7000000000000001 * All Others 7.3% Row: 1, Col: 1, Value: 7.3 * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. BUSINESS SERVICES AND OUTSOURCING PORTFOLIO FUND TALK: THE MANAGERS' OVERVIEW (photograph of Michael Tarlowe)(photograph of Simon Wolf) NOTE TO SHAREHOLDERS: The following is an interview with Michael Tarlowe (left), who managed Fidelity Select Business Services and Outsourcing Portfolio for most of the period covered by this report, with additional comments from Simon Wolf (right), who became manager of the fund on January 4, 2000. Q. HOW DID THE FUND PERFORM, MICHAEL? M.T. For the 12 months ending February 29, 2000, the fund returned 12.15%. The Standard & Poor's 500 Index returned 11.73% for the same time period, while the Goldman Sachs Technology Index - an index of 185 stocks designed to measure the performance of companies in the technology sector - returned 104.99%. Q. WHAT FACTORS AFFECTED THE FUND'S PERFORMANCE OVER THE PAST YEAR? M.T. The fund experienced positive performance compared to the S&P 500 index primarily due to stock selection and an overweighted position compared to the index in the computer services industry. The fund fared unfavorably relative to the Goldman Sachs index because it owned hardly any Internet and related large-cap hardware and software companies. Those companies had exceptional performance but were not in the fund because they are not business-service providers. Q. WHAT WAS YOUR FOCUS DURING THE YEAR? M.T. While the fund has a technology bias, I continued to focus on companies providing outsourcing services that were outside of the technology industry. I was successful in taking advantage of opportunities within other industries where the movement to outsourcing was gaining momentum. Q. WHICH OF THE FUND'S HOLDINGS ADDED THE MOST TO PERFORMANCE? M.T. Nielsen Media Research added value to the fund during the period. During the first part of the year, the company announced its agreement to be acquired by VNU N.V. - a Netherlands-based international publishing company - and during the latter part of the year the acquisition was completed, increasing the value of the company's stock. Technology Solutions also was a strong contributor to performance. I had taken a position in the company betting on a turnaround and, as the company transformed its business to become an Internet services provider, the stock witnessed multiple expansions and rewarded us for that bet. Forrester Research added to performance as well, as investors began to recognize the company's value in providing Internet research, strategy and advisory services to companies not yet doing business on the Web. Q. WERE THERE ANY DETRACTORS FROM PERFORMANCE? M.T. Affiliated Computer Services was a disappointment in terms of its performance during the past 12 months. The company's stock underperformed expectations due to concerns over a Y2K-induced slowdown in demand. Ceridian, while maintaining compelling valuations, was another stock that performed poorly during the year because of lower-than-expected earnings in the company's payroll division. The Gartner Group also detracted from performance. The company's stock experienced a sell-off after it announced an intense investment program to enable the company to take advantage of Internet services. The spending resulted in lower earnings, which caused the stock's valuations to decrease. Q. SIMON, WHAT CHANGES HAVE YOU MADE TO THE FUND SINCE TAKING OVER IN EARLY JANUARY? S.W. Toward the end of the period, there were a number of initial public offerings, or IPOs, for Internet consulting, telecommunications and software businesses. The heavy IPO activity allowed me to increase the fund's exposure in these areas. I anticipate growth in those areas as companies continue to outsource portions of their business needs. The addition of these companies also will more closely align the fund to the Goldman Sachs Technology Index. Q. WHAT IS YOUR OUTLOOK? S.W. My outlook for the fund and the sector is positive. The Y2K software lock-down passed quietly and the proliferation of technology outsourcing continues. Prospects for the sector are bright as technology spending continues. This activity is being driven by the fact that as traditional companies move into the Internet age, they need to undertake a large amount of spending to supplement areas where the company lacks experience and expertise. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGERS ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGERS' VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: February 4, 1998 FUND NUMBER: 353 TRADING SYMBOL: FBSOX SIZE: as of February 29, 2000, more than $52 million MANAGER: Simon Wolf, since January 2000; manager, Fidelity Select Industrial Equipment Portfolio, 1997-2000; joined Fidelity in 1996 BUSINESS SERVICES AND OUTSOURCING PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 94.5% SHARES VALUE (NOTE 1) ADVERTISING - 10.6% Interpublic Group of 55,000 $ 2,210,313 Companies, Inc. Lamar Advertising Co. Class A 12,450 542,353 (a) Omnicom Group, Inc. 29,639 2,791,623 5,544,289 BANKS - 0.3% State Street Corp. 1,900 138,463 BROADCASTING - 0.3% Infinity Broadcasting Corp. 5,350 170,866 Class A (a) COMPUTER SERVICES & SOFTWARE - - 66.7% Affiliated Computer Services, 67,900 2,138,850 Inc. Class A (a) Amdocs Ltd. (a) 5,884 436,519 Automatic Data Processing, 98,300 4,282,191 Inc. Cambridge Technology 17,500 262,500 Partners, Inc. (a) Ceridian Corp. (a) 108,500 2,149,656 Computer Sciences Corp. (a) 37,500 2,955,469 DST Systems, Inc. (a) 39,400 2,211,325 Electronic Data Systems Corp. 39,600 2,564,100 Equifax, Inc. 49,000 1,038,188 Extensity, Inc. 100 7,250 First Data Corp. 87,700 3,946,500 Fiserv, Inc. (a) 58,575 1,596,169 Galileo International, Inc. 16,600 282,200 IMS Health, Inc. 113,300 2,280,163 MatrixOne, Inc. 100 2,500 Metasolv Software, Inc. 3,900 343,688 National Data Corp. 36,800 1,140,800 Onvia.com, Inc. 100 2,100 Paychex, Inc. 59,625 2,984,977 Proxicom, Inc. 3,800 159,125 Razorfish, Inc. 2,600 87,100 Sabre Holdings Corp. Class A 31,700 1,271,963 SunGard Data Systems, Inc. (a) 16,200 486,000 Technology Solutions, Inc. 28,900 209,525 The Bisys Group (a) 28,400 1,464,375 The TriZetto Group, Inc. 6,900 562,350 34,865,583 ELECTRONICS - 0.4% Sterling Commerce, Inc. (a) 4,600 201,538 ENGINEERING - 0.1% Jupiter Communications, Inc. 2,300 73,600 ENTERTAINMENT - 0.4% Ticketmaster Online 5,600 195,388 CitySearch, Inc. (a) PRINTING - 0.9% Reynolds & Reynolds Co. Class 16,200 447,525 A PUBLISHING - 0.7% Harte Hanks Communications, 17,500 381,719 Inc. SHARES VALUE (NOTE 1) SERVICES - 13.8% ACNielsen Corp. (a) 43,600 $ 738,475 Cintas Corp. 18,300 730,856 Diamond Technology Partners, 3,450 235,894 Inc. Class A (a) Dun & Bradstreet Corp. 43,100 1,128,681 eLoyalty Corp. 20,500 626,531 Forrester Research, Inc. (a) 11,200 448,000 Gartner Group, Inc.: Class A 46,000 658,375 Class B (a) 71,683 846,755 Manpower, Inc. 15,500 506,656 Media Metrix, Inc. 4,600 161,575 Robert Half International, 15,800 667,550 Inc. (a) True North Communications 5,600 207,200 Viad Corp. 10,000 234,375 7,190,923 TRUCKING & FREIGHT - 0.3% Expeditors International of 4,600 173,650 Washington, Inc. TOTAL COMMON STOCKS 49,383,544 (Cost $42,547,429) CASH EQUIVALENTS - 4.0% Taxable Central Cash Fund, 2,104,060 2,104,060 5.66% (b) (Cost $2,104,060) TOTAL INVESTMENT PORTFOLIO - 51,487,604 98.5% (Cost $44,651,489) NET OTHER ASSETS - 1.5% 790,776 NET ASSETS - 100% $ 52,278,380 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 $32,119,845 and $49,624,865, 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 $4,996 for the period. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $45,010,865. Net unrealized appreciation aggregated $6,476,739, of which $10,271,185 related to appreciated investment securities and $3,794,446 related to depreciated investment securities. The fund hereby designates approximately $3,462,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 7% of the dividends distributed during the fiscal year qualifies for the dividends-received deduction for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. BUSINESS SERVICES AND OUTSOURCING PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 51,487,604 value (cost $44,651,489) - See accompanying schedule Receivable for investments 1,663,312 sold Receivable for fund shares 252,104 sold Dividends receivable 30,469 Interest receivable 11,247 Redemption fees receivable 530 Other receivables 501 TOTAL ASSETS 53,445,767 LIABILITIES Payable for investments $ 26,700 purchased Payable for fund shares 1,067,318 redeemed Accrued management fee 27,875 Other payables and accrued 45,494 expenses TOTAL LIABILITIES 1,167,387 NET ASSETS $ 52,278,380 Net Assets consist of: Paid in capital $ 41,263,956 Accumulated undistributed net 4,178,309 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 6,836,115 (depreciation) on investments NET ASSETS, for 3,733,248 $ 52,278,380 shares outstanding NET ASSET VALUE and $14.00 redemption price per share ($52,278,380 (divided by) 3,733,248 shares) Maximum offering price per $14.43 share (100/97.00 of $14.00) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 243,254 Dividends Special dividend from Sabre 232,575 Holdings Corp. Class A Interest 236,212 Security lending 3,503 TOTAL INCOME 715,544 EXPENSES Management fee $ 373,270 Transfer agent fees 482,616 Accounting and security 60,490 lending fees Non-interested trustees' 188 compensation Custodian fees and expenses 9,827 Registration fees 26,306 Audit 12,064 Legal 217 Miscellaneous 131 Total expenses before 965,109 reductions Expense reductions (9,220) 955,889 NET INVESTMENT INCOME (LOSS) (240,345) REALIZED AND UNREALIZED GAIN 9,010,305 (LOSS) Net realized gain (loss) on investment securities Change in net unrealized (934,194) appreciation (depreciation) on investment securities NET GAIN (LOSS) 8,076,111 NET INCREASE (DECREASE) IN $ 7,835,766 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 305,372 charges paid to FDC Sales charges - Retained by $ 305,372 FDC Deferred sales charges $ 574 withheld by FDC Exchange fees withheld by FSC $ 10,292 Expense reductions Directed $ 5,758 brokerage arrangements Custodian credits 438 Transfer agent credits 3,024 $ 9,220
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (240,345) $ (505,124) income (loss) Net realized gain (loss) 9,010,305 2,392,697 Change in net unrealized (934,194) 7,144,279 appreciation (depreciation) NET INCREASE (DECREASE) IN 7,835,766 9,031,852 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (5,476,884) (724,580) from net realized gains Share transactions Net 45,241,050 115,593,201 proceeds from sales of shares Reinvestment of distributions 5,296,143 706,597 Cost of shares redeemed (64,818,931) (76,520,490) NET INCREASE (DECREASE) IN (14,281,738) 39,779,308 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 78,625 120,875 TOTAL INCREASE (DECREASE) (11,844,231) 48,207,455 IN NET ASSETS NET ASSETS Beginning of period 64,122,611 15,915,156 End of period $ 52,278,380 $ 64,122,611 OTHER INFORMATION Shares Sold 3,100,058 9,724,396 Issued in reinvestment of 368,258 57,528 distributions Redeemed (4,461,537) (6,516,475) Net increase (decrease) (993,221) 3,265,449
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 I 1999 1998 F SELECTED PER-SHARE DATA Net asset value, beginning of $ 13.57 $ 10.89 $ 10.00 period Income from Investment Operations Net investment income (loss) D (.05) E (.11) - Net realized and unrealized 1.69 2.92 .89 gain (loss) Total from investment 1.64 2.81 .89 operations Less Distributions From net realized gain (1.23) (.16) - Redemption fees added to paid .02 .03 - in capital Net asset value, end of period $ 14.00 $ 13.57 $ 10.89 TOTAL RETURN B, C 12.15% 26.23% 8.90% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 52,278 $ 64,123 $ 15,915 (000 omitted) Ratio of expenses to average 1.50% 1.66% 2.50% A, G net assets Ratio of expenses to average 1.48% H 1.64% H 2.50% A net assets after expense reductions Ratio of net investment (.37)% (.91)% (.49)% A income (loss) to average net assets Portfolio turnover rate 54% 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 INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM SABRE HOLDINGS CORP. CLASS A WHICH AMOUNTED TO $.05 PER SHARE. F FOR THE PERIOD FEBRUARY 4, 1998 (COMMENCEMENT OF OPERATIONS) TO FEBRUARY 28, 1998. 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 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. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT COMPUTERS 119.58% 732.94% 2,261.60% SELECT COMPUTERS (LOAD ADJ.) 112.92% 707.88% 2,190.68% S&P 500 11.73% 206.94% 425.47% GS Technology 104.99% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Technology Index - a market capitalization-weighted index of 185 stocks designed to measure the performance of companies in the technology sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT COMPUTERS 119.58% 52.80% 37.19% SELECT COMPUTERS (LOAD ADJ.) 112.92% 51.87% 36.77% S&P 500 11.73% 25.14% 18.05% GS Technology 104.99% 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 1990/02/28 9700.00 10000.00 1990/03/31 10394.00 10265.00 1990/04/30 10114.80 10008.38 1990/05/31 11431.00 10984.19 1990/06/30 11638.40 10909.50 1990/07/31 10808.80 10874.59 1990/08/31 9093.75 9891.53 1990/09/30 8495.48 9409.81 1990/10/31 8814.56 9369.35 1990/11/30 10266.37 9974.61 1990/12/31 10625.93 10252.90 1991/01/31 12437.17 10699.92 1991/02/28 13242.17 11464.97 1991/03/31 14288.66 11742.42 1991/04/30 13362.92 11770.60 1991/05/31 14039.11 12279.09 1991/06/30 12127.46 11716.71 1991/07/31 13346.01 12262.71 1991/08/31 14174.95 12553.34 1991/09/30 13428.90 12343.69 1991/10/31 13163.64 12509.10 1991/11/30 12260.09 12004.98 1991/12/31 13893.11 13378.35 1992/01/31 15343.76 13129.52 1992/02/29 16396.52 13300.20 1992/03/31 15103.37 13040.85 1992/04/30 14614.29 13424.25 1992/05/31 14796.66 13490.03 1992/06/30 13370.87 13289.02 1992/07/31 14025.74 13832.55 1992/08/31 13221.66 13548.98 1992/09/30 13876.53 13708.86 1992/10/31 14970.74 13756.84 1992/11/30 15899.15 14225.94 1992/12/31 16943.62 14400.92 1993/01/31 17930.07 14521.89 1993/02/28 16703.23 14719.39 1993/03/31 17034.81 15029.97 1993/04/30 16551.00 14666.24 1993/05/31 18490.17 15059.30 1993/06/30 17750.22 15102.97 1993/07/31 18490.17 15042.56 1993/08/31 19587.33 15612.67 1993/09/30 20140.17 15492.45 1993/10/31 20140.17 15813.15 1993/11/30 20999.19 15662.92 1993/12/31 21834.89 15852.44 1994/01/31 23242.73 16391.43 1994/02/28 24229.11 15947.22 1994/03/31 23978.03 15251.92 1994/04/30 23825.59 15447.15 1994/05/31 23807.66 15700.48 1994/06/30 21852.83 15315.82 1994/07/31 22543.30 15818.18 1994/08/31 25242.39 16466.72 1994/09/30 25063.05 16063.29 1994/10/31 26004.60 16424.71 1994/11/30 26157.04 15826.52 1994/12/31 26300.51 16061.23 1995/01/31 25493.47 16477.70 1995/02/28 27502.10 17119.83 1995/03/31 29618.34 17625.04 1995/04/30 31971.61 18144.10 1995/05/31 33552.02 18869.32 1995/06/30 37221.49 19307.65 1995/07/31 41899.15 19947.89 1995/08/31 42834.68 19997.96 1995/09/30 45287.05 20841.88 1995/10/31 43643.06 20767.47 1995/11/30 42589.45 21679.16 1995/12/31 39932.16 22096.70 1996/01/31 39676.12 22848.87 1996/02/29 42021.46 23060.68 1996/03/31 38467.61 23282.76 1996/04/30 42695.87 23625.95 1996/05/31 44171.37 24235.26 1996/06/30 40960.60 24327.60 1996/07/31 38217.43 23252.80 1996/08/31 39869.57 23743.20 1996/09/30 44763.64 25079.47 1996/10/31 47122.36 25771.16 1996/11/30 53533.49 27719.21 1996/12/31 52558.06 27170.09 1997/01/31 59295.17 28867.68 1997/02/28 52093.80 29094.00 1997/03/31 47991.08 27898.53 1997/04/30 50608.81 29564.07 1997/05/31 54256.50 31363.93 1997/06/30 53903.50 32769.03 1997/07/31 66340.96 35376.46 1997/08/31 67682.37 33394.67 1997/09/30 70200.46 35223.70 1997/10/31 60339.92 34047.23 1997/11/30 59222.07 35623.28 1997/12/31 52611.61 36234.93 1998/01/31 56807.73 36635.68 1998/02/28 62682.28 39277.85 1998/03/31 61263.23 41289.27 1998/04/30 67122.53 41704.64 1998/05/31 62544.95 40987.74 1998/06/30 68114.34 42652.66 1998/07/31 71745.88 42198.41 1998/08/31 62117.71 36097.36 1998/09/30 74095.71 38409.76 1998/10/31 79329.40 41534.01 1998/11/30 87919.99 44051.38 1998/12/31 103315.90 46589.63 1999/01/31 119093.28 48538.00 1999/02/28 104322.97 47029.44 1999/03/31 117262.25 48911.09 1999/04/30 115265.37 50805.42 1999/05/31 112437.56 49605.90 1999/06/30 124568.23 52359.03 1999/07/31 126576.61 50724.38 1999/08/31 135766.99 50473.29 1999/09/30 132055.49 49089.82 1999/10/31 140538.92 52196.23 1999/11/30 158662.61 53257.37 1999/12/31 187109.80 56394.23 2000/01/31 183636.51 53560.99 2000/02/29 229068.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000316 094404 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Computers Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $229,068 - a 2,190.68% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS EMC Corp. 6.8 Cisco Systems, Inc. 6.6 Texas Instruments, Inc. 6.5 Hewlett-Packard Co. 4.1 Analog Devices, Inc. 3.7 Motorola, Inc. 3.6 Network Appliance, Inc. 3.1 Gateway, Inc. 2.8 Exodus Communications, Inc. 2.3 JDS Uniphase Corp. 2.3 41.8 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Computers & Office Equipment 33.3% Row: 1, Col: 6, Value: 33.3 Electronics 31.3% Row: 1, Col: 5, Value: 31.3 Computer Services & Software 15.6% Row: 1, Col: 4, Value: 15.6 Communications Equipment 10.1% Row: 1, Col: 3, Value: 10.1 Retail & Wholesale, Miscellaneous 2.1% Row: 1, Col: 2, Value: 2.1 * All Others 7.6% Row: 1, Col: 1, Value: 7.6
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. COMPUTERS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Larry Rakers) NOTE TO SHAREHOLDERS: Larry Rakers became Portfolio Manager of Fidelity Select Computers Portfolio on January 4, 2000. Q. HOW DID THE FUND PERFORM, LARRY? A. For the 12-month period that ended February 29, 2000, the fund produced a total return of 119.58%, outpacing the Goldman Sachs Technology Index - an index of 185 stocks designed to measure the performance of companies in the technology sector - and the Standard & Poor's 500 Index, which returned 104.99% and 11.73%, respectively. Q. HOW DID THE FUND GAIN AN ADVANTAGE OVER THE GOLDMAN SACHS INDEX DURING THE PAST 12 MONTHS? A. Strong stock picking, coupled with an emphasis on high-growth data networking, communications-semiconductor and Internet infrastructure names at the expense of computer hardware manufacturers, gave the fund an edge during the period. The decision to remain underweighted in computer stocks - namely IBM and Dell - was a good one, as these top providers were felled by declining sales related to Y2K. Q. WHAT CHANGES HAVE YOU MADE SINCE TAKING OVER THE FUND? A. Very few. The fund's overarching themes remain in play today. The basic premise behind our positioning is simply a function of where we perceive the highest growth rates to be in the technology sector, which hasn't changed much in recent months. On the margin, though, I made some moves that deserve mention, namely reducing the fund's underweighting in computer hardware - based on a recently improved technical picture - broadening the fund's exposure to optical networking - an area I feel houses some of the best growth prospects in the sector - and taking some profits in a richly valued Internet services group. Q. SPECIFICALLY, HOW DID THE FUND'S VARIOUS STRATEGIES PLAY OUT FOR THE FUND? A. The fund's significant overweighting in semiconductors relative to the Goldman Sachs index proved particularly beneficial. Our stake in communications chipmakers Texas Instruments, Analog Devices and LSI Logic helped, as these firms responded to the explosive demand for voice and data communications. In terms of computer chips, our bet on fiber channel as a new protocol for data transfer between computer devices, storage devices and related peripherals relative to SCSI - or small computer systems interface - paid off for us during the period. Our play on this high-growth area included names such as Emulex, QLogic and Brocade. Additionally, having a healthy exposure to Internet infrastructure providers Redback Networks, Cisco Systems, Juniper Networks and Veritas Software further bolstered fund performance. Q. WHAT OTHER STOCKS WERE KEY CONTRIBUTORS? A. The fund was rewarded for its exposure to the dramatic growth in data storage demand in firms such as top holding EMC, Network Appliance and Advanced Digital Information Corp. Gateway was one of the few bright spots in the personal computer industry, benefiting in the months leading up to Y2K from selling exclusively to individual consumers, a group seemingly more resilient than corporations in the face of the millennium changeover. JDS Uniphase, a top manufacturer of optical network components, and Exodus, a leading Web hosting provider, also added meaningfully to returns. Q. WHICH STOCKS WEREN'T SO HELPFUL? A. Holding less Intel and Sun Microsystems than the index hurt, as these stocks nearly doubled and tripled in price, respectively, during the period. Compaq fell along with many of its counterparts, plagued by weak personal computer sales. Xerox slid lower on slackened demand for copiers and toner attributed to the growing popularity of distributing printing by way of the Internet. Q. WHAT'S YOUR OUTLOOK? A. I think data storage could be the place to be in the foreseeable future, as projected growth rates look to dramatically outpace those of other computer hardware types. From a broader perspective, I'm watching for an acceleration in hardware consumption as we move further away from Y2K. It's feasible that many of these stocks could have a nice boost in revenue, which could similarly sweeten the prospects for component and software manufacturers alike. I'll pay close attention to the introduction of new Internet appliances later on in the year, which logic dictates should lead to exponential growth in networking and server demand as the world tries to satisfy all of its data needs. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 007 TRADING SYMBOL: FDCPX SIZE: as of February 29, 2000, more than $3.8 billion MANAGER: Larry Rakers, since January 2000; manager, Fidelity Select Technology Portfolio, since February 2000; Fidelity Advisor Technology Fund, since January 2000; Fidelity Advisor Natural Resources Fund, 1997-1999; several Fidelity Select Portfolios, 1995-1997; joined Fidelity in 1993 COMPUTERS PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets
COMMON STOCKS - 95.2% SHARES VALUE (NOTE 1) ADVERTISING - 0.1% Avenue A, Inc. 900 $ 64,800 Internet Capital Group, Inc. 30,000 3,172,500 3,237,300 COMMUNICATIONS EQUIPMENT - 10.1% Cabletron Systems, Inc. (a) 300,000 14,700,000 Cisco Systems, Inc. (a) 1,919,400 253,720,688 Comverse Technology, Inc. (a) 257,700 50,734,688 Nokia AB sponsored ADR 189,000 37,481,063 Telefonaktiebolaget LM 320,000 30,720,000 Ericsson sponsored ADR 387,356,439 COMPUTER SERVICES & SOFTWARE - - 15.6% Akamai Technologies, Inc. 100,000 26,125,000 Ariba, Inc. 20,000 5,290,000 Banyan Systems, Inc. (a) 100,000 3,325,000 BEA Systems, Inc. (a) 25,000 3,164,063 BMC Software, Inc. (a) 50,000 2,300,000 Breakaway Solutions, Inc. 84,842 10,605,250 Citrix Systems, Inc. (a) 50,000 5,271,875 Commerce One, Inc. 101,800 21,263,475 E.piphany, Inc. 20,000 4,397,500 Electronics for Imaging, Inc. 950,400 56,430,000 (a) Exodus Communications, Inc. 630,000 89,696,250 (a) F5 Networks, Inc. 75,000 6,750,000 Intuit, Inc. (a) 700,000 36,750,000 Legato Systems, Inc. (a) 85,000 3,028,125 MatrixOne, Inc. 1,000 25,000 Micromuse, Inc. (a) 60,000 8,508,750 Microsoft Corp. (a) 969,100 86,613,313 National Instrument Corp. (a) 180,000 8,083,125 NCR Corp. (a) 60,000 2,276,250 Net.Genesis Corp. 600 34,088 Niku Corp. 1,800 124,200 Onvia.com, Inc. 2,700 56,700 Phone.com, Inc. 37,800 5,277,825 Proxicom, Inc. 20,000 837,500 Redback Networks, Inc. 207,400 61,908,900 Silknet Software, Inc. 20,000 4,481,250 Software.com, Inc. 40,000 3,850,000 Technology Solutions, Inc. 250,000 1,812,500 Unisys Corp. (a) 1,420,000 42,511,250 Usinternetworking, Inc. 130,000 8,677,500 VERITAS Software Corp. (a) 292,500 57,878,438 Vignette Corp. 100,000 23,050,000 Visual Networks, Inc. (a) 110,000 7,232,500 597,635,627 COMPUTERS & OFFICE EQUIPMENT - - 33.3% Adaptec, Inc. (a) 561,100 23,005,100 Advanced Digital Information 286,400 25,955,000 Corp. (a) SHARES VALUE (NOTE 1) Alteon Websystems, Inc. 15,000 $ 1,346,250 Apple Computer, Inc. (a) 530,000 60,751,250 CDW Computer Centers, Inc. (a) 400,000 21,950,000 Comdisco, Inc. 186,000 7,149,375 Compaq Computer Corp. 1,756,350 43,689,206 Dell Computer Corp. (a) 1,725,000 70,401,563 EMC Corp. (a) 2,183,000 259,776,994 Emulex Corp. (a) 441,200 70,592,000 Gateway, Inc. (a) 1,538,700 105,785,625 Globix Corp. (a) 70,000 3,670,625 Hewlett-Packard Co. 1,150,000 154,675,000 Insight Enterprises, Inc. (a) 276,875 8,686,953 Juniper Networks, Inc. 315,900 86,655,319 Lexmark International Group, 430,000 51,277,500 Inc. Class A (a) Network Appliance, Inc. (a) 630,000 118,912,500 Pitney Bowes, Inc. 310,000 15,345,000 Quantum Corp. - DLT & 655,000 6,795,625 Storage Systems Group (a) SCM Microsystems, Inc. (a) 15,800 1,829,166 Seagate Technology, Inc. (a) 250,000 12,468,750 Silicon Graphics, Inc. (a) 900,000 8,831,250 Sun Microsystems, Inc. (a) 900,000 85,725,000 Symbol Technologies, Inc. 253,700 24,133,213 Tech Data Corp. (a) 68,300 1,481,256 1,270,889,520 CONSUMER ELECTRONICS - 1.5% Gemstar International Group 750,000 56,906,250 Ltd. (a) ELECTRICAL EQUIPMENT - 0.7% American Power Conversion 590,000 20,023,125 Corp. (a) ANTEC Corp. (a) 100,000 5,293,750 Pinnacle Systems (a) 50,000 2,506,250 27,823,125 ELECTRONIC INSTRUMENTS - 0.2% Agilent Technologies, Inc. 23,600 2,447,025 Credence Systems Corp. (a) 48,000 6,396,000 8,843,025 ELECTRONICS - 31.3% Altera Corp. (a) 885,400 70,610,650 Analog Devices, Inc. (a) 900,000 141,300,000 Atmel Corp. (a) 580,000 28,710,000 Broadcom Corp. Class A (a) 40,000 7,895,000 Brocade Communications 167,800 48,515,175 Systems, Inc. Cree Research, Inc. (a) 57,000 10,708,875 Cypress Semiconductor Corp. 200,000 9,125,000 (a) Flextronics International 53,200 3,238,550 Ltd. (a) Intel Corp. 150,000 16,950,000 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) ELECTRONICS - CONTINUED JDS Uniphase Corp. (a) 335,200 $ 88,367,100 KEMET Corp. (a) 290,100 17,823,019 Linear Technology Corp. 716,600 75,198,213 LSI Logic Corp. (a) 1,320,000 84,562,500 Maxim Integrated Products, 964,000 64,407,250 Inc. (a) Microchip Technology, Inc. (a) 345,000 21,540,938 Motorola, Inc. 816,200 139,162,100 National Semiconductor Corp. 610,000 45,826,250 (a) PMC-Sierra, Inc. (a) 80,000 15,445,000 QLogic Corp. (a) 170,000 26,520,000 STMicroelectronics NV 170,000 34,000,000 Texas Instruments, Inc. 1,488,400 247,818,600 1,197,724,220 PHOTOGRAPHIC EQUIPMENT - 0.1% Imation Corp. (a) 100,000 3,093,750 RETAIL & WHOLESALE, MISCELLANEOUS - 2.1% Best Buy Co., Inc. (a) 983,000 53,450,625 Circuit City Stores, Inc. - 620,000 25,032,500 Circuit City Group 78,483,125 SERVICES - 0.2% Diamond Technology Partners, 62,250 4,256,344 Inc. Class A (a) eLoyalty Corp. 95,000 2,903,438 7,159,782 TOTAL COMMON STOCKS 3,639,152,163 (Cost $1,616,878,991) CASH EQUIVALENTS - 9.8% Central Cash Collateral Fund, 183,211,300 183,211,300 5.75% (b) Taxable Central Cash Fund, 191,605,385 191,605,385 5.66% (b) TOTAL CASH EQUIVALENTS 374,816,685 (Cost $374,816,685) TOTAL INVESTMENT PORTFOLIO - 4,013,968,848 105.0% (Cost $1,991,695,676) NET OTHER ASSETS - (5.0)% (189,753,495) NET ASSETS - 100% $ 3,824,215,353
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 $2,876,474,244 and $3,058,277,719, 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 $137,531 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $181,496,863. The fund received cash collateral of $183,211,300 which was invested in cash equivalents. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $2,018,674,929. Net unrealized appreciation aggregated $1,995,293,919, of which $2,052,128,020 related to appreciated investment securities and $56,834,101 related to depreciated investment securities. The fund hereby designates approximately $255,923,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 1% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. COMPUTERS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 4,013,968,848 value (cost $1,991,695,676) - - See accompanying schedule Receivable for investments 31,520,584 sold Receivable for fund shares 8,148,145 sold Dividends receivable 100,250 Interest receivable 763,854 Redemption fees receivable 6,901 Other receivables 200,179 TOTAL ASSETS 4,054,708,761 LIABILITIES Payable for investments $ 33,220,850 purchased Payable for fund shares 11,313,761 redeemed Accrued management fee 1,668,140 Other payables and accrued 1,079,357 expenses Collateral on securities 183,211,300 loaned, at value TOTAL LIABILITIES 230,493,408 NET ASSETS $ 3,824,215,353 Net Assets consist of: Paid in capital $ 1,660,627,905 Accumulated undistributed net 141,314,276 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 2,022,273,172 (depreciation) on investments NET ASSETS, for 29,887,615 $ 3,824,215,353 shares outstanding NET ASSET VALUE and $127.95 redemption price per share ($3,824,215,353 (divided by) 29,887,615 shares) Maximum offering price per $131.91 share (100/97.00 of $127.95) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 2,563,455 Dividends Interest 10,521,008 Security lending 996,995 TOTAL INCOME 14,081,458 EXPENSES Management fee $ 13,963,837 Transfer agent fees 9,900,981 Accounting and security 1,342,533 lending fees Non-interested trustees' 7,973 compensation Custodian fees and expenses 67,791 Registration fees 253,218 Audit 56,616 Legal 8,227 Miscellaneous 33,726 Total expenses before 25,634,902 reductions Expense reductions (332,105) 25,302,797 NET INVESTMENT INCOME (LOSS) (11,221,339) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 459,409,641 Foreign currency transactions (38,391) 459,371,250 Change in net unrealized 1,653,265,607 appreciation (depreciation) on investment securities NET GAIN (LOSS) 2,112,636,857 NET INCREASE (DECREASE) IN $ 2,101,415,518 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 11,922,459 charges paid to FDC Sales charges - Retained by $ 11,919,086 FDC Deferred sales charges $ 7,975 withheld by FDC Exchange fees withheld by $ 89,799 FSC Expense reductions Directed $ 317,192 brokerage arrangements Custodian credits 6,587 Transfer agent credits 8,326 $ 332,105
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (11,221,339) $ (5,471,121) income (loss) Net realized gain (loss) 459,371,250 193,034,531 Change in net unrealized 1,653,265,607 272,430,790 appreciation (depreciation) NET INCREASE (DECREASE) IN 2,101,415,518 459,994,200 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (403,921,111) - from net realized gains Share transactions Net 1,163,982,244 1,830,119,568 proceeds from sales of shares Reinvestment of distributions 392,677,083 - Cost of shares redeemed (1,262,885,832) (1,247,821,903) NET INCREASE (DECREASE) IN 293,773,495 582,297,665 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 1,512,642 3,678,254 TOTAL INCREASE (DECREASE) 1,992,780,544 1,045,970,119 IN NET ASSETS NET ASSETS Beginning of period 1,831,434,809 785,464,690 End of period $ 3,824,215,353 $ 1,831,434,809 OTHER INFORMATION Shares Sold 13,611,310 33,082,983 Issued in reinvestment of 4,388,872 - distributions Redeemed (14,898,647) (25,415,629) Net increase (decrease) 3,101,535 7,667,354
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 68.37 $ 41.08 $ 48.25 $ 41.03 $ 30.67 period Income from Investment Operations Net investment income (loss) C (.41) (.29) (.32) (.36) (.23) Net realized and unrealized 74.86 27.39 6.42 9.94 16.10 gain (loss) Total from investment 74.45 27.10 6.10 9.58 15.87 operations Less Distributions From net realized gain (14.92) - (10.64) (2.47) (5.61) In excess of net realized gain - - (2.75) - - Total distributions (14.92) - (13.39) (2.47) (5.61) Redemption fees added to paid .05 .19 .12 .11 .10 in capital Net asset value, end of period $ 127.95 $ 68.37 $ 41.08 $ 48.25 $ 41.03 TOTAL RETURN A, B 119.58% 66.43% 20.33% 23.97% 52.79% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 3,824,215 $ 1,831,435 $ 785,465 $ 604,286 $ 527,337 (000 omitted) Ratio of expenses to average 1.07% 1.25% 1.40% 1.48% 1.40% net assets Ratio of expenses to average 1.05% D 1.23% D 1.34% D 1.44% D 1.38% D net assets after expense reductions Ratio of net investment (.47)% (.54)% (.67)% (.83)% (.56)% income (loss) to average net assets Portfolio turnover rate 129% 133% 333% 255% 129%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 DEVELOPING COMMUNICATIONS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the life of fund total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND 2000 SELECT DEVELOPING 166.12% 586.54% 1,693.31% COMMUNICATIONS SELECT DEVELOPING 158.07% 565.87% 1,639.44% COMMUNICATIONS (LOAD ADJ.) S&P 500 11.73% 206.94% 381.66% GS Technology 104.99% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or since the fund started on June 29, 1990. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Technology Index - a market capitalization-weighted index of 185 stocks designed to measure the performance of companies in the technology sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND 2000 SELECT DEVELOPING 166.12% 47.01% 34.80% COMMUNICATIONS SELECT DEVELOPING 158.07% 46.11% 34.37% COMMUNICATIONS (LOAD ADJ.) S&P 500 11.73% 25.14% 17.66% GS Technology 104.99% 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 80126.95 46265.46 1999/09/30 81771.00 44997.32 1999/10/31 92868.35 47844.75 1999/11/30 103801.29 48817.43 1999/12/31 133700.78 51692.78 2000/01/31 133062.89 49095.74 2000/02/29 173944.00 48166.35 IMATRL PRASUN SHR__CHT 20000229 20000316 093509 R00000000000119 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Developing Communications Portfolio on June 29, 1990, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $173,944 - a 1,639.44% 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 $48,166 - a 381.66% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Juniper Networks, Inc. 8.9 JDS Uniphase Corp. 6.1 Vignette Corp. 6.0 Motorola, Inc. 4.9 Cisco Systems, Inc. 4.8 Broadcom Corp. Class A 4.2 Redback Networks, Inc. 3.7 BroadVision, Inc. 3.4 Sycamore Networks, Inc. 3.1 Comverse Technology, Inc. 2.5 47.6 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Computer Services & Software 24.9% Row: 1, Col: 6, Value: 24.9 Electronics 22.5% Row: 1, Col: 5, Value: 22.5 Communications Equipment 20.1% Row: 1, Col: 4, Value: 20.1 Computers & Office Equipment 9.2% Row: 1, Col: 3, Value: 9.199999999999999 Telephone Services 4.5% Row: 1, Col: 2, Value: 4.5 * All Others 18.8% Row: 1, Col: 1, Value: 18.8
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. DEVELOPING COMMUNICATIONS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Rajiv Kaul) NOTE TO SHAREHOLDERS: Rajiv Kaul became Portfolio Manager of Fidelity Select Developing Communications Portfolio on February 7, 2000. Q. HOW DID THE FUND PERFORM, RAJIV? A. Very well. For the 12-month period ending February 29, 2000, the fund returned 166.12%. By comparison, the Goldman Sachs Technology Index - an index of 185 stocks designed to measure the performance of companies in the technology sector - was up 104.99% for the same period. The fund also compares its performance to the Standard & Poor's 500 Index, which returned 11.73% for the 12-month period. Q. WHY DID THE FUND OUTPERFORM THE GOLDMAN SACHS AND THE S&P 500 INDEXES BY SUCH A WIDE MARGIN? A. The place to invest - particularly in the latter part of the period - - was the Internet. The fund focused on Internet-related wireless and fiber-optics stocks in the telecommunications industry, which performed exceptionally well. The demand for bandwidth really took off, and companies couldn't keep up with that demand. Semiconductor companies also performed well. Their businesses were boosted by demand for chips for the telecommunications industry. Companies involved in developing data, video telephony and voice transmission over the Internet also were winners, accounting for much of the fund's strong performance during the period. Q. WHAT IMPACT DID GLOBAL ECONOMIC CONDITIONS HAVE ON THE FUND DURING THE PERIOD? A. Global capital markets had a significant impact, because they funded many of the new networks being built around the world. As global economic conditions improved, it allowed more capital to be freed up to support funding to establish new networks. The strongest growth came from Europe, where deregulation spurred significant activity. Asian markets also were generally strong, and the U.S. saw greatly increased demand as well. Q. WHAT STOCKS STOOD OUT IN THIS ENVIRONMENT? A. JDS Uniphase, the largest maker of fiber-optic components, performed very well. Demand was so strong for its products that the company just couldn't keep up. JDS strengthened its position by buying competitors, providing further consolidation within the industry. Companies in the area of computer networks and communications equipment also were good bets. Juniper Networks, an attractive IPO that was added to the fund's portfolio early in the period, posted good results. Its product, a high-speed router that competes with Cisco's, benefited from growing demand and, with only two companies competing in this market, Juniper had a very good year. Redback Networks, another maker of products allowing for high-speed access to the Internet, also enjoyed growing demand for its products and performed very well. Q. WHAT ABOUT DISAPPOINTMENTS? A. Newbridge Networks was a disappointment. The company attempted to compete with Cisco in the enterprise software area and was unsuccessful in its efforts. Internet-related service firm Northpoint Communications also disappointed, delivering slower-than-expected growth. These stocks were sold from the fund's portfolio. AT&T also had a difficult year, as investors became increasingly concerned about its ability to join competitors in moving from traditional voice-based services to services capable of sending data in a cost-efficient manner while remaining competitive. AT&T also made some acquisitions in the cable area, and investors reacted negatively to the high amount it paid for those acquisitions. Q. WHAT'S YOUR OUTLOOK, RAJIV? A. I'm very excited about the opportunities that I see ahead. Many new networks being built are in their early phases and the demand for bandwidth is huge. The companies in these areas should enjoy a positive market environment, with ample opportunities to grow over the next several years. Wireless is going to be a big component of this growth, adding to demand for bandwidth. Although further interest-rate increases could dampen growth - hurting capital markets and limiting financing available for building new networks - the fundamentals in this industry are strong. This market is driven by the demand for e-commerce, greater access to leisure activities on the Internet, and phone, video and business-to-business services. Technology also is reducing the cost of these services, making them more affordable. As long as regulation doesn't tighten up, I believe that the potential for growth is very good. Through all types of markets and economic conditions, however, my job is to find the leaders in emerging technologies early, while constantly watching out for new potential leaders. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: June 29, 1990 FUND NUMBER: 518 TRADING SYMBOL: FSDCX SIZE: as of February 29, 2000, more than $3.4 billion MANAGER: Rajiv Kaul, since February 2000; manager, Fidelity Select Biotechnology Portfolio, 1998-February 2000; equity research associate, health care industry, 1996-1998; joined Fidelity in 1996 DEVELOPING COMMUNICATIONS PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets
COMMON STOCKS - 93.3% SHARES VALUE (NOTE 1) ADVERTISING - 0.5% DoubleClick, Inc. (a) 160,000 $ 14,210,000 Internet Capital Group, Inc. 10,420 1,101,915 15,311,915 BROADCASTING - 4.5% AT&T Corp. - Liberty Media 350,000 18,287,500 Group Class A (a) Cablevision Systems Corp. 1,000 64,188 Class A (a) CBS Corp. (a) 74,600 4,443,363 Comcast Corp. Class A 700,100 29,754,250 (special) Cox Communications, Inc. 500,000 22,718,750 Class A (a) MediaOne Group, Inc. (a) 375,000 29,437,500 Wireless Facilities, Inc. 400,000 49,600,000 154,305,551 CELLULAR - 4.3% China Telecom (Hong Kong) 45,000 8,364,375 Ltd. sponsored ADR (a) Leap Wireless International, 204,600 17,940,863 Inc. (a) Sprint Corp. - PCS Group 500,000 25,875,000 Series 1 (a) Vodafone AirTouch PLC 646,250 37,280,547 sponsored ADR VoiceStream Wireless Corp. (a) 450,000 59,878,125 149,338,910 COMMUNICATIONS EQUIPMENT - 20.1% Advanced Fibre 656,800 44,744,500 Communications, Inc. (a) Carrier Access Corp. (a) 200,000 11,350,000 Cisco Systems, Inc. (a) 1,256,600 166,106,813 Comverse Technology, Inc. (a) 439,650 86,556,094 Ditech Communications Corp. 273,200 29,847,100 Globalstar Telecommunications 951,500 27,117,750 Ltd. (a) Lucent Technologies, Inc. 688,440 40,962,180 Nokia AB sponsored ADR 300,000 59,493,750 Nortel Networks Corp. 300,000 33,216,060 Sycamore Networks, Inc. 729,300 107,936,400 Tekelec (a) 300,000 15,450,000 Telefonaktiebolaget LM 510,500 49,008,000 Ericsson sponsored ADR Tellabs, Inc. (a) 200,000 9,600,000 Terayon Communication 50,000 12,856,250 Systems, Inc. (a) 694,244,897 COMPUTER SERVICES & SOFTWARE - - 24.9% Akamai Technologies, Inc. 115,000 30,043,750 Amdocs Ltd. (a) 250,000 18,546,875 At Home Corp. Series A (a) 181,688 6,234,170 Aware, Inc. (a) 243,500 15,340,500 BroadVision, Inc. (a) 466,700 117,870,919 Cobalt Networks, Inc. 1,000 95,750 Concentric Network Corp. (a) 300,000 16,087,500 Critical Path, Inc. 39,600 3,410,550 SHARES VALUE (NOTE 1) DSET Corp. (a)(c) 594,200 $ 14,855,000 eMerge Interactive, Inc. 5,210 276,781 Class A Exodus Communications, Inc. 200,000 28,475,000 (a) Internap Network Services 440,000 42,680,000 Corp. Metasolv Software, Inc. 499,900 44,053,688 Micromuse, Inc. (a) 200,000 28,362,500 PSINet, Inc. (a) 336,000 15,582,000 Redback Networks, Inc. 430,900 128,623,650 Siebel Systems, Inc. (a) 65,800 9,125,638 Silknet Software, Inc. 200,000 44,812,500 US Interactive, Inc. 2,605 118,528 Verio, Inc. (a) 250,000 18,765,625 VeriSign, Inc. (a) 50,000 12,650,000 Vignette Corp. 903,500 208,256,750 WorldGate Communications, 190,000 6,555,000 Inc. Yahoo!, Inc. (a) 300,000 47,906,250 858,728,924 COMPUTERS & OFFICE EQUIPMENT - - 9.2% Juniper Networks, Inc. 1,125,500 308,738,713 Safeguard Scientifics, Inc. 52,100 9,114,244 (a) 317,852,957 CONSUMER ELECTRONICS - 0.3% Gemstar International Group 150,000 11,381,250 Ltd. (a) ELECTRONIC INSTRUMENTS - 0.4% NetOptix Corp. (a) 38,000 6,215,375 Photon Dynamics, Inc. (a) 110,000 7,150,000 13,365,375 ELECTRONICS - 22.5% Applied Micro Circuits Corp. 139,300 38,316,206 (a) Audiovox Corp. Class A (a) 141,100 9,129,611 Brightpoint, Inc. (a) 990,400 12,751,400 Broadcom Corp. Class A (a) 738,200 145,702,225 Brocade Communications 191,900 55,483,088 Systems, Inc. Conductus, Inc. (a) 88,000 5,896,000 Conexant Systems, Inc. (a) 100,000 9,825,000 E Tek Dynamics, Inc. (a) 66,100 18,061,825 GlobeSpan, Inc. 435,000 32,842,500 Illinois Superconductor Corp. 570,000 14,036,250 (a) JDS Uniphase Corp. (a) 793,736 209,248,653 Motorola, Inc. 991,200 168,999,600 QLogic Corp. (a) 158,800 24,772,800 SDL, Inc. (a) 33,500 13,735,000 Texas Instruments, Inc. 20,000 3,330,000 Vitesse Semiconductor Corp. 34,800 3,612,675 (a) Xilinx, Inc. (a) 150,000 11,962,500 777,705,333 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) GAS - 0.3% Williams Companies, Inc. 200,000 $ 8,362,500 PACKAGING & CONTAINERS - 1.8% Corning, Inc. 332,000 62,416,000 TELEPHONE SERVICES - 4.5% AT&T Corp. 1,000,000 49,437,500 MCI WorldCom, Inc. (a) 375,000 16,734,375 McLeodUSA, Inc. Class A (a) 100,000 8,800,000 Metromedia Fiber Network, 510,000 36,664,219 Inc. Class A (a) NEXTLINK Communications, Inc. 250,000 27,546,875 Class A (a) Pac-West Telecomm, Inc. 5,210 182,350 Time Warner Telecom, Inc. 224,200 17,263,400 156,628,719 TOTAL COMMON STOCKS 3,219,642,331 (Cost $1,541,950,322) CASH EQUIVALENTS - 17.8% Central Cash Collateral Fund, 377,506,700 377,506,700 5.75% (b) Taxable Central Cash Fund, 230,938,303 230,938,303 5.66% (b) MATURITY AMOUNT Investments in repurchase $ 7,132,135 7,131,000 agreements (U.S. Treasury obligations), in a joint trading account at 5.73%, dated 2/29/00 due 3/1/00 TOTAL CASH EQUIVALENTS 615,576,003 (Cost $615,576,003) TOTAL INVESTMENT PORTFOLIO - 3,835,218,334 111.1% (Cost $2,157,526,325) NET OTHER ASSETS - (11.1)% (382,491,780) NET ASSETS - 100% $ 3,452,726,554
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 $2,454,507,507 and $1,516,857,851, respectively. The fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of Fidelity Management & Research Company. The commissions paid to these affiliated firms were $41,229 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $386,773,550. The fund received cash collateral of $377,506,700 which was invested in cash equivalents. 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. Transactions during the period with companies which are or were affiliates are as follows: AFFILIATE PURCHASE COST SALES COST DIVIDEND INCOME VALUE DSET Corp. $ 1,035,000 $ - $ - $ 14,855,000 INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $2,161,323,516. Net unrealized appreciation aggregated $1,673,894,818, of which $1,703,298,881 related to appreciated investment securities and $29,404,063 related to depreciated investment securities. The fund hereby designates approximately $59,562,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 3% of the dividends distributed the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for the use in preparing 2000 income tax returns. DEVELOPING COMMUNICATIONS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 3,835,218,334 value (including repurchase agreements of $7,131,000) (cost $2,157,526,325) - See accompanying schedule Cash 660 Receivable for investments 20,566,537 sold Receivable for fund shares 44,554,525 sold Dividends receivable 13,769 Interest receivable 983,756 Redemption fees receivable 5,108 Other receivables 518,889 TOTAL ASSETS 3,901,861,578 LIABILITIES Payable for investments $ 61,942,045 purchased Payable for fund shares 7,141,230 redeemed Accrued management fee 1,382,699 Other payables and accrued 1,162,350 expenses Collateral on securities 377,506,700 loaned, at value TOTAL LIABILITIES 449,135,024 NET ASSETS $ 3,452,726,554 Net Assets consist of: Paid in capital $ 1,677,517,185 Accumulated undistributed net 97,517,360 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 1,677,692,009 (depreciation) on investments NET ASSETS, for 42,201,815 $ 3,452,726,554 shares outstanding NET ASSET VALUE and $81.81 redemption price per share ($3,452,726,554 (divided by) 42,201,815 shares) Maximum offering price per $84.34 share (100/97.00 of $81.81) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 1,804,599 Dividends Interest 6,384,708 Security lending 791,738 TOTAL INCOME 8,981,045 EXPENSES Management fee $ 8,255,415 Transfer agent fees 5,890,569 Accounting and security 830,937 lending fees Non-interested trustees' 5,444 compensation Custodian fees and expenses 40,416 Registration fees 647,193 Audit 41,095 Legal 8,906 Miscellaneous 1,517 Total expenses before 15,721,492 reductions Expense reductions (94,810) 15,626,682 NET INVESTMENT INCOME (LOSS) (6,645,637) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 171,908,622 Foreign currency transactions (9,785) 171,898,837 Change in net unrealized appreciation (depreciation) on: Investment securities 1,553,735,092 Assets and liabilities in (1,555) 1,553,733,537 foreign currencies NET GAIN (LOSS) 1,725,632,374 NET INCREASE (DECREASE) IN $ 1,718,986,737 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 13,537,124 charges paid to FDC Sales charge - Retained by $ 13,526,554 FDC Deferred sales charges $ 3,734 withheld by FDC Exchange fees withheld by FSC $ 55,141 Expense reductions $ 87,692 Directed brokerage arrangements Custodian credits 2,646 Transfer agent credits 4,472 $ 94,810
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (6,645,637) $ (1,996,908) income (loss) Net realized gain (loss) 171,898,837 53,731,227 Change in net unrealized 1,553,733,537 97,390,680 appreciation (depreciation) NET INCREASE (DECREASE) IN 1,718,986,737 149,124,999 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (92,564,065) (820,226) from net realized gains Share transactions Net 2,222,798,318 606,604,197 proceeds from sales of shares Reinvestment of distributions 90,014,100 808,781 Cost of shares redeemed (1,100,728,465) (383,100,933) NET INCREASE (DECREASE) IN 1,212,083,953 224,312,045 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 2,158,711 1,088,615 TOTAL INCREASE (DECREASE) 2,840,665,336 373,705,433 IN NET ASSETS NET ASSETS Beginning of period 612,061,218 238,355,785 End of period $ 3,452,726,554 $ 612,061,218 OTHER INFORMATION Shares Sold 46,122,962 21,247,025 Issued in reinvestment of 1,814,211 39,007 distributions Redeemed (24,438,881) (14,419,633) Net increase (decrease) 23,498,292 6,866,399
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 32.72 $ 20.14 $ 19.68 $ 19.42 $ 20.40 period Income from Investment Operations Net investment income (loss) C (.22) (.16) (.18) (.18) (.17) Net realized and unrealized 52.31 12.72 4.95 .42 4.17 gain (loss) Total from investment 52.09 12.56 4.77 .24 4.00 operations Less Distributions From net realized gain (3.07) (.07) (4.35) - (5.00) Redemption fees added to paid .07 .09 .04 .02 .02 in capital Net asset value, end of period $ 81.81 $ 32.72 $ 20.14 $ 19.68 $ 19.42 TOTAL RETURN A, B 166.12% 63.01% 28.17% 1.34% 21.84% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 3,452,727 $ 612,061 $ 238,356 $ 220,360 $ 333,185 (000 omitted) Ratio of expenses to average 1.11% 1.38% 1.61% 1.64% 1.53% net assets Ratio of expenses to average 1.11% 1.34% D 1.55% D 1.62% D 1.51% D net assets after expense reductions Ratio of net investment (.47)% (.64)% (.82)% (.86)% (.78)% income (loss) to average net assets Portfolio turnover rate 112% 299% 383% 202% 249%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 ELECTRONICS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT ELECTRONICS 178.06% 986.50% 2,842.92% SELECT ELECTRONICS (LOAD ADJ.) 169.64% 953.83% 2,754.56% S&P 500 11.73% 206.94% 425.47% GS Technology 104.99% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Technology Index - a market capitalization-weighted index of 185 stocks designed to measure the performance of companies in the technology sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT ELECTRONICS 178.06% 61.14% 40.24% SELECT ELECTRONICS (LOAD ADJ.) 169.64% 60.16% 39.82% S&P 500 11.73% 25.14% 18.05% GS Technology 104.99% 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 1990/02/28 9700.00 10000.00 1990/03/31 10170.98 10265.00 1990/04/30 10215.84 10008.38 1990/05/31 11718.50 10984.19 1990/06/30 11897.92 10909.50 1990/07/31 11337.23 10874.59 1990/08/31 9565.43 9891.53 1990/09/30 8118.84 9409.81 1990/10/31 7827.28 9369.35 1990/11/30 8634.68 9974.61 1990/12/31 9195.49 10252.90 1991/01/31 10475.44 10699.92 1991/02/28 11396.12 11464.97 1991/03/31 12002.41 11742.42 1991/04/30 12069.78 11770.60 1991/05/31 12462.75 12279.09 1991/06/30 10947.01 11716.71 1991/07/31 11699.26 12262.71 1991/08/31 12182.05 12553.34 1991/09/30 11250.16 12343.69 1991/10/31 11800.31 12509.10 1991/11/30 11081.74 12004.98 1991/12/31 12440.29 13378.35 1992/01/31 13911.12 13129.52 1992/02/29 14674.60 13300.20 1992/03/31 13518.15 13040.85 1992/04/30 13259.91 13424.25 1992/05/31 13282.37 13490.03 1992/06/30 12316.79 13289.02 1992/07/31 12967.99 13832.55 1992/08/31 13102.73 13548.98 1992/09/30 13574.29 13708.86 1992/10/31 14596.01 13756.84 1992/11/30 15550.36 14225.94 1992/12/31 15853.51 14400.92 1993/01/31 16392.44 14521.89 1993/02/28 16033.16 14719.39 1993/03/31 16594.54 15029.97 1993/04/30 16302.03 14666.24 1993/05/31 17937.87 15059.30 1993/06/30 18265.04 15102.97 1993/07/31 18784.00 15042.56 1993/08/31 20397.28 15612.67 1993/09/30 20735.73 15492.45 1993/10/31 20340.87 15813.15 1993/11/30 20182.92 15662.92 1993/12/31 20939.29 15852.44 1994/01/31 22385.66 16391.43 1994/02/28 23447.22 15947.22 1994/03/31 23195.10 15251.92 1994/04/30 23128.76 15447.15 1994/05/31 23062.41 15700.48 1994/06/30 21828.34 15315.82 1994/07/31 22279.51 15818.18 1994/08/31 24455.71 16466.72 1994/09/30 23752.42 16063.29 1994/10/31 24721.10 16424.71 1994/11/30 24402.63 15826.52 1994/12/31 24535.32 16061.23 1995/01/31 23832.04 16477.70 1995/02/28 26273.63 17119.83 1995/03/31 28980.61 17625.04 1995/04/30 32218.37 18144.10 1995/05/31 34567.07 18869.32 1995/06/30 39490.06 19307.65 1995/07/31 45394.99 19947.89 1995/08/31 45992.12 19997.96 1995/09/30 46814.83 20841.88 1995/10/31 45527.69 20767.47 1995/11/30 44386.51 21679.16 1995/12/31 41456.92 22096.70 1996/01/31 42858.14 22848.87 1996/02/29 45386.79 23060.68 1996/03/31 42729.30 23282.76 1996/04/30 47609.42 23625.95 1996/05/31 48865.69 24235.26 1996/06/30 44758.66 24327.60 1996/07/31 42600.45 23252.80 1996/08/31 44662.02 23743.20 1996/09/30 50685.68 25079.47 1996/10/31 51088.33 25771.16 1996/11/30 58754.80 27719.21 1996/12/31 58754.80 27170.09 1997/01/31 67935.23 28867.68 1997/02/28 61122.38 29094.00 1997/03/31 56870.39 27898.53 1997/04/30 62169.74 29564.07 1997/05/31 69000.80 31363.93 1997/06/30 68576.07 32769.03 1997/07/31 80486.19 35376.46 1997/08/31 83530.08 33394.67 1997/09/30 86627.06 35223.70 1997/10/31 73779.00 34047.23 1997/11/30 73248.09 35623.28 1997/12/31 66816.08 36234.93 1998/01/31 67900.41 36635.68 1998/02/28 75881.04 39277.85 1998/03/31 73712.39 41289.27 1998/04/30 77182.23 41704.64 1998/05/31 66859.46 40987.74 1998/06/30 68182.33 42652.66 1998/07/31 71044.95 42198.41 1998/08/31 56883.67 36097.36 1998/09/30 64408.88 38409.76 1998/10/31 77073.80 41534.01 1998/11/30 87613.43 44051.38 1998/12/31 100972.31 46589.63 1999/01/31 121834.72 48538.00 1999/02/28 102663.86 47029.44 1999/03/31 106827.66 48911.09 1999/04/30 109039.69 50805.42 1999/05/31 112878.20 49605.90 1999/06/30 134586.38 52359.03 1999/07/31 138706.81 50724.38 1999/08/31 148509.10 50473.29 1999/09/30 145472.99 49089.82 1999/10/31 161824.61 52196.23 1999/11/30 177308.77 53257.37 1999/12/31 208685.63 56394.23 2000/01/31 216833.01 53560.99 2000/02/29 285457.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000314 100320 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Electronics Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $285,456 - a 2,754.56% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Texas Instruments, Inc. 5.7 Analog Devices, Inc. 5.6 PMC-Sierra, Inc. 5.6 National Semiconductor Corp. 4.8 LAM Research Corp. 4.6 Intel Corp. 4.4 Micron Technology, Inc. 4.3 Linear Technology Corp. 3.7 Altera Corp. 3.5 Motorola, Inc. 3.4 45.6 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Electronics 69.5% Row: 1, Col: 6, Value: 69.5 Electronic Instruments 12.3% Row: 1, Col: 5, Value: 12.3 Computers & Office Equipment 4.7% Row: 1, Col: 4, Value: 4.7 Communications Equipment 2.3% Row: 1, Col: 3, Value: 2.3 Computer Services & Software 1.5% Row: 1, Col: 2, Value: 1.5 * All Others 9.7% Row: 1, Col: 1, Value: 9.699999999999999
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. ELECTRONICS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Brian Hanson) NOTE TO SHAREHOLDERS: Brian Hanson became Portfolio Manager of Fidelity Select Electronics Portfolio on February 1, 2000. Q. HOW DID THE FUND PERFORM, BRIAN? A. The fund performed extremely well relative to its benchmarks. For the 12 months ending February 29, 2000, the fund returned 178.06%. The Goldman Sachs Technology Index - an index of 185 stocks designed to measure the performance of companies in the technology sector - returned 104.99% for the same period, while the Standard & Poor's 500 Index returned 11.73%. Q. WHY WAS THE FUND'S PERFORMANCE SO STRONG COMPARED TO THE GOLDMAN SACHS INDEX? A. The fund was overweighted, compared to the index, in the semiconductor and semiconductor capital equipment industries, both of which tend to be somewhat cyclical. In late 1998, we recognized signs that the semiconductor business appeared to be bottoming out, that the low levels of spending were unsustainable and that industry demand was starting to improve. At the start of 1999, the fund was well-positioned to benefit from the very strong performance that these segments produced - driven by the first full year of a cyclical recovery in these industries. Q. WERE THERE ANY COMPANIES THAT SPECIFICALLY CONTRIBUTED TO THE FUND'S OUTPERFORMANCE? A. Lam Research was an obvious standout. This company sells equipment that enables semiconductor manufacturers to make chips faster and cheaper. Like many equipment suppliers, Lam was hurt badly by the industry downturn that began with the Asian monetary crisis in 1997, and many investors had given up on the company. The fund held a position in Lam and increased that position based on a determination that the industry was beginning its recovery, and that Lam's management would have the company in a position to benefit from the upturn. In 1999, the Asian crisis subsided, the industry began to recover and the management of Lam turned the company around with the result being that it was a great stock to own. Texas Instruments and Analog Devices also were positive contributors to the fund's outperformance for the period. These companies make both analog semiconductors and digital signal processors (DSPs), which are much in demand for use in new cellular phones. Both companies were well-positioned to deliver the chips that will enable the world to go "digital." As the usage of digital cellular phones, DVDs and digital cameras proliferated in 1999, the two firms began to see very strong sales and earnings growth, which helped make these stocks great performers for the year. Q. WERE THERE ANY AREAS THAT DETRACTED FROM PERFORMANCE? A. In general, the companies that were tied to the personal computer industry did not fare as well as those tied to the communications industry. While many personal computer-related companies were good stocks during the period, it was hard for them to compete with some of the communications stocks that saw their end markets grow by more than 50%. An example of this is the huge increase in cellular telephone sales, which grew by approximately 75%, compared to about a 20% growth rate for personal computer sales. As we saw this shift occur, we became much more selective in our stock picking and chose only the most attractive PC stocks, while focusing more on the communications sector. Q. HAVE YOU FOCUSED ON ANY OTHER PARTICULAR AREAS SINCE TAKING OVER THE FUND? A. I have positioned the fund to benefit from the trend of communications becoming a bigger driver for the electronics industry. I like companies that make products used in wireless communications and broadband Internet access. These areas are seeing explosive growth as they are in the early stages of adoption. Sales for cellular phones are strong and, in fact, are already outselling personal computers. Future generations of cellular phones also will have data capabilities such as wireless Internet access, and these additional features will be made possible by better semiconductors. As for broadband Internet access, demand is rapidly gaining momentum as consumers call for faster access to the Internet. Q. BRIAN, WHAT IS YOUR OUTLOOK? A. Assuming the global economic picture remains healthy, I think 2000 will be another good year for the electronics sector. With tech stocks up so much already and valuations at all-time highs, the risk and volatility will be high but the fund will continue to focus on owning the best names, in the best sectors, as that is the key to outperformance. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 008 TRADING SYMBOL: FSELX SIZE: as of February 29, 2000, more than $9.9 billion MANAGER: Brian Hanson, since February 2000; analyst, semiconductor equipment, 1998-2000; health care industry, 1996-1998; joined Fidelity in 1996 ELECTRONICS PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets
COMMON STOCKS - 92.8% SHARES VALUE (NOTE 1) CELLULAR - 0.2% Nextel Communications, Inc. 50,000 $ 6,837,500 Class A (a) VoiceStream Wireless Corp. (a) 100,000 13,306,250 20,143,750 COMMUNICATIONS EQUIPMENT - 2.3% Jabil Circuit, Inc. (a) 2,785,600 193,425,100 Nokia AB sponsored ADR 200,000 39,662,500 233,087,600 COMPUTER SERVICES & SOFTWARE - - 1.5% Cadence Design Systems, Inc. 7,470,300 148,939,106 (a) MatrixOne, Inc. 2,300 57,500 Onvia.com, Inc. 6,800 142,800 149,139,406 COMPUTERS & OFFICE EQUIPMENT - - 4.7% Adaptec, Inc. (a) 2,752,900 112,868,900 Dell Computer Corp. (a) 500,000 20,406,250 Emulex Corp. (a) 271,400 43,424,000 Gateway, Inc. (a) 600,000 41,250,000 Network Appliance, Inc. (a) 150,000 28,312,500 SCI Systems, Inc. (a) 5,435,000 218,758,750 465,020,400 CONSUMER ELECTRONICS - 0.7% Gemstar International Group 960,000 72,840,000 Ltd. (a) ELECTRONIC INSTRUMENTS - 12.3% Agilent Technologies, Inc. 300,000 31,106,250 Cohu, Inc. 400,000 22,550,000 KLA-Tencor Corp. (a) 2,981,200 232,347,275 Kulicke & Soffa Industries, 371,000 29,494,500 Inc. (a) LAM Research Corp. (a)(c) 2,892,927 451,658,228 Lernout & Hauspie Speech 600,000 63,562,500 Products NV (a) Novellus Systems, Inc. (a) 3,628,200 215,197,613 St. Assembly Test Services 31,300 1,502,400 Ltd. ADR Teradyne, Inc. (a) 1,976,700 171,972,900 1,219,391,666 ELECTRONICS - 69.5% Altera Corp. (a) 4,346,700 346,649,325 Analog Devices, Inc. (a) 3,550,300 557,397,100 Applied Micro Circuits Corp. 365,000 100,397,813 (a) ARM Holdings PLC sponsored 243,900 56,981,138 ADR (a) Avnet, Inc. 221,000 14,779,375 AVX Corp. 1,958,200 124,345,700 Broadcom Corp. Class A (a) 500,000 98,687,500 SHARES VALUE (NOTE 1) Brocade Communications 25,000 $ 7,228,125 Systems, Inc. Celestica, Inc. (sub. vtg.) 711,200 33,852,649 (a) Chartered Semiconduct 275,400 24,304,050 Manufacturing Ltd. ADR Cree Research, Inc. (a) 507,600 95,365,350 Dallas Semiconductor Corp. 1,482,800 59,868,050 DII Group, Inc. (a)(c) 2,039,700 197,213,494 Epcos AG (a) 54,600 7,532,575 Etec Systems, Inc. (a) 630,300 74,237,522 Fairchild Semiconduct 200,000 7,550,000 International, Inc. Class A Flextronics International 218,200 13,282,925 Ltd. (a) GlobeSpan, Inc. 369,300 27,882,150 Integrated Device Technology, 487,500 17,976,563 Inc. (a) Intel Corp. 3,883,000 438,779,000 Intersil Holding Corp. 25,500 1,514,063 KEMET Corp. (a) 719,900 44,228,856 Lattice Semiconductor Corp. 898,200 63,098,550 (a) Linear Technology Corp. 3,516,720 369,035,805 LSI Logic Corp. (a) 5,188,000 332,356,250 Maxim Integrated Products, 3,921,000 261,971,813 Inc. (a) Methode Electronics, Inc. 794,500 46,180,313 Class A Microchip Technology, Inc. (a) 1,164,075 72,681,933 Micron Technology, Inc. (a) 4,382,900 429,798,131 Motorola, Inc. 1,990,200 339,329,100 National Semiconductor Corp. 6,324,200 475,105,525 (a) PCD, Inc. (a) 50,000 250,000 Plexus Corp. (a) 509,700 28,782,122 PMC-Sierra, Inc. (a) 2,876,200 555,286,363 QLogic Corp. (a) 200,000 31,200,000 Rambus, Inc. (a) 360,000 108,585,000 RF Micro Devices, Inc. (a) 395,000 54,633,438 Samsung Electronics Co. Ltd. 199,420 45,134,189 Sanmina Corp. (a) 1,719,800 201,324,088 Solectron Corp. (a) 2,739,900 179,463,450 Texas Instruments, Inc. 3,429,100 570,945,144 Vitesse Semiconductor Corp. 2,079,400 215,867,713 (a) Xilinx, Inc. (a) 2,451,800 195,531,050 6,926,613,300 INDUSTRIAL MACHINERY & EQUIPMENT - 1.2% ASM Lithography Holding NV (a) 143,100 18,334,688 PRI Automation, Inc. (a) 761,600 60,832,800 Varian Semiconductor 756,900 43,994,813 Equipment Associates, Inc. (a) 123,162,301 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) TELEPHONE SERVICES - 0.4% McLeodUSA, Inc. Class A (a) 150,000 $ 13,200,000 Metromedia Fiber Network, 304,700 21,905,073 Inc. Class A (a) 35,105,073 TOTAL COMMON STOCKS 9,244,503,496 (Cost $4,118,987,067) CASH EQUIVALENTS - 7.7% SHARES Central Cash Collateral Fund, 150,514,500 150,514,500 5.75% (b) Taxable Central Cash Fund, 590,281,072 590,281,072 5.66% (b) MATURITY AMOUNT Investments in repurchase $ 20,823,314 20,820,000 agreements (U.S. Treasury obligations), in a joint trading account at 5.73%, dated 2/29/00 due 3/1/00 TOTAL CASH EQUIVALENTS 761,615,572 (Cost $761,615,572) TOTAL INVESTMENT PORTFOLIO - 10,006,119,068 100.5% (Cost $4,880,602,639) NET OTHER ASSETS - (0.5)% (45,235,239) NET ASSETS - 100% $ 9,960,883,829
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 $6,419,838,286 and $5,506,306,071, 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 $267,827 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $167,533,313. The fund received cash collateral of $150,514,500 which was invested in cash equivalents. Transactions during the period with companies which are or were affiliates are as follows:
PURCHASE SALES DIVIDEND VALUE AFFILIATE COST COST INCOME DII Group, Inc. $ 5,203,125 $ - $ - $ 197,213,494 LAM Research Corp. 11,140,676 - - 451,658,228 Rambus, Inc. 52,722,193 53,783,517 - - SpeedFam-IPEC, Inc. - 9,979,852 - - TOTALS $ 69,065,994 $ 63,763,369 $ - $ 648,871,722
INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $4,907,432,618. Net unrealized appreciation aggregated $5,098,686,450, of which $5,148,925,291 related to appreciated investment securities and $50,238,841 related to depreciated investment securities. The fund hereby designates approximately $375,456,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 2% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. ELECTRONICS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 10,006,119,068 value (including repurchase agreements of $20,820,000) (cost $4,880,602,639) - See accompanying schedule Cash 843 Receivable for investments 145,947,841 sold Receivable for fund shares 68,431,891 sold Dividends receivable 204,751 Interest receivable 2,527,431 Redemption fees receivable 22,520 Other receivables 727,109 TOTAL ASSETS 10,223,981,454 LIABILITIES Payable for investments $ 85,422,736 purchased Payable for fund shares 20,836,995 redeemed Accrued management fee 4,085,762 Other payables and accrued 2,237,632 expenses Collateral on securities 150,514,500 loaned, at value TOTAL LIABILITIES 263,097,625 NET ASSETS $ 9,960,883,829 Net Assets consist of: Paid in capital $ 4,185,453,141 Accumulated undistributed 649,914,553 net realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 5,125,516,135 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 81,930,320 $ 9,960,883,829 shares outstanding NET ASSET VALUE and $121.58 redemption price per share ($9,960,883,829 (divided by) 81,930,320 shares) Maximum offering price per $125.34 share (100/97.00 of $121.58) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 3,206,419 Dividends Interest 19,705,992 Security lending 1,225,978 TOTAL INCOME 24,138,389 EXPENSES Management fee $ 27,111,529 Transfer agent fees 16,045,438 Accounting and security 1,711,230 lending fees Non-interested trustees' 14,905 compensation Custodian fees and expenses 114,332 Registration fees 897,432 Audit 123,652 Legal 14,078 Miscellaneous 54,859 Total expenses before 46,087,455 reductions Expense reductions (693,280) 45,394,175 NET INVESTMENT INCOME (LOSS) (21,255,786) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 1,262,301,205 (including realized loss of $13,172,535 on sales of investments in affiliated issuers) Foreign currency transactions (186,682) 1,262,114,523 Change in net unrealized appreciation (depreciation) on: Investment securities 4,435,226,341 Assets and liabilities in 7,768 4,435,234,109 foreign currencies NET GAIN (LOSS) 5,697,348,632 NET INCREASE (DECREASE) IN $ 5,676,092,846 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 29,173,213 charges paid to FDC Sales charges - Retained $ 29,139,832 by FDC Deferred sales charges $ 10,707 withheld by FDC Exchange fees withheld by FSC $ 109,127 Expense reductions $ 665,255 Directed brokerage arrangements Custodian credits 2,146 Transfer agent credits 25,879 $ 693,280
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (21,255,786) $ (14,090,154) income (loss) Net realized gain (loss) 1,262,114,523 220,496,758 Change in net unrealized 4,435,234,109 431,151,334 appreciation (depreciation) NET INCREASE (DECREASE) IN 5,676,092,846 637,557,938 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (461,593,652) - from net realized gains Share transactions Net 3,828,731,759 1,488,308,447 proceeds from sales of shares Reinvestment of distributions 446,827,109 - Cost of shares redeemed (2,418,702,252) (1,912,074,698) NET INCREASE (DECREASE) IN 1,856,856,616 (423,766,251) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 3,980,086 3,006,511 TOTAL INCREASE (DECREASE) 7,075,335,896 216,798,198 IN NET ASSETS NET ASSETS Beginning of period 2,885,547,933 2,668,749,735 End of period $ 9,960,883,829 $ 2,885,547,933 OTHER INFORMATION Shares Sold 50,589,405 36,527,830 Issued in reinvestment of 5,580,487 - distributions Redeemed (35,189,966) (51,847,162) Net increase (decrease) 20,979,926 (15,319,332)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 47.34 $ 34.99 $ 37.95 $ 28.18 $ 19.80 period Income from Investment Operations Net investment income (loss) C (.33) (.23) (.17) (.17) (.08) Net realized and unrealized 81.13 12.53 7.32 9.80 13.51 gain (loss) Total from investment 80.80 12.30 7.15 9.63 13.43 operations Less Distributions From net realized gain (6.62) - (7.60) - (5.25) In excess of net realized gain - - (2.60) - - Total distributions (6.62) - (10.20) - (5.25) Redemption fees added to paid .06 .05 .09 .14 .20 in capital Net asset value, end of period $ 121.58 $ 47.34 $ 34.99 $ 37.95 $ 28.18 TOTAL RETURN A, B 178.06% 35.30% 24.15% 34.67% 72.75% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 9,960,884 $ 2,885,548 $ 2,668,750 $ 1,744,017 $ 1,133,362 (000 omitted) Ratio of expenses to average .99% 1.18% 1.18% 1.33% 1.25% net assets Ratio of expenses to average .98% D 1.15% D 1.12% D 1.29% D 1.22% D net assets after expense reductions Ratio of net investment (.46)% (.62)% (.42)% (.54)% (.28)% income (loss) to average net assets Portfolio turnover rate 125% 160% 435% 341% 366%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 SOFTWARE AND COMPUTER SERVICES PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. If Fidelity had not reimbursed certain fund expenses, the past 10 year total returns would have been lower. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT SOFTWARE AND COMPUTER 100.83% 487.34% 1,579.69% SERVICES SELECT SOFTWARE AND COMPUTER 94.74% 469.64% 1,529.22% SERVICES (LOAD ADJ.) S&P 500 11.73% 206.94% 425.47% GS Technology 104.99% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Technology Index - a market capitalization-weighted index of 185 stocks designed to measure the performance of companies in the technology sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT SOFTWARE AND COMPUTER 100.83% 42.49% 32.59% SERVICES SELECT SOFTWARE AND COMPUTER 94.74% 41.62% 32.19% SERVICES (LOAD ADJ.) S&P 500 11.73% 25.14% 18.05% GS Technology 104.99% 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 1990/02/28 9700.00 10000.00 1990/03/31 10087.23 10265.00 1990/04/30 10054.96 10008.38 1990/05/31 11319.89 10984.19 1990/06/30 11584.50 10909.50 1990/07/31 10526.08 10874.59 1990/08/31 9054.62 9891.53 1990/09/30 8015.57 9409.81 1990/10/31 8176.91 9369.35 1990/11/30 9228.88 9974.61 1990/12/31 9887.16 10252.90 1991/01/31 11339.25 10699.92 1991/02/28 12165.34 11464.97 1991/03/31 12855.89 11742.42 1991/04/30 12759.08 11770.60 1991/05/31 12991.42 12279.09 1991/06/30 12039.24 11716.71 1991/07/31 12778.80 12262.71 1991/08/31 13817.04 12553.34 1991/09/30 13361.92 12343.69 1991/10/31 14030.37 12509.10 1991/11/30 12494.36 12004.98 1991/12/31 14419.91 13378.35 1992/01/31 16734.49 13129.52 1992/02/29 17237.34 13300.20 1992/03/31 16409.12 13040.85 1992/04/30 15995.01 13424.25 1992/05/31 16246.43 13490.03 1992/06/30 15366.45 13289.02 1992/07/31 16453.49 13832.55 1992/08/31 15225.94 13548.98 1992/09/30 16327.77 13708.86 1992/10/31 17644.05 13756.84 1992/11/30 19182.18 14225.94 1992/12/31 19544.52 14400.92 1993/01/31 20550.22 14521.89 1993/02/28 20424.51 14719.39 1993/03/31 20860.80 15029.97 1993/04/30 20509.73 14666.24 1993/05/31 22822.92 15059.30 1993/06/30 24000.39 15102.97 1993/07/31 23273.87 15042.56 1993/08/31 24843.83 15612.67 1993/09/30 25344.88 15492.45 1993/10/31 25286.43 15813.15 1993/11/30 24660.11 15662.92 1993/12/31 25941.61 15852.44 1994/01/31 26845.56 16391.43 1994/02/28 27203.38 15947.22 1994/03/31 24284.36 15251.92 1994/04/30 24410.00 15447.15 1994/05/31 21967.09 15700.48 1994/06/30 20039.48 15315.82 1994/07/31 21022.37 15818.18 1994/08/31 23303.05 16466.72 1994/09/30 24362.28 16063.29 1994/10/31 25860.47 16424.71 1994/11/30 25268.83 15826.52 1994/12/31 26041.78 16061.23 1995/01/31 25612.36 16477.70 1995/02/28 27740.37 17119.83 1995/03/31 29324.44 17625.04 1995/04/30 30240.53 18144.10 1995/05/31 31061.19 18869.32 1995/06/30 33809.47 19307.65 1995/07/31 35851.58 19947.89 1995/08/31 36099.69 19997.96 1995/09/30 37588.34 20841.88 1995/10/31 38036.84 20767.47 1995/11/30 39115.16 21679.16 1995/12/31 38089.81 22096.70 1996/01/31 36628.95 22848.87 1996/02/29 38884.69 23060.68 1996/03/31 37896.46 23282.76 1996/04/30 41711.63 23625.95 1996/05/31 43166.04 24235.26 1996/06/30 41012.18 24327.60 1996/07/31 37859.10 23252.80 1996/08/31 38647.37 23743.20 1996/09/30 43698.95 25079.47 1996/10/31 43854.38 25771.16 1996/11/30 47329.43 27719.21 1996/12/31 46380.06 27170.09 1997/01/31 50102.64 28867.68 1997/02/28 45162.61 29094.00 1997/03/31 42844.78 27898.53 1997/04/30 45357.41 29564.07 1997/05/31 49197.85 31363.93 1997/06/30 49222.95 32769.03 1997/07/31 55171.88 35376.46 1997/08/31 54908.32 33394.67 1997/09/30 56627.73 35223.70 1997/10/31 54042.33 34047.23 1997/11/30 55234.63 35623.28 1997/12/31 53343.56 36234.93 1998/01/31 54809.19 36635.68 1998/02/28 61197.15 39277.85 1998/03/31 66299.21 41289.27 1998/04/30 65382.15 41704.64 1998/05/31 60273.74 40987.74 1998/06/30 67617.09 42652.66 1998/07/31 63646.96 42198.41 1998/08/31 52014.21 36097.36 1998/09/30 63466.50 38409.76 1998/10/31 61314.86 41534.01 1998/11/30 67061.82 44051.38 1998/12/31 77759.00 46589.63 1999/01/31 87208.87 48538.00 1999/02/28 81126.85 47029.44 1999/03/31 84849.96 48911.09 1999/04/30 81630.16 50805.42 1999/05/31 81585.85 49605.90 1999/06/30 92014.89 52359.03 1999/07/31 86283.35 50724.38 1999/08/31 90079.76 50473.29 1999/09/30 95589.72 49089.82 1999/10/31 102798.46 52196.23 1999/11/30 117732.97 53257.37 1999/12/31 150169.88 56394.23 2000/01/31 136309.48 53560.99 2000/02/29 162922.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000320 102934 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Software and Computer Services Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $162,922 - a 1,529.22% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Oracle Corp. 8.9 Microsoft Corp. 7.7 Siebel Systems, Inc. 7.1 i2 Technologies, Inc. 5.4 Computer Associates 5.1 International, Inc. VERITAS Software Corp. 3.7 Intuit, Inc. 3.4 America Online, Inc. 2.8 Yahoo!, Inc. 2.8 Automatic Data Processing, Inc. 2.7 49.6 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Computer Services & Software 86.5% Row: 1, Col: 6, Value: 86.5 Computers & Office Equipment 3.5% Row: 1, Col: 5, Value: 3.5 Communications Equipment 3.2% Row: 1, Col: 4, Value: 3.2 Services 0.6% Row: 1, Col: 3, Value: 0.6 Electronics 0.6% Row: 1, Col: 2, Value: 0.6 * All Others 5.6% Row: 1, Col: 1, Value: 5.6 * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. SOFTWARE AND COMPUTER SERVICES PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Telis Bertsekas) NOTE TO SHAREHOLDERS: Telis Bertsekas became Portfolio Manager of Fidelity Select Software and Computer Services Portfolio on March 15, 2000, after the period covered by this report. Q. HOW DID THE FUND PERFORM, TELIS? A. For the 12-month period ending February 29, 2000, the fund returned 100.83%. In comparison, the Goldman Sachs Technology Index - an index of 185 stocks designed to measure the performance of companies in the technology sector - returned 104.99% during the same period. The fund also compares its performance to the Standard & Poor's 500 Index, which returned 11.73% for the 12-month period. Q. WHY DID THE FUND SLIGHTLY UNDERPERFORM THE GOLDMAN SACHS INDEX? A. The fund invests in a narrower range of stocks than the Goldman Sachs index and has a greater proportion of service stocks, which did not do as well as other stocks in this sector. The fund also is slightly less cyclical in nature than the index and will tend to have a more moderate return during prolonged periods of positive and negative market environments. Q. WHAT WAS THE FUND'S STRATEGY DURING THE PERIOD? A. First, the fund focused on companies in the sector's fastest-growing areas - supply chain management, customer-relationship management and Web infrastructure applications. Second, it focused on companies leveraged to the growth of the Internet in general and business-to-business e-commerce in particular. The fund's top holdings as of the end of the period generally reflected these strategies. Q. WHAT STOCKS STOOD OUT IN THIS ENVIRONMENT? A. Siebel Systems was one of the fund's most successful performers. This company maintained one of the best growth rates in the software industry with a strong offering in customer-relationship management. It also was bolstered by its distribution agreement with IBM and weakening competition. Oracle did well as investors began to view the company as having a strategic role in Internet infrastructure and applications. Oracle's database product is an important component of Internet infrastructure, since every Internet site needs a database. The company also announced a number of business-to-business trading exchanges, first with Ford, which proved to be a catalyst for Oracle's stock price improvement. Another holding, i2 Technologies, continued to demonstrate good growth and dominated the supply-chain management software area. The company's move to business-to-business e-commerce drove its stock to higher levels during the period. The announcement of the establishment of i2's new trading exchanges helped the company as investors believed that its trading exchange technology had unique advantages over the competition. Q. WHAT ABOUT DISAPPOINTMENTS? A. Software company Network Associates missed its earnings targets by a significant margin in 1999 due to Y2K budget demands that shifted spending away from some of its products. In addition, the company's new security product that launched last year didn't do as well as expected. This stock is no longer held by the fund. At Home Corp. was another disappointment. Following its acquisition of Excite, investors began to worry about the company's long-term prospects - its strategic agreement with AT&T to sell its products to AT&T customers could expire within two years. Galileo, which provides reservations systems for travel agents, was hurt by travel agencies' declining growth rates and shrinking market share, as more travelers booked reservations via the Internet. Q. WHAT'S YOUR OUTLOOK, TELIS? A. My outlook is positive for overall company fundamentals. The year 2000 should be another strong one for software spending, particularly in the areas most leveraged to the growth in Internet business-to-business e-commerce. The market has rewarded the growth potential in this segment with record high valuations, and this clearly adds some risk to investing in the sector while amplifying the need for careful stock selection. While I expect there will be significant opportunities for both large, well-established companies and rapidly emerging smaller companies, my style tends to favor the fastest-growing and most defensible business models, rather than looking for value in second- or third-tier players. While the fund is not as directly exposed to an economic downturn as other industries, the impact of rising interest rates and inflation on U.S. economic growth may affect the fundamental performance of this sector down the road. The software and computer services sector also may suffer from any large-scale slowing in corporate spending on technology. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 028 TRADING SYMBOL: FSCSX SIZE: as of February 29, 2000, more than $1.4 billion MANAGER: Telis Bertsekas, since March 2000; analyst, beverage and tobacco industries, since 1997; joined Fidelity in 1997 SOFTWARE AND COMPUTER SERVICES PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 95.2% SHARES VALUE (NOTE 1) BROADCASTING - 0.6% MediaOne Group, Inc. (a) 100,000 $ 7,850,000 COMMUNICATIONS EQUIPMENT - 3.2% 3Com Corp. (a) 344,827 33,793,046 Cisco Systems, Inc. (a) 60,000 7,931,250 Nokia AB sponsored ADR 25,000 4,957,813 46,682,109 COMPUTER SERVICES & SOFTWARE - - 86.5% Adobe Systems, Inc. 247,253 25,219,806 Affiliated Computer Services, 150,000 4,725,000 Inc. Class A (a) America Online, Inc. (a) 696,300 41,081,700 Art Technology Group, Inc. 29,000 4,190,500 Aspect Development, Inc. (a) 181,353 26,998,928 At Home Corp. Series A (a) 256,676 8,807,195 Automatic Data Processing, 892,700 38,888,244 Inc. Axent Technolgies, Inc. (a) 200,000 5,425,000 BEA Systems, Inc. (a) 139,582 17,665,847 BMC Software, Inc. (a) 802,525 36,916,150 BroadVision, Inc. (a) 45,000 11,365,313 Calico Commerce, Inc. 40 1,723 Cambridge Technology 30,000 450,000 Partners, Inc. (a) Ceridian Corp. (a) 179,400 3,554,363 Check Point Software 80,000 16,315,000 Technologies Ltd. (a) Citrix Systems, Inc. (a) 257,546 27,155,006 Clarify, Inc. (a) 110,000 15,874,375 CMGI, Inc. (a) 158,000 20,470,875 CNET, Inc. (a) 93,000 6,219,375 Computer Associates 1,148,380 73,855,189 International, Inc. Computer Sciences Corp. (a) 279,732 22,046,378 Compuware Corp. (a) 463,193 10,248,145 DST Systems, Inc. (a) 100,000 5,612,500 eBay, Inc. (a) 30,000 4,301,250 Electronic Data Systems Corp. 329,100 21,309,225 Entrust Technologies, Inc. (a) 62,000 5,471,500 Equifax, Inc. 175,000 3,707,813 Exodus Communications, Inc. 180,000 25,627,500 (a) First Data Corp. 555,000 24,975,000 Fiserv, Inc. (a) 67,500 1,839,375 Galileo International, Inc. 120,000 2,040,000 Go.com (a) 28,750 634,297 Great Plains Software, Inc. 7,500 521,719 (a) i2 Technologies, Inc. (a) 479,598 78,414,273 IMS Health, Inc. 250,000 5,031,250 Industri-Matematik 378,400 3,784,000 International Corp. (a) Informatica Corp. 20,000 3,430,000 Informix Corp. (a) 150,000 2,400,000 Intertrust Technologies Corp. 1,600 135,900 Interwoven, Inc. 6,800 1,016,600 Intuit, Inc. (a) 937,571 49,222,478 SHARES VALUE (NOTE 1) ISS Group, Inc. (a) 119,259 $ 12,522,195 J.D. Edwards & Co. (a) 100,000 4,062,500 Lycos, Inc. (a) 40,000 2,385,000 MatrixOne, Inc. 700 17,500 Microsoft Corp. (a) 1,254,000 112,076,250 NetIQ Corp. 20,000 1,342,500 Network Solutions, Inc. Class 14,000 4,514,125 A (a) New Era of Networks, Inc. (a) 80,000 7,330,000 Novell, Inc. (a) 246,955 8,164,950 Onvia.com, Inc. 1,000 21,000 Oracle Corp. (a) 1,738,868 129,110,945 Parametric Technology Corp. 186,915 5,665,861 (a) Pervasive Software, Inc. (a) 100,000 1,068,750 Policy Management Systems 30,800 273,350 Corp. (a) Rational Software Corp. (a) 100,000 7,112,500 Razorfish, Inc. 87,500 2,931,250 RealNetworks, Inc. (a) 120,000 8,437,500 Sabre Holdings Corp. Class A 90,000 3,611,250 SalesLogix Corp. 58,700 1,636,263 Siebel Systems, Inc. (a) 742,540 102,981,016 SunGard Data Systems, Inc. (a) 90,200 2,706,000 Technology Solutions, Inc. 100,000 725,000 TSI International Software 125,106 10,610,553 Ltd. (a) Tumbleweed Communications 113,000 8,588,000 Corp. Unisys Corp. (a) 173,900 5,206,131 VeriSign, Inc. (a) 68,364 17,296,092 VERITAS Software Corp. (a) 267,000 52,832,625 Vignette Corp. 124,400 28,674,200 WatchGuard Technologies, Inc. 200,400 11,823,600 Whittman-Hart, Inc. (a) 40,000 1,815,000 Yahoo!, Inc. (a) 250,008 39,923,153 1,252,413,851 COMPUTERS & OFFICE EQUIPMENT - - 3.5% Compaq Computer Corp. 10,000 248,750 Gateway, Inc. (a) 55,600 3,822,500 International Business 100,000 10,200,000 Machines Corp. RSA Security, Inc. (a) 10,000 669,375 Sun Microsystems, Inc. (a) 320,000 30,480,000 Tech Data Corp. (a) 238,700 5,176,806 50,597,431 ELECTRONICS - 0.6% Inktomi Corp. (a) 62,000 8,501,750 Intel Corp. 2,000 226,000 8,727,750 SECURITIES INDUSTRY - 0.2% E*Trade Group, Inc. (a) 110,000 2,708,750 SERVICES - 0.6% Computer Horizons Corp. (a) 61,300 1,363,925 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) SERVICES - CONTINUED Diamond Technology Partners, 60,000 $ 4,102,500 Inc. Class A (a) eLoyalty Corp. 100,000 3,056,250 Gartner Group, Inc. Class B 32,550 384,497 (a) 8,907,172 TOTAL COMMON STOCKS 1,377,887,063 (Cost $603,551,602) CASH EQUIVALENTS - 7.0% Central Cash Collateral Fund, 33,551,700 33,551,700 5.75% (b) Taxable Central Cash Fund, 68,748,650 68,748,650 5.66% (b) TOTAL CASH EQUIVALENTS 102,300,350 (Cost $102,300,350) TOTAL INVESTMENT PORTFOLIO - 1,480,187,413 102.2% (Cost $705,851,952) NET OTHER ASSETS - (2.2)% (32,501,532) NET ASSETS - 100% $ 1,447,685,881 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 $513,797,653 and $489,075,914, 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 $6,868 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $33,974,925. The fund received cash collateral of $33,551,700 which was invested in cash equivalents. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $706,311,370. Net unrealized appreciation aggregated $773,876,043, of which $810,091,861 related to appreciated investment securities and $36,215,818 related to depreciated investment securities. The fund hereby designates approximately $90,415,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 11% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. SOFTWARE AND COMPUTER SERVICES PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 1,480,187,413 value (cost $705,851,952) - See accompanying schedule Receivable for investments 427,340 sold Receivable for fund shares 7,199,538 sold Dividends receivable 82,613 Interest receivable 209,890 Redemption fees receivable 2,514 Other receivables 464,022 TOTAL ASSETS 1,488,573,330 LIABILITIES Payable for investments $ 164,700 purchased Payable for fund shares 6,032,650 redeemed Accrued management fee 656,703 Other payables and accrued 481,696 expenses Collateral on securities 33,551,700 loaned, at value TOTAL LIABILITIES 40,887,449 NET ASSETS $ 1,447,685,881 Net Assets consist of: Paid in capital $ 582,217,257 Accumulated undistributed net 91,133,163 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 774,335,461 (depreciation) on investments NET ASSETS, for 13,776,111 $ 1,447,685,881 shares outstanding NET ASSET VALUE and $105.09 redemption price per share ($1,447,685,881 (divided by) 13,776,111 shares) Maximum offering price per $108.34 share (100/97.00 of $105.09) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 680,127 Dividends Special dividend from Sabre 468,273 Holdings Corp. Class A Interest 3,622,188 Security lending 507,138 TOTAL INCOME 5,277,726 EXPENSES Management fee $ 5,131,852 Transfer agent fees 3,862,948 Accounting and security 568,005 lending fees Non-interested trustees' 4,012 compensation Custodian fees and expenses 27,113 Registration fees 172,540 Audit 32,209 Legal 8,072 Miscellaneous 937 Total expenses before 9,807,688 reductions Expense reductions (36,752) 9,770,936 NET INVESTMENT INCOME (LOSS) (4,493,210) REALIZED AND UNREALIZED GAIN 149,967,319 (LOSS) Net realized gain (loss) on investment securities Change in net unrealized 551,761,848 appreciation (depreciation) on investment securities NET GAIN (LOSS) 701,729,167 NET INCREASE (DECREASE) IN $ 697,235,957 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 3,756,113 charges paid to FDC Sales charges - Retained by $ 3,753,515 FDC Deferred sales charges $ 6,139 withheld by FDC Exchange fees withheld by FSC $ 35,313 Expense reductions $ 32,304 Directed brokerage arrangements Custodian credits 2,504 Transfer agent credits 1,944 $ 36,752
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (4,493,210) $ (4,709,221) income (loss) Net realized gain (loss) 149,967,319 46,870,113 Change in net unrealized 551,761,848 110,443,885 appreciation (depreciation) NET INCREASE (DECREASE) IN 697,235,957 152,604,777 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (78,865,404) (15,509,477) from net realized gain Share transactions Net 637,476,790 512,689,909 proceeds from sales of shares Reinvestment of distributions 76,024,721 15,022,690 Cost of shares redeemed (576,132,935) (478,286,707) NET INCREASE (DECREASE) IN 137,368,576 49,425,892 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 1,094,752 963,911 TOTAL INCREASE (DECREASE) 756,833,881 187,485,103 IN NET ASSETS NET ASSETS Beginning of period 690,852,000 503,366,897 End of period $ 1,447,685,881 $ 690,852,000 OTHER INFORMATION Shares Sold 8,519,859 10,599,999 Issued in reinvestment of 1,062,841 314,660 distributions Redeemed (7,907,224) (10,186,951) Net increase (decrease) 1,675,476 727,708
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 57.09 $ 44.26 $ 38.58 $ 36.20 $ 29.07 period Income from Investment Operations Net investment income (loss) C (.36) F (.39) (.33) (.25) (.19) Net realized and unrealized 54.60 14.46 12.57 5.87 11.85 gain (loss) Total from investment 54.24 14.07 12.24 5.62 11.66 operations Less distributions from net (6.33) (1.32) (6.61) (3.31) (4.60) realized gain Redemption fees added to paid .09 .08 .05 .07 .07 in capital Net asset value, end of period $ 105.09 $ 57.09 $ 44.26 $ 38.58 $ 36.20 TOTAL RETURN A, B 100.83% 32.57% 35.50% 16.14% 40.17% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 1,447,686 $ 690,852 $ 503,367 $ 389,699 $ 337,633 (000 omitted) Ratio of expenses to average 1.11% 1.28% 1.44% 1.54% 1.48% net assets Ratio of expenses to average 1.11% 1.27% D 1.42% D 1.51% D 1.47% D net assets after expense reductions Ratio of net investment (.51)% (.82)% (.81)% (.66)% (.54)% income (loss) to average net assets Portfolio turnover rate 59% 72% 145% 279% 183%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 F INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM SABRE HOLDINGS CORP. CLASS A WHICH AMOUNTED TO $.01 PER SHARE. TECHNOLOGY PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT TECHNOLOGY 184.11% 837.89% 2,416.89% SELECT TECHNOLOGY (LOAD ADJ.) 175.52% 809.68% 2,341.31% S&P 500 11.73% 206.94% 425.47% GS Technology 104.99% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Technology Index - a market capitalization-weighted index of 185 stocks designed to measure the performance of companies in the technology sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT TECHNOLOGY 184.11% 56.47% 38.07% SELECT TECHNOLOGY (LOAD ADJ.) 175.52% 55.52% 37.65% S&P 500 11.73% 25.14% 18.05% GS Technology 104.99% 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 1990/02/28 9700.00 10000.00 1990/03/31 10153.86 10265.00 1990/04/30 9695.17 10008.38 1990/05/31 10945.69 10984.19 1990/06/30 11042.26 10909.50 1990/07/31 10453.21 10874.59 1990/08/31 9028.87 9891.53 1990/09/30 8261.17 9409.81 1990/10/31 8497.76 9369.35 1990/11/30 9772.42 9974.61 1990/12/31 10361.47 10252.90 1991/01/31 12109.31 10699.92 1991/02/28 12722.50 11464.97 1991/03/31 13741.26 11742.42 1991/04/30 13065.31 11770.60 1991/05/31 13789.55 12279.09 1991/06/30 12451.80 11716.71 1991/07/31 13830.48 12262.71 1991/08/31 14510.11 12553.34 1991/09/30 14582.93 12343.69 1991/10/31 14976.14 12509.10 1991/11/30 14485.84 12004.98 1991/12/31 16471.78 13378.35 1992/01/31 17098.21 13129.52 1992/02/29 17365.29 13300.20 1992/03/31 15986.17 13040.85 1992/04/30 15753.08 13424.25 1992/05/31 15908.47 13490.03 1992/06/30 14771.16 13289.02 1992/07/31 15523.76 13832.55 1992/08/31 14728.76 13548.98 1992/09/30 15449.56 13708.86 1992/10/31 16361.17 13756.84 1992/11/30 17686.17 14225.94 1992/12/31 17908.77 14400.92 1993/01/31 18454.68 14521.89 1993/02/28 18348.68 14719.39 1993/03/31 18587.18 15029.97 1993/04/30 18533.88 14666.24 1993/05/31 20403.68 15059.30 1993/06/30 21400.13 15102.97 1993/07/31 20831.57 15042.56 1993/08/31 21945.24 15612.67 1993/09/30 22285.21 15492.45 1993/10/31 21845.60 15813.15 1993/11/30 21634.59 15662.92 1993/12/31 23039.65 15852.44 1994/01/31 24199.67 16391.43 1994/02/28 24883.78 15947.22 1994/03/31 24045.00 15251.92 1994/04/30 23560.71 15447.15 1994/05/31 23597.85 15700.48 1994/06/30 21598.35 15315.82 1994/07/31 22434.05 15818.18 1994/08/31 24798.79 16466.72 1994/09/30 24674.98 16063.29 1994/10/31 25597.35 16424.71 1994/11/30 25244.50 15826.52 1994/12/31 25603.54 16061.23 1995/01/31 24606.89 16477.70 1995/02/28 26030.68 17119.83 1995/03/31 27615.43 17625.04 1995/04/30 29696.83 18144.10 1995/05/31 30845.65 18869.32 1995/06/30 33711.30 19307.65 1995/07/31 37119.44 19947.89 1995/08/31 38268.26 19997.96 1995/09/30 40029.77 20841.88 1995/10/31 39429.84 20767.47 1995/11/30 39225.60 21679.16 1995/12/31 36819.65 22096.70 1996/01/31 37192.80 22848.87 1996/02/29 39230.76 23060.68 1996/03/31 36195.34 23282.76 1996/04/30 39312.38 23625.95 1996/05/31 40378.60 24235.26 1996/06/30 37506.33 24327.60 1996/07/31 33502.56 23252.80 1996/08/31 34800.88 23743.20 1996/09/30 39261.61 25079.47 1996/10/31 38978.73 25771.16 1996/11/30 43787.61 27719.21 1996/12/31 42643.85 27170.09 1997/01/31 47690.96 28867.68 1997/02/28 44190.91 29094.00 1997/03/31 41265.28 27898.53 1997/04/30 43670.61 29564.07 1997/05/31 48312.48 31363.93 1997/06/30 49202.10 32769.03 1997/07/31 54839.29 35376.46 1997/08/31 56371.90 33394.67 1997/09/30 58644.39 35223.70 1997/10/31 50320.73 34047.23 1997/11/30 49439.92 35623.28 1997/12/31 47048.31 36234.93 1998/01/31 49604.38 36635.68 1998/02/28 55204.87 39277.85 1998/03/31 55402.29 41289.27 1998/04/30 57667.42 41704.64 1998/05/31 53334.58 40987.74 1998/06/30 57771.33 42652.66 1998/07/31 57927.19 42198.41 1998/08/31 47796.42 36097.36 1998/09/30 56140.02 38409.76 1998/10/31 60628.72 41534.01 1998/11/30 70188.01 44051.38 1998/12/31 81939.70 46589.63 1999/01/31 96133.16 48538.00 1999/02/28 85929.66 47029.44 1999/03/31 97203.38 48911.09 1999/04/30 99687.25 50805.42 1999/05/31 97333.97 49605.90 1999/06/30 111648.80 52359.03 1999/07/31 109639.91 50724.38 1999/08/31 117239.28 50473.29 1999/09/30 117147.44 49089.82 1999/10/31 131244.17 52196.23 1999/11/30 147051.32 53257.37 1999/12/31 189895.27 56394.23 2000/01/31 185733.25 53560.99 2000/02/29 244131.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000309 125343 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Technology Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $244,131 - a 2,341.31% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Juniper Networks, Inc. 9.9 Cisco Systems, Inc. 5.2 Vignette Corp. 4.4 Motorola, Inc. 3.7 Broadcom Corp. Class A 3.1 Redback Networks, Inc. 3.1 Microsoft Corp. 2.9 DoubleClick, Inc. 2.8 Cree Research, Inc. 2.7 Emulex Corp. 2.0 39.8 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Computer Services & Software 27.9% Row: 1, Col: 6, Value: 27.9 Electronics 23.9% Row: 1, Col: 5, Value: 23.9 Computers & Office Equipment 18.0% Row: 1, Col: 4, Value: 18.0 Communications Equipment 16.0% Row: 1, Col: 3, Value: 16.0 Advertising 3.1% Row: 1, Col: 2, Value: 3.1 * All Others 11.1% Row: 1, Col: 1, Value: 11.1 * INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. TECHNOLOGY PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Larry Rakers) NOTE TO SHAREHOLDERS: Larry Rakers became Portfolio Manager of Fidelity Select Technology Portfolio on February 7, 2000. Q. HOW DID THE FUND PERFORM, LARRY? A. It fared quite well. For the 12-month period that ended February 29, 2000, the fund posted a total return of 184.11%. That topped the Goldman Sachs Technology Index - an index of 185 stocks designed to measure the performance of companies in the technology sector - and the Standard & Poor's 500 Index, which returned 104.99% and 11.73%, respectively. Q. WHAT ALLOWED THE FUND TO BEAT THE GOLDMAN SACHS INDEX BY SUCH A WIDE MARGIN DURING THE PAST 12 MONTHS? A. Our strategy to remain underweighted in many lagging computer hardware manufacturers relative to the index worked out nicely for the fund. Not holding IBM and having considerably less Dell and Compaq than the index really helped. Many of the major players in this space were hurt by declining sales attributed to component shortages and Y2K-related shortfalls. Another key was the fund's out-of-benchmark positioning in leading communications equipment and Internet infrastructure names such as Nokia, Juniper and Redback Networks, as was its overweighting in Broadcom. Some good picks within Internet services, most notably DoubleClick, along with our exposure to communications semiconductor providers QLogic and Emulex further bolstered relative performance. Q. HAVE YOU MADE ANY NOTABLE CHANGES SINCE TAKING OVER THE FUND? A. No, I really haven't made many significant changes to the prevailing themes I just outlined. The basic premise behind our current positioning is the same. It remains simply a function of where we perceive the highest growth rates to be in the technology group, which hasn't changed much in recent months. On the margin, though, I did step up our exposure to optical networking - sending data or voice traffic as light signals over fiber-optic cables - an area I feel has some of the best long-term growth prospects in the sector. Q. TECHNOLOGY TROUNCED THE BROADER MARKET OVER THE PAST 12 MONTHS. WHAT HELPED FUEL THIS DISPARITY? A. In short, it was relative growth rates. Investors rallied around the group's superior earnings growth potential relative to all other areas of the market, respectful of the power of the Internet to re-shape the face of the domestic economy and permanently alter the way business is transacted. The market's confidence in the sector was so strong that even markedly higher interest rates - typically a nemesis of growth stocks - couldn't tame the bullishness. Q. WHAT OTHER HOLDINGS PROVED PARTICULARLY BENEFICIAL TO PERFORMANCE? A. The market rewarded JDS Uniphase, a top manufacturer of optical network components, for its leadership position in the race for higher bandwidth - a measure of transmission speed and capacity to deliver data, voice and video. Exodus rose sharply on strong demand for its Web hosting services from companies looking to bring their businesses to the Internet. Having out-of-benchmark exposure to software companies that provide Internet infrastructure, such as Vignette and BroadVision, as well as Cree - a manufacturer of silicon carbide-based semiconductor devices used to make LEDs - also gave us a nice lift. Q. WHAT WERE SOME OF THE STOCKS THAT HURT PERFORMANCE? A. We didn't have much luck with software utility provider BMC, which was felled by slowing sales related to Y2K and a salesforce restructuring. Our stake in Electronics for Imaging - a provider of printer-related products - was equally inauspicious as its stock recoiled in response to soft earnings posted by Xerox, its largest customer. The fund's underexposure to a handful of the period's biggest winners, namely Cisco, Qualcomm, Sun Microsystems, Oracle and Texas Instruments, also dampened relative performance. Q. WHAT'S YOUR OUTLOOK? A. I expect much of the same in terms of strategy in the coming months. That is, I'll likely maintain the fund's overweighting in communications equipment and Internet infrastructure at the expense of computer systems and hardware. I'll continue to be mindful of valuations and relative growth rates to help me further hone my industry positioning. With regard to security selection, I will rely heavily on my team of 20 analysts to support me in uncovering the best stocks in a rapidly changing sector. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: July 14, 1981 FUND NUMBER: 064 TRADING SYMBOL: FSPTX SIZE: as of February 29, 2000, more than $7.9 billion MANAGER: Larry Rakers, since February 2000; manager, Fidelity Select Computers Portfolio and Fidelity Advisor Technology Fund, since January 2000; Fidelity Advisor Natural Resources Fund, 1997-1999; several Fidelity Select Portfolios, 1995-1997; joined Fidelity in 1993 TECHNOLOGY PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 92.8% SHARES VALUE (NOTE 1) ADVERTISING - 3.1% Avenue A, Inc. 3,800 $ 273,600 DoubleClick, Inc. (a) 2,469,500 219,322,469 Internet Capital Group, Inc. 177,840 18,806,580 Lifeminders.com, Inc. 183,300 9,737,813 248,140,462 BROADCASTING - 0.1% American Tower Corp. Class A 200,000 9,850,000 (a) CELLULAR - 0.9% Leap Wireless International, 184,400 16,169,575 Inc. (a) QUALCOMM, Inc. (a) 374,100 53,285,869 69,455,444 CHEMICALS & PLASTICS - 0.1% Peak International Ltd. (a) 701,000 8,368,188 (c) COMMUNICATIONS EQUIPMENT - 16.0% Ciena Corp. (a) 80,000 12,785,000 Cisco Systems, Inc. (a) 3,099,450 409,708,547 Comverse Technology, Inc. (a) 792,300 155,984,063 Ditech Communications Corp. 848,000 92,644,000 Efficient Networks, Inc. 76,000 12,255,000 Jabil Circuit, Inc. (a) 260,000 18,053,750 Lucent Technologies, Inc. 2,627,205 156,318,698 Nokia AB sponsored ADR 600,000 118,987,500 Nortel Networks Corp. 650,000 71,968,129 Sycamore Networks, Inc. 704,200 104,221,600 Telefonaktiebolaget LM 1,119,500 107,472,000 Ericsson sponsored ADR 1,260,398,287 COMPUTER SERVICES & SOFTWARE - - 27.9% Adobe Systems, Inc. 81,400 8,302,800 Amdocs Ltd. (a) 100,000 7,418,750 America Online, Inc. (a) 600,000 35,400,000 Ariba, Inc. 102,200 27,031,900 Art Technology Group, Inc. 150,000 21,675,000 Automatic Data Processing, 100,400 4,373,675 Inc. BEA Systems, Inc. (a) 225,000 28,476,563 BMC Software, Inc. (a) 500,000 23,000,000 BroadVision, Inc. (a) 283,300 71,550,956 Cadence Design Systems, Inc. 725,000 14,454,688 (a) Ceridian Corp. (a) 200,000 3,962,500 Citrix Systems, Inc. (a) 597,200 62,967,275 CMGI, Inc. (a) 700,000 90,693,750 Commerce One, Inc. 125,000 26,109,375 Computer Associates 550,000 35,371,875 International, Inc. Concentric Network Corp. (a) 125,000 6,703,125 Critical Path, Inc. 290,000 24,976,250 SHARES VALUE (NOTE 1) Digex, Inc. Class A 112,700 $ 18,257,400 DigitalThink, Inc. 5,900 240,425 DSET Corp. (a) 500,000 12,500,000 DST Systems, Inc. (a) 200,000 11,225,000 Electronics for Imaging, Inc. 413,900 24,575,313 (a) Engage Technologies, Inc. 120,800 17,516,000 Entrust Technologies, Inc. (a) 65,000 5,736,250 Exodus Communications, Inc. 900,880 128,262,790 (a) Hotel Reservations Network, 1,600 41,600 Inc. Intuit, Inc. (a) 500,000 26,250,000 Kana Communications, Inc. 394,200 56,173,500 Keynote Systems, Inc. 60,000 9,825,000 Liberate Technologies 129,600 13,203,000 MatrixOne, Inc. 3,800 95,000 Metasolv Software, Inc. 502,400 44,274,000 Micromuse, Inc. (a) 200,000 28,362,500 Microsoft Corp. (a) 2,532,080 226,304,650 Net.Genesis Corp. 2,300 130,669 New Era of Networks, Inc. (a) 200,000 18,325,000 Niku Corp. 7,200 496,800 Novell, Inc. (a) 475,000 15,704,688 Onvia.com, Inc. 10,800 226,800 Oracle Corp. (a) 550,000 40,837,500 pcOrder.com, Inc. 204,600 5,421,900 Phone.com, Inc. 300,000 41,887,500 Priceline.com, Inc. 500,000 27,968,750 Proxicom, Inc. 681,000 28,516,875 Redback Networks, Inc. 813,700 242,889,450 SalesLogix Corp. 147,900 4,122,713 Silknet Software, Inc. 500,000 112,031,250 Software.com, Inc. 394,600 37,980,250 Technology Solutions, Inc. 300,000 2,175,000 Unisys Corp. (a) 1,200,000 35,925,000 VeriSign, Inc. (a) 140,000 35,420,000 VERITAS Software Corp. (a) 450,000 89,043,750 Vignette Corp. 1,513,560 348,875,580 WorldGate Communications, 200,000 6,900,000 Inc. 2,210,190,385 COMPUTERS & OFFICE EQUIPMENT - - 18.0% Advanced Digital Information 75,000 6,796,875 Corp. (a) Alteon Websystems, Inc. 533,600 47,890,600 CacheFlow, Inc. 177,500 21,610,625 Compaq Computer Corp. 2,100,000 52,237,500 Dell Computer Corp. (a) 877,900 35,829,294 EMC Corp. (a) 1,008,000 119,952,000 Emulex Corp. (a) 1,000,000 160,000,000 Gateway, Inc. (a) 525,000 36,093,750 Hewlett-Packard Co. 300,000 40,350,000 Juniper Networks, Inc. 2,856,200 783,491,355 COMMON STOCKS - CONTINUED SHARES VALUE (NOTE 1) COMPUTERS & OFFICE EQUIPMENT - - CONTINUED Lexmark International Group, 75,000 $ 8,943,750 Inc. Class A (a) Safeguard Scientifics, Inc. 53,200 9,306,675 (a) SanDisk Corp. (a) 683,800 60,858,200 Sun Microsystems, Inc. (a) 500,000 47,625,000 1,430,985,624 ELECTRONIC INSTRUMENTS - 1.3% Agilent Technologies, Inc. 22,800 2,364,075 Credence Systems Corp. (a) 95,500 12,725,375 KLA-Tencor Corp. (a) 500,000 38,968,750 NetOptix Corp. (a) 87,200 14,262,650 Sawtek, Inc. (a) 205,000 9,840,000 Teradyne, Inc. (a) 250,000 21,750,000 99,910,850 ELECTRONICS - 23.9% Altera Corp. (a) 1,003,000 79,989,250 Applied Micro Circuits Corp. 90,000 24,755,625 (a) Atmel Corp. (a) 600,000 29,700,000 AVX Corp. 344,100 21,850,350 Broadcom Corp. Class A (a) 1,253,800 247,468,775 Brocade Communications 358,700 103,709,138 Systems, Inc. Cree Research, Inc. (a) 1,141,330 214,427,374 E Tek Dynamics, Inc. (a) 95,000 25,958,750 Flextronics International 610,100 37,139,838 Ltd. (a) GlobeSpan, Inc. 773,400 58,391,700 JDS Uniphase Corp. (a) 588,696 155,194,983 KEMET Corp. (a) 1,052,800 64,681,400 LSI Logic Corp. (a) 200,000 12,812,500 Methode Electronics, Inc. 126,600 7,358,625 Class A Micron Technology, Inc. (a) 206,400 20,240,100 Motorola, Inc. 1,704,200 290,566,100 National Semiconductor Corp. 12,800 961,600 (a) PMC-Sierra, Inc. (a) 470,000 90,739,375 QLogic Corp. (a) 910,800 142,084,800 RF Micro Devices, Inc. (a) 100,000 13,831,250 Semtech Corp. (a) 181,400 11,337,500 Silicon Storage Technology, 1,058,900 66,843,063 Inc. (a) Solectron Corp. (a) 132,000 8,646,000 STMicroelectronics NV 50,000 10,000,000 Texas Instruments, Inc. 800,000 133,200,000 Vitesse Semiconductor Corp. 200,000 20,762,500 (a) 1,892,650,596 INDUSTRIAL MACHINERY & EQUIPMENT - 0.1% PRI Automation, Inc. (a) 100,000 7,987,500 SHARES VALUE (NOTE 1) PACKAGING & CONTAINERS - 0.9% Corning, Inc. 395,000 $ 74,260,000 PRINTING - 0.0% Deluxe Corp. 84,600 1,982,813 RETAIL & WHOLESALE, MISCELLANEOUS - 0.1% ShopNow.com, Inc. 235,000 3,290,000 SERVICES - 0.4% Diamond Technology Partners, 300,000 20,512,500 Inc. Class A (a) eLoyalty Corp. 300,000 9,168,750 Per-Se Technologies, Inc. 3,258 0 warrants 7/8/03 (a) 29,681,250 TOTAL COMMON STOCKS 7,347,151,399 (Cost $3,927,016,632) CASH EQUIVALENTS - 13.8% Central Cash Collateral Fund, 546,679,900 546,679,900 5.75% (b) Taxable Central Cash Fund, 549,013,771 549,013,771 5.66% (b) TOTAL CASH EQUIVALENTS 1,095,693,671 (Cost $1,095,693,671) TOTAL INVESTMENT PORTFOLIO - 8,442,845,070 106.6% (Cost $5,022,710,303) NET OTHER ASSETS - (6.6)% (522,894,226) NET ASSETS - 100% $ 7,919,950,844 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 $8,170,003,398 and $5,981,941,034, 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 $325,672 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $583,764,400. The fund received cash collateral of $546,679,900 which was invested in cash equivalents. 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 which are or were affiliates are as follows:
PURCHASE SALES DIVIDEND VALUE AFFILIATE COST COST INCOME Peak International Ltd. $ 287,950 $ - $ - $ 8,368,188 Photon Dynamics, Inc. 8,098,253 9,062,047 - - TOTALS $ 8,386,203 $ 9,062,047 $ - $ 8,368,188
INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $5,053,542,426. Net unrealized appreciation aggregated $3,389,302,644, of which $3,501,136,552 related to appreciated investment securities and $111,833,908 related to depreciated investment securities. The fund hereby designates approximately $90,902,000 as a capital gain dividend for the purpose of the dividend paid deduction. TECHNOLOGY PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 8,442,845,070 value (cost $5,022,710,303) - - See accompanying schedule Receivable for investments 56,647,471 sold Receivable for fund shares 73,456,906 sold Dividends receivable 70,846 Interest receivable 2,314,152 Redemption fees receivable 17,402 Other receivables 563,594 TOTAL ASSETS 8,575,915,441 LIABILITIES Payable for investments $ 85,466,300 purchased Payable for fund shares 18,060,760 redeemed Accrued management fee 3,229,633 Other payables and accrued 2,528,004 expenses Collateral on securities 546,679,900 loaned, at value TOTAL LIABILITIES 655,964,597 NET ASSETS $ 7,919,950,844 Net Assets consist of: Paid in capital $ 4,058,365,160 Accumulated undistributed 441,461,445 net realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 3,420,124,239 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 40,423,494 $ 7,919,950,844 shares outstanding NET ASSET VALUE and $195.92 redemption price per share ($7,919,950,844 (divided by) 40,423,494 shares) Maximum offering price per $201.98 share (100/97.00 of $195.92) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 2,442,938 Dividends Special dividend from 1,823,201 Koninklijke Philips Electronics NV ADR Interest 14,122,929 Security lending 2,166,600 TOTAL INCOME 20,555,668 EXPENSES Management fee $ 17,262,679 Transfer agent fees 11,024,073 Accounting and security 1,346,527 lending fees Non-interested trustees' 10,998 compensation Custodian fees and expenses 90,670 Registration fees 1,264,429 Audit 81,937 Legal 10,926 Interest 810 Miscellaneous 3,285 Total expenses before 31,096,334 reductions Expense reductions (476,148) 30,620,186 NET INVESTMENT INCOME (LOSS) (10,064,518) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 770,123,117 (including realized gain (loss) of $9,351,657 on sales of investments in affiliated issuers) Foreign currency transactions (59,518) 770,063,599 Change in net unrealized appreciation (depreciation) on: Investment securities 3,216,739,244 Assets and liabilities in (10,528) 3,216,728,716 foreign currencies NET GAIN (LOSS) 3,986,792,315 NET INCREASE (DECREASE) IN $ 3,976,727,797 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 37,877,519 charges paid to FDC Sales charges - Retained by $ 37,853,864 FDC Deferred sales charges $ 32,154 withheld by FDC Exchange fees withheld by FSC $ 79,157 Expense reductions $ 451,275 Directed brokerage arrangements Custodian credits 10,606 Transfer agent credits 14,267 $ 476,148
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (10,064,518) $ (4,097,480) income (loss) Net realized gain (loss) 770,063,599 215,485,901 Change in net unrealized 3,216,728,716 122,793,603 appreciation (depreciation) NET INCREASE (DECREASE) IN 3,976,727,797 334,182,024 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (459,113,578) - from net realized gains Share transactions Net 4,214,973,000 1,006,339,152 proceeds from sales of shares Reinvestment of distributions 444,041,082 - Cost of shares redeemed (1,626,839,777) (666,801,634) NET INCREASE (DECREASE) IN 3,032,174,305 339,537,518 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 3,014,809 1,503,543 TOTAL INCREASE (DECREASE) 6,552,803,333 675,223,085 IN NET ASSETS NET ASSETS Beginning of period 1,367,147,511 691,924,426 End of period $ 7,919,950,844 $ 1,367,147,511 OTHER INFORMATION Shares Sold 33,612,582 14,223,107 Issued in reinvestment of 4,064,032 - distributions Redeemed (13,784,852) (10,714,156) Net increase (decrease) 23,891,762 3,508,951
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 F 1999 1998 1997 1996 F SELECTED PER-SHARE DATA Net asset value, beginning of $ 82.70 $ 53.13 $ 57.70 $ 54.67 $ 42.05 period Income from Investment Operations Net investment income (loss) C (.40) D (.34) (.25) (.39) (.28) Net realized and unrealized 133.30 29.79 11.29 6.95 20.83 gain (loss) Total from investment 132.90 29.45 11.04 6.56 20.55 operations Less Distributions From net realized gain (19.80) - (12.39) (3.68) (8.05) In excess of net realized gain - - (3.30) - - Total distributions (19.80) - (15.69) (3.68) (8.05) Redemption fees added to paid .12 .12 .08 .15 .12 in capital Net asset value, end of period $ 195.92 $ 82.70 $ 53.13 $ 57.70 $ 54.67 TOTAL RETURN A, B 184.11% 55.66% 24.92% 12.64% 50.71% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 7,919,951 $ 1,367,148 $ 691,924 $ 478,444 $ 483,026 (000 omitted) Ratio of expenses to average 1.05% 1.24% 1.38% 1.49% 1.40% net assets Ratio of expenses to average 1.04% E 1.20% E 1.30% E 1.44% E 1.39% E net assets after expense reductions Ratio of net investment (.34)% (.54)% (.45)% (.72)% (.52)% income to average net assets Portfolio turnover rate 210% 339% 556% 549% 112%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND FROM KONINKLIJKE PHILIPS ELECTRONICS NV ADR WHICH AMOUNTED TO $.07 PER SHARE E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR THE YEAR ENDED FEBRUARY 29 NATURAL GAS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND 2000 SELECT NATURAL GAS 44.70% 81.78% 65.97% SELECT NATURAL GAS (LOAD ADJ.) 40.28% 76.25% 60.92% S&P 500 11.73% 206.94% 255.64% GS Utilities 19.78% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or since the fund started on April 21, 1993. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Utilities Index - a market capitalization-weighted index of 150 stocks designed to measure the performance of companies in the utilities sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS LIFE OF FUND 2000 SELECT NATURAL GAS 44.70% 12.70% 7.66% SELECT NATURAL GAS (LOAD ADJ.) 40.28% 12.00% 7.18% S&P 500 11.73% 25.14% 20.31% GS Utilities 19.78% 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 16628.02 34160.54 1999/09/30 16014.13 33224.19 1999/10/31 15717.77 35326.62 1999/11/30 14892.19 36044.81 1999/12/31 15273.22 38167.85 2000/01/31 15770.69 36250.30 2000/02/29 16092.00 35564.08 IMATRL PRASUN SHR__CHT 20000229 20000309 114846 R00000000000086 $10,000 OVER LIFE OF FUND: Let's say hypothetically that $10,000 was invested in Fidelity Select Natural Gas Portfolio on April 21, 1993, when the fund started, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $16,092 - a 60.92% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $35,564 - a 255.64% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Williams Companies, Inc. 7.4 The Coastal Corp. 6.7 Enron Corp. 4.7 Burlington Resources, Inc. 4.1 BP Amoco PLC sponsored ADR 4.0 Vastar Resources, Inc. 3.8 Dynegy, Inc. 3.6 Kinder Morgan, Inc. 3.6 Calpine Corp. 3.0 AES Corp. 2.9 43.8 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Oil & Gas 46.8% Row: 1, Col: 6, Value: 46.8 Gas 32.7% Row: 1, Col: 5, Value: 32.7 Electric Utility 8.2% Row: 1, Col: 4, Value: 8.199999999999999 Energy Services 7.3% Row: 1, Col: 3, Value: 7.3 Autos, Tires, & Accessories 0.9% Row: 1, Col: 2, Value: 0.9 *All Others 4.1% Row: 1, Col: 1, Value: 4.1
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. NATURAL GAS PORTFOLIO FUND TALK: THE MANAGER'S OVERVIEW (photograph of Christian Zann) Christian Zann, Portfolio Manager of Fidelity Select Natural Gas Portfolio Q. HOW DID THE FUND PERFORM, CHRISTIAN? A. It did well. For the 12 months that ended February 29, 2000, the fund returned 44.70%, outpacing the 19.78% return of the Goldman Sachs Utilities Index, an index of 150 stocks designed to measure the performance of companies in the utilities sector. The fund also beat the Standard & Poor's 500 Index, which returned 11.73% during the same period. Q. WHY DID THE FUND OUTPERFORM ITS INDEXES? A. Strength in natural gas and oil prices was a key factor influencing the fund's performance. At the beginning of the period, the gas market experienced tight supplies due to decreased drilling activity resulting from previously depressed gas prices. Despite a third consecutive warm winter toward the end of the period, demand was strong enough and supplies remained tight enough to keep prices firm. Oil prices were supported by lower production quotas implemented by the Organization of Petroleum Exporting Countries (OPEC). Lower production from OPEC also coincided with increased demand because of economic recovery in Asia and continued prosperity in the U.S. and Europe. In this environment, the fund's overweighting of gas and oil exploration and production (E&P) stocks was beneficial. Furthermore, the Goldman Sachs index has a heavier exposure to gas and electric utilities, which typically underperform when interest rates rise sharply, as they did during the period. Higher rates also were a limiting factor for the broadly based S&P 500, which includes stocks from a wide variety of sectors. Q. WHAT OTHER FACTORS CONTRIBUTED TO PERFORMANCE? A. An overweighting in independent power producers (IPPs) was a positive influence. A relatively new category of company made possible by the deregulation of the utility industry, IPPs compete with traditional electric and gas utilities. Many IPPs built gas-fired power plants in places where there were power shortages and were well-positioned to reap the benefits. Q. WHAT STOCKS HELPED THE FUND'S PERFORMANCE? A. Enron, which topped the list of the fund's strongest stocks six months ago, occupied the same position at the end of the period. Investors approved of the company's move to add bandwidth trading to its already profitable gas and electric power trading operations. Calpine, an IPP, was originally valued like a traditional utility. However, as earnings estimates for the company were repeatedly revised sharply upward, investors flocked to the stock, causing it to more than quadruple during the period. Vastar outperformed due to its exposure to gas and deep water drilling in the Gulf of Mexico. Penn West, a heavy oil producer, benefited from increased demand for heavy oil as a substitute for light oil. Q. WHAT STOCKS DETRACTED FROM PERFORMANCE? A. Burlington Resources - mainly a gas E&P company - was one of the fund's most disappointing holdings. A lack of deep-water drilling success prompted investors to seek other alternatives. I held on to the stock because I was confident about continued strength in gas prices and the company's re-focus on on-shore drilling. Another gas holding, EOG Resources, also suffered from disappointing production growth. Entergy and CMS Energy reflected the negative influence of increased competition and higher interest rates on electric utilities. Q. WHAT'S YOUR OUTLOOK, CHRISTIAN? A. Year-over-year comparisons reveal that natural gas supplies are declining. Although the number of drilling rigs has increased significantly in the past year or so, indicating more exploration, production from existing wells is declining faster than before. Consequently, more new sources must be found just to keep production stable. Furthermore, a number of new power generation projects coming on line later in 2000 are gas-fired, which will add to demand. In the oil market, assuming an increase in production from OPEC in 2000, we may see short-term softness in crude oil prices. However, historically low inventories and firm demand should help offset the effects of any production increases over the next 12 months. Most companies with oil exposure can do reasonably well in that type of environment. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: April 21, 1993 FUND NUMBER: 513 TRADING SYMBOL: FSNGX SIZE: as of February 29, 2000, more than $53 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 FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 95.9% SHARES VALUE (NOTE 1) AUTOS, TIRES, & ACCESSORIES - 0.9% Barrett Resources Corp. (a) 16,200 $ 471,825 ELECTRIC UTILITY - 8.2% AES Corp. (a) 18,500 1,550,531 Calpine Corp. (a) 17,900 1,637,850 CMS Energy Corp. 12,400 207,700 Entergy Corp. 31,800 643,950 Independent Energy Holdings 7,600 380,475 PLC sponsored ADR (a) 4,420,506 ENERGY SERVICES - 7.3% ENSCO International, Inc. 15,000 453,750 Ensign Resource Service 200 5,070 Group, Inc. Halliburton Co. 10,200 389,513 Marine Drilling Companies, 13,900 317,094 Inc. (a) Nabors Industries, Inc. (a) 36,777 1,319,375 Noble Drilling Corp. (a) 40,100 1,443,600 Oceaneering International, 200 3,800 Inc. (a) Precision Drilling Corp. 100 2,863 Class A (a) 3,935,065 GAS - 32.7% Atmos Energy Corp. 20,201 345,942 Cascade Natural Gas Corp. 37,200 537,075 Columbia Energy Group 15,100 890,900 Dynegy, Inc. Class A 41,541 1,947,234 El Paso Energy Corp. 40,100 1,486,206 Enbridge, Inc. 40,900 747,689 Energen Corp. 21,200 344,500 Enron Corp. 37,000 2,553,000 Equitable Resources, Inc. 30,100 1,136,275 Kinder Morgan, Inc. 69,500 1,937,313 National Fuel Gas Co. 14,000 573,125 New Jersey Resources Corp. 9,300 345,263 Northwest Natural Gas Co. 13,700 267,150 ONEOK, Inc. 6,500 147,469 SEMCO Energy, Inc. 13,600 163,200 Westcoast Energy, Inc. 16,700 241,929 Williams Companies, Inc. 95,560 3,995,599 17,659,869 OIL & GAS - 46.8% Alberta Energy Co. Ltd. 37,167 1,010,196 Anadarko Petroleum Corp. 44,650 1,372,988 Anderson Exploration Ltd. (a) 38,500 464,783 Apache Corp. 39,725 1,449,963 SHARES VALUE (NOTE 1) Atlantic Richfield Co. 4,600 $ 326,600 Baytex Energy Ltd. (a) 7,700 50,462 Bonavista Petroleum Ltd. (a) 3,300 43,253 BP Amoco PLC sponsored ADR 46,438 2,182,586 Burlington Resources, Inc. 79,972 2,209,227 Cabot Oil & Gas Corp. Class A 10,300 162,869 Canada Occidental Petroleum 24,500 454,643 Ltd. Canadian Hunter Exploration 13,700 216,425 Ltd. (a) Canadian Natural Resources 49,400 1,056,429 Ltd. (a) Comstock Resources, Inc. (a) 60,700 254,181 Encal Energy Ltd. (a) 24,100 100,583 EOG Resources, Inc. 60,300 919,575 Forest Oil Corp. (a) 23,100 189,131 Kerr-McGee Corp. 8,012 358,537 Louis Dreyfus Natural Gas 4,700 96,938 Corp. (a) Newfield Exploration Co. (a) 11,400 353,400 Noble Affiliates, Inc. 15,400 346,500 Nuevo Energy Co. (a) 5,600 99,400 Ocean Energy, Inc. (a) 57,200 611,325 Paramount Resources Ltd. 35,700 331,240 Penn West Petroleum Ltd. (a) 26,200 534,989 Pioneer Natural Resources Co. 50,000 415,625 Prima Energy Corp. (a) 19,800 402,188 Remington Oil & Gas Corp. (a) 400 1,275 Rio Alto Exploration Ltd. (a) 79,300 1,203,504 Santa Fe Snyder Corp. (a) 172,015 1,290,113 Talisman Energy, Inc. (a) 23,700 613,100 The Coastal Corp. 85,770 3,607,701 Ulster Petroleums Ltd. (a) 12,000 56,291 Union Pacific Resources 34,400 307,450 Group, Inc. Unocal Corp. 4,600 123,050 Vastar Resources, Inc. 38,700 2,053,519 Western Gas Resources, Inc. 1 14 Wiser Oil Co. (a) 3,900 10,238 25,280,291 TOTAL COMMON STOCKS 51,767,556 (Cost $43,462,500) CASH EQUIVALENTS - 5.4% Taxable Central Cash Fund, 2,885,433 2,885,433 5.66% (b) (Cost $2,885,433) TOTAL INVESTMENT PORTFOLIO - 54,652,989 101.3% (Cost $46,347,933) NET OTHER ASSETS - (1.3)% (676,609) NET ASSETS - 100% $ 53,976,380 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 $47,328,321 and $46,577,003, 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 $8,100 for the period. Distribution of investments by country of issue, as a percentage of net assets, is as follows: United States of America 82.1% Canada 13.2 United Kingdom 4.7 100.0% INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $46,489,213. Net unrealized appreciation aggregated $8,163,776, of which $12,786,848 related to appreciated investment securities and $4,623,072 related to depreciated investment securities. The fund hereby designates approximately $51,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 100% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. NATURAL GAS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 54,652,989 value (cost $46,347,933) - See accompanying schedule Receivable for investments 549,462 sold Receivable for fund shares 208,808 sold Dividends receivable 68,961 Interest receivable 16,691 Redemption fees receivable 383 Other receivables 2,934 TOTAL ASSETS 55,500,228 LIABILITIES Payable for fund shares $ 1,457,872 redeemed Accrued management fee 26,576 Other payables and accrued 39,400 expenses TOTAL LIABILITIES 1,523,848 NET ASSETS $ 53,976,380 Net Assets consist of: Paid in capital $ 45,471,023 Undistributed net investment 9,147 income Accumulated undistributed net 191,173 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 8,305,037 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 3,547,816 $ 53,976,380 shares outstanding NET ASSET VALUE and $15.21 redemption price per share ($53,976,380 (divided by) 3,547,816 shares) Maximum offering price per $15.68 share (100/97.00 of $15.21) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 672,452 Dividends Interest 153,750 Security lending 4,880 TOTAL INCOME 831,082 EXPENSES Management fee $ 339,370 Transfer agent fees 369,977 Accounting and security 60,428 lending fees Non-interested trustees' 165 compensation Custodian fees and expenses 14,986 Registration fees 34,869 Audit 12,165 Legal 189 Total expenses before 832,149 reductions Expense reductions (20,816) 811,333 NET INVESTMENT INCOME 19,749 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 5,626,698 Foreign currency transactions 254 5,626,952 Change in net unrealized appreciation (depreciation) on: Investment securities 10,320,745 Assets and liabilities in 40 10,320,785 foreign currencies NET GAIN (LOSS) 15,947,737 NET INCREASE (DECREASE) IN $ 15,967,486 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 189,442 charges paid to FDC Sales charges - Retained by $ 189,442 FDC Deferred sales charges $ 1,450 withheld by FDC Exchange fees withheld by FSC $ 6,528 Expense reductions $ 20,816 Directed brokerage arrangements
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ 19,749 $ 479,288 income Net realized gain (loss) 5,626,952 (5,303,326) Change in net unrealized 10,320,785 (4,576,943) appreciation (depreciation) NET INCREASE (DECREASE) IN 15,967,486 (9,400,981) NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (330,540) (375,571) From net investment income Share transactions Net 78,842,639 47,858,222 proceeds from sales of shares Reinvestment of distributions 314,409 356,687 Cost of shares redeemed (77,779,879) (61,599,489) NET INCREASE (DECREASE) IN 1,377,169 (13,384,580) NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 133,839 123,693 TOTAL INCREASE (DECREASE) 17,147,954 (23,037,439) IN NET ASSETS NET ASSETS Beginning of period 36,828,426 59,865,865 End of period (including $ 53,976,380 $ 36,828,426 undistributed net investment income of $9,147 and $319,683, respectively) OTHER INFORMATION Shares Sold 5,386,067 3,845,626 Issued in reinvestment of 26,049 32,426 distributions Redeemed (5,342,363) (4,929,086) Net increase (decrease) 69,753 (1,051,034)
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 F 1999 1998 1997 1996 F SELECTED PER-SHARE DATA Net asset value, beginning of $ 10.59 $ 13.22 $ 12.50 $ 11.36 $ 8.98 period Income from Investment Operations Net investment income (loss) C .00 .12 D (.05) (.06) .05 Net realized and unrealized 4.68 (2.68) 1.06 1.30 2.36 gain (loss) Total from investment 4.68 (2.56) 1.01 1.24 2.41 operations Less Distributions From net investment income (.09) (.10) - (.01) (.05) From net realized gain - - (.30) (.29) - In excess of net realized gain - - (.03) - - Total distributions (.09) (.10) (.33) (.30) (.05) Redemption fees added to paid .03 .03 .04 .20 .02 in capital Net asset value, end of period $ 15.21 $ 10.59 $ 13.22 $ 12.50 $ 11.36 TOTAL RETURN A, B 44.70% (19.17)% 8.74% 12.45% 27.10% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 53,976 $ 36,828 $ 59,866 $ 81,566 $ 60,228 (000 omitted) Ratio of expenses to average 1.42% 1.57% 1.82% 1.70% 1.68% net assets Ratio of expenses to average 1.39% E 1.52% E 1.78% E 1.66% E 1.67% E net assets after expense reductions Ratio of net investment .03% .93% (.37)% (.46)% .46% income (loss) to average net assets Portfolio turnover rate 85% 107% 118% 283% 79%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.10 PER SHARE E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR THE YEAR ENDED FEBRUARY 29 TELECOMMUNICATIONS PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT TELECOMMUNICATIONS 84.89% 349.17% 783.06% SELECT TELECOMMUNICATIONS 79.27% 335.62% 756.50% (LOAD ADJ.) S&P 500 11.73% 206.94% 425.47% GS Utilities 19.78% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Utilities Index - a market capitalization-weighted index of 150 stocks designed to measure the performance of companies in the utilities sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT TELECOMMUNICATIONS 84.89% 35.05% 24.34% SELECT TELECOMMUNICATIONS 79.27% 34.22% 23.96% (LOAD ADJ.) S&P 500 11.73% 25.14% 18.05% GS Utilities 19.78% 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 1990/02/28 9700.00 10000.00 1990/03/31 9925.58 10265.00 1990/04/30 9341.49 10008.38 1990/05/31 10324.38 10984.19 1990/06/30 10118.94 10909.50 1990/07/31 9655.69 10874.59 1990/08/31 8531.81 9891.53 1990/09/30 7979.94 9409.81 1990/10/31 8257.89 9369.35 1990/11/30 8729.19 9974.61 1990/12/31 9129.96 10252.90 1991/01/31 9454.42 10699.92 1991/02/28 9770.66 11464.97 1991/03/31 10045.83 11742.42 1991/04/30 10259.40 11770.60 1991/05/31 10366.18 12279.09 1991/06/30 9934.94 11716.71 1991/07/31 10497.61 12262.71 1991/08/31 10809.74 12553.34 1991/09/30 10949.38 12343.69 1991/10/31 11380.62 12509.10 1991/11/30 10945.27 12004.98 1991/12/31 11946.71 13378.35 1992/01/31 11963.31 13129.52 1992/02/29 12112.70 13300.20 1992/03/31 11685.29 13040.85 1992/04/30 12125.14 13424.25 1992/05/31 11984.06 13490.03 1992/06/30 11705.74 13289.02 1992/07/31 12333.87 13832.55 1992/08/31 12188.28 13548.98 1992/09/30 12425.39 13708.86 1992/10/31 12550.18 13756.84 1992/11/30 13203.27 14225.94 1992/12/31 13776.72 14400.92 1993/01/31 13734.34 14521.89 1993/02/28 14488.65 14719.39 1993/03/31 15081.93 15029.97 1993/04/30 15113.75 14666.24 1993/05/31 15722.12 15059.30 1993/06/30 16400.02 15102.97 1993/07/31 16878.03 15042.56 1993/08/31 18151.27 15612.67 1993/09/30 18412.00 15492.45 1993/10/31 18942.16 15813.15 1993/11/30 17390.80 15662.92 1993/12/31 17870.56 15852.44 1994/01/31 18232.35 16391.43 1994/02/28 17661.10 15947.22 1994/03/31 17108.89 15251.92 1994/04/30 17414.27 15447.15 1994/05/31 17312.00 15700.48 1994/06/30 17297.39 15315.82 1994/07/31 18256.73 15818.18 1994/08/31 18787.54 16466.72 1994/09/30 18568.40 16063.29 1994/10/31 19454.69 16424.71 1994/11/30 18422.31 15826.52 1994/12/31 18642.41 16061.23 1995/01/31 18901.06 16477.70 1995/02/28 19070.17 17119.83 1995/03/31 19308.92 17625.04 1995/04/30 19909.05 18144.10 1995/05/31 20452.48 18869.32 1995/06/30 21437.78 19307.65 1995/07/31 22798.91 19947.89 1995/08/31 23474.39 19997.96 1995/09/30 24246.38 20841.88 1995/10/31 23230.61 20767.47 1995/11/30 23743.57 21679.16 1995/12/31 24171.02 22096.70 1996/01/31 24342.11 22848.87 1996/02/29 23989.25 23060.68 1996/03/31 23876.97 23282.76 1996/04/30 24991.75 23625.95 1996/05/31 25546.35 24235.26 1996/06/30 25806.32 24327.60 1996/07/31 23853.66 23252.80 1996/08/31 24350.49 23743.20 1996/09/30 25066.85 25079.47 1996/10/31 24570.02 25771.16 1996/11/30 25315.27 27719.21 1996/12/31 25476.18 27170.09 1997/01/31 25649.49 28867.68 1997/02/28 25872.31 29094.00 1997/03/31 23693.59 27898.53 1997/04/30 24434.87 29564.07 1997/05/31 27912.85 31363.93 1997/06/30 29451.55 32769.03 1997/07/31 30049.23 35376.46 1997/08/31 28580.47 33394.67 1997/09/30 32287.35 35223.70 1997/10/31 31505.28 34047.23 1997/11/30 32808.73 35623.28 1997/12/31 32056.14 36234.93 1998/01/31 34755.31 36635.68 1998/02/28 37909.07 39277.85 1998/03/31 41283.03 41289.27 1998/04/30 41120.35 41704.64 1998/05/31 39364.95 40987.74 1998/06/30 40871.67 42652.66 1998/07/31 42188.23 42198.41 1998/08/31 32548.13 36097.36 1998/09/30 34596.10 38409.76 1998/10/31 37075.61 41534.01 1998/11/30 39189.41 44051.38 1998/12/31 45212.14 46589.63 1999/01/31 48957.35 48538.00 1999/02/28 46328.22 47029.44 1999/03/31 49773.81 48911.09 1999/04/30 53500.97 50805.42 1999/05/31 53309.78 49605.90 1999/06/30 57691.73 52359.03 1999/07/31 56911.69 50724.38 1999/08/31 53936.87 50473.29 1999/09/30 55374.57 49089.82 1999/10/31 61209.51 52196.23 1999/11/30 67503.30 53257.37 1999/12/31 75322.39 56394.23 2000/01/31 76349.90 53560.99 2000/02/29 85650.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000309 125425 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Telecommunications Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $85,650 - a 756.50% increase on the initial investment - and includes the effect of a $7.50 trading fee. For comparison, look at how the Standard & Poor's 500 Index did over the same period. With dividends and capital gains, if any, reinvested, the same $10,000 investment would have grown to $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS Nextel Communications, Inc. 7.2 Class A Vodafone AirTouch PLC 6.1 BellSouth Corp. 5.7 AT&T Corp. 5.5 Cisco Systems, Inc. 5.4 Motorola, Inc. 4.9 MCI WorldCom, Inc. 3.9 Nokia AB sponsored ADR 3.9 Sprint Corp. - PCS Group 3.4 Series 1 Omnipoint Corp. 3.4 49.4 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Telephone Services 36.4% Row: 1, Col: 6, Value: 36.4 Cellular 30.3% Row: 1, Col: 5, Value: 30.3 Communications Equipment 12.6% Row: 1, Col: 4, Value: 12.6 Computer Services & Software 6.4% Row: 1, Col: 3, Value: 6.4 Electronics 5.1% Row: 1, Col: 2, Value: 5.1 *All Others 9.2% Row: 1, Col: 1, Value: 9.199999999999999
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. 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 had one of its strongest periods ever. For the 12 months that ended February 29, 2000, the fund returned 84.89%, far outdistancing the 11.73% return of the Standard & Poor's 500 Index. The fund also outperformed the 19.78% return of the Goldman Sachs Utilities Index, an index of 150 stocks designed to measure the performance of companies in the utilities sector. Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S EXTRAORDINARILY STRONG PERFORMANCE? A. Wireless communications stocks - a group I significantly overweighted relative to the Goldman Sachs index - were big winners during the period. Wireless, or cellular, telephones reached a critical mass in terms of their affordability and technological sophistication. The cost of the handset itself was negligible - in fact, cell phones are often provided to customers free of charge in return for signing up with a particular wireless service provider - and the monthly service fees fell to the point where the average person could easily afford them. Technologically, exciting things were happening, too. Internet-ready wireless phones were introduced in the U.S. during the period, and investors were attracted for that reason. Data communications was another strong point for the fund, reflecting the fact that data communications continued to grow much faster than voice communications. A final high-growth area for the fund was CLECs - - competitive local exchange carriers. These companies were making rapid inroads into local telephone service markets around the country and in the process taking market share from the more established regional Bell operating companies (RBOCs), which I underweighted relative to the Goldman Sachs index. Q. DID HIGHER INTEREST RATES HAVE ANY APPRECIABLE EFFECT ON HOW YOU MANAGED THE FUND? A. Higher rates gave me an additional reason to underweight the RBOCs. Investors have traditionally considered them as a close proxy for bonds and, as a result, they tend to follow bond prices lower in a period of rising rates. Q. WHAT STOCKS PERFORMED WELL FOR THE FUND? A. Cisco Systems, a core holding during the period, was the most positive contributor to performance. Cisco manufactures routers and other equipment that support data networks on the Internet. The strong wireless segment was reflected in the performance of a number of stocks, including Nextel Communications, Motorola, Nokia, Vodafone AirTouch and Qualcomm. All were aided by the favorable factors I mentioned earlier. Representing the CLECs group, McLeodUSA and Metromedia Fiber performed well, as both companies continued to gain market share and expand their capacity to handle data traffic. Q. WHAT STOCKS WERE DISAPPOINTMENTS? A. The list of underperformers included two RBOCs, SBC Communications and BellSouth. The combination of higher interest rates and the potential for slowing earnings growth as a result of increasing market penetration by the CLECs made it a difficult environment for the RBOCs. In the long distance market, slowing earnings growth and increased competition also resulted in the underperformance of core holding MCI WorldCom. Q. WHAT'S YOUR OUTLOOK, PETER? A. I look for strong growth in wireless and data communications, as technological innovation continues to be a catalyst in those markets. Likewise, deregulation should remain a powerful force in the telecommunications sector, and the spoils of victory will go to those that are in a position to offer the most competitive products and services. For the most part, I believe deregulation favors newer companies, which generally have lower cost structures and greater flexibility to pursue the markets and methods of delivery offering the highest profit margins. Finally, after the phenomenal returns the fund enjoyed during the period, I would caution shareholders not to expect comparable performance on a regular basis. With that caveat, I believe that telecommunications will continue to be a high-growth sector for a long time to come. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: July 29, 1985 FUND NUMBER: 096 TRADING SYMBOL: FSTCX SIZE: as of February 29, 2000, more than $1.8 billion MANAGER: Peter Saperstone, since 1998; manager, Fidelity Utilities Fund and Fidelity Advisor Utilities Growth Fund, since 1998; Fidelity Select Air Transportation Portfolio and Fidelity Select Defense and Aerospace Portfolio, 1997-1998; Fidelity Select Construction and Housing Portfolio, 1996-1997; joined Fidelity in 1995 TELECOMMUNICATIONS PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets
COMMON STOCKS - 96.0% SHARES VALUE (NOTE 1) BROADCASTING - 1.2% AlphaNet Telecom, Inc. (a)(c) 1,196,200 $ 8 EchoStar Communications Corp. 53,400 6,087,600 Class A (a) Metro One Telecommunications, 1,040,700 15,610,500 Inc. (a)(c) 21,698,108 CELLULAR - 30.3% ALLTEL Corp. 203,800 11,820,400 China Telecom (Hong Kong) 5,581,000 51,868,421 Ltd. (a) Crown Castle International 250,000 8,062,500 Corp. (a) Dobson Communications Corp. 350,000 6,650,000 Class A Nextel Communications, Inc. 992,200 135,683,344 Class A (a) Nextel Partners, Inc. 6,000 192,000 Omnipoint Corp. (a) 535,300 63,045,793 QUALCOMM, Inc. (a) 282,800 40,281,325 SBA Communications Corp. 467,000 18,913,500 Sprint Corp. - PCS Group 1,233,900 63,854,325 Series 1 (a) Tele Sudeste Celular 245,000 14,026,250 Participacoes SA ADR Telemig Celular Participacoes 98,100 7,222,613 SA ADR Telesp Celular Participacoes 438,800 23,640,350 SA ADR Triton PCS Holdings, Inc. 184,500 11,070,000 Class A Vodafone AirTouch PLC 20,024,378 115,515,587 571,846,408 COMMUNICATIONS EQUIPMENT - 12.6% ADC Telecommunications, Inc. 100,000 4,487,500 (a) Cisco Systems, Inc. (a) 773,400 102,233,813 Lucent Technologies, Inc. 100 5,950 Nokia AB sponsored ADR 369,200 73,216,975 Nortel Networks Corp. 300,000 33,216,060 Pairgain Technologies, Inc. 50,000 893,750 (a) Telefonaktiebolaget LM 245,200 23,539,200 Ericsson sponsored ADR 237,593,248 COMPUTER SERVICES & SOFTWARE - - 6.4% America Online, Inc. (a) 100 5,900 Concentric Network Corp. (a) 174,100 9,336,113 Covad Communications Group, 500,000 45,125,000 Inc. Digex, Inc. Class A 100,000 16,200,000 Infonet Services Corp. Class B 150,000 4,143,750 PSINet, Inc. (a) 406,800 18,865,350 Verio, Inc. (a) 372,800 27,983,300 121,659,413 SHARES VALUE (NOTE 1) COMPUTERS & OFFICE EQUIPMENT - - 1.5% Juniper Networks, Inc. 26,400 $ 7,241,850 Psion PLC 259,973 21,799,406 29,041,256 ELECTRICAL EQUIPMENT - 1.9% ANTEC Corp. (a) 151,100 7,998,856 California Amplifier, Inc. 638,400 28,807,800 (a)(c) 36,806,656 ELECTRONICS - 5.1% JDS Uniphase Corp. (a) 15,000 3,954,375 Motorola, Inc. 546,200 93,127,100 97,081,475 REAL ESTATE INVESTMENT TRUSTS - - 0.6% Pinnacle Holdings, Inc. 180,100 10,535,850 TELEPHONE SERVICES - 36.4% Alaska Communication Systems 373,000 5,222,000 Group, Inc. Allegiance Telecom, Inc. (a) 112,500 11,123,438 AT&T Corp. 2,102,792 103,956,780 BCE, Inc. 100,000 10,899,559 BellSouth Corp. 2,624,100 106,932,075 Carrier1 International SA ADR 6,100 197,869 CenturyTel, Inc. 306,700 10,312,788 Commonwealth Telephone 100,000 4,362,500 Enterprises, Inc. (a) Intermedia Communications, 133,400 8,445,888 Inc. (a) IXnet, Inc. 276,400 14,718,300 MCI WorldCom, Inc. (a) 1,653,554 73,789,847 McLeodUSA, Inc. Class A (a) 697,000 61,336,000 Metromedia Fiber Network, 714,800 51,387,419 Inc. Class A (a) NEXTLINK Communications, Inc. 452,100 49,815,769 Class A (a) Qwest Communications 800,000 37,100,000 International, Inc. (a) SBC Communications, Inc. 1,157,949 44,002,062 Telefonica SA sponsored ADR 182,212 15,795,503 U.S. WEST, Inc. 400,000 29,050,000 WinStar Communications, Inc. 408,700 31,623,163 (a) WorldQuest Networks, Inc. 3,900 132,600 Z-Tel Technologies, Inc. 455,100 16,099,163 686,302,723 TOTAL COMMON STOCKS 1,812,565,137 (Cost $1,197,316,379) CASH EQUIVALENTS - 14.1% SHARES VALUE (NOTE 1) Central Cash Collateral Fund, 191,599,700 $ 191,599,700 5.75% (b) Taxable Central Cash Fund, 73,962,288 73,962,288 5.66% (b) TOTAL CASH EQUIVALENTS 265,561,988 (Cost $265,561,988) TOTAL INVESTMENT PORTFOLIO - 2,078,127,125 110.1% (Cost $1,462,878,367) NET OTHER ASSETS - (10.1)% (189,909,684) NET ASSETS - 100% $ 1,888,217,441
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 $2,205,600,769 and $1,934,102,254, 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 $74,514 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $189,766,256. The fund received cash collateral of $191,599,700 which was invested in cash equivalents. 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%. Distribution of investments by country of issue, as a percentage of net assets, is as follows: United States of America 79.4% United Kingdom 7.2 Finland 3.9 Hong Kong 2.7 Brazil 2.4 Canada 2.4 Sweden 1.2 Others (individually less 0.8 than 1%) 100.0% 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 California Amplifier, Inc. - - - 28,807,800 Metro One Tele- communica- 5,512,599 - - 15,610,500 tions, Inc. TOTALS $ 5,512,599 $ - $ - $ 44,418,308
INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $1,464,576,162. Net unrealized appreciation aggregated $613,550,963, of which $654,376,324 related to appreciated investment securities and $40,825,361 related to depreciated investment securities. The fund hereby designates approximately $90,298,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 8% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. TELECOMMUNICATIONS PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 2,078,127,125 value (cost $1,462,878,367) - - See accompanying schedule Foreign currency held at 1,725,610 value (cost $1,725,634) Receivable for investments 2,985,202 sold Receivable for fund shares 8,626,983 sold Dividends receivable 157,488 Interest receivable 350,937 Redemption fees receivable 4,019 Other receivables 208,854 TOTAL ASSETS 2,092,186,218 LIABILITIES Payable for investments $ 3,041,757 purchased Payable for fund shares 7,784,665 redeemed Accrued management fee 858,088 Other payables and accrued 684,567 expenses Collateral on securities 191,599,700 loaned, at value TOTAL LIABILITIES 203,968,777 NET ASSETS $ 1,888,217,441 Net Assets consist of: Paid in capital $ 1,080,057,527 Accumulated undistributed net 192,911,933 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 615,247,981 (depreciation) on investments and assets and liabilities in foreign currencies NET ASSETS, for 18,719,240 $ 1,888,217,441 shares outstanding NET ASSET VALUE and $100.87 redemption price per share ($1,888,217,441 (divided by) 18,719,240 shares) Maximum offering price per $103.99 share (100/97.00 of $100.87) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 6,680,948 Dividends Interest 3,663,538 Security lending 663,333 TOTAL INCOME 11,007,819 EXPENSES Management fee $ 6,819,043 Transfer agent fees 5,169,450 Accounting and security 726,100 lending fees Non-interested trustees' 5,169 compensation Custodian fees and expenses 56,990 Registration fees 240,740 Audit 35,340 Legal 5,787 Interest 651 Miscellaneous 1,065 Total expenses before 13,060,335 reductions Expense reductions (244,763) 12,815,572 NET INVESTMENT INCOME (LOSS) (1,807,753) REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 341,175,811 Foreign currency transactions 174,459 341,350,270 Change in net unrealized appreciation (depreciation) on: Investment securities 428,709,760 Assets and liabilities in (4,483) 428,705,277 foreign currencies NET GAIN (LOSS) 770,055,547 NET INCREASE (DECREASE) IN $ 768,247,794 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 5,928,316 charges paid to FDC Sales charges - Retained by $ 5,920,617 FDC Deferred sales charges $ 11,792 withheld by FDC Exchange fees withheld by FSC $ 37,832 Expense reductions $ 218,752 Directed brokerage arrangements Custodian credits 21,131 Transfer agent credits 4,880 $ 244,763
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ (1,807,753) $ (874,454) income (loss) Net realized gain (loss) 341,350,270 45,836,208 Change in net unrealized 428,705,277 85,596,709 appreciation (depreciation) NET INCREASE (DECREASE) IN 768,247,794 130,558,463 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (158,958,797) (46,022,800) from net realized gains Share transactions Net 805,565,488 863,829,740 proceeds from sales of shares Reinvestment of distributions 152,949,500 44,998,804 Cost of shares redeemed (504,407,282) (813,636,128) NET INCREASE (DECREASE) IN 454,107,706 95,192,416 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 645,425 997,935 TOTAL INCREASE (DECREASE) 1,064,042,128 180,726,014 IN NET ASSETS NET ASSETS Beginning of period 824,175,313 643,449,299 End of period $ 1,888,217,441 $ 824,175,313 OTHER INFORMATION Shares Sold 9,915,113 15,272,906 Issued in reinvestment of 1,909,440 813,871 distributions Redeemed (6,431,551) (14,817,799) Net increase (decrease) 5,393,002 1,268,978
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 F 1999 1998 1997 1996 F SELECTED PER-SHARE DATA Net asset value, beginning of $ 61.85 $ 53.37 $ 41.80 $ 44.87 $ 38.34 period Income from Investment Operations Net investment income (loss) C (.12) (.06) (.25) .12 D .51 Net realized and unrealized 49.58 11.43 18.20 2.92 9.15 gain (loss) Total from investment 49.46 11.37 17.95 3.04 9.66 operations Less Distributions From net investment income - - - (.16) (.39) From net realized gain (10.48) (2.96) (6.44) (5.98) (2.75) Total distributions (10.48) (2.96) (6.44) (6.14) (3.14) Redemption fees added to paid .04 .07 .06 .03 .01 in capital Net asset value, end of period $ 100.87 $ 61.85 $ 53.37 $ 41.80 $ 44.87 TOTAL RETURN A, B 84.89% 22.21% 46.52% 7.85% 25.79% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 1,888,217 $ 824,175 $ 643,449 $ 388,535 $ 468,300 (000 omitted) Ratio of expenses to average 1.12% 1.27% 1.51% 1.51% 1.52% net assets Ratio of expenses to average 1.09% E 1.25% E 1.48% E 1.47% E 1.52% net assets after expense reductions Ratio of net investment (.15)% (.11)% (.53)% .27% 1.17% income (loss) to average net assets Portfolio turnover rate 173% 150% 157% 175% 89%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME (LOSS) PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D INVESTMENT INCOME PER SHARE REFLECTS A SPECIAL DIVIDEND WHICH AMOUNTED TO $.07 PER SHARE. E FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. F FOR THE YEAR ENDED FEBRUARY 29 UTILITIES GROWTH PORTFOLIO PERFORMANCE AND INVESTMENT SUMMARY PERFORMANCE There are several ways to evaluate a fund's historical performance. You can look at the total percentage change in value, the average annual percentage change or the growth of a hypothetical $10,000 investment. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income and capital gains (the profits earned upon the sale of securities that have grown in value). Load adjusted returns include a 3.00% sales charge and the effect of a $7.50 trading fee. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT UTILITIES GROWTH 29.76% 247.19% 441.05% SELECT UTILITIES GROWTH (LOAD 25.80% 236.70% 424.75% ADJ.) S&P 500 11.73% 206.94% 425.47% GS Utilities 19.78% n/a n/a CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. You can compare the fund's returns to the performance of both the Standard & Poor's 500 Index - a market capitalization-weighted index of common stocks - and the Goldman Sachs Utilities Index - a market capitalization-weighted index of 150 stocks designed to measure the performance of companies in the utilities sector. These benchmarks include reinvestment of dividends and capital gains, if any, and exclude the effect of sales charges. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT UTILITIES GROWTH 29.76% 28.27% 18.39% SELECT UTILITIES GROWTH (LOAD 25.80% 27.48% 18.03% ADJ.) S&P 500 11.73% 25.14% 18.05% GS Utilities 19.78% 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 1990/02/28 9700.00 10000.00 1990/03/31 9647.50 10265.00 1990/04/30 9245.04 10008.38 1990/05/31 9726.25 10984.19 1990/06/30 9841.50 10909.50 1990/07/31 9922.30 10874.59 1990/08/31 9377.71 9891.53 1990/09/30 9401.64 9409.81 1990/10/31 9883.40 9369.35 1990/11/30 10143.72 9974.61 1990/12/31 10278.72 10252.90 1991/01/31 10233.40 10699.92 1991/02/28 10674.52 11464.97 1991/03/31 10795.38 11742.42 1991/04/30 10747.04 11770.60 1991/05/31 10750.06 12279.09 1991/06/30 10619.66 11716.71 1991/07/31 10965.27 12262.71 1991/08/31 11216.62 12553.34 1991/09/30 11562.23 12343.69 1991/10/31 11722.47 12509.10 1991/11/30 11857.57 12004.98 1991/12/31 12440.14 13378.35 1992/01/31 12057.21 13129.52 1992/02/29 11968.84 13300.20 1992/03/31 11844.48 13040.85 1992/04/30 12168.49 13424.25 1992/05/31 12404.13 13490.03 1992/06/30 12547.63 13289.02 1992/07/31 13214.80 13832.55 1992/08/31 13208.03 13548.98 1992/09/30 13279.15 13708.86 1992/10/31 13275.76 13756.84 1992/11/30 13367.20 14225.94 1992/12/31 13757.84 14400.92 1993/01/31 13991.86 14521.89 1993/02/28 14711.66 14719.39 1993/03/31 15108.80 15029.97 1993/04/30 15026.22 14666.24 1993/05/31 15058.45 15059.30 1993/06/30 15635.01 15102.97 1993/07/31 15814.06 15042.56 1993/08/31 16501.63 15612.67 1993/09/30 16501.63 15492.45 1993/10/31 16333.32 15813.15 1993/11/30 15534.74 15662.92 1993/12/31 15483.71 15852.44 1994/01/31 15800.97 16391.43 1994/02/28 15084.06 15947.22 1994/03/31 14540.19 15251.92 1994/04/30 14958.45 15447.15 1994/05/31 14659.78 15700.48 1994/06/30 14613.51 15315.82 1994/07/31 15034.17 15818.18 1994/08/31 14975.28 16466.72 1994/09/30 14592.48 16063.29 1994/10/31 14777.57 16424.71 1994/11/30 14243.34 15826.52 1994/12/31 14336.26 16061.23 1995/01/31 14921.33 16477.70 1995/02/28 15116.35 17119.83 1995/03/31 15177.02 17625.04 1995/04/30 15706.06 18144.10 1995/05/31 15949.09 18869.32 1995/06/30 16105.33 19307.65 1995/07/31 16539.32 19947.89 1995/08/31 16960.29 19997.96 1995/09/30 17767.51 20841.88 1995/10/31 17941.10 20767.47 1995/11/30 18336.03 21679.16 1995/12/31 19266.43 22096.70 1996/01/31 19469.75 22848.87 1996/02/29 19018.91 23060.68 1996/03/31 18850.96 23282.76 1996/04/30 19612.08 23625.95 1996/05/31 19626.28 24235.26 1996/06/30 19929.09 24327.60 1996/07/31 19058.50 23252.80 1996/08/31 19063.23 23743.20 1996/09/30 19408.63 25079.47 1996/10/31 20222.45 25771.16 1996/11/30 21173.48 27719.21 1996/12/31 21456.23 27170.09 1997/01/31 22101.39 28867.68 1997/02/28 22467.95 29094.00 1997/03/31 21275.40 27898.53 1997/04/30 22036.86 29564.07 1997/05/31 23485.60 31363.93 1997/06/30 24202.45 32769.03 1997/07/31 24778.94 35376.46 1997/08/31 23666.07 33394.67 1997/09/30 25751.45 35223.70 1997/10/31 25821.63 34047.23 1997/11/30 27385.67 35623.28 1997/12/31 27958.68 36234.93 1998/01/31 29039.74 36635.68 1998/02/28 30601.26 39277.85 1998/03/31 32677.57 41289.27 1998/04/30 32023.97 41704.64 1998/05/31 31638.98 40987.74 1998/06/30 31662.32 42652.66 1998/07/31 32368.13 42198.41 1998/08/31 29614.88 36097.36 1998/09/30 32537.29 38409.76 1998/10/31 34590.55 41534.01 1998/11/30 35926.34 44051.38 1998/12/31 40024.68 46589.63 1999/01/31 41220.03 48538.00 1999/02/28 40445.02 47029.44 1999/03/31 41561.56 48911.09 1999/04/30 44908.96 50805.42 1999/05/31 46058.33 49605.90 1999/06/30 47096.25 52359.03 1999/07/31 47472.40 50724.38 1999/08/31 45166.70 50473.29 1999/09/30 45117.94 49089.82 1999/10/31 48168.99 52196.23 1999/11/30 48482.46 53257.37 1999/12/31 50400.24 56394.23 2000/01/31 52443.70 53560.99 2000/02/29 52475.00 52547.08 IMATRL PRASUN SHR__CHT 20000229 20000309 125539 R00000000000123 $10,000 OVER 10 YEARS: Let's say hypothetically that $10,000 was invested in Fidelity Select Utilities Growth Portfolio on February 28, 1990, and the current 3.00% sales charge was paid. As the chart shows, by February 29, 2000, the value of the investment would have grown to $52,475 - a 424.75% 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 $52,547 - a 425.47% increase. INVESTMENT SUMMARY TOP TEN STOCKS AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS AT&T Corp. 6.3 SBC Communications, Inc. 5.9 MCI WorldCom, Inc. 4.8 BellSouth Corp. 4.8 AES Corp. 4.8 Dynegy, Inc. 4.5 Calpine Corp. 4.4 BCE, Inc. 4.3 Nextel Communications, Inc. 4.1 Class A Enron Corp. 3.7 47.6 TOP INDUSTRIES AS OF FEBRUARY 29, 2000 % OF FUND'S NET ASSETS
Telephone Services 49.9% Row: 1, Col: 6, Value: 49.9 Electric Utility 16.8% Row: 1, Col: 5, Value: 16.8 Cellular 12.5% Row: 1, Col: 4, Value: 12.5 Gas 10.3% Row: 1, Col: 3, Value: 10.3 Broadcasting 2.9% Row: 1, Col: 2, Value: 2.9 * All Others 7.6% Row: 1, Col: 1, Value: 7.6
* INCLUDES SHORT-TERM INVESTMENTS AND NET OTHER ASSETS. (photograph of John Roth) John Roth, Portfolio Manager of Fidelity Select Utilities Growth Portfolio Q. HOW DID THE FUND PERFORM, JOHN? A. The fund did well. For the 12 months that ended February 29, 2000, the fund returned 29.76%, finishing ahead of both the Goldman Sachs Utilities Index - an index of 150 stocks designed to measure the performance of companies in the utilities sector - and the Standard & Poor's 500 Index, which returned 19.78% and 11.73%, respectively. Q. WHY DID THE FUND BEAT ITS INDEXES? A. Relative to both indexes, one factor that helped the fund was its heavier weighting of independent power producers (IPPs). Although classified as electric utilities, IPPs acted more like growth stocks during the period, as investors realized the potential for strong earnings growth in those companies. Overweighting competitive local exchange carriers (CLECs) also helped relative performance, as did underweighting the slower-growing regional Bell operating companies (RBOCs) and conventional electric utilities. Higher interest rates and intense competitive pressures hurt the performance of stocks in the latter two categories. The Federal Reserve Board raised short-term interest rates in June, August, November and February, making it a difficult period for any stock with even a mild sensitivity to interest rates. Historically, the share prices of electric utilities and RBOCs have followed bond prices, which were sharply lower during the period. Q. YOU BEGAN MANAGING THE FUND ON NOVEMBER 1, 1999. CAN YOU DESCRIBE YOUR MANAGEMENT STYLE? A. I don't expect my style to differ noticeably from that of the previous manager. Like him, I emphasized stocks from the telecommunications sector because of the many outstanding growth opportunities there. The ongoing build-out of worldwide fiber-optics networks and the explosion in wireless usage spurred by new applications in voice and data are powerful influences that should be felt for some time in the telecommunications industry. Likewise, deregulation and privatization have opened the door for IPPs to take market share from the incumbent electric utilities. Having made those "big-picture" observations, though, I also should stress that I am very focused on evaluating the fund's holdings on a stock-by-stock basis and taking full advantage of Fidelity's in-depth research capabilities. Q. WHAT STOCKS DID WELL FOR THE FUND? A. IPPs Calpine and AES, both mentioned in the semiannual report six months ago, again topped the list of stocks that helped performance. Calpine saw the need for new power generation projects in the United States at a time when traditional utilities were being cautious about expanding power generation facilities because of concerns about deregulation. Calpine rushed in to fill the gap, resulting in dynamic earnings growth that galvanized investor interest during the period. AES got off to a rough start during the period, hobbled by Brazil's devaluation of its currency, the real, and the concerns it raised about earnings from AES' Brazilian operations. However, the stock recovered nicely when regulators in Brazil granted AES significant rate increases to compensate for the devaluation. McLeodUSA and Metromedia Fiber represented the strong CLECs group, which continued to win market share from the incumbent local telephone service providers, the RBOCs. Nextel benefited from the strong business prospects for wireless companies. Q. WHAT STOCKS DETRACTED FROM PERFORMANCE? A. SBC Communications reflected the weak RBOCs group, which was plagued by the twin difficulties of higher interest rates and competitive pressures due to deregulation. Those same challenges, along with lower-than-expected earnings from its international operations, caused electric utility CMS Energy to decline. Another underperforming utility, PG&E, received an unfavorable rate decision from the California Public Utility Commission. I sold the latter two holdings. Q. WHAT'S YOUR OUTLOOK, JOHN? A. I see plenty of opportunity in the utilities sector. With respect to both the telecommunications and power industries, the key will likely remain to invest in the companies that stand to benefit most from advances in technology and the ongoing trends of deregulation and privatization. In general, that means investing in newer companies with lower cost structures and greater flexibility to respond to changing market conditions, while underweighting established players that may be slow to adjust to the new playing fields in these industries. As long as interest rates are rising, there is an additional reason to underweight traditional electric utilities and RBOCs because of the close correlation between those stocks and bond prices. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A- 3. (checkmark)FUND FACTS START DATE: December 10, 1981 FUND NUMBER: 065 TRADING SYMBOL: FSUTX SIZE: as of February 29, 2000, more than $645 million MANAGER: John Roth, since November 1999; analyst, utilities industry, September 1999- present; joined Fidelity in 1999 UTILITIES GROWTH PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets COMMON STOCKS - 95.3% SHARES VALUE (NOTE 1) BROADCASTING - 2.9% American Tower Corp. Class A 72,200 $ 3,555,850 (a) AMFM, Inc. (a) 65,600 4,026,200 AT&T Corp. - Liberty Media 63,200 3,302,200 Group Class A (a) EchoStar Communications Corp. 27,300 3,112,200 Class A (a) NTL, Inc. (a) 53,250 4,872,375 18,868,825 CELLULAR - 12.5% Aerial Communications, Inc. 35,100 2,103,806 (a) ALLTEL Corp. 117,000 6,786,000 Crown Castle International 79,800 2,573,550 Corp. (a) Nextel Communications, Inc. 193,600 26,474,800 Class A (a) Omnipoint Corp. (a) 70,100 8,256,137 SBA Communications Corp. 120,600 4,884,300 Sprint Corp. - PCS Group 322,000 16,663,500 Series 1 (a) Telephone & Data Systems, 14,263 1,504,747 Inc. United States Cellular Corp. 10,400 696,150 (a) Vodafone AirTouch PLC 57,900 3,340,106 sponsored ADR VoiceStream Wireless Corp. (a) 55,300 7,358,356 80,641,452 COMMUNICATIONS EQUIPMENT - 1.8% Comverse Technology, Inc. (a) 50,000 9,843,750 Globalstar Telecommunications 59,400 1,692,900 Ltd. (a) 11,536,650 COMPUTER SERVICES & SOFTWARE - - 0.4% Covad Communications Group, 28,400 2,563,100 Inc. MatrixOne, Inc. 200 5,000 Onvia.com, Inc. 500 10,500 2,578,600 CONSUMER ELECTRONICS - 0.5% General Motors Corp. Class H 27,300 3,289,650 (a) ELECTRIC UTILITY - 16.8% AES Corp. (a) 368,675 30,899,573 Calpine Corp. (a) 308,700 28,246,050 DPL, Inc. 351,200 7,550,800 DTE Energy Co. 63,900 1,928,981 Duke Energy Corp. 162,900 7,900,650 Edison International 156,100 4,107,381 Entergy Corp. 97,000 1,964,250 Independent Energy Holdings 185,100 9,266,569 PLC sponsored ADR (a) IPALCO Enterprises, Inc. 418,600 7,090,038 Montana Power Co. 123,200 4,851,000 NSTAR Companies 105,200 4,306,625 108,111,917 SHARES VALUE (NOTE 1) GAS - 10.3% Dynegy, Inc. 621,047 $ 29,111,578 Enron Corp. 346,792 23,928,648 Kinder Morgan, Inc. 299,700 8,354,138 Williams Companies, Inc. 125,000 5,226,563 66,620,927 REAL ESTATE INVESTMENT TRUSTS - - 0.2% Pinnacle Holdings, Inc. 21,600 1,263,600 TELEPHONE SERVICES - 49.9% Allegiance Telecom, Inc. (a) 54,450 5,383,744 AT&T Corp. 825,739 40,822,468 BCE, Inc. 256,900 28,000,966 Bell Atlantic Corp. 386,100 18,894,769 BellSouth Corp. 758,600 30,912,950 CenturyTel, Inc. 52,700 1,772,038 Global Crossing Ltd. (a) 205,700 9,590,763 GTE Corp. 232,300 13,705,700 Level 3 Communications, Inc. 132,600 15,099,825 (a) MCI WorldCom, Inc. (a) 699,324 31,207,334 McLeodUSA, Inc. Class A (a) 242,400 21,331,200 Metromedia Fiber Network, 249,500 17,936,711 Inc. Class A (a) NEXTLINK Communications, Inc. 14,800 1,630,775 Class A (a) Qwest Communications 303,266 14,063,961 International, Inc. (a) SBC Communications, Inc. 1,002,861 38,108,718 Sprint Corp. - FON Group 304,000 18,544,000 U.S. WEST, Inc. 121,500 8,823,938 WinStar Communications, Inc. 72,600 5,617,425 (a) 321,447,285 TOTAL COMMON STOCKS 614,358,906 (Cost $432,041,690) CASH EQUIVALENTS - 14.1% Central Cash Collateral Fund, 54,382,500 54,382,500 5.75% (b) Taxable Central Cash Fund, 36,692,913 36,692,913 5.66% (b) TOTAL CASH EQUIVALENTS 91,075,413 (Cost $91,075,413) TOTAL INVESTMENT PORTFOLIO - 705,434,319 109.4% (Cost $523,117,103) NET OTHER ASSETS - (9.4)% (60,329,224) NET ASSETS - 100% $ 645,105,095 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 $522,864,089 and $530,877,264, 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 $7,727 for the period. The fund participated in the security lending program. At period end, the value of securities loaned amounted to $52,542,658. The fund received cash collateral of $54,382,500 which was invested in cash equivalents. INCOME TAX INFORMATION At February 29, 2000, the aggregate cost of investment securities for income tax purposes was $523,191,269. Net unrealized appreciation aggregated $182,243,050, of which $205,213,033 related to appreciated investment securities and $22,969,983 related to depreciated investment securities. The fund hereby designates approximately $45,820,000 as a capital gain dividend for the purpose of the dividend paid deduction. A total of 19% of the dividends distributed during the fiscal year qualifies for the dividends-received deductions for corporate shareholders (unaudited). The fund will notify shareholders in January 2001 of amounts for use in preparing 2000 income tax returns. UTILITIES GROWTH PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 705,434,319 value (cost $523,117,103) - See accompanying schedule Receivable for investments 7,634,824 sold Receivable for fund shares 2,107,418 sold Dividends receivable 466,145 Interest receivable 178,660 Redemption fees receivable 3,435 Other receivables 110,422 TOTAL ASSETS 715,935,223 LIABILITIES Payable for investments $ 5,051,789 purchased Payable for fund shares 10,846,062 redeemed Accrued management fee 314,892 Other payables and accrued 234,885 expenses Collateral on securities 54,382,500 loaned, at value TOTAL LIABILITIES 70,830,128 NET ASSETS $ 645,105,095 Net Assets consist of: Paid in capital $ 447,582,385 Undistributed net investment 1,726,687 income Accumulated undistributed net 13,478,807 realized gain (loss) on investments and foreign currency transactions Net unrealized appreciation 182,317,216 (depreciation) on investments NET ASSETS, for 9,372,360 $ 645,105,095 shares outstanding NET ASSET VALUE and $68.83 redemption price per share ($645,105,095 (divided by) 9,372,360 shares) Maximum offering price per $70.96 share (100/97.00 of $68.83) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INVESTMENT INCOME $ 8,464,691 Dividends Interest 1,843,700 Security lending 287,237 TOTAL INCOME 10,595,628 EXPENSES Management fee $ 3,483,400 Transfer agent fees 2,358,446 Accounting and security 424,136 lending fees Non-interested trustees' 2,664 compensation Custodian fees and expenses 22,364 Registration fees 80,949 Audit 22,037 Legal 2,104 Miscellaneous 776 Total expenses before 6,396,876 reductions Expense reductions (131,037) 6,265,839 NET INVESTMENT INCOME 4,329,789 REALIZED AND UNREALIZED GAIN (LOSS) Net realized gain (loss) on: Investment securities 65,338,263 Foreign currency transactions 55,830 65,394,093 Change in net unrealized appreciation (depreciation) on: Investment securities 79,862,193 Assets and liabilities in (13) 79,862,180 foreign currencies NET GAIN (LOSS) 145,256,273 NET INCREASE (DECREASE) IN $ 149,586,062 NET ASSETS RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 1,834,883 charges paid to FDC Sales charges - Retained by $ 1,833,822 FDC Deferred sales charges $ 15,873 withheld by FDC Exchange fees withheld by FSC $ 22,570 Expense reductions Directed $ 127,307 brokerage arrangements Custodian credits 2,010 Transfer agent credits 1,720 $ 131,037
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net investment $ 4,329,789 $ 3,134,078 income Net realized gain (loss) 65,394,093 98,328,176 Change in net unrealized 79,862,180 19,577,920 appreciation (depreciation) NET INCREASE (DECREASE) IN 149,586,062 121,040,174 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (3,616,937) (1,845,471) From net investment income From net realized gain (79,551,544) (58,304,043) TOTAL DISTRIBUTIONS (83,168,481) (60,149,514) Share transactions Net 251,824,406 311,901,481 proceeds from sales of shares Reinvestment of distributions 79,235,957 57,497,817 Cost of shares redeemed (260,445,004) (324,713,707) NET INCREASE (DECREASE) IN 70,615,359 44,685,591 NET ASSETS RESULTING FROM SHARE TRANSACTIONS Redemption fees 231,048 337,629 TOTAL INCREASE (DECREASE) 137,263,988 105,913,880 IN NET ASSETS NET ASSETS Beginning of period 507,841,107 401,927,227 End of period (including $ 645,105,095 $ 507,841,107 undistributed net investment income of $1,726,687 and $1,646,086, respectively) OTHER INFORMATION Shares Sold 3,779,328 5,410,133 Issued in reinvestment of 1,263,812 1,024,484 distributions Redeemed (3,917,845) (5,700,831) Net increase (decrease) 1,125,295 733,786
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 E 1999 1998 1997 1996 E SELECTED PER-SHARE DATA Net asset value, beginning of $ 61.58 $ 53.50 $ 45.97 $ 43.03 $ 34.88 period Income from Investment Operations Net investment income C .48 .44 .54 .73 1.10 Net realized and unrealized 16.46 15.77 14.83 6.41 7.86 gain (loss) Total from investment 16.94 16.21 15.37 7.14 8.96 operations Less Distributions From net investment income (.42) (.25) (.58) (.70) (.84) From net realized gain (9.30) (7.93) (7.30) (3.54) - Total distributions (9.72) (8.18) (7.88) (4.24) (.84) Redemption fees added to paid .03 .05 .04 .04 .03 in capital Net asset value, end of period $ 68.83 $ 61.58 $ 53.50 $ 45.97 $ 43.03 TOTAL RETURN A, B 29.76% 32.17% 36.20% 18.13% 25.82% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 645,105 $ 507,841 $ 401,927 $ 256,844 $ 266,768 (000 omitted) Ratio of expenses to average 1.07% 1.18% 1.33% 1.47% 1.39% net assets Ratio of expenses to average 1.04% D 1.16% D 1.30% D 1.46% D 1.38% D net assets after expense reductions Ratio of net investment .72% .77% 1.11% 1.73% 2.76% income to average net assets Portfolio turnover rate 93% 113% 78% 31% 65%
A THE TOTAL RETURNS WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIODS SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C NET INVESTMENT INCOME PER SHARE HAS BEEN CALCULATED BASED ON AVERAGE SHARES OUTSTANDING DURING THE PERIOD. D FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. E FOR THE YEAR ENDED FEBRUARY 29 MONEY MARKET PORTFOLIO PERFORMANCE To evaluate a money market fund's historical performance, you can look at either total return or yield. Total return reflects the change in the value of an investment, assuming reinvestment of the fund's dividend income. Yield measures the income paid by a fund. Since a money market fund tries to maintain a $1 share price, yield is an important measure of performance. Load adjusted returns include a 3.00% sales charge. CUMULATIVE TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT MONEY MARKET 5.08% 28.85% 61.64% SELECT MONEY MARKET (LOAD ADJ.) 1.93% 24.98% 56.79% All Taxable Money Market 4.79% 28.01% 59.94% Funds Average CUMULATIVE TOTAL RETURNS show the fund's performance in percentage terms over a set period - in this case, one year, five years or 10 years. For example, if you had invested $1,000 in a fund that had a 5% return over the past year, the value of your investment would be $1,050 without including the effect of the 3.00% 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 969 taxable money market funds with similar objectives tracked by IBC Financial Data, Inc. over the past one year. AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED FEBRUARY 29, PAST 1 YEAR PAST 5 YEARS PAST 10 YEARS 2000 SELECT MONEY MARKET 5.08% 5.20% 4.92% SELECT MONEY MARKET (LOAD ADJ.) 1.93% 4.56% 4.60% All Taxable Money Market 4.79% 5.06% 4.80% 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
2/29/00 11/30/99 8/31/99 6/1/99 3/2/99 SELECT MONEY MARKET 5.53% 5.18% 4.99% 4.37% 4.71% All Taxable Money Market Funds Average 5.27% 5.03% 4.64% 4.33% 4.37% 3/1/00 12/1/99 9/1/99 6/2/99 3/3/99 MMDA 2.09% 2.07% 2.06% 2.06% 2.16%
Money Market All Taxable Money Market Funds Average MMDA 6% - 4% - 2% - 0% Row: 1, Col: 1, Value: 5.53 Row: 1, Col: 2, Value: 5.270000000000001 Row: 1, Col: 3, Value: 2.09 Row: 2, Col: 1, Value: 5.18 Row: 2, Col: 2, Value: 5.03 Row: 2, Col: 3, Value: 2.07 Row: 3, Col: 1, Value: 4.99 Row: 3, Col: 2, Value: 4.64 Row: 3, Col: 3, Value: 2.06 Row: 4, Col: 1, Value: 4.37 Row: 4, Col: 2, Value: 4.33 Row: 4, Col: 3, Value: 2.06 Row: 5, Col: 1, Value: 4.71 Row: 5, Col: 2, Value: 4.37 Row: 5, Col: 3, Value: 2.16 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 DURING THE 12 MONTHS THAT ENDED FEBRUARY 29, 2000? A. The economy was very strong. Gross domestic product grew at a rate of 4.5% in 1999, including a 6.9% rate in the fourth quarter, its largest gain in three years. At the same time, unemployment edged down, reaching a 30-year low. History tells us that this kind of backdrop typically sparks inflationary pressures. However, even though commodity prices spiked up recently - particularly energy prices - gains in productivity and intense competition helped prevent price increases from reaching the consumer. In turn, consumer spending has sparked the dynamic growth of the economy, driven by gains in both the stock and real estate markets. This environment put the Federal Reserve Board into a difficult situation. On the one hand, with the economy performing so well amid a relatively benign inflation environment, the Fed did not want to pull the rug from under the economy by raising short-term interest rates too far, too fast. On the other, by any historical standard, analysis of the data suggested that the Fed should do something. As a result, the Fed adopted a gradualist approach, inching short-term interest rates higher during the past 12 months in an attempt to tap the brakes on the economy and head off inflation before it emerged. To do so, the Fed raised the rate banks charge each other for overnight loans - known as the fed funds rate - by 0.25 percentage points four times, in June, August and November 1999, and in February 2000, bringing the fed funds rate up to 5.75% by the end of the period. Q. WHAT WAS YOUR STRATEGY WITH THE FUND? A. For much of the 12-month period, I kept the fund's average maturity fairly short. By doing so in a rising interest-rate environment, I was able to re-invest maturing assets in securities offering ever-higher yields. A key part of this approach was emphasizing variable-rate securities, whose yields are re-set to match the direction of the market. These instruments ratcheted up in yield in response to Fed rate hikes, and offered a better alternative to longer-term, fixed-rate securities that did not incorporate the higher rates that I anticipated. However, there were two times during the course of the year when I extended the average maturity of the fund to take advantage of attractive yields offered by longer-term money market securities. The first was in the second quarter of 1999, when, for a time, longer-term yields factored in more significant Fed rate hikes than I thought would occur. The second was in September 1999, when the market was factoring in a sharp spike in rates over the turn of the century because of Y2K concerns. My expectation was that Fed policies designed to maintain liquidity in the marketplace as we entered 2000 would help keep interest rates at a more stable level, which turned out to be correct and helped the fund's performance. During the last month of the period, I again emphasized securities with very short maturities - in the 30- to 60-day range - with the notion that the Fed is likely to raise rates again in March and, depending on emerging data, again in May or June. Q. HOW DID THE FUND PERFORM? A. The fund's seven-day yield on February 29, 2000, was 5.53%, compared to 4.76% 12 months ago. For the 12 months that ended February 29, 2000, the fund had a total return of 5.08%, compared to 4.79% for the all taxable money market funds average, according to IBC Financial Data, Inc. Q. WHAT IS YOUR OUTLOOK? A. We're experiencing something unusual: the acceleration of the economy well into a record-long economic expansion, with declining unemployment and low inflation. As long as the business community continues to invest capital to improve productivity, the Fed appears to have accepted that the economy can grow at a rate above which one would normally expect inflation to occur. If the economy continues to grow without any signs of emerging inflation, I would expect the Fed to continue its gradualist approach, implementing rate hikes slowly to moderately restrain growth. However, if there is some sort of negative surprise on the inflation front, the Fed is liable to adopt a more dramatic monetary policy. THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET OR OTHER CONDITIONS. FOR MORE INFORMATION, SEE PAGE A-3. (checkmark)FUND FACTS START DATE: August 30, 1985 FUND NUMBER: 085 TRADING SYMBOL: FSLXX SIZE: as of February 29, 2000, more than $888 million MANAGER: John Todd, since 1991; manager, various Fidelity and Spartan money market funds; joined Fidelity in 1981 MONEY MARKET PORTFOLIO INVESTMENTS FEBRUARY 29, 2000 Showing Percentage of Net Assets
CERTIFICATES OF DEPOSIT - 14.1% DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1) PURCHASE DOMESTIC CERTIFICATES OF DEPOSIT - 0.9% First Union National Bank, North Carolina 5/20/00 6.18% (b) $ 8,000,000 $ 8,000,000 LONDON BRANCH, EURODOLLAR, FOREIGN BANKS - 1.7% Bayerische Hypo-und Vereinsbank AG 3/8/00 6.00 5,000,000 5,000,000 ING Bank NV 8/3/00 6.25 10,000,000 10,000,209 15,000,209 NEW YORK BRANCH, YANKEE DOLLAR, FOREIGN BANKS - 11.5% Bank of Scotland Treasury Services 3/2/00 5.81 (b) 5,000,000 4,999,993 Commerzbank AG 7/28/00 6.25 37,000,000 36,984,350 Credit Communale de Belgique 3/7/00 6.00 5,000,000 5,000,000 Deutsche Bank AG 5/30/00 6.02 25,000,000 25,000,000 Societe Generale 3/9/00 5.87 (b) 5,000,000 4,997,175 UBS AG 5/18/00 5.35 25,000,000 24,996,918 101,978,436 TOTAL CERTIFICATES OF DEPOSIT 124,978,645 COMMERCIAL PAPER - 44.6% Alliance & Leicester PLC 3/8/00 5.94 30,000,000 29,965,992 American Express Credit Corp. 3/1/00 6.00 5,000,000 5,000,000 Aspen Funding Corp. 3/13/00 5.84 20,000,000 19,961,267 Asset Securitization Coop. Corp. 3/3/00 6.02 (b) 7,000,000 7,000,000 3/14/00 6.17 (b) 5,000,000 5,000,000 Centric Capital Corp. 3/8/00 6.03 10,000,000 9,988,450 Chase Manhattan Corp. 4/26/00 6.03 15,000,000 14,863,500 Citibank Credit Card Master Trust I (Dakota Certificate Program) 3/8/00 6.04 10,000,000 9,988,450 3/9/00 6.04 5,000,000 4,993,389 4/4/00 5.93 25,000,000 24,861,403 Commonwealth Bank of Australia 3/10/00 6.03 5,000,000 4,992,575 Corporate Receivables Corp. 3/14/00 5.86 25,000,000 24,947,458 DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1) PURCHASE CXC, Inc. 3/16/00 6.09% $ 10,000,000 $ 9,975,000 Daimler-Chrysler North America Holding Corp. 3/6/00 6.04 5,000,000 4,995,868 3/6/00 6.05 5,000,000 4,995,903 3/13/00 6.17 10,000,000 9,979,733 3/15/00 6.09 10,000,000 9,976,667 Delaware Funding Corp. 3/20/00 5.83 5,585,000 5,567,904 Edison Asset Securitization LLC 3/10/00 5.96 2,000,000 1,997,100 Enterprise Funding Corp. 3/13/00 5.84 5,926,000 5,914,523 Ford Motor Credit Co. 3/6/00 6.05 10,000,000 9,991,722 GE Capital International Funding, Inc. 3/10/00 6.11 10,000,000 9,985,075 3/15/00 6.06 10,000,000 9,977,056 General Electric Capital Corp. 3/3/00 6.04 25,000,000 24,991,819 General Electric Capital Services, Inc. 3/7/00 5.91 25,000,000 24,976,042 General Motors Acceptance Corp. 3/6/00 5.90 5,000,000 4,996,028 Goldman Sachs Group, Inc. 5/15/00 6.00 5,000,000 4,938,438 Marsh USA, Inc. 3/22/00 5.92 5,000,000 4,983,229 New Center Asset Trust 3/22/00 5.83 10,000,000 9,966,167 Park Avenue Receivables Corp. 3/20/00 5.83 20,000,000 19,938,778 Rohm & Haas Co. 3/8/00 6.35 2,000,000 1,997,608 Tyco International Group SA 3/8/00 6.72 5,000,000 4,993,583 Westdeutsche Landesbank Girozentrale 5/24/00 6.04 25,000,000 24,652,917 Windmill Funding Corp. 5/3/00 6.00 25,000,000 24,741,438 TOTAL COMMERCIAL PAPER 396,095,082 FEDERAL AGENCIES - 12.7% FANNIE MAE - 12.7% Discount Notes - 12.7% 5/4/00 5.91 42,820,000 42,376,956 8/10/00 6.09 25,000,000 24,335,687 8/17/00 6.12 47,873,000 46,538,061 113,250,704 U.S. TREASURY OBLIGATIONS - 5.6% DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1) PURCHASE U.S. TREASURY BILLS - 5.6% 4/27/00 5.76% $ 50,000,000 $ 49,548,747 BANK NOTES - 10.8% Bank of America NA 8/15/00 6.27 35,000,000 34,984,344 Bank One NA 7/26/00 6.25 5,000,000 4,998,068 Bank One NA, Chicago 4/24/00 6.00 (b) 5,000,000 4,997,114 First National Bank, Chicago 7/12/00 5.75 10,000,000 9,998,255 First Union National Bank, North Carolina 4/4/00 6.09 (b) 5,000,000 5,000,000 Fleet National Bank 3/1/00 5.96 (b) 25,000,000 24,995,607 Key Bank NA 3/16/00 6.00 (b) 6,000,000 6,000,000 NationsBank NA 3/1/00 5.91 (b) 5,000,000 4,999,789 TOTAL BANK NOTES 95,973,177 MASTER NOTES - 1.7% J. P. Morgan Securities, Inc. 3/2/00 5.86 (b) 15,000,000 15,000,000 MEDIUM-TERM NOTES - 4.0% American Telephone & Telegraph 3/7/00 5.95 (b) 15,000,000 15,000,000 CIESCO LP 3/15/00 5.87 (b) 5,000,000 4,999,628 Ford Motor Credit Co. 3/1/00 5.95 (b) 6,000,000 6,000,000 5/23/00 6.09 (b) 10,000,000 9,996,714 TOTAL MEDIUM-TERM NOTES 35,996,342 SHORT-TERM NOTES - 1.0% RACERS Series 1999 16MM, 3/2/00 5.91 (a)(b) 5,000,000 5,000,000 SMM Trust Series 1999 E, 4/5/00 6.02 (a)(b) 2,000,000 2,000,000 DUE DATE ANNUALIZED YIELD AT TIME OF PRINCIPAL AMOUNT VALUE (NOTE 1) PURCHASE SMM Trust Series 1999 I, 5/26/00 6.11% (a)(b) $ 2,000,000 $ 2,000,000 TOTAL SHORT-TERM NOTES 9,000,000
REPURCHASE AGREEMENTS - 7.2% MATURITY AMOUNT In a joint trading account $ 3,769,614 3,769,000 (U.S. Government Obligations) dated 2/29/00 due 3/1/00 At 5.86% With: Deutsche Bank Securities, 20,003,344 20,000,000 Inc. At 6.02%, dated 2/29/00 due 3/1/00 (Corporate Bond Obligations) (principal amount $20,521,719) 7.15% - 7.91%, 11/15/09 - 12/15/27 Salomon Smith Barney At 40,006,675 40,000,000 6.01%, dated 2/29/00 due 3/1/00 (Commercial Paper Obligations) (principal amount $40,924,320) 0% - 6.02%, 3/10/00 - 3/31/00 TOTAL REPURCHASE AGREEMENTS 63,769,000 TOTAL INVESTMENT PORTFOLIO - 903,611,697 101.7% NET OTHER ASSETS - (1.7)% (14,742,539) NET ASSETS - 100% $ 888,869,158 Total Cost for Income Tax Purposes $ 903,611,697 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 1.0% 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. OTHER INFORMATION 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 $11,687,000. The weighted average interest rate was 5.37%. Interest earned from the interfund lending program amounted to $1,743 and is included in interest income on the Statement of Operations. INCOME TAX INFORMATION At February 29, 2000, the fund had a capital loss carryforward of approximately $6,000 all of which will expire on February 29, 2008. MONEY MARKET PORTFOLIO FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 29, 2000 ASSETS Investment in securities, at $ 903,611,697 value (including repurchase agreements of $63,769,000) - - See accompanying schedule Cash 255 Receivable for fund shares 35,619,906 sold Interest receivable 2,869,931 Prepaid expenses 41,555 TOTAL ASSETS 942,143,344 LIABILITIES Payable for fund shares $ 52,598,513 redeemed Distributions payable 300,601 Accrued management fee 155,212 Other payables and accrued 219,860 expenses TOTAL LIABILITIES 53,274,186 NET ASSETS $ 888,869,158 Net Assets consist of: Paid in capital $ 888,875,077 Accumulated undistributed (5,919) net realized gain (loss) on investments NET ASSETS, for 888,808,187 $ 888,869,158 shares outstanding NET ASSET VALUE and $1.00 redemption price per share ($888,869,158 (divided by) 888,808,187 shares) Maximum offering price per $1.03 share (100/97.00 of $1.00) STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 29, 2000 INTEREST INCOME $ 56,789,257 EXPENSES Management fee $ 1,924,888 Transfer agent fees 2,197,634 Accounting fees and expenses 119,494 Non-interested trustees' 3,341 compensation Custodian fees and expenses 24,558 Registration fees 636,569 Audit 34,843 Legal 3,590 Miscellaneous 56,000 Total expenses before 5,000,917 reductions Expense reductions (13,922) 4,986,995 NET INTEREST INCOME 51,802,262 NET REALIZED GAIN (LOSS) ON (5,919) INVESTMENTS NET INCREASE IN NET ASSETS $ 51,796,343 RESULTING FROM OPERATIONS OTHER INFORMATION Sales $ 1,898,136 charges paid to FDC Sales charges - Retained by $ 1,885,554 FDC Deferred sales charges $ 62,882 withheld by FDC Expense reductions $ 5,294 Custodian credits Transfer agent credits 8,628 $ 13,922
STATEMENT OF CHANGES IN NET ASSETS INCREASE (DECREASE) IN NET YEAR ENDED FEBRUARY 29, 2000 YEAR ENDED FEBRUARY 28, 1999 ASSETS Operations Net interest income $ 51,802,262 $ 47,769,375 Net realized gain (loss) (5,919) 54,995 NET INCREASE (DECREASE) IN 51,796,343 47,824,370 NET ASSETS RESULTING FROM OPERATIONS Distributions to shareholders (51,802,262) (47,769,375) from net interest income Share transactions at net 4,948,605,084 6,779,151,867 asset value of $1.00 per share Proceeds from sales of shares Reinvestment of 47,380,569 42,982,213 distributions from net interest income Cost of shares redeemed (5,233,284,138) (6,280,934,055) NET INCREASE (DECREASE) IN (237,298,485) 541,200,025 NET ASSETS AND SHARES RESULTING FROM SHARE TRANSACTIONS TOTAL INCREASE (DECREASE) (237,304,404) 541,255,020 IN NET ASSETS NET ASSETS Beginning of period 1,126,173,562 584,918,542 End of period $ 888,869,158 $ 1,126,173,562
FINANCIAL HIGHLIGHTS YEARS ENDED FEBRUARY 28, 2000 D 1999 1998 1997 1996 D SELECTED PER-SHARE DATA Net asset value, beginning of $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 period Income from Investment .050 .050 .051 .049 .054 Operations Net interest income Less Distributions From net interest income (.050) (.050) (.051) (.049) (.054) Net asset value, end of period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 TOTAL RETURN A, B 5.08% 5.08% 5.26% 5.02% 5.56% RATIOS AND SUPPLEMENTAL DATA Net assets, end of period $ 888,869 $ 1,126,174 $ 584,919 $ 848,168 $ 610,821 (000 omitted) Ratio of expenses to average .48% .50% .56% .56% .59% net assets Ratio of expenses to average .48% .49% C .56% .56% .59% net assets after expense reductions Ratio of net interest income 4.95% 5.03% 5.13% 4.92% 5.39% to average net assets
A THE TOTAL RETURN WOULD HAVE BEEN LOWER HAD CERTAIN EXPENSES NOT BEEN REDUCED DURING THE PERIOD SHOWN. B TOTAL RETURNS DO NOT INCLUDE THE ONE TIME SALES CHARGE. C FMR OR THE FUND HAS ENTERED INTO VARYING ARRANGEMENTS WITH THIRD PARTIES WHO EITHER PAID OR REDUCED A PORTION OF THE FUND'S EXPENSES. D FOR THE YEAR ENDED FEBRUARY 29 NOTES TO FINANCIAL STATEMENTS For the period ended February 29, 2000 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-eight equity funds (the fund or the funds) which invest primarily in securities of companies whose principal business activities fall within specific industries, and a money market fund which invests in high quality money market instruments. Each fund is authorized to issue an unlimited number of shares. The Gold Portfolio 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 the business of the fund, are expected to materially affect the value of those securities, then they are valued at their fair value taking this trading or these events into account. Fair value is determined in good faith under consistently applied procedures under the general supervision of the Board of Trustees. Securities (including restricted securities) for which exchange quotations are not readily available (and in certain cases debt securities which trade on an exchange) are valued primarily using dealer-supplied valuations or at their fair value. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost or original cost plus accrued interest, both of which approximate current value. Direct investments in precious metals in the form of bullion are valued at the most recent bid price quoted by a major bank on the New York Commodities Exchange. MONEY MARKET FUND. As permitted under Rule 2a-7 of the 1940 Act, and certain conditions therein, securities are valued initially at cost and thereafter assume a constant amortization to maturity of any discount or premium. FOREIGN CURRENCY TRANSLATION. The accounting records of the funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period end. Purchases and sales of securities, income receipts and expense payments are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Net realized gains and losses on foreign currency transactions represent net gains and losses from sales and maturities of foreign currency contracts, disposition of foreign currencies, the difference between the amount of net investment income accrued and the U.S. dollar amount actually received, and gains and losses between trade 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 U.S. federal 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, 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, Federal Agency, and other obligations found satisfactory by FMR 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 under the caption "Other Information" at the end of each applicable fund's schedule of investments. 3. PURCHASES AND SALES OF INVESTMENTS. Information regarding purchases and sales of securities (other than short-term securities), is included under the caption "Other Information" at the end of each applicable fund's schedule of investments. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES. MANAGEMENT FEE. As each fund's investment adviser, FMR receives a monthly fee. For each equity fund, the monthly fee is calculated on the basis of a group fee rate plus a fixed individual fund fee rate applied to the average net assets of each fund. The group fee rate is the weighted average of a series of rates and is based on the monthly average net assets of all the mutual funds advised by FMR. The rates ranged from .2167% 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 annual 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 .0920% 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 annual rate of .18%. The income-based portion of this fee was equal to $265,903, or an annual rate of .03% of the fund's average net assets. SUB-ADVISER FEE. As the money market fund's investment sub-adviser, FIMM, a wholly owned subsidiary of FMR, receives a fee from FMR of 50% of the management fee payable to FMR. The fee is paid prior to any voluntary expense reimbursements which may be in effect. SALES LOAD. Fidelity Distributors Corporation (FDC), an affiliate of FMR, is the general distributor of the 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 $49,866 for the calendar year 2000 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 $27,913 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 29.5 - - Environmental Services - 1 18.7 Industrial Materials - 1 14.5 Multimedia - 1 10.7 Natural Resources 35.0 - -
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. MERGER INFORMATION. On February 29, 2000, Fidelity Select Gold Portfolio acquired all of the assets and assumed all of the liabilities of Fidelity Select Precious Metals and Minerals Portfolio. The acquisition, which was approved by the shareholders of Fidelity Select Precious Metals and Minerals Portfolio on February 16, 2000, was accomplished by an exchange of 7,736,425 shares of Fidelity Select Gold Portfolio for the 10,907,225 shares then outstanding (each valued at $9.54) of Fidelity Select Precious Metals and Minerals Portfolio. Based on the opinion of fund counsel, the reorganization qualified as a tax-free reorganization for federal income tax purposes with no gain or loss recognized to the funds or their shareholders. Fidelity Select Precious Metals and Minerals Portfolio's net assets, including $14,545,376 of unrealized depreciation, were combined with Fidelity Select Gold Portfolio's net assets for total net assets after the acquisition of $283,966,204. In addition, FMR agreed to reimburse Fidelity Select Gold Portfolio's operating expenses (excluding interest, taxes, certain securities lending costs, brokerage commissions and extraordinary expenses, if any) above an annual rate of 1.54% of average net assets. This arrangement with Fidelity Select Gold Portfolio is effective March 1, 2000 and will remain in effect through February 28, 2001. REPORT OF INDEPENDENT ACCOUNTANTS To the Trustees and the Shareholders of Fidelity Select Portfolios: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of each of the funds constituting Fidelity Select Portfolios at February 29, 2000, and the results of their operations, the changes in their net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fidelity Select Portfolios' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 29, 2000 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. /s/PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Boston, Massachusetts April 19, 2000 DISTRIBUTIONS The Board of Trustees of Fidelity Select Portfolios voted to pay to shareholders of record at the opening of business on record date, the following distributions per share derived from capital gains realized from sales of portfolio securities, and dividends derived from net investment income for each of the following funds:
AMOUNTS PER SHARE RECORD & FUND PAY DATE EX. DATE DIVIDENDS CAPITAL GAINS Air Transportation 4/10/00 4/7/00 - $2.39 Banking 4/17/00 4/14/00 $0.10 $2.48 Biotechnology 4/10/00 4/7/00 - $2.11 Brokerage and Investment 4/10/00 4/7/00 - $0.92 Management Business Services and 4/17/00 4/14/00 - $0.82 Outsourcing Chemicals 4/10/00 4/7/00 $0.03 - Computers 4/10/00 4/7/00 - $3.79 Construction and Housing 4/17/00 4/14/00 - $0.45 Cyclical Industries 4/17/00 4/14/00 - $0.12 Defense and Aerospace 4/10/00 4/7/00 - $0.75 Developing Communications 4/17/00 4/14/00 - $1.75 Electronics 4/10/00 4/7/00 - $6.53 Energy 4/10/00 4/7/00 $0.04 $0.96 Financial Services 4/10/00 4/7/00 $0.12 $1.65 Gold 4/10/00 4/7/00 $0.03 - Health Care 4/10/00 4/7/00 $0.09 $3.96 Home Finance 4/17/00 4/14/00 $0.03 $0.07 Industrial Equipment 4/17/00 4/14/00 - $0.36 Industrial Materials 4/17/00 4/14/00 $0.02 - Leisure 4/10/00 4/7/00 - $9.92 Medical Equipment and Systems 4/10/00 4/7/00 - $1.63 Multimedia 4/17/00 4/14/00 - $2.50 Natural Gas 4/17/00 4/14/00 - $0.07 Natural Resources 4/17/00 4/14/00 - $0.04 Paper and Forest Products 4/17/00 4/14/00 $0.04 - Retailing 4/17/00 4/14/00 - $5.36 Software and Computer Services 4/10/00 4/7/00 - $5.32 Technology 4/10/00 4/7/00 - $9.46 Telecommunications 4/10/00 4/7/00 - $8.59 Transportation 4/17/00 4/14/00 - $0.19 Utilities Growth 4/10/00 4/7/00 $0.07 $0.55
Each fund hereby designates 100% of the long-term capital gain dividends distributed during the fiscal year as 20%-rate capital gain dividends. The amounts per share which represent income derived from sources within, and taxes paid to, foreign countries or possessions of the United States are $.082 and $.002 for the dividend paid from Select Precious Metals and Minerals Portfolio for the year ended February 29, 2000. PROXY VOTING RESULTS A special meeting of the fund's shareholders was held on February 16, 2000. The results of votes taken among shareholders on proposals before them are reported below. Each vote reported represents one dollar of net asset value held on the record date for the meeting. PROPOSAL 1 To approve an Agreement and Plan of Reorganization between Fidelity Select Precious Metals and Minerals Portfolio and Fidelity Select Gold Portfolio providing for the transfer of all of the assets of Fidelity Select Precious Metals and Minerals Portfolio to Fidelity Select Gold Portfolio. # OF % OF VOTES CAST VOTES CAST Affirmative 55,960,195.58 85.077 Against 5,879,093.17 8.938 Abstain 3,936,550.02 5.985 TOTAL 65,775,838.77 100.00 INVESTMENT ADVISER Fidelity Management & Research Company Boston, MA INVESTMENT SUB-ADVISERS Fidelity Investments Money Management, Inc., MONEY MARKET FUND Fidelity Management & Research (U.K.) Inc. Fidelity Management & Research (Far East) Inc. Fidelity Investments Japan Ltd. OFFICERS Edward C. Johnson 3d, PRESIDENT Robert C. Pozen, SENIOR VICE PRESIDENT Eric D. Roiter, SECRETARY Robert A. Dwight, TREASURER Matthew N. Karstetter, DEPUTY TREASURER Maria F. Dwyer, 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 Donald J. Kirk * Ned C. Lautenbach * Peter S. Lynch Marvin L. Mann * William O. McCoy * Gerald C. McDonough * Robert C. Pozen Thomas R. Williams * ADVISORY BOARD 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 Construction and Housing Cyclical Industries 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 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 and Account Assistance 1-800-544-6666 Product Information 1-800-544-6666 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_FIDLIETY_LOGOS)(registered trademark) BULK RATE U.S. Postage PAID Fidelity Investments P.O. Box 193 Boston, MA 02101 -----END PRIVACY-ENHANCED MESSAGE-----