UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-3010
Fidelity Advisor Series VII
(Exact name of registrant as specified in charter)
82 Devonshire St., Boston, Massachusetts 02109
(Address of principal executive offices) (Zip code)
Eric D. Roiter, Secretary
82 Devonshire St.
Boston, Massachusetts 02109
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-563-7000
Date of fiscal year end: | July 31 |
Date of reporting period: | July 31, 2006 |
Item 1. Reports to Stockholders
Fidelity Advisor
Focus Funds®
Class A, Class T, Class B and Class C
Biotechnology
Consumer Industries
Cyclical Industries
Developing Communications
Electronics
Financial Services
Health Care
Natural Resources
Technology
Telecommunications &
Utilities Growth
Annual Report
July 31, 2006
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Biotechnology | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Consumer Industries | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Cyclical Industries | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Developing Communications | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Electronics | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Financial Services | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Health Care | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Natural Resources | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Technology | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Telecommunications & | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Report of Independent Registered Public Accounting Firm | ||
Trustees and Officers | ||
Distributions | ||
Board Approval of Investment Advisory Contracts and |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
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 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.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.advisor.fidelity.com.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the funds nor Fidelity Distributors Corporation is a bank.
Annual Report
Chairman's Message
(Photograph of Edward C. Johnson 3d.)
Dear Shareholder:
Although many securities markets made gains in early 2006, inflation concerns led to mixed results through the year's mid-point. Financial markets are always unpredictable. There are, however, a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies
indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Advisor Biotechnology Fund - Class A, T, B, and C
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of |
Class A (incl. 5.75% sales charge) | -5.61% | -1.97% | -7.62% |
Class T (incl. 3.50% sales charge) | -3.64% | -1.74% | -7.47% |
Class B (incl. contingent deferred sales charge) B | -5.58% | -1.95% | -7.53% |
Class C (incl. contingent deferred sales charge) C | -1.75% | -1.55% | -7.36% |
A From December 27, 2000.
B Class B shares' contingent deferred sales charges included in the past one year, past five years, and life of fund total return figures are 5%, 2%, and 1%, respectively.
C Class C shares' contingent deferred sales charges included in the past one year, past five years, and life of fund total return figures are 1%, 0%, and 0%, respectively.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity® Advisor Biotechnology Fund - Class T on December 27, 2000, when the fund started, and the current 3.50% sales charge was paid. The chart shows how the value of your investment would have changed, and also shows how the S&P 500® Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Rajiv Kaul, Portfolio Manager of Fidelity® Advisor Biotechnology Fund
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
During the past year, the fund's Class A, Class T, Class B and Class C shares returned 0.15%, -0.15%, -0.61% and -0.76%, respectively (excluding sales charges), trailing the 2.25% return of the Goldman Sachs® Health Care Index and the S&P 500. Unfavorable stock selection and a sizable underweighting in the relatively strong pharmaceuticals group hurt performance versus the sector index, along with ineffective picks in the life science tools and services segment. Selling off drug stock Merck, a major component of the sector index that performed well, was detrimental. Two companies that make instruments used in biotechnology research, Invitrogen and Affymetrix, also dented performance. Both companies reported disappointing financial results. The share price of Kos Pharmaceuticals fell due to increasing competition. Charles River Laboratories and PDL BioPharma were detractors as well. Conversely, stock selection in biotechnology aided performance versus the benchmark, although some of the benefit was offset by overweighting the group. Additionally, underweighting the weak performing health care equipment area proved timely. Celgene was the fund's top contributor. The stock was boosted by the Food and Drug Administration's approval of Revlimid to treat multiple myeloma, a common type of blood cancer. Also having a positive impact were Cephalon, Gilead Sciences and Abgenix. All contributors I just mentioned are biotechnology stocks.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 917.80 | $ 6.66 |
HypotheticalA | $ 1,000.00 | $ 1,017.85 | $ 7.00 |
Class T | |||
Actual | $ 1,000.00 | $ 915.40 | $ 7.84 |
HypotheticalA | $ 1,000.00 | $ 1,016.61 | $ 8.25 |
Class B | |||
Actual | $ 1,000.00 | $ 914.40 | $ 10.21 |
HypotheticalA | $ 1,000.00 | $ 1,014.13 | $ 10.74 |
Class C | |||
Actual | $ 1,000.00 | $ 913.20 | $ 10.20 |
HypotheticalA | $ 1,000.00 | $ 1,014.13 | $ 10.74 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 918.90 | $ 4.66 |
HypotheticalA | $ 1,000.00 | $ 1,019.93 | $ 4.91 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.40% |
Class T | 1.65% |
Class B | 2.15% |
Class C | 2.15% |
Institutional Class | .98% |
Annual Report
Advisor Biotechnology Fund
Investment Fund Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
Celgene Corp. | 7.9 | 7.2 |
Biogen Idec, Inc. | 6.8 | 6.3 |
Genentech, Inc. | 6.4 | 6.6 |
Gilead Sciences, Inc. | 6.2 | 7.0 |
Genzyme Corp. | 5.8 | 4.5 |
Amgen, Inc. | 5.5 | 5.6 |
Cephalon, Inc. | 4.4 | 4.3 |
Amylin Pharmaceuticals, Inc. | 4.2 | 2.9 |
Sepracor, Inc. | 4.0 | 4.1 |
MedImmune, Inc. | 3.2 | 4.9 |
54.4 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
 | Biotechnology | 76.6% | |
 | Life Sciences Tools | 11.0% | |
 | Pharmaceuticals | 9.9% | |
 | Health Care Equipment & Supplies | 2.2% | |
 | Health Care Providers & Services | 0.2% | |
 | All Others* | 0.1% | |
As of January 31, 2006 | |||
| Biotechnology | 89.8% | |
 | Pharmaceuticals | 8.3% | |
 | Health Care Equipment & Supplies | 1.3% | |
| Computers & Peripherals | 0.0% | |
| All Others* | 0.6% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Advisor Biotechnology Fund
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 99.9% | |||
Shares | Value (Note 1) | ||
BIOTECHNOLOGY - 76.6% | |||
Biotechnology - 76.6% | |||
Acadia Pharmaceuticals, Inc. (a) | 21,800 | $ 140,174 | |
Alexion Pharmaceuticals, Inc. (a) | 39,900 | 1,370,964 | |
Alkermes, Inc. (a) | 41,640 | 714,542 | |
Alnylam Pharmaceuticals, Inc. (a) | 10,000 | 127,700 | |
Amgen, Inc. (a) | 44,810 | 3,125,049 | |
Amylin Pharmaceuticals, Inc. (a) | 48,902 | 2,386,418 | |
Arena Pharmaceuticals, Inc. (a) | 10,800 | 111,780 | |
Biogen Idec, Inc. (a) | 90,634 | 3,817,504 | |
BioMarin Pharmaceutical, Inc. (a) | 50,385 | 736,125 | |
Celgene Corp. (a) | 93,408 | 4,473,309 | |
Cephalon, Inc. (a)(d) | 37,299 | 2,452,036 | |
Combinatorx, Inc. | 12,700 | 89,789 | |
Cubist Pharmaceuticals, Inc. (a) | 22,200 | 508,824 | |
Digene Corp. (a) | 8,300 | 350,343 | |
Genentech, Inc. (a) | 44,300 | 3,580,326 | |
Genomic Health, Inc. | 7,900 | 90,218 | |
Genzyme Corp. (a) | 47,520 | 3,244,666 | |
Gilead Sciences, Inc. (a) | 57,100 | 3,510,508 | |
Human Genome Sciences, Inc. (a) | 74,900 | 727,279 | |
ImClone Systems, Inc. (a) | 9,364 | 304,330 | |
Isis Pharmaceuticals, Inc. (a) | 17,000 | 102,170 | |
Ligand Pharmaceuticals, Inc. Class B (a) | 20,200 | 186,446 | |
MannKind Corp. (a)(d) | 23,300 | 426,157 | |
Martek Biosciences (a) | 13,200 | 368,676 | |
Medarex, Inc. (a) | 42,790 | 400,087 | |
MedImmune, Inc. (a) | 70,000 | 1,776,600 | |
Momenta Pharmaceuticals, Inc. (a) | 11,308 | 195,968 | |
Myogen, Inc. (a) | 32,392 | 999,617 | |
Myriad Genetics, Inc. (a) | 12,500 | 307,750 | |
Neurocrine Biosciences, Inc. (a) | 8,265 | 76,451 | |
Novacea, Inc. | 4,500 | 37,350 | |
ONYX Pharmaceuticals, Inc. (a) | 5,700 | 89,547 | |
OSI Pharmaceuticals, Inc. (a) | 44,000 | 1,469,160 | |
PDL BioPharma, Inc. (a) | 51,500 | 927,515 | |
Pharmion Corp. (a) | 11,200 | 192,864 | |
Regeneron Pharmaceuticals, Inc. (a) | 16,300 | 222,658 | |
Renovis, Inc. (a) | 15,000 | 189,750 | |
SGX Pharmaceuticals, Inc. | 8,900 | 43,343 | |
Tanox, Inc. (a) | 27,300 | 389,298 | |
Tercica, Inc. (a) | 14,900 | 75,245 | |
Theravance, Inc. (a) | 18,700 | 443,003 | |
United Therapeutics Corp. (a) | 2,500 | 148,275 | |
Vertex Pharmaceuticals, Inc. (a) | 51,700 | 1,732,984 | |
Shares | Value (Note 1) | ||
ViaCell, Inc. (a) | 500 | $ 2,010 | |
Zymogenetics, Inc. (a) | 25,700 | 484,959 | |
43,149,767 | |||
HEALTH CARE EQUIPMENT & SUPPLIES - 2.2% | |||
Health Care Equipment - 1.4% | |||
IDEXX Laboratories, Inc. (a) | 8,744 | 773,844 | |
IntraLase Corp. (a) | 300 | 5,202 | |
779,046 | |||
Health Care Supplies - 0.8% | |||
Gen-Probe, Inc. (a) | 8,923 | 463,550 | |
TOTAL HEALTH CARE EQUIPMENT & SUPPLIES | 1,242,596 | ||
HEALTH CARE PROVIDERS & SERVICES - 0.2% | |||
Health Care Services - 0.2% | |||
Oracle Healthcare Acquisition Corp. unit | 9,600 | 81,600 | |
LIFE SCIENCES TOOLS & SERVICES - 11.0% | |||
Life Science Tools & Services - 11.0% | |||
Affymetrix, Inc. (a) | 16,300 | 351,591 | |
Albany Molecular Research, Inc. (a) | 12,700 | 114,300 | |
Applera Corp.: | |||
- Applied Biosystems Group | 51,100 | 1,642,865 | |
- Celera Genomics Group (a) | 37,000 | 499,500 | |
Bruker BioSciences Corp. (a) | 3,100 | 18,104 | |
Charles River Laboratories International, Inc. (a) | 26,600 | 944,300 | |
Exelixis, Inc. (a) | 36,800 | 327,520 | |
Invitrogen Corp. (a) | 22,150 | 1,368,649 | |
Luminex Corp. (a) | 12,700 | 217,424 | |
Techne Corp. (a) | 14,410 | 716,033 | |
6,200,286 | |||
PHARMACEUTICALS - 9.9% | |||
Pharmaceuticals - 9.9% | |||
Adams Respiratory Therapeutics, Inc. | 13,200 | 590,304 | |
Adolor Corp. (a) | 10,751 | 257,271 | |
Barrier Therapeutics, Inc. (a) | 8,600 | 57,706 | |
Cardiome Pharma Corp. (a) | 17,000 | 207,317 | |
Cypress Bioscience, Inc. (a) | 19,200 | 110,592 | |
Elan Corp. PLC sponsored ADR (a) | 47,800 | 733,252 | |
Kos Pharmaceuticals, Inc. (a) | 11,392 | 470,945 | |
MGI Pharma, Inc. (a) | 3,121 | 45,598 | |
New River Pharmaceuticals, Inc. (a)(d) | 27,878 | 681,338 | |
Pozen, Inc. (a) | 2,000 | 15,100 | |
Sepracor, Inc. (a) | 45,796 | 2,262,322 | |
Somaxon Pharmaceuticals, Inc. | 2,100 | 22,008 | |
Xenoport, Inc. (a) | 7,800 | 135,564 | |
5,589,317 | |||
TOTAL COMMON STOCKS (Cost $50,870,367) | 56,263,566 | ||
Money Market Funds - 6.6% | |||
Shares | Value (Note 1) | ||
Fidelity Cash Central Fund, 5.3% (b) | 349,540 | $ 349,540 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 3,402,600 | 3,402,600 | |
TOTAL MONEY MARKET FUNDS (Cost $3,752,140) | 3,752,140 | ||
TOTAL INVESTMENT PORTFOLIO - 106.5% (Cost $54,622,507) | 60,015,706 | ||
NET OTHER ASSETS - (6.5)% | (3,676,048) | ||
NET ASSETS - 100% | $ 56,339,658 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 27,300 |
Fidelity Securities Lending Cash Central Fund | 14,208 |
Total | $ 41,508 |
Income Tax Information |
At July 31, 2006, the fund had a capital loss carryforward of approximately $6,990,407 all of which will expire on July 31, 2011. |
See accompanying notes which are an integral part of the financial statements.
Biotechnology
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $3,311,232) - See accompanying schedule: Unaffiliated issuers (cost $50,870,367) | $ 56,263,566 | |
Affiliated Central Funds (cost $3,752,140) | 3,752,140 | |
Total Investments (cost $54,622,507) | $ 60,015,706 | |
Receivable for investments sold | 19,151 | |
Receivable for fund shares sold | 48,833 | |
Interest receivable | 763 | |
Prepaid expenses | 82 | |
Other receivables | 7,010 | |
Total assets | 60,091,545 | |
Liabilities | ||
Payable to custodian bank | $ 2,769 | |
Payable for investments purchased | 40,514 | |
Payable for fund shares redeemed | 188,528 | |
Accrued management fee | 31,950 | |
Distribution fees payable | 32,263 | |
Other affiliated payables | 20,629 | |
Other payables and accrued expenses | 32,634 | |
Collateral on securities loaned, at value | 3,402,600 | |
Total liabilities | 3,751,887 | |
Net Assets | $ 56,339,658 | |
Net Assets consist of: | ||
Paid in capital | $ 58,930,470 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | (7,984,011) | |
Net unrealized appreciation (depreciation) on investments | 5,393,199 | |
Net Assets | $ 56,339,658 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price Class A: | $ 6.81 | |
Maximum offering price per share (100/94.25 of $6.81) | $ 7.23 | |
Class T: | $ 6.71 | |
Maximum offering price per share (100/96.50 of $6.71) | $ 6.95 | |
Class B: | $ 6.52 | |
Class C: | $ 6.52 | |
Institutional Class: | $ 6.91 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Biotechnology Fund
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 6,806 | |
Interest | 96 | |
Income from affiliated Central Funds (including $14,208 from security lending) | 41,508 | |
Total income | 48,410 | |
Expenses | ||
Management fee | $ 331,930 | |
Transfer agent fees | 251,299 | |
Distribution fees | 409,150 | |
Accounting and security lending fees | 25,595 | |
Independent trustees' compensation | 236 | |
Custodian fees and expenses | 13,835 | |
Registration fees | 49,335 | |
Audit | 41,563 | |
Legal | 744 | |
Miscellaneous | 560 | |
Total expenses before reductions | 1,124,247 | |
Expense reductions | (60,601) | 1,063,646 |
Net investment income (loss) | (1,015,236) | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 1,448,373 | |
Foreign currency transactions | (490) | |
Total net realized gain (loss) | 1,447,883 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (1,063,304) | |
Assets and liabilities in foreign currencies | 68 | |
Total change in net unrealized appreciation (depreciation) | (1,063,236) | |
Net gain (loss) | 384,647 | |
Net increase (decrease) in net assets resulting from operations | $ (630,589) | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ (1,015,236) | $ (952,674) |
Net realized gain (loss) | 1,447,883 | 3,415,156 |
Change in net unrealized appreciation (depreciation) | (1,063,236) | 3,817,974 |
Net increase (decrease) in net assets resulting from operations | (630,589) | 6,280,456 |
Share transactions - net increase (decrease) | 1,061,142 | (5,129,068) |
Redemption fees | 8,381 | 6,345 |
Total increase (decrease) in net assets | 438,934 | 1,157,733 |
Net Assets | ||
Beginning of period | 55,900,724 | 54,742,991 |
End of period | $ 56,339,658 | $ 55,900,724 |
See accompanying notes which are an integral part of the financial statements.
Biotechnology
Financial Highlights - Class A
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 6.72 | $ 5.95 | $ 5.90 | $ 4.37 | $ 7.07 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.11) | (.10) D | (.10) | (.06) | (.09) |
Net realized and unrealized gain (loss) | .10 | .87 | .15 | 1.59 | (2.62) |
Total from investment operations | (.01) | .77 | .05 | 1.53 | (2.71) |
Redemption fees added to paid in capital C | - F | -F | -F | -F | .01 |
Net asset value, end of period | $ 6.71 | $ 6.72 | $ 5.95 | $ 5.90 | $ 4.37 |
Total Return A, B | (.15)% | 12.94% | .85% | 35.01% | (38.19)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 1.79% | 1.93% | 2.10% | 2.39% | 2.27% |
Expenses net of fee waivers, if any | 1.65% | 1.70% | 1.75% | 1.75% | 1.75% |
Expenses net of all reductions | 1.62% | 1.68% | 1.73% | 1.72% | 1.72% |
Net investment income (loss) | (1.54)% | (1.61)% D | (1.63)% | (1.36)% | (1.45)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 13,808 | $ 14,177 | $ 13,367 | $ 10,281 | $ 6,861 |
Portfolio turnover rate | 62% | 30% | 50% | 71% | 113% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Investment income per share reflects a special dividend which amounted to $ .0004 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (1.61)%. E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. F Amount represents less than $.01 per share. | |||||
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 6.56 | $ 5.84 | $ 5.82 | $ 4.33 | $ 7.05 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.14) | (.13) D | (.13) | (.09) | (.12) |
Net realized and unrealized gain (loss) | .10 | .85 | .15 | 1.58 | (2.61) |
Total from investment operations | (.04) | .72 | .02 | 1.49 | (2.73) |
Redemption fees added to paid in capital C | - F | - F | - F | - F | .01 |
Net asset value, end of period | $ 6.52 | $ 6.56 | $ 5.84 | $ 5.82 | $ 4.33 |
Total Return A ,B | (.61)% | 12.33% | .34% | 34.41% | (38.58)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 2.23% | 2.33% | 2.46% | 2.78% | 2.74% |
Expenses net of fee waivers, if any | 2.15% | 2.19% | 2.25% | 2.25% | 2.25% |
Expenses net of all reductions | 2.12% | 2.18% | 2.22% | 2.22% | 2.22% |
Net investment income (loss) | (2.04)% | (2.11)% D | (2.12)% | (1.86)% | (1.95)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 14,938 | $ 16,921 | $ 16,819 | $ 15,154 | $ 10,218 |
Portfolio turnover rate | 62% | 30% | 50% | 71% | 113% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Investment income per share reflects a special dividend which amounted to $ .0004 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (2.11)%. E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. F Amount represents less than $.01 per share. | |||||
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 6.57 | $ 5.84 | $ 5.82 | $ 4.33 | $ 7.05 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.14) | (.13) D | (.13) | (.09) | (.12) |
Net realized and unrealized gain (loss) | .09 | .86 | .15 | 1.58 | (2.61) |
Total from investment operations | (.05) | .73 | .02 | 1.49 | (2.73) |
Redemption fees added to paid in capital C | - F | - F | - F | - F | .01 |
Net asset value, end of period | $ 6.52 | $ 6.57 | $ 5.84 | $ 5.82 | $ 4.33 |
Total Return A, B | (.76)% | 12.50% | .34% | 34.41% | (38.58)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 2.17% | 2.24% | 2.31% | 2.58% | 2.57% |
Expenses net of fee waivers, if any | 2.15% | 2.19% | 2.25% | 2.25% | 2.25% |
Expenses net of all reductions | 2.12% | 2.18% | 2.23% | 2.22% | 2.22% |
Net investment income (loss) | (2.04)% | (2.11)% D | (2.13)% | (1.86)% | (1.95)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 13,787 | $ 12,538 | $ 13,215 | $ 10,493 | $ 8,204 |
Portfolio turnover rate | 62% | 30% | 50% | 71% | 113% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Investment income per share reflects a special dividend which amounted to $ .0004 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (2.11)%. E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. F Amount represents less than $.01 per share. | |||||
See accompanying notes which are an integral part of the financial statements.
Biotechnology
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 6.89 | $ 6.06 | $ 5.97 | $ 4.40 | $ 7.09 |
Income from Investment Operations | |||||
Net investment income (loss) B | (.07) | (.06) C | (.06) | (.04) | (.06) |
Net realized and unrealized gain (loss) | .09 | .89 | .15 | 1.61 | (2.64) |
Total from investment operations | .02 | .83 | .09 | 1.57 | (2.70) |
Redemption fees added to paid in capital B | -E | -E | -E | -E | .01 |
Net asset value, end of period | $ 6.91 | $ 6.89 | $ 6.06 | $ 5.97 | $ 4.40 |
Total Return A | .29% | 13.70% | 1.51% | 35.68% | (37.94)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.05% | 1.10% | 1.16% | 1.37% | 1.41% |
Expenses net of fee waivers, if any | 1.05% | 1.10% | 1.16% | 1.25% | 1.25% |
Expenses net of all reductions | 1.03% | 1.09% | 1.14% | 1.22% | 1.22% |
Net investment income (loss) | (.94)% | (1.02)%C | (1.04)% | (.86)% | (.94)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 1,268 | $ 1,243 | $ 1,146 | $ 1,153 | $ 857 |
Portfolio turnover rate | 62% | 30% | 50% | 71% | 113% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Investment income per share reflects a special dividend which amounted to $ .0004 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (1.02)%. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. | |||||
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Biotechnology Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, capital loss carryforwards and losses deferred due to wash sales and excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 10,901,837 |
Unrealized depreciation | (6,421,566) |
Net unrealized appreciation (depreciation) | 4,480,271 |
Capital loss carryforward | (6,990,407) |
Cost for federal income tax purposes | $ 55,535,435 |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital. On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $37,290,529 and $36,307,572, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services.
Biotechnology
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan - continued
For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 30,552 | $ 199 |
Class T | .25% | .25% | 72,206 | 4 |
Class B | .75% | .25% | 168,357 | 126,277 |
Class C | .75% | .25% | 138,035 | 27,858 |
$ 409,150 | $ 154,338 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 22,003 |
Class T | 10,973 |
Class B* | 46,882 |
Class C* | 3,458 |
$ 83,316 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 52,804 | .43 |
Class T | 71,479 | .50 |
Class B | 72,567 | .43 |
Class C | 51,338 | .37 |
Institutional Class | 3,111 | .26 |
$ 251,299 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $581 for the period.
Annual Report
Notes to Financial Statements - continued
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $167 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds.
7. Expense Reductions.
FMR voluntarily agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
The following classes were in reimbursement during the period:
Expense | Reimbursement | |
Class A | 1.40% | $ 9,079 |
Class T | 1.65% | 20,108 |
Class B | 2.15% | 12,897 |
Class C | 2.15% | 2,015 |
$ 44,099 |
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $16,502 for the period.
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
Biotechnology
9. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 802,915 | 550,671 | $ 5,733,744 | $ 3,418,022 |
Shares redeemed | (581,094) | (629,006) | (4,036,446) | (3,853,963) |
Net increase (decrease) | 221,821 | (78,335) | $ 1,697,298 | $ (435,941) |
Class T | ||||
Shares sold | 587,840 | 621,575 | $ 4,097,337 | $ 3,773,646 |
Shares redeemed | (638,853) | (760,267) | (4,417,619) | (4,599,360) |
Net increase (decrease) | (51,013) | (138,692) | $ (320,282) | $ (825,714) |
Class B | ||||
Shares sold | 419,648 | 527,483 | $ 2,840,429 | $ 3,194,512 |
Shares redeemed | (706,101) | (831,184) | (4,753,466) | (4,925,475) |
Net increase (decrease) | (286,453) | (303,701) | $ (1,913,037) | $ (1,730,963) |
Class C | ||||
Shares sold | 744,203 | 395,212 | $ 5,179,930 | $ 2,374,238 |
Shares redeemed | (539,467) | (749,216) | (3,621,319) | (4,454,466) |
Net increase (decrease) | 204,736 | (354,004) | $ 1,558,611 | $ (2,080,228) |
Institutional Class | ||||
Shares sold | 94,904 | 56,540 | $ 686,802 | $ 351,953 |
Shares redeemed | (92,008) | (65,245) | (648,250) | (408,175) |
Net increase (decrease) | 2,896 | (8,705) | $ 38,552 | $ (56,222) |
Annual Report
Advisor Consumer Industries Fund - Class A, T, B, and C
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow. Returns reflect the conversion of Class B shares to Class A shares after a maximum of seven years.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of | |
Class A (incl. 5.75% sales charge) | -6.40% | 1.71% | 7.58% | |
Class T (incl. 3.50% sales charge) | -4.36% | 1.94% | 7.55% | |
Class B (incl. contingent deferred sales charge) B | -6.34% | 1.80% | 7.61% | |
Class C (incl. contingent deferred sales charge) C | -2.42% | 2.16% | 7.42% | |
A From September 3, 1996.
B Class B shares bear a 1.00% 12b-1 fee. The initial offering of Class B shares took place on March 3, 1997. Returns prior to March 3, 1997 are those of Class T and reflect a 0.50% 12b-1 fee. Had Class B shares' 12b-1 fee been reflected, returns prior to March 3, 1997 would have been lower. Class B shares' contingent deferred sales charges included in the past one year, past five years, and life of fund total return figures are 5%, 2%, and 0%, respectively.
C Class C shares bear a 1.00% 12b-1 fee. The initial offering of Class C shares took place on November 3, 1997. Returns between March 3, 1997 and November 3, 1997 are those of Class B shares and reflect Class B shares' 1.00% 12b-1 fee. Returns prior to March 3, 1997 are those of Class T and reflect a 0.50% 12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns prior to March 3, 1997 would have been lower. Class C shares' contingent deferred sales charges included in the past one year, past five years, and life of fund total return figures are 1%, 0%, and 0%, respectively.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Consumer Industries Fund - Class T on September 3, 1996, when the fund started, and the current 3.50% sales charge was paid. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Advisor Consumer Industries Fund
Management's Discussion of Fund Performance
Comments from John Roth, Portfolio Manager of Fidelity® Advisor Consumer Industries Fund through June 30, 2006
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
For the 12-month period ending July 31, 2006, the fund's Class A, Class T, Class B and Class C shares returned -0.69%, -0.89%, -1.45% and -1.45%, respectively (excluding sales charges), underperforming the Goldman Sachs® Consumer Industries Index, which fell 0.29%, and the S&P 500 index. A key theme in the fund - and a major driver of performance in previous periods - has been a shift in media and commerce spending toward the Internet, at the expense of traditional media and physical store locations. While that trend continued during the period and key elements of the theme such as Google aided results, other Internet stocks in the portfolio lost ground, including eBay, which was sold out of the fund by period end. Both eBay and Google were out-of-index positions. In the tobacco industry, underweighting Altria Group and avoiding Reynolds American hurt results, as the stocks advanced on court decisions favorable to the tobacco industry. The fund also missed a large part of the run-up in agricultural products firm Archer-Daniels-Midland, whose stock was buoyed by demand for ethanol and lower raw material costs. Retailer Target also was a notable detractor. Conversely, avoiding Home Depot aided results, as this index component declined. Out-of-index positions in Swiss food companies Nestle and Lindt & Spruengli also were strong contributors to performance during the period.
Note to shareholders: Effective July 1, 2006, Robert Lee and Martin Zinny became co-managers of the fund.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Advisor Consumer Industries Fund
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 983.20 | $ 6.88 |
HypotheticalA | $ 1,000.00 | $ 1,017.85 | $ 7.00 |
Class T | |||
Actual | $ 1,000.00 | $ 981.60 | $ 8.11 |
HypotheticalA | $ 1,000.00 | $ 1,016.61 | $ 8.25 |
Class B | |||
Actual | $ 1,000.00 | $ 979.50 | $ 10.55 |
HypotheticalA | $ 1,000.00 | $ 1,014.13 | $ 10.74 |
Class C | |||
Actual | $ 1,000.00 | $ 978.90 | $ 10.30 |
HypotheticalA | $ 1,000.00 | $ 1,014.38 | $ 10.49 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 984.20 | $ 5.66 |
HypotheticalA | $ 1,000.00 | $ 1,019.09 | $ 5.76 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.40% |
Class T | 1.65% |
Class B | 2.15% |
Class C | 2.10% |
Institutional Class | 1.15% |
Annual Report
Advisor Consumer Industries Fund
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
PepsiCo, Inc. | 5.4 | 3.7 |
Nestle SA sponsored ADR | 5.4 | 2.1 |
Procter & Gamble Co. | 5.1 | 6.7 |
Wal-Mart Stores, Inc. | 5.0 | 3.0 |
Federated Department Stores, Inc. | 5.0 | 1.1 |
Altria Group, Inc. | 4.9 | 0.0 |
The Coca-Cola Co. | 3.5 | 2.3 |
Unilever NV (NY Shares) | 3.2 | 0.0 |
CVS Corp. | 2.7 | 1.1 |
Walgreen Co. | 2.5 | 1.8 |
42.7 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Food Products | 13.0% | |
| Beverages | 12.9% | |
| Food & Staples Retailing | 12.7% | |
| Specialty Retail | 12.2% | |
| Multiline Retail | 10.6% | |
| All Others* | 38.6% | |
As of January 31, 2006 | |||
| Hotels, Restaurants & Leisure | 12.8% | |
| Specialty Retail | 11.2% | |
| Media | 10.4% | |
| Multiline Retail | 8.2% | |
| Beverages | 7.8% | |
| All Others* | 49.6% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Advisor Consumer Industries Fund
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 96.0% | |||
Shares | Value (Note 1) | ||
AUTOMOBILES - 0.6% | |||
Motorcycle Manufacturers - 0.6% | |||
Harley-Davidson, Inc. | 5,200 | $ 296,400 | |
BEVERAGES - 12.9% | |||
Brewers - 1.1% | |||
InBev SA | 5,700 | 299,245 | |
SABMiller PLC | 15,100 | 303,231 | |
602,476 | |||
Distillers & Vintners - 1.1% | |||
Diageo PLC sponsored ADR | 4,000 | 281,280 | |
Pernod Ricard SA | 1,400 | 291,491 | |
572,771 | |||
Soft Drinks - 10.7% | |||
Coca-Cola Enterprises, Inc. | 24,900 | 534,354 | |
Coca-Cola Hellenic Bottling Co. SA sponsored ADR | 8,900 | 285,957 | |
Hansen Natural Corp. (a) | 2,800 | 128,772 | |
PepsiCo, Inc. | 45,600 | 2,890,128 | |
The Coca-Cola Co. | 42,200 | 1,877,900 | |
5,717,111 | |||
TOTAL BEVERAGES | 6,892,358 | ||
DIVERSIFIED CONSUMER SERVICES - 1.0% | |||
Specialized Consumer Services - 1.0% | |||
Sothebys Class A (ltd. vtg.) (a) | 10,200 | 281,826 | |
Weight Watchers International, Inc. | 6,600 | 264,066 | |
545,892 | |||
DIVERSIFIED FINANCIAL SERVICES - 0.5% | |||
Specialized Finance - 0.5% | |||
Moody's Corp. | 5,000 | 274,400 | |
ELECTRICAL EQUIPMENT - 0.6% | |||
Electrical Components & Equipment - 0.6% | |||
Evergreen Solar, Inc. (a) | 21,600 | 203,688 | |
SolarWorld AG (d) | 2,500 | 136,645 | |
340,333 | |||
FOOD & STAPLES RETAILING - 12.7% | |||
Drug Retail - 5.2% | |||
CVS Corp. | 44,800 | 1,465,856 | |
Walgreen Co. | 28,600 | 1,337,908 | |
2,803,764 | |||
Food Distributors - 0.2% | |||
United Natural Foods, Inc. (a) | 4,200 | 126,588 | |
Food Retail - 2.3% | |||
Kroger Co. | 25,100 | 575,543 | |
Safeway, Inc. | 22,300 | 626,184 | |
1,201,727 | |||
Shares | Value (Note 1) | ||
Hypermarkets & Super Centers - 5.0% | |||
Wal-Mart Stores, Inc. | 60,580 | $ 2,695,810 | |
TOTAL FOOD & STAPLES RETAILING | 6,827,889 | ||
FOOD PRODUCTS - 13.0% | |||
Agricultural Products - 0.9% | |||
Archer-Daniels-Midland Co. | 11,300 | 497,200 | |
Packaged Foods & Meats - 12.1% | |||
Cadbury Schweppes PLC sponsored ADR | 7,000 | 274,820 | |
Groupe Danone | 2,100 | 277,632 | |
Kellogg Co. | 14,100 | 679,197 | |
Koninklijke Numico NV | 6,000 | 287,864 | |
Lindt & Spruengli AG (participation certificate) | 110 | 221,314 | |
Nestle SA sponsored ADR | 35,150 | 2,868,240 | |
Tyson Foods, Inc. Class A | 9,200 | 130,180 | |
Unilever NV (NY Shares) | 72,600 | 1,719,168 | |
6,458,415 | |||
TOTAL FOOD PRODUCTS | 6,955,615 | ||
HOTELS, RESTAURANTS & LEISURE - 6.4% | |||
Casinos & Gaming - 1.9% | |||
Boyd Gaming Corp. | 2,700 | 90,558 | |
International Game Technology | 8,000 | 309,280 | |
Penn National Gaming, Inc. (a) | 7,000 | 231,490 | |
WMS Industries, Inc. (a) | 5,000 | 132,650 | |
Wynn Resorts Ltd. (a) | 3,700 | 236,837 | |
1,000,815 | |||
Hotels, Resorts & Cruise Lines - 1.2% | |||
Ctrip.com International Ltd. sponsored ADR | 2,600 | 131,599 | |
Starwood Hotels & Resorts Worldwide, Inc. | 10,100 | 531,058 | |
662,657 | |||
Leisure Facilities - 0.3% | |||
Vail Resorts, Inc. (a) | 4,700 | 162,479 | |
Restaurants - 3.0% | |||
Buffalo Wild Wings, Inc. (a) | 14,700 | 473,781 | |
Domino's Pizza, Inc. | 5,600 | 127,344 | |
Panera Bread Co. Class A (a) | 4,000 | 209,240 | |
Starbucks Corp. (a) | 14,900 | 510,474 | |
Wendy's International, Inc. | 4,700 | 282,752 | |
1,603,591 | |||
TOTAL HOTELS, RESTAURANTS & LEISURE | 3,429,542 | ||
HOUSEHOLD PRODUCTS - 7.6% | |||
Household Products - 7.6% | |||
Colgate-Palmolive Co. | 22,400 | 1,328,768 | |
Procter & Gamble Co. (d) | 48,697 | 2,736,771 | |
4,065,539 | |||
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
INTERNET & CATALOG RETAIL - 1.2% | |||
Catalog Retail - 1.2% | |||
Coldwater Creek, Inc. (a) | 33,000 | $ 657,690 | |
INTERNET SOFTWARE & SERVICES - 1.3% | |||
Internet Software & Services - 1.3% | |||
Google, Inc. Class A (sub. vtg.) (a) | 1,800 | 695,880 | |
MEDIA - 6.5% | |||
Broadcasting & Cable TV - 0.3% | |||
Grupo Televisa SA de CV (CPO) sponsored ADR | 7,000 | 129,640 | |
Movies & Entertainment - 4.6% | |||
News Corp. Class A | 56,984 | 1,096,372 | |
The Walt Disney Co. | 36,600 | 1,086,654 | |
Viacom, Inc. Class B (non-vtg.) (a) | 7,600 | 264,860 | |
2,447,886 | |||
Publishing - 1.6% | |||
McGraw-Hill Companies, Inc. | 10,900 | 613,670 | |
R.H. Donnelley Corp. | 5,000 | 261,050 | |
874,720 | |||
TOTAL MEDIA | 3,452,246 | ||
MULTILINE RETAIL - 10.6% | |||
Department Stores - 8.9% | |||
Federated Department Stores, Inc. | 76,400 | 2,682,404 | |
JCPenney Co., Inc. | 14,100 | 887,736 | |
Nordstrom, Inc. | 18,800 | 644,840 | |
Saks, Inc. | 33,800 | 545,532 | |
4,760,512 | |||
General Merchandise Stores - 1.7% | |||
Target Corp. | 19,800 | 909,216 | |
TOTAL MULTILINE RETAIL | 5,669,728 | ||
PERSONAL PRODUCTS - 1.4% | |||
Personal Products - 1.4% | |||
Avon Products, Inc. | 17,700 | 513,123 | |
Herbalife Ltd. (a) | 6,900 | 246,468 | |
759,591 | |||
SPECIALTY RETAIL - 12.2% | |||
Apparel Retail - 7.1% | |||
Abercrombie & Fitch Co. Class A | 2,500 | 132,400 | |
Aeropostale, Inc. (a) | 6,900 | 191,199 | |
American Eagle Outfitters, Inc. | 6,500 | 213,590 | |
Shares | Value (Note 1) | ||
AnnTaylor Stores Corp. (a) | 3,200 | $ 131,392 | |
Casual Male Retail Group, Inc. (a) | 15,200 | 169,480 | |
Charlotte Russe Holding, Inc. (a) | 10,600 | 277,508 | |
Chico's FAS, Inc. (a) | 5,100 | 115,515 | |
Gymboree Corp. (a) | 10,700 | 358,664 | |
Limited Brands, Inc. | 16,100 | 405,076 | |
The Children's Place Retail Stores, Inc. (a) | 4,600 | 256,772 | |
TJX Companies, Inc. | 18,200 | 443,534 | |
Tween Brands, Inc. (a) | 21,400 | 796,508 | |
Urban Outfitters, Inc. (a) | 7,800 | 113,802 | |
Zumiez, Inc. (a) | 7,200 | 215,496 | |
3,820,936 | |||
Automotive Retail - 0.7% | |||
AutoZone, Inc. (a) | 3,100 | 272,397 | |
O'Reilly Automotive, Inc. (a) | 3,500 | 99,225 | |
371,622 | |||
Computer & Electronics Retail - 1.9% | |||
Best Buy Co., Inc. | 17,750 | 804,785 | |
Gamestop Corp. Class B (a) | 6,300 | 236,880 | |
1,041,665 | |||
Specialty Stores - 2.5% | |||
Office Depot, Inc. (a) | 15,400 | 555,170 | |
OfficeMax, Inc. | 6,800 | 279,548 | |
Staples, Inc. | 16,750 | 362,135 | |
Tiffany & Co., Inc. | 4,100 | 129,519 | |
1,326,372 | |||
TOTAL SPECIALTY RETAIL | 6,560,595 | ||
TEXTILES, APPAREL & LUXURY GOODS - 1.7% | |||
Apparel, Accessories & Luxury Goods - 1.4% | |||
Coach, Inc. (a) | 11,000 | 315,810 | |
Polo Ralph Lauren Corp. Class A | 7,400 | 422,096 | |
737,906 | |||
Footwear - 0.3% | |||
Deckers Outdoor Corp. (a) | 4,200 | 179,088 | |
TOTAL TEXTILES, APPAREL & LUXURY GOODS | 916,994 | ||
TOBACCO - 5.8% | |||
Tobacco - 5.8% | |||
Altria Group, Inc. | 33,000 | 2,639,010 | |
British American Tobacco PLC sponsored ADR | 5,400 | 290,574 | |
Loews Corp. - Carolina Group | 2,600 | 149,188 | |
3,078,772 | |||
TOTAL COMMON STOCKS (Cost $47,112,794) | 51,419,464 | ||
Money Market Funds - 7.0% | |||
Shares | Value (Note 1) | ||
Fidelity Cash Central Fund, 5.3% (b) | 2,070,019 | $ 2,070,019 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 1,692,926 | 1,692,926 | |
TOTAL MONEY MARKET FUNDS (Cost $3,762,945) | 3,762,945 | ||
TOTAL INVESTMENT PORTFOLIO - 103.0% (Cost $50,875,739) | 55,182,409 | ||
NET OTHER ASSETS - (3.0)% | (1,587,744) | ||
NET ASSETS - 100% | $ 53,594,665 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 40,835 |
Fidelity Securities Lending Cash Central Fund | 18,821 |
Total | $ 59,656 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 85.0% |
Switzerland | 5.8% |
Netherlands | 3.7% |
United Kingdom | 2.2% |
France | 1.1% |
Others (individually less than 1%) | 2.2% |
100.0% |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Consumer Industries Fund
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $1,637,199) - See accompanying schedule: Unaffiliated issuers (cost $47,112,794) | $ 51,419,464 | |
Affiliated Central Funds (cost $3,762,945) | 3,762,945 | |
Total Investments (cost $50,875,739) | $ 55,182,409 | |
Receivable for investments sold | 219,372 | |
Receivable for fund shares sold | 87,384 | |
Dividends receivable | 33,112 | |
Interest receivable | 4,812 | |
Prepaid expenses | 95 | |
Other receivables | 779 | |
Total assets | 55,527,963 | |
Liabilities | ||
Payable for investments purchased | $ 26,891 | |
Payable for fund shares redeemed | 107,420 | |
Accrued management fee | 26,971 | |
Distribution fees payable | 27,275 | |
Other affiliated payables | 20,213 | |
Other payables and accrued expenses | 31,602 | |
Collateral on securities loaned, at value | 1,692,926 | |
Total liabilities | 1,933,298 | |
Net Assets | $ 53,594,665 | |
Net Assets consist of: | ||
Paid in capital | $ 43,984,008 | |
Accumulated net investment loss | (20) | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 5,303,904 | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | 4,306,773 | |
Net Assets | $ 53,594,665 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price Class A: | $ 16.39 | |
Maximum offering price per share (100/94.25 of $16.39) | $ 17.39 | |
Class T: | $ 16.03 | |
Maximum offering price per share (100/96.50 of $16.03) | $ 16.61 | |
Class B: | $ 15.26 | |
Class C: | $ 15.28 | |
Institutional Class: | $ 16.82 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 627,865 | |
Interest | 149 | |
Income from affiliated Central Funds | 59,656 | |
Total income | 687,670 | |
Expenses | ||
Management fee | $ 336,251 | |
Transfer agent fees | 234,320 | |
Distribution fees | 364,316 | |
Accounting and security lending fees | 24,850 | |
Independent trustees' compensation | 243 | |
Custodian fees and expenses | 6,415 | |
Registration fees | 49,473 | |
Audit | 41,259 | |
Legal | 792 | |
Miscellaneous | 1,649 | |
Total expenses before reductions | 1,059,568 | |
Expense reductions | (23,286) | 1,036,282 |
Net investment income (loss) | (348,612) | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 6,033,365 | |
Foreign currency transactions | (680) | |
Total net realized gain (loss) | 6,032,685 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (6,266,289) | |
Assets and liabilities in foreign currencies | 131 | |
Total change in net unrealized appreciation (depreciation) | (6,266,158) | |
Net gain (loss) | (233,473) | |
Net increase (decrease) in net assets resulting from operations | $ (582,085) | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ (348,612) | $ (477,730) |
Net realized gain (loss) | 6,032,685 | 171,725 |
Change in net unrealized appreciation (depreciation) | (6,266,158) | 9,733,441 |
Net increase (decrease) in net assets resulting from operations | (582,085) | 9,427,436 |
Distributions to shareholders from net realized gain | (441,481) | (1,957,955) |
Share transactions - net increase (decrease) | (8,793,822) | 3,323,070 |
Redemption fees | 4,458 | 3,279 |
Total increase (decrease) in net assets | (9,812,930) | 10,795,830 |
Net Assets | ||
Beginning of period | 63,407,595 | 52,611,765 |
End of period (including accumulated net investment loss of $20 and accumulated net investment loss of $28, respectively) | $ 53,594,665 | $ 63,407,595 |
See accompanying notes which are an integral part of the financial statements.
Consumer Industries
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 16.62 | $ 14.51 | $ 13.71 | $ 12.71 | $ 15.20 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.04) | (.07) | (.07) | (.04) | (.05) |
Net realized and unrealized gain (loss) | (.07) | 2.71 | .87 | 1.04 | (2.09) |
Total from investment operations | (.11) | 2.64 | .80 | 1.00 | (2.14) |
Distributions from net realized gain | (.12) | (.53) | - | - | (.35) |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 16.39 | $ 16.62 | $ 14.51 | $ 13.71 | $ 12.71 |
Total Return A, B | (.69)% | 18.85% | 5.84% | 7.87% | (14.30)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.42% | 1.47% | 1.55% | 1.70% | 1.69% |
Expenses net of fee waivers, if any | 1.40% | 1.44% | 1.50% | 1.53% | 1.50% |
Expenses net of all reductions | 1.39% | 1.42% | 1.45% | 1.48% | 1.47% |
Net investment income (loss) | (.23)% | (.45)% | (.50)% | (.33)% | (.36)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 16,935 | $ 17,887 | $ 11,856 | $ 9,101 | $ 7,209 |
Portfolio turnover rate | 81% | 66% | 152% | 88% | 136% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 16.29 | $ 14.27 | $ 13.51 | $ 12.57 | $ 15.06 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.07) | (.11) | (.11) | (.07) | (.09) |
Net realized and unrealized gain (loss) | (.07) | 2.66 | .87 | 1.01 | (2.05) |
Total from investment operations | (.14) | 2.55 | .76 | .94 | (2.14) |
Distributions from net realized gain | (.12) | (.53) | - | - | (.35) |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 16.03 | $ 16.29 | $ 14.27 | $ 13.51 | $ 12.57 |
Total Return A, B | (.89)% | 18.52% | 5.63% | 7.48% | (14.44)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.69% | 1.75% | 1.81% | 1.87% | 1.89% |
Expenses net of fee waivers, if any | 1.65% | 1.69% | 1.75% | 1.78% | 1.75% |
Expenses net of all reductions | 1.62% | 1.67% | 1.70% | 1.73% | 1.72% |
Net investment income (loss) | (.46)% | (.70)% | (.74)% | (.58)% | (.61)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 14,267 | $ 16,782 | $ 15,555 | $ 13,693 | $ 12,132 |
Portfolio turnover rate | 81% | 66% | 152% | 88% | 136% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 15.60 | $ 13.75 | $ 13.08 | $ 12.22 | $ 14.73 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.15) | (.17) | (.18) | (.13) | (.15) |
Net realized and unrealized gain (loss) | (.07) | 2.55 | .85 | .99 | (2.01) |
Total from investment operations | (.22) | 2.38 | .67 | .86 | (2.16) |
Distributions from net realized gain | (.12) | (.53) | - | - | (.35) |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 15.26 | $ 15.60 | $ 13.75 | $ 13.08 | $ 12.22 |
Total Return A, B | (1.45)% | 17.97% | 5.12% | 7.04% | (14.91)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.19% | 2.24% | 2.29% | 2.37% | 2.39% |
Expenses net of fee waivers, if any | 2.15% | 2.19% | 2.25% | 2.25% | 2.25% |
Expenses net of all reductions | 2.14% | 2.16% | 2.20% | 2.19% | 2.22% |
Net investment income (loss) | (.98)% | (1.20)% | (1.25)% | (1.05)% | (1.11)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 14,088 | $ 18,862 | $ 17,302 | $ 15,944 | $ 13,807 |
Portfolio turnover rate | 81% | 66% | 152% | 88% | 136% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 15.62 | $ 13.77 | $ 13.10 | $ 12.24 | $ 14.75 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.15) | (.17) | (.18) | (.13) | (.15) |
Net realized and unrealized gain (loss) | (.07) | 2.55 | .85 | .99 | (2.01) |
Total from investment operations | (.22) | 2.38 | .67 | .86 | (2.16) |
Distributions from net realized gain | (.12) | (.53) | - | - | (.35) |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 15.28 | $ 15.62 | $ 13.77 | $ 13.10 | $ 12.24 |
Total Return A, B | (1.45)% | 17.94% | 5.11% | 7.03% | (14.89)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.12% | 2.17% | 2.24% | 2.33% | 2.35% |
Expenses net of fee waivers, if any | 2.12% | 2.17% | 2.24% | 2.25% | 2.25% |
Expenses net of all reductions | 2.12% | 2.14% | 2.19% | 2.19% | 2.22% |
Net investment income (loss) | (.95)% | (1.18)% | (1.24)% | (1.05)% | (1.11)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 7,160 | $ 8,505 | $ 6,992 | $ 6,759 | $ 5,391 |
Portfolio turnover rate | 81% | 66% | 152% | 88% | 136% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Consumer Industries
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 17.01 | $ 14.81 | $ 13.95 | $ 12.91 | $ 15.38 |
Income from Investment Operations | |||||
Net investment income (loss) B | - D | (.03) | (.04) | (.01) | (.02) |
Net realized and unrealized gain (loss) | (.07) | 2.76 | .90 | 1.05 | (2.10) |
Total from investment operations | (.07) | 2.73 | .86 | 1.04 | (2.12) |
Distributions from net realized gain | (.12) | (.53) | - | - | (.35) |
Redemption fees added to paid in capital B | - D | - D | - D | - D | - D |
Net asset value, end of period | $ 16.82 | $ 17.01 | $ 14.81 | $ 13.95 | $ 12.91 |
Total Return A | (.44)% | 19.08% | 6.16% | 8.06% | (14.00)% |
Ratios to Average Net Assets C | |||||
Expenses before reductions | 1.18% | 1.26% | 1.34% | 1.49% | 1.39% |
Expenses net of fee waivers, if any | 1.15% | 1.20% | 1.25% | 1.25% | 1.25% |
Expenses net of all reductions | 1.14% | 1.17% | 1.20% | 1.19% | 1.22% |
Net investment income (loss) | .02% | (.21)% | (.25)% | (.05)% | (.11)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 1,144 | $ 1,371 | $ 907 | $ 766 | $ 1,215 |
Portfolio turnover rate | 81% | 66% | 152% | 88% | 136% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. D Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Consumer Industries Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, deferred trustees compensation, net operating losses, and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 5,688,215 |
Unrealized depreciation | (1,420,360) |
Net unrealized appreciation (depreciation) | 4,267,855 |
Undistributed long-term capital gain | 4,942,695 |
Cost for federal income tax purposes | $ 50,914,554 |
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Long-term Capital Gains | $ 441,481 | $ 1,957,955 |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $47,204,450 and $57,845,658, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR.
Consumer Industries
4. Fees and Other Transactions with Affiliates - continued
Management Fee - continued
The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 46,429 | $ 329 |
Class T | .25% | .25% | 76,362 | - |
Class B | .75% | .25% | 165,095 | 123,840 |
Class C | .75% | .25% | 76,430 | 12,697 |
$ 364,316 | $ 136,866 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 24,605 |
Class T | 5,264 |
Class B* | 43,830 |
Class C* | 727 |
$ 74,426 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 72,194 | .39 |
Class T | 62,799 | .41 |
Class B | 67,760 | .41 |
Class C | 26,504 | .35 |
Institutional Class | 5,063 | .40 |
$ 234,320 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $583 for the period.
Annual Report
Notes to Financial Statements - continued
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $173 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $18,821.
7. Expense Reductions.
FMR voluntarily agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
The following classes were in reimbursement during the period:
Expense | Reimbursement | |
Class A | 1.40% | $ 2,755 |
Class T | 1.65% | 5,753 |
Class B | 2.15% | 6,141 |
Institutional Class | 1.15% | 394 |
$ 15,043 |
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $5,064 for the period. In addition, through arrangements with the each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's transfer agent expense as noted in the table below.
Transfer Agent | |
Class T | $ 3,179 |
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
Consumer Industries
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2006 | 2005 |
From net realized gain | ||
Class A | $ 129,938 | $ 428,722 |
Class T | 112,178 | 574,417 |
Class B | 130,928 | 656,667 |
Class C | 59,730 | 265,179 |
Institutional Class | 8,707 | 32,970 |
Total | $ 441,481 | $ 1,957,955 |
10. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 426,479 | 482,465 | $ 7,019,654 | $ 7,543,570 |
Reinvestment of distributions | 7,092 | 26,992 | 116,631 | 380,585 |
Shares redeemed | (476,405) | (250,204) | (7,879,209) | (3,816,608) |
Net increase (decrease) | (42,834) | 259,253 | $ (742,924) | $ 4,107,547 |
Class T | ||||
Shares sold | 183,824 | 253,353 | $ 2,956,227 | $ 3,867,037 |
Reinvestment of distributions | 6,480 | 38,833 | 104,320 | 538,224 |
Shares redeemed | (330,058) | (352,192) | (5,310,774) | (5,340,776) |
Net increase (decrease) | (139,754) | (60,006) | $ (2,250,227) | $ (935,515) |
Class B | ||||
Shares sold | 124,427 | 244,951 | $ 1,901,339 | $ 3,583,578 |
Reinvestment of distributions | 7,467 | 43,290 | 114,882 | 576,619 |
Shares redeemed | (417,847) | (337,303) | (6,443,082) | (4,889,935) |
Net increase (decrease) | (285,953) | (49,062) | $ (4,426,861) | $ (729,738) |
Class C | ||||
Shares sold | 103,187 | 159,223 | $ 1,601,293 | $ 2,344,716 |
Reinvestment of distributions | 3,123 | 16,994 | 48,106 | 226,706 |
Shares redeemed | (182,363) | (139,563) | (2,814,524) | (2,002,889) |
Net increase (decrease) | (76,053) | 36,654 | $ (1,165,125) | $ 568,533 |
Institutional Class | ||||
Shares sold | 14,460 | 26,159 | $ 246,044 | $ 423,819 |
Reinvestment of distributions | 433 | 1,868 | 7,305 | 26,919 |
Shares redeemed | (27,416) | (8,711) | (462,034) | (138,495) |
Net increase (decrease) | (12,523) | 19,316 | $ (208,685) | $ 312,243 |
Annual Report
Advisor Cyclical Industries Fund - Class A, T, B, and C
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow. Returns reflect the conversion of Class B shares to Class A shares after a maximum of seven years.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of |
Class A (incl. 5.75% sales charge) | 2.17% | 8.86% | 11.03% |
Class T (incl. 3.50% sales charge) | 4.35% | 9.10% | 11.04% |
Class B (incl. contingent deferred sales charge) B | 2.54% | 9.03% | 11.09% |
Class C (incl. contingent deferred sales charge) C | 6.59% | 9.34% | 10.89% |
A From September 3, 1996.
B Class B shares bear a 1.00% 12b-1 fee. The initial offering of Class B shares took place on March 3, 1997. Returns prior to March 3, 1997 are those of Class T and reflect a 0.50% 12b-1 fee. Had Class B shares' 12b-1 fee been reflected, returns prior to March 3, 1997 would have been lower. Class B shares contingent deferred sales charges included in the past one year, past five years, and life of fund total return figures are 5%, 2%, and 0%, respectively.
C Class C shares bear a 1.00% 12b-1 fee. The initial offering of Class C shares took place on November 3, 1997. Returns between March 3, 1997 and November 3, 1997 are those of Class B shares and reflect Class B shares' 1.00% 12b-1 fee. Returns prior to March 3, 1997 are those of Class T and reflect a 0.50% 12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns prior to March 3, 1997 would have been lower. Class C shares' contingent deferred sales charges included in the past one year, past five years, and life of fund total return figures are 1%, 0%, and 0%, respectively.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Cyclical Industries Fund - Class T on September 3, 1996, when the fund started, and the current 3.50% sales charge was paid. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Advisor Cyclical Industries Fund
Management's Discussion of Fund Performance
Comments from Christopher Bartel, Portfolio Manager of Fidelity® Advisor Cyclical Industries Fund
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
During the past year, the fund's Class A, Class T, Class B and Class C shares returned 8.40%, 8.13%, 7.54% and 7.59%, respectively (excluding sales charges), topping the 5.30% return of the Goldman Sachs® Cyclical Industries Index, as well as the S&P 500. A significant overweighting in the construction and engineering segment benefited performance the most versus the sector index, further aided by solid stock picking in that industry. Also helping were timely picks and an overweighting in the construction and farm machinery group. Fluor was the top contributor, riding brisk demand for drilling rigs, refineries and the like. I trimmed the position to lock in profits. Commercial electrical products distributor WESCO International boosted performance as well, along with mining equipment maker Joy Global, which I reduced for valuation reasons. Two other contributors, Allegheny Technologies and Oregon Steel Mills, were part of the strong steel group. On the flip side, unfavorable picks in the auto parts and equipment, aerospace and defense, and homebuilding groups limited the fund's gains. Auto parts supplier Delphi - which I sold during the period - hurt performance, filing for bankruptcy protection in the fall of 2005. Homebuilders KB Home and Ryland Group also held back our results, as did an out-of-index position in EADS, the parent company of European aircraft maker Airbus.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Advisor Cyclical Industries Fund
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 984.90 | $ 6.05 |
HypotheticalA | $ 1,000.00 | $ 1,018.70 | $ 6.16 |
Class T | |||
Actual | $ 1,000.00 | $ 983.80 | $ 7.23 |
HypotheticalA | $ 1,000.00 | $ 1,017.50 | $ 7.35 |
Class B | |||
Actual | $ 1,000.00 | $ 980.90 | $ 9.87 |
HypotheticalA | $ 1,000.00 | $ 1,014.83 | $ 10.04 |
Class C | |||
Actual | $ 1,000.00 | $ 981.00 | $ 9.63 |
HypotheticalA | $ 1,000.00 | $ 1,015.08 | $ 9.79 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 986.10 | $ 4.38 |
HypotheticalA | $ 1,000.00 | $ 1,020.38 | $ 4.46 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.23% |
Class T | 1.47% |
Class B | 2.01% |
Class C | 1.96% |
Institutional Class | .89% |
Annual Report
Advisor Cyclical Industries Fund
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
General Electric Co. | 8.1 | 7.5 |
United Technologies Corp. | 4.2 | 3.0 |
Honeywell International, Inc. | 3.2 | 2.5 |
3M Co. | 3.1 | 2.9 |
Tyco International Ltd. | 3.0 | 3.1 |
Illinois Tool Works, Inc. | 2.4 | 0.0 |
E.I. du Pont de Nemours & Co. | 2.2 | 0.7 |
Caterpillar, Inc. | 2.2 | 2.2 |
Dow Chemical Co. | 1.9 | 1.2 |
Fluor Corp. | 1.9 | 4.6 |
32.2 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Aerospace & Defense | 16.4% | |
| Chemicals | 15.6% | |
| Industrial Conglomerates | 15.5% | |
| Machinery | 11.4% | |
| Road & Rail | 6.0% | |
| All Others* | 35.1% | |
As of January 31, 2006 | |||
| Aerospace & Defense | 15.9% | |
| Industrial Conglomerates | 14.5% | |
| Chemicals | 13.2% | |
| Construction & Engineering | 9.5% | |
| Machinery | 9.2% | |
| All Others* | 37.7% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Advisor Cyclical Industries Fund
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 100.0% | |||
Shares | Value (Note 1) | ||
AEROSPACE & DEFENSE - 16.4% | |||
Aerospace & Defense - 16.4% | |||
Alliant Techsystems, Inc. (a) | 3,200 | $ 256,448 | |
BAE Systems PLC sponsored ADR | 34,200 | 930,240 | |
DRS Technologies, Inc. | 5,300 | 245,337 | |
EADS NV | 133,400 | 3,842,486 | |
EDO Corp. | 21,600 | 484,704 | |
General Dynamics Corp. | 15,600 | 1,045,512 | |
Goodrich Corp. | 21,900 | 884,103 | |
Hexcel Corp. (a) | 248,300 | 3,568,071 | |
Honeywell International, Inc. | 205,400 | 7,948,980 | |
L-3 Communications Holdings, Inc. | 16,100 | 1,185,765 | |
Lockheed Martin Corp. | 32,000 | 2,549,760 | |
Meggitt PLC | 68,000 | 376,954 | |
Precision Castparts Corp. | 38,000 | 2,266,700 | |
Raytheon Co. | 70,900 | 3,195,463 | |
Rockwell Collins, Inc. | 14,940 | 797,348 | |
Rolls-Royce Group PLC | 47,423 | 390,454 | |
The Boeing Co. | 1,100 | 85,162 | |
United Technologies Corp. | 169,000 | 10,510,110 | |
40,563,597 | |||
AIR FREIGHT & LOGISTICS - 4.7% | |||
Air Freight & Logistics - 4.7% | |||
C.H. Robinson Worldwide, Inc. | 29,500 | 1,350,510 | |
Expeditors International of Washington, Inc. | 28,500 | 1,295,895 | |
FedEx Corp. | 21,200 | 2,219,852 | |
Forward Air Corp. | 10,120 | 324,751 | |
Hub Group, Inc. Class A | 47,272 | 1,067,402 | |
United Parcel Service, Inc. Class B | 52,700 | 3,631,557 | |
UTI Worldwide, Inc. | 71,760 | 1,672,008 | |
11,561,975 | |||
AIRLINES - 2.4% | |||
Airlines - 2.4% | |||
AirTran Holdings, Inc. (a) | 139,900 | 1,754,346 | |
JetBlue Airways Corp. (a) | 100 | 1,069 | |
Midwest Air Group, Inc. (a)(d) | 36,600 | 207,888 | |
Republic Airways Holdings, Inc. (a) | 32,488 | 539,951 | |
Ryanair Holdings PLC sponsored ADR (a) | 5,700 | 322,107 | |
Southwest Airlines Co. | 107,100 | 1,926,729 | |
UAL Corp. (a)(d) | 42,379 | 1,107,787 | |
5,859,877 | |||
AUTO COMPONENTS - 1.6% | |||
Auto Parts & Equipment - 1.4% | |||
Amerigon, Inc. (a) | 134,758 | 974,300 | |
BorgWarner, Inc. | 12,400 | 744,000 | |
Johnson Controls, Inc. | 22,500 | 1,727,100 | |
3,445,400 | |||
Shares | Value (Note 1) | ||
Tires & Rubber - 0.2% | |||
Continental AG | 4,400 | $ 449,627 | |
TOTAL AUTO COMPONENTS | 3,895,027 | ||
AUTOMOBILES - 2.1% | |||
Automobile Manufacturers - 2.1% | |||
Bayerische Motoren Werke AG (BMW) | 39,400 | 2,033,738 | |
General Motors Corp. (d) | 49,700 | 1,601,831 | |
Renault SA | 11,200 | 1,223,906 | |
Toyota Motor Corp. sponsored ADR | 3,500 | 368,270 | |
5,227,745 | |||
BUILDING PRODUCTS - 1.4% | |||
Building Products - 1.4% | |||
American Standard Companies, Inc. | 39,300 | 1,518,159 | |
Goodman Global, Inc. | 2,000 | 24,600 | |
Masco Corp. | 71,100 | 1,900,503 | |
3,443,262 | |||
CHEMICALS - 15.6% | |||
Commodity Chemicals - 2.4% | |||
Arkema (a) | 31,900 | 1,236,278 | |
Celanese Corp. Class A | 83,700 | 1,607,877 | |
Georgia Gulf Corp. | 29,900 | 761,254 | |
Lyondell Chemical Co. | 46,800 | 1,042,236 | |
NOVA Chemicals Corp. | 15,600 | 460,170 | |
Pioneer Companies, Inc. (a) | 13,600 | 357,136 | |
Westlake Chemical Corp. | 22,500 | 616,500 | |
6,081,451 | |||
Diversified Chemicals - 5.3% | |||
Ashland, Inc. | 17,300 | 1,150,623 | |
Dow Chemical Co. | 136,700 | 4,727,086 | |
E.I. du Pont de Nemours & Co. | 136,600 | 5,417,556 | |
FMC Corp. | 30,600 | 1,887,714 | |
13,182,979 | |||
Fertilizers & Agricultural Chemicals - 2.5% | |||
Agrium, Inc. | 29,700 | 719,403 | |
Monsanto Co. | 45,600 | 1,960,344 | |
Mosaic Co. | 103,851 | 1,629,422 | |
Potash Corp. of Saskatchewan, Inc. | 17,300 | 1,634,850 | |
The Scotts Miracle-Gro Co. Class A | 4,800 | 188,304 | |
6,132,323 | |||
Industrial Gases - 2.3% | |||
Air Products & Chemicals, Inc. | 21,400 | 1,368,102 | |
Airgas, Inc. | 10,200 | 369,750 | |
Linde AG | 15,170 | 1,281,815 | |
Praxair, Inc. | 48,700 | 2,670,708 | |
5,690,375 | |||
Specialty Chemicals - 3.1% | |||
Albemarle Corp. | 20,900 | 1,053,778 | |
Chemtura Corp. | 99,094 | 853,199 | |
Cytec Industries, Inc. | 61,300 | 3,274,033 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
CHEMICALS - CONTINUED | |||
Specialty Chemicals - continued | |||
Ecolab, Inc. | 33,700 | $ 1,451,459 | |
Ferro Corp. | 27,700 | 447,355 | |
Lubrizol Corp. | 200 | 8,554 | |
Minerals Technologies, Inc. | 200 | 10,124 | |
Rohm & Haas Co. | 10,600 | 488,872 | |
7,587,374 | |||
TOTAL CHEMICALS | 38,674,502 | ||
COMMERCIAL SERVICES & SUPPLIES - 2.2% | |||
Diversified Commercial & Professional Services - 0.2% | |||
The Brink's Co. | 8,400 | 462,756 | |
Environmental & Facility Services - 1.4% | |||
Allied Waste Industries, Inc. | 87,900 | 893,064 | |
Republic Services, Inc. | 10,000 | 401,600 | |
Waste Connections, Inc. (a) | 14,550 | 543,879 | |
Waste Management, Inc. | 50,600 | 1,739,628 | |
3,578,171 | |||
Human Resource & Employment Services - 0.6% | |||
CDI Corp. | 38,600 | 754,630 | |
Robert Half International, Inc. | 21,900 | 708,684 | |
1,463,314 | |||
TOTAL COMMERCIAL SERVICES & SUPPLIES | 5,504,241 | ||
COMMUNICATIONS EQUIPMENT - 0.6% | |||
Communications Equipment - 0.6% | |||
Dycom Industries, Inc. (a) | 16,600 | 298,634 | |
Harris Corp. | 28,000 | 1,275,400 | |
1,574,034 | |||
CONSTRUCTION & ENGINEERING - 5.7% | |||
Construction & Engineering - 5.7% | |||
Chicago Bridge & Iron Co. NV (NY Shares) | 95,500 | 2,316,830 | |
Comfort Systems USA, Inc. | 42,200 | 581,094 | |
Fluor Corp. | 53,500 | 4,698,905 | |
Foster Wheeler Ltd. (a) | 9,900 | 377,586 | |
Infrasource Services, Inc. (a) | 64,200 | 1,192,836 | |
Jacobs Engineering Group, Inc. (a) | 12,000 | 995,880 | |
Shaw Group, Inc. (a) | 125,900 | 2,604,871 | |
SNC-Lavalin Group, Inc. | 53,300 | 1,342,862 | |
14,110,864 | |||
CONSTRUCTION MATERIALS - 0.5% | |||
Construction Materials - 0.5% | |||
Martin Marietta Materials, Inc. | 3,200 | 257,664 | |
Vulcan Materials Co. | 15,400 | 1,031,338 | |
1,289,002 | |||
Shares | Value (Note 1) | ||
CONTAINERS & PACKAGING - 0.2% | |||
Metal & Glass Containers - 0.2% | |||
Crown Holdings, Inc. (a) | 16,200 | $ 269,892 | |
Owens-Illinois, Inc. | 11,000 | 166,430 | |
436,322 | |||
ELECTRICAL EQUIPMENT - 4.2% | |||
Electrical Components & Equipment - 3.3% | |||
AMETEK, Inc. | 5,900 | 250,278 | |
Cooper Industries Ltd. Class A | 13,200 | 1,137,312 | |
Emerson Electric Co. | 54,500 | 4,301,140 | |
Hubbell, Inc. Class B | 9,700 | 455,900 | |
Rockwell Automation, Inc. | 22,900 | 1,419,342 | |
Roper Industries, Inc. | 7,300 | 329,960 | |
Thomas & Betts Corp. (a) | 4,900 | 231,917 | |
8,125,849 | |||
Heavy Electrical Equipment - 0.9% | |||
ABB Ltd. sponsored ADR | 94,100 | 1,216,713 | |
Global Power Equipment Group, Inc. (a)(d) | 135,300 | 358,545 | |
Vestas Wind Systems AS (a) | 26,600 | 717,184 | |
2,292,442 | |||
TOTAL ELECTRICAL EQUIPMENT | 10,418,291 | ||
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.1% | |||
Electronic Equipment & Instruments - 0.1% | |||
Cogent, Inc. (a) | 8,600 | 121,690 | |
CPI International, Inc. | 1,000 | 13,980 | |
FARO Technologies, Inc. (a) | 12,200 | 196,786 | |
332,456 | |||
FOOD PRODUCTS - 0.2% | |||
Packaged Foods & Meats - 0.2% | |||
Imperial Sugar Co. | 16,000 | 383,040 | |
HOUSEHOLD DURABLES - 1.8% | |||
Homebuilding - 1.8% | |||
D.R. Horton, Inc. | 40,400 | 865,772 | |
KB Home | 32,300 | 1,373,396 | |
Pulte Homes, Inc. | 23,000 | 655,500 | |
Ryland Group, Inc. | 28,300 | 1,156,055 | |
Toll Brothers, Inc. (a) | 13,200 | 337,524 | |
4,388,247 | |||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 0.2% | |||
Independent Power Producers & Energy Traders - 0.2% | |||
Mirant Corp. (a) | 15,400 | 409,178 | |
INDUSTRIAL CONGLOMERATES - 15.5% | |||
Industrial Conglomerates - 15.5% | |||
3M Co. | 110,360 | 7,769,344 | |
General Electric Co. (d) | 611,200 | 19,980,128 | |
Smiths Group PLC | 59,900 | 1,008,744 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
INDUSTRIAL CONGLOMERATES - CONTINUED | |||
Industrial Conglomerates - continued | |||
Textron, Inc. | 25,700 | $ 2,310,687 | |
Tyco International Ltd. | 284,000 | 7,409,560 | |
38,478,463 | |||
IT SERVICES - 0.5% | |||
IT Consulting & Other Services - 0.5% | |||
CACI International, Inc. Class A (a) | 9,000 | 507,150 | |
ManTech International Corp. Class A (a) | 16,600 | 467,954 | |
NCI, Inc. Class A | 2,800 | 37,968 | |
SI International, Inc. (a) | 6,100 | 166,408 | |
1,179,480 | |||
LIFE SCIENCES TOOLS & SERVICES - 0.0% | |||
Life Science Tools & Services - 0.0% | |||
Varian, Inc. (a) | 2,700 | 121,446 | |
MACHINERY - 11.4% | |||
Construction & Farm Machinery & Heavy Trucks - 5.8% | |||
AGCO Corp. (a) | 9,400 | 215,824 | |
American Railcar Industries, Inc. | 200 | 5,530 | |
Bucyrus International, Inc. Class A | 13,229 | 644,385 | |
Caterpillar, Inc. | 75,200 | 5,329,424 | |
Deere & Co. | 62,200 | 4,513,854 | |
Joy Global, Inc. | 22,600 | 847,952 | |
Manitowoc Co., Inc. | 18,900 | 742,014 | |
Navistar International Corp. (a) | 14,940 | 334,058 | |
Samsung Heavy Industries Ltd. | 890 | 21,897 | |
Terex Corp. (a) | 13,200 | 591,888 | |
Toro Co. | 24,200 | 1,002,122 | |
Wabash National Corp. | 12,300 | 175,152 | |
14,424,100 | |||
Industrial Machinery - 5.6% | |||
Actuant Corp. Class A | 1,800 | 79,218 | |
Atlas Copco AB (B Shares) | 41,200 | 977,509 | |
Danaher Corp. | 34,400 | 2,242,880 | |
Dover Corp. | 17,200 | 810,808 | |
Illinois Tool Works, Inc. | 129,200 | 5,908,316 | |
ITT Industries, Inc. | 37,100 | 1,875,405 | |
KCI Konecranes Oyj | 61,700 | 1,134,900 | |
Pentair, Inc. | 8,300 | 238,376 | |
Schindler Holding AG (participation certificate) | 9,750 | 522,894 | |
13,790,306 | |||
TOTAL MACHINERY | 28,214,406 | ||
MARINE - 0.7% | |||
Marine - 0.7% | |||
Alexander & Baldwin, Inc. | 5,120 | 205,312 | |
Camillo Eitzen & Co. ASA | 36,500 | 379,547 | |
Shares | Value (Note 1) | ||
Odfjell ASA (A Shares) | 39,500 | $ 609,697 | |
Stolt-Nielsen SA (d) | 23,200 | 523,957 | |
1,718,513 | |||
METALS & MINING - 4.3% | |||
Steel - 4.3% | |||
Allegheny Technologies, Inc. | 36,700 | 2,344,763 | |
Carpenter Technology Corp. | 10,300 | 1,013,520 | |
IPSCO, Inc. | 5,000 | 471,721 | |
Mittal Steel Co. NV Class A (NY Shares) (d) | 89,400 | 3,058,374 | |
Nucor Corp. | 26,000 | 1,382,420 | |
Oregon Steel Mills, Inc. (a) | 26,800 | 1,239,232 | |
United States Steel Corp. | 18,200 | 1,147,874 | |
10,657,904 | |||
OIL, GAS & CONSUMABLE FUELS - 0.3% | |||
Coal & Consumable Fuels - 0.3% | |||
CONSOL Energy, Inc. | 12,200 | 502,152 | |
Massey Energy Co. | 6,400 | 171,008 | |
673,160 | |||
Oil & Gas Storage & Transport - 0.0% | |||
Overseas Shipholding Group, Inc. | 300 | 19,317 | |
TOTAL OIL, GAS & CONSUMABLE FUELS | 692,477 | ||
REAL ESTATE INVESTMENT TRUSTS - 0.1% | |||
Specialized REITs - 0.1% | |||
Potlatch Corp. | 10,690 | 369,981 | |
ROAD & RAIL - 6.0% | |||
Railroads - 3.9% | |||
Burlington Northern Santa Fe Corp. | 40,000 | 2,756,400 | |
CSX Corp. | 55,000 | 3,337,400 | |
Kansas City Southern | 600 | 14,772 | |
Norfolk Southern Corp. | 71,800 | 3,117,556 | |
Union Pacific Corp. | 5,800 | 493,000 | |
9,719,128 | |||
Trucking - 2.1% | |||
Con-way, Inc. | 20,900 | 1,034,132 | |
Laidlaw International, Inc. | 17,300 | 458,450 | |
Landstar System, Inc. | 79,126 | 3,377,889 | |
Old Dominion Freight Lines, Inc. (a) | 12,200 | 397,476 | |
5,267,947 | |||
TOTAL ROAD & RAIL | 14,987,075 | ||
SPECIALTY RETAIL - 0.2% | |||
Computer & Electronics Retail - 0.0% | |||
Gamestop Corp. Class B (a) | 2,300 | 86,480 | |
Home Improvement Retail - 0.2% | |||
Sherwin-Williams Co. | 8,600 | 435,160 | |
TOTAL SPECIALTY RETAIL | 521,640 | ||
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
TRADING COMPANIES & DISTRIBUTORS - 1.1% | |||
Trading Companies & Distributors - 1.1% | |||
H&E Equipment Services, Inc. | 600 | $ 15,888 | |
MSC Industrial Direct Co., Inc. Class A | 51,800 | 2,135,714 | |
Watsco, Inc. | 6,300 | 279,216 | |
WESCO International, Inc. (a) | 4,900 | 285,425 | |
2,716,243 | |||
TRANSPORTATION INFRASTRUCTURE - 0.0% | |||
Airport Services - 0.0% | |||
Grupo Aeroportuario del Pacifico SA de CV sponsored ADR | 600 | 17,958 | |
Marine Ports & Services - 0.0% | |||
Eitzen Maritime Services ASA (a) | 8,895 | 3,151 | |
TOTAL TRANSPORTATION INFRASTRUCTURE | 21,109 | ||
TOTAL COMMON STOCKS (Cost $238,539,237) | 247,750,397 | ||
Nonconvertible Preferred Stocks - 0.0% | |||
AEROSPACE & DEFENSE - 0.0% | |||
Aerospace & Defense - 0.0% | |||
Rolls-Royce Group PLC Series B | 2,551,357 | 4,947 | |
Money Market Funds - 9.6% | |||
Shares | Value (Note 1) | ||
Fidelity Cash Central Fund, 5.3% (b) | 1,155,272 | $ 1,155,272 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 22,460,490 | 22,460,490 | |
TOTAL MONEY MARKET FUNDS (Cost $23,615,762) | 23,615,762 | ||
TOTAL INVESTMENT PORTFOLIO - 109.6% (Cost $262,159,539) | 271,371,106 | ||
NET OTHER ASSETS - (9.6)% | (23,690,409) | ||
NET ASSETS - 100% | $ 247,680,697 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 198,282 |
Fidelity Securities Lending Cash Central Fund | 82,525 |
Total | $ 280,807 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 86.5% |
Netherlands | 3.7% |
Canada | 1.9% |
Germany | 1.5% |
United Kingdom | 1.2% |
France | 1.0% |
Others (individually less than 1%) | 4.2% |
100.0% |
See accompanying notes which are an integral part of the financial statements.
Cyclical Industries
Advisor Cyclical Industries Fund
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $21,806,330) - See accompanying schedule: Unaffiliated issuers (cost $238,543,777) | $ 247,755,344 | |
Affiliated Central Funds (cost $23,615,762) | 23,615,762 | |
Total Investments (cost $262,159,539) | $ 271,371,106 | |
Foreign currency held at value (cost $19) | 19 | |
Receivable for investments sold | 1,647,671 | |
Receivable for fund shares sold | 1,867,440 | |
Dividends receivable | 139,271 | |
Interest receivable | 30,659 | |
Prepaid expenses | 200 | |
Other receivables | 48,967 | |
Total assets | 275,105,333 | |
Liabilities | ||
Payable for investments purchased | $ 4,019,742 | |
Payable for fund shares redeemed | 614,443 | |
Accrued management fee | 117,153 | |
Distribution fees payable | 109,325 | |
Other affiliated payables | 70,442 | |
Other payables and accrued expenses | 33,041 | |
Collateral on securities loaned, at value | 22,460,490 | |
Total liabilities | 27,424,636 | |
Net Assets | $ 247,680,697 | |
Net Assets consist of: | ||
Paid in capital | $ 222,920,076 | |
Undistributed net investment income | 65,095 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 15,483,845 | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | 9,211,681 | |
Net Assets | $ 247,680,697 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price Class A: | $ 22.16 | |
Maximum offering price per share (100/94.25 of $22.16) | $ 23.51 | |
Class T: | $ 21.86 | |
Maximum offering price per share (100/96.50 of $21.86) | $ 22.65 | |
Class B: | $ 21.02 | |
Class C: | $ 21.16 | |
Institutional Class: | $ 22.77 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Cyclical Industries Fund
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 2,604,846 | |
Interest | 94 | |
Income from affiliated Central Funds | 280,807 | |
Total income | 2,885,747 | |
Expenses | ||
Management fee | $ 1,036,201 | |
Transfer agent fees | 574,797 | |
Distribution fees | 1,027,192 | |
Accounting and security lending fees | 75,820 | |
Independent trustees' compensation | 694 | |
Custodian fees and expenses | 17,589 | |
Registration fees | 76,551 | |
Audit | 41,823 | |
Legal | 1,870 | |
Miscellaneous | 2,258 | |
Total expenses before reductions | 2,854,795 | |
Expense reductions | (36,545) | 2,818,250 |
Net investment income (loss) | 67,497 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 16,802,300 | |
Foreign currency transactions | (1,826) | |
Total net realized gain (loss) | 16,800,474 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (9,655,028) | |
Assets and liabilities in foreign currencies | 14 | |
Total change in net unrealized appreciation (depreciation) | (9,655,014) | |
Net gain (loss) | 7,145,460 | |
Net increase (decrease) in net assets resulting from operations | $ 7,212,957 | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 67,497 | $ (263,519) |
Net realized gain (loss) | 16,800,474 | 8,599,225 |
Change in net unrealized appreciation (depreciation) | (9,655,014) | 12,830,783 |
Net increase (decrease) in net assets resulting from operations | 7,212,957 | 21,166,489 |
Distributions to shareholders from net realized gain | (7,122,799) | (3,376,455) |
Share transactions - net increase (decrease) | 109,957,564 | 68,385,639 |
Redemption fees | 25,597 | 12,053 |
Total increase (decrease) in net assets | 110,073,319 | 86,187,726 |
Net Assets | ||
Beginning of period | 137,607,378 | 51,419,652 |
End of period (including undistributed net investment income of $65,095 and accumulated net investment loss of $15, respectively) | $ 247,680,697 | $ 137,607,378 |
See accompanying notes which are an integral part of the financial statements.
Cyclical Industries
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 21.53 | $ 18.10 | $ 14.15 | $ 12.75 | $ 15.15 |
Income from Investment Operations | |||||
Net investment income (loss) C | .08 | .02 | (.02) | .06 | (.04) |
Net realized and unrealized gain (loss) | 1.63 | 4.35 | 3.96 | 1.36 | (2.37) |
Total from investment operations | 1.71 | 4.37 | 3.94 | 1.42 | (2.41) |
Distributions from net investment income | - | - | - | (.02) | - |
Distributions from net realized gain | (1.08) | (.94) | - | - | - |
Total distributions | (1.08) | (.94) | - | (.02) | - |
Redemption fees added to paid in capital C | - E | - E | .01 | - E | .01 |
Net asset value, end of period | $ 22.16 | $ 21.53 | $ 18.10 | $ 14.15 | $ 12.75 |
Total Return A, B | 8.40% | 25.04% | 27.92% | 11.16% | (15.84)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.26% | 1.34% | 1.65% | 1.99% | 1.83% |
Expenses net of fee waivers, if any | 1.26% | 1.34% | 1.50% | 1.53% | 1.50% |
Expenses net of all reductions | 1.24% | 1.29% | 1.47% | 1.46% | 1.49% |
Net investment income (loss) | .34% | .09% | (.12)% | .46% | (.25)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 99,255 | $ 40,264 | $ 12,612 | $ 4,272 | $ 3,160 |
Portfolio turnover rate | 94% | 116% | 106% | 149% | 45% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. | |||||
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 21.27 | $ 17.90 | $ 14.02 | $ 12.66 | $ 15.09 |
Income from Investment Operations | |||||
Net investment income (loss) C | .02 | (.03) | (.06) | .03 | (.07) |
Net realized and unrealized gain (loss) | 1.61 | 4.31 | 3.93 | 1.34 | (2.36) |
Total from investment operations | 1.63 | 4.28 | 3.87 | 1.37 | (2.43) |
Distributions from net investment income | - | - | - | (.01) | - |
Distributions from net realized gain | (1.04) | (.91) | - | - | - |
Total distributions | (1.04) | (.91) | - | (.01) | - |
Redemption fees added to paid in capital C | - E | - E | .01 | - E | - E |
Net asset value, end of period | $ 21.86 | $ 21.27 | $ 17.90 | $ 14.02 | $ 12.66 |
Total Return A, B | 8.13% | 24.78% | 27.67% | 10.84% | (16.10)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.49% | 1.57% | 1.90% | 2.25% | 2.07% |
Expenses net of fee waivers, if any | 1.49% | 1.57% | 1.75% | 1.78% | 1.75% |
Expenses net of all reductions | 1.47% | 1.52% | 1.72% | 1.71% | 1.74% |
Net investment income (loss) | .11% | (.14)% | (.36)% | .22% | (.50)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 55,936 | $ 40,126 | $ 13,089 | $ 5,493 | $ 6,216 |
Portfolio turnover rate | 94% | 116% | 106% | 149% | 45% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. | |||||
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 20.55 | $ 17.27 | $ 13.61 | $ 12.33 | $ 14.77 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.09) | (.13) | (.14) | (.03) | (.14) |
Net realized and unrealized gain (loss) | 1.55 | 4.17 | 3.79 | 1.31 | (2.30) |
Total from investment operations | 1.46 | 4.04 | 3.65 | 1.28 | (2.44) |
Distributions from net realized gain | (.99) | (.76) | - | - | - |
Redemption fees added to paid in capital C | - E | - E | .01 | - E | - E |
Net asset value, end of period | $ 21.02 | $ 20.55 | $ 17.27 | $ 13.61 | $ 12.33 |
Total Return A, B | 7.54% | 24.12% | 26.89% | 10.38% | (16.52)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.04% | 2.11% | 2.37% | 2.68% | 2.58% |
Expenses net of fee waivers, if any | 2.04% | 2.11% | 2.25% | 2.25% | 2.25% |
Expenses net of all reductions | 2.02% | 2.07% | 2.22% | 2.18% | 2.24% |
Net investment income (loss) | (.44)% | (.68)% | (.87)% | (.26)% | (1.00)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 37,082 | $ 32,242 | $ 14,722 | $ 9,005 | $ 9,008 |
Portfolio turnover rate | 94% | 116% | 106% | 149% | 45% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. | |||||
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 20.68 | $ 17.36 | $ 13.67 | $ 12.39 | $ 14.84 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.08) | (.12) | (.14) | (.03) | (.14) |
Net realized and unrealized gain (loss) | 1.56 | 4.19 | 3.82 | 1.31 | (2.31) |
Total from investment operations | 1.48 | 4.07 | 3.68 | 1.28 | (2.45) |
Distributions from net realized gain | (1.00) | (.75) | - | - | - |
Redemption fees added to paid in capital C | - E | - E | .01 | - E | - E |
Net asset value, end of period | $ 21.16 | $ 20.68 | $ 17.36 | $ 13.67 | $ 12.39 |
Total Return A, B | 7.59% | 24.16% | 26.99% | 10.33% | (16.51)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.99% | 2.07% | 2.28% | 2.57% | 2.49% |
Expenses net of fee waivers, if any | 1.99% | 2.07% | 2.25% | 2.25% | 2.25% |
Expenses net of all reductions | 1.97% | 2.02% | 2.22% | 2.18% | 2.24% |
Net investment income (loss) | (.38)% | (.64)% | (.87)% | (.26)% | (1.00)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 42,363 | $ 20,595 | $ 9,507 | $ 5,307 | $ 5,143 |
Portfolio turnover rate | 94% | 116% | 106% | 149% | 45% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. | |||||
See accompanying notes which are an integral part of the financial statements.
Cyclical Industries
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 22.06 | $ 18.48 | $ 14.41 | $ 12.96 | $ 15.37 |
Income from Investment Operations | |||||
Net investment income (loss) B | .16 | .07 | .02 | .09 | - D |
Net realized and unrealized gain (loss) | 1.66 | 4.46 | 4.04 | 1.39 | (2.41) |
Total from investment operations | 1.82 | 4.53 | 4.06 | 1.48 | (2.41) |
Distributions from net investment income | - | - | - | (.03) | - |
Distributions from net realized gain | (1.11) | (.95) | - | - | - |
Total distributions | (1.11) | (.95) | - | (.03) | - |
Redemption fees added to paid in capital B | - D | - D | .01 | - D | - D |
Net asset value, end of period | $ 22.77 | $ 22.06 | $ 18.48 | $ 14.41 | $ 12.96 |
Total Return A | 8.73% | 25.41% | 28.24% | 11.46% | (15.68)% |
Ratios to Average Net Assets C | |||||
Expenses before reductions | .91% | 1.06% | 1.38% | 1.55% | 1.45% |
Expenses net of fee waivers, if any | .91% | 1.06% | 1.25% | 1.25% | 1.25% |
Expenses net of all reductions | .89% | 1.01% | 1.22% | 1.18% | 1.24% |
Net investment income (loss) | .69% | .37% | .13% | .74% | - |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 13,043 | $ 4,379 | $ 1,490 | $ 1,156 | $ 2,104 |
Portfolio turnover rate | 94% | 116% | 106% | 149% | 45% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. D Amount represents less than $.01 per share. | |||||
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Cyclical Industries Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, deferred trustees compensation, and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 24,219,736 | |
Unrealized depreciation | (15,471,495) | |
Net unrealized appreciation (depreciation) | 8,748,241 | |
Undistributed ordinary income | 6,963,178 | |
Undistributed long-term capital gain | 7,637,278 | |
Cost for federal income tax purposes | $ 262,622,865 |
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Ordinary Income | $ 2,645,179 | $ 1,163,274 |
Long-term Capital Gains | 4,477,620 | 2,213,181 |
Total | $ 7,122,799 | $ 3,376,455 |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $273,277,250 and $169,163,154, respectively.
Cyclical Industries
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 157,391 | $ 2,381 |
Class T | .25% | .25% | 237,750 | - |
Class B | .75% | .25% | 348,343 | 261,258 |
Class C | .75% | .25% | 283,708 | 120,119 |
$ 1,027,192 | $ 383,758 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 212,424 |
Class T | 22,077 |
Class B* | 75,442 |
Class C * | 8,457 |
$ 318,400 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 202,587 | .32 |
Class T | 145,487 | .31 |
Class B | 122,428 | .35 |
Class C | 84,476 | .30 |
Institutional Class | 19,819 | .22 |
$ 574,797 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $11,065 for the period.
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $489 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $82,525.
7. Expense Reductions.
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $35,804 for the period. In addition, through arrangements with the Fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's custody expenses by $741.
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2006 | 2005 |
From net realized gain | ||
Class A | $ 2,209,329 | $ 1,008,608 |
Class T | 1,993,493 | 1,078,512 |
Class B | 1,595,001 | 740,358 |
Class C | 1,032,683 | 457,235 |
Institutional Class | 292,293 | 91,742 |
Total | $ 7,122,799 | $ 3,376,455 |
Cyclical Industries
10. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 3,250,873 | 1,834,275 | $ 73,798,607 | $ 35,637,759 |
Reinvestment of distributions | 97,417 | 37,514 | 1,982,904 | 702,375 |
Shares redeemed | (738,421) | (698,605) | (16,310,331) | (13,721,410) |
Net increase (decrease) | 2,609,869 | 1,173,184 | $ 59,471,180 | $ 22,618,724 |
Class T | ||||
Shares sold | 1,053,819 | 1,414,958 | $ 23,194,479 | $ 26,674,948 |
Reinvestment of distributions | 95,171 | 55,963 | 1,914,595 | 1,036,099 |
Shares redeemed | (476,485) | (315,493) | (10,217,427) | (6,149,352) |
Net increase (decrease) | 672,505 | 1,155,428 | $ 14,891,647 | $ 21,561,695 |
Class B | ||||
Shares sold | 691,509 | 1,024,205 | $ 14,823,678 | $ 19,088,560 |
Reinvestment of distributions | 68,369 | 34,674 | 1,329,447 | 620,788 |
Shares redeemed | (564,827) | (342,241) | (11,906,215) | (6,386,553) |
Net increase (decrease) | 195,051 | 716,638 | $ 4,246,910 | $ 13,322,795 |
Class C | ||||
Shares sold | 1,219,100 | 649,529 | $ 26,650,232 | $ 12,242,436 |
Reinvestment of distributions | 42,653 | 19,147 | 834,597 | 344,742 |
Shares redeemed | (255,670) | (220,294) | (5,350,637) | (4,110,203) |
Net increase (decrease) | 1,006,083 | 448,382 | $ 22,134,192 | $ 8,476,975 |
Institutional Class | ||||
Shares sold | 685,802 | 168,340 | $ 16,202,741 | $ 3,418,465 |
Reinvestment of distributions | 7,337 | 3,419 | 152,999 | 65,261 |
Shares redeemed | (318,752) | (53,860) | (7,142,105) | (1,078,276) |
Net increase (decrease) | 374,387 | 117,899 | $ 9,213,635 | $ 2,405,450 |
Annual Report
Advisor Developing Communications Fund - Class A, T, B, and C
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of |
Class A (incl. 5.75% sales charge) | -10.77% | -3.94% | -6.49% |
Class T (incl. 3.50% sales charge) | -8.83% | -3.75% | -6.32% |
Class B (incl. contingent deferred sales charge)B | -10.75% | -3.93% | -6.37% |
Class C (incl. contingent deferred sales charge)C | -6.99% | -3.54% | -6.20% |
A From December 27, 2000.
B Class B shares' contingent deferred sales charges included in the past one year, past five years, and life of fund total return figures are 5%, 2%, and 1%, respectively.
C Class C shares' contingent deferred sales charges included in the past one year, past five years, and life of fund total return figures are 1%, 0%, and 0%, respectively.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Developing Communications Fund - Class T on December 27, 2000, when the fund started, and the current 3.50% sales charge was paid. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Advisor Developing Communications Fund
Management's Discussion of Fund Performance
Comments from Charlie Chai, Portfolio Manager of Fidelity® Advisor Developing Communications Fund
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
During the past year, the fund's Class A, Class T, Class B and Class C shares returned -5.32%, -5.52%, -6.05% and -6.05%, respectively (excluding sales charges), topping the -6.42% return of the Goldman Sachs® Technology Index but trailing the S&P 500. Stock selection in the Internet software/services and semiconductor groups particularly helped performance versus the sector index, along with an overweighting in wireless telecommunications services. Underweighting the semiconductor group also added value. Among individual holdings, overweighting search engine Google boosted performance. Additionally, not owning several poorly performing major index components, including eBay, Intel and Dell, was beneficial. An out-of-benchmark position in Finnish wireless handset manufacturer Nokia further aided our results, as did a large stake in wireline equipment provider CIENA. Conversely, performance suffered due to weak stock selection and an overweighting in communications equipment. Further hampering performance were my picks in wireless telecom services and in applications software, along with underweightings in systems software and computer hardware. Canada-based Nortel Networks hurt performance amid the market weakness, investor cautiousness and intensifying industry competition. Also weighing on our results were Juniper Networks and Openwave Systems, along with not owning index components Hewlett-Packard and Apple Computer.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Advisor Developing Communications Fund
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 820.00 | $ 6.32 |
Hypothetical A | $ 1,000.00 | $ 1,017.85 | $ 7.00 |
Class T | |||
Actual | $ 1,000.00 | $ 818.90 | $ 7.44 |
Hypothetical A | $ 1,000.00 | $ 1,016.61 | $ 8.25 |
Class B | |||
Actual | $ 1,000.00 | $ 816.60 | $ 9.68 |
Hypothetical A | $ 1,000.00 | $ 1,014.13 | $ 10.74 |
Class C | |||
Actual | $ 1,000.00 | $ 816.60 | $ 9.68 |
Hypothetical A | $ 1,000.00 | $ 1,014.13 | $ 10.74 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 820.20 | $ 5.19 |
Hypothetical A | $ 1,000.00 | $ 1,019.09 | $ 5.76 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.40% |
Class T | 1.65% |
Class B | 2.15% |
Class C | 2.15% |
Institutional Class | 1.15% |
Annual Report
Advisor Developing Communications Fund
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
Corning, Inc. | 8.4 | 4.9 |
QUALCOMM, Inc. | 7.8 | 7.0 |
Motorola, Inc. | 7.0 | 4.9 |
Comverse Technology, Inc. | 5.5 | 2.9 |
Nortel Networks Corp. | 4.7 | 6.3 |
American Tower Corp. Class A | 4.6 | 2.8 |
Google, Inc. Class A (sub. vtg.) | 4.0 | 6.1 |
CIENA Corp. | 2.7 | 2.2 |
Juniper Networks, Inc. | 2.4 | 2.7 |
F5 Networks, Inc. | 2.3 | 2.9 |
49.4 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Communications Equipment | 62.3% | |
| Semiconductors & Semiconductor Equipment | 12.1% | |
| Wireless Telecommunication Services | 8.2% | |
| Internet Software & Services | 5.3% | |
| Computers & Peripherals | 3.3% | |
| All Others* | 8.8% | |
As of January 31, 2006 | |||
| Communications Equipment | 60.2% | |
| Wireless Telecommunication Services | 13.4% | |
| Internet Software & Services | 9.2% | |
| Semiconductors & Semiconductor Equipment | 7.1% | |
| Electronic Equipment & Instruments | 2.8% | |
| All Others* | 7.3% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Advisor Developing Communications Fund
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 99.2% | |||
Shares | Value (Note 1) | ||
COMMERCIAL SERVICES & SUPPLIES - 0.8% | |||
Diversified Commercial & Professional Services - 0.8% | |||
Tele Atlas NV (a) | 5,200 | $ 85,153 | |
COMMUNICATIONS EQUIPMENT - 62.1% | |||
Communications Equipment - 62.1% | |||
3Com Corp. (a) | 8,000 | 37,920 | |
ADC Telecommunications, Inc. (a) | 7,200 | 88,056 | |
Adtran, Inc. | 3,183 | 69,612 | |
ADVA AG Optical Networking (a) | 7,682 | 64,665 | |
Alvarion Ltd. (a) | 3,200 | 17,088 | |
Andrew Corp. (a) | 7,100 | 59,995 | |
Arris Group, Inc. (a) | 3,700 | 39,553 | |
AudioCodes Ltd. (a) | 14,000 | 135,800 | |
Avanex Corp. (a) | 11,600 | 14,964 | |
Bookham, Inc. (a) | 20,872 | 62,199 | |
C-COR, Inc. (a) | 800 | 5,288 | |
Ceragon Networks Ltd. (a) | 15,600 | 72,540 | |
CIENA Corp. (a) | 78,250 | 284,048 | |
CommScope, Inc. (a) | 300 | 9,369 | |
Comtech Group, Inc. (a) | 2,301 | 24,345 | |
Comverse Technology, Inc. (a) | 30,206 | 585,392 | |
Corning, Inc. | 46,600 | 888,659 | |
CSR PLC (a) | 4,700 | 99,651 | |
ECI Telecom Ltd. (a) | 6,100 | 40,870 | |
F5 Networks, Inc. (a) | 5,300 | 245,602 | |
Foundry Networks, Inc. (a) | 10,000 | 103,600 | |
Foxconn International Holdings Ltd. (a) | 2,000 | 4,649 | |
Ixia (a) | 3,600 | 33,372 | |
JDS Uniphase Corp. (a) | 41,000 | 87,330 | |
Juniper Networks, Inc. (a) | 18,950 | 254,878 | |
Lucent Technologies, Inc. (a) | 77,600 | 165,288 | |
Motorola, Inc. | 32,800 | 746,528 | |
MRV Communications, Inc. (a) | 9,317 | 22,174 | |
Nokia Corp. sponsored ADR | 5,600 | 111,160 | |
Nortel Networks Corp. | 253,700 | 497,253 | |
Orckit Communications Ltd. (a) | 4,000 | 30,800 | |
Powerwave Technologies, Inc. (a) | 12,400 | 98,456 | |
QUALCOMM, Inc. | 23,500 | 828,610 | |
Research In Motion Ltd. (a) | 2,940 | 192,952 | |
Riverstone Networks, Inc. (a) | 30,300 | 27,270 | |
Sandvine Corp. (c) | 58,300 | 136,679 | |
Sonus Networks, Inc. (a) | 24,804 | 111,122 | |
Stratex Networks, Inc. (a) | 13,100 | 45,981 | |
Symmetricom, Inc. (a) | 12,500 | 88,500 | |
Tekelec (a) | 8,100 | 83,349 | |
Telefonaktiebolaget LM Ericsson (B Shares) sponsored ADR | 22 | 693 | |
Telson Electronics Co. Ltd. (a) | 16,942 | 0 | |
Terayon Communication Systems, Inc. (a) | 55,300 | 45,899 | |
TomTom Group BV (a) | 900 | 33,488 | |
Tut Systems, Inc. (a) | 2,400 | 2,640 | |
6,598,287 | |||
Shares | Value (Note 1) | ||
COMPUTERS & PERIPHERALS - 3.3% | |||
Computer Hardware - 1.6% | |||
Compal Electronics, Inc. | 5,509 | $ 5,022 | |
Concurrent Computer Corp. (a) | 86,617 | 161,108 | |
NEC Corp. sponsored ADR | 90 | 492 | |
166,622 | |||
Computer Storage & Peripherals - 1.7% | |||
M-Systems Flash Disk Pioneers Ltd. (a) | 800 | 28,800 | |
Novatel Wireless, Inc. (a) | 3,500 | 38,710 | |
Synaptics, Inc. (a) | 4,600 | 96,692 | |
Xyratex Ltd. (a) | 800 | 18,592 | |
182,794 | |||
TOTAL COMPUTERS & PERIPHERALS | 349,416 | ||
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.5% | |||
Alternative Carriers - 0.2% | |||
Level 3 Communications, Inc. (a) | 5,900 | 23,069 | |
Integrated Telecommunication Services - 0.3% | |||
Embarq Corp. | 30 | 1,358 | |
Philippine Long Distance Telephone Co. sponsored ADR | 900 | 35,271 | |
36,629 | |||
TOTAL DIVERSIFIED TELECOMMUNICATION | 59,698 | ||
ELECTRICAL EQUIPMENT - 0.1% | |||
Electrical Components & Equipment - 0.1% | |||
Energy Conversion Devices, Inc. (a) | 300 | 10,095 | |
ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.8% | |||
Electronic Equipment & Instruments - 2.5% | |||
AU Optronics Corp. sponsored ADR | 3,500 | 51,590 | |
Chi Mei Optoelectronics Corp. | 7,549 | 8,599 | |
Dolby Laboratories, Inc. Class A (a) | 1,000 | 20,050 | |
HannStar Display Corp. | 58,000 | 8,183 | |
LG.Philips LCD Co. Ltd. sponsored ADR (a) | 6,900 | 122,751 | |
Nippon Electric Glass Co. Ltd. | 2,000 | 44,658 | |
Photon Dynamics, Inc. (a) | 916 | 9,728 | |
265,559 | |||
Electronic Manufacturing Services - 0.3% | |||
Molex, Inc. | 500 | 15,860 | |
Trimble Navigation Ltd. (a) | 300 | 14,409 | |
30,269 | |||
TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS | 295,828 | ||
HOUSEHOLD DURABLES - 0.2% | |||
Consumer Electronics - 0.2% | |||
Directed Electronics, Inc. | 2,200 | 25,454 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
INTERNET SOFTWARE & SERVICES - 5.3% | |||
Internet Software & Services - 5.3% | |||
aQuantive, Inc. (a) | 1,000 | $ 20,500 | |
Google, Inc. Class A (sub. vtg.) (a) | 1,093 | 422,554 | |
Openwave Systems, Inc. (a) | 18,107 | 119,325 | |
562,379 | |||
MEDIA - 0.9% | |||
Broadcasting & Cable TV - 0.9% | |||
EchoStar Communications Corp. Class A (a) | 2,900 | 101,645 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 12.1% | |||
Semiconductor Equipment - 0.9% | |||
EMCORE Corp. (a) | 6,200 | 43,772 | |
MEMC Electronic Materials, Inc. (a) | 1,600 | 48,672 | |
92,444 | |||
Semiconductors - 11.2% | |||
Actel Corp. (a) | 451 | 6,116 | |
Advanced Analogic Technologies, Inc. | 6,400 | 60,224 | |
AMIS Holdings, Inc. (a) | 6,600 | 61,908 | |
ANADIGICS, Inc. (a) | 6,100 | 33,672 | |
Analog Devices, Inc. | 700 | 22,631 | |
Applied Micro Circuits Corp. (a) | 11,432 | 29,495 | |
ARM Holdings PLC sponsored ADR | 5,200 | 33,748 | |
Broadcom Corp. Class A (a) | 3,200 | 76,768 | |
Conexant Systems, Inc. (a) | 12,800 | 22,912 | |
Cree, Inc. (a) | 1,100 | 21,703 | |
Exar Corp. (a) | 143 | 1,852 | |
Freescale Semiconductor, Inc. Class A (a) | 4,600 | 131,698 | |
Intersil Corp. Class A | 800 | 18,808 | |
Marvell Technology Group Ltd. (a) | 1,200 | 22,260 | |
Microtune, Inc. (a) | 7,200 | 41,832 | |
Mindspeed Technologies, Inc. (a) | 12,509 | 22,391 | |
MIPS Technologies, Inc. (a) | 1,398 | 8,849 | |
Netlogic Microsystems, Inc. (a) | 2,100 | 51,450 | |
Novatek Microelectronics Corp. | 16,648 | 81,852 | |
O2Micro International Ltd. sponsored ADR (a) | 10,200 | 61,098 | |
Pericom Semiconductor Corp. (a) | 1,700 | 14,280 | |
Pixelplus Co. Ltd. sponsored ADR | 3,600 | 7,200 | |
PLX Technology, Inc. (a) | 1,400 | 12,838 | |
PowerDsine Ltd. (a) | 3,000 | 21,840 | |
RF Micro Devices, Inc. (a) | 3,400 | 20,944 | |
Sigma Designs, Inc. (a) | 5,988 | 54,371 | |
Silicon Motion Technology Corp. sponsored ADR | 2,000 | 26,760 | |
Shares | Value (Note 1) | ||
Silicon On Insulator Technologies SA (SOITEC) (a) | 2,400 | $ 64,011 | |
Silicon Storage Technology, Inc. (a) | 1,200 | 4,776 | |
SiRF Technology Holdings, Inc. (a) | 200 | 3,820 | |
Skyworks Solutions, Inc. (a) | 4,900 | 21,511 | |
Spansion, Inc. Class A | 3,800 | 53,124 | |
Transmeta Corp. (a) | 5,800 | 7,830 | |
Trident Microsystems, Inc. (a) | 3,400 | 58,548 | |
Vimicro International Corp. sponsored ADR | 700 | 7,525 | |
1,190,645 | |||
TOTAL SEMICONDUCTORS & SEMICONDUCTOR | 1,283,089 | ||
SOFTWARE - 2.9% | |||
Application Software - 2.2% | |||
ECtel Ltd. (a) | 84 | 360 | |
NAVTEQ Corp. (a) | 1,000 | 28,180 | |
Ulticom, Inc. (a) | 20,298 | 201,559 | |
230,099 | |||
Home Entertainment Software - 0.2% | |||
Ubisoft Entertainment SA (a) | 400 | 19,416 | |
Systems Software - 0.5% | |||
Ubiquity Software Corp. PLC (a) | 68,200 | 26,754 | |
Wind River Systems, Inc. (a) | 3,800 | 31,426 | |
58,180 | |||
TOTAL SOFTWARE | 307,695 | ||
WIRELESS TELECOMMUNICATION SERVICES - 8.2% | |||
Wireless Telecommunication Services - 8.2% | |||
American Tower Corp. Class A (a) | 14,600 | 493,480 | |
Crown Castle International Corp. | 4,900 | 172,627 | |
MTN Group Ltd. | 3,800 | 29,044 | |
NII Holdings, Inc. (a) | 300 | 15,834 | |
SBA Communications Corp. Class A (a) | 4,800 | 114,624 | |
Sprint Nextel Corp. | 500 | 9,900 | |
Vimpel Communications sponsored ADR (a) | 600 | 28,920 | |
WiderThan Co. Ltd. ADR | 600 | 5,430 | |
869,859 | |||
TOTAL COMMON STOCKS (Cost $12,811,506) | 10,548,598 | ||
Convertible Bonds - 0.2% | ||||
Principal Amount | ||||
COMMUNICATIONS EQUIPMENT - 0.2% | ||||
Communications Equipment - 0.2% | ||||
CIENA Corp. 0.25% 5/1/13 | $ 20,000 | 16,734 | ||
Money Market Funds - 0.2% | |||
Shares | Value (Note 1) | ||
Fidelity Cash Central Fund, 5.3% (b) | 24,915 | $ 24,915 | |
TOTAL INVESTMENT PORTFOLIO - 99.6% (Cost $12,856,421) | 10,590,247 | ||
NET OTHER ASSETS - 0.4% | 40,012 | ||
NET ASSETS - 100% | $ 10,630,259 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(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 $136,679 or 1.3% of net assets. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 7,483 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 78.3% |
Canada | 7.8% |
Israel | 3.4% |
Taiwan | 1.6% |
United Kingdom | 1.4% |
Korea (South) | 1.3% |
Netherlands | 1.1% |
Finland | 1.0% |
Cayman Islands | 1.0% |
Others (individually less than 1%) | 3.1% |
100.0% |
Income Tax Information |
At July 31, 2006, the fund had a capital loss carryforward of approximately $359,916 all of which will expire on July 31, 2013. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Developing Communications Fund
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value - See accompanying schedule: Unaffiliated issuers (cost $12,831,506) | $ 10,565,332 | |
Affiliated Central Funds (cost $24,915) | 24,915 | |
Total Investments (cost $12,856,421) | $ 10,590,247 | |
Receivable for investments sold | 178,888 | |
Receivable for fund shares sold | 51,463 | |
Dividends receivable | 2,929 | |
Interest receivable | 359 | |
Prepaid expenses | 16 | |
Receivable from investment adviser for expense reductions | 3,274 | |
Other receivables | 917 | |
Total assets | 10,828,093 | |
Liabilities | ||
Payable for investments purchased | $ 78,060 | |
Payable for fund shares redeemed | 69,603 | |
Accrued management fee | 5,358 | |
Distribution fees payable | 5,850 | |
Other affiliated payables | 4,260 | |
Other payables and accrued expenses | 34,703 | |
Total liabilities | 197,834 | |
Net Assets | $ 10,630,259 | |
Net Assets consist of: | ||
Paid in capital | $ 13,423,377 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | (526,939) | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | (2,266,179) | |
Net Assets | $ 10,630,259 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price Class A: | $ 7.29 | |
Maximum offering price per share (100/94.25 of $7.29) | $ 7.73 | |
Class T: | $ 7.19 | |
Maximum offering price per share (100/96.50 of $7.19) | $ 7.45 | |
Class B: | $ 6.99 | |
Class C: | $ 6.99 | |
Institutional Class: | $ 7.39 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Developing Communications Fund
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 25,480 | |
Interest | 281 | |
Income from affiliated Central Funds | 7,483 | |
Total income | 33,244 | |
Expenses | ||
Management fee | $ 70,490 | |
Transfer agent fees | 54,743 | |
Distribution fees | 82,167 | |
Accounting fees and expenses | 5,125 | |
Independent trustees' compensation | 50 | |
Custodian fees and expenses | 18,187 | |
Registration fees | 47,515 | |
Audit | 41,336 | |
Legal | 228 | |
Miscellaneous | 145 | |
Total expenses before reductions | 319,986 | |
Expense reductions | (105,112) | 214,874 |
Net investment income (loss) | (181,630) | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 2,009,045 | |
Foreign currency transactions | 2,014 | |
Total net realized gain (loss) | 2,011,059 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (2,911,711) | |
Assets and liabilities in foreign currencies | (3,384) | |
Total change in net unrealized appreciation (depreciation) | (2,915,095) | |
Net gain (loss) | (904,036) | |
Net increase (decrease) in net assets resulting from operations | $ (1,085,666) | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ (181,630) | $ (166,932) |
Net realized gain (loss) | 2,011,059 | (1,564,905) |
Change in net unrealized appreciation (depreciation) | (2,915,095) | 3,600,997 |
Net increase (decrease) in net assets resulting from operations | (1,085,666) | 1,869,160 |
Share transactions - net increase (decrease) | 1,243,705 | (4,921,642) |
Redemption fees | 3,257 | 6,207 |
Total increase (decrease) in net assets | 161,296 | (3,046,275) |
Net Assets | ||
Beginning of period | 10,468,963 | 13,515,238 |
End of period | $ 10,630,259 | $ 10,468,963 |
See accompanying notes which are an integral part of the financial statements.
Developing Communications
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.70 | $ 6.53 | $ 5.57 | $ 3.96 | $ 8.40 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.09) | (.07) | (.09) | (.04) | (.05) |
Net realized and unrealized gain (loss) | (.32) | 1.24 | 1.01 | 1.65 | (4.40) |
Total from investment operations | (.41) | 1.17 | .92 | 1.61 | (4.45) |
Redemption fees added to paid in capital C | - E | - E | .04 | - E | .01 |
Net asset value, end of period | $ 7.29 | $ 7.70 | $ 6.53 | $ 5.57 | $ 3.96 |
Total Return A, B | (5.32)% | 17.92% | 17.24% | 40.66% | (52.86)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.13% | 2.32% | 2.38% | 6.13% | 4.97% |
Expenses net of fee waivers, if any | 1.40% | 1.45% | 1.50% | 1.50% | 1.50% |
Expenses net of all reductions | 1.32% | 1.28% | 1.35% | 1.36% | 1.40% |
Net investment income (loss) | (1.05)% | (.92)% | (1.18)% | (.82)% | (.85)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 3,145 | $ 2,406 | $ 3,480 | $ 970 | $ 371 |
Portfolio turnover rate | 174% | 250% | 306% | 167% | 305% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.61 | $ 6.48 | $ 5.54 | $ 3.95 | $ 8.40 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.11) | (.08) | (.10) | (.05) | (.07) |
Net realized and unrealized gain (loss) | (.31) | 1.21 | 1.00 | 1.64 | (4.39) |
Total from investment operations | (.42) | 1.13 | .90 | 1.59 | (4.46) |
Redemption fees added to paid in capital C | - E | - E | .04 | - E | .01 |
Net asset value, end of period | $ 7.19 | $ 7.61 | $ 6.48 | $ 5.54 | $ 3.95 |
Total Return A, B | (5.52)% | 17.44% | 16.97% | 40.25% | (52.98)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.51% | 2.78% | 3.06% | 6.82% | 5.36% |
Expenses net of fee waivers, if any | 1.65% | 1.71% | 1.75% | 1.75% | 1.75% |
Expenses net of all reductions | 1.57% | 1.54% | 1.60% | 1.61% | 1.64% |
Net investment income (loss) | (1.30)% | (1.18)% | (1.43)% | (1.07)% | (1.10)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 2,932 | $ 3,034 | $ 3,250 | $ 1,723 | $ 775 |
Portfolio turnover rate | 174% | 250% | 306% | 167% | 305% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.44 | $ 6.36 | $ 5.47 | $ 3.92 | $ 8.37 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.14) | (.12) | (.13) | (.07) | (.10) |
Net realized and unrealized gain (loss) | (.31) | 1.20 | .98 | 1.62 | (4.36) |
Total from investment operations | (.45) | 1.08 | .85 | 1.55 | (4.46) |
Redemption fees added to paid in capital C | - E | - E | .04 | - E | .01 |
Net asset value, end of period | $ 6.99 | $ 7.44 | $ 6.36 | $ 5.47 | $ 3.92 |
Total Return A, B | (6.05)% | 16.98% | 16.27% | 39.54% | (53.17)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.94% | 3.14% | 3.48% | 6.88% | 5.62% |
Expenses net of fee waivers, if any | 2.15% | 2.20% | 2.25% | 2.25% | 2.25% |
Expenses net of all reductions | 2.07% | 2.04% | 2.11% | 2.11% | 2.14% |
Net investment income (loss) | (1.80)% | (1.68)% | (1.93)% | (1.56)% | (1.60)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 2,406 | $ 2,864 | $ 2,998 | $ 1,846 | $ 1,162 |
Portfolio turnover rate | 174% | 250% | 306% | 167% | 305% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.44 | $ 6.36 | $ 5.47 | $ 3.92 | $ 8.37 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.15) | (.12) | (.14) | (.07) | (.10) |
Net realized and unrealized gain (loss) | (.30) | 1.20 | .99 | 1.62 | (4.36) |
Total from investment operations | (.45) | 1.08 | .85 | 1.55 | (4.46) |
Redemption fees added to paid in capital C | - E | - E | .04 | - E | .01 |
Net asset value, end of period | $ 6.99 | $ 7.44 | $ 6.36 | $ 5.47 | $ 3.92 |
Total Return A, B | (6.05)% | 16.98% | 16.27% | 39.54% | (53.17)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.86% | 3.07% | 3.19% | 6.81% | 5.49% |
Expenses net of fee waivers, if any | 2.15% | 2.19% | 2.25% | 2.25% | 2.25% |
Expenses net of all reductions | 2.07% | 2.02% | 2.10% | 2.11% | 2.14% |
Net investment income (loss) | (1.81)% | (1.66)% | (1.93)% | (1.57)% | (1.60)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 1,768 | $ 1,846 | $ 3,180 | $ 1,009 | $ 667 |
Portfolio turnover rate | 174% | 250% | 306% | 167% | 305% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Developing Communications
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.79 | $ 6.60 | $ 5.61 | $ 3.98 | $ 8.42 |
Income from Investment Operations | |||||
Net investment income (loss) B | (.07) | (.05) | (.07) | (.03) | (.04) |
Net realized and unrealized gain (loss) | (.33) | 1.24 | 1.02 | 1.66 | (4.41) |
Total from investment operations | (.40) | 1.19 | .95 | 1.63 | (4.45) |
Redemption fees added to paid in capital B | - D | - D | .04 | - D | .01 |
Net asset value, end of period | $ 7.39 | $ 7.79 | $ 6.60 | $ 5.61 | $ 3.98 |
Total Return A | (5.13)% | 18.03% | 17.65% | 40.95% | (52.73)% |
Ratios to Average Net Assets C | |||||
Expenses before reductions | 1.70% | 1.85% | 1.55% | 5.34% | 4.24% |
Expenses net of fee waivers, if any | 1.15% | 1.18% | 1.25% | 1.25% | 1.25% |
Expenses net of all reductions | 1.07% | 1.01% | 1.11% | 1.11% | 1.14% |
Net investment income (loss) | (.80)% | (.65)% | (.93)% | (.57)% | (.60)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 379 | $ 319 | $ 607 | $ 154 | $ 100 |
Portfolio turnover rate | 174% | 250% | 306% | 167% | 305% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. D Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Developing Communications Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Debt securities, including restricted securities, for which quotations are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. As a result in the change in the estimate of the return of capital component of dividend income realized in the year ended July 31, 2005, dividend income has been increased by $4,126 with a corresponding decrease to net unrealized appreciation (depreciation). The change in estimate has no impact on total net assets or total return of the Fund. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, net operating losses, capital loss carryforwards and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 348,152 | |
Unrealized depreciation | (2,781,354) | |
Net unrealized appreciation (depreciation) | (2,433,202) | |
Capital loss carryforward | (359,916) | |
Cost for federal income tax purposes | $ 13,023,449 |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
Restricted Securities. The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $22,446,359 and $21,361,983, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR.
The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Developing Communications
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 7,532 | $ 54 |
Class T | .25% | .25% | 15,728 | - |
Class B | .75% | .25% | 29,527 | 22,149 |
Class C | .75% | .25% | 29,380 | 10,287 |
$ 82,167 | $ 32,490 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 6,558 |
Class T | 2,300 |
Class B* | 10,160 |
Class C* | 794 |
$ 19,812 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 13,189 | .44 |
Class T | 16,558 | .53 |
Class B | 12,910 | .44 |
Class C | 11,199 | .38 |
Institutional Class | 887 | .24 |
$ 54,743 |
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The fee is based on the level of average net assets for the month.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $2,037 for the period.
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $35 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
Annual Report
Notes to Financial Statements - continued
6. Expense Reductions.
FMR voluntarily agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
The following classes were in reimbursement during the period:
Expense | Reimbursement | |
Class A | 1.40% | $ 22,048 |
Class T | 1.65% | 27,171 |
Class B | 2.15% | 23,173 |
Class C | 2.15% | 20,620 |
Institutional Class | 1.15% | 2,078 |
$ 95,090 |
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $10,022 for the period.
7. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 258,256 | 416,894 | $ 2,231,744 | $ 3,024,999 |
Shares redeemed | (139,347) | (636,989) | (1,139,179) | (4,589,727) |
Net increase (decrease) | 118,909 | (220,095) | $ 1,092,565 | $ (1,564,728) |
Class T | ||||
Shares sold | 114,159 | 174,922 | $ 950,677 | $ 1,257,919 |
Shares redeemed | (104,980) | (277,992) | (831,470) | (1,946,912) |
Net increase (decrease) | 9,179 | (103,070) | $ 119,207 | $ (688,993) |
Class B | ||||
Shares sold | 69,205 | 193,607 | $ 569,934 | $ 1,369,993 |
Shares redeemed | (109,978) | (279,761) | (860,340) | (1,968,809) |
Net increase (decrease) | (40,773) | (86,154) | $ (290,406) | $ (598,816) |
Class C | ||||
Shares sold | 307,489 | 114,060 | $ 2,475,377 | $ 812,760 |
Shares redeemed | (302,626) | (365,782) | (2,257,686) | (2,486,084) |
Net increase (decrease) | 4,863 | (251,722) | $ 217,691 | $ (1,673,324) |
Institutional Class | ||||
Shares sold | 30,494 | 11,594 | $ 275,027 | $ 84,651 |
Shares redeemed | (20,224) | (62,684) | (170,379) | (480,432) |
Net increase (decrease) | 10,270 | (51,090) | $ 104,648 | $ (395,781) |
Developing Communications
Advisor Electronics Fund - Class A, T, B, and C
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of |
Class A (incl. 5.75% sales charge) | -13.49% | -6.28% | -6.28% |
Class T (incl. 3.50% sales charge) | -11.62% | -6.07% | -6.09% |
Class B (incl. contingent deferred | -13.30% | -6.23% | -6.11% |
Class C (incl. contingent deferred | -9.66% | -5.86% | -5.96% |
A From December 27, 2000.
B Class B shares' contingent deferred sales charges included in the past one year, past five years, and life of fund total return figures are 5%, 2%, and 1%, respectively.
C Class C shares' contingent deferred sales charges included in the past one year, past five years, and life of fund total return figures are 1%, 0%, and 0%, respectively.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Electronics Fund - Class T on December 27, 2000, when the fund started, and the current 3.50% sales charge was paid. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from James Morrow, Portfolio Manager of Fidelity® Advisor Electronics Fund
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
During the past year, the fund's Class A, Class T, Class B and Class C shares returned -8.21%, -8.42%, -8.74% and -8.75%, respectively (excluding sales charges), lagging the S&P 500 as well as the -6.42% return of the Goldman Sachs® Technology Index. Versus the sector index, the fund was hurt most by its sizable overweighting in semiconductors. Among individual holdings, semiconductor equipment stock Cohu was our biggest detractor. The company warned in February that first-quarter financial results would disappoint. Chip stocks Marvell Technology Group and Maxim Integrated Products also detracted, sidetracked by questions about the companies' options pricing policies and by the general market malaise. Our results also suffered from not owning computer makers Hewlett-Packard and Apple Computer, major index components that did well. On the positive side, favorable stock selection in the semiconductor segment offset some of the damage from overweighting the group. Additionally, performance was lifted by my picks in electronic equipment manufacturers, communication equipment and technology distributors. Heavily underweighting computer maker Dell was beneficial, as the index component struggled amid greater competition. Taiwan-based Motech Industries - with ties to the solar energy and fuel cell industries - performed well, as did Scottish analog chip maker Wolfson Microelectronics. Cohu, Motech and Wolfson were out-of-index holdings. A number of the stocks mentioned in this report were sold by period end.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 824.60 | $ 6.33 |
HypotheticalA | $ 1,000.00 | $ 1,017.85 | $ 7.00 |
Class T | |||
Actual | $ 1,000.00 | $ 823.70 | $ 7.46 |
HypotheticalA | $ 1,000.00 | $ 1,016.61 | $ 8.25 |
Class B | |||
Actual | $ 1,000.00 | $ 821.80 | $ 9.71 |
HypotheticalA | $ 1,000.00 | $ 1,014.13 | $ 10.74 |
Class C | |||
Actual | $ 1,000.00 | $ 821.60 | $ 9.71 |
HypotheticalA | $ 1,000.00 | $ 1,014.13 | $ 10.74 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 826.20 | $ 4.84 |
HypotheticalA | $ 1,000.00 | $ 1,019.49 | $ 5.36 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.40% |
Class T | 1.65% |
Class B | 2.15% |
Class C | 2.15% |
Institutional Class | 1.07% |
Annual Report
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
Broadcom Corp. Class A | 7.0 | 0.0 |
KLA-Tencor Corp. | 6.8 | 3.6 |
Intel Corp. | 5.8 | 5.9 |
Arrow Electronics, Inc. | 5.5 | 5.1 |
Maxim Integrated Products, Inc. | 5.0 | 4.7 |
Marvell Technology Group Ltd. | 4.8 | 4.7 |
Hon Hai Precision Industry Co. Ltd. (Foxconn) | 4.8 | 4.0 |
National Semiconductor Corp. | 4.5 | 5.9 |
Altera Corp. | 4.2 | 4.5 |
Lam Research Corp. | 4.1 | 3.2 |
52.5 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Semiconductors & Semiconductor Equipment | 79.1% | |
| Electronic Equipment & Instruments | 14.7% | |
| Communications Equipment | 2.8% | |
| Electrical Equipment | 2.1% | |
| All Others* | 1.3% | |
Top Industries (% of fund's net assets) | |||
As of January 31, 2006 | |||
| Semiconductors & Semiconductor Equipment | 74.1% | |
| Electronic Equipment & Instruments | 16.0% | |
| Electrical Equipment | 3.3% | |
| Computers & Peripherals | 1.6% | |
| Communications Equipment | 0.7% | |
| All Others* | 4.3% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 98.7% | |||
Shares | Value (Note 1) | ||
COMMUNICATIONS EQUIPMENT - 2.8% | |||
Communications Equipment - 2.8% | |||
CSR PLC (a) | 40,000 | $ 848,095 | |
ELECTRICAL EQUIPMENT - 2.1% | |||
Electrical Components & Equipment - 2.1% | |||
SolarWorld AG | 12,000 | 655,894 | |
ELECTRONIC EQUIPMENT & INSTRUMENTS - 14.7% | |||
Electronic Manufacturing Services - 6.1% | |||
Hon Hai Precision Industry Co. Ltd. (Foxconn) | 250,000 | 1,481,097 | |
Jabil Circuit, Inc. | 17,500 | 404,250 | |
1,885,347 | |||
Technology Distributors - 8.6% | |||
Arrow Electronics, Inc. (a) | 60,000 | 1,695,600 | |
Avnet, Inc. (a) | 30,000 | 546,000 | |
Wolfson Microelectronics PLC (a) | 50,000 | 422,179 | |
2,663,779 | |||
TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS | 4,549,126 | ||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 79.1% | |||
Semiconductor Equipment - 15.7% | |||
Cohu, Inc. | 45,000 | 683,100 | |
KLA-Tencor Corp. | 49,990 | 2,109,078 | |
Lam Research Corp. (a) | 30,030 | 1,248,948 | |
Tessera Technologies, Inc. (a) | 10,000 | 314,700 | |
Varian Semiconductor Equipment Associates, Inc. (a) | 15,000 | 475,500 | |
4,831,326 | |||
Semiconductors - 63.4% | |||
Altera Corp. (a) | 75,000 | 1,298,250 | |
Analog Devices, Inc. | 29,950 | 968,284 | |
Atheros Communications, Inc. (a) | 5,000 | 82,600 | |
Broadcom Corp. Class A (a) | 90,000 | 2,159,100 | |
Cypress Semiconductor Corp. (a) | 10,000 | 151,900 | |
Freescale Semiconductor, Inc. Class A (a) | 30,000 | 858,900 | |
Hittite Microwave Corp. | 10,000 | 407,500 | |
Holtek Semiconductor, Inc. | 201,990 | 362,701 | |
Intel Corp. | 99,990 | 1,799,820 | |
Linear Technology Corp. | 20,000 | 647,000 | |
LSI Logic Corp. (a) | 145,000 | 1,189,000 | |
Marvell Technology Group Ltd. (a) | 80,000 | 1,484,000 | |
Shares | Value (Note 1) | ||
Maxim Integrated Products, Inc. | 52,500 | $ 1,542,450 | |
National Semiconductor Corp. | 60,020 | 1,396,065 | |
ON Semiconductor Corp. (a) | 75,000 | 471,750 | |
Saifun Semiconductors Ltd. | 9,900 | 259,875 | |
Siliconware Precision Industries Co. Ltd. sponsored ADR (d) | 75,000 | 453,750 | |
Taiwan Semiconductor Manufacturing Co. Ltd. sponsored ADR | 92,699 | 803,700 | |
Texas Instruments, Inc. | 27,500 | 818,950 | |
Vimicro International Corp. sponsored ADR | 73,000 | 784,750 | |
Volterra Semiconductor Corp. (a) | 35,000 | 510,300 | |
Xilinx, Inc. | 55,000 | 1,115,950 | |
19,566,595 | |||
TOTAL SEMICONDUCTORS & SEMICONDUCTOR | 24,397,921 | ||
TOTAL COMMON STOCKS (Cost $33,918,314) | 30,451,036 | ||
Money Market Funds - 1.0% | |||
Fidelity Cash Central Fund, 5.3% (b) | 81,361 | 81,361 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 234,375 | 234,375 | |
TOTAL MONEY MARKET FUNDS (Cost $315,736) | 315,736 | ||
TOTAL INVESTMENT PORTFOLIO - 99.7% (Cost $34,234,050) | 30,766,772 | ||
NET OTHER ASSETS - 0.3% | 79,188 | ||
NET ASSETS - 100% | $ 30,845,960 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 36,358 |
Fidelity Securities Lending Cash Central Fund | 11,389 |
Total | $ 47,747 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 75.6% |
Taiwan | 10.1% |
Bermuda | 4.8% |
United Kingdom | 4.1% |
Cayman Islands | 2.5% |
Germany | 2.1% |
Others (individually less than 1%) | 0.8% |
100.0% |
Income Tax Information |
At July 31, 2006, the fund had a capital loss carryforward of approximately $11,946,726 of which $3,573,707, $5,827,947, $2,265,871 and $279,201 will expire on July 31, 2010, 2011, 2012 and 2013, respectively. |
See accompanying notes which are an integral part of the financial statements.
Electronics
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $206,625) - See accompanying schedule: Unaffiliated issuers (cost $33,918,314) | $ 30,451,036 | |
Affiliated Central Funds (cost $315,736) | 315,736 | |
Total Investments (cost $34,234,050) | $ 30,766,772 | |
Cash | 1,179 | |
Receivable for investments sold | 468,703 | |
Receivable for fund shares sold | 29,724 | |
Dividends receivable | 19,617 | |
Interest receivable | 780 | |
Receivable from investment adviser for expense reductions | 516 | |
Other receivables | 2,020 | |
Total assets | 31,289,311 | |
Liabilities | ||
Payable for fund shares redeemed | $ 135,610 | |
Accrued management fee | 14,826 | |
Distribution fees payable | 16,621 | |
Other affiliated payables | 12,379 | |
Other payables and accrued expenses | 29,540 | |
Collateral on securities loaned, at value | 234,375 | |
Total liabilities | 443,351 | |
Net Assets | $ 30,845,960 | |
Net Assets consist of: | ||
Paid in capital | $ 46,461,612 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | (12,148,448) | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | (3,467,204) | |
Net Assets | $ 30,845,960 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price | $ 7.38 | |
Maximum offering price per share (100/94.25 of $7.38) | $ 7.83 | |
Class T: | $ 7.29 | |
Maximum offering price per share (100/96.50 of $7.29) | $ 7.55 | |
Class B: | $ 7.10 | |
Class C: | $ 7.09 | |
Institutional Class: | $ 7.51 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 282,237 | |
Interest | 241 | |
Income from affiliated Central Funds | 47,747 | |
Total income | 330,225 | |
Expenses | ||
Management fee | $ 222,459 | |
Transfer agent fees | 159,451 | |
Distribution fees | 250,884 | |
Accounting and security lending fees | 17,469 | |
Independent trustees' compensation | 164 | |
Custodian fees and expenses | 10,752 | |
Registration fees | 47,681 | |
Audit | 41,473 | |
Legal | 741 | |
Miscellaneous | 441 | |
Total expenses before reductions | 751,515 | |
Expense reductions | (65,817) | 685,698 |
Net investment income (loss) | (355,473) | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 3,647,832 | |
Foreign currency transactions | (34,614) | |
Total net realized gain (loss) | 3,613,218 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (6,283,706) | |
Assets and liabilities in foreign currencies | 3,658 | |
Total change in net unrealized appreciation (depreciation) | (6,280,048) | |
Net gain (loss) | (2,666,830) | |
Net increase (decrease) in net assets resulting from operations | $ (3,022,303) | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ (355,473) | $ (591,417) |
Net realized gain (loss) | 3,613,218 | (807,962) |
Change in net unrealized appreciation (depreciation) | (6,280,048) | 9,643,693 |
Net increase (decrease) in net assets resulting from operations | (3,022,303) | 8,244,314 |
Share transactions - net increase (decrease) | (10,537,180) | (9,174,490) |
Redemption fees | 3,363 | 6,058 |
Total increase (decrease) in net assets | (13,556,120) | (924,118) |
Net Assets | ||
Beginning of period | 44,402,080 | 45,326,198 |
End of period | $ 30,845,960 | $ 44,402,080 |
See accompanying notes which are an integral part of the financial statements.
Electronics
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 8.04 | $ 6.58 | $ 6.59 | $ 5.57 | $ 9.62 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.04) | (.07) | (.09) | (.06) | (.10) |
Net realized and unrealized gain (loss) | (.62) | 1.53 | .08 | 1.07 | (3.96) |
Total from investment operations | (.66) | 1.46 | (.01) | 1.01 | (4.06) |
Redemption fees added to paid in capital C | - E | - E | - E | .01 | .01 |
Net asset value, end of period | $ 7.38 | $ 8.04 | $ 6.58 | $ 6.59 | $ 5.57 |
Total Return A, B | (8.21)% | 22.19% | (.15)% | 18.31% | (42.10)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.50% | 1.59% | 1.55% | 1.89% | 1.68% |
Expenses net of fee waivers, if any | 1.40% | 1.45% | 1.50% | 1.50% | 1.50% |
Expenses net of all reductions | 1.36% | 1.38% | 1.48% | 1.46% | 1.49% |
Net investment income (loss) | (.52)% | (.96)% | (1.15)% | (1.09)% | (1.14)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 7,916 | $ 11,397 | $ 8,374 | $ 8,116 | $ 4,912 |
Portfolio turnover rate | 95% | 128% | 84% | 66% | 58% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.96 | $ 6.53 | $ 6.56 | $ 5.55 | $ 9.62 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.06) | (.08) | (.11) | (.07) | (.12) |
Net realized and unrealized gain (loss) | (.61) | 1.51 | .08 | 1.07 | (3.96) |
Total from investment operations | (.67) | 1.43 | (.03) | 1.00 | (4.08) |
Redemption fees added to paid in capital C | - E | - E | - E | .01 | .01 |
Net asset value, end of period | $ 7.29 | $ 7.96 | $ 6.53 | $ 6.56 | $ 5.55 |
Total Return A, B | (8.42)% | 21.90% | (.46)% | 18.20% | (42.31)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.82% | 1.89% | 1.83% | 2.14% | 1.91% |
Expenses net of fee waivers, if any | 1.65% | 1.69% | 1.75% | 1.75% | 1.75% |
Expenses net of all reductions | 1.61% | 1.61% | 1.72% | 1.71% | 1.74% |
Net investment income (loss) | (.77)% | (1.20)% | (1.39)% | (1.33)% | (1.39)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 9,048 | $ 12,085 | $ 15,445 | $ 14,362 | $ 11,615 |
Portfolio turnover rate | 95% | 128% | 84% | 66% | 58% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.78 | $ 6.42 | $ 6.48 | $ 5.52 | $ 9.60 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.10) | (.12) | (.14) | (.10) | (.16) |
Net realized and unrealized gain (loss) | (.58) | 1.48 | .08 | 1.06 | (3.93) |
Total from investment operations | (.68) | 1.36 | (.06) | .96 | (4.09) |
Redemption fees added to paid in capital C | - E | - E | - E | - E | .01 |
Net asset value, end of period | $ 7.10 | $ 7.78 | $ 6.42 | $ 6.48 | $ 5.52 |
Total Return A, B | (8.74)% | 21.18% | (.93)% | 17.39% | (42.50)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.29% | 2.41% | 2.41% | 2.76% | 2.43% |
Expenses net of fee waivers, if any | 2.15% | 2.21% | 2.25% | 2.25% | 2.25% |
Expenses net of all reductions | 2.11% | 2.13% | 2.23% | 2.21% | 2.24% |
Net investment income (loss) | (1.27)% | (1.72)% | (1.90)% | (1.83)% | (1.89)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 6,123 | $ 8,963 | $ 8,498 | $ 11,335 | $ 8,362 |
Portfolio turnover rate | 95% | 128% | 84% | 66% | 58% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.77 | $ 6.41 | $ 6.47 | $ 5.51 | $ 9.59 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.10) | (.11) | (.14) | (.10) | (.16) |
Net realized and unrealized gain (loss) | (.58) | 1.47 | .08 | 1.06 | (3.93) |
Total from investment operations | (.68) | 1.36 | (.06) | .96 | (4.09) |
Redemption fees added to paid in capital C | - E | - E | - E | - E | .01 |
Net asset value, end of period | $ 7.09 | $ 7.77 | $ 6.41 | $ 6.47 | $ 5.51 |
Total Return A, B | (8.75)% | 21.22% | (.93)% | 17.42% | (42.54)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.26% | 2.31% | 2.24% | 2.52% | 2.34% |
Expenses net of fee waivers, if any | 2.15% | 2.18% | 2.24% | 2.25% | 2.25% |
Expenses net of all reductions | 2.11% | 2.11% | 2.21% | 2.21% | 2.24% |
Net investment income (loss) | (1.27)% | (1.69)% | (1.88)% | (1.83)% | (1.89)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 7,009 | $ 11,058 | $ 12,322 | $ 13,061 | $ 9,921 |
Portfolio turnover rate | 95% | 128% | 84% | 66% | 58% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Electronics
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 8.15 | $ 6.65 | $ 6.64 | $ 5.60 | $ 9.64 |
Income from Investment Operations | |||||
Net investment income (loss) B | (.02) | (.05) | (.06) | (.04) | (.08) |
Net realized and unrealized gain (loss) | (.62) | 1.55 | .07 | 1.07 | (3.97) |
Total from investment operations | (.64) | 1.50 | .01 | 1.03 | (4.05) |
Redemption fees added to paid in capital B | - D | - D | - D | .01 | .01 |
Net asset value, end of period | $ 7.51 | $ 8.15 | $ 6.65 | $ 6.64 | $ 5.60 |
Total Return A | (7.85)% | 22.56% | .15% | 18.57% | (41.91)% |
Ratios to Average Net Assets C | |||||
Expenses before reductions | 1.11% | 1.16% | 1.12% | 1.46% | 1.31% |
Expenses net of fee waivers, if any | 1.11% | 1.16% | 1.12% | 1.25% | 1.25% |
Expenses net of all reductions | 1.07% | 1.08% | 1.09% | 1.21% | 1.24% |
Net investment income (loss) | (.23)% | (.67)% | (.76)% | (.84)% | (.89)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 750 | $ 899 | $ 687 | $ 625 | $ 1,184 |
Portfolio turnover rate | 95% | 128% | 84% | 66% | 58% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. D Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Electronics Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund's investments in emerging markets can be subject to social, economic, regulatory, and political uncertainties and can be extremely volatile.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, net operating losses, capital loss carryforwards, losses deferred due to wash sales and excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 2,032,312 | |
Unrealized depreciation | (5,701,238) | |
Net unrealized appreciation (depreciation) | (3,668,926) | |
Capital loss carryforward | (11,946,726) | |
Cost for federal income tax purposes | $ 34,435,698 |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $36,237,765 and $46,176,803, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Electronics
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 25,396 | $ 202 |
Class T | .25% | .25% | 55,440 | 84 |
Class B | .75% | .25% | 79,574 | 59,697 |
Class C | .75% | .25% | 90,474 | 12,446 |
$ 250,884 | $ 72,429 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 5,615 |
Class T | 5,451 |
Class B* | 31,616 |
Class C* | 3,994 |
$ 46,676 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 38,413 | .38 |
Class T | 49,540 | .45 |
Class B | 33,671 | .42 |
Class C | 35,564 | .39 |
Institutional Class | 2,263 | .24 |
$ 159,451 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $2,937 for the period.
Annual Report
Notes to Financial Statements - continued
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $116 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $11,389.
7. Expense Reductions.
FMR voluntarily agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
The following classes were in reimbursement during the period:
Expense | Reimbursement | |
Class A | 1.40% | $ 9,910 |
Class T | 1.65% | 18,415 |
Class B | 2.15% | 11,255 |
Class C | 2.15% | 10,001 |
$ 49,581 |
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $16,236 for the period.
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
Electronics
9. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 435,594 | 810,216 | $ 3,620,302 | $ 5,985,601 |
Shares redeemed | (781,896) | (665,267) | (6,327,084) | (4,709,912) |
Net increase (decrease) | (346,302) | 144,949 | $ (2,706,782) | $ 1,275,689 |
Class T | ||||
Shares sold | 251,455 | 393,825 | $ 2,041,805 | $ 2,720,747 |
Shares redeemed | (529,920) | (1,240,792) | (4,209,309) | (8,651,718) |
Net increase (decrease) | (278,465) | (846,967) | $ (2,167,504) | $ (5,930,971) |
Class B | ||||
Shares sold | 89,856 | 424,624 | $ 712,048 | $ 2,916,025 |
Shares redeemed | (378,696) | (596,931) | (2,960,769) | (4,165,250) |
Net increase (decrease) | (288,840) | (172,307) | $ (2,248,721) | $ (1,249,225) |
Class C | ||||
Shares sold | 184,474 | 482,588 | $ 1,462,697 | $ 3,305,584 |
Shares redeemed | (618,382) | (982,233) | (4,840,037) | (6,627,459) |
Net increase (decrease) | (433,908) | (499,645) | $ (3,377,340) | $ (3,321,875) |
Institutional Class | ||||
Shares sold | 66,399 | 28,776 | $ 577,320 | $ 204,413 |
Shares redeemed | (76,867) | (21,842) | (614,153) | (152,521) |
Net increase (decrease) | (10,468) | 6,934 | $ (36,833) | $ 51,892 |
Annual Report
Advisor Financial Services Fund - Class A, T, B, and C
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow. Returns reflect the conversion of Class B shares to Class A shares after a maximum of seven years.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of |
Class A (incl. 5.75% sales charge) | 3.98% | 5.29% | 11.55% |
Class T (incl. 3.50% sales charge) | 6.25% | 5.56% | 11.56% |
Class B (incl. contingent deferred sales charge) B | 4.52% | 5.44% | 11.62% |
Class C (incl. contingent deferred sales charge) C | 8.58% | 5.83% | 11.44% |
A From September 3, 1996.
B Class B shares bear a 1.00% 12b-1 fee. The initial offering of Class B shares took place on March 3, 1997. Returns prior to March 3, 1997 are those of Class T and reflect a 0.50% 12b-1 fee. Had Class B shares' 12b-1 fee been reflected, returns prior to March 3, 1997 would have been lower. Class B shares' contingent deferred sales charges included in the past one year, past five years, and life of fund total return figures are 5%, 2%, and 0%, respectively.
C Class C shares bear a 1.00% 12b-1 fee. The initial offering of Class C shares took place on November 3, 1997. Returns between March 3, 1997 and November 3, 1997 are those of Class B shares and reflect Class B shares' 1.00% 12b-1 fee. Returns prior to March 3, 1997 are those of Class T and reflect a 0.50% 12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns prior to March 3, 1997 would have been lower. Class C shares' contingent deferred sales charges included in the past one year, past five years, and life of fund total return figures are 1%, 0%, and 0%, respectively.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Financial Services Fund - Class T on September 3, 1996, when the fund started, and the current 3.50% sales charge was paid. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Advisor Financial Services Fund
Management's Discussion of Fund Performance
Comments from Charles Hebard, Portfolio Manager of Fidelity® Advisor Financial Services Fund
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
During the past year, the fund's Class A, Class T, Class B and Class C shares returned 10.32%, 10.11%, 9.52% and 9.58%, respectively (excluding sales charges). These results beat the S&P 500 but trailed the Goldman Sachs® Financial Services Index, which rose 12.61%. The fund lagged the sector benchmark primarily because of its significant holdings in weak-performing multi-line insurance and reinsurance companies. Stock selection in specialized finance and life/health insurance also detracted. Conversely, an overweighting and favorable security selection in investment banking and brokerage aided results, as did some good picks in diversified capital markets and diversified financial services. Insurers dominated the list of investments that detracted relative to the index. Bermuda-based property-and-casualty reinsurer Endurance Specialty Holdings was the single biggest disappointment. Investors sold the stock because of concerns about future revenue growth and fears that the hurricane season could cause significant underwriting costs for the third consecutive year. Scottish Re Group, a life reinsurance company, fell when higher-than-expected death claims increased costs and negatively affected earnings. As a result of the disappointing earnings, the company's CEO was ousted and the company put itself up for sale. The position was sold. American International Group, the fund's largest holding, declined after a disappointing first-quarter earnings report. First Marblehead, which specializes in securitizing student loans, also detracted from results. The fund had a position in the company early in the fiscal year when its stock price fell amid concerns about its earnings prospects and the resignation of its CEO. I sold the stock, which turned out to be a bad decision, as it rebounded later in the period. The three biggest relative contributors all were involved in the securities markets, which enjoyed healthy growth in trading volumes. Online broker E*TRADE was the top individual contributor, followed by UBS - the Swiss financial giant - and IntercontinentalExchange, which operates an electronic exchange of energy futures.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Advisor Financial Services Fund
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 1,002.10 | $ 6.11 |
HypotheticalA | $ 1,000.00 | $ 1,018.70 | $ 6.16 |
Class T | |||
Actual | $ 1,000.00 | $ 1,001.30 | $ 7.24 |
HypotheticalA | $ 1,000.00 | $ 1,017.55 | $ 7.30 |
Class B | |||
Actual | $ 1,000.00 | $ 998.70 | $ 9.81 |
HypotheticalA | $ 1,000.00 | $ 1,014.98 | $ 9.89 |
Class C | |||
Actual | $ 1,000.00 | $ 999.10 | $ 9.57 |
HypotheticalA | $ 1,000.00 | $ 1,015.22 | $ 9.64 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 1,004.20 | $ 4.27 |
HypotheticalA | $ 1,000.00 | $ 1,020.53 | $ 4.31 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.23% |
Class T | 1.46% |
Class B | 1.98% |
Class C | 1.93% |
Institutional Class | .86% |
Annual Report
Advisor Financial Services Fund
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
American International Group, Inc. | 8.5 | 8.1 |
Bank of America Corp. | 6.6 | 5.4 |
JPMorgan Chase & Co. | 5.5 | 5.0 |
Wachovia Corp. | 4.2 | 3.5 |
Wells Fargo & Co. | 3.7 | 3.4 |
Merrill Lynch & Co., Inc. | 2.9 | 3.5 |
Endurance Specialty Holdings Ltd. | 2.7 | 1.9 |
ACE Ltd. | 2.6 | 2.6 |
Platinum Underwriters Holdings Ltd. | 2.3 | 1.0 |
American Express Co. | 2.1 | 2.6 |
41.1 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Insurance | 29.2% | |
| Commercial Banks | 18.9% | |
| Capital Markets | 18.0% | |
| Diversified Financial Services | 16.2% | |
| Thrifts & Mortgage Finance | 7.9% | |
| All Others* | 9.8% | |
As of January 31, 2006 | |||
| Insurance | 29.5% | |
| Commercial Banks | 23.7% | |
| Capital Markets | 19.5% | |
| Diversified Financial Services | 8.8% | |
| Thrifts & Mortgage Finance | 8.3% | |
| All Others* | 10.2% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Advisor Financial Services Fund
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 99.4% | |||
Shares | Value (Note 1) | ||
CAPITAL MARKETS - 18.0% | |||
Asset Management & Custody Banks - 6.2% | |||
Affiliated Managers Group, Inc. (a)(d) | 10,600 | $ 970,430 | |
American Capital Strategies Ltd. (d) | 55,700 | 1,949,500 | |
Ameriprise Financial, Inc. | 30,540 | 1,362,084 | |
Bank of New York Co., Inc. | 57,860 | 1,944,675 | |
Federated Investors, Inc. Class B (non-vtg.) | 13,900 | 431,039 | |
Franklin Resources, Inc. | 41,600 | 3,804,320 | |
Investors Financial Services Corp. | 81,300 | 3,643,866 | |
Legg Mason, Inc. | 13,400 | 1,118,498 | |
Northern Trust Corp. | 39,100 | 2,232,610 | |
Nuveen Investments, Inc. Class A | 25,300 | 1,201,497 | |
State Street Corp. | 72,600 | 4,360,356 | |
Technology Investment Capital Corp. | 54,800 | 787,476 | |
23,806,351 | |||
Diversified Capital Markets - 1.1% | |||
UBS AG (NY Shares) | 77,300 | 4,205,120 | |
Investment Banking & Brokerage - 10.7% | |||
Bear Stearns Companies, Inc. | 10,400 | 1,475,448 | |
Charles Schwab Corp. | 146,600 | 2,328,008 | |
Daiwa Securities Group, Inc. | 62,000 | 692,734 | |
E*TRADE Financial Corp. (a) | 264,900 | 6,174,819 | |
Goldman Sachs Group, Inc. | 20,400 | 3,116,100 | |
KKR Private Equity Investors, L.P. Restricted Depositary Units (e) | 39,600 | 930,600 | |
Lazard Ltd. Class A | 38,700 | 1,511,235 | |
Lehman Brothers Holdings, Inc. | 15,300 | 993,735 | |
MCF Corp. (a) | 387,200 | 313,632 | |
Merrill Lynch & Co., Inc. | 155,800 | 11,345,356 | |
Morgan Stanley | 104,700 | 6,962,550 | |
Nikko Cordial Corp. | 47,000 | 560,393 | |
Nomura Holdings, Inc. | 49,300 | 878,526 | |
optionsXpress Holdings, Inc. | 42,600 | 1,115,268 | |
SBI E*TRADE Securities Co. Ltd. | 264 | 352,307 | |
TD Ameritrade Holding Corp. | 56,000 | 917,280 | |
TradeStation Group, Inc. (a) | 120,661 | 1,764,064 | |
41,432,055 | |||
TOTAL CAPITAL MARKETS | 69,443,526 | ||
COMMERCIAL BANKS - 18.9% | |||
Diversified Banks - 15.4% | |||
ABN-AMRO Holding NV sponsored ADR | 35,000 | 970,550 | |
Absa Group Ltd. | 43,200 | 637,485 | |
Banco Bilbao Vizcaya Argentaria SA | 51,000 | 1,087,830 | |
Banco Popolare di Verona e Novara | 101,600 | 2,894,066 | |
Bank Hapoalim BM (Reg.) | 146,900 | 656,903 | |
Bank of Montreal | 65,900 | 3,724,200 | |
Shares | Value (Note 1) | ||
HDFC Bank Ltd. sponsored ADR | 27,700 | $ 1,499,955 | |
HSBC Holdings PLC: | |||
(United Kingdom) (Reg.) | 73,800 | 1,342,570 | |
sponsored ADR | 14,700 | 1,337,112 | |
ICICI Bank Ltd. | 104,744 | 1,280,017 | |
Kookmin Bank | 13,930 | 1,216,314 | |
Mizrahi Tefahot Bank Ltd. (a) | 96,900 | 568,118 | |
Standard Chartered PLC (United Kingdom) | 81,387 | 2,058,554 | |
State Bank of India | 42,986 | 877,598 | |
Toronto-Dominion Bank | 46,200 | 2,357,768 | |
U.S. Bancorp, Delaware | 169,900 | 5,436,800 | |
Unicredito Italiano Spa | 141,900 | 1,092,067 | |
Wachovia Corp. | 300,704 | 16,126,756 | |
Wells Fargo & Co. | 198,000 | 14,323,320 | |
59,487,983 | |||
Regional Banks - 3.5% | |||
Cathay General Bancorp | 62,113 | 2,282,653 | |
Center Financial Corp., California | 57,600 | 1,435,392 | |
City National Corp. | 10,100 | 673,771 | |
East West Bancorp, Inc. | 16,477 | 664,847 | |
Kansai Urban Banking Corp. | 202,000 | 796,372 | |
M&T Bank Corp. | 8,600 | 1,048,512 | |
Nara Bancorp, Inc. | 39,459 | 726,440 | |
North Fork Bancorp, Inc., New York | 38,334 | 1,086,002 | |
SVB Financial Group (a) | 50,000 | 2,241,000 | |
The Keiyo Bank Ltd. | 89,000 | 503,803 | |
UCBH Holdings, Inc. | 44,200 | 737,256 | |
UnionBanCal Corp. | 23,500 | 1,452,065 | |
13,648,113 | |||
TOTAL COMMERCIAL BANKS | 73,136,096 | ||
CONSUMER FINANCE - 4.2% | |||
Consumer Finance - 4.2% | |||
American Express Co. | 152,100 | 7,918,326 | |
Capital One Financial Corp. (d) | 41,830 | 3,235,551 | |
Dollar Financial Corp. (a) | 114,533 | 2,299,823 | |
SLM Corp. | 52,500 | 2,640,750 | |
16,094,450 | |||
DIVERSIFIED FINANCIAL SERVICES - 16.2% | |||
Other Diversifed Financial Services - 13.9% | |||
Bank of America Corp. | 492,572 | 25,382,235 | |
Citigroup, Inc. | 118,869 | 5,742,561 | |
FirstRand Ltd. | 252,000 | 626,427 | |
ING Groep NV sponsored ADR | 21,600 | 874,800 | |
JPMorgan Chase & Co. | 465,694 | 21,244,960 | |
53,870,983 | |||
Specialized Finance - 2.3% | |||
Asset Acceptance Capital Corp. (a) | 54,261 | 986,465 | |
CBOT Holdings, Inc. Class A | 8,000 | 1,002,400 | |
CIT Group, Inc. | 16,000 | 734,560 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
DIVERSIFIED FINANCIAL SERVICES - CONTINUED | |||
Specialized Finance - continued | |||
IntercontinentalExchange, Inc. | 38,600 | $ 2,300,560 | |
Marlin Business Services Corp. (a) | 36,749 | 762,909 | |
NETeller PLC (a) | 147,300 | 1,045,622 | |
The NASDAQ Stock Market, Inc. (a) | 72,400 | 1,993,172 | |
8,825,688 | |||
TOTAL DIVERSIFIED FINANCIAL SERVICES | 62,696,671 | ||
HOUSEHOLD DURABLES - 0.4% | |||
Homebuilding - 0.4% | |||
D.R. Horton, Inc. | 81,100 | 1,737,973 | |
INSURANCE - 29.2% | |||
Insurance Brokers - 0.6% | |||
National Financial Partners Corp. | 32,000 | 1,441,280 | |
Willis Group Holdings Ltd. | 29,400 | 956,382 | |
2,397,662 | |||
Life & Health Insurance - 4.0% | |||
AFLAC, Inc. | 70,300 | 3,103,042 | |
Lincoln National Corp. | 25,000 | 1,417,000 | |
MetLife, Inc. | 76,100 | 3,957,200 | |
Protective Life Corp. | 9,500 | 439,945 | |
Prudential Financial, Inc. | 41,400 | 3,255,696 | |
Shin Kong Financial Holding Co. Ltd. | 776,000 | 806,902 | |
Sun Life Financial, Inc. | 62,800 | 2,396,900 | |
15,376,685 | |||
Multi-Line Insurance - 10.0% | |||
American International Group, Inc. | 543,760 | 32,989,916 | |
Hartford Financial Services Group, Inc. | 51,000 | 4,326,840 | |
HCC Insurance Holdings, Inc. | 42,150 | 1,285,154 | |
38,601,910 | |||
Property & Casualty Insurance - 8.3% | |||
ACE Ltd. | 196,900 | 10,146,257 | |
Allied World Assurance Holdings Ltd. | 27,900 | 973,710 | |
Allstate Corp. | 58,400 | 3,318,288 | |
Aspen Insurance Holdings Ltd. | 201,500 | 4,755,400 | |
Axis Capital Holdings Ltd. | 48,800 | 1,442,528 | |
Berkshire Hathaway, Inc. Class B (a) | 754 | 2,297,438 | |
MBIA, Inc. | 35,100 | 2,064,231 | |
The St. Paul Travelers Companies, Inc. | 114,900 | 5,262,420 | |
XL Capital Ltd. Class A | 32,800 | 2,089,360 | |
32,349,632 | |||
Reinsurance - 6.3% | |||
Endurance Specialty Holdings Ltd. | 340,570 | 10,339,705 | |
Everest Re Group Ltd. | 10,800 | 1,021,788 | |
Shares | Value (Note 1) | ||
IPC Holdings Ltd. | 5,600 | $ 161,000 | |
Max Re Capital Ltd. | 78,062 | 1,756,395 | |
PartnerRe Ltd. | 16,600 | 1,031,358 | |
Platinum Underwriters Holdings Ltd. | 313,000 | 8,854,770 | |
Swiss Reinsurance Co. (Reg.) | 15,029 | 1,080,784 | |
24,245,800 | |||
TOTAL INSURANCE | 112,971,689 | ||
REAL ESTATE INVESTMENT TRUSTS - 4.3% | |||
Office REITs - 0.8% | |||
Digital Realty Trust, Inc. | 45,600 | 1,246,248 | |
Duke Realty Corp. | 23,000 | 856,980 | |
Reckson Associates Realty Corp. | 25,400 | 1,131,062 | |
3,234,290 | |||
Residential REITs - 1.6% | |||
Equity Lifestyle Properties, Inc. | 14,200 | 610,174 | |
Equity Residential (SBI) | 77,100 | 3,585,921 | |
United Dominion Realty Trust, Inc. (SBI) | 69,600 | 1,938,360 | |
6,134,455 | |||
Retail REITs - 1.9% | |||
CBL & Associates Properties, Inc. | 24,292 | 951,275 | |
Developers Diversified Realty Corp. | 19,900 | 1,050,322 | |
General Growth Properties, Inc. | 14,800 | 675,472 | |
Kimco Realty Corp. | 20,600 | 808,344 | |
Simon Property Group, Inc. | 42,700 | 3,652,131 | |
7,137,544 | |||
TOTAL REAL ESTATE INVESTMENT TRUSTS | 16,506,289 | ||
REAL ESTATE MANAGEMENT & DEVELOPMENT - 0.3% | |||
Real Estate Management & Development - 0.3% | |||
Mitsui Fudosan Co. Ltd. | 63,000 | 1,338,029 | |
THRIFTS & MORTGAGE FINANCE - 7.9% | |||
Thrifts & Mortgage Finance - 7.9% | |||
Countrywide Financial Corp. | 106,454 | 3,814,247 | |
Doral Financial Corp. | 24,300 | 124,416 | |
Downey Financial Corp. | 7,500 | 497,625 | |
Fannie Mae | 155,735 | 7,461,264 | |
Freddie Mac | 33,900 | 1,961,454 | |
Golden West Financial Corp., Delaware | 55,400 | 4,080,764 | |
Hudson City Bancorp, Inc. | 208,475 | 2,703,921 | |
MGIC Investment Corp. | 16,900 | 961,779 | |
Radian Group, Inc. | 20,655 | 1,270,902 | |
Sovereign Bancorp, Inc. | 79,695 | 1,644,905 | |
The PMI Group, Inc. | 28,200 | 1,197,372 | |
W Holding Co., Inc. | 109,774 | 578,509 | |
Washington Mutual, Inc. (d) | 93,900 | 4,197,330 | |
30,494,488 | |||
TOTAL COMMON STOCKS (Cost $290,361,917) | 384,419,211 | ||
Money Market Funds - 2.5% | |||
Shares | Value (Note 1) | ||
Fidelity Cash Central Fund, 5.3% (b) | 2,120,917 | $ 2,120,917 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 7,335,303 | 7,335,303 | |
TOTAL MONEY MARKET FUNDS (Cost $9,456,220) | 9,456,220 | ||
TOTAL INVESTMENT PORTFOLIO - 101.9% (Cost $299,818,137) | 393,875,431 | ||
NET OTHER ASSETS - (1.9)% | (7,163,226) | ||
NET ASSETS - 100% | $ 386,712,205 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
(e) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $930,600 or 0.2% of net assets. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
KKR Private Equity Investors, L.P. Restricted Depositary Units | 5/3/06 | $ 990,000 |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 64,483 |
Fidelity Securities Lending Cash Central Fund | 77,651 |
Total | $ 142,134 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 78.7% |
Bermuda | 8.4% |
Cayman Islands | 2.6% |
Canada | 2.2% |
United Kingdom | 1.6% |
Switzerland | 1.4% |
Japan | 1.2% |
Italy | 1.1% |
Others (individually less than 1%) | 2.8% |
100.0% |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Financial Services Fund
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $7,160,356) - See accompanying schedule: Unaffiliated issuers (cost $290,361,917) | $ 384,419,211 | |
Affiliated Central Funds (cost $9,456,220) | 9,456,220 | |
Total Investments (cost $299,818,137) | $ 393,875,431 | |
Cash | 30 | |
Foreign currency held at value (cost $4) | 4 | |
Receivable for investments sold | 909,274 | |
Receivable for fund shares sold | 703,692 | |
Dividends receivable | 184,007 | |
Interest receivable | 3,140 | |
Prepaid expenses | 648 | |
Other receivables | 21,424 | |
Total assets | 395,697,650 | |
Liabilities | ||
Payable for fund shares redeemed | $ 1,101,650 | |
Accrued management fee | 180,805 | |
Distribution fees payable | 210,610 | |
Other affiliated payables | 117,914 | |
Other payables and accrued expenses | 39,163 | |
Collateral on securities loaned, at value | 7,335,303 | |
Total liabilities | 8,985,445 | |
Net Assets | $ 386,712,205 | |
Net Assets consist of: | ||
Paid in capital | $ 261,953,470 | |
Undistributed net investment income | 1,145,387 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 29,556,426 | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | 94,056,922 | |
Net Assets | $ 386,712,205 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price | $ 23.34 | |
Maximum offering price per share (100/94.25 of $23.34) | $ 24.76 | |
Class T: | $ 23.26 | |
Maximum offering price per share (100/96.50 of $23.26) | $ 24.10 | |
Class B: | $ 22.75 | |
Class C: | $ 22.74 | |
Institutional Class: | $ 23.63 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Financial Services Fund
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 8,465,105 | |
Interest | 156 | |
Income from affiliated Central Funds | 142,134 | |
Total income | 8,607,395 | |
Expenses | ||
Management fee | $ 2,319,534 | |
Transfer agent fees | 1,340,435 | |
Distribution fees | 2,788,064 | |
Accounting and security lending fees | 171,050 | |
Independent trustees' compensation | 1,674 | |
Custodian fees and expenses | 40,348 | |
Registration fees | 56,140 | |
Audit | 46,225 | |
Legal | 4,957 | |
Miscellaneous | 5,662 | |
Total expenses before reductions | 6,774,089 | |
Expense reductions | (63,514) | 6,710,575 |
Net investment income (loss) | 1,896,820 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers (net of foreign taxes of $121,560) | 35,887,417 | |
Foreign currency transactions | (19,662) | |
Total net realized gain (loss) | 35,867,755 | |
Change in net unrealized appreciation (depreciation) on: Investment securities (net of decrease in deferred foreign taxes of $89,524) | 1,112,625 | |
Assets and liabilities in foreign currencies | (488) | |
Total change in net unrealized appreciation (depreciation) | 1,112,137 | |
Net gain (loss) | 36,979,892 | |
Net increase (decrease) in net assets resulting from operations | $ 38,876,712 | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 1,896,820 | $ 2,004,509 |
Net realized gain (loss) | 35,867,755 | 35,584,689 |
Change in net unrealized appreciation (depreciation) | 1,112,137 | 15,327,421 |
Net increase (decrease) in net assets resulting from operations | 38,876,712 | 52,916,619 |
Distributions to shareholders from net investment income | (1,881,748) | (623,607) |
Distributions to shareholders from net realized gain | (29,223,665) | (38,323,892) |
Total distributions | (31,105,413) | (38,947,499) |
Share transactions - net increase (decrease) | (47,322,942) | (69,921,968) |
Redemption fees | 8,919 | 19,265 |
Total increase (decrease) in net assets | (39,542,724) | (55,933,583) |
Net Assets | ||
Beginning of period | 426,254,929 | 482,188,512 |
End of period (including undistributed net investment income of $1,145,387 and undistributed net investment income of $1,342,292, respectively) | $ 386,712,205 | $ 426,254,929 |
See accompanying notes which are an integral part of the financial statements.
Financial Services
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 23.01 | $ 22.17 | $ 19.98 | $ 17.83 | $ 20.45 |
Income from Investment Operations | |||||
Net investment income (loss) C | .20 | .19 | .14 | .16 | .12 |
Net realized and unrealized gain (loss) | 2.02 | 2.48 | 2.20 | 2.07 | (2.60) |
Total from investment operations | 2.22 | 2.67 | 2.34 | 2.23 | (2.48) |
Distributions from net investment income | (.26) | (.07) | (.15) | (.08) | (.14) |
Distributions from net realized gain | (1.63) | (1.76) | - | - | - |
Total distributions | (1.89) | (1.83) | (.15) | (.08) | (.14) |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 23.34 | $ 23.01 | $ 22.17 | $ 19.98 | $ 17.83 |
Total Return A, B | 10.32% | 12.60% | 11.76% | 12.57% | (12.16)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.25% | 1.26% | 1.27% | 1.31% | 1.27% |
Expenses net of fee waivers, if any | 1.25% | 1.26% | 1.27% | 1.31% | 1.27% |
Expenses net of all reductions | 1.23% | 1.23% | 1.25% | 1.27% | 1.23% |
Net investment income (loss) | .87% | .88% | .63% | .89% | .60% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 85,356 | $ 68,012 | $ 58,222 | $ 57,255 | $ 60,475 |
Portfolio turnover rate | 33% | 61% | 74% | 60% | 125% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 22.87 | $ 22.07 | $ 19.90 | $ 17.77 | $ 20.38 |
Income from Investment Operations | |||||
Net investment income (loss) C | .15 | .14 | .09 | .12 | .07 |
Net realized and unrealized gain (loss) | 2.02 | 2.47 | 2.19 | 2.07 | (2.59) |
Total from investment operations | 2.17 | 2.61 | 2.28 | 2.19 | (2.52) |
Distributions from net investment income | (.15) | (.05) | (.11) | (.06) | (.09) |
Distributions from net realized gain | (1.63) | (1.76) | - | - | - |
Total distributions | (1.78) | (1.81) | (.11) | (.06) | (.09) |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 23.26 | $ 22.87 | $ 22.07 | $ 19.90 | $ 17.77 |
Total Return A, B | 10.11% | 12.37% | 11.49% | 12.37% | (12.39)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.47% | 1.48% | 1.50% | 1.53% | 1.49% |
Expenses net of fee waivers, if any | 1.47% | 1.48% | 1.50% | 1.53% | 1.49% |
Expenses net of all reductions | 1.46% | 1.46% | 1.48% | 1.49% | 1.45% |
Net investment income (loss) | .65% | .66% | .41% | .67% | .38% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 113,344 | $ 128,388 | $ 144,887 | $ 157,238 | $ 169,429 |
Portfolio turnover rate | 33% | 61% | 74% | 60% | 125% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 22.33 | $ 21.65 | $ 19.53 | $ 17.50 | $ 20.08 |
Income from Investment Operations | |||||
Net investment income (loss) C | .03 | .03 | (.02) | .03 | (.03) |
Net realized and unrealized gain (loss) | 1.97 | 2.41 | 2.16 | 2.03 | (2.55) |
Total from investment operations | 2.00 | 2.44 | 2.14 | 2.06 | (2.58) |
Distributions from net investment income | (.01) | - | (.02) | (.03) | - |
Distributions from net realized gain | (1.57) | (1.76) | - | - | - |
Total distributions | (1.58) | (1.76) | (.02) | (.03) | - |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 22.75 | $ 22.33 | $ 21.65 | $ 19.53 | $ 17.50 |
Total Return A, B | 9.52% | 11.78% | 10.96% | 11.80% | (12.85)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.99% | 2.00% | 2.02% | 2.03% | 2.01% |
Expenses net of fee waivers, if any | 1.99% | 2.00% | 2.02% | 2.03% | 2.01% |
Expenses net of all reductions | 1.98% | 1.98% | 2.00% | 1.99% | 1.97% |
Net investment income (loss) | .13% | .14% | (.11)% | .17% | (.14)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 113,652 | $ 145,046 | $ 179,873 | $ 193,373 | $ 206,460 |
Portfolio turnover rate | 33% | 61% | 74% | 60% | 125% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 22.34 | $ 21.65 | $ 19.53 | $ 17.49 | $ 20.05 |
Income from Investment Operations | |||||
Net investment income (loss) C | .04 | .04 | (.01) | .04 | (.02) |
Net realized and unrealized gain (loss) | 1.98 | 2.42 | 2.15 | 2.03 | (2.54) |
Total from investment operations | 2.02 | 2.46 | 2.14 | 2.07 | (2.56) |
Distributions from net investment income | (.02) | (.01) | (.02) | (.03) | - |
Distributions from net realized gain | (1.60) | (1.76) | - | - | - |
Total distributions | (1.62) | (1.77) | (.02) | (.03) | - |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 22.74 | $ 22.34 | $ 21.65 | $ 19.53 | $ 17.49 |
Total Return A, B | 9.58% | 11.88% | 10.96% | 11.86% | (12.77)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.94% | 1.95% | 1.97% | 1.99% | 1.96% |
Expenses net of fee waivers, if any | 1.94% | 1.95% | 1.97% | 1.99% | 1.96% |
Expenses net of all reductions | 1.93% | 1.92% | 1.95% | 1.95% | 1.92% |
Net investment income (loss) | .18% | .19% | (.06)% | .22% | (.09)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 62,469 | $ 72,181 | $ 86,199 | $ 97,434 | $ 107,899 |
Portfolio turnover rate | 33% | 61% | 74% | 60% | 125% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Financial Services
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 23.29 | $ 22.37 | $ 20.17 | $ 17.95 | $ 20.59 |
Income from Investment Operations | |||||
Net investment income (loss) B | .29 | .29 | .23 | .24 | .19 |
Net realized and unrealized gain (loss) | 2.05 | 2.50 | 2.21 | 2.09 | (2.62) |
Total from investment operations | 2.34 | 2.79 | 2.44 | 2.33 | (2.43) |
Distributions from net investment income | (.37) | (.11) | (.24) | (.11) | (.21) |
Distributions from net realized gain | (1.63) | (1.76) | - | - | - |
Total distributions | (2.00) | (1.87) | (.24) | (.11) | (.21) |
Redemption fees added to paid in capital B | - D | - D | - D | - D | - D |
Net asset value, end of period | $ 23.63 | $ 23.29 | $ 22.37 | $ 20.17 | $ 17.95 |
Total Return A | 10.78% | 13.06% | 12.18% | 13.07% | (11.84)% |
Ratios to Average Net Assets C | |||||
Expenses before reductions | .86% | .86% | .88% | .88% | .89% |
Expenses net of fee waivers, if any | .86% | .86% | .88% | .88% | .89% |
Expenses net of all reductions | .85% | .84% | .85% | .84% | .85% |
Net investment income (loss) | 1.26% | 1.28% | 1.03% | 1.32% | .98% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 11,892 | $ 12,629 | $ 13,008 | $ 14,539 | $ 15,283 |
Portfolio turnover rate | 33% | 61% | 74% | 60% | 125% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. D Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Financial Services Fund (the Fund) is a fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund's investments in emerging markets can be subject to social, economic, regulatory, and political uncertainties and can be extremely volatile.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, certain foreign taxes, passive foreign investment companies (PFIC), partnerships, losses deferred due to wash sales and excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 102,554,776 | |
Unrealized depreciation | (9,632,732) | |
Net unrealized appreciation (depreciation) | 92,922,044 | |
Undistributed ordinary income | 2,317,750 | |
Undistributed long-term capital gain | 26,302,676 | |
Cost for federal income tax purposes | $ 300,953,387 |
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Ordinary Income | $ 4,156,447 | $ 2,154,145 |
Long-term Capital Gains | 26,948,966 | 36,793,354 |
Total | $ 31,105,413 | $ 38,947,499 |
New Accounting Pronouncements. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
Restricted Securities. The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.
Financial Services
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $136,792,947 and $213,390,159, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 190,660 | $ 1,678 |
Class T | .25% | .25% | 604,744 | 1,884 |
Class B | .75% | .25% | 1,315,583 | 987,176 |
Class C | .75% | .25% | 677,077 | 27,596 |
$ 2,788,064 | $ 1,018,334 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 23,881 |
Class T | 10,992 |
Class B* | 212,378 |
Class C* | 3,102 |
$ 250,353 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 267,960 | .35 |
Class T | 391,655 | .32 |
Class B | 453,838 | .34 |
Class C | 200,451 | .30 |
Institutional Class | 26,531 | .22 |
$ 1,340,435 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $2,327 for the period.
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $1,187 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $77,651.
7. Expense Reductions.
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $63,074 for the period. In addition, through arrangements with each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, credits reduced each class' transfer agent expense as noted in the table below:
Transfer Agent | ||
Class A | $ 272 | |
Class B | 168 | |
$ 440 |
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
Financial Services
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2006 | 2005 |
From net investment income | ||
Class A | $ 793,007 | $ 192,609 |
Class T | 784,601 | 326,696 |
Class B | 62,350 | - |
Class C | 47,101 | 38,785 |
Institutional Class | 194,689 | 65,517 |
Total | $ 1,881,748 | $ 623,607 |
From net realized gain | ||
Class A | $ 4,952,004 | $ 4,769,034 |
Class T | 8,720,889 | 11,388,557 |
Class B | 9,718,109 | 14,295,898 |
Class C | 4,968,829 | 6,852,951 |
Institutional Class | 863,834 | 1,017,452 |
Total | $ 29,223,665 | $ 38,323,892 |
10. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 1,351,439 | 1,159,503 | $ 31,220,975 | $ 25,692,274 |
Reinvestment of distributions | 234,688 | 198,478 | 5,118,429 | 4,334,590 |
Shares redeemed | (885,268) | (1,028,419) | (20,266,228) | (22,675,155) |
Net increase (decrease) | 700,859 | 329,562 | $ 16,073,176 | $ 7,351,709 |
Class T | ||||
Shares sold | 426,844 | 420,019 | $ 9,717,059 | $ 9,262,219 |
Reinvestment of distributions | 409,216 | 504,911 | 8,897,438 | 10,965,915 |
Shares redeemed | (1,576,453) | (1,875,686) | (35,989,546) | (41,342,266) |
Net increase (decrease) | (740,393) | (950,756) | $ (17,375,049) | $ (21,114,132) |
Class B | ||||
Shares sold | 302,265 | 283,236 | $ 6,677,115 | $ 6,103,430 |
Reinvestment of distributions | 394,522 | 574,588 | 8,409,188 | 12,205,894 |
Shares redeemed | (2,197,220) | (2,670,965) | (49,213,763) | (57,380,601) |
Net increase (decrease) | (1,500,433) | (1,813,141) | $ (34,127,460) | $ (39,071,277) |
Class C | ||||
Shares sold | 241,582 | 213,518 | $ 5,385,733 | $ 4,587,619 |
Reinvestment of distributions | 190,165 | 257,099 | 4,051,037 | 5,464,805 |
Shares redeemed | (915,599) | (1,219,971) | (20,422,653) | (26,243,393) |
Net increase (decrease) | (483,852) | (749,354) | $ (10,985,883) | $ (16,190,969) |
Institutional Class | ||||
Shares sold | 67,105 | 62,760 | $ 1,572,188 | $ 1,387,106 |
Reinvestment of distributions | 34,641 | 37,434 | 762,982 | 826,042 |
Shares redeemed | (140,689) | (139,433) | (3,242,896) | (3,110,447) |
Net increase (decrease) | (38,943) | (39,239) | $ (907,726) | $ (897,299) |
Annual Report
Advisor Health Care Fund - Class A, T, B, and C
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow. Returns reflect the conversion of Class B shares to Class A shares after a maximum of seven years.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of |
Class A (incl. 5.75% sales charge) | -2.18% | 1.91% | 10.30% |
Class T (incl. 3.50% sales charge) | -0.07% | 2.15% | 10.28% |
Class B (incl. contingent deferred sales charge) B | -1.94% | 2.00% | 10.33% |
Class C (incl. contingent deferred sales charge) C | 2.10% | 2.43% | 10.16% |
A From September 3, 1996.
B Class B shares bear a 1.00% 12b-1 fee. The initial offering of Class B shares took place on March 3, 1997. Returns prior to March 3, 1997 are those of Class T and reflect a 0.50% 12b-1 fee. Had Class B shares' 12b-1 fee been reflected, returns prior to March 3, 1997 would have been lower. Class B shares' contingent deferred sales charges included in the past one year, past five years, and life of fund total return figures are 5%, 2%, and 0%, respectively.
C Class C shares bear a 1.00% 12b-1 fee. The initial offering of Class C shares took place on November 3, 1997. Returns between March 3, 1997 and November 3, 1997 are those of Class B shares and reflect Class B shares' 1.00% 12b-1 fee. Returns prior to March 3, 1997 are those of Class T and reflect a 0.50% 12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns prior to March 3, 1997 would have been lower. Class C shares' contingent deferred sales charges included in the past one year, past five years, and life of fund total return figures are 1%, 0%, and 0%, respectively.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Health Care Fund - Class T on September 3, 1996, when the fund started, and the current 3.50% sales charge was paid. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Harlan Carere, Portfolio Manager of Fidelity® Advisor Health Care Fund through July 31, 2006
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
During the past year, the fund's Class A, Class T, Class B and Class C shares returned 3.79%, 3.55%, 3.06% and 3.10%, respectively (excluding sales charges). These results outperformed the Goldman Sachs® Health Care Index, which rose 2.25%, but trailed the S&P 500. Good security and market selection helped the fund outpace its sector benchmark. The strongest contribution came from stock picking in health care facilities, where I favored assisted living and ambulatory surgery centers. Two assisted living companies, Brookdale Senior Living and American Retirement, were especially strong performers. During the period, Brookdale purchased American Retirement. Our overweighted exposure to the managed care subsector also contributed versus the index, particularly our holding of Health Net, a company seen increasingly by the market as an attractive acquisition target. Stock selection in pharmaceuticals, along with out-of-benchmark investments in wellness and nutrition companies, such as Herbalife and Hansen Natural, also boosted performance. Hansen Natural was sold by period end. Underweighting large-cap pharmaceutical stocks, such as Abbott Laboratories, hurt results, as did an underweighted position in medical-device maker Guidant, where a takeover struggle came to a boil and helped its stock. Fund performance also was hurt by out-of-benchmark investments in Aspect Medical Systems, where sales slowed, and Salix Pharmaceuticals, where there were clinical setbacks. Both positions were sold. Security selection in health care services detracted as well.
Note to shareholders: Aaron Cooper became manager of the fund on August 1, 2006.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 971.80 | $ 6.06 |
HypotheticalA | $ 1,000.00 | $ 1,018.65 | $ 6.21 |
Class T | |||
Actual | $ 1,000.00 | $ 970.80 | $ 7.28 |
HypotheticalA | $ 1,000.00 | $ 1,017.41 | $ 7.45 |
Class B | |||
Actual | $ 1,000.00 | $ 968.50 | $ 9.81 |
HypotheticalA | $ 1,000.00 | $ 1,014.83 | $ 10.04 |
Class C | |||
Actual | $ 1,000.00 | $ 968.60 | $ 9.42 |
HypotheticalA | $ 1,000.00 | $ 1,015.22 | $ 9.64 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 973.70 | $ 4.21 |
HypotheticalA | $ 1,000.00 | $ 1,020.53 | $ 4.31 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.24% |
Class T | 1.49% |
Class B | 2.01% |
Class C | 1.93% |
Institutional Class | .86% |
Annual Report
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund' | % of fund's net assets | |
Pfizer, Inc. | 7.8 | 5.8 |
Johnson & Johnson | 7.7 | 3.6 |
Merck & Co., Inc. | 5.4 | 4.1 |
Genentech, Inc. | 4.3 | 3.8 |
Amgen, Inc. | 4.3 | 1.9 |
Wyeth | 4.2 | 4.8 |
UnitedHealth Group, Inc. | 3.8 | 6.7 |
Medtronic, Inc. | 2.7 | 1.6 |
Abbott Laboratories | 2.6 | 0.4 |
Allergan, Inc. | 2.6 | 2.6 |
45.4 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Pharmaceuticals | 37.4% | |
| Health Care Providers & Services | 25.9% | |
| Health Care Equipment & Supplies | 15.9% | |
| Biotechnology | 14.4% | |
| Life Sciences Tools & Services | 3.3% | |
| All Others* | 3.1% | |
As of January 31, 2006 | |||
| Pharmaceuticals | 32.1% | |
| Health Care Providers & Services | 30.9% | |
| Health Care Equipment & Supplies | 18.6% | |
| Biotechnology | 15.0% | |
| Personal Products | 1.0% | |
| All Others* | 2.4% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 99.6% | |||
Shares | Value (Note 1) | ||
BIOTECHNOLOGY - 14.4% | |||
Biotechnology - 14.4% | |||
Alizyme PLC (a) | 24,600 | $ 45,494 | |
Alnylam Pharmaceuticals, Inc. (a) | 67,200 | 858,144 | |
Altus Pharmaceuticals, Inc. | 17,200 | 245,616 | |
Amgen, Inc. (a) | 448,800 | 31,299,312 | |
Amylin Pharmaceuticals, Inc. (a) | 65,400 | 3,191,520 | |
Biogen Idec, Inc. (a) | 124,600 | 5,248,152 | |
BioSphere Medical, Inc. (a) | 24,400 | 143,960 | |
Celgene Corp. (a) | 105,600 | 5,057,184 | |
Cephalon, Inc. (a) | 23,600 | 1,551,464 | |
DOV Pharmaceutical, Inc. (a) | 17,000 | 24,140 | |
DUSA Pharmaceuticals, Inc. (a) | 86,400 | 387,936 | |
Genentech, Inc. (a) | 390,300 | 31,544,046 | |
Gentium Spa sponsored ADR (a) | 2,900 | 39,875 | |
Genzyme Corp. (a) | 54,745 | 3,737,989 | |
Gilead Sciences, Inc. (a) | 183,100 | 11,256,988 | |
Human Genome Sciences, Inc. (a) | 61,200 | 594,252 | |
ICOS Corp. (a) | 28,500 | 650,940 | |
ImClone Systems, Inc. (a) | 34,500 | 1,121,250 | |
MannKind Corp. (a) | 7,000 | 128,030 | |
Martek Biosciences (a)(d) | 14,300 | 399,399 | |
MedImmune, Inc. (a) | 103,230 | 2,619,977 | |
Millennium Pharmaceuticals, Inc. (a) | 139,400 | 1,368,908 | |
Myogen, Inc. (a) | 13,800 | 425,868 | |
Neopharm, Inc. (a) | 2,900 | 13,195 | |
PDL BioPharma, Inc. (a) | 51,500 | 927,515 | |
Solexa, Inc. (a)(d) | 36,515 | 323,523 | |
Tercica, Inc. (a)(d) | 231,800 | 1,170,590 | |
Theravance, Inc. (a) | 6,900 | 163,461 | |
Vertex Pharmaceuticals, Inc. (a) | 41,900 | 1,404,488 | |
105,943,216 | |||
COMMERCIAL SERVICES & SUPPLIES - 0.1% | |||
Human Resource & Employment Services - 0.1% | |||
On Assignment, Inc. (a) | 47,137 | 403,021 | |
DIVERSIFIED CONSUMER SERVICES - 0.1% | |||
Specialized Consumer Services - 0.1% | |||
Service Corp. International (SCI) | 61,700 | 463,367 | |
FOOD & STAPLES RETAILING - 0.1% | |||
Food Distributors - 0.1% | |||
United Natural Foods, Inc. (a) | 22,500 | 678,150 | |
Food Retail - 0.0% | |||
Whole Foods Market, Inc. | 6,600 | 379,566 | |
TOTAL FOOD & STAPLES RETAILING | 1,057,716 | ||
FOOD PRODUCTS - 0.2% | |||
Packaged Foods & Meats - 0.2% | |||
Groupe Danone | 12,100 | 1,599,689 | |
Shares | Value (Note 1) | ||
HEALTH CARE EQUIPMENT & SUPPLIES - 15.9% | |||
Health Care Equipment - 12.4% | |||
Advanced Medical Optics, Inc. (a) | 28,300 | $ 1,393,775 | |
Baxter International, Inc. | 245,930 | 10,329,060 | |
Beckman Coulter, Inc. | 19,000 | 1,087,750 | |
Becton, Dickinson & Co. | 105,200 | 6,934,784 | |
BioLase Technology, Inc. | 37,600 | 308,696 | |
Biomet, Inc. | 38,700 | 1,274,778 | |
Boston Scientific Corp. (a) | 562,700 | 9,571,527 | |
C.R. Bard, Inc. | 71,050 | 5,042,419 | |
Cyberonics, Inc. (a) | 300 | 6,429 | |
Cytyc Corp. (a) | 74,500 | 1,832,700 | |
Dade Behring Holdings, Inc. | 41,760 | 1,700,885 | |
Edwards Lifesciences Corp. (a) | 18,600 | 822,864 | |
HealthTronics, Inc. (a) | 10,195 | 66,981 | |
Hillenbrand Industries, Inc. | 12,400 | 615,784 | |
Hologic, Inc. (a) | 3,700 | 166,167 | |
Hospira, Inc. (a) | 44,382 | 1,939,050 | |
IDEXX Laboratories, Inc. (a) | 13,300 | 1,177,050 | |
Imaging Dynamics Co. Ltd. (a) | 265,100 | 782,462 | |
IntraLase Corp. (a) | 4,951 | 85,850 | |
Intuitive Surgical, Inc. (a) | 13,200 | 1,256,640 | |
Invacare Corp. | 13,700 | 288,111 | |
Kinetic Concepts, Inc. (a) | 31,000 | 1,381,360 | |
Medtronic, Inc. (d) | 389,600 | 19,682,592 | |
Mentor Corp. | 19,600 | 871,416 | |
Natus Medical, Inc. (a) | 45,714 | 559,997 | |
NMT Medical, Inc. (a) | 5,100 | 54,825 | |
Novoste Corp. (a)(e) | 3,125 | 7,969 | |
Optos PLC | 211,000 | 759,741 | |
PhotoMedex, Inc. (a) | 118,426 | 156,322 | |
ResMed, Inc. (a) | 34,600 | 1,605,786 | |
Respironics, Inc. (a) | 34,300 | 1,220,394 | |
Restore Medical, Inc. | 49,900 | 361,775 | |
SonoSite, Inc. (a) | 4,500 | 145,260 | |
St. Jude Medical, Inc. (a) | 125,100 | 4,616,190 | |
Stereotaxis, Inc. (a) | 259,829 | 2,221,538 | |
Steris Corp. | 21,000 | 486,570 | |
Stryker Corp. | 52,500 | 2,389,275 | |
The Spectranetics Corp. (a) | 2,500 | 32,225 | |
Varian Medical Systems, Inc. (a) | 50,600 | 2,293,192 | |
Zimmer Holdings, Inc. (a) | 81,400 | 5,147,736 | |
90,677,925 | |||
Health Care Supplies - 3.5% | |||
Alcon, Inc. | 131,800 | 14,553,356 | |
Arrow International, Inc. | 22,500 | 713,925 | |
Bausch & Lomb, Inc. | 3,800 | 179,740 | |
Cooper Companies, Inc. | 20,043 | 885,901 | |
DENTSPLY International, Inc. | 67,600 | 2,115,880 | |
DJO, Inc. (a) | 74,100 | 2,924,727 | |
Gen-Probe, Inc. (a) | 22,300 | 1,158,485 | |
Immucor, Inc. (a) | 31,050 | 618,206 | |
Inverness Medical Innovations, Inc. (a) | 29,900 | 889,226 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
HEALTH CARE EQUIPMENT & SUPPLIES - CONTINUED | |||
Health Care Supplies - continued | |||
Inverness Medical Innovations, Inc. (a)(f) | 14,543 | $ 432,509 | |
Lifecore Biomedical, Inc. (a) | 42,900 | 633,204 | |
Nutraceutical International Corp. (a) | 47,970 | 677,336 | |
25,782,495 | |||
TOTAL HEALTH CARE EQUIPMENT & SUPPLIES | 116,460,420 | ||
HEALTH CARE PROVIDERS & SERVICES - 25.9% | |||
Health Care Distributors & Services - 3.8% | |||
AmerisourceBergen Corp. | 89,800 | 3,861,400 | |
Andrx Corp. (a) | 30,700 | 732,195 | |
Cardinal Health, Inc. | 177,900 | 11,919,300 | |
Henry Schein, Inc. (a) | 38,000 | 1,801,580 | |
McKesson Corp. | 148,600 | 7,487,954 | |
Patterson Companies, Inc. (a) | 61,155 | 2,034,015 | |
27,836,444 | |||
Health Care Facilities - 5.5% | |||
Acibadem Saglik Hizmetleri AS | 64,830 | 653,668 | |
Apollo Hospitals Enterprise Ltd. | 20,886 | 179,732 | |
Brookdale Senior Living, Inc. | 266,600 | 12,396,900 | |
Bumrungrad Hospital PCL (For. Reg.) | 1,858,800 | 1,742,932 | |
Capital Senior Living Corp. (a) | 215,900 | 2,204,339 | |
Community Health Systems, Inc. (a) | 100,300 | 3,636,878 | |
Emeritus Corp. (a) | 37,400 | 706,486 | |
HCA, Inc. | 132,700 | 6,523,532 | |
Health Management Associates, Inc. Class A | 70,400 | 1,431,232 | |
HealthSouth Corp. | 12,400 | 48,980 | |
LifePoint Hospitals, Inc. (a) | 26,100 | 879,309 | |
Manor Care, Inc. | 8,600 | 430,430 | |
NovaMed Eyecare, Inc. (a) | 4,300 | 31,906 | |
Odyssey Healthcare, Inc. (a) | 66,500 | 1,197,665 | |
Psychiatric Solutions, Inc. (a) | 36,900 | 1,161,981 | |
Sun Healthcare Group, Inc. (a) | 22,600 | 195,942 | |
Tenet Healthcare Corp. (a) | 171,600 | 1,015,872 | |
Triad Hospitals, Inc. (a) | 25,700 | 1,001,529 | |
U.S. Physical Therapy, Inc. (a) | 22,238 | 340,019 | |
United Surgical Partners International, Inc. (a) | 29,588 | 730,824 | |
Universal Health Services, Inc. Class B | 21,600 | 1,209,600 | |
VCA Antech, Inc. (a) | 74,120 | 2,591,976 | |
40,311,732 | |||
Health Care Services - 7.2% | |||
Apria Healthcare Group, Inc. (a) | 5,100 | 89,352 | |
Caremark Rx, Inc. | 187,100 | 9,878,880 | |
Chemed Corp. | 81,500 | 2,997,570 | |
DaVita, Inc. (a) | 88,850 | 4,444,277 | |
Emergency Medical Services Corp. Class A | 52,900 | 630,568 | |
Express Scripts, Inc. (a) | 62,900 | 4,845,187 | |
HAPC, Inc. unit | 215,800 | 1,290,484 | |
Shares | Value (Note 1) | ||
Health Grades, Inc. (a) | 144,800 | $ 615,400 | |
HealthExtras, Inc. (a) | 10,100 | 262,196 | |
Healthways, Inc. (a) | 63,202 | 3,395,211 | |
HMS Holdings Corp. (a) | 5,500 | 61,710 | |
I-trax, Inc. (a) | 24,700 | 82,251 | |
Laboratory Corp. of America Holdings (a) | 56,300 | 3,626,846 | |
Lincare Holdings, Inc. (a) | 40,800 | 1,420,248 | |
Medco Health Solutions, Inc. (a) | 136,000 | 8,068,880 | |
Omnicare, Inc. (d) | 52,500 | 2,376,150 | |
Pediatrix Medical Group, Inc. (a) | 21,000 | 890,400 | |
QMed, Inc. (a) | 8,700 | 26,274 | |
Quest Diagnostics, Inc. | 74,900 | 4,502,988 | |
RehabCare Group, Inc. (a) | 31,300 | 585,936 | |
ResCare, Inc. (a) | 131,336 | 2,498,011 | |
52,588,819 | |||
Managed Health Care - 9.4% | |||
Aetna, Inc. | 244,700 | 7,705,603 | |
AMERIGROUP Corp. (a) | 22,500 | 654,750 | |
CIGNA Corp. | 22,023 | 2,009,599 | |
Coventry Health Care, Inc. (a) | 47,350 | 2,495,345 | |
Health Net, Inc. (a) | 63,800 | 2,677,686 | |
Humana, Inc. (a) | 69,100 | 3,864,763 | |
Magellan Health Services, Inc. (a) | 12,800 | 615,296 | |
Sierra Health Services, Inc. (a) | 42,100 | 1,817,878 | |
UnitedHealth Group, Inc. | 586,009 | 28,028,810 | |
Wellcare Health Plans, Inc. (a) | 3,700 | 181,522 | |
WellPoint, Inc. (a) | 256,200 | 19,086,900 | |
69,138,152 | |||
TOTAL HEALTH CARE PROVIDERS & SERVICES | 189,875,147 | ||
HEALTH CARE TECHNOLOGY - 1.2% | |||
Healthcare Technology - 1.2% | |||
Cerner Corp. (a) | 22,400 | 906,752 | |
Eclipsys Corp. (a) | 101,500 | 1,981,280 | |
Emdeon Corp. (a) | 132,816 | 1,597,776 | |
IMS Health, Inc. | 93,500 | 2,565,640 | |
Systems Xcellence, Inc. (a) | 6,175 | 74,759 | |
WebMD Health Corp. Class A (d) | 42,289 | 1,797,705 | |
8,923,912 | |||
INTERNET & CATALOG RETAIL - 0.4% | |||
Internet Retail - 0.4% | |||
NutriSystem, Inc. (a)(d) | 52,679 | 2,787,773 | |
LIFE SCIENCES TOOLS & SERVICES - 3.3% | |||
Life Science Tools & Services - 3.3% | |||
Affymetrix, Inc. (a) | 44,916 | 968,838 | |
Applera Corp.: | |||
- Applied Biosystems Group | 89,800 | 2,887,070 | |
- Celera Genomics Group (a) | 19,400 | 261,900 | |
Charles River Laboratories International, Inc. (a) | 31,500 | 1,118,250 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
LIFE SCIENCES TOOLS & SERVICES - CONTINUED | |||
Life Science Tools & Services - continued | |||
Covance, Inc. (a) | 30,900 | $ 1,970,184 | |
Exelixis, Inc. (a) | 152,497 | 1,357,223 | |
Fisher Scientific International, Inc. (a) | 51,400 | 3,809,254 | |
Illumina, Inc. (a) | 7,182 | 274,568 | |
Invitrogen Corp. (a) | 26,700 | 1,649,793 | |
MDS, Inc. | 12,500 | 228,769 | |
Millipore Corp. (a) | 25,870 | 1,620,756 | |
Nektar Therapeutics (a)(d) | 39,000 | 635,700 | |
Pharmaceutical Product Development, Inc. | 30,900 | 1,189,032 | |
QIAGEN NV (a) | 10,000 | 151,900 | |
Techne Corp. (a) | 18,600 | 924,234 | |
Thermo Electron Corp. (a) | 69,000 | 2,553,690 | |
Waters Corp. (a) | 74,179 | 3,017,602 | |
24,618,763 | |||
PERSONAL PRODUCTS - 0.6% | |||
Personal Products - 0.6% | |||
Herbalife Ltd. (a) | 105,300 | 3,761,316 | |
NBTY, Inc. (a) | 28,000 | 826,840 | |
4,588,156 | |||
PHARMACEUTICALS - 37.4% | |||
Pharmaceuticals - 37.4% | |||
Abbott Laboratories | 405,320 | 19,362,136 | |
Abraxis BioScience, Inc. (a) | 26,200 | 525,310 | |
Adams Respiratory Therapeutics, Inc. | 3,700 | 165,464 | |
Allergan, Inc. | 178,350 | 19,235,048 | |
Altana AG sponsored ADR (d) | 1,200 | 68,808 | |
AnorMED, Inc. (a) | 23,900 | 153,758 | |
Barr Pharmaceuticals, Inc. (a) | 45,800 | 2,279,008 | |
Biovail Corp. | 37,400 | 826,925 | |
Bristol-Myers Squibb Co. | 298,000 | 7,143,060 | |
Eli Lilly & Co. | 167,900 | 9,531,683 | |
Endo Pharmaceuticals Holdings, Inc. (a) | 58,500 | 1,817,595 | |
Forest Laboratories, Inc. (a) | 139,900 | 6,478,769 | |
Impax Laboratories, Inc. (a) | 8,000 | 38,800 | |
Johnson & Johnson | 909,458 | 56,886,598 | |
King Pharmaceuticals, Inc. (a) | 112,500 | 1,914,750 | |
Kos Pharmaceuticals, Inc. (a) | 13,095 | 541,347 | |
Medicis Pharmaceutical Corp. Class A | 22,100 | 609,076 | |
Merck & Co., Inc. | 988,200 | 39,794,814 | |
MGI Pharma, Inc. (a) | 31,400 | 458,754 | |
Mylan Laboratories, Inc. | 67,100 | 1,473,516 | |
New River Pharmaceuticals, Inc. (a) | 2,200 | 53,768 | |
Novartis AG sponsored ADR | 20,000 | 1,124,400 | |
Perrigo Co. | 7,500 | 118,800 | |
Pfizer, Inc. | 2,215,420 | 57,578,766 | |
Roche Holding AG (participation certificate) | 31,524 | 5,609,845 | |
Schering-Plough Corp. | 360,800 | 7,374,752 | |
Sepracor, Inc. (a) | 46,000 | 2,272,400 | |
Shares | Value (Note 1) | ||
Valeant Pharmaceuticals International | 12,400 | $ 214,272 | |
Watson Pharmaceuticals, Inc. (a) | 18,500 | 414,215 | |
Wyeth | 628,820 | 30,478,905 | |
274,545,342 | |||
TOTAL COMMON STOCKS (Cost $626,521,970) | 731,266,522 | ||
Nonconvertible Preferred Stocks - 0.0% | |||
LIFE SCIENCES TOOLS & SERVICES - 0.0% | |||
Life Science Tools & Services - 0.0% | |||
GeneProt, Inc. Series A (a)(f) | 43,000 | 0 | |
Money Market Funds - 2.0% | |||
Fidelity Cash Central Fund, 5.3% (b) | 399,892 | 399,892 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 14,527,309 | 14,527,309 | |
TOTAL MONEY MARKET FUNDS (Cost $14,927,201) | 14,927,201 | ||
TOTAL INVESTMENT PORTFOLIO - 101.6% (Cost $641,682,011) | 746,193,723 | ||
NET OTHER ASSETS - (1.6)% | (12,032,699) | ||
NET ASSETS - 100% | $ 734,161,024 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
(e) 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 $7,969 or 0.0% of net assets. |
(f) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $432,509 or 0.1% of net assets. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
GeneProt, Inc. Series A | 7/7/00 | $ 232,840 |
Inverness Medical Innovations, Inc. | 2/8/06 | $ 354,995 |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 64,261 |
Fidelity Securities Lending Cash Central Fund | 146,748 |
Total | $ 211,009 |
See accompanying notes which are an integral part of the financial statements.
Health Care
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $14,368,081) - See accompanying schedule: Unaffiliated issuers (cost $626,754,810) | $ 731,266,522 | |
Affiliated Central Funds (cost $14,927,201) | 14,927,201 | |
Total Investments (cost $641,682,011) | $ 746,193,723 | |
Cash | 356,306 | |
Receivable for investments sold | 4,708,509 | |
Receivable for fund shares sold | 1,587,840 | |
Dividends receivable | 229,208 | |
Interest receivable | 3,481 | |
Prepaid expenses | 1,193 | |
Other receivables | 26,532 | |
Total assets | 753,106,792 | |
Liabilities | ||
Payable for investments purchased | $ 616,152 | |
Payable for fund shares redeemed | 2,807,844 | |
Accrued management fee | 339,428 | |
Distribution fees payable | 373,696 | |
Other affiliated payables | 241,426 | |
Other payables and accrued expenses | 39,913 | |
Collateral on securities loaned, at value | 14,527,309 | |
Total liabilities | 18,945,768 | |
Net Assets | $ 734,161,024 | |
Net Assets consist of: | ||
Paid in capital | $ 568,142,874 | |
Accumulated net investment loss | (327) | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 61,506,756 | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | 104,511,721 | |
Net Assets | $ 734,161,024 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price | $ 23.77 | |
Maximum offering price per share (100/94.25 of $23.77) | $ 25.22 | |
Class T: | $ 23.26 | |
Maximum offering price per share (100/96.50 of $23.26) | $ 24.10 | |
Class B: | $ 22.17 | |
Class C: | $ 22.24 | |
Institutional Class: | $ 24.43 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Health Care Fund
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 6,341,103 | |
Interest | 1,386 | |
Income from affiliated Central Funds | 211,009 | |
Total income | 6,553,498 | |
Expenses | ||
Management fee | $ 4,446,781 | |
Transfer agent fees | 2,815,398 | |
Distribution fees | 5,182,001 | |
Accounting and security lending fees | 290,435 | |
Independent trustees' compensation | 3,204 | |
Custodian fees and expenses | 43,944 | |
Registration fees | 68,007 | |
Audit | 46,606 | |
Legal | 9,368 | |
Miscellaneous | 9,193 | |
Total expenses before reductions | 12,914,937 | |
Expense reductions | (236,020) | 12,678,917 |
Net investment income (loss) | (6,125,419) | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 99,179,050 | |
Foreign currency transactions | 7,452 | |
Total net realized gain (loss) | 99,186,502 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (66,786,614) | |
Assets and liabilities in foreign currencies | (495) | |
Total change in net unrealized appreciation (depreciation) | (66,787,109) | |
Net gain (loss) | 32,399,393 | |
Net increase (decrease) in net assets resulting from operations | $ 26,273,974 | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ (6,125,419) | $ (5,116,814) |
Net realized gain (loss) | 99,186,502 | 26,792,251 |
Change in net unrealized appreciation (depreciation) | (66,787,109) | 122,599,712 |
Net increase (decrease) in net assets resulting from operations | 26,273,974 | 144,275,149 |
Distributions to shareholders from net realized gain | (1,408,688) | - |
Share transactions - net increase (decrease) | (90,540,183) | (127,767,624) |
Redemption fees | 29,238 | 24,114 |
Total increase (decrease) in net assets | (65,645,659) | 16,531,639 |
Net Assets | ||
Beginning of period | 799,806,683 | 783,275,044 |
End of period (including accumulated net investment loss of $327 and accumulated net investment loss of $458, respectively) | $ 734,161,024 | $ 799,806,683 |
See accompanying notes which are an integral part of the financial statements.
Health Care
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 22.94 | $ 18.91 | $ 18.29 | $ 16.51 | $ 20.41 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.09) | (.05) | (.05) | - E | (.04) |
Net realized and unrealized gain (loss) | .96 | 4.08 | .67 | 1.78 | (3.86) |
Total from investment operations | .87 | 4.03 | .62 | 1.78 | (3.90) |
Distributions from net realized gain | (.04) | - | - | - | - |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 23.77 | $ 22.94 | $ 18.91 | $ 18.29 | $ 16.51 |
Total Return A, B | 3.79% | 21.31% | 3.39% | 10.78% | (19.11)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.25% | 1.28% | 1.32% | 1.34% | 1.29% |
Expenses net of fee waivers, if any | 1.25% | 1.28% | 1.32% | 1.34% | 1.29% |
Expenses net of all reductions | 1.21% | 1.26% | 1.29% | 1.27% | 1.24% |
Net investment income (loss) | (.38)% | (.22)% | (.26)% | (.01)% | (.23)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 199,221 | $ 139,158 | $ 104,258 | $ 108,692 | $ 103,292 |
Portfolio turnover rate | 99% | 71% | 60% | 120% | 167% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 22.50 | $ 18.60 | $ 18.03 | $ 16.31 | $ 20.22 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.15) | (.09) | (.09) | (.04) | (.09) |
Net realized and unrealized gain (loss) | .95 | 3.99 | .66 | 1.76 | (3.82) |
Total from investment operations | .80 | 3.90 | .57 | 1.72 | (3.91) |
Distributions from net realized gain | (.04) | - | - | - | - |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 23.26 | $ 22.50 | $ 18.60 | $ 18.03 | $ 16.31 |
Total Return A, B | 3.55% | 20.97% | 3.16% | 10.55% | (19.34)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.50% | 1.53% | 1.56% | 1.59% | 1.52% |
Expenses net of fee waivers, if any | 1.50% | 1.53% | 1.56% | 1.59% | 1.52% |
Expenses net of all reductions | 1.47% | 1.51% | 1.53% | 1.51% | 1.47% |
Net investment income (loss) | (.63)% | (.47)% | (.51)% | (.26)% | (.46)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 218,280 | $ 243,353 | $ 243,176 | $ 264,115 | $ 274,243 |
Portfolio turnover rate | 99% | 71% | 60% | 120% | 167% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 21.55 | $ 17.91 | $ 17.45 | $ 15.86 | $ 19.76 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.25) | (.19) | (.18) | (.12) | (.18) |
Net realized and unrealized gain (loss) | .91 | 3.83 | .64 | 1.71 | (3.72) |
Total from investment operations | .66 | 3.64 | .46 | 1.59 | (3.90) |
Distributions from net realized gain | (.04) | - | - | - | - |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 22.17 | $ 21.55 | $ 17.91 | $ 17.45 | $ 15.86 |
Total Return A, B | 3.06% | 20.32% | 2.64% | 10.03% | (19.74)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.01% | 2.04% | 2.06% | 2.05% | 2.02% |
Expenses net of fee waivers, if any | 2.01% | 2.04% | 2.06% | 2.05% | 2.02% |
Expenses net of all reductions | 1.98% | 2.01% | 2.03% | 1.98% | 1.98% |
Net investment income (loss) | (1.14)% | (.98)% | (1.01)% | (.73)% | (.97)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 180,364 | $ 266,319 | $ 285,299 | $ 317,906 | $ 334,056 |
Portfolio turnover rate | 99% | 71% | 60% | 120% | 167% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 21.61 | $ 17.94 | $ 17.47 | $ 15.87 | $ 19.76 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.24) | (.17) | (.17) | (.11) | (.17) |
Net realized and unrealized gain (loss) | .91 | 3.84 | .64 | 1.71 | (3.72) |
Total from investment operations | .67 | 3.67 | .47 | 1.60 | (3.89) |
Distributions from net realized gain | (.04) | - | - | - | - |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 22.24 | $ 21.61 | $ 17.94 | $ 17.47 | $ 15.87 |
Total Return A, B | 3.10% | 20.46% | 2.69% | 10.08% | (19.69)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.94% | 1.97% | 2.00% | 2.00% | 1.97% |
Expenses net of fee waivers, if any | 1.94% | 1.97% | 2.00% | 2.00% | 1.97% |
Expenses net of all reductions | 1.91% | 1.94% | 1.97% | 1.92% | 1.93% |
Net investment income (loss) | (1.07)% | (.91)% | (.95)% | (.67)% | (.92)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 115,644 | $ 131,277 | $ 130,184 | $ 150,576 | $ 160,877 |
Portfolio turnover rate | 99% | 71% | 60% | 120% | 167% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Health Care
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 23.48 | $ 19.28 | $ 18.58 | $ 16.70 | $ 20.58 |
Income from Investment Operations | |||||
Net investment income (loss) B | - D | .04 | .03 | .06 | .02 |
Net realized and unrealized gain (loss) | .99 | 4.16 | .67 | 1.82 | (3.90) |
Total from investment operations | .99 | 4.20 | .70 | 1.88 | (3.88) |
Distributions from net realized gain | (.04) | - | - | - | - |
Redemption fees added to paid in capital B | - D | - D | - D | - D | - D |
Net asset value, end of period | $ 24.43 | $ 23.48 | $ 19.28 | $ 18.58 | $ 16.70 |
Total Return A | 4.21% | 21.78% | 3.77% | 11.26% | (18.85)% |
Ratios to Average Net Assets C | |||||
Expenses before reductions | .86% | .88% | .91% | .96% | .95% |
Expenses net of fee waivers, if any | .86% | .88% | .91% | .96% | .95% |
Expenses net of all reductions | .83% | .85% | .88% | .88% | .90% |
Net investment income (loss) | .01% | .18% | .14% | .37% | .11% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 20,652 | $ 19,698 | $ 20,358 | $ 23,364 | $ 35,923 |
Portfolio turnover rate | 99% | 71% | 60% | 120% | 167% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. D Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Health Care Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, deferred trustees compensation, net operating losses, capital loss carryforwards, losses deferred due to wash sales and excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 128,013,083 | |
Unrealized depreciation | (24,775,757) | |
Net unrealized appreciation (depreciation) | 103,237,326 | |
Undistributed ordinary income | 9,125,963 | |
Undistributed long-term capital gain | 48,458,816 | |
Cost for federal income tax purposes | $ 642,956,397 |
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Long-term Capital Gains | $ 1,408,688 | $ - |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
Restricted Securities. The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $774,813,568 and $871,645,598, respectively.
Health Care
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 423,131 | $ 4,527 |
Class T | .25% | .25% | 1,182,110 | 7,214 |
Class B | .75% | .25% | 2,306,920 | 1,730,783 |
Class C | .75% | .25% | 1,269,840 | 103,729 |
$ 5,182,001 | $ 1,846,253 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 90,379 |
Class T | 33,806 |
Class B * | 378,521 |
Class C * | 7,638 |
$ 510,344 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 624,294 | .37 |
Class T | 871,133 | .37 |
Class B | 882,721 | .38 |
Class C | 390,359 | .31 |
Institutional Class | 46,891 | .23 |
$ 2,815,398 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $5,654 for the period.
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $2,276 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $146,748.
7. Expense Reductions.
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $227,340 for the period. In addition, through arrangements with each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, credits reduced each class' transfer agent expense as noted in the table below.
Transfer Agent | ||
Class A | $ 8,680 |
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
Health Care
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2006 | 2005 |
From net realized gain | ||
Class A | $ 268,383 | $ - |
Class T | 418,518 | - |
Class B | 451,789 | - |
Class C | 237,307 | - |
Institutional Class | 32,691 | - |
Total | $ 1,408,688 | $ - |
10. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 4,246,771 | 2,249,275 | $ 100,545,647 | $ 46,669,256 |
Reinvestment of distributions | 9,593 | - | 231,281 | - |
Shares redeemed | (1,943,098) | (1,695,541) | (45,790,984) | (34,388,787) |
Net increase (decrease) | 2,313,266 | 553,734 | $ 54,985,944 | $ 12,280,469 |
Class T | ||||
Shares sold | 1,483,213 | 1,442,909 | $ 34,397,018 | $ 29,136,425 |
Reinvestment of distributions | 16,686 | - | 394,126 | - |
Shares redeemed | (2,931,043) | (3,703,075) | (67,817,881) | (73,845,453) |
Net increase (decrease) | (1,431,144) | (2,260,166) | $ (33,026,737) | $ (44,709,028) |
Class B | ||||
Shares sold | 602,620 | 688,188 | $ 13,347,616 | $ 13,318,322 |
Reinvestment of distributions | 17,559 | - | 396,669 | - |
Shares redeemed | (4,838,970) | (4,265,630) | (107,126,893) | (81,968,667) |
Net increase (decrease) | (4,218,791) | (3,577,442) | $ (93,382,608) | $ (68,650,345) |
Class C | ||||
Shares sold | 622,433 | 718,291 | $ 13,817,015 | $ 14,077,610 |
Reinvestment of distributions | 8,336 | - | 188,806 | - |
Shares redeemed | (1,506,077) | (1,900,462) | (33,350,524) | (36,319,943) |
Net increase (decrease) | (875,308) | (1,182,171) | $ (19,344,703) | $ (22,242,333) |
Institutional Class | ||||
Shares sold | 197,168 | 80,685 | $ 4,832,048 | $ 1,707,265 |
Reinvestment of distributions | 990 | - | 24,473 | - |
Shares redeemed | (191,717) | (297,641) | (4,628,600) | (6,153,652) |
Net increase (decrease) | 6,441 | (216,956) | $ 227,921 | $ (4,446,387) |
Annual Report
Advisor Natural Resources Fund - Class A, T, B, and C
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow. Returns reflect the conversion of Class B shares to Class A shares after a maximum of seven years.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Past 10 |
Class A (incl. 5.75% sales charge) A | 25.26% | 16.52% | 12.91% |
Class T (incl. 3.50% sales charge) | 27.96% | 16.85% | 13.01% |
Class B (incl. contingent deferred sales charge) B | 26.86% | 16.83% | 13.06% |
Class C (incl. contingent deferred sales charge) C | 30.96% | 17.09% | 12.80% |
A Class A's 12b-1 fee may range over time between 0.25% and 0.35%, as an amount of brokerage commissions equivalent to up to 0.10% of the class's average net assets may be used to promote the sale of class shares. This practice has been discontinued and no commissions incurred after June 30, 2003 have been used to pay distribution expenses. The initial offering of Class A shares took place on September 3, 1996. Returns prior to September 3, 1996 are those of Class T, the original class of the fund, and reflect a 0.50% 12b-1 fee.
B Class B shares bear a 1.00% 12b-1 fee. Class B shares' contingent deferred sales charges included in the past one year, past five years, and past ten years total return figures are 5%, 2%, and 0%, respectively.
C Class C shares bear a 1.00% 12b-1 fee. The initial offering of Class C shares took place on November 3, 1997. Returns prior to November 3, 1997 are those of Class B shares and reflect Class B shares' 1.00% 12b-1 fee. Class C shares' contingent deferred sales charges included in the past one year, past five years, and past ten years total return figures are 1%, 0%, and 0%, respectively.
$10,000 Over 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Natural Resources Fund - Class T on July 31, 1996, and the current 3.50% sales charge was paid. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Advisor Natural Resources Fund
Management's Discussion of Fund Performance
Comments from Matthew Friedman, Portfolio Manager of Fidelity® Advisor Natural Resources Fund through June 30, 2006
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
During the past year, the fund's Class A, Class T, Class B and Class C shares returned 32.90%, 32.60%, 31.86% and 31.96%, respectively (excluding sales charges), outperforming both the S&P 500 and the Goldman Sachs® Natural Resources Index, which gained 27.76%. Favorable security and market selection bolstered returns across a wide range of industries. In particular, investments in the metals industries helped, including Titanium Metals and steel pipe manufacturer Oregon Steel Mills, both of which benefited from high demand for their products. Apex Silver Mines - which was sold from the fund - and gold miner Newmont Mining moved up on higher prices for silver and gold, while mining equipment manufacturer Bucyrus International gained as well. In energy, underweighting integrated oil companies - including BP, Chevron and Exxon Mobil - that underperformed other energy market components further boosted the fund's relative return. Oil and gas refining stocks such as Premcor - which was acquired by Valero - and Frontier Oil also contributed, as did several oil and gas exploration and production stocks. Additionally, the fund's investments in foreign stocks got a boost from favorable currency movements. On the flip side, the fund was underweighted in some index-component metals companies that performed well, including diversified miner Phelps Dodge and Canadian nickel miners Falconbridge and Inco, all companies that benefited from merger discussions. Aluminum giant Alcoa detracted in response to higher energy costs that it couldn't pass on to its customers. In energy, underweighting Canadian oil sands company Suncor Energy and Marathon Oil - which is no longer held - hurt, while natural gas producer Plains Exploration detracted in response to weak gas prices. Elsewhere, Chicago Bridge & Iron disappointed due to accounting-related concerns.
Note to shareholders: John Dowd was named co-manager of the fund on May 1, 2006, and sole manager effective July 1, 2006.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Advisor Natural Resources Fund
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 994.60 | $ 5.93 |
HypotheticalA | $ 1,000.00 | $ 1,018.84 | $ 6.01 |
Class T | |||
Actual | $ 1,000.00 | $ 993.30 | $ 6.92 |
HypotheticalA | $ 1,000.00 | $ 1,017.85 | $ 7.00 |
Class B | |||
Actual | $ 1,000.00 | $ 990.60 | $ 9.62 |
HypotheticalA | $ 1,000.00 | $ 1,015.12 | $ 9.74 |
Class C | |||
Actual | $ 1,000.00 | $ 990.80 | $ 9.43 |
HypotheticalA | $ 1,000.00 | $ 1,015.32 | $ 9.54 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 996.00 | $ 4.26 |
HypotheticalA | $ 1,000.00 | $ 1,020.53 | $ 4.31 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.20% |
Class T | 1.40% |
Class B | 1.95% |
Class C | 1.91% |
Institutional Class | .86% |
Annual Report
Advisor Natural Resources Fund
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
Schlumberger Ltd. (NY Shares) | 4.7 | 3.5 |
ConocoPhillips | 4.0 | 2.4 |
Valero Energy Corp. | 4.0 | 2.5 |
GlobalSantaFe Corp. | 3.6 | 4.0 |
Smith International, Inc. | 3.5 | 3.2 |
National Oilwell Varco, Inc. | 3.5 | 4.6 |
Halliburton Co. | 3.5 | 4.7 |
Alcoa, Inc. | 3.3 | 1.6 |
Chesapeake Energy Corp. | 2.9 | 1.6 |
Exxon Mobil Corp. | 2.8 | 0.5 |
35.8 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Oil, Gas & Consumable Fuels | 42.6% | |
| Energy Equipment & Services | 29.6% | |
| Metals & Mining | 15.0% | |
| Machinery | 2.1% | |
| Chemicals | 1.9% | |
| All Others * | 8.8% | |
As of January 31, 2006 | |||
| Oil, Gas & Consumable Fuels | 41.1% | |
| Energy Equipment & Services | 30.8% | |
| Metals & Mining | 14.2% | |
| Machinery | 3.5% | |
| Construction & Engineering | 2.3% | |
| All Others * | 8.1% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Advisor Natural Resources Fund
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 99.3% | |||
Shares | Value (Note 1) | ||
AIRLINES - 0.2% | |||
Airlines - 0.2% | |||
AirTran Holdings, Inc. (a) | 146,820 | $ 1,841,123 | |
CHEMICALS - 1.9% | |||
Commodity Chemicals - 0.3% | |||
Celanese Corp. Class A | 24,500 | 470,645 | |
Formosa Chemicals & Fibre Corp. | 1,115,490 | 1,566,987 | |
Georgia Gulf Corp. | 14,200 | 361,532 | |
Tokai Carbon Co. Ltd. (d) | 16,000 | 89,176 | |
2,488,340 | |||
Diversified Chemicals - 0.3% | |||
Ashland, Inc. | 36,700 | 2,440,917 | |
Fertilizers & Agricultural Chemicals - 1.2% | |||
Agrium, Inc. | 48,300 | 1,169,939 | |
CF Industries Holdings, Inc. | 118,300 | 1,917,643 | |
Mosaic Co. | 329,700 | 5,172,993 | |
Terra Nitrogen Co. LP | 64,708 | 1,428,753 | |
9,689,328 | |||
Specialty Chemicals - 0.1% | |||
Tokuyama Corp. | 93,000 | 1,235,403 | |
TOTAL CHEMICALS | 15,853,988 | ||
COMMERCIAL SERVICES & SUPPLIES - 0.0% | |||
Environmental & Facility Services - 0.0% | |||
Clean Harbors, Inc. | 5,000 | 184,450 | |
Human Resource & Employment Services - 0.0% | |||
Brunel International NV | 621 | 19,276 | |
TOTAL COMMERCIAL SERVICES & SUPPLIES | 203,726 | ||
CONSTRUCTION & ENGINEERING - 1.3% | |||
Construction & Engineering - 1.3% | |||
Chicago Bridge & Iron Co. NV (NY Shares) | 262,900 | 6,377,954 | |
Fluor Corp. | 37,900 | 3,328,757 | |
Infrasource Services, Inc. (a) | 45,900 | 852,822 | |
10,559,533 | |||
CONTAINERS & PACKAGING - 1.1% | |||
Metal & Glass Containers - 0.6% | |||
Owens-Illinois, Inc. | 320,500 | 4,849,165 | |
Paper Packaging - 0.5% | |||
Smurfit-Stone Container Corp. | 201,100 | 2,035,132 | |
Temple-Inland, Inc. | 49,600 | 2,109,984 | |
4,145,116 | |||
TOTAL CONTAINERS & PACKAGING | 8,994,281 | ||
Shares | Value (Note 1) | ||
ELECTRICAL EQUIPMENT - 1.1% | |||
Electrical Components & Equipment - 0.3% | |||
Q-Cells AG (d) | 18,800 | $ 1,346,235 | |
Suntech Power Holdings Co. Ltd. sponsored ADR | 41,700 | 1,081,281 | |
2,427,516 | |||
Heavy Electrical Equipment - 0.8% | |||
Areva (investment certificates)(non-vtg.) | 100 | 57,660 | |
Vestas Wind Systems AS (a) | 256,400 | 6,913,003 | |
6,970,663 | |||
TOTAL ELECTRICAL EQUIPMENT | 9,398,179 | ||
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.2% | |||
Electronic Equipment & Instruments - 0.2% | |||
Itron, Inc. (a) | 28,000 | 1,303,120 | |
ENERGY EQUIPMENT & SERVICES - 29.6% | |||
Oil & Gas Drilling - 10.1% | |||
Diamond Offshore Drilling, Inc. | 109,800 | 8,666,514 | |
ENSCO International, Inc. | 33,200 | 1,534,504 | |
GlobalSantaFe Corp. | 552,200 | 30,332,346 | |
Helmerich & Payne, Inc. | 400 | 11,072 | |
Nabors Industries Ltd. (a) | 2,200 | 77,704 | |
Noble Corp. | 300,500 | 21,560,875 | |
Patterson-UTI Energy, Inc. | 2,900 | 82,128 | |
Pride International, Inc. (a) | 495,500 | 14,800,585 | |
Rowan Companies, Inc. | 900 | 30,483 | |
TODCO Class A | 1,200 | 45,732 | |
Transocean, Inc. (a) | 99,200 | 7,661,216 | |
84,803,159 | |||
Oil & Gas Equipment & Services - 19.5% | |||
Baker Hughes, Inc. | 175,050 | 13,995,248 | |
BJ Services Co. | 99,700 | 3,616,119 | |
Cameron International Corp. (a) | 2,500 | 126,025 | |
FMC Technologies, Inc. (a) | 2,300 | 144,946 | |
Global Industries Ltd. (a) | 5,000 | 83,400 | |
Grant Prideco, Inc. (a) | 1,900 | 86,469 | |
Halliburton Co. | 871,000 | 29,056,560 | |
Hydril Co. (a) | 45,000 | 3,117,150 | |
Key Energy Services, Inc. (a) | 151,800 | 2,239,050 | |
Maverick Tube Corp. (a) | 2,500 | 159,475 | |
National Oilwell Varco, Inc. (a) | 439,732 | 29,479,633 | |
Oil States International, Inc. (a) | 4,200 | 135,072 | |
RPC, Inc. | 2,900 | 66,700 | |
Saipem Spa | 3,800 | 87,594 | |
Schlumberger Ltd. (NY Shares) | 590,600 | 39,481,608 | |
Smith International, Inc. | 668,200 | 29,781,674 | |
Veritas DGC, Inc. (a) | 35,000 | 2,004,450 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
ENERGY EQUIPMENT & SERVICES - CONTINUED | |||
Oil & Gas Equipment & Services - continued | |||
W-H Energy Services, Inc. (a) | 41,500 | $ 2,283,330 | |
Weatherford International Ltd. (a) | 188,100 | 8,810,604 | |
164,755,107 | |||
TOTAL ENERGY EQUIPMENT & SERVICES | 249,558,266 | ||
FOOD PRODUCTS - 0.5% | |||
Agricultural Products - 0.5% | |||
Archer-Daniels-Midland Co. | 2,300 | 101,200 | |
Corn Products International, Inc. | 117,800 | 3,918,028 | |
Global Bio-Chem Technology Group Co. Ltd. | 102,000 | 34,262 | |
4,053,490 | |||
GAS UTILITIES - 0.1% | |||
Gas Utilities - 0.1% | |||
Questar Corp. | 11,700 | 1,036,620 | |
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 1.1% | |||
Independent Power Producers & Energy Traders - 1.1% | |||
Mirant Corp. (a) | 210,900 | 5,603,613 | |
NRG Energy, Inc. | 11,400 | 561,450 | |
TXU Corp. | 47,300 | 3,038,079 | |
9,203,142 | |||
INDUSTRIAL CONGLOMERATES - 0.4% | |||
Industrial Conglomerates - 0.4% | |||
McDermott International, Inc. (a) | 73,350 | 3,340,359 | |
Walter Industries, Inc. | 1,400 | 62,664 | |
3,403,023 | |||
INSURANCE - 0.0% | |||
Property & Casualty Insurance - 0.0% | |||
Navigators Group, Inc. (a) | 7,800 | 331,578 | |
INVESTMENT COMPANIES - 0.0% | |||
Investment Companies - 0.0% | |||
Canfor Pulp Income Fund (a) | 262 | 2,683 | |
MACHINERY - 2.1% | |||
Construction & Farm Machinery & Heavy Trucks - 2.1% | |||
Bucyrus International, Inc. Class A | 233,400 | 11,368,914 | |
Joy Global, Inc. | 154,550 | 5,798,716 | |
Trinity Industries, Inc. | 19,050 | 636,651 | |
17,804,281 | |||
MARINE - 0.1% | |||
Marine - 0.1% | |||
American Commercial Lines, Inc. | 14,400 | 791,280 | |
Stolt-Nielsen SA (d) | 2,200 | 49,686 | |
840,966 | |||
Shares | Value (Note 1) | ||
METALS & MINING - 15.0% | |||
Aluminum - 3.8% | |||
Alcan, Inc. | 1,300 | $ 59,290 | |
Alcoa, Inc. | 914,800 | 27,398,260 | |
Century Aluminum Co. (a) | 2,500 | 77,175 | |
Novelis, Inc. | 224,400 | 4,422,163 | |
31,956,888 | |||
Diversified Metals & Mining - 4.6% | |||
Falconbridge Ltd. | 217,100 | 11,946,639 | |
Freeport-McMoRan Copper & Gold, Inc. Class B | 1,997 | 108,956 | |
Inco Ltd. | 31,100 | 2,403,407 | |
Phelps Dodge Corp. | 1,000 | 87,340 | |
RTI International Metals, Inc. (a) | 98,562 | 4,541,737 | |
Teck Cominco Ltd. Class B (sub. vtg.) | 79,700 | 5,275,300 | |
Titanium Metals Corp. | 459,855 | 13,262,218 | |
VSMPO-AVISMA Corp. warrants (UBS Warrant Programme) 9/28/06 (a) | 6,329 | 1,379,722 | |
39,005,319 | |||
Gold - 3.4% | |||
Bema Gold Corp. (a) | 168,700 | 961,572 | |
Eldorado Gold Corp. (a) | 436,400 | 2,059,364 | |
Meridian Gold, Inc. (a) | 296,600 | 7,996,877 | |
Newmont Mining Corp. | 340,400 | 17,438,692 | |
Sasamat Capital Corp. (a) | 15,999 | 41,597 | |
28,498,102 | |||
Precious Metals & Minerals - 0.2% | |||
Aquarius Platinum Ltd. (United Kingdom) | 60,400 | 1,009,266 | |
Shore Gold, Inc. (a) | 178,100 | 761,757 | |
1,771,023 | |||
Steel - 3.0% | |||
AK Steel Holding Corp. (a) | 58,300 | 753,236 | |
Allegheny Technologies, Inc. | 148,400 | 9,481,276 | |
Commercial Metals Co. | 30,200 | 685,238 | |
Companhia Vale do Rio Doce sponsored ADR | 4,800 | 111,360 | |
Hitachi Metals Ltd. | 7,000 | 65,268 | |
Mittal Steel Co. NV Class A (NY Shares) | 22,900 | 783,409 | |
Oregon Steel Mills, Inc. (a) | 253,300 | 11,712,592 | |
United States Steel Corp. | 26,500 | 1,671,355 | |
25,263,734 | |||
TOTAL METALS & MINING | 126,495,066 | ||
OIL, GAS & CONSUMABLE FUELS - 42.6% | |||
Coal & Consumable Fuels - 4.3% | |||
Arch Coal, Inc. | 106,800 | 4,051,992 | |
Cameco Corp. | 217,700 | 8,674,525 | |
CONSOL Energy, Inc. | 193,800 | 7,976,808 | |
Foundation Coal Holdings, Inc. | 127,100 | 4,847,594 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
OIL, GAS & CONSUMABLE FUELS - CONTINUED | |||
Coal & Consumable Fuels - continued | |||
Peabody Energy Corp. | 210,300 | $ 10,493,970 | |
USEC, Inc. | 2,300 | 24,219 | |
36,069,108 | |||
Integrated Oil & Gas - 13.1% | |||
BP PLC sponsored ADR | 2,148 | 155,773 | |
Chevron Corp. | 310,236 | 20,407,324 | |
ConocoPhillips | 486,238 | 33,375,376 | |
ENI Spa sponsored ADR | 110,250 | 6,767,145 | |
Exxon Mobil Corp. | 341,460 | 23,130,500 | |
Hess Corp. | 1,800 | 95,220 | |
Husky Energy, Inc. | 35,400 | 2,404,422 | |
MOL Magyar Olay-es Gazipari RT Series A (For. Reg.) | 500 | 55,438 | |
OAO Gazprom sponsored ADR | 129,210 | 5,395,164 | |
Occidental Petroleum Corp. | 64,900 | 6,992,975 | |
OMV AG | 51,100 | 3,134,390 | |
Suncor Energy, Inc. | 102,400 | 8,257,335 | |
110,171,062 | |||
Oil & Gas Exploration & Production - 18.3% | |||
Anadarko Petroleum Corp. | 1,600 | 73,184 | |
Apache Corp. | 600 | 42,282 | |
Cabot Oil & Gas Corp. | 122,900 | 6,482,975 | |
Canadian Natural Resources Ltd. | 223,200 | 11,854,295 | |
Chesapeake Energy Corp. | 746,600 | 24,563,140 | |
Comstock Resources, Inc. (a) | 1,100 | 32,362 | |
Denbury Resources, Inc. (a) | 2,100 | 72,807 | |
Devon Energy Corp. | 700 | 45,248 | |
EnCana Corp. | 96,464 | 5,203,396 | |
Energy Partners Ltd. (a) | 54,100 | 982,997 | |
EOG Resources, Inc. | 151,200 | 11,211,480 | |
EXCO Resources, Inc. | 3,000 | 38,760 | |
Goodrich Petroleum Corp. | 3,400 | 115,430 | |
Houston Exploration Co. (a) | 18,900 | 1,206,954 | |
Hugoton Royalty Trust | 14,085 | 438,044 | |
Kerr-McGee Corp. | 207,300 | 14,552,460 | |
Mariner Energy, Inc. (a) | 34,210 | 616,122 | |
Newfield Exploration Co. (a) | 1,600 | 74,208 | |
Nexen, Inc. | 85,900 | 5,025,256 | |
Penn West Energy Trust (d) | 50,700 | 2,036,334 | |
Plains Exploration & Production Co. (a) | 96,900 | 4,259,724 | |
Pogo Producing Co. | 1,600 | 70,832 | |
Quicksilver Resources, Inc. (a) | 45,050 | 1,592,968 | |
Range Resources Corp. | 633,527 | 17,808,444 | |
Southwestern Energy Co. (a) | 1,800 | 61,920 | |
Shares | Value (Note 1) | ||
Talisman Energy, Inc. | 682,900 | $ 11,604,955 | |
Ultra Petroleum Corp. (a) | 299,800 | 17,556,288 | |
XTO Energy, Inc. | 351,300 | 16,507,587 | |
154,130,452 | |||
Oil & Gas Refining & Marketing - 4.0% | |||
ERG Spa | 3,100 | 75,276 | |
Frontier Oil Corp. | 4,200 | 148,050 | |
Neste Oil Oyj | 2,000 | 68,977 | |
Valero Energy Corp. | 493,248 | 33,259,713 | |
Western Refining, Inc. | 4,700 | 108,053 | |
33,660,069 | |||
Oil & Gas Storage & Transport - 2.9% | |||
El Paso Corp. | 263,200 | 4,211,200 | |
Kinder Morgan, Inc. | 9,500 | 969,000 | |
OMI Corp. | 276,000 | 6,088,560 | |
Overseas Shipholding Group, Inc. | 55,500 | 3,573,645 | |
Plains All American Pipeline LP | 26,300 | 1,213,745 | |
TransCanada Corp. | 74,900 | 2,300,084 | |
Western Gas Resources, Inc. | 46,400 | 2,813,696 | |
Williams Companies, Inc. | 156,700 | 3,799,975 | |
24,969,905 | |||
TOTAL OIL, GAS & CONSUMABLE FUELS | 359,000,596 | ||
PAPER & FOREST PRODUCTS - 1.5% | |||
Forest Products - 1.2% | |||
Canfor Corp. New (a) | 2,629 | 25,881 | |
Sino-Forest Corp. (a) | 691,700 | 3,429,160 | |
Weyerhaeuser Co. | 115,800 | 6,792,828 | |
10,247,869 | |||
Paper Products - 0.3% | |||
Aracruz Celulose SA (PN-B) sponsored ADR (non-vtg.) | 40,900 | 2,044,182 | |
TOTAL PAPER & FOREST PRODUCTS | 12,292,051 | ||
REAL ESTATE INVESTMENT TRUSTS - 0.1% | |||
Specialized REITs - 0.1% | |||
Plum Creek Timber Co., Inc. | 32,700 | 1,113,762 | |
ROAD & RAIL - 0.4% | |||
Railroads - 0.4% | |||
Burlington Northern Santa Fe Corp. | 47,400 | 3,266,334 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.0% | |||
Semiconductors - 0.0% | |||
Renewable Energy Corp. AS | 1,700 | 22,857 | |
TOTAL COMMON STOCKS (Cost $642,782,710) | 836,578,665 | ||
Money Market Funds - 1.2% | |||
Shares | Value (Note 1) | ||
Fidelity Cash Central Fund, 5.3% (b) | 6,802,543 | $ 6,802,543 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 3,352,570 | 3,352,570 | |
TOTAL MONEY MARKET FUNDS (Cost $10,155,113) | 10,155,113 | ||
TOTAL INVESTMENT PORTFOLIO - 100.5% (Cost $652,937,823) | 846,733,778 | ||
NET OTHER ASSETS - (0.5)% | (4,120,528) | ||
NET ASSETS - 100% | $ 842,613,250 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 360,064 |
Fidelity Securities Lending Cash Central Fund | 188,393 |
Total | $ 548,457 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 69.6% |
Canada | 13.7% |
Cayman Islands | 6.3% |
Netherlands Antilles | 4.7% |
Others (individually less than 1%) | 5.7% |
100.0% |
See accompanying notes which are an integral part of the financial statements.
Natural Resources
Advisor Natural Resources Fund
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $2,685,893) - See accompanying schedule: Unaffiliated issuers (cost $642,782,710) | $ 836,578,665 | |
Affiliated Central Funds (cost $10,155,113) | 10,155,113 | |
Total Investments (cost $652,937,823) | $ 846,733,778 | |
Foreign currency held at value (cost $5) | 5 | |
Receivable for investments sold | 5,144,218 | |
Receivable for fund shares sold | 2,541,438 | |
Dividends receivable | 507,898 | |
Interest receivable | 26,643 | |
Prepaid expenses | 821 | |
Other receivables | 57,286 | |
Total assets | 855,012,087 | |
Liabilities | ||
Payable for investments purchased | $ 6,237,239 | |
Payable for fund shares redeemed | 1,747,758 | |
Accrued management fee | 387,516 | |
Distribution fees payable | 397,832 | |
Other affiliated payables | 217,613 | |
Other payables and accrued expenses | 58,309 | |
Collateral on securities loaned, at value | 3,352,570 | |
Total liabilities | 12,398,837 | |
Net Assets | $ 842,613,250 | |
Net Assets consist of: | ||
Paid in capital | $ 544,858,939 | |
Undistributed net investment income | 6,675 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 103,950,573 | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | 193,797,063 | |
Net Assets | $ 842,613,250 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price Class A: | $ 46.39 | |
Maximum offering price per share (100/94.25 of $46.39) | $ 49.22 | |
Class T: | $ 47.18 | |
Maximum offering price per share (100/96.50 of $47.18) | $ 48.89 | |
Class B: | $ 45.10 | |
Class C: | $ 45.33 | |
Institutional Class: | $ 47.48 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Natural Resources Fund
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 7,227,612 | |
Interest | 1,751 | |
Income from affiliated Central Funds | 548,457 | |
Total income | 7,777,820 | |
Expenses | ||
Management fee | $ 4,061,623 | |
Transfer agent fees | 2,021,172 | |
Distribution fees | 4,244,572 | |
Accounting and security lending fees | 272,106 | |
Independent trustees' compensation | 2,959 | |
Custodian fees and expenses | 116,807 | |
Registration fees | 112,077 | |
Audit | 46,148 | |
Legal | 7,719 | |
Interest | 891 | |
Miscellaneous | 7,001 | |
Total expenses before reductions | 10,893,075 | |
Expense reductions | (259,444) | 10,633,631 |
Net investment income (loss) | (2,855,811) | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 151,055,302 | |
Foreign currency transactions | 14,738 | |
Total net realized gain (loss) | 151,070,040 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 36,147,683 | |
Assets and liabilities in foreign currencies | 1,447 | |
Total change in net unrealized appreciation (depreciation) | 36,149,130 | |
Net gain (loss) | 187,219,170 | |
Net increase (decrease) in net assets resulting from operations | $ 184,363,359 | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ (2,855,811) | $ (571,477) |
Net realized gain (loss) | 151,070,040 | 75,535,938 |
Change in net unrealized appreciation (depreciation) | 36,149,130 | 81,246,071 |
Net increase (decrease) in net assets resulting from operations | 184,363,359 | 156,210,532 |
Distributions to shareholders from net investment income | - | (316,454) |
Distributions to shareholders from net realized gain | (96,405,578) | (5,002,969) |
Total distributions | (96,405,578) | (5,319,423) |
Share transactions - net increase (decrease) | 199,114,450 | 49,200,390 |
Redemption fees | 111,350 | 77,479 |
Total increase (decrease) in net assets | 287,183,581 | 200,168,978 |
Net Assets | ||
Beginning of period | 555,429,669 | 355,260,691 |
End of period (including undistributed net investment income of $6,675 and accumulated net investment loss of $1,571, respectively) | $ 842,613,250 | $ 555,429,669 |
See accompanying notes which are an integral part of the financial statements.
Natural Resources
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 40.93 | $ 29.12 | $ 21.65 | $ 20.33 | $ 26.42 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.04) | .06 | .07 | .13 | .15 |
Net realized and unrealized gain (loss) | 12.30 | 12.21 | 7.50 | 1.30 | (4.36) |
Total from investment operations | 12.26 | 12.27 | 7.57 | 1.43 | (4.21) |
Distributions from net investment income | - | (.06) | (.10) | (.11) | (.18) |
Distributions from net realized gain | (6.81) | (.41) | - | - | (1.70) |
Total distributions | (6.81) | (.47) | (.10) | (.11) | (1.88) |
Redemption fees added to paid in capital C | .01 | .01 | - E | - E | - E |
Net asset value, end of period | $ 46.39 | $ 40.93 | $ 29.12 | $ 21.65 | $ 20.33 |
Total Return A, B | 32.90% | 42.69% | 35.08% | 7.07% | (16.92)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.21% | 1.25% | 1.30% | 1.36% | 1.28% |
Expenses net of fee waivers, if any | 1.21% | 1.25% | 1.30% | 1.36% | 1.28% |
Expenses net of all reductions | 1.17% | 1.19% | 1.29% | 1.32% | 1.24% |
Net investment income (loss) | (.09)% | .19% | .28% | .63% | .64% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 204,391 | $ 90,342 | $ 44,315 | $ 21,798 | $ 21,993 |
Portfolio turnover rate | 139% | 125% | 40% | 41% | 85% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 41.46 | $ 29.52 | $ 21.97 | $ 20.61 | $ 26.73 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.13) | - | .03 | .10 | .11 |
Net realized and unrealized gain (loss) | 12.49 | 12.37 | 7.60 | 1.32 | (4.42) |
Total from investment operations | 12.36 | 12.37 | 7.63 | 1.42 | (4.31) |
Distributions from net investment income | - | (.03) | (.08) | (.06) | (.11) |
Distributions from net realized gain | (6.65) | (.41) | - | - | (1.70) |
Total distributions | (6.65) | (.44) | (.08) | (.06) | (1.81) |
Redemption fees added to paid in capital C | .01 | .01 | - E | - E | - E |
Net asset value, end of period | $ 47.18 | $ 41.46 | $ 29.52 | $ 21.97 | $ 20.61 |
Total Return A, B | 32.60% | 42.41% | 34.82% | 6.91% | (17.07)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.42% | 1.44% | 1.48% | 1.50% | 1.45% |
Expenses net of fee waivers, if any | 1.42% | 1.44% | 1.48% | 1.50% | 1.45% |
Expenses net of all reductions | 1.38% | 1.39% | 1.47% | 1.47% | 1.41% |
Net investment income (loss) | (.29)% | (.01)% | .10% | .48% | .47% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 362,272 | $ 280,820 | $ 201,187 | $ 155,249 | $ 174,670 |
Portfolio turnover rate | 139% | 125% | 40% | 41% | 85% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 39.89 | $ 28.54 | $ 21.28 | $ 20.02 | $ 26.04 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.35) | (.18) | (.11) | (.01) | (.02) |
Net realized and unrealized gain (loss) | 11.98 | 11.93 | 7.37 | 1.27 | (4.29) |
Total from investment operations | 11.63 | 11.75 | 7.26 | 1.26 | (4.31) |
Distributions from net investment income | - | - | - | - | (.01) |
Distributions from net realized gain | (6.43) | (.41) | - | - | (1.70) |
Total distributions | (6.43) | (.41) | - | - | (1.71) |
Redemption fees added to paid in capital C | .01 | .01 | - E | - E | - E |
Net asset value, end of period | $ 45.10 | $ 39.89 | $ 28.54 | $ 21.28 | $ 20.02 |
Total Return A, B | 31.86% | 41.66% | 34.12% | 6.29% | (17.51)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.96% | 1.98% | 2.02% | 2.06% | 2.00% |
Expenses net of fee waivers, if any | 1.96% | 1.98% | 2.02% | 2.06% | 2.00% |
Expenses net of all reductions | 1.92% | 1.93% | 2.01% | 2.02% | 1.95% |
Net investment income (loss) | (.84)% | (.55)% | (.44)% | (.07)% | (.07)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 130,973 | $ 102,003 | $ 68,347 | $ 50,833 | $ 58,656 |
Portfolio turnover rate | 139% | 125% | 40% | 41% | 85% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 40.10 | $ 28.68 | $ 21.38 | $ 20.10 | $ 26.15 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.34) | (.17) | (.10) | - E | (.01) |
Net realized and unrealized gain (loss) | 12.06 | 11.99 | 7.40 | 1.28 | (4.32) |
Total from investment operations | 11.72 | 11.82 | 7.30 | 1.28 | (4.33) |
Distributions from net investment income | - | - | - | - | (.02) |
Distributions from net realized gain | (6.50) | (.41) | - | - | (1.70) |
Total distributions | (6.50) | (.41) | - | - | (1.72) |
Redemption fees added to paid in capital C | .01 | .01 | - E | - E | - E |
Net asset value, end of period | $ 45.33 | $ 40.10 | $ 28.68 | $ 21.38 | $ 20.10 |
Total Return A, B | 31.96% | 41.70% | 34.14% | 6.37% | (17.52)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.92% | 1.94% | 1.99% | 2.01% | 1.96% |
Expenses net of fee waivers, if any | 1.92% | 1.94% | 1.99% | 2.01% | 1.96% |
Expenses net of all reductions | 1.88% | 1.89% | 1.97% | 1.97% | 1.92% |
Net investment income (loss) | (.79)% | (.51)% | (.41)% | (.02)% | (.03)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 125,424 | $ 72,832 | $ 37,206 | $ 22,044 | $ 24,201 |
Portfolio turnover rate | 139% | 125% | 40% | 41% | 85% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Natural Resources
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 41.76 | $ 29.64 | $ 22.03 | $ 20.67 | $ 26.82 |
Income from Investment Operations | |||||
Net investment income (loss) B | .12 | .19 | .18 | .22 | .23 |
Net realized and unrealized gain (loss) | 12.56 | 12.44 | 7.62 | 1.32 | (4.43) |
Total from investment operations | 12.68 | 12.63 | 7.80 | 1.54 | (4.20) |
Distributions from net investment income | - | (.11) | (.19) | (.18) | (.25) |
Distributions from net realized gain | (6.97) | (.41) | - | - | (1.70) |
Total distributions | (6.97) | (.52) | (.19) | (.18) | (1.95) |
Redemption fees added to paid in capital B | .01 | .01 | - D | - D | - D |
Net asset value, end of period | $ 47.48 | $ 41.76 | $ 29.64 | $ 22.03 | $ 20.67 |
Total Return A | 33.35% | 43.21% | 35.60% | 7.51% | (16.64)% |
Ratios to Average Net Assets C | |||||
Expenses before reductions | .87% | .89% | .90% | .95% | .93% |
Expenses net of fee waivers, if any | .87% | .89% | .90% | .95% | .93% |
Expenses net of all reductions | .83% | .84% | .89% | .91% | .89% |
Net investment income (loss) | .26% | .54% | .68% | 1.04% | .99% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 19,553 | $ 9,433 | $ 4,206 | $ 2,652 | $ 4,938 |
Portfolio turnover rate | 139% | 125% | 40% | 41% | 85% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. D Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Natural Resources Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund's investments in emerging markets can be subject to social, economic, regulatory, and political uncertainties and can be extremely volatile. The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, passive foreign investment companies (PFIC), partnerships and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 207,199,736 | |
Unrealized depreciation | (14,993,400) | |
Net unrealized appreciation (depreciation) | 192,206,336 | |
Undistributed ordinary income | 35,881,212 | |
Undistributed long-term capital gain | 54,035,463 | |
Cost for federal income tax purposes | $ 654,527,442 |
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Ordinary Income | $ 27,866,863 | $ 316,454 |
Long-term Capital Gains | 68,538,715 | 5,002,969 |
Total | $ 96,405,578 | $ 5,319,423 |
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Funds' net assets and results of operations.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $1,089,448,015 and $992,410,958, respectively.
Natural Resources
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 369,752 | $ 4,412 |
Class T | .25% | .25% | 1,653,110 | 21,400 |
Class B | .75% | .25% | 1,222,397 | 917,147 |
Class C | .75% | .25% | 999,313 | 314,970 |
$ 4,244,572 | $ 1,257,929 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 366,923 |
Class T | 97,815 |
Class B * | 194,578 |
Class C * | 38,445 |
$ 697,761 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 460,271 | .31 |
Class T | 879,204 | .27 |
Class B | 379,871 | .31 |
Class C | 268,549 | .27 |
Institutional Class | 33,277 | .22 |
$ 2,021,172 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $10,562 for the period.
Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the Fund, 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 affiliated funds. At period end, there were no interfund loans outstanding. The Fund's activity in this program during the period for which loans were outstanding was as follows:
Borrower or Lender | Average Daily | Weighted Average | Interest |
Borrower | $ 8,400,000 | 3.82% | $ 891 |
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $1,972 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $188,393.
7. Expense Reductions.
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $258,751 for the period. In addition, through arrangements with each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, credits reduced each class' transfer agent expense as noted in the table below.
Transfer Agent | ||
Institutional Class | $ 693 |
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide
Natural Resources
8. Other - continued
general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2006 | 2005 |
From net investment income | ||
Class A | $ - | $ 99,736 |
Class T | - | 195,831 |
Institutional Class | - | 20,887 |
Total | $ - | $ 316,454 |
From net realized gain | ||
Class A | $ 17,953,640 | $ 681,527 |
Class T | 46,191,250 | 2,676,352 |
Class B | 17,304,417 | 974,727 |
Class C | 12,815,774 | 592,512 |
Institutional Class | 2,140,497 | 77,851 |
Total | $ 96,405,578 | $ 5,002,969 |
10. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 2,831,331 | 1,253,753 | $ 124,673,619 | $ 43,103,050 |
Reinvestment of distributions | 400,806 | 23,046 | 16,449,083 | 714,182 |
Shares redeemed | (1,033,179) | (591,542) | (44,849,856) | (19,723,914) |
Net increase (decrease) | 2,198,958 | 685,257 | $ 96,272,846 | $ 24,093,318 |
Class T | ||||
Shares sold | 1,987,040 | 1,803,813 | $ 88,233,274 | $ 62,397,322 |
Reinvestment of distributions | 1,036,774 | 85,233 | 43,334,106 | 2,678,882 |
Shares redeemed | (2,118,138) | (1,932,106) | (92,809,287) | (66,301,961) |
Net increase (decrease) | 905,676 | (43,060) | $ 38,758,093 | $ (1,225,757) |
Class B | ||||
Shares sold | 1,013,249 | 949,870 | $ 43,295,228 | $ 31,871,038 |
Reinvestment of distributions | 367,313 | 27,043 | 14,743,317 | 820,469 |
Shares redeemed | (1,034,052) | (814,770) | (43,654,702) | (26,808,279) |
Net increase (decrease) | 346,510 | 162,143 | $ 14,383,843 | $ 5,883,228 |
Class C | ||||
Shares sold | 1,465,945 | 999,959 | $ 63,632,906 | $ 33,826,711 |
Reinvestment of distributions | 261,691 | 15,581 | 10,551,203 | 475,225 |
Shares redeemed | (777,152) | (496,487) | (32,787,487) | (16,702,359) |
Net increase (decrease) | 950,484 | 519,053 | $ 41,396,622 | $ 17,599,577 |
Institutional Class | ||||
Shares sold | 261,912 | 134,272 | $ 11,683,224 | $ 4,562,121 |
Reinvestment of distributions | 24,127 | 2,107 | 1,012,348 | 66,476 |
Shares redeemed | (100,080) | (52,414) | (4,392,526) | (1,778,573) |
Net increase (decrease) | 185,959 | 83,965 | $ 8,303,046 | $ 2,850,024 |
Annual Report
Advisor Technology Fund - Class A, T, B, and C
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow. Returns reflect the conversion of Class B shares to Class A shares after a maximum of seven years.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of |
Class A (incl. 5.75% sales charge) | -9.07% | -3.62% | 6.32% |
Class T (incl. 3.50% sales charge) | -7.15% | -3.38% | 6.31% |
Class B (incl. contingent deferred sales charge) B | -9.05% | -3.59% | 6.35% |
Class C (incl. contingent deferred sales charge) C | -5.20% | -3.15% | 6.18% |
A From September 3, 1996.
B Class B shares bear a 1.00% 12b-1 fee. The initial offering of Class B shares took place on March 3, 1997. Returns prior to March 3, 1997 are those of Class T and reflect a 0.50% 12b-1 fee. Had Class B shares' 12b-1 fee been reflected, returns prior to March 3, 1997 would have been lower. Class B shares' contingent deferred sales charges included in the past one year, past five years and life of fund total return figures are 5%, 2%, and 0%, respectively.
C Class C shares bear a 1.00% 12b-1 fee. The initial offering of Class C shares took place on November 3, 1997. Returns between March 3, 1997 and November 3, 1997 are those of Class B shares and reflect Class B shares' 1.00% 12b-1 fee. Returns prior to March 3, 1997 are those of Class T and reflect a 0.50% 12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns prior to March 3, 1997 would have been lower. Class C shares' contingent deferred sales charges included in the past one year, past five years and life of fund total return figures are 1%, 0%, and 0%, respectively.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Technology Fund - Class T on September 3, 1996, when the fund started, and the current 3.50% sales charge was paid. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Charlie Chai, Portfolio Manager of Fidelity® Advisor Technology Fund
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
During the past year, the fund's Class A, Class T, Class B and Class C shares returned -3.53%, -3.78%, -4.27% and -4.25%, respectively (excluding sales charges), beating the -6.42% return of the Goldman Sachs® Technology Index but trailing the S&P 500. Stock selection in the semiconductor, computer hardware, semiconductor equipment and computer storage/peripherals groups particularly helped fund performance versus the sector index, as did an underweighting in the weak semiconductor segment. Semiconductor leader Intel and computer maker Dell were the fund's top relative contributors. Both index components did poorly, and the fund was rewarded for underweighting them. In Dell's case, I sold the entire position by period end. It also helped to overweight Internet services provider Google, which enjoyed strong earnings growth. I subsequently trimmed the stock for valuation reasons. Other beneficial holdings were MEMC Electronic Materials and F5 Networks. Conversely, performance suffered because of underweightings in systems software and in data processing/outsourced services. Roughly a double weighting in communications equipment also hurt. Among individual holdings, overweighting Canada-based telecom equipment stock Nortel Networks proved ill-timed. Further dampening our results was software and services provider Openwave Systems. Underweighting systems software specialist Oracle and computer maker Hewlett-Packard was detrimental as well, as those stocks managed to buck the downward trend. The fund did not own Oracle at period end.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 823.60 | $ 5.79 |
HypotheticalA | $ 1,000.00 | $ 1,018.45 | $ 6.41 |
Class T | |||
Actual | $ 1,000.00 | $ 822.40 | $ 6.87 |
HypotheticalA | $ 1,000.00 | $ 1,017.26 | $ 7.60 |
Class B | |||
Actual | $ 1,000.00 | $ 820.10 | $ 9.12 |
HypotheticalA | $ 1,000.00 | $ 1,014.78 | $ 10.09 |
Class C | |||
Actual | $ 1,000.00 | $ 820.40 | $ 9.12 |
HypotheticalA | $ 1,000.00 | $ 1,014.78 | $ 10.09 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 824.90 | $ 4.07 |
HypotheticalA | $ 1,000.00 | $ 1,020.33 | $ 4.51 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.28% |
Class T | 1.52% |
Class B | 2.02% |
Class C | 2.02% |
Institutional Class | .90% |
Annual Report
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
QUALCOMM, Inc. | 5.8 | 6.2 |
Corning, Inc. | 5.6 | 2.2 |
Apple Computer, Inc. | 4.9 | 4.2 |
Hewlett-Packard Co. | 3.9 | 3.9 |
Motorola, Inc. | 3.8 | 2.4 |
Intel Corp. | 3.1 | 0.0 |
Broadcom Corp. Class A | 2.9 | 0.5 |
Comverse Technology, Inc. | 2.7 | 1.6 |
F5 Networks, Inc. | 2.5 | 3.0 |
Google, Inc. Class A (sub. vtg.) | 2.0 | 3.9 |
37.2 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Communications Equipment | 33.9% | |
| Semiconductors & Semiconductor Equipment | 26.1% | |
| Computers & Peripherals | 13.7% | |
| Software | 8.8% | |
| Electronic Equipment & Instruments | 6.7% | |
| All Others * | 10.8% | |
As of January 31, 2006 | |||
| Communications Equipment | 31.7% | |
| Computers & Peripherals | 18.4% | |
| Semiconductors & Semiconductor Equipment | 17.1% | |
| Software | 8.9% | |
| Internet Software & Services | 8.1% | |
| All Others * | 15.8% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 100.4% | |||
Shares | Value (Note 1) | ||
BUILDING PRODUCTS - 0.3% | |||
Building Products - 0.3% | |||
Asahi Glass Co. Ltd. | 156,000 | $ 1,998,814 | |
COMMERCIAL SERVICES & SUPPLIES - 0.7% | |||
Diversified Commercial & Professional Services - 0.7% | |||
Equifax, Inc. | 10,300 | 332,484 | |
Tele Atlas NV (a) | 319,356 | 5,229,655 | |
5,562,139 | |||
COMMUNICATIONS EQUIPMENT - 33.8% | |||
Communications Equipment - 33.8% | |||
ADC Telecommunications, Inc. (a) | 318,264 | 3,892,369 | |
Adtran, Inc. | 172,500 | 3,772,575 | |
ADVA AG Optical Networking (a) | 363,673 | 3,061,303 | |
Andrew Corp. (a) | 318,600 | 2,692,170 | |
Arris Group, Inc. (a) | 3,200 | 34,208 | |
AudioCodes Ltd. (a) | 853,650 | 8,280,405 | |
Bookham, Inc. (a)(d) | 1,564,658 | 4,662,681 | |
Ceragon Networks Ltd. (a) | 499,500 | 2,322,675 | |
CIENA Corp. (a) | 2,864,400 | 10,397,772 | |
CommScope, Inc. (a) | 16,800 | 524,664 | |
Comverse Technology, Inc. (a) | 1,012,700 | 19,626,126 | |
Corning, Inc. | 2,148,800 | 40,977,616 | |
CSR PLC (a) | 165,200 | 3,502,631 | |
ECI Telecom Ltd. (a) | 436,718 | 2,926,011 | |
F5 Networks, Inc. (a) | 394,300 | 18,271,862 | |
Finisar Corp. (a)(d) | 2,030,371 | 5,685,039 | |
Foundry Networks, Inc. (a) | 304,700 | 3,156,692 | |
Foxconn International Holdings Ltd. (a) | 130,000 | 302,158 | |
Harris Corp. | 40,500 | 1,844,775 | |
ITF Optical Technologies, Inc. Series A (a)(f) | 34,084 | 0 | |
Ixia (a) | 38,186 | 353,984 | |
JDS Uniphase Corp. (a) | 1,492,300 | 3,178,599 | |
Juniper Networks, Inc. (a) | 197,846 | 2,661,029 | |
Motorola, Inc. | 1,235,500 | 28,119,980 | |
Nortel Networks Corp. | 4,517,600 | 8,854,512 | |
Orckit Communications Ltd. (a) | 45,400 | 349,580 | |
OZ Optics Ltd. unit (a)(f) | 68,000 | 1,003,000 | |
Powerwave Technologies, Inc. (a) | 813,100 | 6,456,014 | |
QUALCOMM, Inc. | 1,214,700 | 42,830,321 | |
Research In Motion Ltd. (a) | 28,370 | 1,861,923 | |
Sandvine Corp. (e) | 1,718,500 | 4,028,856 | |
Sonus Networks, Inc. (a) | 790,600 | 3,541,888 | |
Stratex Networks, Inc. (a) | 477,300 | 1,675,323 | |
Symmetricom, Inc. (a) | 634,536 | 4,492,515 | |
Tekelec (a) | 244,100 | 2,511,789 | |
TomTom Group BV (a) | 28,500 | 1,060,462 | |
248,913,507 | |||
Shares | Value (Note 1) | ||
COMPUTERS & PERIPHERALS - 13.7% | |||
Computer Hardware - 11.4% | |||
Apple Computer, Inc. (a) | 527,600 | $ 35,855,696 | |
Concurrent Computer Corp. (a) | 2,791,264 | 5,191,751 | |
Hewlett-Packard Co. | 889,800 | 28,393,518 | |
NCR Corp. (a) | 141,100 | 4,534,954 | |
Neoware Systems, Inc. (a)(d) | 150,300 | 1,860,714 | |
Sun Microsystems, Inc. (a) | 1,776,700 | 7,728,645 | |
83,565,278 | |||
Computer Storage & Peripherals - 2.3% | |||
Brocade Communications Systems, Inc. (a) | 4,200 | 26,292 | |
Emulex Corp. (a) | 80,000 | 1,191,200 | |
Network Appliance, Inc. (a) | 170,900 | 5,074,021 | |
Novatel Wireless, Inc. (a)(d) | 147,700 | 1,633,562 | |
Rackable Systems, Inc. (a) | 11,800 | 251,576 | |
Synaptics, Inc. (a) | 428,000 | 8,996,560 | |
17,173,211 | |||
TOTAL COMPUTERS & PERIPHERALS | 100,738,489 | ||
ELECTRICAL EQUIPMENT - 0.8% | |||
Electrical Components & Equipment - 0.8% | |||
Energy Conversion Devices, Inc. (a) | 35,900 | 1,208,035 | |
Evergreen Solar, Inc. (a)(d) | 437,397 | 4,124,654 | |
Q-Cells AG | 600 | 42,965 | |
Suntech Power Holdings Co. Ltd. sponsored ADR | 35,400 | 917,922 | |
6,293,576 | |||
ELECTRONIC EQUIPMENT & INSTRUMENTS - 6.7% | |||
Electronic Equipment & Instruments - 4.6% | |||
AU Optronics Corp. sponsored ADR (d) | 483,800 | 7,131,212 | |
Cognex Corp. | 13,600 | 320,960 | |
Dolby Laboratories, Inc. Class A (a) | 22,100 | 443,105 | |
LG.Philips LCD Co. Ltd. sponsored ADR (a)(d) | 739,900 | 13,162,821 | |
Nippon Electric Glass Co. Ltd. | 385,000 | 8,596,598 | |
Photon Dynamics, Inc. (a) | 425,351 | 4,517,228 | |
34,171,924 | |||
Electronic Manufacturing Services - 1.5% | |||
Hon Hai Precision Industry Co. Ltd. (Foxconn) | 1,133,878 | 6,717,533 | |
Jabil Circuit, Inc. | 160,000 | 3,696,000 | |
Trimble Navigation Ltd. (a) | 11,200 | 537,936 | |
10,951,469 | |||
Technology Distributors - 0.6% | |||
Brightpoint, Inc. (a) | 233,055 | 3,418,917 | |
Wolfson Microelectronics PLC (a) | 91,000 | 768,366 | |
4,187,283 | |||
TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS | 49,310,676 | ||
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
HOUSEHOLD DURABLES - 0.2% | |||
Consumer Electronics - 0.2% | |||
ReignCom Ltd. (a) | 24,592 | $ 108,394 | |
Thomson SA | 68,900 | 1,157,324 | |
1,265,718 | |||
Household Appliances - 0.0% | |||
iRobot Corp. (d) | 1,400 | 24,514 | |
TOTAL HOUSEHOLD DURABLES | 1,290,232 | ||
INDUSTRIAL CONGLOMERATES - 0.2% | |||
Industrial Conglomerates - 0.2% | |||
Orkla ASA (A Shares) | 27,050 | 1,226,209 | |
INTERNET & CATALOG RETAIL - 0.2% | |||
Internet Retail - 0.2% | |||
Gmarket, Inc. sponsored ADR | 1,400 | 20,342 | |
GSI Commerce, Inc. (a) | 145,137 | 1,863,559 | |
1,883,901 | |||
INTERNET SOFTWARE & SERVICES - 4.6% | |||
Internet Software & Services - 4.6% | |||
Akamai Technologies, Inc. (a) | 3,700 | 146,631 | |
aQuantive, Inc. (a) | 113,200 | 2,320,600 | |
Ariba, Inc. (a) | 43,500 | 339,300 | |
AsiaInfo Holdings, Inc. (a) | 120,000 | 499,200 | |
Baidu.com, Inc. sponsored ADR | 700 | 50,330 | |
Google, Inc. Class A (sub. vtg.) (a) | 37,550 | 14,516,830 | |
Liquidity Services, Inc. | 67,900 | 863,688 | |
Marchex, Inc. Class B | 182,100 | 2,321,775 | |
Openwave Systems, Inc. (a) | 1,144,193 | 7,540,232 | |
Traffic.com, Inc. (d) | 71,391 | 412,640 | |
VeriSign, Inc. (a) | 166,800 | 2,990,724 | |
WebSideStory, Inc. (a) | 164,100 | 2,006,943 | |
34,008,893 | |||
IT SERVICES - 3.6% | |||
Data Processing & Outsourced Services - 1.8% | |||
First Data Corp. | 338,400 | 13,823,640 | |
IT Consulting & Other Services - 1.8% | |||
Cognizant Technology Solutions Corp. Class A (a) | 109,400 | 7,164,606 | |
Infosys Technologies Ltd. sponsored ADR (d) | 82,800 | 3,402,252 | |
Kanbay International, Inc. (a) | 81,900 | 1,187,550 | |
Satyam Computer Services Ltd. sponsored ADR | 38,900 | 1,371,225 | |
13,125,633 | |||
TOTAL IT SERVICES | 26,949,273 | ||
PHARMACEUTICALS - 0.1% | |||
Pharmaceuticals - 0.1% | |||
Merck KGaA | 8,900 | 811,932 | |
Shares | Value (Note 1) | ||
REAL ESTATE MANAGEMENT & DEVELOPMENT - 0.2% | |||
Real Estate Management & Development - 0.2% | |||
Move, Inc. | 295,625 | $ 1,300,750 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 26.1% | |||
Semiconductor Equipment - 5.4% | |||
Applied Materials, Inc. | 237,100 | 3,731,954 | |
ASM International NV (NASDAQ) (a) | 58,900 | 915,306 | |
ASML Holding NV (NY Shares) (a) | 251,500 | 5,004,850 | |
Axcelis Technologies, Inc. (a) | 149,500 | 826,735 | |
Credence Systems Corp. (a) | 261,900 | 738,558 | |
Cymer, Inc. (a) | 63,900 | 2,499,768 | |
EMCORE Corp. (a)(d) | 175,998 | 1,242,546 | |
Entegris, Inc. (a) | 275,945 | 2,607,680 | |
FormFactor, Inc. (a) | 66,600 | 2,855,142 | |
ICOS Vision Systems NV (a) | 9,100 | 330,694 | |
KLA-Tencor Corp. | 53,700 | 2,265,603 | |
Lam Research Corp. (a) | 90,400 | 3,759,736 | |
MEMC Electronic Materials, Inc. (a) | 67,200 | 2,044,224 | |
Rudolph Technologies, Inc. (a) | 203,700 | 2,833,467 | |
Tessera Technologies, Inc. (a) | 113,785 | 3,580,814 | |
Varian Semiconductor Equipment Associates, Inc. (a) | 35,550 | 1,126,935 | |
Verigy Ltd. | 242,400 | 3,623,880 | |
39,987,892 | |||
Semiconductors - 20.7% | |||
Advanced Analogic Technologies, Inc. | 233,550 | 2,197,706 | |
AMIS Holdings, Inc. (a) | 201,200 | 1,887,256 | |
Applied Micro Circuits Corp. (a) | 657,229 | 1,695,651 | |
ARM Holdings PLC sponsored ADR | 193,000 | 1,252,570 | |
Broadcom Corp. Class A (a) | 900,122 | 21,593,927 | |
Cambridge Display Technologies, Inc. (a)(d) | 61,700 | 310,351 | |
Conexant Systems, Inc. (a) | 186,900 | 334,551 | |
Cree, Inc. (a)(d) | 66,700 | 1,315,991 | |
Cypress Semiconductor Corp. (a) | 342,800 | 5,207,132 | |
Exar Corp. (a) | 12,463 | 161,396 | |
Fairchild Semiconductor International, Inc. (a) | 68,300 | 1,117,388 | |
Freescale Semiconductor, Inc. Class A (a) | 280,700 | 8,036,441 | |
Himax Technologies, Inc. sponsored ADR | 487,200 | 3,152,184 | |
Ikanos Communications, Inc. | 270,000 | 3,739,500 | |
Infineon Technologies AG sponsored ADR (a) | 136,600 | 1,469,816 | |
Integrated Device Technology, Inc. (a) | 396,300 | 6,130,761 | |
Intel Corp. | 1,269,600 | 22,852,800 | |
Intersil Corp. Class A | 102,319 | 2,405,520 | |
LSI Logic Corp. (a) | 132,400 | 1,085,680 | |
Marvell Technology Group Ltd. (a) | 596,200 | 11,059,510 | |
Micrel, Inc. (a) | 136,000 | 1,452,480 | |
Microtune, Inc. (a) | 444,440 | 2,582,196 | |
Mindspeed Technologies, Inc. (a) | 764,746 | 1,368,895 | |
MoSys, Inc. (a) | 32,100 | 230,478 | |
National Semiconductor Corp. | 204,200 | 4,749,692 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - CONTINUED | |||
Semiconductors - continued | |||
Netlogic Microsystems, Inc. (a)(d) | 148,000 | $ 3,626,000 | |
Novatek Microelectronics Corp. | 1,172,039 | 5,762,483 | |
O2Micro International Ltd. sponsored ADR (a) | 676,646 | 4,053,110 | |
Pericom Semiconductor Corp. (a) | 37,400 | 314,160 | |
Pixelplus Co. Ltd. sponsored ADR | 114,100 | 228,200 | |
PLX Technology, Inc. (a) | 45,400 | 416,318 | |
PMC-Sierra, Inc. (a) | 135,900 | 694,449 | |
Powerchip Semiconductor Corp. | 2,617,000 | 1,718,240 | |
ProMOS Technologies, Inc. | 4,499,000 | 1,710,516 | |
Saifun Semiconductors Ltd. | 77,000 | 2,021,250 | |
Semiconductor Manufacturing International Corp. sponsored ADR (a)(d) | 126,600 | 835,560 | |
Silicon On Insulator Technologies SA (SOITEC) (a) | 163,000 | 4,347,384 | |
Spansion, Inc. Class A (d) | 407,900 | 5,702,442 | |
STATS ChipPAC Ltd. sponsored ADR (a) | 251,300 | 1,419,845 | |
Taiwan Semiconductor Manufacturing Co. Ltd. sponsored ADR | 227,500 | 1,972,425 | |
Trident Microsystems, Inc. (a) | 469,700 | 8,088,234 | |
Vimicro International Corp. sponsored ADR | 52,200 | 561,150 | |
Winbond Electronics Corp. (a) | 2,721,000 | 762,804 | |
Zoran Corp. (a) | 45,500 | 730,275 | |
152,354,717 | |||
TOTAL SEMICONDUCTORS & SEMICONDUCTOR | 192,342,609 | ||
SOFTWARE - 8.8% | |||
Application Software - 7.0% | |||
Adobe Systems, Inc. (a) | 253,900 | 7,238,689 | |
Ansys, Inc. (a) | 36,000 | 1,652,040 | |
Autodesk, Inc. (a) | 160,400 | 5,471,244 | |
Citrix Systems, Inc. (a) | 126,700 | 4,025,259 | |
Cognos, Inc. (a) | 157,300 | 4,915,625 | |
FileNET Corp. (a) | 33,800 | 1,075,516 | |
Hyperion Solutions Corp. (a) | 76,700 | 2,389,972 | |
Informatica Corp. (a) | 427,400 | 5,970,778 | |
JDA Software Group, Inc. (a) | 92,300 | 1,427,881 | |
Kronos, Inc. (a) | 22,100 | 641,121 | |
NAVTEQ Corp. (a) | 80,356 | 2,264,432 | |
Open Solutions, Inc. (a) | 46,500 | 1,285,725 | |
Quest Software, Inc. (a) | 112,800 | 1,541,976 | |
Ulticom, Inc. (a) | 1,199,117 | 11,907,232 | |
51,807,490 | |||
Home Entertainment Software - 1.0% | |||
Activision, Inc. (a) | 207,600 | 2,480,820 | |
Electronic Arts, Inc. (a) | 45,500 | 2,143,505 | |
Shares | Value (Note 1) | ||
Shanda Interactive Entertainment Ltd. sponsored ADR (a)(d) | 28,600 | $ 431,002 | |
THQ, Inc. (a) | 112,200 | 2,545,818 | |
7,601,145 | |||
Systems Software - 0.8% | |||
Red Hat, Inc. (a) | 136,000 | 3,220,480 | |
Wind River Systems, Inc. (a) | 272,600 | 2,254,402 | |
5,474,882 | |||
TOTAL SOFTWARE | 64,883,517 | ||
SPECIALTY RETAIL - 0.2% | |||
Computer & Electronics Retail - 0.2% | |||
Gamestop Corp. Class B (a) | 37,400 | 1,406,240 | |
WIRELESS TELECOMMUNICATION SERVICES - 0.2% | |||
Wireless Telecommunication Services - 0.2% | |||
SBA Communications Corp. Class A (a) | 45,500 | 1,086,540 | |
Wireless Facilities, Inc. (a) | 163,300 | 393,553 | |
1,480,093 | |||
TOTAL COMMON STOCKS (Cost $852,347,938) | 740,400,850 | ||
Convertible Preferred Stocks - 0.0% | |||
COMMUNICATIONS EQUIPMENT - 0.0% | |||
Communications Equipment - 0.0% | |||
Chorum Technologies, Inc. Series E (a)(f) | 17,200 | 0 | |
Convertible Bonds - 0.1% | ||||
Principal Amount | ||||
COMMUNICATIONS EQUIPMENT - 0.1% | ||||
Communications Equipment - 0.1% | ||||
CIENA Corp. 0.25% 5/1/13 | $ 1,270,000 | 1,062,609 | ||
Money Market Funds - 6.3% | |||
Shares | |||
Fidelity Cash Central Fund, 5.3% (b) | 8,493,900 | 8,493,900 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 37,571,734 | 37,571,734 | |
TOTAL MONEY MARKET FUNDS (Cost $46,065,634) | 46,065,634 | ||
TOTAL INVESTMENT PORTFOLIO - 106.8% (Cost $899,941,604) | 787,529,093 | ||
NET OTHER ASSETS - (6.8)% | (50,202,553) | ||
NET ASSETS - 100% | $ 737,326,540 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
(e) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $4,028,856 or 0.5% of net assets. |
(f) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $1,003,000 or 0.1% of net assets. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
Chorum Technologies, Inc. Series E | 9/19/00 | $ 258,032 |
ITF Optical Technologies, Inc. Series A | 10/11/00 | $ 1,711,500 |
OZ Optics Ltd. unit | 8/18/00 | $ 1,003,680 |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned | ||
Fidelity Cash Central Fund | $ 372,074 | ||
Fidelity Securities Lending Cash Central Fund | 372,226 | ||
Total | $ 744,300 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 79.8% |
Taiwan | 3.5% |
Canada | 2.8% |
Israel | 2.2% |
Korea (South) | 1.8% |
Netherlands | 1.6% |
Bermuda | 1.5% |
Japan | 1.5% |
Cayman Islands | 1.3% |
Others (individually less than 1%) | 4.0% |
100.0% |
Income Tax Information |
At July 31, 2006, the fund had a capital loss carryforward of approximately $1,516,738,814 of which $1,016,932,031 and $499,806,783 will expire on July 31, 2010 and 2011, respectively. |
See accompanying notes which are an integral part of the financial statements.
Technology
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $36,256,883) - See accompanying schedule: Unaffiliated issuers (cost $853,875,970) | $ 741,463,459 | |
Affiliated Central Funds (cost $46,065,634) | 46,065,634 | |
Total Investments (cost $899,941,604) | $ 787,529,093 | |
Cash | 413,442 | |
Receivable for investments sold | 35,272,896 | |
Receivable for fund shares sold | 2,952,591 | |
Dividends receivable | 220,316 | |
Interest receivable | 30,931 | |
Prepaid expenses | 1,344 | |
Other receivables | 88,248 | |
Total assets | 826,508,861 | |
Liabilities | ||
Payable for investments purchased | $ 45,513,384 | |
Payable for fund shares redeemed | 5,033,936 | |
Accrued management fee | 348,838 | |
Distribution fees payable | 381,710 | |
Other affiliated payables | 287,806 | |
Other payables and accrued expenses | 44,913 | |
Collateral on securities loaned, at value | 37,571,734 | |
Total liabilities | 89,182,321 | |
Net Assets | $ 737,326,540 | |
Net Assets consist of: | ||
Paid in capital | $ 2,375,152,344 | |
Accumulated net investment loss | (473) | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | (1,525,413,371) | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | (112,411,960) | |
Net Assets | $ 737,326,540 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price Class A: | $ 15.59 | |
Maximum offering price per share (100/94.25 of $15.59) | $ 16.54 | |
Class T: | $ 15.28 | |
Maximum offering price per share (100/96.50 of $15.28) | $ 15.83 | |
Class B: | $ 14.59 | |
Class C: | $ 14.66 | |
Institutional Class: | $ 16.07 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Technology Fund
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 1,975,176 | |
Interest | 7,353 | |
Income from affiliated Central Funds (including $372,226 from security lending) | 744,300 | |
Total income | 2,726,829 | |
Expenses | ||
Management fee | $ 4,995,050 | |
Transfer agent fees | 3,686,670 | |
Distribution fees | 5,820,455 | |
Accounting and security lending fees | 320,128 | |
Independent trustees' compensation | 3,618 | |
Custodian fees and expenses | 64,525 | |
Registration fees | 67,783 | |
Audit | 52,682 | |
Legal | 12,649 | |
Interest | 2,477 | |
Miscellaneous | 10,528 | |
Total expenses before reductions | 15,036,565 | |
Expense reductions | (952,251) | 14,084,314 |
Net investment income (loss) | (11,357,485) | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 134,132,843 | |
Foreign currency transactions | (325,790) | |
Total net realized gain (loss) | 133,807,053 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (146,912,234) | |
Assets and liabilities in foreign currencies | 93,636 | |
Total change in net unrealized appreciation (depreciation) | (146,818,598) | |
Net gain (loss) | (13,011,545) | |
Net increase (decrease) in net assets resulting from operations | $ (24,369,030) | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ (11,357,485) | $ (2,963,867) |
Net realized gain (loss) | 133,807,053 | 53,318,670 |
Change in net unrealized appreciation (depreciation) | (146,818,598) | 82,424,513 |
Net increase (decrease) in net assets resulting from operations | (24,369,030) | 132,779,316 |
Distributions to shareholders from net investment income | - | (3,825,456) |
Share transactions - net increase (decrease) | (128,197,659) | (218,784,694) |
Redemption fees | 46,191 | 52,561 |
Total increase (decrease) in net assets | (152,520,498) | (89,778,273) |
Net Assets | ||
Beginning of period | 889,847,038 | 979,625,311 |
End of period (including accumulated net investment loss of $473 and accumulated net investment loss of $658, respectively) | $ 737,326,540 | $ 889,847,038 |
See accompanying notes which are an integral part of the financial statements.
Technology
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 16.16 | $ 13.98 | $ 13.36 | $ 10.03 | $ 17.76 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.15) | .02 D | (.17) | (.11) | (.15) |
Net realized and unrealized gain (loss) | (.42) | 2.24 | .79 | 3.44 | (7.58) |
Total from investment operations | (.57) | 2.26 | .62 | 3.33 | (7.73) |
Distributions from net investment income | - | (.08) | - | - | - |
Redemption fees added to paid in capital C | - F | - F | - F | - F | - F |
Net asset value, end of period | $ 15.59 | $ 16.16 | $ 13.98 | $ 13.36 | $ 10.03 |
Total Return A, B | (3.53)% | 16.20% | 4.64% | 33.20% | (43.52)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 1.30% | 1.37% | 1.44% | 1.70% | 1.53% |
Expenses net of fee waivers, if any | 1.30% | 1.37% | 1.44% | 1.59% | 1.51% |
Expenses net of all reductions | 1.20% | 1.26% | 1.35% | 1.38% | 1.43% |
Net investment income (loss) | (.88)% | .12% D | (1.10)% | (1.03)% | (1.07)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 189,054 | $ 144,970 | $ 123,389 | $ 123,604 | $ 101,649 |
Portfolio turnover rate | 258% | 180% | 105% | 140% | 164% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Investment income per share reflects a special dividend which amounted to $.14 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (.87)%. E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. F Amount represents less than $.01 per share. |
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 15.88 | $ 13.76 | $ 13.17 | $ 9.91 | $ 17.59 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.19) | (.02) D | (.19) | (.14) | (.18) |
Net realized and unrealized gain (loss) | (.41) | 2.21 | .78 | 3.40 | (7.50) |
Total from investment operations | (.60) | 2.19 | .59 | 3.26 | (7.68) |
Distributions from net investment income | - | (.07) | - | - | - |
Redemption fees added to paid in capital C | - F | - F | - F | - F | - F |
Net asset value, end of period | $ 15.28 | $ 15.88 | $ 13.76 | $ 13.17 | $ 9.91 |
Total Return A, B | (3.78)% | 15.94% | 4.48% | 32.90% | (43.66)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 1.55% | 1.60% | 1.62% | 1.85% | 1.70% |
Expenses net of fee waivers, if any | 1.55% | 1.60% | 1.62% | 1.83% | 1.70% |
Expenses net of all reductions | 1.44% | 1.48% | 1.53% | 1.63% | 1.62% |
Net investment income (loss) | (1.13)% | (.11)% D | (1.28)% | (1.28)% | (1.26)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 260,966 | $ 315,930 | $ 363,399 | $ 367,257 | $ 302,657 |
Portfolio turnover rate | 258% | 180% | 105% | 140% | 164% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Investment income per share reflects a special dividend which amounted to $.14 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (1.10)%. E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. F Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 15.24 | $ 13.25 | $ 12.76 | $ 9.64 | $ 17.21 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.27) | (.09) D | (.27) | (.17) | (.25) |
Net realized and unrealized gain (loss) | (.38) | 2.12 | .76 | 3.29 | (7.32) |
Total from investment operations | (.65) | 2.03 | .49 | 3.12 | (7.57) |
Distributions from net investment income | - | (.04) | - | - | - |
Redemption fees added to paid in capital C | - F | - F | - F | - F | - F |
Net asset value, end of period | $ 14.59 | $ 15.24 | $ 13.25 | $ 12.76 | $ 9.64 |
Total Return A, B | (4.27)% | 15.33% | 3.84% | 32.37% | (43.99)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 2.05% | 2.13% | 2.21% | 2.38% | 2.28% |
Expenses net of fee waivers, if any | 2.05% | 2.13% | 2.21% | 2.25% | 2.25% |
Expenses net of all reductions | 1.94% | 2.02% | 2.12% | 2.05% | 2.18% |
Net investment income (loss) | (1.63)% | (.65)% D | (1.87)% | (1.69)% | (1.81)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 192,790 | $ 309,020 | $ 355,927 | $ 391,832 | $ 337,976 |
Portfolio turnover rate | 258% | 180% | 105% | 140% | 164% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Investment income per share reflects a special dividend which amounted to $.14 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (1.64)%. E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. F Amount represents less than $.01 per share. |
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 15.31 | $ 13.31 | $ 12.80 | $ 9.67 | $ 17.25 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.27) | (.08) D | (.26) | (.17) | (.24) |
Net realized and unrealized gain (loss) | (.38) | 2.12 | .77 | 3.30 | (7.34) |
Total from investment operations | (.65) | 2.04 | .51 | 3.13 | (7.58) |
Distributions from net investment income | - | (.04) | - | - | - |
Redemption fees added to paid in capital C | - F | - F | - F | - F | - F |
Net asset value, end of period | $ 14.66 | $ 15.31 | $ 13.31 | $ 12.80 | $ 9.67 |
Total Return A, B | (4.25)% | 15.34% | 3.98% | 32.37% | (43.94)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 2.05% | 2.10% | 2.13% | 2.28% | 2.18% |
Expenses net of fee waivers, if any | 2.05% | 2.10% | 2.13% | 2.25% | 2.18% |
Expenses net of all reductions | 1.94% | 1.99% | 2.04% | 2.05% | 2.11% |
Net investment income (loss) | (1.63)% | (.61)% D | (1.79)% | (1.69)% | (1.74)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 82,835 | $ 108,287 | $ 125,926 | $ 139,654 | $ 123,034 |
Portfolio turnover rate | 258% | 180% | 105% | 140% | 164% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Investment income per share reflects a special dividend which amounted to $.14 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (1.60)%. E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. F Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Technology
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 16.60 | $ 14.32 | $ 13.61 | $ 10.15 | $ 17.90 |
Income from Investment Operations | |||||
Net investment income (loss) B | (.09) | .09 C | (.09) | (.05) | (.08) |
Net realized and unrealized gain (loss) | (.44) | 2.30 | .80 | 3.51 | (7.67) |
Total from investment operations | (.53) | 2.39 | .71 | 3.46 | (7.75) |
Distributions from net investment income | - | (.11) | - | - | - |
Redemption fees added to paid in capital B | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 16.07 | $ 16.60 | $ 14.32 | $ 13.61 | $ 10.15 |
Total Return A | (3.19)% | 16.73% | 5.22% | 34.09% | (43.30)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | .90% | .92% | .93% | .99% | 1.00% |
Expenses net of fee waivers, if any | .90% | .92% | .93% | .99% | 1.00% |
Expenses net of all reductions | .80% | .81% | .84% | .79% | .92% |
Net investment income (loss) | (.49)% | .57% C | (.59)% | (.43)% | (.56)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 11,681 | $ 11,640 | $ 10,984 | $ 11,511 | $ 10,495 |
Portfolio turnover rate | 258% | 180% | 105% | 140% | 164% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Investment income per share reflects a special dividend which amounted to $.14 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (.42)%. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Technology Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund's investments in emerging markets can be subject to social, economic, regulatory, and political uncertainties and can be extremely volatile.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Debt securities, including restricted securities, for which quotations are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. As a result in the change in the estimate of the return of capital component of dividend income realized in the year ended July 31, 2006, dividend income has been increased $206,207 with a corresponding decrease to net unrealized appreciation (depreciation). The change in estimate has no impact on total net
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Investment Transactions and Income - continued
assets or total return of the Fund. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, net operating losses, capital loss carryforwards and losses deferred due to wash sales and excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 18,082,086 | |
Unrealized depreciation | (139,168,573) | |
Net unrealized appreciation (depreciation) | (121,086,487) | |
Capital loss carryforward | (1,516,738,814) | |
Cost for federal income tax purposes | $ 908,615,580 |
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Ordinary Income | $ - | $ 3,825,456 |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
Restricted Securities. The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.
Technology
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $2,245,970,047 and $2,372,030,534, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 430,554 | $ 3,991 |
Class T | .25% | .25% | 1,563,436 | 3,218 |
Class B | .75% | .25% | 2,787,577 | 2,091,753 |
Class C | .75% | .25% | 1,038,888 | 53,808 |
$ 5,820,455 | $ 2,152,770 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 38,157 |
Class T | 34,762 |
Class B * | 428,302 |
Class C * | 5,728 |
$ 506,949 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 730,350 | .42 |
Class T | 1,309,587 | .42 |
Class B | 1,173,244 | .42 |
Class C | 438,544 | .42 |
Institutional Class | 34,945 | .28 |
$ 3,686,670 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $135,178 for the period.
Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the Fund, 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 affiliated funds. At period end, there were no interfund loans outstanding. The Fund's activity in this program during the period for which loans were outstanding was as follows:
Borrower or Lender | Average Daily | Weighted Average | Interest |
Borrower | $ 4,274,500 | 5.22% | $ 2,477 |
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $2,566 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds.
7. Expense Reductions.
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $949,108 for the period. In addition, through arrangements with each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, credits reduced each class' transfer agent expense as noted in the table below.
Transfer Agent | ||
Class A | $ 1,587 | |
Class B | 657 | |
Class C | 899 | |
$ 3,143 |
Technology
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2006 | 2005 |
From net investment income | ||
Class A | $ - | $ 693,969 |
Class T | - | 1,715,027 |
Class B | - | 986,706 |
Class C | - | 351,015 |
Institutional Class | - | 78,739 |
Total | $ - | $ 3,825,456 |
10. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 5,933,920 | 2,937,144 | $ 105,071,198 | $ 43,834,461 |
Reinvestment of distributions | - | 41,796 | - | 642,405 |
Shares redeemed | (2,775,104) | (2,834,081) | (47,788,058) | (41,983,001) |
Net increase (decrease) | 3,158,816 | 144,859 | $ 57,283,140 | $ 2,493,865 |
Class T | ||||
Shares sold | 3,384,477 | 3,595,175 | $ 58,748,287 | $ 51,527,367 |
Reinvestment of distributions | - | 108,716 | - | 1,643,786 |
Shares redeemed | (6,198,789) | (10,218,806) | (105,287,546) | (148,664,787) |
Net increase (decrease) | (2,814,312) | (6,514,915) | $ (46,539,259) | $ (95,493,634) |
Class B | ||||
Shares sold | 539,586 | 690,525 | $ 8,903,373 | $ 9,551,506 |
Reinvestment of distributions | - | 61,748 | - | 899,051 |
Shares redeemed | (7,601,103) | (7,334,481) | (125,479,671) | (101,949,576) |
Net increase (decrease) | (7,061,517) | (6,582,208) | $ (116,576,298) | $ (91,499,019) |
Class C | ||||
Shares sold | 570,438 | 609,017 | $ 9,501,649 | $ 8,508,174 |
Reinvestment of distributions | - | 20,786 | - | 304,101 |
Shares redeemed | (1,991,739) | (3,019,680) | (32,610,461) | (42,215,602) |
Net increase (decrease) | (1,421,301) | (2,389,877) | $ (23,108,812) | $ (33,403,327) |
Institutional Class | ||||
Shares sold | 258,108 | 203,821 | $ 4,843,216 | $ 3,156,844 |
Reinvestment of distributions | - | 3,961 | - | 62,341 |
Shares redeemed | (232,556) | (273,671) | (4,099,646) | (4,101,764) |
Net increase (decrease) | 25,552 | (65,889) | $ 743,570 | $ (882,579) |
Annual Report
Advisor Telecommunications & Utilities Growth Fund - Class A, T, B, and C
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow. Returns reflect the conversion of Class B shares to Class A shares after a maximum of seven years.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of |
Class A (incl. 5.75% sales charge) | 8.74% | 2.63% | 8.63% |
Class T (incl. 3.50% sales charge) | 11.17% | 2.87% | 8.62% |
Class B (incl. contingent deferred sales charge) B | 9.57% | 2.74% | 8.68% |
Class C (incl. contingent deferred sales charge) C | 13.72% | 3.18% | 8.54% |
A From September 3, 1996.
B Class B shares bear a 1.00% 12b-1 fee. The initial offering of Class B shares took place on March 3, 1997. Returns prior to March 3, 1997 are those of Class T and reflect a 0.50% 12b-1 fee. Had Class B shares' 12b-1 fee been reflected, returns prior to March 3, 1997 would have been lower. Class B shares' contingent deferred sales charges included in the past one year, past five years and life of fund total return figures are 5%, 2%, and 0%, respectively.
C Class C shares bear a 1.00% 12b-1 fee. The initial offering of Class C shares took place on November 3, 1997. Returns between March 3, 1997 and November 3, 1997 are those of Class B shares and reflect Class B shares' 1.00% 12b-1 fee. Returns prior to March 3, 1997 are those of Class T and reflect a 0.50% 12b-1 fee. Had Class C shares' 12b-1 fee been reflected, returns prior to March 3, 1997 would have been lower. Class C shares' contingent deferred sales charges included in the past one year, past five years and life of fund total return figures are 1%, 0%, and 0%, respectively.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Telecommunications & Utilities Growth Fund - Class T on September 3, 1996, when the fund started, and the current 3.50% sales charge was paid. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Advisor Telecommunications & Utilities Growth Fund
Management's Discussion of Fund Performance
Comments from Brian Younger, Portfolio Manager of Fidelity® Advisor Telecommunications & Utilities Growth Fund
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
For the 12 months that ended July 31, 2006, the fund's Class A, Class T, Class B and Class C shares returned 15.38%, 15.20%, 14.57% and 14.72%, respectively (excluding sales charges). These returns beat the Goldman Sachs® Utilities Index, which gained 8.73%, as well as the S&P 500. Strong stock picking and an overweighting in integrated telecommunication services drove much of the fund's outperformance relative to the sector index. An underweighting in the weak broadcast and cable television industry and stock selection within electric utilities also helped. Alternative carriers - companies that focus on providing local telecom services - modestly hampered relative returns. The fund had sizable overweightings in Qwest Communications International, BellSouth and AT&T Inc. (formed from the merger of AT&T Corp. and SBC Communications), integrated carriers that posted strong gains fueled by a favorable regulatory environment, industry consolidation and strong wireless subscriber growth. The fund also benefited from sidestepping NTL, a British cable company in the sector index that was a weak performer. On the negative side was Vonage Holdings, an alternative carrier that is not in the index. It declined after its initial public offering, leading me to eliminate the position. An overweighting in Sprint Nextel further hampered returns as its recent merger proved more challenging than expected and the company lost subscriber growth.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Advisor Telecommunications & Utilities Growth Fund
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 1,112.50 | $ 6.81 |
HypotheticalA | $ 1,000.00 | $ 1,018.35 | $ 6.51 |
Class T | |||
Actual | $ 1,000.00 | $ 1,112.00 | $ 8.17 |
HypotheticalA | $ 1,000.00 | $ 1,017.06 | $ 7.80 |
Class B | |||
Actual | $ 1,000.00 | $ 1,108.90 | $ 10.72 |
HypotheticalA | $ 1,000.00 | $ 1,014.63 | $ 10.24 |
Class C | |||
Actual | $ 1,000.00 | $ 1,109.60 | $ 10.46 |
HypotheticalA | $ 1,000.00 | $ 1,014.88 | $ 9.99 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 1,114.80 | $ 4.93 |
HypotheticalA | $ 1,000.00 | $ 1,020.13 | $ 4.71 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.30% |
Class T | 1.56% |
Class B | 2.05% |
Class C | 2.00% |
Institutional Class | .94% |
Annual Report
Advisor Telecommunications & Utilities Growth Fund
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
AT&T, Inc. | 14.1 | 12.8 |
Verizon Communications, Inc. | 13.4 | 13.9 |
BellSouth Corp. | 13.3 | 10.5 |
Sprint Nextel Corp. | 6.9 | 8.4 |
Qwest Communications International, Inc. | 4.9 | 4.5 |
Exelon Corp. | 4.5 | 4.7 |
FPL Group, Inc. | 3.6 | 2.2 |
TXU Corp. | 3.3 | 4.2 |
Entergy Corp. | 3.2 | 3.0 |
AES Corp. | 3.1 | 3.1 |
70.3 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Diversified Telecommunication Services | 50.5% | |
| Electric Utilities | 17.7% | |
| Wireless Telecommunication Services | 10.9% | |
| Independent Power Producers & Energy Traders | 9.0% | |
| Multi-utilities | 8.5% | |
| All Others * | 3.4% | |
As of January 31, 2006 | |||
| Diversified Telecommunication Services | 44.0% | |
| Electric Utilities | 19.7% | |
| Wireless Telecommunication Services | 12.7% | |
| Independent Power Producers & Energy Traders | 12.5% | |
| Multi-utilities | 8.2% | |
| All Others * | 2.9% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Advisor Telecommunications & Utilities Growth Fund
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 96.6% | |||
Shares | Value (Note 1) | ||
DIVERSIFIED TELECOMMUNICATION SERVICES - 50.5% | |||
Alternative Carriers - 2.3% | |||
Global Crossing Ltd. (a) | 43,000 | $ 655,750 | |
Level 3 Communications, Inc. (a) | 756,900 | 2,959,479 | |
Time Warner Telecom, Inc. Class A (sub. vtg.) (a) | 54,300 | 909,525 | |
4,524,754 | |||
Integrated Telecommunication Services - 48.2% | |||
Alaska Communication Systems Group, Inc. | 144,200 | 1,786,638 | |
AT&T, Inc. (d) | 934,788 | 28,034,291 | |
BellSouth Corp. | 671,100 | 26,286,987 | |
Cincinnati Bell, Inc. | 107,400 | 430,674 | |
Embarq Corp. | 28,462 | 1,287,906 | |
NTELOS Holding Corp. | 9,300 | 134,385 | |
Qwest Communications International, Inc. (a) | 1,209,600 | 9,664,704 | |
Verizon Communications, Inc. | 785,717 | 26,572,949 | |
Windstream Corp. | 106,793 | 1,338,116 | |
95,536,650 | |||
TOTAL DIVERSIFIED TELECOMMUNICATION | 100,061,404 | ||
ELECTRIC UTILITIES - 17.7% | |||
Electric Utilities - 17.7% | |||
Allegheny Energy, Inc. (a) | 97,000 | 3,981,850 | |
Edison International | 73,300 | 3,033,154 | |
Entergy Corp. | 82,400 | 6,353,040 | |
Exelon Corp. | 153,500 | 8,887,650 | |
FirstEnergy Corp. | 32,900 | 1,842,400 | |
FPL Group, Inc. | 162,500 | 7,010,250 | |
Northeast Utilities | 15,000 | 336,000 | |
PPL Corp. | 105,200 | 3,578,904 | |
35,023,248 | |||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 9.0% | |||
Independent Power Producers & Energy Traders - 9.0% | |||
AES Corp. (a) | 311,300 | 6,182,418 | |
Dynegy, Inc. Class A (a) | 114,000 | 641,820 | |
Mirant Corp. (a) | 91,600 | 2,433,812 | |
NRG Energy, Inc. | 40,000 | 1,970,000 | |
TXU Corp. | 101,100 | 6,493,653 | |
17,721,703 | |||
MULTI-UTILITIES - 8.5% | |||
Multi-Utilities - 8.5% | |||
Ameren Corp. | 9,100 | 468,650 | |
Shares | Value (Note 1) | ||
CMS Energy Corp. (a) | 220,290 | $ 3,086,263 | |
Dominion Resources, Inc. | 31,100 | 2,440,728 | |
Duke Energy Corp. | 151,300 | 4,587,416 | |
Public Service Enterprise Group, Inc. | 54,400 | 3,668,192 | |
Sempra Energy | 54,900 | 2,649,474 | |
16,900,723 | |||
WATER UTILITIES - 0.0% | |||
Water Utilities - 0.0% | |||
Aqua America, Inc. | 75 | 1,635 | |
WIRELESS TELECOMMUNICATION SERVICES - 10.9% | |||
Wireless Telecommunication Services - 10.9% | |||
ALLTEL Corp. | 103,289 | 5,698,454 | |
American Tower Corp. Class A (a) | 20,020 | 676,676 | |
Crown Castle International Corp. | 13,300 | 468,559 | |
Dobson Communications Corp. Class A (a) | 153,400 | 1,029,314 | |
Sprint Nextel Corp. | 693,952 | 13,740,250 | |
21,613,253 | |||
TOTAL COMMON STOCKS (Cost $167,220,519) | 191,321,966 | ||
Money Market Funds - 17.6% | |||
Fidelity Cash Central Fund, 5.3% (b) | 6,037,731 | 6,037,731 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 28,720,500 | 28,720,500 | |
TOTAL MONEY MARKET FUNDS (Cost $34,758,231) | 34,758,231 | ||
TOTAL INVESTMENT PORTFOLIO - 114.2% (Cost $201,978,750) | 226,080,197 | ||
NET OTHER ASSETS - (14.2)% | (28,092,571) | ||
NET ASSETS - 100% | $ 197,987,626 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 85,343 |
Fidelity Securities Lending Cash Central Fund | 15,107 |
Total | $ 100,450 |
Income Tax Information |
At July 31, 2006, the fund had a capital loss carryforward of approximately $289,540,228 of which $135,127,696 and $154,412,532 will expire on July 31, 2010 and 2011, respectively. |
See accompanying notes which are an integral part of the financial statements.
Telecommunications & Utilities Growth
Advisor Telecommunications & Utilities Growth Fund
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $28,010,660) - See accompanying schedule: Unaffiliated issuers (cost $167,220,519) | $ 191,321,966 | |
Affiliated Central Funds (cost $34,758,231) | 34,758,231 | |
Total Investments (cost $201,978,750) | $ 226,080,197 | |
Receivable for investments sold | 835,306 | |
Receivable for fund shares sold | 986,799 | |
Dividends receivable | 829,900 | |
Interest receivable | 9,019 | |
Prepaid expenses | 305 | |
Other receivables | 3,741 | |
Total assets | 228,745,267 | |
Liabilities | ||
Payable for investments purchased | $ 634,331 | |
Payable for fund shares redeemed | 1,105,266 | |
Accrued management fee | 88,611 | |
Distribution fees payable | 109,420 | |
Other affiliated payables | 67,675 | |
Other payables and accrued expenses | 31,838 | |
Collateral on securities loaned, at value | 28,720,500 | |
Total liabilities | 30,757,641 | |
Net Assets | $ 197,987,626 | |
Net Assets consist of: | ||
Paid in capital | $ 465,184,107 | |
Undistributed net investment income | 1,237,487 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | (292,535,415) | |
Net unrealized appreciation (depreciation) on investments | 24,101,447 | |
Net Assets | $ 197,987,626 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price Class A: | $ 17.20 | |
Maximum offering price per share (100/94.25 of $17.20) | $ 18.25 | |
Class T: | $ 17.18 | |
Maximum offering price per share (100/96.50 of $17.18) | $ 17.80 | |
Class B: | $ 16.90 | |
Class C: | $ 16.91 | |
Institutional Class: | $ 17.38 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Telecommunications & Utilities Growth Fund
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 5,306,269 | |
Interest | 2,956 | |
Income from affiliated Central Funds | 100,450 | |
Total income | 5,409,675 | |
Expenses | ||
Management fee | $ 1,084,526 | |
Transfer agent fees | 791,678 | |
Distribution fees | 1,393,086 | |
Accounting and security lending fees | 79,775 | |
Independent trustees' compensation | 781 | |
Custodian fees and expenses | 6,638 | |
Registration fees | 50,409 | |
Audit | 41,911 | |
Legal | 5,540 | |
Miscellaneous | 1,929 | |
Total expenses before reductions | 3,456,273 | |
Expense reductions | (40,605) | 3,415,668 |
Net investment income (loss) | 1,994,007 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 26,822,039 | |
Foreign currency transactions | (6,106) | |
Total net realized gain (loss) | 26,815,933 | |
Change in net unrealized appreciation (depreciation) on investment securities | (2,675,823) | |
Net gain (loss) | 24,140,110 | |
Net increase (decrease) in net assets resulting from operations | $ 26,134,117 | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 1,994,007 | $ 3,088,972 |
Net realized gain (loss) | 26,815,933 | 37,520,442 |
Change in net unrealized appreciation (depreciation) | (2,675,823) | 7,253,242 |
Net increase (decrease) in net assets resulting from operations | 26,134,117 | 47,862,656 |
Distributions to shareholders from net investment income | (1,886,398) | (2,204,610) |
Share transactions - net increase (decrease) | (30,269,037) | (38,936,571) |
Redemption fees | 5,377 | 6,117 |
Total increase (decrease) in net assets | (6,015,941) | 6,727,592 |
Net Assets | ||
Beginning of period | 204,003,567 | 197,275,975 |
End of period (including undistributed net investment income of $1,237,487 and undistributed net investment income of $1,351,200, respectively) | $ 197,987,626 | $ 204,003,567 |
See accompanying notes which are an integral part of the financial statements.
Telecommunications & Utilities Growth
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 15.17 | $ 12.09 | $ 10.37 | $ 8.74 | $ 15.18 |
Income from Investment Operations | |||||
Net investment income (loss) C | .24 | .28 D | .10 | .13 | .10 |
Net realized and unrealized gain (loss) | 2.06 | 3.01 | 1.72 | 1.69 | (6.54) |
Total from investment operations | 2.30 | 3.29 | 1.82 | 1.82 | (6.44) |
Distributions from net investment income | (.27) | (.21) | (.10) | (.19) | - |
Redemption fees added to paid in capital C | - F | - F | - F | - F | - F |
Net asset value, end of period | $ 17.20 | $ 15.17 | $ 12.09 | $ 10.37 | $ 8.74 |
Total Return A, B | 15.38% | 27.48% | 17.67% | 21.22% | (42.42)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 1.34% | 1.39% | 1.51% | 1.67% | 1.45% |
Expenses net of fee waivers, if any | 1.34% | 1.39% | 1.50% | 1.58% | 1.45% |
Expenses net of all reductions | 1.32% | 1.36% | 1.45% | 1.47% | 1.36% |
Net investment income (loss) | 1.51% | 2.03% D | .87% | 1.46% | .79% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 40,599 | $ 29,150 | $ 21,987 | $ 21,761 | $ 22,377 |
Portfolio turnover rate | 64% | 44% | 38% | 81% | 116% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Investment income per share reflects a special dividend which amounted to $.09 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been 1.39%.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Amount represents less than $.01 per share.
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 15.10 | $ 12.04 | $ 10.33 | $ 8.68 | $ 15.11 |
Income from Investment Operations | |||||
Net investment income (loss) C | .19 | .24 D | .07 | .11 | .07 |
Net realized and unrealized gain (loss) | 2.08 | 2.99 | 1.72 | 1.68 | (6.50) |
Total from investment operations | 2.27 | 3.23 | 1.79 | 1.79 | (6.43) |
Distributions from net investment income | (.19) | (.17) | (.08) | (.14) | - |
Redemption fees added to paid in capital C | - F | - F | - F | - F | - F |
Net asset value, end of period | $ 17.18 | $ 15.10 | $ 12.04 | $ 10.33 | $ 8.68 |
Total Return A, B | 15.20% | 27.03% | 17.42% | 20.91% | (42.55)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 1.60% | 1.67% | 1.79% | 1.94% | 1.71% |
Expenses net of fee waivers, if any | 1.60% | 1.67% | 1.75% | 1.83% | 1.71% |
Expenses net of all reductions | 1.58% | 1.64% | 1.70% | 1.72% | 1.62% |
Net investment income (loss) | 1.25% | 1.76% D | .62% | 1.21% | .53% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 52,128 | $ 55,683 | $ 53,255 | $ 55,510 | $ 59,306 |
Portfolio turnover rate | 64% | 44% | 38% | 81% | 116% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Investment income per share reflects a special dividend which amounted to $.09 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been 1.12%.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Amount represents less than $.01 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 14.83 | $ 11.82 | $ 10.15 | $ 8.49 | $ 14.85 |
Income from Investment Operations | |||||
Net investment income (loss) C | .12 | .17 D | .01 | .07 | .01 |
Net realized and unrealized gain (loss) | 2.03 | 2.95 | 1.69 | 1.65 | (6.37) |
Total from investment operations | 2.15 | 3.12 | 1.70 | 1.72 | (6.36) |
Distributions from net investment income | (.08) | (.11) | (.03) | (.06) | - |
Redemption fees added to paid in capital C | - F | - F | - F | - F | - F |
Net asset value, end of period | $ 16.90 | $ 14.83 | $ 11.82 | $ 10.15 | $ 8.49 |
Total Return A, B | 14.57% | 26.51% | 16.79% | 20.37% | (42.83)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 2.09% | 2.14% | 2.25% | 2.32% | 2.20% |
Expenses net of fee waivers, if any | 2.09% | 2.14% | 2.25% | 2.25% | 2.20% |
Expenses net of all reductions | 2.06% | 2.11% | 2.20% | 2.13% | 2.11% |
Net investment income (loss) | .76% | 1.28% D | .12% | .79% | .04% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 65,959 | $ 82,577 | $ 84,742 | $ 87,868 | $ 91,517 |
Portfolio turnover rate | 64% | 44% | 38% | 81% | 116% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Investment income per share reflects a special dividend which amounted to $.09 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been .64%.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Amount represents less than $.01 per share.
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 14.84 | $ 11.84 | $ 10.16 | $ 8.50 | $ 14.85 |
Income from Investment Operations | |||||
Net investment income (loss) C | .13 | .18 D | .02 | .07 | .02 |
Net realized and unrealized gain (loss) | 2.04 | 2.94 | 1.70 | 1.65 | (6.37) |
Total from investment operations | 2.17 | 3.12 | 1.72 | 1.72 | (6.35) |
Distributions from net investment income | (.10) | (.12) | (.04) | (.06) | - |
Redemption fees added to paid in capital C | - F | - F | - F | - F | - F |
Net asset value, end of period | $ 16.91 | $ 14.84 | $ 11.84 | $ 10.16 | $ 8.50 |
Total Return A, B | 14.72% | 26.48% | 16.98% | 20.35% | (42.76)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 2.02% | 2.07% | 2.17% | 2.23% | 2.11% |
Expenses net of fee waivers, if any | 2.02% | 2.07% | 2.17% | 2.23% | 2.11% |
Expenses net of all reductions | 2.00% | 2.04% | 2.12% | 2.12% | 2.02% |
Net investment income (loss) | .83% | 1.36% D | .21% | .80% | .13% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 32,823 | $ 34,827 | $ 35,038 | $ 37,530 | $ 41,496 |
Portfolio turnover rate | 64% | 44% | 38% | 81% | 116% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Investment income per share reflects a special dividend which amounted to $.09 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been .72%.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Amount represents less than $.01 per share.
See accompanying notes which are an integral part of the financial statements.
Telecommunications & Utilities Growth
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 15.31 | $ 12.20 | $ 10.47 | $ 8.86 | $ 15.31 |
Income from Investment Operations | |||||
Net investment income (loss) B | .30 | .33 C | .15 | .18 | .16 |
Net realized and unrealized gain (loss) | 2.10 | 3.03 | 1.73 | 1.71 | (6.61) |
Total from investment operations | 2.40 | 3.36 | 1.88 | 1.89 | (6.45) |
Distributions from net investment income | (.33) | (.25) | (.15) | (.28) | - |
Redemption fees added to paid in capital B | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 17.38 | $ 15.31 | $ 12.20 | $ 10.47 | $ 8.86 |
Total Return A | 15.95% | 27.88% | 18.14% | 21.94% | (42.13)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | .94% | .99% | 1.09% | 1.06% | .96% |
Expenses net of fee waivers, if any | .94% | .99% | 1.09% | 1.06% | .96% |
Expenses net of all reductions | .92% | .96% | 1.04% | .94% | .87% |
Net investment income (loss) | 1.91% | 2.44% C | 1.29% | 1.98% | 1.28% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 6,479 | $ 1,766 | $ 2,254 | $ 2,891 | $ 2,939 |
Portfolio turnover rate | 64% | 44% | 38% | 81% | 116% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Investment income per share reflects a special dividend which amounted to $.09 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been 1.80%.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Amount represents less than $.01 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Telecommunications & Utilities Growth Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, deferred trustees compensation, capital loss carryforwards and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 29,313,795 | |
Unrealized depreciation | (8,207,535) | |
Net unrealized appreciation (depreciation) | 21,106,260 | |
Undistributed ordinary income | 1,237,570 | |
Capital loss carryforward | (289,540,228) | |
Cost for federal income tax purposes | $ 204,973,937 |
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Ordinary Income | $ 1,886,398 | $ 2,204,610 |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $120,913,361 and $157,023,034, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR.
Telecommunications & Utilities Growth
4. Fees and Other Transactions with Affiliates - continued
Management Fee - continued
The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares, except for the and Institutional Class. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 79,618 | $ 904 |
Class T | 25% | .25% | 259,524 | 654 |
Class B | .75% | .25% | 732,258 | 549,359 |
Class C | .75% | .25% | 321,686 | 16,998 |
$ 1,393,086 | $ 567,915 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 22,708 |
Class T | 8,841 |
Class B * | 128,312 |
Class C * | 1,179 |
$ 161,040 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 135,247 | .42 |
Class T | 226,444 | .44 |
Class B | 309,214 | .42 |
Class C | 115,425 | .36 |
Institutional Class | 5,348 | .27 |
$ 791,678 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $1,561 for the period.
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $554 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $15,107.
7. Expense Reductions.
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $40,605 for the period.
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2006 | 2005 |
From net investment income | ||
Class A | $ 515,686 | $ 379,843 |
Class T | 679,149 | 719,068 |
Class B | 428,719 | 727,725 |
Class C | 227,882 | 334,204 |
Institutional Class | 34,962 | 43,770 |
Total | $ 1,886,398 | $ 2,204,610 |
Telecommunications & Utilities Growth
10. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 1,157,742 | 617,343 | $ 18,299,828 | $ 8,551,655 |
Reinvestment of distributions | 29,809 | 25,986 | 453,431 | 343,477 |
Shares redeemed | (749,911) | (539,379) | (11,656,126) | (7,330,607) |
Net increase (decrease) | 437,640 | 103,950 | $ 7,097,133 | $ 1,564,525 |
Class T | ||||
Shares sold | 427,549 | 578,539 | $ 6,679,626 | $ 7,880,368 |
Reinvestment of distributions | 41,716 | 51,235 | 634,275 | 676,884 |
Shares redeemed | (1,121,239) | (1,366,525) | (17,325,224) | (18,576,683) |
Net increase (decrease) | (651,974) | (736,751) | $ (10,011,323) | $ (10,019,431) |
Class B | ||||
Shares sold | 164,555 | 216,806 | $ 2,522,243 | $ 2,882,532 |
Reinvestment of distributions | 24,747 | 47,675 | 371,052 | 631,927 |
Shares redeemed | (1,855,539) | (1,863,609) | (28,512,346) | (24,817,850) |
Net increase (decrease) | (1,666,237) | (1,599,128) | $ (25,619,051) | $ (21,303,391) |
Class C | ||||
Shares sold | 246,869 | 270,120 | $ 3,819,729 | $ 3,555,440 |
Reinvestment of distributions | 11,397 | 19,593 | 170,983 | 258,067 |
Shares redeemed | (663,040) | (903,829) | (10,076,221) | (12,032,784) |
Net increase (decrease) | (404,774) | (614,116) | $ (6,085,509) | $ (8,219,277) |
Institutional Class | ||||
Shares sold | 292,241 | 17,262 | $ 4,893,596 | $ 232,429 |
Reinvestment of distributions | 1,223 | 2,019 | 18,745 | 26,680 |
Shares redeemed | (36,084) | (88,732) | (562,628) | (1,218,106) |
Net increase (decrease) | 257,380 | (69,451) | $ 4,349,713 | $ (958,997) |
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Advisor Series VII and the Shareholders of Fidelity Advisor Biotechnology Fund, Fidelity Advisor Consumer Industries Fund, Fidelity Advisor Cyclical Industries Fund, Fidelity Advisor Developing Communications Fund, Fidelity Advisor Electronics Fund, Fidelity Advisor Financial Services Fund, Fidelity Advisor Health Care Fund, Fidelity Advisor Natural Resources Fund, Fidelity Advisor Technology Fund, and Fidelity Advisor Telecommunications & Utilities Growth Fund:
We have audited the accompanying statements of assets and liabilities of Fidelity Advisor Biotechnology Fund, Fidelity Advisor Consumer Industries Fund, Fidelity Advisor Cyclical Industries Fund, Fidelity Advisor Developing Communications Fund, Fidelity Advisor Electronics Fund, Fidelity Advisor Financial Services Fund, Fidelity Advisor Health Care Fund, Fidelity Advisor Natural Resources Fund, Fidelity Advisor Technology Fund, and Fidelity Advisor Telecommunications & Utilities Growth Fund (collectively, the "Funds"), including the schedules of investments, as of July 31, 2006, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, audits of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2006, by correspondence with the custodians and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial positions of Fidelity Advisor Biotechnology Fund, Fidelity Advisor Consumer Industries Fund, Fidelity Advisor Cyclical Industries Fund, Fidelity Advisor Developing Communications Fund, Fidelity Advisor Electronics Fund, Fidelity Advisor Financial Services Fund, Fidelity Advisor Health Care Fund, Fidelity Advisor Natural Resources Fund, Fidelity Advisor Technology Fund, and Fidelity Advisor Telecommunications & Utilities Growth Fund as of July 31, 2006, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 9, 2006
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and funds, as applicable, are listed below. The Board of Trustees governs each fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee each fund's activities, review contractual arrangements with companies that provide services to each fund, and review each fund's performance. Except for William O. McCoy, each of the Trustees oversees 345 funds advised by FMR or an affiliate. Mr. McCoy oversees 347 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (76) | |
Year of Election or Appointment: 1980 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as President (2006-present), Chief Executive Officer, Chairman, and a Director of FMR Corp.; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001-present) and a Director (1999-present) of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of Fidelity International Limited (FIL). | |
Stephen P. Jonas (53) | |
Year of Election or Appointment: 2005 Mr. Jonas is Senior Vice President of Advisor Biotechnology (2005-present), Advisor Consumer Industries (2005-present), Advisor Cyclical Industries (2005-present), Advisor Developing Communications (2005-present), Advisor Electronics (2005-present), Advisor Financial Services (2005-present), Advisor Health Care (2005-present), Advisor Natural Resources (2005-present), Advisor Technology (2005-present), and Advisor Telecommunications & Utilities Growth (2005-present). He also serves as Senior Vice President of other Fidelity funds (2005-present). Mr. Jonas is Executive Director of FMR (2005-present) and FMR Co., Inc. (2005-present). He also serves as a Director of Fidelity Investments Money Management, Inc. (2005-present) and FMR Corp. (2003-present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004-2005), Chief Administrative Officer (2002-2004), and Chief Financial Officer of FMR Corp. (1998-2002). In addition, he serves on the Boards of Boston Ballet (2003-present) and Simmons College (2003-present). | |
Robert L. Reynolds (54) | |
Year of Election or Appointment: 2003 Mr. Reynolds is President and a Director of FMR (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and FMR Co., Inc. (2005-present). Mr. Reynolds also serves as a Director (2003-present) and Chief Operating Officer (2000-present) of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000-present). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
Annual Report
Trustees and Officers - continued
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
Dennis J. Dirks (58) | |
Year of Election or Appointment: 2005 Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999-2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999-2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999-2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001-2003) and Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation (2001-2003). Mr. Dirks also serves as a Trustee and a member of the Finance Committee of Manhattan College (2005-present) and a Trustee and a member of the Finance Committee of AHRC of Nassau County (2006-present). | |
Robert M. Gates (62) | |
Year of Election or Appointment: 1997 Dr. Gates is Chairman of the Independent Trustees (2006-present). Dr. Gates is President of Texas A&M University (2002-present). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001-present), and Brinker International (restaurant management, 2003-present). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). | |
George H. Heilmeier (70) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002), INET Technologies Inc. (telecommunications network surveillance, 2001-2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display. | |
Marie L. Knowles (59) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing) and McKesson Corporation (healthcare service, 2002-present). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (62) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. Mr. Lautenbach serves as a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004-present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005-present), as well as a member of the Council on Foreign Relations. | |
William O. McCoy (72) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Duke Realty Corporation (real estate). He is also a partner of Franklin Street Partners (private investment management firm). In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves as Chairman of the Board of Directors of the University of North Carolina Health Care System. He also served as Vice President of Finance for the University of North Carolina (16-school system). | |
Cornelia M. Small (62) | |
Year of Election or Appointment: 2005 Ms. Small is a member (2000-present) and Chairperson (2002-present) of the Investment Committee, and a member (2002-present) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990-1997) and Scudder Kemper Investments (1997-1999). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
William S. Stavropoulos (67) | |
Year of Election or Appointment: 2002 Mr. Stavropoulos is Chairman Emeritus of the Board of Directors of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000; 2002-2003), CEO (1995-2000; 2002-2004), and Chairman of the Executive Committee (2000-2004). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, Maersk Inc. (industrial conglomerate, 2002-present), and Metalmark Capital (private equity investment firm, 2005-present). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council and the University of Notre Dame Advisory Council for the College of Science. | |
Kenneth L. Wolfe (67) | |
Year of Election or Appointment: 2005 Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993-2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003-present), Bausch & Lomb, Inc., and Revlon Inc. (2004-present). | |
Advisory Board Members and Executive Officers:
Correspondence intended for Messrs. Keyes and Gamper may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Albert R. Gamper, Jr. (64) | |
Year of Election or Appointment: 2005 Member of the Advisory Board of Fidelity Advisor Series VII. Mr. Gamper also serves as a Trustee (2006-present) or Member of the Advisory Board (2005-present) of other investment companies advised by FMR. Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001-present), Chairman of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. | |
James H. Keyes (65) | |
Year of Election or Appointment: 2006 Member of the Advisory Board of Fidelity Advisor Series VII. Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of LSI Logic Corporation (semiconductor technologies, 1984-present), Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, 2002-present), and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions, 1998-present). | |
Peter S. Lynch (62) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series VII. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001-present) and a Director (1999-present) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as the Chairman of the Inner-City Scholarship Fund. | |
Boyce I. Greer (50) | |
Year of Election or Appointment: 2005 Vice President of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Greer also serves as Vice President of certain Equity Funds (2005-present), certain Asset Allocation Funds (2005-present), Fixed-Income Funds (2006-present), and Money Market Funds (2006-present). Mr. Greer is also a Trustee of other investment companies advised by FMR (2003-present). He is an Executive Vice President of FMR (2005-present) and FMR Co., Inc. (2005-present), and Senior Vice President of Fidelity Investments Money Management, Inc. (2006-present). Previously, Mr. Greer served as a Director and Managing Director of Strategic Advisers, Inc. (2002-2005), and Executive Vice President (2000-2002) and Money Market Group Leader (1997-2002) of the Fidelity Investments Fixed Income Division. He also served as Vice President of Fidelity's Money Market Funds (1997-2002), Senior Vice President of FMR (1997-2002), and Vice President of FIMM (1998-2002). | |
Eric D. Roiter (57) | |
Year of Election or Appointment: 1998 Secretary of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001-present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001-present), Fidelity Research & Analysis Company (2001-present), and Fidelity Investments Money Management, Inc. (2001-present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003-present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (1998-2005). | |
Stuart Fross (46) | |
Year of Election or Appointment: 2003 Assistant Secretary of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003-present), Vice President and Secretary of FDC (2005-present), and is an employee of FMR. | |
Christine Reynolds (47) | |
Year of Election or Appointment: 2004 President and Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Ms. Reynolds also serves as President and Treasurer of other Fidelity funds (2004-present) and is a Vice President (2003-present) and an employee (2002-present) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was most recently an audit partner with PwC's investment management practice. | |
R. Stephen Ganis (40) | |
Year of Election or Appointment: 2006 Anti-Money Laundering (AML) officer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Ganis also serves as AML officer of other Fidelity funds (2006-present) and FMR Corp. (2003-present). Before joining Fidelity Investments, Mr. Ganis practiced law at Goodwin Procter, LLP (2000-2002). | |
Joseph B. Hollis (58) | |
Year of Election or Appointment: 2006 Chief Financial Officer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Hollis also serves as Chief Financial Officer of other Fidelity funds. Mr. Hollis is President of Fidelity Pricing and Cash Management Services (FPCMS) (2005-present). Mr. Hollis also serves as President and Director of Fidelity Service Company, Inc. (2006-present). Previously, Mr. Hollis served as Senior Vice President of Cash Management Services (1999-2002) and Investment Management Operations (2002-2005). | |
Kenneth A. Rathgeber (59) | |
Year of Election or Appointment: 2004 Chief Compliance Officer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004-present) and Executive Vice President of Risk Oversight for Fidelity Investments (2002-present). He is Chief Compliance Officer of FMR (2005-present), FMR Co., Inc. (2005-present), Fidelity Management & Research (U.K.) Inc. (2005-present), Fidelity Research & Analysis Company (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and Strategic Advisers, Inc. (2005-present). Previously, Mr. Rathgeber served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
Bryan A. Mehrmann (45) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004). | |
Kimberley H. Monasterio (42) | |
Year of Election or Appointment: 2004 Deputy Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000-2004) and Chief Financial Officer (2002-2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000-2004). | |
Kenneth B. Robins (36) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2004-present). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG's department of professional practice (2002-2004) and a Senior Manager (1999-2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000-2002). | |
Robert G. Byrnes (39) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003). | |
John H. Costello (59) | |
Year of Election or Appointment: 1987, 1996 or 2000 Assistant Treasurer of Advisor Biotechnology (2000), Advisor Consumer Industries (1996), Advisor Cyclical Industries (1996), Advisor Developing Communications (2000), Advisor Electronics (2000), Advisor Financial Services (1996), Advisor Health Care (1996), Advisor Natural Resources (1987), Advisor Technology (1996), and Advisor Telecommunications & Utilities Growth (1996). Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Peter L. Lydecker (52) | |
Year of Election or Appointment: 2004 Assistant Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR. | |
Mark Osterheld (51) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Gary W. Ryan (47) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999-2005). | |
Salvatore Schiavone (40) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003-2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996-2003). | |
Annual Report
Distributions
The Board of Trustees of each 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:
Consumer Industries | Pay Date | Record Date | Dividends | Capital Gains |
Class A | 09/18/06 | 09/15/06 | $ - | $ 1.500 |
Class T | 09/18/06 | 09/15/06 | $ - | $ 1.500 |
Class B | 09/18/06 | 09/15/06 | $ - | $ 1.500 |
Class C | 09/18/06 | 09/15/06 | $ - | $ 1.500 |
Cyclical Industries | Pay Date | Record Date | Dividends | Capital Gains |
Class A | 09/18/06 | 09/15/06 | $ 0.007 | $ 1.284 |
Class T | 09/18/06 | 09/15/06 | $ - | $ 1.215 |
Class B | 09/18/06 | 09/15/06 | $ - | $ 1.099 |
Class C | 09/18/06 | 09/15/06 | $ - | $ 1.188 |
Financial Services | Pay Date | Record Date | Dividends | Capital Gains |
Class A | 09/18/06 | 09/15/06 | $ 0.129 | $ 1.680 |
Class T | 09/18/06 | 09/15/06 | $ 0.086 | $ 1.680 |
Class B | 09/18/06 | 09/15/06 | $ - | $ 1.677 |
Class C | 09/18/06 | 09/15/06 | $ 0.021 | $ 1.680 |
Health Care | Pay Date | Record Date | Dividends | Capital Gains |
Class A | 09/11/06 | 09/08/06 | $ - | $ 1.945 |
Class T | 09/11/06 | 09/08/06 | $ - | $ 1.845 |
Class B | 09/11/06 | 09/08/06 | $ - | $ 1.658 |
Class C | 09/11/06 | 09/08/06 | $ - | $ 1.746 |
Natural Resources | Pay Date | Record Date | Dividends | Capital Gains |
Class A | 09/11/06 | 09/08/06 | $ - | $ 5.091 |
Class T | 09/11/06 | 09/08/06 | $ - | $ 5.003 |
Class B | 09/11/06 | 09/08/06 | $ - | $ 4.870 |
Class C | 09/11/06 | 09/08/06 | $ - | $ 4.913 |
The funds hereby designate as capital gain dividend the amounts noted below for the taxable year ended July 31, 2006, or, if subsequently determined to be different, the net capital gain of such year.
Fund | |
Consumer Industries | $ 5,573,533 |
Cyclical Industries | $ 8,376,034 |
Financial Services | $ 30,586,460 |
Health Care | $ 49,867,504 |
Natural Resources | $ 84,518,880 |
Annual Report
Distributions - continued
A percentage of the dividends distributed during the fiscal year for the following funds qualifies for the dividends-received deduction for corporate shareholders:
Cyclical Industries | |
Class A | 21% |
Class T | 23% |
Class B | 27% |
Class C | 26% |
Financial Services | |
Class A | 100% |
Class T | 100% |
Class B | 100% |
Class C | 100% |
A percentage of the dividends distributed during the fiscal year for the following funds qualifies for the dividends-received deduction for corporate shareholders:
Fund | September, | December, |
Natural Resources | ||
Class A | 18% | 13% |
Class T | 19% | 14% |
Class B | 22% | 15% |
Class C | 21% | 15% |
Telecommunications & Utilities Growth | ||
Class A | 100% | 100% |
Class T | 100% | 100% |
Class B | 100% | 100% |
Class C | 100% | 100% |
Annual Report
A percentage of the dividends distributed during the fiscal year for the following funds may be taken into account as a dividend for purposes of the maximum rate under section 1(h)(11) of the Internal Revenue Code.
Cyclical Industries | |
Class A | 27% |
Class T | 29% |
Class B | 34% |
Class C | 33% |
Financial Services | |
Class A | 100% |
Class T | 100% |
Class B | 100% |
Class C | 100% |
A percentage of the dividends distributed during the fiscal year for the following funds may be taken into account as a dividend for purposes of the maximum rate under section 1(h)(11) of the Internal Revenue Code.
Fund | September, 2005 | December, 2005 |
Natural Resources | ||
Class A | 28% | 19% |
Class T | 31% | 20% |
Class B | 36% | 22% |
Class C | 34% | 21% |
Telecommunications & Utilities Growth | ||
Class A | 100% | 100% |
Class T | 100% | 100% |
Class B | 100% | 100% |
Class C | 100% | 100% |
The fund will notify shareholders in January 2007 of amounts for use in preparing 2006 income tax returns.
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees
Advisor Focus Funds
Each year, typically in July, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for each fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly each month except August and takes into account throughout the year matters bearing on Advisory Contracts. The Board, acting directly and through its separate committees, considers at each of its meetings factors that are relevant to the annual renewal of each fund's Advisory Contracts, including the services and support provided to each fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has adopted a written charter outlining the structure and purposes of the committee. One such committee, the Equity Contract Committee, meets periodically as needed throughout the year to consider matters specifically related to the annual renewal of Advisory Contracts. The committee requests and receives information on, and makes recommendations to the Independent Trustees concerning, the approval and annual review of the Advisory Contracts.
At its July 2006 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the Advisory Contracts for each fund. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to each fund and its shareholders (including the investment performance of each fund); (ii) the competitiveness of the management fee and total expenses of each fund; (ii) the total costs of the services to be provided by and the profits to be realized by the investment adviser and its affiliates from the relationship with each fund; (iv) the extent to which economies of scale would be realized as each fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In determining whether to renew the Advisory Contracts for each fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contracts is consistent with Fidelity's fiduciary duty under applicable law. In addition to evaluating the specific factors noted above, the Board, in reaching its determination, is aware that shareholders in each fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that each fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in that fund, managed by Fidelity.
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the backgrounds of the funds' portfolio managers and the funds' investment objectives and disciplines. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for each fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, each fund's compliance policies and procedures. The Board reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services. The Board also considered that Fidelity voluntarily pays for market data out of its own resources.
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of a fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying an additional sales charge. The Board noted that, since the last Advisory Contract renewals in July 2005, Fidelity has taken a number of actions that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) voluntarily entering into contractual arrangements with certain brokers pursuant to which Fidelity pays for research products and services separately out of its own resources, rather than bundling with fund commissions; (iii) launching the Fidelity Advantage Class of its five Spartan stock index funds and three Spartan bond index funds, which is a lower-fee class available to shareholders with higher account balances; (iv) contractually agreeing to impose expense limitations on Fidelity U.S. Bond Index Fund and reducing the fund's initial investment minimum; and (v) offering shareholders of each of the Fidelity Institutional Money Market Funds the privilege of exchanging shares of the fund for shares of other Fidelity funds.
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees - continued
Investment Performance and Compliance. The Board considered whether each fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed each fund's absolute investment performance for each class, as well as each fund's relative investment performance for each class measured against (i) a Goldman Sachs index that reflects the market sector in which the fund invests (Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth) or a proprietary custom index (Advisor Biotechnology, Advisor Developing Communications, and Advisor Electronics), and (ii) a peer group of mutual funds over multiple periods. For each fund, the following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2005, the cumulative total returns of Class C and Institutional Class of the fund, the cumulative total returns of a Goldman Sachs index (or a proprietary custom index, in the case of Advisor Biotechnology, Advisor Developing Communications, and Advisor Electronics) ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of Class C and Institutional Class represent the performance of classes with the highest and lowest 12b-1 fees, respectively (not necessarily with the highest and lowest total expenses). The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the Lipper peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the Lipper peer group whose performance was equal to or lower than that of the class indicated. For each of Advisor Biotechnology, Advisor Developing Communications, and Advisor Electronics, the fund's proprietary custom index is an index developed and periodically revised by FMR that is a market-capitalization weighted index of securities that meet the fund's 80% name test.
Advisor Biotechnology
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the third quartile for the one-year period, the second quartile for the three-year period, and the fourth quartile for the five-year period. The Board noted that FMR does not consider that Lipper peer group to be a meaningful comparison for the fund, however, because the funds in the peer group typically have broader investment mandates than the fund, which focuses on a particular subset of companies within the health and biotechnology industries. The Board also stated that the relative investment performance of the fund was lower than its benchmark for all the periods shown. In the absence of a meaningful peer group comparison for the fund and in consideration of the fund's exposure to a narrow market sector, the Board focused its review on the fund's relative investment performance measured against its benchmark. In light of that comparison, the Board discussed with FMR actions to be taken by FMR to improve the fund's below-benchmark performance. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Annual Report
Advisor Consumer Industries
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the third quartile for the one- and five-year periods and the fourth quartile for the three-year period. The Board noted that FMR does not consider that Lipper peer group to be a meaningful comparison for the fund, however, because the peer group includes funds that focus on different industries and sectors than the fund. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for the one- and three-year periods, although the fund's five-year cumulative total return was lower than its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Advisor Cyclical Industries
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the first quartile for all the periods shown. The Board noted that FMR does not consider that Lipper peer group to be a meaningful comparison for the fund, however, because the peer group includes funds that focus on different industries and sectors than the fund. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for all the periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees - continued
Advisor Developing Communications
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the third quartile for the one-year period and the first quartile for the three- and five-year periods. The Board noted that FMR does not consider that Lipper peer group to be a meaningful comparison for the fund, however, because the funds in the peer group typically have broader investment mandates than the fund, which focuses on a particular subset of companies within the science and technology industries. The Board also stated that the relative investment performance of the fund was lower than its benchmark for the one- and three-year periods, although the five-year cumulative total return of Institutional Class of the fund compared favorably to its benchmark. In the absence of a meaningful peer group comparison for the fund and in consideration of the fund's exposure to a narrow market sector, the Board focused its review on the fund's relative investment performance measured against its benchmark. In light of that comparison, the Board discussed with FMR actions to be taken by FMR to improve the fund's below-benchmark performance. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Advisor Electronics
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the first quartile for the one- and five-year periods and the second quartile for the three-year period. The Board noted that FMR does not consider that Lipper peer group to be a meaningful comparison for the fund, however, because the funds in the peer group typically have broader investment mandates than the fund, which focuses on a particular subset of companies within the science and technology industries. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for the one- and five-year periods, although the fund's three-year cumulative total return was lower than its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Annual Report
Advisor Financial Services
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the second quartile for all the periods shown. The Board also stated that the relative investment performance of the fund was lower than its benchmark for all the periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Advisor Health Care
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the first quartile for the one-year period, the third quartile for the three-year period, and the second quartile for the five-year period. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for all the periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees - continued
Advisor Natural Resources
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the second quartile for all the periods shown. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for all the periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Advisor Technology
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the first quartile for the one- and five-year periods and the second quartile for the three-year period. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for all the periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Annual Report
Advisor Telecommunications & Utilities Growth
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the third quartile for the one-year period and the second quartile for the three- and five-year periods. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for all the periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
The Board considered that FMR has taken steps to refocus and strengthen equity research, equity portfolio management, and compliance. The Board noted with favor FMR's reorganization of its senior management team in 2005 and FMR's dedication of additional resources to investment research, and participated in the process that led to those changes.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to each fund will benefit each fund's shareholders, particularly in light of the Board's view that each fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Competitiveness of Management Fee and Total Fund Expenses. The Board considered each fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
The Board considered two proprietary management fee comparisons for the 12-month periods shown in the charts below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than a fund's. For example, a TMG % of 21% would mean that 79% of the funds in the Total Mapped Group had higher management fees than a fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which a fund's management fee ranked, is also included in the charts and considered by the Board.
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees - continued
Advisor Biotechnology
Advisor Consumer Industries
Annual Report
Advisor Cyclical Industries
Advisor Developing Communications
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees - continued
Advisor Electronics
Advisor Financial Services
Annual Report
Advisor Health Care
Advisor Natural Resources
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees - continued
Advisor Technology
Advisor Telecommunications & Utilities Growth
The Board noted that each fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2005.
Based on its review, the Board concluded that each fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
In its review of each class's total expenses, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered current and historical total expenses of each class of each fund compared to competitive fund median expenses. Each class of each fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that each fund offers multiple classes, each of which has a different sales load and 12b-1 fee structure, and that the multiple structures are intended to offer a range of pricing options for the intermediary market. The Board also noted that the total expenses of the classes of each fund vary primarily by the level of their 12b-1 fees, although differences in transfer agent fees may also cause expenses to vary from class to class.
The Board noted that the total expenses of each of Class A, Class B, Class C and Institutional Class of Advisor Biotechnology ranked below its competitive median for 2005, and the total expenses of Class T of the fund ranked above its competitive median for 2005.
Annual Report
The Board noted that the total expenses of each of Class A, Class B, Class C and Institutional Class of Advisor Consumer Industries ranked below its competitive median for 2005, and the total expenses of Class T of the fund ranked above its competitive median for 2005.
The Board noted that the total expenses of each class of Advisor Cyclical Industries ranked below its competitive median for 2005.
The Board noted that the total expenses of each of Class A, Class B, Class C and Institutional Class of Advisor Developing Communications ranked below its competitive median for 2005, and the total expenses of Class T of the fund ranked above its competitive median for 2005.
The Board noted that the total expenses of each of Class A, Class B, Class C and Institutional Class of Advisor Electronics ranked below its competitive median for 2005, and the total expenses of Class T of the fund ranked above its competitive median for 2005.
The Board noted that the total expenses of each class of Advisor Financial Services ranked below its competitive median for 2005.
The Board noted that the total expenses of each class of Advisor Health Care ranked below its competitive median for 2005.
The Board noted that the total expenses of each class of Advisor Natural Resources ranked below its competitive median for 2005.
The Board noted that the total expenses of each of Class A, Class B, Class C and Institutional Class of Advisor Technology ranked below its competitive median for 2005, and the total expenses of Class T of the fund ranked above its competitive median for 2005.
The Board noted that the total expenses of Institutional Class of Advisor Telecommunications & Utilities Growth ranked below its competitive median for 2005, and the total expenses of each of Class A, Class B, Class C and Class T of the fund ranked above its competitive median for 2005. The Board considered that Class A, Class B, Class C and Class T of the fund were above median because of relatively high transfer agent fees resulting from small average account sizes.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Based on its review, the Board concluded that the total expenses of each class of each fund were reasonable, although in some cases above the median of the universe presented for comparison, in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing each fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for each fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the funds' business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of each fund and determined that the amount of profit is a fair entrepreneurial profit for the management of each fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including each fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which each fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions, including reductions that occur through operation of the transfer agent agreement. The transfer agent fee varies in part based on the number of accounts in each fund. If the number of accounts decreases or the average account size increases, the overall transfer agent fee rate decreases.
The Board recognized that each fund's management contract incorporates a "group fee" structure, which provides for lower fee rates as total fund assets under FMR's management increase, and for higher fee rates as total fund assets under FMR's management decrease. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will achieve a certain level of economies of scale as assets under FMR's management increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees - continued
The Board further concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Advisory Contracts, the Board requested additional information on several topics, including (i) Fidelity's fund profitability methodology and profitability trends within certain funds; (ii) portfolio manager compensation; (iii) the extent to which any economies of scale exist and are shared between the funds and Fidelity; (iv) the total expenses of certain funds and classes relative to competitors, including the extent to which the expenses of certain funds have been or could be capped; (v) fund performance trends; and (vi) Fidelity's fee structures, including use of performance fees.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that each fund's Advisory Contracts should be renewed.
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research (U.K.) Inc.
Fidelity Research & Analysis Company (formerly Fidelity Management & Research (Far East) Inc.)
Fidelity Investments Japan Limited
Fidelity International Investment Advisors
Fidelity International Investment Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodians
JPMorgan Chase Bank
New York, NY
Brown Brothers Harriman & Co. (dagger)
Boston, MA
State Street Bank and Trust (dagger)(dagger)
Quincy, MA
(dagger) Custodian for Fidelity Advisor Natural Resources Fund only.
(dagger)(dagger) Custodian for Fidelity Advisor Biotechnology Fund, Fidelity Advisor Developing
Communications Fund, and Fidelity Advisor Electronics Fund only.
AFOC-UANN-0906
1.834301.100
Fidelity Advisor
Focus Funds®
Institutional Class
Biotechnology
Consumer Industries
Cyclical Industries
Developing Communications
Electronics
Financial Services
Health Care
Natural Resources
Technology
Telecommunications &
Utilities Growth
Annual Report
July 31, 2006
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Biotechnology | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Consumer Industries | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Cyclical Industries | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Developing Communications | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Electronics | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Financial Services | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Health Care | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Natural Resources | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Technology | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Telecommunications & | Performance | |
Management's Discussion | ||
Shareholder Expense Example | ||
Investment Changes | ||
Investments | ||
Financial Statements | ||
Notes to the Financial Statements | ||
Report of Independent Registered Public Accounting Firm | ||
Trustees and Officers | ||
Distributions | ||
Board Approval of Investment Advisory Contracts and | ||
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
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 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.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.advisor.fidelity.com.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the funds nor Fidelity Distributors Corporation is a bank.
Annual Report
Chairman's Message
(Photograph of Edward C. Johnson 3d.)
Dear Shareholder:
Although many securities markets made gains in early 2006, inflation concerns led to mixed results through the year's mid-point. Financial markets are always unpredictable. There are, however, a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies
indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Advisor Biotechnology Fund - Institutional Class
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of |
Institutional Class | 0.29% | -0.51% | -6.39% |
A From December 27, 2000.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity® Advisor Biotechnology Fund - Institutional Class on December 27, 2000, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the S&P 500® Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Rajiv Kaul, Portfolio Manager of Fidelity® Advisor Biotechnology Fund
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
During the past year, the fund's Institutional Class shares returned 0.29%, trailing the 2.25% return of the Goldman Sachs® Health Care Index and the S&P 500. Unfavorable stock selection and a sizable underweighting in the relatively strong pharmaceuticals group hurt performance versus the sector index, along with ineffective picks in the life science tools and services segment. Selling off drug stock Merck, a major component of the sector index that performed well, was detrimental. Two companies that make instruments used in biotechnology research, Invitrogen and Affymetrix, also dented performance. Both companies reported disappointing financial results. The share price of Kos Pharmaceuticals fell due to increasing competition. Charles River Laboratories and PDL BioPharma were detractors as well. Conversely, stock selection in biotechnology aided performance versus the benchmark, although some of the benefit was offset by overweighting the group. Additionally, underweighting the weak performing health care equipment area proved timely. Celgene was the fund's top contributor. The stock was boosted by the Food and Drug Administration's approval of Revlimid to treat multiple myeloma, a common type of blood cancer. Also having a positive impact were Cephalon, Gilead Sciences and Abgenix. All contributors I just mentioned are biotechnology stocks.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 917.80 | $ 6.66 |
HypotheticalA | $ 1,000.00 | $ 1,017.85 | $ 7.00 |
Class T | |||
Actual | $ 1,000.00 | $ 915.40 | $ 7.84 |
HypotheticalA | $ 1,000.00 | $ 1,016.61 | $ 8.25 |
Class B | |||
Actual | $ 1,000.00 | $ 914.40 | $ 10.21 |
HypotheticalA | $ 1,000.00 | $ 1,014.13 | $ 10.74 |
Class C | |||
Actual | $ 1,000.00 | $ 913.20 | $ 10.20 |
HypotheticalA | $ 1,000.00 | $ 1,014.13 | $ 10.74 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 918.90 | $ 4.66 |
HypotheticalA | $ 1,000.00 | $ 1,019.93 | $ 4.91 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.40% |
Class T | 1.65% |
Class B | 2.15% |
Class C | 2.15% |
Institutional Class | .98% |
Annual Report
Advisor Biotechnology Fund
Investment Fund Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
Celgene Corp. | 7.9 | 7.2 |
Biogen Idec, Inc. | 6.8 | 6.3 |
Genentech, Inc. | 6.4 | 6.6 |
Gilead Sciences, Inc. | 6.2 | 7.0 |
Genzyme Corp. | 5.8 | 4.5 |
Amgen, Inc. | 5.5 | 5.6 |
Cephalon, Inc. | 4.4 | 4.3 |
Amylin Pharmaceuticals, Inc. | 4.2 | 2.9 |
Sepracor, Inc. | 4.0 | 4.1 |
MedImmune, Inc. | 3.2 | 4.9 |
54.4 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
 | Biotechnology | 76.6% | |
 | Life Sciences Tools | 11.0% | |
 | Pharmaceuticals | 9.9% | |
 | Health Care Equipment & Supplies | 2.2% | |
 | Health Care Providers & Services | 0.2% | |
 | All Others* | 0.1% | |
As of January 31, 2006 | |||
| Biotechnology | 89.8% | |
 | Pharmaceuticals | 8.3% | |
 | Health Care Equipment & Supplies | 1.3% | |
| Computers & Peripherals | 0.0% | |
| All Others* | 0.6% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Advisor Biotechnology Fund
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 99.9% | |||
Shares | Value (Note 1) | ||
BIOTECHNOLOGY - 76.6% | |||
Biotechnology - 76.6% | |||
Acadia Pharmaceuticals, Inc. (a) | 21,800 | $ 140,174 | |
Alexion Pharmaceuticals, Inc. (a) | 39,900 | 1,370,964 | |
Alkermes, Inc. (a) | 41,640 | 714,542 | |
Alnylam Pharmaceuticals, Inc. (a) | 10,000 | 127,700 | |
Amgen, Inc. (a) | 44,810 | 3,125,049 | |
Amylin Pharmaceuticals, Inc. (a) | 48,902 | 2,386,418 | |
Arena Pharmaceuticals, Inc. (a) | 10,800 | 111,780 | |
Biogen Idec, Inc. (a) | 90,634 | 3,817,504 | |
BioMarin Pharmaceutical, Inc. (a) | 50,385 | 736,125 | |
Celgene Corp. (a) | 93,408 | 4,473,309 | |
Cephalon, Inc. (a)(d) | 37,299 | 2,452,036 | |
Combinatorx, Inc. | 12,700 | 89,789 | |
Cubist Pharmaceuticals, Inc. (a) | 22,200 | 508,824 | |
Digene Corp. (a) | 8,300 | 350,343 | |
Genentech, Inc. (a) | 44,300 | 3,580,326 | |
Genomic Health, Inc. | 7,900 | 90,218 | |
Genzyme Corp. (a) | 47,520 | 3,244,666 | |
Gilead Sciences, Inc. (a) | 57,100 | 3,510,508 | |
Human Genome Sciences, Inc. (a) | 74,900 | 727,279 | |
ImClone Systems, Inc. (a) | 9,364 | 304,330 | |
Isis Pharmaceuticals, Inc. (a) | 17,000 | 102,170 | |
Ligand Pharmaceuticals, Inc. Class B (a) | 20,200 | 186,446 | |
MannKind Corp. (a)(d) | 23,300 | 426,157 | |
Martek Biosciences (a) | 13,200 | 368,676 | |
Medarex, Inc. (a) | 42,790 | 400,087 | |
MedImmune, Inc. (a) | 70,000 | 1,776,600 | |
Momenta Pharmaceuticals, Inc. (a) | 11,308 | 195,968 | |
Myogen, Inc. (a) | 32,392 | 999,617 | |
Myriad Genetics, Inc. (a) | 12,500 | 307,750 | |
Neurocrine Biosciences, Inc. (a) | 8,265 | 76,451 | |
Novacea, Inc. | 4,500 | 37,350 | |
ONYX Pharmaceuticals, Inc. (a) | 5,700 | 89,547 | |
OSI Pharmaceuticals, Inc. (a) | 44,000 | 1,469,160 | |
PDL BioPharma, Inc. (a) | 51,500 | 927,515 | |
Pharmion Corp. (a) | 11,200 | 192,864 | |
Regeneron Pharmaceuticals, Inc. (a) | 16,300 | 222,658 | |
Renovis, Inc. (a) | 15,000 | 189,750 | |
SGX Pharmaceuticals, Inc. | 8,900 | 43,343 | |
Tanox, Inc. (a) | 27,300 | 389,298 | |
Tercica, Inc. (a) | 14,900 | 75,245 | |
Theravance, Inc. (a) | 18,700 | 443,003 | |
United Therapeutics Corp. (a) | 2,500 | 148,275 | |
Vertex Pharmaceuticals, Inc. (a) | 51,700 | 1,732,984 | |
Shares | Value (Note 1) | ||
ViaCell, Inc. (a) | 500 | $ 2,010 | |
Zymogenetics, Inc. (a) | 25,700 | 484,959 | |
43,149,767 | |||
HEALTH CARE EQUIPMENT & SUPPLIES - 2.2% | |||
Health Care Equipment - 1.4% | |||
IDEXX Laboratories, Inc. (a) | 8,744 | 773,844 | |
IntraLase Corp. (a) | 300 | 5,202 | |
779,046 | |||
Health Care Supplies - 0.8% | |||
Gen-Probe, Inc. (a) | 8,923 | 463,550 | |
TOTAL HEALTH CARE EQUIPMENT & SUPPLIES | 1,242,596 | ||
HEALTH CARE PROVIDERS & SERVICES - 0.2% | |||
Health Care Services - 0.2% | |||
Oracle Healthcare Acquisition Corp. unit | 9,600 | 81,600 | |
LIFE SCIENCES TOOLS & SERVICES - 11.0% | |||
Life Science Tools & Services - 11.0% | |||
Affymetrix, Inc. (a) | 16,300 | 351,591 | |
Albany Molecular Research, Inc. (a) | 12,700 | 114,300 | |
Applera Corp.: | |||
- Applied Biosystems Group | 51,100 | 1,642,865 | |
- Celera Genomics Group (a) | 37,000 | 499,500 | |
Bruker BioSciences Corp. (a) | 3,100 | 18,104 | |
Charles River Laboratories International, Inc. (a) | 26,600 | 944,300 | |
Exelixis, Inc. (a) | 36,800 | 327,520 | |
Invitrogen Corp. (a) | 22,150 | 1,368,649 | |
Luminex Corp. (a) | 12,700 | 217,424 | |
Techne Corp. (a) | 14,410 | 716,033 | |
6,200,286 | |||
PHARMACEUTICALS - 9.9% | |||
Pharmaceuticals - 9.9% | |||
Adams Respiratory Therapeutics, Inc. | 13,200 | 590,304 | |
Adolor Corp. (a) | 10,751 | 257,271 | |
Barrier Therapeutics, Inc. (a) | 8,600 | 57,706 | |
Cardiome Pharma Corp. (a) | 17,000 | 207,317 | |
Cypress Bioscience, Inc. (a) | 19,200 | 110,592 | |
Elan Corp. PLC sponsored ADR (a) | 47,800 | 733,252 | |
Kos Pharmaceuticals, Inc. (a) | 11,392 | 470,945 | |
MGI Pharma, Inc. (a) | 3,121 | 45,598 | |
New River Pharmaceuticals, Inc. (a)(d) | 27,878 | 681,338 | |
Pozen, Inc. (a) | 2,000 | 15,100 | |
Sepracor, Inc. (a) | 45,796 | 2,262,322 | |
Somaxon Pharmaceuticals, Inc. | 2,100 | 22,008 | |
Xenoport, Inc. (a) | 7,800 | 135,564 | |
5,589,317 | |||
TOTAL COMMON STOCKS (Cost $50,870,367) | 56,263,566 | ||
Money Market Funds - 6.6% | |||
Shares | Value (Note 1) | ||
Fidelity Cash Central Fund, 5.3% (b) | 349,540 | $ 349,540 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 3,402,600 | 3,402,600 | |
TOTAL MONEY MARKET FUNDS (Cost $3,752,140) | 3,752,140 | ||
TOTAL INVESTMENT PORTFOLIO - 106.5% (Cost $54,622,507) | 60,015,706 | ||
NET OTHER ASSETS - (6.5)% | (3,676,048) | ||
NET ASSETS - 100% | $ 56,339,658 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 27,300 |
Fidelity Securities Lending Cash Central Fund | 14,208 |
Total | $ 41,508 |
Income Tax Information |
At July 31, 2006, the fund had a capital loss carryforward of approximately $6,990,407 all of which will expire on July 31, 2011. |
See accompanying notes which are an integral part of the financial statements.
Biotechnology
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $3,311,232) - See accompanying schedule: Unaffiliated issuers (cost $50,870,367) | $ 56,263,566 | |
Affiliated Central Funds (cost $3,752,140) | 3,752,140 | |
Total Investments (cost $54,622,507) | $ 60,015,706 | |
Receivable for investments sold | 19,151 | |
Receivable for fund shares sold | 48,833 | |
Interest receivable | 763 | |
Prepaid expenses | 82 | |
Other receivables | 7,010 | |
Total assets | 60,091,545 | |
Liabilities | ||
Payable to custodian bank | $ 2,769 | |
Payable for investments purchased | 40,514 | |
Payable for fund shares redeemed | 188,528 | |
Accrued management fee | 31,950 | |
Distribution fees payable | 32,263 | |
Other affiliated payables | 20,629 | |
Other payables and accrued expenses | 32,634 | |
Collateral on securities loaned, at value | 3,402,600 | |
Total liabilities | 3,751,887 | |
Net Assets | $ 56,339,658 | |
Net Assets consist of: | ||
Paid in capital | $ 58,930,470 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | (7,984,011) | |
Net unrealized appreciation (depreciation) on investments | 5,393,199 | |
Net Assets | $ 56,339,658 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price Class A: | $ 6.81 | |
Maximum offering price per share (100/94.25 of $6.81) | $ 7.23 | |
Class T: | $ 6.71 | |
Maximum offering price per share (100/96.50 of $6.71) | $ 6.95 | |
Class B: | $ 6.52 | |
Class C: | $ 6.52 | |
Institutional Class: | $ 6.91 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Biotechnology Fund
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 6,806 | |
Interest | 96 | |
Income from affiliated Central Funds (including $14,208 from security lending) | 41,508 | |
Total income | 48,410 | |
Expenses | ||
Management fee | $ 331,930 | |
Transfer agent fees | 251,299 | |
Distribution fees | 409,150 | |
Accounting and security lending fees | 25,595 | |
Independent trustees' compensation | 236 | |
Custodian fees and expenses | 13,835 | |
Registration fees | 49,335 | |
Audit | 41,563 | |
Legal | 744 | |
Miscellaneous | 560 | |
Total expenses before reductions | 1,124,247 | |
Expense reductions | (60,601) | 1,063,646 |
Net investment income (loss) | (1,015,236) | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 1,448,373 | |
Foreign currency transactions | (490) | |
Total net realized gain (loss) | 1,447,883 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (1,063,304) | |
Assets and liabilities in foreign currencies | 68 | |
Total change in net unrealized appreciation (depreciation) | (1,063,236) | |
Net gain (loss) | 384,647 | |
Net increase (decrease) in net assets resulting from operations | $ (630,589) | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ (1,015,236) | $ (952,674) |
Net realized gain (loss) | 1,447,883 | 3,415,156 |
Change in net unrealized appreciation (depreciation) | (1,063,236) | 3,817,974 |
Net increase (decrease) in net assets resulting from operations | (630,589) | 6,280,456 |
Share transactions - net increase (decrease) | 1,061,142 | (5,129,068) |
Redemption fees | 8,381 | 6,345 |
Total increase (decrease) in net assets | 438,934 | 1,157,733 |
Net Assets | ||
Beginning of period | 55,900,724 | 54,742,991 |
End of period | $ 56,339,658 | $ 55,900,724 |
See accompanying notes which are an integral part of the financial statements.
Biotechnology
Financial Highlights - Class A
Financial Highlights - Class T
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 6.56 | $ 5.84 | $ 5.82 | $ 4.33 | $ 7.05 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.14) | (.13) D | (.13) | (.09) | (.12) |
Net realized and unrealized gain (loss) | .10 | .85 | .15 | 1.58 | (2.61) |
Total from investment operations | (.04) | .72 | .02 | 1.49 | (2.73) |
Redemption fees added to paid in capital C | - F | - F | - F | - F | .01 |
Net asset value, end of period | $ 6.52 | $ 6.56 | $ 5.84 | $ 5.82 | $ 4.33 |
Total Return A ,B | (.61)% | 12.33% | .34% | 34.41% | (38.58)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 2.23% | 2.33% | 2.46% | 2.78% | 2.74% |
Expenses net of fee waivers, if any | 2.15% | 2.19% | 2.25% | 2.25% | 2.25% |
Expenses net of all reductions | 2.12% | 2.18% | 2.22% | 2.22% | 2.22% |
Net investment income (loss) | (2.04)% | (2.11)% D | (2.12)% | (1.86)% | (1.95)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 14,938 | $ 16,921 | $ 16,819 | $ 15,154 | $ 10,218 |
Portfolio turnover rate | 62% | 30% | 50% | 71% | 113% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Investment income per share reflects a special dividend which amounted to $ .0004 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (2.11)%. E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. F Amount represents less than $.01 per share. | |||||
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 6.57 | $ 5.84 | $ 5.82 | $ 4.33 | $ 7.05 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.14) | (.13) D | (.13) | (.09) | (.12) |
Net realized and unrealized gain (loss) | .09 | .86 | .15 | 1.58 | (2.61) |
Total from investment operations | (.05) | .73 | .02 | 1.49 | (2.73) |
Redemption fees added to paid in capital C | - F | - F | - F | - F | .01 |
Net asset value, end of period | $ 6.52 | $ 6.57 | $ 5.84 | $ 5.82 | $ 4.33 |
Total Return A, B | (.76)% | 12.50% | .34% | 34.41% | (38.58)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 2.17% | 2.24% | 2.31% | 2.58% | 2.57% |
Expenses net of fee waivers, if any | 2.15% | 2.19% | 2.25% | 2.25% | 2.25% |
Expenses net of all reductions | 2.12% | 2.18% | 2.23% | 2.22% | 2.22% |
Net investment income (loss) | (2.04)% | (2.11)% D | (2.13)% | (1.86)% | (1.95)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 13,787 | $ 12,538 | $ 13,215 | $ 10,493 | $ 8,204 |
Portfolio turnover rate | 62% | 30% | 50% | 71% | 113% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Investment income per share reflects a special dividend which amounted to $ .0004 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (2.11)%. E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. F Amount represents less than $.01 per share. | |||||
See accompanying notes which are an integral part of the financial statements.
Biotechnology
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 6.89 | $ 6.06 | $ 5.97 | $ 4.40 | $ 7.09 |
Income from Investment Operations | |||||
Net investment income (loss) B | (.07) | (.06) C | (.06) | (.04) | (.06) |
Net realized and unrealized gain (loss) | .09 | .89 | .15 | 1.61 | (2.64) |
Total from investment operations | .02 | .83 | .09 | 1.57 | (2.70) |
Redemption fees added to paid in capital B | -E | -E | -E | -E | .01 |
Net asset value, end of period | $ 6.91 | $ 6.89 | $ 6.06 | $ 5.97 | $ 4.40 |
Total Return A | .29% | 13.70% | 1.51% | 35.68% | (37.94)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.05% | 1.10% | 1.16% | 1.37% | 1.41% |
Expenses net of fee waivers, if any | 1.05% | 1.10% | 1.16% | 1.25% | 1.25% |
Expenses net of all reductions | 1.03% | 1.09% | 1.14% | 1.22% | 1.22% |
Net investment income (loss) | (.94)% | (1.02)%C | (1.04)% | (.86)% | (.94)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 1,268 | $ 1,243 | $ 1,146 | $ 1,153 | $ 857 |
Portfolio turnover rate | 62% | 30% | 50% | 71% | 113% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Investment income per share reflects a special dividend which amounted to $ .0004 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (1.02)%. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. | |||||
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Biotechnology Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, capital loss carryforwards and losses deferred due to wash sales and excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 10,901,837 |
Unrealized depreciation | (6,421,566) |
Net unrealized appreciation (depreciation) | 4,480,271 |
Capital loss carryforward | (6,990,407) |
Cost for federal income tax purposes | $ 55,535,435 |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital. On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $37,290,529 and $36,307,572, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services.
Biotechnology
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan - continued
For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 30,552 | $ 199 |
Class T | .25% | .25% | 72,206 | 4 |
Class B | .75% | .25% | 168,357 | 126,277 |
Class C | .75% | .25% | 138,035 | 27,858 |
$ 409,150 | $ 154,338 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 22,003 |
Class T | 10,973 |
Class B* | 46,882 |
Class C* | 3,458 |
$ 83,316 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 52,804 | .43 |
Class T | 71,479 | .50 |
Class B | 72,567 | .43 |
Class C | 51,338 | .37 |
Institutional Class | 3,111 | .26 |
$ 251,299 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $581 for the period.
Annual Report
Notes to Financial Statements - continued
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $167 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds.
7. Expense Reductions.
FMR voluntarily agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
The following classes were in reimbursement during the period:
Expense | Reimbursement | |
Class A | 1.40% | $ 9,079 |
Class T | 1.65% | 20,108 |
Class B | 2.15% | 12,897 |
Class C | 2.15% | 2,015 |
$ 44,099 |
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $16,502 for the period.
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
Biotechnology
9. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 802,915 | 550,671 | $ 5,733,744 | $ 3,418,022 |
Shares redeemed | (581,094) | (629,006) | (4,036,446) | (3,853,963) |
Net increase (decrease) | 221,821 | (78,335) | $ 1,697,298 | $ (435,941) |
Class T | ||||
Shares sold | 587,840 | 621,575 | $ 4,097,337 | $ 3,773,646 |
Shares redeemed | (638,853) | (760,267) | (4,417,619) | (4,599,360) |
Net increase (decrease) | (51,013) | (138,692) | $ (320,282) | $ (825,714) |
Class B | ||||
Shares sold | 419,648 | 527,483 | $ 2,840,429 | $ 3,194,512 |
Shares redeemed | (706,101) | (831,184) | (4,753,466) | (4,925,475) |
Net increase (decrease) | (286,453) | (303,701) | $ (1,913,037) | $ (1,730,963) |
Class C | ||||
Shares sold | 744,203 | 395,212 | $ 5,179,930 | $ 2,374,238 |
Shares redeemed | (539,467) | (749,216) | (3,621,319) | (4,454,466) |
Net increase (decrease) | 204,736 | (354,004) | $ 1,558,611 | $ (2,080,228) |
Institutional Class | ||||
Shares sold | 94,904 | 56,540 | $ 686,802 | $ 351,953 |
Shares redeemed | (92,008) | (65,245) | (648,250) | (408,175) |
Net increase (decrease) | 2,896 | (8,705) | $ 38,552 | $ (56,222) |
Annual Report
Advisor Consumer Industries Fund - Institutional Class
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of | |
Institutional Class | -0.44% | 3.18% | 8.50% |
A From September 3, 1996.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Consumer Industries Fund - Institutional Class on September 3, 1996, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Advisor Consumer Industries Fund
Management's Discussion of Fund Performance
Comments from John Roth, Portfolio Manager of Fidelity® Advisor Consumer Industries Fund through June 30, 2006
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
For the 12-month period ending July 31, 2006, the fund's Institutional Class shares returned -0.44%, underperforming the Goldman Sachs® Consumer Industries Index, which fell 0.29%, and the S&P 500 index. A key theme in the fund - and a major driver of performance in previous periods - has been a shift in media and commerce spending toward the Internet, at the expense of traditional media and physical store locations. While that trend continued during the period and key elements of the theme such as Google aided results, other Internet stocks in the portfolio lost ground, including eBay, which was sold out of the fund by period end. Both eBay and Google were out-of-index positions. In the tobacco industry, underweighting Altria Group and avoiding Reynolds American hurt results, as the stocks advanced on court decisions favorable to the tobacco industry. The fund also missed a large part of the run-up in agricultural products firm Archer-Daniels-Midland, whose stock was buoyed by demand for ethanol and lower raw material costs. Retailer Target also was a notable detractor. Conversely, avoiding Home Depot aided results, as this index component declined. Out-of-index positions in Swiss food companies Nestle and Lindt & Spruengli also were strong contributors to performance during the period.
Note to shareholders: Effective July 1, 2006, Robert Lee and Martin Zinny became co-managers of the fund.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Advisor Consumer Industries Fund
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 983.20 | $ 6.88 |
HypotheticalA | $ 1,000.00 | $ 1,017.85 | $ 7.00 |
Class T | |||
Actual | $ 1,000.00 | $ 981.60 | $ 8.11 |
HypotheticalA | $ 1,000.00 | $ 1,016.61 | $ 8.25 |
Class B | |||
Actual | $ 1,000.00 | $ 979.50 | $ 10.55 |
HypotheticalA | $ 1,000.00 | $ 1,014.13 | $ 10.74 |
Class C | |||
Actual | $ 1,000.00 | $ 978.90 | $ 10.30 |
HypotheticalA | $ 1,000.00 | $ 1,014.38 | $ 10.49 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 984.20 | $ 5.66 |
HypotheticalA | $ 1,000.00 | $ 1,019.09 | $ 5.76 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.40% |
Class T | 1.65% |
Class B | 2.15% |
Class C | 2.10% |
Institutional Class | 1.15% |
Annual Report
Advisor Consumer Industries Fund
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
PepsiCo, Inc. | 5.4 | 3.7 |
Nestle SA sponsored ADR | 5.4 | 2.1 |
Procter & Gamble Co. | 5.1 | 6.7 |
Wal-Mart Stores, Inc. | 5.0 | 3.0 |
Federated Department Stores, Inc. | 5.0 | 1.1 |
Altria Group, Inc. | 4.9 | 0.0 |
The Coca-Cola Co. | 3.5 | 2.3 |
Unilever NV (NY Shares) | 3.2 | 0.0 |
CVS Corp. | 2.7 | 1.1 |
Walgreen Co. | 2.5 | 1.8 |
42.7 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Food Products | 13.0% | |
| Beverages | 12.9% | |
| Food & Staples Retailing | 12.7% | |
| Specialty Retail | 12.2% | |
| Multiline Retail | 10.6% | |
| All Others* | 38.6% | |
As of January 31, 2006 | |||
| Hotels, Restaurants & Leisure | 12.8% | |
| Specialty Retail | 11.2% | |
| Media | 10.4% | |
| Multiline Retail | 8.2% | |
| Beverages | 7.8% | |
| All Others* | 49.6% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Advisor Consumer Industries Fund
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 96.0% | |||
Shares | Value (Note 1) | ||
AUTOMOBILES - 0.6% | |||
Motorcycle Manufacturers - 0.6% | |||
Harley-Davidson, Inc. | 5,200 | $ 296,400 | |
BEVERAGES - 12.9% | |||
Brewers - 1.1% | |||
InBev SA | 5,700 | 299,245 | |
SABMiller PLC | 15,100 | 303,231 | |
602,476 | |||
Distillers & Vintners - 1.1% | |||
Diageo PLC sponsored ADR | 4,000 | 281,280 | |
Pernod Ricard SA | 1,400 | 291,491 | |
572,771 | |||
Soft Drinks - 10.7% | |||
Coca-Cola Enterprises, Inc. | 24,900 | 534,354 | |
Coca-Cola Hellenic Bottling Co. SA sponsored ADR | 8,900 | 285,957 | |
Hansen Natural Corp. (a) | 2,800 | 128,772 | |
PepsiCo, Inc. | 45,600 | 2,890,128 | |
The Coca-Cola Co. | 42,200 | 1,877,900 | |
5,717,111 | |||
TOTAL BEVERAGES | 6,892,358 | ||
DIVERSIFIED CONSUMER SERVICES - 1.0% | |||
Specialized Consumer Services - 1.0% | |||
Sothebys Class A (ltd. vtg.) (a) | 10,200 | 281,826 | |
Weight Watchers International, Inc. | 6,600 | 264,066 | |
545,892 | |||
DIVERSIFIED FINANCIAL SERVICES - 0.5% | |||
Specialized Finance - 0.5% | |||
Moody's Corp. | 5,000 | 274,400 | |
ELECTRICAL EQUIPMENT - 0.6% | |||
Electrical Components & Equipment - 0.6% | |||
Evergreen Solar, Inc. (a) | 21,600 | 203,688 | |
SolarWorld AG (d) | 2,500 | 136,645 | |
340,333 | |||
FOOD & STAPLES RETAILING - 12.7% | |||
Drug Retail - 5.2% | |||
CVS Corp. | 44,800 | 1,465,856 | |
Walgreen Co. | 28,600 | 1,337,908 | |
2,803,764 | |||
Food Distributors - 0.2% | |||
United Natural Foods, Inc. (a) | 4,200 | 126,588 | |
Food Retail - 2.3% | |||
Kroger Co. | 25,100 | 575,543 | |
Safeway, Inc. | 22,300 | 626,184 | |
1,201,727 | |||
Shares | Value (Note 1) | ||
Hypermarkets & Super Centers - 5.0% | |||
Wal-Mart Stores, Inc. | 60,580 | $ 2,695,810 | |
TOTAL FOOD & STAPLES RETAILING | 6,827,889 | ||
FOOD PRODUCTS - 13.0% | |||
Agricultural Products - 0.9% | |||
Archer-Daniels-Midland Co. | 11,300 | 497,200 | |
Packaged Foods & Meats - 12.1% | |||
Cadbury Schweppes PLC sponsored ADR | 7,000 | 274,820 | |
Groupe Danone | 2,100 | 277,632 | |
Kellogg Co. | 14,100 | 679,197 | |
Koninklijke Numico NV | 6,000 | 287,864 | |
Lindt & Spruengli AG (participation certificate) | 110 | 221,314 | |
Nestle SA sponsored ADR | 35,150 | 2,868,240 | |
Tyson Foods, Inc. Class A | 9,200 | 130,180 | |
Unilever NV (NY Shares) | 72,600 | 1,719,168 | |
6,458,415 | |||
TOTAL FOOD PRODUCTS | 6,955,615 | ||
HOTELS, RESTAURANTS & LEISURE - 6.4% | |||
Casinos & Gaming - 1.9% | |||
Boyd Gaming Corp. | 2,700 | 90,558 | |
International Game Technology | 8,000 | 309,280 | |
Penn National Gaming, Inc. (a) | 7,000 | 231,490 | |
WMS Industries, Inc. (a) | 5,000 | 132,650 | |
Wynn Resorts Ltd. (a) | 3,700 | 236,837 | |
1,000,815 | |||
Hotels, Resorts & Cruise Lines - 1.2% | |||
Ctrip.com International Ltd. sponsored ADR | 2,600 | 131,599 | |
Starwood Hotels & Resorts Worldwide, Inc. | 10,100 | 531,058 | |
662,657 | |||
Leisure Facilities - 0.3% | |||
Vail Resorts, Inc. (a) | 4,700 | 162,479 | |
Restaurants - 3.0% | |||
Buffalo Wild Wings, Inc. (a) | 14,700 | 473,781 | |
Domino's Pizza, Inc. | 5,600 | 127,344 | |
Panera Bread Co. Class A (a) | 4,000 | 209,240 | |
Starbucks Corp. (a) | 14,900 | 510,474 | |
Wendy's International, Inc. | 4,700 | 282,752 | |
1,603,591 | |||
TOTAL HOTELS, RESTAURANTS & LEISURE | 3,429,542 | ||
HOUSEHOLD PRODUCTS - 7.6% | |||
Household Products - 7.6% | |||
Colgate-Palmolive Co. | 22,400 | 1,328,768 | |
Procter & Gamble Co. (d) | 48,697 | 2,736,771 | |
4,065,539 | |||
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
INTERNET & CATALOG RETAIL - 1.2% | |||
Catalog Retail - 1.2% | |||
Coldwater Creek, Inc. (a) | 33,000 | $ 657,690 | |
INTERNET SOFTWARE & SERVICES - 1.3% | |||
Internet Software & Services - 1.3% | |||
Google, Inc. Class A (sub. vtg.) (a) | 1,800 | 695,880 | |
MEDIA - 6.5% | |||
Broadcasting & Cable TV - 0.3% | |||
Grupo Televisa SA de CV (CPO) sponsored ADR | 7,000 | 129,640 | |
Movies & Entertainment - 4.6% | |||
News Corp. Class A | 56,984 | 1,096,372 | |
The Walt Disney Co. | 36,600 | 1,086,654 | |
Viacom, Inc. Class B (non-vtg.) (a) | 7,600 | 264,860 | |
2,447,886 | |||
Publishing - 1.6% | |||
McGraw-Hill Companies, Inc. | 10,900 | 613,670 | |
R.H. Donnelley Corp. | 5,000 | 261,050 | |
874,720 | |||
TOTAL MEDIA | 3,452,246 | ||
MULTILINE RETAIL - 10.6% | |||
Department Stores - 8.9% | |||
Federated Department Stores, Inc. | 76,400 | 2,682,404 | |
JCPenney Co., Inc. | 14,100 | 887,736 | |
Nordstrom, Inc. | 18,800 | 644,840 | |
Saks, Inc. | 33,800 | 545,532 | |
4,760,512 | |||
General Merchandise Stores - 1.7% | |||
Target Corp. | 19,800 | 909,216 | |
TOTAL MULTILINE RETAIL | 5,669,728 | ||
PERSONAL PRODUCTS - 1.4% | |||
Personal Products - 1.4% | |||
Avon Products, Inc. | 17,700 | 513,123 | |
Herbalife Ltd. (a) | 6,900 | 246,468 | |
759,591 | |||
SPECIALTY RETAIL - 12.2% | |||
Apparel Retail - 7.1% | |||
Abercrombie & Fitch Co. Class A | 2,500 | 132,400 | |
Aeropostale, Inc. (a) | 6,900 | 191,199 | |
American Eagle Outfitters, Inc. | 6,500 | 213,590 | |
Shares | Value (Note 1) | ||
AnnTaylor Stores Corp. (a) | 3,200 | $ 131,392 | |
Casual Male Retail Group, Inc. (a) | 15,200 | 169,480 | |
Charlotte Russe Holding, Inc. (a) | 10,600 | 277,508 | |
Chico's FAS, Inc. (a) | 5,100 | 115,515 | |
Gymboree Corp. (a) | 10,700 | 358,664 | |
Limited Brands, Inc. | 16,100 | 405,076 | |
The Children's Place Retail Stores, Inc. (a) | 4,600 | 256,772 | |
TJX Companies, Inc. | 18,200 | 443,534 | |
Tween Brands, Inc. (a) | 21,400 | 796,508 | |
Urban Outfitters, Inc. (a) | 7,800 | 113,802 | |
Zumiez, Inc. (a) | 7,200 | 215,496 | |
3,820,936 | |||
Automotive Retail - 0.7% | |||
AutoZone, Inc. (a) | 3,100 | 272,397 | |
O'Reilly Automotive, Inc. (a) | 3,500 | 99,225 | |
371,622 | |||
Computer & Electronics Retail - 1.9% | |||
Best Buy Co., Inc. | 17,750 | 804,785 | |
Gamestop Corp. Class B (a) | 6,300 | 236,880 | |
1,041,665 | |||
Specialty Stores - 2.5% | |||
Office Depot, Inc. (a) | 15,400 | 555,170 | |
OfficeMax, Inc. | 6,800 | 279,548 | |
Staples, Inc. | 16,750 | 362,135 | |
Tiffany & Co., Inc. | 4,100 | 129,519 | |
1,326,372 | |||
TOTAL SPECIALTY RETAIL | 6,560,595 | ||
TEXTILES, APPAREL & LUXURY GOODS - 1.7% | |||
Apparel, Accessories & Luxury Goods - 1.4% | |||
Coach, Inc. (a) | 11,000 | 315,810 | |
Polo Ralph Lauren Corp. Class A | 7,400 | 422,096 | |
737,906 | |||
Footwear - 0.3% | |||
Deckers Outdoor Corp. (a) | 4,200 | 179,088 | |
TOTAL TEXTILES, APPAREL & LUXURY GOODS | 916,994 | ||
TOBACCO - 5.8% | |||
Tobacco - 5.8% | |||
Altria Group, Inc. | 33,000 | 2,639,010 | |
British American Tobacco PLC sponsored ADR | 5,400 | 290,574 | |
Loews Corp. - Carolina Group | 2,600 | 149,188 | |
3,078,772 | |||
TOTAL COMMON STOCKS (Cost $47,112,794) | 51,419,464 | ||
Money Market Funds - 7.0% | |||
Shares | Value (Note 1) | ||
Fidelity Cash Central Fund, 5.3% (b) | 2,070,019 | $ 2,070,019 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 1,692,926 | 1,692,926 | |
TOTAL MONEY MARKET FUNDS (Cost $3,762,945) | 3,762,945 | ||
TOTAL INVESTMENT PORTFOLIO - 103.0% (Cost $50,875,739) | 55,182,409 | ||
NET OTHER ASSETS - (3.0)% | (1,587,744) | ||
NET ASSETS - 100% | $ 53,594,665 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 40,835 |
Fidelity Securities Lending Cash Central Fund | 18,821 |
Total | $ 59,656 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 85.0% |
Switzerland | 5.8% |
Netherlands | 3.7% |
United Kingdom | 2.2% |
France | 1.1% |
Others (individually less than 1%) | 2.2% |
100.0% |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Consumer Industries Fund
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $1,637,199) - See accompanying schedule: Unaffiliated issuers (cost $47,112,794) | $ 51,419,464 | |
Affiliated Central Funds (cost $3,762,945) | 3,762,945 | |
Total Investments (cost $50,875,739) | $ 55,182,409 | |
Receivable for investments sold | 219,372 | |
Receivable for fund shares sold | 87,384 | |
Dividends receivable | 33,112 | |
Interest receivable | 4,812 | |
Prepaid expenses | 95 | |
Other receivables | 779 | |
Total assets | 55,527,963 | |
Liabilities | ||
Payable for investments purchased | $ 26,891 | |
Payable for fund shares redeemed | 107,420 | |
Accrued management fee | 26,971 | |
Distribution fees payable | 27,275 | |
Other affiliated payables | 20,213 | |
Other payables and accrued expenses | 31,602 | |
Collateral on securities loaned, at value | 1,692,926 | |
Total liabilities | 1,933,298 | |
Net Assets | $ 53,594,665 | |
Net Assets consist of: | ||
Paid in capital | $ 43,984,008 | |
Accumulated net investment loss | (20) | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 5,303,904 | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | 4,306,773 | |
Net Assets | $ 53,594,665 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price Class A: | $ 16.39 | |
Maximum offering price per share (100/94.25 of $16.39) | $ 17.39 | |
Class T: | $ 16.03 | |
Maximum offering price per share (100/96.50 of $16.03) | $ 16.61 | |
Class B: | $ 15.26 | |
Class C: | $ 15.28 | |
Institutional Class: | $ 16.82 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 627,865 | |
Interest | 149 | |
Income from affiliated Central Funds | 59,656 | |
Total income | 687,670 | |
Expenses | ||
Management fee | $ 336,251 | |
Transfer agent fees | 234,320 | |
Distribution fees | 364,316 | |
Accounting and security lending fees | 24,850 | |
Independent trustees' compensation | 243 | |
Custodian fees and expenses | 6,415 | |
Registration fees | 49,473 | |
Audit | 41,259 | |
Legal | 792 | |
Miscellaneous | 1,649 | |
Total expenses before reductions | 1,059,568 | |
Expense reductions | (23,286) | 1,036,282 |
Net investment income (loss) | (348,612) | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 6,033,365 | |
Foreign currency transactions | (680) | |
Total net realized gain (loss) | 6,032,685 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (6,266,289) | |
Assets and liabilities in foreign currencies | 131 | |
Total change in net unrealized appreciation (depreciation) | (6,266,158) | |
Net gain (loss) | (233,473) | |
Net increase (decrease) in net assets resulting from operations | $ (582,085) | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ (348,612) | $ (477,730) |
Net realized gain (loss) | 6,032,685 | 171,725 |
Change in net unrealized appreciation (depreciation) | (6,266,158) | 9,733,441 |
Net increase (decrease) in net assets resulting from operations | (582,085) | 9,427,436 |
Distributions to shareholders from net realized gain | (441,481) | (1,957,955) |
Share transactions - net increase (decrease) | (8,793,822) | 3,323,070 |
Redemption fees | 4,458 | 3,279 |
Total increase (decrease) in net assets | (9,812,930) | 10,795,830 |
Net Assets | ||
Beginning of period | 63,407,595 | 52,611,765 |
End of period (including accumulated net investment loss of $20 and accumulated net investment loss of $28, respectively) | $ 53,594,665 | $ 63,407,595 |
See accompanying notes which are an integral part of the financial statements.
Consumer Industries
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 16.62 | $ 14.51 | $ 13.71 | $ 12.71 | $ 15.20 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.04) | (.07) | (.07) | (.04) | (.05) |
Net realized and unrealized gain (loss) | (.07) | 2.71 | .87 | 1.04 | (2.09) |
Total from investment operations | (.11) | 2.64 | .80 | 1.00 | (2.14) |
Distributions from net realized gain | (.12) | (.53) | - | - | (.35) |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 16.39 | $ 16.62 | $ 14.51 | $ 13.71 | $ 12.71 |
Total Return A, B | (.69)% | 18.85% | 5.84% | 7.87% | (14.30)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.42% | 1.47% | 1.55% | 1.70% | 1.69% |
Expenses net of fee waivers, if any | 1.40% | 1.44% | 1.50% | 1.53% | 1.50% |
Expenses net of all reductions | 1.39% | 1.42% | 1.45% | 1.48% | 1.47% |
Net investment income (loss) | (.23)% | (.45)% | (.50)% | (.33)% | (.36)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 16,935 | $ 17,887 | $ 11,856 | $ 9,101 | $ 7,209 |
Portfolio turnover rate | 81% | 66% | 152% | 88% | 136% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 16.29 | $ 14.27 | $ 13.51 | $ 12.57 | $ 15.06 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.07) | (.11) | (.11) | (.07) | (.09) |
Net realized and unrealized gain (loss) | (.07) | 2.66 | .87 | 1.01 | (2.05) |
Total from investment operations | (.14) | 2.55 | .76 | .94 | (2.14) |
Distributions from net realized gain | (.12) | (.53) | - | - | (.35) |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 16.03 | $ 16.29 | $ 14.27 | $ 13.51 | $ 12.57 |
Total Return A, B | (.89)% | 18.52% | 5.63% | 7.48% | (14.44)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.69% | 1.75% | 1.81% | 1.87% | 1.89% |
Expenses net of fee waivers, if any | 1.65% | 1.69% | 1.75% | 1.78% | 1.75% |
Expenses net of all reductions | 1.62% | 1.67% | 1.70% | 1.73% | 1.72% |
Net investment income (loss) | (.46)% | (.70)% | (.74)% | (.58)% | (.61)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 14,267 | $ 16,782 | $ 15,555 | $ 13,693 | $ 12,132 |
Portfolio turnover rate | 81% | 66% | 152% | 88% | 136% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 15.60 | $ 13.75 | $ 13.08 | $ 12.22 | $ 14.73 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.15) | (.17) | (.18) | (.13) | (.15) |
Net realized and unrealized gain (loss) | (.07) | 2.55 | .85 | .99 | (2.01) |
Total from investment operations | (.22) | 2.38 | .67 | .86 | (2.16) |
Distributions from net realized gain | (.12) | (.53) | - | - | (.35) |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 15.26 | $ 15.60 | $ 13.75 | $ 13.08 | $ 12.22 |
Total Return A, B | (1.45)% | 17.97% | 5.12% | 7.04% | (14.91)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.19% | 2.24% | 2.29% | 2.37% | 2.39% |
Expenses net of fee waivers, if any | 2.15% | 2.19% | 2.25% | 2.25% | 2.25% |
Expenses net of all reductions | 2.14% | 2.16% | 2.20% | 2.19% | 2.22% |
Net investment income (loss) | (.98)% | (1.20)% | (1.25)% | (1.05)% | (1.11)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 14,088 | $ 18,862 | $ 17,302 | $ 15,944 | $ 13,807 |
Portfolio turnover rate | 81% | 66% | 152% | 88% | 136% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 15.62 | $ 13.77 | $ 13.10 | $ 12.24 | $ 14.75 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.15) | (.17) | (.18) | (.13) | (.15) |
Net realized and unrealized gain (loss) | (.07) | 2.55 | .85 | .99 | (2.01) |
Total from investment operations | (.22) | 2.38 | .67 | .86 | (2.16) |
Distributions from net realized gain | (.12) | (.53) | - | - | (.35) |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 15.28 | $ 15.62 | $ 13.77 | $ 13.10 | $ 12.24 |
Total Return A, B | (1.45)% | 17.94% | 5.11% | 7.03% | (14.89)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.12% | 2.17% | 2.24% | 2.33% | 2.35% |
Expenses net of fee waivers, if any | 2.12% | 2.17% | 2.24% | 2.25% | 2.25% |
Expenses net of all reductions | 2.12% | 2.14% | 2.19% | 2.19% | 2.22% |
Net investment income (loss) | (.95)% | (1.18)% | (1.24)% | (1.05)% | (1.11)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 7,160 | $ 8,505 | $ 6,992 | $ 6,759 | $ 5,391 |
Portfolio turnover rate | 81% | 66% | 152% | 88% | 136% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Consumer Industries
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 17.01 | $ 14.81 | $ 13.95 | $ 12.91 | $ 15.38 |
Income from Investment Operations | |||||
Net investment income (loss) B | - D | (.03) | (.04) | (.01) | (.02) |
Net realized and unrealized gain (loss) | (.07) | 2.76 | .90 | 1.05 | (2.10) |
Total from investment operations | (.07) | 2.73 | .86 | 1.04 | (2.12) |
Distributions from net realized gain | (.12) | (.53) | - | - | (.35) |
Redemption fees added to paid in capital B | - D | - D | - D | - D | - D |
Net asset value, end of period | $ 16.82 | $ 17.01 | $ 14.81 | $ 13.95 | $ 12.91 |
Total Return A | (.44)% | 19.08% | 6.16% | 8.06% | (14.00)% |
Ratios to Average Net Assets C | |||||
Expenses before reductions | 1.18% | 1.26% | 1.34% | 1.49% | 1.39% |
Expenses net of fee waivers, if any | 1.15% | 1.20% | 1.25% | 1.25% | 1.25% |
Expenses net of all reductions | 1.14% | 1.17% | 1.20% | 1.19% | 1.22% |
Net investment income (loss) | .02% | (.21)% | (.25)% | (.05)% | (.11)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 1,144 | $ 1,371 | $ 907 | $ 766 | $ 1,215 |
Portfolio turnover rate | 81% | 66% | 152% | 88% | 136% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. D Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Consumer Industries Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, deferred trustees compensation, net operating losses, and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 5,688,215 |
Unrealized depreciation | (1,420,360) |
Net unrealized appreciation (depreciation) | 4,267,855 |
Undistributed long-term capital gain | 4,942,695 |
Cost for federal income tax purposes | $ 50,914,554 |
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Long-term Capital Gains | $ 441,481 | $ 1,957,955 |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $47,204,450 and $57,845,658, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR.
Consumer Industries
4. Fees and Other Transactions with Affiliates - continued
Management Fee - continued
The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 46,429 | $ 329 |
Class T | .25% | .25% | 76,362 | - |
Class B | .75% | .25% | 165,095 | 123,840 |
Class C | .75% | .25% | 76,430 | 12,697 |
$ 364,316 | $ 136,866 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 24,605 |
Class T | 5,264 |
Class B* | 43,830 |
Class C* | 727 |
$ 74,426 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 72,194 | .39 |
Class T | 62,799 | .41 |
Class B | 67,760 | .41 |
Class C | 26,504 | .35 |
Institutional Class | 5,063 | .40 |
$ 234,320 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $583 for the period.
Annual Report
Notes to Financial Statements - continued
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $173 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $18,821.
7. Expense Reductions.
FMR voluntarily agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
The following classes were in reimbursement during the period:
Expense | Reimbursement | |
Class A | 1.40% | $ 2,755 |
Class T | 1.65% | 5,753 |
Class B | 2.15% | 6,141 |
Institutional Class | 1.15% | 394 |
$ 15,043 |
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $5,064 for the period. In addition, through arrangements with the each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's transfer agent expense as noted in the table below.
Transfer Agent | |
Class T | $ 3,179 |
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
Consumer Industries
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2006 | 2005 |
From net realized gain | ||
Class A | $ 129,938 | $ 428,722 |
Class T | 112,178 | 574,417 |
Class B | 130,928 | 656,667 |
Class C | 59,730 | 265,179 |
Institutional Class | 8,707 | 32,970 |
Total | $ 441,481 | $ 1,957,955 |
10. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 426,479 | 482,465 | $ 7,019,654 | $ 7,543,570 |
Reinvestment of distributions | 7,092 | 26,992 | 116,631 | 380,585 |
Shares redeemed | (476,405) | (250,204) | (7,879,209) | (3,816,608) |
Net increase (decrease) | (42,834) | 259,253 | $ (742,924) | $ 4,107,547 |
Class T | ||||
Shares sold | 183,824 | 253,353 | $ 2,956,227 | $ 3,867,037 |
Reinvestment of distributions | 6,480 | 38,833 | 104,320 | 538,224 |
Shares redeemed | (330,058) | (352,192) | (5,310,774) | (5,340,776) |
Net increase (decrease) | (139,754) | (60,006) | $ (2,250,227) | $ (935,515) |
Class B | ||||
Shares sold | 124,427 | 244,951 | $ 1,901,339 | $ 3,583,578 |
Reinvestment of distributions | 7,467 | 43,290 | 114,882 | 576,619 |
Shares redeemed | (417,847) | (337,303) | (6,443,082) | (4,889,935) |
Net increase (decrease) | (285,953) | (49,062) | $ (4,426,861) | $ (729,738) |
Class C | ||||
Shares sold | 103,187 | 159,223 | $ 1,601,293 | $ 2,344,716 |
Reinvestment of distributions | 3,123 | 16,994 | 48,106 | 226,706 |
Shares redeemed | (182,363) | (139,563) | (2,814,524) | (2,002,889) |
Net increase (decrease) | (76,053) | 36,654 | $ (1,165,125) | $ 568,533 |
Institutional Class | ||||
Shares sold | 14,460 | 26,159 | $ 246,044 | $ 423,819 |
Reinvestment of distributions | 433 | 1,868 | 7,305 | 26,919 |
Shares redeemed | (27,416) | (8,711) | (462,034) | (138,495) |
Net increase (decrease) | (12,523) | 19,316 | $ (208,685) | $ 312,243 |
Annual Report
Advisor Cyclical Industries Fund - Institutional Class
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of | |
Institutional Class | 8.73% | 10.45% | 12.02% |
A From September 3, 1996.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Cyclical Industries Fund - Institutional Class on September 3, 1996, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Advisor Cyclical Industries Fund
Management's Discussion of Fund Performance
Comments from Christopher Bartel, Portfolio Manager of Fidelity® Advisor Cyclical Industries Fund
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
During the past year, the fund's Institutional Class shares returned 8.73%, topping the 5.30% return of the Goldman Sachs® Cyclical Industries Index, as well as the S&P 500. A significant overweighting in the construction and engineering segment benefited performance the most versus the sector index, further aided by solid stock picking in that industry. Also helping were timely picks and an overweighting in the construction and farm machinery group. Fluor was the top contributor, riding brisk demand for drilling rigs, refineries and the like. I trimmed the position to lock in profits. Commercial electrical products distributor WESCO International boosted performance as well, along with mining equipment maker Joy Global, which I reduced for valuation reasons. Two other contributors, Allegheny Technologies and Oregon Steel Mills, were part of the strong steel group. On the flip side, unfavorable picks in the auto parts and equipment, aerospace and defense, and homebuilding groups limited the fund's gains. Auto parts supplier Delphi - which I sold during the period - hurt performance, filing for bankruptcy protection in the fall of 2005. Homebuilders KB Home and Ryland Group also held back our results, as did an out-of-index position in EADS, the parent company of European aircraft maker Airbus.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Advisor Cyclical Industries Fund
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 984.90 | $ 6.05 |
HypotheticalA | $ 1,000.00 | $ 1,018.70 | $ 6.16 |
Class T | |||
Actual | $ 1,000.00 | $ 983.80 | $ 7.23 |
HypotheticalA | $ 1,000.00 | $ 1,017.50 | $ 7.35 |
Class B | |||
Actual | $ 1,000.00 | $ 980.90 | $ 9.87 |
HypotheticalA | $ 1,000.00 | $ 1,014.83 | $ 10.04 |
Class C | |||
Actual | $ 1,000.00 | $ 981.00 | $ 9.63 |
HypotheticalA | $ 1,000.00 | $ 1,015.08 | $ 9.79 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 986.10 | $ 4.38 |
HypotheticalA | $ 1,000.00 | $ 1,020.38 | $ 4.46 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.23% |
Class T | 1.47% |
Class B | 2.01% |
Class C | 1.96% |
Institutional Class | .89% |
Annual Report
Advisor Cyclical Industries Fund
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
General Electric Co. | 8.1 | 7.5 |
United Technologies Corp. | 4.2 | 3.0 |
Honeywell International, Inc. | 3.2 | 2.5 |
3M Co. | 3.1 | 2.9 |
Tyco International Ltd. | 3.0 | 3.1 |
Illinois Tool Works, Inc. | 2.4 | 0.0 |
E.I. du Pont de Nemours & Co. | 2.2 | 0.7 |
Caterpillar, Inc. | 2.2 | 2.2 |
Dow Chemical Co. | 1.9 | 1.2 |
Fluor Corp. | 1.9 | 4.6 |
32.2 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Aerospace & Defense | 16.4% | |
| Chemicals | 15.6% | |
| Industrial Conglomerates | 15.5% | |
| Machinery | 11.4% | |
| Road & Rail | 6.0% | |
| All Others* | 35.1% | |
As of January 31, 2006 | |||
| Aerospace & Defense | 15.9% | |
| Industrial Conglomerates | 14.5% | |
| Chemicals | 13.2% | |
| Construction & Engineering | 9.5% | |
| Machinery | 9.2% | |
| All Others* | 37.7% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Advisor Cyclical Industries Fund
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 100.0% | |||
Shares | Value (Note 1) | ||
AEROSPACE & DEFENSE - 16.4% | |||
Aerospace & Defense - 16.4% | |||
Alliant Techsystems, Inc. (a) | 3,200 | $ 256,448 | |
BAE Systems PLC sponsored ADR | 34,200 | 930,240 | |
DRS Technologies, Inc. | 5,300 | 245,337 | |
EADS NV | 133,400 | 3,842,486 | |
EDO Corp. | 21,600 | 484,704 | |
General Dynamics Corp. | 15,600 | 1,045,512 | |
Goodrich Corp. | 21,900 | 884,103 | |
Hexcel Corp. (a) | 248,300 | 3,568,071 | |
Honeywell International, Inc. | 205,400 | 7,948,980 | |
L-3 Communications Holdings, Inc. | 16,100 | 1,185,765 | |
Lockheed Martin Corp. | 32,000 | 2,549,760 | |
Meggitt PLC | 68,000 | 376,954 | |
Precision Castparts Corp. | 38,000 | 2,266,700 | |
Raytheon Co. | 70,900 | 3,195,463 | |
Rockwell Collins, Inc. | 14,940 | 797,348 | |
Rolls-Royce Group PLC | 47,423 | 390,454 | |
The Boeing Co. | 1,100 | 85,162 | |
United Technologies Corp. | 169,000 | 10,510,110 | |
40,563,597 | |||
AIR FREIGHT & LOGISTICS - 4.7% | |||
Air Freight & Logistics - 4.7% | |||
C.H. Robinson Worldwide, Inc. | 29,500 | 1,350,510 | |
Expeditors International of Washington, Inc. | 28,500 | 1,295,895 | |
FedEx Corp. | 21,200 | 2,219,852 | |
Forward Air Corp. | 10,120 | 324,751 | |
Hub Group, Inc. Class A | 47,272 | 1,067,402 | |
United Parcel Service, Inc. Class B | 52,700 | 3,631,557 | |
UTI Worldwide, Inc. | 71,760 | 1,672,008 | |
11,561,975 | |||
AIRLINES - 2.4% | |||
Airlines - 2.4% | |||
AirTran Holdings, Inc. (a) | 139,900 | 1,754,346 | |
JetBlue Airways Corp. (a) | 100 | 1,069 | |
Midwest Air Group, Inc. (a)(d) | 36,600 | 207,888 | |
Republic Airways Holdings, Inc. (a) | 32,488 | 539,951 | |
Ryanair Holdings PLC sponsored ADR (a) | 5,700 | 322,107 | |
Southwest Airlines Co. | 107,100 | 1,926,729 | |
UAL Corp. (a)(d) | 42,379 | 1,107,787 | |
5,859,877 | |||
AUTO COMPONENTS - 1.6% | |||
Auto Parts & Equipment - 1.4% | |||
Amerigon, Inc. (a) | 134,758 | 974,300 | |
BorgWarner, Inc. | 12,400 | 744,000 | |
Johnson Controls, Inc. | 22,500 | 1,727,100 | |
3,445,400 | |||
Shares | Value (Note 1) | ||
Tires & Rubber - 0.2% | |||
Continental AG | 4,400 | $ 449,627 | |
TOTAL AUTO COMPONENTS | 3,895,027 | ||
AUTOMOBILES - 2.1% | |||
Automobile Manufacturers - 2.1% | |||
Bayerische Motoren Werke AG (BMW) | 39,400 | 2,033,738 | |
General Motors Corp. (d) | 49,700 | 1,601,831 | |
Renault SA | 11,200 | 1,223,906 | |
Toyota Motor Corp. sponsored ADR | 3,500 | 368,270 | |
5,227,745 | |||
BUILDING PRODUCTS - 1.4% | |||
Building Products - 1.4% | |||
American Standard Companies, Inc. | 39,300 | 1,518,159 | |
Goodman Global, Inc. | 2,000 | 24,600 | |
Masco Corp. | 71,100 | 1,900,503 | |
3,443,262 | |||
CHEMICALS - 15.6% | |||
Commodity Chemicals - 2.4% | |||
Arkema (a) | 31,900 | 1,236,278 | |
Celanese Corp. Class A | 83,700 | 1,607,877 | |
Georgia Gulf Corp. | 29,900 | 761,254 | |
Lyondell Chemical Co. | 46,800 | 1,042,236 | |
NOVA Chemicals Corp. | 15,600 | 460,170 | |
Pioneer Companies, Inc. (a) | 13,600 | 357,136 | |
Westlake Chemical Corp. | 22,500 | 616,500 | |
6,081,451 | |||
Diversified Chemicals - 5.3% | |||
Ashland, Inc. | 17,300 | 1,150,623 | |
Dow Chemical Co. | 136,700 | 4,727,086 | |
E.I. du Pont de Nemours & Co. | 136,600 | 5,417,556 | |
FMC Corp. | 30,600 | 1,887,714 | |
13,182,979 | |||
Fertilizers & Agricultural Chemicals - 2.5% | |||
Agrium, Inc. | 29,700 | 719,403 | |
Monsanto Co. | 45,600 | 1,960,344 | |
Mosaic Co. | 103,851 | 1,629,422 | |
Potash Corp. of Saskatchewan, Inc. | 17,300 | 1,634,850 | |
The Scotts Miracle-Gro Co. Class A | 4,800 | 188,304 | |
6,132,323 | |||
Industrial Gases - 2.3% | |||
Air Products & Chemicals, Inc. | 21,400 | 1,368,102 | |
Airgas, Inc. | 10,200 | 369,750 | |
Linde AG | 15,170 | 1,281,815 | |
Praxair, Inc. | 48,700 | 2,670,708 | |
5,690,375 | |||
Specialty Chemicals - 3.1% | |||
Albemarle Corp. | 20,900 | 1,053,778 | |
Chemtura Corp. | 99,094 | 853,199 | |
Cytec Industries, Inc. | 61,300 | 3,274,033 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
CHEMICALS - CONTINUED | |||
Specialty Chemicals - continued | |||
Ecolab, Inc. | 33,700 | $ 1,451,459 | |
Ferro Corp. | 27,700 | 447,355 | |
Lubrizol Corp. | 200 | 8,554 | |
Minerals Technologies, Inc. | 200 | 10,124 | |
Rohm & Haas Co. | 10,600 | 488,872 | |
7,587,374 | |||
TOTAL CHEMICALS | 38,674,502 | ||
COMMERCIAL SERVICES & SUPPLIES - 2.2% | |||
Diversified Commercial & Professional Services - 0.2% | |||
The Brink's Co. | 8,400 | 462,756 | |
Environmental & Facility Services - 1.4% | |||
Allied Waste Industries, Inc. | 87,900 | 893,064 | |
Republic Services, Inc. | 10,000 | 401,600 | |
Waste Connections, Inc. (a) | 14,550 | 543,879 | |
Waste Management, Inc. | 50,600 | 1,739,628 | |
3,578,171 | |||
Human Resource & Employment Services - 0.6% | |||
CDI Corp. | 38,600 | 754,630 | |
Robert Half International, Inc. | 21,900 | 708,684 | |
1,463,314 | |||
TOTAL COMMERCIAL SERVICES & SUPPLIES | 5,504,241 | ||
COMMUNICATIONS EQUIPMENT - 0.6% | |||
Communications Equipment - 0.6% | |||
Dycom Industries, Inc. (a) | 16,600 | 298,634 | |
Harris Corp. | 28,000 | 1,275,400 | |
1,574,034 | |||
CONSTRUCTION & ENGINEERING - 5.7% | |||
Construction & Engineering - 5.7% | |||
Chicago Bridge & Iron Co. NV (NY Shares) | 95,500 | 2,316,830 | |
Comfort Systems USA, Inc. | 42,200 | 581,094 | |
Fluor Corp. | 53,500 | 4,698,905 | |
Foster Wheeler Ltd. (a) | 9,900 | 377,586 | |
Infrasource Services, Inc. (a) | 64,200 | 1,192,836 | |
Jacobs Engineering Group, Inc. (a) | 12,000 | 995,880 | |
Shaw Group, Inc. (a) | 125,900 | 2,604,871 | |
SNC-Lavalin Group, Inc. | 53,300 | 1,342,862 | |
14,110,864 | |||
CONSTRUCTION MATERIALS - 0.5% | |||
Construction Materials - 0.5% | |||
Martin Marietta Materials, Inc. | 3,200 | 257,664 | |
Vulcan Materials Co. | 15,400 | 1,031,338 | |
1,289,002 | |||
Shares | Value (Note 1) | ||
CONTAINERS & PACKAGING - 0.2% | |||
Metal & Glass Containers - 0.2% | |||
Crown Holdings, Inc. (a) | 16,200 | $ 269,892 | |
Owens-Illinois, Inc. | 11,000 | 166,430 | |
436,322 | |||
ELECTRICAL EQUIPMENT - 4.2% | |||
Electrical Components & Equipment - 3.3% | |||
AMETEK, Inc. | 5,900 | 250,278 | |
Cooper Industries Ltd. Class A | 13,200 | 1,137,312 | |
Emerson Electric Co. | 54,500 | 4,301,140 | |
Hubbell, Inc. Class B | 9,700 | 455,900 | |
Rockwell Automation, Inc. | 22,900 | 1,419,342 | |
Roper Industries, Inc. | 7,300 | 329,960 | |
Thomas & Betts Corp. (a) | 4,900 | 231,917 | |
8,125,849 | |||
Heavy Electrical Equipment - 0.9% | |||
ABB Ltd. sponsored ADR | 94,100 | 1,216,713 | |
Global Power Equipment Group, Inc. (a)(d) | 135,300 | 358,545 | |
Vestas Wind Systems AS (a) | 26,600 | 717,184 | |
2,292,442 | |||
TOTAL ELECTRICAL EQUIPMENT | 10,418,291 | ||
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.1% | |||
Electronic Equipment & Instruments - 0.1% | |||
Cogent, Inc. (a) | 8,600 | 121,690 | |
CPI International, Inc. | 1,000 | 13,980 | |
FARO Technologies, Inc. (a) | 12,200 | 196,786 | |
332,456 | |||
FOOD PRODUCTS - 0.2% | |||
Packaged Foods & Meats - 0.2% | |||
Imperial Sugar Co. | 16,000 | 383,040 | |
HOUSEHOLD DURABLES - 1.8% | |||
Homebuilding - 1.8% | |||
D.R. Horton, Inc. | 40,400 | 865,772 | |
KB Home | 32,300 | 1,373,396 | |
Pulte Homes, Inc. | 23,000 | 655,500 | |
Ryland Group, Inc. | 28,300 | 1,156,055 | |
Toll Brothers, Inc. (a) | 13,200 | 337,524 | |
4,388,247 | |||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 0.2% | |||
Independent Power Producers & Energy Traders - 0.2% | |||
Mirant Corp. (a) | 15,400 | 409,178 | |
INDUSTRIAL CONGLOMERATES - 15.5% | |||
Industrial Conglomerates - 15.5% | |||
3M Co. | 110,360 | 7,769,344 | |
General Electric Co. (d) | 611,200 | 19,980,128 | |
Smiths Group PLC | 59,900 | 1,008,744 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
INDUSTRIAL CONGLOMERATES - CONTINUED | |||
Industrial Conglomerates - continued | |||
Textron, Inc. | 25,700 | $ 2,310,687 | |
Tyco International Ltd. | 284,000 | 7,409,560 | |
38,478,463 | |||
IT SERVICES - 0.5% | |||
IT Consulting & Other Services - 0.5% | |||
CACI International, Inc. Class A (a) | 9,000 | 507,150 | |
ManTech International Corp. Class A (a) | 16,600 | 467,954 | |
NCI, Inc. Class A | 2,800 | 37,968 | |
SI International, Inc. (a) | 6,100 | 166,408 | |
1,179,480 | |||
LIFE SCIENCES TOOLS & SERVICES - 0.0% | |||
Life Science Tools & Services - 0.0% | |||
Varian, Inc. (a) | 2,700 | 121,446 | |
MACHINERY - 11.4% | |||
Construction & Farm Machinery & Heavy Trucks - 5.8% | |||
AGCO Corp. (a) | 9,400 | 215,824 | |
American Railcar Industries, Inc. | 200 | 5,530 | |
Bucyrus International, Inc. Class A | 13,229 | 644,385 | |
Caterpillar, Inc. | 75,200 | 5,329,424 | |
Deere & Co. | 62,200 | 4,513,854 | |
Joy Global, Inc. | 22,600 | 847,952 | |
Manitowoc Co., Inc. | 18,900 | 742,014 | |
Navistar International Corp. (a) | 14,940 | 334,058 | |
Samsung Heavy Industries Ltd. | 890 | 21,897 | |
Terex Corp. (a) | 13,200 | 591,888 | |
Toro Co. | 24,200 | 1,002,122 | |
Wabash National Corp. | 12,300 | 175,152 | |
14,424,100 | |||
Industrial Machinery - 5.6% | |||
Actuant Corp. Class A | 1,800 | 79,218 | |
Atlas Copco AB (B Shares) | 41,200 | 977,509 | |
Danaher Corp. | 34,400 | 2,242,880 | |
Dover Corp. | 17,200 | 810,808 | |
Illinois Tool Works, Inc. | 129,200 | 5,908,316 | |
ITT Industries, Inc. | 37,100 | 1,875,405 | |
KCI Konecranes Oyj | 61,700 | 1,134,900 | |
Pentair, Inc. | 8,300 | 238,376 | |
Schindler Holding AG (participation certificate) | 9,750 | 522,894 | |
13,790,306 | |||
TOTAL MACHINERY | 28,214,406 | ||
MARINE - 0.7% | |||
Marine - 0.7% | |||
Alexander & Baldwin, Inc. | 5,120 | 205,312 | |
Camillo Eitzen & Co. ASA | 36,500 | 379,547 | |
Shares | Value (Note 1) | ||
Odfjell ASA (A Shares) | 39,500 | $ 609,697 | |
Stolt-Nielsen SA (d) | 23,200 | 523,957 | |
1,718,513 | |||
METALS & MINING - 4.3% | |||
Steel - 4.3% | |||
Allegheny Technologies, Inc. | 36,700 | 2,344,763 | |
Carpenter Technology Corp. | 10,300 | 1,013,520 | |
IPSCO, Inc. | 5,000 | 471,721 | |
Mittal Steel Co. NV Class A (NY Shares) (d) | 89,400 | 3,058,374 | |
Nucor Corp. | 26,000 | 1,382,420 | |
Oregon Steel Mills, Inc. (a) | 26,800 | 1,239,232 | |
United States Steel Corp. | 18,200 | 1,147,874 | |
10,657,904 | |||
OIL, GAS & CONSUMABLE FUELS - 0.3% | |||
Coal & Consumable Fuels - 0.3% | |||
CONSOL Energy, Inc. | 12,200 | 502,152 | |
Massey Energy Co. | 6,400 | 171,008 | |
673,160 | |||
Oil & Gas Storage & Transport - 0.0% | |||
Overseas Shipholding Group, Inc. | 300 | 19,317 | |
TOTAL OIL, GAS & CONSUMABLE FUELS | 692,477 | ||
REAL ESTATE INVESTMENT TRUSTS - 0.1% | |||
Specialized REITs - 0.1% | |||
Potlatch Corp. | 10,690 | 369,981 | |
ROAD & RAIL - 6.0% | |||
Railroads - 3.9% | |||
Burlington Northern Santa Fe Corp. | 40,000 | 2,756,400 | |
CSX Corp. | 55,000 | 3,337,400 | |
Kansas City Southern | 600 | 14,772 | |
Norfolk Southern Corp. | 71,800 | 3,117,556 | |
Union Pacific Corp. | 5,800 | 493,000 | |
9,719,128 | |||
Trucking - 2.1% | |||
Con-way, Inc. | 20,900 | 1,034,132 | |
Laidlaw International, Inc. | 17,300 | 458,450 | |
Landstar System, Inc. | 79,126 | 3,377,889 | |
Old Dominion Freight Lines, Inc. (a) | 12,200 | 397,476 | |
5,267,947 | |||
TOTAL ROAD & RAIL | 14,987,075 | ||
SPECIALTY RETAIL - 0.2% | |||
Computer & Electronics Retail - 0.0% | |||
Gamestop Corp. Class B (a) | 2,300 | 86,480 | |
Home Improvement Retail - 0.2% | |||
Sherwin-Williams Co. | 8,600 | 435,160 | |
TOTAL SPECIALTY RETAIL | 521,640 | ||
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
TRADING COMPANIES & DISTRIBUTORS - 1.1% | |||
Trading Companies & Distributors - 1.1% | |||
H&E Equipment Services, Inc. | 600 | $ 15,888 | |
MSC Industrial Direct Co., Inc. Class A | 51,800 | 2,135,714 | |
Watsco, Inc. | 6,300 | 279,216 | |
WESCO International, Inc. (a) | 4,900 | 285,425 | |
2,716,243 | |||
TRANSPORTATION INFRASTRUCTURE - 0.0% | |||
Airport Services - 0.0% | |||
Grupo Aeroportuario del Pacifico SA de CV sponsored ADR | 600 | 17,958 | |
Marine Ports & Services - 0.0% | |||
Eitzen Maritime Services ASA (a) | 8,895 | 3,151 | |
TOTAL TRANSPORTATION INFRASTRUCTURE | 21,109 | ||
TOTAL COMMON STOCKS (Cost $238,539,237) | 247,750,397 | ||
Nonconvertible Preferred Stocks - 0.0% | |||
AEROSPACE & DEFENSE - 0.0% | |||
Aerospace & Defense - 0.0% | |||
Rolls-Royce Group PLC Series B | 2,551,357 | 4,947 | |
Money Market Funds - 9.6% | |||
Shares | Value (Note 1) | ||
Fidelity Cash Central Fund, 5.3% (b) | 1,155,272 | $ 1,155,272 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 22,460,490 | 22,460,490 | |
TOTAL MONEY MARKET FUNDS (Cost $23,615,762) | 23,615,762 | ||
TOTAL INVESTMENT PORTFOLIO - 109.6% (Cost $262,159,539) | 271,371,106 | ||
NET OTHER ASSETS - (9.6)% | (23,690,409) | ||
NET ASSETS - 100% | $ 247,680,697 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 198,282 |
Fidelity Securities Lending Cash Central Fund | 82,525 |
Total | $ 280,807 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 86.5% |
Netherlands | 3.7% |
Canada | 1.9% |
Germany | 1.5% |
United Kingdom | 1.2% |
France | 1.0% |
Others (individually less than 1%) | 4.2% |
100.0% |
See accompanying notes which are an integral part of the financial statements.
Cyclical Industries
Advisor Cyclical Industries Fund
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $21,806,330) - See accompanying schedule: Unaffiliated issuers (cost $238,543,777) | $ 247,755,344 | |
Affiliated Central Funds (cost $23,615,762) | 23,615,762 | |
Total Investments (cost $262,159,539) | $ 271,371,106 | |
Foreign currency held at value (cost $19) | 19 | |
Receivable for investments sold | 1,647,671 | |
Receivable for fund shares sold | 1,867,440 | |
Dividends receivable | 139,271 | |
Interest receivable | 30,659 | |
Prepaid expenses | 200 | |
Other receivables | 48,967 | |
Total assets | 275,105,333 | |
Liabilities | ||
Payable for investments purchased | $ 4,019,742 | |
Payable for fund shares redeemed | 614,443 | |
Accrued management fee | 117,153 | |
Distribution fees payable | 109,325 | |
Other affiliated payables | 70,442 | |
Other payables and accrued expenses | 33,041 | |
Collateral on securities loaned, at value | 22,460,490 | |
Total liabilities | 27,424,636 | |
Net Assets | $ 247,680,697 | |
Net Assets consist of: | ||
Paid in capital | $ 222,920,076 | |
Undistributed net investment income | 65,095 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 15,483,845 | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | 9,211,681 | |
Net Assets | $ 247,680,697 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price Class A: | $ 22.16 | |
Maximum offering price per share (100/94.25 of $22.16) | $ 23.51 | |
Class T: | $ 21.86 | |
Maximum offering price per share (100/96.50 of $21.86) | $ 22.65 | |
Class B: | $ 21.02 | |
Class C: | $ 21.16 | |
Institutional Class: | $ 22.77 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Cyclical Industries Fund
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 2,604,846 | |
Interest | 94 | |
Income from affiliated Central Funds | 280,807 | |
Total income | 2,885,747 | |
Expenses | ||
Management fee | $ 1,036,201 | |
Transfer agent fees | 574,797 | |
Distribution fees | 1,027,192 | |
Accounting and security lending fees | 75,820 | |
Independent trustees' compensation | 694 | |
Custodian fees and expenses | 17,589 | |
Registration fees | 76,551 | |
Audit | 41,823 | |
Legal | 1,870 | |
Miscellaneous | 2,258 | |
Total expenses before reductions | 2,854,795 | |
Expense reductions | (36,545) | 2,818,250 |
Net investment income (loss) | 67,497 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 16,802,300 | |
Foreign currency transactions | (1,826) | |
Total net realized gain (loss) | 16,800,474 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (9,655,028) | |
Assets and liabilities in foreign currencies | 14 | |
Total change in net unrealized appreciation (depreciation) | (9,655,014) | |
Net gain (loss) | 7,145,460 | |
Net increase (decrease) in net assets resulting from operations | $ 7,212,957 | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 67,497 | $ (263,519) |
Net realized gain (loss) | 16,800,474 | 8,599,225 |
Change in net unrealized appreciation (depreciation) | (9,655,014) | 12,830,783 |
Net increase (decrease) in net assets resulting from operations | 7,212,957 | 21,166,489 |
Distributions to shareholders from net realized gain | (7,122,799) | (3,376,455) |
Share transactions - net increase (decrease) | 109,957,564 | 68,385,639 |
Redemption fees | 25,597 | 12,053 |
Total increase (decrease) in net assets | 110,073,319 | 86,187,726 |
Net Assets | ||
Beginning of period | 137,607,378 | 51,419,652 |
End of period (including undistributed net investment income of $65,095 and accumulated net investment loss of $15, respectively) | $ 247,680,697 | $ 137,607,378 |
See accompanying notes which are an integral part of the financial statements.
Cyclical Industries
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 21.53 | $ 18.10 | $ 14.15 | $ 12.75 | $ 15.15 |
Income from Investment Operations | |||||
Net investment income (loss) C | .08 | .02 | (.02) | .06 | (.04) |
Net realized and unrealized gain (loss) | 1.63 | 4.35 | 3.96 | 1.36 | (2.37) |
Total from investment operations | 1.71 | 4.37 | 3.94 | 1.42 | (2.41) |
Distributions from net investment income | - | - | - | (.02) | - |
Distributions from net realized gain | (1.08) | (.94) | - | - | - |
Total distributions | (1.08) | (.94) | - | (.02) | - |
Redemption fees added to paid in capital C | - E | - E | .01 | - E | .01 |
Net asset value, end of period | $ 22.16 | $ 21.53 | $ 18.10 | $ 14.15 | $ 12.75 |
Total Return A, B | 8.40% | 25.04% | 27.92% | 11.16% | (15.84)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.26% | 1.34% | 1.65% | 1.99% | 1.83% |
Expenses net of fee waivers, if any | 1.26% | 1.34% | 1.50% | 1.53% | 1.50% |
Expenses net of all reductions | 1.24% | 1.29% | 1.47% | 1.46% | 1.49% |
Net investment income (loss) | .34% | .09% | (.12)% | .46% | (.25)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 99,255 | $ 40,264 | $ 12,612 | $ 4,272 | $ 3,160 |
Portfolio turnover rate | 94% | 116% | 106% | 149% | 45% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. | |||||
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 21.27 | $ 17.90 | $ 14.02 | $ 12.66 | $ 15.09 |
Income from Investment Operations | |||||
Net investment income (loss) C | .02 | (.03) | (.06) | .03 | (.07) |
Net realized and unrealized gain (loss) | 1.61 | 4.31 | 3.93 | 1.34 | (2.36) |
Total from investment operations | 1.63 | 4.28 | 3.87 | 1.37 | (2.43) |
Distributions from net investment income | - | - | - | (.01) | - |
Distributions from net realized gain | (1.04) | (.91) | - | - | - |
Total distributions | (1.04) | (.91) | - | (.01) | - |
Redemption fees added to paid in capital C | - E | - E | .01 | - E | - E |
Net asset value, end of period | $ 21.86 | $ 21.27 | $ 17.90 | $ 14.02 | $ 12.66 |
Total Return A, B | 8.13% | 24.78% | 27.67% | 10.84% | (16.10)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.49% | 1.57% | 1.90% | 2.25% | 2.07% |
Expenses net of fee waivers, if any | 1.49% | 1.57% | 1.75% | 1.78% | 1.75% |
Expenses net of all reductions | 1.47% | 1.52% | 1.72% | 1.71% | 1.74% |
Net investment income (loss) | .11% | (.14)% | (.36)% | .22% | (.50)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 55,936 | $ 40,126 | $ 13,089 | $ 5,493 | $ 6,216 |
Portfolio turnover rate | 94% | 116% | 106% | 149% | 45% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. | |||||
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 20.55 | $ 17.27 | $ 13.61 | $ 12.33 | $ 14.77 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.09) | (.13) | (.14) | (.03) | (.14) |
Net realized and unrealized gain (loss) | 1.55 | 4.17 | 3.79 | 1.31 | (2.30) |
Total from investment operations | 1.46 | 4.04 | 3.65 | 1.28 | (2.44) |
Distributions from net realized gain | (.99) | (.76) | - | - | - |
Redemption fees added to paid in capital C | - E | - E | .01 | - E | - E |
Net asset value, end of period | $ 21.02 | $ 20.55 | $ 17.27 | $ 13.61 | $ 12.33 |
Total Return A, B | 7.54% | 24.12% | 26.89% | 10.38% | (16.52)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.04% | 2.11% | 2.37% | 2.68% | 2.58% |
Expenses net of fee waivers, if any | 2.04% | 2.11% | 2.25% | 2.25% | 2.25% |
Expenses net of all reductions | 2.02% | 2.07% | 2.22% | 2.18% | 2.24% |
Net investment income (loss) | (.44)% | (.68)% | (.87)% | (.26)% | (1.00)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 37,082 | $ 32,242 | $ 14,722 | $ 9,005 | $ 9,008 |
Portfolio turnover rate | 94% | 116% | 106% | 149% | 45% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. | |||||
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 20.68 | $ 17.36 | $ 13.67 | $ 12.39 | $ 14.84 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.08) | (.12) | (.14) | (.03) | (.14) |
Net realized and unrealized gain (loss) | 1.56 | 4.19 | 3.82 | 1.31 | (2.31) |
Total from investment operations | 1.48 | 4.07 | 3.68 | 1.28 | (2.45) |
Distributions from net realized gain | (1.00) | (.75) | - | - | - |
Redemption fees added to paid in capital C | - E | - E | .01 | - E | - E |
Net asset value, end of period | $ 21.16 | $ 20.68 | $ 17.36 | $ 13.67 | $ 12.39 |
Total Return A, B | 7.59% | 24.16% | 26.99% | 10.33% | (16.51)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.99% | 2.07% | 2.28% | 2.57% | 2.49% |
Expenses net of fee waivers, if any | 1.99% | 2.07% | 2.25% | 2.25% | 2.25% |
Expenses net of all reductions | 1.97% | 2.02% | 2.22% | 2.18% | 2.24% |
Net investment income (loss) | (.38)% | (.64)% | (.87)% | (.26)% | (1.00)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 42,363 | $ 20,595 | $ 9,507 | $ 5,307 | $ 5,143 |
Portfolio turnover rate | 94% | 116% | 106% | 149% | 45% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. | |||||
See accompanying notes which are an integral part of the financial statements.
Cyclical Industries
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 22.06 | $ 18.48 | $ 14.41 | $ 12.96 | $ 15.37 |
Income from Investment Operations | |||||
Net investment income (loss) B | .16 | .07 | .02 | .09 | - D |
Net realized and unrealized gain (loss) | 1.66 | 4.46 | 4.04 | 1.39 | (2.41) |
Total from investment operations | 1.82 | 4.53 | 4.06 | 1.48 | (2.41) |
Distributions from net investment income | - | - | - | (.03) | - |
Distributions from net realized gain | (1.11) | (.95) | - | - | - |
Total distributions | (1.11) | (.95) | - | (.03) | - |
Redemption fees added to paid in capital B | - D | - D | .01 | - D | - D |
Net asset value, end of period | $ 22.77 | $ 22.06 | $ 18.48 | $ 14.41 | $ 12.96 |
Total Return A | 8.73% | 25.41% | 28.24% | 11.46% | (15.68)% |
Ratios to Average Net Assets C | |||||
Expenses before reductions | .91% | 1.06% | 1.38% | 1.55% | 1.45% |
Expenses net of fee waivers, if any | .91% | 1.06% | 1.25% | 1.25% | 1.25% |
Expenses net of all reductions | .89% | 1.01% | 1.22% | 1.18% | 1.24% |
Net investment income (loss) | .69% | .37% | .13% | .74% | - |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 13,043 | $ 4,379 | $ 1,490 | $ 1,156 | $ 2,104 |
Portfolio turnover rate | 94% | 116% | 106% | 149% | 45% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. D Amount represents less than $.01 per share. | |||||
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Cyclical Industries Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, deferred trustees compensation, and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 24,219,736 | |
Unrealized depreciation | (15,471,495) | |
Net unrealized appreciation (depreciation) | 8,748,241 | |
Undistributed ordinary income | 6,963,178 | |
Undistributed long-term capital gain | 7,637,278 | |
Cost for federal income tax purposes | $ 262,622,865 |
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Ordinary Income | $ 2,645,179 | $ 1,163,274 |
Long-term Capital Gains | 4,477,620 | 2,213,181 |
Total | $ 7,122,799 | $ 3,376,455 |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $273,277,250 and $169,163,154, respectively.
Cyclical Industries
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 157,391 | $ 2,381 |
Class T | .25% | .25% | 237,750 | - |
Class B | .75% | .25% | 348,343 | 261,258 |
Class C | .75% | .25% | 283,708 | 120,119 |
$ 1,027,192 | $ 383,758 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 212,424 |
Class T | 22,077 |
Class B* | 75,442 |
Class C * | 8,457 |
$ 318,400 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 202,587 | .32 |
Class T | 145,487 | .31 |
Class B | 122,428 | .35 |
Class C | 84,476 | .30 |
Institutional Class | 19,819 | .22 |
$ 574,797 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $11,065 for the period.
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $489 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $82,525.
7. Expense Reductions.
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $35,804 for the period. In addition, through arrangements with the Fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's custody expenses by $741.
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2006 | 2005 |
From net realized gain | ||
Class A | $ 2,209,329 | $ 1,008,608 |
Class T | 1,993,493 | 1,078,512 |
Class B | 1,595,001 | 740,358 |
Class C | 1,032,683 | 457,235 |
Institutional Class | 292,293 | 91,742 |
Total | $ 7,122,799 | $ 3,376,455 |
Cyclical Industries
10. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 3,250,873 | 1,834,275 | $ 73,798,607 | $ 35,637,759 |
Reinvestment of distributions | 97,417 | 37,514 | 1,982,904 | 702,375 |
Shares redeemed | (738,421) | (698,605) | (16,310,331) | (13,721,410) |
Net increase (decrease) | 2,609,869 | 1,173,184 | $ 59,471,180 | $ 22,618,724 |
Class T | ||||
Shares sold | 1,053,819 | 1,414,958 | $ 23,194,479 | $ 26,674,948 |
Reinvestment of distributions | 95,171 | 55,963 | 1,914,595 | 1,036,099 |
Shares redeemed | (476,485) | (315,493) | (10,217,427) | (6,149,352) |
Net increase (decrease) | 672,505 | 1,155,428 | $ 14,891,647 | $ 21,561,695 |
Class B | ||||
Shares sold | 691,509 | 1,024,205 | $ 14,823,678 | $ 19,088,560 |
Reinvestment of distributions | 68,369 | 34,674 | 1,329,447 | 620,788 |
Shares redeemed | (564,827) | (342,241) | (11,906,215) | (6,386,553) |
Net increase (decrease) | 195,051 | 716,638 | $ 4,246,910 | $ 13,322,795 |
Class C | ||||
Shares sold | 1,219,100 | 649,529 | $ 26,650,232 | $ 12,242,436 |
Reinvestment of distributions | 42,653 | 19,147 | 834,597 | 344,742 |
Shares redeemed | (255,670) | (220,294) | (5,350,637) | (4,110,203) |
Net increase (decrease) | 1,006,083 | 448,382 | $ 22,134,192 | $ 8,476,975 |
Institutional Class | ||||
Shares sold | 685,802 | 168,340 | $ 16,202,741 | $ 3,418,465 |
Reinvestment of distributions | 7,337 | 3,419 | 152,999 | 65,261 |
Shares redeemed | (318,752) | (53,860) | (7,142,105) | (1,078,276) |
Net increase (decrease) | 374,387 | 117,899 | $ 9,213,635 | $ 2,405,450 |
Annual Report
Advisor Developing Communications Fund - Institutional Class
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of |
Institutional Class | -5.13% | -2.58% | -5.26% |
A From December 27, 2000.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Developing Communications Fund - Institutional Class on December 27, 2000, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Advisor Developing Communications Fund
Management's Discussion of Fund Performance
Comments from Charlie Chai, Portfolio Manager of Fidelity® Advisor Developing Communications Fund
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
During the past year, the fund's Institutional Class shares returned -5.13%, topping the -6.42% return of the Goldman Sachs® Technology Index but trailing the S&P 500. Stock selection in the Internet software/services and semiconductor groups particularly helped performance versus the sector index, along with an overweighting in wireless telecommunications services. Underweighting the semiconductor group also added value. Among individual holdings, overweighting search engine Google boosted performance. Additionally, not owning several poorly performing major index components, including eBay, Intel and Dell, was beneficial. An out-of-benchmark position in Finnish wireless handset manufacturer Nokia further aided our results, as did a large stake in wireline equipment provider CIENA. Conversely, performance suffered due to weak stock selection and an overweighting in communications equipment. Further hampering performance were my picks in wireless telecom services and in applications software, along with underweightings in systems software and computer hardware. Canada-based Nortel Networks hurt performance amid the market weakness, investor cautiousness and intensifying industry competition. Also weighing on our results were Juniper Networks and Openwave Systems, along with not owning index components Hewlett-Packard and Apple Computer.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Advisor Developing Communications Fund
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 820.00 | $ 6.32 |
Hypothetical A | $ 1,000.00 | $ 1,017.85 | $ 7.00 |
Class T | |||
Actual | $ 1,000.00 | $ 818.90 | $ 7.44 |
Hypothetical A | $ 1,000.00 | $ 1,016.61 | $ 8.25 |
Class B | |||
Actual | $ 1,000.00 | $ 816.60 | $ 9.68 |
Hypothetical A | $ 1,000.00 | $ 1,014.13 | $ 10.74 |
Class C | |||
Actual | $ 1,000.00 | $ 816.60 | $ 9.68 |
Hypothetical A | $ 1,000.00 | $ 1,014.13 | $ 10.74 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 820.20 | $ 5.19 |
Hypothetical A | $ 1,000.00 | $ 1,019.09 | $ 5.76 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.40% |
Class T | 1.65% |
Class B | 2.15% |
Class C | 2.15% |
Institutional Class | 1.15% |
Annual Report
Advisor Developing Communications Fund
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
Corning, Inc. | 8.4 | 4.9 |
QUALCOMM, Inc. | 7.8 | 7.0 |
Motorola, Inc. | 7.0 | 4.9 |
Comverse Technology, Inc. | 5.5 | 2.9 |
Nortel Networks Corp. | 4.7 | 6.3 |
American Tower Corp. Class A | 4.6 | 2.8 |
Google, Inc. Class A (sub. vtg.) | 4.0 | 6.1 |
CIENA Corp. | 2.7 | 2.2 |
Juniper Networks, Inc. | 2.4 | 2.7 |
F5 Networks, Inc. | 2.3 | 2.9 |
49.4 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Communications Equipment | 62.3% | |
| Semiconductors & Semiconductor Equipment | 12.1% | |
| Wireless Telecommunication Services | 8.2% | |
| Internet Software & Services | 5.3% | |
| Computers & Peripherals | 3.3% | |
| All Others* | 8.8% | |
As of January 31, 2006 | |||
| Communications Equipment | 60.2% | |
| Wireless Telecommunication Services | 13.4% | |
| Internet Software & Services | 9.2% | |
| Semiconductors & Semiconductor Equipment | 7.1% | |
| Electronic Equipment & Instruments | 2.8% | |
| All Others* | 7.3% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Advisor Developing Communications Fund
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 99.2% | |||
Shares | Value (Note 1) | ||
COMMERCIAL SERVICES & SUPPLIES - 0.8% | |||
Diversified Commercial & Professional Services - 0.8% | |||
Tele Atlas NV (a) | 5,200 | $ 85,153 | |
COMMUNICATIONS EQUIPMENT - 62.1% | |||
Communications Equipment - 62.1% | |||
3Com Corp. (a) | 8,000 | 37,920 | |
ADC Telecommunications, Inc. (a) | 7,200 | 88,056 | |
Adtran, Inc. | 3,183 | 69,612 | |
ADVA AG Optical Networking (a) | 7,682 | 64,665 | |
Alvarion Ltd. (a) | 3,200 | 17,088 | |
Andrew Corp. (a) | 7,100 | 59,995 | |
Arris Group, Inc. (a) | 3,700 | 39,553 | |
AudioCodes Ltd. (a) | 14,000 | 135,800 | |
Avanex Corp. (a) | 11,600 | 14,964 | |
Bookham, Inc. (a) | 20,872 | 62,199 | |
C-COR, Inc. (a) | 800 | 5,288 | |
Ceragon Networks Ltd. (a) | 15,600 | 72,540 | |
CIENA Corp. (a) | 78,250 | 284,048 | |
CommScope, Inc. (a) | 300 | 9,369 | |
Comtech Group, Inc. (a) | 2,301 | 24,345 | |
Comverse Technology, Inc. (a) | 30,206 | 585,392 | |
Corning, Inc. | 46,600 | 888,659 | |
CSR PLC (a) | 4,700 | 99,651 | |
ECI Telecom Ltd. (a) | 6,100 | 40,870 | |
F5 Networks, Inc. (a) | 5,300 | 245,602 | |
Foundry Networks, Inc. (a) | 10,000 | 103,600 | |
Foxconn International Holdings Ltd. (a) | 2,000 | 4,649 | |
Ixia (a) | 3,600 | 33,372 | |
JDS Uniphase Corp. (a) | 41,000 | 87,330 | |
Juniper Networks, Inc. (a) | 18,950 | 254,878 | |
Lucent Technologies, Inc. (a) | 77,600 | 165,288 | |
Motorola, Inc. | 32,800 | 746,528 | |
MRV Communications, Inc. (a) | 9,317 | 22,174 | |
Nokia Corp. sponsored ADR | 5,600 | 111,160 | |
Nortel Networks Corp. | 253,700 | 497,253 | |
Orckit Communications Ltd. (a) | 4,000 | 30,800 | |
Powerwave Technologies, Inc. (a) | 12,400 | 98,456 | |
QUALCOMM, Inc. | 23,500 | 828,610 | |
Research In Motion Ltd. (a) | 2,940 | 192,952 | |
Riverstone Networks, Inc. (a) | 30,300 | 27,270 | |
Sandvine Corp. (c) | 58,300 | 136,679 | |
Sonus Networks, Inc. (a) | 24,804 | 111,122 | |
Stratex Networks, Inc. (a) | 13,100 | 45,981 | |
Symmetricom, Inc. (a) | 12,500 | 88,500 | |
Tekelec (a) | 8,100 | 83,349 | |
Telefonaktiebolaget LM Ericsson (B Shares) sponsored ADR | 22 | 693 | |
Telson Electronics Co. Ltd. (a) | 16,942 | 0 | |
Terayon Communication Systems, Inc. (a) | 55,300 | 45,899 | |
TomTom Group BV (a) | 900 | 33,488 | |
Tut Systems, Inc. (a) | 2,400 | 2,640 | |
6,598,287 | |||
Shares | Value (Note 1) | ||
COMPUTERS & PERIPHERALS - 3.3% | |||
Computer Hardware - 1.6% | |||
Compal Electronics, Inc. | 5,509 | $ 5,022 | |
Concurrent Computer Corp. (a) | 86,617 | 161,108 | |
NEC Corp. sponsored ADR | 90 | 492 | |
166,622 | |||
Computer Storage & Peripherals - 1.7% | |||
M-Systems Flash Disk Pioneers Ltd. (a) | 800 | 28,800 | |
Novatel Wireless, Inc. (a) | 3,500 | 38,710 | |
Synaptics, Inc. (a) | 4,600 | 96,692 | |
Xyratex Ltd. (a) | 800 | 18,592 | |
182,794 | |||
TOTAL COMPUTERS & PERIPHERALS | 349,416 | ||
DIVERSIFIED TELECOMMUNICATION SERVICES - 0.5% | |||
Alternative Carriers - 0.2% | |||
Level 3 Communications, Inc. (a) | 5,900 | 23,069 | |
Integrated Telecommunication Services - 0.3% | |||
Embarq Corp. | 30 | 1,358 | |
Philippine Long Distance Telephone Co. sponsored ADR | 900 | 35,271 | |
36,629 | |||
TOTAL DIVERSIFIED TELECOMMUNICATION | 59,698 | ||
ELECTRICAL EQUIPMENT - 0.1% | |||
Electrical Components & Equipment - 0.1% | |||
Energy Conversion Devices, Inc. (a) | 300 | 10,095 | |
ELECTRONIC EQUIPMENT & INSTRUMENTS - 2.8% | |||
Electronic Equipment & Instruments - 2.5% | |||
AU Optronics Corp. sponsored ADR | 3,500 | 51,590 | |
Chi Mei Optoelectronics Corp. | 7,549 | 8,599 | |
Dolby Laboratories, Inc. Class A (a) | 1,000 | 20,050 | |
HannStar Display Corp. | 58,000 | 8,183 | |
LG.Philips LCD Co. Ltd. sponsored ADR (a) | 6,900 | 122,751 | |
Nippon Electric Glass Co. Ltd. | 2,000 | 44,658 | |
Photon Dynamics, Inc. (a) | 916 | 9,728 | |
265,559 | |||
Electronic Manufacturing Services - 0.3% | |||
Molex, Inc. | 500 | 15,860 | |
Trimble Navigation Ltd. (a) | 300 | 14,409 | |
30,269 | |||
TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS | 295,828 | ||
HOUSEHOLD DURABLES - 0.2% | |||
Consumer Electronics - 0.2% | |||
Directed Electronics, Inc. | 2,200 | 25,454 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
INTERNET SOFTWARE & SERVICES - 5.3% | |||
Internet Software & Services - 5.3% | |||
aQuantive, Inc. (a) | 1,000 | $ 20,500 | |
Google, Inc. Class A (sub. vtg.) (a) | 1,093 | 422,554 | |
Openwave Systems, Inc. (a) | 18,107 | 119,325 | |
562,379 | |||
MEDIA - 0.9% | |||
Broadcasting & Cable TV - 0.9% | |||
EchoStar Communications Corp. Class A (a) | 2,900 | 101,645 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 12.1% | |||
Semiconductor Equipment - 0.9% | |||
EMCORE Corp. (a) | 6,200 | 43,772 | |
MEMC Electronic Materials, Inc. (a) | 1,600 | 48,672 | |
92,444 | |||
Semiconductors - 11.2% | |||
Actel Corp. (a) | 451 | 6,116 | |
Advanced Analogic Technologies, Inc. | 6,400 | 60,224 | |
AMIS Holdings, Inc. (a) | 6,600 | 61,908 | |
ANADIGICS, Inc. (a) | 6,100 | 33,672 | |
Analog Devices, Inc. | 700 | 22,631 | |
Applied Micro Circuits Corp. (a) | 11,432 | 29,495 | |
ARM Holdings PLC sponsored ADR | 5,200 | 33,748 | |
Broadcom Corp. Class A (a) | 3,200 | 76,768 | |
Conexant Systems, Inc. (a) | 12,800 | 22,912 | |
Cree, Inc. (a) | 1,100 | 21,703 | |
Exar Corp. (a) | 143 | 1,852 | |
Freescale Semiconductor, Inc. Class A (a) | 4,600 | 131,698 | |
Intersil Corp. Class A | 800 | 18,808 | |
Marvell Technology Group Ltd. (a) | 1,200 | 22,260 | |
Microtune, Inc. (a) | 7,200 | 41,832 | |
Mindspeed Technologies, Inc. (a) | 12,509 | 22,391 | |
MIPS Technologies, Inc. (a) | 1,398 | 8,849 | |
Netlogic Microsystems, Inc. (a) | 2,100 | 51,450 | |
Novatek Microelectronics Corp. | 16,648 | 81,852 | |
O2Micro International Ltd. sponsored ADR (a) | 10,200 | 61,098 | |
Pericom Semiconductor Corp. (a) | 1,700 | 14,280 | |
Pixelplus Co. Ltd. sponsored ADR | 3,600 | 7,200 | |
PLX Technology, Inc. (a) | 1,400 | 12,838 | |
PowerDsine Ltd. (a) | 3,000 | 21,840 | |
RF Micro Devices, Inc. (a) | 3,400 | 20,944 | |
Sigma Designs, Inc. (a) | 5,988 | 54,371 | |
Silicon Motion Technology Corp. sponsored ADR | 2,000 | 26,760 | |
Shares | Value (Note 1) | ||
Silicon On Insulator Technologies SA (SOITEC) (a) | 2,400 | $ 64,011 | |
Silicon Storage Technology, Inc. (a) | 1,200 | 4,776 | |
SiRF Technology Holdings, Inc. (a) | 200 | 3,820 | |
Skyworks Solutions, Inc. (a) | 4,900 | 21,511 | |
Spansion, Inc. Class A | 3,800 | 53,124 | |
Transmeta Corp. (a) | 5,800 | 7,830 | |
Trident Microsystems, Inc. (a) | 3,400 | 58,548 | |
Vimicro International Corp. sponsored ADR | 700 | 7,525 | |
1,190,645 | |||
TOTAL SEMICONDUCTORS & SEMICONDUCTOR | 1,283,089 | ||
SOFTWARE - 2.9% | |||
Application Software - 2.2% | |||
ECtel Ltd. (a) | 84 | 360 | |
NAVTEQ Corp. (a) | 1,000 | 28,180 | |
Ulticom, Inc. (a) | 20,298 | 201,559 | |
230,099 | |||
Home Entertainment Software - 0.2% | |||
Ubisoft Entertainment SA (a) | 400 | 19,416 | |
Systems Software - 0.5% | |||
Ubiquity Software Corp. PLC (a) | 68,200 | 26,754 | |
Wind River Systems, Inc. (a) | 3,800 | 31,426 | |
58,180 | |||
TOTAL SOFTWARE | 307,695 | ||
WIRELESS TELECOMMUNICATION SERVICES - 8.2% | |||
Wireless Telecommunication Services - 8.2% | |||
American Tower Corp. Class A (a) | 14,600 | 493,480 | |
Crown Castle International Corp. | 4,900 | 172,627 | |
MTN Group Ltd. | 3,800 | 29,044 | |
NII Holdings, Inc. (a) | 300 | 15,834 | |
SBA Communications Corp. Class A (a) | 4,800 | 114,624 | |
Sprint Nextel Corp. | 500 | 9,900 | |
Vimpel Communications sponsored ADR (a) | 600 | 28,920 | |
WiderThan Co. Ltd. ADR | 600 | 5,430 | |
869,859 | |||
TOTAL COMMON STOCKS (Cost $12,811,506) | 10,548,598 | ||
Convertible Bonds - 0.2% | ||||
Principal Amount | ||||
COMMUNICATIONS EQUIPMENT - 0.2% | ||||
Communications Equipment - 0.2% | ||||
CIENA Corp. 0.25% 5/1/13 | $ 20,000 | 16,734 | ||
Money Market Funds - 0.2% | |||
Shares | Value (Note 1) | ||
Fidelity Cash Central Fund, 5.3% (b) | 24,915 | $ 24,915 | |
TOTAL INVESTMENT PORTFOLIO - 99.6% (Cost $12,856,421) | 10,590,247 | ||
NET OTHER ASSETS - 0.4% | 40,012 | ||
NET ASSETS - 100% | $ 10,630,259 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(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 $136,679 or 1.3% of net assets. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 7,483 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 78.3% |
Canada | 7.8% |
Israel | 3.4% |
Taiwan | 1.6% |
United Kingdom | 1.4% |
Korea (South) | 1.3% |
Netherlands | 1.1% |
Finland | 1.0% |
Cayman Islands | 1.0% |
Others (individually less than 1%) | 3.1% |
100.0% |
Income Tax Information |
At July 31, 2006, the fund had a capital loss carryforward of approximately $359,916 all of which will expire on July 31, 2013. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Developing Communications Fund
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value - See accompanying schedule: Unaffiliated issuers (cost $12,831,506) | $ 10,565,332 | |
Affiliated Central Funds (cost $24,915) | 24,915 | |
Total Investments (cost $12,856,421) | $ 10,590,247 | |
Receivable for investments sold | 178,888 | |
Receivable for fund shares sold | 51,463 | |
Dividends receivable | 2,929 | |
Interest receivable | 359 | |
Prepaid expenses | 16 | |
Receivable from investment adviser for expense reductions | 3,274 | |
Other receivables | 917 | |
Total assets | 10,828,093 | |
Liabilities | ||
Payable for investments purchased | $ 78,060 | |
Payable for fund shares redeemed | 69,603 | |
Accrued management fee | 5,358 | |
Distribution fees payable | 5,850 | |
Other affiliated payables | 4,260 | |
Other payables and accrued expenses | 34,703 | |
Total liabilities | 197,834 | |
Net Assets | $ 10,630,259 | |
Net Assets consist of: | ||
Paid in capital | $ 13,423,377 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | (526,939) | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | (2,266,179) | |
Net Assets | $ 10,630,259 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price Class A: | $ 7.29 | |
Maximum offering price per share (100/94.25 of $7.29) | $ 7.73 | |
Class T: | $ 7.19 | |
Maximum offering price per share (100/96.50 of $7.19) | $ 7.45 | |
Class B: | $ 6.99 | |
Class C: | $ 6.99 | |
Institutional Class: | $ 7.39 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Developing Communications Fund
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 25,480 | |
Interest | 281 | |
Income from affiliated Central Funds | 7,483 | |
Total income | 33,244 | |
Expenses | ||
Management fee | $ 70,490 | |
Transfer agent fees | 54,743 | |
Distribution fees | 82,167 | |
Accounting fees and expenses | 5,125 | |
Independent trustees' compensation | 50 | |
Custodian fees and expenses | 18,187 | |
Registration fees | 47,515 | |
Audit | 41,336 | |
Legal | 228 | |
Miscellaneous | 145 | |
Total expenses before reductions | 319,986 | |
Expense reductions | (105,112) | 214,874 |
Net investment income (loss) | (181,630) | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 2,009,045 | |
Foreign currency transactions | 2,014 | |
Total net realized gain (loss) | 2,011,059 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (2,911,711) | |
Assets and liabilities in foreign currencies | (3,384) | |
Total change in net unrealized appreciation (depreciation) | (2,915,095) | |
Net gain (loss) | (904,036) | |
Net increase (decrease) in net assets resulting from operations | $ (1,085,666) | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ (181,630) | $ (166,932) |
Net realized gain (loss) | 2,011,059 | (1,564,905) |
Change in net unrealized appreciation (depreciation) | (2,915,095) | 3,600,997 |
Net increase (decrease) in net assets resulting from operations | (1,085,666) | 1,869,160 |
Share transactions - net increase (decrease) | 1,243,705 | (4,921,642) |
Redemption fees | 3,257 | 6,207 |
Total increase (decrease) in net assets | 161,296 | (3,046,275) |
Net Assets | ||
Beginning of period | 10,468,963 | 13,515,238 |
End of period | $ 10,630,259 | $ 10,468,963 |
See accompanying notes which are an integral part of the financial statements.
Developing Communications
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.70 | $ 6.53 | $ 5.57 | $ 3.96 | $ 8.40 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.09) | (.07) | (.09) | (.04) | (.05) |
Net realized and unrealized gain (loss) | (.32) | 1.24 | 1.01 | 1.65 | (4.40) |
Total from investment operations | (.41) | 1.17 | .92 | 1.61 | (4.45) |
Redemption fees added to paid in capital C | - E | - E | .04 | - E | .01 |
Net asset value, end of period | $ 7.29 | $ 7.70 | $ 6.53 | $ 5.57 | $ 3.96 |
Total Return A, B | (5.32)% | 17.92% | 17.24% | 40.66% | (52.86)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.13% | 2.32% | 2.38% | 6.13% | 4.97% |
Expenses net of fee waivers, if any | 1.40% | 1.45% | 1.50% | 1.50% | 1.50% |
Expenses net of all reductions | 1.32% | 1.28% | 1.35% | 1.36% | 1.40% |
Net investment income (loss) | (1.05)% | (.92)% | (1.18)% | (.82)% | (.85)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 3,145 | $ 2,406 | $ 3,480 | $ 970 | $ 371 |
Portfolio turnover rate | 174% | 250% | 306% | 167% | 305% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.61 | $ 6.48 | $ 5.54 | $ 3.95 | $ 8.40 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.11) | (.08) | (.10) | (.05) | (.07) |
Net realized and unrealized gain (loss) | (.31) | 1.21 | 1.00 | 1.64 | (4.39) |
Total from investment operations | (.42) | 1.13 | .90 | 1.59 | (4.46) |
Redemption fees added to paid in capital C | - E | - E | .04 | - E | .01 |
Net asset value, end of period | $ 7.19 | $ 7.61 | $ 6.48 | $ 5.54 | $ 3.95 |
Total Return A, B | (5.52)% | 17.44% | 16.97% | 40.25% | (52.98)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.51% | 2.78% | 3.06% | 6.82% | 5.36% |
Expenses net of fee waivers, if any | 1.65% | 1.71% | 1.75% | 1.75% | 1.75% |
Expenses net of all reductions | 1.57% | 1.54% | 1.60% | 1.61% | 1.64% |
Net investment income (loss) | (1.30)% | (1.18)% | (1.43)% | (1.07)% | (1.10)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 2,932 | $ 3,034 | $ 3,250 | $ 1,723 | $ 775 |
Portfolio turnover rate | 174% | 250% | 306% | 167% | 305% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.44 | $ 6.36 | $ 5.47 | $ 3.92 | $ 8.37 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.14) | (.12) | (.13) | (.07) | (.10) |
Net realized and unrealized gain (loss) | (.31) | 1.20 | .98 | 1.62 | (4.36) |
Total from investment operations | (.45) | 1.08 | .85 | 1.55 | (4.46) |
Redemption fees added to paid in capital C | - E | - E | .04 | - E | .01 |
Net asset value, end of period | $ 6.99 | $ 7.44 | $ 6.36 | $ 5.47 | $ 3.92 |
Total Return A, B | (6.05)% | 16.98% | 16.27% | 39.54% | (53.17)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.94% | 3.14% | 3.48% | 6.88% | 5.62% |
Expenses net of fee waivers, if any | 2.15% | 2.20% | 2.25% | 2.25% | 2.25% |
Expenses net of all reductions | 2.07% | 2.04% | 2.11% | 2.11% | 2.14% |
Net investment income (loss) | (1.80)% | (1.68)% | (1.93)% | (1.56)% | (1.60)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 2,406 | $ 2,864 | $ 2,998 | $ 1,846 | $ 1,162 |
Portfolio turnover rate | 174% | 250% | 306% | 167% | 305% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.44 | $ 6.36 | $ 5.47 | $ 3.92 | $ 8.37 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.15) | (.12) | (.14) | (.07) | (.10) |
Net realized and unrealized gain (loss) | (.30) | 1.20 | .99 | 1.62 | (4.36) |
Total from investment operations | (.45) | 1.08 | .85 | 1.55 | (4.46) |
Redemption fees added to paid in capital C | - E | - E | .04 | - E | .01 |
Net asset value, end of period | $ 6.99 | $ 7.44 | $ 6.36 | $ 5.47 | $ 3.92 |
Total Return A, B | (6.05)% | 16.98% | 16.27% | 39.54% | (53.17)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.86% | 3.07% | 3.19% | 6.81% | 5.49% |
Expenses net of fee waivers, if any | 2.15% | 2.19% | 2.25% | 2.25% | 2.25% |
Expenses net of all reductions | 2.07% | 2.02% | 2.10% | 2.11% | 2.14% |
Net investment income (loss) | (1.81)% | (1.66)% | (1.93)% | (1.57)% | (1.60)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 1,768 | $ 1,846 | $ 3,180 | $ 1,009 | $ 667 |
Portfolio turnover rate | 174% | 250% | 306% | 167% | 305% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Developing Communications
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.79 | $ 6.60 | $ 5.61 | $ 3.98 | $ 8.42 |
Income from Investment Operations | |||||
Net investment income (loss) B | (.07) | (.05) | (.07) | (.03) | (.04) |
Net realized and unrealized gain (loss) | (.33) | 1.24 | 1.02 | 1.66 | (4.41) |
Total from investment operations | (.40) | 1.19 | .95 | 1.63 | (4.45) |
Redemption fees added to paid in capital B | - D | - D | .04 | - D | .01 |
Net asset value, end of period | $ 7.39 | $ 7.79 | $ 6.60 | $ 5.61 | $ 3.98 |
Total Return A | (5.13)% | 18.03% | 17.65% | 40.95% | (52.73)% |
Ratios to Average Net Assets C | |||||
Expenses before reductions | 1.70% | 1.85% | 1.55% | 5.34% | 4.24% |
Expenses net of fee waivers, if any | 1.15% | 1.18% | 1.25% | 1.25% | 1.25% |
Expenses net of all reductions | 1.07% | 1.01% | 1.11% | 1.11% | 1.14% |
Net investment income (loss) | (.80)% | (.65)% | (.93)% | (.57)% | (.60)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 379 | $ 319 | $ 607 | $ 154 | $ 100 |
Portfolio turnover rate | 174% | 250% | 306% | 167% | 305% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. D Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Developing Communications Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Debt securities, including restricted securities, for which quotations are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. As a result in the change in the estimate of the return of capital component of dividend income realized in the year ended July 31, 2005, dividend income has been increased by $4,126 with a corresponding decrease to net unrealized appreciation (depreciation). The change in estimate has no impact on total net assets or total return of the Fund. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, net operating losses, capital loss carryforwards and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 348,152 | |
Unrealized depreciation | (2,781,354) | |
Net unrealized appreciation (depreciation) | (2,433,202) | |
Capital loss carryforward | (359,916) | |
Cost for federal income tax purposes | $ 13,023,449 |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
Restricted Securities. The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the fund's Schedule of Investments.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $22,446,359 and $21,361,983, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR.
The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Developing Communications
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 7,532 | $ 54 |
Class T | .25% | .25% | 15,728 | - |
Class B | .75% | .25% | 29,527 | 22,149 |
Class C | .75% | .25% | 29,380 | 10,287 |
$ 82,167 | $ 32,490 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 6,558 |
Class T | 2,300 |
Class B* | 10,160 |
Class C* | 794 |
$ 19,812 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 13,189 | .44 |
Class T | 16,558 | .53 |
Class B | 12,910 | .44 |
Class C | 11,199 | .38 |
Institutional Class | 887 | .24 |
$ 54,743 |
Accounting Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The fee is based on the level of average net assets for the month.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $2,037 for the period.
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $35 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
Annual Report
Notes to Financial Statements - continued
6. Expense Reductions.
FMR voluntarily agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
The following classes were in reimbursement during the period:
Expense | Reimbursement | |
Class A | 1.40% | $ 22,048 |
Class T | 1.65% | 27,171 |
Class B | 2.15% | 23,173 |
Class C | 2.15% | 20,620 |
Institutional Class | 1.15% | 2,078 |
$ 95,090 |
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $10,022 for the period.
7. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
8. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 258,256 | 416,894 | $ 2,231,744 | $ 3,024,999 |
Shares redeemed | (139,347) | (636,989) | (1,139,179) | (4,589,727) |
Net increase (decrease) | 118,909 | (220,095) | $ 1,092,565 | $ (1,564,728) |
Class T | ||||
Shares sold | 114,159 | 174,922 | $ 950,677 | $ 1,257,919 |
Shares redeemed | (104,980) | (277,992) | (831,470) | (1,946,912) |
Net increase (decrease) | 9,179 | (103,070) | $ 119,207 | $ (688,993) |
Class B | ||||
Shares sold | 69,205 | 193,607 | $ 569,934 | $ 1,369,993 |
Shares redeemed | (109,978) | (279,761) | (860,340) | (1,968,809) |
Net increase (decrease) | (40,773) | (86,154) | $ (290,406) | $ (598,816) |
Class C | ||||
Shares sold | 307,489 | 114,060 | $ 2,475,377 | $ 812,760 |
Shares redeemed | (302,626) | (365,782) | (2,257,686) | (2,486,084) |
Net increase (decrease) | 4,863 | (251,722) | $ 217,691 | $ (1,673,324) |
Institutional Class | ||||
Shares sold | 30,494 | 11,594 | $ 275,027 | $ 84,651 |
Shares redeemed | (20,224) | (62,684) | (170,379) | (480,432) |
Net increase (decrease) | 10,270 | (51,090) | $ 104,648 | $ (395,781) |
Developing Communications
Advisor Electronics Fund - Institutional Class
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of |
Institutional Class | -7.85% | -4.87% | -4.99% |
A From December 27, 2000.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Electronics Fund - Institutional Class on December 27, 2000, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from James Morrow, Portfolio Manager of Fidelity® Advisor Electronics Fund
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
During the past year, the fund's Institutional Class shares returned -7.85%, lagging the S&P 500 as well as the -6.42% return of the Goldman Sachs® Technology Index. Versus the sector index, the fund was hurt most by its sizable overweighting in semiconductors. Among individual holdings, semiconductor equipment stock Cohu was our biggest detractor. The company warned in February that first-quarter financial results would disappoint. Chip stocks Marvell Technology Group and Maxim Integrated Products also detracted, sidetracked by questions about the companies' options pricing policies and by the general market malaise. Our results also suffered from not owning computer makers Hewlett-Packard and Apple Computer, major index components that did well. On the positive side, favorable stock selection in the semiconductor segment offset some of the damage from overweighting the group. Additionally, performance was lifted by my picks in electronic equipment manufacturers, communication equipment and technology distributors. Heavily underweighting computer maker Dell was beneficial, as the index component struggled amid greater competition. Taiwan-based Motech Industries - with ties to the solar energy and fuel cell industries - performed well, as did Scottish analog chip maker Wolfson Microelectronics. Cohu, Motech and Wolfson were out-of-index holdings. A number of the stocks mentioned in this report were sold by period end.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 824.60 | $ 6.33 |
HypotheticalA | $ 1,000.00 | $ 1,017.85 | $ 7.00 |
Class T | |||
Actual | $ 1,000.00 | $ 823.70 | $ 7.46 |
HypotheticalA | $ 1,000.00 | $ 1,016.61 | $ 8.25 |
Class B | |||
Actual | $ 1,000.00 | $ 821.80 | $ 9.71 |
HypotheticalA | $ 1,000.00 | $ 1,014.13 | $ 10.74 |
Class C | |||
Actual | $ 1,000.00 | $ 821.60 | $ 9.71 |
HypotheticalA | $ 1,000.00 | $ 1,014.13 | $ 10.74 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 826.20 | $ 4.84 |
HypotheticalA | $ 1,000.00 | $ 1,019.49 | $ 5.36 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.40% |
Class T | 1.65% |
Class B | 2.15% |
Class C | 2.15% |
Institutional Class | 1.07% |
Annual Report
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
Broadcom Corp. Class A | 7.0 | 0.0 |
KLA-Tencor Corp. | 6.8 | 3.6 |
Intel Corp. | 5.8 | 5.9 |
Arrow Electronics, Inc. | 5.5 | 5.1 |
Maxim Integrated Products, Inc. | 5.0 | 4.7 |
Marvell Technology Group Ltd. | 4.8 | 4.7 |
Hon Hai Precision Industry Co. Ltd. (Foxconn) | 4.8 | 4.0 |
National Semiconductor Corp. | 4.5 | 5.9 |
Altera Corp. | 4.2 | 4.5 |
Lam Research Corp. | 4.1 | 3.2 |
52.5 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Semiconductors & Semiconductor Equipment | 79.1% | |
| Electronic Equipment & Instruments | 14.7% | |
| Communications Equipment | 2.8% | |
| Electrical Equipment | 2.1% | |
| All Others* | 1.3% | |
Top Industries (% of fund's net assets) | |||
As of January 31, 2006 | |||
| Semiconductors & Semiconductor Equipment | 74.1% | |
| Electronic Equipment & Instruments | 16.0% | |
| Electrical Equipment | 3.3% | |
| Computers & Peripherals | 1.6% | |
| Communications Equipment | 0.7% | |
| All Others* | 4.3% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 98.7% | |||
Shares | Value (Note 1) | ||
COMMUNICATIONS EQUIPMENT - 2.8% | |||
Communications Equipment - 2.8% | |||
CSR PLC (a) | 40,000 | $ 848,095 | |
ELECTRICAL EQUIPMENT - 2.1% | |||
Electrical Components & Equipment - 2.1% | |||
SolarWorld AG | 12,000 | 655,894 | |
ELECTRONIC EQUIPMENT & INSTRUMENTS - 14.7% | |||
Electronic Manufacturing Services - 6.1% | |||
Hon Hai Precision Industry Co. Ltd. (Foxconn) | 250,000 | 1,481,097 | |
Jabil Circuit, Inc. | 17,500 | 404,250 | |
1,885,347 | |||
Technology Distributors - 8.6% | |||
Arrow Electronics, Inc. (a) | 60,000 | 1,695,600 | |
Avnet, Inc. (a) | 30,000 | 546,000 | |
Wolfson Microelectronics PLC (a) | 50,000 | 422,179 | |
2,663,779 | |||
TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS | 4,549,126 | ||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 79.1% | |||
Semiconductor Equipment - 15.7% | |||
Cohu, Inc. | 45,000 | 683,100 | |
KLA-Tencor Corp. | 49,990 | 2,109,078 | |
Lam Research Corp. (a) | 30,030 | 1,248,948 | |
Tessera Technologies, Inc. (a) | 10,000 | 314,700 | |
Varian Semiconductor Equipment Associates, Inc. (a) | 15,000 | 475,500 | |
4,831,326 | |||
Semiconductors - 63.4% | |||
Altera Corp. (a) | 75,000 | 1,298,250 | |
Analog Devices, Inc. | 29,950 | 968,284 | |
Atheros Communications, Inc. (a) | 5,000 | 82,600 | |
Broadcom Corp. Class A (a) | 90,000 | 2,159,100 | |
Cypress Semiconductor Corp. (a) | 10,000 | 151,900 | |
Freescale Semiconductor, Inc. Class A (a) | 30,000 | 858,900 | |
Hittite Microwave Corp. | 10,000 | 407,500 | |
Holtek Semiconductor, Inc. | 201,990 | 362,701 | |
Intel Corp. | 99,990 | 1,799,820 | |
Linear Technology Corp. | 20,000 | 647,000 | |
LSI Logic Corp. (a) | 145,000 | 1,189,000 | |
Marvell Technology Group Ltd. (a) | 80,000 | 1,484,000 | |
Shares | Value (Note 1) | ||
Maxim Integrated Products, Inc. | 52,500 | $ 1,542,450 | |
National Semiconductor Corp. | 60,020 | 1,396,065 | |
ON Semiconductor Corp. (a) | 75,000 | 471,750 | |
Saifun Semiconductors Ltd. | 9,900 | 259,875 | |
Siliconware Precision Industries Co. Ltd. sponsored ADR (d) | 75,000 | 453,750 | |
Taiwan Semiconductor Manufacturing Co. Ltd. sponsored ADR | 92,699 | 803,700 | |
Texas Instruments, Inc. | 27,500 | 818,950 | |
Vimicro International Corp. sponsored ADR | 73,000 | 784,750 | |
Volterra Semiconductor Corp. (a) | 35,000 | 510,300 | |
Xilinx, Inc. | 55,000 | 1,115,950 | |
19,566,595 | |||
TOTAL SEMICONDUCTORS & SEMICONDUCTOR | 24,397,921 | ||
TOTAL COMMON STOCKS (Cost $33,918,314) | 30,451,036 | ||
Money Market Funds - 1.0% | |||
Fidelity Cash Central Fund, 5.3% (b) | 81,361 | 81,361 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 234,375 | 234,375 | |
TOTAL MONEY MARKET FUNDS (Cost $315,736) | 315,736 | ||
TOTAL INVESTMENT PORTFOLIO - 99.7% (Cost $34,234,050) | 30,766,772 | ||
NET OTHER ASSETS - 0.3% | 79,188 | ||
NET ASSETS - 100% | $ 30,845,960 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 36,358 |
Fidelity Securities Lending Cash Central Fund | 11,389 |
Total | $ 47,747 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 75.6% |
Taiwan | 10.1% |
Bermuda | 4.8% |
United Kingdom | 4.1% |
Cayman Islands | 2.5% |
Germany | 2.1% |
Others (individually less than 1%) | 0.8% |
100.0% |
Income Tax Information |
At July 31, 2006, the fund had a capital loss carryforward of approximately $11,946,726 of which $3,573,707, $5,827,947, $2,265,871 and $279,201 will expire on July 31, 2010, 2011, 2012 and 2013, respectively. |
See accompanying notes which are an integral part of the financial statements.
Electronics
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $206,625) - See accompanying schedule: Unaffiliated issuers (cost $33,918,314) | $ 30,451,036 | |
Affiliated Central Funds (cost $315,736) | 315,736 | |
Total Investments (cost $34,234,050) | $ 30,766,772 | |
Cash | 1,179 | |
Receivable for investments sold | 468,703 | |
Receivable for fund shares sold | 29,724 | |
Dividends receivable | 19,617 | |
Interest receivable | 780 | |
Receivable from investment adviser for expense reductions | 516 | |
Other receivables | 2,020 | |
Total assets | 31,289,311 | |
Liabilities | ||
Payable for fund shares redeemed | $ 135,610 | |
Accrued management fee | 14,826 | |
Distribution fees payable | 16,621 | |
Other affiliated payables | 12,379 | |
Other payables and accrued expenses | 29,540 | |
Collateral on securities loaned, at value | 234,375 | |
Total liabilities | 443,351 | |
Net Assets | $ 30,845,960 | |
Net Assets consist of: | ||
Paid in capital | $ 46,461,612 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | (12,148,448) | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | (3,467,204) | |
Net Assets | $ 30,845,960 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price | $ 7.38 | |
Maximum offering price per share (100/94.25 of $7.38) | $ 7.83 | |
Class T: | $ 7.29 | |
Maximum offering price per share (100/96.50 of $7.29) | $ 7.55 | |
Class B: | $ 7.10 | |
Class C: | $ 7.09 | |
Institutional Class: | $ 7.51 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 282,237 | |
Interest | 241 | |
Income from affiliated Central Funds | 47,747 | |
Total income | 330,225 | |
Expenses | ||
Management fee | $ 222,459 | |
Transfer agent fees | 159,451 | |
Distribution fees | 250,884 | |
Accounting and security lending fees | 17,469 | |
Independent trustees' compensation | 164 | |
Custodian fees and expenses | 10,752 | |
Registration fees | 47,681 | |
Audit | 41,473 | |
Legal | 741 | |
Miscellaneous | 441 | |
Total expenses before reductions | 751,515 | |
Expense reductions | (65,817) | 685,698 |
Net investment income (loss) | (355,473) | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 3,647,832 | |
Foreign currency transactions | (34,614) | |
Total net realized gain (loss) | 3,613,218 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (6,283,706) | |
Assets and liabilities in foreign currencies | 3,658 | |
Total change in net unrealized appreciation (depreciation) | (6,280,048) | |
Net gain (loss) | (2,666,830) | |
Net increase (decrease) in net assets resulting from operations | $ (3,022,303) | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ (355,473) | $ (591,417) |
Net realized gain (loss) | 3,613,218 | (807,962) |
Change in net unrealized appreciation (depreciation) | (6,280,048) | 9,643,693 |
Net increase (decrease) in net assets resulting from operations | (3,022,303) | 8,244,314 |
Share transactions - net increase (decrease) | (10,537,180) | (9,174,490) |
Redemption fees | 3,363 | 6,058 |
Total increase (decrease) in net assets | (13,556,120) | (924,118) |
Net Assets | ||
Beginning of period | 44,402,080 | 45,326,198 |
End of period | $ 30,845,960 | $ 44,402,080 |
See accompanying notes which are an integral part of the financial statements.
Electronics
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 8.04 | $ 6.58 | $ 6.59 | $ 5.57 | $ 9.62 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.04) | (.07) | (.09) | (.06) | (.10) |
Net realized and unrealized gain (loss) | (.62) | 1.53 | .08 | 1.07 | (3.96) |
Total from investment operations | (.66) | 1.46 | (.01) | 1.01 | (4.06) |
Redemption fees added to paid in capital C | - E | - E | - E | .01 | .01 |
Net asset value, end of period | $ 7.38 | $ 8.04 | $ 6.58 | $ 6.59 | $ 5.57 |
Total Return A, B | (8.21)% | 22.19% | (.15)% | 18.31% | (42.10)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.50% | 1.59% | 1.55% | 1.89% | 1.68% |
Expenses net of fee waivers, if any | 1.40% | 1.45% | 1.50% | 1.50% | 1.50% |
Expenses net of all reductions | 1.36% | 1.38% | 1.48% | 1.46% | 1.49% |
Net investment income (loss) | (.52)% | (.96)% | (1.15)% | (1.09)% | (1.14)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 7,916 | $ 11,397 | $ 8,374 | $ 8,116 | $ 4,912 |
Portfolio turnover rate | 95% | 128% | 84% | 66% | 58% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.96 | $ 6.53 | $ 6.56 | $ 5.55 | $ 9.62 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.06) | (.08) | (.11) | (.07) | (.12) |
Net realized and unrealized gain (loss) | (.61) | 1.51 | .08 | 1.07 | (3.96) |
Total from investment operations | (.67) | 1.43 | (.03) | 1.00 | (4.08) |
Redemption fees added to paid in capital C | - E | - E | - E | .01 | .01 |
Net asset value, end of period | $ 7.29 | $ 7.96 | $ 6.53 | $ 6.56 | $ 5.55 |
Total Return A, B | (8.42)% | 21.90% | (.46)% | 18.20% | (42.31)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.82% | 1.89% | 1.83% | 2.14% | 1.91% |
Expenses net of fee waivers, if any | 1.65% | 1.69% | 1.75% | 1.75% | 1.75% |
Expenses net of all reductions | 1.61% | 1.61% | 1.72% | 1.71% | 1.74% |
Net investment income (loss) | (.77)% | (1.20)% | (1.39)% | (1.33)% | (1.39)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 9,048 | $ 12,085 | $ 15,445 | $ 14,362 | $ 11,615 |
Portfolio turnover rate | 95% | 128% | 84% | 66% | 58% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.78 | $ 6.42 | $ 6.48 | $ 5.52 | $ 9.60 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.10) | (.12) | (.14) | (.10) | (.16) |
Net realized and unrealized gain (loss) | (.58) | 1.48 | .08 | 1.06 | (3.93) |
Total from investment operations | (.68) | 1.36 | (.06) | .96 | (4.09) |
Redemption fees added to paid in capital C | - E | - E | - E | - E | .01 |
Net asset value, end of period | $ 7.10 | $ 7.78 | $ 6.42 | $ 6.48 | $ 5.52 |
Total Return A, B | (8.74)% | 21.18% | (.93)% | 17.39% | (42.50)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.29% | 2.41% | 2.41% | 2.76% | 2.43% |
Expenses net of fee waivers, if any | 2.15% | 2.21% | 2.25% | 2.25% | 2.25% |
Expenses net of all reductions | 2.11% | 2.13% | 2.23% | 2.21% | 2.24% |
Net investment income (loss) | (1.27)% | (1.72)% | (1.90)% | (1.83)% | (1.89)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 6,123 | $ 8,963 | $ 8,498 | $ 11,335 | $ 8,362 |
Portfolio turnover rate | 95% | 128% | 84% | 66% | 58% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 7.77 | $ 6.41 | $ 6.47 | $ 5.51 | $ 9.59 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.10) | (.11) | (.14) | (.10) | (.16) |
Net realized and unrealized gain (loss) | (.58) | 1.47 | .08 | 1.06 | (3.93) |
Total from investment operations | (.68) | 1.36 | (.06) | .96 | (4.09) |
Redemption fees added to paid in capital C | - E | - E | - E | - E | .01 |
Net asset value, end of period | $ 7.09 | $ 7.77 | $ 6.41 | $ 6.47 | $ 5.51 |
Total Return A, B | (8.75)% | 21.22% | (.93)% | 17.42% | (42.54)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.26% | 2.31% | 2.24% | 2.52% | 2.34% |
Expenses net of fee waivers, if any | 2.15% | 2.18% | 2.24% | 2.25% | 2.25% |
Expenses net of all reductions | 2.11% | 2.11% | 2.21% | 2.21% | 2.24% |
Net investment income (loss) | (1.27)% | (1.69)% | (1.88)% | (1.83)% | (1.89)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 7,009 | $ 11,058 | $ 12,322 | $ 13,061 | $ 9,921 |
Portfolio turnover rate | 95% | 128% | 84% | 66% | 58% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Electronics
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 8.15 | $ 6.65 | $ 6.64 | $ 5.60 | $ 9.64 |
Income from Investment Operations | |||||
Net investment income (loss) B | (.02) | (.05) | (.06) | (.04) | (.08) |
Net realized and unrealized gain (loss) | (.62) | 1.55 | .07 | 1.07 | (3.97) |
Total from investment operations | (.64) | 1.50 | .01 | 1.03 | (4.05) |
Redemption fees added to paid in capital B | - D | - D | - D | .01 | .01 |
Net asset value, end of period | $ 7.51 | $ 8.15 | $ 6.65 | $ 6.64 | $ 5.60 |
Total Return A | (7.85)% | 22.56% | .15% | 18.57% | (41.91)% |
Ratios to Average Net Assets C | |||||
Expenses before reductions | 1.11% | 1.16% | 1.12% | 1.46% | 1.31% |
Expenses net of fee waivers, if any | 1.11% | 1.16% | 1.12% | 1.25% | 1.25% |
Expenses net of all reductions | 1.07% | 1.08% | 1.09% | 1.21% | 1.24% |
Net investment income (loss) | (.23)% | (.67)% | (.76)% | (.84)% | (.89)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 750 | $ 899 | $ 687 | $ 625 | $ 1,184 |
Portfolio turnover rate | 95% | 128% | 84% | 66% | 58% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. D Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Electronics Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund's investments in emerging markets can be subject to social, economic, regulatory, and political uncertainties and can be extremely volatile.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, net operating losses, capital loss carryforwards, losses deferred due to wash sales and excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 2,032,312 | |
Unrealized depreciation | (5,701,238) | |
Net unrealized appreciation (depreciation) | (3,668,926) | |
Capital loss carryforward | (11,946,726) | |
Cost for federal income tax purposes | $ 34,435,698 |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $36,237,765 and $46,176,803, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Electronics
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 25,396 | $ 202 |
Class T | .25% | .25% | 55,440 | 84 |
Class B | .75% | .25% | 79,574 | 59,697 |
Class C | .75% | .25% | 90,474 | 12,446 |
$ 250,884 | $ 72,429 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 5,615 |
Class T | 5,451 |
Class B* | 31,616 |
Class C* | 3,994 |
$ 46,676 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 38,413 | .38 |
Class T | 49,540 | .45 |
Class B | 33,671 | .42 |
Class C | 35,564 | .39 |
Institutional Class | 2,263 | .24 |
$ 159,451 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $2,937 for the period.
Annual Report
Notes to Financial Statements - continued
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $116 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $11,389.
7. Expense Reductions.
FMR voluntarily agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
The following classes were in reimbursement during the period:
Expense | Reimbursement | |
Class A | 1.40% | $ 9,910 |
Class T | 1.65% | 18,415 |
Class B | 2.15% | 11,255 |
Class C | 2.15% | 10,001 |
$ 49,581 |
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $16,236 for the period.
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
Electronics
9. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 435,594 | 810,216 | $ 3,620,302 | $ 5,985,601 |
Shares redeemed | (781,896) | (665,267) | (6,327,084) | (4,709,912) |
Net increase (decrease) | (346,302) | 144,949 | $ (2,706,782) | $ 1,275,689 |
Class T | ||||
Shares sold | 251,455 | 393,825 | $ 2,041,805 | $ 2,720,747 |
Shares redeemed | (529,920) | (1,240,792) | (4,209,309) | (8,651,718) |
Net increase (decrease) | (278,465) | (846,967) | $ (2,167,504) | $ (5,930,971) |
Class B | ||||
Shares sold | 89,856 | 424,624 | $ 712,048 | $ 2,916,025 |
Shares redeemed | (378,696) | (596,931) | (2,960,769) | (4,165,250) |
Net increase (decrease) | (288,840) | (172,307) | $ (2,248,721) | $ (1,249,225) |
Class C | ||||
Shares sold | 184,474 | 482,588 | $ 1,462,697 | $ 3,305,584 |
Shares redeemed | (618,382) | (982,233) | (4,840,037) | (6,627,459) |
Net increase (decrease) | (433,908) | (499,645) | $ (3,377,340) | $ (3,321,875) |
Institutional Class | ||||
Shares sold | 66,399 | 28,776 | $ 577,320 | $ 204,413 |
Shares redeemed | (76,867) | (21,842) | (614,153) | (152,521) |
Net increase (decrease) | (10,468) | 6,934 | $ (36,833) | $ 51,892 |
Annual Report
Advisor Financial Services Fund - Institutional Class
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of | |
Institutional Class | 10.78% | 6.97% | 12.61% |
A From September 3, 1996.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Financial Services Fund - Institutional Class on September 3, 1996, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Advisor Financial Services Fund
Management's Discussion of Fund Performance
Comments from Charles Hebard, Portfolio Manager of Fidelity® Advisor Financial Services Fund
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
During the past year, the fund's Institutional Class shares returned 10.78%, beating the S&P 500 but trailing the Goldman Sachs® Financial Services Index, which rose 12.61%. The fund lagged the sector benchmark primarily because of its significant holdings in weak-performing multi-line insurance and reinsurance companies. Stock selection in specialized finance and life/health insurance also detracted. Conversely, an overweighting and favorable security selection in investment banking and brokerage aided results, as did some good picks in diversified capital markets and diversified financial services. Insurers dominated the list of investments that detracted relative to the index. Bermuda-based property-and-casualty reinsurer Endurance Specialty Holdings was the single biggest disappointment. Investors sold the stock because of concerns about future revenue growth and fears that the hurricane season could cause significant underwriting costs for the third consecutive year. Scottish Re Group, a life reinsurance company, fell when higher-than-expected death claims increased costs and negatively affected earnings. As a result of the disappointing earnings, the company's CEO was ousted and the company put itself up for sale. The position was sold. American International Group, the fund's largest holding, declined after a disappointing first-quarter earnings report. First Marblehead, which specializes in securitizing student loans, also detracted from results. The fund had a position in the company early in the fiscal year when its stock price fell amid concerns about its earnings prospects and the resignation of its CEO. I sold the stock, which turned out to be a bad decision, as it rebounded later in the period. The three biggest relative contributors all were involved in the securities markets, which enjoyed healthy growth in trading volumes. Online broker E*TRADE was the top individual contributor, followed by UBS - the Swiss financial giant - and IntercontinentalExchange, which operates an electronic exchange of energy futures.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Advisor Financial Services Fund
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 1,002.10 | $ 6.11 |
HypotheticalA | $ 1,000.00 | $ 1,018.70 | $ 6.16 |
Class T | |||
Actual | $ 1,000.00 | $ 1,001.30 | $ 7.24 |
HypotheticalA | $ 1,000.00 | $ 1,017.55 | $ 7.30 |
Class B | |||
Actual | $ 1,000.00 | $ 998.70 | $ 9.81 |
HypotheticalA | $ 1,000.00 | $ 1,014.98 | $ 9.89 |
Class C | |||
Actual | $ 1,000.00 | $ 999.10 | $ 9.57 |
HypotheticalA | $ 1,000.00 | $ 1,015.22 | $ 9.64 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 1,004.20 | $ 4.27 |
HypotheticalA | $ 1,000.00 | $ 1,020.53 | $ 4.31 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.23% |
Class T | 1.46% |
Class B | 1.98% |
Class C | 1.93% |
Institutional Class | .86% |
Annual Report
Advisor Financial Services Fund
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
American International Group, Inc. | 8.5 | 8.1 |
Bank of America Corp. | 6.6 | 5.4 |
JPMorgan Chase & Co. | 5.5 | 5.0 |
Wachovia Corp. | 4.2 | 3.5 |
Wells Fargo & Co. | 3.7 | 3.4 |
Merrill Lynch & Co., Inc. | 2.9 | 3.5 |
Endurance Specialty Holdings Ltd. | 2.7 | 1.9 |
ACE Ltd. | 2.6 | 2.6 |
Platinum Underwriters Holdings Ltd. | 2.3 | 1.0 |
American Express Co. | 2.1 | 2.6 |
41.1 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Insurance | 29.2% | |
| Commercial Banks | 18.9% | |
| Capital Markets | 18.0% | |
| Diversified Financial Services | 16.2% | |
| Thrifts & Mortgage Finance | 7.9% | |
| All Others* | 9.8% | |
As of January 31, 2006 | |||
| Insurance | 29.5% | |
| Commercial Banks | 23.7% | |
| Capital Markets | 19.5% | |
| Diversified Financial Services | 8.8% | |
| Thrifts & Mortgage Finance | 8.3% | |
| All Others* | 10.2% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Advisor Financial Services Fund
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 99.4% | |||
Shares | Value (Note 1) | ||
CAPITAL MARKETS - 18.0% | |||
Asset Management & Custody Banks - 6.2% | |||
Affiliated Managers Group, Inc. (a)(d) | 10,600 | $ 970,430 | |
American Capital Strategies Ltd. (d) | 55,700 | 1,949,500 | |
Ameriprise Financial, Inc. | 30,540 | 1,362,084 | |
Bank of New York Co., Inc. | 57,860 | 1,944,675 | |
Federated Investors, Inc. Class B (non-vtg.) | 13,900 | 431,039 | |
Franklin Resources, Inc. | 41,600 | 3,804,320 | |
Investors Financial Services Corp. | 81,300 | 3,643,866 | |
Legg Mason, Inc. | 13,400 | 1,118,498 | |
Northern Trust Corp. | 39,100 | 2,232,610 | |
Nuveen Investments, Inc. Class A | 25,300 | 1,201,497 | |
State Street Corp. | 72,600 | 4,360,356 | |
Technology Investment Capital Corp. | 54,800 | 787,476 | |
23,806,351 | |||
Diversified Capital Markets - 1.1% | |||
UBS AG (NY Shares) | 77,300 | 4,205,120 | |
Investment Banking & Brokerage - 10.7% | |||
Bear Stearns Companies, Inc. | 10,400 | 1,475,448 | |
Charles Schwab Corp. | 146,600 | 2,328,008 | |
Daiwa Securities Group, Inc. | 62,000 | 692,734 | |
E*TRADE Financial Corp. (a) | 264,900 | 6,174,819 | |
Goldman Sachs Group, Inc. | 20,400 | 3,116,100 | |
KKR Private Equity Investors, L.P. Restricted Depositary Units (e) | 39,600 | 930,600 | |
Lazard Ltd. Class A | 38,700 | 1,511,235 | |
Lehman Brothers Holdings, Inc. | 15,300 | 993,735 | |
MCF Corp. (a) | 387,200 | 313,632 | |
Merrill Lynch & Co., Inc. | 155,800 | 11,345,356 | |
Morgan Stanley | 104,700 | 6,962,550 | |
Nikko Cordial Corp. | 47,000 | 560,393 | |
Nomura Holdings, Inc. | 49,300 | 878,526 | |
optionsXpress Holdings, Inc. | 42,600 | 1,115,268 | |
SBI E*TRADE Securities Co. Ltd. | 264 | 352,307 | |
TD Ameritrade Holding Corp. | 56,000 | 917,280 | |
TradeStation Group, Inc. (a) | 120,661 | 1,764,064 | |
41,432,055 | |||
TOTAL CAPITAL MARKETS | 69,443,526 | ||
COMMERCIAL BANKS - 18.9% | |||
Diversified Banks - 15.4% | |||
ABN-AMRO Holding NV sponsored ADR | 35,000 | 970,550 | |
Absa Group Ltd. | 43,200 | 637,485 | |
Banco Bilbao Vizcaya Argentaria SA | 51,000 | 1,087,830 | |
Banco Popolare di Verona e Novara | 101,600 | 2,894,066 | |
Bank Hapoalim BM (Reg.) | 146,900 | 656,903 | |
Bank of Montreal | 65,900 | 3,724,200 | |
Shares | Value (Note 1) | ||
HDFC Bank Ltd. sponsored ADR | 27,700 | $ 1,499,955 | |
HSBC Holdings PLC: | |||
(United Kingdom) (Reg.) | 73,800 | 1,342,570 | |
sponsored ADR | 14,700 | 1,337,112 | |
ICICI Bank Ltd. | 104,744 | 1,280,017 | |
Kookmin Bank | 13,930 | 1,216,314 | |
Mizrahi Tefahot Bank Ltd. (a) | 96,900 | 568,118 | |
Standard Chartered PLC (United Kingdom) | 81,387 | 2,058,554 | |
State Bank of India | 42,986 | 877,598 | |
Toronto-Dominion Bank | 46,200 | 2,357,768 | |
U.S. Bancorp, Delaware | 169,900 | 5,436,800 | |
Unicredito Italiano Spa | 141,900 | 1,092,067 | |
Wachovia Corp. | 300,704 | 16,126,756 | |
Wells Fargo & Co. | 198,000 | 14,323,320 | |
59,487,983 | |||
Regional Banks - 3.5% | |||
Cathay General Bancorp | 62,113 | 2,282,653 | |
Center Financial Corp., California | 57,600 | 1,435,392 | |
City National Corp. | 10,100 | 673,771 | |
East West Bancorp, Inc. | 16,477 | 664,847 | |
Kansai Urban Banking Corp. | 202,000 | 796,372 | |
M&T Bank Corp. | 8,600 | 1,048,512 | |
Nara Bancorp, Inc. | 39,459 | 726,440 | |
North Fork Bancorp, Inc., New York | 38,334 | 1,086,002 | |
SVB Financial Group (a) | 50,000 | 2,241,000 | |
The Keiyo Bank Ltd. | 89,000 | 503,803 | |
UCBH Holdings, Inc. | 44,200 | 737,256 | |
UnionBanCal Corp. | 23,500 | 1,452,065 | |
13,648,113 | |||
TOTAL COMMERCIAL BANKS | 73,136,096 | ||
CONSUMER FINANCE - 4.2% | |||
Consumer Finance - 4.2% | |||
American Express Co. | 152,100 | 7,918,326 | |
Capital One Financial Corp. (d) | 41,830 | 3,235,551 | |
Dollar Financial Corp. (a) | 114,533 | 2,299,823 | |
SLM Corp. | 52,500 | 2,640,750 | |
16,094,450 | |||
DIVERSIFIED FINANCIAL SERVICES - 16.2% | |||
Other Diversifed Financial Services - 13.9% | |||
Bank of America Corp. | 492,572 | 25,382,235 | |
Citigroup, Inc. | 118,869 | 5,742,561 | |
FirstRand Ltd. | 252,000 | 626,427 | |
ING Groep NV sponsored ADR | 21,600 | 874,800 | |
JPMorgan Chase & Co. | 465,694 | 21,244,960 | |
53,870,983 | |||
Specialized Finance - 2.3% | |||
Asset Acceptance Capital Corp. (a) | 54,261 | 986,465 | |
CBOT Holdings, Inc. Class A | 8,000 | 1,002,400 | |
CIT Group, Inc. | 16,000 | 734,560 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
DIVERSIFIED FINANCIAL SERVICES - CONTINUED | |||
Specialized Finance - continued | |||
IntercontinentalExchange, Inc. | 38,600 | $ 2,300,560 | |
Marlin Business Services Corp. (a) | 36,749 | 762,909 | |
NETeller PLC (a) | 147,300 | 1,045,622 | |
The NASDAQ Stock Market, Inc. (a) | 72,400 | 1,993,172 | |
8,825,688 | |||
TOTAL DIVERSIFIED FINANCIAL SERVICES | 62,696,671 | ||
HOUSEHOLD DURABLES - 0.4% | |||
Homebuilding - 0.4% | |||
D.R. Horton, Inc. | 81,100 | 1,737,973 | |
INSURANCE - 29.2% | |||
Insurance Brokers - 0.6% | |||
National Financial Partners Corp. | 32,000 | 1,441,280 | |
Willis Group Holdings Ltd. | 29,400 | 956,382 | |
2,397,662 | |||
Life & Health Insurance - 4.0% | |||
AFLAC, Inc. | 70,300 | 3,103,042 | |
Lincoln National Corp. | 25,000 | 1,417,000 | |
MetLife, Inc. | 76,100 | 3,957,200 | |
Protective Life Corp. | 9,500 | 439,945 | |
Prudential Financial, Inc. | 41,400 | 3,255,696 | |
Shin Kong Financial Holding Co. Ltd. | 776,000 | 806,902 | |
Sun Life Financial, Inc. | 62,800 | 2,396,900 | |
15,376,685 | |||
Multi-Line Insurance - 10.0% | |||
American International Group, Inc. | 543,760 | 32,989,916 | |
Hartford Financial Services Group, Inc. | 51,000 | 4,326,840 | |
HCC Insurance Holdings, Inc. | 42,150 | 1,285,154 | |
38,601,910 | |||
Property & Casualty Insurance - 8.3% | |||
ACE Ltd. | 196,900 | 10,146,257 | |
Allied World Assurance Holdings Ltd. | 27,900 | 973,710 | |
Allstate Corp. | 58,400 | 3,318,288 | |
Aspen Insurance Holdings Ltd. | 201,500 | 4,755,400 | |
Axis Capital Holdings Ltd. | 48,800 | 1,442,528 | |
Berkshire Hathaway, Inc. Class B (a) | 754 | 2,297,438 | |
MBIA, Inc. | 35,100 | 2,064,231 | |
The St. Paul Travelers Companies, Inc. | 114,900 | 5,262,420 | |
XL Capital Ltd. Class A | 32,800 | 2,089,360 | |
32,349,632 | |||
Reinsurance - 6.3% | |||
Endurance Specialty Holdings Ltd. | 340,570 | 10,339,705 | |
Everest Re Group Ltd. | 10,800 | 1,021,788 | |
Shares | Value (Note 1) | ||
IPC Holdings Ltd. | 5,600 | $ 161,000 | |
Max Re Capital Ltd. | 78,062 | 1,756,395 | |
PartnerRe Ltd. | 16,600 | 1,031,358 | |
Platinum Underwriters Holdings Ltd. | 313,000 | 8,854,770 | |
Swiss Reinsurance Co. (Reg.) | 15,029 | 1,080,784 | |
24,245,800 | |||
TOTAL INSURANCE | 112,971,689 | ||
REAL ESTATE INVESTMENT TRUSTS - 4.3% | |||
Office REITs - 0.8% | |||
Digital Realty Trust, Inc. | 45,600 | 1,246,248 | |
Duke Realty Corp. | 23,000 | 856,980 | |
Reckson Associates Realty Corp. | 25,400 | 1,131,062 | |
3,234,290 | |||
Residential REITs - 1.6% | |||
Equity Lifestyle Properties, Inc. | 14,200 | 610,174 | |
Equity Residential (SBI) | 77,100 | 3,585,921 | |
United Dominion Realty Trust, Inc. (SBI) | 69,600 | 1,938,360 | |
6,134,455 | |||
Retail REITs - 1.9% | |||
CBL & Associates Properties, Inc. | 24,292 | 951,275 | |
Developers Diversified Realty Corp. | 19,900 | 1,050,322 | |
General Growth Properties, Inc. | 14,800 | 675,472 | |
Kimco Realty Corp. | 20,600 | 808,344 | |
Simon Property Group, Inc. | 42,700 | 3,652,131 | |
7,137,544 | |||
TOTAL REAL ESTATE INVESTMENT TRUSTS | 16,506,289 | ||
REAL ESTATE MANAGEMENT & DEVELOPMENT - 0.3% | |||
Real Estate Management & Development - 0.3% | |||
Mitsui Fudosan Co. Ltd. | 63,000 | 1,338,029 | |
THRIFTS & MORTGAGE FINANCE - 7.9% | |||
Thrifts & Mortgage Finance - 7.9% | |||
Countrywide Financial Corp. | 106,454 | 3,814,247 | |
Doral Financial Corp. | 24,300 | 124,416 | |
Downey Financial Corp. | 7,500 | 497,625 | |
Fannie Mae | 155,735 | 7,461,264 | |
Freddie Mac | 33,900 | 1,961,454 | |
Golden West Financial Corp., Delaware | 55,400 | 4,080,764 | |
Hudson City Bancorp, Inc. | 208,475 | 2,703,921 | |
MGIC Investment Corp. | 16,900 | 961,779 | |
Radian Group, Inc. | 20,655 | 1,270,902 | |
Sovereign Bancorp, Inc. | 79,695 | 1,644,905 | |
The PMI Group, Inc. | 28,200 | 1,197,372 | |
W Holding Co., Inc. | 109,774 | 578,509 | |
Washington Mutual, Inc. (d) | 93,900 | 4,197,330 | |
30,494,488 | |||
TOTAL COMMON STOCKS (Cost $290,361,917) | 384,419,211 | ||
Money Market Funds - 2.5% | |||
Shares | Value (Note 1) | ||
Fidelity Cash Central Fund, 5.3% (b) | 2,120,917 | $ 2,120,917 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 7,335,303 | 7,335,303 | |
TOTAL MONEY MARKET FUNDS (Cost $9,456,220) | 9,456,220 | ||
TOTAL INVESTMENT PORTFOLIO - 101.9% (Cost $299,818,137) | 393,875,431 | ||
NET OTHER ASSETS - (1.9)% | (7,163,226) | ||
NET ASSETS - 100% | $ 386,712,205 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
(e) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $930,600 or 0.2% of net assets. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
KKR Private Equity Investors, L.P. Restricted Depositary Units | 5/3/06 | $ 990,000 |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 64,483 |
Fidelity Securities Lending Cash Central Fund | 77,651 |
Total | $ 142,134 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 78.7% |
Bermuda | 8.4% |
Cayman Islands | 2.6% |
Canada | 2.2% |
United Kingdom | 1.6% |
Switzerland | 1.4% |
Japan | 1.2% |
Italy | 1.1% |
Others (individually less than 1%) | 2.8% |
100.0% |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Financial Services Fund
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $7,160,356) - See accompanying schedule: Unaffiliated issuers (cost $290,361,917) | $ 384,419,211 | |
Affiliated Central Funds (cost $9,456,220) | 9,456,220 | |
Total Investments (cost $299,818,137) | $ 393,875,431 | |
Cash | 30 | |
Foreign currency held at value (cost $4) | 4 | |
Receivable for investments sold | 909,274 | |
Receivable for fund shares sold | 703,692 | |
Dividends receivable | 184,007 | |
Interest receivable | 3,140 | |
Prepaid expenses | 648 | |
Other receivables | 21,424 | |
Total assets | 395,697,650 | |
Liabilities | ||
Payable for fund shares redeemed | $ 1,101,650 | |
Accrued management fee | 180,805 | |
Distribution fees payable | 210,610 | |
Other affiliated payables | 117,914 | |
Other payables and accrued expenses | 39,163 | |
Collateral on securities loaned, at value | 7,335,303 | |
Total liabilities | 8,985,445 | |
Net Assets | $ 386,712,205 | |
Net Assets consist of: | ||
Paid in capital | $ 261,953,470 | |
Undistributed net investment income | 1,145,387 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 29,556,426 | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | 94,056,922 | |
Net Assets | $ 386,712,205 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price | $ 23.34 | |
Maximum offering price per share (100/94.25 of $23.34) | $ 24.76 | |
Class T: | $ 23.26 | |
Maximum offering price per share (100/96.50 of $23.26) | $ 24.10 | |
Class B: | $ 22.75 | |
Class C: | $ 22.74 | |
Institutional Class: | $ 23.63 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Financial Services Fund
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 8,465,105 | |
Interest | 156 | |
Income from affiliated Central Funds | 142,134 | |
Total income | 8,607,395 | |
Expenses | ||
Management fee | $ 2,319,534 | |
Transfer agent fees | 1,340,435 | |
Distribution fees | 2,788,064 | |
Accounting and security lending fees | 171,050 | |
Independent trustees' compensation | 1,674 | |
Custodian fees and expenses | 40,348 | |
Registration fees | 56,140 | |
Audit | 46,225 | |
Legal | 4,957 | |
Miscellaneous | 5,662 | |
Total expenses before reductions | 6,774,089 | |
Expense reductions | (63,514) | 6,710,575 |
Net investment income (loss) | 1,896,820 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers (net of foreign taxes of $121,560) | 35,887,417 | |
Foreign currency transactions | (19,662) | |
Total net realized gain (loss) | 35,867,755 | |
Change in net unrealized appreciation (depreciation) on: Investment securities (net of decrease in deferred foreign taxes of $89,524) | 1,112,625 | |
Assets and liabilities in foreign currencies | (488) | |
Total change in net unrealized appreciation (depreciation) | 1,112,137 | |
Net gain (loss) | 36,979,892 | |
Net increase (decrease) in net assets resulting from operations | $ 38,876,712 | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 1,896,820 | $ 2,004,509 |
Net realized gain (loss) | 35,867,755 | 35,584,689 |
Change in net unrealized appreciation (depreciation) | 1,112,137 | 15,327,421 |
Net increase (decrease) in net assets resulting from operations | 38,876,712 | 52,916,619 |
Distributions to shareholders from net investment income | (1,881,748) | (623,607) |
Distributions to shareholders from net realized gain | (29,223,665) | (38,323,892) |
Total distributions | (31,105,413) | (38,947,499) |
Share transactions - net increase (decrease) | (47,322,942) | (69,921,968) |
Redemption fees | 8,919 | 19,265 |
Total increase (decrease) in net assets | (39,542,724) | (55,933,583) |
Net Assets | ||
Beginning of period | 426,254,929 | 482,188,512 |
End of period (including undistributed net investment income of $1,145,387 and undistributed net investment income of $1,342,292, respectively) | $ 386,712,205 | $ 426,254,929 |
See accompanying notes which are an integral part of the financial statements.
Financial Services
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 23.01 | $ 22.17 | $ 19.98 | $ 17.83 | $ 20.45 |
Income from Investment Operations | |||||
Net investment income (loss) C | .20 | .19 | .14 | .16 | .12 |
Net realized and unrealized gain (loss) | 2.02 | 2.48 | 2.20 | 2.07 | (2.60) |
Total from investment operations | 2.22 | 2.67 | 2.34 | 2.23 | (2.48) |
Distributions from net investment income | (.26) | (.07) | (.15) | (.08) | (.14) |
Distributions from net realized gain | (1.63) | (1.76) | - | - | - |
Total distributions | (1.89) | (1.83) | (.15) | (.08) | (.14) |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 23.34 | $ 23.01 | $ 22.17 | $ 19.98 | $ 17.83 |
Total Return A, B | 10.32% | 12.60% | 11.76% | 12.57% | (12.16)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.25% | 1.26% | 1.27% | 1.31% | 1.27% |
Expenses net of fee waivers, if any | 1.25% | 1.26% | 1.27% | 1.31% | 1.27% |
Expenses net of all reductions | 1.23% | 1.23% | 1.25% | 1.27% | 1.23% |
Net investment income (loss) | .87% | .88% | .63% | .89% | .60% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 85,356 | $ 68,012 | $ 58,222 | $ 57,255 | $ 60,475 |
Portfolio turnover rate | 33% | 61% | 74% | 60% | 125% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 22.87 | $ 22.07 | $ 19.90 | $ 17.77 | $ 20.38 |
Income from Investment Operations | |||||
Net investment income (loss) C | .15 | .14 | .09 | .12 | .07 |
Net realized and unrealized gain (loss) | 2.02 | 2.47 | 2.19 | 2.07 | (2.59) |
Total from investment operations | 2.17 | 2.61 | 2.28 | 2.19 | (2.52) |
Distributions from net investment income | (.15) | (.05) | (.11) | (.06) | (.09) |
Distributions from net realized gain | (1.63) | (1.76) | - | - | - |
Total distributions | (1.78) | (1.81) | (.11) | (.06) | (.09) |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 23.26 | $ 22.87 | $ 22.07 | $ 19.90 | $ 17.77 |
Total Return A, B | 10.11% | 12.37% | 11.49% | 12.37% | (12.39)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.47% | 1.48% | 1.50% | 1.53% | 1.49% |
Expenses net of fee waivers, if any | 1.47% | 1.48% | 1.50% | 1.53% | 1.49% |
Expenses net of all reductions | 1.46% | 1.46% | 1.48% | 1.49% | 1.45% |
Net investment income (loss) | .65% | .66% | .41% | .67% | .38% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 113,344 | $ 128,388 | $ 144,887 | $ 157,238 | $ 169,429 |
Portfolio turnover rate | 33% | 61% | 74% | 60% | 125% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 22.33 | $ 21.65 | $ 19.53 | $ 17.50 | $ 20.08 |
Income from Investment Operations | |||||
Net investment income (loss) C | .03 | .03 | (.02) | .03 | (.03) |
Net realized and unrealized gain (loss) | 1.97 | 2.41 | 2.16 | 2.03 | (2.55) |
Total from investment operations | 2.00 | 2.44 | 2.14 | 2.06 | (2.58) |
Distributions from net investment income | (.01) | - | (.02) | (.03) | - |
Distributions from net realized gain | (1.57) | (1.76) | - | - | - |
Total distributions | (1.58) | (1.76) | (.02) | (.03) | - |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 22.75 | $ 22.33 | $ 21.65 | $ 19.53 | $ 17.50 |
Total Return A, B | 9.52% | 11.78% | 10.96% | 11.80% | (12.85)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.99% | 2.00% | 2.02% | 2.03% | 2.01% |
Expenses net of fee waivers, if any | 1.99% | 2.00% | 2.02% | 2.03% | 2.01% |
Expenses net of all reductions | 1.98% | 1.98% | 2.00% | 1.99% | 1.97% |
Net investment income (loss) | .13% | .14% | (.11)% | .17% | (.14)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 113,652 | $ 145,046 | $ 179,873 | $ 193,373 | $ 206,460 |
Portfolio turnover rate | 33% | 61% | 74% | 60% | 125% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 22.34 | $ 21.65 | $ 19.53 | $ 17.49 | $ 20.05 |
Income from Investment Operations | |||||
Net investment income (loss) C | .04 | .04 | (.01) | .04 | (.02) |
Net realized and unrealized gain (loss) | 1.98 | 2.42 | 2.15 | 2.03 | (2.54) |
Total from investment operations | 2.02 | 2.46 | 2.14 | 2.07 | (2.56) |
Distributions from net investment income | (.02) | (.01) | (.02) | (.03) | - |
Distributions from net realized gain | (1.60) | (1.76) | - | - | - |
Total distributions | (1.62) | (1.77) | (.02) | (.03) | - |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 22.74 | $ 22.34 | $ 21.65 | $ 19.53 | $ 17.49 |
Total Return A, B | 9.58% | 11.88% | 10.96% | 11.86% | (12.77)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.94% | 1.95% | 1.97% | 1.99% | 1.96% |
Expenses net of fee waivers, if any | 1.94% | 1.95% | 1.97% | 1.99% | 1.96% |
Expenses net of all reductions | 1.93% | 1.92% | 1.95% | 1.95% | 1.92% |
Net investment income (loss) | .18% | .19% | (.06)% | .22% | (.09)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 62,469 | $ 72,181 | $ 86,199 | $ 97,434 | $ 107,899 |
Portfolio turnover rate | 33% | 61% | 74% | 60% | 125% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Financial Services
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 23.29 | $ 22.37 | $ 20.17 | $ 17.95 | $ 20.59 |
Income from Investment Operations | |||||
Net investment income (loss) B | .29 | .29 | .23 | .24 | .19 |
Net realized and unrealized gain (loss) | 2.05 | 2.50 | 2.21 | 2.09 | (2.62) |
Total from investment operations | 2.34 | 2.79 | 2.44 | 2.33 | (2.43) |
Distributions from net investment income | (.37) | (.11) | (.24) | (.11) | (.21) |
Distributions from net realized gain | (1.63) | (1.76) | - | - | - |
Total distributions | (2.00) | (1.87) | (.24) | (.11) | (.21) |
Redemption fees added to paid in capital B | - D | - D | - D | - D | - D |
Net asset value, end of period | $ 23.63 | $ 23.29 | $ 22.37 | $ 20.17 | $ 17.95 |
Total Return A | 10.78% | 13.06% | 12.18% | 13.07% | (11.84)% |
Ratios to Average Net Assets C | |||||
Expenses before reductions | .86% | .86% | .88% | .88% | .89% |
Expenses net of fee waivers, if any | .86% | .86% | .88% | .88% | .89% |
Expenses net of all reductions | .85% | .84% | .85% | .84% | .85% |
Net investment income (loss) | 1.26% | 1.28% | 1.03% | 1.32% | .98% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 11,892 | $ 12,629 | $ 13,008 | $ 14,539 | $ 15,283 |
Portfolio turnover rate | 33% | 61% | 74% | 60% | 125% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. D Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Financial Services Fund (the Fund) is a fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund's investments in emerging markets can be subject to social, economic, regulatory, and political uncertainties and can be extremely volatile.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, certain foreign taxes, passive foreign investment companies (PFIC), partnerships, losses deferred due to wash sales and excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 102,554,776 | |
Unrealized depreciation | (9,632,732) | |
Net unrealized appreciation (depreciation) | 92,922,044 | |
Undistributed ordinary income | 2,317,750 | |
Undistributed long-term capital gain | 26,302,676 | |
Cost for federal income tax purposes | $ 300,953,387 |
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Ordinary Income | $ 4,156,447 | $ 2,154,145 |
Long-term Capital Gains | 26,948,966 | 36,793,354 |
Total | $ 31,105,413 | $ 38,947,499 |
New Accounting Pronouncements. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
Restricted Securities. The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.
Financial Services
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $136,792,947 and $213,390,159, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 190,660 | $ 1,678 |
Class T | .25% | .25% | 604,744 | 1,884 |
Class B | .75% | .25% | 1,315,583 | 987,176 |
Class C | .75% | .25% | 677,077 | 27,596 |
$ 2,788,064 | $ 1,018,334 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 23,881 |
Class T | 10,992 |
Class B* | 212,378 |
Class C* | 3,102 |
$ 250,353 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 267,960 | .35 |
Class T | 391,655 | .32 |
Class B | 453,838 | .34 |
Class C | 200,451 | .30 |
Institutional Class | 26,531 | .22 |
$ 1,340,435 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $2,327 for the period.
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $1,187 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $77,651.
7. Expense Reductions.
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $63,074 for the period. In addition, through arrangements with each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, credits reduced each class' transfer agent expense as noted in the table below:
Transfer Agent | ||
Class A | $ 272 | |
Class B | 168 | |
$ 440 |
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
Financial Services
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2006 | 2005 |
From net investment income | ||
Class A | $ 793,007 | $ 192,609 |
Class T | 784,601 | 326,696 |
Class B | 62,350 | - |
Class C | 47,101 | 38,785 |
Institutional Class | 194,689 | 65,517 |
Total | $ 1,881,748 | $ 623,607 |
From net realized gain | ||
Class A | $ 4,952,004 | $ 4,769,034 |
Class T | 8,720,889 | 11,388,557 |
Class B | 9,718,109 | 14,295,898 |
Class C | 4,968,829 | 6,852,951 |
Institutional Class | 863,834 | 1,017,452 |
Total | $ 29,223,665 | $ 38,323,892 |
10. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 1,351,439 | 1,159,503 | $ 31,220,975 | $ 25,692,274 |
Reinvestment of distributions | 234,688 | 198,478 | 5,118,429 | 4,334,590 |
Shares redeemed | (885,268) | (1,028,419) | (20,266,228) | (22,675,155) |
Net increase (decrease) | 700,859 | 329,562 | $ 16,073,176 | $ 7,351,709 |
Class T | ||||
Shares sold | 426,844 | 420,019 | $ 9,717,059 | $ 9,262,219 |
Reinvestment of distributions | 409,216 | 504,911 | 8,897,438 | 10,965,915 |
Shares redeemed | (1,576,453) | (1,875,686) | (35,989,546) | (41,342,266) |
Net increase (decrease) | (740,393) | (950,756) | $ (17,375,049) | $ (21,114,132) |
Class B | ||||
Shares sold | 302,265 | 283,236 | $ 6,677,115 | $ 6,103,430 |
Reinvestment of distributions | 394,522 | 574,588 | 8,409,188 | 12,205,894 |
Shares redeemed | (2,197,220) | (2,670,965) | (49,213,763) | (57,380,601) |
Net increase (decrease) | (1,500,433) | (1,813,141) | $ (34,127,460) | $ (39,071,277) |
Class C | ||||
Shares sold | 241,582 | 213,518 | $ 5,385,733 | $ 4,587,619 |
Reinvestment of distributions | 190,165 | 257,099 | 4,051,037 | 5,464,805 |
Shares redeemed | (915,599) | (1,219,971) | (20,422,653) | (26,243,393) |
Net increase (decrease) | (483,852) | (749,354) | $ (10,985,883) | $ (16,190,969) |
Institutional Class | ||||
Shares sold | 67,105 | 62,760 | $ 1,572,188 | $ 1,387,106 |
Reinvestment of distributions | 34,641 | 37,434 | 762,982 | 826,042 |
Shares redeemed | (140,689) | (139,433) | (3,242,896) | (3,110,447) |
Net increase (decrease) | (38,943) | (39,239) | $ (907,726) | $ (897,299) |
Annual Report
Advisor Health Care Fund - Institutional Class
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of | |
Institutional Class | 4.21% | 3.52% | 11.31% |
A From September 3, 1996.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Health Care Fund - Institutional Class on September 3, 1996, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Harlan Carere, Portfolio Manager of Fidelity® Advisor Health Care Fund through July 31, 2006
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
During the past year, the fund's Institutional Class shares returned 4.21%, outperforming the Goldman Sachs® Health Care Index, which rose 2.25%, but trailing the S&P 500. Good security and market selection helped the fund outpace its sector benchmark. The strongest contribution came from stock picking in health care facilities, where I favored assisted living and ambulatory surgery centers. Two assisted living companies, Brookdale Senior Living and American Retirement, were especially strong performers. During the period, Brookdale purchased American Retirement. Our overweighted exposure to the managed care subsector also contributed versus the index, particularly our holding of Health Net, a company seen increasingly by the market as an attractive acquisition target. Stock selection in pharmaceuticals, along with out-of-benchmark investments in wellness and nutrition companies, such as Herbalife and Hansen Natural, also boosted performance. Hansen Natural was sold by period end. Underweighting large-cap pharmaceutical stocks, such as Abbott Laboratories, hurt results, as did an underweighted position in medical-device maker Guidant, where a takeover struggle came to a boil and helped its stock. Fund performance also was hurt by out-of-benchmark investments in Aspect Medical Systems, where sales slowed, and Salix Pharmaceuticals, where there were clinical setbacks. Both positions were sold. Security selection in health care services detracted as well.
Note to shareholders: Aaron Cooper became manager of the fund on August 1, 2006.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 971.80 | $ 6.06 |
HypotheticalA | $ 1,000.00 | $ 1,018.65 | $ 6.21 |
Class T | |||
Actual | $ 1,000.00 | $ 970.80 | $ 7.28 |
HypotheticalA | $ 1,000.00 | $ 1,017.41 | $ 7.45 |
Class B | |||
Actual | $ 1,000.00 | $ 968.50 | $ 9.81 |
HypotheticalA | $ 1,000.00 | $ 1,014.83 | $ 10.04 |
Class C | |||
Actual | $ 1,000.00 | $ 968.60 | $ 9.42 |
HypotheticalA | $ 1,000.00 | $ 1,015.22 | $ 9.64 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 973.70 | $ 4.21 |
HypotheticalA | $ 1,000.00 | $ 1,020.53 | $ 4.31 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.24% |
Class T | 1.49% |
Class B | 2.01% |
Class C | 1.93% |
Institutional Class | .86% |
Annual Report
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund' | % of fund's net assets | |
Pfizer, Inc. | 7.8 | 5.8 |
Johnson & Johnson | 7.7 | 3.6 |
Merck & Co., Inc. | 5.4 | 4.1 |
Genentech, Inc. | 4.3 | 3.8 |
Amgen, Inc. | 4.3 | 1.9 |
Wyeth | 4.2 | 4.8 |
UnitedHealth Group, Inc. | 3.8 | 6.7 |
Medtronic, Inc. | 2.7 | 1.6 |
Abbott Laboratories | 2.6 | 0.4 |
Allergan, Inc. | 2.6 | 2.6 |
45.4 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Pharmaceuticals | 37.4% | |
| Health Care Providers & Services | 25.9% | |
| Health Care Equipment & Supplies | 15.9% | |
| Biotechnology | 14.4% | |
| Life Sciences Tools & Services | 3.3% | |
| All Others* | 3.1% | |
As of January 31, 2006 | |||
| Pharmaceuticals | 32.1% | |
| Health Care Providers & Services | 30.9% | |
| Health Care Equipment & Supplies | 18.6% | |
| Biotechnology | 15.0% | |
| Personal Products | 1.0% | |
| All Others* | 2.4% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 99.6% | |||
Shares | Value (Note 1) | ||
BIOTECHNOLOGY - 14.4% | |||
Biotechnology - 14.4% | |||
Alizyme PLC (a) | 24,600 | $ 45,494 | |
Alnylam Pharmaceuticals, Inc. (a) | 67,200 | 858,144 | |
Altus Pharmaceuticals, Inc. | 17,200 | 245,616 | |
Amgen, Inc. (a) | 448,800 | 31,299,312 | |
Amylin Pharmaceuticals, Inc. (a) | 65,400 | 3,191,520 | |
Biogen Idec, Inc. (a) | 124,600 | 5,248,152 | |
BioSphere Medical, Inc. (a) | 24,400 | 143,960 | |
Celgene Corp. (a) | 105,600 | 5,057,184 | |
Cephalon, Inc. (a) | 23,600 | 1,551,464 | |
DOV Pharmaceutical, Inc. (a) | 17,000 | 24,140 | |
DUSA Pharmaceuticals, Inc. (a) | 86,400 | 387,936 | |
Genentech, Inc. (a) | 390,300 | 31,544,046 | |
Gentium Spa sponsored ADR (a) | 2,900 | 39,875 | |
Genzyme Corp. (a) | 54,745 | 3,737,989 | |
Gilead Sciences, Inc. (a) | 183,100 | 11,256,988 | |
Human Genome Sciences, Inc. (a) | 61,200 | 594,252 | |
ICOS Corp. (a) | 28,500 | 650,940 | |
ImClone Systems, Inc. (a) | 34,500 | 1,121,250 | |
MannKind Corp. (a) | 7,000 | 128,030 | |
Martek Biosciences (a)(d) | 14,300 | 399,399 | |
MedImmune, Inc. (a) | 103,230 | 2,619,977 | |
Millennium Pharmaceuticals, Inc. (a) | 139,400 | 1,368,908 | |
Myogen, Inc. (a) | 13,800 | 425,868 | |
Neopharm, Inc. (a) | 2,900 | 13,195 | |
PDL BioPharma, Inc. (a) | 51,500 | 927,515 | |
Solexa, Inc. (a)(d) | 36,515 | 323,523 | |
Tercica, Inc. (a)(d) | 231,800 | 1,170,590 | |
Theravance, Inc. (a) | 6,900 | 163,461 | |
Vertex Pharmaceuticals, Inc. (a) | 41,900 | 1,404,488 | |
105,943,216 | |||
COMMERCIAL SERVICES & SUPPLIES - 0.1% | |||
Human Resource & Employment Services - 0.1% | |||
On Assignment, Inc. (a) | 47,137 | 403,021 | |
DIVERSIFIED CONSUMER SERVICES - 0.1% | |||
Specialized Consumer Services - 0.1% | |||
Service Corp. International (SCI) | 61,700 | 463,367 | |
FOOD & STAPLES RETAILING - 0.1% | |||
Food Distributors - 0.1% | |||
United Natural Foods, Inc. (a) | 22,500 | 678,150 | |
Food Retail - 0.0% | |||
Whole Foods Market, Inc. | 6,600 | 379,566 | |
TOTAL FOOD & STAPLES RETAILING | 1,057,716 | ||
FOOD PRODUCTS - 0.2% | |||
Packaged Foods & Meats - 0.2% | |||
Groupe Danone | 12,100 | 1,599,689 | |
Shares | Value (Note 1) | ||
HEALTH CARE EQUIPMENT & SUPPLIES - 15.9% | |||
Health Care Equipment - 12.4% | |||
Advanced Medical Optics, Inc. (a) | 28,300 | $ 1,393,775 | |
Baxter International, Inc. | 245,930 | 10,329,060 | |
Beckman Coulter, Inc. | 19,000 | 1,087,750 | |
Becton, Dickinson & Co. | 105,200 | 6,934,784 | |
BioLase Technology, Inc. | 37,600 | 308,696 | |
Biomet, Inc. | 38,700 | 1,274,778 | |
Boston Scientific Corp. (a) | 562,700 | 9,571,527 | |
C.R. Bard, Inc. | 71,050 | 5,042,419 | |
Cyberonics, Inc. (a) | 300 | 6,429 | |
Cytyc Corp. (a) | 74,500 | 1,832,700 | |
Dade Behring Holdings, Inc. | 41,760 | 1,700,885 | |
Edwards Lifesciences Corp. (a) | 18,600 | 822,864 | |
HealthTronics, Inc. (a) | 10,195 | 66,981 | |
Hillenbrand Industries, Inc. | 12,400 | 615,784 | |
Hologic, Inc. (a) | 3,700 | 166,167 | |
Hospira, Inc. (a) | 44,382 | 1,939,050 | |
IDEXX Laboratories, Inc. (a) | 13,300 | 1,177,050 | |
Imaging Dynamics Co. Ltd. (a) | 265,100 | 782,462 | |
IntraLase Corp. (a) | 4,951 | 85,850 | |
Intuitive Surgical, Inc. (a) | 13,200 | 1,256,640 | |
Invacare Corp. | 13,700 | 288,111 | |
Kinetic Concepts, Inc. (a) | 31,000 | 1,381,360 | |
Medtronic, Inc. (d) | 389,600 | 19,682,592 | |
Mentor Corp. | 19,600 | 871,416 | |
Natus Medical, Inc. (a) | 45,714 | 559,997 | |
NMT Medical, Inc. (a) | 5,100 | 54,825 | |
Novoste Corp. (a)(e) | 3,125 | 7,969 | |
Optos PLC | 211,000 | 759,741 | |
PhotoMedex, Inc. (a) | 118,426 | 156,322 | |
ResMed, Inc. (a) | 34,600 | 1,605,786 | |
Respironics, Inc. (a) | 34,300 | 1,220,394 | |
Restore Medical, Inc. | 49,900 | 361,775 | |
SonoSite, Inc. (a) | 4,500 | 145,260 | |
St. Jude Medical, Inc. (a) | 125,100 | 4,616,190 | |
Stereotaxis, Inc. (a) | 259,829 | 2,221,538 | |
Steris Corp. | 21,000 | 486,570 | |
Stryker Corp. | 52,500 | 2,389,275 | |
The Spectranetics Corp. (a) | 2,500 | 32,225 | |
Varian Medical Systems, Inc. (a) | 50,600 | 2,293,192 | |
Zimmer Holdings, Inc. (a) | 81,400 | 5,147,736 | |
90,677,925 | |||
Health Care Supplies - 3.5% | |||
Alcon, Inc. | 131,800 | 14,553,356 | |
Arrow International, Inc. | 22,500 | 713,925 | |
Bausch & Lomb, Inc. | 3,800 | 179,740 | |
Cooper Companies, Inc. | 20,043 | 885,901 | |
DENTSPLY International, Inc. | 67,600 | 2,115,880 | |
DJO, Inc. (a) | 74,100 | 2,924,727 | |
Gen-Probe, Inc. (a) | 22,300 | 1,158,485 | |
Immucor, Inc. (a) | 31,050 | 618,206 | |
Inverness Medical Innovations, Inc. (a) | 29,900 | 889,226 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
HEALTH CARE EQUIPMENT & SUPPLIES - CONTINUED | |||
Health Care Supplies - continued | |||
Inverness Medical Innovations, Inc. (a)(f) | 14,543 | $ 432,509 | |
Lifecore Biomedical, Inc. (a) | 42,900 | 633,204 | |
Nutraceutical International Corp. (a) | 47,970 | 677,336 | |
25,782,495 | |||
TOTAL HEALTH CARE EQUIPMENT & SUPPLIES | 116,460,420 | ||
HEALTH CARE PROVIDERS & SERVICES - 25.9% | |||
Health Care Distributors & Services - 3.8% | |||
AmerisourceBergen Corp. | 89,800 | 3,861,400 | |
Andrx Corp. (a) | 30,700 | 732,195 | |
Cardinal Health, Inc. | 177,900 | 11,919,300 | |
Henry Schein, Inc. (a) | 38,000 | 1,801,580 | |
McKesson Corp. | 148,600 | 7,487,954 | |
Patterson Companies, Inc. (a) | 61,155 | 2,034,015 | |
27,836,444 | |||
Health Care Facilities - 5.5% | |||
Acibadem Saglik Hizmetleri AS | 64,830 | 653,668 | |
Apollo Hospitals Enterprise Ltd. | 20,886 | 179,732 | |
Brookdale Senior Living, Inc. | 266,600 | 12,396,900 | |
Bumrungrad Hospital PCL (For. Reg.) | 1,858,800 | 1,742,932 | |
Capital Senior Living Corp. (a) | 215,900 | 2,204,339 | |
Community Health Systems, Inc. (a) | 100,300 | 3,636,878 | |
Emeritus Corp. (a) | 37,400 | 706,486 | |
HCA, Inc. | 132,700 | 6,523,532 | |
Health Management Associates, Inc. Class A | 70,400 | 1,431,232 | |
HealthSouth Corp. | 12,400 | 48,980 | |
LifePoint Hospitals, Inc. (a) | 26,100 | 879,309 | |
Manor Care, Inc. | 8,600 | 430,430 | |
NovaMed Eyecare, Inc. (a) | 4,300 | 31,906 | |
Odyssey Healthcare, Inc. (a) | 66,500 | 1,197,665 | |
Psychiatric Solutions, Inc. (a) | 36,900 | 1,161,981 | |
Sun Healthcare Group, Inc. (a) | 22,600 | 195,942 | |
Tenet Healthcare Corp. (a) | 171,600 | 1,015,872 | |
Triad Hospitals, Inc. (a) | 25,700 | 1,001,529 | |
U.S. Physical Therapy, Inc. (a) | 22,238 | 340,019 | |
United Surgical Partners International, Inc. (a) | 29,588 | 730,824 | |
Universal Health Services, Inc. Class B | 21,600 | 1,209,600 | |
VCA Antech, Inc. (a) | 74,120 | 2,591,976 | |
40,311,732 | |||
Health Care Services - 7.2% | |||
Apria Healthcare Group, Inc. (a) | 5,100 | 89,352 | |
Caremark Rx, Inc. | 187,100 | 9,878,880 | |
Chemed Corp. | 81,500 | 2,997,570 | |
DaVita, Inc. (a) | 88,850 | 4,444,277 | |
Emergency Medical Services Corp. Class A | 52,900 | 630,568 | |
Express Scripts, Inc. (a) | 62,900 | 4,845,187 | |
HAPC, Inc. unit | 215,800 | 1,290,484 | |
Shares | Value (Note 1) | ||
Health Grades, Inc. (a) | 144,800 | $ 615,400 | |
HealthExtras, Inc. (a) | 10,100 | 262,196 | |
Healthways, Inc. (a) | 63,202 | 3,395,211 | |
HMS Holdings Corp. (a) | 5,500 | 61,710 | |
I-trax, Inc. (a) | 24,700 | 82,251 | |
Laboratory Corp. of America Holdings (a) | 56,300 | 3,626,846 | |
Lincare Holdings, Inc. (a) | 40,800 | 1,420,248 | |
Medco Health Solutions, Inc. (a) | 136,000 | 8,068,880 | |
Omnicare, Inc. (d) | 52,500 | 2,376,150 | |
Pediatrix Medical Group, Inc. (a) | 21,000 | 890,400 | |
QMed, Inc. (a) | 8,700 | 26,274 | |
Quest Diagnostics, Inc. | 74,900 | 4,502,988 | |
RehabCare Group, Inc. (a) | 31,300 | 585,936 | |
ResCare, Inc. (a) | 131,336 | 2,498,011 | |
52,588,819 | |||
Managed Health Care - 9.4% | |||
Aetna, Inc. | 244,700 | 7,705,603 | |
AMERIGROUP Corp. (a) | 22,500 | 654,750 | |
CIGNA Corp. | 22,023 | 2,009,599 | |
Coventry Health Care, Inc. (a) | 47,350 | 2,495,345 | |
Health Net, Inc. (a) | 63,800 | 2,677,686 | |
Humana, Inc. (a) | 69,100 | 3,864,763 | |
Magellan Health Services, Inc. (a) | 12,800 | 615,296 | |
Sierra Health Services, Inc. (a) | 42,100 | 1,817,878 | |
UnitedHealth Group, Inc. | 586,009 | 28,028,810 | |
Wellcare Health Plans, Inc. (a) | 3,700 | 181,522 | |
WellPoint, Inc. (a) | 256,200 | 19,086,900 | |
69,138,152 | |||
TOTAL HEALTH CARE PROVIDERS & SERVICES | 189,875,147 | ||
HEALTH CARE TECHNOLOGY - 1.2% | |||
Healthcare Technology - 1.2% | |||
Cerner Corp. (a) | 22,400 | 906,752 | |
Eclipsys Corp. (a) | 101,500 | 1,981,280 | |
Emdeon Corp. (a) | 132,816 | 1,597,776 | |
IMS Health, Inc. | 93,500 | 2,565,640 | |
Systems Xcellence, Inc. (a) | 6,175 | 74,759 | |
WebMD Health Corp. Class A (d) | 42,289 | 1,797,705 | |
8,923,912 | |||
INTERNET & CATALOG RETAIL - 0.4% | |||
Internet Retail - 0.4% | |||
NutriSystem, Inc. (a)(d) | 52,679 | 2,787,773 | |
LIFE SCIENCES TOOLS & SERVICES - 3.3% | |||
Life Science Tools & Services - 3.3% | |||
Affymetrix, Inc. (a) | 44,916 | 968,838 | |
Applera Corp.: | |||
- Applied Biosystems Group | 89,800 | 2,887,070 | |
- Celera Genomics Group (a) | 19,400 | 261,900 | |
Charles River Laboratories International, Inc. (a) | 31,500 | 1,118,250 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
LIFE SCIENCES TOOLS & SERVICES - CONTINUED | |||
Life Science Tools & Services - continued | |||
Covance, Inc. (a) | 30,900 | $ 1,970,184 | |
Exelixis, Inc. (a) | 152,497 | 1,357,223 | |
Fisher Scientific International, Inc. (a) | 51,400 | 3,809,254 | |
Illumina, Inc. (a) | 7,182 | 274,568 | |
Invitrogen Corp. (a) | 26,700 | 1,649,793 | |
MDS, Inc. | 12,500 | 228,769 | |
Millipore Corp. (a) | 25,870 | 1,620,756 | |
Nektar Therapeutics (a)(d) | 39,000 | 635,700 | |
Pharmaceutical Product Development, Inc. | 30,900 | 1,189,032 | |
QIAGEN NV (a) | 10,000 | 151,900 | |
Techne Corp. (a) | 18,600 | 924,234 | |
Thermo Electron Corp. (a) | 69,000 | 2,553,690 | |
Waters Corp. (a) | 74,179 | 3,017,602 | |
24,618,763 | |||
PERSONAL PRODUCTS - 0.6% | |||
Personal Products - 0.6% | |||
Herbalife Ltd. (a) | 105,300 | 3,761,316 | |
NBTY, Inc. (a) | 28,000 | 826,840 | |
4,588,156 | |||
PHARMACEUTICALS - 37.4% | |||
Pharmaceuticals - 37.4% | |||
Abbott Laboratories | 405,320 | 19,362,136 | |
Abraxis BioScience, Inc. (a) | 26,200 | 525,310 | |
Adams Respiratory Therapeutics, Inc. | 3,700 | 165,464 | |
Allergan, Inc. | 178,350 | 19,235,048 | |
Altana AG sponsored ADR (d) | 1,200 | 68,808 | |
AnorMED, Inc. (a) | 23,900 | 153,758 | |
Barr Pharmaceuticals, Inc. (a) | 45,800 | 2,279,008 | |
Biovail Corp. | 37,400 | 826,925 | |
Bristol-Myers Squibb Co. | 298,000 | 7,143,060 | |
Eli Lilly & Co. | 167,900 | 9,531,683 | |
Endo Pharmaceuticals Holdings, Inc. (a) | 58,500 | 1,817,595 | |
Forest Laboratories, Inc. (a) | 139,900 | 6,478,769 | |
Impax Laboratories, Inc. (a) | 8,000 | 38,800 | |
Johnson & Johnson | 909,458 | 56,886,598 | |
King Pharmaceuticals, Inc. (a) | 112,500 | 1,914,750 | |
Kos Pharmaceuticals, Inc. (a) | 13,095 | 541,347 | |
Medicis Pharmaceutical Corp. Class A | 22,100 | 609,076 | |
Merck & Co., Inc. | 988,200 | 39,794,814 | |
MGI Pharma, Inc. (a) | 31,400 | 458,754 | |
Mylan Laboratories, Inc. | 67,100 | 1,473,516 | |
New River Pharmaceuticals, Inc. (a) | 2,200 | 53,768 | |
Novartis AG sponsored ADR | 20,000 | 1,124,400 | |
Perrigo Co. | 7,500 | 118,800 | |
Pfizer, Inc. | 2,215,420 | 57,578,766 | |
Roche Holding AG (participation certificate) | 31,524 | 5,609,845 | |
Schering-Plough Corp. | 360,800 | 7,374,752 | |
Sepracor, Inc. (a) | 46,000 | 2,272,400 | |
Shares | Value (Note 1) | ||
Valeant Pharmaceuticals International | 12,400 | $ 214,272 | |
Watson Pharmaceuticals, Inc. (a) | 18,500 | 414,215 | |
Wyeth | 628,820 | 30,478,905 | |
274,545,342 | |||
TOTAL COMMON STOCKS (Cost $626,521,970) | 731,266,522 | ||
Nonconvertible Preferred Stocks - 0.0% | |||
LIFE SCIENCES TOOLS & SERVICES - 0.0% | |||
Life Science Tools & Services - 0.0% | |||
GeneProt, Inc. Series A (a)(f) | 43,000 | 0 | |
Money Market Funds - 2.0% | |||
Fidelity Cash Central Fund, 5.3% (b) | 399,892 | 399,892 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 14,527,309 | 14,527,309 | |
TOTAL MONEY MARKET FUNDS (Cost $14,927,201) | 14,927,201 | ||
TOTAL INVESTMENT PORTFOLIO - 101.6% (Cost $641,682,011) | 746,193,723 | ||
NET OTHER ASSETS - (1.6)% | (12,032,699) | ||
NET ASSETS - 100% | $ 734,161,024 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
(e) 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 $7,969 or 0.0% of net assets. |
(f) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $432,509 or 0.1% of net assets. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
GeneProt, Inc. Series A | 7/7/00 | $ 232,840 |
Inverness Medical Innovations, Inc. | 2/8/06 | $ 354,995 |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 64,261 |
Fidelity Securities Lending Cash Central Fund | 146,748 |
Total | $ 211,009 |
See accompanying notes which are an integral part of the financial statements.
Health Care
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $14,368,081) - See accompanying schedule: Unaffiliated issuers (cost $626,754,810) | $ 731,266,522 | |
Affiliated Central Funds (cost $14,927,201) | 14,927,201 | |
Total Investments (cost $641,682,011) | $ 746,193,723 | |
Cash | 356,306 | |
Receivable for investments sold | 4,708,509 | |
Receivable for fund shares sold | 1,587,840 | |
Dividends receivable | 229,208 | |
Interest receivable | 3,481 | |
Prepaid expenses | 1,193 | |
Other receivables | 26,532 | |
Total assets | 753,106,792 | |
Liabilities | ||
Payable for investments purchased | $ 616,152 | |
Payable for fund shares redeemed | 2,807,844 | |
Accrued management fee | 339,428 | |
Distribution fees payable | 373,696 | |
Other affiliated payables | 241,426 | |
Other payables and accrued expenses | 39,913 | |
Collateral on securities loaned, at value | 14,527,309 | |
Total liabilities | 18,945,768 | |
Net Assets | $ 734,161,024 | |
Net Assets consist of: | ||
Paid in capital | $ 568,142,874 | |
Accumulated net investment loss | (327) | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 61,506,756 | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | 104,511,721 | |
Net Assets | $ 734,161,024 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price | $ 23.77 | |
Maximum offering price per share (100/94.25 of $23.77) | $ 25.22 | |
Class T: | $ 23.26 | |
Maximum offering price per share (100/96.50 of $23.26) | $ 24.10 | |
Class B: | $ 22.17 | |
Class C: | $ 22.24 | |
Institutional Class: | $ 24.43 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Health Care Fund
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 6,341,103 | |
Interest | 1,386 | |
Income from affiliated Central Funds | 211,009 | |
Total income | 6,553,498 | |
Expenses | ||
Management fee | $ 4,446,781 | |
Transfer agent fees | 2,815,398 | |
Distribution fees | 5,182,001 | |
Accounting and security lending fees | 290,435 | |
Independent trustees' compensation | 3,204 | |
Custodian fees and expenses | 43,944 | |
Registration fees | 68,007 | |
Audit | 46,606 | |
Legal | 9,368 | |
Miscellaneous | 9,193 | |
Total expenses before reductions | 12,914,937 | |
Expense reductions | (236,020) | 12,678,917 |
Net investment income (loss) | (6,125,419) | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 99,179,050 | |
Foreign currency transactions | 7,452 | |
Total net realized gain (loss) | 99,186,502 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (66,786,614) | |
Assets and liabilities in foreign currencies | (495) | |
Total change in net unrealized appreciation (depreciation) | (66,787,109) | |
Net gain (loss) | 32,399,393 | |
Net increase (decrease) in net assets resulting from operations | $ 26,273,974 | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ (6,125,419) | $ (5,116,814) |
Net realized gain (loss) | 99,186,502 | 26,792,251 |
Change in net unrealized appreciation (depreciation) | (66,787,109) | 122,599,712 |
Net increase (decrease) in net assets resulting from operations | 26,273,974 | 144,275,149 |
Distributions to shareholders from net realized gain | (1,408,688) | - |
Share transactions - net increase (decrease) | (90,540,183) | (127,767,624) |
Redemption fees | 29,238 | 24,114 |
Total increase (decrease) in net assets | (65,645,659) | 16,531,639 |
Net Assets | ||
Beginning of period | 799,806,683 | 783,275,044 |
End of period (including accumulated net investment loss of $327 and accumulated net investment loss of $458, respectively) | $ 734,161,024 | $ 799,806,683 |
See accompanying notes which are an integral part of the financial statements.
Health Care
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 22.94 | $ 18.91 | $ 18.29 | $ 16.51 | $ 20.41 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.09) | (.05) | (.05) | - E | (.04) |
Net realized and unrealized gain (loss) | .96 | 4.08 | .67 | 1.78 | (3.86) |
Total from investment operations | .87 | 4.03 | .62 | 1.78 | (3.90) |
Distributions from net realized gain | (.04) | - | - | - | - |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 23.77 | $ 22.94 | $ 18.91 | $ 18.29 | $ 16.51 |
Total Return A, B | 3.79% | 21.31% | 3.39% | 10.78% | (19.11)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.25% | 1.28% | 1.32% | 1.34% | 1.29% |
Expenses net of fee waivers, if any | 1.25% | 1.28% | 1.32% | 1.34% | 1.29% |
Expenses net of all reductions | 1.21% | 1.26% | 1.29% | 1.27% | 1.24% |
Net investment income (loss) | (.38)% | (.22)% | (.26)% | (.01)% | (.23)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 199,221 | $ 139,158 | $ 104,258 | $ 108,692 | $ 103,292 |
Portfolio turnover rate | 99% | 71% | 60% | 120% | 167% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 22.50 | $ 18.60 | $ 18.03 | $ 16.31 | $ 20.22 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.15) | (.09) | (.09) | (.04) | (.09) |
Net realized and unrealized gain (loss) | .95 | 3.99 | .66 | 1.76 | (3.82) |
Total from investment operations | .80 | 3.90 | .57 | 1.72 | (3.91) |
Distributions from net realized gain | (.04) | - | - | - | - |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 23.26 | $ 22.50 | $ 18.60 | $ 18.03 | $ 16.31 |
Total Return A, B | 3.55% | 20.97% | 3.16% | 10.55% | (19.34)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.50% | 1.53% | 1.56% | 1.59% | 1.52% |
Expenses net of fee waivers, if any | 1.50% | 1.53% | 1.56% | 1.59% | 1.52% |
Expenses net of all reductions | 1.47% | 1.51% | 1.53% | 1.51% | 1.47% |
Net investment income (loss) | (.63)% | (.47)% | (.51)% | (.26)% | (.46)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 218,280 | $ 243,353 | $ 243,176 | $ 264,115 | $ 274,243 |
Portfolio turnover rate | 99% | 71% | 60% | 120% | 167% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 21.55 | $ 17.91 | $ 17.45 | $ 15.86 | $ 19.76 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.25) | (.19) | (.18) | (.12) | (.18) |
Net realized and unrealized gain (loss) | .91 | 3.83 | .64 | 1.71 | (3.72) |
Total from investment operations | .66 | 3.64 | .46 | 1.59 | (3.90) |
Distributions from net realized gain | (.04) | - | - | - | - |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 22.17 | $ 21.55 | $ 17.91 | $ 17.45 | $ 15.86 |
Total Return A, B | 3.06% | 20.32% | 2.64% | 10.03% | (19.74)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 2.01% | 2.04% | 2.06% | 2.05% | 2.02% |
Expenses net of fee waivers, if any | 2.01% | 2.04% | 2.06% | 2.05% | 2.02% |
Expenses net of all reductions | 1.98% | 2.01% | 2.03% | 1.98% | 1.98% |
Net investment income (loss) | (1.14)% | (.98)% | (1.01)% | (.73)% | (.97)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 180,364 | $ 266,319 | $ 285,299 | $ 317,906 | $ 334,056 |
Portfolio turnover rate | 99% | 71% | 60% | 120% | 167% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 21.61 | $ 17.94 | $ 17.47 | $ 15.87 | $ 19.76 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.24) | (.17) | (.17) | (.11) | (.17) |
Net realized and unrealized gain (loss) | .91 | 3.84 | .64 | 1.71 | (3.72) |
Total from investment operations | .67 | 3.67 | .47 | 1.60 | (3.89) |
Distributions from net realized gain | (.04) | - | - | - | - |
Redemption fees added to paid in capital C | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 22.24 | $ 21.61 | $ 17.94 | $ 17.47 | $ 15.87 |
Total Return A, B | 3.10% | 20.46% | 2.69% | 10.08% | (19.69)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.94% | 1.97% | 2.00% | 2.00% | 1.97% |
Expenses net of fee waivers, if any | 1.94% | 1.97% | 2.00% | 2.00% | 1.97% |
Expenses net of all reductions | 1.91% | 1.94% | 1.97% | 1.92% | 1.93% |
Net investment income (loss) | (1.07)% | (.91)% | (.95)% | (.67)% | (.92)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 115,644 | $ 131,277 | $ 130,184 | $ 150,576 | $ 160,877 |
Portfolio turnover rate | 99% | 71% | 60% | 120% | 167% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Health Care
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 23.48 | $ 19.28 | $ 18.58 | $ 16.70 | $ 20.58 |
Income from Investment Operations | |||||
Net investment income (loss) B | - D | .04 | .03 | .06 | .02 |
Net realized and unrealized gain (loss) | .99 | 4.16 | .67 | 1.82 | (3.90) |
Total from investment operations | .99 | 4.20 | .70 | 1.88 | (3.88) |
Distributions from net realized gain | (.04) | - | - | - | - |
Redemption fees added to paid in capital B | - D | - D | - D | - D | - D |
Net asset value, end of period | $ 24.43 | $ 23.48 | $ 19.28 | $ 18.58 | $ 16.70 |
Total Return A | 4.21% | 21.78% | 3.77% | 11.26% | (18.85)% |
Ratios to Average Net Assets C | |||||
Expenses before reductions | .86% | .88% | .91% | .96% | .95% |
Expenses net of fee waivers, if any | .86% | .88% | .91% | .96% | .95% |
Expenses net of all reductions | .83% | .85% | .88% | .88% | .90% |
Net investment income (loss) | .01% | .18% | .14% | .37% | .11% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 20,652 | $ 19,698 | $ 20,358 | $ 23,364 | $ 35,923 |
Portfolio turnover rate | 99% | 71% | 60% | 120% | 167% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. D Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Health Care Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders - continued
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, deferred trustees compensation, net operating losses, capital loss carryforwards, losses deferred due to wash sales and excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 128,013,083 | |
Unrealized depreciation | (24,775,757) | |
Net unrealized appreciation (depreciation) | 103,237,326 | |
Undistributed ordinary income | 9,125,963 | |
Undistributed long-term capital gain | 48,458,816 | |
Cost for federal income tax purposes | $ 642,956,397 |
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Long-term Capital Gains | $ 1,408,688 | $ - |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
Restricted Securities. The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $774,813,568 and $871,645,598, respectively.
Health Care
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 423,131 | $ 4,527 |
Class T | .25% | .25% | 1,182,110 | 7,214 |
Class B | .75% | .25% | 2,306,920 | 1,730,783 |
Class C | .75% | .25% | 1,269,840 | 103,729 |
$ 5,182,001 | $ 1,846,253 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 90,379 |
Class T | 33,806 |
Class B * | 378,521 |
Class C * | 7,638 |
$ 510,344 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 624,294 | .37 |
Class T | 871,133 | .37 |
Class B | 882,721 | .38 |
Class C | 390,359 | .31 |
Institutional Class | 46,891 | .23 |
$ 2,815,398 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $5,654 for the period.
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $2,276 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $146,748.
7. Expense Reductions.
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $227,340 for the period. In addition, through arrangements with each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, credits reduced each class' transfer agent expense as noted in the table below.
Transfer Agent | ||
Class A | $ 8,680 |
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
Health Care
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2006 | 2005 |
From net realized gain | ||
Class A | $ 268,383 | $ - |
Class T | 418,518 | - |
Class B | 451,789 | - |
Class C | 237,307 | - |
Institutional Class | 32,691 | - |
Total | $ 1,408,688 | $ - |
10. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 4,246,771 | 2,249,275 | $ 100,545,647 | $ 46,669,256 |
Reinvestment of distributions | 9,593 | - | 231,281 | - |
Shares redeemed | (1,943,098) | (1,695,541) | (45,790,984) | (34,388,787) |
Net increase (decrease) | 2,313,266 | 553,734 | $ 54,985,944 | $ 12,280,469 |
Class T | ||||
Shares sold | 1,483,213 | 1,442,909 | $ 34,397,018 | $ 29,136,425 |
Reinvestment of distributions | 16,686 | - | 394,126 | - |
Shares redeemed | (2,931,043) | (3,703,075) | (67,817,881) | (73,845,453) |
Net increase (decrease) | (1,431,144) | (2,260,166) | $ (33,026,737) | $ (44,709,028) |
Class B | ||||
Shares sold | 602,620 | 688,188 | $ 13,347,616 | $ 13,318,322 |
Reinvestment of distributions | 17,559 | - | 396,669 | - |
Shares redeemed | (4,838,970) | (4,265,630) | (107,126,893) | (81,968,667) |
Net increase (decrease) | (4,218,791) | (3,577,442) | $ (93,382,608) | $ (68,650,345) |
Class C | ||||
Shares sold | 622,433 | 718,291 | $ 13,817,015 | $ 14,077,610 |
Reinvestment of distributions | 8,336 | - | 188,806 | - |
Shares redeemed | (1,506,077) | (1,900,462) | (33,350,524) | (36,319,943) |
Net increase (decrease) | (875,308) | (1,182,171) | $ (19,344,703) | $ (22,242,333) |
Institutional Class | ||||
Shares sold | 197,168 | 80,685 | $ 4,832,048 | $ 1,707,265 |
Reinvestment of distributions | 990 | - | 24,473 | - |
Shares redeemed | (191,717) | (297,641) | (4,628,600) | (6,153,652) |
Net increase (decrease) | 6,441 | (216,956) | $ 227,921 | $ (4,446,387) |
Annual Report
Advisor Natural Resources Fund - Institutional Class
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Past 10 | |
Institutional Class | 33.35% | 18.34% | 14.02% |
$10,000 Over Past 10 Years
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Natural Resources Fund - Institutional Class on July 31, 1996. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Advisor Natural Resources Fund
Management's Discussion of Fund Performance
Comments from Matthew Friedman, Portfolio Manager of Fidelity® Advisor Natural Resources Fund through June 30, 2006
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
During the past year, the fund's Institutional Class shares returned 33.35%, outperforming both the S&P 500 and the Goldman Sachs® Natural Resources Index, which gained 27.76%. Favorable security and market selection bolstered returns across a wide range of industries. In particular, investments in the metals industries helped, including Titanium Metals and steel pipe manufacturer Oregon Steel Mills, both of which benefited from high demand for their products. Apex Silver Mines - which was sold from the fund - and gold miner Newmont Mining moved up on higher prices for silver and gold, while mining equipment manufacturer Bucyrus International gained as well. In energy, underweighting integrated oil companies - including BP, Chevron and Exxon Mobil - that underperformed other energy market components further boosted the fund's relative return. Oil and gas refining stocks such as Premcor - which was acquired by Valero - and Frontier Oil also contributed, as did several oil and gas exploration and production stocks. Additionally, the fund's investments in foreign stocks got a boost from favorable currency movements. On the flip side, the fund was underweighted in some index-component metals companies that performed well, including diversified miner Phelps Dodge and Canadian nickel miners Falconbridge and Inco, all companies that benefited from merger discussions. Aluminum giant Alcoa detracted in response to higher energy costs that it couldn't pass on to its customers. In energy, underweighting Canadian oil sands company Suncor Energy and Marathon Oil - which is no longer held - hurt, while natural gas producer Plains Exploration detracted in response to weak gas prices. Elsewhere, Chicago Bridge & Iron disappointed due to accounting-related concerns.
Note to shareholders: John Dowd was named co-manager of the fund on May 1, 2006, and sole manager effective July 1, 2006.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Advisor Natural Resources Fund
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 994.60 | $ 5.93 |
HypotheticalA | $ 1,000.00 | $ 1,018.84 | $ 6.01 |
Class T | |||
Actual | $ 1,000.00 | $ 993.30 | $ 6.92 |
HypotheticalA | $ 1,000.00 | $ 1,017.85 | $ 7.00 |
Class B | |||
Actual | $ 1,000.00 | $ 990.60 | $ 9.62 |
HypotheticalA | $ 1,000.00 | $ 1,015.12 | $ 9.74 |
Class C | |||
Actual | $ 1,000.00 | $ 990.80 | $ 9.43 |
HypotheticalA | $ 1,000.00 | $ 1,015.32 | $ 9.54 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 996.00 | $ 4.26 |
HypotheticalA | $ 1,000.00 | $ 1,020.53 | $ 4.31 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.20% |
Class T | 1.40% |
Class B | 1.95% |
Class C | 1.91% |
Institutional Class | .86% |
Annual Report
Advisor Natural Resources Fund
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
Schlumberger Ltd. (NY Shares) | 4.7 | 3.5 |
ConocoPhillips | 4.0 | 2.4 |
Valero Energy Corp. | 4.0 | 2.5 |
GlobalSantaFe Corp. | 3.6 | 4.0 |
Smith International, Inc. | 3.5 | 3.2 |
National Oilwell Varco, Inc. | 3.5 | 4.6 |
Halliburton Co. | 3.5 | 4.7 |
Alcoa, Inc. | 3.3 | 1.6 |
Chesapeake Energy Corp. | 2.9 | 1.6 |
Exxon Mobil Corp. | 2.8 | 0.5 |
35.8 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Oil, Gas & Consumable Fuels | 42.6% | |
| Energy Equipment & Services | 29.6% | |
| Metals & Mining | 15.0% | |
| Machinery | 2.1% | |
| Chemicals | 1.9% | |
| All Others * | 8.8% | |
As of January 31, 2006 | |||
| Oil, Gas & Consumable Fuels | 41.1% | |
| Energy Equipment & Services | 30.8% | |
| Metals & Mining | 14.2% | |
| Machinery | 3.5% | |
| Construction & Engineering | 2.3% | |
| All Others * | 8.1% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Advisor Natural Resources Fund
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 99.3% | |||
Shares | Value (Note 1) | ||
AIRLINES - 0.2% | |||
Airlines - 0.2% | |||
AirTran Holdings, Inc. (a) | 146,820 | $ 1,841,123 | |
CHEMICALS - 1.9% | |||
Commodity Chemicals - 0.3% | |||
Celanese Corp. Class A | 24,500 | 470,645 | |
Formosa Chemicals & Fibre Corp. | 1,115,490 | 1,566,987 | |
Georgia Gulf Corp. | 14,200 | 361,532 | |
Tokai Carbon Co. Ltd. (d) | 16,000 | 89,176 | |
2,488,340 | |||
Diversified Chemicals - 0.3% | |||
Ashland, Inc. | 36,700 | 2,440,917 | |
Fertilizers & Agricultural Chemicals - 1.2% | |||
Agrium, Inc. | 48,300 | 1,169,939 | |
CF Industries Holdings, Inc. | 118,300 | 1,917,643 | |
Mosaic Co. | 329,700 | 5,172,993 | |
Terra Nitrogen Co. LP | 64,708 | 1,428,753 | |
9,689,328 | |||
Specialty Chemicals - 0.1% | |||
Tokuyama Corp. | 93,000 | 1,235,403 | |
TOTAL CHEMICALS | 15,853,988 | ||
COMMERCIAL SERVICES & SUPPLIES - 0.0% | |||
Environmental & Facility Services - 0.0% | |||
Clean Harbors, Inc. | 5,000 | 184,450 | |
Human Resource & Employment Services - 0.0% | |||
Brunel International NV | 621 | 19,276 | |
TOTAL COMMERCIAL SERVICES & SUPPLIES | 203,726 | ||
CONSTRUCTION & ENGINEERING - 1.3% | |||
Construction & Engineering - 1.3% | |||
Chicago Bridge & Iron Co. NV (NY Shares) | 262,900 | 6,377,954 | |
Fluor Corp. | 37,900 | 3,328,757 | |
Infrasource Services, Inc. (a) | 45,900 | 852,822 | |
10,559,533 | |||
CONTAINERS & PACKAGING - 1.1% | |||
Metal & Glass Containers - 0.6% | |||
Owens-Illinois, Inc. | 320,500 | 4,849,165 | |
Paper Packaging - 0.5% | |||
Smurfit-Stone Container Corp. | 201,100 | 2,035,132 | |
Temple-Inland, Inc. | 49,600 | 2,109,984 | |
4,145,116 | |||
TOTAL CONTAINERS & PACKAGING | 8,994,281 | ||
Shares | Value (Note 1) | ||
ELECTRICAL EQUIPMENT - 1.1% | |||
Electrical Components & Equipment - 0.3% | |||
Q-Cells AG (d) | 18,800 | $ 1,346,235 | |
Suntech Power Holdings Co. Ltd. sponsored ADR | 41,700 | 1,081,281 | |
2,427,516 | |||
Heavy Electrical Equipment - 0.8% | |||
Areva (investment certificates)(non-vtg.) | 100 | 57,660 | |
Vestas Wind Systems AS (a) | 256,400 | 6,913,003 | |
6,970,663 | |||
TOTAL ELECTRICAL EQUIPMENT | 9,398,179 | ||
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.2% | |||
Electronic Equipment & Instruments - 0.2% | |||
Itron, Inc. (a) | 28,000 | 1,303,120 | |
ENERGY EQUIPMENT & SERVICES - 29.6% | |||
Oil & Gas Drilling - 10.1% | |||
Diamond Offshore Drilling, Inc. | 109,800 | 8,666,514 | |
ENSCO International, Inc. | 33,200 | 1,534,504 | |
GlobalSantaFe Corp. | 552,200 | 30,332,346 | |
Helmerich & Payne, Inc. | 400 | 11,072 | |
Nabors Industries Ltd. (a) | 2,200 | 77,704 | |
Noble Corp. | 300,500 | 21,560,875 | |
Patterson-UTI Energy, Inc. | 2,900 | 82,128 | |
Pride International, Inc. (a) | 495,500 | 14,800,585 | |
Rowan Companies, Inc. | 900 | 30,483 | |
TODCO Class A | 1,200 | 45,732 | |
Transocean, Inc. (a) | 99,200 | 7,661,216 | |
84,803,159 | |||
Oil & Gas Equipment & Services - 19.5% | |||
Baker Hughes, Inc. | 175,050 | 13,995,248 | |
BJ Services Co. | 99,700 | 3,616,119 | |
Cameron International Corp. (a) | 2,500 | 126,025 | |
FMC Technologies, Inc. (a) | 2,300 | 144,946 | |
Global Industries Ltd. (a) | 5,000 | 83,400 | |
Grant Prideco, Inc. (a) | 1,900 | 86,469 | |
Halliburton Co. | 871,000 | 29,056,560 | |
Hydril Co. (a) | 45,000 | 3,117,150 | |
Key Energy Services, Inc. (a) | 151,800 | 2,239,050 | |
Maverick Tube Corp. (a) | 2,500 | 159,475 | |
National Oilwell Varco, Inc. (a) | 439,732 | 29,479,633 | |
Oil States International, Inc. (a) | 4,200 | 135,072 | |
RPC, Inc. | 2,900 | 66,700 | |
Saipem Spa | 3,800 | 87,594 | |
Schlumberger Ltd. (NY Shares) | 590,600 | 39,481,608 | |
Smith International, Inc. | 668,200 | 29,781,674 | |
Veritas DGC, Inc. (a) | 35,000 | 2,004,450 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
ENERGY EQUIPMENT & SERVICES - CONTINUED | |||
Oil & Gas Equipment & Services - continued | |||
W-H Energy Services, Inc. (a) | 41,500 | $ 2,283,330 | |
Weatherford International Ltd. (a) | 188,100 | 8,810,604 | |
164,755,107 | |||
TOTAL ENERGY EQUIPMENT & SERVICES | 249,558,266 | ||
FOOD PRODUCTS - 0.5% | |||
Agricultural Products - 0.5% | |||
Archer-Daniels-Midland Co. | 2,300 | 101,200 | |
Corn Products International, Inc. | 117,800 | 3,918,028 | |
Global Bio-Chem Technology Group Co. Ltd. | 102,000 | 34,262 | |
4,053,490 | |||
GAS UTILITIES - 0.1% | |||
Gas Utilities - 0.1% | |||
Questar Corp. | 11,700 | 1,036,620 | |
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 1.1% | |||
Independent Power Producers & Energy Traders - 1.1% | |||
Mirant Corp. (a) | 210,900 | 5,603,613 | |
NRG Energy, Inc. | 11,400 | 561,450 | |
TXU Corp. | 47,300 | 3,038,079 | |
9,203,142 | |||
INDUSTRIAL CONGLOMERATES - 0.4% | |||
Industrial Conglomerates - 0.4% | |||
McDermott International, Inc. (a) | 73,350 | 3,340,359 | |
Walter Industries, Inc. | 1,400 | 62,664 | |
3,403,023 | |||
INSURANCE - 0.0% | |||
Property & Casualty Insurance - 0.0% | |||
Navigators Group, Inc. (a) | 7,800 | 331,578 | |
INVESTMENT COMPANIES - 0.0% | |||
Investment Companies - 0.0% | |||
Canfor Pulp Income Fund (a) | 262 | 2,683 | |
MACHINERY - 2.1% | |||
Construction & Farm Machinery & Heavy Trucks - 2.1% | |||
Bucyrus International, Inc. Class A | 233,400 | 11,368,914 | |
Joy Global, Inc. | 154,550 | 5,798,716 | |
Trinity Industries, Inc. | 19,050 | 636,651 | |
17,804,281 | |||
MARINE - 0.1% | |||
Marine - 0.1% | |||
American Commercial Lines, Inc. | 14,400 | 791,280 | |
Stolt-Nielsen SA (d) | 2,200 | 49,686 | |
840,966 | |||
Shares | Value (Note 1) | ||
METALS & MINING - 15.0% | |||
Aluminum - 3.8% | |||
Alcan, Inc. | 1,300 | $ 59,290 | |
Alcoa, Inc. | 914,800 | 27,398,260 | |
Century Aluminum Co. (a) | 2,500 | 77,175 | |
Novelis, Inc. | 224,400 | 4,422,163 | |
31,956,888 | |||
Diversified Metals & Mining - 4.6% | |||
Falconbridge Ltd. | 217,100 | 11,946,639 | |
Freeport-McMoRan Copper & Gold, Inc. Class B | 1,997 | 108,956 | |
Inco Ltd. | 31,100 | 2,403,407 | |
Phelps Dodge Corp. | 1,000 | 87,340 | |
RTI International Metals, Inc. (a) | 98,562 | 4,541,737 | |
Teck Cominco Ltd. Class B (sub. vtg.) | 79,700 | 5,275,300 | |
Titanium Metals Corp. | 459,855 | 13,262,218 | |
VSMPO-AVISMA Corp. warrants (UBS Warrant Programme) 9/28/06 (a) | 6,329 | 1,379,722 | |
39,005,319 | |||
Gold - 3.4% | |||
Bema Gold Corp. (a) | 168,700 | 961,572 | |
Eldorado Gold Corp. (a) | 436,400 | 2,059,364 | |
Meridian Gold, Inc. (a) | 296,600 | 7,996,877 | |
Newmont Mining Corp. | 340,400 | 17,438,692 | |
Sasamat Capital Corp. (a) | 15,999 | 41,597 | |
28,498,102 | |||
Precious Metals & Minerals - 0.2% | |||
Aquarius Platinum Ltd. (United Kingdom) | 60,400 | 1,009,266 | |
Shore Gold, Inc. (a) | 178,100 | 761,757 | |
1,771,023 | |||
Steel - 3.0% | |||
AK Steel Holding Corp. (a) | 58,300 | 753,236 | |
Allegheny Technologies, Inc. | 148,400 | 9,481,276 | |
Commercial Metals Co. | 30,200 | 685,238 | |
Companhia Vale do Rio Doce sponsored ADR | 4,800 | 111,360 | |
Hitachi Metals Ltd. | 7,000 | 65,268 | |
Mittal Steel Co. NV Class A (NY Shares) | 22,900 | 783,409 | |
Oregon Steel Mills, Inc. (a) | 253,300 | 11,712,592 | |
United States Steel Corp. | 26,500 | 1,671,355 | |
25,263,734 | |||
TOTAL METALS & MINING | 126,495,066 | ||
OIL, GAS & CONSUMABLE FUELS - 42.6% | |||
Coal & Consumable Fuels - 4.3% | |||
Arch Coal, Inc. | 106,800 | 4,051,992 | |
Cameco Corp. | 217,700 | 8,674,525 | |
CONSOL Energy, Inc. | 193,800 | 7,976,808 | |
Foundation Coal Holdings, Inc. | 127,100 | 4,847,594 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
OIL, GAS & CONSUMABLE FUELS - CONTINUED | |||
Coal & Consumable Fuels - continued | |||
Peabody Energy Corp. | 210,300 | $ 10,493,970 | |
USEC, Inc. | 2,300 | 24,219 | |
36,069,108 | |||
Integrated Oil & Gas - 13.1% | |||
BP PLC sponsored ADR | 2,148 | 155,773 | |
Chevron Corp. | 310,236 | 20,407,324 | |
ConocoPhillips | 486,238 | 33,375,376 | |
ENI Spa sponsored ADR | 110,250 | 6,767,145 | |
Exxon Mobil Corp. | 341,460 | 23,130,500 | |
Hess Corp. | 1,800 | 95,220 | |
Husky Energy, Inc. | 35,400 | 2,404,422 | |
MOL Magyar Olay-es Gazipari RT Series A (For. Reg.) | 500 | 55,438 | |
OAO Gazprom sponsored ADR | 129,210 | 5,395,164 | |
Occidental Petroleum Corp. | 64,900 | 6,992,975 | |
OMV AG | 51,100 | 3,134,390 | |
Suncor Energy, Inc. | 102,400 | 8,257,335 | |
110,171,062 | |||
Oil & Gas Exploration & Production - 18.3% | |||
Anadarko Petroleum Corp. | 1,600 | 73,184 | |
Apache Corp. | 600 | 42,282 | |
Cabot Oil & Gas Corp. | 122,900 | 6,482,975 | |
Canadian Natural Resources Ltd. | 223,200 | 11,854,295 | |
Chesapeake Energy Corp. | 746,600 | 24,563,140 | |
Comstock Resources, Inc. (a) | 1,100 | 32,362 | |
Denbury Resources, Inc. (a) | 2,100 | 72,807 | |
Devon Energy Corp. | 700 | 45,248 | |
EnCana Corp. | 96,464 | 5,203,396 | |
Energy Partners Ltd. (a) | 54,100 | 982,997 | |
EOG Resources, Inc. | 151,200 | 11,211,480 | |
EXCO Resources, Inc. | 3,000 | 38,760 | |
Goodrich Petroleum Corp. | 3,400 | 115,430 | |
Houston Exploration Co. (a) | 18,900 | 1,206,954 | |
Hugoton Royalty Trust | 14,085 | 438,044 | |
Kerr-McGee Corp. | 207,300 | 14,552,460 | |
Mariner Energy, Inc. (a) | 34,210 | 616,122 | |
Newfield Exploration Co. (a) | 1,600 | 74,208 | |
Nexen, Inc. | 85,900 | 5,025,256 | |
Penn West Energy Trust (d) | 50,700 | 2,036,334 | |
Plains Exploration & Production Co. (a) | 96,900 | 4,259,724 | |
Pogo Producing Co. | 1,600 | 70,832 | |
Quicksilver Resources, Inc. (a) | 45,050 | 1,592,968 | |
Range Resources Corp. | 633,527 | 17,808,444 | |
Southwestern Energy Co. (a) | 1,800 | 61,920 | |
Shares | Value (Note 1) | ||
Talisman Energy, Inc. | 682,900 | $ 11,604,955 | |
Ultra Petroleum Corp. (a) | 299,800 | 17,556,288 | |
XTO Energy, Inc. | 351,300 | 16,507,587 | |
154,130,452 | |||
Oil & Gas Refining & Marketing - 4.0% | |||
ERG Spa | 3,100 | 75,276 | |
Frontier Oil Corp. | 4,200 | 148,050 | |
Neste Oil Oyj | 2,000 | 68,977 | |
Valero Energy Corp. | 493,248 | 33,259,713 | |
Western Refining, Inc. | 4,700 | 108,053 | |
33,660,069 | |||
Oil & Gas Storage & Transport - 2.9% | |||
El Paso Corp. | 263,200 | 4,211,200 | |
Kinder Morgan, Inc. | 9,500 | 969,000 | |
OMI Corp. | 276,000 | 6,088,560 | |
Overseas Shipholding Group, Inc. | 55,500 | 3,573,645 | |
Plains All American Pipeline LP | 26,300 | 1,213,745 | |
TransCanada Corp. | 74,900 | 2,300,084 | |
Western Gas Resources, Inc. | 46,400 | 2,813,696 | |
Williams Companies, Inc. | 156,700 | 3,799,975 | |
24,969,905 | |||
TOTAL OIL, GAS & CONSUMABLE FUELS | 359,000,596 | ||
PAPER & FOREST PRODUCTS - 1.5% | |||
Forest Products - 1.2% | |||
Canfor Corp. New (a) | 2,629 | 25,881 | |
Sino-Forest Corp. (a) | 691,700 | 3,429,160 | |
Weyerhaeuser Co. | 115,800 | 6,792,828 | |
10,247,869 | |||
Paper Products - 0.3% | |||
Aracruz Celulose SA (PN-B) sponsored ADR (non-vtg.) | 40,900 | 2,044,182 | |
TOTAL PAPER & FOREST PRODUCTS | 12,292,051 | ||
REAL ESTATE INVESTMENT TRUSTS - 0.1% | |||
Specialized REITs - 0.1% | |||
Plum Creek Timber Co., Inc. | 32,700 | 1,113,762 | |
ROAD & RAIL - 0.4% | |||
Railroads - 0.4% | |||
Burlington Northern Santa Fe Corp. | 47,400 | 3,266,334 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.0% | |||
Semiconductors - 0.0% | |||
Renewable Energy Corp. AS | 1,700 | 22,857 | |
TOTAL COMMON STOCKS (Cost $642,782,710) | 836,578,665 | ||
Money Market Funds - 1.2% | |||
Shares | Value (Note 1) | ||
Fidelity Cash Central Fund, 5.3% (b) | 6,802,543 | $ 6,802,543 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 3,352,570 | 3,352,570 | |
TOTAL MONEY MARKET FUNDS (Cost $10,155,113) | 10,155,113 | ||
TOTAL INVESTMENT PORTFOLIO - 100.5% (Cost $652,937,823) | 846,733,778 | ||
NET OTHER ASSETS - (0.5)% | (4,120,528) | ||
NET ASSETS - 100% | $ 842,613,250 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 360,064 |
Fidelity Securities Lending Cash Central Fund | 188,393 |
Total | $ 548,457 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 69.6% |
Canada | 13.7% |
Cayman Islands | 6.3% |
Netherlands Antilles | 4.7% |
Others (individually less than 1%) | 5.7% |
100.0% |
See accompanying notes which are an integral part of the financial statements.
Natural Resources
Advisor Natural Resources Fund
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $2,685,893) - See accompanying schedule: Unaffiliated issuers (cost $642,782,710) | $ 836,578,665 | |
Affiliated Central Funds (cost $10,155,113) | 10,155,113 | |
Total Investments (cost $652,937,823) | $ 846,733,778 | |
Foreign currency held at value (cost $5) | 5 | |
Receivable for investments sold | 5,144,218 | |
Receivable for fund shares sold | 2,541,438 | |
Dividends receivable | 507,898 | |
Interest receivable | 26,643 | |
Prepaid expenses | 821 | |
Other receivables | 57,286 | |
Total assets | 855,012,087 | |
Liabilities | ||
Payable for investments purchased | $ 6,237,239 | |
Payable for fund shares redeemed | 1,747,758 | |
Accrued management fee | 387,516 | |
Distribution fees payable | 397,832 | |
Other affiliated payables | 217,613 | |
Other payables and accrued expenses | 58,309 | |
Collateral on securities loaned, at value | 3,352,570 | |
Total liabilities | 12,398,837 | |
Net Assets | $ 842,613,250 | |
Net Assets consist of: | ||
Paid in capital | $ 544,858,939 | |
Undistributed net investment income | 6,675 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 103,950,573 | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | 193,797,063 | |
Net Assets | $ 842,613,250 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price Class A: | $ 46.39 | |
Maximum offering price per share (100/94.25 of $46.39) | $ 49.22 | |
Class T: | $ 47.18 | |
Maximum offering price per share (100/96.50 of $47.18) | $ 48.89 | |
Class B: | $ 45.10 | |
Class C: | $ 45.33 | |
Institutional Class: | $ 47.48 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Natural Resources Fund
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 7,227,612 | |
Interest | 1,751 | |
Income from affiliated Central Funds | 548,457 | |
Total income | 7,777,820 | |
Expenses | ||
Management fee | $ 4,061,623 | |
Transfer agent fees | 2,021,172 | |
Distribution fees | 4,244,572 | |
Accounting and security lending fees | 272,106 | |
Independent trustees' compensation | 2,959 | |
Custodian fees and expenses | 116,807 | |
Registration fees | 112,077 | |
Audit | 46,148 | |
Legal | 7,719 | |
Interest | 891 | |
Miscellaneous | 7,001 | |
Total expenses before reductions | 10,893,075 | |
Expense reductions | (259,444) | 10,633,631 |
Net investment income (loss) | (2,855,811) | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 151,055,302 | |
Foreign currency transactions | 14,738 | |
Total net realized gain (loss) | 151,070,040 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | 36,147,683 | |
Assets and liabilities in foreign currencies | 1,447 | |
Total change in net unrealized appreciation (depreciation) | 36,149,130 | |
Net gain (loss) | 187,219,170 | |
Net increase (decrease) in net assets resulting from operations | $ 184,363,359 | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ (2,855,811) | $ (571,477) |
Net realized gain (loss) | 151,070,040 | 75,535,938 |
Change in net unrealized appreciation (depreciation) | 36,149,130 | 81,246,071 |
Net increase (decrease) in net assets resulting from operations | 184,363,359 | 156,210,532 |
Distributions to shareholders from net investment income | - | (316,454) |
Distributions to shareholders from net realized gain | (96,405,578) | (5,002,969) |
Total distributions | (96,405,578) | (5,319,423) |
Share transactions - net increase (decrease) | 199,114,450 | 49,200,390 |
Redemption fees | 111,350 | 77,479 |
Total increase (decrease) in net assets | 287,183,581 | 200,168,978 |
Net Assets | ||
Beginning of period | 555,429,669 | 355,260,691 |
End of period (including undistributed net investment income of $6,675 and accumulated net investment loss of $1,571, respectively) | $ 842,613,250 | $ 555,429,669 |
See accompanying notes which are an integral part of the financial statements.
Natural Resources
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 40.93 | $ 29.12 | $ 21.65 | $ 20.33 | $ 26.42 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.04) | .06 | .07 | .13 | .15 |
Net realized and unrealized gain (loss) | 12.30 | 12.21 | 7.50 | 1.30 | (4.36) |
Total from investment operations | 12.26 | 12.27 | 7.57 | 1.43 | (4.21) |
Distributions from net investment income | - | (.06) | (.10) | (.11) | (.18) |
Distributions from net realized gain | (6.81) | (.41) | - | - | (1.70) |
Total distributions | (6.81) | (.47) | (.10) | (.11) | (1.88) |
Redemption fees added to paid in capital C | .01 | .01 | - E | - E | - E |
Net asset value, end of period | $ 46.39 | $ 40.93 | $ 29.12 | $ 21.65 | $ 20.33 |
Total Return A, B | 32.90% | 42.69% | 35.08% | 7.07% | (16.92)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.21% | 1.25% | 1.30% | 1.36% | 1.28% |
Expenses net of fee waivers, if any | 1.21% | 1.25% | 1.30% | 1.36% | 1.28% |
Expenses net of all reductions | 1.17% | 1.19% | 1.29% | 1.32% | 1.24% |
Net investment income (loss) | (.09)% | .19% | .28% | .63% | .64% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 204,391 | $ 90,342 | $ 44,315 | $ 21,798 | $ 21,993 |
Portfolio turnover rate | 139% | 125% | 40% | 41% | 85% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 41.46 | $ 29.52 | $ 21.97 | $ 20.61 | $ 26.73 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.13) | - | .03 | .10 | .11 |
Net realized and unrealized gain (loss) | 12.49 | 12.37 | 7.60 | 1.32 | (4.42) |
Total from investment operations | 12.36 | 12.37 | 7.63 | 1.42 | (4.31) |
Distributions from net investment income | - | (.03) | (.08) | (.06) | (.11) |
Distributions from net realized gain | (6.65) | (.41) | - | - | (1.70) |
Total distributions | (6.65) | (.44) | (.08) | (.06) | (1.81) |
Redemption fees added to paid in capital C | .01 | .01 | - E | - E | - E |
Net asset value, end of period | $ 47.18 | $ 41.46 | $ 29.52 | $ 21.97 | $ 20.61 |
Total Return A, B | 32.60% | 42.41% | 34.82% | 6.91% | (17.07)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.42% | 1.44% | 1.48% | 1.50% | 1.45% |
Expenses net of fee waivers, if any | 1.42% | 1.44% | 1.48% | 1.50% | 1.45% |
Expenses net of all reductions | 1.38% | 1.39% | 1.47% | 1.47% | 1.41% |
Net investment income (loss) | (.29)% | (.01)% | .10% | .48% | .47% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 362,272 | $ 280,820 | $ 201,187 | $ 155,249 | $ 174,670 |
Portfolio turnover rate | 139% | 125% | 40% | 41% | 85% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 39.89 | $ 28.54 | $ 21.28 | $ 20.02 | $ 26.04 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.35) | (.18) | (.11) | (.01) | (.02) |
Net realized and unrealized gain (loss) | 11.98 | 11.93 | 7.37 | 1.27 | (4.29) |
Total from investment operations | 11.63 | 11.75 | 7.26 | 1.26 | (4.31) |
Distributions from net investment income | - | - | - | - | (.01) |
Distributions from net realized gain | (6.43) | (.41) | - | - | (1.70) |
Total distributions | (6.43) | (.41) | - | - | (1.71) |
Redemption fees added to paid in capital C | .01 | .01 | - E | - E | - E |
Net asset value, end of period | $ 45.10 | $ 39.89 | $ 28.54 | $ 21.28 | $ 20.02 |
Total Return A, B | 31.86% | 41.66% | 34.12% | 6.29% | (17.51)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.96% | 1.98% | 2.02% | 2.06% | 2.00% |
Expenses net of fee waivers, if any | 1.96% | 1.98% | 2.02% | 2.06% | 2.00% |
Expenses net of all reductions | 1.92% | 1.93% | 2.01% | 2.02% | 1.95% |
Net investment income (loss) | (.84)% | (.55)% | (.44)% | (.07)% | (.07)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 130,973 | $ 102,003 | $ 68,347 | $ 50,833 | $ 58,656 |
Portfolio turnover rate | 139% | 125% | 40% | 41% | 85% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 40.10 | $ 28.68 | $ 21.38 | $ 20.10 | $ 26.15 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.34) | (.17) | (.10) | - E | (.01) |
Net realized and unrealized gain (loss) | 12.06 | 11.99 | 7.40 | 1.28 | (4.32) |
Total from investment operations | 11.72 | 11.82 | 7.30 | 1.28 | (4.33) |
Distributions from net investment income | - | - | - | - | (.02) |
Distributions from net realized gain | (6.50) | (.41) | - | - | (1.70) |
Total distributions | (6.50) | (.41) | - | - | (1.72) |
Redemption fees added to paid in capital C | .01 | .01 | - E | - E | - E |
Net asset value, end of period | $ 45.33 | $ 40.10 | $ 28.68 | $ 21.38 | $ 20.10 |
Total Return A, B | 31.96% | 41.70% | 34.14% | 6.37% | (17.52)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | 1.92% | 1.94% | 1.99% | 2.01% | 1.96% |
Expenses net of fee waivers, if any | 1.92% | 1.94% | 1.99% | 2.01% | 1.96% |
Expenses net of all reductions | 1.88% | 1.89% | 1.97% | 1.97% | 1.92% |
Net investment income (loss) | (.79)% | (.51)% | (.41)% | (.02)% | (.03)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 125,424 | $ 72,832 | $ 37,206 | $ 22,044 | $ 24,201 |
Portfolio turnover rate | 139% | 125% | 40% | 41% | 85% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Natural Resources
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 41.76 | $ 29.64 | $ 22.03 | $ 20.67 | $ 26.82 |
Income from Investment Operations | |||||
Net investment income (loss) B | .12 | .19 | .18 | .22 | .23 |
Net realized and unrealized gain (loss) | 12.56 | 12.44 | 7.62 | 1.32 | (4.43) |
Total from investment operations | 12.68 | 12.63 | 7.80 | 1.54 | (4.20) |
Distributions from net investment income | - | (.11) | (.19) | (.18) | (.25) |
Distributions from net realized gain | (6.97) | (.41) | - | - | (1.70) |
Total distributions | (6.97) | (.52) | (.19) | (.18) | (1.95) |
Redemption fees added to paid in capital B | .01 | .01 | - D | - D | - D |
Net asset value, end of period | $ 47.48 | $ 41.76 | $ 29.64 | $ 22.03 | $ 20.67 |
Total Return A | 33.35% | 43.21% | 35.60% | 7.51% | (16.64)% |
Ratios to Average Net Assets C | |||||
Expenses before reductions | .87% | .89% | .90% | .95% | .93% |
Expenses net of fee waivers, if any | .87% | .89% | .90% | .95% | .93% |
Expenses net of all reductions | .83% | .84% | .89% | .91% | .89% |
Net investment income (loss) | .26% | .54% | .68% | 1.04% | .99% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 19,553 | $ 9,433 | $ 4,206 | $ 2,652 | $ 4,938 |
Portfolio turnover rate | 139% | 125% | 40% | 41% | 85% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. D Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Natural Resources Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund's investments in emerging markets can be subject to social, economic, regulatory, and political uncertainties and can be extremely volatile. The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, passive foreign investment companies (PFIC), partnerships and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 207,199,736 | |
Unrealized depreciation | (14,993,400) | |
Net unrealized appreciation (depreciation) | 192,206,336 | |
Undistributed ordinary income | 35,881,212 | |
Undistributed long-term capital gain | 54,035,463 | |
Cost for federal income tax purposes | $ 654,527,442 |
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Ordinary Income | $ 27,866,863 | $ 316,454 |
Long-term Capital Gains | 68,538,715 | 5,002,969 |
Total | $ 96,405,578 | $ 5,319,423 |
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Funds' net assets and results of operations.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $1,089,448,015 and $992,410,958, respectively.
Natural Resources
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 369,752 | $ 4,412 |
Class T | .25% | .25% | 1,653,110 | 21,400 |
Class B | .75% | .25% | 1,222,397 | 917,147 |
Class C | .75% | .25% | 999,313 | 314,970 |
$ 4,244,572 | $ 1,257,929 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 366,923 |
Class T | 97,815 |
Class B * | 194,578 |
Class C * | 38,445 |
$ 697,761 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 460,271 | .31 |
Class T | 879,204 | .27 |
Class B | 379,871 | .31 |
Class C | 268,549 | .27 |
Institutional Class | 33,277 | .22 |
$ 2,021,172 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $10,562 for the period.
Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the Fund, 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 affiliated funds. At period end, there were no interfund loans outstanding. The Fund's activity in this program during the period for which loans were outstanding was as follows:
Borrower or Lender | Average Daily | Weighted Average | Interest |
Borrower | $ 8,400,000 | 3.82% | $ 891 |
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $1,972 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $188,393.
7. Expense Reductions.
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $258,751 for the period. In addition, through arrangements with each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, credits reduced each class' transfer agent expense as noted in the table below.
Transfer Agent | ||
Institutional Class | $ 693 |
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide
Natural Resources
8. Other - continued
general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2006 | 2005 |
From net investment income | ||
Class A | $ - | $ 99,736 |
Class T | - | 195,831 |
Institutional Class | - | 20,887 |
Total | $ - | $ 316,454 |
From net realized gain | ||
Class A | $ 17,953,640 | $ 681,527 |
Class T | 46,191,250 | 2,676,352 |
Class B | 17,304,417 | 974,727 |
Class C | 12,815,774 | 592,512 |
Institutional Class | 2,140,497 | 77,851 |
Total | $ 96,405,578 | $ 5,002,969 |
10. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 2,831,331 | 1,253,753 | $ 124,673,619 | $ 43,103,050 |
Reinvestment of distributions | 400,806 | 23,046 | 16,449,083 | 714,182 |
Shares redeemed | (1,033,179) | (591,542) | (44,849,856) | (19,723,914) |
Net increase (decrease) | 2,198,958 | 685,257 | $ 96,272,846 | $ 24,093,318 |
Class T | ||||
Shares sold | 1,987,040 | 1,803,813 | $ 88,233,274 | $ 62,397,322 |
Reinvestment of distributions | 1,036,774 | 85,233 | 43,334,106 | 2,678,882 |
Shares redeemed | (2,118,138) | (1,932,106) | (92,809,287) | (66,301,961) |
Net increase (decrease) | 905,676 | (43,060) | $ 38,758,093 | $ (1,225,757) |
Class B | ||||
Shares sold | 1,013,249 | 949,870 | $ 43,295,228 | $ 31,871,038 |
Reinvestment of distributions | 367,313 | 27,043 | 14,743,317 | 820,469 |
Shares redeemed | (1,034,052) | (814,770) | (43,654,702) | (26,808,279) |
Net increase (decrease) | 346,510 | 162,143 | $ 14,383,843 | $ 5,883,228 |
Class C | ||||
Shares sold | 1,465,945 | 999,959 | $ 63,632,906 | $ 33,826,711 |
Reinvestment of distributions | 261,691 | 15,581 | 10,551,203 | 475,225 |
Shares redeemed | (777,152) | (496,487) | (32,787,487) | (16,702,359) |
Net increase (decrease) | 950,484 | 519,053 | $ 41,396,622 | $ 17,599,577 |
Institutional Class | ||||
Shares sold | 261,912 | 134,272 | $ 11,683,224 | $ 4,562,121 |
Reinvestment of distributions | 24,127 | 2,107 | 1,012,348 | 66,476 |
Shares redeemed | (100,080) | (52,414) | (4,392,526) | (1,778,573) |
Net increase (decrease) | 185,959 | 83,965 | $ 8,303,046 | $ 2,850,024 |
Annual Report
Advisor Technology Fund - Institutional Class
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of | |
Institutional Class | -3.19% | -2.00% | 7.35% |
A From September 3, 1996.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Technology Fund - Institutional Class on September 3, 1996, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Charlie Chai, Portfolio Manager of Fidelity® Advisor Technology Fund
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
During the past year, the fund's Institutional Class shares returned -3.19%, beating the -6.42% return of the Goldman Sachs® Technology Index but trailing the S&P 500. Stock selection in the semiconductor, computer hardware, semiconductor equipment and computer storage/peripherals groups particularly helped fund performance versus the sector index, as did an underweighting in the weak semiconductor segment. Semiconductor leader Intel and computer maker Dell were the fund's top relative contributors. Both index components did poorly, and the fund was rewarded for underweighting them. In Dell's case, I sold the entire position by period end. It also helped to overweight Internet services provider Google, which enjoyed strong earnings growth. I subsequently trimmed the stock for valuation reasons. Other beneficial holdings were MEMC Electronic Materials and F5 Networks. Conversely, performance suffered because of underweightings in systems software and in data processing/outsourced services. Roughly a double weighting in communications equipment also hurt. Among individual holdings, overweighting Canada-based telecom equipment stock Nortel Networks proved ill-timed. Further dampening our results was software and services provider Openwave Systems. Underweighting systems software specialist Oracle and computer maker Hewlett-Packard was detrimental as well, as those stocks managed to buck the downward trend. The fund did not own Oracle at period end.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 823.60 | $ 5.79 |
HypotheticalA | $ 1,000.00 | $ 1,018.45 | $ 6.41 |
Class T | |||
Actual | $ 1,000.00 | $ 822.40 | $ 6.87 |
HypotheticalA | $ 1,000.00 | $ 1,017.26 | $ 7.60 |
Class B | |||
Actual | $ 1,000.00 | $ 820.10 | $ 9.12 |
HypotheticalA | $ 1,000.00 | $ 1,014.78 | $ 10.09 |
Class C | |||
Actual | $ 1,000.00 | $ 820.40 | $ 9.12 |
HypotheticalA | $ 1,000.00 | $ 1,014.78 | $ 10.09 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 824.90 | $ 4.07 |
HypotheticalA | $ 1,000.00 | $ 1,020.33 | $ 4.51 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.28% |
Class T | 1.52% |
Class B | 2.02% |
Class C | 2.02% |
Institutional Class | .90% |
Annual Report
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
QUALCOMM, Inc. | 5.8 | 6.2 |
Corning, Inc. | 5.6 | 2.2 |
Apple Computer, Inc. | 4.9 | 4.2 |
Hewlett-Packard Co. | 3.9 | 3.9 |
Motorola, Inc. | 3.8 | 2.4 |
Intel Corp. | 3.1 | 0.0 |
Broadcom Corp. Class A | 2.9 | 0.5 |
Comverse Technology, Inc. | 2.7 | 1.6 |
F5 Networks, Inc. | 2.5 | 3.0 |
Google, Inc. Class A (sub. vtg.) | 2.0 | 3.9 |
37.2 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Communications Equipment | 33.9% | |
| Semiconductors & Semiconductor Equipment | 26.1% | |
| Computers & Peripherals | 13.7% | |
| Software | 8.8% | |
| Electronic Equipment & Instruments | 6.7% | |
| All Others * | 10.8% | |
As of January 31, 2006 | |||
| Communications Equipment | 31.7% | |
| Computers & Peripherals | 18.4% | |
| Semiconductors & Semiconductor Equipment | 17.1% | |
| Software | 8.9% | |
| Internet Software & Services | 8.1% | |
| All Others * | 15.8% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 100.4% | |||
Shares | Value (Note 1) | ||
BUILDING PRODUCTS - 0.3% | |||
Building Products - 0.3% | |||
Asahi Glass Co. Ltd. | 156,000 | $ 1,998,814 | |
COMMERCIAL SERVICES & SUPPLIES - 0.7% | |||
Diversified Commercial & Professional Services - 0.7% | |||
Equifax, Inc. | 10,300 | 332,484 | |
Tele Atlas NV (a) | 319,356 | 5,229,655 | |
5,562,139 | |||
COMMUNICATIONS EQUIPMENT - 33.8% | |||
Communications Equipment - 33.8% | |||
ADC Telecommunications, Inc. (a) | 318,264 | 3,892,369 | |
Adtran, Inc. | 172,500 | 3,772,575 | |
ADVA AG Optical Networking (a) | 363,673 | 3,061,303 | |
Andrew Corp. (a) | 318,600 | 2,692,170 | |
Arris Group, Inc. (a) | 3,200 | 34,208 | |
AudioCodes Ltd. (a) | 853,650 | 8,280,405 | |
Bookham, Inc. (a)(d) | 1,564,658 | 4,662,681 | |
Ceragon Networks Ltd. (a) | 499,500 | 2,322,675 | |
CIENA Corp. (a) | 2,864,400 | 10,397,772 | |
CommScope, Inc. (a) | 16,800 | 524,664 | |
Comverse Technology, Inc. (a) | 1,012,700 | 19,626,126 | |
Corning, Inc. | 2,148,800 | 40,977,616 | |
CSR PLC (a) | 165,200 | 3,502,631 | |
ECI Telecom Ltd. (a) | 436,718 | 2,926,011 | |
F5 Networks, Inc. (a) | 394,300 | 18,271,862 | |
Finisar Corp. (a)(d) | 2,030,371 | 5,685,039 | |
Foundry Networks, Inc. (a) | 304,700 | 3,156,692 | |
Foxconn International Holdings Ltd. (a) | 130,000 | 302,158 | |
Harris Corp. | 40,500 | 1,844,775 | |
ITF Optical Technologies, Inc. Series A (a)(f) | 34,084 | 0 | |
Ixia (a) | 38,186 | 353,984 | |
JDS Uniphase Corp. (a) | 1,492,300 | 3,178,599 | |
Juniper Networks, Inc. (a) | 197,846 | 2,661,029 | |
Motorola, Inc. | 1,235,500 | 28,119,980 | |
Nortel Networks Corp. | 4,517,600 | 8,854,512 | |
Orckit Communications Ltd. (a) | 45,400 | 349,580 | |
OZ Optics Ltd. unit (a)(f) | 68,000 | 1,003,000 | |
Powerwave Technologies, Inc. (a) | 813,100 | 6,456,014 | |
QUALCOMM, Inc. | 1,214,700 | 42,830,321 | |
Research In Motion Ltd. (a) | 28,370 | 1,861,923 | |
Sandvine Corp. (e) | 1,718,500 | 4,028,856 | |
Sonus Networks, Inc. (a) | 790,600 | 3,541,888 | |
Stratex Networks, Inc. (a) | 477,300 | 1,675,323 | |
Symmetricom, Inc. (a) | 634,536 | 4,492,515 | |
Tekelec (a) | 244,100 | 2,511,789 | |
TomTom Group BV (a) | 28,500 | 1,060,462 | |
248,913,507 | |||
Shares | Value (Note 1) | ||
COMPUTERS & PERIPHERALS - 13.7% | |||
Computer Hardware - 11.4% | |||
Apple Computer, Inc. (a) | 527,600 | $ 35,855,696 | |
Concurrent Computer Corp. (a) | 2,791,264 | 5,191,751 | |
Hewlett-Packard Co. | 889,800 | 28,393,518 | |
NCR Corp. (a) | 141,100 | 4,534,954 | |
Neoware Systems, Inc. (a)(d) | 150,300 | 1,860,714 | |
Sun Microsystems, Inc. (a) | 1,776,700 | 7,728,645 | |
83,565,278 | |||
Computer Storage & Peripherals - 2.3% | |||
Brocade Communications Systems, Inc. (a) | 4,200 | 26,292 | |
Emulex Corp. (a) | 80,000 | 1,191,200 | |
Network Appliance, Inc. (a) | 170,900 | 5,074,021 | |
Novatel Wireless, Inc. (a)(d) | 147,700 | 1,633,562 | |
Rackable Systems, Inc. (a) | 11,800 | 251,576 | |
Synaptics, Inc. (a) | 428,000 | 8,996,560 | |
17,173,211 | |||
TOTAL COMPUTERS & PERIPHERALS | 100,738,489 | ||
ELECTRICAL EQUIPMENT - 0.8% | |||
Electrical Components & Equipment - 0.8% | |||
Energy Conversion Devices, Inc. (a) | 35,900 | 1,208,035 | |
Evergreen Solar, Inc. (a)(d) | 437,397 | 4,124,654 | |
Q-Cells AG | 600 | 42,965 | |
Suntech Power Holdings Co. Ltd. sponsored ADR | 35,400 | 917,922 | |
6,293,576 | |||
ELECTRONIC EQUIPMENT & INSTRUMENTS - 6.7% | |||
Electronic Equipment & Instruments - 4.6% | |||
AU Optronics Corp. sponsored ADR (d) | 483,800 | 7,131,212 | |
Cognex Corp. | 13,600 | 320,960 | |
Dolby Laboratories, Inc. Class A (a) | 22,100 | 443,105 | |
LG.Philips LCD Co. Ltd. sponsored ADR (a)(d) | 739,900 | 13,162,821 | |
Nippon Electric Glass Co. Ltd. | 385,000 | 8,596,598 | |
Photon Dynamics, Inc. (a) | 425,351 | 4,517,228 | |
34,171,924 | |||
Electronic Manufacturing Services - 1.5% | |||
Hon Hai Precision Industry Co. Ltd. (Foxconn) | 1,133,878 | 6,717,533 | |
Jabil Circuit, Inc. | 160,000 | 3,696,000 | |
Trimble Navigation Ltd. (a) | 11,200 | 537,936 | |
10,951,469 | |||
Technology Distributors - 0.6% | |||
Brightpoint, Inc. (a) | 233,055 | 3,418,917 | |
Wolfson Microelectronics PLC (a) | 91,000 | 768,366 | |
4,187,283 | |||
TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS | 49,310,676 | ||
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
HOUSEHOLD DURABLES - 0.2% | |||
Consumer Electronics - 0.2% | |||
ReignCom Ltd. (a) | 24,592 | $ 108,394 | |
Thomson SA | 68,900 | 1,157,324 | |
1,265,718 | |||
Household Appliances - 0.0% | |||
iRobot Corp. (d) | 1,400 | 24,514 | |
TOTAL HOUSEHOLD DURABLES | 1,290,232 | ||
INDUSTRIAL CONGLOMERATES - 0.2% | |||
Industrial Conglomerates - 0.2% | |||
Orkla ASA (A Shares) | 27,050 | 1,226,209 | |
INTERNET & CATALOG RETAIL - 0.2% | |||
Internet Retail - 0.2% | |||
Gmarket, Inc. sponsored ADR | 1,400 | 20,342 | |
GSI Commerce, Inc. (a) | 145,137 | 1,863,559 | |
1,883,901 | |||
INTERNET SOFTWARE & SERVICES - 4.6% | |||
Internet Software & Services - 4.6% | |||
Akamai Technologies, Inc. (a) | 3,700 | 146,631 | |
aQuantive, Inc. (a) | 113,200 | 2,320,600 | |
Ariba, Inc. (a) | 43,500 | 339,300 | |
AsiaInfo Holdings, Inc. (a) | 120,000 | 499,200 | |
Baidu.com, Inc. sponsored ADR | 700 | 50,330 | |
Google, Inc. Class A (sub. vtg.) (a) | 37,550 | 14,516,830 | |
Liquidity Services, Inc. | 67,900 | 863,688 | |
Marchex, Inc. Class B | 182,100 | 2,321,775 | |
Openwave Systems, Inc. (a) | 1,144,193 | 7,540,232 | |
Traffic.com, Inc. (d) | 71,391 | 412,640 | |
VeriSign, Inc. (a) | 166,800 | 2,990,724 | |
WebSideStory, Inc. (a) | 164,100 | 2,006,943 | |
34,008,893 | |||
IT SERVICES - 3.6% | |||
Data Processing & Outsourced Services - 1.8% | |||
First Data Corp. | 338,400 | 13,823,640 | |
IT Consulting & Other Services - 1.8% | |||
Cognizant Technology Solutions Corp. Class A (a) | 109,400 | 7,164,606 | |
Infosys Technologies Ltd. sponsored ADR (d) | 82,800 | 3,402,252 | |
Kanbay International, Inc. (a) | 81,900 | 1,187,550 | |
Satyam Computer Services Ltd. sponsored ADR | 38,900 | 1,371,225 | |
13,125,633 | |||
TOTAL IT SERVICES | 26,949,273 | ||
PHARMACEUTICALS - 0.1% | |||
Pharmaceuticals - 0.1% | |||
Merck KGaA | 8,900 | 811,932 | |
Shares | Value (Note 1) | ||
REAL ESTATE MANAGEMENT & DEVELOPMENT - 0.2% | |||
Real Estate Management & Development - 0.2% | |||
Move, Inc. | 295,625 | $ 1,300,750 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 26.1% | |||
Semiconductor Equipment - 5.4% | |||
Applied Materials, Inc. | 237,100 | 3,731,954 | |
ASM International NV (NASDAQ) (a) | 58,900 | 915,306 | |
ASML Holding NV (NY Shares) (a) | 251,500 | 5,004,850 | |
Axcelis Technologies, Inc. (a) | 149,500 | 826,735 | |
Credence Systems Corp. (a) | 261,900 | 738,558 | |
Cymer, Inc. (a) | 63,900 | 2,499,768 | |
EMCORE Corp. (a)(d) | 175,998 | 1,242,546 | |
Entegris, Inc. (a) | 275,945 | 2,607,680 | |
FormFactor, Inc. (a) | 66,600 | 2,855,142 | |
ICOS Vision Systems NV (a) | 9,100 | 330,694 | |
KLA-Tencor Corp. | 53,700 | 2,265,603 | |
Lam Research Corp. (a) | 90,400 | 3,759,736 | |
MEMC Electronic Materials, Inc. (a) | 67,200 | 2,044,224 | |
Rudolph Technologies, Inc. (a) | 203,700 | 2,833,467 | |
Tessera Technologies, Inc. (a) | 113,785 | 3,580,814 | |
Varian Semiconductor Equipment Associates, Inc. (a) | 35,550 | 1,126,935 | |
Verigy Ltd. | 242,400 | 3,623,880 | |
39,987,892 | |||
Semiconductors - 20.7% | |||
Advanced Analogic Technologies, Inc. | 233,550 | 2,197,706 | |
AMIS Holdings, Inc. (a) | 201,200 | 1,887,256 | |
Applied Micro Circuits Corp. (a) | 657,229 | 1,695,651 | |
ARM Holdings PLC sponsored ADR | 193,000 | 1,252,570 | |
Broadcom Corp. Class A (a) | 900,122 | 21,593,927 | |
Cambridge Display Technologies, Inc. (a)(d) | 61,700 | 310,351 | |
Conexant Systems, Inc. (a) | 186,900 | 334,551 | |
Cree, Inc. (a)(d) | 66,700 | 1,315,991 | |
Cypress Semiconductor Corp. (a) | 342,800 | 5,207,132 | |
Exar Corp. (a) | 12,463 | 161,396 | |
Fairchild Semiconductor International, Inc. (a) | 68,300 | 1,117,388 | |
Freescale Semiconductor, Inc. Class A (a) | 280,700 | 8,036,441 | |
Himax Technologies, Inc. sponsored ADR | 487,200 | 3,152,184 | |
Ikanos Communications, Inc. | 270,000 | 3,739,500 | |
Infineon Technologies AG sponsored ADR (a) | 136,600 | 1,469,816 | |
Integrated Device Technology, Inc. (a) | 396,300 | 6,130,761 | |
Intel Corp. | 1,269,600 | 22,852,800 | |
Intersil Corp. Class A | 102,319 | 2,405,520 | |
LSI Logic Corp. (a) | 132,400 | 1,085,680 | |
Marvell Technology Group Ltd. (a) | 596,200 | 11,059,510 | |
Micrel, Inc. (a) | 136,000 | 1,452,480 | |
Microtune, Inc. (a) | 444,440 | 2,582,196 | |
Mindspeed Technologies, Inc. (a) | 764,746 | 1,368,895 | |
MoSys, Inc. (a) | 32,100 | 230,478 | |
National Semiconductor Corp. | 204,200 | 4,749,692 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - CONTINUED | |||
Semiconductors - continued | |||
Netlogic Microsystems, Inc. (a)(d) | 148,000 | $ 3,626,000 | |
Novatek Microelectronics Corp. | 1,172,039 | 5,762,483 | |
O2Micro International Ltd. sponsored ADR (a) | 676,646 | 4,053,110 | |
Pericom Semiconductor Corp. (a) | 37,400 | 314,160 | |
Pixelplus Co. Ltd. sponsored ADR | 114,100 | 228,200 | |
PLX Technology, Inc. (a) | 45,400 | 416,318 | |
PMC-Sierra, Inc. (a) | 135,900 | 694,449 | |
Powerchip Semiconductor Corp. | 2,617,000 | 1,718,240 | |
ProMOS Technologies, Inc. | 4,499,000 | 1,710,516 | |
Saifun Semiconductors Ltd. | 77,000 | 2,021,250 | |
Semiconductor Manufacturing International Corp. sponsored ADR (a)(d) | 126,600 | 835,560 | |
Silicon On Insulator Technologies SA (SOITEC) (a) | 163,000 | 4,347,384 | |
Spansion, Inc. Class A (d) | 407,900 | 5,702,442 | |
STATS ChipPAC Ltd. sponsored ADR (a) | 251,300 | 1,419,845 | |
Taiwan Semiconductor Manufacturing Co. Ltd. sponsored ADR | 227,500 | 1,972,425 | |
Trident Microsystems, Inc. (a) | 469,700 | 8,088,234 | |
Vimicro International Corp. sponsored ADR | 52,200 | 561,150 | |
Winbond Electronics Corp. (a) | 2,721,000 | 762,804 | |
Zoran Corp. (a) | 45,500 | 730,275 | |
152,354,717 | |||
TOTAL SEMICONDUCTORS & SEMICONDUCTOR | 192,342,609 | ||
SOFTWARE - 8.8% | |||
Application Software - 7.0% | |||
Adobe Systems, Inc. (a) | 253,900 | 7,238,689 | |
Ansys, Inc. (a) | 36,000 | 1,652,040 | |
Autodesk, Inc. (a) | 160,400 | 5,471,244 | |
Citrix Systems, Inc. (a) | 126,700 | 4,025,259 | |
Cognos, Inc. (a) | 157,300 | 4,915,625 | |
FileNET Corp. (a) | 33,800 | 1,075,516 | |
Hyperion Solutions Corp. (a) | 76,700 | 2,389,972 | |
Informatica Corp. (a) | 427,400 | 5,970,778 | |
JDA Software Group, Inc. (a) | 92,300 | 1,427,881 | |
Kronos, Inc. (a) | 22,100 | 641,121 | |
NAVTEQ Corp. (a) | 80,356 | 2,264,432 | |
Open Solutions, Inc. (a) | 46,500 | 1,285,725 | |
Quest Software, Inc. (a) | 112,800 | 1,541,976 | |
Ulticom, Inc. (a) | 1,199,117 | 11,907,232 | |
51,807,490 | |||
Home Entertainment Software - 1.0% | |||
Activision, Inc. (a) | 207,600 | 2,480,820 | |
Electronic Arts, Inc. (a) | 45,500 | 2,143,505 | |
Shares | Value (Note 1) | ||
Shanda Interactive Entertainment Ltd. sponsored ADR (a)(d) | 28,600 | $ 431,002 | |
THQ, Inc. (a) | 112,200 | 2,545,818 | |
7,601,145 | |||
Systems Software - 0.8% | |||
Red Hat, Inc. (a) | 136,000 | 3,220,480 | |
Wind River Systems, Inc. (a) | 272,600 | 2,254,402 | |
5,474,882 | |||
TOTAL SOFTWARE | 64,883,517 | ||
SPECIALTY RETAIL - 0.2% | |||
Computer & Electronics Retail - 0.2% | |||
Gamestop Corp. Class B (a) | 37,400 | 1,406,240 | |
WIRELESS TELECOMMUNICATION SERVICES - 0.2% | |||
Wireless Telecommunication Services - 0.2% | |||
SBA Communications Corp. Class A (a) | 45,500 | 1,086,540 | |
Wireless Facilities, Inc. (a) | 163,300 | 393,553 | |
1,480,093 | |||
TOTAL COMMON STOCKS (Cost $852,347,938) | 740,400,850 | ||
Convertible Preferred Stocks - 0.0% | |||
COMMUNICATIONS EQUIPMENT - 0.0% | |||
Communications Equipment - 0.0% | |||
Chorum Technologies, Inc. Series E (a)(f) | 17,200 | 0 | |
Convertible Bonds - 0.1% | ||||
Principal Amount | ||||
COMMUNICATIONS EQUIPMENT - 0.1% | ||||
Communications Equipment - 0.1% | ||||
CIENA Corp. 0.25% 5/1/13 | $ 1,270,000 | 1,062,609 | ||
Money Market Funds - 6.3% | |||
Shares | |||
Fidelity Cash Central Fund, 5.3% (b) | 8,493,900 | 8,493,900 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 37,571,734 | 37,571,734 | |
TOTAL MONEY MARKET FUNDS (Cost $46,065,634) | 46,065,634 | ||
TOTAL INVESTMENT PORTFOLIO - 106.8% (Cost $899,941,604) | 787,529,093 | ||
NET OTHER ASSETS - (6.8)% | (50,202,553) | ||
NET ASSETS - 100% | $ 737,326,540 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
(e) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At the period end, the value of these securities amounted to $4,028,856 or 0.5% of net assets. |
(f) Restricted securities - Investment in securities not registered under the Securities Act of 1933 (excluding 144A issues). At the end of the period, the value of restricted securities (excluding 144A issues) amounted to $1,003,000 or 0.1% of net assets. |
Additional information on each holding is as follows: |
Security | Acquisition Date | Acquisition Cost |
Chorum Technologies, Inc. Series E | 9/19/00 | $ 258,032 |
ITF Optical Technologies, Inc. Series A | 10/11/00 | $ 1,711,500 |
OZ Optics Ltd. unit | 8/18/00 | $ 1,003,680 |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned | ||
Fidelity Cash Central Fund | $ 372,074 | ||
Fidelity Securities Lending Cash Central Fund | 372,226 | ||
Total | $ 744,300 |
Other Information |
Distribution of investments by country of issue, as a percentage of total net assets, is as follows: |
United States of America | 79.8% |
Taiwan | 3.5% |
Canada | 2.8% |
Israel | 2.2% |
Korea (South) | 1.8% |
Netherlands | 1.6% |
Bermuda | 1.5% |
Japan | 1.5% |
Cayman Islands | 1.3% |
Others (individually less than 1%) | 4.0% |
100.0% |
Income Tax Information |
At July 31, 2006, the fund had a capital loss carryforward of approximately $1,516,738,814 of which $1,016,932,031 and $499,806,783 will expire on July 31, 2010 and 2011, respectively. |
See accompanying notes which are an integral part of the financial statements.
Technology
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $36,256,883) - See accompanying schedule: Unaffiliated issuers (cost $853,875,970) | $ 741,463,459 | |
Affiliated Central Funds (cost $46,065,634) | 46,065,634 | |
Total Investments (cost $899,941,604) | $ 787,529,093 | |
Cash | 413,442 | |
Receivable for investments sold | 35,272,896 | |
Receivable for fund shares sold | 2,952,591 | |
Dividends receivable | 220,316 | |
Interest receivable | 30,931 | |
Prepaid expenses | 1,344 | |
Other receivables | 88,248 | |
Total assets | 826,508,861 | |
Liabilities | ||
Payable for investments purchased | $ 45,513,384 | |
Payable for fund shares redeemed | 5,033,936 | |
Accrued management fee | 348,838 | |
Distribution fees payable | 381,710 | |
Other affiliated payables | 287,806 | |
Other payables and accrued expenses | 44,913 | |
Collateral on securities loaned, at value | 37,571,734 | |
Total liabilities | 89,182,321 | |
Net Assets | $ 737,326,540 | |
Net Assets consist of: | ||
Paid in capital | $ 2,375,152,344 | |
Accumulated net investment loss | (473) | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | (1,525,413,371) | |
Net unrealized appreciation (depreciation) on investments and assets and liabilities in foreign currencies | (112,411,960) | |
Net Assets | $ 737,326,540 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price Class A: | $ 15.59 | |
Maximum offering price per share (100/94.25 of $15.59) | $ 16.54 | |
Class T: | $ 15.28 | |
Maximum offering price per share (100/96.50 of $15.28) | $ 15.83 | |
Class B: | $ 14.59 | |
Class C: | $ 14.66 | |
Institutional Class: | $ 16.07 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Technology Fund
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 1,975,176 | |
Interest | 7,353 | |
Income from affiliated Central Funds (including $372,226 from security lending) | 744,300 | |
Total income | 2,726,829 | |
Expenses | ||
Management fee | $ 4,995,050 | |
Transfer agent fees | 3,686,670 | |
Distribution fees | 5,820,455 | |
Accounting and security lending fees | 320,128 | |
Independent trustees' compensation | 3,618 | |
Custodian fees and expenses | 64,525 | |
Registration fees | 67,783 | |
Audit | 52,682 | |
Legal | 12,649 | |
Interest | 2,477 | |
Miscellaneous | 10,528 | |
Total expenses before reductions | 15,036,565 | |
Expense reductions | (952,251) | 14,084,314 |
Net investment income (loss) | (11,357,485) | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 134,132,843 | |
Foreign currency transactions | (325,790) | |
Total net realized gain (loss) | 133,807,053 | |
Change in net unrealized appreciation (depreciation) on: Investment securities | (146,912,234) | |
Assets and liabilities in foreign currencies | 93,636 | |
Total change in net unrealized appreciation (depreciation) | (146,818,598) | |
Net gain (loss) | (13,011,545) | |
Net increase (decrease) in net assets resulting from operations | $ (24,369,030) | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ (11,357,485) | $ (2,963,867) |
Net realized gain (loss) | 133,807,053 | 53,318,670 |
Change in net unrealized appreciation (depreciation) | (146,818,598) | 82,424,513 |
Net increase (decrease) in net assets resulting from operations | (24,369,030) | 132,779,316 |
Distributions to shareholders from net investment income | - | (3,825,456) |
Share transactions - net increase (decrease) | (128,197,659) | (218,784,694) |
Redemption fees | 46,191 | 52,561 |
Total increase (decrease) in net assets | (152,520,498) | (89,778,273) |
Net Assets | ||
Beginning of period | 889,847,038 | 979,625,311 |
End of period (including accumulated net investment loss of $473 and accumulated net investment loss of $658, respectively) | $ 737,326,540 | $ 889,847,038 |
See accompanying notes which are an integral part of the financial statements.
Technology
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 16.16 | $ 13.98 | $ 13.36 | $ 10.03 | $ 17.76 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.15) | .02 D | (.17) | (.11) | (.15) |
Net realized and unrealized gain (loss) | (.42) | 2.24 | .79 | 3.44 | (7.58) |
Total from investment operations | (.57) | 2.26 | .62 | 3.33 | (7.73) |
Distributions from net investment income | - | (.08) | - | - | - |
Redemption fees added to paid in capital C | - F | - F | - F | - F | - F |
Net asset value, end of period | $ 15.59 | $ 16.16 | $ 13.98 | $ 13.36 | $ 10.03 |
Total Return A, B | (3.53)% | 16.20% | 4.64% | 33.20% | (43.52)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 1.30% | 1.37% | 1.44% | 1.70% | 1.53% |
Expenses net of fee waivers, if any | 1.30% | 1.37% | 1.44% | 1.59% | 1.51% |
Expenses net of all reductions | 1.20% | 1.26% | 1.35% | 1.38% | 1.43% |
Net investment income (loss) | (.88)% | .12% D | (1.10)% | (1.03)% | (1.07)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 189,054 | $ 144,970 | $ 123,389 | $ 123,604 | $ 101,649 |
Portfolio turnover rate | 258% | 180% | 105% | 140% | 164% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Investment income per share reflects a special dividend which amounted to $.14 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (.87)%. E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. F Amount represents less than $.01 per share. |
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 15.88 | $ 13.76 | $ 13.17 | $ 9.91 | $ 17.59 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.19) | (.02) D | (.19) | (.14) | (.18) |
Net realized and unrealized gain (loss) | (.41) | 2.21 | .78 | 3.40 | (7.50) |
Total from investment operations | (.60) | 2.19 | .59 | 3.26 | (7.68) |
Distributions from net investment income | - | (.07) | - | - | - |
Redemption fees added to paid in capital C | - F | - F | - F | - F | - F |
Net asset value, end of period | $ 15.28 | $ 15.88 | $ 13.76 | $ 13.17 | $ 9.91 |
Total Return A, B | (3.78)% | 15.94% | 4.48% | 32.90% | (43.66)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 1.55% | 1.60% | 1.62% | 1.85% | 1.70% |
Expenses net of fee waivers, if any | 1.55% | 1.60% | 1.62% | 1.83% | 1.70% |
Expenses net of all reductions | 1.44% | 1.48% | 1.53% | 1.63% | 1.62% |
Net investment income (loss) | (1.13)% | (.11)% D | (1.28)% | (1.28)% | (1.26)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 260,966 | $ 315,930 | $ 363,399 | $ 367,257 | $ 302,657 |
Portfolio turnover rate | 258% | 180% | 105% | 140% | 164% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the sales charges. C Calculated based on average shares outstanding during the period. D Investment income per share reflects a special dividend which amounted to $.14 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (1.10)%. E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. F Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 15.24 | $ 13.25 | $ 12.76 | $ 9.64 | $ 17.21 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.27) | (.09) D | (.27) | (.17) | (.25) |
Net realized and unrealized gain (loss) | (.38) | 2.12 | .76 | 3.29 | (7.32) |
Total from investment operations | (.65) | 2.03 | .49 | 3.12 | (7.57) |
Distributions from net investment income | - | (.04) | - | - | - |
Redemption fees added to paid in capital C | - F | - F | - F | - F | - F |
Net asset value, end of period | $ 14.59 | $ 15.24 | $ 13.25 | $ 12.76 | $ 9.64 |
Total Return A, B | (4.27)% | 15.33% | 3.84% | 32.37% | (43.99)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 2.05% | 2.13% | 2.21% | 2.38% | 2.28% |
Expenses net of fee waivers, if any | 2.05% | 2.13% | 2.21% | 2.25% | 2.25% |
Expenses net of all reductions | 1.94% | 2.02% | 2.12% | 2.05% | 2.18% |
Net investment income (loss) | (1.63)% | (.65)% D | (1.87)% | (1.69)% | (1.81)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 192,790 | $ 309,020 | $ 355,927 | $ 391,832 | $ 337,976 |
Portfolio turnover rate | 258% | 180% | 105% | 140% | 164% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Investment income per share reflects a special dividend which amounted to $.14 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (1.64)%. E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. F Amount represents less than $.01 per share. |
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 15.31 | $ 13.31 | $ 12.80 | $ 9.67 | $ 17.25 |
Income from Investment Operations | |||||
Net investment income (loss) C | (.27) | (.08) D | (.26) | (.17) | (.24) |
Net realized and unrealized gain (loss) | (.38) | 2.12 | .77 | 3.30 | (7.34) |
Total from investment operations | (.65) | 2.04 | .51 | 3.13 | (7.58) |
Distributions from net investment income | - | (.04) | - | - | - |
Redemption fees added to paid in capital C | - F | - F | - F | - F | - F |
Net asset value, end of period | $ 14.66 | $ 15.31 | $ 13.31 | $ 12.80 | $ 9.67 |
Total Return A, B | (4.25)% | 15.34% | 3.98% | 32.37% | (43.94)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 2.05% | 2.10% | 2.13% | 2.28% | 2.18% |
Expenses net of fee waivers, if any | 2.05% | 2.10% | 2.13% | 2.25% | 2.18% |
Expenses net of all reductions | 1.94% | 1.99% | 2.04% | 2.05% | 2.11% |
Net investment income (loss) | (1.63)% | (.61)% D | (1.79)% | (1.69)% | (1.74)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 82,835 | $ 108,287 | $ 125,926 | $ 139,654 | $ 123,034 |
Portfolio turnover rate | 258% | 180% | 105% | 140% | 164% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Total returns do not include the effect of the contingent deferred sales charge. C Calculated based on average shares outstanding during the period. D Investment income per share reflects a special dividend which amounted to $.14 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (1.60)%. E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. F Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Technology
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 16.60 | $ 14.32 | $ 13.61 | $ 10.15 | $ 17.90 |
Income from Investment Operations | |||||
Net investment income (loss) B | (.09) | .09 C | (.09) | (.05) | (.08) |
Net realized and unrealized gain (loss) | (.44) | 2.30 | .80 | 3.51 | (7.67) |
Total from investment operations | (.53) | 2.39 | .71 | 3.46 | (7.75) |
Distributions from net investment income | - | (.11) | - | - | - |
Redemption fees added to paid in capital B | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 16.07 | $ 16.60 | $ 14.32 | $ 13.61 | $ 10.15 |
Total Return A | (3.19)% | 16.73% | 5.22% | 34.09% | (43.30)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | .90% | .92% | .93% | .99% | 1.00% |
Expenses net of fee waivers, if any | .90% | .92% | .93% | .99% | 1.00% |
Expenses net of all reductions | .80% | .81% | .84% | .79% | .92% |
Net investment income (loss) | (.49)% | .57% C | (.59)% | (.43)% | (.56)% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 11,681 | $ 11,640 | $ 10,984 | $ 11,511 | $ 10,495 |
Portfolio turnover rate | 258% | 180% | 105% | 140% | 164% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown. B Calculated based on average shares outstanding during the period. C Investment income per share reflects a special dividend which amounted to $.14 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been (.42)%. D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class. E Amount represents less than $.01 per share. |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Technology Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund's investments in emerging markets can be subject to social, economic, regulatory, and political uncertainties and can be extremely volatile.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Debt securities, including restricted securities, for which quotations are readily available, are valued by independent pricing services or by dealers who make markets in such securities. Pricing services consider yield or price of bonds of comparable quality, coupon, maturity and type as well as dealer supplied prices. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. As a result in the change in the estimate of the return of capital component of dividend income realized in the year ended July 31, 2006, dividend income has been increased $206,207 with a corresponding decrease to net unrealized appreciation (depreciation). The change in estimate has no impact on total net
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Investment Transactions and Income - continued
assets or total return of the Fund. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, net operating losses, capital loss carryforwards and losses deferred due to wash sales and excise tax regulations.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 18,082,086 | |
Unrealized depreciation | (139,168,573) | |
Net unrealized appreciation (depreciation) | (121,086,487) | |
Capital loss carryforward | (1,516,738,814) | |
Cost for federal income tax purposes | $ 908,615,580 |
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Ordinary Income | $ - | $ 3,825,456 |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
Restricted Securities. The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the Fund's Schedule of Investments.
Technology
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $2,245,970,047 and $2,372,030,534, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 430,554 | $ 3,991 |
Class T | .25% | .25% | 1,563,436 | 3,218 |
Class B | .75% | .25% | 2,787,577 | 2,091,753 |
Class C | .75% | .25% | 1,038,888 | 53,808 |
$ 5,820,455 | $ 2,152,770 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 38,157 |
Class T | 34,762 |
Class B * | 428,302 |
Class C * | 5,728 |
$ 506,949 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 730,350 | .42 |
Class T | 1,309,587 | .42 |
Class B | 1,173,244 | .42 |
Class C | 438,544 | .42 |
Institutional Class | 34,945 | .28 |
$ 3,686,670 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $135,178 for the period.
Interfund Lending Program. Pursuant to an Exemptive Order issued by the SEC, the Fund, 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 affiliated funds. At period end, there were no interfund loans outstanding. The Fund's activity in this program during the period for which loans were outstanding was as follows:
Borrower or Lender | Average Daily | Weighted Average | Interest |
Borrower | $ 4,274,500 | 5.22% | $ 2,477 |
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $2,566 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds.
7. Expense Reductions.
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $949,108 for the period. In addition, through arrangements with each class' transfer agent, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, credits reduced each class' transfer agent expense as noted in the table below.
Transfer Agent | ||
Class A | $ 1,587 | |
Class B | 657 | |
Class C | 899 | |
$ 3,143 |
Technology
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2006 | 2005 |
From net investment income | ||
Class A | $ - | $ 693,969 |
Class T | - | 1,715,027 |
Class B | - | 986,706 |
Class C | - | 351,015 |
Institutional Class | - | 78,739 |
Total | $ - | $ 3,825,456 |
10. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 5,933,920 | 2,937,144 | $ 105,071,198 | $ 43,834,461 |
Reinvestment of distributions | - | 41,796 | - | 642,405 |
Shares redeemed | (2,775,104) | (2,834,081) | (47,788,058) | (41,983,001) |
Net increase (decrease) | 3,158,816 | 144,859 | $ 57,283,140 | $ 2,493,865 |
Class T | ||||
Shares sold | 3,384,477 | 3,595,175 | $ 58,748,287 | $ 51,527,367 |
Reinvestment of distributions | - | 108,716 | - | 1,643,786 |
Shares redeemed | (6,198,789) | (10,218,806) | (105,287,546) | (148,664,787) |
Net increase (decrease) | (2,814,312) | (6,514,915) | $ (46,539,259) | $ (95,493,634) |
Class B | ||||
Shares sold | 539,586 | 690,525 | $ 8,903,373 | $ 9,551,506 |
Reinvestment of distributions | - | 61,748 | - | 899,051 |
Shares redeemed | (7,601,103) | (7,334,481) | (125,479,671) | (101,949,576) |
Net increase (decrease) | (7,061,517) | (6,582,208) | $ (116,576,298) | $ (91,499,019) |
Class C | ||||
Shares sold | 570,438 | 609,017 | $ 9,501,649 | $ 8,508,174 |
Reinvestment of distributions | - | 20,786 | - | 304,101 |
Shares redeemed | (1,991,739) | (3,019,680) | (32,610,461) | (42,215,602) |
Net increase (decrease) | (1,421,301) | (2,389,877) | $ (23,108,812) | $ (33,403,327) |
Institutional Class | ||||
Shares sold | 258,108 | 203,821 | $ 4,843,216 | $ 3,156,844 |
Reinvestment of distributions | - | 3,961 | - | 62,341 |
Shares redeemed | (232,556) | (273,671) | (4,099,646) | (4,101,764) |
Net increase (decrease) | 25,552 | (65,889) | $ 743,570 | $ (882,579) |
Annual Report
Advisor Telecommunications & Utilities Growth Fund - Institutional Class
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Past 5 | Life of | |
Institutional Class | 15.95% | 4.33% | 9.70% |
A From September 3, 1996.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity Advisor Telecommunications & Utilities Growth Fund - Institutional Class on September 3, 1996, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the S&P 500 Index performed over the same period.
Annual Report
Advisor Telecommunications & Utilities Growth Fund
Management's Discussion of Fund Performance
Comments from Brian Younger, Portfolio Manager of Fidelity® Advisor Telecommunications & Utilities Growth Fund
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
For the 12 months that ended July 31, 2006, the fund's Institutional Class shares returned 15.95%. This beat the Goldman Sachs® Utilities Index, which gained 8.73%, as well as the S&P 500. Strong stock picking and an overweighting in integrated telecommunication services drove much of the fund's outperformance relative to the sector index. An underweighting in the weak broadcast and cable television industry and stock selection within electric utilities also helped. Alternative carriers - companies that focus on providing local telecom services - modestly hampered relative returns. The fund had sizable overweightings in Qwest Communications International, BellSouth and AT&T Inc. (formed from the merger of AT&T Corp. and SBC Communications), integrated carriers that posted strong gains fueled by a favorable regulatory environment, industry consolidation and strong wireless subscriber growth. The fund also benefited from sidestepping NTL, a British cable company in the sector index that was a weak performer. On the negative side was Vonage Holdings, an alternative carrier that is not in the index. It declined after its initial public offering, leading me to eliminate the position. An overweighting in Sprint Nextel further hampered returns as its recent merger proved more challenging than expected and the company lost subscriber growth.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Advisor Telecommunications & Utilities Growth Fund
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds and redemption fees, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 1,112.50 | $ 6.81 |
HypotheticalA | $ 1,000.00 | $ 1,018.35 | $ 6.51 |
Class T | |||
Actual | $ 1,000.00 | $ 1,112.00 | $ 8.17 |
HypotheticalA | $ 1,000.00 | $ 1,017.06 | $ 7.80 |
Class B | |||
Actual | $ 1,000.00 | $ 1,108.90 | $ 10.72 |
HypotheticalA | $ 1,000.00 | $ 1,014.63 | $ 10.24 |
Class C | |||
Actual | $ 1,000.00 | $ 1,109.60 | $ 10.46 |
HypotheticalA | $ 1,000.00 | $ 1,014.88 | $ 9.99 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 1,114.80 | $ 4.93 |
HypotheticalA | $ 1,000.00 | $ 1,020.13 | $ 4.71 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.30% |
Class T | 1.56% |
Class B | 2.05% |
Class C | 2.00% |
Institutional Class | .94% |
Annual Report
Advisor Telecommunications & Utilities Growth Fund
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
AT&T, Inc. | 14.1 | 12.8 |
Verizon Communications, Inc. | 13.4 | 13.9 |
BellSouth Corp. | 13.3 | 10.5 |
Sprint Nextel Corp. | 6.9 | 8.4 |
Qwest Communications International, Inc. | 4.9 | 4.5 |
Exelon Corp. | 4.5 | 4.7 |
FPL Group, Inc. | 3.6 | 2.2 |
TXU Corp. | 3.3 | 4.2 |
Entergy Corp. | 3.2 | 3.0 |
AES Corp. | 3.1 | 3.1 |
70.3 | ||
Top Industries (% of fund's net assets) | |||
As of July 31, 2006 | |||
| Diversified Telecommunication Services | 50.5% | |
| Electric Utilities | 17.7% | |
| Wireless Telecommunication Services | 10.9% | |
| Independent Power Producers & Energy Traders | 9.0% | |
| Multi-utilities | 8.5% | |
| All Others * | 3.4% | |
As of January 31, 2006 | |||
| Diversified Telecommunication Services | 44.0% | |
| Electric Utilities | 19.7% | |
| Wireless Telecommunication Services | 12.7% | |
| Independent Power Producers & Energy Traders | 12.5% | |
| Multi-utilities | 8.2% | |
| All Others * | 2.9% | |
* Includes short-term investments and net other assets. |
Prior period industry classifications reflect the categories in place as of the date indicated and have not been adjusted to reflect current industry classifications. |
Annual Report
Advisor Telecommunications & Utilities Growth Fund
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 96.6% | |||
Shares | Value (Note 1) | ||
DIVERSIFIED TELECOMMUNICATION SERVICES - 50.5% | |||
Alternative Carriers - 2.3% | |||
Global Crossing Ltd. (a) | 43,000 | $ 655,750 | |
Level 3 Communications, Inc. (a) | 756,900 | 2,959,479 | |
Time Warner Telecom, Inc. Class A (sub. vtg.) (a) | 54,300 | 909,525 | |
4,524,754 | |||
Integrated Telecommunication Services - 48.2% | |||
Alaska Communication Systems Group, Inc. | 144,200 | 1,786,638 | |
AT&T, Inc. (d) | 934,788 | 28,034,291 | |
BellSouth Corp. | 671,100 | 26,286,987 | |
Cincinnati Bell, Inc. | 107,400 | 430,674 | |
Embarq Corp. | 28,462 | 1,287,906 | |
NTELOS Holding Corp. | 9,300 | 134,385 | |
Qwest Communications International, Inc. (a) | 1,209,600 | 9,664,704 | |
Verizon Communications, Inc. | 785,717 | 26,572,949 | |
Windstream Corp. | 106,793 | 1,338,116 | |
95,536,650 | |||
TOTAL DIVERSIFIED TELECOMMUNICATION | 100,061,404 | ||
ELECTRIC UTILITIES - 17.7% | |||
Electric Utilities - 17.7% | |||
Allegheny Energy, Inc. (a) | 97,000 | 3,981,850 | |
Edison International | 73,300 | 3,033,154 | |
Entergy Corp. | 82,400 | 6,353,040 | |
Exelon Corp. | 153,500 | 8,887,650 | |
FirstEnergy Corp. | 32,900 | 1,842,400 | |
FPL Group, Inc. | 162,500 | 7,010,250 | |
Northeast Utilities | 15,000 | 336,000 | |
PPL Corp. | 105,200 | 3,578,904 | |
35,023,248 | |||
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 9.0% | |||
Independent Power Producers & Energy Traders - 9.0% | |||
AES Corp. (a) | 311,300 | 6,182,418 | |
Dynegy, Inc. Class A (a) | 114,000 | 641,820 | |
Mirant Corp. (a) | 91,600 | 2,433,812 | |
NRG Energy, Inc. | 40,000 | 1,970,000 | |
TXU Corp. | 101,100 | 6,493,653 | |
17,721,703 | |||
MULTI-UTILITIES - 8.5% | |||
Multi-Utilities - 8.5% | |||
Ameren Corp. | 9,100 | 468,650 | |
Shares | Value (Note 1) | ||
CMS Energy Corp. (a) | 220,290 | $ 3,086,263 | |
Dominion Resources, Inc. | 31,100 | 2,440,728 | |
Duke Energy Corp. | 151,300 | 4,587,416 | |
Public Service Enterprise Group, Inc. | 54,400 | 3,668,192 | |
Sempra Energy | 54,900 | 2,649,474 | |
16,900,723 | |||
WATER UTILITIES - 0.0% | |||
Water Utilities - 0.0% | |||
Aqua America, Inc. | 75 | 1,635 | |
WIRELESS TELECOMMUNICATION SERVICES - 10.9% | |||
Wireless Telecommunication Services - 10.9% | |||
ALLTEL Corp. | 103,289 | 5,698,454 | |
American Tower Corp. Class A (a) | 20,020 | 676,676 | |
Crown Castle International Corp. | 13,300 | 468,559 | |
Dobson Communications Corp. Class A (a) | 153,400 | 1,029,314 | |
Sprint Nextel Corp. | 693,952 | 13,740,250 | |
21,613,253 | |||
TOTAL COMMON STOCKS (Cost $167,220,519) | 191,321,966 | ||
Money Market Funds - 17.6% | |||
Fidelity Cash Central Fund, 5.3% (b) | 6,037,731 | 6,037,731 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (b)(c) | 28,720,500 | 28,720,500 | |
TOTAL MONEY MARKET FUNDS (Cost $34,758,231) | 34,758,231 | ||
TOTAL INVESTMENT PORTFOLIO - 114.2% (Cost $201,978,750) | 226,080,197 | ||
NET OTHER ASSETS - (14.2)% | (28,092,571) | ||
NET ASSETS - 100% | $ 197,987,626 | ||
Legend |
(a) Non-income producing |
(b) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(c) Investment made with cash collateral received from securities on loan. |
(d) Security or a portion of the security is on loan at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 85,343 |
Fidelity Securities Lending Cash Central Fund | 15,107 |
Total | $ 100,450 |
Income Tax Information |
At July 31, 2006, the fund had a capital loss carryforward of approximately $289,540,228 of which $135,127,696 and $154,412,532 will expire on July 31, 2010 and 2011, respectively. |
See accompanying notes which are an integral part of the financial statements.
Telecommunications & Utilities Growth
Advisor Telecommunications & Utilities Growth Fund
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $28,010,660) - See accompanying schedule: Unaffiliated issuers (cost $167,220,519) | $ 191,321,966 | |
Affiliated Central Funds (cost $34,758,231) | 34,758,231 | |
Total Investments (cost $201,978,750) | $ 226,080,197 | |
Receivable for investments sold | 835,306 | |
Receivable for fund shares sold | 986,799 | |
Dividends receivable | 829,900 | |
Interest receivable | 9,019 | |
Prepaid expenses | 305 | |
Other receivables | 3,741 | |
Total assets | 228,745,267 | |
Liabilities | ||
Payable for investments purchased | $ 634,331 | |
Payable for fund shares redeemed | 1,105,266 | |
Accrued management fee | 88,611 | |
Distribution fees payable | 109,420 | |
Other affiliated payables | 67,675 | |
Other payables and accrued expenses | 31,838 | |
Collateral on securities loaned, at value | 28,720,500 | |
Total liabilities | 30,757,641 | |
Net Assets | $ 197,987,626 | |
Net Assets consist of: | ||
Paid in capital | $ 465,184,107 | |
Undistributed net investment income | 1,237,487 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | (292,535,415) | |
Net unrealized appreciation (depreciation) on investments | 24,101,447 | |
Net Assets | $ 197,987,626 | |
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price Class A: | $ 17.20 | |
Maximum offering price per share (100/94.25 of $17.20) | $ 18.25 | |
Class T: | $ 17.18 | |
Maximum offering price per share (100/96.50 of $17.18) | $ 17.80 | |
Class B: | $ 16.90 | |
Class C: | $ 16.91 | |
Institutional Class: | $ 17.38 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Advisor Telecommunications & Utilities Growth Fund
Financial Statements - continued
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 5,306,269 | |
Interest | 2,956 | |
Income from affiliated Central Funds | 100,450 | |
Total income | 5,409,675 | |
Expenses | ||
Management fee | $ 1,084,526 | |
Transfer agent fees | 791,678 | |
Distribution fees | 1,393,086 | |
Accounting and security lending fees | 79,775 | |
Independent trustees' compensation | 781 | |
Custodian fees and expenses | 6,638 | |
Registration fees | 50,409 | |
Audit | 41,911 | |
Legal | 5,540 | |
Miscellaneous | 1,929 | |
Total expenses before reductions | 3,456,273 | |
Expense reductions | (40,605) | 3,415,668 |
Net investment income (loss) | 1,994,007 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 26,822,039 | |
Foreign currency transactions | (6,106) | |
Total net realized gain (loss) | 26,815,933 | |
Change in net unrealized appreciation (depreciation) on investment securities | (2,675,823) | |
Net gain (loss) | 24,140,110 | |
Net increase (decrease) in net assets resulting from operations | $ 26,134,117 | |
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 1,994,007 | $ 3,088,972 |
Net realized gain (loss) | 26,815,933 | 37,520,442 |
Change in net unrealized appreciation (depreciation) | (2,675,823) | 7,253,242 |
Net increase (decrease) in net assets resulting from operations | 26,134,117 | 47,862,656 |
Distributions to shareholders from net investment income | (1,886,398) | (2,204,610) |
Share transactions - net increase (decrease) | (30,269,037) | (38,936,571) |
Redemption fees | 5,377 | 6,117 |
Total increase (decrease) in net assets | (6,015,941) | 6,727,592 |
Net Assets | ||
Beginning of period | 204,003,567 | 197,275,975 |
End of period (including undistributed net investment income of $1,237,487 and undistributed net investment income of $1,351,200, respectively) | $ 197,987,626 | $ 204,003,567 |
See accompanying notes which are an integral part of the financial statements.
Telecommunications & Utilities Growth
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 15.17 | $ 12.09 | $ 10.37 | $ 8.74 | $ 15.18 |
Income from Investment Operations | |||||
Net investment income (loss) C | .24 | .28 D | .10 | .13 | .10 |
Net realized and unrealized gain (loss) | 2.06 | 3.01 | 1.72 | 1.69 | (6.54) |
Total from investment operations | 2.30 | 3.29 | 1.82 | 1.82 | (6.44) |
Distributions from net investment income | (.27) | (.21) | (.10) | (.19) | - |
Redemption fees added to paid in capital C | - F | - F | - F | - F | - F |
Net asset value, end of period | $ 17.20 | $ 15.17 | $ 12.09 | $ 10.37 | $ 8.74 |
Total Return A, B | 15.38% | 27.48% | 17.67% | 21.22% | (42.42)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 1.34% | 1.39% | 1.51% | 1.67% | 1.45% |
Expenses net of fee waivers, if any | 1.34% | 1.39% | 1.50% | 1.58% | 1.45% |
Expenses net of all reductions | 1.32% | 1.36% | 1.45% | 1.47% | 1.36% |
Net investment income (loss) | 1.51% | 2.03% D | .87% | 1.46% | .79% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 40,599 | $ 29,150 | $ 21,987 | $ 21,761 | $ 22,377 |
Portfolio turnover rate | 64% | 44% | 38% | 81% | 116% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Investment income per share reflects a special dividend which amounted to $.09 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been 1.39%.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Amount represents less than $.01 per share.
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 15.10 | $ 12.04 | $ 10.33 | $ 8.68 | $ 15.11 |
Income from Investment Operations | |||||
Net investment income (loss) C | .19 | .24 D | .07 | .11 | .07 |
Net realized and unrealized gain (loss) | 2.08 | 2.99 | 1.72 | 1.68 | (6.50) |
Total from investment operations | 2.27 | 3.23 | 1.79 | 1.79 | (6.43) |
Distributions from net investment income | (.19) | (.17) | (.08) | (.14) | - |
Redemption fees added to paid in capital C | - F | - F | - F | - F | - F |
Net asset value, end of period | $ 17.18 | $ 15.10 | $ 12.04 | $ 10.33 | $ 8.68 |
Total Return A, B | 15.20% | 27.03% | 17.42% | 20.91% | (42.55)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 1.60% | 1.67% | 1.79% | 1.94% | 1.71% |
Expenses net of fee waivers, if any | 1.60% | 1.67% | 1.75% | 1.83% | 1.71% |
Expenses net of all reductions | 1.58% | 1.64% | 1.70% | 1.72% | 1.62% |
Net investment income (loss) | 1.25% | 1.76% D | .62% | 1.21% | .53% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 52,128 | $ 55,683 | $ 53,255 | $ 55,510 | $ 59,306 |
Portfolio turnover rate | 64% | 44% | 38% | 81% | 116% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the sales charges.
C Calculated based on average shares outstanding during the period.
D Investment income per share reflects a special dividend which amounted to $.09 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been 1.12%.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Amount represents less than $.01 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 14.83 | $ 11.82 | $ 10.15 | $ 8.49 | $ 14.85 |
Income from Investment Operations | |||||
Net investment income (loss) C | .12 | .17 D | .01 | .07 | .01 |
Net realized and unrealized gain (loss) | 2.03 | 2.95 | 1.69 | 1.65 | (6.37) |
Total from investment operations | 2.15 | 3.12 | 1.70 | 1.72 | (6.36) |
Distributions from net investment income | (.08) | (.11) | (.03) | (.06) | - |
Redemption fees added to paid in capital C | - F | - F | - F | - F | - F |
Net asset value, end of period | $ 16.90 | $ 14.83 | $ 11.82 | $ 10.15 | $ 8.49 |
Total Return A, B | 14.57% | 26.51% | 16.79% | 20.37% | (42.83)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 2.09% | 2.14% | 2.25% | 2.32% | 2.20% |
Expenses net of fee waivers, if any | 2.09% | 2.14% | 2.25% | 2.25% | 2.20% |
Expenses net of all reductions | 2.06% | 2.11% | 2.20% | 2.13% | 2.11% |
Net investment income (loss) | .76% | 1.28% D | .12% | .79% | .04% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 65,959 | $ 82,577 | $ 84,742 | $ 87,868 | $ 91,517 |
Portfolio turnover rate | 64% | 44% | 38% | 81% | 116% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Investment income per share reflects a special dividend which amounted to $.09 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been .64%.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Amount represents less than $.01 per share.
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 14.84 | $ 11.84 | $ 10.16 | $ 8.50 | $ 14.85 |
Income from Investment Operations | |||||
Net investment income (loss) C | .13 | .18 D | .02 | .07 | .02 |
Net realized and unrealized gain (loss) | 2.04 | 2.94 | 1.70 | 1.65 | (6.37) |
Total from investment operations | 2.17 | 3.12 | 1.72 | 1.72 | (6.35) |
Distributions from net investment income | (.10) | (.12) | (.04) | (.06) | - |
Redemption fees added to paid in capital C | - F | - F | - F | - F | - F |
Net asset value, end of period | $ 16.91 | $ 14.84 | $ 11.84 | $ 10.16 | $ 8.50 |
Total Return A, B | 14.72% | 26.48% | 16.98% | 20.35% | (42.76)% |
Ratios to Average Net Assets E | |||||
Expenses before reductions | 2.02% | 2.07% | 2.17% | 2.23% | 2.11% |
Expenses net of fee waivers, if any | 2.02% | 2.07% | 2.17% | 2.23% | 2.11% |
Expenses net of all reductions | 2.00% | 2.04% | 2.12% | 2.12% | 2.02% |
Net investment income (loss) | .83% | 1.36% D | .21% | .80% | .13% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 32,823 | $ 34,827 | $ 35,038 | $ 37,530 | $ 41,496 |
Portfolio turnover rate | 64% | 44% | 38% | 81% | 116% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Total returns do not include the effect of the contingent deferred sales charge.
C Calculated based on average shares outstanding during the period.
D Investment income per share reflects a special dividend which amounted to $.09 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been .72%.
E Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
F Amount represents less than $.01 per share.
See accompanying notes which are an integral part of the financial statements.
Telecommunications & Utilities Growth
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 | 2002 |
Selected Per-Share Data | |||||
Net asset value, beginning of period | $ 15.31 | $ 12.20 | $ 10.47 | $ 8.86 | $ 15.31 |
Income from Investment Operations | |||||
Net investment income (loss) B | .30 | .33 C | .15 | .18 | .16 |
Net realized and unrealized gain (loss) | 2.10 | 3.03 | 1.73 | 1.71 | (6.61) |
Total from investment operations | 2.40 | 3.36 | 1.88 | 1.89 | (6.45) |
Distributions from net investment income | (.33) | (.25) | (.15) | (.28) | - |
Redemption fees added to paid in capital B | - E | - E | - E | - E | - E |
Net asset value, end of period | $ 17.38 | $ 15.31 | $ 12.20 | $ 10.47 | $ 8.86 |
Total Return A | 15.95% | 27.88% | 18.14% | 21.94% | (42.13)% |
Ratios to Average Net Assets D | |||||
Expenses before reductions | .94% | .99% | 1.09% | 1.06% | .96% |
Expenses net of fee waivers, if any | .94% | .99% | 1.09% | 1.06% | .96% |
Expenses net of all reductions | .92% | .96% | 1.04% | .94% | .87% |
Net investment income (loss) | 1.91% | 2.44% C | 1.29% | 1.98% | 1.28% |
Supplemental Data | |||||
Net assets, end of period (000 omitted) | $ 6,479 | $ 1,766 | $ 2,254 | $ 2,891 | $ 2,939 |
Portfolio turnover rate | 64% | 44% | 38% | 81% | 116% |
A Total returns would have been lower had certain expenses not been reduced during the periods shown.
B Calculated based on average shares outstanding during the period.
C Investment income per share reflects a special dividend which amounted to $.09 per share. Excluding the special dividend, the ratio of net investment income (loss) to average net assets would have been 1.80%.
D Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
E Amount represents less than $.01 per share.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Telecommunications & Utilities Growth Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds received from litigation. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, deferred trustees compensation, capital loss carryforwards and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 29,313,795 | |
Unrealized depreciation | (8,207,535) | |
Net unrealized appreciation (depreciation) | 21,106,260 | |
Undistributed ordinary income | 1,237,570 | |
Capital loss carryforward | (289,540,228) | |
Cost for federal income tax purposes | $ 204,973,937 |
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Ordinary Income | $ 1,886,398 | $ 2,204,610 |
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
Short-Term Trading (Redemption) Fees. Shares held in the Fund less than 60 days are subject to a redemption fee equal to 1.00% of the proceeds of the redeemed shares. All redemption fees, including any estimated redemption fees paid by FMR, are retained by the Fund and accounted for as an addition to paid in capital.
On September 21, 2006, the Board of Trustees approved a change in the redemption fee. Effective October 1, 2006, shares held in the Fund less than 30 days will be subject to a redemption fee equal to .75% of the proceeds of the redeemed shares.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $120,913,361 and $157,023,034, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR.
Telecommunications & Utilities Growth
4. Fees and Other Transactions with Affiliates - continued
Management Fee - continued
The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares, except for the and Institutional Class. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 79,618 | $ 904 |
Class T | 25% | .25% | 259,524 | 654 |
Class B | .75% | .25% | 732,258 | 549,359 |
Class C | .75% | .25% | 321,686 | 16,998 |
$ 1,393,086 | $ 567,915 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 22,708 |
Class T | 8,841 |
Class B * | 128,312 |
Class C * | 1,179 |
$ 161,040 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 135,247 | .42 |
Class T | 226,444 | .44 |
Class B | 309,214 | .42 |
Class C | 115,425 | .36 |
Institutional Class | 5,348 | .27 |
$ 791,678 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $1,561 for the period.
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $554 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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 Fund and any additional required collateral is delivered to the Fund 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $15,107.
7. Expense Reductions.
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $40,605 for the period.
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2006 | 2005 |
From net investment income | ||
Class A | $ 515,686 | $ 379,843 |
Class T | 679,149 | 719,068 |
Class B | 428,719 | 727,725 |
Class C | 227,882 | 334,204 |
Institutional Class | 34,962 | 43,770 |
Total | $ 1,886,398 | $ 2,204,610 |
Telecommunications & Utilities Growth
10. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 1,157,742 | 617,343 | $ 18,299,828 | $ 8,551,655 |
Reinvestment of distributions | 29,809 | 25,986 | 453,431 | 343,477 |
Shares redeemed | (749,911) | (539,379) | (11,656,126) | (7,330,607) |
Net increase (decrease) | 437,640 | 103,950 | $ 7,097,133 | $ 1,564,525 |
Class T | ||||
Shares sold | 427,549 | 578,539 | $ 6,679,626 | $ 7,880,368 |
Reinvestment of distributions | 41,716 | 51,235 | 634,275 | 676,884 |
Shares redeemed | (1,121,239) | (1,366,525) | (17,325,224) | (18,576,683) |
Net increase (decrease) | (651,974) | (736,751) | $ (10,011,323) | $ (10,019,431) |
Class B | ||||
Shares sold | 164,555 | 216,806 | $ 2,522,243 | $ 2,882,532 |
Reinvestment of distributions | 24,747 | 47,675 | 371,052 | 631,927 |
Shares redeemed | (1,855,539) | (1,863,609) | (28,512,346) | (24,817,850) |
Net increase (decrease) | (1,666,237) | (1,599,128) | $ (25,619,051) | $ (21,303,391) |
Class C | ||||
Shares sold | 246,869 | 270,120 | $ 3,819,729 | $ 3,555,440 |
Reinvestment of distributions | 11,397 | 19,593 | 170,983 | 258,067 |
Shares redeemed | (663,040) | (903,829) | (10,076,221) | (12,032,784) |
Net increase (decrease) | (404,774) | (614,116) | $ (6,085,509) | $ (8,219,277) |
Institutional Class | ||||
Shares sold | 292,241 | 17,262 | $ 4,893,596 | $ 232,429 |
Reinvestment of distributions | 1,223 | 2,019 | 18,745 | 26,680 |
Shares redeemed | (36,084) | (88,732) | (562,628) | (1,218,106) |
Net increase (decrease) | 257,380 | (69,451) | $ 4,349,713 | $ (958,997) |
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Advisor Series VII and the Shareholders of Fidelity Advisor Biotechnology Fund, Fidelity Advisor Consumer Industries Fund, Fidelity Advisor Cyclical Industries Fund, Fidelity Advisor Developing Communications Fund, Fidelity Advisor Electronics Fund, Fidelity Advisor Financial Services Fund, Fidelity Advisor Health Care Fund, Fidelity Advisor Natural Resources Fund, Fidelity Advisor Technology Fund, and Fidelity Advisor Telecommunications & Utilities Growth Fund:
We have audited the accompanying statements of assets and liabilities of Fidelity Advisor Biotechnology Fund, Fidelity Advisor Consumer Industries Fund, Fidelity Advisor Cyclical Industries Fund, Fidelity Advisor Developing Communications Fund, Fidelity Advisor Electronics Fund, Fidelity Advisor Financial Services Fund, Fidelity Advisor Health Care Fund, Fidelity Advisor Natural Resources Fund, Fidelity Advisor Technology Fund, and Fidelity Advisor Telecommunications & Utilities Growth Fund (collectively, the "Funds"), including the schedules of investments, as of July 31, 2006, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, audits of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2006, by correspondence with the custodians and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial positions of Fidelity Advisor Biotechnology Fund, Fidelity Advisor Consumer Industries Fund, Fidelity Advisor Cyclical Industries Fund, Fidelity Advisor Developing Communications Fund, Fidelity Advisor Electronics Fund, Fidelity Advisor Financial Services Fund, Fidelity Advisor Health Care Fund, Fidelity Advisor Natural Resources Fund, Fidelity Advisor Technology Fund, and Fidelity Advisor Telecommunications & Utilities Growth Fund as of July 31, 2006, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 9, 2006
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and funds, as applicable, are listed below. The Board of Trustees governs each fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee each fund's activities, review contractual arrangements with companies that provide services to each fund, and review each fund's performance. Except for William O. McCoy, each of the Trustees oversees 345 funds advised by FMR or an affiliate. Mr. McCoy oversees 347 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (76) | |
Year of Election or Appointment: 1980 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as President (2006-present), Chief Executive Officer, Chairman, and a Director of FMR Corp.; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001-present) and a Director (1999-present) of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of Fidelity International Limited (FIL). | |
Stephen P. Jonas (53) | |
Year of Election or Appointment: 2005 Mr. Jonas is Senior Vice President of Advisor Biotechnology (2005-present), Advisor Consumer Industries (2005-present), Advisor Cyclical Industries (2005-present), Advisor Developing Communications (2005-present), Advisor Electronics (2005-present), Advisor Financial Services (2005-present), Advisor Health Care (2005-present), Advisor Natural Resources (2005-present), Advisor Technology (2005-present), and Advisor Telecommunications & Utilities Growth (2005-present). He also serves as Senior Vice President of other Fidelity funds (2005-present). Mr. Jonas is Executive Director of FMR (2005-present) and FMR Co., Inc. (2005-present). He also serves as a Director of Fidelity Investments Money Management, Inc. (2005-present) and FMR Corp. (2003-present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004-2005), Chief Administrative Officer (2002-2004), and Chief Financial Officer of FMR Corp. (1998-2002). In addition, he serves on the Boards of Boston Ballet (2003-present) and Simmons College (2003-present). | |
Robert L. Reynolds (54) | |
Year of Election or Appointment: 2003 Mr. Reynolds is President and a Director of FMR (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and FMR Co., Inc. (2005-present). Mr. Reynolds also serves as a Director (2003-present) and Chief Operating Officer (2000-present) of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000-present). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
Annual Report
Trustees and Officers - continued
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
Dennis J. Dirks (58) | |
Year of Election or Appointment: 2005 Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999-2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999-2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999-2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001-2003) and Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation (2001-2003). Mr. Dirks also serves as a Trustee and a member of the Finance Committee of Manhattan College (2005-present) and a Trustee and a member of the Finance Committee of AHRC of Nassau County (2006-present). | |
Robert M. Gates (62) | |
Year of Election or Appointment: 1997 Dr. Gates is Chairman of the Independent Trustees (2006-present). Dr. Gates is President of Texas A&M University (2002-present). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001-present), and Brinker International (restaurant management, 2003-present). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). | |
George H. Heilmeier (70) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002), INET Technologies Inc. (telecommunications network surveillance, 2001-2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display. | |
Marie L. Knowles (59) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing) and McKesson Corporation (healthcare service, 2002-present). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (62) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. Mr. Lautenbach serves as a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004-present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005-present), as well as a member of the Council on Foreign Relations. | |
William O. McCoy (72) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Duke Realty Corporation (real estate). He is also a partner of Franklin Street Partners (private investment management firm). In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves as Chairman of the Board of Directors of the University of North Carolina Health Care System. He also served as Vice President of Finance for the University of North Carolina (16-school system). | |
Cornelia M. Small (62) | |
Year of Election or Appointment: 2005 Ms. Small is a member (2000-present) and Chairperson (2002-present) of the Investment Committee, and a member (2002-present) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990-1997) and Scudder Kemper Investments (1997-1999). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
William S. Stavropoulos (67) | |
Year of Election or Appointment: 2002 Mr. Stavropoulos is Chairman Emeritus of the Board of Directors of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000; 2002-2003), CEO (1995-2000; 2002-2004), and Chairman of the Executive Committee (2000-2004). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, Maersk Inc. (industrial conglomerate, 2002-present), and Metalmark Capital (private equity investment firm, 2005-present). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council and the University of Notre Dame Advisory Council for the College of Science. | |
Kenneth L. Wolfe (67) | |
Year of Election or Appointment: 2005 Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993-2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003-present), Bausch & Lomb, Inc., and Revlon Inc. (2004-present). | |
Advisory Board Members and Executive Officers:
Correspondence intended for Messers. Keyes and Gamper may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Albert R. Gamper, Jr. (64) | |
Year of Election or Appointment: 2005 Member of the Advisory Board of Fidelity Advisor Series VII. Mr. Gamper also serves as a Trustee (2006-present) or Member of the Advisory Board (2005-present) of other investment companies advised by FMR. Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001-present), Chairman of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. | |
James H. Keyes (65) | |
Year of Election or Appointment: 2006 Member of the Advisory Board of Fidelity Advisor Series VII. Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of LSI Logic Corporation (semiconductor technologies, 1984-present), Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, 2002-present), and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions, 1998-present). | |
Peter S. Lynch (62) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series VII. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001-present) and a Director (1999-present) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as the Chairman of the Inner-City Scholarship Fund. | |
Boyce I. Greer (50) | |
Year of Election or Appointment: 2005 Vice President of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Greer also serves as Vice President of certain Equity Funds (2005-present), certain Asset Allocation Funds (2005-present), Fixed-Income Funds (2006-present), and Money Market Funds (2006-present). Mr. Greer is also a Trustee of other investment companies advised by FMR (2003-present). He is an Executive Vice President of FMR (2005-present) and FMR Co., Inc. (2005-present), and Senior Vice President of Fidelity Investments Money Management, Inc. (2006-present). Previously, Mr. Greer served as a Director and Managing Director of Strategic Advisers, Inc. (2002-2005), and Executive Vice President (2000-2002) and Money Market Group Leader (1997-2002) of the Fidelity Investments Fixed Income Division. He also served as Vice President of Fidelity's Money Market Funds (1997-2002), Senior Vice President of FMR (1997-2002), and Vice President of FIMM (1998-2002). | |
Eric D. Roiter (57) | |
Year of Election or Appointment: 1998 Secretary of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001-present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001-present), Fidelity Research & Analysis Company (2001-present), and Fidelity Investments Money Management, Inc. (2001-present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003-present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (1998-2005). | |
Stuart Fross (46) | |
Year of Election or Appointment: 2003 Assistant Secretary of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003-present), Vice President and Secretary of FDC (2005-present), and is an employee of FMR. | |
Christine Reynolds (47) | |
Year of Election or Appointment: 2004 President and Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Ms. Reynolds also serves as President and Treasurer of other Fidelity funds (2004-present) and is a Vice President (2003-present) and an employee (2002-present) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was most recently an audit partner with PwC's investment management practice. | |
R. Stephen Ganis (40) | |
Year of Election or Appointment: 2006 Anti-Money Laundering (AML) officer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Ganis also serves as AML officer of other Fidelity funds (2006-present) and FMR Corp. (2003-present). Before joining Fidelity Investments, Mr. Ganis practiced law at Goodwin Procter, LLP (2000-2002). | |
Joseph B. Hollis (58) | |
Year of Election or Appointment: 2006 Chief Financial Officer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Hollis also serves as Chief Financial Officer of other Fidelity funds. Mr. Hollis is President of Fidelity Pricing and Cash Management Services (FPCMS) (2005-present). Mr. Hollis also serves as President and Director of Fidelity Service Company, Inc. (2006-present). Previously, Mr. Hollis served as Senior Vice President of Cash Management Services (1999-2002) and Investment Management Operations (2002-2005). | |
Kenneth A. Rathgeber (59) | |
Year of Election or Appointment: 2004 Chief Compliance Officer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004-present) and Executive Vice President of Risk Oversight for Fidelity Investments (2002-present). He is Chief Compliance Officer of FMR (2005-present), FMR Co., Inc. (2005-present), Fidelity Management & Research (U.K.) Inc. (2005-present), Fidelity Research & Analysis Company (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and Strategic Advisers, Inc. (2005-present). Previously, Mr. Rathgeber served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
Bryan A. Mehrmann (45) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004). | |
Kimberley H. Monasterio (42) | |
Year of Election or Appointment: 2004 Deputy Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000-2004) and Chief Financial Officer (2002-2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000-2004). | |
Kenneth B. Robins (36) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2004-present). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG's department of professional practice (2002-2004) and a Senior Manager (1999-2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000-2002). | |
Robert G. Byrnes (39) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003). | |
John H. Costello (59) | |
Year of Election or Appointment: 1987, 1996 or 2000 Assistant Treasurer of Advisor Biotechnology (2000), Advisor Consumer Industries (1996), Advisor Cyclical Industries (1996), Advisor Developing Communications (2000), Advisor Electronics (2000), Advisor Financial Services (1996), Advisor Health Care (1996), Advisor Natural Resources (1987), Advisor Technology (1996), and Advisor Telecommunications & Utilities Growth (1996). Mr. Costello also serves as Assistant Treasurer of other Fidelity funds and is an employee of FMR. | |
Peter L. Lydecker (52) | |
Year of Election or Appointment: 2004 Assistant Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR. | |
Mark Osterheld (51) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Gary W. Ryan (47) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999-2005). | |
Salvatore Schiavone (40) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Advisor Biotechnology, Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Developing Communications, Advisor Electronics, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003-2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996-2003). | |
Annual Report
Distributions
The Board of Trustees of each fund 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:
Fund | Pay Date | Record Date | Dividends | Capital Gains |
Consumer Industries | 09/18/06 | 09/15/06 | $- | $1.500 |
Cyclical Industries | 09/18/06 | 09/15/06 | $0.045 | $1.284 |
Financial Services | 09/18/06 | 09/15/06 | $0.173 | $1.680 |
Health Care | 09/11/06 | 09/08/06 | $- | $2.015 |
Natural Resources | 09/11/06 | 09/08/06 | $- | $5.163 |
The funds hereby designate as capital gain dividend the amounts noted below for the taxable year ended July 31, 2006, or, if subsequently determined to be different, the net capital gain of such year.
Fund | |
Consumer Industries | $5,573,533 |
Cyclical Industries | $8,376,034 |
Financial Services | $30,586,460 |
Health Care | $49,867,504 |
Natural Resources | $84,518,880 |
A percentage of the dividends distributed during the fiscal year for the following funds qualifies for the dividends -received deduction for corporate shareholders:
Cyclical Industries | 20% |
Financial Services | 100% |
A percentage of the dividends distributed during the fiscal year for the following funds qualifies for the dividends-received deduction for corporate shareholders:
Natural Resources | |
September, 2005 | 16% |
December, 2005 | 12% |
Telecommunications & Utilities Growth | |
September, 2005 | 100% |
December, 2005 | 100% |
A percentage of the dividends distributed during the fiscal year for the following funds may be taken into account as a dividend for purposes of the maximum rate under section 1(h)(11) of the Internal Revenue Code.
Cyclical Industries | 25% |
Financial Services | 100% |
A percentage of the dividends distributed during the fiscal year for the following funds may be taken into account as a dividend for purposes of the maximum rate under section 1(h)(11) of the Internal Revenue Code.
Natural Resources | |
September, 2005 | 26% |
December, 2005 | 18% |
Telecommunications & Utilities Growth | |
September, 2005 | 100% |
December, 2005 | 100% |
The fund will notify shareholders in January 2007 of amounts for use in preparing 2006 income tax returns.
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees
Advisor Focus Funds
Each year, typically in July, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for each fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly each month except August and takes into account throughout the year matters bearing on Advisory Contracts. The Board, acting directly and through its separate committees, considers at each of its meetings factors that are relevant to the annual renewal of each fund's Advisory Contracts, including the services and support provided to each fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has adopted a written charter outlining the structure and purposes of the committee. One such committee, the Equity Contract Committee, meets periodically as needed throughout the year to consider matters specifically related to the annual renewal of Advisory Contracts. The committee requests and receives information on, and makes recommendations to the Independent Trustees concerning, the approval and annual review of the Advisory Contracts.
At its July 2006 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the Advisory Contracts for each fund. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to each fund and its shareholders (including the investment performance of each fund); (ii) the competitiveness of the management fee and total expenses of each fund; (ii) the total costs of the services to be provided by and the profits to be realized by the investment adviser and its affiliates from the relationship with each fund; (iv) the extent to which economies of scale would be realized as each fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In determining whether to renew the Advisory Contracts for each fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contracts is consistent with Fidelity's fiduciary duty under applicable law. In addition to evaluating the specific factors noted above, the Board, in reaching its determination, is aware that shareholders in each fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that each fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in that fund, managed by Fidelity.
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the backgrounds of the funds' portfolio managers and the funds' investment objectives and disciplines. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for each fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, each fund's compliance policies and procedures. The Board reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services. The Board also considered that Fidelity voluntarily pays for market data out of its own resources.
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of a fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying an additional sales charge. The Board noted that, since the last Advisory Contract renewals in July 2005, Fidelity has taken a number of actions that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) voluntarily entering into contractual arrangements with certain brokers pursuant to which Fidelity pays for research products and services separately out of its own resources, rather than bundling with fund commissions; (iii) launching the Fidelity Advantage Class of its five Spartan stock index funds and three Spartan bond index funds, which is a lower-fee class available to shareholders with higher account balances; (iv) contractually agreeing to impose expense limitations on Fidelity U.S. Bond Index Fund and reducing the fund's initial investment minimum; and (v) offering shareholders of each of the Fidelity Institutional Money Market Funds the privilege of exchanging shares of the fund for shares of other Fidelity funds.
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees - continued
Investment Performance and Compliance. The Board considered whether each fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed each fund's absolute investment performance for each class, as well as each fund's relative investment performance for each class measured against (i) a Goldman Sachs index that reflects the market sector in which the fund invests (Advisor Consumer Industries, Advisor Cyclical Industries, Advisor Financial Services, Advisor Health Care, Advisor Natural Resources, Advisor Technology, and Advisor Telecommunications & Utilities Growth) or a proprietary custom index (Advisor Biotechnology, Advisor Developing Communications, and Advisor Electronics), and (ii) a peer group of mutual funds over multiple periods. For each fund, the following charts considered by the Board show, over the one-, three-, and five-year periods ended December 31, 2005, the cumulative total returns of Class C and Institutional Class of the fund, the cumulative total returns of a Goldman Sachs index (or a proprietary custom index, in the case of Advisor Biotechnology, Advisor Developing Communications, and Advisor Electronics) ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of Class C and Institutional Class represent the performance of classes with the highest and lowest 12b-1 fees, respectively (not necessarily with the highest and lowest total expenses). The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the Lipper peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the Lipper peer group whose performance was equal to or lower than that of the class indicated. For each of Advisor Biotechnology, Advisor Developing Communications, and Advisor Electronics, the fund's proprietary custom index is an index developed and periodically revised by FMR that is a market-capitalization weighted index of securities that meet the fund's 80% name test.
Advisor Biotechnology
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the third quartile for the one-year period, the second quartile for the three-year period, and the fourth quartile for the five-year period. The Board noted that FMR does not consider that Lipper peer group to be a meaningful comparison for the fund, however, because the funds in the peer group typically have broader investment mandates than the fund, which focuses on a particular subset of companies within the health and biotechnology industries. The Board also stated that the relative investment performance of the fund was lower than its benchmark for all the periods shown. In the absence of a meaningful peer group comparison for the fund and in consideration of the fund's exposure to a narrow market sector, the Board focused its review on the fund's relative investment performance measured against its benchmark. In light of that comparison, the Board discussed with FMR actions to be taken by FMR to improve the fund's below-benchmark performance. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Annual Report
Advisor Consumer Industries
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the third quartile for the one- and five-year periods and the fourth quartile for the three-year period. The Board noted that FMR does not consider that Lipper peer group to be a meaningful comparison for the fund, however, because the peer group includes funds that focus on different industries and sectors than the fund. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for the one- and three-year periods, although the fund's five-year cumulative total return was lower than its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Advisor Cyclical Industries
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the first quartile for all the periods shown. The Board noted that FMR does not consider that Lipper peer group to be a meaningful comparison for the fund, however, because the peer group includes funds that focus on different industries and sectors than the fund. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for all the periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees - continued
Advisor Developing Communications
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the third quartile for the one-year period and the first quartile for the three- and five-year periods. The Board noted that FMR does not consider that Lipper peer group to be a meaningful comparison for the fund, however, because the funds in the peer group typically have broader investment mandates than the fund, which focuses on a particular subset of companies within the science and technology industries. The Board also stated that the relative investment performance of the fund was lower than its benchmark for the one- and three-year periods, although the five-year cumulative total return of Institutional Class of the fund compared favorably to its benchmark. In the absence of a meaningful peer group comparison for the fund and in consideration of the fund's exposure to a narrow market sector, the Board focused its review on the fund's relative investment performance measured against its benchmark. In light of that comparison, the Board discussed with FMR actions to be taken by FMR to improve the fund's below-benchmark performance. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Advisor Electronics
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the first quartile for the one- and five-year periods and the second quartile for the three-year period. The Board noted that FMR does not consider that Lipper peer group to be a meaningful comparison for the fund, however, because the funds in the peer group typically have broader investment mandates than the fund, which focuses on a particular subset of companies within the science and technology industries. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for the one- and five-year periods, although the fund's three-year cumulative total return was lower than its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Annual Report
Advisor Financial Services
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the second quartile for all the periods shown. The Board also stated that the relative investment performance of the fund was lower than its benchmark for all the periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Advisor Health Care
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the first quartile for the one-year period, the third quartile for the three-year period, and the second quartile for the five-year period. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for all the periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees - continued
Advisor Natural Resources
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the second quartile for all the periods shown. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for all the periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Advisor Technology
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the first quartile for the one- and five-year periods and the second quartile for the three-year period. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for all the periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
Annual Report
Advisor Telecommunications & Utilities Growth
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the third quartile for the one-year period and the second quartile for the three- and five-year periods. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for all the periods shown. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
The Board considered that FMR has taken steps to refocus and strengthen equity research, equity portfolio management, and compliance. The Board noted with favor FMR's reorganization of its senior management team in 2005 and FMR's dedication of additional resources to investment research, and participated in the process that led to those changes.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to each fund will benefit each fund's shareholders, particularly in light of the Board's view that each fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Competitiveness of Management Fee and Total Fund Expenses. The Board considered each fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
The Board considered two proprietary management fee comparisons for the 12-month periods shown in the charts below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than a fund's. For example, a TMG % of 21% would mean that 79% of the funds in the Total Mapped Group had higher management fees than a fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which a fund's management fee ranked, is also included in the charts and considered by the Board.
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees - continued
Advisor Biotechnology
Advisor Consumer Industries
Annual Report
Advisor Cyclical Industries
Advisor Developing Communications
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees - continued
Advisor Electronics
Advisor Financial Services
Annual Report
Advisor Health Care
Advisor Natural Resources
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees - continued
Advisor Technology
Advisor Telecommunications & Utilities Growth
The Board noted that each fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2005.
Based on its review, the Board concluded that each fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
In its review of each class's total expenses, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered current and historical total expenses of each class of each fund compared to competitive fund median expenses. Each class of each fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that each fund offers multiple classes, each of which has a different sales load and 12b-1 fee structure, and that the multiple structures are intended to offer a range of pricing options for the intermediary market. The Board also noted that the total expenses of the classes of each fund vary primarily by the level of their 12b-1 fees, although differences in transfer agent fees may also cause expenses to vary from class to class.
The Board noted that the total expenses of each of Class A, Class B, Class C and Institutional Class of Advisor Biotechnology ranked below its competitive median for 2005, and the total expenses of Class T of the fund ranked above its competitive median for 2005.
Annual Report
The Board noted that the total expenses of each of Class A, Class B, Class C and Institutional Class of Advisor Consumer Industries ranked below its competitive median for 2005, and the total expenses of Class T of the fund ranked above its competitive median for 2005.
The Board noted that the total expenses of each class of Advisor Cyclical Industries ranked below its competitive median for 2005.
The Board noted that the total expenses of each of Class A, Class B, Class C and Institutional Class of Advisor Developing Communications ranked below its competitive median for 2005, and the total expenses of Class T of the fund ranked above its competitive median for 2005.
The Board noted that the total expenses of each of Class A, Class B, Class C and Institutional Class of Advisor Electronics ranked below its competitive median for 2005, and the total expenses of Class T of the fund ranked above its competitive median for 2005.
The Board noted that the total expenses of each class of Advisor Financial Services ranked below its competitive median for 2005.
The Board noted that the total expenses of each class of Advisor Health Care ranked below its competitive median for 2005.
The Board noted that the total expenses of each class of Advisor Natural Resources ranked below its competitive median for 2005.
The Board noted that the total expenses of each of Class A, Class B, Class C and Institutional Class of Advisor Technology ranked below its competitive median for 2005, and the total expenses of Class T of the fund ranked above its competitive median for 2005.
The Board noted that the total expenses of Institutional Class of Advisor Telecommunications & Utilities Growth ranked below its competitive median for 2005, and the total expenses of each of Class A, Class B, Class C and Class T of the fund ranked above its competitive median for 2005. The Board considered that Class A, Class B, Class C and Class T of the fund were above median because of relatively high transfer agent fees resulting from small average account sizes.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Based on its review, the Board concluded that the total expenses of each class of each fund were reasonable, although in some cases above the median of the universe presented for comparison, in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing each fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
On an annual basis, FMR presents to the Board Fidelity's profitability for each fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the funds' business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of each fund and determined that the amount of profit is a fair entrepreneurial profit for the management of each fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including each fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which each fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions, including reductions that occur through operation of the transfer agent agreement. The transfer agent fee varies in part based on the number of accounts in each fund. If the number of accounts decreases or the average account size increases, the overall transfer agent fee rate decreases.
The Board recognized that each fund's management contract incorporates a "group fee" structure, which provides for lower fee rates as total fund assets under FMR's management increase, and for higher fee rates as total fund assets under FMR's management decrease. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will achieve a certain level of economies of scale as assets under FMR's management increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees - continued
The Board further concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Advisory Contracts, the Board requested additional information on several topics, including (i) Fidelity's fund profitability methodology and profitability trends within certain funds; (ii) portfolio manager compensation; (iii) the extent to which any economies of scale exist and are shared between the funds and Fidelity; (iv) the total expenses of certain funds and classes relative to competitors, including the extent to which the expenses of certain funds have been or could be capped; (v) fund performance trends; and (vi) Fidelity's fee structures, including use of performance fees.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that each fund's Advisory Contracts should be renewed.
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research (U.K.) Inc.
Fidelity Research & Analysis Company (formerly Fidelity Management & Research (Far East) Inc.)
Fidelity Investments Japan Limited
Fidelity International Investment Advisors
Fidelity International Investment Advisors (U.K.) Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodians
JPMorgan Chase Bank
New York, NY
Brown Brothers Harriman & Co. (dagger)
Boston, MA
State Street Bank and Trust (dagger)(dagger)
Quincy, MA
(dagger) Custodian for Fidelity Advisor Natural Resources Fund only.
(dagger)(dagger) Custodian for Fidelity Advisor Biotechnology Fund, Fidelity Advisor Developing
Communications Fund, and Fidelity Advisor Electronics Fund only.
AFOCI-UANN-0906
1.834302.100
(Fidelity Investment logo)(registered trademark)
Fidelity® Advisor
Real Estate
Fund - Class A, Class T, Class B
and Class C
Annual Report
July 31, 2006
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to financial statements. | |
Report of Independent Registered Public Accounting Firm | ||
Trustees and Officers | ||
Distributions | ||
Board Approval of Investment Advisory Contracts and Management Fees |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
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.
Annual Report
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.advisor.fidelity.com.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Annual Report
Chairman's Message
(Photograph of Edward C. Johnson 3d.)
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Although many securities markets made gains in early 2006, inflation concerns led to mixed results through the year's mid-point. Financial markets are always unpredictable. There are, however, a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Fidelity Advisor Real Estate Fund - Class A, T, B, and C
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Life of FundA | |
Class A (incl. 5.75% sales charge) | 11.51% | 23.25% | |
Class T (incl. 3.50% sales charge) | 13.85% | 23.64% | |
Class B (incl. contingent deferred sales charge) B | 12.42% | 23.76% | |
Class C (incl. contingent deferred sales charge) C | 16.46% | 24.21% |
A From September 12, 2002.
B Class B shares' contingent deferred sales charges included in the past one year and life of fund total return figures are 5% and 4%, respectively.
C Class C shares' contingent deferred sales charge included in the past one year and life of fund total return figures are 1% and 0%, respectively.
Annual Report
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity® Advisor Real Estate Fund - Class T on September 12, 2002, when the fund started, and the current 3.50% sales charge was paid. The chart shows how the value of your investment would have changed, and also shows how the Standard & Poor's 500SM Index (S&P 500®) performed over the same period.
Note: Class T performance is shown above. Class A, Class B, and Class C returns may vary due to the difference in sales charges paid by each class or expenses borne by a particular class. Please see prospectus for added detail regarding class-level expenses.
Annual Report
Management's Discussion of Fund Performance
Comments from Samuel Wald, Portfolio Manager of Fidelity® Advisor Real Estate Fund
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
For the 12 months ending July 31, 2006, the fund's Class A, Class T, Class B and Class C shares gained 18.32%, 17.98%, 17.42% and 17.46%, respectively (excluding sales charges), topping the S&P 500, the Dow Jones Wilshire Real Estate Securities IndexSM, which rose 17.33%, and the LipperSM Real Estate Funds Average, which increased 15.39%. Relative to the Dow Jones Wilshire index, the fund benefited from strong stock selection in the office, mall and industrial subsectors, more than making up for underperforming picks in the apartment subsector. The fund's biggest positive was an underweighting in mall operator Mills, which was hurt by accounting questions that weighed on the company. Investors also saw risks associated with some of its development projects. Mills was not in the portfolio at period end. In the office industry, Trizec Properties was acquired for a significant premium in June, while SL Green Realty benefited from faster-than-expected growth in the Manhattan office market. A notable negative was not owning apartment real estate investment trust (REIT) and index component Archstone Smith Trust, which I avoided in favor of other apartment REITs that I believed offered similar growth potential at more-attractive valuations. Unfortunately, the market did not share my concern about these companies' high valuations during the period. Midscale mall company CBL & Associates also hurt, hampered by investors' worries about a decline in consumer spending.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Annual Report
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 1,105.40 | $ 6.53 |
HypotheticalA | $ 1,000.00 | $ 1,018.60 | $ 6.26 |
Class T | |||
Actual | $ 1,000.00 | $ 1,104.40 | $ 7.83 |
HypotheticalA | $ 1,000.00 | $ 1,017.36 | $ 7.50 |
Class B | |||
Actual | $ 1,000.00 | $ 1,102.10 | $ 10.42 |
HypotheticalA | $ 1,000.00 | $ 1,014.88 | $ 9.99 |
Class C | |||
Actual | $ 1,000.00 | $ 1,102.00 | $ 10.42 |
HypotheticalA | $ 1,000.00 | $ 1,014.88 | $ 9.99 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 1,107.10 | $ 4.91 |
HypotheticalA | $ 1,000.00 | $ 1,020.13 | $ 4.71 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.25% |
Class T | 1.50% |
Class B | 2.00% |
Class C | 2.00% |
Institutional Class | .94% |
Annual Report
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
Equity Residential (SBI) | 7.4 | 5.8 |
ProLogis Trust | 6.4 | 6.6 |
General Growth Properties, Inc. | 5.9 | 5.5 |
Host Hotels & Resorts, Inc. | 5.5 | 1.9 |
Equity Office Properties Trust | 5.5 | 4.3 |
Simon Property Group, Inc. | 5.3 | 5.7 |
United Dominion Realty Trust, Inc. (SBI) | 4.6 | 5.1 |
Duke Realty Corp. | 4.3 | 3.6 |
Boston Properties, Inc. | 4.2 | 4.0 |
Vornado Realty Trust | 4.0 | 2.7 |
53.1 | ||
Top Five REIT Sectors as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
REITs - Office Buildings | 22.7 | 20.7 |
REITs - Apartments | 16.6 | 17.1 |
REITs - Malls | 14.8 | 16.8 |
REITs - Industrial Buildings | 13.7 | 11.5 |
REITs - Shopping Centers | 13.6 | 11.8 |
Asset Allocation (% of fund's net assets) | |||||||
As of July 31, 2006 * | As of January 31, 2006 ** | ||||||
 | Stocks 97.1% | | Stocks 96.5% | ||||
 | Short-Term | | Short-Term | ||||
* Foreign investments | 0.0% | ** Foreign investments | 0.1% | ||||
Annual Report
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 97.1% | |||
Shares | Value (Note 1) | ||
HEALTH CARE PROVIDERS & SERVICES - 0.3% | |||
Health Care Facilities - 0.3% | |||
Brookdale Senior Living, Inc. | 16,800 | $ 781,200 | |
HOTELS, RESTAURANTS & LEISURE - 2.5% | |||
Hotels, Resorts & Cruise Lines - 2.5% | |||
Starwood Hotels & Resorts Worldwide, Inc. | 117,710 | 6,189,192 | |
REAL ESTATE INVESTMENT TRUSTS - 94.3% | |||
REITs - Apartments - 16.6% | |||
Apartment Investment & Management Co. Class A | 41,700 | 2,005,353 | |
AvalonBay Communities, Inc. | 61,000 | 7,132,120 | |
Equity Residential (SBI) | 394,700 | 18,357,496 | |
GMH Communities Trust | 176,379 | 2,211,793 | |
United Dominion Realty Trust, Inc. (SBI) | 405,700 | 11,298,745 | |
TOTAL REITS - APARTMENTS | 41,005,507 | ||
REITs - Factory Outlets - 1.5% | |||
Tanger Factory Outlet Centers, Inc. | 110,700 | 3,642,030 | |
REITs - Health Care Facilities - 1.9% | |||
Ventas, Inc. | 129,300 | 4,619,889 | |
REITs - Hotels - 5.9% | |||
Host Hotels & Resorts, Inc. (c) | 647,194 | 13,733,457 | |
Innkeepers USA Trust (SBI) | 53,900 | 909,293 | |
Sunstone Hotel Investors, Inc. | 2,254 | 63,923 | |
TOTAL REITS - HOTELS | 14,706,673 | ||
REITs - Industrial Buildings - 13.7% | |||
Duke Realty Corp. | 286,010 | 10,656,733 | |
ProLogis Trust | 288,623 | 15,975,283 | |
Public Storage, Inc. | 91,500 | 7,346,535 | |
TOTAL REITS - INDUSTRIAL BUILDINGS | 33,978,551 | ||
REITs - Malls - 14.8% | |||
CBL & Associates Properties, Inc. | 179,260 | 7,019,822 | |
General Growth Properties, Inc. | 322,299 | 14,709,726 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
REAL ESTATE INVESTMENT TRUSTS - CONTINUED | |||
REITs - Malls - continued | |||
Simon Property Group, Inc. | 152,200 | $ 13,017,666 | |
Taubman Centers, Inc. | 46,700 | 1,938,050 | |
TOTAL REITS - MALLS | 36,685,264 | ||
REITs - Management/Investment - 2.6% | |||
CentraCore Properties Trust | 69,695 | 1,795,343 | |
Equity Lifestyle Properties, Inc. | 83,200 | 3,575,104 | |
Mission West Properties, Inc. | 105,400 | 1,141,482 | |
TOTAL REITS - MANAGEMENT/INVESTMENT | 6,511,929 | ||
REITs - Mortgage - 1.0% | |||
HomeBanc Mortgage Corp., Georgia (c) | 152,800 | 1,252,960 | |
Newcastle Investment Corp. | 44,730 | 1,149,114 | |
TOTAL REITS - MORTGAGE | 2,402,074 | ||
REITs - Office Buildings - 22.7% | |||
Alexandria Real Estate Equities, Inc. | 62,200 | 5,872,924 | |
Boston Properties, Inc. (c) | 106,000 | 10,409,200 | |
Columbia Equity Trust, Inc. | 122,100 | 1,852,257 | |
Corporate Office Properties Trust (SBI) (c) | 71,800 | 3,231,000 | |
Equity Office Properties Trust | 355,800 | 13,488,378 | |
Kilroy Realty Corp. | 17,500 | 1,293,075 | |
Reckson Associates Realty Corp. | 31,770 | 1,414,718 | |
Shurgard Storage Centers, Inc. Class A | 38,400 | 2,530,560 | |
SL Green Realty Corp. | 64,900 | 7,418,070 | |
Sovran Self Storage, Inc. | 59,802 | 3,089,969 | |
Trizec Properties, Inc. | 190,500 | 5,478,780 | |
TOTAL REITS - OFFICE BUILDINGS | 56,078,931 | ||
REITs - Shopping Centers - 13.6% | |||
Developers Diversified Realty Corp. | 46,900 | 2,475,382 | |
Federal Realty Investment Trust (SBI) | 51,800 | 3,758,090 | |
Inland Real Estate Corp. | 235,200 | 3,812,592 | |
Kimco Realty Corp. | 244,300 | 9,586,332 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
REAL ESTATE INVESTMENT TRUSTS - CONTINUED | |||
REITs - Shopping Centers - continued | |||
Pan Pacific Retail Properties, Inc. | 61,190 | $ 4,228,229 | |
Vornado Realty Trust | 94,750 | 9,906,113 | |
TOTAL REITS - SHOPPING CENTERS | 33,766,738 | ||
TOTAL REAL ESTATE INVESTMENT TRUSTS | 233,397,586 | ||
TOTAL COMMON STOCKS (Cost $183,072,028) | 240,367,978 | ||
Money Market Funds - 7.2% | |||
Fidelity Cash Central Fund, 5.3% (a) | 6,438,729 | 6,438,729 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (a)(b) | 11,351,750 | 11,351,750 | |
TOTAL MONEY MARKET FUNDS (Cost $17,790,479) | 17,790,479 | ||
TOTAL INVESTMENT PORTFOLIO - 104.3% (Cost $200,862,507) | 258,158,457 | ||
NET OTHER ASSETS - (4.3)% | (10,715,865) | ||
NET ASSETS - 100% | $ 247,442,592 | ||
Legend |
(a) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(b) Investment made with cash collateral received from securities on loan. |
(c) Security or a portion of the security is on loan at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 242,036 |
Fidelity Securities Lending Cash Central Fund | 1,620 |
Total | $ 243,656 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $11,128,160) - See accompanying schedule: Unaffiliated issuers (cost $183,072,028) | $ 240,367,978 | |
Affiliated Central Funds (cost $17,790,479) | 17,790,479 | |
Total Investments (cost $200,862,507) | $ 258,158,457 | |
Foreign currency held at value (cost $14) | 14 | |
Receivable for investments sold | 1,923,047 | |
Receivable for fund shares sold | 1,036,637 | |
Dividends receivable | 97,158 | |
Interest receivable | 30,806 | |
Prepaid expenses | 257 | |
Receivable from investment adviser for expense reductions | 10,178 | |
Other receivables | 4,704 | |
Total assets | 261,261,258 | |
Liabilities | ||
Payable for investments purchased | $ 1,621,301 | |
Payable for fund shares redeemed | 516,987 | |
Accrued management fee | 113,600 | |
Distribution fees payable | 106,429 | |
Other affiliated payables | 74,375 | |
Other payables and accrued expenses | 34,224 | |
Collateral on securities loaned, at value | 11,351,750 | |
Total liabilities | 13,818,666 | |
Net Assets | $ 247,442,592 | |
Net Assets consist of: | ||
Paid in capital | $ 174,192,496 | |
Undistributed net investment income | 521,902 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 15,432,244 | |
Net unrealized appreciation (depreciation) on investments | 57,295,950 | |
Net Assets | $ 247,442,592 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price | $ 20.34 | |
Maximum offering price per share (100/94.25 of $20.34) | $ 21.58 | |
Class T: | $ 20.31 | |
Maximum offering price per share (100/96.50 of $20.31) | $ 21.05 | |
Class B: | $ 20.19 | |
Class C: | $ 20.21 | |
Institutional Class: | $ 20.47 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 5,408,050 | |
Interest | 266 | |
Income from affiliated Central Funds | 243,656 | |
Total income | 5,651,972 | |
Expenses | ||
Management fee | $ 1,135,599 | |
Transfer agent fees | 705,583 | |
Distribution fees | 1,096,258 | |
Accounting and security lending fees | 82,656 | |
Independent trustees' compensation | 783 | |
Custodian fees and expenses | 13,421 | |
Registration fees | 75,015 | |
Audit | 63,627 | |
Legal | 7,125 | |
Miscellaneous | 1,392 | |
Total expenses before reductions | 3,181,459 | |
Expense reductions | (119,808) | 3,061,651 |
Net investment income (loss) | 2,590,321 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 18,564,357 | |
Foreign currency transactions | 200 | |
Total net realized gain (loss) | 18,564,557 | |
Change in net unrealized appreciation (depreciation) on investment securities | 13,773,537 | |
Net gain (loss) | 32,338,094 | |
Net increase (decrease) in net assets resulting from operations | $ 34,928,415 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 2,590,321 | $ 2,012,236 |
Net realized gain (loss) | 18,564,557 | 8,236,230 |
Change in net unrealized appreciation (depreciation) | 13,773,537 | 35,843,402 |
Net increase (decrease) in net assets resulting | 34,928,415 | 46,091,868 |
Distributions to shareholders from net investment income | (2,073,129) | (1,811,337) |
Distributions to shareholders from net realized gain | (8,286,409) | (3,726,590) |
Total distributions | (10,359,538) | (5,537,927) |
Share transactions - net increase (decrease) | 43,551,731 | 61,397,757 |
Total increase (decrease) in net assets | 68,120,608 | 101,951,698 |
Net Assets | ||
Beginning of period | 179,321,984 | 77,370,286 |
End of period (including undistributed net investment income of $521,902 and undistributed net investment income of $377,371, respectively) | $ 247,442,592 | $ 179,321,984 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 18.23 | $ 13.22 | $ 11.33 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .29 | .31 | .27 | .21 |
Net realized and unrealized gain (loss) | 2.85 | 5.52 | 2.03 | 1.28 |
Total from investment operations | 3.14 | 5.83 | 2.30 | 1.49 |
Distributions from net investment income | (.23) | (.29) | (.30) | (.16) |
Distributions from net realized gain | (.80) | (.53) | (.11) | - |
Total distributions | (1.03) | (.82) | (.41) | (.16) |
Net asset value, end of period | $ 20.34 | $ 18.23 | $ 13.22 | $ 11.33 |
Total Return B,C,D | 18.32% | 45.48% | 20.59% | 15.13% |
Ratios to Average Net Assets G | ||||
Expenses before reductions | 1.29% | 1.31% | 1.54% | 2.98% A |
Expenses net of fee waivers, if any | 1.25% | 1.28% | 1.54% | 1.75% A |
Expenses net of all reductions | 1.24% | 1.25% | 1.52% | 1.72% A |
Net investment income (loss) | 1.59% | 1.98% | 2.10% | 2.35% A |
Supplemental Data | ||||
Net assets, end of period (000 omitted) | $ 85,000 | $ 53,097 | $ 22,273 | $ 3,993 |
Portfolio turnover rate | 65% | 62% | 52% | 47% A |
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period September 12, 2002 (commencement of operations) to July 31, 2003.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 18.23 | $ 13.21 | $ 11.32 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .24 | .26 | .23 | .18 |
Net realized and unrealized gain (loss) | 2.84 | 5.53 | 2.02 | 1.29 |
Total from investment operations | 3.08 | 5.79 | 2.25 | 1.47 |
Distributions from net investment income | (.20) | (.24) | (.25) | (.15) |
Distributions from net realized gain | (.80) | (.53) | (.11) | - |
Total distributions | (1.00) | (.77) | (.36) | (.15) |
Net asset value, end of period | $ 20.31 | $ 18.23 | $ 13.21 | $ 11.32 |
Total Return B,C,D | 17.98% | 45.12% | 20.12% | 14.91% |
Ratios to Average Net Assets G | ||||
Expenses before reductions | 1.55% | 1.61% | 1.86% | 3.32% A |
Expenses net of fee waivers, if any | 1.50% | 1.57% | 1.85% | 2.00% A |
Expenses net of all reductions | 1.49% | 1.54% | 1.83% | 1.97% A |
Net investment income (loss) | 1.34% | 1.70% | 1.80% | 2.10% A |
Supplemental Data | ||||
Net assets, end of period (000 omitted) | $ 91,224 | $ 66,303 | $ 26,037 | $ 9,049 |
Portfolio turnover rate | 65% | 62% | 52% | 47% A |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period September 12, 2002 (commencement of operations) to July 31, 2003.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 18.16 | $ 13.18 | $ 11.29 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .15 | .18 | .16 | .14 |
Net realized and unrealized gain (loss) | 2.83 | 5.50 | 2.04 | 1.28 |
Total from investment operations | 2.98 | 5.68 | 2.20 | 1.42 |
Distributions from net investment income | (.15) | (.17) | (.20) | (.13) |
Distributions from net realized gain | (.80) | (.53) | (.11) | - |
Total distributions | (.95) | (.70) | (.31) | (.13) |
Net asset value, end of period | $ 20.19 | $ 18.16 | $ 13.18 | $ 11.29 |
Total Return B,C,D | 17.42% | 44.31% | 19.67% | 14.38% |
Ratios to Average Net Assets G | ||||
Expenses before reductions | 2.05% | 2.10% | 2.33% | 3.82% A |
Expenses net of fee waivers, if any | 2.00% | 2.07% | 2.33% | 2.50% A |
Expenses net of all reductions | 1.98% | 2.03% | 2.31% | 2.47% A |
Net investment income (loss) | .84% | 1.20% | 1.31% | 1.60% A |
Supplemental Data | ||||
Net assets, end of period (000 omitted) | $ 27,397 | $ 26,349 | $ 12,910 | $ 5,061 |
Portfolio turnover rate | 65% | 62% | 52% | 47% A |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period September 12, 2002 (commencement of operations) to July 31, 2003.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 18.17 | $ 13.18 | $ 11.29 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .15 | .19 | .17 | .14 |
Net realized and unrealized gain (loss) | 2.84 | 5.50 | 2.03 | 1.28 |
Total from investment operations | 2.99 | 5.69 | 2.20 | 1.42 |
Distributions from net investment income | (.15) | (.17) | (.20) | (.13) |
Distributions from net realized gain | (.80) | (.53) | (.11) | - |
Total distributions | (.95) | (.70) | (.31) | (.13) |
Net asset value, end of period | $ 20.21 | $ 18.17 | $ 13.18 | $ 11.29 |
Total Return B,C,D | 17.46% | 44.38% | 19.67% | 14.38% |
Ratios to Average Net Assets G | ||||
Expenses before reductions | 2.05% | 2.09% | 2.29% | 3.76% A |
Expenses net of fee waivers, if any | 2.00% | 2.05% | 2.29% | 2.50% A |
Expenses net of all reductions | 1.98% | 2.02% | 2.27% | 2.47% A |
Net investment income (loss) | .84% | 1.22% | 1.35% | 1.60% A |
Supplemental Data | ||||
Net assets, end of period (000 omitted) | $ 36,669 | $ 29,410 | $ 13,671 | $ 5,059 |
Portfolio turnover rate | 65% | 62% | 52% | 47% A |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period September 12, 2002 (commencement of operations) to July 31, 2003.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 E |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 18.33 | $ 13.28 | $ 11.35 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) D | .35 | .36 | .32 | .23 |
Net realized and unrealized gain (loss) | 2.85 | 5.56 | 2.04 | 1.28 |
Total from investment operations | 3.20 | 5.92 | 2.36 | 1.51 |
Distributions from net investment income | (.26) | (.34) | (.32) | (.16) |
Distributions from net realized gain | (.80) | (.53) | (.11) | - |
Total distributions | (1.06) | (.87) | (.43) | (.16) |
Net asset value, end of period | $ 20.47 | $ 18.33 | $ 13.28 | $ 11.35 |
Total Return B,C | 18.61% | 46.05% | 21.11% | 15.33% |
Ratios to Average Net Assets F | ||||
Expenses before reductions | .94% | .91% | 1.12% | 2.68% A |
Expenses net of fee waivers, if any | .94% | .91% | 1.12% | 1.50% A |
Expenses net of all reductions | .92% | .88% | 1.10% | 1.47% A |
Net investment income (loss) | 1.90% | 2.35% | 2.53% | 2.60% A |
Supplemental Data | ||||
Net assets, end of period (000 omitted) | $ 7,152 | $ 4,162 | $ 2,478 | $ 1,225 |
Portfolio turnover rate | 65% | 62% | 52% | 47% A |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E For the period September 12, 2002 (commencement of operations) to July 31, 2003.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Real Estate Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Security Valuation - continued
market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Annual Report
1. Significant Accounting Policies - continued
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, passive foreign investment companies (PFIC) and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 57,924,726 | |
Unrealized depreciation | (810,546) | |
Net unrealized appreciation (depreciation) | 57,114,180 | |
Undistributed ordinary income | 3,928,862 | |
Undistributed long-term capital gain | 10,528,552 | |
Cost for federal income tax purposes | $ 201,044,277 |
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Ordinary Income | $ 5,799,680 | $ 2,778,359 |
Long-term Capital Gains | 4,559,858 | 2,759,568 |
Total | $ 10,359,538 | $ 5,537,927 |
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $162,742,410 and $127,121,548, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 161,957 | $ 1,710 |
Class T | .25% | .25% | 375,880 | 5,560 |
Class B | .75% | .25% | 258,335 | 196,108 |
Class C | .75% | .25% | 300,086 | 89,189 |
$ 1,096,258 | $ 292,567 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 109,152 |
Class T | 22,203 |
Class B* | 46,272 |
Class C* | 7,350 |
$ 184,977 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees - continued
shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 225,190 | .35 |
Class T | 270,826 | .36 |
Class B | 91,846 | .36 |
Class C | 106,928 | .36 |
Institutional Class | 10,793 | .25 |
$ 705,583 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $6,179 for the period.
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $405 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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
Annual Report
6. Security Lending - continued
securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $1,620.
7. Expense Reductions.
FMR voluntarily agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
The following classes were in reimbursement during the period:
Expense | Reimbursement | |
Class A | 1.25% | $ 25,223 |
Class T | 1.50% | 39,189 |
Class B | 2.00% | 12,672 |
Class C | 2.00% | 14,842 |
$ 91,926 |
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $27,258 for the period. In addition, through arrangements with the Fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's custody expenses by $612. During the period, credits reduced each class' transfer agent expense as noted in the table below.
Transfer Agent | ||
Class A | $ 12 |
Annual Report
Notes to Financial Statements - continued
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2006 | 2005 |
From net investment income | ||
Class A | $ 741,719 | $ 641,230 |
Class T | 796,426 | 658,084 |
Class B | 226,838 | 211,083 |
Class C | 250,448 | 231,206 |
Institutional Class | 57,698 | 69,734 |
Total | $ 2,073,129 | $ 1,811,337 |
From net realized gain | ||
Class A | $ 2,548,943 | $ 1,060,102 |
Class T | 3,068,411 | 1,278,789 |
Class B | 1,188,352 | 601,375 |
Class C | 1,299,203 | 680,328 |
Institutional Class | 181,500 | 105,996 |
Total | $ 8,286,409 | $ 3,726,590 |
Annual Report
10. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 2,262,157 | 1,794,039 | $ 41,503,690 | $ 27,861,174 |
Reinvestment of distributions | 181,664 | 108,047 | 3,138,257 | 1,637,672 |
Shares redeemed | (1,177,662) | (674,456) | (21,289,349) | (10,403,304) |
Net increase (decrease) | 1,266,159 | 1,227,630 | $ 23,352,598 | $ 19,095,542 |
Class T | ||||
Shares sold | 2,143,039 | 2,519,838 | $ 39,115,936 | $ 38,726,163 |
Reinvestment of distributions | 214,228 | 120,472 | 3,700,674 | 1,827,521 |
Shares redeemed | (1,504,010) | (973,349) | (27,210,343) | (14,990,709) |
Net increase (decrease) | 853,257 | 1,666,961 | $ 15,606,267 | $ 25,562,975 |
Class B | ||||
Shares sold | 398,999 | 716,470 | $ 7,246,734 | $ 10,968,432 |
Reinvestment of distributions | 73,796 | 47,658 | 1,270,470 | 717,181 |
Shares redeemed | (566,868) | (292,735) | (10,197,671) | (4,504,213) |
Net increase (decrease) | (94,073) | 471,393 | $ (1,680,467) | $ 7,181,400 |
Class C | ||||
Shares sold | 763,395 | 948,824 | $ 14,132,910 | $ 14,523,391 |
Reinvestment of distributions | 80,957 | 54,204 | 1,394,942 | 815,331 |
Shares redeemed | (647,908) | (421,720) | (11,656,661) | (6,415,506) |
Net increase (decrease) | 196,444 | 581,308 | $ 3,871,191 | $ 8,923,216 |
Institutional Class | ||||
Shares sold | 225,212 | 56,832 | $ 4,253,663 | $ 882,400 |
Reinvestment of distributions | 12,056 | 10,199 | 209,183 | 154,843 |
Shares redeemed | (115,041) | (26,530) | (2,060,704) | (402,619) |
Net increase (decrease) | 122,227 | 40,501 | $ 2,402,142 | $ 634,624 |
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Advisor Series VII and Shareholders of Fidelity Advisor Real Estate Fund:
We have audited the accompanying statement of assets and liabilities of Fidelity Advisor Real Estate Fund (the Fund), a fund of Fidelity Advisor Series VII, including the schedule of investments as of July 31, 2006, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended and the period September 12, 2002 (commencement of operations) to July 31, 2003. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2006, by correspondence with the custodians and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Advisor Real Estate Fund as of July 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the three years in the period then ended and the period September 12, 2002 (commencement of operations) to July 31, 2003, in conformity with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 9, 2006
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 345 funds advised by FMR or an affiliate. Mr. McCoy oversees 347 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (76) | |
Year of Election or Appointment: 1980 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as President (2006-present), Chief Executive Officer, Chairman, and a Director of FMR Corp.; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001-present) and a Director (1999-present) of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of Fidelity International Limited (FIL). | |
Stephen P. Jonas (53) | |
Year of Election or Appointment: 2005 Mr. Jonas is Senior Vice President of Advisor Real Estate. He also serves as Senior Vice President of other Fidelity funds (2005-present). Mr. Jonas is Executive Director of FMR (2005-present) and FMR Co., Inc. (2005-present). He also serves as a Director of Fidelity Investments Money Management, Inc. (2005-present) and FMR Corp. (2003-present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004-2005), Chief Administrative Officer (2002-2004), and Chief Financial Officer of FMR Corp. (1998-2002). In addition, he serves on the Boards of Boston Ballet (2003-present) and Simmons College (2003-present). | |
Robert L. Reynolds (54) | |
Year of Election or Appointment: 2003 Mr. Reynolds is President and a Director of FMR (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and FMR Co., Inc. (2005-present). Mr. Reynolds also serves as a Director (2003-present) and Chief Operating Officer (2000-present) of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000-present). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
Annual Report
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
Dennis J. Dirks (58) | |
Year of Election or Appointment: 2005 Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999-2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999-2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999-2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001-2003) and Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation (2001-2003). Mr. Dirks also serves as a Trustee and a member of the Finance Committee of Manhattan College (2005-present) and a Trustee and a member of the Finance Committee of AHRC of Nassau County (2006-present). | |
Robert M. Gates (62) | |
Year of Election or Appointment: 1997 Dr. Gates is Chairman of the Independent Trustees (2006-present). Dr. Gates is President of Texas A&M University (2002-present). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001-present), and Brinker International (restaurant management, 2003-present). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). | |
George H. Heilmeier (70) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002), INET Technologies Inc. (telecommunications network surveillance, 2001-2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display. | |
Marie L. Knowles (59) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing) and McKesson Corporation (healthcare service, 2002-present). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (62) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. Mr. Lautenbach serves as a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004-present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005-present), as well as a member of the Council on Foreign Relations. | |
William O. McCoy (72) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Duke Realty Corporation (real estate). He is also a partner of Franklin Street Partners (private investment management firm). In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves as Chairman of the Board of Directors of the University of North Carolina Health Care System. He also served as Vice President of Finance for the University of North Carolina (16-school system). | |
Cornelia M. Small (62) | |
Year of Election or Appointment: 2005 Ms. Small is a member (2000-present) and Chairperson (2002-present) of the Investment Committee, and a member (2002-present) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990-1997) and Scudder Kemper Investments (1997-1999). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
William S. Stavropoulos (67) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman Emeritus of the Board of Directors of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000; 2002-2003), CEO (1995-2000; 2002-2004), and Chairman of the Executive Committee (2000-2004). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, Maersk Inc. (industrial conglomerate, 2002-present), and Metalmark Capital (private equity investment firm, 2005-present). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council and the University of Notre Dame Advisory Council for the College of Science. | |
Kenneth L. Wolfe (67) | |
Year of Election or Appointment: 2005 Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993-2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003-present), Bausch & Lomb, Inc., and Revlon Inc. (2004-present). | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Mr. Keyes may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Albert R. Gamper, Jr. (64) | |
Year of Election or Appointment: 2005 Member of the Advisory Board of Fidelity Advisor Series VII. Mr. Gamper also serves as a Trustee (2006-present) or Member of the Advisory Board (2005-present) of other investment companies advised by FMR. Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001-present), Chairman of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. | |
James H. Keyes (65) | |
Year of Election or Appointment: 2006 Member of the Advisory Board of Fidelity Advisor Series VII. Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of LSI Logic Corporation (semiconductor technologies, 1984-present), Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, 2002-present), and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions, 1998-present). | |
Peter S. Lynch (62) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series VII. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001-present) and a Director (1999-present) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as the Chairman of the Inner-City Scholarship Fund. | |
Dwight D. Churchill (52) | |
Year of Election or Appointment: 2005 Vice President of Advisor Real Estate. Mr. Churchill also serves as Vice President of certain Equity Funds (2005-present). Mr. Churchill is Executive Vice President of FMR (2005-present) and FMR Co., Inc. (2005-present). Previously, Mr. Churchill served as Senior Vice President of Fidelity Investments Money Management, Inc. (2005-2006), Head of Fidelity's Fixed-Income Division (2000-2005), Vice President of Fidelity's Money Market Funds (2000-2005), Vice President of Fidelity's Bond Funds, and Senior Vice President of FMR. | |
Boyce I. Greer (50) | |
Year of Election or Appointment: 2005 Vice President of Advisor Real Estate. Mr. Greer also serves as Vice President of certain Equity Funds (2005-present), certain Asset Allocation Funds (2005-present), Fixed-Income Funds (2006-present), and Money Market Funds (2006-present). Mr. Greer is also a Trustee of other investment companies advised by FMR (2003-present). He is an Executive Vice President of FMR (2005-present) and FMR Co., Inc. (2005-present), and Senior Vice President of Fidelity Investments Money Management, Inc. (2006-present). Previously, Mr. Greer served as a Director and Managing Director of Strategic Advisers, Inc. (2002-2005), and Executive Vice President (2000-2002) and Money Market Group Leader (1997-2002) of the Fidelity Investments Fixed Income Division. He also served as Vice President of Fidelity's Money Market Funds (1997-2002), Senior Vice President of FMR (1997-2002), and Vice President of FIMM (1998-2002). | |
Samuel J. Wald (32) | |
Year of Election or Appointment: 2005 Vice President of Advisor Real Estate. Mr. Wald also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Wald worked as a research analyst and portfolio manager. | |
Eric D. Roiter (57) | |
Year of Election or Appointment: 1998 Secretary of Advisor Real Estate. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001-present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001-present), Fidelity Research & Analysis Company (2001-present), and Fidelity Investments Money Management, Inc. (2001-present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003-present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (1998-2005). | |
Stuart Fross (46) | |
Year of Election or Appointment: 2003 Assistant Secretary of Advisor Real Estate. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003-present), Vice President and Secretary of FDC (2005-present), and is an employee of FMR. | |
Christine Reynolds (47) | |
Year of Election or Appointment: 2004 President and Treasurer of Advisor Real Estate. Ms. Reynolds also serves as President and Treasurer of other Fidelity funds (2004-present) and is a Vice President (2003-present) and an employee (2002-present) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was most recently an audit partner with PwC's investment management practice. | |
R. Stephen Ganis (40) | |
Year of Election or Appointment: 2006 Anti-Money Laundering (AML) officer of Advisor Real Estate. Mr. Ganis also serves as AML officer of other Fidelity funds (2006-present) and FMR Corp. (2003-present). Before joining Fidelity Investments, Mr. Ganis practiced law at Goodwin Procter, LLP (2000-2002). | |
Joseph B. Hollis (58) | |
Year of Election or Appointment: 2006 Chief Financial Officer of Advisor Real Estate. Mr. Hollis also serves as Chief Financial Officer of other Fidelity funds. Mr. Hollis is President of Fidelity Pricing and Cash Management Services (FPCMS) (2005-present). Mr. Hollis also serves as President and Director of Fidelity Service Company, Inc. (2006-present). Previously, Mr. Hollis served as Senior Vice President of Cash Management Services (1999-2002) and Investment Management Operations (2002-2005). | |
Kenneth A. Rathgeber (59) | |
Year of Election or Appointment: 2004 Chief Compliance Officer of Advisor Real Estate. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004-present) and Executive Vice President of Risk Oversight for Fidelity Investments (2002-present). He is Chief Compliance Officer of FMR (2005-present), FMR Co., Inc. (2005-present), Fidelity Management & Research (U.K.) Inc. (2005-present), Fidelity Research & Analysis Company (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and Strategic Advisers, Inc. (2005-present). Previously, Mr. Rathgeber served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
Bryan A. Mehrmann (45) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Advisor Real Estate. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004). | |
Kimberley H. Monasterio (42) | |
Year of Election or Appointment: 2004 Deputy Treasurer of Advisor Real Estate. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000-2004) and Chief Financial Officer (2002-2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000-2004). | |
Kenneth B. Robins (36) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Advisor Real Estate. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2004-present). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG's department of professional practice (2002-2004) and a Senior Manager (1999-2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000-2002). | |
Robert G. Byrnes (39) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Advisor Real Estate. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003). | |
John H. Costello (59) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Real Estate. Mr. Costello also serves as Assistant Treasurer of Fidelity funds and is an employee of FMR. | |
Peter L. Lydecker (52) | |
Year of Election or Appointment: 2004 Assistant Treasurer of Advisor Real Estate. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR. | |
Mark Osterheld (51) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Real Estate. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Gary W. Ryan (47) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Advisor Real Estate. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999-2005). | |
Salvatore Schiavone (40) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Advisor Real Estate. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003-2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996-2003). | |
Annual Report
Distributions
The Board of Trustees of Advisor Real Estate Fund 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:
Pay Date | Record Date | Dividends | Capital Gains | |
Class A | 09/18/06 | 09/15/06 | $0.081 | $1.100 |
Class T | 09/18/06 | 09/15/06 | $0.047 | $1.100 |
Class B | 09/18/06 | 09/15/06 | - | $1.079 |
Class C | 09/18/06 | 09/15/06 | - | $1.097 |
Capital Gain Designation Note:
The fund hereby designates as a capital gain dividend with respect to the taxable year ended July 31 2006, $11,918,849, or, if subsequently determined to be different, the net capital gain of such year.
A total of 0.07% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund will notify shareholders in January 2007 of amounts for use in preparing 2006 income tax returns.
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees
Advisor Real Estate Fund
Each year, typically in July, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly each month except August and takes into account throughout the year matters bearing on Advisory Contracts. The Board, acting directly and through its separate committees, considers at each of its meetings factors that are relevant to the annual renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has adopted a written charter outlining the structure and purposes of the committee. One such committee, the Equity Contract Committee, meets periodically as needed throughout the year to consider matters specifically related to the annual renewal of Advisory Contracts. The committee requests and receives information on, and makes recommendations to the Independent Trustees concerning, the approval and annual review of the Advisory Contracts.
At its July 2006 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the Advisory Contracts for the fund. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the management fee and total expenses of the fund; (iii) the total costs of the services to be provided by and the profits to be realized by the investment adviser and its affiliates from the relationship with the fund; (iv) the extent to which economies of scale would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In determining whether to renew the Advisory Contracts for the fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contract is consistent with Fidelity's fiduciary duty under applicable law. In addition to evaluating the specific factors noted above, the Board, in reaching its determination, is aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that the fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the background of the fund's portfolio manager and the fund's investment objective and discipline. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services. The Board also considered that Fidelity voluntarily pays for market data out of its own resources.
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Annual Report
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of the fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying an additional sales charge. The Board noted that, since the last Advisory Contract renewals in July 2005, Fidelity has taken a number of actions that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) voluntarily entering into contractual arrangements with certain brokers pursuant to which Fidelity pays for research products and services separately out of its own resources, rather than bundling with fund commissions; (iii) launching the Fidelity Advantage Class of its five Spartan stock index funds and three Spartan bond index funds, which is a lower-fee class available to shareholders with higher account balances; (iv) contractually agreeing to impose expense limitations on Fidelity U.S. Bond Index Fund and reducing the fund's initial investment minimum; and (v) offering shareholders of each of the Fidelity Institutional Money Market Funds the privilege of exchanging shares of the fund for shares of other Fidelity funds.
Investment Performance and Compliance. The Board considered whether the fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. Because the fund had been in existence less than five calendar years, the following charts considered by the Board show, over the one- and three-year periods ended December 31, 2005, the cumulative total returns of Class C and Institutional Class of the fund, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of Class C and Institutional Class represent the performance of classes with the highest and lowest 12b-1 fees, respectively (not necessarily with the highest and lowest total expenses). The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the Lipper peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the Lipper peer group whose performance was equal to or lower than that of the class indicated.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Advisor Real Estate Fund
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the first quartile for the one-year period and the second quartile for the three-year period. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for the one-year period, although the fund's three-year cumulative total return was lower than its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
The Board considered that FMR has taken steps to refocus and strengthen equity research, equity portfolio management, and compliance. The Board noted with favor FMR's reorganization of its senior management team in 2005 and FMR's dedication of additional resources to investment research, and participated in the process that led to those changes.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to the fund will benefit the fund's shareholders, particularly in light of the Board's view that the fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Competitiveness of Management Fee and Total Fund Expenses. The Board considered the fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
Annual Report
The Board considered two proprietary management fee comparisons for the 12-month (or shorter) periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 21% means that 79% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.
Advisor Real Estate Fund
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2005.
Based on its review, the Board concluded that the fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
In its review of each class's total expenses, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered current and historical total expenses of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that the total expenses of Institutional Class ranked below its competitive median for 2005, the total expenses of Class A ranked equal to its competitive median for 2005, and the total expenses of each of Class B, Class C, and Class T ranked above its competitive median for 2005. The Board considered that Lipper categorizes the fund in the real estate objective and that, if the fund were compared to funds in the Lipper real estate objective, Class B, Class C, and Class T would be below median. The Board noted that the fund offers multiple classes, each of which has a different sales load and 12b-1 fee structure, and that the multiple structures are intended to offer a range of pricing options for the intermediary market. The Board also noted that the total expenses of the classes vary primarily by the level of their 12b-1 fees, although differences in transfer agent fees may also cause expenses to vary from class to class.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Based on its review, the Board concluded that the total expenses of each class of the fund were reasonable, although in some cases above the median of the universe presented for comparison, in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
Annual Report
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and determined that the amount of profit is a fair entrepreneurial profit for the management of the fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions, including reductions that occur through operation of the transfer agent agreement. The transfer agent fee varies in part based on the number of accounts in the fund. If the number of accounts decreases or the average account size increases, the overall transfer agent fee rate decreases.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower fee rates as total fund assets under FMR's management increase, and for higher fee rates as total fund assets under FMR's management decrease. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will achieve a certain level of economies of scale as assets under FMR's management increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board further concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Advisory Contracts, the Board requested additional information on several topics, including (i) Fidelity's fund profitability methodology and profitability trends within certain funds; (ii) portfolio manager compensation; (iii) the extent to which any economies of scale exist and are shared between the funds and Fidelity; (iv) the total expenses of certain funds and classes relative to competitors, including the extent to which the expenses of certain funds have been or could be capped; (v) fund performance trends; and (vi) Fidelity's fee structures, including use of performance fees.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Annual Report
Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Research & Analysis Company (formerly Fidelity Management &
Research (Far East) Inc.)
Fidelity International Investment Advisors
Fidelity International Investment Advisors (U.K.) Limited
Fidelity Investments Japan Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agents
Fidelity Investments Institutional Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
Mellon Bank, N.A.
Pittsburgh, PA
(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
ARE-UANN-0906
1.789707.103
(Fidelity Investment logo)(registered trademark)
Fidelity ® Advisor
Real Estate
Fund - Institutional Class
Annual Report
July 31, 2006
(2_fidelity_logos) (Registered_Trademark)
Contents
Chairman's Message | Ned Johnson's message to shareholders. | |
Performance | How the fund has done over time. | |
Management's Discussion | The manager's review of fund performance, strategy and outlook | |
Shareholder Expense Example | An example of shareholder expenses. | |
Investment Changes | A summary of major shifts in the fund's investments over the past six months. | |
Investments | A complete list of the fund's investments with their market values. | |
Financial Statements | Statements of assets and liabilities, operations, and changes in net assets, | |
Notes | Notes to financial statements. | |
Report of Independent Registered Public Accounting Firm | ||
Trustees and Officers | ||
Distributions | ||
Board Approval of Investment Advisory Contracts and Management Fees |
To view a fund's proxy voting guidelines and proxy voting record for the 12-month period ended June 30, visit www.fidelity.com/proxyvotingresults or visit the Securities and Exchange Commission's (SEC) web site at www.sec.gov. You may also call 1-877-208-0098 to request a free copy of the proxy voting guidelines.
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.
Annual Report
This report and the financial statements contained herein are submitted for the general information of the shareholders of the fund. This report is not authorized for distribution to prospective investors in the fund unless preceded or accompanied by an effective prospectus.
A fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. A fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. For a complete list of a fund's portfolio holdings, view the most recent quarterly holdings report, semiannual report, or annual report on Fidelity's web site at http://www.advisor.fidelity.com.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Annual Report
Chairman's Message
(Photograph of Edward C. Johnson 3d.)
(photo_of_Edward_C_Johnson_3d)
Dear Shareholder:
Although many securities markets made gains in early 2006, inflation concerns led to mixed results through the year's mid-point. Financial markets are always unpredictable. There are, however, a number of time-tested principles that can put the historical odds in your favor.
One of the basic tenets is to invest for the long term. Over time, riding out the markets' inevitable ups and downs has proven much more effective than selling into panic or chasing the hottest trend. Even missing only a few of the markets' best days can significantly diminish investor returns. Patience also affords the benefits of compounding - of earning interest on additional income or reinvested dividends and capital gains. There are tax advantages and cost benefits to consider as well. The more you sell, the more taxes you pay, and the more you trade, the higher the costs. While staying the course doesn't eliminate risk, it can considerably lessen the effect of short-term declines.
You can further manage your investing risk through diversification. And today, more than ever, geographic diversification should be taken into account. Studies indicate that asset allocation is the single most important determinant of a portfolio's long-term success. The right mix of stocks, bonds and cash - aligned to your particular risk tolerance and investment objective - is very important. Age-appropriate rebalancing is also an essential aspect of asset allocation. For younger investors, an emphasis on equities - which historically have been the best performing asset class over time - is encouraged. As investors near their specific goal, such as retirement or sending a child to college, consideration may be given to replacing volatile assets (e.g. common stocks) with more-stable fixed investments (bonds or savings plans).
A third investment principle - investing regularly - can help lower the average cost of your purchases. Investing a certain amount of money each month or quarter helps ensure you won't pay for all your shares at market highs. This strategy - known as dollar cost averaging - also reduces unconstructive "emotion" from investing, helping shareholders avoid selling weak performers just prior to an upswing, or chasing a hot performer just before a correction.
We invite you to contact us via the Internet, through our Investor Centers or over the phone. It is our privilege to provide you the information you need to make the investments that are right for you.
Sincerely,
/s/Edward C. Johnson 3d
Edward C. Johnson 3d
Annual Report
Fidelity Advisor Real Estate Fund - Institutional Class
Performance: The Bottom Line
Average annual total return reflects the change in the value of an investment, assuming reinvestment of the class' dividend income and capital gains (the profits earned upon the sale of securities that have grown in value) and assuming a constant rate of performance each year. The $10,000 table and the fund's returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. During periods of reimbursement by Fidelity, a fund's total return will be greater than it would be had the reimbursement not occurred. How a fund did yesterday is no guarantee of how it will do tomorrow.
Average Annual Total Returns
Periods ended July 31, 2006 | Past 1 | Life of |
Institutional Class | 18.61% | 25.54% |
A From September 12, 2002.
$10,000 Over Life of Fund
Let's say hypothetically that $10,000 was invested in Fidelity® Advisor Real Estate Fund - Institutional Class on September 12, 2002, when the fund started. The chart shows how the value of your investment would have changed, and also shows how the Standard & Poor's 500SM Index (S&P 500®) Index performed over the same period.
Annual Report
Management's Discussion of Fund Performance
Comments from Sam Wald, Portfolio Manager of Fidelity® Advisor Real Estate Fund
As measured by the Dow Jones Wilshire 5000 Composite IndexSM - the broadest measure of U.S. equity market performance - stocks did well for most of the 12-month period ending July 31, 2006, before faltering. For the one-year time frame as a whole, the Dow Jones Wilshire benchmark rose 5.43%. That was nearly identical to the 5.38% gain of the Standard & Poor's 500SM Index, a broad market proxy that's a reflection of larger-cap stocks. Stocks were resilient early on, bouncing back quickly after Hurricanes Katrina and Rita caused energy prices to spike to record-high levels. Buoyed by strong corporate earnings and solid economic growth, the S&P 500® ran off six consecutive months of positive returns from November through April. However, stocks pulled back for most of the remainder of the period. A slowdown in economic expansion and consumer spending, reaccelerating energy prices and continued interest rate hikes by the Federal Reserve Board cooled equity performance. Among other widely quoted market yardsticks, the Dow Jones Industrial AverageSM returned 7.59%, while the NASDAQ Composite® Index dropped 3.47%.
For the 12 months ending July 31, 2006, the fund's Institutional Class shares gained 18.61%, topping the S&P 500, the Dow Jones Wilshire Real Estate Securities IndexSM, which rose 17.33%, and the LipperSM Real Estate Funds Average, which increased 15.39%. Relative to the Dow Jones Wilshire index, the fund benefited from strong stock selection in the office, mall and industrial subsectors, more than making up for underperforming picks in the apartment subsector. The fund's biggest positive was an underweighting in mall operator Mills, which was hurt by accounting questions that weighed on the company. Investors also saw risks associated with some of its development projects. Mills was not in the portfolio at period end. In the office industry, Trizec Properties was acquired for a significant premium in June, while SL Green Realty benefited from faster-than-expected growth in the Manhattan office market. A notable negative was not owning apartment real estate investment trust (REIT) and index component Archstone Smith Trust, which I avoided in favor of other apartment REITs that I believed offered similar growth potential at more-attractive valuations. Unfortunately, the market did not share my concern about these companies' high valuations during the period. Midscale mall company CBL & Associates also hurt, hampered by investors' worries about a decline in consumer spending.
The views expressed above reflect those of the portfolio manager(s) only through the end of the period as stated on the cover of this report 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.
Annual Report
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments or redemption proceeds, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (February 1, 2006 to July 31, 2006).
Actual Expenses
The first line of the accompanying table for each class of the Fund provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000.00 (for example, an $8,600 account value divided by $1,000.00 = 8.6), then multiply the result by the number in the first line for a class of the Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table for each class of the Fund provides information about hypothetical account values and hypothetical expenses based on a Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Annual Report
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Class A | |||
Actual | $ 1,000.00 | $ 1,105.40 | $ 6.53 |
HypotheticalA | $ 1,000.00 | $ 1,018.60 | $ 6.26 |
Class T | |||
Actual | $ 1,000.00 | $ 1,104.40 | $ 7.83 |
HypotheticalA | $ 1,000.00 | $ 1,017.36 | $ 7.50 |
Class B | |||
Actual | $ 1,000.00 | $ 1,102.10 | $ 10.42 |
HypotheticalA | $ 1,000.00 | $ 1,014.88 | $ 9.99 |
Class C | |||
Actual | $ 1,000.00 | $ 1,102.00 | $ 10.42 |
HypotheticalA | $ 1,000.00 | $ 1,014.88 | $ 9.99 |
Institutional Class | |||
Actual | $ 1,000.00 | $ 1,107.10 | $ 4.91 |
HypotheticalA | $ 1,000.00 | $ 1,020.13 | $ 4.71 |
A 5% return per year before expenses
* Expenses are equal to each Class' annualized expense ratio (shown in the table below); multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
Annualized | |
Class A | 1.25% |
Class T | 1.50% |
Class B | 2.00% |
Class C | 2.00% |
Institutional Class | .94% |
Annual Report
Investment Changes
Top Ten Stocks as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
Equity Residential (SBI) | 7.4 | 5.8 |
ProLogis Trust | 6.4 | 6.6 |
General Growth Properties, Inc. | 5.9 | 5.5 |
Host Hotels & Resorts, Inc. | 5.5 | 1.9 |
Equity Office Properties Trust | 5.5 | 4.3 |
Simon Property Group, Inc. | 5.3 | 5.7 |
United Dominion Realty Trust, Inc. (SBI) | 4.6 | 5.1 |
Duke Realty Corp. | 4.3 | 3.6 |
Boston Properties, Inc. | 4.2 | 4.0 |
Vornado Realty Trust | 4.0 | 2.7 |
53.1 | ||
Top Five REIT Sectors as of July 31, 2006 | ||
% of fund's | % of fund's net assets | |
REITs - Office Buildings | 22.7 | 20.7 |
REITs - Apartments | 16.6 | 17.1 |
REITs - Malls | 14.8 | 16.8 |
REITs - Industrial Buildings | 13.7 | 11.5 |
REITs - Shopping Centers | 13.6 | 11.8 |
Asset Allocation (% of fund's net assets) | |||||||
As of July 31, 2006 * | As of January 31, 2006 ** | ||||||
| Stocks 97.1% | | Stocks 96.5% | ||||
| Short-Term | | Short-Term | ||||
* Foreign investments | 0.0% | ** Foreign investments | 0.1% | ||||
Annual Report
Investments July 31, 2006
Showing Percentage of Net Assets
Common Stocks - 97.1% | |||
Shares | Value (Note 1) | ||
HEALTH CARE PROVIDERS & SERVICES - 0.3% | |||
Health Care Facilities - 0.3% | |||
Brookdale Senior Living, Inc. | 16,800 | $ 781,200 | |
HOTELS, RESTAURANTS & LEISURE - 2.5% | |||
Hotels, Resorts & Cruise Lines - 2.5% | |||
Starwood Hotels & Resorts Worldwide, Inc. | 117,710 | 6,189,192 | |
REAL ESTATE INVESTMENT TRUSTS - 94.3% | |||
REITs - Apartments - 16.6% | |||
Apartment Investment & Management Co. Class A | 41,700 | 2,005,353 | |
AvalonBay Communities, Inc. | 61,000 | 7,132,120 | |
Equity Residential (SBI) | 394,700 | 18,357,496 | |
GMH Communities Trust | 176,379 | 2,211,793 | |
United Dominion Realty Trust, Inc. (SBI) | 405,700 | 11,298,745 | |
TOTAL REITS - APARTMENTS | 41,005,507 | ||
REITs - Factory Outlets - 1.5% | |||
Tanger Factory Outlet Centers, Inc. | 110,700 | 3,642,030 | |
REITs - Health Care Facilities - 1.9% | |||
Ventas, Inc. | 129,300 | 4,619,889 | |
REITs - Hotels - 5.9% | |||
Host Hotels & Resorts, Inc. (c) | 647,194 | 13,733,457 | |
Innkeepers USA Trust (SBI) | 53,900 | 909,293 | |
Sunstone Hotel Investors, Inc. | 2,254 | 63,923 | |
TOTAL REITS - HOTELS | 14,706,673 | ||
REITs - Industrial Buildings - 13.7% | |||
Duke Realty Corp. | 286,010 | 10,656,733 | |
ProLogis Trust | 288,623 | 15,975,283 | |
Public Storage, Inc. | 91,500 | 7,346,535 | |
TOTAL REITS - INDUSTRIAL BUILDINGS | 33,978,551 | ||
REITs - Malls - 14.8% | |||
CBL & Associates Properties, Inc. | 179,260 | 7,019,822 | |
General Growth Properties, Inc. | 322,299 | 14,709,726 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
REAL ESTATE INVESTMENT TRUSTS - CONTINUED | |||
REITs - Malls - continued | |||
Simon Property Group, Inc. | 152,200 | $ 13,017,666 | |
Taubman Centers, Inc. | 46,700 | 1,938,050 | |
TOTAL REITS - MALLS | 36,685,264 | ||
REITs - Management/Investment - 2.6% | |||
CentraCore Properties Trust | 69,695 | 1,795,343 | |
Equity Lifestyle Properties, Inc. | 83,200 | 3,575,104 | |
Mission West Properties, Inc. | 105,400 | 1,141,482 | |
TOTAL REITS - MANAGEMENT/INVESTMENT | 6,511,929 | ||
REITs - Mortgage - 1.0% | |||
HomeBanc Mortgage Corp., Georgia (c) | 152,800 | 1,252,960 | |
Newcastle Investment Corp. | 44,730 | 1,149,114 | |
TOTAL REITS - MORTGAGE | 2,402,074 | ||
REITs - Office Buildings - 22.7% | |||
Alexandria Real Estate Equities, Inc. | 62,200 | 5,872,924 | |
Boston Properties, Inc. (c) | 106,000 | 10,409,200 | |
Columbia Equity Trust, Inc. | 122,100 | 1,852,257 | |
Corporate Office Properties Trust (SBI) (c) | 71,800 | 3,231,000 | |
Equity Office Properties Trust | 355,800 | 13,488,378 | |
Kilroy Realty Corp. | 17,500 | 1,293,075 | |
Reckson Associates Realty Corp. | 31,770 | 1,414,718 | |
Shurgard Storage Centers, Inc. Class A | 38,400 | 2,530,560 | |
SL Green Realty Corp. | 64,900 | 7,418,070 | |
Sovran Self Storage, Inc. | 59,802 | 3,089,969 | |
Trizec Properties, Inc. | 190,500 | 5,478,780 | |
TOTAL REITS - OFFICE BUILDINGS | 56,078,931 | ||
REITs - Shopping Centers - 13.6% | |||
Developers Diversified Realty Corp. | 46,900 | 2,475,382 | |
Federal Realty Investment Trust (SBI) | 51,800 | 3,758,090 | |
Inland Real Estate Corp. | 235,200 | 3,812,592 | |
Kimco Realty Corp. | 244,300 | 9,586,332 | |
Common Stocks - continued | |||
Shares | Value (Note 1) | ||
REAL ESTATE INVESTMENT TRUSTS - CONTINUED | |||
REITs - Shopping Centers - continued | |||
Pan Pacific Retail Properties, Inc. | 61,190 | $ 4,228,229 | |
Vornado Realty Trust | 94,750 | 9,906,113 | |
TOTAL REITS - SHOPPING CENTERS | 33,766,738 | ||
TOTAL REAL ESTATE INVESTMENT TRUSTS | 233,397,586 | ||
TOTAL COMMON STOCKS (Cost $183,072,028) | 240,367,978 | ||
Money Market Funds - 7.2% | |||
Fidelity Cash Central Fund, 5.3% (a) | 6,438,729 | 6,438,729 | |
Fidelity Securities Lending Cash Central Fund, 5.32% (a)(b) | 11,351,750 | 11,351,750 | |
TOTAL MONEY MARKET FUNDS (Cost $17,790,479) | 17,790,479 | ||
TOTAL INVESTMENT PORTFOLIO - 104.3% (Cost $200,862,507) | 258,158,457 | ||
NET OTHER ASSETS - (4.3)% | (10,715,865) | ||
NET ASSETS - 100% | $ 247,442,592 | ||
Legend |
(a) Affiliated fund that is available only to investment companies and other accounts managed by Fidelity Investments. The rate quoted is the annualized seven-day yield of the fund at period end. A complete unaudited listing of the fund's holdings as of its most recent quarter end is available upon request. |
(b) Investment made with cash collateral received from securities on loan. |
(c) Security or a portion of the security is on loan at period end. |
Affiliated Central Funds |
Information regarding fiscal year to date income earned by the fund from the affiliated Central funds is as follows: |
Fund | Income earned |
Fidelity Cash Central Fund | $ 242,036 |
Fidelity Securities Lending Cash Central Fund | 1,620 |
Total | $ 243,656 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements
Statement of Assets and Liabilities
July 31, 2006 | ||
Assets | ||
Investment in securities, at value (including securities loaned of $11,128,160) - See accompanying schedule: Unaffiliated issuers (cost $183,072,028) | $ 240,367,978 | |
Affiliated Central Funds (cost $17,790,479) | 17,790,479 | |
Total Investments (cost $200,862,507) | $ 258,158,457 | |
Foreign currency held at value (cost $14) | 14 | |
Receivable for investments sold | 1,923,047 | |
Receivable for fund shares sold | 1,036,637 | |
Dividends receivable | 97,158 | |
Interest receivable | 30,806 | |
Prepaid expenses | 257 | |
Receivable from investment adviser for expense reductions | 10,178 | |
Other receivables | 4,704 | |
Total assets | 261,261,258 | |
Liabilities | ||
Payable for investments purchased | $ 1,621,301 | |
Payable for fund shares redeemed | 516,987 | |
Accrued management fee | 113,600 | |
Distribution fees payable | 106,429 | |
Other affiliated payables | 74,375 | |
Other payables and accrued expenses | 34,224 | |
Collateral on securities loaned, at value | 11,351,750 | |
Total liabilities | 13,818,666 | |
Net Assets | $ 247,442,592 | |
Net Assets consist of: | ||
Paid in capital | $ 174,192,496 | |
Undistributed net investment income | 521,902 | |
Accumulated undistributed net realized gain (loss) on investments and foreign currency transactions | 15,432,244 | |
Net unrealized appreciation (depreciation) on investments | 57,295,950 | |
Net Assets | $ 247,442,592 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Assets and Liabilities - continued
July 31, 2006 | ||
Calculation of Maximum Offering Price | $ 20.34 | |
Maximum offering price per share (100/94.25 of $20.34) | $ 21.58 | |
Class T: | $ 20.31 | |
Maximum offering price per share (100/96.50 of $20.31) | $ 21.05 | |
Class B: | $ 20.19 | |
Class C: | $ 20.21 | |
Institutional Class: | $ 20.47 | |
A Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Statement of Operations
Year ended July 31, 2006 | ||
Investment Income | ||
Dividends | $ 5,408,050 | |
Interest | 266 | |
Income from affiliated Central Funds | 243,656 | |
Total income | 5,651,972 | |
Expenses | ||
Management fee | $ 1,135,599 | |
Transfer agent fees | 705,583 | |
Distribution fees | 1,096,258 | |
Accounting and security lending fees | 82,656 | |
Independent trustees' compensation | 783 | |
Custodian fees and expenses | 13,421 | |
Registration fees | 75,015 | |
Audit | 63,627 | |
Legal | 7,125 | |
Miscellaneous | 1,392 | |
Total expenses before reductions | 3,181,459 | |
Expense reductions | (119,808) | 3,061,651 |
Net investment income (loss) | 2,590,321 | |
Realized and Unrealized Gain (Loss) Net realized gain (loss) on: | ||
Investment securities: | ||
Unaffiliated issuers | 18,564,357 | |
Foreign currency transactions | 200 | |
Total net realized gain (loss) | 18,564,557 | |
Change in net unrealized appreciation (depreciation) on investment securities | 13,773,537 | |
Net gain (loss) | 32,338,094 | |
Net increase (decrease) in net assets resulting from operations | $ 34,928,415 | |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Statements - continued
Statement of Changes in Net Assets
Year ended | Year ended | |
Increase (Decrease) in Net Assets | ||
Operations | ||
Net investment income (loss) | $ 2,590,321 | $ 2,012,236 |
Net realized gain (loss) | 18,564,557 | 8,236,230 |
Change in net unrealized appreciation (depreciation) | 13,773,537 | 35,843,402 |
Net increase (decrease) in net assets resulting | 34,928,415 | 46,091,868 |
Distributions to shareholders from net investment income | (2,073,129) | (1,811,337) |
Distributions to shareholders from net realized gain | (8,286,409) | (3,726,590) |
Total distributions | (10,359,538) | (5,537,927) |
Share transactions - net increase (decrease) | 43,551,731 | 61,397,757 |
Total increase (decrease) in net assets | 68,120,608 | 101,951,698 |
Net Assets | ||
Beginning of period | 179,321,984 | 77,370,286 |
End of period (including undistributed net investment income of $521,902 and undistributed net investment income of $377,371, respectively) | $ 247,442,592 | $ 179,321,984 |
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class A
Years ended July 31, | 2006 | 2005 | 2004 | 2003 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 18.23 | $ 13.22 | $ 11.33 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .29 | .31 | .27 | .21 |
Net realized and unrealized gain (loss) | 2.85 | 5.52 | 2.03 | 1.28 |
Total from investment operations | 3.14 | 5.83 | 2.30 | 1.49 |
Distributions from net investment income | (.23) | (.29) | (.30) | (.16) |
Distributions from net realized gain | (.80) | (.53) | (.11) | - |
Total distributions | (1.03) | (.82) | (.41) | (.16) |
Net asset value, end of period | $ 20.34 | $ 18.23 | $ 13.22 | $ 11.33 |
Total Return B,C,D | 18.32% | 45.48% | 20.59% | 15.13% |
Ratios to Average Net Assets G | ||||
Expenses before reductions | 1.29% | 1.31% | 1.54% | 2.98% A |
Expenses net of fee waivers, if any | 1.25% | 1.28% | 1.54% | 1.75% A |
Expenses net of all reductions | 1.24% | 1.25% | 1.52% | 1.72% A |
Net investment income (loss) | 1.59% | 1.98% | 2.10% | 2.35% A |
Supplemental Data | ||||
Net assets, end of period (000 omitted) | $ 85,000 | $ 53,097 | $ 22,273 | $ 3,993 |
Portfolio turnover rate | 65% | 62% | 52% | 47% A |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period September 12, 2002 (commencement of operations) to July 31, 2003.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class T
Years ended July 31, | 2006 | 2005 | 2004 | 2003 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 18.23 | $ 13.21 | $ 11.32 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .24 | .26 | .23 | .18 |
Net realized and unrealized gain (loss) | 2.84 | 5.53 | 2.02 | 1.29 |
Total from investment operations | 3.08 | 5.79 | 2.25 | 1.47 |
Distributions from net investment income | (.20) | (.24) | (.25) | (.15) |
Distributions from net realized gain | (.80) | (.53) | (.11) | - |
Total distributions | (1.00) | (.77) | (.36) | (.15) |
Net asset value, end of period | $ 20.31 | $ 18.23 | $ 13.21 | $ 11.32 |
Total Return B,C,D | 17.98% | 45.12% | 20.12% | 14.91% |
Ratios to Average Net Assets G | ||||
Expenses before reductions | 1.55% | 1.61% | 1.86% | 3.32% A |
Expenses net of fee waivers, if any | 1.50% | 1.57% | 1.85% | 2.00% A |
Expenses net of all reductions | 1.49% | 1.54% | 1.83% | 1.97% A |
Net investment income (loss) | 1.34% | 1.70% | 1.80% | 2.10% A |
Supplemental Data | ||||
Net assets, end of period (000 omitted) | $ 91,224 | $ 66,303 | $ 26,037 | $ 9,049 |
Portfolio turnover rate | 65% | 62% | 52% | 47% A |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the sales charges.
E Calculated based on average shares outstanding during the period.
F For the period September 12, 2002 (commencement of operations) to July 31, 2003.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class B
Years ended July 31, | 2006 | 2005 | 2004 | 2003 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 18.16 | $ 13.18 | $ 11.29 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .15 | .18 | .16 | .14 |
Net realized and unrealized gain (loss) | 2.83 | 5.50 | 2.04 | 1.28 |
Total from investment operations | 2.98 | 5.68 | 2.20 | 1.42 |
Distributions from net investment income | (.15) | (.17) | (.20) | (.13) |
Distributions from net realized gain | (.80) | (.53) | (.11) | - |
Total distributions | (.95) | (.70) | (.31) | (.13) |
Net asset value, end of period | $ 20.19 | $ 18.16 | $ 13.18 | $ 11.29 |
Total Return B,C,D | 17.42% | 44.31% | 19.67% | 14.38% |
Ratios to Average Net Assets G | ||||
Expenses before reductions | 2.05% | 2.10% | 2.33% | 3.82% A |
Expenses net of fee waivers, if any | 2.00% | 2.07% | 2.33% | 2.50% A |
Expenses net of all reductions | 1.98% | 2.03% | 2.31% | 2.47% A |
Net investment income (loss) | .84% | 1.20% | 1.31% | 1.60% A |
Supplemental Data | ||||
Net assets, end of period (000 omitted) | $ 27,397 | $ 26,349 | $ 12,910 | $ 5,061 |
Portfolio turnover rate | 65% | 62% | 52% | 47% A |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period September 12, 2002 (commencement of operations) to July 31, 2003.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Class C
Years ended July 31, | 2006 | 2005 | 2004 | 2003 F |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 18.17 | $ 13.18 | $ 11.29 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) E | .15 | .19 | .17 | .14 |
Net realized and unrealized gain (loss) | 2.84 | 5.50 | 2.03 | 1.28 |
Total from investment operations | 2.99 | 5.69 | 2.20 | 1.42 |
Distributions from net investment income | (.15) | (.17) | (.20) | (.13) |
Distributions from net realized gain | (.80) | (.53) | (.11) | - |
Total distributions | (.95) | (.70) | (.31) | (.13) |
Net asset value, end of period | $ 20.21 | $ 18.17 | $ 13.18 | $ 11.29 |
Total Return B,C,D | 17.46% | 44.38% | 19.67% | 14.38% |
Ratios to Average Net Assets G | ||||
Expenses before reductions | 2.05% | 2.09% | 2.29% | 3.76% A |
Expenses net of fee waivers, if any | 2.00% | 2.05% | 2.29% | 2.50% A |
Expenses net of all reductions | 1.98% | 2.02% | 2.27% | 2.47% A |
Net investment income (loss) | .84% | 1.22% | 1.35% | 1.60% A |
Supplemental Data | ||||
Net assets, end of period (000 omitted) | $ 36,669 | $ 29,410 | $ 13,671 | $ 5,059 |
Portfolio turnover rate | 65% | 62% | 52% | 47% A |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Total returns do not include the effect of the contingent deferred sales charge.
E Calculated based on average shares outstanding during the period.
F For the period September 12, 2002 (commencement of operations) to July 31, 2003.
G Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Financial Highlights - Institutional Class
Years ended July 31, | 2006 | 2005 | 2004 | 2003 E |
Selected Per-Share Data | ||||
Net asset value, beginning of period | $ 18.33 | $ 13.28 | $ 11.35 | $ 10.00 |
Income from Investment Operations | ||||
Net investment income (loss) D | .35 | .36 | .32 | .23 |
Net realized and unrealized gain (loss) | 2.85 | 5.56 | 2.04 | 1.28 |
Total from investment operations | 3.20 | 5.92 | 2.36 | 1.51 |
Distributions from net investment income | (.26) | (.34) | (.32) | (.16) |
Distributions from net realized gain | (.80) | (.53) | (.11) | - |
Total distributions | (1.06) | (.87) | (.43) | (.16) |
Net asset value, end of period | $ 20.47 | $ 18.33 | $ 13.28 | $ 11.35 |
Total Return B,C | 18.61% | 46.05% | 21.11% | 15.33% |
Ratios to Average Net Assets F | ||||
Expenses before reductions | .94% | .91% | 1.12% | 2.68% A |
Expenses net of fee waivers, if any | .94% | .91% | 1.12% | 1.50% A |
Expenses net of all reductions | .92% | .88% | 1.10% | 1.47% A |
Net investment income (loss) | 1.90% | 2.35% | 2.53% | 2.60% A |
Supplemental Data | ||||
Net assets, end of period (000 omitted) | $ 7,152 | $ 4,162 | $ 2,478 | $ 1,225 |
Portfolio turnover rate | 65% | 62% | 52% | 47% A |
A Annualized
B Total returns for periods of less than one year are not annualized.
C Total returns would have been lower had certain expenses not been reduced during the periods shown.
D Calculated based on average shares outstanding during the period.
E For the period September 12, 2002 (commencement of operations) to July 31, 2003.
F Expense ratios reflect operating expenses of the class. Expenses before reductions do not reflect amounts reimbursed by the investment adviser or reductions from brokerage service arrangements or other expense offset arrangements and do not represent the amount paid by the class during periods when reimbursements or reductions occur. Expense ratios before reductions for start-up periods may not be representative of longer-term operating periods. Expenses net of fee waivers reflect expenses after reimbursement by the investment adviser but prior to reductions from brokerage service arrangements or other expense offset arrangements. Expenses net of all reductions represent the net expenses paid by the class.
See accompanying notes which are an integral part of the financial statements.
Annual Report
Notes to Financial Statements
For the period ended July 31, 2006
1. Significant Accounting Policies.
Fidelity Advisor Real Estate Fund (the Fund) is a non-diversified fund of Fidelity Advisor Series VII (the trust) and is authorized to issue an unlimited number of shares. 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 Fund offers Class A, Class T, Class B, Class C, and Institutional Class shares, each of which has equal rights as to assets and voting privileges. Each class has exclusive voting rights with respect to matters that affect that class. Class B shares will automatically convert to Class A shares after a holding period of seven years from the initial date of purchase. Investment income, realized and unrealized capital gains and losses, the common expenses of the Fund, and certain fund-level expense reductions, if any, are allocated on a pro rata basis to each class based on the relative net assets of each class to the total net assets of the Fund. Each class differs with respect to transfer agent and distribution and service plan fees incurred. Certain expense reductions also differ by class.
The Fund may invest in affiliated money market central funds (Money Market Central Funds), which are open-end investment companies available to investment companies and other accounts managed by Fidelity Management & Research Company (FMR) and its affiliates. The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, 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 Fund:
Security Valuation. Investments are valued and net asset value (NAV) per share is calculated (NAV calculation) as of the close of business of the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time. Wherever possible, the Fund uses independent pricing services approved by the Board of Trustees to value its investments.
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by an independent pricing service on the primary market or exchange on which they are traded. In the event there were no sales during the day or closing prices are not available, securities are valued at the last quoted bid price. Investments in open-end mutual funds are valued at their closing net asset value each business day. Short-term securities with remaining maturities of sixty days or less for which quotations are not readily available are valued at amortized cost, which approximates value.
When current market prices or quotations are not readily available or do not accurately reflect fair value, valuations may be determined in accordance with procedures adopted by the Board of Trustees. For example, when developments occur between the close of a
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
Security Valuation - continued
market and the close of the NYSE that may materially affect the value of some or all of the securities, or when trading in a security is halted, those securities may be fair valued. Factors used in the determination of fair value may include monitoring news to identify significant market or security specific events such as changes in the value of U.S. securities markets, reviewing developments in foreign markets and evaluating the performance of ADRs, futures contracts and exchange-traded funds. Because the Fund's utilization of fair value pricing depends on market activity, the frequency with which fair value pricing is used can not be predicted and may be utilized to a significant extent. The value of securities used for NAV calculation under fair value pricing may differ from published prices for the same securities.
Foreign Currency. The Fund uses foreign currency contracts to facilitate transactions in foreign-denominated securities. Losses from these transactions may arise from changes in the value of the foreign currency or if the counterparties do not perform under the contracts' terms.
Foreign-denominated assets, including investment securities, and liabilities are translated into U.S. dollars at the exchange rate at period end. Purchases and sales of investment securities, income and dividends received and expenses denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date.
The effects of exchange rate fluctuations on investments are included with the net realized and unrealized gain (loss) on investment securities. Other foreign currency transactions resulting in realized and unrealized gain (loss) are disclosed separately.
Investment Transactions and Income. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities where the ex-dividend date may have passed, which are recorded as soon as the Fund is 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Interest income is accrued as earned. Interest income includes coupon interest and amortization of premium and accretion of discount on debt securities. Investment income is recorded net of foreign taxes withheld where recovery of such taxes is uncertain.
Annual Report
1. Significant Accounting Policies - continued
Expenses. Most expenses of the trust can be directly attributed to a fund. Expenses which cannot be directly attributed are apportioned among each Fund in the trust. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Income Tax Information and Distributions to Shareholders. Each year, the Fund intends to qualify as a regulated investment company by distributing all of its taxable income and realized gains under Subchapter M of the Internal Revenue Code. As a result, no provision for income taxes is required in the accompanying financial statements. Foreign taxes are provided for based on the Fund's understanding of the tax rules and rates that exist in the foreign markets in which it invests.
Distributions are recorded on the ex-dividend date. Income dividends and capital gain distributions are declared separately for each class. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. In addition, the Fund will claim a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences will reverse in a subsequent period.
Book-tax differences are primarily due to foreign currency transactions, passive foreign investment companies (PFIC) and losses deferred due to wash sales.
The tax-basis components of distributable earnings and the federal tax cost as of period end were as follows:
Unrealized appreciation | $ 57,924,726 | |
Unrealized depreciation | (810,546) | |
Net unrealized appreciation (depreciation) | 57,114,180 | |
Undistributed ordinary income | 3,928,862 | |
Undistributed long-term capital gain | 10,528,552 | |
Cost for federal income tax purposes | $ 201,044,277 |
The tax character of distributions paid was as follows:
July 31, 2006 | July 31, 2005 | |
Ordinary Income | $ 5,799,680 | $ 2,778,359 |
Long-term Capital Gains | 4,559,858 | 2,759,568 |
Total | $ 10,359,538 | $ 5,537,927 |
Annual Report
Notes to Financial Statements - continued
1. Significant Accounting Policies - continued
New Accounting Pronouncement. In July 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management is currently evaluating the impact, if any, the adoption of FIN 48 will have on the Fund's net assets and results of operations.
2. Operating Policies.
Repurchase Agreements. FMR has received an Exemptive Order from the Securities and Exchange Commission (the SEC) which permits the Fund and other affiliated entities of FMR to transfer uninvested cash balances into joint trading accounts which are then invested in repurchase agreements. The Fund may also invest directly with institutions in repurchase agreements. Repurchase agreements are collateralized by government or non-government securities. Upon settlement date, collateral is held in segregated accounts with custodian banks and may be obtained in the event of a default of the counterparty. The Fund monitors, on a daily basis, the value of the collateral to ensure it is at least equal to the principal amount of the repurchase agreement (including accrued interest). In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the value of the collateral may decline.
3. Purchases and Sales of Investments.
Purchases and sales of securities, other than short-term securities, aggregated $162,742,410 and $127,121,548, respectively.
4. Fees and Other Transactions with Affiliates.
Management Fee. FMR and its affiliates provide the Fund with investment management related services for which the Fund pays a monthly management fee. The management fee is the sum of an individual fund fee rate that is based on an annual rate of .30% of the Fund's average net assets and a group fee rate that averaged .27% during the period. The group fee rate is based upon the average net assets of all the mutual funds advised by FMR. The group fee rate decreases as assets under management increase and increases as assets under management decrease. For the period, the total annual management fee rate was .57% of the Fund's average net assets.
Annual Report
4. Fees and Other Transactions with Affiliates - continued
Distribution and Service Plan. In accordance with Rule 12b-1 of the 1940 Act, the Fund has adopted separate Distribution and Service Plans for each class of shares. Certain classes pay Fidelity Distributors Corporation (FDC), an affiliate of FMR, separate Distribution and Service Fees, each of which is based on an annual percentage of each class' average net assets. In addition, FDC may pay financial intermediaries for selling shares of the Fund and providing shareholder support services. For the period, the Distribution and Service Fee rates and the total amounts paid to and retained by FDC were as follows:
Distribution | Service | Paid to | Retained | |
Class A | 0% | .25% | $ 161,957 | $ 1,710 |
Class T | .25% | .25% | 375,880 | 5,560 |
Class B | .75% | .25% | 258,335 | 196,108 |
Class C | .75% | .25% | 300,086 | 89,189 |
$ 1,096,258 | $ 292,567 |
Sales Load. FDC receives a front-end sales charge of up to 5.75% for selling Class A shares, and 3.50% for selling Class T shares, some of which is paid to financial intermediaries for selling shares of the Fund. FDC receives the proceeds of contingent deferred sales charges levied on Class A, Class T, Class B, and Class C redemptions. These charges depend on the holding period. The deferred sales charges range from 5% to 1% for Class B, 1% for Class C, 1.00% to .50% for certain purchases of Class A shares (.25% prior to February 24, 2006) and .25% for certain purchases of Class T shares.
For the period, sales charge amounts retained by FDC were as follows:
Retained | |
Class A | $ 109,152 |
Class T | 22,203 |
Class B* | 46,272 |
Class C* | 7,350 |
$ 184,977 |
* When Class B and Class C shares are initially sold, FDC pays commissions from its own resources to financial intermediaries through which the sales are made.
Transfer Agent Fees. Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of FMR, is the transfer, dividend disbursing and shareholder servicing agent for each class of the Fund. FIIOC receives account fees and asset-based fees that vary according to the account size and type of account of the shareholders of the respective classes of the Fund. FIIOC pays for typesetting, printing and mailing of
Annual Report
Notes to Financial Statements - continued
4. Fees and Other Transactions with Affiliates - continued
Transfer Agent Fees - continued
shareholder reports, except proxy statements. For the period the total transfer agent fees paid by each class to FIIOC, were as follows:
Amount | % of | |
Class A | $ 225,190 | .35 |
Class T | 270,826 | .36 |
Class B | 91,846 | .36 |
Class C | 106,928 | .36 |
Institutional Class | 10,793 | .25 |
$ 705,583 |
Accounting and Security Lending Fees. Fidelity Service Company, Inc. (FSC), an affiliate of FMR, maintains the Fund's accounting records. The accounting fee is based on the level of average net assets for the month. Under a separate contract, FSC administers the security lending program. The security lending fee is based on the number and duration of lending transactions.
Affiliated Central Funds. The Fund may invest in Money Market Central Funds which seek preservation of capital and current income and are managed by Fidelity Investments Money Management, Inc. (FIMM), an affiliate of FMR.
The Money Market Central Funds do not pay a management fee.
Brokerage Commissions. The Fund placed a portion of its portfolio transactions with brokerage firms which are affiliates of the investment adviser. The commissions paid to these affiliated firms were $6,179 for the period.
5. Committed Line of Credit.
The Fund participates with other funds managed by FMR in a $4.2 billion credit facility (the "line of credit") to be utilized for temporary or emergency purposes to fund shareholder redemptions or for other short-term liquidity purposes. The Fund has agreed to pay commitment fees on its pro rata portion of the line of credit, which amounts to $405 and is reflected in Miscellaneous Expense on the Statement of Operations. During the period, there were no borrowings on this line of credit.
6. Security Lending.
The Fund lends portfolio securities from time to time in order to earn additional income. On the settlement date of the loan, the 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
Annual Report
6. Security Lending - continued
securities during the period of the loan. The market value of the loaned securities is determined at the close of business of the Fund and any additional required collateral is delivered to the Fund on the next business day. 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. Any cash collateral received is invested in the Fidelity Securities Lending Cash Central Fund. The value of loaned securities and cash collateral at period end are disclosed on the Fund's Statement of Assets and Liabilities. Security lending income represents the income earned on investing cash collateral, less fees and expenses associated with the loan, plus any premium payments that may be received on the loan of certain types of securities. Security lending income is presented in the Statement of Operations as a component of income from affiliated central funds. Net income from lending portfolio securities during the period amounted to $1,620.
7. Expense Reductions.
FMR voluntarily agreed to reimburse each class to the extent annual operating expenses exceeded certain levels of average net assets as noted in the table below. Some expenses, for example interest expense, are excluded from this reimbursement.
The following classes were in reimbursement during the period:
Expense | Reimbursement | |
Class A | 1.25% | $ 25,223 |
Class T | 1.50% | 39,189 |
Class B | 2.00% | 12,672 |
Class C | 2.00% | 14,842 |
$ 91,926 |
Many of the brokers with whom FMR places trades on behalf of the Fund provided services to the Fund in addition to trade execution. These services included payments of certain expenses on behalf of the Fund totaling $27,258 for the period. In addition, through arrangements with the Fund's custodian, credits realized as a result of uninvested cash balances were used to reduce the Fund's expenses. During the period, these credits reduced the Fund's custody expenses by $612. During the period, credits reduced each class' transfer agent expense as noted in the table below.
Transfer Agent | ||
Class A | $ 12 |
Annual Report
Notes to Financial Statements - continued
8. Other.
The Fund's organizational documents provide former and current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Subsequent to fiscal year end, the Fund's transfer agent, Fidelity Investments Institutional Operations Company, Inc. (FIIOC), an affiliate of Fidelity Management & Research Company, notified the Fund that the fund's books and records did not reflect a conversion of certain Class B to Class A shares upon their conversion date. Management has determined that this did not have a material impact to the Fund's reported net assets or results of operations in the accompanying financial statements. FIIOC will cause the books and records of the fund to reflect a conversion of the relevant Class B shares to Class A and is in the process of determining the impact to affected shareholder accounts for purposes of its remediation.
9. Distributions to Shareholders.
Distributions to shareholders of each class were as follows:
Years ended July 31, | 2006 | 2005 |
From net investment income | ||
Class A | $ 741,719 | $ 641,230 |
Class T | 796,426 | 658,084 |
Class B | 226,838 | 211,083 |
Class C | 250,448 | 231,206 |
Institutional Class | 57,698 | 69,734 |
Total | $ 2,073,129 | $ 1,811,337 |
From net realized gain | ||
Class A | $ 2,548,943 | $ 1,060,102 |
Class T | 3,068,411 | 1,278,789 |
Class B | 1,188,352 | 601,375 |
Class C | 1,299,203 | 680,328 |
Institutional Class | 181,500 | 105,996 |
Total | $ 8,286,409 | $ 3,726,590 |
Annual Report
10. Share Transactions.
Transactions for each class of shares were as follows:
Shares | Dollars | |||
Years ended July 31, | 2006 | 2005 | 2006 | 2005 |
Class A | ||||
Shares sold | 2,262,157 | 1,794,039 | $ 41,503,690 | $ 27,861,174 |
Reinvestment of distributions | 181,664 | 108,047 | 3,138,257 | 1,637,672 |
Shares redeemed | (1,177,662) | (674,456) | (21,289,349) | (10,403,304) |
Net increase (decrease) | 1,266,159 | 1,227,630 | $ 23,352,598 | $ 19,095,542 |
Class T | ||||
Shares sold | 2,143,039 | 2,519,838 | $ 39,115,936 | $ 38,726,163 |
Reinvestment of distributions | 214,228 | 120,472 | 3,700,674 | 1,827,521 |
Shares redeemed | (1,504,010) | (973,349) | (27,210,343) | (14,990,709) |
Net increase (decrease) | 853,257 | 1,666,961 | $ 15,606,267 | $ 25,562,975 |
Class B | ||||
Shares sold | 398,999 | 716,470 | $ 7,246,734 | $ 10,968,432 |
Reinvestment of distributions | 73,796 | 47,658 | 1,270,470 | 717,181 |
Shares redeemed | (566,868) | (292,735) | (10,197,671) | (4,504,213) |
Net increase (decrease) | (94,073) | 471,393 | $ (1,680,467) | $ 7,181,400 |
Class C | ||||
Shares sold | 763,395 | 948,824 | $ 14,132,910 | $ 14,523,391 |
Reinvestment of distributions | 80,957 | 54,204 | 1,394,942 | 815,331 |
Shares redeemed | (647,908) | (421,720) | (11,656,661) | (6,415,506) |
Net increase (decrease) | 196,444 | 581,308 | $ 3,871,191 | $ 8,923,216 |
Institutional Class | ||||
Shares sold | 225,212 | 56,832 | $ 4,253,663 | $ 882,400 |
Reinvestment of distributions | 12,056 | 10,199 | 209,183 | 154,843 |
Shares redeemed | (115,041) | (26,530) | (2,060,704) | (402,619) |
Net increase (decrease) | 122,227 | 40,501 | $ 2,402,142 | $ 634,624 |
Annual Report
Report of Independent Registered Public Accounting Firm
To the Trustees of Fidelity Advisor Series VII and Shareholders of Fidelity Advisor Real Estate Fund:
We have audited the accompanying statement of assets and liabilities of Fidelity Advisor Real Estate Fund (the Fund), a fund of Fidelity Advisor Series VII, including the schedule of investments as of July 31, 2006, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended and the period September 12, 2002 (commencement of operations) to July 31, 2003. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2006, by correspondence with the custodians and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Fidelity Advisor Real Estate Fund as of July 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the three years in the period then ended and the period September 12, 2002 (commencement of operations) to July 31, 2003, in conformity with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 9, 2006
Annual Report
Trustees and Officers
The Trustees, Members of the Advisory Board, and executive officers of the trust and fund, as applicable, are listed below. The Board of Trustees governs the fund and is responsible for protecting the interests of shareholders. The Trustees are experienced executives who meet periodically throughout the year to oversee the fund's activities, review contractual arrangements with companies that provide services to the fund, and review the fund's performance. Except for William O. McCoy, each of the Trustees oversees 345 funds advised by FMR or an affiliate. Mr. McCoy oversees 347 funds advised by FMR or an affiliate.
The Trustees hold office without limit in time except that (a) any Trustee may resign; (b) any Trustee may be removed by written instrument, signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become incapacitated by illness or injury may be retired by written instrument signed by a majority of the other Trustees; and (d) any Trustee may be removed at any special meeting of shareholders by a two-thirds vote of the outstanding voting securities of the trust. Each Trustee who is not an interested person (as defined in the 1940 Act) (Independent Trustee), shall retire not later than the last day of the calendar year in which his or her 72nd birthday occurs. The Independent Trustees may waive this mandatory retirement age policy with respect to individual Trustees. The executive officers and Advisory Board Members hold office without limit in time, except that any officer and Advisory Board Member may resign or may be removed by a vote of a majority of the Trustees at any regular meeting or any special meeting of the Trustees. Except as indicated, each individual has held the office shown or other offices in the same company for the past five years.
The fund's Statement of Additional Information (SAI) includes more information about the Trustees. To request a free copy, call Fidelity at 1-877-208-0098.
Interested Trustees*:
Correspondence intended for each Trustee who is an interested person may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Edward C. Johnson 3d (76) | |
Year of Election or Appointment: 1980 Mr. Johnson is Chairman of the Board of Trustees. Mr. Johnson serves as President (2006-present), Chief Executive Officer, Chairman, and a Director of FMR Corp.; Chairman and a Director of FMR; Chairman and a Director of Fidelity Research & Analysis Company (FRAC); Chairman and a Director of Fidelity Investments Money Management, Inc.; and Chairman (2001-present) and a Director (1999-present) of FMR Co., Inc. In addition, Mr. Johnson serves as Chairman and Director of Fidelity International Limited (FIL). | |
Stephen P. Jonas (53) | |
Year of Election or Appointment: 2005 Mr. Jonas is Senior Vice President of Advisor Real Estate. He also serves as Senior Vice President of other Fidelity funds (2005-present). Mr. Jonas is Executive Director of FMR (2005-present) and FMR Co., Inc. (2005-present). He also serves as a Director of Fidelity Investments Money Management, Inc. (2005-present) and FMR Corp. (2003-present). Previously, Mr. Jonas served as President of Fidelity Enterprise Operations and Risk Services (2004-2005), Chief Administrative Officer (2002-2004), and Chief Financial Officer of FMR Corp. (1998-2002). In addition, he serves on the Boards of Boston Ballet (2003-present) and Simmons College (2003-present). | |
Robert L. Reynolds (54) | |
Year of Election or Appointment: 2003 Mr. Reynolds is President and a Director of FMR (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and FMR Co., Inc. (2005-present). Mr. Reynolds also serves as a Director (2003-present) and Chief Operating Officer (2000-present) of FMR Corp. and a Director of Strategic Advisers, Inc. (2005-present). He also serves on the Board at Fidelity Investments Canada, Ltd. (2000-present). Previously, Mr. Reynolds served as President of Fidelity Investments Institutional Retirement Group (1996-2000). | |
* Trustees have been determined to be "Interested Trustees" by virtue of, among other things, their affiliation with the trust or various entities under common control with FMR.
Annual Report
Independent Trustees:
Correspondence intended for each Independent Trustee (that is, the Trustees other than the Interested Trustees) may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235.
Name, Age; Principal Occupation | |
Dennis J. Dirks (58) | |
Year of Election or Appointment: 2005 Prior to his retirement in May 2003, Mr. Dirks was Chief Operating Officer and a member of the Board of The Depository Trust & Clearing Corporation (DTCC) (1999-2003). He also served as President, Chief Operating Officer, and Board member of The Depository Trust Company (DTC) (1999-2003) and President and Board member of the National Securities Clearing Corporation (NSCC) (1999-2003). In addition, Mr. Dirks served as Chief Executive Officer and Board member of the Government Securities Clearing Corporation (2001-2003) and Chief Executive Officer and Board member of the Mortgage-Backed Securities Clearing Corporation (2001-2003). Mr. Dirks also serves as a Trustee and a member of the Finance Committee of Manhattan College (2005-present) and a Trustee and a member of the Finance Committee of AHRC of Nassau County (2006-present). | |
Robert M. Gates (62) | |
Year of Election or Appointment: 1997 Dr. Gates is Chairman of the Independent Trustees (2006-present). Dr. Gates is President of Texas A&M University (2002-present). He was Director of the Central Intelligence Agency (CIA) from 1991 to 1993. From 1989 to 1991, Dr. Gates served as Assistant to the President of the United States and Deputy National Security Advisor. Dr. Gates is a Director of NACCO Industries, Inc. (mining and manufacturing), Parker Drilling Co., Inc. (drilling and rental tools for the energy industry, 2001-present), and Brinker International (restaurant management, 2003-present). Previously, Dr. Gates served as a Director of LucasVarity PLC (automotive components and diesel engines), a Director of TRW Inc. (automotive, space, defense, and information technology), and Dean of the George Bush School of Government and Public Service at Texas A&M University (1999-2001). | |
George H. Heilmeier (70) | |
Year of Election or Appointment: 2004 Dr. Heilmeier is Chairman Emeritus of Telcordia Technologies (communication software and systems), where prior to his retirement, he served as company Chairman and Chief Executive Officer. He currently serves on the Boards of Directors of The Mitre Corporation (systems engineering and information technology support for the government), and HRL Laboratories (private research and development, 2004-present). He is Chairman of the General Motors Science & Technology Advisory Board and a Life Fellow of the Institute of Electrical and Electronics Engineers (IEEE). Dr. Heilmeier is a member of the Defense Science Board and the National Security Agency Advisory Board. He is also a member of the National Academy of Engineering, the American Academy of Arts and Sciences, and the Board of Overseers of the School of Engineering and Applied Science of the University of Pennsylvania. Previously, Dr. Heilmeier served as a Director of TRW Inc. (automotive, space, defense, and information technology, 1992-2002), Compaq (1994-2002), Automatic Data Processing, Inc. (ADP) (technology-based business outsourcing, 1995-2002), INET Technologies Inc. (telecommunications network surveillance, 2001-2004), and Teletech Holdings (customer management services). He is the recipient of the 2005 Kyoto Prize in Advanced Technology for his invention of the liquid crystal display. | |
Marie L. Knowles (59) | |
Year of Election or Appointment: 2001 Prior to Ms. Knowles' retirement in June 2000, she served as Executive Vice President and Chief Financial Officer of Atlantic Richfield Company (ARCO) (diversified energy, 1996-2000). From 1993 to 1996, she was a Senior Vice President of ARCO and President of ARCO Transportation Company. She served as a Director of ARCO from 1996 to 1998. She currently serves as a Director of Phelps Dodge Corporation (copper mining and manufacturing) and McKesson Corporation (healthcare service, 2002-present). Ms. Knowles is a Trustee of the Brookings Institution and the Catalina Island Conservancy and also serves as a member of the Advisory Board for the School of Engineering of the University of Southern California. | |
Ned C. Lautenbach (62) | |
Year of Election or Appointment: 2000 Mr. Lautenbach has been a partner of Clayton, Dubilier & Rice, Inc. (private equity investment firm) since September 1998. Previously, Mr. Lautenbach was with the International Business Machines Corporation (IBM) from 1968 until his retirement in 1998. Mr. Lautenbach serves as a Director of Italtel Holding S.p.A. (telecommunications (Milan, Italy), 2004-present) and Eaton Corporation (diversified industrial) as well as the Philharmonic Center for the Arts in Naples, Florida. He also is a member of the Board of Trustees of Fairfield University (2005-present), as well as a member of the Council on Foreign Relations. | |
William O. McCoy (72) | |
Year of Election or Appointment: 1997 Prior to his retirement in December 1994, Mr. McCoy was Vice Chairman of the Board of BellSouth Corporation (telecommunications) and President of BellSouth Enterprises. He is currently a Director of Duke Realty Corporation (real estate). He is also a partner of Franklin Street Partners (private investment management firm). In addition, Mr. McCoy served as the Interim Chancellor (1999-2000) and a member of the Board of Visitors for the University of North Carolina at Chapel Hill and currently serves as Chairman of the Board of Directors of the University of North Carolina Health Care System. He also served as Vice President of Finance for the University of North Carolina (16-school system). | |
Cornelia M. Small (62) | |
Year of Election or Appointment: 2005 Ms. Small is a member (2000-present) and Chairperson (2002-present) of the Investment Committee, and a member (2002-present) of the Board of Trustees of Smith College. Previously, she served as Chief Investment Officer (1999-2000), Director of Global Equity Investments (1996-1999), and a member of the Board of Directors of Scudder, Stevens & Clark (1990-1997) and Scudder Kemper Investments (1997-1999). In addition, Ms. Small served as Co-Chair (2000-2003) of the Annual Fund for the Fletcher School of Law and Diplomacy. | |
William S. Stavropoulos (67) | |
Year of Election or Appointment: 2001 Mr. Stavropoulos is Chairman Emeritus of the Board of Directors of The Dow Chemical Company. Since joining The Dow Chemical Company in 1967, Mr. Stavropoulos served in numerous senior management positions, including President (1993-2000; 2002-2003), CEO (1995-2000; 2002-2004), and Chairman of the Executive Committee (2000-2004). Currently, he is a Director of NCR Corporation (data warehousing and technology solutions), BellSouth Corporation (telecommunications), Chemical Financial Corporation, Maersk Inc. (industrial conglomerate, 2002-present), and Metalmark Capital (private equity investment firm, 2005-present). He also serves as a member of the Board of Trustees of the American Enterprise Institute for Public Policy Research. In addition, Mr. Stavropoulos is a member of The Business Council, J.P. Morgan International Council and the University of Notre Dame Advisory Council for the College of Science. | |
Kenneth L. Wolfe (67) | |
Year of Election or Appointment: 2005 Prior to his retirement in 2001, Mr. Wolfe was Chairman and Chief Executive Officer of Hershey Foods Corporation (1993-2001). He currently serves as a member of the boards of Adelphia Communications Corporation (2003-present), Bausch & Lomb, Inc., and Revlon Inc. (2004-present). | |
Annual Report
Advisory Board Members and Executive Officers:
Correspondence intended for Mr. Keyes may be sent to Fidelity Investments, P.O. Box 55235, Boston, Massachusetts 02205-5235. Correspondence intended for each executive officer and Mr. Lynch may be sent to Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109.
Name, Age; Principal Occupation | |
Albert R. Gamper, Jr. (64) | |
Year of Election or Appointment: 2005 Member of the Advisory Board of Fidelity Advisor Series VII. Mr. Gamper also serves as a Trustee (2006-present) or Member of the Advisory Board (2005-present) of other investment companies advised by FMR. Prior to his retirement in December 2004, Mr. Gamper served as Chairman of the Board of CIT Group Inc. (commercial finance). During his tenure with CIT Group Inc. Mr. Gamper served in numerous senior management positions, including Chairman (1987-1989; 1999-2001; 2002-2004), Chief Executive Officer (1987-2004), and President (1989-2002). He currently serves as a member of the Board of Directors of Public Service Enterprise Group (utilities, 2001-present), Chairman of the Board of Governors, Rutgers University (2004-present), and Chairman of the Board of Saint Barnabas Health Care System. | |
James H. Keyes (65) | |
Year of Election or Appointment: 2006 Member of the Advisory Board of Fidelity Advisor Series VII. Prior to his retirement in 2003, Mr. Keyes was Chairman, President, and Chief Executive Officer of Johnson Controls, Inc. (automotive supplier, 1993-2003). He currently serves as a member of the boards of LSI Logic Corporation (semiconductor technologies, 1984-present), Navistar International Corporation (manufacture and sale of trucks, buses, and diesel engines, 2002-present), and Pitney Bowes, Inc. (integrated mail, messaging, and document management solutions, 1998-present). | |
Peter S. Lynch (62) | |
Year of Election or Appointment: 2003 Member of the Advisory Board of Fidelity Advisor Series VII. Mr. Lynch is Vice Chairman and a Director of FMR, and Vice Chairman (2001-present) and a Director (1999-present) of FMR Co., Inc. Previously, Mr. Lynch served as a Trustee of the Fidelity funds (1990-2003). In addition, he serves as the Chairman of the Inner-City Scholarship Fund. | |
Dwight D. Churchill (52) | |
Year of Election or Appointment: 2005 Vice President of Advisor Real Estate. Mr. Churchill also serves as Vice President of certain Equity Funds (2005-present). Mr. Churchill is Executive Vice President of FMR (2005-present) and FMR Co., Inc. (2005-present). Previously, Mr. Churchill served as Senior Vice President of Fidelity Investments Money Management, Inc. (2005-2006), Head of Fidelity's Fixed-Income Division (2000-2005), Vice President of Fidelity's Money Market Funds (2000-2005), Vice President of Fidelity's Bond Funds, and Senior Vice President of FMR. | |
Boyce I. Greer (50) | |
Year of Election or Appointment: 2005 Vice President of Advisor Real Estate. Mr. Greer also serves as Vice President of certain Equity Funds (2005-present), certain Asset Allocation Funds (2005-present), Fixed-Income Funds (2006-present), and Money Market Funds (2006-present). Mr. Greer is also a Trustee of other investment companies advised by FMR (2003-present). He is an Executive Vice President of FMR (2005-present) and FMR Co., Inc. (2005-present), and Senior Vice President of Fidelity Investments Money Management, Inc. (2006-present). Previously, Mr. Greer served as a Director and Managing Director of Strategic Advisers, Inc. (2002-2005), and Executive Vice President (2000-2002) and Money Market Group Leader (1997-2002) of the Fidelity Investments Fixed Income Division. He also served as Vice President of Fidelity's Money Market Funds (1997-2002), Senior Vice President of FMR (1997-2002), and Vice President of FIMM (1998-2002). | |
Samuel J. Wald (32) | |
Year of Election or Appointment: 2005 Vice President of Advisor Real Estate. Mr. Wald also serves as Vice President of other funds advised by FMR. Prior to assuming his current responsibilities, Mr. Wald worked as a research analyst and portfolio manager. | |
Eric D. Roiter (57) | |
Year of Election or Appointment: 1998 Secretary of Advisor Real Estate. He also serves as Secretary of other Fidelity funds; Vice President, General Counsel, and Secretary of FMR Co., Inc. (2001-present) and FMR; Assistant Secretary of Fidelity Management & Research (U.K.) Inc. (2001-present), Fidelity Research & Analysis Company (2001-present), and Fidelity Investments Money Management, Inc. (2001-present). Mr. Roiter is an Adjunct Member, Faculty of Law, at Boston College Law School (2003-present). Previously, Mr. Roiter served as Vice President and Secretary of Fidelity Distributors Corporation (FDC) (1998-2005). | |
Stuart Fross (46) | |
Year of Election or Appointment: 2003 Assistant Secretary of Advisor Real Estate. Mr. Fross also serves as Assistant Secretary of other Fidelity funds (2003-present), Vice President and Secretary of FDC (2005-present), and is an employee of FMR. | |
Christine Reynolds (47) | |
Year of Election or Appointment: 2004 President and Treasurer of Advisor Real Estate. Ms. Reynolds also serves as President and Treasurer of other Fidelity funds (2004-present) and is a Vice President (2003-present) and an employee (2002-present) of FMR. Before joining Fidelity Investments, Ms. Reynolds worked at PricewaterhouseCoopers LLP (PwC) (1980-2002), where she was most recently an audit partner with PwC's investment management practice. | |
R. Stephen Ganis (40) | |
Year of Election or Appointment: 2006 Anti-Money Laundering (AML) officer of Advisor Real Estate. Mr. Ganis also serves as AML officer of other Fidelity funds (2006-present) and FMR Corp. (2003-present). Before joining Fidelity Investments, Mr. Ganis practiced law at Goodwin Procter, LLP (2000-2002). | |
Joseph B. Hollis (58) | |
Year of Election or Appointment: 2006 Chief Financial Officer of Advisor Real Estate. Mr. Hollis also serves as Chief Financial Officer of other Fidelity funds. Mr. Hollis is President of Fidelity Pricing and Cash Management Services (FPCMS) (2005-present). Mr. Hollis also serves as President and Director of Fidelity Service Company, Inc. (2006-present). Previously, Mr. Hollis served as Senior Vice President of Cash Management Services (1999-2002) and Investment Management Operations (2002-2005). | |
Kenneth A. Rathgeber (59) | |
Year of Election or Appointment: 2004 Chief Compliance Officer of Advisor Real Estate. Mr. Rathgeber also serves as Chief Compliance Officer of other Fidelity funds (2004-present) and Executive Vice President of Risk Oversight for Fidelity Investments (2002-present). He is Chief Compliance Officer of FMR (2005-present), FMR Co., Inc. (2005-present), Fidelity Management & Research (U.K.) Inc. (2005-present), Fidelity Research & Analysis Company (2005-present), Fidelity Investments Money Management, Inc. (2005-present), and Strategic Advisers, Inc. (2005-present). Previously, Mr. Rathgeber served as Executive Vice President and Chief Operating Officer for Fidelity Investments Institutional Services Company, Inc. (1998-2002). | |
Bryan A. Mehrmann (45) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Advisor Real Estate. Mr. Mehrmann also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR. Previously, Mr. Mehrmann served as Vice President of Fidelity Investments Institutional Services Group (FIIS)/Fidelity Investments Institutional Operations Corporation, Inc. (FIIOC) Client Services (1998-2004). | |
Kimberley H. Monasterio (42) | |
Year of Election or Appointment: 2004 Deputy Treasurer of Advisor Real Estate. Ms. Monasterio also serves as Deputy Treasurer of other Fidelity funds (2004) and is an employee of FMR (2004). Before joining Fidelity Investments, Ms. Monasterio served as Treasurer (2000-2004) and Chief Financial Officer (2002-2004) of the Franklin Templeton Funds and Senior Vice President of Franklin Templeton Services, LLC (2000-2004). | |
Kenneth B. Robins (36) | |
Year of Election or Appointment: 2005 Deputy Treasurer of Advisor Real Estate. Mr. Robins also serves as Deputy Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2004-present). Before joining Fidelity Investments, Mr. Robins worked at KPMG LLP, where he was a partner in KPMG's department of professional practice (2002-2004) and a Senior Manager (1999-2000). In addition, Mr. Robins served as Assistant Chief Accountant, United States Securities and Exchange Commission (2000-2002). | |
Robert G. Byrnes (39) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Advisor Real Estate. Mr. Byrnes also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Byrnes served as Vice President of FPCMS (2003-2005). Before joining Fidelity Investments, Mr. Byrnes worked at Deutsche Asset Management where he served as Vice President of the Investment Operations Group (2000-2003). | |
John H. Costello (59) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Real Estate. Mr. Costello also serves as Assistant Treasurer of Fidelity funds and is an employee of FMR. | |
Peter L. Lydecker (52) | |
Year of Election or Appointment: 2004 Assistant Treasurer of Advisor Real Estate. Mr. Lydecker also serves as Assistant Treasurer of other Fidelity funds (2004) and is an employee of FMR. | |
Mark Osterheld (51) | |
Year of Election or Appointment: 2002 Assistant Treasurer of Advisor Real Estate. Mr. Osterheld also serves as Assistant Treasurer of other Fidelity funds (2002) and is an employee of FMR. | |
Gary W. Ryan (47) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Advisor Real Estate. Mr. Ryan also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Previously, Mr. Ryan served as Vice President of Fund Reporting in FPCMS (1999-2005). | |
Salvatore Schiavone (40) | |
Year of Election or Appointment: 2005 Assistant Treasurer of Advisor Real Estate. Mr. Schiavone also serves as Assistant Treasurer of other Fidelity funds (2005-present) and is an employee of FMR (2005-present). Before joining Fidelity Investments, Mr. Schiavone worked at Deutsche Asset Management, where he most recently served as Assistant Treasurer (2003-2005) of the Scudder Funds and Vice President and Head of Fund Reporting (1996-2003). | |
Annual Report
Distributions
The Board of Trustees of Advisor Real Estate Fund voted to pay on September 15, 2006, to shareholders of record at the opening of business on September 18, 2006, a distribution of $1.10 per share derived from capital gains realized from sales of portfolio securities and a dividend of $.121 per share from net investment income.
The fund hereby designates as a capital gain dividend with respect to the taxable year ended July 31, 2006, $11,918,849, or, if subsequently determined to be different, the net capital gain of such year.
A total of 0.07% of the dividends distributed during the fiscal year was derived from interest on U.S. Government securities which is generally exempt from state income tax.
The fund will notify shareholders in January 2007 of amounts for use in preparing 2006 income tax returns.
Annual Report
Board Approval of Investment Advisory Contracts and Management Fees
Advisor Real Estate Fund
Each year, typically in July, the Board of Trustees, including the Independent Trustees (together, the Board), votes on the renewal of the management contract and sub-advisory agreements (together, the Advisory Contracts) for the fund. The Board, assisted by the advice of fund counsel and Independent Trustees' counsel, requests and considers a broad range of information throughout the year.
The Board meets regularly each month except August and takes into account throughout the year matters bearing on Advisory Contracts. The Board, acting directly and through its separate committees, considers at each of its meetings factors that are relevant to the annual renewal of the fund's Advisory Contracts, including the services and support provided to the fund and its shareholders. At the time of the renewal, the Board had 12 standing committees, each composed of Independent Trustees with varying backgrounds, to which the Board has assigned specific subject matter responsibilities in order to enhance effective decision-making by the Board. Each committee has adopted a written charter outlining the structure and purposes of the committee. One such committee, the Equity Contract Committee, meets periodically as needed throughout the year to consider matters specifically related to the annual renewal of Advisory Contracts. The committee requests and receives information on, and makes recommendations to the Independent Trustees concerning, the approval and annual review of the Advisory Contracts.
At its July 2006 meeting, the Board of Trustees, including the Independent Trustees, unanimously determined to renew the Advisory Contracts for the fund. In reaching its determination, the Board considered all factors it believed relevant, including (i) the nature, extent, and quality of the services to be provided to the fund and its shareholders (including the investment performance of the fund); (ii) the competitiveness of the management fee and total expenses of the fund; (iii) the total costs of the services to be provided by and the profits to be realized by the investment adviser and its affiliates from the relationship with the fund; (iv) the extent to which economies of scale would be realized as the fund grows; and (v) whether fee levels reflect these economies of scale, if any, for the benefit of fund shareholders.
In determining whether to renew the Advisory Contracts for the fund, the Board ultimately reached a determination, with the assistance of fund counsel and Independent Trustees' counsel, that the renewal of the Advisory Contracts and the compensation to be received by Fidelity under the management contract is consistent with Fidelity's fiduciary duty under applicable law. In addition to evaluating the specific factors noted above, the Board, in reaching its determination, is aware that shareholders in the fund have a broad range of investment choices available to them, including a wide choice among mutual funds offered by competitors to Fidelity, and that the fund's shareholders, with the opportunity to review and weigh the disclosure provided by the fund in its prospectus and other public disclosures, have chosen to invest in this fund, managed by Fidelity.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Nature, Extent, and Quality of Services Provided. The Board considered staffing within the investment adviser, FMR, and the sub-advisers (together, the Investment Advisers), including the background of the fund's portfolio manager and the fund's investment objective and discipline. The Independent Trustees also had discussions with senior management of Fidelity's investment operations and investment groups. The Board considered the structure of the portfolio manager compensation program and whether this structure provides appropriate incentives.
Resources Dedicated to Investment Management and Support Services. The Board reviewed the size, education, and experience of the Investment Advisers' investment staff, their use of technology, and the Investment Advisers' approach to recruiting, training, and retaining portfolio managers and other research, advisory, and management personnel. The Board considered Fidelity's extensive global research capabilities that enable the Investment Advisers to aggregate data from various sources in an effort to produce positive investment results. The Board noted that Fidelity's analysts have access to a variety of technological tools that enable them to perform both fundamental and quantitative analysis and to specialize in various disciplines. The Board also considered that Fidelity's portfolio managers and analysts have access to daily portfolio attribution that allows for monitoring of a fund's portfolio, as well as an electronic communication system that provides immediate real-time access to research concerning issuers and credit enhancers.
Shareholder and Administrative Services. The Board considered (i) the nature, extent, quality, and cost of administrative, distribution, and shareholder services performed by the Investment Advisers and their affiliates under the Advisory Contracts and under separate agreements covering transfer agency, pricing and bookkeeping, and securities lending services for the fund; (ii) the nature and extent of the Investment Advisers' supervision of third party service providers, principally custodians and subcustodians; and (iii) the resources devoted to, and the record of compliance with, the fund's compliance policies and procedures. The Board reviewed the allocation of fund brokerage, including allocations to brokers affiliated with the Investment Advisers, the use of brokerage commissions to pay fund expenses, and the use of "soft" commission dollars to pay for research services. The Board also considered that Fidelity voluntarily pays for market data out of its own resources.
The Board noted that the growth of fund assets across the complex allows Fidelity to reinvest in the development of services designed to enhance the value or convenience of the Fidelity funds as investment vehicles. These services include 24-hour access to account information and market information through phone representatives and over the Internet, and investor education materials and asset allocation tools.
Annual Report
Investment in a Large Fund Family. The Board considered the benefits to shareholders of investing in a Fidelity fund, including the benefits of investing in a fund that is part of a large family of funds offering a variety of investment disciplines and providing for a large variety of mutual fund investor services. For example, fund shareholders are offered the privilege of exchanging shares of the fund for shares of other Fidelity funds, as set forth in the fund's prospectus, without paying an additional sales charge. The Board noted that, since the last Advisory Contract renewals in July 2005, Fidelity has taken a number of actions that benefited particular funds, including (i) dedicating additional resources to investment research and to restructure the investment research teams; (ii) voluntarily entering into contractual arrangements with certain brokers pursuant to which Fidelity pays for research products and services separately out of its own resources, rather than bundling with fund commissions; (iii) launching the Fidelity Advantage Class of its five Spartan stock index funds and three Spartan bond index funds, which is a lower-fee class available to shareholders with higher account balances; (iv) contractually agreeing to impose expense limitations on Fidelity U.S. Bond Index Fund and reducing the fund's initial investment minimum; and (v) offering shareholders of each of the Fidelity Institutional Money Market Funds the privilege of exchanging shares of the fund for shares of other Fidelity funds.
Investment Performance and Compliance. The Board considered whether the fund has operated within its investment objective, as well as its record of compliance with its investment restrictions. It also reviewed the fund's absolute investment performance for each class, as well as the fund's relative investment performance for each class measured against (i) a broad-based securities market index, and (ii) a peer group of mutual funds deemed appropriate by the Board over multiple periods. Because the fund had been in existence less than five calendar years, the following charts considered by the Board show, over the one- and three-year periods ended December 31, 2005, the cumulative total returns of Class C and Institutional Class of the fund, the cumulative total returns of a broad-based securities market index ("benchmark"), and a range of cumulative total returns of a peer group of mutual funds identified by Lipper Inc. as having an investment objective similar to that of the fund. The returns of Class C and Institutional Class represent the performance of classes with the highest and lowest 12b-1 fees, respectively (not necessarily with the highest and lowest total expenses). The box within each chart shows the 25th percentile return (bottom of box) and the 75th percentile return (top of box) of the Lipper peer group. Returns shown above the box are in the first quartile and returns shown below the box are in the fourth quartile. The percentage beaten numbers noted below each chart correspond to the percentile box and represent the percentage of funds in the Lipper peer group whose performance was equal to or lower than that of the class indicated.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
Advisor Real Estate Fund
The Board reviewed the fund's relative investment performance against its Lipper peer group and stated that the performance of Institutional Class of the fund was in the first quartile for the one-year period and the second quartile for the three-year period. The Board also stated that the relative investment performance of Institutional Class of the fund compared favorably to its benchmark for the one-year period, although the fund's three-year cumulative total return was lower than its benchmark. The Board considered that the variations in performance among the fund's classes reflect the variations in class expenses, which result in lower performance for higher expense classes.
The Board considered that FMR has taken steps to refocus and strengthen equity research, equity portfolio management, and compliance. The Board noted with favor FMR's reorganization of its senior management team in 2005 and FMR's dedication of additional resources to investment research, and participated in the process that led to those changes.
Based on its review, and giving particular weight to the nature and quality of the resources dedicated by the Investment Advisers to maintain and improve relative performance, the Board concluded that the nature, extent, and quality of the services provided to the fund will benefit the fund's shareholders, particularly in light of the Board's view that the fund's shareholders benefit from investing in a fund that is part of a large family of funds offering a variety of investment disciplines and services.
Competitiveness of Management Fee and Total Fund Expenses. The Board considered the fund's management fee and total expenses compared to "mapped groups" of competitive funds and classes. Fidelity creates "mapped groups" by combining similar Lipper investment objective categories that have comparable management fee characteristics. Combining Lipper investment objective categories aids the Board's management fee and total expense comparisons by broadening the competitive group used for comparison and by reducing the number of universes to which various Fidelity funds are compared.
Annual Report
The Board considered two proprietary management fee comparisons for the 12-month (or shorter) periods shown in the chart below. The group of Lipper funds used by the Board for management fee comparisons is referred to below as the "Total Mapped Group" and, for the reasons explained above, is broader than the Lipper peer group used by the Board for performance comparisons. The Total Mapped Group comparison focuses on a fund's standing relative to the total universe of comparable funds available to investors, in terms of gross management fees before expense reimbursements or caps. "TMG %" represents the percentage of funds in the Total Mapped Group that had management fees that were lower than the fund's. For example, a TMG % of 21% means that 79% of the funds in the Total Mapped Group had higher management fees than the fund. The "Asset-Size Peer Group" (ASPG) comparison focuses on a fund's standing relative to non-Fidelity funds similar in size to the fund within the Total Mapped Group. The ASPG represents at least 15% of the funds in the Total Mapped Group with comparable asset size and management fee characteristics, subject to a minimum of 50 funds (or all funds in the Total Mapped Group if fewer than 50). Additional information, such as the ASPG quartile in which the fund's management fee ranked, is also included in the chart and considered by the Board.
Advisor Real Estate Fund
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board noted that the fund's management fee ranked below the median of its Total Mapped Group and below the median of its ASPG for 2005.
Based on its review, the Board concluded that the fund's management fee was fair and reasonable in light of the services that the fund receives and the other factors considered.
In its review of each class's total expenses, the Board considered the fund's management fee as well as other fund or class expenses, as applicable, such as transfer agent fees, pricing and bookkeeping fees, fund-paid 12b-1 fees, and custodial, legal, and audit fees. The Board also noted the effects of any waivers and reimbursements on fees and expenses. As part of its review, the Board also considered current and historical total expenses of each class of the fund compared to competitive fund median expenses. Each class of the fund is compared to those funds and classes in the Total Mapped Group (used by the Board for management fee comparisons) that have a similar sales load structure.
The Board noted that the total expenses of Institutional Class ranked below its competitive median for 2005, the total expenses of Class A ranked equal to its competitive median for 2005, and the total expenses of each of Class B, Class C, and Class T ranked above its competitive median for 2005. The Board considered that Lipper categorizes the fund in the real estate objective and that, if the fund were compared to funds in the Lipper real estate objective, Class B, Class C, and Class T would be below median. The Board noted that the fund offers multiple classes, each of which has a different sales load and 12b-1 fee structure, and that the multiple structures are intended to offer a range of pricing options for the intermediary market. The Board also noted that the total expenses of the classes vary primarily by the level of their 12b-1 fees, although differences in transfer agent fees may also cause expenses to vary from class to class.
In its review of total expenses, the Board also considered Fidelity fee structures and other information on clients that FMR and its affiliates service in other competitive markets, such as other mutual funds advised or subadvised by FMR or its affiliates, pension plan clients, and other institutional clients.
Based on its review, the Board concluded that the total expenses of each class of the fund were reasonable, although in some cases above the median of the universe presented for comparison, in light of the services that the fund and its shareholders receive and the other factors considered.
Costs of the Services and Profitability. The Board considered the revenues earned and the expenses incurred by Fidelity in conducting the business of developing, marketing, distributing, managing, administering and servicing the fund and its shareholders. The Board also considered the level of Fidelity's profits in respect of all the Fidelity funds.
Annual Report
On an annual basis, FMR presents to the Board Fidelity's profitability for the fund. Fidelity calculates the profitability for each fund, as well as aggregate profitability for groups of Fidelity funds and all Fidelity funds, using a series of detailed revenue and cost allocation methodologies which originate with the audited books and records of Fidelity. The Audit Committee of the Board reviews any significant changes from the prior year's methodologies.
PricewaterhouseCoopers LLP (PwC), independent registered accounting firm and auditor to Fidelity and certain Fidelity funds, has been engaged annually by the Board as part of the Board's assessment of the results of Fidelity's profitability analysis. PwC's engagement includes the review and assessment of Fidelity's methodologies used in determining the revenues and expenses attributable to Fidelity's mutual fund business, and completion of agreed-upon procedures surrounding the mathematical accuracy of fund profitability and its conformity to allocation methodologies. After considering PwC's reports issued under the engagement and information provided by Fidelity, the Board believes that while other allocation methods may also be reasonable, Fidelity's profitability methodologies are reasonable in all material respects.
The Board has also reviewed Fidelity's non-fund businesses and any fall-out benefits related to the mutual fund business as well as cases where Fidelity's affiliates may benefit from or be related to the fund's business.
The Board considered the costs of the services provided by and the profits realized by Fidelity in connection with the operation of the fund and determined that the amount of profit is a fair entrepreneurial profit for the management of the fund.
Economies of Scale. The Board considered whether there have been economies of scale in respect of the management of the Fidelity funds, whether the Fidelity funds (including the fund) have appropriately benefited from any such economies of scale, and whether there is potential for realization of any further economies of scale. The Board considered the extent to which the fund will benefit from economies of scale through increased services to the fund, through waivers or reimbursements, or through fee or expense reductions, including reductions that occur through operation of the transfer agent agreement. The transfer agent fee varies in part based on the number of accounts in the fund. If the number of accounts decreases or the average account size increases, the overall transfer agent fee rate decreases.
The Board recognized that the fund's management contract incorporates a "group fee" structure, which provides for lower fee rates as total fund assets under FMR's management increase, and for higher fee rates as total fund assets under FMR's management decrease. The Board considered that the group fee is designed to deliver the benefits of economies of scale to fund shareholders when total fund assets increase, even if assets of any particular fund are unchanged or have declined, because some portion of Fidelity's costs are attributable to services provided to all Fidelity funds, and all funds benefit if those costs can be allocated among more assets. The Board concluded that, given the group fee structure, fund shareholders will achieve a certain level of economies of scale as assets under FMR's management increase at the fund complex level, regardless of whether Fidelity achieves any such economies of scale.
Annual Report
Board Approval of Investment Advisory Contracts and
Management Fees - continued
The Board further concluded that any potential economies of scale are being shared between fund shareholders and Fidelity in an appropriate manner.
Additional Information Requested by the Board. In order to develop fully the factual basis for consideration of the Advisory Contracts, the Board requested additional information on several topics, including (i) Fidelity's fund profitability methodology and profitability trends within certain funds; (ii) portfolio manager compensation; (iii) the extent to which any economies of scale exist and are shared between the funds and Fidelity; (iv) the total expenses of certain funds and classes relative to competitors, including the extent to which the expenses of certain funds have been or could be capped; (v) fund performance trends; and (vi) Fidelity's fee structures, including use of performance fees.
Based on its evaluation of all of the conclusions noted above, and after considering all material factors, the Board ultimately concluded that the advisory fee structures are fair and reasonable, and that the fund's Advisory Contracts should be renewed.
Annual Report
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Investment Adviser
Fidelity Management & Research Company
Boston, MA
Investment Sub-Advisers
FMR Co., Inc.
Fidelity Management & Research
(U.K.) Inc.
Fidelity Research & Analysis Company
(formerly Fidelity Management &
Research (Far East) Inc.)
Fidelity International Investment Advisors
Fidelity International Investment Advisors
(U.K.) Limited
Fidelity Investments Japan Limited
General Distributor
Fidelity Distributors Corporation
Boston, MA
Transfer and Service Agents
Fidelity Investments Institutional
Operations Company, Inc.
Boston, MA
Fidelity Service Company, Inc.
Boston, MA
Custodian
Mellon Bank, N.A.
Pittsburgh, PA
(Fidelity Investment logo)(registered trademark)
Corporate Headquarters
82 Devonshire St., Boston, MA 02109
www.fidelity.com
AREI-UANN-0906
1.789708.103
Item 2. Code of Ethics
As of the end of the period, July 31, 2006, Fidelity Advisor Series VII (the trust) has adopted a code of ethics, as defined in Item 2 of Form N-CSR, that applies to its President and Treasurer and its Chief Financial Officer. A copy of the code of ethics is filed as an exhibit to this Form N-CSR.
Item 3. Audit Committee Financial Expert
The Board of Trustees of the trust has determined that Marie L. Knowles is an audit committee financial expert, as defined in Item 3 of Form N-CSR. Ms. Knowles is independent for purposes of Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services
(a) Audit Fees.
For the fiscal years ended July 31, 2006 and July 31, 2005, the aggregate Audit Fees billed by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, "Deloitte Entities") for professional services rendered for the audits of the financial statements, or services that are normally provided in connection with statutory and regulatory filings or engagements for those fiscal years, for Fidelity Advisor Biotechnology Fund, Fidelity Advisor Consumer Industries Fund, Fidelity Advisor Cyclical Industries Fund, Fidelity Advisor Developing Communications Fund, Fidelity Advisor Electronics Fund, Fidelity Advisor Financial Services Fund, Fidelity Advisor Health Care Fund, Fidelity Advisor Natural Resources Fund, Fidelity Advisor Real Estate Fund, Fidelity Advisor Technology Fund and Fidelity Advisor Telecommunications & Utilities Growth Fund (the funds) and for all funds in the Fidelity Group of Funds are shown in the table below.
Fund | 2006A | 2005A |
Fidelity Advisor Biotechnology Fund | $31,000 | $34,000 |
Fidelity Advisor Consumer Industries Fund | $31,000 | $32,000 |
Fidelity Advisor Cyclical Industries Fund | $31,000 | $32,000 |
Fidelity Advisor Developing Communications Fund | $31,000 | $34,000 |
Fidelity Advisor Electronics Fund | $31,000 | $34,000 |
Fidelity Advisor Financial Services Fund | $33,000 | $33,000 |
Fidelity Advisor Health Care Fund | $34,000 | $35,000 |
Fidelity Advisor Natural Resources Fund | $34,000 | $34,000 |
Fidelity Advisor Real Estate Fund | $52,000 | $52,000 |
Fidelity Advisor Technology Fund | $34,000 | $35,000 |
Fidelity Advisor Telecommunications & Utilities Growth Fund | $31,000 | $32,000 |
All funds in the Fidelity Group of Funds audited by Deloitte Entities | $5,900,000 | $4,800,000 |
A | Aggregate amounts may reflect rounding. |
(b) Audit-Related Fees.
In each of the fiscal years ended July 31, 2006 and July 31, 2005 the aggregate Audit-Related Fees billed by Deloitte Entities for services rendered for assurance and related services to each fund that are reasonably related to the performance of the audit or review of the fund's financial statements, but not reported as Audit Fees, are shown in the table below.
Fund | 2006A | 2005A |
Fidelity Advisor Biotechnology Fund | $0 | $0 |
Fidelity Advisor Consumer Industries Fund | $0 | $0 |
Fidelity Advisor Cyclical Industries Fund | $0 | $0 |
Fidelity Advisor Developing Communications Fund | $0 | $0 |
Fidelity Advisor Electronics Fund | $0 | $0 |
Fidelity Advisor Financial Services Fund | $0 | $0 |
Fidelity Advisor Health Care Fund | $0 | $0 |
Fidelity Advisor Natural Resources Fund | $0 | $0 |
Fidelity Advisor Real Estate Fund | $0 | $0 |
Fidelity Advisor Technology Fund | $0 | $0 |
Fidelity Advisor Telecommunications & Utilities Growth Fund | $0 | $0 |
A | Aggregate amounts may reflect rounding. |
In each of the fiscal years ended July 31, 2006 and July 31, 2005, the aggregate Audit-Related Fees that were billed by Deloitte Entities that were required to be approved by the Audit Committee for services rendered on behalf of Fidelity Management & Research Company (FMR) and entities controlling, controlled by, or under common control with FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) that provide ongoing services to the funds ("Fund Service Providers") for assurance and related services that relate directly to the operations and financial reporting of each fund that are reasonably related to the performance of the audit or review of the fund's financial statements, but not reported as Audit Fees, are shown in the table below.
Billed By | 2006A | 2005A |
Deloitte Entities | $0 | $0 |
A | Aggregate amounts may reflect rounding. |
Fees included in the audit-related category comprise assurance and related services (e.g., due diligence services) that are traditionally performed by the independent registered public accounting firm. These audit-related services include due diligence related to mergers and acquisitions, accounting consultations and audits in connection with acquisitions, internal control reviews, attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards.
(c) Tax Fees.
In each of the fiscal years ended July 31, 2006 and July 31, 2005, the aggregate Tax Fees billed by Deloitte Entities for professional services rendered for tax compliance, tax advice, and tax planning for each fund is shown in the table below.
Fund | 2006A | 2005A |
Fidelity Advisor Biotechnology Fund | $4,000 | $4,000 |
Fidelity Advisor Consumer Industries Fund | $4,000 | $4,000 |
Fidelity Advisor Cyclical Industries Fund | $4,000 | $4,000 |
Fidelity Advisor Developing Communications Fund | $4,000 | $4,000 |
Fidelity Advisor Electronics Fund | $4,000 | $4,000 |
Fidelity Advisor Financial Services Fund | $4,000 | $4,000 |
Fidelity Advisor Health Care Fund | $4,000 | $4,000 |
Fidelity Advisor Natural Resources Fund | $4,000 | $4,000 |
Fidelity Advisor Real Estate Fund | $4,200 | $3,600 |
Fidelity Advisor Technology Fund | $4,000 | $4,000 |
Fidelity Advisor Telecommunications & Utilities Growth Fund | $4,000 | $4,000 |
A | Aggregate amounts may reflect rounding. |
In each of the fiscal years ended July 31, 2006 and July 31, 2005, the aggregate Tax Fees billed by Deloitte Entities that were required to be approved by the Audit Committee for professional services rendered on behalf of the Fund Service Providers for tax compliance, tax advice, and tax planning that relate directly to the operations and financial reporting of each fund is shown in the table below.
Billed By | 2006A | 2005A |
Deloitte Entities | $0 | $0 |
A | Aggregate amounts may reflect rounding. |
Fees included in the Tax Fees category comprise all services performed by professional staff in the independent registered public accounting firm's tax division except those services related to the audit. Typically, this category would include fees for tax compliance, tax planning, and tax advice. Tax compliance, tax advice, and tax planning services include preparation of original and amended tax returns, claims for refund and tax payment-planning services, assistance with tax audits and appeals, tax advice related to mergers and acquisitions and requests for rulings or technical advice from taxing authorities.
(d) All Other Fees.
In each of the fiscal years ended July 31, 2006 and July 31, 2005, the aggregate Other Fees billed by Deloitte Entities for all other non-audit services rendered to the funds is shown in the table below.
Fund | 2006A | 2005A |
Fidelity Advisor Biotechnology Fund | $0 | $0 |
Fidelity Advisor Consumer Industries Fund | $0 | $0 |
Fidelity Advisor Cyclical Industries Fund | $0 | $0 |
Fidelity Advisor Developing Communications Fund | $0 | $0 |
Fidelity Advisor Electronics Fund | $0 | $0 |
Fidelity Advisor Financial Services Fund | $0 | $0 |
Fidelity Advisor Health Care Fund | $0 | $0 |
Fidelity Advisor Natural Resources Fund | $0 | $0 |
Fidelity Advisor Real Estate Fund | $0 | $0 |
Fidelity Advisor Technology Fund | $0 | $0 |
Fidelity Advisor Telecommunications & Utilities Growth Fund | $0 | $0 |
A | Aggregate amounts may reflect rounding. |
In each of the fiscal years ended July 31, 2006 and July 31, 2005, the aggregate Other Fees billed by Deloitte Entities that were required to be approved by the Audit Committee for all other non-audit services rendered on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund is shown in the table below.
Billed By | 2006A | 2005A |
Deloitte Entities | $255,000 | $210,000 |
A | Aggregate amounts may reflect rounding. |
Fees included in the All Other Fees category include services related to internal control reviews, strategy and other consulting, financial information systems design and implementation, consulting on other information systems, and other tax services unrelated to the fund.
(e) (1) | Audit Committee Pre-Approval Policies and Procedures: |
The trust's Audit Committee must pre-approve all audit and non-audit services provided by the independent registered public accounting firm relating to the operations or financial reporting of the funds. Prior to the commencement of any audit or non-audit services to a fund, the Audit Committee reviews the services to determine whether they are appropriate and permissible under applicable law.
The trust's Audit Committee has adopted policies and procedures to, among other purposes, provide a framework for the Committee's consideration of non-audit services by the audit firms that audit the Fidelity funds. The policies and procedures require that any non-audit service provided by a fund audit firm to a Fidelity Fund and any non-audit service provided by a fund auditor to a Fund Service Provider that relates directly to the operations and financial reporting of a Fidelity fund (Covered Service) are subject to approval by the Audit Committee before such service is provided. Non-audit services provided by a fund audit firm for a Fund Service Provider that do not relate directly to the operations and financial reporting of a Fidelity fund (Non-Covered Service) but that are expected to exceed $50,000 are also subject to pre-approval by the Audit Committee.
All Covered Services, as well as Non-Covered Services that are expected to exceed $50,000, must be approved in advance of provision of the service either: (i) by formal resolution of the Audit Committee, or (ii) by oral or written approval of the service by the Chair of the Audit Committee (or if the Chair is unavailable, such other member of the Audit Committee as may be designated by the Chair to act in the Chair's absence). The approval contemplated by (ii) above is permitted where the Treasurer determines that action on such an engagement is necessary before the next meeting of the Audit Committee. Neither pre-approval nor advance notice of Non-Covered Service engagements for which fees are not expected to exceed $50,000 is required; such engagements are to be reported to the Audit Committee monthly.
(e) (2) | Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X: |
Audit-Related Fees:
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2006 and July 31, 2005 on behalf of each fund.
There were no amounts that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2006 and July 31, 2005 on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund.
Tax Fees:
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2006 and July 31, 2005 on behalf of each fund.
There were no amounts that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2006 and July 31, 2005 on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund.
All Other Fees:
There were no amounts that were approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2006 and July 31, 2005 on behalf of each fund.
There were no amounts that were required to be approved by the Audit Committee pursuant to the de minimis exception for the fiscal years ended July 31, 2006 and July 31, 2005 on behalf of the Fund Service Providers that relate directly to the operations and financial reporting of each fund.
(f) Not applicable.
(g) For the fiscal years ended July 31, 2006 and July 31, 2005, the aggregate fees billed by Deloitte Entities of $670,000A and $575,000A,B for non-audit services rendered on behalf of the funds, FMR (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and Fund Service Providers relating to Covered Services and Non-Covered Services are shown in the table below.
2006A | 2005A | |
Covered Services | $300,000 | $250,000 |
Non-Covered Services | $370,000 | $325,000B |
A | Aggregate amounts may reflect rounding. |
B | Reflects current period presentation. |
(h) The trust's Audit Committee has considered Non-Covered Services that were not pre-approved that were provided by Deloitte Entities to Fund Service Providers to be compatible with maintaining the independence of Deloitte Entities in its audit of the funds, taking into account representations from Deloitte Entities, in accordance with Independence Standards Board Standard No.1, regarding its independence from the funds and their related entities.
Item 5. Audit Committee of Listed Registrants
Not applicable.
Item 6. Schedule of Investments
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not applicable.
Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders
There were no material changes to the procedures by which shareholders may recommend nominees to the trust's Board of Trustees.
Item 11. Controls and Procedures
(a)(i) The President and Treasurer and the Chief Financial Officer have concluded that the trust's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) provide reasonable assurances that material information relating to the trust is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report.
(a)(ii) There was no change in the trust's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the trust's internal control over financial reporting.
Item 12. Exhibits
(a) | (1) | Code of Ethics pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. |
(a) | (2) | Certification pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) is filed and attached hereto as Exhibit 99.CERT. |
(a) | (3) | Not applicable. |
(b) | Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) is furnished and attached hereto as Exhibit 99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Fidelity Advisor Series VII
By: | /s/Kimberley Monasterio |
Kimberley Monasterio | |
President and Treasurer | |
Date: | October 9, 2006 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/Kimberley Monasterio |
Kimberley Monasterio | |
President and Treasurer | |
Date: | October 9, 2006 |
By: | /s/Joseph B. Hollis |
Joseph B. Hollis | |
Chief Financial Officer | |
Date: | October 9, 2006 |