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U.S. Securities and Exchange Commission

Regulation S-X under the Securities Exchange Act of 1934
Rule 6-03(c)
Fidelity Select Portfolio

April 29, 2008


In your letter dated February 13, 2008, you request our assurance that the staff would not recommend enforcement action to the Commission against Gold Portfolio, a series of Fidelity Select Portfolio, a registered investment company and business trust organized under the laws of the Commonwealth of Massachusetts, under Rule 6-03(c)(1) of Regulation S-X with respect to its proposed consolidation of its financial statements as of February 29, 2008, with those of its wholly-owned subsidiary, Fidelity Select Gold Cayman Ltd., a Cayman Islands limited company (the “Gold Subsidiary”).

You state that Gold Portfolio’s principal investments consist of securities of companies principally engaged in gold-related activities, and gold bullion or coins. You state that historically, Gold Portfolio has not invested directly in commodities such as gold because the income derived from such investments is not considered qualifying income under Subchapter M of the Internal Revenue Code (the “Code”). You represent that Section 851(b)(2) of the Code states, in relevant part, that a corporation shall not be considered a regulated investment company for any taxable year unless, among other things, at least 90% of its gross income is derived from “dividends, interest, payments with respect to securities loans (as defined in section 512(a)(5)), and gains from the sale or other disposition of stock or securities (as defined in section 2(a)(36) of the Investment Company Act of 1940, as amended) or foreign currencies, or other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies” or from net income of certain publicly traded partnerships. You state that in order to gain significant exposure to these instruments, Gold Portfolio (and certain other Fidelity Funds) obtained a ruling from the U.S. Internal Revenue Service (“IRS Ruling”), which concluded that income arising from investments in certain foreign corporations (i.e., corporations that are “controlled foreign corporations” for purposes of the Code) that invest in commodities and commodities-linked investments constitutes qualifying income (the “IRS Ruling”).

You represent that consistent with the IRS Ruling, certain Fidelity Funds, including Gold Portfolio, have formed, or may in the future form, Cayman Islands limited companies as wholly-owned subsidiaries (each a “Subsidiary”). You state that each Subsidiary, including Gold Subsidiary, is authorized to invest in commodities, commodities-linked instruments and derivatives and commodity exchange-traded funds, in each case, to the extent consistent with the investment objectives and policies of its corresponding Fidelity Fund. You state that the purpose of each Subsidiary is to serve as a vehicle through which its corresponding Fidelity Fund may gain investment exposure to commodities in a manner consistent with the IRS Ruling. As a result of Gold Portfolio’s investment in Gold Subsidiary, Gold Portfolio could receive income derived from commodities, such as gold, to a greater extent than otherwise permitted by Subchapter M had Gold Portfolio invested in the commodities directly.

You state that the investment company diversification tests under Section 851(b)(3)(B) of the Code limit a mutual fund’s investment in the securities of any one issuer to 25% of the investment company’s assets at the end of each quarter and as a result, each Fidelity Fund would limit its investment in a Subsidiary to 25% of the Fidelity Fund’s assets at the end of each quarter. You state that depending on its investments, the Gold Subsidiary may not be an investment company under Section 3(a)(1) of the Investment Company Act of 1940 (the “1940 Act”). Alternatively, the Gold Subsidiary may be excepted from the definition of investment company by Section 3(c)(7) of the 1940 Act. You state that you believe, however, that because the Gold Subsidiary is authorized to invest in securities, and may invest primarily in securities, and because the Gold Subsidiary will operate in all other respects as an investment company, including accounting for Gold Subsidiary’s holdings using the fair value basis of accounting, the Gold Subsidiary should be treated as an investment company for purposes of consolidating the Gold Portfolio’s financial statements.

You state that typically, a registered investment company may consolidate its financial statements only with a subsidiary that is another registered investment company. You state that although U.S. Generally Accepted Accounting Principles and Rule 6-03(c)(1) of Regulation S-X preclude consolidation by a registered investment company of any entity other than another investment company, it would be appropriate to consolidate the financial statements of the Gold Subsidiary into the Gold Portfolio because it would give shareholders a more accurate picture of the Gold Portfolio and its financial position, structure and investment strategies, and would more fully reflect the fact that the sole purpose of the Gold Subsidiary is to serve as a vehicle through which the Gold Portfolio gains exposure to particular commodities.

Based on the facts and representations in your letter, we would not recommend enforcement action to the Commission against the Gold Portfolio under Rule 6-03(c)(1) of Regulation S-X if the financial statements of the Gold Subsidiary are consolidated into the financial statements of the Gold Portfolio. You should note that different facts or representations may require a different conclusion. Further, this response expresses the position of the Division on enforcement only, and does not purport to express any accounting or legal conclusions on the issues presented. If you have any comments or questions, please contact Chad Gazzillo at
(202) 551-6934.

Richard F. Sennett
Chief Accountant
Division of Investment Management

Incoming Letter

The Incoming Letter is in Acrobat format.


Modified: 05/01/2008