SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Preliminary Additional Materials
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(e) or Sec. 240.14a-12
Fidelity Magellan Fund
File no. 811-1193
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(ii), 14a-6(j) (1), or 14a-6(j) (2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(j) (3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(j) (4) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
[X] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a) (2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of
its filing.
(1) Amount Previously Paid: $125
(2) Form, Schedule or Registration Statement No.: 811-1193
(3) Filing Party: Fidelity Magellan Fund
(4) Date Filed: December 20, 1993
FIDELITY MAGELLAN FUND
82 DEVONSHIRE STREET, BOSTON, MASSACHUSETTS 02109
1-800-544-8888
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of FIDELITY MAGELLAN FUND:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
Meeting) of Fidelity Magellan Fund (the fund) will be held at the office of
the fund, 82 Devonshire Street, Boston, Massachusetts 02109 on March 23,
1994, at 9:00 a.m. The purpose of the Meeting is to consider and act upon
the following proposals, and to transact such other business as may
properly come before the meeting or any adjournments thereof.
1. To elect a Board of Trustees.
2. To ratify the selection of Coopers & Lybrand as independent
accountants of the fund.
3. To approve an amended management contract for the fund.
4. To approve a new Sub-Advisory Agreement with FMR Far East for the fund.
5. To approve a new Sub-Advisory Agreement with FMR U.K. for the fund.
6. To amend the Declaration of Trust to provide dollar-based voting rights
for shareholders of the fund.
7. To amend the Declaration of Trust regarding shareholder notification of
the appointment of Trustees.
8. To amend the Declaration of Trust to provide the fund with the ability
to invest all of its assets in another open-end investment company with the
same investment objective and policies.
9. To adopt a new fundamental investment policy permitting the fund to
invest all of its assets in another open-end investment company with
substantially the same investment objective and policies.
10. To amend the fund's fundamental objective and certain fundamental
policies to broaden the fund's ability to invest in domestic and foreign
securities of all types to seek capital appreciation.
ADOPTION OF STANDARDIZED INVESTMENT LIMITATIONS
11. To amend the fund's fundamental investment limitation concerning
borrowing.
12. To amend the fund's fundamental investment limitation concerning real
estate.
13. To amend the fund's fundamental investment limitation concerning the
issuance of senior securities.
14. To eliminate the fund's fundamental investment limitation concerning
short sales of securities.
15. To eliminate the fund's fundamental investment limitation concerning
margin purchases.
16. To amend the fund's fundamental investment limitation concerning the
purchase or sale of physical commodities.
17. To amend the fund's fundamental investment limitation concerning
lending.
18. To eliminate the fund's fundamental investment limitation concerning
investment in other investment companies.
19. To amend the fund's fundamental investment limitation concerning the
concentration of its investments in a single industry.
20. To eliminate the fund's fundamental investment limitation concerning
investments in securities of newly-formed issuers.
The Board of Trustees has fixed the close of business on January
25, 1994 as the record date for the determination of the shareholders of
the fund entitled to notice of, and to vote at, such Meeting and any
adjournments thereof.
By order of the Board of Trustees,
ARTHUR S. LORING, Secretary
January 25, 1994
YOUR VOTE IS IMPORTANT -
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
SHAREHOLDERS ARE INVITED TO ATTEND THE MEETING IN PERSON. ANY SHAREHOLDER
WHO DOES NOT EXPECT TO ATTEND THE MEETING IS URGED TO INDICATE VOTING
INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE AND SIGN IT, AND RETURN IT IN
THE ENVELOPE PROVIDED, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED
STATES. IN ORDER TO AVOID UNNECESSARY EXPENSE TO THE FUND , WE ASK
YOUR COOPERATION IN MAILING YOUR PROXY CARD PROMPTLY, NO MATTER HOW LARGE
OR SMALL YOUR HOLDINGS MAY BE.
INSTRUCTIONS FOR EXECUTING PROXY CARD
The following general rules for executing proxy cards may be of assistance
to you and help you avoid the time and expense involved in validating your
vote if you fail to execute your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Your name should be signed exactly as it appears
in the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the party
signing should conform exactly to a name shown in the registration.
3. ALL OTHER ACCOUNTS should show the capacity of the individual signing.
This can be shown either in the form of the account registration itself or
by the individual executing the proxy card. For example:
REGISTRATION VALID
SIGNATURE
A. 1) ABC Corp. John Smith,
Treasurer
2) ABC Corp. John Smith,
Treasurer
c/o John Smith, Treasurer
B. 1) ABC Corp. Profit Sharing Plan Ann B. Collins,
Trustee
2) ABC Trust Ann B. Collins,
Trustee
3) Ann B. Collins, Trustee Ann B. Collins,
Trustee
u/t/d 12/28/78
C. 1) Anthony B. Craft, Cust. Anthony B. Craft
f/b/o Anthony B. Craft, Jr.
UGMA
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS OF
FIDELITY MAGELLAN FUND
TO BE HELD ON MARCH 23, 1994
This Proxy Statement is furnished in connection with a solicitation of
proxies made by, and on behalf of, the Board of Trustees of Fidelity
Magellan Fund (the fund) to be used at the Special Meeting of Shareholders
of the fund (the Meeting) and at any adjournments thereof, to be held March
23, 1994 at 9 :00 a .m. at 82 Devonshire Street, Boston,
Massachusetts 02109, the principal executive office of the fund. The
purpose of the Meeting is set forth in the accompanying Notice. The
solicitation is made primarily by the mailing of this Proxy Statement and
the accompanying proxy card on or about January 25, 1994. Supplementary
solicitations may be made by mail, telephone, telegraph, or by personal
interview by representatives of the fund. The expenses in connection with
preparing this Proxy Statement and its enclosures and of all solicitations
will be paid by the fund. The fund will reimburse brokerage firms and
others for their reasonable expenses in forwarding solicitation material to
the beneficial owners of shares.
If the enclosed proxy card is executed and returned, it may nevertheless
be revoked at any time prior to its use by written notification received by
the fund, by the execution of a later-dated proxy card or by attending the
Meeting and voting in person. All proxy cards solicited by the Board of
Trustees that are properly executed and received by the Secretary prior to
the Meeting, and which are not revoked, will be voted at the Meeting.
Shares represented by such proxies will be voted in accordance with the
instructions thereon. If no specification is made on a proxy card, it will
be voted FOR the matters specified on the proxy card. All proxies not
voted, including broker non-votes, will not be counted toward establishing
a quorum. Shareholders should note that while votes to ABSTAIN will count
toward establishing a quorum, passage of any proposal being considered at
the Meeting will occur only if a sufficient number of votes are cast FOR
the proposal. Accordingly, votes to ABSTAIN and votes AGAINST will have the
same effect in determining whether the proposal is approved.
If a quorum is present at the Meeting, but sufficient votes to approve one
or more of the proposed items are not received, or if other matters arise
requiring shareholder attention, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of a
majority of those shares present at the Meeting or represented by proxy.
When voting on a proposed adjournment, the persons named as proxies will
vote for the proposed adjournment all shares that they are entitled to vote
with respect to each item, unless directed to vote AGAINST the item, in
which case such shares will be voted against the proposed adjournment with
respect to that item. A shareholder vote may be taken on one or more of the
items in this Proxy Statement prior to such adjournment if sufficient votes
have been received and it is otherwise appropriate. A copy of the fund's
annual report for the fiscal year ended March 31, 1993 has been mailed or
delivered to each shareholder of the fund entitled to vote at the meeting.
On November 30 , 1993 there were 449,481,339 shares of
Fidelity Magellan Fund issued and outstanding. To the knowledge of the
fund, no shareholder owned of record or beneficially more than 5% of the
outstanding shares of the fund on that date. Shareholders of record at the
close of business on January 25, 1994 will be entitled to vote at the
Meeting. Each such shareholder will be entitled to one vote for each share
held on that date.
VOTE REQUIRED: A PLURALITY OF ALL VOTES CAST AT THE MEETING WILL BE
SUFFICIENT TO APPROVE PROPOSALS 1 AND 2. APPROVAL OF PROPOSALS 3 THROUGH 20
REQUIRES THE AFFIRMATIVE VOTE OF A "MAJORITY OF THE OUTSTANDING VOTING
SECURITIES'' OF THE FUND. UNDER THE INVESTMENT COMPANY ACT OF 1940 (THE
1940 ACT), A "MAJORITY VOTE OF THE OUTSTANDING VOTING SECURITIES'' MEANS
THE AFFIRMATIVE VOTE OF THE LESSER OF (A) 67% OR MORE OF THE SHARES OF THE
FUND PRESENT AT THE MEETING OR REPRESENTED BY PROXY IF THE HOLDERS OF MORE
THAN 50% OF THE OUTSTANDING SHARES ARE PRESENT OR REPRESENTED BY PROXY OR
(B) MORE THAN 50% OF THE OUTSTANDING SHARES.
1. TO ELECT A BOARD OF TRUSTEES.
Pursuant to the provisions of the Declaration of Trust of Fidelity
Magellan Fund (the trust) , the Trustees have determined that the
number of Trustees shall be fixed at twelve. It is intended that the
enclosed proxy card will be voted for the election as Trustees of the
twelve nominees listed below, unless such authority has been withheld in
the proxy card.
Except for Mrs. Davis and Mr. Mann, all nominees named below are currently
Trustees of Fidelity Magellan Fund and have served in that capacity
continuously since originally elected or appointed. Mr. Cox, Mr. Jones, Mr.
Lynch, and Mr. McDonough were selected by the trust's Nominating and
Administration Committee (see page ) and were appointed to the Board in
November 1991, May 1990, April 1990, and August 1989, respectively. None of
the nominees is related to one another. Those nominees indicated by an
asterisk (*) are "interested persons" of the trust by virtue of, among
other things, their affiliation with either the trust, the fund's
investment adviser, Fidelity Management & Research Company (FMR, or the
Adviser), or the fund's distribution agent, Fidelity Distributors
Corporation (FDC). Each of the nominees is currently a Trustee or General
Partner, as the case may be, of other funds advised by FMR.
In the election of Trustees, those twelve nominees receiving the highest
number of votes cast at the Meeting, providing a quorum is present, shall
be elected.
Nominee Principal Occupation ** Year of
(Age) Election or
Appointmen
t
*J. Gary Burkhead Senior Vice President, is President 1986
82 Devonshire Street of FMR; and President and a
Boston, MA Director of FMR Texas Inc. (1989),
(52) Fidelity Management &
Research (U.K.) Inc. and Fidelity
Management & Research (Far
East) Inc.
Ralph F. Cox President of Greenhill Petroleum 1991
200 Rivercrest Drive Corporation (petroleum exploration
Forth Worth, TX and production, 1990). Prior to his
(61) retirement in March 1990, Mr. Cox
was President and Chief Operating
Officer of Union Pacific Resources
Company (exploration and
production). He is a Director of
Bonneville Pacific Corporation
(independent power, 1989) and
CH2M Hill Companies
(engineering). In addition, he
served on the Board of Directors of
the Norton Company (manufacturer
of industrial devices, 1983-1990)
and continues to serve on the Board
of Directors of the Texas State
Chamber of Commerce, and is a
member of advisory boards of
Texas A&M University and
the University of Texas at Austin.
Phyllis Burke Davis Prior to her retirement in ____
340 E. 6 4 th Street #22C September of 1991, Mrs. Davis was
New York, NY the Senior Vice President of
(6 2 ) Corporate Affairs of Avon
Products, Inc. She is currently a
Director of BellSouth Corporation
(telecommunications), Eaton
Corporation (manufacturing, 1991),
and the TJX Companies, Inc. (retail
stores, 1990), and previously
served as a Director of Hallmark
Cards, Inc. (1985-1991) and
Nabisco Brands, Inc. In addition,
she serves as a Director of the New
York City Chapter of the National
Multiple Sclerosis Society, and is a
member of the Advisory Council of
the International Executive
Services Corps. and the President's
Advisory Council of The
University of Vermont of Business
Administration (1988).
Richard J. Flynn A financial consultant. Prior to 1984
77 Fiske Hill September 1986, Mr. Flynn was
Sturbridge, MA Vice Chairman and a Director of
(70) the Norton Company (manufacturer
of industrial devices). He is
currently a Director of Mechanics
Bank and a Trustee of College of
the Holy Cross and Old Sturbridge
Village, Inc.
*Edward C. Johnson 3d President, is Chairman, Chief 1984
82 Devonshire Street Executive Officer and a Director of
Boston, MA FMR Corp.; a director and
(63) Chairman of the Board and of the
Executive Committee of FMR; a
Director of FMR, Chairman and a
Director of FMR Texas Inc. (1989),
Fidelity Management &
Research (U.K.) Inc., and Fidelity
Management & Research (Far
East) Inc.
E. Bradley Jones Prior to his retirement in 1984, Mr. 1990
3881-2 Lander Road Jones was Chairman and Chief
Chagrin Falls , OH Executive Officer of LTV Steel
(67) Company. Prior to May 1990, he
was Director of National City
Corporation (a bank holding
company) and National City Bank
of Cleveland. He is a Director of
TRW Inc. (original equipment and
replacement products),
Cleveland-Cliffs Inc (mining),
NACCO Industries, Inc (mining
and marketing), Consolidated Rail
Corporation, Birmingham Steel
Corporation (1988), Hyster-Yale
Materials Handling, Inc. (1989),
and RPM, Inc. (manufacturer of
chemical products, 1990). In
addition, he serves as a Trustee of
First Union Real Estate
Investments; Chairman of the
Board of Trustees and a member of
the Executive Committee of the
Cleveland Clinic Foundation, a
Trustee and a member of the
Executive Committee of University
School (Cleveland), and a Trustee
of Cleveland Clinic Florida.
Donald J. Kirk Professor at Columbia University 1987
680 Steamboat Road Graduate School of Business and a
Apartment #1 - North financial consultant. Prior to 1987,
Greenwich, CT he was Chairman of the Financial
(62) Accounting Standards Board. Mr.
Kirk is a Director of General Re
Corporation (reinsurance) and
Valuation Research Corp.
(appraisals and valuations, 1993).
In addition, he serves as Vice
Chairman of the Board of Directors
of the National Arts Stabilization
Fund and Vice Chairman of the
Board of Trustees of the Greenwich
Hospital Association (1989).
*Peter S. Lynch Vice Chairman of FMR (1992). 1990
82 Devonshire Street Prior to his retirement on May 31,
Boston, MA 1990, he was a Director of FMR
(51) (1989) and Executive Vice
President of FMR (a position he
held until March 31, 1991); Vice
President of Fidelity Magellan
Trust and FMR Growth Group
Leader; and a Managing Director
of FMR Corp. Mr. Lynch was also
Vice President of Fidelity
Investments Corporate Services
(1991-1992). He is a Director of
W.R. Grace & Co. (chemicals,
1989) and Morrison Knudsen
Corporation (engineering and
construction, 1988). In addition, he
serves as a Trustee of Boston
College, Massachusetts Eye &
Ear Infirmary, Historic Deerfield
(1989) and Society for the
Preservation of New England
Antiquities, and as an Overseer of
the Museum of Fine Arts of Boston
(1990).
Gerald C. McDonough Chairman of G.M. Management 1989
135 Aspenwood Drive Group (strategic advisory services).
Cleveland, OH Prior to his retirement in July 1988,
(64) he was Chairman and Chief
Executive Officer of Leaseway
Transportation Corp. (physical
distribution services). Mr.
McDonough is a Director of
ACME-Cleveland Corp. (metal
working, telecommunications and
electronic products),
Brush-Wellman Inc. (metal
refining), York International Corp.
(air-conditioning and refrigeration,
1989), and Commercial Intertech
Corp. (water treatment equipment,
1992) and Associated Estates
Realty Corporation (a real estate
investment trust, 1993).
Edward H. Malone Prior to his retirement in 1985, Mr. 1988
5601 Turtle Bay Drive Malone was Chairman, General
#2104 Electric Investment Corporation
Naples, FL and a Vice President of General
(69) Electric Company. He is a Director
of Allegheny Power Systems, Inc.
(electric utility), General Re
Corporation (reinsurance), and
Mattel Inc. (toy manufacturer). He
is also a Trustee of Rensselaer
Polytechnic Institute and of
Corporate Property Investors and a
member of the Advisory Boards of
Butler Capital Corporation Trusts
and Warburg, Pincus Partnership
Trusts.
Marvin L. Mann Trustee (1993) is Chairman of the ____
55 Railroad Avenue Board, President, and Chief
Greenwich,CT Executive Officer of Lexmark
( 60 ) International, Inc. (office
machines, 1991). Prior to 1991, he
held the positions of Vice President
of International Business Machines
Corporation (IBM) and President
and General Manager of various
IBM divisions and subsidiaries. Mr.
Mann is a Director of M.A. Hanna
Company (chemicals, 1993) and
Infomart (marketing services,
1991), a Trammell Crow Co. In
addition, he serves as the
Campaign Vice Chairman of the
Tri-State United Way (1993) and is
a member of the University of
Alabama President's Cabinet
(1990).
Nominee Principal Occupation ** Year of
(Age) Election or
Appointmen
t
Thomas R. Williams President of The Wales Group, Inc. 1988
21st Floor (management and financial
191 Peachtree Street, advisory services). Prior to retiring
N.E. in 1987, Mr. Williams served as
Atlanta, GA Chairman of the Board of First
(65) Wachovia Corporation (bank
holding company, 1985-1987), and
Chairman and Chief Executive
Officer of The First National Bank
of Atlanta and First Atlanta
Corporation (bank holding
company). He is currently a
Director of BellSouth Corporation
(telecommunications), ConAgra,
Inc. (agricultural products), Fisher
Business Systems, Inc. (computer
software, 1988), Georgia Power
Company (electric utility), Gerber
Alley & Associates, Inc.
(computer software), National Life
Insurance Company of Vermont,
American Software, Inc. (1989),
and AppleSouth Inc. (restaurants,
1992).
_______________
** Except as otherwise indicated, each individual has held the office shown
or other offices in the same company for the last five years.
As of November 30 , 1993, the nominees and officers of the trust
owned, in the aggregate, less than 1 % of any of the fund's
outstanding shares.
If elected, the Trustees will 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) a Trustee
may be removed at any Special Meeting of shareholders by a vote of
two-thirds of the outstanding shares of the trust. In case a vacancy shall
for any reason exist, the remaining Trustees will fill such vacancy by
appointing another Trustee, so long as, immediately after such appointment,
at least two-thirds of the Trustees have been elected by shareholders. If,
at any time, less than a majority of the Trustees holding office has been
elected by the shareholders, the Trustees then in office will promptly call
a shareholders' meeting for the purpose of electing a Board of Trustees.
Otherwise, there will normally be no meeting of shareholders for the
purpose of electing Trustees.
The f und's Board, which is currently composed of three interested
and seven non-interested Trustees, met eleven times during the twelve
months ended March 31, 1993. It is expected that the Trustees will meet at
least ten times a year at regularly scheduled meetings.
As a group, the non-interested Trustees received fees and expenses of
$ 159,924 from the fund in their capacities as Trustees for the
fiscal year ended March 31, 1993. The non-interested Trustees also served
in similar capacities for other funds advised by FMR (see page ), and
received additional compensation for such services.
The Board of Trustees has adopted a policy whereby non-interested
Trustees, upon reaching their 72nd birthday will resign. Under a defined
benefit retirement program, non-interested Trustees, upon reaching age 72,
are entitled to payments during their lifetime based on their basic Trustee
fees and their length of service.
The fund's Audit Committee is composed entirely of Trustees who are not
interested persons of the fund, or FMR or its affiliates , and
normally meets three times a year, or as required, prior to meetings of the
Board of Trustees. Currently, Messrs. Kirk (Chairman), Cox, and Jones are
members of the Committee. This Committee oversees and monitors the
financial reporting process, including recommending to the Board the
independent accountants to be selected for the fund (see proposal 2),
reviewing internal controls and the auditing function (both internal and
external), reviewing the qualifications of key personnel performing audit
work, and overseeing compliance procedures. During the twelve months ended
March 31, 1993, the Committee held 5 meetings.
The fund's Nominating and Administration Committee is currently composed
of Messrs. Flynn (Chairman), McDonough, and Williams. The Committee members
confer periodically and hold meetings as required. The Committee is charged
with the duties of reviewing the composition and compensation of the Board
of Trustees, proposing additional non-interested Trustees, monitoring the
performance of legal counsel employed by the fund and the non-interested
Trustees, and acting as administrative committee under the Retirement Plan
for non-interested Trustees. During the twelve months ended March 31, 1993,
the committee held 2 meetings. The Nominating and Administration Committee
will consider nominees recommended by shareholders. Recommendations should
be submitted to the Committee in care of the Secretary of the fund. The
fund does not have a compensation committee; such matters are considered by
the Nominating and Administration Committee.
2. TO RATIFY THE SELECTION OF COOPERS & LYBRAND AS INDEPENDENT
ACCOUNTANTS OF THE FUND.
By a vote of the non-interested Trustees, the firm of Coopers &
Lybrand has been selected as independent accountants for the fund to sign
or certify any financial statements of the fund required by any law or
regulation to be certified by an independent accountant and filed with the
Securities and Exchange Commission (SEC) or any state. Pursuant to the
Investment Company Act of 1940 (the 1940 Act), such selection requires the
ratification of fund shareholders. In addition, as required by the 1940
Act, the vote of the Trustees is subject to the right of the fund, by vote
of a majority of its outstanding voting securities at any meeting called
for the purpose of voting on such action, to terminate such employment
without penalty. Coopers & Lybrand has advised the fund that it has no
direct or material indirect ownership interest in the fund.
The services provided to the fund include (1) audit of annual financial
statements and, if requested, an audit of the semiannual financial
statements; (2) assistance and consultation in connection with SEC filings;
and (3) review of the federal income tax returns filed on behalf of the
fund. In recommending the selection of the fund's accountants, the Audit
Committee reviewed the nature and scope of the services to be provided
(including non-audit services) and whether the performance of such services
would affect the accountant's independence. Representatives of Coopers
& Lybrand are not expected to be present at the Meeting, but have been
given the opportunity to make a statement if they so desire and will be
available should any matter arise requiring their presence.
3. TO APPROVE AN AMENDED MANAGEMENT CONTRACT FOR THE FUND.
The Board of Trustees has approved, and recommends that shareholders of
Fidelity Magellan Fund approve, a proposal to amend the fund's management
contract with FMR (the Amended Contract). The proposal would modify the
management fee that FMR receives from the fund to provide for lower fees
when FMR's assets under management exceed certain levels. THE AMENDED
C ONTRACT WILL RESULT IN A MANAGEMENT FEE WHICH IS THE SAME AS, OR LOWER
THAN, THE FEE PAYABLE UNDER THE PRESENT MANAGEMENT CONTRACT (THE PRESENT
CONTRACT) .
PROPOSED AMENDMENT TO THE MANAGEMENT CONTRACT. A copy of the Amended
C ontract, marked to indicate the proposed amendment, is supplied as
Exhibit 1 on page . Except for the amendment to the management fee,
it is substantially identical to the present contract. (For a detailed
discussion of the fund's present contract, refer to the section
entitled "Present Management Contract" beginning on page .) If
approved by shareholders, the Amended C ontract will take effect on
April 1, 1994 (or, if later, the first day of the first month following
approval) and will remain in effect through June 30, 1994 and thereafter
subject to continuation by the fund's Board of Trustees. If the
Amended C ontract is not approved, the present contract will
continue in effect through June 30, 1994, and thereafter subject to
continuation by the fund's Board of Trustees.
The management fee is an annual percentage of a fund's average net assets,
calculated and paid monthly. The percentage is the sum of two components: a
basic fee rate and a performance adjustment. The basic fee rate is the sum
of a group fee rate, which varies according to FMR's assets under
management, and a fixed individual fund fee rate. The proposal would modify
the group fee by providing for lower fee rates if FMR's assets under
management remain above $ 138 billion.
MODIFICATION TO GROUP FEE RATE. The group fee rate varies based on the
aggregate net assets of all registered investment companies having
management contracts with FMR. As group net assets increase, the group fee
rate declines. The Amended C ontract would not change the
group fee calculation for group net assets of $1 38 billion or less.
Above $ 138 billion in group net assets, the group fee rate does not
decline, but under the Amended C ontract, it declines as
indicated in the table on the next page . These lower fee rates were
voluntarily adopted by FMR providing they resulted in a lower management
fee payable by the fund.
The group fee rate is calculated according to a graduated fee schedule
providing for different rates for different levels of group net assets. The
rate at which the fee declines is determined by fee "breakpoints" that
provide for lower fees when assets increase. The proposed contract would
add six new fee breakpoints for group asset levels above $ 102
billion as illustrated in the table below. (For an explanation of how these
breakpoints are factored into the fee calculation, see the section
entitled "Present Management Contract" beginning on page .)
GROUP FEE RATES
Average Group Present Proposed
Assets Contract * Contract
($ billions)
102-138 .310 0 % .3100%
138-174 .3 100 % .3050%
174-228 .3 100 % .3000%
228-282 .3 100 % .2950%
282-336 .3100% .2900%
Over 336 .3 1 0 0 % .2850 %
The result at various levels of group net assets is illustrated by the
table below.
EFFECTIVE ANNUAL GROUP FEE RATES
Group Net Present Proposed
Assets Contract * Contract
($ billions)
215 .3 292 % .3 264 %
250 .32 65 % .3 223 %
300 .3 238 % .3 175 %
350 .3 218 % .3 133 %
400 .3 203 % .3 098 %
* Does not reflect voluntary adoption of extended group fee rate
schedules.
Average group net assets for December 1993 were approximately $ 233
billion.
The fund's annual individual fund fee rate is .30%. The sum of the group
fee rate and the individual fund fee rate is referred to as a fund's basic
fee rate. One-twelfth (1/12) of this annual management fee rate is applied
to a fund's average net assets for the current month, resulting in a dollar
amount which is the basic fee for that month. The basic fee is subject to
an upward or downward adjustment, depending on whether the fund's
investment performance exceeds or is exceeded by the Standard & Poor's
500 Composite Stock Price Index (S&P 500) over the same period. The
performance period consists of the most recent month plus the previous 35
months. Each percentage point of difference (up to a maximum difference of
+ 10) is multiplied by a performance adjustment rate of .02%. Thus, the
maximum annualized adjustment rate is + .20%. This performance comparison
is made at the end of each month. One twelfth of this rate is applied to
the average daily net assets for the fund over the entire performance
period, giving a dollar amount which is added to or subtracted from the
basic fee.
COMPARISON OF MANAGEMENT FEES AND TOTAL EXPENSES. For December,
1993 average group net assets of $ 233 billion, the fund's management
fee rate under the Amended Contract would have been . 3243 %, compared
to . 3277 % under the p resent c ontract. The management
fee rate will remain the same under both the p resent c ontract
and the Amended Contract until group net assets exceed $ 138 billion,
at which point the management fee rate under the Amended Contract begins to
decline. The following chart compares the fund's management fee
(including the Performance Adjustment) and total expense ratio under
the terms of the present contract for the fiscal period ended March 31,
1993 to the fees and expenses the funds would have incurred if the Amended
Contract had been in effect.
Present Contract* Amended Contract
Management Total Expense Management Total Expense
Fee Ratio Fee Ratio
$161,443,528 1.00% $161,242,950 1.00%
* Does not reflect voluntary adoption of extended group fee rate schedules.
MATTERS CONSIDERED BY THE BOARD OF TRUSTEES. The non-interested Trustees
recommended in 1991, and again in 1993, that the existing group fee be
reconsidered in light of the significant growth in the assets of funds
advised by FMR. The Combined Committee, a standing Committee of the Board
composed solely of non-interested Trustees, and the Board considered
revisions to the group fee component of the management fee on various
occasions during 1991 and 1993.
FMR provided substantial information to the Committee to assist it in its
deliberations. In addition, the Committee requested and reviewed additional
data, including analyses prepared by independent counsel to both the funds
and the non-interested Trustees. In unanimously approving the proposed
contract and recommending its approval by shareholders, the Trustees of the
fund, including the Independent Trustees, considering the best interests of
shareholders of the fund, took into account all factors they deemed
relevant. The factors considered by the Independent Trustees included the
nature, quality, and extent of the services furnished by FMR to the fund;
the necessity of FMR maintaining and enhancing its ability to retain and
attract high caliber personnel to serve the fund; the increased complexity
of the domestic and international securities markets; the investment record
of FMR in managing the fund; extensive financial, personnel, and structural
information as to the Fidelity organization, including the revenues and
expenses of FMR, and Fidelity Service Co. (FSC, the funds' transfer,
shareholder servicing, and pricing and bookkeeping agent) relating to their
mutual fund activities; whether economies of scale were demonstrated in
connection with FMR's provision of investment management and shareholder
services as assets increased; data on investment performance, management
fees and expense ratios of competitive funds and other Fidelity funds;
FMR's expenditures in developing enhanced shareholder services for the
fund; enhancements in the quality and scope of the shareholder services
provided to the fund's shareholders; the fees charged and services offered
by an affiliate of FMR for providing investment management services to
non-investment company accounts; and possible "spin-off" benefits to FMR
from serving as manager and from affiliates of FMR serving as principal
underwriter and transfer agent of the fund.
CONCLUSION, ACTION OF THE BOARD OF TRUSTEES, AND RECOMMENDED SHAREHOLDER
ACTION. Based on its evaluation of the extensive materials presented and
assisted by the advice of independent counsel, the Board of Trustees
concluded (i) that the existing management fee rate structure was fair and
reasonable and (ii) that the proposed reduction in the group fee rate
structure was in the best interest of the fund's shareholders. The Board of
Trustees voted to approve the submission of the Amended Contracts to
shareholders of the fund and recommends that shareholders of the fund vote
FOR the Amended Contract.
4. TO APPROVE A NEW SUB-ADVISORY AGREEMENT WITH FMR FAR EAST FOR THE FUND.
In conjunction with its portfolio management responsibilities on behalf of
the fund, FMR has entered into sub-advisory agreements with affiliates
whose offices are geographically dispersed around the world. To strengthen
and coordinate these relationships, the Board of Trustees proposes that
shareholders of the fund approve a new sub-advisory agreement (the proposed
agreement) between Fidelity Management & Research Company (FMR) and
Fidelity Management & Research (Far East) Inc. (FMR Far East) with
respect to the fund to replace FMR's existing agreement with FMR Far East.
The proposed agreement would allow FMR not only to receive investment
advice and research services from FMR Far East, but also would permit FMR
to grant FMR Far East investment management authority, as well as the
authority to buy and sell securities , if FMR believes it would be
beneficial to the fund and its shareholders. BECAUSE FMR PAYS ALL OF FMR
FAR EAST'S FEES, THE PROPOSED AGREEMENT WOULD NOT AFFECT THE FEES PAID BY
THE FUND TO FMR.
On September 17, 1993, the Board of Trustees agreed to submit the proposed
agreement to shareholders of the fund pursuant to a unanimous vote of both
the full Board of Trustees and those Trustees who were not "interested
persons" of the trust or FMR. If approved by shareholders, the proposed
agreement will replace the sub-advisory agreement currently in effect with
respect to the fund (the current agreement) . The current agreement
was approved by shareholders on October 26 , 1989. A copy of the
proposed agreement is attached to this proxy statement as Exhibit 2 .
FMR Far East, with its principal office in Tokyo, is a wholly-owned
subsidiary of FMR established in 1986 to provide investment research to FMR
with respect to foreign securities. This research complements other
research on foreign securities produced by FMR's U.S.- based research
analysts and portfolio managers, or obtained from broker-dealers or other
sources.
Under the current agreement, the FMR Far East acts as an investment
consultant to FMR and supplies FMR with investment research information and
portfolio management advice as FMR reasonably requests on behalf of the
fund. FMR Far East provides investment advice and research services
exclusively with respect to companies based outside of the United States
focusing primarily on companies based in the Far East. Under the current
agreement with FMR Far East, FMR, NOT THE FUND, pays FMR Far East's fee
equal to 105% of its costs incurred in connection with the agreement. For
the fiscal years ended March 31, 1993, 1992, and 1991, the fees paid by FMR
to FMR Far East on behalf of the fund amounted to $237,864, $466,930, and
$444,000, respectively.
Although FMR employees are expected to consult regularly with FMR Far
East, under the current agreement, FMR Far East has no authority to make
investment decisions on behalf of the fund. FMR Far East may also provide
investment advisory services to FMR with respect to other investment
companies for which FMR serves as investment adviser, and to other clients.
Currently, FMR Far East's only client other than FMR is Fidelity
International Limited (FIL), an affiliate of FMR organized under the laws
of Bermuda. FIL provides investment advisory services to non-U.S.
investment companies and institutional clients investing in securities of
issuers throughout the world. Edward C. Johnson 3d, President and a Trustee
of the trust, is Chairman and a Director of FMR Far East, Chairman and a
Director of FIL, and a principal stockholder of both FIL and FMR.
Under the proposed agreement, FMR would continue to receive investment
advice from FMR Far East, but it could also grant investment management
authority with respect to all or a portion of the fund's assets to FMR Far
East. If FMR Far East were to exercise investment management authority on
behalf of the fund, it would be required, subject to the supervision of
FMR, to direct the investments of the fund in accordance with the fund's
investment objective, policies, and limitations. If FMR grants investment
management authority to FMR Far East with respect to all or a portion of
the fund's assets, FMR Far East would be authorized to buy or sell stocks,
bonds, and other securities for the fund subject to the overall supervision
of FMR and the Board of Trustees. In addition, the proposed agreement would
authorize FMR to delegate other investment management services to FMR Far
East, including, but not limited to, currency management services,
(including buying and selling currency options and entering into currency
forward and futures contracts on behalf of the fund), other transactions in
futures contracts and options, and borrowing or lending portfolio
securities. If any of these investment management services were delegated,
FMR Far East would continue to be subject to the control and direction of
FMR and the Board of Trustees and to be bound by the investment objective,
policies, and limitations of the fund. If granted investment management
authority, FMR Far East would also execute orders to purchase and sell
securities as described in the "Portfolio Transactions" section on page .
Allowing FMR to grant investment management authority to FMR Far East
would provide FMR increased flexibility in the assignment of portfolio
managers and give the fund access to managers located abroad who may have
more specialized expertise with respect to local companies and markets.
Additionally, the Trustees believe that the fund and its shareholders may
benefit from giving FMR, through FMR Far East, the ability to execute
portfolio transactions from points in the Far East that are physically
closer to foreign issuers and the primary markets in which their securities
are traded. Increasing FMR's proximity to foreign markets should enable the
fund to participate more readily in full trading sessions on foreign
exchanges, and to react more quickly to changing market conditions.
THE PROPOSED AGREEMENT WOULD NOT INCREASE THE FEES PAID TO FMR BY THE
FUND. The fees paid by FMR to FMR Far East for investment advice as
described above would remain unchanged. However, to the extent that FMR
granted investment management authority to FMR Far East, FMR would pay FMR
Far East 50% of its monthly management fee with respect to the average net
assets managed on a discretionary basis by FMR Far East for investment
management and portfolio execution services.
If approved by shareholders, the proposed agreement would continue in
force until July 31, 1994 and from year to year thereafter, as long as its
continuance is approved at least annually by (i) the vote, cast in person
at a meeting called for the purpose, of a majority of those Trustees who
are not "interested persons" of the trust or FMR and (ii) the vote of
either a majority of the Trustees or by the vote of a majority of the
outstanding shares of the fund.
The proposed agreement could be transferred to a successor of FMR Far East
without resulting in termination and without shareholder approval, as long
as the transfer did not constitute an assignment under applicable
securities regulations. The proposed agreement would be terminable on 60
days' written notice by either party to the agreement and each proposed
agreement would terminate automatically in the event of its assignment.
CONCLUSION. The Board of Trustees unanimously recommends that shareholders
of the fund vote FOR the proposed agreement. If the proposed agreement is
not approved, FMR's current agreement on behalf of the fund will continue
in effect.
5. TO APPROVE A NEW SUB-ADVISORY AGREEMENT WITH FMR U.K. FOR THE FUND.
In conjunction with its portfolio management responsibilities on behalf of
the fund, FMR has entered into sub-advisory agreements with affiliates
whose offices are geographically dispersed around the world. To strengthen
and coordinate these relationships, the Board of Trustees proposes that
shareholders of the fund approve a new sub-advisory agreement (the proposed
agreement) between Fidelity Management & Research Company (FMR) and
Fidelity Management & Research (U.K.) Inc. (FMR U.K.) with respect to
the fund to replace FMR's existing agreement with FMR U.K. The proposed
agreement would allow FMR not only to receive investment advice and
research services from FMR U.K., but also would permit FMR to grant FMR
U.K. investment management authority, as well as the authority to buy and
sell securities if FMR believes it would be beneficial to the fund and its
shareholders. BECAUSE FMR PAYS ALL OF FMR U.K.'S FEES, THE PROPOSED
AGREEMENT WOULD NOT AFFECT THE FEES PAID BY THE FUND TO FMR.
On September 17, 1993, the Board of Trustees agreed to submit the proposed
agreement to shareholders of the fund pursuant to a unanimous vote of both
the full Board of Trustees and those Trustees who were not "interested
persons" of the trust or FMR. If approved by shareholders, the proposed
agreement will replace the sub-advisory agreement currently in effect with
respect to the fund (the current agreement) . The current agreement
was approved by shareholders on October 26 , 1989. A copy of the
proposed agreement is attached to this proxy statement as Exhibit 3 .
FMR U.K., with its principal office in London, is a wholly-owned
subsidiary of FMR established in 1986 to provide investment research to FMR
with respect to foreign securities. This research complements other
research on foreign securities produced by FMR's U.S.-based research
analysts and portfolio managers, or obtained from broker-dealers or other
sources.
Under the current agreement, FMR U.K. acts as an investment consultant to
FMR and supplies FMR with investment research information and portfolio
management advice as FMR reasonably requests on behalf of the fund. FMR
U.K. provides investment advice and research services exclusively with
respect to companies based outside of the United States focusing primarily
on companies based in Europe. Under the current agreement with FMR U.K.,
FMR, NOT THE FUND, pays FMR U.K.'s fee equal to 110% of its costs incurred
in connection with the agreement. For the fiscal years ended March 31,
1993, 1992, and 1991, the fees paid by FMR to FMR U.K. on behalf of the
fund amounted to $224,843, $434,709, and $507,000, respectively.
Although FMR employees are expected to consult regularly with FMR U.K.,
under the current agreement, FMR U.K. has no authority to make investment
decisions on behalf of the fund. FMR U.K. may also provide investment
advisory services to FMR with respect to other investment companies for
which FMR serves as investment adviser, and to other clients. Currently,
FMR U.K.'s only client other than FMR is Fidelity International Limited
(FIL), an affiliate of FMR organized under the laws of Bermuda. FIL
provides investment advisory services to non-U.S. investment companies and
institutional clients investing in securities of issuers throughout the
world. Edward C. Johnson 3d, President and a Trustee of the trust, is
Chairman and a Director of FMR U.K., Chairman and a Director of FIL, and a
principal stockholder of both FIL and FMR.
Under the proposed agreement, FMR would continue to receive investment
advice from FMR U.K., but it could also grant investment management
authority with respect to all or a portion of the fund's assets to FMR U.K.
If FMR U.K. were to exercise investment management authority on behalf of
the fund, it would be required, subject to the supervision of FMR, to
direct the investments of the fund in accordance with the fund's investment
objective, policies, and limitations. If FMR grants investment management
authority to FMR U.K. with respect to all or a portion of the fund's
assets, FMR U.K. would be authorized to buy or sell stocks, bonds, and
other securities for the fund subject to the overall supervision of FMR and
the Board of Trustees. In addition, the proposed agreement would authorize
FMR to delegate other investment management services to FMR U.K.,
including, but not limited to, currency management services (including
buying and selling currency options and entering into currency forward and
futures contracts on behalf of the fund), other transactions in futures
contracts and options, and borrowing or lending portfolio securities. If
any of these investment management services were delegated, FMR U.K. would
continue to be subject to the control and direction of FMR and the Board of
Trustees and to be bound by the investment objective, policies, and
limitations of the fund. If granted investment management authority, FMR
U.K. would also execute orders to purchase and sell securities as described
in the "Portfolio Transactions" section on page .
Allowing FMR to grant investment management authority to FMR U.K. would
provide FMR increased flexibility in the assignment of portfolio managers
and give the fund access to managers located abroad who may have more
specialized expertise with respect to local companies and markets.
Additionally, the Trustees believe that the fund and its shareholders may
benefit from giving FMR, through FMR U.K., the ability to execute portfolio
transactions from points in Europe that are physically closer to foreign
issuers and the primary markets in which their securities are traded.
Increasing FMR's proximity to foreign markets should enable the fund to
participate more readily in full trading sessions on foreign exchanges, and
to react more quickly to changing market conditions.
THE PROPOSED AGREEMENT WOULD NOT INCREASE THE FEES PAID TO FMR BY THE
FUND. The fees paid by FMR to FMR U.K. for investment advice as described
above would remain unchanged. However, to the extent that FMR granted
investment management authority to FMR U.K., FMR would pay FMR U.K. 50% of
its monthly management fee with respect to the average net assets managed
on a discretionary basis by FMR U.K. for investment management and
portfolio execution services.
If approved by shareholders, the proposed agreement would continue in
force until July 31, 1994 and from year to year thereafter, as long as its
continuance is approved at least annually by (i) the vote, cast in person
at a meeting called for the purpose, of a majority of those Trustees who
are not "interested persons" of the trust or FMR and (ii) the vote of
either a majority of the Trustees or by the vote of a majority of the
outstanding shares of the fund.
The proposed agreement could be transferred to a successor of FMR U.K.
without resulting in termination and without shareholder approval, as long
as the transfer did not constitute an assignment under applicable
securities regulations. The proposed agreement would be terminable on 60
days' written notice by either party to the agreement and each proposed
agreement would terminate automatically in the event of its assignment.
CONCLUSION. The Board of Trustees unanimously recommends that shareholders
of the fund vote FOR the proposed agreement. If the proposed agreement is
not approved, FMR's current agreement on behalf of the fund will continue
in effect.
6. TO AMEND THE DECLARATION OF TRUST TO PROVIDE DOLLAR-BASED VOTING RIGHTS
FOR SHAREHOLDERS OF THE FUND.
The Board of Trustees has approved, and recommends that shareholders of
the trust approve a proposal to amend Article VII, Section 7.01 of the
Declaration of Trust. The amendment would provide voting rights based on a
shareholder's total dollar interest in the trust (dollar-based voting)
rather than on the number of shares owned for all shareholder votes for the
fund. As a result, voting power would be allocated in proportion to the
value of each shareholder's investment.
BACKGROUND. Fidelity Magellan Fund is an open-end management investment
company organized as a Massachusetts business trust. Currently, it is the
only fund in the trust. If there were additional funds in the trust,
shareholders of each fund would vote separately on matters concerning only
that fund and would vote on a trust-wide basis on matters that affect the
trust as a whole, such as electing trustees or amending the Declaration of
Trust. Currently under the Declaration of Trust, each share is entitled to
one vote, regardless of the relative value of the shares of each fund in
the trust.
The original intent of the one share, one-vote provision was to provide
equitable voting rights as required by the 1940 Act. In the case where a
trust has several series or funds, voting rights may become
disproportionate since the net asset values per share (NAVs) of the
separate funds diverge over time. Recently, the SEC issued a "no-action"
letter permitting a trust to seek shareholder approval of a dollar-based
voting system. The proposed amendment compl ies with the no-action
letter.
REASON FOR PROPOSAL. If approved, the amendment would provide a more
equitable distribution of voting rights than the one share, one-vote system
currently in effect. The voting power of shareholders would be commensurate
with the value of the shareholder's dollar investment in the trust rather
than with the number of shares held.
Under the current voting provisions, an investment in a fund with a lower
NAV may have significantly greater voting power than the same dollar amount
invested in a fund with a higher NAV. The table below shows a hypothetical
example of this.
Fund $1,000 investment in
Net Asset Value terms of shares
A $10.00 100.00 0
B $7.57 132.100
C $10.93 91.491
D $1.00 1,000.000
For example, Fund D shareholders would have ten times the voting power of
Fund A shareholders, because a $1,000 investment in Fund D would buy ten
times as many shares as a $1,000 investment in Fund A. Accordingly, a one
share, one-vote system may provide certain shareholders with a
disproportionate ability to affect the vote relative to shareholders of
other funds in the trust. If dollar-based voting had been in effect, each
shareholder would have had 1,000 voting shares. Their voting power would be
proportionate to their economic interest which FMR believes is a more
equitable result, and is the result in a typical corporation where each
voting share has an equal market price.
Currently, since there is only one fund in the trust, the proposal will
not affect the voting rights of fund shareholders. However, if additional
funds are added to the trust, relative voting rights would be changed under
the proposal . For example, under the current Declaration of Trust and
under the amended Declaration of Trust, when voting on matters that only
affect their fund, shareholders would have the same relative voting rights
as other shareholders in the fund, since the NAV of all shares in one fund
is the same. On trust-wide votes in the future, shareholders who own shares
with a lower NAV than other funds in a trust would be giving other
shareholders in the trust more voting "power" than they otherwise would
have had.
AMENDMENT TO THE DECLARATION OF TRUST. Article VII, Section 1 determines
the method of calculating voting rights for all shareholder votes for the
fund. If approved Article VII, Section 7.01 will be amended as follows
(material to be added is underlined and material to be deleted is
[bracketed]):
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
Section 7.01 ... On any matter submitted to a vote of the Shareholders,
all Shares shall be voted by individual Series, except (i) when required by
the 1940 Act, Shares shall be voted in the aggregate and not by individual
Series; and (ii) when the Trustees have determined that the matter affects
the interests of one or more Series, then the Shareholders of all such
Series shall be entitled to vote thereon. The Trustees may also determine
that a matter only affects only the interests of one or more classes of a
Series, in which case any such matters shall be voted on by such class or
classes. [Each whole Share shall be entitled to one vote as to any matter
on which it is entitled to vote, and each fractional Share shall be
entitled to a proportionate fractional vote.] A shareholder of each series
shall be entitled to one vote for each dollar of net asset value (number of
shares owned times net asset value per share) of such series, on any matter
on which such shareholder is entitled to vote and each fractional dollar
amount shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of Trustees. Shares may be
voted in person or by proxy, or in any manner provided for in the Bylaws. A
proxy may be given in writing. The Bylaws may provide that proxies may
also, or may instead, be given by any electronic or telecommunications
device or in any other manner. Notwithstanding anything else herein or in
the Bylaws, in the event a proposal by anyone other than the officers or
Trustees of the Trust is submitted to a vote of the Shareholders of one or
more Series or of the Trust, or in the event of any proxy contest or proxy
solicitation or proposal in opposition to any proposal by the officers or
Trustees of the Trust, Shares may be voted only in person or by written
proxy. Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required or permitted by law, this
Declaration of Trust or any Bylaws of the Trust to be taken by
Shareholders.
CONCLUSION. If approved, the amendment will take effect after the
shareholder meeting or any adjournments thereof. The Trustees believe the
proposed amendment will benefit the fund by bringing greater equality in
voting rights amongst all shareholders. The Trustees unanimously recommend
that shareholders of the fund vote FOR the proposed amendment to the
Declaration of Trust. If the proposed amendment is not approved, the
Declaration of Trust will remain unchanged.
7. TO AMEND THE DECLARATION OF TRUST REGARDING SHAREHOLDER NOTIFICATION OF
APPOINTMENT OF TRUSTEES.
The fund's Declaration of Trust provides that in the case of a vacancy on
the Board of Trustees, the remaining Trustees shall fill the vacancy by
appointing a person they, in their discretion see fit, consistent with the
limitations of the 1940 Act. Section 16 of the 1940 Act states that a
vacancy may be filled by the Trustees, if after filling the vacancy, at
least two-thirds of the Trustees then holding office were elected by the
outstanding shareholders of the trust. It also states that if at any time
less than 50% of the Trustees were elected by shareholders, a shareholder
meeting must be called within 60 days for the purposes of electing Trustees
to fill the existing vacancies.
The Declaration of Trust currently requires that within three months of a
Trustee appointment, notification of such be mailed to each shareholder of
the trust. Trustees also may appoint a Trustee in anticipation of a current
Trustee's retirement or resignation, or in the event of an increase in the
number of Trustees. An appointment in this case would also require
shareholder notification within three months of the appointment under the
current Declaration of Trust.
Subject to shareholder approval, the Trustees intend to eliminate the
notification requirement from the Trust's Declaration of Trust. The
language to be deleted from the Declaration of Trust is [bracketed].
ARTICLE IV
RESIGNATION AND APPOINTMENT OF TRUSTEES
Section 4. In case of the declination, death, resignation, retirement,
removal, incapacity, or inability of any of the Trustees, or in case a
vacancy shall, by reason of an increase in number, or for any other reason,
exist, the remaining Trustees shall fill such vacancy by appointing such
other person as they in their discretion shall see fit consistent with the
limitations under the Investment Company Act of 1940. Such appointment
shall be evidenced by a written instrument signed by a majority of the
Trustees in office or by recording in the records of the trust, whereupon
the appointment shall take effect. [Within three months of such appointment
the Trustees shall cause notice of such appointment to be mailed to each
Shareholder at his address as recorded on the books of the trust.] An
appointment of a Trustee may be made by the Trustees then in office [and
notice thereof mailed to Shareholders as aforesaid] in anticipation of a
vacancy to occur by reason of retirement, resignation or increase in number
of Trustees effective at a later date, provided that said appointment shall
become effective only at or after the effective date of said retirement,
resignation or increase in number of Trustees. As soon as any Trustee so
appointed shall have accepted this trust, the trust estate shall vest in
the new Trustee or Trustees, together with the continuing Trustees, without
any further act or conveyance, and he shall be deemed a Trustee hereunder.
The power of appointment is subject to the provisions of Section 16 (a) of
the 1940 Act.
Notifying a trust's shareholders in the event of an appointment of a
Trustee is not required by any federal or state law. Such notification to
all shareholders of a trust would be costly to the portfolios of the trust.
If the proposal is approved, shareholders will be notified of Trustee
appointments in the next financial report for the fund. Other than
eliminating the notification requirement, this proposal does not amend any
other aspect of Trustee resignation or appointment.
CONCLUSION. The Board of Trustees has concluded that the proposed
elimination of the Declaration of Trust's shareholder notification
requirement in the event of an appointment of a Trustee is in the best
interests of the trust's shareholders. The Trustees recommend voting FOR
the proposed amendment. If the proposal is not approved, the Declaration of
Trust's current section entitled "Resignation and Appointment of Trustees"
will remain unchanged.
8. TO AMEND THE DECLARATION OF TRUST TO PROVIDE THE FUND WITH THE ABILITY
TO INVEST ALL OF ITS ASSETS IN ANOTHER OPEN-END INVESTMENT COMPANY WITH THE
SAME INVESTMENT OBJECTIVES AND POLICIES.
The Board of Trustees has approved, and recommends that shareholders of
the fund approve a proposal to amend Article V, Section 1 of the
Declaration of Trust. If the proposal is approved, an amendment to the
Declaration of Trust would be adopted that clarifies that the Trustees may
authorize the investment of all of a fund's assets in another open-end
investment company with the same investment objective and policies ("Pooled
Fund structure"). The purpose of the Pooled Fund structure is to achieve
operational efficiencies. In order to implement a pooled fund structure,
both the Declaration of Trust and the fund's policies must permit the
structure. Currently,the fund's policies do not allow for such investments.
Proposal 9 below seeks shareholder approval to adopt a fundamental
investment policy to permit investment in another open-end investment
company. This proposal, which amends the Declaration of Trust clarifies the
Board's ability to implement the Pooled Fund structure once the
fund's policies permit it.
BACKGROUND. A number of mutual funds have developed structures under which
several funds invest all of their assets in a single pooled investment. For
example, an institutional equity fund with a high initial minimum
investment amount for large investors might pool its investments with
another retail equity fund designed for investors with lower minimums. This
structure allows several funds with different features to combine their
investments instead of managing them separately. The funds combine their
investments by investing all of their assets in the same pooled fund which
is organized as an open-end management investment company (mutual fund).
The current Declaration of Trust does not specifically provide the trustees
the ability to authorize the pooled structure.
REASON FOR THE PROPOSAL. If this proposal is approved, the Declaration of
Trust amendment would provide the Trustees with the power to authorize
the fund to invest all of its assets in a single open-end investment
company. The Trustees will authorize such a transaction only if a Pooled
Fund structure is permitted under the fund's investment policies (see
Proposal 9 ) and they determine that a Pooled Fund structure is in
the best interests of a fund and if, upon advice of counsel, they determine
that the investment will not have material adverse tax consequences to the
fund or its shareholders.
AMENDMENT TO THE DECLARATION OF TRUST. If the proposal is approved,
Article V, Section 1 of the Declaration of Trust will be amended as
follows: (material to be added is underlined)
"Subject to any applicable limitation in the Declaration of Trust or the
Bylaws of the Trust, the Trustees shall have the power and authority:....
( t ) (Notwithstanding any other provision hereof, to invest all of
the assets of any series in a single open-end investment company, including
investment by means of transfer of such assets in exchange for an interest
or interests in such investment company;...)"
CONCLUSION. If approved, the amendment to the Declaration of Trust will
take effect after the shareholder meeting or after any adjournments
thereof. The Trustees believe the proposed amendment will benefit the
fund by providing the Trustees with the flexibility to adopt a
Pooled Fund structure in the future if permitted by the fund's investment
policies and if FMR determines it to be in the best interests of the fund.
The Trustees recommend that shareholders vote FOR the proposed amendment to
the Declaration of Trust.
9. TO ADOPT A NEW FUNDAMENTAL INVESTMENT POLICY PERMITTING THE FUND TO
INVEST ALL OF ITS ASSETS IN ANOTHER OPEN-END INVESTMENT COMPANY WITH THE
SUBSTANTIALLY THE SAME INVESTMENT OBJECTIVE AND POLICIES.
The Board of Trustees has approved, subject to a shareholder vote, the
adoption of a new fundamental investment policy that would permit the fund
to pool its assets with other Fidelity funds (Pooled Fund). If the proposal
is approved, the fund will be authorized to invest all of its assets in a
Pooled Fund that will invest in the same type of securities (and have an
objective, and policies and limitations consistent with those of the fund)
as the fund does currently. The purpose of pooling would be to achieve
operational efficiencies.
BACKGROUND. A number of mutual funds have developed structures under which
several funds invest all of their assets in a single pooled investment. In
order to implement a pooled fund structure both the Declaration of Trust
and a fund's policies must permit the structure. Proposal 8, which proposes
to amend the Declaration of Trust, if approved would allow the Trustees to
authorize the conversion to a pooled fund structure if permitted by a
fund's policies. This proposal would add a fundamental policy to the fund
permitting a Pooled Fund structure.
PURPOSE OF THE PROPOSAL. FMR and the Board of Trustees continually review
methods of structuring mutual funds to take maximum advantage of potential
efficiencies. While neither the Board nor FMR has determined that the fund
should invest in a Pooled Fund, the Trustees believe it could be in the
best interests of the fund to adopt such a structure at a future date.
At present, certain of the fund's fundamental investment policies and
limitations would prevent the fund from investing all of its assets in
another investment company, and would require a vote of shareholders before
such a structure could be adopted. To avoid the costs associated with a
subsequent shareholder meeting, the Trustees recommend that shareholders
vote to permit the fund's assets to be invested in a single Pooled Fund,
without a further vote of shareholders, if the Trustees determine that
action to be in the best interests of the fund and its shareholders.
Approval of Proposal 8 is needed to provide the Trustees with explicit
authority to approve a pooled fund structure. If shareholders approve this
proposal, the fundamental policies and limitations of the fund that
currently prohibit investment in shares of one investment company would be
modified to permit the investment in a Pooled Fund. These policies include
the fund's limitations on investing more than 5% of assets in one issuer or
more than 25% in one industry, and on acting as an underwriter.
DISCUSSION. FMR may manage a number of mutual funds with similar
investment objectives, policies, and limitations but with different
features and services (Comparable Funds). Were these Comparable Funds to
pool their assets, operational efficiencies could be achieved, offering the
opportunity to reduce costs. Similarly, FMR anticipates that a Pooled Fund
structure would facilitate the introduction of new Fidelity mutual funds,
increasing the investment options available to shareholders.
The fund's method of operation and shareholder services would not be
materially affected by its investment in a Pooled Fund, except that the
assets of the fund would be managed as part of a larger pool. Were the fund
to invest all of its assets in a Pooled Fund, it would hold only a single
investment security, and the Pooled Fund would directly invest in
individual securities pursuant to its investment objective. Whenever a fund
is asked to vote at a shareholder meeting of the pooled fund, the fund will
hold a meeting of its shareholders if required by applicable law or its
policies. The fund will cast its votes at the Pooled Fund meeting in the
same proportion as the fund's shareholders voted at theirs. The fund would
otherwise continue its normal operation. The Pooled Fund would be managed
by FMR or an affiliate such as FMR Texas in the case of a money market
fund. The Trustees would retain the right to withdraw the fund's
investments from the Pooled Fund at any time and would do so if the Pooled
Fund's objective was no longer appropriate for the fund. The fund would
then resume investing directly in securities as it is does
currently.
At present the Trustees have not considered any specific proposal to
authorize pooling of assets. The Trustees will authorize investing the
fund's assets in a Pooled Fund only if they determine that pooling is in
the best interests of the fund and if, upon advice of counsel, they
determine that the investment will not have material adverse tax
consequences to the fund or its shareholders. In determining whether to
invest in a Pooled Fund, the Trustees will consider, among other things,
the opportunity to reduce costs and to achieve operational efficiencies.
The Trustees will not authorize investment in a Pooled Fund if doing so
would materially increase costs to shareholders.
FMR is presently seeking federal and state regulatory approval in order to
allow the Fidelity funds to invest in Pooled Funds. There is, of course, no
assurance that all necessary regulatory approvals will be obtained, or that
cost reductions or increased efficiencies will be achieved.
FMR may benefit from the use of a Pooled Fund if overall assets are
increased (since FMR's fees are based on assets). Also, FMR's expenses of
providing investment and other services to the fund may be reduced. If the
fund's investment in a Pooled Fund were to reduce FMR's expenses
materially, the Trustees would consider whether a reduction in FMR's
management fee would be appropriate if and when Pooled Fund operation
occurs.
PROPOSED FUNDAMENTAL POLICY. To allow the fund to invest in a Pooled Fund
at a future date, the Trustees recommend that the fund adopt the following
fundamental policy:
"The fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objective, policies, and limitations as the fund."
If the proposal is adopted, the Trustees intend to adopt a non-fundamental
investment limitation for the fund which states:
"The fund does not currently intend to invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
limitations as the fund."
CONCLUSION. After consideration of the relevant factors, the Board of
Trustees recommends that shareholders vote to adopt a new fundamental
policy that would permit the fund, subject to future review by the Board of
Trustees as described above, to invest all of its assets in an open-end
investment company with substantially the same fundamental investment
objective, policies, and limitations as the fund. If the proposal is not
approved the fund's current fundamental investment policies will
remain unchanged with respect to potential investment in Pooled Funds.
10. TO AMEND THE FUND'S FUNDAMENTAL OBJECTIVE AND CERTAIN FUNDAMENTAL
POLICIES TO BROADEN THE FUND'S ABILITY TO INVEST IN DOMESTIC AND FOREIGN
SECURITIES OF ALL TYPES IN SEEKING CAPITAL APPRECIATION.
The Board of Trustees has approved, and recommends that shareholders
approve, modifications to the fund's investment objective and policies that
would broaden the fund's authority to invest in domestic and foreign
securities of all types. While the fund would continue to invest
primarily in common stock and convertible securities under normal
conditions , the proposal would give the fund more flexibility to seek
capital appreciation from debt and other types of securities as well.
CURRENT OBJECTIVE AND POLICIES. The fund's current fundamental objective
and policies provide that the fund will seek capital appreciation through
investments in securities of domestic corporations operating primarily in
the U.S., domestic corporations with significant activities and interests
abroad, and foreign companies. The fund normally invests primarily
in common stock and securities convertible into common stock, and may also
invest up to 20% of its assets in bonds and other fixed-income securities
of domestic issuers (both corporate and governmental) and foreign corporate
issuers. The fund also reserves the right to make substantial investments
in investment-grade debt securities for defensive purposes.
PROPOSED CHANGES. The Trustees recommend that the above policies be
modified to clarify the fund's ability to invest in all kinds of issuers,
including foreign governments and other non-corporate entities . This
will provide the fund with greater flexibility to invest in debt
securities of all types in search of capital appreciation. If the proposal
is approved, the above objective and policies will be replaced with the
following fundamental objective and polic y :
The fund seeks capital appreciation through investments in securities of
domestic, foreign and multinational issuers. The fund normally invests
primarily in common stock and securities convertible into common stock, but
may also invest in other types of securities in seeking its objective.
The fund's Trustees also intend to adopt the following non-fundamental
policies, which could be changed in the future without further approval of
shareholders:
The fund may invest up to 20% of its total assets in debt securities of
all types and qualities issued by domestic and foreign issuers, if FMR
believes that doing so will result in capital appreciation. The fund may
also make substantial temporary investments in investment-grade debt
securities for defensive purposes when FMR believes market conditions
warrant.
DISCUSSION. The proposed changes to the fund's objective and policies
would clarify its ability to invest in all types of securities in search of
capital appreciation, including debt securities as well as equity
securities, and including securities of domestic and foreign governmental
entities as well as corporations . T he fund will continue to
maintain its investments primarily in common stock and convertible
securities under normal conditions. FMR believes that the fund's current
policies may needlessly restrict the fund's investments in debt securities
of foreign governments or governmental entities . These types of
securities which represent a significant part of the universe of
available securities worldwide. In addition, by making the fund's 20% limit
on debt securities and defensive policy non-fundamental, the proposal would
allow the Board of Trustees to modify those policies in the future
in response to changing market conditions or changing opportunities for
capital appreciation.
Governmental entities include foreign governments or their agencies or
political subdivisions, and supranational organizations such as the World
Bank that are supported by a variety of nations. Increasing the fund's
flexibility with respect to debt securities issued by such entities would
provide the fund with increased and more diversified opportunities for
capital appreciation abroad. However, foreign securities also entail
significant risks. These include risks related to fluctuations in currency
values, the uncertainty of political and regulatory environments abroad,
generally reduced regulatory structures compared to the U.S., and
the possibility of illiquidity in foreign markets.
The fund is permitted to invest in debt securities of any quality in
seeking capital appreciation, and its foreign investments could therefore
include securities of emerging governments with poor credit standing.
Emerging markets have been characterized by substantial volatility, and
emerging market securities have generally offered significant potential for
depreciation as well as appreciation. As compared to U.S. government debt,
foreign government securities are generally of lower quality; however, as
compared to foreign corporate debt, foreign government debt may be of
higher credit quality and more liquid due to more active trading markets.
CONCLUSION. The Board of Trustees believes that the proposed modifications
to the fund's investment objective and policies are in the best interests
of the fund and its shareholders, and unanimously recommends that
shareholders vote FOR the proposal. If the proposal is not approved, the
fund's fundamental objective and policies will remain unchanged.
ADOPTION OF STANDARDIZED INVESTMENT LIMITATIONS
The primary purpose of Proposals 11 through 20 is to revise several of the
fund's investment limitations to conform to limitations which are expected
to become standard for all funds managed by FMR. The Board of Trustees has
asked FMR to analyze the various fundamental and non-fundamental investment
limitations of the Fidelity funds, and, where practical and appropriate to
a fund's investment objective, to adopt standard non-fundamental
limitations and to propose to shareholders elimination of certain
fundamental limitations or adoption of standard fundamental limitations.
FMR believes that increased standardization will help to promote
operational efficiencies and facilitate monitoring of compliance with
fundamental and non-fundamental investment limitations. Although adoption
of a new or revised limitation is not likely to have any impact on the
investment techniques employed by the fund at this time, it will contribute
to the overall objectives of standardization.
Additionally, Proposals 18 , and 20 relate to investment
limitations that restate requirements imposed by state laws as a condition
of registering shares of the fund for sale in certain states. Currently,
these limitations are fundamental and can only be changed by a shareholder
vote. As a result, if the state laws were changed, or if they no longer
applied to the fund, the fund would be required to call a shareholder
meeting to adapt to changed state regulatory requirements. Proposals
14 , 15, 18 , and 20 recommend that these limitations be
made non-fundamental so that they can be changed by the Board of Trustees
as state laws permit. The Proposals would not change how the fund is
managed at this time, but would allow the fund to respond more quickly to
future state law changes.
11. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
BORROWING.
The fund's current fundamental investment limitation regarding borrowing
states:
"The fund may not borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of the value of its total assets (including
the amount borrowed) less liabilities (other than borrowings). Any
borrowings that come to exceed 33 1/3% of the fund's total assets by reason
of a decline in net assets will be reduced within three business days to
the extent necessary to comply with the 33 1/3% limitation"
Subject to shareholder approval, the Trustees intend to replace this
limitation with the following fundamental investment limitation governing
borrowing:
"The fund may not borrow money, except that the fund may borrow money for
temporary or emergency purposes (not for leveraging or investment) in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that
come to exceed this amount will be reduced within three days (not including
Sundays and holidays) to the extent necessary to comply with the 33 1/3%
limitation."
The proposed amended limitation would require the fund to reduce
borrowings that come to exceed 33 1/3% of total assets for any reason.
Under the current limitation, the fund must reduce borrowings that come to
exceed 33 1/3% of total assets only by reason of a decline in net assets.
In addition, the proposal limitation specifically defines "three business
days" to exclude Sundays and holidays.
The proposal would also act to revise the fund's fundamental borrowing
limitation to conform to a limitation that is expected to become standard
for all funds managed by FMR. It will contribute to the overall objectives
of standardization.
CONCLUSION. The Board of Trustees has concluded that the proposed
amendment will benefit the fund. Accordingly, the Trustees recommend that
shareholders of the fund vote FOR the proposed amendment. The new
limitation, upon shareholder approval, will become effective immediately.
If the proposal is not approved, the fund's current limitation will remain
unchanged.
12. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING REAL
ESTATE.
The fund's current fundamental investment limitation regarding
the purchase and sale of real estate states:
"The fund may not buy or sell real estate, unless acquired as a result of
ownership of securities, except that the fund may purchase or hold
securities issued by companies such as real estate investment trusts which
deal in real estate or interests therein;"
Subject to shareholder approval, the Trustees intend to replace this
limitation with the following fundamental investment limitation governing
purchases and sales of real estate.
"The fund may not purchase or sell real estate unless acquired as a result
of ownership of securities or other instruments (but this shall not prevent
the fund from investing in securities or other instruments backed by real
estate or securities of companies engaged in the real estate business)."
The primary purpose of the proposed amendment is to clarify the types of
securities in which the fund is authorized to invest and to conform the
fund's fundamental real estate limitation to a limitation that is expected
to become standard for all funds managed by FMR. (See "Adoption of
Standardized Investment Limitations" on page .) If the proposal is
approved, the new limitation may not be changed without a future vote of
shareholders.
Adoption of the proposed limitation on real estate is not expected to
affect the way in which the fund is managed or the securities or
instruments in which the fund invests. The fund does not expect to acquire
real estate. However, the proposed amendment would clarify two points.
First, the proposed amendment would make it explicit that the fund may
acquire a security or other instrument, the payments of interest and
principal on which may be secured by a mortgage or other right to foreclose
on real estate in the event of default. Second, the proposed amended
limitation would clarify the fact that the fund may invest without
limitation in securities issued or guaranteed by companies engaged in
acquiring, constructing, financing, developing, or operating real estate
projects, subject to the fund's investment objective and other policies and
limitations.
CONCLUSION. The Board of Trustees has concluded that the proposed
amendment will benefit the fund by providing more investment flexibility.
Accordingly, the Trustees recommend that shareholders vote FOR the
proposal. The amended limitation, upon shareholder approval, will become
effective immediately. If the proposal is not approved, the current
limitation will remain unchanged.
13. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING THE
ISSUANCE OF SENIOR SECURITIES.
The fund's current fundamental investment limitation regarding the
issuance of senior securities states:
"The fund may not issue senior securities."
The Trustees recommend that shareholders vote to replace this limitation
with the following fundamental investment limitation governing the issuance
of senior securities:
"The fund may not issue senior securities, except as permitted under the
Investment Company Act of 1940."
The 1940 Act restricts a fund's ability to issue senior securities.
Although the definition of a "senior security" involves complex statutory
and regulatory concepts, a senior security is generally thought of as a
class of security preferred over shares of the fund with respect to the
fund's assets or earnings. It generally does not include temporary or
emergency borrowings by the fund (which might occur to meet shareholder
redemption requests) in accordance with federal law and the fund's
investment limitations. Various investment techniques that obligate the
fund to pay money at a future date (e.g., the purchase of securities for
settlement on a date that is longer than normal) occasionally raise
questions as to whether a "senior security" is created. The fund utilizes
such techniques only in accordance with applicable regulatory requirements
under the 1940 Act.
Although adoption of the new senior securities limitation is not likely to
have any impact on the investment techniques employed by the fund, it will
contribute to the overall objectives of standardization. (See "Adoption of
Standardized Investment Limitations" on page .) If the proposal is
approved, the new fundamental senior securities limitation cannot be
changed without a future vote of the fund's shareholders.
CONCLUSION. The Board of Trustees recommends voting FOR the proposed
amendment. The amended limitation, upon shareholder approval, will become
effective immediately. If the proposal is not approved, the fund's current
limitation will remain unchanged.
14. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
SHORT SALES OF SECURITIES.
The fund's current fundamental investment limitation concerning short
sales of securities states:
"The fund may not engage in short sales of securities (unless it owns, or
by virtue of its ownership of other securities has the right to obtain
securities equivalent in kind and amount to the securities sold); provided,
however, that the fund may purchase or sell futures contracts."
The Trustees recommend that shareholders vote to eliminate the above
fundamental limitation. If the proposal is approved, the Trustees intend to
adopt a non-fundamental limitation that could be changed without a vote of
shareholders.
In a short sale, an investor sells a borrowed security and has a
corresponding obligation to the lender to return the identical security.
The fund's fundamental investment limitation on short sales provides that
the fund may not engage in short sales of securities unless it owns, or, by
virtue of its ownership of other securities, has the right to obtain,
securities equivalent in kind and amount to the securities sold short. This
investment technique is known as a short sale "against the box." If the
proposal is approved by shareholders, the Trustees intend to adopt the
following non-fundamental investment limitation on short selling, which
would also permit the fund to engage in short sales against the box.
"The fund does not currently intend to sell securities short, unless it
owns or has the right to obtain securities equivalent in kind and amount to
the securities sold short, and provided that transactions in futures
contracts and options are not deemed to constitute selling securities
short."
The proposed non-fundamental limitation would also clarify that
option transactions are not considered short sales.
Certain state regulations currently prohibit mutual funds from entering
into any short sales, other than short sales against the box. If the
proposal is approved, however, the Board of Trustees would be able to
change the proposed non-fundamental limitation in the future, without a
vote of shareholders. As an example, the Trustees may vote to change the
limitation if state regulations were to change to permit other types of
short sales.
CONCLUSION. The Board of Trustees believes that the efforts to standardize
the fund's investment limitations will facilitate FMR's investment
compliance efforts (see "Adoption of Standardized Investment Limitations"
on page ) and are in the best interests of the shareholders. Accordingly,
the Board of Trustees recommends voting FOR the proposal to eliminate the
fund's fundamental investment limitation regarding short sales of
securities. If approved, the new non-fundamental limitation will become
effective immediately. If the proposal is not approved, the fund's current
limitation will remain unchanged.
15. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
MARGIN PURCHASES.
The fund's current fundamental investment limitation concerning purchasing
securities on margin states:
"The fund may not purchase any securities or other property on margin;
provided, however, that the fund may make initial and variation margin
payments in connection with purchases or sales of futures contracts or of
options on futures contracts."
The Trustees recommend that shareholders vote to eliminate the above
fundamental investment limitation. If the proposal is approved, the
Trustees intend to adopt a non-fundamental limitation that could be changed
without a vote of shareholders.
Margin purchases involve the purchase of securities with money borrowed
from a broker. "Margin" is the cash or eligible securities that the
borrower places with their broker as collateral against this loan. The
fund's current fundamental limitation prohibits the fund from purchasing
securities on margin, except for initial and variation margin payments made
in connection with the purchase and sale of futures contracts and options
on futures contracts. Mutual funds are also permitted to obtain such
short-term credits as may be necessary for the clearance of transactions.
The proposed non-fundamental limitation would include this exception. With
these exceptions, mutual funds are prohibited from entering into most types
of margin purchases by applicable SEC policies.
If the proposal is approved by shareholders, the Trustees intend to adopt
the following non-fundamental investment limitation, which would prohibit
margin purchases except as permitted under the conditions referred to
above:
"The fund does not currently intend to purchase securities on margin,
except that the fund may obtain such short-term credits as are necessary
for the clearance of transactions, and provided that margin payments in
connection with futures contracts and options on futures contracts shall
not constitute purchasing securities on margin."
CONCLUSION. Although elimination of the fund's fundamental limitation on
margin purchases is unlikely to affect the fund's investment techniques at
this time, the fund may alter its investment practices in the future in the
event of a change in federal regulatory requirements. The Board of Trustees
believes that efforts to standardize the fund's investment limitations will
facilitate FMR's investment compliance efforts (see "Adoption of
Standardized Investment Limitations" on page ) and are in the best
interests of shareholders. Accordingly, the Board of Trustees recommends
voting FOR the proposal to eliminate the fund's fundamental investment
limitation regarding margin purchases. If approved, the new non-fundamental
limitation will become effective immediately. If the proposal is not
approved, the fund's current limitation will remain unchanged.
16. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING THE
PURCHASE OR SALE OF PHYSICAL COMMODITIES.
The fund's current fundamental investment limitation concerning purchasing
physical commodities states:
"The fund may not purchase or sell physical commodities (but this shall
not prevent the fund from purchasing or selling options and futures
contracts)"
Subject to shareholder approval, the Trustees intend to adopt a new
fundamental investment limitation concerning commodities. The proposed
investment policy is:
"The fund may not purchase or sell physical commodities unless acquired as
a result of ownership of securities or other instruments (but this shall
not prevent the fund from purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities)."
The primary purpose of this proposal is to implement a fundamental
limitation on commodities that conforms to a limitation which is expected
to become standard for all funds managed by FMR. (See "Adoption of
Standardized Investment Limitations" on page .) If the proposal is
approved, the new fundamental commodities limitation cannot be changed
without a future vote of shareholders.
Adoption of the proposed limitation on commodities is not expected to
affect the way in which the fund is managed, the investment performance of
the fund, or the securities or instruments in which the fund invests.
However, the proposed limitation would clarify two points. First, the
proposed limitation would make it explicit that the fund may acquire
physical commodities as the result of ownership of securities or other
instruments. Second, the proposed limitation would clarify that the fund
may invest without limit in securities or other instruments backed by
physical commodities, subject only to the fund's investment objective,
policies, and other limitations.
CONCLUSION. The Board of Trustees has concluded that the adoption of the
standardized limitation is in the best interest of the fund and its
shareholders. The Trustees recommend that shareholders of the fund vote FOR
the proposed amendment. The amended limitation, upon shareholder approval,
will become effective immediately. If the proposal is not approved, the
fund's current limitation will remain unchanged.
17. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
LENDING.
The fund's fundamental investment limitation concerning lending currently
states:
"The fund may not lend any security or make any other loan if, as a
result, more than 33 1/3% of the fund's total assets would be lent to other
parties except, (i) through the purchase of a portion of an issue of debt
securities in accordance with its investment objective, policies, and
limitations, or (ii) by engaging in repurchase agreements with respect to
portfolio securities."
Subject to shareholder approval, the Trustees intend to replace this
limitation with the following fundamental investment limitation governing
lending:
"The fund may not lend any security or make any other loan if, as a
result, more than 33 1/3% of its total assets would be lent to other
parties, but this limitation does not apply to purchases of debt securities
or to repurchase agreements."
The primary purpose of the proposal is to revise the fund's fundamental
lending limitation to conform to a limitation that is expected to become
standard for all funds managed by FMR. Although adoption of the new lending
limitation is not likely to have a significant impact on the investment
techniques employed by the fund, it will contribute to the overall
objectives of standardization. (See "Adoption of Standardized Investment
Limitations" on page .) If the proposal is approved, the new fundamental
lending limitation cannot be changed without a future vote of the fund's
shareholders.
The proposed amended limitation provides specific authority for the
fund to acquire an entire issue of debt securities, whether
privately or publicly offered. Ordinarily, if a fund purchases an entire
issue of debt securities, there may be greater risks associated with
liquidity and availability of public information if the issuer has no other
issue of securities outstanding, and it may be more difficult to obtain
pricing information to be used in establishing the fund's daily share
price.
CONCLUSION. The Board of Trustees has concluded that the proposed
amendment will benefit the fund. Accordingly, the Trustees recommend that
shareholders of the fund vote FOR the proposed amendment. The amended
limitation, upon shareholder approval, will become effective immediately.
If the proposal is not approved, the current limitation will remain
unchanged.
18. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
INVESTMENT IN OTHER INVESTMENT COMPANIES.
The fund's current fundamental investment limitation concerning investment
in other investment companies states:
"The fund may not purchase securities of other investment companies except
in the open market where no commission other than the ordinary broker's
commission is paid, or as part of a merger or consolidation, and in no
event may investments in such securities exceed 10% of the value of total
assets of the fund. It may not purchase or retain securities issued by
other open-end investment companies; "
The Trustees recommend that shareholders of the fund vote to eliminate the
above fundamental investment limitation. If the proposal is approved, the
Trustees intend to replace the current fundamental limitation with the
following non-fundamental limitation, which could be changed without a vote
of shareholders:
"The fund does not currently intend to (a) purchase securities of other
investment companies, except in the open market where no commission except
the ordinary broker's commission is paid, or (b) purchase or retain
securities issued by other open-end investment companies. Limitations (a)
and (b) do not apply to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger."
The ability of mutual funds to invest in other investment companies is
restricted by rules under the 1940 Act and by some state regulations. The
fund's current fundamental investment limitation recites certain of the
applicable federal and former state restrictions. The federal restrictions
will remain applicable to the fund whether or not they are recited in a
fundamental limitation. As a result, elimination of the above fundamental
limitation is not expected to have any impact on the fund's investment
practices, except to the extent that regulatory requirements may change in
the future.
CONCLUSION. The Board of Trustees believes that the efforts to standardize
the fund's investment limitations will facilitate FMR's investment
compliance efforts (see "Adoption of Standardized Investment Limitations"
on page ) and are in the best interests of the shareholders. Accordingly,
the Board of Trustees recommends voting FOR the proposal to eliminate the
fund's fundamental investment limitation regarding investments in other
investment companies. If approved, the new non-fundamental limitation will
become effective immediately. If the proposal is not approved, the fund's
current limitation will remain unchanged.
19. TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING THE
CONCENTRATION OF ITS INVESTMENTS IN A SINGLE INDUSTRY.
The fund's current fundamental investment limitation concerning the
concentration of its investments within a single industry states:
"The fund may not concentrate its investments in any particular industry,
but if it is deemed appropriate for the attainment the fund's investment
objective, up to 25% its assets may be invested in any one industry."
Subject to shareholder approval, the trustees intend to replace this
policy with the following amended fundamental investment policy governing
concentration:
"The fund may not purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. government or any of its
agencies or instrumentalities) if, as a result, more than 25% of the fund's
total assets would be invested in the securities of companies whose
principal business activities are in the same industry."
The primary purpose of the proposal is to revise the fund's fundamental
concentration limitation to conform to a limitation which is expected to
become standard for all funds managed by FMR. (See "Adoption of
Standardized Investment Limitations" on page .) The proposed amended
limitation, while not substantially different from the current policy,
explicitly states that securities not only issued but also guaranteed by
the U.S. government or any of its agencies or instrumentalities are
excluded from the limitation. If the proposal is approved, the new
fundamental concentration limitation could not be changed without a future
vote of shareholders.
CONCLUSION. The Board of Trustees has concluded that the proposed
amendment will benefit the fund. The Trustees recommend that shareholders
of the fund vote FOR the proposed amendment. The amended limitation, upon
shareholder approval, will become effective immediately. If the proposal is
not approved, the fund's current investment limitation will remain
unchanged.
20. TO ELIMINATE THE FUND'S FUNDAMENTAL INVESTMENT LIMITATION CONCERNING
INVESTMENTS IN SECURITIES OF NEWLY-FORMED ISSUERS.
The fund's current fundamental investment limitation regarding investments
in securities of newly-formed issuers states:
"The fund may not invest in the securities of companies if such purchase,
at the time thereof, would cause more than 5% of the value of the fund's
total assets taken at market value to be invested in companies, which,
including predecessors, have a record of less than three years' continuous
operation."
If the proposal is approved, the Trustees intend to replace the current
fundamental limitation with the following non-fundamental limitation, which
could be changed without a vote of shareholders:
"The fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than
5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three
years of continuous operation."
Newly-formed issuers or "unseasoned issuers" are issuers with less than
three years of continuous operation. The purpose of the fundamental
limitation on investments in unseasoned issuers is to comply with state
laws and limit the risks associated with investing in companies that have
no proven track record in business and whose prospects are uncertain. The
proposed non-fundamental limitation will clarify the fact that the fund's
unseasoned issuers limitation is applicable only to securities issued by
newly-formed entities engaged in a trade or business with a prior history
of operations of less than three years and not to pools of asset-backed
securities and U.S. government and foreign government securities. The
proposal will have no current impact on the fund. However, adoption of a
standard non-fundamental limitation will facilitate FMR's compliance
efforts (see "Adoption of Standardized Investment Limitations" on page )
and will enable the fund to respond more promptly if applicable state laws
change in the future.
CONCLUSION. The Board of Trustees has determined that it is in the best
interests of the shareholders to replace the fund's fundamental limitation
concerning investments in unseasoned issuers with a non-fundamental
limitation. Accordingly, the Trustees recommend that shareholders vote FOR
the proposal to eliminate the fund's fundamental investment limitation
regarding investments in securities of newly-formed issuers. If the
proposal is approved, the new non-fundamental limitation will become
effective immediately. If the proposal is not approved, the current
limitation will remain unchanged.
OTHER BUSINESS
The Board knows of no other business to be brought before the Meeting.
However, if any other matters properly come before the Meeting, it is the
intention that proxies that do not contain specific instructions to the
contrary will be voted on such matters in accordance with the judgment of
the persons therein designated.
PRESENT MANAGEMENT CONTRACT
The fund employs FMR to furnish investment advisory and other services.
Under its management contract with the fund, FMR acts as investment adviser
and, subject to the supervision of the fund's Board of Trustees, directs
the investments of the fund in accordance with its investment objective,
policies, and limitations. FMR also provides the fund with all necessary
office facilities and personnel for servicing the fund's investments, and
compensates all officers of the fund, all Trustees who are "interested
persons" of the fund or FMR, and all personnel of the fund or FMR
performing services relating to research, statistical, and investment
activities.
In addition, FMR or its affiliates, subject to the supervision of the
fund's Board of Trustees, provide the management and administrative
services necessary for the operation of the fund. These services include
providing facilities for maintaining the fund's organization; supervising
relations with custodians, transfer and pricing agents, accountants,
underwriters, and other persons dealing with the fund; preparing all
general shareholder communications and conducting shareholder relations;
maintaining the fund's records and the registration of the fund's shares
under federal and state law; developing management and shareholder services
for the fund; and furnishing reports, evaluations, and analyses on a
variety of subjects to the Board of Trustees.
In addition to the management fee payable to FMR and the fees payable to
Fidelity Service Co. (FSC), the fund pays all of its expenses, without
limitation, that are not assumed by those parties. The fund pays for
typesetting, printing, and mailing proxy material to shareholders, legal
expenses, and the fees of the custodian, auditor, and non-interested
Trustees. Although the fund's management contract provides that the fund
will pay for typesetting, printing, and mailing prospectuses, statements of
additional information, notices, and reports to existing shareholders, the
fund has entered into a revised transfer agent agreement with FSC, pursuant
to which FSC bears the cost of providing these services to existing
shareholders. Other expenses paid by the fund include interest, taxes,
brokerage commissions, the fund's proportionate share of insurance premiums
and Investment Company Institute dues, and the costs of registering shares
under federal and state securities laws. The fund is also liable for such
nonrecurring expenses as may arise, including costs of any litigation to
which the fund may be a party and any obligation it may have to indemnify
the fund's officers and Trustees with respect to litigation.
FMR is the fund's manager pursuant to a management contract dated November
1, 1989, which was approved by shareholders on October 26, 1989. For the
services of FMR under the contract, the fund pays FMR a monthly management
fee composed of the sum of two elements: a basic fee and a performance
adjustment based on a comparison of the fund's performance to that of the
Standard & Poor's 500 Composite Stock Price Index (S&P 500).
COMPUTING THE BASIC FEE. The fund's basic fee rate is composed of two
elements: a group fee rate and an individual fund fee rate. The group fee
rate is based on the monthly average net assets of all of the registered
investment companies with which FMR has management contracts and is
calculated on a cumulative basis pursuant to the graduated schedule shown
below. Also shown below is the effective annual fee rate at various levels
of group net assets. For example, the effective annual fee rate at
$ 233 billion of group net assets - their approximate level for
December 1993 was . 3243 %, which is the weighted average of the
respective fee rates for each level of group net assets up to that level.
GROUP FEE RATE SCHEDULE* EFFECTIVE ANNUAL FEE
RATES
Average Annualized Group Effective
Group Fee Rate Net Annual
Assets Assets Fee Rate
0 - $ 3 billion .520% $ 0.5 .5200%
billion
3 - 6 .490 25 .4238
6 - 9 .460 50 .3823
9 - 12 .430 75 .3626
12 - 15 .400 100 .3512
15 - 18 .385 125 .3430
18 - 21 .370 150 .3371
21 - 24 .360 175 .3325
24 - 30 .350 200 .3284
30 - 36 .345 225 .3253
36 - 42 .340 250 .3223
42 - 48 .335 275 .3198
48 - 66 .325 300 .3175
66 - 84 .320 325 .3153
84 - 120 .315 350 .3133
102 - 138 .310
138 - 174 .305
174 - 228 .300
228 - 282 .295
282 - 336 .290
Over 336 .285
* The rates shown for average group assets in excess of $ 174 billion
were adopted by FMR on a voluntary basis on November 1, 1993 pending
shareholder approval of a new management contract reflecting the extended
schedule. The extended schedule provides for lower management fees as total
assets under management increase.
The individual fund fee rate is . 30%. Based on the average net
assets of funds advised by FMR for December 1993 , the annual basic
fee rate would be calculated as follows:
GROUP FEE RATE INDIVIDUAL FUND FEE RATE BASIC FEE RATE
. 3243 % + .30% = .6243 %
One twelfth (1/12) of this annual basic fee rate is then applied to the
fund's average net assets for the current month, giving a dollar amount
which is the fee for that month.
Effective August 1, 1988, FMR voluntarily agreed to collect its basic
fee according to the schedule shown above (minus the break points above
$138 billion added January 1, 1992) or according to a prior schedule (with
rates tied to average group assets up to $48 billion), until shareholders
could meet to consider the current contract. With the exception of changing
the group fee rate schedule, the terms of the current contract are
identical to those of the prior contract.
FMR adopted the revised group fee rate schedule in part in accordance
with the settlement reached in the Labaton v. Fidelity Management &
Research, et al (Civ. Action No. 82-270-MA) litigation, brought against the
fund on February 1, 1984 and approved by the United States District Court
for the District of Massachusetts on April 7, 1986. Under the terms of the
settlement, FMR agreed to reduce its management fee, pending shareholder
approval, through a revision of its group fee rate schedule as described
above. The terms of the settlement also required that FMR will not seek an
increase in fee rates paid by the fund to FMR for a period of five
years.
COMPUTING THE PERFORMANCE ADJUSTMENT. The basic fee is subject to upward
or downward adjustment, depending upon whether, and to what extent, the
fund's investment performance for the performance period exceeds, or is
exceeded by, the record of the S&P 500 over the same period. The
performance period consists of the most recent month plus the previous 35
months. Each percentage point of difference (up to a maximum difference of
+ 10) is multiplied by a performance adjustment rate of .02%. Thus, the
maximum annualized adjustment rate is + .20%. This performance comparison
is made at the end of each month. One twelfth of this rate is then applied
to the fund's average net assets for the entire performance period, giving
a dollar amount which will be added to (or subtracted from) the basic fee.
The fund's performance is calculated based on change in net asset value.
For purposes of calculating the performance adjustment, any dividends or
capital gain distributions paid by the fund are treated as if reinvested in
fund shares at the net asset value as of the record date for payment. The
record of the S&P 500 is based on change in value and is adjusted for
any cash distributions from the companies whose securities compose the
S&P 500.
Because the adjustment to the basic fee is based on the fund's performance
compared to the investment record of the S&P 500, the controlling
factor is not whether the fund's performance is up or down per se, but
whether it is up or down more or less than the record of the S&P 500.
Moreover, the comparative investment performance of the fund is based
solely on the relevant performance period without regard to the cumulative
performance over a longer or shorter period of time.
During the fiscal years ended March 31, 199 3 , 199 2
and 199 1, FMR received the payments shown in the table below for its
services as investment adviser to the fund. These fees include both the
basic fee and the performance adjustment. If FMR had not voluntarily
adopted the extended group fee rate schedule, these fees would have been
higher.
Management Fee Management
Including Fee as a Performance
Fiscal Year Ended Performance % of Average Adjustment
March 31 Adjustment Net Assets to Basic Fee
199 3 $ 161,242, 9 50 .75% $ 24,964,876
199 2 $ 135,671,227 .78% $ 24,853,118
199 1 $ 100,971,351 .78% $ 17,116,116
To comply with the California Code of Regulations, FMR will reimburse the
fund if and to the extent that the fund's aggregate annual operating
expenses exceed specified percentages of its average net assets. The
applicable percentages are 2 1/2% of the first $30 million, 2% of the next
$70 million, and 1 1/2% of average net assets in excess of $100 million.
When calculating the fund's expenses for purposes of this regulation, the
fund may exclude interest, taxes, brokerage commissions, and extraordinary
expenses, as well as a portion of its custodian fees attributable to
investments in foreign securities.
SUB-ADVISERS. On November 1, 1989, FMR entered into sub-advisory
agreements with FMR U.K. and FMR Far East pursuant to which FMR U.K. and
FMR Far East supply FMR with investment research and recommendations
concerning foreign securities for the benefit of the fund. The sub-advisory
agreements provide that FMR will pay fees to FMR U.K. and FMR Far East
equal to 110% and 105%, respectively, of FMR U.K.'s and FMR Far East's
costs incurred in connection with each agreement, said costs to be
determined in relation to the assets of the fund that benefit from the
services of the sub-advisers. The fees paid to FMR U.K. and FMR Far East
under the subadvisory agreements for fiscal 1993, 1992, and 1991, are shown
in the table below.
Fiscal Year Ended Fees paid Fees pai d
to
March 31 to FMR U.K. FMR Far East
1993 $224,843 $237,864
1992 $ 434,709 $466,930
1991 $507,000 $444,000
ACTIVITIES AND MANAGEMENT OF FMR
FMR, a corporation organized in 1946, serves as investment adviser to a
number of investment companies whose net assets as of December 31,
1993, were in excess of $2 3 0 billion. The Fidelity family of funds
currently includes a number of funds with a broad range of investment
objectives and permissible portfolio compositions. The Boards of these
funds are substantially identical to that of this trust. In addition, FMR
serves as investment adviser to certain other funds which are generally
offered to limited groups of investors. Information concerning the advisory
fees, net assets, and total expenses of the funds advised by FMR is
contained in The Table of Average Net Assets and Expense Ratios in
Exhibit 4 .
Several affiliates of FMR are also engaged in the investment advisory
business. Fidelity Management Trust Company provides trustee, investment
advisory, and administrative services to retirement plans and corporate
employee benefit accounts. Fidelity Management & Research (U.K.) Inc.
(FMR U.K.) and Fidelity Management & Research (Far East) Inc. (FMR Far
East), both wholly-owned subsidiaries of FMR formed in 1986, supply
investment research information, and may supply portfolio management
services to FMR in connection with certain funds advised by FMR. FMR Texas
Inc., a wholly-owned subsidiary of FMR formed in 1989, supplies portfolio
management and research services in connection with certain money market
funds advised by FMR.
FMR, its officers and directors, its affiliated companies and personnel,
and the Trustees, from time to time have transactions with various banks,
including the custodian banks for certain of the funds advised by FMR.
Those transactions which have occurred to date have included mortgages and
personal and general business loans. In the judgment of FMR, the terms and
conditions of those transactions were not influenced by existing or
potential custodial or other fund relationships.
The Consolidated Statements of Financial Condition of Fidelity
Management & Research Company and Subsidiaries as of December 31, 1992
(audited) and for the period January 1, 1993 through September 30, 1993
(unaudited) are shown beginning on page .
The Directors of FMR are Edward C. Johnson 3d, Chairman of the Board; and
J. Gary Burkhead, President ; and Peter S. Lynch, Vice Chairman . Each
of the Directors is also a Trustee of the trust. Messrs. Johnson 3d,
Burkhead, John H. Costello, Jeff Vinik, Gary L. French, and Arthur S.
Loring, are currently officers of the trust and officers or employees of
FMR or FMR Corp. With the exception of Mr. Costello, all of these
persons are stockholders of FMR Corp. FMR's address is 82 Devonshire
Street, Boston, Massachusetts 02109, which is also the address of the
Directors of FMR.
All of the stock of FMR is owned by a parent company, FMR Corp., 82
Devonshire Street, Boston, Massachusetts 02109, which was organized on
October 31, 1972. At present, the principal operating activities of FMR
Corp. are those conducted by three of its divisions, Fidelity Service Co.,
which is the transfer and shareholder servicing agent for certain of the
retail funds advised by FMR, Fidelity Investments Institutional Operations
Company, which performs shareholder servicing functions for certain
institutional customers, and Fidelity Investments Retail Marketing Company,
which provides marketing services to various companies within the Fidelity
organization. Messrs. Johnson 3d, Burkhead, William L. Byrnes, James C.
Curvey, and Caleb Loring, Jr. are the Directors of FMR Corp. On
November 30, 1993, Messrs. Johnson 3d, Burkhead, Curvey, and Loring,
Jr. and Ms. Abigail Johnson owned approximately 34%, 3%, 3%, 11%, and 11%,
respectively, of the voting common stock of FMR Corp. In addition, various
Johnson family members and various trusts for the benefit of Johnson family
members, for which Messrs. Burkhead, Curvey, or Loring, Jr. are Trustees,
owned in the aggregate approximately 32% of the voting common stock of FMR
Corp. Messrs. Johnson 3d, Burkhead, and Curvey owned approximately 2%, 3%
and 1%, respectively, of the non-voting common stock of FMR Corp. In
addition, various trusts for the benefit of members of the Johnson family,
for which Mr. Loring, Jr. is the sole Trustee, and other trusts for the
benefit of Johnson family members, through limited partnership interests in
a partnership the corporate general partner of which is controlled by Mr.
Johnson 3d, Mr. Loring, Jr., and other Johnson family members, together
owned approximately 44% of the non-voting common stock of FMR Corp. Through
ownership of voting common stock, Edward C. Johnson 3d (President and a
Trustee of the trust), Johnson family members, and various trusts for the
benefit of the Johnson family form a controlling group with respect to FMR
Corp.
During the period April 1, 1992 through November 30, 1993,
the following transactions were entered into by officers and/or Trustees of
the fund or of FMR Corp. involving more than 1% of the voting common,
non-voting common or preferred stock of FMR Corp. Mr. William L. Byrnes
redeemed 410 shares of voting common stock for a cash payment of
approximately $44,000. Mr. John J. Cook Jr. redeemed 10,000 shares of
non-voting common stock for a cash payment of approximately $1.1 million.
Mr. C. Bruce Johnstone redeemed an aggregate of 25,500 shares of non-voting
common stock for an aggregate cash payment of approximately $3.4 million.
Mr. Morris J. Smith redeemed 15,000 shares of non-voting common stock for a
cash payment of approximately $1.8 million.
ACTIVITIES AND MANAGEMENT OF FMR U.K. AND FMR FAR EAST
FMR U.K. and FMR Far East are wholly-owned subsidiaries of FMR formed in
1986 to provide investment research information with respect to certain
funds for which FMR acts as investment adviser. Under sub-advisory
agreements with FMR U.K. and FMR Far East, FMR pays fees equal to 110% of
FMR U.K.'s costs and 105% of FMR Far East's costs, respectively, in
connection with research services provided for the benefit of certain
Fidelity funds. During the fiscal year ended March 31, 1993, the fees paid
by FMR on behalf of the fund to FMR U.K. and FMR Far East were $224,843 and
$ 237,864, respectively.
The Statements of Financial Condition of FMR U.K. and FMR Far East as of
December 31, 1992 are shown on page and , respectively. Funds managed by
FMR with respect to which FMR currently has sub-advisory agreements with
either FMR U.K. or FMR Far East, and the net assets of each of these funds,
are indicated in the Table of Average Net Assets and Expense Ratios
(Exhibit 4) on page .
The Directors of FMR U.K. and FMR Far East are Edward C. Johnson 3d,
Chairman, and J. Gary Burkhead, President. The affiliations of Messrs.
Johnson 3d and Burkhead are described in Proposal 1. The principal business
address of the Directors and FMR U.K. and FMR Far East is 82 Devonshire
Street, Boston, Massachusetts.
BALANCE SHEETS
The Consolidated Statements of Financial Condition of FMR, FMR U.K.,
and FMR Far East as of December 31, 1992 (audited) and as of September
30, 199 3 (unaudited) are shown on pages through . To the
knowledge of FMR, there has been no material adverse change in the
financial condition from September 30, 1993 to the date of this proxy
statement. Proxies will not be voted for approval of any of the proposals
in this proxy statement unless (a) in the judgment of the Board of Trustees
of the trust there have been no material changes in the financial condition
of FMR between September 30, 1993 and December 31, 1993 and (b) the trust
has received a certificate of the Chairman, President, or Senior Vice
President of FMR, dated the day on which such proxies are to be voted,
that, to his or her knowledge, since December 31, 1993, there has been no
material adverse change in FMR's financial condition which has not been
disclosed to shareholders in additional proxy solicitation material.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of the fund by FMR pursuant to authority contained in its
management contract. FMR is also responsible for the placement of
transaction orders for other investment companies and accounts for which it
or its affiliates act as investment adviser. In selecting broker-dealers,
subject to applicable limitations of the federal securities laws, FMR will
consider various relevant factors, including, but not limited to, the size
and type of the transaction; the nature and character of the markets for
the security to be purchased or sold; the execution efficiency, settlement
capability, and financial condition of the broker-dealer firm; the
broker-dealer's execution services rendered on a continuing basis; and the
reasonableness of any commissions. Commissions for foreign investments
traded on foreign exchanges generally will be higher than for U.S.
investments traded on domestic exchanges and may not be subject to
negotiation.
The fund may execute portfolio transactions with broker-dealers who
provide research and execution services to the fund or other
accounts over which FMR or its affiliates exercise investment discretion.
Such services may include advice concerning the value of securities; the
advisability of investing in, purchasing, or selling securities; the
availability of securities or the purchasers or sellers of securities;
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and performance of
accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement). The selection of
such broker-dealers is generally made by FMR (to the extent possible
consistent with execution considerations) in accordance with a ranking of
broker-dealers determined periodically by FMR's investment staff based upon
the quality of research and execution services provided.
The receipt of research from broker-dealers that execute transactions on
behalf of the fund may be useful to FMR in rendering investment management
services to the fund or its other clients, and conversely, such
research provided by broker-dealers who have executed transaction orders on
behalf of other FMR clients may be useful to FMR in carrying out its
obligations to the fund . The receipt of such research has not
reduced FMR's normal independent research activities; however, it enables
FMR to avoid the additional expenses that could be incurred if FMR tried to
develop comparable information through its own efforts.
Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause the
fund to pay such higher commissions, FMR must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage
and research services provided by such executing broker-dealers, viewed in
terms of a particular transaction or FMR's overall responsibilities to the
fund and its other clients. In reaching this determination, FMR will
not attempt to place a specific dollar value on the brokerage and research
services provided, or to determine what portion of the compensation should
be related to those services.
FMR is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance
in the distribution of shares of the fund or shares of other
Fidelity funds to the extent permitted by law. FMR may use research
services provided by and place agency transactions with Fidelity Brokerage
Services, Inc. (FBSI) and Fidelity Brokerage Services. Ltd. (FBSL),
subsidiaries of FMR Corp., if the commissions are fair, reasonable, and
comparable to commissions charged by non-affiliated, qualified brokerage
firms for similar services. Prior to September 4, 1992, FBSL operated under
the name Fidelity Portfolio Services, Ltd. (FPSL) as a wholly-owned
subsidiary of Fidelity International Limited (FIL). Edward C. Johnson 3d is
Chairman of FIL. Mr. Johnson 3d, together with various trusts for the
benefit of Johnson family members, owns directly or indirectly more than
25% of the voting common stock of FIL.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for
accounts which they or their affiliates manage, except in accordance with
SEC regulations. Pursuant to such regulations, the Board of Trustees has
approved a written agreement that permits FBSI to effect portfolio
transactions on national securities exchanges and to retain compensation in
connection with such transactions.
The Trustees periodically review FMR's performance of its responsibilities
in connection with the placement of portfolio transactions on behalf of the
fund and review the commissions paid by the fund over
representative periods of time to determine if they are reasonable in
relation to the benefits to the fund.
The fund's annual portfolio turnover rate for the fiscal years ended March
31, 1993 and 1992 were 155% and 172%.
The table below lists the total brokerage commissions paid; the percentage
of brokerage commissions paid to brokerage firms that provided research
services; the total dollar value of brokerage commissions paid to firms
that provided research service, and the commissions paid to FBSI and FBSL
in dollars and as a percentage of the dollar value of all transactions in
which brokerage commissions were paid for the fiscal year ended March 31,
1993 for the fund . The differences in the percentage of
brokerage commissions paid to FBSI and FBSL and the percentage of
transactions effected through FBSI and FBSL are a result of low commission
rates charged by FBSI and FBSL in comparison to those charged by
unaffiliated broker-dealers.
Total % Paid to Amount
Commissions Firms Paid to Firms
Providing Providing
Research Research
$62,757,285 57% $36,073,117
To To % To % To Transacti Transact
FBSI FBSL FBSI FBSL ons ions
Through Through
FBSI FBSL
$20,714,134 $38,938 33% .06% 44% .06%
From time to time the Trustees will review whether the recapture for the
benefit of the fund of some portion of the brokerage commissions or
similar fees paid by the fund on portfolio transactions is legally
permissible and advisable. The fund seeks to recapture soliciting
broker-dealer fees on the tender of portfolio securities, but at present no
other recapture arrangements are in effect. The Trustees intend to continue
to review whether recapture opportunities are available and are legally
permissible and, if so, to determine, in the exercise of their business
judgment, whether it would be advisable for the fund to seek such
recapture.
Although the Trustees and officers of the fund are substantially
the same as those of other funds managed by FMR, investment decisions for
the fund are made independently from those of other funds managed by
FMR or accounts managed by FMR affiliates. It sometimes happens that the
same security is held in the portfolio of more than one of these funds or
accounts. Simultaneous transactions are inevitable when several funds are
managed by the same investment adviser, particularly when the same security
is suitable for the investment objective of more than one fund.
When two or more funds are simultaneously engaged in the purchase or sale
of the same security, the prices and amounts are allocated in accordance
with a formula considered by the officers of the funds involved to be
equitable to each fund. In some cases, this system could have a detrimental
effect on the price or value of a security as far as the fund is
concerned. In other cases, however, the ability of the fund to
participate in volume transactions will produce better executions and
prices for the fund. It is the current opinion of the Trustees that
the desirability of retaining FMR as investment adviser to the funds
outweighs any disadvantages that may be said to exist from exposure to
simultaneous transactions.
CONTRACTS WITH COMPANIES AFFILIATED WITH FMR
Fidelity Service Co. (FSC) is transfer, dividend disbursing, and
shareholders' servicing agent for the fund. Under the fund's
contract with FSC, the fund pays an annual fee of $25.50 per basic retail
account with a balance of $5,000 or more, $15.00 per basic retail account
with a balance of less than $5,000, and a supplemental activity charge of
$5.61 for monetary transactions. These fees and charges are subject to
annual cost escalation based on postal rate changes and changes in wage and
price levels as measured by the National Consumer Price Index for Urban
Areas. With respect to certain institutional client master accounts,
the fund pays FSC a per-account fee of $95.00 and monetary
transaction charges of $20.00 and $17.50, depending on the nature of
services provided. With respect to certain broker-dealer master
accounts, the fund pays FSC a per account fee of $30, and a charge of $6
for monetary transactions. Fees for certain institutional retirement
plan accounts are based on the net assets of all such accounts in the fund.
Under the fund's current contract, FSC pays out-of-pocket
expenses associated with providing transfer agent services. In addition,
FSC bears the expense of typesetting, printing, and mailing prospectuses,
statements of additional information, and all other reports, notices, and
statements to shareholders, with the exception of proxy statements.
The transfer agent fees , including reimbursement for out-of-pocket
expenses, paid to FSC by the fund for the fiscal years
ended March 31 , 1993, 1992, and 1991 were $49,705,683, $41,482,323,
and $32,006,786, respectively.
The fund 's contract with FSC also provides that FSC will perform
the calculations necessary to determine the fund's net asset value
per share and dividends and maintain the fund's accounting records.
Prior to July 1, 1991, the annual fee for these pricing and bookkeeping
services was based on two schedules , one pertaining to the fund's
average net assets, and one pertaining to the type and number of
transactions the fund made. The fee rates in effect as of July 1, 1991 are
based on the fund's average net assets, specifically, .06% for the
first $500 million of average net assets and .03% for average net assets in
excess of $500 million. The fee is limited to a minimum of $45,000 and a
maximum of $750,000 per year. Pricing and bookkeeping fees, including
related out-of-pocket paid to FSC for fiscal 199 3 , 199 2 ,
and 199 1 , were $846,447, $884,596 and $846,611, respectively .
From October 31, 1989 to October 18, 1991, Fidelity Management Trust
Company (FMTC) served as custodian of the fund's assets. FMTC, an affiliate
of FMR, was organized as a Massachusetts trust company in 1981. FMTC took
no part in determining the investment policies of the fund or in deciding
which securities were purchased or sold by the fund. Effective October 19,
1991, Brown Brothers Harriman & Co. was appointed custodian of the
fund's assets. Custodian fees paid to FMTC for the period April 1, 1991 to
October 18, 1991 and fiscal 1991, were $618,481 and $1,580,869,
respectively, for its services as custodian to fund.
The fund has a distribution agreement with FDC, a Massachusetts
corporation organized on July 18, 1960. FDC is a broker-dealer registered
under the Securities Exchange Act of 1934 and is a member of the National
Association of Securities Dealers, Inc. The distribution agreement calls
for FDC to use all reasonable efforts, consistent with its other business,
to secure purchasers for shares of the fund, which are continuously
offered. Promotional and administrative expenses in connection with t he
offer and sale of shares are paid by FDC. Sales charge revenue paid to FDC
for fiscal 1993, 1992, and 1991 amounted to $28,821,876, $38,609,038, and
$17,874,035, respectively.
SUBMISSION OF CERTAIN SHAREHOLDER PROPOSALS
The fund does not hold annual shareholder meetings. Shareholders wishing
to submit proposals for inclusion in a proxy statement for a subsequent
shareholder meeting should send their written proposals to the Secretary of
the fund, 82 Devonshire Street, Boston, Massachusetts 02109.
NOTICE TO BANKS, BROKER-DEALERS AND
VOTING TRUSTEES AND THEIR NOMINEES
Please advise the fund, in care of Fidelity Service Co., P.O. Box 789,
Boston, Massachusetts 02102, whether other persons are beneficial owners of
shares for which proxies are being solicited and, if so, the number of
copies of the Proxy Statement and Annual Report you wish to receive in
order to supply copies to the beneficial owners of the respective
shares .
FIDELITY MANAGEMENT & RESEARCH COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
________
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Fidelity Management & Research Company
(a Wholly-Owned Subsidiary of FMR Corp.):
We have audited the accompanying consolidated statement of financial
condition of Fidelity Management & Research Company as of December 31,
1992. This financial statement is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the consolidated financial position of Fidelity
Management & Research Company as of December 31, 1992, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND
Boston, Massachusetts
January 29, 1993
FIDELITY MANAGEMENT & RESEARCH COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1992
(IN THOUSANDS)
________
ASSETS
Cash and cash equivalents $ 5,960
Management fees receivable 67,506
Invested assets:
Managed funds (market value $82,406) 79,248
Other (fair value $24,066) 21,668
Property and equipment, net 70,275
Deferred income taxes 24,331
Prepaid expenses and other assets 9,042
Total Assets $ 278,030
LIABILITIES AND STOCKHOLDER'S EQUITY
Payable to mutual funds $ 12,761
Accounts payable and accrued expenses 27,330
Payable to parent company 121,923
Other liabilities 2,590
Total Liabilities 164,604
Stockholder's equity:
Common stock, $.30 par value;
authorized 50,000 shares;
issued and outstanding
26,500 shares 8
Additional paid-in capital 36,590
Retained earnings 76,828
Total Stockholder's Equity 113,426
Total Liabilities and Stockholder's Equity $ 278,030
The accompanying notes are an integral part
of the consolidated statement of financial condition.
FIDELITY MANAGEMENT & RESEARCH COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
NOTES TO CONSOLIDATED STATEMENT
OF FINANCIAL CONDITION
________
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fidelity Management & Research Company and Subsidiaries (the Company)
provide investment management and advisory services and other services
principally for the Fidelity Investments Family of Funds. The Company also
provides computer support and systems development services to affiliated
companies.
PRINCIPLES OF CONSOLIDATION
The consolidated statement of financial condition includes the accounts of
Fidelity Management & Research Company and its wholly-owned
subsidiaries. All intercompany accounts have been eliminated.
INVESTED ASSETS
Managed funds investments (consisting primarily of Fidelity Mutual Funds)
are carried at the lower of aggregate cost or market. Other invested assets
consist primarily of an investment in a limited partnership which is
carried at cost. Certain restrictions exist with respect to the sale or
transfer of this investment to third parties. For managed funds investments
and other securities, fair value is determined by the quoted market price
except in the case of restricted investments which are valued based on
management's assessment of fair value. When the Company has determined that
an impairment, which is deemed other than temporary, in the market or fair
value of an invested asset has occurred, the carrying value of the
investment is reduced to its net realizable value.
INCOME TAXES
The Company is included in the consolidated federal and state income tax
returns of FMR Corp. Deferred income taxes are allocated to the Company by
FMR Corp. as a direct charge (credit) and arise due to the differences in
the timing of recognition of certain items of income and expense for tax
and financial reporting purposes.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(the Statement). The Statement mandates the liability method for computing
deferred income taxes. The Company is required to adopt the Statement in
1993. Upon adoption, the principles of the Statement may be applied
retroactively or on a prospective basis. The effect on the Company's
consolidated financial position of adopting the Statement is not expected
to be material.
FIDELITY MANAGEMENT & RESEARCH COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
NOTES TO CONSOLIDATED STATEMENT
OF FINANCIAL CONDITION
(CONTINUED)
________
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation of furniture and equipment is computed over the
estimated useful lives of the related assets, which are principally three
to five years, using the straight-line method. Leasehold improvements are
amortized over the lesser of their economic useful lives or the period of
the lease. Maintenance and repairs are charged to operations when incurred.
Renewals and betterments of a nature considered to materially extend the
useful life of the assets are capitalized.
PENSION AND PROFIT SHARING PLANS
The Company participates in FMR Corp.'s noncontributory defined benefit
pension plan covering all of its eligible employees. There are no
statistics available for the actuarial data of this separate company.
The Company also participates in FMR Corp.'s defined contribution profit
sharing and retirement plans covering substantially all eligible employees.
FUTURES CONTRACTS
The Company utilizes futures contracts to hedge a portion of its
investments against changes in value. Futures contracts are valued at the
settlement price established each day by the exchange on which they are
traded. Realized and unrealized gains and losses arising from these
contracts are deferred until the disposition of the underlying hedged
assets.
B. PROPERTY AND EQUIPMENT, NET
At December 31, 1992, property and equipment, at cost, consists of (in
thousands):
Furniture $ 2,713
Equipment (principally computer related) 227,020
Leasehold improvements 7,149
236,882
Less: Accumulated depreciation and amortization 166,607
$ 70,275
C. TRANSACTIONS WITH AFFILIATED COMPANIES
In connection with its operations, the Company provides services to and
obtains services from affiliated companies. Transactions related to these
services are settled, in the normal course of business, through an
intercompany account with the Company's parent, FMR Corp. The terms of
these transactions may not be the same as those which would otherwise exist
or result from agreements and transactions among unrelated parties.
FIDELITY MANAGEMENT & RESEARCH COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
NOTES TO CONSOLIDATED STATEMENT
OF FINANCIAL CONDITION
(CONTINUED)
________
D. COMMITMENTS
Aggregate rentals of office space and equipment under operating leases with
non-cancellable terms in excess of one year at December 31, 1992 are as
follows (in thousands):
Year
1993 $1,241
1994 1,391
1995 1,494
1996 1,251
1997 853
Thereafter 1,114
E. FUTURES CONTRACTS
The futures contracts involve, to varying degrees, elements of market risk
and risks in excess of the amounts recognized in the Consolidated Statement
of Financial Condition. Risks may be caused by the imperfect correlation
between movements in the price of the contracts and the price of the
underlying securities. Risks also may arise if there is an illiquid
secondary market for the instruments, or due to the inability of the
counterparties to perform.
At December 31, 1992, the Company had outstanding futures sales contracts
expiring in March 1993 with an aggregate face value of approximately
$17,520,000. Current value of such contracts approximated $17,796,000 at
December 31, 1992.
F. EVENTS SUBSEQUENT TO REPORT OF INDEPENDENT ACCOUNTANTS
On March 1, 1993, a significant subsidiary of the Company, Fidelity
Investments Institutional Services Company, Inc. was transferred to the
Company's parent. As of December 31, 1992, this subsidiary had net worth,
intercompany assets, and total assets of approximately $55,000,000,
$43,000,000 and $63,000,000, respectively.
FIDELITY MANAGEMENT & RESEARCH COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 1993
(UNAUDITED)
(IN THOUSANDS)
________
ASSETS
Cash and cash equivalents $ 117
Management fees receivable 94,523
Managed funds (market value $78,836) 69,808
Property and equipment, net 112,898
Deferred income taxes 15,389
Other investments 3,209
Prepaid expenses and other assets 5,741
Prepaid income taxes 177
Total Assets $ 301,862
LIABILITIES AND STOCKHOLDER'S EQUITY
Payable to mutual funds $ 10,946
Accounts payable and accrued expenses 83,481
Payable to parent company 116,832
Other liabilities 2,571
Total Liabilities 213,830
Stockholder's equity:
Common stock, $.30 par value;
authorized 50,000 shares;
issued and outstanding
26,500 shares 8
Additional paid-in capital 38,824
Retained earnings 49,200
Total Stockholder's Equity 88,032
Total Liabilities and Stockholder's Equity $ 301,862
The accompanying notes are an integral part
of the consolidated statement of financial condition.
FIDELITY MANAGEMENT & RESEARCH COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
NOTES TO CONSOLIDATED STATEMENT
OF FINANCIAL CONDITION
(UNAUDITED)
________
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Fidelity Management & Research Company and Subsidiaries (the Company)
provide investment management and advisory services and other services
principally for the Fidelity Investments Family of Funds. The Company also
provides computer support and systems development services to affiliated
companies.
PRINCIPLES OF CONSOLIDATION
The consolidated statement of financial condition includes the accounts of
Fidelity Management & Research Company and its wholly-owned
subsidiaries. All intercompany accounts have been eliminated.
INVESTED ASSETS
Managed funds investments (consisting primarily of Fidelity Mutual Funds)
are carried at the lower of aggregate cost or market. Other invested assets
consist primarily of an investment in a limited partnership which is
carried at cost. Certain restrictions exist with respect to the sale or
transfer of this investment to third parties. For managed funds investments
and other securities, fair value is determined by the quoted market price
except in the case of restricted investments which are valued based on
management's assessment of fair value. When the Company has determined that
an impairment, which is deemed other than temporary, in the market or fair
value of an invested asset has occurred, the carrying value of the
investment is reduced to its net realizable value.
INCOME TAXES
The Company is included in the consolidated federal and state income tax
returns of FMR Corp. Deferred income taxes are allocated to the Company by
FMR Corp. as a direct charge (credit) and arise due to the differences in
the timing of recognition of certain items of income and expense for tax
and financial reporting purposes.
In 1993, the Company adopted the Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (the Statement). The principles of the Statement were applied
retroactively, and did not have a material affect on the Company's
consolidated financial position.
FIDELITY MANAGEMENT & RESEARCH COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
NOTES TO CONSOLIDATED STATEMENT
OF FINANCIAL CONDITION
(UNAUDITED)
(CONTINUED)
________
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation of furniture and equipment is computed over the
estimated useful lives of the related assets, which are principally three
to five years, using the straight-line method. Leasehold improvements are
amortized over the lesser of their economic useful lives or the period of
the lease. Maintenance and repairs are charged to operations when incurred.
Renewals and betterments of a nature considered to materially extend the
useful life of the assets are capitalized.
PENSION AND PROFIT SHARING PLANS
The Company participates in FMR Corp.'s noncontributory defined benefit
pension plan covering all of its eligible employees. There are no
statistics available for the actuarial data of this separate company.
The Company also participates in FMR Corp.'s defined contribution profit
sharing and retirement plans covering substantially all eligible employees.
B. PROPERTY AND EQUIPMENT, NET
At September 30, 1993, property and equipment, at cost, consists of (in
thousands):
Furniture $ 1,853
Equipment (principally computer related) 276,647
Leasehold improvements 5,859
284,359
Less: Accumulated depreciation and amortization 171,461
$ 112,898
C. TRANSACTIONS WITH AFFILIATED COMPANIES
In connection with its operations, the Company provides services to and
obtains services from affiliated companies. Transactions related to these
services are settled, in the normal course of business, through an
intercompany account with the Company's parent, FMR Corp. The terms of
these transactions may not be the same as those which would otherwise exist
or result from agreements and transactions among unrelated parties.
FIDELITY MANAGEMENT & RESEARCH COMPANY
(A WHOLLY-OWNED SUBSIDIARY OF FMR CORP.)
NOTES TO CONSOLIDATED STATEMENT
OF FINANCIAL CONDITION
(UNAUDITED)
(CONTINUED)
________
D. TRANSFER OF SUBSIDIARY
On March 1, 1993, a significant subsidiary of the Company, Fidelity
Investments Institutional Services Company, Inc. was transferred to the
Company's parent. As of March 1, 1993, this subsidiary had net worth and
total assets of approximately $53,000,000, and $70,000,000, respectively.
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
(A WHOLLY-OWNED SUBSIDIARY OF FIDELITY MANAGEMENT & RESEARCH COMPANY)
________
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Fidelity Management & Research (U.K.) Inc.
(a Wholly-Owned Subsidiary of Fidelity Management & Research
Company):
We have audited the accompanying statement of financial condition of
Fidelity Management & Research (U.K.) Inc. as of December 31, 1992.
This financial statement is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of Fidelity Management
& Research (U.K.) Inc. as of December 31, 1992, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND
Boston, Massachusetts
January 29, 1993
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
(A WHOLLY-OWNED SUBSIDIARY OF FIDELITY MANAGEMENT & RESEARCH COMPANY)
STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1992
________
ASSETS
Investments at lower of cost or market (cost $2,435,422) $ 2,351,700
Equipment, net of accumulated
depreciation of $349,058 982,463
Other assets 143,762
Accounts receivable from parent 890,605
Total Assets $ 4,368,530
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Subordinated loan $ 1,608,100
Accounts payable to affiliate 121,567
Income taxes payable 91,743
Other liabilities 86,706
Total Liabilities 1,908,116
Stockholder's equity:
Common stock, $1, par value;
authorized 300,000 shares;
issued and outstanding 100 shares 100
Additional paid-in capital 900
Retained earnings 2,459,414
Total Stockholder's Equity 2,460,414
Total Liabilities and Stockholder's Equity $ 4,368,530
The accompanying notes are an integral part
of the statement of financial condition.
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
(A WHOLLY-OWNED SUBSIDIARY OF FIDELITY MANAGEMENT & RESEARCH COMPANY)
NOTES TO STATEMENT OF
FINANCIAL CONDITION
________
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF REPORTING
The financial statement is presented in accordance with United States
generally accepted accounting principles. The functional and reporting
currency for Fidelity Management & Research (U.K.) Inc. (the Company)
is the U.S. dollar.
BUSINESS
The Company is a wholly-owned subsidiary of Fidelity Management &
Research Company (the parent). The Company is a registered investment
advisor and provides research and investment advisory services under
subadvisory agreements with its parent. The Company also provides research
advice to the parent and an affiliate pursuant to a research joint venture
agreement.
INVESTMENTS
Investments consist of shares held in a Fidelity mutual fund and are
carried at the lower of cost or market. The fair value of investments is
equal to the quoted market price.
EQUIPMENT
Equipment is stated at cost less accumulated depreciation. Depreciation is
computed over the estimated useful lives of the related assets, which vary
from three to five years, using the straight-line method. Maintenance and
repairs are charged to operations when incurred.
SUBORDINATED LOAN
The Company has a subordinated loan payable to its parent and due on March
31, 1994.The loan is subordinated in all respects to the rights of senior
creditors. Interest is payable annually at a rate equal to LIBOR on the
date of the agreement. Repayment or modification of this loan is subject to
regulatory approval.
INCOME TAXES
The Company is included in the consolidated federal and state income tax
returns of FMR Corp., the parent company of Fidelity Management &
Research Company. The Company is assessed a charge by FMR Corp. at the
higher of the U.S. statutory income tax rate or the applicable foreign
statutory income tax rate based upon its pretax accounting income adjusted
for permanent book/tax differences, if any.
B. NET CAPITAL REQUIREMENT:
The Company is subject to certain financial regulatory resource rules which
requires the Company to maintain a certain level of net capital (as
defined). At December 31, 1992, the minimum net capital requirement of
approximately $750,000 has been satisfied by the Company.
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
(A WHOLLY-OWNED SUBSIDIARY OF
FIDELITY MANAGEMENT & RESEARCH COMPANY)
STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 1993
(UNAUDITED)
________
ASSETS
Investments at lower of cost or market
(market value $3,023,991) $ 2,482,897
Equipment, net of accumulated depreciation of $693,466 713,873
Accounts receivable from parent 3,129,092
Total Assets $ 6,325,862
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Subordinated loan $ 1,608,100
Accounts payable to affiliate 1,923,816
Income taxes payable 181,225
Other Liabilities 130
Total Liabilities 3,713,271
Stockholder's Equity:
Common stock, $1, par value;
authorized 300,000 shares;
issued and outstanding 100 shares 100
Additional paid-in capital 900
Retained earnings 2,611,591
Total Stockholder's Equity 2,612,591
Total Liabilities and Stockholder's Equity $ 6,325,862
The accompanying notes are an integral part
of the consolidated statement of financial condition.
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
(A WHOLLY-OWNED SUBSIDIARY OF
FIDELITY MANAGEMENT & RESEARCH COMPANY)
NOTES TO STATEMENT OF FINANCIAL CONDITION
(UNAUDITED)
________
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF REPORTING
The financial statements are presented in accordance with United States
generally accepted accounting principles. The functional and reporting
currency for Fidelity Management & Research (U.K.) Inc. (the Company)
is the U.S. dollar.
BUSINESS
The Company is a wholly-owned subsidiary of Fidelity Management &
Research Company (the parent). The Company is a registered investment
advisor and provides research and investment advisory services under
subadvisory agreements with its parent. The Company also provides research
advice to the parent and an affiliate pursuant to a research joint venture
agreement.
REVENUE RECOGNITION
Fees earned from management and investment advisory services provided to
mutual funds are recognized as earned and shared equally with the parent.
Research joint venture fees are charged to the parent and an affiliate
based on a cost plus fee arrangement. Intercompany transactions are settled
during the normal course of business. Gains and losses from the sale of
invested assets are computed on a specific identified cost basis.
INVESTMENTS
Investments consist of shares held in Fidelity mutual funds and are carried
at the lower of aggregate cost or market. The fair value of investments is
equal to the quoted market price.
EQUIPMENT
Equipment is stated at cost less accumulated depreciation. Depreciation is
computed over the estimated useful lives of the related assets, which vary
from three to five years, using the straight-line method. Maintenance and
repairs are charged to operations when incurred.
FIDELITY MANAGEMENT & RESEARCH (U.K.) INC.
(A WHOLLY-OWNED SUBSIDIARY OF
FIDELITY MANAGEMENT & RESEARCH COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
________
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED:
SUBORDINATED LOAN
The Company has a subordinated loan payable to its parent and due on March
31, 1994. The loan is subordinated in all respects to the rights of senior
creditors. Interest is payable annually at a rate equal to LIBOR on the
date of the agreement. Repayment or modification of this loan is subject to
regulatory approval.
INCOME TAXES
The Company is included in the consolidated federal and state income tax
returns of FMR Corp., the parent company of Fidelity Management &
Research Company. The Company is assessed a charge by FMR Corp. at the
higher of the U.S. statutory income tax rate or the applicable foreign
statutory income tax rate based upon its pretax accounting income adjusted
for permanent book/tax differences, if any.
B. NET CAPITAL REQUIREMENT:
The Company is subject to certain financial regulatory resource rules which
require the Company to maintain a certain level of net capital (as
defined). At September 30, 1993, the minimum net capital requirement of
approximately $425,000 has been satisfied by the Company.
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
(A WHOLLY-OWNED SUBSIDIARY OF FIDELITY MANAGEMENT & RESEARCH COMPANY)
________
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
Fidelity Management & Research (Far East) Inc.
(a Wholly-Owned Subsidiary of Fidelity Management & Research Company):
We have audited the accompanying statement of financial condition of
Fidelity Management & Research (Far East) Inc. as of December 31, 1992.
This financial statement is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of Fidelity Management
& Research (Far East) Inc. as of December 31, 1992, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND
Boston, Massachusetts
January 29, 1993
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
(A WHOLLY-OWNED SUBSIDIARY OF FIDELITY MANAGEMENT & RESEARCH COMPANY)
STATEMENT OF FINANCIAL CONDITION
DECEMBER 31, 1992
________
ASSETS
Cash $ 19,146
Investments (market value $1,010,000) 1,009,000
Furniture and equipment, net of
accumulated depreciation of $10,068 1,278
Prepaid expenses and other assets 143,499
Total Assets $ 1,172,923
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Payable to parent company $ 105,983
Payable to affiliate 286,387
Income taxes payable 202,728
Total Liabilities 595,098
Stockholder's equity:
Common stock, $1, par value;
authorized 300,000 shares;
issued and outstanding 100 shares 100
Additional paid-in capital 900
Retained earnings 576,825
Total Stockholder's Equity 577,825
Total Liabilities and Stockholder's Equity $ 1,172,923
The accompanying notes are an integral part
of the statement of financial condition.
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
(A WHOLLY-OWNED SUBSIDIARY OF FIDELITY MANAGEMENT & RESEARCH COMPANY)
NOTES TO STATEMENT
OF FINANCIAL CONDITION
________
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS
Fidelity Management & Research (Far East) Inc. (the Company) is a
wholly-owned subsidiary of Fidelity Management & Research Company (the
parent). The Company provides investment research advice under a
subadvisory agreement with its parent.
The Company is a registered investment advisor and receives fees from its
parent for the services provided. Intercompany transactions are settled
during the normal course of business.
INVESTMENTS
Investments consist of shares held in a Fidelity mutual fund and are
carried at the lower of cost or market. The fair value of investments is
equal to the quoted market price.
FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost less accumulated depreciation.
Depreciation is computed over the estimated useful lives of the related
assets, which vary from three to five years, using the straight-line
method.
INCOME TAXES
The Company is included in the consolidated federal and state income tax
returns of FMR Corp., the parent company of Fidelity Management &
Research Company. The Company is assessed a charge by FMR Corp. at the
higher of the U.S. statutory income tax rate or the applicable foreign
statutory income tax rates based upon its pretax accounting income adjusted
for permanent book/tax differences, if any.
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
(A WHOLLY-OWNED SUBSIDIARY OF
FIDELITY MANAGEMENT & RESEARCH COMPANY)
STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 1993
(UNAUDITED)
ASSETS
Cash $ 19,146
Investments (market value $603,714) 555,702
Furniture and equipment, net of
accumulated depreciation of $10,582 764
Prepaid expenses and other assets 143,499
Receivable from parent company 30,491
Total Assets $ 749,602
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Payable to affiliate $ 50,700
Income taxes payable 109,967
Total Liabilities 160,667
Stockholder's equity:
Common stock, $1, par value;
authorized 300,000 shares;
issued and outstanding 100 shares 100
Additional paid-in capital 900
Retained earnings 587,935
Total Stockholder's Equity 588,935
Total Liabilities and Stockholder's Equity $ 749,602
The accompanying notes are an integral part
of the consolidated statement of financial condition.
FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC.
(A WHOLLY-OWNED SUBSIDIARY OF
FIDELITY MANAGEMENT & RESEARCH COMPANY)
NOTES TO STATEMENT OF FINANCIAL CONDITION
(UNAUDITED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS
Fidelity Management & Research (Far East) Inc. (the Company) is a
wholly-owned subsidiary of Fidelity Management & Research Company (the
parent). The Company provides investment research advice under a
subadvisory agreement with its parent.
The Company is a registered investment advisor and receives fees from its
parent for the services provided. Intercompany transactions are settled
during the normal course of business.
INVESTMENTS
Investments consist of shares held in a Fidelity mutual fund and are
carried at the lower of cost or market. The fair value of investments is
equal to the quoted market price.
FURNITURE AND EQUIPMENT
Furniture and equipment are stated at cost less accumulated depreciation.
Depreciation is computed over the estimated useful lives of the related
assets, which vary from three to five years, using the straight-line
method. Maintenance and repairs are charged to operations when incurred.
INCOME TAXES
The Company is included in the consolidated federal and state income tax
returns of FMR Corp., the parent company of Fidelity Management &
Research Company. The Company is assessed a charge by FMR Corp. at the
higher of the U.S. statutory income tax rate or the applicable foreign
statutory income tax rates based upon its pretax accounting income adjusted
for permanent book/tax differences, if any.
EXHIBIT 1
FORM OF MANAGEMENT CONTRACT
The language to be added to the current contract is underlined; the
language to be deleted is set forth in [brackets].
FORM OF MANAGEMENT CONTRACT
BETWEEN
FIDELITY MAGELLAN FUND
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY
MODIFICATION made this 1st day of [November 1989] April 1994, by and
between Fidelity Magellan Fund, a Massachusetts business trust [that]
which may issue one or more series of shares of beneficial
interest (hereinafter called the "Fund"), on behalf of its single
existing series of shares of beneficial interest (hereinafter called the
"Portfolio"), and Fidelity Management & Research Company, a
Massachusetts corporation (hereinafter [sometimes]called the "Adviser").
Required authorization[s] and approval[s] by shareholders and Trustees
having been obtained, the [Fidelity Magellan] Fund, on behalf
of [its single existing series of shares of beneficial interest
(hereinafter called the "Portfolio"),] the Portfolio , and
[Fidelity Management & Research Company] the Adviser
hereby consent, pursuant to [Paragraph 7 of the former Advisory and
Service Contract dated October 2, 1984, and] Paragraph 6 of the existing
Management Contract dated [April 1, 1987] November 1, 1989, to a
modification of said [latter] Contract in the manner set forth below. The
Modifi[cations] ed Management Contract shall [take effect
upon the execution of this modification of the management contract]
when executed by duly authorized officers of the Fund and the
Adviser , take effect on the later of April 1, 1994 or the first day
of the month following approval.
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Portfolio and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Portfolio in
accordance with the investment objective, policies and limitations as
provided in the Portfolio's Prospectus or other governing instruments, as
amended from time to time, the Investment Company Act of 1940 and rules
thereunder, as amended from time to time (the "1940 Act"), and such other
limitations as the Portfolio may impose by notice in writing to the
Adviser. The Adviser shall also furnish for the use of the Portfolio office
space and all necessary office facilities, equipment and personnel for
servicing the investments of the Portfolio; and shall pay the salaries and
fees of all officers of the Fund, of all Trustees of the Fund who are
"interested persons" of the Fund or of the Adviser and of all personnel of
the Fund or the Adviser performing services relating to research,
statistical and investment activities. The Adviser is authorized, in its
discretion and without prior consultation with the Portfolio, to buy, sell,
lend and otherwise trade in any stocks, bonds and other securities and
investment instruments on behalf of the Portfolio. The investment policies
and all other actions of the Portfolio are and shall at all times be
subject to the control and direction of the Fund's Board of Trustees.
(b) Management Services. The Adviser shall perform (or arrange for the
performance by its affiliates of) the management and administrative
services necessary for the operation of the Fund. The Adviser shall,
subject to the supervision of the Board of Trustees, perform various
services for the Portfolio, including but not limited to: (i) providing the
Portfolio with office space, equipment and facilities (which may be its
own) for maintaining its organization; (ii) on behalf of the Portfolio,
supervising relations with, and monitoring the performance of, custodians,
depositories, transfer and pricing agents, accountants, attorneys,
underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable; (iii) preparing all general
shareholder communications, including shareholder reports; (iv) conducting
shareholder relations; (v) maintaining the Fund's existence and its
records; (vi) during such times as shares are publicly offered, maintaining
the registration and qualification of the Portfolio's shares under federal
and state law; and (vii) investigating the development of and developing
and implementing, if appropriate, management and shareholder services
designed to enhance the value or convenience of the Portfolio as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, information or
analyses to the Fund as the Fund's Board of Trustees may request from time
to time or as the Adviser may deem to be desirable. The Adviser shall make
recommendations to the Fund's Board of Trustees with respect to Fund
policies, and shall carry out such policies as are adopted by the Trustees.
The Adviser shall, subject to review by the Board of Trustees, furnish such
other services as the Adviser shall from time to time determine to be
necessary or useful to perform its obligations under this Contract.
(c) The Adviser[, at its own expense,] shall place all orders for the
purchase and sale of portfolio securities for the Portfolio's account with
brokers or dealers selected by the Adviser which may include brokers or
dealers affiliated with the Adviser. The Adviser shall use its best efforts
to seek to execute portfolio transactions at prices which are advantageous
to the Portfolio and at commission rates which are reasonable in relation
to the benefits received. In selecting brokers or dealers qualified to
execute a particular transaction, brokers or dealers may be selected who
also provide brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) to the Portfolio
and/or the other accounts over which the Adviser or its affiliates exercise
investment discretion. The Adviser is authorized to pay a broker or dealer
who provides such brokerage and research services a commission for
executing a portfolio transaction for the Portfolio which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction if the Adviser determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer. This
determination may be viewed in terms of either that particular transaction
or the overall responsibilities which the Adviser and its affiliates have
with respect to [the fund and to] accounts over which they exercise
investment discretion. The Trustees of the Fund shall periodically review
the commissions paid by the Portfolio to determine if the commissions paid
over representative periods of time were reasonable in relation to the
benefits to the Portfolio.
The Adviser shall, in acting hereunder, be an independent contractor. The
Adviser shall not be an agent of the Portfolio.
2. It is understood that the Trustees, officers and shareholders of the
Fund are or may be or become interested in the Adviser as directors,
officers or otherwise and that directors, officers and stockholders of the
Adviser are or may be or become similarly interested in the Fund, and that
the Adviser may be or become interested in the Fund as a shareholder or
otherwise.
3. [Management Fee.] The Adviser will be compensated on the following
basis for the services and facilities to be furnished hereunder. The
Adviser shall receive a monthly management fee, payable monthly as soon as
practicable after the last day of each month, composed of a Basic Fee and a
Performance Adjustment [to the basic fee based upon the investment
performance of the Portfolio in relation to the Standard & Poor's Daily
Stock Price Index of 500 Common Stocks (the "Index")]. The Performance
Adjustment is added to or subtracted from the Basic Fee depending on
whether the Portfolio experienced better or worse performance than the
Standard & Poor's Daily Stock Price Index of 500 Common Stocks (the
"Index"). The Performance Adjustment is not cumulative. An increased fee
will result even though the performance of the Portfolio over some period
of time shorter than the performance period has been behind that of the
Index, and, conversely, a reduction in the fee will be made for a month
even though the performance of the Portfolio over some period of time
shorter than the performance period has been ahead of that of the Index.
The Basic Fee and the Performance Adjustment will be computed as follows:
(a) Basic Fee Rate: The annual Basic Fee Rate shall be the sum of the
Group Fee Rate and the Individual Fund Fee Rate calculated to the nearest
millionth decimal place as follows:
(i) Group Fee Rate. The Group Fee Rate shall be based upon the monthly
average of the net assets of the registered investment companies having
Advisory and Service or Management Contracts with the Adviser (computed in
the manner set forth in the charter of each investment company) determined
as of the close of business on each business day throughout the month. The
Group Fee Rate shall be determined on a cumulative basis pursuant to the
following schedule:
Average Net Assets Annualized Fee Rate (for each level)
$0 - 3 billion .5200%
3 - 6 .4900
6 - 9 .4600
9 - 12 .4300
12 - 15 .4000
15 - 18 .3850
18 - 21 .3700
21 - 24 .3600
24 - 30 .3500
30 - 36 .3450
36 - 42 .3400
42 - 48 .3350
48 - 66 .3250
66 - 84 .3200
84 - 102 .3150
[Over 102] [.3100]
102 - 138 .3100
138 - 174 .3050
174 - 228 .3000
228 - 282 .2950
282 - 336 .2900
Over 336 - .2850
(ii) Individual Fund Fee Rate. The Individual Fund Fee Rate shall be
.30%.
(b) Basic Fee. One-twelfth of the [annual] Basic Fee Rate shall be
applied to the average of the net assets of the Portfolio (computed in the
manner set forth in [Article 10 of] the Fund's Declaration of
Trust [of the fund] or other organizational document)
determined as of the close of business on each business
day throughout the month. The resulting dollar amount comprises the
Basic Fee.
(c) Performance Adjustment Rate: The Performance Adjustment Rate [will be
determined on the basis of the Portfolio's investment performance as
follows:] is 0.02% for each percentage point (the performance of the
Portfolio and the Index each being calculated to the nearest percentage
point) that the Portfolio's investment performance for the performance
period was better or worse than the record of the Index as then
constituted. The maximum performance adjustment rate is 0.20%.
Upward Adjustment. The performance adjustment rate will be a positive
number at the annual rate of 0.02% for each percentage point, rounded to
the nearer point (the higher point if exactly one-half a point), that the
Portfolio's investment performance over the month and the preceding 35
months (the "Performance Period") exceeds the record of the Index, as then
constituted, for the performance period,with the maximum such increase in
the fee rate being at the annual rate of 0.20%
Downward Adjustment. The performance adjustment rate will be a negative
number at the annual rate of 0.02% for each percentage point rounded to the
nearer point (the higher point if exactly one-half a point), that the
record of the Index for the performance period exceeds the investment
performance of the Portfolio, with the maximum such reduction in fee rate
being at the annual rate of 0.20%.
The Portfolio's investment performance will be measured by comparing (i)
the opening net asset value of one share of the Portfolio on the first
business day of the performance period with (ii) the closing net asset
value of one share of the Portfolio as of the last business day of such
period. In computing the investment performance of the Portfolio and the
investment record of the Index, distributions of realized capital gains,
the value of capital gains taxes per share paid or payable on undistributed
realized long-term capital gains accumulated to the end of such period and
dividends paid out of investment income on the part of the Portfolio, and
all cash distributions of the securities included in the Index, will be
treated as reinvested in accordance with Rule 205-1 or any other applicable
rules under the Investment Advisers Act of 1940, as the same from time to
time may be amended.
The computation of the performance adjustment will not be cumulative. A
positive fee rate will apply even though the performance of the Portfolio
over some period of time shorter than the performance period has
been behind that of the Index, and conversely, a negative fee rate will
apply for a month even though the performance of the Portfolio over some
period of time shorter than the performance period has been ahead of that
of the Index.
(d) Performance Adjustment. One-twelfth of the annual
Performance Adjustment Rate will be applied to the average of the net
assets of the Portfolio (computed in the manner set forth in [Article 10
of] the Fund's Declaration of Trust [of the fund] or
other organizational document) [adjusted as provided in Paragraph
(3) below, if applicable] determined as of the close of business on each
business day throughout the month and the performance period. [The
resulting dollar amount is added to or deducted from the basic fee.]
(e) [In the event of a merger of other business combination involving
another entity for which the Adviser is the investment adviser, and where
such other entity utilizes a performance adjustment in determining its
investment advisory fee, then:] In case of termination of this
Contract during any month, the fee for that month shall be reduced
proportionately on the basis of the number of business days during which it
is in effect for that month. The Basic Fee Rate will be computed on the
basis of and applied to net assets averaged over that month ending on the
last business day on which this Contract is in effect. The amount of this
Performance Adjustment to the Basic Fee will be computed on the basis of
and applied to net assets averaged over the 36-month period ending on the
last business day on which this Contract is in effect provided that if this
Contract has been in effect less than 36 months, the computation will be
made on the basis of the period of time during which it has been in
effect.
4. It is understood that the Portfolio will pay all its expenses other
than those expressly stated to be payable by the Adviser hereunder, which
expenses payable by the Portfolio shall include, without limitation, (i)
interest and taxes; (ii) brokerage commissions and other costs in
connection with the purchase or sale of securities and other investment
instruments; (iii) fees and expenses of the Fund's Trustees other than
those who are "interested persons" of the Fund or the Adviser; (iv) legal
and audit expenses; (v) custodian, registrar and transfer agent fees and
expenses; (vi) fees and expenses related to the registration and
qualification of the Fund and the Portfolio's shares for distribution under
state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the Portfolio;
(viii) all other expenses incidental to holding meetings of the Portfolio's
shareholders, including proxy solicitations therefor; (ix) a pro rata
share, based on relative net assets of the Portfolio and other registered
investment companies having Advisory and Service or Management Contracts
with the Adviser, of 50% of insurance premiums for fidelity and other
coverage; (x) its proportionate share of association membership dues; (xi)
expenses of typesetting for printing Prospectuses and Statements of
Additional Information and supplements thereto; (xii) expenses of printing
and mailing Prospectuses and Statements of Additional Information and
supplements thereto sent to existing shareholders; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Portfolio is a party
and the legal obligation which the Portfolio may have to indemnify the
Fund's Trustees and officers with respect thereto.
5. The services of the Adviser to the Portfolio are not to be deemed
exclusive, the Adviser being free to render services to others and engage
in other activities, provided, however, that such other services and
activities do not, during the term of this Contract, interfere, in a
material manner, with the Adviser's ability to meet all of its obligations
with respect to rendering services to the Portfolio hereunder. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Adviser,
the Adviser shall not be subject to liability to the Portfolio or to any
shareholder of the Portfolio for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
6. (a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph 6, this Contract shall continue in force until July 31,
[1990] 1994 and indefinitely thereafter, but only so long as
the continuance after such date shall be specifically approved at least
annually by vote of the Trustees of the Fund or by vote of a majority of
the outstanding voting securities of the Portfolio.
(b) This Contract may be modified by mutual consent, such consent on the
part of the Fund to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of this
paragraph 6, the terms of any continuance or modification of [the]
this Contract must have been approved by the vote of a majority
of those Trustees of the Fund who are not parties to the Contract or
interested persons of any such party, cast in person at a meeting called
for the purpose of voting on such approval.
(d) Either party hereto may, at any time on sixty (60) days' prior
written notice to the other, terminate this Contract, without payment of
any penalty, by action of its Trustees or Board of Directors, as the case
may be, or with respect to the Portfolio by vote of a majority of the
outstanding voting securities of the Portfolio. This Contract shall
terminate automatically in the event of its assignment.
7. The Adviser is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Fund's Declaration of Trust
or other organizational document and agrees that the obligations
assumed by the Fund pursuant to this Contract shall be limited in all cases
to the Portfolio and its assets, and the Adviser shall not seek
satisfaction of any such obligation from the shareholders or any
shareholder of the Portfolio or any other Portfolios of the Fund. In
addition, the Adviser shall not seek satisfaction of any such obligations
from the Trustees or any individual Trustee. The Adviser understands that
the rights and obligations of any Portfolio under the Declaration of
Trust or other organizational document are separate and
distinct from those of any and all other Portfolios.
8. This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts, without
giving effect to the choice of laws provisions thereof.
IN WITNESS WHEREOF the parties have caused this instrument to be signed in
their behalf by their respective officers thereunto duly authorized, and
their respective seals to be hereunto affixed, all as of the date written
above.
[SIGNATURE LINES OMITTED]
EXHIBIT 2
FORM OF SUB-ADVISORY AGREEMENT
The language to be added to the current contract is underlined; the
language to be deleted is set forth in [brackets].
SUB-ADVISORY AGREEMENT
BETWEEN
[FIDELITY MANAGEMENT & RESEARCH (FAR EAST) INC. AND]
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY (FAR EAST) INC.
AND
FIDELITY MAGELLAN FUND
AGREEMENT made this 1st day of [November 1989] April 1994 by and
between Fidelity Management & Research[Far East Inc.]
Company, a Massachusetts corporation with principal offices at
82 Devonshire Street, Boston, Massachusetts (hereinafter called the
["Sub-Adviser] "Advisor"); [and] Fidelity Management &
Research [Company a Massachusetts corporation with principal offices
at 82 Devonshire Street, Boston, Massachusetts.] (Far East) Inc.
(hereinafter called the ["Advisor"] "Sub-Advisor"); and Fidelity
Magellan Fund, a Massachusetts business trust which may issue one or more
series of shares of beneficial interest (hereinafter called the "Trust or
the Portfolio").
WHEREAS the Trust and the Advisor [has] have entered into a Management
Contract [with Fidelity Magellan fund a Massachusetts business trust which
may issue one or more series of shares of beneficial interest (hereinafter
called the "Fund"),] on behalf of [its single existing series of shares
(hereinafter called "the Portfolio"),] the Portfolio, pursuant to which the
Advisor is to act as investment [Adviser] manager to the Portfolio; and
WHEREAS the Sub-Advisor [has personnel in Asia and the Pacific Basin and
was] and its subsidiaries and other affiliated persons have
personnel in various locations throughout the world and have been
formed in part for the purpose of researching and
compiling information and recommendations with respect to the economies of
various countries,[and issuers located outside of North America,
principally in Asia and the Pacific Basin] including securities
issued in and issuers located in such countries, and providing investment
advisory services in connection therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Advisor and the
Sub-Advisor agree as follows:
1. Duties: The Advisor may, in its discretion, appoint the
Sub-Advisor to perform one or more of the following services with respect
to all or a portion of the investments of the Portfolio. The services and
the portion of the investments of the Portfolio to be advised or managed by
the Sub-Advisor shall be as agreed upon from time to time by the Advisor
and the Sub-Advisor. The Sub-Advisor shall pay the salaries and fees of all
personnel of the Sub-Advisor performing services for the Portfolio relating
to research, statistical and investment activities.
[The Sub Adviser shall act as an investment consultant to the Adviser and]
(a) INVESTMENT ADVICE: If and to the extent requested by the
Advisor, the Sub-Advisor shall provide investment advice to the Portfolio
and the Advisor with respect to all or a portion of the investments of the
Portfolio, and in connection with such advice shall furnish the
Portfolio and the Advisor such factual information, research
reports and investment recommendations [relating to non-U.S. issuers of
securities located in, and the economies of various countries outside the
U.S., all as the Adviser may reasonably require.] as the Advisor may
reasonably require. Such information may include written and oral
reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the
Advisor, the Sub-Advisor shall, subject to the supervision of the Advisor,
manage all or a portion of the investments of the Portfolio in accordance
with the investment objective, policies and limitations provided in the
Portfolio's Prospectus or other governing instruments, as amended from time
to time, the Investment Company Act of 1940 (the "1940 Act") and rules
thereunder, as amended from time to time, and such other limitations as the
Trust or Advisor may impose with respect to the Portfolio by notice to the
Sub-Advisor. With respect to the portion of the investments of the
Portfolio under its management, the Sub-Advisor is authorized to make
investment decisions on behalf of the Portfolio with regard to any stock,
bond, other security or investment instrument, and to place orders for the
purchase and sale of such securities through such broker-dealers as the
Sub-Advisor may select. The Sub-Advisor may also be authorized, but only to
the extent such duties are delegated in writing by the Advisor, to provide
additional investment management services to the Portfolio, including but
not limited to services such as managing foreign currency investments,
purchasing and selling or writing futures and options contracts, borrowing
money, or lending securities on behalf of the Portfolio. All investment
management and any other activities of the Sub-Advisor shall at all times
be subject to the control and direction of the Advisor and the Trust's
Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any
or all of the services contemplated by this Agreement directly or through
such of its subsidiaries or other affiliated persons as the Sub-Advisor
shall determine; provided, however, that performance of such services
through such subsidiaries or other affiliated persons shall have been
approved by the Trust to the extent required pursuant to the 1940 Act and
rules thereunder.
2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees or
the Advisor may reasonably request from time to time, or as the Sub-Advisor
may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor, at its
own expense, shall place all orders for the purchase and sale of portfolio
securities for the Portfolio's account with brokers or dealers selected by
the Sub-Advisor, which may include brokers or dealers affiliated with the
Advisor or Sub-Advisor. The Sub-Advisor shall use its best efforts to seek
to execute portfolio transactions at prices which are advantageous to the
Portfolio and at commission rates which are reasonable in relation to the
benefits received. In selecting brokers or dealers qualified to execute a
particular transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of l934) to the Portfolio and to any
other accounts over which the Sub-Advisor or Advisor exercise investment
discretion. The Sub-Advisor is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Sub-Advisor determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination may
be viewed in terms of either that particular transaction or the overall
responsibilities which the Sub-Advisor has with respect to accounts over
which it exercises investment discretion. The Trustees of the Trust shall
periodically review the commissions paid by the Portfolio to determine if
the commissions paid over representative periods of time were reasonable in
relation to the benefits to the Portfolio.
[2] 4. Compensation: The [Sub-Advisor] Advisor
[will be] shall compensate [compensated by] the
[Advisor] Sub-Advisor on the following basis for the
services to be furnished hereunder. [the advisor agrees to pay the
Sub-Advisor a monthly fee]
(a) INVESTMENT ADVISORY FEE: For services provided under
subparagraph (a) of paragraph 1 of this Agreement, the Advisor agrees to
pay the Sub-Advisor a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall
be equal to 105% of the Sub-Advisor's costs incurred in connection
with [the Agreement, said costs to be determined in relation to the assets
of the Portfolio that benefit from the services of the Sub Adviser.]
rendering the services referred to in subparagraph (a) of paragraph 1
of this Agreement. The Sub-Advisory Fee shall not be reduced to reflect
expense reimbursements or fee waivers by the Advisor, if any, in effect
from time to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Advisor agrees to
pay the Sub-Advisor a monthly Investment Management Fee. The Investment
Management Fee shall be equal to: (i) 50% of the monthly management fee
rate (including performance adjustments, if any) that the Portfolio is
obligated to pay the Advisor under its Management Contract with the
Advisor, multiplied by: (ii) the fraction equal to the net assets of the
Portfolio as to which the Sub-Advisor shall have provided investment
management services divided by the net assets of the Portfolio for that
month. If in any fiscal year the aggregate expenses of the Portfolio exceed
any applicable expense limitation imposed by any state or federal
securities laws or regulations, and the Advisor waives all or a portion of
its management fee or reimburses the Portfolio for expenses to the extent
required to satisfy such limitation, the Investment Management Fee paid to
the Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements and
the Advisor subsequently recovers all or any portion of such waivers and
reimbursements, then the Sub-Advisor shall be entitled to receive from the
Advisor a proportionate share of the amount recovered. To the extent that
waivers and reimbursements by the Advisor required by such limitations are
in excess of the Advisor's management fee, the Investment Management Fee
paid to the Sub-Advisor will be reduced to zero for that month, but in no
event shall the Sub-Advisor be required to reimburse the Advisor for all or
a portion of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall
have provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph 1 for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Advisor with respect to such investments shall be
calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of
its expenses other than those expressly stated to be payable by the
Sub-Advisor hereunder or by the Advisor under the Management Contract with
the Portfolio, which expenses payable by the Portfolio shall include,
without limitation, (i) interest and taxes; (ii) brokerage commissions and
other costs in connection with the purchase or sale of securities and other
investment instruments; (iii) fees and expenses of the Trust's Trustees
other than those who are "interested persons" of the Trust, the Sub-Advisor
or the Advisor; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Trust and the Portfolio's shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders
of the Portfolio; (viii) all other expenses incidental to holding meetings
of the Portfolio's shareholders, including proxy solicitations therefore;
(ix) a pro rata share, based on relative net assets of the Portfolio and
other registered investment companies having Advisory and Service or
Management Contracts with the Advisor, of 50% of insurance premiums for
fidelity and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing Prospectuses and
Statements of Additional Information and supplements thereto; (xii)
expenses of printing and mailing Prospectuses and Statements of Additional
Information and supplements thereto sent to existing shareholders; and
(xiii) such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to indemnify
the Trust's Trustees and officers with respect thereto.
[3] 6. Interested Persons: It is understood that Trustees,
officers, and shareholders of the [Fund] Trust are or may be
or become interested in the Advisor or the Sub-Advisor as directors,
officers or otherwise and that directors, officers and stockholders of the
Advisor [and] or the Sub-Advisor are or may be or become similarly
interested in the [Fund] Trust , and that the Advisor or the
Sub-Advisor may be or become interested in the [Fund] Trust
as a shareholder or otherwise.
[4. The Sub-Advisor shall for all purposes be an independent contractor
and not an agent or employee of the Adviser or the Fund. The Sub Adviser
shall have no authority to act for, represent, bind or obligate the Adviser
or the Fund, and shall in no event have discretion to invest or reinvest
assets held by the Portfolio.]
[5] 7. Services to Other Companies or Accounts: The
services of the Sub-Advisor to the Advisor are not to be deemed to be
exclusive, the Sub-Advisor being free to render services to others and
engage in other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the Sub-Advisor's ability to meet all of its
obligations [with respect to rendering investment advice] hereunder.[In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the
Sub-Adviser, the Sub-Adviser shall not be subject to liability to the
Adviser, the Fund or to any shareholder of the fund for any act or omission
in the course of, or connected with rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any
security.] The Sub-Advisor shall for all purposes be an independent
contractor and not an agent or employee of the Advisor or the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Sub-Advisor, the Sub-Advisor shall not be
subject to liability to the Advisor, the Trust or to any shareholder of the
Portfolio for any act or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security.
[6] 9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of this
paragraph [6] 9, this Agreement shall continue in force until July 31,
[1991] 1994 and indefinitely thereafter, but only so long as
the continuance after such period shall be specifically approved at least
annually by vote of the [Fund] Trust's Board of Trustees or
by vote of a majority of the outstanding voting securities of the
Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor, the
Sub-Advisor and the Portfolio, such consent on the part of the
Portfolio to be authorized by vote of a majority of the
outstanding voting securities of the Portfolio.
(c) In addition to the requirements of subparagraphs (a) and (b) of this
paragraph [6] 9, the terms of any continuance or modification of [the]
this Agreement must have been approved by the vote of a majority
of those Trustees of the [Fund] Trust who are not parties to
[such] this Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval.
(d) Either the Advisor, the Sub-Advisor or the Portfolio may, at any time
on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Trustees or Directors, or with respect to the Portfolio by
vote of a majority of its outstanding voting securities. This Agreement
shall terminate automatically in the event of its assignment.
[7.] 10. Limitation of Liability: The Sub-Advisor is hereby
expressly put on notice of the limitation of shareholder liability as set
forth in the Declaration of Trust or other organizational
document of the [Fund] Trust and agrees that any
obligations of the [Fund] Trust or the Portfolio arising in connection with
this Agreement shall be limited in all cases to the Portfolio and its
assets, and the Sub-Advisor shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Portfolio. Nor
shall the Sub-Advisor seek satisfaction of any such obligation from the
Trustees or any individual Trustee.
11. Governing Law: This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of
Massachusetts, without giving effect to the choice of laws provisions
thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the 1940
Act as now in effect or as hereafter amended.
IN WITNESS WHEREOF the parties hereto have caused this instrument to be
signed in their behalf by their respective officers thereunto duly
authorized, and their respective seals to be hereunto affixed, all as of
the date written above.
[Signature Lines Omitted]
EXHIBIT 3
FORM OF SUB-ADVISORY AGREEMENT
The language to be added to the current contract is underlined; the
language to be deleted is set forth in [brackets].
FORM OF
SUB-ADVISORY AGREEMENT
BETWEEN
FIDELITY MANAGEMENT & RESEARCH COMPANY
AND
FIDELITY MANAGEMENT & RESEARCH COMPANY (U.K.) INC.
AND
FIDELITY MAGELLAN FUND
AGREEMENT made this 1st day of [November 1989] April 1993 by [and
between] Fidelity Management & Research[(U.K.) Inc.] Company,
a Massachusetts corporation with principal offices at 82 Devonshire
Street, Boston, Massachusetts (hereinafter called the ["Sub-Adviser]
"Advisor" ); Fidelity Management & Research Company[ a
Massachusetts corporation with principal offices at 82 Devonshire Street,
Boston, Massachusetts.] (U.K.) Inc. (hereinafter called the ["Advisor"]
"Sub-Advisor" ); and Fidelity Magellan Fund, a Massachusetts
business trust which may issue one or more series of shares of beneficial
interest (hereinafter called the "Trust or the Portfolio").
WHEREAS the Trust and the Advisor [has] have entered into a Management
Contract [with Fidelity Magellan Fund, a Massachusetts business trust which
may issue one or more series of shares of beneficial interest (hereinafter
called the "Fund") on behalf of its single existing series of shares
(hereinafter called the "Portfolio")] the Portfolio pursuant to which the
Advisor is to act as investment [Advisor] manager of the Portfolio, and
WHEREAS the Sub-Advisor [has personnel in Western Europe and was]
and its subsidiaries and other affiliated persons have personnel in
various locations throughout the world and have been formed
in part for the purpose of researching and compiling information
and recommendations with respect to the economies of various countries [and
issuers located outside of North America, principally in Western
Europe.], including securities issued in and issuers located in such
countries, and providing investment advisory services in connection
therewith;
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, the Trust, the Advisor and the
Sub-Advisor agree as follows:
1. Duties: The Advisor may, in its discretion, appoint the
Sub-Advisor to perform one or more of the following services with respect
to all or a portion of the investments of the Portfolio. The services and
the portion of the investments of the Portfolio to be advised or managed by
the Sub-Advisor shall be as agreed upon from time to time by the Advisor
and the Sub-Advisor. The Sub-Advisor shall pay the salaries and fees of all
personnel of the Sub-Advisor performing services for the Portfolio relating
to research, statistical and investment activities.
(a) INVESTMENT ADVICE: If and to the extent requested by the
Advisor, the Sub-Advisor shall provide investment advice to the Portfolio
and the Advisor with respect to all or a portion of the investments of the
Portfolio, and in connection with such advice shall furnish the Portfolio
and [The Sub-adviser shall act as an investment consultant to] the
Advisor such factual information, research reports and investment
recommendations [relating to non-U.S. issuers of securities located in, and
the economics of, various countries outside the U.S.] all as the Advisor
may reasonably require. Such information [shall] may include
written and oral reports and analyses.
(b) INVESTMENT MANAGEMENT: If and to the extent requested by the
Advisor, the Sub-Advisor shall, subject to the supervision of the Advisor,
manage all or a portion of the investments of the Portfolio in accordance
with the investment objective, policies and limitations provided in the
Portfolio's Prospectus or other governing instruments, as amended from time
to time, the Investment Company Act of 1940 (the "1940 Act") and rules
thereunder, as amended from time to time, and such other limitations as the
Trust or Advisor may impose with respect to the Portfolio by notice to the
Sub-Advisor. With respect to the portion of the investments of the
Portfolio under its management, the Sub-Advisor is authorized to make
investment decisions on behalf of the Portfolio with regard to any stock,
bond, other security or investment instrument, and to place orders for the
purchase and sale of such securities through such broker-dealers as the
Sub-Advisor may select. The Sub-Advisor may also be authorized, but only to
the extent such duties are delegated in writing by the Advisor, to provide
additional investment management services to the Portfolio, including but
not limited to services such as managing foreign currency investments,
purchasing and selling or writing futures and options contracts, borrowing
money or lending securities on behalf of the Portfolio. All investment
management and any other activities of the Sub-Advisor shall at all times
be subject to the control and direction of the Advisor and the Trust's
Board of Trustees.
(c) SUBSIDIARIES AND AFFILIATES: The Sub-Advisor may perform any
or all of the services contemplated by this Agreement directly or through
such of its subsidiaries or other affiliated persons as the Sub-Advisor
shall determine; provided, however, that performance of such services
through such subsidiaries or other affiliated persons shall have been
approved by the Trust to the extent required pursuant to the 1940 Act and
rules thereunder.
2. Information to be Provided to the Trust and the Advisor: The
Sub-Advisor shall furnish such reports, evaluations, information or
analyses to the Trust and the Advisor as the Trust's Board of Trustees or
the Advisor may reasonably request from time to time, or as the Sub-Advisor
may deem to be desirable.
3. Brokerage: In connection with the services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Sub-Advisor, at its
own expense, shall place all orders for the purchase and sale of portfolio
securities for the Portfolio's account with brokers or dealers selected by
the Sub-Advisor, which may include brokers or dealers affiliated with the
Advisor or Sub-Advisor. The Sub-Advisor shall use its best efforts to seek
to execute portfolio transactions at prices which are advantageous to the
Portfolio and at commission rates which are reasonable in relation to the
benefits received. In selecting brokers or dealers qualified to execute a
particular transaction, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of l934) to the Portfolio and to any
other accounts over which the Sub-Advisor or Advisor exercise investment
discretion. The Sub-Advisor is authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Sub-Advisor determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer. This determination may
be viewed in terms of either that particular transaction or the overall
responsibilities which the Sub-Advisor has with respect to accounts over
which it exercises investment discretion. The Trustees of the Trust shall
periodically review the commissions paid by the Portfolio to determine if
the commissions paid over representative periods of time were reasonable in
relation to the benefits to the Portfolio.
[2] 4. Compensation: The [Sub-Advisor] Advisor
[will be] shall compensate [compensated by] the [Advisor] Sub-Advisor
on the following basis for the services to be furnished hereunder[:]. [the
advisor agrees to pay the Sub-Adviser a monthly fee]
(a) INVESTMENT ADVISORY FEE: For services provided under
subparagraph (a) of paragraph 1 of this Agreement, the Advisor agrees to
pay the Sub-Advisor a monthly Sub-Advisory Fee. The Sub-Advisory Fee shall
be equal to 110% of the Sub-Advisor's costs incurred in connection
with [the Agreement, said costs to be determined in relation to the assets
of the Portfolio that benefit from the services of the Sub-Adviser]
rendering the services referred to in subparagraph (a) of paragraph 1
of this Agreement. The Sub-Advisory Fee shall not be reduced to reflect
expense reimbursements or fee waivers by the Advisor, if any, in effect
from time to time.
(b) INVESTMENT MANAGEMENT FEE: For services provided under
subparagraph (b) of paragraph 1 of this Agreement, the Advisor agrees to
pay the Sub-Advisor a monthly Investment Management Fee. The Investment
Management Fee shall be equal to: (i) 50% of the monthly management fee
rate (including performance adjustments, if any) that the Portfolio is
obligated to pay the Advisor under its Management Contract with the
Advisor, multiplied by: (ii) the fraction equal to the net assets of the
Portfolio as to which the Sub-Advisor shall have provided investment
management services divided by the net assets of the Portfolio for that
month. If in any fiscal year the aggregate expenses of the Portfolio exceed
any applicable expense limitation imposed by any state or federal
securities laws or regulations, and the Advisor waives all or a portion of
its management fee or reimburses the Portfolio for expenses to the extent
required to satisfy such limitation, the Investment Management Fee paid to
the Sub-Advisor will be reduced by 50% of the amount of such waivers or
reimbursements multiplied by the fraction determined in (ii). If the
Sub-Advisor reduces its fees to reflect such waivers or reimbursements and
the Advisor subsequently recovers all or any portion of such waivers or
reimbursements, then the Sub-Advisor shall be entitled to receive from the
Advisor a proportionate share of the amount recovered. To the extent that
waivers and reimbursements by the Advisor required by such limitations are
in excess of the Advisor's management fee, the Investment Management Fee
paid to the Sub-Advisor will be reduced to zero for that month, but in no
event shall the Sub-Advisor be required to reimburse the Advisor for all or
a portion of such excess reimbursements.
(c) PROVISION OF MULTIPLE SERVICES: If the Sub-Advisor shall
have provided both investment advisory services under subparagraph (a) and
investment management services under subparagraph (b) of paragraph (1) for
the same portion of the investments of the Portfolio for the same period,
the fees paid to the Sub-Advisor with respect to such investments shall be
calculated exclusively under subparagraph (b) of this paragraph 4.
5. Expenses: It is understood that the Portfolio will pay all of
its expenses other than those expressly stated to be payable by the
Sub-Advisor hereunder or by the Advisor under the Management Contract with
the Portfolio, which expenses payable by the Portfolio shall include,
without limitation, (i) interest and taxes; (ii) brokerage commissions and
other costs in connection with the purchase or sale of securities and other
investment instruments; (iii) fees and expenses of the Trust's Trustees
other than those who are "interested persons" of the Trust, the Sub-Advisor
or the Advisor; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Trust and the Portfolio's shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders
of the Portfolio; (viii) all other expenses incidental to holding meetings
of the Portfolio's shareholders, including proxy solicitations therefore;
(ix) a pro rata share, based on relative net assets of the Portfolio and
other registered investment companies having Advisory and Service or
Management Contracts with the Advisor, of 50% of insurance premiums for
fidelity and other coverage; (x) its proportionate share of association
membership dues; (xi) expenses of typesetting for printing Prospectuses and
Statements of Additional Information and supplements thereto; (xii)
expenses of printing and mailing Prospectuses and Statements of Additional
Information and supplements thereto sent to existing shareholders; and
(xiii) such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Portfolio is a
party and the legal obligation which the Portfolio may have to indemnify
the Trust's Trustees and officers with respect thereto.
[3.] 6. Interested Persons: It is understood that Trustees,
officers, and shareholders of the [Fund] Trust are or may be
or become interested in the Advisor [and] or the Sub-Advisor as directors,
officers or otherwise and that directors, officers and stockholders of the
Advisor [and] or the Sub-Advisor are or may be or become similarly
interested in the [Fund] Trust , and that the Advisor or the
Sub-Advisor may be or become interested in the [Fund] Trust as a
shareholder or otherwise.
[4. The Sub-Adviser for all purposes be an independent contractor and not
an agent or employee of the Adviser or the Fund. The Sub-Adviser shall have
no authority to act for, represent, bind or obligate the Adviser or the
Fund, and shall in no event have discretion to invest or reinvest assets
held by the Portfolio.]
[5.] 7. Services to Other Companies or Accounts: The
services of the Sub-Advisor to the Advisor are not to be deemed to be
exclusive, the Sub-Advisor being free to render services to others and
engage in other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a
material manner, with the Sub-Advisor's ability to meet all of its
obligations [with respect to rendering investment advice] hereunder. [In
the absence of willful misfeance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the
Sub-Adviser, the Sub-Adviser shall not be subject to liability to the
Adviser , the Fund or to any losses that may be sustained in the purchase,
holding or sale of any security.] The Sub-Advisor shall for all
purposes be an independent contractor and not an agent or employee of the
Advisor or the Trust.
8. Standard of Care: In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Sub-Advisor, the Sub-Advisor shall not be
subject to liability to the Advisor, the Trust or to any shareholder of the
Portfolio for any act or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be sustained in the
purchase, holding or sale of any security.
[6.] 9. Duration and Termination of Agreement; Amendments:
(a) Subject to prior termination as provided in subparagraph (d) of this
paragraph [6] 9, this Agreement shall continue in force until July 31,
[199 1 ] 1994 and indefinitely thereafter, but only
so long as the continuance after such period shall be specifically approved
at least annually by vote of the [Fund's] Trust's Board of
Trustees or by vote of a majority of the outstanding voting securities of
the Portfolio.
(b) This Agreement may be modified by mutual consent of the Advisor, the
Sub-Advisor and the Portfolio, such consent on the part of the
Portfolio to be authorized by vote of a majority of the outstanding
voting securities of the Portfolio.
(c) In addition to the requirements of subparagraphs (a) and (b) of this
paragraph [6] 9 , the terms of any continuance or
modification of [the] this Agreement must have been approved by the vote of
a majority of those Trustees of the [Fund] Trust who are not
parties to [such] this Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such
approval.
(d) Either the Advisor, the Sub-Advisor or the Portfolio may, at any time
on sixty (60) days' prior written notice to the other parties, terminate
this Agreement, without payment of any penalty, by action of its Board of
Trustees or Directors, or with respect to the Portfolio by
vote of a majority of its outstanding voting securities. This Agreement
shall terminate automatically in the event of its assignment.
[7.] 10. Limitation of Liability: The Sub-Advisor is hereby
expressly put on notice of the limitation of shareholder liability as set
forth in the Declaration of Trust [of the Fund] or other
organizational document of the Trust and agrees that any obligations
of the [Fund] Trust or the Portfolio arising in connection with this
Agreement shall be limited in all cases to the Portfolio and its assets,
and the Sub-Advisor shall not seek satisfaction of any such obligation from
the shareholders or any shareholder of the Portfolio. Nor shall the
Sub-Advisor seek satisfaction of any such obligation from the Trustees or
any individual Trustee.
11. Governing Law: This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of
Massachusetts, without giving effect to the choice of laws provisions
thereof.
The terms "registered investment company," "vote of a majority of the
outstanding voting securities," "assignment," and "interested persons,"
when used herein, shall have the respective meanings specified in the 1940
Act as now in effect or as hereafter amended.
[SIGNATURE LINES OMITTED]
EXHIBIT 4
FUNDS ADVISED BY FMR - TABLE OF AVERAGE NET ASSETS AND EXPENSE RATIOS (A)
RATIO OF RATIO OF NET
ADVISORY FEES ADVISORY FEES
TO AVERAGE TO AVERAGE RATIO OF
AVERAGE NET ASSETS NET ASSETS EXPENSES TO
INVESTMENT FISCAL NET ASSETS PURSUANT TO PAID AVERAGE NET
OBJECTIVE AND FUND YEAR END (A) (MILLIONS) ADVISORY CONTRACT TO FMR
(B) ASSETS (B)
GROWTH AND INCOME
Advisor Equity
Portfolio Income (3) 11/30/92**$ 0.5 0.50%(dagger) 0.50%(dagger)
1.55%(dagger)
Advisor Institutional
Equity Portfolio
Income(3) 11/30/92 147.1 0.50 0.42 0.71
Convertible Securities (3) 11/30/92 254.1 0.54 0.54 0.96
Equity Income II (3) 11/30/92 1,045.7 0.53 0.53 1.01
Variable Insurance
Products:
Equity-Income 12/31/92 408.0 0.53 0.53 0.65
Equity-Income (3) 1/31/93 4,656.2 0.37 0.37 0.67
Real Estate (3) 1/31/93 98.3 0.64 0.64 1.16
Utilities Income (3) 1/31/93 787.5 0.53 0.53 0.87
U.S. Equity Index 2/28/93# 1,482.3 0.28(dagger) -- 0.28(dagger)
Market Index 4/30/93 265.2 0.45 0.44 0.44
Fidelity Fund (3) 6/30/93# 1,398.0 0.42(dagger) 0.42(dagger) 0.66(dagger)
Balanced (3) 7/31/93 2,154.5 0.53 0.53 0.93
Dividend Growth (3) 7/31/93** 9.2 0.62(dagger) -- 2.50(dagger)
Global Balanced (1) 7/31/93** 35.7 0.77(dagger) 0.77(dagger) 2.12(dagger)
Growth & Income 7/31/93 5,195.4 0.53 0.53 0.83
Puritan (3) 7/31/93 6,319.2 0.47 0.47 0.74
Advisor Income &
Growth 10/31/93 870.1 0.53 0.53 1.51
International Growth
& Income (2) 10/31/93 301.5 0.77 0.77 1.52
ASSET ALLOCATION
Variable Insurance
Products II:
Asset Manager (3) 12/31/92 418.2 0.73 0.73 0.91
Index 500 12/31/92** 12.3 0.28(dagger) -- 0.28(dagger)
Asset Manager 9/30/93 4,704.2 0.72 0.72 1.09
Asset Manager: Growth(3) 9/30/93 566.0 0.73 0.63 1.19
Asset Manager: Income(3) 9/30/93 79.1 0.44 -- 0.65
GROWTH
RATIO OF RATIO OF NET
ADVISORY FEES ADVISORY FEES
TO AVERAGE TO AVERAGE RATIO OF
AVERAGE NET ASSETS NET ASSETS EXPENSES TO
INVESTMENT FISCAL NET ASSETS PURSUANT TO PAID AVERAGE NET
OBJECTIVE AND FUND YEAR END (A) (MILLIONS) ADVISORY CONTRACT TO FMR
(B)
ASSETS (B)
Advisor Equity
Portfolio Growth(3) 11/30/92** 8.5 0.74(dagger) 0.74(dagger)
1.64(dagger)
Advisor Institutional
Equity Portfolio
Growth(3) 11/30/92 $ 129.3 0.67% 0.67% 0.98%
Emerging Growth (3) 11/30/92 595.4 0.70 0.70 1.09
Growth Company (3) 11/30/92 1,436.5 0.74 0.74 1.09
Retirement Growth (3) 11/30/92 1,918.0 0.71 0.71 1.02
Congress Street 12/31/92 64.4 0.45 0.45 0.62
Contrafund (3) 12/31/92 1,339.1 0.51 0.51 0.87
Exchange 12/31/92 185.7 0.54 0.54 0.58
Trend (3) 12/31/92 920.0 0.32 0.32 0.56
Variable Insurance
Products:
Growth 12/31/92 520.9 0.63 0.63 0.75
Overseas (2) 12/31/92 157.0 0.78 0.78 1.14
Select Portfolios:
Air Transportation (3) 2/28/93# 11.3 0.64(dagger) 0.48(dagger)
2.48(dagger)
American Gold 2/28/93# 160.2 0.64(dagger) 0.64(dagger) 1.59(dagger)
Automotive (3) 2/28/93# 106.1 0.64(dagger) 0.64(dagger) 1.57(dagger)
Biotechnology (3) 2/28/93# 752.3 0.64(dagger) 0.64(dagger) 1.50(dagger)
Broadcast and Media (3) 2/28/93# 13.9 0.64(dagger) 0.59(dagger)
2.49(dagger)
Brokerage and Investment
Management (3) 2/28/93# 18.0 0.64(dagger) 0.64(dagger) 2.21(dagger)
Chemicals (3) 2/28/93# 35.1 0.64(dagger) 0.64(dagger) 1.89(dagger)
Computers (3) 2/28/93# 38.3 0.64(dagger) 0.64(dagger) 1.81(dagger)
Construction and
Housing (3) 2/28/93# 22.1 0.64(dagger) 0.64(dagger) 2.02(dagger)
Consumer Products (3) 2/28/93# 7.5 0.64(dagger) -- 2.47(dagger)
Defense and
Aerospace (3) 2/28/93# 1.3 0.64(dagger) -- 2.48(dagger)
Developing
Communications (3) 2/28/93# 51.3 0.64(dagger) 0.64(dagger) 1.88(dagger)
Electric Utilities (3) 2/28/93# 30.6 0.64(dagger) 0.64(dagger)
1.70(dagger)
Electronics (3) 2/28/93# 47.1 0.64(dagger) 0.64(dagger) 1.69(dagger)
Energy (3) 2/28/93# 78.7 0.64(dagger) 0.64(dagger) 1.71(dagger)
Energy Service (3) 2/28/93# 52.3 0.64(dagger) 0.64(dagger) 1.76(dagger)
Environmental
Services (3) 2/28/93# 62.5 0.64(dagger) 0.64(dagger) 1.99(dagger)
Financial Services (3) 2/28/93# 119.9 0.64(dagger) 0.64(dagger)
1.54(dagger)
Food and Agriculture (3) 2/28/93# 109.1 0.64(dagger) 0.64(dagger)
1.67(dagger)
Health Care (3) 2/28/93# 782.6 0.64(dagger) 0.64(dagger) 1.46(dagger)
Home Finance (3) 2/28/93# 138.3 0.64(dagger) 0.64(dagger) 1.55(dagger)
Industrial Equipment (3) 2/28/93# 6.1 0.64(dagger) -- 2.49(dagger)
Industrial Materials (3) 2/28/93# $ 25.0 0.64%(dagger) 0.64%(dagger)
2.02%(dagger)
Insurance (3) 2/28/93# 12.3 0.64(dagger) 0.61(dagger) 2.49(dagger)
Leisure (3) 2/28/93# 39.5 0.64(dagger) 0.64(dagger) 1.90(dagger)
Medical Delivery (3) 2/28/93# 126.4 0.64(dagger) 0.64(dagger)
1.77(dagger)
Natural Gas (3) 2/28/94** 9.1 0.64(dagger) -- 2.42(dagger)
Paper and Forest
Products (3) 2/28/93# 17.5 0.64(dagger) 0.64(dagger) 2.21(dagger)
Precious Metals and
Minerals (3) 2/28/93# 127.8 0.64(dagger) 0.64(dagger) 1.73(dagger)
Regional Banks (3) 2/28/93# 193.5 0.64(dagger) 0.64(dagger) 1.49(dagger)
Retailing (3) 2/28/93# 63.1 0.64(dagger) 0.64(dagger) 1.77(dagger)
Software and Computer
Services (3) 2/28/93# 113.6 0.64(dagger) 0.64(dagger) 1.64(dagger)
Technology (3) 2/28/93# 115.2 0.64(dagger) 0.64(dagger) 1.64(dagger)
Telecommunications (3) 2/28/93# 95.0 0.64(dagger) 0.64(dagger)
1.74(dagger)
Transportation (3) 2/28/93# 4.4 0.64(dagger) -- 2.48(dagger)
Utilities (3) 2/28/93# 243.9 0.64(dagger) 0.64(dagger) 1.42(dagger)
Magellan (3) 3/31/93 21,506.4 0.75 0.75 1.00
Small Cap Stock 4/30/94** 461.9 0.67(dagger) 0.65(dagger) 1.40
Fidelity Fifty (3) 6/30/94** 18,106.2 0.69(dagger) 0.00(dagger)
2.49(dagger)
Blue Chip Growth 7/31/93 589.5 0.72 0.72 1.25
Low-Priced Stock (3) 7/31/93 2,048.8 0.76 0.76 1.12
OTC Portfolio 7/31/93 1,202.7 0.74 0.74 1.08
Advisor Strategic
Opportunities (3) 9/30/93 219.2 0.54 0.54 1.57
Destiny I 9/30/93# 2,920.5 0.60(dagger) 0.60(dagger) 0.65(dagger)
Destiny II 9/30/93# 1,100.8 0.71(dagger) 0.71(dagger) 0.84(dagger)
Strategic
Opportunities (3) 9/30/93 19.2 0.54 0.54 0.89
Advisor Global
Resources (3) 10/31/93 14.4 0.77 0.77 2.62
Advisor Growth
Opportunities 10/31/93 1,204.5 0.68 0.68 1.64
Advisor Overseas (2) 10/31/93 65.5 0.77 0.77 2.3
Canada (1) 10/31/93 61.1 0.86 0.86 2.00
Capital Appreciation (3) 10/31/93 1,139.1 0.48 0.48 0.86
Disciplined Equity (3) 10/31/93 622.1 0.70 0.70 1.09
Diversified
International (2) 10/31/93 119.1 0.73 0.73 1.47
Emerging Markets (2) 10/31/93 144.4 0.77 0.77 1.91
Europe (1) 10/31/93 488.3 0.64 0.64 1.25
Japan (1) 10/31/93 98.4 0.77 0.77 1.71
Latin America (2) 10/31/93** $ 114.6 0.77%(dagger) 0.77%(dagger)
1.94%(dagger)
Overseas (2) 10/31/93 1,025.1 0.77 0.77 1.27
Pacific Basin (1) 10/31/93 251.2 0.80 0.80 1.59
Southeast Asia (1) 10/31/93** 139.3 0.77(dagger) 0.71(dagger) 2.00(dagger)
Stock Selector (3) 10/31/93 459.7 0.71 0.69 1.10
Value (3) 10/31/93 1,100.8 0.72 0.71 1.11
Worldwide (2) 10/31/93 148.9 0.78 0.78 1.40
New Millennium 11/30/93** 181.1 0.68(dagger) 0.68(dagger) 1.25(dagger)
CURRENCY PORTFOLIOS
Deutsche Mark
Peformance, L.P. 12/31/92 18.6 0.50 0.50 1.29
Sterling
Performance, L.P. 12/31/92 7.3 0.50 -- 1.50
Yen Performance, L.P. 12/31/92 3.9 0.50 -- 1.50
INCOME
Advisor Institutional
Limited Term Bond 11/30/92 227.6 0.42 0.42 0.57
Advisor Limited
Term Bond 11/30/92** 1.0 0.42(dagger) 0.42(dagger) 0.82(dagger)
Institutional Short-
Intermediate
Government 11/30/92 189.3 0.45 0.45 0.45
Global Bond (2) 12/31/92# 300.5 0.72(dagger) 0.72(dagger) 1.37(dagger)
New Markets Income (2) 12/31/93** 54.1 0.71(dagger) 0.24(dagger)
1.25(dagger)
Short-Term World
Income (2) 12/31/92# 563.2 0.62(dagger) 0.59(dagger) 1.20(dagger)
Spartan Bond Strategist 12/31/93** 11.0 .70(dagger) .70(dagger)
.70(dagger)
Variable Insurance
Products:
High Income 12/31/92 150.7 0.52 0.52 0.67
Variable Insurance
Products II:
Investment Grade
Bond 12/31/92 57.8 0.47 0.47 0.76
Spartan Long-Term
Government Bond 1/31/93 78.3 0.65 0.65 0.65
U.S. Bond Index 2/28/93# 104.8 0.32(dagger) -- 0.32(dagger)
Capital & Income (3) 4/30/93 1,771.1 0.54 0.54 0.91
Intermediate Bond (3) 4/30/93 1,434.0 0.32 0.27 0.61
Investment Grade Bond (3) 4/30/93 1,049.6 0.37 0.37 0.68
Short-Term Bond (3) 4/30/93 1,634.8 0.47 0.47 0.77
Spartan Government
Income 4/30/93 $ 491.8 0.65% 0.65% 0.65%
Spartan High Income 4/30/93 470.8 0.70 0.70 0.70
Spartan Short-Intermediate
Government 4/30/93 23.5 0.65 0.02 0.02
The North Carolina Capital
Management Trust:
Term Portfolio 6/30/93 83.4 0.41 0.41 0.41
Ginnie Mae 7/31/93 953.2 0.47 0.47 0.80
Mortgage Securities 7/31/93 428.9 0.47 0.47 0.76
Spartan Limited Maturity
Government 7/31/93 1,653.7 0.65 0.65 0.65
Spartan Ginnie Mae 8/31/93 766.9 0.65 0.41 0.41
Government Securities 9/30/93** 616.6 0.47(dagger) 0.47(dagger)
0.69(dagger)
Short-Intermediate
Government 9/30/93 167.6 0.47 0.18 0.61
Spartan Investment
Grade Bond 9/30/93 59.1 0.65 0.65 0.65
Spartan Short-Term Bond 9/30/93 547.0 0.65 0.20 0.20
Advisor Government
Investment 10/31/93 40.8 0.46 -- 0.68
Advisor High Yield 10/31/93 299.1 0.51 0.51 1.11
Advisor Short Fixed
Income 10/31/93 359.6 0.47 0.47 0.95
MONEY MARKET
Cash Reserves (4) 11/30/92 10,249.7 0.17 0.17 0.48
State and Local Asset
Management Series:
Government Money
Market (4) 11/30/92 1,046.4 0.43 0.43 0.43
Variable Insurance
Products:
Money Market (4) 12/31/92 295.1 0.17 0.17 0.24
Select-Money Market (4) 2/28/93# 492.5 0.14(dagger) 0.14(dagger)
0.56(dagger)
Institutional Cash:
Domestic Money
Market (4) 3/31/93 768.4 0.20 0.12 0.18
Money Market (4) 3/31/93 5,033.1 0.20 0.15 0.18
U.S. Government (4) 3/31/93 6,305.4 0.20 0.14 0.18
U.S. Treasury (4) 3/31/93 2,683.0 0.20 0.15 0.18
U.S. Treasury II (4) 3/31/93 7,014.6 0.20 0.15 0.18
Spartan Money Market (4) 4/30/93 4,841.1 0.30 0.30 0.30
Spartan U.S. Government
Money Market (4) 4/30/93 $ 1,204.8 0.55% 0.45% 0.45%
The North Carolina
Capital Management Trust:
Cash Portfolio (4) 6/30/93 1,538.3 0.38 0.38 0.39
Daily Money Fund:
Capital Reserves:
Money Market (4) 7/31/93 443.3 0.50 0.31 0.95
U.S. Government
Money Market (4) 7/31/93 269.5 0.50 0.38 0.95
Money Market (4) 7/31/93 1,554.7 0.50 0.50 0.61
U.S. Treasury (4) 7/31/93 2,841.7 0.50 0.50 0.57
U.S. Treasury
Income (4) 7/31/93 1,166.9 0.42 0.20 0.20
Spartan U.S. Treasury
Money Market (4) 7/31/93 2,138.9 0.55 0.42 0.42
Daily Income Trust (4) 8/31/93 2,302.8 0.30 0.30 0.57
Money Market Trust:
Domestic Money
Market (4) 8/31/93 690.3 0.42 0.42 0.42
Retirement Government
Money Market (4) 8/31/93 1,338.8 0.42 0.42 0.42
Retirement Money
Market (4) 8/31/93 1,661.1 0.42 0.42 0.42
U.S. Government (4) 8/31/93 297.5 0.42 0.42 0.42
U.S. Treasury (4) 8/31/93 181.5 0.42 0.42 0.42
U.S. Government
Reserves (4) 9/30/93 1,139.5 0.43 0.43 0.73
TAX-EXEMPT INCOME
Advisor Institutional
Limited Term
Tax-Exempt 11/30/92 63.5 0.42 0.41 0.66
Advisor Limited
Term Tax-Exempt 11/30/92** 1.1 0.42(dagger) 0.40(dagger) 1.04(dagger)
Connecticut Municipal
Money Market (4) 11/30/92 379.8 0.42 0.26 0.43
High Yield Tax-Free 11/30/92 2,036.2 0.42 0.42 0.57
New Jersey Tax-Free
Money Market (4) 11/30/92 360.5 0.42 0.42 0.64
Spartan Connecticut
Municipal:
High Yield 11/30/92 389.8 0.55 0.55 0.55
Money Market (4) 11/30/92 48.7 0.50 0.02 0.02
Spartan Florida Municipal:
Income 11/30/92** $ 118.4 0.55%(dagger) 0.03%(dagger) 0.03%(dagger)
Money Market (4) 11/30/92** 15.8 0.50(dagger) -- --
Spartan New Jersey
Municipal High Yield 11/30/92 324.6 0.55 0.49 0.51
Aggressive Tax-Free 12/31/92 711.1 0.47 0.47 0.64
Insured Tax-Free 12/31/92 335.7 0.42 0.40 0.63
Limited Term
Municipals 12/31/92 827.3 0.47 0.47 0.64
Michigan Tax-Free:
High Yield 12/31/92 419.6 0.42 0.42 0.61
Money Market (4) 12/31/92 170.1 0.42 0.30 0.49
Minnesota Tax-Free 12/31/92 255.1 0.42 0.42 0.67
Municipal Bond 12/31/92 1,178.4 0.37 0.37 0.49
Ohio Tax-Free:
High Yield 12/31/92 359.3 0.42 0.42 0.61
Money Market (4) 12/31/92 257.0 0.42 0.41 0.58
Spartan Pennsylvania
Municipal:
High Yield 12/31/92 218.9 0.55 0.55 0.55
Money Market (4) 12/31/92 249.3 0.50 0.47 0.47
Massachusetts Tax-Free:
High Yield 1/31/93# 1,215.5 0.42(dagger) 0.42(dagger) 0.55(dagger)
Money Market (4) 1/31/93# 592.0 0.42(dagger) 0.42(dagger) 0.64(dagger)
New York Tax-Free:
High Yield 1/31/93# 429.2 0.42(dagger) 0.42(dagger) 0.61(dagger)
Insured 1/31/93# 338.7 0.42(dagger) 0.42(dagger) 0.61(dagger)
Money Market (4) 1/31/93# 536.3 0.42(dagger) 0.42(dagger) 0.62(dagger)
Spartan Massachusetts
Municipal Money
Market (4) 1/31/93# 316.1 0.50(dagger) 0.17(dagger) 0.17(dagger)
Spartan New York
Municipal:
High Yield 1/31/93# 332.3 0.55(dagger) 0.48(dagger) 0.48(dagger)
Money Market (4) 1/31/93# 454.3 0.50(dagger) 0.50(dagger) 0.50(dagger)
California Tax-Free:
High Yield 2/28/93# 543.5 0.42(dagger) 0.42(dagger) 0.60(dagger)
Insured 2/28/93# 213.4 0.42(dagger) 0.42(dagger) 0.63(dagger)
Money Market (4) 2/28/93# 548.7 0.42(dagger) 0.42(dagger) 0.62(dagger)
Spartan California
Municipal:
High Yield 2/28/93# $ 514.4 0.55%(dagger) 0.40%(dagger) 0.40%(dagger)
Money Market (4) 2/28/93# 894.4 0.50(dagger) 0.30(dagger) 0.30(dagger)
Institutional Tax-
Exempt Cash (4) 5/31/93 2,517.7 0.20 0.14 0.18
Daily Money Fund:
Capital Reserves:
Municipal Money
Market (4) 7/31/93 91.7 0.50 0.22 0.95
Spartan Aggressive
Municipal 8/31/93** 6.4 0.60(dagger) 0.60(dagger) 0.60(dagger)
Spartan Intermediate
Municipal 8/31/93** 82.6 0.55(dagger) - -
Spartan Maryland Municipal
Income 8/31/93** 13.4 0.55(dagger) -- --
Spartan Municipal
Income 8/31/93 869.8 0.55 0.47 0.47
Spartan Municipal
Money Market (4) 8/31/93 1,561.2 0.50 0.27 0.27
Spartan Short-
Intermediate
Municipal 8/31/93# 819.9 0.55(dagger) 0.55(dagger) 0.55(dagger)
Advisor High Income
Municipal 10/31/93 316.4 0.42 0.42 0.92
Daily Tax-Exempt
Money (4) 10/31/93 504.9 0.50 0.50 0.61
Spartan New Jersey
Municipal Money
Market (4) 10/31/93 329.1 0.50 0.44 0.44
Tax-Exempt Money
Market Trust (4) 10/31/93 2,789.6 0.27 0.27 0.49
(a) All fund data are as of the fiscal year end noted in the chart or as of
October 31, 1993, if fiscal year end figures are not yet available. Average
net assets are computed on the basis of average net assets of each fund at
the close of business on each business day throughout its fiscal period.
(b) Reflects reductions for any expense reimbursement paid by or due from
FMR pursuant to voluntary or state expense limitations.
(dagger) Annualized
# Year end changed
** Less than a complete fiscal year
(1) Fidelity Management & Research Company has entered into
sub-advisory agreements with the following affiliates: Fidelity Management
& Research (U.K.) Inc. (FMR U.K.), Fidelity Management & Research
(Far East) Inc. (FMR Far East), Fidelity Investments Japan Ltd. (FIJ),
Fidelity International Investment Advisors (FIIA), and Fidelity
International Investment Advisors (U.K.) Limited (FIIAL U.K.), with respect
to the fund.
(2) Fidelity Management & Research Company has entered into
sub-advisory agreements with the following affiliates: FMR U.K., FMR Far
East, FIJ (New Markets Income only), FIIA, and FIIAL U.K., with respect to
the fund.
(3) Fidelity Management & Research Company has entered into
sub-advisory agreements with FMR U.K. and FMR Far East, with respect to the
fund.
(4) Fidelity Management & Research Company has entered into a
sub-advisory agreement with FMR Texas Inc., with respect to the fund.
MAG-PXS-194 CUSIP #316184100/FUND#021
Vote this proxy card TODAY! Your prompt response will
save your fund the expense of additional mailings.
Return the proxy card in the enclosed envelope or mail to:
FIDELITY INVESTMENTS
Proxy Department
Hingham, MA 02043-9848
PLEASE DETACH AT PERFORATION BEFORE MAILING.
- --------------------------------------------------------------------------
- --------------------
FIDELITY MAGELLAN FUND
PROXY SOLICITED BY THE TRUSTEES
The undersigned, revoking previous proxies, hereby appoint(s) Edward C.
Johnson 3d, Arthur Loring, and Edward H. Malone, or any one or more of
them, attorneys, with full power of substitution, to vote all shares of
FIDELITY MAGELLAN FUND as indicated above whiich the undersigned is
entitled to vote at the Special Meeting of Shareholders of the fund to be
held at the office of the trust at 82 Devonshire St., Boston, MA 02109, on
March 23, 1994 at 9:00 a.m. and at any adjournments thereof. All powers
may be exercised by a majority of said proxy holders or substitutes voting
or acting or, if only one votes and acts, then by that one. This Proxy
shall be voted on the proposals described in the Proxy Statement as
specified on the reverse side. Receipt of the Notice of the Meeting and
the accompanying Proxy Statement is hereby acknowledged.
NOTE: Please sign exactly as your name appears on this Proxy. When signing
in a fiduciary capacity, such as executor, administrator, trustee,
attorney, guardian, etc., please so indicate. Corporate and partnership
proxies should be signed by an authorized person indicating the person's
title.
Date _____________, 1993
_______________________________________
_______________________________________
Signature(s) (Title(s), if applicable)
PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN ENCLOSED ENVELOPE
CUSIP316184100/FUND#021
Please refer to the Proxy Statement discussion of each of these matters.
IF NO SPECIFICATION IS MADE, THE PROXY SHALL BE VOTED FOR THE PROPOSALS.
As to any other matter, said attorneys shall vote in accordance with their
best judgment.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING:
- --------------------------------------------------------------------------
- --------------------
1. To elect the twelve nominees specified below as FOR all nominees WITHHOLD 1.
Trustees: J. Gary Burkhead, Ralph F. Cox, Phyllis listed (except as vote for
Burke Davis, Richard J. Flynn, Edward C. Johnson 3d, marked to the contrary allnominees.
E. Bradley Jones, Donald J. Kirk, Peter S. Lynch, below).
Gerald C. McDonough, Edward H. Malone, Marvin L.
Mann, and Thomas R. Williams. (INSTRUCTION: TO
WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE(S), WRITE THE NAME(S) OF THE NOMINEE(S) ON
THE LINE BELOW.)
2. To ratify the selection of Coopers & Lybrand as FOR AGAINST ABSTAIN 2.
independent accountants of the fund .
3. To approve a amended management contract for the fund. FOR AGAINST ABSTAIN 7.
4. To approve a new Sub-Advisory Agreement with FMR Far FOR AGAINST ABSTAIN 8.
East for the fund.
5. To approve a new Sub-Advisory Agreement with FMR FOR AGAINST ABSTAIN 9.
U.K. for the fund.
6. To amend the Declaration of Trust to provide dollar-based FOR AGAINST ABSTAIN 4.
voting rights for shareholders of the fund.
7. To amend the Declaration of Trust regarding shareholder FOR AGAINST ABSTAIN 5.
notification of the appointment of Trustees.
8. To amend the Declaration of Trust toprovide the fund with FOR AGAINST ABSTAIN 6.
the ability to invest all of its assets in another open-end
investment company with the same objective and policies.
9. To adopt a new fundamental investment policy permitting FOR AGAINST ABSTAIN 10.
the fund to invest all of its assets in another open-end
investment company with substantially the same
investment objective and policies.
10. To amend the fund's fundamental objective and certain FOR AGAINST ABSTAIN 3.
fundamental policies to broaden the fund's ability to invest
in domestic and foreign securities of all types to seek capital
appreciation.
11. To amend the fund's fundamental investment limitation FOR AGAINST ABSTAIN 11.
concerning borrowing.
12. To amend the fund's fundamental investment limitation FOR AGAINST ABSTAIN 12.
concerning real estate.
13. To amend the fund's fundamental investment limitation FOR AGAINST ABSTAIN 13.
concerning the issuance of senior securities.
14. To eliminate the fund's fundamental investment limitation FOR AGAINST ABSTAIN 14.
concerning short sales of securities.
15. To eliminate the fund's fundamental investment limitation FOR AGAINST ABSTAIN 15.
concerning margin purchases.
16. To amend the fund's fundamental investment limitation FOR AGAINST ABSTAIN 16.
concerning physical commodities.
17. To amend the fund's fundamental investment limitation FOR AGAINST ABSTAIN 17.
concerning lending.
18. To eliminate the fund's fundamental investment limitation FOR AGAINST ABSTAIN 18.
concerning investment in other investment companies.
19. To amend the fund's fundamental investment limitation FOR AGAINST ABSTAIN 19.
concerning the concentration of its investments in a single
industry.
20. To eliminate the fund's fundamental investment limitation FOR AGAINST ABSTAIN 20.
concerning investments in securities of newly formed
issuers.
MAG-PXC-194
021
FIDELITY MAGELLAN FUND
Dear Fellow Shareholder:
I am writing to let you know that a special meeting of Fidelity Magellan
Fund shareholders will be held in March to vote on several important
proposals that affect the fund and your investment in it. As a shareholder,
you have the opportunity to voice your opinion on these matters. This
package contains information about the proposals and the materials to use
when voting by mail.
Please take a few minutes to read the enclosed materials and cast your vote
on the yellow proxy card(s). PLEASE VOTE PROMPTLY. IT IS EXTREMELY
IMPORTANT, NO MATTER HOW MANY SHARES YOU OWN.
This is an opportunity to voice your opinion on matters that affect your
fund. Voting promptly helps save money. If we do not receive enough votes,
we must resolicit shareholders in an attempt to increase voter
participation. That is a costly process paid for by your fund and,
ultimately, by you.
HERE IS A BRIEF SUMMARY OF THE PROPOSALS.
All of the proposals summarized below have been carefully reviewed by the
Board of Trustees. The Board of Trustees is responsible for protecting your
interests as a shareholder. The Trustees believe these proposals are in the
best interest of shareholders. They recommend that you vote for each
proposal.
PROPOSAL 1 is to elect Trustees to the Board to supervise the fund's
activities and review contractual arrangements with companies that provide
the fund with services.
PROPOSAL 2 is to ratify the selection of Coopers & Lybrand as
independent accountants of the fund.
PROPOSAL 3 asks shareholders to approve a new Management Contract for the
fund. The purpose of the amendment is to revise the "Group fee" component
of the management fee contained in the current contract to reflect
potential economies of scale by providing for lower fees when FMR's mutual
fund assets under management exceed certain levels. THE PROPOSED CONTRACT
CAN ONLY RESULT IN A MANAGEMENT FEE THAT IS THE SAME OR LOWER COMPARED TO
THE CURRENT CONTRACT.
PROPOSALS 4 AND 5 ask for shareholder approval of two sub-advisory
agreements for the fund. The new agreements would authorize FMR to grant
investment discretion and portfolio execution to the sub-advisors in order
to more fully utilize foreign managers and analysts with investment
expertise in local markets, and to potentially enable the fund to
participate more readily and efficiently in full trading sessions on
foreign exchanges.
PROPOSAL 6 is to amend the Declaration of Trust to provide voting rights
based on a shareholder's total dollar value in the trust rather than on the
number of shares owned. As a result, for votes such as electing Trustees,
voting power would be allocated proportionate to the dollar value of each
shareholder's investment.
PROPOSAL 7 is to amend the Declaration of Trust to eliminate the
requirement of notifying fund shareholders within three months in the event
of an appointment of a Trustee. This proposal does not amend any other
aspect of Trustee resignation or appointment.
PROPOSALS 8 AND 9. The primary purpose of these proposals is to permit the
fund to pool its assets with other comparable Fidelity funds. Pooling of
assets would be implemented to reduce fund operating costs, and would occur
only if regulatory approval were obtained and if the Trustees determine
that doing so would be in the fund's best interest.
PROPOSAL 10 is to modify the fund's fundamental investment objective and
policies to broaden the types of securities in which the fund may invest to
include foreign and domestic securities of all types when seeking capital
appreciation.
ADOPTION OF STANDARDIZED INVESTMENT LIMITATIONS. The primary purpose of
Proposals 11 through 20 is to revise several of the fund's investment
limitations to conform to limitations which are expected to become standard
for all funds managed by FMR. The increased standardization will help to
promote operational efficiencies but is not likely to have any impact on
the investment techniques employed by the fund.
Each of these proposals is described in greater detail in the enclosed
Proxy Statement.
MAG-PXL-194
VOTING BY MAIL IS QUICK AND EASY. EVERYTHING YOU NEED IS ENCLOSED.
We encourage you to exercise your right as a shareholder and to vote
promptly. To cast your vote, simply complete the yellow proxy card enclosed
in this package. Be sure to sign the card before mailing it in the
postage-paid envelope provided.
If you have any questions before you vote, please call us at
1-800-544-6666. We'll be glad to help you get your vote in quickly. Thank
you for your participation in this important initiative for your fund.
Sincerely,
Edward C. Johnson 3d
President