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In addition to executing an investment advisory and
management contract (the management contract) with FMR Co., each
RIC managed by FMR Co. executes contracts appointing Fidelity
Service Co. (FSC) or Fidelity Investments Institutional
Operations Co. (FIIOC), divisions of petitioner, as agent for the
transfer of shares, recordkeeping and disbursements. Under
separate contracts between the trusts (not each RIC within a
given trust) and FDC, petitioner distributes and markets shares
in all but three of the RIC's it manages.
After petitioner creates a new RIC, and prior to actually
selling shares to the public, petitioner supplies the initial
investment (seed money) for the RIC to establish the beginning
portfolio. If the RIC is being established as a new trust,
rather than as a series within an existing trust, the SEC
requires petitioner to fund the RIC with $100,000 of seed money
for at least 2 years. In practice, petitioner, through FMR Co.
or its wholly owned subsidiary FMR Capital, seeds each new RIC
with between $1 and $3 million (as needed to establish a
diversified opening portfolio), and by so doing, petitioner
acquires shares in, and thus an ownership interest in, the new
RIC. As sole shareholder, petitioner votes to approve the
initial directors (in the case of a new trust) and ratifies the
management contract with itself. As the new RIC receives money
from the public, petitioner begins to redeem its investment in
the RIC. Petitioner attempts to redeem the seed money in an
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