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petitioner and the RIC realistically expect the relationship to
continue indefinitely and, thus, the relationship has an expected
life of more than 1 year.
Petitioner viewed the launching of a new RIC as a long-term
proposition and generally anticipated that it could take several
years for a new RIC to become successful.11 Mr. Roger Servison,
executive vice president in charge of new business development
and corporate policy for Fidelity Investments testified at trial
regarding when a RIC would be considered successful, stating:
11Mr. Edward C. Johnson, III, the chief executive officer of
petitioner, testified:
A. * * * sometimes we bring out new funds, and they
can--the germination period can be an incredible period
of time. I mean I think in terms--we started talking
about Magellan Fund a little earlier--I think in terms
of Magellan Fund, I think we first brought it out in
1962, '63. Then, there were some taxes put on foreign
investment, so that slowed the fund up.
And then we went through the malaise of the early
seventies. I think by--by 1980, the fund had hardly
grown one single bit, and needless to say, it cost us a
lot of money. We felt an obligation to the
shareholders primarily who were in the fund.
I think we also had a faith that at some point in
time, that other investors would come along and then
something that had not produced an interest level by
the shareholders in the seventies--and the fund was
available to investors in the seventies--we had a faith
that sometime they--there would be an interest, but it
took--with that fund, it really took probably 20 years
before it what you might say made any particular
contribution to overhead.
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