EXHIBIT 5
MANAGEMENT CONTRACT
between
FIDELITY EXCHANGE FUND
and
FIDELITY MANAGEMENT & RESEARCH COMPANY
AGREEMENT made this 1st day of November, 1988, by and between
Fidelity Exchange Fund, a Massachusetts business trust which may issue
one or more series of shares of beneficial interest (hereinafter
called the "Fund"), and Fidelity Management & Research Company, a
Massachusetts corporation (hereinafter called the "Adviser").
1. (a) Investment Advisory Services. The Adviser undertakes to act as
investment adviser of the Fund and shall, subject to the supervision
of the Fund's Board of Trustees, direct the investments of the Fund in
accordance with the investment objective, policies and limitations as
provided in the Fund'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 Fund may impose by notice in writing to
the Adviser. The Adviser shall also furnish for the use of the Fund
office space and all necessary office facilities, equipment and
personnel for servicing the investments of the Fund; 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 and, either itself
or through such person as approved by the Trustees, shall compute the
net asset value of the shares of beneficial interest of the Fund as
provided in the Fund's Declaration of Trust, and shall maintain the
portfolio and general accounting records of the Fund. The Adviser is
authorized, in its discretion and without prior consultation with the
Fund, to buy, sell, lend and otherwise trade in any stocks, bonds and
other securities and investment instruments on behalf of the Fund. The
investment policies and all other actions of the Fund 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 Fund, including but not limited to:
(i) providing the Fund with office space, equipment and facilities
(which may be its own) for maintaining its organization; (ii) on
behalf of the Fund, 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 Fund'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 Fund as an
investment vehicle.
The Adviser shall also furnish such reports, evaluations, 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 Fund'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 Fund 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 Fund 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 Fund 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 accounts over which they exercise investment discretion.
The Trustees of the Fund shall periodically review the commissions
paid by the Fund to determine if the commissions paid over
representative periods of time were reasonable in relation to the
benefits to the Fund.
The Adviser shall, in acting hereunder, be an independent contractor.
The Adviser shall not be an agent of the Fund.
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. For the services and facilities to be furnished hereunder, the
Adviser shall receive a management fee at the rate of 1/20 of 1% per
month (equivalent to an annual rate of 6/10 of 1%) of the average
daily net assets of the Fund (computed in the manner set forth in the
Fund's Declaration of Trust throughout the month (hereinafter call
"average net assets"); provided that: (a) for any month in which the
average net assets of those registered investment companies, including
the Fund, having Management Contracts with the Adviser, exceed
$4,000,000,000, the Fund's management fee attributable to its portion
of such excess (determined on the basis of this Fund's proportionate
share of those average net assets) shall be reduced by 10%; in case of
initiation or 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 and the fee
computed upon the average net assets for the business days it is so in
effect for that month. (b) In addition, in the event of any such
initiation or termination, the applicability of the 10% fee reduction
will be determined on the basis of the net assets of the respective
registered investment companies averaged over the business days in
such month during which this Contract is in effect.
4. It is understood that the Fund will pay all its expenses other
than those expressly stated to be payable by the Adviser hereunder,
which expenses payable by the Fund 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 Fund'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 Fund; (viii) all other expenses
incidental to holding meetings of the Fund's shareholders, including
proxy solicitations therefor; (ix) a pro rata share, based on relative
net assets of the Fund 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 Fund is a party
and the legal obligation which the Fund may have to indemnify the
Fund's Trustees and officers with respect thereto.
The Adviser shall reimburse the Fund in an amount not in excess of
the management fee payable by the Fund for any fiscal year, if and to
the extent that the aggregate operating expenses of the fund for its
fiscal year, including the management fee but excluding interest
expense, taxes, brokerage fees and commissions, and extraordinary
expenses, are in excess of an amount equal to 1% of the average of the
daily net assets of the Fund for such fiscal year.
5. The services of the Adviser to the Fund 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 Fund
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 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.
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 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 Fund.
(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 Fund.
(c) In addition to the requirements of sub-paragraphs (a) and (b)
of this paragraph 6, the terms of any continuance or modification of
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 Fund by vote of a majority of
the outstanding voting securities of the Fund. 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
and agrees that the obligations assumed by the Fund pursuant to this
Contract shall be limited in all cases to the Fund and its assets, and
the Adviser shall not seek satisfaction of any such obligation from
the shareholders or any shareholder of the Fund or any other portfolio
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 fund under
the Declaration of Trust are separate and distinct from those of any
and all other funds.
The terms "vote of a majority of the outstanding 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, and subject to such orders as may be granted by
the Securities and Exchange Commission.
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.
FIDELITY EXCHANGE FUND
By /s/Xxxxxx X. Xxxxxxx 3d
President
FIDELITY MANAGEMENT & RESEARCH COMPANY
By /s/J. Xxxx Xxxxxxxx
President
