Revisiting Fidelity Magellan

As reported in our fourth quarter 2005 newsletter, Mr. Harry Lange took over portfolio management responsibilities of Fidelity Magellan in October 2005, due primarily to Magellan’s underperformance compared to its peer group and benchmark. Mr. Lange implemented a new management style through the emphasis of growth stocks and increased exposure to non-U.S. securities, resulting in an investment alternative that does not track the S&P 500 Index as closely as it once did.

The fund’s new all-cap style is reflective of Mr. Lange’s success in managing smaller-company mandates. Before taking over portfolio management duties of the Magellan fund, Mr. Lange managed the Fidelity Capital Appreciation fund from 1996 to October 2005 and also managed several Fidelity Select funds prior to becoming a diversified portfolio manager in 1996.

Initially, the Magellan fund responded positively to the portfolio changes, but its performance has lagged more recently. The Board, Program staff, and an independent investment consultant continue to monitor the changes employed by Magellan’s new leadership closely. At the January 2007 Board meeting, additional discussions will be conducted to revisit Magellan’s role in the Program’s investment lineup. The first quarter 2007 newsletter will report the conclusion of these discussions.