Subject: File No. S7-12-04
From: David L Spurr

March 15, 2004

The compensation disclosure should include specifics about benchmark performance. Many fund managers are paid to outperform a benchmark index....sp500, russell 1000 value, Wilshire 5000 etc. Also, many managers may also be paid to not lag the benchmark performance.

There are rewards when performance exceeds the benchmark, but equally important, there may be penalties assessed when performance lags the benchmark, providing an incentive for the managers not to deviate from the index.

In essence, these Agreements are rewarding the managers for not taking risk. The more a funds performance duplicates benchmark performance, the less value the fund investor actually receives. The disclosure must address both the upside rewards, the downside penalties, and a discussion about the benchmark R-Squared measure.

Not to single out Fidelity.......but,

Why should an investor pay Fidelity Magellan Fund 70bps, when they could purchase the SP500 Index fund for 15bps, while receiving almost identical performance.

Magellan Fidelity Spartan SP500
1997 26.6 33.0
1998 33.6 28.5
1999 24.1 20.7
2000 -9.3 -9.1
2001 -11.7 -12.1
2002 -23.7 -22.2
2003 24.8 28.5

Cost: 76bps 19bps ----- +57bps

Size: 68.289 Billion

R-Squared 99 100

The compensation incentives on both the upside and the downside must be disclosed so that the fund investor can make an educated decision about the amount of risk that the portfolio manager may or may not be willing to undertake.

There should also be disclosure about R-Squared - which should explain in plain english to the investor that as a result of compensation incentives as well as other factors, that a specific percentage a a funds performance is due to changes in the Benchmark Index.

Morningstar website defines R-Squared as follows:

R-squared ranges from 0 to 100 and reflects the percentage of a funds movements that are explained by movements in its benchmark index. An R-squared of 100 means that all movements of a fund are completely explained by movements in the index.

The R-Squared for Magellan is listed as 99, indicating that 99 of a Magellans movements are explained by movements in the SP500 Index.

Why should an investor unknowingly pay Fidelity a 57bp premium/year over the index fund for index performance.

At 68.289 Billion in assets Fidelity Magellan takes in approx. 390 million .0057 X 68.289 billion in assets per year from investors for providing index performance.

This NEEDS to be disclosed.