FIDELITY INTERMEDIATE BOND FUND
OUTBOUND CALLING INFORMATION PACKAGE
BACKGROUND AND OVERVIEW
Beginning August 29, 1994, Fidelity will be mailing proxy packages to all
Intermediate Bond Fund shareholders of record as of August 29th. A key
proposal in the proxy is a request to increase the fund's management fee to
bring it in line with similar Fidelity funds.
Voting for the management fee increase would mean additional revenue to
Fidelity, helping us to continue to devote the considerable resources to
portfolio management for the fund.
For the next few weeks, your role is to call fund shareholders who have not
yet voted to ask them if they have received and understand the proxy and to
encourage them to vote their proxy, including the management contract
proposal. You cannot, however, ask the shareholder how he or she intends
to vote or instruct them to vote FOR the proposal.
The attached information is designed to help you in your conversations with
shareholders regarding the proxy proposals. It describes your role in
helping us achieve the proxy votes and lays out some specific reasons why
we are asking for the management fee increase.
Also included in this package are copies of the proxy package that was sent
to shareholders, including the letter, the proxy card, and the proxy
statement. Please be sure to read these materials so that you can assist
shareholders with questions.
WHAT'S INSIDE
The Call and Your Role p.2
Intermediate Bond Fund Proposal Summaries p.3-4
Intermediate Bond Fund Q&A p.5-10
Intermediate Bond Fund Information p.11
Intermediate Bond Fund Shareholder Letter p.12-13
IF YOU HAVE ANY QUESTIONS ABOUT INTERMEDIATE BOND FUND, PLEASE CONTACT:
HEIDI BAXTER DAY: 617-563-6153
VICE PRESIDENT EVENING: 617-237-1938
FIDELITY INTERMEDIATE BOND FUND
THE CALL AND YOUR ROLE
APPROACH: TALK ABOUT THE ENTIRE PROXY--NOT JUST THE MANAGEMENT CONTRACT
CHANGE. ENCOURAGE THE SHAREHOLDER TO VOTE ALL THE PROPOSALS AND RETURN
THEIR PROXY CARDS.
1. Confirm that the shareholder received the proxy package. Describe the
package to the shareholder if they do not recall it. (6'x9' envelope with
yellow bar across top)
2. Explain to the shareholder that his/her vote is extremely important. If
a majority of shareholders do not vote prior to the meeting we must send
out additional mailings, which are costly to the fund.
3. If shareholders have specific questions on the management contract
change or any other proxy proposal, refer to the background material for
answers to specific questions.
4 You cannot instruct someone to vote FOR any of the proposals, but you can
remind the shareholder that the Trustees recommend a vote FOR each
proposal. Mention that all of the proposals have been carefully reviewed
by the entire Board, including the independent Trustees, whose role it is
to protect the interests of shareholders. The Board believes the proposals
are fair and reasonable and unanimously recommends that shareholders vote
for all proposals.
5. IF THE SHAREHOLDER INDICATES THAT HE/SHE PLANS TO VOTE YES, please
reconfirm that he/she has a proxy card. Offer to assist the shareholder in
completing the card. If the shareholder does not have a card, please order
another for him/her.
IF THE SHAREHOLDER INDICATES THAT HE/SHE DOES NOT PLAN TO VOTE YES, please
make sure that s/he understands the issues. If the shareholder restates
that s/he will vote no, please thank him/her for his/her time and
consideration. If the shareholder does not have a card, please order
another for him/her.
FIDELITY INTERMEDIATE BOND FUND
SUMMARY OF MANAGEMENT FEE PROPOSAL
The fee is composed of two components: a group fee rate, which varies
based on the combined assets of all Fidelity funds, and an individual fund
fee rate. The group fee rate decreases as total Fidelity fund assets
increase and would be decreasing under the proposed contract. The group
fee rate for bond funds for the fiscal year ended April 30, 1994 was 0.16%.
If the proposal is approved, the individual fund fee rate would INCREASE
from 0.15% to 0.30% effective November 1, 1994 or the first day of the
month following approval.
Individual Total Mgmt.
Fee Rate Fee Rate*
Current Contract 0.15% 0.31%
Proposed Contract 0.30% 0.46%
* Estimated using group fee rate as of 4/30/94.
Intermediate Bond Fund's total management fee would increase from 0.31% to
0.46%, using the group fee rate as of April 30, 1994.
Before Proxy After Proxy Change
Group 0.16%* 0.16%* 0.00%*
Fee Rate
Individual Fund 0.15% 0.30% +0.15%
Fee Rate
______ ______ ______
Total 0.31%* 0.46%* +0.15%*
* Using group fee rate for the fiscal year ended April 30, 1994.
REASONS FOR PROPOSAL
Make Intermediate Bond Fund's management fee consistent with other
comparable Fidelity fixed-income funds.
Management efforts have resulted in strong competitive performance
reflecting Fidelity's commitment to developing superior investment analysis
and portfolio management.
Because of the group fee calculations, Intermediate Bond Fund's fee rate
has actually declined by approximately 4 bp or 11% (from 0.35% to 0.31%)
since 1988.
When in effect in November, the fund's management fee will remain below
the median for similar funds in the industry. THE MEDIAN FOR INTERMEDIATE
BOND FUNDS IN THE U.S. IS 0.50% VS. INTERMEDIATE BOND FUND'S NEW MANAGEMENT
FEE OF 0.46%.
(solid bullet) Under the amended contract however, the fund's total
expenses would be slightly higher than the median total expense level for
all intermediate investment-grade debt funds - - 0.79% vs. 0.76%.
FIDELITY INTERMEDIATE BOND FUND
QUESTIONS AND ANSWERS
1. PLEASE EXPLAIN FIDELITY INTERMEDIATE BOND FUND'S PROPOSED FEE INCREASE
TO ME.
FMR has proposed, and the Board has approved, a change to Fidelity
Intermediate Bond Fund's management fee that would bring it in line with
Fidelity's management fee for similar funds. This fee is below industry
averages for similar type funds.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Current Proposed Change Average for Industry Median
Fee Fee Similar Fidelity for Similar Funds
Funds
Intermediate 31bp 46bp +15bp 46bp 50bp
Bond Fund
</TABLE>
The fee increase would be implemented as of November 1, 1994 or the first
of the month following approval, as illustrated below.
Individual Total Mgmt.
Fee Rate Fee Rate*
Current 0.15% 0.31%
Proposed 0.30% 0.46%
* Using the group fee rate for the fiscal year ended 4/30/94.
2. CAN YOU TRANSLATE THIS INTO DOLLARS AND CENTS FOR ME?
The estimated increase in the annual cost of an existing $10,000 investment
in Intermediate Bond would be approximately $15, or about 1.5 cents per
share.
3. WHAT DOES INTERMEDIATE BOND FUND'S OVERALL MANAGEMENT FEE CONSIST OF?
The management fee rate is made up of two main parts: (1) the group fee
rate and (2) the individual fund fee rate.
THE GROUP FEE RATE for Intermediate Bond Fund is based on the total assets
under FMR's management. The group fee was established to recognize
economies of scale for providing basic services -- such as fundamental and
technical research, securities trading, legal and administrative services
- -- that benefit a number of Fidelity funds rather than being specifically
tied to any single fund. This structure ties a portion of the management
fee rate to the aggregate net assets of all Fidelity funds. The group fee
rate for fixed-income funds was 0.16% as of April 30 1994. Equity funds
have a different group fee rate.
THE INDIVIDUAL FUND FEE RATE is a fee expressed as a percentage of the
fund's assets. The individual fee is specific to each fund and may vary
among funds depending on how complex a fund is to manage. Most of the
domestic bond funds have individual fund fees of 0.30%.
4. WHAT PORTION OF INTERMEDIATE BOND FUND'S FEE DOES FIDELITY PROPOSE TO
INCREASE AT THIS TIME?
Fidelity Management Research (FMR) is proposing to increase the individual
fund fee rate.
Intermediate Bond Current Proposed Increase
Fund Individual 15bp 30bp 15bp
Fee Rate
5. WILL THE GROUP FEE RATE ALSO CHANGE?
The fixed-income fund group fee rate, which Intermediate Bond Fund pays
will decline under the proposed contract. The group fee rate, once
determined, is the same for all fixed-income funds that incorporate the
fee. However, unlike the individual fee, the group fee can fluctuate each
month. The fee declines as the total assets that Fidelity manages
increase. The maximum fixed-income fund group fee rate is 0.37% and can go
as low as 0.12%. The chart below shows how the group fee rates will be
lowered at various levels of group net assets.
EFFECTIVE ANNUAL GROUP FEE RATES*
Group Net Assets Present Proposed
($Billions) Contract Contract
150 .1736% .1736%
200 .1658% .1652%
250 .1606% .1587%
300 .1572% .1536%
350 .1547% .1494%
400 .1529% .1459%
Average group net assets for July 1994 were approximately $258 billion.
*FMR voluntarily adopted the new group fee rate schedule on August 1, 1994.
FMR had previously adopted a revised schedule on November 1, 1993. Each
schedule provides for lower group fees as FMR's assets under management
increase.
6. WHY ARE YOU PROPOSING TO INCREASE INTERMEDIATE BOND FUND'S MANAGEMENT
FEE?
FMR believes Intermediate Bond Fund's management fee should be in line with
the management fees of comparable funds that it advises. At present,
Intermediate Bond Fund's management fee is about 67% of the fee of
comparable Fidelity funds that receive essentially the same services.
Additionally, FMR has made a substantial commitment to developing superior
investment capabilities -- including portfolio management, research, and
systems -- that have benefited the fund.
The management fee rate on Intermediate Bond Fund has not been increased
since inception of the Fund in 1974, while the total dollar costs
associated with running the fund have grown. In fact, because of the group
fee component calculation , the fund's fee has actually declined by
approximately 4bp or 11% since 1988 ( the first time the group fee
schedules were introduced).
7. HOW DOES INTERMEDIATE BOND FUND'S PROPOSED MANAGEMENT FEE COMPARE WITH
THOSE OF SIMILAR BOND FUNDS?
The proposed total management fee of 0.46% (the 0.16% group fee plus the
proposed 0.30% individual fund fee rate) is below fees paid by the
majority of intermediate investment-grade debt funds. The median
management fee for such funds, according to Lipper Analytical Services,
Inc. is 0.50%.
Additionally, Intermediate Bond's total fund operating expenses, taking
into account the proposed individual fund fee rate increase, would be
0.79%, slightly above the median for competitive funds (which is .76%).
Total expenses include both management fees and non-advisory fees.
8. HOW HAS INTERMEDIATE BOND FUND PERFORMED?
The fund's performance suffered this year as did the whole bond market.
However, for the one-year period ended July 31, 1994, the fund ranked 13 of
105 intermediate bond funds and still turned in a positive return of 0.79%
according to Lipper Analytical Services, Inc.
For the three, five, and ten year periods ended July 31,1994, the fund
ranked 12 out of 44, 10 out of 31, and 7 out of 11, respectively.
9. HOW WOULD THE FEE INCREASE AFFECT INTERMEDIATE BOND FUND'S PERFORMANCE?
The impact on performance would be nominal, and the fund's return would
still rank above competitive medians for the one, three and five year
periods, and would still be below the competitive median for the ten year
period (all as measured by Lipper Analytical Services, Inc.):
Period Ending Reported Return Under Competitive
July 31, 1994 Return Proposed Median
Contract Return
One year 0.79% 0.64% (0.35%)
Three year 26.91% 26.34% 24.69%
Five year 46.41% 45.32% 44.77%
Ten year 166.64% 162.70% 168.73%
10. WHY WOULD THE BOARD RECOMMEND A FEE INCREASE? I THOUGHT THEY WERE
SUPPOSED TO PROTECT THE BEST INTERESTS OF SHAREHOLDERS?
They do. The Board carefully considered a number of factors before
unanimously approving the fee increase. Some of these factors included:
that the fund's fee was out of line with the fees of comparable funds
managed by FMR.
that the fund's management fee had declined since 1988.
the need for FMR to maintain and enhance its ability to attract and retain
top managers and analysts to serve the fund.
management fees of competitive funds.
the quality and service being provided to the fund.
11. WHAT OTHER PROPOSALS ARE INCLUDED IN INTERMEDIATE BOND FUND'S PROXY
STATEMENT?
Eleven other proposals are contained in the proxy statement. Shareholders
are being asked to:
ELECT A BOARD OF TRUSTEES and to RATIFY THE SELECTION OF COOPERS &
LYBRAND as
independent accountants of the Fidelity Commonwealth Trust
Amend the Declaration of Trust to provide DOLLAR-BASED, RATHER THAN
SHARE-BASED VOTING RIGHTS to the shareholders of the trust. Intermediate
Bond Fund is a portfolio of Fidelity Commonwealth Trust; the trust also
includes two other Fidelity funds (Fidelity Small Cap Stock Fund and
Fidelity Market Index Fund). Currently, the funds operate with a one
share, one vote provision; however, when the net asset values of the
various portfolios in the trust diverge, voting rights may become
disproportionate. The proposal is intended to eliminate this possibility
by replacing the one share, one vote provision with one that provides for
voting rights based on a shareholder's total dollar investment in the
trust. Additionally, amend the Declaration of Trust to ELIMINATE THE
REQUIREMENT TO NOTIFY SHAREHOLDERS WITHIN THREE MONTHS OF THE APPOINTMENT
OF A TRUSTEE. Instead, shareholders would be notified in the fund's next
financial report.
PERMIT INVESTMENTS IN ANOTHER OPEN-END INVESTMENT COMPANY. These changes
would amend the Declaration of Trust and adopt a fundamental investment
policy to allow the investment of all of the fund's assets in another
open-end mutual fund with substantially the same investment objectives
and policies in order to improve operational efficiencies.
Expand the sub-advisors role under the SUB-ADVISORY AGREEMENTS between FMR
and its foreign subsidiaries, FMR U.K. and FMR Far East. FMR already pays
and will continue to pay all of the sub-advisor fees for trading, research,
and investment advice on foreign securities to fund management. The
expanded contracts allow for discretionary management ability by the
sub-advisors on behalf of the fund. FMR willl also pay for these services.
Revise the fund's fundamental limitations to conform to the limits that are
expected to become standard for funds managed by FMR. The INCREASED
STANDARDIZATION will promote operational efficiencies but is not likely to
have any impact on the investment techniques employed by the fund. They
will facilitate FMR's investment compliance efforts with standardized
investment descriptions.
FIDELITY INTERMEDIATE BOND FUND INFORMATION
FUND HISTORY
Intermediate Bond Fund is one of Fidelity's older mutual funds, started in
1974. Its original name was Fidelity Investors Trust. It was then called
Thrift Trust, until it was given its current name.
The fund has had solid performance. A $10,000 investment made in the fund
on July 31,1984 would have been worth over $26,664 on July 31, 1994 if all
dividends and capital gains had been reinvested.
FUND MANAGEMENT
The fund seeks high current income by investing mainly in investment grade
debt securities, and maintains an average maturity between three and ten
years.
The fund is less volatile than longer-term higher-yielding fixed-income
funds.
SHAREHOLDER PROFILE
Intermediate Bond Fund has approximately 27,582 retail accounts - 38% non
retirement, 62% retirement. 22% of the fund's assets are in retail
accounts.
(solid bullet) Almost half of the fund's assets are in 401(k) accounts.
The average retail account size is quite a bit lower than the average
retail Fidelity domestic bond fund account at $18,126 vs. $25,729.
The fund has grown solidly over the last few years with the strong bond
market and its strong performance. As of 7/31/94, the fund had $1.8
billion in assets.
Many of shareholders will generally be investors who have been in the fund
for several years. We believe them to be less sophisticated investors and
generally older than the average Fidelity customer.
Another segment of shareholders will be those who have recently invested
in the fund. These may be bank investors who were looking for an
alternative to today's low interest rates.
FIDELITY INTERMEDIATE BOND FUND
MANAGER TALKING POINTS FOR CALLOUT EFFORT
OBJECTIVES FOR TRAINING
Make sure the representatives feel comfortable talking about the
management fee proposal--not defensive about it.
Representatives should understand the entire proxy - not just the request
to raise the management fee. They may get questions on all of the
proposals.
Make sure representatives treat the call as a service call - focusing on
assisting the shareholder -- getting them to understand the proxy, to fill
out the card and send it back. Representatives should not ask how any
shareholder intends to vote.
Motivate representatives to provide accurate, balanced information.
Thoroughly review information with representatives and find out if they
need any additional information.
Ensure that representatives do not solicit "yes" votes.
KEY POINTS TO ADDRESS
Importance of Proxy Vote
Reinforce comments made by Heidi Baxter and Michael Gray in the
teleconference.
The additional revenue will help us to continue to devote the considerable
resources to high quality portfolio management and shareholder services
that we have had in the past.
Fee increase will simply bring Intermediate Bond Fund's management fee to
the level of similar Fidelity taxable bond funds.
Importance of Representatives' Role
We have chosen qualified representatives to take on this challenge.
Very important to Fidelity -- high profile-- of great importance to FMR.
This should be upbeat and motivational.
Explain to representatives the campaign programs:
- Call quality important
- A $1,000 budget per site when we obtain the vote.
- Weekly updates on campaign progress.
Historical Context
Three years ago we asked shareholders to vote for a management fee
increase on Contrafund, Fidelity and Trend funds. We did not get the vote
on any of these proxies and have learned some valuable lessons. Those
lessons were recently employed in the Contrafund, Puritan, Capital &
Income, Trend, Equity Income and Cash Reserves proxies in which we
successfully did get the vote. THE CALLOUT EFFORT PLAYED A VERY IMPORTANT
ROLE.
- -- An approval from the Trustees (the majority of whom are unaffiliated
with FMR) helps. The letter and the proposal state the Trustees unanimous
approval of all proxy proposals. Representatives should mention this in
the course of their conversation.
- -- The management fee change should be positioned as one of many proposals
and should not be given undue attention. However, if the customer has
questions on the management fees, representatives should clearly and
accurately address those questions--not gloss over them.
- -- Follow-up phone calls done promptly and effectively will positively
impact the vote. This is the representatives' role!
Campaign Outline
Proxies will begin mailing Monday, August 29, 1994.
Kick-off on Wednesday, September 7, 1994, at 5:00 EST.
Will begin making calls Thursday, September 8, 1994.
We will target largest shareholders first.
Calls will continue until we get the vote or through the meeting date
(which ever comes first). The meeting date is scheduled for October 26,
1994.
To get the vote we need 67% or more of at least 50% of shares voting, or
more than 50% of outstanding shares.
Approach to Call
The call should be approached as a service call, with emphasis on
assisting the shareholder with the proxy in general, rather than focusing
on the management contract change specifically. Encourage shareholders to
fill out the proxy card and vote on all the proposals promptly. This will
save costs of additional mailings and will allow them to voice their
opinion.
Representatives should:
1. Ask shareholder if s/he received the proxy.
2. Explain importance of shareholder vote.
3. If s/he can't find the proxy or says s/he never got it, explain to
her/him what it looks like. If it still doesn't register, offer to send
out another.
4. Encourage shareholders to vote as recommended by the Trustees who have
reviewed the proposals and think they are fair and reasonable.
THE KEY TO THE CALL IS TO GET THE SHAREHOLDER TO VOTE BY FILLING THE CARD
OUT AND SENDING IT IN. REPS CAN HELP EXPEDITE THIS PROCESS BY BEING WELL
VERSED IN ALL PROPOSALS. BY QUICKLY AND ACCURATELY ANSWERING QUESTIONS,
SHAREHOLDERS WILL FIND IT EASIER TO FILL OUT THE CARD.
NOTE: INTERMEDIATE BOND'S MANAGEMENT FEE INCREASE IS PROPOSAL #7
Review all materials with the representatives
-- Information package
-- Letter
-- Card
-- Proxy proposals
REPRESENTATIVES SHOULD FEEL VERY COMFORTABLE WITH HOW THEY PRESENT THE
ARGUMENTS FOR AND REASONS WHY WE ARE REQUESTING A CHANGE TO THE MANAGEMENT
FEE. REPRESENTATIVES NEED NOT FEEL DEFENSIVE. (SOME ROLE PLAYING MIGHT BE
HELPFUL).
KEY ARGUMENTS REPRESENTATIVES SHOULD REMEMBER
Intermediate Bond Fund's competitive performance has been solid. For a
one year period ending July 31, 1994, the fund ranked in the top quartile
of all intermediate investment-grade debt funds as reported by Lipper
Analytical Services, Inc.
Even with the management fee increase, the fund's management fee rate
would still be below similar competitive funds and consistent with fees
paid by comparable Fidelity funds.
Fidelity's commitment to research and trading capabilities has not
increased Intermediate Bond's Fund's fee rate. In fact, because of the
effect of the group fee rate (which declines as FMR's assets increase), the
management fee rate on Intermediate Bond Fund has declined since 1988.
MAKE SURE REPRESENTATIVES FEEL COMFORTABLE WITH HOW THE MANAGEMENT FEES ON
OUR FUNDS ARE STRUCTURED (EXPLAINED IN QUESTION 3 ON PAGE 5.)
CUSTOMER QUESTIONS YOU CAN EXPECT.
Here is a listing of questions we have experienced in the past with
customers. Take some time to familiarize yourself with them as you are sure
to encounter some if not all of them at one time or another.
1. HOW SHOULD I VOTE?
The Board of Trustees has unanimously approved all of the proposals. My
role in calling you is to encourage you to cast your vote. How you choose
to vote is based upon what you feel is most appropriate.
2. WHAT PROPOSALS SHOULD I BE ON THE LOOKOUT FOR?
All of the proposals are important to the fund, but I'd be happy to answer
any specific questions or describe the proposals. (These should not be
detailed descriptions, but rather the highlights of the proposal, e.g.
Ratification of the independent accountants for the fund).
3. HOW IS EVERYONE ELSE VOTING?
The votes are tallied by an outside firm. The results are not disclosed
until the share owner meeting. While shareholder votes vary, the Trustees
recommend voting FOR each of the proposals.
4. I ALREADY VOTED. DIDN'T YOU RECEIVE IT?
I'm sure we have received your proxy card, but we track the votes at an
independent agency and that information isn't provided to me. (If they want
another proxy sent to them at this time, we can send it, but assure them
that we probably received their proxy card.)
5. WILL I BE NOTIFIED OF THE OUTCOME OF THE VOTE?
Due to the expense of the additional mailing, we will not be sending a
written notification. However you can call us after the share owner meeting
to obtain the results. In addition, approved changes will be reflected in
the fund's next prospectus and statement of additional information, if
applicable.
6. WHEN AND WHERE IS THE SHARE OWNER MEETING?
The meeting will be held at Fidelity's headquarters at 82 Devonshire
Street in Boston. The time and date of the meeting is 9:30 A.M. ON OCTOBER
26TH.
7. I SOLD MY SHARES SO I DISCARDED THE PROXY MATERIAL. DO I STILL NEED TO
VOTE?
Since you were a shareholder of record, you are entitled to vote. Let me
send you another proxy. Please take the time to fill it out and return it
to us in the envelope provided.
8. CAN YOU FAX ME A NEW PROXY?
At this time we are not able to fax proxies.
9. CAN I FAX MY PROXY CARD TO YOU?
You shouldn't generally encourage shareholders to fax proxy cards; however
if he/she specifically asks for this option or if it is very close to the
meeting date and there is a danger that we won't receive their card if it's
mailed, we will accept faxed proxy cards.
CARDS SHOULD BE FAXED TO:
MIS (the company that records proxy votes for us)
at (617) 871- 2569.
They must fax BOTH SIDES of the card to us.
Please encourage the shareholder, if possible, to mail the actual card as
well. (Their vote will still be counted even if they do not.)
10. I HAVE OTHER FUNDS AT FIDELITY AS WELL. WILL THERE BE OTHER PROXIES
BEING MAILED?
We do periodically mail proxies when there is a need to gain shareholder
approval. I do not have the information that would tell me when any
upcoming proxies will be required.
